G.R. No.
200134               August 15, 2012 As to the second assignment of error, suffice to say that as borne out by the record of the case,
ROBERTO OTERO, Petitioner,  defendant-appellant was given his day in Court contrary to his claim. His wife, Grace R. Otero
vs.
ROGER TAN, Respondent.
VILLARAMA, JR.,*
RESOLUTION
REYES, J.:
Petition: Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision1 dated April 29, 2011 rendered by the Court
of Appeals (CA) in CA-G.R. SP No. 02244, which affirmed the Judgment 2 dated December
28, 2007 issued by the Regional Trial Court (RTC), Cagayan de Oro City, Branch 23 in Civil
Case No. 2007-90.
The Antecedent Facts
A Complaint3 for collection of sum of money and damages was filed by Roger Tan (Tan) with
the Municipal Trial Court in Cities (MTCC), Cagayan de Oro City on July 28, 2005 against
Roberto Otero (Otero). Tan alleged that on several occasions from February 2000 to May
2001, Otero purchased on credit petroleum products from his Petron outlet in Valencia City,
Bukidnon in the aggregate amount of ₱ 270,818.01. Tan further claimed that despite several
verbal demands, Otero failed to settle his obligation.
Despite receipt of the summons and a copy of the said complaint, which per the records of the
case below were served through his wife Grace R. Otero on August 31, 2005, Otero failed to
file his answer with the MTCC.
On November 18, 2005, Tan filed a motion with the MTCC to declare Otero in default for his
failure to file his answer. Otero opposed Tan’s motion, claiming that he did not receive a copy
of the summons and a copy of Tan’s complaint. Hearing on the said motion was set on January
25, 2006, but was later reset to March 8, 2006, Otero manifesting that he only received the
notice therefor on January 23, 2006. The hearing on March 8, 2006 was further reset to April
26, 2006 since the presiding judge was attending a convention. Otero failed to appear at the
next scheduled hearing, and the MTCC issued an order declaring him in default. A copy of the
said order was sent to Otero on May 9, 2006. Tan was then allowed to present his evidence ex
parte.
Tan adduced in evidence the testimonies of Rosemarie Doblado and Zita Sara, his employees
in his Petron outlet who attended Otero when the latter made purchases of petroleum products
now the subject of the action below. He likewise presented various statements of
account4 showing the petroleum products which Otero purchased from his establishment. The
said statements of account were prepared and checked by a certain Lito Betache (Betache),
apparently likewise an employee of Tan.
The MTCC Decision
On February 14, 2007, the MTCC rendered a Decision5 directing Otero to pay Tan his
outstanding obligation in the amount of ₱ 270,818.01, as well as attorney’s fees and litigation
expenses and costs in the amounts of ₱ 15,000.00 and ₱ 3,350.00, respectively. The MTCC
opined that Otero’s failure to file an answer despite notice is a tacit admission of Tan’s claim.
Undeterred, Otero appealed the MTCC Decision dated February 14, 2007 to the RTC,
asserting that the MTCC’s disposition is factually baseless and that he was deprived of due
process.
The RTC Decision
On December 28, 2007, the RTC rendered a Judgment6 affirming the MTCC Decision dated
February 14, 2007. The RTC held that the statements of account that were presented by Tan
before the MTCC were overwhelming enough to prove that Otero is indeed indebted to Tan in
the amount of ₱ 270,818.01. Further, brushing aside Otero’s claim of denial of due process,
the RTC pointed out that:
received a copy of the summons together with a copy of the Complaint and its corresponding
annexes on August 31, 2005, per Return of Service made by Angelita N. Bandoy, Process
Server of OCC-MTCC of Davao City. He was furnished with a copy of the Motion to Declare
Defendant in Default on November 18, 2005, per Registry Receipt No. 2248 which was
received by the defendant. Instead of filing his answer or any pleading to set aside the Order of
default, he filed his Comment to the Motion to Declare Defendant in Default of which plaintiff
filed his Rejoinder to Defendant’s Comment.
The case was set for hearing on January 23, 2006, but defendant through counsel sent a
telegram that he only received the notice on the day of the hearing thereby he was unable to
appear due to his previous scheduled hearings. Still, for reasons only known to him, defendant
failed to lift the Order of Default.
The hearing on January 23, 2006 was reset on March 8, 2006 and again reset on April 26,
2006 by agreement of counsels x x x.
It is not therefore correct when defendant said that he was deprived of due process.7
Otero sought reconsideration of the Judgment dated December 28, 2007 but it was denied by
the RTC in its Order8dated February 20, 2008.
Otero then filed a petition for review9 with the CA asserting that both the RTC and the MTCC
erred in giving credence to the pieces of evidence presented by Tan in support of his
complaint. Otero explained that the statements of account, which Tan adduced during the ex
parte presentation of his evidence, were prepared by a certain Betache who was not presented
as a witness by Tan. Otero avers that the genuineness and due execution of the said statements
of account, being private documents, must first be established lest the said documents be
rendered inadmissible in evidence. Thus, Otero asserts, the MTCC and the RTC should not
have admitted in evidence the said statements of account as Tan failed to establish the
genuineness and due execution of the same.
The CA Decision
On April 29, 2011, the CA rendered the assailed Decision10 which denied the petition for
review filed by Otero. In rejecting Otero’s allegation with regard to the genuineness and due
execution of the statements of account presented by Tan, the CA held that any defense which
Otero may have against Tan’s claim is already deemed waived due to Otero’s failure to file his
answer. Thus:
Otero never denied that his wife received the summons and a copy of the complaint. He did
not question the validity of the substituted service. Consequently, he is charged with the
knowledge of Tan’s monetary claim. Section 1, Rule 9 of the Rules of Court explicitly
provides that defenses and objections not pleaded are deemed waived. Moreover, when the
defendant is declared in default, the court shall proceed to render judgment granting the
claimant such relief as his pleading may warrant.
Due to Otero’s failure to file his Answer despite being duly served with summons coupled
with his voluntary appearance in court, he is deemed to have waived whatever defenses he has
against Tan’s claim. Apparently, Otero is employing dilatory moves to defer the payment of
his obligation which he never denied.11 (Citation omitted)
Otero’s Motion for Reconsideration12 was denied by the CA in its Resolution13 dated December
13, 2011.
Hence, the instant petition.
Issues
Essentially, the fundamental issues to be resolved by this Court are the following: first,
whether Otero, having been declared in default by the MTCC, may, in the appellate
proceedings, still raise the failure of Tan to authenticate the statements of account which he
adduced in evidence; and second, whether Tan was able to prove the material allegations of his
complaint.
The Court’s Ruling
The petition is denied.
First Issue: Authentication of the Statements of Account
The CA, in denying the petition for review filed by Otero, held that since he was declared in
default by the MTCC, he is already deemed to have waived whatever defenses he has against
Tan’s claim. He is, thus, already barred from raising the alleged infirmity in the presentation
of the statements of account.
We do not agree.
A defendant who fails to file an
answer loses his standing in court.
The effect of a defendant’s failure to file an answer within the time allowed therefor is
primarily governed by Section 3, Rule 9 of the Rules of Court, viz:
Sec. 3. Default; declaration of. – If the defending party fails to answer within the time allowed
therefor, the court shall, upon motion of the claiming party with notice to the defending party,
and proof of such failure, declare the defending party in default. Thereupon, the court shall
proceed to render judgment granting the claimant such relief as his pleading may warrant,
unless the court in its discretion requires the claimant to submit evidence. Such reception of
evidence may be delegated to the clerk of court. x x x (Emphasis ours)
A defendant who fails to file an answer may, upon motion, be declared by the court in default.
Loss of standing in court, the forfeiture of one’s right as a party litigant, contestant or legal
adversary, is the consequence of an order of default. A party in default loses his right to
present his defense, control the proceedings, and examine or cross-examine witnesses. He has
no right to expect that his pleadings would be acted upon by the court nor may be object to or
refute evidence or motions filed against him.14
A defendant who was declared in
default may nevertheless appeal
from the judgment by default,
albeit on limited grounds.
Nonetheless, the fact that a defendant has lost his standing in court for having been declared in
default does not mean that he is left sans any recourse whatsoever. In Lina v. CA, et al.,15 this
Court enumerated the remedies available to party who has been declared in default, to wit:
a) The defendant in default may, at any time after discovery thereof and before judgment, file
a motion, under oath, to set aside the order of default on the ground that his failure to answer
was due to fraud, accident, mistake or excusable neglect, and that he has meritorious defenses;
(Sec 3, Rule 18)
b) If the judgment has already been rendered when the defendant discovered the default, but
before the same has become final and executory, he may file a motion for new trial under
Section 1(a) of Rule 37;
c) If the defendant discovered the default after the judgment has become final and executory,
he may file a petition for relief under Section 2 of Rule 38; and
d) He may also appeal from the judgment rendered against him as contrary to the evidence or
to the law, even if no petition to set aside the order of default has been presented by him. (Sec.
2, Rule 41)16(Emphasis ours)
Indeed, a defending party declared in default retains the right to appeal from the judgment by
default. However, the grounds that may be raised in such an appeal are restricted to any of the
following: first, the failure of the plaintiff to prove the material allegations of the complaint;
second, the decision is contrary to law; and third, the amount of judgment is excessive or
different in kind from that prayed for.17 In these cases, the appellate tribunal should only
consider the pieces of evidence that were presented by the plaintiff during the ex parte
presentation of his evidence.
A defendant who has been declared in default is precluded from raising any other ground in
his appeal from the judgment by default since, otherwise, he would then be allowed to adduce
evidence in his defense, which right he had lost after he was declared in default. 18 Indeed, he is
proscribed in the appellate tribunal from adducing any evidence to bolster his defense against
the plaintiff’s claim. Thus, in Rural Bank of Sta. Catalina, Inc. v. Land Bank of the
Philippines,19 this Court explained that:
It bears stressing that a defending party declared in default loses his standing in court and his
right to adduce evidence and to present his defense. He, however, has the right to appeal from
the judgment by default and assail said judgment on the ground, inter alia, that the amount of
the judgment is excessive or is different in kind from that prayed for, or that the plaintiff failed
to prove the material allegations of his complaint, or that the decision is contrary to law. Such
party declared in default is proscribed from seeking a modification or reversal of the assailed
decision on the basis of the evidence submitted by him in the Court of Appeals, for if it were
otherwise, he would thereby be allowed to regain his right to adduce evidence, a right which
he lost in the trial court when he was declared in default, and which he failed to have vacated.
In this case, the petitioner sought the modification of the decision of the trial court based on
the evidence submitted by it only in the Court of Appeals. 20 (Citations omitted and emphasis
ours)
Here, Otero, in his appeal from the judgment by default, asserted that Tan failed to prove the
material allegations of his complaint. He contends that the lower courts should not have given
credence to the statements of account that were presented by Tan as the same were not
authenticated. He points out that Betache, the person who appears to have prepared the said
statements of account, was not presented by Tan as a witness during the ex parte presentation
of his evidence with the MTCC to identify and authenticate the same. Accordingly, the said
statements of account are mere hearsay and should not have been admitted by the lower
tribunals as evidence.
Thus, essentially, Otero asserts that Tan failed to prove the material allegations of his
complaint since the statements of account which he presented are inadmissible in evidence.
While the RTC and the CA, in resolving Otero’s appeal from the default judgment of the
MTCC, were only required to examine the pieces of evidence that were presented by Tan, the
CA erred in brushing aside Otero’s arguments with respect to the admissibility of the said
statements of account on the ground that the latter had already waived any defense or
objection which he may have against Tan’s claim.
Contrary to the CA’s disquisition, it is not accurate to state that having been declared in
default by the MTCC, Otero is already deemed to have waived any and all defenses which he
may have against Tan’s claim.
While it may be said that by defaulting, the defendant leaves himself at the mercy of the court,
the rules nevertheless see to it that any judgment against him must be in accordance with the
evidence required by law. The evidence of the plaintiff, presented in the defendant’s absence,
cannot be admitted if it is basically incompetent. Although the defendant would not be in a
position to object, elementary justice requires that only legal evidence should be considered
against him. If the same should prove insufficient to justify a judgment for the plaintiff, the
complaint must be dismissed. And if a favorable judgment is justifiable, it cannot exceed in
amount or be different in kind from what is prayed for in the complaint.21
Thus, in SSS v. Hon. Chaves,22 this Court emphasized that:
We must stress, however, that a judgment of default against the petitioner who failed to appear
during pre-trial or, for that matter, any defendant who failed to file an answer, does not imply
a waiver of all of their rights, except their right to be heard and to present evidence to support
their allegations. Otherwise, it would be meaningless to request presentation of evidence every
time the other party is declared in default. If it were so, a decision would then automatically be
rendered in favor of the non-defaulting party and exactly to the tenor of his prayer. The law
also gives the defaulting parties some measure of protection because plaintiffs, despite the
default of defendants, are still required to substantiate their allegations in the
complaint.23 (Citations omitted and emphasis ours)
The statements of account Notwithstanding the inadmissibility of the said statements of account, this Court finds that Tan
presented by Tan were merely was still able to prove by a preponderance of evidence the material allegations of his
hearsay as the genuineness and due complaint against Otero.
execution of the same were not First, the statements of account adduced by Tan during the ex parte presentation of his
established. evidence are just summaries of Otero's unpaid obligations, the absence of which do not
Anent the admissibility of the statements of account presented by Tan, this Court rules that the necessarily disprove the latter's liability.
same should not have been admitted in evidence by the lower tribunals. Second, aside from the statements of account, Tan likewise adduced in evidence the
Section 20, Rule 132 of the Rules of Court provides that the authenticity and due execution of testimonies of his employees in his Petron outlet who testified that Otero, on various
a private document, before it is received in evidence by the court, must be established. Thus: occasions, indeed purchased on credit petroleum products from the former and that he failed to
Sec. 20. Proof of private document. – Before any private document offered as authentic is pay for the same. It bears stressing that the MTCC, the R TC and the CA all gave credence to
received in evidence, its due execution and authenticity must be proved either: the said testimonial evidence presented by Tan and, accordingly, unanimously found that
a) By anyone who saw the document executed or written; or Otero still has unpaid outstanding obligation in favor of Tan in the amount of ₱ 270,818.01.
b) By evidence of the genuineness of the signature or handwriting of the maker. Well-established is the principle that factual findings of the trial court, when adopted and
Any other private document need only be identified as that which it is claimed to be. confirmed by the CA, are binding and conclusive on this Court and will generally not be
A private document is any other writing, deed, or instrument executed by a private person reviewed on appeal.28 The Court sees no compelling reason to depart from the foregoing
without the intervention of a notary or other person legally authorized by which some finding of fact of the lower courts.
disposition or agreement is proved or set forth. Lacking the official or sovereign character of a WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED. The
public document, or the solemnities prescribed by law, a private document requires Decision dated April 29, 2011 rendered by the Court of Appeals in CA-G.R. SP No. 02244
authentication in the manner allowed by law or the Rules of Court before its acceptance as is AFFIRMED.
evidence in court. The requirement of authentication of a private document is excused only in SO ORDERED.
four instances, specifically: (a) when the document is an ancient one within the context of
Section 21, Rule 132 of the Rules of Court; (b) when the genuineness and authenticity of an FIRST DIVISION
actionable document have not been specifically denied under oath by the adverse party; (c)  
when the genuineness and authenticity of the document have been admitted; or (d) when the  
document is not being offered as genuine.24 ERLINDA GAJUDO, FERNANDO G.R. No. 151098
The statements of account which Tan adduced in evidence before the MTCC indubitably are GAJUDO, JR., ESTELITA GAJUDO,
private documents. Considering that these documents do not fall among the aforementioned BALTAZAR GAJUDO and DANILO Present:
exceptions, the MTCC could not admit the same as evidence against Otero without the ARAHAN CHUA,
required authentication thereof pursuant to Section 20, Rule 132 of the Rules of Court. During Petitioners, Panganiban, CJ,
authentication in court, a witness positively testifies that a document presented as evidence is Chairman,
genuine and has been duly executed, or that the document is neither spurious nor counterfeit Ynares-Santiago,
nor executed by mistake or under duress.25 - versus - Austria-Martinez,
Here, Tan, during the ex parte presentation of his evidence, did not present anyone who Callejo, Sr., and
testified that the said statements of account were genuine and were duly executed or that the Chico-Nazario, JJ
same were neither spurious or counterfeit or executed by mistake or under duress. Betache, the Promulgated:
one who prepared the said statements of account, was not presented by Tan as a witness during TRADERS ROYAL BANK,[1]
the ex parte presentation of his evidence with the MTCC. Respondent. March 21, 2006
Considering that Tan failed to authenticate the aforesaid statements of account, the said x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -- x
documents should not have been admitted in evidence against Otero. It was thus error for the  
lower tribunals to have considered the same in assessing the merits of Tan’s Complaint. DECISION
Second Issue: The Material Allegations of the Complaint  
In view of the inadmissibility of the statements of account presented by Tan, the remaining PANGANIBAN, CJ:
question that should be settled is whether the pieces of evidence adduced by Tan during the ex  
parte presentation of his evidence, excluding the said statements of account, sufficiently prove T he mere fact that a defendant is declared in default does not automatically result in the grant
the material allegations of his complaint against Otero. of the prayers of the plaintiff. To win, the latter must still present the same quantum of
We rule in the affirmative. evidence that would be required if the defendant were still present. A party that defaults is not
In civil cases, it is a basic rule that the party making allegations has the burden of proving deprived of its rights, except the right to be heard and to present evidence to the trial court. If
them by a preponderance of evidence. The parties must rely on the strength of their own the evidence presented does not support a judgment for the plaintiff, the complaint should be
evidence and not upon the weakness of the defense offered by their opponent. 26 This rule holds dismissed, even if the defendant may not have been heard or allowed to present any
true especially when the latter has had no opportunity to present evidence because of a default countervailing evidence.
order. Needless to say, the extent of the relief that may be granted can only be so much as has  
been alleged and proved with preponderant evidence required under Section 1 of Rule 133.27 The Case
  
Before us is a Petition for Review[2] under Rule 45 of the Rules of Court, assailing
the June 29, 2001 Decision[3] and December 6, 2001 Resolution[4] of the Court of Appeals
(CA) in CA-GR CV No. 43889. The CA disposed as follows:
 
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the
partial judgment appealed from, must be, as it hereby is, VACATED and
SET ASIDE, and another one entered DISMISSING the complaint at
bench. Without costs.[5]
 
 
The assailed Resolution denied petitioners Motion for Reconsideration[6] for lack of
merit.
 
The Facts
The CA narrated the facts as follows:
 
[Petitioners] filed a complaint before the Regional Trial Court
of Quezon City, Branch 90, against [respondent] Traders Royal Bank, the
City Sheriff of Quezon City and the Register of Deeds of Quezon
City. Docketed thereat as Civil Case No. Q-41203, the complaint sought
the annulment of the extra-judicial foreclosure and auction sale made by
[the] city sheriff of Quezon City of a parcel of land covered by TCT No.
16711 of the Register of Deeds of Quezon City, the conventional
redemption thereof, and prayed for damages and the issuance of a writ of
preliminary injunction.
The complaint alleged that in mid 1977[, Petitioner] Danilo
Chua obtained a loan from [respondent] bank in the amount
of P75,000.00 secured by a real estate mortgage over a parcel of land
covered by TCT No. 16711, and owned in common by the [petitioners];
that when the loan was not paid, [respondent] bank commenced extra-
judicial foreclosure proceedings on the property; that the auction sale of
the property was set on 10 June 1981, but was reset to 31 August 1981,
on [Petitioner Chuas] request, which, however, was made without the
knowledge and conformity of the other [petitioners]; that on the re-
scheduled auction sale, [the] Sheriff of Quezon City sold the property to
the [respondent] bank, the highest bidder therein, for the sum
of P24,911.30; that the auction sale was tainted with irregularity because,
amongst others, the bid price was shockingly or unconscionably, low; that
the other [petitioners] failed to redeem the property due to their lack of
knowledge of their right of redemption, and want of sufficient education;
that, although the period of redemption had long expired, [Petitioner]
Chua offered to buy back, and [respondent] bank also agreed to sell back,
the foreclosed property, on the understanding that Chua would pay
[respondent] bank the amount of P40,135.53, representing the sum that
the bank paid at the auction sale, plus interest; that [Petitioner] Chua
made an initial payment thereon in the amount of P4,000.00, covered by
Interbank Check No. 09173938, dated 16 February 1984, duly receipted
by [respondent] bank; that, in a sudden change of position, [respondent]
bank wrote Chua, on 20 February 1984, asking that he could repurchase
the property, but based on the current market value thereof; and that
sometime later, or on 22 March 1984, [respondent] bank wrote Chua
anew, requiring him to tender a new offer to counter the offer made
thereon by another buyer.
 
Traversing [petitioners] complaint, [respondent] bank, upon 05
July 1984, filed its answer with counterclaim, thereunder asserting that
the foreclosure sale of the mortgaged property was done in accordance
with law; and that the bid price was neither unconscionable, nor
shockingly low; that [petitioners] slept on their rights when they failed to
redeem the property within the one year statutory period; and that
[respondent] bank, in offering to sell the property to [Petitioner] Chua on
the basis of its current market price, was acting conformably with law,
and with legitimate banking practice and regulations.
Pre-trial having been concluded, the parties entered upon trial,
which dragged/lengthened to several months due to
postponements. Upon 11 June 1988, however, a big conflagration hit
the City Hall of Quezon City, which destroyed, amongst other things, the
records of the case. After the records were reconstituted, [petitioners]
discovered that the foreclosed property was sold by [respondent] bank to
the Ceroferr Realty Corporation, and that the notice of lis pendens
annotated on the certificate of title of the foreclosed property, had already
been cancelled. Accordingly, [petitioners], with leave of court, amended
their complaint, but the Trial Court dismissed the case without prejudice
due to [petitioners] failure to pay additional filing fees.
So, upon 11 June 1990, [petitioners] re-filed the complaint with
the same Court, whereat it was docketed as Civil Case No. 90-5749, and
assigned to Branch 98: the amended complaint substantially reproduced
the allegations of the original complaint. But [petitioners] this time
impleaded as additional defendants the Ceroferr Realty Corporation
and/or Cesar Roque, and Lorna Roque, and included an additional cause
of action, to wit: that said new defendants conspired with [respondent]
bank in [canceling] the notice of lis pendens by falsifying a letter sent to
and filed with the office of the Register of Deeds of Quezon City,
purportedly for the cancellation of said notice.
 
Summons was served on [respondent] bank on 26 September
1990, per Sheriffs Return dated 08 October 1990. Supposing that all the
defendants had filed their answer, [petitioners] filed, on 23 October 1991,
a motion to set case for pre-trial, which motion was, however, denied by
the Trial Court in its Order of 25 October 1991, on the ground that
[respondent] bank has not yet filed its answer. On 13 November 1991[,
petitioners] filed a motion for reconsideration, thereunder alleging that
they received by registered mail, on 19 October 1990, a copy of
[respondent] banks answer with counterclaim, dated 04 October 1990,
which copy was attached to the motion. In its Order of 14 November
1991, the trial Court denied for lack of merit, the motion for
 reconsideration, therein holding that the answer with counterclaim filed
by [respondent] bank referred to another civil case pending before Branch
90 of the same Court.
 
For this reason, [petitioners] filed on 02 December 1991 a
motion to declare [respondent] bank in default, thereunder alleging that
no answer has been filed despite the service of summons on it on 26
September 1990.
 
On 13 December 1991, the Trial Court declared the motion
submitted for resolution upon submission by [petitioners] of proof of
service of the motion on [respondent] bank.
 
Thus, on 16 January 1992, upon proof that [petitioners] had
indeed served [respondent] bank with a copy of said motion, the Trial
Court issued an Order of default against [respondent] bank.
 
Upon 01 December 1992, on [petitioners] motion, they were by
the Court allowed to present evidence ex parte on 07 January 1993,
insofar as [respondent] bank was concerned.
 
Thereafter, or on 08 February 1993, the Trial Court rendered
the new questioned partial decision.[7]
Aggrieved, [respondent] bank filed a motion to set aside [the]
partial decision by default against Traders Royal Bank and admit
[respondent] Traders Royal Banks x x x Answer with counterclaim:
thereunder it averred, amongst others, that the erroneous filing of said
answer was due to an honest mistake of the typist and inadvertence of its
counsel.
 
The [trial court] thumbed down the motion in its Order of 26
July 1993.[8]
 
Respondent bank appealed the Partial Decision[9] to the CA. During the pendency of
that appeal, Ceroferr Realty Corporation and/or Cesar and/or Lorna Roque filed a
Manifestation with Motion[10] asking the CA to discharge them as parties, because the case
against them had already been dismissed on the basis of their Compromise Agreement [11] with
petitioners. On May 14, 1996, the CA issued a Resolution[12] granting Ceroferr et al.s
Manifestation with Motion to discharge movants as parties to the appeal. The Court, though,
deferred resolution of the matters raised in the Comment[13] of respondent bank. The latter
contended that the Partial Decision had been novated by the Compromise Agreement, whose
effect of res judicata had rendered that Decision functus officio.
Ruling of the Court of Appeals
 
The CA ruled in favor of respondent bank. Deemed, however, to have rested on
shaky ground was the latters Motion to Set Aside Partial Decision by Default Against Traders
Royal Bank and Admit Defendant Traders Royal Banks Answer.[14] The reasons offered by the
bank for failing to file an answer were considered by the appellate court to be at once
specious, shallow and sophistical and can hardly be dignified as a mistake or excusable
negligence, which ordinary prudence could not have guarded against.[15]
In particular, the CA ruled that the erroneous docket number placed on the Answer
filed before the trial court was not an excusable negligence by the banks counsel. The latter
had a bounden duty to be scrupulously careful in reviewing pleadings. Also, there were several
opportunities to discover and rectify the mistake, but these were not taken. Moreover, the
banks Motion to Set Aside the Partial Decision and to Admit [the] Answer was not
accompanied by an affidavit of merit.These mistakes and the inexcusable negligence
committed by respondents lawyer were binding on the bank.
 
On the issue of whether petitioners had convincingly established their right to relief,
the appellate court held that there was no ground to invalidate the foreclosure sale of the
mortgaged property. First, under Section 3 of Act No. 3135, an extrajudicial foreclosure sale
did not require personal notice to the mortgagor.Second, there was no allegation or proof of
noncompliance with the publication requirement and the public posting of the notice of sale,
provided under Act No. 3135, as amended. Third, there was no showing of inadequacy of
price as no competent evidence was presented to show the real market value of the land sold or
the readiness of another buyer to offer a price higher than that at which the property had been
sold.
 
Moreover, petitioners failed to prove that the bank had agreed to sell the property
back to them. After pointing out that the redemption period had long expired, respondents
written communications to Petitioner Chua only showed, at most, that the former had made a
proposal for the latter to buy back the property at the current market price; and that Petitioner
Chua was requested to make an offer to repurchase the property, because another buyer had
already made an offer to buy it. On the other hand, respondent noted that the Interbank check
for P4,000 was for deposit only. Thus, there was no showing that the check had been issued to
cover part of the repurchase price.
 
The appellate court also held that the Compromise Agreement had not resulted in the
novation of the Partial Decision, because the two were not incompatible. In fact, the bank was
not even a party to the Agreement. Petitioners recognition of Ceroferrs title to the mortgaged
property was intended to preclude future litigation against it.
 
Hence this Petition.[16]
Issues
 
In their Memorandum, petitioners raise the following issues:
 
1. Whether or not the Respondent Court of Appeals erred in
failing to apply the provisions of Section 3, Rule 9 of the 1997 Rules of
Civil Procedure [and in applying instead] the rule on preponderance of
evidence under Section 1, Rule 133 of the Rules of Court.
 
2. Whether or not the respondent appellate court failed to apply
the conventional redemption rule provided for under Article 1601 of the
New Civil Code.
 
3. Whether or not this Honorable Court can exercise its judicial
prerogative to evaluate the findings of facts.[17]
 
 
The first issue is one of law and may be taken up by the Court without hindrance, pursuant to
Section 1 of Rule 45 of the Rules of Court.[18] The second and the third issues, however, would
entail an evaluation of the factual findings of the appellate court, a function ordinarily not
assumed by this Court, unless in some excepted cases. The Court will thus rule on the first
issue before addressing the second and the third issues jointly.
 
The Courts Ruling
 
The Petition has no merit.
 
First Issue:
Quantum of Proof
 
Petitioners challenge the CA Decision for applying Section 3 of Rule 9 of the Rules of
Court, rather than Section 1 of Rule 133 of the same Rules. In essence, petitioners argue that the
quantum of evidence for judgments flowing from a default order under Section 3 of Rule 9 is not the
same as that provided for in Section 1 of Rule 133.
 
For ease of discussion, these two rules will be reproduced below, starting with
Section 3 of Rule 9 of the Rules of Court:
 
Sec. 3. Default; declaration of. If the defending party fails to
answer within the time allowed therefor, the court shall, upon motion of the
claiming party with notice to the defending party, and proof of such failure,
declare the defending party in default. Thereupon, the court shall proceed to
render judgment granting the claimant such relief as his pleading may
warrant, unless the court in its discretion requires the claimant to submit
evidence. Such reception of evidence may be delegated to the clerk of court.
(a) Effect of order of default. A party in default shall be entitled to
notice of subsequent proceedings but not to take part in the trial.
 
(b) Relief from order of default. A party declared in default may
at any time after notice thereof and before judgment file a motion under oath
to set aside the order of default upon proper showing that his failure to
answer was due to fraud, accident, mistake or excusable negligence and that
he has a meritorious defense. In such case, the order of default may be set
aside on such terms and conditions as the judge may impose in the interest of
justice.
 
(c) Effect of partial default. When a pleading asserting a claim
states a common cause of action against several defending parties, some of
whom answer and the others fail to do so, the court shall try the case against
all upon the answers thus filed and render judgment upon the evidence
presented.
 
(d) Extent of relief to be awarded. A judgment rendered against a
party in default shall not exceed the amount or be different in kind from that
prayed for nor award unliquidated damages.
 
(e) Where no defaults allowed. If the defending party in an action
for annulment or declaration of nullity of marriage or for legal separation
fails to answer, the court shall order the prosecuting attorney to investigate
whether or nor a collusion between the parties exists, and if there is no
collusion, to intervene for the State in order to see to it that the evidence
submitted is not fabricated.
 
 
We now quote Section 1 of Rule 133:
 
SECTION 1. Preponderance of evidence, how determined. In
civil cases, the party having the burden of proof must establish his case by a
preponderance of evidence.In determining where the preponderance or
superior weight of evidence on the issues involved lies, the court may
consider all the facts and circumstances of the case, the witnesses manner of
testifying, their intelligence, their means and opportunity of knowing the
facts to which they are testifying, the nature of the facts to which they
testify, the probability or improbability of their testimony, their interest or
want of interest, and also their personal credibility so far as the same may
legitimately appear upon the trial. The court may also consider the number
of witnesses, though the preponderance is not necessarily with the greater
number.
 
 
Between the two rules, there is no incompatibility that would preclude the application
of either one of them. To begin with, Section 3 of Rule 9 governs the procedure which the
trial court is directed to take when a defendant fails to file an answer. According to this
provision, the court shall proceed to render judgment granting the claimant such relief as his
pleading may warrant, subject to the courts discretion on whether to require the presentation
of evidence ex parte. The same provision also sets down guidelines on the nature and extent of
the relief that may be granted. In particular, the courts judgment shall not exceed the amount
or be different in kind from that prayed for nor award unliquidated damages.
 
As in other civil cases, basic is the rule that the party making allegations has the
burden of proving them by a preponderance of evidence. [19] Moreover, parties must rely on the
strength of their own evidence, not upon the weakness of the defense offered by their
opponent.[20] This principle holds true, especially when the latter has had no opportunity to
present evidence because of a default order. Needless to say, the extent of the relief that may
be granted can only be as much as has been alleged and proved [21] with preponderant evidence
required under Section 1 of Rule 133.
 
Regarding judgments by default, it was explained in Pascua v. Florendo[22] that
complainants are not automatically entitled to the relief prayed for, once the defendants are
declared in default. Favorable relief can be granted only after the court has ascertained that the
relief is warranted by the evidence offered and the facts proven by the presenting
party. In Pascua, this Court ruled that x x x it would be meaningless to require presentation of
evidence if every time the other party is declared in default, a decision would automatically be
rendered in favor of the non-defaulting party and exactly according to the tenor of his prayer.
This is not contemplated by the Rules nor is it sanctioned by the due process clause.[23]
 
The import of a judgment by default was further clarified in Lim Tanhu v. Ramolete.
[24]
 The following disquisition is most instructive:
 
Unequivocal, in the literal sense, as these provisions [referring to
the subject of default then under Rule 18 of the old Rules of Civil
Procedure] are, they do not readily convey the full import of what they
contemplate. To begin with, contrary to the immediate notion that can be
drawn from their language, these provisions are not to be understood as
meaning that default or the failure of the defendant to answer should be
interpreted as an admission by the said defendant that the plaintiffs cause of
action find support in the law or that plaintiff is entitled to the relief prayed
for. x x x.
 
x x x x x x x x x
 
Being declared in default does not constitute a waiver of rights
except that of being heard and of presenting evidence in the trial court. x x
x.
In other words, a defaulted defendant is not actually thrown out
of court. While in a sense it may be said that by defaulting he leaves himself
at the mercy of the court, the rules see to it that any judgment against him
must be in accordance with law. The evidence to support the plaintiffs cause
is, of course, presented in his absence, but the court is not supposed to admit
that which is basically incompetent. Although the defendant would not be in
a position to object, elementary justice requires that only legal evidence
should be considered against him. If the evidence presented should not be
sufficient to justify a judgment for the plaintiff, the complaint must be
dismissed. And if an unfavorable judgment should be justifiable, it cannot
exceed in amount or be different in kind from what is prayed for in the
complaint.[25]
 
 
In sum, while petitioners were allowed to present evidence ex parte under Section 3
of Rule 9, they were not excused from establishing their claims for damages by the required
quantum of proof under Section 1 of Rule 133. Stated differently, any advantage they may
have gained from the ex parte presentation of evidence does not lower the degree of proof
required. Clearly then, there is no incompatibility between the two rules.
 
Second and Third Issues:
Review of the Evidence
 
Petitioners urge this Court to depart from the general rule that the lower courts findings of fact
are not reviewable in a petition for review. [26] In support of their plea, they cite the conflicting
findings of the trial and the appellate courts, as well as the alleged conjectures and surmises
made by the CA in arriving at its Decision.
Indeed, the differences between the findings of the two courts a quo, leading to entirely
disparate dispositions, is reason enough for this Court to review the evidence in this case.
[27]
 Whether the CA indulged in surmises and conjectures when it issued the assailed Decision
will thus be determined.
 
At the outset, it behooves this Court to clarify the CAs impression that no evidence was
presented in the case which might have contributed to petitioners challenge to its
Decision. The appellate courts observation was based on the notation by the lower courts clerk
of court that there were no separate folders for exhibits and transcripts, because there was no
actual hearing conducted in this case.[28]
 
True, there was no hearing conducted between petitioners and respondent, precisely
because the latter had been declared in default, and petitioners had therefore been ordered to
present their evidence ex parte. But the absence of a hearing did not mean that no evidence
was presented. The Partial Decision dated February 8, 1993, in fact clearly enumerated the
pieces of evidence adduced by petitioners during the ex parte presentation on January 7,
1993. The documentary evidence they presented consisted of the following:
1. A copy of respondent banks Petition for the extrajudicial foreclosure and auction
sale of the mortgaged parcel of land[29]
 
2. The Certificate of Sale that was a consequence of the foreclosure sale[30]
3. A Statement of Account dated February 15, 1984, showing Petitioner Chuas
outstanding debt in the amount of P40,135.53[31]
 
4. A copy of the Interbank check dated February 16, 1984, in the amount
of P4,000[32]
 
5. The Official Receipt issued by the bank acknowledging the check[33]
 
6. The banks letter dated February 20, 1984, advising Petitioner Chua of the sale of
the property at an extrajudicial public auction; the lapse of the period of redemption; and an
invitation to purchase the property at its current market price[34]
 
7. Another letter from the bank dated March 22, 1984, inviting Petitioner Chua to
submit, within five days, an offer to buy the same property, which another buyer had offered
to buy[35]
 
8. A copy of the Notice of Lis Pendens, the filing of which was done after that of
the Amended Complaint[36]
 
9. A copy of the title showing the inscription of the Notice of Lis Pendens[37]
 
10. A copy of the Absolute Deed of Sale to Cerrofer[38]
11. A copy of a letter dated August 29, 1986, made and signed by petitioners
counsel, requesting the cancellation of the Notice of Lis Pendens[39]
  
12. A copy of a page of the Memorandum of Encumbrance from TCT No.
(314341) 7778/T-39[40]
 
Having clarified this matter, we proceed to review the facts.
 
Petitioners do not deny that the one-year period for legal redemption had already lapsed when
respondent bank supposedly offered to sell the property in question. The records clearly show
that the Certificate of Sale following the extrajudicial public auction of the property was
registered on June 21, 1982, the date from which the legal redemption period was to be
reckoned.[41] Petitioners insist, though, that they had the right to repurchase the property
through conventional redemption, as provided under Article 1601 of the Civil Code, worded as
follows:
 
ART. 1601. Conventional redemption shall take place when the
vendor reserves the right to repurchase the thing sold, with the obligation to
comply with the provisions of Article 1616 and other stipulations which
may have been agreed upon.
It is true that the one-year period of redemption provided in Act No. 3135, as
amended -- the law under which the property here was sold in a foreclosure sale -- is only
directory and, as such can be extended by agreement of the parties.[42] However, it has also
been held that for legal redemption to be converted into conventional redemption, two
requisites must be established: 1) voluntary agreement of the parties to extend the redemption
period; and 2) the debtors commitment to pay the redemption price on a fixed date. [43] Thus,
assuming that an offer was made to Petitioner Chua to buy back the property after the lapse of
the period of legal redemption, petitioners needed to show that the parties had agreed to extend
the period, and that Petitioner Chua had committed to pay the redemption price on a fixed
date.
The letters sent by the bank to Petitioner Chua on February 20 and March 22, 1984, do not
convincingly show that the parties arrived at a firm agreement for the repurchase of the
property. What can be gleaned from the February 20 letter is that Petitioner Chua proposed to
pay the redemption price for the property, but that the bank refused to accede to his request,
because the one-year redemption period had already lapsed.[44] The bank, though, had offered
to sell back the property to him at the current market value. Indeed, an examination of his
earlier letter of February 17, 1984, readily reveals that he expressed willingness to settle his
account with the bank, but that his present financial situation precludes [him] from effecting
an immediate settlement x x x.[45]
On the other hand, the letter dated March 22, 1984, clearly states that x x x the Bank
rejected [his] request to redeem said property due to [the] lapse of [the] one (1) year legal
redemption period.[46] Nonetheless, he was [invited] to submit an offer to buy the same
property in five (5) days from receipt [of the letter]. [47]Petitioner Chua was also informed that
the bank had received an offer to purchase the foreclosed property. As to the P4,000 check
enclosed in his proposal dated February 17, 1984, as a token of his good faith, he was advised
that the amount was still outstanding in the books of the bank and could be claimed by him if
he thought the invitation was not feasible.
More important, there was no showing that petitioners had committed to pay the redemption
price on a fixed date. True, Petitioner Chua had attempted to establish a previous agreement to
repurchase the property for less than its fair market value. He had submitted in evidence a
Statement of Account[48] dated February 15, 1984, showing a balance of P40,135.53; the
Interbank check dated February 16, 1984 , for P4,000, which was deposited to the account of
respondent bank;[49] and the Official Receipt for the check.[50]
Granting that these documents evinced an agreement, petitioners were still unable to
establish a firm commitment on their part to pay the redemption price on a fixed date. On the
contrary, the February 17 letter of Petitioner Chua to the bank clearly manifested that he was
not capable of paying the account immediately. For this reason, he proposed to pay in three or
four installments without a specification of dates for the payments, but with a plea for a
reduction of the interest charges.That proposal was rejected.
Indeed, other than the Interbank check marked for deposit by respondent bank, no
other evidence was presented to establish that petitioners had offered to pay the alleged
redemption price of P40,135.53 on a fixed date. For that matter, petitioners have not shown
that they tendered payment of the balance and/or consigned the payment to the court, in order
to fulfill their part of the purported agreement. These remedies are available to an aggrieved
debtor under Article 1256 of the Civil Code,[51] when the creditor unjustly refuses to accept the
payment of an obligation.
The next question that presents itself for resolution is the propriety of the CAs ruling vacating
the Partial Decision of the regional trial court (RTC) and dismissing the case. To recall, the
RTC had resolved to withhold a ruling on petitioners right to redeem conventionally and/or
order the reconveyance of the property in question, pending a determination of the validity of
the sale to Cerrofer Realty Corporation and Spouses Cesar and Lorna Roque. The trial court,
however, granted the prayer for damages against respondent bank. The RTC ruled as follows:
 
The evidence presented by [petitioners] in so far as the cause of
action against [respondent] Traders Royal Bank is concerned are
preponderant to support the claims of the [petitioners]. However, in view
of the fact that the property subject matter of this case has already been
conveyed to defendant Cerrofer Realty Corporation thus the issue as to
whether or not the said conveyance or sale is valid is sill pending between
the [petitioners] and [respondents] Cerrofer Realty Corporation and Cesar
Roque and Lorna Roque. Hence, this Court resolves to grant the prayer for
damages against Traders Royal Bank.
 
The claims of the [petitioners] as against [respondent] Traders
Royal Bank having been established and proved by evidence, judgment is
hereby rendered ordering [respondent] Traders Royal Bank to pay
[petitioners] actual damage or the market value of the land in question in
the sum of P500,000.00; the sum of P70,000.00 as compensatory
damages; the sum of P200,000.00 to the heirs of [petitioner] Danilo Chua;
and attorneys fees in the sum of P30,000.00.[52]
 
 
In the light of the pending issue as to the validity of the sale of the property to the
third parties (Cerrofer Realty Corporation and Spouses Roque), the trial court properly
withheld judgment on the matter and thus left the prayer for damages as the sole issue for
resolution.
 
To adjudge damages, paragraph (d) of Section 3 of Rule 9 of the Rules of Court
provides that a judgment against a party in default shall not exceed the amount or be different
in kind from that prayed for nor award unliquidated damages. The proscription against the
award of unliquidated damages is significant, because it means that the damages to be
awarded must be proved convincingly, in accordance with the quantum of evidence required
in civil cases.
 
 Unfortunately for petitioners, the grant of damages was not sufficiently supported
by the evidence for the following reasons.
 
First, petitioners were not deprived of their property without cause. As correctly
pointed out by the CA, Act No. 3135, as amended, does not require personal notice to the
mortgagor.[53] In the present case, there has been no allegation -- much less, proof -- of
noncompliance with the requirement of publication and public posting of the notice of sale, as
required by ct No. 3135. Neither has there been competent evidence to show that the price
paid at the foreclosure sale was inadequate. [54] To be sure, there was no ground to invalidate
the sale.
 
Second, as previously stated, petitioners have not convincingly established their
right to damages on the basis of the purported agreement to repurchase.Without reiterating our
prior discussion on this point, we stress that entitlement to actual and compensatory damages
must be proved even under Section 3 of Rule 9 of the Rules of Court. The same is true with
regard to awards for moral damages and attorneys fees, which were also granted by the trial
court.
 
In sum, petitioners have failed to convince this Court of the cogency of their position,
notwithstanding the advantage they enjoyed in presenting their evidence ex parte. Not in every
case of default by the defendant is the complainant entitled to win automatically.
 
WHEREFORE, this Petition is hereby DENIED and the assailed Decision and
Resolution AFFIRMED. Costs against petitioners.
 
SO ORDERED.
 
THIRD DIVISION
G.R. No. 225035, February 08, 2017
CARSON REALTY & MANAGEMENT CORPORATION, Petitioner, v. RED ROBIN
SECURITY AGENCY AND MONINA C. SANTOS, Respondents.
DECISION
VELASCO JR., J.:
Nature of the Case
This is a petition for review under Rule 45 of the Rules of Court, which seeks to reverse and
set aside the August 20, 2015 Decision1 and June 8, 2016 Resolution2 of the Court of Appeals
(CA) in CA-G.R. SP No. 121983.chanroblesvirtuallawlibrary
Factual Antecedents
The facts according to the CA are as follows:
On March 23, 2007, respondent Monina C. Santos (Santos) filed a Complaint for Sum of
Money and Damages against petitioner Carson Realty & Management Corp. (Carson) with the
Quezon City Regional Trial Court (RTC), Branch 216. As per the Officer's Return dated April
12, 2007 of Process Server Jechonias F. Pajila, Jr. (Process Server Pajila), a copy of the
Summons dated April 11, 2007, together with the Complaint and its annexes, was served upon
Carson at its business address at Unit 601 Prestige Tower Condominium, Emerald Avenue,
Ortigas Center, Pasig City, through its "corporate secretary," Precilla S. Serrano. 3
Thereafter, the appointed Corporate Secretary and legal counsel of Carson, Atty. Tomas Z.
Roxas, Jr. (Atty. Roxas), filed an Appearance and Motion dated April 25, 2007 with the court
wherein the latter entered his appearance and acknowledged that the Summons was served and
received by one of the staff assistants of Carson. Atty. Roxas prayed for an extension of fifteen
(15) days from April 27, 2007 within which to file a responsive pleading. The RTC, in its
Order dated May 3, 2007, noted the appearance of Atty. Roxas as counsel for Carson and
granted his request for extension of time to file a responsive pleading. 4
Instead of filing a responsive pleading, Atty. Roxas moved to dismiss the complaint, alleging
that the Summons dated April 11, 2007 was not served on any of the officers and personnel
authorized to receive summons under the Rules of Court.5
In her Comment, Santos countered that while the Summons was initially received by Serrano,
who as it turned out was a staff assistant and not the corporate secretary of Carson, the
corporation acknowledged receipt of the Summons when Atty. Roxas alleged in his
Appearance and Motion that he may not be able to comply with the 15-day prescribed period
stated in the Summons within which to file a responsive pleading. Thus, when Carson sought
for an affirmative relief of a 15-day extension from April 27, 2007 to file its pleading, it
already voluntarily submitted itself to the jurisdiction of the RTC.6
The RTC denied Carson's Motion to Dismiss and directed the issuance of an alias summons to
be served anew upon the corporation. On November 9, 2007, Process Server Pajila submitted
his Officer's Report stating in essence that he attempted to serve the alias Summons dated
September 24, 2007 on the President and General Manager of Carson, as well as on the Board
of Directors and Corporate Secretary, but they were not around. Hence, he was advised by a
certain Lorie Fernandez, the '"secretary" of the company, to bring the alias Summons to the
law office of Atty. Roxas. Process Server Pajila attempted to serve the alias Summons at the
law office of Atty. Roxas twice, but to no avail. This prompted him to resort to substituted
service of the alias Summons by leaving a copy thereof with a certain Mr. JR Taganila, but the
latter also refused to acknowledge receipt of the alias Summons.7
Atty. Roxas filed a Manifestation stating that the alias Summons was again improperly and
invalidly served as his law office was not empowered to receive summons on behalf of
Carson. In relation thereto, Atty. Roxas maintained that substituted service is not allowed if
the party defendant is a corporation. Thus, Atty. Roxas manifested his intention of returning
the alias Summons to the RTC.
On December 10, 2007, Santos filed a Motion to Declare Defendant in Default. Finding that
there was an improper service of summons on Carson, the RTC denied the motion.
Thereafter, Santos requested the RTC for the issuance of another alias Summons. The RTC
granted this request and issued an alias Summons dated September 9, 2008. Process Server
Pajila submitted his Officer's Return dated October 28, 2008 on the services of the alias
Summons, quoted hereunder in full:
chanRoblesvirtualLawlibrary
THIS IS TO CERTIFY that on October 2, 2008 at around 12:51 in the afternoon, when a copy
of Alias Summons dated September 9, 2008 issued in the above-entitled case together with a
copy of the complaint and annexes attached thereto was brought for service to the
President/General Manager of CARSON REALTY & MANAGEMENT CORP., in the person
of Marcial M. Samson and/or Nieva A Cabrera at its office address at Unit 601 Prestige Tower
Condominium, Emerald Avenue, Ortigas Center, 1605 Pasig City, undersigned was informed
by the secretary of the company in the person of Ms. Vina Azonza that the abovementioned
persons were not around and there was no one in the company authorized to receive the
aforesaid summons. That the undersigned went back to the said office on October 16, 2008 at
around 3:08 in the afternoon and was entered by Ms. Lorie Fernandez, also an employee of the
company who is authorized to receive the said process. On October 27, 2008, at around 2:23 in
the afternoon, undersigned tried again to serve the same process to the President/General
Manager of Carson Realty & Management Corp. but with the same result.
Even on the assumption that Carson did not voluntarily submit to the RTC's jurisdiction, the
CA maintained that the RTC still acquired jurisdiction over it due to the substituted service of
the alias Summons dated September 9, 2008. The appellate court reasoned that Fernandez is a
competent person charged with authority to receive court documents on behalf of the
corporation.16 Consequently, the CA upheld the Order dated June 29, 2009 declaring Carson in
default.

Finally, on October 28, 2008 at around 1:03 in the afternoon, the undersigned went back to the
said company to personally serve the Alias Summons together with the other pertinent
documents, just the same, the President/General Manager of the company was not around,
hence, substituted service of summons was resorted to by leaving the copy of the Alias
Summons at the company's office through its employee, MS. LORIE FERNANDEZ, however,
she refused to acknowledge receipt of the process.ChanRoblesVirtualawlibrary
Loreta M. Fernandez (Fernandez), the receptionist who received the September 9, 2008 alias
Summons, filed a Manifestation before the RTC signifying her intention of returning the alias
Summons, together with the Complaint. Fernandez posited that, as a mere receptionist, she had
no authority to receive the said documents and that there was an improper service of
summons.
Carson moved for reconsideration but was denied by the CA in its Resolution dated June 8,
2016. Hence, this petition.
Carson, in the main, argues that the trial court did not acquire jurisdiction over its person
because the summons was not properly served upon its officers as mandated under Section
11,17 Rule 14 of the Rules of Court. Thus, Carson posits, the RTC improperly declared it in
default and should not have allowed Santos to present her evidence ex-
parte.chanroblesvirtuallawlibrary
Issues
The pertinent issues for the resolution of this Court can be summarized, as follows:

Santos filed a second Motion to Declare Defendant in Default in January 2009. The RTC (1) Whether the RTC acquired jurisdiction over Carson.
granted the motion and allowed her to present her evidence ex-parte in its Order dated June
29, 2009.8 (2) Whether Carson was properly declared in default.chanroblesvirtuallawlibrary
Our Ruling
On August 27, 2009, Carson filed an Urgent Motion to Set Aside Order of Default 9 alleging
that the RTC has yet to acquire jurisdiction over its person due to improper service of The petition is bereft of merit.
summons. The RTC denied the same in its December 4, 2009 Order.10
In actions in personam, such as the present case, the court acquires jurisdiction over the person
Carson filed an Urgent Motion for Reconsideration and for Leave of Court to Admit of the defendant through personal or substituted service of summons. However, because
Responsive Pleading on March 17, 2010, appending thereto its Answer with Counterclaims. substituted service is in derogation of the usual method of service and personal service of
This was opposed by Santos in her Comment/Opposition. In the meantime, Santos filed an Ex- summons is preferred over substituted service, parties do not have unbridled right to resort to
Parte Motion to Set for Hearing and for Reception of Evidence Before the Branch Clerk of substituted service of summons. Before substituted service of summons is resorted to, the
Court.11 On November 22, 2010, the RTC rendered an Order12 denying Carson's Urgent parties must: (a) indicate the impossibility of personal service of summons within a reasonable
Motion for Reconsideration and granting Santos' Ex-Parte Motion to Set Case for Hearing and time; (b) specify the efforts exerted to locate the defendant; and (c) state that the summons was
for Reception of Evidence Before the Branch Clerk. 13 served upon a person of sufficient age and discretion who is residing in the address, or who is
in charge of the office or regular place of business of the defendant. 18
Carson filed a Motion for Clarification and prayed for the annulment of the Orders dated June
29, 2009, December 4, 2009, and November 22, 2010. The RTC, however, maintained its In relation to the foregoing, Manotoc v. Court of Appeals119 provides an exhaustive discussion
stance and denied the motion in its Order14 dated September 9, 2011. on what constitutes valid resort to substituted service of summons:
chanRoblesvirtualLawlibrary
Thus, Carson filed a Petition for Certiorari15 dated November 9, 2011 under Rule 65 of the (1) Impossibility of Prompt Personal Service
Rules of Court with the CA, imputing grave abuse of discretion amounting to lack or excess of
jurisdiction to the RTC for issuing the Orders dated June 29, 2009, December 4, 2009, The party relying on substituted service or the sheriff must show that defendant cannot be
November 22, 2010, and September 9, 2011. Carson essentially questioned the validity of the served promptly or there is impossibility of prompt service. Section 8, Rule 14 provides that
service of the second alias Summons dated September 9, 2008, received by Fernandez, who is the plaintiff or the sheriff is given a "reasonable time" to serve the summons to the defendant
a receptionist assigned at its office in Ortigas.chanroblesvirtuallawlibrary in person, but no specific time frame is mentioned. "Reasonable time" is defined as "so much
Ruling of the Court of Appeals time as is necessary under the circumstances for a reasonably prudent and diligent man to do,
conveniently, what the contract or duty requires that should be done, having a regard for the
The CA denied the petition and ruled that the RTC had properly acquired jurisdiction over rights and possibility of loss, if any, to the other party." Under the Rules, the service of
Carson due to its voluntary appearance in court. In ruling thus, the CA considered Carson's act summons has no set period.
of requesting additional time to file its responsive pleading as voluntary submission to the
jurisdiction of the trial court. However, when the court, clerk of court, or the plaintiff asks the sheriff to make the return of
the summons and the latter submits the return of summons, then the validity of the summons
lapses. The plaintiff may then ask for an alias summons if the service of summons has failed.
What then is a reasonable time for the sheriff to effect a personal service in order to
demonstrate impossibility of prompt service? To the plaintiff, "reasonable time" means no
more than seven (7) days since an expeditious processing of a complaint is what a plaintiff
wants. To the sheriff: "reasonable time" means 15 to 30 days because at the end of the month,
it is a practice for the branch clerk of court to require the sheriff to submit a return of the
summons assigned to the sheriff for service. The Sheriffs Return provides data to the Clerk of
Court, which the clerk uses in the Monthly Report of Cases to be submitted to the Office of the
Court Administrator within the first ten (10) days of the succeeding month. Thus, one month
from the issuance of summons can be considered "reasonable time" with regard to personal
service on the defendant.
Sheriffs are asked to discharge their duties on the service of summons with due care, utmost
diligence, and reasonable promptness and speed so as not to prejudice the expeditious
dispensation of justice. Thus, they are enjoined to try their best efforts to accomplish personal
service on defendant. On the other hand, since the defendant is expected to try to avoid and
evade service of summons, the sheriff must be resourceful, persevering, canny, and diligent in
serving the process on the defendant. For substituted service of summons to be available, there
must be several attempts by the sheriff to personally serve the summons within a reasonable
period [of one month] which eventually resulted in failure to prove impossibility of prompt
service. "Several attempts" means at least three (3) tries, preferably on at least two different
dates. In addition, the sheriff must cite why such efforts were unsuccessful. It is only then that
impossibility of service can be confirmed or accepted.
(2) Specific Details in the Return
The sheriff must describe in the Return of Summons the facts and circumstances surrounding
the attempted personal service. The efforts made to find the defendant and the reasons behind
the failure must be clearly narrated in detail in the Return. The date and time of the attempts
on personal service, the inquiries made to locate the defendant, the name/s of the occupants of
the alleged residence or house of defendant and all other acts done, though futile, to serve the
summons on defendant must be specified in the Return to justify substituted service. The form
on Sheriffs Return of Summons on Substituted Service prescribed in the Handbook for
Sheriffs published by the Philippine Judicial Academy requires a narration of the efforts made
to find the defendant personally and the fact of failure. Supreme Court Administrative Circular
No. 5 dated November 9, 1989 requires that "impossibility of prompt service should be shown
by stating the efforts made to find the defendant personally and the failure of such efforts,"
which should be made in the proof of service.
(3) A Person of Suitable Age and Discretion
If the substituted service will be effected at defendant's house or residence, it should be left
with a person of "suitable age and discretion then residing therein." A person of suitable age
and discretion is one who has attained the age of full legal capacity (18 years old) and is
considered to have enough discernment to understand the importance of a summons.
"Discretion" is defined as "the ability to make decisions which represent a responsible choice
and for which an understanding of what is lawful, right or wise may be presupposed". Thus, to
be of sufficient discretion, such person must know how to read and understand English to
comprehend the import of the summons, and fully realize the need to deliver the summons and
complaint to the defendant at the earliest possible time for the person to take appropriate
action. Thus, the person must have the "relation of confidence" to the defendant, ensuring that
the latter would receive or at least be notified of the receipt of the summons. The sheriff must
therefore determine if the person found in the alleged dwelling or residence of defendant is of
legal age, what the recipient's relationship with the defendant is, and whether said person
comprehends the significance of the receipt of the summons and his duty to immediately
deliver it to the defendant or at least notify the defendant of said receipt of summons. These
matters must be clearly and specifically described in the Return of Summons.
(4) A Competent Person in Charge
If the substituted service will be done at defendant's office or regular place of business, then it
should be served on a competent person in charge of the place. Thus, the person on whom the
substituted service will be made must be the one managing the office or business of defendant,
such as the president or manager; and such individual must have sufficient knowledge to
understand the obligation of the defendant in the summons, its importance, and the prejudicial
effects arising from inaction on the summons. Again, these details must be contained in the
Return.ChanRoblesVirtualawlibrary
The substituted service of summons is valid
While Our pronouncement in Manotoc has been strictly applied to several succeeding cases,
We do not cling to such strictness in instances where the circumstances justify substantial
compliance with the requirements laid down therein. It is the spirit of the procedural rules, not
their letter, that governs.20
In Sagana v. Francisco,21 the substituted service of summons was questioned for non-
compliance with the Rules, since the summons was not allegedly served at defendant's
residence or left with any person who was authorized to receive it on behalf of the defendant.
We upheld the validity of the substituted service of summons due to the defendant's evident
avoidance to receive the summons personally despite the process server's diligent efforts to
effect personal service upon him. We explained:
chanRoblesvirtualLawlibrary
We do not intend this ruling to overturn jurisprudence to the effect that statutory requirements
of substituted service must be followed strictly, faithfully, and fully, and that any substituted
service other than that authorized by the Rules is considered ineffective. However, an overly
strict application of the Rules is not warranted in this case, as it would clearly frustrate the
spirit of the law as well as do injustice to the parties, who have been waiting for almost 15
years for a resolution of this case. We are not heedless of the widespread and flagrant practice
whereby defendants actively attempt to frustrate the proper service of summons by refusing to
give their names, rebuffing requests to sign for or receive documents, or eluding officers of the
court. Of course it is to be expected that defendants try to avoid service of summons,
prompting this Court to declare that, "the sheriff must be resourceful, persevering, canny, and
diligent in serving the process on the defendant." However, sheriffs are not expected to be
sleuths, and cannot be t1mlted where the defendants themselves engage in deception to thwart
the orderly administration of justice.ChanRoblesVirtualawlibrary
Similarly, given the circumstances in the case at bench, We find that resort to substituted
service was warranted since the impossibility of personal service is clearly apparent.
A perusal of the Officer's Return dated October 28, 2008 detailing the circumstances
surrounding the service of the second alias Summons dated September 9, 2008 shows that the
foregoing requirements for a valid substituted service of summons were substantially complied
with.
Indeed, the Return established the impossibility of personal service to Carson's officers, as
shown by the efforts made by Process Server Pajila to serve the September 8, 2008 alias
Summons on Carson's President/General Manager. In particular, several attempts to serve the
summons on these officers were made on four separate occasions: October 2, 2008, October
16, 2008, October 27, 2008, and October 28, 2008, but to no avail.
On his fourth and final attempt, Process Server Pajila served the summons on Fernandez,
Carson's receptionist, due to the unavailability and difficulty to locate the company's corporate
officers. The pertinent portion of the Return states:
chanRoblesvirtualLawlibrary
[S]ubstituted service of summons was resorted to by leaving the copy of the Alias Summons at
the company's office through its employee, MS. LORIE FERNANDEZ, however, she refused
to acknowledge receipt of the process.ChanRoblesVirtualawlibrary
Based on the facts, there was a deliberate plan of Carson's for its officers not to receive the
Summons. It is a legal maneuver that is in derogation of the rules on Summons. We cannot
tolerate that.
The facts now show that the responsible officers did not intend to receive the alias Summons
through substituted service. The Summons is considered validly served.
The RTC acquired jurisdiction over Carson
In any event, even if We concede the invalidity of the substituted service, such is of little
significance in view of the fact that the RTC had already acquired jurisdiction over Carson
early on due to its voluntary submission to the jurisdiction of the court.
Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint. On the other
hand, jurisdiction over the defendants in a civil case is acquired either through the service of
summons upon them or through their voluntary appearance in court and their submission to its
authority,22 as provided in Section 20,23 Rule 14 of the Rules of Court.
On this score, Philippine Commercial International Bank v. Spouses Day 24 instructs that:
chanRoblesvirtualLawlibrary
As a general proposition, one who seeks an affirmative relief is deemed to have submitted to
the jurisdiction of the court. It is by reason of this rule that we have had occasion to declare
that the filing of motions to admit answer, for additional time to file answer, for
reconsideration of a default judgment, and to lift order of default with motion for
reconsideration, is considered voluntary submission to the court's jurisdiction. This, however,
is tempered only by the concept of conditional appearance, such that a party who makes a
special appearance to challenge, among others, the court's jurisdiction over his person cannot
be considered to have submitted to its authority. Prescinding from the foregoing, it is thus
clear that:
(1) Special appearance operates as an exception to the general rule on voluntary
appearance;chanrobleslaw
(2) Accordingly, objections to the jurisdiction of the court over the person of the defendant
must be explicitly made, i.e., set forth in an unequivocal manner; and
(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court, especially
in instances where a pleading or motion seeking affirmative relief is filed and submitted to the
court for resolution. (underscoring supplied)ChanRoblesVirtualawlibrary
We have, time and again, held that the filing of a motion for additional time to file answer is
considered voluntary submission to the jurisdiction of the court.25cralawred If the defendant
knowingly does an act inconsistent with the right to object to the lack of personal jurisdiction
as to him, like voluntarily appearing in the action, he is deemed to have submitted himself to
the jurisdiction of the court.26Seeking an affirmative relief is inconsistent with the position that
no voluntary appearance had been made, and to ask for such relief, without the proper
objection, necessitates submission to the Court's jurisdiction.27
Carson voluntarily submitted to the jurisdiction of the RTC when it filed, through Atty. Roxas,
the Appearance and Motion dated April 25, 2007 acknowledging Carson's receipt of the
Summons dated April 11, 2007 and seeking additional time to file its responsive pleading. As
noted by the CA, Carson failed to indicate therein that the Appearance and Motion was being
filed by way of a conditional appearance to question the regularity of the service of summons.
Thus, by securing the affirmative relief of additional time to file its responsive pleading,
Carson effectively voluntarily submitted to the jurisdiction of the RTC.
Carson was properly declared in default
Section 3, Rule 9 of the Rules of Court states when a party may be properly declared in default
and the remedy available in such case:
chanRoblesvirtualLawlibrary
SEC. 3. Default; declaration of. - If the defending party fails to answer within the time allowed
therefor, the court shall, upon motion of the claiming party with notice to the defending party,
and proof of such failure, declare the defending party in default. Thereupon, the court shall
proceed to render judgment granting the claimant such relief as his pleading may warrant,
unless the court in its discretion requires the claimant to submit evidence. Such reception of
evidence may be delegated to the clerk of court.
(a) Effect of order of default. - A party in default shall be entitled to notice of subsequent
proceedings but not to take part in the trial.
(b) Relief from order of default. - A party declared in default may at any time after notice
thereof and before judgment file a motion under oath to set aside the order of default upon
proper showing that his failure to answer was due to fraud, accident, mistake or excusable
negligence and that he has a meritorious defense. In such case, the order of default may be set
aside on such terms and conditions as the judge may impose in the interest of justice.
(emphasis supplied)ChanRoblesVirtualawlibrary
Carson moved to dismiss the complaint instead of submitting a responsive pleading within
fifteen (15) days from April 27, 2007 as prayed for in its Appearance and Motion. Clearly,
Carson failed to answer within the time allowed for by the RTC. At this point, Carson could
have already been validly declared in default. However, believing that it has yet to acquire
jurisdiction over Carson, the RTC issued the September 24, 2007 and September 9, 2008 alias
Summons. This culminated in the issuance of the assailed June 29, 2009 Order declaring
Carson in default on the basis of the substituted service of the September 9, 2008 alias
Summons. While Carson filed its Urgent Motion to Lift Order of Default, the CA found that
the same failed to comply with the requirement under Sec. 3(b) that the motion be under oath.
It bears noting that the propriety of the default order stems from Carson's failure to file its
responsive pleading despite its voluntary submission to the jurisdiction of the trial court
reckoned from its filing of the Appearance and Motion, and not due to its failure to file its
answer to the September 8, 2008 alias Summons. This conclusion finds support in Atiko
Trans, Inc. and Cheng Lie Navigation Co., Ltd v. Prudential Guarantee and Assurance,
Inc.,28 wherein We upheld the trial court's order declaring petitioner Atiko Trans, Inc. (Atiko)
in default despite the invalid service of summons upon it. In this case, respondent Prudential instead, The Order of the Court of First Instance of August 7, 1963 be affirmed, or, in the
Guarantee and Assurance Inc. (Prudential) moved to declare Atiko in default due to the latter's alternative, that the case be remanded to it for new trial.
failure to file its responsive pleading despite receipt of the summons. Acting on Prudential's
motion, the trial court declared Atiko in default. In affirming the validity of the default order, Involved in this controversy are the respective claims of petitioner and private respondents
We took note that the trial court acquired jurisdiction over Atiko due to its voluntary over Lot No. 551 of the Sta. Cruz de Malabon Estate (part of the friar lands) in Tanza, Cavite,
submission to the jurisdiction of the court by filing numerous pleadings seeking affirmative with an area of approximately 1,622 square meters. covered by Transfer Certificate of Title
relief, and not on the strength of the invalidly served summons. No. T-6804 issued in the name of the legal heirs of Margarita Torres.
In a similar vein, the erroneous basis cited in the June 29, 2009 Order, due to the RTC's
mistaken belief that the substituted service vested it with jurisdiction over Carson, does not The facts of the case cover three generations. The propositus, Margarita Torres, during the
render the pronouncement invalid in view of the existence of a lawful ground therefor. Spanish regime, was married to Claro Santillan. Vicente and Antonina were begotten of this
union. Claro died leaving Margarita a widow. Antonina married and had six children, namely:
WHEREFORE, the petition is DENIED. The Decision dated August 20, 2015 and Alfredo, Salud (married to Baldomero Buenaventura), Demetria (married to Leonardo
Resolution dated June 8, 2016 of the Court of Appeals in CA G.R. SP No. 121983 Quinto), Adelina (married to Cesario Punzalan), Tomas and Amado all surnamed Narciso,
are AFFIRMED. who, together with Vicente Santillan, are the private respondents. Antonina died before the
institution of the cases while Vicente died on June 4, 1957, 2 during the pendency of the cases
SO ORDERED.cralawlawlibrary in the Trial Courts, without progeny .

G.R. No. L-37420 July 31, 1984 After the death of her husband, Margarita Torres cohabited with Leon Arvisu Arbole, without
benefit of marriage. Out of their cohabitation, petitioner Macaria Torres (later married to
Francisco Bautista) was born on June 20, 1898, and baptized on June 26, 1898. In a Certificate
MACARIA A. TORRES, petitioner,  of Baptism issued by the Parish Priest of Tanza, Cavite, Leon Arvisu Arbole and Margarita
vs. Torres were named as father and mother of petitioner whose name was listed as Macaria
COURT OF APPEALS, VICENTE SANTILLAN, ALFREDO NARCISO, TOMAS Arvisu", (Exhibit "C" Another Baptismal Certificate, however, listed her name as Macaria
NARCISO, AMADO NARCISO, SALUD NARCISO, DEMETRIA NARCISO and Torres, while her father's name was left blank (Exhibit "4"). Subsequently, or on June 7, 1909,
ADELINA NARCISO, respondents. Leon Arbole and Margarita Torres were married (Exhibit "A"). Petitioner lived with and was
reared by her parents. Margarita, the mother, died on December 20, 1931 (Exhibit "D"), while
G.R. No. L-37421 July 31, 1984 Leon, the father, passed away on September 14, 1933 (Exhibit " E ").

MACARIA A. TORRES, petitioner,  Lot No. 551, an urban lot with an area of 1,622 sq. ms., more or less, had been leased
vs.
COURT OF APPEALS, VICENTE SANTILLAN, ALFREDO NARCISO, SALUD
NARCISO, BALDOMERO BUENAVENTURA, DEMETRIA NARCISO, LEONARDO
QUINTO, ADELINA NARCISO, CESARIO PUNZALAN, TOMAS NARCISO and
AMADO NARCISO, respondents.
Juan R. Liwag for petitioner.
Cesar Nocon for respondents.
MELENCIO-HERRERA, J.:
This Petition for Review on Certiorari, treated as a special civil action. 1 prays that the
judgment rendered by the then Court of Appeals in the consolidated cases, CA-G.R. NO.
34998-R entitled "Macaria A. Torres, plaintiff-appellee vs. Vicente Santillan, et al.,
defendants-appellants", and CA-G.R. No. 34999-R entitled "Vicente Santillan, et al.,
plaintiffs-appellants vs. Macaria A. Bautista, et al., defendants-appellees and the Resolution
denying the Motion for Reconsideration and Petition for New Trial, be set aside; and that,
temporarily by the Government (Lease No. 17) to Margarita Torres who was the actual
occupant of the lot. The date of the lease cannot be determined with exactitude from the
records. On December 13, 1910, the Government, through the Director of Lands, issued to
Margarita Torres, Sale Certificate No. 222 (Exhibit "B") over the said lot at the price of
P428.80, payable in 20 annual installments of P20.00 each. The rental/s previously paid of
P17.40 was credited to the purchase price. Testimonial evidence is to the effect that Leon
Arbole paid the installments out of his earnings as a water tender at the Bureau of Lands,
Tanza, Cavite. The last installment, however, was paid on December 17, 1936, or three (3)
years after his death.
On August 25, 1933, twenty (20) days before his death, Leon Arbole sold and transferred in a
notarial deed all his rights and interest to the one-half (1/2) portion of Lot No. 551 in favor of
petitioner, for the sum of P300.00.3
On June 6, 1953, Vicente Santillan executed an Affidavit claiming possession of Lot No. 551
and asking for the issuance of title in his name, which he filed with the Bureau of Lands.
Based thereon, the Bureau of Lands issued the corresponding patent in the name of the legal
heirs of Margarita Torres. Transfer Certificate of Title No. T-6804 was eventually issued by
the Register of Deeds of Cavite on November 7, 1957, also in the name of said heirs.
On June 3, 1954, private respondents filed a complaint against petitioner for Forcible Entry,
with the Justice of the Peace Court of Tanza, Cavite, alleging that petitioner had entered a
portion of Lot No. 551 without their consent, constructed a house. and refused to vacate upon
demand. For her part, petitioner claimed that she is a co-owner of the lot in question, being
one of the daughters of Margarita Torres. The ejectment case was decided against petitioner
and the latter appealed to the then Court of First Instance of Cavite, where it was docketed as
Civil Case No. 5547 (Ejectment Case).
On June 8, 1954, petitioner instituted an action for partition of Lot No. 551 before the then
Court of First Instance of Cavite, docketed as Civil Case No. 5505 (Partition Case), alleging
that said lot was conjugal property of the spouses Margarita Torres and Leon Arbole, and that
she is their legitimated child. Private respondents filed an Answer alleging that the lot
belonged exclusively to Margarita Torres; that they are her only heirs, and that the complaint
for partition should be dismissed.
The Ejectment Case and the Partition Case were jointly tried and decided on November 20,
1958 with a finding that Lot No. 551 is the paraphernal property of Margarita Torres and
adjudicating to private respondents two-thirds (2/3) of the property in equal shares, and to
petitioner a one-third (1/3) portion. 4 Petitioner moved for reconsideration, which private
respondents opposed. Pending its resolution, the Provincial Capitol of Cavite was burned,
resulting in the complete destruction of the records of the two cases, which, however, were
later partially reconstituted.
On August 7, 1963, the then Court of First Instance of Cavite, Branch 1, issued an Order
granting reconsideration and amending the Decision of November 20, 1958. The positive
portion thereof reads as follows:
Wherefore, judgment is hereby rendered in Civil Case No. .5505:
(1) Declaring Macaria A. Torres as the legitimated child of the spouses
Leon Arbole and Margarita Torres;
(2) Declaring that Lot No. 551 of the Sta. Cruz de Malabon Estate is a
conjugal partnership property of the spouses Leon Arbole and Margarita
Torres;
(3) Adjudicating four-sixths (4/6th of Lot No. 551 of S.C. de Malabon
Estate to Macaria Torres, and two-sixths (2/6th) in equal shares to Alfredo,
Tomas, Amado, Salud, Demetria and Adelina, all surnamed Narciso,
legitimate children and heirs of the deceased Antonina Santillan, since
Vicente Santillan is already dead. The parties may make the partition
among themselves by proper instruments of conveyance, subject to
confirmation by the Court. In fairness, however, to the parties, each party
should be alloted that portion of the lot where his or her house has been
constructed, as far as this is possible. In case the parties are unable to
agree upon the partition, the Court shall appoint three commissioners to
make the partition.
As to Civil Case No. 5547, the same is hereby dismissed.
Without costs in both cases. 5
In concluding that petitioner is a legitimated child, the Trial Court opined:
It is undisputed that when Macaria A. Torres was born on June 20, 1898,
her parents, Leon Arbole and Margarita Torres, had the capacity to marry
each other. There was no legal impediment for them to marry It has also
been established that Macaria A. Torres had been taken care of, brought
up and reared by her parents until they died. The certificate of baptism
(Exh. "G") also shows that Macaria Torres was given the family name of
Arvisu, which is also the family name of her father, Leon Arbole, and that
her father is Leon Arvisu and her mother is Margarita Torres. Such being
the case, Macaria A. Torres possessed the status of an acknowledged
natural child. And when her parents were married on June 7, 1909, she
became the legitimated daughter of on Arbole and Margarita Torres. 6
Private respondents appealed. On April 2, 1973, the then Court of Appeals 7 rendered the
judgment sought to be set aside herein, the decretal part of which states:
Wherefore, judgment is hereby rendered in Civil Case No. 5505:
(1) Declaring that Macaria A. Torres is not the legitimated child of the
spouses Leon Arbole and Margarita Torres;
(2) Declaring that Lot No. 551 of the Sta Cruz de Malabon Estate is a
conjugal partnership property of the spouses Leon Arbole and Margarita
Torres; and
(3) Adjudicating one-half (1/2) of Lot No. 551 of S.C. de Malabon Estate
to Macaria Torres, and the other half (1/2) in equal shares to Alfredo,
Tomas, Amado, Salud, Demetria and Adelina, an surnamed Narciso,
legitimate children and heirs of Antonina Santillan, since Vicente Santillan
is already dead. The parties may make the partition among themselves by
proper instruments of conveyance, subject to confirmation by the Court. In
fairness, however, to the parties, each party should be alloted that portion
of the lot where his or her house has been constructed, as far as this is
possible. In case the parties are unable to agree upon the partition, the
Court shall appoint three commissioners to make the partition.
As to Civil Case No. 5547, the same is hereby dismissed.
Without costs in both cases. 8
The Appellate Court was of the opinion that:
Macaria A. Torres is not a legitimated daughter of Leon Arvisu Arbole
and Margarita Torres, the former not having been legally acknowledged
before or after the marriage of her parents. As correctly pointed out by the
 appellants in their brief, the fact that she was taken cared of, brought up  
and reared by her parents until they died, and that the certificate of
baptism (Exhibit "C") shows that she was given the family name of Arvisu (Thumbmarked) (Thumbmarked)
did not bestow upon her the status of an acknowledged natural child. LEON ARVISU MARGARITA TORRES

Under Article 121 of the old Civil Code, the governing law on the matter, Signed in the prsence of:
children shall be considered legitimated by subsequent marriage only
when they have been acknowledged by the parents before or after the
celebration thereof, and Article 131 of the same code provides that the (Sgd.) Illegible (Sgd.) Macaria Bautista
acknowledgement of a natural child must be in the record of birth, in a will
or in some public document. Article 131 then prescribed the form in which x--------------------------------------------------
the acknowledgment of a natural child should be made. The certificate of --x
baptism of Macaria A. Torres (Exhibit "C") is not the record of birth
referred to in Article 131. This article of the old Civil Code 'requires that UNITED STATES OF AMERICA )
unless the acknowledgement is made in a will or other public document, it PHILIPPINE ISLANDS )
must be made in the record of birth, or in other words, in the civil register MUNICIPALITY OF TANZA ) ss
(Samson vs. Corrales Tan, 48 PhiL 406). 9 PROVINCE OF CAVITE )

A Motion for Reconsideration and for New Trial, dated April 16, 1973, was filed by petitioner. Subscribed and sworn to before me this 5th day of March 1930. The
In support thereof, petitioner submitted a typewritten Sworn Statement, dated March 5, 1930, affiant Leon Arvisu exhibited to me no cedula certificate being exempt on
of spouses Leon Arvisu (Arbole) and Margarita Torres,10 reading in full as follows: account of going over 60 years of age and Margarita Torres having
exhibited no cedula certificate being exempt on account of her sex.
SWORN STATEMENT
Witness my hand and seal of office on the date and place aforesaid.
We, Leon Arvisu and Margarita Torres husband and wife respectively, of
majority age, and residents of the Municipality of Tanza, Province of CON
Cavite, P.I., after being duly sworn to according to law depose and say STA
NCI
That Macaria de Torres is our legitimized daughter she being born out of O T.
wedlock on the 26 th of June 1898 all Tanza, Cavite, but as stated she was VEL
legitimized by our subsequent marriage. ASC
O 
That at the time of her birth or conception, we, her parents could have Nota
married without dispensation had we desired. ry
Publi
c,
That as natural child our aforesaid daughter was surnamed de Torres after Cavit
that of her mother's at the time she was baptized as per record on file in the e
Church. Provi
nce
That as a legitimized daughter she should now be surnamed Arvisu after Until
her father's family name. Dec.
31,
Wherefore, it is respectfully requested to anybody concerned that proper 1930
remedy be made for the change of the surname of said Macaria de Torres .
as desired.
Not. Reg. No. 56 
In testimony hereof, we hereunto signed out names at Tanza, Cavite, this P. No. 2
5th day of March 1930. Book No. III Series of 1930. 11
The reason given for the non-production of the notarial document during trial was that the
same was only found by petitioner's daughter, Nemensia A. Bautista, among the personal
belongings of private respondent, Vicente Santillan, an adverse party, after his death and who
may have attempted to suppress it. Private respondents, for their part, argued against new trial,
and contended that it is not newly discovered evidence which could not have been produced
during the trial by the exercise of due diligence.
The Decision of the Appellate Court was rendered by a Division of three, composed of
Justices Jesus Y. Perez, Jose N. Leuterio and Luis B. Reyes, ponente. When the Motion for
Reconsideration and New Trial was considered, there was disagreement, possibly as to
whether or not new trial should be granted in respect of the sworn statement of March 5, 1930.
A Special Division of five was then formed, composed of Justices Antonio Lucero Magno S.
Gatmaitan, Lourdes P. San Diego, Jose N. Leuterio and Luis B. Reyes (Justice Perez having
retired or having disqualified himself). In a minute resolution of August 24, 1973, the Division
of five, by a vote of three or two, denied both reconsideration and new trial.
To warrant review, petitioner, has summarized her submission based on two assignments of
error. The first was expressed as follows:
Although the Court of Appeals is correct in declaring that Macaria A.
Torres is not the legitimated child of the spouses Leon Arbole and
Margarita Torres, it has overlooked to include in its findings of facts the
admission made by Vicente Santillan and the heirs of Antonina Santillan
(herein respondents) that Macaria A. Torres and Vicente Santillan and
Antonina Santillan are brother and sisters with a common mother
Margarita Torres and they are the legal heirs and nearest of relatives of
Margarita Torres, and as a consequence thereof, the Court of Appeals had
drawn an incorrect conclusion in adjudicating the entire share of Margarita
Torres in the conjugal property solely to Vicente Santillan and the heirs of
Antonina Santillan. (emphasis supplied)
As we understand it, petitioner has conceded, with which we concur, that, without taking
account of the sworn statement of March 5, 1930, she cannot be considered a legitimated child
of her parents. Continuous possession of the status of a natural child, fact of delivery by the
mother, etc. will not amount to automatic recognition, but an action for compulsory
recognition is still necessary, which action may be commenced only during the lifetime of the
putative parents, subject to certain exceptions. 12
The admission adverted to appears in paragraph 3 of private respondents' original complaint in
the Ejectment Case reading:
the plaintiffs and the defendant Macaria A. Bautista are the legal
heirs and nearest of kins of Margarita Torres, who died in Tanza, Cavite
on December 20, 1931. (Emphasis supplied).
The statement, according to petitioner, is an admission of her legitimation and is controlling in
the determination of her participation in the disputed property.
We are not persuaded. In the Amended Complaint filed by private respondents in the same
Ejectment Case, the underlined portion was deleted so that the statement simply read:
That the plaintiffs are the legal heirs and nearest of kin of Margarita
Torres, who died at Tanza, Cavite, on December 20, 1931.
In virtue thereof, the Amended Complaint takes the place of the original. The latter is regarded
as abandoned and ceases to perform any further function as a pleading. The original complaint
no longer forms part of the record. 13
If petitioner had desired to utilize the original complaint she should have offered it in
evidence. Having been amended, the original complaint lost its character as a judicial
admission, which would have required no proof, and became merely an extrajudicial
admission, the admissibility of which, as evidence, required its formal offer. Contrary to
petitioner's submission, therefore there can be no estoppel by extrajudicial admission made in
the original complaint, for failure to offer it in evidence. 14
It should be noted that in the Partition Case private respondents, in their Answer (parag. 4),
denied the legitimacy of petitioner.
The second error attributed to the Appellate Court has been pleaded as follows:
Also, the Court of Appeals has gravely abused its discretion when it
denied the petition for new trial, knowing as it does that the judgment is
clearly erroneous in view of the evidence which is offered and no amount
of diligence on the part of the petitioner could it be produced in court at
any time before it was offered as it was found from the personal
belongings of Vicente Santillan, an adverse party, after his death.
It is our considered opinion that new trial was warranted to prevent a possible miscarriage of
justice. Assuming that the genuineness and due execution of the Sworn Statement of March 5,
1930 is established in accordance with procedural due process, a new trial would resolve such
vital considerations as (1) whether or not said Sworn Statement qualifies as the public
document prescribed in Article 131 of the old Civil Code; 15 (2) whether or not it conforms to
an act of acknowledgment by the parents after the celebration of their marriage as required by
Article 121 of the same code; 16 and (3) whether or not petitioner's signature as a witness to
said document was the equivalent of the consent necessary for acknowledgment of an adult
person under Article 133 of that Code. 17 Affirmative answers would confer upon petitioner
the status of a legitimated child of her parents, and would entitle her to enjoy hereditary rights
to her mother's estate.
Private respondents stress that since petitioner signed as a witness to the document she should
be chargeable with knowledge of its existence, and, therefore, the Sworn Statement was not
newly discovered evidence. In our view, the document can reasonably qualify as newly
discovered evidence, which could not have been produced during the trial even with the
exercise of due diligence; specially if it really had been in the possession of Vicente Santillan,
an adverse party who, it was alleged, suppressed the document.
In the interest of judicial expediency, the new trial can be conducted by respondent Appellate Rosario
Court, now empowered to do so under Section 9 of Batas Pambansa Blg. 129. 3. 59547 3-31-69 Pangilinan 195.00 Unreleased
Enterprises
WHEREFORE, this case is hereby remanded to the now Intermediate Appellate Court for new 4. 59549 3-31-69 Natividad 3,239.88 4-23-69
trial, and depending on its outcome, said Court shall also resolve the respective participation Rosario
of the parties in the disputed property, inclusive of the estate of the deceased Vicente Santillan. 5. 59552 4-1-69 Villarama 987.59 5-6-69
No costs. & Sons
6. 59554 4-1-69 Gascom 6,057.60 4-16 69
Engineering
SO ORDERED. 7. 59558 4-2-69 The Evening 112.00 Unreleased
News
8. 59544 3-27-69 Progressive 18,391.20 4-18 69
SO ORDERED. Const.
G.R. No. L-62943 July 14, 1986 9. 59564 4-2-69 Ind. Insp. 594.06 4-18 69
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner,  Int. Inc.
vs. 10. 59568 4-7-69 Roberto 800.00 4-22-69
COURT OF APPEALS (Now INTERMEDIATE APPELLATE COURT) and THE Marsan
PHILIPPINE NATIONAL BANK, respondents. 11. 59570 4-7-69 Paz Andres 200.00 4-22-69
Juan J. Diaz and Cesar T. Basa for respondent PNB. 12. 59574 4-8-69 Florentino 100,000.00 4-11-69
San Juan, Africa, Gonzales & San Agustin Law Offices for respondent PCIB. Santos
13. 59578 4-8-69 Mla. Daily 95.00 Unreleased
GUTIERREZ, JR., J.: Bulletin
This petition for review asks us to set aside the October 29, 1982 decision of the respondent 14. 59580 4-8-69 Phil. Herald 100.00 5-9-69
Court of Appeals, now Intermediate Appellate Court which reversed the decision of the Court 15. 59582 4-8-69 Galauran 7,729.09 5-6-69
of First Instance of Manila, Branch XL, and dismissed the plaintiff's complaint, the third party & Pilar
complaint, as well as the defendant's counterclaim. 16. 59581 4-8-69 Manila 110.00 5-12 69
The background facts which led to the filing of the instant petition are summarized in the Chronicle
decision of the respondent Court of Appeals: 17. 59588 4-8-69 Treago 21,583.00 4-11 69
Metropolitan Waterworks and Sewerage System (hereinafter referred to as Tunnel
MWSS) is a government owned and controlled corporation created under 18. 59587 4-8-69 Delfin 120,000.00 4-11-69
Republic Act No. 6234 as the successor-in- interest of the defunct NWSA. Santiago
The Philippine National Bank (PNB for short), on the other hand, is the 19. 59589 4-10-69 Deogracias 1,257.49 4-16 69
depository bank of MWSS and its predecessor-in-interest NWSA. Among Estrella
the several accounts of NWSA with PNB is NWSA Account No. 6, 20. 59594 4-14-69 Philam Ac- 33.03 4-29 69
otherwise known as Account No. 381-777 and which is presently allocated cident Inc.
No. 010-500281. The authorized signature for said Account No. 6 were 21. 59577 4-8-69 Esla 9,429.78 4-29 69
those of MWSS treasurer Jose Sanchez, its auditor Pedro Aguilar, and its 22. 59601 4-16-69 Justino 20,000.00 4-18-69
acting General Manager Victor L. Recio. Their respective specimen Torres
signatures were submitted by the MWSS to and on file with the PNB. By 23. 59595 4-14-69 Neris Phil. 4,274.00 5-20-69
special arrangement with the PNB, the MWSS used personalized checks in Inc. --------------------
drawing from this account. These checks were printed for MWSS by its P 320,636.26
printer, F. Mesina Enterprises, located at 1775 Rizal Extension, Caloocan During the same months of March, April and May 1969, twenty-three (23)
City. checks bearing the same numbers as the aforementioned NWSA checks
During the months of March, April and May 1969, twenty-three (23) were likewise paid and cleared by PNB and debited against NWSA
checks were prepared, processed, issued and released by NWSA, all of Account No. 6, to wit:
which were paid and cleared by PNB and debited by PNB against NWSA Check Date Payee Amount Date Paid
Account No. 6, to wit: No. Issued By PNB
Check No. Date Payee Amount Date Paid 1. 59546 3-6-69 Raul Dizon P 84,401.00 3-16-69
By PNB 2. 59548 3-11-69 Raul Dizon 104,790.00 4-1-69
1. 59546 8-21-69 Deogracias P 3,187.79 4-2-69 3. 59547 3-14-69 Arturo Sison 56,903.00 4-11-69
Estrella 4. 59549 3-20-69 Arturo Sison 48,903.00 4-15-69
2. 59548 3-31-69 Natividad 2,848.86 4-23 69 5. 59552 3-24-69 Arturo Sison 63,845.00 4-16-69
6. 59544 3-26-69 Arturo Sison 98,450.00 4-17-69
7. 59558 3-28-69 Arturo Sison 114,840.00 4-21-69
8. 59544 3-16-69 Antonio 38,490.00 4-22-69 Mendoza
9. 59564 3-31-69 Arturo Sison 180,900.00 4-23-69
10.59568 4-2-69 Arturo Sison 134,940.00 4- 5-69
11.59570 4-1-69 Arturo Sison 64,550.00 4-28-69
12.59574 4-2-69 Arturo Sison 148,610.00 4-29-69
13.59578 4-10-69 Antonio 93,950.00 4-29-69
Mendoza
14.59580 4-8-69 Arturo Sison 160,000.00 5-2-69
15.59582 4-10-69 Arturo Sison 155,400.00 5-5-69
16.59581 4-8-69 Antonio 176,580.00 5-6-69
Mendoza
17.59588 4-16-69 Arturo Sison 176,000.00 5-8-69
18.59587 4-16-69 Arturo Sison 300,000.00 5-12-69
19.59589 4-18-69 Arturo Sison 122,000.00 5-14-69
20.59594 4-18-69 Arturo Sison 280,000.00 5-15-69
21.59577 4-14-69 Antonio 260,000.00 5-16-69
Mendoza
22.59601 4-18-69 Arturo Sison 400,000.00 5-19-69
23.59595 4-28-69 Arturo Sison 190,800.00 5-21-69
---------------
P3,457,903.00
The foregoing checks were deposited by the payees Raul Dizon, Arturo
Sison and Antonio Mendoza in their respective current accounts with the
Philippine Commercial and Industrial Bank (PCIB) and Philippine Bank
of Commerce (PBC) in the months of March, April and May 1969. Thru
the Central Bank Clearing, these checks were presented for payment by
PBC and PCIB to the defendant PNB, and paid, also in the months of
March, April and May 1969. At the time of their presentation to PNB
these checks bear the standard indorsement which reads 'all prior
indorsement and/or lack of endorsement guaranteed.'
Subsequent investigation however, conducted by the NBI showed that
Raul Dizon, Arturo Sison and Antonio Mendoza were all fictitious
persons. The respective balances in their current account with the PBC
and/or PCIB stood as follows: Raul Dizon P3,455.00 as of April 30, 1969;
Antonio Mendoza P18,182.00 as of May 23, 1969; and Arturo Sison
Pl,398.92 as of June 30, 1969.
On June 11, 1969, NWSA addressed a letter to PNB requesting the
immediate restoration to its Account No. 6, of the total sum of
P3,457,903.00 corresponding to the total amount of these twenty-three
(23) checks claimed by NWSA to be forged and/or spurious checks. "In
view of the refusal of PNB to credit back to Account No. 6 the said total
sum of P3,457,903.00 MWSS filed the instant complaint on November 10,
1972 before the Court of First Instance of Manila and docketed thereat as
Civil Case No. 88950.
In its answer, PNB contended among others, that the checks in question
were regular on its face in all respects, including the genuineness of the
signatures of authorized NWSA signing officers and there was nothing on
its face that could have aroused any suspicion as to its genuineness and
due execution and; that NWSA was guilty of negligence which was the
proximate cause of the loss.
PNB also filed a third party complaint against the negotiating banks PBC
and PCIB on the ground that they failed to ascertain the Identity of the
payees and their title to the checks which were deposited in the respective
new accounts of the payees with them.
xxx xxx xxx
On February 6, 1976, the Court of First Instance of Manila rendered judgment in favor of the
MWSS. The dispositive portion of the decision reads:
WHEREFORE, on the COMPLAINT by a clear preponderance of
evidence and in accordance with Section 23 of the Negotiable Instruments
Law, the Court hereby renders judgment in favor of the plaintiff
Metropolitan Waterworks and Sewerage System (MWSS) by ordering the
defendant Philippine National Bank (PNB) to restore the total sum of
THREE MILLION FOUR HUNDRED FIFTY SEVEN THOUSAND
NINE HUNDRED THREE PESOS (P3,457,903.00) to plaintiff's Account
No. 6, otherwise known as Account No. 010-50030-3, with legal interest
thereon computed from the date of the filing of the complaint and until as
restored in the said Account No. 6.
On the THIRD PARTY COMPLAINT, the Court, for lack of evidence,
hereby renders judgment in favor of the third party defendants Philippine
Bank of Commerce (PBC) and Philippine Commercial and Industrial Bank
(PCIB) by dismissing the Third Party Complaint.
The counterclaims of the third party defendants are likewise dismissed for
lack of evidence.
No pronouncement as to costs.
As earlier stated, the respondent court reversed the decision of the Court of First Instance of
Manila and rendered judgment in favor of the respondent Philippine National Bank.
A motion for reconsideration filed by the petitioner MWSS was denied by the respondent
court in a resolution dated January 3, 1983.
The petitioner now raises the following assignments of errors for the grant of this petition:
I. IN NOT HOLDING THAT AS THE SIGNATURES ON THE
CHECKS WERE FORGED, THE DRAWEE BANK WAS LIABLE FOR
THE LOSS UNDER SECTION 23 OF THE NEGOTIABLE
INSTRUMENTS LAW.
II. IN FAILING TO CONSIDER THE PROXIMATE NEGLIGENCE OF
PNB IN ACCEPTING THE SPURIOUS CHECKS DESPITE THE
OBVIOUS IRREGULARITY OF TWO SETS OF CHECKS BEARING
IdENTICAL NUMBER BEING ENCASHED WITHIN DAYS OF EACH
OTHER.
III. IN NOT HOLDING THAT THE SIGNATURES OF THE DRAWEE
MWSS BEING CLEARLY FORGED, AND THE CHECKS SPURIOUS,
SAME ARE INOPERATIVE AS AGAINST THE ALLEGED DRAWEE.
The appellate court applied Section 24 of the Negotiable Instruments Law which provides:
Every negotiable instrument is deemed prima facie to have been issued for
valuable consideration and every person whose signature appears thereon
to have become a party thereto for value.
The petitioner submits that the above provision does not apply to the facts of the instant case
because the questioned checks were not those of the MWSS and neither were they drawn by
its authorized signatories. The petitioner states that granting that Section 24 of the Negotiable
Instruments Law is applicable, the same creates only a prima facie presumption which was
overcome by the following documents, to wit: (1) the NBI Report of November 2, 1970; (2)
the NBI Report of November 21, 1974; (3) the NBI Chemistry Report No. C-74891; (4) the
Memorandum of Mr. Juan Dino, 3rd Assistant Auditor of the respondent drawee bank
addressed to the Chief Auditor of the petitioner; (5) the admission of the respondent bank's
counsel in open court that the National Bureau of Investigation found the signature on the
twenty-three (23) checks in question to be forgeries; and (6) the admission of the respondent
bank's witness, Mr. Faustino Mesina, Jr. that the checks in question were not printed by his
printing press. The petitioner contends that since the signatures of the checks were forgeries,
the respondent drawee bank must bear the loss under the rulings of this Court.
A bank is bound to know the signatures of its customers; and if it pays a
forged check it must be considered as making the payment out of its
obligation funds, and cannot ordinarily charge the amount so paid to the
account of the depositor whose name was forged.
xxx xxx xxx
The signatures to the checks being forged, under Section 23 of the
Negotiable Instruments Law they are not a charge against plaintiff nor are
the checks of any value to the defendant.
It must therefore be held that the proximate cause of loss was due to the
negligence of the Bank of the Philippine Islands in honoring and cashing
the two forged checks. (San Carlos Milling Co. v. Bank of the P. I., 59
Phil. 59)
It is admitted that the Philippine National Bank cashed the check upon a
forged signature, and placed the money to the credit of Maasim, who was
the forger. That the Philippine National Bank then endorsed the chock and
forwarded it to the Shanghai Bank by whom it was paid. The Philippine
National Bank had no license or authority to pay the money to Maasim or
anyone else upon a forged signature. It was its legal duty to know that
Malicor's endorsement was genuine before cashing the check. Its remedy
is against Maasim to whom it paid the money. (Great Eastern Life Ins. Co.
v. Hongkong & Shanghai Bank, 43 Phil. 678).
We have carefully reviewed the documents cited by the petitioner. There is no express and
categorical finding in these documents that the twenty-three (23) questioned checks were
indeed signed by persons other than the authorized MWSS signatories. On the contrary, the
findings of the National Bureau of Investigation in its Report dated November 2, 1970 show
that the MWSS fraud was an "inside job" and that the petitioner's delay in the reconciliation of
bank statements and the laxity and loose records control in the printing of its personalized
checks facilitated the fraud. Likewise, the questioned Documents Report No. 159-1074 dated
November 21, 1974 of the National Bureau of Investigation does not declare or prove that the
signatures appearing on the questioned checks are forgeries. The report merely mentions the
alleged differences in the type face, checkwriting, and printing characteristics appearing in the
standard or submitted models and the questioned typewritings. The NBI Chemistry Report No.
C-74-891 merely describes the inks and pens used in writing the alleged forged signatures.
It is clear that these three (3) NBI Reports relied upon by the petitioner are inadequate to
sustain its allegations of forgery. These reports did not touch on the inherent qualities of the
signatures which are indispensable in the determination of the existence of forgery. There
must be conclusive findings that there is a variance in the inherent characteristics of the
signatures and that they were written by two or more different persons.
Forgery cannot be presumed (Siasat, et al. v. Intermediate Appellate Court, et al, 139 SCRA
238). It must be established by clear, positive, and convincing evidence. This was not done in
the present case.
The cases of San Carlos Milling Co. Ltd. v. Bank of the Philippine Islands, et al. (59 Phil. 59)
and Great Eastern Life Ins., Co. v. Hongkong and Shanghai Bank (43 Phil. 678) relied upon
by the petitioner are inapplicable in this case because the forgeries in those cases were either
clearly established or admitted while in the instant case, the allegations of forgery were not
clearly established during trial.
Considering the absence of sufficient security in the printing of the checks coupled with the
very close similarities between the genuine signatures and the alleged forgeries, the twenty-
three (23) checks in question could have been presented to the petitioner's signatories without
their knowing that they were bogus checks. Indeed, the cashier of the petitioner whose
signatures were allegedly forged was unable to ten the difference between the allegedly forged
signature and his own genuine signature. On the other hand, the MWSS officials admitted that
these checks could easily be passed on as genuine.
The memorandum of Mr. A. T. Tolentino, no, Assistant Chief Accountant of the drawee
Philippine National Bank to Mr. E. Villatuya, Executive Vice-President of the petitioner dated
June 9, 1969 cites an instance where even the concerned NWSA officials could not ten the
differences between the genuine checks and the alleged forged checks.
At about 12:00 o'clock on June 6, 1969, VP Maramag requested me to see
him in his office at the Cashier's Dept. where Messrs. Jose M. Sanchez,
treasurer of NAWASA and Romeo Oliva of the same office were present.
Upon my arrival I observed the NAWASA officials questioning the issue
of the NAWASA checks appearing in their own list, xerox copy attached.
For verification purposes, therefore, the checks were taken from our file.
To everybody there present namely VIP Maramag, the two
abovementioned NAWASA officials, AVP, Buhain, Asst. Cashier Castelo,
Asst. Cashier Tejada and Messrs. A. Lopez and L. Lechuga, both C/A
bookkeepers, no one was able to point out any difference on the signatures
of the NAWASA officials appearing on the checks compared to their
official signatures on file. In fact 3 checks, one of those under question,
were presented to the NAWASA treasurer for verification but he could not
point out which was his genuine signature. After intent comparison, he
pointed on the questioned check as bearing his correct signature.
xxx xxx xxx
Moreover, the petitioner is barred from setting up the defense of forgery under Section 23 of
the Negotiable Instruments Law which provides that:
SEC. 23. FORGED SIGNATURE; EFFECT OF.- When the signature is
forged or made without authority of the person whose signature it purports
to be, it is wholly inoperative, and no right to retain the instrument, or to
give a discharge therefor, or to enforce payment thereof against any party
thereto can be acquired through or under such signature unless the party
against whom it is sought to enforce such right is precluded from setting
up the forgery or want of authority.
because it was guilty of negligence not only before the questioned checks were negotiated but
even after the same had already been negotiated. (See Republic v. Equitable Banking
Corporation, 10 SCRA 8) The records show that at the time the twenty-three (23) checks were
prepared, negotiated, and encashed, the petitioner was using its own personalized checks,
instead of the official PNB Commercial blank checks. In the exercise of this special privilege,
however, the petitioner failed to provide the needed security measures. That there was gross
negligence in the printing of its personalized checks is shown by the following uncontroverted
facts, to wit:
(1) The petitioner failed to give its printer, Mesina Enterprises, specific instructions relative to
the safekeeping and disposition of excess forms, check vouchers, and safety papers;
(2) The petitioner failed to retrieve from its printer all spoiled check forms;
(3) The petitioner failed to provide any control regarding the paper used in the printing of said
checks;
(4) The petitioner failed to furnish the respondent drawee bank with samples of typewriting,
cheek writing, and print used by its printer in the printing of its checks and of the inks and
pens used in signing the same; and
(5) The petitioner failed to send a representative to the printing office during the printing of
said checks.
This gross negligence of the petitioner is very evident from the sworn statement dated June 19,
1969 of Faustino Mesina, Jr., the owner of the printing press which printed the petitioner's
personalized checks:
xxx xxx xxx
7. Q: Do you have any business transaction with the
National Waterworks and Sewerage Authority
(NAWASA)?
A: Yes, sir. I have a contract with the NAWASA in
printing NAWASA Forms such as NAWASA Check
xxx xxx xxx
15. Q: Were you given any ingtruction by the
NAWASA in connection with the printing of these
check vouchers?
A: There is none, sir. No instruction whatsoever was
given to me.
16. Q: Were you not advised as to what kind of paper
would be used in the check vouchers?
A: Only as per sample, sir.
xxx xxx xxx
20. Q: Where did you buy this Hammermill Safety
check paper?
A: From Tan Chiong, a paper dealer with store located
at Juan Luna, Binondo, Manila. (In front of the
Metropolitan Bank).
xxx xxx xxx
24. Q: Were all these check vouchers printed by you
submitted to NAWASA?
A: Not all, sir. Because we have to make reservations
or allowances for spoilage.
25. Q: Out of these vouchers printed by you, how
many were spoiled and how many were the excess
printed check vouchers?
A: Approximately four hundred (400) sheets, sir. I
cannot determine the proportion of the excess and
spoiled because the final act of perforating these check
vouchers has not yet been done and spoilage can only
be determined after this final act of printing.
26. Q: What did you do with these excess check
vouchers?
A: I keep it under lock and key in my firing cabinet.
xxx xxx xxx
28. Q: Were you not instructed by the NAWASA
authorities to bum these excess check vouchers?
A: No, sir. I was not instructed.
29. Q: What do you intend to do with these excess
printed check vouchers?
A: I intend to use them for future orders from the
xxx xxx xxx
32. Q: In the process of printing the check vouchers
ordered by the NAWASA, how many sheets were
actually spoiled?
A: I cannot approximate, sir. But there are spoilage in
the process of printing and perforating.
33. Q: What did you do with these spoilages?
A: Spoiled printed materials are usually thrown out, in
the garbage can.
34. Q: Was there any representative of the NAWASA
to supervise the printing or watch the printing of these
check vouchers?
A: None, sir.
xxx xxx xxx
39. Q: During the period of printing after the days
work, what measures do you undertake to safeguard
the mold and other paraphernalia used in the printing
of these particular orders of NAWASA?
A: Inasmuch as I have an employee who sleeps in the
printing shop and at the same time do the guarding, we
just leave the mold attached to the machine and the
other finished or unfinished work check vouchers are
left in the rack so that the work could be continued the
following day.
The National Bureau of Investigation Report dated November 2, 1970 is even more explicit.
Thus—
xxx xxx xxx
60. We observed also that there is some laxity and
loose control in the printing of NAWASA cheeks. We
gathered from MESINA ENTERPRISES, the printing
firm that undertook the printing of the check vouchers
of NAWASA that NAWASA had no representative at
the printing press during the process of the printing
and no particular security measure instructions
adopted to safeguard the interest of the government in
connection with printing of this accountable form.
Another factor which facilitated the fraudulent encashment of the twenty-three (23) checks in
question was the failure of the petitioner to reconcile the bank statements with its own records.
It is accepted banking procedure for the depository bank to furnish its depositors bank
statements and debt and credit memos through the mail. The records show that the petitioner
requested the respondent drawee bank to discontinue the practice of mailing the bank
statements, but instead to deliver the same to a certain Mr. Emiliano Zaporteza. For reasons
known only to Mr. Zaporteza however, he was unreasonably delayed in taking prompt
deliveries of the said bank statements and credit and debit memos. As a consequence, Mr.
Zaporteza failed to reconcile the bank statements with the petitioner's records. If Mr.
Zaporteza had not been remiss in his duty of taking the bank statements and reconciling them
with the petitioner's records, the fraudulent encashments of the first checks should have been
discovered, and further frauds prevented. This negligence was, therefore, the proximate cause
of the failure to discover the fraud. Thus,
When a person opens a checking account with a bank, he is given blank
checks which he may fill out and use whenever he wishes. Each time he
issues a check, he should also fill out the check stub to which the check is
usually attached. This stub, if properly kept, will contain the number of the
 check, the date of its issue, the name of the payee and the amount thereof.
The drawer would therefore have a complete record of the checks he
issues. It is the custom of banks to send to its depositors a monthly
statement of the status of their accounts, together with all the cancelled
checks which have been cashed by their respective holders. If the
depositor has filled out his check stubs properly, a comparison between
them and the cancelled checks will reveal any forged check not taken from
his checkbook. It is the duty of a depositor to carefully examine the bank's
statement, his cancelled checks, his check stubs and other pertinent
records within a reasonable time, and to report any errors without
unreasonable delay. If his negligence should cause the bank to honor a
forged check or prevent it from recovering the amount it may have already
paid on such check, he cannot later complain should the bank refuse to
recredit his account with the amount of such check. (First Nat. Bank of
Richmond v. Richmond Electric Co., 106 Va. 347, 56 SE 152, 7 LRA, NS
744 [1907]. See also Leather Manufacturers' Bank v. Morgan, 117 US 96,
6 S. Ct. 657 [1886]; Deer Island Fish and Oyster Co. v. First Nat. Bank of
Biloxi, 166 Miss. 162, 146 So. 116 [1933]). Campos and Campos, Notes
and Selected Cases on Negotiable Instruments Law, 1971, pp. 267-268).
This failure of the petitioner to reconcile the bank statements with its cancelled checks was
noted by the National Bureau of Investigation in its report dated November 2, 1970:
58. One factor which facilitate this fraud was the delay in the
reconciliation of bank (PNB) statements with the NAWASA bank
accounts. x x x. Had the NAWASA representative come to the PNB early
for the statements and had the bank been advised promptly of the reported
bogus check, the negotiation of practically all of the remaining checks on
May, 1969, totalling P2,224,736.00 could have been prevented.
The records likewise show that the petitioner failed to provide appropriate security measures
over its own records thereby laying confidential records open to unauthorized persons. The
petitioner's own Fact Finding Committee, in its report submitted to their General manager
underscored this laxity of records control. It observed that the "office of Mr. Ongtengco
(Cashier No. VI of the Treasury Department at the NAWASA) is quite open to any person
known to him or his staff members and that the check writer is merely on top of his table."
When confronted with this report at the Anti-Fraud Action Section of the National Bureau of
Investigation. Mr. Ongtengco could only state that:
A. Generally my order is not to allow anybody to enter
my office. Only authorized persons are allowed to
enter my office. There are some cases, however, where
some persons enter my office because they are
following up their checks. Maybe, these persons may
have been authorized by Mr. Pantig. Most of the
people entering my office are changing checks as
allowed by the Resolution of the Board of Directors of
the NAWASA and the Treasurer. The check writer
was never placed on my table. There is a place for the
check write which is also under lock and key.
Q. Is Mr. Pantig authorized to allow unauthorized
persons to enter your office?
A. No, sir.
Q. Why are you tolerating Mr. Pantig admitting
unauthorized persons in your office?
A. I do not want to embarrass Mr. Pantig. Most of the
people following up checks are employees of the
NAWASA.
Q. Was the authority given by the Board of Directors
and the approval by the Treasurer for employees, and
other persons to encash their checks carry with it their
authority to enter your office?
A. No, sir.
xxx xxx xxx
Q. From the answers that you have given to us we
observed that actually there is laxity and poor control
on your part with regards to the preparations of check
payments inasmuch as you allow unauthorized persons
to follow up their vouchers inside your office which
may leakout confidential informations or your books
of account. After being apprised of all the
shortcomings in your office, as head of the Cashiers'
Office of the Treasury Department what remedial
measures do you intend to undertake?
A. Time and again the Treasurer has been calling our
attention not to allow interested persons to hand carry
their voucher checks and we are trying our best and if
I can do it to follow the instructions to the letter, I will
do it but unfortunately the persons who are allowed to
enter my office are my co-employees and persons who
have connections with our higher ups and I can not
possibly antagonize them. Rest assured that even
though that everybody will get hurt, I win do my best
not to allow unauthorized persons to enter my office.
xxx xxx xxx
Q. Is it not possible inasmuch as your office is in
charge of the posting of check payments in your books
that leakage of payments to the banks came from your
office?
A. I am not aware of it but it only takes us a couple of
minutes to process the checks. And there are cases
wherein every information about the checks may be
obtained from the Accounting Department, Auditing
Department, or the Office of the General Manager.
Relying on the foregoing statement of Mr. Ongtengco, the National Bureau of Investigation
concluded in its Report dated November 2, 1970 that the fraudulent encashment of the twenty-
three (23)cheeks in question was an "inside job". Thus-
We have all the reasons to believe that this fraudulent act was an inside
job or one pulled with inside connivance at NAWASA. As pointed earlier
in this report, the serial numbers of these checks in question conform with
the numbers in current use of NAWASA, aside from the fact that these
fraudulent checks were found to be of the same kind and design as that of
NAWASA's own checks. While knowledge as to such facts may be
obtained through the possession of a NAWASA check of current issue, an
outsider without information from the inside can not possibly pinpoint
which of NAWASA's various accounts has sufficient balance to cover all
 these fraudulent checks. None of these checks, it should be noted, was Under the circumstances, therefore, the petitioner was in a better position to detect and prevent
dishonored for insufficiency of funds. . . the fraudulent encashment of its checks.
Even if the twenty-three (23) checks in question are considered forgeries, considering the WHEREFORE, the petition for review on certiorari is hereby DISMISSED for lack of merit.
petitioner's gross negligence, it is barred from setting up the defense of forgery under Section The decision of the respondent Court of Appeals dated October 29, 1982 is AFFIRMED. No
23 of the Negotiable Instruments Law. pronouncement as to costs.
Nonetheless, the petitioner claims that it was the negligence of the respondent Philippine SO ORDERED.
National Bank that was the proximate cause of the loss. The petitioner relies on our ruling THIRD DIVISION
in Philippine National Bank v. Court of Appeals (25 SCRA 693) that.  
Thus, by not returning the cheek to the PCIB, by thereby indicating that  
the PNB had found nothing wrong with the check and would honor the PHILIPPINE PORTS   G.R. No. 158401
same, and by actually paying its amount to the PCIB, the PNB induced the AUTHORITY,    
latter, not only to believe that the check was genuine and good in every Petitioner,   Present:
respect, but, also, to pay its amount to Augusto Lim. In other words, the      
PNB was the primary or proximate cause of the loss, and, hence, may not     YNARES-SANTIAGO, J.,
recover from the PCIB.     Chairperson,
The argument has no merit. The records show that the respondent drawee bank, had taken the - versus -   AUSTRIA-MARTINEZ,
necessary measures in the detection of forged checks and the prevention of their fraudulent     CORONA,*
encashment. In fact, long before the encashment of the twenty-three (23) checks in question,     NACHURA, and
the respondent Bank had issued constant reminders to all Current Account Bookkeepers     REYES, JJ.
informing them of the activities of forgery syndicates. The Memorandum of the Assistant WILLIAM GOTHONG &    
Vice-President and Chief Accountant of the Philippine National Bank dated February 17, 1966 ABOITIZ (WG&A), INC.,   Promulgated:
reads in part: Respondent.   January 28, 2008
SUBJECT: ACTIVITIES OF FORGERY SYNDICATE x------------------------------------------------x
From reliable information we have gathered that personalized checks of  
current account depositors are now the target of the forgery syndicate. To  
protect the interest of the bank, you are hereby enjoined to be more careful DECISION
in examining said checks especially those coming from the clearing, mails  
and window transactions. As a reminder please be guided with the  
following: AUSTRIA-MARTINEZ, J.:
1. Signatures of drawers should be properly scrutinized and compared with  
those we have on file.  
2. The serial numbers of the checks should be compared with the serial This resolves the Petition for Review on Certiorari filed by the Philippine Ports Authority
numbers registered with the Cashier's Dept. (petitioner) seeking the reversal of the Decision[1] of the Court of Appeals (CA) promulgated
3. The texture of the paper used and the printing of the checks should be on October 24, 2002 and its Resolution dated May 15, 2003.
compared with the sample we have on file with the Cashier's Dept.  
4. Checks bearing several indorsements should be given a special The antecedent facts are accurately narrated by the CA as follows:
attention.  
5. Alteration in amount both in figures and words should be carefully Petitioner William Gothong & Aboitiz, Inc. (WG&A for brevity), is a duly
examined even if signed by the drawer. organized domestic corporation engaged in the shipping
6. Checks issued in substantial amounts particularly by depositors who do industry. Respondent Philippine Ports Authority (PPA for brevity), upon
not usually issue checks in big amounts should be brought to the attention the other hand, is a government-owned and controlled company created
of the drawer by telephone or any fastest means of communication for and existing by virtue of the provisions of P.D. No. 87 and mandated
purposes of confirmation. under its charter to operate and administer the country's sea port and port
and your attention is also invited to keep abreast of previous circulars and facilities.
memo instructions issued to bookkeepers.  
We cannot fault the respondent drawee Bank for not having detected the fraudulent After the expiration of the lease contract of Veterans Shipping Corporation
encashment of the checks because the printing of the petitioner's personalized checks was not over the Marine Slip Way in the North Harbor on December 31, 2000,
done under the supervision and control of the Bank. There is no evidence on record indicating petitioner WG&A requested respondent PPA for it to be allowed to lease
that because of this private printing the petitioner furnished the respondent Bank with samples and operate the said facility. Thereafter, then President Estrada issued a
of checks, pens, and inks or took other precautionary measures with the PNB to safeguard its memorandum dated December 18, 2000 addressed to the Secretary of the
interests. Department of Transportation and Communication (DOTC) and the
General Manager of PPA, stating to the effect that in its meeting held on
December 13, 2000, the Economic Coordinating Council (ECC) has
approved the request of petitioner WG&A to lease the Marine Slip Way
from January 1 to June 30, 2001 or until such time that respondent PPA
turns over its operations to the winning bidder for the North Harbor
Modernization Project.
 
Pursuant to the said Memorandum, a Contract of Lease was prepared by
respondent PPA containing the following terms:
 
1.      The lease of the area shall take effect on January 1 to June
30, 2001 or until such time that PPA turns over its
operation to the winning bidder for
the North Harbor modernization;
 
2.      You shall pay a monthly rental rate of P12.15 per square
meter or an aggregate monthly rental amount
of P886,950.00;
 
3.      All structures/improvements introduced in the leased
premises shall be turned over to PPA;
 
4.      Water, electricity, telephone and other utility expenses
shall be for the account of William, Gothong & Aboitiz,
Inc.;
 
5.      Real Estate tax/insurance and other government dues and
charges shall be borne by WG&A.
 
The said contract was eventually conformed to and signed by the
petitioner company, through its President/Chief Executive
Officer Endika Aboitiz, Jr. Thereafter, in accordance with the stipulations
made in the lease agreement, PPA surrendered possession of the Marine
Slip Way in favor of the petitioner.
 
However, believing that the said lease already expired on June 30, 2001,
respondent PPA subsequently sent a letter to petitioner WG&A dated
November 12, 2001 directing the latter to vacate the contested premises
not later than November 30, 2001 and to turnover the improvements made
therein pursuant to the terms and conditions agreed upon in the contract.
 
In response, petitioner WG&A wrote PPA on November 27, 2001 urging
the latter to reconsider its decision to eject the former. Said request was
denied by the PPA via a letter dated November 29, 2001.
 
On November 28, 2001, petitioner WG&A commenced an Injunction suit
before the Regional Trial Court of Manila. Petitioner claims that the PPA
unjustly, illegally and prematurely terminated the lease contract. It
likewise prayed for the issuance of a temporary restraining order to arrest
the evacuation. In its complaint, petitioner also sought recovery of
damages for breach of contract and attorney's fees.
 
On December 11, 2001, petitioner WG&A amended its complaint for the
first time. The complaint was still denominated as one for Injunction with
prayer for TRO. In the said amended pleading, the petitioner incorporated
statements to the effect that PPA is already estopped from denying that the
correct period of lease is until such time that the North Harbor
Modernization Project has been bidded out to and operations turned over
to the winning bidder. It likewise included, as its third cause of action, the
additional relief in its prayer, that should the petitioner be forced to vacate
the said facility, it should be deemed as entitled to be refunded of the value
of the improvements it introduced in the leased property.
 
Following the first amendment in the petitioner's complaint, respondent
PPA submitted its answer on January 23, 2002. Meanwhile, the TRO
sought by the former was denied by the trial court by way of an order
dated January 16, 2002.
 
Petitioner later moved for the reconsideration of the said Order
on February 11, 2002. Shortly thereafter, petitioner filed a Motion to
Admit Attached Second Amended Complaint. This time, however, the
complaint was already captioned as one for Injunction with Prayer for
Temporary Restraining Order and/or Writ of Preliminary Injunction and
damages and/or for Reformation of Contract. Also, it included as its fourth
cause of action and additional relief in its prayer, the reformation of the
contract as it failed to express or embody the true intent of the contracting
parties.
 
The admission of the second amended complaint met strong opposition
from the respondent PPA. It postulated that the reformation sought for by
the petitioner constituted substantial amendment, which if granted, will
substantially alter the latter's cause of action and theory of the case.
 
On March 22, 2002, the respondent judge issued an Order denying the
Admission of the Second Amended Complaint. Petitioner filed a motion
for reconsideration of the aforesaid order but the same was again denied in
an order dated April 26, 2002.[2]
Herein respondent WG&A then filed a petition for certiorari with the CA seeking the
nullification of the aforementioned RTC orders.
 
In its Decision dated October 24, 2002, the CA granted respondent's petition, thereby setting
aside the RTC orders and directing the RTC to admit respondent's second amended complaint
pursuant to Section 3, Rule 10 of the 1997 Rules of Civil Procedure. Petitioner moved for
reconsideration but the same was denied per Resolution dated May 15, 2003.
 
Hence, the present petition where the only issue raised is whether the CA erred in ruling that
the RTC committed grave abuse of discretion when it denied the admission of the second
amended complaint.
 
The Court finds the petition without merit.
 
The CA did not err in finding that the RTC committed grave abuse of discretion in
issuing the Order dated March 22, 2002 denying the admission of respondent's second
amended complaint.
  
The RTC applied the old Section 3, Rule 10 of the Rules of Court:
Section 3. Amendments by leave of court. after the case is set
for hearing, substantial amendments may be made only upon leave of
court. But such leave may be refused if it appears to the court that the
motion was made with intent to delay the action or that the cause of action
or defense is substantially altered. Orders of the court upon the matters
provided in this section shall be made upon motion filed in court, and after
notice to the adverse party, and an opportunity to be heard.
 
instead of the provisions of the 1997 Rules of Civil Procedure, amending Section 3, Rule 10,
to wit:
 
SECTION 3. Amendments by leave of court. Except as provided
in the next preceding section, substantial amendments may be made
only upon leave of court. But such leave may be refused if it appears
to the court that the motion was made with intent to delay. Orders of
the court upon the matters provided in this section shall be made upon
motion filed in court, and after notice to the adverse party, and an
opportunity to be heard.
 
The Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil
Procedure in Valenzuela v. Court of Appeals,[3] thus:
 
Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil
Procedure amended the former rule in such manner that the phrase "or that
the cause of action or defense is substantially altered" was stricken-off and
not retained in the new rules. The clear import of such amendment in
Section 3, Rule 10 is that under the new rules, "the amendment may
(now) substantially alter the cause of action or defense." This should
only be true, however, when despite a substantial change or alteration in
the cause of action or defense, the amendments sought to be made shall
serve the higher interests of substantial justice, and prevent delay and
equally promote the laudable objective of the rules which is to secure a
just, speedy and inexpensive disposition of every action and proceeding.[4]
 
The application of the old Rules by the RTC almost five years after its amendment by the 1997
Rules of Civil Procedure patently constitutes grave abuse of discretion.
 
WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of
Appeals promulgated on October 24, 2002 and its Resolution dated May 15, 2003 are
hereby AFFIRMED in toto.
 
SO ORDERED.
 
G.R. No. 72566 April 12, 1988
DELBROS HOTEL CORPORATION, petitioner,  a] Disposing, removing, tampering, destroying, or otherwise concealing
vs.
THE INTERMEDIATE APPELLATE COURT [FIRST SPECIAL CASES DIVISION],
HILTON INTERNATIONAL COMPANY, ACHIM IHLENFELD as successor to
RICHARD CHAPMAN and FLAVIANO MOSQUERA JR., the latter two in their
respective capacities as former General Manager and Comptroller of the Manila Hilton
International Hotel, respondents.
FERNAN, J.:
This is a petition for certiorari with urgent prayer for the issuance of a temporary restraining
order and/or writ of preliminary injunction to nullify and resolutions dated September 5, 11
and 24, 1985, issued by the then Intermediate Appellate court, now Court of Appeals, in AC-
G.R. No. SP-07020, entitled "Hilton Hotels International, Inc, [Hilton International Co.] et al.
vs. Hon Abelardo M. Dayrit, et al."
The antecedent facts are as follows:
On February 27,1985, petitioner Delbros Hotel Corporation [DELBROS, for short] filed
before the Regional Trial Court of Manila a complaint for termination of agreement and
damages, with prayer for the issuance of a restraining order and/or writ of preliminary
mandatory injunction against private respondents Hilton Hotels International [now known as
Hilton International Company] and Richard Chapman, in his capacity as General Manager of
Manila Hilton. In said complaint, docketed as Civil Case No. 85-29489 and raffled off to
Branch XXIX presided over by Judge Abelardo M. Dayrit, it was alleged that pursuant to the
Agreement and Lease entered into by and between DELBROS and Hilton Hotels International,
Inc. [HILTON] on June 2,1964, later amended into a Management Agreement on June 9,
1966, and its Supplemental Amendments of March 23, 1973 and November 22, 1976,
DELBROS financed, built, furnished and equipped a first-class hotel of approximately 400
rooms, now known as the "Manila Hilton," the operation and management of which was
granted to HILTON; that for their respective undertakings, DELBROS was to receive a share
in the gross operating profit [GOP] of the hotel, as defined in Article V of the basic
agreements, while HILTON was entitled to a management fee equivalent to five percent [5%]
of the gross revenues and an incentive fee equivalent to ten percent [10%] of the GOP of the
hotel; that in violation of the terms of the agreement, HILTON a] refused, despite repeated
demands, to remit to DELBROS its share in the GOP which as of December 31, 1984
amounted to P2,591,165.00 as well as the excess of the normal working capital; b] transferred,
without DELBROS' prior approval, a portion of the reserve funds to its operating funds; and,
c] used said operating funds for capital expenditures without the consent of DELBROS; that in
addition, HILTON grossly mismanaged the hotel and breached the trust and confidence
reposed upon it by DELBROS; thereby causing DELBROS to default in its amortizations to
the GSIS. 1
In their Answer with Compulsory counterclaim, therein defendants HILTON and Chapman
specifically denied the allegations of DELBROS and set forth the following as affirmative
defenses: that DELBROS had no valid and sufficient cause of action for failure to give a five-
day notice of termination of the Management Agreement as required under Article XI thereof;
DELBROS' cause or causes of action, if any, were barred by estoppel or laches; DELBROS'
claims or demands had been waived or abandoned; and that the alleged violations of the
Management Agreement were too trivial or insignificant to warrant the grave penalty of
termination of the Management Agreement after it had been in force for 17 years. By way of
compulsory counterclaim, HILTON and Chapman prayed for an award of moral damages in
the amount of P1,000,000.00 each and the same amount each as exemplary damages plus
attorney's fees. 2
On March 21, 1985, Judge Dayrit issued a writ of preliminary injunction, enjoining HILTON
and Chapman from:
corporate records, books of accounts, statement of accounts receivables,
ledgers, vouchers, invoices, receipts, purchase orders, job orders, bank
statements, returned checks, gate passes, incident reports, debit/credit
memos and/or any other document of similar nature, pertaining to the
 operation, management and administration of the business and affairs of
the hotel known as the 'Manila Hilton' located at the United Nations
Avenue, Ermita, Manila;
b] Disposing, removing, destroying, dissipating, or otherwise concealing
hotel stocks [consisting of food, beverage, supplies and items of similar
nature], furniture, furnishings, specialized hotel equipment [which term
shall mean all equipment required for the operation of kitchen, laundries,
dry cleaning facilities, restaurants, bars, special lighting and other
equipment of similar nature] operating equipment [which term shall
include chinaware, linens, silverware, kitchenwares and other similar
items], operating and guest supplies [which term shall include soaps,
cleaning materials, matches, paper supplies, stationery and other similar
items] and such other furnishings equipment and other personal properties
or assets as are normally required for the efficient and continuing
operation of the Manila Hilton;
c] Disbursing, expending and/or dissipating testimonies funds, time
deposits, revenues, and income under the account of Hilton International
Company and/or Manila Hilton without prior approval from this Court,
except only as may be necessary to prevent total or partial disruption of
the hotels services;
d] Disbursing funds in payment to Hilton International Company or
transferring funds to Hilton's local bank accounts or offsetting hotel
receivables in favor of Hilton International Company and/or its affiliated
companies;
e] Remitting funds from their local bank accounts to their foreign offices. 3
A clarificatory order on this writ was issued on March 28, 1985.
From these orders, HILTON and Chapman went to the Intermediate Appellate Court on a
petition for certiorari docketed as AC-G.R. No. SP-06474. On July 3, 1985, the Third Special
Cases Division of the IAC, to which the petition was assigned, issued a temporary restraining
order enjoining the implementation of the orders of Judge Dayrit. The temporary restraining
order was replaced on August 21, 1985 with a writ of preliminary injunction. 4
Meanwhile, on April 12,1985, DELBROS filed in Civil Case No. 85-29489 a motion to admit
Supplemental Complaint. The Supplemental Complaint impleaded as an additional defendant
Flaviano Mosquera, Jr., in his capacity as Comptroller of the Manila Hilton and sought the
confirmation by the trial court of the termination of the Management Contract effected by
DELBROS through the service upon HILTON of the five-day notice of termination provided
thereunder, as well as the payment of DELBROS' share in the GOP of the hotel for the months
of January and February 1985 and other damages.
Over the opposition of HILTON and Chapman, the lower court issued an Order on June 14,
1985, admitting the Supplemental Complaint, directing summons and copy of the
supplemental complaint to be served on the additional defendant and requiting HILTON and
Chapman to answer the supplemental complaint within five [5] days from notice. Copies of
the June 14, 1985 Order were received by the parties' counsels on June 21, 1985.
On July 6, 1986, an ex-parte motion for an extension of twelve [12] days to answer the
supplemental complaint was filed in behalf of all the three defendants, HILTON,
Chapman and Mosquera. Said motion, sent by registered mail, was not reserved by
the trial court until July 16, 1985.
However, earlier, or on July 9, 1985, DELBROS had filed a motion to declare defendants
HILTON and Chapman in default with respect to the supplemental complaint. This was
granted on even date and DELBROS allowed to present its evidence ex-parte in support of its
supplemental complaint.
On July 15, 1986, the lower court rendered a judgment by default, confirming as legal and
valid the termination as of March 31, 1985 of the Management Agreement between the parties
and ordering, among others, the defendants to immediately quit and surrender the Manila
Hilton International Hotel to DELBROS' President as well as to pay DELBROS its share in
the GOP of the hotel for the months of January to March, 1985, plus legal interest thereon
from the date of the filing of the Supplemental Complaint until full payment thereof. 5 Copies
of the default judgment were served on the parties' counsels in the morning of July 18, 1985.
In the afternoon of the same day, HILTON, et al. filed their Answer to the Supplemental
Complaint, and on July 24, 1985, filed a notice of appeal from the judgment by default.
Meanwhile, on July 19, 1985, DELBROS moved for the execution of the judgment pending
appeal. Although opposed by HILTON, et al., the motion was granted in a Special Order dated
September 3, 1985. A writ of execution was issued and served upon defendants on the same
day. The Partial Sheriff s Return reads as follows:
That on September 3, 1985, copies of the Writ of Execution dated
September 3, 1985 together with the Judgment by Default dated July 15,
1985 and the Special Order dated September 3, 1985, all issued in the
above-entitled case, were served and tendered upon the following:
1. Defendant Hilton International, Inc. [now known as Hilton International
Company] through Achim Ihlenfeld General Manager of Manila Hilton
International Hotel; and,
2. Defendant Flaviano Mosquera, Jr. at their given addresses, as evidenced
by their signatures acknowledging receipt of the aforementioned
documents, hereto attached,
The aforesaid individuals, after carefully reading the documents served
and after consuIting with their counsel by telephone voluntarily vacated
and surrendered their respective offices at the Manila Hilton International.
Thereupon, Delbros Hotel Corporation took over possession and control
over the management and operation of the Hotel as evidenced by notices
of take over of the hotel signed by the President of Delbros Hotel
Corporation and addressed to all officers and employees, posted in
strategic places in the hotel, a copy hereto attached.
The Notices of Garnishment were likewise served on the following banks:
1. Pilipinas Bank, Manila Hilton Branch
2. PNB, Ermita Branch
3. Bank of America, Paseo de Roxas Branch
as evidenced by the rubber stamp mark and signatures appearing on the
duplicate original copies thereof, hereto attached.
The undersigned posted guard in the respective offices of Messrs.
Ihlenfeld and Mosquera.
Manila, Philippines, September 3, 1985.
For the Sh
[Sgd.] M
Navarro
Deputy Sh
Branch X
Manila. 6
On the following day, September 4, 1985, HILTON, et al. instituted before the then
Intermediate Appellate Court a petition for certiorari with prayer for a restraining
order/preliminary injunction, docketed as AC-G.R. No. SP-07020, to assail the Special Order
of September 3, 1985 for allegedly having been issued with grave abuse of discretion
amounting to lack of jurisdiction. 7 As prayed for, the First Special Cases Division of the IAC,
to which the petition was assigned, issued on September 5, 1985 a temporary restraining order
enjoining the implementation and/or enforcement of the Special Order of September 3, 1985.
On September 9, 1985, HILTON, et al. filed in AC-G.R. No. SP-07020 an urgent ex-parte
motion to deputize Manila police authorities to enforce/implement the restraining order of
September 5, 1985. 8 This was opposed by DELBROS.
On September 11, 1985, the First Special Cases Division of the IAC issued a resolution
reiterating 'the continuing efficacy of its restraining order dated September 5, 1985, enjoining
the parties to conform to the restraint against the execution/implementation of the Special
Order dated September 3, 1985 ..." 9 and on September 24,1985 granted HILTON's motion to
deputize Manila police authorities to enforce the restraining order of September 5, 1985. 10
DELBROS forthwith filed on September 25, 1985 an urgent motion for reconsideration of the
resolution dated September 24, 1985. When more than a month had elapsed without the IAC
acting on its motion for reconsideration, petitioner filed the instant petition assailing as null
and void the three orders issued in AC-G.R. No. SP-07020, and raising the following
questions of law:
[1] Can a temporary restraining order,or a writ of preliminary injunction,
for that matter, prohibit an act already performed and accomplished?
[2] Can a party in legal and actual possession and control be deprived of
the same by means of a temporary restraining order?
[3] Can a temporary restraining order continue to be enforced beyond
twenty (20) days from its issuance, contrary to paragraph 8 of the Interim
or Transitional Rules and Guidelines relative to the implementation of the
Judiciary Reorganization Act of 1981. (B.P. Blg. 129)? 11
In their comment, private respondents HILTON, Achim Ihlenfeld [successor of Chapman] and
Flaviano Mosquera, Jr. assailed the veracity of the Partial Sheriffs Return, contending that no
take-over of the hotel's management was ever effected as no advice to surrender their offices
was given to either Ihlenfeld and Mosquera, Jr., and that it is HILTON which continues to run
and manage the hotel and which is recognized by the employees as manager thereof; that the
twenty-day lifespan of a temporary restraining order provided under B.P. 224 does not apply
to the Court of Appeals; and that, at any rate, the Special Order of September 3, 1985 which
granted petitioner's motion for execution pending appeal is null and void, having as its basis an
invalid judgment by default.
As aforesaid, the instant petition is focused primarily on the interlocutory orders dated
September 5, 11 and 24, 1985 issued in AC-G.R. No. SP-07020. These orders, however, are so
inextricably connected with the default order of July 9, 1985, the default judgment of July 15,
1985 as well as the Special Order dated September 3, 1985, that to simply limit ourselves to
said orders would afford the parties neither complete relief nor substantial justice, Thus, it
becomes imperative that We should delve further back into the proceedings taken in the trial
court and in the process, preempt the jurisdiction of the appellate court before which the
question of legality and propriety of the Special Order of September 3, 1985 had been brought
as well as the appeal filed by private respondents HILTON and Ihlenfeld [as successor to
Chapman] from the judgment by default.
Private respondents HILTON and Chapman were declared in default for failure to file an
answer to the Supplemental Complaint. This is reversible error.
Fundamentally, default orders are taken on the legal presumption that in failing to file an
answer, the defendant does not oppose the allegations and relief demanded in the complaint. In
the case at bar, however, no such presumption can arise vis-a-vis the Answer filed by
HILTON and Chapman to the original complaint; their institution of the certiorari proceedings
in AC-G.R. No. SP-06474 in opposition to petitioner's attempt to interfere with and/or take
over the control and management of the hotel pendente lite; and their vigorous opposition to
the admission of the supplemental complaint under consideration. These factors, of which the
trial judge had full knowledge and notice, should have cautioned him from precipitately
rendering the default order as well as the default judgment.
"A supplemental pleading is not like an amended pleading — substitute for the original one. It
does not supersede the original, but assumes that the original pleading is to stand, and the
issues joined under the original pleading remain as issues to be tried in the action." 12 While it
is conceded that there is authority in support of a default judgment being predicated upon
defendant's failure to answer a supplemental complaint, 13 the same cannot apply here. The
reason is that although in the supplemental complaint, the relief prayed for was altered from
termination of the management contract to judicial confirmation of its termination, the basic
and principal issue of whether or not petitioner was entitled to terminate the management
contract, remained. As this basic issue had been previously traversed and joined by the
Answer filed by HILTON and Chapman, there was no necessity for requiring them to plead
further to the Supplemental Complaint. Consequently, the trial judge did not have a legal
ground for declaring them in default for such failure to plead.
Another factor which the trial judge should have considered is that the supplemental complaint
brought in an additional defendant, Flaviano Mosquera, Jr. On this score, it would have been
more prudent under the liberal construction rule provided in Section 2, Rule 1 of the Rules of
Court, for the trial court to have treated the supplemental complaint as an amended complaint,
and the original answer thereto as sufficient; 14 or otherwise to have waited for the answer of
the newly-impleaded defendant before acting on the motion to declare the original defendants
in default and rendering the default judgment, considering that a common cause of action has
been asserted against the three defendants, so that the answer of Mosquera, Jr. could inure to
the benefit of the original defendants. 15 As it turned out, the Answer filed on July 18, 1985
was for and in behalf of all the defendants. Hence, under Sec. 4 of Rule 18, the court shall try
the case against all upon the answer filed and render judgment upon the evidence presented.
Indeed, no prejudice wouId result to petitioner had the trial judge taken a more prudent and
judicious course of action as above suggested. Acting as the trial judge did, grave, irreparable
and serious damage caused to private respondents. Such prejudice is compounded by the
issuance of the Special Order of September 3, 1985 decreeing the execution pending appeal of
the default judgment at a time when defendant Mosquera was not yet declared in default.
Consequently, any defense set up by him for himself and for the benefit of his co-defendants
was rendered practically inutile by the execution of the default judgment.
Time ang again, this Court has expressed disfavor toward default judgments 16 for the reason
that:
A default judgment does not pretend to be based on the merits of the
controversy. Its existence is justified by expediency. It may, however,
amount to a positive and considerable injustice to the defendant. The
possibility of such serious consequences necessarily requires a careful
examination of the circumstances under which a default order was issued.
And when no real injury would result to the interests of the plaintiff by the
reopening of the case, the only objection to such action would, therefore,
be solely on a technicality. On such an infirm foundation, it would be a
grevious error to sacrifice the substantial rights of a litigant. 17
Upon these considerations, the order of default dated July 9, 1985, the default judgment of
July 15, 1985 as well as the Special Order dated September 3, 1985, should be, as they are
hereby set aside.
With this conclusion, We could very wen write finish to this opinion, were it not for an
important legal issue raised herein that has long awaited resolution by this Court; namely,
whether or not paragraph 8 of the Interim Rules and Guidelines promulgated by this Court
relative to the implementation of the Judiciary Reorganization Act of 1981 applies to the Court
of Appeals.
The provision in the Interim Rules and Guidelines adverted to reads in full thus-.
 8. Preliminary injunction not granted without notice; issuance of
restraining order. — No preliminary injunction shall be granted without
notice to the defendant. if it shall appear from the facts shown by
affidavits or by verified complaint, that great or irreparable injury would
result to the applicant before the matter can be heard on notice, the Court
to which the application for preliminary injunction was made, may issue a
restraining order to be effective only for a period of twenty days from date
of its issuance, Within said twenty day period, the court must cause an
order to be served on the defendant, requiring him to show cause, at a
specified time and place, why the injunction should not be granted, and
determine within the same period whether or not the preliminary
injunction shall be granted, and shall accordingly issue the corresponding
order. In the event that the application for preliminary injunction is denied,
the restraining order is deemed automatically vacated.
The applicability of the above-quoted provision to the then Intermediate Appellate Court, now
the Court of Appeals, can hardly be doubted. The Interim Rules and Guidelines were
promulgated to implement the Judiciary Reorganization Act of 1981 18 which included the
Intermediate Appellate Court among the courts reorganized thereunder. This is emphasized in
the preamble of the Interim Rules which states that the same shall apply to "all inferior courts
according to the Constitution.' The term 'inferior courts' as used therein refers to all courts
except the Supreme Court, the Sandiganbayan and the Court of Tax Appeals. Thus, paragraphs
14 and 15 of the Interim Rules expressedly provide for "Procedure in the Intermediate
Appellate Court. "
Indeed, if paragraph 8 of the Interim Rules were not intended to apply to temporary restraining
orders issued by the respondent Court, there would have been absolutely no reason for the
inclusion of said paragraph in the Interim Rules. The limited life-span of temporary restraining
orders issued by the regional trial courts and municipal trial courts is already provided for in
B.P. Blg. 224. It was precisely to include the Intermediate Appellate Court within the same
limitation as to the effectivity of its temporary restraining orders that B.P. Blg. 224 was
incorporated in the Interim Rules, with the significant change of the word "judge" to "court",
so as to make it clear and unequivocal that the temporary restraining orders contemplated
therein are those issued not only by trial judges but also by justices of the appellate court.
Private respondents argue that it is impractical to apply paragraph 8 of the Interim Rules to the
respondent court because the latter's processes are enforceable throughout the country and
there could be instances when the twenty-day period of the effectivity of a temporary
restraining order would lapse before it is served on the parties concerned. This allegation
appears to be more illusory and imaginary than real. Private respondents have not cited any
single, actual instance when such eventuality had occurred. Its possibility is deemed remote
and unlikely considering the present state of fast and efficient modes of communication as
well as the presumed eagerness of a party-litigant who has secured a temporary restraining
order to have the same immediately served on the parties concerned with the least waste of
time.
WHEREFORE, the instant petition is hereby DISMISSED. The default order of July 9, 1985,
the default judgment dated July 15, 1985 and the Special Order of September 3, 1985 issued in
Civil Case No. 85-29489 of the Regional Trial Court of Manila are hereby annulled and set
aside. The Answer dated July 18, 1985 filed by herein private respondents in Id case is ordered
admitted and the case is remanded for trial on the merits. No pronouncement as to costs.
SO ORDERED.
G.R. No. 106429 June 13, 1994
JOSELITA SALITA, petitioner,  question that may be resolved in a motion to dismiss or after trial on the
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 . . .
In our view, the aforesaid specification more than satisfies the Rules’
requirement that a complaint 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
 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 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 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.
G.R. No. 174385               February 20, 2013
REPUBLIC OF THE PHILIPPINES, Petitioner,  On January 1, 2005, Congress passed R.A. No. 9334. Based on Section 6 of R.A. No. 9334,
vs.
HON. RAMON S. CAGUIOA, Presiding Judge, Branch 74, Regional Trial Court, Third
Judicial Region, Olongapo City, META TRANS TRADING INTERNATIONAL
CORPORATION, and HUNDRED YOUNG SUBIC INTERNATIONAL,
INC., Respondents.
DECISION
BRION, J.:
We resolve in this petition for certiorari and prohibition 1 (the present petition) the challenge
to the August 11, 2005 and July 5, 2006 orders2 of respondent Judge Ramon S. Caguioa,
Regional Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 102-0-05. The
August 11, 2005 order granted the motion to intervene filed by private respondents Metatrans
Trading International Corporation and Hundred Young Subic International, Inc., while the
July 5, 2006 order denied the motion for reconsideration and the motion to suspend the
proceedings filed by the petitioner Republic of the Philippines (Republic).
The Factual Antecedents
On March 14, 2005,3 Indigo Distribution Corporation and thirteen other petitioners
(collectively referred to as lower court petitioners) filed before the respondent judge a petition
for declaratory relief with prayer for temporary restraining order (TRO) and preliminary
mandatory injunction4 against the Honorable Secretary of Finance, et al. The petition sought
to nullify the implementation of Section 6 of Republic Act (R.A.) No. 9334, otherwise known
as "AN ACT INCREASING THE EXCISE TAX RATES IMPOSED ON ALCOHOL AND
TOBACCO PRODUCTS, AMENDING FOR THE PURPOSE SECTIONS 131, 141, 142,
143, 144, 145 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS
AMENDED," as unconstitutional. Section 6 of R.A. No. 9334, in part, reads:
SEC. 6. Section 131 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:
SEC. 131. Payment of Excise Taxes on Imported Articles. –
(A) Persons Liable. – x x x.
xxxx
The provision of any special or general law to the contrary notwithstanding, the
importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into
the Philippines, even if destined for tax and duty-free shops, shall be subject to all
applicable taxes, duties, charges, including excise taxes due thereon. This shall apply to
cigars and cigarettes, distilled spirits, fermented liquors and wines brought directly into
the duly chartered or legislated freeports of the Subic Special Economic and Freeport
Zone, created under Republic Act No. 7227; the Cagayan Special Economic Zone and
Freeport, created under Republic Act No. 7922; and the Zamboanga City Special Economic
Zone, created under Republic Act No. 7903, and such other freeports as may hereafter be
established or created by law: Provided, further, That importations of cigars and cigarettes,
distilled spirits, fermented liquors and wines made directly by a government- owned and
operated duty-free shop, like the Duty-Free Philippines (DFP), shall be exempted from all
applicable duties only[.] [emphasis ours; italics supplied]
The lower court petitioners are importers and traders duly licensed to operate inside the Subic
Special Economic and Freeport Zone (SSEFZ).
By way of background, Congress enacted, in 1992, R.A. No. 7227, otherwise known as "The
BASES CONVERSION AND DEVELOPMENT ACT OF 1992," which provided, among
others, for the creation of the SSEFZ, as well as the Subic Bay Metropolitan
Authority (SBMA). Pursuant to this law, the SBMA granted the lower court petitioners
Certificates of Registration and Tax Exemption. The certificates allowed them to engage in the
business of import and export of general merchandise (including alcohol and tobacco
products) and uniformly granted them tax exemptions for these importations.
the SBMA issued a Memorandum on February 7, 2005 directing its various departments to
require importers in the SSEFZ to pay the applicable duties and taxes on their importations of
tobacco and alcohol products before these importations are cleared and released from the
freeport. The memorandum prompted the lower court petitioners to bring before the RTC their
petition for declaratory relief (Civil Case No. 102-0- 05). The petition included a prayer for the
issuance of a writ of preliminary injunction and/or a TRO to enjoin the Republic (acting
through the SBMA) from enforcing the challenged memorandum.
On May 4, 2005,5 the respondent judge granted the lower court petitioners’ application for
preliminary injunction despite the Republic’s opposition, and on May 11, 2005, he issued the
preliminary injunction.
The Republic filed before this Court a petition for certiorari and prohibition – docketed in
this Court as G.R. No. 168584 – to annul the respondent judge’s order and the writ issued
pursuant to this order. The petition asked for the issuance of a TRO and/or a writ of
preliminary injunction. By motion dated July 21, 2005 filed before the lower court, the
Republic asked the respondent judge to suspend the proceedings pending the resolution of
G.R. No. 168584.
On August 5, 2005, the private respondents (in the present petition now before us) filed before
the respondent judge motions for leave to intervene and to admit complaints-in-intervention.
They also asked in these motions that the respondent judge extend to them the effects and
benefits of his May 4, 2005 order, in the lower court petitioners’ favor, and the subsequently
issued May 11, 2005 writ of preliminary mandatory injunction.
Without acting on the Republic’s motion to suspend the proceedings, the respondent judge
granted on August 11, 2005 the private respondents’ motions and complaints-in-intervention.
The respondent judge found the private respondents to be similarly situated as the lower court
petitioners; they stood, too, to be adversely affected by the implementation of R.A. No. 9334.
The Republic moved to reconsider6 the respondent judge’s August 11, 2005 order, arguing that
it had been denied due process because it never received copies of the private respondents’
motions and complaints-in-intervention.
On July 5, 2006, the respondent judge denied the Republic’s motion for reconsideration and
the previously filed motion to suspend the proceedings. The respondent judge held that all of
the parties in the case had been duly notified per the records. To justify the denial of the
motion to suspend the proceedings, the respondent judge pointed to the absence of any
restraining order in G.R. No. 168584. The Republic responded to the respondent judge’s
actions by filing the present petition.
The Petition
The present petition charges that the respondent judge acted with manifest partiality and with
grave abuse of discretion when he issued his August 11, 2005 and July 5, 2006 orders. In
particular, the Republic contends that the respondent judge violated its right to due process
when he peremptorily allowed the private respondents’ motions and complaints-in-
intervention and proceeded with their hearing ex parte despite the absence of any prior notice
to it. The Republic maintains that it never received any notice of hearing, nor any copy of the
questioned motions and complaints-in-intervention.7
Further, the Republic posits that the respondent judge abused his discretion when he extended
to the private respondents the benefits of the preliminary injunction earlier issued to the lower
court petitioners under the same ₱1,000,000.00 bond the lower court petitioners posted. The
Republic labels this action as a violation of Section 4, Rule 58 of the Rules of Court, claiming
at the same time that the bond is manifestly disproportionate to the resulting damage the
Republic stood to incur considering the number of the original and the additional lower court
petitioners.8
Finally, in support of its prayer for the issuance of a TRO and/or a writ of preliminary
injunction, the Republic stresses that the assailed orders continue to cause it multi-million tax
losses. It justifies its prayer for the respondent judge’s inhibition by pointing to the latter’s act
of continuously allowing parties to intervene despite the absence of notice and to the inclusion
of non-parties to the original case.
During the pendency of the present petition, the Court en banc partially granted the Republic’s
petition in G.R. No. 168584. By a Decision9 dated October 15, 2007, this Court set aside and
nullified the respondent judge’s order of May 4, 2005 and the subsequent May 11, 2005 writ
of preliminary injunction. On January 15, 2008, the Court denied with finality the lower court
petitioners’ motion for reconsideration.10
The Respondent’s Position
In their defense, the private respondents point to the procedural defects in the petition,
specifically: first, the petition was filed out of time, arguing that the Republic only had 53
remaining days to file the petition from notice of the denial of its motion for reconsideration,
maintaining that the 60-day period within which to file the petition is counted from the notice
of the denial of the August 11, 2005 order; second, the petition did not comply with the rules
on proof of filing and service; third, the Republic failed to properly serve their counsel of
record a copy of the petition; and fourth, the Republic did not observe the hierarchy of courts
in filing the instant petition.11
The private respondents further contend that the respondent judge correctly allowed their
complaints-in-intervention as the matter of intervention is addressed to the courts’ discretion;
as noted in the assailed orders, the records show that the notice of hearing was addressed to all
of the parties in the original case.12
Finally, on the Republic’s prayer for prohibition, the private respondents maintain that
prohibition is improper since this Court, in G.R. No. 168584, denied the Republic’s prayer for
a writ of prohibition, noting that the respondent judge had been suspended, pending resolution
of this petition.13
The Court’s Ruling
We resolve to PARTLY GRANT the petition.
Relaxation of procedural rules for compelling reasons
We disagree with the private respondents’ procedural objections.
First, we find that the present petition was filed within the reglementary period. Contrary to
the private respondents’ position, the 60- day period within which to file the petition
for certiorari is counted from the Republic’s receipt of the July 5, 2006 order denying the
latter’s motion for reconsideration. Section 4, Rule 65 of the Rules of Court is clear on this
point – "In case a motion for reconsideration or new trial is timely filed, whether such
motion is required or not, the sixty (60) day period shall be counted from notice of the
denial of said motion."14 We find too that the present petition complied with the rules on
proof of filing and service of the petition. Attached to the petition – in compliance with
Sections 12 and 13, Rule 13 of the Rules of Court – are the registry receipts and the affidavit
of the person who filed and served the petition by registered mail.
Second, while the principle of hierarchy of courts does indeed require that recourses should be
made to the lower courts before they are made to the higher courts,15 this principle is not an
absolute rule and admits of exceptions under well-defined circumstances. In several cases, we
have allowed direct invocation of this Court’s original jurisdiction to issue writs
of certiorari on the ground of special and important reasons clearly stated in the
petition;16when dictated by public welfare and the advancement of public policy; when
demanded by the broader interest of justice; when the challenged orders were patent
nullities;17 or when analogous exceptional and compelling circumstances called for and
justified our immediate and direct handling of the case.18
The Republic claims that the respondent judge violated and continues to violate its right to due
process by allowing the private respondents and several others to intervene in the
case sans notice to the Republic; by extending to them the benefit of the original injunction
without the requisite injunction bond applicable to them as separate injunction applicants; and
by continuing to suspend the Republic’s right to collect excise taxes from the private
respondents and from the lower court petitioners, thus adversely affecting the government’s
revenues. To our mind, the demonstrated extent of the respondent judge’s actions and their
effects constitute special and compelling circumstances calling for our direct and immediate
attention.
Lastly, under our rules of procedure,19 service of the petition on a party, when that party is
represented by a counsel of record, is a patent nullity and is not binding upon the party
wrongfully served.20 This rule, however, is a procedural standard that may admit of exceptions
when faced with compelling reasons of substantive justice manifest in the petition and in the
surrounding circumstances of the case.21 Procedural rules can bow to substantive
considerations through a liberal construction aimed at promoting their objective of securing a
just, speedy and inexpensive disposition of every action and proceeding.22
The Republic has consistently and repeatedly maintained that it never received a copy of the
motions and complaints-in-intervention, as evidenced by the certification of the Docket
Division of the Office of the Solicitor General (OSG); it learned of the private respondents’
presence in this case only after it received copies of the assailed orders, and it even had to
inquire from the lower court for the private respondents’ addresses. Although their counsels
did not formally receive any copy of the petition, the private respondents themselves admitted
that they received their copy of the present petition. The records show that the Republic
subsequently complied with the rules on service when, after the private respondents’
comment, the Republic served copies of its reply and memorandum to the respondents’
counsel of record.
Under these circumstances, we are satisfied with the Republic’s explanation on why it failed to
initially comply with the rule on service of the present petition; its subsequent compliance
with the rule after being informed of the presence of counsels of record sufficiently warrants
the rule’s relaxed application.23 The lack of a proper service – unlike the situation when the
Republic was simply confronted with already-admitted complaints-in-intervention – did not
result in any prejudice; the private respondents themselves were actually served with, and duly
received, their copies of the present petition, allowing them to comment and to be heard on the
petition.
The Republic was denied due process; the respondent judge issued the assailed orders with
grave abuse of discretion
Due process of law is a constitutionally guaranteed right reserved to every
litigant.1âwphi1 Even the Republic as a litigant is entitled to this constitutional right, in the
same manner and to the same extent that this right is guaranteed to private litigants. The
essence of due process is the opportunity to be heard, logically preconditioned on prior notice,
before judgment is rendered.24
A motion for intervention, like any other motion, has to comply with the mandatory
requirements of notice and hearing, as well as proof of its service, 25 save only for those that the
courts can act upon without prejudice to the rights of the other parties.26 A motion which fails
to comply with these requirements is a worthless piece of paper that cannot and should not be
acted upon.27 The reason for this is plain: a movant asks the court to take a specific course of
action, often contrary to the interest of the adverse party and which the latter must then be
given the right and opportunity to oppose.28 The notice of hearing to the adverse party thus
directly services the required due process as it affords the adverse party the opportunity to
properly state his agreement or opposition to the action that the movant asks
for.29 Consequently, our procedural rules provide that a motion that does not afford the adverse
party this kind of opportunity should simply be disregarded.30
The notice requirement is even more mandatory when the movant asks for the issuance of a
preliminary injunction and/or a TRO. Under Section 5, Rule 58 of the Rules of Court, no
preliminary injunction shall be granted without a hearing and without prior notice to the party
sought to be enjoined. The prior notice under this requirement is as important as the hearing,
as no hearing can meaningfully take place, with both parties present or represented, unless a
prior notice of the hearing is given.
Additionally, in the same way that an original complaint must be served on the defendant, a
copy of the complaint-in-intervention must be served on the adverse party with the requisite
proof of service duly filed prior to any valid court action. Absent these or any reason duly
explained and accepted excusing strict compliance, the court is without authority to act on
such complaint; any action taken without the required service contravenes the law and the
rules, and violates the adverse party’s basic and constitutional right to due process.
In the present case, records show that the OSG had never received – contrary to the private
respondents’ claim – a copy of the motions and complaints-in-intervention. 31 The Republic
duly and fully manifested the irregularity before the respondent judge.32 Thus, the mere
statement in the assailed orders that the parties were duly notified is insufficient on the face of
the appropriate manifestation made and the supporting proof that the Republic submitted. In
these lights, the motions and complaints-in-intervention cannot but be mere scraps of paper
that the respondent judge had no reason to consider; in admitting them despite the absence of
prior notice, the respondent judge denied the Republic of its right to due process.
While we may agree with the private respondents’ claim that the matter of intervention is
addressed to the sound discretion of the court,33 what should not be forgotten is the
requirement that the exercise of discretion must in the first place be "sound." In other words,
the basic precepts of fair play and the protection of all interests involved must always be
considered in the exercise of discretion. Under the circumstances of the present case, these
considerations demand that the original parties to the action, which include the Republic, must
have been properly informed to give them a chance to protect their interests. These interests
include, among others, the protection of the Republic’s revenue-generating authority that
should have been insulated against damage through the filing of a proper bond. Thus, even
from this narrow view that does not yet consider the element of fair play, the private
respondents’ case must fail; judicial discretion cannot override a party litigant’s right to due
process.
All told, the respondent judge acted with grave abuse of discretion warranting the issuance of
the corrective writ of certiorari. Grave abuse of discretion arises when a lower court or
tribunal violates the Constitution or grossly disregards the law or existing jurisprudence. 34 The
term refers to such capricious and whimsical exercise of judgment equivalent to lack of
jurisdiction, as when the act amounts to an evasion of a positive duty or to a virtual refusal to
perform a duty enjoined by law, or to act at all in contemplation of law .35 The respondent
judge so acted so that the orders he issued should be declared void and of no effect.
Petition for prohibition and prayer for inhibition are denied for having been mooted by
subsequent events
On November 9, 2006, the Republic filed an administrative case against the respondent judge
for gross ignorance of the law, manifest partiality and conduct prejudicial to the best interest
of the service. The case, docketed as A.M. No. RTJ-07-2063, is likewise related to Civil Case
No. 102-0-05 that underlie the present petition. By a decision dated June 26, 2009, and while
this case was still pending, this Court found the respondent judge guilty of gross ignorance of
the law and conduct prejudicial to the best interest of the service. The Court accordingly
dismissed the respondent judge from the service.
In light of these supervening events, the Court sees no reason to resolve the other matters
raised in this petition for being moot.
WHEREFORE, under these premises, we PARTIALLY GRANT the petition. We GRANT the
writ of certiorari and accordingly SET ASIDE the orders dated August 11, 2005 and July 5,
2006 of respondent Judge Ramon S. Caguioa in Civil Case No. 102-0-05 for being NULL and
VOID. We DISMISS the prayer for writ of prohibition on the ground of mootness. Costs
against Metatrans Trading International Corporation and Hundred Young Subic International,
Inc.
SO ORDERED.
G.R. No. 171182               August 23, 2012
UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. DE GUZMAN,
RUBEN P. ASPIRAS, EMMANUEL P. BELLO, WILFREDO P. DAVID, CASIANO S.
ABRIGO, and JOSEFINA R. LICUANAN,Petitioners, 
vs.
HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the Regional Trial Court
of Quezon City, Branch 80, STERN BUILDERS, INC., and SERVILLANO DELA
CRUZ, Respondents.
DECISION
BERSAMIN, J.:
Trial judges should not immediately issue writs of execution or garnishment against the
Government or any of its subdivisions, agencies and instrumentalities to enforce money
judgments.1 They should bear in mind that the primary jurisdiction to examine, audit and settle
all claims of any sort due from the Government or any of its subdivisions, agencies and
instrumentalities pertains to the Commission on Audit (COA) pursuant to Presidential Decree
No. 1445 (Government Auditing Code of the Philippines).
The Case
On appeal by the University of the Philippines and its then incumbent officials (collectively,
the UP) is the decision promulgated on September 16, 2005, 2 whereby the Court of Appeals
(CA) upheld the order of the Regional Trial Court (RTC), Branch 80, in Quezon City that
directed the garnishment of public funds amounting to ₱ 16,370,191.74 belonging to the UP to
satisfy the writ of execution issued to enforce the already final and executory judgment against
the UP.
Antecedents
On August 30, 1990, the UP, through its then President Jose V. Abueva, entered into a General
Construction Agreement with respondent Stern Builders Corporation (Stern Builders),
represented by its President and General Manager Servillano dela Cruz, for the construction of
the extension building and the renovation of the College of Arts and Sciences Building in the
campus of the University of the Philippines in Los Baños (UPLB).3
In the course of the implementation of the contract, Stern Builders submitted three progress
billings corresponding to the work accomplished, but the UP paid only two of the billings. The
third billing worth ₱ 273,729.47 was not paid due to its disallowance by the Commission on
Audit (COA). Despite the lifting of the disallowance, the UP failed to pay the billing,
prompting Stern Builders and dela Cruz to sue the UP and its co-respondent officials to collect
the unpaid billing and to recover various damages. The suit, entitled Stern Builders
Corporation and Servillano R. Dela Cruz v. University of the Philippines Systems, Jose V.
Abueva, Raul P. de Guzman, Ruben P. Aspiras, Emmanuel P. Bello, Wilfredo P. David,
Casiano S. Abrigo, and Josefina R. Licuanan, was docketed as Civil Case No. Q-93-14971 of
the Regional Trial Court in Quezon City (RTC).4
After trial, on November 28, 2001, the RTC rendered its decision in favor of the
plaintiffs,5 viz:
Wherefore, in the light of the foregoing, judgment is hereby rendered in favor of the plaintiff
and against the defendants ordering the latter to pay plaintiff, jointly and severally, the
following, to wit:
1. ₱ 503,462.74 amount of the third billing, additional accomplished work
and retention money
2. ₱ 5,716,729.00 in actual damages
3. ₱ 10,000,000.00 in moral damages
 4. ₱ 150,000.00 and ₱ 1,500.00 per appearance as attorney’s fees; and
5. Costs of suit.
SO ORDERED.
Following the RTC’s denial of its motion for reconsideration on May 7, 2002,6 the UP filed a
notice of appeal on June 3, 2002.7 Stern Builders and dela Cruz opposed the notice of appeal
on the ground of its filing being belated, and moved for the execution of the decision. The UP
countered that the notice of appeal was filed within the reglementary period because the UP’s
Office of Legal Affairs (OLS) in Diliman, Quezon City received the order of denial only on
May 31, 2002. On September 26, 2002, the RTC denied due course to the notice of appeal for
having been filed out of time and granted the private respondents’ motion for execution.8
The RTC issued the writ of execution on October 4, 2002, 9 and the sheriff of the RTC served
the writ of execution and notice of demand upon the UP, through its counsel, on October 9,
2002.10 The UP filed an urgent motion to reconsider the order dated September 26, 2002, to
quash the writ of execution dated October 4, 2002, and to restrain the proceedings.11 However,
the RTC denied the urgent motion on April 1, 2003.12
On June 24, 2003, the UP assailed the denial of due course to its appeal through a petition
for certiorari in the Court of Appeals (CA), docketed as CA-G.R. No. 77395.13
On February 24, 2004, the CA dismissed the petition for certiorari upon finding that the UP’s
notice of appeal had been filed late,14 stating:
Records clearly show that petitioners received a copy of the Decision dated November 28,
2001 and January 7, 2002, thus, they had until January 22, 2002 within which to file their
appeal. On January 16, 2002 or after the lapse of nine (9) days, petitioners through their
counsel Atty. Nolasco filed a Motion for Reconsideration of the aforesaid decision, hence,
pursuant to the rules, petitioners still had six (6) remaining days to file their appeal. As
admitted by the petitioners in their petition (Rollo, p. 25), Atty. Nolasco received a copy of the
Order denying their motion for reconsideration on May 17, 2002, thus, petitioners still has
until May 23, 2002 (the remaining six (6) days) within which to file their appeal. Obviously,
petitioners were not able to file their Notice of Appeal on May 23, 2002 as it was only filed on
June 3, 2002.
In view of the said circumstances, We are of the belief and so holds that the Notice of Appeal
filed by the petitioners was really filed out of time, the same having been filed seventeen (17)
days late of the reglementary period. By reason of which, the decision dated November 28,
2001 had already become final and executory. "Settled is the rule that the perfection of an
appeal in the manner and within the period permitted by law is not only mandatory but
jurisdictional, and failure to perfect that appeal renders the challenged judgment final and
executory. This is not an empty procedural rule but is grounded on fundamental considerations
of public policy and sound practice." (Ram’s Studio and Photographic Equipment, Inc. vs.
Court of Appeals, 346 SCRA 691, 696). Indeed, Atty. Nolasco received the order of denial of
the Motion for Reconsideration on May 17, 2002 but filed a Notice of Appeal only on June 3,
3003. As such, the decision of the lower court ipso facto became final when no appeal was
perfected after the lapse of the reglementary period. This procedural caveat cannot be trifled
with, not even by the High Court.15
The UP sought a reconsideration, but the CA denied the UP’s motion for reconsideration on
April 19, 2004.16
On May 11, 2004, the UP appealed to the Court by petition for review on certiorari (G.R. No.
163501).
On June 23, 2004, the Court denied the petition for review. 17 The UP moved for the
reconsideration of the denial of its petition for review on August 29, 2004,18 but the Court
denied the motion on October 6, 2004.19 The denial became final and executory on November
12, 2004.20
In the meanwhile that the UP was exhausting the available remedies to overturn the denial of
due course to the appeal and the issuance of the writ of execution, Stern Builders and dela
Cruz filed in the RTC their motions for execution despite their previous motion having already
been granted and despite the writ of execution having already issued. On June 11, 2003, the
RTC granted another motion for execution filed on May 9, 2003 (although the RTC had
already issued the writ of execution on October 4, 2002).21
On June 23, 2003 and July 25, 2003, respectively, the sheriff served notices of garnishment on
the UP’s depository banks, namely: Land Bank of the Philippines (Buendia Branch) and the
Development Bank of the Philippines (DBP), Commonwealth Branch. 22 The UP assailed the
garnishment through an urgent motion to quash the notices of garnishment;23 and a motion to
quash the writ of execution dated May 9, 2003.24
On their part, Stern Builders and dela Cruz filed their ex parte motion for issuance of a release
order.25
On October 14, 2003, the RTC denied the UP’s urgent motion to quash, and granted Stern
Builders and dela Cruz’s ex parte motion for issuance of a release order.26
The UP moved for the reconsideration of the order of October 14, 2003, but the RTC denied
the motion on November 7, 2003.27
On January 12, 2004, Stern Builders and dela Cruz again sought the release of the garnished
funds.28 Despite the UP’s opposition,29 the RTC granted the motion to release the garnished
funds on March 16, 2004.30 On April 20, 2004, however, the RTC held in abeyance the
enforcement of the writs of execution issued on October 4, 2002 and June 3, 2003 and all the
ensuing notices of garnishment, citing Section 4, Rule 52, Rules of Court, which provided that
the pendency of a timely motion for reconsideration stayed the execution of the judgment.31
On December 21, 2004, the RTC, through respondent Judge Agustin S. Dizon, authorized the
release of the garnished funds of the UP,32 to wit:
WHEREFORE, premises considered, there being no more legal impediment for the release of
the garnished amount in satisfaction of the judgment award in the instant case, let the amount
garnished be immediately released by the Development Bank of the Philippines,
Commonwealth Branch, Quezon City in favor of the plaintiff.
SO ORDERED.
The UP was served on January 3, 2005 with the order of December 21, 2004 directing DBP to
release the garnished funds.33
On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in direct contempt of
court for its non-compliance with the order of release.34
Thereupon, on January 10, 2005, the UP brought a petition for certiorari in the CA to
challenge the jurisdiction of the RTC in issuing the order of December 21, 2004 (CA-G.R. CV
No. 88125).35 Aside from raising the denial of due process, the UP averred that the RTC
committed grave abuse of discretion amounting to lack or excess of jurisdiction in ruling that
there was no longer any legal impediment to the release of the garnished funds. The UP argued
that government funds and properties could not be seized by virtue of writs of execution or
garnishment, as held in Department of Agriculture v. National Labor Relations
Commission,36 and citing Section 84 of Presidential Decree No. 1445 to the effect that
"revenue funds shall not be paid out of any public treasury or depository except in pursuance
of an appropriation law or other specific statutory authority;" and that the order of garnishment
clashed with the ruling in University of the Philippines Board of Regents v. Ligot-Telan37 to
the effect that the funds belonging to the UP were public funds.
On January 19, 2005, the CA issued a temporary restraining order (TRO) upon application by
the UP.38
On March 22, 2005, Stern Builders and dela Cruz filed in the RTC their amended motion for
sheriff’s assistance to implement the release order dated December 21, 2004, stating that the
60-day period of the TRO of the CA had already lapsed.39 The UP opposed the amended
motion and countered that the implementation of the release order be suspended.40
On May 3, 2005, the RTC granted the amended motion for sheriff’s assistance and directed the
sheriff to proceed to the DBP to receive the check in satisfaction of the judgment.41
The UP sought the reconsideration of the order of May 3, 2005.42
On May 16, 2005, DBP filed a motion to consign the check representing the judgment award
and to dismiss the motion to cite its officials in contempt of court.43
On May 23, 2005, the UP presented a motion to withhold the release of the payment of the
judgment award.44
On July 8, 2005, the RTC resolved all the pending matters, 45 noting that the DBP had already
delivered to the sheriff Manager’s Check No. 811941 for ₱ 16,370,191.74 representing the
garnished funds payable to the order of Stern Builders and dela Cruz as its compliance with
the RTC’s order dated December 21, 2004.46 However, the RTC directed in the same order that
Stern Builders and dela Cruz should not encash the check or withdraw its amount pending the
final resolution of the UP’s petition for certiorari, to wit:47
To enable the money represented in the check in question (No. 00008119411) to earn interest
during the pendency of the defendant University of the Philippines application for a writ of
injunction with the Court of Appeals the same may now be deposited by the plaintiff at the
garnishee Bank (Development Bank of the Philippines), the disposition of the amount
represented therein being subject to the final outcome of the case of the University of the
Philippines et al., vs. Hon. Agustin S. Dizon et al., (CA G.R. 88125) before the Court of
Appeals.
Let it be stated herein that the plaintiff is not authorized to encash and withdraw the amount
represented in the check in question and enjoy the same in the fashion of an owner during the
pendency of the case between the parties before the Court of Appeals which may or may not
be resolved in plaintiff’s favor.
With the end in view of seeing to it that the check in question is deposited by the plaintiff at
the Development Bank of the Philippines (garnishee bank), Branch Sheriff Herlan Velasco is
directed to accompany and/or escort the plaintiff in making the deposit of the check in
question.
SO ORDERED.
On September 16, 2005, the CA promulgated its assailed decision dismissing the UP’s petition
for certiorari, ruling that the UP had been given ample opportunity to contest the motion to
direct the DBP to deposit the check in the name of Stern Builders and dela Cruz; and that the
garnished funds could be the proper subject of garnishment because they had been already
earmarked for the project, with the UP holding the funds only in a fiduciary capacity,48 viz:
Petitioners next argue that the UP funds may not be seized for execution or garnishment to
satisfy the judgment award. Citing Department of Agriculture vs. NLRC, University of the
Philippines Board of Regents vs. Hon. Ligot-Telan, petitioners contend that UP deposits at
Land Bank and the Development Bank of the Philippines, being government funds, may not
be released absent an appropriations bill from Congress.
The argument is specious. UP entered into a contract with private respondents for the
expansion and renovation of the Arts and Sciences Building of its campus in Los Baños,
Laguna. Decidedly, there was already an appropriations earmarked for the said project. The
said funds are retained by UP, in a fiduciary capacity, pending completion of the construction
project.
We agree with the trial Court [sic] observation on this score:
"4. Executive Order No. 109 (Directing all National Government Agencies
to Revert Certain Accounts Payable to the Cumulative Result of
Operations of the National Government and for Other Purposes) Section 9.
Reversion of Accounts Payable, provides that, all 1995 and prior years
documented accounts payable and all undocumented accounts regardless
of the year they were incurred shall be reverted to the Cumulative Result
of Operations of the National Government (CROU). This shall apply to
accounts payable of all funds, except fiduciary funds, as long as the
purpose for which the funds were created have not been accomplished and
accounts payable under foreign assisted projects for the duration of the
said project. In this regard, the Department of Budget and Management
issued Joint-Circular No. 99-6 4.0 (4.3) Procedural Guidelines which
provides that all accounts payable that reverted to the CROU may be
considered for payment upon determination thru administrative process, of
the existence, validity and legality of the claim. Thus, the allegation of the
defendants that considering no appropriation for the payment of any
amount awarded to plaintiffs appellee the funds of defendant-appellants
may not be seized pursuant to a writ of execution issued by the regular
court is misplaced. Surely when the defendants and the plaintiff entered
into the General Construction of Agreement there is an amount already
allocated by the latter for the said project which is no longer subject of
future appropriation."49
After the CA denied their motion for reconsideration on December 23, 2005, the petitioners
appealed by petition for review.
Matters Arising During the Pendency of the Petition
On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern Builders and dela
Cruz’s motion to withdraw the deposit, in consideration of the UP’s intention to appeal to the
CA,50 stating:
Since it appears that the defendants are intending to file a petition for review of the Court of
Appeals resolution in CA-G.R. No. 88125 within the reglementary period of fifteen (15) days
from receipt of resolution, the Court agrees with the defendants stand that the granting of
plaintiffs’ subject motion is premature.
Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part
that the "disposition of the amount represented therein being subject to the final outcome of
the case of the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R.
No. 88125 before the Court of Appeals) is that the judgment or resolution of said court has to
be final and executory, for if the same will still be elevated to the Supreme Court, it will not
attain finality yet until the highest court has rendered its own final judgment or resolution.51
However, on January 22, 2007, the UP filed an Urgent Application for A Temporary
Restraining Order and/or A Writ of Preliminary Injunction, 52 averring that on January 3, 2007,
Judge Maria Theresa dela Torre-Yadao (who had meanwhile replaced Judge Dizon upon the
latter’s appointment to the CA) had issued another order allowing Stern Builders and dela
Cruz to withdraw the deposit,53 to wit:
It bears stressing that defendants’ liability for the payment of the judgment obligation has
become indubitable due to the final and executory nature of the Decision dated November 28,
2001. Insofar as the payment of the [sic] judgment obligation is concerned, the Court believes
that there is nothing more the defendant can do to escape liability. It is observed that there is
nothing more the defendant can do to escape liability. It is observed that defendant U.P.
System had already exhausted all its legal remedies to overturn, set aside or modify the
decision (dated November 28, 2001( rendered against it. The way the Court sees it, defendant
U.P. System’s petition before the Supreme Court concerns only with the manner by which said
judgment award should be satisfied. It has nothing to do with the legality or propriety thereof,
although it prays for the deletion of [sic] reduction of the award of moral damages.
It must be emphasized that this Court’s finding, i.e., that there was sufficient appropriation
earmarked for the project, was upheld by the Court of Appeals in its decision dated September
16, 2005. Being a finding of fact, the Supreme Court will, ordinarily, not disturb the same was
said Court is not a trier of fact. Such being the case, defendants’ arguments that there was no
sufficient appropriation for the payment of the judgment obligation must fail.
While it is true that the former Presiding Judge of this Court in its Order dated January 30,
2006 had stated that:
Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part
that the "disposition of the amount represented therein being subject to the final outcome of
the case of the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R.
No. 88125 before the Court of Appeals) is that the judgment or resolution of said court has to
be final and executory, for if the same will still be elevated to the Supreme Court, it will not
attain finality yet until the highest court has rendered its own final judgment or resolution.
it should be noted that neither the Court of Appeals nor the Supreme Court issued a
preliminary injunction enjoining the release or withdrawal of the garnished amount. In fact, in
its present petition for review before the Supreme Court, U.P. System has not prayed for the
issuance of a writ of preliminary injunction. Thus, the Court doubts whether such writ is
forthcoming.
The Court honestly believes that if defendants’ petition assailing the Order of this Court dated
December 31, 2004 granting the motion for the release of the garnished amount was
meritorious, the Court of Appeals would have issued a writ of injunction enjoining the same.
Instead, said appellate court not only refused to issue a wit of preliminary injunction prayed
for by U.P. System but denied the petition, as well.54
The UP contended that Judge Yadao thereby effectively reversed the January 30, 2006 order
of Judge Dizon disallowing the withdrawal of the garnished amount until after the decision in
the case would have become final and executory.
Although the Court issued a TRO on January 24, 2007 to enjoin Judge Yadao and all persons
acting pursuant to her authority from enforcing her order of January 3, 2007, 55 it appears that
on January 16, 2007, or prior to the issuance of the TRO, she had already directed the DBP to
forthwith release the garnished amount to Stern Builders and dela Cruz; 56 and that DBP had
forthwith complied with the order on January 17, 2007 upon the sheriff’s service of the order
of Judge Yadao.57
These intervening developments impelled the UP to file in this Court a supplemental petition
on January 26, 2007,58alleging that the RTC (Judge Yadao) gravely erred in ordering the
immediate release of the garnished amount despite the pendency of the petition for review in
this Court.
The UP filed a second supplemental petition59 after the RTC (Judge Yadao) denied the UP’s
motion for the redeposit of the withdrawn amount on April 10, 2007,60 to wit:
This resolves defendant U.P. System’s Urgent Motion to Redeposit Judgment Award praying
that plaintiffs be directed to redeposit the judgment award to DBP pursuant to the Temporary
Restraining Order issued by the Supreme Court. Plaintiffs opposed the motion and countered
that the Temporary Restraining Order issued by the Supreme Court has become moot and
academic considering that the act sought to be restrained by it has already been performed.
They also alleged that the redeposit of the judgment award was no longer feasible as they have
already spent the same.
It bears stressing, if only to set the record straight, that this Court did not – in its Order dated
January 3, 2007 (the implementation of which was restrained by the Supreme Court in its
Resolution dated January 24, 2002) – direct that that garnished amount "be deposited with the
garnishee bank (Development Bank of the Philippines)". In the first place, there was no need
to order DBP to make such deposit, as the garnished amount was already deposited in the
account of plaintiffs with the DBP as early as May 13, 2005. What the Court granted in its
Order dated January 3, 2007 was plaintiff’s motion to allow the release of said deposit. It must
be recalled that the Court found plaintiff’s motion meritorious and, at that time, there was no
restraining order or preliminary injunction from either the Court of Appeals or the Supreme
Court which could have enjoined the release of plaintiffs’ deposit. The Court also took into
account the following factors:
a) the Decision in this case had long been final and executory after it was
rendered on November 28, 2001;
b) the propriety of the dismissal of U.P. System’s appeal was upheld by
the Supreme Court;
c) a writ of execution had been issued;
d) defendant U.P. System’s deposit with DBP was garnished pursuant to a
lawful writ of execution issued by the Court; and
e) the garnished amount had already been turned over to the plaintiffs and
deposited in their account with DBP.
The garnished amount, as discussed in the Order dated January 16, 2007, was already owned
by the plaintiffs, having been delivered to them by the Deputy Sheriff of this Court pursuant to
par. (c), Section 9, Rule 39 of the 1997 Rules of Civil Procedure. Moreover, the judgment
obligation has already been fully satisfied as per Report of the Deputy Sheriff.
Anent the Temporary Restraining Order issued by the Supreme Court, the same has become
functus oficio, having been issued after the garnished amount had been released to the
plaintiffs. The judgment debt was released to the plaintiffs on January 17, 2007, while the
Temporary Restraining Order issued by the Supreme Court was received by this Court on
February 2, 2007. At the time of the issuance of the Restraining Order, the act sought to be
restrained had already been done, thereby rendering the said Order ineffectual.
After a careful and thorough study of the arguments advanced by the parties, the Court is of
the considered opinion that there is no legal basis to grant defendant U.P. System’s motion to
redeposit the judgment amount. Granting said motion is not only contrary to law, but it will
also render this Court’s final executory judgment nugatory. Litigation must end and terminate
sometime and somewhere, and it is essential to an effective administration of justice that once
a judgment has become final the issue or cause involved therein should be laid to rest. This
doctrine of finality of judgment is grounded on fundamental considerations of public policy
and sound practice. In fact, nothing is more settled in law than that once a judgment attains
finality it thereby becomes immutable and unalterable. It may no longer be modified in any
respect, even if the modification is meant to correct what is perceived to be an erroneous
conclusion of fact or law, and regardless of whether the modification is attempted to be made
by the court rendering it or by the highest court of the land.
WHEREFORE, premises considered, finding defendant U.P. System’s Urgent Motion to
Redeposit Judgment Award devoid of merit, the same is hereby DENIED.
SO ORDERED.
Issues
The UP now submits that:
I
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DISMISSING THE
PETITION, ALLOWING IN EFFECT THE GARNISHMENT OF UP FUNDS, WHEN IT
RULED THAT FUNDS HAVE ALREADY BEEN EARMARKED FOR THE
CONSTRUCTION PROJECT; AND THUS, THERE IS NO NEED FOR FURTHER
APPROPRIATIONS.
II
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING
GARNISHMENT OF A STATE UNIVERSITY’S FUNDS IN VIOLATION OF ARTICLE
XIV, SECTION 5(5) OF THE CONSTITUTION.
III
IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE REVIEW
POWERS OF THIS HONORABLE COURT TO MODIFY, IF NOT TOTALLY DELETE
THE AWARD OF ₱ 10 MILLION AS MORAL DAMAGES TO RESPONDENTS.
IV
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE
IMMEDIATE RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 3
JANUARY 2007 ON THE GROUND OF EQUITY AND JUDICIAL COURTESY.
V Ruling
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE
IMMEDIATE RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 16
JANUARY 2007 ON THE GROUND THAT PETITIONER UNIVERSITY STILL HAS A
PENDING MOTION FOR RECONSIDERATION OF THE ORDER DATED 3 JANUARY
2007.
VI
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING THE
REDEPOSIT OF THE GARNISHED AMOUNT TO THE DBP IN VIOLATION OF THE
CLEAR LANGUAGE OF THE SUPREME COURT RESOLUTION DATED 24 JANUARY
2007.
The UP argues that the amount earmarked for the construction project had been purposely set
aside only for the aborted project and did not include incidental matters like the awards of
actual damages, moral damages and attorney’s fees. In support of its argument, the UP cited
Article 12.2 of the General Construction Agreement, which stipulated that no deductions
would be allowed for the payment of claims, damages, losses and expenses, including
attorney’s fees, in case of any litigation arising out of the performance of the work. The UP
insists that the CA decision was inconsistent with the rulings in Commissioner of Public
Highways v. San Diego61 and Department of Agriculture v. NLRC62 to the effect that
government funds and properties could not be seized under writs of execution or garnishment
to satisfy judgment awards.
Furthermore, the UP contends that the CA contravened Section 5, Article XIV of the
Constitution by allowing the garnishment of UP funds, because the garnishment resulted in a
substantial reduction of the UP’s limited budget allocated for the remuneration, job
satisfaction and fulfillment of the best available teachers; that Judge Yadao should have
exhibited judicial courtesy towards the Court due to the pendency of the UP’s petition for
review; and that she should have also desisted from declaring that the TRO issued by this
Court had become functus officio.
Lastly, the UP states that the awards of actual damages of ₱ 5,716,729.00 and moral damages
of ₱ 10 million should be reduced, if not entirely deleted, due to its being unconscionable,
inequitable and detrimental to public service.
In contrast, Stern Builders and dela Cruz aver that the petition for review was fatally defective
for its failure to mention the other cases upon the same issues pending between the parties
(i.e., CA-G.R. No. 77395 and G.R No. 163501); that the UP was evidently resorting to forum
shopping, and to delaying the satisfaction of the final judgment by the filing of its petition for
review; that the ruling in Commissioner of Public Works v. San Diego had no application
because there was an appropriation for the project; that the UP retained the funds allotted for
the project only in a fiduciary capacity; that the contract price had been meanwhile adjusted to
₱ 22,338,553.25, an amount already more than sufficient to cover the judgment award; that the
UP’s prayer to reduce or delete the award of damages had no factual basis, because they had
been gravely wronged, had been deprived of their source of income, and had suffered untold
miseries, discomfort, humiliation and sleepless years; that dela Cruz had even been
constrained to sell his house, his equipment and the implements of his trade, and together with
his family had been forced to live miserably because of the wrongful actuations of the UP; and
that the RTC correctly declared the Court’s TRO to be already functus officio by reason of the
withdrawal of the garnished amount from the DBP.
The decisive issues to be considered and passed upon are, therefore:
(a) whether the funds of the UP were the proper subject of garnishment in order to satisfy the
judgment award; and (b) whether the UP’s prayer for the deletion of the awards of actual
damages of ₱ 5,716,729.00, moral damages of ₱ 10,000,000.00 and attorney’s fees of ₱
150,000.00 plus ₱ 1,500.00 per appearance could be granted despite the finality of the
judgment of the RTC.
The petition for review is meritorious.
I.
UP’s funds, being government funds,
are not subject to garnishment
The UP was founded on June 18, 1908 through Act 1870 to provide advanced instruction in
literature, philosophy, the sciences, and arts, and to give professional and technical training to
deserving students.63 Despite its establishment as a body corporate,64 the UP remains to be a
"chartered institution"65 performing a legitimate government function. It is an institution of
higher learning, not a corporation established for profit and declaring any dividends. 66 In
enacting Republic Act No. 9500 (The University of the Philippines Charter of 2008), Congress
has declared the UP as the national university67 "dedicated to the search for truth and
knowledge as well as the development of future leaders."68
Irrefragably, the UP is a government instrumentality,69 performing the State’s constitutional
mandate of promoting quality and accessible education.70 As a government instrumentality, the
UP administers special funds sourced from the fees and income enumerated under Act No.
1870 and Section 1 of Executive Order No. 714,71 and from the yearly appropriations, to
achieve the purposes laid down by Section 2 of Act 1870, as expanded in Republic Act No.
9500.72 All the funds going into the possession of the UP, including any interest accruing from
the deposit of such funds in any banking institution, constitute a "special trust fund," the
disbursement of which should always be aligned with the UP’s mission and purpose, 73 and
should always be subject to auditing by the COA.74
Presidential Decree No. 1445 defines a "trust fund" as a fund that officially comes in the
possession of an agency of the government or of a public officer as trustee, agent or
administrator, or that is received for the fulfillment of some obligation.75 A trust fund may be
utilized only for the "specific purpose for which the trust was created or the funds received."76
The funds of the UP are government funds that are public in character. They include the
income accruing from the use of real property ceded to the UP that may be spent only for the
attainment of its institutional objectives.77 Hence, the funds subject of this action could not be
validly made the subject of the RTC’s writ of execution or garnishment. The adverse judgment
rendered against the UP in a suit to which it had impliedly consented was not immediately
enforceable by execution against the UP,78 because suability of the State did not necessarily
mean its liability.79
A marked distinction exists between suability of the State and its liability. As the Court
succinctly stated in Municipality of San Fernando, La Union v. Firme:80
A distinction should first be made between suability and liability. "Suability depends on the
consent of the state to be sued, liability on the applicable law and the established facts. The
circumstance that a state is suable does not necessarily mean that it is liable; on the other hand,
it can never be held liable if it does not first consent to be sued. Liability is not conceded by
the mere fact that the state has allowed itself to be sued. When the state does waive its
sovereign immunity, it is only giving the plaintiff the chance to prove, if it can, that the
defendant is liable.
Also, in Republic v. Villasor,81 where the issuance of an alias writ of execution directed against
the funds of the Armed Forces of the Philippines to satisfy a final and executory judgment was
nullified, the Court said:
xxx The universal rule that where the State gives its consent to be sued by private parties
either by general or special law, it may limit claimant’s action "only up to the completion of
proceedings anterior to the stage of execution" and that the power of the Courts ends when the
judgment is rendered, since government funds and properties may not be seized under writs of
execution or garnishment to satisfy such judgments, is based on obvious considerations of
public policy. Disbursements of public funds must be covered by the corresponding
appropriation as required by law. The functions and public services rendered by the State
cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their
legitimate and specific objects, as appropriated by law.
The UP correctly submits here that the garnishment of its funds to satisfy the judgment awards
of actual and moral damages (including attorney’s fees) was not validly made if there was no
special appropriation by Congress to cover the liability. It was, therefore, legally unwarranted
for the CA to agree with the RTC’s holding in the order issued on April 1, 2003 that no
appropriation by Congress to allocate and set aside the payment of the judgment awards was
necessary because "there (were) already an appropriations (sic) earmarked for the said
project."82 The CA and the RTC thereby unjustifiably ignored the legal restriction imposed on
the trust funds of the Government and its agencies and instrumentalities to be used exclusively
to fulfill the purposes for which the trusts were created or for which the funds were received
except upon express authorization by Congress or by the head of a government agency in
control of the funds, and subject to pertinent budgetary laws, rules and regulations.83
Indeed, an appropriation by Congress was required before the judgment that rendered the UP
liable for moral and actual damages (including attorney’s fees) would be satisfied considering
that such monetary liabilities were not covered by the "appropriations earmarked for the said
project." The Constitution strictly mandated that "(n)o money shall be paid out of the Treasury
except in pursuance of an appropriation made by law."84
II
COA must adjudicate private respondents’ claim
before execution should proceed
The execution of the monetary judgment against the UP was within the primary jurisdiction of
the COA. This was expressly provided in Section 26 of Presidential Decree No. 1445, to wit:
Section 26. General jurisdiction. - The authority and powers of the Commission shall extend
to and comprehend all matters relating to auditing procedures, systems and controls, the
keeping of the general accounts of the Government, the preservation of vouchers pertaining
thereto for a period of ten years, the examination and inspection of the books, records, and
papers relating to those accounts; and the audit and settlement of the accounts of all persons
respecting funds or property received or held by them in an accountable capacity, as well as
the examination, audit, and settlement of all debts and claims of any sort due from or owing to
the Government or any of its subdivisions, agencies and instrumentalities. The said
jurisdiction extends to all government-owned or controlled corporations, including their
subsidiaries, and other self-governing boards, commissions, or agencies of the Government,
and as herein prescribed, including non governmental entities subsidized by the government,
those funded by donations through the government, those required to pay levies or government
share, and those for which the government has put up a counterpart fund or those partly funded
by the government.
It was of no moment that a final and executory decision already validated the claim against the
UP. The settlement of the monetary claim was still subject to the primary jurisdiction of the
COA despite the final decision of the RTC having already validated the claim.85 As such, Stern
Builders and dela Cruz as the claimants had no alternative except to first seek the approval of
the COA of their monetary claim.
On its part, the RTC should have exercised utmost caution, prudence and judiciousness in
dealing with the motions for execution against the UP and the garnishment of the UP’s funds.
The RTC had no authority to direct the immediate withdrawal of any portion of the garnished
funds from the depository banks of the UP. By eschewing utmost caution, prudence and
judiciousness in dealing with the execution and garnishment, and by authorizing the
withdrawal of the garnished funds of the UP, the RTC acted beyond its jurisdiction, and all its
orders and issuances thereon were void and of no legal effect, specifically: (a) the order Judge
Yadao issued on January 3, 2007 allowing Stern Builders and dela Cruz to withdraw the
deposited garnished amount; (b) the order Judge Yadao issued on January 16, 2007 directing
DBP to forthwith release the garnish amount to Stern Builders and dela Cruz; (c) the sheriff’s
report of January 17, 2007 manifesting the full satisfaction of the writ of execution; and (d) the
order of April 10, 2007 deying the UP’s motion for the redeposit of the withdrawn amount.
Hence, such orders and issuances should be struck down without exception.
Nothing extenuated Judge Yadao’s successive violations of Presidential Decree No. 1445. She
was aware of Presidential Decree No. 1445, considering that the Court circulated to all judges
its Administrative Circular No. 10-2000,86 issued on October 25, 2000, enjoining them "to
observe utmost caution, prudence and judiciousness in the issuance of writs of execution to
satisfy money judgments against government agencies and local government units" precisely
in order to prevent the circumvention of Presidential Decree No. 1445, as well as of the rules
and procedures of the COA, to wit:
In order to prevent possible circumvention of the rules and procedures of the
Commission on Audit, judges are hereby enjoined to observe utmost caution, prudence
and judiciousness in the issuance of writs of execution to satisfy money judgments
against government agencies and local government units.
Judges should bear in mind that in Commissioner of Public Highways v. San Diego (31 SCRA
617, 625 1970), this Court explicitly stated:
"The universal rule that where the State gives its consent to be sued by private parties either by
general or special law, it may limit claimant’s action ‘only up to the completion of
proceedings anterior to the stage of execution’ and that the power of the Court ends when the
judgment is rendered, since government funds and properties may not be seized under writs of
execution or garnishment to satisfy such judgments, is based on obvious considerations of
public policy. Disbursements of public funds must be covered by the corresponding
appropriation as required by law. The functions and public services rendered by the State
cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their
legitimate and specific objects, as appropriated by law.
Moreover, it is settled jurisprudence that upon determination of State liability, the
prosecution, enforcement or satisfaction thereof must still be pursued in accordance with
the rules and procedures laid down in P.D. No. 1445, otherwise known as the
Government Auditing Code of the Philippines (Department of Agriculture v. NLRC, 227
SCRA 693, 701-02 1993 citing Republic vs. Villasor, 54 SCRA 84 1973). All money claims
against the Government must first be filed with the Commission on Audit which must act
upon it within sixty days. Rejection of the claim will authorize the claimant to elevate the
matter to the Supreme Court on certiorari and in effect, sue the State thereby (P.D. 1445,
Sections 49-50).
However, notwithstanding the rule that government properties are not subject to levy and
execution unless otherwise provided for by statute (Republic v. Palacio, 23 SCRA 899 1968;
Commissioner of Public Highways v. San Diego, supra) or municipal ordinance (Municipality
of Makati v. Court of Appeals, 190 SCRA 206 1990), the Court has, in various instances,
distinguished between government funds and properties for public use and those not held for
public use. Thus, in Viuda de Tan Toco v. Municipal Council of Iloilo (49 Phil 52 1926, the
Court ruled that "where property of a municipal or other public corporation is sought to be
subjected to execution to satisfy judgments recovered against such corporation, the question as
to whether such property is leviable or not is to be determined by the usage and purposes for
which it is held." The following can be culled from Viuda de Tan Toco v. Municipal Council
of Iloilo:
1. Properties held for public uses – and generally everything held for governmental
purposes – are not subject to levy and sale under execution against such corporation. The
same rule applies to funds in the hands of a public officer and taxes due to a municipal
corporation.
2. Where a municipal corporation owns in its proprietary capacity, as distinguished from its
public or government capacity, property not used or used for a public purpose but for quasi-
private purposes, it is the general rule that such property may be seized and sold under
execution against the corporation.
3. Property held for public purposes is not subject to execution merely because it is
temporarily used for private purposes. If the public use is wholly abandoned, such property
becomes subject to execution.
This Administrative Circular shall take effect immediately and the Court Administrator shall
see to it that it is faithfully implemented.
Although Judge Yadao pointed out that neither the CA nor the Court had issued as of then any
writ of preliminary injunction to enjoin the release or withdrawal of the garnished amount, she
did not need any writ of injunction from a superior court to compel her obedience to the law.
The Court is disturbed that an experienced judge like her should look at public laws like
Presidential Decree No. 1445 dismissively instead of loyally following and unquestioningly
implementing them. That she did so turned her court into an oppressive bastion of mindless
tyranny instead of having it as a true haven for the seekers of justice like the UP.
III
Period of appeal did not start without effective
service of decision upon counsel of record;
Fresh-period rule announced in
Neypes v. Court of Appeals
can be given retroactive application
The UP next pleads that the Court gives due course to its petition for review in the name of
equity in order to reverse or modify the adverse judgment against it despite its finality. At
stake in the UP’s plea for equity was the return of the amount of ₱ 16,370,191.74 illegally
garnished from its trust funds. Obstructing the plea is the finality of the judgment based on the
supposed tardiness of UP’s appeal, which the RTC declared on September 26, 2002. The CA
upheld the declaration of finality on February 24, 2004, and the Court itself denied the UP’s
petition for review on that issue on May 11, 2004 (G.R. No. 163501). The denial became final
on November 12, 2004.
It is true that a decision that has attained finality becomes immutable and unalterable, and
cannot be modified in any respect,87 even if the modification is meant to correct erroneous
conclusions of fact and law, and whether the modification is made by the court that rendered it
or by this Court as the highest court of the land. 88 Public policy dictates that once a judgment
becomes final, executory and unappealable, the prevailing party should not be deprived of the
fruits of victory by some subterfuge devised by the losing party. Unjustified delay in the
enforcement of such judgment sets at naught the role and purpose of the courts to resolve
justiciable controversies with finality.89Indeed, all litigations must at some time end, even at
the risk of occasional errors.
But the doctrine of immutability of a final judgment has not been absolute, and has admitted
several exceptions, among them: (a) the correction of clerical errors; (b) the so-called nunc pro
tunc entries that cause no prejudice to any party; (c) void judgments; and (d) whenever
circumstances transpire after the finality of the decision that render its execution unjust and
inequitable.90 Moreover, in Heirs of Maura So v. Obliosca,91 we stated that despite the absence
of the preceding circumstances, the Court is not precluded from brushing aside procedural
norms if only to serve the higher interests of justice and equity. Also, in Gumaru v. Quirino
State College,92 the Court nullified the proceedings and the writ of execution issued by the
RTC for the reason that respondent state college had not been represented in the litigation by
the Office of the Solicitor General.
We rule that the UP’s plea for equity warrants the Court’s exercise of the exceptional power to
disregard the declaration of finality of the judgment of the RTC for being in clear violation of
the UP’s right to due process.
Both the CA and the RTC found the filing on June 3, 2002 by the UP of the notice of appeal to
be tardy. They based their finding on the fact that only six days remained of the UP’s
reglementary 15-day period within which to file the notice of appeal because the UP had filed
a motion for reconsideration on January 16, 2002 vis-à-vis the RTC’s decision the UP received
on January 7, 2002; and that because the denial of the motion for reconsideration had been
served upon Atty. Felimon D. Nolasco of the UPLB Legal Office on May 17, 2002, the UP
had only until May 23, 2002 within which to file the notice of appeal.
The UP counters that the service of the denial of the motion for reconsideration upon Atty.
Nolasco was defective considering that its counsel of record was not Atty. Nolasco of the
UPLB Legal Office but the OLS in Diliman, Quezon City; and that the period of appeal should
be reckoned from May 31, 2002, the date when the OLS received the order. The UP submits
that the filing of the notice of appeal on June 3, 2002 was well within the reglementary period
to appeal.
We agree with the submission of the UP.
Firstly, the service of the denial of the motion for reconsideration upon Atty. Nolasco of the
UPLB Legal Office was invalid and ineffectual because he was admittedly not the counsel of
record of the UP. The rule is that it is on the counsel and not the client that the service should
be made.93
That counsel was the OLS in Diliman, Quezon City, which was served with the denial only on
May 31, 2002. As such, the running of the remaining period of six days resumed only on June
1, 2002,94 rendering the filing of the UP’s notice of appeal on June 3, 2002 timely and well
within the remaining days of the UP’s period to appeal.
Verily, the service of the denial of the motion for reconsideration could only be validly made
upon the OLS in Diliman, and no other. The fact that Atty. Nolasco was in the employ of the
UP at the UPLB Legal Office did not render the service upon him effective. It is settled that
where a party has appeared by counsel, service must be made upon such counsel. 95 Service on
the party or the party’s employee is not effective because such notice is not notice in
law.96 This is clear enough from Section 2, second paragraph, of Rule 13, Rules of Court,
which explicitly states that: "If any party has appeared by counsel, service upon him shall be
made upon his counsel or one of them, unless service upon the party himself is ordered by the
court. Where one counsel appears for several parties, he shall only be entitled to one copy of
any paper served upon him by the opposite side." As such, the period to appeal resumed only
on June 1, 2002, the date following the service on May 31, 2002 upon the OLS in Diliman of
the copy of the decision of the RTC, not from the date when the UP was notified.97
Accordingly, the declaration of finality of the judgment of the RTC, being devoid of factual
and legal bases, is set aside.
Secondly, even assuming that the service upon Atty. Nolasco was valid and effective, such
that the remaining period for the UP to take a timely appeal would end by May 23, 2002, it
would still not be correct to find that the judgment of the RTC became final and immutable
thereafter due to the notice of appeal being filed too late on June 3, 2002.
In so declaring the judgment of the RTC as final against the UP, the CA and the RTC applied
the rule contained in the second paragraph of Section 3, Rule 41 of the Rules of Court to the
effect that the filing of a motion for reconsideration interrupted the running of the period for
filing the appeal; and that the period resumed upon notice of the denial of the motion for
reconsideration. For that reason, the CA and the RTC might not be taken to task for strictly
adhering to the rule then prevailing.
However, equity calls for the retroactive application in the UP’s favor of the fresh-period rule
that the Court first announced in mid-September of 2005 through its ruling in Neypes v. Court
of Appeals,98 viz:
To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity
to appeal their cases, the Court deems it practical to allow a fresh period of 15 days within
which to file the notice of appeal in the Regional Trial Court, counted from receipt of the order
dismissing a motion for a new trial or motion for reconsideration.
The retroactive application of the fresh-period rule, a procedural law that aims "to regiment or
make the appeal period uniform, to be counted from receipt of the order denying the motion
for new trial, motion for reconsideration (whether full or partial) or any final order or
resolution,"99 is impervious to any serious challenge. This is because there are no vested rights
in rules of procedure.100 A law or regulation is procedural when it prescribes rules and forms of
procedure in order that courts may be able to administer justice.101 It does not come within the
legal conception of a retroactive law, or is not subject of the general rule prohibiting the
retroactive operation of statues, but is given retroactive effect in actions pending and
undetermined at the time of its passage without violating any right of a person who may feel
that he is adversely affected.
We have further said that a procedural rule that is amended for the benefit of litigants in
furtherance of the administration of justice shall be retroactively applied to likewise favor
actions then pending, as equity delights in equality.102 We may even relax stringent procedural
rules in order to serve substantial justice and in the exercise of this Court’s equity
jurisdiction.103 Equity jurisdiction aims to do complete justice in cases where a court of law is
unable to adapt its judgments to the special circumstances of a case because of the inflexibility
of its statutory or legal jurisdiction.104
It is cogent to add in this regard that to deny the benefit of the fresh-period rule to the UP
would amount to injustice and absurdity – injustice, because the judgment in question was
issued on November 28, 2001 as compared to the judgment in Neypes that was rendered in
1998; absurdity, because parties receiving notices of judgment and final orders issued in the
year 1998 would enjoy the benefit of the fresh-period rule but the later rulings of the lower
courts like that herein would not.105
Consequently, even if the reckoning started from May 17, 2002, when Atty. Nolasco received
the denial, the UP’s filing on June 3, 2002 of the notice of appeal was not tardy within the
context of the fresh-period rule. For the UP, the fresh period of 15-days counted from service
of the denial of the motion for reconsideration would end on June 1, 2002, which was a
Saturday. Hence, the UP had until the next working day, or June 3, 2002, a Monday, within
which to appeal, conformably with Section 1 of Rule 22, Rules of Court, which holds that: "If
the last day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday in
the place where the court sits, the time shall not run until the next working day."
IV
Awards of monetary damages,
being devoid of factual and legal bases,
did not attain finality and should be deleted
Section 14 of Article VIII of the Constitution prescribes that express findings of fact and of
law should be made in the decision rendered by any court, to wit:
Section 14. No decision shall be rendered by any court without expressing therein clearly and
distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision of the court shall be refused
due course or denied without stating the legal basis therefor.
Implementing the constitutional provision in civil actions is Section 1 of Rule 36, Rules of
Court, viz:
Section 1. Rendition of judgments and final orders. — A judgment or final order determining
the merits of the case shall be in writing personally and directly prepared by the judge, stating
clearly and distinctly the facts and the law on which it is based, signed by him, and filed with
the clerk of the court. (1a)
The Constitution and the Rules of Court apparently delineate two main essential parts of a
judgment, namely: the body and the decretal portion. Although the latter is the controlling
part,106 the importance of the former is not to be lightly regarded because it is there where the
court clearly and distinctly states its findings of fact and of law on which the decision is based.
To state it differently, one without the other is ineffectual and useless. The omission of either
inevitably results in a judgment that violates the letter and the spirit of the Constitution and the
Rules of Court.
The term findings of fact that must be found in the body of the decision refers to statements of
fact, not to conclusions of law. 107 Unlike in pleadings where ultimate facts alone need to be
stated, the Constitution and the Rules of Court require not only that a decision should state the
ultimate facts but also that it should specify the supporting evidentiary facts, for they are what
are called the findings of fact.
The importance of the findings of fact and of law cannot be overstated. The reason and
purpose of the Constitution and the Rules of Court in that regard are obviously to inform the
parties why they win or lose, and what their rights and obligations are. Only thereby is the
demand of due process met as to the parties. As Justice Isagani A. Cruz explained in Nicos
Industrial Corporation v. Court of Appeals:108
It is a requirement of due process that the parties to a litigation be informed of how it was
decided, with an explanation of the factual and legal reasons that led to the conclusions of the
court. The court cannot simply say that judgment is rendered in favor of X and against Y and
just leave it at that without any justification whatsoever for its action. The losing party is
entitled to know why he lost, so he may appeal to a higher court, if permitted, should he
believe that the decision should be reversed. A decision that does not clearly and distinctly
state the facts and the law on which it is based leaves the parties in the dark as to how it was
reached and is especially prejudicial to the losing party, who is unable to pinpoint the possible
errors of the court for review by a higher tribunal.
Here, the decision of the RTC justified the grant of actual and moral damages, and attorney’s
fees in the following terse manner, viz:
xxx The Court is not unmindful that due to defendants’ unjustified refusal to pay their
outstanding obligation to plaintiff, the same suffered losses and incurred expenses as he was
forced to re-mortgage his house and lot located in Quezon City to Metrobank (Exh. "CC") and
BPI Bank just to pay its monetary obligations in the form of interest and penalties incurred in
the course of the construction of the subject project.109
The statement that "due to defendants’ unjustified refusal to pay their outstanding obligation to
plaintiff, the same suffered losses and incurred expenses as he was forced to re-mortgage his
house and lot located in Quezon City to Metrobank (Exh. "CC") and BPI Bank just to pay its
monetary obligations in the form of interest and penalties incurred in the course of the
construction of the subject project" was only a conclusion of fact and law that did not comply
with the constitutional and statutory prescription. The statement specified no detailed expenses
or losses constituting the ₱ 5,716,729.00 actual damages sustained by Stern Builders in
relation to the construction project or to other pecuniary hardships. The omission of such
expenses or losses directly indicated that Stern Builders did not prove them at all, which then
contravened Article 2199, Civil Code, the statutory basis for the award of actual damages,
which entitled a person to an adequate compensation only for such pecuniary loss suffered by
him as he has duly proved. As such, the actual damages allowed by the RTC, being bereft of
factual support, were speculative and whimsical. Without the clear and distinct findings of fact
and law, the award amounted only to an ipse dixit on the part of the RTC, 110 and did not attain
finality.
There was also no clear and distinct statement of the factual and legal support for the award of
moral damages in the substantial amount of ₱ 10,000,000.00. The award was thus also
speculative and whimsical. Like the actual damages, the moral damages constituted another
judicial ipse dixit, the inevitable consequence of which was to render the award of moral
damages incapable of attaining finality. In addition, the grant of moral damages in that manner
contravened the law that permitted the recovery of moral damages as the means to assuage
"physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury."111 The contravention of the law
was manifest considering that Stern Builders, as an artificial person, was incapable of
experiencing pain and moral sufferings.112 Assuming that in granting the substantial amount of
₱ 10,000,000.00 as moral damages, the RTC might have had in mind that dela Cruz had
himself suffered mental anguish and anxiety. If that was the case, then the RTC obviously
disregarded his separate and distinct personality from that of Stern Builders. 113 Moreover, his
moral and emotional sufferings as the President of Stern Builders were not the sufferings of
Stern Builders. Lastly, the RTC violated the basic principle that moral damages were not
intended to enrich the plaintiff at the expense of the defendant, but to restore the plaintiff to his
status quo ante as much as possible. Taken together, therefore, all these considerations
exposed the substantial amount of ₱ 10,000,000.00 allowed as moral damages not only to be
factually baseless and legally indefensible, but also to be unconscionable, inequitable and
unreasonable.
Like the actual and moral damages, the ₱ 150,000.00, plus ₱ 1,500.00 per appearance, granted
as attorney’s fees were factually unwarranted and devoid of legal basis. The general rule is that
a successful litigant cannot recover attorney’s fees as part of the damages to be assessed
against the losing party because of the policy that no premium should be placed on the right to
litigate.114 Prior to the effectivity of the present Civil Code, indeed, such fees could be
recovered only when there was a stipulation to that effect. It was only under the present Civil
Code that the right to collect attorney’s fees in the cases mentioned in Article 2208 115 of the
Civil Code came to be recognized.116 Nonetheless, with attorney’s fees being allowed in the
concept of actual damages,117 their amounts must be factually and legally justified in the body
of the decision and not stated for the first time in the decretal portion. 118 Stating the amounts
only in the dispositive portion of the judgment is not enough;119 a rendition of the factual and
legal justifications for them must also be laid out in the body of the decision.120
That the attorney’s fees granted to the private respondents did not satisfy the foregoing
requirement suffices for the Court to undo them.121 The grant was ineffectual for being
contrary to law and public policy, it being clear that the express findings of fact and law were
intended to bring the case within the exception and thereby justify the award of the attorney’s
fees. Devoid of such express findings, the award was a conclusion without a premise, its basis
being improperly left to speculation and conjecture.122
Nonetheless, the absence of findings of fact and of any statement of the law and jurisprudence
on which the awards of actual and moral damages, as well as of attorney’s fees, were based
was a fatal flaw that invalidated the decision of the RTC only as to such awards. As the Court
declared in Velarde v. Social Justice Society, 123 the failure to comply with the constitutional
requirement for a clear and distinct statement of the supporting facts and law "is a grave abuse
of discretion amounting to lack or excess of jurisdiction" and that "(d)ecisions or orders issued
in careless disregard of the constitutional mandate are a patent nullity and must be struck down
as void."124 The other item granted by the RTC (i.e., ₱ 503,462.74) shall stand, subject to the
action of the COA as stated herein.
WHEREFORE, the Court GRANTS the petition for review on
certiorari; REVERSES and SETS ASIDE the decision of the Court of Appeals under
review; ANNULS the orders for the garnishment of the funds of the University of the
Philippines and for the release of the garnished amount to Stern Builders Corporation and
Servillano dela Cruz; and DELETES from the decision of the Regional Trial Court dated
November 28, 2001 for being void only the awards of actual damages of ₱ 5,716,729.00,
moral damages of ₱ 10,000,000.00, and attorney's fees of ₱ 150,000.00, plus ₱ 1,500.00 per
appearance, in favor of Stern Builders Corporation and Servillano dela Cruz.
The Court ORDERS Stem Builders Corporation and Servillano dela Cruz to redeposit the
amount of ₱ 16,370,191.74 within 10 days from receipt of this decision.
Costs of suit to be paid by the private respondents.
SO ORDERED.
[G.R. No. 124893. April 18, 1997]
LYNETTE G. GARVIDA, petitioner, vs. FLORENCIO G. SALES, JR., THE
HONORABLE COMMISSION ON ELECTIONS, ELECTION OFFICER
DIONISIO F. RIOS and PROVINCIAL SUPERVISOR NOLI
PIPO, respondents.
DECISION
PUNO, J.:
Petitioner Lynette G. Garvida seeks to annul and set aside the order dated May 2, 1996
of respondent Commission on Elections (COMELEC) en banc suspending her proclamation as
the duly elected Chairman of the Sangguniang Kabataan of Barangay San Lorenzo,
Municipality of Bangui, Ilocos Norte.
The facts are undisputed. The Sangguniang Kabataan (SK) elections nationwide was
scheduled to be held on May 6, 1996. On March 16, 1996, petitioner applied for registration as
member and voter of the Katipunan ng Kabataan of Barangay San Lorenzo, Bangui, Ilocos
Norte. The Board of Election Tellers, however, denied her application on the ground that
petitioner, who was then twenty-one years and ten (10) months old, exceeded the age limit for
membership in the Katipunan ng Kabataan as laid down in Section 3 [b] of COMELEC
Resolution No. 2824.
On April 2, 1996, petitioner filed a "Petition for Inclusion as Registered Kabataang
Member and Voter" with the Municipal Circuit Trial Court, Bangui-Pagudpud-Adams-
Damalneg, Ilocos Norte. In a decision dated April 18, 1996, the said court found petitioner
qualified and ordered her registration as member and voter in the Katipunan ng Kabataan.
[1]
 The Board of Election Tellers appealed to the Regional Trial Court, Bangui, Ilocos Norte.
[2]
 The presiding judge of the Regional Trial Court, however, inhibited himself from acting on
the appeal due to his close association with petitioner.[3]
On April 23, 1996, petitioner filed her certificate of candidacy for the position of
Chairman, Sangguniang Kabataan, Barangay San Lorenzo, Municipality of Bangui, Province
of Ilocos Norte. In a letter dated April 23, 1996, respondent Election Officer Dionisio F. Rios,
per advice of Provincial Election Supervisor Noli Pipo,[4] disapproved petitioner's certificate of
candidacy again due to her age.[5]Petitioner, however, appealed to COMELEC Regional
Director Filemon A. Asperin who set aside the order of respondents and allowed petitioner to
run.[6]
On May 2, 1996, respondent Rios issued a memorandum to petitioner informing her of
her ineligibility and giving her 24 hours to explain why her certificate of candidacy should not
be disapproved.[7]Earlier and without the knowledge of the COMELEC officials, private
respondent Florencio G. Sales, Jr., a rival candidate for Chairman of the Sangguniang
Kabataan, filed with the COMELEC en banc a "Petition of Denial and/or Cancellation of
Certificate of Candidacy" against petitioner Garvida for falsely representing her age
qualification in her certificate of candidacy. The petition was sent by facsimile[8]and registered
mail on April 29, 1996 to the Commission on Elections National Office, Manila.
On May 2, 1996, the same day respondent Rios issued the memorandum to petitioner,
the COMELEC en banc issued an order directing the Board of Election Tellers and Board of
Canvassers of Barangay San Lorenzo to suspend the proclamation of petitioner in the event
she won in the election. The order reads as follows:
"Acting on the Fax "Petition for Denial And/Or Cancellation of Certificate of
Candidacy" by petitioner Florencio G. Sales, Jr. against Lynette G. Garvida,
received on April 29, 1996, the pertinent allegations of which reads:
xxx
5. That the said respondent is disqualified to become a voter and a candidate for the SK for the
reason that she will be more than twenty-one (21) years of age on May 6, 1996; that she was
born on June 11, 1974 as can be gleaned from her birth certificate, a copy of which is hereto
attached and marked as Annex "A";
6. That in filing her certificate of candidacy as candidate for SK of Bgy. San Lorenzo, Bangui,
Ilocos Norte, she made material representation which is false and as such, she is disqualified;
that her certificate of candidacy should not be given due course and that said candidacy must
be cancelled;
x x x."
the Commission, it appearing that the petition is meritorious, hereby DIRECTS the
Board of Election Tellers/Board of Canvassers of Barangay San Lorenzo, Bangui,
Ilocos Norte, to suspend the proclamation of Lynette G. Garvida in the event she
garners the highest number of votes for the position of Sangguniang Kabataan
[sic].
Meantime, petitioner is hereby required to submit immediately ten (10) copies of
his petition and to pay the filing and legal research fees in the amount of P510.00.
SO ORDERED."[9]
On May 6, 1996, election day, petitioner garnered 78 votes as against private
respondent's votes of 76.[10] In accordance with the May 2, 1996 order of the COMELEC en
banc, the Board of Election Tellers did not proclaim petitioner as the winner. Hence, the
instant petition for certiorari was filed on May 27, 1996.
On June 2, 1996, however, the Board of Election Tellers proclaimed petitioner the
winner for the position of SK chairman, Barangay San Lorenzo, Bangui, Ilocos Norte. [11] The
proclamation was "without prejudice to any further action by the Commission on Elections or
any other interested party."[12] On July 5, 1996, petitioner ran in the Pambayang Pederasyon ng
mga Sangguniang Kabataan for the municipality of Bangui, Ilocos Norte. She won as Auditor
and was proclaimed one of the elected officials of the Pederasyon.[13]
Petitioner raises two (2) significant issues: the first concerns the jurisdiction of the
COMELEC en banc to act on the petition to deny or cancel her certificate of candidacy; the
second, the cancellation of her certificate of candidacy on the ground that she has exceeded the
age requirement to run as an elective official of the SK.
I In the instant case, the subject petition was not in proper form. Only two (2) copies of
Section 532 (a) of the Local Government Code of 1991 provides that the conduct of the
SK elections is under the supervision of the COMELEC and shall be governed by the
Omnibus Election Code.[14] The Omnibus Election Code, in Section 78, Article IX, governs the
procedure to deny due course to or cancel a certificate of candidacy, viz:
"Sec. 78.  Petition to deny due course to or cancel a certificate of candidacy . -- A
verified petition seeking to deny due course or to cancel a certificate of candidacy
may be filed by any person exclusively on the ground that any material
representation contained therein as required under Section 74 hereof is false. The
petition may be filed at any time not later than twenty-five days from the time of
filing of the certificate of candidacy and shall be decided, after due notice and
hearing, not later than fifteen days before election."
In relation thereto, Rule 23 of the COMELEC Rules of Procedure provides that a petition to
deny due course to or cancel a certificate of candidacy for an elective office may be filed with
the Law Department of the COMELEC on the ground that the candidate has made a false
material representation in his certificate. The petition may be heard and evidence received by
any official designated by the COMELEC after which the case shall be decided by the
COMELEC itself.[15]
Under the same Rules of Procedure, jurisdiction over a petition to cancel a certificate of
candidacy lies with the COMELEC sitting in Division, not en banc. Cases before a Division
may only be entertained by the COMELEC en banc when the required number of votes to
reach a decision, resolution, order or ruling is not obtained in the Division. Moreover, only
motions to reconsider decisions, resolutions, orders or rulings of the COMELEC in Division
are resolved by the COMELEC en banc.[16] It is therefore the COMELEC sitting in Divisions
that can hear and decide election cases. This is clear from Section 3 of the said Rules thus:
"Sec. 3. The Commission Sitting in Divisions. -- The Commission shall sit in two
(2) Divisions to hear and decide protests or petitions in ordinary actions, special
actions, special cases, provisional remedies, contempt and special proceedings
except in accreditation of citizens' arms of the Commission."[17]
In the instant case, the COMELEC en banc did not refer the case to any of its Divisions
upon receipt of the petition. It therefore acted without jurisdiction or with grave abuse of
discretion when it entertained the petition and issued the order of May 2, 1996.[18]
II
The COMELEC en banc also erred when it failed to note that the petition itself did not
comply with the formal requirements of pleadings under the COMELEC Rules of
Procedure. These requirements are:
"Sec. 1. Filing of Pleadings. -- Every pleading, motion and other papers must be
filed in ten (10) legible copies. However, when there is more than one respondent
or protestee, the petitioner or protestant must file additional number of copies of
the petition or protest as there are additional respondents or protestees.
Sec. 2. How Filed. -- The documents referred to in the immediately preceding
section must be filed directly with the proper Clerk of Court of the Commission
personally, or, unless otherwise provided in these Rules, by registered mail. In the
latter case, the date of mailing is the date of filing and the requirement as to the
number of copies must be complied with.
Sec. 3. Form of Pleadings, etc. -- (a) All pleadings allowed by these Rules shall be
printed, mimeographed or typewritten on legal size bond paper and shall be in
English or Filipino.
x x x."
Every pleading before the COMELEC must be printed, mimeographed or typewritten in legal
size bond paper and filed in at least ten (10) legible copies. Pleadings must be filed directly
with the proper Clerk of Court of the COMELEC personally, or, by registered mail.
the petition were filed with the COMELEC.[19] Also, the COMELEC en banc issued its
Resolution on the basis of the petition transmitted by facsimile, not by registered mail.
A facsimile or fax transmission is a process involving the transmission and reproduction
of printed and graphic matter by scanning an original copy, one elemental area at a time, and
representing the shade or tone of each area by a specified amount of electric current. [20] The
current is transmitted as a signal over regular telephone lines or via microwave relay and is
used by the receiver to reproduce an image of the elemental area in the proper position and the
correct shade.[21] The receiver is equipped with a stylus or other device that produces a printed
record on paper referred to as a facsimile.[22]
Filing a pleading by facsimile transmission is not sanctioned by the COMELEC Rules of
Procedure, much less by the Rules of Court. A facsimile is not a genuine and authentic
pleading. It is, at best, an exact copy preserving all the marks of an original.[23]
Without the original, there is no way of determining on its face whether the facsimile
pleading is genuine and authentic and was originally signed by the party and his counsel. It
may, in fact, be a sham pleading. The uncertainty of the authenticity of a facsimile pleading
should have restrained the COMELEC en banc from acting on the petition and issuing the
questioned order. The COMELEC en bancshould have waited until it received the petition
filed by registered mail.
III
To write finis to the case at bar, we shall now resolve the issue of petitioner's age.
The Katipunan ng Kabataan was originally created by Presidential Decree No. 684 in
1975 as the Kabataang Barangay, a barangay youth organization composed of all residents of
the barangay who were at least 15 years but less than 18 years of age.[24]
 The Kabataang Barangay sought to provide its members a medium to express their
views and opinions and participate in issues of transcendental importance. [25] Its affairs were
administered by a barangay youth chairman together with six barangay youth leaders who
were actual residents of the barangay and were at least 15 years but less than 18 years of age.
[26]
 In 1983, Batas Pambansa Blg. 337, then the Local Government Code, raised the maximum
age of the Kabataang Barangay members from "less than 18 years of age" to "not more than 21
years of age."
The Local Government Code of 1991 changed the Kabataang Barangay into the
Katipunan ng Kabataan. It, however, retained the age limit of the members laid down in B.P.
337 at 15 but not more than 21 years old.[27] The affairs of the Katipunan ng Kabataan are
administered by the Sangguniang Kabataan (SK) composed of a chairman and seven (7)
members who are elected by the Katipunan ng Kabataan.[28]
The chairman automatically becomes ex-officio member of the Sangguniang Barangay.
[29]
 A member of the SK holds office for a term of three (3) years, unless sooner removed for
cause, or becomes permanently incapacitated, dies or resigns from office.[30]
Membership in the Katipunan ng Kabataan is subject to specific qualifications laid down
by the Local Government Code of 1991, viz:
"Sec. 424.  Katipunan ng Kabataan. -- The katipunan ng kabataan shall be
composed of all citizens of the Philippines actually residing in the barangay for at
least six (6) months, who are fifteen (15) but not more than twenty-one (21) years
of age, and who are duly registered in the list of the sangguniang kabataan or in
the official barangay list in the custody of the barangay secretary."
A member of the Katipunan ng Kabataan may become a candidate for the Sangguniang
Kabataan if he possesses the following qualifications:
"Sec. 428.  Qualifications. -- An elective official of the sangguniang kabataan must
be a citizen of the Philippines, a qualified voter of the katipunan ng kabataan, a
resident of the barangay for at least one (1) year immediately prior to election, at
least fifteen (15) years but not more than twenty-one (21) years of age on the day
of his election, able to read and write Filipino, English, or the local dialect, and
must not have been convicted of any crime involving moral turpitude."
Under Section 424 of the Local Government Code, a member of the Katipunan ng
Kabataan must be: (a) a Filipino citizen; (b) an actual resident of the barangay for at least six
months; (c) 15 but not more than 21 years of age; and (d) duly registered in the list of the
Sangguniang Kabataan or in the official barangay list. Section 428 of the Code requires that an
elective official of the Sangguniang Kabataan must be: (a) a Filipino citizen; (b) a
qualified voter in the Katipunan ng Kabataan; (c) a resident of the barangay at least one (1)
year immediately preceding the election; (d) at least 15 years but not more than 21 years of
age on the day of his election; (e) able to read and write; and (f) must not have been convicted
of any crime involving moral turpitude.
For the May 6, 1996 SK elections, the COMELEC interpreted Sections 424 and 428 of
the Local Government Code of 1991 in Resolution No. 2824 and defined how a member of the
Katipunan ng Kabataan becomes a qualified voter and an elective official. Thus:
"Sec. 3.  Qualifications of a voter. -- To be qualified to register as a voter in the SK
elections, a person must be:
a) a citizen of the Philippines;
b) fifteen (15) but not more than twenty-one (21) years of age on election day, that is, he must
have been born between May 6, 1975 and May 6, 1981, inclusive; and
c) a resident of the Philippines for at least one (1) year and actually residing in the barangay
wherein he proposes to vote for at least six (6) months immediately preceding the elections."
xxx
"Sec. 6. Qualifications of elective members. -- An elective official of the SK must
be:
a) a qualified voter;
b) a resident in the barangay for at least one (1) year immediately prior to the elections; and
c) able to read and write Filipino or any Philippine language or dialect or English.
Cases involving the eligibility or qualification of candidates shall be decided by
the city/municipal Election Officer (EO) whose decision shall be final."
A member of the Katipunan ng Kabataan may be a qualified voter in the May 6, 1996 SK
elections if he is: (a) a Filipino citizen; (b) 15 but not more than 21 years of age on election
day, i.e., the voter must be born between May 6, 1975 and May 6, 1981, inclusive; and (c) a
resident of the Philippines for at least one (1) year and an actual resident of the barangay at
least six (6) months immediately preceding the elections. A candidate for the SK
must: (a) possess the foregoing qualifications of a voter; (b) be a resident in the barangay at
least one (1) year immediately preceding the elections; and (c) able to read and write.
Except for the question of age, petitioner has all the qualifications of a member and
voter in the Katipunan ng Kabataan and a candidate for the Sangguniang
Kabataan. Petitioner's age is admittedly beyond the limit set in Section 3 [b] of COMELEC
Resolution No. 2824. Petitioner, however, argues that Section 3 [b] of Resolution No. 2824 is
unlawful, ultra vires and beyond the scope of Sections 424 and 428 of the Local Government
Code of 1991. She contends that the Code itself does not provide that the voter must
be exactly 21 years of age on election day. She urges that so long as she did not turn twenty-
two (22) years old, she was still twenty-one years of age on election day and therefore
qualified as a member and voter in the Katipunan ng Kabataan and as candidate for the SK
elections.
A closer look at the Local Government Code will reveal a distinction between the
maximum age of a member in the Katipunan ng Kabataan and the maximum age of an elective
SK official. Section 424 of the Code sets a member's maximum age at 21 years only. There is
no further provision as to when the member shall have turned 21 years of age. On the other
hand, Section 428 provides that the maximum age of an elective SK official is 21 years old
"on the day of his election." The addition of the phrase "on the day of his election" is an
additional qualification. The member may be more than 21 years of age on election day or on
the day he registers as member of the Katipunan ng Kabataan. The elective official, however,
must not be more than 21 years old on the day of election. The distinction is understandable
considering that the Code itself provides more qualifications for an elective SK official than
for a member of the Katipunan ng Kabataan. Dissimilum dissimilis est ratio.[31] The courts may
distinguish when there are facts and circumstances showing that the legislature intended a
distinction or qualification.[32]
The qualification that a voter in the SK elections must not be more than 21 years of age
on the day of the election is not provided in Section 424 of the Local Government Code of
1991. In fact the term "qualified voter" appears only in COMELEC Resolution No. 2824.
[33]
 Since a "qualified voter" is not necessarily an elective official, then it may be assumed that
a "qualified voter" is a "member of the Katipunan ng Kabataan." Section 424 of the Code does
not provide that the maximum age of a member of the Katipunan ng Kabataan is determined
on the day of the election. Section 3 [b] of COMELEC Resolution No. 2824 is therefore ultra
vires insofar as it sets the age limit of a voter for the SK elections at exactly 21 years on the
day of the election.
The provision that an elective official of the SK should not be more than 21 years of age
on the day of his election is very clear. The Local Government Code speaks of years, not
months nor days.When the law speaks of years, it is understood that years are of 365 days
each.[34] One born on the first day of the year is consequently deemed to be one year old on the
365th day after his birth -- the last day of the year. [35] In computing years, the first year is
reached after completing the first 365 days. After the first 365th day, the first day of the
second 365-day cycle begins. On the 365th day of the second cycle, the person turns two years
old. This cycle goes on and on in a lifetime. A person turns 21 years old on the 365th day of
his 21st 365-day cycle. This means on his 21st birthday, he has completed the entire span of
21 365-day cycles. After this birthday, the 365-day cycle for his 22nd year begins. The day
after the 365th day is the first day of the next 365-day cycle and he turns 22 years old on the
365th day.
The phrase "not more than 21 years of age" means not over 21 years, not beyond 21
years. It means 21 365-day cycles. It does not mean 21 years and one or some days or a
fraction of a year because that would be more than 21 365-day cycles. "Not more than 21
years old" is not equivalent to "less than 22 years old," contrary to petitioner's claims. The law
does not state that the candidate be less than 22 years on election day.
In P.D. 684, the law that created the Kabataang Barangay, the age qualification of a
barangay youth official was expressly stated as "x x x at least fifteen years of age or over but
less than eighteen x x x."[36] This provision clearly states that the youth official must be at least
15 years old and may be 17 years and a fraction of a year but should not reach the age of
eighteen years. When the Local Government Code increased the age limit of members of the
youth organization to 21 years, it did not reenact the provision in such a way as to make the
youth "at least 15 but less than 22 years old." If the intention of the Code's framers was to
include citizens less than 22 years old, they should have stated so expressly instead of leaving
the matter open to confusion and doubt.[37]
Former Senator Aquilino Q. Pimentel, the sponsor and principal author of the Local
Government Code of 1991 declared that one of the reasons why the Katipunan ng Kabataan
was created and the Kabataang Barangay discontinued was because most, if not all, Kabataang
Barangay leaders were already over 21 years of age by the time President Aquino assumed
power.[38] They were not the "youth" anymore. The Local Government Code of 1991 fixed the
maximum age limit at not more than 21 years[39] and the only exception is in the second
paragraph of Section 423 which reads:
"Sec. 423. Creation and Election. -- a) x x x;
b) A sangguniang kabataan official who, during his term of office, shall have
passed the age of twenty-one (21) years shall be allowed to serve the remaining
portion of the term for which he was elected."
The general rule is that an elective official of the Sangguniang Kabataan must
not be more than 21 years of age on the day of his election. The only exception is when the
official reaches the age of 21 years during his incumbency. Section 423 [b] of the Code allows
him to serve the remaining portion of the term for which he was elected. According to Senator
Pimentel, the youth leader must have "been elected prior to his 21st birthday." [40] Conversely,
the SK official must not have turned 21 years old before his election. Reading Section 423 [b]
together with Section 428 of the Code, the latest date at which an SK elective official turns 21
years old is on the day of his election. The maximum age of a youth official must therefore be
exactly 21 years on election day. Section 3 [b] in relation to Section 6 [a] of COMELEC
Resolution No. 2824 is not ultra vires insofar as it fixes the maximum age of an elective SK
official on the day of his election.
In the case at bar, petitioner was born on June 11, 1974. On March 16, 1996, the day she
registered as voter for the May 6, 1996 SK elections, petitioner was twenty-one (21) years and
nine (9) months old. On the day of the elections, she was 21 years, 11 months and 5 days
old. When she assumed office on June 1, 1996, she was 21 years, 11 months and 20 days old
and was merely ten (10) days away from turning 22 years old. Petitioner may have qualified as
a member of the Katipunan ng Kabataan but definitely, petitioner was over the age limit for
elective SK officials set by Section 428 of the Local Government Code and Sections 3 [b] and
6 of Comelec Resolution No. 2824. She was ineligible to run as candidate for the May 6, 1996
Sangguniang Kabataan elections.
The requirement that a candidate possess the age qualification is founded on public
policy and if he lacks the age on the day of the election, he can be declared ineligible.[41]
In the same vein, if the candidate is over the maximum age limit on the day of the
election, he is ineligible. The fact that the candidate was elected will not make the age
requirement directory, nor will it validate his election.[42] The will of the people as expressed
through the ballot cannot cure the vice of ineligibility.[43]
The ineligibility of petitioner does not entitle private respondent, the candidate who
obtained the highest number of votes in the May 6, 1996 elections, to be declared elected. [44] A
defeated candidate cannot be deemed elected to the office. [45] Moreover, despite his claims,
[46]
 private respondent has failed to prove that the electorate themselves actually knew of
petitioner's ineligibility and that they maliciously voted for her with the intention of
misapplying their franchises and throwing away their votes for the benefit of her rival
candidate.[47]
Neither can this Court order that pursuant to Section 435 of the Local Government Code
petitioner should be succeeded by the Sangguniang Kabataan member who obtained the next
highest number of votes in the May 6, 1996 elections. [48] Section 435 applies when a
Sangguniang Kabataan Chairman "refuses to assume office, fails to qualify,[49] is convicted of
a felony, voluntarily resigns, dies, is permanently incapacitated, is removed from office, or has
been absent without leave for more than three (3) consecutive months."
The question of the age qualification is a question of eligibility.[50]
Being "eligible" means being "legally qualified; capable of being legally chosen."[51]
Ineligibility, on the other hand, refers to the lack of the qualifications prescribed in
the Constitution or the statutes for holding public office.[52] Ineligibility is not one of the
grounds enumerated in Section 435 for succession of the SK Chairman.
To avoid a hiatus in the office of SK Chairman, the Court deems it necessary to order
that the vacancy be filled by the SK member chosen by the incumbent SK members
of Barangay San Lorenzo, Bangui, Ilocos Norte by simple majority from among
themselves. The member chosen shall assume the office of SK Chairman for the unexpired
portion of the term, and shall discharge the powers and duties, and enjoy the rights and
privileges appurtenant to said office.
IN VIEW WHEREOF, the petition is dismissed and petitioner Lynette G. Garvida is
declared ineligible for being over the age qualification for candidacy in the May 6, 1996
elections of the Sangguniang Kabataan, and is ordered to vacate her position as Chairman of
the Sangguniang Kabataan of Barangay San Lorenzo, Bangui, Ilocos Norte. The Sangguniang
Kabataan member voted by simple majority by and from among the incumbent Sangguniang
Kabataan members of Barangay San Lorenzo, Bangui, Ilocos Norte shall assume the office
of Sangguniang Kabataan Chairman of Barangay San Lorenzo, Bangui, Ilocos Norte for the
unexpired portion of the term.
SO ORDERED.
G.R. No. 219260, November 06, 2017
BERNICE JOAN TI, Petitioner, v. MANUEL S. DIÑO, Respondent.
DECISION
PERALTA, J.:
This is to resolve the Petition for Review on Certiorari under Rule 45 of the Rules of Court
dated July 31, 2015 of petitioner Bernice Joan Ti that seeks to reverse and set aside the
Decision1 dated January 10, 2014 and Resolution2 dated June 30, 2015 of the Court of Appeals
(CA) reversing the Order3 dated May 20, 2011 of the Regional Trial Court (RTC), Branch 77,
Quezon City in SP. Civil Action No. Q-09-65933, disapproving respondent's Notice of Appeal
for being filed out of time.
The facts follow.
The Office of the City Prosecutor (City Prosecutor), on February 19, 2008, issued a
Resolution recommending the filing of an Information against petitioner and a certain Julieta
Fernandez (Fernandez) for falsification of public documents, to which the petitioner and
Fernandez filed a Motion for Reconsideration of said resolution. The Metropolitan Trial Court
(MeTC) allowed the reinvestigation of the case and, thereafter, the first ruling of the City
Prosecutor was reversed and set aside. Thus, a Motion to Withdraw Information was filed
before the MeTC which was granted by the latter in an Order dated June 24, 2008.
Subsequently, respondent, through a private prosecutor, filed a Motion for Reconsideration of
the MeTC's Order dated June 24, 2008 and, on November 14, 2008, the MeTC issued an Order
granting the same motion for reconsideration and, thus, finding probable cause to indict
petitioner and Fernandez for the crime charged.
As such, petitioner and Fernandez filed a petition for certiorari and prohibition with prayer for
temporary restraining order/preliminary injunction with the RTC, Branch 77, Quezon City and
the case was docketed as SP. Civil Action No. Q-09-65933 seeking to enjoin the MeTC from
proceeding with the case claiming that the MeTC committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it granted respondent's motion for
reconsideration.
On March 8, 2010, the RTC rendered a decision and ruled that the MeTC committed grave
abuse of discretion amounting to lack or excess of jurisdiction in reviving and reinstating the
criminal case against petitioner and Fernandez on the basis of respondent's motion for
reconsideration filed by the private prosecutor without the concurrence or conformity of the
public prosecutor. Respondent, thereafter, filed a Motion for Reconsideration dated April 5,
2010, with the contention that the RTC erred in its resolution because the private prosecutor
had the right to file a motion for reconsideration even without the conformity or concurrence
of the public prosecutor.
Thereafter, petitioner and Fernandez filed a Motion to Expunge the Motion for
Reconsideration dated April 5, 2010 of the respondent on the ground that there was a violation
of the 3-day notice rule for motions and the lack of MCLE Compliance of the respondent's
counsel. Respondent also filed an Opposition to the motion to expunge the motion for
reconsideration.
The RTC, on December 28, 2010, denied respondent's Motion for Reconsideration dated April
5, 2010. It was ruled that the failure of the respondent movant to comply with the 3-day notice
rule on motions rendered the said motion for reconsideration defective. It was found by the
RTC that respondent's motion for reconsideration was set for hearing on April 16, 2010, and
that a copy thereof was received by the petitioner's counsel only on April 19, 2010 or three (3)
days after the hearing. Respondent received a copy of the said RTC Resolution on February
11, 2011. Thereafter, respondent filed a Notice of Appeal on February 24, 2011 which
petitioner opposed. Respondent also filed a Motion for the Transmittal of the Records of the
Case to the Court of Appeals.
On May 20, 2011, the RTC disapproved respondent's Notice of Appeal for not having been
perfected within the fifteen-day reglementary period, and thus, no order was made to transfer
the records of the case to the CA.
Respondent, therefore, filed a petition for certiorari under Rule 65 with the CA assailing the
Order of the RTC. Respondent contended that the RTC committed grave abuse of discretion
amounting to lack or excess of jurisdiction in denying respondent's motion to transmit the
records of the case to the CA despite the filing of the notice of appeal on time.
On January 10, 2014, the CA granted respondent's petition and reversed and set aside the
RTC's Order dated May 20, 2011 and, thus, the notice of appeal of respondent was given due
course. The CA further directed the RTC to transmit the entire records of the case to the
former. The dispositive portion of the CA's decision reads as follows:
WHEREFORE, on all the foregoing, the instant petition for certiorari is GRANTED. The
assailed Resolution dated May 20, 2011 is hereby REVERSED and SET ASIDE and
petitioner's Notice of Appeal in SP Civil Action No. Q-09-65933 is GIVEN DUE COURSE.
Accordingly, the court a quo is hereby DIRECTED to transmit the entire records of the said
case to this Court.
SO ORDERED.4
According to the CA, the respondent was able to file the notice of appeal within the fifteen-
day reglementary period, thus, the RTC should have ordered the transfer of the records of the
case with the CA. Aggrieved, petitioner filed a motion for reconsideration, which the CA
denied in its Resolution dated June 30, 2015.
Hence, the present petition.
Petitioner contends that respondent's filing of a petition for certiorari under Rule 65 with the
CA was premature. According to petitioner, the respondent should have first filed a motion for
reconsideration of the RTC's denial of respondent's notice of appeal and motion for the
transmittal of records to the CA before he filed the petition for certiorari before the CA.
Petitioner further insists that respondent violated the three-day notice rule requiring every
movant of a motion required to be heard to ensure the receipt of the said motion with notice of
hearing to the other party at least three (3) days before the date of the hearing. Petitioner
argues that respondent should have resorted to personal service of the motion because such is
not impossible considering that the counsel of petitioner's office is located in Ortigas Center,
Pasig City, while that of the respondent's counsel is located in Malate, Manila.
In his Comment5 dated October 13, 2015, respondent reiterates the CA's decision and claims
that the CA did not commit any error. In her Reply 6 dated December 18, 2015, petitioner
rehashes the arguments she stated in her petition.
The petition is meritorious.
The basic issue presented before this Court is whether or not, under the circumstances of this
case, the provisions of the Rules of Court be interpreted liberally.
Sections 4 and 5, Rule 15 of the Rules of Court read as follows:
Section 4. Hearing of motion. - Except for motions which the court may act upon without
prejudicing the rights of the adverse party, every written motion shall be set for hearing by the
applicant.
Every written motion required to be heard and the notice of the hearing thereof shall be served
in such a manner as to ensure its receipt by the other party at least three (3) days before the
date of hearing, unless the court for good cause sets the hearing on shorter notice.
Section 5. Notice of hearing. - The notice of hearing shall be addressed to all parties
concerned, and shall specify the time and date of the hearing which must not be later than ten
(10) days after the filing of the motion.
These requirements are mandatory.7 Except for motions which the court may act on without
prejudice to the adverse party, all motions must set a hearing. 8 This includes motions for
reconsideration.
The notice of hearing on the motion must be directed to the adverse party and must inform him
or her of the time and date of the hearing. 9 Failure to comply with these mandates renders the
motion fatally defective, equivalent to a useless scrap of paper. 10
The RTC, in its Order11 dated December 28, 2010, ruled that respondent failed to comply with
the 3-day notice rule in filing his motion for reconsideration, hence, the court treated the
motion as mere scrap of paper and as such, the court granted petitioner's motion to expunge
respondent's motion for reconsideration. The said Order reads as follows:
x x x x
The records show that the private respondent's motion for reconsideration was set for hearing
on April 16, 2010, and that a copy thereof was received by the petitioner's counsel only on
April 19, 2010 or three (3) days after the hearing; and that there was no appearance on the part
of the petitioners and their counsel at the hearing on the said motion for reconsideration.
The failure of the private respondent movant to comply with the 3-day notice rule on motions
rendered the motion for reconsideration fatally defective. It is pro forma, a mere scrap or
worthless piece of paper which is not entitled to judicial cognizance.
x x x x
Thus, the petitioner's "Motion to Expunge" from the record the private respondent's motion for
reconsideration and to declare as final the Decision rendered in this case is meritorious.
Consequently, the Decision rendered in this case has become final after the lapse of fifteen
(15) days or on May 5, 2010, pursuant to the ruling that a defective motion does not toll the
running of the period to appeal from the judgment or final order.12
It is indisputable that petitioner was not able to receive respondent's notice of hearing on time.
According to respondent, a notice of hearing was sent to petitioner through registered mail.
However, petitioner was only able to receive the said notice three days after the scheduled
hearing. The Rules of Court mandates that every written motion required to be heard and the
notice of the hearing thereof shall be served in such a manner as to ensure its receipt by the
other party at least three (3) days before the date of hearing. In this case, respondent failed to
ensure the receipt by the petitioner of the notice of hearing at least three days before the date
of such hearing. The sending of a registered mail can hardly be an assurance that such notice
will fall under the hands of the other party on time. Under the circumstances of the case,
respondent should have personally served the notice of hearing since the offices of the
respondent and petitioner's counsels are both located in the National Capital Region. The CA,
however, did not find fault on the respondent, but ruled that the RTC should have exerted an
effort to determine whether or not petitioner received the said notice of hearing, thus:
From the foregoing, it could be gleaned that public respondent court merely delved into
technicalities instead of on the merits of the issues raised in petitioner's Motion for
Reconsideration. In so ruling, it did not take into account the fact that, indeed, as alleged by
herein petitioner, and, as proven by the certification issued by the Postmaster of the Pasig
Central Post Office, the subject motion was served by registered mail to private respondent a
considerable number of days before the scheduled hearing. Public respondent should not have
faulted petitioner for private respondent's receipt of the said motion after the date set for
hearing. It would have been more prudent for the court to schedule a resetting of the hearing
on the motion rather than to outrightly deny the same on the basis of a technicality. The
absence of private respondent on the day of the scheduled hearing should have prompted the
court first to determine whether a copy of the motion had, indeed, been served on the opposing
party and then to consider whether, under normal circumstances, the same should have been
received by the addressee at least three days before the scheduled hearing stated therein.
Considering that such fact cannot be established on the very day of the hearing, as the registry
return card had not yet been returned to the sender, petitioner herein, the court should have
made a resetting of the case so as not to prejudice the rights of the litigants to be heard. Courts
should consider public policy and necessity of putting an end to litigation speedily and yet
harmonizing such necessity with the right of litigants to an opportunity to be heard. The rules
of fair play would have been adequately met had the trial court heard the arguments or
objections to petitioner's motion and, as regards the latter, to hear the reasons thereof.
Be that as it may, it has been categorically ruled by the Supreme Court that it is the motion
that does not contain a notice of hearing that is deemed mere scrap of paper. As such, it
presents no question which merits the attention of the court. Being a mere scrap of paper, the
trial court had no alternative but to disregard it. In this case, the motion for reconsideration
contains a notice of hearing and in fact was set for hearing on April 16, 2010. Private
respondents were furnished with a copy thereof by registered mail on April 5, 2010, same day
that it was filed in court. We take note of the fact that the addressee's office is located in
Ortigas Center, Pasig City while that of petitioner's counsel was in Malate, Manila. Service on
the addressee would normally take only a week since both offices are located in the National
Capital Region (NCR). But, for one reason or another unknown to petitioner, private
respondents received a copy of said motion two weeks after the date the same was mailed.
Such fact cannot be reflective of petitioner's supposed "failure" or "neglect" to furnish his
opponents with a copy of the motion. Petitioner surely would not have intentionally prevented
the speedy resolution of his case by foregoing a procedural requirement such as that attributed
to him.
Again, it would have been more prudent for the court a quo to simply order a resetting of the
hearing on the subject motion, pending the determination thereof if, indeed, a copy of the
motion had been served on private respondents. Technicality should not be allowed to stand in
the way of equitably and completely resolving the rights and obligations of the parties. After
all, no party can ever claim a vested right in technicalities. Litigations should, as much as
possible, be decided on the merits and not on technicalities.
x x x.13
A close reading of the provisions of Section 4, Rule 15 of the Rules of Court clearly shows
that the directive to ensure that the receipt by the other party .of the notice of hearing at least
three (3) days before the date of the said hearing is for the party who filed the motion.
Nowhere in the said rule does it state that the court is obligated to determine whether a copy of
the motion had, indeed, been served on the opposing party. The court is not required by the
rules to reset the hearing in case the other party fails to attend the hearing on the motion. In
fact, what the rules allow is for the court to set the hearing on shorter notice for good cause
and not to delay or reset the hearing. The fault, therefore, is with the respondent and not with
the RTC. It was the respondent who resorted to a mode of service other than personal service
and, thus, he should have been the one who ensured that such notice was received by the
petitioner. Under the Rules, whenever practicable, the service and filing of pleadings and other
papers shall be done personally. Section 11, Rule 13 of the Rules of Court provides:
Section 11. Priorities in modes of service and filing. - Whenever practicable, the service and
filing of pleadings and other papers shall be done personally. Except with respect to papers
emanating from the court, a resort to other modes must be accompanied by a written
explanation why the service or filing was not done personally. A violation of this Rule may be
the case to consider the paper as not filed.
In Solar Team Entertainment, Inc. v. Judge Ricafort,14 this Court emphasized the importance
of resorting to personal service first before any other mode of service, thus:
Personal service and filing are preferred for obvious reasons. Plainly, such should expedite
action or resolution on a pleading, motion or other paper; and conversely, minimize, if not
eliminate, delays likely to be incurred if service or filing is done by mail, considering the
inefficiency of the postal service. Likewise, personal service will do away with the practice of
some lawyers who, wanting to appear clever, resort to the following less than ethical practices:
(1) serving or filing pleadings by mail to catch opposing counsel off-guard, thus leaving the
latter with little or no time to prepare, for instance, responsive pleadings or an opposition; or
(2) upon receiving notice from the post office that the registered parcel containing the pleading
of or other paper from the adverse party may be claimed, unduly procrastinating before
claiming the parcel, or, worse, not claiming it at all, thereby causing undue delay in the
disposition of such pleading or other papers.
If only to underscore the mandatory nature of this innovation to our set of adjective rules
requiring personal service whenever practicable, Section 11 of Rule 13 then gives the court the
discretion to consider a pleading or paper as not filed if the other modes of service or filing
were resorted to and no written explanation was made as to why personal service was not done
in the first place. The exercise of discretion must, necessarily, consider the practicability of
personal service, for Section 11 itself begins with the clause whenever practicable.
We thus take this opportunity to clarify that under Section 11, Rule 13 of the 1997 Rules of
Civil Procedure, personal service and filing is the general rule, and resort to other modes of
service and filing, the exception. Henceforth, whenever personal service or filing is
practicable, in light of the circumstances of time, place and person, personal service or filing is
mandatory. Only when personal service or filing is not practicable may resort to other modes
be had, which must then be accompanied by a written explanation as to why personal service
or filing was not practicable to begin with. In adjudging the plausibility of an explanation, a
court shall likewise consider the importance of the subject matter of the case or the issues
involved therein, and the prima facie merit of the pleading sought to be expunged for violation
of Section 11. This Court cannot rule otherwise, lest we allow circumvention of the innovation
introduced by the 1997 Rules in order to obviate delay in the administration of justice.
In this case, the office of petitioner's counsel is located in Ortigas Center, Pasig City, while
that of the respondent's counsel is at Malate, Manila. Personal service, therefore, is the most
practicable considering the close proximity of the places. Nevertheless, respondent was not
able to satisfactorily explain why he made use of registered mail instead of personally serving
the notice of hearing. It must be remembered that "only when personal service or filing is not
practicable may the resort to other modes be had, which must then be accompanied by a
written explanation as to why personal service or filing was not practicable to begin
with."15 Concomitant to a liberal application of the rules of procedure should be an effort on
the part of the party invoking liberality to explain his failure to abide by the rules. 16
It must be emphasized that procedural rules are designed to facilitate the adjudication of cases.
Courts and litigants alike are enjoined to abide strictly by the rules. 17 While in certain
instances, the Court allows a relaxation in the application of the rules, it never intends to forge
a weapon for erring litigants to violate the rules with impunity. 18 The liberal interpretation and
application of rules apply only in proper cases of demonstrable merit and under justifiable
causes and circumstances.19 While it is true that litigation is not a game of technicalities, it is
equally true that every case must be prosecuted in accordance with the prescribed procedure to
ensure an orderly and speedy administration of justice.20Party-litigants and their counsel are
well advised to abide by, rather than flaunt, procedural rules, for these rules illumine the path
of the law and rationalize the pursuit of justice.21 It is this symbiosis between form and
substance that guarantees that discernible result.22
The use of the words "substantial justice" is not a magic wand that will automatically compel
this Court to suspend procedural rules.23 Procedural rules are not to be belittled or dismissed,
simply because their non-observance may have resulted in prejudice to a party's substantive
rights.24 Like all rules, they are required to be followed except only for the most persuasive of
reasons, when they may be relaxed to relieve a litigant of an injustice not commensurate with
the degree of his thoughtlessness in not complying with the procedure prescribed. 25 Thus, as
called upon by the respondents, the Court yields to the time-honored principle "Justice is for
all." Litigants must have equal footing in a court of law; the rules are laid down for the benefit
of all and should not be made dependent upon a suitor's sweet time and own bidding. 26
Hence, the RTC did not commit any grave abuse of discretion when it ruled that respondent
violated the three-day rule as provided in Section 4, Rule 15 of the Rules of Court. The RTC,
therefore, was correct in ruling that the Decision rendered in this case has become final after
the lapse of fifteen (15) days or on May 5, 2010, pursuant to the ruling that a defective motion
does not toll the running period to appeal from the judgment or final order.
WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court
dated July 31, 2015 of petitioner Bernice Joan Ti is GRANTED. Consequently, the Decision
dated January 10, 2014 and Resolution dated June 30, 2015 of the Court of Appeals
are REVERSED and SET ASIDE and the Order dated May 20, 2011 of the R IRST
DIVISION
[G.R. No. 104769. March 3, 2000]
AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs. COURT OF APPEALS,
SOLID HOMES, INC., INVESTCO, INC., and REGISTER OF DEEDS OF
MARIKINA, respondents.
[G.R. No. 135016. March 3, 2000]
SOLID HOMES, INC., petitioner, vs. INVESTCO, INC. substituted by AFP MUTUAL
BENEFIT ASSOCIATION, INC., respondent.
DECISION
PARDO, J.:
The above cases were consolidated[1] and are thus jointly decided. The first case (G. R. No.
104769) is an appeal via certiorari taken by AFP Mutual Benefit Association, Inc. (AFP
MBAI for short) from the decision of the Court of Appeals the dispositive portion of which
reads as follows:
"WHEREFORE, the Decision appealed from is hereby REVERSED and
SET ASIDE insofar as it orders appellant AFP Mutual Benefit
Association, Inc. to pay plaintiff appellee exemplary damages; and
AMENDED by reducing the nominal damages to P10,000.00, and
ordering the private defendants to pay the costs instead of treble costs.
Furthermore, the Clerk of the Court a quo is hereby instructed to reassess
and determine the additional filing fee that should be paid by plaintiff
considering the total amount awarded and to require plaintiff-appellee to
pay the deficiency, if any.
"In all other respect, the decision is hereby AFFIRMED.
"SO ORDERED."[2]
The second case (G. R. No. 135016), is an appeal via certiorari interposed by Solid Homes,
Inc. (hereafter Solid Homes) from the decision of the Court of Appeals, the dispositive portion
of which reads as follows:
 "WHEREFORE, premises considered, the petition for review is hereby
DISMISSED. The appealed order of the Regional Trial Court of Pasig
City is hereby AFFIRMED in toto."
"SO ORDERED."[3]
The facts are as follows:
Prior to September 7, 1976, Investco, Inc. was the owner of six (6) parcels of raw land, located
in Quezon City and Marikina (Metro Manila, now a City), registered under titles in the names
of its predecessors-in-interests, Angela Perez-Staley and Antonio Perez, Jr.
On September 7, 1976, Investco, Inc. agreed to sell the six (6) parcels of land to Solid Homes
for P10,211,075.00, payable in installments from July 22, 1977 to January 22, 1983. Among
other terms, the parties agreed that Solid Homes would pay the amount of P100,000.00 as
down payment upon execution of the contract; that Solid Homes would pay P1,942,215.00 as
additional down payment on July 22, 1977, October 22, 1977, and January 22, 1978; and that
Solid Homes would pay the balance of P8,188.860.00 in ten (10) semi-annual installments for
a period of five (5) years, with interest at twelve (12%) percent per annum. The first
installment was due on July 22, 1978. Paragraph 2 of the contract stipulates that:
"Should the (Vendee) fail to pay any of the installments on the due date
thereof, he shall pay interest on the installment due at the rate of 1% per
month for a total period of only two months or pro rata thereof, and should
the (Vendee) still fail to pay the installment due including interest after the
grace period of two months, the entire balance of the purchase price
agreed upon shall become immediately due and demandable, and the
(Vendee) shall pay the same within a period of thirty (30) days from the
expiration of the grace period, without the need for judicial action on the
part of the (Vendor)."
The parties further agreed that Solid Homes would evict the squatters in the property or obtain
a waiver from them, that it would cause the original titles to be cancelled and new ones issued
in the name of Investco, Inc. and that Investco, Inc. would contribute one-half of the expenses
in clearing the property of occupants, in an amount not exceeding P350,000.00. On or about
March 28, 1979, the Register of Deeds of Marikina issued in favor of Investco, Inc. Transfer
Certificate of Title Nos. 36518, 36680, 36681, 36682, 36683 and 36684 covering the Marikina
portion of the property. The contract of sale to Solid Homes was not registered with the
Registry of Deeds of Marikina nor annotated on the original titles issued in the name of
Investco, Inc.
However, after paying the amount of P2,042,215.00 corresponding to the downpayment, and
the amount of P4,084,430.00 representing the first four (4) semi-annual installments and a
portion of the fifth installment, Solid Homes made no further payment to Investco, Inc. after
February 19, 1981. The postdated checks issued by Solid homes to Investco, Inc. intended for
the remaining installments were dishonored, leaving a balance of P4,300,282.91 due under the
contract in Investco, Inc.s favor.
On March 13, 1981, Investco, Inc. and its predecessors-in-interests Angela Perez-Staley and
Antonio Perez, Jr. filed with the Court of First Instance of Rizal, Pasig, Branch 26 an action
for specific performance and damages against Solid Homes, Inc. [4] In the complaint, Investco,
Inc. and co-plaintiffs sought to collect from Solid Homes, Inc. the sum of P4,800,282.91
representing the balance on the purchase price due under the contract, reimbursement of
P350,000.00 representing Investco, Inc.s contribution to the expenses for eviction of squatters
and the further sum of P99,559.00 for science and transfer taxes, and actual and moral
damages, including attorneys fees.
On April 20, 1981, Solid Homes filed with the trial court an answer to Investco, Inc.s
complaint alleging that the purchase price under the contract was "not yet due" and that the
former, in fact, exceeded the installment payments due thereon. Solid Homes prayed for
dismissal of Investco, Inc.s complaint, and interposed a counterclaim for the refund of its
excess payments, moral damages in the sum of P500,000.00, and attorneys fees of P20,000.00
"or in the sum equivalent to 10% of whatever amount is awarded in favor of defendant."[5]
On September 20, 1984, Solid Homes filed with the Register of Deeds of Marikina a notice
of lis pendens with reference to Civil Case No. 40615 requesting that the same be annotated on
the titles in Investco, Inc.s name. On the same date, the notice of lis pendens was recorded as
Entry No. 117191 of the primary Entry Book, Volume 14 of the Office of the Register of
Deeds of Marikina, Metro Manila.
However, the notice of lis pendens was not actually annotated on the titles in the name of
Investco, Inc.
On February 14, 1985, the trial court rendered judgment in favor of Investco, Inc. ordering
solid Homes to pay plaintiffs P4,800,282.91, representing the balance of the purchase price
due under the contract, with interest thereon from February 23, 1981 until paid; P99,559.00
representing science and transfer taxes advanced by Investco to Solid Homes and P250,000.00
as attorneys fees and expenses of litigation.[6]
On May 27, 1985, the trial court ordered the original record transmitted to the appellate court
in view of Solid Homes filing of a notice of appeal.[7]
In the meantime, on April 23, 1984, Investco, Inc. offered to sell the property to AFP Mutual
Benefit Association, Inc. for P27,079,767.00, subsequently reduced to P24,000,000.00,
payable in installments. Investco, Inc. furnished AFP MBAI with certified true copies of the
titles covering the Marikina property.
In June, 1984, AFP MBAI verified the titles with the Register of Deeds of Marikina, Metro
Manila and found that copies of the titles that Investco, Inc. gave were genuine and faithful
reproductions of the original titles on file with the Register of Deeds. AFP MBAI noted that
there were no liens or encumbrances annotated on the titles.
Moreover, AFP MBAI, through its Real Estate Committee, made an ocular inspection of the
property sometime in June and July, 1984 "to determine the nature of the property and its
(metes) and bounds." During the inspection, AFP MBAI found that the Investco, Inc. property
was underdeveloped raw land "which is mostly cogonal, (with) few trees and shrubs x x x and
bounded on one side by the Marikina River."[8] AFP MBAI confirmed the presence of squatter
shanties numbering about twenty (20) to thirty (30). Except for a foot path used by the
squatters, there was no development on the property.
After determining that the Investco property was suitable for the housing project of the Armed
Forces of the Philippines and that the titles covering the same were "clean" and "genuine,"
AFP MBAI agreed to purchase the same from Investco, Inc. for the price of P24,000,000.00,
payable in installments for a period of one (1) year.
On October 10, 1984, Investco, Inc. executed a "Deed of Absolute Sale" conveying the
property to AFP MBAI for the price of P24,000,000.00, payable in installments until October
10, 1985.[9] Among other terms, Investco, Inc. warranted to AFP MBAI that "it has good and
valid title over the properties subject of (the) sale and (that it ) shall hold (AFP MBAI) free
from any adverse claim of whatever nature and from liens an encumbrances of third
parties."[10]
In November, 1984, AFP MBAI again verified the records of the Register of Deeds of
Marikina, Metro Manila and confirmed "(t)he absence of any lis pendens, adverse claims or
any liens or encumbrance (on) the originals of the title(s) x x x." AFP MBAI also inquired
from the Malacaang Legal Office, the Land Registration Commission, and the Metropolitan
Trial Court of Marikina if there were cases and other problems concerning the property, but
found no case involving either Investco, Inc. or the property pending with said court and
offices.[11] AFP MBAI also obtained a certification from the Clerk of the Metropolitan Trial
Court of Marikina that Investco, Inc. "has no pending case before (that) court."[12]
In April, 1985, AFP MBAI completed its payments of the purchase price.
On April 26, 1985, the Register of Deeds of Marikina issued Transfer Certificates of Title
Nos. N-104941, N-104942, N-104943, N-104944, N-104945 and N-104946 in the name of
AFP MBAI. The titles issued were "clean" and contained no annotation of any lien,
encumbrance, or adverse claim by a third party.
On November 28, 1985, Solid Homes commenced action[13] before the Regional Trial Court,
Marikina, against the Register of Deeds, AFP MBAI and Investco, Inc. for "annotation of lis
pendens and damages" with temporary restraining order and preliminary injunction. In its
verified complaint, Solid Homes prayed that (a) the Register of Deeds be ordered to annotate
on the titles registered in the name of Investco, Inc. the notice of lis pendens dated September
19, 1984 in relation to civil Case No. 40615, and to carry over the same to the titles in the
name of AFP MBAI; (b) alternatively, to declare AFP MBAI as a buyer in bad faith, bound by
the judgment to be rendered in Civil Case No. 40615; and (c) AFP MBAI and Investco, Inc. be
ordered to pay Solid Homes jointly and severally, unspecified amount of actual, moral and
exemplary damages, as well as attorney fees of P100,000.00 plus "ten (10%) percent of the
total amount to be awarded to plaintiff." Solid Homes also prayed for an order to enjoin
provisionally the Register of Deeds from registering any deed affecting the titles in derogation
of solid Homes rights under the contract executed between itself and Investco, Inc.
In due time, AFP MBAI and Investco, Inc. filed with the trial court an answer to the
complaint. After pre-trial and trial, on April 25, 1990, the trial court rendered decision holding
that:
"Accordingly, judgment is hereby rendered as follows:
1. Ordering defendant Register of Deeds for (sic) Marikina to annotate the
Notice of Lis Pendens, dated September 19, 1984 regarding Civil Case
No. 40615 on the titles registered in the name of defendant AFP MBAI,
that is TCT Nos. 104941,104942, 104943, 104944 and 104945 and
104946.
2. Declaring defendant AFP MBAI as a buyer in bad faith and accordingly
bound by the final judgment in Civil Case No. 40615, RTC, Pasig, now
CA-G.R. No. 13400.
3. Ordering defendant Investco, Inc. to pay plaintiff nominal damages in
the amount of P200,000.00 and exemplary damages in the amount of
P100,000.00.
4. Ordering defendant AFP Mutual Benefit Association, Inc., to pay
plaintiff the amount of P50,000.00 as nominal damages and P50,000.00 as
exemplary damages.
5. Ordering defendants Investco and AFP MBAI to pay attorneys fees of
P50,000.00 jointly and severally.
6. Dismissing the counterclaim of defendants.
7. Ordering private defendants to pay treble costs.
8. On the cross-claim of defendant AFP MBAI against defendant Investco,
Inc., ordering the latter to reimburse the former the amount of P11,000.00
paid pursuant to the Deed of Absolute Sale presented for registration,
Exhibit "7".
"SO ORDERED."[14]
Aggrieved thereby, AFP MBAI appealed the decision to the Court of Appeals.[15]
On November 29, 1992, the Court of Appeals rendered decision the dispositive portion of
which is quoted in the opening paragraph of this decision.
On December 24, 1991, AFP MBAI filed with the Court of Appeals a motion for
reconsideration of the decision, which Solid Homes opposed. On March 17, 1991, the Court of
Appeals denied the motion.[16]
Hence, this petition.[17]
The issue raised is whether Solid Homes is entitled to the annotation of its notice of lis
pendens on the titles of Investco, Inc. and AFP Mutual Benefit Association, Inc., in relation to
Civil Case No. 40615 of the Regional Trial Court, Pasig and thereby be bound by the final
judgment therein.
Basically, Solid Homes complaint was one for "annotation of lis pendens and other matters
with prayer for restraining order and writ of preliminary injunction" against Investco, Inc. AFP
MBAI and the Register of Deeds of Marikina, to cause the annotation of lis pendens in the
titles of Investco, Inc. and AFP MBAI. Actually, therefore, the suit is to compel the Register
of Deeds of Marikina to annotate the notice of lis pendens on the titles of AFP MBAI with a
claim for damages against Investco, Inc. and AFP MBAI for depriving Solid Homes of its
rights to the property as provided under the contract to buy and sell. In its verified complaint,
Solid Homes alleged that "the act of defendant Register of Deeds in not causing the annotation
of the lis pendens on the titles then registered in the name of defendant Investco, Inc. and in
issuing titles in the name of defendant AFP Mutual Benefit Association, Inc., without carrying
over the proper annotation of lis pendens are contrary to law".[18] On the basis of this
allegation, it prayed for an order directing the Register of Deeds of Marikina "to cause the
annotation" of the notice of lis pendens on the old and new titles.
Obviously, the Register of Deeds obligation to annotate the notice of lis pendens is one that
arises from law.[19] Hence, the action is actually one for mandamus to compel the performance
of a clear legal duty.[20] There is no such action as one for "annotation of lis pendens," as Solid
Homes sought in its complaint.
"Lis pendens is a Latin term which literally means a pending suit or a pending litigation while
a notice of lis pendens is an announcement to the whole world that a particular real property is
in litigation, serving as a warning that one who acquires an interest over the said property does
so at his own risk, or that he gambles on the result of the litigation over the said property. It is
but a signal to the intending buyer or mortgagee to take care or beware and to investigate the
prospect or non-prospect of the litigation succeeding before he forks down his money."[21]
A notice of lis pendens is not and can not be sought as a principal action for relief. "The notice
is but an incident to an action, an extra-judicial one to be sure. It does not affect the merits
thereof. It is intended merely to constructively advise, or warn, all people who deal with the
property that they so deal with it at their own risk, and whatever rights they may acquire in the
property in any voluntary transaction are subject to the results of the action, and may well be
inferior and subordinate to those which may be finally determined and laid down
therein."[22] The notice of lis pendens--that real property is involved in an action--is ordinarily
recorded without the intervention of the court where the action is pending.[23] As a settled rule,
notice of lis pendens may be annotated only where there is an action or proceeding in court
which affects title to or possession of real property.[24]
Under Presidential Decree No. 1529, known as the "Property Registration Decree of 1978",
the Register of Deeds may deny registration of the notice of lis pendens, which denial may be
appealed by the applicant en consulta (Section 10, paragraph 2) to the Commissioner of Land
Registration.[25] Section 117 of P.D. No. 1529 provides:
"When the Register of Deeds is in doubt with regard to the proper step to
be taken or memorandum to be made in pursuance of any deed, mortgage
or other instrument present to him for registration, or where any party in
interest does not agree with the action taken by the Register of Deeds with
reference to any such instrument, the question shall be submitted to the
Commissioner of Land Registration by the Register of Deeds, or by the
party in interest thru the Register of Deeds.
"Where the instrument is denied registration, the Registration of Deeds
shall notify the interested party in writing, setting forth the defects of the
instrument or legal grounds relied upon, and advising him that if he is not
agreeable to such ruling, he may, without withdrawing the documents
from the Registry, elevate the matter by consulta within five days from
 receipt of notice of the denial of registration to the Commissioner of Land
Registration.
The Register of Deeds shall make a memorandum of the pending consulta
on the certificate of title which shall be cancelled motu proprio by the
Register of Deeds after final resolution or decision thereof, or before
resolution, if withdrawn by petitioner.
"The Commissioner of Land Registration considering the consulta and the
records certified to him after notice to the parties and hearing, shall enter
an order prescribing the step to be taken or memorandum to be made. His
resolution of ruling in consultas shall be conclusive and binding upon all
Register of Deeds, provided, that the party in interest who disagrees with
the final resolution, ruling or order of the Commissioner relative to
consultas may appeal to the Court of Appeals within the period and in the
manner provided in Republic Act No. 5434."
Here, the Register of Deeds of Marikina denied the annotation of the notice of lis pendens on
the ground that the complaint in Civil Case No. 40615 was for collection of a sum of money
and did not involve the titles to or possession of the subject property. [26] If Solid Homes did not
agree with the denial of the Register of Deeds, it could appeal the same en consulta to the
Commissioner of Land Registration.[27] The resolution of the Commissioner may then be
appealed to the Court of Appeals, which has exclusive jurisdiction to decide the same, "within
the period and in the manner provided in Republic Act No. 5434."[28]
In its questioned decision, the Court of Appeals held that the action filed by Investco, Inc.
against Solid Homes "is not exclusively for payment of the unpaid installments on the
purchase price of the subject properties and damages, but also one for rescission of the
contract to sell and to buy the subject properties executed by defendant Investco, Inc. in favor
of (Solid Homes) which necessarily involves delivery of possession and ownership of the
same."[29]
We do not agree. This ruling conflicts with the final decision of the Supreme Court on the
case.[30] What is more, in determining the nature of plaintiffs (Investco, Inc.) action in Civil
Case No. 40615 and defendant Solid Homes counterclaim thereto, the Court of Appeals went
beyond the allegations in the complaint and ventured into speculation and conjecture. There is
nothing in Investcos complaint in Civil Case No. 40615 that even remotely suggests that
Investco, Inc. has rescinded the contract, or that it sought the rescission of the sale as an
alternative remedy. Specific performance and rescission are alternative remedies which a party
may not avail himself of at the same time.[31]
The nature of an action is determined by the allegations of the complaint.[32]
Investcos complaint was an action for collection of sums of money, damages and attorneys
fees[33] to recover from Solid Homes unpaid installments on the purchase price of the subject
property. To emphasize, the case was an action for collection of unpaid installments on the
purchase price subject real property. In such case, the annotation of a notice of lis
pendens on the titles of the property was not proper as the action was in personam.[34]
Consequently, the doctrine of lis pendens is inapplicable to this case. The Register of Deeds of
Marikina correctly denied the annotation of the notice of lis pendens on the titles of Investco,
Inc. and the AFP MBAI.[35]
Even on the basis of Solid Homes counterclaim, which is disregarded in determining the
nature of the action, notice of lis pendens is improper as the counterclaim was also for sums of
money--alleged excess payment and for damages--not one affecting title to or possession of
real property. Such counterclaim did not convert the nature of the action into a real action
involving title to or possession of subject property.
The rule that "all persons dealing with property covered by Torrens Certificate of title are not
required to go beyond what appears on the face of the title"[36] applies herein with full vigor. In
the absence of anything to excite suspicion, the buyer is not obligated to look beyond the
certificate to investigate the titles of the seller appearing on the face of the certificate.[37]
"Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor
rests the burden of proof."[38] Here, Solid Homes alleged that Investco, Inc. and AFP MBAI
"confederated with each other in entering into the aforementioned sale in order to deprive
herein plaintiff (Solid Homes) of its rights over subject properties under the Contract to Sell
and to Buy..."[39] However, Solid Homes adduced no evidence to prove such allegation of bad
faith.
The conclusion is inevitable that contrary to the holding of the Court of Appeals, AFP MBAI
was a purchaser in good faith and for value, and, consequently, acquired valid and indefeasible
titles to the Investco, Inc. property.
Resultantly, we find the appeal via certiorari of solid Homes[40] without merit. Its objective
was to compel AFP MBAI to execute a deed of transfer of the titles to parcels of land
originally covered by the agreement to buy and sell between Solid Homes, Inc. and Investco,
Inc. and for Solid Homes to pay AFP MBAI, in substitution of Investco, Inc. the amount of
P4,800,282.91 with interest thereon at one per cent per month from March 22, 1982, until
paid. Thus, if Solid Homes would succeed in its scheme in the case, it would unjustly enrich
itself enormously, acquiring subject property now worth billions of pesos[41] for the measly
sum of P4,800,282.91 with interest at one per cent a month from March 22, 1982, which it was
unable to pay Investco, Inc. in the first place.
Solid Homes claim is predicated on the assumption that AFP MBAI is a transferee pendente
lite of Investco, Inc. of the subject parcels of land and bound by the result of the suit.[42] Such
claim is not factually or legally correct. In the absence of a valid notice of lis
pendens annotated in the titles, AFP MBAI is a buyer in good faith and for value, and thus,
acquired clean and valid titles to the property in question.
WHEREFORE, the Court:
(1) In G. R. No. 104769, GRANTS the petition, and SETS ASIDE the Court of Appeals
decision in CA-G.R. CV No. 27398 and, in lieu thereof, renders judgment:
(a) dismissing the complaint in Civil Case No. 52999 of the Regional Trial
Court, Pasig Branch 165;
(b) ordering the Register of Deeds of Marikina to cancel the notice of lis
pendens annotated on Transfer Certificates of Title Nos. N-104941, N-
104942, N-104943, N-104944, N-104945 and N-104946 of the Register of
Deeds for Marikina, Metro Manila;
(c) Ordering respondent Solid Homes, Inc. to pay AFP MBAI
P300,000.00 as attorneys fees and expenses of litigation; and costs.
(2) In G.R. No. 135016, DENIES the petition, for lack of merit.
With costs against Solid Homes, Inc.
SO ORDERED.
egional Trial Court, Branch 77, Quezon City in SP. Civil Action No. Q-09-65933
is AFFIRMED and REINSTATED.
SO ORDERED.