January 20, 2016

G.R. NO. 207970

FERNANDO MEDICAL ENTERPRISES, INC., Petitioner,

vs.
WESLEYAN UNIVERSITY PHILIPPINES, INC., Respondent.

DECISION

BERSAMIN, J.:

The trial court may render a judgment on the pleadings upon motion of the claiming party when the
defending party's answer fails to tender an issue, or otherwise admits the material allegations of the
adverse party's pleading. For that purpose, only the pleadings of the parties in the action are
considered. It is error for the trial court to deny the motion for judgment on the pleadings because
the defending party's pleading in another case supposedly tendered an issue of fact.

The Case

The petitioner appeals the decision promulgated on July 2, 2013,  whereby the Court of Appeals
1

(CA) affirmed the order issued on November 23, 2011 by the Regional Trial Court (RTC), Branch 1,
in Manila, denying its motion for judgment on the pleadings in Civil Case No. 09-122116
entitled Fernando Medical Enterprises, Inc. v. Wesleyan University-Philippines. 2

Antecedents

From January 9, 2006 until February 2, 2007, the petitioner, a domestic corporation dealing with
medical equipment and supplies, delivered to and installed medical equipment and supplies at the
respondent’s hospital under the following contracts:

a. Memorandum of Agreement dated January 9, 2006 for the supply of medical equipment in
the total amount of P18,625,000.00; 3

b. Deed of Undertaking dated July 5, 2006 for the installation of medical gas pipeline system
valued at P8,500,000.00; 4

c. Deed of Undertaking dated July 27, 2006 for the supply of one unit of Diamond Select
Slice CT and one unit of Diamond Select CV-P costing P65,000,000.00;  and 5

d. Deed of Undertaking dated February 2, 2007 for the supply of furnishings and equipment
worth P32,926,650.00. 6

According to the petitioner, the respondent paid only P67,357,683.23 of its total obligation of
P123,901,650.00, leaving unpaid the sum of P54,654,195.54.  However, on February 11, 2009, the
7

petitioner and the respondent, respectively represented by Rafael P. Fernando and Guillermo T.
Maglaya, Sr., entered into an agreement,  whereby the former agreed to reduce its claim to only
8

P50,400,000.00, and allowed the latter to pay the adjusted obligation on installment basis within 36
months. 9

In the letter dated May 27, 2009,  the respondent notified the petitioner that its new administration
10

had reviewed their contracts and had found the contracts defective and rescissible due to economic
prejudice or lesion; and that it was consequently declining to recognize the February 11, 2009
agreement because of the lack of approval by its Board of Trustees and for having been signed by
Maglaya whose term of office had expired.

On June 24, 2009, the petitioner sent a demand letter to the respondent. 11

Due to the respondent’s failure to pay as demanded, the petitioner filed its complaint for sum of
money in the RTC,  averring as follows:
12

xxxx
2. On January 9, 2006, plaintiff supplied defendant with hospital medical equipment for an in
consideration of P18,625,000.00 payable in the following manner: (2.1) For nos. 1 to 9 of
items to be sourced from Fernando Medical Equipment, Inc. (FMEI) – 30% down payment of
P17,475,000 or P5,242,500 with the balance of P12,232,500 or 70% payable in 24 equal
monthly instalments of P509,687.50 and (2.2.) cash transaction amounting to P1,150,000.00
(2.3) or an initial cash payment of P6,392,500.00 with the remaining balance payable in 24
equal monthly installments every 20th day of each month until paid, as stated in the
Memorandum of Agreement, copy of which is hereto attached as Annex "A";

3. On July 5, 2006, plaintiff installed defendants medical gas pipeline system in the latter’s
hospital building complex for and in consideration of P8,500,000.00 payable upon installation
thereof under a Deed of Undertaking, copy of which is hereto attached as Annex "B";

4. On July 27, 2006, plaintiff supplied defendant one (1) unit Diamond Select Slice CT and
one (1) unit Diamond Select CV-9 for and in consideration of P65,000,000.00 thirty percent
(30%) of which shall be paid as down payment and the balance in 30 equal monthly
instalments as provided in that Deed of Undertaking, copy of which is hereto attached
as Annex "C";

5. On February 2, 2007, plaintiff supplied defendants hospital furnishings and equipment for
an in consideration of P32,926,650.00 twenty percent (20%) of which was to be paid as
downpayment and the balance in 30 months under a Deed of Undertaking, copy of which is
hereto attached as Annex "D";

6. Defendant’s total obligation to plaintiff was P123,901,650.00 as of February 15, 2009, but
defendant was able to pay plaintiff the sum of P67,357,683.23 thus leaving a balance
P54,654,195.54 which has become overdue and demandable;

7. On February 11, 2009, plaintiff agreed to reduce its claim to only P50,400,000.00 and
extended its payment for 36 months provided defendants shall pay the same within 36
months and to issue 36 postdated checks therefor in the amount of P1,400,000.00 each to
which defendant agreed under an Agreement, copy of which is hereto attached as Annex
"E";

8. Accordingly, defendant issued in favor of plaintiff 36 postdated checks each in the

[a]mount of P1,400,000.00 but after four (4) of the said checks in the sum of P5,600,000.00
were honored defendant stopped their payment thus making the entire obligation of
defendant due and demandable under the February 11, 2009 agreement;

9. In a letter dated May 27, 2009, defendant claimed that all of the first four (4) agreements
may be rescissible and one of them is unenforceable while the Agreement dated February
11, 2009 was without the requisite board approval as it was signed by an agent whose term
of office already expired, copy of which letter is hereto attached as Annex "F";

10. Consequently, plaintiff told defendant that if it does not want to honor the February 11,
2009 contract then plaintiff will insists [sic] on its original claim which is P54,654,195.54 and
made a demand for the payment thereof within 10 days from receipt of its letter copy of
which is hereto attached as Annex "G";

11. Defendant received the aforesaid letter on July 6, 2009 but to date it has not paid plaintiff
any amount, either in the first four contracts nor in the February 11, 2009 agreement, hence,
the latter was constrained to institute the instant suit and thus incurred attorney’s fee
equivalent to 10% of the overdue account but only after endeavouring to resolve the dispute
amicable and in a spirit of friendship[;]

12. Under the February 11, 2009 agreement the parties agreed to bring all actions or
proceedings thereunder or characterized therewith in the City of Manila to the exclusion of
other courts and for defendant to pay plaintiff 3% per months of delay without need of
demand; 13

xxxx
The respondent moved to dismiss the complaint upon the following grounds,  namely: (a) lack of
14

jurisdiction over the person of the defendant; (b) improper venue; (c) litis pendentia; and (d) forum
shopping. In support of the ground of litis pendentia, it stated that it had earlier filed a complaint for
the rescission of the four contracts and of the February 11, 2009 agreement in the RTC in
Cabanatuan City; and that the resolution of that case would be determinative of the petitioner’s
action for collection.15

After the RTC denied the motion to dismiss on July 19, 2009,  the respondent filed its answer (ad
16

cautelam),  averring thusly:

17

xxxx

2. The allegations in Paragraphs Nos. 2, 3, 4, and 5 of the complaint are ADMITTED subject
to the special and affirmative defenses hereafter pleaded;

3. The allegations in Paragraphs Nos. 6, 7 and 8 of the complaint are DENIED for lack of
knowledge or information sufficient to form a belief as to the truth or falsity thereof, inasmuch
as the alleged transactions were undertaken during the term of office of the past officers of
defendant Wesleyan University-Philippines. At any rate, these allegations are subject to the
special and affirmative defenses hereafter pleaded;

4. The allegations in Paragraphs Nos. 9 and 10 of the complaint are ADMITTED subject to
the special and affirmative defenses hereafter pleaded;

5. The allegations in Paragraphs Nos. 11 and 12 of the complaint are DENIED for being
conclusions of law. 18

xxxx

The petitioner filed its reply to the answer. 19

On September 28, 2011, the petitioner filed its Motion for Judgment Based on the Pleadings,  stating
20

that the respondent had admitted the material allegations of its complaint and thus did not tender
any issue as to such allegations.

The respondent opposed the Motion for Judgment Based on the Pleadings, arguing that it had
specifically denied the material allegations in the complaint, particularly paragraphs 6, 7, 8, 11 and
12.21

On November 23, 2011, the RTC issued the order denying the Motion for Judgment Based on the
Pleadings of the petitioner, to wit:

At the hearing of the "Motion for Judgment Based on the Pleadings" filed by the plaintiff thru counsel,
Atty. Jose Mañacop on September 28, 2011, the court issued an Order dated October 27, 2011
which read in part as follows:

xxxx

Considering that the allegations stated on the Motion for Judgment Based on the Pleadings, are
evidentiary in nature, the Court, instead of acting on the same, hereby sets this case for pre-trial,
considering that with the Answer and the Reply, issues have been joined.

xxxx

In view therefore of the Order of the Court dated October 27, 2011, let the Motion for Judgment
Based on the Pleadings be hereby ordered DENIED on reasons as abovestated and hereto
reiterated.

xxxx

SO ORDERED. 22
The petitioner moved for reconsideration,  but its motion was denied on December 29, 2011.
23 24

The petitioner assailed the denial in the CA on certiorari. 25

Judgment of the CA

On July 2, 2013, the CA promulgated its decision. Although observing that the respondent had
admitted the contracts as well as the February 11, 2009 agreement, viz.:

It must be remembered that Private Respondent admitted the existence of the subject contracts,
including Petitioner’s fulfilment of its obligations under the same, but subjected the said admission to
the "special and affirmative defenses" earlier raised in its Motion to Dismiss.

xxxx

Obviously, Private Respondent’s special and affirmative defenses are not of such character as to
avoid Petitioner’s claim. The same special and affirmative defenses have been passed upon by the
RTC in its Order dated July 19, 2010 when it denied Private Respondent’s Motion to Dismiss. As
correctly found by the RTC, Private Respondent’s special and affirmative defences of lack of
jurisdiction over its person, improper venue, litis pendentia and wilful and deliberate forum shopping
are not meritorious and cannot operate to dismiss Petitioner’s Complaint. Hence, when Private
Respondent subjected its admission to the said defenses, it is as though it raised no defense at all.

Not even is Private Respondent’s contention that the rescission case must take precedence over
Petitioner’s Complaint for Sum of Money tenable.  To begin with, Private Respondent had not yet
1avvphi1

proven that the subject contracts are rescissible. And even if the subject contracts are indeed
rescissible, it is well-settled that rescissible contracts are valid contracts until they are rescinded.
Since the subject contracts have not yet been rescinded, they are deemed valid contracts which may
be enforced in legal contemplation.

In effect, Private Respondent admitted that it entered into the subject contracts and that Petitioner
had performed its obligations under the same.

As regards Private Respondent’s denial by disavowal of knowledge of the Agreement dated

February 11, 2009, We agree with Petitioner that such denial was made in bad faith because such
allegations are plainly and necessarily within its knowledge.

In its letter dated May 27, 2009, Private Respondent made reference to the Agreement dated
February 11, 2009, viz.:

"The Agreement dated 11 February 2009, in particular, was entered into by an Agent of the
University without the requisite authority from the Board of Trustees, and executed when said
agent’s term of office had already expired. Consequently, such contract is, being an unenforceable
contract."

Also, Private Respondent averred in page 5 of its Complaint for Rescission, which it attached to its
Motion to Dismiss, that:

"13. On 6 February 2009, when the terms of office of plaintiff’s Board of Trustess chaired by
Dominador Cabasal, as well as of Atty. Guillermo C. Maglaya as President, had already expired,
thereby rendering them on a hold-over capacity, the said Board once again authorized Atty. Maglaya
to enter into another contract with defendant FMEI, whereby the plaintiff was obligated to pay and
deliver to defendant FMEI the amount of Fifty Million Four Hundred Thousand Pesos
(Php50,400,000.00) in thirty five (35) monthly instalments of One Million Four Hundred Thousand
Pesos (Php1,400,000.00), representing the balance of the payment for the medical equipment
supplied under the afore-cited rescissible contracts. This side agreement, executed five (5) days
later, or on 11 February 2009, and denominated as "AGREEMENT", had no object as a contract, but
was entered into solely for the purpose of getting the plaintiff locked-in to the payment of the balance
price under the rescissible contracts; x x x"

From the above averments, Private Respondent cannot deny knowledge of the Agreement dated
February 11, 2009. In one case, it was held that when a respondent makes a "specific denial" of a
material allegation of the petition without setting forth the substance of the matters relied upon to
support its general denial, when such matters where plainly within its knowledge and the defendant
could not logically pretend ignorance as to the same, said defendant fails to properly tender an
issue. 26

the CA ruled that a judgment on the pleadings would be improper because the outstanding balance
due to the petitioner remained to be an issue in the face of the allegations of the respondent in its
complaint for rescission in the RTC in Cabanatuan City, to wit:

However, Private Respondent’s disavowal of knowledge of its outstanding balance is well-taken.

Paragraph 6 of Petitioner’s Complaint states that Private Respondent was able to pay only the
amount of P67,357,683.23. Taken together with paragraph 8, which states that Private Respondent
was only able to make good four (4) check payments worth P1,400,000.00 or a total of
P5,600,000.00, Private Respondent’s total payments would be, in Petitioner’s view, P72,957,683.23.
However, in its Complaint for Rescission, attached to its Motion to Dismiss Petitioner’s Complaint for
Sum of Money, Private Respondent alleged that:

"16. To date, plaintiff had already paid defendant the amount of Seventy Eight Million Four Hundred
One Thousand Six Hundred Fifty Pesos (P78,401,650.00)"

It is apparent that Private Respondent’s computation and Petitioner’s computation of the total
payments made by Private Respondent are different. Thus, Private Respondent tendered an issue
as to the amount of the balance due to Petitioner under the subject contracts. 27

Hence, this appeal.

Issue

The petitioner posits that the CA erred in going outside of the respondent’s answer by relying on the
allegations contained in the latter’s complaint for rescission; and insists that the CA should have
confined itself to the respondent’s answer in the action in order to resolve the petitioner’s motion for
judgment based on the pleadings. 1âwphi1

In contrast, the respondent contends that it had specifically denied the material allegations of the
petitioner’s complaint, including the amount claimed; and that the CA only affirmed the previous
ruling of the RTC that the pleadings submitted by the parties tendered an issue as to the balance
owing to the petitioner.

Did the CA commit reversible error in affirming the RTC’s denial of the petitioner’s motion for
judgment on the pleadings?

Ruling of the Court

The appeal is meritorious.

The rule on judgment based on the pleadings is Section 1, Rule 34 of the Rules of Court, which
provides thus:

Section 1. Judgment on the pleadings. – Where an answer fails to tender an issue, or otherwise
admits the material allegations of the adverse party’s pleading, the court may, on motion of that
party, direct judgment on such pleading. x x x

The essential query in resolving a motion for judgment on the pleadings is whether or not there are
issues of fact generated by the pleadings.  Whether issues of fact exist in a case or not depends on
28

how the defending party’s answer has dealt with the ultimate facts alleged in the complaint. The
defending party’s answer either admits or denies the allegations of ultimate facts in the complaint or
other initiatory pleading. The allegations of ultimate facts the answer admit, being undisputed, will
not require evidence to establish the truth of such facts, but the allegations of ultimate facts the
answer properly denies, being disputed, will require evidence.

The answer admits the material allegations of ultimate facts of the adverse party’s pleadings not only
when it expressly confesses the truth of such allegations but also when it omits to deal with them at
all.  The controversion of the ultimate facts must only be by specific denial. Section 10, Rule 8 of
29

the Rules of Court recognizes only three modes by which the denial in the answer raises an issue of
fact. The first is by the defending party specifying each material allegation of fact the truth of which
he does not admit and, whenever practicable, setting forth the substance of the matters upon which
he relies to support his denial. The second applies to the defending party who desires to deny only a
part of an averment, and the denial is done by the defending party specifying so much of the
material allegation of ultimate facts as is true and material and denying only the remainder. The third
is done by the defending party who is without knowledge or information sufficient to form a belief as
to the truth of a material averment made in the complaint by stating so in the answer. Any material
averment in the complaint not so specifically denied are deemed admitted except an averment of the
amount of unliquidated damages. 30

In the case of a written instrument or document upon which an action or defense is based, which is
also known as the actionable document, the pleader of such document is required either to set forth
the substance of such instrument or document in the pleading, and to attach the original or a copy
thereof to the pleading as an exhibit, which shall then be deemed to be a part of the pleading, or to
set forth a copy in the pleading.  The adverse party is deemed to admit the genuineness and due
31

execution of the actionable document unless he specifically denies them under oath, and sets forth
what he claims to be the facts, but the requirement of an oath does not apply when the adverse
party does not appear to be a party to the instrument or when compliance with an order for an
inspection of the original instrument is refused.32

In Civil Case No. 09-122116, the respondent expressly admitted paragraphs no. 2, 3, 4, 5, 9 and 10

of the complaint. The admission related to the petitioner’s allegations on: (a) the four transactions for
the delivery and installation of various hospital equipment; (b) the total liability of the respondent; (c)
the payments made by the respondents; (d) the balance still due to the petitioner; and (e) the
execution of the February 11, 2009 agreement. The admission of the various agreements, especially
the February 11, 2009 agreement, significantly admitted the petitioner’s complaint. To recall, the
petitioner’s cause of action was based on the February 11, 2009 agreement, which was the
actionable document in the case. The complaint properly alleged the substance of the February 11,
2009 agreement, and contained a copy thereof as an annex. Upon the express admission of the
genuineness and due execution of the February 11, 2009 agreement, judgment on the pleadings
became proper.  As held in Santos v. Alcazar:
33 34

There is no need for proof of execution and authenticity with respect to documents the genuineness
and due execution of which are admitted by the adverse party. With the consequent admission
engendered by petitioners’ failure to properly deny the Acknowledgment in their Answer, coupled
with its proper authentication, identification and offer by the respondent, not to mention petitioners’
admissions in paragraphs 4 to 6 of their Answer that they are indeed indebted to respondent, the
Court believes that judgment may be had solely on the document, and there is no need to present
receipts and other documents to prove the claimed indebtedness. The Acknowledgment, just as an
ordinary acknowledgment receipt, is valid and binding between the parties who executed it, as a
document evidencing the loan agreement they had entered into. The absence of rebutting evidence
occasioned by petitioners’ waiver of their right to present evidence renders the Acknowledgment as
the best evidence of the transactions between the parties and the consequential indebtedness
incurred. Indeed, the effect of the admission is such that a prima facie case is made for the plaintiff
which dispenses with the necessity of evidence on his part and entitled him to a judgment on the
pleadings unless a special defense of new matter, such as payment, is interposed by the
defendant.  (citations omitted)
35

The respondent denied paragraphs no. 6, 7 and 8 of the complaint "for lack of knowledge or

information sufficient to form a belief as to the truth or falsity thereof, inasmuch as the alleged
transactions were undertaken during the term of office of the past officers of defendant Wesleyan
University-Philippines." Was the manner of denial effective as a specific denial?

We answer the query in the negative. Paragraph no. 6 alleged that the respondent’s total obligation
as of February 15, 2009 was P123,901,650.00, but its balance thereafter became only
P54,654,195.54 because it had since then paid P67,357,683.23 to the petitioner. Paragraph no. 7
stated that the petitioner had agreed with the respondent on February 11, 2009 to reduce the
balance to only P50,400,000.00, which the respondent would pay in 36 months through 36
postdated checks of P1,400,000.00 each, which the respondent then issued for the purpose.
Paragraph no. 8 averred that after four of the checks totalling P5,600,000.00 were paid the
respondent stopped payment of the rest, rendering the entire obligation due and demandable
pursuant to the February 11, 2009 agreement. Considering that paragraphs no. 6, 7 and 8 of the
complaint averred matters that the respondent ought to know or could have easily known, the
answer did not specifically deny such material averments. It is settled that denials based on lack of
knowledge or information of matters clearly known to the pleader, or ought to be known to it, or could
have easily been known by it are insufficient, and constitute ineffective  or sham denials.
36 37

That the respondent qualified its admissions and denials by subjecting them to its special and
affirmative defenses of lack of jurisdiction over its person, improper venue, litis pendentia and forum
shopping was of no consequence because the affirmative defenses, by their nature, involved
matters extrinsic to the merits of the petitioner’s claim, and thus did not negate the material
averments of the complaint.

Lastly, we should emphasize that in order to resolve the petitioner’s Motion for Judgment Based on
the Pleadings, the trial court could rely only on the answer of the respondent filed in Civil Case No.
09-122116. Under Section 1, Rule 34 of the Rules of Court, the answer was the sole basis for
ascertaining whether the complaint’s material allegations were admitted or properly denied. As such,
the respondent’s averment of payment of the total of P78,401,650.00 to the petitioner made in its
complaint for rescission had no relevance to the resolution of the Motion for Judgment Based on the
Pleadings. The CA thus wrongly held that a factual issue on the total liability of the respondent
remained to be settled through trial on the merits. It should have openly wondered why the
respondent's answer in Civil Case No. 09-122116 did not allege the supposed payment of the
P78,401,650.00, if the payment was true, if only to buttress the specific denial of its alleged liability.
The omission exposed the respondent's denial of liability as insincere.

WHEREFORE, the Court REVERSES and SETS ASIDE the decision promulgated on July 2,

2013; DIRECTS the Regional Trial Court, Branch 1, in Manila to resume its proceedings in Civil
Case No. 09-122116 entitled Fernando Medical Enterprises, Inc. v. Wesleyan University-
Philippines, and to forthwith act on and grant the Motion for Judgment Based on the Pleadings by
rendering the proper judgment on the pleadings; and ORDERS the respondent to pay the costs of
suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice

TERESITA J. LEONARDO-DE CASTRO ESTELA M. PERLAS-BERNABE

Associate Justice Associate Justice

FRANCIS H. JARDELEZA *

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice

G.R. No. 182779               August 23, 2010

VICTORINA (VICTORIA) ALICE LIM LAZARO, Petitioner,

vs.
BREWMASTER INTERNATIONAL, INC., Respondent.

RESOLUTION
NACHURA, J.:

Before the Court is a petition for review on certiorari of the Court of Appeals (CA) Decision1 dated
September 4, 2007 and Resolution dated January 31, 2008, which awarded the amount sought by
respondent in its Complaint. As held by the CA, to grant the relief prayed for by respondent is, in the
words of Section 6 of the Revised Rule on Summary Procedure, the judgment "warranted by the
facts alleged in the complaint."

Respondent, Brewmaster International, Inc., is a marketing company engaged in selling and

distributing beer and other products of Asia Brewery, Inc. On November 9, 2005, it filed a Complaint
for Sum of Money against Prescillo G. Lazaro (Prescillo) and petitioner, Victorina (also known as
Victoria) Alice Lazaro, with the Metropolitan Trial Court (MeTC) of Makati City. The complaint alleged
as follows:

6. During the period from February 2002 to May 2002, defendants obtained on credit from
plaintiff beer and other products in the total amount of ONE HUNDRED THIRTY EIGHT
THOUSAND FIVE HUNDRED TWO PESOS AND NINETY TWO CENTAVOS (Php
138,502.92), evidenced by sales invoices photocopies of which are hereto attached as
Annexes "A," "A-1" to "A-11,"

7. Despite repeated demands, defendants have failed and refused, and up to now, still fail
and refuse to pay their aforesaid obligation to plaintiff in the amount of ONE HUNDRED
THIRTY EIGHT THOUSAND FIVE HUNDRED TWO PESOS AND NINETY TWO
CENTAVOS (Php 138,502.92) as evidenced by the demand letters dated 21 April 2003, 12
May 2003, 5 August 2003 and 17 August 2005, photocopies of which are hereto attached as
Annexes "B," "C," "C-1," "D," "D-1," "D-2," and "E," "E-1,"

8. Under the terms of the sales invoices, defendants agreed that in case of litigation, the
venue shall only be at the proper courts of Makati City and to pay 24% interest on all
overdue accounts.

WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against the
defendants, ordering the latter to pay the sum of Php138,502.92 representing plaintiff’s claim and
the sum of Php33,240.00 as interest.

Plaintiff prays for such other or further relief and remedies that are just and equitable in the
premises.2

Annexes A, A-1 to A-11 are photocopies of sales invoices3 indicating the amount of the goods
purchased and showing that they were sold to "TOTAL" and received by a certain Daniel Limuco.

Prescillo filed an answer with counterclaim, denying any knowledge of the obligation sued upon.
According to Prescillo, he and petitioner had lived separately since January 15, 2002 and he never
authorized petitioner to purchase anything from respondent. He pointed out that the purchaser of the
items, as borne out by the sales invoices attached to the complaint, was Total, which should have
been the one sued by respondent.4

Petitioner, in her own answer with counterclaims, likewise denied having transacted with respondent,
and averred that the documents attached to the complaint showed that it was Total which purchased
goods from respondent.5

On June 14, 2006, during the scheduled preliminary conference, petitioner and her co-defendant did
not appear. Hence, the MeTC declared the case submitted for decision.6

On August 22, 2006, the MeTC dismissed the complaint, ratiocinating that respondent, as plaintiff,
failed to meet the burden of proof required to establish its claim by preponderance of evidence. The
court a quo noted that the sales invoices attached to the complaint showed that the beer and the
other products were sold to Total and were received by a certain Daniel Limuco; they did not
indicate, in any way, that the goods were received by petitioner or her husband.7

Respondent elevated the case to the Regional Trial Court (RTC) through a notice of appeal.
Attached to its Memorandum was additional evidence, showing that it transacted with petitioner and
her husband, who were then the operators and franchisees of the Total gasoline station and
convenience store where the subject goods were delivered, and that Daniel Limuco was their
employee.8

Unmoved, the RTC found no reversible error in the assailed decision. It agreed with the MeTC that
respondent failed to submit any evidence proving that petitioner and her husband were liable for the
obligation. The RTC disregarded the documents attached to the memorandum on the ground that
admission of such additional evidence would be offensive to the basic rule of fair play and would
violate the other party’s right to due process. Thus, the RTC affirmed the assailed decision in toto.9

Respondent then went to the CA through a petition for review. There, it succeeded in obtaining a
judgment in its favor. Applying Section 710 of the Revised Rule on Summary Procedure, in
conjunction with Section 611 thereof, the CA held that judgment should have been rendered "as may
be warranted by the facts alleged in the complaint" considering that both defendants failed to appear
during the preliminary conference. The appellate court said that "by instead referring to the sales
invoices and bypassing [the] ultimate facts [alleged in the complaint], the MeTC contravened the
evident purposes of the [Revised] Rule on Summary Procedure directing that the judgment be based
on the allegations of the complaint, which were, firstly, to avoid delay and, secondly, to consider the
non-appearance at the preliminary conference as an admission of the ultimate facts." The CA
judiciously pronounced that:

In fact, evidentiary matters (like the sales invoices attached to the complaint) were not yet to be
considered as of that early stage of the proceedings known under the Rule on Summary Procedure
as the preliminary conference. The evidentiary matters and facts are to be required only upon the
termination of the preliminary conference and only if further proceedings become necessary to
establish factual issues defined in the order issued by the court. (citing Section 9, Rule on Summary
Procedure)

Thus, finding the amount claimed to be warranted by the allegations in the complaint, the CA, in its
September 4, 2007 Decision, reversed the trial court’s decision and ordered petitioner and her
husband to pay the said amount plus interests, thus:

WHEREFORE, the DECISION DATED MARCH 12, 2007 is REVERSED AND SET ASIDE.

The respondents are ORDERED to pay, jointly and severally, to the petitioner the amount of
₱138,502.92, plus interest of 6% per annum from the filing of the complaint until this judgment
becomes final and executory, and 12% per annum upon finality of this judgment until full payment.

The respondents are also ORDERED to pay the costs of suit.

SO ORDERED.12

Petitioner filed a motion for reconsideration of the said Decision but the same was denied by the CA
in its January 31, 2008 Resolution.13

Petitioner submits the following issues to this Court for resolution:

Petitioner respectfully submits that the Honorable Court of Appeals erred in the interpretation of
Section 6 of the Revised Rules of Summary Procedure when it reversed the Decision of the RTC,
Branch 162 of Makati in Civil Case [N]o. 06-944.

Petitioner further submits that the Court of Appeals erred in giving relief to the private respondent
despite the lack of cause of action in its complaint against the petitioner herein.14

Petitioner contends that the Revised Rule on Summary Procedure does not warrant the automatic
grant of relief in favor of the plaintiff when the complaint fails to state a cause of action. She avers
that respondent’s complaint fails to state a cause of action; hence, no relief can be given to
respondent. Petitioner points out that the sales invoices formed part of the complaint and should be
considered in determining whether respondent has a cause of action against her. Consideration of
the said sales invoices, she avers, would show that there is no contractual relationship between her
and respondent; the invoices did not indicate in any way that petitioner was liable for the amount
stated therein.
Petitioner is correct in saying that no relief can be awarded to respondent if its complaint does not
state a cause of action. Indeed, if the complaint does not state a cause of action, then no relief can
be granted to the plaintiff and it would necessarily follow that the allegations in the complaint would
not warrant a judgment favorable to the plaintiff.

The basic requirement under the rules of procedure is that a complaint must make a plain, concise,
and direct statement of the ultimate facts on which the plaintiff relies for his claim.15 Ultimate facts
mean the important and substantial facts which either directly form the basis of the plaintiff’s primary
right and duty or directly make up the wrongful acts or omissions of the defendant.16 They refer to the
principal, determinative, constitutive facts upon the existence of which the cause of action rests. The
term does not refer to details of probative matter or particulars of evidence which establish the
material elements.17

The test of sufficiency of the facts alleged in a complaint to constitute a cause of action is whether,
admitting the facts alleged, the court could render a valid judgment upon the same in accordance
with the prayer of the petition or complaint.18 To determine whether the complaint states a cause of
action, all documents attached thereto may, in fact, be considered, particularly when referred to in
the complaint.19 We emphasize, however, that the inquiry is into the sufficiency, not the veracity of
the material allegations in the complaint.20 Thus, consideration of the annexed documents should
only be taken in the context of ascertaining the sufficiency of the allegations in the complaint.

Petitioner argues that the complaint fails to state a cause of action since reference to the sales
invoices attached to and cited in paragraph six of the Complaint shows that it was not her who
purchased and received the goods from respondent.

Contrary to petitioner’s stance, we find that the Complaint sufficiently states a cause of action.  The
1âwphi1

following allegations in the complaint adequately make up a cause of action for collection of sum of
money against petitioner: (1) that petitioner and her husband obtained beer and other products worth
a total of ₱138,502.92 on credit from respondent; and (2) that they refused to pay the said amount
despite demand.

As correctly held by the CA, the sales invoices are not actionable documents. They were not the
bases of respondent’s action for sum of money but were attached to the Complaint only to provide
details on the alleged transactions. They were evidentiary in nature and not even necessary to be
stated or cited in the Complaint.

At any rate, consideration of the attached sales invoices would not change our conclusion. The sales
invoices, naming Total as the purchaser of the goods, do not absolutely foreclose the probability of
petitioner being liable for the amounts reflected thereon. An invoice is nothing more than a detailed
statement of the nature, quantity, and cost of the thing sold and has been considered not a bill of
sale.21 Had the case proceeded further, respondent could have presented evidence linking these
sales invoices to petitioner.

In Peña v. Court of Appeals,22 petitioners therein likewise argued that the sales invoices did not show
that they had any involvement in the transactions covered by the same. What the Court said in reply
to this argument bolsters our view in this petition:

Although it appears in the other sales invoices that the petitioners were the salespersons who
brokered the sales of the products covered by the said sales invoices to the vendees therein named,
the said entries are not conclusive of the extent and the nature of the involvement of the petitioners
in the sales of the products under the said sales invoices which are not absolutely binding. They may
be explained and put to silence by all the facts and circumstances characterizing the true import of
the dealings to which they refer. The facts contained in the said sales invoices may be contradicted
by oral testimony.23

WHEREFORE, premises considered, the Court of Appeals Decision dated September 4, 2007 and
Resolution dated January 31, 2008 are AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice
WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

G.R. No. 156474. August 16, 2005

PESANE ANIMAS MONGAO, joined by her husband BENHUR MONGAO, Petitioners,

vs.
PRYCE PROPERTIES CORPORATION, Respondent.

DECISION

TINGA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure
assailing the Decision of the Court of Appeals in CA-G.R. CV No. 52753, which reversed the trial
1 

court’s judgment on the pleadings and remanded the case thereto for trial on the merits, and
the Resolution denying petitioners’ motion for reconsideration.
2 

The instant petition originated from a complaint for rescission and damages filed on February 14,
1995 by petitioners, Spouses Pesane Animas Mongao (hereafter referred to as petitioner Mongao)
and Benhur Mongao, against respondent Pryce Properties Corporation before the Regional Trial
Court (RTC) in General Santos City. The complaint alleged that petitioner Mongao and respondent
3 

corporation executed a Memorandum of Agreement on December 20, 1993, wherein the former
4 

agreed to sell to the latter for the total price of Five Million Twenty-Eight Thousand Eight Hundred
Pesos (₱5,028,800.00) a parcel of land in Polomolok, South Cotabato covered by Transfer
Certificate of Title (TCT) No. T-22186 registered in the name of petitioner Mongao only. In
5 

accordance with the terms and conditions of the Memorandum of Agreement, Respondent

Corporation allegedly paid petitioners the sum of Five Hundred Fifty Thousand Pesos (₱550,000.00)
as earnest money considered as part of the purchase price. The complaint further alleged that after
considerable delay, Respondent Corporation offered to pay the balance of the purchase price by
issuing a check payable to petitioner Mongao and her mother, Nellie Animas, which the former
rejected. Allegedly, Respondent Corporation continuously refused to heed petitioners’ written and
oral demands to pay the balance solely to petitioner Mongao.
The complaint also denied that petitioner Mongao executed a Deed of Absolute Sale dated
November 15, 1994 in favor of Respondent Corporation, the registration of which caused the
cancellation of TCT No. T-22186 in the name of petitioner Mongao and the issuance of TCT No. T-
62944. In addition to petitioners’ prayer for the rescission of the Memorandum of Agreement and
the Deed of Absolute Sale and the forfeiture of the earnest money paid by Respondent Corporation,
the complaint also asked for the award of moral and exemplary damages and attorney’s fees.

Respondent Corporation filed an answer and refuted petitioners’ allegations with a narration of the
factual antecedents leading to the perfection of the contract of sale. It claimed that sometime in
6 

1993, a certain Pedro Animas IV approached Sonito N. Mole, an officer of Respondent Corporation,
and negotiated the sale of properties belonging to the Animas family which were on the verge of
being foreclosed by the bank. Respondent Corporation further claimed that the subject property was
one of the two parcels of land it selected for purchase. Said property covered by TCT No. T-22186
allegedly belonged to petitioner Mongao’s parents but was registered in petitioner Mongao’s name
as a trustee thereof.

Respondent Corporation averred that the true agreement between Respondent Corporation and the
Animas family was for the former to purchase the two parcels of land belonging to the late Pedro
Animas, father of petitioner Mongao. It admitted the execution of the Memorandum of Agreement but
qualified that respondent corporation did not pay the earnest money directly and solely to petitioner
Mongao. Said earnest money was allegedly part of the amount directly paid by Respondent
Corporation to the Development Bank of the Philippines in order to redeem certain properties of the
Animas family which were foreclosed and sold at a public auction.

Respondent corporation averred that petitioner Mongao and Pedro Animas, Jr., the registered
owners of the subject properties, executed simultaneously the corresponding Deed of
Sale and Memorandum of Agreement after respondent corporation’s representative delivered the
checks to the bank as payment for redemption of the properties. Controversy arose after
Respondent Corporation had allegedly manifested its intent to complete payments but petitioner
Mongao demanded that payment be made to her alone to the exclusion of the rest of the Animas
family. Respondent Corporation admitted issuing a check in the amount of Three Million Three
Hundred Fifty-Seven Pesos and Eighty-Seven Centavos (₱3,353,357.84) payable to the order of
petitioner Mongao and her mother, Nellie Animas, which was however refused by petitioner Mongao.

The answer also admitted that due to the demands of both petitioner Mongao and the Animas family,
Respondent Corporation was constrained to deposit the payment with the Clerk of Court of the RTC
of Davao City. By way of a compulsory counterclaim, Respondent Corporation prayed that
petitioners be adjudged liable for attorney’s fees for their hasty and unjustified institution of the case.

Petitioners moved for judgment on the pleadings on the ground that the answer admitted the
material allegations of the complaint and, therefore, failed to tender an issue. In particular, the
7 

answer allegedly admitted the existence of the contract of sale and Respondent Corporation’s
refusal to satisfy the unpaid balance of the purchase price despite demand. Petitioners contended
that respondent corporation cannot avoid rescission by raising the defense that it contracted with the
Animas family and not solely with petitioner Mongao. Petitioners belied respondent corporation’s
claim for consignation by attaching a letter from the Office of the Clerk of Court of the RTC of Davao
City to the effect that the court could not act on petitioners’ motion to deny consignation because the
deposit was transmitted through a mere letter, hence, the case was not raffled to a particular branch
of the court.
8

Respondent corporation opposed petitioners’ motion for judgment on the pleadings, arguing that two
material allegations in the complaint, namely: that petitioner Mongao did not execute the Deed of
Sale and that petitioner Mongao was the owner of the subject property, were disputed in the
answer. 9

The trial court granted petitioners’ motion for judgment on the pleadings and considered the case
submitted for decision. The trial court rendered a Decision on November 13, 1995. The dispositive
10 

portion thereof reads:

WHEREFORE, premises considered, the Memorandum of Agreement dated 20 December 1993, as

well as the Deed of Absolute Sale entered into between plaintiff Pesane Animas Mongao and
defendant Pryce Properties Corporation dated November 15, 1994, are hereby declared rescinded.
As a consequence thereof, Pryce Properties Corporation is directed to execute a Deed of
Reconveyance of the property covered by TCT No. T-62944 in favor of Pesane Animas and to pay
attorney’s fees in the amount of ₱50,000.00 as well as costs of suit, by way of damages.

On the other hand plaintiff Pesane Animas Mongao is likewise directed to return to the defendant
Pryce Properties Corporation, what she had received by virtue of the contract in the amount of
₱1,675,442.16, a portion of which may be compensated to the damages herein awarded pursuant to
Article 1278 of the New Civil Code.

SO ORDERED. 11

With the adverse decision, Respondent Corporation elevated the case to the Court of Appeals,
which reversed the trial court’s Decision and remanded the case for trial on the merits through
its Decision promulgated on March 22, 2001. On the main issue of whether or not judgment on the
12 

pleadings was proper, the Court of Appeals ruled in the negative, finding that there were actual
issues raised in the answer requiring the presentation and assessment of evidence. The appellate
court opined that aside from the amount of damages claimed by both parties, the following were also
put in issue: (1) the genuineness of the Deed of Sale purportedly executed by petitioner Mongao,
and (2) the nature of petitioner Mongao’s title to the subject property. The Court of Appeals also
ruled against the trial court’s interference with the consignation case pending before the RTC of
Davao City but did not find petitioners guilty of forum-shopping in filing the action for rescission
despite the pendency of the consignation case with the RTC of Davao City.

Petitioners moved for the reconsideration of the Court of Appeals’ Decision but the same was denied
in a Resolution dated November 25, 2002. Hence, this petition for review, raising the following
issues:

A. WHETHER OR NOT THE MERE DEPOSIT OF A CHECK ¾ PAYABLE TO TWO PERSONS,

ONE OF WHOM IS A THIRD PARTY AND/OR A STRANGER TO THE TRANSACTION, AND THE
RELEASE OF WHICH IS SUBJECT TO CERTAIN CONDITIONS¾ CONSTITUTES
CONSIGNATION.

B. WHETHER OR NOT JUDGMENT ON THE PLEADINGS IS PROPER IN THIS CASE. 13

The main issue for this Court’s resolution is the propriety of the trial court’s judgment on the
pleadings on the ground that respondent corporation’s allegation did not tender an issue.

Judgment on the pleadings is governed by Section 1, Rule 34 of the 1997 Rules of Civil Procedure,
essentially a restatement of Section 1, Rule 19 of the 1964 Rules of Court then applicable to the
proceedings before the trial court. Section 1, Rule 19 of the Rules of Court provides that where an
answer "fails to tender an issue, or otherwise admits the material allegations of the adverse party's
pleading, the court may, on motion of that party, direct judgment on such pleading." The answer
would fail to tender an issue, of course, if it does not comply with the requirements for a specific
denial set out in Section 10 (or Section 8) of Rule 8; and it would admit the material allegations of
14  15 

the adverse party's pleadings not only where it expressly confesses the truthfulness thereof but also
if it omits to deal with them at all.
16

Now, if an answer does in fact specifically deny the material averments of the complaint in the
manner indicated by said Section 10 of Rule 8, and/or asserts affirmative defenses (allegations of
new matter which, while admitting the material allegations of the complaint expressly or impliedly,
would nevertheless prevent or bar recovery by the plaintiff) in accordance with Sections 4 and 5 of
17  18 

Rule 6, a judgment on the pleadings would naturally not be proper. 19

Thus, there is joinder of issues when the answer makes a specific denial of the material allegations
in the complaint or asserts affirmative defenses which would bar recovery by the plaintiff. Where
there is proper joinder of issues, the trial court is barred from rendering judgment based only on the
pleadings filed by the parties and must conduct proceedings for the reception of evidence. On the
other hand, an answer fails to tender an issue where the allegations admit the allegations in support
of the plaintiff’s cause of action or fail to address them at all. In either case, there is no genuine issue
and judgment on the pleadings is proper.

Petitioners’ action for rescission is mainly based on the alleged breach by Respondent Corporation
of its contractual obligation under the Memorandum of Agreement when respondent refused to effect
payment of the purchase price solely to petitioner Mongao. The complaint pertinently alleged the
following:

4. Plaintiff Pesane Animas Mongao is the registered owner in fee simple of a parcel of land more
particularly described as: . . . .

5. In a Memorandum of Agreement dated 20 December 1993 and entered in the Notarial Register of
Atty. Rosalio C. Cariño, as Document No. 75, Page No. 15, Book No. II, Series of 1993; plaintiff
Pesane Animas Mongao agreed to sell the aforesaid parcel of land to defendant (copy of the
Memorandum of Agreement is attached as Annex B);

6. As earnest money, defendant paid to plaintiff Pesane Animas Mongao, and in her sole name, the
amount of P550,000.00;

....20

On the other hand, nothing from the allegations in Respondent Corporation’s answer makes out a
proper joinder of issues. Petitioners’ cause of action for rescission is founded mainly on a perfected
contract of sale allegedly entered into between petitioners and respondent corporation as embodied
in the Memorandum of Agreement attached to the complaint. First, the allegations in Respondent
Corporation’s answer do not make out a specific denial that a contract of sale was perfected
between the parties. Second, respondent corporation does not contest the due execution and/or
genuineness of said Memorandum of Agreement. In fact, paragraph 1 of the answer categorically
admits paragraph 5 of the complaint, thus:

1. Paragraphs 1, 2, 3, and 5 of the Complaint are admitted. 21

Paragraph 5 of the complaint referred to above states:

5. In a Memorandum of Agreement dated 20 December 1993 and entered in the Notarial Register of
Atty. Rosalio C. Cariño, as Document No. 75, Page No. 15, Book No. II, Series of 1993; plaintiff
Pesane Animas Mongao agreed to sell the aforesaid parcel of land to defendant (copy of the
Memorandum of Agreement is attached as Annex B); 22

As to how Respondent Corporation allegedly breached its contractual obligation under

the Memorandum of Agreement is illustrated by the following averments in the complaint:

7. Subsequent to the execution of the Memorandum of Agreement, defendant corporation after

considerable delay offered to pay the balance of the purchase price net of still undetermined and
undisclosed deductions, this time in the name of both plaintiff Pesane Animas Mongao and that of
her mother;

8. Plaintiff Pesane Animas Mongao justifiably refused to accept payment under the conditions
unilaterally imposed by Defendant Corporation;

9. Several demands, both written and oral, were conveyed by plaintiffs to defendant corporation to
pay the balance immediately, directly and solely to plaintiff Pesane Animas Mongao, but defendant
corporation, in patent breach of its contractual obligation, refused;
23

The answer denied the aforequoted allegations and asserted that there was an earlier understanding
between the parties, the substance of which was not clearly expressed in the following averments:

4. Paragraph 7 of the Complaint is denied, the truth of the matter being those stated in the Special
and Affirmative Defenses in this Answer.

5. Paragraph 8 of the Complaint is denied, the truth of the matter being that plaintiff’s refusal to
accept payment was not justified and was contrary to the earlier understanding and agreement of
the parties.

6. Paragraph 9 of the Complaint is admitted, except for the allegation that defendant was in "patent
breach of its contractual obligation, the truth of the matter being that defendant’s refusal was in
accordance with its contractual obligation.24
Respondent corporation offered the affirmative defense that the separate demands of petitioner
Mongao and the Animas family compelled it to issue the check payable to both petitioner Mongao
and her mother, to wit:

16. That in so far as Pedro Animas, Jr., was concerned, he did not object to payment being made to
his brother and/or mother, but with respect to plaintiff Pesane Animas Mongao, it was then that the
controversy began since plaintiff now demanded that payment be given to her alone to the exclusion
of the rest of the Animas family.

17. That in order to play safe, defendant issued the check in the amount of ₱3,353,357.84, payable
to the order of plaintiff "Pesane Animas Mongao" and the surviving matriarch of the Animas Family in
the person of "Nellie vda. de Animas". Plaintiff resented this arrangement and refused to accept
payment unless the check was made out to her alone.

18. That since defendant was now receiving demands from plaintiff and the rest of the Animas
Family (through Nellie vda. de Animas), defendant became confused on which was the proper party
to receive payment and, on January 18, 1995, the amount of ₱3,353,357.84 was deposited by the
defendant by way consignment with the Clerk of Court of the Regional Court, 11th Judicial Region. 25

Effectively, the aforequoted averments imply an admission by Respondent Corporation that it

effected payment contrary to the express terms of the contract of sale. Nowhere in the terms of
the Memorandum of Agreement does it state that the payment of the purchase price be tendered to
any person other than petitioner Mongao. The averment virtually admits petitioners’ allegation that
respondent corporation committed a breach of its contractual obligation to petitioners and supports
their cause of action for rescission. Indeed, the drawing of the check payable to the order of
petitioner Mongao and Nellie Vda. de Animas would deprive petitioner Mongao of the exclusive
benefit of the payment, thereby sharply deviating from the terms of the contract of sale.

As earlier stated, an answer may allege affirmative defenses which may strike down the plaintiff’s
cause of action. An affirmative defense is one which is not a denial of an essential ingredient in the
plaintiff’s cause of action, but one which, if established, will be a good defense—i.e. an "avoidance"
of the claim. Affirmative defenses include fraud, statute of limitations, release payment, illegality,
26 

statute of frauds, estoppel, former recovery, discharge in bankruptcy, and any other matter by way of
confession and avoidance. When the answer asserts affirmative defenses, there is proper joinder of
issues which must be ventilated in a full-blown trial on the merits and cannot be resolved by a mere
judgment on the pleadings. Allegations presented in the answer as affirmative defenses are not
automatically characterized as such. Before an allegation qualifies as an affirmative defense, it must
be of such nature as to bar the plaintiff from claiming on his cause of action. For easy reference,
respondent corporation’s affirmative defenses shall be laid out in full:

SPECIAL AND AFFIRMATIVE DEFENSES

9. That, sometime in the latter half of 1993, defendant’s officer, Sonito N. Mole, was approached by
a real estate broker who introduced Pedro Animas IV who disclosed that his family (referring to his
mother, brothers and sisters) was on the verge of permanently losing to the Bank all of their family
properties. The Animas family desperately needed to sell some of the properties so that the rest
could be saved. Thus, S.N. Mole, as representative of the defendant, and Pedro Animas IV, as
representative of the Animas Family, discussed and negotiated on what properties would be
purchased and the terms of the purchase.

10. That defendant was shown a sketch plan of what was referred to therein as the "ANIMAS
SUBDIVISION" situated at Matinao, Polomolok, South Cotabato and its corresponding
"Development Permit" No. 01835 issued on January 10, 1985, covering TCT Nos. T-22186 and T-
22188, for a residential subdivision in the name of applicant/owner "PEDRO ANIMAS", the late
father of the Complainant Pesane Animas Mongao. Because of their potential as residential
subdivision, these very same two (2) parcels of land at Matinao were the ones defendant chose to
purchase.

11. That, sometime in December, 1993, the defendant, through S.N. Mole went to General Santos
City, bringing with him the two (2) checks necessary to pay the Bank in order to redeem the Animas
family lands from the Bank, the written agreements outlining the terms of the purchase by defendant
of the lands, and the deeds of absolute sale for the lands that defendant intended to purchase.
12. That upon delivery of the checks to the Bank, plaintiff (and her husband), as well as Pedro
Animas, Jr. (the registered owner of the other land purchased by the defendant) signed the
necessary memoranda of agreement, as well as the deeds of conveyances (deeds of absolute sale).

13. That, in the meantime, a Notice of Lis Pendens was annotated in TCT No. T-22186 regarding
Civil Case No. 5195 "FOR: PARTITION" then pending . . . and entitled "PEDRO ANIMAS VI,
Plaintiff, versus NELLIE ANIMAS, BALDOMERO ANIMAS, EDUARDO ANIMAS, PEDRO ANIMAS,
JR., PEDRO ANIMAS IV, PEDRO ANIMAS V, MARIVIC ANIMAS, MARINEL ANIMAS LIM and
PESANE ANIMAS, Defendants" and, on May 23, 1994, judgment was rendered approving the
Compromise Agreement, wherein "the defendants will give plaintiff the amount of ONE HUNDRED
THOUSAND (₱100,000.00) PESOS upon the sale of their Matinao properties in favor of PRYCE
INC."

14. That in the middle of November, 1995 the lands subject of the purchase by the defendant were
finally issued clearances for transfer of title in favor and in the name of the defendant.

15. That in early December, 1995, plaintiff Pesane Animas Mongao and the rest of the Animas
Family were advised that defendant was ready to complete payments in accordance with their
Memorandum of Agreement.

16. That in so far as Pedro Animas, Jr., was concerned, he did not object to payment being made to
his brother and/or mother, but with respect to plaintiff Pesane Animas Mongao, it was then that the
controversy began since plaintiff now demanded that payment be given to her alone to the exclusion
of the rest of the Animas Family.

17. That in order to play safe, defendant issued the check in the amount of ₱3,353,357.84, payable
to the order of plaintiff "Pesane Animas Mongao" and the surviving matriarch of the Animas Family in
the person of "Nellie vda. de Animas". Plaintiff resented this arrangement and refused to accept
payment unless the check was made out to her alone.

18. That since defendant was now receiving demands from plaintiff and the rest of the Animas
Family (through Nellie vda. de Animas), defendant became confused on which was the proper party
to receive payment and, on January 18, 1995, the amount of ₱3,353,357.84 was deposited by the
defendant by way consignment with the Clerk of Court of the Regional Court, 11th Judicial Region.

19. The defendant is still ready and willing to cause the release of said consignment amount (less
consignment fees of the court) to whomsoever that the Court may adjudge to be the proper party
entitled to the amount.

20. That since the start of the negotiations for the purchase of the lands, it was made clear to the
defendant that the properties were part of the estate of the deceased Judge Pedro Animas and his
surviving wife Nellie vda. de Animas and that the registered owners (the children) were merely
holding the same in trust for the estate and Nellie vda. de Animas.

21. That no factual nor legal ground exists to support plaintiffs claim for rescission of contract.

22. That the complaint states no cause of action against the defendant.

23. That this suit actually involves conflicting claims among members of the same family. 27

In essence, respondent corporation justifies its refusal to tender payment of the purchase price
solely to petitioner Mongao by alleging that the latter was a mere trustee and not the beneficial
owner of the property subject of the sale and therefore not the proper party to receive payment.
Such defense cannot prevent petitioners from seeking the rescission of the contract of sale. The
express terms of the Memorandum of Agreement, the genuineness and due execution of which are
not denied, clearly show that the contract of sale was executed only between petitioner Mongao and
Respondent Corporation. Where there is an apparent repudiation of the trust by petitioner Mongao,
such claim or defense may properly be raised only by the parties for whose benefit the trust was
created. Respondent Corporation cannot assert said defense in order to resist petitioners’ claim for
rescission where it has been sufficiently shown by the allegations of the complaint and answer that
respondent corporation has breached its contractual obligation to petitioners. There being no
material allegation in the answer to resist petitioners’ claim, the trial court correctly rendered
judgment based on the pleadings submitted by the parties.
The Court of Appeals enumerated certain factual controversies, which it believed can only be
resolved after presentation of evidence, and these are: (1) whether or not petitioner Mongao
executed the Deed of Absolute Sale in favor of Respondent Corporation, and (2) whether or not
petitioner Mongao is the sole owner of the subject property.

The Court finds that the determination of these factual questions is immaterial to the resolution of the
main issue of whether or not there is a valid cause for rescission in light of respondent’s implied
admissions of certain allegations and the weakness of the affirmative defenses in the answer. At the
risk of being repetitious, Respondent Corporation’s answer admitted that there was a perfected
contract of sale between respondent and petitioner Mongao and that respondent corporation refused
to tender payment of the purchase price solely to petitioner Mongao. These admissions clearly make
out a case for rescission of contract.

On the peripheral issue of whether or not there was proper consignation of the purchase price with
the RTC of Davao City, the Court adopts the trial court’s finding that respondent corporation did not
follow the procedure required by law, to wit:

On the second issue, the mere consignment or deposit of the check to the Clerk of Court without
observing the mandatory provisions of Articles 1256 to 1257 of the New Civil Code, does not
produce the effect of payment in order that the obligor or the defendant herein shall be released from
the obligation, hence, no payment of the unpaid balance of ₱3,533,357.84 has actually been made.
In fact it was noted by the Court that the deposit is even conditional, i.e. it should not be released
without a court order.28

The records reveal that respondent corporation did not file any formal complaint for consignation but
merely deposited the check with the Clerk of Court. A formal complaint must be commenced with the
trial court to provide the proper venue for the determination if there is a valid tender of payment.
Strictly speaking, without the institution of an action for tender of payment and consignation, the trial
court cannot rule on whether or not respondent was justified in not effecting payment solely to
petitioner Mongao.

WHEREFORE, the instant petition for review is GRANTED. The Decision of the Court of Appeals in
CA-G.R. CV No. 52753 is REVERSED and SET ASIDE and the Decision of the Regional Trial Court,
Branch 35, General Santos City in Civil Case No. 5545 is hereby REINSATED. Costs against
respondent.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

G.R. No. 155173             November 23, 2004

LAFARGE CEMENT PHILIPPINES, INC., (formerly Lafarge Philippines, Inc.), LUZON

CONTINENTAL LAND CORPORATION, CONTINENTAL OPERATING CORPORATION and
PHILIP ROSEBERG, petitioners,
vs.
CONTINENTAL CEMENT CORPORATION, GREGORY T. LIM and ANTHONY A.
MARIANO, respondents.

DECISION

PANGANIBAN, J.:

May defendants in civil cases implead in their counterclaims persons who were not parties to the
original complaints? This is the main question to be answered in this controversy.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to nullify the May 22,
1 

2002 and the September 3, 2002 Orders of the Regional Trial Court (RTC) of Quezon City (Branch
2  3 

80) in Civil Case No. Q-00-41103. The decretal portion of the first assailed Order reads:
 "WHEREFORE, in the light of the foregoing as earlier stated, the plaintiff's motion to dismiss
claims is granted. Accordingly, the defendants' claims against Mr. Lim and Mr. Mariano
captioned as their counterclaims are dismissed." 4

The second challenged Order denied petitioners' Motion for Reconsideration.

The Facts

Briefly, the origins of the present controversy can be traced to the Letter of Intent (LOI) executed by
both parties on August 11, 1998, whereby Petitioner Lafarge Cement Philippines, Inc. (Lafarge) -- on
behalf of its affiliates and other qualified entities, including Petitioner Luzon Continental Land
Corporation (LCLC) -- agreed to purchase the cement business of Respondent Continental Cement
Corporation (CCC). On October 21, 1998, both parties entered into a Sale and Purchase Agreement
(SPA). At the time of the foregoing transactions, petitioners were well aware that CCC had a case
pending with the Supreme Court. The case was docketed as GR No. 119712, entitled Asset
Privatization Trust (APT) v. Court of Appeals and Continental Cement Corporation.

In anticipation of the liability that the High Tribunal might adjudge against CCC, the parties, under
Clause 2 (c) of the SPA, allegedly agreed to retain from the purchase price a portion of the contract
price in the amount of P117,020,846.84 -- the equivalent of US$2,799,140. This amount was to be
deposited in an interest-bearing account in the First National City Bank of New York (Citibank) for
payment to APT, the petitioner in GR No. 119712.

However, petitioners allegedly refused to apply the sum to the payment to APT, despite the
subsequent finality of the Decision in GR No. 119712 in favor of the latter and the repeated
instructions of Respondent CCC. Fearful that nonpayment to APT would result in the foreclosure, not
just of its properties covered by the SPA with Lafarge but of several other properties as well, CCC
filed before the Regional Trial Court of Quezon City on June 20, 2000, a "Complaint with Application
for Preliminary Attachment" against petitioners. Docketed as Civil Case No. Q-00-41103, the
Complaint prayed, among others, that petitioners be directed to pay the "APT Retained Amount"
referred to in Clause 2 (c) of the SPA.

Petitioners moved to dismiss the Complaint on the ground that it violated the prohibition on forum-
shopping. Respondent CCC had allegedly made the same claim it was raising in Civil Case No. Q-
00-41103 in another action, which involved the same parties and which was filed earlier before the
International Chamber of Commerce. After the trial court denied the Motion to Dismiss in its
November 14, 2000 Order, petitioners elevated the matter before the Court of Appeals in CA-GR SP
No. 68688.

In the meantime, to avoid being in default and without prejudice to the outcome of their appeal,
petitioners filed their Answer and Compulsory Counterclaims ad Cautelam before the trial court in
Civil Case No. Q-00-41103. In their Answer, they denied the allegations in the Complaint. They
prayed -- by way of compulsory counterclaims against Respondent CCC, its majority stockholder
and president Gregory T. Lim, and its corporate secretary Anthony A. Mariano -- for the sums of (a)
P2,700,000 each as actual damages, (b) P100,000,000 each as exemplary damages, (c)
P100,000,000 each as moral damages, and (d) P5,000,000 each as attorney's fees plus costs of
suit.

Petitioners alleged that CCC, through Lim and Mariano, had filed the "baseless" Complaint in Civil
Case No. Q-00-41103 and procured the Writ of Attachment in bad faith. Relying on this Court's
pronouncement in Sapugay v. CA, petitioners prayed that both Lim and Mariano be held "jointly and
5 

solidarily" liable with Respondent CCC.

On behalf of Lim and Mariano who had yet to file any responsive pleading, CCC moved to dismiss
petitioners' compulsory counterclaims on grounds that essentially constituted the very issues for
resolution in the instant Petition.

Ruling of the Trial Court

On May 22, 2002, the Regional Trial Court of Quezon City (Branch 80) dismissed petitioners'
counterclaims for several reasons, among which were the following: a) the counterclaims against
Respondents Lim and Mariano were not compulsory; b) the ruling in Sapugay was not applicable;
and c) petitioners' Answer with Counterclaims violated procedural rules on the proper joinder of
causes of action. 6

Acting on the Motion for Reconsideration filed by petitioners, the trial court -- in an Amended Order
dated September 3, 2002 -- admitted some errors in its May 22, 2002 Order, particularly in its
7 

pronouncement that their counterclaim had been pleaded against Lim and Mariano only. However,
the RTC clarified that it was dismissing the counterclaim insofar as it impleaded Respondents Lim
and Mariano, even if it included CCC.

Hence this Petition. 8

Issues

In their Memorandum, petitioners raise the following issues for our consideration:

"[a] Whether or not the RTC gravely erred in refusing to rule that Respondent CCC has no
personality to move to dismiss petitioners' compulsory counterclaims on Respondents Lim
and Mariano's behalf.

"[b] Whether or not the RTC gravely erred in ruling that (i) petitioners' counterclaims against
Respondents Lim and Mariano are not compulsory; (ii) Sapugay v. Court of Appeals is
inapplicable here; and (iii) petitioners violated the rule on joinder of causes of action."
9

For clarity and coherence, the Court will resolve the foregoing in reverse order.

The Court's Ruling

The Petition is meritorious.

First Issue:

Counterclaims and Joinder of Causes of Action.

Petitioners' Counterclaims Compulsory

Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil Procedure as "any claim which
a defending party may have against an opposing party." They are generally allowed in order to avoid
a multiplicity of suits and to facilitate the disposition of the whole controversy in a single action, such
that the defendant's demand may be adjudged by a counterclaim rather than by an independent suit.
The only limitations to this principle are (1) that the court should have jurisdiction over the subject
matter of the counterclaim, and (2) that it could acquire jurisdiction over third parties whose presence
is essential for its adjudication.
10

A counterclaim may either be permissive or compulsory. It is permissive "if it does not arise out of or
is not necessarily connected with the subject matter of the opposing party's claim." A permissive
11 

counterclaim is essentially an independent claim that may be filed separately in another case.

A counterclaim is compulsory when its object "arises out of or is necessarily 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."
12

Unlike permissive counterclaims, compulsory counterclaims should be set up in the same action;
otherwise, they would be barred forever. NAMARCO v. Federation of United Namarco
Distributors laid down the following criteria to determine whether a counterclaim is compulsory or
13 

permissive: 1) Are issues of fact and law raised by the claim and by the 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
as defendant's counterclaim? 4) Is there any logical relation between the claim and the
counterclaim? A positive answer to all four questions would indicate that the counterclaim is
compulsory.
Adopted in Quintanilla v. CA and reiterated in Alday v. FGU Insurance Corporation, the "compelling
14  15 

test of compulsoriness" characterizes a counterclaim as compulsory if there should exist a "logical

relationship" between the main claim and the counterclaim. There exists such a relationship when
conducting separate trials of the respective claims of the parties would entail substantial duplication
of time and effort by the parties and the court; when the multiple claims involve the same factual and
legal issues; or when the claims are offshoots of the same basic controversy between the parties.

We shall now examine the nature of petitioners' counterclaims against respondents with the use of
the foregoing parameters.

Petitioners base their counterclaim on the following allegations:

"Gregory T. Lim and Anthony A. Mariano were the persons responsible for making the bad
faith decisions for, and causing plaintiff to file this baseless suit and to procure an
unwarranted writ of attachment, notwithstanding their knowledge that plaintiff has no right to
bring it or to secure the writ. In taking such bad faith actions, Gregory T. Lim was motivated
by his personal interests as one of the owners of plaintiff while Anthony A. Mariano was
motivated by his sense of personal loyalty to Gregory T. Lim, for which reason he
disregarded the fact that plaintiff is without any valid cause.

"Consequently, both Gregory T. Lim and Anthony A. Mariano are the plaintiff's co-joint
tortfeasors in the commission of the acts complained of in this answer and in the compulsory
counterclaims pleaded below. As such they should be held jointly and solidarily liable as
plaintiff's co-defendants to those compulsory counterclaims pursuant to the Supreme Court's
decision in Sapugay v. Mobil.

xxx    xxx    xxx

"The plaintiff's, Gregory T. Lim and Anthony A. Mariano's bad faith filing of this baseless
case has compelled the defendants to engage the services of counsel for a fee and to incur
costs of litigation, in amounts to be proved at trial, but in no case less than P5 million for
each of them and for which plaintiff Gregory T. Lim and Anthony A. Mariano should be held
jointly and solidarily liable.

"The plaintiff's, Gregory T. Lim's and Anthony A. Mariano's actions have damaged the
reputations of the defendants and they should be held jointly and solidarily liable to them for
moral damages of P100 million each.

"In order to serve as an example for the public good and to deter similar baseless, bad faith
litigation, the plaintiff, Gregory T. Lim and Anthony A. Mariano should be held jointly and
solidarily liable to the defendants for exemplary damages of P100 million each."  16

The above allegations show that petitioners' counterclaims for damages were the result of
respondents' (Lim and Mariano) act of filing the Complaint and securing the Writ of Attachment in
bad faith. Tiu Po v. Bautista involved the issue of whether the counterclaim that sought moral, actual
17 

and exemplary damages and attorney's fees against respondents on account of their "malicious and
unfounded" complaint was compulsory. In that case, we held as follows:

"Petitioners' counterclaim for damages fulfills the necessary requisites of a compulsory

counterclaim. They are damages claimed to have been suffered by petitioners as a
consequence of the action filed against them. They have to be pleaded in the same action;
otherwise, petitioners would be precluded by the judgment from invoking the same in an
independent action. The pronouncement in Papa vs. Banaag (17 SCRA 1081) (1966) is in
point:

"Compensatory, moral and exemplary damages, allegedly suffered by the creditor in

consequence of the debtor's action, are also compulsory counterclaim barred by the
dismissal of the debtor's action. They cannot be claimed in a subsequent action by the
creditor against the debtor."

"Aside from the fact that petitioners' counterclaim for damages cannot be the subject of an
independent action, it is the same evidence that sustains petitioners' counterclaim that will
 refute private respondent's own claim for damages. This is an additional factor that
characterizes petitioners' counterclaim as compulsory." 18

Moreover, using the "compelling test of compulsoriness," we find that, clearly, the recovery of
petitioners' counterclaims is contingent upon the case filed by respondents; thus, conducting
separate trials thereon will result in a substantial duplication of the time and effort of the court and
the parties.

Since the counterclaim for damages is compulsory, it must be set up in the same action; otherwise, it
would be barred forever. If it is filed concurrently with the main action but in a different proceeding, it
would be abated on the ground of litis pendentia; if filed subsequently, it would meet the same fate
on the ground of res judicata. 19

Sapugay v. Court of Appeals Applicable to the Case at Bar

Sapugay v. Court of Appeals finds application in the present case. In Sapugay, Respondent Mobil
Philippines filed before the trial court of Pasig an action for replevin against Spouses Marino and
Lina Joel Sapugay. The Complaint arose from the supposed failure of the couple to keep their end of
their Dealership Agreement. In their Answer with Counterclaim, petitioners alleged that after
incurring expenses in anticipation of the Dealership Agreement, they requested the plaintiff to allow
them to get gas, but that it had refused. It claimed that they still had to post a surety bond which,
initially fixed at P200,000, was later raised to P700,000.

The spouses exerted all efforts to secure a bond, but the bonding companies required a copy of the
Dealership Agreement, which respondent continued to withhold from them. Later, petitioners
discovered that respondent and its manager, Ricardo P. Cardenas, had intended all along to award
the dealership to Island Air Product Corporation.

In their Answer, petitioners impleaded in the counterclaim Mobil Philippines and its manager --
Ricardo P. Cardenas -- as defendants. They prayed that judgment be rendered, holding both jointly
and severally liable for pre-operation expenses, rental, storage, guarding fees, and unrealized profit
including damages. After both Mobil and Cardenas failed to respond to their Answer to the
Counterclaim, petitioners filed a "Motion to Declare Plaintiff and its Manager Ricardo P. Cardenas in
Default on Defendant's Counterclaim."

Among the issues raised in Sapugay was whether Cardenas, who was not a party to the original
action, might nevertheless be impleaded in the counterclaim. We disposed of this issue as follows:

"A counterclaim is defined as any claim for money or other relief which a defending party
may have against an opposing party. However, the general rule that a defendant cannot by a
counterclaim bring into the action any claim against persons other than the plaintiff admits of
an exception under Section 14, Rule 6 which provides that 'when the presence of parties
other than those to the original action is required for the granting of complete relief in the
determination of a counterclaim or cross-claim, the court shall order them to be brought in as
defendants, if jurisdiction over them can be obtained.' The inclusion, therefore, of Cardenas
in petitioners' counterclaim is sanctioned by the rules." 20

The prerogative of bringing in new parties to the action at any stage before judgment is intended to
accord complete relief to all of them in a single action and to avert a duplicity and even a multiplicity
of suits thereby.

In insisting on the inapplicability of Sapugay, respondents argue that new parties cannot be included
in a counterclaim, except when no complete relief can be had. They add that "[i]n the present case,
Messrs. Lim and Mariano are not necessary for petitioners to obtain complete relief from
Respondent CCC as plaintiff in the lower court. This is because Respondent CCC as a corporation
with a separate [legal personality] has the juridical capacity to indemnify petitioners even without
Messrs. Lim and Mariano." 21

We disagree. The inclusion of a corporate officer or stockholder -- Cardenas in Sapugay or Lim and
Mariano in the instant case -- is not premised on the assumption that the plaintiff corporation does
not have the financial ability to answer for damages, such that it has to share its liability with
individual defendants. Rather, such inclusion is based on the allegations of fraud and bad faith on
the part of the corporate officer or stockholder. These allegations may warrant the piercing of the veil
of corporate fiction, so that the said individual may not seek refuge therein, but may be held
individually and personally liable for his or her actions.

In Tramat Mercantile v. Court of Appeals, the Court held that generally, it should only be the
22 

corporation that could properly be held liable. However, circumstances may warrant the inclusion of
the personal liability of a corporate director, trustee, or officer, if the said individual is found guilty of
bad faith or gross negligence in directing corporate affairs.

Remo Jr. v. IAC has stressed that while a corporation is an entity separate and distinct from its
23 

stockholders, the corporate fiction may be disregarded if "used to defeat public convenience, justify a
wrong, protect fraud, or defend crime." In these instances, "the law will regard the corporation as an
association of persons, or in case of two corporations, will merge them into one." Thus, there is no
debate on whether, in alleging bad faith on the part of Lim and Mariano the counterclaims had in
effect made them "indispensable parties" thereto; based on the alleged facts, both are clearly parties
in interest to the counterclaim. 24

Respondents further assert that "Messrs. Lim and Mariano cannot be held personally liable [because
their assailed acts] are within the powers granted to them by the proper board resolutions; therefore,
it is not a personal decision but rather that of the corporation as represented by its board of
directors." The foregoing assertion, however, is a matter of defense that should be threshed out
25 

during the trial; whether or not "fraud" is extant under the circumstances is an issue that must be
established by convincing evidence. 26

Suability and liability are two distinct matters. While the Court does rule that the counterclaims
against Respondent CCC's president and manager may be properly filed, the determination of
whether both can in fact be held jointly and severally liable with Respondent Corporation is entirely
another issue that should be ruled upon by the trial court.

However, while a compulsory counterclaim may implead persons not parties to the original
complaint, the general rule -- a defendant in a compulsory counterclaim need not file any responsive
pleading, as it is deemed to have adopted the allegations in the complaint as its answer -- does not
apply. The filing of a responsive pleading is deemed a voluntary submission to the jurisdiction of the
court; a new party impleaded by the plaintiff in a compulsory counterclaim cannot be considered to
have automatically and unknowingly submitted to the jurisdiction of the court. A contrary ruling would
result in mischievous consequences whereby a party may be indiscriminately impleaded as a
defendant in a compulsory counterclaim; and judgment rendered against it without its knowledge,
much less participation in the proceedings, in blatant disregard of rudimentary due process
requirements.

The correct procedure in instances such as this is for the trial court, per Section 12 of Rule 6 of the
Rules of Court, to "order [such impleaded parties] to be brought in as defendants, if jurisdiction over
them can be obtained," by directing that summons be served on them. In this manner, they can be
properly appraised of and answer the charges against them. Only upon service of summons can the
trial court obtain jurisdiction over them.

In Sapugay, Cardenas was furnished a copy of the Answer with Counterclaim, but he did not file any
responsive pleading to the counterclaim leveled against him. Nevertheless, the Court gave due
consideration to certain factual circumstances, particularly the trial court's treatment of the Complaint
as the Answer of Cardenas to the compulsory counterclaim and of his seeming acquiescence
thereto, as evidenced by his failure to make any objection despite his active participation in the
proceedings. It was held thus:

"It is noteworthy that Cardenas did not file a motion to dismiss the counterclaim against him
on the ground of lack of jurisdiction. While it is a settled rule that the issue of jurisdiction may
be raised even for the first time on appeal, this does not obtain in the instant case. Although
it was only Mobil which filed an opposition to the motion to declare in default, the fact that the
trial court denied said motion, both as to Mobil and Cardenas on the ground that Mobil's
complaint should be considered as the answer to petitioners' compulsory counterclaim, leads
us to the inescapable conclusion that the trial court treated the opposition as having been
filed in behalf of both Mobil and Cardenas and that the latter had adopted as his answer the
allegations raised in the complaint of Mobil. Obviously, it was this ratiocination which led the
trial court to deny the motion to declare Mobil and Cardenas in default. Furthermore,
Cardenas was not unaware of said incidents and the proceedings therein as he testified and
was present during trial, not to speak of the fact that as manager of Mobil he would
 necessarily be interested in the case and could readily have access to the records and the
pleadings filed therein.

"By adopting as his answer the allegations in the complaint which seeks affirmative relief,
Cardenas is deemed to have recognized the jurisdiction of the trial court over his person and
submitted thereto. He may not now be heard to repudiate or question that jurisdiction." 27

Such factual circumstances are unavailing in the instant case. The records do not show that
Respondents Lim and Mariano are either aware of the counterclaims filed against them, or
that they have actively participated in the proceedings involving them. Further, in dismissing
the counterclaims against the individual respondents, the court a quo -- unlike in Sapugay --
cannot be said to have treated Respondent CCC's Motion to Dismiss as having been filed on
their behalf.

Rules on Permissive Joinder of Causes

of Action or Parties Not Applicable

Respondent CCC contends that petitioners' counterclaims violated the rule on joinder of causes of
action. It argues that while the original Complaint was a suit for specific performance based on a
contract, the counterclaim for damages was based on the tortuous acts of respondents. In its Motion
28 

to Dismiss, CCC cites Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Civil Procedure,
which we quote:

"Section 5. Joinder of causes of action. – A party may in one pleading assert, in the
alternative or otherwise, as many causes of action as he may have against an opposing
party, subject to the following conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of parties; x x
x"

Section 6. Permissive joinder of parties. – All persons in whom or against whom any right to
relief in respect to or arising out of the same transaction or series of transactions is alleged to
exist whether jointly, severally, or in the alternative, may, except as otherwise provided in
these Rules, join as plaintiffs or be joined as defendants in one complaint, where any
question of law or fact common to all such plaintiffs or to all such defendants may arise in the
action; but the court may make such orders as may be just to prevent any plaintiff or
defendant from being embarrassed or put to expense in connection with any proceedings in
which he may have no interest."

The foregoing procedural rules are founded on practicality and convenience. They are meant to
discourage duplicity and multiplicity of suits. This objective is negated by insisting -- as the court a
quo has done -- that the compulsory counterclaim for damages be dismissed, only to have it possibly
re-filed in a separate proceeding. More important, as we have stated earlier, Respondents Lim and
Mariano are real parties in interest to the compulsory counterclaim; it is imperative that they be
joined therein. Section 7 of Rule 3 provides:

"Compulsory joinder of indispensable parties. – Parties in interest without whom no final

determination can be had of an action shall be joined either as plaintiffs or defendants."

Moreover, in joining Lim and Mariano in the compulsory counterclaim, petitioners are being
consistent with the solidary nature of the liability alleged therein.

Second Issue:

CCC's Personality to Move to Dismiss the Compulsory Counterclaims

Characterizing their counterclaim for damages against Respondents CCC, Lim and Mariano as "joint
and solidary," petitioners prayed:

"WHEREFORE, it is respectfully prayed that after trial judgment be rendered:

"1. Dismissing the complaint in its entirety;

 "2. Ordering the plaintiff, Gregory T. Lim and Anthony A. Mariano jointly and solidarily to pay
defendant actual damages in the sum of at least P2,700,000.00;

"3. Ordering the plaintiff, Gregory T. Lim and Anthony A, Mariano jointly and solidarily to pay
the defendants LPI, LCLC, COC and Roseberg:

"a. Exemplary damages of P100 million each;

"b. Moral damages of P100 million each; and

"c. Attorney's fees and costs of suit of at least P5 million each.

Other reliefs just and equitable are likewise prayed for." 29

Obligations may be classified as either joint or solidary. "Joint" or "jointly" or "conjoint" means
mancum or mancomunada or pro rata obligation; on the other hand, "solidary obligations" may be
used interchangeably with "joint and several" or "several." Thus, petitioners' usage of the term "joint
and solidary" is confusing and ambiguous.

The ambiguity in petitioners' counterclaims notwithstanding, respondents' liability, if proven, is

solidary. This characterization finds basis in Article 1207 of the Civil Code, which provides that
obligations are generally considered joint, except when otherwise expressly stated or when the law
or the nature of the obligation requires solidarity. However, obligations arising from tort are, by their
nature, always solidary. We have assiduously maintained this legal principle as early as 1912 in
Worcester v. Ocampo, in which we held:
30 

"x x x The difficulty in the contention of the appellants is that they fail to recognize that the
basis of the present action is tort. They fail to recognize the universal doctrine that each joint
tort feasor is not only individually liable for the tort in which he participates, but is also jointly
liable with his tort feasors. x x x

"It may be stated as a general rule that joint tort feasors are all the persons who command,
instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if done for their benefit. They are
each liable as principals, to the same extent and in the same manner as if they had
performed the wrongful act themselves. x x x

"Joint tort feasors are jointly and severally liable for the tort which they commit. The persons
injured may sue all of them or any number less than all. Each is liable for the whole damages
caused by all, and all together are jointly liable for the whole damage. It is no defense for one
sued alone, that the others who participated in the wrongful act are not joined with him as
defendants; nor is it any excuse for him that his participation in the tort was insignificant as
compared to that of the others. x x x

"Joint tort feasors are not liable pro rata. The damages can not be apportioned among them,
except among themselves. They cannot insist upon an apportionment, for the purpose of
each paying an aliquot part. They are jointly and severally liable for the whole amount. x x x

"A payment in full for the damage done, by one of the joint tort feasors, of course satisfies
any claim which might exist against the others. There can be but satisfaction. The release of
one of the joint tort feasors by agreement generally operates to discharge all. x x x

"Of course the court during trial may find that some of the alleged tort feasors are liable and
that others are not liable. The courts may release some for lack of evidence while
condemning others of the alleged tort feasors. And this is true even though they are charged
jointly and severally."

In a "joint" obligation, each obligor answers only for a part of the whole liability; in a "solidary" or
"joint and several" obligation, the relationship between the active and the passive subjects is so
close that each of them must comply with or demand the fulfillment of the whole obligation. The fact
31 

that the liability sought against the CCC is for specific performance and tort, while that sought
against the individual respondents is based solely on tort does not negate the solidary nature of their
liability for tortuous acts alleged in the counterclaims. Article 1211 of the Civil Code is explicit on this
point:

"Solidarity may exist although the creditors and the debtors may not be bound in the same
manner and by the same periods and conditions."

The solidary character of respondents' alleged liability is precisely why credence cannot be given to
petitioners' assertion. According to such assertion, Respondent CCC cannot move to dismiss the
counterclaims on grounds that pertain solely to its individual co-debtors. In cases filed by the
32 

creditor, a solidary debtor may invoke defenses arising from the nature of the obligation, from
circumstances personal to it, or even from those personal to its co-debtors. Article 1222 of the Civil
Code provides:

"A solidary debtor may, in actions filed by the creditor, avail itself of all defenses which are
derived from the nature of the obligation and of those which are personal to him, or pertain to
his own share. With respect to those which personally belong to the others, he may avail
himself thereof only as regards that part of the debt for which the latter are responsible."
(Emphasis supplied).

The act of Respondent CCC as a solidary debtor -- that of filing a motion to dismiss the counterclaim
on grounds that pertain only to its individual co-debtors -- is therefore allowed.

However, a perusal of its Motion to Dismiss the counterclaims shows that Respondent CCC filed it
on behalf of Co-respondents Lim and Mariano; it did not pray that the counterclaim against it be
dismissed. Be that as it may, Respondent CCC cannot be declared in default. Jurisprudence
teaches that if the issues raised in the compulsory counterclaim are so intertwined with the
allegations in the complaint, such issues are deemed automatically joined. Counterclaims that are
33 

only for damages and attorney's fees and that arise from the filing of the complaint shall be
considered as special defenses and need not be answered. 34

CCC's Motion to Dismiss the Counterclaim on Behalf of Respondents Lim and Mariano Not Allowed

While Respondent CCC can move to dismiss the counterclaims against it by raising grounds that
pertain to individual defendants Lim and Mariano, it cannot file the same Motion on their behalf for
the simple reason that it lacks the requisite authority to do so. A corporation has a legal personality
entirely separate and distinct from that of its officers and cannot act for and on their behalf, without
being so authorized. Thus, unless expressly adopted by Lim and Mariano, the Motion to Dismiss the
compulsory counterclaim filed by Respondent CCC has no force and effect as to them.

In summary, we make the following pronouncements:

1. The counterclaims against Respondents CCC, Gregory T. Lim and Anthony A. Mariano
are compulsory.

2. The counterclaims may properly implead Respondents Gregory T. Lim and Anthony A.
Mariano, even if both were not parties in the original Complaint.

3. Respondent CCC or any of the three solidary debtors (CCC, Lim or Mariano) may include,
in a Motion to Dismiss, defenses available to their co-defendants; nevertheless, the same
Motion cannot be deemed to have been filed on behalf of the said co-defendants.

4. Summons must be served on Respondents Lim and Mariano before the trial court can
obtain jurisdiction over them.

WHEREFORE, the Petition is GRANTED and the assailed Orders REVERSED. The court of origin is
hereby ORDERED to take cognizance of the counterclaims pleaded in petitioners' Answer with
Compulsory Counterclaims and to cause the service of summons on Respondents Gregory T. Lim
and Anthony A. Mariano. No costs.

SO ORDERED.

Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.

Corona, J., on leave.
G.R. Nos. 158090               October 4, 2010

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner,

vs.
HEIRS OF FERNANDO F. CABALLERO, represented by his daughter, JOCELYN G.
CABALLERO, Respondents.

DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
set aside the Decision1 and the Resolution,2 dated December 17, 2002 and April 29, 2003,
respectively, of the Court of Appeals (CA) in CA-G.R. CV. No. 49300.

The antecedents are as follows:

Respondent Fernando C. Caballero (Fernando) was the registered owner of a residential lot
designated as Lot No. 3355, Ts-268, covered by TCT No. T-16035 of the Register of Deeds of
Cotabato, containing an area of 800 square meters and situated at Rizal Street, Mlang, Cotabato.
On the said lot, respondent built a residential/commercial building consisting of two (2) stories.

On March 7, 1968, Fernando and his wife, Sylvia Caballero, secured a loan from petitioner
Government Service Insurance System (GSIS) in the amount of ₱20,000.00, as evidenced by a
promissory note. Fernando and his wife likewise executed a real estate mortgage on the same date,
mortgaging the afore-stated property as security.

Fernando defaulted on the payment of his loan with the GSIS. Hence, on January 20, 1973, the
mortgage covering the subject property was foreclosed, and on March 26, 1973, the same was sold
at a public auction where the petitioner was the only bidder in the amount of ₱36,283.00. For failure
of Fernando to redeem the said property within the designated period, petitioner executed an
Affidavit of Consolidation of Ownership on September 5, 1975. Consequently, TCT No. T-16035 was
cancelled and TCT No. T-45874 was issued in the name of petitioner.

On November 26, 1975, petitioner wrote a letter to Fernando, informing him of the consolidation of
title in its favor, and requesting payment of monthly rental in view of Fernando's continued
occupancy of the subject property. In reply, Fernando requested that he be allowed to repurchase
the same through partial payments. Negotiation as to the repurchase by Fernando of the subject
property went on for several years, but no agreement was reached between the parties.

On January 16, 1989, petitioner scheduled the subject property for public bidding. On the scheduled
date of bidding, Fernando's daughter, Jocelyn Caballero, submitted a bid in the amount of
₱350,000.00, while Carmelita Mercantile Trading Corporation (CMTC) submitted a bid in the amount
of ₱450,000.00. Since CMTC was the highest bidder, it was awarded the subject property. On May
16, 1989, the Board of Trustees of the GSIS issued Resolution No. 199 confirming the award of the
subject property to CMTC for a total consideration of ₱450,000.00. Thereafter, a Deed of Absolute
Sale was executed between petitioner and CMTC on July 27, 1989, transferring the subject property
to CMTC. Consequently, TCT No. T-45874 in the name of GSIS was cancelled, and TCT No. T-
76183 was issued in the name of CMTC.

Due to the foregoing, Fernando, represented by his daughter and attorney-in-fact, Jocelyn
Caballero, filed with the Regional Trial Court (RTC) of Kabacan, Cotabato a Complaint3 against
CMTC, the GSIS and its responsible officers, and the Register of Deeds of Kidapawan, Cotabato.
Fernando prayed, among others, that judgment be rendered: declaring GSIS Board of Trustees
Resolution No. 199, dated May 16, 1989, null and void; declaring the Deed of Absolute Sale
between petitioner and CMTC null and void ab initio; declaring TCT No. 76183 of the Register of
Deeds of Kidapawan, Cotabato, likewise, null and void ab initio; declaring the bid made by Fernando
in the amount of ₱350,000.00 for the repurchase of his property as the winning bid; and ordering
petitioner to execute the corresponding Deed of Sale of the subject property in favor of Fernando.
He also prayed for payment of moral damages, exemplary damages, attorney's fees and litigation
expenses.
In his complaint, Fernando alleged that there were irregularities in the conduct of the bidding. CMTC
misrepresented itself to be wholly owned by Filipino citizens. It misrepresented its working capital. Its
representative Carmelita Ang Hao had no prior authority from its board of directors in an appropriate
board resolution to participate in the bidding. The corporation is not authorized to acquire real estate
or invest its funds for purposes other than its primary purpose. Fernando further alleged that the
GSIS allowed CMTC to bid despite knowledge that said corporation has no authority to do so. The
GSIS also disregarded Fernando's prior right to buy back his family home and lot in violation of the
laws. The Register of Deeds of Cotabato acted with abuse of power and authority when it issued the
TCT in favor of CMTC without requiring the CMTC to submit its supporting papers as required by the
law.

Petitioner and its officers filed their Answer with Affirmative Defenses and Counterclaim.4 The GSIS
alleged that Fernando lost his right of redemption. He was given the chance to repurchase the
property; however, he did not avail of such option compelling the GSIS to dispose of the property by
public bidding as mandated by law. There is also no "prior right to buy back" that can be exercised
by Fernando. Further, it averred that the articles of incorporation and other papers of CMTC were all
in order. In its counterclaim, petitioner alleged that Fernando owed petitioner the sum of
₱130,365.81, representing back rentals, including additional interests from January 1973 to
February 1987, and the additional amount of ₱249,800.00, excluding applicable interests,
representing rentals Fernando unlawfully collected from Carmelita Ang Hao from January 1973 to
February 1988.

After trial, the RTC, in its Decision5 dated September 27, 1994, ruled in favor of petitioner and
dismissed the complaint. In the same decision, the trial court granted petitioner's counterclaim and
directed Fernando to pay petitioner the rentals paid by CMTC in the amount of ₱249,800.00. The
foregoing amount was collected by Fernando from the CMTC and represents payment which was
not turned over to petitioner, which was entitled to receive the rent from the date of the consolidation
of its ownership over the subject property.

Fernando filed a motion for reconsideration, which was denied by the RTC in an Order dated March
27, 1995.

Aggrieved by the Decision, respondent filed a Notice of Appeal.6 The CA, in its Decision dated
December 17, 2002, affirmed the decision of the RTC with the modification that the portion of the
judgment ordering Fernando to pay rentals in the amount of ₱249,800.00, in favor of petitioner, be
deleted. Petitioner filed a motion for reconsideration, which the CA denied in a Resolution dated April
29, 2003. Hence, the instant petition.

An Ex Parte Motion for Substitution of Party,7 dated July 18, 2003, was filed by the surviving heirs of
Fernando, who died on February 12, 2002. They prayed that they be allowed to be substituted for
the deceased, as respondents in this case.

Petitioner enumerated the following grounds in support of its petition:

THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING

THAT GSIS' COUNTERCLAIM, AMONG OTHERS, OF ₱249,800.00 REPRESENTING
RENTALS COLLECTED BY PRIVATE RESPONDENT FROM CARMELITA MERCANTILE
TRADING CORPORATION IS IN THE NATURE OF A PERMISSIVE COUNTERCLAIM
WHICH REQUIRED THE PAYMENT BY GSIS OF DOCKET FEES BEFORE THE TRIAL
COURT CAN ACQUIRE JURISDICTION OVER SAID COUNTERCLAIM.

II

THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING

THAT GSIS' DOCUMENTARY EVIDENCE SUPPORTING ITS CLAIM OF ₱249,800.00
LACKS PROPER IDENTIFICATION.8

The petition of the GSIS seeks the review of the CA's Decision insofar as it deleted the trial court's
award of ₱249,800.00 in its favor representing rentals collected by Fernando from the CMTC.
In their Memorandum, respondents’ claim that CMTC cannot purchase real estate or invest its funds
in any purpose other than its primary purpose for which it was organized in the absence of a
corporate board resolution; the bid award, deed of absolute sale and TCT No. T-76183, issued in
favor of the CMTC, should be nullified; the trial court erred in concluding that GSIS personnel have
regularly performed their official duty when they conducted the public bidding; Fernando, as former
owner of the subject property and former member of the GSIS, has the preemptive right to
repurchase the foreclosed property.

These additional averments cannot be taken cognizance by the Court, because they were
substantially respondents’ arguments in their petition for review on certiorari earlier filed before Us
and docketed as G.R. No. 156609. Records show that said petition was denied by the Court in a
Resolution9 dated April 23, 2003, for petitioners’ (respondents herein) failure to sufficiently show that
the Court of Appeals committed any reversible error in the challenged decision as to warrant the
exercise by this Court of its discretionary appellate jurisdiction.10 Said resolution became final and
executory on June 9, 2003.11 Respondents’ attempt to re-litigate claims already passed upon and
resolved with finality by the Court in G.R. No. 156609 cannot be allowed.

Going now to the first assigned error, petitioner submits that its counterclaim for the rentals collected
by Fernando from the CMTC is in the nature of a compulsory counterclaim in the original action of
Fernando against petitioner for annulment of bid award, deed of absolute sale and TCT No. 76183.
Respondents, on the other hand, alleged that petitioner's counterclaim is permissive and its failure to
pay the prescribed docket fees results into the dismissal of its claim.

To determine whether a counterclaim is compulsory or not, the Court has devised the following tests:
(a) Are the issues of fact and law raised by the claim and by the counterclaim largely the same? (b)
Would res judicata bar a subsequent suit on defendant’s claims, absent the compulsory
counterclaim rule? (c) Will substantially the same evidence support or refute plaintiff’s claim as well
as the defendant’s counterclaim? and (d) Is there any logical relation between the claim and the
counterclaim? A positive answer to all four questions would indicate that the counterclaim is
compulsory.12

Tested against the above-mentioned criteria, this Court agrees with the CA's view that petitioner's
counterclaim for the recovery of the amount representing rentals collected by Fernando from the
CMTC is permissive. The evidence needed by Fernando to cause the annulment of the bid award,
deed of absolute sale and TCT is different from that required to establish petitioner's claim for the
recovery of rentals.

The issue in the main action, i.e., the nullity or validity of the bid award, deed of absolute sale and
TCT in favor of CMTC, is entirely different from the issue in the counterclaim, i.e., whether petitioner
is entitled to receive the CMTC's rent payments over the subject property when petitioner became
the owner of the subject property by virtue of the consolidation of ownership of the property in its
favor.

The rule in permissive counterclaims is that for the trial court to acquire jurisdiction, the
counterclaimant is bound to pay the prescribed docket fees.13 This, petitioner did not do, because it
asserted that its claim for the collection of rental payments was a compulsory counterclaim. Since
petitioner failed to pay the docket fees, the RTC did not acquire jurisdiction over its permissive
counterclaim. The judgment rendered by the RTC, insofar as it ordered Fernando to pay petitioner
the rentals which he collected from CMTC, is considered null and void. Any decision rendered
without jurisdiction is a total nullity and may be struck down at any time, even on appeal before this
Court.14

Petitioner further argues that assuming that its counterclaim is permissive, the trial court has
jurisdiction to try and decide the same, considering petitioner's exemption from all kinds of fees.

In In Re: Petition for Recognition of the Exemption of the Government Service Insurance System
from Payment of Legal Fees,15 the Court ruled that the provision in the Charter of the GSIS, i.e.,
Section 39 of Republic Act No. 8291, which exempts it from "all taxes, assessments, fees, charges
or duties of all kinds," cannot operate to exempt it from the payment of legal fees. This was because,
unlike the 1935 and 1973 Constitutions, which empowered Congress to repeal, alter or supplement
the rules of the Supreme Court concerning pleading, practice and procedure, the 1987 Constitution
removed this power from Congress. Hence, the Supreme Court now has the sole authority to
promulgate rules concerning pleading, practice and procedure in all courts.
In said case, the Court ruled that:

The separation of powers among the three co-equal branches of our government has erected an
impregnable wall that keeps the power to promulgate rules of pleading, practice and procedure
within the sole province of this Court. The other branches trespass upon this prerogative if they
enact laws or issue orders that effectively repeal, alter or modify any of the procedural rules
promulgated by this Court. Viewed from this perspective, the claim of a legislative grant of exemption
from the payment of legal fees under Section 39 of RA 8291 necessarily fails.

Congress could not have carved out an exemption for the GSIS from the payment of legal fees
without transgressing another equally important institutional safeguard of the Court's independence
− fiscal autonomy. Fiscal autonomy recognizes the power and authority of the Court to levy, assess
and collect fees, including legal fees. Moreover, legal fees under Rule 141 have two basic
components, the Judiciary Development Fund (JDF) and the Special Allowance for the Judiciary
Fund (SAJF). The laws which established the JDF and the SAJF expressly declare the identical
purpose of these funds to "guarantee the independence of the Judiciary as mandated by the
Constitution and public policy." Legal fees therefore do not only constitute a vital source of the
Court's financial resources but also comprise an essential element of the Court's fiscal
independence. Any exemption from the payment of legal fees granted by Congress to government-
owned or controlled corporations and local government units will necessarily reduce the JDF and the
SAJF. Undoubtedly, such situation is constitutionally infirm for it impairs the Court's guaranteed fiscal
autonomy and erodes its independence.

Petitioner also invoked our ruling in Sun Insurance Office, Ltd. v. Judge Asuncion,16 where the Court
held that:

xxxx

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.

In Ayala Corporation v. Madayag,17 the Court, in interpreting the third rule laid down in Sun Insurance
Office, Ltd. v. Judge Asuncion regarding awards of claims not specified in the pleading, held that the
same refers only to damages arising after the filing of the complaint or similar pleading as to which
the additional filing fee therefor shall constitute a lien on the judgment.

The amount of any claim for damages, therefore, arising on or before the filing of the complaint or
any pleading should be specified. While it is true that the determination of certain damages as
exemplary or corrective damages is left to the sound discretion of the court, it is the duty of the
parties claiming such damages to specify the amount sought on the basis of which the court may
make a proper determination, and for the proper assessment of the appropriate docket fees. The
exception contemplated as to claims not specified or to claims although specified are left for
determination of the court is limited only to any damages that may arise after the filing of the
complaint or similar pleading for then it will not be possible for the claimant to specify nor speculate
as to the amount thereof. (Emphasis supplied.) 1avvphi1

Petitioner's claim for payment of rentals collected by Fernando from the CMTC did not arise after the
filing of the complaint; hence, the rule laid down in Sun Insurance finds no application in the present
case.

Due to the non-payment of docket fees on petitioner's counterclaim, the trial court never acquired
jurisdiction over it and, thus, there is no need to discuss the second issue raised by petitioner.

WHEREFORE, the petition is DENIED. The Decision and the Resolution, dated December 17, 2002
and April 29, 2003, respectively, of the Court of Appeals in CA-G.R. CV. No. 49300, are AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice
WE CONCUR:

PRESBITERO J. VELASCO, JR.*

Associate Justice

ANTONIO EDUARDO B. NACHURA**

JOSE CATRAL MENDOZA
Associate Justice
Associate Justice
Acting Chairperson

MARIA LOURDES P.A. SERENO***

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

ANTONIO EDUARDO B. NACHURA

Associate Justice
Second Division, Acting Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

G.R. No. 161909               April 25, 2012

PHILTRANCO SERVICE ENTERPRISES, INC., Petitioner,

vs.
FELIX PARAS AND INLAND TRAILWAYS, INC., AND HON. COURT OF
APPEALS, Respondents.

DECISION

BERSAMIN, J.:

In an action for breach of contract of carriage commenced by a passenger against his common
carrier, the plaintiff can recover damages from a third-party defendant brought into the suit by the
common carrier upon a claim based on tort or quasi-delict. The liability of the third-party defendant is
independent from the liability of the common carrier to the passenger.

Philtranco Service Enterprises, Inc. (Philtranco) appeals the affirmance with modifications by the
Court of Appeals (CA) of the decision of the Regional Trial Court (RTC) awarding moral, actual and
temperate damages, as well as attorney’s fees and costs of suit, to respondent Felix Paras (Paras),
and temperate damages to respondent Inland Trailways, Inc. (Inland), respectively the plaintiff and
the defendant/third-party plaintiff in this action for breach of contract of carriage, upon a finding that
the negligence of the petitioner and its driver had caused the serious physical injuries Paras
sustained and the material damage Inland’s bus suffered in a vehicular accident.

Antecedents

The antecedent facts, as summarized by the CA, are as follows:

Plaintiff-appellant [respondent] Felix Paras (Paras for brevity), who hails from Cainta, Rizal is
engaged in the buy and sell of fish products. Sometime on 08 February 1987, on his way home to
Manila from Bicol Region, he boarded a bus with Body No. 101 and Plate No. EVE 508, owned and
operated by Inland Trailways, Inc. (Inland for brevity) and driven by its driver Calvin Coner (Coner for
brevity).

At approximately 3:50 o’clock in the morning of 09 February 1987, while the said bus was travelling
along Maharlika Highway, Tiaong, Quezon, it was bumped at the rear by another bus with Plate No.
EVB 259, owned and operated by Philtranco Service Enterprises, Inc. (Philtranco for brevity). As a
result of the strong and violent impact, the Inland bus was pushed forward and smashed into a cargo
truck parked along the outer right portion of the highway and the shoulder thereof. Consequently, the
said accident bought considerable damage to the vehicles involved and caused physical injuries to
the passengers and crew of the two buses, including the death of Coner who was the driver of the
Inland Bus at the time of the incident.

Paras was not spared from the pernicious effects of the accident. After an emergency treatment at
the San Pablo Medical Center, San Pablo City, Laguna, Paras was taken to the National Orthopedic
Hospital. At the latter hospital, he was found and diagnosed by Dr. Antonio Tanchuling, Jr. to be
affected with the following injuries: a) contusion/hematoma; b) dislocation of hip upon fracture of the
fibula on the right leg; c) fractured small bone on the right leg; and d) close fracture on the tibial
plateau of the left leg. (Exh. "A", p. 157, record)

On 04 March 1987 and 15 April 1987, Paras underwent two (2) operations affecting the fractured
portions of his body. (Exhs. "A-2" and "A-3", pp. 159 and 160 respectively, record)

Unable to obtain sufficient financial assistance from Inland for the costs of his operations,
hospitalization, doctors’ fees and other miscellaneous expenses, on 31 July 1989, Paras filed a
complaint for damages based on breach of contract of carriage against Inland.

In its answer, defendant Inland denied responsibility, by alleging, among others, that its driver Coner
had observed an utmost and extraordinary care and diligence to ensure the safety of its passengers.
In support of its disclaimer of responsibility, Inland invoked the Police Investigation Report which
established the fact that the Philtranco bus driver of [sic] Apolinar Miralles was the one which
violently bumped the rear portion of the Inland bus, and therefore, the direct and proximate cause of
Paras’ injuries.

On 02 March 1990, upon leave of court, Inland filed a third-party complaint against Philtranco and
Apolinar Miralles (Third Party defendants). In this third-party complaint, Inland, sought for
exoneration of its liabilities to Paras, asserting that the latter’s cause of action should be directed
against Philtranco considering that the accident was caused by Miralles’ lack of care, negligence and
reckless imprudence. (pp. 50 to 56, records).

After trial, the RTC (Branch 71) in Antipolo, Rizal rendered its judgment on July 18, 1997, viz:
1 

WHEREFORE, third-party defendant Philtranco and Apolinar Miralles are hereby ordered to pay
plaintiff jointly and severally, the following amounts:

1.₱54,000.00 as actual damages;

2.₱50,000.00 as moral damages;

3.₱20,000.00 as attorney’s fees and costs.

SO ORDERED.

All the parties appealed to the CA on different grounds.

On his part, Paras ascribed the following errors to the RTC, to wit:

I. THE TRIAL COURT ERRED IN HOLDING THAT ONLY THIRD-PARTY DEFENDANT-

APPELLANT PHILTRANCO IS LIABLE FOR THE DAMAGES SUFFERED BY APPELLANT
PARAS.
 II. THE TRIAL COURT ERRED IN NOT HOLDING APPELLANT INLAND TRAILWAYS INC.
TO BE JOINTLY AND SEVERALLY LIABLE FOR THE DAMAGES SUFFERED BY PARAS.

III. THE TRIAL COURT ERRED IN NOT AWARDING UNEARNED INCOME AS

ADDITIONAL ACTUAL DAMAGES SUFFERED BY APPELLANT PARAS AS HIS
PHYSICAL DISABILITY IS PERMANENT IN NATURE.

IV. THE TRIAL COURT ERRED IN NOT AWARDING EXEMPLARY DAMAGES IN FAVOR
OF APPELLANT PARAS.

On the other hand, Inland assigned the following errors to the RTC, namely:

THE TRIAL COURT ERRED WHEN IT FAILED TO AWARD DAMAGES UNTO THE THIRD PARTY
PLAINTIFF NOTWITHSTANDING CLEAR FINDING THAT:

‘It is clear from the evidence that the plaintiff sustained injuries because of the reckless, negligence,
and lack of precaution of third party defendant Apolinar Miralles, an employee of Philtranco.’

AND, COMPLETELY DISREGARDED THE UNCONTROVERTED ORAL AND DOCUMENTARY

EVIDENCES ESTABLISHING THE EXTENT AND DEGREE OF DAMAGES SUSTAINED BY THE
THIRD PARTY PLAINTIFF.

Lastly, Philtranco stated that the RTC erred thuswise:

THE COURT A QUO MISERABLY ERRED IN AWARDING ACTUAL DAMAGES GREATER

THAN WHAT WAS ALLEGED IN THE COMPLAINT ITSELF, AND EVEN MUCH MORE
GREATER THAN WHAT WERE PROVED DURING THE TRIAL, HENCE, PERPETUATING
UNJUST ENRICHMENT.

II

THE COURT A QUO SERIOUSLY ERRED IN AWARDING MORAL DAMAGES TO A

CAUSE OF ACTION OF CULPA-CONTRACTUAL EVEN WITHOUT ANY EVIDENCE OF
GROSS BAD FAITH; HENCE, CONTRARY TO THE ESTABLISHED DOCTRINE IN THE
CASES OF PHIL. RABBIT BUS LINES VS. ESGUERRA; SOBERANO VS. BENGUET
AUTO LINE AND FLORES VS. MIRANDA.

III

THE COURT A QUO MISERABLY ERRED IN HOLDING THAT MIRALLES WAS THE ONE
AT FAULT MERELY ON THE STRENGHT OF THE TESTIMONY OF THE POLICE
INVESTIGATOR WHICH IS IN TURN BASED ON THE STATEMENTS OF ALLEGED
WITNESSES WHO WERE NEVER PRESENTED ON THE WITNESS STAND.

IV

THE COURT A QUO COMMITTED A GRIEVOUS ERROR IN DISREGARDING THE

TESTIMONY OF APPELLANTS’ WITNESSES WHO TESTIFIED AS TO THE DEFENSE OF
EXERCISE OF DUE DILIGENCE IN THE SELECTION AND SUPERVISION OF
EMPLOYEES PURSUANT TO ART. 2180, LAST PARAGRAPH, NEW CIVIL CODE.

On September 25, 2002, the CA promulgated its decision, disposing:

2 

WHEREFORE, in consideration of the foregoing premises, the assailed decision dated 18 July
19(9)7 is perforce affirmed with the following modifications:

1. Third party defendants-appellants Philtranco and Apolinar Miralles are ordered to pay
plaintiff-appellant Felix Paras jointly and severally the following amounts:

a) ₱1,397.95 as actual damages;

 b) ₱50,000.00 as temperate damages;

c) ₱50,000.00 as moral damages; and

d) ₱20,000.00 as attorney’s fees and costs of suit.

2. On the third party plaintiff-appellant Inland’s claims, the third party defendant-appellants
Philtranco and Apolinar Miralles are hereby ordered to pay the former (Inland) jointly and
severally the amount of ₱250,000.00 as and by way of temperate damages.

SO ORDERED.

The CA agreed with the RTC’s finding that no trace of negligence at the time of the accident was
attributable to Inland’s driver, rendering Inland not guilty of breach of contract of carriage; that faulty
brakes had caused Philtranco’s bus to forcefully bump Inland’s bus from behind, making it hit the
rear portion of a parked cargo truck; that the impact had resulted in considerable material damage to
the three vehicles; and that Paras and others had sustained various physical injuries.

Accordingly, the CA:– (a) sustained the award of moral damages of ₱50,000.00 in favor of Paras
pursuant to Article 2219 of the Civil Code based on quasi-delict committed by Philtranco and its
driver; (b) reduced the actual damages to be paid by Philtranco to Paras from ₱54,000.00 to
₱1,397.95 because only the latter amount had been duly supported by receipts; (c) granted
temperate damages of ₱50,000.00 (in lieu of actual damages in view of the absence of competent
proof of actual damages for his hospitalization and therapy) to be paid by Philtranco to Paras; and
(d) awarded temperate damages of ₱250,000.00 under the same premise to be paid by Philtranco to
Inland for the material damage caused to Inland’s bus.

Philtranco moved for reconsideration, but the CA denied its motion for reconsideration on January
3 

21, 2004. 4

Issues

Hence, this appeal, in which the petitioner submits that the CA committed grave abuse of discretion
amounting to lack of jurisdiction in awarding moral damages to Paras despite the fact that the
complaint had been anchored on breach of contract of carriage; and that the CA committed a
reversible error in substituting its own judgment by motu proprio awarding temperate damages of
₱250,000.00 to Inland and ₱50,000.00 to Paras despite the clear fact that temperate damages were
not raised on appeal by Paras and Inland.

Ruling

The appeal lacks merit.

The Court does not disturb the unanimous findings by the CA and the RTC on the negligence of
Philtranco and its driver being the direct cause of the physical injuries of Paras and the material
damage of Inland.

Nonetheless, we feel bound to pass upon the disparate results the CA and the RTC reached on the
liabilities of Philtranco and its driver.

1.

Paras can recover moral damages

in this suit based on quasi-delict

Philtranco contends that Paras could not recover moral damages because his suit was based on
breach of contract of carriage, pursuant to which moral damages could be recovered only if he had
died, or if the common carrier had been guilty of fraud or bad faith. It argues that Paras had suffered
only physical injuries; that he had not adduced evidence of fraud or bad faith on the part of the
common carrier; and that, consequently, Paras could not recover moral damages directly from it
(Philtranco), considering that it was only being subrogated for Inland.
The Court cannot uphold the petitioner’s contention.

As a general rule, indeed, moral damages are not recoverable in an action predicated on a breach of
contract. This is because such action is not included in Article 2219 of the Civil Code as one of the
5 

actions in which moral damages may be recovered. By way of exception, moral damages are
recoverable in an action predicated on a breach of contract: (a) where the mishap results in the
death of a passenger, as provided in Article 1764, in relation to Article 2206, (3), of the Civil Code;
6  7 

and (b) where the common carrier has been guilty of fraud or bad faith, as provided in Article
8 

2220 of the Civil Code.

9 

Although this action does not fall under either of the exceptions, the award of moral damages to
Paras was nonetheless proper and valid. There is no question that Inland filed its third-party
complaint against Philtranco and its driver in order to establish in this action that they, instead of
Inland, should be directly liable to Paras for the physical injuries he had sustained because of their
negligence. To be precise, Philtranco and its driver were brought into the action on the theory of
liability that the proximate cause of the collision between Inland’s bus and Philtranco’s bus had been
"the negligent, reckless and imprudent manner defendant Apolinar Miralles drove and operated his
driven unit, the Philtranco Bus with Plate No. 259, owned and operated by third-party defendant
Philtranco Service Enterprises, Inc." The apparent objective of Inland was not to merely subrogate
10 

the third-party defendants for itself, as Philtranco appears to suggest, but, rather, to obtain a
11 

different relief whereby the third-party defendants would be held directly, fully and solely liable to
Paras and Inland for whatever damages each had suffered from the negligence committed by
Philtranco and its driver. In other words, Philtranco and its driver were charged here as joint
tortfeasors who would be jointly and severally be liable to Paras and Inland.

Impleading Philtranco and its driver through the third-party complaint filed on March 2, 1990 was
correct. The device of the third-party action, also known as impleader, was in accord with Section
12, Rule 6 of the Revised Rules of Court, the rule then applicable, viz:

Section 12. Third-party complaint. – A third-party complaint is a claim that a defending party may,
with leave of court, file against a person not a party to the action, called the third-party defendant, for
contribution, indemnity, subrogation or any other relief, in respect of his opponent’s claim. 12

Explaining the application of Section 12, Rule 6, supra, the Court said in Balbastro v. Court of
Appeals, to wit:
13 

Section 12 of Rule 6 of the Revised Rules of Court authorizes a defendant to bring into a lawsuit any
person "not a party to the action . . . for contribution, indemnity, subrogation or any other relief in
respect of his opponent's claim." From its explicit language it does not compel the defendant to bring
the third-parties into the litigation, rather it simply permits the inclusion of anyone who meets the
standard set forth in the rule. The secondary or derivative liability of the third-party is central —
whether the basis is indemnity, subrogation, contribution, express or implied warranty or some other
theory. The impleader of new parties under this rule is proper only when a right to relief exists under
the applicable substantive law. This rule is merely a procedural mechanism, and cannot be utilized
unless there is some substantive basis under applicable law.

Apart from the requirement that the third-party complainant should assert a derivative or secondary
claim for relief from the third-party defendant there are other limitations on said party’s ability to
implead. The rule requires that the third-party defendant is "not a party to the action" for otherwise
the proper procedure for asserting a claim against one who is already a party to the suit is by means
of counterclaim or cross-claim under sections 6 and 7 of Rule 6. In addition to the aforecited
requirement, the claim against the third-party defendant must be based upon plaintiff's claim against
the original defendant (third-party claimant). The crucial characteristic of a claim under section 12 of
Rule 6, is that the original "defendant is attempting to transfer to the third-party defendant the liability
asserted against him by the original plaintiff."

Accordingly, the requisites for a third-party action are, firstly, that the party to be impleaded must not
yet be a party to the action; secondly, that the claim against the third-party defendant must belong to
the original defendant; thirdly, the claim of the original defendant against the third-party defendant
must be based upon the plaintiff’s claim against the original defendant; and, fourthly, the defendant
is attempting to transfer to the third-party defendant the liability asserted against him by the original
plaintiff.14
As the foregoing indicates, the claim that the third-party complaint asserts against the third-party
defendant must be predicated on substantive law. Here, the substantive law on which the right of
Inland to seek such other relief through its third-party complaint rested were Article 2176 and Article
2180 of the Civil Code, which read:

Article 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this chapter. (1902a)

Article 2180. The obligation imposed by article 2176 is demandable not only for one’s own acts or
omissions, but also for those of persons for whom one is responsible.

xxx

Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.

xxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that
they observed all the diligence of a good father of a family to prevent damage. (1903a)

Paras’ cause of action against Inland (breach of contract of carriage) did not need to be the same as
the cause of action of Inland against Philtranco and its driver (tort or quasi-delict) in the impleader. It
is settled that a defendant in a contract action may join as third-party defendants those who may be
liable to him in tort for the plaintiff’s claim against him, or even directly to the plaintiff. Indeed, Prof.
15 

Wright, et al., commenting on the provision of the Federal Rules of Procedure of the United States
from which Section 12, supra, was derived, observed so, to wit: 16

The third-party claim need not be based on the same theory as the main claim. For example, there
are cases in which the third-party claim is based on an express indemnity contract and the original
complaint is framed in terms of negligence. Similarly, there need not be any legal relationship
between the third-party defendant and any of the other parties to the action. Impleader also is proper
even though the third party’s liability is contingent, and technically does not come into existence until
the original defendant’s liability has been established. In addition, the words ‘is or may be liable’ in
Rule 14(a) make it clear that impleader is proper even though the third-party defendant’s liability is
not automatically established once the third-party plaintiff’s liability to the original plaintiff has been
determined.

Nor was it a pre-requisite for attachment of the liability to Philtranco and its driver that Inland be first
declared and found liable to Paras for the breach of its contract of carriage with him. As the Court
17 

has cogently discoursed in Samala v. Judge Victor: 18

Appellants argue that since plaintiffs filed a complaint for damages against the defendants on a
breach of contract of carriage, they cannot recover from the third-party defendants on a cause of
action based on quasi-delict. The third party defendants, they allege, are never parties liable with
respect to plaintiff s claim although they are with respect to the defendants for indemnification,
subrogation, contribution or other reliefs. Consequently, they are not directly liable to the plaintiffs.
Their liability commences only when the defendants are adjudged liable and not when they are
absolved from liability as in the case at bar.

Quite apparent from these arguments is the misconception entertained by appellants with respect to
the nature and office of a third party complaint.

Section 16, Rule 6 of the Revised Rules of Court defines a third party complaint as a "claim that a
defending party may, with leave of court, file against a person not a party to the action, called the
third-party defendant, for contribution, indemnification, subrogation, or any other relief, in respect of
his opponent’s claim." In the case of Viluan vs. Court of Appeals, et al., 16 SCRA 742 [1966], this
Court had occasion to elucidate on the subjects covered by this Rule, thus:
... As explained in the Atlantic Coast Line R. Co. vs. U.S. Fidelity & Guaranty Co., 52 F. Supp. 177
(1943:)

‘From the sources of Rule 14 and the decisions herein cited, it is clear that this rule, like the
admiralty rule, ‘covers two distinct subjects, the addition of parties defendant to the main cause of
action, and the bringing in of a third party for a defendant’s remedy over’. xxx

‘If the third party complaint alleges facts showing a third party’s direct liability to plaintiff on the claim
set out in plaintiff’s petition, then third party ‘shall’ make his defenses as provided in Rule 12 and his
counterclaims against plaintiff as provided in Rule 13. In the case of alleged direct liability, no
amendment (to the complaint) is necessary or required. The subject-matter of the claim is contained
in plaintiff's complaint, the ground of third party’s liability on that claim is alleged in third party
complaint, and third party’s defense to set up in his answer to plaintiff's complaint. At that point and
without amendment, the plaintiff and third party are at issue as to their rights respecting the claim.

The provision in the rule that, ‘The third-party defendant may assert any defense which the third-
party plaintiff may assert to the plaintiffs claim,’ applies to the other subject, namely, the alleged
liability of third party defendant. The next sentence in the rule, ‘The third-party defendant is bound by
the adjudication of the third party plaintiffs liability to the plaintiff, as well as of his own to the plaintiff
or to the third-party plaintiff applies to both subjects. If third party is brought in as liable only to
defendant and judgment is rendered adjudicating plaintiff's right to recover against defendant and
defendant’s rights to recover against third party, he is bound by both adjudications. That part of the
sentence refers to the second subject. If third party is brought in as liable to plaintiff, then third party
is bound by the adjudication as between him and plaintiff. That refers to the first subject. If third party
is brought in as liable to plaintiff and also over to defendant, then third party is bound by both
adjudications. xxx

Under this Rule, a person not a party to an action may be impleaded by the defendant either (a) on
an allegation of liability to the latter; (b) on the ground of direct liability to the plaintiff-; or, (c) both (a)
and (b). The situation in (a) is covered by the phrase "for contribution, indemnity or subrogation;"
while (b) and (c) are subsumed under the catch all "or any other relief, in respect of his opponent’s
claim."

The case at bar is one in which the third party defendants are brought into the action as directly
liable to the plaintiffs upon the allegation that "the primary and immediate cause as shown by the
police investigation of said vehicular collision between (sic) the above-mentioned three vehicles was
the recklessness and negligence and lack of imprudence (sic) of the third-party defendant Virgilio
(should be Leonardo) Esguerra y Ledesma then driver of the passenger bus." The effects are that
"plaintiff and third party are at issue as to their rights respecting the claim" and "the third party is
bound by the adjudication as between him and plaintiff." It is not indispensable in the premises that
the defendant be first adjudged liable to plaintiff before the third-party defendant may be held liable
to the plaintiff, as precisely, the theory of defendant is that it is the third party defendant, and not he,
who is directly liable to plaintiff. The situation contemplated by appellants would properly pertain to
situation (a) above wherein the third party defendant is being sued for contribution, indemnity or
subrogation, or simply stated, for a defendant's "remedy over". 19

It is worth adding that allowing the recovery of damages by Paras based on quasi-delict, despite his
complaint being upon contractual breach, served the judicial policy of avoiding multiplicity of suits
and circuity of actions by disposing of the entire subject matter in a single litigation. 20

2.

Award of temperate damages was in order

Philtranco assails the award of temperate damages by the CA considering that, firstly, Paras and
Inland had not raised the matter in the trial court and in their respective appeals; secondly, the CA
could not substitute the temperate damages granted to Paras if Paras could not properly establish
his actual damages despite evidence of his actual expenses being easily available to him; and,
thirdly, the CA gravely abused its discretion in granting motu proprio the temperate damages of
₱250,000.00 to Inland although Inland had not claimed temperate damages in its pleading or during
trial and even on appeal.

The Court cannot side with Philtranco.

Actual damages, to be recoverable, must not only be capable of proof, but must actually be proved
with a reasonable degree of certainty. The reason is that the court "cannot simply rely on
speculation, conjecture or guesswork in determining the fact and amount of damages," but "there
must be competent proof of the actual amount of loss, credence can be given only to claims which
are duly supported by receipts."21

The receipts formally submitted and offered by Paras were limited to the costs of medicines
purchased on various times in the period from February 1987 to July 1989 (Exhibits E to E-35,
inclusive) totaling only ₱1,397.95. The receipts by no means included hospital and medical
22 

expenses, or the costs of at least two surgeries as well as rehabilitative therapy. Consequently, the
CA fixed actual damages only at that small sum of ₱1,397.95. On its part, Inland offered no definite
proof on the repairs done on its vehicle, or the extent of the material damage except the testimony of
its witness, Emerlinda Maravilla, to the effect that the bus had been damaged beyond economic
repair. The CA rejected Inland’s showing of unrealized income worth ₱3,945,858.50 for 30 months
23 

(based on alleged average weekly income of ₱239,143.02 multiplied by its guaranteed revenue
amounting to 55% thereof, then spread over a period of 30 months, the equivalent to the remaining
40% of the vehicle’s un-depreciated or net book value), finding such showing arbitrary, uncertain and
speculative. As a result, the CA allowed no compensation to Inland for unrealized income.
24 

Nonetheless, the CA was convinced that Paras should not suffer from the lack of definite proof of his
actual expenses for the surgeries and rehabilitative therapy; and that Inland should not be deprived
of recourse to recover its loss of the economic value of its damaged vehicle. As the records
indicated, Paras was first rushed for emergency treatment to the San Pablo Medical Center in San
Pablo City, Laguna, and was later brought to the National Orthopedic Hospital in Quezon City where
he was diagnosed to have suffered a dislocated hip, fracture of the fibula on the right leg, fracture of
the small bone of the right leg, and closed fracture on the tibial plateau of the left leg. He underwent
surgeries on March 4, 1987 and April 15, 1987 to repair the fractures. Thus, the CA awarded to him
25 

temperate damages of ₱50,000.00 in the absence of definite proof of his actual expenses towards
that end. As to Inland, Maravilla’s testimony of the bus having been damaged beyond economic
repair showed a definitely substantial pecuniary loss, for which the CA fixed temperate damages of
₱250,000.00. We cannot disturb the CA’s determination, for we are in no position today to judge its
reasonableness on account of the lapse of a long time from when the accident occurred. 26

In awarding temperate damages in lieu of actual damages, the CA did not err, because Paras and
Inland were definitely shown to have sustained substantial pecuniary losses. It would really be a
travesty of justice were the CA now to be held bereft of the discretion to calculate moderate or
temperate damages, and thereby leave Paras and Inland without redress from the wrongful act of
Philtranco and its driver. We are satisfied that the CA exerted effort and practiced great care to
27 

ensure that the causal link between the physical injuries of Paras and the material loss of Inland, on
the one hand, and the negligence of Philtranco and its driver, on the other hand, existed in fact. It
also rejected arbitrary or speculative proof of loss. Clearly, the costs of Paras’ surgeries and
consequential rehabilitation, as well as the fact that repairing Inland’s vehicle would no longer be
economical justly warranted the CA to calculate temperate damages of ₱50,000.00 and
₱250,000.00 respectively for Paras and Inland.

There is no question that Article 2224 of the Civil Code expressly authorizes the courts to award
temperate damages despite the lack of certain proof of actual damages, to wit:

Article 2224. Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty.

The rationale for Article 2224 has been stated in Premiere Development Bank v. Court of Appeals in 28 

the following manner:

Even if not recoverable as compensatory damages, Panacor may still be awarded damages in the
concept of temperate or moderate damages. When the court finds that some pecuniary loss has
been suffered but the amount cannot, from the nature of the case, be proved with certainty,
temperate damages may be recovered. Temperate damages may be allowed in cases where from
the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is
convinced that the aggrieved party suffered some pecuniary loss.

The Code Commission, in explaining the concept of temperate damages under Article 2224, makes
the following comment:
In some States of the American Union, temperate damages are allowed. There are cases where
from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court is
convinced that there has been such loss. For instance, injury to one’s commercial credit or to the
goodwill of a business firm is often hard to show with certainty in terms of money. Should damages
be denied for that reason? The judge should be empowered to calculate moderate damages in such
cases, rather than that the plaintiff should suffer, without redress from the defendant’s wrongful act.

3.

Paras’ loss of earning capacity

must be compensated

In the body of its decision, the CA concluded that considering that Paras had a minimum monthly
income of ₱8,000.00 as a trader he was entitled to recover compensation for unearned income
during the 3-month period of his hospital confinement and the 6-month period of his recovery and
rehabilitation; and aggregated his unearned income for those periods to ₱72,000.00. Yet, the CA
29 

omitted the unearned income from the dispositive portion.

The omission should be rectified, for there was credible proof of Paras’ loss of income during his
disability. According to Article 2205, (1), of the Civil Code, damages may be recovered for loss or
impairment of earning capacity in cases of temporary or permanent personal injury. Indeed,
indemnification for damages comprehends not only the loss suffered (actual damages or damnum
emergens) but also the claimant’s lost profits (compensatory damages or lucrum cessans). Even so,30 

the formula that has gained acceptance over time has limited recovery to net earning capacity;
hence, the entire amount of ₱72,000.00 is not allowable. The premise is obviously that net earning
capacity is the person’s capacity to acquire money, less the necessary expense for his own
living. To simplify the determination, therefore, the net earning capacity of Paras during the 9-month
31 

period of his confinement, surgeries and consequential therapy is pegged at only half of his
unearned monthly gross income of ₱8,000.00 as a trader, or a total of ₱36,000.00 for the 9-month
period, the other half being treated as the necessary expense for his own living in that period.

It is relevant to clarify that awarding the temperate damages (for the substantial pecuniary losses
corresponding to Paras’s surgeries and rehabilitation and for the irreparability of Inland’s damaged
bus) and the actual damages to compensate lost earnings and costs of medicines give rise to no
incompatibility. These damages cover distinct pecuniary losses suffered by Paras and Inland, and 32 

do not infringe the statutory prohibition against recovering damages twice for the same act or
omission. 33

4.

Increase in award of attorney’s fees

Although it is a sound policy not to set a premium on the right to litigate, we consider the grant to
34 

Paras and Inland of reasonable attorney’s fees warranted. Their entitlement to attorney’s fees was
by virtue of their having been compelled to litigate or to incur expenses to protect their interests, as 35 

well as by virtue of the Court now further deeming attorney’s fees to be just and equitable. 36

In view of the lapse of a long time in the prosecution of the claim, the Court considers it reasonable
37 

and proper to grant attorney’s fees to each of Paras and Inland equivalent to 10% of the total
amounts hereby awarded to them, in lieu of only ₱20,000.00 for that purpose granted to Paras.

5.

Legal interest on the amounts awarded

Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals, legal interest at the rate of 6% per
38 

annum accrues on the amounts adjudged reckoned from July 18, 1997, the date when the RTC
rendered its judgment; and legal interest at the rate of 12% per annum shall be imposed from the
finality of the judgment until its full satisfaction, the interim period being regarded as the equivalent of
a forbearance of credit.
WHEREFORE, the Court AFFIRMS WITH MODIFICATION the decision of the Court of Appeals
promulgated on September 25, 2002, by ordering PHILTRANCO SERVICE ENTERPRISES, INC.
and APOLINAR MIRALLES to pay, jointly and severally, as follows:

1. To Felix Paras:

(a) ₱1,397.95, as reimbursement for the costs of medicines purchased between

February 1987 and July 1989;

(b) ₱50,000.00 as temperate damages;

(c) ₱50,000.00 as moral damages;

(d) ₱36,000.00 for lost earnings;

(e) 10% of the total of items (a) to (d) hereof as attorney’s fees; and

(f) Interest of 6% per annum from July 18, 1997 on the total of items (a) to (d) hereof
until finality of this decision, and 12% per annum thereafter until full payment.

2. To Inland Trailways, Inc.:

(a) ₱250,000.00 as temperate damages;

(b) 10% of item (a) hereof; and

(c) Interest of 6% per annum on item (a) hereof from July 18, 1997 until finality of this
decision, and 12% per annum thereafter until full payment.

3. The petitioner shall pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.

RENATO C. CORONA
Chief Justice

G.R. No. 199107, August 30, 2017

 ALFONSO SINGSON CORTAL, JUANITO SINGSON CORTAL, NENITA CODILLA,
GENEROSO PEPITO LONGAKIT, PONCIANA BATOON, AND GREGORIA
SABROSO, Petitioners, v. INAKI A. LARRAZABAL ENTERPRISES, REPRESENTED
BY INAKI P. LARRAZABAL, JR., THE HONORABLE REGIONAL DIRECTOR,
REGIONAL OFFICE NO. VIII, TACLOBAN CITY AND THE HONORABLE
SECRETARY, DEPARTMENT OF AGRARIAN REFORM, QUEZON CITY IN HIS
CAPACITY AS CHAIRMAN OF THE DEPARTMENT OF AGRARIAN REFORM
ADJUDICATION BOARD (DARAB), Respondents.

DECISION

LEONEN, J.:

Procedural rules must be faithfully followed and dutifully enforced. Still, their application
should not amount to "plac[ing] the administration of justice in a straightjacket."1 An
inordinate fixation on technicalities cannot defeat the need for a full, just, and equitable
litigation of claims.

This resolves a Petition for Review on Certiorari2 under Rule 45 of the 1997 Rules of
Civil Procedure, praying that the assailed September 30, 20103 and September 7,
20114 Resolutions of the Court of Appeals in CA-G.R. SP No. 04659 be reversed and set
aside, and that the Court of Appeals be directed to give due course to the dismissed
appeal of Alfonso Singson Cortal, Juanito Singson Cortal, Nenita Codilla, Generoso
Pepito Longakit, Ponciana Batoon, and Gregoria Sabroso (petitioners).

The assailed Court of Appeals September 30, 2010 Resolution dismissed petitioners'
appeal under Rule 43 of the 1997 Rules of Civil Procedure on account of several
technical defects. First was an inconsistency between the listing of petitioners' names in
their prior Motion for Extension of Time and subsequent Petition for Review, in which
the accompanying verification and certification of non-forum shopping were laden with
this same inconsistency and other defects. Second was the non-inclusion of the original
Complaint filed by the adverse party, now private respondent Inaki A. Larrazabal
Enterprises, before the Regional Agrarian Reform Adjudicator of the Department of
Agrarian Reform. And last was petitioners' counsel's failure to indicate the place of issue
of the official receipt of his payment of annual membership dues to the Integrated Bar
of the Philippines.5

The assailed Court of Appeals September 7, 2011 Resolution denied petitioners' Motion
for Reconsideration.6

Private respondent Inaki A. Larrazabal Enterprises (Larrazabal Enterprises) owned three

(3) parcels of land in Sitio Coob, Barangay Libertad, Ormoc City: Lot No. 5383-G, with
an area of 7.6950 hectares and covered by Transfer Certificate of Title (TCT) No.
10530; Lot No. 5383-N, with an area of 5.7719 hectares and covered by TCT No.
10530; and Lot No. 5383-F, with an area of 8.7466 hectares and covered by TCT No.
16178.7

In 1988, these three (3) parcels were placed under the Compulsory Acquisition Scheme
of Presidential Decree No. 27, as amended by Executive Order No. 228. Pursuant to the
Scheme, Emancipation Patents and new transfer certificates of title were issued to
farmer-beneficiaries, petitioners included.8

In 1999, Larrazabal Enterprises filed its Action for Recovery of these parcels against the
Department of Agrarian Reform and the petitioners before the Office of the Regional
Adjudicator, Department of Agrarian Reform Adjudication Board (DARAB).9 It assailed
the cancellation of its transfer certificates of title and the subsequent issuance of new
titles to petitioners. It alleged that no price had been fixed, much less paid, for the
expropriation of its properties, in violation of the just compensation requirement under
Presidential Decree No. 27, as amended. Thus, it prayed for the recovery of these lots
and the cancellation of petitioners' transfer certificates of title.10
In their Answer, petitioners denied non-payment of just compensation. They presented
certifications issued by the Land Bank of the Philippines (Landbank) that the amounts of
P80,359.37 and P95,691.49 had been deposited as payments in the name of Larrazabal
Enterprises.11 They added that since they had paid, the cancellation of Larrazabal
Enterprises' transfer certificates of title, the subdivision of the parcels, and the issuance
of emancipation patents in their favor were all properly made.12

In his October 15, 1999 Decision,13 Regional Adjudicator Felixberto M. Diloy (Regional

Adjudicator Diloy) noted that there was nothing in the records to show that just
compensation was fixed or paid for the parcels.14 Hence, he ruled in favor of Larrazabal
Enterprises and ordered that it be restored to ownership of the lots.15

Petitioners appealed to the DARAB. In its September 16, 2008 Decision,16 the DARAB
reversed the Decision of Regional Adjudicator Diloy.17 It ruled that Larrazabal
Enterprises' action, which was filed in 1999, was already barred by prescription and
laches, as the assailed Emancipation Patents were issued in 1988.18 It likewise gave
credence to the certificates issued by Landbank, which confirmed the payment of just
compensation.19

Larrazabal Enterprises filed a Motion for Reconsideration. In its September 30, 2009
Resolution,20 the DARAB reversed its own decision and granted Larrazabal Enterprises'
Motion for Reconsideration.21 It justified its ruling by saying that Larrazabal Enterprises
had been denied due process when the parcels were taken from it without having been
given just compensation.22

Petitioners then filed a Petition for Review before the Court of Appeals. In its assailed
September 30, 2010 Resolution,23 the Court of Appeals dismissed their Petition for the
following formal errors:

a. the name of Raymundo Claros Codilla was indicated in the Motion for
Extension of Time to File Petition for Review as one of the petitioners, but
in the Petition for Review and in the Verification and Certification of Non-
Forum Shopping, his name was no longer indicated[;]

b. the Verification and Certification of Non-Forum Shopping failed to show

any competent evidence of identity of the petitioners, Alfonso Singson
Cortal, Juanito Singson Cortal, Nenita Codilla, Cenon Baseles, Felimon
Almacin Batoon, Rodrigo Panilag Cabonillas, Generoso Pepito Longakit,
Exopiro Limgas Cabonillas, Jose Panilag Cabonillas, Avelino Panilag
Cabonillas, Ricardo Estrera German and Victoria Rosales, at least one
current identification document issued by an official agency bearing the
photographs and signatures of petitioners, in violation of Sec. 2.(2) Rule
IV of the Rules of Notarial Practice[;]

c. petitioners failed to attach the copy of the Complaint filed by respondent

Inaki A. Larrazabal Enterprises before the Office of the Regional
Adjudicator, Tacloban City, docketed as DARAB Case No. E.O. No. 288
(sic); and

d. counsel for the petitioners, Atty. Norjue I. Juego did not indicate the place
of issue of his [Integrated Bar of the Philippines] number.24

Following the dismissal of their Petition for Review, petitioners filed a Motion for
Reconsideration. In its assailed September 7, 2011 Resolution,25 the Court of Appeals
denied petitioners' Motion for Reconsideration.

Thus, this Petition was filed.

For resolution of this Court is the sole issue of whether or not the dismissal of
petitioners' appeal was justified by the errors noted by the Court of Appeals.

It was not.
 I

Appeal is the remedy available to a litigant seeking to reverse or modify a judgment on

the merits of a case.26 The right to appeal is not constitutional or natural, and is not
part of due process27 but is a mere statutory privilege.28 Thus, it must be availed in
keeping with the manner set by law and is lost by a litigant who does not comply with
the rules.29

Nevertheless, appeal has been recognized as an important part of our judicial system
and courts have been advised by the Supreme Court to cautiously proceed to avoid
inordinately denying litigants this right.30

II

Procedural rules "are tools designed to facilitate the adjudication of cases [so] [c]ourts
and litigants alike are thus enjoined to abide strictly by the rules."31 They provide a
system for forestalling arbitrariness, caprice, despotism, or whimsicality in dispute
settlement. Thus, they are not to be ignored to suit the interests of a party.32 Their
disregard cannot be justified by a sweeping reliance on a "policy of liberal
construction."33

Still, this Court has stressed that every party litigant must be afforded the fullest
opportunity to properly ventilate and argue his or her case, "free from the constraints
of technicalities."34 Rule 1, Section 6 of the Rules of Court expressly stipulates their
liberal construction to the extent that justice is better served:
Section 6. Construction. - These Rules shall be liberally construed in order to promote
their objective of securing a just, speedy and inexpensive disposition of every action
and proceeding.
Procedural rules may be relaxed for the most persuasive of reasons so as to relieve a
litigant of an injustice not commensurate with the degree of his thoughtlessness in not
complying with the procedure prescribed.35 This Court has noted that a strict application
of the rules should not amount to straight-jacketing the administration of justice36 and
that the principles of justice and equity must not be sacrificed for a stern application of
the rules of procedure.37 In Obut v. Court of Appeals:38
We cannot look with favor on a course of action which would place the administration of
justice in a straightjacket for then the result would be a poor kind of justice if there
would be justice at all. Verily, judicial orders, such as the one subject of this petition,
are issued to be obeyed. nonetheless a non-compliance is to be dealt with as the
circumstances attending the case may warrant. What should guide judicial action is the
principle that a party-litigant is to be given the fullest opportunity to establish the
merits of his complaint or defense rather than for him to lose life, liberty, honor or
property on technicalities.39 (Emphasis supplied)
Nevertheless, alluding to the "interest of substantial justice" should not automatically
compel the suspension of procedural rules.40 While they may have occasionally been
suspended, it remains basic policy that the Rules of Court are to be faithfully observed.
A bare invocation of substantial justice cannot override the standard strict
implementation of procedural rules.41 In Spouses Bergonia v. Court of Appeals:42
The petitioners ought to be reminded that the bare invocation of "the interest of
substantial justice" is not a magic wand that will automatically compel this Court to
suspend procedural rules. Procedural rules. are not to be belittled or dismissed simply
because their non observance may have resulted in prejudice to a party's substantive
rights. Like all rules, they are required to be followed except only for the most
persuasive of reasons when they may be relaxed to relieve a litigant of an injustice not
commensurate with the degree of his thoughtlessness in not complying with the
procedure prescribed.43 (Emphasis supplied)
In Barnes v. Padilla,44 this Court relaxed the 15-day period to perfect an appeal to serve
substantial justice; and identified situations justifying a liberal application of procedural
rules:
[T]his Court has relaxed this rule in order to serve substantial justice considering (a)
matters of life, liberty, honor or property, (b) the existence of special or compelling
circumstances, (c) the merits of the case, (d) a cause not entirely attributable to the
fault or negligence of the party favored by the suspension of the rules, (e) a lack of any
showing that the review sought is merely frivolous and dilatory, and (f) the other party
will not be unjustly prejudiced thereby.45
A petition for review filed out of time was entertained by this Court in Yong Chan Kim v.
People46 as it considered the strict application of the rules as unjustly depriving the
accused of his liberty. It appeared that no party stood to suffer substantial injury if the
accused were to be extended an opportunity to be heard.47

Telan v. Court of Appeals48 gave due course to a belatedly filed petition. Finding that
the petitioners were assisted by someone who misrepresented himself to be a lawyer, it
held that denying an opportunity for relief to petitioners, despite the misrepresentation,
was tantamount to depriving them of their right to counsel.49 It underscored that in
criminal cases, the right to counsel is immutable as its denial could amount to a
peremptory deprivation of a person's life, liberty, or property.50 It stated that the right
to counsel was just as important in civil cases:51
There is no reason why the rule in criminal cases has to be different from that in civil
cases. The preeminent right to due process of law applies not only to life and liberty but
also to property. There can be no fair hearing unless a party, who is in danger of losing
his house in which he and his family live and in which he has established a modest
means of livelihood, is given the right to be heard by himself and counsel.52
III

Judgments and final orders of quasi-judicial agencies are appealed to the Court of
Appeals through petitions for review under Rule 43 of the 1997 Rules of Civil Procedure.
Rule 43 was adopted in order to provide uniform rules on appeals from quasi-judicial
agencies.53

Rule 43 appeals shall be taken through the filing of a verified petition for review with
the Court of Appeals,54 within 15 days from notice of the appealed action.55
Rule 43, Section 6 specifies the required contents of Rule 43 petitions:

Section 6. Contents of the Petition. - The petition for review shall (a) state the full
names of the parties to the case, without impleading the court or agencies either as
petitioners or respondents; (b) contain a concise statement of the facts and issues
involved and the grounds relied upon for the review; (c) be accompanied by a clearly
legible duplicate original or a certified true copy of the award, judgment, final order or
resolution appealed from, together with certified true copies of such material portions of
the record referred to therein and other supporting papers; and (d) contain a sworn
certification against forum shopping as provided in the last paragraph of Section 2, Rule
42. The petition shall state the specific material dates showing that it was filed within
the period fixed herein.
Rule 43, Section 7 stipulates that failure to comply with these requisites may be
sufficient ground for dismissing the appeal:

Section 7. Effect of Failure to Comply with Requirements. The failure of the petitioner to
comply with any of the foregoing requirements regarding the payment of the docket
and other lawful fees, the deposit for costs, proof of service of the petition, and the
contents of and the documents which should accompany the petition shall be sufficient
ground for the dismissal thereof.
IV

In its assailed September 30, 2010 Resolution, the Court of Appeals dismissed
petitioners' appeal for purely formal defects and without discussing the merits of the
case:56

After a cursory examination of the instant Petition for Review filed by petitioner under
Rule 43 of the 1997 Rules in Civil Procedure, the same reveals the following defects:

a. the name of Raymundo Claros Codilla was indicated in the Motion for
Extension of Time to File Petition for Review as one of the petitioners, but
 in the Petition for Review and in the Verification and Certification of Non
Forum Shopping, his name was no longer indicated[;]

b. the Verification and Certification of Non-Forum Shopping failed to show

any competent evidence of identity of the petitioners, Alfonso Singson
Cortal, Juanito Singson Cortal, Nenita Codilla, Cenon Baseles, Felimon
Almacin Batoon, Rodrigo Panilag Cabonillas, Generoso Pepito Longakit,
Exopiro Limgas Cabonillas, Jose Panilag Cabonillas, Avelino Panilag
Cabonillas. Ricardo Estrera German and Victoria Rosales, at least one
current identification document issued by an official agency bearing the
photographs and signatures of petitioners, in violation of Sec. 2.(2) Rule
IV of the Rules of Notarial Practice[;]

c. petitioners failed to attach the copy of the Complaint filed by respondent

Inaki A. Larrazabal Enterprises before the Office of the Regional
Adjudicator, Tacloban City, docketed as DARAB Case No. E.O. No. 288
(sic); and

d. counsel for the petitioners, Atty. Norjue I. Juego did not indicate the place
of issue of his [Integrated Bar of the Philippines] number.57

Contrary to the Court of Appeals' conclusion, this Court does not consider these defects
to have been so fatal as to peremptorily deny petitioners the opportunity to fully
ventilate their case on appeal.

IV.A

Rule 7, Sections 4 and 5 of the 1997 Rules of Civil Procedure articulate the basic rules
concerning the verification of pleadings and their accompaniment by a certification of
non-forum shopping:

Section 4. Verification. - Except when otherwise specifically required by law or rule,

pleadings need not be under oath, verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his knowledge and belief.
A pleading required to be verified which contains a verification based on "information
and belief," or upon "knowledge, information and belief," or lacks a proper verification,
shall be treated as an unsigned pleading.

Section 5. Certification Against Forum Shopping. - The plaintiff or principal party shall
certify under oath in the complaint or other initiatory pleading asserting a claim for
relief, or in a sworn certification annexed thereto and simultaneously filed therewith:
(a) that he has not theretofore commenced any action or filed any claim involving the
same issues in any court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there is such other
pending action or claim, a complete statement of the present status thereof; and (c) if
he should thereafter learn that the same or similar action or claim has been filed or is
pending, he shall report that fact within five (5) days therefrom to the court wherein his
aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt of court, without prejudice to
the corresponding administrative and criminal actions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct contempt, as
well as a cause for administrative sanctions.
An affiant verifies a pleading to indicate that he or she has read it and that to his or her
knowledge and belief, its allegations are true and correct and that it has been prepared
in good faith and not out of mere speculation.58 Jurisprudence has considered the lack
of verification as a mere formal, rather than a jurisdictional, defect that is not fatal.
Thus, courts may order the correction of a pleading or act on an unverified pleading, if
the circumstances would warrant the dispensing of the procedural requirement to serve
the ends of justice.59

Altres v. Empleo,60 outlined the differences "between non-compliance with the

requirement on or submission of defective verification, and noncompliance with the
requirement on or submission of defective certification against forum shopping":

1) A distinction must be made between non-compliance with the requirement on or

submission of defective verification, and non-compliance with the requirement on or
submission of defective certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily

render the pleading fatally defective, The court may order its submission or correction
or act on the pleading if the attending circumstances are such that strict compliance
with the Rule may be dispensed with in order that the ends of justice may be served
thereby.

3) Verification is deemed substantially complied with when one who has ample
knowledge to swear to the truth of the allegations in the complaint or petition signs the
verification, and when matters alleged in the petition nave been made in good faith or
are true and correct.

4) As to certification against forum shopping, non-compliance therewith or a defect

therein, unlike in verification, is generally not curable by its subsequent submission or
correction thereof, unless there is a need to relax the Rule on the ground of "substantial
compliance" or presence of "special circumstances or compelling reasons".

5) The certification against forum shopping must be signed by all the plaintiffs or
petitioners in a case; otherwise, those who did not sign will be dropped as parties to
the case. Under reasonable or justifiable circumstances, however, as when all the
plaintiffs or petitioners share a common interest and invoke a common cause of action
or defense, the signature of only one of them in the certification against forum
shopping substantially complies with the Rule.

6) Finally, the certification against forum shopping must be executed by the party-
pleader, not by his counsel. If, however, for reasonable or justifiable reasons, the
party-pleader is unable to sign, he must execute a Special Power of Attorney
designating his counsel of record to sign on his behalf.61 (Emphasis supplied, citations
omitted)
Thus, in Torres v. Specialized Packaging Development Corporation,62 this Court gave
due course to a petition even if the verification and certification against forum shopping
were not signed by all of the parties.63 Though there were 25 petitioners in Torres, this
Court held that the signatures of just two (2) of them in the verification were suitable,
substantial compliance considering that they were "unquestionably real parties in
interest, who undoubtedly have sufficient knowledge and belief to swear to the truth of
the allegations in the Petition."64 On the lacking signatures in the certificate of non-
forum shopping, this Court noted that the petitioners have shown that "there was
reasonable cause for the failure of some of them to sign the certification against forum
shopping, and that the outright dismissal of the Petition would defeat the administration
of justice."65

In Cavile v. Heirs of Clarita Cavile,66 this Court held that the signing by only one (1) of
the 22 petitioners on the certificate of non-forum shopping67 was substantial
compliance as the petitioners had a common interest in the property involved, they
being relatives and co-owners of that property.68
Cavile69 was echoed in Heirs of Agapito Olarte v. Office of the President,70 where the
certification of non-forum shopping, signed by only two (2) of four (4)
petitioners,71 was condoned considering that the petitioners shared a common interest
over the lot subject of that case.72

In the same vein, the inclusion of Raymundo Claros Codilla (Codilla) in the Motion for
Extension of Time to File Petition for Review but not in the Petition for Review and in
the verification and certificate of non-forum shopping73 should not have been fatal to
petitioners' appeal. The defective verification amounted to a mere formal defect that
was neither jurisdictional nor fatal and for which a simple correction could have been
ordered by the Court of Appeals.74 Petitioners here, too, are acting out of a common
interest. Even assuming that a strict application of the rules must be maintained, the
Court of Appeals could just as easily have merely dropped Codilla as a party instead of
peremptorily and indiscriminately foreclosing any further chance at relief to those who
had affixed their signatures.75

IV.B

Equally not fatal to petitioners' appeal was their supposed failure to show competent
evidence of identities in their petition's verification and certification of non-forum
shopping.

Rule IV, Section 2(b)(2) of the 2004 Rules on Notarial Practice76 stipulates that a notary
public is not to perform a notarial act if the signatory to the document subject to
notarization is not personally known to the notary or otherwise identified through a
competent evidence of identity:

SECTION 2. Prohibitions. - . . .

. . . .

(b) A person shall not perform a notarial act if the person involved as signatory to the
instrument or document -

    . . . .

(2) is not personally known to the notary public or otherwise identified by the notary
public through competent evidence of identity as defined by these Rules.
Competent evidence of identity enables the notary to "verify the genuineness of the
signature of the acknowledging party and to ascertain that the document is the party's
free act and deed."77 Rule II, Section 12 of the 2004 Rules on Notarial Practice
elaborates on what is "competent evidence of identity":

Section 12. Competent Evidence of Identity. - The phrase "competent evidence of

identity" refers to the identification of an individual based on:

(a) at least one current identification document issued by an official agency bearing the
photograph and signature of the individual, such as but not limited to, passport, driver's
license, Professional Regulations Commission ID, National Bureau of Investigation
clearance, police clearance, postal ID, voter's ID, Barangay certification, Government
Service and Insurance System (GSIS) ecard, Social Security System (SSS) card,
Philhealth card, senior citizen card, Overseas Workers Welfare Administration (OWWA)
ID, OFW ID, seaman's book, alien certificate of registration/immigrant certificate of
registration, government office ID, certification from the National Council for the
Welfare of Disabled Persons (NCWDP), Department of Social Welfare and Development
(DSWD) certification; or
(b) the oath or affirmation of one credible witness not privy to the instrument, document or
transaction who is personally known to the notary public and who personally knows the
individual, or of two credible witnesses neither of whom is privy to the instrument,
document or transaction who each personally knows the individual and shows to the
notary public documentary identification.78
As is evident from Rule IV, Section 2(b)(2) of the 2004 Rules on Notarial Practice, the
need for a competent evidence of identity is not an absolute requirement. It is
imperative only when the signatory is not personally known to the notary.79 When the
signatory is personally known to the notary, the presentation of competent evidence of
identity is a superfluity.

Heirs of Amada Zaulda v. Zaulda,80 which concerned the Court of Appeals' prior

determination that a senior citizen card is not among the competent evidence of
identity recognized in the 2004 Rules on Notarial Practice, referred to the more basic
consideration that a defect in a pleading's verification is merely formal, and not
jurisdictional or otherwise fatal:

Even assuming that a photocopy of competent evidence of identity was indeed

required, non-attachment thereof would not render the petition fatally defective. It has
been consistently held that verification is merely a formal, not jurisdictional,
requirement, affecting merely the form of the pleading such that non-compliance
therewith does not render the pleading fatally defective. It is simply intended to provide
an assurance that the allegations are true and correct and not a product of the
imagination or a matter of speculation, and that the pleading is filed in good faith. The
court may in fact order the correction of the pleading verification is lacking or it may
act on the pleading although it may not have been verified, where it is made evident
that strict compliance with the rules may be dispensed so that the ends of justice may
be served.81 (Emphasis supplied, citation omitted)
In Coca-Cola Bottlers Philippines, Inc. v. Dela Cruz,82 the petitioner bewailed the notary
public's failure to "indicate that the affiants were personally known to the notary public,
[or to] identify the affiants through competent evidence of identity other than their
community tax certificate."83

The petitioner's objection, while correctly pointing out a deficiency, failed to convince
this Court that a fatal defect existed:

[T]he defect is a technical and minor one; the respondents did file the required
verification and certification of non-forum shopping with all the respondents properly
participating, marred only by a glitch in the evidence of their identity. In the interest of
justice, this minor defect should not defeat their petition and is one that we can
overlook in the interest of substantial justice[.]84
In this case, the Court of Appeals' bare reference to petitioners' inadequate proof of
identity does not justify the outright denial of their appeal. The Court of Appeals failed
to absolutely discount the possibility that petitioners may have been personally known
to the notary public, especially considering that, by that advanced stage in litigating
their claims, they must have already verified several pleadings, likely before the same
notary public.

It is true that the notary public failed to categorically indicate that petitioners were
personally known to him.85Coca-Cola demonstrates, however, that even if this were the
case, the notary public's lapse is not fatal. While the circumstances were concededly
less than ideal, Coca-Cola did not obsess on how only community tax certificates were
indicated in the verification and certification of non forum shopping.86

This Court elects to be liberal here, as it was in Coca-Cola. Even conceding the lapses
noted by the Court of Appeals, petitioners had not gotten themselves into an
irremediable predicament. This Court repeats that, ultimately, a defective verification is
merely a formal and not a fatal, jurisdictional defect, which could have very easily been
ordered corrected.87 As to the defective certification of non-forum shopping, the greater
cause of justice should have impelled the Court of Appeals, as this Court implored
in Altres v. Empleo,88 to have at least enabled petitioners to rectify their lapse, rather
than completely deny them a chance at exhaustive litigation by a mere stroke of its
pen.

IV.C

Rule 43, Section 6 of the 1997 Rules of Civil Procedure states that a verified petition for
review must "be accompanied by a clearly legible duplicate original or a certified true
copy of the award, judgment, final order or resolution appealed from, together with
certified true copies of such material portions of the record referred to therein and
other supporting papers."89

In Quintano v. National Labor Relations Commission,90 this Court faulted the Court of

Appeals for dismissing a Rule 65 petition on account of failure to include in the petition
a copy of the Complaint initially brought before the Labor Arbiter. Referencing Rule 65's
own requirement that the petition shall be "accompanied by a certified true copy of the
judgment, order or resolution subject thereof, copies of all pleadings and documents
relevant and pertinent thereto, and a sworn certification of non forum shopping,"91 this
Court explained that appending a copy of an original complaint is not even required:

The Rules do not specify the precise documents, pleadings or parts of the records that
should be appended to the petition other than the judgment, final order, or resolution
being assailed. The Rules only state that such documents, pleadings or records should
be relevant or pertinent to the assailed resolution, judgment or orders; as such, the
initial determination of which pleading, document or parts of the records are relevant to
the assailed order, resolution, or judgment, falls upon the petitioner.92
Given this Rule's generic reference to "copies of all pleadings and documents relevant
and pertinent thereto,"93 this Court explained that:

The [Court of Appeals] will ultimately determine if the supporting documents are
sufficient to even make out a prima facie case. If the [Court of Appeals] was of the view
that the petitioner should have submitted other pleadings, documents or portions of the
records to enable it to determine whether the petition was sufficient in substance, it
should have accorded the petitioner, in the interest of substantial justice, a chance to
submit the same instead of dismissing the petition outright. Clearly, this is the better
policy.94
Quintano was echoed in Panaga v. Court of Appeals.95 There, a petition for certiorari
was dismissed by the Court of Appeals for failure to include an affidavit of proof of
service and after appending only the decisions of the Labor Arbiter and the National
Labor Relations Commission.96 This Court explained that the petition's annexes sufficed
as the Labor Arbiter's decision already recounted the material allegations in the
pleadings of the parties and wo4ld have been enough for the Court of Appeals to
determine whether there was a prima facie case.97

Quintano was further echoed in Valenzuela v. Caltex Philippines, Inc.,98 where this

Court stated that "the failure to submit certain documents, assuming there was such a
failure on respondent's part, does not automatically warrant outright dismissal of its
petition."99

Quintano equally holds true here, Though Quintano was concerned with a Rule 65

petition and this case with a Rule 43 petition, the crucial procedural rule here is
substantially the same as that in which Quintano hinged. As with Rule 65's generic
reference to "copies of all pleadings and documents relevant and pertinent
thereto,"100 Rule 43 also only references "material portions of the record referred to . . .
and other supporting papers."101

To be sure, the determination of what is sufficiently pertinent to require inclusion in a

pleading is not a whimsical exercise. Air Philippines Corporation v. Zamora laid down
guideposts for determining the necessity of the pleadings or parts of the records. It also
clarified that even if a pertinent document was missing, its subsequent submission was
no less fatal:

First, not all pleadings and parts of case records are required to be attached to the
petition, Only those which are relevant and pertinent must accompany it. The test of
relevancy is whether the document in question will support the material allegations in
the petition, whether said document will make out a prima facie case of grave abuse of
discretion as to convince the court to give due course to the petition.

Second, even if a docurnent is relevant and pertinent to the petition, it need not be
appended if it is shown that the contents thereof can also [be] found in another
document already attached to the petition. Thus, if the material allegations in a position
paper are summarized in a questioned judgment, it will suffice that only a certified true
copy of the judgment is attached.

Third, a petition lacking an essential pleading or part of the case record may still be
given due course or reinstated (if earlier dismissed) upon showing that petitioner later
submitted the documents required, or that it will serve the higher interest of justice
that the case be decided on the merits.102 (Citations omitted, emphasis supplied)
Here, petitioners' failure to attach a copy of the complaint originally filed by Larrazabal
Enterprises before the DARAB should not have been fatal to their Rule 43 petition. Its
inclusion was not absolutely required, as it was certainly not the award, judgment, final
order or resolution appealed from.103 If, in the Court of Appeals' judgment, it was a
material document, the more prudent course of action would have been to afford
petitioners time to adduce it, not to make a justit1cation out of it for dispossessing
petitioners of relief.

IV.D

Through Bar Matter No. 287, this court required the inclusion of the number and date of
[lawyers'] official receipt indicating payment of their annual membership dues to the
Integrated Bar of the Philippines for the current year; in lieu of this, a lawyer may
indicate his or her lifetime membership number:104

Effective August 1, 1985, all lawyers shall indicate in all pleadings, motions and papers
signed and filed by them in any Court in the Philippines, the number and date of their
official receipt indicating payment of their annual membership dves to the Integrated
Bar of the Philippines for the current year; provided, however, that such official receipt
number and date for any year may be availed of and indicated in all such pleadings,
motions and papers filed by them in court up to the end of the month of February of the
next succeeding year. 105
Indicating the place of issue of the official receipt is not even a requirement. While its
inclusion may certainly have been desirable and would have allowed for a more
consummate disclosure of information, its non-inclusion was certainly not fatal. As with
the other procedural lapses considered by the Court of Appeals, its non-inclusion could
have very easily been remedied by the Court of Appeals' prudent allowance of time and
opportunity to petitioners and their counsel.

This Court entertains no doubt that petitioners' Petition for Review, which the Court of
Appeals discarded, falls within the exceptions to the customary strict application of
procedural rules. This Court has previously overlooked more compelling procedural
lapse, such as the period for filing pleadings and appeals. The Court of Appeals was
harsh in denying petitioners the opportunity to exhaustively ventilate and arsue their
case.

Rather than dwelling on procedural minutiae, the Court of Appeals shoqld have been
impelled by the greater interest of justice. It should have enabled a better consideration
of the intricate issues of the application of the Comprehensive Agrarian Reform Law,
social justice, expropriation, and just compensation. The reversals of rulins at the level
of the DARAB could have been taken as an indication that the matters at stake were far
from being so plain that they should be ignored on mere technicalities. The better part
of its discretion dictated a solicitous stance towards petitioners.

The present Petition must be gnmt d. The Court of Appeals must give due course to
petitioners' appeal to enable a better appreciation of the myriad substantive issues
which have otherwise not been pleaded and litigated before this Court by the parties.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The assailed

September 30, 2010 and September 7, 2011 Resolutions of the Court of Appeals in CA-
G.R. SP No. 04659 are REVERSED and SET ASIDE. The Court of Appeals is ordered to
give due course to the petition subject of CA-G.R. SP No. 04659.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.

G.R. No. 175507               October 8, 2014

RAMON CHING AND POWING PROPERTIES, INC., Petitioners,

vs.
JOSEPH CHENG, JAIME CHENG, MERCEDES IGNE  AND LUCINA SANTOS, Respondents.
1

DECISION

LEONEN, J.:

Rule 17 of the Rules of Civil Procedure governs dismissals of actions at the instance of the plaintiff.
Hence, the "two-dismissal rule" under Rule 17, Section 1 of the Rules of Civil Procedure will not
apply if the prior dismissal was done at the instance of the defendant.

This is a petition for review on certiorari assailing the decision  and resolution  of the Court of
2 3

Appeals in CA-G.R. SP. No. 86818, which upheld the (1) order  dated November 22, 2002
4

dismissing Civil Case No. 02-103319 without prejudice, and (2) the omnibus order  dated July 30,
5

2004, which denied petitioners’ motion for reconsideration. Both orders were issued by the Regional
Trial Court of Manila, Branch 6. 6

The issues before this court are procedural. However, the factual antecedents in this case, which
stemmed from a complicated family feud, must be stated to give context to its procedural
development.

It is alleged that Antonio Ching owned several businesses and properties, among which was Po
Wing Properties, Incorporated (Po Wing Properties).  His total assets are alleged to have been worth
7

more than 380 million.  It is also alleged that while he was unmarried, he had children from two
8

women. 9

Ramon Ching alleged that he was the only child of Antonio Ching with his common-law wife, Lucina
Santos.  She, however, disputed this. She maintains that even ifRamon Ching’s birth certificate
10

indicates that he was Antonio Ching’s illegitimate child, she and Antonio Ching merely adopted him
and treated him like their own.11

Joseph Cheng and Jaime Cheng, on the other hand, claim to be Antonio Ching’s illegitimate children
with his housemaid, Mercedes Igne.  While Ramon Ching disputed this,  both Mercedes and Lucina
12 13

have not. 14
Lucina Santos alleged that when Antonio Ching fell ill sometime in 1996, he entrusted her with the
distribution of his estate to his heirs if something were to happen to him. She alleged that she
handed all the property titles and business documents to Ramon Ching for
safekeeping.  Fortunately, Antonio Ching recovered from illness and allegedly demanded that
15

Ramon Ching return all the titles to the properties and business documents. 16

On July 18, 1996, Antonio Ching was murdered.  Ramon Ching allegedly induced Mercedes Igne
17

and her children, Joseph Cheng and Jaime Cheng, to sign an agreement and waiver  to Antonio 18

Ching’s estate in consideration of ₱22.5 million. Mercedes Igne’s children alleged that Ramon Ching
never paid them.  On October 29, 1996, Ramon Ching allegedly executed an affidavit of settlement
19

of estate,  naming himself as the sole heir and adjudicating upon himself the entirety of Antonio
20

Ching’s estate. 21

Ramon Ching denied these allegations and insisted that when Antonio Ching died, the Ching family
association, headed by Vicente Cheng, unduly influenced him to give Mercedes Igne and her
children financial aid considering that they served Antonio Ching for years. It was for this reason that
an agreement and waiver in consideration of 22.5 million was made. He also alleged that he was
summoned by the family association to execute an affidavit of settlement of estate declaring him to
be Antonio Ching’s sole heir. 22

After a year of investigating Antonio Ching’s death, the police found Ramon Ching to be its primary
suspect.  Information  was filed against him, and a warrant of arrest  was issued.
23 24 25

On October 7, 1998, Joseph Cheng, Jaime Cheng, and Mercedes Igne (the Chengs) filed a
complaint for declaration of nullity of titles against Ramon Ching before the Regional Trial Court of
Manila. This case was docketed as Civil Case No. 98-91046 (the first case). 26

On March 22, 1999, the complaint was amended, with leave of court, to implead additional
defendants, including Po Wing Properties, of which Ramon Ching was a primary stockholder. The
amended complaint was for "Annulment of Agreement, Waiver, Extra-Judicial Settlement of Estate
and the Certificates of Title Issued by Virtue of Said Documents with Prayer for Temporary
Restraining Order and Writ of Preliminary Injunction."  Sometime after, Lucina Santos filed a motion
27

for intervention and was allowed to intervene. 28

After the responsive pleadings had been filed, Po Wing Properties filed a motion to dismiss on the
ground of lack of jurisdiction of the subject matter. 29

On November 13, 2001, the Regional Trial Court of Manila, Branch 6, granted the motion to dismiss
on the ground of lack of jurisdiction over the subject matter.  Upon motion of the Chengs’ counsel,
30

however, the Chengs and Lucina Santos were given fifteen (15) days to file the appropriate
pleading. They did not do so. 31

On April 19, 2002, the Chengs and Lucina Santos filed a complaint for "Annulment of Agreement,
Waiver, Extra-Judicial Settlement of Estate and the Certificates of Title Issued by Virtue of Said
Documents with Prayer for Temporary Restraining Order and Writ of Preliminary Injunction" against
Ramon Ching and Po Wing Properties.  This case was docketed as Civil Case No. 02-103319 (the
32

second case) and raffled to Branch 20 of the Regional Trial Court of Manila.  When Branch 20 was
33

made aware of the first case, it issued an order transferring the case to Branch 6, considering that
the case before it involved substantially the same parties and causes of action. 34

On November 11, 2002, the Chengs and Lucina Santos filed a motion to dismiss their complaint in
the second case, praying that it be dismissed without prejudice. 35

On November 22, 2002, Branch 6 issued an order granting the motion to dismiss on the basis that
the summons had not yet been served on Ramon Ching and Po Wing Properties, and they had not
yet filed any responsive pleading. The dismissal of the second case was made without prejudice. 36

On December 9, 2002, Ramon Ching and Po Wing Properties filed a motion for reconsideration of
the order dated November 22, 2002. They argue that the dismissal should have been with prejudice
under the "two dismissal rule" of Rule 17, Section 1 of the 1997 Rules of Civil Procedure, in view of
the previous dismissal of the first case.
37
During the pendency of the motion for reconsideration, the Chengs and Lucina Santos filed a
complaint for "Disinheritance and Declaration of Nullity of Agreement and Waiver, Affidavit of Extra
judicial Agreement, Deed of Absolute Sale, and Transfer Certificates of Title with Prayer for TRO
and Writ of Preliminary Injunction" against Ramon Ching and Po Wing Properties. This case was
docketed as Civil Case No. 02-105251(the third case) and was eventually raffled to Branch 6. 38

On December 10, 2002, Ramon Ching and Po Wing Properties filed their comment/opposition to the
application for temporary restraining order in the third case. They also filed a motion to dismiss on
the ground of res judicata, litis pendencia, forum-shopping, and failure of the complaint to state a
cause of action. A series of responsive pleadings were filed by both parties. 39

On July 30, 2004, Branch 6 issued an omnibus order  resolving both the motion for reconsideration
40

in the second case and the motion to dismiss in the third case. The trial court denied the motion for
reconsideration and the motion to dismiss, holding that the dismissal of the second case was without
prejudice and, hence, would not bar the filing of the third case.  On October 8, 2004, while their
41

motion for reconsideration in the third case was pending, Ramon Ching and Po Wing Properties filed
a petition for certiorari (the first certiorari case) with the Court of Appeals, assailing the order dated
November 22,2002 and the portion of the omnibus order dated July 30, 2004, which upheldthe
dismissal of the second case. 42

On December 28, 2004, the trial court issued an order denying the motion for reconsideration in the
third case. The denial prompted Ramon Ching and Po Wing Properties to file a petition for certiorari
and prohibition with application for a writ of preliminary injunction or the issuance of a temporary
restraining order (the second certiorari case) with the Court of Appeals. 43

On March 23, 2006, the Court of Appeals rendered the decision  in the first certiorari case
44

dismissing the petition. The appellate court ruled that Ramon Ching and Po Wing Properties’
reliance on the "two-dismissal rule" was misplaced since the rule involves two motions for dismissals
filed by the plaintiff only. In this case, it found that the dismissal of the first case was upon the motion
of the defendants, while the dismissal of the second case was at the instance of the plaintiffs. 45

Upon the denial of their motion for reconsideration,  Ramon Ching and Po Wing Properties filed this
46

present petition for review  under Rule 45 of the Rules of Civil Procedure.
47

Ramon Ching and Po Wing Properties argue that the dismissal of the second case was with
prejudice since the non-filing of an amended complaint in the first case operated as a dismissal on
the merits.  They also argue that the second case should be dismissed on the ground of res judicata
48

since there was a previous final judgment of the first case involving the same parties, subject matter,
and cause of action. 49

Lucina Santos was able to file a comment  on the petition within the period required.  The Chengs,
50 51

however, did not comply.  Upon the issuance by this court of a show cause order on September 24,
52

2007,  they eventually filed a comment with substantially the same allegations and arguments as
53

that of Lucina Santos’. 54

In their comment, respondents allege that when the trial court granted the motion to dismiss, Ramon
Ching’s counsel was notified in open court that the dismissal was without prejudice. They argue that
the trial court’s order became final and executory when he failed to file his motion for reconsideration
within the reglementary period. 55

Respondents argue that the petition for review should be dismissed on the ground of forum shopping
and litis pendencia since Ramon Ching and Po Wing Properties are seeking relief simultaneously in
two forums by filing the two petitions for certiorari, which involved the same omnibus order by the
trial court.  They also argue that the "two-dismissal rule" and res judicata did not apply since (1) the
56

failure to amend a complaint is not a dismissal, and (2) they only moved for dismissal once in the
second case. 57

In their reply,  petitioners argue that they did not commit forum shopping since the actions they
58

commenced against respondents stemmed from the complaints filed against them in the trial
courts.  They reiterate that their petition for review is only about the second case; it just so happened
59

that the assailed omnibus order resolved both the second and third cases. 60

Upon the filing of the parties’ respective memoranda,  the case was submitted for decision.
61 62
For this court’s resolution are the following issues:

I. Whether the trial court’s dismissal of the second case operated as a bar to the filing of a
third case, as per the "two-dismissal rule"; and

II. Whether respondents committed forum shopping when they filed the third case while the
motion for reconsideration of the second case was still pending.

The petition is denied.

The "two-dismissal rule" vis-à-vis

the Rules of Civil Procedure

Dismissals of actions are governed by Rule 17 of the 1997 Rules of Civil Procedure. The pertinent
provisions state:

RULE 17
DISMISSAL OF ACTIONS

SEC. 1. Dismissal upon notice by plaintiff. — A complaint may be dismissed by the plaintiff by filing a
notice of dismissal at any time before service of the answer or of a motion for summary judgment.
Upon such notice being filed, the court shall issue an order confirming the dismissal. Unless
otherwise stated in the notice, the dismissal is without prejudice, except that a notice operates as an
adjudication upon the merits when filed by a plaintiff who has once dismissed in a competent court
an action based on or including the same claim.

SEC. 2. Dismissal upon motion of plaintiff. — Except as provided in the preceding section, a
complaint shall not be dismissed at the plaintiff's instance save upon approval of the court and upon
such terms and conditions as the court deems proper. If a counterclaim has been pleaded by a
defendant prior to the service upon him of the plaintiff’s motion for dismissal, the dismissal shall be
limited to the complaint. The dismissal shall be without prejudice to the right of the defendant to
prosecute his counterclaim in a separate action unless within fifteen (15) days from notice of the
motion he manifests his preference to have his counterclaim resolved in the same action. Unless
otherwise specified in the order, a dismissal under this paragraph shall be without prejudice. A class
suit shall not be dismissed or compromised without the approval of the court.

SEC. 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause, the plaintiff fails to appear on
the date of the presentation of his evidence in chief on the complaint, or to prosecute his action for
an unreasonable length of time, or to comply with these Rules or any order of the court, the
complaint may be dismissed upon motion of the defendant or upon the court's own motion, without
prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate
action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise
declared by the court. (Emphasis supplied)

The first section of the rule contemplates a situation where a plaintiff requests the dismissal of the
case before any responsive pleadings have been filed by the defendant. It is done through notice by
the plaintiff and confirmation by the court. The dismissal is without prejudice unless otherwise
declared by the court.

The second section of the rule contemplates a situation where a counterclaim has been pleaded by
the defendant before the service on him or her of the plaintiff’s motion to dismiss. It requires leave of
court, and the dismissal is generally without prejudice unless otherwise declared by the court.

The third section contemplates dismissals due to the fault of the plaintiff such as the failure to
prosecute. The case is dismissed either upon motion of the defendant or by the court motu propio.
Generally, the dismissal is with prejudice unless otherwise declared by the court.

In all instances, Rule 17 governs dismissals at the instance of the plaintiff, not of the defendant.
Dismissals upon the instance of the defendant are generally governed by Rule 16, which covers
motions to dismiss. 63
In Insular Veneer, Inc. v. Hon. Plan,  Consolidated Logging and Lumber Mills filed a complaint
64

against Insular Veneer to recover some logs the former had delivered to the latter. It also filed ex
parte a motion for issuance of a restraining order. The complaint and motion were filed in a trial court
in Isabela.65

The trial court granted the motion and treated the restraining order as a writ of preliminary injunction.
When Consolidated Logging recovered the logs, it filed a notice of dismissal under Rule 17, Section
1 of the 1964 Rules of Civil Procedure. 66

While the action on its notice for dismissal was pending, Consolidated Logging filed the same
complaint against Insular Veneer, this time in a trial court in Manila. It did not mention any previous
action pending in the Isabela court. 67

The Manila court eventually dismissed the complaint due to the nonappearance of Consolidated
Logging’s counsel during pre-trial. Consolidated Logging subsequently returned to the Isabela court
to revive the same complaint. The Isabela court apparently treated the filing of the amended
complaint as a withdrawal of its notice of dismissal. 68

Insular Veneer also filed in the Isabela court a motion to dismiss, arguing that the dismissal by the
Manila court constituted res judicata over the case. The Isabela court, presided over by Judge Plan,
denied the motion to dismiss. The dismissal was the subject of the petition for certiorari and
mandamus with this court. 69

This court stated that:

In resolving that issue, we are confronted with the unarguable fact that Consolidated Logging on its
volition dismissed its action for damages and injunction in the Isabela court and refiled substantially
the same action in the Manila court. Then, when the Manila court dismissed its action for failure to
prosecute, it went hack [sic] to the Isabela court and revived its old action by means of an amended
complaint.

Consolidated Logging would like to forget the Manila case, consign it to oblivion as if it were a bad
dream, and prosecute its amended complaint in the Isabela court as if nothing had transpired in the
Manila court. We hold that it cannot elude the effects of its conduct in junking the Isabela case and in
giving that case a reincarnation in the Manila court.

Consolidated Logging’ [sic] filed a new case in Manila at its own risk. Its lawyer at his peril failed to
appear at the pre-trial. 70

This court ruled that the filing of the amended complaint in the Isabela court was barred by the prior
dismissal of the Manila court, stating that:

The provision in section 1(e), Rule 16 of the Rules of Court that an action may be dismissed
because "there is another action pending between the same parties for the same cause"
presupposes that two similar actions are simultaneously pending in two different Courts of First
Instance. Lis pendens as a ground for a motion to dismiss has the same requisites as the plea of res
judicata.

On the other hand, when a pleading is amended, the original pleading is deemed abandoned. The
original ceases to perform any further function as a pleading. The case stands for trial on the
amended pleading only. So, when Consolidated Logging filed its amended complaint dated March
16, 1970 in Civil Case No. 2158, the prior dismissal order dated January 5, 1970 in the Manila case
could he [sic] interposed in the Isabela court to support the defense of res judicata. 71

As a general rule, dismissals under Section 1 of Rule 17 are without prejudice except when it is the
second time that the plaintiff caused its dismissal. Accordingly, for a dismissal to operate as an
adjudication upon the merits, i.e, with prejudice to the re-filing of the same claim, the following
requisites must be present:

(1) There was a previous case that was dismissed by a competent court;

(2) Both cases were based on or include the same claim;

 (3) Both notices for dismissal were filed by the plaintiff; and

(4) When the motion to dismiss filed by the plaintiff was consented to by the defendant on
the ground that the latter paid and satisfied all the claims of the former. 72

The purpose of the "two-dismissal rule" is "to avoid vexatious litigation."  When a complaint is
73

dismissed a second time, the plaintiff is now barred from seeking relief on the same claim.

The dismissal of the second case was without prejudice in view of the "two-dismissal rule"

Here, the first case was filed as an ordinary civil action. It was later amended to include not only new
defendants but new causes of action that should have been adjudicated in a special proceeding. A
motion to dismiss was inevitably filed by the defendants on the ground of lack of jurisdiction.

The trial court granted that motion to dismiss, stating that:

A careful perusal of the allegations of the Amended Complaint dated February 10, 1999, filed by
Plaintiff Joseph Cheng, show that additional causes of action were incorporated i.e. extra-judicial
settlement of the intestate estate of Antonio Ching and receivership, subject matters, which should
be threshed out in a special proceedings case. This is a clear departure from the main cause of
action in the original complaint which is for declaration of nullity of certificate of titles with damages.
And the rules of procedure which govern special proceedings case are different and distinct from the
rules of procedure applicable in an ordinary civil action.

In view of the afore-going, the court finds the Motion to Dismiss filed by Atty. Maria Lina Nieva S.
Casals to be meritorious and the Court is left with no alternative but to dismiss as it hereby
dismisses the Amended Complaint.

However, on motion of Atty. Mirardo Arroyo Obias, counsel for the plaintiffs, he is given a period of
fifteen (15) days from today, within which to file an appropriate pleading, copy furnished to all the
parties concerned.

....

SO ORDERED. 74

Petitioners are of the view that when Atty. Mirardo Arroyo Obias failed to file the appropriate
pleading within fifteen (15) days, he violated the order of the court. This, they argue, made the
original dismissal an adjudication upon the merits, in accordance with Rule 17, Section 3, i.e., a
dismissal through the default of the plaintiff. Hence, they argue that when respondents filed the
second case and then caused its dismissal, the dismissal should have been with prejudice according
to Rule 17, Section 1, i.e., two dismissals caused by the plaintiff on the same claim. Unfortunately,
petitioners’ theory is erroneous.

The trial court dismissed the first case by granting the motion to dismiss filed by the defendants.
When it allowed Atty. Mirardo Arroyo Obias a period of fifteen (15) days to file an appropriate
pleading, it was merely acquiescing to a request made by the plaintiff’s counsel that had no bearing
on the dismissal of the case.

Under Rule 17, Section 3, a defendant may move to dismiss the case if the plaintiff defaults; it does
not contemplate a situation where the dismissal was due to lack of jurisdiction. Since there was
already a dismissal prior to plaintiff’s default, the trial court’s instruction to file the appropriate
pleading will not reverse the dismissal. If the plaintiff fails to file the appropriate pleading, the trial
court does not dismiss the case anew; the order dismissing the case still stands.

The dismissal of the first case was done at the instance of the defendant under Rule 16, Section 1(b)
of the Rules of Civil Procedure, which states:

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:

....
(b) That the court has no jurisdiction over the subject matter of the claim;

....

Under Section 5 of the same rule,  a party may re-file the same action or claim subject to certain
75

exceptions.

Thus, when respondents filed the second case, they were merely refiling the same claim that had
been previously dismissed on the basis of lack of jurisdiction. When they moved to dismiss the
second case, the motion to dismiss can be considered as the first dismissal at the plaintiff’s instance.

Petitioners do not deny that the second dismissal was requested by respondents before the service
of any responsive pleadings. Accordingly, the dismissal at this instance is a matter of right that is not
subject to the trial court’s discretion. In O.B. Jovenir Construction and Development Corporation v.
Macamir Realty and Development Corporation: 76

[T]he trial court has no discretion or option to deny the motion, since dismissal by the plaintiff under
Section 1, Rule 17 is guaranteed as a matter of right to the plaintiffs. Even if the motion cites the
most ridiculous of grounds for dismissal, the trial court has no choice but to consider the complaint
as dismissed, since the plaintiff may opt for such dismissal as a matter of right, regardless of
ground.  (Emphasis supplied)
77

For this reason, the trial court issued its order dated November 22, 2002 dismissing the case,
without prejudice. The order states:

When this Motion was called for hearing, all the plaintiffs namely, Joseph Cheng, Jaime Cheng,
Mercedes Igne and Lucina Santos appeared without their counsels. That they verbally affirmed the
execution of the Motion to Dismiss, as shown by their signatures over their respective names
reflected thereat. Similarly, none of the defendants appeared, except the counsel for defendant,
Ramon Chang [sic], who manifested that they have not yet filed their Answer as there was a defect
in the address of Ramon Cheng [sic] and the latter has not yet been served with summons.

Under the circumstances, and further considering that the defendants herein have not yet filed their
Answers nor any pleading, the plaintiffs has [sic] the right to out rightly [sic] cause the dismissal of
the Complaint pursuant to Section 2, Rule 17 of the 1997 Rules of Civil Procedure without prejudice.
Thereby, and as prayed for, this case is hereby ordered DISMISSED without prejudice.

SO ORDERED.  (Emphasis supplied)

78

When respondents filed the third case on substantially the same claim, there was already one prior
dismissal at the instance of the plaintiffs and one prior dismissal at the instance of the defendants.
While it is true that there were two previous dismissals on the same claim, it does not necessarily
follow that the re-filing of the claim was barred by Rule 17, Section 1 of the Rules of Civil Procedure.
The circumstances surrounding each dismissal must first be examined to determine before the rule
may apply, as in this case.

Even assuming for the sake of argument that the failure of Atty. Mirardo Arroyo Obias to file the
appropriate pleading in the first case came under the purview of Rule 17, Section 3 of the Rules of
Civil Procedure, the dismissal in the second case is still considered as one without prejudice. In
Gomez v. Alcantara: 79

The dismissal of a case for failure to prosecute has the effect of adjudication on the merits, and is
necessarily understood to be with prejudice to the filing of another action, unless otherwise provided
in the order of dismissal. Stated differently, the general rule is that dismissal of a case for failure to
prosecute is to be regarded as an adjudication on the merits and with prejudice to the filing of
another action, and the only exception is when the order of dismissal expressly contains a
qualification that the dismissal is without prejudice.  (Emphasis supplied)
80

In granting the dismissal of the second case, the trial court specifically orders the dismissal to be
without prejudice. It is only when the trial court’s order either is silent on the matter, or states
otherwise, that the dismissal will be considered an adjudication on the merits.
However, while the dismissal of the second case was without prejudice, respondents’ act of filing the
third case while petitioners’ motion for reconsideration was still pending constituted forum shopping.

The rule against forum shopping and the "twin-dismissal rule"

In Yap v. Chua: 81

Forum shopping is the institution of two or more actions or proceedings involving the same parties
for the same cause of action, either simultaneously or successively, on the supposition that one or
the other court would make a favorable disposition. Forum shopping may be resorted to by any party
against whom an adverse judgment or order has been issued in one forum, in an attempt to seek a
favorable opinion in another, other than by appeal or a special civil action for certiorari. Forum
shopping trifles with the courts, abuses their processes, degrades the administration of justice and
congest court dockets. What is critical is the vexation brought upon the courts and the litigants by a
party who asks different courts to rule on the same or related causes and grant the same or
substantially the same reliefs and in the process creates the possibility of conflicting decisions being
rendered by the different fora upon the same issues. Willful and deliberate violation of the rule
against forum shopping is a ground for summary dismissal of the case; it may also constitute direct
contempt.

To determine whether a party violated the rule against forum shopping, the most important factor to
ask is whether the elements of litis pendentia are present, or whether a final judgment in one case
will amount to res judicata in another; otherwise stated, the test for determining forum shopping is
whether in the two (or more) cases pending, there is identity of parties, rights or causes of action,
and reliefs sought.  (Emphasis supplied)
82

When respondents filed the third case, petitioners’ motion for reconsideration of the dismissal of the
second case was still pending. Clearly, the order of dismissal was not yet final since it could still be
overturned upon reconsideration, or even on appeal to a higher court.

Moreover, petitioners were not prohibited from filing the motion for reconsideration. This court has
already stated in Narciso v. Garcia  that a defendant has the right to file a motion for reconsideration
83

of a trial court’s order denying the motion to dismiss since "[n]o rule prohibits the filing of such a
motion for reconsideration."  The second case, therefore, was still pending when the third case was
84

filed.

The prudent thing that respondents could have done was to wait until the final disposition of the
second case before filing the third case. As it stands, the dismissal of the second case was without
prejudice to the re-filing of the same claim, in accordance with the Rules of Civil Procedure. In their
haste to file the third case, however, they unfortunately transgressed certain procedural safeguards,
among which are the rules on litis pendentia and res judicata.

In Yap:

Litis pendentia as a ground for the dismissal of a civil action refers to that situation wherein another
action is pending between the same parties for the same cause of action, such that the second
action becomes unnecessary and vexatious. The underlying principle of litis pendentia is the theory
that a party is not allowed to vex another more than once regarding the same subject matter and for
the same cause of action. This theory is founded on the public policy that the same subject matter
should not be the subject of controversy in courts more than once, in order that possible conflicting
judgments may be avoided for the sake of the stability of the rights and status of persons.

The requisites of litis pendentia are: (a) the identity of parties, or at least such as representing the
same interests in both actions; (b) the identity of rights asserted and relief prayed for, the relief being
founded on the same facts; and (c) the identity of the two cases such that judgment in one,
regardless of which party is successful, would amount to res judicata in the other.  (Emphasis
85

supplied)

There is no question that there was an identity of parties, rights, and reliefs in the second and third
cases. While it may be true that the trial court already dismissed the second case when the third
case was filed, it failed to take into account that a motion for reconsideration was filed in the second
case and, thus, was still pending. Considering that the dismissal of the second case was the subject
of the first certiorari case and this present petition for review, it can be reasonably concluded that the
second case, to this day, remains pending.

Hence, when respondents filed the third case, they engaged in forum shopping. Any judgment by
this court on the propriety of the dismissal of the second case will inevitably affect the disposition of
the third case.

This, in fact, is the reason why there were two different petitions for certiorari before the appellate
court. The omnibus order dated July 30, 2004 denied two pending motions by petitioners: (1) the
motion for reconsideration in the second case and (2) the motion to dismiss in the third case. Since
petitioners are barred from filing a second motion for reconsideration of the second case, the first
certiorari case was filed before the appellate court and is now the subject of this review. The denial
of petitioners’ motion for reconsideration in the third case, however, could still be the subject of a
separate petition for certiorari. That petition would be based now on the third case, and not on the
second case.

This multiplicity of suits is the very evil sought to be avoided by the rule on forum shopping. In Dy v.
Mandy Commodities Co., Inc.,  the rule is that:
86

Once there is a finding of forum shopping, the penalty is summary dismissal not only of the petition
pending before this Court, but also of the other case that is pending in a lower court. This is so
because twin dismissal is a punitive measure to those who trifle with the orderly administration of
justice.  (Emphasis supplied)
87

The rule originated from the 1986 case of Buan v. Lopez, Jr.  In Buan, petitioners filed a petition for
88

prohibition with this court while another petition for prohibition with preliminary injunction was
pending before the Regional Trial Court of Manila involving the same parties and based on the same
set of facts. This court, in dismissing both actions, stated:

Indeed, the petitioners in both actions . . . have incurred not only the sanction of dismissal of their
case before this Court in accordance with Rule 16 of the Rules of Court, but also the punitive
measure of dismissal of both their actions, that in this Court and that in the Regional Trial Court as
well. Quite recently, upon substantially identical factual premises, the Court en banc had occasion to
condemn and penalize the act of litigants of filing the same suit in different courts, aptly described as
"forum shopping[.]" 89

The rule essentially penalizes the forum shopper by dismissing all pending actions on the same
claim filed in any court. Accordingly, the grant of this petition would inevitably result in the summary
dismissal of the third case. Any action, therefore, which originates from the third case pending with
any court would be barred by res judicata.

Because of the severity of the penalty of the rule, an examination must first be made on the purpose
of the rule.  Parties resort to forum shopping when they file several actions of the same claim in
1âwphi1

different forums in the hope of obtaining a favorable result. It is prohibited by the courts as it "trifle[s]
with the orderly administration of justice."90

In this case, however, the dismissal of the first case became final and executory upon the failure of
respondents’ counsel to file the appropriate pleading. They filed the correct pleading the second time
around but eventually sought its dismissal as they"[suspected] that their counsel is not amply
protecting their interests as the case is not moving for almost three (3) years."  The filing of the third
91

case, therefore, was not precisely for the purpose of obtaining a favorable result but only to get the
case moving, in an attempt to protect their rights.

It appears that the resolution on the merits of the original controversy between the parties has long
been mired in numerous procedural entanglements. While it might be more judicially expedient to
apply the "twin-dismissal rule" and disallow the proceedings in the third case to continue, it would not
serve the ends of substantial justice. Courts of justice must always endeavor to resolve cases on
their merits, rather than summarily dismiss these on technicalities: [C]ases should be determined on
the merits, after all parties have been given full opportunity to ventilate their causes and defenses,
rather than on technicalities or procedural imperfections. In that way, the ends of justice would be
served better. Rules of procedure are mere tools designed to expedite the decision or resolution of
cases and other matters pending in court. A strict and rigid application of rules, resulting in
technicalities that tend to frustrate rather than promote substantial justice, must be avoided. In fact,
Section 6 of Rule 1 states that the Rules [on Civil Procedure] shall be liberally construed in order to
promote their objective of ensuring the just, speedy and inexpensive disposition of every action and
proceeding.  (Emphasis supplied)
92

The rule on forum shopping will not strictly apply when it can be shown that (1) the original case has
been dismissed upon request of the plaintiff for valid procedural reasons; (2) the only pending matter
is a motion for reconsideration; and (3) there are valid procedural reasons that serve the goal of
substantial justice for the fresh new· case to proceed.

The motion for reconsideration filed in the second case has since been dismissed and is now the
subject of a petition for certiorari. The third case filed apparently contains the better cause of action
for the plaintiffs and is now being prosecuted by a counsel they are more comfortable with.
Substantial justice will be better served if respondents do not fall victim to the labyrinth in the
procedures that their travails led them. It is for this reason that we deny the petition. WHEREFORE,
the petition is DENIED. The Regional Trial Court of Manila, Branch 6 is ordered to proceed with Civil
Case No. 02-105251 with due and deliberate dispatch.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

MARIANO C. DEL CASTILLO JOSE CATRAL MENDOZA

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE*
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before tlie case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

G.R. No. 200191               August 20, 2014

LOURDES C. FERNANDEZ, Petitioner,
vs.
NORMA VILLEGAS and any person acting in her behalf including her family, Respondents.

DECISION

PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari  are the Resolutions dated June 22, 2011  and
1 2

December 28, 2011  of the Court of Appeals (CA) in CA-G.R. SP No. 116143 which dismissed the
3

petition for review under Rule 42 of the Rules of Court  (CA petition) due to defective verification and
4

certification against forum shopping.

The Facts

On August 21, 2008, petitioner Lourdes C. Fernandez (Lourdes) and her sister, Cecilia Siapno
(Cecilia), represented by her attorney-in-fact, Imelda S. Slater (Imelda), filed a Complaint for
Ejectment  before the Municipal Trial Court in Cities, Branch 1, Dagupan City(MTCC), docketed as
5

Civil Case No. 15980, against respondent Norma Villegas (Norma) and any person acting in her
behalf including her family (respondents), seeking to recover possession of a parcel of land situated
in Guilig Street, Dagupan City covered by Transfer Certificate of Title (TCT) No. 19170  (subject
6

property).

In their complaint, Lourdes and Cecilia(plaintiffs) averred that they are the registered owners of the
subject property on which both Lourdes and respondents previously lived under one roof. However,
when their house was destroyed by typhoon "Cosme," Lourdes transferred to a nipa hut on the same
lot, while Norma, Cecilia’s daughter-in-law, and her family were advised to relocate but, in the
meantime, allowed to use a portion thereof.  Instead, respondents erected a house thereon over
7

plaintiffs’ objections and, despite demands, refused to vacate and surrender possession of the
subject property.  The dispute was referred to the Barangay Office of Pugo  Chico and the Public
8 9

Attorney’s Office, both of Dagupan City, but no settlement was reached. 10

For their part, respondents, in their Answer,  averred that the complaint stated no cause of action,
11

considering that Lourdes has no standing to question their possession of the subject property as she
had already donated her portion in favor of Cecilia,  adding too that the latter is bound by her
12

declaration that "the house and lot belong[s] to Eddie," who is Norma’s late husband.  Respondents
13

further asserted that there was no compliance with the required conciliation and mediation under the
Katarungang Pambarangay Law  as no Certificate to File Action was attached to the
14

complaint,  thereby rendering the complaint dismissible.

15

The MTCC Ruling

In a Decision  dated September 30, 2009, the MTCC found that respondents failed to impugn the
16

validity of plaintiffs’ ownership over the subject property. As owners, plaintiffs therefore have the right
to enjoy the use and receive the fruits from the said property, as well as to exclude one from its
enjoyment pursuant to Articles 428 and 429 of the Civil Code.  Accordingly, the MTCC ordered
17

respondents to: (a) vacate the subject property and pay plaintiffs the amount of ₱1,000.00 per month
as reasonable compensation for the use and occupation of the portion of the lot occupied by them,
reckoned from the filing of the complaint; (b) pay plaintiffs ₱10,000.00 as attorney’s fees; and (c) pay
the cost of suit. 18

Dissatisfied with the MTCC’s ruling, respondents filed an appeal  before the Regional Trial Court of
19

Dagupan City (RTC), Branch 40, docketed as Civil Case No. 2009-0224-D.

The RTC Ruling

In a Decision  dated March 16, 2010, the RTC, Branch 40 granted respondents’ appeal and ordered
20

the dismissal of plaintiffs’ complaint based on the following grounds: (a) there was no substantial
compliance with the mandatory conciliation and mediation process before the barangay, especially
considering that the parties are very close relatives;  and (b) respondents are builders in good faith
21

and cannot be summarily ejected from the subject property without compliance with the provisions of
Articles 448, 546, and 548 of the Civil Code. 22

The RTC, Branch 40 further ordered plaintiffs to jointly and severally pay respondents the amount of
₱50,000.00 as attorney’s fees. 23

Aggrieved, plaintiffs filed a motion for reconsideration  which was denied by the RTC, Branch 44  in
24 25

a Resolution  dated August 18, 2010, prompting the filing of the CA petition.
26

The CA Proceedings
In response to plaintiffs’ CA petition, respondents filed a Motion to Dismiss Appeal on the grounds
that: (a) Cecilia failed to personally verify the petition; and (b) the appeal is dilatory.  In their
27

comment, plaintiffs maintained that Lourdes, as co-owner of the subject property, has the right to file
an ejectment case by herself, without joining her co-owner, Cecilia, as provided under Article 487 of
the Civil Code. Moreover, Lourdes was specially authorized by Imelda to file the CA petition. 28

In a Resolution  dated June 22, 2011, the CA granted respondents’ Motion to Dismiss Appeal,
29

holding that the verification and certification  against forum shopping attached to the CA petition was
30

defective since it was signed only by Lourdes, one of the plaintiffs in the case, in violation of Section
5,  Rule 7 of the Rules of Court which requires all the plaintiffs to sign the same.  There was also no
31 32

showing that Lourdes was authorized by her co-plaintiff, Cecilia, to represent the latter and to sign
the said certification, and neither did the submission of the special powers of attorney of Cecilia and
Imelda to that effect constitute substantial compliance with the rules.  The CA further noted that
33

plaintiffs failed to comply with its prior Resolution dated October 11, 2010 requiring the submission of
an amended verification/certification against forum shopping within five (5) days from notice,
warranting the dismissal of the CA petition on this score.34

At odds with the CA’s resolution, plaintiffs sought reconsideration  but the same was denied in a
35

Resolution  dated December 28, 2011, hence, the instant petition filed by Lourdes alone.
36

The Issue Before the Court

The primordial issue in this case is whether or not the CA erred in dismissing outright the CA petition
due to a defective verification and certification against forum shopping attached to the CA petition.

The Court’s Ruling

The present petition has merit.

The Court laid down the following guidelines with respect to noncompliance with the requirements on
or submission of a defective verification and certification against forum shopping, viz.:

1) A distinction must be made between non-compliance with the requirement on or

submission of defective verification, and noncompliance with the requirement on or
submission of defective certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily

render the pleading fatally defective. The court may order its submission or correction or act
on the pleading if the attending circumstances are such that strict compliance with the Rule
may be dispensed with in order that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample knowledge to
swear to the truth of the allegations in the complaint or petition signs the verification, and
when matters alleged in the petition have been made in good faith or are true and correct.

4) As to certification against forum shopping, non-compliance therewith or a defect therein,

unlike in verification, is generally not curable by its subsequent submission or correction
thereof, unless there is a need to relax the Rule on the ground of "substantial compliance" or
presence of "special circumstances or compelling reasons."

5) The certification against forum shopping must be signed by all the plaintiffs or petitioners
in a case; otherwise, those who did not sign will be dropped as parties to the case. Under
reasonable or justifiable circumstances, however, as when all the plaintiffs or petitioners
share a common interest and invoke a common cause of action or defense, the signature of
only one of them in the certification against forum shopping substantially complies with the
Rule.

6) Finally, the certification against forum shopping must be executed by the party-pleader,
not by his counsel. If, however, for reasonable or justifiable reasons, the party-pleader is
unable to sign, he must execute a Special Power of Attorney designating his counsel of
record to sign on his behalf.  (Emphases supplied)
37
Applying these guidelines to the case at bar, particularly, those stated in paragraphs 3 and 5
highlighted above, the Court finds that the CA committed reversible error in dismissing the CA
petition due to a defective verification and certification against forum shopping.

A. Substantial Compliance with the Verification Requirement.

It is undisputed that Lourdes is not only a resident of the subject property but is a co-owner thereof
together with her co-plaintiff/sister, Cecilia. As such, she is "one who has ample knowledge to swear
to the truth of the allegations in the x x x [CA] petition" and is therefore qualified to "sign x x x the
verification" attached thereto in view of paragraph 3 of the above-said guidelines. 1âwphi1

In fact, Article 487 of the Civil Code explicitly provides that any of the co-owners may bring an action
for ejectment, without the necessity of joining all the other co-owners as co-plaintiffs because the suit
is deemed to be instituted for the benefit of all.  To reiterate, both Lourdes and Cecilia are co-
38

plaintiffs in the ejectment suit. Thus, they share a commonality of interest and cause of action as
against respondents. Notably, even the petition for review filed before the CA indicated that they are
the petitioners therein and that the same was filed on their behalf. Hence, the lone signature of
Lourdes on the verification attached to the CA petition constituted substantial compliance with the
rules.  As held in the case of Medado v. Heirs of the Late Antonio Consing:
39 40

[W]here the petitioners are immediate relatives, who share a common interest in the property subject
of the action, the fact that only one of the petitioners executed the verification or certification of forum
shopping will not deter the court from proceeding with the action.  (Emphases and underscoring
41

supplied)

Besides, it is settled that the verification of a pleading is only a formal, not a jurisdictional
requirement intended to secure the assurance that the matters alleged in a pleading are true and
correct. Therefore, the courts may simply order the correction of the pleadings or act on them and
waive strict compliance with the rules,  as in this case.
42

B. Substantial Compliance with the Certification Against Forum Shopping Requirement.

Following paragraph 5 of the guidelines as aforestated, there was also substantial compliance with
the certification against forum shopping requirement, notwithstanding the fact that only Lourdes
signed the same.

It has been held that under reasonable or justifiable circumstances - as in this case where the
plaintiffs or petitioners share a common interest and invoke a common cause of action or defense -
the rule requiring all such plaintiffs or petitioners to sign the certification against forum shopping may
be relaxed.  Consequently, the CA erred in dismissing the petition on this score.
43

Similar to the rules on verification, the rules on forum shopping are designed to promote and
facilitate the orderly administration of justice; hence, it should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objectives. The requirement of strict
compliance with the provisions on certification against forum shopping merely underscores its
mandatory nature to the effect that the certification cannot altogether be dispensed with or its
requirements completely disregarded. It does not prohibit substantial compliance with the rules
under justifiable circumstances,  as also in this case.
44

As there was substantial compliance with the above-discussed procedural requirements at the
onset, plaintiffs' subsequent failure to file an amended verification and certification, as directed by
the October 11, 2010 CA Resolution, should not have warranted the dismissal of the CA petition.

WHEREFORE, the petition is GRANTED. The Resolutions dated January 22, 2011 and December
28, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 116143 are hereby REVERSED and SET
ASIDE. Accordingly, the case is REINSTATED and REMANDED to the CA for proper and immediate
disposition.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice
WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

PRESBITERO J. VELASCO, JR.* MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

G.R. No. 197380               October 8, 2014

ELIZA ZUNIGA-SANTOS,* represented by her Attorney-in Fact, NYMPHA Z.

SALES, Petitioners,
vs.
MARIA DIVINA GRACIA SANTOS-GRAN** and REGISTER OF DEEDS OF MARIKINA
CITY, Respondents.

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari  assailing the Decision  dated January 10, 2011
1 2

and the Resolution  dated June 22, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 87849
3

which affirmed the Order  dated July 6, 2006 of the Regional Trial Court of San Mateo, Rizal, Branch
4

76 (RTC) in Civil Case No. 2018-06, dismissing the Amended Complaint for annulment of sale and
revocation of title on the ground of insufficiency of factual basis.

The Facts

On January 9, 2006, petitioner Eliza Zuñiga-Santos (petitioner), through her authorized

representative, Nympha Z. Sales,  filed a Complaint  for annulment of sale and revocation of title
5 6

against respondents Maria Divina Gracia Santos-Gran (Gran) and the Register of Deeds of Marikina
City before the RTC, docketed as Civil Case No. 2018-06. The said complaint was later
amended  on March 10, 2006 (Amended Complaint).
7

In her Amended Complaint,  petitioner alleged, among others, that: (a) she was the registered owner
8

of three (3) parcels of land located in the Municipality of Montalban, Province of Rizal, covered by
Transfer Certificate of Title (TCT) Nos. N-5500,  224174,  and N-4234  (subject properties) prior to
9 10 11

their transfer in the name of private respondent Gran; (b) she has a second husband by the name of
Lamberto C. Santos (Lamberto), with whom she did not have any children; (c) she was forced to
take care of Lamberto’s alleged daughter, Gran, whose birth certificate was forged to make it appear
that the latter was petitioner’s daughter; (d) pursuant to void and voidable documents, i.e., a Deed of
Sale, Lamberto succeeded in transferring the subject properties in favor of and in the name of Gran;
(e) despite diligent efforts, said Deed of Sale could not be located; and (f) she discovered that the
subject properties were transferred to Gran sometime in November 2005. Accordingly, petitioner
prayed, inter alia, that Gran surrender to her the subject properties and pay damages, including
costs of suit. 12

For her part, Gran filed a Motion to Dismiss,  contending, inter alia, that (a) the action filed by
13

petitioner had prescribed since an action upon a written contract must be brought within ten (10)
years from the time the cause of action accrues, or in this case, from the time of registration of the
questioned documents before the Registry of Deeds;  and (b) the Amended Complaint failed to state
14

a cause of action as the void and voidable documents sought to be nullified were not properly
identified nor the substance thereof set forth, thus, precluding the RTC from rendering a valid
judgment in accordance with the prayer to surrender the subject properties. 15

The RTC Ruling

In an Order  dated July 6, 2006, the RTC granted Gran’s motion and dismissed the Amended
16

Complaint for its failure to state a cause of action, considering that the deed of sale sought to be
nullified – an "essential and indispensable part of [petitioner’s] cause of action"  – was not attached.
17

It likewise held that the certificates of title covering the subject properties cannot be collaterally
attacked and that since the action was based on a written contract, the same had already prescribed
under Article 1144 of the Civil Code. 18

Dissatisfied, petitioner elevated the matter to the CA.

The CA Ruling

In a Decision  dated January 10, 2011, the CA sustained the dismissal of petitioner’s Amended
19

Complaint but on the ground of insufficiency of factual basis. It disagreed with the RTC’s finding that
the said pleading failed to state a cause of action since it had averred that: (a) petitioner has a right
over the subject properties being the registered owner thereof prior to their transfer in the name of
Gran; (b) Lamberto succeeded in transferring the subject properties to his daughter, Gran, through
void and voidable documents; and (c) the latter’s refusal and failure to surrender to her the subject
properties despite demands violated petitioner’s rights over them.  The CA likewise ruled that the
20

action has not yet prescribed since an action for nullity of void deeds of conveyance is
imprescriptible.  Nonetheless, it held that since the Deed of Sale sought to be annulled was not
21

attached to the Amended Complaint, it was impossible for the court to determine whether petitioner’s
signature therein was a forgery and thus, would have no basis to order the surrender or
reconveyance of the subject properties. 22

Aggrieved, petitioner moved for reconsideration  and attached, for the first time, a copy of the
23

questioned Deed of Sale  which she claimed to have recently recovered, praying that the order of
24

dismissal be set aside and the case be remanded to the RTC for further proceedings.

In a Resolution  dated June 22, 2011, the CA denied petitioner’s motion and held that the admission
25

of the contested Deed of Sale at this late stage would be contrary to Gran’s right to due process.

Hence, the instant petition.

The Issue Before the Court

The primordial issue for the Court’s resolution is whether or not the dismissal of petitioner’s
Amended Complaint should be sustained.

The Court’s Ruling

Failure to state a cause of action and lack of cause of action are distinct grounds to dismiss a
particular action. The former refers to the insufficiency of the allegations in the pleading, while the
latter to the insufficiency of the factual basis for the action. Dismissal for failure to state a cause of
action may be raised at the earliest stages of the proceedings through a motion to dismiss under
Rule16 of the Rules of Court, while dismissal for lack of cause of action may be raised any time after
the questions of fact have been resolved on the basis of stipulations, admissions or evidence
presented by the plaintiff.  In Macaslang v. Zamora,  the Court, citing the commentary of Justice
26 27

Florenz D. Regalado, explained:

Justice Regalado, a recognized commentator on remedial law, has explained the distinction:

x x x What is contemplated, therefore, is a failure to state a cause of action which is provided in Sec.
1(g) of Rule 16. This is a matter of insufficiency of the pleading. Sec. 5 of Rule 10, which was also
included as the last mode for raising the issue to the court, refers to the situation where the evidence
does not prove a cause of action. This is, therefore, a matter of insufficiency of evidence. Failure to
state a cause of action is different from failure to prove a cause of action. The remedy in the first is to
move for dismissal of the pleading, while the remedy in the second is to demur to the evidence,
hence reference to Sec. 5 of Rule 10 has been eliminated in this section. The procedure would
consequently be to require the pleading to state a cause of action, by timely objection to its
deficiency; or, at the trial, to file a demurrer to evidence, if such motion is warranted.
28

In the case at bar, both the RTC and the CA were one in dismissing petitioner’s Amended
Complaint, but varied on the grounds thereof – that is, the RTC held that there was failure to state a
cause of action while the CA ruled that there was insufficiency of factual basis.

At once, it is apparent that the CA based its dismissal on an incorrect ground. From the preceding
discussion, it is clear that "insufficiency of factual basis" is not a ground for a motion to dismiss.
Rather, it is a ground which becomes available only after the questions of fact have been resolved
on the basis of stipulations, admissions or evidence presented by the plaintiff. The procedural
recourse to raise such ground is a demurrer to evidence taken only after the plaintiff’s presentation
of evidence. This parameter is clear under Rule 33 of the Rules of Court: RULE 33

Demurrer to Evidence

Section 1. Demurrer to evidence. — After the plaintiff has completed the presentation of his
evidence, the defendant may move for dismissal on the ground that upon the facts and the law the
plaintiff has shown no right to relief. If his motion is denied he shall have the right to present
evidence. If the motion is granted but on appeal the order of dismissal is reversed he shall be
deemed to have waived the right to present evidence.

At the preliminary stages of the proceedings, without any presentation of evidence even conducted,
it is perceptibly impossible to assess the insufficiency of the factual basis on which the plaintiff
asserts his cause of action, as in this case. Therefore, that ground could not be the basis for the
dismissal of the action.

However, the Amended Complaint is still dismissible but on the ground of failure to state a cause of
action, as correctly held by the RTC. Said ground was properly raised by Gran in a motion to dismiss
pursuant to Section 1, Rule 16 of the Rules of Court:

RULE 16
Motion to Dismiss

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:

xxxx

(g) That the pleading asserting the claim states no cause of action;

xxxx

A complaint states a cause of action if it sufficiently avers the existence of the three (3) essential
elements of a cause of action, namely: (a) a right in favor of the plaintiff by whatever means and
under whatever law it arises or is created; (b) an obligation on the part of the named defendant to
respect or not to violate such right; and (c) an act or omission on the part of the named defendant
violative of the right of the plaintiff or constituting a breach of the obligation of defendant to the
plaintiff for which the latter may maintain an action for recovery of damages.  If the allegations of the
29
complaint do not state the concurrence of these elements, the complaint becomes vulnerable to a
motion to dismiss on the ground of failure to state a cause of action. 30

It is well to point out that the plaintiff’s cause of action should not merely be "stated" but, importantly,
the statement thereof should be "sufficient." This is why the elementary test in a motion to dismiss
on such ground is whether or not the complaint alleges facts which if true would justify the relief
demanded.  As a corollary, it has been held that only ultimate facts and not legal conclusions or
31

evidentiary facts are considered for purposes of applying the test.  This is consistent with Section 1,
32

Rule 8 of the Rules of Court which states that the complaint need only allege the ultimate facts or the
essential facts constituting the plaintiff’s cause of action. A fact is essential if they cannot be stricken
out without leaving the statement of the cause of action inadequate.  Since the inquiry is into the
33

sufficiency, not the veracity, of the material allegations, it follows that the analysis should be confined
to the four corners of the complaint, and no other. 34

A judicious examination of petitioner’s Amended Complaint readily shows its failure to sufficiently
state a cause of action. Contrary to the findings of the CA, the allegations therein do not proffer
ultimate facts which would warrant an action for nullification of the sale and recovery of the
properties in controversy, hence, rendering the same dismissible.

While the Amended Complaint does allege that petitioner was the registered owner of the subject
properties in dispute, nothing in the said pleading or its annexes would show the basis of that
assertion, either through statements/documents tracing the root of petitioner’s title or copies of
previous certificates of title registered in her name. Instead, the certificates of title covering the said
properties that were attached to the Amended Complaint are in the name of Gran. At best, the
attached copies of TCT Nos. N-5500 and N-4234 only mention petitioner as the representative of
Gran at the time of the covered property’s registration when she was a minor. Nothing in the
pleading, however, indicates that the former had become any of the properties’ owner. This leads to
the logical conclusion that her right to the properties in question – at least through the manner in
which it was alleged in the Amended Complaint – remains ostensibly unfounded. Indeed, while the
facts alleged in the complaint are hypothetically admitted for purposes of the motion, it must,
nevertheless, be remembered that the hypothetical admission extends only to the relevant and
material facts well pleaded in the complaint as well as to inferences fairly deductible
therefrom.  Verily, the filing of the motion to dismiss assailing the sufficiency of the complaint does
35

not hypothetically admit allegations of which the court will take judicial notice of to be not true, nor
does the rule of hypothetical admission apply to legally impossible facts, or to facts inadmissible in
evidence, or to facts that appear to be unfounded by record or document included in the pleadings. 36

Aside from the insufficiency of petitioner’s allegations with respect to her right to the subject
properties sought to be recovered, the ultimate facts supposedly justifying the "annulment of sale,"
by which the reconveyance of the subject properties is sought, were also insufficiently pleaded. The
following averments in the Amended Complaint betray no more than an insufficient narration of facts:

6. That pursuant to a voidable [sic] and void documents, the second husband of the plaintiff succeed
[sic] in transferring the above TITLES in the name of MARIA DIVINAGRACIA SANTOS, who is (sic)
alleged daughter of LAMBERTO C. SANTOS in violation of Article 1409, Par. 2 of the Civil Code;

7. That the said properties [were] transferred to the said defendant by a Deed of Sale (DOS) to the
said MARIA DIVINA GRACIA SANTOS through a void documents [sic] considering that the seller is
the alleged mother of defendant is also the buyer of the said properties in favor of defendant;

8. x x x.

9. That the alleged sale and transfer of the said properties in favor of defendant was only discovered
by [plaintiff’s] daughter CYNTHIA BELTRAN-LASMARIAS when [plaintiff] has been requesting for
financial assistance, considering that the said mother of plaintiff [sic] has so many properties which
is now the subject of this complaint;

10. That plaintiff then return on [to] the Philippines sometime [in] November, 2005 and discovered
that all [plaintiff’s] properties [had] been transferred to defendant MARIA DIVINA GRACIA SANTOS
who is not a daughter either by consanguinity or affinity to the plaintiff mother [sic];
11. That the titles that [were] issued in the name of MARIA DIVINAGRACIA SANTOS by virtue of the
said alleged voidable and void documents, should be annulled and cancelled as the basis of the
transfer is through void and voidable documents;

xxxx 37

Clearly, the claim that the sale was effected through "voidable and void documents" partakes merely
of a conclusion of law that is not supported by any averment of circumstances that will show why or
how such conclusion was arrived at. In fact, what these "voidable and void documents" are were not
properly stated and/or identified. In Abad v. Court of First Instance of Pangasinan,  the Court
38

pronounced that:

A pleading should state the ultimate facts essential to the rights of action or defense asserted, as
distinguished from mere conclusions of fact, or conclusions of law. General allegations that a
contract is valid or legal, or is just, fair, and reasonable, are mere conclusions of law. Likewise,
allegations that a contract is void, voidable, invalid, illegal, ultra vires, or against public policy,
without stating facts showing its invalidity, are mere conclusions of law.  (Emphases supplied)
39

Hence, by merely stating a legal conclusion, the Amended Complaint presented no sufficient
allegation upon which the Court could grant the relief petitioner prayed for. Thus, said pleading
should be dismissed on the ground of failure to state cause of action, as correctly held by the RTC.

That a copy of the Deed of Sale adverted to in the Amended Complaint was subsequently submitted
by petitioner does not warrant a different course of action.  The submission of that document was
1âwphi1

made, as it was purportedly "recently recovered," only on reconsideration before the CA which,
nonetheless, ruled against the remand of the case. An examination of the present petition, however,
reveals no counter-argument against the foregoing actions; hence, the Court considers any objection
thereto as waived.

In any event, the Court finds the Amended Complaint’s dismissal to be in order considering that
petitioner’s cause of action had already prescribed.

It is evident that petitioner ultimately seeks for the reconveyance to her of the subject properties
through the nullification of their supposed sale to Gran. An action for reconveyance is one that seeks
to transfer property, wrongfully registered by another, to its rightful and legal owner.  Having alleged
40

the commission of fraud by Gran in the transfer and registration of the subject properties in her
name, there was, in effect, an implied trust created by operation of law pursuant to Article 1456 of
the Civil Code which provides:

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes. 1âwphi1

To determine when the prescriptive period commenced in an action for reconveyance, the plaintiff’s
possession of the disputed property is material. If there is an actual need to reconvey the property as
when the plaintiff is not in possession, the action for reconveyance based on implied trust prescribes
in ten (10) years, the reference point being the date of registration of the deed or the issuance of the
title. On the other hand, if the real owner of the property remains in possession of the property, the
prescriptive period to recover title and possession of the property does not run against him and in
such case, the action for reconveyance would be in the nature of a suit for quieting of title which is
imprescriptible.41

In the case at bar, a reading of the allegations of the Amended Complaint failed to show that
petitioner remained in possession of the subject properties in dispute. On the contrary, it can be
reasonably deduced that it was Gran who was in possession of the subject properties, there being
an admission by the petitioner that the property covered by TCT No. 224174 was being used by
Gran’s mother-in-law.  In fact, petitioner’s relief in the Amended Complaint for the "surrender" of
42

three (3) properties to her bolsters such stance.  And since the new titles to the subject properties in
43

the name of Gran were issued by the Registry of Deeds of Marikina on the following dates: TCT No.
224174 on July 27, 1992,  TCT No. N-5500 on January 29, 1976,  and TCT No. N-4234 on
44 45

November 26, 1975,  the filing of the petitioner’s complaint before the RTC on January 9, 2006 was
46

obviously beyond the ten-year prescriptive period, warranting the Amended Complaint’s dismissal all
the same.
WHEREFORE, the petition is DENIED. The Decision dated January 10, 2011 and the Resolution
dated June 22, 2011 of the Court of Appeals in CA-G.R. CV No. 87849 are hereby AFFIRMED with
MODIFICATION in that the Amended Complaint be dismissed on the grounds of (a) failure to state a
cause of action, and (b) prescription as herein discussed.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice