Rules 1-5
v. Court of Appeals, is the "compelling test of
1. EVANGELINE ALDAY, petitioner, vs.FGU INSURANCE
CORPORATION, respondent.
GONZAGA-REYES, J.: G.R. No. 138822 January 23,
2001
Facts:
FGU insurance filed a collection case with damages,
etc. against their insurance agent, Alday who allegedly
owed it unliquidated cash advances, unremitted costs of
premiums and other charges. Alday filed her answer and by
way of counterclaim asserted her right for the alleged unpaid
commissions and bonuses and damages against FGU.
FGU filed a "Motion to Strike Out Answer With Compulsory
Counterclaim And To Declare Defendant In Default" because
Alday's answer was allegedly filed out of time. Trial court
denied the motion and rejected FGU's motion for
reconsideration.
FGU filed a motion to dismiss Alday's counterclaim,
contending that the trial court never acquired jurisdiction
over the same because of the non-payment of docket fees
by Alday. In response, Alday asked the trial court to declare
her counterclaim as exempt from payment of docket fees
since it is compulsory and that FGU be declared in default for
having failed to answer such counterclaim.
Trial court granted FGU's motion to dismiss Alday's
counterclaim and consequently, denied Alday's motion. The
court found Alday's counterclaim to be merely permissive in
nature and held that Alday's failure to pay docket fees
prevented the court from acquiring jurisdiction over the
same. The trial court similar denied Alday's motion for
reconsideration. The Court of Appeals sustained the trial
court, finding that Alday's own admissions, as contained in
her answer, show that her counterclaim is merely
permissive. The appellate court denied Alday's motion for
reconsideration, giving rise to the present petition.
Issue:
Whether or not Alday is required to pay docket fees?
Held:
In determining if Alday is required to pay the
docket fees, the Supreme Court ruled first on the issue of
whether or not the counterclaim of petitioner is compulsory
or permissive in nature.
A compulsory counterclaim is one which, being
cognizable by the regular courts of justice, arises out of or is
connected with the transaction or occurrence constituting
the subject matter of the opposing party's claim and does
not require for its adjudication the presence of third parties
of whom the court cannot acquire jurisdiction.
In Valencia v. Court of Appeals, this Court
capsulized the criteria or tests that may be used in
determining whether a counterclaim is compulsory or
permissive, summarized as follows:
1. Are the issues of fact and law raised by the claim
and counterclaim largely the same?
2. Would res judicata bar a subsequent suit on
defendant's claim absent the compulsory
counterclaim rule?
3. Will substantially the same evidence support or
refute plaintiff's claim as well s defendant's
counterclaim?
4. Is there any logical relation between the claim
and the counterclaim?
Another test, applied in the more recent case of Quintanilla
compulsoriness" which requires "a logical relationship
between the claim and counterclaim, that is, where
conducting separate trials of the respective claims of the
parties would entail a substantial duplication of effort and
time by the parties and the court."
Tested against the abovementioned standards,
petitioner's counterclaim for commissions, bonuses, and
accumulated premium reserves is merely permissive. The
evidence required to prove petitioner's claims differs from
that needed to establish respondent's demands for the
recovery of cash accountabilities from petitioner, such as
cash advances and costs of premiums.
The recovery of respondent's claims is not
contingent or dependent upon establishing petitioner's
counterclaim, such that conducting separate trials will not
result in the substantial duplication of the time and effort of
the court and the parties. One would search the records in
vain for a logical connection between the parties' claims.
This conclusion is further reinforced by petitioner's
own admissions since she declared in her answer that
respondent's cause of action, unlike her own, was not based
upon the Special Agent's Contract.
However, petitioner's claims for damages, allegedly
suffered as a result of the filing by respondent of its
complaint, are compulsory.
There is no need for need for petitioner to pay docket
fees for her compulsory counterclaim. On the other hand, in
order for the trial court to acquire jurisdiction over her
permissive counterclaim, petitioner is bound to pay the
prescribed docket fees. The rule on the payment of filing
fees has been laid down by the Court in the case of Sun
Insurance Office, Ltd. V. Hon. Maximiano Asuncion-
1. It is not simply the filing of the complaint or
appropriate initiatory pleading, but the payment of the
prescribed docket fee, that vests a trial court with
jurisdiction over the subject-matter or nature of the
action. Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court
may allow payment of the fee within a reasonable time
but in no case beyond the applicable prescriptive or
reglementary period.
2. The same rule applies to permissive counterclaims,
third-party claims and similar pleadings, which shall not
be considered filed until and unless the filing fee
prescribed therefor is paid. The court may allow
payment of said fee within a reasonable time but also
in no case beyond its applicable prescriptive or
reglementary period.
3. Where the trial court acquires jurisdiction over a
claim by the filing of the appropriate pleading and
payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not
specified in the pleading, or if specified the same
has been left for determination by the court, the
additional filing fee therefor shall constitute a lien
on the judgment. It shall be the responsibility of
the Clerk of Court or his duly authorized deputy to
enforce said lien and assess and collect the
additional fee.
2. KOREA TECHNOLOGIES CO., G.R. No. 143581
LTD., vs. LERMA
Facts:
KOGIES, korean corp. entered into a contract with
Pacific General Steel (PGSMC), domestic corporation,
whereby KOGIES would set up an LPG Cylinder
Manufacturing Plant in Carmona, Cavite. The contract was
executed in the Philippines and an amendment was executed
in Korea.
The contract and its amendment stipulated that KOGIES will
ship the machinery and facilities necessary for manufacturing
LPG cylinders for which PGSMC would pay USD
1,224,000. KOGIES would install and initiate the operation of
the plant for which PGSMC bound itself to pay USD 306,000
upon the plant’s production of the 11-kg. LPG cylinder
samples. Thus, the total contract price amounted to USD
1,530,000. PGSMC paid KOGIES USD 1,224,000.
After the installation of the plant, the initial operation could
not be conducted as PGSMC encountered financial difficulties
affecting the supply of materials. For the remaining balance
for the installation and initial operation of the plant, PGSMC
issued two postdated checks.
When KOGIES deposited the checks, these were dishonored
for the reason PAYMENT STOPPED. This prompted it to send
a demand letter to PGSMC on May 7, 1998. The wife of
PGSMCs President on the other hand on the same date faxed
a letter to KOGIES President. She complained that not only
did KOGIES deliver a different brand of hydraulic press from
that agreed upon but it had not delivered several equipment
parts already paid for.
PGSMC replied that the two checks it issued KOGIES were
fully funded but the payments were stopped for reasons
previously made known to KOGIES.
On June 1, 1998, PGSMC informed KOGIES that PGSMC was
canceling their Contract on the ground that KOGIES had
altered the quantity and lowered the quality of the
machineries and equipment it delivered to PGSMC, and that
PGSMC would dismantle and transfer the machineries,
equipment, and facilities installed in the Carmona plant.
PGSMC again wrote KOGIES reiterating the contents of its
previous letter.
It averred that whatever was unfinished was PGSMCs fault
since it failed to procure raw materials due to lack of
funds. KOGIES, relying on Chung Fu Industries (Phils.), Inc.
v. Court of Appeals, insisted that the arbitration clause was
without question valid.
RTC denied KOGIES motion to dismiss PGSMCs compulsory
counterclaims as these counterclaims fell within the
requisites of compulsory counterclaims.
KOGIES filed an Urgent Motion for Reconsideration of the
September 21, 1998 RTC Order denying dismissal of PGSMCs
compulsory counterclaims. The CA held that the
counterclaims of PGSMC were compulsory ones and payment
of docket fees was not required since the Answer with
counterclaim was not an initiatory pleading.
Hence, we have this Petition for Review on Certiorari under
Rule 45.
Issue:
Whether or not PRIVATE RESPONDENT’S
COUNTERCLAIMS are ALL COMPULSORY NOT
NECESSITATING PAYMENT OF DOCKET FEES?
Held:
As aptly ruled by the CA, the counterclaims of
PGSMC were incorporated in its Answer with Compulsory
Counterclaim dated July 17, 1998 in accordance with Section
8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule
that was effective at the time the Answer with Counterclaim
was filed. Sec. 8 on existing counterclaim or cross-
claim states, A compulsory counterclaim or a cross-claim that
a defending party has at the time he files his answer shall be
contained therein.
On July 17, 1998, at the time PGSMC filed its
Answer incorporating its counterclaims against KOGIES, it
was not liable to pay filing fees for said counterclaims being
compulsory in nature. We stress, however, that
effective August 16, 2004 under Sec. 7, Rule 141, as
amended by A.M. No. 04-2-04-SC, docket fees are now
required to be paid in compulsory counterclaim or cross-
claims.

On July 3, 1998, KOGIES filed a Complaint for Specific

Performance, against PGSMC before the Muntinlupa City
(RTC).

On July 17, 1998, PGSMC filed its Answer with Compulsory

Counterclaim, asserting that it had the full right to dismantle
and transfer the machineries and equipment because it had
paid for them in full as stipulated in the contract; that
KOGIES was not entitled to the PhP 9,000,000 covered by
the checks for failing to completely install and make the
plant operational; and that KOGIES was liable for damages
amounting to PhP 4,500,000 for altering the quantity and
lowering the quality of the machineries and equipment.

On July 29, 1998, KOGIES filed its Reply to Answer and

Answer to Counterclaim. KOGIES denied it had altered the
quantity and lowered the quality of the machinery,
equipment, and facilities it delivered to the plant. It claimed
that it had performed all the undertakings under the contract
and had already produced certified samples of LPG
cylinders.
3. Mercado vs. CA
G.R. No. 169576
October 27, 2008
Leonides Mercado had been distributing respondent
San Miguel Corporation’s (SMC’s) beer products in Quiapo,
Manila since 1967. Then in 1991, SMC extended to him a
P7.5 million credit line allowing him to withdraw goods on
credit. To secure his purchases, Mercado assigned three
China Banking Corporation (CBC) certificates of deposit
amounting to P5 million to SMC and executed a continuing
hold-out agreement stating:
Any demand made by [SMC] on [CBC], claiming
default on my/our part shall be conclusive on
[CBC] and shall serve as absolute authority for
[CBC] to encash the [CBC certificates of deposit]
in accordance with the third paragraph of this
Hold-Out Agreement, whether or not I/we have
in fact defaulted on any of my/our obligations
with [SMC], it being understood that the issue of
whether or not there was factual default must be
threshed out solely between me/us and [SMC]
He also submitted three surety bonds from Eastern
Assurance and Surety Corporation (EASCO) totaling P2.6
million.
Consequently, on February 10, 1992, SMC notified
CBC that Mercado failed to pay for the items he withdrew on
credit. Consequently, citing the continuing hold-out
agreement, it asked CBC to release the proceeds of the
assigned certificates of deposit. CBC approved SMB’s request
and informed Mercado.
On March 2, 1992, Mercado filed an action to annul
the continuing hold-out agreement and deed of assignment
in the Regional Trial Court (RTC) of Manila, Branch 55,
claiming that that the continuing hold-out agreement
allowed forfeiture without the benefit of foreclosure. It was
therefore void pursuant to Article 2088 of the Civil Code.
Moreover, Mercado argued that he had already settled his
recent purchases on credit but SMC erroneously applied the
said payments to his old accounts not covered by the
continuing hold-out agreement (i.e., purchases made prior to
the extension of the credit line).
On March 18, 1992, SMC filed its answer with
counterclaim against Mercado. It contended that Mercado
delivered only two CBC certificates of deposit amounting to
P4.5 million and asserted that the execution of the
continuing hold-out agreement and deed of assignment was
a recognized business practice. Furthermore, because
Mercado admitted his outstanding liabilities, SMC sought
payment of the lees products he withdrew (or purchased on
credit) worth P7,468,153.75.
On April 23, 1992, SMC filed a third-party complaint
against EASCO. It sought to collect the proceeds of the
surety bonds submitted by Mercado.
On September 14, 1994, Mercado filed an urgent
manifestation and motion seeking the dismissal of the
complaint. He claimed that he was no longer interested in
annulling the continuing hold-out agreement and deed of
assignment. The RTC, however, denied the motion. Instead,
it set the case for pre-trial. Thereafter, trial ensued.
During trial, Mercado acknowledged the accuracy of
SMC’s computation of his outstanding liability as of August
15, 1991. Thus, the RTC dismissed the complaint and
ordered Mercado and EASCO (to the extent of P2.6 million or
the value of its bonds) to jointly and severally pay SMC the
amount of P7,468,153.75.
Aggrieved, Mercado and EASCO appealed to the
Court of Appeals (CA) insisting that Mercado did not default
in the payment of his obligations to SMC.
On December 14, 2004, the CA affirmed the RTC
decision in toto. Mercado and EASCO both moved for
reconsideration but their respective motions were denied.
On October 28, 2005, EASCO filed a petition for
review on certiorari in this Court but eventually agreed to
settle its liability with SMC. The petition was terminated on
September 19, 2007.
Meanwhile, Mercado passed away and was
substituted by his heirs, petitioners Racquel D. Mercado,
Jimmy D. Mercado, Henry D. Mercado, Louricar D. Mercado
and Virgilio D. Mercado.
Petitioners subsequently filed this petition asserting
that the CA erred in affirming the RTC decision in toto. The
said decision (insofar as it ordered Mercado to pay SMC
P7,468,153.75) was void. SMC’s counterclaim was permissive
in nature. Inasmuch as SMC did not pay docket fees, the
RTC never acquired jurisdiction over the counterclaim.
ISSUE:
Whether or not SMC’s counterclaim was permissive?
HELD:
No.
A counterclaim (or a claim which a defending party
may have against any party) may be compulsory or
permissive. A counterclaim that (1) arises out of (or is
necessarily connected with) the transaction or occurrence
that is the subject matter of the opposing party’s claim; (2)
falls within the jurisdiction of the court and (3) does not
require for its adjudication the presence of third parties over
whom the court cannot acquire jurisdiction, is compulsory.
Otherwise, a counterclaim is merely permissive.
When Mercado sought to annul the continuing hold-
out agreement and deed of assignment (which he executed
as security for his credit purchases), he in effect sought to
be freed from them. While he admitted having outstanding
obligations, he nevertheless asserted that those were not
covered by the assailed accessory contracts. For its part,
aside from invoking the validity of the said agreements, SMC
therefore sought to collect the payment for the value of
goods Mercado purchased on credit. Thus, Mercado’s
complaint and SMC’s counterclaim both touched the issues of
whether the continuing hold-out agreement and deed of
assignment were valid and whether Mercado had
outstanding liabilities to SMC. The same evidence would
essentially support or refute Mercado’s claim and SMC’s
counterclaim.
Based on the foregoing, had these issues been tried
separately, the efforts of the RTC and the parties would have
had to be duplicated. Clearly, SMC’s counterclaim, being
logically related to Mercado’s claim, was compulsory in
nature. Consequently, the payment of docket fees was not
necessary for the RTC to acquire jurisdiction over the subject
matter.
4. ANTONIO NAVARRO AND GRAHMMS, INV. VS.
MBTC
G.R. No. 138031
May 27, 2004
DOCKET FEES; PAYMENT – FAILURE; EFFECTS
FACTS:
The private respondent Metropolitan Bank and
Trust Company (respondent MBTC) filed with the RTC of
Makati City a petition for the judicial foreclosure of the real
estate mortgage executed by the petitioners in its favor. The
petitioners filed a Motion for Reconsideration of the decision,
however the trial court issued an order denying the said
motion.
On, the last day of the reglementary period, the
petitioners filed with the RTC a Notice of Appeal. However,
the petitioners failed to pay the requisite docket and other
lawful fees.
Thereafter, the respondent MBTC filed a Motion to
Deny Due Course to Notice of Appeal with Motion for
Execution on the ground that the notice of appeal was not
timely filed. Acting on the motion, the RTC, while ruling in
favor of the timeliness of the petitioners' notice of appeal,
nevertheless denied the appeal for not being accompanied
by the required docket fees. Hence, the RTC granted the
motion of the respondents for the issuance of a writ of
execution for the enforcement of the decision.
On June 11, 1998, the counsel for the petitioners
informed the court by letter that on June 9, 1998, he sent
his messenger to the court to pay the docket fees on the
notice of appeal but was refused by the receiving clerk. 11 In
a Letter-Response dated June 19, 1998, the trial court
instructed the counsel for the petitioners, to wit:
In response to your letter dated June 11, 1998, please be
informed that as a matter of policy, courts do not receive
payments of docket fees. This should be made to the Office
of the Clerk of Court, with only the official receipts and/or
proofs of payment filed in court to be attached to the record
of the case to be forwarded to the Court of Appeals.
Moreover, the court has already resolved all pending
incidents before it, the last one in its Order dated May 27,
1998 so that, if the receiving clerk refused receipt of the
docket fee on the nature (sic) of appeal, it is only in
consonance with the above-mentioned order.
June 29, 1998, the petitioner filed with the CA a
petition for certiorari assailing the May 27, 1998 Order of the
RTC for having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction. In their reply to
the comment, the petitioners, for the first time, proffered to
the appellate court an explanation for their admitted failure
to pay the appellate docket fees within the prescribed
reglementary period and the CA promulgated its Decision
dismissing the petitioner's appeal. The petitioner's motion for
reconsideration and its supplement thereto was, likewise,
denied by the appellate court in its Resolution.
Hence, the petition at bar.
ISSUE:
Whether or not the notice of appeal is duly and seasonably
perfected?
HELD:
Time and time again, this Court has consistently
held that the "payment of docket fees within the prescribed
period is mandatory for the perfection of an appeal. Without
such payment, the appeal is not perfected. The appellate
court does not acquire jurisdiction over the subject matter of
the action and the decision sought to be appealed from
becomes final and executory."
It bears stressing that appeal is not a right, but a
mere statutory privilege. Corollary to this principle is that the
appeal must be exercised strictly in accordance with the
provisions set by law under Rule 41 of the Rules of Court.
Thus, the payment of the docket fees within this period is a
condition sine qua non to the perfection of the appeal.
Contrary to the petitioners' predication, the payment of the
appellate docket and other lawful fees is not a mere
technicality of law or procedure. It is an essential
requirement, without which the decision or final order
appealed from would become final and executory as if no
appeal was filed at all.
In the present case, the petitioners failed to
establish any sufficient and satisfactory reason to warrant a
relaxation of the mandatory rule on the payment of appellate
docket and other lawful fees. The explanation given by the
petitioners' counsel for the non-payment was that his
secretary, who migrated to another country, inadvertently
failed to pay the docket and other fees when she filed the
petitioners' notice of appeal with the court. The said counsel
came to know of the inadvertence only when he received a
copy of the RTC's May 27, 1998 Order which denied due
course to the appeal for failure to pay the required docket
fees. The explication deserves scant consideration. We have
reviewed the records and find that the petitioners failed to
show how and when their counsel's secretary left the
country. Neither did the petitioners submit any explanation
why their counsel failed to ascertain immediately after April
14, 1998 if the requisite appellate docket and other lawful
fees had been paid by the said secretary before her
departure.
Thus, putting the blame on the counsel's secretary
for her failure to perfect the petitioners' appeal to the CA is
unjustified. As aptly declared by the appellate court:
The reason given for movants' failure to pay the docket fees,
i.e., that their counsel's employee had left his office has
been debunked by the Supreme Court as "a hackneyed and
habitual subterfuge employed by litigants who fail to observe
the procedural requirements prescribed by the Rules of
Court. (Lanting vs. Guevarra, 27 SCRA 974) The Supreme
Court has also often repeated that the negligence of clerks
which adversely affect the case handled by lawyers, is
binding upon the latter." (Negros Stevedoring Co., Inc. vs.
Court of Appeals, 162 SCRA 371.)29
5. PROTON PILIPINAS CORPORATION, AUTOMOTIVE
PHILIPPINES, ASEA ONE CORPORATION and
AUTOCORP, vs. BANQUE NATIONALE DEPARIS.
G. R. No. 151242.
June 15, 2005
DOCKET FEES; DEFICIENCY IN ASSESSMENT
FACTS:
Sometime in 1995, petitioner Proton availed of the
credit facilities of respondent Banque Nationale de Paris
(BNP). To guarantee the payment of its obligation, its co-
petitioners (Automotive, Asea and Autocorp) executed a
corporate guarantee to the extent of US$2,000,000.00.
BNP and Proton subsequently entered into three
trust receipt agreements. Under the terms of the trust
receipt agreements, Proton would receive imported
passenger motor vehicles and hold them in trust for BNP.
Proton would be free to sell the vehicles subject to the
condition that it would deliver the proceeds of the sale to
BNP, to be applied to its obligations to it. In case the
vehicles are not sold, Proton would return them to BNP,
together with all the accompanying documents of title.
Allegedly, Proton failed to deliver the proceeds of the sale
and return the unsold motor vehicles. Pursuant to the
corporate guarantee, BNP demanded from Automotive, Asea
and Autocorp the payment of the amount representing
Protons total outstanding obligations.
These guarantors refused to pay, however. Hence,
on September 7, 1998 BNP filed before the RTC of Makati a
complaint against petitioners praying that they be ordered to
pay (1) US$1,544,984.40 plus accrued interest and other
related charges thereon subsequent to August 15, 1998 until
fully paid and (2) an amount equivalent to 5% of all sums
due from petitioners as attorneys fees. Petitioners filed a
Motion to Dismiss on the ground that BNP failed to pay the
correct docket fees to thus prevent the trial court from
acquiring jurisdiction over the case.
The RTC denied petitioners Motion to Dismiss
saying that the docket fees were properly paid. Petitioners’
motion for reconsideration being denied, they brought the
case on certiorari and mandamus to the CA. The CA likewise
denied petitioners’ argument citing Ng Soon vs. Alday and
Tacay vs. RTC of Tagum, Davao del Norte wherein the
Supreme Court explicitly ruled that where the action is purely
for recovery of money or damages, the docket fees are
assessed on the basis of the aggregate amount claimed,
exclusive only of interests and costs. Their motion for
reconsideration to the CA having been denied, petitioners
filed a petition for review on certiorari before the SC arguing
that BNP failed to pay the correct docket fees as
Administrative Circular No. 11-94 provides that in the
assessment thereof, interest claimed should be included.
ISSUES:
1. WON interests are included in the proper computation of
the correct docket fees.
2. WON the case should be dismissed for failure of BNP to
pay the correct docket fees.
RULINGS:
1. YES.
When the complaint in this case was filed in 1998,
Rule 141 had been amended by Administrative Circular No.
11-94. Thus, the clerk of court should have assessed the
filing fee by taking into consideration the total sum claimed,
inclusive of interest, damages of whatever kind, attorneys
fees, litigation expenses, and costs, or the stated value of
the property in litigation. In the case at bar, respondent did
not pay the filing fee corresponding to its claim for interest
from August 16, 1998 until the filing of the complaint on
September 7, 1998.
2. NO.
While the payment of the prescribed docket fee is a
jurisdictional requirement, even its non-payment at the time
of filing does not automatically cause the dismissal of the
case, as long as the fee is paid within the applicable
prescriptive or reglementary period, more so when the party
involved demonstrates a willingness to abide by the rules
prescribing such payment. In the case at bar, respondent
merely relied on the assessment made by the clerk of court
which turned out to be incorrect.
Under the circumstances, the clerk of court has the
responsibility of reassessing what respondent must pay
within the prescriptive period, failing which the complaint
merits dismissal. With respect to the interest accruing after
the filing of the complaint, the same can only be determined
after a final judgment has been handed down. Respondent
cannot thus be made to pay the corresponding docket fee
therefor. Pursuant, however, to Section 2, Rule 141, as
amended by Administrative Circular No. 11-94, respondent
should be made to pay additional fees which shall constitute
a lien in the event the trial court adjudges that it is entitled
to interest accruing after the filing of the complaint.
6. RUBY SHELTER BUILDERS AND REALTY DEVELOPMENT
CORPORATION vs. HON. PABLO C. FORMARAN III, Presiding
Judge of Regional Trial Court Branch 21, Naga City G.R. No.
175914. February 10, 2009
FACTS:
Petitioner obtained a loan from respondents Romeo
Y. Tan (Tan) and Roberto L. Obiedo (Obiedo), which was
secured by real estate mortgages over five parcels of land,
all located in Triangulo, Naga City.
When petitioner was unable to pay the loan, Tan
and Obiedo granted petitioner until 31 December 2005 to
settle its indebtedness.
They further executed a Memorandum of
Agreement wherein petitioner was made to execute Deeds of
Absolute Sale in favor of respondents Tan and Obiedo,
covering the same parcels of land.
In the event that petitioner is unable to redeem the
parcels of land within the period agreed upon, respondents
Tan and Obiedo could already present the Deeds of Absolute
Sale covering the same to the Office of the Register of
Deeds.
Without payment having been made by petitioner
on 31 December 2005, respondents Tan and Obiedo
presented the Deeds of Absolute Sale before the Register of
Deeds of Naga City, as a result of which, they were able to
secure TCTs over the five parcels of land in their names.
On 16 March 2006, petitioner filed before the RTC a
Complaint for declaration of nullity of deeds of sales and
damages, with prayer for the issuance of a writ of
preliminary injunction and/or TRO.
 The Clerk of Court initially considered Civil Case No.
2006-0030 as an action incapable of pecuniary estimation
and computed the docket and other legal fees due thereon
according to Section 7(b)(1), Rule 141 of the Rules of Court.
Thereafter, respondent Tan filed before the RTC an
Omnibus Motion in which he contended that the case
involved real properties, the docket fees for which should be
computed in accordance with Section 7(a), not Section
7(b)(1), of Rule 141 of the Rules of Court, as amended by
A.M. No. 04-2-04-SC which took effect on 16 August 2004.
The RTC issued an Order holding that both petitioner and
respondent Tan must pay docket fees in accordance with
Section 7(a), Rule 141 of the Rules of Court.
Petitioner moved for the partial reconsideration of
the said Order arguing that the case was principally for the
annulment of the Deeds of Absolute Sale and, as such,
incapable of pecuniary estimation. This was denied by the
RTC.
Petitioner then filed a Petition for Certiorari with the
Court of Appeals arguing that the RTC acted with grave
abuse of discretion, amounting to lack or excess of
jurisdiction, when it ordered that the docket/filing fees for
Civil Case No. 2006-0030, an action for annulment of deeds
of sale, be assessed under Section 7(a), Rule 141 of the
Rules of Court, as amended.
The CA affirmed the RTC order. Hence, without
seeking reconsideration with the Court of Appeals, petitioner
filed its Petition for Review on Certiorari before the SC.
ISSUE:
WON a case for annulment of the Deeds of
Absolute Sale is an action incapable of pecuniary estimation,
the docket fees for which should be computed in accordance
with Section 7(b)(1), of Rule 141 of the Rules of Court, as
amended.
RULING:
No. Petitioner’s allegations and reliefs sought in his
Complaint appears to be ultimately a real action, involving
the recovery by petitioner of its title to and possession of the
five parcels of land from respondents Tan and Obiedo.
Hence, the docket fees for which must be computed in
accordance with Section 7(a), Rule 141 of the Rules of
Court, as amended. The docket fees under Section 7(a),
Rule 141, in cases involving real property depend on the fair
market value of the same: the higher the value of the real
property, the higher the docket fees due. In contrast,
Section 7(b)(1), Rule 141 imposes a fixed or flat rate of
docket fees on actions incapable of pecuniary estimation.
In Manchester Development Corporation v. Court of Appeals,
the Court explicitly pronounced that [t]he court acquires
jurisdiction over any case only upon the payment of the
prescribed docket fee. Hence, the payment of docket fees is
not only mandatory, but also jurisdictional.
In Sun Insurance Office, Ltd. (SIOL) v. Asuncion, the Court
laid down guidelines for the implementation of its previous
pronouncement in Manchester under particular
circumstances, to wit:
1. It is not simply the filing of the complaint or appropriate
initiatory pleading, but the payment of the prescribed docket
fee, that vests a trial court with jurisdiction over the subject
matter or nature of the action. Where the filing of the
initiatory pleading is not accompanied by payment of the
docket fee, the court may allow payment of the fee within a
reasonable time but in no case beyond the applicable
prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-
party claims and similar pleadings, which shall not be
considered filed until and unless the filing fee prescribed
therefor is paid. The court may also allow payment of said
fee within a reasonable time but also in no case beyond its
applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by
the filing of the appropriate pleading and payment of the
prescribed filing fee but, subsequently, the judgment awards
a claim not specified in the pleading, or if specified the same
has been left for determination by the court, the additional
filing fee therefor shall constitute a lien on the judgment.
It shall be the responsibility of the Clerk of Court or his duly
authorized deputy to enforce said lien and assess and collect
the additional fee.
7. St. Louis University Inc. vs. Evangeline Cobarrubias
G.R. No. 187104 August 3, 2010
DOCKET FEES; APPEALS;PERFECTION; NON-
PAYMENT -EFFECTS
Facts:
Cobarrubias is an associate professor of the
petitioner and an active member of the union of faculty and
employees. The Collective Bargaining Agreements contained
the following provision that for teaching employees in
college who fail the yearly evaluation, who are retained for
three cumulative years in five years, shall be on forced leave
for one regular semester during which period all benefits due
them shall be suspended. Petitioner placed Cobarrubias on
forced leave for failing to achieve the required rating points
(85, 77, and 72.9, below the required rating of 87).
To reverse the imposed forced leave, Cobarrubias sought
recourse from the CBA’s grievance machinery but the parties
failed to settle their dispute. Cobarruubias filed a case for
illegal forced leave or illegal suspension with DOLE but
circulation and mediation again failed.
Cobarrubias argued that the CA already resolved
the forced leave issue in a prior case between the parties,
CA-G.R. SP No. 90596,8 ruling that the forced leave for
teachers who fail their evaluation for three (3) times within a
five-year period should be coterminous with the CBA in force
during the same five-year period. On the other hand,
Petitioner argued that said CA decision is not yet final for
there is still a pending appeal.
The VA dismissed the complaint, then Cobarrubias
filed with the CA a petition for review under Rule 43 of the
Rules of Court, but failed to pay the required filing fees
and to attach to the petition copies of the material portions
of the record. The CA responded by dismissing the petition
for procedural lapses. Nevertheless, Cobarrubias filed a
motion for reconsiderationand attached copies of the
material portions of the record and the postal money orders.
She maintained that the ends of justice and fair
play are better served if the case is decided on its merits.
The CA reinstated the petition.
Issue:
Whether the CA is correct in reinstating the petition despite
the failure of Cobarrubias to pay the appeal docket fees on
time.
Held:
Appeal is not a natural right but a mere statutory
privilege, thus, appeal must be made strictly in accordance
with the provision set by law.25 Rule 43 of the Rules of
Court provides that appeals from the judgment of the VA
shall be taken to the CA, by filing a petition for review within
fifteen days from the receipt of the notice of judgment.Upon
the filing of the petition, the petitioner shall pay to
the CA clerk of court the docketing and other lawful
fees; non-compliance with the procedural
requirements shall be a sufficient ground for the
petition’s dismissal. Thus, payment in full of docket
fees within the prescribed period is not only
mandatory, but also jurisdictional. It is an essential
requirement, without which, the decision appealed
from would become final and executory as if no
appeal has been filed.
Procedural rules are not to be belittled or dismissed
simply because their non-observance may have prejudiced a
party's substantive rights; like all rules, they are required to
be followed. However, there are recognized exceptions
to their strict observance, such as:
(1) Most persuasive and weighty
reasons;
(2) To relieve a litigant from an
injustice not commensurate with his failure
to comply with the prescribed procedure;
(3) Good faith of the defaulting party by
immediately paying within a reasonable
time from the time of the default;
(4) The existence of special or
compelling circumstances;
(5) The merits of the case;
(6) A cause not entirely attributable to
the fault or negligence of the party favored
by the suspension of the rules;
(7) A lack of any showing that the
review sought is merely frivolous and
dilatory;
(8) The other party will not be unjustly
prejudiced thereby;
(9) Fraud, accident, mistake or
excusable negligence without the
appellant's fault;
(10) Peculiar, legal and equitable
circumstances attendant to each case;
(11) In the name of substantial justice
and fair play;
(12) Importance of the issues involved;
and
(13) Exercise of sound discretion by the
judge, guided by all the attendant
circumstances.
Thus, there should be an effort, on the part of the
party invoking liberality, to advance a reasonable or
meritorious explanation for his/her failure to comply with the
rules, in this case, no explanation has been given.
8. Relucio vs. Lopez
G.R. No. 138497
January 16, 2002
REAL PARTY IN INTEREST; NECESSARY PARTY;
FACTS:
Angelina Meija Lopez filed a petition for Appointment as Sole
Administratix of Conjugal Partnership of Properties,
Forfeiture, etc. against her husband Alberto Lopez and
Imelda Relucio, for Alberto abandoned Angelina and her four
children and maintained an illicit relationship with Relucio.
A motion to dismiss was filed by Relucio on the ground that
Angelina Lopez has no cause of action against her. The
judge of the RTC denied her Motion to Dismiss on the
ground that some of the properties are registered in her
name. A motion for reconsideration was filed by Relucio but
the same was denied by the RTC. Relucio then filed a
petition for certiorari with the CA which denied the same.
Hence the appeal to the Supreme Court.
ISSUE:
Whether Relucio is an indispensable party or only a
necessary party.
HELD: Neither.
“A real party in interest is one who stands "to be
benefited or injured by the judgment of the suit."In
this case, petitioner would not be affected by any judgment
in Special Proceedings M-3630.
If petitioner is not a real party in interest, she cannot be an
indispensable party. An indispensable party is one without
whom there can be no final determination of an action.19
Petitioner's participation in Special Proceedings M-36-30 is
not indispensable. Certainly, the trial court can issue a
judgment ordering Alberto J. Lopez to make an accounting
of his conjugal partnership with respondent, and give
support to respondent and their children, and dissolve
Alberto J. Lopez' conjugal partnership with respondent, and
forfeit Alberto J. Lopez' share in property co-owned by him
and petitioner. Such judgment would be perfectly valid and
enforceable against Alberto J. Lopez.
Nor can petitioner be a necessary party in Special
Proceedings M-3630. A necessary party as one who is
not indispensable but who ought to be joined as
party if complete relief is to be accorded those
already parties, or for a complete determination or
settlement of the claim subject of the action. In the
context of her petition in the lower court, respondent would
be accorded complete relief if Alberto J. Lopez were ordered
to account for his alleged conjugal partnership property with
respondent, give support to respondent and her children,
turn over his share in the co-ownership with petitioner and
dissolve his conjugal partnership or absolute community
property with respondent.
9. De Castro vs. CA
REAL PARTY IN INTEREST; AGENCY
FACTS:
Petitioners De Castro were co-owners of four (4)
lots located at EDSA corner New York and Denver Streets in
Cubao, Quezon City.
In a letter, Francisco Antigo was authorized by the
De Castros to act as real estate broker in the sale of these
properties for the amount of P23,000,000.00, five percent
(5%) of which will be given to him as commission.
Antigo found Times Transit Corporation,
represented by its president Mr. Rondaris, as a prospective
buyer which desired to buy two (2) lots only, specifically lots
14 and 15. Eventually, the sale of lots 14 and 15 was
consummated.
Antigo however received only P48,893.76 as
commission. He asserted that his total commission should be
P352,500.00 which is five percent (5%) of the agreed price
of P7,050,000.00 paid by Times Transit Corporation to the
De Castro for the two (2) lots.
Francisco Artigo then sued petitioners Constante A.
De Castro and Corazon A. De Castro to collect the unpaid
balance of his broker’s commission from the De Castros. One
of the defenses advanced by the De Castro is that complaint
failed to implead their other siblings who were co-owners as
well.
Issue:
Whether the complaint should be dismissed.
Held:
No. An indispensable party is one whose interest will
be affected by the court’s action in the litigation, and without
whom no final determination of the case can be had.The
joinder of indispensable parties is mandatory and courts
cannot proceed without their presence. Whenever it appears
to the court in the course of a proceeding that an
indispensable party has not been joined, it is the duty of the
court to stop the trial and order the inclusion of such party.
However, the rule on mandatory joinder of
indispensable parties is not applicable to the instant case.
Under the note/letter sent by the De Castro to Antigo, a
contract of agency was clearly constituted between
Constante and Artigo. Whether Constante appointed Artigo
as agent, in Constante’s individual or representative
capacity, or both, the De Castros cannot seek the dismissal
of the case for failure to implead the other co-owners as
indispensable parties.
The De Castros admit that the other co-owners
are solidarily liable under the contract of agency,
citing Article 1915 of the Civil Code, which reads: Art. 1915.
If two or more persons have appointed an agent for a
common transaction or undertaking, they shall be solidarily
liable to the agent for all the consequences of the agency.
The solidary liability of the four co-owners, however,
militates against the De Castros theory that the other co-
owners should be impleaded as indispensable parties. When
the law expressly provides for solidarity of the obligation, as
in the liability of co-principals in a contract of agency, each
obligor may be compelled to pay the entire obligation. The
agent may recover the whole compensation from any one of
the co-principals, as in this case.
10. Orquiola vs CA
REAL PARTY IN INTEREST; FAILURE TO IMPLEAD-
EFFECTS
FACTS:
Pura Kalaw Ledesma was the registered owner of
Lot 689, covered by TCT Nos. 111267 and 111266. This
parcel of land was adjacent to certain portions of Lot 707 of
the Piedad Estates, namely, Lot 707-A and 707-B, registered
in the name of Herminigilda Pedro under TCT Nos. 16951
and 16952, respectively.
Herminigilda Pedro sold Lot 707-A and 707-B to
Mariano Lising who then registered both lots and Lot 707-C
in the name of M.B. Lising Realty and subdivided them into
smaller lots.
Certain portions of the subdivided lots were sold to
third persons including herein petitioners, spouses Victor and
Honorata Orquiola.
Sometimes in 1969, Pura Kalaw Ledesma filed a
complaint, docketed as Civil Case No. Q-12918, with the
Regional Trial Court of Quezon City against Herminigilda
Pedro and Mariano Lising for allegedly encroaching upon Lot
689.
Subsequently, the trial court adjudged defendants
Pedro and Lising jointly and severally liable for encroaching
on plaintiff’s land. As a result, the Deputy Sheriff directed
petitioners Orquiola, through an alias writ of execution, to
remove the house they constructed on the land they were
occupying. However, to prohibit the RTC from issuing a writ
of demolition and the Quezon City sheriff from implementing
the alias writ of execution, petitioners filed with the Court of
Appeals a petition for prohibition with prayer for a
restraining order and preliminary injunction.
Petitioners alleged that they bought the subject
parcel of land in good faith and for value, hence, they were
parties in interest. Since they were not impleaded in the
case, the writ of demolition issued in connection therewith
cannot be enforced against them because to do so would
amount to deprivation of property without due process of
law. The CA dismissed the petition.
ISSUE:
Whether the alias writ of execution may be
enforced against petitioners.
HELD:
No. As builders in good faith and innocent
purchasers for value, petitioners have rights over the subject
property and hence they are proper parties in interest in any
case thereon. Consequently, private respondents should
have impleaded them in Civil Case No. Q-12918. Since they
failed to do so, petitioners cannot be reached by the decision
in said case.
“No man shall be affected by any proceeding to
which he is a stranger, and strangers to a case are not
bound by any judgment rendered by the court.”
 In the same manner, a writ of execution can be
issued only against a party and not against one who did not
have his day in court. Only real parties in interest in an
action are bound by the judgment therein and by writs of
execution and demolition issued pursuant thereto. In our
view, the spouses Victor and Honorata Orquiola have valid
and meritorious cause to resist the demolition of their house
on their own titled lot, which is tantamount to a deprivation
of property without due process of law.
11. China Banking Corp. vs Oliver
FACTS:
In August 1995, Pangan Lim, Jr. and a certain
Mercedes M. Oliver opened a joint account in China Banking
Corp. Lim introduced Oliver to the bank’s branch manager as
his partner in the rice and palay trading business.
Thereafter, Lim and Oliver applied for a P17 million
loan, offering as collateral a 7,782 square meter lot located
in Tunasan, Muntinlupa and covered by TCT No. S-50195 in
the name of Oliver. The bank approved the application.
On November 17, 1995, Lim and Oliver executed in
favor of Chinabank a promissory note for P16,650,000, as
well as a Real Estate Mortgage on the property.
The mortgage was duly registered and annotated
on the original title under the custody of the Registry of
Deeds of Makati and on the owner’s duplicate copy in the
bank’s possession. The mortgage document showed
Mercedes Oliver’s address to be No. 95 Malakas Street,
Diliman, Quezon City. For brevity, she is hereafter referred
to as “Oliver One.”
On November 18, 1996, respondent claiming that
she is Mercedes M. Oliver with postal office address at No.
40 J.P. Rizal St., San Pedro, Laguna, filed an action for
annulment of mortgage and cancellation of title with
damages against Chinabank and Register of Deeds
Respondent, whom we shall call as “Oliver Two,” claimed
that she was the registered and lawful owner of the land
subject of the real estate mortgage.
On January 31, 1997, Chinabank moved to dismiss
the case for lack of cause of action and non-joinder of an
indispensable party, the mortgagor. RTC denied the Motion
to Dismiss. Chinabank filed with the Court of Appeals a
petition for certiorari with prayer for the issuance of a writ of
preliminary injunction and/or restraining order to enjoin
enforcement of the March 13, 1997 order and further action
on the case.
Court of Appeals promulgated the assailed
decision, finding no grave abuse of discretion committed by
the trial judge in ruling that the Rules of Court provided the
manner of impleading parties to a case and in suggesting
that petitioner file an appropriate action to bring the
mortgagor within the court’s jurisdiction.
The appellate court said that Rule 6, Section 11 of
the Rules of Court allows petitioner to file a third-party
complaint against the mortgagor. As to the judgment by
default, the Court of Appeals said that an order denying the
motion to dismiss is inter-locutory and may not be
questioned through a special civil action for certiorari. The
defendant must proceed with the case and raise the issues
in his motion to dismiss when he appeals to a higher court.
The Court of Appeals denied petitioner’s motion for
reconsideration. Hence, this petition.
ISSUE:
Is the mortgagor who goes by the name of
Mercedes M. Oliver, herein called Oliver One, an
indispensable party in Civil Case No. 96219?
HELD:
An indispensable party is a party in interest, without
whom no final determination can be had of an action. It is
true that mortgagor Oliver One is a party in interest, for she
will be affected by the outcome of the case. She stands to
be benefited in case the mortgage is declared valid, or
injured in case her title is declared fake.
However, mortgagor Oliver One’s absence from the
case does not hamper the trial court in resolving the dispute
between respondent Oliver Two and petitioner.
A party is not indispensable to the suit if his
interest in the controversy or subject matter is distinct and
divisible from the interest of the other parties.
In this case, Chinabank has interest in the loan
which, however, is distinct and divisible from the
mortgagor’s interest, which involves the land used as
collateral for the loan.
Further, a declaration of the mortgage’s nullity in
this case will not necessarily prejudice mortgagor Oliver One.
The bank still needs to initiate proceedings to go after the
mortgagor, who in turn can raise other defenses pertinent to
the two of them.
A party is also not indispensable if his presence
would merely permit complete relief between him and those
already parties to the action, or will simply avoid multiple
litigation, as in the case of Chinabank and mortgagor Oliver
One. Non-joinder of parties is not a ground for dismissal of
an action.— since mortgagor Oliver One is not an
indispensable party, Section 7, Rule 3 of the 1997 Rules of
Civil Procedure, which requires compulsory joinder of
indispensable parties in a case, does not apply. Instead, it is
Section 11, Rule 3, that applies. Non-joinder of parties is not
a ground for dismissal of an action.
12. Lotte Phil. Co., Inc. vs. Dela Cruz
INDISPENSIBLE PARTY; NON-JOINDER – EFFECTS
FACTS:
Lotte Phils., Inc. (Lotte) is a domestic corporation.
Respondents herein are among those who were hired and
assigned to the confectionery facility operated by Lotte. On
December 14, 1995—and yearly thereafter until the year
2000—7J Maintenance and Janitorial Services (“7J”) entered
into a contract with Lotte to provide manpower for needed
maintenance, utility, janitorial and other services to the
latter.
In compliance with the terms and conditions of the
service contract, and to accommodate the needs of Lotte for
personnel/workers to do and perform “piece works,”
respondents (Dela Cruz at. Al) among others, were hired and
assigned to private respondent as repackers or sealers.

However, either in October, 1999 or on February 9,
2000, private respondent dispensed with their services
allegedly due to the expiration/termination of the service
contract by respondent with 7J. They were either told “hwag
muna kayong pumasok at tatawagan na lang kung may
gawa”; or were asked to wait “pag magrereport sila sa
trabaho.”
Unfortunately, petitioners were never called back to
work again. Aggrieved, petitioners lodged a labor complaint
against both private respondent Lotte and 7J, for illegal
dismissal, regularization, payment of corresponding
backwages and related employment benefits, 13th month
pay, service incentive leave, moral and exemplary damages
and attorney’s fees based on total judgment award.
On February 28, 2001, Labor Arbiter rendered
judgment declaring 7J as employer of respondents. The
arbiter also found 7J guilty of illegal dismissal and ordered to
reinstate respondents,8 pay P2,374,710.00 as backwages,
P713,648.00 as 13th month pay and P117,000.00 as service
incentive leave pay.
Respondents appealed to the National Labor
Relations Commission (NLRC) praying that Lotte be declared
as their direct employer because 7J is merely a labor-only
contractor.
In its decision dated April 24, 2002, the NLRC found
no cogent reason to disturb the findings of the labor arbiter
and affirmed its ruling that 7J is the employer of respondents
and solely liable for their claims.
Respondents’ motion for reconsideration was
denied by the NLRC in a resolution dated June 18, 2002.
Undaunted, they filed a petition for certiorari in the Court of
Appeals11 against the NLRC and Lotte, insisting that their
employer is Lotte and not 7J. Lotte, however, denied that
respondents were its employees. It prayed that the petition
be dismissed for failure to implead 7J who is a party
interested in sustaining the proceedings in court, pursuant to
Section 3, Rule 46 of the Revised Rules of Civil Procedure.
ISSUE:
WON 7J is an indispensable party and should have been
impleaded in respondents’ petition in the Court of Appeals?
HELD:
An indispensable party is a party in interest without whom
no final determination can be had of an action, and who
shall be joined either as plaintiffs or defendants.
The joinder of indispensable parties is mandatory. The
presence of indispensable parties is necessary to vest the
court with jurisdiction, which is “the authority to hear and
determine a cause, the right to act in a case.” Thus, without
the presence of indispensable parties to a suit or proceeding,
judgment of a court cannot attain real finality.
The absence of an indispensable party renders all
subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but even
as to those present. In the case at bar, 7J is an
indispensable party. It is a party in interest because it will be
affected by the outcome of the case.
In Domingo v. Scheer, we held that the non-joinder
of indispensable parties is not a ground for the dismissal of
an action and the remedy is to implead the non-party
claimed to be indispensable. Parties may be added by order
of the court on motion of the party or on its own initiative at
any stage of the action and/or such times as are just. If the
petitioner refuses to implead an indispensable party despite
the order of the court, the latter may dismiss the
complaint/petition for the petitioner/plaintiff’s failure to
comply therefor.
13. OMINGO CARABEO vs. SPOUSES NORBERTO and
SUSAN DINGCO
G.R. No. 190823. April 4, 2011
DEATH OF PARTY - EFFECTS
FACTS:
On July 10, 1990, petitioner) entered into a
contract denominated as "Kasunduan sa Bilihan ng
Karapatan sa Lupa" with Spouses Norberto and Susan
Dingco (respondents) whereby petitioner agreed to sell his
rights over a 648 square meter parcel of unregistered land
situated in Purok III, Tugatog, Orani, Bataan to respondents
for P38,000.
Sometime in 1994, respondents learned that the
alleged problem over the land had been settled and that
petitioner had caused its registration in his name under
Transfer Certificate of Title No. 161806. They thereupon
offered to pay the balance but petitioner declined, drawing
them to file a complaint before the Katarungan
Pambarangay. No settlement was reached, however, hence,
respondent filed a complaint for specific performance before
the RTC of Balanga, Bataan.
After the case was submitted for decision or on
January 31, 2001, petitioner passed away. The records do
not show that petitioner’s counsel informed Branch 1 of the
Bataan RTC, where the complaint was lodged, of his death
and that proper substitution was effected in accordance with
Section 16, Rule 3, Rules of Court. Petitioner’s counsel filed a
Notice of Appeal with the CA but the latter affirmed the RTC
Decision. Petitioner’s motion for reconsideration having been
denied, the present petition for review was filed by Antonio
Carabeo, petitioner’s son.
ISSUE: WON petitioner’s death rendered respondents’
complaint against him dismissible.
RULING: NO. The question as to whether an action survives
or not depends on the nature of the action and the damage
sued for. In the causes of action which survive, the wrong
complained affects primarily and principally property and
property rights, the injuries to the person being merely
incidental, while in the causes of action which do not
survive, the injury complained of is to the person, the
property and rights of property affected being incidental. In
the present case, respondents are pursuing a property right
arising from the kasunduan, whereas petitioner is invoking
nullity of the kasunduan to protect his proprietary interest.
Assuming arguendo, however, that the kasunduan is
deemed void, there is a corollary obligation of petitioner to
return the money paid by respondents, and since the action
involves property rights, it survives.
14. Spouses JULITA DE LA CRUZ and FELIPE DE LA
CRUZ, petitioners, vs. PEDRO
JOAQUIN, respondent. [G.R. No. 162788. July 28,
2005]
DEATH OF PARTY; SUBSTITUTION
FACTS:
The case originated from a Complaint for the
recovery of possession and ownership, the cancellation of
title, and damages, filed by Pedro Joaquin against spouses
Dela Cruz. alleged that he had obtained a loan(9,000.00)
from them on June 29, 1974, payable after five (5) years; To
secure the payment of the obligation, he supposedly
executed a Deed of Sale in favor of petitioners. The parties
also executed another document entitled Kasunduan.
Respondent claimed that the Kasunduan showed the
Deed of Sale to be actually an equitable mortgage. Spouses
De la Cruz contended that this document was merely an
accommodation to allow the repurchase of the property until
June 29, 1979, a right that he failed to exercise.
On April 23, 1990, the RTC issued a Decision in his
favor. The trial court declared that the parties had entered
into a sale with a right of repurchase. It further held that
respondent had made a valid tender of payment on two
separate occasions to exercise his right of
repurchase. Accordingly, petitioners were required to
reconvey the property upon his payment.
The CA noted that petitioners had given respondent the
right to repurchase the property within five (5) years from
the date of the sale or until June 29, 1979. Accordingly, the
parties executed the Kasunduan to express the terms and
conditions of their actual agreement. The appellate court
also found no reason to overturn the finding that respondent
had validly exercised his right to repurchase the land.
the CA denied reconsideration and ordered a
substitution by legal representatives, in view of respondents
death on December 24, 1988. Hence, this Petition.
ISSUE:
Whether the trial court lost jurisdiction over the case
upon the death of Pedro Joaquin?
HELD:
Petitioners assert that the RTCs Decision was invalid for
lack of jurisdiction. They claim that respondent died during
the pendency of the case. There being no substitution by the
heirs, the trial court allegedly lacked jurisdiction over the
litigation.
Rule on Substitution
When a party to a pending action dies and the claim is
not extinguished, the Rules of Court require a substitution of
the deceased. The procedure is specifically governed by
Section 16 of Rule 3, which reads thus:
“Section 16. Death of a party; duty of
counsel. Whenever a party to a pending
action dies, and the claim is not thereby
extinguished, it shall be the duty of his
counsel to inform the court within thirty
(30) days after such death of the fact
thereof, and to give the name and address
of his legal representative or
representatives. Failure of counsel to
comply with this duty shall be a ground for
disciplinary action.
The heirs of the deceased may be allowed
to be substituted for the deceased, without
requiring the appointment of an executor
or administrator and the court may
appoint a guardian ad litem for the minor
heirs.
The court shall forthwith order said legal
representative or representatives to
appear and be substituted within a period
of thirty (30) days from notice.
If no legal representative is named by the
counsel for the deceased party, or if the
one so named shall fail to appear within
the specified period, the court may order
the opposing party, within a specified
time, to procure the appointment of an
executor or administrator for the estate of
the deceased, and the latter shall
immediately appear for and on behalf of
the deceased. The court charges in
procuring such appointment, if defrayed
by the opposing party, may be recovered
as costs.”
The rule on the substitution of parties was
crafted to protect every partys right to due
process. The estate of the deceased party will continue to
be properly represented in the suit through the duly
appointed legal representative. Moreover, no adjudication
can be made against the successor of the deceased if the
fundamental right to a day in court is denied.
The Court has nullified not only trial proceedings
conducted without the appearance of the legal
representatives of the deceased, but also the resulting
judgments. In those instances, the courts acquired no
jurisdiction over the persons of the legal representatives or
the heirs upon whom no judgment was binding.
This general rule notwithstanding, a formal substitution
by heirs is not necessary when they themselves voluntarily
appear, participate in the case, and present evidence in
defense of the deceased. These actions negate any claim
that the right to due process was violated.
The Court is not unaware of Chittick v. Court of
Appeals, in which the failure of the heirs to substitute for the
original plaintiff upon her death led to the nullification of the
trial court’s Decision. The latter had sought to recover
support in arrears and her share in the conjugal partnership.
The children who allegedly substituted for her refused to
continue the case against their father and vehemently
objected to their inclusion as parties. Moreover, because he
died during the pendency of the case, they were bound to
substitute for the defendant also. The substitution effectively
merged the persons of the plaintiff and the defendant and
thus extinguished the obligation being sued upon.
Clearly, the present case is not similar, much less
identical, to the factual milieu of Chittick.
Strictly speaking, the rule on the substitution by
heirs is not a matter of jurisdiction, but a
requirement of due process. Thus, when due process is
not violated, as when the right of the representative or heir
is recognized and protected, noncompliance or belated
formal compliance with the Rules cannot affect the validity of
a promulgated decision. Mere failure to substitute for a
deceased plaintiff is not a sufficient ground to nullify
a trial courts decision. The alleging party must prove
that there was an undeniable violation of due
process.

Substitution in
the Instant Case

The records of the present case contain a Motion for

Substitution of Party Plaintiff dated February 15, 2002, filed
before the CA.

Evidently, the heirs of Pedro Joaquin voluntary

appeared and participated in the case. We stress that the
appellate court had ordered his legal representatives to
appear and substitute for him. The substitution even on
appeal had been ordered correctly. In all proceedings, the
legal representatives must appear to protect the interests of
the deceased. After the rendition of judgment, further
proceedings may be held, such as a motion for
reconsideration or a new trial, an appeal, or an execution.
Considering the foregoing circumstances, the Motion
for Substitution may be deemed to have been granted; and
the heirs, to have substituted for the deceased, Pedro
Joaquin. There being no violation of due process, the issue
of substitution cannot be upheld as a ground to nullify the
trial court’s Decision.
15. Navarro vs. Escobido
G.R. No. 153788
November 27, 2009
REAL PARTY IN INTEREST; JURIDICAL PERSONS; CO-
OWERNSHIP; SOLE PROPRIETORSHIP
Facts:
A motor vehicle was leased by Navarro from
defendant as evidenced by a lease agreement with option to
purchase between Navarro and KARGO Enterprises
represented by its manager Glenn Go.
Navarro then delivered six post-dated checks. The
5th and the 6th checks were dishonored by the bank for
insufficiency of funds. Karen Go, married to Glenn Go, filed a
complaint before the RTC for Replevin and/or sum of money
with damages against Navarro.
In Navarro’s answer, he alleged as a special
affirmative defense that the two complaints stated no cause
of action, since Karen Go was not aparty to the lease
agreement with option to purchase.
RTC dismissed the case for the complaints did not
state a cause of action.
Karen Go filed a motion for reconsideration and the
RTC issued another order of setting aside the order of
dismissal, acting in presumption that Glenn Go’s leasing
business is a conjugal property.
The RTC held that Karen Go should have included
Glenn Go in the Complain (Section 4, Rule 3 of the Rules of
Court), then ordered Karen Go to file a motion for the
inclusion of Glenn Go as co-plaintiff.
RTC denied the motion for reconsideration of
Navarro, hence the latter filed a petition for certiorari with
the CA contended that the RTC committed a grave abuse of
discretion when it reconsidered the dismissal of the case and
directed Karen Go to amend her complaints by including
Glenn Go as co-plaintiff.
The CA denied Navarro’s petition and affirmed the RTC’s
order.
Issues:
1. Whether KARGO Enterprises can be a party to an
action (Sole Proprietorship)
2. Whether Karen Go is the real party in interest.
Held:
As to Whether KARGO Enterprises can be a party to
an action (Sole Proprietorship):
As Navarro correctly points out, Kargo Enterprises is
a sole proprietorship, which is neither a natural person, nor a
juridical person, as defined by Article 44 of the Civil Code:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public
interest or purpose, created by law; their personality begins
as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private
interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each
shareholder, partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules,
Kargo Enterprises cannot be a party to a civil action.
In Juasing Hardware vs. Mendoza the SC held:
“The law merely recognizes the existence
of a sole proprietorship as a form of
business organization conducted for profit
by a single individual, and requires the
proprietor or owner thereof to secure
licenses and permits, register the business
name, and pay taxes to the national
government. It does not vest juridical or
legal personality upon the sole
proprietorship nor empower it to file or
defend an action in court.
Thus, the complaint in the court below
should have been filed in the name of the
owner of Juasing Hardware. The allegation
in the body of the complaint would show
that the suit is brought by such person as
proprietor or owner of the business
conducted under the name and style
Juasing Hardware. The descriptive words
"doing business as Juasing Hardware" may
be added to the title of the case, as is
customarily done”
As to Karen Go, whether she is a real party in
interest:
SEC. 2. Parties in interest. – A real party in
interest is the party who stands to be
benefited or injured by the judgment in
the suit, or the party entitled to the avails
of the suit. Unless otherwise authorized by
law or these Rules, every action must be
prosecuted or defended in the name of the
real party in interest.
As the registered owner of Kargo Enterprises, Karen Go is
the party who will directly benefit from or be injured by a
judgment in this case. Thus, contrary to Navarro’s
contention, Karen Go is the real party-in-interest, and it is
legally incorrect to say that her Complaint does not state a
cause of action because her name did not appear in the
Lease Agreement that her husband signed in behalf of Kargo
Enterprises
Whether Glenn Go can legally sign the Lease Agreement in
his capacity as a manager of Kargo Enterprises, a sole
proprietorship, is a question we do not decide, as this is a
matter for the trial court to consider in a trial on the merits.
Glenn and Karen Go are effectively co-owners of Kargo
Enterprises and the properties registered under this name;
hence, both have an equal right to seek possession of these
properties.
Therefore, only one of the co-owners, namely the co-owner
who filed the suit for the recovery of the co-owned property,
is an indispensable party thereto. The other co-owners are
not indispensable parties. They are not even necessary
parties, for a complete relief can be accorded in the suit
even without their participation, since the suit is presumed
to have been filed for the benefit of all co-owners.
We hold that since Glenn Go is not strictly an indispensable
party in the action to recover possession of the leased
vehicles, he only needs to be impleaded as a pro-forma
party to the suit, based on Section 4, Rule 4 of the Rules.
16. PACIFIC CONSULTANTS INTERNATIONAL ASIA,
INC VS KLAUS SCHONFELD
VENUE; STIPULATIONS; RESTRICTIVE/EXCLUSIVE or
GENERAL/PERMISSIVE
FACTS:
Pacific Consultants International of Japan decided
to engage in consultancy services for water and sanitation in
the Philippines.
Jens Peter Henrichsen, who was the director of
Pacific Consultants International, transmitted a letter of
employment to respondent Klaus K. Schonfeld in Canada,
requesting him to accept the same and affix his conformity
thereto. Respondent made some revisions in the letter of
employment and signed the contract. He then sent a copy to
Henrichsen.
Section 21 of the General Conditions of
Employment appended to the letter of employment reads:
Any question of interpretation, understanding or
fulfillment of the conditions of employment, as well as any
question arising between the Employee and the Company
which is in consequence of or connected with his
employment with the Company and which cannot be settled
amicably, is to be finally settled, binding to both parties
through written submissions, by the Court of Arbitration in
London.
Klaus Schonfeld was assigned as sector manager in
the Philippines. Later on, Henrichsen informed Klaus through
a letter on May 5, 1999, that his employment had been
terminated effective August 4, 1999 for the reason that
Pacific Consultants International had not been successful in
the water and sanitation sector in the Philippines.
However, on July 24, 1999, Henrichsen, by
electronic mail, requested Klaus to stay put in his job after
August 5, 1999, until such time that he would be able to
report on certain projects and discuss all the opportunities
he had developed.
Respondent continued his work with until the end
of business hours on October 1, 1999. Thereafter Klaus filed
with PPI, the subsidiary corporation of Pacific Consultants,
several money claims, including unpaid salary, leave pay, air
fare from Manila to Canada, and cost of shipment of goods
to Canada. PPI partially settled some of his claims
(US$5,635.99), but refused to pay the rest. Klaus then
filed a complaint for illegal dismissal against Pacific
Consultants. The Pacific Consultants moved to dismiss the
complaint on the ground that the venue should be the Court
of Arbitration of London pursuant to section 21 of the of the
General Conditions of Employment.
ISSUE:
Whether the Pacific Consultants in correct?
HELD:
No. The settled rule on stipulations regarding venue, as
held by this Court in the vintage case of Philippine Banking
Corporation v. Tensuan, is that while they are considered
valid and enforceable, venue stipulations in a contract
do not, as a rule, supersede the general rule set forth
in Rule 4 of the Revised Rules of Court in the absence
of qualifying or restrictive words. They should be
considered merely as an agreement or additional forum, not
as limiting venue to the specified place. They are not
exclusive but, rather permissive. If the intention of the
parties were to restrict venue, there must be accompanying
language clearly and categorically expressing their purpose
and design that actions between them be litigated only at
the place named by them. In the instant case, no restrictive
words like "only," "solely," "exclusively in this court," "in no
other court save —," "particularly," "nowhere else but/except
—," or words of equal import were stated in the contract. It
cannot be said that the court of arbitration in London is an
exclusive venue to bring forth any complaint arising out of
the employment contract.
17. Biaco vs. Countryside Rural Bank
FACTS:
Biaco vs Countryside Rural Bank Ernesto Biaco is
the husband of petitioner Ma. Teresa Chaves Biaco. Ernesto
obtained several loans from the respondent bank as
evidenced by promissory notes.
As security for the payment of the said loans,
Ernesto executed a real estate mortgage in favor of the bank
covering the parcel of land described in Original Certificate of
Title (OCT) No. P-14423. The real estate mortgages bore the
signatures of the spouses Biaco.
When Ernesto failed to settle the above-mentioned
loans on its due date, respondent bank through counsel sent
him a written demand . The written demand, however,
proved futile prompting respondent bank to file a complaint
for foreclosure of mortgage against the spouses Ernesto and
Teresa Biaco before the RTC of Misamis Oriental. Summons
was served to the spouses Biaco through Ernesto at his
office. Ernesto received the summons but for unknown
reasons, he failed to file an answer. Hence, the spouses
Biaco were declared in default upon motion of the
respondent bank. The respondent bank was allowed to
present its evidence ex parte before the Branch Clerk of
Court who was then appointed by the court as
Commissioner.
RTC rendered decision in favor of respondent. In
case of non-payment within the period, the Sheriff of this
Court is ordered to sell at public auction the mortgaged Lot,
a parcel of registered land to satisfy the mortgage debt, and
the surplus if there be any should be delivered to the
defendants spouses ERNESTO and MA. THERESA [CHAVES]
BIACO.
In the event however[,] that the proceeds of the
auction sale of the mortgage[d] property is not enough to
pay the outstanding obligation, the defendants are ordered
to pay any deficiency of the judgment as their personal
liability.
Petitioner sought the annulment of the Regional
Trial Court decision contending that extrinsic fraud prevented
her from participating in the judicial foreclosure proceedings.
According to her, she came to know about the judgment in
the case only after the lapse of more than six (6) months
after its finality. . She moreover asserted that the trial court
failed to acquire jurisdiction because summons were served
on her through her husband without any explanation as to
why personal service could not be made. Petitioner further
argues that the deficiency judgment is a personal judgment
which should be deemed void for lack of jurisdiction over her
person.
CA ruled that judicial foreclosure proceedings are
actions quasi in rem. As such, jurisdiction over the person of
the defendant is not essential as long as the court acquires
jurisdiction over the res. Noting that the spouses Biaco were
not opposing parties in the case, the Court of Appeals
further ruled that the fraud committed by one against the
other cannot be considered extrinsic fraud.

ISSUE:
WON CA erred in ruling that there was no fraud perpetrated
by respondent upon her thereby violating her right to due
process?
HELD:
The appellate court acted well in ruling that there
was no fraud perpetrated by respondent bank upon
petitioner, noting that the spouses Biaco were co-defendants
in the case and shared the same interest. Whatever fact or
circumstance concealed by the husband from the wife
cannot be attributed to respondent bank.
An action in personam is an action against a person
on the basis of his personal liability. An action in rem is an
action against the thing itself instead of against the person.
An action quasi in rem is one wherein an individual is named
as defendant and the purpose of the proceeding is to subject
his interest therein to the obligation or lien burdening the
property.
In an action in personam, jurisdiction over the
person of the defendant is necessary for the court to validly
try and decide the case. In a proceeding in rem or quasi in
rem, jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court provided that
the court acquires jurisdiction over the res. Jurisdiction over
the res is acquired either (1) by the seizure of the property
under legal process, whereby it is brought into actual
custody of the law; or (2) as a result of the institution of
legal proceedings, in which the power of the court is
recognized and made effective. In a proceeding in rem or
quasi in rem, the only relief that may be granted by the
court against a defendant over whose person it has not
acquired jurisdiction either by valid service of summons or by
voluntary submission to its jurisdiction, is limited to the res.
Similarly, in this case, while the trial court acquired
jurisdiction over the res, its jurisdiction is limited to a
rendition of judgment on the res. It cannot extend its
jurisdiction beyond the res and issue a judgment enforcing
petitioner’s personal liability. In doing so without first having
acquired jurisdiction over the person of petitioner, as it did,
the trial court violated her constitutional right to due
process, warranting the annulment of the judgment
rendered in the case.
18.
BAUTISTA vs. UNGAST
G.R. No. 173002
July 4, 2008
DOCKET FEES; FAILURE TO PAY; INCORRECT
ASSESSMENT
FACTS:
On November 15, 1996, Hamilton Salak rented a
car from GAB Rent-A-Car, a car rental shop owned by
petitioner Benjamin Bautista. The lease was for three (3)
consecutive days at a rental fee of P1,000.00 per day.
However, Salak failed to return the car after three (3) days
prompting petitioner to file a complaint against him for
estafa, violation of Batas Pambansa Blg. 22 and carnapping.
On February 2, 1997, Salak and his common-law
wife, respondent Shirley G. Unangst, were arrested by
officers of the Criminal Investigation Service Group (CISG) of
the Philippine National Police while riding the rented car
along Quezon City. The next day, petitioner demanded from
Salak at the CISG Office the sum of P232,372.00 as payment
for car rental fees, fees incurred in locating the car,
attorney's fees, capital gains tax, transfer tax, and other
incidental expenses.
Salak and respondent expressed willingness to pay
but since they were then short on cash, Salak proposed to
sell to petitioner a house and lot titled in the name of
respondent. Petitioner welcomed the proposal after
consulting his wife, Cynthia. Cynthia, on the other hand,
further agreed to pay the mortgage loan of respondent over
the subject property to a certain Jojo Lee in the amount of
P295,000.00 as the property was then set to be publicly
auctioned on February 17, 1997..
To formalize their amicable settlement, Cynthia,
Salak and respondent executed a written agreement. They
stipulated that respondent would sell, subject to repurchase,
her residential property in favor of Cynthia and Cynthia also
agreed to desist from pursuing the complaint against Salak
and respondent.
Respondent and petitioner also executed a separate
deed of sale with right to repurchase, and the event if
respondent fails to repurchase the property within 30 days
from the date of the deed, she and her assigns shall
immediately vacate the premises and deliver its possession
to petitioner without need of a judicial order and
respondent's refusal to do so will entitle petitioner to take
immediate possession of the property.
However, the Respondent failed to repurchase the
property within the stipulated period. As a result, petitioner
filed, on June 5, 1998, a complaint for specific performance
or recovery of possession, for sum of money, for
consolidation of ownership and damages against respondent
and other unnamed persons before the RTC of Olongapo
City.
On July 29, 2004, after due proceedings, the RTC
rendered a decision in favor of petitioner and ordered that
the defendants to vacate from the place and turn over its
possession to the plaintiff.
Respondents failed to interpose a timely appeal.
However, on September 10, 2004, respondent Unangst filed
a petition for relief pursuant to Section 38 of the 1997 Rules
on Civil Procedure. She argued that she learned of the
decision of the RTC only on September 6, 2004 when she
received a copy of the motion for execution filed by
petitioner.
Petitioner, on the other hand, moved for the
dismissal of respondent's petition on the ground that the
latter paid an insufficient sum of P200.00 as docket fees.
It appears that respondent Unangst initially paid
P200.00 as docket fees as this was the amount assessed by
the Clerk of Court of the RTC. Said amount was insufficient
as the proper filing fees amount to P1,715.00. Nevertheless,
the correct amount was subsequently paid by said mandatory and jurisdictional. Nevertheless, as this Court
respondent on February 22, 2005. ruled in Aranas v. Endona, the strict application of the
In their comment, respondents countered that they jurisdictional nature of the above rule on payment of
should not be faulted for paying deficient docket fees as it appellate docket fees may be mitigated under exceptional
was due to an erroneous assessment of the Clerk of Court. circumstances to better serve the interest of justice. It is
always within the power of this Court to suspend its own
The RTC granted the petition for relief. rules, or to except a particular case from their operation,
Subsequently, it directed respondents to file a notice of whenever the purposes of justice require it.
appeal within twenty-four (24) hours from receipt of the
order. Accordingly, on February 23, 2005, respondents filed In not a few instances, the Court relaxed the rigid
their notice of appeal. application of the rules of procedure to afford the parties the
opportunity to fully ventilate their cases on the merits. This
Respondents contended before the CA that the RTC is in line with the time-honored principle that cases should
erred among others, that although the petition for relief of be decided only after giving all parties the chance to argue
respondents was filed on time, the proper filing fees for said their causes and defenses. For, it is far better to dispose of
petition were paid beyond the 60-day reglementary period. a case on the merit which is a primordial end, rather than on
He posited that jurisdiction is acquired by the court over the a technicality, if it be the case, that may result in injustice.
action only upon full payment of prescribed docket fees. The emerging trend in the rulings of this Court is to afford
every party-litigant the amplest opportunity for the proper
CA rendered decision in favor of the respondents and just determination of his cause, free from the
Unangast and rationed Appellee recognizes the timely filing constraints of technicalities.
of appellants' petition for relief to be able to appeal
judgment but nonetheless points out that the proper filing Technicality and procedural imperfections should
fees were paid beyond the 60-day reglementary period. thus not serve as bases of decisions. In that way, the ends
Arguing that the court acquires jurisdiction over the action of justice would be better served. For, indeed, the general
only upon full payment of the prescribed docket fees, he objective of procedure is to facilitate the application of
submits that the trial court erred in granting appellants' justice to the rival claims of contending parties, bearing
petition for relief despite the late payment of the filing fees. always in mind that procedure is not to hinder but to
promote the administration of justice.
Applied in the instant case, the docket fees were
admittedly paid only on February 22, 2005, or a little less
than two (2) months after the period for filing the petition
lapsed. Yet, this matter was sufficiently explained by
appellants. The records bear out that appellants initially paid
P200.00 as docket fees because this was the amount
assessed by the Clerk of Court of the RTC of Olongapo City
(p. 273, Records). As it turned out, the fees paid was
insufficient, the proper filing fees being P1,715.00, which
was eventually paid by appellants on February 1, 2005 (p.
296, Records). As such, appellants cannot be faulted for
their failure to pay the proper docket fees for, given the
prevailing circumstances, such failure was clearly not a
dilatory tactic nor intended to circumvent the Rules of Court.
On the contrary, appellants demonstrated their willingness to
pay the docket fees when they subsequently paid on the
same day they were assessed the correct fees.
Hence this appeal.

ISSUE:
Whether or not the CA committed grave error in
finding that the respondent perfected an appeal even when
the proper docket fees were paid beyond the period
prescribed?

HELD:
No. The failure of the respondents to pay the
correct amount of docket fees was due to a justifiable
reason.

The right to appeal is a purely statutory right. Not

being a natural right or a part of due process, the right to
appeal may be exercised only in the manner and in
accordance with the rules provided therefor. For this reason,
payment of the full amount of the appellate court docket and
other lawful fees within the reglementary period is