Merged Cases Part 5 LegForm

4/12/24, 12:17 AM [ G.R. No. L-22578.
January 31, 1973 ]
151 Phil. 338
[ G.R. No. L-22578. January 31, 1973 ]

NATIONAL MARKETING CORPORATION, PLAINTIFF-APPELLEE,
VS. FEDERATION OF UNITED NAMARCO DISTRIBUTORS, INC.,
DEFENDANT-APPELLANT.
DECISION
ANTONIO, J.:
Appeal by defendant, Federation of United Namarco Distributors, Inc., from a decision of the
Court of First Instance of Manila in Civil Case No. 46124, ordering said defendant to pay the
plaintiff, National Marketing Corporation, the sum of P609,014.73, representing the cost of
merchandise delivered to, and not paid for by, the defendant, with interest thereon at the legal
rate from the date of delivery of the merchandise, until the whole obligation is paid; and the
sum of P5,000.00, for and as attorney's fees and other expenses of litigation, plus costs.
The facts of this case, which are not disputed by the parties, are correctly set forth in the
appealed decision from which we reproduce hereunder, as follows:
"The plaintiff, hereinafter to be called the NAMARCO, is a government owned

and controlled corporation duly organized and existing under and by virtue of
Republic Act No. 1345, as amended; and the defendant, hereinafter to be called
the FEDERATION, is a non-stock corporation duly organized and existing under
and by virtue of the laws of the Philippines.
On November 16, 1959, the NAMARCO and the FEDERATION entered into a Contract of
Sale which contains the following stipulations, terms and conditions:
'That, WHEREAS, by virtue of NAMARCO Board Resolution dated

November 3, 1959, the Management of NAMARCO was authorized
to import the following items with the corresponding dollar value
totalling Two Million One Thousand Thirty One Dollars
($2,001,031.00) to wit;
xxx xxx xxx
'That, WHEREAS, for and in consideration of the sum of Two

Hundred Thousand Pesos (P200,000.00) as part payment of the items
and/or merchandise above-mentioned, and deposited by the
FEDERATION with the NAMARCO upon signing of the items and/or
merchandise above enumerated items and/or merchandise shall be
paid on cash basis upon delivery of the duly indorsed negotiable
shipping document covering the same, the NAMARCO agrees to sell
the said items and/or merchandise, subject to the following terms and
conditions:
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'1. That the FEDERATION shall pay the NAMARCO the value of the
goods equivalent to the procurement costs plus 5% mark-up, provided,
however, that should there be any adjustment in the procurement costs
the same shall be refunded to the FEDERATION.
C2. That all handling and storage charges of the goods sold shall be
for the account of the FEDERATION.
'3. That the FEDERATION waives its right to claim for any loss or
damage that may be suffered due to force majeure such as war, riots,
strikes, etc., except when such incident is directly or indirectly due to
the negligence of the NAMARCO or its representative;
'4. That the items and/or merchandise sold by NAMARCO to the

FEDERATION shall be distributed among its members and retailers in
accordance with NAMARCO's existing rules and regulations
governing the distribution of NAMARCO goods and at the wholesale
and retail prices to be determined by NAMARCO.
xxx xxx xxx
(Annex 'A' to the Complaint or Exh. 'A').
"Among the goods covered by the Contract of Sale were 2,000 cartons of PK
Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, 500 cartons of
Adams Chicklets, 168 cartons of Blue Denims, and 138 bales of Khaki Twill.
"To insure the payment of those goods by the FEDERATION, the NAMARCO
accepted three domestic letters of credit, to wit: PNB Domestic L/C No. 600570,
dated January 27, 1960, in favor of the NAMARCO for the account of the
FEDERATION, available by draft up to the aggregate amount of P277,357.91,
covering the full invoice value of the 2,000 cartons PK-5 Chewing Gums, 1,000
cartons of Juicy Fruit Chewing Gums, and 500 cartons of Adams Chicklets; PNB
Domestic L/C No. 600606, dated January 28, 1960, in favor of the NAMARCO
for the account of the FEDERATION, available by draft up to the aggregate
amount of P135,891.82? covering the full invoice value of the 168 cartons of
Blue Denims; and PNB Domestic L/C No. 600586, dated January 28, 1960, in
favor of the NAMARCO for the account of the FEDERATION, available by draft
up to the aggregate amount of P197,804.12, covering the full invoice value of the
183 bales of Khaki Twill, each to be accompamed by statement of account of
buyer issued by. the NAMARCO, accepted draft and duly executed trust receipt
approved by the Philippine National Bank.
"Upon arrival of the goods in Manila in January, 1960, the NAMARCO submitted
to the FEDERATION Statement of Account for P277.357.91, covering shipment
of the 2,000 cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit Chewing
Gums, and 500 cartons of Adams Chicklets; Statement of Account of
P135,891.32, covering shipment of the 168 cartons of Blue Denims; and
Statement of Account of P197,824.12, covering shipment of the 183 bales of
Khaki Twill, or a total of P611,053.35, for the FEDERATION to pay.
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"On January 29, 1960, the FEDERATION received from the NAMARCO the
2,000 cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums,
and 500 cartons of Adams Chicklets, all with a total value of P277,357.91, under
the condition that the cost thereof would be paid in cash through PNB Domestic
L/C No. 600570; and on February 20, I960, the FEDERATION received from the
NAMARCO the 168 cartons of Blue Denims and 183 bales of Khaki Twill, with a
total value of P135,891.82 and P197,804.12, respectively, under the condition that
the cost thereof would be paid in cash through PNB Domestic L/C Nos. 600606
and 600586, respectively.
"On March 2, 1960, the FEDERATION and some of its members filed a
complaint against the NAMARCO, which became Civil Case No. 42684 of this
Court, for specific performance and damages, alleging that after the NAMARCO
had delivered a great portion of the goods listed in the Contract of Sale, it refused
to deliver the other goods mentioned in the said contract. The pertinent
allegations of the complaint in that case is, as follows:
'17. That now the defendant has refused and declined to accept the
cash payments by the FEDERATION, in accordance with the terms
and conditions stipulated,in said contract, Annex 'A' hereof, against
deliveries to it of the commodities listed in paragraph 16 hereof, and
has refused and declined to make deliveries thereof to the
FEDERATION, in accordance with such terms and conditions; and
that the plaintiffs have always been, and still are willing to take
deliveries of the same commodities and to pay for them, through the
FEDERATION, in accordance with the terms and conditions, of said
contract' (Exh. 'Is)
"On March 10, 1960, the NAMARCO presented to the Philippine National Bank,
Manila, for payment Sight Draft, dated March 10, 1960, for P277,357.91, to
cover the full payment of the 2,000 cartons of PK Chewing Gums, 1,000 cartons
of Juicy Fruit Chewing Gums, and 500 cartons of Adams Chicklets, duly
accompanied with supporting papers; Sight Draft, dated March 10, 1960, for
P135.891.82, to cover the full payment of the 168 cartons of Blue Denims, duly
accompanied with supporting papers; and Sight Draft, dated March 10, 1960, for
P197,804.12, to cover the full payment of 183 bales of Khaki Twill, duly
accompanied with supporting papers.
"On March 19, 1960, the NAMARCO filed in Civil Case No. 42684 its answer to
the complaint, alleging that the Contract of Sale was not validly entered into by
the NAMARCO and, therefore, it is not bound by the provisions thereof, without
setting up any counterclaim for the value of the goods which it had already
delivered but which had not yet been paid for by the FEDERATION.
"On May 19, 1960, the Philippine National Bank informed the NAMARCO that
it could not negotiate and effect payment on the sight drafts drawn under PNB
Domestic L/C Nos. 600570, 600606 and 600586, in the amounts of P277.357.91,
P135.891.82 and P197,804.12, respectively, as the requirements of the covering
letters of credit had not been complied with. The common condition of the three
letters of credit is that the sight drafts drawn on them must be duly accepted by
the FEDERATION before they will be honored by the Philippine National Bank.
But the said drafts were not presented to the FEDERATION for acceptance.
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"On June 7, I960, the NAMARCO demanded from the FEDERATION the
payment of the total amount of P611,053.35, but the latter failed and refused to -
pay the said amount, or any portion thereof, to the NAMARCO.
"In the readjustment made on the basis of actual expenditures, the total cost of the
goods was reduced from P611.053.35 to P609,014.73.
On October 15, 1960, the Court of First Instance of Manila promulgated its decision in Civil
Case No. 42684, ordering the NAMARCO to specifically perform its obligation in the
Contract of Sale, by delivering to the FEDERATION the undelivered goods.
"On November 11, 1960, the NAMARCO appealed from the decision. On March
31, 1962, the Supreme Court1 rendered a decision on NAMARCO's appeal in
Civil Case No. 42684, holding that the Contract of Sale was valid." (Record on
Appeal, pp. 63-71, Civil Case No. 46124.)
On January 25, 1961, NAMARCO instituted the present action (Civil Case No. 46124)
alleging, among others, that the FEDERATION'S act or omission in refusing to satisfy the
former's valid, just and demandable claim has compelled it to file the instant action; and
praying that the FEDERATION be ordered to pay the NAMARCO the sum of P611,053.35,
representing the cost of merchandise mentioned in the preceding paragraph, with interest
thereon at the legal rate from the date of delivery of the merchandise in question, until the
whole obligation is paid; P20,000.00 as attorney's fees, and other expenses of litigation, plus
costs.
On February 7, 1961, the FEDERATION moved to dismiss the complaint on the ground that
the cause of action alleged therein is barred forever, pursuant to Section 6 of Rule 10 of the
Rules of Court. In support thereof, the FEDERATION alleged that on March 2, 1960, the
FEDERATION and some of its members instituted Civil Case No. 42684 against
NAMARCO for specific performance to enforce compliance with the contract of sale; that
said contract, basis of Civil Case No. 42684, is also the basis of NAMARCO's present
complaint in Civil Case No. 46124; that when NAMARCO filed, on March 19, 1960, its
answer to the complaint in Civil Case No. 42684, it did not set up any counterclaim therein;
that on October 15, 1960, the Court of First Instance of Manila promulgated the decision in
said Civil Case No. 42684, ordering, among others, the NAMARCO to specifically perform
its obligation under the contract of sale by delivering to the FEDERATION the goods
subject-matter of the contract as are involved in the complaint; that the claim of NAMARCO
against the FEDERATION matured either on May 19, 1960 when the Philippine National
Bank, Manila, informed the NAMARCO that it could not effect payment on the sight drafts,
or on June 7, 1969 when NAMARCO demanded payment of the sum of P611,053.35; that
the FEDERATION refused to pay said amount; that NAMARCO's claim in the present case,
Civil Case No. 46124, against the FEDERATION alone, being a compulsory counterclaim
against the latter, in that it arose out of or is necessarily connected with the transaction or
occurrence that is the subject-matter of the action of the FEDERATION in Civil Case No.
42684 against the NAMARCO and therefore it must have been set up in said Civil Case No.
42684 in the manner prescribed by Section 4, Rule 10 of the Rules of Court, and within the
time between March 19, 1960, the date of filing, in Civil Case No. 42684, of the answer of
NAMARCO, and October 15, 1960, the date of the decision in that case; and that the failure
of NAMARCO to set up, in said Civil Case No. 42684, such a counterclaim, precludes
NAMARCO from raising it as an independent action, pursuant to Section 6 of Rule 10 of the
Rules of Court.
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On February 11, 1961, NAMARCO interposed its opposition to said motion to dismiss
contending that its claim for the recovery of the cost of merchandise delivered to the
FEDERATION on January 29 and February 20, 1960 is not necessarily connected with the
suit in Civil Case No. 42684 for specific performance and, therefore, does not fall under the
category of compulsory counterclaim; that NAMARCO's failure to set it up as a
counterclaim in its answer in Civil Case No. 42684 does not constitute res judicata; that the
deliveries of the merchandise were effected through the fault or negligence of one of its
personnel, Juan T. Arive, who was administratively charged therefor, found guilty and
accordingly dismissed; that the issue in Civil Case No. 42684, was the genuineness and due
execution of said contract as the same was entered into by the General Manager of the
NAMARCO without the knowledge, consent and approval of the Board of Directors and that
the same was not approved by the Auditor General conformably with Administrative Order
No. 290 dated February 3, 1959 of the President of the Philippines and therefore it would
have been inconsistent for NAMARCO to avail itself of the contract the validity of which it
was impugning, to enforce its claim; and that the present claim is not necessarily connected
with the transaction or occurrence that is the subject matter of Civil Case No. 42684, as the
same evidence would not support or refute both.
On February 18, 1961, the FEDERATION filed a rejoinder reiterating that the requirements
on the rule of compulsory counterclaim are present; that the first requirement — that the
counterclaim arises out of or is necessarily connected with the contract of sale subject-matter
of NAMARCO's cause of action — is evident from the face of the complaint itself.
On June 3, 1961, the lower court issued an order holding "in abeyance" action on the motion
to dismiss till after the trial on the merits.
On June 14, 1961, the FEDERATION filed its answer to the NAMARCO's complaint
admitting some material averments of the complaint, specifically denying other allegations
and consistently with its position averred as affirmative defense that NAMARCO's failure to
assert its claim against the FEDERATION before judgment in Civil Case No. 42684 on
October 15, 1960 constituted a bar to the institution of the present action. By way of
counterclaim, the FEDERATION sought P50,000.00 as attorney's fees and other expenses of
litigation, as well as P17,000.00 as damages for improper issuance of a writ of attachment
which writ, evidently had been issued earlier by the court.
On June 21, 1961, NAMARCO filed an answer to the FEDERATION'S counterclaim

specifically denying the material averments thereof and maintaining that the present action is
not barred by Civil Case No. 42684.
On January 13, 1964, after due hearing, the lower court rendered its aforementioned
decision. Hence, the present appeal.
In this appeal, the FEDERATION contends that:
"The lower court erred in failing to hold that the complaint does not state a cause
of action against the defendant-appellant;
II
"The lower court erred in holding that the plaintiff-appellee's claim is not a
compulsory counterclaim as defined and governed by Section 6, Rule 10 of the
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old Rules of Court (Section 4, Rule 9 of the new);
III
"The lower court erred in entering judgment in favor of the plaintiff-appellee and
ordering defendant-appellant to pay the former the sum of P609,014.73 with
interest thereon at the legal rate from the date of delivery of the merchandise, and
the sum of P5,000.00 for and as attorney's fees and other expenses of litigation,
with costs."
We shall first proceed because of its decisive significance, with the issue posed by appellant
in its second assignment of error * * * whether or not this action of NAMARCO for the
collection of the payment of the merchandise delivered to, but not yet paid by, the
FEDERATION, is already barred as a consequence of the failure of NAMARCO to set it up
as a counterclaim in the previous case, (Civil Case No. 42684).
In ruling that the present claim of NAMARCO is not compulsory counterclaim, that should
have been asserted in the previous case the lower court had the following to say:
"As to the meaning of the terms 'transactions' and 'occurrence' used in Section 6,
Rule 10, Rules of Court, Francisco in his annotations and commentaries on the
Rules of Court, Vol. I, p. 577, cites the following:
'The terms 'transaction' and 'occurrence' used in the section now under
consideration include the facts and circumstances out of which a claim
may arise, and whether two claims arise out of the same transaction or
occurrence depends in part on whether the same evidence would
support or refute both. (Williams v. Robinson, 3 Federal Rules
Service, 174). These terms are broader than the term 'contract', and
authorize matters to be counterclaimed which could not be
counterclaimed as arising out of the contract sued upon by the
plaintiff. This is obvious, for while a contract is a transaction, a
transaction is not necessarily a contract. One of the definitions of the
term 'transaction' is, 'a matter of affair either completed or in course of
completion,' (Story etc., Commercial Co. v. Story, 100 Cal. 35, 34 Pac.
671).
'Mr. Pomeroy defines the term as 'that combination of acts and events,
circumstances and defaults which viewed in one aspect results in the
plaintiff's right of action, and viewed in another aspect results in the
defendant's right of action. * * * As these two opposing rights cannot
be the same, it follows that there may be, and generally must be, acts,
facts, events, and defaults in the transaction as a whole which do not
enter into each cause of action.' Every transaction is more or less
complex, consisting of various facts and acts done by the respective
parties and it frequently happens that one or more of these acts, if
viewed by itself, may be such a violation of duty as to give to the
other a right of action; but the obligation thus created may be so
counter-balanced by other matters growing out of the same transaction
that no compensation ought to be made therefor. In such a case, simple
equity requires that the respective causes of action in behalf of each be
adjusted in a single suit.' (Story, etc. Commercial Co. v. Story, 100
Cal. 35, 34 Pac. 671).
4/12/24, 12:17 AM [ G.R. No. L-22578. January 31, 1973 ]
"What is the 'transaction or occurrence that is the subject-matter of the opposing

party's (FEDERATION'S) claim' in Civil Case No. 42684? It must consist in 'the
facts and circumstances out of which a claim may arise,' or it must be 'that
combination of acts and events, circumstances and defaults which viewed in one
aspect results in the plaintiff's right of action, and viewed in another aspect results
in defendant's.right of action.'
"The complaint of the FEDERATION against the NAMARCO in Civil Case No.
42684 was predicated on the refusal of the latter to perform its obligation under
the Contract of Sale. The refusal of the NAMARCO to perform its obligation
under the Contract of Sale is the act or the event, the circumstance or default,
which constitutes the transaction or the occurrence.
"The FEDERATION contends that NAMARCO's claim arose out of that

transaction or occurrence, or was necessarily connected with that transaction or
occurrence, because the cause of action of the FEDERATION in Civil Case No.
42684 and the cause of action of the NAMARCO in this case are based on the
same Contract of Sale.
"But it will be noted that one of the requisites for the application of the rule on
compulsory counterclaim is that the counterclaim should at least be connected
with or must arise out of the transaction or occurrence which gave rise to the
opposing party's claim.
"To illustrate the meaning of that requisite, the following cases are cited:
'1. In a former suit, B claimed realty under a will of her deceased

husband and L claimed the same as a forced heir, After judgment
dividing the property and requiring B to turn over a part of the same to
L, this suit was brought by B to recover the value of the improvements
made on the property during the time she had possession of the same.
Defendant pleaded res adjudicata alleging that B should have made a
counterclaim in the first action. Held: That the former suit was a
petition for the inheritance and the present one being a claim for
improvements is in no wise connected with the principal object of the
former litigation and that a counterclaim could not properly have been
presented in the first action (Bautista v. Jimenez, 24 Phil. 111).'
'2. Mariano executed an instrument purporting to be a deed of

conveyance of two parcels of land in favor of Maclan. About a year
later, Mariano instituted an action (Civil Case No. 106) against
Maclan for the annulment of the said instrument on the ground of
fraud and the recovery of the property. Judgment was rendered in
favor of Mariano. About two years later, Maclan filed a complaint
against Garcia who acquired the property by inheritance from
Mariano, for the purpose of recovering the sum of P5,200.00 as
necessary expenses allegedly incurred in the preservation of said
property prior to the commencement of case No. 106, Held: It is clear
that the claim for repairs or necessary expenses allegedly made by
Maclan in the property in dispute in Case No. 106, is necessarily
connected with the action of the plaintiff therein to recover said
property from Maclan. Said connection is substantially identical with
that which exists between an action for recovery of a land and the
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claim for improvements therein made by the defendant in said case. It

is well settled that such claim for improvements is barred unless set up
by recovery of the land (Bautista v. Jimenez, 24 Phil. Ill; Berses v.
Villanueva, 25 Phil. 473; Lopez v. Gloria, 40 Phil. 76; Beltran v.
Valbuena, 53 Phil. 697; Calit v, Giness and Hernandez, 62 Phil. 451).'
"The right of the NAMARCO to the cost of the goods existed upon delivery of
the said goods to the FEDERATION which, under the Contract of Sale, had to
pay for them. Therefore, the claim of the NAMARCO for the cost of the goods
delivered arose out of the failure of the FEDERATION to pay for the said goods,
and not out of the refusal of the NAMARCO to deliver the other goods to the
FEDERATION. The action of the FEDERATION in Civil Case No. 42684, based
on the refusal of the NAMARCO to deliver the other goods, had nothing to do
with the latter's claim for the cost of the goods delivered and, hence, such claim
was not necessarily connected therewith. * * *
"The claim of the NAMARCO in this case could have been a permissive
counterclaim, but is not a compulsory counterclaim, in Civil Case No. 42684.
"While the Contract of Sale created reciprocal obligations between the

FEDERATION and the NAMARCO, the refusal of the latter to deliver the other
goods was not due to the failure of the FEDERATION to pay for the goods
delivered, but rather to the fact that it believed, as alleged in its answer in Civil
Case No. 42684, that the Contract of Sale was not validiy entered into by it. Such
being the case, the failure of the FEDERATION to pay for the goods delivered
could not have been properly raised by the NAMARCO as a defense or pleaded
as a compulsory counterclaim in Civil Case No. 42684. However, had the
NAMARCO alleged its present claim in Civil Case No. 42684, the Court would
have permitted it. A permissive counterclaim is one which does not arise out of,
or is not necessarily connected with, the transaction or occurrence that is the
subject-matter of the opposing party's claim.
"Since the cause of action of the FEDERATION in Civil Case No. 42684 is such
that the claim of the NAMARCO in this case could not properly be pleaded as a
compulsory counterclaim in that case, the NAMARCO is not precluded from
bringing this present action. Section 6, Rule 10, Rules of Court, is not
applicable."[2] (Italics supplied.)
This ruling of the court a quo is now assigned as error by the FEDERATION for it is its
position that the previous action which it filed against NAMARCO, for specific performance
to compel NAMARCO to deliver the goods, was predicated upon the contract of sale
of/November 16, 1959 executed by the FEDERATION and NAMARCO who are the same
parties, both in the previous case as well as in the present case, (Civil Case No. 46124) and
therefore this action must be considered as having arisen out of or is necessarily connected
with the transaction or occurrence that was the subject matter of the previous case. It is the
theory of the FEDERATION that the applicable guiding principle is "that there be a logical
relationship between" plaintiffs claim and defendant's counterclaim. It insists that "logical
relationship" exists between the previous action for specific performance (Civil Case No.
42684) and NAMARCO's present action for the payment of the goods delivered as (a) both
actions are derived from the same contract of sale; and (b) the two actions are but the
consequences of the reciprocal obligation imposed by law[3] upon the parties by virtue of the
aforesaid contract. The alleged failure of the FEDERATION to pay for goods delivered
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should therefore have been raised by NAMARCO as a defense or counterclaim in the

previous case notwithstanding the fact that said claim only accrued after NAMARCO's
answer was filed in said Civil Case No. 42684 because NAMARCO could have set it up as a
counterclaim in a supplemental pleading pursuant to Section 4 of Rule 10 of the old Rules of
Court.[4]
On the other hand, NAMARCO insists that the same evidence or substantial identity in the
evidence criterion should be applied in determining whether or not its claim is compulsory, *
* * and on the basis of such test its claim could not be considered compulsory, because: (a)
the evidence presented to support the genuineness and due execution of the contract of sale
as ground for specific performance in Civil Case No. 42684, is not the same as the evidence
presented to support NAMARCO's claim for recovery of the cost of the merchandise
received by the FEDERATION, subject of the instant appeal; (b) for NAMARCO in Civil
Case No. 42684 to interpose its claim for the payment of the goods delivered pursuant to the
contract of sale, and thus seek in effect the enforcement of said contract, would have been
inconsistent with its defense that the same contract was a nullity, and (c) in any event, such
claim could neither have been asserted as a counterclaim by NAMARCO in its answer, filed
on March 19, 1960, to the complaint in Civil Case No. 42684, for it had no cause of action as
yet against the FEDERATION as, under the rule, a claim to be available as a counterclaim to
an action must be due and owing at the time of the commencement of the action, nor could
NAMARCO file it as a counterclaim based on a contingent demand for the same cannot be
allowed.
1. The rule on compulsory counterclaim contained in Section 6 of Rule 10 of the old

Rules of Court,[5] is taken from Section 97 of Act No. 190.[6] This rule is substantially
the same as Rule 13(a) of the Federal Rules of Civil Procedure.[7] This rule is
"mandatory" because the failure of the corresponding party to set it up will bar his right
to interpose it in a subsequent litigation.[8] Under this Rule, a counterclaim not set up
shall be barred if the following circumstances are present: (1) that it arises out of, or is
necessarily connected with, the transaction or occurrence that is the subject matter of
the opposing party's claim; (2) that it does not require for its adjudication the presence
of third parties of whom the court cannot acquire jurisdiction; and (3) that the court has
jurisdiction to entertain the claim.[9] Conversely, a counterclaim is merely permissive
and hence is not barred if not set up, where it has no logical relation with the
transaction or occurrence that is the subject matter of the opposing parry's claim, or
even where there is such connection, the court has no jurisdiction to entertain the claim
or it requires for its adjudication the presence of third persons of whom the court
cannot acquire jurisdiction.[10]
The first requisite that the claim should arise out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the opposing party's claim, may give
rise to the critical question: What constitutes a "transaction" or "occurrence"? On this point
the lower court has conveniently embodied in its decision, quoted elsewhere herein, the
meaning of the terms "transaction" or "occurrence," as defined in Williams v. Robinson,[11]
and in Pomeroy's Treatise on Remedies and Remedial Rights.[12] The formulation in
Williams v. Robinson shows the futility of attempting to reduce the term "transaction" or
"occurrence" within the context of an all-embracing definition. Such formulation does not
adequately answer eveiy question whether a particular claim is compulsory in character. As a
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matter of fact most courts, rather than attempting to define the key terms of the rule on
compulsory counterclaim,[13] have preferred to suggest certain criteria or tests by which the
compulsory or permissive nature of specific counterclaims can be determined. Wright &
Miller in their Federal Practice and Procedure[14] summarize them as follows:
1. Are the issues of fact and law raised by the claim and counterclaim largely the same?
2. Would res judicata bar a subsequent suit on defendant's claim absent the compulsory
counterclaim rule?
3. Will substantially the same evidence support or refute plaintiffs claim as well as
defendant's counterclaim?
4. Is there any logical relation between the claim and the counterclaim?
An affirmative answer to each of the foregoing questions suggests that the counterclaim is
compulsory. These tests or standards have been the object of extensive analysis and
criticisms, as follows:
The first test * * * identity of issues[15] had been considered of doubtful utility for it assumes
that, in order to protect himself from inadvertently losing the right to present his claim in a
later action, defendant will be both motivated and able to determine before answering
whether his claim must be asserted as a compulsory counterclaim. * * * Yet, no one can be
certain what the issues are until after the pleadings are closed and discovery is underway, and
in many instances the issues are not really formulated until the pre-trial conference.
The second test * * * that the counterclaim is compulsory if it would be barred by res
judicata,[16] has been judicially recognized by some courts as "the acid test" for
distinguishing compulsory from permissive counterclaims. As aptly stated by Judge Frank in
a dissenting opinion:
" * * * Everyone agrees, too, that, if a counterclaim is not 'compulsory,' it is

'permissive' and that the following is the acid test in distinguishing the two: If a
defendant fails to set up a 'compulsory' counterclaim, he cannot in a later suit
assert it against the plaintiff, since it is barred by res judicata; but if it is
'permissive,' then Jt is not thus barred. To put it differently, if a counterclaim is
the kind not thus barred, it is 'permissive'- We have recently employed that test;
see Claim v. Kastar, 2 Cir, 138 F. 2d 828, 830; See also Moore, Federal Practice,
682; Clark, Code Pleading, 447; Big Cola Corp. v. World Bottling Co., 6 Cir., 134
F.2d 718."[17]
This criterion has however been found inadequate as an overall standard.
The third test * * * same evidence or substantial identity in the evidence relating to the claim
and counterclaim[18] has been considered satisfactory if used with caution. A test based on
similarity of evidence appears reasonable considering that the very purpose of making certain
types of counterclaim compulsory is to prevent the relitigation of the same set of facts.
However, it has been shown that some counterclaims may be compulsory even if they do not
meet this test. For instance in an action to void an insurance policy on the ground of fraud, in
which there is a counterclaim for the amount of the loss covered by the policy, the evidence
of fraud is apt to be entirely different from the evidence as to the loss suffered by the insured
(Mercury Ins. Co. v. Verea Ruegg, D.C.N.Y. 1949, 12 F. R. Serv. 13a. 11 case 2) or an action
https://elibrary.judiciary.gov.ph/assets/dtSearch/dtSearch_system_files/dtisapi6.dll?cmd=getdoc&DocId=26165&Index=%2a4aeb4dbdcceeda9… 10/25
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for earned freight with counterclaims for damages to cargo, demurrage, and expenses due to
the unseaworthiness of the vessel (Eastern Transp. Co. v. U.S., C.A. 2d 1947, 159 F.2d. 349).
The fourth test * * * the logical relationship between the claim and counterclaim has been
called "the one compelling test of compulsoriness."[19] It was enunciated in the leading case
of Moore v. New York Cotton Exchange.[20] Under this test, any claim a party has against an
opposing party that is logically related to the claim being asserted by the opposing party and
that is not within the exceptions to the rule, is a compulsory counterclaim. Its outstanding
quality is its flexibility. On the other hand this flexibility necessarily entails some uncertainty
in its application because pf its looseness and potentially overbroad scope. This difficulty
notwithstanding, of the four judicially formulated criteria it has by far attained the widest
acceptance among the courts.
An examination of the cases on compulsory counterclaims may help clarify and illuminate
the judicial application of the 'logical relation test." In the leading case of Moore v. New York
Cotton Exchange (1926, 46 S.Ct 367, 371, 270 U.S. 593, 70 L. Ed. 750, 45 A.L.R. 1370) the
logical relation or connection between the defendant's counterclaim and the plaintiffs claim
has been explained thus:
"The bill sets forth the contract with the Western Union and the refusal of the
New York Exchange to allow appellant to receive the continuous cotton
quotations, and asks a mandatory injunction to compel appellees to furnish them.
The answer admits the refusal and justifies it. The counterclaim sets up that,
nevertheless, appellant is purloining or otherwise illegally obtaining them, and
asks that this practice be enjoined. Transaction' is a word of flexible meaning. It
may comprehend a series of many occurrences, depending not so much upon the
immediateness of their connection as upon their logical relationship. The refusal
to furnish the quotations is one of the links in the chain which constitutes the
transaction upon which appellant here bases its cause of action. It is an important
part of the transaction constituting the subject-matter of the counterclaim. It is the
one circumstance without which neither party would have found it necessary to
seek relief. Essential facts alleged by appellant enter into and constitute in part the
cause of action set forth in the counterclaim. That they are not precisely identical,
or that the counterclaim embraces additional allegations, as, for example, that
appellant is unlawfully getting the quotations, does not matter. To hold otherwise
would be to rob this branch of the rule of all serviceable meaning, since the facts
relied upon by the plaintiff rarely, if ever, are, in all particulars, the same as those
constituting the defendant's counterclaim. Compare Xenia Branch Bank v. Lee, 7
Abb. Pr. 372, 390-394. And see generally, Cleveland Engineering Co. v. Galion
Dynamic Motor Truck Co. supra, p. 408 [243 Fed.]; Champion Spark Plug Co. v.
Champion Ignition Co. (D.C.) 247 Fed. 200, 203-205.
"So close is the connection between the case sought to be stated in the bill and
that set up in the counterclaim, that it only needs the failure of the former to
establish a foundation for the latter; but the relief afforded by the dismissal of the
bill is not complete without an injunction restraining appellant from continuing to
obtain by stealthy appropriation what the court had said it could not have by
judicial compulsion."[21]
It must be observed that in Moore, the important link which established that "logical
relation" between plaintiff Moore's claim and defendant New York Cotton Exchange's
counterclaim, is the refusal of the latter to furnish to the former cotton price quotations
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because of its belief that Moore was purloining or otherwise illegally obtaining its cotton
price quotations and distributing them to bucket-shops. As the Court pointed out "It is an
important part of the transaction constituting the subject matter of the counterclaim. It is the
one circumstance without which neither party could have found it necessary to seek relief. *
* * So close is the connection between the case sought to be stated in the bill and that set up
in the counterclaim, that it only needs the failure of the former to establish a foundation for
the latter; but the relief afforded by the dismissal of the bill is not complete without an
injunction restraining appellant from continuing to obtain by stealthy appropriation what the
court held it could not have by judicial compulsion."
A review of decided cases in this jurisdiction on compulsory counterclaims likewise

demonstrates the nexus between plaintiffs claim and defendant's counterclaim showing the
"logical relation" between the two. Thus in actions for ejectment,[22] or for the recovery of
possession of real property,[23] it is well settled that the defendant's claims for value of the
improvements on the property or necessary expenses for its preservation are required to be
interposed in the same action as compulsory counterclaims. In such cases it is the refusal of
the defendant to vacate or surrender possession of the premises that serves as the vital link in
the chain of facts and events, that constitutes the transaction upon which the plaintiff bases
his cause of action. It is likewise an "important part of the transaction constituting the subject
matter of the counterclaim" of defendant for the value of the improvements or the necessary
expenses incurred for the preservation of the property. For they are off-shoots of the same
basic controversy between the parties which is the right of either to the possession of the
property.
While the refusal of NAMARCO to deliver the remainder of the goods contracted for in its
"trade assistance agreement" with FEDERATION, is the important link in the chain of facts
and events that constituted the transaction upon which FEDERATION'S cause of action was
based in Civil Case No. 42684, it is not even a part of the transaction constituting the subject
matter of NAMARCO's present suit. For the action of FEDERATION on March 2, 1960, to
compel NAMARCO to recognize the validity of their agreement and deliver the remainder of
the goods to be paid "on cash basis" in no way involved the payment of the merchandise
worth P609,014.73, already delivered and presumptively paid for in cash by means of the
domestic letters of credit. When the domestic letters of credit were subsequently dishonored
by the Philippine National Bank on May 19, 1960 compelling NAMARCO to send on June
7,1960 a letter of demand for payment to FEDERATION which the latter received on July 5,
1960, but which it apparently ignored and because of such inaction NAMARCO therefore
sued FEDERATION for payment on January 25, 1961, such non-payment by FEDERATION
was a matter which was distinct and separate from and had no logical relationship with the
subject matter of FEDERATION'S own suit. These two claims are separate and distinct, as
they involve totally different factual and legal issues and do not represent the same "basic
controversy."
"A counterclaim has been held to be compulsory if there is a logical relationship

between it and the main claim. Thus, in Great Lakes Rubber Corporation v.
Herbert Cooper Co., 286 F.2d 631 (1961), Judge Biggs speaking for the Third
Circuit Court said this:
'We have indicated that a counterclaim is compulsory if it bears a

'logical relationship' to an opposing party's claim. Zion v. Sentry
Safety Control Corp., 3 Cir., 1958, 258 F.2d 31. See also United
Artists Corp. v. Masterpiece Productions, Inc. 2 Cir., 1955, 221 F.2d
213, 216. The phrase 'logical relationship' is given meaning by the
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purpose of the rule which it was designed to implement. Thus, a

counterclaim is logically related to the opposing party's claim where
separate trials of each of their respective claims would involve a
substantial duplication of effort and time by the parties and the courts.
Where multiple claims involve many of the same factual issues, or the
same factual and legal issues, or where they are offshoots of the same
basic controversy between the parties, fairness and considerations of
convenience and of economy require that the counterclaimant be
permitted to maintain his cause of action. * * *"[24]
II
But even assuming for the nonce that NAMARCO's present claim is logically related to the
claim of the FEDERATION in the previous case, NAMARCO's claim having accrued or
matured after the service of its answer in the earlier case is in the nature of an after-acquired
counterclaim which under the rules is not barred even if it is not set up in the previous case
as a counterclaim. An after-acquired counterclaim, is one of the recognized exceptions to the
general rule that a counterclaim is compulsory and must be asserted if it arises out of the
same transaction as the opposing party's claim.
"Although the claim arises out of the transaction or occurrence three exceptions
are made to the compulsory requirement that it be pleaded. They are:
(1) Time of Filing. The claim which is the basis of the counterclaim must be in existence at
the time the 'counterclaimant' files his pleading. Thus if P sues A and A does not have a claim
arising out of the transaction or occurrence of P's suit at the time A files his answer A is not
obliged to plead such a claim, although one arises subsequent to the filing of his answer."[25]
Wright & Miller, Federal Practice and Procedure,[26] explain this exception to the
compulsory counterclaim requirement thus:
"The first exception is that the party need not assert a counterclaim that has not
matured at the time he serves his pleading. This is derived from the language in
the rule limiting its application to claims the leader has 'at the time of serving the
pleading.' A counterclaim acquired by defendant after he has answered will not be
considered compulsory, even if it arises out of the same transaction as does
plaintiffs claim. Similarly, a counterclaim acquired by plaintiff after he has
replied to a counterclaim by defendant is not compulsory under Rule 13(a).
However, if a party should acquire a matured counterclaim after he has pleaded,
Rule 13(e) provides that fee may obtain the court's permission to include it in a
supplemental pleading under Rule 15(d)."[27]
"A counterclaim may be asserted under Rule 13(e) only by leave of court, which
usually will be granted in order to enable the parties to litigate all the claims that
they have against each other at one time thereby avoiding multiple actions.
However, Rule 13(e) is permissive in character. An after-acquired counterclaim,
even if it arises out of the transaction or occurrence that is the subject matter of
the opposing party's claim, need not be pleaded supplementally; the after-
acquired claim is not considered a compulsory counterclaim under Rule 13(a) and
a failure to interpose it will not bar its assertion in a later suit."
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"The decision to grant or deny a motion to serve a supplemental counterclaim is

totally within the trial court's discretion."[28]
The provisions of Rule 13 of the Federal Rules of Civil Procedure, adverted to in the
preceding commentaries and decisions of the federal courts, have been engrafted into our
procedural rules. Thus Section 3 of Rule 1029 of the former Rules of Court was taken from
Rule 13(a) and (g) of the Federal Rules of Civil Procedure, while Sections 4 and 6 of same
Rule 10,[30] were taken, respectively, from Rule 13(e) and (a) of the said Federal Rules.[31]
It is a rational rule of statutory construction that a statute adopted from another state or
country will be presumed to have been adopted with the construction placed upon it by the
courts of that state or country before its adoption. Such construction is regarded as of great
weight, or at least persuasive and will generally be followed if sound and reasonable, and in
harmony with justice and public policy, and with other laws of the adopting jurisdiction on
the subject.[32] And while the construction of a statute by courts of the original state after its
adoption by another, may have no controlling effect on the adopting state, it may be strongly
persuasive and will be followed when it is considered to give true force and effect to the
statute.[33]
We find no cogent reason why such uniform and settled construction of Rule 13 of the
Federal Rules should not be applied in the interpretation of the aforesaid Sections of Rule 10
of the old Rules of Court. Thus while Section 6 of Rule 10 of the old Rules defines a
compulsory counterclaim as a claim that "arises out of or is necessarily connected with, the
transaction or occurrence that is the subject-matter of the opposing party's claim," Section 3
of the same rule, requires that such counterclaim must be in existence "at the time" the
counterclaimant files his answer.
The counterclaim must be existing at the time of filing the answer, though not at the
commencement of the action for under Section 3 of the former Rule 10, the counterclaim or
cross-claim which a party may aver in Ms answer must be one which he may have "at the
time " against the opposing party. That phrase can only have reference to the time of the
answer.[34] Certainly a premature counterclaim cannot be set up in the answer. Tftis
construction is not only explicit from the language of the aforecited provisions but also
serves to harmonize the aforecited Sections of Rule 10, with Section 4 of the same rule
which provides that "a counterclaim * * * which either matured or was acquired by a party
after serving his pleading may, with the permission of the court, be presented as a
counterclaim * * * by supplemental pleading before judgment"
Thus a party who fails to interpose a counterclaim although arising out of or is necessarily
connected with, the transaction or occurrence of the plaintiffs suit but which did not exist or
mature at the time said party files his answer is not thereby barred from interposing such
claim in a future litigation. However such claim may with the court's permission be- included
in the same case by way of supplemental pleading before judgment under Section 4 of the
former Rule 10 of the Rules (now Sec. 9 of Rule 6). And the same may be allowed unless the
case has progressed so far that it may be inconvenient or confusing to allow the additional
claim to be pleaded.[35]
We therefore rule that NAMARCO's present action, is not barred by its failure to assert it as a
counterclaim in the previous case.
III
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The FEDERATION also contends that it has incurred no liability, as NAMARCO has neither
alleged nor proved that it has complied with the conditions contained in the three domestic
letters of credit, that the sight drafts drawn upon them be presented to FEDERATION for
acceptance before they can be honored by the Bank. It is the theory of the FEDERATION in
its brief that the failure of NAMARCO to present the sight drafts to the former for
acceptance, pursuant to the requirements of the letters of credit deprives NAMARCO of a
cause of action against FEDERATION. It must be noted however that such purported
discharge from its obligation to NAMARCO due to the failure of the latter to comply with
the requirements of the domestic letters of credit, was never invoked by FEDERATION as a
basis for its "Motion to Dismiss" of February 7, 1961[36] or as an affirmative defense in its
"answer" to the complaint on June 14, 1961 in Civil Case No. 46124.[37] There is no showing
that this question was raised as an issue during the trial. As a matter of fact such matter was
neither discussed nor mentioned in the appealed judgment since the entire theory of the
FEDERATION in its defense is that the claim of NAMARCO being a "compulsory
counterclaim," is now barred, NAMARCO having failed to set it up on a counterclaim in the
previous case. Well settled is the rule that questions which were not raised in the lower court
cannot be raised for the first time on appeal.[38] Defendant-appellant therefore is now
precluded from raising that question.
In any event NAMARCO's action is not based on the domestic letters of credit, but on its
legal right to the cost of the goods delivered to the FEDERATION, the correlative obligation
of the latter to pay for the same, and its default or refusal to make such payments.
Furthermore the mere delivery by the FEDERATION of the domestic letters of credit to
NAMARCO did not operate to discharge the debt of the FEDERATION. As shown by the
appealed judgment NAMARCO accepted the three letters of credit "to insure the payment of
those goods by the FEDERATION * * *." It was given therefore as a mere guarantee for the
payment of the merchandise. The delivery of promissory notes payable to order, or bills of
exchange or drafts or other mercantile document shall produce the effect of payment only
when realized, or when by the fault of the creditor, the privileges inherent in their negotiable
character have been impaired. (Art. 1249, New Civil Code.) The clause of Article 1249
relative to the impairment of the negotiable character of the commercial paper by the fault of
the creditor, is applicable only to instruments executed by third persons and delivered by the
debtor to the creditor, and does not apply to instruments executed by the debtor himself and
delivered to the creditor.[39] hi the case at bar it is not even pretended that the negotiable
character of the sight drafts was impaired as a result of the fault of NAMARCO. The fact that
NAMARCO attempted to collect from the Philippine National Bank on the sight drafts on
March 10, I960, is of no material significance. As heretofore stated they were never taken, in
the first instance as payment. There was no agreement that they should be accepted as
payment. The mere fact that NAMARCO proceeded in good faith to try to collect payments
thereon, did not amount to an appropriation by it of the amounts mentioned in the sight drafts
so as to release its claims against the FEDERATION. A mere attempt to collect or enforce a
bill or note from which no payment results is not such an appropriation of it as to discharge
the debt.[40]
We note however that the lower court erred in imposing interest at the legal rate on the
amount due, from date of delivery of the merchandise," and not from the date of the extra-
judicial demand. In the absence of any stipulations on the matter, the rule is that the obligor
is considered in default only from the time the obligee judicially or extra-judicially demands
fulfillment of the obligation and interest is recoverable only from the time such demand is
made.[41] There being no stipulation as to when the aforesaid payments were to be made,"
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the FEDERATION is therefore liable to pay interest at the legal rate only from June 7, 1960,
the date when NAMARCO made the extra-judicial demand upon said party. We likewise fail
to find any factual or legal basis for the award of attorney's fees.
ACCORDINGLY, with the modifications above indicated, the appealed judgment is hereby
affirmed, with costs against defendant-appellant.
Fernando, J., concur.
Makalintal, Zaldivar,Esguerra, and Ruiz Castro, JJ., concur in the result.
Teehankee, J., files a separate concurring opinion.
Barredo, J., dissents in a separate opinion.
Makasiar, J., concurs solely on the basis of reason no. II.
Concepcion, C.J., did not take part.
[1] In case G.R. No. L-17819, Federation of United Namarco Distributors, Inc., et al.,
Plaintiffs-Appellees, vs. National Marketing Corporation, Defendant-Appellant.
[2] See Decision, Record on appeal, pp. 72-79.
[3] Articles 1191, 1524, 1528, 1583, 1597 & 1598, Civil Code of the Philippines.
[4] Now Section 9 of Rule 6 of the new Rules of Court.
[5] Now Section 4 of Rule 9 of the new Rules of Court, with modification.
[6] SEC. 97. Effect of ommission to Set up Counterclaim.— If the right out of which the
counterclaim arises exists at the time of the commencement of the action and arises out of the
transaction set forth in the complaint as the foundation of the plaintiffs claim, or is
necessarily connected with the subject of the action, neither the defendant nor his assignee
can afterwards maintain an action against the plaintiff therefor, if the defendant omits to set
up a counterclaim for the same. But if the counterclaim arises out of transaction distinct from
those set forth in the complaint as the foundation of the plaintiffs claim and not connected
with the subject of the action, the defendant shall not be barred from any subsequent action
upon such counterclaim by reason of his failure to set it up in his answer to the pending
action. (Code of Civil Procedure of the P.I., which took effect on Oct 1, 1901; italics
supplied.)
[7] RULE 13(a) Compulsory Counterclaims.— A pleading shall state as a counterclaim any
claim which at the time of serving the pleading the pleader has against any opposing party,
if it arises out of the transaction or occurence that is the subject matter of the opposing party's
claim and does not require for its adjudication the presence of third parties of whom the
courts cannot acquire jurisdiction. But the pleader need not state the claim if (1) at the time
the action was commenced the claim was the subject of another pending action, or (2) the
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opposing parly brought suit upon his claim by attachment or other process by which the court
did not acquire jurisdiction to render a personal judgment on that claim, and the pleader is
not stating any counterclaim under this Rule 13. (Federal Rules of Civil Procedure, which
took effect in 1938; italics supplied.)
[8]De Jesus v. I M. Tuason & Co., 18 SCRA 403; Papa v. Banaag, 17 SCRA 1083; Tornado v.
Bilbars 17 SCRA 251; Pennsylvania R. Co. v. Musante- Philipps, Inc., 42 F. Supp. 340.
[9]
See Sec. 3 of Rule 10 of the old Rules, now Sec. 8 of Rule 6 of the new Rules of Court Cf.
Yu Lay v. Galmes, 40 Phil. 651.
[10] Sec. 8 Rule 6, New Rules of Court; Rule 13(b) Federal Rules of Civil Procedure.
[11] 3 Federal Rules Service, 174.
[12] Cited in Story 8c Isham Commercial Co. v. Story, 100 Cal. 35, 34 Pac. 671.
[13]Sec. 3 of Rule 10 of old Rules, now Sec. 8 of Rule 6 of the new Rules of Court; Rule
13(a) Fed. Rules of Civil Procedure.
[14]6 Fed. Practice & Proc, Civil Sec. 1410, p. 42, 1971 Ed. Same issues of fact and law test
applied in: Connecticut Indem. Co. v. Lee, CA. 1st, 1948, 168 F. 2d 420.
[15]Same issues of fact and law test applied in: Connecticut Indem. Co. v. Lee, CA. 1st,
1948, 168 F.2d420. Nachtman v. Crucible Steel Co., CA. 3d, 1948, 165 F.2d 997. Nye
Rubber Co. v. V.R.P. Rubber Co., D.C. Ohio 1948, 81 F. Supp. 635.
Keyes Fibre Co. v. Chaplin Corp., D.C. Me. 1947, 76 F. Supp. 981. International Union,
United Automobile, Aircraft & Agricultural Implement Workers of America v. Piasecki
Aircraft Corp., D.C. Del. 1965, 241 F. Supp. 385.
[16] Res judicata as test applied in:
Libbey-owens-Ford Glass Co. v. Sylvania Indus. Corp., CA 2d, 1946, 154 F.2d 814, 818,
certiorari denied 66 S.Ct 1353, 328 U.S. 859, 90 L.Ed. 1630; Big Cola Corp. v. World
Bottling Co., CA. 6th, 1943, 134 F.2d 718; Weber v. Weber, D.C. Pa. 1968, 44 F.R.D. 227;
Non Ferrous Metals, Inc. v. Saramar Aluminum Co., D.C. Onio I960, 25 F.R.D. 102;
American Samec Corp. v. Florian, D.C. Conn. 1949, 9 F.R.D. 718.
[17] Libbey-Owens-Ford Glass Co. v. Sylvania Indus. Corp., supra.
[18]Same evidence or substantial identity as test applied in: Non-Ferrous Metals, Inc. v.
Saramar Aluminum Co., D.C. Ohio I960, 25 F.R.D. 102. In the Matter of Farrell Publishing
Corp., D.C.N.Y. 1955, 130 F. Supp. 449.
Kuster Labs., Inc. v. Lee, D.C. Cal. 1950, 10 F.R.D. 350. American Samec Corp. v. Florian,
D.C. Conn. 1949, 9 F.R. D. 718. Keyes Fibre co. v. Chaplin, D.C.Me. 1947, 76 F.Supp. 981.
Williams v. Robinson, D.C.D.C. 1940, 1 F.R.D. 211.
[19] Rosenthal v. Fowler, D.C.N.Y. 1952, 12 F.R.D. 388, 391.

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[20]Logical relation as test applied in: Moore v. New York Cotton Exhange, 1926, 46 S.Ct.
367, 371, 270 U.S. 593 70 L.Ed. 750, 45 AX.R. 1370.
U.S. for Use &, Benefit of D'Agostino Excavators, Inc. v. Heyward-Robinson Co., CA.2d,
1970,430 F.2d. 1077. Revere Copper 8c Brass Inc. v. Aetna Cas. & Sur. Co., C.A. 5th, 1970,
426 F.2& 709.
Koufakis v. Carvel, C.A. 2d, 1970, 425 F.2d 892.
Diamond v. Terminal Ry. Alabama State Docks, C A. 5th 1970, 421 F.2d. 228, certiorari
denied 90 S.Ct 1531, 397 U.S. 1079, 25 L.Ed. 2 815.
Kissel Co. v. Farley, C.A. 7th, 1969, 417 F.2d. 1180. National Equip. Rental, Ltd. v. Fowler,
C.A. 2d. 1961. 267 F.2d 43. Great Lakes Rubber Corp. v. Herbert Cooper Co., C A. 3d, 1961,
286 F.2d. 631, 634.
[21] 70 L. ed. pp. 756-757.
See also United States v. Heyward-Robinson Co. (430 F. 2d. 1077 [1970] where the court
ruled in an action by D'Agostino against Heyward to recover payments alleged to be due on a
Navy construction job, that Heyward's counterclaim for alleged overpayments and extra
costs of completing both the Navy construction contract and the construction of a plant for
Stelma Inc., was compulsory. The court explaining the close and logical relationship between
the two claims thus:
"There was such a close and logical relationship between the claims on the Navy and Stehna
jobs that the Stelma counterclaims arose out of the same 'transaction or occurrence' as those
terms are now broadly defined. Both subcontracts were entered into by the same parties for
the same type of work and carried on during substantially the same period. Heyward had the
right to terminate both subcontracts in the event of a'breach by D'Agostino of either.
Heyward also had the right to withhold monies due on one to apply against any damages
suffered on the other. Progress payments made by Heyward were not allocated as between
jobs and were made on a lump sum basis for both as though for a single account.
"A single insurance policy covered both jobs. The letters of Heyward to D'Agostino of
October 8 and 19,1965 threatening termination and terminating both jobs, allegedly because
of the cancellation by D'Agostino of this point insurance coverage and failure to properly
man bom projects, treated both jobs together. These letters formed the basis of one of
Heyward's major claims at the trial.
"The controversy between the parties which gave rise to this litigation was with respect to
both jobs and arose from occurrence affecting both. Indeed, it would seem to have been
impossible for Heyward to have fully litigated the claims against it on the Navy job without
including the Stelma job, because the payments it made to D'Agostino could not be allocated
between the two jobs.
"As the appellants themselves point out in their brief, the 'Stelma and Navy claims were so
interwoven at the trial that they are now absolutely incapable of separation.' The proof as to
payments and alleged defaults in payments was made without any differentiation between the
two claims and neither of the parties was able to offer any evidence of apportionment Finally,
the evidence as to the breaches of contract claimed by the respective parties related in the
main to both contracts rather than to one or the other."
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[22]
Berses v. Villanueva, 25 Phil. 473; Beltran v. Valbuena, 53 Phil. 697; Ozoa v. Vda. de
Montaur, L-8621, Aug. 26, 1956, 99 Phil. 1061; Carpena v. Manalo, 1 SCRA 1060.
[23]Berses v. Villanueva, supra; Yap Unli v. Chua Jamco, 14 Phil. 602; Camara v Aguilar, 94
Phil. 527; Castro v. Montes, 107 Phil. 533; See also; Motos v. Soler, 2 SCRA 293, 295.
[24]
International Union, U.A., A. & A.I. WXRS v. PIASECK 1 Air Corp. 241 Fed. Supp. pp.
388-389.
[25] I Moore's Federal Practice, 1938, pp. 384-385.
[26] 6 Wright & Miller, Federal Practice and Procedure, Civil Section 1411, pp. 54-55, citing:
Stahl v. Ohio River Co., C.A. 3d 1970, 424 F. 2d 52.
Esquire, Inc. v. Varga Enterprises, Inc., C.A. 7th, 1950, 185 F. 2d 14.
Denys Fisher (Spirograph) Ltd. v. Louis Marx & Co., D.C.W. Va. 1969,. 306 F. Supp. 956.
Goldlawr, Inc. v. Shubert, D.C. Pa. 1967, 268 F. Supp. 965.
Marcus v. Marcoux, D.C.R.I. 1967, 41 F.R.D. 332.
Local Union 499 oflnt'I Bhd. of Elec. Workers, AFL-CIO v. Iowa Power & Light Co., D.C.
Iowa 1964, 224 F. Supp. 731, 738.
Slavics v. Wood, D.C. Pa. 1964, 36 F.R.D. 47.
Allstate Ins. Co v. Valdez, D.C. Mich. 1962, 29 F.R.D. 479.
Miner v. Commerce Oil Ref. Corp., D.C.R.I. 1961, 198 F. Supp. 887, vacated on other
grounds C.A. 1st, 1962, 303 F. 2d 125.
Hartford Ace. & Indem. Co. v. Levitt & Sons, Inc., D.C.Pa. 1959, 24 F.R.D.230.
Cyclotherm Corp. v. Miller, D.C.Pa. 1950, 11 F.R.D. 88.
Goodyear Tire & Rubber Co. v. Marbon Corp., D.C. Del. 1940. 32 F. Supp. 279, 280.
Cold Metal Process Co. v. United Engineering & Foundry Co., C.A. 3d, 1951, 190 F. 2d 217.
Magna Pictures Corp. v. Paramount Pictures Corp., D.C. Cal. 1967, 265 F. Supp. 144.
RFC v. First Nat. Bank of Cody, D.C. Wyo. 1955, 17 F.R.D. 397.
[27] Ibid., Civil Section 1411, p.55.
[28] Ibid., Civil Section 1428, pp. 148-149.
[29] Now Section 8 of Rule 6, Revised Rules of Court.
[30] Now Section 9 of Rule 6, and Section 4 of Rule 9, respectively of the Revised Rules.
4/12/24, 12:17 AM [ G.R. No. L-22578. January 31, 1973 ]
[31] Rule 13. Counterclaim and Cross-Claim.
(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim, not the
subject of a pending action, which at the time of filing the pleading the pleader has against
any opposing party, if it arises out of the transaction or occurrence that is the subject matter
of the opposing party's claim and does not require for its adjudication the presence of third
parties of whom the court cannot acquire jurisdiction.
xxx xxx xxx
(e) Counterclaim Maturing or Acquired After Pleading. A claim which either matured or was
acquired by the pleader after serving his pleading may, with the permission of the court, be
presented as a counterclaim by supplemental pleading.
xxx xxx xxx
(g) Cross-Claim Against Co-Party. A pleading may state as a cross-claim any claim by one
party against a co-party arising out of the transaction or occurrence that is the subject matter
either of the original action or of a' counterclaim therein. Such cross-claim may include a
claim that the party against whom it is asserted is or may be liable to the cross-claimant for
all or part of a claim asserted in the action against the cross-claimant. (See 1 Moore's Federal
Practice, 1938 ed., pp. 664-665.)
[32] 82 C.J.S. 860-863; Cu v. Republic, 89 Phil. 473.
[33] 82 CIS. 867-868.
[34]The counterclaim procedure in the federal courts is set forth in Rule 13 of the Federal
Rules of Civil Procedure. Rule 13 refers only to claims which have "matured" at the time
they are pleaded as counterclaims. See Cold Metal Process Co. v. United Engineering &
Foundry Co., 190 F. 2d 217 (3d Cir. 1951); 3 J. MOore, Federal Practice, par. 13.32, pp. 85-
88 (2d ed. 1966), pp. 46-47 (Supp. 1967). 1A. Barron & Holtzoff, Federal Practice and
Procedure, Sec. 402, p. 622 (1960) and cases cited therein. The crucial time for determining
whether a claim may be filed as a counterclaim under the Rule 13(a) and Rule 13(b) is the
time pleadings are filed. 3 J. Moore, Federal Practice, par. 13.32. Claims which have
"matured" after the filing of a party's pleadings in the action may be pleaded with the
pennission of the court under Rule 13(e). But under the specific language of Rule 13(e) such
permission may be given only if the claim is a "matured" one at the time pennission is
requested. (Stahl v. Ohio River Company, 424 F. 2d 52).
[35]A motion to serve a supplemental counterclaim should be granted when plaintiff cannot
be seriously prejudiced by so doing inasmuch as the trial of the case will not be delayed,
(Dazian's Inc. v. Switzer Bros., Inc., D.C. Ohio 1953, 14 F.R.D. 24), unless the case has
progressed to a stage in the action that to do so would cause hardship or confusion (Newell v.
O.A. Newton & Son Co., D.D. Del. 1950, 10 F.R.D. 286.)
See also: Shwab v. Doelz, C.A. 7th, 1956, 229 F. 2d 749 Michigan Tool Co. v. Drummond,
D.C.D.C. 1938, 33 F. Supp. 540.
4/12/24, 12:17 AM [ G.R. No. L-22578. January 31, 1973 ]
[36] Pp. 15-31, Record on Appeal.
[37] Pp. 54-61, Record on Appeal.
[38]City of Manila v. Ebay, 1 SCRA 1086; Zambales Chromite Co. v. Robles, 2 SCRA 1051;
Ferrer v. Commissioner of Internal Revenue, 5 SCRA 1022; San Miguel Brewery v. Vda. de
Joves, 23 SCRA 1093; Luzon Surety Co. Inc. v. De Garcia, 30 SCRA 111 and other cases.
[39] Compania General de Tabacos v. Molina, 5 Phil. 142.
[40] Olyphant v. St. Louis Ore & Steel Co., 28 F. 729.
[41] Vda. de Murciano v. Auditor General, 103 Phil. 907, 914
SEPARATE OPINION
TEEHANKEE, J.,
I concur in the main opinion in effect affirming in toto the appealed judgment sentencing
defendant-appellant to pay plaintiff-appellee the sum of P609,014.73 representing the Cost of
admittedly unpaid merchandise delivered to defendant since January, 1960, with interests,
attorney's fees and costs of suit.
The merchandise was delivered by plaintiff Namarco to defendant under the so-called
Namarco ''trade assistance agreements" whereby Namarco imported the merchandise under
its dollar allocation tax- and duty-free and in turn sold and delivered the same to defendant at
procurement cost plus a mere 5% mark-up, for distribution to Namarco retailers for resale
supposedly under Namarco-approved prices.
Defendant in turn contracted to pay for the merchandise upon delivery in cash through
domestic letters of credit opened through the Philippine National Bank in favor of Namarco.
The mere fact that defendant federation as plaintiff filed suit against Namarco on March 2,
1960 for specific performance, to require Namarco to make delivery of the remainder of the
merchandise contracted for in their "trade assistance agreement" and to accept the cash
payments preferred therefor by the federation (since Namarco had second thoughts about the
legality and validity of its agreement) in no way involved the merchandise worth
P609,014.73 already delivered by Namarco and presumably paid for in cash under the
domestic letters of credit opened therefor. When it turned out subsequently on May 19, 1960
that the sight drafts drawn by Namarco against the domestic letters of credit opened with the
Philippine National bank for collection of the payments due thereon were not honored, such
non-payment was entirely separate from the subject-matter of the federation's first suit
against Namarco to compel it to recognize the validity of their agreement and deliver upon
cash payment the remainder of the contracted merchandise.
Such non-payment could in no way be deemed a compulsory counterclaim that should have
been filed as such by Namarco in the first suit, so as to bar the present action subsequently
filed on January 25, 1961 by Namarco as plaintiff this time against the federation as
4/12/24, 12:17 AM [ G.R. No. L-22578. January 31, 1973 ]
defendant to collect the unpaid price of P609,014.73 justly due Namarco for the
merchandise.
This collection suit by Namarco could not be deemed barred by the compulsory counterclaim
rule provided in Rule 9, Section 4 (formerly Rule 10, Section 6) since it was not a
compulsory counterclaim that should have been set up as such in the first suit and it was long
after Namarco had joined issues therein with the filing of its answer that its sight drafts for
collection under the domestic letters of credit opened in its favor were dishonored by the
bank. Namarco had every reason to expect that the federation, which was suing it for further
deliveries, would honor its just commitments and see to it that the sight drafts drawn against
its L/C's would be duly honored and made good.
Namarco had every legal right therefore to institute in January, 1961 this action for
collection and payment of the sums justly due it, upon the federation's failing to make
payment notwithstanding the lapse of over a year.
The Rules of Court were never intended to serve as a tool for a party to unjustly enrich itself
to the extent of over PI million (including interests) for merchandise long delivered to it in
I960 practically at procurement cost, which it could not otherwise have procured due to
exchange and import control restrictions and which it has not paid for up to now
notwithstanding its then having immediately enjoyed the benefits and profits thereof.
The defendant-appellant's stance raises a mere technicality — which, as was long ago held
by me Court, when it deserts
its proper office as an aid to the administration of justice and becomes its great hindrance and
chief enemy, deserves scant consideration from the courts. (Alonso vs. Villamor, 16 Phil.
315).
Hence, even if Namarco's present collection suit could technically be deemed a compulsory
counterclaim which should have been filed by it as such in the first suit filed against it by the
federation, I would disregard such a technicality and hold nevertheless as a matter of plain
and simple justice and equity that Namarco's failure to file such counterclaim should not bar
the present action and Namarco's right to judgment against defendant federation for the sums
justly due it.
DISSENTING
BARREDO, J.,
I was on the verge of expressing my reluctant concurrence in the judgment in this case, when
upon further study and deeper reflection, I became more convinced that a reversal rather than
an affirmance of the trial court's decision would be more in conso nance with the
fundamental principles on the prescription of com pulsory counterclaims.
As I see it now, the situation confronting the Court in this case is very simple and is far from
being unusual. Its solution requires no more than the application of the basic rules on
pleadings, without the need of any scholarly discourse which can only serve to confuse
concepts and mislead one into error in the application of the proper rule.
Both the claim of the Federation against the Namarco in Civil Case No. 42684 and the claim
of the Namarco against the Federa tion in Civil Case No. 46124 arose from the same
4/12/24, 12:17 AM [ G.R. No. L-22578. January 31, 1973 ]
contract. The Federation had sued Namarco for the specific performance thereof seeking the
delivery of the balance of the goods which Namarco allegedly agreed to sell to it, but which
the former refused to deliver claiming that the contract was illegal, whereas Namarco, in
turn, sued the Federation in the present action for the payment of the goods already delivered
thereunder, with the particularity, however, that Namarco chose to file this suit against the
Federa tion only when the Federation's case against it was already pend ing appeal by
Namarco in this Court. The issue now is whether or not Namarco should have made its claim
against the Federation the subject of a counterclaim when the Federation's own claim against
it was still pending in the lower court, with the conse quence that, not having done so, it
should no longer be allowed to maintain the case at bar, pursuant to the rule on prescription
of compulsory counterclaims, more specifically, what was Section 6 of Rule 10 of the old
rules and is now Section 4 of Rule 9 of the present rules in force since January 1, 1964.[1]
It appears that when Namarco was informed by the Philippine National Bank on May 19,
1960 that it could not negotiate and effect payment of the sight drafts of the Federation
totally worth P611,053.35, corresponding to the goods already received by the Federation
since January 29, 1960 and February 20, 1960 and covered by PNB Domestic L/C Nos.
600606 and 600586, respec tively, the Federation's action against it (Civil Case No. 42684)
for specific performance by the delivery of the balance of the goods stipulated in the contract
was still pending in the trial court. In fact, the Federation had already failed to pay
notwithstanding Namarco's formal demand made on June 7, 1960, when the deci sion of the
trial court was promulgated on October 15, 1960.
Notwithstanding the lengthy exposition in the main opinion regarding the meaning of the
words '"transaction" and "occur rence" used in the aforecited provisions, it is very clear to me
that, having in mind the objective of the rules in permitting counter claims and, more
particularly, in making some of them compul sory, Namarco's present claim did arise out of
or was necessarily connected with the transaction or occurrence that was the subject matter
of the Federation's action in Civil Case No. 42684 within the contemplation of the rule on
compulsory counterclaims. It is too obvious for equivocation or doubt that the material
subject matter of both of said claims were the goods referred to in their contract, while
juridically, it was the contract itself. As I have already stated, the Federation sued for their
complete delivery, whereas Namarco has sued in the present action for the payment of the
part thereof that it had already delivered to the Federation. I consider it beyond dispute that
under these circumstances, the claim of Namarco for such payment of the goods it had
delivered pursuant to the contract "arose out of that contract, which is precisely the very
same one that was "the subject matter" of the Federation's claim for the delivery of the
balance of the goods covered by it
To believe otherwise is to ignore the fundamental reason behind the rule on counterclaims
which is to avoid multiplicity of suits. In the case of permissive counterclaims which are
unrelated to the adverse party's claims, I can understand the option given to the defendant to
plead them in the same action or not, because it is possible that the defendant may wish to
immediately remove the risk of a judgment against him and thus have peace of mind as early
as possible, instead of suffering delay in his exoneration by litigating with the plaintiff in
regard to his (defendant's) own claims against him, which, of course, will necessarily entail a
longer and more complicated proceeding. On the other hand, one can easily see why the
claims of the defendant arising out of the same transaction or occurrence are made
compulsory in the sense of considering them as completely barred if they are not set up in the
same action of the plaintiff. Since the subject matter involved in the defendant's claim is the
same one on which the plaintifThas sued him, it becomes a matter of public policy that they
should be settled in one proceeding, thus avoiding any duplication of the time, effort and
4/12/24, 12:17 AM [ G.R. No. L-22578. January 31, 1973 ]
money that would have to be spent in the trial and disposition of more or less the same set of
facts and circumstances as well as legal issues, varying only in some details or aspects which
can anyway be conveniently and properly determined in the same proceeding. Thus, it is too
plain to be overlooked or not to be understood that when, on the one hand, a party sues for
the complete delivery of goods covered by a contract, and the other party, on the other hand,
claims payment for goods it has already delivered under the same contract, the rule should be
that both claims should be made in the same action or in one single pro ceeding, and, as I
will explain later, this must be the rule even if
the legality or validity of the contract should be put in issue by any of the parties. This to me
in synthesis is the situation in the case at bar. Indeed, even if it were necessary to apply the
so-called logical-relation-test referred to in the main opinion, I would still say that there is
definitely such logical relation between the claim at bar of Namarco and the claim of the
Federation in Civil Case No. 42684, since that one was for the delivery of goods promised
under the contract whereas the other was for the payment of goods delivered under it, so
much so that the reliefs in one could in fact be possibly setofif against the reliefs in the other.
It was the element of time herein involved that somehow in duced me at the beginning to be
inclined, albeit reluctantly, to sustain Namarco's position in this appeal. As I have explained
above, at the precise time that Namarco filed its answer in Civil Case No. 42684, it was not
yet certain that the Federation would not pay or that payment of its sight drafts would not be
effected by the bank. In other words, from that point of view, Namarco's cause of action had
not yet matured then. It is also clear, however, that said cause of action accrued before the
judgment was rendered by the trial court. Under Section 4 of Rule 10 of the old rules, now
Section 9 of Rule 6, a counterclaim which either matured or was acquired by a defendant
after serving his answer may be set up in a supplemental pleading later -before judgment.
Since this may be done or not in the case of counterclaims not arising out of the same
transaction or occurrence, the question that arises is, must it have to be done in the case of
counterclaims that do arise from the same transaction or occurrence, such that if not inter
posed, they must be deemed barred? Stated differently, the doubt that assailed me in regard to
this view of this case is whether or not the fact that a supplemental pleading could in fact
have been filed by Namarco before judgment placed its present claim within the
contemplation of Section 6 of Rule 10 of the old rules as a claim that should be barred.
In this connection, much as I am inclined towards compelling parties to litigate all their
claims against each other in one single proceeding in the interest of a more speedy
restoration of normal
relations between them, I feel constrained in the absence of any contrary precedent, to yield
to the observations noted in footnote 25 of the main opinion to the effect that for a
counterclaim, arising out of the same transaction or occurrence that is the subject matter of
the plaintiffs claim to be compulsory, under the said Section 6 of Rule 10, it must be existing
at the time of the filing of the answer by the defendant, and the fact that Section 4 of the
same rule allows the filing of supplemental counterclaims before judg ment does not alter the
situation.
To make myself clearer, I agree that the Court rule for the present that for a counterclaim to
be considered as barred, under the above provisions, the cause of action thereof must have al
ready accrued at the time the answer is filed by the defendant, although I, for one, would
prefer that, considering the provisions allowing the filing of supplemental counterclaims, the
defendant should just the same be compelled to allege it in such a supple mental pleading in
those cases where his claim accrues before trial has began or at the latest, before the
defendant has started present ing his evidence. Otherwise stated, my position is that the claim
4/12/24, 12:17 AM [ G.R. No. L-22578. January 31, 1973 ]
of Namarco in this case did arise out of the same transaction or occurrence that was the
subject matter of the Federation's anterior action, but inasmuch as, on the hypothesis that the
contract were binding, the former's cause of action could not have been consid ered as
already matured when it filed its answer, there would have been no need for it to file this
counterclaim..
The whole trouble with Namarco's pose in this appeal lies, however, in the fact that in its
answer to the Federation's com plaint, it pleaded the defense of illegality or nullity of the
contract From that point of view, it was immaterial to Namarco's recovery of the purchase
price of goods it had already delivered under the contract that these was in said contract any
term for the payment thereof. As far as Namarco was concerned, those goods had been
delivered illegally and should have been immediately returned unless their value had been
paid for, [Article 1412. (2), Civil Code] or Namarco was in pah delicto (Article 1411, id).
Such being the case, it is quite evident that when Namarco filed its answer to the Federation's
action, its cause of action for the recov ery of the price of the delivered goods was already
existing and could have been the subject of a counterclaim. This means that as of the time
Namarco filed its answer contesting the legality or validity of the contract, it was already
incumbent upon it to then and there seek recovery of whatever it had delivered thereunder.
Nothing could be more logical and legally proper, specially when viewed from the angle of
diligent protection of public interest, Namarco being a government corporation.
Obviously, the foregoing consideration serves also to refute Namarco's contention that it
could not have claimed for the pay ment now in question because it would have been
inconsistent for it to do so. Moreover, in Camara vs. Aguilar, 94 Phil. 527, this Court already
held that:
"The contention that a counterclaim for expenses incurred in clearing and

cultivating the parcel of land and planting coconut and other fruit-bearing trees
therein could not have been set up in the former case because that would have
been inconsistent with or would have weakened the claim that they were entitled
to the parcel of land, is without merit, because 'A party may set forth two or more
statements of a claim or defense alternatively or hypothetically, either in one
cause of action or defense or in sepa rate causes of action or defenses.' Hence, the
plaintiffs herein and intervenors in the former case could have set up the claim
that they were entitled to the parcel of land and alternatively that as suming
(hypothetically) that they were not entitled to the parcel of land, at least they were
entitled as possessors in good faith to the coconut and other fiuit-bearing trees
planted by them in the parcel of land and their fruits or their value."
IN VIEW OF ALL THE FOREGOING, I vote to reverse the judgment of the lower court,
with the result that Namaro's present suit should be dismissed, without costs.
[1] The action herein was filed and tried before the Revised Rules of 1964 took effect.
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4/12/24, 12:18 AM [ G.R. No. 138822. January 23, 2001 ]
402 Phil. 962
THIRD DIVISION
[ G.R. No. 138822. January 23, 2001 ]
EVANGELINE ALDAY, PETITIONER, VS. FGU INSURANCE
CORPORATION, RESPONDENT.
DECISION
GONZAGA-REYES, J.:
On 5 May 1989, respondent FGU Insurance Corporation filed a complaint with the Regional
Trial Court of Makati[1] alleging that petitioner Evangeline K. Alday owed it P114,650.76,
representing unliquidated cash advances, unremitted costs of premiums and other charges
incurred by petitioner in the course of her work as an insurance agent for respondent.[2]
Respondent also prayed for exemplary damages, attorney's fees, and costs of suit.[3]
Petitioner filed her answer and by way of counterclaim, asserted her right for the payment of
P104,893.45, representing direct commissions, profit commissions and contingent bonuses
earned from 1 July 1986 to 7 December 1986, and for accumulated premium reserves
amounting to P500,000.00. In addition, petitioner prayed for attorney's fees, litigation
expenses, moral damages and exemplary damages for the allegedly unfounded action filed
by respondent.[4] On 23 August 1989, respondent filed a "Motion to Strike Out Answer With
Compulsory Counterclaim And To Declare Defendant In Default" because petitioner's
answer was allegedly filed out of time.[5] However, the trial court denied the motion on 25
August 1989 and similarly rejected respondent's motion for reconsideration on 12 March
1990.[6] A few weeks later, on 11 April 1990, respondent filed a motion to dismiss
petitioner's counterclaim, contending that the trial court never acquired jurisdiction over the
same because of the non-payment of docket fees by petitioner.[7] In response, petitioner
asked the trial court to declare her counterclaim as exempt from payment of docket fees since
it is compulsory and that respondent be declared in default for having failed to answer such
counterclaim.[8]
In its 18 September 1990 Order, the trial court[9] granted respondent's motion to dismiss
petitioner's counterclaim and consequently, denied petitioner's motion. The court found
petitioner's counterclaim to be merely permissive in nature and held that petitioner's failure to
pay docket fees prevented the court from acquiring jurisdiction over the same.[10] The trial
court similarly denied petitioner's motion for reconsideration on 28 February 1991.
On 23 December 1998, the Court of Appeals[11] sustained the trial court, finding that
petitioner's own admissions, as contained in her answer, show that her counterclaim is merely
permissive. The relevant portion of the appellate court's decision[12] is quoted herewith -
Contrary to the protestations of appellant, mere reading of the allegations in the

answer a quo will readily show that her counterclaim can in no way be
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compulsory. Take note of the following numbered paragraphs in her answer:
"(14) That, indeed, FGU's cause of action which is not supported by

any document other than the self-serving `Statement of Account' dated
March 28, 1988 x x x
(15) That it should be noted that the cause of action of FGU is not the
enforcement of the Special Agent's Contract but the alleged `cash
accountabilities which are not based on written agreement x x x.
xxxx
(19) x x x A careful analysis of FGU's three-page complaint will show

that its cause of action is not for specific performance or enforcement
of the Special Agent's Contract rather, it is for the payment of the
alleged cash accountabilities incurred by defendant during the period
form [sic] 1975 to 1986 which claim is executory and has not been
ratified. It is the established rule that unenforceable contracts, like this
purported money claim of FGU, cannot be sued upon or enforced
unless ratified, thus it is as if they have no effect. x x x."
To support the heading "Compulsory Counterclaim" in her answer and give the
impression that the counterclaim is compulsory appellant alleged that "FGU has
unjustifiably failed to remit to defendant despite repeated demands in gross
violation of their Special Agent's Contract x x x." The reference to said contract
was included purposely to mislead. While on one hand appellant alleged that
appellee's cause of action had nothing to do with the Special Agent's Contract, on
the other hand, she claim that FGU violated said contract which gives rise of [sic]
her cause of action. Clearly, appellant's cash accountabilities cannot be the
offshoot of appellee's alleged violation of the aforesaid contract.
On 19 May 1999, the appellate court denied petitioner's motion for reconsideration,[13]
giving rise to the present petition.
Before going into the substantive issues, the Court shall first dispose of some procedural
matters raised by the parties. Petitioner claims that respondent is estopped from questioning
her non-payment of docket fees because it did not raise this particular issue when it filed its
first motion - the "Motion to Strike out Answer With Compulsory Counterclaim And To
Declare Defendant In Default" - with the trial court; rather, it was only nine months after
receiving petitioner's answer that respondent assailed the trial court's lack of jurisdiction over
petitioner's counterclaims based on the latter's failure to pay docket fees.[14] Petitioner's
position is unmeritorious. Estoppel by laches arises from the negligence or omission to assert
a right within a reasonable time, warranting a presumption that the party entitled to assert it
either has abandoned or declined to assert it.[15] In the case at bar, respondent cannot be
considered as estopped from assailing the trial court's jurisdiction over petitioner's
counterclaim since this issue was raised by respondent with the trial court itself - the body
where the action is pending - even before the presentation of any evidence by the parties and
definitely, way before any judgment could be rendered by the trial court.
Meanwhile, respondent questions the jurisdiction of the Court of Appeals over the appeal
filed by petitioner from the 18 September 1990 and 28 February 1991 orders of the trial
4/12/24, 12:18 AM [ G.R. No. 138822. January 23, 2001 ]
court. It is significant to note that this objection to the appellate court's jurisdiction is raised
for the first time before this Court; respondent never having raised this issue before the
appellate court. Although the lack of jurisdiction of a court may be raised at any stage of the
action, a party may be estopped from raising such questions if he has actively taken part in
the very proceedings which he questions, belatedly objecting to the court's jurisdiction in the
event that that the judgment or order subsequently rendered is adverse to him.[16] In this
case, respondent actively took part in the proceedings before the Court of Appeals by filing
its appellee's brief with the same.[17] Its participation, when taken together with its failure to
object to the appellate court's jurisdiction during the entire duration of the proceedings before
such court, demonstrates a willingness to abide by the resolution of the case by such tribunal
and accordingly, respondent is now most decidedly estopped from objecting to the Court of
Appeals' assumption of jurisdiction over petitioner's appeal.[18]
The basic issue for resolution in this case is whether or not the counterclaim of petitioner is
compulsory or permissive in nature. A compulsory counterclaim is one which, being
cognizable by the regular courts of justice, arises out of or is connected with the transaction
or occurrence constituting the subject matter of the opposing party's claim and does not
require for its adjudication the presence of third parties of whom the court cannot acquire
jurisdiction.[19]
In Valencia v. Court of Appeals,[20] this Court capsulized the criteria or tests that may be
used in determining whether a counterclaim is compulsory or permissive, summarized as
follows:
1. Are the issues of fact and law raised by the claim and counterclaim largely
the same?
2. Would res judicata bar a subsequent suit on defendant's claim absent the
compulsory counterclaim rule?
3. Will substantially the same evidence support or refute plaintiff's claim as

well as defendant's counterclaim?
4. Is there any logical relation between the claim and the counterclaim?
Another test, applied in the more recent case of Quintanilla v. Court of Appeals,[21] is the
"compelling test of compulsoriness" which requires "a logical relationship between the claim
and counterclaim, that is, where conducting separate trials of the respective claims of the
parties would entail a substantial duplication of effort and time by the parties and the court."
As contained in her answer, petitioner's counterclaims are as follows:
(20) That defendant incorporates and repleads by reference all the foregoing
allegations as may be material to her Counterclaim against FGU.
(21) That FGU is liable to pay the following just, valid and legitimate claims of
defendant:
(a) the sum of at least P104,893.45 plus maximum interest thereon

representing, among others, direct commissions, profit commissions
and contingent bonuses legally due to defendant; and
4/12/24, 12:18 AM [ G.R. No. 138822. January 23, 2001 ]
(b) the minimum amount of P500,000.00 plus the maximum allowable

interest representing defendant's accumulated premium reserve for
1985 and previous years,
which FGU has unjustifiably failed to remit to defendant despite repeated

demands in gross violation of their Special Agent's Contract and in contravention
of the principle of law that "every person must, in the exercise of his rights and in
the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith."
(22) That as a result of the filing of this patently baseless, malicious and
unjustified Complaint, and FGU's unlawful, illegal and vindictive termination of
their Special Agent's Contract, defendant was unnecessarily dragged into this
litigation and to defense [sic] her side and assert her rights and claims against
FGU, she was compelled to hire the services of counsel with whom she agreed to
pay the amount of P30,000.00 as and for attorney's fees and stands to incur
litigation expenses in the amount estimated to at least P20,000.00 and for which
FGU should be assessed and made liable to pay defendant.
(23) That considering further the malicious and unwarranted action of defendant
in filing this grossly unfounded action, defendant has suffered and continues to
suffer from serious anxiety, mental anguish, fright and humiliation. In addition to
this, defendant's name, good reputation and business standing in the insurance
business as well as in the community have been besmirched and for which FGU
should be adjudged and made liable to pay moral damages to defendant in the
amount of P300,000.00 as minimum.
(24) That in order to discourage the filing of groundless and malicious suits like
FGU's Complaint, and by way of serving [as] an example for the public good,
FGU should be penalized and assessed exemplary damages in the sum of
P100,000.00 or such amount as the Honorable Court may deem warranted under
the circumstances.[22]
Tested against the abovementioned standards, petitioner's counterclaim for commissions,

bonuses, and accumulated premium reserves is merely permissive. The evidence required to
prove petitioner's claims differs from that needed to establish respondent's demands for the
recovery of cash accountabilities from petitioner, such as cash advances and costs of
premiums. The recovery of respondent's claims is not contingent or dependent upon
establishing petitioner's counterclaim, such that conducting separate trials will not result in
the substantial duplication of the time and effort of the court and the parties. One would
search the records in vain for a logical connection between the parties' claims. This
conclusion is further reinforced by petitioner's own admissions since she declared in her
answer that respondent's cause of action, unlike her own, was not based upon the Special
Agent's Contract.[23] However, petitioner's claims for damages, allegedly suffered as a result
of the filing by respondent of its complaint, are compulsory.[24]
There is no need for petitioner to pay docket fees for her compulsory counterclaim.[25] On
the other hand, in order for the trial court to acquire jurisdiction over her permissive
counterclaim, petitioner is bound to pay the prescribed docket fees.[26] The rule on the
4/12/24, 12:18 AM [ G.R. No. 138822. January 23, 2001 ]
payment of filing fees has been laid down by the Court in the case of Sun Insurance Office,
Ltd. v. Hon. Maximiano Asuncion[27]-
1. It is not simply the filing of the complaint or appropriate initiatory pleading,

but the payment of the prescribed docket fee, that vests a trial court with
jurisdiction over the subject-matter or nature of the action. Where the filing
of the initiatory pleading is not accompanied by payment of the docket fee,
the court may allow payment of the fee within a reasonable time but in no
case beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and

similar pleadings, which shall not be considered filed until and unless the
filing fee prescribed therefor is paid. The court may allow payment of said
fee within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading, or
if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It shall
be the responsibility of the Clerk of Court or his duly authorized deputy to
enforce said lien and assess and collect the additional fee.
The above mentioned ruling in Sun Insurance has been reiterated in the recent case of Suson
v. Court of Appeals.[28] In Suson, the Court explained that although the payment of the
prescribed docket fees is a jurisdictional requirement, its non-payment does not result in the
automatic dismissal of the case provided the docket fees are paid within the applicable
prescriptive or reglementary period. Coming now to the case at bar, it has not been alleged
by respondent and there is nothing in the records to show that petitioner has attempted to
evade the payment of the proper docket fees for her permissive counterclaim. As a matter of
fact, after respondent filed its motion to dismiss petitioner's counterclaim based on her failure
to pay docket fees, petitioner immediately filed a motion with the trial court, asking it to
declare her counterclaim as compulsory in nature and therefore exempt from docket fees and,
in addition, to declare that respondent was in default for its failure to answer her
counterclaim.[29] However, the trial court dismissed petitioner's counterclaim. Pursuant to
this Court's ruling in Sun Insurance, the trial court should have instead given petitioner a
reasonable time, but in no case beyond the applicable prescriptive or reglementary period, to
pay the filing fees for her permissive counterclaim.
Petitioner asserts that the trial court should have declared respondent in default for having
failed to answer her counterclaim.[30] Insofar as the permissive counterclaim of petitioner is
concerned, there is obviously no need to file an answer until petitioner has paid the
prescribed docket fees for only then shall the court acquire jurisdiction over such claim.[31]
Meanwhile, the compulsory counterclaim of petitioner for damages based on the filing by
respondent of an allegedly unfounded and malicious suit need not be answered since it is
inseparable from the claims of respondent. If respondent were to answer the compulsory
counterclaim of petitioner, it would merely result in the former pleading the same facts raised
in its complaint.[32]
4/12/24, 12:18 AM [ G.R. No. 138822. January 23, 2001 ]
WHEREFORE, the assailed Decision of the Court of Appeals promulgated on 23 December

1998 and its 19 May 1999 Resolution are hereby MODIFIED. The compulsory
counterclaim of petitioner for damages filed in Civil Case No. 89-3816 is ordered
REINSTATED. Meanwhile, the Regional Trial Court of Makati (Branch 134) is ordered to
require petitioner to pay the prescribed docket fees for her permissive counterclaim (direct
commissions, profit commissions, contingent bonuses and accumulated premium reserves),
after ascertaining that the applicable prescriptive period has not yet set in.[33]
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.
[1] Branch 134.
[2] Docketed as Civil Case No. 89-3816.
[3] Rollo, 42-44.
[4] Ibid., 53-63.
[5] RTC Records, 37-39.
[6] Ibid., 46, 93.
[7] Ibid., 96-102.
[8] Ibid., 110-125.
[9] Judge Ignacio M. Capulong
[10] Rollo, 105.
[11]Fourth Division, composed of Justices Jesus M. Elbinias, ponente and Chairman;

Eugenio S. Labitoria; and Marina L. Buzon.
[12] Rollo, 36-39.
[13] Ibid., 41.
[14] Ibid., 332.
[15]Philippine National Construction Corporation v. National Labor Relations Commission,

307 SCRA 218 (1999).
[16] National Steel Corporation v. Court of Appeals, 302 SCRA 522 (1999).
4/12/24, 12:18 AM [ G.R. No. 138822. January 23, 2001 ]
[17] CA Records, 88-115.
[18] ABS-CBN Supervisors Employees Union Members v. ABS-CBN Broadcasting

Corporation, 304 SCRA 489. See also Stilianopulos v. City of Legaspi; 316 SCRA 523
(1999); Pantranco North Express, Inc. v. Court of Appeals, 224 SCRA 477 (1993).
[19]
Rule 6, section 7; BA Finance v. Co, 224 SCRA 163 (1993); Javier v. Intermediate
Appellate Court, 171 SCRA 609 (1989).
[20] 263 SCRA 275 (1996).
[21] 279 SCRA 397 (1997).
[22] Rollo, 61-62.
[23] Ibid., 58-59, 60.
[24]
Santo Tomas University Hospital v. Surla, 294 SCRA 382 (1998); Intestate Estate of
Amado B. Dalisay v. Marasigan, 257 SCRA 509 (1996).
[25] Quintanilla v. Court of Appeals, supra.
[26] Suson v. Court of Appeals, 278 SCRA 284 (1997).
[27] 170 SCRA 274 (1989).
[28] Supra. See also Cabaero v. Cantos, 271 SCRA 391 (1997).
[29] RTC Records, 110-125.
[30] Rollo, 342-343.
[31] Gegare v. Court of Appeals, 297 SCRA 587 (1998).
[32] Ballecer v. Bernardo, 18 SCRA 291(1966); Navarro v. Bello, 102 Phil 1019 (1958).
[33] Suson v. Court of Appeals, supra.
Source: Supreme Court E-Library | Date created: December 03, 2014

4/12/24, 12:19 AM [ G.R. No. 53969. February 21, 1989 ]
252 Phil. 469
THIRD DIVISION
[ G.R. No. 53969. February 21, 1989 ]
PURIFICACION SAMALA AND LEONARDO ESGUERRA,
PETITIONERS, VS. HON. LUIS L. VICTOR, CFI OF CAVITE, BR. II,
EMERITA C. JUMANAN AND RICARDO JUMANAN,
RESPONDENTS.
DECISION
FERNAN, C.J.:
This is a petition for review on certiorari seeking the reversal of the decision of the Court of
First Instance of Cavite, Branch II, Cavite City, in Civil Case No. N-2411 entitled: "Emerita
C. Jumanan, et al., plaintiffs, v. Felisa R. Garcia, et aI, defendants; Felisa R. Garcia, et al.,
third-party plaintiffs, v. Purification Samala, et al., third party defendants; Purification
Samala, fourth-party plaintiff, v. The lmperial Insurance, Inc., fourth-party defendant",
absolving the defendants from any liability and ordering the third party defendants and fourth
party plaintiffs, Purificacion Samala and Leonardo Esguerra (petitioners herein) and the
fourth party defendant Imperial Insurance, Inc., jointly and severally to pay to plaintiffs
(respondents herein) the damages mentioned in the decision.[1]
The factual background of this case as found by the trial court is as follows:
"At approximately 6:30 o'clock in the morning of February 7, 1976, plaintiff

Emerita C. Jumanan was riding a passenger jeepney on her way from her
residence at Binakayan, Kawit, Cavite to her place of work at the Department
(now Ministry) of Public Information in Intramuros, Manila, where she was
employed. The said passenger jeepney, which is owned by defendants Felisa and
Tomas Garcia, was the being driven by defendant Virgilio Profeta and was bound
for Manila carrying about twelve passengers.
"While the aforesaid passenger jeepney where Emerita C. Jumanan was riding
was about to make a left turn on the road just below the bridge at Barrio Mabolo,
Bacoor, Cavite, a delivery panel of the Luau restaurant bearing plato no. UH-413
'73, driven by Domingo Medina was approaching them the opposite direction
from Manila, followed by the Saint Raphael Transit passenger bus, owned by
third party defendant Purificacion Samala and being driven by third party
defendant Leonardo Esguerra. The Saint Raphael Transit passenger bus was
running fast and after overtaking a vehicle the Saint Raphael Transit bumped the
back portion of the delivery panel so violently and strongly causing the delivery
panel to swerve abruptly to the path of the oncoming passenger jeepney in which
plaintiff Emerita C. Jumanan was on board. So forceful was the impact of the
collision between the delivery panel and the passenger jeepney that several
passengers of the jeepney were injured, including plaintiff Emerita C. Jumanan.
4/12/24, 12:19 AM [ G.R. No. 53969. February 21, 1989 ]
"Taken to the National Orthopedic Hospital, after an emergency treatment at the

Katigbak clinic at Binakayan, Kawit, Cavite, Emerita C. Jumanan was examined
and found to be suffering from ‘tenderness and swelling of the right thigh,
tenderness over the left hip, tenderness over the nape and back of the neck of the
right shoulder; limitation of left extremity, light limitation of motion of right
extremity; contusion left hip and right thigh and fracture of left inferior ramus of
ischium’ (Exhibits D and D-1). Admitted and treated at the National Orthopedic
Hospital on February 7, 1976, Emerita C. Jumanan was discharged on a wheel
chair on February 20, 1976 and advised to have complete bed rest for thirty
days."[2]
Emerita C. Jumanan, assisted by her husband Ricardo Jumanan, filed before the CFI of
Cavite a complaint for damages arising physical injuries suffered by her as a passenger of the
jeepney bearing plate no. PUJ-VY-542 ‘75 allegedly owned and operated by the four-named
defendant, spouses Felisa and Tomas Garcia, Emetiquio M. Jarin and Juanita Madlangbayan,
and driven by the last named defendant, Virgilio Profeta.
In their separate answers, both Jarin and Madlangbayan denied liability, claiming they no
longer owned the passenger jeepney at the time of the incident in question, said ownership
having been transferred to the spouses Garcia. While admitting to be the owners of the
passenger jeepney, the spouses Garcia nonetheless denied liability, alleging that the vehicular
collision complained of was attributable to the fault and negligence of the owner and driver
of the Saint Raphael Transit passenger bus with plate no. XGY-297 PUB-Phil. ’75.
Consequently, a third-party complaint was filed by defendants spouses Garcia and Virgilio
Profeta against Purification Samala and Loenardo Esguerra, owner and driver, respectively,
of the Saint Raphael Transit bus. The latter defendants, in turn, filed a fourth-party
complaint against the insurer of the Saint Raphael Transit Bus, Imperial Insurance, Inc.,
which was declared in default for failure to appear at the pre-trial conference.
After trial, respondent Judge rendered a decision in favor of the defendants, the dispositive
portion of which reads:
"PREMISES CONSIDERED, judgment is hereby rendered -
1. Absolving defendants, Felisa and Tomas Garcia, Virgilio Profeta, Juanito

Madlangbayan and Emetiquio Jarin from any liability;
2. Ordering the third party defendants and fourth party plaintiffs, Purification
Samala and Leonardo Esguerra, and the fourth party defendant Imperial
Insurance, Inc., jointly and severally, to pay to plaintiffs Emerita C. Jumanan and
Ricardo Jumanan the following:
(a) Actual or compensatory damages in the amount of P7,958.83;
(b) Moral damages in the amount of P5,000.00;
(c) Exemplary damages in the amount of P3,000.00; and
(d) Attorney's fees and expenses of litigation in the amount of P2,000.00.
Plus costs of this suit.
4/12/24, 12:19 AM [ G.R. No. 53969. February 21, 1989 ]
SO ORDERED."[3]
Third party defendants Purificacion Samala and Leonardo Esguerra moved to reconsider said
decision, but to no avail. Hence, this appeal by certiorari, therein third party defendants
(petitioners herein) contending that:
1. The lower court erred in holding that the third-party defendants and fourth party plaintiff
and the fourth party defendant are jointly and severally liable to pay the claim of plaintiffs.
2. The third-party defendants and fourth-party plaintiff should be absolved from any liability
since the principal defendants have been absolved from the claim of plaintiffs, a matter not
appreciated by the lower court;
3. The Lower Court erred in not holding that since plaintiffs' cause of action is based on
culpa contractual against the defendants only, they cannot recover from the third-party
defendants and fourth-party plaintiffs on a cause of action based on tort or quasi-delict.[4]
At issue in this case is the nature and office of a third-party complaint.
Appellants argue that since plaintiffs filed a complaint for damages against the defendants on
a breach of contract of carriage, they cannot recover from the third-party defendants on a
cause of action based on quasi-delict. The third party defendants, they allege, are never
parties liable with respect to plaintiff's claim although they are with respect to the defendants
for indemnification, subrogation, contribution or other reliefs. Consequently, they are not
directly liable to the plaintiffs. Their liability commences only when the defendants are
adjudged liable and not when they are absolved from liability as in the case at bar.[5]
Quite apparent from these arguments is the misconception entertained by appellants with
respect to the nature and office of a third party complaint.
Section 16, Rule 6 of the Revised Rules of Court defines a third party complaint as a "claim
that a defending party may, with leave of court, file against a person not a party to the action,
called the third-party defendant, for contribution, indemnification, subrogation, or any other
relief, in respect of his opponent's claim." In the case of Viluan vs. Court of Appeals, et al.,
16 SCRA 742 [1966], this Court had occasion to elucidate on the subjects covered by this
Rule, thus:
"x x x As explained in the Atlantic Coast Line R. Co. vs. U.S. Fidelity &
Guaranty Co., 52 F. Supp. 177 (1943:)
‘From the sources of Rule 14[6] and the decisions herein cited, it is clear that this
rule, like the admiralty rule, covers two distinct subjects, the addition of parties
defendant to the main cause of action, and the bringing in of a third party for a
defendant's remedy over’. x x x
'If the third party complaint alleges facts showing a third party's direct liability to
plaintiff on the claim set out in plaintiff's petition, then third party 'shall' make his
defenses as provided in Rule 12 and his counterclaims against plaintiff as
provided in Rule 13. In the case of alleged direct liability, no amendment (to the
complaint) is necessary or required. The subject-matter of the claim is contained
4/12/24, 12:19 AM [ G.R. No. 53969. February 21, 1989 ]
in plaintiff's complaint, the ground of third party's liability on that claim is alleged
in third party complaint, and third party's defense to set up in his answer to
plaintiff's complaint. At that point and without amendment, the plaintiff and third
party are at issue as to their rights respecting the claim.
'The provision in the rule that, ‘The third-party defendant may assert any defenses
which the third-party plaintiff may assert to the plaintiff's claim,’ applies to the
other subject, namely, the alleged liability of third party defendant. The next
sentence in the rule, ‘The third-party defendant is bound by the adjudication of
the third party plaintiff's liability to the plaintiff, as well as of his own to the
plaintiff or to the third-party plaintiff,’ applies to both subjects. If third party is
brought in as liable only to defendant and judgment is rendered adjudicating
plaintiff's right to recover against defendant and defendant's rights to recover
against third party, he is bound by both adjudications. That part of the sentence
refers to the second subject. If third party is brought in as liable plaintiff, then
third party is bound by the adjudication as between him and plaintiff. That refers
to the first subject. If third party is brought in as liable to plaintiff and also over
to defendant, then third party bound by both adjudications. x x x’”.
Under this Rule, a person not a party to an action may be impleaded by the defendant either
(a) on an allegation of liability to the latter; (b) on the ground of direct liability to the
plaintiff; or (c) both (a) and (b). The situation in (a) is covered by the phrase "for
contribution, indemnity or subrogation;" while (b) and (c) are subsumed under the catch-all
"or any other relief, in respect of his opponent's claim."
The case at bar is one in which the third party defendants are brought into the action as
directly liable to the plaintiffs upon the allegation that "the primary and immediate cause as
shown by the police investigation of said vehicular collision between (sic) the above-
mentioned three vehicles was the recklessness and negligence and lack of imprudence (sic)
of the third-party defendant Virgilio (should be Leonardo) Esguerra y Ledesma then driver of
the passenger bus".[7] The effects are that "plaintiff and third party are at issue as to their
rights respecting the claim" and "the third party is bound by the adjudication as between him
and plaintiff." It is not indispensable in the premises that the defendant be first adjudged
liable to plaintiff before the third-party defendant may be held liable to the plaintiff, as
precisely, the theory of defendant is that it is the third party defendant, and not he, who is
directly liable to plaintiff. The situation contemplated by appellants would properly pertain
to situation (a) above wherein the third party defendant is being sued for contribution,
indemnity or subrogation, or simply stated, for a defendant's "remedy over".
Anent appellants' claim that plaintiff who sued on contractual breach cannot recover on the
basis of quasi-delict, suffice it to say that as the primary purpose of this rule is to avoid
circuity of action and to dispose of in one litigation, the entire subject matter arising from a
particular set of facts[8] it is immaterial that the third-party plaintiff asserts a cause of action
against the third party defendant on a theory different from that asserted by the plaintiff
against the defendant.[9] It has likewise been held that "a defendant in a contract action may
join as third-party defendants those liable to him in tort for the plaintiff's claim against him or
directly to the plaintiff."[10]
The incident complained of having been found to have been caused by the negligence of
appellant Leonardo Esguerra, driver and employee of co-appellant Purification Samala, no
reversible error was committed by the trial court in adjudging the latter liable to plaintiffs-
4/12/24, 12:19 AM [ G.R. No. 53969. February 21, 1989 ]
appellees.
WHEREFORE, the instant appeal by certiorari is hereby DISMISSED with costs against
appellants. This decision is immediately executory.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin, and Cortes, JJ., concur.
[1] Rollo, pp. 3 - 4
[2] Rollo, pp. 11-13
[3] Rollo, pp. 16-17
[4] Rollo, p. 7
[5] Rollo, p. 8
[6]Rule 14 of the Federal Rules of Civil Procedure governs the procedure of third party
complaint. It was adopted in the Philippines’ Rules of Court of 1940 under Section 1 of Rule
12 thereof together with Article 13, Section 1 of the Rules of Civil Procedure by the
American Judicature Society. Section 12, Rule 6 of the present Rules is a concise statement
of Section I of Rule 12 of the old Rule of Court (See Annotations on Third Party Complaint,
25 SCRA 651).
[7] Rollo, p. 35
[8] Tulgreen v. Jasper, 27 F. Supp. 413, cited in I Martin, RuIes of Court of the Philippines, p.
325
[9] Jeub. v. Ct. D. D. Minn., Jan. 8, 1945; 2 F.R.D. 238, cited in Ibid., p. 328
[10] Fruit Growers Cooperative v. California Pie and Baking Co., Inc., 2 F.D.R. 415, cited in
I. Francisco, The Revised Rules of Court in the Philippines, p. 352 under footnote 59
Source: Supreme Court E-Library | Date created: October 30, 2014

4/12/24, 12:21 AM [ G.R. Nos. L-12634 and G.R. Nos.L-12720. May 29, 1959 ]
105 Phil. 949
[ G.R. Nos. L-12634 and G.R. Nos.L-12720. May 29, 1959 ]

JOSE G. TAMAYO; PETITIONER, VS. INOCENCIO AQUINO, ET AL.,
AND SILVESTRE KAYOS, RESPONDENTS. SILVESTRE KAYOS,
PETITIONER, VS. JOSE G. TAMAYO AND INOCENCIO AQUINO ET
AL., RESPONDENTS.
DECISION
LABRADOR, J.:
Inocencio Aquino and his children brought this action against Jose G. Tamayo, holder of a
certificate of public convenience to operate two trucks for damages for the death of
Inocencio's wife, Epifania Gonzales, while riding aboard Tamayo's truck. It is alleged that
while his (Inocencio Aquino) wife was making a trip aboard truck with Plate No .TPU-735,
it bumped against a culvert on the side of the road in Bugallon, Pangasinan; that as a
consequence of this accident Epifania Gonzales was thrown away from the vehicle and two
pieces of wood embedded in her skull. as a result of which she died; that the impact of the
truck against the culvert was so violent that the roof of the vehicle was ripped off from its
body, one fender was smashed and the engine damaged beyond repair. Complaint was
filed for the recovery of P10,000 as actual damages, P10,000 as moral damages, and
costs.
Upon being summoned, defendant Tamayo answered alleging that the truck is owned by
Silvestre Rayos, so he filed a third-party complaint against the latter, alleging that he no
longer had any interest whatsoever in the said truck, as he had sold the same before the
accident to the third-party defendant Silvestre Rayos. Answering the third-party complaint,
Rayos alleged that if any indemnity is due, it should come from Jose G. Tamayo, because he
did not have any transaction with him regarding such sale.
The Court of First Instance found that the truck with plate No. TPU-735 was one of the
trucks of Tamayo under a certificate of public convenience issued to him; that he had sold it
to Rayos in March, 1953, but did not inform the Public Service Commission of the sale until
June 30, 1953, one month after the accident. On the basis of the above facts, the Court of
First Instance ordered the defend-. ant Tamayo and the third-party defendant Rayos to pay
plaintiffs jointly and severally the sum of P6,000 as compensatory damages, and another
sum of P5,000 as moral damages, with interest, and authorized the defendant or third-party
defendant, whoever should pay the entire amount, to recover from the other any sum in
excess of one-half of the amount ordered to be paid, with interest.
The court also dismissed the third-party complaint.
Appeal against the above decision was made to the Court of Appeals. This court affirmed
the judgment of the Court of First Instance in all respects, and against this judgment
certiorari was issued by us on separate petitions of Tamayo and Rayos.
Tamayo claims exemption from liability, arguing that the owner and operator of the truck
at the time the accident was not he but Rayos. In answer we state that we have already held
in the cases of Medina vs. Cresencia, 99 Phil., 506; 52 Off. Gaz., (11) 4606; Timbol vs.
Osias, 98 98 Phil., 432; 52 Off. Gaz. (3) 1392; Montoya vs. Ignacio, 94 Phil., 182; 50 Off.
Gaz., 108, and Roque vs. Malibay, L-8561, Nov. 18, 1955, that the registered owner of a
public service vehicle is responsible for damages that may be caused to any of the
passengers therein, even if the said vehicle had already been sold leased or transferred to
another person who was, at the time of the accident, actually operating the vehicle. This
principle was also reafirmed in the case of Erezo vs. Jepte, 102 Phil., 103. The reason
given by us for the above liability imposed upon the registered owner of the vehicle under
a certificate of public convenience is as follows:
"* * * we hold with the trial court that the law does not allow him to do so;
the law, with its aim and policy in mind, does not relieve him directly of the
responsibility that the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner allowed to evade
responsibility by proving who the supposed transferee or owner is, it would be
easy for him by collusion with others or otherwise, to escape said responsibility
and transfer the same to an indefinite person, or to one who possesses no
property with which to respond financially for the damage or injury done. A
victim of recklessness on the public highways is usually without means to
discover or identify the person, actually causing the injury or damage. He has no'
means other than by a recourse to the registration in the Motor Vehicles Office to
determine who is the owner. The protection that the law aims to extend to him
would become illusory were the registered owner given the opportunity to
escape liability by disproving his ownership. If the policy of the law is to be
enforced and carried out, the registered owner should not be allowed to prove the
contrary to the prejudice of the person injured, that is, to prove that a third person
or another has become the owner, so that he may thereby be relieved of the
responsibility to the injured." (Erezo vs. Jepte, supra).
The decision of the Court of Appeals is also attacked insofar as it holds that inasmuch as the
third-party defendant had used the truck) on a route not covered by the registered owner's
franchise, both the registered owner and the actual owner and operator should be considered
as joint tortfeasors and should be made liable in accordance with Article 2194 of the Civil
Code. This Article is as follows:
"Art.. 2194. , The responsibility of two or more persons who are liable for. a
quasi-relict is solidary."
But the action instituted in the case at bar is one for breach of contract, for failure of the
defendant to carry safety the deceased to her destination. The liability for which he is made
responsible, i. e., for the death of the passenger, may not be considered as arising from a
quasi delict. As the registered owner Tamayo and his transferee Rayos may not be held
guilty of tort or a quasi-delict; their responsibility is not solidary as held by the Court of
Appeals.
The question that poses, therefore, is how should the holder of the certificate of public
convenience Tamayo participate with his transferee, operator Rayos, in the damages
recoverable by the heirs of the deceased passenger, if their liability is not that of joint
tortfeasors in accordance with Article 2194 of the Civil Code. The. following considerations
must be borne in mind in determining this question. As Tamayo is the registered owner of
the truck, his responsibility to the public or to any passenger riding in the vehicle or truck
must be direct, for the reasons given in our decision in the case of Erezo vs. Jepte, supra, as
quoted above. But as the transferee, who operated the vehicle when the passenger died, is
the one directly responsible for the accident and death he should in turn be made
responsible to the registered owner for what the latter may have been adjudged to pay. In
operating the truck without transfer thereof having been approved by the Public Service
Commission, the transferee acted merely as agent of the registered owner and should be
responsible to him (the registered owner), for any damages that he may cause the latter by
his negligence. In the case at bar, the court found, furthermore, that inspite of the fact that
the agreement between Tamayo and Rayos was for Rayos to use the truck in carrying of
gasoline, the latter used the same in transporting passengers outside the route covered by
the franchise of Tamayo. For this additional reason, the agent or Rayos must be held
responsible to the registered owner, to the extent that the latter may suffer damage by reason
of the death caused during the accident. The responsibility of the transferee was already
adverted to by us in the case of Erezo vs. Jepte, supra, when we held expressly:
"In synthesis, we hold that the registered owner, the defendant-appellant herein,
is primarily responsible for the damage caused to the vehicle of the plaintiff-
appellee, but he (defendant-appellant) has a right to be indemnified by the real
or actual owner of the amount that he may be required to pay as damage for the
injury caused to the plaintiff-appellant." (Erezo vs. Jepte, supra.)
We hereby affirm that the responsibility of the transferee of the public vehicle be as above
denied.
The procedural means by which the liability of the transferee to the holder of the certificate
should be enforced is that indicated by us in the above-quoted portion of the case of Erezo vs.
Jepte. This procedure was adopted by Tamayo, the defendant herein, when he presented a
third-party complaint against Rayos. The courts below should not have dismissed this
third-party complaint, and should have adjudged the responsibility to make indemnity in
accordance therewith. The transferee is liable to indemnify the registered owner for the
damages that the latter may be required to pay for the accident, hence the remedy is by third-
party complaint (See Rule 12, Rules of Court).
We now come to the question of the damages that the Court of Appeals and the Court of
First Instance awarded to the plaintiffs. The actual or compensatory damage of P6,000 is
not seriously questioned by any of the defendants, but the award of P5,000 as moral damages
is questioned by them in this appeal. We agree with the appellants that as the responsibility
of Tamayo and his agent Rayos is culpa-contractual, no award of moral damages can be
given. The law on this matter is expressed in Article 2220 of the Civil Code, which
provides:
"Willful injury to property may be a legal ground for awarding moral damages if
the court should find that, under the circumstances, such damages are justly due.
The same rule applies, to breaches of contract where the defendant acted
fraudulently or in bad faith."
Both the Court of First Instance and the Court of Appeals considered the violation of the
rules of the Public Service Commission prohibiting transfer of public vehicles without
approval by the Commission as justifying the award of moral damages. We believe4 that
both courts erred. The law expressly provides that award of moral damages can be made in
a suit for breach of contract only when the defendants acted fraudulently or in bad faith.
We do not believe that the holder of the certificate, defendant Tamayo, was guilty of fraud
or bad faith. There appears to be no fraud at all in the transfer. Transfers are prohibited only
if made without approval by the Public Service Commission. There may have been a
violation of the regulations because Tamayo did not secure a previous authority to transfer
from said Commission, but he actually applied for and obtained said permission or
approval about a month after the accident. Besides, the truck was transferred to Rayos with
the understanding that the same was not to be used as a public convenience, so that insofar
as Tamayo is concerned, there could have been no shade or tint of bad faith at all.
Consequently, the ground upon which moral damages may be demanded from him by the
plaintiffs does not exist.
Neither can we find that there was fraud or bad faith committed on the part of the transferee
or agent. There may have been a breach of the agreement between Tamayo and Rayos, but
this was not the immediate cause of the accident. It was the negligence of the driver.
What the law would seem to consider as bad faith which may furnish a ground for the
award of moral damages in the case at bar would be bad faith in the securing and in the
execution of the contract and in the enforcement of its terms (Article 1338, Civil Code), or
any other kind of deceit which may have been used by both defendants. None can be said to
have been present in the case at bar. There was no bad faith on the part of the agent Rayos;
there was negligence of the driver employed by him, but this is certainly not bad faith on
defendants' part contemplated by law.
For the foregoing considerations, the judgment appealed from is hereby modified, in that the
defendant-appellant Tamayo is hereby ordered to pay to the plaintiff-appellees the sum of
P6,000 as compensatory damages for the death of the deceased, but that he (Tamayo) has the
right to be indemnified by third-party defendant-appellant Rayos of the amount he is
hereby ordered to pay. With costs against appellants.
Paras, C. J., Bengzon, Montemayor, Reyes, A. Bautista Angelo, Concepcion, and Endencia,
JJ., concur.
Source: Supreme Court E-Library | Date created: April 07, 2015

4/12/24, 12:21 AM [ G.R. NO. L-36413. September 26, 1988 ]
248 Phil. 1
SECOND DIVISION
[ G.R. NO. L-36413. September 26, 1988 ]
MALAYAN INSURANCE CO. INC., PETITIONER, VS. THE HON.
COURT OF APPEALS (THIRD DIVISION) MARTIN C. VALLEJOS,
SIO CHOY, SAN LEON RICE MILL, INC. AND PANGASINAN
TRANSPORTATION CO., INC., RESPONDENTS.
DECISION
PADILLA, J.:
Review on certiorari of the judgment[*] of the respondent appellate court in CA-G.R. No.
47319-R, dated 22 February 1973, which affirmed, with some modifications, the decision[**]
dated 27 April 1970, rendered in Civil Case No. U-2021 of the Court of First Instance of
Pangasinan.
The antecedent facts of the case are as follows:
On 29 March 1967, herein petitioner Malayan Insurance Co., Inc. issued in favor of private
respondent Sio Choy Private Car Comprehensive Policy No. MRO/PV-15753, effective from
18 April 1967 to 18 April 1968, covering a Willys jeep with Motor No. ET-03023, Serial No.
351672, and Plate No. J-21536, Quezon City, 1967. The insurance cover age was for "own
damage" not to exceed P600.00 and "third—party liability" in the amount of P20,000.00.
During the effectivity of said insurance policy, and more particularly on 19 December 1967,
at about 3:30 o'clock in the afternoon the insured jeep, while being driven by one Juan P.
Compollo, an employee of the respondent San Leon Rice Mill, Inc., collided with a
passenger bus belonging to the respondent Pangasinan Transportation Co. Inc.
(PANTRANCO for short) at the national highway in Barrio San Pedro, Rosales, Pangasinan,
causing damage to the insured vehicle and injuries to the driver, Juan P. Campollo, and the
respondent Martin C. Vallejos, who was riding in the ill-fated jeep.
As a result, martin C. Vallejos filed an action for damages against Sio Choy, Malayan
Insurance Co., Inc. and PANTRANCO before the Court of First Instance of Pangasinan,
which was docketed as Civil Case No. U-2021. He prayed therein that the defendants be
ordered to pay him, jointly and severally, the amount of P15,000.00, as reimbursement for
medical and hospital expenses; P6,000.00, for lost income; P51,000.00 as actual, moral and
compensatory damages, and P5,000.00 for attorney's fees.
Answering, PANTRANCO claimed that the jeep of Sio Choy was then operated at an
excessive speed and bumped the PANTRANCO bus which had moved to, and stopped at, the
shoulder of the highway in order to avoid the jeep; and that it had observed the diligence of a
good father of a family to prevent damage, especially in the selection and supervision of its
employees and in the maintenance of its motor vehicles. It prayed that it be absolved from
any and all liability.
Defendant Sio Choy and the petitioner insurance company in their answer, also denied
liability to the plaintiff, claiming that the fault in the accident was solely imputable to the
PANTRANCO.
Sio Choy, however, later filed a separate answer with a cross-claim against the herein
petitioner wherein he alleged that he had actually paid the plaintiff, Martin C. Vallejos, the
amount of P5,000.00 for hospitalization and other expenses, and, in his cross-claim against
the herein petitioner, he alleged that the petitioner had issued in his favor a private car
comprehensive policy wherein the insurance company obligated itself to indemnify Sio
Choy. as insured, for the damage to his motor vehicle, as well as for any liability to third
persons arising out of any accident during the effectivity of such insurance contract, which
policy was in full force and effect when the vehicular accident complained of occurred. He
prayed that he be reimbursed by the insurance company for the amount that he may be
ordered to pay.
Also later, the herein petitioner sought, and was granted, leave to file a third-party complaint
against the San Leon Rice Mill, Inc. for the reason that the person driving the jeep of Sio
Choy, at the time of the accident, was an employee of the San Leon Rice Mill, Inc.
performing his duties within the scope of his assigned task, and not an employee of Sio
Choy; and that, as the San Leon Rice Mill, Inc. is the employer of the deceased driver, Juan
P. Campollo it should be liable for the acts of its employee, pursuant to Art. 2180 of the Civil
Code. The herein petitioner prayed that judgment be rendered against the San Leon Rice
Mill, Inc., making it liable for the amounts claimed by the plaintiff and/or ordering said San
Leon Rice Mill, Inc. to reimburse and indemnify the petitioner for any sum that it may be
ordered to pay the plaintiff.
After trial, judgment was rendered as follows:
"WHEREFORE, in view of the foregoing findings of this Court judgment is

hereby rendered in favor of the plaintiff and against Sio Choy and Malayan
Insurance Co. Inc., and third-party defendant San Leon Rice Mill, Inc., as
follows:
"(a) P4,103 as actual damages;
"(b) P18,000.00 representing the unearned income of plaintiff Martin C. Vallejos

for the period of three (3) years;
"(c) P5,000.00 as moral damages;
"(d) P2,000.00 as attorney's fees or the total of P29,103.00. plus costs.
"The above—named parties against whom this judgment is rendered are hereby
held jointly and severally liable. With respect, however, to Malayan Insurance
Co., Inc., its liability will be up to only P20,000.00.
"As no satisfactory proof of cost of damage to its bus was presented by defendant
Pantranco, no award should be made in its favor. Its counter—claim for attorney's
fees is also dismissed for not being proved."[1]
On appeal, the respondent Court of Appeals affirmed the judgment of the trial court that Sio
Choy, the San Leon Rice Mill, Inc. and the Malayan Insurance Co., Inc. are jointly and
severally liable for the damages awarded to the plaintiff Martin C. Vallejos. It ruled,
however, that the San Leon Rice Mill, Inc. has no obligation to indemnify or reimburse the
petitioner insurance company for whatever amount it has been ordered to pay on its policy,
since the San Leon Rice Mill, Inc. is not a privy to the contract of insurance between Sio
Choy and the insurance company.[2]
Hence, the present recourse by petitioner insurance company.
The petitioner prays for the reversal of the appellate court's judgment, or, in the alternative,
to order the San Leon Rice Mill, Inc. to reimburse petitioner any amount, in excess of one-
half (½) of the entire amount of damages, petitioner may be ordered to pay jointly and
severally with Sio Choy.
The Court, acting upon the petition, gave due course to the same, but "only insofar as it
concerns the alleged liability of respondent San Leon Rice Mill, Inc. to petitioner, it being
understood that no other aspect of the decision of the Court of Appeals shall be reviewed,
hence, execution may already issue in favor on respondent Martin C. Vallejos against the
respondents, without prejudice to the determination of whether or not petitioner shall be
entitled to reimbursement by respondent by San Leon Rice Mill, Inc. for the whole or part of
whatever the former may pay on the P20,000.00 has been adjudged to pay respondent
Vallejos."[3]
However, in order to determine the alleged liability of respondent San Leon Rice Mill, Inc. to
petitioner, it is important to determine first the nature or basis of the liability of petitioner to
respondent Vallejos, as compared to that of respondents Sio Choy and San Leon Rice Mill,
Inc.
Therefore, the two (2) principal issues to be resolved are (1) whether the trial court as upheld
by the Court of Appeals, was correct in holding petitioner and respondents Sio Choy and San
Leon Rice Mill, Inc. "solidarily liable" to respondent Vallejos, and whether petitioner is
entitled to be reimbursed by respondent San Leon Rice Mill, Inc. for whatever amount
petitioner has been adjudged to pay respondent Vallejos on its Insurance policy.
As to the first issue, it is noted that the trial court found, as affirmed by the appellate court,
that petitioner and respondents Sio Choy and San Leon Rice Mill, Inc. are jointly and
severally liable to respondent Vallejos.
We do not agree with the aforesaid ruling. We hold instead that it is only respondents Sio
Choy and San Leon Rice Mill, Inc. (to the exclusion of the petitioner) that are solidarily
liable to respondent Vallejos for the damages awarded to Vallejos.
It must be observed that respondent Sio Choy is made liable to said plaintiff as owner of the
ill-fated Willys jeep, pursuant to Article 2184 of the Civil Code which provides:
"Art. 2184. In motor vehicle mishaps, the owner is solidarily liable with his
driver, if the former, who was in the vehicle, could have, by the use of due
diligence, prevented the misfortune. It is disputably presumed that a driver was
negligent, if he had been found guilty of reckless driving or violating traffic
regulations at least twice within the next preceding two months.
"If the owner was not in the motor vehicle, the provisions of article 2180 are
applicable."
On the other hand, it is noted that the basis of liability of respondent San Leon Rice Mill, Inc.
to plaintiff Vallejos, the former being the employer of the driver of the Willys jeep at the time
of the motor vehicle mishap, is Article 2180 of the Civil Code which reads:
"Art. 2180. The obligation imposed by article 2176 is demandable not only for
one's own acts or omissions, but also for those of persons for whom one is
responsible.
xxx xxx xxx
"Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
xxx xxx xxx
"The responsibility treated in this article shall cease when the persons Herein
mentioned proved that they observed all the diligence of a good father of a family
to prevent damage."
It thus appears that respondents Sio Choy and San Leon Rice Mill, Inc. are the principal
tortfeasors who are primarily liable to respondent Vallejos. The law states that, the
responsibility of two or more persons who are liable for a quasi-delict is solidary.[4]
On the other hand, the basis of petitioner's liability is its insurance contract with respondent
Sio Choy. If petitioner is adjudged to pay respondent Vallejos in the amount of not more than
P20,000.00, this is on account of its being the insurer of respondent Sio Choy under the third
party liability clause included in the private car comprehensive policy existing between
petitioner and respondent Sio Choy at the time of the complained vehicular accident.
In Guingon vs. Del Monte,[5] a passenger of a jeepney had just alighted therefrom, when he
was bumped by another passenger jeepney. He died as a result thereof. In the damage suit
filed, by the heirs of said passenger against the driver and owner of the jeepney at fault as
well as against the insurance company which insured the latter jeepney against third party
liability, the trial court affirmed by this Court, adjudged the owner and the driver of the
jeepney at fault jointly and severally liable to the heirs of the victim in the total amount of
P9,572.95 as damages and attorney's fees; while the insurance company was sentenced to
pay the heirs the amount of P5,500.00 which was to be applied as partial satisfaction of the
judgment rendered against said owner and driver of the jeepney. Thus, in said Guingon case,
it was only the owner and the driver of the jeepney at fault, not including the insurance
company, who were held solidarily liable to the heirs of the victim.
While it is true that where the insurance contract provides for indemnity against liability to
third persons, such third persons can directly sue the insurer,[6] however, the direct liability
of the insurer under indemnity con tracts against third party liability does not mean that the
insurer can be held solidarily liable with the insured and/ or the other parties found at fault.
The liability of the insurer is based on contract; that of the insured is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos, but it
cannot, as incorrectly held by the trial court, be made "solidarily" liable with the two
principal tortfeasors, namely respondents Sio Choy and San Leon Rice Mill, Inc. For if
petitioner—insurer were solidarily liable with said two (2) respondents by reason of the
indemnity contract against third party liability — under which an insurer can be directly sued
by a third, party — this will result in a violation of the principles underlying , solidary
obligation and insurance con tracts.
In solidary obligation, the creditor may enforce the entire obligation against one of the
solidary debtors.[7] On the other hand, insurance is defined as "a contract whereby one
undertakes for a consideration to indemnify another against loss, damage, or liability arising
from an unknown or contingent event."[8]
In the case at bar, the trial court held petitioner together with respondents Sio Choy and San
Leon Rice Mills, Inc. v. solidarily liable to respondent Vallejos for a total amount of
P29,103,00, with the qualification that petitioner's liability is only up to P20,000.00. In the
context of a solidary obligation, petitioner may be compelled by respondent Valiejos to pay
the entire obligation of P29,103.00, notwithstanding the qualification made by the trial court.
But, how can petitioner be obliged to pay the entire obligation when the amount stated in its
insurance policy with respondent Sio Choy for indemnity against third party liability is only
P20,000.00? Moreover, the qualification made in the decision of the trial court to the effect
that petitioner is sentenced to pay up to P20,000.00 only when the obligation to pay
P29,103.00 is made solidary, is an evident breach of the concept of a solidary obligation.
Thus, We hold that the trial court, as upheld by the Court of Appeals, erred in holding
petitioner, solidarily liable with respondents Sio Choy and San Leon Rice Mill, Inc. to
respondent Vallejos.
As to the second issue, the Court of Appeals, in affirming the decision of the trial court, ruled
that petitioner is not entitled to be reimbursed by respondent San Leon Rice Mill, Inc. on the
ground that said respondent is not privy to the contract of insurance existing between
petitioner and respondent Sio Choy. We disagree.
The appellate court overlooked the principle of subrogation in insurance contracts. Thus —
"xxx Subrogation is a normal incident of indemnity insurance (Aetna L. Ins. Co.

vs. Moses. 287 U.S. 530, 77 L. ed. 477). Upon payment of the loss, the insurer is
entitled to be subrogated pro tanto to any right of action which the insured may
have against the third person whose negligence or wrongful act caused the loss
(44 Am. Jur. 2nd 745, citing Standard Marine Ins. Co. vs. Scottish Metropolitan
Assurance Co., 283 U.S. 284, 75 L. ed. 1037).
"The right of subrogation is of the highest equity. The loss in the first instance is
that of the insured but after reimbursement or compensation, it becomes the loss
of the insurer (44 Am. Jur. 2d. 746, note 16, citing Newcomb vs. Cincinnati Ins.
Co., 22 Ohio St. 382).
"Although many policies including policies in the standard form, now provide for
subrogation, and thus determine the rights of the insurer in this respect, the
equitable right of sub rogation as the legal effect of payment inures to the insurer
without any formal assignment or any express stipulation to that effect in the
policy" (44 Am. Jur. 2nd 746). Stated other wise, when the insurance company
pays for the loss, such payment operates as an equitable assignment to the insurer
of the property and all remedies which the insured may have for the recovery
thereof. That right is not dependent upon nor does it grow out of any privity of
contract. (underscoring supplied) or upon written assignment of claim, and
payment to the insured makes the insurer an assignee in equity (Shambley v. Jobe-
Blackley Plumbing and Heating Co., 264 N.C. 456, 142 SE 2d 18)."[9]
It follows, therefore, that petitioner, upon paying respondent Vallejos the amount of not
exceeding P20,000.00, shall become the subrogee of the insured, the respondent Sio Choy, as
such, it is subrogated to whatever rights the latter has against respondent San Leon Rice Mill,
Inc. Article 1217 of the Civil Code gives to a solidary debtor who has paid the entire
obligation the right to be reimbursed by his co-debtors for the share which corresponds to
each:
"Art. 1217. Payment made by one of the solidary debtors extinguishes the
obligation. If two or more solidary debtors offer to pay, the creditor may choose
which offer to accept.
"He who made the payment may claim from his co-debtors only the share which
corresponds to each, with the interest for the payment already made. If the
payment is made before the debt is due, no interest for the intervening period may
be demanded.
xxx xxx xxx
In accordance with Article 217, petitioner, upon payment to respondent Vallejos and thereby
becoming the subrogee of solidary debtor Sio Choy, is entitled to reimbursement from
respondent San Leon Rice Mill, Inc.
To recapitulate then: We hold that only respondents Sio Choy and San Leon Rice Mill, Inc,
are solidarily liable to the respondent Martin C. Vallejos for the amount of P29,103.00.
Vallejos may enforce the entire obligation on only one of said solidary debtors. If Sio Choy
as solidary debtor is made to pay for the entire obligation (P29,103.00) and petitioner, as
insurer of Sho Choy, is compelled to pay P20,000.00 of said entire obligation, petitioner
would be entitled, as subrogee of Sio Choy as against San Leon Rice Mill, Inc., to be
reimbursed by the latter in the amount of P14,551.50 (which is ½ of P29,103.00).
WHEREFORE, the petition is GRANTED. The decision of the trial court, as affirmed by
the Court of Appeals, is hereby AFFIRMED, with the modification above-mentioned.
Without pronouncement as to costs.
SO ORDERED.
Melencio-Herrera (Chairman), Paras, Sarmiento and Regalado, JJ., concur.
[*]Penned by Justice Ramon C. Fernandez, concurred in by Justices Hermogenes

Concepcion, Jr. and Emilio A. Gancayco.
[**] Penned by Judge Vicente M. Santiago, Jr.
[1] Record on Appeal, pp. 202-203
[2] Rollo, p. 46
[3] Rollo, P. 67
[4] Article 2194, Civil Code
[5] G.R. No. L-22042. August 17,1967, 20 SCRA 1043
[6]
Coquia vs. Fieldman's Insurance Co., Inc., G.R. No. L-23276, November 29, 1968, 26
SCRA 178.
[7]
The Imperial Insurance, Inc. vs. David, G.R. No. L-32425, November 21, 1984, 133
SCRA 317.
[8] Philippine Phoenix Surety Insurance Co. vs. Woodworks, Inc., G.R. No. L-25317, August
6, 1979, 92 SCRA 419.
[9]
Fireman's Fund Insurance Company, et al. vs. Jamila & Company, Inc. et al., G.R. No. L-
27427, April 7, 1976, 70 SCRA 323.
Source: Supreme Court E-Library | Date created: May 21, 2015

4/12/24, 12:22 AM [ G.R. No. L-475. August 31, 1946 ]
77 Phil. 181
[ G.R. No. L-475. August 31, 1946 ]

ISAAC CAPAYAS, ETC., PETITIONER, VS. THE COURT OF FIRST
INSTANCE OF ALBAY, ET AL., RESPONDENTS.
DECISION
FERIA, J.:
This is a petition for mandamus to compel the respondent Court of First Instance of Albay to
admit the so-called amended third-party complaint filed by petitioner against several persons
named therein, on the ground that the refusal of the respondent court to admit the same
constitutes an unlawful neglect of the performance of a duty specifically enjoined upon it by
law, pursuant to Rule 12 of the Rules of Court, sections 1 and 2 of which read as follows:
"SECTION 1. Claim against one not a party to an action.—When a defendant

claims to be entitled against a person not a party to the action, hereinafter called
the third-party defendant, to contribution, indemnity, subrogation or any other
relief, in respect of the plaintiff's claim, he may file, with leave of court, against
such person a pleading which shall state the nature of his claim and shall bo
called the third-party complaint.
"SEC. 2. Motion for leave.—Before the service of his answer a defendant may
move ex parte or, after the service of his answer, on notice to the plaintiff, for
leave as third-party plaintiff to file a complaint against a third-party defendant."
Petitioner's contention is untenable.
First. Because from the said provisions it clearly appears that it is not a court's duty
especially enjoined by law to admit a third-party complaint. Were it a ministerial duty, it
would not be necessary for the defendant to obtain leave of court to file such a complaint;
because if the court has the duty to admit, the defendant has the correlative right to file, a
third-party complaint without necessity of such leave. Of course, when the law says that a
third-party complaint may be filed with leave of court, it refers to a complaint that alleges
facts which prima facie show that the defendant is entitled against the third-party defendant
to contribution, etc., etc. Otherwise the court can not legally grant leave to a defendant to file
it, because it would not be a third-party complaint.
In the case of General Taxicab Assn., Inc. vs. O'Shea, U. S. Court of Appeals, Dist. Court of
Columbia, January 15, 1940, the court said: "Against this background of statutes and
decisions, the Supreme Court, in framing Rule 14 (a), chose the language 'a defendant may
move * * * for leave as a third-party plaintiff to serve a summons and complaint upon a
person not a party to the action, * * *' and the language 'if the motion is granted. * * *' We
think there can be no doubt that it was thus intended to make the impleading of third parties
in the Federal practice discretionary with the trial court. See 1 Moore, op. cit., supra, 741:
'Whether a party to an action shall be allowed to implead an additional party rests in the
4/12/24, 12:22 AM [ G.R. No. L-475. August 31, 1946 ]
discretion of the court. This is in accord with the English, New York and Wisconsin
practices.' " (2 Fed. Rules Service, 14a.l5, Case No. 1.)
Secondly, Because the respondent court would have committed an error if it had admitted the
so-called third-party complaint filed by the petitioner against Isidora Lladoc, Fulgencio
Lladoc and Gregorio Navera, since the facts alleged therein do not show that the petitioner is
entitled to indemnity against them "in respect to plaintiff's claim." The test to determine
whether the claim for indemnity in a third-party complaint, "in respect to plaintiff's claim" is,
whether it arises out of the same transaction on which the plaintiff's claim is based, or the
third-party's claim, although arising out of another or different contract or transaction, is
connected wiish the plaintiff's claim.
According to the decision in the case of Crim vs. Lumberman's Mutual Casualty Co.,(26 Fed.
Supp., 715 [1 Fed. Rules Service, 14all, Case No. 1]), the test to determine when a third-
party defendant may be impleaded is whether he could have been joined originally as a
defendant by the plaintiff. But this could be applied only if there could be asserted against the
defendant as the third-party defendant, jointly and severally or in the alternatives, any right to
relief arising out of the same transaction. For example in an action against the surety on a
bond, the surety may bring in as a third party defendant, the principal who had agreed to
indemnify the surety, because the surety's claim arises out of the same transaction (United
States vs. United States Fidelity and Guaranty Co. vs. Rolling, U. S. Dist. Ct, D. Minn.,
February 1, 1940, 2 Fed. Rules Service 14a.222, Case No. 1). The above test does not cover
all cases in which impleading a third-party may be and have been allowed, which are also
covered by the test we have laid down in the previous paragraph. Under Rule 14 of Federal
Rules of Civil Procedure, which corresponds to our Rule 12, the bringing" in of a third-party
defendant is proper if he would be liable to the plaintiff or to the defendant for all or' part of
the plaintiff's claim against the original defendant, although the third-party defendant's
liability arises out of another transaction. So in the case of Carbola Chemical Co., Inc. vs.
Trundle Engineering Co. (U. S. Dist. Ct., S. D. N. Y., December 26, 1942), it was held that in
an action for breach of contract to render engineering services and to survey a plant, the
defendant was allowed to bring as a third-party defendant, the manufacturer which sold
defendant's equipment to the plaintiff (7 Fed. Rules Service, 14a.ll, Case No. 1). And in a
negligence action by the purchaser of a confection in which it is alleged that the confection
contained a foreign object, the defendant may bring in the person who supplied him with the
constituent containing the foreign object, as a third-party defendant (Saunders vs. Southern
Dairies, Inc., U. S. Dist. Ct., District of Columbia, November 6, 1939 [2 Fed. Rules Service,
14a.226, Case No. 3]).
Another test, provided for by section 4, Rule 12, of our Rules of Court, is whether the third-
party defendant may assert any defenses which the third-party plaintiff has or may have to
the plaintiff's claim. If he may properly assert such defenses, then he is a proper third-party
defendant; otherwise he is not and the claim against him can not be considered as a third-
party complaint.
Petitioner's claim for indemnity against Lladoc and others does neither arise out of the same
transaction or the alleged petitioner's tortuous acts on which plaintiff's action is based, nor is
it based on a different transaction but connected with the plaintiff's claim. Plaintiff's claim
against petitioner and his co-defendants is, according to the allegations in the complaint, (a)
to recover from them damages for the palay which have been illegally harvested from certain
lands belonging to the plaintiff, and (b) to enjoin them from entering said lands and
disturbing and molesting the plaintiff's right of ownership and possession thereof. Whereas
the petitioner's claim against Isidora Llacloc and others is to recover from the latter the value
4/12/24, 12:22 AM [ G.R. No. L-475. August 31, 1946 ]
of the three parcels of land and their fruits amounting to P3,200 plus legal interest, for having
said Isidora, as administratrix of the intestate estate of Ceferino Guanzon, sold said lands in
1927 without authority of the court to Domingo Imperial, from whom said lands were
acquired by the plaintiff. And in the present case, it is clear that if the so-called third-party
complaint be allowed, Isidora Lladoc and others named therein as third-party defendants
could not assert any defense which the petitioner has or may have to the plaintiff's claim.
Lastly. Because the causes of action in this complaint against the petitioner are that "oiv the
month of April, 1944, the defendants by force, intimidation and threat * * * entered upon the
aforesaid Iancis (described in the complaint) and harvested and collected * * * 400 cavanes
of palay produced therefrom"; and that "the defendants persist in their threat to enter upon
said lands with the purpose of disturbing and molesting the plaintiff's right of ownership and
possession thereof." From these allegations it appears that the petitioner is being sued in his
personal capacity, and not'as administrator of the intestate estate of Ceferino Guanzon;
because he was appointed as administrator only on July 1, 1944, according to petitioner's
Exhibit A; and it is not within the powers and duties conferred by law upon an administrator
to do the acts complained of. Being sued in his individual capacity, it is evident that the
petitioner can not file, in his capacity as administrator of the intestate estate of Ceferino
Guanzon, a third-party complaint against Isidora Lladoc and others. It requires no elaborate
argument to show that, under the provisions of section 1, Rule 12, a defendant can not file a
third-party complaint in a different capacity in which he is being sued; otherwise his claim
against the third-party defendant would not be in respect to plaintiff's claim. In other words,
the would be third-party defendants can not be made liable to the petitioner for all or part of
the plaintiff's claim against the petitioner. Petition is therefore denied with costs against the
petitioner. So ordered.
Moran, C. J., Paras, Pablo, Perfecto, Hilado, Bengzon, Briones, Padilla, and Tuason, JJ.,
concur.
Source: Supreme Court E-Library | Date created: August 14, 2014

4/12/24, 12:23 AM [ G.R. No. L-28140. March 19, 1970 ]
143 Phil. 1
[ G.R. No. L-28140. March 19, 1970 ]

CAPITOL MOTORS CORPORATIONS, PLAINTIFF-APPELLEE, VS.
NEMESIO I. YABUT, DEFENDANT-APPELLANT.
DECISION
VILLAMOR, J.:
Appeal on a question of law from the judgment of the Court of First Instance of Rizal in its
Civil Case No. Q-9869.
On March 1, 1966, Capitol Motors Corporations filed a complaint against Nemesio I. Yabut.
It was therein averred that on April 24, 1965, the defendant executed in favor of the plaintiff
a promissory note (copy of which was attached to the complaint) for the sum of P30,134.25,
payable in eighteen (18) equal monthly installments with interest at 12% per annum the first
installment to become due on June 10, 1965; that it was stipulated in the promissory note that
should the defendant fail to pair two (2) successive installments, the principal sum remaining
unpaid would immediately become due and demandable and the defendant would, by way of
attorney's fees and costs of collection, be obligated to the plaintiff for an additional sum
equivalent to 25% of the principal and interest due; that as of February 23, 1966, the sum
remaining unpaid on the promissory note was P30,754.79, including accrued interest; that the
defendant defaulted in the payment of two (2) successive installments, and likewise failed to
pay the interest due on the promissory note; and that in spite of demands by the plaintiff, the
defendant failed and refused to pay the said principal sum and interest due. Prayer was made
that the defendant be ordered to pay the plaintiff the sum of P30,754.79, as well as the
interest due thereon from February 23, 1966, and an additional sum equivalent to 25% of the
amount due, plus costs.
On April 27, 1966, and within the reglementary period, the defendant, through his counsel,
filed an answer which reads:
"DEFENDANT through counsel alleges:
“1. Paragraph 1 of the complaint is admitted.
“2. Paragraphs 2, 3, 4, 5, 6 and 7 of the complaint are specifically denied for lack
of knowledge sufficient to form a belief as to the truth thereof.
"WHEREFORE, it is respectfully prayed that the Complaint be dismissed with

costs against the plaintiff."
On June 16, 1966, the plaintiff filed a motion for judgment on the pleadings, on the ground
that the defendant, not having set forth in his answer the substance of the matters relied upon
by him to support his denial, had failed to deny specifically the material allegations of the
complaint, hence, must be deemed to have admitted them. The defendant did not file an
opposition to the motion. On September 13, 1966, after hearing on the motion, the court
4/12/24, 12:23 AM [ G.R. No. L-28140. March 19, 1970 ]
issued an order granting the said motion and considering the case submitted for decision on
the basis of the pleadings; and on January 9, 1967, the court rendered judgment granting in
toto the plaintiff's prayer in its complaint.
In this appeal, defendant-appellant contends that the court a quo erred in considering him as
having failed to deny specifically the material allegations of the complaint, and,
consequently, in deciding the case on the basis of the pleadings. Citing Moran, Comments
on the Rules of Court, Vol. I 1963 Ed., p. 281, he argues that since Section 10 Rule 8 of the
Revised Rules of Court, recognizes three (3) modes of specific denial, namely: (1) by
specifying each material allegation of fact in the complaint the truth of which the defendant
does not admit and, whenever practicable, setting forth the substance of the matters which he
will rely upon to support his denial or (2) by specifying so much of an averment in the
complaint as is true and material and denying only the remainder or (3) by stating that the
defendant is without knowledge or information sufficient to form a belief as to the truth of a
material averment in the complaint, which has the effect of a denial, and he has adopted the
third mode of specific denial, his answer tendered an issue, and, consequently, the court a
quo could not render a valid judgment on the pleadings.
This appeal is without merit.
We agree with defendant-appellant that one of the modes of specific denial contemplated in
Section 10, Rule 8, is a denial by stating that, the defendant is without knowledge or
information sufficient to form a belief as to the truth of a material averment in the complaint.
The question, however, is whether paragraph 2 of defendant-appellant's answer constitutes a
specific denial under the said rule. We do not think so. In Warner Barnes & Co., Ltd. vs.
Reyes, et al., G.R.No.L-9531, May 140 1958 (103 Phil., 662), this Court said that the rule
authorizing an answer to the effect that the defendant has no knowledge or information
sufficient to form a belief as to the truth of an averment and giving such answer the effect of
a denial, does not apply where the fact as to which want of knowledge is asserted, is so
plainly and necessarily within the defendant's knowledge that his averment of ignorance
must be palpably untrue. In said case the suit was one for foreclosure of mortgage; and a
copy of the deed of mortgage was attached to the complaint; thus, according to this Court, it
would have been easy for the defendants to specifically allege in their answer whether or not
they had executed the alleged mortgage. The same thing can be said in the present case,
where a copy of the promissory note sued upon was attached to the complaint. The doctrine
in Warner Barnes & Co., Ltd. was reiterated in J.P. Juan & Sons, Inc. vs. Lianga Industries,
Inc., G.R.No. L-25137, July 28, 1969 (28 SCRA 807). And in Sy-quia vs. Marsman, G.R.
No. L-23426, March 1, 1968 (22 SCRA 927), this Court said:
"With regard to the plea of lack of knowledge or information set up in paragraph

3 of the answer, this Court's decision in Warner Barnes vs. Reyes, 103 Phil. 662,
6650 is authority for the proposition that this form of denial must be availed of
with sincerity and good faith, not for the purpose of confusing the other party, nor
for purposes of delay. Yet, so lacking in sincerity and good faith is this part of the
answer that defendants-appellants go to the limit of denying knowledge or
information as to whether they (defendants) were in the premises (Marsman
Bldg.) on January 4, 1961, as averred, in paragraph 4 of the complaint. Yet
whether such a fact was or was not true could not be unknown to these
defendants."
In National Marketing Corporation vs. De Castro, 106 Phil., 803 (1959), this Court held:
4/12/24, 12:23 AM [ G.R. No. L-28140. March 19, 1970 ]
"Furthermore, in his answer to the appellee's complaint, he merely alleged that 'he
has no knowledge of information sufficient to form a belief as to the truth of the
matters contained in paragraphs 3, 4, 5 and 6 so much so that he denies
specifically said allegations.' A denial is not specific simply because it is so
qualified. (Sections 6 and 7, Rule 9; El Hogar Filipino vs. Santos Investments,
Inc. 74 Phil., 79; Baetamo vs. Amador, 74 Phil., 735; Dacanay vs. Lucero, 76
Phil., 139; Lagrimas vs. Lagrimas, 95 Phil., 113.) Material averments in a
complaint, other than those as to the amount of damage, are deemed admitted
when not specifically denied. (Section 8, Rule 9.) The court may render judgment
upon the pleadings if material averments in the complaint are admitted. (Section
10, Rule 35; Baetamo vs. Amador, supra Lichauco vs. Guash, 76 Phil., 5; Lati vs.
Valmores, G.R.No. L-6877, 30 March 1954.)”
It becomes evident from all the above doctrines that a mere allegation of ignorance of the
facts alleged in the complaint, is insufficient to raise an issue; the defendant must aver
positively or state how it is that he is ignorant of the facts so alleged. (Francisco, The
Revised Rules of Court in the Philippines, Vol. I, p. 417, citing Wood vs. Staniels 3 Code
Rep. 152 and Vassalt vs. Austin, 32 Cal. 597.)
Thus, in at least two (2) cases where this Court ruled that judgment on the pleadings was not
proper, it will be seen that the reason was that in each case the defendants did something
more than merely alleging lack of knowledge or information sufficient to form a belief. In
Arrojo vs. Caldoza, et al., G.R.No. L-17454, July 31, 1963 (8 SCRA 547), the defendants, in
their answer to the complaint for recovery of possession of a parcel of land, did not merely
allege that they had no knowledge or information sufficient to form a belief as to the truth of
the material allegations in the complaint, but added the following: "The truth of the matter is
that the defendants have not occupied or taken any property belonging to the plaintiff. They
took possession and ownership only of the land belonging to them, which properties were
possessed and owned originally by their predecessors-in-interest, who were the parents of the
defendants * * *." In Benavides vs. Alabastro, G.R.No.L-19762, December 23, 1964 (12
SCRA 553), the defendant's answer did not only deny the material allegations of the
complaint but also set up certain special and affirmative defenses the nature of which called
for presentation of evidence.
There are two other reasons why the present appeal must fail. First. The present action is
founded upon a written instrument attached to the complaint, but defendant-appellant failed
to deny under oath the genuineness and due execution of the instrument; hence, the same are
deemed admitted. (Section 8, Rule 8 of the Revised Rules of Court; Songco vs. Sellner, 37
Phil. 254; Philippine Commercial & Industrial Bank vs. ELRO Phil., Corporation et al., G.R.
No. L-30830, August 22, 1969 [29 SCRA 38]; J.P. Juan & Sons, Inc. vs. Lianga Industries,
Inc., supra.) Second. Defendant-appellant did not oppose the motion for judgment on the
pleadings filed by plaintiff-appellee; neither has he filed a motion for reconsideration of the
order of September 13, 1966, which deemed the case submitted for decision on the
pleadings, or of the decision rendered on January 9, 1967. In Santiago vs. Basilan Lumber
Company, G.R. No. L-15532, October 31, 1963 (9 SCRA 349), this Court said:
"It appears that when the plaintiff moved to have the case decided on the
pleadings, the defendant interposed no objection and has practically assented
thereto. The defendant, therefore, is deemed to have admitted the allegations of
the complaint, so that there was no necessity for the plaintiff to submit evidence
of his claim."
4/12/24, 12:23 AM [ G.R. No. L-28140. March 19, 1970 ]
PREMISES CONSIDERED, the judgment appealed from is affirmed, with costs against
defendant-appellant.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee,
and Barredo, JJ., concur.
Source: Supreme Court E-Library | Date created: November 13, 2014

4/12/24, 12:33 AM E-Library - Information At Your Fingertips: Printer Friendly
453 Phil. 1059
EN BANC
[ G.R. No. 152154, July 15, 2003 ]
REPUBLIC OF THE PHILIPPINES, PETITIONER, VS.
HONORABLE SANDIGANBAYAN (SPECIAL FIRST DIVISION),
FERDINAND E. MARCOS (REPRESENTED BY HIS
ESTATE/HEIRS: IMELDA R. MARCOS, MARIA IMELDA [IMEE]
MARCOS-MANOTOC, FERDINAND R. MARCOS, JR. AND
IRENE MARCOS-ARANETA) AND IMELDA ROMUALDEZ
MARCOS, RESPONDENTS.
DECISION
CORONA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking to (1) set
aside the Resolution dated January 31, 2002 issued by the Special First Division of the
Sandiganbayan in Civil Case No. 0141 entitled Republic of the Philippines vs.
Ferdinand E. Marcos, et. al., and (2) reinstate its earlier decision dated September 19,
2000 which forfeited in favor of petitioner Republic of the Philippines (Republic) the
amount held in escrow in the Philippine National Bank (PNB) in the aggregate amount
of US$658,175,373.60 as of January 31, 2002.
BACKGROUND OF THE CASE
On December 17, 1991, petitioner Republic, through the Presidential Commission on

Good Government (PCGG), represented by the Office of the Solicitor General (OSG),
filed a petition for forfeiture before the Sandiganbayan, docketed as Civil Case No.
0141 entitled Republic of the Philippines vs. Ferdinand E. Marcos, represented by his
Estate/Heirs and Imelda R. Marcos, pursuant to RA 1379[1] in relation to Executive
Order Nos. 1,[2] 2,[3] 14[4] and 14-A.[5]
In said case, petitioner sought the declaration of the aggregate amount of US$356
million (now estimated to be more than US$658 million inclusive of interest) deposited
in escrow in the PNB, as ill-gotten wealth. The funds were previously held by the
following five account groups, using various foreign foundations in certain Swiss
banks:
(1) Azio-Verso-Vibur Foundation accounts;
(2) Xandy-Wintrop: Charis-Scolari-Valamo-Spinus- Avertina Foundation

accounts;
(3) Trinidad-Rayby-Palmy Foundation accounts;
(4) Rosalys-Aguamina Foundation accounts and
https://elibrary.judiciary.gov.ph/thebookshelf/showdocsfriendly/1/48708 1/57
(5) Maler Foundation accounts.
In addition, the petition sought the forfeiture of US$25 million and US$5 million in
treasury notes which exceeded the Marcos couple's salaries, other lawful income as
well as income from legitimately acquired property. The treasury notes are frozen at the
Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, by virtue of the
freeze order issued by the PCGG.
On October 18, 1993, respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene
M. Araneta and Ferdinand R. Marcos, Jr. filed their answer.
Before the case was set for pre-trial, a General Agreement and the Supplemental
Agreements[6] dated December 28, 1993 were executed by the Marcos children and
then PCGG Chairman Magtanggol Gunigundo for a global settlement of the assets of
the Marcos family. Subsequently, respondent Marcos children filed a motion dated
December 7, 1995 for the approval of said agreements and for the enforcement thereof.
The General Agreement/Supplemental Agreements sought to identify, collate, cause the

inventory of and distribute all assets presumed to be owned by the Marcos family under
the conditions contained therein. The aforementioned General Agreement specified in
one of its premises or "whereas clauses" the fact that petitioner "obtained a judgment
from the Swiss Federal Tribunal on December 21, 1990, that the Three Hundred Fifty-
six Million U.S. dollars (US$356 million) belongs in principle to the Republic of the
Philippines provided certain conditionalities are met x x x." The said decision of the
Swiss Federal Supreme Court affirmed the decision of Zurich District Attorney Peter
Consandey, granting petitioner's request for legal assistance.[7] Consandey declared the
various deposits in the name of the enumerated foundations to be of illegal provenance
and ordered that they be frozen to await the final verdict in favor of the parties entitled
to restitution.
Hearings were conducted by the Sandiganbayan on the motion to approve the

General/Supplemental Agreements. Respondent Ferdinand, Jr. was presented as witness
for the purpose of establishing the partial implementation of said agreements.
On October 18, 1996, petitioner filed a motion for summary judgment and/or judgment
on the pleadings. Respondent Mrs. Marcos filed her opposition thereto which was later
adopted by respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr.
In its resolution dated November 20, 1997, the Sandiganbayan denied petitioner's
motion for summary judgment and/or judgment on the pleadings on the ground that the
motion to approve the compromise agreement "(took) precedence over the motion for
summary judgment."
Respondent Mrs. Marcos filed a manifestation on May 26, 1998 claiming she was not a
party to the motion for approval of the Compromise Agreement and that she owned
90% of the funds with the remaining 10% belonging to the Marcos estate.
Meanwhile, on August 10, 1995, petitioner filed with the District Attorney in Zurich,
Switzerland, an additional request for the immediate transfer of the deposits to an
escrow account in the PNB. The request was granted. On appeal by the Marcoses, the
Swiss Federal Supreme Court, in a decision dated December 10, 1997, upheld the
ruling of the District Attorney of Zurich granting the request for the transfer of the
funds. In 1998, the funds were remitted to the Philippines in escrow. Subsequently,
respondent Marcos children moved that the funds be placed in custodia legis because
the deposit in escrow in the PNB was allegedly in danger of dissipation by petitioner.
The Sandiganbayan, in its resolution dated September 8, 1998, granted the motion.
After the pre-trial and the issuance of the pre-trial order and supplemental pre-trial
order dated October 28, 1999 and January 21, 2000, respectively, the case was set for
trial. After several resettings, petitioner, on March 10, 2000, filed another motion for
summary judgment pertaining to the forfeiture of the US$356 million, based on the
following grounds:
THE ESSENTIAL FACTS WHICH WARRANT THE FORFEITURE OF

THE FUNDS SUBJECT OF THE PETITION UNDER R.A. NO. 1379 ARE
ADMITTED BY RESPONDENTS IN THEIR PLEADINGS AND OTHER
SUBMISSIONS MADE IN THE COURSE OF THE PROCEEDING.
II
RESPONDENTS' ADMISSION MADE DURING THE PRE-TRIAL THAT

THEY DO NOT HAVE ANY INTEREST OR OWNERSHIP OVER THE
FUNDS SUBJECT OF THE ACTION FOR FORFEITURE TENDERS NO
GENUINE ISSUE OR CONTROVERSY AS TO ANY MATERIAL FACT
IN THE PRESENT ACTION, THUS WARRANTING THE RENDITION
OF SUMMARY JUDGMENT.[8]
Petitioner contended that, after the pre-trial conference, certain facts were established,
warranting a summary judgment on the funds sought to be forfeited.
Respondent Mrs. Marcos filed her opposition to the petitioner's motion for summary
judgment, which opposition was later adopted by her co-respondents Mrs. Manotoc,
Mrs. Araneta and Ferdinand, Jr.
On March 24, 2000, a hearing on the motion for summary judgment was conducted.
In a decision[9] dated September 19, 2000, the Sandiganbayan granted petitioner's

motion for summary judgment:
CONCLUSION
There is no issue of fact which calls for the presentation of evidence.
The Motion for Summary Judgment is hereby granted.
The Swiss deposits which were transmitted to and now held in escrow at the
PNB are deemed unlawfully acquired as ill-gotten wealth.
DISPOSITION
WHEREFORE, judgment is hereby rendered in favor of the Republic of the

Philippines and against the respondents, declaring the Swiss deposits which
were transferred to and now deposited in escrow at the Philippine National

Bank in the total aggregate value equivalent to US$627,608,544.95 as of
August 31, 2000 together with the increments thereof forfeited in favor of
the State.[10]
Respondent Mrs. Marcos filed a motion for reconsideration dated September 26, 2000.
Likewise, Mrs. Manotoc and Ferdinand, Jr. filed their own motion for reconsideration
dated October 5, 2000. Mrs. Araneta filed a manifestation dated October 4, 2000
adopting the motion for reconsideration of Mrs. Marcos, Mrs. Manotoc and Ferdinand,
Jr.
Subsequently, petitioner filed its opposition thereto.
In a resolution[11] dated January 31, 2002, the Sandiganbayan reversed its September
19, 2000 decision, thus denying petitioner's motion for summary judgment:
CONCLUSION
In sum, the evidence offered for summary judgment of the case did not
prove that the money in the Swiss Banks belonged to the Marcos spouses
because no legal proof exists in the record as to the ownership by the
Marcoses of the funds in escrow from the Swiss Banks.
The basis for the forfeiture in favor of the government cannot be deemed to
have been established and our judgment thereon, perforce, must also have
been without basis.
WHEREFORE, the decision of this Court dated September 19, 2000 is

reconsidered and set aside, and this case is now being set for further
proceedings.[12]
Hence, the instant petition. In filing the same, petitioner argues that the Sandiganbayan,
in reversing its September 19, 2000 decision, committed grave abuse of discretion
amounting to lack or excess of jurisdiction considering that --
PETITIONER WAS ABLE TO PROVE ITS CASE IN ACCORDANCE

WITH THE REQUISITES OF SECTIONS 2 AND 3 OF R.A. NO. 1379:
A. PRIVATE RESPONDENTS CATEGORICALLY ADMITTED NOT

ONLY THE PERSONAL CIRCUMSTANCES OF FERDINAND E.
MARCOS AND IMELDA R. MARCOS AS PUBLIC OFFICIALS
BUT ALSO THE EXTENT OF THEIR SALARIES AS SUCH
PUBLIC OFFICIALS, WHO UNDER THE CONSTITUTION,
WERE PROHIBITED FROM ENGAGING IN THE
MANAGEMENT OF FOUNDATIONS.
B. PRIVATE RESPONDENTS ALSO ADMITTED THE EXISTENCE

OF THE SWISS DEPOSITS AND THEIR OWNERSHIP THEREOF:
1. ADMISSIONS IN PRIVATE RESPONDENTS'

ANSWER;
2. ADMISSION IN THE GENERAL /

SUPPLEMENTAL AGREEMENTS THEY SIGNED
AND SOUGHT TO IMPLEMENT;
3. ADMISSION IN A MANIFESTATION OF
PRIVATE RESPONDENT IMELDA R. MARCOS
AND IN THE MOTION TO PLACE THE RES IN
CUSTODIA LEGIS; AND
4. ADMISSION IN THE UNDERTAKING TO PAY

THE HUMAN RIGHTS VICTIMS.
C. PETITIONER HAS PROVED THE EXTENT OF THE
LEGITIMATE INCOME OF FERDINAND E. MARCOS AND
IMELDA R. MARCOS AS PUBLIC OFFICIALS.
D. PETITIONER HAS ESTABLISHED A PRIMA FACIE

PRESUMPTION OF UNLAWFULLY ACQUIRED WEALTH.
II
SUMMARY JUDGMENT IS PROPER SINCE PRIVATE RESPONDENTS

HAVE NOT RAISED ANY GENUINE ISSUE OF FACT CONSIDERING
THAT:
A. PRIVATE RESPONDENTS' DEFENSE THAT SWISS DEPOSITS

WERE LAWFULLY ACQUIRED DOES NOT ONLY FAIL TO
TENDER AN ISSUE BUT IS CLEARLY A SHAM; AND
B. IN SUBSEQUENTLY DISCLAIMING OWNERSHIP OF THE

SWISS DEPOSITS, PRIVATE RESPONDENTS ABANDONED
THEIR SHAM DEFENSE OF LEGITIMATE ACQUISITION, AND
THIS FURTHER JUSTIFIED THE RENDITION OF A SUMMARY
JUDGMENT.
III
THE FOREIGN FOUNDATIONS NEED NOT BE IMPLEADED.
IV
THE HONORABLE PRESIDING JUSTICE COMMITTED GRAVE

ABUSE OF DISCRETION IN REVERSING HIMSELF ON THE
GROUND THAT ORIGINAL COPIES OF THE AUTHENTICATED
SWISS DECISIONS AND THEIR "AUTHENTICATED
TRANSLATIONS" HAVE NOT BEEN SUBMITTED TO THE COURT,
WHEN EARLIER THE SANDIGANBAYAN HAS QUOTED
EXTENSIVELY A PORTION OF THE TRANSLATION OF ONE OF
THESE SWISS DECISIONS IN HIS "PONENCIA" DATED JULY 29,
1999 WHEN IT DENIED THE MOTION TO RELEASE ONE HUNDRED
FIFTY MILLION US DOLLARS ($150,000,000.00) TO THE HUMAN

RIGHTS VICTIMS.
PRIVATE RESPONDENTS ARE DEEMED TO HAVE WAIVED THEIR

OBJECTION TO THE AUTHENTICITY OF THE SWISS FEDERAL
SUPREME COURT DECISIONS.[13]
Petitioner, in the main, asserts that nowhere in the respondents' motions for
reconsideration and supplemental motion for reconsideration were the authenticity,
accuracy and admissibility of the Swiss decisions ever challenged. Otherwise stated, it
was incorrect for the Sandiganbayan to use the issue of lack of authenticated
translations of the decisions of the Swiss Federal Supreme Court as the basis for
reversing itself because respondents themselves never raised this issue in their motions
for reconsideration and supplemental motion for reconsideration. Furthermore, this
particular issue relating to the translation of the Swiss court decisions could not be
resurrected anymore because said decisions had been previously utilized by the
Sandiganbayan itself in resolving a "decisive issue" before it.
Petitioner faults the Sandiganbayan for questioning the non-production of the

authenticated translations of the Swiss Federal Supreme Court decisions as this was a
marginal and technical matter that did not diminish by any measure the conclusiveness
and strength of what had been proven and admitted before the Sandiganbayan, that is,
that the funds deposited by the Marcoses constituted ill-gotten wealth and thus
belonged to the Filipino people.
In compliance with the order of this Court, Mrs. Marcos filed her comment to the
petition on May 22, 2002. After several motions for extension which were all granted,
the comment of Mrs. Manotoc and Ferdinand, Jr. and the separate comment of Mrs.
Araneta were filed on May 27, 2002.
Mrs. Marcos asserts that the petition should be denied on the following grounds:
A.
PETITIONER HAS A PLAIN, SPEEDY, AND ADEQUATE REMEDY AT

THE SANDIGANBAYAN.
B.
THE SANDIGANBAYAN DID NOT ABUSE ITS DISCRETION IN

SETTING THE CASE FOR FURTHER PROCEEDINGS.[14]
Mrs. Marcos contends that petitioner has a plain, speedy and adequate remedy in the
ordinary course of law in view of the resolution of the Sandiganbayan dated January
31, 2000 directing petitioner to submit the authenticated translations of the Swiss
decisions. Instead of availing of said remedy, petitioner now elevates the matter to this
Court. According to Mrs. Marcos, a petition for certiorari which does not comply with
the requirements of the rules may be dismissed. Since petitioner has a plain, speedy and
adequate remedy, that is, to proceed to trial and submit authenticated translations of the
Swiss decisions, its petition before this Court must be dismissed. Corollarily, the
Sandiganbayan's ruling to set the case for further proceedings cannot and should not be
considered a capricious and whimsical exercise of judgment.
Likewise, Mrs. Manotoc and Ferdinand, Jr., in their comment, prayed for the dismissal
of the petition on the grounds that:
(A)
BY THE TIME PETITIONER FILED ITS MOTION FOR SUMMARY

JUDGMENT ON 10 MARCH 2000, IT WAS ALREADY BARRED FROM
DOING SO.
(1) The Motion for Summary Judgment was based on private respondents'
Answer and other documents that had long been in the records of the case.
Thus, by the time the Motion was filed on 10 March 2000, estoppel by
laches had already set in against petitioner.
(2) By its positive acts and express admissions prior to filing the Motion for
Summary Judgment on 10 March 1990, petitioner had legally bound itself
to go to trial on the basis of existing issues. Thus, it clearly waived
whatever right it had to move for summary judgment.
(B)
EVEN ASSUMING THAT PETITIONER WAS NOT LEGALLY BARRED

FROM FILING THE MOTION FOR SUMMARY JUDGMENT, THE
SANDIGANBAYAN IS CORRECT IN RULING THAT PETITIONER
HAS NOT YET ESTABLISHED A PRIMA FACIE CASE FOR THE
FORFEITURE OF THE SWISS FUNDS.
(1) Republic Act No. 1379, the applicable law, is a penal statute. As such, its
provisions, particularly the essential elements stated in section 3 thereof,
are mandatory in nature. These should be strictly construed against
petitioner and liberally in favor of private respondents.
(2) Petitioner has failed to establish the third and fourth essential elements in
Section 3 of R.A. 1379 with respect to the identification, ownership, and
approximate amount of the property which the Marcos couple allegedly
acquired during their incumbency.
(a) Petitioner has failed to prove that the Marcos couple acquired or
own the Swiss funds.
(b) Even assuming, for the sake of argument, that the fact of
acquisition has been proven, petitioner has categorically admitted
that it has no evidence showing how much of the Swiss funds was
acquired during the incumbency of the Marcos couple from 31
December 1965 to 25 February 1986.
(3) In contravention of the essential element stated in Section 3 (e) of R.A.

1379, petitioner has failed to establish the other proper earnings and
income from legitimately acquired property of the Marcos couple over and
above their government salaries.
(4) Since petitioner failed to prove the three essential elements provided in
paragraphs (c)[15] (d),[16] and (e)[17] of Section 3, R.A. 1379, the
inescapable conclusion is that the prima facie presumption of unlawful
acquisition of the Swiss funds has not yet attached. There can, therefore, be
no premature forfeiture of the funds.
(C)
IT WAS ONLY BY ARBITRARILY ISOLATING AND THEN TAKING

CERTAIN STATEMENTS MADE BY PRIVATE RESPONDENTS OUT
OF CONTEXT THAT PETITIONER WAS ABLE TO TREAT THESE AS
"JUDICIAL ADMISSIONS" SUFFICIENT TO ESTABLISH A PRIMA
FACIE AND THEREAFTER A CONCLUSIVE CASE TO JUSTIFY THE
FORFEITURE OF THE SWISS FUNDS.
(1) Under Section 27, Rule 130 of the Rules of Court, the General and
Supplemental Agreements, as well as the other written and testimonial
statements submitted in relation thereto, are expressly barred from being
admissible in evidence against private respondents.
(2) Had petitioner bothered to weigh the alleged admissions together with the
other statements on record, there would be a demonstrable showing that no
such judicial admissions were made by private respondents.
(D)
SINCE PETITIONER HAS NOT (YET) PROVEN ALL THE ESSENTIAL

ELEMENTS TO ESTABLISH A PRIMA FACIE CASE FOR
FORFEITURE, AND PRIVATE RESPONDENTS HAVE NOT MADE
ANY JUDICIAL ADMISSION THAT WOULD HAVE FREED IT FROM
ITS BURDEN OF PROOF, THE SANDIGANBAYAN DID NOT
COMMIT GRAVE ABUSE OF DISCRETION IN DENYING THE
MOTION FOR SUMMARY JUDGMENT. CERTIORARI, THEREFORE,
DOES NOT LIE, ESPECIALLY AS THIS COURT IS NOT A TRIER OF
FACTS.[18]
For her part, Mrs. Araneta, in her comment to the petition, claims that obviously
petitioner is unable to comply with a very plain requirement of respondent
Sandiganbayan. The instant petition is allegedly an attempt to elevate to this Court
matters, issues and incidents which should be properly threshed out at the
Sandiganbayan. To respondent Mrs. Araneta, all other matters, save that pertaining to
the authentication of the translated Swiss Court decisions, are irrelevant and
impertinent as far as this Court is concerned. Respondent Mrs. Araneta manifests that
she is as eager as respondent Sandiganbayan or any interested person to have the Swiss
Court decisions officially translated in our known language. She says the authenticated
official English version of the Swiss Court decisions should be presented. This should
stop all speculations on what indeed is contained therein. Thus, respondent Mrs.
Araneta prays that the petition be denied for lack of merit and for raising matters
which, in elaborated fashion, are impertinent and improper before this Court.
PROPRIETY OF PETITIONER'S
ACTION FOR CERTIORARI
But before this Court discusses the more relevant issues, the question regarding the
propriety of petitioner Republic's action for certiorari under Rule 65[19] of the 1997
Rules of Civil Procedure assailing the Sandiganbayan Resolution dated January 21,
2002 should be threshed out.
At the outset, we would like to stress that we are treating this case as an exception to
the general rule governing petitions for certiorari. Normally, decisions of the
Sandiganbayan are brought before this Court under Rule 45, not Rule 65.[20] But where
the case is undeniably ingrained with immense public interest, public policy and deep
historical repercussions, certiorari is allowed notwithstanding the existence and
availability of the remedy of appeal.[21]
One of the foremost concerns of the Aquino Government in February 1986 was the
recovery of the unexplained or ill-gotten wealth reputedly amassed by former President
and Mrs. Ferdinand E. Marcos, their relatives, friends and business associates. Thus,
the very first Executive Order (EO) issued by then President Corazon Aquino upon her
assumption to office after the ouster of the Marcoses was EO No. 1, issued on February
28, 1986. It created the Presidential Commission on Good Government (PCGG) and
charged it with the task of assisting the President in the recovery of all ill-gotten wealth
accumulated by former President Ferdinand E. Marcos, his immediate family, relatives,
subordinates and close associates, whether located in the Philippines or abroad,
including the takeover or sequestration of all business enterprises and entities owned or
controlled by them during his administration, directly or through nominees, by taking
undue advantage of their public office and/or using their powers, authority, influence,
connections or relationship. The urgency of this undertaking was tersely described by
this Court in Republic vs. Lobregat[22]:
surely x x x an enterprise" of great pith and moment"; it was attended by"

great expectations"; it was initiated not only out of considerations of simple
justice but also out of sheer necessity - the national coffers were empty, or
nearly so.
In all the alleged ill-gotten wealth cases filed by the PCGG, this Court has seen fit to
set aside technicalities and formalities that merely serve to delay or impede judicious
resolution. This Court prefers to have such cases resolved on the merits at the
Sandiganbayan. But substantial justice to the Filipino people and to all parties
concerned, not mere legalisms or perfection of form, should now be relentlessly and
firmly pursued. Almost two decades have passed since the government initiated its
search for and reversion of such ill-gotten wealth. The definitive resolution of such
cases on the merits is thus long overdue. If there is proof of illegal acquisition,
accumulation, misappropriation, fraud or illicit conduct, let it be brought out now. Let
the ownership of these funds and other assets be finally determined and resolved with
dispatch, free from all the delaying technicalities and annoying procedural sidetracks.
[23]
We thus take cognizance of this case and settle with finality all the issues therein.
ISSUES BEFORE THIS COURT
The crucial issues which this Court must resolve are: (1) whether or not respondents
raised any genuine issue of fact which would either justify or negate summary
judgment; and (2) whether or not petitioner Republic was able to prove its case for
forfeiture in accordance with Sections 2 and 3 of RA 1379.
(1) THE PROPRIETY OF SUMMARY JUDGMENT
We hold that respondent Marcoses failed to raise any genuine issue of fact in their
pleadings. Thus, on motion of petitioner Republic, summary judgment should take
place as a matter of right.
In the early case of Auman vs. Estenzo[24], summary judgment was described as a
judgment which a court may render before trial but after both parties have pleaded. It is
ordered by the court upon application by one party, supported by affidavits, depositions
or other documents, with notice upon the adverse party who may in turn file an
opposition supported also by affidavits, depositions or other documents. This is after
the court summarily hears both parties with their respective proofs and finds that there
is no genuine issue between them. Summary judgment is sanctioned in this jurisdiction
by Section 1, Rule 35 of the 1997 Rules of Civil Procedure:
SECTION 1. Summary judgment for claimant.- A party seeking to recover

upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief
may, at any time after the pleading in answer thereto has been served, move
with supporting affidavits, depositions or admissions for a summary
judgment in his favor upon all or any part thereof.[25]
Summary judgment is proper when there is clearly no genuine issue as to any material
fact in the action.[26] The theory of summary judgment is that, although an answer may
on its face appear to tender issues requiring trial, if it is demonstrated by affidavits,
depositions or admissions that those issues are not genuine but sham or fictitious, the
Court is justified in dispensing with the trial and rendering summary judgment for
petitioner Republic.
The Solicitor General made a very thorough presentation of its case for forfeiture:
xxx
4. Respondent Ferdinand E. Marcos (now deceased and represented by

his Estate/Heirs) was a public officer for several decades continuously
and without interruption as Congressman, Senator, Senate President
and President of the Republic of the Philippines from December 31,
1965 up to his ouster by direct action of the people of EDSA on
February 22-25, 1986.
5. Respondent Imelda Romualdez Marcos (Imelda, for short) the former

First Lady who ruled with FM during the 14-year martial law regime,
occupied the position of Minister of Human Settlements from June
1976 up to the peaceful revolution in February 22-25, 1986. She
likewise served once as a member of the Interim Batasang Pambansa
during the early years of martial law from 1978 to 1984 and as Metro
Manila Governor in concurrent capacity as Minister of Human
Settlements. x x x
xxx xxx xxx
11. At the outset, however, it must be pointed out that based on the Official
Report of the Minister of Budget, the total salaries of former President
Marcos as President form 1966 to 1976 was P60,000 a year and from 1977
to 1985, P100,000 a year; while that of the former First Lady, Imelda R.
Marcos, as Minister of Human Settlements from June 1976 to February 22-
25, 1986 was P75,000 a year xxx.
ANALYSIS OF RESPONDENTS
LEGITIMATE INCOME
xxx
12. Based on available documents, the ITRs of the Marcoses for the years
1965-1975 were filed under Tax Identification No. 1365-055-1. For
the years 1976 until 1984, the returns were filed under Tax
Identification No. M 6221-J 1117-A-9.
13. The data contained in the ITRs and Balance Sheet filed by the
"Marcoses are summarized and attached to the reports in the following
schedules:
Schedule A:
Schedule of Income (Annex "T" hereof);
Schedule B:
Schedule of Income Tax Paid (Annex "T-1" hereof);
Schedule C:
Schedule of Net Disposable Income (Annex "T-2" hereof);
Schedule D:
Schedule of Networth Analysis (Annex "T-3" hereof).
14. As summarized in Schedule A (Annex "T" hereof), the Marcoses

reported P16,408,442.00 or US$2,414,484.91 in total income over a
period of 20 years from 1965 to 1984. The sources of income are as
follows:
Official Salaries - P 2,627,581.00 - 16.01%

Legal Practice - 11,109,836.00 - 67.71%
Farm Income - 149,700.00 - .91%
Others - 2,521,325.00 - 15.37%
Total - P16,408,442.00 - 100.00%
15. FM's official salary pertains to his compensation as Senate President

in 1965 in the amount of P15,935.00 and P1,420,000.00 as President
of the Philippines during the period 1966 until 1984. On the other
hand, Imelda reported salaries and allowances only for the years 1979
to 1984 in the amount of P1,191,646.00. The records indicate that the
reported income came from her salary from the Ministry of Human
Settlements and allowances from Food Terminal, Inc., National Home
Mortgage Finance Corporation, National Food Authority Council,

Light Rail Transit Authority and Home Development Mutual Fund.
16. Of the P11,109,836.00 in reported income from legal practice, the

amount of P10,649,836.00 or 96% represents "receivables from prior
years" during the period 1967 up to 1984.
17. In the guise of reporting income using the cash method under Section
38 of the National Internal Revenue Code, FM made it appear that he
had an extremely profitable legal practice before he became a
President (FM being barred by law from practicing his law profession
during his entire presidency) and that, incredibly, he was still
receiving payments almost 20 years after. The only problem is that in
his Balance Sheet attached to his 1965 ITR immediately preceeding
his ascendancy to the presidency he did not show any Receivables
from client at all, much less the P10,65-M that he decided to later
recognize as income. There are no documents showing any
withholding tax certificates. Likewise, there is nothing on record that
will show any known Marcos client as he has no known law office. As
previously stated, his networth was a mere P120,000.00 in December,
1965. The joint income tax returns of FM and Imelda cannot,
therefore, conceal the skeletons of their kleptocracy.
18. FM reported a total of P2,521,325.00 as Other Income for the years

1972 up to 1976 which he referred to in his return as "Miscellaneous
Items" and "Various Corporations." There is no indication of any
payor of the dividends or earnings.
19. Spouses Ferdinand and Imelda did not declare any income from any
deposits and placements which are subject to a 5% withholding tax.
The Bureau of Internal Revenue attested that after a diligent search of
pertinent records on file with the Records Division, they did not find
any records involving the tax transactions of spouses Ferdinand and
Imelda in Revenue Region No. 1, Baguio City, Revenue Region
No.4A, Manila, Revenue Region No. 4B1, Quezon City and Revenue
No. 8, Tacloban, Leyte. Likewise, the Office of the Revenue Collector
of Batac. Further, BIR attested that no records were found on any
filing of capital gains tax return involving spouses FM and Imelda
covering the years 1960 to 1965.
20. In Schedule B, the taxable reported income over the twenty-year

period was P14,463,595.00 which represents 88% of the gross
income. The Marcoses paid income taxes totaling P8,233,296.00 or
US$1,220,667.59. The business expenses in the amount of
P861,748.00 represent expenses incurred for subscription, postage,
stationeries and contributions while the other deductions in the
amount of P567,097.00 represents interest charges, medicare fees,
taxes and licenses. The total deductions in the amount of
P1,994,845.00 represents 12% of the total gross income.
21. In Schedule C, the net cumulative disposable income amounts to

P6,756,301.00 or US$980,709.77. This is the amount that represents
that portion of the Marcoses income that is free for consumption,

savings and investments. The amount is arrived at by adding back to
the net income after tax the personal and additional exemptions for the
years 1965-1984, as well as the tax-exempt salary of the President for
the years 1966 until 1972.
22. Finally, the networth analysis in Schedule D, represents the total

accumulated networth of spouses, Ferdinand and Imelda.
Respondent's Balance Sheet attached to their 1965 ITR, covering the
year immediately preceding their ascendancy to the presidency,
indicates an ending networth of P120,000.00 which FM declared as
Library and Miscellaneous assets. In computing for the networth, the
income approach was utilized. Under this approach, the beginning
capital is increased or decreased, as the case may be, depending upon
the income earned or loss incurred. Computations establish the total
networth of spouses Ferdinand and Imelda, for the years 1965 until
1984 in the total amount of US$957,487.75, assuming the income
from legal practice is real and valid x x x.
G. THE SECRET MARCOS DEPOSITS IN SWISS BANKS
23. The following presentation very clearly and overwhelmingly show in

detail how both respondents clandestinely stashed away the country's
wealth to Switzerland and hid the same under layers upon layers of
foundations and other corporate entities to prevent its detection.
Through their dummies/nominees, fronts or agents who formed those
foundations or corporate entities, they opened and maintained
numerous bank accounts. But due to the difficulty if not the
impossibility of detecting and documenting all those secret accounts
as well as the enormity of the deposits therein hidden, the following
presentation is confined to five identified accounts groups, with
balances amounting to about $356-M with a reservation for the filing
of a supplemental or separate forfeiture complaint should the need
arise.
H. THE AZIO-VERSO-VIBUR FOUNDATION ACCOUNTS
24. On June 11, 1971, Ferdinand Marcos issued a written order to Dr.
Theo Bertheau, legal counsel of Schweizeresche Kreditanstalt or
SKA, also known as Swiss Credit Bank, for him to establish the AZIO
Foundation. On the same date, Marcos executed a power of attorney in
favor of Roberto S. Benedicto empowering him to transact business in
behalf of the said foundation. Pursuant to the said Marcos mandate,
AZIO Foundation was formed on June 21, 1971 in Vaduz. Walter
Fessler and Ernst Scheller, also of SKA Legal Service, and Dr.
Helmuth Merling from Schaan were designated as members of the
Board of Trustees of the said foundation. Ferdinand Marcos was
named first beneficiary and the Marcos Foundation, Inc. was second
beneficiary. On November 12, 1971, FM again issued another written
order naming Austrahil PTY Ltd. In Sydney, Australia, as the
foundation's first and sole beneficiary. This was recorded on
December 14, 1971.
25. In an undated instrument, Marcos changed the first and sole

beneficiary to CHARIS FOUNDATION. This change was recorded on
December 4, 1972.
26. On August 29, 1978, the AZIO FOUNDATION was renamed to

VERSO FOUNDATION. The Board of Trustees remained the same.
On March 11, 1981, Marcos issued a written directive to liquidated
VERSO FOUNDATION and to transfer all its assets to account of
FIDES TRUST COMPANY at Bank Hofman in Zurich under the
account "Reference OSER." The Board of Trustees decided to dissolve
the foundation on June 25, 1981.
27. In an apparent maneuver to bury further the secret deposits beneath

the thick layers of corporate entities, FM effected the establishment of
VIBUR FOUNDATION on May 13, 1981 in Vaduz. Atty. Ivo Beck
and Limag Management, a wholly-owned subsidiary of Fides Trust,
were designated as members of the Board of Trustees. The account
was officially opened with SKA on September 10, 1981. The
beneficial owner was not made known to the bank since Fides Trust
Company acted as fiduciary. However, comparison of the listing of the
securities in the safe deposit register of the VERSO FOUNDATION
as of February 27, 1981 with that of VIBUR FOUNDATION as of
December 31, 1981 readily reveals that exactly the same securities
were listed.
28. Under the foregoing circumstances, it is certain that the VIBUR

FOUNDATION is the beneficial successor of VERSO
FOUNDATION.
29. On March 18, 1986, the Marcos-designated Board of Trustees decided

to liquidate VIBUR FOUNDATION. A notice of such liquidation was
sent to the Office of the Public Register on March 21, 1986. However,
the bank accounts and respective balances of the said VIBUR
FOUNDATION remained with SKA. Apparently, the liquidation was
an attempt by the Marcoses to transfer the foundation's funds to
another account or bank but this was prevented by the timely freeze
order issued by the Swiss authorities. One of the latest documents
obtained by the PCGG from the Swiss authorities is a declaration
signed by Dr. Ivo Beck (the trustee) stating that the beneficial owner
of VIBUR FOUNDATION is Ferdinand E. Marcos. Another
document signed by G. Raber of SKA shows that VIBUR
FOUNDATION is owned by the "Marcos Familie"
30. As of December 31, 1989, the balance of the bank accounts of VIBUR
FOUNDATION with SKA, Zurich, under the General Account No.
469857 totaled $3,597,544.00
I. XANDY-WINTROP: CHARIS-SCOLARI- VALAMO-SPINUS-

AVERTINA FOUNDATION ACCOUNTS
31. This is the most intricate and complicated account group. As the Flow
Chart hereof shows, two (2) groups under the foundation organized by
Marcos dummies/nominees for FM's benefit, eventually joined
together and became one (1) account group under the AVERTINA
FOUNDATION for the benefit of both FM and Imelda. This is the
biggest group from where the $50-M investment fund of the Marcoses
was drawn when they bought the Central Bank's dollar-denominated
treasury notes with high-yielding interests.
32. On March 20, 1968, after his second year in the presidency, Marcos
opened bank accounts with SKA using an alias or pseudonym
WILLIAM SAUNDERS, apparently to hide his true identity. The next
day, March 21, 1968, his First Lady, Mrs. Imelda Marcos also opened
her own bank accounts with the same bank using an American-
sounding alias, JANE RYAN. Found among the voluminous
documents in Malacañang shortly after they fled to Hawaii in haste
that fateful night of February 25, 1986, were accomplished forms for
"Declaration/Specimen Signatures" submitted by the Marcos couple.
Under the caption "signature(s)" Ferdinand and Imelda signed their
real names as well as their respective aliases underneath. These
accounts were actively operated and maintained by the Marcoses for
about two (2) years until their closure sometime in February, 1970 and
the balances transferred to XANDY FOUNDATION.
33. The XANDY FOUNDATION was established on March 3, 1970 in

Vaduz. C.W. Fessler, C. Souviron and E. Scheller were named as
members of the Board of Trustees.
34. FM and Imelda issued the written mandate to establish the foundation
to Markus Geel of SKA on March 3, 1970. In the handwritten
Regulations signed by the Marcos couple as well as in the type-written
Regulations signed by Markus Geel both dated February 13, 1970, the
Marcos spouses were named the first beneficiaries, the surviving
spouse as the second beneficiary and the Marcos children - Imee,
Ferdinand, Jr. (Bongbong) and Irene - as equal third beneficiaries.
35. The XANDY FOUNDATION was renamed WINTROP

FOUNDATION on August 29, 1978. The Board of Trustees remained
the same at the outset. However, on March 27, 1980, Souviron was
replaced by Dr. Peter Ritter. On March 10. 1981, Ferdinand and
Imelda Marcos issued a written order to the Board of Wintrop to
liquidate the foundation and transfer all its assets to Bank Hofmann in
Zurich in favor of FIDES TRUST COMPANY. Later, WINTROP
FOUNDATION was dissolved.
36. The AVERTINA FOUNDATION was established on May 13, 1981 in

Vaduz with Atty. Ivo Beck and Limag Management, a wholly-owned
subsidiary of FIDES TRUST CO., as members of the Board of
Trustees. Two (2) account categories, namely: CAR and NES, were
opened on September 10, 1981. The beneficial owner of AVERTINA
was not made known to the bank since the FIDES TRUST CO. acted
as fiduciary. However, the securities listed in the safe deposit register
of WINTROP FOUNDATION Category R as of December 31, 1980

were the same as those listed in the register of AVERTINA
FOUNDATION Category CAR as of December 31, 1981. Likewise,
the securities listed in the safe deposit register of WINTROP
FOUNDATION Category S as of December 31, 1980 were the same
as those listed in the register of Avertina Category NES as of
December 31, 1981.Under the circumstances, it is certain that the
beneficial successor of WINTROP FOUNDATION is AVERTINA
FOUNDATION. The balance of Category CAR as of December 31,
1989 amounted to US$231,366,894.00 while that of Category NES as
of 12-31-83 was US$8,647,190.00. Latest documents received from
Swiss authorities included a declaration signed by IVO Beck stating
that the beneficial owners of AVERTINA FOUNDATION are FM and
Imelda. Another document signed by G. Raber of SKA indicates that
Avertina Foundation is owned by the "Marcos Families."
37. The other groups of foundations that eventually joined AVERTINA

were also established by FM through his dummies, which started with
the CHARIS FOUNDATION.
38. The CHARIS FOUNDATION was established in VADUZ on

December 27, 1971. Walter Fessler and Ernst Scheller of SKA and Dr.
Peter Ritter were named as directors. Dr. Theo Bertheau, SKA legal
counsel, acted as founding director in behalf of FM by virtue of the
mandate and agreement dated November 12, 1971. FM himself was
named the first beneficiary and Xandy Foundation as second
beneficiary in accordance with the handwritten instructions of FM on
November 12, 1971 and the Regulations. FM gave a power of attorney
to Roberto S. Benedicto on February 15, 1972 to act in his behalf with
regard to Charis Foundation.
39. On December 13, 1974, Charis Foundation was renamed Scolari

Foundation but the directors remained the same. On March 11, 1981
FM ordered in writing that the Valamo Foundation be liquidated and
all its assets be transferred to Bank Hofmann, AG in favor of Fides
Trust Company under the account "Reference OMAL". The Board of
Directors decided on the immediate dissolution of Valamo Foundation
on June 25, 1981.
40. The SPINUS FOUNDATION was established on May 13, 1981 in

Vaduz with Atty. Ivo Beck and Limag Management, a wholly-owned
subsidiary of Fides Trust Co., as members of the Foundation's Board
of Directors. The account was officially opened with SKA on
September 10, 1981. The beneficial owner of the foundation was not
made known to the bank since Fides Trust Co. acted as fiduciary.
However, the list of securities in the safe deposit register of Valamo
Foundation as of December 31, 1980 are practically the same with
those listed in the safe deposit register of Spinus Foundation as of
December 31, 1981. Under the circumstances, it is certain that the
Spinus Foundation is the beneficial successor of the Valamo
Foundation.
41. On September 6, 1982, there was a written instruction from Spinus

Foundation to SKA to close its Swiss Franc account and transfer the
balance to Avertina Foundation. In July/August, 1982, several
transfers from the foundation's German marks and US dollar accounts
were made to Avertina Category CAR totaling DM 29.5-M and $58-
M, respectively. Moreover, a comparison of the list of securities of the
Spinus Foundation as of February 3, 1982 with the safe deposit slips
of the Avertina Foundation Category CAR as of August 19, 1982
shows that all the securities of Spinus were transferred to Avertina.
J. TRINIDAD-RAYBY-PALMY FOUNDATION ACCOUNTS
42. The Trinidad Foundation was organized on August 26, 1970 in Vaduz
with C.W. Fessler and E. Scheller of SKA and Dr. Otto Tondury as the
foundation's directors. Imelda issued a written mandate to establish the
foundation to Markus Geel on August 26, 1970. The regulations as
well as the agreement, both dated August 28, 1970 were likewise
signed by Imelda. Imelda was named the first beneficiary and her
children Imelda (Imee), Ferdinand, Jr. (Bongbong) and, Irene were
named as equal second beneficiaries.
43. Rayby Foundation was established on June 22, 1973 in Vaduz with
Fessler, Scheller and Ritter as members of the board of directors.
Imelda issued a written mandate to Dr. Theo Bertheau to establish the
foundation with a note that the foundation's capitalization as well as
the cost of establishing it be debited against the account of Trinidad
Foundation. Imelda was named the first and only beneficiary of Rayby
foundation. According to written information from SKA dated
November 28, 1988, Imelda apparently had the intention in 1973 to
transfer part of the assets of Trinidad Foundation to another
foundation, thus the establishment of Rayby Foundation. However,
transfer of assets never took place. On March 10, 1981, Imelda issued
a written order to transfer all the assets of Rayby Foundation to
Trinidad Foundation and to subsequently liquidate Rayby. On the
same date, she issued a written order to the board of Trinidad to
dissolve the foundation and transfer all its assets to Bank Hofmann in
favor of Fides Trust Co. Under the account "Reference Dido," Rayby
was dissolved on April 6, 1981 and Trinidad was liquidated on August
3, 1981.
44. The PALMY FOUNDATION was established on May 13, 1981 in

Vaduz with Dr. Ivo Beck and Limag Management, a wholly-owned
subsidiary of Fides Trust Co, as members of the Foundation's Board of
Directors. The account was officially opened with the SKA on
September 10, 1981. The beneficial owner was not made known to the
bank since Fides Trust Co. acted as fiduciary. However, when one
compares the listing of securities in the safe deposit register of
Trinidad Foundation as of December 31,1980 with that of the Palmy
Foundation as of December 31, 1980, one can clearly see that
practically the same securities were listed. Under the circumstances, it
is certain that the Palmy Foundation is the beneficial successor of the
Trinidad Foundation.
45. As of December 31, 1989, the ending balance of the bank accounts of
Palmy Foundation under General Account No. 391528 is
$17,214,432.00.
46. Latest documents received from Swiss Authorities included a

declaration signed by Dr. Ivo Beck stating that the beneficial owner of
Palmy Foundation is Imelda. Another document signed by Raber
shows that the said Palmy Foundation is owned by "Marcos Familie".
K. ROSALYS-AGUAMINA FOUNDATION ACCOUNTS
47. Rosalys Foundation was established in 1971 with FM as the

beneficiary. Its Articles of Incorporation was executed on September
24, 1971 and its By-Laws on October 3, 1971. This foundation
maintained several accounts with Swiss Bank Corporation (SBC)
under the general account 51960 where most of the bribe monies from
Japanese suppliers were hidden.
48. On December 19, 1985, Rosalys Foundation was liquidated and all its
assets were transferred to Aguamina Corporation's (Panama) Account
No. 53300 with SBC. The ownership by Aguamina Corporation of
Account No. 53300 is evidenced by an opening account documents
from the bank. J. Christinaz and R.L. Rossier, First Vice-President and
Senior Vice President, respectively, of SBC, Geneva issued a
declaration dated September 3, 1991 stating that the by-laws dated
October 3, 1971 governing Rosalys Foundation was the same by-law
applied to Aguamina Corporation Account No. 53300. They further
confirmed that no change of beneficial owner was involved while
transferring the assets of Rosalys to Aguamina. Hence, FM remains
the beneficiary of Aguamina Corporation Account No. 53300.
As of August 30, 1991, the ending balance of Account No. 53300

amounted to $80,566,483.00.
L. MALER FOUNDATION ACCOUNTS
49. Maler was first created as an establishment. A statement of its rules

and regulations was found among Malacañang documents. It stated,
among others, that 50% of the Company's assets will be for sole and
full right disposal of FM and Imelda during their lifetime, which the
remaining 50% will be divided in equal parts among their children.
Another Malacañang document dated October 19,1968 and signed by
Ferdinand and Imelda pertains to the appointment of Dr. Andre
Barbey and Jean Louis Sunier as attorneys of the company and as
administrator and manager of all assets held by the company. The
Marcos couple, also mentioned in the said document that they bought
the Maler Establishment from SBC, Geneva. On the same date, FM
and Imelda issued a letter addressed to Maler Establishment, stating
that all instructions to be transmitted with regard to Maler will be
signed with the word "JOHN LEWIS". This word will have the same
value as the couple's own personal signature. The letter was signed by
FM and Imelda in their signatures and as John Lewis.
50. Maler Establishment opened and maintained bank accounts with SBC,
Geneva. The opening bank documents were signed by Dr. Barbey and
Mr. Sunnier as authorized signatories.
51. On November 17, 1981, it became necessary to transform Maler

Establishment into a foundation. Likewise, the attorneys were changed
to Michael Amaudruz, et. al. However, administration of the assets
was left to SBC. The articles of incorporation of Maler Foundation
registered on November 17, 1981 appear to be the same articles
applied to Maler Establishment. On February 28, 1984, Maler
Foundation cancelled the power of attorney for the management of its
assets in favor of SBC and transferred such power to Sustrust
Investment Co., S.A.
52. As of June 6, 1991, the ending balance of Maler Foundation's Account

Nos. 254,508 BT and 98,929 NY amount SF 9,083,567 and SG
16,195,258, respectively, for a total of SF 25,278,825.00. GM only
until December 31, 1980. This account was opened by Maler when it
was still an establishment which was subsequently transformed into a
foundation.
53. All the five (5) group accounts in the over-all flow chart have a total
balance of about Three Hundred Fifty Six Million Dollars
($356,000,000.00) as shown by Annex "R-5" hereto attached as
integral part hereof.
x x x x x x.[27]
Respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and

Ferdinand Marcos, Jr., in their answer, stated the following:
xxx xxx xxx
4. Respondents ADMIT paragraphs 3 and 4 of the Petition.
5. Respondents specifically deny paragraph 5 of the Petition in so far as

it states that summons and other court processes may be served on
Respondent Imelda R. Marcos at the stated address the truth of the
matter being that Respondent Imelda R. Marcos may be served with
summons and other processes at No. 10-B Bel Air Condominium 5022
P. Burgos Street, Makati, Metro Manila, and ADMIT the rest.
xxx xxx xxx
10. Respondents ADMIT paragraph 11 of the Petition.
11. Respondents specifically DENY paragraph 12 of the Petition for lack

of knowledge sufficient to form a belief as to the truth of the
allegation since Respondents were not privy to the transactions and
that they cannot remember exactly the truth as to the matters alleged.

of knowledge or information sufficient to form a belief as to the truth
of the allegation since Respondents cannot remember with exactitude
the contents of the alleged ITRs and Balance Sheet.

the contents of the alleged ITRs.


16. Respondents specifically DENY paragraph 17 of the Petition insofar

as it attributes willful duplicity on the part of the late President
Marcos, for being false, the same being pure conclusions based on
pure assumption and not allegations of fact; and specifically DENY
the rest for lack of knowledge or information sufficient to form a
belief as to the truth of the allegation since Respondents cannot
remember with exactitude the contents of the alleged ITRs or the
attachments thereto.


the contents of the alleged ITRs and that they are not privy to the
activities of the BIR.



22. Respondents specifically DENY paragraph 23 insofar as it alleges that

Respondents clandestinely stashed the country's wealth in Switzerland
and hid the same under layers and layers of foundation and corporate
entities for being false, the truth being that Respondents aforesaid
properties were lawfully acquired.
23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and
30 of the Petition for lack of knowledge or information sufficient to
form a belief as to the truth of the allegation since Respondents were
not privy to the transactions regarding the alleged Azio-Verso-Vibur
Foundation accounts, except that as to Respondent Imelda R. Marcos
she specifically remembers that the funds involved were lawfully
acquired.
24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36,37,
38, 39, 40, and 41 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegations since
Respondents are not privy to the transactions and as to such
transaction they were privy to they cannot remember with exactitude
the same having occurred a long time ago, except that as to
Respondent Imelda R. Marcos she specifically remembers that the
funds involved were lawfully acquired.
25. Respondents specifically DENY paragraphs 42, 43, 44, 45, and 46, of
the Petition for lack of knowledge or information sufficient to form a
belief as to the truth of the allegations since Respondents were not
privy to the transactions and as to such transaction they were privy to
they cannot remember with exactitude the same having occurred a
long time ago, except that as to Respondent Imelda R. Marcos she
specifically remembers that the funds involved were lawfully
acquired.
26. Respondents specifically DENY paragraphs 49, 50, 51 and 52, of the
Petition for lack of knowledge or information sufficient to form a
belief as to the truth of the allegations since Respondents were not
long time ago, except that as to Respondent Imelda R. Marcos she
acquired.
Upon careful perusal of the foregoing, the Court finds that respondent Mrs. Marcos and
the Marcos children indubitably failed to tender genuine issues in their answer to the
petition for forfeiture. A genuine issue is an issue of fact which calls for the
presentation of evidence as distinguished from an issue which is fictitious and
contrived, set up in bad faith or patently lacking in substance so as not to constitute a
genuine issue for trial. Respondents' defenses of "lack of knowledge for lack of privity"
or "(inability to) recall because it happened a long time ago" or, on the part of Mrs.
Marcos, that "the funds were lawfully acquired" are fully insufficient to tender genuine
issues. Respondent Marcoses' defenses were a sham and evidently calibrated to
compound and confuse the issues.
The following pleadings filed by respondent Marcoses are replete with indications of a
spurious defense:
(a) Respondents' Answer dated October 18, 1993;
(b) Pre-trial Brief dated October 4, 1999 of Mrs. Marcos, Supplemental Pre-
trial Brief dated October 19, 1999 of Ferdinand, Jr. and Mrs. Imee Marcos-
Manotoc adopting the pre-trial brief of Mrs. Marcos, and Manifestation
dated October 19, 1999 of Irene Marcos-Araneta adopting the pre-trial
briefs of her co- respondents;
(c) Opposition to Motion for Summary Judgment dated March 21, 2000, filed
by Mrs. Marcos which the other respondents (Marcos children) adopted;
(d) Demurrer to Evidence dated May 2, 2000 filed by Mrs. Marcos and
adopted by the Marcos children;
(e) Motion for Reconsideration dated September 26, 2000 filed by Mrs.
Marcos; Motion for Reconsideration dated October 5, 2000 jointly filed by
Mrs. Manotoc and Ferdinand, Jr., and Supplemental Motion for
Reconsideration dated October 9, 2000 likewise jointly filed by Mrs.
Manotoc and Ferdinand, Jr.;
(f) Memorandum dated December 12, 2000 of Mrs. Marcos and Memorandum
dated December 17, 2000 of the Marcos children;
(g) Manifestation dated May 26, 1998; and
(h) General/Supplemental Agreement dated December 23, 1993.
An examination of the foregoing pleadings is in order.
RESPONDENTS' ANSWER DATED OCTOBER 18, 1993.
In their answer, respondents failed to specifically deny each and every allegation
contained in the petition for forfeiture in the manner required by the rules. All they
gave were stock answers like "they have no sufficient knowledge" or "they could not
recall because it happened a long time ago," and, as to Mrs. Marcos, "the funds were
lawfully acquired," without stating the basis of such assertions.
Section 10, Rule 8 of the 1997 Rules of Civil Procedure, provides:
A defendant must specify each material allegation of fact the truth of which
he does not admit and, whenever practicable, shall set forth the substance of
the matters upon which he relies to support his denial. Where a defendant
desires to deny only a part of an averment, he shall specify so much of it as
is true and material and shall deny the remainder. Where a defendant is
without knowledge or information sufficient to form a belief as to the truth
of a material averment made in the complaint, he shall so state, and this
shall have the effect of a denial.[28]
The purpose of requiring respondents to make a specific denial is to make them

disclose facts which will disprove the allegations of petitioner at the trial, together with
the matters they rely upon in support of such denial. Our jurisdiction adheres to this
rule to avoid and prevent unnecessary expenses and waste of time by compelling both
parties to lay their cards on the table, thus reducing the controversy to its true terms. As
explained in Alonso vs. Villamor,[29]
A litigation is not a game of technicalities in which one, more deeply

schooled and skilled in the subtle art of movement and position, entraps and
destroys the other. It is rather a contest in which each contending party fully
and fairly lays before the court the facts in issue and then, brushing aside as
wholly trivial and indecisive all imperfections of form and technicalities of
procedure, asks that justice be done upon the merits. Lawsuits, unlike duels,
are not to be won by a rapier's thrust.
On the part of Mrs. Marcos, she claimed that the funds were lawfully acquired.
However, she failed to particularly state the ultimate facts surrounding the lawful
manner or mode of acquisition of the subject funds. Simply put, she merely stated in
her answer with the other respondents that the funds were "lawfully acquired" without
detailing how exactly these funds were supposedly acquired legally by them. Even in
this case before us, her assertion that the funds were lawfully acquired remains bare
and unaccompanied by any factual support which can prove, by the presentation of
evidence at a hearing, that indeed the funds were acquired legitimately by the Marcos
family.
Respondents' denials in their answer at the Sandiganbayan were based on their alleged
lack of knowledge or information sufficient to form a belief as to the truth of the
allegations of the petition.
It is true that one of the modes of specific denial under the rules is a denial through a
statement that the defendant is without knowledge or information sufficient to form a
belief as to the truth of the material averment in the complaint. The question, however,
is whether the kind of denial in respondents' answer qualifies as the specific denial
called for by the rules. We do not think so. In Morales vs. Court of Appeals,[30] this
Court ruled that if an allegation directly and specifically charges a party with having
done, performed or committed a particular act which the latter did not in fact do,
perform or commit, a categorical and express denial must be made.
Here, despite the serious and specific allegations against them, the Marcoses responded
by simply saying that they had no knowledge or information sufficient to form a belief
as to the truth of such allegations. Such a general, self-serving claim of ignorance of the
facts alleged in the petition for forfeiture was insufficient to raise an issue. Respondent
Marcoses should have positively stated how it was that they were supposedly ignorant
of the facts alleged.[31]
To elucidate, the allegation of petitioner Republic in paragraph 23 of the petition for

forfeiture stated:
23. The following presentation very clearly and overwhelmingly show in

detail how both respondents clandestinely stashed away the country's
wealth to Switzerland and hid the same under layers upon layers of
foundations and other corporate entities to prevent its detection.

Through their dummies/nominees, fronts or agents who formed those
foundations or corporate entities, they opened and maintained
numerous bank accounts. But due to the difficulty if not the
impossibility of detecting and documenting all those secret accounts
as well as the enormity of the deposits therein hidden, the following
presentation is confined to five identified accounts groups, with
balances amounting to about $356-M with a reservation for the filing
of a supplemental or separate forfeiture complaint should the need
arise.[32]
Respondents' lame denial of the aforesaid allegation was:
22. Respondents specifically DENY paragraph 23 insofar as it alleges that

Respondents clandestinely stashed the country's wealth in Switzerland
and hid the same under layers and layers of foundations and corporate
entities for being false, the truth being that Respondents' aforesaid
properties were lawfully acquired.[33]
Evidently, this particular denial had the earmark of what is called in the law on
pleadings as a negative pregnant, that is, a denial pregnant with the admission of the
substantial facts in the pleading responded to which are not squarely denied. It was in
effect an admission of the averments it was directed at.[34] Stated otherwise, a negative
pregnant is a form of negative expression which carries with it an affirmation or at least
an implication of some kind favorable to the adverse party. It is a denial pregnant with
an admission of the substantial facts alleged in the pleading. Where a fact is alleged
with qualifying or modifying language and the words of the allegation as so qualified
or modified are literally denied, has been held that the qualifying circumstances alone
are denied while the fact itself is admitted.[35]
In the instant case, the material allegations in paragraph 23 of the said petition were not
specifically denied by respondents in paragraph 22 of their answer. The denial
contained in paragraph 22 of the answer was focused on the averment in paragraph 23
of the petition for forfeiture that "Respondents clandestinely stashed the country's
wealth in Switzerland and hid the same under layers and layers of foundations and
corporate entities." Paragraph 22 of the respondents' answer was thus a denial pregnant
with admissions of the following substantial facts:
(1) the Swiss bank deposits existed and
(2) that the estimated sum thereof was US$356 million as of December, 1990.
Therefore, the allegations in the petition for forfeiture on the existence of the Swiss
bank deposits in the sum of about US$356 million, not having been specifically denied
by respondents in their answer, were deemed admitted by them pursuant to Section 11,
Rule 8 of the 1997 Revised Rules on Civil Procedure:
Material averment in the complaint, xxx shall be deemed admitted when not
specifically denied. xxx.[36]
By the same token, the following unsupported denials of respondents in their answer
were pregnant with admissions of the substantial facts alleged in the Republic's petition
for forfeiture:
23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and
30 of the Petition for lack of knowledge or information sufficient to
form a belief as to the truth of the allegation since respondents were
not privy to the transactions regarding the alleged Azio-Verso-Vibur
Foundation accounts, except that, as to respondent Imelda R. Marcos,
she specifically remembers that the funds involved were lawfully
acquired.
24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36, 37,
38, 39, 40, 41 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegations since
respondents were not privy to the transactions and as to such
transactions they were privy to, they cannot remember with exactitude
the same having occurred a long time ago, except as to respondent
Imelda R. Marcos, she specifically remembers that the funds involved
were lawfully acquired.
25. Respondents specifically DENY paragraphs 42, 43, 45, and 46 of the
petition for lack of knowledge or information sufficient to from a
belief as to the truth of the allegations since respondents were not
privy to the transactions and as to such transaction they were privy to,
they cannot remember with exactitude, the same having occurred a
long time ago, except that as to respondent Imelda R. Marcos, she
acquired.
26. Respondents specifically DENY paragraphs 49, 50, 51 and 52 of the

petition for lack of knowledge and information sufficient to form a
belief as to the truth of the allegations since respondents were not
long time ago, except that as to respondent Imelda R. Marcos, she
acquired.
The matters referred to in paragraphs 23 to 26 of the respondents' answer pertained to

the creation of five groups of accounts as well as their respective ending balances and
attached documents alleged in paragraphs 24 to 52 of the Republic's petition for
forfeiture. Respondent Imelda R. Marcos never specifically denied the existence of the
Swiss funds. Her claim that "the funds involved were lawfully acquired" was an
acknowledgment on her part of the existence of said deposits. This only reinforced her
earlier admission of the allegation in paragraph 23 of the petition for forfeiture
regarding the existence of the US$356 million Swiss bank deposits.
The allegations in paragraphs 47[37] and 48[38] of the petition for forfeiture referring to
the creation and amount of the deposits of the Rosalys-Aguamina Foundation as well as
the averment in paragraph 52-a[39] of the said petition with respect to the sum of the
Swiss bank deposits estimated to be US$356 million were again not specifically denied
by respondents in their answer. The respondents did not at all respond to the issues
raised in these paragraphs and the existence, nature and amount of the Swiss funds
were therefore deemed admitted by them. As held in Galofa vs. Nee Bon Sing,[40] if a
defendant's denial is a negative pregnant, it is equivalent to an admission.
Moreover, respondents' denial of the allegations in the petition for forfeiture "for lack
of knowledge or information sufficient to form a belief as to the truth of the allegations
since respondents were not privy to the transactions" was just a pretense. Mrs. Marcos'
privity to the transactions was in fact evident from her signatures on some of the vital
documents[41] attached to the petition for forfeiture which Mrs. Marcos failed to
specifically deny as required by the rules.[42]
It is worthy to note that the pertinent documents attached to the petition for forfeiture
were even signed personally by respondent Mrs. Marcos and her late husband,
Ferdinand E. Marcos, indicating that said documents were within their knowledge. As
correctly pointed out by Sandiganbayan Justice Francisco Villaruz, Jr. in his dissenting
opinion:
The pattern of: 1) creating foundations, 2) use of pseudonyms and dummies,

3) approving regulations of the Foundations for the distribution of capital
and income of the Foundations to the First and Second beneficiary (who are
no other than FM and his family), 4) opening of bank accounts for the
Foundations, 5) changing the names of the Foundations, 6) transferring
funds and assets of the Foundations to other Foundations or Fides Trust, 7)
liquidation of the Foundations as substantiated by the Annexes U to U-168,
Petition [for forfeiture] strongly indicate that FM and/or Imelda were the
real owners of the assets deposited in the Swiss banks, using the
Foundations as dummies.[43]
How could respondents therefore claim lack of sufficient knowledge or information

regarding the existence of the Swiss bank deposits and the creation of five groups of
accounts when Mrs. Marcos and her late husband personally masterminded and
participated in the formation and control of said foundations? This is a fact respondent
Marcoses were never able to explain.
Not only that. Respondents' answer also technically admitted the genuineness and due
execution of the Income Tax Returns (ITRs) and the balance sheets of the late
Ferdinand E. Marcos and Imelda R. Marcos attached to the petition for forfeiture, as
well as the veracity of the contents thereof.
The answer again premised its denials of said ITRs and balance sheets on the ground of
lack of knowledge or information sufficient to form a belief as to the truth of the
contents thereof. Petitioner correctly points out that respondents' denial was not really
grounded on lack of knowledge or information sufficient to form a belief but was based
on lack of recollection. By reviewing their own records, respondent Marcoses could
have easily determined the genuineness and due execution of the ITRs and the balance
sheets. They also had the means and opportunity of verifying the same from the records
of the BIR and the Office of the President. They did not.
When matters regarding which respondents claim to have no knowledge or information

sufficient to form a belief are plainly and necessarily within their knowledge, their
alleged ignorance or lack of information will not be considered a specific denial.[44] An
unexplained denial of information within the control of the pleader, or is readily

accessible to him, is evasive and is insufficient to constitute an effective denial.[45]
The form of denial adopted by respondents must be availed of with sincerity and in
good faith, and certainly not for the purpose of confusing the adverse party as to what
allegations of the petition are really being challenged; nor should it be made for the
purpose of delay.[46] In the instant case, the Marcoses did not only present
unsubstantiated assertions but in truth attempted to mislead and deceive this Court by
presenting an obviously contrived defense.
Simply put, a profession of ignorance about a fact which is patently and necessarily
within the pleader's knowledge or means of knowing is as ineffective as no denial at
all.[47] Respondents' ineffective denial thus failed to properly tender an issue and the
averments contained in the petition for forfeiture were deemed judicially admitted by
them.
As held in J.P. Juan & Sons, Inc. vs. Lianga Industries, Inc.:
Its "specific denial" of the material allegation of the petition without setting
forth the substance of the matters relied upon to support its general denial,
when such matters were plainly within its knowledge and it could not
logically pretend ignorance as to the same, therefore, failed to properly
tender on issue.[48]
Thus, the general denial of the Marcos children of the allegations in the petition for
forfeiture "for lack of knowledge or information sufficient to form a belief as to the
truth of the allegations since they were not privy to the transactions" cannot rightfully
be accepted as a defense because they are the legal heirs and successors-in-interest of
Ferdinand E. Marcos and are therefore bound by the acts of their father vis-a-vis the
Swiss funds.
PRE-TRIAL BRIEF DATED OCTOBER 18, 1993
The pre-trial brief of Mrs. Marcos was adopted by the three Marcos children. In said
brief, Mrs. Marcos stressed that the funds involved were lawfully acquired. But, as in
their answer, they failed to state and substantiate how these funds were acquired
lawfully. They failed to present and attach even a single document that would show and
prove the truth of their allegations. Section 6, Rule 18 of the 1997 Rules of Civil
Procedure provides:
The parties shall file with the court and serve on the adverse party, x x x
their respective pre-trial briefs which shall contain, among others:
xxx
(d) the documents or exhibits to be presented, stating the purpose thereof;
xxx
(f) the number and names of the witnesses, and the substance of their
respective testimonies.[49]
It is unquestionably within the court's power to require the parties to submit their pre-
trial briefs and to state the number of witnesses intended to be called to the stand, and a
brief summary of the evidence each of them is expected to give as well as to disclose
the number of documents to be submitted with a description of the nature of each. The
tenor and character of the testimony of the witnesses and of the documents to be
deduced at the trial thus made known, in addition to the particular issues of fact and
law, it becomes apparent if genuine issues are being put forward necessitating the
holding of a trial. Likewise, the parties are obliged not only to make a formal
identification and specification of the issues and their proofs, and to put these matters
in writing and submit them to the court within the specified period for the prompt
disposition of the action.[50]
The pre-trial brief of Mrs. Marcos, as subsequently adopted by respondent Marcos

children, merely stated:
xxx
WITNESSES
4.1 Respondent Imelda will present herself as a witness and reserves the
right to present additional witnesses as may be necessary in the course of
the trial.
xxx
DOCUMENTARY EVIDENCE
5.1 Respondent Imelda reserves the right to present and introduce in

evidence documents as may be necessary in the course of the trial.
Mrs. Marcos did not enumerate and describe the documents constituting her evidence.
Neither the names of witnesses nor the nature of their testimony was stated. What alone
appeared certain was the testimony of Mrs. Marcos only who in fact had previously
claimed ignorance and lack of knowledge. And even then, the substance of her
testimony, as required by the rules, was not made known either. Such cunning tactics of
respondents are totally unacceptable to this Court. We hold that, since no genuine issue
was raised, the case became ripe for summary judgment.
OPPOSITION TO MOTION FOR SUMMARY JUDGMENT DATED MARCH

21, 2000
The opposition filed by Mrs. Marcos to the motion for summary judgment dated March
21, 2000 of petitioner Republic was merely adopted by the Marcos children as their
own opposition to the said motion. However, it was again not accompanied by
affidavits, depositions or admissions as required by Section 3, Rule 35 of the 1997
Rules on Civil Procedure:
x x x The adverse party may serve opposing affidavits, depositions, or

admissions at least three (3) days before hearing. After hearing, the
judgment sought shall be rendered forthwith if the pleadings, supporting
affidavits, depositions, and admissions on file, show that, except as to the
amount of damages, there is no genuine issue as to any material fact and

that the moving party is entitled to a judgment as a matter of law.[51]
The absence of opposing affidavits, depositions and admissions to contradict the sworn
declarations in the Republic's motion only demonstrated that the averments of such
opposition were not genuine and therefore unworthy of belief.
DEMURRER TO EVIDENCE DATED MAY 2, 2000;[52] MOTIONS FOR

RECONSIDERATION;[53] AND MEMORANDA OF MRS. MARCOS AND THE
MARCOS CHILDREN[54]
All these pleadings again contained no allegations of facts showing their lawful
acquisition of the funds. Once more, respondents merely made general denials without
alleging facts which would have been admissible in evidence at the hearing, thereby
failing to raise genuine issues of fact.
Mrs. Marcos insists in her memorandum dated October 21, 2002 that, during the pre-
trial, her counsel stated that his client was just a beneficiary of the funds, contrary to
petitioner Republic's allegation that Mrs. Marcos disclaimed ownership of or interest in
the funds.
This is yet another indication that respondents presented a fictitious defense because,
during the pre-trial, Mrs. Marcos and the Marcos children denied ownership of or
interest in the Swiss funds:
PJ Garchitorena:
Make of record that as far as Imelda Marcos is concerned through the

statement of Atty. Armando M. Marcelo that the US$360 million more or
less subject matter of the instant lawsuit as allegedly obtained from the
various Swiss Foundations do not belong to the estate of Marcos or to
Imelda Marcos herself. That's your statement of facts?
Atty. MARCELO:
Yes, Your Honor.
PJ Garchitorena:
That's it. Okay. Counsel for Manotoc and Manotoc, Jr. What is your point
here? Does the estate of Marcos own anything of the $360 million subject
of this case.
Atty. TECSON:
We joined the Manifestation of Counsel.

PJ Garchitorena:
You do not own anything?
Atty. TECSON:
Yes, Your Honor.

PJ Garchitorena:
Counsel for Irene Araneta?
Atty. SISON:
I join the position taken by my other compañeros here, Your Honor.
xxx
Atty. SISON:
Irene Araneta as heir do (sic) not own any of the amount, Your Honor.[55]
We are convinced that the strategy of respondent Marcoses was to confuse petitioner
Republic as to what facts they would prove or what issues they intended to pose for the
court's resolution. There is no doubt in our mind that they were leading petitioner
Republic, and now this Court, to perplexity, if not trying to drag this forfeiture case to
eternity.
MANIFESTATION DATED MAY 26, 1998 FILED BY MRS. MARCOS;

GENERAL/SUPPLEMENTAL COMPROMISE AGREEMENT DATED
DECEMBER 28, 1993
These pleadings of respondent Marcoses presented nothing but feigned defenses. In

their earlier pleadings, respondents alleged either that they had no knowledge of the
existence of the Swiss deposits or that they could no longer remember anything as it
happened a long time ago. As to Mrs. Marcos, she remembered that it was lawfully
acquired.
In her Manifestation dated May 26, 1998, Mrs. Marcos stated that:
COMES NOW undersigned counsel for respondent Imelda R. Marcos, and

before this Honorable Court, most respectfully manifests:
That respondent Imelda R, Marcos owns 90% of the subject matter of the
above-entitled case, being the sole beneficiary of the dollar deposits in the
name of the various foundations alleged in the case;
That in fact only 10% of the subject matter in the above-entitled case
belongs to the estate of the late President Ferdinand E. Marcos.
In the Compromise/Supplemental Agreements, respondent Marcoses sought to

implement the agreed distribution of the Marcos assets, including the Swiss deposits.
This was, to us, an unequivocal admission of ownership by the Marcoses of the said
deposits.
But, as already pointed out, during the pre-trial conference, respondent Marcoses
denied knowledge as well as ownership of the Swiss funds.
Anyway we look at it, respondent Marcoses have put forth no real defense. The "facts"
pleaded by respondents, while ostensibly raising important questions or issues of fact,
in reality comprised mere verbiage that was evidently wanting in substance and
constituted no genuine issues for trial.
We therefore rule that, under the circumstances, summary judgment is proper.
In fact, it is the law itself which determines when summary judgment is called for.
Under the rules, summary judgment is appropriate when there are no genuine issues of
fact requiring the presentation of evidence in a full-blown trial. Even if on their face the
pleadings appear to raise issue, if the affidavits, depositions and admissions show that
such issues are not genuine, then summary judgment as prescribed by the rules must
ensue as a matter of law.[56]
In sum, mere denials, if unaccompanied by any fact which will be admissible in

evidence at a hearing, are not sufficient to raise genuine issues of fact and will not
defeat a motion for summary judgment.[57] A summary judgment is one granted upon
motion of a party for an expeditious settlement of the case, it appearing from the
pleadings, depositions, admissions and affidavits that there are no important questions
or issues of fact posed and, therefore, the movant is entitled to a judgment as a matter
of law. A motion for summary judgment is premised on the assumption that the issues
presented need not be tried either because these are patently devoid of substance or that
there is no genuine issue as to any pertinent fact. It is a method sanctioned by the Rules
of Court for the prompt disposition of a civil action where there exists no serious
controversy.[58] Summary judgment is a procedural device for the prompt disposition
of actions in which the pleadings raise only a legal issue, not a genuine issue as to any
material fact. The theory of summary judgment is that, although an answer may on its
face appear to tender issues requiring trial, if it is established by affidavits, depositions
or admissions that those issues are not genuine but fictitious, the Court is justified in
dispensing with the trial and rendering summary judgment for petitioner.[59]
In the various annexes to the petition for forfeiture, petitioner Republic attached sworn
statements of witnesses who had personal knowledge of the Marcoses' participation in
the illegal acquisition of funds deposited in the Swiss accounts under the names of five
groups or foundations. These sworn statements substantiated the ill-gotten nature of the
Swiss bank deposits. In their answer and other subsequent pleadings, however, the
Marcoses merely made general denials of the allegations against them without stating
facts admissible in evidence at the hearing, thereby failing to raise any genuine issues
of fact.
Under these circumstances, a trial would have served no purpose at all and would have
been totally unnecessary, thus justifying a summary judgment on the petition for
forfeiture. There were no opposing affidavits to contradict the sworn declarations of the
witnesses of petitioner Republic, leading to the inescapable conclusion that the matters
raised in the Marcoses' answer were false.
Time and again, this Court has encountered cases like this which are either only half-
heartedly defended or, if the semblance of a defense is interposed at all, it is only to
delay disposition and gain time. It is certainly not in the interest of justice to allow
respondent Marcoses to avail of the appellate remedies accorded by the Rules of Court
to litigants in good faith, to the prejudice of the Republic and ultimately of the Filipino
people. From the beginning, a candid demonstration of respondents' good faith should
have been made to the court below. Without the deceptive reasoning and
argumentation, this protracted litigation could have ended a long time ago.
Since 1991, when the petition for forfeiture was first filed, up to the present, all
respondents have offered are foxy responses like "lack of sufficient knowledge or lack
of privity" or "they cannot recall because it happened a long time ago" or, as to Mrs.
Marcos, "the funds were lawfully acquired." But, whenever it suits them, they also
claim ownership of 90% of the funds and allege that only 10% belongs to the Marcos
estate. It has been an incredible charade from beginning to end.
In the hope of convincing this Court to rule otherwise, respondents Maria Imelda
Marcos-Manotoc and Ferdinand R. Marcos Jr. contend that by its positive acts and
express admissions prior to filing the motion for summary judgment on March 10,
2000, petitioner Republic had bound itself to go to trial on the basis of existing issues.
Thus, it had legally waived whatever right it had to move for summary judgment.[60]
We do not think so. The alleged positive acts and express admissions of the petitioner
did not preclude it from filing a motion for summary judgment.
Rule 35 of the 1997 Rules of Civil Procedure provides:
Rule 35
Summary Judgment
Section 1. Summary judgment for claimant. - A party seeking to recover

upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief
may, at any time after the pleading in answer thereto has been served,
move with supporting affidavits, depositions or admissions for a summary
judgment in his favor upon all or any part thereof.
Section 2. Summary judgment for defending party. - A party against whom a

claim, counterclaim, or cross-claim is asserted or a declaratory relief is
sought may, at any time, move with supporting affidavits, depositions or
admissions for a summary judgment in his favor as to all or any part
thereof. (Emphasis ours)[61]
Under the rule, the plaintiff can move for summary judgment "at any time after the
pleading in answer thereto (i.e., in answer to the claim, counterclaim or cross-claim)
has been served. No fixed reglementary period is provided by the Rules. How else does
one construe the phrase any time after the answer has been served?"
This issue is actually one of first impression. No local jurisprudence or authoritative

work has touched upon this matter. This being so, an examination of foreign laws and
jurisprudence, particularly those of the United States where many of our laws and rules
were copied, is in order.
Rule 56 of the Federal Rules of Civil Procedure provides that a party seeking to recover
upon a claim, counterclaim or cross-claim may move for summary judgment at any
time after the expiration of 20 days from the commencement of the action or after
service of a motion for summary judgment by the adverse party, and that a party against
whom a claim, counterclaim or cross-claim is asserted may move for summary
judgment at any time.
However, some rules, particularly Rule 113 of the Rules of Civil Practice of New York,
specifically provide that a motion for summary judgment may not be made until issues
have been joined, that is, only after an answer has been served.[62] Under said rule,
after issues have been joined, the motion for summary judgment may be made at any
stage of the litigation.[63] No fixed prescriptive period is provided.
Like Rule 113 of the Rules of Civil Practice of New York, our rules also provide that a
motion for summary judgment may not be made until issues have been joined,
meaning, the plaintiff has to wait for the answer before he can move for summary
judgment.[64] And like the New York rules, ours do not provide for a fixed
reglementary period within which to move for summary judgment.
This being so, the New York Supreme Court's interpretation of Rule 113 of the Rules of
Civil Practice can be applied by analogy to the interpretation of Section 1, Rule 35, of
our 1997 Rules of Civil Procedure.
Under the New York rule, after the issues have been joined, the motion for summary
judgment may be made at any stage of the litigation. And what exactly does the phrase
at any stage of the litigation mean? In Ecker vs. Muzysh,[65] the New York Supreme
Court ruled:
PER CURIAM.
Plaintiff introduced her evidence and the defendants rested on the case made
by the plaintiff. The case was submitted. Owing to the serious illness of the
trial justice, a decision was not rendered within sixty days after the final
adjournment of the term at which the case was tried. With the approval of
the trial justice, the plaintiff moved for a new trial under Section 442 of the
Civil Practice Act. The plaintiff also moved for summary judgment under
Rule 113 of the Rules of Civil Practice. The motion was opposed mainly on
the ground that, by proceeding to trial, the plaintiff had waived her right
to summary judgment and that the answer and the opposing affidavits
raised triable issues. The amount due and unpaid under the contract is not in
dispute. The Special Term granted both motions and the defendants have
appealed.
The Special Term properly held that the answer and the opposing affidavits
raised no triable issue. Rule 113 of the Rules of Civil Practice and the Civil
Practice Act prescribe no limitation as to the time when a motion for
summary judgment must be made. The object of Rule 113 is to empower
the court to summarily determine whether or not a bona fide issue exists
between the parties, and there is no limitation on the power of the court to
make such a determination at any stage of the litigation. (emphasis ours)
On the basis of the aforequoted disquisition, any stage of the litigation means that even
if the plaintiff has proceeded to trial, this does not preclude him from thereafter moving
for summary judgment.[66]
In the case at bar, petitioner moved for summary judgment after pre-trial and before its
scheduled date for presentation of evidence. Respondent Marcoses argue that, by
agreeing to proceed to trial during the pre-trial conference, petitioner waived its right to
summary judgment.
This argument must fail in the light of the New York Supreme Court ruling which we
apply by analogy to this case. In Ecker,[67] the defendant opposed the motion for
summary judgment on a ground similar to that raised by the Marcoses, that is, that
plaintiff had waived her right to summary judgment by her act of proceeding to trial. If,
as correctly ruled by the New York court, plaintiff was allowed to move for summary
judgment even after trial and submission of the case for resolution, more so should we
permit it in the present case where petitioner moved for summary judgment before trial.
Therefore, the phrase anytime after the pleading in answer thereto has been served in
Section 1, Rule 35 of our Rules of Civil Procedure means at any stage of the litigation.
Whenever it becomes evident at any stage of the litigation that no triable issue exists, or
that the defenses raised by the defendant(s) are sham or frivolous, plaintiff may move
for summary judgment. A contrary interpretation would go against the very objective of
the Rule on Summary Judgment which is to weed out sham claims or defenses thereby
avoiding the expense and loss of time involved in a trial.[68]
In cases with political undertones like the one at bar, adverse parties will often do
almost anything to delay the proceedings in the hope that a future administration
sympathetic to them might be able to influence the outcome of the case in their favor.
This is rank injustice we cannot tolerate.
The law looks with disfavor on long, protracted and expensive litigation and
encourages the speedy and prompt disposition of cases. That is why the law and the
rules provide for a number of devices to ensure the speedy disposition of cases.
Summary judgment is one of them.
Faithful therefore to the spirit of the law on summary judgment which seeks to avoid
unnecessary expense and loss of time in a trial, we hereby rule that petitioner Republic
could validly move for summary judgment any time after the respondents' answer was
filed or, for that matter, at any subsequent stage of the litigation. The fact that petitioner
agreed to proceed to trial did not in any way prevent it from moving for summary
judgment, as indeed no genuine issue of fact was ever validly raised by respondent
Marcoses.
This interpretation conforms with the guiding principle enshrined in Section 6, Rule 1
of the 1997 Rules of Civil Procedure that the [r]ules should be liberally construed in
order to promote their objective of securing a just, speedy and inexpensive disposition
of every action and proceeding.[69]
Respondents further allege that the motion for summary judgment was based on
respondents' answer and other documents that had long been in the records of the case.
Thus, by the time the motion was filed on March 10, 2000, estoppel by laches had
already set in against petitioner.
We disagree. Estoppel by laches is the failure or neglect for an unreasonable or

unexplained length of time to do that which, by exercising due diligence, could or
should have been done earlier, warranting a presumption that the person has abandoned
his right or declined to assert it.[70] In effect, therefore, the principle of laches is one of
estoppel because it prevents people who have slept on their rights from prejudicing the
rights of third parties who have placed reliance on the inaction of the original parties
and their successors-in-interest.[71]
A careful examination of the records, however, reveals that petitioner was in fact never
remiss in pursuing its case against respondent Marcoses through every remedy
available to it, including the motion for summary judgment.
Petitioner Republic initially filed its motion for summary judgment on October 18,
1996. The motion was denied because of the pending compromise agreement between
the Marcoses and petitioner. But during the pre-trial conference, the Marcoses denied
ownership of the Swiss funds, prompting petitioner to file another motion for summary
judgment now under consideration by this Court. It was the subsequent events that
transpired after the answer was filed, therefore, which prevented petitioner from filing
the questioned motion. It was definitely not because of neglect or inaction that
petitioner filed the (second) motion for summary judgment years after respondents'
answer to the petition for forfeiture.
In invoking the doctrine of estoppel by laches, respondents must show not only
unjustified inaction but also that some unfair injury to them might result unless the
action is barred.[72]
This, respondents failed to bear out. In fact, during the pre-trial conference, the
Marcoses disclaimed ownership of the Swiss deposits. Not being the owners, as they
claimed, respondents did not have any vested right or interest which could be adversely
affected by petitioner's alleged inaction.
But even assuming for the sake of argument that laches had already set in, the doctrine
of estoppel or laches does not apply when the government sues as a sovereign or asserts
governmental rights.[73] Nor can estoppel validate an act that contravenes law or public
policy.[74]
As a final point, it must be emphasized that laches is not a mere question of time but is
principally a question of the inequity or unfairness of permitting a right or claim to be
enforced or asserted.[75] Equity demands that petitioner Republic should not be barred
from pursuing the people's case against the Marcoses.
(2) The Propriety of Forfeiture
The matter of summary judgment having been thus settled, the issue of whether or not
petitioner Republic was able to prove its case for forfeiture in accordance with the
requisites of Sections 2 and 3 of RA 1379 now takes center stage.
The law raises the prima facie presumption that a property is unlawfully acquired,
hence subject to forfeiture, if its amount or value is manifestly disproportionate to the
official salary and other lawful income of the public officer who owns it. Hence,
Sections 2 and 6 of RA 1379[76] provide:
xxxxxx
Section 2. Filing of petition. - Whenever any public officer or employee has

acquired during his incumbency an amount or property which is manifestly
out of proportion to his salary as such public officer or employee and to his
other lawful income and the income from legitimately acquired property,
said property shall be presumed prima facie to have been unlawfully
acquired.
xxxxxx
Sec. 6. Judgment - If the respondent is unable to show to the satisfaction of

the court that he has lawfully acquired the property in question, then the
court shall declare such property in question, forfeited in favor of the State,
and by virtue of such judgment the property aforesaid shall become the
property of the State. Provided, That no judgment shall be rendered within
six months before any general election or within three months before any
special election. The Court may, in addition, refer this case to the
corresponding Executive Department for administrative or criminal action,
or both.
From the above-quoted provisions of the law, the following facts must be established in
order that forfeiture or seizure of the Swiss deposits may be effected:
(1) ownership by the public officer of money or property acquired during his
incumbency, whether it be in his name or otherwise, and
(2) the extent to which the amount of that money or property exceeds, i. e., is
grossly disproportionate to, the legitimate income of the public officer.
That spouses Ferdinand and Imelda Marcos were public officials during the time
material to the instant case was never in dispute. Paragraph 4 of respondent Marcoses'
answer categorically admitted the allegations in paragraph 4 of the petition for
forfeiture as to the personal circumstances of Ferdinand E. Marcos as a public official
who served without interruption as Congressman, Senator, Senate President and
President of the Republic of the Philippines from December 1, 1965 to February 25,
1986.[77] Likewise, respondents admitted in their answer the contents of paragraph 5 of
the petition as to the personal circumstances of Imelda R. Marcos who once served as a
member of the Interim Batasang Pambansa from 1978 to 1984 and as Metro Manila
Governor, concurrently Minister of Human Settlements, from June 1976 to February
1986.[78]
Respondent Mrs. Marcos also admitted in paragraph 10 of her answer the allegations of
paragraph 11 of the petition for forfeiture which referred to the accumulated salaries of
respondents Ferdinand E. Marcos and Imelda R. Marcos.[79] The combined
accumulated salaries of the Marcos couple were reflected in the Certification dated
May 27, 1986 issued by then Minister of Budget and Management Alberto Romulo.[80]
The Certification showed that, from 1966 to 1985, Ferdinand E. Marcos and Imelda R.
Marcos had accumulated salaries in the amount of P1,570,000 and P718,750,
respectively, or a total of P2,288,750:
FERDINAND E. MARCOS, AS PRESIDENT
1966-1976 at P60,000/year P660,000

1977-1984 at P100,000/year 800,000

1985 at P110,000/year 110,000
P1,570,00
IMELDA R. MARCOS, AS MINISTER
June 1976-1985 at P75,000/year P718,000
In addition to their accumulated salaries from 1966 to 1985 are the Marcos couple's
combined salaries from January to February 1986 in the amount of P30,833.33. Hence,
their total accumulated salaries amounted to P2,319,583.33. Converted to U.S. dollars
on the basis of the corresponding peso-dollar exchange rates prevailing during the
applicable period when said salaries were received, the total amount had an equivalent
value of $304,372.43.
The dollar equivalent was arrived at by using the official annual rates of exchange of
the Philippine peso and the US dollar from 1965 to 1985 as well as the official monthly
rates of exchange in January and February 1986 issued by the Center for Statistical
Information of the Bangko Sentral ng Pilipinas.
Prescinding from the aforesaid admissions, Section 4, Rule 129 of the Rules of Court
provides that:
Section 4. - Judicial admissions - An admission, verbal or written, made by

a party in the course of the proceedings in the same case does not require
proof. The admission may be contradicted only by showing that it was made
through palpable mistake or that no such admission was made.[81]
It is settled that judicial admissions may be made: (a) in the pleadings filed by the
parties; (b) in the course of the trial either by verbal or written manifestations or
stipulations; or (c) in other stages of judicial proceedings, as in the pre-trial of the case.
[82] Thus, facts pleaded in the petition and answer, as in the case at bar, are deemed
admissions of petitioner and respondents, respectively, who are not permitted to
contradict them or subsequently take a position contrary to or inconsistent with such
admissions.[83]
The sum of $304,372.43 should be held as the only known lawful income of
respondents since they did not file any Statement of Assets and Liabilities (SAL), as
required by law, from which their net worth could be determined. Besides, under the
1935 Constitution, Ferdinand E. Marcos as President could not receive "any other
emolument from the Government or any of its subdivisions and instrumentalities".[84]
Likewise, under the 1973 Constitution, Ferdinand E. Marcos as President could "not
receive during his tenure any other emolument from the Government or any other
source."[85] In fact, his management of businesses, like the administration of
foundations to accumulate funds, was expressly prohibited under the 1973
Constitution:
Article VII, Sec. 4(2) - The President and the Vice-President shall not,
during their tenure, hold any other office except when otherwise provided in
this Constitution, nor may they practice any profession, participate directly
or indirectly in the management of any business, or be financially interested
directly or indirectly in any contract with, or in any franchise or special
privilege granted by the Government or any other subdivision, agency, or
instrumentality thereof, including any government owned or controlled

corporation.
Article VII, Sec. 11 - No Member of the National Assembly shall appear as

counsel before any court inferior to a court with appellate jurisdiction, x x x.
Neither shall he, directly or indirectly, be interested financially in any
contract with, or in any franchise or special privilege granted by the
Government, or any subdivision, agency, or instrumentality thereof
including any government owned or controlled corporation during his term
of office. He shall not intervene in any matter before any office of the
government for his pecuniary benefit.
Article IX, Sec. 7 - The Prime Minister and Members of the Cabinet shall
be subject to the provision of Section 11, Article VIII hereof and may not
appear as counsel before any court or administrative body, or manage any
business, or practice any profession, and shall also be subject to such other
disqualification as may be provided by law.
Their only known lawful income of $304,372.43 can therefore legally and fairly serve
as basis for determining the existence of a prima facie case of forfeiture of the Swiss
funds.
Respondents argue that petitioner was not able to establish a prima facie case for the
forfeiture of the Swiss funds since it failed to prove the essential elements under
Section 3, paragraphs (c), (d) and (e) of RA 1379. As the Act is a penal statute, its
provisions are mandatory and should thus be construed strictly against the petitioner
and liberally in favor of respondent Marcoses.
We hold that it was not for petitioner to establish the Marcoses' other lawful income or
income from legitimately acquired property for the presumption to apply because, as
between petitioner and respondents, the latter were in a better position to know if there
were such other sources of lawful income. And if indeed there was such other lawful
income, respondents should have specifically stated the same in their answer. Insofar as
petitioner Republic was concerned, it was enough to specify the known lawful income
of respondents.
Section 9 of the PCGG Rules and Regulations provides that, in determining prima facie
evidence of ill-gotten wealth, the value of the accumulated assets, properties and other
material possessions of those covered by Executive Order Nos. 1 and 2 must be out of
proportion to the known lawful income of such persons. The respondent Marcos couple
did not file any Statement of Assets and Liabilities (SAL) from which their net worth
could be determined. Their failure to file their SAL was in itself a violation of law and
to allow them to successfully assail the Republic for not presenting their SAL would
reward them for their violation of the law.
Further, contrary to the claim of respondents, the admissions made by them in their
various pleadings and documents were valid. It is of record that respondents judicially
admitted that the money deposited with the Swiss banks belonged to them.
We agree with petitioner that respondent Marcoses made judicial admissions of their
ownership of the subject Swiss bank deposits in their answer, the
General/Supplemental Agreements, Mrs. Marcos' Manifestation and Constancia dated
May 5, 1999, and the Undertaking dated February 10, 1999. We take note of the fact
that the Associate Justices of the Sandiganbayan were unanimous in holding that
respondents had made judicial admissions of their ownership of the Swiss funds.
In their answer, aside from admitting the existence of the subject funds, respondents
likewise admitted ownership thereof. Paragraph 22 of respondents' answer stated:
22. Respondents specifically DENY PARAGRAPH 23 insofar as it

alleges that respondents clandestinely stashed the country's wealth in
Switzerland and hid the same under layers and layers of foundations
and corporate entities for being false, the truth being that
respondents' aforesaid properties were lawfully acquired.
(emphasis supplied)
By qualifying their acquisition of the Swiss bank deposits as lawful, respondents

unwittingly admitted their ownership thereof.
Respondent Mrs. Marcos also admitted ownership of the Swiss bank deposits by failing
to deny under oath the genuineness and due execution of certain actionable documents
bearing her signature attached to the petition. As discussed earlier, Section 11, Rule
8[86] of the 1997 Rules of Civil Procedure provides that material averments in the
complaint shall be deemed admitted when not specifically denied.
The General[87] and Supplemental[88] Agreements executed by petitioner and

respondents on December 28, 1993 further bolstered the claim of petitioner Republic
that its case for forfeiture was proven in accordance with the requisites of Sections 2
and 3 of RA 1379. The whereas clause in the General Agreement declared that:
WHEREAS, the FIRST PARTY has obtained a judgment from the Swiss
Federal Tribunal on December 21, 1990, that the $356 million belongs in
principle to the Republic of the Philippines provided certain conditionalities
are met, but even after 7 years, the FIRST PARTY has not been able to
procure a final judgment of conviction against the PRIVATE PARTY.
While the Supplemental Agreement warranted, inter alia, that:
In consideration of the foregoing, the parties hereby agree that the

PRIVATE PARTY shall be entitled to the equivalent of 25% of the amount
that may be eventually withdrawn from said $356 million Swiss deposits.
The stipulations set forth in the General and Supplemental Agreements undeniably
indicated the manifest intent of respondents to enter into a compromise with petitioner.
Corollarily, respondents' willingness to agree to an amicable settlement with the
Republic only affirmed their ownership of the Swiss deposits for the simple reason that
no person would acquiesce to any concession over such huge dollar deposits if he did
not in fact own them.
Respondents make much capital of the pronouncement by this Court that the General
and Supplemental Agreements were null and void.[89] They insist that nothing in those
agreements could thus be admitted in evidence against them because they stood on the
same ground as an accepted offer which, under Section 27, Rule 130[90] of the 1997
Rules of Civil Procedure, provides that "in civil cases, an offer of compromise is not an
admission of any liability and is not admissible in evidence against the offeror."
We find no merit in this contention. The declaration of nullity of said agreements was
premised on the following constitutional and statutory infirmities: (1) the grant of
criminal immunity to the Marcos heirs was against the law; (2) the PCGG's
commitment to exempt from all forms of taxes the properties to be retained by the
Marcos heirs was against the Constitution; and (3) the government's undertaking to
cause the dismissal of all cases filed against the Marcoses pending before the
Sandiganbayan and other courts encroached on the powers of the judiciary. The reasons
relied upon by the Court never in the least bit even touched on the veracity and
truthfulness of respondents' admission with respect to their ownership of the Swiss
funds. Besides, having made certain admissions in those agreements, respondents
cannot now deny that they voluntarily admitted owning the subject Swiss funds,
notwithstanding the fact that the agreements themselves were later declared null and
void.
The following observation of Sandiganbayan Justice Catalino Castañeda, Jr. in the

decision dated September 19, 2000 could not have been better said:
x x x The declaration of nullity of the two agreements rendered the same

without legal effects but it did not detract from the admissions of the
respondents contained therein. Otherwise stated, the admissions made in
said agreements, as quoted above, remain binding on the respondents.[91]
A written statement is nonetheless competent as an admission even if it is contained in

a document which is not itself effective for the purpose for which it is made, either by
reason of illegality, or incompetency of a party thereto, or by reason of not being
signed, executed or delivered. Accordingly, contracts have been held as competent
evidence of admissions, although they may be unenforceable.[92]
The testimony of respondent Ferdinand Marcos, Jr. during the hearing on the motion
for the approval of the Compromise Agreement on April 29, 1998 also lent credence to
the allegations of petitioner Republic that respondents admitted ownership of the Swiss
bank accounts. We quote the salient portions of Ferdinand Jr.'s formal declarations in
open court:
ATTY. FERNANDO:
Mr. Marcos, did you ever have any meetings with PCGG Chairman
Magtanggol C. Gunigundo?
F. MARCOS, JR.:
Yes. I have had very many meetings in fact with Chairman.
ATTY. FERNANDO:
Would you recall when the first meeting occurred?
PJ GARCHITORENA:
In connection with what?
ATTY. FERNANDO:
In connection with the ongoing talks to compromise the various cases

initiated by PCGG against your family?
F. MARCOS, JR.:
The nature of our meetings was solely concerned with negotiations towards
achieving some kind of agreement between the Philippine government and
the Marcos family. The discussions that led up to the compromise
agreement were initiated by our then counsel Atty. Simeon Mesina x x x.
[93]
xxx xxx xxx
ATTY. FERNANDO:
What was your reaction when Atty. Mesina informed you of this
possibility?
F. MARCOS, JR.:
My reaction to all of these approaches is that I am always open, we are

always open, we are very much always in search of resolution to the
problem of the family and any approach that has been made us, we have
entertained. And so my reaction was the same as what I have always ...
why not? Maybe this is the one that will finally put an end to this problem.
[94]
xxx xxx xxx
ATTY. FERNANDO:
Basically, what were the true amounts of the assets in the bank?
PJ GARCHITORENA:
So, we are talking about liquid assets here? Just Cash?
F. MARCOS, JR.:
Well, basically, any assets. Anything that was under the Marcos name in
any of the banks in Switzerland which may necessarily be not cash.[95]
xxx xxx xxx
PJ GARCHITORENA:
x x x What did you do in other words, after being apprised of this contract
in connection herewith?
F. MARCOS, JR.:
I assumed that we are beginning to implement the agreement because this

was forwarded through the Philippine government lawyers through our
lawyers and then, subsequently, to me. I was a little surprised because we
hadn't really discussed the details of the transfer of the funds, what the
bank accounts, what the mechanism would be. But nevertheless, I was
happy to see that as far as the PCGG is concerned, that the agreement was
perfected and that we were beginning to implement it and that was a source
of satisfaction to me because I thought that finally it will be the end.[96]
Ferdinand Jr.'s pronouncements, taken in context and in their entirety, were a

confirmation of respondents' recognition of their ownership of the Swiss bank deposits.
Admissions of a party in his testimony are receivable against him. If a party, as a
witness, deliberately concedes a fact, such concession has the force of a judicial
admission.[97] It is apparent from Ferdinand Jr.'s testimony that the Marcos family
agreed to negotiate with the Philippine government in the hope of finally putting an end
to the problems besetting the Marcos family regarding the Swiss accounts. This was
doubtlessly an acknowledgment of ownership on their part. The rule is that the
testimony on the witness stand partakes of the nature of a formal judicial admission
when a party testifies clearly and unequivocally to a fact which is peculiarly within his
own knowledge.[98]
In her Manifestation[99] dated May 26, 1998, respondent Imelda Marcos

furthermore revealed the following:
That respondent Imelda R. Marcos owns 90% of the subject matter of the
name of the various foundations alleged in the case;
That in fact only 10% of the subject matter in the above-entitled case
belongs to the estate of the late President Ferdinand E. Marcos;
xxx xxx xxx
Respondents' ownership of the Swiss bank accounts as borne out by Mrs. Marcos'
manifestation is as bright as sunlight. And her claim that she is merely a beneficiary of
the Swiss deposits is belied by her own signatures on the appended copies of the
documents substantiating her ownership of the funds in the name of the foundations. As
already mentioned, she failed to specifically deny under oath the authenticity of such
documents, especially those involving "William Saunders" and "Jane Ryan" which
actually referred to Ferdinand Marcos and Imelda Marcos, respectively. That failure of
Imelda Marcos to specifically deny the existence, much less the genuineness and due
execution, of the instruments bearing her signature, was tantamount to a judicial
admission of the genuineness and due execution of said instruments, in accordance
with Section 8, Rule 8[100] of the 1997 Rules of Civil Procedure.
Likewise, in her Constancia[101] dated May 6, 1999, Imelda Marcos prayed for the
approval of the Compromise Agreement and the subsequent release and transfer of the
$150 million to the rightful owner. She further made the following manifestations:
xxx xxx xxx
2. The Republic's cause of action over the full amount is its forfeiture in
favor of the government if found to be ill-gotten. On the other hand,
the Marcoses defend that it is a legitimate asset. Therefore, both
parties have an inchoate right of ownership over the account. If it turns
out that the account is of lawful origin, the Republic may yield to the
Marcoses. Conversely, the Marcoses must yield to the Republic.
(underscoring supplied)
xxx xxx xxx
3. Consistent with the foregoing, and the Marcoses having committed

themselves to helping the less fortunate, in the interest of peace,
reconciliation and unity, defendant MADAM IMELDA
ROMUALDEZ MARCOS, in firm abidance thereby, hereby affirms
her agreement with the Republic for the release and transfer of the US
Dollar 150 million for proper disposition, without prejudice to the
final outcome of the litigation respecting the ownership of the
remainder.
Again, the above statements were indicative of Imelda's admission of the Marcoses'
ownership of the Swiss deposits as in fact "the Marcoses defend that it (Swiss deposits)
is a legitimate (Marcos) asset."
On the other hand, respondents Maria Imelda Marcos-Manotoc, Ferdinand Marcos, Jr.
and Maria Irene Marcos-Araneta filed a motion[102] on May 4, 1998 asking the
Sandiganbayan to place the res (Swiss deposits) in custodia legis:
7. Indeed, the prevailing situation is fraught with danger! Unless the

aforesaid Swiss deposits are placed in custodia legis or within the
Court's protective mantle, its dissipation or misappropriation by the
petitioner looms as a distinct possibility.
Such display of deep, personal interest can only come from someone who believes that
he has a marked and intimate right over the considerable dollar deposits. Truly, by
filing said motion, the Marcos children revealed their ownership of the said deposits.
Lastly, the Undertaking[103] entered into by the PCGG, the PNB and the Marcos
foundations on February 10, 1999, confirmed the Marcoses' ownership of the Swiss
bank deposits. The subject Undertaking brought to light their readiness to pay the
human rights victims out of the funds held in escrow in the PNB. It stated:
WHEREAS, the Republic of the Philippines sympathizes with the plight of

the human rights victims-plaintiffs in the aforementioned litigation through
the Second Party, desires to assist in the satisfaction of the judgment awards
of said human rights victims-plaintiffs, by releasing, assigning and or
waiving US$150 million of the funds held in escrow under the Escrow
Agreements dated August 14, 1995, although the Republic is not obligated
to do so under final judgments of the Swiss courts dated December 10 and
19, 1997, and January 8, 1998;
WHEREAS, the Third Party is likewise willing to release, assign and/or

waive all its rights and interests over said US$150 million to the
aforementioned human rights victims-plaintiffs.
All told, the foregoing disquisition negates the claim of respondents that "petitioner
failed to prove that they acquired or own the Swiss funds" and that "it was only by
arbitrarily isolating and taking certain statements made by private respondents out of
context that petitioner was able to treat these as judicial admissions." The Court is fully
aware of the relevance, materiality and implications of every pleading and document
submitted in this case. This Court carefully scrutinized the proofs presented by the
parties. We analyzed, assessed and weighed them to ascertain if each piece of evidence
rightfully qualified as an admission. Owing to the far-reaching historical and political
implications of this case, we considered and examined, individually and totally, the
evidence of the parties, even if it might have bordered on factual adjudication which,
by authority of the rules and jurisprudence, is not usually done by this Court. There is
no doubt in our mind that respondent Marcoses admitted ownership of the Swiss bank
deposits.
We have always adhered to the familiar doctrine that an admission made in the
pleadings cannot be controverted by the party making such admission and becomes
conclusive on him, and that all proofs submitted by him contrary thereto or inconsistent
therewith should be ignored, whether an objection is interposed by the adverse party or
not.[104] This doctrine is embodied in Section 4, Rule 129 of the Rules of Court:
SEC. 4. Judicial admissions. - An admission, verbal or written, made by a

party in the course of the proceedings in the same case, does not require
proof. The admission may be contradicted only by showing that it was made
through palpable mistake or that no such admission was made.[105]
In the absence of a compelling reason to the contrary, respondents' judicial admission

of ownership of the Swiss deposits is definitely binding on them.
The individual and separate admissions of each respondent bind all of them pursuant to
Sections 29 and 31, Rule 130 of the Rules of Court:
SEC. 29. Admission by co-partner or agent. - The act or declaration of a

partner or agent of the party within the scope of his authority and during the
existence of the partnership or agency, may be given in evidence against
such party after the partnership or agency is shown by evidence other than
such act or declaration. The same rule applies to the act or declaration of a
joint owner, joint debtor, or other person jointly interested with the party.
[106]
SEC. 31. Admission by privies. - Where one derives title to property from
another, the act, declaration, or omission of the latter, while holding the title,
in relation to the property, is evidence against the former.[107]
The declarations of a person are admissible against a party whenever a "privity of

estate" exists between the declarant and the party, the term "privity of estate" generally
denoting a succession in rights.[108] Consequently, an admission of one in privity with
a party to the record is competent.[109] Without doubt, privity exists among the
respondents in this case. And where several co-parties to the record are jointly
interested in the subject matter of the controversy, the admission of one is competent
against all.[110]
Respondents insist that the Sandiganbayan is correct in ruling that petitioner Republic
has failed to establish a prima facie case for the forfeiture of the Swiss deposits.
We disagree. The sudden turn-around of the Sandiganbayan was really strange, to say
the least, as its findings and conclusions were not borne out by the voluminous records
of this case.
Section 2 of RA 1379 explicitly states that "whenever any public officer or employee
has acquired during his incumbency an amount of property which is manifestly out of
proportion to his salary as such public officer or employee and to his other lawful
income and the income from legitimately acquired property, said property shall be
presumed prima facie to have been unlawfully acquired. x x x"
The elements which must concur for this prima facie presumption to apply are:
(1) the offender is a public officer or employee;
(2) he must have acquired a considerable amount of money or property during

his incumbency; and
(3) said amount is manifestly out of proportion to his salary as such public
officer or employee and to his other lawful income and the income from
legitimately acquired property.
It is undisputed that spouses Ferdinand and Imelda Marcos were former public officers.
Hence, the first element is clearly extant.
The second element deals with the amount of money or property acquired by the public
officer during his incumbency. The Marcos couple indubitably acquired and owned
properties during their term of office. In fact, the five groups of Swiss accounts were
admittedly owned by them. There is proof of the existence and ownership of these
assets and properties and it suffices to comply with the second element.
The third requirement is met if it can be shown that such assets, money or property is
manifestly out of proportion to the public officer's salary and his other lawful income.
It is the proof of this third element that is crucial in determining whether a prima facie
presumption has been established in this case.
Petitioner Republic presented not only a schedule indicating the lawful income of the
Marcos spouses during their incumbency but also evidence that they had huge deposits
beyond such lawful income in Swiss banks under the names of five different
foundations. We believe petitioner was able to establish the prima facie presumption
that the assets and properties acquired by the Marcoses were manifestly and patently
disproportionate to their aggregate salaries as public officials. Otherwise stated,
petitioner presented enough evidence to convince us that the Marcoses had dollar
deposits amounting to US $356 million representing the balance of the Swiss accounts
of the five foundations, an amount way, way beyond their aggregate legitimate income
of only US$304,372.43 during their incumbency as government officials.
Considering, therefore, that the total amount of the Swiss deposits was considerably out
of proportion to the known lawful income of the Marcoses, the presumption that said
dollar deposits were unlawfully acquired was duly established. It was sufficient for the
petition for forfeiture to state the approximate amount of money and property acquired
by the respondents, and their total government salaries. Section 9 of the PCGG Rules
and Regulations states:
Prima Facie Evidence. - Any accumulation of assets, properties, and other

material possessions of those persons covered by Executive Orders No. 1
and No. 2, whose value is out of proportion to their known lawful income is
prima facie deemed ill-gotten wealth.
Indeed, the burden of proof was on the respondents to dispute this presumption and
show by clear and convincing evidence that the Swiss deposits were lawfully acquired
and that they had other legitimate sources of income. A presumption is prima facie
proof of the fact presumed and, unless the fact thus prima facie established by legal
presumption is disproved, it must stand as proved.[111]
Respondent Mrs. Marcos argues that the foreign foundations should have been
impleaded as they were indispensable parties without whom no complete determination
of the issues could be made. She asserts that the failure of petitioner Republic to
implead the foundations rendered the judgment void as the joinder of indispensable
parties was a sine qua non exercise of judicial power. Furthermore, the non-inclusion of
the foreign foundations violated the conditions prescribed by the Swiss government
regarding the deposit of the funds in escrow, deprived them of their day in court and
denied them their rights under the Swiss constitution and international law.[112]
The Court finds that petitioner Republic did not err in not impleading the foreign
foundations. Section 7, Rule 3 of the 1997 Rules of Civil Procedure,[113] taken from
Rule 19b of the American Federal Rules of Civil Procedure, provides for the
compulsory joinder of indispensable parties. Generally, an indispensable party must be
impleaded for the complete determination of the suit. However, failure to join an
indispensable party does not divest the court of jurisdiction since the rule regarding
indispensable parties is founded on equitable considerations and is not jurisdictional.
Thus, the court is not divested of its power to render a decision even in the absence of
indispensable parties, though such judgment is not binding on the non-joined party.[114]
An indispensable party[115] has been defined as one:
[who] must have a direct interest in the litigation; and if this interest is such
that it cannot be separated from that of the parties to the suit, if the court
cannot render justice between the parties in his absence, if the decree will
have an injurious effect upon his interest, or if the final determination of the
controversy in his absence will be inconsistent with equity and good
conscience.
There are two essential tests of an indispensable party: (1) can relief be afforded the
plaintiff without the presence of the other party? and (2) can the case be decided on its
merits without prejudicing the rights of the other party?[116] There is, however, no
fixed formula for determining who is an indispensable party; this can only be
determined in the context and by the facts of the particular suit or litigation.
In the present case, there was an admission by respondent Imelda Marcos in her May
26, 1998 Manifestation before the Sandiganbayan that she was the sole beneficiary of
90% of the subject matter in controversy with the remaining 10% belonging to the
estate of Ferdinand Marcos.[117] Viewed against this admission, the foreign foundations
were not indispensable parties. Their non-participation in the proceedings did not
prevent the court from deciding the case on its merits and according full relief to
petitioner Republic. The judgment ordering the return of the $356 million was neither
inimical to the foundations' interests nor inconsistent with equity and good conscience.
The admission of respondent Imelda Marcos only confirmed what was already
generally known: that the foundations were established precisely to hide the money
stolen by the Marcos spouses from petitioner Republic. It negated whatever illusion
there was, if any, that the foreign foundations owned even a nominal part of the assets
in question.
The rulings of the Swiss court that the foundations, as formal owners, must be given an
opportunity to participate in the proceedings hinged on the assumption that they owned
a nominal share of the assets.[118] But this was already refuted by no less than Mrs.
Marcos herself. Thus, she cannot now argue that the ruling of the Sandiganbayan
violated the conditions set by the Swiss court. The directive given by the Swiss court
for the foundations to participate in the proceedings was for the purpose of protecting
whatever nominal interest they might have had in the assets as formal owners. But
inasmuch as their ownership was subsequently repudiated by Imelda Marcos, they
could no longer be considered as indispensable parties and their participation in the
proceedings became unnecessary.
In Republic vs. Sandiganbayan,[119] this Court ruled that impleading the firms which
are the res of the action was unnecessary:
"And as to corporations organized with ill-gotten wealth, but are not

themselves guilty of misappropriation, fraud or other illicit conduct - in
other words, the companies themselves are not the object or thing involved
in the action, the res thereof - there is no need to implead them either.
Indeed, their impleading is not proper on the strength alone of their having
been formed with ill-gotten funds, absent any other particular wrongdoing
on their part...
Such showing of having been formed with, or having received ill-gotten

funds, however strong or convincing, does not, without more, warrant
identifying the corporations in question with the person who formed or
made use of them to give the color or appearance of lawful, innocent
acquisition to illegally amassed wealth - at the least, not so as place on the
Government the onus of impleading the former with the latter in actions to
recover such wealth. Distinguished in terms of juridical personality and
legal culpability from their erring members or stockholders, said
corporations are not themselves guilty of the sins of the latter, of the
embezzlement, asportation, etc., that gave rise to the Government's cause of
action for recovery; their creation or organization was merely the result of
their members' (or stockholders') manipulations and maneuvers to conceal
the illegal origins of the assets or monies invested therein. In this light, they
are simply the res in the actions for the recovery of illegally acquired
wealth, and there is, in principle, no cause of action against them and no
ground to implead them as defendants in said actions."
Just like the corporations in the aforementioned case, the foreign foundations here were
set up to conceal the illegally acquired funds of the Marcos spouses. Thus, they were
simply the res in the action for recovery of ill-gotten wealth and did not have to be
impleaded for lack of cause of action or ground to implead them.
Assuming arguendo, however, that the foundations were indispensable parties, the
failure of petitioner to implead them was a curable error, as held in the previously cited
case of Republic vs. Sandiganbayan:[120]
"Even in those cases where it might reasonably be argued that the failure of
the Government to implead the sequestered corporations as defendants is
indeed a procedural abberation, as where said firms were allegedly used,
and actively cooperated with the defendants, as instruments or conduits for
conversion of public funds and property or illicit or fraudulent obtention of
favored government contracts, etc., slight reflection would nevertheless lead
to the conclusion that the defect is not fatal, but one correctible under
applicable adjective rules - e.g., Section 10, Rule 5 of the Rules of Court
[specifying the remedy of amendment during trial to authorize or to
conform to the evidence]; Section 1, Rule 20 [governing amendments
before trial], in relation to the rule respecting omission of so-called
necessary or indispensable parties, set out in Section 11, Rule 3 of the Rules
of Court. It is relevant in this context to advert to the old familiar doctrines
that the omission to implead such parties "is a mere technical defect which
can be cured at any stage of the proceedings even after judgment"; and that,
particularly in the case of indispensable parties, since their presence and
participation is essential to the very life of the action, for without them no
judgment may be rendered, amendments of the complaint in order to
implead them should be freely allowed, even on appeal, in fact even after
rendition of judgment by this Court, where it appears that the complaint
otherwise indicates their identity and character as such indispensable
parties."[121]
Although there are decided cases wherein the non-joinder of indispensable parties in
fact led to the dismissal of the suit or the annulment of judgment, such cases do not jibe
with the matter at hand. The better view is that non-joinder is not a ground to dismiss
the suit or annul the judgment. The rule on joinder of indispensable parties is founded
on equity. And the spirit of the law is reflected in Section 11, Rule 3[122] of the 1997
Rules of Civil Procedure. It prohibits the dismissal of a suit on the ground of non-
joinder or misjoinder of parties and allows the amendment of the complaint at any stage
of the proceedings, through motion or on order of the court on its own initiative.[123]
Likewise, jurisprudence on the Federal Rules of Procedure, from which our Section 7,
Rule 3[124] on indispensable parties was copied, allows the joinder of indispensable
parties even after judgment has been entered if such is needed to afford the moving
party full relief.[125] Mere delay in filing the joinder motion does not necessarily result
in the waiver of the right as long as the delay is excusable.[126] Thus, respondent Mrs.
Marcos cannot correctly argue that the judgment rendered by the Sandiganbayan was
void due to the non-joinder of the foreign foundations. The court had jurisdiction to
render judgment which, even in the absence of indispensable parties, was binding on all
the parties before it though not on the absent party.[127] If she really felt that she could
not be granted full relief due to the absence of the foreign foundations, she should have
moved for their inclusion, which was allowable at any stage of the proceedings. She
never did. Instead she assailed the judgment rendered.
In the face of undeniable circumstances and the avalanche of documentary evidence

against them, respondent Marcoses failed to justify the lawful nature of their
acquisition of the said assets. Hence, the Swiss deposits should be considered ill-gotten
wealth and forfeited in favor of the State in accordance with Section 6 of RA 1379:
SEC. 6. Judgment. If the respondent is unable to show to the satisfaction of

the court that he has lawfully acquired the property in question, then the
court shall declare such property forfeited in favor of the State, and by
virtue of such judgment the property aforesaid shall become property of the
State x x x.
THE FAILURE TO PRESENT AUTHENTICATED

TRANSLATIONS OF THE SWISS DECISIONS
Finally, petitioner Republic contends that the Honorable Sandiganbayan Presiding

Justice Francis Garchitorena committed grave abuse of discretion in reversing himself
on the ground that the original copies of the authenticated Swiss decisions and their
authenticated translations were not submitted to the court a quo. Earlier PJ
Garchitorena had quoted extensively from the unofficial translation of one of these
Swiss decisions in his ponencia dated July 29, 1999 when he denied the motion to
release US$150 Million to the human rights victims.
While we are in reality perplexed by such an incomprehensible change of heart, there

might nevertheless not be any real need to belabor the issue. The presentation of the
authenticated translations of the original copies of the Swiss decision was not de
rigueur for the public respondent to make findings of fact and reach its conclusions. In
short, the Sandiganbayan's decision was not dependent on the determination of the
Swiss courts. For that matter, neither is this Court's.
The release of the Swiss funds held in escrow in the PNB is dependent solely on the
decision of this jurisdiction that said funds belong to the petitioner Republic. What is
important is our own assessment of the sufficiency of the evidence to rule in favor of
either petitioner Republic or respondent Marcoses. In this instance, despite the absence
of the authenticated translations of the Swiss decisions, the evidence on hand tilts
convincingly in favor of petitioner Republic.
WHEREFORE, the petition is hereby GRANTED. The assailed Resolution of the

Sandiganbayan dated January 31, 2002 is SET ASIDE. The Swiss deposits which were
transferred to and are now deposited in escrow at the Philippine National Bank in the
estimated aggregate amount of US$658,175,373.60 as of January 31, 2002, plus
interest, are hereby forfeited in favor of petitioner Republic of the Philippines.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Panganiban, Ynares-Santiago, Austria-Martinez, Carpio-

Morales, Callejo, Sr., Azcuna, and Tinga, JJ., concur.
Puno, and Vitug, JJ., in the result
Quisumbing, and Sandoval-Gutierrez, JJ., on official leave.
Carpio, J., no part.
[1]An Act Declaring Forfeiture In Favor of the State Any Property To Have Been
Unlawfully Acquired By Any Public Officer or Employee and Providing For the
Procedure Therefor.
[2]E.O. No. 1 - promulgated on February 28, 1986, only two (2) days after the
Marcoses fled the country, creating the PCGG which was primarily tasked to assist the
President in the recovery of vast government resources allegedly amassed by former
President Marcos, his immediate family, relatives, and close associates, both here and
abroad.
[3] E.O. No. 2 - issued twelve (12) days later, warning all persons and entities who had
knowledge of possession of ill-gotten assets and properties under pain of penalties
prescribed by law, prohibiting them from concealing, transferring or dissipating them
or from otherwise frustrating or obstructing the recovery efforts of the government.
[4] E.O. No. 14 - Series of 1986, as amended by E.O. No. 14-A.
[5]Also series of 1986, vested Sandiganbayan the exclusive and original jurisdiction
over cases, whether civil or criminal, to be filed by the PCGG with the assistance of the
Office of the Solicitor General. The law also declared that the civil actions for the
recovery of unlawfully acquired property under Republic Act No. 1379 or for
restitution, reparation of damages, or indemnification for consequential and other
damages or any other civil action under the Civil Code or other existing laws filed with
the Sandiganbayan against Ferdinand Marcos et. al., may proceed independently of any
criminal proceedings and may be proved by preponderance of evidence.
[6] Declared null and void by this Court on December 9, 1998 in the case of "Francisco
I. Chavez vs. PCGG and Magtanggol Gunigundo, docketed as G.R. No. 130716.
[7]In April 1986, pursuant to E.O. No. 2, the Republic of the Philippines through the
PCGG filed a request for mutual assistance with the Swiss Federal Police Department,
under the procedures of the International Mutual Assistance in Criminal Proceedings
(IMAC) to freeze the bank deposits of the Marcoses located in Switzerland.
IMAC is a domestic statute of Switzerland which generally affords relief to the kind of
request from foreign governments or entities as authorized under E.O. No. 2.
The various Swiss local authorities concerned granted the request of petitioner
Republic, and ordered the Swiss deposits to be "blocked" until the competent
Philippine court could decide on the matter.
[8] Volume III, Rollo, p. 2195.
[9]Penned by Justice Catalino R. Castañeda, Jr. and concurred in by Presiding Justice

Francis E. Garchitorena and Associate Justice Gregory S. Ong.
[10] Volume III, Rollo, p. 2218.
[11] Penned by Presiding Justice Francis E. Garchitorena with the separate concurring
opinions of Associate Justice Nicodemo T. Ferrer and Associate Justice Gregory S.

Ong. Associate Justices Catalino R. Castañeda, Jr. and Francisco H. Villaruz, Jr. both
wrote their respective dissenting opinions.
[12] Volume I, Rollo, pp. 145-146.
[13] Volume I, Rollo, pp. 60-62.
[14] Volume IV, Rollo, p. 2605.
[15] Sec. 3 - the petition shall contain the following information
xxx
(c) The approximate amount of property he has acquired during his incumbency in his
past and present offices and employments.
[16](d) A description of said property, or such thereof as has been identified by the
Solicitor General.
[17](e) The total amount of his government salary and other proper earnings and
incomes from legitimately acquired property xxx.
[18] Volume IV, Rollo, pp. 2651-2654.
[19] Same as Section 1, Rule 65 of the old Rules of Court.
[20] Filoteo, Jr. vs. Sandiganbayan, 263 SCRA 222 [1996].
[21] Central Bank vs. Cloribel, 44 S 307, 314 [1972].
[22] 240 SCRA 376 [1995].
[23] Republic vs. Sandiganbayan, 269 SCRA 316 [1997].
[24] 69 SCRA 524 [1976].
[25] Substantially the same as Section 1, Rule 34 of the old Rules of Court.
[26] Agcanas vs. Nagum, L-20707, 143 Phil 177 [1970].
[27] Rollo, Vol. I, pp. 22-37.
[29] 16 Phil., 315, 321-322 [1910].
[30] 197 SCRA 391 [1991].
[31] Philippine Advertising vs. Revilla, 52 SCRA 246 [1973].
[32] Petition, Annex C, Volume I, Rollo, p. 236.
[33] Answer, Annex D, Volume II, Rollo, p. 1064.
[34] 61A Am. Jur., 172-173.
[35]Blume vs. MacGregor, 148 P. 2d. 656 [see p.428, Moran, Comments on the Rules
of Court, 1995 ed.].
[37] Supra.
[38] Supra.
[39]"All the five (5) group accounts in the over-all flow chart have a total balance of
about Three Hundred Fifty Six Million Dollars ($356,000,000.00) as shown by Annex
`R-5' hereto attached as integral part hereof."
[40] 22 SCRA 48 [1968]
[41] XANDY-WINTROP-AVERTINA FOUNDATION: (a) Contract for opening of

deposit dated March 21, 1968; (b) Handwritten instruction; (c) Letter dated March 3,
1970; (d) Handwritten regulation of Xandy dated February 13, 1970; (e) Letter of
instruction dated March 10, 1981; (f) Letter of Instructions dated March 10, 1991.
TRINIDAD-RAYBY-PALMY FOUNDATION: (a) Management agreement

dated August 28, 1990; (b) Letter of instruction dated August 26, 1970 to
Markers Geel of Furich; (c) Approval of Statutes and By-laws of Trinidad
Foundation dated August 26, 1990; (d) Regulations of the Trinidad
Foundation dated August 28, 1970; (e) Regulations of the Trinidad
Foundation prepared by Markers Geel dated August 28, 1970; (f) Letter of
Instructions to the Board of Rayby Foundation dated March 10, 1981; (g)
Letter of Instructions to the Board of Trinidad Foundation dated March 10,
1981.
MALER ESTABLISHMENT FOUNDATION: (a) Rules and Regulations of

Maler dated October 15, 1968; (b) Letter of Authorization dated October 19,
1968 to Barbey d Suncir; (c) Letter of Instruction to Muler to Swiss Bank
dated October 19, 1968.
[42] "Where an action or defense is founded upon a written instrument, copied in or

attached to the corresponding pleading xxx, the genuineness and due execution of the
instrument shall be deemed admitted unless the adverse party under oath, specifically
denies them, and sets forth what he claims to be the facts xxx."
[43] Annex A-F, Volume I, Rollo, pp. 193-194.
[44] Ice Plant Equipment vs. Martocello, D.C.P., 1941, 43 F. Supp. 281.
[45] Phil. Advertising Counselors, Inc. vs. Revilla, L- 31869, Aug. 8, 1973.
[46] Warner Barnes Co., Ltd. vs. Reyes, et. al., 55 O.G. 3109-3111.
[47] Philippine Bank of Communications vs. Court of Appeals, 195 SCRA 567 [1991].
[48] 28 SCRA 807, 812 [1969].
[49]Rule 20 of the old Rules of Court was amended but the change(s) had no adverse
effects on the rights of private respondents.
[50] Development Bank of the Phils. vs. CA, G.R. No. L-49410, 169 SCRA 409 [1989].
[52] adopted by the Marcos children.
[53] dated September 26, 2000 as filed by Mrs. Marcos; dated October 5, 2000 as
jointly filed by Mrs. Manotoc and Ferdinand, Jr.; supplemental motion for
reconsideration dated October 9, 2000 jointly filed by Mrs. Manotoc and Ferdinand, Jr.;
[54] dated December 12, 2000 and December 17, 2000 as filed by the Marcos children.
[55] TSN, pp. 47-48, October 28, 1999.
[56]Evadel Realty and Development Corp. vs. Spouses Antera and Virgilio Soriano,
April 20, 2001.
[57] Plantadosi vs. Loew's, Inc., 7 Fed. Rules Service, 786, June 2, 1943.
[58] Rabaca vs. Velez, 341 SCRA 543 [2000].
[59] Carcon Development Corp. vs. Court of Appeals, 180 SCRA 348 [1989].
[60] Rollo, pp. 2659-70.
[61] Substantially the same as Sections 1 and 2, Rule 34 of the old Rules of Court.
[62]Rule 113. Summary Judgment. - When an answer is served in an action to recover

a debt or a liquidated demand arising,
1. on a contract, express or implied, sealed or not sealed; or
2. on a judgment for a stated sum;
the answer may be struck out and judgment entered thereon on motion, and the
affidavit of the plaintiff or of any other person having knowledge of the facts, verifying
the cause of action and stating the amount claimed, and his belief that there is no
defense to the action; unless the defendant by affidavit or other proof, shall show such
facts as may be deemed, by the judge hearing the motion, sufficient to entitle him to
defend. (emphasis ours)
[63] 73 Am Jur 2d 733, §12; 49 C.J.S. 412, § 224.
[64] Moran, Comments on the Rules of Court, Vol. II. (1996), pp. 183-184.
[65] 19 NYS2d 250 [1940].
[66] 73 Am Jur 2d 733, §12; 49 C.J.S. 412, § 224.
[67] Supra.
[68] Gregorio Estrada vs. Hon. Fracisco Consolacion, et. al., 71 SCRA 523 [1976].
[70] Madeja vs. Patcho, 123 SCRA 540 [1983].
[71] Mejia de Lucas vs. Gamponia, 100 Phil. 277 [1956].
[72] Diaz vs. Gorricho, 103 Phil. 261 [1958].
[73] Collado vs. Court of Appeals, G.R. No.107764, October 4, 2002; Section 15,
Article XI of the 1987 Constitution.
[74] Go Tian An vs. Republic of the Philippines, 124 Phil. 472 [1966].
[75] Tijam vs. Sibonghanoy, 23 SCRA 29 [1968].
[76]An Act Declaring Forfeiture in Favor of the State any Property Found to Have
Been Unlawfully Acquired by Any Public Officer or Employee and Providing for the
Proceedings Therefor, approved on June 18, 1955.
[77] Petition, Annex D, Volume II, p. 1081.
[78] Ibid.
[79] Id., p. 1062.

[80] Exhibit "S."
[82] Regalado, Remedial Law Compendium, Vol. II, 1997 ed., p. 650.
[83] Moran, Comments on the Rules of Court, Volume V, 1980 ed., p. 64.
[84] Section 9, Article VII.
[85] Section 4(1), Article VII.
[87] Annex F-1, Volume II, Rollo, pp. 1095-1098.
[88] Annex F-2, Volume II, Rollo, pp.1099-1100.
[89] Chavez vs. PCGG, 299 SCRA 744, [1998].
[91] Annex HH, Volume III, Rollo, p. 2205.
[92] 31A C.J.S., Par. 284, p.721.
[93] Annex I, Volume II, Rollo, pp. 1177-1178.
[94] Ibid, p. 1181.
[95] Ibid, p. 1188.
[96] Ibid, p. 1201.
[97] 29A Am. Jur., Par. 770, p. 137.
[98] 31A C.J.S., Par. 311, p.795.
[99] Annex M, Volume II, Rollo, pp.1260-1261.
[101] Annex S, Volume II, Rollo, pp.1506-1507.
[102] Annex L, Volume II, Rollo, p. 1256.
[103] Annex P-1, Volume II, Rollo, p. 1289.
[104] Santiago vs. de los Santos, 61 SCRA 146 [1974].
[108] 29 Am Jur 2d Par. 824, p. 211.
[109] 31A C.J.S., Par. 322, p. 817.
[110] Ibid, p. 814.
[111] Miriam Defensor Santiago, Rules of Court Annotated, 1999 ed., p. 857.
[112] Rollo, pp. 2255-2265.
[113]Sec. 7. Compulsory joinder of indispensable parties.--Parties in interest without

whom no final determination can be had of an action shall be joined either as plaintiffs
or defendants. The same as Section 7, Rule 3 of the old Rules of Court.
[114] 59 Am. Jur. 2d Parties §97 (2000).
[115] Supra note 3 § 13 (2000).
[116] Supra note 3 citing Picket vs. Paine, 230 Ga 786, 199 SE2d 223.
[117] Rollo, p. 1260. Manifestation:
"Comes now undersigned counsel for the respondent Imelda R. Marcos, and before this
Honorable Court, most respectfully manifests:
I. That respondent Imelda R. Marcos owns 90% of the subject-matter of the
name of the various Foundations alleged in the case;
II. That in fact only 10% of the subject-matter in the above-entitled case
belongs to the Estate of the late President Ferdinand E. Marcos;"
[118]Rollo, p. 2464, quoted from the December 18, 2000 memorandum of respondent
Mrs. Marcos:
"On the other hand, the opponent to the appeal, formally the owner of the
assets to be seized and restituted, has not been involved in the collecting
procedure pending in the Philippines. Even though such opponent is nothing

but a legal construction to hide the true ownership to the assets of the
Marcos family, they nevertheless are entitled to a hearing as far as the
proceedings are concerned with accounts which are nominally theirs. The
guarantees of the Republic of the Philippines therefore must include the
process rights not only of the defendants but also of the formal owners of
the assets to be delivered."
[119] 240 SCRA 376, 469 [1995].
[120] Supra.
[121] Id at 470-471.
[123] Sec. 11. Misjoinder and non-joinder of parties. - Neither misjoinder nor non-
joinder of parties is ground for the dismissal of an action. Parties may be dropped or
added by order of the court on motion of any party or 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 proceeded with separately.
[124] Same as Section 7, Rule 3 of the old Rules of Court.
[125] Supra note 3 § 265 (2000)
[126]Id citing Gentry vs. Smith (CA5 Fla) 487 F2d 571, 18 FR Serv 2d 221, later app
(CA5 Fla) 538 F2d 1090, on reh (CA5 Fla) 544 F2d 900, holding that a failure to
request the joinder of a defendant was excused where the moving party's former
counsel, who had resisted the joinder, abruptly withdrew his appearance and substitute
counsel moved promptly to join the corporation.
[127] Supra note 3.
Source: Supreme Court E-Library

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4/12/24, 12:17 AM [ G.R. No. L-22578.

January 31, 1973 ]

151 Phil. 338

[ G.R. No. L-22578. January 31, 1973 ]

"The plaintiff, hereinafter to be called the NAMARCO, is a government owned

'That, WHEREAS, by virtue of NAMARCO Board Resolution dated

xxx xxx xxx

'That, WHEREAS, for and in consideration of the sum of Two

'4. That the items and/or merchandise sold by NAMARCO to the

xxx xxx xxx

(Annex 'A' to the Complaint or Exh. 'A').

On June 21, 1961, NAMARCO filed an answer to the FEDERATION'S counterclaim

In this appeal, the FEDERATION contends that:

old Rules of Court (Section 4, Rule 9 of the new);

"What is the 'transaction or occurrence that is the subject-matter of the opposing

"The FEDERATION contends that NAMARCO's claim arose out of that

'1. In a former suit, B claimed realty under a will of her deceased

'2. Mariano executed an instrument purporting to be a deed of

claim for improvements therein made by the defendant in said case. It

"While the Contract of Sale created reciprocal obligations between the

should therefore have been raised by NAMARCO as a defense or counterclaim in the

1. The rule on compulsory counterclaim contained in Section 6 of Rule 10 of the old

" * * * Everyone agrees, too, that, if a counterclaim is not 'compulsory,' it is

This criterion has however been found inadequate as an overall standard.

A review of decided cases in this jurisdiction on compulsory counterclaims likewise

"A counterclaim has been held to be compulsory if there is a logical relationship

'We have indicated that a counterclaim is compulsory if it bears a

purpose of the rule which it was designed to implement. Thus, a

"The decision to grant or deny a motion to serve a supplemental counterclaim is

Fernando, J., concur.

Makalintal, Zaldivar,Esguerra, and Ruiz Castro, JJ., concur in the result.

Teehankee, J., files a separate concurring opinion.

Barredo, J., dissents in a separate opinion.

Makasiar, J., concurs solely on the basis of reason no. II.

Concepcion, C.J., did not take part.

[2] See Decision, Record on appeal, pp. 72-79.

[4] Now Section 9 of Rule 6 of the new Rules of Court.

[11] 3 Federal Rules Service, 174.

[16] Res judicata as test applied in:

[17] Libbey-Owens-Ford Glass Co. v. Sylvania Indus. Corp., supra.

[19] Rosenthal v. Fowler, D.C.N.Y. 1952, 12 F.R.D. 388, 391.

Koufakis v. Carvel, C.A. 2d, 1970, 425 F.2d 892.

[21] 70 L. ed. pp. 756-757.

[25] I Moore's Federal Practice, 1938, pp. 384-385.

Stahl v. Ohio River Co., C.A. 3d 1970, 424 F. 2d 52.

Goldlawr, Inc. v. Shubert, D.C. Pa. 1967, 268 F. Supp. 965.

Marcus v. Marcoux, D.C.R.I. 1967, 41 F.R.D. 332.

Slavics v. Wood, D.C. Pa. 1964, 36 F.R.D. 47.

Allstate Ins. Co v. Valdez, D.C. Mich. 1962, 29 F.R.D. 479.

Cyclotherm Corp. v. Miller, D.C.Pa. 1950, 11 F.R.D. 88.

[27] Ibid., Civil Section 1411, p.55.

[28] Ibid., Civil Section 1428, pp. 148-149.

[29] Now Section 8 of Rule 6, Revised Rules of Court.

[31] Rule 13. Counterclaim and Cross-Claim.

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[32] 82 C.J.S. 860-863; Cu v. Republic, 89 Phil. 473.

[33] 82 CIS. 867-868.

[36] Pp. 15-31, Record on Appeal.

[37] Pp. 54-61, Record on Appeal.

[39] Compania General de Tabacos v. Molina, 5 Phil. 142.

[40] Olyphant v. St. Louis Ore & Steel Co., 28 F. 729.

[41] Vda. de Murciano v. Auditor General, 103 Phil. 907, 914