G.R. No.

124043 October 14, 1998

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
COURT OF APPEALS, COURT OF TAX APPEALS and YOUNG MEN'S CHRISTIAN ASSOCIATION OF THE
PHILIPPINES, INC., respondents.

Page |
1
PANGANIBAN, J.:

Is the income derived from rentals of real property owned by the Young Men's Christian Association of the
Philippines, Inc. (YMCA) — established as "a welfare, educational and charitable non-profit corporation" — subject
to income tax under the National Internal Revenue Code (NIRC) and the Constitution?

The Case

This is the main question raised before us in this petition for review on certiorari challenging two Resolutions issued
by the Court of Appeals1 on September 28, 19952 and February 29, 19963 in CA-GR SP No. 32007. Both
Resolutions affirmed the Decision of the Court of Tax Appeals (CTA) allowing the YMCA to claim tax
exemption on the latter's income from the lease of its real property.

The Facts

The facts are undisputed.4 Private Respondent YMCA is a non-stock, non-profit institution, which conducts
various programs and activities that are beneficial to the public, especially the young people, pursuant to
its religious, educational and charitable objectives.

In 1980, private respondent earned, among others, an income of P676,829.80 from leasing out a portion of
its premises to small shop owners, like restaurants and canteen operators, and P44,259.00 from parking
fees collected from non-members. On July 2, 1984, the commissioner of internal revenue (CIR) issued an
assessment to private respondent, in the total amount of P415,615.01 including surcharge and interest, for
deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and
deficiency withholding tax on wages. Private respondent formally protested the assessment and, as a
supplement to its basic protest, filed a letter dated October 8, 1985. In reply, the CIR denied the claims of
YMCA.

Contesting the denial of its protest, the YMCA filed a petition for review at the Court of Tax Appeals (CTA)
on March 14, 1989. In due course, the CTA issued this ruling in favor of the YMCA:

. . . [T]he leasing of [private respondent's] facilities to small shop owners, to restaurant and
canteen operators and the operation of the parking lot are reasonably incidental to and
reasonably necessary for the accomplishment of the objectives of the [private respondents].
It appears from the testimonies of the witnesses for the [private respondent] particularly Mr.
James C. Delote, former accountant of YMCA, that these facilities were leased to members
and that they have to service the needs of its members and their guests. The rentals were
minimal as for example, the barbershop was only charged P300 per month. He also testified
that there was actually no lot devoted for parking space but the parking was done at the sides
of the building. The parking was primarily for members with stickers on the windshields of
their cars and they charged P.50 for non-members. The rentals and parking fees were just
enough to cover the costs of operation and maintenance only. The earning[s] from these
rentals and parking charges including those from lodging and other charges for the use of
the recreational facilities constitute [the] bulk of its income which [is] channeled to support
its many activities and attainment of its objectives. As pointed out earlier, the membership
dues are very insufficient to support its program. We find it reasonably necessary therefore
for [private respondent] to make [the] most out [of] its existing facilities to earn some income.
It would have been different if under the circumstances, [private respondent] will purchase a
lot and convert it to a parking lot to cater to the needs of the general public for a fee, or
construct a building and lease it out to the highest bidder or at the market rate for
commercial purposes, or should it invest its funds in the buy and sell of properties, real or
personal. Under these circumstances, we could conclude that the activities are already profit
oriented, not incidental and reasonably necessary to the pursuit of the objectives of the
association and therefore, will fall under the last paragraph of Section 27 of the Tax Code and
any income derived therefrom shall be taxable.

Considering our findings that [private respondent] was not engaged in the business of
operating or contracting [a] parking lot, we find no legal basis also for the imposition of [a]
 deficiency fixed tax and [a] contractor's tax in the amount[s] of P353.15 and P3,129.73,
respectively.

xxx xxx xxx

WHEREFORE, in view of all the foregoing, the following assessments are hereby dismissed
for lack of merit:
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1980 Deficiency Fixed Tax — P353,15; 2

1980 Deficiency Contractor's Tax — P3,129.23;

1980 Deficiency Income Tax — P372,578.20.

While the following assessments are hereby sustained:

1980 Deficiency Expanded Withholding Tax — P1,798.93;

1980 Deficiency Withholding Tax on Wages — P33,058.82

plus 10% surcharge and 20% interest per annum from July 2, 1984 until fully paid but not to
exceed three (3) years pursuant to Section 51(e)(2) & (3) of the National Internal Revenue
Code effective as of 1984. 5

Dissatisfied with the CTA ruling, the CIR elevated the case to the Court of Appeals (CA). In its Decision of
February 16, 1994, the CA6 initially decided in favor of the CIR and disposed of the appeal in the following
manner:

Following the ruling in the afore-cited cases of Province of Abra vs. Hernando and Abra
Valley College Inc. vs. Aquino, the ruling of the respondent Court of Tax Appeals that "the
leasing of petitioner's (herein respondent's) facilities to small shop owners, to restaurant and
canteen operators and the operation of the parking lot are reasonably incidental to and
reasonably necessary for the accomplishment of the objectives of the petitioners, and the
income derived therefrom are tax exempt, must be reversed.

WHEREFORE, the appealed decision is hereby REVERSED in so far as it dismissed the

assessment for:

1980 Deficiency Income Tax P 353.15

1980 Deficiency Contractor's Tax P 3,129.23, &

1980 Deficiency Income Tax P 372,578.20

but the same is AFFIRMED in all other respect. 7

Aggrieved, the YMCA asked for reconsideration based on the following grounds:

The findings of facts of the Public Respondent Court of Tax Appeals being supported by
substantial evidence [are] final and conclusive.

II

The conclusions of law of [p]ublic [r]espondent exempting [p]rivate [r]espondent from the
income on rentals of small shops and parking fees [are] in accord with the applicable law and
jurisprudence. 8

Finding merit in the Motion for Reconsideration filed by the YMCA, the CA reversed itself and promulgated
on September 28, 1995 its first assailed Resolution which, in part, reads:

The Court cannot depart from the CTA's findings of fact, as they are supported by evidence
beyond what is considered as substantial.

xxx xxx xxx

 The second ground raised is that the respondent CTA did not err in saying that the rental
from small shops and parking fees do not result in the loss of the exemption. Not even the
petitioner would hazard the suggestion that YMCA is designed for profit. Consequently, the
little income from small shops and parking fees help[s] to keep its head above the water, so
to speak, and allow it to continue with its laudable work.

The Court, therefore, finds the second ground of the motion to be meritorious and in accord
with law and jurisprudence. Page |
3
WHEREFORE, the motion for reconsideration is GRANTED; the respondent CTA's decision is
AFFIRMED in toto.9

The internal revenue commissioner's own Motion for Reconsideration was denied by Respondent Court in
its second assailed Resolution of February 29, 1996. Hence, this petition for review under Rule 45 of the
Rules of Court. 10

The Issues

Before us, petitioner imputes to the Court of Appeals the following errors:

In holding that it had departed from the findings of fact of Respondent Court of Tax Appeals
when it rendered its Decision dated February 16, 1994; and

II

In affirming the conclusion of Respondent Court of Tax Appeals that the income of private
respondent from rentals of small shops and parking fees [is] exempt from taxation. 11

This Court's Ruling

The petition is meritorious.

First Issue:
Factual Findings of the CTA

Private respondent contends that the February 16, 1994 CA Decision reversed the factual findings of the
CTA. On the other hand, petitioner argues that the CA merely reversed the "ruling of the CTA that the
leasing of private respondent's facilities to small shop owners, to restaurant and canteen operators and the
operation of parking lots are reasonably incidental to and reasonably necessary for the accomplishment of
the objectives of the private respondent and that the income derived therefrom are tax exempt." 12 Petitioner
insists that what the appellate court reversed was the legal conclusion, not the factual finding, of the
CTA. 13 The commissioner has a point.

Indeed, it is a basic rule in taxation that the factual findings of the CTA, when supported by substantial
evidence, will be disturbed on appeal unless it is shown that the said court committed gross error in the
appreciation of facts. 14 In the present case, this Court finds that the February 16, 1994 Decision of the CA
did not deviate from this rule. The latter merely applied the law to the facts as found by the CTA and ruled
on the issue raised by the CIR: "Whether or not the collection or earnings of rental income from the lease of
certain premises and income earned from parking fees shall fall under the last paragraph of Section 27 of
the National Internal Revenue Code of 1977, as amended." 15

Clearly, the CA did not alter any fact or evidence. It merely resolved the aforementioned issue, as indeed it
was expected to. That it did so in a manner different from that of the CTA did not necessarily imply a
reversal of factual findings.

The distinction between a question of law and a question of fact is clear-cut. It has been held that "[t]here is
a question of law in a given case when the doubt or difference arises as to what the law is on a certain state
of facts; there is a question of fact when the doubt or difference arises as to the truth or falsehood of
alleged facts." 16 In the present case, the CA did not doubt, much less change, the facts narrated by the CTA.
It merely applied the law to the facts. That its interpretation or conclusion is different from that of the CTA is
not irregular or abnormal.

Second Issue:
Is the Rental Income of the YMCA Taxable?
We now come to the crucial issue: Is the rental income of the YMCA from its real estate subject to tax? At
the outset, we set forth the relevant provision of the NIRC:

Sec. 27. Exemptions from tax on corporations. — The following organizations shall not be
taxed under this Title in respect to income received by them as such —

xxx xxx xxx

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(g) Civic league or organization not organized for profit but operated exclusively for the 4
promotion of social welfare;

(h) Club organized and operated exclusively for pleasure, recreation, and other non-profitable
purposes, no part of the net income of which inures to the benefit of any private stockholder
or member;

xxx xxx xxx

Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind
and character of the foregoing organizations from any of their properties, real or personal, or
from any of their activities conducted for profit, regardless of the disposition made of such
income, shall be subject to the tax imposed under this Code. (as amended by Pres. Decree
No. 1457)

Petitioner argues that while the income received by the organizations enumerated in Section 27 (now
Section 26) of the NIRC is, as a rule, exempted from the payment of tax "in respect to income received by
them as such," the exemption does not apply to income derived ". . . from any of their properties, real or
personal, or from any of their activities conducted for profit, regardless of the disposition made of such
income . . . ."

Petitioner adds that "rental income derived by a tax-exempt organization from the lease of its properties,
real or personal, [is] not, therefore, exempt from income taxation, even if such income [is] exclusively used
for the accomplishment of its objectives." 17 We agree with the commissioner.

Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in
interpretation in construing tax exemptions. 18 Furthermore, a claim of statutory exemption from taxation
should be manifest. and unmistakable from the language of the law on which it is based. Thus, the claimed
exemption "must expressly be granted in a statute stated in a language too clear to be mistaken." 19

In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very wording of the
last paragraph of then Section 27 of the NIRC which mandates that the income of exempt organizations
(such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the
same Code. Because the last paragraph of said section unequivocally subjects to tax the rent income of the
YMCA from its real property, 20 the Court is duty-bound to abide strictly by its literal meaning and to refrain
from resorting to any convoluted attempt at construction.

It is axiomatic that where the language of the law is clear and unambiguous, its express terms must be
applied. 21 Parenthetically, a consideration of the question of construction must not even begin, particularly
when such question is on whether to apply a strict construction or a liberal one on statutes that grant tax
exemptions to "religious, charitable and educational propert[ies] or institutions." 22

The last paragraph of Section 27, the YMCA argues, should be "subject to the qualification that the income
from the properties must arise from activities 'conducted for profit' before it may be considered
taxable." 23 This argument is erroneous. As previously stated, a reading of said paragraph ineludibly shows
that the income from any property of exempt organizations, as well as that arising from any activity it
conducts for profit, is taxable. The phrase "any of their activities conducted for profit" does not qualify the
word "properties." This makes from the property of the organization taxable, regardless of how that income
is used — whether for profit or for lofty non-profit purposes.

Verba legis non est recedendum. Hence, Respondent Court of Appeals committed reversible error when it
allowed, on reconsideration, the tax exemption claimed by YMCA on income it derived from renting out its
real property, on the solitary but unconvincing ground that the said income is not collected for profit but is
merely incidental to its operation. The law does not make a distinction. The rental income is taxable
regardless of whence such income is derived and how it is used or disposed of. Where the law does not
distinguish, neither should we.

Constitutional Provisions

On Taxation
Invoking not only the NIRC but also the fundamental law, private respondent submits that Article VI, Section
28 of par. 3 of the 1987 Constitution, 24 exempts "charitable institutions" from the payment not only of
property taxes but also of income tax from any source. 25 In support of its novel theory, it compares the use
of the words "charitable institutions," "actually" and "directly" in the 1973 and the 1987 Constitutions, on
the one hand; and in Article VI, Section 22, par. 3 of the 1935 Constitution, on the other hand. 26

Private respondent enunciates three points. First, the present provision is divisible into two categories: (1)
"[c]haritable institutions, churches and parsonages or convents appurtenant thereto, mosques and non- Page |
profit cemeteries," the incomes of which are, from whatever source, all tax-exempt; 27 and (2) "[a]ll lands,
buildings and improvements actually and directly used for religious, charitable or educational purposes," 5
which are exempt only from property taxes. Second, Lladoc v. Commissioner of Internal Revenue, which
28 29

limited the exemption only to the payment of property taxes, referred to the provision of the 1935
Constitution and not to its counterparts in the 1973 and the 1987 Constitutions. 30 Third, the phrase
"actually, directly and exclusively used for religious, charitable or educational purposes" refers not only to
"all lands, buildings and improvements," but also to the above-quoted first category which includes
charitable institutions like the private respondent. 31

The Court is not persuaded. The debates, interpellations and expressions of opinion of the framers of the
Constitution reveal their intent which, in turn, may have guided the people in ratifying the Charter. 32 Such
intent must be effectuated.

Accordingly, Justice Hilario G. Davide, Jr., a former constitutional commissioner, who is now a member of
this Court, stressed during the Concom debates that ". . . what is exempted is not the institution itself . . .;
those exempted from real estate taxes are lands, buildings and improvements actually, directly and
exclusively used for religious, charitable or educational
purposes." 33 Father Joaquin G. Bernas, an eminent authority on the Constitution and also a member of the
Concom, adhered to the same view that the exemption created by said provision pertained only to property
taxes. 34

In his treatise on taxation, Mr. Justice Jose C. Vitug concurs, stating that "[t]he tax exemption
covers property taxes only." 35 Indeed, the income tax exemption claimed by private respondent finds no
basis in Article VI, Section 26, par. 3 of the Constitution.

Private respondent also invokes Article XIV, Section 4, par. 3 of the Character, 36 claiming that the YMCA "is
a non-stock, non-profit educational institution whose revenues and assets are used actually, directly and
exclusively for educational purposes so it is exempt from taxes on its properties and income." 37 We
reiterate that private respondent is exempt from the payment of property tax, but not income tax on the
rentals from its property. The bare allegation alone that it is a non-stock, non-profit educational institution
is insufficient to justify its exemption from the payment of income tax.

As previously discussed, laws allowing tax exemption are construed strictissimi juris. Hence, for the YMCA
to be granted the exemption it claims under the aforecited provision, it must prove with substantial
evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the
income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational
purposes. However, the Court notes that not a scintilla of evidence was submitted by private respondent to
prove that it met the said requisites.

Is the YMCA an educational institution within the purview of Article XIV, Section 4, par. 3 of the
Constitution? We rule that it is not. The term "educational institution" or "institution of learning" has
acquired a well-known technical meaning, of which the members of the Constitutional Commission are
deemed cognizant. 38 Under the Education Act of 1982, such term refers to schools. 39 The school system is
synonymous with formal education, 40 which "refers to the hierarchically structured and chronologically
graded learnings organized and provided by the formal school system and for which certification is
required in order for the learner to progress through the grades or move to the higher levels." 41 The Court
has examined the "Amended Articles of Incorporation" and "By-Laws"43 of the YMCA, but found nothing in
them that even hints that it is a school or an educational institution. 44

Furthermore, under the Education Act of 1982, even non-formal education is understood to be school-based
and "private auspices such as foundations and civic-spirited organizations" are ruled out. 45 It is settled that
the term "educational institution," when used in laws granting tax exemptions, refers to a ". . . school
seminary, college or educational establishment . . . ." 46 Therefore, the private respondent cannot be deemed
one of the educational institutions covered by the constitutional provision under consideration.

. . . Words used in the Constitution are to be taken in their ordinary acceptation. While in its
broadest and best sense education embraces all forms and phases of instruction,
improvement and development of mind and body, and as well of religious and moral
sentiments, yet in the common understanding and application it means a place where
systematic instruction in any or all of the useful branches of learning is given by methods
common to schools and institutions of learning. That we conceive to be the true intent and
 scope of the term [educational institutions,] as used in the
Constitution. 47

Moreover, without conceding that Private Respondent YMCA is an educational institution, the Court also
notes that the former did not submit proof of the proportionate amount of the subject income that was
actually, directly and exclusively used for educational purposes. Article XIII, Section 5 of the YMCA by-laws,
which formed part of the evidence submitted, is patently insufficient, since the same merely signified that
"[t]he net income derived from the rentals of the commercial buildings shall be apportioned to the Page |
Federation and Member Associations as the National Board may decide." 48 In sum, we find no basis for
granting the YMCA exemption from income tax under the constitutional provision invoked. 6

Cases Cited by Private

Respondent Inapplicable

The cases 49 relied on by private respondent do not support its cause. YMCA of Manila v. Collector of
Internal Revenue 50 and Abra Valley College, Inc. v. Aquino 51 are not applicable, because the controversy in
both cases involved exemption from the payment of property tax, not income tax. Hospital de San Juan de
Dios, Inc. v. Pasay City 52 is not in point either, because it involves a claim for exemption from the payment
of regulatory fees, specifically electrical inspection fees, imposed by an ordinance of Pasay City — an issue
not at all related to that involved in a claimed exemption from the payment of income taxes imposed on
property leases. In Jesus Sacred Heart College v. Com. of Internal Revenue, 53 the party therein, which
claimed an exemption from the payment of income tax, was an educational institution which submitted
substantial evidence that the income subject of the controversy had been devoted or used solely for
educational purposes. On the other hand, the private respondent in the present case has not given any
proof that it is an educational institution, or that part of its rent income is actually, directly and exclusively
used for educational purposes.

Epilogue

In deliberating on this petition, the Court expresses its sympathy with private respondent. It appreciates the
nobility of its cause. However, the Court's power and function are limited merely to applying the law fairly
and objectively. It cannot change the law or bend it to suit its sympathies and appreciations. Otherwise, it
would be overspilling its role and invading the realm of legislation.

We concede that private respondent deserves the help and the encouragement of the government. It needs
laws that can facilitate, and not frustrate, its humanitarian tasks. But the Court regrets that, given its limited
constitutional authority, it cannot rule on the wisdom or propriety of legislation. That prerogative belongs to
the political departments of government. Indeed, some of the members of the Court may even believe in the
wisdom and prudence of granting more tax exemptions to private respondent. But such belief, however
well-meaning and sincere, cannot bestow upon the Court the power to change or amend the law.

WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated September 28, 1995
and February 29, 1996 are hereby REVERSED and SET ASIDE. The Decision of the Court of Appeals dated
February 16, 1995 is REINSTATED, insofar as it ruled that the income derived by petitioner from rentals of
its real property is subject to income tax. No pronouncement as to costs.

SO ORDERED.

Davide, Jr., Vitug and Quisumbing, JJ., concur.

Bellosillo, J., Please see Dissenting Opinion.

G.R. No. 127997 August 7, 1998

FELIX VILLANUEVA, petitioner,

vs.
COURT OF APPEALS and ALMARIO GO MANUEL, respondents.

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7
ROMERO, J.:

For the Court's resolution is the petition for review of the decision of the Court of Appeals in CA-G.R. CV 39731
entitled "Almario Go Manuel v. Felix Villanueva" 1 dated January 30, 1996, involving an action for sum of money.

In 1991, private respondent, Almario Go Manuel filed a civil action for sum of money with damages before the
Regional Trial Court of Cebu City, Branch 8 against petitioner, Felix Villanueva and his wife Melchora. The subject
matter of the action involved a check dated June 30, 1991 in the amount of P167,600.00 issued by petitioner in
favor of private respondent. The check supposedly represented payment of loans previously obtained by petitioner
from private respondent as capital for the former's mining and fertilizer business. The check when duly represented
for payment was dishonored due to insufficiency of funds. A demand was made upon petitioner to make good the
check but he failed to do so. Private respondent then filed a criminal complaint for violation of Batas Pambansa
Bilang 22 2 before the Cebu City Prosecutor's Office and the subject civil complaint for sum of money. Petitioner, on
the other hand, avers that his principal obligation only amounts to P23,420.00.

On July 27, 1992, the trial court rendered a decision in favor of private respondent, the dispositive portion of which
reads:

THE FOREGOING CONSIDERED, Judgment is hereby rendered in favor of the plaintiff and against
co-defendant Felix Villanueva, directing the latter to pay the former P167,600.00, the dismissal of
this case with respect to co-defendant Melchora Villanueva, and finally with costs against the
husband.

SO ORDERED. 3

Apparently aggrieved, both parties appealed the decision to the Court of Appeals. Petitioner prayed for the reversal
of the trial court's decision and contended that his principal obligation is only P23,420.00, while private respondent
sought interest of ten percent (10%) of the principal obligation; twenty-five percent (25%) as attorney's fees, as well
as moral and exemplary damages.

The Court of Appeals dismissed the petition and affirmed the decision of the trial court subject to the modification
that petitioner was directed to additionally pay private respondent attorney's fees and litigation expenses in the
amount of ten (10%) percent of P167,000.00, and the entire obligation to earn interest at six (6%) percent per
annum from the filing of the complaint. 4 Petitioner now comes before this Court basically alleging the same issues
raised before the Court of Appeals as follows: (a) the Court of Appeals erred in not ruling that the five (5%) and ten
(10%) percent interest imposed is not enforceable due to absence of such stipulation in writing; (b) the Court of
Appeals erred in not finding that petitioner is only liable for the amount P23,420.00; and (c) the Court of Appeals
erred in not declaring that the Central Bank and Monetary Board has no power or authority to repeal the usury law. 5

The petition should be denied.

Time and again it has been ruled that the jurisdiction of this Court in cases brought to it from the Court of Appeals is
limited to the review and revision of errors of law allegedly committed by the appellate court, as its findings of fact
are deemed conclusive. As such, this Court is not duty-bound to analyze and weigh all over again the evidence
already considered in the proceedings below. 6 The rule, however, admits of the following exceptions: (1) when the
inference made is manifestly mistaken, absurd or impossible; (2) when there is a grave abuse of discretion; (3)
when the finding is grounded entirely on speculations, surmises or conjectures; (4) when the judgment of the Court
of Appeals is based on misapprehension of facts; (5) when the findings are conflicting; (6) when the Court of
Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of
both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to those of the trial court; (8)
when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly
considered, would justify a different conclusion; and (10) when the findings of fact of the Court of Appeals are
premised on the absence of evidence and are contradicted by the evidence on record. 7

After a review of the case at bar, we consider petitioner to have failed to raise issues which would constitute
sufficient ground to warrant the reversal of the findings of the trial and appellate courts.
As regards the matter of legal interest, this Court, in the case of Eastern Shipping Lines, Inc. v. Court of
Appeals 8 laid down the following guidelines:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVII
on "Damages" of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory Page |
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
8
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due is that which may have
been stipulated in writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached,

an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. . . . .

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.

Applying the foregoing rules, since the principal obligation in the amount of P167,600.00 is a loan, the same should
earn legal interest at the rate of 12% per annum computed from the time the complaint was filed until the finality of
this decision. On the other hand, if the total obligation is not satisfied it shall further earn legal interest at the rate of
12% per annum computed from the finality of the decision until payment thereof, the interim period being deemed to
be a forbearance of credit.

WHEREFORE, premises considered, the decision of the Court of Appeals in CA-G.R. CV 39731 dated January 30,
1996 is hereby AFFIRMED with the MODIFICATION that the rate of legal interest to be paid is TWELVE PERCENT
(12%) per annum of the amount due computed from the time the complaint was filed until the finality of this decision.
After this decision becomes final and executory, the rate of TWELVE PERCENT (12%) per annum shall be
additionally imposed on the total obligation until payment thereof is satisfied. No costs.

SO ORDERED.

Narvasa, C.J., Kapunan and Purisima, JJ., concur.

Footnotes

1 Penned by Associate Justice Alfredo L. Benipayo, Ibay-Somera and Lipana-Reyes, JJ., concurring.

2 An Act Penalizing the Making and Issuance of Bouncing Checks.

3 Rollo, pp. 35-48.

4 Ibid., pp. 24-34.

5 Id., pp. 12-13.

6 Gaw v. Intermediate Appellate Court, 220 SCRA 405 (1993).

7 Reyes v. Court of Appeals, 258 SCRA 651 (1996).

8 234 SCRA 78 (1994).

G.R. No. 89114 December 2, 1991

FRANCISCO S. TANTUICO, JR., petitioner,

vs.
REPUBLIC OF THE PHILIPPINES, PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, MATEO A. T.
CAPARAS, AND THE SANDIGANBAYAN, respondents.

Kenny H. Tantuico for petitioner. Page |

9

PADILLA, J.:

In this petition for certiorari, mandamus and prohibition with a prayer for the issuance of a writ of preliminary
injunction and/or restraining order, the petitioner seeks to annul and set aside the resolution of the Sandiganbayan,
dated 21 April 1989, denying his motion for a bill of particulars as well as its resolution, dated 29 May 1989, which
denied his motion for reconsideration; to compel the respondent PCGG to prepare and file a bill of particulars, or
that said respondent be ordered to exclude petitioner as defendant in Civil Case No. 0035 should they fail to submit
the said bill of particulars; and to enjoin the respondent Sandiganbayan from further proceeding against petitioner
until the bill of particulars is submitted, claiming that the respondent Sandiganbayan acted with grave abuse of
discretion amounting to lack of jurisdiction in promulgating the aforesaid resolutions and that there is no appeal, nor
any plain, speedy and adequate remedy for him in the ordinary course of law other than the present petition.

As prayed for, this Court issued on 1 August 1989 a temporary restraining order "effective immediately and
continuing until further orders from this Court, ordering the respondent Sandiganbayan to CEASE and DESIST from
further proceeding in Civil Case No. 0035 (PCGG 35), entitled "Republic of the Philippines vs. Benjamin (Kokoy)
Romualdez, et al." pending before it. 1

The antecedents are as follows:

On 31 July 1987, the Republic of the Philippines, represented by the PCGG, and assisted by the Office of the Solicitor General, filed with the Sandiganbayan Civil Case No. 0035, entitled "Republic of the Philippines vs. Benjamin (Kokoy) Romualdez, et al." for
reconveyance, reversion, accounting, restitution and damages. 2

The principal defendants in the said Civil Case No. 0035 are Benjamin (Kokoy) Romualdez, Ferdinand E. Marcos and Imelda R. Marcos.

Petitioner Francisco S. Tantuico, Jr. was included as defendant in Civil Case No. 0035 on the theory that: (1) he acted in unlawful concert with the principal defendants in the misappropriation and theft of public funds, plunder of the nation's wealth, extortion, blackmail,

(2) he acted as dummy, nominee or agent, by allowing himself to be

bribery, embezzlement and other acts of corruption, betrayal of public trust and brazen abuse of power; 3

incorporator, director, board member and/or stockholder of corporations beneficially held and/or controlled by the
principal defendants; 4 (3) he acted singly or collectively, and/or in unlawful concert with one another, in flagrant
breach of public trust and of their fiduciary obligations as public officers, with gross and scandalous abuse of right
and power and in brazen violation of the Constitution and laws of the Philippines, embarked upon a systematic plan
to accumulate ill-gotten wealth ; 5 (4) he (petitioner) taking undue advantage of his position as Chairman of the
Commission on Audit and with grave failure to perform his constitutional duties as such Chairman, acting in concert
with defendants Ferdinand E. Marcos and Imelda R. Marcos, facilitated and made possible the withdrawals,
disbursements and questionable use of government funds; 6 and (5) he acted as dummy, nominee and/or agent by
allowing himself to be used as instrument in accumulating ill-gotten wealth through government concessions, orders
and/or policies prejudicial to plaintiff, or to be incorporator, director, or member of corporations beneficially held
and/or controlled by defendants Ferdinand E. Marcos, Imelda R. Marcos, Benjamin (Kokoy) Romualdez and Juliette
Gomez Romualdez in order to conceal and prevent recovery of assets illegally obtained. 7

was denied by respondent court in its resolution 9 dated 9 March 1988, petitioner
On 11 April 1988, after his motion for production and inspection of documents 8

filed a Motion for a Bill of Particulars, 10 alleging inter alia that he is sued for acts allegedly committed by him as (a) a
public officer-Chairman of the Commission on Audit, (b) as a private individual, and (c) in both capacities, in a
complaint couched in too general terms and shorn of particulars that would inform him of the factual and legal basis
thereof, and that to enable him to understand and know with certainty the particular acts allegedly committed by him
and which he is now charged with culpability, it is necessary that plaintiff furnish him the particulars sought therein
relative to the averments in paragraphs 2, 9(a), 15, 7 and 17 of the Second Amended Complaint so that he can
intelligently prepare his responsive pleading and prepare for trial. The particulars sought for in the said motion are
as follows:
a. Relative to the averments in paragraphs 2, 9(a) and l5 of the Second Amended Complaint:

i) What are the dates of the resolutions (if on appeal) or the acts (if otherwise) issued or performed
by herein defendant which allowed the facilitation of, and made possible the, withdrawals,
disbursements and questionable use of government funds;

ii) What ministries or Departments, offices or agencies of the government were involved in these
questionable use of government funds; Page |
10
iii) What are the names of the auditors who had the original audit jurisdiction over the said
withdrawals, disbursements and questionable use of government funds;

iv) How much government funds were involved in these questionable-disbursements, individually
and in totally?

v) Were the disbursements brought to herein defendant for action on pre-audit, post-audit or
otherwise or where they initiated and/or allowed release by herein defendant alone, without them
undergoing usual governmental audit procedures, or in violation thereof.?

vi) What were herein defendant's other acts or omission or participation in the matter of allowing
such disbursements and questionable use of government funds, if any?

b. Relative to paragraphs 7 and 17 of the Second Amended Complaint:

i) In what particular contract, dealing, transaction and/or relationship of any nature of Ferdinand E.
Marcos, Imelda R. Marcos, Juliette Gomez Romualdez or Benjamin T. Romualdez did herein
defendant act as dummy, nominee or agent? Please specify the dealings, the dates, the
corporations or entities involved, the government offices involved and the private and public
documents, if any, showing herein defendant's complicity, since he is not aware of any such
instance. More basically, please specify whether the defendant is a dummy or nominee or agent and
of which corporation or transaction?

ii) What particular government concession, order and/or policy obtained by Ferdinand E. Marcos, or
Imelda R. Marcos, or Juliette Gomez Romualdez and/or Benjamin T. Romualdez allowed them
either singly or jointly to accumulate ill-gotten wealth by using herein defendant as instrument for
their accomplishment. Likewise please identify the nature of the transactions, the dates and the
document showing complicity on the part of herein defendant; he is not aware of any such instance.

iii) Please specify the name or denominate the particular government concession, order and/or
policy prejudicial to the interest of the government which was obtained by either of the above-named
four defendants through the participation of herein defendant as a dummy, nominee or agent of
herein defendant. Please likewise identify the government office involved, the dates and other
particulars, likewise defendant is not aware of any such instance.

iv) Please name and specify the corporation whether stock or non-stock, whether government or
private, beneficially held and/or controlled by either of the four above defendants, where herein
defendant is an incorporator, director or member and where his inclusion as such incorporator,
director or member of the corporation was made in order to conceal and prevent recovery of assets
illegally obtained by the aforementioned four defendants, how many shares are involved and what
are their values, how and when have they been acquired.

The Solicitor General, for and in behalf of respondents (except the respondent Sandiganbayan), opposed
the motion. 11 After the petitioner had filed his reply 12 thereto, the respondent Sandiganbayan promulgated
on 21 April 1990 a resolution 13 denying the petitioner's motion for a bill of particulars on the ground that the
particulars sought by petitioner are evidentiary in nature, the pertinent part of which resolution reads, as
follows:

We are of the considered opinion that the allegations in the Expanded Complaint are quite clear and
sufficient enough for defendant-movant to know the nature and scope of the causes of action upon
which plaintiff seeks relief. They provide the factual scenario which, coupled with other allegations
set forth in the "Common Averments" and further specified in the "Specific Averments" of herein
defendant-movant and his co-defendants' illegal acts which are within defendant-movant's peculiar
and intimate knowledge as a government official and corporate executive, will enable him to make
the proper admission, denials or qualifications, set out affirmative and/or special defenses and
thereafter prepare for trial. Evidentiary facts or matters are not essential in the pleading of the cause
of action, nor to details or probative value or particulars of evidence by which these material
evidence are to be established (Remitere vs. Yulu, 6 SCRA 251). The matters which he seeks are
 evidentiary in nature and, being within his intimate or personal knowledge, may be denied or
admitted by him or if deemed necessary, be the subject of other forms of discovery. 14

Petitioner moved for reconsideration 15

but this was denied by respondent Sandiganbayan in its resolution 16 dated 29 May 1990.

Hence, petitioner filed the present petition.

The principal issue to be resolved in the case at bar is whether or not the respondent Sandiganbayan acted Page |
with grave abuse of discretion in issuing the disputed resolutions. 11

Petitioner argues that the allegations of the Second Amended Complaint in Civil Case No. 0035 (PCGG 35)
pertaining to him state only conclusions of fact and law, inferences of facts from facts not pleaded and mere
presumptions, not ultimate facts as required by the Rules of Court.

On the other hand, the respondent Sandiganbayan, by and through the Solicitor General, contends that the
essential elements of an action for recovery of ill-gotten wealth are: (1) an accumulation of assets, properties
and other possessions; (2) of former President Ferdinand E. Marcos, Mrs. Imelda Romualdez Marcos, their
close relatives, subordinates, business associates, dummies, agents, or nominees; and (3) whose value is
out of proportion to their known lawful income, and that the ultimate facts establishing these three (3)
essential elements of an action for recovery of ill-gotten wealth are sufficiently alleged in the complaint.
Hence, petitioner is not entitled to a bill of particulars.

A complaint is defined as a concise statement of the ultimate facts constituting the plaintiff's cause or causes
of action. 17 Like all other pleadings allowed by the Rules of Court, 18 the complaint shall contain in a
methodical and logical form a plain, concise and direct statement of the ultimate facts on which the plaintiff
relies for his claim, omitting the statement of mere evidentiary
facts. 19 Its office, purpose or function is to inform the defendant clearly and definitely of the claims made
against him so that he may be prepared to meet the issues at the trial. The complaint should inform the
defendant of all the material facts on which the plaintiff relies to support his demand; it should state the
theory of a cause of action which forms the bases of the plaintiff's claim of liability. 20

The rules on pleading speak of two (2) kinds of facts: the first, the "ultimate facts", and the second, the
"evidentiary facts." In Remitere vs. Vda. de Yulo, 21 the term "ultimate facts" was defined and explained as
follows:

The term "ultimate facts" as used in Sec. 3, Rule 3 of the Rules of Court, means the essential facts
constituting the plaintiffs cause of action. A fact is essential if it cannot be stricken out without leaving
the statement of the cause of action insufficient. . . . (Moran, Rules of Court, Vol. 1, 1963 ed., p.
213).

Ultimate facts are important and substantial facts which either directly form the basis of the primary
right and duty, or which directly make up the wrongful acts or omissions of the defendant. The term
does not refer to the details of probative matter or particulars of evidence by which these material
elements are to be established. It refers to principal, determinate, constitutive facts, upon the
existence of which, the entire cause of action rests.

while the term "evidentiary fact" has been defined in the following tenor:

Those facts which are necessary for determination of the ultimate facts; they are the premises upon
which conclusions of ultimate facts are based. Womack v. Industrial Comm., 168 Colo. 364,451 P.
2d 761, 764. Facts which furnish evidence of existence of some other fact. 22
Where the complaint states ultimate facts that constitute the three (3) essential elements of a cause of action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation

However, where the allegations

of said legal right, the complaint states a cause of action, otherwise, the complaint must succumb to a motion to dismiss on that ground of failure to state a cause of action. 23

of the complaint are vague, indefinite, or in the form of conclusions, the proper recourse would be, not a
motion to dismiss, but a motion for a bill of particulars. 24 Thus, Section 1, Rule 12 of the Rules of Court
provides:

Before responding to a pleading or, if no responsive pleading is permitted by these rules, within ten
(10) days after service of the pleading upon him, a party may move for a more definite statement or
for a bill of particulars of any matter which is not averred with sufficient definiteness or particularity to
enable him properly to prepare his responsive pleading or to prepare for trial. Such motion shall
point out the defects complained of and the details desired.

In this connection, the following allegations have been held as mere conclusions of law, inferences from
facts not alleged or opinion of the pleader: (a) the allegations that defendants appellees were "actuated by
ulterior motives, contrary to law and morals, with abuse of their advantageous position as employers, in
gross and evident bad faith and without giving plaintiff . . . his due, wilfully, maliciously, unlawfully, and in
summary and arbitrary manner", are conclusions of law, inferences from facts not alleged and expressions
of opinion unsupported by factual premises; 25 (b) an allegation of duty in terms unaccompanied by a
statement of facts showing the existence of the duty, is a mere conclusion of law, unless there is a relation
set forth from which the law raises the duty; 26 (c) an averment . . . that an act was "unlawful" or "wrongful" is
a mere legal conclusion or opinion of the pleader; 27 (d) the allegation that there was a violation of trust was
plainly a conclusion of law, for "a mere allegation that it was the duty of a party to do this or that, or that he
was guilty of a breach of duty, is a statement of a conclusion, not of a fact;" 28 (e) an allegation that a contract
is valid or void, is a mere conclusion of law; 29 (f) the averment in the complaint that "defendant usurped the
Page |
office of Senator of the Philippines" is a conclusion of law — not a statement of fact — inasmuch as the
particular facts on which the alleged usurpation is predicated are not set forth therein; 30 and (g) the 12
averment that "with intent of circumventing the constitutional prohibition that 'no officer or employee in the
civil service shall be removed or suspended except for cause as provided by law', respondents maliciously
and illegally for the purpose of political persecution and political vengeance, reverted the fund of the salary
item . . . and furthermore eliminated or abolished the said position effective 1 July 1960" is a mere
conclusion of law unsupported by factual premises. 31

Bearing in mind the foregoing rules on pleading and case law, let us now examine the allegations of the Second Amended Complaint against
the petitioner to determine whether or no they were averred with sufficient definiteness or particularity to enable him properly to prepare his
responsive pleading or to prepare for trial. If the allegations of the said complaint are vague, indefinite or in the form of conclusions, then
petitioner is entitled to a bill of particulars.

The allegations in the complaint pertaining to the alleged culpable and unlawful acts of herein petitioner are quoted hereunder as follows:

GENERAL AVERMENTS

OF

DEFENDANTS' ILLEGAL ACTS

9. (a) From the early years of his presidency, Defendant Ferdinand E. Marcos took undue advantage of his powers as President. All
throughout the period from September 21, 1972 to February 25, 1986, he gravely abused his powers under martial law and ruled as
Dictator under the 1973 Marcos-promulgated Constitution. Defendant Ferdinand E. Marcos, together with other Defendants, acting
singly or collectively, and/or in unlawful concert with one another, in flagrant breach of public trust and of their fiduciary obligations
as public officers, with gross and scandalous abuse of right and power and in brazen violation of the Constitution and laws of the
Philippines, embarked upon a systematic plan to accumulate ill-gotten wealth;

(b) Upon his unfettered discretion, and sole authority, for the purpose of implementing the plan referred to above, Defendant
Ferdinand E. Marcos ordered and caused, among others:

(b-i) the massive and unlawful withdrawal of funds, securities, reserves and other assets and property from the National
Treasury, the Central Bank, the other financial institutions and depositories of Plaintiff;

(b-ii) the transfer of such funds, securities, reserves and other assets and property to payees or transferees of his choice
and whether and in what manner such transactions should be recorded in the books and records of these institutions and
other depositories of Plaintiff;

10. Among others, in furtherance of the plan and acting in the manner referred to above, in unlawful concerted with one another and
with gross abuse of power and authority, Defendants Ferdinand E. Marcos and Imelda R. Marcos;

xxx xxx xxx

b. Converted government-owned and controlled corporations into private enterprises and appropriated them and/or their
assets for their own benefit and enrichment;

c. Awarded contracts with the Government to their relatives, business associates, dummies, nominees, agents or persons
who were beholden to said Defendants, under terms and conditions grossly and manifestly disadvantageous to the
Government;

d. Misappropriated, embezzled and/or converted to their own use funds of Government financial institutions, particularly
those allocated to the Office of the President and other ministries and agencies of the Government including, those
 conveniently denominated as intelligence or counter-insurgency funds, as well as funds provided to Plaintiff by foreign
countries, multinationals, public and private financial institutions;

e. Raided Government financial and banking institutions of billions of pesos in loans, guarantees and other types of
financial accommodations to finance dubious and/or overpriced projects of favored corporations or individuals and
misused and/or converted to their own use and benefit deposits found therein to the financial ruin of Plaintiff and the
Filipino people;
Page |
xxx xxx xxx 13

h. Sold, conveyed and/or transferred Government property, real and/or personal, to corporations beneficially held and/ or
controlled by them or through third persons, under such terms and conditions grossly and manifestly disadvantageous to
the Government;

i. Engaged in other illegal and improper acts and practices designed to defraud Plaintiff and the Filipino people, or
otherwise misappropriated and converted to their own use, benefit and enrichment the lawful patrimony and revenues of
Plaintiff and the Filipino people.

11. Among the assets acquired by Defendants in the manner above-described and discovered by the Commission in the exercise of
its official responsibilities are funds and other property listed in Annex "A" hereof and made an integral part of this Complaint.

12. Defendants, acting singly or collectively, and/or in unlawful concert with one another, for the purpose of preventing disclosure
and avoiding discovery of their unmitigated plunder of the National Treasury and of their other illegal acts, and employing the
services of prominent lawyers, accountants, financial experts, businessmen and other persons, deposited, kept and invested funds,
securities and other assets estimated at billions of US dollars in various banks, financial institutions, trust or investment companies
and with persons here and abroad.

SPECIFIC AVERMENTS

OF

DEFENDANTS' ILLEGAL ACTS

xxx xxx xxx

14. Defendants Benjamin (Kokoy) Romualdez and Juliette Gomez Romualdez, acting by themselves and/or in unlawful concert with
Defendants Ferdinand E. Marcos and Imelda R. Marcos, and taking undue advantage of their relationship, influence and connection
with the latter Defendant spouses, engaged in devices, schemes and strategems to unjustly enrich themselves at the expense of
Plaintiff and the Filipino people, among others:

(a) obtained, with the active collaboration of Defendants Senen J. Gabaldon, Mario D. Camacho, Mamerto Nepomuceno, Carlos J.
Valdes, Delia Tantuico, Jovencio F. Cinco, Cesar C. Zalamea and Francisco Tantuico, control of some of the biggest business
enterprises in the Philippines, such as, the Manila Electric Company (MERALCO), Benguet Consolidated Mining Corporation
(BENGUET) and the Pilipinas Shell Corporation, by employing devious financial schemes and techniques calculated to require the
massive infusion and hemmorrhage of government funds with minimum or negligible "cashout" from Defendant Benjamin
Romualdez. The following are the general features of a classic take-over bid by Defendant Benjamin Romualdez:

xxx xxx xxx

(ii) The shares were held in the name of corporations which were organized soldely (sic) for the purpose of holding title to
them. These corporations did not have any operating history nor any financial track record. Projected cash flow consisted
almost solely of future and contingent dividends on the shares held. In spite of these limitations, these companies enjoyed
excellent credit lines from banks and other financial institutions, as evidenced by the millions of pesos in loan and
guarantees outstanding in their books;

(iii) The "seed money" used to wrest control came from government and taxpayers' money in the form of millions of pesos
in loans, guarantees and standby L/C's from government financial institutions, notably the DBP and PNB, which were in
turn rediscounted with the Central Bank;
 (iv) Additional funding was provided from the related interests; and

(v) This intricate (sic) skein of inter-corporate dealings was controlled and administered by an exclusive and closely knit
group of interlocking directorate and officership

xxx xxx xxx

(g) Secured, in a veiled attempt to justify MERALCO's anomalous acquisition of the electric cooperatives, with the active Page |
collaborations of Defendants Cesar E. A. Virata, Juanita R. Remulla, Isidro Rodriguez, Jose C. Hernandez, Pedro Dumol, Ricardo 14
C. Galing, Francisco C. Gatmaitan, Mario D. Camacho and the rest of the Defendants, the approval by Defendant Ferdinand E.
Marcos and his cabinet of the so-called "Three-Year Program for the Extension of MERALCO's Services to Areas Within The 60-
kilometer Radius of Manila", which required government capital investment amounting to millions of pesos;

xxx xxx xxx

(1) Caused the National Investment and Development Corporation (NIDC) to dispose of its interest in the oil plants located in
Tanauan, Leyte, which were owned and operated by its subsidiary, the NIDC Oil Mills, Inc., in favor of the SOLO II, Inc., a
corporation beneficially held and controlled by Defendant Benjamin Romualdez, with the active collaboration of Defendants Jose
Sandejas, Francisco Tantuico and Dominador G. Ingco, under terms and conditions grossly disadvantageous to NIDC, to the grave
and irreparable damage of Plaintiff and the Filipino people.

(2) Defendant Francisco Tantuico, taking undue advantage of his position as Chairman of the Commission on Audit and with grave
failure to perform his constitutional duties as such Chairman, acting in concert with Defendants Ferdinand E. Marcos and Imelda R.
Marcos, facilitated and made possible the withdrawals, disbursements and questionable use of government funds as stated in the
foregoing paragraphs to the grave and irreparable damage and injury of Plaintiff and the entire Filipino people.

xxx xxx xxx

17. The following Defendants acted as dummies, nominees and/ or agents by allowing themselves (i) to be used as instruments in
accumulating ill-gotten wealth through government concessions, orders and/or policies prejudicial to Plaintiff, or (ii) to be
incorporators, directors, or members of corporations held and/or controlled by Defendants Ferdinand E. Marcos, Imelda R. Marcos,
Benjamin (Kokoy) Romualdez, and Juliette Gomez Romualdez in order conceal (sic) and prevent recovery of assets illegally
obtained: Francisco Tantuico . . .

17.a. THE NAMES OF SOME OF THE CORPORATIONS BENEFICALLY HELD AND/OR CONTROLLED BY THE DEFENDANTS
BENJAMIN (KOKOY) ROMUALDEZ, FERDINAND E. MARCOS AND IMELDA R. MARCOS WHERE THE
POSITIONS/PARTICIPATIONS AND/OR INVOLVEMENTS OF SOME OF THE DEFENDANTS AS DUMMIES, NOMINEES
AND/OR AGENTS ARE INDICATED ARE LISTED IN ANNEX "B" HEREOF AND MADE AN INTEGRAL PART OF THIS
COMPLAINT.

xxx xxx xxx

18. The acts of Defendants, singly or collectively, and/or in unlawful concert with one another, constitute gross abuse of official
position and authority, flagrant breach of public trust and fiduciary obligations, acquisition of unexplained wealth, brazen abuse of
official position and authority, flagrant breach of public trust and fiduciary obligations, acquisition of unexplained wealth, brazen
abuse of right and power, unjust enrichment, violation of the Constitution and laws of the Republic of the Philippines, to the grave
and irreparable damage of Plaintiff and the Filipino people. (Emphasis supplied)

Let us now analyze and discuss the allegations of the complaint in relation to which the petitioner pleads for a bill of particulars.

As quoted above, paragraph 9(a) of the complaint alleges that "Defendant Ferdinand E. Marcos, together with other Defendants, acting singly
or collectively, and/or in unlawful concert with one another, in flagrant breach of public trust and of their fiduciary obligations as public officers,
with gross and scandalous abuse of right and power and in brazen violation of the Constitution and laws of the Philippines, embarked upon a
systematic plan to accumulate ill-gotten wealth." In the light of the rules on pleading and case law cited above, the allegations that defendant
Ferdinand E. Marcos, together with the other defendants "embarked upon a systematic plan to accumulate ill-gotten wealth" and that said
defendants acted "in flagrant breach of public trust and of their fiduciary obligations as public officers, with gross and scandalous abuse of
right and in brazen violation of the Constitution and laws of the Philippines", are conclusions of law unsupported by factual premises.

Nothing is said in the complaint about the petitioner's acts in execution of the alleged "systematic plan to accumulate ill-gotten wealth", or
which are supposed to constitute "flagrant breach of public trust", "gross and scandalous abuse of right and power", and "violations of the
Constitution and laws of the Philippines". The complaint does not even allege what duties the petitioner failed to perform, or the particular
rights he abused.

Likewise, paragraph 15 avers that "defendant Francisco Tantuico, taking undue advantage of his position as Chairman of the Commission on
Audit and with grave failure to perform his constitutional duties as such Chairman, acting in concert with Defendants Ferdinand E. Marcos and
Imelda R. Marcos facilitated and made possible the withdrawals, disbursements and questionable use of government funds as stated in the
foregoing paragraphs to the grave and irreparable damage and injury of Plaintiff and the entire Filipino people." In like manner, the allegation
that petitioner "took undue advantage of his position as Chairman of the Commission on Audit," that he "failed to perform his constitutional Page |
duties as such Chairman," and acting in concert with Ferdinand E. Marcos and Imelda R. Marcos, "facilitated and made possible the 15
withdrawals, disbursements, and questionable use of government funds as stated in the foregoing paragraphs, to the grave and irreparable
damage and injury of plaintiff and the entire Filipino people", are mere conclusions of law. Nowhere in the complaint is there any allegation as
to how such duty came about, or what petitioner's duties were, with respect to the alleged withdrawals and disbursements or how petitioner
facilitated the alleged withdrawals, disbursements, or conversion of public funds and properties, nor an allegation from where the withdrawals
and disbursements came from, except for a general allegation that they came from the national treasury. On top of that, the complaint does
not even contain any factual allegation which would show that whatever withdrawals, disbursements, or conversions were made, were indeed
subject to audit by the COA.

In this connection, it may well be stated that the Commission on Audit (COA) is an independent, constitutional commission, which has no power or authority to withdraw, disburse, or use funds and property pertaining to other government offices or

The COA is merely authorized

agencies. This is done by the agency or office itself, the chief or head of which is primarily and directly responsible for the funds and property pertaining to such office or agency. 32

to audit, examine and settle accounts of the various government offices or agencies, and this task is
performed not by the Chairman of the COA but by the COA auditors assigned to the government office or
agency subject to COA audit.

Thus, in each agency of the government, there is an auditing unit headed by an auditor, whose duty is to
audit and settle the accounts, funds, financial transactions, and resources of the agency under his audit
jurisdiction. 33 The decision of the auditor is appealable to the Regional Director, 34 whose decision, is in turn,
appealable to the COA Manager. 35 Any party dissatisfied with the decision of the COA Manager may bring
the matter on appeal to the Commission proper, a collegiate body exercising quasi-judicial functions,
composed of three (3) COA Commissioners, with the COA Chairman as presiding officer. 36 It is only at this
stage that the COA Chairman would come to know of the matter and be called upon to act on the same, and
only if an aggrieved party brings the matter on appeal.

In other words, the Chairman of the COA does not participate or personally audit all disbursements and
withdrawals of government funds, as well as transactions involving government property. The averments in
the particular paragraph of the complaint merely assume that petitioner participated in or personally
audited all disbursements and withdrawals of government funds, and all transactions involving government
property. Hence, the alleged withdrawals, disbursements and questionable use of government funds could
not have been, as held by respondent Sandiganbayan, "within the peculiar and intimate knowledge of
petitioner as Chairman of the COA."

The complaint further avers in paragraph 17 that "(t)he following Defendants acted as dummies, nominees
and/or agents by allowing themselves (i) to be instruments in accumulating ill-gotten wealth through
government concessions, order and/or policies prejudicial to Plaintiff, or (ii) to be incorporators, directors, or
members of corporations beneficially held and/or controlled by Defendant Ferdinand E. Marcos, Imelda R.
Marcos, Benjamin (Kokoy) T. Romualdez and Juliette Gomez Romualdez in order to conceal and prevent
recovery of assets illegally obtained: Francisco Tantuico . . ." 37 Again, the allegation that petitioner acted as
dummy, nominee, or agent by allowing himself "to be used as instrument in accumulating ill-gotten wealth
through government concessions, orders and/or policies prejudicial to Plaintiff" or "to be (an) incorporator,
director, or member of corporations beneficially held and/or controlled" by the Marcoses and Romualdezes,
is a conclusion of law without factual basis.

The complaint does not contain any allegation as to how petitioner became, or why he is perceived to be, a
dummy, nominee or agent. Besides, there is no averment in the complaint how petitioner allowed himself to
be used as instrument in the accumulation of ill-gotten wealth, what the concessions, orders and/or policies
prejudicial to plaintiff are, why they are prejudicial, and what petitioner had to do with the granting, issuance,
and or formulation of such concessions, orders, and/or policies. Moreover, Annex "A" of the complaint lists
down sixty-one (61) corporations which are supposed to be beneficially owned or controlled by the
Marcoses and Romualdezes. However, the complaint does not state which corporations petitioner is
supposed to be a stockholder, director, member, dummy, nominee and/or agent. More significantly, the
petitioner's name does not even appear in Annex "B" of the complaint, which is a listing of the alleged
"Positions and Participations of Some Defendants".

The allegations in the complaint, above-referred to, pertaining to petitioner are, therefore, deficient in that
they merely articulate conclusions of law and presumptions unsupported by factual premises. Hence,
without the particulars prayed for in petitioner's motion for a bill of particulars, it can be said the petitioner
can not intelligently prepare his responsive pleading and for trial.

Furthermore, the particulars prayed for, such as, names of persons, names of corporations, dates, amounts
involved, specification of property for identification purposes, the particular transactions involving
withdrawals and disbursements, and a statement of other material facts as would support the conclusions
and inferences in the complaint, are not evidentiary in nature. On the contrary, those particulars are material
facts that should be clearly and definitely averred in the complaint in order that the defendant may, in Page |
fairness, be informed of the claims made against him to the end that he may be prepared to meet the issues
at the trial. 16

Thus, it has been held that the purpose or object of a bill of particulars is —

. . . to amplify or limit a pleading, specify more minutely and particularly a claim or defense set up
and pleaded in general terms, give information, not contained in the pleading, to the opposite party
and the court as to the precise nature, character, scope, and extent of the cause of action or defense
relied on by the pleader, and apprise the opposite party of the case which he has to meet, to the end
that the proof at the trial may be limited to the matters specified, and in order that surprise at, and
needless preparation for, the trial may be avoided, and that the opposite party may be aided in
framing his answering pleading and preparing for trial. It has also been stated that it is the function or
purpose of a bill of particulars to define, clarify, particularize, and limit or circumscribe the issues in
the case, to expedite the trial, and assist the court. A general function or purpose of a bill of
particulars is to prevent injustice or do justice in the case when that cannot be accomplished without
the aid of such a bill. 38

Anent the contention of the Solicitor General that the petitioner is not entitled to a bill of particulars because the ultimate facts constituting the three (3) essential
elements of a cause of action for recovery of ill-gotten wealth have been sufficiently alleged in the complaint, it would suffice to state that in a motion for a bill of
particulars, the only question to be resolved is whether or not the allegations of the complaint are averred with sufficient definiteness or particularity to enable the
movant properly to prepare his responsive pleading and to prepare for trial. As already discussed, the allegations of the complaint pertaining to the herein
petitioner are deficient because the averments therein are mere conclusions of law or presumptions, unsupported by factual premises.

In the light of the foregoing, the respondent Sandiganbayan acted with grave abuse of discretion amounting to lack or excess of jurisdiction in promulgating the
questioned resolutions.

WHEREFORE, the petition is GRANTED and the resolutions dated 21 April 1989 and 29 May 1989 are hereby ANNULLED and SET ASIDE. The respondents are
hereby ordered to PREPARE and FILE a Bill of Particulars containing the facts prayed for by petitioner within TWENTY (20) DAYS from notice, and should they
fail to submit the said Bill of Particulars, respondent Sandiganbayan is ordered TO EXCLUDE the herein petitioner as defendant in Civil Case No. 0035.

SO ORDERED.

Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Bidin, Griño-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.
Romero, J., took no part.

Fernan, C.J., is on leave.

G.R. No. 94093 August 10, 1993

FAR EAST MARBLE (PHILS.), INC., LUIS R. TABUENA, JR. and RAMON A. TABUENA, petitioners,
vs.
HONORABLE COURT OF APPEALS and BANK OF PHILIPPINE ISLANDS, respondents.

Minerva C. genevea for petitioners.

Page |
Sabino B. Padilla IV for Bank of the Philippines Islands. 17

MELO, J.:

This has reference to a petition for review by certiorari seeking the reversal of the decision of the Court of Appeals
dated June 26, 1990, in CA-G.R. CV No. 14404 (Bellosillo (P), Marigomen, Sempio-Diy, JJ.) which set aside the
order of the Regional Trial Court of the National Capital Judicial Region (Manila, Branch XIV), dated June 1, 1987
and remanded the case to the court a quo for further proceedings on the grounds that the complaint for foreclosure
of chattel mortgage with replevin had not prescribed and that, there being a cause of action, further proceedings,
including the resolution of the motion for summary judgment may be pursued.

The antecedent facts of the case may be chronicled as follows:

On February 5, 1987, herein respondent Bank of the Philippines Islands (BPI) filed a complaint for foreclosure of
chattel mortgage with replevin against petitioner Far East Marble (Phils.), Inc. (Far East), Ramon A. Tabuena and
Luis R. Tabuena, Jr. which was docketed as Civil Case No. 87-39345 of Branch XIV of the Regional Trial Court of
the National Capital Judicial Region stationed in Manila.

The complaint pertinently alleged:

FIRST CAUSE OF ACTION AGAINST FAR EAST

2. That on various dates and for valuable consideration, the defendant Far East received from
Commercial Bank and Trust Company . . . now merged with and into the plaintiff bank . . . several
loans evidenced by promissory notes executed by said Far East, photo copies of which are attached
hereto and made integral parts hereof as Annexes A, B and C.

3. That said promissory notes . . . .have long matured but despite repeated requests and demands
for payment thereof with interests and related charges due, Far East has failed and refused to pay.
The account due on said promissory notes with interests and related charges as of 10 September
1986 is P4,471,854.32 itemized in a statement of account, copy of which is attached hereto and
made a part hereof as Annex D

4. That because of Far East's failure and refusal in bad faith to pay its long past due obligations
under the promissory notes above alleged, plaintiff was constrained to file this suit . . .

SECOND CAUSE OF ACTION AGAINST FAR EAST

6. That on various dates and for valuable consideration, the defendant Far East received from and
was extended by . . . plaintiff
Bank . . . credit facilities in the form of Trust Receipts, photo copies of which are hereto attached and
made integral parts hereof as Annexes E, F, G, H, I and J.

7. That said Trust Receipts . . . have long matured and despite repeated requests and demands for
payment thereof with interests and related charges due Far East has failed and refused to pay. The
amount due on said Trust Receipts with interests and related charges as of 10 September 1986 is
P2,170,476.62 as itemized in a statement of account, copy of which is attached hereto and made an
integral part hereof as
Annex K.

8. That because of far East's failure and refusal to pay its long past due obligations under the Trust
Receipts above alleged, plaintiff was constrained to file this suit . . .

xxx xxx xxx

 10. That in September 1976 Far East executed in favor of . . . plaintiff Bank . . . a Chattel Mortgage,
photocopy of which is attached hereto and made an integral part hereof as Annex L, to secure the
payment of its loan obligations including interests and related charges. . .

xxx xxx xxx

CAUSE OF ACTION AGAINST INDIVIDUAL DEFENDANTS RAMON A. TABUENA AND LUIS R.

TABUENA, JR. Page |
18
13. That in September 1976, defendants Ramon A. Tabuena and Luis R. Tabuena, Jr. executed in
favor of . . . plaintiff Bank . . . a "continuing guaranty" photocopy of which is attached hereto and
made a part hereof as Annex M, whereby they bind themselves, jointly and severally, to answer for
the loan obligations to the Bank of defendant Far East.

14. That despite requests and demands for their payment of Far East's long past due accounts, said
defendants Ramon A. Tabuena and Luis R. Tabuena, Jr. have failed and refused to pay said Far
East accounts and have already defaulted in their solidary obligation under said "continuing
Guaranty."

15. That because of the failure and refusal of defendants Ramon A. Tabuena and Luis R. Tabuena,
Jr. in bad faith to pay Far East's past due accounts under their solidary obligation stipulated in said
"Continuing Guaranty,". . . plaintiff has been constrained to file suit against them . . .
(pp. 32-36, Rollo.)

On March 10, 1987, Far East filed an answer with compulsory counterclaim admitting the genuineness and due
execution of the promissory notes attached as Annexes A, B, and C to the complaint, but alleging further that said
notes became due and demandable on November 19, 1976, respectively. On the basis of the maturity dates of the
notes, Far East thereupon raised the affirmative defenses of prescription and lack of cause of action as it denied the
allegation of the complaint that BPI had made previous repeated requests and demands for payment. Far East
claimed that during the more than 10 years which elapsed from the dates of maturity of said obligations up to the
time the action for foreclosure of the chattel mortgage securing said obligations was filed, it had not received from
BPI or its predecessor any demand for payment and thus, it had "labored under the belief that they [the obligations]
have already been written off" in the books of BPI. Moreover, Far East denied the genuineness and due execution
of the trust receipts and of the Statement of Account (pp. 78-79, Rollo). A motion to hear affirmative defenses was
attached to the answer.

On March 16, 1987, BPI filed an opposition to the motion to hear affirmative defenses, alleging that its cause of
action against Far East have not prescribed, since within 10 years from the time its cause of action accrued, various
written extrajudicial demands (attached thereto as Annexes "A" and
"A-1") were sent by BPI and received by Far East. Moreover, BPI offered several written documents whereby Far
East supposedly acknowledged its debt to BPI (Annexes "B" to "B-6). Withal, BPI maintained, the ten-years
prescriptive period to enforce its written contract had not only been interrupted, but was renewed.

On the same date, BPI filed a motion for summary judgment on the ground that since Far East had admitted the
genuineness and due execution of the promissory notes and the deed of chattel mortgage annexed to its complaint,
there was no genuine issue as to any material fact, thus entitling BPI to a favorable judgment as a matter of law in
regard to its causes of action and on its right to foreclose the chattel mortgage.

On June 1, 1987, the trial court issued an order to the following effect:

WHEREFORE, the Court issues this Order:

1 — Dismissing the complaint against the defendant Far East Marble (Phils.) Inc. for lack of cause of
action and on grounds of pre[s]cription:

2 — Denying for lack of merit the Motion for Summary Judgment and the Supplemental Motion for
Summary Judgment;

3 — Striking off from the records the order of March 6, 1987 and recalling the writ of replevin issued
by this Court, and dismissing all the contempt charges;

4 — Ordering the Sheriff to desist permanently from enforcing the writ of seizure and to return all the
property seized by him under the Writ of Replevin, to the defendant Far East Marble (Phils.) Inc.
immediately from receipt of a copy of this order, and in case of his failure to do so, the value thereof
shall be charged against the replevin bond. (pp. 89-90, Rollo.)

An appeal therefrom was forthwith interposed by BPI, assailing the findings of the trial court with respect to its
finding that BPI's cause of action has prescribed and the consequent denial of the motion for summary judgment.
On June 26, 1990, the Court of Appeals rendered a decision setting aside the June 1, 1987 order of the court of
origin and remanding the case to said court for further proceedings, "including the resolution anew of plaintiff's
motion for summary judgment . . ., reception of the evidence of the parties and, thereafter, to decide the case as the
facts may warrant." (pp. 98-99, Rollo.)

Hence, the instant petition for review on certiorari filed by Far East, anchored on the following assigned errors:

I Page |
19
THE COURT OF APPEALS ERRED WHEN IT DISREGARDED THE FINDINGS OF THE TRIAL
COURT THAT PRESCRIPTION HAS SET IN OBLIVIOUS OF THE FACT THAT THIS FINDING
WAS REACHED AFTER DUE HEARING.

II

THE COURT OF APPEALS GRAVELY ERRED IN RULING FOR A REOPENING OF THE TRIAL
FOR THE RECEPTION OF EVIDENCE ON BOTH ISSUES OF PRESCRIPTION AND SUMMARY
JUDGMENT WHEN THESE WERE ALREADY TRIED AND WEIGHED BY THE TRIAL COURT.

III

THE COURT OF APPEALS ERRED IN ASSUMING JURISDICTION OVER THE CASE

CONSIDERING THAT THE ISSUES RAISED THEREIN INVOLVE PURE QUESTIONS OF LAW. (p.
14, Rollo.)

The issue of jurisdiction being basis, we shall endeavor to dispose of it ahead of the other topics raised by
petitioners

Petitioner Far East maintains the position that the Court of Appeals stepped beyond the limits of its authority when it
assumed jurisdiction over the appeal filed by BPI inasmuch as said appeal raised only the pure questions of law or
whether or not the trial court erred: (1) in dismissing BPI's complaint for lack of cause of action; (2) in finding that
BPI's cause of action had prescribed; and (3) in ruling that BPI is not entitled to summary judgment on its causes of
action against Far East. Consequently, Far East contends, BPI should have taken its case directly to this Court.

There is no dispute with respect to the fact that when an appeal raises only pure questions of law, it is only this
Court which has jurisdiction to entertain the same (Article VIII, Section 5 (2) (e), 1987 Constitution; Rule 45, Rules of
Court; see also Santos, Jr. vs. Court of Appeals, 152 SCRA 378 [1987]). On the other hand, appeals involving both
questions of law and fact fall within the exclusive appellate jurisdiction of the Court of Appeals. At this point, there
seems to be a need to distinguish a question of law from a question of fact.

It has been held in a number of cases (Medina vs. Asistio, Jr., 191 SCRA 218 [1990]; Gan vs. Licup Design Group,
Inc., G.R. NO. 94264, July 24, 1990, En Banc, Minute Resolution; Pilar Development Corp. vs. Intermediate
Appellate Court, et al., 146 SCRA 215 [1986]; Ramos vs. Pepsi-Cola Bottling Co., 19 SCRA 289 [1967];
Consolidated Mines, Inc. vs. Court of Tax Appeals, et al., 58 SCRA 618 [1974]), that there is a "question of law"
when there is doubt or difference of opinion as to what the law is on certain state of facts and which does not call for
an examination of the probative value of the evidence presented by the parties-litigants. On the other hand, there is
a "question of fact" when the doubt or controversy arises as to the truth or falsity of the alleged facts. Simply put,
when there is no dispute as to fact, the question of whether or not the conclusion drawn therefrom is correct is a
question of law.

In the case at bar, BPI alleged in its complaint (Rollo, p. 42) that on various dates and for valuable consideration, it
extended to Far East several loans, evidenced by promissory notes, and credit facilities in the form of trust receipts,
and that despite repeated requests and demands for payment thereof, Far East had failed and refused to pay. Thus
BPI sought foreclosure of the chattel mortgage securing such indebtedness.

In its answer (Rollo, p. 78), Far East admitted the genuineness and due execution of the promissory notes involved
in the case, but denied BPI's allegation that repeated demands for payment were made by BPI on it. Far East then
raised the affirmative defenses of prescription and lack of cause of action, arguing that since the promissory notes
matured in 1976 while BPI filed its action to foreclose the chattel mortgage only in 1987 (or more than 10 years from
the time its cause of action accrued), and there being no demand for payment which would interrupt the period of
prescription for instituting said action, BPI's claims have prescribed.

BPI, however, countered that its allegation of repeated demands on Far East for payment sufficiently stated a cause
of action; that within ten years from the time its cause of action accrued in 1976, it sent written extrajudicial demands
on Far East requesting payment of its due and outstanding obligations; that within that 10-years period, it received
written acknowledgments of debt from Far East; and, that these demands for payment and acknowledgments of
debt effectively interrupted and renewed the prescriptive period. Worth noting is the fact that the acknowledgment of
debt and the demands for payment, including the affidavits of BPI's counsel who prepared the demand letter and
that of BPI's messenger who allegedly personally delivered said letters to Far East were duly annexed to BPI's
pleadings.

From the foregoing exchange of pleading, the conflicting allegations of fact by the contending parties sprung forth. It
is thus quite obvious that the controversy centered on, and the doubt arose with respect to, the very existence of
previous demands for payment allegedly made by BPI on petitioner Far East, receipt of which was denied by the
latter. This dispute or controversy inevitably raised a question of fact. Such being the case, the appeal taken by BPI
to the Court of Appeals was proper. Page |
20
We now come to petitioner's first two assigned errors.

The trial court's finding that BPI's claims due to prescription, can no longer prosper, is inextricably connected with,
and underpinned by, its other conclusion that BPI's allegation that it made "repeated requests and demands for
payment" is not sufficient to state a cause of action. Moreover, in its questioned Order (Rollo, p. 88) dated June 1,
1987, the trial court held that:

Apart from the fact that the complaint failed to allege that the period of prescription was interrupted,
the phrase "repeated requests and demands for payment" is vague and incomplete as to establish in
the minds of the defendant, or to enable the Court to draw a conclusion, that demands or
acknowledgment [of debt] were made that could have interrupted the period of prescription. (p.
88, Rollo.).

Seemingly, therefore, the trial court believed that the interruption of the prescriptive period to institute an action is an
ULTIMATE FACT which had to be expressly and indispensably pleaded by BPI in its complaint, and that failure to
so alleged such circumstance is fatal to BPI's cause of action.

We believe and hold otherwise.

Section 3 of Rule 6 state that a "complaint is a concise statement of the ultimate facts constituting the plaintiff's
cause or causes of action." Further elaborating thereon, Section 1 of Rule 8 declares that every pleading, including,
of course, a complaint, "shall contain in a methodical and logical form, a plain, concise and direct statement of the
ultimate facts . . . omitting the statement of mere evidentiary facts." "Ultimate facts" are the essential and substantial
facts which either form the basis of the primary right and duty or which directly make up the wrongful acts or
omissions of the defendant (Tantuico, Jr. vs. Republic of the Phil., et al., 204 SCRA 428 [1991]), while "evidentiary
facts" are those which tend to prove or establish said ultimate facts.

What then are the ultimate facts which BPI had to allege in its complaint so as to sufficiently establish its cause of
action?

Basically, a cause of action consists of three elements, namely: (1) the legal right of the plaintiff; (2) the correlative
obligation of the defendant; and (3) the act or omission of the defendant in violation of said legal right (Nabus vs.
Court of Appeals, et al., 193 SCRA 732 [1991]); Rebollido vs. Court of Appeals et al., 170 SCRA 800 [1989]). These
elements are manifest in BPI's complaint, particularly when it was therein alleged that: (1) for valuable
consideration, BPI granted several loans, evidenced by promissory notes, and extended credit facilities in the form
of trust receipts to Far East (photocopies of said notes and receipts were duly attached to the Complaint); (2) said
promissory notes and trust receipts had matured; and (3) despite repeated requests and demands for payment
thereof, Far East had failed and refused to pay.

Clearly then, the general allegation of BPI that "despite repeated requests and demands for payment, Far East has
failed to pay" is sufficient to establish BPI's cause of action. Besides, prescription is not a cause of action; it is a
defense which, having been raised, should, as correctly ruled by the Court of Appeals (DBP vs. Ozarraga, 15 SCRA
48 [1965]), be supported by competent evidence. But even as Far East raised the defense of prescription, BPI
countered to the effect that the prescriptive period was interrupted and renewed by written extrajudicial demands for
payment and acknowledgment by Far East of the debt.

A complaint is sufficient if it contains sufficient notice of the cause of action even though the allegation may be
vague or indefinite, for in such case, the recourse of the defendant would be to file a motion for a bill of particulars
(Ramos vs. Condez, 20 SCRA 1146 [1967]). It is indeed the better rule that, pleadings, as well as remedial laws,
should be liberally construed so that the litigants may have ample opportunity to prove their respective claims so as
to avoid possible denial of substantial justice due to legal technicalities (Adamo, et al. vs. Intermediate Appellate
Court, et al., 191 SCRA 195 [1990]).

In the case at bar, the circumstances of BPI extending loans and credits to Far East and the failure of the latter to
pay and discharge the same upon maturity are the only ultimate facts which have to be pleaded, although the facts
necessary to make the mortgage valid enforceable must be proven during the trial (Ortiz v. Garcia, 15 Phil. 192
[1910]).
In fine, the finding of the trial court that prescription has set in is primarily premised on a misappreciation of the
sufficiency of BPI's allegation as above discussed. The records will show that the hearing conducted by the trial
court was merely pro forma and the trial judge did not sufficiently address the issue of whether or not a demand for
payment in fact made by BPI and duly received by herein petitioner Far East.

WHEREFORE, the instant petition is hereby DENIED and the decision of the Court of Appeals hereby AFFIRMED.
No special pronouncement is made as to costs.
Page |
SO ORDERED.
21

G.R. No. 106429 June 13, 1994

JOSELITA SALITA, petitioner,

vs.
HON. DELILAH MAGTOLIS, in her capacity as Judge of the RTC, Quezon City, Br. 107, and ERWIN
ESPINOSA, respondents.

Alfredo F. Tadiar for petitioner.

Yolanda, Quisumbing-Javellana & Associates for private respondent.

BELLOSILLO, J.:

Erwin Espinosa, 32, and Joselita Salita, 22, were married at the Roman Catholic Church in Ermita, Manila, on 25
January 1986. A year later, their union turned sour. They separated in fact in 1988. Subsequently, Erwin sued for
annulment on the ground of Joselita’s psychological incapacity.

The issue before us however is not the scope nor even the interpretation of Art. 36 of the Family Code. 1 Rather, the
issue is the sufficiency of the allegations in the petition for annulment of marriage and the subsequent bill of
particulars filed in amplification of the petition.

The petition for annulment was filed before the Regional Trial Court of Quezon City on 7 January 1992. Therein it is
alleged that "[s]ometime in 1987, petitioner came to realize that respondent was psychologically incapacitated to
comply with the essential marital obligations of their marriage, which incapacity existed at the time of the marriage
although the same became manifest only thereafter." 2 Dissatisfied with the allegation in the petition, Joselita moved
for a bill of particulars which the trial court granted. 3 Subsequently, in his Bill of Particulars, Edwin specified that —

. . . at the time of their marriage, respondent (Joselita Salita) was psychologically incapacitated to
comply with the essential marital obligations of their marriage in that she was unable to understand
and accept the demands made by his profession — that of a newly qualified Doctor of Medicine —
upon petitioner’s time and efforts so that she frequently complained of his lack of attention to her
even to her mother, whose intervention caused petitioner to lose his job.

Still Joselita was not contented with the Bill of Particulars. She argued that the "assertion (in the Bill of Particulars) is
a statement of legal conclusion made by petitioner’s counsel and not an averment of ‘ultimate facts,’ as required by
the Rules of Court, from which such a conclusion may properly be inferred . . . ." 4 But finding the questioned Bill of
Particulars adequate, the trial court issued an order upholding its sufficiency and directing Joselita to file her
responsive pleading.
Joselita was not convinced. She filed a petition for certiorari with us. However, we referred her petition to the Court
of Appeals for resolution.

On 21 July 1992, the Court of Appeals denied due course to her petition thus —

In the case under consideration, Espinosa has amplified Salita’s alleged psychological incapacity in
his bill of particulars . . .
Page |
In our view, the aforesaid specification more than satisfies the Rules’ requirement that a complaint 22
must allege the ultimate facts constituting a plaintiff’s cause of action. To require more details
thereof, to insist on a specification of Salita’s particular conduct or behavior with the corresponding
‘circumstances of time, place and person’ indicating her alleged psychological incapacity would be to
ask for information on evidentiary matters. To obtain evidentiary details, Salita may avail herself of
the different modes of discovery provided by the Rules of Court
(Rules 24 to 28).

Whether Espinosa’s averments in his bill of particulars constitute psychological incapacity in the
contemplation of the Family Code is a question that may be resolved in a motion to dismiss or after
trial on the merits of the case, not in a motion for bill of particulars. And certainly, that matter cannot
be resolved in the present petition. 5

Hence, the instant petition for review on certiorari filed by Joselita Salita questioning the Resolution of the Court of
Appeals denying due course to her petition.

Petitioner insists that the allegations in the Bill of Particulars constitute a legal conclusion, not an averment of facts,
and fail to point out the specific essential marital obligations she allegedly was not able to perform, and thus render
the Bill of Particulars insufficient if not irrelevant to her husband’s cause of action. She rationalizes that her
insistence on the specification of her particular conduct or behavior with the corresponding circumstances of time,
place and person does not call for information on evidentiary matters because without these details she cannot
adequately and intelligently prepare her answer to the petition.

Private respondent on the other hand believes that his allegations in the Bill of Particulars constitute the ultimate
facts which the Rules of Court requires at this point. He defines ultimate facts as —

. . . important and substantial facts which either directly form the basis of the primary right and duty,
or which directly make upon the wrongful acts or omissions of the defendant. The term does not
refer to the details of probative matter or particulars of evidence by which these material elements
are to be established. It refers to principal, determinate facts upon the existence of which the entire
cause of action rests. 6

Ultimate facts are conclusions drawn from intermediate and evidentiary facts, or allegations of mixed
law and fact; they are conclusions from reflection and natural reasoning on evidentiary fact. The
ultimate facts which are to be pleaded are the issuable, constitutive, or traversible facts essential to
the statement of the cause of action; the facts which the evidence on the trial will prove, and not the
evidence which will be required to prove the existence of those facts . . . 7

Private respondent further argues that "[c]onclusions of law and evidentiary matters need not be stated in the
complaint. The rules of pleading limit the statement of the cause of action only to such operative facts as would give
rise to the right of action of the plaintiff to obtain relief against the wrongdoer. The details of probative matter or
particulars of evidence, statements of law, inferences and arguments need not be stated." 8

In a nutshell, the ultimate question is whether the Bill of Particulars submitted by herein respondent is of sufficient
definiteness or particularity as to enable herein petitioner to properly prepare her responsive pleading or for trial.

A complaint only needs to state the "ultimate facts constituting the plaintiff’s cause or causes of action." 9 Ultimate
facts has been defined as "those facts which the expected evidence will support." 10 As stated by private respondent,
"[t]he term does not refer to the details of probative matter or particulars of evidence by which these material
elements are to be established." It refers to "the facts which the evidence on the trial will prove, and not the
evidence which will be required to prove the existence of those facts." And a motion for bill of particulars will not be
granted if the complaint, while not very definite, nonetheless already states a sufficient cause of action. 11 A motion
for bill of particulars may not call for matters which should form part of the proof of the complaint upon trial. Such
information may be obtained by other means. 12

We sustain the view of respondent Court of Appeals that the Bill of Particulars filed by private respondent is
sufficient to state a cause of action, and to require more details from private respondent would be to ask for
information on evidentiary matters. Indeed, petitioner has already been adequately apprised of private respondent’s
cause of action against her thus —
 . . . . (she) was psychologically incapacitated to comply with the essential marital obligations of their
marriage in that she was unable to understand and accept the demands made by his profession —
that of a newly qualified Doctor of Medicine — upon petitioner’s time and efforts so that she
frequently complained of his lack of attention to her even to her mother, whose intervention caused
petitioner to lose his job.

On the basis of the aforequoted allegations, it is evident that petitioner can already prepare her responsive pleading
or for trial. Private respondent has already alleged that "she (petitioner) was unable to understand and accept the Page |
demands made by his profession . . . upon his time and efforts . . . " Certainly, she can respond to this. To demand
for more details would indeed be asking for information on evidentiary facts — facts necessary to prove essential or 23
ultimate facts. 13 For sure, the additional facts called for by petitioner regarding her particular acts or omissions would
be evidentiary, and to obtain evidentiary matters is not the function of a motion for bill of particulars. 14

We distinguish the instant case from Tantuico, Jr. v. Republic 15 where we said —

Furthermore, the particulars prayed for such as names of persons, names of corporations, dates,
amounts involved, a specification of property for identification purposes, the particular transactions
involving withdrawals and disbursements, and a statement of other material facts as would support
the conclusions and inferences in the complaint, are not evidentiary in nature. On the contrary, those
particulars are material facts that should be clearly and definitely averred in the complaint in order
that the defendant may, in fairness, be informed of the claims made against him to the end that he
may be prepared to meet the issues at the trial.

The aforementioned pronouncement cannot apply to the instant case. That ruling involves alleged "misappropriation
and theft of public funds, plunder of the nation’s wealth, extortion, blackmail, bribery, embezzlement, and other acts
of corruption, betrayal of public trust and brazen abuse of power." The respondents therein pray for reconveyance,
reversion, accounting, restitution and damages. There, the alleged illicit acts should be fully documented. The
instant case, on the other hand, concerns marital relationship. It would be unreasonable, if not unfeeling, to
document each and every circumstance of marital disagreement. True, the complaining spouse will have to prove
his case, but that will not come until trial begins.

Consequently, we have no other recourse but to order the immediate resumption of the annulment proceeding
which have already been delayed for more than two years now, even before it could reach its trial stage. Whether
petitioner is psychologically incapacitated should be immediately determined. There is no point in unreasonably
delaying the resolution of the petition and prolonging the agony of the wedded couple who after coming out from a
storm still have the right to a renewed blissful life either alone or in the company of each other.

A word on Art. 36 of the Family Code. 16 We do not see the need to define or limit the scope of the provision. Not in
this case, at least. For, we are not called upon to do so, the actual controversy being the sufficiency of the bill of
particulars. To interpret the provision at this juncture would be to give an obiter dictum which is ill-timed. Besides, it
appears that petitioner in her memorandum has demonstrated a good grasp of what Art. 36 actually covers. Suffice
it to say that Mme. Justice Sempio-Diy, formerly of the Court of Appeals and a member of the Civil Code Revision
Committee that drafted the Family code, explains —

The Committee did not give any examples of psychological incapacity for fear that the giving of
examples would limit the applicability of the provision under the principle of ejusdem generis. Rather,
the Committee would like the judge to interpret the provision on a case-to-case basis, guided by
experience, the findings of experts and researchers in psychological disciplines, and by decisions of
church tribunals which, although not binding on the civil courts, may be given persuasive effect since
the provision was taken from Canon Law. 17

WHEREFORE, there being no reversible error, the instant petition is DENIED and the questioned Resolution of
respondent Court of Appeals dated 21 July 1992 is AFFIRMED.

SO ORDERED.

Cruz, Davide, Jr., Quiason and Kapunan, JJ., concur.

# Footnotes

1 Art. 36. A marriage contracted by any party who, at the time of the celebration, was psychologically
incapacitated to comply with the essential marital obligations of marriage, shall likewise be void even
if such incapacity becomes manifest only after its solemnization (As amended by E.O. 227).

2 Petition for Annulment of Marriage filed by Erwin Espinosa, par. 3; Rollo, p. 20.
 3 Order issued by Judge Delilah Magtolis, Regional Trial Court, Br. 107, Quezon City; Rollo, p. 26.

4 Opposition to the Supposed Bill of Particulars Submitted by Petitioner, p. 2, par. 6; Rollo, p. 30.

5 Resolution penned by Associate Justice Alfredo L. Benipayo, concurred in by Associate Justices

Fidel P. Purisima and Quirino D. Abad Santos, Jr., of the Ninth Division.

6 Francisco, The Revised Rules of Court in the Philippines, Vol. I, p. 435. Page |
24
7 Id., citing 71 C.J.S. 34.

8 Memorandum for Private Respondent, p. 10; Rollo, p. 197.

9 Sec. 3, Rule 6, Rules of Court.

G.R. No. L-38544 July 30, 1982

LUZ E. BALITAAN, petitioner,

vs.
COURT OF FIRST INSTANCE OF BATANGAS, BRANCH II, and RITA DE LOS REYES, respondents.

Julio D. Enriquez, Sr. for petitioner.

Jose N. Contreras for respondents.

GUERRERO, J.:

This is a petition for review on certiorari of the decision of the Court of First Instance of Batangas in Civil Case No.
81 entitled "Rita de los Reyes vs. Luz E. Balitaan, et al." which annulled the orders of the Judge of the Municipal
Court of Bauan, Batangas and ordered the questioned testimonies to be striken out from the record on the ground
that they are at variance with the allegations of the Information.

The chronological sequence of the events leading to the filing of the instant petition is as follows:

On April 11, 1973, Special Counsel Arcadio M. Aguila filed with the Municipal Court of Bauan, Batangas, an
Information charging respondent Rita de los Reyes of the crime of estafa. The Information reads as follows:

That in, about and during the period comprised between April 27, 1982 to June, 1972, inclusive, in
the Municipality of Bauan, Batangas, Philippines, and within the jurisdiction of this Honorable Court,
the abovenamed accused, being then an employee of one Luz E. Balitaan, owner of a baby dresses
mending shop in Barrio Aplaya of the said municipality and having collected and received from
Uniware, Inc., a business establishment in Makati, Rizal, to which finished baby dresses are turned
over after they have been mended and made, the sum of P127.58 in payment of work done on baby
dresses by said Luz E. Balitaan, and under the express obligation on the part of the accused to
immediately account for and deliver the said amount of P127.58 to said Luz E. Balitaan, with
unfaithfulness and grave abuse of confidence and in spite of repeated demands made to the said
accused to turn over the said amount of P127.58, did then and there, wilfully, unlawfully and
feloniously misappropriate, misapply and convert the sum of P127.58 to her (accused) own use and
benefit, to the damage and prejudice of the said Luz E. Balitaan in the aforementioned amount of
P127.58.

Contrary to law. 1

At the initial hearing on September 18, 1973, complaining witness Luz E. Balitaan, herein petitioner, was called as the
prosecution's first witness. She testified that she was the proprietress of a baby dress mending shop, that her business
was engaged in the sewing of baby dresses with the accused, Rita de los Reyes, herein respondent, as the one in charge
of the management of her business, including the procurement of unsewed baby dresses from, and the delivery of
finished dresses to Unaware, Inc. She further testified as follows:

Q. Sometime in April 27,1972, do you know if the accused in this case, Rita de los
Reyes had made deliveries of baby dresses to Uniware, Incorporated?
 A. Yes, sir.

Q. Do you have a receipt or cash voucher to show that those baby dresses were
delivered?

A. Yes, sir.

Q. I am going to show you a cash voucher dated April 27, 1972, which appears to be Page |
the original carbon copy and which for purposes of Identification we ask that the 25
same be marked as Exhibit "A" for the prosecution.

COURT:

Mark it.

Atty. Enriquez:

Q. Is this the cash voucher of baby dresses delivered by Rita de los Reyes?

xxx xxx xxx

A. Yes, sir.

Q. Do you know this or what is this about?

A. This is receipt of payment made to us for the dresses we have made.

xxx xxx xxx

Q. It appears in this voucher, Exhibit "A", that the total payment made and suppose
to be received was in the amount of P1,632.27 in words and figures, how was the
payment made?

A. By checks sir.

Q. How many checks?

A. Three (3) checks, sir.

Q. Would you know from this Exhibit "A" the number of checks and the
corresponding amount appearing in the checks in payment of this P1,632.97?

(Witness again shown Exhibit "A").

A. Yes sir.

Q. Where, will you point to this Exhibit "A"?

A. Witnesses pointing to #17000703 and opposite it the amount of P500.00; she was
also pointing to #17000702 and opposite it P500.00; and also #17000704, opposite it
is the amount of P632.97.

Q. Now, who received the checks in payment of the dresses made in this cash
voucher?

A. Rita de los Reyes, sir. (herein respondent)

Q. From where?

A. In Makati.

Q. This cash voucher dated April 27, 1972, Exhibit "A", who received this from
Unaware, Incorporated, if it was received? 2

At this juncture, counsel for the accused Rita de los Reyes objected to the testimony of complaining witness, Luz E.
Balitaan and presented two motions. The transcript of stenographic notes shows what these motions are:
 ATTY. CONTRERAS:

If your Honor please, the defense is respectfully presenting to this Honorable Court
two (2) motions: first, to strike out all the testimonies of the witness as far as Exhibit
"A" is concerned on the ground that said testimonies are at variance with the
allegations in the information, there is no allegation in the information whatsoever
regarding these checks and this cash voucher, your Honor, and we are filing a
motion in the nature of an objection to any other question or questions regarding Page |
these checks that were allegedly received by the herein accused from the Unaware
Incorporated because there is no allegation in the information. If the information will 26
only be read carefully, the sum of P127.58 in payment of work done in baby dresses
was received by the accused, so that all these evidence, having received checks in
so much amount ... It is respectfully submitted by the defense that no evidence could
be admissible under the rules.

ATTY. ENRIQUEZ:

There was already testimony of this witness that there is certain amount received
and that portion thereof was not delivered to the offended party. What we are proving
here are preliminary evidence going directly to the present issue of P127.58 was
received, as the Court would readily see in this cash voucher that the amount subject
matter of the information or complaint is indicated in this cash voucher. This exhibit
and evidence is germane and I want to show that there is misappropriation of the
amount from the total amount of P1,632.97.

ATTY. CONTRERAS:

The information alleges that the accused received the sum of P127.58, the
information does not cite that this amount was only a part of the cash received. All
these evidence will be immaterial, there is no allegation in the information by which
this information would be tending to sustain. I submit, your Honor.

ATTY. ENRIQUEZ:

We submit, your Honor.

COURT:

Objection overruled. 3

As clearly seen above, the objection was overruled. Luz E. Balitaan thereby continued with her testimony and
declared that accused Rita de los Reyes delivered the said checks and voucher to her; that upon delivery, the said
accused represented to her that the baby dresses with style Nos. 648, 151, 161 and 203 were those of Cesar
Dalangin whose payment in the amount of P127.58 was included in the checks; that in view of this statement, said
Luz E. Balitaan instructed said accused to cash the checks in order to pay Cesar Dalangin; that Rita de los Reyes
returned the following day with the cash minus the amount of P127.58. She further declared that two or three weeks
afterwards, she noticed that there were too many baby dresses that were lost prompting her to verify the receipts of
payment, one of which is the cash voucher, Exhibit "A". In the course of her investigation, she went to see Cesar
Dalangin who declared that Style Nos. 648, 151, 161 and 203 were not his and denied having received any amount
from Rita de los Reyes or of even knowing the latter; that when she confronted the accused and asked why she
deceived her, said accused could not talk, turned pale but later admitted having kept the amount.

At the close of the direct examination of Luz E. Balitaan, counsel for the accused moved to strike out the foregoing
testimonies but respondent court also denied the motion.

Consequently, accused Rita de los Reyes instituted in the Court of First Instance of Batangas, Eighth Judicial
District, Branch II, Civil Case No. 81, against petitioner-appellant, Luz E. Balitaan, and the Honorable Guillermo B.
Magnaye, in his capacity as Judge of the Municipal Court of Bauan, Batangas, a petition for certiorari, with
preliminary injunction, to annul the aforementioned orders of the said Municipal Court of Bauan, Batangas,
overruling the objections of accused Rita de los Reyes to the testimony of complaining witness on the grounds of
immateriality and variance with the Information as well as denying the motion to strike out the same.

In a decision dated March 13, 1973, the Court of First Instance of Batangas sustained respondent's stand and
hence, granted the petition for writ of certiorari, the dispositive portion of the same states as follows:

WHEREFORE, the petition is granted and the orders of respondent Judge overruling petitioner's
objection, as well as denying her motion to strike out the testimonies of Luz E. Balitaan abovequoted
and appearing on pages 23-32 of the transcript of stenographic notes marked Exhibit "X", are hereby
 annulled. Let said testimonies be stricken out from the record of the hearing of September 18, 1973,
of Criminal Case No. 2172 of the Municipal Court of Bauan, Batangas entitled People vs. Rita de los
Reyes. Costs against private respondent Luz E. Balitaan.

SO ORDERED. 4

From said decision, Luz E. Balitaan filed this instant petition for review with the following assigned errors:
Page |
I. The lower court erred in granting the writ of certiorari to annul the orders of the Municipal Court of 27
Bauan, Batangas in Criminal Case No. 2172.

II. The lower court erred in holding that there is a variance between the allegation in the information
for estafa in Criminal Case No. 2172 and the proof established by the petitioner's testimony thereat.

III. The lower court, in resolving the present case, erred when it decided the merits of Criminal Case
No. 2172 instead of limiting itself to a determination of whether the writ of certiorari should issue or
not. 5

In resolving the issue of variance between allegation and proof, the Court of First Instance ruled:

Private respondent contends that Luz E. Balitaan's testimonies about the delivery of the checks to
petitioner and their having been cashed by her is merely to show the source of the P127.58
misappropriated. True but when she testified that petitioner deducted the said amount from the
proceeds falsely representing that the same belonged to Cesar Dalangin, and should be delivered to
him, when in fact she did not deliver but misappropriated the same to her own use and benefit, the
testimony became objectionable. It became objectionable because it tended to prove estafa
committed not in the manner as alleged in the information but in a manner not alleged therein. In
overruling petitioner's objection, respondent Judge acted in excess of his jurisdiction because the
Rules expressly provides (sic) that evidence should correspond with the allegations of the complaint
or information. 6

Petitioner vehemently objected to the resolution of the issue in that manner, contending that what counsel for Rita
de los Reyes presented before the Municipal Court of Bauan were only these two motions; viz: (1) to strike out
complaining witness' testimony concerning the cash voucher on the ground of immateriality and variance with the
Information which did not allege the existence of said voucher and three checks; and (2) a motion objecting to any
and all other questions concerning the checks in the total amount of P1,632.97 on the ground of variance inasmuch
as the Information recited that the accused received and misappropriated the amount of P127.58 only.

In other words, it is petitioner's stand that since these were the only motions that were denied by the Municipal
Court, it is their denial that is accordingly questioned by way of certiorari before the Court of First Instance and that
when the latter court went beyond the merits of the motions in question, it acted improperly for in so doing, it did not
give the adverse party a chance to argue the point and receive evidence on the question.

We disagree. The facts of the case, culled from petitioner-appellant's brief itself, show that aside from the two
motions above-mentioned, private respondent moved to strike out complaining witness' testimony "relating to the
receipt (voucher) of the three checks" and cashing thereof by the accused Rita de los Reyes, which, according to
counsel, is at variance with the allegation in the Information, it appearing that there is no allegation or averment
therein that "the accused received the checks," that those checks "were cashed by the accused", and that the
accused got a portion of the amount or cash "for the purpose of having it delivered to Cesar Dalangin." 7

The issue of variance between the mode or from of estafa alleged in the Information and that sought to be proved by
the testimony may be inferred from the foregoing motion to strike out. Contrary also to petitioner's contention in her
brief before this Court that this issue was not raised in Civil Case No. 81 in the Court of First Instance of Batangas,
private respondent aptly quoted her arguments in her memorandum dated February 3, 1974 before said court
showing that the issue was in fact raised, to wit:

... the information charges the accused with Estafa under Article 315, 4th par., No. 1, letter (b) of the
Revised Penal Code, the allegation being that the accused, with unfaithfulness and abuse of
confidence, misappropriated and converted the amount of P127.58 which she received in trust for a
certain specific purpose. But, the evidence consisting of the testimony of the complainant, as already
adverted to in the foregoing discussion, tends to prove another kind of estafa which may fan under
Article 315, 4th par., No. 2, letter (a) of the Revised Penal Code wherein the punishable act consists
of using false pretenses or fraudulent act. This is so because, according to the complainant's
testimony, the accused made false pretense or misrepresentation that the amount of P127.58 was
due in favor of Cesar Dalangin. The essence therefore of the criminal act shown by the testimonial
evidence is the element of deceit, and this is an entirely different kind of estafa (from that) charged
against the accused in the information under which she was arraigned and pleaded not guilty. 8
After threshing out this preliminary matter of whether the issue at hand was raised or not, We now proceed with the
resolution of the said issue.

It is fundamental that every element of which the offense is composed must be alleged in the complaint or
information. What facts and circumstances are necessary to be stated must be determined by reference to the
definitions and the essentials of the specific crimes. 9

Thus, in the case at bar, inasmuch as the crime of estafa through misappropriation or with grave abuse of Page |
confidence is charged, the information must contain these elements: (a) that personal property is received in trust,
28
on commission, for administration or under any other circumstance involving the duty to make delivery of or to return
the same, even though the obligation is guaranteed by a bond; (b) that there is conversion or diversion of such
property by the person who has so received it; (c) that such conversion, diversion or denial is to the injury of another
and (d) that there be demand for the return of the property. 10

The main purpose of requiring the various elements of a crime to be set out in an information is to enable the
accused to suitably prepare his defense. He is presumed to have no independent knowledge of the facts that
constitute the offense. 11

However, it is often difficult to say what is a matter of evidence, as distinguished from facts necessary to be stated in
order to render the information sufficiently certain to Identify the offense. As a general rule, matters of evidence, as
distinguished from facts essential to the description of the offense, need not be averred. 12 For instance, it is not
necessary to show on the face of an information for forgery in what manner a person is to be defrauded, as that is a
matter of evidence at the trial. 13

Moreover, reasonable certainty in the statement of the crime suffices. All that is required is that the charge be set
forth with such particularity as will reasonably indicate the exact offense which the accused is alleged to have
committed and will enable him intelligently to prepare his defense, and if found guilty to plead her conviction, in a
subsequent prosecution for the same offense. 14

Applying these principles, We rule that the existence of the three checks need not be alleged in the Information. This is an
evidentiary matter which is not required to be alleged therein. Further, that these checks, as testified by petitioner
amounted to P1,632.97 did not vary the allegation in the Information that respondent Rita de los Reyes misappropriated
the amount of P127.58. Proof of the checks and their total amount was material evidence of the fact that respondent
misappropriated the amount of P127.58 which was but a part of the total sum of the checks.

Inasmuch as the Information herein sufficiently charges the crime of estafa under paragraph 1(b) of Article 315,
Revised Penal Code, We shall now determine whether the testimonies of complaining witness prove the same or
tend to prove instead estafa under paragraph 2(a) of the same article.

It is true that estafa under paragraph 1(b) is essentially a different offense from estafa under paragraph 2(a) of the
same article because the elements of these two offenses are not the same. In estafa under paragraph 1(b), which is
committed with grave abuse of confidence, it must be shown that the offender received money or other personalty in
trust or on commission or for administration, or under any other obligation involving the duty to make delivery of or to
return the same but misappropriated it to the prejudice of another. It is also necessary that previous demand be
made on the offender. To sustain a conviction for estafa under paragraph 2(a), on the other hand, deceit or false
representation to defraud and the damage caused thereby must be proved. And no demand is necessary. 15

This does not mean, however, that presentation of proof of deceit in a prosecution for estafa under paragraph 1(b) is
not allowed. Abuse of confidence and deceit may co-exist. Even if deceit may be present, the abuse of confidence
win characterize the estafa as the deceit will be merely incidental or as the Supreme Court of Spain held, is
absorbed by abuse of confidence. 16

It has also been held that as long as there is a relation of trust and confidence between the complainant and the
accused and even though such relationship has been induced by the accused thru false representations and
pretense and which is continued by active deceit without truthfully disclosing the facts to the complainant, the estafa
committed is by abuse of confidence although deceit co-exists in its commission. 17

Thus, the questioned testimony eliciting the fact that accused respondent falsely represented to the complainant-
petitioner that the amount of P127.58 out of the total of P1,632.97 belonged to Cesar Dalangin may not be said to
be at variance with the allegations of the Information. The presence of deceit would not change the whole theory of
the prosecution that estafa with abuse of confidence was committed. Besides, in estafa by means of deceit, it is
essential that the false statement or fraudulent representation constitutes the very cause or the only motive which
induces the complainant to part with the thing. 18 The municipal court properly denied, therefore, the motion to strike out
the testimonies anent use of false representations.

WHEREFORE, the decision of the Court of First Instance of Batangas, Branch II in Civil Case No. 81, ordering the
questioned testimonies to be stricken from the record is hereby REVERSED and SET ASIDE.
SO ORDERED.

Concepcion, Jr., Abad Santos and de Castro, JJ., concur.

Escolin, J., concur in the result.

Page |
29

G.R. No. 111538 February 26, 1997

PARAÑAQUE KINGS ENTERPRISES, INCORPORATED, petitioner,

vs.
COURT OF APPEALS, CATALINA L. SANTOS, represented by her attorney-in-fact, LUZ B. PROTACIO, and
DAVID A. RAYMUNDO, respondents.

PANGANIBAN, J.:

Do allegations in a complaint showing violation of a contractual right of "first option or priority to buy the properties
subject of the lease" constitute a valid cause of action? Is the grantee of such right entitled to be offered the same
terms and conditions as those given to a third party who eventually bought such properties? In short, is such right of
first refusal enforceable by an action for specific performance?

These questions are answered in the affirmative by this Court in resolving this petition for review under Rule 45 of
the Rules of Court challenging the Decision 1 of the Court of Appeals 2 promulgated on March 29, 1993, in CA-G.R.
CV No. 34987 entitled "Parañaque Kings Enterprises, Inc. vs. Catalina L. Santos, et al.," which affirmed the
order 3 of September 2, 1991, of the Regional Trial Court of Makati, Branch 57, 4 dismissing Civil Case No. 91-786
for lack of a valid cause of action.

Facts of the Case

On March 19, 1991, herein petitioner filed before the Regional Trial Court of Makati a complaint, 5 which is
reproduced in full below:

Plaintiff, by counsel, respectfully states that:

1. Plaintiff is a private corporation organized and existing under and by virtue of the laws of the
Philippines, with principal place of business of (sic) Dr. A. Santos Avenue, Parañaque, Metro Manila,
while defendant Catalina L. Santos, is of legal age, widow, with residence and postal address at 444
Plato Street, Ct., Stockton, California, USA, represented in this action by her attorney-in-fact, Luz B.
Protacio, with residence and postal address at No, 12, San Antonio Street, Magallanes Village,
Makati, Metro Manila, by virtue of a general power of attorney. Defendant David A. Raymundo, is of
legal age, single, with residence and postal address at 1918 Kamias Street, Damariñas Village,
Makati, Metro Manila, where they (sic) may be served with summons and other court processes.
Xerox copy of the general power of attorney is hereto attached as Annex "A".

2. Defendant Catalina L. Santos is the owner of eight (8) parcels of land located at (sic) Parañaque,
Metro Manila with transfer certificate of title nos. S-19637, S-19638 and S-19643 to S-19648. Xerox
copies of the said title (sic) are hereto attached as Annexes "B" to "I", respectively.

3. On November 28, 1977, a certain Frederick Chua leased the above-described property from
defendant Catalina L. Santos, the said lease was registered in the Register of Deeds. Xerox copy of
the lease is hereto attached as Annex "J".
4. On February 12, 1979, Frederick Chua assigned all his rights and interest and participation in the
leased property to Lee Ching Bing, by virtue of a deed of assignment and with the conformity of
defendant Santos, the said assignment was also registered. Xerox copy of the deed of assignment is
hereto attached as Annex "K".

5. On August 6, 1979, Lee Ching Bing also assigned all his rights and interest in the leased property
to Parañaque Kings Enterprises, Incorporated by virtue of a deed of assignment and with the
conformity of defendant Santos, the same was duly registered, Xerox copy of the deed of Page |
assignment is hereto attached as Annex "L".
30
6. Paragraph 9 of the assigned leased (sic) contract provides among others that:

"9. That in case the properties subject of the lease agreement are sold or
encumbered, Lessors shall impose as a condition that the buyer or mortgagee
thereof shall recognize and be bound by all the terms and conditions of this lease
agreement and shall respect this Contract of Lease as if they are the LESSORS
thereof and in case of sale, LESSEE shall have the first option or priority to buy the
properties subject of the lease;"

7. On September 21, 1988, defendant Santos sold the eight parcels of land subject of the lease to
defendant David Raymundo for a consideration of FIVE MILLION (P5,000,000.00) PESOS. The said
sale was in contravention of the contract of lease, for the first option or priority to buy was not offered
by defendant Santos to the plaintiff. Xerox copy of the deed of sale is hereto attached as Annex "M".

8. On March 5, 1989, defendant Santos wrote a letter to the plaintiff informing the same of the sale
of the properties to defendant Raymundo, the said letter was personally handed by the attorney-in-
fact of defendant Santos, Xerox copy of the letter is hereto attached as Annex "N".

9. Upon learning of this fact plaintiff's representative wrote a letter to defendant Santos, requesting
her to rectify the error and consequently realizing the error, she had it reconveyed to her for the
same consideration of FIVE MILLION (P5,000,000.00) PESOS. Xerox copies of the letter and the
deed of reconveyance are hereto attached as Annexes "O" and "P".

10. Subsequently the property was offered for sale to plaintiff by the defendant for the sum of
FIFTEEN MILLION (P15,000,000.00) PESOS. Plaintiff was given ten (10) days to make good of the
offer, but therefore (sic) the said period expired another letter came from the counsel of defendant
Santos, containing the same tenor of (sic) the former letter. Xerox copies of the letters are hereto
attached as Annexes "Q" and "R".

11. On May 8, 1989, before the period given in the letter offering the properties for sale expired,
plaintiff's counsel wrote counsel of defendant Santos offering to buy the properties for FIVE MILLION
(P5,000,000.00) PESOS. Xerox copy of the letter is hereto attached as Annex "S".

12. On May 15, 1989, before they replied to the offer to purchase, another deed of sale was
executed by defendant Santos (in favor of) defendant Raymundo for a consideration of NINE
MILLION (P9,000,000.00) PESOS. Xerox copy of the second deed of sale is hereto attached as
Annex "T".

13. Defendant Santos violated again paragraph 9 of the contract of lease by executing a second
deed of sale to defendant Raymundo.

14. It was only on May 17, 1989, that defendant Santos replied to the letter of the plaintiff's offer to
buy or two days after she sold her properties. In her reply she stated among others that the period
has lapsed and the plaintiff is not a privy (sic) to the contract. Xerox copy of the letter is hereto
attached as Annex "U".

15. On June 28, 1989, counsel for plaintiff informed counsel of defendant Santos of the fact that
plaintiff is the assignee of all rights and interest of the former lessor. Xerox copy of the letter is
hereto attached as Annex "V".

16. On July 6, 1989, counsel for defendant Santos informed the plaintiff that the new owner is
defendant Raymundo. Xerox copy of the letter is hereto attached as Annex "W".

17. From the preceding facts it is clear that the sale was simulated and that there was a collusion
between the defendants in the sales of the leased properties, on the ground that when plaintiff wrote
a letter to defendant Santos to rectify the error, she immediately have (sic) the property reconveyed
it (sic) to her in a matter of twelve (12) days.
 18. Defendants have the same counsel who represented both of them in their exchange of
communication with plaintiff's counsel, a fact that led to the conclusion that a collusion exist (sic)
between the defendants.

19. When the property was still registered in the name of defendant Santos, her collector of the
rental of the leased properties was her brother-in-law David Santos and when it was transferred to
defendant Raymundo the collector was still David Santos up to the month of June, 1990. Xerox
copies of cash vouchers are hereto attached as Annexes "X" to "HH", respectively. Page |
31
20. The purpose of this unholy alliance between defendants Santos and Raymundo is to mislead the
plaintiff and make it appear that the price of the leased property is much higher than its actual value
of FIVE MILLION (P5,000,000.00) PESOS, so that plaintiff would purchase the properties at a higher
price.

21. Plaintiff has made considerable investments in the said leased property by erecting a two (2)
storey, six (6) doors commercial building amounting to THREE MILLION (P3,000,000.00) PESOS.
This considerable improvement was made on the belief that eventually the said premises shall be
sold to the plaintiff.

22. As a consequence of this unlawful act of the defendants, plaintiff will incurr (sic) total loss of
THREE MILLION (P3,000,000.00) PESOS as the actual cost of the building and as such defendants
should be charged of the same amount for actual damages.

23. As a consequence of the collusion, evil design and illegal acts of the defendants, plaintiff in the
process suffered mental anguish, sleepless nights, bismirched (sic) reputation which entitles plaintiff
to moral damages in the amount of FIVE MILLION (P5,000,000.00) PESOS.

24. The defendants acted in a wanton, fraudulent, reckless, oppressive or malevolent manner and
as a deterrent to the commission of similar acts, they should be made to answer for exemplary
damages, the amount left to the discretion of the Court.

25. Plaintiff demanded from the defendants to rectify their unlawful acts that they committed, but
defendants refused and failed to comply with plaintiffs just and valid and (sic) demands. Xerox
copies of the demand letters are hereto attached as Annexes "KK" to "LL", respectively.

26. Despite repeated demands, defendants failed and refused without justifiable cause to satisfy
plaintiff's claim, and was constrained to engaged (sic) the services of undersigned counsel to
institute this action at a contract fee of P200,000.00, as and for attorney's fees, exclusive of cost and
expenses of litigation.

PRAYER

WHEREFORE, it is respectfully prayed, that judgment be rendered in favor of the plaintiff and
against defendants and ordering that:

a. The Deed of Sale between defendants dated May 15, 1989, be

annulled and the leased properties be sold to the plaintiff in the
amount of P5,000,000.00;

b. Dependants (sic) pay plaintiff the sum of P3,000,000.00 as actual

damages;

c. Defendants pay the sum of P5,000,000.00 as moral damages;

d. Defendants pay exemplary damages left to the discretion of the

Court;

e. Defendants pay the sum of not less than P200,000.00 as

attorney's fees.

Plaintiff further prays for other just and equitable reliefs plus cost of
suit.

Instead of filing their respective answers, respondents filed motions to dismiss anchored on the grounds of lack of
cause of action, estoppel and laches.
On September 2, 1991, the trial court issued the order dismissing the complaint for lack of a valid cause of action. It
ratiocinated thus:

Upon the very face of the plaintiff's Complaint itself, it therefore indubitably appears that the
defendant Santos had verily complied with paragraph 9 of the Lease Agreement by twice offering the
properties for sale to the plaintiff for ~1 5 M. The said offers, however, were plainly rejected by the
plaintiff which scorned the said offer as "RIDICULOUS". There was therefore a definite refusal on the
part of the plaintiff to accept the offer of defendant Santos. For in acquiring the said properties back Page |
to her name, and in so making the offers to sell both by herself (attorney-in-fact) and through her
counsel, defendant Santos was indeed conscientiously complying with her obligation under 32
paragraph 9 of the Lease Agreement. . . . .

xxx xxx xxx

This is indeed one instance where a Complaint, after barely commencing to create a cause of action,
neutralized itself by its subsequent averments which erased or extinguished its earlier allegations of
an impending wrong. Consequently, absent any actionable wrong in the very face of the Complaint
itself, the plaintiffs subsequent protestations of collusion is bereft or devoid of any meaning or
purpose. . . . .

The inescapable result of the foregoing considerations point to no other conclusion than that the
Complaint actually does not contain any valid cause of action and should therefore be as it is hereby
ordered DISMISSED. The Court finds no further need to consider the other grounds of estoppel and
laches inasmuch as this resolution is sufficient to dispose the matter. 6

Petitioners appealed to the Court of Appeals which affirmed in toto the ruling of the trial court, and further reasoned
that:

. . . . Appellant's protestations that the P15 million price quoted by appellee Santos was reduced to
P9 million when she later resold the leased properties to Raymundo has no valid legal moorings
because appellant, as a prospective buyer, cannot dictate its own price and forcibly ram it against
appellee Santos, as owner, to buy off her leased properties considering the total absence of any
stipulation or agreement as to the price or as to how the price should be computed under paragraph
9 of the lease contract, . . . . 7

Petitioner moved for reconsideration but was denied in an order dated August 20, 1993. 8

Hence this petition. Subsequently, petitioner filed an "Urgent Motion for the Issuance of Restraining Order and/or
Writ of Preliminary Injunction and to Hold Respondent David A. Raymundo in Contempt of Court." 9 The motion
sought to enjoin respondent Raymundo and his counsel from pursuing the ejectment complaint filed before the
barangay captain of San Isidro, Parañaque, Metro Manila; to direct the dismissal of said ejectment complaint or of
any similar action that may have been filed; and to require respondent Raymundo to explain why he should not be
held in contempt of court for forum-shopping. The ejectment suit initiated by respondent Raymundo against
petitioner arose from the expiration of the lease contract covering the property subject of this case. The ejectment
suit was decided in favor of Raymundo, and the entry of final judgment in respect thereof renders the said motion
moot and academic.

Issue

The principal legal issue presented before us for resolution is whether the aforequoted complaint alleging breach of
the contractual right of "first option or priority to buy" states a valid cause of action.

Petitioner contends that the trial court as well as the appellate tribunal erred in dismissing the complaint because it
in fact had not just one but at least three (3) valid causes of action, to wit: (1) breach of contract, (2) its right of first
refusal founded in law, and (3) damages.

Respondents Santos and Raymundo, in their separate comments, aver that the petition should be denied for not
raising a question of law as the issue involved is purely factual — whether respondent Santos complied with
paragraph 9 of the lease agreement — and for not having complied with Section 2, Rule 45 of the Rules of Court,
requiring the filing of twelve (12) copies of the petitioner's brief. Both maintain that the complaint filed by petitioner
before the Regional Trial Court of Makati stated no valid cause of action and that petitioner failed to substantiate its
claim that the lower courts decided the same "in a way not in accord with law and applicable decisions of the
Supreme Court"; or that the Court of Appeals has "sanctioned departure by a trial court from the accepted and usual
course of judicial proceedings" so as to merit the exercise by this Court of the power of review under Rule 45 of the
Rules of Court. Furthermore, they reiterate estoppel and laches as grounds for dismissal, claiming that petitioner's
payment of rentals of the leased property to respondent Raymundo from June 15, 1989, to June 30, 1990, was an
acknowledgment of the latter's status as new owner-lessor of said property, by virtue of which petitioner is deemed
to have waived or abandoned its first option to purchase.
Private respondents likewise contend that the deed of assignment of the lease agreement did not include the
assignment of the option to purchase. Respondent Raymundo further avers that he was not privy to the contract of
lease, being neither the lessor nor lessee adverted to therein, hence he could not be held liable for violation thereof.

The Court's Ruling

Preliminary Issue: Failure to File

Sufficient Copies of Brief Page |
33
We first dispose of the procedural issue raised by respondents, particularly petitioner's failure to file twelve (12)
copies of its brief. We have ruled that when non-compliance with the Rules was not intended for delay or did not
result in prejudice to the adverse party, dismissal of appeal on mere technicalities — in cases where appeal is a
matter of right — may be stayed, in the exercise of the court's equity jurisdiction. 10 It does not appear that
respondents were unduly prejudiced by petitioner's nonfeasance. Neither has it been shown that such failure was
intentional.

Main Issue: Validity of Cause of Action

We do not agree with respondents' contention that the issue involved is purely factual. The principal legal question,
as stated earlier, is whether the complaint filed by herein petitioner in the lower court states a valid cause of action.
Since such question assumes the facts alleged in the complaint as true, it follows that the determination thereof is
one of law, and not of facts. There is a question of law in a given case when the doubt or difference arises as to
what the law is on a certain state of facts, and there is a question of fact when the doubt or difference arises as to
the truth or the falsehood of alleged facts. 11

At the outset, petitioner concedes that when the ground for a motion to dismiss is lack of cause of action, such
ground must appear on the face of the complaint; that to determine the sufficiency of a cause of action, only the
facts alleged in the complaint and no others should be considered; and that the test of sufficiency of the facts
alleged in a petition or complaint to constitute a cause of action is whether, admitting the facts alleged, the court
could render a valid judgment upon the same in accordance with the prayer of the petition or complaint.

A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means
and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not
to violate such right, and (3) an act or omission on the part of such defendant violative of the right of plaintiff or
constituting a breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for
recovery of damages. 12

In determining whether allegations of a complaint are sufficient to support a cause of action, it must be borne in
mind that the complaint does not have to establish or allege facts proving the existence of a cause of action at the
outset; this will have to be done at the trial on the merits of the case. To sustain a motion to dismiss for lack of cause
of action, the complaint must show that the claim for relief does not exist, rather than that a claim has been
defectively stated, or is ambiguous, indefinite or uncertain. 13

Equally important, a defendant moving to dismiss a complaint on the ground of lack of cause of action is regarded
as having hypothetically admitted all the averments thereof. 14

A careful examination of the complaint reveals that it sufficiently alleges an actionable contractual breach on the part
of private respondents. Under paragraph 9 of the contract of lease between respondent Santos and petitioner, the
latter was granted the "first option or priority" to purchase the leased properties in case Santos decided to sell. If
Santos never decided to sell at all, there can never be a breach, much less an enforcement of such "right." But on
September 21, 1988, Santos sold said properties to Respondent Raymundo without first offering these to petitioner.
Santos indeed realized her error, since she repurchased the properties after petitioner complained. Thereafter, she
offered to sell the properties to petitioner for P15 million, which petitioner, however, rejected because of the
"ridiculous" price. But Santos again appeared to have violated the same provision of the lease contract when she
finally resold the properties to respondent Raymundo for only P9 million without first offering them to petitioner at
such price. Whether there was actual breach which entitled petitioner to damages and/or other just or equitable
relief, is a question which can better be resolved after trial on the merits where each party can present evidence to
prove their respective allegations and defenses. 15

The trial and appellate courts based their decision to sustain respondents' motion to dismiss on the allegations of
Parañaque Kings Enterprises that Santos had actually offered the subject properties for sale to it prior to the final
sale in favor of Raymundo, but that the offer was rejected. According to said courts, with such offer, Santos had
verily complied with her obligation to grant the right of first refusal to petitioner.

We hold, however, that in order to have full compliance with the contractual right granting petitioner the first option to
purchase, the sale of the properties for the amount of P9 million, the price for which they were finally sold to
respondent Raymundo, should have likewise been first offered to petitioner.
The Court has made an extensive and lengthy discourse on the concept of, and obligations under, a right of first
refusal in the case of Guzman, Bocaling & Co. vs. Bonnevie. 16 In that case, under a contract of lease, the lessees
(Raul and Christopher Bonnevie) were given a "right of first priority" to purchase the leased property in case the
lessor (Reynoso) decided to sell. The selling price quoted to the Bonnevies was 600,000.00 to be fully paid in cash,
less a mortgage lien of P100,000.00. On the other hand, the selling price offered by Reynoso to and accepted by
Guzman was only P400,000.00 of which P137,500.00 was to be paid in cash while the balance was to be paid only
when the property was cleared of occupants. We held that even if the Bonnevies could not buy it at the price quoted
(P600,000.00), nonetheless, Reynoso could not sell it to another for a lower price and under more favorable terms
Page |
and conditions without first offering said favorable terms and price to the Bonnevies as well. Only if the Bonnevies
failed to exercise their right of first priority could Reynoso thereafter lawfully sell the subject property to others, and 34
only under the same terms and conditions previously offered to the Bonnevies.

Of course, under their contract, they specifically stipulated that the Bonnevies could exercise the right of first priority,
"all things and conditions being equal." This Court interpreted this proviso to mean that there should be identity of
terms and conditions to be offered to the Bonnevies and all other prospective buyers, with the Bonnevies to enjoy
the right of first priority. We hold that the same rule applies even without the same proviso if the right of first refusal
(or the first option to buy) is not to be rendered illusory.

From the foregoing, the basis of the right of first refusal* must be the current offer to sell of the seller or offer to
purchase of any prospective buyer. Only after the optionee fails to exercise its right of first priority under the same
terms and within the period contemplated, could the owner validly offer to sell the property to a third person, again,
under the same terms as offered to the optionee.

This principle was reiterated in the very recent case of Equatorial Realty vs. Mayfair Theater, Inc. 17 which was
decided en banc. This Court upheld the right of first refusal of the lessee Mayfair, and rescinded the sale of the
property by the lessor Carmelo to Equatorial Realty "considering that Mayfair, which had substantial interest over
the subject property, was prejudiced by its sale to Equatorial without Carmelo conferring to Mayfair every
opportunity to negotiate within the 30-day stipulated period" (emphasis supplied).

In that case, two contracts of lease between Carmelo and Mayfair provided "that if the LESSOR should desire to sell
the leased premises, the LESSEE shall be given 30 days exclusive option to purchase the same." Carmelo initially
offered to sell the leased property to Mayfair for six to seven million pesos. Mayfair indicated interest in purchasing
the property though it invoked the 30-day period. Nothing was heard thereafter from Carmelo. Four years later, the
latter sold its entire Recto Avenue property, including the leased premises, to Equatorial for P11,300,000.00 without
priorly informing Mayfair. The Court held that both Carmelo and Equatorial acted in bad faith: Carmelo for knowingly
violating the right of first option of Mayfair, and Equatorial for purchasing the property despite being aware of the
contract stipulation. In addition to rescission of the contract of sale, the Court ordered Carmelo to allow Mayfair to
buy the subject property at the same price of P11,300,000.00.

No cause of action
under P.D. 1517

Petitioner also invokes Presidential Decree No. 1517, or the Urban Land Reform Law, as another source of its right
of first refusal. It claims to be covered under said law, being the "rightful occupant of the land and its structures"
since it is the lawful lessee thereof by reason of contract. Under the lease contract, petitioner would have occupied
the property for fourteen (14) years at the end of the contractual period.

Without probing into whether petitioner is rightfully a beneficiary under said law, suffice it to say that this Court has
previously ruled that under
Section 6 18 of P.D. 1517, "the terms and conditions of the sale in the exercise of the lessee's right of first refusal to
purchase shall be determined by the Urban Zone Expropriation and Land Management Committee. Hence, . . . .
certain prerequisites must be complied with by anyone who wishes to avail himself of the benefits of the
decree." 19 There being no allegation in its complaint that the prerequisites were complied with, it is clear that the
complaint did fail to state a cause of action on this ground.

Deed of Assignment included

the option to purchase

Neither do we find merit in the contention of respondent Santos that the assignment of the lease contract to
petitioner did not include the option to purchase. The provisions of the deeds of assignment with regard to matters
assigned were very clear. Under the first assignment between Frederick Chua as assignor and Lee Ching Bing as
assignee, it was expressly stated that:

. . . . the ASSIGNOR hereby CEDES, TRANSFERS and ASSIGNS to herein ASSIGNEE, all his
rights, interest and participation over said premises afore-described, . . . . 20 (emphasis supplied)

And under the subsequent assignment executed between Lee Ching Bing as assignor and the petitioner,
represented by its Vice President Vicenta Lo Chiong, as assignee, it was likewise expressly stipulated that;
 . . . . the ASSIGNOR hereby sells, transfers and assigns all his rights, interest and participation over
said leased premises, . . . . 21 (emphasis supplied)

One of such rights included in the contract of lease and, therefore, in the assignments of rights was the lessee's
right of first option or priority to buy the properties subject of the lease, as provided in paragraph 9 of the assigned
lease contract. The deed of assignment need not be very specific as to which rights and obligations were passed on
to the assignee. It is understood in the general provision aforequoted that all specific rights
and obligations contained in the contract of lease are those referred to as being assigned. Needless to state, Page |
respondent Santos gave her unqualified conformity to both assignments of rights.
35
Respondent Raymundo privy
to the Contract of Lease

With respect to the contention of respondent Raymundo that he is not privy to the lease contract, not being the
lessor nor the lessee referred to therein, he could thus not have violated its provisions, but he is nevertheless a
proper party. Clearly, he stepped into the shoes of the owner-lessor of the land as, by virtue of his purchase, he
assumed all the obligations of the lessor under the lease contract. Moreover, he received benefits in the form of
rental payments. Furthermore, the complaint, as well as the petition, prayed for the annulment of the sale of the
properties to him. Both pleadings also alleged collusion between him and respondent Santos which defeated the
exercise by petitioner of its right of first refusal.

In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if not indispensable,
party to the case. 22 A favorable judgment for the petitioner will necessarily affect the rights of respondent Raymundo
as the buyer of the property over which petitioner would like to assert its right of first option to buy.

Having come to the conclusion that the complaint states a valid cause of action for breach of the right of first refusal
and that the trial court should thus not have dismissed the complaint, we find no more need to pass upon the
question of whether the complaint states a cause of action for damages or whether the complaint is barred by
estoppel or laches. As these matters require presentation and/or determination of facts, they can be best resolved
after trial on the merits.

While the lower courts erred in dismissing the complaint, private respondents, however, cannot be denied their day
in court. While, in the resolution of a motion to dismiss, the truth of the facts alleged in the complaint are theoretically
admitted, such admission is merely hypothetical and only for the purpose of resolving the motion. In case of denial,
the movant is not to be deprived of the right to submit its own case and to submit evidence to rebut the allegations in
the complaint. Neither will the grant of the motion by a trial court and the ultimate reversal thereof by an appellate
court have the effect of stifling such right. 23 So too, the trial court should be given the opportunity to evaluate the
evidence, apply the law and decree the proper remedy. Hence, we remand the instant case to the trial court to allow
private respondents to have their day in court.

WHEREFORE, the petition is GRANTED. The assailed decisions of the trial court and Court of Appeals are hereby
REVERSED and SET ASIDE. The case is REMANDED to the Regional Trial Court of Makati for further
proceedings.

SO ORDERED.