June 6, 2018

G.R. No. 190324

PHILIPPINE PORTS AUTHORITY, Petitioner

vs.
THE CITY OF DAVAO, SANGGUNIANG PANGLUNGSOD NG DAVAO CITY, CITY MAYOR OF DAVAO
CITY, CITY TREASURER OF DAVAO CITY, CITY ASSESSOR OF DAVAO CITY, AND CENTRAL BOARD
OF ASSESSMENT APPEALS (CBAA), Respondents

DECISION

LEONEN, J.:

When a tax case is pending on appeal with the Court of Tax Appeals, the Court of Tax Appeals has the
exclusive jurisdiction to enjoin the levy of taxes and the auction of a taxpayer's properties in relation to that case.

This is a Petition for Review on Certiorari,   assailing the Court of Appeals December 15, 2008 Decision  and
1 2

September 11, 2009 Resolution  in CA-G.R. SP No. 00735-MIN, dismissing the Philippine Ports Authority's
3

Petition for Prohibition.

The Philippine Ports Authority was created under Presidential Decree No. 857, as amended. It was mandated
"to implement an integral program for the planning, development, financing, and operation of ports in the
Philippines" and was "empowered to administer properties of any kind under its jurisdiction." 4

On June 17, 2004, the Philippine Ports Authority received a letter from the City Assessor of Davao for the
assessment and collection of real property taxes against its administered properties located at Sasa Port. It
appealed the assessment via registered mail to the Local Board of Assessment Appeals through the Office of
the City Treasurer of Davao on August 2, 2004. The Office of the City Treasurer of Davao received the appeal
on August 11, 2004, and forwarded it to the Chairman of the Local Board of Assessment Appeals, who received
it on September 6, 2004. While the case was pending, the City of Davao posted a notice of sale of delinquent
real properties,   including the three (3) properties subject of this case, namely, 1) the quay covered by Tax
5

Declaration No. E-04-09-063842; 2) the parcel of land with Tax Declaration No. E-04-09-092572; and 3) the
administrative building under Tax Declaration No. E-04-09-090803. 6

The Local Board of Assessment Appeals dismissed the Philippine Ports Authority's appeal for having been filed
out of time, and for its lack of · jurisdiction on the latter's tax exemption in its January 25, 2005 Order.  The
7

Philippine Ports Authority appealed  before the Central Board of Assessment Appeals, but this appeal was
8

denied in the Central Board of Assessment Appeals April 7, 2005 Decision.  Thus, it filed an appeal with the
9

Court of Tax Appeals.  10

The Philippine Ports Authority claimed that it did not receive any warrant of levy for the three (3) properties which
were sold to respondent City of Davao, or any notice that they were going to be auctioned. It was informed that it
had one (1) year from the date of registration of the sale within which to redeem the properties by paying the
taxes, penalties, and incidental expenses, plus interest at the rate of 2% per month on the purchase price.  11

Thus, it filed a petition for certiorari with the Court of Appeals, arguing that the City of Davao's taxation of its
properties and their subsequent auction and sale to satisfy the alleged tax liabilities were without or in excess of
its jurisdiction and contrary to law. It argued that it had no other speedy and adequate remedy except to file a
petition for certiorari with the Court of Appeals. 
12

While the petition was pending with the Court of Appeals, the Court of Tax Appeals promulgated a
Decision  dated July 30, 2007, granting the Philippine Ports Authority's appeal, resolving in its favor the issue of
13

its liability for the real estate tax of Sasa Port and its buildings. The dispositive portion of this Decision read:

WHEREFORE, premises considered, the present Petition for Review is hereby GRANTED. Accordingly, the
Decision dated April 7, 2005 of the Central Board of Assessment Appeals in CBAA Case No. M- 20 and the
Order dated January 25, 2005 of the LBAA in LBAA Case No. 01-04 dismissing the appeal are
hereby SET ASIDE. We declare the Sasa Port, Davao City and its buildings EXEMPT from the real estate tax
imposed by Davao City. We declare VOID all the real estate tax assessments issued by Davao City on the Sasa
Port and its buildings.
SO ORDERED.   (Emphasis in the original)
14

Additionally, while the petition was pending with the Court of Appeals, the Court of Tax Appeals issued an Entry
of Judgment stating that its July 30, 2007 Decision became final and executory on February 13, 2008,
considering that no appeal to the Supreme Court had been taken. 15

Thereafter, the Court of Appeals dismissed the petition in its December 15, 2008 Decision.   It held that the
16

Court of Tax Appeals had exclusive jurisdiction to determine the matter  and said that the Philippine Ports
17

Authority "should have applied for the issuance of writ of injunction or prohibition before the Court of Tax
Appeals."   It further found the petition dismissible on the ground that the Philippine Ports Authority committed
18

forum shopping, as the petition raised the same facts and issues as in its appeal before the Court of Tax
Appeals.  19

Petitioner filed a motion for reconsideration, which the Court of Appeals denied in its September 11, 2009
Resolution,   which read, in part:
20

This Court GRANTS the Motion For Extension Of Time To file Comment and NOTES the Comment
subsequently filed within the extended period prayed for, and DENIES petitioner's Motion for Reconsideration
from the Decision dated December 15, 2008, dismissing the petition for prohibition and upholding the authority of
the City Government of Davao in taxing, auctioning and selling petitioner's properties to satisfy the latter's real
property tax liabilities.

....

WHEREFORE, the instant Motion for Reconsideration is hereby DENIED.

SO ORDERED.  (Emphasis in the original)

21

Thus, the Philippine Ports Authority filed its Petition for Review  under Rule 45 of the Rules of Court before this
22

Court against the City of Davao, Sangguniang Panglungsod ng Davao City, City Mayor of Davao City, City
Treasurer of Davao City, City Assessor of Davao City, and Central Board of Assessment Appeals (collectively,
respondents), assailing the Court of Appeals December 15, 2008 Decision and September 11, 2009 Resolution.
Respondents filed their Comment  to which petitioner filed its Reply.
23 24

Petitioner argues that it did not commit forum shopping, asserting that the only element of forum shopping
present as between the appeals filed before the Court of Tax Appeals and the Court of Appeals is identity of
parties.  Its arguments regarding the jurisdiction of the Court of Appeals are inscrutable but appear to maintain
25

that the Court of Appeals has jurisdiction on the basis of urgency. It also avers that the Court of Appeals erred
when it "ruled, declared and upheld the authority" of respondent City of Davao to tax, auction, and sell its
properties.  It points out that the Supreme Court has held that as a government instrumentality, its properties
26

cannot be taxed by local government.  27

Respondents insist that forum shopping exists, considering that the elements of litis pendentia were present
when the case was filed with the Court of Appeals.   On the question of the propriety of the imposition of tax on
28

petitioner's properties, respondents claim that there was an error in the Court of Tax Appeals July 30, 2007
Decision. Thus, while they maintain that this case is not the proper case to rectify the error of the Court of Tax
Appeals, they ask that this Court lay down a jurisprudential pronouncement on the real property tax treatment of
petitioner's properties. 29

The issues for resolution by this Court are:

First, whether or not the Court of Appeals had jurisdiction to issue the injunctive relief prayed for by petitioner
Philippine Ports Authority; and

Second, whether or not the petition before the Court of Appeals was properly dismissed for forum shopping.

This Court denies the Petition.

I
In real property tax cases such as this, the remedy of a taxpayer depends on the stage in which the local
government unit is enforcing its authority to impose real property taxes.   Moreover, as jurisdiction is conferred
30

by law,   reference must be made to the law when determining which court has jurisdiction over a case, in
31

relation to its factual and procedural antecedents.

Petitioner has failed to cite any law supporting its contention that the Court of Appeals has jurisdiction over this
case. On the other hand, Section 7, paragraph (a)(5) of Republic Act No. 1125,  as amended by Republic Act
32

No. 9282,  provides that the Court of Tax Appeals has exclusive appellate jurisdiction over:
33

Section 7. Jurisdiction. - The CT A shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:

....

(5) Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases
involving the assessment and taxation of real property originally decided by the provincial or city board of
assessment appeals[.]

The Central Board of Assessment Appeals April 7, 2005 Decision assailed by petitioner before the Court of
Appeals was rendered in the exercise of its appellate jurisdiction over the real property tax assessment of its
properties. Clearly, this falls within the above-cited provision. Indeed, there is no dispute that this Central Board
of Assessment Appeals decision constitutes one of the cases covered by the Court of Tax Appeals' exclusive
jurisdiction.

Despite the clear wording of the law placing this case within the exclusive appellate jurisdiction of the Cmn1 of
Tax Appeals, petitioner insists that the Court of Appeals could have issued the relief prayed for despite the
provisions of Republic Act No. 9282, considering its urgent need for injunctive relief. 34

Petitioner's contention has no legal basis whatsoever and must be rejected. Urgency does not remove the
Central Board of Assessment Appeals decision from the exclusive appellate jurisdiction of the Court of Tax
Appeals. This is pai1icularly true since, as properly recognized by the Court of Appeals, petitioner could have,
and should have, applied for injunctive relief with the Court of Tax Appeals, which has the power to issue the
preliminary injunction prayed for. 35

In City of Manila v. Grecia-Cuerdo,   this Court expressly recognized the Court of Tax Appeals' power to
36

determine whether or not there has been grave abuse of discretion in cases falling within its exclusive appellate
jurisdiction and its power to issue writs of certiorari:

On the strength of the above constitutional provisions. it can be fairly interpreted that the power of the CT A
includes that of determining whether or not there has been grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within the exclusive
appellate jurisdiction of the tax court. It, thus, follows that the CT A, by constitutional mandate, is vested with
jurisdiction to issue writs of certiorari in these cases.

Indeed, in order for any appellate court, to effectively exercise its appellate jurisdiction, it must have the authority
to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed tax cases to the
CT A, it can reasonably be assumed that the law intended to transfer also such power as is deemed necessary,
if not indispensable, in aid of such appellate jurisdiction. There is no perceivable reason why the transfer should
only be considered as partial, not total.

Consistent with the above pronouncement, this Court has held as early as the case of JM Tuason & Co., Inc. v.
Jaramillo, et al. that "if a case may be appealed to a particular court or judicial tribunal or body, then said court or
judicial tribunal or body has jurisdiction to issue the extraordinary writ of certiorari, in aid of its appellate
jurisdiction." This principle was affirmed in De Jesus v. Court of Appeals, where the Court stated that "a court
may issue a writ of certiorari in aid of its appellate jurisdiction if said com1 has jurisdiction to review, by appeal or
writ of error, the final orders or decisions of the lower court." The rulings in J.M. Tuason and De Jesus were
reiterated in the more recent cases of Galang, Jr. v. Geronimo and Bulilis v. Nuez.
Furthermore, Section 6, Rule 135 of the present Rules of Com1 provides that when by law, jurisdiction is
conferred on a court or judicial officer, all auxiliary writs, processes and other means necessary to carry it into
effect may be employed by such court or officer.

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies with the CA,
this Court would be confirming the exercise by two judicial bodies, the CA and the CTA, of jurisdiction over
basically the same subject matter - precisely the split-jurisdiction situation which is anathema to the orderly
administration of justice. The Court cannot accept that such was the legislative motive, especially considering
that the law expressly confers on the CTA, the tribunal with the specialized competence over tax and tariff
matters, the role of judicial review over local tax cases without mention of any other court that may exercise such
power. Thus, the Court agrees with the ruling of the CA that since appellate jurisdiction over private respondents'
complaint for tax refund is vested in the CT A, it follows that a petition for certiorari seeking nullification of an
interlocutory order issued in the said case should, likewise, be filed with the same court. To rule otherwise would
lead to an absurd situation where one court decides an appeal in the main case while another court rules on an
incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to split jurisdiction
to conclude that the intention of the law is to divide the authority over a local tax case filed with the RTC by
giving to the CA or this Court jurisdiction to issue a writ of certiorari against interlocutory orders of the RTC but
giving to the CT A the jurisdiction over the appeal from the decision of the trial court in the same case. It is more
in consonance with logic and legal soundness to conclude that the grant of appellate jurisdiction to the CT A
over tax cases filed in and decided by the RTC carries with it the power to issue a writ of certiorari when
necessary in aid of such appellate jurisdiction. The supervisory power or jurisdiction of the CTA to issue a writ
of certiorari in aid of its appellate jurisdiction should co-exist with, and be a complement to, its appellate
jurisdiction to review, by appeal, the final orders and decisions of the RTC, in order to have complete supervision
over the acts of the latter.

A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it effectively,
to make all orders that will preserve the subject of the action, and to give effect to the final determination of the
appeal. It carries with it the power to protect that jurisdiction and to make the decisions of the court there under
effective. The court, in aid of its appellate jurisdiction, has authority to control all auxiliary and incidental matters
necessary to the efficient and proper exercise of that jurisdiction. For this purpose, it may, when necessary,
prohibit or restrain the performance of any act which might interfere with the proper exercise of its rightful
jurisdiction in cases pending before it.

Lastly, it would not be amiss to point out that a court which is endowed with a particular jurisdiction should have
powers which are necessary to enable it to act effectively within such jurisdiction. These should be regarded as
powers which are inherent in its jurisdiction and the court must possess them in order to enforce its rules of
practice and to suppress any abuses of its process and to defeat any attempted thwarting of such
process.  (Citations omitted)
37

In this case, the Court of Tax Appeals had jurisdiction over petitioner's appeal to resolve the question of whether
or not it was liable for real property tax. To recall, the real property tax liability was the very reason for the acts
which petitioner wanted to have enjoined. It was, thus, the Court of Tax Appeals, and not the Court of Appeals,
that had the power to preserve the subject of the appeal, to give effect to its final determination, and, when
necessary, to control auxiliary and incidental matters and to prohibit or restrain acts which might interfere with its
exercise of jurisdiction over petitioner's appeal. Thus, respondents' acts carried out pursuant to the imposition of
the real property tax were also within the jurisdiction of the Court of Tax Appeals.

Even if the law had vested the Court of Appeals with jurisdiction to issue injunctive relief in real property tax
cases such as this, the Court of Appeals was still correct in dismissing the petition before it. Once a court
acquires jurisdiction over a case, it also has the power to issue all auxiliary writs necessary to maintain and
exercise its jurisdiction, to the exclusion of all other courts.   Thus, once the Court of Tax Appeals acquired
38

jurisdiction over petitioner's appeal, the Court of Appeals would have been precluded from taking cognizance of
the case.

II

The rule against forum shopping is violated when a party institutes more than one action based on the same
cause to increase its chances of obtaining a favorable outcome. Thus, when a party institutes a case while
another case is pending, where there is an identity of parties and an identity of rights asserted and relief prayed
for such that judgment in one case amounts to res judicata in the other, it is guilty of forum shopping. 39
To reverse a court determination that a party has violated the rule against forum shopping, this party must show
that one or more of the requirements for forum shopping does not exist. To this end, petitioner attempts to
differentiate the petition filed with the Court of Appeals from the appeal filed with the Court of Tax Appeals. It
argues that the right asserted before the Court of Appeals is its right to peacefully possess its ports, free from
the threat of losing the properties due to tax liabilities, whereas the right asserted before the Court of Tax
Appeals is its right to be exempt from real property tax, as a government instrumentality. Petitioner further
argues that the reliefs sought from the two (2) tribunals were not the same-it sought a final relief from payment of
real property taxes on its ports from the Court of Tax Appeals; on the other hand, it sought a temporary and
immediate relief from respondents' acts from the Court of Appeals, while the issue of taxability was still pending
with the Court of Tax Appeals. 40

However, even assuming without conceding that the arguments laid down by petitioner could support its claim
that it did not forum shop, this Court cannot accept that it was what was argued before the Court of Tax Appeals
and Court of Appeals, respectively, without reading the text itself.  Whether or not the rights asserted and reliefs
1âwphi1

prayed for in the two (2) petitions were different would best be determined from a reading of the appeal and
petition themselves.

Unfortunately for petitioner, it submitted only its own arguments. Neither its petition before the Court of Appeals
nor its appeal before the Court of Tax Appeals was attached to the petition filed with this Court. Without any of
these texts, this Court is in no position to determine that the elements of forum shopping are absent here.

Thus, this Court affirms the Court of Appeals' finding that the rule against forum shopping was violated when
petitioner filed its Petition for Certiorari despite its pending appeal before the Cou1i of Tax Appeals.
41

WHEREFORE, the Petition for Review on Certiorari is DENIED. The Court of Appeals December 15, 2008
Decision and September 11, 2009. Resolution in CA-G.R. SP No. 00735-MIN are hereby AFFIRMED.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

APRIL 4, 2018

G.R. No. 195814

EVERSLEY CHILDS SANITARIUM, represented by DR. GERARDO M. AQUINO, JR. (now DR. PRIMO
JOEL S. ALVEZ) CHIEF OF SANITARIUM,, Petitioner
vs
SPOUSES ANASTACIO PERLABARBARONA, Respondents

DECISION

LEONEN, J.:

A case for unlawful detainer must state the period from when the occupation by tolerance started and the acts of
tolerance exercised by the party with the right to possession. If it is argued that the possession was illegal from
the start, the proper remedy is to file an accion publiciana, or a plenary action to recover the right of possession.
Moreover, while an ejectment case merely settles the issue of the right of actual possession, the issue of
ownership may be provisionally passed upon if the issue of possession cannot be resolved without it. Any fina1
disposition on the issue of ownership, however, must be resolved in the proper forum.

This is a Petition for Review on Certiorari   assailing the Court of Appeals February 17, 2011 Decision,  which
1 2

upheld the judgments of the Municipal Trial Court and Regional Trial Court ordering Eversley Childs Sanitarium
(Eversley) to vacate the disputed property. Eversley assails the August 31, 2011 Resolution  of the Court of
3

Appeals for resolving its Motion for Reconsideration despite its earlier submission of a Motion to Withdraw the
Motion for Reconsideration.
Eversley is a public health facility operated by the Department of Health to administer care and treatment to
patients suffering from Hansen's disease, commonly known as leprosy, and to provide basic health services to
non-Hansen's cases.  Since 1930, it has occupied a portion of a parcel of land denominated as Lot No. 1936 in
4

Jagobiao, Mandaue City, Cebu. 5

Spouses Anastacio and Perla Barbarona (the Spouses Barbarona) allege that they are the owners of Lot No.
1936 by virtue of Transfer Certificate of Title (TCT) No. 53698. They claim that they have acquired the property
from the Spouses Tarcelo B. Gonzales and Cirila Alba (the Spouses Gonzales),  whose ownership was covered
6

by Original Certificate of Title (OCT) No. R0-824. Per the Spouses Barbarona's verification, OCT No. R0-824
was reconstituted based on Decree No. 699021, issued to the Spouses Gonzales by the Land Registration
Office on March 29, 1939. 7

On May 6, 2005, the Spouses Barbarona filed a Complaint for Ejectment (Complaint)  before the Municipal Trial
8

Court in Cities of Mandaue City against the occupants of Lot No. 1936, namely, Eversley, Jagobiao National
High School, the Bureau of Food and Drugs, and some residents (collectively, the occupants). The Spouses
Barbarona alleged that they had sent demand letters and that the occupants were given until April 15, 2005 to
vacate the premises. They further claimed that despite the lapse of the period, the occupants refused to vacate;
hence, they were constrained to file the Complaint. 9

In their Answer,   the occupants alleged that since they had been in possession of the property for more than 70
10

years, the case was effectively one for recovery of possession, which was beyond the jurisdiction of the
Municipal Trial Court. They likewise claimed that the Spouses Barbarona were guilty of laches since it took more
than 60 years for them to seek the issuance of a Torrens title over the property. They also averred that the
Spouses Barbarona's certificate of title was void since they, the actual inhabitants of the property, were never
notified of its issuance. 11

In its September 29, 2005 Decision,   the Municipal Trial Court in Cities ordered the occupants to vacate the
12

property, finding that the action was one for unlawful detainer, and thus, within its jurisdiction. It likewise found
that the Spouses Barbarona were the lawful owners of Lot No. 1936 and that the occupants were occupying the
property by mere tolerance.  13

The Municipal Trial Court in Cities also held that a titled property could not be acquired through laches. It found
that even the occupants' tax declarations in their names could not prevail over a valid certificate of title.   The
14

dispositive portion of its Decision read:

WHEREFORE, judgment is hereby rendered in favor of the [the Spouses Barbarona] and against all the
[occupants] and ordering the latter to peacefully vacate the portion of the premises in question and remove their
houses, structures or any building and improvements introduced or constructed on said portion on Lot 1936
covered by TCT No. 53698.

The [occupants] are further ordered to pay the following, to wit:

1. The amount of ₱10.00 per square meter for the area occupied by each [of the occupants] as
reasonable monthly compensation for the use of the portion of the property of [the Spouses Barbarona]
from the date of the filing of the complaint until [the occupants] shall have actually vacated and turned
over the portion of their possession to the [Spouses Barbarona];

2. The amount of ₱20,000 as litigation expenses and P20,000 as reasonable attorney[']s fees; and

3. The cost of suit.

Counterclaims of the [occupants] are hereby ordered DISMISSED for lack of merit.

SO ORDERED. 15

The occupants appealed to the Regional Trial Court. In its November 24, 2006 Decision,   the Regional Trial
16

Court affirmed in toto the Decision of the Municipal Trial Court in Cities. One of the occupants, Eversley, filed a
motion for reconsideration.  17
During the pendency of Eversley's motion, or on February 19, 2007, the Court of Appeals in CA-G.R. CEB-SP
No. 01503 rendered a Decision, cancelling OCT No. R0-824 and its derivative titles, including TCT No. 53698,
for lack of notice to the owners of the adjoining properties and its occupants. 18

On April 23, 2007, the Regional Trial Court issued an Order denying Eversley's Motion for Reconsideration.  19

Eversley filed a Petition for Review  with the Court of Appeals, arguing that the Municipal Trial Court had no
20

jurisdiction over the action and that the Regional Trial Court erred in not recognizing that the subsequent
invalidation of the Spouses Barbarona's certificate of title was prejudicial to their cause of action.
21

On February 17, 2011, the Court of Appeals rendered its Decision,   denying the Petition. According to the Court
22

of Appeals, the allegations in the Complaint were for the recovery of the physical possession of the property and
not a determination of the property's ownership. The action, thus, was one for unlawful detainer and was
properly filed with the Municipal Trial Court. 
23

The Court of Appeals held that the subsequent invalidation of the issuance of the certificate of title was
immaterial, stating:

Whether or not [the Spouses Barbarona are] holder[s] or not of a certificate of title is immaterial. The matter of
the issuance of the decree by the Land Registration Office in favor of [the Spouses Barbarona's]
predecessor[s-]in[-]interest has not been resolved on the merits by the RTC. [The Spouses Barbarona,] having
acquired all the rights of their predecessors-in-interest[,] have[,] from the time of the issuance of the decree[,]
also derived title over the property and nullification of the title based on procedural defects is not tantamount to
the nullification of the decree. The decree stands and remains a prima facie source of the [Spouses Barbarona's]
right of ownership over the subject property.  24

Eversley, represented by the Office of the Solicitor General, filed a Petition for Review  with this Court assailing
25

the February 17, 2011 Decision of the Court of Appeals. It likewise prayed for the issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction  to restrain the immediate execution of the assailed
26

judgment and to prevent impairing the operations of the government hospital, which had been serving the public
for more than 80 years.

In its May 13, 2011 Resolution,   this Court issued a Temporary Restraining Order enjoining the implementation
27

of the Court of Appeals February 17, 2011 Decision. Respondents were also directed to comment on the
Petition.

In its Petition before this Court, petitioner argues that the nullification of TCT No. 53698 should have been
prejudicial to respondents' right to recover possession over the property. Petitioner claims that since the
Metropolitan Trial Comi relied on respondents' title to determine their right of possession over the property, the
subsequent nullification of their title should have invalidated their right of possession. Petitioner maintains that
even if Decree No. 699021 was valid, the effect of its validity does not extend to respondents since there is no
evidence to prove that they have acquired the property from Tarcelo B. Gonzales, the owner named in the
decree.28

Petitioner points out that respondents' Complaint before the trial court was a case for accion publiciana, not one
for unlawful detainer, since respondents have not proven petitioner's initial possession to be one of mere
tolerance. It claims that respondents' bare allegation that they merely tolerated petitioner's possession is
insufficient in a case for unlawful detainer, especially with petitioner's possession of the property since 1930,
which pre-dates the decree that was reconstituted in 193 9.   It argues that its long occupancy should have been
29

the subject of judicial notice since it is a government hospital serving the city for decades and is even considered
as a landmark of the city. 30

On the other hand, respondents counter that the cancellation of TCT No. 53698 "does not ... divest respondents
of their rightful ownership of the subject property[,] more so their right of possession"  since their predecessors-
31

in-interest's title was still valid and protected under the Torrens system. They insist that "petitioner has not
shown . . . any sufficient evidence proving [its] ownership ... much less, [its] right of possession."
32

Respondents maintain that the Municipal Trial Court had jurisdiction over their complaint since prior physical
possession is not an indispensable requirement and all that is required is "that the one-year period of limitation
commences from the time of demand to vacate." 33
While the Petition was pending before this Court, respondents raised a few procedural concerns before
submitting their Comment. In their Motion for Leave to File Comment/Manifestation,  respondents informed this
34

Court that petitioner still had a pending and unresolved Motion for Reconsideration  before the Court of Appeals,
35

in violation of the rule against forum shopping. Respondents, nonetheless, filed their Comment/Manifestation,  to 36

which this Court ordered petitioner to reply. 37

Petitioner filed its Reply  and submitted a Manifestation,  explaining that the Court of Appeals had issued a
38 39

Resolution  on August 31, 2011, denying its Motion for Reconsideration despite its earlier filing on April 14, 2011
40

of a Manifestation and Motion to Withdraw its Motion for Reconsideration. Thus, it manifested its intention to
likewise question the Court of Appeals August 31, 2011 Resolution with this Court.

On November 28, 2011, this Court noted that petitioner's Reply and Manifestation and directed respondents to
comment on the Manifestation. 41

In their Comment on Petitioner's Manifestation,  respondents assert that while petitioner submitted a
42

Manifestation and Motion to Withdraw its Motion for Reconsideration, the Court of Appeals did not issue any
order considering petitioner's Motion for Reconsideration to have been abandoned. The Court of Appeals
instead proceeded to resolve it in its August 31, 2011 Resolution; hence, respondents submit that petitioner
violated the rule on non-forum shopping. 43

Based on the arguments of the parties, this Court is asked to resolve the following issues:

First, whether or not the nullification of the Spouses Anastacio and Perla Barbarona's title had the effect of
invalidating their right of possession over the disputed property; and

Second, whether or not the Spouses Anastacio and Perla Barbarona's complaint against Eversley Childs
Sanitarium was for accion publiciana or for unlawful detainer.

Before these issues may be passed upon, however, this Court must first resolve the procedural question of
whether or not Eversley Childs Sanitarium violated the rule on non-forum shopping.

In City of Taguig v. City of Makati,   this Court discussed the definition, origins, and purpose of the rule on forum
44

shopping:

Top Rate Construction & General Services, Inc. v. Paxton Development Corporation explained that:

Forum shopping is committed by a party who institutes two or more suits -in different courts, either
simultaneously or successively, in order to ask the courts to rule on the same or related causes or to grant the
same or substantially the same reliefs, on the supposition that one or the other court would make a favorable
disposition or increase a party's chances of obtaining a favorable decision or action.

First Philippine International Bank v. Court of Appeals recounted that forum shopping originated as a concept in
private international law:

To begin with, forum-shopping originated as a concept in private international law, where non-resident litigants
are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses,
including to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets,
or to select a more friendly venue. To combat these less than honorable excuses, the principle of forum non
conveniens was developed whereby a court, in conflicts of law cases, may refuse impositions on its jurisdiction
where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies
elsewhere.

In this light, Black's Law Dictionary says that forum-shopping "occurs when a party attempts to have his action
tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict."
Hence, according to Words and Phrases, "a litigant is open to the charge of 'forum shopping' whenever he
chooses a forum with slight connection to factual circumstances surrounding his suit, and litigants should be
encouraged to attempt to settle their differences without imposing undue expense and vexatious situations on
the courts."
Further, Prubankers Association v. Prudential Bank and Trust Co. recounted that:

The rule on forum-shopping was first included in Section 17 of the Interim Rules and Guidelines issued by this
Court on January 11, 1983, which imposed a sanction in this wise: "A violation of the rule shall constitute
contempt of court and shall be a cause for the summary dismissal of both petitions, without prejudice to the
taking of appropriate action against the counsel or party concerned." Thereafter, the Court restated the rule in
Revised Circular No. 28-91 and Administrative Circular No. 04-94. Ultimately, the rule was embodied in the 1997
amendments to the Rules of Court.  45

There is forum shopping when a party files different pleadings in different tribunals, despite having the same
"identit[ies] of parties, rights or causes of action, and reliefs sought."  Consistent with the principle of fair play,
46

parties are prohibited from seeking the same relief in multiple forums in the hope of obtaining a favorable
judgment. The rule against forum shopping likewise fulfills an administrative purpose as it prevents conflicting
decisions by different tribunals on the same issue.

In filing complaints and other initiatory pleadings, the plaintiff or petitioner is required to attach a certification
against forum shopping, certifying that (a) no other action or claim involving the same issues has been filed or is
pending in any court, tribunal, or quasi-judicial agency, (b) if there is a pending action or claim, the party shall
make a complete statement of its present status, and (c) if the party should learn that the same or similar action
has been filed or is pending, that he or she will report it within five (5) days to the tribunal where the complaint or
initiatory pleading is pending. Thus, Rule 7, Section 5 of the Rules of Court provides:

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.

Petitioner, through the Office of the Solicitor General, is alleged to have committed forum shopping when it filed
its Petition for Review on Ce1iiorari with this Court, despite a pending Motion for Reconsideration with the Court
of Appeals.

According to the Solicitor General, it filed a Motion for Extension of Time to File a Petition for Review
on Certiorari with this Court on March 10, 2011 but that another set of solicitors erroneously filed a Motion for
Reconsideration with the Court of Appeals on March 11, 2011.  Thus, it was constrained to file a Manifestation
47

and Motion to Withdraw its Motion for Reconsideration on April 14, 2011,  the same date as its Petition for
48

Review on Certiorari with this Court. Indeed, its Certification of Non-Forum Shopping, as certified by State
Solicitor Joan V. Ramos-Fabella, provides:

....

5. I certify that there is a pending Motion/or Reconsideration erroneously filed in the Court of Appeals, Special
Eighteenth Division which we have asked to be withdrawn. Aside from said pending motion, I have not
commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency
and, to the best of my knowledge, no such other action or claim is pending therein; and should I thereafter learn
that the same or similar action or claim is pending before any other court, tribunal or quasi-judicial agency, I shall
report such fact within five (5) days therefrom from the court wherein this petition has been filed.   (Emphasis
49

supplied)

The Office of the Solicitor General, however, mistakenly presumed that the mere filing of a motion to withdraw
has the effect of withdrawing the motion for reconsideration without having to await the action of the Court of
Appeals. The Office of the Solicitor General's basis is its reading of Rule VI, Section 15 of the 2002 Internal
Rules of the Court of Appeals:

Section 15. Effect of Filing an Appeal in the Supreme Court. - No motion for reconsideration or rehearing shall
be acted upon if the movant has previously filed in the Supreme Court a petition for review on certiorari or a
motion for extension of time to file such petition. If such petition or motion is subsequently filed, the motion for
reconsideration pending in this Court shall be deemed abandoned.

This would have been true had the Office of the Solicitor General merely manifested that it had already
considered its Motion for Reconsideration before the Court of Appeals as abandoned, pursuant to its Internal
Rules. However, it filed a Motion to Withdraw, effectively submitting the withdrawal of its Motion for
Reconsideration to the Court of Appeals' sound discretion. A motion is not presumed to have already been acted
upon by its mere filing. Prudence dictated that the Office of the Solicitor General await the Court of Appeals'
action on its Motion to Withdraw before considering its Motion for Reconsideration as withdrawn.

Ordinarily, "a motion that is not acted upon in due time is deemed denied."  When the Court of Appeals denied
50

the Office of the Solicitor General's Motion for Reconsideration without acting on its Motion to Withdraw, the
latter was effectively denied. Petitioner, thus, committed forum shopping when it filed its Petition before this
Court despite a pending Motion for Reconsideration before the Court of Appeals.

To rule in this manner, however, is to unnecessarily deprive petitioner of its day in court despite the Court of
Appeals' failure to apply its own Internal Rules. The Internal Rules of the Court of Appeals clearly provide that a
subsequent motion for reconsideration shall be deemed abandoned if the movant filed a petition for review or
motion for extension of time to file a petition for review before this Court. While the Office of the Solicitor General
can be faulted for filing a motion instead of a mere manifestation, it cannot be faulted for presuming that the
Court of Appeals would follow its Internal Rules as a matter of course.

Rule VI, Section 15 of the Internal Rules of the Court of Appeals is provided for precisely to prevent forum
shopping. It mandates that once a party seeks relief with this Court, any action for relief with the Court of
Appeals will be deemed abandoned to prevent conflicting decisions on the same issues. Had the Court of
Appeals applied its own Internal Rules, petitioner's Motion for Reconsideration would have been deemed
abandoned.

Moreover, unlike this Court, which can suspend the effectivity of its own rules when the ends of justice require
it,  the Court of Appeals cannot exercise a similar power. Only this Court may suspend the effectivity of any
51

provision in its Internal Rules.  Thus, it would be reasonable for litigants to expect that the Court of Appeals
52

would comply with its own Internal Rules.

Petitioner's Motion for Reconsideration having been deemed abandoned with its filing of a Motion for Extension
of Time before this Court, the Court of Appeals' August 31, 2011 Resolution denying the Motion for
Reconsideration, thus, has no legal effect. It is as if no motion for reconsideration was filed at all.   Considering
53

that petitioner counted the running of the period to file its Petition with this Court from its receipt of the Court of
Appeals February 17, 2011 Decision, and not of the Court of Appeals August 31, 2011 Resolution, it does not
appear that petitioner "wanton[ly] disregard[ed] the rules or cause[d] needless delay in the administration of
justice."  In this particular instance, petitioner did not commit a fatal procedural error.
54

II

By its very nature, an ejectment case only resolves the issue of who has the better right of possession over the
property. The right of possession in this instance refers to actual possession, not legal possession. While a party
may later be proven to have the legal right of possession by virtue of ownership, he or she must still institute an
ejectment case to be able to dispossess an actual occupant of the property who refuses to vacate. In Mediran v.
Villanueva:  55

Juridically speaking, possession is distinct from ownership, and from this distinction are derived legal
consequences of much importance. In giving recognition to the action of forcible entry and detainer the purpose
of the law is to protect the person who in fact has actual possession; and in case of controverted right, it requires
the parties to preserve the status quo until one or the other of them sees fit to invoke the decision of a court of
competent jurisdiction upon the question of ownership. It is obviously just that the person who has first acquired
possession should remain in possession pending this decision; and the parties cannot be permitted meanwhile
to engage in a petty warfare over the possession of the property which is the subject of dispute. To permit this
would be highly dangerous to individual security and disturbing to social order. Therefore, where a person
supposes himself to be the owner of a piece of property and desires to vindicate his ownership against the party
actually in possession, it is incumbent upon him to institute an action to this end in a court of competent
jurisdiction; and he [cannot] be permitted, by invading the property and excluding the actual possessor, to place
upon the latter the burden of instituting an action to try the property right.
56

In ejectment cases, courts will only resolve the issue of ownership provisionally if the issue of possession cannot
be resolved without passing upon it. In Co v. Militar: 57

We have, time and again, held that the only issue for resolution in an unlawful detainer case is physical or
material possession of the property involved, independent of any claim of ownership by any of the party litigants.
Moreover, an ejectment suit is summary in nature and is not susceptible to circumvention by the simple
expedient of asserting ownership over the property.

In forcible entry and unlawful detainer cases, even if the defendant raises the question of ownership in his
pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the lower
courts and the Court of Appeals, nonetheless, have the undoubted competence to provisionally resolve the issue
of ownership for the sole purpose of determining the issue of possession.

Such decision, however, does not bind the title or affect the ownership of the land nor is conclusive of the facts
therein found in a case between the same parties upon a different cause of action involving possession.  58

In this instance, respondents anchor their right of possession over the disputed property on TCT No.
53698  issued in their names. It is true that a registered owner has a right of possession over the property as
59

this is one of the attributes of ownership.  Ejectment cases, however, are not automatically decided in favor of
60

the party who presents proof of ownership, thus:

Without a doubt, the registered owner of real property is entitled to its possession. However, the owner cannot
simply wrest possession thereof from whoever is in actual occupation of the property. To recover possession, he
must resort to the proper judicial remedy and, once he chooses what action to file, he is required to satisfy the
conditions necessary for such action to prosper.

In the present case, petitioner opted to file an ejectment case against respondents. Ejectment cases - forcible
entry and unlawful detainer - are summary proceedings designed to provide expeditious means to protect actual
possession or the right to possession of the property involved. The only question that the courts resolve in
ejectment proceedings is: who is entitled to the physical possession of the premises, that is, to the
possession de facto and not to the possession de Jure. It does not even matter if a party's title to the property is
questionable. For this reason, an ejectment case will not necessarily be decided in favor of one who has
presented proof of ownership of the subject property. Key jurisdictional facts constitutive of the particular
ejectment case filed must be averred in the complaint and sufficiently proven.  (Emphasis supplied)
61

Here, respondents alleged that their right of ownership was derived from their predecessors-in-interest, the
Spouses Gonzales, whose Decree No. 699021 was issued on March 29, 1939.  The Register of Deeds certified
62

that there was no original certificate of title or owner's duplicate issued over the property, or if there was, it may
have been lost or destroyed during the Second World War. The heirs of the Spouses Gonzales subsequently
executed a Deed of Full Renunciation of Rights, Conveyance of Full Ownership and Full Waiver of Title and
Interest on March 24, 2004 in respondents' favor. Thus, respondent Anastacio Barbarona succeeded in having
Decree No. 699021 reconstituted on July 27, 2004 and having TCT No. 53698 issued in respondents' names on
February 7, 2005. 63

The Municipal and Regional Trial Courts referred to respondents' Torrens title as basis to rule the ejectment
case in their favor:

The complaint in this case sufficiently ... establish[es] beyond doubt that [the Spouses Barbarona] are the lawful
owners of Lot 1936, situated at Jagobiao, Mandaue City, as evidenced by Transfer Certificate of Title No.
53698 . . . .

....

A certificate of title is a conclusive evidence of ownership and as owners, the [the Spouses Bnrbarona] are
entitled to possession of the property . . . .
This Court however cannot just simply closed (sic) its eyes into the fact presented before the trial court that the
subject lot owned by [the Spouses Barbarona] is covered by a Torrens Certificate of Title. Until such time or
period that such title is rendered worthless, the same is BINDING UPON THE WHOLE WORLD in terms of
ownership[.]  (Emphasis in the original)
64

During the interim, the Republic of the Philippines, represented by the Office of the Solicitor General, filed a
Petition for Annulment of Judgment before the Court of Appeals to assail the reconstitution of Decree No.
699021, docketed as CA-G.R. SP No. 01503. On February 19, 2007,  the Court of Appeals in that case found
65

that the trial court reconstituted the title without having issued the required notice and initial hearing to the actual
occupants, rendering all proceedings void. The dispositive portion of the Decision read:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered GRANTING the instant petition and
SETTING ASIDE the Order of Branch 55 of the Regional Trial Court, Mandaue City in Case No. 3 G.L.R.O.,
Record No. 4030.

SO ORDERED. 66

As a consequence of this ruling, TCT No. 53698 was cancelled by the

Register of Deeds on January 25, 2011. 67

Despite these developments, the Court of Appeals in this case proceeded to affirm the Municipal Trial Court's
and Regional Trial Court's judgments on the basis that Decree No. 699021 was still valid, stating:

Whether or not [the Spouses Barbarona are] holder[s] or not of a certificate of title is immaterial. The matter of
the issuance of the decree by the Land Registration Office in favor of [the Spouses Barbarona's]
predecessor[ s-]in[-]interest has not been resolved on the merits by the RTC. [The Spouses Barbarona,] having
acquired all the rights of their predecessors-in-interest[,] have[,] from the time of the issuance of the decree[,]
also derived title over the property and nullification of the title based on procedurai defects is not tantamount to
the nullification of the decree. The decree stands and remains a prima facie source of the [Spouses Barbarona's]
right of ownership over the subject property.  68

Blinded by respondents' allegedly valid title on the property, the three (3) tribunals completely ignored how
petitioner came to occupy the property in the first place.

Petitioner, a public hospital operating as a leprosarium dedicated to treating persons suffering from Hansen's
disease, has been occupying the property since May 30, 1930. According to its history:

The institution was built by the Leonard Wood Memorial with most of the funds donated by the late Mr. Eversley
Childs of New York, USA, hence the name, Eversley Childs Sanitarium, in honor of the late donor. The total cost
was about 400,000.00 which were spent for the construction of 52 concrete buildings (11 cottages for females
and 22 for males, 5 bathhouses, 2 infirmaries, powerhouse, carpentry shop, general kitchen and storage,
consultation and treatment clinics and offices), waterworks, sewerage, road and telephone system, equipment
and the likes.

The construction of the building [was] started sometime on May 1928 and was completed 2 years later. It was
formally turned over the Philippine government and was opened [on] May 30, 1930 with 540 patients transferred
in from Caretta Treatment Station, now Cebu Skin Clinic in Cebu City. 69

Proclamation No. 507 was issued on October 21, 1932, "which reserved certain parcels of land in Jagobiao,
Mandaue City, Cebu as additional leprosarium site for the Eversley Childs Treatment Station."  Petitioner's
70

possession of the property, therefore, pre-dates that of respondents' predecessors-in-interest, whose Decree
No. 699021 was issued in 1939.

It is true that defects in TCT No. 53698 or even Decree No. 699021 will not affect the fact of ownership,
considering that a certificate of title does not vest ownership. The Torrens system "simply recognizes and
documents ownership and provides for the consequences of issuing paper titles." 71

Without TCT No. 53698, however, respondents have no other proof on which to anchor their claim. The Deed of
Full Renunciation of Rights, Conveyance of Full Ownership and Full Waiver of Title and Interest executed in their
favor by the heirs of the Spouses Gonzales is insufficient to prove conveyance of property since no evidence
was introduced to prove that ownership over the property was validly transferred to the Spouses Gonzales' heirs
upon their death.

Moreover, Proclamation No. 507, series of 1932, reserved portions of the property specifically for petitioner's
use as a leprosarium. Even assuming that Decree No. 699021 is eventually held as a valid Torrens title, a title
under the Torrens system is always issued subject to the annotated liens or encumbrances, or what the law
warrants or reserves. Thus:

Under the Torrens system of registration, the government is required to issue an official certificate of title to
attest to the fact that the person named is the owner of the property described therein, subject to such liens and
encumbrances as thereon noted or what the law warrants or reserves.   (Emphasis supplied)
72

Portions occupied by petitioner, having been reserved by law, cannot be affected by the issuance of a Torrens
title. Petitioner cannot be considered as one occupying under mere tolerance of the registered owner since its
occupation was by virtue of law. Petitioner's right of possession, therefore, shall remain unencumbered subject
to the final disposition on the issue of the property's ownership.

III

There are three (3) remedies available to one who has been dispossessed of property: (I) an action for
ejectment to recover possession, whether for unlawful detainer or forcible entry; (2) accion publiciana or accion
plenaria de posesion, or a plenary action to recover the right of · possession; and (3) accion reivindicatoria, or
an action to recover ownership.  73

Although both ejectment and accion publiciana are actions specifically to recover the right of possession, they
have two (2) distinguishing differences. The first is the filing period. Ejectment cases must be filed within one (I)
year from the date of dispossession. If the dispossession lasts for more than a year, then an accion
publiciana must be filed. The second distinction concerns jurisdiction. Ejectment cases, being summary in
nature, are filed with the Municipal Trial Courts. Accion publiciana, however, can only be taken cognizance by
the Regional Trial Court. 74

Petitioner argues that the Municipal Trial Court has no jurisdiction over the case since respondents' cause of
action makes a case for ace ion publiciana and not ejectment through unlawful detainer. It asserts that
respondents failed to prove that petitioner occupied the property by mere tolerance.

Jurisdiction over subject matter is conferred by the allegations stated in the complaint.   Respondents' Complaint
75

before the Municipal Trial Court states:

That [the occupants] are presently occupying the above-mentioned property of the [Spouses Barbarona] without
color [of] right or title. Such occupancy is purely by mere tolerance. Indeed, [the occupants'] occupying the lot
owned by [the Spouses Barbarona] is illegal and not anchored upon any contractual relations with the [Spouses
Barbarona.] 76

Indeed, no mention has been made as to how petitioner came to possess the property and as to what acts
constituted tolerance on the part of respondents or their predecessors-in-interest to allow petitioner's occupation.
In Carbonilla v. Abiera:77

A requisite for a valid cause of action in an unlawful detainer case is that possession must be originally lawful,
and such possession must have turned unlawful only upon the expiration of the right to possess. It must be
shown that the possession was initially lawful; hence, the basis of such lawful possession must be established.
If, as in this case, the claim is that such possession is by mere tolerance of the plaintiff, the acts of tolerance
must be proved.

Petitioner failed to prove that respondents' possession was based on his alleged tolerance.  He did not offer any
1âwphi1

evidence or even only an affidavit of the Garcianos attesting that they tolerated respondents' entry to and
occupation of the subject properties. A bare allegation of tolerance will not suffice. Plaintiff must, at least, show
overt acts indicative of his or his predecessor's permission to occupy the subject property . . . .

....
In addition, plaintiff must also show that the supposed acts of tolerance have been present right from the very
start of the possession - from entry to the property. Otherwise, if the possession was unlawful from the start, an
action for unlawful detainer would be an improper remedy. Notably, no mention was made in the complaint of
how entry by respondents was effected or how and when dispossession started. Neither was there any evidence
showing such details.

In any event, petitioner has some other recourse. He may pursue recovering possession of his property by filing
an accion publiciana, which is a plenary action intended to recover the better right to possess; or an accion
reivindicatoria, a suit to recover ownership of real property. We stress, however, that the pronouncement in this
case as to the ownership of the land should be regarded as merely provisional and, therefore, would not bar or
prejudice an action between the same parties involving title to the land.  78

The same situation is present in this case. Respondents failed to state when petitioner's possession was initially
lawful, and how and when their dispossession started. All that appears from the Complaint is that petitioner's
occupation "is illegal and not anchored upon any contractual relations with [respondents.]" 79

This, however, is insufficient to determine if the action was filed within a year from dispossession, as required in
an ejectment case. On the contrary, respondents allege that petitioner's occupation was illegal from the start.
The proper remedy, therefore, should have been to file an accion publiciana or accion reivindicatoria to assert
their right of possession or their right of ownership.

Considering that respondents filed the improper case before the Municipal Trial Court, it had no jurisdiction over
the case. Any disposition made, therefore, was void. The subsequent judgments of the Regional Trial Court and
the Court of Appeals, which proceeded from the void Municipal Trial Court judgment, are likewise void.

WHEREFORE, the Petition is GRANTED. The February 17, 2011 Decision and August 31, 2011 Resolution of
the Court of Appeals in CAG. R. SP No. 02762 are REVERSED and SET ASIDE. The Temporary Restraining
Order dated May 13, 2011 is made PERMANENT.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

G.R. No.197530               July 9, 2014

ABOITIZ EQUITY VENTURES, INC., Petitioner,

vs.
VICTOR S. CHIONGBIAN, BENJAMIN D. GOTHONG, and CARLOS A. GOTHONG LINES, INC.
(CAGLI), Respondents.

DECISION

LEONEN, J.:

This is a petition for review on certiorari with an application for the issuance of a temporary restraining order
and/or writ of preliminary injunction under Rule 45 of the Rules of Court. This petition prays that the assailed
orders dated May 5, 2011  and June 24, 2011  of the Regional Trial Court, Cebu City, Branch 10 in Civil Case
1 2

No. CEB-37004 be nullified and set aside and that judgment be rendered dismissing with prejudice the
complaint  dated July 20, 2010 filed by respondents Carlos A. Gothong Lines, Inc. ("CAGLI") and Benjamin D.
3

Gothong. On January 8, 1996, Aboitiz Shipping Corporation ("ASC"), principally owned by the Aboitiz family,
CAGLI, principally owned by the Gothong family, and William Lines, Inc.("WLI"), principally owned by the
Chiongbian family, entered into anagreement (the "Agreement"),  whereby ASC and CAGLI would transfer their
4

shipping assets to WLI in exchange for WLI’s shares of stock.  WLI, in turn, would run their merged shipping
5

businesses and, henceforth, be known as WG&A, Inc. ("WG&A"). 6

Sec. 11.06 of the Agreement required all disputes arising out of or in connection with the Agreement tobe settled
by arbitration:

11.06 Arbitration
All disputes arising out of or in connection with this Agreement including any issue as to this Agreement’s validity
or enforceability, which cannot be settled amicably among the parties, shall be finally settled by arbitration in
accordance with the Arbitration Law (Republic Act No. 876) by an arbitration tribunal composed of four (4)
arbitrators. Each of the parties shall appoint one (1) arbitrator, the three (3) to appoint the fourth arbitrator who
shall act as Chairman. Any award by the arbitration tribunal shall be final and binding upon the parties and shall
be enforced by judgment of the Courts of Cebu or Metro Manila. 7

Among the attachments to the Agreement was Annex SL-V.  This was a letter dated January 8,1996, from WLI,
8

through its President (herein respondent) Victor S. Chiongbian addressed to CAGLI, through its Chief Executive
Officer Bob D. Gothong and Executive Vice President for Engineering (herein respondent) Benjamin D.
Gothong. On its second page, Annex SL-V bore the signatures ofBob D. Gothong and respondent Benjamin D.
Gothong by way of a conforme on behalf of CAGLI.

Annex SL-V confirmed WLI’s commitment to acquire certain inventories of CAGLI. These inventories would
havea total aggregate value of, at most, ₱400 million, "as determinedafter a special examination of the
[i]nventories."  Annex SL-V also specificallystated that such acquisition was "pursuant to the Agreement."
9 10

The entirety of Annex SL-V’s substantive portion reads:

We refer to the Agreement dated January 8, 1996 (the "Agreement") among William Lines, Inc. ("Company C"),
Aboitiz Shipping Corporation ("Company A") and Carlos A. Gothong Lines, Inc. ("Company B") regarding the
transfer of various assets of Company A and Company B to Company C in exchangefor shares of capital stock
of Company C. Terms defined in the Agreement are used herein as therein defined.

This will confirm our commitment to acquire certain spare parts and materials inventory (the "Inventories") of
Company B pursuant to the Agreement.

The total aggregate value of the Inventories to be acquired shall not exceed ₱400 Million as determined after a
special examination of the Inventories as performed by SGV & Co. to be completed on or before the Closing
Date under the agreed procedures determined by the parties.

Subject to documentation acceptable to both parties, the Inventories to be acquired shall be determined not later
than thirty (30) days after the Closing Date and the payments shall be made in equal quarterly instalments over
a period of two years with the first payment due on March 31, 1996. 11

Pursuant to Annex SL-V, inventories were transferred from CAGLI to WLI. These inventories were assessed to
have a value of 514 million, which was later adjusted to 558.89 million.  Of the total amount of 558.89 million,
12

"CAGLIwas paid the amount of 400 Million."  In addition to the payment of 400 million,petitioner Aboitiz Equity
13

Ventures ("AEV") noted that WG&A shares with a book value of 38.5 million were transferred to CAGLI. 14

As there was still a balance, in2001, CAGLI sent WG&A (the renamed WLI) demand letters "for the return of or
the payment for the excess [i]nventories."  AEV alleged that to satisfy CAGLI’s demand, WLI/WG&A returned
15

inventories amounting to 120.04 million.  As proof of this, AEV attached copies of delivery receipts signed by
16

CAGLI’s representatives as Annex "K" of the present petition. 17

Sometime in 2002, the Chiongbian and Gothong families decided to leave the WG&A enterprise and sell their
interest in WG&A to the Aboitiz family. As such, a share purchase agreement  ("SPA") was entered into by
18

petitioner AEV and the respective shareholders groups of the Chiongbians and Gothongs. In the SPA, AEV
agreedto purchase the Chiongbian group's 40.61% share and the Gothong group's 20.66% share in WG&A’s
issued and outstanding stock. 19

Section 6.5 of the SPA provided for arbitration as the mode of settling any dispute arising from the SPA. It reads:

6.5 Arbitration. Should there be any dispute arising between the parties relating to this Agreement including the
interpretation or performance hereof which cannot beresolved by agreement of the parties within fifteen (15)
days after written notice by a party to another, such matter shall then be finally settled by arbitration in Cebu City
in accordance with the Philippine Arbitration Law. Substantive aspects of the dispute shall be settled by applying
the laws of the Philippines. The decision of the arbitrators shall be final and binding upon the parties hereto and
the expense of arbitration (including without limitation the award of attorney’s fees to the prevailing party) shall
be paid as the arbitrators shall determine. 20
Section 6.8 of the SPA further provided that the Agreement (of January 8, 1996) shall be deemed terminated
except its Annex SL-V. It reads:

6.8 Termination of Shareholders Agreement. The Buyer and the Sellers hereby agree that on Closing, the
Agreement among Aboitiz Shipping Corporation, Carlos A. Gothong Lines, Inc. and William Lines, Inc. dated
January 8, 1996, as the same has been amended from time to time (the "Shareholders’ Agreement") shall all be
considered terminated, except with respect to such rights and obligations that the parties to the Shareholders’
Agreement have under a letter dated January 8, 1996 (otherwise known as "SL-V") from William Lines, Inc. to
Carlos A. Gothong Lines, Inc. regarding certain spare parts and materials inventory, which rights and obligations
shall survive through the date prescribed by the applicable statute of limitations. 21

As part of the SPA, the parties entered into an Escrow Agreement  whereby ING Bank N.V.-Manila Branch was
22

to take custody of the shares subject of the SPA.  Section 14.7 of the Escrow Agreement provided that all
23

disputes arising from it shall be settled through arbitration:

14.7 All disputes, controversies or differences which may arise by and among the parties hereto out of, or in
relation to, or in connection with this Agreement, orfor the breach thereof shall be finally settled by arbitration in
Cebu City in accordance with the Philippine Arbitration Law. The award rendered by the arbitrator(s) shall be
final and binding upon the parties concerned. However, notwithstanding the foregoing provision, the parties
reserve the right to seek redress before the regular court and avail of any provisional remedies in the event of
any misconduct, negligence, fraud or tortuous acts which arise from any extra-contractual conduct that affects
the ability ofa party to comply with his obligations and responsibilities under this Agreement. 24

As a result of the SPA, AEV became a stockholder of WG&A. Subsequently, WG&A was renamed Aboitiz
Transport Shipping Corporation ("ATSC"). 25

Petitioner AEV alleged that in2008, CAGLI resumed making demands despite having already received 120.04
million worth of excess inventories.  CAGLI initially made its demand to ATSC (the renamed WLI/WG&A)
26

through a letter  dated February 14, 2008. As alleged by AEV, however, CAGLI subsequently resorted to a
27

"shotgun approach"  and directed its subsequent demand letters to AEV  as well as to FCLC  (a company
28 29 30

related to respondent Chiongbian).

AEV responded to CAGLI’s demands through several letters.  In these letters, AEV rebuffed CAGLI's demands
31

noting that: (1) CAGLI already received the excess inventories;(2) it was not a party to CAGLI's claim as it had a
personality distinct from WLI/WG&A/ATSC; and (3) CAGLI's claim was already barred by prescription.

In a reply-letter  dated May 5, 2008, CAGLI claimed that it was unaware of the delivery to it of the excess
32

inventories and asked for copies of the corresponding delivery receipts.  CAGLI threatened that unless it
33

received proof of payment or return ofexcess inventories having been made on or before March 31, 1996, it
would pursue arbitration. 34

In letters written for AEV (the first dated October 16, 2008 by Aboitiz and Company, Inc.’s Associate General
Counsel Maria Cristina G. Gabutina  and the second dated October 27, 2008 by SyCip Salazar Hernandez and
35

Gatmaitan ), it was noted that the excess inventories were delivered to GT Ferry Warehouse.  Attached to these
36 37

letters were a listing and/or samples  of the corresponding delivery receipts. In these letters it was also noted
38

that the amount of excess inventories delivered (120.04 million) was actually in excess of the value of the
supposedly unreturned inventories (119.89 million).  Thus, it was pointed out that it was CAGLI which was liable
39

to return the difference between 120.04 million and 119.89 million.  Its claims not having been satisfied, CAGLI
40

filed on November 6, 2008 the first of two applications for arbitration ("first complaint")  against respondent
41

Chiongbian, ATSC, ASC, and petitioner AEV, before the Cebu City Regional Trial Court, Branch 20. The first
complaint was docketed as Civil Case No. CEB-34951.

In response, AEV filed a motion to dismiss  dated February 5, 2009. AEV argued that CAGLI failed to state a
42

cause of action as there was no agreement to arbitrate between CAGLI and AEV.  Specifically, AEV pointed out
43

that: (1) AEV was never a party to the January 8, 1996 Agreement or to its Annex SL-V;  (2) while AEV is a
44

party to the SPA and Escrow Agreement, CAGLI's claim had no connection to either agreement; (3) the
unsigned and unexecuted SPA attached to the complaint cannot be a source of any right to arbitrate;  and (4) 45

CAGLI did not say how WLI/WG&A/ATSC's obligation to return the excess inventories can be charged to AEV.

On December 4, 2009, the Cebu City Regional Trial Court, Branch 20 issued an order  dismissing the first
46

complaint with respect to AEV. It sustained AEV’s assertion that there was no agreement binding AEV and
CAGLI to arbitrate CAGLI’s claim.  Whether by motion for reconsideration, appeal or other means, CAGLI did
47

not contest this dismissal.

On February 26, 2010, the Cebu CityRegional Trial Court, Branch 20 issued an order  directing the parties
48

remaining in the first complaint (after the discharge of AEV) to proceed with arbitration.

The February 26, 2010 order notwithstanding, CAGLI filed a notice of dismissal  dated July 8, 2010, withdrawing
49

the first complaint. In an order  dated August 13, 2010, the Cebu City Regional Trial Court, Branch 20 allowed
50

this withdrawal.

ATSC (the renamed WLI/WG&A) filed a motion for reconsideration  dated September 20, 2010 to the allowance
51

of CAGLI's notice of dismissal. This motion was denied in an order  dated April 15, 2011.
52

On September 1, 2010, while the first complaint was still pending (n.b., it was only on April 15, 2011 that the
Cebu City Regional Trial Court, Branch 20 denied ATSC’s motion for reconsideration assailing the allowance of
CAGLI’s notice of disallowance), CAGLI, now joined by respondent Benjamin D. Gothong, filed a second
application for arbitration ("second complaint")  before the Cebu City Regional Trial Court, Branch 10. The
53

second complaint was docketed as Civil Case No. CEB-37004 and was also in view of the return of the same
excess inventories subject of the first complaint.

On October 28, 2010, AEV filed a motion to dismiss  the second complaint on the following grounds:  (1) forum
54 55

shopping; (2) failure to state a cause of action; (3) res judicata; and (4) litis pendentia.

In the first of the two (2) assailed orders dated May 5, 2011,  the Cebu City Regional Trial Court, Branch 10
56

denied AEV's motion to dismiss.

On the matter of litis pendentia, the Regional Trial Court, Branch 10 noted that the first complaint was dismissed
with respect to AEV on December 4, 2009, while the second complaint was filed on September 1, 2010. As
such, the first complaint was no longer pending at the time of the filing of the second complaint.  On the matter
57

of res judicata, the trial court noted that the dismissal without prejudice of the first complaint "[left] the parties free
to litigate the matter in a subsequent action, as though the dismiss[ed] action had not been commenced."  It 58

added that since litis pendentia and res judicata did not exist, CAGLI could not be charged with forum
shopping.  On the matter of an agreement to arbitrate, the Regional Trial Court, Branch 10 pointed to the SPA
59

as "clearly express[ing] the intention of the parties to bring to arbitration process all disputes, if amicable
settlement fails."  It further dismissed AEV’s claim that it was not a party to the SPA, as "already touching on the
60

merits of the case"  and therefore beyond its duty "to determine if they should proceed to arbitration or not."
61 62

In the second assailed order  dated June 24, 2011, the Cebu City Regional Trial Court, Branch 10 deniedAEV's
63

motion for reconsideration.

Aggrieved, AEV filed the present petition.  AEV asserts that the second complaint is barred by res judicata and
64

litis pendentia and that CAGLI engaged in blatant forum shopping.  It insists that it is not bound by an agreement
65

to arbitrate with CAGLI and that, even assuming that it may be required to arbitrate, it is being ordered to do so
under terms that are "manifestly contrary to the . . . agreements on which CAGLI based its demand for
arbitration." 66

For resolution are the following issues:

I. Whether the complaint in Civil Case No. CEB-37004 constitutes forum shopping and/or is barred by res
judicata and/or litis pendentia

II. Whether petitioner, Aboitiz Equity Ventures, Inc., is bound by an agreement to arbitrate with Carlos A.
Gothong Lines, Inc., with respect to the latter’s claims for unreturned inventories delivered to William Lines,
Inc./WG&A, Inc./Aboitiz Transport System Corporation

AEV availed of the wrong

remedy in seeking relief from
this court

Before addressing the specific mattersraised by the present petition, we emphasize that AEV is in error
inseeking relief from this court via a petition for review on certiorari under Rule45 of the Rules of Court. As such,
we are well in a position to dismiss the present petition outright. Nevertheless, as the actions of the Cebu City
Regional Trial Court, Branch 10 are tainted with grave abuse of discretion amounting to lack or excess of
jurisdiction, this court treats the present Rule 45 petition as a Rule 65 petition and gives it due course.

A petition for review on certiorari under Rule 45 is a mode of appeal. This is eminently clear from the very title
and from the first section of Rule 45 (as amended by A.M. No. 07-7-12-SC):

Rule 45
APPEAL BY CERTIORARITO THE SUPREME COURT

SECTION 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorarifrom a judgment, final
order or resolution of the Court of Appeals, the Sandiganbayan, the Court of Tax Appeals, the Regional Trial
Court or other courts, whenever authorized by law, may file with the Supreme Court a verified petition for review
on certiorari. The petition may include an application for a writ of preliminary injunction or other provisional
remedies and shall raise only questions of law, which must be distinctly set forth. The petitioner may seek the
same provisional remedies by verified motion filed inthe same action or proceeding at any time during its
pendency. (Emphasis supplied)

Further, it is elementary that anappeal may only be taken from a judgment or final order that completely
disposes of the case.  As such, no appeal may be taken from an interlocutory order  (i.e., "one which refers to
67 68

something between the commencement and end of the suit which decides some point or matter but it is not the
final decision of the whole controversy" ). As explained in Sime Darby Employees Association v. NLRC,  "[a]n
69 70

interlocutory order is not appealable until after the rendition of the judgment on the merits for a contrary rule
would delay the administration of justice and unduly burden the courts." 71

An order denying a motion to dismiss is interlocutory in character. Hence, it may not be the subject of an appeal.
The interlocutory nature of an order denying a motion to dismiss and the remedies for assailing such an order
were discussed in Douglas Lu Ym v. Nabua: 72

An order denying a motion to dismiss is an interlocutory order which neither terminates nor finally disposes of a
case, as it leaves something to be done by the court before the case is finally decided on the merits. As such,
the general rule is that the denial of a motion to dismiss cannot be questioned in a special civil action for
certiorariwhich is a remedy designed to correct errors ofjurisdiction and not errors of judgment. Neither can a
denial of a motion todismiss be the subject of an appeal unless and until a final judgment or order is rendered.In
order to justify the grant of the extraordinary remedy of certiorari, the denial of the motion to dismiss must have
been tainted with grave abuse of discretion amounting to lack or excess of jurisdiction.  (Emphasis supplied)
73

Thus, where a motion to dismiss is denied, the proper recourse is for the movant to file an
answer.  Nevertheless, where the order denying the motion to dismiss is tainted with grave abuse of discretion
74

amounting to lack or excess of jurisdiction, the movant may assail such order via a Rule 65 (i.e., certiorari,
prohibition, and/or mandamus) petition. This is expressly recognized in the third paragraph of Rule 41, Section 1
of the Rules of Court.  Following the enumeration in the second paragraph of Rule 41, Section 1 of the instances
75

when an appeal may not be taken, the third paragraph specifies that "[in] any of the foregoing circumstances,
the aggrieved party may file an appropriate special civil action as provided in Rule 65." 76

Per these rules, AEV is in error for having filed what it itself calls a "Petition for Review on Certiorari [Appeal by
Certiorari under Rule 45 of the Rules of Court]."  Since AEV availed of the improper remedy, this court is well in
77

a position to dismiss the present petition.

Nevertheless, there have been instances when a petition for review on certiorari under Rule 45 was treated by
this court as a petition for certiorari under Rule 65. As explained in China Banking Corporation v. Asian
Construction and Development Corporation: 78

[I]n many instances, the Court has treated a petition for review on certiorariunder Rule 45 as a petition for
certiorari under Rule 65 of the Rules of Court, such as in cases where the subject of the recourse was one of
jurisdiction, or the act complained of was perpetrated by a court with grave abuse of discretion amounting to lack
or excess of jurisdiction. 79

In this case, the May 5, 2011 and June 24, 2011 orders of the Cebu City Regional Trial Court, Branch 10 in Civil
Case No. CEB-37004 are assailed for having denied AEV’s motion todismiss despite: first, the second complaint
having been filed in a manner constituting forum shopping; second, the prior judgment on the merits made in
Civil Case No. CEB-34951, thereby violating the principle ofres judicata; and third, the (then) pendency of Civil
Case No. CEB-34951 with respect to the parties that, unlike AEV, were not discharged from the case, thereby
violating the principle of litis pendentia. The same orders are assailed for having allowed CAGLI’s application for
arbitration to continue despite supposedly clear and unmistakable evidence that AEV is not bound by an
agreement to arbitrate with CAGLI.

As such, the Cebu City, Regional Trial Court, Branch 10’s orders are assailed for having been made with grave
abuse of discretion amounting to lack or excess of jurisdiction in that the Cebu City Regional Trial Court, Branch
10 chose to continue taking cognizance of the second complaint, despite there being compelling reasons for its
dismissal and the Cebu City, Regional Trial Court Branch 20’s desistance. Conformably, we treat the present
petition as a petition for certiorari under Rule 65 of the Rules of Court and give it due course.

The complaint in Civil Case

No. CEB-37004 constitutes
forum shopping and is barred
by res judicata

The concept of and rationale against forum shopping were explained by this court in Top Rate Construction &
General Services, Inc. v. Paxton Development Corporation: 80

FORUM SHOPPING is committed by a party who institutes two or more suits in different courts, either
simultaneously or successively, in order to ask the courts to rule on the same or related causes or to grant the
same or substantially the same reliefs, on the supposition that one or the other court would make a
favorabledisposition or increase a party's chances of obtaining a favorable decision or action. It is an act of
malpractice for it trifles with the courts, abuses their processes, degrades the administration of justice and adds
to the already congested 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, regardless of whether the court in which one of the suits was brought has no
jurisdiction over the action.
81

Equally settled is the test for determining forum shopping. As this court explained in Yap v. Chua: 82

To determine whether a party violated the rule against forum shopping, the most important factor toask is
whether the elements of litis pendentiaare present, or whether a final judgment in one case will amount to res
judicatain 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. 83

Litis pendentia "refers to that situation wherein another action is pending between the same parties for the same
cause ofaction, such that the second action becomes unnecessary and vexatious."  It requires the concurrence
84

of three (3) requisites: "(1)the identity of parties, or at least such as representing the same interests in both
actions; (2) the identity of rights asserted and relief prayed for,the relief being founded on the same facts; and (3)
the identity of the two cases such that judgment in one, regardless of which party issuccessful, would amount
tores judicatain the other."
85

In turn, prior judgment or res judicata bars a subsequent case when the following requisites concur: "(1) the
former judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter and the parties;
(3) it is a judgment or an order on the merits; (4) there is — between the first and the second actions — identityof
parties, of subject matter, and of causes of action." 86

Applying the cited concepts and requisites, we find that the complaint in Civil Case No. CEB-37004 is barred
byres judicata and constitutes forum shopping.

First, between the first and second complaints, there is identity of parties. The first complaint was brought by
CAGLI as the sole plaintiff against Victor S. Chiongbian, ATSC, and AEV as defendants. In the second
complaint, CAGLI was joined by Benjamin D. Gothong as (co-)plaintiff. As to the defendants, ATSC was deleted
while Chiongbian and AEV were retained.

While it is true that the parties to the first and second complaints are not absolutely identical, this court has
clarified that, for purposes of forum shopping, "[a]bsolute identity of parties is not required [and that it] is enough
that there is substantial identity of parties."
87
Even as the second complaint alleges that Benjamin D. Gothong "is . . . suing in his personal
capacity,"  Gothong failed to show any personal interest in the reliefs sought by the second complaint.
88

Ultimately, what is at stake in the second complaint is the extent to which CAGLI may compel AEV and
Chiongbian to arbitrate in order that CAGLI may then recover the value of its alleged unreturned inventories.
This claim for recovery is pursuant to the agreement evinced in Annex SL-V. Annex SL-V was entered into by
CAGLI and not by Benjamin D. Gothong. While it is true that Benjamin D. Gothong, along with Bob D. Gothong,
signed Annex SL-V, he did so only in a representative, and not in a personal, capacity. As such, Benjamin D.
Gothong cannot claim any right that personally accrues to him on account of Annex SL-V. From this, it follows
that Benjamin D. Gothong is not a real party in interest — "one who stands to be benefitted or injured by the
judgment in the suit or the party entitled to the avails of the suit"  — and that his inclusion in the second
89

complaint is an unnecessary superfluity.

Second, there is identity in subject matter and cause of action. There is identity in subject matter as both
complaints are applications for the same relief. There is identity in cause ofaction as both complaints are
grounded on the right to be paid for or to receive the value of excess inventories (and the supposed
corresponding breach thereof) as spelled out in Annex SL-V.

The first and second complaints are both applications for arbitration and are founded on the same instrument —
Annex SL-V. Moreover, the intended arbitrations in both complaintscater to the sameultimate purpose, i.e., that
CAGLI may recover the value of its supposedly unreturned inventories earlier delivered to WLI/WG&A/ATSC.

In both complaints, the supposedpropriety of compelling the defendants to submit themselves to arbitration are
anchored on the same bases: (1) Section 6.8 of the SPA, which provides that the January 8, 1996 Agreement
shall be deemed terminatedbut that the rights and obligations arising from Annex SL-V shall continue to
subsist;  (2) Section 6.5 of the SPA, which requires arbitration as the mode for settling disputes relating to the
90

SPA;  and, (3) defendants’ refusal to submit themselves to arbitration vis-a-vis Republic Act No. 876, which
91

provides that "[a] party aggrieved by the failure, neglect or refusal of another to perform under an agreement in
writing providing for arbitration may petition the court for an order directing that such arbitration proceed in the
manner provided for in such agreement." 92

Both complaints also rely on the same factual averments: 93

1. that ASC, CAGLI, and WLI entered into an agreement on January 8, 1996;

2. that under Annex SL-V of the Agreement, WLI/WG&A "committed to acquire certain [inventories], the
total aggregate value of which shall not exceed ₱400 Million";94

3. that after examination, it was ascertained that the value of the transferred inventories exceeded ₱400
million;

4. that pursuant to Annex SL-V, WG&A paid CAGLI ₱400 million but that the former failed to return or
pay for spare parts representing a value in excess of ₱400 million;

5. "[t]hat on August 31, 2001, [CAGLI] wrote the WG&A through its AVP Materials Management, Ms.
Concepcion M. Magat, asking for the return of the excess spare parts"; 95

6. that on September 5, 2001, WG&A’s Ms. Magat replied that the matter is beyond her authority level
and that she must elevate it to higher management;

7. that several communications demanding the return of the excess spare parts were sent to WG&Abut
these did not elicit any response; and

8. "[t]hat the issue of excess spare parts, was taken over by events, when on July 31, 2002,"  the
96

Chiongbians and Gothongs entered into an Escrow Agreement with AEV.

Third, the order dated December 4, 2009 of the Cebu City Regional Trial Court, Branch 20, which dismissed the
first complaint with respect to AEV, attained finality when CAGLI did not file a motion for reconsideration,
appealed, or, in any other manner, questioned the order.

Fourth, the parties did not dispute that the December 4, 2009 order was issued by a court having jurisdiction
over the subject matter and the parties. Specifically as to jurisdiction over the parties,jurisdiction was acquired
over CAGLI as plaintiff when it filed the first complaint and sought relief from the Cebu City Regional Trial Court,
Branch 20; jurisdiction over defendants AEV, ATSC, and Victor S.Chiongbian was acquired with the service of
summons upon them. Fifth, the dismissal of the first complaint with respect to AEV was a judgment on the
merits. As explained in Cabreza, Jr. v. Cabreza: 97

A judgment may be considered as one rendered on the merits "when it determines the rights and liabilities of the
parties based on the disclosed facts, irrespective of formal, technical or dilatoryobjections"; or when the
judgment is rendered "aftera determination of which party is right, as distinguished from a judgment rendered
upon some preliminary or formal or merely technical point." 98

Further, as this court clarified in Mendiola v. Court of Appeals,  "[i]t is not necessary . . . that there [be] a
99

trial"  in order that a judgment be considered as one on the merits.

100

Prior to issuing the December 4, 2009 order dismissing the first complaint with respect to AEV, the Cebu City
Regional Trial Court, Branch 20 allowed the parties the full opportunity to establish the facts and to ventilate their
arguments relevant to the complaint. Specifically, the Cebu City Regional Trial Court, Branch 20 admitted: 1)
AEV’s motion to dismiss;  2) CAGLI’s opposition to the motion to dismiss;  3) AEV’s reply and opposition;  4)
101 102 103

CAGLI’s rejoinder;  and 5) AEV’s surrejoinder.

104 105

Following these, the Cebu City Regional Trial Court, Branch 20 arrived at the following findings and made a
definitive determination that CAGLI had no right to compel AEV to subject itself to arbitration with respect to
CAGLI’s claims under Annex SL-V:

After going over carefully the contentions and arguments of both parties, the court has found that no contract or
document exists binding CAGLI and AEV to arbitrate the former’s claim. The WLI Letter upon which the claim is
based confirms only the commitment of William Lines, Inc. (WLI) to purchase certain material inventories from
CAGLI. It does not involve AEV. The court has searched in vain for any agreement or document showing that
said commitment was passed on to and assumed by AEV. Such agreement or document, if one exists, being an
actionable document, should have been attached to the complaint. While the Agreement of January 8, 1996 and
the Share Purchase Agreement provide for arbitration of disputes, they refer to disputes arising from or in
connection with the Agreements themselves. No reference is made, as included therein, to the aforesaid
commitment of WLI or to any claim that CAGLI may pursue based thereon or relative thereto. Section 6.8 of the
Share Purchase Agreement, cited by plaintiff CAGLI, does not incorporate therein, expressly or impliedly, the
WLI commitment above-mentioned. It only declares that the rights and obligations of the parties under the WLI
Letter shall survive even after the termination of the Shareholder’s Agreement. It does not speak of arbitration.
Finally, the complaint does not allege the existence of a contract obliging CAGLI and AEV to arbitrate CAGLI’s
claim under the WLI Letter. Consequently, there is no legal or factual basis for the present complaint for
application for arbitration.  (Emphasis supplied)
106

In the assailed order dated May 5, 2011, the Cebu City Regional Trial Court, Branch 10 made much of the Cebu
City Regional Trial Court, Branch 20’s pronouncement in the latter’s December 4, 2009 order that "the [first]
complaint fails to state a cause of action."  Based on this, the Cebu City Regional Trial Court, Branch 10
107

concluded that the dismissal of the first complaint was one made without prejudice, thereby "leav[ing] the parties
free to litigate the matter ina subsequent action, as though the dismissal [sic] action had not been
commenced." 108

The Cebu City Regional Trial Court, Branch 10 is in serious error. In holding that the second complaint was not
barred by res judicata, the Cebu City Regional Trial Court, Branch 10 ignored established jurisprudence.

Referring to the earlier cases of Manalo v. Court of Appeals  and Mendiola v. Court of Appeals,  this court
109 110

emphasized in Luzon Development Bank v. Conquilla  that dismissal for failure to state a cause of action may
111

very well be considered a judgment on the merits and, thereby, operate as res judicata on a subsequent case:

[E]ven a dismissal on the ground of "failure to state a cause of action" may operate as res judicata on a
subsequent case involving the same parties, subject matter, and causes of action, provided that the order of
dismissalactually ruled on the issues raised.What appears to be essential to a judgment on the merits is that it
be a reasoned decision, which clearly states the facts and the law on which it is based.  (Emphasis supplied)
112

To reiterate, the Cebu City Regional Trial Court, Branch 20 made a definitive determination that CAGLI had no
right to compel AEV to subject itself to arbitrationvis-a-vis CAGLI’s claims under Annex SL-V. This determination
was arrived at after due consideration of the facts established and the arguments advancedby the parties.
Accordingly, the Cebu City Regional Trial Court, Branch 20’s December 4, 2009 order constituted a judgment on
the merits and operated as res judicata on the second complaint.

In sum, the requisites for res judicata have been satisfied and the second complaint should, thus, have been
dismissed. From this, it follows that CAGLI committed an act of forum shopping in filing the second complaint.
CAGLI instituted two suits in two regional trial court branches, albeit successively and not simultaneously. It
asked both branches to rule on the exact same cause and to grant the exact same relief. CAGLI did so after it
had obtained an unfavorable decision (at least with respect to AEV) from the Cebu City Regional Trial Court,
Branch 20. These circumstances afford the reasonable inference that the second complaint was filed in the
hopes of a more favorable ruling.

Notwithstanding our pronouncements sustaining AEV’s allegations that CAGLI engaged in forum shopping and
that the second complaint was barred by res judicata, we find that at the time of the filing of the second
complaint, AEV had already been discharged from the proceedings relating to the first complaint. Thus,
asbetween AEV and CAGLI, the first complaint was no longer pending at the time of the filing of the second
complaint. Accordingly, the second complaint could not have been barred by litis pendentia.

There is no agreement
binding AEV to arbitrate
with CAGLI on the latter’s
claims arising from Annex SL-V

For arbitration to be proper, it is imperative thatit be grounded on an agreement between the parties. This was
adequately explained in Ormoc Sugarcane Planters’ Association,Inc. v. Court of Appeals: 113

Section 2 of R.A. No. 876 (the Arbitration Law) pertinently provides:

Sec. 2. Persons and matterssubject to arbitration. – Two or more persons or parties may submit to the arbitration
of one or more arbitrators any controversy existing between them at the time of the submission and which may
be the subject of an action, or the parties to any contract may in such contract agree to settle by arbitration a
controversy thereafter arising between them. Such submission or contract shall be valid, enforceable and
irrevocable, save upon such grounds as exist at law for the revocation of any contract. . . . (Emphasis ours)

The foregoing provision speaks of two modes of arbitration: (a) an agreement to submit to arbitration somefuture
dispute, usually stipulated upon in a civil contract between the parties, and known as an agreement to submit to
arbitration, and (b) an agreement submitting an existing matter of difference to arbitrators, termed the
submission agreement. Article XX of the milling contract is an agreement to submit to arbitrationbecause it was
made in anticipation of a dispute that might arise between the parties after the contract’s execution.

Except where a compulsory arbitration is provided by statute, the first step toward the settlement of a difference
by arbitration is the entry by the parties into a valid agreement to arbitrate.An agreement to arbitrate is a
contract, the relation ofthe parties is contractual, and the rights and liabilities of the parties are controlled by the
law of contracts. In an agreement for arbitration, the ordinary elements of a valid contract must appear, including
an agreement toarbitrate some specific thing, and an agreement to abide by the award, either in express
language or by implication.  (Emphasis supplied)
114

In this petition, not one of the parties — AEV, CAGLI, Victor S. Chiongbian, and Benjamin D. Gothong — has
alleged and/or shown that the controversy is properly the subject of "compulsory arbitration [as] provided by
statute."  Thus, the propriety of compelling AEV to submit itself to arbitration must necessarilybe founded on
115

contract.

Four (4) distinct contracts have been cited in the present petition:

1. The January 8, 1996 Agreement in which ASC, CAGLI, and WLI merged their shipping enterprises,
with WLI (subsequently renamed WG&A) as the surviving entity. Section 11.06 of this Agreement
provided for arbitration as the mechanism for settling all disputes arising out of or in connection with the
Agreement.

2. Annex SL-V of the Agreement between CAGLI and WLI (and excluded ASC and any other Aboitiz-
controlled entity), and which confirmed WLI’s commitment to acquire certain inventories, worth not more
 than 400 million, of CAGLI. Annex SL-V stated that the acquisition was "pursuant to the Agreement."  It 116

did not contain an arbitration clause.

3. The September 23, 2003 Share Purchase Agreement or SPA in which AEV agreed to purchasethe
Chiongbian and Gothong groups' shares in WG&A’s issued and outstanding stock. Section 6.5 of the
SPA provided for arbitration as the mode of settling any dispute arising from the SPA. Section 6.8 of the
SPA further provided that the Agreement of January 8, 1996 shall be deemed terminatedexcept its
Annex SL-V.

4. The Escrow Agreement whereby ING Bank N.V.-Manila Branch was to take custody of the shares
subject of the SPA. Section 14.7 of the Escrow Agreement provided that all disputes arising from it shall
be settled via arbitration.

The obligation for WLI to acquire certain inventories of CAGLI and which is the subject of the present petition
was contained in Annex SL-V. It is therefore this agreement which deserves foremost consideration. As to this
particular agreement, these points must be underscored: first, that it has no arbitration clause; second, Annex
SL-V is only between WLI and CAGLI.

On the first point, it is clear, pursuant to this court’s pronouncements in Ormoc Sugarcane Planters’ Association,
that neither WLI nor CAGLI can compel arbitration under Annex SL-V. Plainly, there is no agreement to arbitrate.

It is of no moment that Annex SL-Vstates that it was made "pursuant to the Agreement" or that Section 11.06 of
the January 8, 1996 Agreement provides for arbitration as the mode of settling disputes arising out of or in
connection with the Agreement.

For one, to say that Annex SL-V was made"pursuant to the Agreement" is merely to acknowledge: (1) the factual
context in which Annex SL-V was executed and (2) that it was that context that facilitated the agreement
embodied in it. Absentany other clear or unequivocal pronouncement integrating Annex SL-V into the January 8,
1996 Agreement, it would be too much of a conjecture to jump to the conclusion that Annex SL-V is governed by
the exact same stipulations which govern the January 8, 1996 Agreement.

Likewise, a reading of the Agreement’s arbitration clause will reveal that it does not contemplate disputes arising
from Annex SL-V.

Section 11.06 of the January 8, 1996 Agreement requires the formation of an arbitration tribunal composed of
four (4) arbitrators. Each of the parties — WLI, CAGLI, and ASC — shall appoint one (1) arbitrator, and the
fourth arbitrator, who shall actas chairman, shall be appointed by the three (3) arbitrators appointed by the
parties. From the manner by which the arbitration tribunal is to be constituted, the necessary implication is that
the arbitration clause is applicable tothree-party disputes — as will arise from the tripartite January 8, 1996
Agreement — and not to two-party disputesas will arise from the two-party Annex SL-V.

From the second point — that Annex SL-V is only between WLI and CAGLI — it necessarily follows that none
but WLI/WG&A/ATSC and CAGLI are bound by the terms of Annex SL-V. It is elementary that contracts are
characterized by relativity or privity, that is, that "[c]ontracts take effect only between the parties, their assigns
and heirs."  As such, one who is not a party to a contract may not seek relief for such contract’s breach.
117

Likewise, one who is not a party to a contract may not be held liable for breach of any its terms.

While the principle of privity or relativity of contracts acknowledges that contractual obligations are transmissible
to a party’s assigns and heirs, AEV is not WLI’s successor-in-interest. In the period relevant to this petition, the
transferee of the inventories transferred by CAGLI pursuant to Annex SL-V assumed three (3) names: (1) WLI,
the original name of the entity that survived the merger under the January 8, 1996 Agreement; (2) WG&A, the
name taken by WLI in the wake of the Agreement; and (3) ATSC, the name taken by WLI/WG&A inthe wake of
the SPA. As such, it is now ATSC that is liable under Annex SL-V.

Pursuant to the January 8, 1996 Agreement, the Aboitiz group (via ASC) and the Gothong group (viaCAGLI)
became stockholders of WLI/WG&A, along with the Chiongbiangroup (which initially controlled WLI). This
continued until, pursuant to the SPA, the Gothong group and the Chiongbian group transferred their shares to
AEV. With the SPA, AEV became a stockholder of WLI/WG&A, which was subsequently renamed ATSC.
Nonetheless, AEV’s status asATSC’s stockholder does not subject it to ATSC’s obligations
It is basic that a corporation has a personality separate and distinct from that of its individual stockholders. Thus,
a stockholder does not automatically assume the liabilities of the corporation of which he is a stockholder. As
explained in Philippine National Bankv. Hydro Resources Contractors Corporation: 118

A corporation is an artificial entitycreated by operation of law. It possesses the right of succession and such
powers, attributes, and properties expressly authorized by law or incident to its existence. It has a personality
separate and distinct from that of its stockholders and from that of other corporations to which it may be
connected. As a consequence of its status as a distinct legal entityand as a result of a conscious policy decision
to promote capital formation, a corporation incurs its own liabilities and is legally responsible for payment of its
obligations. In other words, by virtue of the separate juridical personality ofa corporation, the corporate debt or
credit is not the debt or credit of the stockholder. This protection from liability for shareholders is the principle of
limited liability.
119

In fact, even the ownership by a single stockholder of all or nearly all the capital stock of a corporation is not, in
and of itself, a ground for disregarding a corporation’s separate personality. As explained in Secosa v. Heirs of
Francisco: 120

It is a settled precept in this jurisdiction that a corporation is invested by law with a personality separate from
thatof its stockholders or members. It has a personality separate and distinct from those of the persons
composing it as well as from that of any other entity to which it may be related. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not in itself
sufficient ground for disregarding the separate corporate personality.A corporation’s authority to act and its
liability for its actions are separate and apart from the individuals who own it.

The so-called veil of corporation fiction treats as separate and distinct the affairs of a corporation and its officers
and stockholders. As a general rule, a corporation will be looked upon as a legal entity, unless and until sufficient
reason to the contrary appears. When the notion of legal entity is used to defeat public convenience, justify
wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons. Also, the
corporate entity may be disregarded in the interest of justice in such cases asfraud that may work inequities
among members of the corporation internally, involving no rights of the public or third persons. In both instances,
there must have been fraud and proof of it. For the separate juridical personality of a corporation to be
disregarded, the wrongdoing must be clearly and convincingly established. It cannot be presumed.  (Emphasis
121

supplied)

AEV’s status as ATSC’s stockholder is, in and of itself, insufficient to make AEV liable for ATSC’s obligations.
Moreover, the SPA does not contain any stipulation which makes AEV assume ATSC’s obligations. It is true that
Section 6.8 of the SPA stipulates that the rights and obligations arising from Annex SL-V are not terminated. But
all that Section 6.8 does is recognize that the obligations under Annex SL-V subsist despite the termination of
the January 8, 1996 Agreement. At no point does the text of Section 6.8 support the position that AEV steps into
the shoes of the obligor under Annex SL-V and assumes its obligations.

Neither does Section 6.5 of the SPAsuffice to compel AEV to submit itself to arbitration. While it is true that
Section 6.5 mandates arbitration as the mode for settling disputes between the parties to the SPA, Section 6.5
does not indiscriminatelycover any and all disputes which may arise between the parties to the SPA. Rather,
Section 6.5 is limited to "dispute[s] arising between the parties relating tothis Agreement [i.e., the SPA]."  To
122

belabor the point, the obligation which is subject of the present dispute pertains to Annex SL-V, not to the SPA.
That the SPA, in Section 6.8, recognizes the subsistence of Annex SL-Vis merely a factual recognition. It does
not create new obligations and does not alter or modify the obligations spelled out in Annex SL-V.

AEV was drawn into the present controversy on account of its having entered into the SPA. This SPA made AEV
a stockholder of WLI/WG&A/ATSC. Even then, AEV retained a personality separate and distinct from
WLI/WG&A/ATSC. The SPA did not render AEV personally liable for the obligations of the corporation whose
stocks it held.

The obligation animating CAGLI’s desire to arbitrate is rooted in Annex SL-V. Annex SL-V is a contractentirely
different from the SPA. It created distinct obligations for distinctparties. AEV was never a party to Annex SL-V.
Rather than pertaining to AEV, Annex SL-V pertained to a different entity: WLI (renamed WG&A then renamed
ATSC). AEV is, thus, not bound by Annex SL-V.

On one hand, Annex SL-V does not stipulate that disputes arising from it are to be settled via arbitration.On the
other hand, the SPA requires arbitration as the mode for settling disputes relating to it and recognizes the
subsistence of the obligations under Annex SL-V. But as a separate contract, the mere mention of Annex SL-V
in the SPA does not suffice to place Annex SL-V under the ambit of the SPA or to render it subject to the SPA’s
terms, such as the requirement to arbitrate.

WHEREFORE, the petition is GRANTED. The assailed orders dated May 5, 2011 and June 24,2011 of the
Regional Trial Court, Cebu City, Branch 10 in Civil Case No. CEB-37004 are declared VOID. The Regional Trial
Court, Cebu City, Branch 10 is ordered to DISMISSCivil Case No. CEB-37004.

SO ORDERED.

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

FIL-ESTATE PROPERTIES, INC., PETITIONER, VS. PAULINO REYES, DANILO BAON, PACITA D.
VADURIA, JULIE MONTOYA, MERCEDES RAMOS, GERONIMO DERAIN, FELICIANO D. BAON, PACIFICO
DERAIN, EUTERIO SEVILLA, MAMERTO B. ESPINELI, CARMELITA GRAVADOS, AVELINO E. PASTOR,
ANTONIO BUHAY, TIRZO GULFAN, JR., FELIX SOBREMONTE, ERNESTO SOBREMONTE, BEN PILIIN,
PASCUAL V. DISTREZA, JACINTO P. BACALAG, ADELAIDA BAYANI, ELMERT BAYANI, EGLESIA
SOBREMONTE, NICASIO TINAUGISAN, VICENTE VILLALUNA, MEYNARDO VILLALUNA, LEOPOLDO DE
JOYA, LENIE DE JOYA, LIBERATO DE JOYA, CRESENCIANA DE JOYA, FRESCO CATAPANG, ROSITA
CATAPANG, DOMINGO P. LIMBOC, VIRGILIO A. LIMBOC, VICENTE LIMBOC, MARIO H. PERNO,
LAZARITO CABRAL, CARLITO CAPACIA, RESPONDENTS.

[G.R. No. 189315]

PAULINO REYES, DANILO BAON, PACITA D. VADURIA, JULIE MONTOYA, BENIGNO BAON, BEATRIZ
DERAIN, MARILOU SEVILLA, MAMERTO B. ESPINELLI, CARMELITA GRANADOS, ANTONIO BUHAY,
FELIX SOBREMONTE, NICASIO TINAMISAN, CRESCENCIANA DE JOYA, FRESCO CATAPANG, SONNY
CATAPANG, MARIO H. PERNO, CARLITO CAPACIA, AQUILINA BAUTISTA, FELECITO BARCELON, LUIS
MANGI, BAYANI ORIONDO, BASILISA DERAIN, GUILLERMO BAUTISTA, BEATRIZ SEVILLA, NICOLAS
ASAHAN, ROSITA MERCADO, LAMBERTO BAUTISTA, REXIE DINGLES, JOSE QUIROZ, PETITIONERS,
VS. FIL-ESTATE PROPERTIES, INC., RESPONDENT.

[G.R. No. 200684]

NOLITO G. DEL MUNDO, GABRIEL A. MAULLON, MARIA L. TENORIO, NOEL G. DEL MUNDO, RACQUEL
DEL MUNDO-REDUCA, TEODORICO D. AGUSTIN, REPRESENTED BY THEIR ATTORNEY-IN-FACT,
NOMER G. DEL MUNDO, PETITIONERS, VS. THE MANILA SOUTHCOAST DEVELOPMENT
CORPORATION, INC., RESPONDENT.

DECISION

LEONEN, J.:

The Department of Agrarian Reform is vested with primary jurisdiction to determine and adjudicate agrarian
reform matters and has exclusive original jurisdiction over all matters involving the implementation of the
Comprehensive Agrarian Reform Law. In carrying out its mandate, the Department of Agrarian Reform, through
its Secretary, may investigate acts that are directed toward the circumvention of the law's objectives. Its findings
are accorded great weight and respect, especially when supported by substantial evidence.

Before this Court are consolidated Petitions for Review on Certiorari involving Hacienda Looc in Nasugbu,
Batangas. Portions of the property had previously been awarded to farmer-beneficiaries through Certificates of
Land Ownership Award, but these certificates were canceled on the ground that the lands covered were
excluded from the Comprehensive Agrarian Reform Program.

The Petition docketed as G.R. No. 1527971 questions the Decision2 of the Court of Appeals in CA-G.R. SP No.
47497, which affirmed then Agrarian Reform Secretary Ernesto D. Garilao's (Agrarian Reform Secretary Garilao)
Order3 declaring 70 hectares of the 1,219.0133 hectares of Hacienda Looc as covered land under the
Comprehensive Agrarian Reform Program.

The Petition docketed as G.R. No. 1893154 challenges the Decision5 and Resolution6 of the Court of Appeals in
CA-G.R. SP No. 60203, which upheld the Office of the President's Decision affirming the same Order7 issued by
Agrarian Reform Secretary Garilao.

Finally, the Petition docketed as G.R. No. 2006848 assails the Decision9 and Resolution10 of the Court of
Appeals in CA-G.R. SP No. 111965, which affirmed the Department of Agrarian Reform Adjudication Board's
Decision11 upholding the cancellation of Certificates of Land Ownership Award previously granted to farmer-
beneficiaries of Hacienda Looc.

Hacienda Looc is an 8,650.7778-hectare property in Nasugbu, Batangas12 that is covered by Transfer

Certificate of Title No. T-2871913 and registered in the name of the Development Bank of the Philippines
(Development Bank).14 Development Bank acquired the property from Magdalena Estate, Inc. and the
Philippine National Bank.15

In 1987, then President Corazon Aquino issued Executive Order No. 14, transferring Development Bank's
certain assets and liabilities to the government, including Hacienda Looc. Following the conveyance, the
government entered into an agreement with the Asset Privatization Trust, in which the latter was appointed as
trustee of the property.16

On June 28, 1990, Asset Privatization Trust, through a Memorandum of Agreement,17 offered to sell portions of
Hacienda Looc to the Department of Agrarian Reform under the Voluntary Offer to Sell scheme of Republic Act
No. 6657.18

Through this agreement, Asset Privatization Trust transferred the physical possession of Hacienda Looc to the
Department of Agrarian Reform. In effect, the Department of Agrarian Reform was allowed to: (1) identify and
segregate areas that were covered by the Comprehensive Agrarian Reform Program; (2) purchase the
segregated areas; and (3) return portions of the property that were not covered.19

From 1991 to 1993, the Department of Agrarian Reform distributed 25 Certificates of Land Ownership Award
covering 3,981.2806 hectares of land:

LOT NO. LOCATION CLOA NO. AREA (Has.)

1 LOOC 6639 480.5125

2 LOOC 4795 46.0099

3 LOOC 5514 328.7855

4 LOOC 4796 46.4415

5 CALAYO 4152 117.223

6 CALAYO 4153 50.676

8 CALAYO 4154 4.7502

9 CALAYO 4156 21.5041

10 CALAYO 4155 0.7274

11 CALAYO 4157 135.2297

12 CALAYO 4158 133.4841

13 CALAYO 4159 79.4639

14 PAPAYA 4474 113.0728

15 PAPAYA 4476 30.6594

16 PAPAYA 4475 234.3264

 17 PAPAYA 4527 79.823

18 PAPAYA 4526 91.4672

19 PAPAYA 4478 266.8548

20 PAPAYA 4477 43.8803

21 PAPAYA 4995 48.6447

22 PAPAYA 4994 266.5072

23 BULIHAN 5373 720.6063

24 BULIHAN 5513 387.0644

31 PAPAYA 5614 195.5431

32 CALAYO 6662 58.02320

Meanwhile, on December 10, 1993, Asset Privatization Trust offered to sell its rights and interests in Hacienda
Looc through public bidding. Bellevue Properties, Inc. (Bellevue), which emerged as the winning bidder, then
assigned its right to purchase Hacienda Looc to the Manila Southcoast Development Corporation (Manila
Southcoast).21

By virtue of the assignment, Asset Privatization Trust executed a Deed of Sale22 transferring all its rights,
claims, and benefits over Hacienda Looc to Manila Southcoast.23 Accordingly, Transfer Certificate of Title No.
T-28719 was canceled and a new certificate of title was issued in Manila Southcoast's name.24 Manila
Southcoast was able to register portions of Hacienda Looc in its name.25

On April 10, 1995, Manila Southcoast filed a Petition26 before the Department of Agrarian Reform Adjudication
Board Region IV.27 It sought, among others, the cancellation of the 25 Certificates of Land Ownership Award,
the resurvey of Hacienda Looc, and the reconveyance of the excluded areas.28

The Petition, which was docketed as DARAB Case No. 3468, was referred to the Provincial Agrarian Reform
Adjudication Board of Batangas.29 Provincial Adjudicator Antonio C. Cabili initially handled the case but later
inhibited himself from further hearing the Petition. The case was, thus, elevated to the Regional Agrarian Reform
Adjudication Board under Regional Adjudicator Fe Arche-Manalang (Regional Adjudicator Arche-Manalang).30

Instead of filing an answer, the farmer-beneficiaries moved for the Petition's dismissal. Manila Southcoast, in
turn, opposed the motions.31 The parties exchanged pleadings,32 but before the pending incidents could be
resolved, several of the farmer-beneficiaries entered into amicable settlements with Manila Southcoast.33

Between January and June 1996, Regional Adjudicator Arche-Manalang rendered three (3) Partial Summary
Judgments and an Order canceling 15 Certificates of Land Ownership Award:

Judgment/Order CLOA No. Lot No.

First Partial Summary Judgment34 dated January 8, 1996 4152 5

4153 6

4157 11

4158 12

4159 13

4474 14

4475 16

4476 15

4478 19
 6662 32

Order35 dated 4156 9
February 16 1996 4477 20

Second Partial Summary 4995 21

Judgment36 dated May 16, 1996 5614 31

Third Partial Summary Judgment37

4154 8
dated June 14, 1996

The Certificates of Land Ownership Award were canceled based on the waivers allegedly executed by the
farmer-beneficiaries.38

On October 27, 1997, Agrarian Reform Undersecretary Artemio A. Adasa (Undersecretary Adasa) issued an
Order39 canceling Certificates of Land Ownership Award Nos. 6639, 5514, 4796, 4155, 4527, 4526, 4994, 5373,
and 5513 from the coverage of the Comprehensive Agrarian Reform Program.40

Accordingly, these Certificates of Land Ownership Award were canceled by Regional Adjudicator Conchita C.
Minas (Regional Adjudicator Minas) in a March 10, 1998 Order.41

Aggrieved, the farmer-beneficiaries appealed the case. However, this appeal was denied by the Department of
Agrarian Reform Adjudication Board in its January 25, 2005 Decision.42

Meanwhile, on October 17, 1995, while its Petition was still pending, Manila Southcoast entered into a joint
venture agreement with Fil-Estate Properties, Inc. (Fil-Estate). The agreement was made for the development of
the 10 lots covered by Certificates of Land Ownership Award Nos. 4152, 4153, 4157, 4158, 4159, 4474, 4475,
4476, 4478, and 6662, with an area totaling 1,219.0133 hectares. These were the same lots that would later be
the subject of the First Partial Summary Judgment.43

In view of this joint venture agreement, Fil-Estate filed a Petition44 on October 8, 1996, praying that these 10
lots be excluded from the coverage of the Comprehensive Agrarian Reform Program. It claimed that the lots had
slopes of more than 18%.45

For their part, the affected farmer-beneficiaries questioned the validity of the cancellation proceedings presided
by Regional Adjudicator Arche Manalang, claiming that they were denied due process.46 They also claimed that
some waivers had been falsified, pointing out that the signatories were already dead at the time of execution of
the waivers.47

Following this, Agrarian Reform Secretary Garilao instructed Undersecretary for Operations Hector D. Soliman
(Undersecretary Soliman) to conduct a fact-finding investigation. Hearings were then conducted.48

In his Report,49 Undersecretary Soliman recommended that a cease and desist order be issued to temporarily
stop the development of the area. He also suggested that a massive information campaign be done to apprise
the farmer-beneficiaries of their rights and responsibilities under the agrarian reform law. Moreover, he
recommended that an investigating panel be formed to look into the allegedly falsified waivers.50

These recommendations were favorably acted upon by Agrarian Reform Secretary Garilao.51

On December 26, 1996, Department of Agrarian Reform Regional Director Remigio A. Tabones (Regional
Director Tabones) issued an Order52 granting Fil-Estate's Petition and ordering that the 10 lots be excluded
from the coverage of the Comprehensive Agrarian Reform Program.

Thus, the affected farmer-beneficiaries appealed before the Agrarian Reform Secretary.53

In his March 25, 1998 Order,54 Agrarian Reform Secretary Garilao, on the basis of Undersecretary Soliman's
report and the report of three (3) other task forces, declared 70 hectares of the 1,219.0133-hectare parcel of
land as covered land under the Comprehensive Agrarian Reform Program. The dispositive portion of the Order
read:
WHEREFORE, given these different recommendations of four different Committees and Task Forces, after a
careful study of the proceedings of the different committees and Task Forces, this Order is hereby issued as
follows:

1. Coverage of the following agriculturally developed areas, re documentation of the same under
CARP acquisition and award to individual beneficiaries found to be qualified under the CARL:

a. Lot No. 5: 2.3029 hectares as farmlots and 0.0666 as homelots, the homelots to be
awarded to actual occupants thereof. Priority for the award of the farmlot will be the
claimant, UNLESS there is reason to disqualify him and said award shall not result in the
claimant becoming an owner of more than three (3) hectares of agricultural land;

b. Lot No. 6: 12.8467 hectare farmlot. Priority for the award of the farmlot will be the
claimant, UNLESS there is reason to disqualify him and said award shall not result in the
claimant becoming an owner of more than three (3) hectares of agricultural land;

c. Lot No. 11: 1.1234 hectares farmlot and 0.6388 homelots to be awarded to actual
occupants thereof. Priority for the award of the farmlot will be the claimant, UNLESS
there is reason to disqualify him and said award shall not result in the claimant becoming
an owner of more than three (3) hectares of agricultural land;

d. Lot No. 12: 13.894 hectares as farmlots. Some 2.3674 has. and .4586 has. were
deducted from the claim of Mr. Jaime Sobremonte and Mr. Leonardo Caronilla,
respectively, as these already exceed the three hectares award ceiling. The area has
been scraped by previous bulldozing by the applicant such that it becomes impossible for
the team to determine the actual agricultural development of the area. In view of this
situation, the Task Force deemed it proper to award the land to the claimants as the
presumption must tilt in their favor, there being no contrary evidence presented by the
applicant. The award shall not exceed three hectares per claimant UNLESS there is
reason to disqualify him and said award shall not result in the claimant becoming an
owner of more than three (3) hectares of agricultural land;

e. Lot No. 13: 0.2251 hectare farmlot. Priority for the award of the farmlot will be the
claimant, UNLESS there is reason to disqualify him and said award shall not result in the
claimant becoming an owner of more than three (3) hectares of agricultural land;

g. (sic) Lot No. 15: 7.6376 hectares as farmlot. However, the coverage of the areas
identified as fishponds shall be suspended until the Courts resolve the constitutionality of
the law exempting fishponds from the coverage of agrarian reform. Priority for the award
of the farmlot will be the claimant, UNLESS there is reason to disqualify him and said
award shall not result in the claimant becoming an owner of more than three (3) hectares
of agricultural land;

h. (sic) Lot No. 16: 14.2026 hectares as farmlots. Priority for the award of the farmlot will
be the claimant, UNLESS there is reason to disqualify him and said award shall not result
in the claimant becoming an owner of more than three (3) hectares of agricultural land;

i. (sic) Lot No. 19: 16.5695 hectares as farmlots. Priority for the award of the farmlot will
be the claimant, UNLESS there is reason to disqualify him and said award shall not result
in the claimant becoming an owner of more than three (3) hectares of agricultural land;

j. (sic) Approval of the distribution of homelots in Lots No. 9 and 20. As manifested, the
total area of 65.38 hectares shall be distributed primarily as homelots to actual
occupants. The area within Lot 20 which is agriculturally developed shall be subjected to
further verification as to its CARPability and the same shall also be awarded as farmlots,
covered by Certificates of Land Ownership Awards (CLOAs). Priority for the award of the
farmlot will be the claimant, UNLESS there is reason to disqualify him and said award
shall not result in the claimant becoming an owner of more than three (3) hectares of
agricultural land;
 2. Maintaining the coverage of some 1,197 hectares, more or less of lands under Operation Land
Transfer and conducting a survey of the actual tillers of the land for purposes of awarding the
same/re-allocating the same to its actual tillers in accordance with the land to the tiller principle[;]

3. On the matter of Environmental Protection. In areas that will be exempted by virtue of Section
10, of RA 6657, any development thereon, should be consistent with the intent of the law to
preserve these lands for forest cover and soil conservation. It is therefore recommended that the
DENR study the development of the area with this end in view in its issuance of ECCs.

Particularly, it is recommended that a buffer zone be established by the DENR to ensure

protection of OLT and CARP lands from damage or erosion, as a result of any development to be
implemented in excluded areas;

4. Re-conveyance of the exempt parcels to the Asset Privatization Trust, or its successors-in-
interest, after the CLOAs are properly cancelled by the proper forum;

5. Nullifying the alleged sale or transfer of rights over the CLOAs as contrary to the provisions of
agrarian law; and

6. Directing the Regional Director to post a copy of this Order, including the maps attached
hereto in the baranggay (sic) halls of Bgys. Calayo and Papaya to afford all parties the
opportunity to be notified and to cause the amendments of CLOAs issued.

SO ORDERED.55

Following this Order, the farmer-beneficiaries moved for reconsideration and sought the issuance of a
clarificatory ruling. However, their Motion was denied in Agrarian Reform Secretary Garilao's June 15, 1998
Order.56

For its part, Fil-Estate filed before the Court of Appeals a Petition for Partial Review57 seeking that paragraphs
1, 2, 4, 5, and 6 be deleted from the dispositive portion of the March 25, 1998 Order. It argued that the 10 lots,
which are located inside a tourist zone, were excluded from the Comprehensive Agrarian Reform Law's
coverage. It further averred that Agrarian Reform Secretary Garilao erred when he awarded portions of the lots
to farmer-beneficiaries who did not file an appeal. This Petition was docketed as CA-G.R. SP No. 47497.58

As this Petition for Partial Review was pending, the farmer-beneficiaries appealed their case before the Office of
the President.59 They also filed a Petition to Re-Open Case before the Department of Agrarian Reform
Secretary,60 but it was denied on May 17, 2000.61

Subsequently, in its July 5, 2000 Decision, the Office of the President dismissed the farmer-beneficiaries'
appeal.62 It upheld the Department of Agrarian Reform's findings that majority of the 1,219.0133-hectare parcel
of land had an average slope of 18% and were agriculturally undeveloped.63

Aggrieved, the farmer-beneficiaries filed a Petition for Review64 before the Court of Appeals, which was
docketed as CA-G.R. SP No. 60203. Among others, they argued that the Office of the President erred in limiting
its scope of review to the 1,219.0133-hectare property when it should have conducted the review over the entire
Hacienda Looc based on the community of interest principle. They also argued that the Office of the President
erred in characterizing the property as undeveloped and in relying on the findings of the Department of Agrarian
Reform, especially since the proceedings for exemption were done in secrecy.65

In a November 23, 2000 Resolution, however, the Court of Appeals dismissed the case on technical grounds.
The farmer-beneficiaries moved for reconsideration, but the Motion was likewise denied.66

Thus, the farmer-beneficiaries filed a Petition for Certiorari before this Court, docketed as G.R. No. 148967.67 In
a February 9, 2007 Decision on the case entitled Reyes v. Fil-Estate Properties, Inc.,68 this Court remanded the
case to the Court of Appeals for it to be resolved on the merits.

As to Fil-Estate's Petition for Partial Review in CA-G.R. SP No. 47497, the Court of Appeals rendered a
Decision69 on March 26, 2002 affirming Agrarian Reform Secretary Garilao's March 25, 1998 Order in toto.70
In its ruling, the Court of Appeals declared moot the allegation that the farmer-beneficiaries committed forum
shopping.71

As to the merits of the case, the Court of Appeals held that although Nasugbu, Batangas was declared a tourist
zone under Proclamation No. 1520, none of the areas were identified by the Philippine Tourism Authority to have
potential tourism value. Its classification as a tourist zone did not automatically exclude it from the coverage of
the Comprehensive Agrarian Reform Program. Further, the enumeration of the excluded areas under Section 10
of Republic Act No. 6657 neither mentions nor describes areas that have been reserved as tourist zones.72

The Court of Appeals upheld the factual findings of Agrarian Reform Secretary Garilao regarding the lots' slope
and level of development.73 As to the farmer-beneficiaries who did not appeal, it ruled that they may benefit
from the favorable ruling of Agrarian Reform Secretary Garilao based on the community of interest principle.74

As to the remanded case, on February 27, 2009, the Court of Appeals rendered a Decision75 in CA G.R. SP No.
60203 affirming the Office of the President's July 5, 2000 Decision. It ruled that its appellate jurisdiction was
limited to the subject matter of the case, which only covers the 1,219.0133-hectare parcel of land, not the entire
Hacienda Looc. Otherwise, the decision would affect persons not impleaded and would open issues that were
not raised in the earlier proceedings.

For the substantive issues, the Court of Appeals affirmed the factual findings of Agrarian Reform Secretary
Garilao on the nature of the 1,219.0133-hectare parcel of land, adhering to the rule of according great respect to
administrative agencies' factual findings. It also ruled that the farmer-beneficiaries were not denied due process
because they were given the opportunity to appeal and seek reconsideration.76

Meanwhile, six (6) farmer-beneficiaries—Nolito G. del Mundo, Maria L. Tenorio, Noel G. del Mundo, Racquel del
Mundo-Reduca, Teodorico D. Agustin, and Gabriel Maullon (Del Mundo, et al.)—filed a separate Petition for
Review before the Court of Appeals, which was docketed as CA-G.R. SP No. 111965. They were assailing the
Department of Agrarian Reform Adjudication Board's January 25, 2005 Decision, which upheld the cancellation
of their Certificate of Land Ownership Award Nos. 5373 and 5513.77

Del Mundo, et al. questioned the validity of the certificates' cancellation, arguing that it never attained finality as
they were never notified of it. They further argued that their lands are agriculturally developed and, thus, covered
under the Comprehensive Agrarian Reform Program. They insisted that while they did not appeal the March 10,
1998 Order of Regional Adjudicator Minas, they could benefit from the appeal filed by the other farmer-
beneficiaries based on the community of interest principle.78

Manila Southcoast, the respondent in Del Mundo, et al.'s Petition, argued that the cancellation of the Certificates
of Land Ownership Award had become final and executory as to their case, since they failed to appeal Regional
Adjudicator Minas' March 10, 1998 Order.79 It also pointed out that the lands covered under their certificates
have slopes of more than 18% and are undeveloped.80

In its September 28, 2011 Decision,81 the Court of Appeals affirmed the Department of Agrarian Reform
Adjudication Board's January 25, 2005 Decision. It ruled that the decision82 canceling the Certificates of Land
Ownership Award of Del Mundo, et al. had attained finality as to them for their failure to appeal from Regional
Adjudicator Minas' Order. It also adopted the Department of Agrarian Reform's finding that the subject lands
were "mostly idle and vacant, predominantly forested, hilly and mountainous with thick growths of shrubs and
grass . . . with above 18 percent slope."83

Moreover, the Court of Appeals rejected Del Mundo, et al.'s allegation that they were denied due process. Even
if they were not notified of the cancellation proceedings, the Court of Appeals pointed out that the defect was
cured when they submitted, although belatedly, an Appearance and Opposition to the Notice of Withdrawal of
Appeal and Motion for Reconsideration.84

Del Mundo, et al. moved for reconsideration. They contended, among others, that Associate Justice Marlene
Gonzales-Sison (Associate Justice Gonzales-Sison), who had concurred in the Court of Appeals Decision,
should have mandatorily inhibited form the case on the ground of bias and partiality. Their Motion, however, was
denied by the Court of Appeals in its February 20, 2012 Resolution.85

Following all of these proceedings, the parties filed different pleadings before this Court.
On May 20, 2002, Fil-Estate filed a Petition for Review on Certiorari86 assailing the Court of Appeals' March 26,
2002 Decision in CA-G.R. SP No. 47497. To recall, the Court of Appeals affirmed Agrarian Reform Secretary
Garilao's March 25, 1998 Order declaring 70 hectares of the 1,219.0133-hectare parcel of land in Hacienda
Looc as covered land under the Comprehensive Agrarian Reform Program. Docketed as G.R. No. 152797, the
Petition was filed against farmer-beneficiaries headed by Paulino Reyes (Reyes, et al.).

After an exchange of pleadings, the Petition was given due course on August 13, 2003.87 The parties filed their
respective memoranda on December 1, 2003 and December 10, 2003.88

On October 19, 2009, Reyes, et al. filed their own Petition for Review on Certiorari,89 docketed as G.R. No.
189315, questioning the Court of Appeals' February 27, 2009 Decision and August 25, 2009 Resolution in CA -
G.R. SP No. 60203. In these assailed judgments, the Court of Appeals affirmed the Office of the President's July
5, 2000 Decision upholding Agrarian Reform Secretary Garilao's March 25, 1998 Order. Fil-Estate filed its
Comment on March 3, 2010.90

On March 15, 2010, the Petitions were consolidated.91

On September 2, 2011, Reyes, et al. filed a Reply92 to Fil-Estate's Comment in G.R. No. 189315.

Meanwhile, on April 4, 2012, Del Mundo, et al. also filed before this Court their Petition for Review on
Certiorari93 questioning the September 28, 2011 Decision and February 20, 2012 Resolution of the Court of
Appeals in CA-G.R. SP No. 111965. Manila Southcoast later filed a Comment.94 This case was docketed as
G.R. No. 200684.

On August 29, 2012, all three (3) cases were consolidated.95

On October 2, 2014, Reyes, et al. and Fil-Estate, the parties in G.R. Nos. 152797 and 189315, later filed a Joint
Motion for Partial Judgment Based on Compromise Agreement (Joint Motion for Partial Judgment).96 Under the
Compromise Agreement, the parties sought to exclude from litigation Lots 780-12 and 780-13, which are
covered by Certificates of Land Ownership Award Nos. 4158 and 4159, respectively. These lots have a total
land area of 212 hectares.97

The Compromise Agreement identified the proper claimants to Lots 780-12 and 780-13, namely:

For Lot 780-12: Antonio Buhay, Mamerto Espineli, Carmelita Granados, Tirso Gulfan, Jr., Heirs of Avelino Pastor
(represented by Felipe G. Pastor), Heirs of Benjamin Piliin (represented by Hermie M. Piliin), Felix Sobremonte,
and Heirs of Egliceria Sobremonte (represented by Dionisio Sobremonte) (hereafter collectively known as the
Lot 780-12 Claimants); and

For Lot 780-13: Adelaida S. Bayani, Elmer Bayani, Heirs of Jacinto Cabalag (represented by Lauriana Cabalag),
Heirs of Pascual Destreza (represented by Eulogia D. Sobremonte), Ernesto Sobremonte, and nicasio
Tinamisan (hereafter collectively known as the Lot 780-13 Claimants).98

The Heirs of Francisco Mendoza, Liberato De Joya, Jocelyn Mercado Reyes, Juan Bautista, Paulino M.
Mercado, Tesresita Dinglas, Heirs of Moses Carable, and Enriquito Dinglas are not parties to G.R. Nos. 152797
and 189315 but have voluntarily submitted themselves to this Court's jurisdiction to seek the approval of the
Compromise Agreement.99

The Compromise Agreement, however, was only signed by the parties' respective counsels without a special
power of attorney.100 The Compromise Agreement also omitted other parties to G.R. Nos. 152797 and
189315.101

Thus, on October 21, 2015, this Court issued a Resolution102 requiring the parties to submit a compromise
agreement signed either by themselves or by their counsel with a special power of attorney. The parties were
also required to include all the parties to G.R. Nos. 152797 and 189315 in the Joint Motion for Partial
Judgment.103

On March 11, 2016, the parties in the Joint Motion for Partial Judgment submitted a Sworn Declaration with
Instructions to Counsel dated September 18, 2014, individually signed by the petitioners in G.R. Nos. 152797
and 189315. They also submitted individual Special Powers of Attorney executed by the parties and their
heirs.104
In the August 30, 2016 Resolution,105 the parties in G.R. Nos. 152797 and 189315 were ordered to comment
on the effects of the omission of Fresco Catapang, Rosita Catapang, Domingo P. Limboc, Virgilio A. Limboc,
Sonny Catapang, and Rexie Dingles from the Joint Motion for Partial Judgment. In compliance, the parties
submitted their explanation stating that the six (6) individuals are claimants of other lots.106

In G.R. Nos. 152797 and G.R. No. 189315, the following arguments were raised:

Fil-Estate argues that the proper remedy from the decisions, resolutions, and orders of the Agrarian Reform
Secretary is a petition for review under Rule 43 of the Rules of Court, not an appeal to the Office of the
President.107

Fil-Estate also argues that Reyes, et al. committed willful and deliberate forum shopping. It points out that the
three (3) pleadings filed by Reyes, et al. raised the same allegations and prayed for the same reliefs: (1) in their
appeal before the Office of the President, seeking the denial of Fil-Estate's application for exemption; (2) in their
Comment before the Court of Appeals in CA-G.R. SP No. 47497; and (3) in their Petition to Re-Open Case
before the Department of Agrarian Reform.108

As to the substantive issues, Fil-Estate essentially asserts that the 10 lots subject of Regional Adjudicator Arche-
Manalang's First Partial Summary Judgment are excluded from the coverage of the Comprehensive Agrarian
Reform Program.

According to Fil-Estate, Nasugbu, Batangas was classified as a tourism zone and under the Philippine Tourism
Authority's control pursuant to Proclamation No. 1520, issued by then President Ferdinand Marcos (President
Marcos) on November 20, 1975. The entire coastline of Batangas was also classified as a tourism zone under
Proclamation No. 1801, which was also issued by then President Marcos on March 10, 1978. The Philippine
Tourism Authority even attested that Hacienda Looc has been identified as one (1) of the four (4) major tourism
development areas. Therefore, the 10 lots are excluded from the coverage of the Comprehensive Agrarian
Reform Program, regardless of whether they have slopes of less than 18% or whether they are agriculturally
developed.109

In any case, Fil-Estate insists that the 10 lots are undeveloped and have slopes of 18% or over based on the
certifications issued by the Community Environmental and Natural Resources Office and the Department of
Agriculture.110

Finally, Fil-Estate claims that the Court of Appeals erred in sustaining the March 25, 1998 Order of Agrarian
Reform Secretary Garilao, who adjudicated on matters that were not at issue. The only issue was the propriety
of Regional Director Tabones' Order excluding the 10 lots from the Comprehensive Agrarian Reform Program,
but he supposedly exceeded the scope of his review by looking at the validity of the cancellation of the 25
Certificates of Land Ownership Award.111

On the other hand, Reyes, et al. argue that under the doctrine of exhaustion of administrative remedies, an
appeal before the Office of the President is the proper remedy against Agrarian Reform Secretary Garilao's
Orders. They point out that it was Fil-Estate that sought relief from another forum by instituting a case before the
Court of Appeals despite the pendency of their appeal before the Office of the President.112

Maintaining that the 10 lots are covered by the Comprehensive Agrarian Reform Program, Reyes, et al. rely on
experts from the Institute of Environmental Science and Management, who characterized the lands in Hacienda
Looc as agricultural and the 10 lots as agriculturally developed.113 They question Agrarian Reform Secretary
Garilao's basis in declaring that some areas have slopes of at least 18% and are agriculturally undeveloped.
They point out that the evidence that he relied on are inaccurate and flawed since the farmer-beneficiaries were
excluded from the exemption proceedings.114

Next, Reyes, et al. argue that Proclamation No. 1520 had already been repealed by Executive Order Nos. 448
and 506, as amended. These executive orders provide, among others, that lands reserved by virtue of
proclamations or laws for specific purposes, which are suitable for agriculture but are no longer used for the
purposes for which they have been reserved, shall be transferred to the Department of Agrarian Reform for
distribution under the Comprehensive Agrarian Reform Program. At the time that Executive Order Nos. 448 and
506 were issued, the Philippine Tourism Authority had no existing plan to develop Hacienda Looc pursuant to
Proclamation Nos. 1520 and 1801. Its "master plans" were only made sometime after the passage of the two (2)
executive orders.115
Assuming that Proclamation No. 1520 had not been repealed, Reyes, et al. argue that agrarian reform, as an
aspect of social justice, outweighs the ends of tourism and should be given more consideration.116

Finally, Reyes, et al. argue that Agrarian Reform Secretary Garilao did not err in looking into the validity of the
cancellation proceedings, as he was authorized under Section 50 of the Comprehensive Agrarian Reform Law to
correct all errors that would defeat the substantive rights of farmer-beneficiaries.117 Further insisting that the
certificates' cancellation is void, they claim that the Department of Agrarian Reform Adjudication Board did not
acquire jurisdiction over the farmer-beneficiaries as they were not made aware of the proceedings.118 They
further allege that the farmer-beneficiaries were deceived, threatened, and intimidated into signing blank waivers
and declarations of abandonment in favor of Manila Southcoast.119

Reyes, et al. add that although the subject of the Petition only covers 10 lots situated in Hacienda Looc, the
community of interest principle warrants a review of the application of the Comprehensive Agrarian Reform Law
over the entire Hacienda Looc. They point out that Fil-Estate's plans to convert the 10 lots into a tourist haven
would negatively impact the agricultural activities in other areas of Hacienda Looc.120

Meanwhile, the parties in G.R. No. 200684 raise the following allegations:

First, Del Mundo, et al. assert that the Court of Appeals' rulings in CA G.R. SP No. 111965 are void, as
Associate Justice Gonzales-Sison's did not inhibit from the case. They point out she had penned two (2) cases
involving the same subject matter, which cast doubt on her objectivity as a magistrate.121

Del Mundo, et al. further claim that Undersecretary Adasa's October 27, 1997 Order, which had their lots
excluded from the coverage of the Comprehensive Agrarian Reform Program, is not binding on them since they
were denied due process.122 They also assert that Regional Adjudicator Minas' March 10, 1998 Order, which
had their Certificates of Land Ownership Award canceled, did not attain finality as to their case. Citing the
community of interest principle, they claim that while they did not file an appeal, they should benefit from the
appeal filed by the other farmer-beneficiaries.123

As to the substantive issues, Del Mundo, et al. again question the validity of the cancellation of their Certificates
of Land Ownership Award. First, they assail the issuance of a new certificate of title in favor of Manila
Southcoast despite its Petition for cancellation pending before the Department of Agrarian Reform. Second, they
believe that Undersecretary Adasa disregarded Undersecretary Soliman’s findings, pointing out that most
Certificates of Land Ownership Award were canceled by virtue of waivers, which were not voluntarily executed
by the farmer-beneficiaries.124 Thus, they pray that the case be remanded to the Department of Agrarian
Reform for the reception of further evidence.125

For its part, Manila Southcoast counters that Del Mundo, et al. merely imputed bias on Associate Justice
Gonzales-Sison without providing extrinsic evidence. In any case, it asserts that her non-inhibition would not
render the Court of Appeals’ ruling void.126

As to the assailed Orders’ finality, Manila Southcoast argues that the community of interest principle does not
apply to Del Mundo, et al. This is because, it claims, they claims, they failed to show that they and the other
farmer-beneficiaries have rights and interests that are interwoven and dependent on each other. It asserts that
Del Mundo, et al. have lost their right to appeal and cannot invoke the community of interest principle to recover
it.127

Manila Southcoast also claims that the issuance of a new certificate of title in its favor did not automatically result
in the cancellation of the Certificate of Land Ownership Award. They assert that the new certificate of title issued
was based on the Deed of Sale it had executed with the government. They find nothing questionable about the
issuance of a new certificate of title in its name while its petition for cancellation was still pending before the
Department of Agrarian Reform.128

Finally, Manila Southcoast argue that Del Mundo, et al. were not denied due process, having been given an
opportunity to explain their side.129

These consolidated cases raise several issues for this Court’s resolution. In G.R. Nos. 152797 and 189315:

First, whether or not Lots 780-12 and 780-13 should be excluded from litigation in G.R. Nos. 152797 and 189315
based on the Compromise Agreement between the parties;
Second, whether or not Reyes, et al. in filing an appeal before the Office of the President instead of a petition for
review before the Court of Appeals to challenge Agrarian Reform Secretary Garilao’s March 25, 1998 Order;

Third, whether or not Reyes, et al. committed willful and deliberate forum shopping by filing their Comment to the
Petition in CA-G.R. SP No. 47497 and by filing a Petition to Re-Open Case before the Department of Agrarian
Reform during the pendency of their appeal before the Office of the President;

Fourth, whether or not Agrarian Reform Secretary Garilao exceeded the scope of his review by looking into the
validity of the cancellation proceeding; and

Fifth, whether or not the lots subject of G.R. Nos. 152797 and 189315 are excluded from the coverage of the
Comprehensive Agrarian Reform Program.

As to G.R. No. 200684, the following issues are raised:

First, whether or not the non-inhibition of Court of Appeals Associate Justice Gonzales-Sison rendered the
judgments in CA-G.R. SP No. 111965 void;

Second, whether or not, under the principle of community of interest, the Orders rendered by Undersecretary
Adasa and Regional Adjudicator Minas did not attain finality as to Del Mundo, et al.; and

Finally, whether or not the cancellation of Del Mundo, et al.’s Certificates of Land Ownership Award was valid.

Article 2028 of the Civil Code defines a compromise as a "contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced." It can either be judicial or extrajudicial
depending on its object or purpose. A judicial compromise is one that puts an end to pending lawsuit, while an
extrajudicial compromise is one entered into by the parties to avoid litigation.130

By its very definition, a compromise is a contract between two (2) or more parties. Just like any other contract, its
validity depends upon compliance with the requisites enumerated in Article 1318 of the Civil Code,131 namely:
(1) consent of the contracting parties; (2) object certain, which is the subject matter of the contract; (3) cause of
the obligation.

Certain matters cannot be the subject of a compromise.132 Courts should carefully look into the terms and
conditions stipulated by the parties, as a compromise must not have provisions that are contrary to "law, morals,
good customs, public order or public policy";133 otherwise, it shall be deemed void, and shall vest no right in and
hold on obligation for either of the parties.134 A compromise is strictly limited to objects expressly stated in its
provisions and those that are deemed included by necessary implication.135

In cases where a party is represented by another, a special power of attorney is necessary. Article 1878 of the
Civil Code is explicit about this requirement.136 However, the absence of a special power of attorney does not
render the compromise void but merely unenforceable, capable of being ratified by the proper party.137 In Lim
Pin v. Liao Tan,138 this Court explained the nature of such authorization:

The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special authority in
Rule 138 of the Rules of Court refer to the nature of the authorization and not its form. The requirements are met
if there is a clear mandate from the principal specifically authorizing the performance of the act. As early as
1906, this Court in Strong v. Gutierrez-Repide stated that such a mandate may be either oral or written, the one
vital thing being that it shall be express. And more recently, We stated that, if the special authority is not written,
then it must be duly established by evidence:

… the Rules require, for attorneys to compromise the litigation of their clients, a special authority. And while the
same does not state that the special authority be in writing the Court has every reason to expect that, if not in
writing the same be duly established by evidence other than the self-serving assertion of counsel himself that
such authority was verbally given him.139 (Citations omitted)

In this case, the Compromise Agreement submitted by the parties in G.R. Nos. 152797 and 189315 was only
signed by the parties’ respective counsels. This Court deferred action on the Joint Motion for Partial Judgment
pending the submission of a Compromise Agreement duly signed by the parties or a special power of attorney
authorizing the parties’ counsel to enter into a Compromise Agreement.

On March 11, 2016, Reyes, et al. submitted a Sworn Declaration with Instructions to Counsel dated September
18, 2014, individually signed by the parties in G.R. Nos. 152797 and 189315. They also submitted individually
executed Special Powers of Attorney.140

A perusal of these documents shows that all claimants of Lots 780-12 and 780-13141 signed the Sworn
Declaration with Instructions to Counsel.142 Although some parties in G.R. Nos. 152797 and 189315 were not
included, their omission cannot be deemed fatal to the validity of the Joint Motion for Partial Judgment. Based on
the evidence on record, Fresco Catapang, Rosita Catapang, Domingo P. Limboc, Virgilio A. Limboc, Sonny
Catapang, and Rexie Dingles are not claimants of Lots 780-12 and 780-13. Fresco Catapang, Rosita Catapang
(who was substituted by her son, Sonny Catapang), Domingo P. Limboc, and Virgilio A. Limboc are among the
claimants of Lots 780-15 and 780-16.143 Meanwhile, Rexie Dingles is the wife of Celerio Dingles,144 who is a
claimant of Lot 780-5.145 These individuals have no interest over the lots sought to be excluded.

In any case, their omission from the Compromise Agreement will not prejudice them. As a contract, a
compromise agreement only has binding and obligatory force between the parties, their heirs, and
assigns.146 Non-parties to the agreement cannot be bound by its terms and conditions.147 This is because
there is no "vinculum or juridical tie which is the efficient cause for the establishment of an obligation."148

The Compromise Agreement149 states, among others, that claimants of Lots 780-12 and 780-13 acknowledge
receipt of valuable and sufficient consideration in view of which, they agree to:

. . . Waive, renounce and cede, in favor of [Fil-Estate] any and all rights to exclusive ownership or co-ownership,
past, present or future, contingent or otherwise, whether or not with merit or validity, which they may have over
Lot 780-12 and Lot 780-13 . . . based on CLOA No. 4158 (for Lot 780-12) and CLOA No. 4159 (for Lot 780-13)
[.]150

Republic Act No. 6657, as amended by Republic Act No. 9700, places reasonable limitations on the
transferability of awarded lands. The pertinent portion of Section 27 states, in part:

SECTION 27. Transferability of Awarded Lands. — Lands acquired by beneficiaries under this Act or other
agrarian reform laws shall not be sold, transferred or conveyed except through hereditary succession, or to the
government, or to the LBP, or to other qualified beneficiaries through the DAR for a period of ten (10)
years: Provided, however, That the children or the spouse of the transferor shall have a right to repurchase the
land from the government or LBP within a period of two (2) years.

An agrarian reform beneficiary is prohibited from alienating awarded lands for a period of 10 years, save in
certain cases. In Lebrudo v. Loyola,151 a waiver and transfer of rights over a property covered under the
Comprehensive Agrarian Reform Program was declared invalid for violating the prohibition under Section 27 of
the Comprehensive Agrarian Reform Law, as amended. In upholding the invalidity of the waiver and transfer of
rights, this Court explained that:

. . . lands awarded to beneficiaries under the Comprehensive Agrarian Reform Program (CARP) may not be
sold, transferred or conveyed for a period of 10 years. The law enumerates four exceptions: (1) through
hereditary succession; (2) to the government; (3) to the Land Bank of the Philippines (LBP); or (4) to other
qualified beneficiaries. In short, during the prohibitory 10-year period, any sale, transfer or conveyance of land
reform rights is void, except as allowed by law, in order to prevent a circumvention of agrarian reform laws.

. . . The law expressly prohibits any sale, transfer or conveyance by farmer-beneficiaries of their land reform
rights within 10 years from the grant by the DAR. The law provides for four exceptions and Lebrudo does not fall
under any of the exceptions. In Maylem v. Ellano, we held that the waiver of rights and interests over
landholdings awarded by the government is invalid for being violative of agrarian reform laws. Clearly, the waiver
and transfer of rights to the lot as embodied in the Sinumpaang Salaysay executed by Loyola is void for falling
under the 10-year prohibitory period specified in RA 6657.152 (Citation omitted)

In this case, the claimants of Lots 780-12 and 780-13 are no longer covered by the prohibition under Section 27
of Republic Act No. 6657, as amended. The Department of Agrarian Reform issued their Certificates of Land
Ownership long ago, from 1991 to 1993. With the lapse of more than 10 years, the claimants may now renounce
their rights over the two (2) lots in favor of Fil-Estate.
 II

Fil-Estate asserts that the proper remedy to assail Agrarian Reform Secretary Garilao's rulings is a Rule 43
petition before the Court of Appeals, following Section 54 of Republic Act No. 6657. Reyes, et al. counter that
filing an appeal before the Office of the President is the appropriate remedy, pursuant to the doctrine of
exhaustion of administrative remedies.

Section 54 of Republic Act No. 6657 in relation to Section 61 provides the mode of appeal from the decisions,
orders, awards, or rulings of the Department of Agrarian Reform:

SECTION 54. Certiorari. — Any decision, order, award or ruling of the DAR on any agrarian dispute or on any
matter pertaining to the application, implementation, enforcement, or interpretation of this Act and other pertinent
laws on agrarian reform may be brought to the Court of Appeals by certiorari except as otherwise provided in
this Act within fifteen (15) days from the receipt of a copy thereof.

The findings of fact of the DAR shall be final and conclusive if based on substantial evidence.

....

SECTION 61. Procedure on Review. — Review by the Court of Appeals or the Supreme Court, as the case may
be, shall be governed by the Rules of Court. The Court of Appeals, however, may require the parties to file
simultaneous memoranda within a period of fifteen (15) days from notice, after which the case is deemed
submitted for decision.

On one (1) occasion, this Court held that the proper remedy to question the decisions of the Secretary of
Agrarian Reform is a petition for certiorari filed before the Court of Appeals.

In Samahang Magbubukid ng Kapdula, Inc. v. Court of Appeals,153 a petition for certiorari was filed before the
Court of Appeals assailing the Secretary of Agrarian Reform's determination of qualified beneficiaries. It was
argued that the Secretary of Agrarian Reform's decision should have first been appealed to the Department of
Agrarian Reform Adjudication Board based on the doctrine of exhaustion of administrative remedies. In rejecting
the argument, this Court held that the Secretary of Agrarian Reform's determination of qualified beneficiaries is a
final ruling of the Department of Agrarian Reform itself, one that need not be appealed to the Department of
Agrarian Reform Adjudication Board. It also ruled that only the decisions of other Agrarian Reform officials other
than the Secretary may be reviewed by the Department of Agrarian Reform Adjudication Board.154

Later, in Sebastian v. Morales,155 this Court held that Section 54 of Republic Act No. 6657 must be read in
relation to Sections 60 and 61 of Republic Act No. 6657 and Republic Act No. 7902. The proper mode of appeal
from the decisions, resolutions, and final orders of the Secretary of Agrarian Reform is through a petition for
review on certiorari filed under Rule 43 of the Rules of Court:

We agree with the appellate court that petitioners' reliance on Section 54 of R.A. No. 6657 "is not merely a
mistake in the designation of the mode of appeal, but clearly an erroneous appeal from the assailed Orders." For
in relying solely on Section 54, petitioners patently ignored or conveniently overlooked Section 60 of R.A. No.
6657, the pertinent portion of which provides that:

An appeal from the decision of the Court of Appeals, or from any order, ruling or decision of the DAR, as the
case may be, shall be by a petition for review with the Supreme Court, within a non-extendible period of fifteen
(15) days from receipt of a copy of said decision. . . .

Section 60 of R.A. No. 6657 should be read in relation to R.A. No. 7902 expanding the appellate jurisdiction of
the Court of Appeals to include:

Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial
Courts and quasi-judicial agencies, instrumentalities, boards or commissions . . . except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the
Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1)
of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.
With the enactment of R.A. No. 7902, this Court issued Circular 1-95 dated May 16, 1995 governing appeals
from all quasi-judicial bodies to the Court of Appeals by petition for review, regardless of the nature of the
question raised. Said circular was incorporated in Rule 43 of the 1997 Rules of Civil Procedure.

Section 61 of R.A. No. 6657 clearly mandates that judicial review of DAR orders or decisions are governed by
the Rules of Court. The Rules direct that it is Rule 43 that governs the procedure for judicial review of decisions,
orders, or resolutions of the DAR Secretary. By pursuing a special civil action for certiorari under Rule 65 rather
than the mandatory petition for review under Rule 43, petitioners opted for the wrong mode of appeal. Pursuant
to the fourth paragraph of Supreme Court Circular No. 2-90, "an appeal taken to the Supreme Court or the Court
of Appeals by the wrong or inappropriate mode shall be dismissed." Therefore, we hold that the Court of
Appeals committed no reversible error in dismissing CA-G.R. SP No. 51288 for failure of petitioners to pursue
the proper mode of appeal.156

This rule was further qualified in Valencia v. Court of Appeals.157 The petitioner in that case appealed the
Agrarian Reform Secretary's Decision to the Office of the President. As basis, he relied on Department of
Agrarian Reform Memorandum Circular No. 3, series of 1994. The Court of Appeals later declared that the
proper remedy from the decision of the Secretary of Agrarian Reform was a petition for review to the Court of
Appeals under Rule 43 of the Rules of Court, not an appeal to the Office of the President.

This Court reversed the Court of Appeals Decision and upheld the propriety of the procedural remedy Valencia
had taken:

Interpreting and harmonizing laws with laws is the best method of interpretation. Interpretare et concordare leges
legibus est optimus interpretandi modus. This manner of construction would provide a complete, consistent and
intelligible system to secure the rights of all persons affected by different legislative and quasi-legislative acts.
Where two (2) rules on the same subject, or on related subjects, are apparently in conflict with each other, they
are to be reconciled by construction, so far as may be, on any fair and reasonable hypothesis. Validity and legal
effect should therefore be given to both, if this can be done without destroying the evident intent and meaning of
the later act. Every statute should receive such a construction as will harmonize it with the pre-existing body of
laws.

Harmonizing DAR Memo. Circ. No. 3, series of 1994, with SC Adm. Circ. No. 1-95 and Sec. 54 of R.A. No. 6657
would be consistent with promoting the ends of substantial justice for all parties seeking the protective mantle of
the law. To reconcile and harmonize them, due consideration must be given to the purpose for which each was
promulgated. The purpose of DAR Memo. Circ. No. 3, series of 1994, is to provide a mode of appeal for matters
not falling within the jurisdictional ambit of the Department of Agrarian Reform Adjudication Board (DARAB)
under R.A. No. 6657 and correct technical errors of the administrative agency. In such exceptional cases, the
Department Secretary has established a mode of appeal from the Department of Agrarian Reform to the Office
of the President as a plain, speedy, adequate and inexpensive remedy in the ordinary course of law. This would
enable the Office of the President, through the Executive Secretary, to review technical matters within the
expertise of the administrative machinery before judicial review can be resorted to by way of an appeal to the
Court of Appeals under Rule 43 of the 1997 Rules on Civil Procedure.

On the other hand, the purpose of SC Adm. Circ. No. 1-95, now embodied in Rule 43 of the 1997 Rules of Civil
Procedure, is to invoke the constitutional power of judicial review over quasi-judicial agencies, such as the
Department of Agrarian Reform under R.A. No. 6657 and the Office of the President in other cases by providing
for an appeal to the Court of Appeals. Section 54 of R.A. No. 6657 is consistent with SC Adm. Circ. No.  1-95
and Rule 43 in that it establishes a mode of appeal from the DARAB to the Court of Appeals.

....

As a valid exercise of the Secretary's rule-making power to issue internal rules of procedure, DAR Memo. Circ.
No. 3, series of 1994, expressly provides for an appeal to the Office of the President. Thus, petitioner Valencia
filed on 24 November 1993 a timely appeal by way of a petition for review under Rule 43 to the Court of Appeals
from the decision of the Office of the President, which was received on 11 November 1993, well within the fifteen
(15)-day reglementary period.

an appeal is first made by the highest administrative body in the hierarchy of the executive branch of
government.158 (Emphasis supplied, citations omitted)

This Court in Valencia distinguished two (2) modes of appeal that may be taken from the decisions, resolutions,
and final orders of the Department of Agrarian Reform depending on the subject matter of the case. For matters
falling within the jurisdiction of the Department of Agrarian Reform Adjudication Board, the appeal should be
lodged before the Court of Appeals by way of a petition for review on certiorari under Rule 43 of the Rules of
Court. Otherwise, the case may be elevated to the Office of the President depending on whether the rules
provide for such mode of appeal.

The distinction made in Valencia is consistent with the two-fold nature of the Department of Agrarian Reform's
jurisdiction159 as set forth in Section 50 of Republic Act No. 6657:

SECTION 50. Quasi-Judicial Powers of the DAR. — The DAR is hereby vested with primary jurisdiction to
determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters
involving the implementation of agrarian reform, except those falling under the exclusive jurisdiction of the
Department of Agriculture (DA) and the DENR.

It shall not be bound by technical rules of procedure and evidence but shall proceed to hear and decide all
cases, disputes or controversies in a most expeditious manner, employing all reasonable means to ascertain the
facts of every case in accordance with justice and equity and the merits of the case. Toward this end, it shall
adopt a uniform rule of procedure to achieve a just, expeditious and inexpensive determination of every action or
proceeding before it.

It shall have the power to summon witnesses, administer oaths, take testimony, require submission of reports,
compel the production of books and documents and answers to interrogatories and
issue subpoena, and subpoena duces tecum and to enforce its writs through sheriffs or other duly deputized
officers. It shall likewise have the power to punish direct and indirect contempts in the same manner and subject
to the same penalties as provided in the Rules of Court.

Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers, or their organizations
in any proceedings before the DAR: Provided, however, That when there are two or more representatives for
any individual or group, the representatives should choose only one among themselves to represent such party
or group before any DAR proceedings.

Notwithstanding an appeal to the Court of Appeals, the decision of the DAR shall be immediately executory
except a decision or a portion thereof involving solely the issue of just compensation.

This two-fold jurisdiction of the Department of Agrarian Reform has been delineated through various issuances.

The Secretary of Agrarian Reform has jurisdiction over all matters involving the administrative implementation of
Republic Act No. 6657. At present, these matters are governed by rules outlined in Department of Agrarian
Reform Administrative Order No. 03, series of 2017. Applications for exemption from coverage under Section 10
of Republic Act No. 6657 have been classified as Agrarian Law Implementation Cases, which fall under the
exclusive jurisdiction of the Secretary of Agrarian Reform.160

Jurisdiction over agrarian disputes, on the other hand, is lodged before the Department of Agrarian Reform
Adjudication Board. Agrarian Law Implementation Cases are not within its jurisdiction.161

The Rules for Agrarian Law Implementation Cases, both past and present, provide a mode of appeal from the
decisions of the Secretary of Agrarian Reform to the Office of the President.162 On the other hand, the Rules of
Procedure of the Department of Agrarian Reform Adjudication Board states that appeals from the decisions of
the Department of Agrarian Reform Adjudication Board may be brought to the Court of Appeals pursuant to the
Rules of Court.163

Here, Fil-Estate applied for exemption from coverage under Section 10 of Republic Act No. 6657.164 Certainly,
this is a matter that fell within the exclusive jurisdiction of Agrarian Reform Secretary Garilao.

Moreover, Agrarian Reform Secretary Garilao's March 25, 1998 Order would have depended on the governing
rules of procedure at that time. When Reyes, et al. received a copy of the Order, the Rules for Agrarian Law
Implementation Cases had not yet been promulgated. Nevertheless, Department of Agrarian Reform
Memorandum Circular No. 3, which allows parties to appeal the Agrarian Reform Secretary's rulings to the Office
of the President, was still in effect.

Therefore, Reyes, et al. did not err in elevating the case to the Office of the President first before filing a petition
for review before the Court of Appeals.
 III

The rule on forum shopping is found in Rule 7, Section 5 of the Rules of Court:

RULE 7
Parts of a 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.

The provision is intended to cover only initiatory pleadings or incipient applications "asserting a claim for
relief."165 A claim for relief "that is derived only from, or is necessarily connected with, the main action or
complaint"166 such as an answer with compulsory counterclaim is not covered by the rule requiring a
certification against forum shopping.167 Likewise, a comment to a petition filed before an appellate tribunal, not
being an initiatory pleading, does not require a certification against forum shopping.168

A comment to a petition is not an initiatory pleading or an incipient application asserting a claim for relief as
contemplated in Rule 7, Section 5 of the Rules of Court. Thus, Reyes, et al. cannot be said to have committed
forum shopping when they filed their Comment to Fil-Estate's Petition in CA G.R. SP No. 47497.

Similarly, Reyes, et al. are not guilty of forum shopping when they filed a Petition to Reopen the Case before the
Secretary of Agrarian Reform.

Forum shopping exists when litigants resort to two (2) different forums "for the purpose of obtaining the same
relief, to increase the chances of obtaining a favorable judgment."169 The rules impose sanctions on parties
who commit forum shopping, since its practice "trifles with the courts, abuses their processes, degrades the
administration of justice and adds to the already congested court dockets."170

The evil sought to be avoided by the rule on forum shopping is the proliferation of contradictory decisions on the
same controversy. This is the critical factor that courts must consider in determining whether forum shopping
exists.171 There is forum shopping when "the elements of litis pendentia are present, or whether a final
judgment in one case amounts to res judicata in another."172 In Dy v. Mandy Commodities Company, Inc.:173

Thus, there is forum shopping when the following elements are present: (a) identify of parties, or at least such
parties as represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the
relief being founded on the same facts; and (c) the identity of the two preceding particulars, such that any
judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the
action under consideration. Said requisites are also constitutive of the requisites for auter action pendant or lis
pendens.174

It may seem that Reyes, et al. committed forum shopping by elevating Agrarian Reform Secretary Garilao’s
adverse Order to the Office of the President, then filing a Petition to Re-Open Case before the Secretary of
Agrarian Reform. Nonetheless, the evil sought to be avoided by the rule did not exist. When Reyes, et al. filed
the Petition to Re-open Case, Agrarian Reform Secretary had yet to act upon their appeal. Moreover, at that
time, the case records had still not been elevated to the Office of the President for review.175 Thus, there could
have been no possibility that two (2) conflicting decisions would be rendered by two (2) different forums.
 IV

Fil-Estate insists that Agrarian Reform Secretary Garilao, in issuing the March 25, 1998 Order, exceeded his
jurisdiction. It argues that since the scope of his review was limited to the exclusion proceedings over the 10 lots,
he Erred in looking into other matters, such as the proceedings involving the cancellation of the Certificates of
Land Ownership Award issued to the Hacienda Looc farmers.176

The Comprehensive Agrarian Reform Law recognizes the need of landless farmers and farmworkers to either
own the land they till or receive a just share of the fruits.177 This government initiative is founded upon the
history of agrarian reform in the country, which was exhaustively discussed in Heirs of Nuñez, Sr. v. Heirs of
Villanoza:178

Prior to any colonization, various ethnolinguistic cultures had their own customary laws governing their property
relationships. The arrival of the Spanish introduced the concept of encomienda, or royal land grants, to loyal
Spanish subjects, particularly the soldiers. Under King Philip II’s decree, the encomienderos or landowners were
tasked "to maintain peace and order" within their encomiendas, to protect the large estates from external
attacks, and to support the missionaries in converting the natives into Christians. In turn, the encomienderos had
the right to collect tributes or taxes such as gold, pearls, cotton cloth, chickens, and rice from the natives called
indios. The encomienda system helped Hispanicize the natives and extended Spanish colonial rule by pacifying
the early Filipinos within the estates.

There were three (3) kinds of encomiendas: the royal encomiendas, which belonged to the King; the
ecclesiastical encomiendas, which belonged to the Church; and the private encomiendas, which belonged to
private individuals. The local elites were exempted from tribute-paying and labor, or polo services, required of
the natives.

The encomienda system was abused by the encomienderos. Filipinos were made to pay tribute more than what
the law required. Their animals and crops were taken without just compensation, and they were forced to work
for the encomienderos.

Thus, the indios, who once freely cultivated the lands, became mere share tenants or dependent sharecroppers
of the colonial landowners.

In the 1899 Malolos Constitution and true to one (1) of the principal concerns of the Philippine Revolution, then
President General Emilio Aguinaldo declared "his intention to confiscate large estates, especially the so-called
[f]riar lands." Unfortunately, the First Philippine Republic did not last long.

The encomienda system was a vital source of revenue and information on the natives for the Spanish crown. In
the first half of the 19th century, the cash crop economy emerged after the Philippines integrated into the world
market, increasing along with it the powers of the local elites, called principalias, and landlords.

The United States arrived later as the new colonizer. It enacted the Philippine Bill of 1902, which limited land
area acquisitions into 16 hectares for private individuals and 1,024 hectares for corporations. The Land
Registration Act of 1902 (Act No. 496) established a comprehensive registration of land titles called the Torrens
system. This resulted in several ancestral lands being titled in the names of the settlers.

The Philippines witnessed peasant uprisings including the Sakdalista movement in the 1930's. During World War
II, peasants and workers organizations took up arms and many identified themselves with the Hukbalahap,
or Hukbo ng Bayan Laban sa Hapon. After the Philippine Independence in 1946, the problems of land tenure
remained and worsened in some parts of the country. The Hukbalahaps continued the peasant uprisings in the
1950s.

To address the farmers' unrest, the government began initiating various land reform programs, roughly divided
into three (3) stages.

The first stage was the share tenancy system under then President Ramon Magsaysay (1953-1957). In a share
tenancy agreement, the landholder provided the land while the tenant provided the labor for agricultural
production. The produce would then be divided between the parties in proportion to their respective
contributions. On August 30, 1954, Congress passed Republic Act No. 1199 (Agricultural Tenancy Act),
ensuring the "equitable division of the produce and [the] income derived from the land[.]"
Compulsory land registration was also established under the Magsaysay Administration. Republic Act No. 1400
(Land Reform Act) granted the Land Tenure Administration the power to purchase or expropriate large tenanted
rice and corn lands for resale to bona fide tenants or occupants who owned less than six (6) hectares of land.
However, Section 6 (2) of Republic Act No. 1400 set unreasonable retention limits at 300 hectares for individuals
and 600 hectares for corporations, rendering President Magsaysay's efforts to redistribute lands futile.

On August 8, 1963, Congress enacted Republic Act No. 3844 (Agricultural Land Reform Code) and abolished
the share tenancy system, declaring it to be against public policy. The second stage of land reform, the
agricultural leasehold system, thus began under President Diosdado Macapagal (1961-1965).

Under the agricultural leasehold system, the landowner, lessor, usufructuary, or legal possessor furnished his or
her landholding, while another person cultivated it until the leasehold relation was extinguished. The landowner
had the right to collect lease rental from the agricultural lessee, while the lessee had the right to a homelot and
to be indemnified for his or her labor if the property was surrendered to the landowner or if the lessee was
ejected from the landholding.

Republic Act No. 3844 also sought to provide economic family-sized farms to landless citizens of the Philippines
especially to qualified farmers. The landowners were allowed to retain as much as 75 hectares of their
landholdings. Those lands in excess of 75 hectares could be expropriated by the government.

The system finally transitioned from agricultural leasehold to one of full ownership under President Ferdinand E.
Marcos (1965-1986). On September 10, 1971, Congress enacted Republic Act No. 6389 or the Code of Agrarian
Reform.

Republic Act No. 6389 automatically converted share tenancy into agricultural leasehold. It also established the
Department of Agrarian Reform as the implementing agency for the government's agrarian reform program.
Presidential Decree No. 2 proclaimed the whole country as a land reform area.

On October 21, 1972, Presidential Decree No. 27, or the Tenants Emancipation Decree, superseded Republic
Act No. 3844. Seeking to "emancipat[e] the tiller of the soil from his bondage," Presidential Decree No. 27
mandated the compulsory acquisition of private lands to be distributed to tenant-farmers. From 75 hectares
under Republic Act No. 3844, Presidential Decree No. 27 reduced the landowner's retention area to a maximum
of seven (7) hectares of land.

Presidential Decree No. 27 implemented the Operation Land Transfer Program to cover tenanted rice or corn
lands. According to Daez v. Court of Appeals, "the requisites for coverage under the [Operation Land Transfer]
program are the following: (1) the land must be devoted to rice or corn crops; and (2) there must be a system of
share-crop or lease-tenancy obtaining therein."

....

Following the People Power Revolution, then President Corazon C. Aquino (1986-1992) fulfilled the promise of
land ownership for the tenant farmers. Proclamation No. 131 instituted the Comprehensive Agrarian Reform
Program. Executive Order No. 129 (1987) reorganized the Department of Agrarian Reform and expanded it in
power and operation. Executive Order No. 228 (1987) declared the full ownership of the land to qualified farmer
beneficiaries under Presidential Decree No. 27.

....

On June 10, 1988, Congress enacted Republic Act No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law, to supersede Presidential Decree No. 27.

The compulsory land acquisition scheme under Republic Act No. 6657 empowers the government to acquire
private agricultural lands for distribution to tenant-farmers. A qualified farmer beneficiary is given an
emancipation patent, called the Certificate of Land Ownership Award, which serves as conclusive proof of his or
her ownership of the land.179 (Citations omitted)

Republic Act No. 6657 is anchored on the social justice provisions on agrarian reform found in Article XIII of the
1987 Constitution:
 ARTICLE XIII
Social Justice and Human Rights

....

Agrarian and Natural Resources Reform

SECTION 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and
regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake
the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the
Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to
the payment of just compensation. In determining retention limits, the State shall respect the right of small
landowners. The State shall further provide incentives for voluntary land-sharing.

SECTION 5. The State shall recognize the right of farmers, farmworkers, and landowners, as well as
cooperatives, and other independent farmers' organizations to participate in the planning, organization, and
management of the program, and shall provide support to agriculture through appropriate technology and
research, and adequate financial, production, marketing, and other support services.

SECTION 6. The State shall apply the principles of agrarian reform or stewardship, whenever applicable in
accordance with law, in the disposition or utilization of other natural resources, including lands of the public
domain under lease or concession suitable to agriculture, subject to prior rights, homestead rights of small
settlers, and the rights of indigenous communities to their ancestral lands.

The State may resettle landless farmers and farmworkers in its own agricultural estates which shall be
distributed to them in the manner provided by law.

SECTION 7. The State shall protect the rights of subsistence fishermen, especially of local communities, to the
preferential use of local marine and fishing resources, both inland and offshore. It shall provide support to such
fishermen through appropriate technology and research, adequate financial, production, and marketing
assistance, and other services. The State shall also protect, develop, and conserve such resources. The
protection shall extend to offshore fishing grounds of subsistence fishermen against foreign intrusion.
Fishworkers shall receive a just share from their labor in the utilization of marine and fishing resources.

SECTION 8. The State shall provide incentives to landowners to invest the proceeds of the agrarian reform
program to promote industrialization, employment creation, and privatization of public sector enterprises.
Financial instruments used as payment for their lands shall be honored as equity in enterprises of their choice.

Republic Act No. 6657, as amended, echoes these social justice provisions. Section 2 lists among the objectives
of agrarian reform "the just distribution of all agricultural lands" subject to certain conditions. It also recognizes,
among others, the participatory role of all stakeholders by allowing farmers, farmworkers, landowners,
cooperatives, and other independent farmer's organizations to "participate in the planning, organization, and
management" of the Comprehensive Agrarian Reform Program.

Section 50 of Republic Act No. 6657, as amended, vests the Department of Agrarian Reform with primary
jurisdiction over agrarian reform matters and over all matters involving the implementation of agrarian reform.
This provision is further reiterated in jurisprudence. In the recent case of Secretary of Department of Agrarian
Reform v. Heirs of Abucay,180 for one, this Court held that the "jurisdiction over the administrative
implementation of agrarian laws exclusively belongs to the Department of Agrarian Reform Secretary."181

Thus, in carrying out its mandate of resolving disputes and controversies in the most expeditious manner, the
Department of Agrarian Reform is not constrained by the technical rules of procedure and evidence. It may
employ "all reasonable means to ascertain the facts of every case in accordance with justice and equity and the
merits of the case."182 Toward this end, it is empowered to issue the necessary rules and regulations.183

This Court finds that Agrarian Reform Secretary Garilao did not exceed the scope of his jurisdiction in issuing the
March 25, 1998 Order. The Department of Agrarian Reform, through its Secretary, has primary jurisdiction over
all matters involving the implementation of agrarian reform, including the investigation of acts that he or she
believes are directed toward the circumvention of the objectives of the Comprehensive Agrarian Reform
Program.
A reading of the Comprehensive Agrarian Reform Law, as a social welfare legislation, should be "more than just
an inquiry into the literal meaning of the law."184 In interpreting tenancy and labor legislations, the broad
consideration is the ultimate resolution of doubts in favor of the tenant or worker.185

Here, while the cancellation proceedings initiated by Manila Southcoast are different from the Petition for
exclusion filed by Fil-estate, Agrarian Reform Secretary Garilao may still probe into the validity of the
cancellation proceedings. This is in view of the powers granted to the Department of Agrarian Reform under
Section 50 of Republic Act No. 6657, as amended.

In the March 25, 1998 Order, Agrarian Reform Secretary Garilao found merit in the farmer-beneficiaries’ claims
on the fraudulent means by which their Certificates of Land Ownership Award were canceled.186 He cannot
simply brush aside the irregularities attending the cancellation proceedings when, as the head of the Department
of Agrarian Reform, he must carry out the objectives of Republic Act No. 6657.

Thus, Agrarian Reform Secretary Garilao did not err in considering all the controversies surrounding Hacienda
Looc, especially since there were serious allegation raised by the farmer-beneficiaries. The cancellation
proceedings were allegedly based on "waivers which are of dubious veracity."187 For instance, in his
investigation, Undersecretary Soliman found that some of the waivers executed by the farmer-beneficiaries were
uniform in phraseology and in format. Some were even allegedly falsified: they were apparently signed by
farmer-beneficiaries who had already died.188 As a result of the allegation of the farmer-beneficiaries, Agrarian
Reform Secretary Garilao saw the need to create other fact-finding teams to investigate further.189

In the March 25, 1998 Order, Agrarian Reform Secretary Gariloa found several areas of Hacienda Looc suitable
for agrarian reform. In questioning this finding, Fil-Estate argues that Nasugbu, Batangas was classified as a
tourism zone prior to the enactment and effectivity of the Comprehensive Agrarian Reform Law. Thus, Nasugbu,
Batangas is excluded from the coverage of the Comprehensive Agrarian Reform Program.

Proclamation No. 1520, on which Fil-Estate heavily relies, was issued on November 28, 1975. The Proclamation
indentifies the municipalities of Maragondon and Ternate in Cavite and the municipality of Nasugbu in Batangas
as potential tourist zones:

DECLARING THE MUNICIPALITIES OF MARAGONDON AND TERNATE IN CAVITE PROVINCE AND THE
MUNICIPALITY OF NASUGBU IN BATANGAS PROVINCE AS A TOURIST ZONE, AND FOR OTHER
PURPOSES

WHEREAS, certain areas in the sector compromising the Municipalities of Maragondon and Ternate in Cavite
Province and Nasugbu in Batangas have potential tourism value after being developed into resort complexes for
the foreign and domestic market; and

WHEREAS, it is necessary to conduct the necessary studies and to segregate specific geographic areas for
concentrated efforts of both the government and private sectors in developing their tourism potential;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested
in me by the Constitution, do hereby declare the area comprising the Municipalities of Maragondon and Ternante
in Cavite Province and Nasugbu in Batangas Province as a tourist zone under the administration and control of
the Philippine Tourism Authority (PTA) pursuant to Section 5 (D) of P.D. 564.

The PTA shall identify well-defined geographic areas within the zone with potential tourism value, wherein
optimum use of natural assets and attractions, as well as existing facilities and concentration of efforts and
limited resources of both government and private sector may be affected and realized in order to generate
foreign exchange as well as other tourist receipts.

Any duly established military reservation existing within the zone shall be excluded from this proclamation.

All proclamations, decrees or executive orders inconsistent herewith are hereby revoked or modified
accordingly.

IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of the Republic of the Philippines to
be affixed.
DONE in the City of Manila, this 28th day of November, in the year if Our Lord, Nineteen Hundred and Seventy-
Five.

The effect of Proclamation No. 1520 vis-à-vis the application of the Comprehensive Agrarian Reform Law was
tackled in Roxas & Company, Inc. v. DAMBA-NSFW.190

In that case, the petitioner sought the conversion and exclusion of three (3) haciendas in Nasugbu, Batangas
from the coverage of the Comprehensive Agrarian Reform Program on the basis of Proclamation No. 1520.
Among the arguments raised was that Proclamation NO. 1520 effectively reclassified and converted the use of
the lands in Maragondon and Ternate in Cavite and Nasugbu in Batangas from agricultural to non-agricultural.
This Court rejected the argument and ruled that Proclamation No. 1520 merely identified areas that had potential
tourism value:

Roxas & Co. contends that PP 1520 declared the three municipalities as each constituting a tourism zone,
reclassified all lands therein to tourism and, therefore, converted their use to non-agricultural purposes.

To determine the chief intent of PP 1520, reference to the "whereas clauses" is in order. By and large, a
reference to the congressional deliberation records would provide guidance in dissecting the intent of legislation.
But since PP 1520 emanated from the legislative powers of then President Marcos during martial rule, reference
to the whereas clauses cannot be dispensed with.

The perambulatory clauses of PP 1520 identified only "certain areas in the sector compromising the [three
Municipalities that] have potential tourism value" and mandated the conduct of "necessary studies" and the
segregation of "specific geographic areas" to achieve its purpose. Which is why the PP directed the Philippine
Tourism Authority (PTA) to identify what those potential tourism areas are. If all the lands in those tourism zones
were to be wholly converted to non-agricultural use, there would have been no need for the PP to direct the PTA
to identify what those "specific geographic areas" are.

The Court had in fact passed upon a similar matter before. Thus in DAR v. Franco, it pronounced:

Thus, the DAR Regional Office VII, in coordination with the Philippine Tourism Authority, has to determine
precisely which areas are for tourism development and excluded from the Operation Land Transfer and the
Comprehensive Agrarian Reform Program. And suffice it to state here that the Court has repeatedly ruled that
lands already classified as non-agricultural before the eneactment of RA 6657 on 15 June 1988 do not need any
conversion clearance. . . .

While the above pronouncement in Franco is an obiter, it should not be ignored in the resolution of the present
petitions since it reflects a more rational and just interpretation of PP 1520. There is no prohibition in embracing
the rationale of an obiter dictum in settling controversies, or in considering related proclamations establishing
tourism zones.191 (Emphasis supplied, citations omitted)

According to Roxas, Proclamation No. 1520 neither reclassified nor converted all lands in the Maragondon,
Ternate, and Nasugbu from agricultural to non-agricultural. Thus, these areas were deemed not to have been
automatically excluded from the coverage of the Comprehensive Agrarian Reform Program.

This Court further held that the Department of Agrarian Reform has primary jurisdiction over applications for
conversion and, as an administrative body with special competence, it has the power to determine whether a
parcel of land should be included in the coverage of the Comprehensive Agrarian Reform Program:

In the above-cited case of Roxas & Co v. CA, the Court made it clear that the "power to determine
whether Haciendas Palico, Banilad and Caylaway are non-agricultural, hence, exempt from the coverage of the
[Comprehensive Agrarian Reform Law] lies with the [Department of Agrarian Reform], not with this Court." The
DAR, an administrative body of special competence, denied, by Order of October 22, 2001, the application for
CARP exemption of Roxas & Co., it finding that PP 1520 did not automatically reclassify all the lands in the
affected municipalities from their original uses. It appears that the PTA had not yet, at that time, identified the
"specific geographic areas" for tourism development and had no pending tourism development projects in the
areas. Further, report from the Center for Land Use Policy Planning and Implementation (CLUPPI) indicated that
the areas were planted with sugar cane and other crops.

Relatedly, the DAR, by Memorandum Circular No. 7, Series of 2004, came up with clarificatory guidelines and
therein decreed that
 A….

B. Proclamations declaring general areas such as whole provinces, municipalities, barangays, islands or
peninsulas as tourist zones that merely:

(1) Recognize certain still unidentified areas within the covered provinces, municipalities, barangay,
islands, or peninsulas to be with potential tourism value and charge the Philippine Tourism Authority with
the task to identify/delineate specific geographic areas within the zone with potential tourism value and to
coordinate said areas’ development; or

(2) Recognize the potential value of identified spots located within the general area declared as tourist
zone (i.e. . . .) and direct the Philippine Tourism Authority to coordinate said areas’ development; could
not be regarded as effecting an automatic reclassification of the entirety of the land area declared as
tourist zone. This is so because "reclassification of lands" denotes their allocation into some specific use
and "providing for the manner of their utilization and disposition" (Sec. 20, Local Government Code) or
the "act of specifying how agricultural lands shall be utilized for non-agricultural uses such as residential,
industrial, or commercial, as embodied in the land use plan." (Joint HLURB, DAR, DA, DILG Memo.
Circular Prescribing Guidelines for MC 54, S. 1995, Sec. 2)

A proclamation that merely recognizes the potential tourism value of certain areas within the general area
declared as tourist zone clearly does not allocate, reserve, or intend the entirety of the land area of the zone for
non-agricultural purposes. Neither does said proclamation direct that otherwise CARPable lands within the zone
shall already be used for purposes other than agricultural.

Moreover, to view these kinds of proclamation as a reclassification for non-agricultural purposes of entire
provinces, municipalities, barangays, islands, or peninsulas would be unreasonable as it amounts to an
automatic and sweeping exemption from CARP in the name of tourism development. The same would also
undermine the land use reclassification powers vested in local government units in conjunction with pertinent
agencies of government.

C. There being no reclassification, it is clear that said proclamations/issuances, assuming [these] took effect
before June 15, 1988, could not supply a basis for exemption of the entirety of the lands embraced therein from
CARP coverage . . . .

D. . . . .

The DAR's reading into these general proclamations of tourism zones deserves utmost consideration, more
especially in the present petitions which involve vast tracts of agricultural land. To reiterate, PP 1520 merely
recognized the "potential tourism value" of certain areas within the general area declared as tourism zones. It did
not reclassify the areas to non-agricultural use.

Apart from PP 1520, there are similarly worded proclamations declaring the whole of Ilocos Norte and Bataan
Provinces, Camiguin, Puerto Prinsesa, Siquijor, Panglao Island, parts of Cebu City and Municipalities of Argao
and Dalaguete in Cebu Province as tourism zones.

Indubitably, these proclamations, particularly those pertaining to the Provinces of Ilocos Norte and Bataan, did
not intend to reclassify all agricultural lands into non-agricultural lands in one fell swoop. The Court takes notice
of how the agrarian reform program was — and still is — implemented in these provinces since there are lands
that do not have any tourism potential and are more appropriate for agricultural utilization.

Relatedly, a reference to the Special Economic Zone Act of 1995 provides a parallel orientation on the issue.
Under said Act, several towns and cities encompassing the whole Philippines were readily identified as
economic zones. To uphold Roxas & Co.'s reading of PP 1520 would see a total reclassification of practically all
the agricultural lands in the country to non-agricultural use. Propitiously, the legislature had the foresight to
include a bailout provision in Section 31 of said Act for land conversion. The same cannot be said of PP 1520,
despite the existence of Presidential Decree (PD) No. 27 or the Tenant Emancipation Decree, which is the
precursor of the CARP.

....
Given these martial law-era decrees and considering the socio-political backdrop at the time PP 1520 was
issued in 1975, it is inconceivable that PP 1520, as well as other similarly worded proclamations which are
completely silent on the aspect of reclassification of the lands in those tourism zones, would nullify the gains
already then achieved by PD 27.192 (Emphasis in the original, citations omitted)

Thus, in this case, there is no merit in Fil-Estate's argument that, in light of Proclamation No. 1520, the 10 lots
are excluded from the coverage of the Comprehensive Agrarian Reform Program.

In addition, the Certifications193 issued by the Philippine Tourism Authority attached to the Petition merely
reiterate the provisions of Proclamation No. 1520. There is no competent proof to show that specific geographic
areas in Nasugbu have been identified by the Philippine Tourism Authority for development based on studies.
There is also no proof of the existence of a tourism development plan that specifically covers the disputed areas.
At best, these Certifications only recognize the passage of Proclamation No. 1520.

VI

Section 10 of Republic Act No. 6657 enumerates the types of land excluded from the coverage of the
Comprehensive Agrarian Reform Program. Among the lands excluded are those with slopes of 18% and over,
except if they are already developed:

SECTION 10. Exemptions and Exclusions. —

....

(c) Lands actually, directly and exclusively used and found to be necessary for national defense, school sites
and campuses, including experimental farm stations operated by public or private schools for educational
purposes, seeds and seedling research and pilot production center, church sites and convents appurtenant
thereto, mosque sites and Islamic centers appurtenant thereto, communal burial grounds and cemeteries, penal
colonies and penal farms actually worked by the inmates, government and private research and quarantine
centers and all lands with eighteen percent (18%) slope and over, except those already developed, shall be
exempt from the coverage of this Act. (Emphasis supplied)

Both parties believe that the findings of Agrarian Reform Secretary Garilao on the lots' slope and development
are enoneous. Fil-Estate claims that the lots in dispute fall squarely under Section 10 of Republic Act No. 6657,
as amended. On the other hand, Reyes, et al. claim that all the lots are agriculturally developed and are, hence,
covered under the Comprehensive Agrarian Reform Program.

This Court sees no reason to disturb the factual findings of Agrarian Reform Secretary Garilao in his March 25,
1998 Order, which were affirmed by the Court of Appeals. ℒαwρhi ৷

This Court is not a trier of facts;194 we do not examine and weigh anew the probative value of the parties'
evidence. As a rule, the factual findings of lower tribunals are "final, binding[,] or conclusive on the parties and
upon this [c]ourt[.]"195 The jurisdiction of this Court in Rule 45 petitions is limited in scope such that only
questions of law may be raised.196

A question of law exists when "doubt or difference arises as to what the law is on a certain state of facts[.]"197

On the other hand, a question of fact exists when "doubt or difference arises as to the truth or the falsehood of
alleged facts[.]"198 It inquires into the probative value of the parties' evidence.199

The general rule admits of certain exceptions, which must be alleged and proved by the parties. These
exceptions are:

(1) When the conclusion is a finding grounded entirely on speculation, surmises or conjectures; (2) When
the inference made is manifestly mistaken, absurd or impossible; (3) Where there is a grave abuse of
discretion; (4) When the judgment is based on a misapprehension of facts; (5) When the findings of fact
are conflicting; (6) When the Court of Appeals, in making its findings, went beyond the issues of the case
and the same is contrary to the admissions of both appellant and appellee; (7) The findings of the Court
of Appeals are contrary to those of the trial court; (8) When the findings of fact are conclusions without
citation of specific evidence on which they are based; (9) When the facts set forth in the petition as well
as in the petitioner's main and reply briefs are not disputed by the respondents; and (10) The finding of
 fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by the
evidence on record.200 (Citation omitted)

None of these exceptions are present here.

Moreover, as a rule, the findings of administrative agencies, such as the Department of Agrarian Reform, are
deemed binding and conclusive upon the appellate courts.201 Administrative agencies possess special
knowledge and expertise on "matters falling under their specialized jurisdiction."202 Thus, their findings, when
supported by substantial evidence, are accorded great respect and even finality, especially when affirmed by the
Court of Appeals.203

In this case, to determine whether the lots should be excluded from the coverage of the Comprehensive
Agrarian Reform Program, the Department of Agrarian Reform, through Agrarian Reform Secretary Garilao,
created a regional task force and two (2) other fact-finding teams headed by Undersecretary Soliman. In
addition, an inter-agency committee was formed, headed by Undersecretary Victor Gerardo Bulatao, together
with representatives from the Department of Environment and Natural Resources, the Department of Agriculture,
and the Department of Tourism. These investigating teams conducted site inspections and verifications, field
surveys, and entered into dialogues with the affected stakeholders.204

The Department of Agrarian Reform's factual findings on the lots' slope and level of development are based on
substantial evidence. There is no reason to depart from them.

VII

Judges have the duty to render just decisions, which must be done in a manner "completely free from suspicion
as to its fairness and as to [their] integrity."205 The public's faith and confidence in the justice system must
always be preserved.206 Thus, in certain instances, judges may be compelled to inhibit themselves from sitting
in a case. Rule 137, Section 1 of the Rules of Court outlines these instances:

SECTION 1. Disqualification of judges. — No judge or judicial officer shall sit in any case in which he, or his wife
or child, is pecuniarily interested as heir, legatee, creditor or otherwise, or in which he is related to either party
within the sixth degree of consanguinity or affinity, or to counsel within the fourth degree, computed according to
the rules of the civil law, or in which he has been executor, administrator, guardian, trustee or counsel, or in
which he has presided in any inferior court when his ruling or decision is the subject of review, without the written
consent of all parties in interest, signed by them and entered upon the record.

A judge may, in the exercise of his sound discretion, disqualify himself from sitting in a case, for just or valid
reasons other than those mentioned above.

The first paragraph pertains to compulsory disqualification or inhibition where it is conclusively presumed that a
judge's partiality and objectivity might be questioned due to his or her relationship or interest. In Garcia v. Judge
De la Peña:207

The rule on compulsory disqualification of a judge to hear a case where, as in the instant case, the respondent
judge is related to either party within the sixth degree of consanguinity or affinity rests on the salutary principle
that no judge should preside in a case in which he is not wholly free, disinterested, impartial and independent. A
judge has both the duty of rendering a just decision and the duty of doing it in a manner completely free from
suspicion as to its fairness and as to his integrity. The law conclusively presumes that a judge cannot objectively
or impartially sit in such a case and, for that reason, prohibits him and strikes at his authority to hear and decide
it, in the absence of written consent of all parties concerned. The purpose is to preserve the people's faith and
confidence in the courts of justice.208 (Citations omitted)

The second paragraph of Rule 137, Section 1 refers to voluntary inhibition. Unlike the first paragraph, which
enumerates specific cases where a judge should inhibit, the rule on voluntary inhibition gives judges the
discretion to determine whether they should sit in a case for "just and valid reasons, with only. their conscience
as guide."209 Broad as it may seem, the rule on voluntary inhibition "does not give judges the unfettered
discretion to decide whether to desist from hearing a case."210 There must be a just and valid cause or reason.
An imputation of bias or partiality will not suffice absent any showing of "acts or conduct clearly indicative of
arbitrariness or prejudice."211
Here, this Court finds no reason for Court of Appeals Associate Justice Gonzales-Sison to inhibit from sitting in
CA-G.R. SP No. 111965.

Del Mundo, et al. simply accused her of bias and partiality for having penned two (2) cases involving the same
subject matter as their Petition. This is insufficient; there must be evidence of acts or conduct indicative of the
charges. In Pagoda Philippines, Inc., v. Universal Canning, Inc.,212 this Court explained that:

. . . for bias and prejudice to be considered valid reasons for the voluntary inhibition of judges, mere suspicion is
not enough. Bare allegations of their partiality will not suffice "in the absence of clear and convincing evidence to
overcome the presumption that a judge will undertake his noble role to dispense justice according to law and
evidence and without fear or favor."213

Besides, Del Mundo, et al. did not even attach copies of the two (2) decisions that Associate Justice Gonzales-
Sison penned which allegedly indicate her bias. Thus, she was not shown to have been motivated by bias or
prejudice.

VIII

Del Mundo, et al. concede that they failed to appeal Undersecretary Adasa and Regional Adjudicator Minas'
Orders. They believe, however, that this is not fatal to their cause. Citing Dadizon v. Bernadas,214 they claim
that the appeal filed by the other farmer-beneficiaries should be considered as an appeal of all the farmer-
beneficiaries under the community of interest principle.215

Their argument fails to persuade.

The procedural issue in Dadizon was whether the requirement of impleading all indispensable parties under
Rule 7, Section 3 of the Rules of Court applies to appeals. This Court ruled that the rule on indispensable parties
only applies to original actions, not to appeals. The reversal of the judgment on appeal would only bind the
parties in the appealed case but not those who were not made parties.

As an exception, however, this Court cited communality of interest among the parties, where a reversal of the
judgment on appeal operates as a reversal to all the parties—even to those who did not appeal—if it is shown
that their rights and interests are inseparable or so "interwoven and dependent on each other[.]"216 The rule has
also been held to apply in instances when an "injustice might result from a.reversal as to less than all the
parties."217

The rule on communality of interest does not apply here. The rule refers to the effect of a reversal of a judgment
on parties who did not appeal. Del Mundo, et al. cannot rely upon this rule to recover an appeal which they had
already lost.

Even if the rule were applicable, there is no showing that Del Mundo, et al.'s rights and interests are inseparable
or so "interwoven and dependent'' on the rights and interests of the parties who filed an appeal.

WHEREFORE, the consolidated Petitions are DENIED. The March 26, 2002 Decision of the Court of Appeals in
CA-G.R. SP No. 47497, the February 27, 2009 Decision and August 25, 2009 Resolution of the Court of Appeals
in CA-G.R. SP No. 60203, and the September 28, 2011 Decision and February 20, 2012 Resolution of the Court
of Appeals in CA-G.R. SP No. 111965 are AFFIRMED.

SO ORDERED.
RULE 9

August 6, 2018

G.R. No. 212987

ELIZABETH M. LANSANGAN, Petitioner
vs.
ANTONIO S. CAISIP, Respondent

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari  are the Decision  dated January 23, 2014 and the
1 2

Resolution  dated May 20, 2014 of the Court of Appeals (CA) in CA-G.R. SP No. 129824, which affirmed the
3

Decision  dated January 31, 2013 and the Order  dated April 2, 2013 of the Regional Trial Court of Capas,
4 5

Tarlac, Branch 66 (RTC) in Special Civil Action Case No. 58-C-12, upholding the motu proprio dismissal of
petitioner Elizabeth M. Lansangan's (petitioner) complaint for failure to refer the matter for barangay conciliation
proceedings before recourse to the courts.

The Facts

This case stemmed from a Complaint for Sum of Money and Damages  dated June 27, 2012 filed before the 2nd
6

Municipal Circuit Trial Court of Capas-Bamban-Concepcion, Tarlac (MCTC) by petitioner against respondent
Antonio Caisip (respondent), docketed as Civil Case No. 2738- 12.

Petitioner, a resident of Camanse Street, Purok 4, Rose Park, Concepcion, Tarlac, alleged that respondent, a
resident of Barangay Sto. Niño, Concepcion, Tarlac, executed a promissory note  in her favor in the amount of
7

€2,522.00 payable in three (3) installments. As respondent defaulted in his obligation under the promissory note
and refused to heed petitioner's demands to comply therewith, the latter was constrained to file the said
complaint. 8

Since respondent failed to file any responsive pleading, petitioner moved to declare him in default and for the
MCTC to render judgment,  which was granted in an Order  dated August 28, 2012. Accordingly, the case was
9 10

submitted for resolution. 11

The MCTC Ruling

In an Order  dated September 3, 2012, the MCTC motu proprio dismissed without prejudice the complaint for
12

failure to comply with the provisions of Republic Act No. (RA) 7160,  otherwise known as "The Local
13

Government Code of 1991," which requires the prior referral of the dispute between residents of the same
barangay for conciliation proceedings before the filing of a case in court. 14

Petitioner moved for reconsideration,  which was, however, denied in an Order  dated September 25, 2012. In
15 16

the said Order, the MCTC opined that petitioner's failure to refer the matter for barangay conciliation
proceedings rendered it without jurisdiction to rule on her complaint.  Aggrieved, she filed a petition
17

for certiorari  before the RTC.

18

The RTC Ruling

In a Decision  dated January 31, 2013, the RTC upheld the motu proprio dismissal of petitioner's complaint. It
19

ruled that prior barangay conciliation proceedings before the filing of the instant complaint is jurisdictional; thus,
non-compliance therewith warrants its dismissal. 20

Petitioner moved for reconsideration,  but the same was denied in an Order  dated April 2, 2013. Undeterred,
21 22

she appealed  to the CA.23

The CA Ruling
In a Decision  dated January 23, 2014, the CA affirmed the RTC Ruling. It held that since the party-litigants are
24

both residents of Concepcion, Tarlac, petitioner's complaint should have undergone the mandatory barangay
conciliation proceedings before raising the matter before the courts. 25

Undaunted, Elizabeth moved for reconsideration,  which was denied in a Resolution  dated May 20, 2014;
26 27

hence, this petition.

The Issue Before the Court

The issue for the Court's resolution is whether or not the CA erred in upholding the motu proprio dismissal of
petitioner's complaint.

The Court's Ruling

The petition is meritorious.

Section 1, Rule 16 of the Rules of Court provides for the grounds that may be raised in a motion to dismiss a
complaint, to wit:

Section 1. Grounds. - Within the time for but before filing the answer to the complaint or pleading asserting a
claim, a motion to dismiss may be made on any of the following grounds:

(a) That the court has no jurisdiction over the person of the def ending party;

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

(c) That venue is improperly laid;

(d) That the plaintiff has no legal capacity to sue;

(e) That there is another action pending between the same parties for the same cause;

(f) That the cause of action is barred by a prior judgment or by the statute of limitations;

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

(h) That the claim or demand set forth in the plaintiff's pleading has been paid, waived, abandoned, or
otherwise extinguished;

(i) That the claim on which the action is founded is unenforceable under the provisions of the statute of
frauds; and

(j) That a condition precedent for filing the claim has not been complied with. (Emphasis and
underscoring supplied)

As a general rule, the above-listed grounds must be invoked by the party-litigant at the earliest opportunity, as in
a motion to dismiss or in the answer; otherwise, such grounds are deemed waived. As an exception, however,
the courts may order the motu proprio dismissal of a case on the grounds of lack of jurisdiction over the subject
matter, litis pendentia, res judicata, and prescription of action, pursuant to Section 1, Rule 9 of the Rules of
Court, which reads:

Section 1. Defenses and objections not pleaded. - Defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived.  However, when it appears from the pleadings or the evidence on
1âwphi1

record that the court has no jurisdiction over the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the
court shall dismiss the claim.

In this case, the motu proprio dismissal of the complaint was anchored on petitioner's failure to refer the matter
for barangay conciliation proceedings which in certain instances, is a condition precedent before filing a case in
court. As Section 412 (a) of RA 7160 provides, the conduct of barangay conciliation proceedings is a pre-
condition to the filing of a complaint involving any matter within the authority of the lupon, to wit:

Section 412. Conciliation. - (a) Pre-condition to Filing of Complaint in Court. - No complaint, petition, action, or

proceeding involving any matter within the authority of the !upon shall be filed or instituted directly in court or any
other government office for adjudication, unless there has been a confrontation between the parties before
the lupon chairman or the pangkat, and that no conciliation or settlement has been reached as certified by
the lupon secretary or pangkat secretary as attested to by the lupon or pangkat chairman or unless the
settlement has been repudiated by the parties thereto.

Under Section 409 (a) of RA 7160, "[d]isputes between persons actually residing in the same barangay [(as in
the parties in this case)] shall be brought for amicable settlement before the Zupan of said barangay."

Lifted from Presidential Decree No. 1508,  otherwise known as the "Katarungang Pambarangay Law," the
28

primordial objective of a prior barangay conciliation is to reduce the number of court litigations and prevent the
deterioration of the quality of justice which has been brought by the indiscriminate filing of cases in courts.
Subject to certain exemptions,  a party's failure to comply with this requirement before filing a case in court
29

would render his complaint dismissible on the ground of failure to comply with a condition precedent, pursuant to
Section 1 (j), Rule 16 of the Rules of Court. 30

Notably, in Aquino v. Aure,  the Court clarified that such conciliation process is not a jurisdictional
31

requirement, such that noncompliance therewith cannot affect the jurisdiction which the court has
otherwise acquired over the subject matter or over the person of the defendant,  viz.: 32

Ordinarily, non-compliance with the condition precedent [of prior barangay conciliation] could affect the
sufficiency of the plaintiff's cause of action and make his complaint vulnerable to dismissal on [the] ground of
lack of cause of action or prematurity; but the same would not prevent a court of competent jurisdiction from
exercising its power of adjudication over the case before it, where the defendants, as in this case, failed to object
to such exercise of jurisdiction in their answer and even during the entire proceedings a quo. 33

Similarly, in Banares II v. Balising,  it was mentioned that the non-referral of a case for barangay conciliation
34

when so required under the law is not jurisdictional in nature, and may therefore be deemed waived if not
raised seasonably in a motion to dismiss or in a responsive pleading. 35

Here, the ground of non-compliance with a condition precedent, i.e., undergoing prior barangay conciliation
proceedings, was not invoked at the earliest opportunity, as in fact, respondent was declared in default for failure
to file a responsive pleading despite due notice. Therefore, it was grave error for the courts a quo to order the
dismissal of petitioner's complaint on said ground. Hence, in order to rectify the situation, the Court finds it
proper that the case be reinstated and remanded to the MCTC, which is the court of origin, for its resolution on
the merits.

WHEREFORE, the petition is GRANTED. The Decision dated January 23, 2014 and the Resolution dated May
20, 2014 of the Court of Appeals in CA-G.R. SP No. 129824 are hereby REVERSED and SET
ASIDE. Accordingly, Civil Case No. 2738-12 is hereby REINSTATED and REMANDED to the 2nd Municipal
Circuit Trial Court of Capas-Bamban- Concepcion, Tarlac for resolution on the merits, with reasonable dispatch.

SO ORDERED.

G.R. No. 168979               December 2, 2013

REBECCA PACAÑA-CONTRERAS and ROSALIE PACAÑA, Petitioners,

vs.
ROVILA WATER SUPPLY, INC., EARL U KOKSENG, LILIA TORRES, DALLA P. ROMANILLOS and
MARISSA GABUYA, Respondents.

DECISION

BRION, J.:
Before the Court is a petition for review on certiorari  under Rule 4 of the Rules of Court seeking the reversal of
1

the decision  dated January 27, 2005 and the resolution  dated June 6, 2005 of the Courts of Appeals (CA) in
2 3

CA-G.R. SP No. 71551. The CA set aside the orders dated February 28, 2002  and April 1, 2002  of the Regional
4 5

Trial Court (RTC), Branch 8, Cebu City, which denied the motion to dismiss for reconsideration respectively, of
respondents Rovila Water Supply, Inc. (Rovilla, Inc.), Earl U. Kokseng, Lialia Torres, Dalla P. Romanillos and
Marissa Gabuya.

THE FACTUAL ANTECEDENTS

Petitioners Rebecca Pacaña-Contreras and Rosalie Pacaña, children of Lourdes Teves Pacaña and Luciano
Pacaña, filed the present case against Rovila Inc., Earl, Lilia, Dalla and Marisa for accounting and damages. 6

The petitioners claimed that their family has long been known in the community to be engaged in the water
supply business; they operated the "Rovila Water Supply" from their family residence and were engaged in the
distribution of water to customers in Cebu City. The petitioners alleged that Lilia was a former trusted employee
in the family business who hid business records and burned and ransacked the family files. Lilia also allegedly
posted security guards and barred the members of the Pacaña family from operating their business. She then
claimed ownership over the family business through a corporation named "Rovila Water Supply, Inc." (Rovila
Inc.) Upon inquiry with the Securities and Exchange Commission (SEC), the petitioners claimed that Rovila Inc.
was surreptitiously formed with the respondents as the majority stockholders. The respondents did so by
conspiring with one another and forming the respondent corporation to takeover and illegally usurp the family
business’ registered name. 7

In forming the respondent corporation, the respondents allegedly used the name of Lourdes as one of the
incorporators and made it appear in the SEC documents that the family business was operated in a place other
than the Pacaña residence. Thereafter, the respondents used the Pacaña family’s receipts and the deliveries
and sales were made to appear as those of the respondent Rovila Inc. Using this scheme, the respondents
fraudulently appropriated the collections and payments. 8

The petitioners filed the complaint in their own names although Rosalie was authorized by Lourdes through a
sworn declaration and special power of attorney (SPA). The respondents filed a first motion to dismiss on the
ground that the RTC had no jurisdiction over an intra-corporate controversy. 9

The RTC denied the motion. On September 26, 2000, Lourdes died  and the petitioners amended their
10

complaint, with leave of court, on October 2, 2000 to reflect this development. 11

They still attached to their amended complaint the sworn declaration with SPA, but the caption of the amended
complaint remained the same. 12

On October 10, 2000, Luciano also died. 13

The respondents filed their Answer on November 16, 2000. 14

The petitioners’ sister, Lagrimas Pacaña-Gonzales, filed a motion for leave to intervene and her answer-in-
intervention was granted by the trial court. At the subsequent pre-trial, the respondents manifested to the RTC
that a substitution of the parties was necessary in light of the deaths of Lourdes and Luciano. They further stated
that they would seek the dismissal of the complaint because the petitioners are not the real parties in interest to
prosecute the case. The pre-trial pushed through as scheduled and the RTC directed the respondents to put into
writing their earlier manifestation. The RTC issued a pre-trial order where one of the issues submitted was
whether the complaint should be dismissed for failure to comply with Section 2, Rule 3 of the Rules of Court
which requires that every action must be prosecuted in the name of the real party in interest.15

On January 23, 2002,  the respondents again filed a motion to dismiss on the grounds, among others, that the
16

petitioners are not the real parties in interest to institute and prosecute the case and that they have no valid
cause of action against the respondents.

THE RTC RULING

The RTC denied the respondents’ motion to dismiss. It ruled that, save for the grounds for dismissal which may
be raised at any stage of the proceedings, a motion to dismiss based on the grounds invoked by the
respondents may only be filed within the time for, but before, the filing of their answer to the amended complaint.
Thus, even granting that the defenses invoked by the respondents are meritorious, their motion was filed out of
time as it was filed only after the conclusion of the pre-trial conference. Furthermore, the rule on substitution of
parties only applies when the parties to the case die, which is not what happened in the present case. 17

The RTC likewise denied the respondents’ motion for reconsideration. 18

The respondents filed a petition for certiorari under Rule 65 of the Rules of Court with the CA, invoking grave
abuse of discretion in the denial of their motion to dismiss. They argued that the deceased spouses Luciano and
Lourdes, not the petitioners, were the real parties in interest. Thus, the petitioners violated Section 16, Rule 3 of
the Rules of Court on the substitution of parties. 19

Furthermore, they seasonably moved for the dismissal of the case  and the RTC never acquired jurisdiction over
20

the persons of the petitioners as heirs of Lourdes and Luciano. 21

THE CA RULING

The CA granted the petition and ruled that the RTC committed grave abuse of discretion as the petitioners filed
the complaint and the amended complaint as attorneys-in-fact of their parents. As such, they are not the real
parties in interest and cannot bring an action in their own names; thus, the complaint should be
dismissed  pursuant to the Court’s ruling in Casimiro v. Roque and Gonzales.
22 23

Neither are the petitioners suing as heirs of their deceased parents.  Pursuant to jurisprudence,  the petitioners
1awp++i1
24

should first be declared as heirs before they can be considered as the real parties in interest. This cannot be
done in the present ordinary civil case but in a special proceeding for that purpose. The CA agreed with the
respondents that they alleged the following issues as affirmative defenses in their answer: 1) the petitioners are
not the real parties in interest; and 2) that they had no legal right to institute the action in behalf of their parents. 25

That the motion to dismiss was filed after the period to file an answer has lapsed is of no moment. The RTC
judge entertained it and passed upon its merit. He was correct in doing so because in the pre-trial order, one of
the submitted issues was whether the case must be dismissed for failure to comply with the requirements of the
Rules of Court. Furthermore, in Dabuco v. Court of Appeals,  the Court held that the ground of lack of cause of
26

action may be raised in a motion to dismiss at anytime. 27

The CA further ruled that, in denying the motion to dismiss, the RTC judge acted contrary to established rules
and jurisprudence which may be questioned via a petition for certiorari. The phrase "grave abuse of discretion"
which was traditionally confined to "capricious and whimsical exercise of judgment" has been expanded to
include any action done "contrary to the Constitution, the law or jurisprudence[.]" 28

THE PARTIES’ ARGUMENTS

The petitioners filed the present petition and argued that, first, in annulling the interlocutory orders, the CA
unjustly allowed the motion to dismiss which did not conform to the rules. 29

Specifically, the motion was not filed within the time for, but before the filing of, the answer to the amended
complaint, nor were the grounds raised in the answer. Citing Section 1, Rule 9 of the Rules of Court, the
respondents are deemed to have waived these grounds, as correctly held by the RTC. 30

Second, even if there is non-joinder and misjoinder of parties or that the suit is not brought in the name of the
real party in interest, the remedy is not outright dismissal of the complaint, but its amendment to include the real
parties in interest. 31

Third, the petitioners sued in their own right because they have actual and substantial interest in the subject
matter of the action as heirs or co-owners, pursuant to Section 2, Rule 3 of the Rules of Court. 32

Their declaration as heirs in a special proceeding is not necessary, pursuant to the Court’s ruling in Marabilles,
et al. v. Quito. 33

Finally, the sworn declaration is evidentiary in nature which remains to be appreciated after the trial is
completed. 34

The respondents reiterated in their comment that the petitioners are not the real parties in interest. 35
They likewise argued that they moved for the dismissal of the case during the pre-trial conference due to the
petitioners’ procedural lapse in refusing to comply with a condition precedent, which is, to substitute the heirs as
plaintiffs. Besides, an administrator of the estates of Luciano and Lourdes has already been appointed. 36

The respondents also argued that the grounds invoked in their motion to dismiss were timely raised, pursuant to
Section 2, paragraphs g and i, Rule 18 of the Rules of Court. Specifically, the nature and purposes of the pre-
trial include, among others, the dismissal of the action, should a valid ground therefor be found to exist; and such
other matters as may aid in the prompt disposition of the action. Finally, the special civil action of certiorari was
the proper remedy in assailing the order of the RTC. 37

THE COURT’S RULING

We find the petition meritorious.

Petition for certiorari under Rule 65 is a proper remedy for a denial of a motion to dismiss attended by grave
abuse of discretion

In Barrazona v. RTC, Branch 61, Baguio City,  the Court held that while an order denying a motion to dismiss is
38

interlocutory and non-appealable, certiorari and prohibition are proper remedies to address an order of denial
made without or in excess of jurisdiction. The writ of certiorari is granted to keep an inferior court within the
bounds of its jurisdiction or to prevent it from committing grave abuse of discretion amounting to lack or excess
of jurisdiction.

The history and development of the ground "fails to state a cause of action" in the 1940, 1964 and the present
1997 Rules of Court Preliminarily, a suit that is not brought in the name of the real party in interest is dismissible
on the ground that the complaint "fails to state a cause of action."39

Pursuant to jurisprudence,  this is also the ground invoked when the respondents alleged that the petitioners are
40

not the real parties in interest because: 1) the petitioners should not have filed the case in their own names,
being merely attorneys-in-fact of their mother; and 2) the petitioners should first be declared as heirs. A review of
the 1940, 1964 and the present 1997 Rules of Court shows that the fundamentals of the ground for dismissal
based on "failure to state a cause of action" have drastically changed over time. A historical background of this
particular ground is in order to preclude any confusion or misapplication of jurisprudence decided prior to the
effectivity of the present Rules of Court. The 1940 Rules of Court provides under Section 10, Rule 9 that:

Section 10. Waiver of defenses- Defenses and objections not pleaded either in a motion to dismiss or in the
answer are deemed waived; except the defense of failure to state a cause of action, which may be alleged in a
later pleading, if one is permitted, or by motion for judgment on the pleadings, or at the trial on the merits; but in
the last instance, the motion shall be disposed of as provided in section 5 of Rule 17 in the light of any evidence
which may have been received. Whenever it appears that the court has no jurisdiction over the subject-matter, it
shall dismiss the action. [underscoring supplied]

This provision was essentially reproduced in Section 2, Rule 9 of the 1964 Rules of Court, and we quote:

Section 2. Defenses and objections not pleaded deemed waived. — Defenses and objections not pleaded either
in a motion to dismiss or in the answer are deemed waived; except the failure to state a cause of action which
may be alleged in a later pleading, if one is permitted, or by motion for judgment on the pleadings, or at the trial
on the merits; but in the last instance, the motion shall be disposed of as provided in section 5 of Rule 10 in the
light of any evidence which may have been received. Whenever it appears that the court has no jurisdiction over
the subject-matter, it shall dismiss the action. [underscoring supplied]

Under the present Rules of Court, this provision was reflected in Section 1, Rule 9, and we quote:

Section 1. Defenses and objections not pleaded. — Defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on
record that the court has no jurisdiction over the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the
court shall dismiss the claim. [underscoring supplied]

Notably, in the present rules, there was a deletion of the ground of "failure to state a cause of action" from the list
of those which may be waived if not invoked either in a motion to dismiss or in the answer. Another novelty
introduced by the present Rules, which was totally absent in its two precedents, is the addition of the period of
time within which a motion to dismiss should be filed as provided under Section 1, Rule 16 and we quote:

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: xxx [underscoring supplied]

All these considerations point to the legal reality that the new Rules effectively restricted the dismissal of
complaints in general, especially when what is being invoked is the ground of "failure to state a cause of action."
Thus, jurisprudence governed by the 1940 and 1964 Rules of Court to the effect that the ground for dismissal
based on failure to state a cause of action may be raised anytime during the proceedings, is already inapplicable
to cases already governed by the present Rules of Court which took effect on July 1, 1997. As the rule now
stands, the failure to invoke this ground in a motion to dismiss or in the answer would result in its waiver.
According to Oscar M. Herrera,  the reason for the deletion is that failure to state a cause of action may be
41

cured under Section 5, Rule 10 and we quote:

Section 5. Amendment to conform to or authorize presentation of evidence. — When issues not raised by the
pleadings are tried with the express or implied consent of the parties they shall be treated in all respects as if
they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to
conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after
judgment; but failure to amend does not effect the result of the trial of these issues. If evidence is objected to at
the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to
be amended and shall do so with liberality if the presentation of the merits of the action and the ends of
substantial justice will be subserved thereby. The court may grant a continuance to enable the amendment to be
made.

With this clarification, we now proceed to the substantial issues of the petition. 1âwphi1

The motion to dismiss in the present case based on failure to state a cause of action was not timely filed and
was thus waived

Applying Rule 16 of the Rules of Court which provides for the grounds for the dismissal of a civil case, the
respondents’ grounds for dismissal fall under Section 1(g) and (j), Rule 16 of the Rules of Court, particularly,
failure to state a cause of action and failure to comply with a condition precedent (substitution of parties),
respectively. The first paragraph of Section 1,42

Rule 16 of the Rules of Court provides for the period within which to file a motion to dismiss under the grounds
enumerated. Specifically, the motion should be filed within the time for, but before the filing of, the answer to the
complaint or pleading asserting a claim. Equally important to this provision is Section 1, 43

Rule 9 of the Rules of Court which states that defenses and objections not pleaded either in a motion to dismiss
or in the answer are deemed waived, except for the following grounds: 1) the court has no jurisdiction over the
subject matter; 2) litis pendencia; 3) res judicata; and 4) prescription. Therefore, the grounds not falling under
these four exceptions may be considered as waived in the event that they are not timely invoked. As the
respondents’ motion to dismiss was based on the grounds which should be timely invoked, material to the
resolution of this case is the period within which they were raised. Both the RTC and the CA found that the
motion to dismiss was only filed after the filing of the answer and after the pre-trial had been concluded.
Because there was no motion to dismiss before the filing of the answer, the respondents should then have at
least raised these grounds as affirmative defenses in their answer. The RTC’s assailed orders did not touch on
this particular issue but the CA ruled that the respondents did, while the petitioners insist that the respondents
did not. In the present petition, the petitioners reiterate that there was a blatant non-observance of the rules
when the respondents did not amend their answer to invoke the grounds for dismissal which were raised only
during the pre-trial and, subsequently, in the subject motion to dismiss. 44

The divergent findings of the CA and the petitioners’ arguments are essentially factual issues. Time and again,
we have held that the jurisdiction of the Court in a petition for review on certiorari under Rule 45, such as the
present case, is limited only to questions of law, save for certain exceptions. One of these is attendant herein,
which is, when the findings are conclusions without citation of specific evidence on which they are based. 45

In the petition filed with the CA, the respondents made a passing allegation that, as affirmative defenses in their
answer, they raised the issue that the petitioners are not the real parties in interest. 46
On the other hand, the petitioners consistently argued otherwise in their opposition  to the motion to dismiss,
47

and in their comment  and in their memorandum  on the respondents’ petition before the CA. Our examination
48 49

of the records shows that the CA had no basis in its finding that the respondents alleged the grounds as
affirmative defenses in their answer. The respondents merely stated in their petition for certiorari that they
alleged the subject grounds in their answer. However, nowhere in the petition did they support this allegation;
they did not even attach a copy of their answer to the petition. It is basic that the respondents had the duty to
prove by substantial evidence their positive assertions. Considering that the petition for certiorari is an original
and not an appellate action, the CA had no records of the RTC’s proceedings upon which the CA could refer to
in order to validate the respondents’ claim. Clearly, other than the respondents’ bare allegations, the CA had no
basis to rule, without proof, that the respondents alleged the grounds for dismissal as affirmative defenses in the
answer. The respondents, as the parties with the burden of proving that they timely raised their grounds for
dismissal, could have at least attached a copy of their answer to the petition. This simple task they failed to do.
That the respondents did not allege in their answer the subject grounds is made more apparent through their
argument, both in their motion to dismiss  and in their comment,  that it was only during the pre-trial stage that
50 51

they verbally manifested and invited the attention of the lower court on their grounds for dismissal. In order to
justify such late invocation, they heavily relied on Section 2(g) and (i), Rule 18  of the Rules of Court that the
52

nature and purpose of the pre-trial include, among others, the propriety of dismissing the action should there be
a valid ground therefor and matters which may aid in the prompt disposition of the action. The respondents are
not correct. The rules are clear and require no interpretation. Pursuant to Section 1, Rule 9 of the Rules of Court,
a motion to dismiss based on the grounds invoked by the respondents may be waived if not raised in a motion to
dismiss or alleged in their answer. On the other hand, "the pre-trial is primarily intended to make certain that all
issues necessary to the disposition of a case are properly raised. The purpose is to obviate the element of
surprise, hence, the parties are expected to disclose at the pre-trial conference all issues of law and fact which
they intend to raise at the trial, except such as may involve privileged or impeaching matter." 53

The issues submitted during the pre-trial are thus the issues that would govern the trial proper. The dismissal of
the case based on the grounds invoked by the respondents are specifically covered by Rule 16 and Rule 9 of
the Rules of Court which set a period when they should be raised; otherwise, they are deemed waived.

The Dabuco ruling is inapplicable in the present case; the ground for dismissal "failure to state a cause of action"
distinguished from "lack of cause of action"

To justify the belated filing of the motion to dismiss, the CA reasoned out that the ground for dismissal of "lack of
cause of action" may be raised at any time during the proceedings, pursuant to Dabuco v. Court of Appeals. 54

This is an erroneous interpretation and application of Dabuco as will be explained below.

First, in Dabuco, the grounds for dismissal were raised as affirmative defenses in the answer which is in stark
contrast to the present case.

Second, in Dabuco, the Court distinguished between the dismissal of the complaint for "failure to state a cause
of action" and "lack of cause of action." The Court emphasized that in a dismissal of action for lack of cause of
action, "questions of fact are involved, [therefore,] courts hesitate to declare a plaintiff as lacking in cause of
action. Such declaration is postponed until the insufficiency of cause is apparent from a preponderance of
evidence.

Usually, this is done only after the parties have been given the opportunity to present all relevant evidence on
such questions of fact." 55

In fact, in Dabuco, the Court held that even the preliminary hearing on the propriety of lifting the restraining order
was declared insufficient for purposes of dismissing the complaint for lack of cause of action. This is so because
the issues of fact had not yet been adequately ventilated at that preliminary stage. For these reasons, the Court
declared in Dabuco that the dismissal by the trial court of the complaint was premature. In the case of
Macaslang v. Zamora,  the Court noted that the incorrect appreciation by both the RTC and the CA of the
56

distinction between the dismissal of an action, based on "failure to state a cause of action" and "lack of cause of
action," prevented it from properly deciding the case, and we quote:

Failure to state a cause of action and lack of cause of action are really different from each other. On the one
hand, failure to state a cause of action refers to the insufficiency of the pleading, and is a ground for dismissal
under Rule 16 of the Rules of Court. On the other hand, lack of cause [of] action refers to a situation where the
evidence does not prove the cause of action alleged in the pleading. Justice Regalado, a recognized
commentator on remedial law, has explained the distinction: xxx 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. [italics supplied]

Based on this discussion, the Court cannot uphold the dismissal of the present case based on the grounds
invoked by the respondents which they have waived for failure to invoke them within the period prescribed by the
Rules. The Court cannot also dismiss the case based on "lack of cause of action" as this would require at least a
preponderance of evidence which is yet to be appreciated by the trial court. Therefore, the RTC did not commit
grave abuse of discretion in issuing the assailed orders denying the respondents’ motion to dismiss and motion
for reconsideration. The Court shall not resolve the merits of the respondents’ grounds for dismissal which are
considered as waived.

Other heirs of the spouses Pacaña to be impleaded in the case.

It should be emphasized that insofar as the petitioners are concerned, the respondents have waived the
dismissal of the complaint based on the ground of failure to state a cause of action because the petitioners are
not the real parties in interest. At this juncture, a distinction between a real party in interest and an indispensable
party is in order. In Carandang v. Heirs of de Guzman, et al.,  the Court clarified these two concepts and held
57

that "[a] real party in interest is the party who stands to be benefited or injured by the judgment of the suit, or the
party entitled to the avails of the suit. On the other hand, an indispensable party is a party in interest without
whom no final determination can be had of an action, in contrast to a necessary party, which is one who is not
indispensable but who ought to be joined as a party if complete relief is to be accorded as to those already
parties, or for a complete determination or settlement of the claim subject of the action. xxx If a suit is not
brought in the name of or against the real party in interest, a motion to dismiss may be filed on the ground that
the complaint states no cause of action. However, the dismissal on this ground entails an examination of
whether the parties presently pleaded are interested in the outcome of the litigation, and not whether all persons
interested in such outcome are actually pleaded. The latter query is relevant in discussions concerning
indispensable and necessary parties, but not in discussions concerning real parties in interest. Both
indispensable and necessary parties are considered as real parties in interest, since both classes of parties
stand to be benefited or injured by the judgment of the suit."

At the inception of the present case, both the spouses Pacaña were not impleaded as parties-plaintiffs. The
Court notes, however, that they are indispensable parties to the case as the alleged owners of Rovila Water
Supply. Without their inclusion as parties, there can be no final determination of the present case. They possess
such an interest in the controversy that a final decree would necessarily affect their rights, so that the courts
cannot proceed without their presence. Their interest in the subject matter of the suit and in the relief sought is
inextricably intertwined with that of the other parties. 58

Jurisprudence on the procedural consequence of the inclusion or non-inclusion of an indispensable party is

divided in our jurisdiction. Due to the non-inclusion of indispensable parties, the Court dismissed the case in
Lucman v. Malawi, et al.  and Go v. Distinction Properties Development Construction, Inc.,  while in Casals, et
59 60

al. v. Tayud Golf and Country Club et al.,  the Court annulled the judgment which was rendered without the
61

inclusion of the indispensable parties. In Arcelona et al. v. Court of Appeals  and Bulawan v. Aquende,  and
62 63

Metropolitan Bank & Trust Company v. Alejo et al.  the Court ruled that the burden to implead or order the
64

impleading of an indispensable party rests on the plaintiff and on the trial court, respectively. Thus, the non-
inclusion of the indispensable parties, despite notice of this infirmity, resulted in the annulment of these cases. In
Plasabas, et al. v. Court of Appeals, et al.,  the Court held that the trial court and the CA committed reversible
65

error when they summarily dismissed the case, after both parties had rested their cases following a protracted
trial, on the sole ground of failure to implead indispensable parties. Non-joinder of indispensable parties is not a
ground for the dismissal of an action. The remedy is to implead the non-party claimed to be indispensable.
However, in the cases of Quilatan, et al. v. Heirs of Quilatan, et al.  and Lagunilla, et al. v. Monis, et al.,  the
66 67

Court remanded the case to the RTC for the impleading of indispensable parties. On the other hand, in Lotte
Phil. Co., Inc. v. Dela Cruz,  PepsiCo, Inc. v. Emerald Pizza,   and Valdez Tallorin, v. Heirs of Tarona, et
68 69

al.,  the Court directly ordered that the indispensable parties be impleaded. Mindful of the differing views of the
70

Court as regards the legal effects of the non-inclusion of indispensable parties, the Court clarified in Republic of
the Philippines v. Sandiganbayan, et al.,  that the failure to implead indispensable parties is a curable error and
71
the foreign origin of our present rules on indispensable parties permitted this corrective measure. This cited case
held:

Even in those cases where it might reasonably be argued that the failure of the Government to implead the
sequestered corporations as defendants is indeed a procedural aberration xxx, slight reflection would
nevertheless lead to the conclusion that the defect is not fatal, but one correctible under applicable adjective
rules – e.g., Section 10, Rule 5 of the Rules of Court [specifying the remedy of amendment during trial to
authorize or to conform to the evidence]; Section 1, Rule 20 [governing amendments before trial], in relation to
the rule respecting omission of so-called necessary or indispensable parties, set out in Section 11, Rule 3 of the
Rules of Court. It is relevant in this context to advert to the old familiar doctrines that the omission to implead
such parties "is a mere technical defect which can be cured at any stage of the proceedings even after
judgment"; and that, particularly in the case of indispensable parties, since their presence and participation is
essential to the very life of the action, for without them no judgment may be rendered, amendments of the
complaint in order to implead them should be freely allowed, even on appeal, in fact even after rendition of
judgment by this Court, where it appears that the complaint otherwise indicates their identity and character as
such indispensable parties." Although there are decided cases wherein the non-joinder of indispensable parties
in fact led to the dismissal of the suit or the annulment of judgment, such cases do not jibe with the matter at
hand. The better view is that non-joinder is not a ground to dismiss the suit or annul the judgment. The rule on
joinder of indispensable parties is founded on equity. And the spirit of the law is reflected in Section 11, Rule 3 of
the 1997 Rules of Civil Procedure. It prohibits the dismissal of a suit on the ground of non-joinder or misjoinder
of parties and allows the amendment of the complaint at any stage of the proceedings, through motion or on
order of the court on its own initiative. Likewise, jurisprudence on the Federal Rules of Procedure, from which
our Section 7, Rule 3 on indispensable parties was copied, allows the joinder of indispensable parties even after
judgment has been entered if such is needed to afford the moving party full relief. Mere delay in filing the joinder
motion does not necessarily result in the waiver of the right as long as the delay is excusable.

In Galicia, et al. v. Vda. De Mindo, et al.,  the Court ruled that in line with its policy of promoting a just and
72

inexpensive disposition of a case, it allowed the intervention of the indispensable parties instead of dismissing
the complaint. Furthermore, in Commissioner Domingo v. Scheer,  the Court cited Salvador, et al. v. Court of
73

Appeals, et al.  and held that the Court has full powers, apart from that power and authority which are inherent,
74

to amend the processes, pleadings, proceedings and decisions by substituting as party-plaintiff the real party in
interest. The Court has the power to avoid delay in the disposition of this case, and to order its amendment in
order to implead an indispensable party. With these discussions as premises, the Court is of the view that the
proper remedy in the present case is to implead the indispensable parties especially when their non-inclusion is
merely a technical defect. To do so would serve proper administration of justice and prevent further delay and
multiplicity of suits. Pursuant to Section 9, Rule 3 of the Rules of Court, parties may be added by order of the
court on motion of the party or on its own initiative at any stage of the action. If the plaintiff refuses to implead an
indispensable party despite the order of the court, then the court may dismiss the complaint for the plaintiff’s
failure to comply with a lawful court order. 75

The operative act that would lead to the dismissal of the case would be the refusal to comply with the directive of
the court for the joinder of an indispensable party to the case. 76

Obviously, in the present case, the deceased Pacañas can no longer be included in the complaint as
indispensable parties because of their death during the pendency of the case. Upon their death, however, their
ownership and rights over their properties were transmitted to their heirs, including herein petitioners, pursuant
to Article 774  in relation with Article 777  of the Civil Code.
77 78

In Orbeta, et al. v. Sendiong,  the Court acknowledged that the heirs, whose hereditary rights are to be affected
79

by the case, are deemed indispensable parties who should have been impleaded by the trial court. Therefore, to
obviate further delay in the proceedings of the present case and given the Court’s authority to order the inclusion
of an indispensable party at any stage of the proceedings, the heirs of the spouses Pacaña, except the
petirioners who are already parties to the case are Lagrimas Pacaña-Gonzalez who intervened in the case, are
hereby ordered impleaded as parties-plaintiffs.

WHEREFORE, the petition is GRANTED. The decision dated January 27, 2005 and the resolution date June 6,
2005 of the Court of Appeals in CA-G.R. SP No. 71551 are REVERSED and SET ASIDE. The heirs of the
spouses Luciano and Lourdes Pacaña, except herein petitioner and Lagrimas Pacaña-Gonzalez, are ORDERED
IMPLEADED as parties plaintiffs and the RTC is directed tp proceed with the trial of the case with DISPATCH.

SO ORDERED.
ARTURO D. BRION
Associate Justice

G.R. No. 173559               January 7, 2013

LETICIA DIONA, represented by her Attorney-in-Fact, MARCELINA DIONA, Petitioner,

vs.
ROMEO A. BALANGUE, SONNY A. BALANGUE, REYNALDO A. BALANGUE, and ESTEBAN A.
BALANGUE, JR., Respondents.

DECISION

DEL CASTILLO, J.:

The great of a relief neither sought by the party in whose favor it was given not supported by the evidence
presented violates the opposing party’s right to due process and may be declared void ab initio in a proper
proceeding.

This Petition for Review on Certiorari1 assails the November 24, 2005 Resolution2 of the Court of Appeals (CA)
issued in G.R. SP No. 85541 which granted the Petition for Annulment of Judgment3 filed by the respondents
seeking to nullify that portion of the October 17, 2000 Decision4 of the Regional Trial Court (RTC), Branch 75,
Valenzuela City awarding petitioner 5% monthly interest rate for the principal amount of the loan respondent
obtained from her.

This Petition likewise assails the CA’s June 26, 2006 Resolution5 denying petitioner’s Motion for
Reconsideration.

Factual Antecedents

The facts of this case are simple and undisputed.

On March 2, 1991, respondents obtained a loan of ₱45,000.00 from petitioner payable in six months and
secured by a Real Estate Mortgage6 over their 202-square meter property located in Marulas, Valenzuela and
covered by Transfer Certificate of Title (TCT) No. V-12296.7 When the debt became due, respondents failed to
pay notwithstanding demand. Thus, on September 17, 1999, petitioner filed with the RTC a Complaint8 praying
that respondents be ordered:

(a) To pay petitioner the principal obligation of ₱45,000.00, with interest thereon at the rate of 12% per
annum, from 02 March 1991 until the full obligation is paid.

(b) To pay petitioner actual damages as may be proven during the trial but shall in no case be less than
₱10,000.00; ₱25,000.00 by way of attorney’s fee, plus ₱2,000.00 per hearing as appearance fee.

(c) To issue a decree of foreclosure for the sale at public auction of the aforementioned parcel of land,
and for the disposition of the proceeds thereof in accordance with law, upon failure of the respondents to
fully pay petitioner within the period set by law the sums set forth in this complaint.

(d) Costs of this suit.

Other reliefs and remedies just and equitable under the premises are likewise prayed for.9 (Emphasis supplied)

Respondents were served with summons thru respondent Sonny A. Balangue (Sonny). On October 15, 1999,
with the assistance of Atty. Arthur C. Coroza (Atty. Coroza) of the Public Attorney’s Office, they filed a Motion to
Extend Period to Answer. Despite the requested extension, however, respondents failed to file any responsive
pleadings. Thus, upon motion of the petitioner, the RTC declared them in default and allowed petitioner to
present her evidence ex parte.10

Ruling of the RTC sought to be annulled.

In a Decision11 dated October 17, 2000, the RTC granted petitioner’s Complaint. The dispositive portion of said
Decision reads:

WHEREFORE, judgment is hereby rendered in favor of the petitioner, ordering the respondents to pay the
petitioner as follows:

a) the sum of FORTY FIVE THOUSAND (₱45,000.00) PESOS, representing the unpaid principal loan
obligation plus interest at 5% per month [sic] reckoned from March 2, 1991, until the same is fully paid;

b) ₱20,000.00 as attorney’s fees plus cost of suit;

c) in the event the [respondents] fail to satisfy the aforesaid obligation, an order of foreclosure shall be
issued accordingly for the sale at public auction of the subject property covered by Transfer Certificate of
Title No. V-12296 and the improvements thereon for the satisfaction of the petitioner’s claim.

SO ORDERED.12 (Emphasis supplied)

Subsequently, petitioner filed a Motion for Execution,13 alleging that respondents did not interpose a timely
appeal despite receipt by their former counsel of the RTC’s Decision on November 13, 2000. Before it could be
resolved, however, respondents filed a Motion to Set Aside Judgment14 dated January 26, 2001, claiming that
not all of them were duly served with summons. According to the other respondents, they had no knowledge of
the case because their co-respondent Sonny did not inform them about it. They prayed that the RTC’s October
17, 2000 Decision be set aside and a new trial be conducted.

But on March 16, 2001, the RTC ordered15 the issuance of a Writ of Execution to implement its October 17, 2000
Decision. However, since the writ could not be satisfied, petitioner moved for the public auction of the mortgaged
property,16 which the RTC granted.17 In an auction sale conducted on November 7, 2001, petitioner was the only
bidder in the amount of ₱420,000.00. Thus, a Certificate of Sale18 was issued in her favor and accordingly
annotated at the back of TCT No. V-12296.

Respondents then filed a Motion to Correct/Amend Judgment and To Set Aside Execution Sale19 dated
December 17, 2001, claiming that the parties did not agree in writing on any rate of interest and that petitioner
merely sought for a 12% per annum interest in her Complaint. Surprisingly, the RTC awarded 5% monthly
interest (or 60% per annum) from March 2, 1991 until full payment. Resultantly, their indebtedness inclusive of
the exorbitant interest from March 2, 1991 to May 22, 2001 ballooned from ₱124,400.00 to ₱652,000.00.

In an Order20 dated May 7, 2002, the RTC granted respondents’ motion and accordingly modified the interest
rate awarded from 5% monthly to 12% per annum. Then on August 2, 2002, respondents filed a Motion for
Leave To Deposit/Consign Judgment Obligation21 in the total amount of ₱126,650.00.22

Displeased with the RTC’s May 7, 2002 Order, petitioner elevated the matter to the CA via a Petition for
Certiorari23 under Rule 65 of the Rules of Court. On August 5, 2003, the CA rendered a Decision24 declaring that
the RTC exceeded its jurisdiction in awarding the 5% monthly interest but at the same time pronouncing that the
RTC gravely abused its discretion in subsequently reducing the rate of interest to 12% per annum. In so ruling,
the CA ratiocinated:

Indeed, We are convinced that the Trial Court exceeded its jurisdiction when it granted 5% monthly interest
instead of the 12% per annum prayed for in the complaint. However, the proper remedy is not to amend the
judgment but to declare that portion as a nullity. Void judgment for want of jurisdiction is no judgment at all. It
cannot be the source of any right nor the creator of any obligation (Leonor vs. CA, 256 SCRA 69). No legal rights
can emanate from a resolution that is null and void (Fortich vs. Corona, 312 SCRA 751).

From the foregoing, the remedy of the respondents is to have the Court declare the portion of the judgment
providing for a higher interest than that prayed for as null and void for want of or in excess of jurisdiction. A void
judgment never acquire[s] finality and any action to declare its nullity does not prescribe (Heirs of Mayor
Nemencio Galvez vs. CA, 255 SCRA 672).

WHEREFORE, foregoing premises considered, the Petition having merit, is hereby GIVEN DUE COURSE.
Resultantly, the challenged May 7, 2002 and September 5, 2000 orders of Public Respondent Court are hereby
ANNULLED and SET ASIDE for having been issued with grave abuse of discretion amounting to lack or in
excess of jurisdiction. No costs.
SO ORDERED.25 (Emphases in the original; italics supplied.)

Proceedings before the Court of Appeals

Taking their cue from the Decision of the CA in the special civil action for certiorari, respondents filed with the
same court a Petition for Annulment of Judgment and Execution Sale with Damages.26 They contended that the
portion of the RTC Decision granting petitioner 5% monthly interest rate is in gross violation of Section 3(d) of
Rule 9 of the Rules of Court and of their right to due process. According to respondents, the loan did not carry
any interest as it was the verbal agreement of the parties that in lieu thereof petitioner’s family can continue
occupying respondents’ residential building located in Marulas, Valenzuela for free until said loan is fully paid.

Ruling of the Court of Appeals

Initially, the CA denied due course to the Petition.27 Upon respondents’ motion, however, it reinstated and
granted the Petition. In setting aside portions of the RTC’s October 17, 2000 Decision, the CA ruled that aside
from being unconscionably excessive, the monthly interest rate of 5% was not agreed upon by the parties and
that petitioner’s Complaint clearly sought only the legal rate of 12% per annum. Following the mandate of
Section 3(d) of Rule 9 of the Rules of Court, the CA concluded that the awarded rate of interest is void for being
in excess of the relief sought in the Complaint. It ruled thus:

WHEREFORE, respondents’ motion for reconsideration is GRANTED and our resolution dated October 13,
2004 is, accordingly, REVERSED and SET ASIDE. In lieu thereof, another is entered ordering the ANNULMENT
OF:

(a) public respondent’s impugned October 17, 2000 judgment, insofar as it awarded 5% monthly interest
in favor of petitioner; and

(b) all proceedings relative to the sale at public auction of the property titled in respondents’ names
under Transfer Certificate of Title No. V-12296 of the Valenzuela registry.

The judgment debt adjudicated in public respondent’s impugned October 17, 2000 judgment is, likewise, ordered
RECOMPUTED at the rate of 12% per annum from March 2, 1991. No costs.

SO ORDERED.28 (Emphases in the original.)

Petitioner sought reconsideration, which was denied by the CA in its June 26, 2006 Resolution.29

Issues

Hence, this Petition anchored on the following grounds:

I. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR OF LAW
WHEN IT GRANTED RESPONDENTS’ PETITION FOR ANNULMENT OF JUDGMENT AS A
SUBSTITUTE OR ALTERNATIVE REMEDY OF A LOST APPEAL.

II. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR AND
MISAPPREHENSION OF LAW AND THE FACTS WHEN IT GRANTED RESPONDENTS’ PETITION
FOR ANNULMENT OF JUDGMENT OF THE DECISION OF THE REGIONAL TRIAL COURT OF
VALENZUELA, BRANCH 75 DATED OCTOBER 17, 2000 IN CIVIL CASE NO. 241-V-99, DESPITE THE
FACT THAT SAID DECISION HAS BECOME FINAL AND ALREADY EXECUTED CONTRARY TO THE
DOCTRINE OF IMMUTABILITY OF JUDGMENT.30

Petitioner’s Arguments

Petitioner claims that the CA erred in partially annulling the RTC’s October 17, 2000 Decision. She contends that
a Petition for Annulment of Judgment may be availed of only when the ordinary remedies of new trial, appeal,
petition for relief or other appropriate remedies are no longer available through no fault of the claimant. In the
present case, however, respondents had all the opportunity to question the October 17, 2000 Decision of the
RTC, but because of their own inaction or negligence they failed to avail of the remedies sanctioned by the rules.
Instead, they contented themselves with the filing of a Motion to Set Aside Judgment and then a Motion to
Correct/Amend Judgment and to Set Aside Execution Sale.
Petitioner likewise argues that for a Rule 47 petition to prosper, the same must either be based on extrinsic fraud
or lack of jurisdiction. However, the allegations in respondents’ Rule 47 petition do not constitute extrinsic fraud
because they simply pass the blame to the negligence of their former counsel. In addition, it is too late for
respondents to pass the buck to their erstwhile counsel considering that when they filed their Motion to
Correct/Amend Judgment and To Set Aside Execution Sale they were already assisted by their new lawyer, Atty.
Reynaldo A. Ruiz, who did not also avail of the remedies of new trial, appeal, etc. As to the ground of lack of
jurisdiction, petitioner posits that there is no reason to doubt that the RTC had jurisdiction over the subject matter
of the case and over the persons of the respondents.

While conceding that the RTC patently made a mistake in awarding 5% monthly interest, petitioner nonetheless
invokes the doctrine of immutability of final judgment and contends that the RTC Decision can no longer be
corrected or modified since it had long become final and executory. She likewise points out that respondents
received a copy of said Decision on November 13, 2000 but did nothing to correct the same. They did not even
question the award of 5% monthly interest when they filed their Motion to Set Aside Judgment which they
anchored on the sole ground of the RTC’s lack of jurisdiction over the persons of some of the respondents.

Respondents’ Arguments

Respondents do not contest the existence of their obligation and the principal amount thereof. They only seek
quittance from the 5% monthly interest or 60% per annum imposed by the RTC. Respondents contend that
Section (3)d of Rule 9 of the Rules of Court is clear that when the defendant is declared in default, the court
cannot grant a relief more than what is being prayed for in the Complaint. A judgment which transgresses said
rule, according to the respondents, is void for having been issued without jurisdiction and for being violative of
due process of law.

Respondents maintain that it was through no fault of their own, but through the gross negligence of their former
counsel, Atty. Coroza, that the remedies of new trial, appeal or petition for relief from judgment were lost. They
allege that after filing a Motion to Extend Period to Answer, Atty. Coroza did not file any pleading resulting to
their being declared in default. While the said lawyer filed on their behalf a Motion to Set Aside Judgment dated
January 26, 2001, he however took no steps to appeal from the Decision of the RTC, thereby allowing said
judgment to lapse into finality. Citing Legarda v. Court of Appeals,31 respondents aver that clients are not always
bound by the actions of their counsel, as in the present case where the clients are to lose their property due to
the gross negligence of their counsel.

With regard to petitioner’s invocation of immutability of judgment, respondents argue that said doctrine applies
only to valid and not to void judgments.

Our Ruling

The petition must fail.

We agree with respondents that the award of 5% monthly interest violated their right to due process and, hence,
the same may be set aside in a Petition for Annulment of Judgment filed under Rule 47 of the Rules of Court.

Annulment of judgment under Rule 47; an exception to the final judgment rule; grounds therefor.

A Petition for Annulment of Judgment under Rule 47 of the Rules of Court is a remedy granted only under
exceptional circumstances where a party, without fault on his part, has failed to avail of the ordinary remedies of
new trial, appeal, petition for relief or other appropriate remedies. Said rule explicitly provides that it is not
available as a substitute for a remedy which was lost due to the party’s own neglect in promptly availing of the
same. "The underlying reason is traceable to the notion that annulling final judgments goes against the grain of
finality of judgment. Litigation must end and terminate sometime and somewhere, and it is essential to an
effective administration of justice that once a judgment has become final, the issue or cause involved therein
should be laid to rest."32

While under Section 2, Rule 4733 of the Rules of Court a Petition for Annulment of Judgment may be based only
on the grounds of extrinsic fraud and lack of jurisdiction, jurisprudence recognizes lack of due process as
additional ground to annul a judgment.34 In Arcelona v. Court of Appeals,35 this Court declared that a final and
executory judgment may still be set aside if, upon mere inspection thereof, its patent nullity can be shown for
having been issued without jurisdiction or for lack of due process of law.
Grant of 5% monthly interest is way beyond the 12% per annum interest sought in the Complaint and smacks of
violation of due process.

It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess of what is being sought
by the party. They cannot also grant a relief without first ascertaining the evidence presented in support thereof.
Due process considerations require that judgments must conform to and be supported by the pleadings and
evidence presented in court. In Development Bank of the Philippines v. Teston,36 this Court expounded that:

Due process considerations justify this requirement. It is improper to enter an order which exceeds the scope of
relief sought by the pleadings, absent notice which affords the opposing party an opportunity to be heard with
respect to the proposed relief. The fundamental purpose of the requirement that allegations of a complaint must
provide the measure of recovery is to prevent surprise to the defendant.

Notably, the Rules is even more strict in safeguarding the right to due process of a defendant who was declared
in default than of a defendant who participated in trial. For instance, amendment to conform to the evidence
presented during trial is allowed the parties under the Rules.37 But the same is not feasible when the defendant is
declared in default because Section 3(d), Rule 9 of the Rules of Court comes into play and limits the relief that
may be granted by the courts to what has been prayed for in the Complaint. It provides:

(d) Extent of relief to be awarded. – A judgment rendered against a party in default shall not exceed the amount
or be different in kind from that prayed for nor award unliquidated damages.

The raison d’être in limiting the extent of relief that may be granted is that it cannot be presumed that the
defendant would not file an Answer and allow himself to be declared in default had he known that the plaintiff will
be accorded a relief greater than or different in kind from that sought in the Complaint.38 No doubt, the reason
behind Section 3(d), Rule 9 of the Rules of Court is to safeguard defendant’s right to due process against
unforeseen and arbitrarily issued judgment. This, to the mind of this Court, is akin to the very essence of due
process. It embodies "the sporting idea of fair play"39 and forbids the grant of relief on matters where the
defendant was not given the opportunity to be heard thereon.

In the case at bench, the award of 5% monthly interest rate is not supported both by the allegations in the
pleadings and the evidence on record. The Real Estate Mortgage40 executed by the parties does not include any
provision on interest. When petitioner filed her Complaint before the RTC, she alleged that respondents
borrowed from her "the sum of FORTY-FIVE THOUSAND PESOS (₱45,000.00), with interest thereon at the rate
of 12% per annum"41 and sought payment thereof. She did not allege or pray for the disputed 5% monthly
interest. Neither did she present evidence nor testified thereon. Clearly, the RTC’s award of 5% monthly interest
or 60% per annum lacks basis and disregards due process. It violated the due process requirement because
respondents were not informed of the possibility that the RTC may award 5% monthly interest. They were
deprived of reasonable opportunity to refute and present controverting evidence as they were made to believe
that the complainant petitioner was seeking for what she merely stated in her Complaint.

Neither can the grant of the 5% monthly interest be considered subsumed by petitioner’s general prayer for
"other reliefs and remedies just and equitable under the premises x x x."42 To repeat, the court’s grant of relief is
limited only to what has been prayed for in the Complaint or related thereto, supported by evidence, and covered
by the party’s cause of action.43 Besides, even assuming that the awarded 5% monthly or 60% per annum
interest was properly alleged and proven during trial, the same remains unconscionably excessive and ought to
be equitably reduced in accordance with applicable jurisprudence. In Bulos, Jr. v. Yasuma,44 this Court held:

In the case of Ruiz v. Court of Appeals, citing the cases of Medel v. Court of Appeals, Garcia v. Court of
Appeals, Spouses Bautista v. Pilar Development Corporation and the recent case of Spouses Solangon v.
Salazar, this Court considered the 3% interest per month or 36% interest per annum as excessive and
unconscionable. Thereby, the Court, in the said case, equitably reduced the rate of interest to 1% interest per
month or 12% interest per annum. (Citations omitted)

It is understandable for the respondents not to contest the default order for, as alleged in their Comment, "it is
not their intention to impugn or run away from their just and valid obligation."45 Nonetheless, their waiver to
present evidence should never be construed as waiver to contest patently erroneous award which already
transgresses their right to due process, as well as applicable jurisprudence.

Respondents’ former counsel was grossly negligent in handling the case of his clients; respondents did not lose
ordinary remedies of new trial, petition for relief, etc. through their own fault.
Ordinarily, the mistake, negligence or lack of competence of counsel binds the client.  This is based on the rule
1âwphi1

that any act performed by a counsel within the scope of his general or implied authority is regarded as an act of
his client. A recognized exception to the rule is when the lawyers were grossly negligent in their duty to maintain
their client’s cause and such amounted to a deprivation of their client’s property without due process of law.46 In
which case, the courts must step in and accord relief to a client who suffered thereby.47

The manifest indifference of respondents’ former counsel in handling the cause of his client was already present
even from the beginning. It should be recalled that after filing in behalf of his clients a Motion to Extend Period to
Answer, said counsel allowed the requested extension to pass without filing an Answer, which resulted to
respondents being declared in default. His negligence was aggravated by the fact that he did not question the
awarded 5% monthly interest despite receipt of the RTC Decision on November 13, 2000.48 A simple reading of
the dispositive portion of the RTC Decision readily reveals that it awarded exorbitant and unconscionable rate of
interest. Its difference from what is being prayed for by the petitioner in her Complaint is so blatant and very
patent. It also defies elementary jurisprudence on legal rate of interests. Had the counsel carefully read the
judgment it would have caught his attention and compelled him to take the necessary steps to protect the
interest of his client. But he did not. Instead, he filed in behalf of his clients a Motion to Set Aside
Judgment49 dated January 26, 2001 based on the sole ground of lack of jurisdiction, oblivious to the fact that the
erroneous award of 5% monthly interest would result to his clients’ deprivation of property without due process of
law. Worse, he even allowed the RTC Decision to become final by not perfecting an appeal. Neither did he file a
petition for relief therefrom. It was only a year later that the patently erroneous award of 5% monthly interest was
brought to the attention of the RTC when respondents, thru their new counsel, filed a Motion to Correct/Amend
Judgment and To Set Aside Execution Sale. Even the RTC candidly admitted that it "made a glaring mistake in
directing the defendants to pay interest on the principal loan at 5% per month which is very different from what
was prayed for by the plaintiff."50

"A lawyer owes entire devotion to the interest of his client, warmth and zeal in the maintenance and defense of
his rights and the exertion of his utmost learning and ability, to the end that nothing can be taken or withheld
from his client except in accordance with the law."51 Judging from how respondents’ former counsel handled the
cause of his clients, there is no doubt that he was grossly negligent in protecting their rights, to the extent that
they were deprived of their property without due process of law.

In fine, respondents did not lose the remedies of new trial, appeal, petition for relief and other remedies through
their own fault. It can only be attributed to the gross negligence of their erstwhile counsel which prevented them
from pursuing such remedies. We cannot also blame respondents for relying too much on their former counsel.
Clients have reasonable expectations that their lawyer would amply protect their interest during the trial of the
case.52 Here,

"respondents are plain and ordinary people x x x who are totally ignorant of the intricacies and technicalities of
law and legal procedures. Being so, they completely relied upon and trusted their former counsel to
appropriately act as their interest may lawfully warrant and require."53

As a final word, it is worth noting that respondents’ principal obligation was only ₱45,000.00. Due to their former
counsel’s gross negligence in handling their cause, coupled with the RTC’s erroneous, baseless, and illegal
award of 5% monthly interest, they now stand to lose their property and still owe petitioner a large amount of
money. As aptly observed by the CA:

x x x If the impugned judgment is not, therefore, rightfully nullified, petitioners will not only end up losing their
property but will additionally owe private respondent the sum of ₱232,000.00 plus the legal interest said balance
had, in the meantime, earned. As a court of justice and equity, we cannot, in good conscience, allow this
unconscionable situation to prevail.54

Indeed, this Court is appalled by petitioner’s invocation of the doctrine of immutability of judgment. Petitioner
does not contest as she even admits that the RTC made a glaring mistake in awarding 5% monthly
interest.55 Amazingly, she wants to benefit from such erroneous award. This Court cannot allow this injustice to
happen.

WHEREFORE, the instant Petition is hereby DENIED and the assailed November 24, 2005 and June 26, 2006
Resolution of the Court of Appeals in CA-G.R. SP No. 85541 are AFFIRMED.

SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice

WE CONCUR: