REPLEVIN as it was, under shades of extortion, threats and force.
" 4 The trial
G.R. No. 111080             April 5, 2000
JOSE S. OROSA and MARTHA P. OROSA, petitioners,
vs.
HON. COURT OF APPEALS and FCP CREDIT
CORPORATION, respondents.
YNARES-SANTIAGO, J.:
On December 6, 1984, private respondent FCP Credit Corporation filed
a complaint for replevin and damages 1 in the Regional Trial Court of
Manila against petitioner Jose S. Orosa and one John Doe to recover
possession of a 1983 Ford Laser 1.5 Sedan with Motor and Serial No.
SUNKBT-14584. The complaint alleged that on September 28, 1983,
petitioner purchased the subject motor vehicle on installment from
Fiesta Motor Sales Corporation. He executed and delivered to Fiesta
Motor Sales Corp. a promissory note in the sum of P133,824.00
payable in monthly installments. 2 To secure payment, petitioner
executed a chattel mortgage over the subject motor vehicle in favor of
Fiesta Motor Sales Corp. On September 28, 1983, Fiesta Motor Sales
assigned the promissory note and chattel mortgage to private
respondent FCP Credit Corporation. The complaint further alleged that
petitioner failed to pay part of the installment which fell due on July
28, 1984 as well as three (3) consecutive installment which fell due on
August 28, September 28, and October 28, 1984. Consequently,
private respondent FCP Credit Corporation demanded from petitioner
payment of the entire outstanding balance of the obligation amounting
to P106,154.48 with accrued interest and to surrender the vehicle
which petitioner was allegedly detaining.
After trial, the lower court dismissed private respondent's complaint in
a Decision dated March 25, 1988, the decretal portion of which reads:
WHEREFORE, judgment is rendered for the defendant, and against the
plaintiff:
1) Dismissing the complaint for lack of merit;
2) Declaring that the plaintiff was not entitled to the Writ of
Replevin, issued on January 7, 1985, and is now liable to the
defendant for actual damages under the Replevin bond it
filed;
3) On defendant's counter-claim, ordering the plaintiff to pay
the defendant the sum of P400,000.00 as moral damages,
P100,000.00 as exemplary damages, and P50,000.00 as,
and for, attorney's fees;
4) Ordering the plaintiff to return to the defendant the
subject 1983 Ford Laser Sedan, with Motor or Serial No.
SUNKBT-14584, or its equivalent, in kind or value, in cash,
as of this date, and to pay the costs.
SO ORDERED.
The trial court ruled that private respondent FCP had no reason to file
the present action since petitioner already paid the installments for the
months of July to November 1984, which are the sole bases of the
complaint. The lower court declared that private respondent was not
entitled to the writ of replevin, and was liable to petitioner for actual
damages under the replevin bond it filed. 3
Ruling on petitioner's counterclaim, the trial court stated that there
was no legal or factual basis for the writ of replevin and that its
enforcement by the sheriff was "highly irregular, and unlawful, done,
1
court ordered private respondent to pay the sum of P400,000.00 as
moral damages; P100,000.00 as exemplary damages and P50,000.00
as attorney's fees. Private respondent was also ordered to return to
petitioner the 1983 Ford Laser 1.5 Sedan, or its equivalent, in kind or
value in cash, as of date of judgment and to pay the costs of the suit. 5
On June 7, 1988, a "Supplemental Decision" was rendered by the trial
court ordering private respondent's surety, Stronghold Insurance Co.,
Inc. to jointly and severally [with private respondent] return to
petitioner the 1983 Ford Laser 1.5 Sedan or its, equivalent in kind or in
cash and to pay the damages specified in the main decision to the
extent of the value of the replevin bond in the amount of
P210,000.00. 6
The surety company filed with the Court of Appeals a petition
for certiorari to annul the Order of the trial court denying its motion for
partial reconsideration, as well as the Supplemental Decision. On the
other hand, private respondent appealed the decision of the RTC
Manila to the Court of Appeals.
The surety company's petition for certiorari, docketed as CA-G.R. SP
No. 14938, was dismissed by the Court of Appeals' First Division which
upheld the trial court's order of execution pending appeal. 7 On
November 6, 1989, this Court affirmed the Court of Appeals decision,
but deleted the order for the issuance of a writ of execution pending
appeal. 8
Meanwhile, in private respondent's appeal, the Court of Appeals'
Eighth Division partially affirmed the ruling of the trial court, in a
Decision dated April 19, 1993, the dispositive portion of which reads: 9
WHEREFORE, the Decision of 25 March 1988 of the Regional
Trial Court, Branch 3, Manila is hereby AFFIRMED with the
following modifications:
(1) The award of moral damages, exemplary
damages and attorney's fees is DELETED;
(2) The order directing plaintiff-appellant FCP
Credit Corporation to return to defendant-appellee
Jose S. Orosa the subject 1983 Ford Laser Sedan,
with Motor and Serial No. SUNKBT-14584, its
equivalent, in kind or value in cash, as of 25 March
1988, and to pay the costs is DELETED; and;
(3) Plaintiff-appellant FCP Credit Corporation is
ordered to pay defendant-appellee Jose S. Orosa
the amount equivalent to the value of the fourteen
(14) monthly installments made by the latter to
the former on the subject motor vehicle, with
interest from the time of filing of the complaint or
from 6 December 1984.
No costs.
SO ORDERED.
Hence, this petition for review, on the following assignments of
error: 10
 (1) The Hon. Court of Appeals (former Eighth Division) acted
without or in excess of jurisdiction when reversed a final
decision dated September 9, 1988, of a co-equal division of
the Hon. Court of Appeals (Special First Division)
promulgated in CA. G.R. No. 14938, and which was
sustained by the Hon. Supreme Court in a final decision
promulgated in G.R. No. 84979 dated November 6, 1989
which cases have the same causes of actions, same set of
facts, the same parties and the same relief.
(2) The Hon. Court of Appeals (former Eighth Division) acted
with grave abuse of discretion and authority when it
considered causes of actions not alleged in the complaint
and which were raised for the first time on appeal in
deciding this case.
(3) The Hon. Court of Appeals (former Eighth Division)
committed serious error in applying the cause of Filinvest
Credit Corporation vs. Ivans Mendez, 152 SCRA 598, as
basis in deciding this case when said case has a different set
of facts from this case.
In its first assignment of error, petitioner alleges that the Eighth
Division of the Court of Appeals had no jurisdiction to review the
present case since the First Division of the Court of Appeals already
passed upon the law and the facts of the same. Petitioner alleges that
the present appeal involves the same causes of action, same parties,
same facts and same relief involved in the decision rendered by the
First Division and affirmed by this Court in G.R. No. 84979. 11
Petitioner's argument is untenable. Jurisdiction is simply the power or
authority to hear a case. The appellate jurisdiction of the Court of
Appeals to review decisions and orders of lower courts is conferred by
Batas Pambansa Blg. 129. More importantly, petitioner cannot now
assail the Court of Appeals' jurisdiction after having actively
participated in the appeal and after praying for affirmative relief. 12
Neither can petitioner argue that res judicata bars the determination of
the present case. The two cases involve different subject matters,
parties and seek different reliefs.
The petition docketed as CA-G.R. SP No. 14938 was for certiorari with
injunction, brought by Stronghold Insurance Company, Inc. alleging
that there was grave abuse of discretion when the trial court adjudged
it liable for damages without due process, in violation of Rule 60,
Section 10 in relation to Rule 57, Section 20, of the Rules of Court. The
surety also questioned the propriety of the writ of execution issued by
the trial court pending appeal. 13
On the other hand, CA-G.R. CV No. 25929 was filed by petitioner
Orosa under Rule 45 of the Revised Rules of Court raising alleged
errors of law on the part of the trial court. The subject of the appeal
was the main decision, while the subject of the petition in CA-G.R. SP
No. 14938 was the Supplemental Decision.
We agree with the Court of Appeals that: 14
The decisions of the Court of Appeals in CA-G.R. SP No.
14938 and the Supreme Court in G.R. No. 84979 did not
pass on the merits of this case. It merely ruled on the issues
of whether the surety, Stronghold Insurance, Co., Inc., can
be held jointly and solidarily liable with plaintiff-
appellant and whether execution pending appeal is
proper under the facts and circumstances of this case.
Consequently, this Court is not estopped from reviewing the
conclusions reached by the court a quo. (emphasis ours)
In its second assigned error, petitioner posits that the Court of Appeals
committed grave abuse of discretion when it considered causes of
actions which were raised for the first time on appeal. 15
2
True, private respondent submitted issues to the Court of Appeals
which were not raised in the original complaint. Private respondent
belatedly pointed out that: 16
1.1. It is pertinent to note that Defendant-Appellee
has waived prior notice and demand in order to be rendered
in default, as in fact the Promissory Note expressly stipulates
that the monthly installments shall be paid on the date they
fall due, without need of prior notice or demand.
1.2. Said Promissory Note likewise expressly stipulates that a
late payment charge of 2% per month shall be added on
each unpaid installment from maturity thereof until fully
paid.
1.3. Of equal significance is the Acceleration Clause in the
Promissory Note which states that if default be made in the
payment of any of the installments or late payment charges
thereon when the same became due and payable, the total
principle sum then remaining unpaid, together with the
agreed late payment charges thereon, shall at once become
due and payable.
Private respondent argued that based on the provisions of the
Promissory Note itself, petitioner incurred in default since, even though
there was actual payment of the installments which fell due on July 28,
1984, as well as the three installments on August 28 to October 28,
1984, the payments were all late and irregular. 17 Private respondent
also argued that petitioner assigned the subject car to his daughter
without the written consent of the obligee, and hence, violated the
terms of the chattel mortgage. 18 Meritorious as these arguments are,
they come too late in the day. Basic is the rule that matters not raised
in the complaint cannot be raised for the first time on appeal.
Contrary to petitioner's accusation, the Court of Appeals restricted the
determination of the case to matters alleged in the complaint and
raised during trial. 19 Citing jurisprudence, 20 the Court of Appeals held
that "it would be offensive to the basic rule of fair play, justice and due
process" if it considered issues raised for the first time on appeal. 21
The Court of Appeals' statement that "under the terms and conditions
of the chattel mortgage, defendant-appellee Jose S. Orosa was already
in default," was made only to justify the deletion of the trial court's
award of moral, exemplary damages and attorney's fees, in
consonance with its finding that private respondent was motivated by
a sincere belief that it had sufficient basis and acted in good faith
when it filed the claim. 22
We now come to the matter of moral damages. Petitioner insists that
he suffered untold embarrassment when the complaint was filed
against him. According to petitioner, the car subject of this case was
being used by his daughter, married to Jose Concepcion III, a scion of
a prominent family. Petitioner laments that he assigned the car to his
daughter so that she could "approximate without equaling the status
of her in-laws." This being the case, petitioner experienced anguish
and unquantifiable humiliation when he had to face his daughter's
wealthy in-laws to explain the "why and the whats of the subject
case." Petitioner further insists that an award of moral damages is
especially justified since he is no ordinary man, but a businessman of
high social standing, a graduate of De La Salle University and belongs
to a well known family of bankers. 23
We must deny the claim. The law clearly states that one may only
recover moral damages if they are the proximate result of the, other
party's wrongful act or omission. 24 Two elements are required. First,
the act or omission must be the proximate result of the physical
suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation and
similar injury. Second, the act must be wrongful.
Petitioner maintains that embarrassment resulted when he had to G.R. Nos. 151079 and 151372 question the June 11, 2001
explain the suit to his daughter's in-laws.1a\^/phi1 However, that Decision3 and the December 18, 2001 Resolution 4 in CA-G.R. SP. No.
could have been avoided had he not assigned the car to his daughter 57065.
and had he been faithful and prompt in paying the installments
required. Petitioner brought the situation upon himself and cannot now
Regina M. Astorga (Astorga) was employed by respondent Smart
complain that private respondent is liable for the mental anguish and
Communications, Incorporated (SMART) on May 8, 1997 as District
humiliation he suffered.
Sales Manager of the Corporate Sales Marketing Group/ Fixed Services
Division (CSMG/FSD). She was receiving a monthly salary
Furthermore, we agree with the appellate court that when private of P33,650.00. As District Sales Manager, Astorga enjoyed additional
respondent brought the complaint, it did so only to exercise a legal benefits, namely, annual performance incentive equivalent to 30% of
right, believing that it had a meritorious cause of action clearly borne her annual gross salary, a group life and hospitalization insurance
out by a mere perusal of the promissory note and chattel mortgage. coverage, and a car plan in the amount of P455,000.00.5
To constitute malicious prosecution, there must be proof that the
prosecution was prompted by a sinister design to vex and humiliate a
In February 1998, SMART launched an organizational realignment to
person, and that it was initiated deliberately, knowing that the charges
achieve more efficient operations. This was made known to the
were false and groundless. 25 Such was not the case when the instant
employees on February 27, 1998.6 Part of the reorganization was the
complaint was filed. The rule has always been that moral damages
outsourcing of the marketing and sales force. Thus, SMART entered
cannot be recovered from a person who has filed a complaint against
into a joint venture agreement with NTT of Japan, and formed SMART-
another in good faith. 26 The law always presumes good faith such that
NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do
any person who seeks to be awarded damages due to acts of another
the sales and marketing work, SMART abolished the CSMG/FSD,
has the burden of proving that the latter acted in bad faith or with ill
Astorga’s division.
motive. 27

To soften the blow of the realignment, SNMI agreed to absorb the

Anent the award of exemplary damages, jurisprudence provides that
CSMG personnel who would be recommended by SMART. SMART then
where a party is not entitled to actual or moral damages, an award of
conducted a performance evaluation of CSMG personnel and those
exemplary damages is likewise baseless. 28
who garnered the highest ratings were favorably recommended to
SNMI. Astorga landed last in the performance evaluation, thus, she
In the matter of attorney's fees, petitioner avers that to prosecute and was not recommended by SMART. SMART, nonetheless, offered her a
defend this case in the lower court and in the appellate court, he supervisory position in the Customer Care Department, but she refused
incurred expenses amounting to P50,000.00, 29 and as such, attorney's the offer because the position carried lower salary rank and rate.
fees should be granted. We deny the claim. No premium should be
placed on the right to litigate and not every winning party is entitled to
Despite the abolition of the CSMG/FSD, Astorga continued reporting for
an automatic grant of attorney's fees. 30 The party must show that he
work. But on March 3, 1998, SMART issued a memorandum advising
falls under one of the instances enumerated in Article 2208 of the Civil
Astorga of the termination of her employment on ground of
Code. 31 This, petitioner failed to do. Furthermore, where the award of
redundancy, effective April 3, 1998. Astorga received it on March 16,
moral and exemplary damages is eliminated, so must the award for
1998.7
attorney's fees be deleted. 32

The termination of her employment prompted Astorga to file a

We also agree with the Court of Appeals that the trial court erred
Complaint8 for illegal dismissal, non-payment of salaries and other
when it ordered private respondent to return the subject car or its
benefits with prayer for moral and exemplary damages against SMART
equivalent considering that petitioner had not yet fully paid the
and Ann Margaret V. Santiago (Santiago). She claimed that abolishing
purchase price. Verily, to sustain the trial court's decision would
CSMG and, consequently, terminating her employment was illegal for it
amount to unjust enrichment. The Court of Appeals was correct when
violated her right to security of tenure. She also posited that it was
it instead ordered private respondent to return, not the car itself, but
illegal for an employer, like SMART, to contract out services which will
only the amount equivalent to the fourteen installments actually paid
displace the employees, especially if the contractor is an in-house
with interest. 33
agency.9

WHEREFORE, above premises considered, the petition is DENIED, and

SMART responded that there was valid termination. It argued that
the Court of Appeals' Decision of April 19, 1993 and its Resolution of
Astorga was dismissed by reason of redundancy, which is an
July 22, 1993 are AFFIRMED in toto.
authorized cause for termination of employment, and the dismissal
was effected in accordance with the requirements of the Labor Code.
No costs.1âwphi1.nêt The redundancy of Astorga’s position was the result of the abolition of
CSMG and the creation of a specialized and more technically equipped
SNMI, which is a valid and legitimate exercise of management
SO ORDERED.
prerogative.10

G.R. No. 148132             January 28, 2008

In the meantime, on May 18, 1998, SMART sent a letter to Astorga
demanding that she pay the current market value of the Honda Civic
SMART COMMUNICATIONS, INC., petitioner, Sedan which was given to her under the company’s car plan program,
vs. or to surrender the same to the company for proper
REGINA M. ASTORGA, respondent. disposition.11 Astorga, however, failed and refused to do either, thus
prompting SMART to file a suit for replevin with the Regional Trial
DECISION Court of Makati (RTC) on August 10, 1998. The case was docketed as
Civil Case No. 98-1936 and was raffled to Branch 57.12

NACHURA, J.:

For the resolution of the Court are three consolidated petitions for
review on certiorari under Rule 45 of the Rules of Court. G.R. No.
148132 assails the February 28, 2000 Decision1 and the May 7, 2001
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 53831.

3
Astorga moved to dismiss the complaint on grounds of (i) lack of
jurisdiction; (ii) failure to state a cause of action; (iii) litis pendentia;
and (iv) forum-shopping. Astorga posited that the regular courts have
no jurisdiction over the complaint because the subject thereof pertains
to a benefit arising from an employment contract; hence, jurisdiction
over the same is vested in the labor tribunal and not in regular
courts.13
Pending resolution of Astorga’s motion to dismiss the replevin case,
the Labor Arbiter rendered a Decision 14 dated August 20, 1998,
declaring Astorga’s dismissal from employment illegal. While
recognizing SMART’s right to abolish any of its departments, the Labor
Arbiter held that such right should be exercised in good faith and for
causes beyond its control. The Arbiter found the abolition of CSMG
done neither in good faith nor for causes beyond the control of
SMART, but a ploy to terminate Astorga’s employment. The Arbiter
also ruled that contracting out the functions performed by Astorga to
an in-house agency like SNMI was illegal, citing Section 7(e), Rule
VIII-A of the Rules Implementing the Labor Code.
Accordingly, the Labor Arbiter ordered:
WHEREFORE, judgment is hereby rendered declaring the
dismissal of [Astorga] to be illegal and unjust. [SMART and
Santiago] are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a
substantially equivalent position, without loss of seniority
rights and other privileges, with full backwages, inclusive of
allowances and other benefits from the time of [her]
dismissal to the date of reinstatement, which computed as of
this date, are as follows:
xxxx
3. Jointly and severally pay moral damages in the amount
of P500,000.00 x x x and exemplary damages in the amount
of P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as
attorney’s fees.
SO ORDERED.15
Subsequently, on March 29, 1999, the RTC issued an Order16 denying
Astorga’s motion to dismiss the replevin case. In so ruling, the RTC
ratiocinated that:
Assessing the [submission] of the parties, the Court finds no
merit in the motion to dismiss.
As correctly pointed out, this case is to enforce a right of
possession over a company car assigned to the defendant
under a car plan privilege arrangement. The car is registered
in the name of the plaintiff. Recovery thereof via replevin
suit is allowed by Rule 60 of the 1997 Rules of Civil
Procedure, which is undoubtedly within the jurisdiction of
the Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the
company car and despite demand, defendant refused to
return said car. This is clearly sufficient statement of
plaintiff’s cause of action.
Neither is there forum shopping. The element of litis
penden[t]ia does not appear to exist because the judgment
in the labor dispute will not constitute res judicata to bar the
filing of this case.
4
WHEREFORE, the Motion to Dismiss is hereby denied for
lack of merit.
SO ORDERED.17
Astorga filed a motion for reconsideration, but the RTC denied it on
June 18, 1999.18
Astorga elevated the denial of her motion via certiorari to the CA,
which, in its February 28, 2000 Decision,19 reversed the RTC ruling.
Granting the petition and, consequently, dismissing the replevin case,
the CA held that the case is intertwined with Astorga’s complaint for
illegal dismissal; thus, it is the labor tribunal that has rightful
jurisdiction over the complaint. SMART’s motion for reconsideration
having been denied,20 it elevated the case to this Court, now docketed
as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor
Arbiter in the illegal dismissal case to the National Labor Relations
Commission (NLRC). In its September 27, 1999 Decision,21 the NLRC
sustained Astorga’s dismissal. Reversing the Labor Arbiter, the NLRC
declared the abolition of CSMG and the creation of SNMI to do the
sales and marketing services for SMART a valid organizational action.
It overruled the Labor Arbiter’s ruling that SNMI is an in-house agency,
holding that it lacked legal basis. It also declared that contracting,
subcontracting and streamlining of operations for the purpose of
increasing efficiency are allowed under the law. The NLRC further
found erroneous the Labor Arbiter’s disquisition that redundancy to be
valid must be impelled by economic reasons, and upheld the
redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby
reversed and set aside. [Astorga] is further ordered to
immediately return the company vehicle assigned to her.
[Smart and Santiago] are hereby ordered to pay the final
wages of [Astorga] after [she] had submitted the required
supporting papers therefor.
SO ORDERED.22
Astorga filed a motion for reconsideration, but the NLRC denied it on
December 21, 1999.23
Astorga then went to the CA via certiorari. On June 11, 2001, the CA
rendered a Decision24 affirming with modification the resolutions of the
NLRC. In gist, the CA agreed with the NLRC that the reorganization
undertaken by SMART resulting in the abolition of CSMG was a
legitimate exercise of management prerogative. It rejected Astorga’s
posturing that her non-absorption into SNMI was tainted with bad
faith. However, the CA found that SMART failed to comply with the
mandatory one-month notice prior to the intended termination.
Accordingly, the CA imposed a penalty equivalent to Astorga’s one-
month salary for this non-compliance. The CA also set aside the
NLRC’s order for the return of the company vehicle holding that this
issue is not essentially a labor concern, but is civil in nature, and thus,
within the competence of the regular court to decide. It added that the
matter had not been fully ventilated before the NLRC, but in the
regular court.
Astorga filed a motion for reconsideration, while SMART sought partial
reconsideration, of the Decision. On December 18, 2001, the CA
resolved the motions, viz.:
 WHEREFORE, [Astorga’s] motion for reconsideration is
hereby PARTIALLY GRANTED. [Smart] is hereby ordered to
pay [Astorga] her backwages from 15 February 1998 to 06
November 1998. [Smart’s] motion for reconsideration is
outrightly DENIED.
SO ORDERED.25
Astorga and SMART came to us with their respective petitions for
review assailing the CA ruling, docketed as G.R Nos. 151079 and
151372. On February 27, 2002, this Court ordered the consolidation of
these petitions with G.R. No. 148132.26
In her Memorandum, Astorga argues:
I LEGALLY DISMISSED.
THE COURT OF APPEALS ERRED IN UPHOLDING THE
VALIDITY OF ASTORGA’S DISMISSAL DESPITE THE FACT
THAT HER DISMISSAL WAS EFFECTED IN CLEAR
VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY
OF TENURE, CONSIDERING THAT THERE WAS NO GENUINE
GROUND FOR HER DISMISSAL.
II
SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE
PENDENCY OF THE APPEAL AS REQUIRED BY ARTICLE 223
OF THE LABOR CODE, ENTITLES ASTORGA TO HER
SALARIES DURING THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT
THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER
THE COMPLAINT FOR RECOVERY OF A CAR WHICH
ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic)
BENEFIT.27
On the other hand, Smart in its Memoranda raises the following issues:
I wrongfully taken or detained the property.30 The term may refer either
WHETHER THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE IN A WAY
PROBABLY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISION OF THE HONORABLE SUPREME
COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO
CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION
WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE
NOTICE REQUIREMENTS PRIOR TO TERMINATING
ASTORGA ON THE GROUND OF REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA
AND THE DEPARTMENT OF LABOR AND EMPLOYMENT ARE
SUBSTANTIAL COMPLIANCE WITH THE NOTICE
REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS.
NATIONAL LABOR RELATIONS COMMISSION FINDS
APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN
5
THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE
AT ALL.28
IV
WHETHER THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE IN A WAY
PROBABLY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISION[S] OF THE HONORABLE SUPREME
COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO
CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION
WHEN IT RULED THAT THE REGIONAL TRIAL COURT DOES
NOT HAVE JURISDICTION OVER THE COMPLAINT FOR
REPLEVIN FILED BY SMART TO RECOVER ITS OWN
COMPANY VEHICLE FROM A FORMER EMPLOYEE WHO WAS
V
WHETHER THE HONORABLE COURT OF APPEALS HAS
FAILED TO APPRECIATE THAT THE SUBJECT OF THE
REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR
PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A
COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS
FAILED TO APPRECIATE THAT ASTORGA CAN NO LONGER
BE CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE
LABOR CODE.29
The Court shall first deal with the propriety of dismissing the replevin
case filed with the RTC of Makati City allegedly for lack of jurisdiction,
which is the issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to
repossession of goods or chattels may recover those goods or chattels
from one who has wrongfully distrained or taken, or who wrongfully
detains such goods or chattels. It is designed to permit one having
right to possession to recover property in specie from one who has
to the action itself, for the recovery of personalty, or to the provisional
remedy traditionally associated with it, by which possession of the
property may be obtained by the plaintiff and retained during the
pendency of the action.31
That the action commenced by SMART against Astorga in the RTC of
Makati City was one for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for
lack of jurisdiction, the CA made the following disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga]
by [Smart] as part of the employment package. We doubt
that [SMART] would extend [to Astorga] the same car plan
privilege were it not for her employment as district sales
manager of the company. Furthermore, there is no civil
contract for a loan between [Astorga] and [Smart].
Consequently, We find that the car plan privilege is a benefit
arising out of employer-employee relationship. Thus, the
claim for such falls squarely within the original and exclusive
jurisdiction of the labor arbiters and the NLRC.32
We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully
assumed jurisdiction over the suit and acted well within its discretion in
denying Astorga’s motion to dismiss. SMART’s demand for payment of
the market value of the car or, in the alternative, the surrender of the
car, is not a labor, but a civil, dispute. It involves the relationship of
debtor and creditor rather than employee-employer relations.33 As
such, the dispute falls within the jurisdiction of the regular courts.
In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of
the RTC over the replevin suit, explained:
The characterization of an employee’s services as superfluous or no
longer necessary and, therefore, properly terminable, is an exercise of
business judgment on the part of the employer. The wisdom and
soundness of such characterization or decision is not subject to
discretionary review provided, of course, that a violation of law or
arbitrary or malicious action is not shown.36

Astorga claims that the termination of her employment was illegal and
Replevin is a possessory action, the gist of which is the right
tainted with bad faith. She asserts that the reorganization was done in
of possession in the plaintiff. The primary relief sought
order to get rid of her. But except for her barefaced allegation, no
therein is the return of the property in specie wrongfully
convincing evidence was offered to prove it. This Court finds it
detained by another person. It is an ordinary statutory
extremely difficult to believe that SMART would enter into a joint
proceeding to adjudicate rights to the title or possession of
venture agreement with NTT, form SNMI and abolish CSMG/FSD
personal property. The question of whether or not a party
simply for the sole purpose of easing out a particular employee, such
has the right of possession over the property involved and if
as Astorga. Moreover, Astorga never denied that SMART offered her a
so, whether or not the adverse party has wrongfully taken
supervisory position in the Customer Care Department, but she refused
and detained said property as to require its return to
the offer because the position carried a lower salary rank and rate. If
plaintiff, is outside the pale of competence of a labor tribunal
indeed SMART simply wanted to get rid of her, it would not have
and beyond the field of specialization of Labor Arbiters.
offered her a position in any department in the enterprise.

xxxx
The labor dispute involved is not intertwined with the issue
in the Replevin Case. The respective issues raised in each
forum can be resolved independently on the other. In fact in
18 November 1986, the NLRC in the case before it had
issued an Injunctive Writ enjoining the petitioners from
blocking the free ingress and egress to the Vessel and
ordering the petitioners to disembark and vacate. That
aspect of the controversy is properly settled under the Labor
Code. So also with petitioners’ right to picket. But the
determination of the question of who has the better right to
take possession of the Vessel and whether petitioners can
deprive the Charterer, as the legal possessor of the Vessel,
of that right to possess in addressed to the competence of
Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction
but defining avenues of jurisdiction as laid down by pertinent
laws.
The CA, therefore, committed reversible error when it overturned the
RTC ruling and ordered the dismissal of the replevin case for lack of
jurisdiction.
Having resolved that issue, we proceed to rule on the validity of
Astorga’s dismissal.
Astorga was terminated due to redundancy, which is one of the
authorized causes for the dismissal of an employee. The nature of
redundancy as an authorized cause for dismissal is explained in the
leading case of Wiltshire File Co., Inc. v. National Labor Relations
Commission,35 viz:
x x x redundancy in an employer’s personnel force
necessarily or even ordinarily refers to duplication of work.
That no other person was holding the same position that
private respondent held prior to termination of his services
does not show that his position had not become redundant.
Indeed, in any well organized business enterprise, it would
be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that
redundancy, for purposes of the Labor Code, exists where
the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the
enterprise. Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions may be
the outcome of a number of factors, such as overhiring of
workers, decreased volume of business, or dropping of a
particular product line or service activity previously
manufactured or undertaken by the enterprise.
Astorga also states that the justification advanced by SMART is not
true because there was no compelling economic reason for
redundancy. But contrary to her claim, an employer is not precluded
from adopting a new policy conducive to a more economical and
effective management even if it is not experiencing economic reverses.
Neither does the law require that the employer should suffer financial
losses before he can terminate the services of the employee on the
ground of redundancy. 37
We agree with the CA that the organizational realignment introduced
by SMART, which culminated in the abolition of CSMG/FSD and
termination of Astorga’s employment was an honest effort to make
SMART’s sales and marketing departments more efficient and
competitive. As the CA had taken pains to elucidate:
x x x a careful and assiduous review of the records will yield
no other conclusion than that the reorganization undertaken
by SMART is for no purpose other than its declared objective
– as a labor and cost savings device. Indeed, this Court finds
no fault in SMART’s decision to outsource the corporate sales
market to SNMI in order to attain greater productivity.
[Astorga] belonged to the Sales Marketing Group under the
Fixed Services Division (CSMG/FSD), a distinct sales force of
SMART in charge of selling SMART’s telecommunications
services to the corporate market. SMART, to ensure it can
respond quickly, efficiently and flexibly to its customer’s
requirement, abolished CSMG/FSD and shortly thereafter
assigned its functions to newly-created SNMI Multimedia
Incorporated, a joint venture company of SMART and NTT of
Japan, for the reason that CSMG/FSD does not have the
necessary technical expertise required for the value added
services. By transferring the duties of CSMG/FSD to SNMI,
SMART has created a more competent and specialized
organization to perform the work required for corporate
accounts. It is also relieved SMART of all administrative costs
– management, time and money-needed in maintaining the
CSMG/FSD. The determination to outsource the duties of the
CSMG/FSD to SNMI was, to Our mind, a sound business
judgment based on relevant criteria and is therefore a
legitimate exercise of management prerogative.

6
Indeed, out of our concern for those lesser circumstanced in life, this dismissal is based on an authorized cause under Article 283
Court has inclined towards the worker and upheld his cause in most of but the employer failed to comply with the notice
his conflicts with his employer. This favored treatment is consonant requirement, the sanction should be stiffer because the
with the social justice policy of the Constitution. But while tilting the dismissal process was initiated by the employer’s exercise of
scales of justice in favor of workers, the fundamental law also his management prerogative.
guarantees the right of the employer to reasonable returns for his
investment.38 In this light, we must acknowledge the prerogative of the
We deem it proper to increase the amount of the penalty on SMART
employer to adopt such measures as will promote greater efficiency,
to P50,000.00.
reduce overhead costs and enhance prospects of economic gains,
albeit always within the framework of existing laws. Accordingly, we
sustain the reorganization and redundancy program undertaken by As provided in Article 283 of the Labor Code, Astorga is, likewise,
SMART. entitled to separation pay equivalent to at least one (1) month salary
or to at least one (1) month’s pay for every year of service, whichever
is higher. The records show that Astorga’s length of service is less than
However, as aptly found by the CA, SMART failed to comply with the
a year. She is, therefore, also entitled to separation pay equivalent to
mandated one (1) month notice prior to termination. The record is
one (1) month pay.
clear that Astorga received the notice of termination only on March 16,
199839 or less than a month prior to its effectivity on April 3, 1998.
Likewise, the Department of Labor and Employment was notified of Finally, we note that Astorga claimed non-payment of wages from
the redundancy program only on March 6, 1998.40 February 15, 1998. This assertion was never rebutted by SMART in the
proceedings a quo. No proof of payment was presented by SMART to
disprove the allegation. It is settled that in labor cases, the burden of
Article 283 of the Labor Code clearly provides:
proving payment of monetary claims rests on the employer. 44 SMART
failed to discharge the onus probandi. Accordingly, it must be held
Art. 283. Closure of establishment and reduction of liable for Astorga’s salary from February 15, 1998 until the effective
personnel. — The employer may also terminate the date of her termination, on April 3, 1998.
employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses
However, the award of backwages to Astorga by the CA should be
or the closing or cessation of operation of the establishment
deleted for lack of basis. Backwages is a relief given to an illegally
or undertaking unless the closing is for the purpose of
dismissed employee. Thus, before backwages may be granted, there
circumventing the provisions of this Title, by serving a
must be a finding of unjust or illegal dismissal from work. 45 The Labor
written notice on the workers and the Ministry of Labor and
Arbiter ruled that Astorga was illegally dismissed. But on appeal, the
Employment at least one (1) month before the intended date
NLRC reversed the Labor Arbiter’s ruling and categorically declared
thereof x x x.
Astorga’s dismissal valid. This ruling was affirmed by the CA in its
assailed Decision. Since Astorga’s dismissal is for an authorized cause,
SMART’s assertion that Astorga cannot complain of lack of notice she is not entitled to backwages. The CA’s award of backwages is
because the organizational realignment was made known to all the totally inconsistent with its finding of valid dismissal.
employees as early as February 1998 fails to persuade. Astorga’s
actual knowledge of the reorganization cannot replace the formal and
WHEREFORE, the petition of SMART docketed as G.R. No. 148132
written notice required by the law. In the written notice, the
is GRANTED. The February 28, 2000 Decision and the May 7, 2001
employees are informed of the specific date of the termination, at least
Resolution of the Court of Appeals in CA-G.R. SP. No. 53831 are SET
a month prior to the effectivity of such termination, to give them
ASIDE. The Regional Trial Court of Makati City, Branch 57
sufficient time to find other suitable employment or to make whatever
is DIRECTED to proceed with the trial of Civil Case No. 98-1936 and
arrangements are needed to cushion the impact of termination. In this
render its Decision with reasonable dispatch.
case, notwithstanding Astorga’s knowledge of the reorganization, she
remained uncertain about the status of her employment until SMART
gave her formal notice of termination. But such notice was received by On the other hand, the petitions of SMART and Astorga docketed as
Astorga barely two (2) weeks before the effective date of termination, G.R. Nos. 151079 and 151372 are DENIED. The June 11, 2001
a period very much shorter than that required by law. Decision and the December 18, 2001 Resolution in CA-G.R. SP. No.
57065, are AFFIRMED with MODIFICATION. Astorga is declared
validly dismissed. However, SMART is ordered to pay
Be that as it may, this procedural infirmity would not render the
Astorga P50,000.00 as indemnity for its non-compliance with
termination of Astorga’s employment illegal. The validity of termination
procedural due process, her separation pay equivalent to one (1)
can exist independently of the procedural infirmity of the
month pay, and her salary from February 15, 1998 until the effective
dismissal.41 In DAP Corporation v. CA,42 we found the dismissal of the
date of her termination on April 3, 1998. The award of backwages
employees therein valid and for authorized cause even if the employer
is DELETED for lack of basis.
failed to comply with the notice requirement under Article 283 of the
Labor Code. This Court upheld the dismissal, but held the employer
liable for non-compliance with the procedural requirements. SO ORDERED.

The CA, therefore, committed no reversible error in sustaining A.M. No. P-07-2384             June 18, 2008
Astorga’s dismissal and at the same time, awarding indemnity for
violation of Astorga's statutory rights. KENNETH HAO, complainant,
vs.
However, we find the need to modify, by increasing, the indemnity ABE C. ANDRES, Sheriff IV, Regional Trial Court, Branch 16,
awarded by the CA to Astorga, as a sanction on SMART for non- Davao City, respondent.
compliance with the one-month mandatory notice requirement, in light
of our ruling in Jaka Food Processing Corporation v. Pacot,43 viz.: RESOLUTION

[I]f the dismissal is based on a just cause under Article 282
but the employer failed to comply with the notice
requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect,
initiated by an act imputable to the employee, and (2) if the
QUISUMBING, J.:
Before us is an administrative complaint for gross neglect of duty,
grave abuse of authority (oppression) and violation of Republic Act No.

7
30191 filed by complainant Kenneth Hao against respondent Abe C.
Andres, Sheriff IV of the Regional Trial Court (RTC) of Davao City,
Branch 16.
The antecedent facts are as follows:
Complainant Hao is one of the defendants in a civil case for replevin
docketed as Civil Case No. 31, 127-2005 2 entitled "Zenaida Silver,
doing trade and business under the name and style ZHS Commercial v.
Loreto Hao, Atty. Amado Cantos, Kenneth Hao and John Does ,"
pending before the RTC of Davao City, Branch 16.
On October 17, 2005, Judge Renato A. Fuentes3 issued an Order of
Seizure4 against 22 motor vehicles allegedly owned by the
complainant. On the strength of the said order, Andres was able to
seize two of the subject motor vehicles on October 17, 2005; four on
October 18, 2005, and another three on October 19, 2005, or a total of
nine motor vehicles.5
In his Affidavit-Complaint6 against Andres before the Office of the
Court Administrator (OCA), Hao alleged that Andres gave undue
advantage to Zenaida Silver in the implementation of the order and
that Andres seized the nine motor vehicles in an oppressive manner.
Hao also averred that Andres was accompanied by unidentified armed
personnel on board a military vehicle which was excessive since there
were no resistance from them. Hao also discovered that the compound
where the seized motor vehicles were placed is actually owned by
Silver.7
On October 21, 2005, in view of the approval of the complainant’s
counter-replevin bond, Judge Emmanuel C. Carpio8 ordered Andres to
immediately cease and desist from further implementing the order of
seizure, and to return the seized motor vehicles including its
accessories to their lawful owners.9
However, on October 24, 2005, eight of the nine seized motor vehicles
were reported missing. In his report,10 Andres stated that he was
shocked to find that the motor vehicles were already missing when he
inspected it on October 22, 2005. He narrated that on October 21,
2005, PO3 Rodrigo Despe, one of the policemen guarding the subject
motor vehicles, reported to him that a certain "Nonoy" entered the
compound and caused the duplication of the vehicles’ keys.11 But
Andres claimed the motor vehicles were still intact when he inspected
it on October 21, 2005.
Subsequently, Hao reported that three of the carnapped vehicles were
recovered by the police.12 He then accused Andres of conspiring and
conniving with Atty. Oswaldo Macadangdang (Silver’s counsel) and the
policemen in the carnapping of the motor vehicles. Hao also accused
Andres of concealing the depository receipts from them and pointed
out that the depository receipts show that Silver and Atty.
Macadangdang were the ones who chose the policemen who will
guard the motor vehicles.
In his Comment13 dated March 3, 2006, Andres vehemently denied
violating Rep. Act No. 3019 and committing gross neglect of duty.
Andres denied implementing the Order of Seizure in an oppressive
manner. He said he took the vehicles because they were the specific
vehicles ordered to be seized after checking their engine and chassis
numbers. Andres likewise denied that he was accompanied by military
personnel in the implementation of the order. He claimed that he was
merely escorted by policemen pursuant to the directive of Police Senior
Supt. Catalino S. Cuy, Chief of the Davao City Police Office. Andres
also maintained that no form of harassment or oppression was
committed during the implementation of the order, claiming that the
presence of the policemen was only for the purpose of preserving
peace and order, considering there were 22 motor vehicles specified in
the Order of Seizure. Andres added that he exercised no discretion in
8
the selection of the policemen who assisted in the implementation of
the order, much less of those who will guard the seized motor vehicles.
Andres disputed the allegation that he neglected his duty to safeguard
the seized vehicles by pointing out that he placed all the motor
vehicles under police watch. He added that the policemen had control
of the compound where the seized motor vehicles were kept.
Andres likewise contended that after the unauthorized duplication of
the vehicles’ keys was reported to him, he immediately advised the
policemen on duty to watch the motor vehicles closely.14 He negated
the speculations that he was involved in the disappearance of the
seized motor vehicles as he claims to be the one who reported the
incident to the court and the police.
As to the allegation of undisclosed depository receipts, Andres
maintained that he never denied the existence of the depository
receipts. He said the existence of the depository receipts was
immediately made known on the same day that the subject motor
vehicles were discovered missing. He even used the same in the filing
of the carnapping case against Silver and her co-conspirators.
Finally, Andres insisted that the guarding of properties under custodia
legis by policemen is not prohibited, but is even adopted by the court.
Hence, he prays that he be held not liable for the loss of the vehicles
and that he be relieved of his duty to return the vehicles.15
After the OCA recommended that the matter be investigated, we
referred the case to Executive Judge Renato A. Fuentes for
investigation, report and recommendation.16
In his Investigation Report17 dated September 21, 2006, Judge Fuentes
found Andres guilty of serious negligence in the custody of the nine
motor vehicles. He recommended that Andres be suspended from
office.
Judge Fuentes found numerous irregularities in the implementation of
the writ of replevin/order of seizure, to wit: (1) at the time of the
implementation of the writ, Andres knew that the vehicles to be seized
were not in the names of any of the parties to the case; (2) one
vehicle was taken without the knowledge of its owner, a certain Junard
Escudero; (3) Andres allowed Atty. Macadangdang to get a keymaster
to duplicate the vehicles’ keys in order to take one motor vehicle; and
(4) Andres admitted that prior to the implementation of the writ of
seizure, he consulted Silver and Atty. Macadangdang regarding the
implementation of the writ and was accompanied by the latter in the
course of the implementation. Judge Fuentes observed that the motor
vehicles were speedily seized without strictly observing fairness and
regularity in its implementation.18
Anent the safekeeping of the seized motor vehicles, Judge Fuentes
pointed out several instances where Andres lacked due diligence to
wit: (1) the seized motor vehicles were placed in a compound
surrounded by an insufficiently locked see-through fence; (2) three
motor vehicles were left outside the compound; (3) Andres turned
over the key of the gate to the policemen guarding the motor vehicles;
(4) Andres does not even know the full name of the owner of the
compound, who was merely known to him as "Gloria"; (5) except for
PO3 Despe and SPO4 Nelson Salcedo, the identities of the other
policemen tapped to guard the compound were unknown to Andres;
(6) Andres also admitted that he only stayed at least one hour each
day from October 19-21, 2005 during his visits to the compound; and
(7) even after it was reported to him that a certain "Nonoy" entered
the compound and duplicated the keys of the motor vehicles, he did
not exert his best effort to look for that "Nonoy" and to confiscate the
duplicated keys.19
Judge Fuentes also observed that Andres appeared to be more or less
accommodating to Silver and her counsel but hostile and
uncooperative to the complainant. He pointed out that Andres
depended solely on Silver in the selection of the policemen who would
guard the seized motor vehicles. He added that even the depository
receipts were not turned over to the defendants/third-party claimants
in the replevin case but were in fact concealed from them. Andres also
gave inconsistent testimonies as to whether he has in his possession
the depository receipts.20
The OCA disagreed with the observations of Judge Fuentes. It
recommended that Andres be held liable only for simple neglect of
duty and be suspended for one (1) month and one (1) day.21
We adopt the recommendation of the investigating judge.
Being an officer of the court, Andres must be aware that there are
well-defined steps provided in the Rules of Court regarding the proper
implementation of a writ of replevin and/or an order of seizure. The
Rules, likewise, is explicit on the duty of the sheriff in its
implementation. To recapitulate what should be common knowledge to
sheriffs, the pertinent provisions of Rule 60, of the Rules of Court are
quoted hereunder:
SEC. 4. Duty of the sheriff.–Upon receiving such order, the
sheriff must serve a copy thereof on the adverse party,
together with a copy of the application, affidavit and bond,
and must forthwith take the property, if it be in the
possession of the adverse party, or his agent, and
retain it in his custody. If the property or any part thereof
be concealed in a building or enclosure, the sheriff must
demand its delivery, and if it be not delivered, he must
cause the building or enclosure to be broken open and take
the property into his possession. After the sheriff has
taken possession of the property as herein provided,
he must keep it in a secure place and shall be
responsible for its delivery to the party entitled
thereto upon receiving his fees and necessary
expenses for taking and keeping the same. (Emphasis
supplied.)
SEC. 6. Disposition of property by sheriff.–If within five
(5) days after the taking of the property by the
sheriff, the adverse party does not object to the sufficiency
of the bond, or of the surety or sureties thereon; or if the
adverse party so objects and the court affirms its approval of
the applicant’s bond or approves a new bond, or if the
adverse party requires the return of the property but his
bond is objected to and found insufficient and he does not
forthwith file an approved bond, the property shall be
delivered to the applicant. If for any reason the property is
not delivered to the applicant, the sheriff must return it to
the adverse party. (Emphasis supplied.)
First, the rules provide that property seized under a writ of replevin is
not to be delivered immediately to the plaintiff. 22 In accordance with
the said rules, Andres should have waited no less than five days in
order to give the complainant an opportunity to object to the
sufficiency of the bond or of the surety or sureties thereon, or require
the return of the seized motor vehicles by filing a counter-bond. This,
he failed to do.
Records show that Andres took possession of two of the subject motor
vehicles on October 17, 2005, four on October 18, 2005, and another
three on October 19, 2005. Simultaneously, as evidenced by the
depository receipts, on October 18, 2005, Silver received from Andres
six of the seized motor vehicles, and three more motor vehicles on
October 19, 2005. Consequently, there is no question that Silver was
already in possession of the nine seized vehicles immediately after
seizure, or no more than three days after the taking of the vehicles.
Thus, Andres committed a clear violation of Section 6, Rule 60 of the
Rules of Court with regard to the proper disposal of the property.
9
It matters not that Silver was in possession of the seized vehicles
merely for safekeeping as stated in the depository receipts. The rule is
clear that the property seized should not be immediately delivered to
the plaintiff, and the sheriff must retain custody of the seized property
for at least five days.23 Hence, the act of Andres in delivering the
seized vehicles immediately after seizure to Silver for whatever
purpose, without observing the five-day requirement finds no legal
justification.
In Pardo v. Velasco,24 this Court held that
…Respondent as an officer of the Court is charged with
certain ministerial duties which must be performed faithfully
to the letter. Every provision in the Revised Rules of Court
has a specific reason or objective. In this case, the
purpose of the five (5) days is to give a chance to the
defendant to object to the sufficiency of the bond or
the surety or sureties thereon or require the return of
the property by filing a counterbond.…25 (Emphasis
supplied.)
In Sebastian v. Valino,26 this Court reiterated that
Under the Revised Rules of Court, the property seized
under a writ of replevin is not to be delivered
immediately to the plaintiff. The sheriff must retain it
in his custody for five days and he shall return it to the
defendant, if the latter, as in the instant case, requires its
return and files a counterbond.…27 (Emphasis supplied.)
Likewise, Andres’ claim that he had no knowledge that the compound
is owned by Silver fails to convince us. Regardless of who actually
owns the compound, the fact remains that Andres delivered the
vehicles to Silver prematurely. It violates the rule requiring him to
safekeep the vehicles in his custody.28 The alleged lack of facility to
store the seized vehicles is unacceptable considering that he should
have deposited the same in a bonded warehouse. If this was not
feasible, he should have sought prior authorization from the court
issuing the writ before delivering the vehicles to Silver.
Second, it must be stressed that from the moment an order of delivery
in replevin is executed by taking possession of the property specified
therein, such property is in custodia legis. As legal custodian, it is
Andres’ duty to safekeep the seized motor vehicles. Hence, when he
passed his duty to safeguard the motor vehicles to Silver, he
committed a clear neglect of duty.
Third, we are appalled that even after PO3 Despe reported the
unauthorized duplication of the vehicles’ keys, Andres failed to take
extra precautionary measures to ensure the safety of the vehicles. It is
obvious that the vehicles were put at risk by the unauthorized
duplication of the keys of the vehicles. Neither did he immediately
report the incident to the police or to the court. The loss of the motor
vehicles could have been prevented if Andres immediately asked the
court for an order to transfer the vehicles to another secured place as
soon as he discovered the unauthorized duplication. Under these
circumstances, even an ordinary prudent man would have exercised
extra diligence. His warning to the policemen to closely watch the
vehicles was insufficient. Andres cannot toss back to Silver or to the
policemen the responsibility for the loss of the motor vehicles since he
remains chiefly responsible for their safekeeping as legal custodian
thereof. Indeed, Andres’ failure to take the necessary precaution and
proper monitoring of the vehicles to ensure its safety constitutes plain
negligence.
Fourth, despite the cease and desist order, Andres failed to return the
motor vehicles to their lawful owners. Instead of returning the motor
vehicles immediately as directed, he opted to write Silver and demand
that she put up an indemnity bond to secure the third-party claims.
Consequently, due to his delay, the eventual loss of the motor vehicles
rendered the order to return the seized vehicles ineffectual to the
prejudice of the complaining owners.
It must be stressed that as court custodian, it was Andres’
responsibility to ensure that the motor vehicles were safely kept and
that the same were readily available upon order of the court or
demand of the parties concerned. Specifically, sheriffs, being ranking
officers of the court and agents of the law, must discharge their duties
with great care and diligence. In serving and implementing court writs,
as well as processes and orders of the court, they cannot afford to err
without affecting adversely the proper dispensation of justice. Sheriffs
play an important role in the administration of justice and as agents of
the law, high standards of performance are expected of them. 29 Hence,
his failure to return the motor vehicles at the time when its return was
still feasible constitutes another instance of neglect of duty.
Fifth, as found by the OCA, we agree that Andres also disregarded the
provisions of Rule 14130 of the Rules of Court with regard to payment
of expenses.
Under Section 9,31 Rule 141 of the Rules of Court, the procedure for
the execution of writs and other processes are: First, the sheriff must
make an estimate of the expenses to be incurred by him; Second, he
must obtain court approval for such estimated expenses; Third, the
approved estimated expenses shall be deposited by the interested
party with the Clerk of Court and ex officio sheriff; Fourth, the Clerk of
Court shall disburse the amount to the executing sheriff; and Fifth, the
executing sheriff shall liquidate his expenses within the same period
for rendering a return on the writ.
In this case, no estimate of sheriff’s expenses was submitted to the
court by Andres. Without approval of the court, he also allowed Silver
to pay directly to the policemen the expenses for the safeguarding of
the motor vehicles including their meals.32 Obviously, this practice
departed from the accepted procedure provided in the Rules of Court.
In view of the foregoing, there is no doubt that Andres failed to live up
to the standards required of his position. The number of instances that
Andres strayed from the regular course observed in the proper
implementation of the orders of the court cannot be countenanced.
Thus, taking into account the numerous times he was found negligent
and careless of his duties coupled with his utter disregard of legal
procedures, he cannot be considered guilty merely of simple
negligence. His acts constitute gross negligence.
As we have previously ruled:
…Gross negligence refers to negligence characterized by
the want of even slight care, acting or omitting to act
in a situation where there is a duty to act, not
inadvertently but willfully and intentionally, with a
conscious indifference to consequences in so far as
other persons may be affected. It is the omission of
that care which even inattentive and thoughtless
men never fail to take on their own property.…
33
 (Emphasis supplied.)
…Gross neglect, on the other hand, is such neglect
from the gravity of the case, or the frequency of
instances, becomes so serious in its character as to
endanger or threaten the public welfare. The term
does not necessarily include willful neglect or intentional
official wrongdoing.34 (Emphasis supplied.)
Good faith on the part of Andres, or lack of it, in proceeding to
properly execute his mandate would be of no moment, for he is
chargeable with the knowledge that being an officer of the court
tasked therefor, it behooves him to make due compliance. He is
expected to live up to the exacting standards of his office and his
conduct must at all times be characterized by rectitude and
10
forthrightness, and so above suspicion and mistrust as well. 35 Thus, an
act of gross neglect resulting in loss of properties in custodia
legis ruins the confidence lodged by the parties to a suit or the
citizenry in our judicial process. Those responsible for such act or
omission cannot escape the disciplinary power of this Court.
Anent the allegation of grave abuse of authority (oppression), we
likewise agree with the observations of the investigating judge.
Records show that Andres started enforcing the writ of replevin/order
of seizure on the same day that the order of seizure was issued. He
also admitted that he took the vehicles of persons who are not parties
to the replevin case.36 He further admitted that he took one vehicle
belonging to a certain Junard Escudero without the latter’s knowledge
and even caused the duplication of its keys in order that it may be
taken by Andres.37 Certainly, these are indications that Andres
enforced the order of seizure with undue haste and without giving the
complainant prior notice or reasonable time to deliver the motor
vehicles. Hence, Andres is guilty of grave abuse of authority
(oppression).
When a writ is placed in the hands of a sheriff, it is his duty, in the
absence of any instructions to the contrary, to proceed with
reasonable celerity and promptness to execute it according to its
mandate. However, the prompt implementation of an order of seizure
is called for only in instances where there is no question regarding the
right of the plaintiff to the property.38 Where there is such a question,
the prudent recourse for Andres is to desist from executing the order
and convey the information to his judge and to the plaintiff.
True, sheriffs must comply with their mandated ministerial duty to
implement writs promptly and expeditiously, but equally true is the
principle that sheriffs by the nature of their functions must at all times
conduct themselves with propriety and decorum and act above
suspicion. There must be no room for anyone to conjecture that
sheriffs and deputy sheriffs as officers of the court have conspired with
any of the parties to a case to obtain a favorable judgment or
immediate execution. The sheriff is at the front line as representative
of the judiciary and by his act he may build or destroy the institution.39
However, as to the charge of graft and corruption, it must be stressed
that the same is criminal in nature, thus, the resolution thereof cannot
be threshed out in the instant administrative proceeding. We also take
note that there is a pending criminal case for carnapping against
Andres;40 hence, with more reason that we cannot rule on the
allegation of graft and corruption as it may preempt the court in its
resolution of the said case.
We come to the matter of penalties. The imposable penalty for gross
neglect of duty is dismissal. While the penalty imposable for grave
abuse of authority (oppression) is suspension for six (6) months one
(1) day to one (1) year.41 Section 55, Rule IV, of the Uniform Rules on
Administrative Cases in the Civil Service provides that if the respondent
is found guilty of two or more charges or counts, the penalty to be
imposed should be that corresponding to the most serious charge or
count and the rest shall be considered as aggravating circumstances.
In the instant case, the penalty for the more serious offense which is
dismissal should be imposed on Andres. However, following Sections
5342 and 54,43 Rule IV of the Uniform Rules on Administrative Cases in
the Civil Service, we have to consider that Andres is a first-time
offender; hence, a lighter penalty than dismissal from the service
would suffice. Consequently, instead of imposing the penalty of
dismissal, the penalty of suspension from office for one (1) year
without pay is proper for gross neglect of duty, and another six (6)
months should be added for the aggravating circumstance of grave
abuse of authority (oppression).
WHEREFORE, the Court finds Abe C. Andres, Sheriff IV, RTC of
Davao City, Branch 16, GUILTY of gross neglect of duty and grave
abuse of authority (oppression) and is SUSPENDED for one (1) year
and six (6) months without pay. He is also hereby WARNED that a
repetition of the same or similar offenses in the future shall be dealt
with more severely.
SO ORDERED.
G.R. No. 153788               November 27, 2009
ROGER V. NAVARRO, Petitioner,
vs.
HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37,
Cagayan de Oro City, and KAREN T. GO, doing business under
the name KARGO ENTERPRISES, Respondents.
DECISION
BRION, J.:
This is a petition for review on certiorari1 that seeks to set aside the
Court of Appeals (CA) Decision2 dated October 16, 2001 and
Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA
rulings affirmed the July 26, 2000 4 and March 7, 20015 orders of the
Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City,
denying petitioner Roger V. Navarro’s (Navarro) motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two complaints,
docketed as Civil Case Nos. 98-599 (first complaint) 6 and 98-598
(second complaint),7 before the RTC for replevin and/or sum of money
with damages against Navarro. In these complaints, Karen Go prayed
that the RTC issue writs of replevin for the seizure of two (2) motor
vehicles in Navarro’s possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal age,
married to GLENN O. GO, a resident of Cagayan de Oro City
and doing business under the trade name KARGO
ENTERPRISES, an entity duly registered and existing under
and by virtue of the laws of the Republic of the Philippines,
which has its business address at Bulua, Cagayan de Oro
City; that defendant ROGER NAVARRO is a Filipino, of legal
age, a resident of 62 Dolores Street, Nazareth, Cagayan de
Oro City, where he may be served with summons and other
processes of the Honorable Court; that defendant "JOHN
DOE" whose real name and address are at present unknown
to plaintiff is hereby joined as party defendant as he may be
the person in whose possession and custody the personal
property subject matter of this suit may be found if the
same is not in the possession of defendant ROGER
NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among
others, buying and selling motor vehicles, including hauling
trucks and other heavy equipment;
3. That for the cause of action against defendant ROGER
NAVARRO, it is hereby stated that on August 8, 1997, the
said defendant leased [from] plaintiff a certain motor vehicle
which is more particularly described as follows –
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
11
as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE
entered into by and between KARGO ENTERPRISES, then represented
by its Manager, the aforementioned GLENN O. GO, and defendant
ROGER NAVARRO xxx; that in accordance with the provisions of the
above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant
ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks
each in the amount of SIXTY-SIX THOUSAND THREE HUNDRED
THIRTY-THREE & 33/100 PESOS (₱66,333.33) which were supposedly
in payment of the agreed rentals; that when the fifth and sixth checks,
i.e. PHILIPPINE BANK OF COMMUNICATIONS – CAGAYAN DE ORO
BRANCH CHECKS NOS. 017112 and 017113, respectively dated
January 8, 1998 and February 8, 1998, were presented for payment
and/or credit, the same were dishonored and/or returned by the
drawee bank for the common reason that the current deposit account
against which the said checks were issued did not have sufficient funds
to cover the amounts thereof; that the total amount of the two (2)
checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX
HUNDRED SIXTY-SIX & 66/100 PESOS (₱132,666.66) therefore
represents the principal liability of defendant ROGER NAVARRO unto
plaintiff on the basis of the provisions of the above LEASE AGREEMENT
WITH RIGHT TO PURCHASE; that demands, written and oral, were
made of defendant ROGER NAVARRO to pay the amount of ONE
HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX &
66/100 PESOS (₱132,666.66), or to return the subject motor vehicle as
also provided for in the LEASE AGREEMENT WITH RIGHT TO
PURCHASE, but said demands were, and still are, in vain to the great
damage and injury of herein plaintiff; xxx
4. That the aforedescribed motor vehicle has not been the subject of
any tax assessment and/or fine pursuant to law, or seized under an
execution or an attachment as against herein plaintiff;
xxx
8. That plaintiff hereby respectfully applies for an order of the
Honorable Court for the immediate delivery of the above-described
motor vehicle from defendants unto plaintiff pending the final
determination of this case on the merits and, for that purpose, there is
attached hereto an affidavit duly executed and bond double the value
of the personal property subject matter hereof to answer for damages
and costs which defendants may suffer in the event that the order for
replevin prayed for may be found out to having not been properly
issued.
The second complaint contained essentially the same allegations as
the first complaint, except that the Lease Agreement with Option to
Purchase involved is dated October 1, 1997 and the motor vehicle
leased is described as follows:
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-
dated checks, each for the amount of ₱100,000.00, to Karen Go in
payment of the agreed rentals; however, the third check was
dishonored when presented for payment.8
On October 12, 19989 and October 14, 1998,10 the RTC issued writs of
replevin for both cases; as a result, the Sheriff seized the two vehicles
and delivered them to the possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative defense that
the two complaints stated no cause of action, since Karen Go was not
a party to the Lease Agreements with Option to Purchase (collectively,
the lease agreements) – the actionable documents on which the
complaints were based.
On Navarro’s motion, both cases were duly consolidated on December
13, 1999.
In its May 8, 2000 order, the RTC dismissed the case on the ground Karen Go, on the other hand, claims that it is misleading for Navarro to
that the complaints did not state a cause of action. state that she has no real interest in the subject of the complaint, even
if the lease agreements were signed only by her husband, Glenn Go;
she is the owner of Kargo Enterprises and Glenn Go signed the lease
In response to the motion for reconsideration Karen Go filed dated
agreements merely as the manager of Kargo Enterprises. Moreover,
May 26, 2000,11 the RTC issued another order dated July 26, 2000
Karen Go maintains that Navarro’s insistence that Kargo Enterprises is
setting aside the order of dismissal. Acting on the presumption that
Karen Go’s paraphernal property is without basis. Based on the law
Glenn Go’s leasing business is a conjugal property, the RTC held that
and jurisprudence on the matter, all property acquired during the
Karen Go had sufficient interest in his leasing business to file the
marriage is presumed to be conjugal property. Finally, Karen Go insists
action against Navarro. However, the RTC held that Karen Go should
that her complaints sufficiently established a cause of action against
have included her husband, Glenn Go, in the complaint based on
Navarro. Thus, when the RTC ordered her to include her husband as
Section 4, Rule 3 of the Rules of Court (Rules).12 Thus, the lower court
co-plaintiff, this was merely to comply with the rule that spouses
ordered Karen Go to file a motion for the inclusion of Glenn Go as co-
should sue jointly, and was not meant to cure the complaints’ lack of
plaintiff.1avvphi1
cause of action.

When the RTC denied Navarro’s motion for reconsideration on March

THE COURT’S RULING
7, 2001, Navarro filed a petition for certiorari with the CA, essentially
contending that the RTC committed grave abuse of discretion when it
reconsidered the dismissal of the case and directed Karen Go to amend We find the petition devoid of merit.
her complaints by including her husband Glenn Go as co-plaintiff.
According to Navarro, a complaint which failed to state a cause of
Karen Go is the real party-in-interest
action could not be converted into one with a cause of action by mere
amendment or supplemental pleading.
The 1997 Rules of Civil Procedure requires that every action must be
prosecuted or defended in the name of the real party-in-
On October 16, 2001, the CA denied Navarro’s petition and affirmed
interest, i.e.,  the party who stands to be benefited or injured by the
the RTC’s order.13 The CA also denied Navarro’s motion for
judgment in the suit, or the party entitled to the avails of the suit.15
reconsideration in its resolution of May 29, 2002,14 leading to the filing
of the present petition.
Interestingly, although Navarro admits that Karen Go is the registered
owner of the business name Kargo Enterprises, he still insists that
THE PETITION
Karen Go is not a real party-in-interest in the case. According to
Navarro, while the lease contracts were in Kargo Enterprises’ name,
Navarro alleges that even if the lease agreements were in the name of this was merely a trade name without a juridical personality, so the
Kargo Enterprises, since it did not have the requisite juridical actual parties to the lease agreements were Navarro and Glenn Go, to
personality to sue, the actual parties to the agreement are himself and the exclusion of Karen Go.
Glenn Go. Since it was Karen Go who filed the complaints and not
Glenn Go, she was not a real party-in-interest and the complaints
As a corollary, Navarro contends that the RTC acted with grave abuse
failed to state a cause of action.
of discretion when it ordered the inclusion of Glenn Go as co-plaintiff,
since this in effect created a cause of action for the complaints when in
Navarro posits that the RTC erred when it ordered the amendment of truth, there was none.
the complaint to include Glenn Go as a co-plaintiff, instead of
dismissing the complaint outright because a complaint which does not
We do not find Navarro’s arguments persuasive.
state a cause of action cannot be converted into one with a cause of
action by a mere amendment or a supplemental pleading. In effect,
the lower court created a cause of action for Karen Go when there was The central factor in appreciating the issues presented in this case is
none at the time she filed the complaints. the business name Kargo Enterprises. The name appears in the title of
the Complaint where the plaintiff was identified as "KAREN T. GO
doing business under the name KARGO ENTERPRISES," and this
Even worse, according to Navarro, the inclusion of Glenn Go as co-
identification was repeated in the first paragraph of the Complaint.
plaintiff drastically changed the theory of the complaints, to his great
Paragraph 2 defined the business KARGO ENTERPRISES undertakes.
prejudice. Navarro claims that the lower court gravely abused its
Paragraph 3 continued with the allegation that the defendant "leased
discretion when it assumed that the leased vehicles are part of the
from plaintiff a certain motor vehicle" that was thereafter described.
conjugal property of Glenn and Karen Go. Since Karen Go is the
Significantly, the Complaint specifies and attaches as its integral part
registered owner of Kargo Enterprises, the vehicles subject of the
the Lease Agreement that underlies the transaction between the
complaint are her paraphernal properties and the RTC gravely erred
plaintiff and the defendant. Again, the name KARGO ENTERPRISES
when it ordered the inclusion of Glenn Go as a co-plaintiff.
entered the picture as this Lease Agreement provides:

Navarro likewise faults the lower court for setting the trial of the case
in the same order that required Karen Go to amend her complaints,
claiming that by issuing this order, the trial court violated Rule 10 of
the Rules.
Even assuming the complaints stated a cause of action against him,
Navarro maintains that the complaints were premature because no
prior demand was made on him to comply with the provisions of the
lease agreements before the complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin were issued
based on flawed complaints, the vehicles were illegally seized from his
possession and should be returned to him immediately.
This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office address at xxx,
herein referred to as the LESSOR-SELLER; representing KARGO
ENTERPRISES as its Manager,
xxx
thus, expressly pointing to KARGO ENTERPRISES as the principal that
Glenn O. Go represented. In other words, by the express terms of this
Lease Agreement, Glenn Go did sign the agreement only as the
manager of Kargo Enterprises and the latter is clearly the real party to
the lease agreements.

12
As Navarro correctly points out, Kargo Enterprises is a sole
proprietorship, which is neither a natural person, nor a juridical person,
as defined by Article 44 of the Civil Code:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public
interest or purpose, created by law; their personality begins
as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private
interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each
shareholder, partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises
cannot be a party to a civil action. This legal reality leads to the
question: who then is the proper party to file an action based on a
contract in the name of Kargo Enterprises?
We faced a similar question in Juasing Hardware v. Mendoza,17 where
we said:
Finally, there is no law authorizing sole proprietorships like petitioner
to bring suit in court. The law merely recognizes the existence of a
sole proprietorship as a form of business organization conducted for
profit by a single individual, and requires the proprietor or owner
thereof to secure licenses and permits, register the business name,
and pay taxes to the national government. It does not vest juridical or
legal personality upon the sole proprietorship nor empower it to file or
defend an action in court.
Thus, the complaint in the court below should have been filed in the
name of the owner of Juasing Hardware. The allegation in the body of
the complaint would show that the suit is brought by such person as
proprietor or owner of the business conducted under the name and
style Juasing Hardware. The descriptive words "doing business as
Juasing Hardware" may be added to the title of the case, as is
customarily done.18 [Emphasis supplied.]
This conclusion should be read in relation with Section 2, Rule 3 of the
Rules, which states:
SEC. 2. Parties in interest.  – A real party in interest is the party who
stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. Unless otherwise authorized by
law or these Rules, every action must be prosecuted or defended in
the name of the real party in interest.
As the registered owner of Kargo Enterprises, Karen Go is the party
who will directly benefit from or be injured by a judgment in this case.
Thus, contrary to Navarro’s contention, Karen Go is the real party-in-
interest, and it is legally incorrect to say that her Complaint does not
state a cause of action because her name did not appear in the Lease
Agreement that her husband signed in behalf of Kargo Enterprises.
Whether Glenn Go can legally sign the Lease Agreement in his capacity
as a manager of Kargo Enterprises, a sole proprietorship, is a question
we do not decide, as this is a matter for the trial court to consider in a
trial on the merits.
Glenn Go’s Role in the Case
We find it significant that the business name Kargo Enterprises is in
the name of Karen T. Go,19 who described herself in the Complaints to
be "a Filipino, of legal age, married to GLENN O. GO, a resident of
Cagayan de Oro City, and doing business under the trade name
13
KARGO ENTERPRISES."20 That Glenn Go and Karen Go are married to
each other is a fact never brought in issue in the case. Thus, the
business name KARGO ENTERPRISES is registered in the name of a
married woman, a fact material to the side issue of whether Kargo
Enterprises and its properties are paraphernal or conjugal properties.
To restate the parties’ positions, Navarro alleges that Kargo
Enterprises is Karen Go’s paraphernal property, emphasizing the fact
that the business is registered solely in Karen Go’s name. On the other
hand, Karen Go contends that while the business is registered in her
name, it is in fact part of their conjugal property.
The registration of the trade name in the name of one person – a
woman – does not necessarily lead to the conclusion that the trade
name as a property is hers alone, particularly when the woman is
married. By law, all property acquired during the marriage, whether
the acquisition appears to have been made, contracted or registered in
the name of one or both spouses, is presumed to be conjugal unless
the contrary is proved.21 Our examination of the records of the case
does not show any proof that Kargo Enterprises and the properties or
contracts in its name are conjugal. If at all, only the bare allegation of
Navarro to this effect exists in the records of the case. As we
emphasized in Castro v. Miat:22
Petitioners also overlook Article 160 of the New Civil Code. It provides
that "all property of the marriage is presumed to be conjugal
partnership, unless it be prove[n] that it pertains exclusively to the
husband or to the wife." This article does not require proof that
the property was acquired with funds of the partnership. The
presumption applies even when the manner in which the property was
acquired does not appear.23 [Emphasis supplied.]
Thus, for purposes solely of this case and of resolving the issue of
whether Kargo Enterprises as a sole proprietorship is conjugal or
paraphernal property, we hold that it is conjugal property.
Article 124 of the Family Code, on the administration of the conjugal
property, provides:
Art. 124. The administration and enjoyment of the conjugal
partnership property shall belong to both spouses jointly. In
case of disagreement, the husband’s decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which must be
availed of within five years from the date of the contract implementing
such decision.
xxx
This provision, by its terms, allows either Karen or Glenn Go to speak
and act with authority in managing their conjugal property, i.e., Kargo
Enterprises. No need exists, therefore, for one to obtain the consent of
the other before performing an act of administration or any act that
does not dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is
governed by the rules on the contract of partnership in all that is not in
conflict with what is expressly determined in this Chapter or by the
spouses in their marriage settlements. In other words, the property
relations of the husband and wife shall be governed primarily by
Chapter 4 on Conjugal Partnership of Gains of the Family Code and,
suppletorily, by the spouses’ marriage settlement and by the rules on
partnership under the Civil Code. In the absence of any evidence of a
marriage settlement between the spouses Go, we look at the Civil
Code provision on partnership for guidance.
A rule on partnership applicable to the spouses’ circumstances is
Article 1811 of the Civil Code, which states:
Art. 1811. A partner is a co-owner with the other partners of specific
partnership property.
The incidents of this co-ownership are such that: of the co-owners, namely the co-owner who filed the suit for the
recovery of the co-owned property, is an indispensable party thereto.
The other co-owners are not indispensable parties. They are not even
(1) A partner, subject to the provisions of this Title and to any
necessary parties, for a complete relief can be accorded in the suit
agreement between the partners, has an equal right with his
even without their participation, since the suit is presumed to have
partners to possess specific partnership property for partnership
been filed for the benefit of all co-owners.25 [Emphasis supplied.]
purposes; xxx

Under this ruling, either of the spouses Go may bring an action against
Under this provision, Glenn and Karen Go are effectively co-owners of
Navarro to recover possession of the Kargo Enterprises-leased vehicles
Kargo Enterprises and the properties registered under this name;
which they co-own. This conclusion is consistent with Article 124 of the
hence, both have an equal right to seek possession of these
Family Code, supporting as it does the position that either spouse may
properties. Applying Article 484 of the Civil Code, which states that "in
act on behalf of the conjugal partnership, so long as they do not
default of contracts, or special provisions, co-ownership shall be
dispose of or encumber the property in question without the other
governed by the provisions of this Title," we find further support in
spouse’s consent.
Article 487 of the Civil Code that allows any of the co-owners to bring
an action in ejectment with respect to the co-owned property.
On this basis, we hold that since Glenn Go is not strictly an
indispensable party in the action to recover possession of the leased
While ejectment is normally associated with actions involving real
vehicles, he only needs to be impleaded as a pro-forma party to the
property, we find that this rule can be applied to the circumstances of
suit, based on Section 4, Rule 4 of the Rules, which states:
the present case, following our ruling in Carandang v. Heirs of De
Guzman.24 In this case, one spouse filed an action for the recovery of
credit, a personal property considered conjugal property, without Section 4. Spouses as parties. – Husband and wife shall sue or be sued
including the other spouse in the action. In resolving the issue of jointly, except as provided by law.
whether the other spouse was required to be included as a co-plaintiff
in the action for the recovery of the credit, we said:
Non-joinder of indispensable parties not ground to dismiss action

Milagros de Guzman, being presumed to be a co-owner of the credits

Even assuming that Glenn Go is an indispensable party to the action,
allegedly extended to the spouses Carandang, seems to be either an
we have held in a number of cases26 that the misjoinder or non-joinder
indispensable or a necessary party. If she is an indispensable party,
of indispensable parties in a complaint is not a ground for dismissal of
dismissal would be proper. If she is merely a necessary party,
action. As we stated in Macababbad v. Masirag:27
dismissal is not warranted, whether or not there was an order for her
inclusion in the complaint pursuant to Section 9, Rule 3.
Rule 3, Section 11 of the Rules of Court provides that neither
misjoinder nor nonjoinder of parties is a ground for the dismissal of an
Article 108 of the Family Code provides:
action, thus:

Art. 108. The conjugal partnership shall be governed by the rules on

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor
the contract of partnership in all that is not in conflict with what is
non-joinder of parties is ground for dismissal of an action. Parties may
expressly determined in this Chapter or by the spouses in their
be dropped or added by order of the court on motion of any party or
marriage settlements.
on its own initiative at any stage of the action and on such terms as
are just. Any claim against a misjoined party may be severed and
This provision is practically the same as the Civil Code provision it proceeded with separately.
superseded:
In Domingo v. Scheer, this Court held that the proper remedy when a
Art. 147. The conjugal partnership shall be governed by the rules on party is left out is to implead the indispensable party at any stage of
the contract of partnership in all that is not in conflict with what is the action. The court, either motu proprio or upon the motion of a
expressly determined in this Chapter. party, may order the inclusion of the indispensable party or give the
plaintiff opportunity to amend his complaint in order to include
indispensable parties. If the plaintiff to whom the order to include the
In this connection, Article 1811 of the Civil Code provides that "[a]
indispensable party is directed refuses to comply with the order of the
partner is a co-owner with the other partners of specific partnership
court, the complaint may be dismissed upon motion of the defendant
property." Taken with the presumption of the conjugal nature of the
or upon the court's own motion. Only upon unjustified failure or refusal
funds used to finance the four checks used to pay for petitioners’ stock
to obey the order to include or to amend is the action dismissed.
subscriptions, and with the presumption that the credits themselves
are part of conjugal funds, Article 1811 makes Quirino and Milagros de
Guzman co-owners of the alleged credit. In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen
Go to join her husband as a party plaintiff is fully in order.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman
may separately bring an action for the recovery thereof. In the fairly Demand not required prior
recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held that, to filing of replevin action
in a co-ownership, co-owners may bring actions for the recovery of co-
owned property without the necessity of joining all the other co-
In arguing that prior demand is required before an action for a writ of
owners as co-plaintiffs because the suit is presumed to have been filed
replevin is filed, Navarro apparently likens a replevin action to an
for the benefit of his co-owners. In the latter case and in that of De
unlawful detainer.
Guia v. Court of Appeals, we also held that Article 487 of the Civil
Code, which provides that any of the co-owners may bring an action
for ejectment, covers all kinds of action for the recovery of possession. For a writ of replevin to issue, all that the applicant must do is to file
an affidavit and bond, pursuant to Section 2, Rule 60 of the Rules,
which states:
In sum, in suits to recover properties, all co-owners are real parties in
interest. However, pursuant to Article 487 of the Civil Code and
relevant jurisprudence, any one of them may bring an action, any kind Sec. 2. Affidavit and bond.
of action, for the recovery of co-owned properties. Therefore, only one

14
The applicant must show by his own affidavit or that of some other
person who personally knows the facts:
(a) That the applicant is the owner of the
property claimed, particularly describing it, or is entitled
to the possession thereof;
(b) That the property is wrongfully detained by the
adverse party, alleging the cause of detention thereof
according to the best of his knowledge, information, and
belief;
(c) That the property has not been distrained or taken for a
tax assessment or a fine pursuant to law, or seized under a
writ of execution or preliminary attachment, or otherwise
placed under custodia legis, or if so seized, that it is exempt
from such seizure or custody; and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the adverse party in
double the value of the property as stated in the affidavit
aforementioned, for the return of the property to the adverse party if
such return be adjudged, and for the payment to the adverse party of
such sum as he may recover from the applicant in the action.
We see nothing in these provisions which requires the applicant to
make a prior demand on the possessor of the property before he can
file an action for a writ of replevin. Thus, prior demand is not a
condition precedent to an action for a writ of replevin.
More importantly, Navarro is no longer in the position to claim that a
prior demand is necessary, as he has already admitted in his Answers
that he had received the letters that Karen Go sent him, demanding
that he either pay his unpaid obligations or return the leased motor
vehicles. Navarro’s position that a demand is necessary and has not
been made is therefore totally unmeritorious.
WHEREFORE, premises considered, we DENY the petition for review
for lack of merit. Costs against petitioner Roger V. Navarro.
SO ORDERED.
G.R. No. 182963               June 3, 2013
SPOUSES DEO AGNER and MARICON AGNER, Petitioners,
vs.
BPI FAMILY SAVINGS BANK, INC., Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari assailing the April 30, 2007
Decision1 and May 19, 2008 Resolution2of the Court of Appeals in
15
CAG.R. CV No. 86021, which affirmed the August 11, 2005 Decision3 of
the Regional Trial Court, Branch 33, Manila City.
On February 15, 2001, petitioners spouses Deo Agner and Maricon
Agner executed a Promissory Note with Chattel Mortgage in favor of
Citimotors, Inc. The contract provides, among others, that: for
receiving the amount of Php834, 768.00, petitioners shall pay Php
17,391.00 every 15th day of each succeeding month until fully paid;
the loan is secured by a 2001 Mitsubishi Adventure Super Sport; and
an interest of 6% per month shall be imposed for failure to pay each
installment on or before the stated due date.4
On the same day, Citimotors, Inc. assigned all its rights, title and
interests in the Promissory Note with Chattel Mortgage to ABN AMRO
Savings Bank, Inc. (ABN AMRO), which, on May 31, 2002, likewise
assigned the same to respondent BPI Family Savings Bank, Inc.5
For failure to pay four successive installments from May 15, 2002 to
August 15, 2002, respondent, through counsel, sent to petitioners a
demand letter dated August 29, 2002, declaring the entire obligation
as due and demandable and requiring to pay Php576,664.04, or
surrender the mortgaged vehicle immediately upon receiving the
letter.6 As the demand was left unheeded, respondent filed on October
4, 2002 an action for Replevin and Damages before the Manila
Regional Trial Court (RTC).
A writ of replevin was issued.7 Despite this, the subject vehicle was not
seized.8 Trial on the merits ensued. On August 11, 2005, the Manila
RTC Br. 33 ruled for the respondent and ordered petitioners to jointly
and severally pay the amount of Php576,664.04 plus interest at the
rate of 72% per annum from August 20, 2002 until fully paid, and the
costs of suit.
Petitioners appealed the decision to the Court of Appeals (CA), but the
CA affirmed the lower court’s decision and, subsequently, denied the
motion for reconsideration; hence, this petition.
Before this Court, petitioners argue that: (1) respondent has no cause
of action, because the Deed of Assignment executed in its favor did
not specifically mention ABN AMRO’s account receivable from
petitioners; (2) petitioners cannot be considered to have defaulted in
payment for lack of competent proof that they received the demand
letter; and (3) respondent’s remedy of resorting to both actions of
replevin and collection of sum of money is contrary to the provision of
Article 14849 of the Civil Code and the Elisco Tool Manufacturing
Corporation v. Court of Appeals10 ruling. WON the contention of the
petitioner is correct? No
The contentions are untenable.
With respect to the first issue, it would be sufficient to state that the
matter surrounding the Deed of Assignment had already been
considered by the trial court and the CA. Likewise, it is an issue of fact
that is not a proper subject of a petition for review under Rule 45. An
issue is factual when the doubt or difference arises as to the truth or
falsehood of alleged facts, or when the query invites calibration of the
whole evidence, considering mainly the credibility of witnesses,
existence and relevancy of specific surrounding circumstances, their
relation to each other and to the whole, and the probabilities of the
situation.11 Time and again, We stress that this Court is not a trier of
facts and generally does not weigh anew evidence which lower courts
have passed upon.
As to the second issue, records bear that both verbal and written
demands were in fact made by respondent prior to the institution of
the case against petitioners.12 Even assuming, for argument’s sake,
that no demand letter was sent by respondent, there is really no need
for it because petitioners legally waived the necessity of notice or
demand in the Promissory Note with Chattel Mortgage, which they
voluntarily and knowingly signed in favor of respondent’s predecessor-
in-interest. Said contract expressly stipulates:
In case of my/our failure to pay when due and payable, any sum
which I/We are obliged to pay under this note and/or any other
obligation which I/We or any of us may now or in the future owe to
the holder of this note or to any other party whether as principal or
guarantor x x x then the entire sum outstanding under this note shall,
without prior notice or demand, immediately become due and payable.
(Emphasis and underscoring supplied)
A provision on waiver of notice or demand has been recognized as
legal and valid in Bank of the Philippine Islands v. Court of
Appeals,13 wherein We held:
The Civil Code in Article 1169 provides that one incurs in delay or is in
default from the time the obligor demands the fulfillment of the
obligation from the obligee. However, the law expressly provides that
demand is not necessary under certain circumstances, and one of
these circumstances is when the parties expressly waive demand.
Hence, since the co-signors expressly waived demand in the
promissory notes, demand was unnecessary for them to be in
default.14
Further, the Court even ruled in Navarro v. Escobido 15 that prior
demand is not a condition precedent to an action for a writ of replevin,
since there is nothing in Section 2, Rule 60 of the Rules of Court that
requires the applicant to make a demand on the possessor of the
property before an action for a writ of replevin could be filed.
Also, petitioners’ representation that they have not received a demand
letter is completely inconsequential as the mere act of sending it would
suffice. Again, We look into the Promissory Note with Chattel
Mortgage, which provides:
All correspondence relative to this mortgage, including demand letters,
summonses, subpoenas, or notifications of any judicial or extrajudicial
action shall be sent to the MORTGAGOR at the address indicated on
this promissory note with chattel mortgage or at the address that may
hereafter be given in writing by the MORTGAGOR to the MORTGAGEE
or his/its assignee. The mere act of sending any correspondence by
mail or by personal delivery to the said address shall be valid and
effective notice to the mortgagor for all legal purposes and the fact
that any communication is not actually received by the MORTGAGOR
or that it has been returned unclaimed to the MORTGAGEE or that no
person was found at the address given, or that the address is fictitious
or cannot be located shall not excuse or relieve the MORTGAGOR from
the effects of such notice.16 (Emphasis and underscoring supplied)
The Court cannot yield to petitioners’ denial in receiving respondent’s
demand letter. To note, their postal address evidently remained
unchanged from the time they executed the Promissory Note with
Chattel Mortgage up to time the case was filed against them. Thus, the
presumption that "a letter duly directed and mailed was received in the
regular course of the mail"17 stands in the absence of satisfactory proof
to the contrary.
Petitioners cannot find succour from Ting v. Court of Appeals 18 simply
because it pertained to violation of Batas Pambansa Blg. 22 or the
Bouncing Checks Law. As a higher quantum of proof – that is, proof
beyond reasonable doubt – is required in view of the criminal nature of
the case, We found insufficient the mere presentation of a copy of the
demand letter allegedly sent through registered mail and its
corresponding registry receipt as proof of receiving the notice of
dishonor.
16
Perusing over the records, what is clear is that petitioners did not take
advantage of all the opportunities to present their evidence in the
proceedings before the courts below. They miserably failed to produce
the original cash deposit slips proving payment of the monthly
amortizations in question. Not even a photocopy of the alleged proof
of payment was appended to their Answer or shown during the trial.
Neither have they demonstrated any written requests to respondent to
furnish them with official receipts or a statement of account. Worse,
petitioners were not able to make a formal offer of evidence
considering that they have not marked any documentary evidence
during the presentation of Deo Agner’s testimony.19
Jurisprudence abounds that, in civil cases, one who pleads payment
has the burden of proving it; the burden rests on the defendant to
prove payment, rather than on the plaintiff to prove non-
payment.20 When the creditor is in possession of the document of
credit, proof of non-payment is not needed for it is
presumed.21 Respondent's possession of the Promissory Note with
Chattel Mortgage strongly buttresses its claim that the obligation has
not been extinguished. As held in Bank of the Philippine Islands v.
Spouses Royeca:22
x x x The creditor's possession of the evidence of debt is proof that the
debt has not been discharged by payment. A promissory note in the
hands of the creditor is a proof of indebtedness rather than proof of
payment. In an action for replevin by a mortgagee, it is prima facie
evidence that the promissory note has not been paid. Likewise, an
uncanceled mortgage in the possession of the mortgagee gives rise to
the presumption that the mortgage debt is unpaid.23
Indeed, when the existence of a debt is fully established by the
evidence contained in the record, the burden of proving that it has
been extinguished by payment devolves upon the debtor who offers
such defense to the claim of the creditor. 24 The debtor has the burden
of showing with legal certainty that the obligation has been discharged
by payment.25
Lastly, there is no violation of Article 1484 of the Civil Code and the
Court’s decision in Elisco Tool Manufacturing Corporation v. Court of
Appeals.26
In Elisco, petitioner's complaint contained the following prayer:
WHEREFORE, plaintiffs pray that judgment be rendered as follows:
ON THE FIRST CAUSE OF ACTION
Ordering defendant Rolando Lantan to pay the plaintiff the sum of
₱39,054.86 plus legal interest from the date of demand until the whole
obligation is fully paid;
ON THE SECOND CAUSE OF ACTION
To forthwith issue a Writ of Replevin ordering the seizure of the motor
vehicle more particularly described in paragraph 3 of the Complaint,
from defendant Rolando Lantan and/or defendants Rina Lantan, John
Doe, Susan Doe and other person or persons in whose possession the
said motor vehicle may be found, complete with accessories and
equipment, and direct deliver thereof to plaintiff in accordance with
law, and after due hearing to confirm said seizure and plaintiff's
possession over the same;
PRAYER COMMON TO ALL CAUSES OF ACTION
1. Ordering the defendant Rolando Lantan to pay the
plaintiff an amount equivalent to twenty-five percent (25%)
of his outstanding obligation, for and as attorney's fees;
 2. Ordering defendants to pay the cost or expenses of
collection, repossession, bonding fees and other incidental
expenses to be proved during the trial; and
3. Ordering defendants to pay the costs of suit.
Plaintiff also prays for such further reliefs as this Honorable Court may
deem just and equitable under the premises.27
The Court therein ruled:
The remedies provided for in Art. 1484 are alternative, not cumulative.
The exercise of one bars the exercise of the others. This limitation
applies to contracts purporting to be leases of personal property with
option to buy by virtue of Art. 1485. The condition that the lessor has
deprived the lessee of possession or enjoyment of the thing for the
purpose of applying Art. 1485 was fulfilled in this case by the filing by
petitioner of the complaint for replevin to recover possession of
movable property. By virtue of the writ of seizure issued by the trial
court, the deputy sheriff seized the vehicle on August 6, 1986 and
thereby deprived private respondents of its use. The car was not
returned to private respondent until April 16, 1989, after two (2) years
and eight (8) months, upon issuance by the Court of Appeals of a writ
of execution.
Petitioner prayed that private respondents be made to pay the sum of
₱39,054.86, the amount that they were supposed to pay as of May
1986, plus interest at the legal rate. At the same time, it prayed for the
issuance of a writ of replevin or the delivery to it of the motor vehicle
"complete
with accessories and equipment." In the event the car could not be
delivered to petitioner, it was prayed that private respondent Rolando
Lantan be made to pay petitioner the amount of ₱60,000.00, the
"estimated actual value" of the car, "plus accrued monthly rentals
thereof with interests at the rate of fourteen percent (14%) per annum
until fully paid." This prayer of course cannot be granted, even
assuming that private respondents have defaulted in the payment of
their obligation. This led the trial court to say that petitioner wanted to
eat its cake and have it too.28
In contrast, respondent in this case prayed:
(a) Before trial, and upon filing and approval of the bond, to
forthwith issue a Writ of Replevin ordering the seizure of the
motor vehicle above-described, complete with all its
accessories and equipments, together with the Registration
Certificate thereof, and direct the delivery thereof to plaintiff
in accordance with law and after due hearing, to confirm the
said seizure;
Plaintiff further prays for such other relief as this Honorable Court may
deem just and equitable in the premises.29
Compared with Elisco, the vehicle subject matter of this case was
never recovered and delivered to respondent despite the issuance of a
writ of replevin. As there was no seizure that transpired, it cannot be
said that petitioners were deprived of the use and enjoyment of the
mortgaged vehicle or that respondent pursued, commenced or
concluded its actual foreclosure. The trial court, therefore, rightfully
granted the alternative prayer for sum of money, which is equivalent
to the remedy of "exacting fulfillment of the obligation." Certainly,
there is no double recovery or unjust enrichment30 to speak of.
All the foregoing notwithstanding, We are of the opinion that the
interest of 6% per month should be equitably reduced to one percent
(1%) per month or twelve percent (12%) per annum, to be reckoned
from May 16, 2002 until full payment and with the remaining
outstanding balance of their car loan as of May 15, 2002 as the base
amount.
Settled is the principle which this Court has affirmed in a number of
cases that stipulated interest rates of three percent (3%) per month
and higher are excessive, iniquitous, unconscionable, and
exorbitant.31 While Central Bank Circular No. 905-82, which took effect
on January 1, 1983, effectively removed the ceiling on interest rates
for both secured and unsecured loans, regardless of maturity, nothing
in the said circular could possibly be read as granting carte blanche
authority to lenders to raise interest rates to levels which would either
enslave their borrowers or lead to a hemorrhaging of their
assets.32 Since the stipulation on the interest rate is void for being
contrary to morals, if not against the law, it is as if there was no
express contract on said interest rate; thus, the interest rate may be
reduced as reason and equity demand.33
WHEREFORE, the petition is DENIED and the Court AFFIRMS WITH
MODIFICATION the April 30, 2007 Decision and May 19, 2008
Resolution of the Court of Appeals in CA-G.R. CV No. 86021.
Petitioners spouses Deo Agner and Maricon Agner are ORDERED to
pay, jointly and severally, respondent BPI Family Savings Bank, Inc.
( 1) the remaining outstanding balance of their auto loan obligation as
of May 15, 2002 with interest at one percent ( 1 o/o) per month from
May 16, 2002 until fully paid; and (2) costs of suit.
SO ORDERED.

(b) Or, in the event that manual delivery of the said motor
vehicle cannot be effected to render judgment in favor of
plaintiff and against defendant(s) ordering them to pay to
plaintiff, jointly and severally, the sum of ₱576,664.04 plus
interest and/or late payment charges thereon at the rate of
72% per annum from August 20, 2002 until fully paid;

(c) In either case, to order defendant(s) to pay jointly and

severally:

(1) the sum of ₱297,857.54 as attorney’s fees,

liquidated damages, bonding fees and other
expenses incurred in the seizure of the said motor
vehicle; and

(2) the costs of suit.

17