G.R. No. 191336 January 25, 2012 1. The amount of [Php147,893.
1. The amount of [Php147,893.00] representing the obligation with legal
CRISANTA ALCARAZ MIGUEL, Petitioner, vs.
JERRY D. MONTANEZ, Respondent.
DECISION
REYES, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court. Petitioner Crisanta Alcaraz Miguel (Miguel) seeks the
reversal and setting aside of the September 17, 2009 Decision1 and February
11, 2010 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
100544, entitled "Jerry D. Montanez v. Crisanta Alcaraz Miguel."
Antecedent Facts
On February 1, 2001, respondent Jerry Montanez (Montanez) secured a
loan of One Hundred Forty-Three Thousand Eight Hundred Sixty-Four
Pesos (₱143,864.00), payable in one (1) year, or until February 1, 2002,
from the petitioner. The respondent gave as collateral therefor his house
and lot located at Block 39 Lot 39 Phase 3, Palmera Spring, Bagumbong,
Caloocan City.
Due to the respondent’s failure to pay the loan, the petitioner filed a
complaint against the respondent before the Lupong Tagapamayapa of
Barangay San Jose, Rodriguez, Rizal. The parties entered into a
Kasunduang Pag-aayos wherein the respondent agreed to pay his loan in
installments in the amount of Two Thousand Pesos ( ₱2,000.00) per month,
and in the event the house and lot given as collateral is sold, the respondent
would settle the balance of the loan in full. However, the respondent still
failed to pay, and on December 13, 2004, the Lupong Tagapamayapa
issued a certification to file action in court in favor of the petitioner.
On April 7, 2005, the petitioner filed before the Metropolitan Trial Court
(MeTC) of Makati City, Branch 66, a complaint for Collection of Sum of
Money. In his Answer with Counterclaim,3 the respondent raised the defense
of improper venue considering that the petitioner was a resident of
Bagumbong, Caloocan City while he lived in San Mateo, Rizal.
After trial, on August 16, 2006, the MeTC rendered a Decision,4 which
disposes as follows:
WHEREFORE, premises considered[,] judgment is hereby rendered
ordering defendant Jerry D. Montanez to pay plaintiff the following:
period of the original agreement had long expired without compliance on the
rate of interest from February 1, 2002 which was the date of the loan
maturity until the account is fully paid;
2. The amount of Php10,000.00 as and by way of attorney’s fees; and the
costs.
SO ORDERED. 5
On appeal to the Regional Trial Court (RTC) of Makati City, Branch 146,
the respondent raised the same issues cited in his Answer. In its March 14,
2007 Decision,6 the RTC affirmed the MeTC Decision, disposing as
follows:
WHEREFORE, finding no cogent reason to disturb the findings of the court
a quo, the appeal is hereby DISMISSED, and the DECISION appealed
from is hereby AFFIRMED in its entirety for being in accordance with
law and evidence.
SO ORDERED.7
Dissatisfied, the respondent appealed to the CA raising two issues, namely,
(1) whether or not venue was improperly laid, and (2) whether or not the
Kasunduang Pag-aayos effectively novated the loan agreement. On
September 17, 2009, the CA rendered the assailed Decision, disposing as
follows:
WHEREFORE, premises considered, the petition is hereby GRANTED. The
appealed Decision dated March 14, 2007 of the Regional Trial Court (RTC)
of Makati City, Branch 146, is REVERSED and SET ASIDE. A new
judgment is entered dismissing respondent’s complaint for collection of
sum of money, without prejudice to her right to file the necessary action to
enforce the Kasunduang Pag-aayos.
SO ORDERED.8
Anent the issue of whether or not there is novation of the loan contract,
the CA ruled in the negative. It ratiocinated as follows:
Judging from the terms of the Kasunduang Pag-aayos, it is clear that no
novation of the old obligation has taken place.1âwphi1 Contrary to
petitioner’s assertion, there was no reduction of the term or period
originally stipulated. The original period in the first agreement is one (1)
year to be counted from February 1, 2001, or until January 31, 2002.
When the complaint was filed before the barangay on February 2003, the
part of petitioner. Hence, there was nothing to reduce or extend. There
was only a change in the terms of payment which is not incompatible
with the old agreement. In other words, the Kasunduang Pag-aayos
merely supplemented the old agreement.9
The CA went on saying that since the parties entered into a Kasunduang
Pag-aayos before the Lupon ng Barangay, such settlement has the force
and effect of a court judgment, which may be enforced by execution within
six (6) months from the date of settlement by the Lupon ng Barangay, or by
court action after the lapse of such time.10 Considering that more than six
(6) months had elapsed from the date of settlement, the CA ruled that the
remedy of the petitioner was to file an action for the execution of the
Kasunduang Pag-aayos in court and not for collection of sum of
money.11 Consequently, the CA deemed it unnecessary to resolve the issue
on venue.12
The petitioner now comes to this Court.
Issues
(1) Whether or not a complaint for sum of money is the proper remedy for
the petitioner, notwithstanding the Kasunduang Pag-aayos;13 and
(2) Whether or not the CA should have decided the case on the merits rather
than remand the case for the enforcement of the Kasunduang Pag-aayos.14
Our Ruling
Because the respondent failed to comply with the terms of the
Kasunduang Pag-aayos, said agreement is deemed rescinded pursuant
to Article 2041 of the New Civil Code and the petitioner can insist on his
original demand. Perforce, the complaint for collection of sum of money
is the proper remedy.
The petitioner contends that the CA erred in ruling that she should have
followed the procedure for enforcement of the amicable settlement as
provided in the Revised Katarungang Pambarangay Law, instead of
filing a collection case. The petitioner points out that the cause of action did
not arise from the Kasunduang Pag-aayos but on the respondent’s breach of
the original loan agreement.15
This Court agrees with the petitioner.
It is true that an amicable settlement reached at the barangay conciliation
proceedings, like the Kasunduang Pag-aayos in this case, is binding
between the contracting parties and, upon its perfection, is immediately
executory insofar as it is not contrary to law, good morals, good
customs, public order and public policy.16 This is in accord with the
broad precept of Article 2037 of the Civil Code, viz:
A compromise has upon the parties the effect and authority of res judicata;
but there shall be no execution except in compliance with a judicial
compromise.
Being a by-product of mutual concessions and good faith of the parties, an
amicable settlement has the force and effect of res judicata even if not
judicially approved. It transcends being a mere contract binding only upon
the parties thereto, and is akin to a judgment that is subject to execution
in accordance with the Rules.18 Thus, under Section 417 of the Local
Government Code,19 such amicable settlement or arbitration award
may be enforced by execution by the Barangay Lupon within six (6)
months from the date of settlement, or by filing an action to enforce such
settlement in the appropriate city or municipal court, if beyond the six-
month period.
Under the FIRST REMEDY, the proceedings are covered by the Local
Government Code and the Katarungang Pambarangay Implementing
Rules and Regulations. The Punong Barangay is called upon during the
hearing to determine solely the fact of non-compliance of the terms of
the settlement and to give the defaulting party another chance at
voluntarily complying with his obligation under the settlement. Under
the SECOND REMEDY, the proceedings are governed by the Rules of
Court, as amended. The cause of action is the amicable settlement itself,
which, by operation of law, has the force and effect of a final
judgment.20
It must be emphasized, however, that enforcement by execution of the
amicable settlement, either under the first or the second remedy, is only
applicable if the contracting parties have not repudiated such settlement
within ten (10) days from the date thereof in accordance with Section 416
of the Local Government Code. If the amicable settlement is repudiated
by one party, either expressly or impliedly, the other party has two
options, namely, to enforce the compromise in accordance with the
Local Government Code or Rules of Court as the case may be, or to
consider it rescinded and insist upon his original demand. This is in
accord with Article 2041 of the Civil Code, which qualifies the broad
application of Article 2037, viz:
If one of the parties fails or refuses to abide by the
compromise, the other party may either enforce the
compromise or regard it as rescinded and insist upon his
original demand.
In the case of Leonor v. Sycip, the Supreme Court (SC) had the occasion to
explain this provision of law. It ruled that Article 2041 does not require
an action for rescission, and the aggrieved party, by the breach of
compromise agreement, may just consider it already rescinded, to wit:
It is worthy of notice, in this connection, that, unlike Article 2039 of the
same Code, which speaks of "a cause of annulment or rescission of the
compromise" and provides that "the compromise may be annulled or
rescinded" for the cause therein specified, thus suggesting an action for
annulment or rescission, said Article 2041 confers upon the party
concerned, not a "cause" for rescission, or the right to "demand" the
rescission of a compromise, but the authority, not only to "regard it as
rescinded", but, also, to "insist upon his original demand". The language
of this Article 2041, particularly when contrasted with that of Article 2039,
denotes that no action for rescission is required in said Article 2041, and
that the party aggrieved by the breach of a compromise agreement may,
if he chooses, bring the suit contemplated or involved in his original
demand, as if there had never been any compromise agreement, without
bringing an action for rescission thereof. He need not seek a judicial
declaration of rescission, for he may "regard" the compromise
agreement already "rescinded".22 (emphasis supplied)
As so well stated in the case of Chavez v. Court of Appeals, a party's non-
compliance with the amicable settlement paved the way for the application
of Article 2041 under which the other party may either enforce the
compromise, following the procedure laid out in the Revised Katarungang
Pambarangay Law, or consider it as rescinded and insist upon his original
demand. To quote:
In the case at bar, the Revised Katarungang Pambarangay Law provides
for a two-tiered mode of enforcement of an amicable settlement, to wit:
(a) by execution by the Punong Barangay which is quasi-judicial and
summary in nature on mere motion of the party entitled thereto; and (b)
an action in regular form, which remedy is judicial. However, the mode
of enforcement does not rule out the right of rescission under Art. 2041 of
the Civil Code. The availability of the right of rescission is apparent from the
wording of Sec. 417 itself which provides that the amicable settlement
"may" be enforced by execution by the lupon within six (6) months from its
date or by action in the appropriate city or municipal court, if beyond that
period. The use of the word "may" clearly makes the procedure provided in
the Revised Katarungang Pambarangay Law directory or merely optional in
nature.
Thus, although the "Kasunduan" executed by petitioner and respondent
before the Office of the Barangay Captain had the force and effect of a
final judgment of a court, petitioner's non-compliance paved the way for
the application of Art. 2041 under which respondent may either enforce
the compromise, following the procedure laid out in the Revised
Katarungang Pambarangay Law, or regard it as rescinded and insist upon his
original demand. Respondent chose the latter option when he instituted Civil
Case No. 5139-V-97 for recovery of unrealized profits and reimbursement of
advance rentals, moral and exemplary damages, and attorney's fees.
Respondent was not limited to claiming ₱150,000.00 because although he
agreed to the amount in the "Kasunduan," it is axiomatic that a compromise
settlement is not an admission of liability but merely a recognition that there
is a dispute and an impending litigation which the parties hope to prevent by
making reciprocal concessions, adjusting their respective positions in the
hope of gaining balanced by the danger of losing. Under the "Kasunduan,"
respondent was only required to execute a waiver of all possible claims
arising from the lease contract if petitioner fully complies with his
obligations thereunder. It is undisputed that herein petitioner did not.24
(emphasis supplied and citations omitted)
In the instant case, the respondent did not comply with the terms and
conditions of the Kasunduang Pag-aayos. Such non-compliance may be
construed as repudiation because it denotes that the respondent did not
intend to be bound by the terms thereof, thereby negating the very
purpose for which it was executed. Perforce, the petitioner has the option
either to enforce the Kasunduang Pag-aayos, or to regard it as rescinded and
insist upon his original demand, in accordance with the provision of Article
2041 of the Civil Code. Having instituted an action for collection of sum of
money, the petitioner obviously chose to rescind the Kasunduang Pag-aayos.
As such, it is error on the part of the CA to rule that enforcement by
execution of said agreement is the appropriate remedy under the
circumstances.
Considering that the Kasunduang Pag-aayos is deemed rescinded by the
non-compliance of the respondent of the terms thereof, remanding the
case to the trial court for the enforcement of said agreement is clearly
unwarranted.
The petitioner avers that the CA erred in remanding the case to the trial court
for the enforcement of the Kasunduang Pag-aayos as it prolonged the
process, "thereby putting off the case in an indefinite pendency."25 Thus, the
petitioner insists that she should be allowed to ventilate her rights before this
Court and not to repeat the same proceedings just to comply with the
enforcement of the Kasunduang Pag-aayos, in order to finally enforce her
right to payment.26
The CA took off on the wrong premise that enforcement of the Kasunduang
Pag-aayos is the proper remedy, and therefore erred in its conclusion that the
case should be remanded to the trial court. The fact that the petitioner opted
to rescind the Kasunduang Pag-aayos means that she is insisting upon the
undertaking of the respondent under the original loan contract. Thus, the CA
should have decided the case on the merits, as an appeal before it, and
not prolong the determination of the issues by remanding it to the trial
court. Pertinently, evidence abounds that the respondent has failed to
comply with his loan obligation. In fact, the Kasunduang Pag-aayos is the
well nigh incontrovertible proof of the respondent’s indebtedness with the
petitioner as it was executed precisely to give the respondent a second
chance to make good on his undertaking. And since the respondent still
reneged in paying his indebtedness, justice demands that he must be held
answerable therefor.
WHEREFORE, the petition is GRANTED. The assailed decision of the
Court of Appeals is SET ASIDE and the Decision of the Regional Trial
Court, Branch 146, Makati City, dated March 14, 2007 is REINSTATED.
SO ORDERED.
[ A.C. No. 12121 (Formerly CBD Case No. 14-4322), June 27, 2018 ]
CELESTINO MALECDAN, COMPLAINANT, VS. ATTY. SIMPSON
T. BALDO, RESPONDENT.
DECISION
CAGUIOA, J:
Before this Court is an administrative complaint[1] filed with the Office of
the Integrated Bar of the Philippines Baguio-Benguet Chapter (IBP Baguio-
Benguet Chapter) by Complainant Celestino Malecdan (Malecdan) against
Respondent Atty. Simpson T. Baldo (Atty. Baldo), for the latter's alleged
violation of Section 9 of Presidential Decree 1508 (P.D. 1508), otherwise
known as the Katarungang Pambarangay Law, which prohibits. the
participation of lawyers in the proceedings before the Lupon:
SEC. 9. Appearance of parties in person. - In all proceedings provided for
herein, the parties must appear in person without the assistance of
counsel/representative, with the exception of minors and incompetents who
may be assisted by their next of kin who are not lawyers. (Emphasis
supplied)
The Factual Antecedents
Malecdan filed a letter of complaint for Estafa, Breach of Contract and
Damages against spouses James and Josephine Baldo, before the Lupon of
Barangay Pico in La Trinidad, Benguet.
On August 14, 2014, Atty. Baldo appeared as counsel of spouses Baldo
during the hearing on the subject complaint before the Punong Barangay.[2]
On August 18, 2014, Malecdan filed a Complaint-Affidavit (Complaint)
before the IBP Baguio-Benguet Chapter praying that proper sanctions be
imposed on Atty. Baldo for violating Section 9 of P.D. 1508.
On August 20, 2014, the Committee on Ethics of the IBP Baguio-Benguet
Chapter furnished Atty. Baldo with a copy of the complaint and set the case
for a conciliation conference on September 12, 2014.[3]
On September 15, 2014, the Complaint was endorsed to the Committee on
Bar Discipline-IBP (CBD-IBP) by the Committee on Ethics of IBP Baguio-
Benguet Chapter after the parties failed to agree on a settlement.[4]
The CBD-IBP thereafter issued an Order[5] dated September 17, 2014,
requiring Atty. Baldo to submit a duly verified Answer, within fifteen (15)
days from receipt of the order.[6]
On January 14, 2015, the CBD-IBP issued a Notice[7] setting the mandatory
conference/hearing of the subject complaint on February 18, 2015.[8]
On February 12, 2015, Malecdan filed his Mandatory Conference Brief.[9]
On February 23, 2015, the mandatory conference of the case was re-
scheduled to March 24, 2015 after Atty. Baldo failed to attend the same.[10]
In his Answer[11] dated February 23, 2015, Atty. Baldo admitted that he
was present during the proceedings before the Punong Barangay. He
explained that he was permitted by the parties to participate in the said
hearing, to wit:
1. The allegation in the complaint is admitted. However, the rest of the truth
to the matter is that, before entering the barangay session hall, respondent
asked permission from the officer-in-charge if he will be allowed that before
any hearing be conducted, he and the respondent in the said barangay case,
his uncle, James Baldo, be allowed to talk to complainant Celestino
Malecdan as they may be able to amicably settle the matter on their own, of
which the officer in charge granted on the reason that the proceeding was
still in the dialogue stage;
2. Likewise, when he entered inside the barangay session hall where
complainant and his companion, Laila Alumno was waiting, respondent
again asked permission from complainant and his companion, Laila Alumno
if the latter will allow the former to join them in the dialogue with James
Baldo as the parties may amicably settle the case on their own;
3. Since complainant already knew respondent as they had a previous
meeting at the office of complainant's lawyer, Atty. Melissa QuitanCorpuz
concerning the same case against James Baldo, complainant readily
permitted and allowed that parties have a dialogue on their own with
respondent joining them and without the presence of any barangay officials.
[12] (Emphasis supplied)
In an Order[13] dated March 24, 2015, Investigating Commissioner Eduardo
R. Robles gave Malecdan a period of fifteen (15) days to file a supplemental
complaint where he can incorporate other facts and circumstances which he
failed to indicate in his complaint. Atty. Baldo was likewise given a period
of fifteen (15) days from his receipt of the supplemental complaint within
which to file his supplemental answer should he wish to do so.[14]
On March 31, 2015, Malecdan filed his Verified Supplemental Complaint
Affidavit,[15] wherein he insisted that he vehemently objected to the
presence of Atty. Baldo during the proceedings before the Punong Barangay,
to wit:
2. Using his influence as a lawyer, Atty. Baldo prevailed upon the Punong
Barangay and the Barangay Secretary to let him participate in the barangay
proceedings intended for the settlement of our grievance against Spouses
Josephine Baldo and James Baldo on August 14, 2014.
3. He did this over my vehement objections. I told him that he was not
supposed to be there but then he insisted. It even got to the point that we
were already arguing out loud. I resented the fact that he was there assisting
and representing his clients, the Spouses Baldo while I was not represented
by counsel. We were in a situation that Section 9 of Presidential Decree 1508
sought to prevent.[16] (Emphasis supplied)
After due proceedings, Investigating Commissioner Robles rendered a
Report and Recommendation[17] on June 2, 2015, recommending that Atty.
Baldo be given a warning. Commissioner Robles found that the language of
the Katarungang Pambarangay Law is not that definite as to unqualifiedly
bar lawyers from appearing before the Lupon, nor is the language that clear
on the sanction imposable for such an appearance.[18] Commissioner Robles
reasoned that the matter of appearance or non-appearance before the Lupon
is clearly addressed to a lawyer's taste of propriety:
x x x. The respondent ought to have known that his attendance thereat would
have caused some ruckus. That respondent chose to attend is some measure
of his lack of propriety.

Although this Commission cannot legislate good taste or an acute sense of
propriety, the Commission can definitely remind the respondent that another
act of insensitivity to the rules of good conduct will court administrative
sanctions.[19]
The dispositive portion of Commissioner Robles' Report and
Recommendation reads as follows:
UPON THE FOREGOING, it is respectfully recommended that the
respondent Atty. Simpson T. Baldo be given a warning.
RESPECTFULLY SUBMITTED.[20]
On June 20, 2015, the IBP Board of Governors passed a Resolution[21]
reversing and setting aside the Report and Recommendation of the
Investigating Commissioner and instead recommended that Atty. Baldo be
reprimanded, thus:
RESOLVED to REVERSE as it is hereby REVERSED and SET ASIDE, the
Report and Recommendation of the Investigating Commissioner in the
above-entitled case, herein made part of this Resolution as Annex "A",
considering Respondent's appearance as counsel for Spouses James and
Josephine Baldo in a Katarungan[g] Pambarangay hearing, Thus,
Respondent is hereby REPRIMANDED.[22] (Emphasis in the original and
italics omitted)
The Court's Ruling
After a judicious examination of the records and submission of the parties,
the Court upholds the findings and recommendation of the IBP Board of
Governors.
The Court agrees with the IBP Board of Governors that the language of P.D.
1508 is mandatory in barring lawyers from appearing before the Lupon.
As stated in the case of Ledesma v. Court of Appeals,[23] Section 9 of P.D.
1508 mandates personal confrontation of the parties because:
"x x x a personal confrontation between the parties without the intervention
of a counsel or representative would generate spontaneity and a favorable
disposition to amicable settlement on the part of the disputants. In other
words, the said procedure is deemed conducive to the successful resolution
of the dispute at the barangay level."
xxxx
"To ensure compliance with the requirement of personal confrontation
between the parties, and thereby, the effectiveness of the barangay
conciliation proceedings as a mode of dispute resolution, the above-quoted
provision is couched in mandatory language. Moreover, pursuant to the
familiar maxim in statutory construction dictating that 'expressio unius est
exclusio alterius', the express exceptions made regarding minors and
incompetents must be construed as exclusive of all others not
mentioned."[24] (Emphasis supplied)
Atty. Baldo's violation of P.D. 1508 thus falls squarely within the prohibition
of Rule 1.01 of Canon 1 of the Code of Professional Responsibility (CPR),
which provides:
CANON 1 -
A LAWYER SHALL UPHOLD THE CONSTITUTION, OBEY THE
LAWS OF THE LAND AND PROMOTE RESPECT FOR LAW AND
LEGAL PROCESSES.
Rule 1.01 -
A lawyer shall not engage in unlawful, dishonest, immoral or deceitful
conduct.
Canon 1 clearly mandates the obedience of every lawyer to laws and legal
processes. A lawyer, to the best of his ability, is expected to respect and
abide by the law: and thus, avoid any act or omission that is contrary to the
same.[25] A lawyer's personal deference to the law not only speaks of his
character but it also inspires the public to likewise respect and obey the law.
[26] Rule 1.01, on the other hand, states the norm of conduct to be observed
by all lawyers. Any act or omission that is contrary to, or prohibited or
unauthorized by, or in defiance of, disobedient to, or disregards the law is
unlawful.[27] Unlawful conduct does not necessarily imply the element of
criminality although the concept is broad enough to include such element.
[28]
Here, Atty. Baldo admitted that he appeared and participated in the
proceedings before the Punong Barangay in violation of Section 9 of P.D.
1508. Atty. Baldo therefore violated Rule 1.01 of the CPR in connection
with Section 9 of P.D. 1508 when he appeared as counsel for spouses James
and Josephine Baldo in a hearing before the Punong Barangay, Barangay
Pico, Municipality of La Trinidad in Benguet.
All told, the Court finds that the evidence adduced is sufficient to support the
allegations against Atty. Baldo.
WHEREFORE, the Court finds Atty. Simpson T. Baldo LIABLE for
violation of Canon 1 and Rule 1.01 of the Code of Professional
Responsibility and he is hereby REPRIMANDED with a stem warning that a
repetition of the same or similar act would be dealt with more severely.
SO ORDERED.
G.R. No. 201302, January 23, 2019
HYGIENIC PACKAGING CORPORATION, Petitioner, v. NUTRI-
ASIA, INC., DOING BUSINESS UNDER THE NAME AND STYLE
OF UFC PHILIPPINES (FORMERLY NUTRI-ASIA, INC.),
Respondent.
DECISION
LEONEN, J.:
The venue for the collection of sum of money case is governed by Rule 4,
Section 2 of the Rules of Court. Unless the parties enter into a written
agreement on their preferred venue before an action is instituted, the plaintiff
may commence his or her action before the trial court of the province or city
either where he or she resides, or where the defendant resides. If the party is
a corporation, its residence is the province or city where its principal place of
business is situated as recorded in its Articles of Incorporation.1
This is a Petition for Review on Certiorari2 assailing the January 13, 2012
Decision3 and March 28, 2012 Resolution4 of the Court of Appeals in CA-
G.R. SP No. 119511. The Court of Appeals granted Nutri-Asia, Inc.'s (Nutri-
Asia) Petition for Certiorari,5 and reversed and set aside the May 24, 2010
Order6 of the Regional Trial Court Branch 46, Manila and the March 14,
2011 Joint Order7 of the Regional Trial Court Branch 24, Manila in Civil
Case No. 09-121849. The trial courts denied Nutri-Asia's Omnibus Motion
to Set for Hearing the Affirmative Defenses Pleaded in the Answer and to
Refer the Parties to Arbitration in a collection of sum of money case.8
Hygienic Packaging Corporation (Hygienic) is a domestic corporation that
manufactures, markets, and sells packaging materials such as plastic bottles
and ratchet caps.9 Meanwhile, Nutri-Asia is a domestic corporation that
manufactures, sells, and distributes food products such as banana-based and
tomato-based condiments, fish sauce, vinegar, soy sauce, and other sauces.10
From 1998 to 2009, Hygienic supplied Nutri-Asia with KG Orange Bottles
and Ratchet Caps with Liners (plastic containers) for its banana catsup
products.11 Every transaction was covered by a Purchase Order issued by
Nutri-Asia.12 The Terms and Conditions on the Purchase Order provided:
TERMS AND CONDITIONS
The following terms and conditions and any of the specifications, drawings,
samples and additional terms and conditions which may be incorporated
herein by reference or appended hereto are part of this Purchase Order. By
accepting this Purchase Order or any part thereof the Seller agrees to and
accepts all terms and conditions.
The number of this Purchase Order must appear on the corresponding Sales
Invoice, Shipping papers and other pertinent documents and the Seller's
VAT No., when applicable, must be on all Invoices/Delivery receipts.
NO Payment will be made unless original sales invoice received by Buyer's
accounting Department.
....
The Seller warrants that the Goods delivered to the Buyer will be
merchantable, of commercial standard and that the Goods will conform with
(sic) the written specifications and requirements of the Buyer. The Buyer
shall have the right to reject or return any or all items found not in
conformity with such standards[,] [s]pecifications or requirements. The
Seller shall likewise indemnify and hold the Buyer free and harmless from
any and all damages incurred by the Buyer as a result of the violation of
these warranties.
The above warranties by the Seller shall also apply in case o[f] Goods
consisting of packaging materials or foodstuffs to be used as raw materials or
ingredients in the manufacture or processing of foodstuff in ensuring that
they shall be fit for human consumption and free from adulteration or foreign
materials and shall comply with all the relevant food and hygiene statutes
and regulations both in the Buyer's Country and in any other such relevant
country as to composition, processing (if any), packaging and description.
....
Arbitration [of] all disputes arising in connection with this Contract shall be
referred to an Arbitration Committee, in accordance with the Philippine
Arbitration Law, composed of three members: one (1) member to be chosen
by the Buyer; another member to be chosen by . the Seller[;] and the third
member to be chosen by the other two members. The decision of the
Arbitration Committee shall be binding upon the parties.13
From December 29, 2007 to January 22, 2009, Nutri-Asia purchased from
Hygienic 457,128 plastic containers, for a total consideration of
P9,737,674.62.14 Hygienic issued Sales Invoices15 and Delivery Receipts16
to cover these transactions.17
On July 29, 2009, Hygienic filed a Complaint18 for sum of money against
Nutri-Asia. It instituted the case before the Regional Trial Court of Manila
"pursuant to the stipulation of the parties as stated in the Sales Invoices
submitting themselves to the jurisdiction of the Courts of the City of Manila
in any legal action arising out of their transaction[.]"19
In its Complaint, Hygienic alleged that based on the Purchase Orders and
Sales Invoices, Nutri-Asia agreed to pay Hygienic 30 days after every
delivery of plastic containers. However, Nutri-Asia refused to pay for the
goods delivered from December 29, 2007 to January 22, 2009 after their
payment became due, despite oral and written demands from Hygienic.20
Hygienic prayed that Nutri-Asia be ordered to pay it the sum of: (1)
P9,737,674.62 plus 12% interest per annum as the total unpaid cost of the
plastic containers; (2) 25% of P9,737,674.62 or the amount to be collected
from Nutri-Asia as attorney's fees; (3) P300,000.00 as their counsel's
acceptance fee; (4) P4,000.00 as their counsel's appearance fee for each and
every appearance of its counsel in court; and (5) costs of suit.21
In its Answer with Compulsory Counter-Claim,22 Nutri-Asia argued that the
case should be dismissed as Hygienic failed to comply with a condition
precedent prior to its filing of the Complaint.23 It claimed that under the
Terms and Conditions of the Purchase Orders, Hygienic should have first
referred the matter to the Arbitration Committee.24
Nutri-Asia alleged that the venue was also improperly laid since the
Regional Trial Court of Manila was not the proper venue for the institution
of Hygienic's personal action. The Complaint should have been filed either
before the trial courts of San Pedro, Laguna or Pasig City, where the
principal places of business of Hygienic and Nutri-Asia are located,
respectively. The venue of actions as stated in the Sales Invoices could not
bind Nutri-Asia since it did not give its express conformity to that
stipulation.25
Nutri-Asia admitted purchasing the plastic containers, and receiving
Hygienic's Demand Letter and Final Demand Letter.26 However, it
countered that Hygienic's claim "has been extinguished on the ground of
compensation."27
Nutri-Asia claimed that of the 457,128 plastic containers, it only used
327,046 for its products, while the 130,082 pieces were unused.28 It narrated
that since January 21, 2009, it received numerous customer complaints on its
UFC Banana Catsup products. Consumers complained that the catsup
smelled like detergent and soap and tasted like chemical, soap, plastic, and
rubber.29 After investigation, Nutri-Asia discovered that "the contaminated
products were all manufactured on December 15, 2008 and they [were]
limited to UFC Banana Catsup in 2 kg. plastic containers supplied by
[Hygienic]."30 It was compelled to recall the contaminated products.31
Nutri-Asia stated that in the meetings held on January 22 and 23, 2009, the
officers of Hygienic admitted and confirmed that it "used a different colorant
which has a poor Low Density Polyethylene (LDPE) carrier grade or poor
bonding of the die/powder (sic) with the carrier."32 The colorant bleeding in
the containers contaminated Nutri-Asia's banana catsup. Hygienic's officers
allegedly assured Nutri-Asia representatives that Hygienic will shoulder the
expenses that would be incurred in the recall of the contaminated products.
Its Sales and Marketing Manager, Judith B. Lim, allegedly reassured the
same in an electronic mail.33
Nutri-Asia further stated that it sent a Letter dated May 6, 2009 to Hygienic,
requesting for the reimbursement of P36,304,451.27, representing the recall
expenses, product and container costs, freight and rental charges, and brand
damage. This amount excludes Nutri-Asia's unrealized income.34
Nutri-Asia disclosed that Hygienic, in its June 9, 2009 letter, stated that it
could not assess Nutri-Asia's claims as they were not accompanied by any
supporting document. It also said that it would consider the case closed if
Nutri-Asia failed to provide supporting documents by the end of June 11,
2009 office hours. Nutri-Asia replied that Hygienic had no basis to consider
the matter closed since the former did not abandon or waive its
reimbursement claim. Nutri-Asia requested for a meeting to further discuss
the matter.35
Nutri-Asia alleged that it sent Hygienic the supporting documents on June
15, 2009. However, Hygienic stated that the documents it received were
insufficient to support Nutri-Asia's reimbursement claim. Nutri-Asia insisted
that the documents were sufficient, and again suggested a meeting between
the parties.36
After a re-computation of its claims, Nutri-Asia informed Hygienic that its
request for reimbursement decreased to P25,850,759.31. The new amount
was due to the reduction of the number of rejects and the reduction in freight
charges, rental charges, and additional manpower charges. The parties
exchanged several correspondences, until Nutri-Asia received a copy of the
Complaint. As of September 4, 2009, Nutri-Asia's expenses increased to
P26,405,553.95.37
In arguing that its obligation was extinguished by compensation, Nutri-Asia
contended:
10.47
In the instant case, both plaintiff and defendant are bound principally and at
the same time a principal creditor of the other; both debts consist in a sum of
money; both debts are due, liquidated and demandable; and neither plaintiff
[n]or defendant there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.

10.48
By virtue of compensation, the plaintiff's obligation to defendant for the said
losses and damages in the sum of P26,405,553.95 is set off to the extent of
P9,737,674.12 with the defendant's alleged obligation to plaintiff in the sum
of P9,737,674.12 resulting to the extinguishment of defendant's alleged
obligation to plaintiff.38
Due to compensation, Hygienic's unpaid obligation was reduced to
Pl6,667,879.83.39 Nutri-Asia added that Hygienic's cause of action against it
had yet to accrue, and that Nutri-Asia was merely holding the payment of
P9,737,674.12 as a lien to ensure that Hygienic would pay the losses and
damages it incurred.40
Lastly, Nutri-Asia alleged that Hygienic did not come to comi with clean
hands, and that it acted in bad faith when it filed the Complaint.41 It claimed
that the amount charged by Hygienic was "excessive, iniquitious[,] and
unconscionable."42
After Hygienic filed its Reply,43 Nutri-Asia filed an Omnibus Motion.44
Nutri-Asia reiterated its arguments in its Answer, adding that its affirmative
defenses could "be resolved on the basis of the pleadings and the documents
attached to the complaint without the need of further hearing."45
Hygienic opposed Nutri-Asia's Omnibus Motion in its Consolidated or Joint
Comment.46 It countered that the allegation of noncompliance with a
condition precedent was incorrect.47 Moreover, its cause of action was
anchored on "the sales invoices and delivery receipts duly acknowledged by
[Nutri-Asia] through its authorized representative and that these deliveries
made by [Hygienic] were not properly paid by [Nutri-Asia]."48
Hygienic claimed that even if the cause of action was based on all attached
documents in the Complaint, which included the Purchase Orders, the
arbitration clause was "inoperative or incapable of being performed."49 This
is because of the conflict between the arbitration clause in the Purchase
Orders and the submission of parties to the Manila courts' jurisdiction in the
Sales Invoices. The arbitration clause was merely an offer from Nutri-Asia,
which Hygienic rejected in its Sales Invoices. To submit the dispute to
arbitration, there should have been an unequivocal agreement between the
parties. This agreement was lacking in their case.50
In its May 24, 2010 Order,51 the Regional Trial Court Branch 46, Manila
denied the Omnibus Motion.52 It held that the venue was properly laid. It
considered the signatures ofNutri-Asia's representatives in the Sales Invoices
as the company's concurrence that any dispute would be raised before the
courts of Manila.53
The trial court also found that the elements of compensation under the Civil
Code were absent. It held that Hygienic and Nutri-Asia were not creditors
and debtors of each other. Only Hygienic was the creditor, and only Nutri-
Asia was the debtor. Nutri-Asia's Counter-Claim for damages still had to be
proven.54
The trial court likewise did not give credence to Nutri-Asia's allegation that
Hygienic had no cause of action against it.55 As to the allegation that Nutri-
Asia's affirmative defenses could already be resolved without going through
trial, the trial court held that the issues Nutri-Asia raised "must be heard in a
full blown trial."56 It held:
It is the view of the court that the arguments presented are factual in nature.
Trial therefore is essential for the court to best appreciate the facts presented.
It cannot be done by mere reading, study and evaluation of the documents
attached to the complaint and the arguments presented in their respective
motions and comments to prevent miscarriage of justice.
....
[Rule 16, Section 6 of the Rules of Civil Procedure] provides that it is
discretionary upon the court to conduct a preliminary hearing on the
affirmative defenses as a ground for dismissal.
Considering therefore that it is discretionary upon the court to allow the
hearing on special and affirmative defenses[,] this court would rather
conduct a full blown trial so it could evaluate the respective issues raised by
the parties.57
The trial court ruled that Nutri-Asia's Counter-Claim was permissive in
nature; thus, it could not acquire jurisdiction over the Counter-Claim unless
the filing fees were paid.58
The dispositive portion of the trial court's May 24, 2010 Order read:
Considering the above premises, the Omnibus Motion is hereby denied.
Defendant is directed to pay the appropriate docket fees on its permissive
counterclaim within thirty (30) days from receipt of this order.
Let the pre-trial of the above case be set on July 28, 2010 at 8:30 A.M.
Notify Attys. Malinao and Po of this order.
SO ORDERED.59
Nutri-Asia filed a Motion for Reconsideration.60 However, in its March 14,
2011 Joint Order,61 the Regional Trial Court Branch 24, Manila denied the
Motion. It also endorsed the case for mediation to the Philippine Mediation
Center and set a pre-trial conference on May 11, 2011, in case mediation was
unsuccessful.62
Thus, Nutri-Asia filed a Petition for Certiorari63 before the Court of
Appeals.
In its January 13, 2012 Decision,64 the Court of Appeals granted the
Petition.65 It held:
Here, the trial courts rendered the assailed Orders deferring a ruling on the
issues of venue· and compliance with a condition precedent, which is the
arbitration clause. No trial was necessary to resolve them. All the trial courts
ought to know could be determined from the documents on record, namely,
the sales invoices, the purchase orders, the respective places of business of
petitioner and private respondent, and the jurisprudence on these issues. We
cannot envision any factual question, and the trial courts did not mention
any, to be threshed out before they can rule on these affirmative defenses.
The error in refusing to resolve them violates so basic and elemental precepts
on what and how discretion is to be exercised. We have to set aside and
reverse these Orders.66 (Emphasis in the original)
The Court of Appeals also found that "the trial courts committed grave abuse
of discretion in allowing the complaint to stand and stay in Manila."67 It
held that since the signature of Nutri-Asia's employee in the Sales Invoices
was only for the receipt of goods, Nutri-Asia did not agree to be bound by
the venue stipulation in the Sales Invoices. Meanwhile, Hygienic did not
deny that an arbitration clause was written on the Purchase Orders.68 Its
representative even "acknowledged its conformity to the purchase orders."69
Since Hygienic "availed of the advantages and benefits of the purchase
orders when it acted on them[,]"70 it is thus estopped from rebuffing the
arbitration clause.71
The Court of Appeals held that Nutri-Asia should have submitted its
Counter-Claim to arbitration for resolution. Thus, whether the Counter
Claim was permissive or compulsory was irrelevant.72
The dispositive portion of the Court of Appeals January 13, 2012 Decision
read:
ACCORDINGLY, the petition is GRANTED. The Orders dated May 24,
2010 and March 14, 2011 of the Regional Trial Court, Branches 46 and 24,
in Civil Case No. 09-121849, are REVERSED AND SET ASIDE. The
complaint and the counterclaim in Civil Case No. 09-121849 are
DISMISSED WITHOUT PREJUDICE to referral of the disputes between
petitioner Nutri-Asia, Inc. and private respondent Hygienic Packaging
Corporation to arbitration, as stipulated in the purchase orders. No costs.
SO ORDERED.73 (Emphasis in the original)
Hygienic filed a Motion for Reconsideration,74 but it was denied by the
Court of Appeals in its March 28, 2012 Resolution.75
On May 14, 2012, Hygienic filed a Petition for Review on Certiorari76
against Nutri-Asia before this Court. It prayed that the Court of Appeals
January 13, 2012 Decision and March 28, 2012 Resolution be reversed and
set aside, and the trial court's May 24, 2010 Order and March 14, 2011 Joint
Order be reinstated.77 Respondent filed its Comment78 on August 22, 2012,
while petitioner filed its Reply79 on September 4, 2013.
In its October 7, 2013 Resolution,80 this Court gave due course to the
Petition and required the parties to submit their respective memoranda.81
Petitioner filed its Memorandum of Arguments82 on December 12, 2013,
while respondent filed its Memorandum83 on December 19, 2013.
Petitioner argues that the decision of the Court of Appeals to dismiss the
Complaint and deny its Motion for Reconsideration is improper. It claims
that the Court of Appeals did not discuss the issues it raised in its
pleadings.84 Moreover, if the arbitration clause was found to be valid, the
Court of Appeals should have "referred the matter to arbitration and
suspended the proceedings of the case."85
Petitioner maintains that the arbitration clause lacks the elements of a valid
arbitration agreement. Although present in writing, it was not properly
subscribed, and the person who signed the Purchase Orders was only a
messenger, not petitioner's authorized agent. Thus, the arbitration clause
cannot bind petitioner.86
Petitioner reiterates that the Purchase Orders constitute respondent's offer to
petitioner to enter into a contract with it. Meanwhile, the Sales Invoices
constitute petitioner's counter-offer rejecting the stipulation clause.87 Since
the parties did not agree on the arbitration agreement, the arbitration clause
is "inoperative and incapable of being performed, if not totally null and
void."88
Petitioner also insists that the venue was properly laid when it filed the
Complaint before the trial court in Manila. It claims that when respondent
accepted the Sales Invoices without protest, it adhered to the contract, which
included the venue stipulation. Petitioner points out that the person who
signed the Sales Invoices was a high-ranking officer of respondent, not a
mere messenger. By signing the Sales Invoices, respondent's representative
bound the company to the venue stipulation.89
Petitioner asserts that its Motion for Reconsideration and Petition are not
prohibited pleadings. It filed the Motion to question both its Complaint's
dismissal and the case's supposed referral to arbitration. Thus, the Motion
does not fall under Rule 4.6 of the Special Rules of Court on Alternative
Dispute Resolution. There is no basis for this Court to deny outright the
Petition, which assails the Court of Appeals Resolution denying the
Motion.90
Petitioner also argues it raised purely questions of law:91
The main contention of the petitioner is that the alleged arbitration
agreement between the parties of this case did not comply with the requisites
provided in the Rules. This is certainly not a question of fact but rather, a
question of law, as it necessitates the interpretation and application of
Section 4 of [Republic Act No.] 876 to the attendant facts of the case.
....
Contrary to the position of the respondent, the specific issue on whether or
not the messenger-signatory had the authority to bind petitioner Nutri-Asia
with respect to the Arbitration Clause is not at all a question of fact. [Neither
the] identity nor the rank of the signatory was not disputed or put in question
so as to require further reception of evidence and conduction of trial. The
truth or falsehood of the incidents related to the act of signing of the mere
messenger is not disputed by the respondent. The issue is only with respect
to his very authority to bind petitioner Hygienic as to the alleged agreement
on arbitration. In short, the issue is limited to whether or not the messenger
acted as a lawful agent of the petitioner - and this is undeniably a pure
question of law.
The same rationale applies on the issue raised by the petitioner as to whether
or not the document pe1iaining to the arbitration clause was properly
subscribed.
... This specific issue merely concerns the correct application of law or
jurisprudence as to the construction of the term "subscribed" and does not
require the examination of the probative value of evidence pertaining to the
document containing the arbitration clause.92 (Emphasis in the original)
Lastly, assuming that petitioner raised factual issues, it argues that these
issues fall under the exceptions provided by law and jurisprudence;93
specifically, when the Court of Appeals rendered its Decision: (1) "based on
a misapprehension of facts";94 and (2) its findings were "contrary to those of
the trial court[.]"95
Respondent counters that petitioner's Motion for Reconsideration and
Petition for Review should have been dismissed outright under Rule 4.6 of
the Special Rules of Court on Alternative Dispute Resolution.96 Since the
Court of Appeals referred the dispute to arbitration, it is "immediately
executory - not subject to a motion for reconsideration, appeal[,] or petition
for certiorari[.]"97
Respondent argues that the Court of Appeals correctly dismissed the case
since the parties failed to submit the case to arbitration. In any case, since it
already found that the venue was improperly laid, the Court of Appeals did
not err in dismissing the case.98
Respondent further claims that the Petition raises questions of fact.99 It
states that petitioner, in filing the Petition, wants this Court "to review the
evidence on record and ascertain the authority of the persons who signed the
Purchase Orders, as well as the Sales Invoices."100 This Court will then
have to examine these facts:
(a)
The identities of the persons who signed the Purchase Orders and the Sales
Invoices;
(b)
The positions of the persons in HYGIENIC [NUTRI-ASIA never stipulated
on the positions of the said persons] who signed the Purchase Orders;
(c)
The positions of the persons who ostensibly signed the Sales Invoices;
(d)
The duties and functions of the persons who signed the Purchase Orders and
the Sales Invoices;
(e)
Whether the persons who signed the Purchase Orders had the authority to act
on behalf of HYGIENIC [To be clear, NUTRI-ASIA never admitted that the
persons were not authorized to act on behalf of HYGIENIC];
(f)
Whether the persons who signed the Sales Invoices had the authority to act
on behalf of NUTRI-ASIA [Again, NUTRI-ASIA never admitted the alleged
authority of the persons who signed the Sales Invoices]; and
[g]
The circumstances surrounding the signing of the Purchase Orders and the
Sales Invoices.101
Respondent adds that the conflicting findings of the trial court and the Court
of Appeals on the issue of arbitration do not suffice to allow the Petition.102
It highlights that in resolving the case, the question is "whether the Court of
Appeals correctly determined the presence of grave abuse of discretion in the
ruling of RTC-Manila[.]"103
Contrary to petitioner's assertion, respondent contends that the arbitration
clause is operative and capable of being performed. Aside from being in
writing, both parties subscribed to the Terms and Conditions of the Purchase
Orders.104 Petitioner's acceptance of the Terms and Conditions, which
included the arbitration clause, is "manifested by its issuance of the
corresponding Sales Invoices, which made reference to the relevant Purchase
Orders."105 By reflecting in its Sales Invoices the serial numbers of
respondent's Purchase Orders, petitioner "effectively incorporated the
Purchase Order and its contents into the Sales Invoice, including the
arbitration clause."106 For failing to refer the case to arbitration - a condition
precedent before taking judicial action-the Court of Appeals correctly
dismissed the case.107
Finally, respondent maintains that "the Sales Invoices and the venue
stipulation therein did not constitute a rejection of the arbitration clause in
the Purchase Orders."108 It claims that the persons who signed the Sales
Invoices were not respondent's employees, but of a third party contractor for
their logistics operations.109 It notes that above the signature line of the
Sales Invoices, the phrase "[r]eceived the above goods in good order and
condition"110 is written. The contractor's employees only signed the Sales
Invoices to signify that they received the deliveries. Their signatures cannot
bind respondent to the venue stipulation. Assuming that they were
authorized by respondent, the venue stipulation cannot supersede the
arbitration clause in the Purchase Orders.111 The Sales Invoices' venue
stipulation "does not authorize either party to do away with arbitration before
proceeding to the courts to seek relief."112
The sole issue for this Court's resolution is whether or not the action for
collection of sum of money was properly filed.
Petitioner and respondent differ as to where their dispute should be brought
for resolution. On the one hand, petitioner contends that the venue
stipulation in the Sales Invoices should be enforced. On the other hand,
respondent asserts that the arbitration clause in the Purchase Orders should
be carried out.
This Court cannot subscribe to either contention.
Parties are allowed to constitute any stipulation on the venue or mode of
dispute resolution as part of their freedom to contract under Article 1306 of
the Civil Code of the Philippines, which provides:
ARTICLE 1306. The contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order, or public policy.
Here, however, the records lack any written contract of sale containing the
specific terms and conditions agreed upon by the parties. The parties failed
to provide evidence of any contract, which could have contained stipulations
on the venue of dispute resolution. Nonetheless, petitioner and respondent
both claim that the Sales Invoices and the Purchase Orders, respectively,
contained a stipulation on where to raise issues on any conflict regarding the
sale of plastic containers. Each party also insists that the other party accepted
the venue stipulation in the Sales Invoices or the Purchase Orders when its
representative signed them.
Upon examination of the Sales Invoices and the Purchase Orders, this Court
cannot consider the documents as contracts that would bind the parties as to
the venue of dispute resolution.
A closer look at the Sales Invoices issued by petitioner reveals that above the
signature of respondent's representative is the phrase, "Received the above
goods in good order and condition."113 Clearly, the purpose of respondent's
representative in signing the Sales Invoices is merely to acknowledge that he
or she has received the plastic containers in good condition. He or she did
not affix his or her signature in any other capacity except as the recipient of
the goods. To extend the effect of the signature by including the venue
stipulation would be to stretch the intention of the signatory beyond his or
her objective. This Court, then, cannot bind respondent to the other
stipulations in the Sales Invoices.
A scrutiny of the Purchase Orders issued by respondent also reveals that
above the signature of petitioner's representative is the phrase
"Acknowledged By (Supplier)."114 Since the Purchase Orders indicated
how many pieces of plastic containers respondent wanted to order from
petitioner, the signatory merely affixed his or her signature to acknowledge
respondent's order. Moreover, the Purchase Orders included a note stating
that the "[Purchase Order] must be DULY acknowledged to facilitate
payment."115
Thus, it was necessary for petitioner's representative to sign the document
for the processing of payment. The act of signing the Purchase Orders, then,
was limited to acknowledging respondent's order and facilitating the
payment of the goods to be delivered. It did not bind petitioner to the terms
and conditions in the Purchase Orders, which included the arbitration clause.
Petitioner and respondent may have entered into a contract of sale with
respect to petitioner's merchandise. However, the case records do not show
that they have a contract in relation to the venue of any civil action arising
from their business transaction.
Cathay Metal Corporation v. Laguna West Multi-Purpose Cooperative,
Inc.116 provides, "[f]or there to be a contract, there must be a meeting of the
minds between the parties."117 Here, no evidence shows that petitioner and
respondent had a meeting of minds and agreed to submit any future issue
either to the trial court or to arbitration.
Since there is no contractual stipulation that can be enforced on the venue of
dispute resolution, the venue of petitioner's personal action will be governed
by the 1997 Revised Rules of Civil Procedure. Rule 4 provides:
RULE 4
Venue of Actions
SECTION 1. Venue of Real Actions. - Actions affecting title to or
possession of real property, or interest therein, shall be commenced and tried
in the proper court which has jurisdiction over the area wherein the real
property involved, or a portion thereof, is situated.
Forcible entry and detainer actions shall be commenced and tried in the
Municipal Trial Court of the municipality or city wherein the real property
involved, or a portion thereof, is situated.
SECTION 2. Venue of Personal Actions. - All other actions may be
commenced and tried where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants resides, or
in the case of a non-resident defendant where he may be found, at the
election of the plaintiff.
SECTION 3. Venue of Actions Against Nonresidents. - If any of the
defendants does not reside and is not found in the Philippines, and the action
affects the personal status of the plaintiff, or any property of said defendant
located in the Philippines, the action may be commenced and tried in the
court of the place where the plaintiff resides, or where the property or any
portion thereof is situated or found.
SECTION 4. When Rule not Applicable. - This Rule shall not apply -
(a) In those cases where a specific rule or law provides otherwise; or
(b) Where the parties have validly agreed in writing before the filing of the
action on the exclusive venue thereof.
In City of Lapu-Lapu v. Philippine Economic Zone Authority:118
[V]enue is "the place of trial or geographical location in which an action or
proceeding should be brought." In civil cases, venue is a matter of
procedural law. A party's objections to venue must be brought at the earliest
opportunity either in a motion to dismiss or in the answer; otherwise the
objection shall be deemed waived. When the venue of a civil action is
improperly laid, the court cannot motu proprio dismiss the case.
The venue of an action depends on whether the action is a real or personal
action. Should the action affect title to or possession of real property, or
interest therein, it is a real action. The action should be filed in the proper
court which has jurisdiction over the area wherein the real property involved,
or a portion thereof, is situated. If the action is a personal action, the action
shall be filed with the proper court where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or any of the principal defendants
resides, or in the case of a non-resident defendant where he may be found, at
the election of the plaintiff.119 (Emphasis supplied, citations omitted)
It has been consistently held that an action for collection of sum of money is
a personal action.120 Taking into account that no exception can be applied
in this case, the venue, then, is "where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or any of the principal defendants
resides, ... at the election of the plaintiff."121 For a corporation, its residence
is considered "the place where its principal office is located as stated in its
Articles of Incorporation."122
In its Complaint, petitioner stated that its principal place of business is on
San Vicente Road beside South Superhighway, San Pedro, Laguna.123
Meanwhile, respondent admitted in its Answer that its principal office is at
12/F Centerpoint Building, Garnet Road corner Julia Vargas Avenue,
Ortigas Center, Pasig City.124 Considering that the amount petitioner claims
falls within the jurisdiction of the Regional Trial Court,125 petitioner may
file its Complaint for sum of money either in the Regional Trial Court of San
Pedro, Laguna or in the Regional Trial Court of Pasig City.
Petitioner's erroneous belief on the applicability of the venue stipulation in
the Sales Invoices led it to file an action before the Regional Trial Court of
Manila. This error is fatal to petitioner's case.
One (1) of the grounds for dismissal of an action under Rule 16, Section
1126 of the 1997 Revised Rules of Civil Procedure is when the venue is
improperly laid. Although respondent did not file a Motion to Dismiss on
this ground, it cited the improper venue as one (1) of the affirmative defenses
in its Answer:127
9. The venue of the instant complaint is improperly laid.
9.1
The instant complaint for collection of a sum of money, a personal action
was filed before the Regional Trial Court of the City of Manila which is not
the proper venue for the instant complaint.
....
9.3
In paragraphs 1 and 2 of the instant complaint, the plaintiff had made an
admission on the pleading that its principal place of business is located at
San Vicente Road beside South Superhighway, San Pedro, [Laguna,] while
the principal place of business of defendant is located at 12/F The
Centerpoint Building, Garnet Road corner Julia Vargas Avenue, Ortigas
Center, Pasig City. With this admission on the pleading, it is clear that the
instant complaint should have been filed before the Regional Trial Court of
San Pedro, Laguna, where the plaintiff has its principal place of business or
before the Regional Trial Court of Pasig City, Laguna where the defendant
has its principal place of business.
9.4
The parties did not validly agree in writing before the filing of the action that
the Courts of the City of Manila shall be the exclusive venue thereof.
9.5
The alleged stipulation in the Sales Invoice that the parties submit
themselves to jurisdiction of the Courts of the City of Manila in any legal
action out of the transaction between the parties cannot and should not bind
defendant in the absence of the express conformity by the defendant. The
defendant has never signed the said Sales Invoice to signify its conformity to
the said stipulation regarding venue of actions.128 (Emphasis in the original)
This Court finds that the Court of Appeals is partly correct in ruling that the
trial court committed grave abuse of discretion in denying respondent's
Omnibus Motion. The assailed Court of Appeals January 13, 2012 Decision
held:
On the issue of venue, the trial courts committed grave abuse of discretion in
allowing the complaint to stand and stay in Manila. The sales invoices, if
viewed to be a contract on venue stipulation, were not signed by petitioner's
agent to be bound by such stipulation. The signature has to do with the
receipt of the purchased goods "in good order and condition." Petitioner did
not, therefore, agree to be restricted to a venue in Manila and was never
obliged to observe this unilateral statement in the sales invoices.129
(Citation omitted)
However, contrary to the Court of Appeals' finding on the validity of the
arbitration clause, this Court cannot give the stipulation any effect as
discussed earlier.
This Court reminds litigants that while the rules on venue are for the
convenience of plaintiffs, these rules do not give them unbounded freedom
to file their cases wherever they may please:130
[T]he rules on venue, like the other procedural rules, are designed to insure a
just and orderly administration of justice or the impartial and even-handed
determination of every action and proceeding. Obviously, this objective will
not be attained if the plaintiff is given unrestricted freedom to choose the
court where he may file his complaint or petition. The choice of venue
should not be left to the plaintiff's whim or caprice. He [or she] may be
impelled by some ulterior motivation in choosing to file a case in a particular
court even if not allowed by the rules on venue.131 (Citation omitted)
WHEREFORE, premises considered, the Court of Appeals January 13, 2012
Decision and March 28, 2012 Resolution in CA-G.R. SP No. 119511 are
AFFIRMED insofar as they reversed and set aside the May 24, 2010 Order
and March 14, 2011 Joint Order of the Regional Trial Court, Branches 46
and 24, in Civil Case No. 09-121849.
However, the rulings of the Court of Appeals dismissing the Complaint and
the Counter-Claim in Civil Case No. 09-121849 without prejudice to referral
of the disputes to arbitration are REVERSED and SET ASIDE.
The Complaint and the Counter-Claim in Civil Case No. 09-121849 are
DISMISSED WITHOUT PREJUDICE to the refiling of the same claims
before the proper court.
SO ORDERED.
FIRST DIVISION
[ G.R. No. 211966, August 07, 2017 ]
JOSE AUDIE ABAGATNAN, JOSEPHINE A. PARCE, JIMMY
ABAGATNAN, JOHN ABAGATNAN, JENALYN A. DE LEON, JOEY
ABAGATNAN, JOJIE ABAGATNAN, AND JOY ABAGATNAN,
PETITIONERS, VS. SPOUSES JONATHAN CLARITO AND ELSA
CLARITO, RESPONDENTS.
DECISION
DEL CASTILLO, J.:
We resolve the Petition for Review on Certiorari under Rule 45 of the Rules
of Court, assailing the June 20, 2013 Decision[1] and the February 3, 2014
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 03283 which
dismissed, albeit without prejudice, the Complaint for Unlawful Detainer
and Damages[3] filed by petitioners Jose Audie Abagatnan, Josephine A.
Parce, Jimmy Abagatnan, John Abagatnan, Jenalyn A. De Leon, Joey
Abagatnan, Jojie Abagatnan and Joy Abagatnan against respondents spouses
Jonathan Clarito and Elsa Clarito, for failure to comply with the mandatory
requirement of resorting to prior barangay conciliation, as required under
Section 412 of Republic Act No. 7160, or the Local Government Code
(LGC).
The Antecedent Facts
Wenceslao Abagatnan (Wenceslao) and his late wife, Lydia Capote (Lydia),
acquired a parcel of land designated as Lot 1472-B, with a total land area of
5,046 square meters, and located at Barangay Cogon, Roxas City from
Mateo Ambrad (Mateo) and Soteraña Clarito (Soteraña), by virtue of a Deed
of Absolute Sale[4] executed on August 1, 1967.[5]
On October 4, 1999, Lydia died, leaving her children, who are co-petitioners
in this case, to succeed into the ownership of her conjugal share of said
property.[6]
In 1990, respondents allegedly approached Wenceslao and asked for
permission to construct a residential house made of light materials on a 480-
square meter portion of Lot 1472-B (subject property). Because respondent
Jonathan Clarito (Jonathan) is a distant relative, Wenceslao allowed them to
do so subject to the condition that respondents will vacate the subject
property should he need the same for his own use.[7]
In September 2006, petitioners decided to sell portions of Lot 1472-B,
including the subject property which was then still being occupied by
respondents. They offered to sell said portion to respondents, but the latter
declined.[8]
Consequently, petitioners sent respondents a Demand Letter[9] dated
October 2, 2006 requiring the latter to vacate the subject property within
fifteen (15) days from receipt of the letter. The respondents, however,
refused to heed such demand.[10]
On November 10, 2006, petitioners filed a Complaint for Unlawful Detainer
and Damages[11] against respondents before the Municipal Trial Court in
Cities (MTCC), Branch 2, Roxas City, where they claimed to have been
unlawfully deprived of the use and possession of a portion of their land.
Notably, the Complaint alleged that prior barangay conciliation proceedings
are not required as a pre-condition for the filing of the case in court, given
that not all petitioners are residents of Roxas City. Specifically, petitioner
Jimmy C. Abagatnan (Jimmy) resided in Laguna, while petitioner Jenalyn A.
De Leon (Jenalyn) resided in Pasig City.[12]
In their Answer with Counterclaim,[13] respondents argued that prior
barangay conciliation is a mandatory requirement that cannot be dispensed
with, considering that Jimmy and Jenalyn had already executed a Special
Power of Attorney[14] (SPA) in favor of their co-petitioner and sister,
Josephine A. Parce (Josephine), who is a resident of Roxas City.[15]
Respondents also insisted that Lot 1472-B is only a portion of Lot 1472
which is covered by its mother title, Original Certificate of Title (OCT) No.
9882, under the name of Nicolas Clarito, et al., Jonathan's predecessors-in-
interest. Unfortunately, said title was lost or destroyed during the war, but a
copy of the owner's duplicate copy was presented before the trial court and
made part of the records.[16]
The Municipal Trial Court in Cities Ruling
In its Decision[17] dated August 17, 2007, the MTCC rendered judgment in
favor of petitioners and ordered respondents to remove the structures they
erected on the subject property and to vacate the same. It also directed
respondents to pay petitioners the amount of P500.00 per month as
reasonable compensation for the use and occupancy of the subject property
from the date of the filing of the action up to and until the structures on the
property have been removed, as well as the cost of suit.[18]
The MTCC ruled that by preponderance of evidence, petitioners have a
better right of material possession over the subject property. It gave merit to
petitioners' proof of purchase of Lot 1472-B from Mateo and Soterana, the
Demand Letter dated October 2, 2006 that they sent to respondents, and
respondents' refusal to vacate the property.[19]
Respondents thereafter appealed the MTCC Decision to the Regional Trial
Court (RTC), Branch 19, Roxas City.
The Regional Trial Court Ruling
In its Decision[20] dated January 15, 2008, the RTC denied the appeal for
lack of merit. It ruled that since the parties raised the issue of ownership to
justify their claims of possession, and the evidence of ownership is
preponderant on petitioners, the MTCC was justified in ruling the case in the
latter's favor.[21]
The RTC, too, held that the lack of barangay conciliation proceedings cannot
be brought on appeal because it was not made an issue in the Pre-Trial
Order.[22]
Following the denial, respondents filed a Petition for Review[23] before the
CA, assailing the RTC's January 15, 2008 Decision.
The Court of Appeals Ruling
In its Decision dated June 20, 2013, the CA ruled that the findings of fact of
both the MTCC and the RTC are supported by the evidence on record. It
gave more probative value to the tax declarations and the Deed of Absolute
Sale submitted by petitioners, considering that only a copy of OCT No. 9882
was presented by respondents in court and said copy contained clouded and
blurred characters. The name of the alleged registered owner, Francisco
Clarito (Jonathan's father), is also not decipherable on the title.[24]
Nevertheless, the CA granted the Petition and dismissed the petitioners'
Complaint, albeit without prejudice, for lack of prior referral to the
Katarungang Pambarangay.[25] It pointed out that majority of petitioners
actually resided in Barangay Cogon, Roxas City, while the two non-residents
of Roxas City already executed an SPA in favor of Josephine, whom they
authorized, among others, to enter into an amicable settlement with
respondents. Since respondents also reside in the same barangay, the dispute
between the parties is clearly within the ambit of the Lupon Tagapamayapa's
(Lupon) authority.[26]
The CA thus concluded that petitioners' Complaint had been prematurely
filed with the MTCC, as it should have been first brought before the Lupon
for mandatory conciliation to accord the parties the chance for amicable
settlement.[27]
Petitioners moved for reconsideration, but the CA denied the motion in its
Resolution dated February 3, 2014. As a consequence, petitioners filed the
present Petition for Review on Certiorari before the Court on April 14, 2014,
assailing the CA's June 20, 2013 Decision and February 3, 2014 Resolution.
The Issue
Petitioners raise the sole issue of whether the CA correctly dismissed the
Complaint for failure to comply with the prior barangay conciliation
requirement under Section 412 of the LGC, despite the fact that not all real
parties in interest resided in the same city or municipality.[28]
The Court's Ruling
The Petition is impressed with merit.
xxx Section 412(a) of the LGC requires the parties to undergo a conciliation
process before the Lupon Chairman or the Pangkat as a pre-condition to the
filing of a complaint in court, thus:
SECTION 412. Conciliation. - (a) Pre-condition to Filing of Complaint in
Court. No complaint, petition, action, or proceeding involving any matter
within the authority of the lupon shall be filed or instituted directly in court
or any other government office for adjudication, unless there has been a
confrontation between the parties before the lupon chairman or the pangkat,
and that no conciliation or settlement has been reached as certified by the
lupon or pangkat secretary and attested to by the lupon or pangkat chairman
[or unless the settlement has been repudiated by the parties thereto. xxx][29]
(Emphasis supplied)
The LGC further provides that "the lupon of each barangay shall have
authority to bring together the parties actually residing in the same city or
municipality for amicable settlement of all disputes," subject to certain
exceptions enumerated in the law.[30]
One such exception is in cases where the dispute involves parties who
actually reside in barangays of different cities or municipalities, unless said
barangay units adjoin each other and the parties thereto agree to submit their
differences to amicable settlement by an appropriate lupon.[31]
Thus, parties who do not actually reside in the same city or municipality or
adjoining barangays are not required to submit their dispute to the lupon as a
pre¬condition to the filing of a complaint in court.
In Pascual v. Pascual[32] the Court ruled that the express statutory
requirement of actual residency in the LGC pertains specifically to the real
parties in interest in the case. It further explained that said requirement
cannot be construed to apply to the attorney-in-fact of the party-plaintiff, as
doing so would abrogate the meaning of a "real party in interest" as defined
in Section 2,[33] in relation to Section 3, of Rule 3 of the Rules of Court.
The same ruling was reiterated in Banting v. Spouses Maglapuz[34] where
the Court held that "the requirement under Section 412 of the [LGC] that a
case be referred for conciliation before the Lupon as a precondition to its
filing in court applies only to those cases where the real parties-in-interest
actually reside in the same city or municipality."
In the present case, the Complaint filed before the MTCC specifically
alleged that not all the real parties in interest in the case actually reside in
Roxas City:[35] Jimmy resided in Poblacion, Siniloan, Laguna, while
Jenalyn resided in Brgy. de La Paz, Pasig City.[36] As such, the lupon has
no jurisdiction over their dispute, and prior referral of the case for barangay
conciliation is not a pre-condition to its filing in court.
This is true regardless of the fact that Jimmy and Jenalyn had already
authorized their sister and co-petitioner, Josephine, to act as their attorney-
in-fact in the ejectment proceedings before the MTCC. As previously
explained, the residence of the attorney-in-fact of a real party in interest is
irrelevant in so far as the "actual residence" requirement under the LGC for
prior barangay conciliation is concerned.
Besides, as the RTC correctly pointed out, the lack of barangay conciliation
proceedings cannot be brought on appeal because it was not included in the
Pre-Trial Order, which only enumerates the following issues to be resolved
during the trial:
The following issues to be resolved by plaintiffs:
1. Whether or not the defendants have unlawfully withheld the portion of Lot
1472 over which were occupied by them, particularly Lot 1472-B;
2. Whether or not the defendants can be lawfully ejected from that portion of
Lot 1472-B which are occupied by them;
3. Whether or not the prevailing parties can recover damages. For the
defendants, the issues to be resolved are as follows:
1. Whether or not the plaintiffs have a cause of action for unlawful detainer
against the defendants; and,
2. Whether or not the prevailing parties are entitled to an award of damages.
[37]
On this point, it is important to stress that the issues to be tried between
parties in a case is limited to those defined in the pre-trial order[38] as well
as those which may be implied from those written in the order or inferred
from those listed by necessary implication.[39]
In this case, a cursory reading of the issues listed in the Pre-Trial Order
easily shows that the parties never agreed, whether expressly or impliedly, to
include the lack of prior barangay conciliation proceedings in the list of
issues to be resolved before the MTCC.
In effect, the non-inclusion of this issue in the Pre-Trial Order barred its
consideration during the trial. This is but consistent with the rule that parties
are bound by the delimitation of issues that they agreed upon during the pre-
trial proceedings.[40]
WHEREFORE, we GRANT the Petition for Review on Certiorari. The
Decision dated June 20, 2013 and the Resolution dated February 3, 2014 of
the Court of Appeals in CA-G.R. SP No. 03283 are REVERSED and SET
ASIDE. The Decision dated January 15, 2008 of the Regional Trial Court,
Branch 19, Roxas City in Civil Case No. V-47-07 is REINSTATED.
SO ORDERED.
SECOND DIVISION
[ G.R. No. 212987, August 06, 2018 ]
ELIZABETH M. LANSANGAN, PETITIONER, VS. ANTONIO S.
CAISIP, RESPONDENT.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari [1] are the Decision[2] dated
January 23, 2014 and the Resolution[3] dated May 20, 2014 of the Court of
Appeals (CA) in CA-G.R. SP No. 129824, which affirmed the Decision[4]
dated January 31, 2013 and the Order[5] dated April 2, 2013 of the Regional
Trial Court of Capas, Tarlac, Branch 66 (RTC) in Special Civil Action Case
No. 58-C-12, upholding the motu proprio dismissal of petitioner Elizabeth
M. Lansangan's (petitioner) complaint for failure to refer the matter for
barangay conciliation proceedings before recourse to the courts.
The Facts
This case stemmed from a Complaint for Sum of Money and Damages[6]
dated June 27, 2012 filed before the 2nd Municipal Circuit Trial Court of
Capas-Bamban-Concepcion, Tarlac (MCTC) by petitioner against
respondent Antonio Caisip (respondent), docketed as Civil Case No. 2738-
12.
Petitioner, a resident of Camanse Street, Purok 4, Rose Park, Concepcion,
Tarlac, alleged that respondent, a resident of Barangay Sto. Niño,
Concepcion, Tarlac, executed a promissory note[7] in her favor in the
amount of €2,522.00 payable in three (3) installments. As respondent
defaulted in his obligation under the promissory note and refused to heed
petitioner's demands to comply therewith, the latter was constrained to file
the said complaint.[8]
Since respondent failed to file any responsive pleading, petitioner moved to
declare him in default and for the MCTC to render judgment,[9] which was
granted in an Order[10] dated August 28, 2012. Accordingly, the case was
submitted for resolution.[11]
The MCTC Ruling
In an Order[12] dated September 3, 2012, the MCTC motu proprio
dismissed without prejudice the complaint for failure to comply with the
provisions of Republic Act No. (RA) 7160,[13] otherwise known as "The
Local Government Code of 1991," which requires the prior referral of the
dispute between residents of the same barangay for conciliation proceedings
before the filing of a case in court.[14]
Petitioner moved for reconsideration,[15] which was, however, denied in an
Order[16] dated September 25, 2012. In the said Order, the MCTC opined
that petitioner's failure to refer the matter for barangay conciliation
proceedings rendered it without jurisdiction to rule on her complaint.[17]
Aggrieved, she filed a petition for certiorari[18] before the RTC.
The RTC Ruling
In a Decision[19] dated January 31, 2013, the RTC upheld the motu proprio
dismissal of petitioner's complaint. It ruled that prior barangay conciliation
proceedings before the filing of the instant complaint is jurisdictional; thus,
non-compliance therewith warrants its dismissal.[20]
Petitioner moved for reconsideration,[21] but the same was denied in an
Order[22] dated April 2, 2013. Undeterred, she appealed[23] to the CA.
The CA Ruling
In a Decision[24] dated January 23, 2014, the CA affirmed the RTC Ruling.
It held that since the party-litigants are both residents of Concepcion Tarlac,
petitioner's complaint should have undergone the mandatory barangay
conciliation proceedings before raising the matter before the courts.[25]
Undaunted, Elizabeth moved for reconsideration,[26] which was denied in a
Resolution[27] dated May 20, 2014; hence, this petition.
The Issue Before the Court
The issue for the Court's resolution is whether or not the CA erred in
upholding the motu proprio dismissal of petitioner's complaint.
The Court's Ruling
The petition is meritorious.
Section 1, Rule 16 of the Rules of Court provides for the grounds that may
be raised in a motion to dismiss a complaint, to wit:
Section 1. Grounds. – Within the time for but before filing the answer to the
complaint or pleading asserting a claim, a motion to dismiss may be made on
any of the following grounds:
(a) That the court has no jurisdiction over the person of the defending party;
(b) That the court has no jurisdiction over the subject matter of the claim;
(c) That venue is improperly laid;
(d) That the plaintiff has no legal capacity to sue;
(e) That there is another action pending between the same parties for the
same cause;
(f) That the cause of action is barred by a prior judgment or by the statute of
limitations;
(g) That the pleading asserting the claim states no cause of action;
(h) That the claim or demand set forth in the plaintiff's pleading has been
paid, waived, abandoned, or otherwise extinguished;
(i) That the claim on which the action is founded is unenforceable under the
provisions of the statute of frauds; and
(j) That a condition precedent for filing the claim has not been complied
with. (Emphasis and underscoring supplied)
As a general rule, the above-listed grounds must be invoked by the party-
litigant at the earliest opportunity, as in a motion to dismiss or in the answer;
otherwise, such grounds are deemed waived. As an exception, however, the
courts may order the motu proprio dismissal of a case on the grounds of lack
of jurisdiction over the subject matter, litis pendentia, res judicata, and
prescription of action, pursuant to Section 1, Rule 9 of the Rules of Court,
which reads:
Section 1. Defenses and objections not pleaded. — Defenses and objections
not pleaded either in a motion to dismiss or in the answer are deemed
waived. However, when it appears from the pleadings or the evidence on
record that the court has no jurisdiction over the subject matter, that there is
another action pending between the same parties for the same cause, or that
the action is barred by a prior judgment or by statute of limitations, the court
shall dismiss the claim.
In this case, the motu proprio dismissal of the complaint was anchored on
petitioner's failure to refer the matter for barangay conciliation proceedings
which in certain instances, is a condition precedent before filing a case in
court. As Section 412 (a) of RA 7160 provides, the conduct of barangay
conciliation proceedings is a pre-condition to the filing of a complaint
involving any matter within the authority of the lupon, to wit:
Section 412. Conciliation. — (a) Pre-condition to Filing of Complaint in
Court. — No complaint, petition, action, or proceeding involving any matter
within the authority of the lupon shall be filed or instituted directly in court
or any other government office for adjudication, unless there has been a
confrontation between the parties before the lupon chairman or the pangkat,
and that no conciliation or settlement has been reached as certified by the
lupon secretary or pangkat secretary as attested to by the lupon or pangkat
chairman or unless the settlement has been repudiated by the parties thereto.
Under Section 409 (a) of RA 7160, "[d]isputes between persons actually
residing in the same barangay [(as in the parties in this case)] shall be
brought for amicable settlement before the lupon of said barangay."
Lifted from Presidential Decree No. 1508,[28] otherwise known as the
"Katarungang Pambarangay Law," the primordial objective of a prior
barangay conciliation is to reduce the number of court litigations and prevent
the deterioration of the quality of justice which has been brought by the
indiscriminate filing of cases in courts. Subject to certain exemptions,[29] a
party's failure to comply with this requirement before filing a case in court
would render his complaint dismissible on the ground of failure to comply
with a condition precedent, pursuant to Section 1 (j), Rule 16 of the Rules of
Court.[30]
Notably, in Aquino v. Aure,[31] the Court clarified that such conciliation
process is not a jurisdictional requirement, such that non-compliance
therewith cannot affect the jurisdiction which the court has otherwise
acquired over the subject matter or over the person of the defendant,[32]
viz.:
Ordinarily, non-compliance with the condition precedent [of prior barangay
conciliation] could affect the sufficiency of the plaintiff's cause of action and
make his complaint vulnerable to dismissal on [the] ground of lack of cause
of action or prematurity; but the same would not prevent a court of
competent jurisdiction from exercising its power of adjudication over the
case before it, where the defendants, as in this case, failed to object to such
exercise of jurisdiction in their answer and even during the entire
proceedings a quo.[33]
Similarly, in Banares II v. Balising,[34] it was mentioned that the non-
referral of a case for barangay conciliation when so required under the law is
not jurisdictional in nature, and may therefore be deemed waived if not
raised seasonably in a motion to dismiss or in a responsive pleading.[35]
Here, the ground of non-compliance with a condition precedent, i.e.,
undergoing prior barangay conciliation proceedings, was not invoked at the
earliest opportunity, as in fact, respondent was declared in default for failure
to file a responsive pleading despite due notice. Therefore, it was grave error
for the courts a quo to order the dismissal of petitioner's complaint on said
ground. Hence, in order to rectify the situation, the Court finds it proper that
the case be reinstated and remanded to the MCTC, which is the court of
origin, for its resolution on the merits.
WHEREFORE, the petition is GRANTED. The Decision dated January 23,
2014 and the Resolution dated May 20, 2014 of the Court of Appeals in CA-
G.R. SP No. 129824 are hereby REVERSED and SET ASIDE. Accordingly,
Civil Case No. 2738-12 is hereby REINSTATED and REMANDED to the
2nd Municipal Circuit Trial Court of Capas-Bamban-Concepcion, Tarlac for
resolution on the merits, with reasonable dispatch.
SO ORDERED.
SECOND DIVISION
[ G.R. No. 164594, April 22, 2015 ]
MICHAEL SEBASTIAN, PETITIONER, VS. ANNABEL LAGMAY
NG, REPRESENTED BY HER ATTORNEY-IN-FACT, ANGELITA
LAGMAY, RESPONDENT.
DECISION
BRION, J.:
We resolve the petition for review on certiorari,[1] filed by petitioner
Michael Sebastian (Michael), assailing the March 31, 2004 Decision,[2] and
the July 15, 2004 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP
No. 65450.
The CA decision reversed and set aside the decision of the Regional Trial
Court (RTC) of Palayan City, Branch 40, in SP. Proc. Case No. 0096-P.
Factual Background
Sometime in 1997, Angelita Lagmay (Angelita), acting as representative and
attorney-in-fact of her daughter Annabel Lagmay Ng (Annabel), filed a
complaint before the Barangay Justice of Siclong, Laur, Nueva Ecija. She
sought to collect from Michael the sum of P350,000.00 that Annabel sent to
Michael. She claimed that Annabel and Michael were once sweethearts, and
that they agreed to jointly invest their financial resources to buy a truck. She
alleged that while Annabel was working in Hongkong, Annabel sent Michael
the amount of P350,000.00 to purchase the truck. However, after Annabel
and Michael's relationship has ended, Michael allegedly refused to return the
money to Annabel, prompting the latter to bring the matter before the
Barangay Justice.
On July 9, 1997, the parties entered into an amicable settlement, evidenced
by a document denominated as "kasunduan''[4] wherein Michael agreed to
pay Annabel the amount of P250,000.00 on specific dates. The kasunduan
was signed by Angelita (on behalf of Annabel), Michael, and the members of
the pangkat ng tagapagkasundo. The kasunduan reads:
KASUNDUAN
Nagkasundo ang dalawang panig na pagkayari ng labing apat na buwan (14
months) Simula ngayong July 9, 1997 hanggang September 1998 ay
kailangan ng maibigay ni Mr. Sebastian ang pera ni Ms. Anabelle Lagmay.
At napagkasunduan ay dalawang hulog ang halagang P250,000.00 na pera ni
Ms.Lagmay at Simula ng pagbibigay ni Mr. Sebastian ay sa buwan ng
September 1998.
At upang may katunayan ang lahat ng napag usapan ay lumagda sa ibaba
nito at sa harap ng mga saksi ngayong ika-9 ng Hulyo, 1997
Mrs. Angelita Lagmay - (Lagda)
Mr. Michael Sebastian - (Lagda)
Saksi: Kagawad Rolando Mendizabal - (Lagda)
Hepe Quirino Sapon - (Lagda)
Benjamin Sebastian - (Lagda)
Jun Roxas - (Lagda)
Angelita alleged that the kasunduan was not repudiated within a period of
ten (10) days from the settlement, in accordance with the Katarungang
Pambarangay Law embodied in the Local Government Code of 1991
[Republic Act (R.A.) No. 7160], and Section 14 of its Implementing Rules.
When Michael failed to honor the kasunduan, Angelita brought the matter
back to the Barangay, but the Barangay Captain failed to enforce the
kasunduan, and instead, issued a Certification to File Action.
After about one and a half years from the date of the execution of the
kasunduan or on January 15, 1999, Angelita filed with the Municipal Circuit
Trial Court (MCTC) of Laur and Gabaldon, Nueva Ecija, a Motion for
Execution of the kasunduan.
Michael moved for the dismissal of the Motion for Execution, citing as a
ground Angelita's alleged violation of Section 15, Rule 13 of the 1997 Rules
of Civil Procedure.
On January 17, 2000, the MCTC rendered a decision[5] in favor of Annabel,
the dispositive portion of which reads, as follows:
WHEREFORE, the plaintiff through counsel has satisfactorily proven by
preponderance of evidence based on Exhibits "A," "B," "C," "D," and "F,"
that defendant has obligation to the plaintiff in the amount ofP250,000.00.
IN VIEW OF THE FOREGOING, the Motion for Execution filed by the
plaintiff is hereby granted based on Sec. 2, Rule 7 of the Implementing Rules
and Regulations of Republic Act No. 7160, and therefore, defendant is
hereby ordered within 15 days upon receipt of this decision to pay the
plaintiff the amount of P250,000.00 as evidenced by the Kasunduan (Exhibit
"C") with legal interests from July 9, 1997 until said obligation is fully paid,
and to pay attorney's fees for the plaintiffs counsel in the amount of
P15,000.00 and to pay the cost of the suit.
SO ORDERED.
Michael filed an appeal with the RTC arguing that the MCTC committed
grave abuse of discretion in prematurely deciding the case. Michael also
pointed out that a hearing was necessary for the petitioner to establish the
genuineness and due execution of the kasunduan.
The Regional Trial Court's Ruling
In its November 13, 2000 Decision,[6] the RTC, Branch 40 of Palayan City
upheld the MCTC decision, finding Michael liable to pay Annabel the sum
of P250,000.00. It held that Michael failed to assail the validity of the
kasunduan, or to adduce any evidence to dispute Annabel's claims or the
applicability of the Implementing Rules and Regulations of R.A. No. 7160.
The dispositive portion of the decision reads:
WHEREFORE, the assailed Decision and Order of the lower court is hereby
MODIFIED in that the appellant is ordered to pay the appellee the amount of
Two hundred Fifty Thousand pesos (P250,000.00) plus twelve percent
interest(12%) per annum from September, 1998 up to the time it is actually
paid and fifty Thousand Pesos(P50,000.00) representing attorney's fees.
Michael filed a Motion for Reconsideration arguing that: (i) an amicable
settlement or arbitration award can be enforced by the Lupon within six (6)
months from date of settlement or after the lapse of six (6) months, by
ordinary civil action in the appropriate City or Municipal Trial Court and not
by a mere Motion for execution; and (ii) the MCTC does not have
jurisdiction over the case since the amount of P250,000.00 (as the subject
matter of the kasunduan) is in excess of MCTC's jurisdictional amount of
P200,000.00.[7]
In its March 13, 2001 Order, the RTC granted Michael's Motion for
Reconsideration, and ruled that there is merit in the jurisdictional issue he
raised. It dismissed Angelita's Motion for Execution, and set aside the
MCTC Decision. The dispositive portion of the said Order reads:
WHEREFORE, the Motion for Reconsideration is GRANTED. The
Decision of the Court dated November 13, 2000 is hereby SET ASIDE. The
Decision of the Municipal Trial Court of Laur, Nueva Ecija dated January
17, 2000 is likewise SET ASIDE and the Motion for Execution of
Kasunduan is DISMISSED, the said court having had no jurisdiction to hear
and decide the matter.[8]
Angelita moved for the reconsideration of the March 13, 2001 Order, but the
motion was subsequently denied. Aggrieved, she filed a Petition for
Review[9] with the CA.
The Court of Appeal's Ruling
On August 2, 2001, the CA initially dismissed the petition for review on a
mere technical ground of failure to attach the Affidavit of Service. Angelita
moved for reconsideration, attaching in her motion the Affidavit of Service.
The CA granted the motion.
On March 31, 2004, the CA rendered its decision granting the petition, and
reversing the RTC's decision. The CA declared that the "appropriate local
trial court" stated in Section 2, Rule VII of the Implementing Rules of R.A.
No. 7160 refers to the municipal trial courts. Thus, contrary to Michael's
contention, the MCTC has jurisdiction to enforce any settlement or
arbitration award, regardless of the amount involved.
The CA also ruled that Michael's failure to repudiate the kasunduan in
accordance with the procedure prescribed under the Implementing Rules of
R.A. No. 7160, rendered the kasunduan final. Hence, Michael can no longer
assail the kasunduan on the ground of forgery.
Michael moved to reconsider this decision, but the CA denied his motion in
its resolution dated July 15, 2004. Hence, this petition.
The Petition
In the present petition for review on certiorari, Michael alleges that the
kasunduan cannot be given the force and effect of a final judgment because
it did not conform to the provisions of the Katarungang Pambarangay law
embodied in Book III, Title One, Chapter 7 of R.A. No. 7160. He points out
the following irregularities in the kasunduan's, execution, and claims that the
agreement forged between him and Angelita was fictitious and simulated:
(1) there was no record of the complaint in the Barangay;
(2) there was no notice of mediation sent to him;
(3) there was no constitution of the Pangkat Ng Tagapagasundo;
(4) the parties were never called upon to choose the three (3) members
from among the Lupon members;
(5) he had no participation in the execution of the kasunduan;
(6) his signature in the kasunduan was forged;
(7) he did not personally appear before the Barangay;
(8) there was no attestation clause;
(9) the kasunduan was neither reported nor filed before the MCTC;
and
(10) Annabel, the real party in interest, did not personally appear before
the Barangay as required by the law.
Michael additionally claims that the kasunduan is merely in the nature of a
private document. He also reiterates that since the amount of P250,000.00 -
the subject matter of the kasunduan - is in excess of MCTC's jurisdictional
amount of P200,000.00, the kasunduan is beyond the MCTC's jurisdiction to
hear and to resolve. Accordingly, the proceedings in the Barangay are all
nullity.
The Issues
The issues to be resolved in the present petition are:
Whether or not the MCTC has the authority and jurisdiction to execute the
kasunduan regardless of the amount involved;
Whether or not the kasunduan could be given the force and effect of a final
judgment; and
Whether or not the kasunduan can be enforced.
The Court's Ruling
We deny the petition.
A perusal of the body of the motion for
execution shows that it is actually in the
nature of an action for execution; hence,
it was a proper remedy;
We note at the outset that Michael raised - in his brief before the C A - the
issue of wrong remedy. He alleged that Angelita's recourse should have been
to file a civil action, not a mere motion for execution, in a regular court.
However, the CA failed to address this issue and only ruled on the issues of
the kasunduan's irregularities and the MCTC's jurisdiction.
A simple reading of Section 417 of the Local Government Code readily
discloses the two-tiered mode of enforcement of an amicable settlement. The
provision reads:
Section 417. Execution. - The amicable settlement or arbitration award may
be enforced by execution by the lupon within six (6) months from the date of
the settlement. After the lapse of such time, the settlement may be enforced
by action in the appropriate city or municipal court. [Emphasis ours.]
Under this provision, an amicable settlement or arbitration award that is not
repudiated within a period often (10) days from the settlement may be
enforced by: first, execution by the Lupon within six (6) months from the
date of the settlement; or second, by an action in the appropriate city or
municipal trial court if more than six (6) months from the date of settlement
has already elapsed.
Under the first mode of enforcement, the execution of an amicable
settlement could be done on mere motion of the party entitled thereto before
the Punong Barangay.[10] The proceedings in this case are summary in
nature and are governed by the Local Government Code and the
Katarungang Pambarangay Implementing Rules and Regulations.
The second mode of enforcement, on the other hand, is judicial in nature and
could only be resorted to through the institution of an action in a regular
form before the proper City/Municipal Trial Court.[11] The proceedings
shall be governed by the provisions of the Rules of Court.
Indisputably, Angelita chose to enforce the kasunduan under the second
mode and filed a motion for execution, which was docketed as Special
Proceedings No. 45-99. The question for our resolution is: Whether the
MCTC, through Angelita's motion for execution, is expressly authorized to
enforce the kasunduan under Section 417 of the Local Government Code?
The Court rules in the affirmative.
It is undisputed that what Angelita filed before the MCTC was captioned
"motion for execution," rather than a petition/complaint for execution.
A perusal of the motion for execution, however, shows that it contains the
material requirements of an initiatory action.
First, the motion is sufficient in form[12] and substance.[13] It is complete
with allegations of the ultimate facts constituting the cause of action; the
names and residences of the plaintiff and the defendant; it contains the
prayer for the MCTC to order the execution of the kasunduan; and there was
also a verification and certification against forum shopping.

Furthermore, attached to the motion are: 1) the authenticated special power
of attorney of Annabel, authorizing Angelita to file the present action on her
behalf; and 2) the copy of the kasunduan whose contents were quoted in the
body of the motion for execution.
It is well-settled that what are controlling in determining the nature of the
pleading are the allegations in the body and not the caption.[14]
Thus, the motion for execution that Angelita filed was intended to be an
initiatory pleading or an original action that is compliant with the
requirement under Section 3, Rule 6 of the Rules of Court that the complaint
should allege the plaintiffs cause of action and the names and residences of
the plaintiff and the defendant.
Angelita's motion could therefore be treated as an original action, and not
merely as a motion/special proceeding. For this reason, Annabel has filed the
proper remedy prescribed under Section 417 of the Local Government Code.
However, Angelita should pay the proper docket fees corresponding to the
filing of an action for execution. The docket fees shall be computed by the
Clerk of Court of the MCTC, with due consideration, of course, of what
Angelita had already paid when her motion for execution was docketed as a
special proceeding.
The kasunduan has the force and effect of a final judgment.
Under Section 416 of the Local Government Code, the amicable settlement
and arbitration award shall have the force and effect of a final judgment of a
court upon the expiration often (10) days from the date of its execution,
unless the settlement or award has been repudiated or a petition to nullify the
award has been filed before the proper city or municipal court.
Moreover, Section 14, Rule VI of the Katarungang Pambarangay
Implementing Rules states that the party's failure to repudiate the settlement
within the period often (10) days shall be deemed a waiver of the right to
challenge the settlement on the ground that his/her consent was vitiated by
fraud, violence or intimidation.
In the present case, the records reveal that Michael never repudiated the
kasunduan within the period prescribed by the law. Hence, the CA correctly
ruled that the kasunduan has the force and effect of a final judgment that is
ripe for execution.
Furthermore, the irregularities in the kasunduan's execution, and the claim of
forgery are deemed waived since Michael never raised these defenses in
accordance with the procedure prescribed under the Local Government
Code. Thus, we see no reason to discuss these issues in the present case.
The MCTC has the authority and jurisdiction
to enforce the kasunduan regardless of the amount involved.
The Court also finds that the CA correctly upheld the MCTC's jurisdiction to
enforce any settlement or arbitration .award issued by the Lupon.
We again draw attention to the provision of Section 417 of the Local
Government Code that after the lapse of the six (6) month period from the
date of the settlement, the agreement may be enforced by action in the
appropriate city or municipal court.
The law, as written, unequivocally speaks of the "appropriate city or
municipal court" as the forum for the execution of the settlement or
arbitration award issued by the Lupon. Notably, in expressly conferring
authority over these courts, Section 417 made no distinction with respect to
the amount involved or the nature of the issue involved. Thus, there can be
no question that the law's intendment was to grant jurisdiction over the
enforcement of settlement/arbitration awards to the city or municipal courts
regardless of the amount. A basic principle of interpretation is that words
must be given their literal meaning and applied without attempted
interpretation where the words of a statute are clear,' plain and free from
ambiguity.[15]
WHEREFORE, premises considered, we hereby DENY the petitioner's
petition for review on certiorari, and AFFIRM the March 31, 2004 Decision
of the Court of Appeals in CA-G.R. SP No. 65450.
Angelita Lagmay is ORDERED to pay the proper docket fees to be
computed by the Clerk of Court of the Municipal Circuit Trial Court of Laur
and Gabaldon, Nueva Ecija, with due consideration of what she had paid
when her motion for execution was docketed as a special proceeding.
SO ORDERED.