KINDS OF ACTIONS (ACTION IN REM)

G.R. Nos. 88075-77 December 20, 1989

MAXIMO TACAY, PONCIANO PANES and ANTONIA NOEL, petitioners,vs.
REGIONAL TRIAL COURT OF TAGUM Davao del Norte,
In the Regional Trial Court at Tagum, Davao del Norte, 1 three
(3) actions for recovery of possession (acciones publicianas 2 ) were separately
instituted by Godofredo Pineda against three (3) defendants, docketed as follows:
1) vs. Antonia Noel Civil Case No. 2209
2) vs. Ponciano Panes Civil Case No. 2210
3) vs. Maximo Tacay Civil Case No. 2211.
Civil Cases Numbered 2209 and 2211 were raffled to Branch I of the Trial Court,
presided over by Judge Marcial Hernandez. Civil No. 2210 was assigned to Branch 2,
presided over by Judge Jesus Matas.
The complaints 3 all alleged the same essential facts (1) Pineda was the owner of a
parcel of land measuring 790 square meters, his ownership being evidenced by TCT
No. T-46560; (2) the previous owner had allowed the defendants to occupy portions
of the land by mere tolerance; (3) having himself need to use the property, Pineda
had made demands on the defendants to vacate the property and pay reasonable
rentals therefor, but these demands had been refused; and (4) the last demand had
been made more than a year prior to the commencement of suit. The complaints
prayed for the same reliefs, to wit:
1) that plaintiff be declared owner of the areas occupied by the defendants;
2) that defendants and their "privies and allies" be ordered to vacate and deliver
the portions of the land usurped by them;
3) that each defendant be ordered to pay:
1 ) P 2,000 as monthly rents from February, 1987;
2 ) Actual damages, as proven;
3 ) Moral and nominal damages as the Honorable Court may fix ;
4) P30,000.00, "as attorney's fees, and representation fees of P5,000.00 per day of
appearance;" 4and
5) that he (Pineda) be granted such "further relief and remedies ... just and
equitable in the premises.
The prayer of each complaint contained a handwritten notation (evidently made by
plaintiff's counsel) reading, "P5,000.00 as and for," immediately above the
typewritten words, "Actual damages, as proven," the intention apparently being to
make the entire phrase read, " P5,000.00 as and for actual damages as proven. 5
Motions to dismiss were filed in behalf of each of the defendants by common
counsel . 6 Every motion alleged that the Trial Court had not acquired jurisdiction of
the case

. . . for the reason that the ... complaint violates the mandatory and clear provision
of Circular No. 7 of the ... Supreme Court dated March 24,1988, by failing to specify
all the amounts of damages which plaintiff is claiming from defendant;" and
. . . for ... failure (of the complaint) to even allege the basic requirement as to the
assessed value of the subject lot in dispute.
Judge Matas denied the motion to dismiss filed in Civil Case No. 2210 but ordered
the expunction of the "allegations in paragraph 11 of the ... complaint regarding
moral as well as nominal damages . 7 On motion of defendant Panes, Judge Matas
later ordered the striking out, too, of the "handwritten amount of 'P5,000. 00 as and
for.' including the typewritten words 'actual damages as proven' ... in sub-paragraph
b of paragraph 4 in the conclusion and prayer of the complaint ..." 8
The motions to dismiss submitted in Civil Cases Numbered 2211 and 2209 were also
denied in separate orders promulgated by Judge Marcial Fernandez. 9 His Order in
Case No. 2209 dated March 15, 1989 (a) declared that since the "action at bar is for
Reivindicatoria, Damages and Attorney's fees ... (d)efinitely this Court has the
exclusive jurisdiction," (b) that the claims for actual, moral and nominal damages
"are only one aspect of the cause of action," and (c) because of absence of
specification of the amounts claimed as moral, nominal and actual damages, they
should be "expunged from the records."
Ascribing grave abuse of discretion to both Judges Matas and Fernandez in the
rendition of the Orders above described, the defendants in all three (3) actions have
filed with this Court a "Joint Petition" for certiorari, prohibition and mandamus, with
prayer for temporary restraining order and/or writ of preliminary prohibitory
injunction," praying essentially that said orders be annulled and respondent judges
directed to dismiss all the complaints "without prejudice to private respondent
Pineda's re-filing a similar complaint that complies with Circular No. 7." The joint
petition (a) re-asserted the proposition that because the complaints had failed to
state the amounts being claimed as actual, moral and nominal damages, the Trial
Courts a quo had not acquired jurisdiction over the three (3) actions in questionindeed, the respondent Clerk of Court should not have accepted the complaints
which initiated said suits, and (b) it was not proper merely to expunge the claims for
damages and allow "the so-called cause of action for "reivindicatoria" remain for
trial" by itself. 10
The joint petition should be, as it is hereby, dismissed.
It should be dismissed for failure to comply with this Court's Circular No. 1-88
(effective January 1, 1989). The copies of the challenged Orders thereto attached 11
were not certified by the proper Clerk of Court or his duly authorized representative.
Certification was made by the petitioners' counsel, which is not allowed.
The petition should be dismissed, too, for another equally important reason. It fails
to demonstrate any grave abuse of discretion on the part of the respondent Judges
in rendering the Orders complained of or, for that matter, the existence of any
proper cause for the issuance of the writ of mandamus. On the contrary, the orders
appear to have correctly applied the law to the admitted facts.

It is true that the complaints do not state the amounts being claimed as actual,
moral and nominal damages. It is also true, however, that the actions are not
basically for the recovery of sums of money. They are principally for recovery of
possession of real property, in the nature of an accion publiciana. Determinative of
the court's jurisdiction in this type of actions is the nature thereof, not the amount
of the damages allegedly arising from or connected with the issue of title or
possession, and regardless of the value of the property. Quite obviously, an action
for recovery of possession of real property (such as an accion plenaria de possesion)
or the title thereof, 12 or for partition or condemnation of, or the foreclosure of a
mortgage on, said real property 13 - in other words, a real action-may be
commenced and prosecuted without an accompanying claim for actual, moral,
nominal or exemplary damages; and such an action would fall within the exclusive,
original jurisdiction of the Regional Trial Court.
Batas Pambansa Bilang 129 provides that Regional Trial Courts shall exercise
exclusive original jurisdiction inter alia over "all civil actions which involve the title
to, or possession of, real property, or any interest therein, except actions for forcible
entry into and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts." 14 The rule applies regardless of the value of the real
property involved, whether it be worth more than P20,000.00 or not, infra. The rule
also applies even where the complaint involving realty also prays for an award of
damages; the amount of those damages would be immaterial to the question of the
Court's jurisdiction. The rule is unlike that in other cases e.g., actions simply for
recovery of money or of personal property, 15 or actions in admiralty and maritime
jurisdiction 16 in which the amount claimed, 17 or the value of the personal
property, is determinative of jurisdiction; i.e., the value of the personal property or
the amount claimed should exceed twenty thousand pesos (P20,000.00) in order to
be cognizable by the Regional Trial Court.
Circular No. 7 of this Court, dated March 24, 1988, cannot thus be invoked, as the
petitioner does, as authority for the dismissal of the actions at bar. That circular,
avowedly inspired by the doctrine laid down in Manchester Development
Corporation v. Court of appeals, 149 SCRA 562 (May 7, 1987), has but limited
application to said actions, as shall presently be discussed. Moreover, the rules
therein laid down have since been clarified and amplified by the Court's subsequent
decision in Sun Insurance Office, Ltd. (SIOL) v. Asuncion, et al., G.R. Nos. 79937-38,
February 13, 1989.
Circular No. 7 was aimed at the practice of certain parties who omit from the prayer
of their complaints "any specification of the amount of damages," the omission
being "clearly intended for no other purposes than to evade the payment of the
correct filing fees if not to mislead the docket clerk, in the assessment of the filing
fee." The following rules were therefore set down:
1. All complaints, petitions, answers, and similar pleadings should specify the
amount of damages being prayed for not only in the body of the pleading but also in
the prayer, and said damages shall be considered in the assessment of the filing
fees in any case.

2. Any pleading that fails to comply with this requirement shall not be accepted nor
admitted, or shall otherwise be expunged from the record.
3. The Court acquires jurisdiction over any case only upon the payment of the
prescribed docket fee. An amendment of the complaint or similar pleading will not
thereby vest jurisdiction in the Court, much less the payment of the docket fee
based on the amount sought in the amended pleading.
The clarificatory and additional rules laid down in Sun Insurance Office, Ltd. v.
Asuncion, supra, read as follows:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but
(also) the payment of the prescribed docket fee that vests a trial court with
jurisdiction over the subject-matter or nature of the action. Where the filing of the
initiatory pleading is not accompanied by payment of the docket fee, the court may
allow payment of the fee within a reasonable time but in no case beyond the
applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee
prescribed therefor is paid. The court may also allow payment of said fee within a
reasonable time but also in no case beyond its applicable prescriptive or
reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but, subsequently,
the judgment awards a claim not specified in the pleading, or if specified, the same
has been left for determination by the court, the additional filing fee therefor shall
constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court
or his duly authorized deputy to enforce said lien and assess and collect the
additional fee.
As will be noted, the requirement in Circular No. 7 that complaints, petitions,
answers, and similar pleadings should specify the amount of damages being prayed
for not only in the body of the pleading but also in the prayer, has not been altered.
What has been revised is the rule that subsequent "amendment of the complaint or
similar pleading will not thereby vest jurisdiction in the Court, much less the
payment of the docket fee based on the amount sought in the amended pleading,"
the trial court now being authorized to allow payment of the fee within a reasonable
time but in no case beyond the applicable prescriptive or reglementary period.
Moreover, a new rule has been added, governing awards of claims not specified in
the pleading - i.e., damages arising after the filing of the complaint or similar
pleading-as to which the additional filing fee therefor shall constitute a lien on the
judgment.
Now, under the Rules of Court, docket or filing fees are assessed on the basis of the
"sum claimed," on the one hand, or the "value of the property in litigation or the
value of the estate," on the other. 18 There are, in other words, as already above
intimated, actions or proceedings involving real property, in which the value of the

property is immaterial to the court's jurisdiction, account thereof being taken merely
for assessment of the legal fees; and there are actions or proceedings, involving
personal property or the recovery of money and/or damages, in which the value of
the property or the amount of the demand is decisive of the trial court's
competence (aside from being the basis for fixing the corresponding docket fees).
19
Where the action is purely for the recovery of money or damages, the docket fees
are assessed on the basis of the aggregate amount claimed, exclusive only of
interests and costs. In this case, the complaint or similar pleading should, according
to Circular No. 7 of this Court, "specify the amount of damages being prayed for not
only in the body of the pleading but also in the prayer, and said damages shall be
considered in the assessment of the filing fees in any case."
Two situations may arise. One is where the complaint or similar pleading sets out a
claim purely for money or damages and there is no precise statement of the
amounts being claimed. In this event the rule is that the pleading will "not be
accepted nor admitted, or shall otherwise be expunged from the record." In other
words, the complaint or pleading may be dismissed, or the claims as to which the
amounts are unspecified may be expunged, although as aforestated the Court may,
on motion, permit amendment of the complaint and payment of the fees provided
the claim has not in the meantime become time-barred. The other is where the
pleading does specify the amount of every claim, but the fees paid are insufficient;
and here again, the rule now is that the court may allow a reasonable time for the
payment of the prescribed fees, or the balance thereof, and upon such payment,
the defect is cured and the court may properly take cognizance of the action, unless
in the meantime prescription has set in and consequently barred the right of action.
Where the action involves real property and a related claim for damages as well, the
legal fees shall be assessed on the basis of both (a) the value of the property and
(b) the total amount of related damages sought. The Court acquires jurisdiction over
the action if the filing of the initiatory pleading is accompanied by the payment of
the requisite fees, or, if the fees are not paid at the time of the filing of the pleading,
as of the time of full payment of the fees within such reasonable time as the court
may grant, unless, of course, prescription has set in the meantime. But where-as in
the case at bar-the fees prescribed for an action involving real property have been
paid, but the amounts of certain of the related damages (actual, moral and nominal)
being demanded are unspecified, the action may not be dismissed. The Court
undeniably has jurisdiction over the action involving the real property, acquiring it
upon the filing of the complaint or similar pleading and payment of the prescribed
fee. And it is not divested of that authority by the circumstance that it may not have
acquired jurisdiction over the accompanying claims for damages because of lack of
specification thereof. What should be done is simply to expunge those claims for
damages as to which no amounts are stated, which is what the respondent Courts
did, or allow, on motion, a reasonable time for the amendment of the complaints so
as to allege the precise amount of each item of damages and accept payment of
the requisite fees therefor within the relevant prescriptive period.
WHEREFORE, the petition is DISMISSED, without pronouncement as to costs.

SPLITTING OF CAUSE OF ACTION

GEORGE LEONARD S. UMALE, Petitioner, - versus - CANOGA PARK
DEVELOPMENT CORPORATION, Respondent. July 20, 2011
On January 4, 2000, the parties entered into a Contract of Lease[5] whereby the
petitioner agreed to lease, for a period of two (2) years starting from January 16,
2000, an eight hundred sixty (860)-square-meter prime lot located in Ortigas
Center, Pasig City owned by the respondent. The respondent acquired the subject
lot from Ortigas & Co. Ltd. Partnership through a Deed of Absolute Sale, subject to
the following conditions: (1) that no shopping arcades or retail stores, restaurants,
etc. shall be allowed to be established on the property, except with the prior written
consent from Ortigas & Co. Ltd. Partnership and (2) that the respondent and/or its
successors-in-interest shall become member/s of the Ortigas Center Association,
Inc. (Association), and shall abide by its rules and regulations.[6]
On October 10, 2000, before the lease contract expired, the respondent filed an
unlawful detainer case against the petitioner before the Metropolitan Trial Court
(MTC)-Branch 68, Pasig City, docketed as Civil Case No. 8084.[7] The respondent
used as a ground for ejectment the petitioners violation of stipulations in the lease
contract regarding the use of the property. Under this contract, the petitioner shall
use the leased lot as a parking space for light vehicles and as a site for a small
drivers canteen,[8] and may not utilize the subject premises for other purposes
without the respondents prior written consent.[9] The petitioner, however,
constructed restaurant buildings and other commercial establishments on the lot,
without first securing the required written consent from the respondent, and the
necessary permits from the Association and the Ortigas & Co. Ltd. Partnership. The
petitioner also subleased the property to various merchants-tenants in violation of
the lease contract.
The MTC-Branch 68 decided the ejectment case in favor of the respondent. On
appeal, the RTC-Branch 155, Pasig City affirmed in toto the MTC-Branch 68 decision.
[10] The case, however, was re-raffled to the RTC-Branch 267, Pasig City because
the Presiding Judge of the RTC-Branch 155, upon motion, inhibited himself from
resolving the petitioners motion for reconsideration.[11] The RTC-Branch 267
granted the petitioners motion, thereby reversing and setting aside the MTC-Branch
68 decision. Accordingly, Civil Case No. 8084 was dismissed for being prematurely
filed.[12] Thus, the respondent filed a petition for review with the CA on April 10,
2002.[13]
During the pendency of the petition for review, the respondent filed on May 3, 2002
another case for unlawful detainer against the petitioner before the MTC-Branch 71,
Pasig City. The case was docketed as Civil Case No. 9210.[14] This time, the
respondent used as a ground for ejectment the expiration of the parties lease
contract.
On December 4, 2002, the MTC-Branch 71 rendered a decision[15] in favor of the
respondent.

On appeal, the RTC-Branch 68 reversed and set aside the decision of the MTCBranch 71, and dismissed Civil Case No. 9210 on the ground of litis pendentia.[16]
The petitioner, however, was still ordered to pay rent in the amount of seventy-one
thousand five hundred pesos (P71,500.00) per month beginning January 16, 2002,
which amount is the monthly rent stipulated in the lease contract.
Aggrieved by the reversal, the respondent filed a Petition for Review under Rule 42
of the Rules of Court with the CA. The respondent argued that there exists no litis
pendentia between Civil Case Nos. 8084 and 9210 because the two cases involved
different grounds for ejectment, i.e., the first case was filed because of violations of
the lease contract, while the second case was filed due to the expiration of the
lease contract. The respondent emphasized that the second case was filed based on
an event or a cause not yet in existence at the time of the filing of the first case.[17]
The lease contract expired on January 15, 2002,[18] while the first case was filed on
October 10, 2000.
On August 20, 2004, the CA nullified and set aside the assailed decision of the RTCBranch 68, and ruled that there was no litis pendentia because the two civil cases
have different causes of action. The decision of the MTC- Branch 71 was ordered
reinstated. Subsequently, the petitioners motion for reconsideration was denied;
hence, the filing of the present petition for review on certiorari.
In presenting his case before this Court, the petitioner insists that litis pendentia
exists between the two ejectment cases filed against him because of their identity
with one another and that any judgment on the first case will amount to res judicata
on the other. The petitioner argues that the respondent reiterated the ground of
violations of the lease contract, with the additional ground of the expiration of the
lease contract in the second ejectment case. Also, the petitioner alleges that all of
the elements of litis pendentia are present in this case, thus, he prays for the
reversal and setting aside of the assailed CA decision and resolution, and for the
dismissal of the complaint in Civil Case No. 9210 on the ground of litis pendentia
and/or forum shopping.
THE COURTS RULING
We disagree with the petitioner and find that there is no litis pendentia.
As a ground for the dismissal of a civil action, litis pendentia refers to a situation
where two actions are pending between the same parties for the same cause of
action, so that one of them becomes unnecessary and vexatious.[19]
Litis pendentia exists when the following requisites are present: identity of the
parties in the two actions; substantial identity in the causes of action and in the
reliefs sought by the parties; and the identity between the two actions should be
such that any judgment that may be rendered in one case, regardless of which
party is successful, would amount to res judicata in the other.[20]
In the present case, the parties bone of contention is whether Civil Case Nos. 8084
and 9210 involve the same cause of action. The petitioner argues that the causes of
action are similar, while the respondent argues otherwise. If an identity, or

substantial identity, of the causes of action in both cases exist, then the second
complaint for unlawful detainer may be dismissed on the ground of litis pendentia.
We rule that Civil Case Nos. 8084 and 9210 involve different causes of action.
Generally, a suit may only be instituted for a single cause of action.[21] If two or
more suits are instituted on the basis of the same cause of action, the filing of one
or a judgment on the merits in any one is ground for the dismissal of the others.[22]
Several tests exist to ascertain whether two suits relate to a single or common
cause of action, such as whether the same evidence would support and sustain both
the first and second causes of action[23] (also known as the same evidence test),
[24] or whether the defenses in one case may be used to substantiate the
complaint in the other.[25] Also fundamental is the test of determining whether the
cause of action in the second case existed at the time of the filing of the first
complaint.[26]
Of the three tests cited, the third one is especially applicable to the present case,
i.e., whether the cause of action in the second case existed at the time of the filing
of the first complaint and to which we answer in the negative. The facts clearly
show that the filing of the first ejectment case was grounded on the petitioners
violation of stipulations in the lease contract, while the filing of the second case was
based on the expiration of the lease contract. At the time the respondent filed the
first ejectment complaint on October 10, 2000, the lease contract between the
parties was still in effect. The lease was fixed for a period of two (2) years, from
January 16, 2000, and in the absence of a renewal agreed upon by the parties, the
lease remained effective until January 15, 2002. It was only at the expiration of the
lease contract that the cause of action in the second ejectment complaint accrued
and made available to the respondent as a ground for ejecting the petitioner. Thus,
the cause of action in the second case was not yet in existence at the time of filing
of the first ejectment case.
In response to the petitioners contention that the similarity of Civil Case Nos. 8084
and 9210 rests on the reiteration in the second case of the cause of action in the
first case, we rule that the restatement does not result in substantial identity
between the two cases. Even if the respondent alleged violations of the lease
contract as a ground for ejectment in the second complaint, the main basis for
ejecting the petitioner in the second case was the expiration of the lease contract. If
not for this subsequent development, the respondent could no longer file a second
complaint for unlawful detainer because an ejectment complaint may only be filed
within one year after the accrual of the cause of action,[27] which, in the second
case, was the expiration of the lease contract.
Also, contrary to petitioners assertion, there can be no conflict between the
decisions rendered in Civil Case Nos. 8084 and 9210 because the MTC-Branch 71
decided the latter case on the sole issue of whether the lease contract between the
parties had expired. Although alleged by the respondent in its complaint, the MTCBranch 71 did not rule on the alleged violations of the lease contract committed by
the petitioner. We note that the damages awarded by the MTC-Branch 71 in Civil

Case No. 9210 were for those incurred after the expiration of the lease contract,[28]
not for those incurred prior thereto.
Similarly, we do not find the respondent guilty of forum shopping in filing Civil Case
No. 9210, the second civil case. To determine whether a party violated the rule
against forum shopping, the test applied is whether the elements of litis pendentia
are present or whether a final judgment in one case will amount to res judicata in
another.[29] Considering our pronouncement that not all the requisites of litis
pendentia are present in this case, the CA did not err in declaring that the
respondent committed no forum shopping. Also, a close reading of the Verification
and Certification of Non-Forum Shopping[30] (attached to the second ejectment
complaint) shows that the respondent did disclose that it had filed a former
complaint for unlawful detainer against the petitioner. Thus, the respondent cannot
be said to have committed a willful and deliberate forum shopping.
WHEREFORE, the instant petition is DENIED. The assailed Decision dated August 20,
2004 and Resolution dated February 23, 2005 of the Court of Appeals in CA-G.R. SP.
No. 78836 are AFFIRMED.
CLASS SUIT
BIENVENIDO M. CADALIN, ET AL., petitioners, vs. POEA, respondents.
This is a consolidation of 3 cases of SPECIAL CIVIL ACTIONS in the Supreme
Court for Certiorari.
On June 6, 1984, Cadalin, Amul and Evangelista, in their own behalf and on behalf of
728 other OCWs instituted a class suit by filing an Amended Complaint with the
POEA for money claims arising from their recruitment by ASIA INTERNATIONAL
BUILDERS CORPORATION (AIBC) and employment by BROWN & ROOT
INTERNATIONAL, INC (BRI) which is a foreign corporation with headquarters in
Houston, Texas, and is engaged in construction; while AIBC is a domestic
corporation licensed as a service contractor to recruit, mobilize and deploy Filipino
workers for overseas employment on behalf of its foreign principals.
The amended complaint sought the payment of the unexpired portion of the
employment contracts, which was terminated prematurely, and secondarily, the
payment of the interest of the earnings of the Travel and Reserved Fund; interest on
all the unpaid benefits; area wage and salary differential pay; fringe benefits;
reimbursement of SSS and premium not remitted to the SSS; refund of withholding
tax not remitted to the BIR; penalties for committing prohibited practices; as well as
the suspension of the license of AIBC and the accreditation of BRII
On October 2, 1984, the POEA Administrator denied the Motion to Strike Out of the
Records filed by AIBC but required the claimants to correct the deficiencies in the
complaint pointed out.
AIB and BRII kept on filing Motion for Extension of Time to file their answer. The
POEA kept on granting such motions.

On November 14, 1984, claimants filed an opposition to the motions for extension
of time and asked that AIBC and BRII declared in default for failure to file their
answers.
On December 27, 1984, the POEA Administrator issued an order directing AIBC and
BRII to file their answers within ten days from receipt of the order.
(at madami pang motions ang na-file, new complainants joined the case, ang
daming inavail na remedies ng both parties)
On June 19, 1987, AIBC finally submitted its answer to the complaint. At the same
hearing, the parties were given a period of 15 days from said date within which to
submit their respective position papers. On February 24, 1988, AIBC and BRII
submitted position paper. On October 27, 1988, AIBC and BRII filed a Consolidated
Reply, POEA Adminitartor rendered his decision which awarded the amount of
$824, 652.44 in favor of only 324 complainants. Claimants submitted their Appeal
Memorandum For Partial Appeal from the decision of the POEA. AIBC also filed its
MR and/or appeal in addition to the Notice of Appeal filed earlier.
NLRC promulgated its Resolution, modifying the decision of the POEA. The resolution
removed some of the benefits awarded in favor of the claimants. NLRC denied all
the MRs. Hence, these petitions filed by the claimants and by AlBC and BRII.
The case rooted from the Labor Law enacted by Bahrain where most of the
complainants were deployed. His Majesty Ise Bin Selman Al Kaifa, Amir of Bahrain,
issued his Amiri Decree No. 23 on June 16, 1176, otherwise known re the Labour
Law for the Private Sector. Some of the provision of Amiri Decree No. 23 that are
relevant to the claims of the complainants-appellants are as follows:
Art. 79: x x x A worker shall receive payment for each extra hour equivalent to his
wage entitlement increased by a minimum of twenty-rive per centurn thereof for
hours worked during the day; and by a minimum off fifty per centurn thereof for
hours worked during the night which shall be deemed to being from seven oclock in
the evening until seven oclock in the morning .
Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.
If employee worked, 150% of his normal wage shall be paid to him x x x.
Art. 81; x x x When conditions of work require the worker to work on any official
holiday, he shall be paid an additional sum equivalent to 150% of his normal wage.
Art. 84: Every worker who has completed one years continuous service with his
employer shall be entitled to Laos on full pay for a period of not less than 21 days
for each year increased to a period not less than 28 days after five continuous years
of service.
A worker shall be entitled to such leave upon a quantum meruit in respect of the
proportion of his service in that year.
Art. 107: A contract of employment made for a period of indefinite duration may be
terminated by either party thereto after giving the other party prior notice before

such termination, in writing, in respect of monthly paid workers and fifteen days
notice in respect of other workers. The party terminating a contract without the
required notice shall pay to the other party compensation equivalent to the amount
of wages payable to the worker for the period of such notice or the unexpired
portion thereof.
Art. Ill: x x x the employer concerned shall pay to such worker, upon termination of
employment, a leaving indemnity for the period of his employment calculated on
the basis of fifteen days wages for each year of the first three years of service and
of one months wages for each year of service thereafter. Such worker shall be
entitled to payment of leaving indemnity upon a quantum meruit in proportion to
the period of his service completed within a year.
Whether or not the instant cases qualify as a class suit.
NLRC agreed with the POEA Administrator that the labor cases cannot be treated as
a class suit for the simple reason that not all the complainants worked in Bahrain
and therefore, the subject matter of the action, the claims arising from the Bahrain
law, is not of common or general interest to all the complainants.
Claimants insist that all their claims could properly be consolidated in a "class suit"
because "all the named complainants have similar money claims and similar rights
sought irrespective of whether they worked in Bahrain, United Arab Emirates or in
Abu Dhabi, Libya or in any part of the Middle East" (Rollo, pp. 35-38).
A class suit is proper where the subject matter of the controversy is one of common
or general interest to many and the parties are so numerous that it is impracticable
to bring them all before the court (Revised Rules of Court, Rule 3, Sec. 12).
While all the claims are for benefits granted under the Bahrain Law, many of the
claimants worked outside Bahrain. Some of the claimants were deployed in
Indonesia and Malaysia under different terms and conditions of employment.
NLRC and the POEA Administrator are correct in their stance that inasmuch as the
first requirement of a class suit is not present (common or general interest based on
the Amiri Decree of the State of Bahrain), it is only logical that only those who
worked in Bahrain shall be entitled to file their claims in a class suit.
While there are common defendants (AIBC and BRII) and the nature of the claims is
the same (for employee's benefits), there is no common question of law or fact.
While some claims are based on the Amiri Law of Bahrain, many of the claimants
never worked in that country, but were deployed elsewhere. Thus, each claimant is
interested only in his own demand and not in the claims of the other employees of
defendants. The named claimants have a special or particular interest in specific
benefits completely different from the benefits in which the other named claimants
and those included as members of a "class" are claiming (Berses v. Villanueva, 25
Phil. 473 [1913]). It appears that each claimant is only interested in collecting his
own claims. A claimants has no concern in protecting the interests of the other
claimants as shown by the fact, that hundreds of them have abandoned their coclaimants and have entered into separate compromise settlements of their

respective claims. A principle basic to the concept of "class suit" is that plaintiffs
brought on the record must fairly represent and protect the interests of the others
(Dimayuga v. Court of Industrial Relations, 101 Phil. 590 [1957]). For this matter, the
claimants who worked in Bahrain can not be allowed to sue in a class suit in a
judicial proceeding. The most that can be accorded to them under the Rules of
Court is to be allowed to join as plaintiffs in one complaint (Revised Rules of Court,
Rule 3, Sec. 6).
The Court is extra-cautious in allowing class suits because they are the exceptions
to the condition sine qua non, requiring the joinder of all indispensable parties.
In an improperly instituted class suit, there would be no problem if the decision
secured is favorable to the plaintiffs. The problem arises when the decision is
adverse to them, in which case the others who were impleaded by their selfappointed representatives, would surely claim denial of due process.
The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC
should have declared Atty. Florante De Castro guilty of "forum shopping, ambulance
chasing activities, falsification, duplicity and other unprofessional activities" and his
appearances as counsel for some of the claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop
to the practice of some parties of filing multiple petitions and complaints involving
the same issues, with the result that the courts or agencies have to resolve the
same issues. Said Rule, however, applies only to petitions filed with the Supreme
Court and the Court of Appeals. It is entitled "Additional Requirements For Petitions
Filed with the Supreme Court and the Court of Appeals To Prevent Forum Shopping
or Multiple Filing of Petitioners and Complainants." The first sentence of the circular
expressly states that said circular applies to an governs the filing of petitions in the
Supreme Court and the Court of Appeals.
While Administrative Circular No. 04-94 extended the application of the anti-forum
shopping rule to the lower courts and administrative agencies, said circular took
effect only on April 1, 1994.
POEA and NLRC could not have entertained the complaint for unethical conduct
against Atty. De Castro because NLRC and POEA have no jurisdiction to investigate
charges of unethical conduct of lawyers.
ENTITY WITHOUT JURIDICAL PERSONALITY
G.R. No. L-26364
May 29, 1968
MARIANO A. ALBERT, petitioner, vs. THE COURT OF FIRST INSTANCE OF MANILA (BR.
VI), UNIVERSITY PUBLISHING CO., INC., and JOSE M. ARUEGO, respondents.
This case is a veritable legal marathon. Originally docketed in 1949, within a span of
19 years, the legal dispute has come to this Court four times. The present petition
for certiorari is the fifth. The time is long past when courts of justice must write finis
to this case.

The factual setting necessary to a clear understanding of the instant petition for
certiorari needs to be restated. Plaintiff Albert sued University Publishing Company,
Inc. for breach of contract. Albert died before the case proceeded to trial, and Justo
R. Albert, his estate's administrator, was substituted. Finally, defendant's liability
was determined by this Court in L-15275. Plaintiff was to recover P15,000.00 with
legal interest from judicial demand.
From the inception of the suit below up to the time the judgment in L-15275 was to
be executed, the corporate existence of university Publishing Company, Inc.
appears to have been taken for granted, and was not then put in issue. However,
when the Court of First Instance of Manila issued on July 22, 1961 an order of
execution against University Publishing Company, Inc., a new problem cropped up.
By virtue of this writ, plaintiff's counsel and the Sheriff of the City of Manila went to
see Jose M. Aruego who signed the contract with plaintiff on behalf and as President
of University Publishing Company, Inc. They then discovered that no such entity
exists. A verification made at the Securities and Exchange Commission confirmed
this fact. On July 31, 1961, said Commission issued a certification "that the records
of this Commission do not show the registration of UNIVERSITY PUBLISHING CO.,
INC., either as a corporation or partnership." 2 This triggered a verified petition in
the court below on August 10, 1961 for the issuance of a writ of execution ordering
the Sheriff of Manila to cause the satisfaction of the judgment against the assets
and properties of Jose M. Aruego as the real defendant in the case.
All along, Jose M. Aruego and his law firm were counsel for the University Publishing
Company, Inc.
Instead of informing the lower court that it had in its possession copies of its
certificate of registration, its articles of incorporation, its by-laws and all other paper
materials to its disputed corporate existence, University Publishing Company, Inc.
chose to remain silent. On August 11, 1961, University Publishing Company, Inc., by
counsel Aruego, Mamaril and Associates (the law firm of Jose M. Aruego aforesaid)
merely countered plaintiffs petition for execution as against Aruego with an unsworn
manifestation in court that "said Jose M. Aruego is not a party to this case," and,
therefore, plaintiff's petition should be denied.3
Respondent court, presided over by His Honor, Judge Gaudencio Cloribel, on
September 9, 1961, came up with an order, which reads thus:
It appearing that Jose M. Aruego against whom the judgment rendered herein is
sought to be enforced is not a party to this case, plaintiff's motion filed on August
10, 1961 is hereby denied.4
Plaintiff appealed to this Court on this sole issue: "The lower court erred in denying
the plaintiff-appellant's petition praying that the judgment rendered against the
alleged corporation, the above-named defendant-appellee, be executed against the
personal assets and properties of Jose M. Aruego, the real party to this case."
In an extended opinion written by Mr. Justice Jose P. Bengzon, this Court in L-19118,
on January 30, 1965, resolved the issue as follows:

The fact of non-registration of University Publishing Co., Inc. in the Securities and
Exchange Commission has not been disputed. Defendant would only raise the point
that "University Publishing Co., Inc." and not Jose M. Aruego, is the party defendant;
thereby assuming that "University Publishing Co., Inc." is an existing corporation
with an independent juridical personality. Precisely, however, on account of the nonregistration it cannot be considered a corporation, not even a corporation de facto
(Hall vs. Piccio, 86 Phil. 603). It has therefore no personality separate from Jose M.
Aruego; it cannot be sued independently.
The corporation-by-estoppel doctrine has not been invoked. At any rate, the same is
inapplicable here. Aruego represented a non-existent entity and induced not only
the plaintiff but even the court to believe in such representation. He signed the
contract as "President" of "University Publishing Co., Inc.," stating that this was 'a
corporation duly organized and existing under the laws of the Philippines,' and
obviously misled plaintiff (Mariano A. Albert) into believing the same. One who has
induced another to act upon his wilful misrepresentation that a corporation was duly
organized and existing under the law, cannot thereafter set up against his victim
the principle of corporation by estoppel (Salvatiera vs. Garlitos, 56 O.G. 3609).
"University Publishing Co., Inc." purported to come to court, answering the
complaint and litigating upon the merits. But as stated, "University Publishing Co.,
Inc." has no independent personality; it is just a name. Jose M. Aruego was, in
reality, the one who answered and litigated, through his own law firm as counsel. He
was in fact, if not in name, the defendant.
Even with regard to corporations duly organized and existing under the law, we
have in many a case pierced the veil of corporate fiction to administer the ends of
justice. (Arnold vs. Willits & Patterson, Ltd., 44 Phil. 634; Koppel (Phil.), Inc. vs.
Yatco, 77 Phil. 496; La Campana Coffee Factory, Inc. vs. Kaisahan ng mga
Manggagawa sa La Campana, 93 Phil. 160; Marvel Building Corporation vs. David,
94 Phil. 376; Madrigal Shipping Co., Inc. vs. Ogilvie, L-8431, Oct. 30, 1958; Laguna
Transportation Co., Inc. vs. S.S.S., L-14606, April 28, 1960; McConnel vs. C.A., L10510, Mar. 17, 1961; Liddell & Co., Inc. vs. Collector of Internal Revenue, L-9687,
June 30, 1961; Palacio vs. Fely Transportation Co., L-15121, August 31, 1962). And in
Salvatiera vs. Garlitos, supra, p. 3073, we ruled: "A person acting or purporting to
act on behalf of a corporation which has no valid existence assumes such privileges
and obligations and becomes personally liable for contracts entered into or for other
acts performed as such agent." Had Jose M. Aruego been named as party defendant
instead of, or together, with, "University Publishing Co., Inc." there would be no
room for debate as to his personal liability. Since he was not so named, the matters
of "day in court" and "due process" have arisen.
In this connection, it must be realized that parties to a suit are "persons who have a
right to control the proceedings, to make defense, to adduce and cross-examine
witnesses, and to appeal from a decision" (67 C.J.S. 887) and Aruego was, in
reality, the person who had and exercised these rights. Clearly then, Aruego had his
day in court as the real defendant; and due process of law has been substantially
observed.

By "due process of law" we mean "a law which hears before it condemns; which
proceeds upon inquiry, and renders judgment only after trial.... (4 Wheaton, U.S.
518, 581); or, as this Court has said, "Due process of law" contemplates notice and
opportunity to be heard before judgment is rendered, affecting one's person or
property." (Lopez vs. Director of Lands, 47 Phil. 23, 32). (Sicat vs. Reyes, L-11023,
Dec. 14, 1956.) And it may not be amiss to mention here also that the "due process"
clause of the Constitution is designed to secure justice as a living reality; not to
sacrifice it by paying undue homage to formality. For substance must prevail over
form. It may now be trite, but none the less apt, to quote what long ago we said in
Alonso vs. Villamor, 16 Phil. 315, 321-322:
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.
Technicality, when it deserts its proper office as an aid to justice and becomes its
great hindrance and chief enemy, deserves scant consideration from courts. There
should be no vested rights in technicalities.
The evidence is patently clear that Jose M. Aruego, acting as representative of a
non-existent principal was the real party to the contract sued upon; that he was the
one who reaped the benefits resulting from it, so much so that partial payments of
the consideration were made by him; that he violated its terms, thereby
precipitating the suit in question; and that in the litigation he was the real
defendant. Perforce, in line with the ends of justice, responsibility under the
judgment falls on him.
We need hardly state that should there be persons who under the law are liable to
Aruego for reimbursement or contribution with respect to the payment he makes
under the judgment in question, he may, of course, proceed against them through
proper remedial measures.
PREMISES CONSIDERED, the order appealed from is hereby set aside and the case
remanded ordering the lower court to hold supplementary proceedings for the
purpose of carrying the judgment into effect against University Publishing Co., Inc.
and/or Jose M. Aruego.
It is to be observed that even as this case was elevated to this Court in L-19118,
University Publishing Company, Inc. or its president and counsel chose to withhold
pertinent documents and papers in its possession and control. But when the
foregoing judgment came, the University Publishing Company, Inc., in its motion for
reconsideration thereof, asked that it be afforded opportunity to prove its corporate
existence. It submitted with that motion for reconsideration, its certificate of
registration, articles of incorporation, by-laws, and a certificate of reconstitution of
records issued by the Securities and Exchange Commission, which was procured
only from the Securities and Exchange Commissioner on April 1, 1965 after the
decision in L-19118 was promulgated.

Jose M. Aruego, the president and counsel of University Publishing Company, Inc.,
for the first time appeared in propria persona before this Court as a "member of the
Philippine Bar, private citizen." He pointedly stated that he did not submit to the
jurisdiction of this Court. He wanted, though, that his side of the case be heard. He
formally joined hands with University Publishing Company, Inc. on the plea of due
process in his favor. He insisted that he was not a party to this litigation.
The resolution of this Court, on June 16, 1965, extensively dwelt on the due process
plea of Jose M. Aruego, thus:
It may be worth noting again that Jose M. Aruego started the negotiation which
culminated in the contract between the parties, signing said contract as president of
University Publishing Co., Inc. Likewise he was the one who made partial payments
up to the amount of P7,000.00 for and in behalf of University Publishing Co., Inc. He
also appeared not only as a witness but as a lawyer, signing some pleadings or
motions in defense of University Publishing Co., Inc., although in other instances it is
one of his associates or member of his law firm who did so. Known is the fact that
even a duly existing corporation can only move and act through natural persons. In
this case it was Jose M. Aruego who moved and acted as or for University Publishing
Co., Inc.
It is elemental that the courts can only decide the merits of a given suit according to
the records that are in the case. It is true that in the two previous cases decided by
this Court, the first, awarding damages (L-9300), the second, clarifying the amount
of P15,000.00 awarded as such (L-15275), the corporate existence of University
Publishing Co., Inc. as a legal entity was merely taken for granted.
However, when the said issue was squarely presented before the court, and
University Publishing Co., Inc., chose to keep the courts in the dark by withholding
pertinent documents and papers in its possession and control, Court had to decide
the points raised according to the records of the case and whatever related matters
necessarily included therein. Hence, as a consequence of the certification of the
Securities and Exchange Commission that its records 'do not show the registration
of University Publishing Co., Inc., either as a corporation or partnership' this Court
concluded that by virtue of its non-registration it cannot be considered a
corporation. We further said that it has therefore no personality separate from Jose
M. Aruego and that Aruego was in reality the one who answered and litigated
through his own law firm as counsel. Stated otherwise, we found that Aruego was in
fact, if not in name, the defendant (Decision, p. 6). Indeed, the judge of the court of
first instance wrote in his decision thus: "Defendant Aruego (all along the judge who
pens this decision considered that the defendant here is the president of the
University Publishing Co., Inc. since it was he who really made the contract with
Justice Albert)." (Decision of CFI, p. 9, quoted in plaintiff-appellant's brief, p. 10).
And this portion of the decision made by the court a quo was never questioned by
the defendant.
The above statement made by the court a quo in its decision compelled this Court
to carefully examine the facts surrounding the dispute starting from the time of the
negotiation of the business proposition, followed by the signing of the contract;
considered the benefits received; took into account the partial payments made, the

litigation conducted, the decisions rendered and the appeals undertaken. After thus
considering the facts and circumstances, keeping in mind that even with regard to
corporations shown as duly registered and existing, we have in many a case pierced
the veil of corporate fiction to administer the ends of justice, (Arnold vs. Willits &
Patterson, Ltd., 44 Phil. 634; Koppel (Phil.), Inc. vs. Yatco, 77 Phil. 496; La Campana
Coffee Factory, Inc. vs. Kaisahan ng mga Manggagawa sa La Campana, 93 Phil. 160;
Marvel Building Corporation vs. David, 94 Phil. 376; Madrigal Shipping Co., Inc. vs
Ogilvie, L-8431, Oct. 30, 1958; Laguna Transportation Co., Inc. vs. S.S.S., L-14606,
April 28, 1960; McConnel vs. C.A., L-10510, Mar. 17, 1961; Liddell & Co., Inc., vs.
Collector of Internal Revenue, L-9687, June 30, 1961: Palacio vs. Fely Transportation
Co., L-15121, August 31, 1962) we held Aruego personally responsible for his acts
on behalf of University Publishing Co., Inc.
Defendant would reply that in all those cases where the Court pierced the veil of
corporate fiction the officials held liable were made party defendants. As stated,
defendant-appellee could not even pretend to possess corporate fiction in view of
its non-registration per the evidence so that from the start Aruego was the real
defendant. Since the purpose of formally impleading a party is to assure him a day
in court, once the protective mantle of due process of law has in fact been accorded
a litigant, whatever the imperfection in form, the real litigant may be held liable as a
party. Jose M. Aruego definitely had his day in court, and due process of law was
enjoyed by him as a matter of fact as revealed by the records of the case. (Decision,
p. 6).
The dispositive portion of the decision the reconsideration of which is being sought
is the following: "Premises considered, the order appealed from is hereby set aside
and the case remanded ordering the lower court to hold supplementary proceedings
for the purpose of carrying the judgment into effect against University Publishing
Co., Inc. and/or Jose M. Aruego."
According to several cases a litigant is not allowed to speculate on the decision the
court may render in the case. (Rodriguez vs. Treasurer of the Philippines, 45 O.G.
4457 (Resolution); Arnault vs. Nazareno, L-3820, Resolution of August 9, 1950;
Howden vs. Collector of Internal Revenue, L-19392, April 14, 1965). The University
Publishing Co., Inc. speculated on a favorable decision based on the issue that Jose
M. Aruego not being a formal party defendant in this case a writ of execution
against him was not in order. It therefore preferred to suppress vital documents
under its possession and control rather than to rebut the certification issued by the
Securities and Exchange Commission that according to its records University
Publishing Co., Inc. was not registered. If the lower court's order is sustained,
collection of damages becomes problematical. If a new suit is filed against Aruego,
prescription might be considered as effective defense, aside from the prospect of
another ten years of pending litigation. Such are the possible reasons for adopting
the position of speculation of our decision. Our ruling appeared to be unfavorable to
such speculation. It was only after the receipt of the adverse decision promulgated
by this Court that University Publishing Co., Inc. disclosed its registration papers. For
purposes of this case only and according to its particular facts and circumstances,
we rule that in view of the late disclosure of said papers by the University Publishing
Co., Inc., the same can no longer be considered at this stage of the proceedings.

And on the issue of whether or not the certificate of registration, the articles of
incorporation, the by-laws and the certificate of the reconstitution of the records
proffered by the University Publishing Company, Inc. should be admitted, this Court,
in the said resolution of the motion for reconsideration, in part said:
Defendant-appellee could have presented the foregoing papers before the lower
court to counter the evidence of non-registration, but defendant-appellee did not do
so. It could have reconstituted its records at that stage of the proceedings, instead
of only on April 1, 1965, after decision herein was promulgated.
xxx

xxx

xxx

As far as this case is concerned, therefore, University Publishing Co., Inc. must be
deemed as unregistered, since by defendant-appellee's choice the record shows it
to be so. Defendant-appellee apparently sought to delay the execution by remaining
unregistered per the certification of the Securities and Exchange Commission. It was
only when execution was to be carried out, anyway, against it and/or its president
and almost 19 years after the approval of the law authorizing reconstitution that
it reconstituted its records to show its registration, thereby once more attempting to
delay the payment of plaintiff's claim, long since adjudged meritorious. Deciding,
therefore, as we must, this particular case on its record as submitted by the parties,
defendant-appellee's proffered evidence of its corporate existence cannot at this
stage be considered to alter the decision reached herein. This is not to preclude in
future cases the consideration of properly submitted evidence as to defendantappellee's corporate existence.
WHEREFORE, the motion for reconsideration and for leave to file original papers not
in the record, is hereby denied.
Armed with the aforementioned decision and resolution of this Court in L-19118,
petitioner returned to the lower court on July 28, 1965 with a motion for execution
and approval of the bill of costs and asking specifically for the issuance of the
corresponding writ against Aruego to satisfy the judgment.
On July 30, 1965, Aruego moved to intervene with an opposition in intervention to
the motion for execution. Alleging that the judgment of this Court in L-19118 dated
January 30, 1965, which reads:
PREMISES CONSIDERED, the order appealed from is hereby set aside and the case
remanded ordering the lower court to hold supplementary proceedings for the
purpose of carrying the judgment into effect against University Publishing Co., Inc.
and/or Jose M. Aruego.
should be construed in the sense that "the supplementary proceedings mentioned
in the aforequoted dispositive portion of the Supreme Court Decision means no
other than a proceeding to show cause why the judgment should be carried into
effect against either the University Publishing Co., Inc. and/or Jose M. Aruego, as the
case may be" and that until such supplementary proceedings was had petitioner
could ask for the execution of the judgment against Jose M. Aruego as a matter of
course, Aruego falls back on his averment (made in his manifestation already ruled

out by this Court in L-19118) that he had never been a party to the case and that
the judgment sought to be executed was solely against University Publishing
Company, Inc.
On February 21, 1966, Judge Gaudencio Cloribel, upon consideration of this motion
for execution and for approval of the bill of costs, the opposition thereto by Aruego,
and the reply to the opposition, granted the motion for execution and directed that
a writ of execution "be issued accordingly".
Aruego came back with a motion for reconsideration, adamant in his resolve that he
would not pay as he was not a party to the suit. This was opposed by plaintiff.
On March 5, 1966, Judge Gaudencio Cloribel reconsidered his order of February 21,
1966, and denied the motion for a writ of execution against Jose M. Aruego upon
the ground that "said Jose M. Aruego has never been a party to the case and that
the judgment sought to be executed is not against him."
On April 4, 1966, it was petitioner's turn to file a motion for reconsideration for the
reason that the question of whether or not an order of execution could issue against
Aruego had already been resolved by this Court in its final judgment in L-19118.
On April 20, 1966, Jose M. Aruego opposed the motion for reconsideration and
prayed for supplementary proceedings to allow him as intervenor to present
evidence in support thereof, alleging that the execution of the judgment against him
was not sanctioned by law and procedure and that had intervenor been impleaded
or given his day in court, he could have easily proven the legitimate and due
existence of the University Publishing Company, Inc. as a bona fide corporation. He
attached thereto the very same articles of incorporation, certificate of registration,
by-laws and certificate of the Securities and Exchange Commission in the
reconstitution of its records documents which were rejected by this Court in its
resolution of June 16, 1965 in L-19118.
On April 28, 1966, petitioner filed his reply to Aruego's opposition upon the ground
that these are matters concluded in the decision and resolution of this Court, and
that respondent court cannot admit said documents without going against this
Court's clear mandate.
Resolution on plaintiff's motion for reconsideration was, by Judge Gaudencio
Cloribel's order of May 20, 1966, held in abeyance until the termination of the
supplementary proceedings, which the court thereupon granted, to allow Aruego to
present evidence in support of his opposition to the motion for reconsideration.
On May 28, 1966, Aruego presented in evidence the documents heretofore
mentioned, and in addition, the certificate dated February 17, 1965 signed by a
majority of the directors of the University Publishing Company, Inc. declaring that
the corporation still exists and that the articles of incorporation have not been
amended or modified.
On July 13, 1966, notwithstanding plaintiff's opposition to the admission of the
documents just mentioned, and his claim that the matter involved in the execution

had long been finished and decided by this Court, Judge Gaudencio Cloribel denied
plaintiff's motion for execution.
Hence, this petition for a writ of certiorari and mandamus.
1. When this case was elevated to this Court for the fourth time in L-19118, we
made it abundantly clear in the decision therein rendered and in the resolution
issued thereafter, that the judgment rendered against University Publishing
Company, Inc. could and should be enforced against respondent Jose M. Aruego.
Our language in the dispositive portion is clear. It reads:
PREMISES CONSIDERED, the order appealed from is hereby set aside and the case
remanded ordering the lower court to hold supplementary proceedings for the
purpose of carrying the judgment into effect against University Publishing Co., Inc.
and/or Jose M. Aruego.
The judgment does not contemplate of any proceeding other than for the purpose of
carrying into effect the judgment against University Publishing Company, Inc. and/or
Jose M. Aruego which is the proceeding on execution. It does not admit of any
other interpretation such as that which is advocated by Aruego that such
proceeding "is to show cause why the judgment should be carried into effect against
either the University Publishing Co., Inc. and/or Jose M. Aruego." Indeed, the issue of
whether or not the judgment rendered against University Publishing Company, Inc.
could be enforced against Jose M. Aruego had already been definitely decided in
that case, L-19118. Even worse, all the arguments and evidence presented by
Aruego before the respondent court resulting in the orders that gave rise to the
present proceedings had been previously adduced before this Court and decided
adversely against him in the January decision and the June resolution of 1965 in L19118. There can be no clearer case for the principle of conclusiveness of judgment
to apply. Thus, in certiorari and prohibition proceedings brought by the Manila
Underwriters Insurance Co., Inc. against Judge Bienvenido A. Tan, L-17445,
November 27, 1964, this Court ruled:
On August 15, 1960, respondent Borja filed another motion in the same case asking
the court to require petitioner again to show cause why it should not be made liable
under its bond, and thereafter to issue a writ of execution against it. Petitioner
opposed the motion on the ground that our decision in G.R. No. L-12256 had finally
disposed of the issue raised therein. Despite this, the respondent judge, on August
30, 1960 issued an order citing petitioner to appear before it and show cause why it
should not be held liable under its bond, and on September 10 of the same year, his
honor also denied petitioner's motion for reconsideration of said order. Thereupon,
the present action was filed.
Upon the undisputed facts stated heretofore, it appears abundantly clear that the
respondent judge seriously erred in issuing the orders complained of. The question
of whether petitioner could still be held liable upon its bond must be deemed finally
settled by our decision in G.R. No. L-12256, and any attempt to hold petitioner liable
upon the bond already mentioned must necessarily be deemed as an improper
attempt to reopen a case already finally adjudicated.

WHEREFORE, the orders complained of are hereby declared void and of no legal
force and effect. The writ of preliminary injunction issued in this case on October 26,
1960 is hereby made final. Costs against respondent Borja.
The liability of Aruego has been established so plainly in the decision and resolution
in L-19118 that there could not be any quibbling as to the import of the words there
used. Case L-19118 was brought into being because precisely Judge Cloribel ruled
that execution could not be issued against Jose M. Aruego upon the ground, so he
said in his appealed order, that Aruego was not a party to the action. This Court
there reversed Judge Gaudencio Cloribel.
In the circumstances of this case, we are constrained to articulate a number of
possibilities: that Judge Gaudencio Cloribel either (1) did not read our decision in L19118, January 30, 1965, and our resolution in the same case promulgated on June
16, 1965; or (2) having read, did not comprehend their import; or (3) having read
and understood, wantonly ignored them. It is the thinking of this Court, however,
that Judge Gaudencio Cloribel simply shunted aside our decision and resolution. He
could not have overlooked the fact that it was his own order of September 9, 1961
denying execution because Aruego is not a party to this case which was
appealed to this Court. That very question of whether execution should issue
against Aruego was squarely presented and as squarely resolved in the affirmative
by this Court in L-19118. That Gaudencio Cloribel should have insisted in his opinion
after his attention to this Court's decision and resolution adverse thereto had been
repeatedly called by plaintiff, is an act which deserves unsympathetic and
unqualified condemnation.
Judge Gaudencio Cloribel need not be reminded that the Supreme Court, by
tradition and in our system of judicial administration, has the last word on what the
law is; it is the final arbiter of any justifiable controversy. There is only one Supreme
Court from whose decisions all other courts should take their bearings. 5 Judge
Gaudencio Cloribel should have known that "[a] becoming modesty of inferior courts
demands conscious realization of the position that they occupy in the interrelation
and operation of the integrated judicial system of the nation."6
So it is, that in Martiniano P. Vivo vs. Hon. Gaudencio Cloribel, et al., L-23239,
November 23, 1966 (18 Supreme Court Reports Anno. 713, 726), this Court stressed
the need for trial judges to take cognizance of the rulings of the Supreme Court. We
there reproduced the following from People vs. Santos, 56 O.G. 3546, 3552-3552,
viz.:
Now, if a judge of a lower Court feels, in the fulfillment of his mission of deciding
cases, that the application of a doctrine promulgated by this Superiority is against
his way of reasoning, or against his conscience, he may state his opinion on the
matter, but rather than disposing of the case in accordance with his personal views
he must first think that it is his duty to apply the law as interpreted by the Highest
Court of the Land, and that any deviation from a principle laid down by the latter
would unavoidably cause, as a sequel, unnecessary inconveniences, delays and
expenses to the litigants. And if despite of what is here said, a Judge still believes
that he cannot follow Our rulings, then he has no other alternative than to place
himself in the position that he could properly avoid the duty of having to render

judgment on the case concerned (Art. 9, C.C.), and he has only one legal way to do
that.7
We rule that because of the foregoing circumstances, Judge Gaudencio Cloribel
acted with grave abuse of discretion. And certiorari lies. 8
2. We now come to the cry of injustice proffered by respondent Jose M. Aruego. Even
upon a cursory examination of his gripe, his position at once loses leverage; the
potency of his arguments vanishes.
As we look in retrospect at the facts, we find that it was Aruego who executed the
contract as president of the University Publishing Company, Inc. He is a lawyer. At
the time he executed the contract with plaintiff, he should have known that the
possibility existed that the records of the corporation had been destroyed. For, it is a
matter of public knowledge that buildings which kept public records in the City of
Manila had been razed by fire during the last war. He should have at least inquired
whether the records of the corporation in the Securities and Exchange Commission
had been saved. Of course, he knew and should have known that persons dealing
with corporations are wont to look to records of the Securities and Exchange
Commission for the existence or non-existence thereof. In this particular case, from
the documents he himself presented in the court below (after he had knowledge of
the fact that admission thereof was denied by this Court in L-19118), he is
practically the corporation itself. Because out of the capital stock of P2,000.00, he
subscribed to P1,600.00, and out of the paid subscription of P500.00, he contributed
the sum of P450.00, leaving but P50.00 to be spread amongst the minor
stockholders.
This case was filed and concluded as against the corporation. When finally,
plaintiff's counsel and the Sheriff came to him as president (and incidentally
counsel) of University Publishing Company, Inc. for execution of that judgment, he
sought to stave off satisfaction thereof. Then, plaintiff's counsel and the Sheriff
came to know that the corporation did not legally exist. Aruego could have very
easily caused the corporation to pay. Or did he think that the corporation could
evade payment, since the records of the corporation in the Securities and Exchange
Commission had not yet been reconstituted? The resultant effect is that after long
years of ligation, plaintiff is still left holding the bag. As this Court noted in L-19118,
it would be too late for the plaintiff to file suit against Aruego personally. For, by
then prescription has set in.
Canon 22 of the Canons of Legal Ethics is a constant reminder to the members of
the Bar that the conduct of a lawyer before the court "should be characterized by
candor and fairness"; and it is "unprofessional and dishonorable to deal other than
candidly with the facts ... in the presentation of causes." When the question of
whether execution should issue against Jose M. Aruego, a member of the Bar, did
emerge before the lower court in the proceedings for execution of the judgment,
candor and fairness should have impelled him to tell the court that the
representation of counsel for plaintiff that University Publishing Company, Inc. is not
a corporation, was not true, and that the corporation had the papers and documents
to show otherwise. He should not have kept this fact under wraps for so long a time
while the execution proceedings were still with the lower court and before judgment

on the appeal taken by plaintiff in L-19118. He has failed in these. Literally, he laid
an ambush. It was only after he realized that this Court considered him as the real
party in interest that he presented the fact of corporate existence to this Court to
overturn the decision rendered in L-19118. Where a party "has taken a position with
regard to procedure, which has been acted or relied on by his adversary or by the
court," he must be held to be in estoppel "from taking an inconsistent position
respecting the same matter in the same proceeding, to his adversary's prejudice." 9
This is not the first time that this Court has ordered the execution of a judgment
against a person who was not formally named as party defendant in the action. In a
series of cases, substantial in number, 10 this Court's stand has been consistent
that the judgment for payment of back salaries of officers entitled to reinstatement
may, in effect, be enforced against the city or municipality, although not by name
impleaded in the suit. Reasons therefore are concretely expressed in Mangubat vs.
Osmea, supra, in this wise:
The necessity of making the City a respondent herein is based upon its right to
defend itself, as demanded by the requirements of due process. However, these
requirement have been substantially complied with in the case at bar. The parties
herein have handled the case, and the same was heard and decided in the lower
court, as if the City had been named respondent in the pleadings. The officer
required by law "to cause to be defended all suits against the City", namely, its
mayor (Sec. 8, Commonwealth Act No. 58), is respondent in his official capacity. The
officer charged with the duty to represent the City "in all civil cases wherein the
city ... is a party" to wit, its city attorney (Sec. 17, Commonwealth Act No. 58)
is counsel for respondents herein. In addition thereto, the auditor, the treasurer and
even the municipal board of the City of Cebu, are parties respondents.
There is no reason to believe that these officers and the City Mayor would have
exerted greater efforts than those already displayed by them, in protesting the
interests of the City of Cebu, were it formally a respondent herein. Indeed, it is only
logical to expect that, having been individually named as respondents, said officers
must have taken as much concern, if not more, in warding off petitioners' claim.
Under the foregoing circumstances, we would be subordinating the substance to the
form if the action for mandamus insofar as the claim for back salaries is
concerned were either dismissed or remanded to the lower court, for the
corresponding amendment of the pleadings and a repetition of the proceedings held
for the last five (5) years, in order to reach the same decision rendered by the lower
court and the same conclusions set forth in this decision, as regards the substantive
rights of the parties. It is our considered opinion, therefore, that the ends of justice
and equity would be served best if the inclusion of the City of Cebu, as one of the
respondents herein, were considered a mere formality and deemed effected, as if a
formal amendment of the pleadings had been made.
A recent case, whose factual situation has great relevance to the present, is Torres
vs. Caluag, L-20906, July 30, 1966. There, petitioner Torres was not a party
defendant in a suit to recover possession of land instituted against defendant
Conocido who declared that he was a mere tenant of Torres. Judgment was rendered
against Conocido, and a writ of execution was issued ejecting Torres from the
property. On writ of certiorari and prohibition to this Court to nullify the writ of

execution aforesaid, we pronounced that when petitioner Torres testified in the court
below, she had her day in court and had laid squarely before said court the issue of
ownership. We then explicitly stated that the fact that petitioner was not formally
made a party defendant is a mere technicality that does not serve the interest of
justice.
In the end, we find it pertinent to quote from the early case of Herrera vs. Barretto,
25 Phil. 245, 271, thus:
... The office of the writ of certiorari has been reduced to the correction of defects of
jurisdiction solely and cannot legally be used for any other purpose. It is truly an
extraordinary remedy and, in this jurisdiction, its use is restricted to truly extraordinary cases cases in which the action of the inferior court is wholly void; where
any further steps in the case would result in a waste of time and money and would
produce no result whatever; where the parties, or their privies, would be utterly
deceived; where a final judgment or decree would be nought but a snare and a
delusion, deciding nothing, protecting nobody, a judicial pretention, a recorded
falsehood, a standing menace. It is only to avoid such results as these that a writ of
certiorari is issuable; and even here an appeal will lie if the aggrieved party prefers
to prosecute it.
For the reasons given, the petition for certiorari and mandamus prayed for herein is
hereby granted; and
(a) The orders of Judge Gaudencio Cloribel of March 5, May 20, and July 13, 1966 are
hereby set aside and declared null and void; and
(b) The Court a quo is hereby directed forthwith to issue a writ of execution against
respondent University Publishing Company, Inc. and/or Jose M. Aruego.
Treble costs shall be paid by respondent Jose M. Aruego. So ordered.
EVIDENCE
G.R. No. 173038
September 14, 2011
ELENA JANE DUARTE, Petitioner,vs. MIGUEL SAMUEL A.E. DURAN,
Respondent.
Preponderance of evidence only requires that evidence be greater or more
convincing than the opposing evidence.1
Factual Antecedents
This petition arose from a suit5 for collection of sum of money filed by respondent
Miguel Samuel A.E. Duran6 against petitioner Elena Jane Duarte with Branch 5 of
the Municipal Trial Court in Cities (MTCC), Cebu.
According to respondent, on February 14, 2002, he offered to sell a laptop computer
for the sum of P15,000.00 to petitioner thru the help of a common friend, Josephine
Dy (Dy).7 Since petitioner was undecided, respondent left the laptop with petitioner

for two days.8 On February 16, 2002, petitioner told respondent that she was willing
to buy the laptop on installment.9 Respondent agreed; thus, petitioner gave
P5,000.00 as initial payment and promised to pay P3,000.00 on February 18, 2002
and P7,000.00 on March 15, 2002.10 On February 18, 2002, petitioner gave her
second installment of P3,000.00 to Dy, who signed the handwritten receipt11
allegedly made by petitioner as proof of payment.12 But when Dy returned to get
the remaining balance on March 15, 2002, petitioner offered to pay only P2,000.00
claiming that the laptop was only worth P10,000.00.13 Due to the refusal of
petitioner to pay the remaining balance, respondent thru counsel sent petitioner a
demand letter dated July 29, 2002.14
Petitioner, however, denied writing the receipt dated February 18, 2002,15 and
receiving the demand letter dated July 29, 2002.16 Petitioner claimed that there
was no contract of sale.17 Petitioner said that Dy offered to sell respondents laptop
but because petitioner was not interested in buying it, Dy asked if petitioner could
instead lend respondent the amount of P5,000.00.18 Petitioner agreed and in turn,
Dy left the laptop with petitioner.19 On February 18, 2002, Dy came to get the
laptop but petitioner refused to give it back because the loan was not yet paid.20
Dy then asked petitioner to lend an additional amount of P3,000.00 to respondent
who allegedly was in dire need of money.21 Petitioner gave the money under
agreement that the amounts she lent to respondent would be considered as partial
payments for the laptop in case she decides to buy it.22 Sometime in the first week
of March 2002, petitioner informed respondent that she has finally decided not to
buy the laptop.23 Respondent, however, refused to pay and insisted that petitioner
purchase the laptop instead.24
Ruling of the Municipal Trial Court in Cities
On June 2, 2003, the MTCC rendered a Decision25 in favor of respondent. It found
the receipt dated February 18, 2002 and the testimonies of respondent and his
witness, Dy, sufficient to prove that there was a contract of sale between the
parties.
On appeal,28 the Regional Trial Court (RTC) of Cebu, Branch 12, reversed the MTCC
Decision. CA reversed the RTC Decision and reinstated the Decision of the MTCC.
Summed up, the issues boil down to: (1) the timeliness of the filing of the Petition
for Review with the CA; (2) the existence of a contract of sale; and (3) respondents
entitlement to attorneys fees and litigation expenses.
Petitioners Arguments
Petitioner contends that the filing of the Petition for Review with the CA on June 1,
2004 was beyond the reglementary period.41 Records show that respondent
received a copy of the RTC Decision on March 25, 2004, filed a Motion for
Reconsideration on April 12, 2004 since April 9 and 10 were holidays and April 11,
2004 was a Sunday, and received a copy of the RTC Order denying his Motion for
Reconsideration on May 27, 2004.42 Thus, he only had one day left from May 27,
2004 within which to file a Petition for Review with the CA.43

Petitioner likewise denies the existence of a contract of sale, insisting that the
laptop was not sold to her but was given as a security for respondents debt. To
prove that there was no contract of sale, petitioner calls attention to respondents
failure to present a written contract of sale.44 She claims that under the Statute of
Frauds, a contract of sale to be enforceable must be in writing.45 She also imputes
error on the part of the CA in giving weight and credence to the receipt dated
February 18, 2002 and the demand letter dated July 29, 2002.46 She claims that the
receipt dated February 18, 2002, which she denies having written, is not an
actionable document; thus, there was no need for her to deny under oath its
genuineness and due execution.47 Furthermore, she claims that her denial of the
receipt of the demand letter dated July 29, 2002 shifted the burden upon
respondent to prove that the letter was indeed received by her.48 As to the
attorneys fees and litigation expenses, petitioner contends that these were not
discussed in the MTCC Decision but were only stated in the dispositive portion and
that the amount of P5,000.00 is excessive considering that it is 70% of the principal
amount claimed by respondent.49
Respondents Arguments
Respondent, on the other hand, argues that his Petition for Review was timely filed
with the CA because he has 15 days from receipt of the RTC Order dated May 13,
2004 within which to file a Petition for Review with the CA under Section 150 of Rule
42 of the Rules of Court.51 Respondent defends the ruling of the CA by arguing that
the receipt dated February 18, 2002 is an actionable document, and thus,
petitioners failure to deny under oath its genuineness and due execution
constitutes an admission thereof.52 In addition, petitioners denial of the receipt of
the demand letter dated July 29, 2002 cannot overcome the presumption that the
said letter was received in the regular course of mail.53 Respondent likewise points
out that the Statute of Frauds does not apply in the instant case.54 Finally,
respondent claims that the award of attorneys fees and litigation expenses are not
excessive and that the factual and legal bases of the award were stated in the body
of MTCC Decision.55
Our Ruling
The Petition lacks merit.
The Petition for Review was timely filed with the CA
To standardize the appeal periods and afford litigants fair opportunity to appeal their
cases, we ruled in Neypes v. Court of Appeals56 that litigants must be given a fresh
period of 15 days within which to appeal, counted from receipt of the order
dismissing a motion for a new trial or motion for reconsideration under Rules 40, 41,
42, 43 and 45 of the Rules of Court. This ruling, as we have said in Fil-Estate
Properties, Inc. v. Homena-Valencia,58 retroactively applies even to cases pending
prior to the promulgation of Neypes on September 14, 2005, there being no vested
rights in the rules of procedure.
Since the instant case was pending in the CA at the time Neypes was promulgated,
respondent is entitled to a fresh period of 15 days, counted from May 27, 2004, the

date respondent received the RTC Order dated May 13, 2004 denying his motion for
reconsideration of the RTC Decision dated March 19, 2004 or until June 11, 2004,
within which to file his Petition for Review with the CA. Thus, we find that when he
filed the Petition for Review with the CA on June 1, 2004, his period to appeal had
not yet lapsed.
There was a contract of sale between the parties
As to whether there was a contract of sale between the parties, we hold that there
was, and the absence of a written contract of sale does not mean otherwise. A
contract of sale is perfected the moment the parties agree upon the object of the
sale, the price, and the terms of payment.60 Once perfected, the parties are bound
by it whether the contract is verbal or in writing because no form is required.61
Contrary to the view of petitioner, the Statute of Frauds does not apply in the
present case as this provision applies only to executory, and not to completed,
executed or partially executed contracts.62 In this case, the contract of sale had
been partially executed because the possession of the laptop was already
transferred to petitioner and the partial payments had been made by her. Thus, the
absence of a written contract is not fatal to respondents case. Respondent only
needed to show by a preponderance of evidence that there was an oral contract of
sale, which he did by submitting in evidence his own affidavit, the affidavit of his
witness Dy, the receipt dated February 18, 2002 and the demand letter dated July
29, 2002.
As regards the receipt dated February 18, 2002, we agree with petitioner that it is
not an actionable document. Hence, there was no need for her to deny its
genuineness and due execution under oath. Nonetheless, we find no error on the
part of the CA in giving full weight and credence to it since it corroborates the
testimonies of respondent and his witness Dy that there was an oral contract of sale
between the parties.
With regard to petitioners denial of the receipt of the demand letter dated July 29,
2002, we believe that this did not overturn the presumption of regularity that the
letter was delivered and received by the addressee in the regular course of the mail
considering that respondent was able to present the postmasters certification63
stating that the letter was indeed sent to the address of petitioner. Bare denial of
receipt of a mail cannot prevail over the certification of the postmaster, whose
official duty is to send notices of registered mail.64
As we see it then, the evidence submitted by respondent weigh more than
petitioners bare denials. Other than her denials, no other evidence was submitted
by petitioner to prove that the laptop was not sold but was only given as security for
respondents loan. What adds doubt to her story is the fact that from the first week
of March 2002, the time she allegedly decided not to buy the laptop, up to the time
the instant case was filed against her, she did not exert any effort to recover from
respondent the payment of the alleged loan. Her inaction leads us to conclude that
the alleged loan was a mere afterthought.
All told, no error can be attributed to the CA in finding that there was a contract of
sale between the parties

The award for attorneys fees and litigation expenses was proper. Neither do we find
any error in the award of attorneys fees and litigation expenses.
SUMMARY RULES
FLORAIDA TERAA, - versus - HON. ANTONIO DE SAGUN,
The respondent Antonio Simuangco (respondent) owned a house and lot at 138 J.P.
Laurel St., Nasugbu, Batangas, which he leased to the petitioner. Sometime in 1996,
the petitioner demolished the leased house and erected a new one in its place. The
respondent alleged that this was done without his consent.
The petitioner allegedly also gave the materials from the demolished house to her
sister, who built a house adjacent to the respondents property.[8] When the
respondent discovered what the petitioner did, he immediately confronted her and
advised her to vacate the premises.[9] She refused. On February 3, 1997, the
respondent sent a letter demanding the petitioner to vacate the leased property.
[10] Despite this letter of demand, which the petitioner received on February 10,
[11] she still refused to vacate the said property.
The respondent thus filed a complaint for unlawful detainer against the petitioner on
April 16, 1997 on the ground of the petitioners violation of the terms of the Contract
of Lease. The petitioner denied allegations of the complaint in her Sagot.[16] She
claimed that she demolished the old building and built a new one with the
knowledge and consent of the respondent.
The trial court called for a preliminary conference under Section 7 of the Revised
Rules of Summary Procedure (RSP) and Section 8 of Rule 70 of the Rules of Court,
and required the parties to file their position papers and affidavits of their witnesses
after they failed to reach an amicable settlement.[19] Instead of filing their position
papers, both parties moved for an extension of time to file the necessary pleadings.
The trial court denied both motions on the ground that the RSP and the Rules of
Court, particularly Rule 70, Section 13(5), prohibit the filing of a motion for
extension of time.[20]
The MTC framed the issues in the case as follows:
1.
Whether or not there was a violation of the contract of lease when the old
house was demolished and a new house was constructed by the defendant; and
2.
Whether or not defendant is entitled to be reimbursed for her expenses in the
construction of the new house.[21]
The MTC rendered its decision on November 5, 1997[23] despite the parties failure
to timely file their respective position papers. The MTC thus ruled:
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the plaintiff
Antonio B. Simuangco and against the defendant Aida Terana as follows:
1.
Ordering the defendant Aida Terana and all persons claiming right under her
to vacate and surrender possession of the subject house to the plaintiff;

2.
Ordering the said defendant to pay the amount of Five Thousand Pesos
(P5,000.00) as Attorneys fees; and
3.
To pay the costs of suit.
Unaware that a decision had already been rendered, the petitioner filed a letter
entitled Kahilingan,[26] to which she attached her position paper and the affidavits
of her witnesses.[27] The submission was essentially a motion for reconsideration of
the denial of motion for extension of time. On November 6, 1977, the MTC denied
the petitioners Kahilingan as follows:
Defendant Aida Teranias KAHILINGAN dated November 5, 1997 is DENIED for being
moot and academic on account of the decision on the merits rendered by this court
dated November 4, 1997 relative to the instant case.
Petitioner then filed a Notice of Appeal on November 12, 1997. [29] The records of
the case were ordered elevated to the Regional Trial Court (RTC) where the case was
docketed as Civil Case No. 439.
THE RTCS DECISION[30]
The RTC rendered judgment affirming the decision of the MTC on February 26, 1998.
The RTC ruled that: 1) the ruling of the MTC was supported by the facts on record; 2)
although the respondent failed to submit his position paper and the affidavits of his
witnesses, the MTC correctly rendered its decision on the basis of the pleadings
submitted by the parties, as well as the evidence on record; 3) the petitioner failed
to show enough reason to reverse the MTCs decision. The court further declared
that its decision was immediately executory, without prejudice to any appeal the
parties may take.
The petitioner filed a Motion for Reconsideration and/or for New Trial on March 3,
1998.[31] The petitioner argued that the appealed MTC decision was not supported
by any evidence, and that the respondent failed to substantiate the allegations of
his complaint and to discharge the burden of proving these allegations after the
petitioner denied them in her Sagot. In effect, the petitioner argued that the
allegations of the complaint should not have been the sole basis for the judgment
since she filed an answer and denied the allegations in the complaint; the RTC
should have also appreciated her position paper and the affidavit of her witnesses
that, although filed late, were nevertheless not expunged from the records.
In her motion for a new trial, the petitioner argued that her failure to submit her
position paper and the affidavits of her witnesses within the 10-day period was due
to excusable negligence. She explained that she incurred delay because of the
distance of some of her witnesses residence. The petitioner alleged that she had a
good and meritorious claim against the respondent, and that aside from her position
paper and the affidavits of her witnesses, she would adduce receipts and other
pieces of documentary evidence to establish the costs incurred in the demolition of
the old house and the construction of the new one.
On April 28, 1998, the RTC granted the motion for reconsideration, and thus
reversed its February 26, 1998 judgment, as well as the November 5, 1997 decision

of the MTC. It noted that: 1) the MTC rendered its decision before the petitioner was
able to file her position paper and the affidavit of her witnesses; 2) the rule on the
timeliness of filing pleadings may be relaxed on equitable considerations; and 3) the
denial of the petitioners motion for reconsideration and/or new trial will result to a
miscarriage of justice. Thus, believing that it was equitable to relax the rules on the
timeliness of the filing of pleadings, the RTC remanded the case to the MTC for
further proceedings, after giving the respondent the opportunity to submit his
position paper and the affidavits of his witnesses. The fallo reads:

WHEREFORE, on considerations of equity and substantial justice, and in the light of

Section 6, Rule 135 of the Rules of Court, the judgment of this Court dated February
26, 1998, as well as the Decision dated November 4, 1997 of the Lower Court in
Civil Case No. 1305, are hereby both set aside. The lower court to which the records
were heretofore remanded is hereby ordered to conduct further proceedings in this
case, after giving the plaintiff-appellee an opportunity to file his position paper and
affidavits of witnesses as required by Section 10, Rule 70, of the 1997 Rules of Civil
Procedure. [Underscoring supplied.] SO ORDERED.
On May 9, 1998, the petitioner challenged the order of remand through another
motion for reconsideration.[32] The petitioner argued that since the original action
for unlawful detainer had already been elevated from the MTC to the RTC, the RSP
no longer governed the disposal of the case. Before the RTC, the applicable rule is
the Rules of Court, particularly Section 6 of Rule 37, which reads:
Sec. 6. Effect of granting of motion for new trial. If a new trial is granted in
accordance with the provisions of this Rule, the original judgment or final order shall
be vacated, and the action shall stand for trial de novo; but the recorded evidence
taken upon the former trial, in so far as the same is material and competent to
establish the issues, shall be used at the new trial without retaking the same.
Thus, the RTC should have conducted a trial de novo instead of remanding the case
to the MTC. The petitioner further argued that a remand to the court a quo may only
be ordered under Section 8, Rule 40[33] of the Rules of Court.
The RTC denied the motion noting that the petitioner missed the whole point of the
reversal of the decision. First, the reversal was made in the interest of substantial
justice and the RTC hewed more to the spirit that vivifieth than to the letter that
killeth,[34] and that a lawsuit is best resolved on its full merits, unfettered by the
stringent technicalities of procedure. The RTC further emphasized that a remand is
not prohibited under the Rules of Court and that Section 6 of Rule 135 allows it:
Sec. 6. Means to carry jurisdiction into effect When by law jurisdiction is conferred
on a court or judicial officer, all auxiliary writs, processes and other means
necessary to carry it into effect may be employed by such court or officer, and if the
procedure to be followed in the exercise of such jurisdiction is not specifically

pointed out by law or by these rules, any suitable process or mode of proceeding
may be adopted which appears conformable to the spirit of said law or rules.
Second, Rule 40 governs appeals from the MTC to the RTC. Nowhere in Rule 40 is
there a provision similar to Section 6 of Rule 37.
Third, Section 6 of Rule 37 contemplates a motion for new trial and for
reconsideration filed before a trial court a quo. The RTC in this case was acting as an
appellate court; the petitioners motion for new trial and reconsideration was
directed against the appellate judgment of the RTC, not the original judgment of the
trial court.
Fourth, after Republic Act No. 6031 mandated municipal trial courts to record their
proceedings, a trial de novo at the appellate level may no longer be conducted. The
appellate courts may instead review the evidence and records transmitted to it by
the trial court. Since the petitioner is asking the court to review the records of the
MTC, inclusive of her position paper and the affidavits of her witnesses, it is also
important to give the respondent an opportunity to file his position paper and the
affidavits of his witnesses before the MTC renders a judgment. It is the MTC or the
trial court that has the jurisdiction to do that.
THE CA DECISION
The CA affirmed the RTC in a decision promulgated on September 7, 2001.[35] The
CA noted that the RTCs order of remand was not just based on equity and
substantial justice, but was also based on law, specifically Section 6 of Rule 135.
Thus, the CA ruled that the RTC did not err in remanding the case to the MTC and
ordering the conduct of further proceedings after giving the respondent an
opportunity to present his position paper and the affidavits of his witnesses. This
ruling did not satisfy petitioner, giving way to the present petition.
THE PETITION
Before this Court, the petitioner alleges: 1) that the respondent made a request for
the petitioner to vacate the subject property because his nearest of kin needed it; 2)
that she was only going to vacate the premises if she were reimbursed the actual
cost incurred in building the said house;[36] 3) that the case be decided on the
basis of the entire record of the proceedings in the court of origin, including
memoranda and briefs submitted by the parties, instead of being remanded to the
MTC.
In his Comment[37] and Memorandum,[38] the respondent joins the petitioners
prayer for a ruling based on the records instead of remanding the case to the MTC.
He prays that, as the MTC ruled, the petitioner be ordered to vacate the leased
property, and that the petitioners claim for reimbursement be denied. The
respondent argues that the MTC correctly ruled on the basis of the parties
pleadings, the stipulation of facts during the preliminary conference, and the
records of the proceedings.
ISSUES

The petitioner submits the following as the issue to be decided:

[W]hether under the Rules of Summary Procedure, the Regional Trial Court, as well
as the Court of Appeals, may order the case remanded to the MTC after the plaintiff,
herein respondent, failed to submit evidence in support of his complaint because his
Position Paper, affidavit of witnesses and evidence, were not submitted on time and
the extension of time to file the same was denied because it is prohibited under the
Rules on Summary Procedure.
which we break down into the following sub-issues: 1) whether a remand is proper;
2) whether the Court should appreciate the petitioners position paper and the
affidavits of her witnesses; and 3) whether the complaint for unlawful detainer
should be dismissed.
THE COURTS RULING
The petition is partly meritorious.
Remand Not Necessary
We find that a remand of the case to the lower courts is no longer necessary, given
the pleadings and submissions filed, and the records of the proceedings below. A
remand would delay the overdue resolution of this case (originally filed with the MTC
on April 16, 1997), and would run counter to the spirit and intent of the RSP.[40]
Petitioners Position Paper and the Affidavits of Her Witnesses Cannot Be Admitted
Should the Court admit the petitioners position paper and the affidavits of her
witnesses attached to her Kahilingan?
The intent and terms of the RSP both speak against the liberality that the petitioner
sees. By its express terms, the purpose of the RSP is to achieve an expeditious and
inexpensive determination of the cases they cover, among them, forcible entry and
unlawful detainer cases.[41] To achieve this objective, the RSP expressly prohibit
certain motions and pleadings that could cause delay, among them, a motion for
extension of time to file pleadings, affidavits or any other paper. If the extension for
the filing of these submissions cannot be allowed, we believe it illogical and
incongruous to admit a pleading that is already filed late. Effectively, we would then
allow indirectly what we prohibit to be done directly. It is for this reason that in Don
Tino Realty Development Corporation v. Florentino,[42] albeit on the issue of late
filing of an answer in a summary proceeding, we stated that [t]o admit a late
answer is to put a premium on dilatory measures, the very mischief that the rules
seek to redress.
The strict adherence to the reglementary period prescribed by the RSP is due to the
essence and purpose of these rules. The law looks with compassion upon a party
who has been illegally dispossessed of his property. Due to the urgency presented
by this situation, the RSP provides for an expeditious and inexpensive means of
reinstating the rightful possessor to the enjoyment of the subject property.[43] This

fulfills the need to resolve the ejectment case quickly. Thus, we cannot reward the
petitioners late filing of her position paper and the affidavits of her witnesses by
admitting them now.
The failure of one party to submit his position paper does not bar at all the MTC
from issuing a judgment on the ejectment complaint. Section 10 of the RSP states:
Section 10. Rendition of judgment. Within thirty (30) days after receipt of the last
affidavits and position papers, or the expiration of the period for filing the same, the
court shall render judgment. [Underscoring supplied.]
However, should the court find it necessary to clarify certain material facts, it may,
during the said period, issue an order specifying the matters to be clarified, and
require the parties to submit affidavits or other evidence on the said matters within
ten (10) days from receipt of said order. Judgment shall be rendered within fifteen
(15) days after the receipt of the last affidavit or the expiration of the period for
filing the same.
The court shall not resort to the foregoing procedure just to gain time for the
rendition of the judgment.
Thus, the situation obtaining in the present case has been duly provided for by the
Rules; it was correct to render a judgment, as the MTC did, after one party failed to
file their position paper and supporting affidavits.
That a position paper is not indispensable to the courts authority to render
judgment is further evident from what the RSP provides regarding a preliminary
conference: on the basis of the pleadings and the stipulations and admissions made
by the parties, judgment may be rendered without the need for further proceedings,
in which event the judgment shall be rendered within 30 days from the issuance of
the order.[44] Thus, the proceedings may stop at that point, without need for the
submission of position papers. In such a case, what would be extant in the record
and the bases for the judgment would be the complaint, answer, and the record of
the preliminary conference.
Unlawful detainer
The special civil action for unlawful detainer has the following essential requisites:
1) the fact of lease by virtue of a contract, express or implied;
2) the expiration or termination of the possessor's right to hold possession;
3) withholding by the lessee of possession of the land or building after the
expiration or termination of the right to possess;
4) letter of demand upon lessee to pay the rental or comply with the terms of the
lease and vacate the premises; and
5) the filing of the action within one year from the date of the last demand
received by the defendant.[45]
Requisites 1, 4, and 5 have been duly established. The presence of the Contract of
Lease is undisputed; the letter of demand was sent on February 3, 1997, and
received by the petitioner on February 10, 1997; and the action was filed on April
16, 1997, well within the one-year period from the letter of demand. For our
determination is whether the petitioners right to possess the subject property may

be terminated by virtue of her violation of the terms of the contract. If we answer in

the affirmative, her continued detention of the property is illegal.
Section 1673(3) of the Civil Code answers this question by providing that the lessor
may terminate the lease contract for violation of any of the conditions or terms
agreed upon,[46] and may judicially eject the lessee.[47] One of the stipulated
terms of the parties Contract of Lease, as narrated above, is that no alterations may
be made on the leased property without the knowledge and consent of the lessor.
The issue in this case is beyond the fact of alteration since it is not disputed that the
petitioner demolished the house under lease and built a new one. The crucial issue
is whether the demolition was with or without the knowledge and consent of the
respondent.
The petitioner contends that the Court should not give credence to the respondents
claim that he neither had knowledge of nor gave his consent to her acts. She
argued that the respondent had the burden of proving this allegation with positive
evidence after she frontally denied it in her answer. Since the respondent failed to
discharge this burden, she argues that she no longer needed to prove her defense
that the demolition and construction were done with the respondents knowledge
and consent.[48]
The petitioners contention is misplaced.
First, the material allegations in a complaint must be specifically denied by the
defendant in his answer. Section 10, Rule 8 of the 1997 Rules of Court, 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.
Section 11, Rule 8 of the Rules of Court likewise provides that material allegations in
the complaint which are not specifically denied, other than the amount of
unliquidated damages, are deemed admitted. A denial made without setting forth
the substance of the matters relied upon in support of the denial, even when to do
so is practicable, does not amount to a specific denial.[49]
The petitioners denial in her answer consists of the following:
1. Maliban sa personal na katangian at tirahan ng nasasakdal, ay walang
katotuhanan ang mga isinasakdal ng nagsasakdal;
2. Na hindi lumabag sa kasunduan ng upahan ang nasasakdal;
3. Na, ang pagpapagawa ng bahay na inuupahan ng nasasakdal ay sa kaalaman at
kapahintulutan ng nagsasakdal at higit na gumanda at tumibay ang bahay ng
nagsasakdal sa pamamagitan ng pagpapagawa ng nasasakdal; xxx[50]

We do not find this denial to be specific as the petitioner failed to set forth the
substance of the matters in which she relied upon to support her denial. The
petitioner merely alleged that consent was given; how and why, she did not say. If
indeed consent were given, it would have been easy to fill in the details. She could
have stated in her pleadings that she verbally informed the respondent of the need
for the repairs, or wrote him a letter. She could have stated his response, and how it
was conveyed, whether verbally or in writing. She could have stated when the
consent was solicited and procured. These, she failed to do. Ergo, the petitioner is
deemed to have admitted the material allegations in the complaint.
Second, both parties failed to present evidence other than the allegations in their
pleadings. Thus, the court may weigh the parties allegations against each other. The
petitioner presented a general denial, while the respondent set forth an affirmative
assertion. This Court has time and again said that a general denial cannot be given
more weight than an affirmative assertion.
Damages recoverable in an unlawful detainer action are limited to rentals or
reasonable compensation for the use of the property.
This Court has no jurisdiction to award the reimbursement prayed for by both
parties. Both parties seek damages other than rentals or reasonable compensation
for the use of the property, which are the only forms of damages that may be
recovered in an unlawful detainer case.[52] Rule 70, Section 17 of the Rules of Court
authorizes the trial court to order the award of an amount representing arrears of
rent or reasonable compensation for the use and occupation of the premises if it
finds that the allegations of the complaint are true.
The rationale for limiting the kind of damages recoverable in an unlawful detainer
case was explained in Araos v. Court of Appeals,[54] wherein the Court held that:
The rule is settled that in forcible entry or unlawful detainer cases, the only
damage that can be recovered is the fair rental value or the reasonable
compensation for the use and occupation of the leased property. The reason for this
is that in such cases, the only issue raised in ejectment cases is that of rightful
possession; hence, the damages which could be recovered are those which the
plaintiff could have sustained as a mere possessor, or those caused by the loss of
the use and occupation of the property, and not the damages which he may have
suffered but which have no direct relation to his loss of material possession.
An action for reimbursement or for recovery of damages may not be properly joined
with the action for ejectment. The former is an ordinary civil action requiring a fullblown trial, while an action for unlawful detainer is a special civil action which
requires a summary procedure. The joinder of the two actions is specifically
enjoined by Section 5 of Rule 2 of the Rules of Court, which provides:
Section 5. Joinder of causes of action. A party may in one pleading assert, in the
alternative or otherwise, as many causes of action as he may have against an
opposing party, subject to the following conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of
parties;
(b) The joinder shall not include special civil actions or actions governed by special
rules;
(c) Where the causes of action are between the same parties but pertain to
different venues or jurisdictions, the joinder may be allowed in the Regional Trial
Court provided one of the causes of action falls within the jurisdiction of said court
and the venue lies therein; and
(d) Where the claims in all the causes of action are principally for recovery of
money, the aggregate amount claimed shall be the test of jurisdiction.
[Underscoring supplied.]
WHEREFORE, the petition is PARTIALLY GRANTED. The decision of the Court of
Appeals in CA-G.R. No. SP-48534 is REVERSED AND SET ASIDE. The petitioner
FLORAIDA TERANA and all persons claiming right under her are ordered to vacate
and surrender possession of the subject property to the respondent ANTONIO
SIMUANGCO. No costs. SO ORDERED.
GLORIA LUCAS, complainant, vs. JUDGE AMELIA A. FABROS, MeTC, Branch
9, Manila, respondent.
In a verified complaint[1] dated May 20, 1997, complainant Gloria Lucas charged
respondent, Judge Amelia A. Fabros of the Metropolitan Trial Court, Branch 9, Manila,
with Gross Ignorance of the Law and Grave Abuse of Discretion relative to Civil Case
No. 151248 entitled "Editha F. Gacad, represented by Elenita F. Castelo vs. Gloria
Lucas, for Ejectment". Jksm
Complainant, who was the defendant in the aforecited case, alleged that Judge
Amelia A. Fabros issued an Order[2] dated February 26, 1997 granting the plaintiffs
motion for reconsideration of the Order[3] dated January 13, 1997, which dismissed
the case for failure of plaintiff and her counsel to appear at the Preliminary
Conference.
Complainant averred that it is elementary, under Section 19 (c) of the Rules of
Summary Procedure, that a motion for reconsideration is prohibited, but respondent
judge, in violation of the rule, granted the motion for reconsideration. She added
that, notwithstanding the fact that the respondent herself had pointed out in open
court that the case is governed by the Rules on Summary Procedure,[4] the judge
ordered the revival of the case out of malice, partiality and with intent to cause an
injury to complainant.
Further, complainant alleged that the actuations of the respondent is in blatant
disregard of the established rules on procedure, and it is an instance where the
doctrine of IPSA LOQUITOR may once again may be applied by the Court to
discipline judges.
On June 18, 1997, respondent judge was required to comment on the administrative
complaint. In her Comment[5] dated September 16, 1997, she admitted that she
granted the motion for reconsideration even if the same is a prohibited motion in an

ejectment case. She explained, however, that it was granted in the interest of
justice.
In her Comment, respondent stated:
"The Order subject of this complaint is the Order dated January 13, 1997 dismissing
the complaint for ejectment for failure of the plaintiff to appear for preliminary
conference and more importantly her lawyer, Atty. Jose Suing, who was duly
empowered to appear for preliminary conference by virtue of a Special Power of
Attorney. Chief
Immediately upon learning the said order of dismissal and awarding of attorneys
fees, Atty. Suing filed a Motion for Reconsideration on January 17, 1997 (Annex "A")
stating that he failed to appear due to a sudden excruciating stomach pain. He
further stated that his Secretary called the Court but to no avail until finally the call
came through and she was informed that the case was dismissed. Over the
objection of the defendant that the Motion for Reconsideration was a prohibited
pleading which this Presiding Judge is fully aware of under the Rule on Summary
Procedure, the Motion for Reconsideration was nonetheless granted in the interest
of justice. The question is poised. Are the actuations of judges to be governed
strictly by the Rule on Summary Procedure despite their belief in good faith that in
special cases, its observance would result in a miscarriage of justice? This Presiding
Judge does not think so. Judges are supposed to responsible Public Officials and
should be able to perceive and discern circumstances which might lead to
miscarriage of justice, thus, negating the very purpose and essence of the Rule on
Summary Procedure. The Rule on Summary Procedure is not a straight jacket and it
is believed it was never meant to be that. This is the reason why we have in the
Rules of Court Section 5 (g) of Rule 135 which is one of the inherent powers of the
Court, that is, to amend and control its process and orders so as to make them
conformable to law and justice. Ignorance of the law, to the mind of the
undersigned, is the act of a judge in taking legal steps or adopting procedure
unknowingly aware that they are contrary to established Rules which should be
known to the judge. This Presiding Judge in this particular case was fully aware of
the Rule on Summary Procedure. She fully knew that the Motion for Reconsideration
was a prohibited pleading but she still considered it because to deny it would result
in a miscarriage of justice. It was not a capricious, whimsical and despotic act when
viewed in the light of this circumstance.
With respect to the allegation that the charge of ignorance of the law was
compounded by the failure to issue a writ of execution, it bears stressing that the
Order dated January 13, 1997 never gained finality because the plaintiff was able to
file the Motion for Reconsideration within the fifteen (15) day period, that is, on
January 17, 1997. But even if it is argued validly that the Motion for Reconsideration
being a prohibited pleading did not interrupt the running of the period of appeal,
still the said Order did not gain finality as far as defendant Gloria Lucas is concerned
because as the record shows, it was she who received the Order, not her lawyer,
Atty. Sulit." Esm
The complaint and the Comment were referred to the Office of the Court
Administrator for evaluation, report and recommendation after the case was

docketed as an administrative matter. On August 25, 1997, OCA in a Memorandum,

submitted the following findings:
"After a careful perusal of the records of the case, we find that respondent Judge
Fabros abused her discretion in granting the Motion for Reconsideration.
Respondent Judge Fabros maintained that she could not be guilty of gross ignorance
of the law as she knows that a motion for reconsideration of judgment is a
prohibited motion in an ejectment case. She explained that although there is
already a judgment dismissing the case, she granted the plaintiffs motion for
reconsideration in the interest of justice since the reasons stated in the motion for
reconsideration are meritorious.
Respondent failed to realize that the first duty of the court is to apply the law and
that when the law is clear and unambiguous, there is no room for interpretation.
Although her intention was good, this could not free her from liability.
Respondent should have denied the motion since the plaintiff had other judicial
remedies like appeal."[6]
The Office of the Court Administrator recommended that respondent judge be fined
in the amount of P2,000.00 for grave abuse of discretion. The Court, however, finds
this recommendation without factual and legal basis.
As a rule, a motion for reconsideration is a prohibited pleading under Section 19 of
the Revised Rule on Summary Procedure. Thus,
"SEC. 19. Prohibited pleadings and motions. The following pleadings, motions, or
petitions shall not be allowed in the cases covered by this Rule.
xxx
(c) Motion for new trial, or for reconsideration of a judgment, or for reopening of
trial;
xxx"
This rule, however, applies only where the judgment sought to be reconsidered is
one rendered on the merits. As held by the Court in an earlier case involving Sec. 15
(c) of the Rules on Summary Procedure, later Sec. 19 (c) of the Revised Rules on
Summary Procedure effective November 15, 1991: "The motion prohibited by this
Section is that which seeks reconsideration of the judgment rendered by the court
after trial on the merits of the case."[7] Here, the order of dismissal issued by
respondent judge due to failure of a party to appear during the preliminary
conference is obviously not a judgment on the merits after trial of the case. Hence,
a motion for the reconsideration of such order is not the prohibited pleading
contemplated under Section 19 (c) of the present Rule on Summary Procedure.
Thus, respondent judge committed no grave abuse of discretion, nor is she guilty of
ignorance of the law, in giving due course to the motion for reconsideration subject
of the present complaint. Esmsc

ACCORDINGLY, the complaint filed against respondent Judge Amelia A. Fabros is

DISMISSED. SO ORDERED.
VIRGINIA GOCHAN, LOUISE GOCHAN, vs. MERCEDES GOCHAN
Respondents were stockholders of the Felix Gochan and Sons Realty Corporation
and the Mactan Realty Development Corporation. Sometime in 1996, respondents
offered to sell their shares in the two corporations to the individual petitioners, the
heirs of the late Ambassador Esteban Gochan, for and in consideration of the sum of
P200,000,000.00. Petitioners accepted and paid the said amount to respondents.
Accordingly, respondents issued to petitioners the necessary Receipts.[3] In
addition, respondents executed their respective Release, Waiver and Quitclaim,[4]
wherein they undertook that they would not initiate any suit, action or complaint
against petitioners for whatever reason or purpose.
In turn, respondents, through Crispo Gochan, Jr., required individual petitioners to
execute a promissory note,[5] undertaking not to divulge the actual consideration
they paid for the shares of stock. For this purpose, Crispo Gochan, Jr. drafted a
document entitled promissory note in his own handwriting and had the same signed
by Felix Gochan, III, Louise Gochan and Esteban Gochan, Jr.
Unbeknown to petitioners, Crispo Gochan, Jr. inserted in the promissory note a
phrase that says, Said amount is in partial consideration of the sale.[6]
On April 3, 1998, respondents filed a complaint against petitioners for specific
performance and damages with the Regional Trial Court of Cebu City, Branch 11,
docketed as Civil Case No. CEB-21854. Respondents alleged that sometime in
November 1996, petitioner Louise Gochan, on behalf of all the petitioners, offered to
buy their shares of stock, consisting of 254 shares in the Felix Gochan and Sons
Realty Corporation and 1,624 shares of stock in the Mactan Realty Development
Corporation; and that they executed a Provisional Memorandum of Agreement,
wherein they enumerated the following as consideration for the sale:
1. Pesos: Two Hundred Million Pesos (P200M)
2. Two (2) hectares more or less of the fishpond in Gochan compound, Mabolo, Lot
4F-2-B
3. Lot 2, Block 9 with an area of 999 square meters in Gochan Compound, Mabolo,
Cebu
4. Three Thousand (3,000) square meters of Villas Magallanes in Mactan, Cebu
5. Lot 423 New Gem Building with an area of 605 square meters.[7]
Accordingly, respondents claimed that they are entitled to the conveyance of the
aforementioned properties, in addition to the amount of P200,000,000.00, which
they acknowledge to have received from petitioners. Further, respondents prayed
for moral damages of P15,000,000.00, exemplary damages of P2,000,000.00,
attorneys fees of P14,000,000.00, and litigation expenses of P2,000,000.00.
Petitioners filed their answer, raising the following affirmative defenses: (a) lack of
jurisdiction by the trial court for non-payment of the correct docket fees; (b)

unenforceability of the obligation to convey real properties due to lack of a written

memorandum thereof, pursuant to the Statute of Frauds; (c) extinguishment of the
obligation by payment; (d) waiver, abandonment and renunciation by respondent of
all their claims against petitioners; and (e) non-joinder of indispensable parties.
On August 7, 1998, petitioners filed with the trial court a motion for a preliminary
hearing on the affirmative defenses. In an Order dated August 11, 1998, the trial
court denied the motion, ruling as follows:
As the grant of said motion lies in the discretion of the court under Section 6 of Rule
16 of the 1997 Rules of Civil Procedure, this Court in the exercise of its discretion,
hereby denies the said motion because the matters sought to be preliminarily heard
do not appear to be tenable. For one, the statute of frauds does not apply in this
case because the contract which is the subject matter of this case is already an
executed contract. The statute of frauds applies only to executory contracts.
According to Dr. Arturo M. Tolentino, a leading authority in civil law, since the statute
of frauds was enacted for the purpose of preventing frauds, it should not be made
the instrument to further them. Thus, where one party has performed his obligation
under a contract, equity would agree that all evidence should be admitted to prove
the alleged agreement (PNB vs. Philippine Vegetable Oil Company, 49 Phil. 897). For
another, the contention of the defendants that the claims of the plaintiffs are
already extinguished by full payment thereof does not appear to be indubitable
because the plaintiffs denied under oath the due execution and genuineness of the
receipts which are attached as Annexes 1-A, 1-B and 1-C of defendants answer. This
issue therefore has to be determined on the basis of preponderance of evidence to
be adduced by both parties. Then, still for another, the contention that the
complaint is defective because it allegedly has failed to implead indispensable
parties appears to be wanting in merit because the parties to the memorandum of
agreement adverted to in the complaint are all parties in this case. Then the matter
of payment of docketing and filing fees is not a fatal issue in this case because the
record shows that the plaintiffs had paid at least P165,000.00 plus in the form of
filing and docketing fees. Finally, regarding exerting earnest efforts toward a
compromise by the plaintiffs, the defendants cannot say that there is an absence of
an allegation to this effect in the complaint because paragraph 11 of the complaint
precisely states that before filing this case, earnest efforts toward a compromise
have been made.
Petitioners motion for reconsideration of the above Order was denied by the trial
court on September 11, 1998.
Petitioners thus filed a petition for certiorari with the Court of Appeals, docketed as
CA-G.R. SP No. 49084. On September 10, 1999, the Court of Appeals rendered the
appealed decision dismissing the petition on the ground that respondent court did
not commit grave abuse of discretion, tantamount to lack or in excess of jurisdiction
in denying the motion to hear the affirmative defenses.[8]
Again, petitioners filed a motion for reconsideration, but the same was denied by
the Court of Appeals in its assailed Resolution of November 22, 2000.[9]

Petitioners, thus, brought the present petition for review anchored on the following
grounds:
I.THE COURT OF APPEALS COMMITTED GRAVE AND PALPABLE ERROR IN FINDING
THAT THE CORRECT DOCKET FEES HAVE BEEN PAID.
II. THE COURT OF APPEALS COMMITTED GRAVE ERROR IN RESOLVING THAT FELIX
GOCHAN III AND ESTEBAN GOCHAN, JR. ARE NOT INDISPENSABLE PARTIES AND
THEREFORE NEED NOT BE IMPLEADED AS PARTIES.[10]
Respondents filed their Comment,[11] arguing, in fine, that petitioners are guilty of
forum-shopping when they filed two petitions for certiorari with the Court of
Appeals; and that the Court of Appeals did not err in dismissing the petition for
certiorari.
The instant petition has merit.
The rule is well-settled that the court acquires jurisdiction over any case only upon
the payment of the prescribed docket fees. In the case of Sun Insurance Office, Ltd.
(SIOL) v. Asuncion,[12] this Court held that 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.
Respondents maintain that they paid the correct docket fees in the amount of
P165,000.00 when they filed the complaint with the trial court. Petitioners, on the
other hand, contend that the complaint is in the nature of a real action which affects
title to real properties; hence, respondents should have alleged therein the value of
the real properties which shall be the basis for the assessment of the correct docket
fees.
The Court of Appeals found that the complaint was one for specific performance and
incapable of pecuniary estimation. We do not agree.
It is necessary to determine the true nature of the complaint in order to resolve the
issue of whether or not respondents paid the correct amount of docket fees therefor.
In this jurisdiction, the dictum adhered to is that the nature of an action is
determined by the allegations in the body of the pleading or complaint itself, rather
than by its title or heading.[13] The caption of the complaint below was
denominated as one for specific performance and damages. The relief sought,
however, is the conveyance or transfer of real property, or ultimately, the execution
of deeds of conveyance in their favor of the real properties enumerated in the
provisional memorandum of agreement. Under these circumstances, the case below
was actually a real action, affecting as it does title to or possession of real property.
In the case of Hernandez v. Rural Bank of Lucena,[14] this Court held that a real
action is one where the plaintiff seeks the recovery of real property or, as indicated
in section 2(a) of Rule 4 (now Section 1, Rule 4 of the 1997 Rules of Civil Procedure),
a real action is an action affecting title to or recovery of possession of real property.

It has also been held that where a complaint is entitled as one for specific
performance but nonetheless prays for the issuance of a deed of sale for a parcel of
land, its primary objective and nature is one to recover the parcel of land itself and,
thus, is deemed a real action. In such a case, the action must be filed in the proper
court where the property is located:
In this Court, the appellant insists that her action is one for specific performance,
and, therefore, personal and transitory in nature.
This very issue was considered and decided by this Court in the case of Manuel B.
Ruiz vs. J.M. Tuason & Co., Inc. et al., L-18692, promulgated 31 January 1963. There
the Court, by unanimous vote of all the Justices, held as follows:
This contention has no merit. Although appellants complaint is entitled to be one for
specific performance, yet the fact that he asked that a deed of sale of a parcel of
land situated in Quezon City be issued in his favor and that a transfer certificate of
title covering said parcel of land be issued to him shows that the primary objective
and nature of the action is to recover the parcel of land itself because to execute in
favor of appellant the conveyance requested there is need to make a finding that he
is the owner of the land which in the last analysis resolves itself into an issue of
ownership. Hence, the action must be commenced in the province where the
property is situated pursuant to Section 3, Rule 5, of the Rules of Court, which
provides that actions affecting title to or recovery of possession of real property
shall be commenced and tried in the province where the property or any part
thereof lies.[15]
In the case at bar, therefore, the complaint filed with the trial court was in the
nature of a real action, although ostensibly denominated as one for specific
performance. Consequently, the basis for determining the correct docket fees shall
be the assessed value of the property, or the estimated value thereof as alleged by
the claimant. Rule 141, Section 7, of the Rules of Court, as amended by A.M. No. 002-01-SC, provides:
Section 7. Clerks of Regional Trial Courts. - x x x
(b) xxx
In a real action, the assessed value of the property, or if there is none, the
estimated value thereof shall be alleged by the claimant and shall be the basis in
computing the fees.
We are not unmindful of our pronouncement in the case of Sun Insurance,[16] to the
effect that in case 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 period. However,
the liberal interpretation of the rules relating to the payment of docket fees as
applied in the case of Sun Insurance cannot apply to the instant case as
respondents have never demonstrated any willingness to abide by the rules and to
pay the correct docket fees. Instead, respondents have stubbornly insisted that the
case they filed was one for specific performance and damages and that they

actually paid the correct docket fees therefor at the time of the filing of the
complaint. Thus, it was stated in the case of Sun Insurance:[17]
The principle in Manchester could very well be applied in the present case. The
pattern and the intent to defraud the government of the docket fee due it is obvious
not only in the filing of the original complaint but also in the filing of the second
amended complaint.
However, in Manchester, petitioner did not pay any additional docket fee until the
case was decided by this Court on May 7, 1987. Thus, in Manchester, due to the
fraud committed on the government, this Court held that the court a quo did not
acquire jurisdiction over the case and that the amended complaint could not have
been admitted inasmuch as the original complaint was null and void.
In the present case, a more liberal interpretation of the rules is called for
considering that, unlike Manchester, private respondent demonstrated his
willingness to abide by the rules by paying the additional docket fees as required.
The promulgation of the decision in Manchester must have had that sobering
influence on private respondent who thus paid the additional docket fee as ordered
by the respondent court. It triggered his change of stance by manifesting his
willingness to pay such additional docket fee as may be ordered.
Respondents accuse petitioners of forum-shopping when they filed two petitions
before the Court of Appeals. Petitioners, on the other hand, contend that there was
no forum-shopping as there was no identity of issues or identity of reliefs sought in
the two petitions.
We agree with petitioners that they are not guilty of forum-shopping. The deplorable
practice of forum-shopping is resorted to by litigants who, for the purpose of
obtaining the same relief, resort to two different fora to increase his or her chances
of obtaining a favorable judgment in either one. In the case of Golangco v. Court of
Appeals,[18] we laid down the following test to determine whether there is forumshopping:
Ultimately, what is truly important to consider in determining whether forumshopping exists or not is the vexation caused the courts and the parties-litigant by a
person who asks different courts and/or administrative agencies to rule on the same
or related causes and/or grant the same or substantially the same reliefs, in the
process creating the possibility of conflicting decisions being rendered by the
different fora upon the same issues.
In sum, two different orders were questioned, two distinct causes of action and
issues were raised, and two objectives were sought; thus, forum shopping cannot be
said to exist in the case at bar.
Likewise, we do not find that there is forum-shopping in the case at bar. The first
petition, docketed as CA-G.R. SP. No. 49084, which is now the subject of the instant
petition, involved the propriety of the affirmative defenses relied upon by
petitioners in Civil Case No. CEB-21854. The second petition, docketed as CA-G.R.
SP No. 54985, raised the issue of whether or not public respondent Judge Dicdican

was guilty of manifest partiality warranting his inhibition from further hearing Civil
Case No. CEB-21854.
More importantly, the two petitions did not seek the same relief from the Court of
Appeals. In CA-G.R. SP. No. 49084, petitioners prayed, among others, for the
annulment of the orders of the trial court denying their motion for preliminary
hearing on the affirmative defenses in Civil Case No. CEB-21854. No such reliefs are
involved in the second petition, where petitioners merely prayed for the issuance of
an order enjoining public respondent Judge Dicdican from further trying the case
and to assign a new judge in his stead.
True, the trial court has the discretion to conduct a preliminary hearing on
affirmative defenses. In the case at bar, however, the trial court committed a grave
abuse of its discretion when it denied the motion for preliminary hearing. As we
have discussed above, some of these defenses, which petitioners invoked as
grounds for the dismissal of the action, appeared to be indubitable, contrary to the
pronouncement of the trial court. Indeed, the abuse of discretion it committed
amounted to an evasion of positive duty or virtual refusal to perform a duty
enjoined by law, or to act at all in contemplation of law,[19] which would have
warranted the extraordinary writ of certiorari. Hence, the Court of Appeals erred
when it dismissed the petition for certiorari filed by petitioners.
WHEREFORE, in view of the foregoing, the instant petition is GRANTED. This case is
REMANDED to the Regional Trial Court of Cebu City, Branch 11, which is directed to
forthwith conduct the preliminary hearing on the affirmative defenses in Civil Case
No. CEB-21854. SO ORDERED.
LOLITA B. COPIOSO, petitioner, vs. LAURO, DOLORES, RAFAEL, ESTEBAN,
and CORAZON, all surnamed COPIOSO, and COURT OF APPEALS,
respondents.
On 4 July 2000 respondents Lauro, Dolores, Rafael, Esteban and Corazon, all
surnamed Copioso, filed a complaint for reconveyance of two (2) parcels of coconut
land situated in Banilad, Nagcarlan, Laguna, against Lolita B. Copioso, spouses
Bernabe and Imelda Doria, and the estate of deceased Antonio Copioso, as well as
vendees Dolores Reduca, Mercedes Reduca, Rosario Pascua, Elvira Bombasi and
Federico Casabar.
Respondents alleged that they together with their deceased brother Antonio
Copioso were co-owners of the subject property having inherited the same from
their parents, and that through fraud and machination Antonio had the property
transferred to his name and that of spouses Bernabe and Imelda Doria who
subsequently sold the same to third parties. They thus prayed for the reconveyance
of the property by virtue of their being co-owners thereof.
When respondents claimed in a manifestation with motion for bill of particulars that
the assessed value of the subject property was P3,770.00, petitioner Lolita Copioso
and spouses Bernabe and Imelda Doria separately moved to dismiss the complaint
on the ground that it was the Municipal Trial Court (MTC) and not the Regional Trial

Court (RTC) that had jurisdiction over the case considering that the assessed value
of the property was lower than P20,000.00.
The trial court in its twin orders of 5 and 12 September 2000 denied the motions to
dismiss holding that since the subject matter of the action was beyond pecuniary
estimation it was properly within its jurisdiction.[3] Lolita Copioso's Motion for
Reconsideration was denied,[4] hence, she filed with the Court of Appeals a petition
for certiorari and prohibition praying for the annulment of the twin orders of the trial
court which denied the motions to dismiss and at the same time maintaining her
position that the RTC had no jurisdiction over the case because the assessed value
of the property was below P20,000.00.
The appellate court denied the petition thus affirming the jurisdiction of the RTC
over the complaint for reconveyance. Motion for reconsideration thereon was
similarly denied by the appellate court, hence this petition.
Petitioner Lolita Copioso anchors her argument on Sec. 33, par. (3), of B.P. Blg. 129
otherwise known as The Judiciary Reorganization Act of 1980 as amended by Sec. 3
of RA 7691 which provides Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts shall exercise: x x x x (3) Exclusive original
jurisdiction in all civil actions which involve title to, or possession of, real property,
or any interest therein where the assessed value of the property or interest therein
does not exceed twenty thousand pesos (P20,000.00) or, in civil actions in Metro
Manila, where such assessed value does not exceed fifty thousand pesos
(P50,000.00) exclusive of interest, damages of whatever kind, attorneys fees,
litigation expenses and costs: Provided, that in cases of land not declared for
taxation purposes, the value of such property shall be determined by the assessed
value of the adjacent lots.
Petitioner argues that the complaint for reconveyance cannot be resolved unless the
trial court delves upon the issues of "title, possession and interests" of each of the
stakeholders over the subject parcels of land. She asserts that the allegations and
relief prayed for in the complaint coupled with the assessed value of the disputed
property place the action within the exclusive jurisdiction of the MTC and not the
RTC.
In turn, private respondents anchor their position on Sec. 19, par. (1), of the same
law which provides Sec. 19. Jurisdiction in civil cases. The Regional Trial Courts shall exercise exclusive
original jurisdiction: In all civil actions in which the subject of the litigation is
incapable of pecuniary estimation: x x x
Simply, they claim that the instant complaint for reconveyance is a case of joinder
of causes of action which include the annulment of sale and other instruments of
false conveyance incapable of pecuniary estimation thus within the legal
competence of the RTC.

The law on jurisdiction of trial courts over civil cases is neither ambiguous nor
confusing. Sec. 33, par. (3), in relation to Sec. 19 par. (2) of B.P. 129 as amended by
RA 7691, deals with civil cases capable of pecuniary estimation. On the other hand,
Sec. 33, par. (3), in relation to Sec. 19, par. (1), applies to cases incapable of
pecuniary estimation.
Sec. 33, par. (3), in relation to Sec. 19, par. (2), of B.P. 129, as amended by RA 7691,
provides that in civil cases involving sum of money or title to, possession of, or any
interest in real property, jurisdiction is determined on the basis of the amount of the
claim or the assessed value of the real property involved, such that where the sum
of money or the assessed value of the real property does not exceed P20,000.00, or
P50,000.00 in Metro Manila, jurisdiction lies with the MTC; and where it exceeds that
amount, jurisdiction is vested with the RTC.
Indeed, the present dispute pertains to the title, possession and interest of each of
the contending parties over the contested property the assessed value of which falls
within the jurisdictional range of the MTC. Nonetheless, the nature of the action
filed, the allegations set forth, and the reliefs prayed for, forestall its cognizance by
the MTC.
As can be readily gleaned from the records, the complaint was for "Reconveyance
and/or Recovery of Common Properties Illegally Disposed, with Annulment of Sales
and other Instruments of False Conveyance, with Damages, and Restraining Order."
Private respondents alleged therein that they were co-owners of the property along
with their deceased brother Antonio Copioso; and that in or about 1998, with fraud
and machination, Antonio together with the spouses Bernabe and Imelda Doria
made it appear in a public document entitled Pagpapatunay ng Kusang Loob na
Pagbabahagi that they were the co-owners of the subject property and had divided
the same equally between themselves to the exclusion of private respondents.
Subsequently, they sold the subdivided lots to the other defendants namely Dolores
Reduca, Mercedes Reduca, Rosario Pascua, Elvira Bombasi and Federico Casabar.
Private respondents also sought payment of moral damages, exemplary damages,
litigation expenses, attorney's fees plus appearance fees amounting to more or less
P286,500.00. They likewise applied for a TRO pending the issuance of a writ of
preliminary injunction restraining the defendants from further alienating the
common properties. They also prayed of the trial court to order the cancellation,
annulment and/or rescission of the four (4) deeds of absolute sale made in favor of
the buyers, and to order Lolita B. Copioso and the estate of Antonio Copioso to
return the price that the buyer-defendants had paid to them for the land sold.
Clearly, this is a case of joinder of causes of action which comprehends more than
the issue of title to, possession of, or any interest in the real property under
contention but includes an action to annul contracts, reconveyance or specific
performance, and a claim for damages, which are incapable of pecuniary estimation
and thus properly within the jurisdiction of the RTC.
As correctly opined by the appellate court, if the only issue involved herein is naked
possession or bare ownership, then petitioner Lolita Copioso would not be amiss in

her assertion that the instant complaint for reconveyance, considering the assessed
value of the disputed property, falls within the exclusive jurisdiction of the MTC. But
as herein before stated, the issue of title, ownership and/or possession thereof is
intertwined with the issue of annulment of sale and reconveyance hence within the
ambit of the jurisdiction of the RTC. The assessed value of the parcels of land thus
becomes merely an incidental matter to be dealt with by the court, when necessary,
in the resolution of the case but is not determinative of its jurisdiction.
WHEREFORE, the petition is DENIED. The 16 May 2001 Decision of the Court of
Appeals in CA-G.R. SP No. 62090 as well as its 30 July 2001 Resolution denying
reconsideration thereof is AFFIRMED. Costs against petitioner. SO ORDERED.
CAUSE OF ACTION
G.R. No. 173987
February 25, 2012
PADILLA MERCADO, ZULUETA MERCADO, BONIFACIA MERCADO, DAMIAN
MERCADO and EMMANUEL MERCADO BASCUG, Petitioners, vs. SPOUSES
AGUEDO ESPINA and LOURDES ESPINA, Respondents.
On May 8, 2000, herein petitioners filed with the Regional Trial Court (RTC) of
Maasin, Southern Leyte, a Complaint for Recovery of Property and Declaration of
Nullity of Deed of Sale, Certificate of Title and Damages. The case was docketed as
Civil Case No. R-3147.
On June 29, 2000, respondents filed a Motion to Dismiss on grounds that the RTC
has no jurisdiction over the case due to the failure of the complainant to state the
assessed value of the property, that petitioners' cause of action is barred by
prescription, laches and indefeasibility of title, and that the complaint does not state
sufficient cause of action against respondents who are buyers in good faith.3
Failure to state a cause of action refers to the insufficiency of the pleading, and is a
ground for dismissal under Rule 16 of the Rules of Court.17
A complaint states a cause of action if it avers the existence of the three essential
elements of a cause of action, namely:
(a) The legal right of the plaintiff;
(b) The correlative obligation of the defendant; and
(c) The act or omission of the defendant in violation of said legal right.18
If the allegations in the complaint do not aver the concurrence of these elements,
the complaint becomes vulnerable to a motion to dismiss on the ground of failure to
state a cause of action.19 A perusal of the Amended Complaint in the present case
would show that there is, indeed, no allegation of any act or omission on the part of
respondents which supposedly violated the legal rights of petitioners. Thus, the CA
is correct in dismissing the complaint on the ground of failure to state a cause of
action.

Apropos to the foregoing, it bears to note at this stage that the Court likewise
agrees with the ruling of the CA that respondents are presumed purchasers in good
faith. In holding thus, the CA relied on the settled principle that one who deals with
property registered under the Torrens System need not go beyond the same, but
only has to rely on the title. In the instant case, there is no dispute that the subject
property was already covered by a Torrens title when respondents bought the same.
There was no allegation in the Amended Complaint that respondents were not
buyers in good faith. More particularly, there was nothing in the said complaint to
indicate that respondents were aware of or were participants in the alleged fraud
supposedly committed against petitioners' predecessor-in-interest, or that they
have notice of any defect in the title of the seller. As the CA correctly noted, from
the time that petitioners' predecessor-in-interest was supposedly deprived of
ownership of the subject Jot through an alleged fraudulent sale, the same had
already been sold thrice. Moreover, since the subject property was already covered
by a Torrens title at the time that respondents bought the same, the law does not
require them to go beyond what appears on the face of the title. The lot has, thus,
passed to respondents, who are presumed innocent purchasers for value, in the
absence of any allegation to the contrary.
Paragraph 3, Section 53 of Presidential Decree No. 1529 provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and
equitable remedies against the parties to such fraud without prejudice, however, to
the rights of any i1moccnt holder for value of a certificate of title. x x x
Petitioners' cause of action should, therefore, be directed not against respondents,
who are innocent holders for value, but against those whom petitioners alleged to
have defrauded them.
Based on the above discussions, the Court no longer finds any need to resolve the
other issues raised in the instant petition.
WHEREFORE, the petition for review on certiorari is DENIED. The April 27, 2005
Decision and July 12, 2006 Resolution of the Court of Appeals in CA-G.R. SP No.
84537 are AFFIRMED. SO ORDERED.
FAILURE TO STATE CAUSE OF ACTION
DOLORES ADORA MACASLANG, -versus - RENATO AND MELBA ZAMORA,
The Regional Trial Court (RTC) is not limited in its review of the decision of the
Municipal Trial Court (MTC) to the issues assigned by the appellant, but can decide
on the basis of the entire records of the proceedings of the trial court and such
memoranda or briefs as may be submitted by the parties or required by the RTC.
On March 10, 1999, the respondents filed a complaint for unlawful detainer in the
MTCC, alleging that the [petitioner] sold to [respondents] a residential land located
in Sabang, DanaoCity and that the [petitioner] requested to be allowed to live in the
house with a promise to vacate as soon as she would be able to find a new

residence. They further alleged that despite their demand after a year, the
petitioner failed or refused to vacate the premises.
Despite the due service of the summons and copy of the complaint, the petitioner
did not file her answer. The MTCC declared her in default upon the respondents
motion to declare her in default, and proceeded to receive the respondents oral
testimony and documentary evidence. Thereafter, on September 13, 1999, the
MTCC rendered judgment against her.
ISSUES
1.
Whether or not the CA correctly found that the RTC committed reversible error
in ruling on issues not raised by the petitioner in her appeal;
2.
Whether or not the CA correctly found that the complaint stated a valid cause
of action;
RULING
We grant the petition for review.
A. As an appellate court, RTC may rule upon an issue not raised on appeal.
In its decision, the CA ruled that the RTC could not resolve issues that were not
assigned by the petitioner in her appeal memorandum, explaining:
Indeed(,) We are rather perplexed why the Regional Trial Court, in arriving at its
decision, discussed and ruled on issues or grounds which were never raised,
assigned, or argued on by the Defendant-appellee in her appeal to the former. A
careful reading of the Defendant-appellees appeal memorandum clearly shows that
it only raised two (2) grounds, namely (a) alleged extrinsic fraud, (b) meritorious
defenses based on nullity of the Deed of Sale Instrument. And yet the Trial Court, in
its decision, ruled on issues not raised such as lack of cause of action and no prior
demand to vacate having been made.
Only errors assigned and properly argued on the brief and those necessarily related
thereto, may be considered by the appellate court in resolving an appeal in a civil
case. Based on said clear jurisprudence, the court a quo committed grave abuse of
discretion amounting to lack of jurisdiction when it resolved Defendant-appellees
appeal based on grounds or issues not raised before it, much less assigned by
Defendant-appellee as an error.
Not only that. It is settled that an issue which was not raised during the Trial in the
court below would not be raised for the first time on appeal as to do so would be
offensive to the basic rules of fair play, justice and due process (Victorias Milling Co.,
Inc. vs. CA, 333 SCRA 663). We can therefore appreciate Plaintiffs-appellants dismay
caused by the Regional Trial Courts blatant disregard of a basic and fundamental
right to due process.[10]

The petitioner disagrees with the CA and contends that the RTC as an appellate
court could rule on the failure of the complaint to state a cause of action and the
lack of demand to vacate even if not assigned in the appeal.
We concur with the petitioners contention.
The CA might have been correct had the appeal been a first appeal from the RTC to
the CA or another proper superior court, in which instance Section 8 of Rule 51,
which applies to appeals from the RTC to the CA, imposes the express limitation of
the review to only those specified in the assignment of errors or closely related to or
dependent on an assigned error and properly argued in the appellants brief, viz:
Section 8. Questions that may be decided. No error which does not affect the
jurisdiction over the subject matter or the validity of the judgment appealed from or
the proceeding therein will be considered unless stated in the assignment of errors,
or closely related to or dependent on an assigned error and properly argued in the
brief, save as the court may pass upon plain errors and clerical errors.
But the petitioners appeal herein, being taken from the decision of the MTCC to the
RTC, was governed by a different rule, specifically Section 18 of Rule 70 of the Rules
of Court, to wit:
Section 18. xxx
The judgment or final order shall be appealable to the appropriate Regional Trial
Court which shall decide the same on the basis of the entire record of the
proceedings had in the court of origin and such memoranda and/or briefs as may be
submitted by the parties or required by the Regional Trial Court.
As such, the RTC, in exercising appellate jurisdiction, was not limited to the errors
assigned in the petitioners appeal memorandum, but could decide on the basis of
the entire record of the proceedings had in the trial court and such memoranda
and/or briefs as may be submitted by the parties or required by the RTC.
The difference between the procedures for deciding on review is traceable to
Section 22 of Batas Pambansa Blg. 129,[11]which provides:
Section 22. Appellate Jurisdiction. Regional Trial Courts shall exercise appellate
jurisdiction over all cases decided by Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts in their respective territorial
jurisdictions.Such cases shall be decided on the basis of the entire record of the
proceedings had in the court of origin [and] such memoranda and/or briefs as may
be submitted by the parties or required by the Regional Trial Courts. The decision of
the Regional Trial Courts in such cases shall be appealable by petition for review to
the Court of Appeals which may give it due course only when the petition shows
prima facie that the lower court has committed an error of fact or law that will
warrant a reversal or modification of the decision or judgment sought to be
reviewed.[12]

As its compliance with the requirement of Section 36 of Batas PambansaBlg. 129to

adopt special rules or procedures applicable to such cases in order to achieve an
expeditious and inexpensive determination thereof without regard to technical
rules, the Court promulgated the 1991 Revised Rules on Summary Procedure,
whereby it institutionalized the summary procedure for all the first level courts.
Section 21 of the 1991 Revised Rules on Summary Procedure specifically stated:
Section 21. Appeal. The judgment or final order shall be appealable to the
appropriate Regional Trial Court which shall decide the same in accordance with
Section 22 of Batas Pambansa Blg. 129. The decision of the Regional Trial Court in
civil cases governed by this Rule, including forcible entry and unlawful detainer shall
be immediately executory, without prejudice to a further appeal that may be taken
therefrom. Section 10 of Rule 70 shall be deemed repealed.
Later on, the Court promulgated the 1997 Rules of Civil Procedure, effective on July
1, 1997, and incorporated in Section 7 of Rule 40 thereof the directive to the RTC to
decide appealed cases on the basis of the entire record of the proceedings had in
the court of origin and such memoranda as are filed,viz:
Section 7. Procedure in the Regional Trial Court.
(a) Upon receipt of the complete record or the record on appeal, the clerk of court of
the Regional Trial Court shall notify the parties of such fact.
(b) Within fifteen (15) days from such notice, it shall be the duty of the appellant to
submit a memorandum which shall briefly discuss the errors imputed to the lower
court, a copy of which shall be furnished by him to the adverse party. Within fifteen
(15) days from receipt of the appellants memorandum, the appellee may file his
memorandum. Failure of the appellant to file a memorandum shall be a ground for
dismissal of the appeal.
(c) Upon the filing of the memorandum of the appellee, or the expiration of the
period to do so, the case shall be considered submitted for decision. The Regional
Trial Court shall decide the case on the basis of the entire record of the proceedings
had in the court of origin and such memoranda as are filed. (n)
As a result, the RTC presently decides all appeals from the MTC based on the entire
record of the proceedings had in the court of origin and such memoranda or briefs
as are filed in the RTC.
Yet, even without the differentiation in the procedures of deciding appeals, the
limitation of the review to only the errors assigned and properly argued in the
appeal brief or memorandum and the errors necessarily related to such assigned
error sought not to have obstructed the CA from resolving the unassigned issues by
virtue of their coming under one or several of the following recognized exceptions to
the limitation, namely:
(a) When the question affects jurisdiction over the subject matter;
(b) Matters that are evidently plain or clerical errors within contemplation of law;
(c) Matters whose consideration is necessary in arriving at a just decision and
complete resolution of the case or in serving the interests of justice or avoiding
dispensing piecemeal justice;

(d) Matters raised in the trial court and are of record having some bearing on the
issue submitted that the parties failed to raise or that the lower court ignored;
(e) Matters closely related to an error assigned; and
(f) Matters upon which the determination of a question properly assigned is
dependent.[13]
Consequently, the CA improperly disallowed the consideration and resolution of the
two errors despite their being: (a) necessary in arriving at a just decision and a
complete resolution of the case; and (b) matters of record having some bearing on
the issues submitted that the lower court ignored.
B. CA correctly delved into and determined whether or not complaint stated a cause
of action
The RTC opined that the complaint failed to state a cause of action because the
evidence showed that there was no demand to vacate made upon the petitioner.
The CA disagreed, observing in its appealed decision:
But what is worse is that a careful reading of Plaintiffs-appellants Complaint would
readily reveal that they have sufficiently established (sic) a cause of action against
Defendant-appellee. It is undisputed that as alleged in the complaint and testified to
by Plaintiffs-appellants, a demand to vacate was made before the action for
unlawful detainer was instituted.
A complaint for unlawful detainer is sufficient if it alleges that the withholding of
possession or the refusal is unlawful without necessarily employing the terminology
of the law (Jimenez vs. Patricia, Inc., 340 SCRA 525). In the case at bench, par. 4 of
the Complaint alleges, thus:
4. After a period of one (1) year living in the aforementioned house, Plaintiff
demanded upon defendant to vacate but she failed and refused;
From the foregoing allegation, it cannot be disputed that a demand to vacate has
not only been made but that the same was alleged in the complaint. How the
Regional Trial Court came to the questionable conclusion that Plaintiffs-appellants
had no cause of action is beyond Us.
We concur with the CA.
A complaint sufficiently alleges a cause of action for unlawful detainer if it states the
following:
(a)Initially, the possession of the property by the defendant was by contract with or
by tolerance of the plaintiff;
(b)Eventually, such possession became illegal upon notice by the plaintiff to the
defendant about the termination of the latters right of possession;
(c)Thereafter, the defendant remained in possession of the property and deprived
the plaintiff of its enjoyment; and

(d)Within one year from the making of the last demand to vacate the property on
the defendant, the plaintiff instituted the complaint for ejectment.[15]
In resolving whether the complaint states a cause of action or not, only the facts
alleged in the complaint are considered. The test is whether the court can render a
valid judgment on the complaint based on the facts alleged and the prayer asked
for. Only ultimate facts, not legal conclusions or evidentiary facts, are considered for
purposes of applying the test.
Based on its allegations, the complaint sufficiently stated a cause of action for
unlawful detainer. Firstly, it averred that the petitioner possessed the property by
the mere tolerance of the respondents. Secondly, the respondents demanded that
the petitioner vacate the property, thereby rendering her possession illegal. Thirdly,
she remained in possession of the property despite the demand to vacate. And,
fourthly, the respondents instituted the complaint on March 10, 1999, which was
well within a year after the demand to vacate was made around September of 1998
or later.
Yet, even as we rule that the respondents complaint stated a cause of action, we
must find and hold that both the RTC and the CA erroneously appreciated the real
issue to be about the complaints failure to state a cause of action. It certainly was
not so, but the respondents lack of cause of action. Their erroneous appreciation
expectedly prevented the correct resolution of the action.
Failure to state a cause of action and lack of cause of action are really different from
each other. On the one hand, failure to state a cause of action refers to the
insufficiency of the pleading, and is a ground for dismissal under Rule 16 of the
Rules of Court. On the other hand, lack of cause action refers to a situation where
the evidence does not prove the cause of action alleged in the pleading. Justice
Regalado, a recognized commentator on remedial law, has explained the distinction:
[19]
xxx What is contemplated, therefore, is a failure to state a cause of action which is
provided in Sec. 1(g) of Rule 16. This is a matter of insufficiency of the pleading.
Sec. 5 of Rule 10, which was also included as the last mode for raising the issue to
the court, refers to the situation where the evidence does not prove a cause of
action. This is, therefore, a matter of insufficiency of evidence. Failure to state a
cause of action is different from failure to prove a cause of action. The remedy in
the first is to move for dismissal of the pleading, while the remedy in the second is
to demur to the evidence, hence reference to Sec. 5 of Rule 10 has been eliminated
in this section. The procedure would consequently be to require the pleading to
state a cause of action, by timely objection to its deficiency; or, at the trial, to file a
demurrer to evidence, if such motion is warranted.
A complaint states a cause of action if it avers the existence of the three essential
elements of a cause of action, namely:
(a) The legal right of the plaintiff;
(b) The correlative obligation of the defendant; and
(c) The act or omission of the defendant in violation of said legal right.

If the allegations of the complaint do not aver the concurrence of these elements,
the complaint becomes vulnerable to a motion to dismiss on the ground of failure to
state a cause of action. Evidently, it is not the lack or absence of a cause of action
that is a ground for the dismissal of the complaint but the fact that the complaint
states no cause of action. Failure to state a cause of action may be raised at the
earliest stages of an action through a motion to dismiss, but lack of cause of action
may be raised at any time after the questions of fact have been resolved on the
basis of the stipulations, admissions, or evidence presented.[20]
Having found that neither Exhibit C nor Exhibit E was a proper demand to vacate,
[21] considering that Exhibit C (the respondents letter dated February 11,
1998)demanded the payment of P1,101,089.90, and Exhibit E (their letter dated
January 21, 1999) demanded the payment of P1,600,000.00, the RTC concluded that
the demand alleged in the complaint did not constitute a demand to pay rent and to
vacate the premises necessary in an action for unlawful detainer. It was this
conclusion that caused the RTC to confuse the defect as failure of the complaint to
state a cause of action for unlawful detainer.
The RTC erred even in that regard.
To begin with, it was undeniable that Exhibit D (the respondents letter dated April
28, 1998) constituted the demand to vacate that validly supported their action for
unlawful detainer, because of its unmistakable tenor as a demand to vacate, which
the following portion indicates:[22]
This is to give notice that since the mortgage to your property has long expired and
that since the property is already in my name, I will be taking over the occupancy of
said property two (2) months from date of this letter.
Exhibit D, despite not explicitly using the word vacate, relayed to the petitioner the
respondents desire to take over the possession of the property by giving her no
alternative except to vacate. The word vacate, according to Golden Gate Realty
Corporation v. Intermediate Appellate Court,[23]is not a talismanic word that must
be employed in all notices to vacate. The tenants in Golden Gate Realty Corporation
had defaulted in the payment of rents, leading their lessor to notify them to pay
with a warning that a case of ejectment would be filed against them should they not
do so. The Court held that the lessor had thereby given strong notice that you either
pay your unpaid rentals or I will file a court case to have you thrown out of my
property, for there was no other interpretation of the import of the notice due to the
alternatives being clear cut, in that the tenants must pay rentals that had been
fixed and had become payable in the past, failing in which they must move out.[24]
Also, the demand not being to pay rent and to vacate did not render the cause of
action deficient. Based on the complaint, the petitioners possession was allegedly
based on the respondents tolerance, not on any contract between them. Hence, the
demand to vacate sufficed.
DERIVATIVE PARTIES

SANTIAGO CUA, JR., SOLOMON S. CUA and EXEQUIEL D. ROBLES, in their

capacity as Directors of PHILIPPINE RACING CLUB, INC., - versus - MIGUEL
OCAMPO TAN, JEMIE U. TAN and ATTY. BRIGIDO J. DULAY,
PRCI is a corporation organized and established under Philippine laws to: (1) carry
on the business of a race course in all its branches and, in particular, to conduct
horse races or races of any kind, to accept bets on the results of the races, and to
construct grand or other stands, booths, stablings, paddocks, clubhouses,
refreshment rooms and other erections, buildings, and conveniences, and to
conduct, hold and promote race meetings and other shows and exhibitions; and (2)
promote the breeding of better horses in the Philippines, lend all possible aid in the
development of sports, and uphold the principles of good sportsmanship and fair
play.[7] To pursue its avowed purposes, PRCI holds a franchise granted under
Republic Act No. 6632, as amended by Republic Act No. 7953, to operate a horse
racetrack and manage betting stations. Under its franchise, PRCI may operate only
one racetrack.
In 1999, the Articles of Incorporation of PRCI was amended to include a secondary
purpose, viz:
To acquire real properties and/or develop real properties into mix-use realty projects
including but not limited to leisure, recreational and memorial parks and to own,
operate, manage and/or sell these real estate projects.[8]
PRCI is publicly listed with the Philippine Stock Exchange (PSE). In 2006, PRCI had an
authorized capital stock of P1,000,000,000.00 divided into 1,000,000,000 shares,
with a par value of P1.00 each; of which a total of P569,857,749.00, representing
569,857,749 shares, had been subscribed and paid up.[9]
PRCI owns only two real properties, each covered by several transfer certificates of
title. One is known as the Sta. Ana Racetrack, located along A. P. Reyes Avenue,
Makati City (Makati property), measuring around 21.2 hectares; and the other is
located in the towns of Naic and Tanza in the province of Cavite (Cavite property).
Following the trend in the development of properties in the same area, PRCI wished
to convert its Makati property from a racetrack to urban residential and commercial
use. Given the location and size of its Makati property, PRCI believed that said
property was severely under-utilized. Hence, PRCI management decided to transfer
its racetrack from Makati to Cavite. PRCI began developing its Cavite property as a
racetrack, scheduled to be completed by April 2008.
Now as to its Makati property, PRCI management decided that it was best to spin off
the management and development of the same to a wholly owned subsidiary, so
that PRCI could continue to focus its efforts on pursuing its core business
competence of horse racing. Instead of organizing and establishing a new
corporation for the said purpose, PRCI management opted to acquire another
domestic corporation, JTH Davies Holdings, Inc. (JTH).[11]
JTH was then owned by Jardine Matheson Europe B.V. (JME).[12] It had an authorized
capital stock of P25,000,000.00, divided into 50,000,000 common shares with a par

value of P0.50 each. JTH was publicly listed with the PSE. Its tangible assets
substantially consisted of cash. To determine the value of JTH, PRCI engaged the
services of the accounting firm Sycip Gorres Velayo & Co. (SGV) to conduct a due
diligence study.[13]
Using the results of the SGV study, PRCI management determined that PRCI could
initially acquire 41,928,290 shares, or 95.55% of the outstanding capital stock of
JTH, for the price of P10.71 per share, or for a total of P449,250,000.00; in this case,
PRCI would be paying a premium of P42,410,450.00 for the said JTH shares.
The PRCI Board of Directors held a meeting on 26 September 2006. Among the
directors present were petitioners Santiago Sr., Santiago Jr., and Solomon, as well as
respondent Dulay. After discussing and deliberating on the matter of the acquisition
of JTH by PRCI, all the directors present, except respondent Dulay, voted
affirmatively to pass and approve the resolutions.
The Complaint was based on three causes of action: (1) the approval by the
majority directors of PRCI of the Board Resolutions dated 26 September 2006 and
11 May 2007 -- with undue haste and deliberate speed, despite the absence of any
disclosure and information -- was not only anomalous and fraudulent, but also
extremely prejudicial and inimical to interest of PRCI, committed in violation of their
fiduciary duty as directors of the said corporation; (2) respondent Solomon, as PRCI
President, with the acquiescence of the majority directors of PRCI, maliciously
refused and resisted the request of respondents Miguel, et al., for complete and
adequate information relative to the disputed Board Resolutions, brazenly and
unlawfully violating the rights of the minority stockholders to information and to
inspect corporate books and records; and (3) without being officially and formally
nominated, the majority directors of PRCI illegally and unlawfully constituted
themselves as members of the Board of Directors and/or Executive Officers of JTH,
rendering all the actions they have taken as such null and void ab initio.
Respondents Miguel, et al., call attention to two procedural infirmities of the Petition
for Certiorari of petitioner Santiago Sr. in G.R. No. 180028: (1) the failure to inform
the Court of the pendency of the Petition in G.R. No. 181455-56, thus, violating the
rule against forum-shopping; and (2) its being the wrong mode of appeal.
The Verification and Certification of Non-Forum Shopping attached to the Petition for
Certiorari of petitioner Santiago Sr. in G.R. No. 180028 was actually signed by his
attorney-in-fact, Solomon,[52] who is also a petitioner in G.R. No. 181455-56. It
contains the following paragraph:
4. In compliance with the 1997 Rules of Civil Procedure, I hereby certify that the
petitioner, by himself personally and/or acting through his attorneys-in fact, has not
heretofore commenced any other action or proceeding involving the same issues in
the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other
tribunal or agency, and that to the best of my knowledge, no such action or
proceeding is pending in the Supreme Court, the Court of Appeals, or different
Divisions thereof, or any other tribunal or agency. If I should learn that a similar
action or proceeding has been filed or is pending before the Supreme Court, Court
of Appeals, or different Divisions thereof, or any other tribunal or agency, I

undertake to promptly inform this Honorable Court, the aforesaid courts and other
tribunal or agency within five (5) days therefrom.[53]
Respondents Miguel, et al., maintain that the failure of Solomon, as petitioner
Santiago Sr.s attorney-in-fact, to inform the Court as regards the pendency of the
Petition for Review in G.R. No. 181455-56, of which Solomon is one of the
petitioners, is in violation of the rule against forum-shopping and warrants the
summary dismissal of the Petition in G.R. No. 182008.
Forum shopping is the institution of two or more actions or proceedings grounded
on the same cause on the supposition that one or the other court would make a
favorable disposition. It is an act of malpractice and is prohibited and condemned as
trifling with courts and abusing their processes. In determining whether or not there
is forum shopping, what is important is the vexation caused the courts and partieslitigants by a party who asks different courts and/or administrative bodies to rule on
the same or related causes and/or grant the same or substantially the same reliefs
and in the process creates the possibility of conflicting decisions being rendered by
the different bodies upon the same issues.
Forum shopping is present when, in two or more cases pending, there is identity of
(1) parties (2) rights or causes of action and reliefs prayed for, and (3) the two
preceding particulars, such that any judgment rendered in the other action will,
regardless of which party is successful, amount to res judicata in the action under
consideration.[55]
It is evident that Santiago Sr., the petitioner in G.R. No. 182008, is not a party to
G.R. No. 181455-56. Even though Solomon is admittedly a petitioner in G.R. No.
181455-56, he is only acting in G.R. No. 182008 as the attorney-in-fact of Santiago
Sr., the actual petitioner in the latter case. Thus, the very first element for forum
shopping, identity of parties, is lacking.
Respondents Miguel, et al., cannot insist on identity of interests between petitioner
Santiago Sr. in G.R. No. 182008 and petitioners Santiago Jr., et al., in G.R. No.
181455-56, when the Complaint itself of respondents Miguel, et al., before the RTC,
docketed as Civil Case No. 07-610, impleads the petitioners Santiago Sr. and
Santiago Jr., et al., as defendants a quo in their individual capacities as PRCI
directors, and not collectively as the PRCI Board of Directors. Each individual PRCI
director, therefore, is not precluded from hiring his own counsel, presenting his own
arguments and defenses, and resorting to his own procedural remedies, apart and
independent from the other PRCI directors. In addition, the consolidation of G.R. No.
181455-56 and G.R. No. 182008 has already eliminated the danger of conflicting
decisions being issued in said cases.
Assuming arguendo that Solomon did have the legal obligation to inform the Court
in G.R. No. 182008 of the pendency of G.R. No. 181455-56, his failure to do so does
not necessarily result in the dismissal of the former. Although the submission of a
certificate against forum shopping is deemed obligatory, it is not jurisdictional.[56]
Hence, in this case in which such a certification was in fact submitted only, it was
defective -- the Court may still refuse to dismiss and may, instead, give due course
to the Petition in light of attendant exceptional circumstances.[57]

Santiago Sr. committed another procedural faux pas by filing before this Court a
Petition for Certiorari under Rule 65 of the Rules of Court to assail the Decision
dated 6 September 2007 and Resolution dated 22 January 2008 of the Court of
Appeals in CA-G.R. SP No. 99769 and No. 99780.
The proper remedy of a party aggrieved by a decision of the Court of Appeals is a
petition for review under Rule 45, which is not similar to a petition for certiorari
under Rule 65 of the Rules of Court. As provided in Rule 45 of the Rules of Court,
decisions, final orders or resolutions of the Court of Appeals in any case, i.e.,
regardless of the nature of the action or proceedings involved, may be appealed to
this Court by filing a petition for review, which would be but a continuation of the
appellate process over the original case. On the other hand, a special civil action
under Rule 65 is an independent action based on the specific grounds therein
provided and, as a general rule, cannot be availed of as a substitute for the lost
remedy of an ordinary appeal, including that under Rule 45.[58]
Accordingly, when a party adopts an improper remedy, as in this case, his Petition
may be dismissed outright. However, in the interest of substantial justice, the strict
application of procedural technicalities should not hinder the speedy disposition of
this case on the merits. Thus, while the instant Petition is one for certiorari under
Rule 65 of the Rules of Court, the assigned errors are more properly addressed in a
petition for review under Rule 45.[59]
The merits of the Petitions in both G.R. No. 181455-56 and No. 182008 compel this
Court to give more weight to substantive justice, instead of technical rules. Indeed,
where, as here, there is a strong showing that a grave miscarriage of justice would
result from the strict application of the Rules, the Court will not hesitate to relax the
same in the interest of substantial justice. It bears stressing that the rules of
procedure are merely tools designed to facilitate the attainment of justice. They
were conceived and promulgated to effectively aid the court in the dispensation of
justice. Courts are not slaves to or robots of technical rules, shorn of judicial
discretion. In rendering justice, courts have always been, as they ought to be,
conscientiously guided by the norm that, on the balance, technicalities take a
backseat against substantive rights, and not the other way around. Thus, if the
application of the Rules would tend to frustrate rather than promote justice, it is
always within the power of the Court to suspend the Rules, or except a particular
case from its operation.[60]
Derivative suits, in general
A corporation, such as PRCI, is but an association of individuals, allowed to transact
under an assumed corporate name, and with a distinct legal personality. In
organizing itself as a collective body, it waives no constitutional immunities and
perquisites appropriate to such body. As to its corporate and management
decisions, therefore, the State will generally not interfere with the same. Questions
of policy and of management are left to the honest decision of the officers and
directors of a corporation, and the courts are without authority to substitute their

judgment for the judgment of the board of directors. The board is the business
manager of the corporation, and so long as it acts in good faith, its orders are not
reviewable by the courts.[61]
The governing body of a corporation is its board of directors. Section 23 of the
Corporation Code provides that [u]nless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all
business conducted and all property of such corporations controlled and held by the
board of directors or trustees x x x. The concentration in the board of the powers of
control of corporate business and of appointment of corporate officers and
managers is necessary for efficiency in any large organization. Stockholders are too
numerous, scattered and unfamiliar with the business of a corporation to conduct its
business directly. And so the plan of corporate organization is for the stockholders to
choose the directors who shall control and supervise the conduct of corporate
business.[62]
The following discourse on the corporate powers of the board of directors under
Section 23 of the Corporation Code establishes the extent thereof:
Under the above provision, it is quite clear that, except in the instances where the
Code expressly grants a specific power to the stockholders or member, the board
has the sole power and responsibility to decide whether a corporation should sue,
purchase and sell property, enter into any contract, or perform any act.
Stockholders or members resolutions dealing with matters other than the
exceptions are not legally effective nor binding on the board, and may be treated by
it as merely advisory, or may even be completely disregarded. Since the law has
vested the responsibility of managing the corporate affairs on the board, the
stockholders must abide by its decisions. If they do not agree with the policies of
the board, their remedy is to wait for the next election of the directors and choose
new ones to take their place. The theory of the law is that although stockholders are
to have all the profit, the complete management of the enterprise shall be with the
board.
The board of directors of a corporation is a creation of the stockholders. The board
of directors, or the majority thereof, controls and directs the affairs of the
corporation; but in drawing to itself the power of the corporation, it occupies a
position of trusteeship in relation to the minority of the stock. The board shall
exercise good faith, care, and diligence in the administration of the affairs of the
corporation, and protect not only the interest of the majority but also that of the
minority of the stock. Where the majority of the board of directors wastes or
dissipates the funds of the corporation or fraudulently disposes of its properties, or
performs ultra vires acts, the court, in the exercise of its equity jurisdiction, and
upon showing that intracorporate remedy is unavailing, will entertain a suit filed by
the minority members of the board of directors, for and in behalf of the corporation,
to prevent waste and dissipation and the commission of illegal acts and otherwise
redress the injuries of the minority stockholders against the wrongdoing of the
majority. The action in such a case is said to be brought derivatively in behalf of the
corporation to protect the rights of the minority stockholders thereof.[64]

It is well settled in this jurisdiction that where corporate directors are guilty of a
breach of trust not of mere error of judgment or abuse of discretion and
intracorporate remedy is futile or useless, a stockholder may institute a suit in
behalf of himself and other stockholders and for the benefit of the corporation, to
bring about a redress of the wrong inflicted directly upon the corporation and
indirectly upon the stockholders.[65]
A derivative suit must be differentiated from individual and representative or class
suits, thus:
Suits by stockholders or members of a corporation based on wrongful or fraudulent
acts of directors or other persons may be classified into individual suits, class suits,
and derivative suits. Where a stockholder or member is denied the right of
inspection, his suit would be individual because the wrong is done to him personally
and not to the other stockholders or the corporation. Where the wrong is done to a
group of stockholders, as where preferred stockholders rights are violated, a class or
representative suit will be proper for the protection of all stockholders belonging to
the same group. But where the acts complained of constitute a wrong to the
corporation itself, the cause of action belongs to the corporation and not to the
individual stockholder or member. Although in most every case of wrong to the
corporation, each stockholder is necessarily affected because the value of his
interest therein would be impaired, this fact of itself is not sufficient to give him an
individual cause of action since the corporation is a person distinct and separate
from him, and can and should itself sue the wrongdoer. Otherwise, not only would
the theory of separate entity be violated, but there would be multiplicity of suits as
well as a violation of the priority rights of creditors. Furthermore, there is the
difficulty of determining the amount of damages that should be paid to each
individual stockholder.
However, in cases of mismanagement where the wrongful acts are committed by
the directors or trustees themselves, a stockholder or member may find that he has
no redress because the former are vested by law with the right to decide whether or
not the corporation should sue, and they will never be willing to sue themselves.
The corporation would thus be helpless to seek remedy. Because of the frequent
occurrence of such a situation, the common law gradually recognized the right of a
stockholder to sue on behalf of a corporation in what eventually became known as a
derivative suit. It has been proven to be an effective remedy of the minority against
the abuses of management. Thus, an individual stockholder is permitted to institute
a derivative suit on behalf of the corporation wherein he holds stock in order to
protect or vindicate corporate rights, whenever officials of the corporation refuse to
sue or are the ones to be sued or hold the control of the corporation. In such
actions, the suing stockholder is regarded as the nominal party, with the corporation
as the party in interest.[66]
The afore-quoted exposition is relevant considering the claim of respondents Miguel,
et al., that its Complaint in Civil Case No. 07-610 is not just a derivative suit, but
also an intracorporate action arising from devices or schemes employed by the PRCI
Board of Directors amounting to fraud or misrepresentation.[67] A thorough study of
the said Complaint, however, reveals that the distinction is deceptive. The supposed
devices and schemes employed by the PRCI Board of Directors amounting to fraud

or misrepresentation are the very same bases for the derivative suit. They are the
very same acts of the PRCI Board of Directors that have supposedly caused injury to
the corporation. From the very beginning of their Complaint, respondents have
alleged that they are filing the same as shareholders, for and in behalf of the
Corporation, in order to redress the wrongs committed against the Corporation and
to protect or vindicate corporate rights, and to prevent wastage and dissipation of
corporate funds and assets and the further commission of illegal acts by the Board
of Directors. Although respondents Miguel, et al., also aver that they are seeking
redress for the injuries of the minority stockholders against the wrongdoings of the
majority, the rest of the Complaint does not bear this out, and is utterly lacking any
allegation of injury personal to them or a certain class of stockholders to which they
belong.[68]
Indeed, the Court notes American jurisprudence to the effect that a derivative suit,
on one hand, and individual and class suits, on the other, are mutually exclusive,
viz:
As the Supreme Court has explained: A shareholder's derivative suit seeks to
recover for the benefit of the corporation and its whole body of shareholders when
injury is caused to the corporation that may not otherwise be redressed because of
failure of the corporation to act. Thus, the action is derivative, i.e., in the corporate
right, if the gravamen of the complaint is injury to the corporation, or to the whole
body of its stock and property without any severance or distribution among
individual holders, or it seeks to recover assets for the corporation or to prevent the
dissipation of its assets. [Citations.] (Jones, supra, 1 Cal.3d 93, 106, 81 Cal.Rptr.
592, 460 P.2d 464.) In contrast, a direct action [is one] filed by the shareholder
individually (or on behalf of a class of shareholders to which he or she belongs) for
injury to his or her interest as a shareholder. ... [] ... [T]he two actions are mutually
exclusive: i.e., the right of action and recovery belongs to either the shareholders
(direct action) *651 or the corporation (derivative action). (Friedman, Cal. Practice
Guide: Corporations, supra, 6:598, p. 6-127.)
Thus, in Nelson v. Anderson (1999) 72 Cal.App.4th 111, 84 Cal.Rptr.2d 753, the
**289 minority shareholder alleged that the other shareholder of the corporation
negligently managed the business, resulting in its total failure. (Id. at p. 125, 84
Cal.Rptr.2d 753) The appellate court concluded that the plaintiff could not maintain
the suit as a direct action: Because the gravamen of the complaint is injury to the
whole body of its stockholders, it was for the corporation to institute and maintain a
remedial action. [Citation.] A derivative action would have been appropriate if its
responsible officials had refused or failed to act. (Id. at pp. 125-126, 84 Cal.Rptr.2d
753) The court went on to note that the damages shown at trial were the loss of
corporate profits. (Id. at p. 126, 84 Cal.Rptr.2d 753) Since [s]hareholders own
neither the property nor the earnings of the corporation, any damages that the
plaintiff alleged that resulted from such loss of corporate profits were incidental to
the injury to the corporation.[69]
Based on allegations in the Complaint of Miguel, et al., in Civil Case No. 07-610, the
Court determines that there is only a derivative suit, based on the devices and
schemes employed by the PRCI Board of Directors that amounts to
mismanagement, misrepresentation, fraud, and bad faith.

At the crux of the Complaint of respondents Miguel, et al., in Civil Case No. 07-610 is
their dissent from the passage by the majority of the PRCI Board of Directors of the
disputed resolutions, particularly: (1) the Resolution dated 26 September 2006,
authorizing the acquisition by PRCI of up to 100% of the common shares of JTH; and
(2) the Resolution dated 11 May 2007, approving the property-for-shares exchange
between PRCI and JTH.
Derivative suit (re: acquisition of JTH)
It is important for the Court to mention that the 26 September 2006 Resolution of
the PRCI Board of Directors not only authorized the acquisition by PRCI of up to
100% of the common stock of JTH, but it also specifically appointed petitioner
Santiago Sr.[70] to act as attorney-in-fact and proxy who could vote all the shares of
PRCI in JTH, as well as nominate, appoint, and vote into office directors and/or
officers during regular and special stockholders meetings of JTH. It was by this
authority that PRCI directors were able to constitute the JTH Board of Directors.
Thus, the protest of respondents Miguel, et al., against the interlocking directors of
PRCI and JTH is also rooted in the 26 September 2006 Resolution of the PRCI Board
of Directors.
After a careful study of the allegations concerning this derivative suit, the Court
rules that it is dismissible for being moot and academic.
That a court will not sit for the purpose of trying moot cases and spend its time in
deciding questions, the resolution of which cannot in any way affect the rights of
the person or persons presenting them, is well settled. Where the issues have
become moot and academic, there is no justiciable controversy, thereby rendering
the resolution of the same of no practical use or value.[71]
The Resolution dated 26 September 2006 of the PRCI Board of Directors was
approved and ratified by the stockholders, holding 74% of the outstanding capital
stock in PRCI, during the Special Stockholders Meeting held on 7 November 2006.
[72]

Respondents Miguel, et al., instituted Civil Case No. 07-610 only on 10 July 2007,
against herein petitioners Santiago Sr., Santiago Jr., Solomon, and Robles, together
with Renato de Villa, Lim Teong Leong, Lawrence Lim Swee Lin, Tham Ka Hon, and
Dato Surin Upatkoon, in their capacity as directors of PRCI and/or JTH. Clearly, the
acquisition by PRCI of JTH and the constitution of the JTH Board of Directors are no
longer just the acts of the majority of the PRCI Board of Directors, but also of the
majority of the PRCI stockholders. By ratification, even an unauthorized act of an
agent becomes the authorized act of the principal.[73] To declare the Resolution
dated 26 September 2006 of the PRCI Board of Directors null and void will serve no
practical use or value, or affect any of the rights of the parties, because the
Resolution dated 7 November 2006 of the PRCI stockholders -- approving and
ratifying said acquisition and the manner in which PRCI shall constitute the JTH
Board of Directors -- will still remain valid and binding.

In fact, if the derivative suit, insofar as it concerns the Resolution dated 26

September 2006 of the PRCI Board of Directors, is not dismissible for mootness, it is
still vulnerable to dismissal for failure to implead indispensable parties, namely, the
majority of the PRCI stockholders.
Under Rule 3, Section 7 of the Rules of Court, an indispensable party is a party-ininterest, without whom there can be no final determination of an action. The
interests of such indispensable party in the subject matter of the suit and the relief
are so bound with those of the other parties that his legal presence as a party to the
proceeding is an absolute necessity. As a rule, an indispensable partys interest in
the subject matter is such that a complete and efficient determination of the
equities and rights of the parties is not possible if he is not joined.[74]
The majority of the stockholders of PRCI are indispensable parties to Civil Case No.
07-610, for they have approved and ratified, during the Special Stockholders
Meeting on 7 November 2006, the Resolution dated 26 September 2006 of the PRCI
Board of Directors. Obviously, no final determination of the validity of the
acquisition by PRCI of JTH or of the constitution of the JTH Board of Directors can be
had without consideration of the effect of the approval and ratification thereof by
the majority stockholders.
Respondents Miguel, et al., cannot simply assert that the majority of the PRCI Board
of Directors named as defendants in Civil Case No. 07-610 are also the PRCI
majority stockholders, because respondents Miguel, et al., explicitly impleaded said
defendants in their capacity as directors of PRCI and/or JTH, not as stockholders.
Derivative suit (re: property-for-shares exchange)
The derivative suit, with respect to the Resolution dated 11 May 2007 of the PRCI
Board of Directors, is similarly dismissible for lack of cause of action.
The Court has recognized that a stockholders right to institute a derivative suit is
not based on any express provision of the Corporation Code, or even the Securities
Regulation Code, but is impliedly recognized when the said laws make corporate
directors or officers liable for damages suffered by the corporation and its
stockholders for violation of their fiduciary duties. In effect, the suit is an action for
specific performance of an obligation, owed by the corporation to the stockholders,
to assist its rights of action when the corporation has been put in default by the
wrongful refusal of the directors or management to adopt suitable measures for its
protection. The basis of a stockholders suit is always one of equity. However, it
cannot prosper without first complying with the legal requisites for its institution.
[75]
Rule 8, Section 1 of the Interim Rules of Procedure for Intra-Corporate Controversies
(IRPICC) lays down the following requirements which a stockholder must comply
with in filing a derivative suit:
Sec. 1. Derivative action. A stockholder or member may bring an action in the name
of a corporation or association, as the case may be, provided, that:

(1) He was a stockholder or member at the time the acts or transactions subject of
the action occurred and at the time the action was filed;
(2) He exerted all reasonable efforts, and alleges the same with particularity in the
complaint, to exhaust all remedies available under the articles of incorporation, bylaws, laws or rules governing the corporation or partnership to obtain the relief he
desires;
(3) No appraisal rights are available for the act or acts complained of; and
(4) The suit is not a nuisance or harassment suit. (Emphasis ours.)
In their Complaint before the RTC in Civil Case No. 07-610, respondents Miguel, et
al., made no mention at all of appraisal rights, which could or could not have been
available to them. In their Comment on the Petitions at bar, respondents Miguel, et
al., contend that there are no appraisal rights available for the acts complained of,
since (1) the PRCI directors are being charged with mismanagement,
misrepresentation, fraud, and breach of fiduciary duties, which are not subject to
appraisal rights; (2) appraisal rights will only obtain for acts of the Board of
Directors in good faith; and (3) appraisal rights may be exercised by a stockholder
who shall have voted against the proposed corporate action, and no corporate
action has yet been taken herein by PRCI stockholders, who still have not voted on
the intended property-for-shares exchange between PRCI and JTH.
The Court disagrees.
It bears to point out that every derivative suit is necessarily grounded on an alleged
violation by the board of directors of its fiduciary duties, committed by
mismanagement, misrepresentation, or fraud, with the latter two situations already
implying bad faith. If the Court upholds the position of respondents Miguel, et al.
that the existence of mismanagement, misrepresentation, fraud, and/or bad faith
renders the right of appraisal unavailable it would give rise to an absurd situation.
Inevitably, appraisal rights would be unavailable in any derivative suit. This renders
the requirement in Rule 8, Section 1(3) of the IPRICC superfluous and effectively
inoperative; and in contravention of an elementary rule of legal hermeneutics that
effect must be given to every word, clause, and sentence of the statute, and that a
statute should be so interpreted that no part thereof becomes inoperative or
superfluous.[76]
The import of establishing the availability or unavailability of appraisal rights to the
minority stockholder is further highlighted by the fact that it is one of the factors in
determining whether or not a complaint involving an intra-corporate controversy is
a nuisance and harassment suit. Section 1(b), Rule 1 of IRPICC provides:
(b) Prohibition against nuisance and harassment suits. - Nuisance and harassment
suits are prohibited. In determining whether a suit is a nuisance or harassment suit,
the court shall consider, among others, the following:
(1) The extent of the shareholding or interest of the initiating stockholder or
member;
(2) Subject matter of the suit;
(3) Legal and factual basis of the complaint;
(4) Availability of appraisal rights for the act or acts complained of; and

(5) Prejudice or damage to the corporation, partnership, or association in relation to

the relief sought.
In case of nuisance or harassment suits, the court may, motu proprio or upon
motion, forthwith dismiss the case.
The availability or unavailability of appraisal rights should be objectively based on
the subject matter of the complaint, i.e., the specific act or acts performed by the
board of directors, without regard to the subjective conclusion of the minority
stockholder instituting the derivative suit that such act constituted
mismanagement, misrepresentation, fraud, or bad faith.
Personal action for inspection of corporate books and records
Respondents Miguel, et al., allege another cause of action, other than the derivative
suit -- the violation of their right to information relative to the disputed Resolutions,
i.e., the Resolutions dated 16 September 2006 and 11 May 2007 of the PRCI Board
of Directors.
Rule 7 of the IRPICC shall apply to disputes exclusively involving the rights of
stockholders or members to inspect the books and records and/or to be furnished
with the financial statements of a corporation, under Sections 74[79] and 75[80] of
the Corporation Code.[81]
Rule 7, Section 2 of IRPICC enumerates the requirements particular to a complaint
for inspection of corporate books and records:
Sec. 2. Complaint. - In addition to the requirements in section 4, Rule 2 of these
Rules, the complaint must state the following:
(1) The case is for the enforcement of plaintiff's right of inspection of corporate
orders or records and/or to be furnished with financial statements under Sections 74
and 75 of the Corporation Code of the Philippines;
(2) A demand for inspection and copying of books and records and/or to be
furnished with financial statements made by the plaintiff upon defendant;
(3) The refusal of defendant to grant the demands of the plaintiff and the reasons
given for such refusals, if any; and
(4) The reasons why the refusal of defendant to grant the demands of the plaintiff is
unjustified and illegal, stating the law and jurisprudence in support thereof.
(Emphasis ours.)
As has already been previously established herein, the right to information, which
includes the right to inspect corporate books and records, is a right personal to each
stockholder. After a closer reading of the Complaint in Civil Case No. 07-610, the
Court observes that only respondent Dulay actually made a demand for a copy of all
the records, documents, contracts, and agreements, emails, letters,
correspondences, relative to the acquisition of JTH x x x. There is no allegation that
his co-respondents (who are his co-plaintiffs in Civil Case No. 07-610) made similar
demands for the inspection or copying of corporate books and records. Only

respondent Dulay complied then with the requirement under Rule 7, Section 2(2) of
IRPICC.

Even so, respondent Dulays Complaint should be dismissed for lack of cause of
action, for his demand for copies of pertinent documents relative to the acquisition
of JTH shares was not denied by any of the defendants named in the Complaint in
Civil Case No. 07-610, but by Atty. Jesulito A. Manalo (Manalo), the Corporate
Secretary of PRCI, in a letter dated 17 January 2006. Section 74 of the Corporation
Code, the substantive law on which respondent Dulays Complaint for inspection and
copying of corporate books and records is based, states that:
Sec. 74. Books to be kept; stock transfer agent.
xxxx
Any officer or agent of the corporation who shall refuse to allow any director,
trustees, stockholder or member of the corporation to examine and copy excerpts
from its records or minutes, in accordance with the provisions of this Code, shall be
liable to such director, trustee, stockholder or member for damages, and in addition,
shall be guilty of an offense which shall be punishable under Section 144 of this
Code: Provided, That if such refusal is pursuant to a resolution or order of the Board
of Directors or Trustees, the liability under this section for such action shall be
imposed upon the directors or trustees who voted for such refusal: x x x (Emphasis
ours.)
Based on the foregoing, it is Corporate Secretary Manalo who should be held liable
for the supposedly wrongful and unreasonable denial of respondent Dulays demand
for inspection and copying of corporate books and records; but, as previously
mentioned, Corporate Secretary Manalo is not among the defendants named in the
Complaint in Civil Case No. 07-610. There is also utter lack of any allegation in the
Complaint that Corporate Secretary Manalo denied respondent Dulays demand
pursuant to a resolution or order of the PRCI Directors, so that the latter (who are
actually named defendants in the Complaint) could also be held liable for the denial.
The very nature of Civil Case No. 07-610 as a derivative suit bars Civil Case No. 08458 and warrants the latters dismissal.
In Chua v. Court of Appeals,[83] the Court stresses that the corporation is the real
party in interest in a derivative suit, and the suing stockholder is only a nominal
party:
An individual stockholder is permitted to institute a derivative suit on behalf of the
corporation wherein he holds stocks in order to protect or vindicate corporate rights,
whenever the officials of the corporation refuse to sue, or are the ones to be sued,
or hold the control of the corporation. In such actions, the suing stockholder is
regarded as a nominal party, with the corporation as the real party in interest.
xxxx
x x x For a derivative suit to prosper, it is required that the minority stockholder
suing for and on behalf of the corporation must allege in his complaint that he is
suing on a derivative cause of action on behalf of the corporation and all other

stockholders similarly situated who may wish to join him in the suit. It is a condition
sine qua non that the corporation be impleaded as a party because not only is the
corporation an indispensable party, but it is also the present rule that it must be
served with process. The judgment must be made binding upon the corporation in
order that the corporation may get the benefit of the suit and may not bring
subsequent suit against the same defendants for the same cause of action. In other
words, the corporation must be joined as party because it is its cause of action that
is being litigated and because judgment must be a res adjudicata against it.
(Emphases ours.)
The more extensive discussion by the Court of the nature of a derivative suit in
Asset Privatization Trust v. Court of Appeals[84] is presented below:
Settled is the doctrine that in a derivative suit, the corporation is the real party in
interest while the stockholder filing suit for the corporations behalf is only a nominal
party. The corporation should be included as a party in the suit.
An individual stockholder is permitted to institute a derivative suit on behalf of the
corporation wherein he holds stock in order to protect or vindicate corporate rights,
whenever the officials of the corporation refuse to sue, or are the ones to be sued or
hold the control of the corporation. In such actions, the suing stockholder is
regarded as a nominal party, with the corporation as the real party in interest. x x x.
It is a condition sine qua non that the corporation be impleaded as a party becausex x x. Not only is the corporation an indispensable party, but it is also the present
rule that it must be served with process. The reason given is that the judgment
must be made binding upon the corporation and in order that the corporation may
get the benefit of the suit and may not bring a subsequent suit against the same
defendants for the same cause of action. In other words the corporations must be
joined as party because it is its cause of action that is being litigated and because
judgment must be a res ajudicata against it.
The reasons given for not allowing direct individual suit are:
(1) x x x the universally recognized doctrine that a stockholder in a corporation has
no title legal or equitable to the corporate property; that both of these are in the
corporation itself for the benefit of the stockholders. In other words, to allow
shareholders to sue separately would conflict with the separate corporate entity
principle;
(2) x x x that the prior rights of the creditors may be prejudiced. Thus, our Supreme
Court held in the case of Evangelista v. Santos, that the stockholders may not
directly claim those damages for themselves for that would result in the
appropriation by, and the distribution among them of part of the corporate assets
before the dissolution of the corporation and the liquidation of its debts and
liabilities, something which cannot be legally done in view of Section 16 of the
Corporation Law xxx;
(3) the filing of such suits would conflict with the duty of the management to sue for
the protection of all concerned;
(4) it would produce wasteful multiplicity of suits; and

(5) it would involve confusion in ascertaining the effect of partial recovery by an

individual on the damages recoverable by the corporation for the same act.
As established in the foregoing jurisprudence, in a derivative suit, it is the
corporation that is the indispensable party, while the suing stockholder is just a
nominal party. Under Rule 7, Section 3 of the Rules of Court, an indispensable party
is a party-in-interest, without whom no final determination can be had of an action
without that party being impleaded. Indispensable parties are those with such an
interest in the controversy that a final decree would necessarily affect their rights,
so that the court cannot proceed without their presence. Interest, within the
meaning of this rule, should be material, directly in issue, and to be affected by the
decree, as distinguished from a mere incidental interest in the question involved. On
the other hand, a nominal or pro forma party is one who is joined as a plaintiff or
defendant, not because such party has any real interest in the subject matter or
because any relief is demanded, but merely because the technical rules of
pleadings require the presence of such party on the record.[85]
With the corporation as the real party-in-interest and the indispensable party, any
ruling in one of the derivative suits should already bind the corporation as res
judicata in the other. Allowing two different minority stockholders to institute
separate derivative suits arising from the same factual background, alleging the
same causes of action, and praying for the same reliefs, is tantamount to allowing
the corporation, the real party-in-interest, to file the same suit twice, resulting in the
violation of the rules against a multiplicity of suits and even forum-shopping. It is
also in disregard of the separate-corporate-entity principle, because it is to look
beyond the corporation and to give recognition to the different identities of the
stockholders instituting the derivative suits.
It is for these reasons that the derivative suit, Civil Case No. 08-458, although filed
by a different set of minority stockholders from those in Civil Case No. 07-610,
should still not be allowed to proceed.
Furthermore, the highly suspicious circumstances surrounding the institution of Civil
Case No. 08-458 are not lost upon the Court. To recall, on 9 April 2008, the Court
already issued in G.R. No. 182008 a TRO enjoining the execution and enforcement
of the writ of permanent injunction issued by the RTC in Civil Case No. 07-610, which
prevented the PRCI Board of Directors from presenting to the PRCI stockholders at
the Annual Stockholders Meeting, for approval and ratification, the agenda items on
the acquisition by PRCI of JTH shares and the property-for-shares exchange between
PRCI and JTH. The Complaint in Civil Case No. 08-458 was filed with the RTC on 16
June 2008, just two days before the scheduled Annual Stockholders Meeting on 18
June 2008, where the items subject of the permanent injunction were again included
in the agenda. The 72-hour TRO issued by the RTC in Civil Case No. 08-458 enjoined
the very same acts covered by the writ of permanent injunction issued by the RTC in
Civil Case No. 07-610, the execution and enforcement of which, in turn, was already
enjoined by the TRO dated 9 April 2008 of this Court. Considering that it is PRCI
which is the real party-in-interest in both Civil Cases No. 07-610 and No. 08-458,
then its acquisition in the latter of a TRO exactly similar to the writ of permanent
injunction in the former is but an obvious attempt to circumvent the TRO of this
Court enjoining the execution and enforcement of the permanent injunction.

Intervention of APRI
It is also the nature of a derivative suit that prompts the Court to deny the
intervention by APRI in Civil Case No. 07-610. Once more, the Court emphasizes
that PRCI is the real party-in-interest in Civil Case No. 07-610, not respondents
Miguel, et al., whose participation therein is deemed nominal. APRI, moreover,
merely echoes the position of respondents Miguel, et al., and, hence, renders the
participation of APRI in Civil Case No. 07-610 redundant.
G.R. No. 182819
June 22, 2011
MAXIMINA A. BULAWAN, Petitioner, vs. EMERSON B. AQUENDE,
Respondent.
On 1 March 1995, Bulawan filed a complaint for annulment of title, reconveyance
and damages against Lourdes Yap (Yap) and the Register of Deeds before the trial
court docketed as Civil Case No. 9040.6 Bulawan claimed that she is the owner of
Lot No. 1634-B of Psd-153847 covered by Transfer Certificate of Title (TCT) No.
13733 having bought the property from its owners, brothers Santos and Francisco
Yaptengco (Yaptengco brothers), who claimed to have inherited the property from
Yap Chin Cun.7 Bulawan alleged that Yap claimed ownership of the same property
and caused the issuance of TCT No. 40292 in Yaps name.
In her Answer,8 Yap clarified that she asserts ownership of Lot No. 1634-A of Psd187165, which she claimed is the controlling subdivision survey for Lot No. 1634.
Yap also mentioned that, in Civil Case No. 5064, the trial court already declared that
Psd-153847 was simulated by the Yaptengco brothers and that their claim on Lot
No. 1634-B was void.9 The trial court likewise adjudged Yap Chin Cun as the rightful
owner of Lot No. 1634-B. Yap also stated that Lot No. 1634-B was sold by Yap Chin
Cun to the Aquende family.
On 26 November 1996, the trial court ruled in favor of Bulawan. The trial courts 26
November 1996 Decision reads:
WHEREFORE, premises considered, decision is hereby rendered in favor of the
plaintiff (Bulawan) and against the defendant (Yap) declaring the plaintiff as the
lawful owner and possesor of the property in question, particularly designated as
Lot 1634-B of Plan Psd-153847. The defendant Lourdes Yap is hereby ordered to
respect the plaintiffs ownership and possession of said lot and to desist from
disturbing the plaintiff in her ownership and possession of said lot.
Subdivision Plan Psd-187165 for Lot 1634 Albay Cadastre as well as TCT No. 40292
in the name of plaintiff10 over Lot 1634-A of Plan Psd-187165 are hereby declared
null and void and the Register of Deeds of Legazpi City is hereby ordered to cancel
as well as any other certificate of title issued pursuant to said Plan Psd-187165.
Defendant Lourdes Yap is hereby ordered to pay plaintiff P10,000.00 as reasonable
attorneys fees, P5,000.00 as litigation and incidental expenses and the costs.

SO ORDERED.11
Yap appealed. On 20 July 2001, the Court of Appeals dismissed Yaps appeal.
On 7 February 2002, the trial courts 26 November 2006 Decision became final and
executory per entry of judgment dated 20 July 2001. On 19 July 2002, the trial court
issued a writ of execution.12
In a letter dated 24 July 2002,13 the Register of Deeds informed Aquende of the trial
courts writ of execution and required Aquende to produce TCT No. 40067 so that a
memorandum of the lien may be annotated on the title. On 25 July 2002, Aquende
wrote a letter to the Register of Deeds questioning the trial courts writ of execution
against his property.14 Aquende alleged that he was unaware of any litigation
involving his property having received no summons or notice thereof, nor was he
aware of any adverse claim as no notice of lis pendens was inscribed on the title.
On 2 August 2002, Aquende filed a Third Party Claim15 against the writ of execution
because it affected his property and, not being a party in Civil Case No. 9040, he
argued that he is not bound by the trial courts 26 November 1996 Decision. In a
letter dated 5 August 2002,16 the Clerk of Court said that a Third Party Claim was
not the proper remedy because the sheriff did not levy upon or seize Aquendes
property. Moreover, the property was not in the sheriffs possession and it was not
about to be sold by virtue of the writ of execution.
Aquende then filed a Notice of Appearance with Third Party Motion17 and prayed for
the partial annulment of the trial courts 26 November 1996 Decision, specifically
the portion which ordered the cancellation of Psd-187165 as well as any other
certificate of title issued pursuant to Psd-187165. Aquende also filed a
Supplemental Motion18 where he reiterated that he was not a party in Civil Case
No. 9040 and that since the action was in personam or quasi in rem, only the
parties in the case are bound by the decision.
In its 19 February 2003 Order,19 the trial court denied Aquendes motions.
According to the trial court, it had lost jurisdiction to modify its 26 November 1996
Decision when the Court of Appeals affirmed said decision.
Thereafter, Aquende filed a petition for annulment of judgment before the Court of
Appeals on the grounds of extrinsic fraud and lack of jurisdiction.20 Aquende
alleged that he was deprived of his property without due process of law. Aquende
argued that there was extrinsic fraud when Bulawan conveniently failed to implead
him despite her knowledge of the existing title in his name and, thus, prevented him
from participating in the proceedings and protecting his title. Aquende also alleged
that Bulawan was in collusion with Judge Vladimir B. Brusola who, despite
knowledge of the earlier decision in Civil Case No. 5064 on the ownership of Lot No.
1634-B and Aquendes interest over the property, ruled in favor of Bulawan.
Aquende added that he is an indispensable party and the trial court did not acquire
jurisdiction over his person because he was not impleaded as a party in the case.
Aquende also pointed out that the trial court went beyond the jurisdiction conferred
by the allegations on the complaint because Bulawan did not pray for the
cancellation of Psd-187165 and TCT No. 40067. Aquende likewise argued that a

certificate of title should not be subject to collateral attack and it cannot be altered,
modified or canceled except in direct proceedings in accordance with law.
The Court of Appeals ruled in favor of Aquende. The 26 November 2007 Decision of
the Court of Appeals reads:
WHEREFORE, the petition is GRANTED. The Decision dated November 26, 1996 in
Civil Case No. 9040 is hereby declared NULL and VOID. Transfer Certificate of Title
No. 40067 registered in the name of petitioner Emerson B. Aquende and (LRC) Psd187165 are hereby ordered REINSTATED. Entry Nos. 3823 A, B and C annotated by
the Register of Deeds of Legazpi City on TCT No. 40067 are hereby ordered
DELETED.
The parties are hereby DIRECTED to respect and abide by the Decision dated
October 31, 1990 in Civil Case No. 5064 quieting title over Lot No. 1634-B (LRC) Psd187165, now registered in the name of Emerson Aquende under TCT No. 40067.
SO ORDERED.21
On 8 January 2008, Bulawan filed a motion for reconsideration.22 In its 7 May 2008
Resolution, the Court of Appeals denied Bulawans motion.
Hence, this petition.
The Ruling of the Court of Appeals
The Court of Appeals ruled that it may still entertain the petition despite the fact
that another division of the Court of Appeals already affirmed the trial courts 26
November 1996 Decision. The other division of the Court of Appeals was not given
the opportunity to rule on the issue of Aquende being an indispensable party
because that issue was not raised during the proceedings before the trial court and
on appeal.
The Court of Appeals declared that Aquende was an indispensable party who was
adversely affected by the trial courts 26 November 1996 Decision. The Court of
Appeals said that the trial court should have impleaded Aquende under Section 11,
Rule 323 of the Rules of Court. Since jurisdiction was not properly acquired over
Aquende, the Court of Appeals declared the trial courts 26 November 1996
Decision void. According to the Court of Appeals, Aquende had no other recourse
but to seek the nullification of the trial courts 26 November 1996 Decision that
unduly deprived him of his property.
The Court of Appeals added that the trial courts 26 November 1996 Decision was
void because the trial court failed to note that the Extrajudicial Settlement of Estate
and Partition, from where the Yaptengco brothers derived their ownership over Lot
No. 1634-B of Psd-153847 allegedly as heirs of Yap Chin Cun and now being claimed
by Bulawan, had already been declared void in Civil Case No. 5064.24 The Court of
Appeals also said that a reading of Bulawans complaint showed that the trial court
had no jurisdiction to order the nullification of Psd-187165 and TCT No. 40067
because this was not one of the reliefs that Bulawan prayed for.

The Issues
I. The Former Third Division of the Court of Appeals decided contrary to existing
laws and jurisprudence when it declared the Decision, dated 26 November 1996, in
Civil Case No. 9040 null and void considering that a petition for annulment [of
judgment] under Rule 47 of the Rules of Court is an equitable remedy which is
available only under extraordinary circumstances.
II. The Former Third Division of the Court of Appeals decided contrary to law when it
considered Respondent Emerson B. Aquende as an indispensable party in Civil Case
No. 9040.
III. The Former Third Division of the Court of Appeals sanctioned a departure from
the accepted and usual course of judicial proceedings when it overturned a final and
executory decision of another Division thereof.25
The Ruling of the Court
The petition has no merit.
Petition for Annulment of Judgment is the Proper Remedy
Bulawan argues that the Court of Appeals erred in granting Aquendes petition for
annulment of judgment in the absence of extrinsic fraud and the existence of
jurisdiction on the part of the trial court. Bulawan adds that the Court of Appeals
erred because it annulled a decision which had already been considered and
affirmed by another division of the Court of Appeals. According to Bulawan, the trial
courts 26 November 1996 Decision is already final and had been fully executed.
In a petition for annulment of judgment, the judgment may be annulled on the
grounds of extrinsic fraud and lack of jurisdiction.26 Fraud is extrinsic where it
prevents a party from having a trial or from presenting his entire case to the court,
or where it operates upon matters pertaining not to the judgment itself but to the
manner in which it is procured.27 The overriding consideration when extrinsic fraud
is alleged is that the fraudulent scheme of the prevailing litigant prevented a party
from having his day in court.28 On the other hand, lack of jurisdiction refers to
either lack of jurisdiction over the person of the defending party or over the subject
matter of the claim, and in either case the judgment or final order and resolution
are void.29 Where the questioned judgment is annulled, either on the ground of
extrinsic fraud or lack of jurisdiction, the same shall be set aside and considered
void.30
In his petition for annulment of judgment, Aquende alleged that there was extrinsic
fraud because he was prevented from protecting his title when Bulawan and the
trial court failed to implead him as a party. Bulawan also maintained that the trial
court did not acquire jurisdiction over his person and, therefore, its 26 November
1996 Decision is not binding on him. In its 26 November 2007 Decision, the Court of
Appeals found merit in Aquendes petition and declared that the trial court did not

acquire jurisdiction over Aquende, who was adversely affected by its 26 November
1996 Decision. We find no error in the findings of the Court of Appeals.
Moreover, annulment of judgment is a remedy in law independent of the case where
the judgment sought to be annulled was rendered.31 Consequently, an action for
annulment of judgment may be availed of even if the judgment to be annulled had
already been fully executed or implemented.32
Therefore, the Court of Appeals did not err when it took cognizance of Aquendes
petition for annulment of judgment and overturned the trial courts 26 November
1996 Decision even if another division of the Court of Appeals had already affirmed
it and it had already been executed.
The Court also notes that when the Court of Appeals affirmed the trial courts 26
November 1996 Decision, it had not been given the occasion to rule on the issue of
Aquende being an indispensable party and, if in the affirmative, whether the trial
court properly acquired jurisdiction over his person. This question had not been
raised before the trial court and earlier proceedings before the Court of Appeals.
Aquende is a Proper Party to Sue for the Annulment of the Judgment
Bulawan argues that Aquende was not an indispensable party in Civil Case No. 9040
because the lot Aquende claims ownership of is different from the subject matter of
the case. Bulawan clarifies that she claims ownership of Lot No. 1634-B of Psd153847, while Aquende claims ownership of Lot No. 1634-B of Psd-187165. Bulawan
argues that even if Aquende will be affected by the trial courts 26 November 1996
Decision, this will not make him an indispensable party.
Contrary to Bulawans argument, it appears that Aquendes Lot No. 1634-B of Psd187165 and Bulawans Lot No. 1634-B of Psd-153847 actually refer to the same Lot
No. 1634-B originally owned by Yap Chin Cun. Both Aquende and Bulawan trace
their ownership of the property to Yap Chin Cun. Aquende maintains that he
purchased the property from Yap Chin Cun, while Bulawan claims to have purchased
the property from the Yaptengco brothers, who alleged that they inherited the
property from Yap Chin Cun. However, as the Court of Appeals declared, the title of
the Yaptengco brothers over Lot No. 1634-B of Psd-153847 had already been
cancelled and they were forever enjoined not to disturb the right of ownership and
possession of Yap Chin Cun.
Section 7, Rule 3 of the Rules of Court defines indispensable parties as parties in
interest without whom no final determination can be had of an action. An
indispensable party is one whose interest will be affected by the courts action in
the litigation.33 As such, they must be joined either as plaintiffs or as defendants. In
Arcelona v. Court of Appeals,34 we said:
The general rule with reference to the making of parties in a civil action requires, of
course, the joinder of all necessary parties where possible, and the joinder of all
indispensable parties under any and all conditions, their presence being a sine qua
non for the exercise of judicial power. It is precisely "when an indispensable party is
not before the court (that) the action should be dismissed." The absence of an

indispensable party renders all subsequent actions of the court null and void for
want of authority to act, not only as to the absent parties but even as to those
present.35lawphi1
During the proceedings before the trial court, the answers of Yap36 and the Register
of Deeds37 should have prompted the trial court to inquire further whether there
were other indispensable parties who were not impleaded. The trial court should
have taken the initiative to implead Aquende as defendant or to order Bulawan to
do so as mandated under Section 11, Rule 3 of the Rules of Court.38 The burden to
implead or to order the impleading of indispensable parties is placed on Bulawan
and on the trial court, respectively.39
However, even if Aquende were not an indispensable party, he could still file a
petition for annulment of judgment. We have consistently held that a person need
not be a party to the judgment sought to be annulled.40 What is essential is that he
can prove his allegation that the judgment was obtained by the use of fraud and
collusion and that he would be adversely affected thereby.41
We agree with the Court of Appeals that Bulawan obtained a favorable judgment
from the trial court by the use of fraud. Bulawan prevented Aquende from
presenting his case before the trial court and from protecting his title over his
property. We also agree with the Court of Appeals that the 26 November 1996
Decision adversely affected Aquende as he was deprived of his property without
due process.
Moreover, a person who was not impleaded in the complaint cannot be bound by
the decision rendered therein, for no man shall be affected by a proceeding in which
he is a stranger.42 In National Housing Authority v. Evangelista,43 we said:
In this case, it is undisputed that respondent was never made a party to Civil Case
No. Q-91-10071. It is basic that no man shall be affected by any proceeding to
which he is a stranger, and strangers to a case are not bound by judgment rendered
by the court. Yet, the assailed paragraph 3 of the trial courts decision decreed that
"(A)ny transfers, assignment, sale or mortgage of whatever nature of the parcel of
land subject of this case made by defendant Luisito Sarte or his/her agents or
assigns before or during the pendency of the instant case are hereby declared null
and void, together with any transfer certificates of title issued in connection with
the aforesaid transactions by the Register of Deeds of Quezon City who is likewise
ordered to cancel or cause the cancellation of such TCTs." Respondent is adversely
affected by such judgment, as he was the subsequent purchaser of the subject
property from Sarte, and title was already transferred to him. It will be the height of
inequity to allow respondents title to be nullified without being given the
opportunity to present any evidence in support of his ostensible ownership of the
property. Much more, it is tantamount to a violation of the constitutional guarantee
that no person shall be deprived of property without due process of law. Clearly, the
trial courts judgment is void insofar as paragraph 3 of its dispositive portion is
concerned.44 (Emphasis supplied)
Likewise, Aquende was never made a party in Civil Case No. 9040. Yet, the trial
court ordered the cancellation of Psd-187165 and any other certificate of title issued

pursuant to Psd-187165, including Aquendes TCT No. 40067. Aquende was

adversely affected by such judgment as his title was cancelled without giving him
the opportunity to present his evidence to prove his ownership of the property.
WHEREFORE, we DENY the petition. We AFFIRM the 26 November 2007 Decision
and 7 May 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 91763.
G.R. No. 182984
February 10, 2009
MARIANO NOCOM Petitioner, vs. OSCAR CAMERINO, EFREN CAMERINO,
CORNELIO MANTILE and MILDRED DEL ROSARIO, in her capacity as legal
heir and representative of NOLASCO DEL ROSARIO, Respondents.
This is a petition for review on certiorari seeking to reverse and set aside the
Decision dated February 14, 2008 of the Court of Appeals (CA) which affirmed the
Joint Order dated June 9, 2005 and Summary Judgment dated June 15, 2006 of the
Regional Trial Court (RTC) of Muntinlupa City, Branch 203 and dismissed petitioners
appeal under Rule 41 of the Rules of Court for lack of jurisdiction and its Resolution
dated May 23, 2008 which denied petitioners motion for reconsideration.
The present case is an offshoot of the prior case, G.R. No. 161029, entitled
"Springsun Management Systems Corporation v. Oscar Camerino, Efren Camerino,
Cornelio Mantile, Nolasco Del Rosario, and Domingo Enriquez," which was
promulgated on January 19, 2005 (449 SCRA 65) and became final and executory on
May 4, 2005 as recorded in the Book of Entries of Judgment.
On October 24, 2005, respondent Oscar Camerino filed a complaint against
petitioner, captioned as "Petition to Revoke Power of Attorney," docketed as Civil
Case No. 05-172, in the RTC of Muntinlupa City, Branch 203, seeking to annul the
"Irrevocable Power of Attorney" dated December 18, 2003, the turnover of the titles
to the properties in his favor, and the payment of attorneys fees and other legal
fees.
Respondent Oscar Camerinos complaint alleged that he and co-respondents were
asked by their counsel, Atty. Arturo S. Santos, to sign a document with the
representation that it was urgently needed in the legal proceedings against SMSC;
that the contents of the said document were not explained to him; that in the first
week of September 2005, he learned that TCT Nos. 15895, 15896 and 15897 were
issued in their favor by the Register of Deeds; that he discovered that the
annotation of the "Irrevocable Power of Attorney" on the said titles was pursuant to
the Order of the RTC of Muntinlupa City, Branch 256 dated August 31, 2005; that
the "Irrevocable Power of Attorney" turned out to be the same document which Atty.
Santos required him and the other respondents to sign on December 18, 2003; that
despite repeated demands, petitioner refused to surrender the owners duplicate
copies of the said titles; that petitioner had retained ownership over the subject
lots; that he had no intention of naming, appointing, or constituting anyone,
including petitioner, to sell, assign, dispose, or encumber the subject parcels of
land; and that he executed an Affidavit of Adverse Claim which was annotated on
the titles involving the subject lots.

On January 17, 2006, petitioner filed a Motion for Preliminary Hearing on his special
and/or affirmative defense that respondent Oscar Camerino had no cause of action
or legal right over the subject lots because the latter and his wife received the
proceeds of the Philtrust Bank Managers check in the sum of P500,000 which they
personally encashed on December 19, 2003 and that being coupled with interest,
the "Irrevocable Power of Attorney" cannot be revoked or cancelled at will by any of
the parties.
On June 9, 2006, the RTC of Muntinlupa City, Branch 203 admitted the Complaint-inIntervention because the movants-intervenors ([herein respondents] Efren
Camerino, Cornelio Mantile, and Mildred Del Rosario as legal heir of Nolasco Del
Rosario) "have legal interest in the subject properties in litigation and in the success
of the petitioner [herein respondent Oscar Camerino], who was precisely their coplaintiff in Civil Case No. 95-020, entitled Oscar Camerino, et al. v. Springsun
Management Systems Corporation et al., where they are the prevailing parties
against the defendant therein [SMSC], with respect to the same properties, subject
of this case, in a decision rendered by Branch 256 of this Court." The RTC, Branch
203, also granted the Motion for Summary Judgment because "a meticulous scrutiny
of the material facts admitted in the pleadings of the parties reveals that there is
really no genuine issue of fact presented therein that needs to be tried to enable
the court to arrive at a judicious resolution of a matter of law if the issues presented
by the pleadings are not genuine issues as to any material fact but are patently
unsubstantial issues that do not require a hearing on the merits." Thus,
The instant Motion to Dismiss by the respondent is therefore DENIED, PROVIDED,
the petitioner should pay the balance of the docket fees remaining unpaid, if any,
pursuant to Rule 141, Section 7 of the Rules of Court, as amended by A.M. No. 04-204-SC within the applicable prescriptive or reglementary period.
The "Motion for Intervention" timely filed by intervenors Efren Camerino, Cornelio
Mantile and Mildred Del Rosario, in her capacity as legal heir of Nolasco Del Rosario,
as opposed by the respondent, is hereby GRANTED.
xxx
Petitioners Motion for Summary Judgment is therefore GRANTED.
Consequently, respondents Motion for Preliminary Hearing on his Special and
Affirmative Defenses is deemed moot and academic. SO ORDERED.3
On June 15, 2006, the RTC of Muntinlupa City, Branch 203 rendered a Summary
Judgment annulling the "Irrevocable Power of Attorney" for being contrary to law
and public policy.
On July 3, 2006 petitioner filed an Omnibus Motion for Reconsideration seeking to
set aside the trial courts Joint Order dated June 9, 2005 and Summary Judgment
dated June 15, 2006 which was opposed by the respondents.
On July 4, 2006, respondents filed a Motion for Execution Pending Final
Decision/Appeal which was opposed by petitioner.

On August 14, 2006, the trial court issued an order denying petitioners Omnibus
Motion for Reconsideration. Within the reglementary period, petitioner filed a Notice
of Appeal and paid the corresponding appeal docket fees.
On February 14, 2008, the CA affirmed the trial courts Joint Order dated June 9,
2006 and Summary Judgment dated June 15, 2006 and dismissed the petitioners
appeal for lack of jurisdiction. The CA ruled that as the RTC rendered the assailed
Summary Judgment based on the pleadings and documents on record, without any
trial or reception of evidence, the same did not involve factual matters. The CA
found the issues raised by the petitioner in his appeal to be questions of law, to wit:
(a) whether Summary Judgment was proper under the admitted facts and
circumstances obtaining in the present case; (b) whether undue haste attended the
rendition of the Summary Judgment; (c) whether the Summary Judgment was valid
for failure of the RTC to implead an indispensable party; (d) whether the RTC erred
in allowing the intervention of respondents Efren Camerino, Cornelio Mantile, and
Mildred Del Rosario; and (e) whether the RTC erred in taking cognizance of the case
despite nonpayment of the required docket fees. The CA concluded that since the
issues involved questions of law, the proper mode of appeal should have been
through a petition for review on certiorari under Rule 45 of the Rules of Court
directly to this Court and not through an ordinary appeal under Rule 41 thereof and,
thus, petitioners appeal to the CA should be dismissed outright pursuant to this
Courts Circular No. 2-90, dated March 9, 1990, mandating the dismissal of appeals
involving pure questions of law erroneously brought to the CA.
In its Resolution of May 23, 2008, the CA denied petitioners Motion for
Reconsideration dated February 26, 2008.
Hence, this present petition.
Petitioner raises the following issues:
I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR
IN DISMISSING PETITIONERS APPEAL.
II. WHETHER OR NOT THE COURT OF APPEALS ERRED IN UPHOLDING THE SUMMARY
JUDGMENT OF THE TRIAL COURT DESPITE THE GENUINE ISSUE OF FACT RAISED IN
PETITIONERS ANSWER.
III. WHETHER OR NOT THE COURT OF APPEALS IS CORRECT IN NOT VOIDING THE
ASSAILED SUMMARY JUDGMENT FOR FAILURE OF RESPONDENTS TO IMPLEAD AN
INDISPENSABLE PARTY.
IV. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT DISMISSING CIVIL
CASE NO. 05-172 FOR NON-PAYMENT OF THE CORRECT DOCKET FEES.
Petitioner contends that the CA erred in dismissing his appeal as the case involves
questions of fact; that summary judgment was not proper as there were genuine
issues of fact raised in his Answer; that respondents failed to implead their lawyer,
Atty. Arturo S. Santos, as an indispensable party-defendant, who, according to them,
allegedly connived with him in making them sign the "Irrevocable Power of
Attorney" in his favor; and that since the case partakes of the nature of an action to
recover ownership and titles to the properties, respondents complaint should be
dismissed for failure to pay the correct docket fees.

Respondent Oscar Camerino argues that the sole issue to be resolved pertains to
the legal issue of whether the Special Power of Attorney (SPA) denominated as
irrevocable may be revoked; that three material facts have been established, i.e.,
that the SPA was executed, that Atty. Santos facilitated the signing and execution of
the SPA, and that petitioner paid P500,000 to each of the respondents in
consideration for the signing of the SPA and, thus, summary judgment was proper;
and that pure questions of law are not proper in an ordinary appeal under Rule 41 of
the Rules.
Respondents Efren Camerino, Cornelio Mantile, and Mildred Del Rosario, in her
capacity as legal heir of Nolasco Del Rosario, aver that petitioners petition is
insufficient in form, i.e., due to defective verification as the word "personal" was not
stated when referring to "personal knowledge," and in substance, i.e., there is no
genuine issue to be resolved as the factual allegations of the petitioner are
unsubstantial and that Atty. Santos is not an indispensable party to the case.
The petition has merit.
In dismissing petitioners appeal, the CA erroneously relied on the rationale that the
petitioners appeal raised questions of law and, therefore, it had no recourse but to
dismiss the same for lack of jurisdiction. The summary judgment rendered by the
trial court has the effect of an adjudication on the merits and, thus, the petitioner,
being the aggrieved party, correctly appealed the adverse decision of the RTC to the
CA by filing a notice of appeal coupled with the appellants brief under Rule 41 of
the Rules.
Contrary to the findings of the RTC and the CA, the present case involves certain
factual issues which remove it from the coverage of a summary judgment.
Under Section 1, Rule 35 of the Rules of Court, 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.
Summary judgment is a procedural device resorted to in order to avoid long drawn
out litigations and useless delays. When the pleadings on file show that there are no
genuine issues of fact to be tried, the Rules allow a party to obtain immediate relief
by way of summary judgment, that is, when the facts are not in dispute, the court is
allowed to decide the case summarily by applying the law to the material facts.
Conversely, where the pleadings tender a genuine issue, summary judgment is not
proper. A genuine issue is such issue of fact which requires the presentation of
evidence as distinguished from a sham, fictitious, contrived or false claim. Section 3
of the said rule provides two (2) requisites for summary judgment to be proper: (1)
there must be no genuine issue as to any material fact, except for the amount of
damages; and (2) the party presenting the motion for summary judgment must be
entitled to a judgment as a matter of law.5 A summary judgment is permitted only if
there is no genuine issue as to any material fact and a moving party is entitled to a
judgment as a matter of law. A summary judgment is proper if, while the pleadings

on their face appear to raise issues, the affidavits, depositions, and admissions
presented by the moving party show that such issues are not genuine.6
The present case should not be decided via a summary judgment. Summary
judgment is not warranted when there are genuine issues which call for a full blown
trial. The party who moves for summary judgment has the burden of demonstrating
clearly the absence of any genuine issue of fact, or that the issue posed in the
complaint is patently unsubstantial so as not to constitute a genuine issue for trial.
Trial courts have limited authority to render summary judgments and may do so
only when there is clearly no genuine issue as to any material fact. When the facts
as pleaded by the parties are disputed or contested, proceedings for summary
judgment cannot take the place of trial.7
Summary judgment is generally based on the facts proven summarily by affidavits,
depositions, pleadings, or admissions of the parties. In this present case, while both
parties acknowledge or admit the existence of the "Irrevocable Power of Attorney,"
the variance in the allegations in the pleadings of the petitioner vis--vis that of the
respondents require the presentation of evidence on the issue of the validity of the
"Irrevocable Power of Attorney" to determine whether its execution was attended by
the vices of consent and whether the respondents and their spouses did not freely
and voluntarily execute the same. In his Answer with Counterclaim, petitioner
denied the material allegations of respondent Oscar Camerinos complaint for being
false and baseless as respondents were informed that the document they signed
was the "Irrevocable Power of Attorney" in his favor and that they had received the
full consideration of the transaction and, thus, had no legal right over the three
parcels of land. Indeed, the presentation of evidence is necessary to determine the
validity and legality of the "Irrevocable Power of Attorney," dated December 18,
2003, executed by the respondents in favor of the petitioner. From said main factual
issue, other relevant issues spring therefrom, to wit: whether the said "Irrevocable
Power of Attorney" was coupled with interest; whether it had been obtained through
fraud, deceit, and misrepresentation or other vices of consent; whether the five (5)
Philtrust Bank Managers checks given by petitioner to the respondents amounting
to P500,000 each were in consideration of the "inchoate and contingent rights" of
the respondents in favor of the petitioner; whether Atty. Santos connived with
petitioner in causing the preparation of the said document and, therefore, should be
impleaded as party-defendant together with the petitioner; whether respondents
deposited the amount of P9,790,612.00 plus P147,059.18 with the RTC of
Muntinlupa City, Branch 256; and whether the sale of respondents inchoate and
contingent rights amounted to a champertous contract.
The incongruence and disparity in the material allegations of both parties have
been evident. Respondent Oscar Camerino alleged in his complaint that he and his
co-respondents were required by their counsel, Atty. Santos, to sign a document on
the representation that it was urgently needed in the legal proceedings against
SMSC which turned out to be the "Irrevocable Power of Attorney"; but petitioner
disproved the vitiated consent on the part of the respondents as they knew fully
well that the document they signed, voluntarily and intelligently, on December 18,
2003, was the said "Irrevocable Power of Attorney." Respondent Oscar Camerino
alleged in his complaint that he has no intention of naming, appointing or
constituting anyone, including the petitioner, to sell, assign, dispose or encumber

the lots in question; but petitioner maintained that respondent Oscar Camerino
agreed to sell and assign to him his "inchoate and contingent rights and interests"
over the subject lot for and in consideration of the sum of P500,000, plus the
redemption price of P9,790,612. Respondents claimed that the amount they
received was grossly disproportionate to the value of the subject land; but petitioner
countered that the respondents did not have the amount of P9,790,612 needed to
redeem the subject lots, so he decided to buy their contingent rights and paid each
of them P500,000 or a total of P2,500,000 as evidenced by five (5) Philtrust Bank
Managers Check which they personally encashed on December 19, 2003, that he
also paid the amount of P147,059.18 as commission on August 4, 2005, that
simultaneous with the aforesaid payment, respondents and their spouses voluntarily
signed the "Irrevocable Power of Attorney" dated December 18, 2003, and that
being coupled with interest, the "Irrevocable Power of Attorney" cannot be revoked
at will by any of the parties.
Respondents maintain that they were deceived into executing the "Irrevocable
Power of Attorney" in favor of the petitioner which was done through the
maneuverings of their own lawyer, Atty. Santos, who, according to them, had
connived with petitioner in order to effect the fraudulent transaction. In this regard,
respondents should have impleaded Atty. Santos as an indispensable partydefendant early on when the case was still with the RTC, but they failed to do so.
However, their procedural lapse did not constitute a sufficient ground for the
dismissal of Civil Case No. 05-172.
In Domingo v. Scheer,8 the Court explained that the non-joinder of an indispensable
party is not a ground for the dismissal of an action. Section 7, Rule 3 of the Rules, as
amended, requires indispensable parties to be joined as plaintiffs or defendants.
The joinder of indispensable parties is mandatory. Without the presence of
indispensable parties to the suit, the judgment of the court cannot attain real
finality. Strangers to a case are not bound by the judgment rendered by the court.
The absence of an indispensable party renders all subsequent actions of the court
null and void. There is lack of authority to act not only of the absent party but also
as to those present. The responsibility of impleading all the indispensable parties
rests on the petitioner or plaintiff. However, the non-joinder of indispensable parties
is not a ground for the dismissal of an action. Parties may be added by order of the
court on motion of the party or on its own initiative at any stage of the action and/or
such times as are just. If the petitioner or plaintiff refuses to implead an
indispensable party despite the order of the court, the latter may dismiss the
complaint or petition for the petitioner or plaintiffs failure to comply therefor. The
remedy is to implead the non-party claimed to be indispensable. In the present
case, the RTC and the CA did not require the respondents to implead Atty. Santos as
party-defendant or respondent in the case. The operative act that would lead to the
dismissal of Civil Case No. 05-172 would be the refusal of respondents to comply
with the directive of the court for the joinder of an indispensable party to the case.
In his petition, petitioner prays for the reversal of the Decision dated February 14,
2008 of the CA which affirmed the Joint Order dated June 9, 2005 and Summary
Judgment dated June 15, 2006 of the RTC of Muntinlupa City, Branch 203 and
dismissed petitioners appeal under Rule 41 of the Rules for lack of jurisdiction and
its Resolution dated May 23, 2008 which denied petitioners motion for

reconsideration; the annulment of the RTCs Summary Judgment rendered on June

15, 2006; and the dismissal of Civil Case No. 05-172 filed with the RTC on the
ground that respondents failed to pay the correct docket fees as the action actually
sought the recovery of ownership over the subject properties.
The record shows that Civil Case No. 05-172 is a complaint filed by respondent
Oscar Camerino against petitioner, denominated as "Petition to Revoke Power of
Attorney," that seeks to nullify the "Irrevocable Power of Attorney" coupled with
interest dated December 18, 2003; that petitioner be ordered to turn over TCT No.
15898, 15896, and 15897 to him; and that petitioner be ordered to pay the
attorneys fees and other legal fees as a consequence of the suit. This case is
therefore not an action to recover the titles and ownership over the subject
properties. For now, the nature of the suit remains that of personal action and not a
real action in contemplation of Rule 4 of the Rules. Hence, the docket fees paid by
the respondents were in order. Should the complaint be amended to seek recovery
of ownership of the land, then the proper docket fees should be paid and collected.
While the RTC erred in rendering the summary judgment, Civil Case No. 05-172
should not perforce be dismissed. Instead, this present case should be remanded to
the RTC for further proceedings and proper disposition according to the rudiments of
a regular trial on the merits and not through an abbreviated termination of the case
by summary judgment.
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals
dated February 14, 2008 which affirmed the Joint Order dated June 9, 2005 and
Summary Judgment dated June 15, 2006 of the Regional Trial Court of Muntinlupa
City, Branch 203 and dismissed petitioners appeal under Rule 41 of the Rules of
Court on the ground of lack of jurisdiction and the Resolution of the Court of Appeals
dated May 23, 2008 which denied petitioners motion for reconsideration in CA-G.R.
CV No. 87656 are REVERSED and SET ASIDE. The case is REMANDED to the Regional
Trial Court of Muntinlupa City, Branch 203, for further proceedings in accordance
with this Decision. No costs. SO ORDERED.
VENUE, SEVERAL PLAINTIFF, FORUM SHOPPING
IRENE MARCOS-ARANETA, DANIEL RUBIO, ORLANDO G. RESLIN, and JOSE G.
RESLIN, - versus - COURT OF APPEALS, JULITA C. BENEDICTO, and
FRANCISCA BENEDICTO-PAULINO,
Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now deceased, and
his business associates (Benedicto Group) organized Far East Managers and
Investors, Inc. (FEMII) and Universal Equity Corporation (UEC), respectively. As
petitioner Irene Marcos-Araneta would later allege, both corporations were
organized pursuant to a contract or arrangement whereby Benedicto, as trustor,
placed in his name and in the name of his associates, as trustees, the shares of
stocks of FEMII and UEC with the obligation to hold those shares and their fruits in
trust and for the benefit of Irene to the extent of 65% of such shares. Several years
after, Irene, through her trustee-husband, Gregorio Ma. Araneta III, demanded the
reconveyance of said 65% stockholdings, but the Benedicto Group refused to oblige.

In March 2000, Irene thereupon instituted before the RTC two similar complaints for
conveyance of shares of stock, accounting and receivership against the Benedicto
Group with prayer for the issuance of a temporary restraining order (TRO). The first,
docketed as Civil Case No. 3341-17, covered the UEC shares and named Benedicto,
his daughter, and at least 20 other individuals as defendants. The second, docketed
as Civil Case No. 3342-17, sought the recovery to the extent of 65% of FEMII shares
held by Benedicto and the other defendants named therein.
Respondent Francisca Benedicto-Paulino,[3] Benedictos daughter, filed a Motion to
Dismiss Civil Case No. 3341-17, followed later by an Amended Motion to Dismiss.
Benedicto, on the other hand, moved to dismiss[4] Civil Case No. 3342-17, adopting
in toto the five (5) grounds raised by Francisca in her amended motion to dismiss.
Among these were: (1) the cases involved an intra-corporate dispute over which the
Securities and Exchange Commission, not the RTC, has jurisdiction; (2) venue was
improperly laid; and (3) the complaint failed to state a cause of action, as there was
no allegation therein that plaintiff, as beneficiary of the purported trust, has
accepted the trust created in her favor.
To the motions to dismiss, Irene filed a Consolidated Opposition, which Benedicto
and Francisca countered with a Joint Reply to Opposition.
Upon Benedictos motion, both cases were consolidated.
During the preliminary proceedings on their motions to dismiss, Benedicto and
Francisca, by way of bolstering their contentions on improper venue, presented the
Joint Affidavit[5] of Gilmia B. Valdez, Catalino A. Bactat, and Conchita R. Rasco who
all attested being employed as household staff at the Marcos Mansion in Brgy.
Lacub, Batac, Ilocos Norte and that Irene did not maintain residence in said place as
she in fact only visited the mansion twice in 1999; that she did not vote in Batac in
the 1998 national elections; and that she was staying at her husbands house in
Makati City.
Against the aforesaid unrebutted joint affidavit, Irene presented her PhP 5
community tax certificate[6] (CTC) issued on 11/07/99 in Curimao, Ilocos Norte to
support her claimed residency in Batac, Ilocos Norte.
In the meantime, on May 15, 2000, Benedicto died and was substituted by his wife,
Julita C. Benedicto, and Francisca.
On June 29, 2000, the RTC dismissed both complaints, stating that these partly
constituted real action, and that Irene did not actually reside in Ilocos Norte, and,
therefore, venue was improperly laid. In its dismissal order,[7] the court also
declared all the other issues raised in the different Motions to Dismiss x x x moot
and academic.
From the above order, Irene interposed a Motion for Reconsideration[8] which Julita
and Francisca duly opposed.
Pending resolution of her motion for reconsideration, Irene filed on July 17, 2000 a
Motion (to Admit Amended Complaint),[9] attaching therewith a copy of the

Amended Complaint[10] dated July 14, 2000 in which the names of Daniel Rubio,
Orlando G. Reslin, and Jose G. Reslin appeared as additional plaintiffs. As stated in
the amended complaint, the added plaintiffs, all from Ilocos Norte, were Irenes new
trustees. Parenthetically, the amended complaint stated practically the same cause
of action but, as couched, sought the reconveyance of the FEMII shares only.
During the August 25, 2000 hearing, the RTC dictated in open court an order
denying Irenes motion for reconsideration aforementioned, but deferred action on
her motion to admit amended complaint and the opposition thereto.[11]
On October 9, 2000, the RTC issued an Order[12] entertaining the amended
complaint, dispositively stating:
WHEREFORE, the admission of the Amended Complaint being tenable and legal, the
same is GRANTED.
Let copies of the Amended Complaint be served to the defendants who are ordered
to answer within the reglementary period provided by the rules.
The RTC predicated its order on the following premises:
(1) Pursuant to Section 2, Rule 10 of the Rules of Court,[13] Irene may opt to file, as
a matter of right, an amended complaint.
(2) The inclusion of additional plaintiffs, one of whom was a Batac, an Ilocos Norte
resident, in the amended complaint setting out the same cause of action cured the
defect of improper venue.
(3) Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the filing of the
amended complaint in question in the place of residence of any of Irenes coplaintiffs.
In time, Julita and Francisca moved to dismiss the amended complaint, but the RTC,
by Order[14] dated December 18, 2000, denied the motion and reiterated its
directive for the two to answer the amended complaint.
In said order, the RTC stood pat on its holding on the rule on amendments of
pleadings. And scoffing at the argument about there being no complaint to amend
in the first place as of October 9, 2000 (when the RTC granted the motion to amend)
as the original complaints were dismissed with finality earlier, i.e., on August 25,
2000 when the court denied Irenes motion for reconsideration of the June 29, 2000
order dismissing the original complaints, the court stated thusly: there was actually
no need to act on Irenes motion to admit, it being her right as plaintiff to amend her
complaints absent any responsive pleading thereto. Pushing its point, the RTC
added the observation that the filing of the amended complaint on July 17, 2000
ipso facto superseded the original complaints, the dismissal of which, per the June
29, 2000 Order, had not yet become final at the time of the filing of the amended
complaint.
Following the denial on March 15, 2001 of their motion for the RTC to reconsider its
December 18, 2000 order aforestated, Julita and Francisca, in a bid to evade being
declared in default, filed on April 10, 2001 their Answer to the amended complaint.
[15] But on the same day, they went to the CA via a petition for certiorari, docketed

as CA-G.R. SP No. 64246, seeking to nullify the following RTC orders: the first,
admitting the amended complaint; the second, denying their motion to dismiss the
amended complaint; and the third, denying their motion for reconsideration of the
second issuance.
Inasmuch as the verification portion of the joint petition and the certification on
non-forum shopping bore only Franciscas signature, the CA required the joint
petitioners to submit x x x either the written authority of Julita C. Benedicto to
Francisca B. Paulino authorizing the latter to represent her in these proceedings, or
a supplemental verification and certification duly signed by x x x Julita C. Benedicto.
[16] Records show the submission of the corresponding authorizing Affidavit[17]
executed by Julita in favor of Francisca.
Later developments saw the CA issuing a TRO[18] and then a writ of preliminary
injunction[19] enjoining the RTC from conducting further proceedings on the subject
civil cases.
On October 17, 2001, the CA rendered a Decision, setting aside the assailed RTC
orders and dismissing the amended complaints in Civil Case Nos. 3341-17 and
3342-17. The fallo of the CA decision reads:
WHEREFORE, based on the foregoing premises, the petition is hereby GRANTED.
The assailed Orders admitting the amended complaints are SET ASIDE for being null
and void, and the amended complaints a quo are, accordingly, DISMISSED.[20]
Irene and her new trustees motion for reconsideration of the assailed decision was
denied through the equally assailed June 20, 2002 CA Resolution. Hence, this
petition for review is before us.
The Issues
Petitioners urge the setting aside and annulment of the assailed CA decision and
resolution on the following submissions that the appellate court erred in: (1)
allowing the submission of an affidavit by Julita as sufficient compliance with the
requirement on verification and certification of non-forum shopping; (2) ruling on
the merits of the trust issue which involves factual and evidentiary determination,
processes not proper in a petition for certiorari under Rule 65 of the Rules of Court;
(3) ruling that the amended complaints in the lower court should be dismissed
because, at the time it was filed, there was no more original complaint to amend;
(4) ruling that the respondents did not waive improper venue; and (5) ruling that
petitioner Irene was not a resident of Batac, Ilocos Norte and that none of the
principal parties are residents of Ilocos Norte.[21]
The Courts Ruling
We affirm, but not for all the reasons set out in, the CAs decision.
First Issue: Substantial Compliance with the Rule on Verification and Certification of
Non-Forum Shopping

Petitioners tag private respondents petition in CA-G.R. SP No. 64246 as defective for
non-compliance with the requirements of Secs. 4[22] and 5[23] of Rule 7 of the
Rules of Court at least with regard to Julita, who failed to sign the verification and
certification of non-forum shopping. Petitioners thus fault the appellate court for
directing Julitas counsel to submit a written authority for Francisca to represent
Julita in the certiorari proceedings.
We are not persuaded.
Verification not Jurisdictional; May be Corrected
Verification is, under the Rules, not a jurisdictional but merely a formal requirement
which the court may motu proprio direct a party to comply with or correct, as the
case may be. As the Court articulated in Kimberly Independent Labor Union for
Solidarity, Activism and Nationalism (KILUSAN)-Organized Labor Associations in Line
Industries and Agriculture (OLALIA) v. Court of Appeals:
[V]erification is a formal, not a jurisdictional requisite, as it is mainly intended to
secure an assurance that the allegations therein made are done in good faith or are
true and correct and not mere speculation. The Court may order the correction of
the pleading, if not verified, or act on the unverified pleading if the attending
circumstances are such that a strict compliance with the rule may be dispensed
with in order that the ends of justice may be served.[24]
Given this consideration, the CA acted within its sound discretion in ordering the
submission of proof of Franciscas authority to sign on Julitas behalf and represent
her in the proceedings before the appellate court.
Signature by Any of the Principal Petitioners is Substantial Compliance
Regarding the certificate of non-forum shopping, the general rule is that all the
petitioners or plaintiffs in a case should sign it.[25] However, the Court has time and
again stressed that the rules on forum shopping, which were designed to promote
the orderly administration of justice, do not interdict substantial compliance with its
provisions under justifiable circumstances.[26] As has been ruled by the Court, the
signature of any of the principal petitioners[27] or principal parties,[28] as Francisca
is in this case, would constitute a substantial compliance with the rule on
verification and certification of non-forum shopping. It cannot be overemphasized
that Francisca herself was a principal party in Civil Case No. 3341-17 before the RTC
and in the certiorari proceedings before the CA. Besides being an heir of Benedicto,
Francisca, with her mother, Julita, was substituted for Benedicto in the instant case
after his demise.
And should there exist a commonality of interest among the parties, or where the
parties filed the case as a collective, raising only one common cause of action or
presenting a common defense, then the signature of one of the petitioners or
complainants, acting as representative, is sufficient compliance. We said so in
Cavile v. Heirs of Clarita Cavile.[29] Like Thomas Cavile, Sr. and the other petitioners
in Cavile, Francisca and Julita, as petitioners before the CA, had filed their petition as
a collective, sharing a common interest and having a common single defense to
protect their rights over the shares of stocks in question.

Second Issue: Merits of the Case cannot be Resolved on Certiorari under Rule 65
Petitioners posture on the second issue is correct. As they aptly pointed out, the CA,
in the exercise of its certiorari jurisdiction under Rule 65, is limited to reviewing and
correcting errors of jurisdiction only. It cannot validly delve into the issue of trust
which, under the premises, cannot be judiciously resolved without first establishing
certain facts based on evidence.
Whether a determinative question is one of law or of fact depends on the nature of
the dispute. A question of law exists when the doubt or controversy concerns the
correct application of law or jurisprudence to a certain given set of facts; or when
the issue does not call for an examination of the probative value of the evidence
presented, the truth or falsehood of facts being admitted. A question of fact obtains
when the doubt or difference arises as to the truth or falsehood of facts or when the
query invites the calibration of the whole evidence considering mainly the credibility
of the witnesses, the existence and relevancy of specific surrounding circumstances,
as well as their relation to each other and to the whole, and the probability of the
situation.[30]
Third Issue: Admission of Amended Complaint Proper
As may be recalled, the CA veritably declared as reversibly erroneous the admission
of the amended complaint. The flaw in the RTCs act of admitting the amended
complaint lies, so the CA held, in the fact that the filing of the amended complaint
on July 17, 2000 came after the RTC had ordered with finality the dismissal of the
original complaints. According to petitioners, scoring the CA for its declaration
adverted to and debunking its posture on the finality of the said RTC order, the CA
failed to take stock of their motion for reconsideration of the said dismissal order.
We agree with petitioners and turn to the governing Sec. 2 of Rule 10 of the Rules of
Court which provides:
SEC. 2. Amendments as a matter of right. A party may amend his pleading once as
a matter of right at any time before a responsive pleading is served or in the case of
a reply, at any time within ten (10) days after it is served.
As the aforequoted provision makes it abundantly clear that the plaintiff may amend
his complaint once as a matter of right, i.e., without leave of court, before any
responsive pleading is filed or served. Responsive pleadings are those which seek
affirmative relief and/or set up defenses,[32] like an answer. A motion to dismiss is
not a responsive pleading for purposes of Sec. 2 of Rule 10.[33] Assayed against the
foregoing perspective, the RTC did not err in admitting petitioners amended
complaint, Julita and Francisca not having yet answered the original complaints
when the amended complaint was filed. At that precise moment, Irene, by force of
said Sec. 2 of Rule 10, had, as a matter of right, the option of amending her
underlying reconveyance complaints. As aptly observed by the RTC, Irenes motion
to admit amended complaint was not even necessary. The Court notes though that
the RTC has not offered an explanation why it saw fit to grant the motion to admit in
the first place.

In Alpine Lending Investors v. Corpuz, the Court, expounding on the propriety of

admitting an amended complaint before a responsive pleading is filed, wrote:
[W]hat petitioner Alpine filed in Civil Case No. C-20124 was a motion to dismiss, not
an answer. Settled is the rule that a motion to dismiss is not a responsive pleading
for purposes of Section 2, Rule 10. As no responsive pleading had been filed,
respondent could amend her complaint in Civil Case No. C-20124 as a matter of
right. Following this Courts ruling in Breslin v. Luzon Stevedoring Co. considering
that respondent has the right to amend her complaint, it is the correlative duty of
the trial court to accept the amended complaint; otherwise, mandamus would lie
against it. In other words, the trial courts duty to admit the amended complaint was
purely ministerial. In fact, respondent should not have filed a motion to admit her
amended complaint.[34]
It may be argued that the original complaints had been dismissed through the June
29, 2000 RTC order. It should be pointed out, however, that the finality of such
dismissal order had not set in when Irene filed the amended complaint on July 17,
2000, she having meanwhile seasonably sought reconsideration thereof. Irenes
motion for reconsideration was only resolved on August 25, 2000. Thus, when Irene
filed the amended complaint on July 17, 2000, the order of dismissal was not yet
final, implying that there was strictly no legal impediment to her amending her
original complaints.[35]
Fourth Issue: Private Respondents did not Waive Improper Venue
Petitioners maintain that Julita and Francisca were effectively precluded from raising
the matter of improper venue by their subsequent acts of filing numerous pleadings.
To petitioners, these pleadings, taken together, signify a waiver of private
respondents initial objection to improper venue.
This contention is without basis and, at best, tenuous. Venue essentially concerns a
rule of procedure which, in personal actions, is fixed for the greatest convenience
possible of the plaintiff and his witnesses. The ground of improperly laid venue must
be raised seasonably, else it is deemed waived. Where the defendant failed to
either file a motion to dismiss on the ground of improper venue or include the same
as an affirmative defense, he is deemed to have waived his right to object to
improper venue.[36] In the case at bench, Benedicto and Francisca raised at the
earliest time possible, meaning within the time for but before filing the answer to
the complaint,[37] the matter of improper venue. They would thereafter reiterate
and pursue their objection on venue, first, in their answer to the amended
complaints and then in their petition for certiorari before the CA. Any suggestion,
therefore, that Francisca and Benedicto or his substitutes abandoned along the way
improper venue as ground to defeat Irenes claim before the RTC has to be rejected.
Fifth Issue: The RTC Has No Jurisdiction on the Ground of Improper Venue
Subject Civil Cases are Personal Actions

It is the posture of Julita and Francisca that the venue was in this case improperly
laid since the suit in question partakes of a real action involving real properties
located outside the territorial jurisdiction of the RTC in Batac.
This contention is not well-taken. In a personal action, the plaintiff seeks the
recovery of personal property, the enforcement of a contract, or the recovery of
damages.[38] Real actions, on the other hand, are those affecting title to or
possession of real property, or interest therein. In accordance with the wordings of
Sec. 1 of Rule 4, the venue of real actions shall be the proper court which has
territorial jurisdiction over the area wherein the real property involved, or a portion
thereof, is situated. The venue of personal actions is the court where the plaintiff or
any of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be
found, at the election of the plaintiff.[39]
In the instant case, petitioners are basically asking Benedicto and his Group, as
defendants a quo, to acknowledge holding in trust Irenes purported 65%
stockownership of UEC and FEMII, inclusive of the fruits of the trust, and to execute
in Irenes favor the necessary conveying deed over the said 65% shareholdings. In
other words, Irene seeks to compel recognition of the trust arrangement she has
with the Benedicto Group. The fact that FEMIIs assets include real properties does
not materially change the nature of the action, for the ownership interest of a
stockholder over corporate assets is only inchoate as the corporation, as a juridical
person, solely owns such assets. It is only upon the liquidation of the corporation
that the stockholders, depending on the type and nature of their stockownership,
may have a real inchoate right over the corporate assets, but then only to the
extent of their stockownership.
The amended complaint is an action in personam, it being a suit against Francisca
and the late Benedicto (now represented by Julita and Francisca), on the basis of
their alleged personal liability to Irene upon an alleged trust constituted in 1968
and/or 1972. They are not actions in rem where the actions are against the real
properties instead of against persons.[40] We particularly note that possession or
title to the real properties of FEMII and UEC is not being disputed, albeit part of the
assets of the corporation happens to be real properties.
Given the foregoing perspective, we now tackle the determinative question of
venue in the light of the inclusion of additional plaintiffs in the amended complaint.
Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2 of Rule 4
We point out at the outset that Irene, as categorically and peremptorily found by the
RTC after a hearing, is not a resident of Batac, Ilocos Norte, as she claimed. The
Court perceives no compelling reason to disturb, in the confines of this case, the
factual determination of the trial court and the premises holding it together.
Accordingly, Irene cannot, in a personal action, contextually opt for Batac as venue
of her reconveyance complaint. As to her, Batac, Ilocos Norte is not what Sec. 2,
Rule 4 of the Rules of Court adverts to as the place where the plaintiff or any of the
principal plaintiffs resides at the time she filed her amended complaint. That Irene
holds CTC No. 17019451[41] issued sometime in June 2000 in Batac, Ilocos Norte

and in which she indicated her address as Brgy. Lacub, Batac, Ilocos is really of no
moment. Let alone the fact that one can easily secure a basic residence certificate
practically anytime in any Bureau of Internal Revenue or treasurers office and
dictate whatever relevant data one desires entered, Irene procured CTC No.
17019451 and appended the same to her motion for reconsideration following the
RTCs pronouncement against her being a resident of Batac.
Petitioners, in an attempt to establish that the RTC in Batac, Ilocos Norte is the
proper court venue, asseverate that Batac, Ilocos Norte is where the principal
parties reside.
Pivotal to the resolution of the venue issue is a determination of the status of Irenes
co-plaintiffs in the context of Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4,
which pertinently provide as follows:
Rule 3: PARTIES TO CIVIL ACTIONS
SEC. 2. Parties in interest. A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of
the suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.
SEC. 3. Representatives as parties. Where the action is allowed to be prosecuted or
defended by a representative or someone acting in a fiduciary capacity, the
beneficiary shall be included in the title of the case and shall be deemed to be the
real party in interest. A representative may be a trustee of an express trust, a
guardian, an executor or administrator, or a party authorized by law or these Rules.
An agent acting in his own name and for the benefit of an undisclosed principal may
sue or be sued without joining the principal except when the contract involves
things belonging to the principal.
Rule 4: VENUE OF ACTIONS
SEC. 2. Venue of personal actions. All other actions may be commenced and tried
where the plaintiff or any of the principal plaintiffs resides, or where the defendant
or any of the principal defendants resides, or in the case of a non-resident
defendant where he may be found, at the election of the plaintiff.
Venue is Improperly Laid
There can be no serious dispute that the real party-in-interest plaintiff is Irene. As
self-styled beneficiary of the disputed trust, she stands to be benefited or entitled to
the avails of the present suit. It is undisputed too that petitioners Daniel Rubio,
Orlando G. Reslin, and Jose G. Reslin, all from Ilocos Norte, were included as coplaintiffs in the amended complaint as Irenes new designated trustees. As trustees,
they can only serve as mere representatives of Irene.
Upon the foregoing consideration, the resolution of the crucial issue of whether or
not venue had properly been laid should not be difficult.

Sec. 2 of Rule 4 indicates quite clearly that when there is more than one plaintiff in
a personal action case, the residences of the principal parties should be the basis
for determining proper venue. According to the late Justice Jose Y. Feria, the word
principal has been added [in the uniform procedure rule] in order to prevent the
plaintiff from choosing the residence of a minor plaintiff or defendant as the venue.
[42] Eliminate the qualifying term principal and the purpose of the Rule would, to
borrow from Justice Regalado, be defeated where a nominal or formal party is
impleaded in the action since the latter would not have the degree of interest in the
subject of the action which would warrant and entail the desirably active
participation expected of litigants in a case.[43]
Before the RTC in Batac, in Civil Case Nos. 3341-17 and 3342-17, Irene stands
undisputedly as the principal plaintiff, the real party-in-interest. Following Sec. 2 of
Rule 4, the subject civil cases ought to be commenced and prosecuted at the place
where Irene resides.
Principal Plaintiff not a Resident in Venue of Action
As earlier stated, no less than the RTC in Batac declared Irene as not a resident of
Batac, Ilocos Norte. Withal, that court was an improper venue for her conveyance
action.
The Court can concede that Irenes three co-plaintiffs are all residents of Batac,
Ilocos Norte. But it ought to be stressed in this regard that not one of the three can
be considered as principal party-plaintiffs in Civil Case Nos. 3341-17 and 3342-17,
included as they were in the amended complaint as trustees of the principal
plaintiff. As trustees, they may be accorded, by virtue of Sec. 3 of Rule 3, the right
to prosecute a suit, but only on behalf of the beneficiary who must be included in
the title of the case and shall be deemed to be the real party-in-interest. In the final
analysis, the residences of Irenes co-plaintiffs cannot be made the basis in
determining the venue of the subject suit. This conclusion becomes all the more
forceful considering that Irene herself initiated and was actively prosecuting her
claim against Benedicto, his heirs, assigns, or associates, virtually rendering the
impleading of the trustees unnecessary.
And this brings us to the final point. Irene was a resident during the period material
of Forbes Park, Makati City. She was not a resident of Brgy. Lacub, Batac, Ilocos
Norte, although jurisprudence[44] has it that one can have several residences, if
such were the established fact. The Court will not speculate on the reason why
petitioner Irene, for all the inconvenience and expenses she and her adversaries
would have to endure by a Batac trial, preferred that her case be heard and decided
by the RTC in Batac. On the heels of the dismissal of the original complaints on the
ground of improper venue, three new personalities were added to the complaint
doubtless to insure, but in vain as it turned out, that the case stays with the RTC in
Batac.
Litigants ought to bank on the righteousness of their causes, the superiority of their
cases, and the persuasiveness of arguments to secure a favorable verdict. It is high
time that courts, judges, and those who come to court for redress keep this ideal in
mind.

JESUSITO D. LEGASPI, doing business under the name and style of J.D.
Legaspi Construction, - versus- REPUBLIC OF THE PHILIPPINES,
represented by Social Security System (SSS),
Jesusito D. Legaspi, as owner and manager of J.D. Legaspi Construction (petitioner),
entered into a Construction Agreement with the Social Security System
(respondent) in June 1997 for the construction of a four-storey building in Baguio
City which will serve as respondent's branch office. The contract price was
P88,348,533.74.
In an unfortunate turn of events, the Philippine peso collapsed as against the U.S.
Dollar in 1997.[1] Thus, the cost of imported materials which petitioner was
contracted to use and install on the project shot up, and petitioner incurred
expenses more than the original contract price. Petitioner had several meetings
with respondent's representatives during which he informed them of his difficulty in
meeting his obligations under the contract due to the devaluation of peso. After
several failed meetings, petitioner sent a letter to respondent requesting an
adjustment in the contract price, which was denied by respondent. This constrained
petitioner to file a complaint for payment of sum of money plus damages with the
Regional Trial Court (RTC) of Makati City, docketed as Civil Case No. 00-1354.
Instead of filing an answer, respondent, represented by the Office of the Solicitor
General, filed a Motion to Dismiss on the grounds that venue was improperly laid
and petitioner had no cause of action. On the ground of improper venue, it was
respondent's argument that the Construction Agreement provided that all actions
may be brought before the proper court in Quezon City and that petitioner waived
any other venue.
Respondent also contended that petitioner's allegations in his Complaint stated no
cause of action. According to respondent, petitioner sought to amend the contract
by increasing the stipulated contract price; however, this cannot be done since
amendments or modifications are not allowed in bidded government contracts,
specially since the contract expressly provided for a no escalation clause.
Respondent also argued that an adjustment of the price would be disadvantageous
to the government.
In its Order[2] dated July 18, 2001, the RTC denied respondent's Motion to Dismiss.
It was the RTC's ruling that the venue was properly laid since petitioner's action was
not based on the Construction Agreement which was faithfully complied with by
petitioner; rather, it was a collection suit for the increase in the price of imported
materials and equipment furnished and installed to complete the construction. The
RTC also ruled that petitioner's cause of action was based on Article 1267 of the
Civil Code[3] provision on price adjustment and not on the terms and conditions of
the Construction Agreement. The RTC was also of the view that respondent's claim
of lack of cause of action should be properly raised and proved in a regular trial and
not merely by pleadings.[4]
Respondent moved to reconsider the Order but this was denied by the RTC in an
Order[5] dated September 25, 2001.

Respondent then filed a petition for certiorari with the Court of Appeals (CA), and in
the assailed Decision[6] dated August 26, 2003, respondent's petition was granted
and the RTC was ordered to dismiss Civil Case No. 00-1354.
Petitioner sought reconsideration of the assailed Decision, which was denied by the
CA in its Resolution dated October 27, 2003. Hence, the present petition for review
on certiorari under Rule 45 of the Rules of Court, raising as sole ground, viz:
THE HONORABLE COURT OF APPEALS PLAINLY ERRED AND ACTED CONTRARY TO
EXISTING LAW AND JURISPRUDENCE IN ORDERING THE DISMISSAL OF THE CIVIL
CASE BEFORE THE COURT A QUO CONSIDERING THAT VENUE IS PROPERLY LAID.[9]
Petitioner insists that the venue provision in the Construction Agreement does not
apply. He argues that his cause of action does not arise from the agreement, nor
was it for the performance of any of the obligations under the agreement. According
to petitioner, his action was for additional payment due to the extraordinary
devaluation of the peso at the time; and is based on Article 1267 of the Civil Code,
not on any provision of the Construction Agreement. Petitioner believes that his
action is personal in nature such that Section 2, Rule 4 of the Rules of Court applies,
and he has the option to file the same where he or respondent resides.
Respondent counters that petitioner's claim, while anchored on Article 1267 of the
Civil Code, emanated from the Construction Agreement; hence, the restrictive
provision on venue applies. Respondent also reiterates its argument that petitioner
does not have any cause of action against respondent.
As a general rule, venue of personal actions is governed by Section 2, Rule 4 of the
Rules of Court, to wit:
Sec. 2. Venue of personal actions. All other actions may be commenced and tried
where the plaintiff or any of the principal plaintiffs resides, or where the defendant
or any of the principal defendants resides, or in the case of a non-resident
defendant, where he may be found, at the election of the plaintiff.
The parties, however, are not precluded from agreeing in writing on an exclusive
venue, as qualified by Section 4 of the same rule. Written stipulations as to venue
may be restrictive in the sense that the suit may be filed only in the place agreed
upon, or merely permissive in that the parties may file their suit not only in the
place agreed upon but also in the places fixed by law. As in any other agreement,
what is essential is the ascertainment of the intention of the parties respecting the
matter.[10]
As regards restrictive stipulations on venue, jurisprudence instructs that it must be
shown that such stipulation is exclusive. In the absence of qualifying or restrictive
words, such as exclusively, waiving for this purpose any other venue, shall only
preceding the designation of venue, to the exclusion of the other courts, or words of
similar import, the stipulation should be deemed as merely an agreement on an
additional forum, not as limiting venue to the specified place.[11]
In the present case, the Construction Agreement provides:

ARTICLE XIV JUDICIAL REMEDIES

All actions and controversies that may arise from this Agreement involving but not
limited to demands for the specific performance of the obligations as specified in
the clauses contained herein and/or as resolved or interpreted by the CLIENT
pursuant to the third paragraph of Article I hereof may be brought by the parties
before the proper courts in Quezon City where the main office of the CLIENT is
located, the CONTRACTOR hereby expressly waiving any other venue.
The venue is specific - Quezon City - and accompanied by the words the
CONTRACTOR hereby expressly waiving any other venue, which connote exclusivity
of the designated venue. These terms clearly stipulate exclusively the venue where
actions arising from the Construction Agreement should be filed.
Petitioner, however, contends that the case does not arise from the Construction
Agreement; hence, it may be filed in Makati City, which is his place of residence.
Contrary to petitioners contention, the allegations in his complaint indubitably show
that his cause of action arose from the Construction Agreement, viz:
12. Defendant should be ordered to pay the just and fair price for the construction
of its building in Baguio, considering that the foreign currency crisis that hit the
country was manifestly beyond the contemplation of the parties. Hence, a renegotiation of the contract price would be just and reasonable under the
circumstances.
13. Plaintiff's request for price adjustment is based on Article 1267 of the New Civil
Code, which states:
15. Clearly, the 65% increase in price for the imported components of the project
was manifestly beyond the contemplation of the parties. Hence, plaintiffs request
for price adjustment should not be considered as falling under the prohibition stated
in Article III of the Construction Agreement. Following the principle enunciated in
Article 1267 of the Civil Code, plaintiff should be released from the obligation to
complete the project at the original contract price, specifically by granting plaintiff a
price adjustment in the amount equivalent to the difference between the unit prices
as stated in the plans and the actual cost of the purchase.[13]
Petitioners claim for price adjustment rests on the basic operative facts that the
Construction Agreement originally pegged the contract price at P88, 348,533.74,
and that the devaluation of the peso in 1997 brought about an increase in the costs
of imported materials and furnishings to be used in the construction.
Petitioner also alleges in his Complaint that his request for price adjustment should
not be considered as falling under the prohibition clause in Article III of the
Construction Agreement, to wit:
ARTICLE III - CONTRACT PRICE
The CLIENT shall pay the CONTRACTOR for the full, faithful and complete
performance of the works called for under this Agreement, a fixed amount of
EIGHTY EIGHT MILLION THREE HUNDRED FORTY EIGHT THOUSAND FIVE HUNDRED

THIRTY THREE PESOS AND 74/100 (P88,348,533.74), Philippine Currency, the

manner of payment of which shall be in accordance with Article V hereof subject to
the retention of six percent (6%) withholding tax to be remitted directly by the
CLIENT to the Bureau of Internal Revenue. The Contract price shall not be subject to
escalation. All costs and expenses over and above thereof, except as provided for in
Article IV shall be for the account of the CONTRACTOR.[14]
Ineluctably, the allegations in the Complaint relating to petitioners request for price
adjustment clearly originate from the Construction Agreement. Article 1267 of the
Civil Code is merely the law upon which petitioners claim for price adjustment is
anchored. What is essential is the factual substance of his claim, as alleged in the
Complaint, which should be taken into account in determining whether or not it
arose from the Construction Agreement.
As correctly ruled by the CA which the Court adopts as its own:
Although the court was correct in holding that Mr. Legaspis prayer for price
adjustment is anchored on the Civil Code, the controversy in this case started when
J.D. Legaspi Construction claimed difficulty of performance due to change of
circumstances. In effect, Mr. Legaspi is assailing the no escalation clause of the
project cost indicated in the contract. If the action proceeds, the court in
determining whether Mr. Legaspi has the right to claim will necessarily have to
determine the intent of the parties in assuming the contractual risks by necessarily
referring to the Construction Agreement. Undoubtedly, Mr. Legaspis action refers to
a dispute arising out of and relating to the provisions of the Agreement. Therefore,
the venue stipulation will have to be applied.[15]
The Court also agrees with the CA that petitioner has a cause of action against
respondent.
A motion to dismiss based on lack of cause of action hypothetically admits the truth
of the allegations in the complaint. The allegations in a complaint are sufficient to
constitute a cause of action against the defendants if, hypothetically admitting the
facts alleged, the court can render a valid judgment upon the same in accordance
with the prayer therein.[16] The complaint filed by petitioner sets forth the ultimate
facts upon which his claim for price adjustment is based. Respondents allegation
that petitioner is not entitled to it is a matter of defense, properly raised in an
answer which will then be accordingly threshed out in full-blown proceedings. Thus,
the CA was correct when it ruled that the complaint does not have to establish or
allege facts proving the existence of a cause of action at the outset, as this will have
to be done at the trial on the merits of the case.[17] WHEREFORE, the petition is
DENIED for lack of merit.
VENUE, CONSTRUED-TOGETHER DOCTRINE
PHILIPPINE BANK OF, COMMUNICATIONS, petitioner, vs. ELENA LIM,
RAMON CALDERON, and TRI-ORO INTERNATIONAL TRADING &
MANUFACTURING CORPORATION, respondents.

On September 3, 1999, the Philippine Bank of Communications (hereinafter

[petitioner]) filed a complaint against [Respondents Elena Lim, Ramon Calderon and
Tri-Oro International Trading & Manufacturing Corporation (Tri-Oro for brevity)] with
the Regional Trial Court of Manila for the collection of a deficiency amounting to
P4,014,297.23 exclusive of interest. [Petitioner] alleged therein that [respondents]
obtained a loan from it and executed a continuing surety agreement dated
November 16, 1995 in favor of [petitioner] for all loans, credits, etc., that were
extended or may be extended in the future to [respondents]. [Petitioner] granted a
renewal of said loan upon [respondents] request, the most recent being on January
21, 1998 as evidenced by Promissory Note Renewal BD-Variable No. 8298021001 in
the amount of P3,000,000.00. It was expressly stipulated therein that the venue for
any legal action that may arise out of said promissory note shall be Makati City, to
the exclusion of all other courts x x x. [Respondents allegedly] failed to pay said
obligation upon maturity. Thus, [petitioner] foreclosed the real estate mortgage
executed by [respondents] valued at P1,081,600.00 leaving a deficiency balance of
P4,014,297.23 as of August 31, 1999.
[Respondents] moved to dismiss the complaint on the ground of improper venue,
invoking the stipulation contained in the last paragraph of the promissory note with
respect to the restrictive/exclusive venue. [The trial court] denied said motion
asseverating that [petitioner] ha[d] separate causes of action arising from the
promissory note and the continuing surety agreement. Thus, [under] Rule 4, Section
2, of the 1997 Rules of Civil Procedure, as amended, x x x venue was properly laid in
Manila. [The trial court] supported [its] order with cases where venue was held to be
merely permissive. A motion for reconsideration of said order was likewise denied.
[4]
Ruling of the Court of Appeals
On appeal, the CA ruled that respondents alleged debt was based on the Promissory
Note, which had provided an exclusionary stipulation on venue to the exclusion of
all other courts.[5] The parties Surety Agreement, though silent as to venue, was an
accessory contract that should have been interpreted in consonance with the
Promissory Note.[6]
Hence, this Petition.
Petitioner raises the following issue for our consideration:
Whether or not the Honorable Court of Appeals had decided the issue of venue in a
way not in accord with law and applicable decisions of this Honorable Court and had
thereby departed from the accepted and usual course of judicial proceedings, as to
call for this Honorable Supreme Courts power of supervision and appellate review.
The Courts Ruling
The Petition is unmeritorious.
At the outset, this Court observes that petitioner took liberties with the stipulated
facts to suit its allegations in the present Petition. In its Complaint, petitioner bank

averred that respondents had entered into the Surety Agreement (SA) to guarantee
existing and future credit facilities, and that they had executed the Promissory Note
(PN) to document their loan.[9] Now, the bank is claiming that Tri-Oro issued the PN
on which the other respondents should be made liable as sureties.[10]
This strategy is obviously intended to disconnect the SA from the PN and to support
the claim of petitioner that the stipulation on venue does not apply to the SA.
However, as will be discussed below, the cause of action to recover on the basis of
the SA is inseparable from that which is based on the PN.
Rule on Venue
Section 2 of Rule 4 of the Rules of Court provides that personal actions[11] must be
commenced and tried (1) in the place where the plaintiff resides, or (2) where the
defendant resides, or (3) in case of non-resident defendants, where they may be
found, at the choice of the plaintiff.[12] This rule on venue does not apply when the
law specifically provides otherwise, or when -- before the filing of the action -- the
contracting parties agree in writing on the exclusive venue thereof.[13] Venue is not
jurisdictional and may be waived by the parties.[
A stipulation as to venue does not preclude the filing of the action in other places,
unless qualifying or restrictive words are used in the agreement.
In the instant case, the stipulation on the exclusivity of the venue as stated in the
PN is not at issue. What petitioner claims is that there was no restriction on the
venue, because none was stipulated in the SA on which petitioner had allegedly
based its suit.[16] Accordingly, the action on the SA may be filed in Manila,
petitioners place of residence.
Petitioner adds that its Complaint filed in the trial court had two causes of action:
the first was founded on a breach of the PN; and the second, on a violation of the
SA.[17] Consequently, it was allegedly correct to join the causes of action and to file
the case in Manila, per Section 5 of Rule 2 of the Rules of Court, which reads:[18]
Section 5. Joinder of Causes of Action. A party may in one pleading assert, in the
alternative or otherwise, as many causes of action as he may have against an
opposing party, subject to the following conditions:
(c) Where the causes of action are between the same parties but pertain to different
venue or jurisdictions, the joinder may be allowed in the Regional Trial Court
provided one of the causes of action falls within the jurisdiction of the said court and
venue lies therein.[19]
Surety Agreement
Suretyship arises upon the solidary binding of a person -- deemed the surety -- with
the principal debtor, for the purpose of fulfilling an obligation.[20] The prestation is
not an original and direct obligation for the performance of the suretys own act, but
merely accessory or collateral to the obligation contracted by the principal.[21]

Although the surety contract is secondary to the principal obligation, the surety
assumes liability as a regular party to the undertaking.[22]
In enforcing a surety contract, the complementary-contracts-construed-together
doctrine finds application.[23] According to this principle, an accessory contract
must be read in its entirety and together with the principal agreement.[24] This
principle is used in construing contractual stipulations in order to arrive at their true
meaning; certain stipulations cannot be segregated and then made to control.[25]
This no-segregation principle is based on Article 1374 of the Civil Code, which we
quote:
Art. 1374. The various stipulations of a contract shall be interpreted together,
attributing to the doubtful ones that sense which may result from all of them taken
jointly.
The aforementioned doctrine is applicable to the present case. Incapable of
standing by itself, the SA can be enforced only in conjunction with the PN. The latter
documents the debt that is sought to be collected in the action against the sureties.
The factual milieu of the present case shows that the SA was entered into to
facilitate existing and future loan agreements. Petitioner approved the loan covered
by the PN, partly because of the SA that assured the payment of the principal
obligation. The circumstances that related to the issuance of the PN and the SA are
so intertwined that neither one could be separated from the other. It makes no
sense to argue that the parties to the SA were not bound by the stipulations in the
PN.
Notably, the PN was a contract of adhesion that petitioner required the principal
debtor to execute as a condition of the approval of the loan. It was made in the form
and language prepared by the bank. By inserting the provision that Makati City
would be the venue for any legal action [that] may arise out of [the] Promissory
Note,[26] petitioner also restricted the venue of actions against the sureties. The
legal action against the sureties arose not only from the SA, but also from the PN.
Cause of Action
Petitioner correctly argues that there are two causes of action contained in its
Complaint. A cause of action is a partys act or omission that violates the rights of
the other.[27] Only one suit may be commenced for a single cause of action.[28] If
two or more suits are instituted on the basis of the same cause of action, only one
case should remain and the others must be dismissed.[29]
As against Tri-Oro International Trading & Manufacturing Corporation, petitioners
cause of action is the alleged failure to pay the debt in violation of the PN; as
against Elena Lim and Ramon Calderon, in violation of the SA.
Because of the variance between the causes of action, petitioner could have filed
separate actions against respondents to recover the debt, on condition that it could
not recover twice from the same cause. It could have proceeded against only one or
all of them,[30] as full payment by any one of them would have extinguished the

obligation.[31] By the same token, respondents could have been joined as

defendants in one suit, because petitioners alleged right of relief arose from the
same transaction or series of transactions that had common questions of fact.[32]
To avoid a multiplicity of suits, joinder of parties is encouraged by the law.
The cause of action, however, does not affect the venue of the action. The vital
issue in the present case is whether the action against the sureties is covered by
the restriction on venue stipulated in the PN. As earlier stated, the answer is in the
affirmative. Since the cases pertaining to both causes of action are restricted to
Makati City as the proper venue, petitioner cannot rely on Section 5 of Rule 2 of the
Rules of Court.
Liberal Construction
Petitioners final plea for liberality in applying the rules on venue must be rejected.
As earlier discussed, the PN was a contract of adhesion. Ambiguities therein are to
be construed against the party that prepared the contract.[33] On the same
principle, petitioner can no longer disavow the stipulation on venue, considering
that it drafted the Surety Agreement. Besides, this alleged technicality caused no
miscarriage of substantial justice, as petitioner may refile the case.[34] The
inconveniences brought about by its failure to observe the rules on venue sprang
from its own acts. Hence, it cannot blame the courts or anyone else for the resulting
delay in the adjudication of the merits of its cause.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.
G.R. No. 192877
March 23, 2011
SPOUSES HERMES P. OCHOA and ARACELI D. OCHOA, Petitioners,vs. CHINA
BANKING CORPORATION, Respondent.
For resolution is petitioners motion for reconsideration1 of our January 17, 2011
Resolution2 denying their petition for review on certiorari3 for failing to sufficiently
show any reversible error in the assailed judgment4 of the Court of Appeals (CA).
Petitioners insist that it was error for the CA to rule that the stipulated exclusive
venue of Makati City is binding only on petitioners complaint for Annulment of
Foreclosure, Sale, and Damages filed before the Regional Trial Court of Paraaque
City, but not on respondent banks Petition for Extrajudicial Foreclosure of Mortgage,
which was filed with the same court.
We disagree.
The extrajudicial foreclosure sale of a real estate mortgage is governed by Act No.
3135, as amended by Act No. 4118, otherwise known as "An Act to Regulate the
Sale of Property Under Special Powers Inserted In or Annexed to Real-Estate
Mortgages." Sections 1 and 2 thereof clearly state:
Section 1. When a sale is made under a special power inserted in or attached to any
real-estate mortgage hereafter made as security for the payment of money or the
fulfillment of any other obligation, the provisions of the following sections shall

govern as to the manner in which the sale and redemption shall be effected,
whether or not provision for the same is made in the power.
Sec. 2. Said sale cannot be made legally outside of the province in which the
property sold is situated; and in case the place within said province in which the
sale is to be made is the subject of stipulation, such sale shall be made in said place
or in the municipal building of the municipality in which the property or part thereof
is situated.5
The case at bar involves petitioners mortgaged real property located in Paraaque
City over which respondent bank was granted a special power to foreclose extrajudicially. Thus, by express provision of Section 2, the sale can only be made in
Paraaque City.
The exclusive venue of Makati City, as stipulated by the parties6 and sanctioned by
Section 4, Rule 4 of the Rules of Court,7 cannot be made to apply to the Petition for
Extrajudicial Foreclosure filed by respondent bank because the provisions of Rule 4
pertain to venue of actions, which an extrajudicial foreclosure is not.
Pertinent are the following disquisitions in Supena v. De la Rosa:8
Section 1, Rule 2 [of the Rules of Court] defines an action in this wise:
"Action means an ordinary suit in a court of justice, by which one party prosecutes
another for the enforcement or protection of a right, or the prevention or redress of
a wrong."
Hagans v. Wislizenus does not depart from this definition when it states that "[A]n
action is a formal demand of one's legal rights in a court of justice in the manner
prescribed by the court or by the law. x x x." It is clear that the determinative or
operative fact which converts a claim into an "action or suit" is the filing of the
same with a "court of justice." Filed elsewhere, as with some other body or office
not a court of justice, the claim may not be categorized under either term. Unlike an
action, an extrajudicial foreclosure of real estate mortgage is initiated by filing a
petition not with any court of justice but with the office of the sheriff of the province
where the sale is to be made.1avvphi1 By no stretch of the imagination can the
office of the sheriff come under the category of a court of justice. And as aptly
observed by the complainant, if ever the executive judge comes into the picture, it
is only because he exercises administrative supervision over the sheriff. But this
administrative supervision, however, does not change the fact that extrajudicial
foreclosures are not judicial proceedings, actions or suits.9
These pronouncements were confirmed on August 7, 2001 through A.M. No. 99-1005-0, entitled "Procedure in Extra-Judicial Foreclosure of Mortgage," the significant
portions of which provide:
In line with the responsibility of an Executive Judge under Administrative Order No.
6, date[d] June 30, 1975, for the management of courts within his administrative
area, included in which is the task of supervising directly the work of the Clerk of
Court, who is also the Ex-Office Sheriff, and his staff, and the issuance of

commissions to notaries public and enforcement of their duties under the law, the
following procedures are hereby prescribed in extra-judicial foreclosure of
mortgages:
1. All applications for extrajudicial foreclosure of mortgage whether under the
direction of the sheriff or a notary public, pursuant to Act 3135, as amended by Act
4118, and Act 1508, as amended, shall be filed with the Executive Judge, through
the Clerk of Court who is also the Ex-Officio Sheriff.
Verily then, with respect to the venue of extrajudicial foreclosure sales, Act No.
3135, as amended, applies, it being a special law dealing particularly with
extrajudicial foreclosure sales of real estate mortgages, and not the general
provisions of the Rules of Court on Venue of Actions.
Consequently, the stipulated exclusive venue of Makati City is relevant only to
actions arising from or related to the mortgage, such as petitioners complaint for
Annulment of Foreclosure, Sale, and Damages.
The other arguments raised in the motion are a mere reiteration of those already
raised in the petition for review. As declared in this Courts Resolution on January 17,
2011, the same failed to show any sufficient ground to warrant the exercise of our
appellate jurisdiction.
WHEREFORE, premises considered, the motion for reconsideration is hereby
DENIED.
G.R. No. 167484
September 9, 2013
HERNANDO BORRA, et. al, vs. COURT OF APPEALS SECOND AND
NINETEENTH DIVISIONS and HAWAIIAN PHILIPPINE COMPANY
Before the Court is a special civil action for certiorari under Rule 65of the Rules of
Court seeking the nullification of the November 14, 2003Resolution,1 as well as the
subsequent Decision2 and Resolution,3 dated June22, 2004 and January 14, 2005,
respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 78729. The November
14, 2003 Resolution granted private respondent's motion for the issuance of a
preliminary mandatory injunction. The assailed CA Decision, on the other hand, set
aside the Order of the Labor Arbiter, dated August 12, 2003, and dismissed RAB
Case No. 09-10698-97, while the January 14, 2005 CA Resolution denied petitioners'
motion for reconsideration.
The factual and procedural antecedents of the case are as follows:
On September 12, 1997, herein petitioners filed with the National Labor Relations
Commission (NLRC) Regional Arbitration Branch No. VIin Bacolod City two separate
complaints which were docketed as RAB Case No. 06-09-10698-97 and RAB Case
No. 06-09-10699-97. RAB Case No.06-09-10698-97 was filed against herein private
respondent alone, while RAB Case No. 06-09-10699-97 impleaded herein private
respondent and a certain Fela Contractor as respondents. In RAB Case No. 06-0910698-97,herein petitioners asked that they be recognized and confirmed as regular
employees of herein private respondent and further prayed that they be awarded

various benefits received by regular employees for three (3) years prior to the filing
of the complaint, while in RAB Case No. 06-09-10699-97,herein petitioners sought
for payment of unpaid wages, holiday pay, allowances, 13th month pay, service
incentive leave pay, moral and exemplary damages also during the three (3) years
preceding the filing of the complaint.
On October 16, 1997, private respondent filed a Motion to Consolidate4 the above
mentioned cases, but the Labor Arbiter in charge of the case denied the said Motion
in its Order5 dated October 20, 1997.
On January 9, 1998, private respondent filed a Motion to Dismiss6 RAB Case No. 0609-0698-97 on the ground of res judicata. Private respondent cited an earlier
decided case entitled " Humphrey Perez, et al. v. Hawaiian Philippine Co. et al.
"(Perez case) and docketed as RAB Case No.06-04-10169-95, which was an action
for recovery of 13th month pay and service incentive leave pay, and it includes
herein petitioners among the complainants and herein private respondent and one
Jose Castillon (Castillon) as respondents. Private respondent contended that the
Perez case, which has already become final and executory, as no appeal was taken
there from, serves as a bar to the litigation of RAB Case No. 06-09-10698-97,
because it was ruled therein that petitioners are not employees of private
respondent but of Castillon.
In an Order7 dated July 9, 1998, the Labor Arbiter granted private respondent's
Motion to Dismiss.
Petitioners appealed to the NLRC which set aside the Order of the Labor Arbiter,
reinstated the complaint in RAB Case No. 06-09-10698-97and remanded the same
for further proceedings.8
Private respondent appealed to the CA. On January 12, 2001, the CA rendered
judgment, affirming the Decision of the NLRC and denied the subsequent motion for
reconsideration.
Aggrieved, private respondent filed a petition for review on certiorari before this
Court. The case was entitled as "Hawaiian Philippine Company v. Borra" and
docketed as G.R. No. 151801. On November 12, 2002, this Court rendered its
Decision denying the petition and affirming the Decision of the CA. Quoting with
approval, the assailed Decision of the CA, this Court held, thus:
The Court of Appeals committed no reversible error. The two cases in question
indeed involved different causes of action. The previous case of "Humphrey Perez
vs. Hawaiian Philippine Company" concerned a money claim and pertained to the
years 1987 up until 1995. During that period, private respondents were engaged by
contractor Jose Castillon to work for petitioner at its warehouse. It would appear that
the finding of the Labor Arbiter, to the effect that no employer-employee
relationship existed between petitioner and private respondents, was largely
predicated on the absence of privity between them. The complaint for confirmation
of employment, however, was filed by private respondents on 12 September 1997,
by which time, Jose Castillon was no longer the contractor. The Court of Appeals
came out with these findings; viz.:

At first glance, it would appear that the case at bench is indeed barred by Labor
Arbiter Drilons findings since both petitioner and private respondents are parties in
Perez and the issue of employer-employee relationship was finally resolved therein.
However, the factual milieu of the Perez case covered the period November 1987 to
April 6, 1995 (date of filing of the complaint), during which time private
respondents, by their own admission, were engaged by Castillon to work at
petitioners warehouse.
In contrast, the instant case was filed on September 12, 1997, by which time, the
contractor involved was Fela Contractor; and private respondents prayer is for
confirmation of their status as regular employees of petitioner.
Stated differently, Perez pertains to private respondents employment from 1987 to
1995, while the instant case covers a different (subsequent) period. Moreover, in
Perez, the finding that no employer-employee relationship existed between
petitioner and private respondents was premised on absence of privity between
Castillon and petitioner. Consequently, Perez and the instant case involve different
subject matters and causes of action.
On the other hand, resolution of the case at bench would hinge on the nature of the
relationship between petitioner and Fela Contractor. In other words, private
respondents action for declaration as regular employees of petitioner will not
succeed unless it is established that Fela Contractor is merely a "labor-only"
contractor and that petitioner is their real employer.
Indeed, it is pure conjecture to conclude that the circumstances obtaining in Perez
subsisted until the filing of the case at bench as there is no evidence supporting
such conclusion. There is, as yet, no showing that Fela Contractor merely stepped
into the shoes of Castillon. Neither has Fela Contractors real principal been shown:
petitioner or the sugar traders/planters?
Consequently, factual issues must first be ventilated inappropriate proceedings
before the issue of employer-employee relationship between petitioner and private
respondents [herein private respondent and petitioners] can be determined.
It is premature to conclude that the evidence in Perez would determine the outcome
of the case at bench because as earlier pointed out, there is still no showing that
the contractor (Fela contractor) in this case can be considered as on the same
footing as the previous contractor (Castillon). Such factual issue is crucial in
determining whether petitioner is the real employer of private respondents.9
In the meantime, on December 21, 1998, the Labor Arbiter rendered a Decision10 in
RAB Case No. 06-09-10699-97 holding that there is no employer-employee relations
between private respondent and petitioners. The Labor Arbiter held as follows:
x x x Fela Contractor as may be noted happened to replace Jose Castillon, as
Contractor of the traders or sugar planters, who absorbed the workers of the
erstwhile contractor Castillon.

The complainants herein, who were the workers of Castillon, formally applied for
employment with respondent Jose Castillon, the owner of Fela Contractor, the new
handler and hauler of the sugar planters and traders. Thus, on February 15, 1996,
respondent Jardinico, representative of respondent Fela Contractor, wrote a letter to
the Administrative Manager of respondent Hawaiian informing the latter that as of
March 1, 1996,the former workers of Castillon the previous contractor, who under
took the handling and withdrawal of the sugar of the traders and planters, have
been absorbed and employed by Fela, with a request to allow them to enter the
premises of the company.
In this suit, the same complainants now seek monetary benefits arising from the
employment and they again impleaded respondent Hawaiian.
We, thus resolve to dismiss the complaint against respondent Hawaiian, who as we
have found in an earlier pronouncement has no employer-employee relations with
the complainant, let alone, any privity of relationship, except for the fact that it is
the depository of sugar where the sugar of the planters and traders are hauled by
the workers of the contractor, like respondent herein Fela Contractor/Jardinico.11
No appeal was taken from the above quoted Decision. Thus, the same became final
and executory.12
As a consequence of the finality of the Decision in RAB Case No. 06-09-10699-97,
herein private respondent again filed a Motion to Dismiss13 RAB Case No. 06-0910698-97 on the ground, among others, of res judicata. Private respondent
contended that the final and executory Decision of the Labor Arbiter in RAB Case
No. 06-09-10699-97, which found no employer-employee relations between private
respondent and petitioners, serves as a bar to the further litigation of RAB Case No.
06-09-10698-97.
On August 12, 2003, the Labor Arbiter handling RAB Case No. 06-09-10698-97
issued an Order
14 denying private respondent's Motion to Dismiss.
Private respondent then filed a petition for certiorari and prohibition with the CA
assailing the August 12, 2003 Order of the Labor Arbiter.
On June 22, 2004, the CA rendered its questioned Decision, the dispositive portion
of which reads, thus:
WHEREFORE, foregoing premises considered, the petition is GRANTED. Accordingly,
the Order dated August 12, 2003 of public respondent is hereby ANNULLED and SET
ASIDE. RAB Case No. 09-10698-97 is ordered DISMISSED.
SO ORDERED.15
Petitioners filed a Motion for Reconsideration, but the CA denied it in its
Resolution16 dated January 14, 2005.

Hence, the present petition for certiorari based on the following grounds:
I. THE COURT OF APPEALS ACTED ABSOLUTELY WITHOUTANY JURISDICTION WHEN IT
TOOK COGNIZANCE OF THE 2nd PETITION OF HPCO DESPITE THE ABSOLUTE LACK
OF ANYINTERVENING OR SUPERVENING EVENT THAT WOULD RENDER THE ORDERS
OF THE SUPREME COURT AND COURT OFAPPEALS INAPPLICABLE AND THE CLEAR
AND ESTABLISHEDDECISION LAID DOWN BY THE FIRST DIVISION OF THE SUPREME
COURT UNDER CHIEF JUSTICE HILARIO G. DAVIDE,JR., ASSOCIATE JUSTICES JOSE C.
VITUG, CONSUELO YNARES-SANTIAGO, ANTONIO T. CARPIO, AND ADOLFO S.
AZCUNA ANDBY THE COURT OF APPEALS UNDER JUSTICES EDGARDO P.CRUZ,
RAMON MABUTAS, JR., ROBERTO A. BARRIOS, MA.ALICIA AUSTRIA-MARTINEZ AND
HILARION L. AQUINO,RULING THAT FURTHER HEARINGS AND TRIAL MUST
BECONDUCTED BY THE LABOR ARBITER WHICH SIGNIFICANTLYFOUND THE
EXISTENCE OF EMPLOYER-EMPLOYEERELATIONSHIP IN HIS DECISION DATED
SEPTEMBER 25, 2003.
II. THE COURT OF APPEALS HAD SERIOUSLY ERRED, IF NOTGRAVELY ABUSED ITS
DISCRETION WHEN IT CHOSE TODELIBERATELY IGNORE AND/OR ENTIRELY
DISREGARD THECLEAR AND ESTABLISHED FACTS ON RECORD AS TO THEEXISTENCE
OF THE IDENTITY OF SUBJECT MATTER ANDCAUSE OF ACTION BETWEEN HPCO VS.
BORRA & 48 OTHERS/NLRC, ET. AL., C.A. G.R. NO. 59132 AND HPCO VS.
NLRC,BORRA, ET AL., G.R. NO. 151801 ON ONE HAND AND HPCO VS.HON. PHEBUN
PURA/BORRA & 48 OTHERS C.A. G.R. NO. 78729ON THE OTHER HAND.
III. THE COURT OF APPEALS SERIOUSLY ERRED IN TAKINGCOGNIZANCE OF THE
SECOND PETITION OF HPCO DESPITE THECLEAR AND ESTABLISHED FACT ON
RECORD THAT HPCO HADSIMULTANEOUSLY AND SUCCESSIVELY FILED AN
(sic)IDENTICAL THREE (3) MOTIONS TO DISMISS IN THE SALA OFLABOR ARBITERS
AND TWO (2) PETITIONS FOR CERTIORARI INTHE COURT OF APPEALS WHICH IS A
FLAGRANT VIOLATION ONTHE LAW OF FORUM SHOPPING.17
The petition lacks merit.
This Court is not persuaded by petitioners' argument that the CA has no jurisdiction
over private respondent's petition for certiorari because this Court, in G.R. No.
151801, lodged jurisdiction in the Labor Arbiter by directing the remand of RAB
Case No. 06-09-10698-97 thereto for further proceedings.
It is settled that jurisdiction over the subject matter is conferred by law and it is not
within the courts, let alone the parties, to themselves determine or conveniently set
aside.18
In this regard, it should be reiterated that what has been filed by private respondent
with the CA is a special civil action for certiorari assailing the Labor Arbiter's Order
which denied its motion to dismiss.
Section 3, Rule V of the NLRC Rules of Procedure, which was then prevailing at the
time of the filing of private respondent's petition for certiorari with the CA, clearly
provides:

SECTION 3.
MOTION TO DISMISS. - On or before the date set for the conference, the respondent
may file a motion to dismiss. Any motion to dismiss on the ground of lack of
jurisdiction, improper venue, or that the cause of action is barred by prior judgment,
prescription or forum shopping, shall be immediately resolved by the Labor Arbiter
by a written order. An order denying the motion to dismiss or suspending its
resolution until the final determination of the case is not appealable.19
In the case of Metro Drug Distribution, Inc. v. Metro Drug Corporation Employees
Association-Federation of Free Workers,20 this Court held that:
x x x The NLRC rule proscribing appeal from a denial of a motion to dismiss is
similar to the general rule observed in civil procedure that an order denying a
motion to dismiss is interlocutory and, hence, not appealable until final judgment or
order is rendered. The remedy of the aggrieved party in case of denial of the motion
to dismiss is to file an answer and interpose, as a defense or defenses, the ground
or grounds relied upon in the motion to dismiss, proceed to trial and, in case of
adverse judgment, to elevate the entire case by appeal in due course. In order to
avail of the extraordinary writ of certiorari, it is incumbent upon petitioner to
establish that the denial of the motion to dismiss was tainted with grave abuse of
discretion.21
In this regard, Rule 41 of the Rules of Court, which is applied in a suppletory
character to cases covered by the NLRC Rules, provides that in all the instances
enumerated under the said Rule, where the judgment or final order is not
appealable, the aggrieved party may file an appropriate special civil action under
Rule 65.22 Thus, this Court has held that when the denial of a motion to dismiss is
tainted with grave abuse of discretion, the grant of the extraordinary remedy of
certiorari may be justified.23 On the basis of the foregoing, it is clear that the CA
has jurisdiction over the special civil action for certiorari filed by private respondent
as the latter was able to allege and establish that the denial of its motion to dismiss
was tainted with grave abuse of discretion. Petitioners are wrong to argue that this
Court's directive in G.R. No. 151801 to remand RAB Case No. 06-09-10698-97 to the
Labor Arbiter for further proceedings deprives the CA of its jurisdiction over private
respondent's petition for certiorari. The essence of this Court's ruling in G.R. No.
151801 is simply to require resolution of the factual issue of whether or not Fela
Contractor has stepped into the shoes of Castillon and, thus, has taken petitioners
in its employ. In other words, this Court called for a prior determination as to who is
the real employer of petitioners. This issue, however, was already settled as will be
discussed below.
At the outset, the underlying question which has to be resolved in both RAB Case
Nos. 06-09-10698-97 and 06-09-10699-97, before any other issue in these cases
could be determined, is the matter of determining petitioners' real employer. Is it
Fela Contractor, or is it private respondent? Indeed, the tribunals and courts cannot
proceed to decide whether or not petitioners should be considered regular
employees, and are thus entitled to the benefits they claim, if there is a prior finding
that they are, in the first place, not employees of private respondent. Stated

differently, and as correctly held by the CA, petitioners' prayer for regularization in
RAB Case No. 06-09-10698-97 is essentially dependent on the existence of
employer-employee relations between them and private respondent, because one
cannot be made a regular employee of one who is not his employer. In the same
vein, petitioners' prayer in RAB Case No. 06-09-10699-97 for the recovery of
backwages,13th month pay, holiday pay and service incentive leave pay from
private respondent likewise rests on the determination of whether or not the former
are, indeed, employees of the latter.
As earlier mentioned, this issue has already been settled. In the already final and
executory decision of the Labor Arbiter in RAB Case No.06-09-10699-97, it was ruled
therein that no employer-employee relationship exists between private respondent
and petitioners because the latter's real employer is Fela Contractor. Thus, insofar
as the question of employer and employee relations between private respondent
and petitioners is concerned, the final judgment in RAB Case No. 06-09-10699-97
has the effect and authority of res judicata by conclusiveness of judgment.
Discussing the concept of res judicata, this Court held in Antonio v.Sayman Vda. de
Monje24
that:
x x x Res judicata is defined as "a matter adjudged; a thing judicially acted upon
or decided; a thing or matter settled by judgment." According to the doctrine of res
judicata, an existing final judgment or decree rendered on the merits, and without
fraud or collusion, by a court of competent jurisdiction, upon any matter within its
jurisdiction, is conclusive of the rights of the parties or their privies, in all other
actions or suits in the same or any other judicial tribunal of concurrent jurisdiction
on the points and matters in issue in the first suit. To state simply, a final judgment
or decree on the merits by a court of competent jurisdiction is conclusive of the
rights of the parties or their privies in all later suits on all points and matters
determined in the former suit.
The principle of res judicata is applicable by way of (1) "bar by prior judgment"
and (2) "conclusiveness of judgment." This Court had occasion to explain the
difference between these two aspects of res judicata as follows:
There is "bar by prior judgment" when, as between the first case where the
judgment was rendered and the second case that is sought to be barred, there is
identity of parties, subject matter, and causes of action. In this instance, the
judgment in the first case constitutes an absolute bar to the second action.
Otherwise put, the judgment or decree of the court of competent jurisdiction on the
merits concludes the litigation between the parties, as well as their privies, and
constitutes a bar to a new action or suit involving the same cause of action before
the same or other tribunal.
But where there is identity of parties in the first and second cases, but no
identity of causes of action, the first judgment is conclusive only as to those matters
actually and directly controverted and determined and not as to matters merely
involved therein. This is the concept of res judicata known as "conclusiveness of

judgment." Stated differently, any right, fact or matter in issue directly adjudicated
or necessarily involved in the determination of an action before a competent court
in which judgment is rendered on the merits is conclusively settled by the judgment
therein and cannot again be litigated between the parties and their privies whether
or not the claim, demand, purpose, or subject matter of the two actions is the
same.1wphi1
Stated differently, conclusiveness of judgment finds application when a fact or
question has been squarely put in issue, judicially passed upon, and adjudged in a
former suit by a court of competent jurisdiction. The fact or question settled by final
judgment or order binds the parties to that action (and persons in privity with them
or their successors-in-interest), and continues to bind them while the judgment or
order remains standing and unreversed by proper authority on a timely motion or
petition; the conclusively-settled fact or question cannot again be litigated in any
future or other action between the same parties or their privies and successors-ininterest, in the same or in any other court of concurrent jurisdiction, either for the
same or for a different cause of action. Thus, only the identities of parties and
issues are required for the operation of the principle of conclusiveness of
judgment.25
Hence, there is no point in determining the main issue raised in RAB Case No. 0609-10698-97,
i.e., whether petitioners may be considered regular employees of private
respondent, because, in the first place, they are not even employees of the latter.
As such, the CA correctly held that the Labor Arbiter committed grave abuse of
discretion in denying private respondent's motion to dismiss RAB Case No. 06-0910698-97.
The question that follows is whether private respondent is guilty of forum shopping,
considering that it already filed a motion to dismiss RAB Case No. 06-09-10698-97 in
1998? The Court answers in the negative.
In Pentacapital Investment Corporation v. Mahinay,26 this Court's discussion on
forum shopping is instructive, to wit:
Forum-shopping is the act of a litigant who repetitively availed of several judicial
remedies in different courts, simultaneously or successively, all substantially
founded on the same transactions and the same essential facts and circumstances,
and all raising substantially the same issues, either pending in or already resolved
adversely by some other court, to increase his chances of obtaining a favorable
decision if not in one court, then in another.
What is important in determining whether forum-shopping exists is the vexation
caused the courts and parties-litigants by a party who asks different courts and/or
administrative agencies to rule on the same or related causes and/or grant the
same or substantially the same reliefs, in the process creating the possibility of
conflicting decisions being rendered by the different fora upon the same issues.

Forum-shopping can be committed in three ways: (1) by filing multiple cases based
on the same cause of action and with the same prayer, the previous case not
having been resolved yet (where the ground for dismissal is litis pendentia); (2) by
filing multiple cases based on the same cause of action and with the same prayer,
the previous case having been finally resolved (where the ground for dismissal is res
judicata); and (3) by filing multiple cases based on the same cause of action but
with different prayers (splitting of causes of action, where the ground for dismissal
is also either litis pendentia or res judicata).
More particularly, the elements of forum-shopping are: (a) identity of parties or at
least such parties that represent the same interests in both actions; (b) identity of
rights asserted and reliefs prayed for, the relief being founded on the same facts;
(c) identity of the two preceding particulars, such that any judgment rendered in the
other action will, regardless of which party is successful, amount to res judicata in
the action under consideration.27
In the instant case, there can be no forum shopping, because the grounds cited by
private respondent in its motions to dismiss filed in 1998and in the present case are
different. In 1998, the motion to dismiss is based on the argument that the final and
executory decision in the
Perez case serves as res judicata and, thus, bars the re-litigation of the issue of
employer-employee relations between private respondent and petitioners. In the
instant case, private respondent again cites res judicata as a ground for its motion
to dismiss. This time, however, the basis for such ground is not Perez but the final
and executory decision in RAB Case No. 06-09-10699-97. Thus, the relief prayed for
in private respondent's motion to dismiss subject of the instant case is founded on
totally different facts and issues.
As a final note, this Court cannot help but call the attention of the Labor Arbiter
regarding Our observation that the resolution of RAB Case No. 06-09-10698-97 has
been unnecessarily pending for almost sixteen (16)years now. The resulting delay in
the resolution of the instant case could have been avoided had the Labor Arbiter
granted private respondent's Motion to Consolidate RAB Case Nos. 06-09-10698-97
and 06-09-10699-97. This Court quotes with approval the contention of private
respondent in its Motion, to wit:
3. That in light of the fact that the question as to whether or not there exists
employer-employee relations as between complainants [herein petitioners] and
herein respondent HPCO will indispensably have to be resolved in light of the
presence of an independent contractor (FELA Contractors) in RAB Case No. 06-0910699-97 which should otherwise be determinative of the issue involved in the
present suit it should only be logical and proper that for purposes of abating
separate and inconsistent verdicts by two distinct arbitration salas of this
Commission that the present suit be accordingly consolidated for joint hearing and
resolution with said RAB Case No. 06-09-10699-97 x x x.28
Under Section 3, Rule IV of the then prevailing, as well as in the presently existing,
NLRC Rules of Procedure, it is clearly provided that:

Section 3. Consolidation of Cases. Where there are two or more cases pending
before different Labor Arbiters in the same Regional Arbitration Branch involving the
same employer and issues, or the same parties and different issues, whenever
practicable, the subsequent easels shall be consolidated with the first to avoid
unnecessary costs or delay. x x x
In the same manner, Section 1, Rule 31 of the 1997 Rules of Civil Procedure, allows
consolidation, thus:
SECTION 1. Consolidation. When actions involving a common question of law or
fact are pending before the court, it may order a joint hearing or trial of any or all
the matters in issue in the actions; it may order all the actions consolidated; and it
may make such orders concerning
Proceedings therein as may tend to avoid unnecessary costs or delay.
Considering that the above mentioned cases involved essentially the same parties
and the basic issue of employer-employee relations between private respondent
and petitioners, the Labor Arbiter should have been more circumspect and should
have allowed the cases to be consolidated. This would be in consonance with the
parties' constitutional right to a speedy disposition of cases as well as in keeping
with the orderly and efficient disposition of cases.
WHEREFORE, the petition is DISMISSED. The assailed Decision and Resolutions of
the Court of Appeals in CA-G.R. SP No. 78729 are AFFIRMED.
SO ORDERED.
PLEADINGS
G.R. No. 141508
ROBERTO S. BENEDICTO and TRADERS ROYAL BANK,
Petitioners,

- versus -

MANUEL LACSON, ETC

DECISION

PERALTA, J.:
Before this Court is a Petition for Review on certiorari,[1] under Rule 45 of the Rules
of Court, seeking to set aside the September 30, 1999 Decision[2] and January 10,
2000 Resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 53841.
The facts of the case are as follows:
Under Presidential Decree No. 388,[4] the Philippine Sugar Commission
(PHILSUCOM) was created and vested with the power to act as the single buying
and selling agency of sugar in the Philippines. On September 7, 1977, PHILSUCOM
further organized the National Sugar Trading Corporation (NASUTRA) as its buying
marketing arm. Petitioner Robert S. Benedicto[5] was the concurrent Chairman and
President of Traders Royal Bank[6] and NASUTRA.
The case stems from a Complaint,[7] docketed as Civil Case No. 95-9137 (Bacolod
Case), filed by respondents, individual sugar planters and agricultural corporations
Manuel Lacson et al., on November 23, 1995, in the Regional Trial Court (RTC) of
Bacolod City, Branch 44. Respondents complaint was premised on a claim for
unpaid shares based on Sugar Order No. 2, series of 1979-1980[8] and Sugar Order
No. 1, series of 1980-1981[9] issued by PHILSUCOM. The claims cover the sugar
export sales[10] supposedly undervalued by NASUTRA and coursed through Traders
Royal Bank, the total amount of which is claimed by respondents to be $33,907,172.
47, to wit:

SUMMARY OF CLAIMS UNDER THE FIRST TO FIFTEENTH

CAUSES OF ACTION

92. As tabulated in Annex C hereof, while the total amount actually paid by the
buyers and collected by the PHILSUCOM and the Defendants NASUTRA, BENEDICTO,
MONTEBON and TRB on the sales of export sugar subject of the preceding Causes of
Action, amounted to US$ 94,146,954.03, the PHILSUCOM and the said Defendants
recorded and reported a total collection of only US$60,239,781.56, resulting in an
undervaluation of Defendant NASUTRAs export sales by US$ 33, 907,172.74 and,
correspondingly, in an equivalent understatement of the amount due the Plaintiffs
and other sugar producers in the profits realized from such sales, pursuant to the
directive of then President Marcos as implemented in the PHILSUCOM SUGAR
ORDERS hereto attached as Annexes B and B-1 hereof.

93. Accordingly, on the basis of their respective production of A and C sugar for the
1980-1981 crop year vis--vis the national production of 20,474,653 piculs of the
same classes of sugar for the same crop year, the Plaintiffs are entitled to the
payment by Defendants of their pro rata share, in the amounts indicated opposite
their respective names in Annex C-1 hereof, in the undeclared profit of
US$33,907,172.74 realized from the export sales, subject of the preceding Causes
of Action, during the said crop year.[11]

Petitioner, as President and concurrent Chairman of both Traders Royal Bank and
NASUTRA, was charged by respondents with fraud and bad faith, not only in refusing
to furnish them accurate data on NASUTRAs export sugar sales, but, more
importantly, in under-reporting and under-declaring the true prices of the
shipments.[12] Respondents, thus, prayed for a refund of their shares in the
undervalued shipments.

On December 27, 1995, petitioner filed a Motion to Dismiss,[13] arguing therein (1)
that respondents had violated the rule on forum shopping; (2) that respondents
have no cause of action; (3) that the issues involved are res judicata or rendered
moot by case law; and (4) that the claim or demand has already been paid.

On the issue of forum shopping, petitioner argued that respondents have already
filed the following cases beforehand, viz.: (a) Civil Case No. 4301, before Branch 51
of the RTC of Bacolod, entitled Hector Lacson, et al. v. NASUTRA et al., (Hector
Lacson Case); (b) Civil Case No. 88-46368, before Branch 23 of the RTC of Manila,
entitled Ramon Monfort et al. v. NASUTRA et al. (Ramon Monfort Case); and (c) Civil
Case No. 65156, before Branch 264 of the RTC of Pasig, entitled Manuel Lacson, et
al. v. NASUTRA, et al. (Pasig Case).[14]

On the issue of no cause of action, petitioner argued that: (a) not being their agent,
NASUTRA had no obligation to share its profits with respondents; (b) the questioned
transactions were already perfected and consummated both with respect to the
delivery of the sugar and full payment of the price; (c) respondents are estopped
from questioning the subject transactions, having executed in favor of NASUTRA a
Chattel Mortgage on Standing Crop which authorized the latter, among others, to
sell or dispose of the same at the time, place, and for the price which it may deem
convenient and reasonable; and (d) NASUTRA had long been dissolved and
liquidated under Presidential Decree No. 2005 and Executive Order No. 114.[15]

Lastly, petitioner argued that the issues posed by respondents are barred by res
judicata and/or rendered moot by the decisions in the following cases, viz.: (a) G.R.
No. 55798, entitled Corazon Zayco, et al. v. NASUTRA et al.; (b) Civil Case No. Q33723, entitled Hortensia Starke v. NASUTRA, et al.; (c) Civil Case No. 3265, entitled
Cecilia Magsaysay, et al. v. NASUTRA et al.; and (d) Civil Case No. 16439, entitled
John Keng Seng v. NASUTRA, et al.[16]

On March 26, 1996, respondents filed a Consolidated Opposition to Motion to

Dismiss.[17] Simultaneous thereto, respondents also filed an Amended Certification
to the following effect:

xxxx

2. That, except for the case entitled Manuel Lacson v. Roberto S. Benedicto, et al.,
Civil Case 65156, Pasig, RTC Branch 264, filed by some of the Plaintiffs on June 20,
1995 and subsequently withdrawn by them without prejudice on November 14,
1995 pursuant to Sec. 1, Rule 17 prior to the filing of the present suit, Plaintiffs have
not commenced any other action or proceeding involving the same issues in the
Supreme Court, the Court of Appeals, or any other tribunal or agency; that to the
best of my knowledge, no such action or proceeding is pending the Supreme Court,
the Court of Appeals, or any other tribunal or agency; and if I or they should
hereafter learn that a similar action or proceeding has been filed or pending before
the Supreme Court , Court of Appeals, or any other tribunal or agency, Plaintiffs and
I hereby undertake to report such fact within five (5) days therefrom to this
Honorable Court.[18]

On June 5, 1996, the RTC issued an Order[19] granting petitioners motion to dismiss
the complaint, the dispositive portion of which reads:

WHEREFORE, premises considered, the Motions to Dismiss are hereby GRANTED.

The case against all the defendants is ordered DISMISSED.

Furnish copies of this Order all counsel on record for their information.

SO ORDERED.[20]

The RTC ruled that a perusal of the copies of the complaints in two cases, namely:
Hector Lacson Case and Ramon Monfort Case show similarities with the present
Bacolod Case such that different decisions or rulings would give rise to conflicting
rules on law on similar issues.[21] The RTC also held that respondents were guilty of
forum shopping for failure to report in their original anti-forum shopping certification
in the Bacolod Case that they had filed a similar case with the RTC of Pasig
notwithstanding that the same had been withdrawn by them. The RTC ruled that
even if the Pasig Case had been withdrawn, the same had already been
commenced.[22] Thus, the RTC held that there was a need to report the same in the
anti-forum shopping certification in the Bacolod Case. Lastly, the RTC ruled that
NASUTRA had already been dissolved and hence, respondents have no cause of
action against NASUTRA.[23] The other grounds raised, however, by petitioner in
support of its motion to dismiss were denied by the RTC, as the same did not appear
to be indubitable without further evidence.[24]

Respondents appealed the RTC Order to the CA.

On September 30, 1999, the CA rendered a Decision reversing the assailed RTC
Order. The CA found merit in respondents appeal and ordered for the remand of the
case to the RTC. The dispositive portion of the Decision reads:

WHEREFORE, the appeal is GRANTED and the Assailed Order dated June 5, 1996 is
REVERSED and SET ASIDE, and in lieu thereof, a new one is entered ordering the
REMAND of the case to the court of origin for further proceedings.

SO ORDERED.[25]

Aggrieved by the CA Decision, petitioner filed a Motion for Reconsideration[26],

which was, however, denied by the CA in a Resolution dated January 10, 2000.

Hence, herein petition, with petitioner raising the following errors committed by the
CA, to wit:

5.1. WHEN IT ABSOLVED THE PRIVATE RESPONDENTS OF ANY VIOLATION OF THE

ANTI-FORUM SHOPPING RULE NOTWITHSTANDING THEIR (CONCEDED) FAILURE TO
SEASONABLY APPRISE THE BACOLOD COURT OF THE EARLIER FILING OF A SIMILAR
CASE BEFORE THE PASIG COURT, THE SAME BEING A MATERIAL INFORMATION THE
NON-DISCLOSURE OR CONCEALMENT THEREOF CONSTITUTING AN INEXCUSABLE
OMISSION CLEARLY PENALIZED UNDER THE PERTINENT SC CIRCULARS AND SECTION
5, RULE 7 OF THE NEW RULES OF CIVIL PROCEDURE;

5.2. WHEN IT REFUSED TO APPLY THE PRINCIPLE OF LITIS PENDENTIA

NOTWITHSTANDING THE (CONCEDED) SIMILARITIES IN THE CIRCUMSTANCES OF THE
PLAINTIFFS, THE IDENTITIES OF THE DEFENDANTS AND, MOREOVER, THE
SIMILARITIES IN SOME OF THE ANTECEDENT ISSUES IN CIVIL CASE NO. 95-9137 AND
IN THE OTHER PENDING CASES AGAINST THE HEREIN PETITIONERS; and

5.3. WHEN IT FAILED TO CONSIDER THAT CIVIL CASE NO. 95-9137 DESERVES
DISMISSAL, AT ANY RATE, BASED ON THE OTHER GROUNDS INVOKED BY THE
HEREIN PETITIONERS, NAMELY, LACK OF CAUSE OF ACTION, RES JUDICATA, PAYMENT
AND PRESCRIPTION.[27]

The petition is not meritorious.

On Forum Shopping: Civil Case No. 95-9137 (Bacolod Case) vis-a-vis Civil Case No.
65156 (Pasig Case)

Petitioner contends that respondents are guilty of forum shopping because they
failed to disclose, at the time of the filing of the Bacolod Case, the fact that some of
the respondents had earlier commenced a similar action in Pasig. Petitioner claims
that respondents should have informed the RTC of Bacolod of the commencement
and subsequent withdrawal of the Pasig Case in the certificate of non-forum
shopping. Petitioner insists that even if the Pasig Case was subsequently withdrawn,
the same still constituted a commenced action, which is required to be disclosed
under the rules of forum shopping.

Section 5, Rule 7 of the 1997 Rules of Civil Procedure provides that:

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

Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of
the undertakings therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal actions. If the acts of the
party or his counsel clearly constitute willful and deliberate forum shopping, the
same shall be ground for summary dismissal with prejudice and shall constitute
direct contempt as well as a cause for administrative sanctions.

A perusal of the records shows that, with the exception of additional party-plaintiffs,
the Pasig Case actually has a strong resemblance to the Bacolod Case. The Pasig
Case, however, was dismissed upon the instance of the plaintiffs even before the
Bacolod Case was filed. The RTC Order[28] allowing the dismissal of the complaint in
the Pasig Case is hereunder reproduced, to wit:

xxxx

On November 14, 1995, A Notice of Dismissal was filed by plaintiffs thru counsel,
Attys. Ricardo G. Nepomuceno, Jr. and Epifanio Sedigo, Jr., pursuant to Section 1,
Rule 17 of the Rules of Court.

According to the said Rule, plaintiff may, at any time before service of answer,
dismiss an action by filing a notice of dismissal.

Records show that no answer has yet been filed by defendants.

Being in conformity to the Rules, the same is hereby granted.

WHEREFORE, herein complaint is hereby DISMISSED and without prejudice to the refiling thereof.

Notify parties and counsel of this Order.

SO ORDERED.[29]

The essence of forum shopping is the filing by a party against whom an adverse
judgment has been rendered in one forum, seeking another and possibly favorable
opinion in another suit other than by appeal or special civil action for certiorari;[30]
the act of filing of multiple suits involving the same parties for the same cause of
action, either simultaneously or successively for the purpose of obtaining a
favorable judgment.[31] Forum shopping exists where the elements of litis
pendentia are present or where a final judgment in one case will amount to res
judicata in the action under consideration.[32]

There is no dispute that the dismissal of the complaint in the Pasig case, upon
notice of the plaintiffs therein, was sanctioned by Section 1, Rule 17 of the Revised
Rules of Court.[33] Quite clearly, the Order declared that the dismissal of the
complaint was without prejudice to the re-filing thereof. Moreover, even if the same
were tested under the rules on litis pendentia and res judicata, the danger of
conflicting decisions cannot be present, since the Pasig case was dismissed even
before a responsive pleading was filed by petitioner. Since a party resorts to forum
shopping in order to increase his chances of obtaining a favorable decision or
action, it has been held that a party cannot be said to have sought to improve his
chances of obtaining a favorable decision or action where no unfavorable decision

has even been rendered against him in any of the cases he has brought before the
courts.[34]

While the RTC may have been of the opinion that the Pasig Case was nevertheless
commenced and, therefore, the same should have been stated by respondents in
their certification of non-forum shopping in the Bacolod case, this Court does not
share the same view.

In Roxas v. Court of Appeals,[35] this Court had on occasion ruled that when a
complaint is dismissed without prejudice at the instance of the plaintiff, pursuant to
Section 1, Rule 17 of the 1997 Rules of Civil Procedure, there is no need to state in
the certificate of non-forum shopping in a subsequent re-filed complaint the fact of
the prior filing and dismissal of the former complaint, thus:

Considering that the complaint in Civil Case No. 97-0523 was dismissed without
prejudice by virtue of the plaintiffs (herein petitioners) Notice of Dismissal dated
November 20, 1997 filed pursuant to Section 1, Rule 17 of the 1997 Rules of Civil
Procedure, there is no need to state in the certificate of non-forum shopping in Civil
Case No. 97-0608 about the prior filing and dismissal of Civil Case No. 97-0523. In
Gabionza v. Court of Appeals, we ruled that it is scarcely necessary to add that
Circular No. 28-91 (now Section 5, Rule 7 of the 1997 Rules of Civil Procedure) must
be so interpreted and applied as to achieve the purposes projected by the Supreme
Court when it promulgated that Circular. Circular No. 28-91 was designed to serve
as an instrument to promote and facilitate the orderly administration of justice and
should not be interpreted with such absolute literalness as to subvert its own
ultimate and legitimate objective or the goal of all rules or procedure which is to
achieve substantial justice as expeditiously as possible. The fact that the Circular
requires that it be strictly complied with merely underscores its mandatory nature in
that it cannot be dispensed with or its requirements altogether disregarded, but it
does not thereby interdict substantial compliance with its provisions under
justifiable circumstances.

Thus, an omission in the certificate of non-forum shopping about any event that
would not constitute res judicata and litis pendencia as in the case at bar, is not
fatal as to merit the dismissal and nullification of the entire proceedings considering
that the evils sought to be prevented by the said certificate are not present. It is in
this light that we ruled in Maricalum Mining Corp. v. National Labor Relations
Commission that a liberal interpretation of Supreme Court Circular No. 04-94 on
non-forum shopping would be more in keeping with the objectives of procedural
rules which is to "secure a just, speedy and inexpensive disposition of every action
and proceeding."[36]

Verily, in numerous occasions, this Court has relaxed the rigid application of the
rules to afford the parties the opportunity to fully ventilate their cases on the merits.
This is in line with the time-honored principle that cases should be decided only
after giving all parties the chance to argue their causes and defenses. Technicality
and procedural imperfection should thus not serve as basis of decisions.[37]
Technicalities should never be used to defeat the substantive rights of the other
party.[38] Every party-litigant must be afforded the amplest opportunity for the
proper and just determination of his cause, free from the constraints of
technicalities.[39] In that way, the ends of justice would be better served.[40] For,
indeed, the general objective of procedure is to facilitate the application of justice to
the rival claims of contending parties, bearing always in mind that procedure is not
to hinder but to promote the administration of justice.[41] In the case at bar,
considering that the same involves the various claims of 371 respondents, this
Court finds that justice and equity are best served by allowing respondents to prove
their case on the merits rather than denying them their day in court on a strict
application of the rules.

On Litis Pendentia: Bacolod Case, Hector Lacson Case, Ramon Monfort Case

Petitioner contends that the CA erred when it refused to apply the principle of litis
pendentia notwithstanding the similarities in the circumstances of the plaintiffs, the
identities of the defendants and the similarities in some of the antecedent issues in
the Bacolod Case, the Hector Lacson Case and Ramon Monfort Case.

The requisites of litis pendentia are: (a) the identity of parties, or at least, such as
representing the same interests in both actions; (b) the identity of rights asserted
and relief prayed for, the relief being founded on the same facts; and (c) the identity
of the two cases, such that judgment in one, regardless of which party is successful,
would amount to res judicata in the other.[42]

The underlying principle of litis pendentia is the theory that a party is not allowed to
vex another more than once regarding the same subject matter and for the same

cause of action.[43] This theory is founded on the public policy that the same
subject matter should not be the subject of controversy in courts more than once, in
order that possible conflicting judgments may be avoided for the sake of the
stability of the rights and status of persons.[44]

The CA was correct when it opined that:

Our perusal of the record reveals that forum shopping cannot, indeed, be attributed
to the appellants. While it may be readily conceded that the plaintiffs in the instant
case are more or less similarly situated as the plaintiffs in the cases previously filed
and that the defendants, or at least the interest they represent, are basically the
same, the fact remains that there is no identity of causes of action and issues in the
cases so far filed against the latter. The instant suit, as may be gleaned from the
complaint, concerns the supposed undervaluation by the appellees of fifteen (15)
sugar export sales of the appellants export sugar production for the crop years
1979-1980 and 1980-1981 (pp. 3-32, Orig. Rec.). In contrast, Civil Case No. 4301,
entitled Hector Lacson, et al. vs. National Sugar Trading Corporation, et al. concerns
the overcharging of trading costs for the plaintiffs export sugar production for the
crop years 1981-1982 and 1982-1983, underpayment resulting from the defendants
use of an erroneous peso-dollar exchange rate and reimbursement for amounts
alleged to have been wrongfully withheld by the latter (pp. 163-171, ibid.) On the
other hand, Civil Case No. 88-46368 entitled Ramon Monfort, et al. vs. Philippine
Sugar Commission, et al. concerned the deficiency due the plaintiffs therein from
sugar export sales for which a lower exchange rate was allegedly used by the
defendants, the recovery, among others, of excessive trading costs charged,
unauthorized deductions, damages, premiums and other sums supposedly still due
from the defendants, as well as a detailed accounting of the sales of the export
sugar produced by the plaintiffs therein. While the amended complaint filed in the
case also sought to claim differentials for three (3) under-valued/under-declared
NASUTRA export sales from the crop year 1980-1981 harvest, the same significantly
pertained to different shipments and were coursed not through appellee Traders
Royal Bank but through the Republic Planters Bank (pp. 246-271, ibid). The variance
in the subject matters of the instant case and the aforesaid cases are even
conceded in the brief filed by appellee Roberto Benedicto (pp. 153-155, Rollo).[45]

The test to determine identity of causes of action is to ascertain whether the same
evidence necessary to sustain the second cause of action is sufficient to authorize a
recovery in the first, even if the forms or the nature of the two (2) actions are
different from each other. If the same facts or evidence would sustain both, the two
(2) actions are considered the same within the rule that the judgment in the former
is a bar to the subsequent action; otherwise, it is not. This method has been
considered the most accurate test as to whether a former judgment is a bar in
subsequent proceedings between the same parties. It has even been designated as
infallible.[46]

While the plaintiffs in the Bacolod Case are more or less similarly situated as the
plaintiffs in the Hector Lacson Case and Ramon Monfort Case, the CA was correct
when it ruled that there was no identity of causes of action and issues[47] as it
cannot be said that exactly the same evidence are needed to prove the causes of
action in all three cases.

Thus, in the Bacolod Case, the evidence needed to prove that petitioner
undervalued fifteen sugar export sales of respondents export sugar production for
the crop years 1979-1980 and 1980-1981 is not the same evidence needed in the
Hector Lacson Case to prove the over-charging of trading costs for respondents
export sugar production for the crop years 1981-1982 and 1982-1983,
underpayment resulting from the petitioners use of an erroneous peso-dollar
exchange rate and reimbursement for amounts alleged to have been wrongfully
withheld by the latter. The same holds true for the Ramon Monfort Case where the
same significantly pertained to different shipments and were coursed not thru the
Traders Royal Bank, but thru the Republic Planters Bank. The Court of Appeals,
therefore, did not abuse its discretion in finding that no litis pendentia existed in the
case at bar.

On the other grounds which warrant the dismissal of the action

It is the position of petitioner that the CA erred when it chose not to dismiss the
case based on the other grounds petitioner had earlier raised in its motion to
dismiss. More specifically, petitioner claims that the grounds of lack of cause of
action, res judicata, payment and prescription warrant the dismissal of the
complaint.

The same deserves scant consideration.

It bears to stress that the RTC, in its June 5, 1996 Order, did not also consider the
other grounds now raised by petitioner, to wit:

In view of the sufficiency of the grounds for dismissal discussed above, the other
grounds invoked by the defendants in their Motion to Dismiss, which do not appear
to be indubitable without additional evidence need not be considered.[48]

While petitioners Motion to Dismiss was granted by the RTC in its June 5, 1996
Order, the same Order, however, effectively denied the other grounds raised by
petitioner as the same did not appear to be indubitable without additional evidence.

It is a settled rule that an Order denying a motion to dismiss is merely interlocutory

and, therefore, not appealable, nor can it be subject of a petition for review on
certiorari. Such order may only be reviewed in the ordinary course of law by an
appeal from the judgment after trial. The ordinary procedure to be followed in that
event is to file an answer, go to trial, and if the decision is adverse, reiterate the
issue on appeal from the final judgment.[49]

While the rule refers to instances when a motion to dismiss is completely denied,
this Court finds no reason not to apply the same in instances when some of the
grounds raised in a motion to dismiss are denied by the lower court. The other
grounds now raised by petitioner were not before the CA because the same were
not put in issue by respondents when they chose to assail the RTCs Order to dismiss
the complaint. This is understandable especially since the other grounds were not
made the basis of the RTCs Order. Procedurally then, the proper remedy of
petitioner, should he choose to reassert the other grounds, is to interpose the same
as defenses in his answer and not to put them in issue in this appeal.
WHEREFORE, premises considered, the petition is DENIED. The September 30, 1999
Decision and January 10, 2000 Resolution of the Court of Appeals in CA-G.R. CV No.
53841, directing for the remand of the case, are AFFIRMED. The Regional Trial Court
of Bacolod City, Branch 44, is hereby ordered to hear the case on the merits and
decide the same with deliberate dispatch.
SO ORDERED.
FORUM SHOPPING
MID-PASIG LAND DEVELOPMENT
CORPORATION,
Petitioner,

- versus -

MARIO TABLANTE, doing business under the name and style ECRM ENTERPRISES;
ROCKLAND CONSTRUCTION COMPANY;
LAURIE LITAM; and MC HOME DEPOT, INC.,
Respondents.

G.R. No. 162924

Present:

CARPIO, J.,*
CORONA,
Chairperson,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

Promulgated:

February 4, 2010

x-----------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Assailed in the instant petition are the two (2) Resolutions[1] of the Court of Appeals
(CA) dated November 20, 2003 and March 22, 2004, dismissing the petition for
certiorari before it on technical grounds and denying the motion for reconsideration
thereof, respectively.

The background facts are as follows:

Petitioner is the registered owner of a piece of land situated in Pasig City, bounded
by Meralco Avenue, Ortigas Avenue, Doa Julia Vargas Avenue, and Valle Verde
Subdivision. On December 6, 1999, petitioner, represented by its Chairman and
President, Ronaldo Salonga, and ECRM Enterprises, represented by its proprietor,
Mario P. Tablante, executed an agreement whereby the former would lease to the
latter an area, approximately one (1) hectare, of the aforesaid land, for a period of
three (3) months, to be used as the staging area for the Home and Garden
Exhibition Fair. On March 6, 2000, the date of the expiration of the Lease
Agreement, Tablante assigned all his rights and interests under the said agreement
to respondents Laurie M. Litam and/or Rockland Construction Company, Inc.
(Rockland) under a Deed of Assignment of the same date. Petitioner eventually
learned that respondent Tablante had executed a Contract of Lease with respondent
MC Home Depot, Inc. on November 26, 1999 over the same parcel of land.
Thereafter, respondent MC Home Depot, Inc. constructed improvements on the land
and subdivided the area into fifty-nine (59) commercial stalls, which it leased to
various entities. Upon the expiration of the lease on March 6, 2000, petitioner

demanded that respondents vacate the land. A final demand was made in a letter
dated December 20, 2000.[2]

In order to forestall ejectment from the premises, respondent Rockland filed a case
for Specific Performance with the Regional Trial Court (RTC), Branch 266, Pasig City,
on January 11, 2001, compelling petitioner to execute a new lease contract for
another three (3) years, commencing in July 2000. This was docketed as Civil Case
No. 68213. Petitioner moved to dismiss the complaint on the ground that it was
anticipatory in nature.

Consequently, on August 22, 2001, petitioner filed Civil Case No. 8788 for unlawful
detainer against herein respondents, raffled to the Municipal Trial Court (MTC), Pasig
City, Branch 70. Simultaneously, petitioner filed a supplemental motion to dismiss
Civil Case No. 68213, on the ground of litis pendentia. Petitioners motion to dismiss
was denied. The denial was questioned and eventually elevated to the Supreme
Court.[3]

Meantime, on April 29, 2002, the MTC rendered judgment in the unlawful detainer
(ejectment) case. In the main, the trial court ruled that the issue did not involve
material or physical possession, but rather, whether or not ECRM had the right to
exercise an option to renew its lease contract. The MTC stated that, considering that
this issue was incapable of pecuniary estimation, jurisdiction over the case was
vested in the RTC. The trial court, therefore, disposed, as follows:
WHEREFORE, judgment is hereby rendered DISMISSING the complaint for lack of
merit. In the meantime, the plaintiff is hereby ordered to pay the defendants
attorneys fees and expenses of litigation in the amount of TWENTY THOUSAND
PESOS (P20,000.00).[4]

On appeal, the RTC, Pasig City, Branch 160, affirmed in toto. In its decision dated
July 10, 2003, the RTC ruled that:

Relative to the issue raised by the appellant that the lower court erred in finding it
had no jurisdiction over the subject matter of this case as the question of whether
or not ECRM under the provisions of the lease agreement (pars. 3 and 13) has the
right to exercise an option to renew its lease contract is one incapable of pecuniary
estimation and therefore jurisdiction is vested in the Regional Trial Court. Republic
Act No. 7691 grants Metropolitan Trial Courts the exclusive jurisdiction over cases of

forcible entry and unlawful detainer. Since it has been sufficiently established under
the facts obtaining that the contract of lease has been renewed before the
expiration of the lease period, and the appellant has consented to the renewal and
assignment of the lease, it necessarily follows that the issue on whether the lower
court erred in finding that it did not have jurisdiction over the subject matter raised
by the appellant, deserves scant consideration and this court need not delve into it
anymore.[5]

A petition for certiorari was consequently filed with the CA.

In the assailed resolution dated November 20, 2003, the CA resolved to dismiss the
petition on the following grounds:

1)
The verification and certification against non-forum shopping was
signed by a certain Antonio A. Merelos as General Manager of the petitionercorporation without attaching therewith a Corporate Secretarys certificate or board
resolution that he is authorized to sign for and on behalf of the petitioner; and

2)
Lack of pertinent and necessary documents which are material
portions of the record as required by Section 2, Rule 42 of the Rules of Civil
Procedure.[6]

The motion for reconsideration was denied;[7] hence, the instant petition assigning
the following errors:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT THE

VERIFICATION AND CERTIFICATION AGAINST FORUM-SHOPPING IN THE PETITION
FAILED TO ATTACH THE BOARD RESOLUTION SHOWING THE AUTHORITY OF THE
AFFIANT.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT THE

PETITION LACKED THE PERTINENT AND NECESSARY DOCUMENTS REQUIRED BY THE
RULES.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN DISMISSING THE

PETITION THUS EFFECTIVELY UPHOLDING THE DECISION OF THE REGIONAL TRIAL
COURT, TO WIT: (a) THAT THE LEASE AGREEMENT WAS UNILATERALLY RENEWED
AND THAT PETITIONER IS ESTOPPED FROM DENYING SUCH UNILATERAL RENEWAL;
(b) THAT RESPONDENTS TABLANTE/ECRM, ROCKLAND AND MC HOME DEPOT COULD
VALIDLY OCCUPY THE PROPERTY IN THE ABSENCE OF ANY VALID LEASE AGREEMENT
CONSENTED TO BY PETITIONER; (c) PETITIONER [IS] LIABLE FOR ATTORNEYS FEES
AND COSTS OF SUIT.[8]

The petition is granted.

In Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue,[9] the

Court had occasion to explain that:

It must be borne in mind that Sec. 23, in relation to Sec. 25 of the Corporation Code,
clearly enunciates that all corporate powers are exercised, all business conducted,
and all properties controlled by the board of directors. A corporation has a separate
and distinct personality from its directors and officers and can only exercise its
corporate powers through the board of directors. Thus, it is clear that an individual
corporate officer cannot solely exercise any corporate power pertaining to the
corporation without authority from the board of directors. This has been our
constant holding in cases instituted by a corporation.

In a slew of cases, however, we have recognized the authority of some corporate

officers to sign the verification and certification against forum shopping. In MactanCebu International Airport Authority v. CA, we recognized the authority of a general
manager or acting general manager to sign the verification and certificate against
forum shopping; x x x.

In sum, we have held that the following officials or employees of the company can
sign the verification and certification without need of a board resolution: (1) the
Chairperson of the Board of Directors, (2) the President of a corporation, (3) the
General Manager or Acting General Manager, (4) Personnel Officer, and (5) an
Employment Specialist in a labor case.

While the above cases do not provide a complete listing of authorized signatories to
the verification and certification required by the rules, the determination of the
sufficiency of the authority was done on a case to case basis. The rationale applied
in the foregoing cases is to justify the authority of corporate officers or
representatives of the corporation to sign the verification or certificate against
forum shopping, being in a position to verify the truthfulness and correctness of the
allegations in the petition.[10]

From the foregoing, it is thus clear that the failure to attach the Secretarys
Certificate, attesting to General Manager Antonio Mereloss authority to sign the
Verification and Certification of Non-Forum Shopping, should not be considered fatal
to the filing of the petition. Nonetheless, the requisite board resolution was
subsequently submitted to the CA, together with the pertinent documents.[11]
Considering that petitioner substantially complied with the rules, the dismissal of
the petition was, therefore, unwarranted. Time and again, we have emphasized that
dismissal of an appeal on a purely technical ground is frowned upon especially if it
will result in unfairness. The rules of procedure ought not to be applied in a very
rigid, technical sense for they have been adopted to help secure, not override,
substantial justice. For this reason, courts must proceed with caution so as not to
deprive a party of statutory appeal; rather, they must ensure that all litigants are
granted the amplest opportunity for the proper and just ventilation of their causes,
free from the constraint of technicalities.[12]

After a finding that the CA erred in dismissing the petition before it, a remand of the
case is in order. However, a perusal of the records reveals that this is no longer
necessary in light of relevant developments obtaining in the case at bar.

Petitioner, in its Memorandum dated October 28, 2005, alleged that respondents
possessory claims had lapsed and, therefore, had become moot and academic.
Respondent Rockland prayed that a three-year lease period be granted to it in order
that it would be able to plan its activities more efficiently. Since the claimed lease
contract had already expired as of July or August 2003, there appears no reason
why respondents should continue to have any claim to further possession of the
property.[13]

Respondent Rockland also stated in its Memorandum dated March 16, 2006 that it
was no longer in possession of the subject property considering that:

50. In a Resolution dated 17 September 2004, in the case of Rockland Construction

Company, Inc. vs. Mid-Pasig Land Development Corporation, et al., docketed as SCA
No. 2673, and the Omnibus Order dated 12 November 2004, affirming the aforesaid
Resolution, Branch 67 Pasig City Regional Trial Court Presiding Judge Mariano M.
Singzon awarded possession (albeit erroneously) of subject property to Pasig
Printing Corporation, an intervenor in the SCA case.

51. At present, petitioner does not have a cause of action against herein respondent
Rockland. Respondent is not unlawfully withholding possession of the property in
question as in fact respondent is not in possession of the subject property. The issue
of possession in this ejectment case has therefore been rendered moot and
academic.[14]

This allegation was confirmed by respondent MC Home Depot, Inc. in its

Comment/Memorandum dated May 22, 2007 submitted to the Court. It stated
therein that the passage of time has rendered the issue of possession moot and
academic with respect to respondent Rockland, as the three-year period has long
been expired in 2003.[15] Furthermore, respondent MC Home Depot, Inc. asserts
that it is in rightful possession of the land on the strength of a Memorandum of
Agreement dated November 22, 2004 between the latter and Pasig Printing
Corporation. By petitioners admission that while it remains the registered owner of
the land, possession of the same had been adjudicated in favor of Pasig Printing
Corporation, another entity without any contractual relationship with petitioner, on
the strength of an Order from the RTC of Pasig City. Considering that Pasig Printing
Corporation has the jus possessionis over the subject property, it granted the MC
Home Depot, Inc. actual occupation and possession of the subject property for a
period of four (4) years, renewable for another four (4) years upon mutual
agreement of the parties.[16]

WHEREFORE, the petition is GRANTED. The assailed Resolutions of the Court of

Appeals are REVERSED and SET ASIDE. However, in view of the developments which
have rendered the issue of the right of possession over the subject property moot
and academic, the main case is hereby considered CLOSED AND TERMINATED.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 88709 February 11, 1992

NICOS INDUSTRIAL CORPORATION, JUAN COQUINCO and CARLOS COQUINCO,
petitioners,
vs.
THE COURT OF APPEALS, VICTORINO P. EVANGELISTA, in his capacity as Ex-Officio
Sheriff of Bulacan, UNITED COCONUT PLANTERS BANK, MANUEL L. CO, GOLDEN
STAR INDUSTRIAL CORPORATION and THE REGISTER OF DEEDS FOR THE PROVINCE
OF BULACAN, respondents.
Manuel T. Ubarra for petitioners.
Encanto, Mabugat & Associates for UCPB.
Mangalindan and Bermas Law Offices for private respondent.
Federico Reyes for Manuel L. Co.

CRUZ, J.:
We are asked once again to interpret the constitutional provision that no decision
shall be rendered by any court without stating therein clearly and distinctly the facts
and the law on which it is based, 1 this time in connection with an order of the trial
court sustaining demurrer to the evidence. 2 The order has been affirmed by the
respondent Court of Appeals, 3 and the appellant has come to this Court in this
petition for review on certiorari, invoking the said provision and alleging several
reversible errors.
In the complaint filed by the petitioners before the Regional Trial Court of Bulacan, it
was alleged that on January 24, 1980, NICOS Industrial Corporation obtained a loan
of P2,000,000.00 from private respondent United Coconut Planters Bank and to
secure payment thereof executed a real estate mortgage on two parcels of land
located at Marilao, Bulacan. The mortgage was foreclosed for the supposed nonpayment of the loan, and the sheriff's sale was held on July 11, 1983, without republication of the required notices after the original date for the auction was
changed without the knowledge or consent of the mortgagor. UCPB was the highest
and lone bidder and the mortgaged lands were sold to it for P3,558,547.64. On
August 29, 1983, UCPB sold all its rights to the properties to private respondent
Manuel Co, who on the same day transferred them to Golden Star Industrial
Corporation, another private respondent, upon whose petition a writ of possession
was issued to it on November 4, 1983. On September 6, 1984, NICOS and the other
petitioners, as chairman of its board of directors and its executive vice-president,
respectively, filed their action for "annulment of sheriff's sale, recovery of
possession, and damages, with prayer for the issuance of a preliminary prohibitory
and mandatory injunction."

Golden Star and Victorino P. Evangelista, as ex officio sheriff of Bulacan, moved to

dismiss the complaint on the grounds of lack of jurisdiction, prescription, estoppel,
and regularity of the sheriff's sale. Co denied the allegations of the plaintiffs and,
like the other defendants, counterclaimed for damages. In its answer with
counterclaim, UCPB defended the foreclosure of the mortgage for failure of NICOS to
pay the loan in accordance with its promissory note and insisted that the sheriff's
sale had been conducted in accordance with the statutory requirements.
The plaintiffs presented two witnesses, including petitioner Carlos Coquinco, who
testified at three separate hearings. They also submitted 21 exhibits. On April 30,
1986, Golden Star and Evangelista filed a 7-page demurrer to the evidence where
they argued that the action was a derivative suit that came under the jurisdiction of
the Securities and Exchange Commission; that the mortgage had been validly
foreclosed; that the sheriff's sale had been held in accordance with Act 3135; that
the notices had been duly published in a newspaper of general circulation; and that
the opposition to the writ of possession had not been filed on time. No opposition to
the demurrer having been submitted despite notice thereof to the parties, Judge
Nestor F. Dantes considered it submitted for resolution and on June 6, 1986, issued
the
following
ORDER
Acting on the "Demurrer to Evidence" dated April 30, 1986 filed by defendants
Victorino P. Evangelista and Golden Star Industrial Corporation to which plaintiff and
other defendants did not file their comment/opposition and it appearing from the
very evidence adduced by the plaintiff that the Sheriff's Auction Sale conducted on
July 11, 1983 was in complete accord with the requirements of Section 3, Act 3135
under which the auction sale was appropriately held and conducted and it
appearing from the allegations in paragraph 13 of the plaintiff's pleading and
likewise from plaintiff Carlos Coquinco's own testimony that his cause is actuallyagainst the other officers and stockholders of the plaintiff Nicos Industrial
Corporation ". . . for the purpose of protecting the corporation and its stockholders,
as well as their own rights and interests in the corporation, and the corporate
assets, against the fraudulent ants and devices of the responsible officials of the
corporation, in breach of the trust reposed upon them by the stockholders . . ." a
subject matter not within the competent jurisdiction of the Court, the court finds the
same to be impressed with merit.
WHEREFORE, plaintiff's complaint is hereby dismissed. The Defendants' respective
counterclaims are likewise dismissed.
The Writ of Preliminary Injunction heretofore issued is dissolved and set aside.
It is this order that is now assailed by the petitioners on the principal ground that it
violates the aforementioned constitutional requirement. The petitioners claim that it
is not a reasoned decision and does not clearly and distinctly explain how it was
reached by the trial court. They also stress that the sheriff's sale was irregular
because the notices thereof were published in a newspaper that did not have
general circulation and that the original date of the sheriff's sale had been changed

without its consent, the same having been allegedly given by a person not
authorized to represent NICOS. It is also contended that the original P2 million loan
had already been paid and that if there was indeed a second P2 million loan also
secured by the real estate mortgage, it was for UCPB to prove this, as well as its
allegation that NICOS had defaulted in the payment of the first quarterly installment
on the first loan.
The petitioners complain that there was no analysis of their testimonial evidence or
of their 21 exhibits, the trial court merely confining itself to the pronouncement that
the sheriff's sale was valid and that it had no jurisdiction over the derivative suit.
There was therefore no adequate factual or legal basis for the decision that could
justify its review and affirmance by the Court of Appeals.
Rejecting this contention, the respondent court held:
In their first assignment of error, appellants faults the court for its failure to state
clearly and distinctly the facts and the law on which the order of dismissal is based,
as required by Section 1, Rule 36, of the Rules of Court and the Constitution.
An order granting a demurrer to the evidence is in fact an adjudication on the
merits and consequently the requirements of Section 1, Rule 36, is applicable. We
are not however prepared to hold that there is a reversible omission of the
requirements of the rule in the Order appealed from, it appearing from a reading
thereof that there is substantial reference to the facts and the law on which it is
based.
The Order which adverts to the Demurrer to the Evidence expressly referred to the
evidence adduced by the plaintiff as showing that the Sheriff's auction sale
conducted on July 11, 1983, was in complete accord with the requisites of Section 3,
Act 3135 under which the auction sale was apparently held and conducted. It
likewise makes reference to the allegations in paragraph 13 of plaintiff's pleadings
and plaintiff Carlos Coquinco's own testimony that the case is actually against the
other officers and stockholders of plaintiff NICOS Industrial Corporation and
concludes, rightly or wrongly, that the subject matter thereof is not within the
competent jurisdiction of the Court.
We hold that the order appealed from as framed by the court a quo while leaving
much to be desired, substantially complies with the rules.
This Court does not agree. The questioned order is an over-simplification of the
issues, and violates both the letter and spirit of Article VIII, Section 14, of the
Constitution.
It is a requirement of due process that the parties to a litigation be informed of how
it was decided, with an explanation of the factual and legal reasons that led to the
conclusions of the court. The court cannot simply say that judgment is rendered in
favor of X and against Y and just leave it at that without any justification
whatsoever for its action. The losing party is entitled to know why he lost, so he
may appeal to a higher court, if permitted, should he believe that the decision
should be reversed. A decision that does not clearly and distinctly state the facts

and the law on which it is based leaves the parties in the dark as to how it was
reached and is especially prejudicial to the losing party, who is unable to pinpoint
the possible errors of the court for review by a higher tribunal.
It is important to observe at this point that the constitutional provision does not
apply to interlocutory orders, such as one granting a motion for postponement or
quashing a subpoena, because it "refers only to decisions on the merits and not to
orders of the trial court resolving incidental matters." 4 As for the minute resolutions
of this Court, we have already observed in Borromeo v. Court of Appeals 5 that
The Supreme Court disposes of the bulk of its cases by minute resolutions and
decrees them as final and executory, as where a case is patently without merit,
where the issues raised are factual in nature, where the decision appealed from is
supported by substantial evidence and is in accord with the facts of the case and
the applicable laws, where it is clear from the records that the petitions were filed
merely to forestall the early execution of judgment and for non-compliance with the
rules. The resolution denying due course or dismissing a petition always gives the
legal basis.
xxx xxx xxx
The Court is not duty bound to render signed decisions all the time. It has ample
discretion to formulate decisions and/or minute resolutions, provided a legal basis is
given, depending on its evaluation of a case.
The order in the case at bar does not come under either of the above exceptions. As
it is settled that an order dismissing a case for insufficient evidence is a judgment
on the merits, 6 it is imperative that it be a reasoned decision clearly and distinctly
stating therein the facts and the law on which it is based.
It may be argued that a dismissal based on lack of jurisdiction is not considered a
judgment on the merits and so is not covered by the aforecited provision. There is
no quarrel with this established principle. However, the rule would be applicable
only if the case is dismissed on the sole ground of lack of jurisdiction and not when
some other additional ground is invoked.
A careful perusal of the challenged order will show that the complaint was dismissed
not only for lack of jurisdiction but also because of the insufficiency of the evidence
to prove the invalidity of the sheriff's sale. Regarding this second ground, all the trial
court did was summarily conclude "from the very evidence adduced by the plaintiff"
that the sheriff's sale "was in complete accord with the requirements of Section 3,
Act 3135." It did not bother to discuss what that evidence was or to explain why it
believed that the legal requirements had been observed. Its conclusion was
remarkably threadbare. Brevity is doubtless an admirable trait, but it should not and
cannot be substituted for substance. As the ruling on this second ground was
unquestionably a judgment on the merits, the failure to state the factual and legal
basis thereof was fatal to the order.
Significantly, the respondent court found that the trial court did have jurisdiction
over the case after all. This made even more necessary the factual and legal

explanation for the dismissal of the complaint on the ground that the plaintiff's
evidence was insufficient.
In People v. Escober, 7 the trial court in a decision that covered only one and a half
pages, single spaced found the defendant guilty of murder and sentenced him to
death. Holding that the decision violated the constitutional requirement, the Court
observed through then Associate Justice Marcelo B. Fernan:
The above-quoted decision falls short of this standard. The inadequacy stems
primarily from the respondent judge's tendency to generalize and to form
conclusions without detailing the facts from which such conclusions are deduced.
Thus, he concluded that the material allegations of the Amended Information were
the facts without specifying which of the testimonies or the exhibits supported this
conclusion. He rejected the testimony of accused-appellant Escober because it was
allegedly replete with contradictions without pointing out what these contradictions
consist of or what "vital details" Escober could have recalled as a credible witness.
He also found the crime to be attended by the aggravating circumstances of
cruelty, nighttime, superior strength, treachery, in band, "among others" but did not
particularly state the factual basis for such findings.
While it is true that the case before us does not involve the life or liberty of the
defendant, as in Escober, there is still no reason for the constitutional short-cut
taken by the trial judge. The properties being litigated are not of inconsequential
value; they were sold for three and a half million pesos in 1983 and doubtless have
considerably appreciated since then, after more than eight years. These facts alone
justified a more careful and thorough drafting of the order, to fully inform the parties
and the courts that might later be called upon to review it of the reasons why the
demurrer to the evidence was sustained and the complaint dismissed.
In Romero v. Court of Appeals, 8 the Court, somewhat reluctantly, approved a
memorandum decision of the Court of Appeals consisting of 4 pages, single-spaced,
which adopted by reference the findings of fact and conclusions of law of the Court
of Agrarian Relations. While holding that the decision could be considered
substantial compliance with PD 946, Section 18, 9 and BP 129, Section 40, 10
Justice Jose Y. Feria nevertheless expressed the misgiving that "the tendency would
be to follow the line of least resistance by just adopting the findings and conclusions
of the lower court without thoroughly studying the appealed case."
Obviously, the order now being challenged cannot qualify as a memorandum
decision because it was not issued by an appellate court reviewing the findings and
conclusions of a lower court. We note that, contrary to the impression of the
respondent court, there is not even an incorporation by reference of the evidence
and arguments of the parties, assuming this is permitted. No less importantly, again
assuming arguendo that such reference is allowed and has been made, there is no
immediate accessibility to the incorporated matters so as to insure their convenient
examination by the reviewing court. In Francisco v. Permskul, 11 which is the latest
decision of the Court on the issue now before us, we categorically required:
. . . Although only incorporated by reference in the memorandum decision of the
regional trial court, Judge Balita's decision was nevertheless available to the Court

of Appeals. It is this circumstance, or even happenstance, if you will, that has

validated the memorandum decision challenged in this case and spared it from
constitutional infirmity.
That same circumstance is what will move us now to lay down the following
requirement, as a condition for the proper application of Section 40 of BP Blg. 129.
The memorandum decision, to be valid, cannot incorporate the findings of fact and
the conclusions of law of the lower court only by remote reference, which is to say
that the challenged decision is not easily and immediately available to the person
reading the memorandum decision. For the incorporation by reference to be
allowed, it must provide for direct access to the facts and the law being adopted,
which must be contained in a statement attached to the said decision. In other
words, the memorandum decision authorized under Section 40 of BP Blg. 129
should actually embody the findings of fact and conclusions of law of the lower
court in an annex attached to and made an indispensable part of the decision.
It is expected that this requirement will allay the suspicion that no study was made
of the decision of the lower court and that its decision was merely affirmed without
a proper examination of the facts and the law on which it was based. The proximity
at least of the annexed statement should suggest that such an examination has
been undertaken. It is, of course, also understood that the decision being adopted
should, to begin with, comply with Article VIII, Section 14 as no amount of
incorporation or adoption will rectify its violation.
In Escober, the Court observed that the flawed decision "should have been
remanded to the court a quo for the rendition of a new judgment" but decided
nevertheless to decide the case directly, the records being already before it and in
deference to the right of the accused to a speedy trial as guaranteed by the Bill of
Rights. However, we are not so disposed in the case now before us.
It is not the normal function of this Court to rule on a demurrer to the evidence in
the first instance; our task comes later, to review the ruling of the trial court after it
is examined by the Court of Appeals and, when proper, its decision is elevated to us.
In the present case, we find that the respondent court did not have an adequate
basis for such examination because of the insufficiency of the challenged order. It
must also be noted that we deal here only with property rights and, although we do
not mean to minimize them, they do not require the same urgent action we took in
Escober, which involved the very life of the accused. All things considered, we feel
that the proper step is to remand this case to the court a quo for a revision of the
challenged order in accordance with the requirements of the Constitution.
Review by the Court of the other issues raised, most of which are factual, e.g., the
allegation of default in the payment of the loan, the existence of a second loan, the
nature of the newspapers where the notices of the sale were published, the
authority of the person consenting to the postponement of the sale, etc., is
impractical and unnecessary at this time. These matters should be discussed in
detail in the revised order to be made by the trial court so that the higher courts will
know what they are reviewing when the case is appealed.

In one case, 12 this Court, exasperated over the inordinate length of a decision rife
with irrelevant details, castigated the trial judge for his "extraordinary verbiage."
Kilometric decisions without much substance must be avoided, to be sure, but the
other extreme, where substance is also lost in the wish to be brief, is no less
unacceptable either. The ideal decision is that which, with welcome economy of
words, arrives at the factual findings, reaches the legal conclusions, renders its
ruling and, having done so, ends.
WHEREFORE, the challenged decision of the Court of Appeals is SET ASIDE for lack
of basis. This case is REMANDED to the Regional Trial Court of Bulacan, Branch 10,
for revision, within 30 days from notice, of the Order of June 6, 1986, conformably to
the requirements of Article VIII, Section 14, of the Constitution, subject to the appeal
thereof, if desired, in accordance with law. It is so ordered.
Narvasa, C.J., Grio-Aquino and Medialdea, JJ., concur.
NEGATIVE PREGNANT
EQUITABLE CARDNETWORK, INC., G.R. No. 180157
Petitioner,
Present:
VELASCO, JR., J., Chairperson,
- versus - PERALTA,
ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.
JOSEFA BORROMEO CAPISTRANO,
Respondent. Promulgated:

February 8, 2012
x --------------------------------------------------------------------------------------- x
DECISION

ABAD, J.:

This case is about the sufficiency of the defendants allegations in the answer
denying the due execution and genuineness of the plaintiffs actionable documents
and the kind of evidence needed to prove forgery of signature.

The Facts and the Case

Petitioner Equitable Cardnetwork, Inc. (ECI) alleged in its complaint that in
September 1997 respondent Josefa B. Capistrano (Mrs. Capistrano) applied for
membership at the Manila Yacht Club (MYC) under the latters widow-membership
program. Since the MYC and ECI had a credit card sponsorship agreement in which
the Club would solicit for ECI credit card enrollment among its members and
dependents, Mrs. Capistrano allegedly applied for and was granted a Visa Credit
Card by ECI.

ECI further alleged that Mrs. Capistrano authorized her daughter, Valentina C.
Redulla (Mrs. Redulla), to claim from ECI her credit card and ATM application form.
[1] Mrs. Redulla signed the acknowledgment receipt[2] on behalf of her mother,
Mrs. Capistrano. After Mrs. Capistrano got hold of the card, she supposedly started
using it. On November 24, 1997 Mrs. Redulla personally issued a P45,000.00 check
as partial payment of Mrs. Capistranos account with ECI. But Mrs. Redullas check
bounced upon deposit.

Because Mrs. Capistrano was unable to settle her P217,235.36 bill, ECI demanded
payment from her. But she refused to pay, prompting ECI to file on February 30,
1998 a collection suit against her before the Regional Trial Court (RTC) of Cebu City.

Answering the complaint, Mrs. Capistrano denied ever applying for MYC
membership and ECI credit card; that Mrs. Redulla was not her daughter; and that
she never authorized her or anyone to claim a credit card for her. Assuming she
applied for such a card, she never used it. Mrs. Redulla posed as Mrs. Capistrano
and fooled ECI into issuing the card to her. Consequently, the action should have
been brought against Mrs. Redulla. Mrs. Capistrano asked the court to hold ECI
liable to her for moral and exemplary damages, attorneys fees, and litigation
expenses.

After trial, the RTC[3] ruled that, having failed to deny under oath the genuineness
and due execution of ECIs actionable documents that were attached to the
complaint, Mrs. Capistrano impliedly admitted the genuineness and due execution
of those documents. In effect she admitted: 1) applying for membership at the MYC;
[4] 2) accomplishing the MYC membership information sheet[5] which contained a
request for an ECI Visa card; 3) holding herself liable for all obligations incurred in
the use of such card; 4) authorizing Mrs. Redulla to receive the Visa card issued in
her name;[6] 5) applying for an ATM Card with ECI; [7] and 6) using the credit card
in buying merchandise worth P217,235.36 as indicated in the sales slips.

The RTC said that when an action is founded upon written documents, their
genuineness and due execution shall be deemed admitted unless the defendant
specifically denies them under oath and states what he claims to be the facts.[8] A
mere statement that the documents were procured by fraudulent representation
does not raise any issue as to their genuineness and due execution.[9] The RTC
rejected Mrs. Capistranos argument that, having verified her answer, she should be
deemed to have denied those documents under oath. The RTC reasoned that she
did not, in her verification, deny signing those documents or state that they were
false or fabricated.
The RTC added that respondent Mrs. Capistrano could no longer raise the defense of
forgery since this had been cut-off by her failure to make a specific denial. Besides,
said the RTC, Mrs. Capistrano failed to present strong and convincing evidence that
her signatures on the document had been forged. She did not present a handwriting
expert who could attest to the forgery. The trial court ordered Mrs. Capistrano to pay
ECIs claim of P217,235.36 plus interests, attorneys fees and litigation expenses.
Mrs. Capistrano appealed the decision to the Court of Appeals (CA).

On May 10, 2007 the CA reversed the trial courts decision and dismissed ECIs
complaint.[10] The CA ruled that, although Mrs. Capistranos answer was somewhat
infirm, still she raised the issue of the genuineness and due execution of ECIs
documents during trial by presenting evidence that she never signed any of them.
Since ECI failed to make a timely objection to its admission, such evidence cured
the vagueness in her answer. Further, the CA ruled that Mrs. Capistrano sufficiently
proved by evidence that her signatures had been forged.

The Issues Presented

The issues presented are:

1. Whether or not the CA correctly ruled that, although Mrs. Capistrano failed to
make an effective specific denial of the actionable documents attached to the
complaint, she overcame this omission by presenting parol evidence to which ECI
failed to object; and

2. Whether or not the CA correctly ruled that Mrs. Capistrano presented clear and
convincing evidence that her signatures on the actionable documents had been
forged.

Ruling of the Court

One. An answer to the complaint may raise a negative defense which consists in
defendants specific denial of the material fact that plaintiff alleges in his complaint,
which fact is essential to the latters cause of action.[11] Specific denial has three
modes. Thus:

1) The defendant must specify each material allegation of fact the truth of which he
does not admit and whenever practicable set forth the substance of the matters on
which he will rely to support his denial;

2) When the defendant wants to deny only a part or a qualification of an averment

in the complaint, he must specify so much of the averment as is true and material
and deny the remainder; and

3) When the defendant is without knowledge and 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.

But the rule that applies when the defendant wants to contest the documents
attached to the claimants complaint which are essential to his cause of action is
found in Section 8, Rule 8 of the Rules of Court, which provides:

SECTION 8. How to contest such documents. When an action or defense is founded

upon a written instrument, copied in or attached to the corresponding pleading as
provided in the preceding Section, 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; but the
requirement of an oath does not apply when the adverse party does not appear to
be a party to the instrument or when compliance with an order for an inspection of
the original instrument is refused.

To determine whether or not respondent Mrs. Capistrano effectively denied the

genuineness and due execution of ECIs actionable documents as provided above,
the pertinent averments of the complaint and defendant Capistranos answer are
here reproduced.

ECIs complaint:
3. That sometime in 1997, defendant applied for membership, as widow of a
deceased member of the Manila Yacht Club;

4. That in connection with her application for membership in the Manila Yacht Club,
defendant applied for and was granted a Manila Yacht Club Visa Card in accordance
with Credit Card Sponsorship Agreement entered into between the plaintiff and the
Manila Yacht Club wherein Manila Yacht Club shall solicit applications for the Manila
Yacht Club Visa Cards from Manila Yacht Club members and dependents. Copy of the
Manila Yacht Club Information Sheet is hereto attached as Annex A;

Mrs. Capistranos answer:

3. She specifically denies paragraph[s] 3 and 4 of the complaint for want of
sufficient knowledge to form a belief as to the veracity of the allegations contained
therein and for the reasons stated in her special and affirmative defenses.

xxxx

ECIs complaint:
5. That defendant authorized her daughter, Mrs. Valentina Redulla to get the said
credit card including her ATM application form from the plaintiff which enabled the
defendant to avail of the cash advance facility with the use of said card; Copy of the
authorization letter, application form and acknowledgment receipt showing that
Valentina C. Redulla received the said credit card are hereto attached as Annexes B,
C, and D, respectively;
Mrs. Capistranos answer:
4. She specifically denies paragraph 5 of the complaint for want of sufficient
knowledge to form a belief as to the allegations contained therein. She never
authorized any person to get her card. Valentina Redulla is not her daughter.

xxxx

ECIs complaint:
6. That with the use of the said Manila Yacht Club Visa Card, defendant could
purchase goods and services from local and accredited stores and establishments
on credit and could make cash advances from ATM machines since it is the plaintiff
who pays first the said obligations and later at a stated period every month, the
plaintiff will send a statement of account to defendant showing how much she owes
the plaintiff for the payments it previously made on her behalf. Copy of the monthly
statement of accounts for the months of November and December 1997 are hereto
attached as Annexes E and F, respectively;

Mrs. Capistranos answer:

5. She specifically denies paragraph 6 of the complaint for want of sufficient
knowledge to form a belief as to the veracity of the allegations contained therein
and for the reasons as stated in her special and affirmative defenses.

xxxx

ECIs complaint:

7. That it is the agreement of the parties that in the event that an account is
overdue, interest at 1.75% per month and service charge at 1.25% will be charged
to the defendant;

Mrs. Capistranos answer:

6. She specifically denies paragraph 7 of the complaint for want of sufficient
knowledge to form a belief as to the veracity of the allegations contained therein.

xxxx

ECIs complaint:
8. That on November 24, 1997, defendants daughter, Mrs. Valentina C. Redulla
issued Solidbank Check No. 0127617 dated November 24, 1997 in the amount of
P45,000.00 in partial payment of defendants account with the plaintiff;

9. That when the said check was deposited in the bank, the same was dishonored
for the reason Account Closed. Copy of said said check is hereto attached as Annex
G;

Mrs. Capistranos answer:

7. She denies paragraph[s] 8 and 9 for want of sufficient knowledge to form a belief
as to the veracity of the allegations contained therein and for the reasons
aforestated. It is quite peculiar that herein defendants alleged account would be
paid with a personal check of somebody not related to her.

xxxx

ECIs complaint:
10. That defendant has an unpaid principal obligation to the plaintiff in the amount
of P217,235.326;

Mrs. Capistranos answer:

8. She denies paragraph 10 for want of sufficient knowledge as to the veracity of
the allegations contained therein and for the reasons stated in her special and
affirmative defenses. Granting ex gratia argumenti that defendant did indeed apply
for a card, still, she vehemently denies using the same to purchase goods from any
establishment on credit.

xxxx

ECIs complaint
11. That plaintiff made demands on the defendant to pay her obligation but despite
said demands, defendant has failed and refused to pay her obligation and still fails
and refuses to pay her obligation to the plaintiff and settle her obligation, thus,
compelling the plaintiff to file the present action and hire the services of counsel for
the amount of P53,998.84 and incur litigation expenses in the amount of
P30,000.00;

12. That it is further provided as one of the terms and conditions in the issuance of
the Manila Yacht Club Card that in the event that collection is enforced through
court action, 25% of the amount due of P53,998.84 will be charged as attorneys
fees and P53,998.84 will be charged as liquidated damages;

Mrs. Capistranos answer

9. She denies paragraph[s] 11 and 12 for want of sufficient knowledge to form a
belief as to the veracity of the allegations therein. If ever there was any demand
sent to herein defendant the same would have been rejected on valid and lawful
grounds. Therefore, any damage or expense, real or imaginary, incurred or
sustained by the plaintiff should be for its sole and exclusive account.

xxxx

Further, Mrs. Capistranos special and affirmative defenses read as follows:

10. Defendant repleads by reference all the foregoing allegations which are relevant
and material hereto.

11. Defendant denies having applied for membership with the Equitable
Cardnetwork, Inc. as a widow of a deceased member of the Manila Yacht Club.

12. She has never authorized anyone to get her alleged card for the preceding
reason. Therefore, being not a member, she has no obligation, monetary or
otherwise to herein plaintiff.

13. Plaintiff has no cause of action against herein answering defendant.

14. This Valentina C. Redulla is not her daughter. In all modesty, defendant being a
member of one of the prominent families of Cebu and being a board member of the
Borromeo Brothers Estate whose holdings include Honda Cars Cebu as well as other
prestigious establishments, it would be totally uncalled for if she would not honor a
valid obligation towards any person or entity.

15. She surmises that this Valentina Redulla has been posing as Josefa Capistrano.
Therefore, plaintiffs cause of action should have been directed towards this Redulla.

16. Even granting for the sake of argument that herein answering defendant did
indeed authorized somebody to pick up her card, still, she never made any
purchases with the use thereof. She, therefore, vehemently denies having used the
card to purchase any merchandise on credit.

In substance, ECIs allegations, supported by the attached documents, are that Mrs.
Capistrano applied through Mrs. Redulla for a credit card and that the former used it
to purchase goods on credit yet Mrs. Capistrano refused to pay ECI for them. On the
other hand, Mrs. Capistrano denied these allegations for lack of knowledge as to
their truth.[12] This mode of denial is by itself obviously ineffectual since a person
must surely know if he applied for a credit card or not, like a person must know if he
is married or not. He must also know if he used the card and if he did not pay the
card company for his purchases. A persons denial for lack of knowledge of things
that by their nature he ought to know is not an acceptable denial.

In any event, the CA ruled that, since ECI did not object on time to Mrs. Capistranos
evidence that her signatures on the subject documents were forged, such omission
cured her defective denial of their genuineness and due execution. The CAs ruling
on this point is quite incorrect.

True, issues not raised by the pleadings may be tried with the implied consent of the
parties as when one of them fails to object to the evidence adduced by the other
concerning such unimpleaded issues.[13] But the CA fails to reckon with the rule
that a partys admissions in the course of the proceedings, like an admission in the
answer of the genuineness and true execution of the plaintiffs actionable
documents, can only be contradicted by showing that defendant made such
admission through palpable mistake.[14] Here, Mrs. Capistrano never claimed
palpable mistake in the answer she filed.

It is of no moment that plaintiff ECI failed to object to Mrs. Capistranos evidence at

the trial that the subject documents were forgeries. As the Court ruled in Elayda v.
Court of Appeals,[15] the trial court may reject evidence that a party adduces to
contradict a judicial admission he made in his pleading since such admission is
conclusive as to him. It does not matter that the other party failed to object to the
contradictory evidence so adduced.
Notwithstanding the above, the Court holds that the CA correctly ordered the
dismissal of ECIs action since, contrary to the RTCs finding, Mrs. Capistrano
effectively denied the genuineness and due execution of ECIs actionable
documents. True, Mrs. Capistrano denied ECIs actionable documents merely for lack
of knowledge which denial, as pointed out above, is inadequate since by their
nature she ought to know the truth of the allegations regarding those documents.
But this inadequacy was cured by her quick assertion that she was also denying the
allegations regarding those actionable documents for the reasons as stated in her
special and affirmative defenses.

In the Special and Affirmative Defenses section of her answer, Mrs. Capistrano in
fact denied ECIs documented allegations that she applied for a credit card, was
given one, and used it. She said:

11. Defendant denies having applied for membership with the Equitable
Cardnetwork, Inc. as a widow of a deceased member of the Manila Yacht Club.

12. She has never authorized anyone to get her alleged card for the preceding
reason. Therefore, being not a member, she has no obligation, monetary or
otherwise to herein plaintiff.

Neither the RTC nor the CA can ignore Mrs. Capistranos above additional reasons
denying ECIs allegations regarding its actionable documents. Such reasons form
part of her answer. Parenthetically, it seems that, when Mrs. Capistrano denied the
transactions with ECI for lack of knowledge, it was her way of saying that such
transactions took place without her knowing. And, since Mrs. Capistrano in fact
verified her claim that she had no part in those transactions, she in effect denied
under oath the genuineness and due execution of the documents supporting them.
For this reason, she is not barred from introducing evidence that those documents
were forged.

Two. Here, apart from presenting an officer who identified its documents, ECI
presented no other evidence to support its claim that Mrs. Capistrano did business
with it. On the other hand, the evidence for the defense shows that it was not likely
for Mrs. Capistrano to have applied for a credit card since she was already 81 years
old, weak, bedridden, and suffering from senility at the time in question.[16] What is
more, she had been staying in Cagayan de Oro under the care of his son Mario;
whereas she made the alleged cash advances and purchases using the credit card
in different malls in Cebu City, Bohol, and Muntinlupa City.[17]

Further, as the CA found, Mrs. Capistranos specimen signatures on a Deed of Sale,

[18] an Extra-judicial Settlement of Estate of Deceased Person,[19] a Waiver of
Rights,[20] and a handwritten note,[21] executed at about the time in question,
clearly varied from the signatures found on ECIs documents.[22] The testimony of a
handwriting expert, while useful, is not indispensable in examining or comparing
handwritings or signatures.[23] The matter here is not too technical as to preclude
the CA from examining the signatures and ruling on whether or not they are
forgeries. The Court finds no reason to take exception from the CAs finding.
WHEREFORE, the Court DISMISSES the petition and AFFIRMS the order of the Court
of Appeals in CA-G.R. CV 79424 dated May 10, 2007 that directed the dismissal of
the complaint against respondent Josefa B. Capistrano.

SO ORDERED.
G.R. No. 178031

August 28, 2013

VIRGINIA M. VENZON, Petitioner,

vs.
RURAL BANK OF BUENAVISTA (AGUSAN DEL NORTE), INC., represented by
LOURDESITA E. PARAJES, Respondent.
DECISION
DEL CASTILLO, J.:
Before us is a Petition for Review on Certiorari1 questioning the December 14, 2006
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 01341-MIN which
dismissed the Petition in said case, as well as its May 7, 2007 Resolution3 denying
reconsideration thereof.
Factual Antecedents
On January 28, 2005, petitioner Virginia M. Venzon filed a Petition4 to nullify
foreclosure proceedings and Tax Declaration Nos. 96-GR-06-003-7002-R and 96-GR06-7003-R issued in the name of respondent Rural Bank of Buenavista (Agusan del
Norte), Inc. The case5 was docketed as Civil Case No. 5535 and raffled to Branch 5
of the Regional Trial Court (RTC) of Butuan City. Petitioner alleged that in 1983 she
and her late spouse, George F. Venzon, Sr., obtained a P5,000.00 loan from
respondent against a mortgage on their house and lot in Libertad, Butuan City,
covered by Tax Declaration Nos. 28289 and 42710 issued in their names, which
were later on replaced with Tax Declaration Nos. 96 GR-06-003-2884-R and 96 GR06-003-2885-R; that she was able to pay P2,300.00, thus leaving an outstanding
balance of only P2,370.00; that sometime in March 1987, she offered to pay the
said balance in full, but the latter refused to accept payment, and instead shoved
petitioner away from the bank premises; that in March 1987, respondent foreclosed
on the mortgage, and the property was sold at auction for P6,472.76 to respondent,
being the highest bidder; that the foreclosure proceedings are null and void for lack
of notice and publication of the sale, lack of sheriffs final deed of sale and notice of
redemption period; and that she paid respondent P6,000.00 on October 9, 1995, as
evidenced by respondents Official Receipt No. 4108486 issued on October 9, 1995.
In its Answer with Counterclaims,7 respondent claimed that petitioner did not make
any payment on the loan; that petitioner never went to the bank in March 1987 to
settle her obligations in full; that petitioner was not shoved and driven away from its
premises; that the foreclosure proceedings were regularly done and all
requirements were complied with; that a certificate of sale was issued by the sheriff
and duly recorded in the Registry of Deeds; that petitioners claim that she paid
P6,000.00 on October 9, 1995 is utterly false; that petitioners cause of action has
long prescribed as the case was filed only in 2005 or 18 years after the foreclosure
sale; and that petitioner is guilty of laches. Respondent interposed its counterclaim
for damages and attorneys fees as well.
In her Reply,8 petitioner insisted that the foreclosure proceedings were irregular and
that prescription and laches do not apply as the foreclosure proceedings are null
and void to begin with.
Ruling of the Regional Trial Court

On July 13, 2006, the trial court issued a Resolution9 dismissing Civil Case No. 5535.
It held that
The plaintiff, however, may have erroneously relied the [sic] mandatorily [sic]
requirement of the aforestated provision of law upon failure to consider that the
other party is a Rural Bank. Under the R.A. No. 720 as amended, (Rural Bank Act)
property worth exceeding P100,000.00 [sic] is exempt from the requirement of
publication. This may have been the reason why the foreclosure prosper [sic]
without the observance of the required publication. Moreover, neither in the said
applicable laws provide [sic] for the impairment of the extrajudicial foreclosure and
the subsequent sale to the public. The Court ruled in Bonnevie, et al. vs. CA, et al.
that Act No. 3135 as amended does not require personal notice to the mortgagor. In
the same view, lack of final demand or notice of redemption are [sic] not considered
indispensable requirements and failure to observe the same does not render the
extrajudicial foreclosure sale a nullity.10
In other words, the trial court meant that under the Rural Banks Act, the foreclosure
of mortgages covering loans granted by rural banks and executions of judgments
thereon involving real properties levied upon by a sheriff shall be exempt from
publication where the total amount of the loan, including interests due and unpaid,
does not exceed P10,000.00.11 Since petitioners outstanding obligation amounted
to just over P6,000.00 publication was not necessary.
Petitioner moved for reconsideration,12 but in the September 6, 2006 Resolution,13
the trial court denied the same.
Ruling of the Court of Appeals
Petitioner went up to the CA via an original Petition for Certiorari.14 On December
14, 2006, the CA issued the first assailed Resolution15 dismissing the Petition. It
held that petitioners remedy should have been an appeal under Rule 41 of the
Rules of Court since the July 13, 2006 Resolution is a final order of dismissal.
Petitioner received the Resolution denying her Motion for Reconsideration on
September 18, 2006;16 but she filed the Petition for Certiorari on October 25, 2006
when she should have interposed an appeal on or before October 3, 2006. Having
done so, her Petition may not even be treated as an appeal for the same was
belatedly filed.
The CA added that the Petition does not provide a sufficient factual background of
the case as it merely alleges a chronology of the legal remedies she took before the
trial court which does not comply with the requirement under Section 3 of Rule
46.17
Petitioner moved for reconsideration18 by submitting a rewritten Petition. However,
in a Resolution dated May 7, 2007, the CA denied the same, hence the present
Petition.
Issues

Petitioner submits the following assignment of errors:

I
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS REVERSIBLY ERRED IN
DISMISSING THE PETITION FOR CERTIORARI THEREBY PREVENTING THE COURT
FROM FINDING OUT THAT ACTUALLY NO EXTRAJUDICIAL FORECLOSURE WAS
CONDUCTED BY THE OFFICE OF THE PROVINCIAL SHERIFF ON PETITIONERS
PROPERTY AT THE INSTANCE OF THE PRIVATE RESPONDENT.
II
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS REVERSIBLY ERRED IN
NOT DISREGARDING TECHNICALITIES IN ORDER TO ADMINISTER SUBSTANTIAL
JUSTICE TO THE PETITIONER.19
Petitioners Arguments
Petitioner claims that no extrajudicial foreclosure proceedings ever took place, citing
a February 2, 2005 Certification issued by the Office of the Clerk of Court of Butuan
City stating that the record pertaining to the foreclosure proceedings covering her
property "could not be found in spite of diligent efforts to find the same."20 And
because no foreclosure proceedings took place, there could not have been notice
and publication of the sale, and no sheriffs certificate of sale. For this reason, she
claims that the CA erred in dismissing her case.
Petitioner adds that, technicalities aside, a Petition for Certiorari is available to her
in order to prevent the denial of her substantial rights. She also argues that her
payment to respondent of the amount of P6,000.00 in 1995 should be considered as
a valid redemption of her property.
Respondents Arguments
For its part, respondent merely validates the pronouncements of the CA by citing
and echoing the same, and holding petitioner to a strict observance of the rules for
perfecting an appeal within the reglementary period, as it claims they are necessary
for the orderly administration of justice,21 as well as that which requires that only
questions of law may be raised in a Petition for Review on Certiorari.
Our Ruling
The Court denies the Petition.
The Court finds no error in the CAs treatment of the Petition for Certiorari. The trial
courts July 13, 2006 Resolution dismissing the case was indeed to be treated as a
final order, disposing of the issue of publication and notice of the foreclosure sale
which is the very core of petitioners cause of action in Civil Case No. 5535 and
declaring the same to be unnecessary pursuant to the Rural Banks Act, as
petitioners outstanding obligation did not exceed P10,000.00, and thus leaving
petitioner without basis to maintain her case. This constitutes a dismissal with the

character of finality. As such, petitioner should have availed of the remedy under
Rule 41, and not Rule 65.
The Court is not prepared to be lenient in petitioners case, either. Civil Case No.
5535 was instituted only in 2005, while the questioned foreclosure proceedings took
place way back in 1987. Petitioners long inaction and commission of a procedural
faux pas certainly cannot earn the sympathy of the Court.
Nor can the Court grant the Petition on the mere allegation that no foreclosure
proceedings ever took place. The February 2, 2005 Certification issued by the Office
of the Clerk of Court of Butuan City to the effect that the record of the foreclosure
proceedings could not be found is not sufficient ground to invalidate the
proceedings taken. Petitioner herself attached the Sheriffs Certificate of Sale22 as
Annex "A" of her Petition in Civil Case No. 5535; this should belie the claim that no
record exists covering the foreclosure proceedings. Besides, if petitioner insists that
no foreclosure proceedings took place, then she should not have filed an action to
annul the same since there was no foreclosure to begin with. She should have filed
a different action.
However, petitioner is entitled to a return of the P6,000.00 she paid to respondent
in 1995. While this may not be validly considered as a redemption of her property
as the payment was made long after the redemption period expired, respondent
had no right to receive the amount. In its Answer with Counterclaims in Civil Case
No. 5535, respondent simply alleged therein that
10. Defendant DENIES the allegations under paragraph 10 of the petition for being
utterly false, highly self-serving and patently speculative, the truth being -- Assumption cannot be had that there was an alleged foreclosure of the then
property of the petitioner for the truth of the matter is that a foreclosure proceeding
was duly conducted, which fact remains undisputable for so many years now.
Without necessarily admitting that payment of P6,000.00 was made, the same
however could hardly and could never be considered as redemption price for the
following reasons -- The redemption period had long lapsed when the payment of P6,000.00 was
allegedly made. Thus, there is no point talking about redemption price when the
redemption period had long been gone at the time the alleged payment was made.
Even x x x granting, without conceding, that the amount of P6,000.00 was a
redemption price, said amount, however, could not constitute as a legal redemption
price since the same was not enough to cover the entire redemption price as
mandated by the rules and laws.23 (Emphases supplied)
Interestingly, respondent did not deny being the issuer of Official Receipt No.
410848. Instead, it averred that petitioners payment to it of P6,000.00 was false
and self-serving, but in the same breath argued that, without necessarily admitting
that payment of P6,000.00 was made, the same cannot be considered as
redemption price.

By making such an ambiguous allegation in its Answer with Counterclaims,

respondent is deemed to have admitted receiving the amount of P6,000.00 from
petitioner as evidenced by Official Receipt No. 410848, which amount under the
circumstances it had no right to receive. "If an allegation is not specifically denied or
the denial is a negative pregnant, the allegation is deemed admitted."24 "Where a
fact is alleged with some qualifying or modifying language, and the denial is
conjunctive, a negative pregnant exists, and only the qualification or modification
is denied, while the fact itself is admitted."25 "A denial in the form of a negative
pregnant is an ambiguous pleading, since it cannot be ascertained whether it is the
fact or only the qualification that is intended to be denied."26 "Profession of
ignorance about a fact which is patently and necessarily within the pleader's
knowledge, or means of knowing as ineffectual, is no denial at all."27 In fine,
respondent failed to refute petitioners claim of having paid the amount of
P6,000.00.
Since respondent was not entitled to receive the said amount, as it is deemed fully
paid from the foreclosure of petitioners property since its bid price at the auction
sale covered all that petitioner owed it by way of principal, interest, attorneys fees
and charges,28 it must return the same to petitioner. "If something is received when
there is no right to demand it, and it was unduly delivered through mistake, the
obligation to return it arises."29 Moreover, pursuant to Circular No. 799, series of
2013 of the Bangko Sentral ng Pilipinas which took effect July 1, 2013, the amount
of P6,000.00 shall earn interest at the rate of 6% per annum computed from the
filing of the Petition in Civil Case No. 5535 up to its full satisfaction.
WHEREFORE, premises considered, the Petition is DENIED. The December 14, 2006
and May 7, 2007 Resolutions of the Court of Appeals in CA-G.R. SP No. 01341-MIN
are AFFIRMED.
However, respondent Rural Bank of Buenavista (Agusan del Norte), Inc. is ORDERED
to return to petitioner Virginia M. Venzon or her assigns the amount of P6,000.00,
with interest at the rate of 6% per annum computed from the filing of the Petition in
Civil Case No. 5535 up to its full satisfaction.
SO ORDERED.

CASENT REALTY DEVELOPMENT CORP.,

Petitioner,

- versus -

PHILBANKING
CORPORATION,
Respondent.
G.R. No. 150731

Present:

QUISUMBING, J., Chairperson,

CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

Promulgated:

September 14, 2007

x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

On appeal to this Court through Rule 45 of the Rules of Court is the March 29, 2001
Decision[1] and November 7, 2001 Resolution[2] of the Court of Appeals (CA) in CAG.R. CV No. 63979 entitled Philbanking Corporation v. Casent Realty Development
Corporation. The CA reversed the May 12, 1999 Order[3] of the Makati City Regional
Trial Court (RTC), Branch 145 in Civil Case No. 93-2612, which granted petitioners
demurrer to evidence and dismissed the complaint filed by respondent.

The Facts

The facts according to the appellate court are as follows:

In 1984, petitioner Casent Realty Development Corporation executed two

promissory notes in favor of Rare Realty Corporation (Rare Realty) involving the
amounts of PhP 300,000 (PN No. 84-04) and PhP 681,500 (PN No. 84-05). It was
agreed in PN No. 84-04 that the loan it covered would earn an interest of 36% per
annum and a penalty of 12% in case of non-payment by June 27, 1985, while the
loan covered by PN No. 84-05 would earn an interest of 18% per annum and 12%
penalty if not paid by June 25, 1985.[4] On August 8, 1986, these promissory notes
were assigned to respondent Philbanking Corporation through a Deed of
Assignment.[5]

Respondent alleged that despite demands, petitioner failed to pay the promissory
notes upon maturity such that its obligation already amounted to PhP 5,673,303.90
as of July 15, 1993. Respondent filed on July 20, 1993 a complaint before the Makati
City RTC for the collection of said amount. In its Answer,[6] petitioner raised the
following as special/affirmative defenses:

1.
The complaint stated no cause of action or if there was any, the same
was barred by estoppel, statute of frauds, statute of limitations, laches, prescription,
payment, and/or release;

2.
On August 27, 1986, the parties executed a Dacion en Pago[7] (Dacion)
which ceded and conveyed petitioners property in Iloilo City to respondent, with the
intention of totally extinguishing petitioners outstanding accounts with respondent.
Petitioner presented a Confirmation Statement[8] dated April 3, 1989 issued by
respondent stating that petitioner had no loans with the bank as of December 31,
1988.

3.
Petitioner complied with the condition in the Dacion regarding the
repurchase of the property since the obligation was fully paid. Respondent sent
confirmation statements in the latter months of 1989, which showed that petitioner
had no more outstanding loan; and

4.
Assuming that petitioner still owed respondent, the latter was already
estopped since in October 1988, it reduced its authorized capital stock by 50% to
wipe out a deficit of PhP 41,265,325.12.[9]

Thus, petitioner, by way of compulsory counterclaim, alleged that it made an

overpayment of approximately PhP 4 million inclusive of interest based on Central
Bank Reference Lending Rates on dates of overpayment. Petitioner further claimed
moral and exemplary damages and attorneys fee, amounting to PhP 4.5 million plus
the costs of suit as a consequence of respondents insistence on collecting.[10]

The parties failed to reach an amicable settlement during the pre-trial conference.
Thereafter, respondent presented its evidence and formally offered its exhibits.
Petitioner then filed a Motion for Judgment on Demurrer to the Evidence,[11]
pointing out that the plaintiffs failure to file a Reply to the Answer which raised the
Dacion and Confirmation Statement constituted an admission of the genuineness
and execution of said documents; and that since the Dacion obliterated petitioners
obligation covered by the promissory notes, the bank had no right to collect
anymore.
Respondent subsequently filed an Opposition[12] which alleged that: (1) the
grounds relied upon by petitioner in its demurrer involved its defense and not
insufficiency of evidence; (2) the Dacion and Confirmation Statement had yet to be
offered in evidence and evaluated; and (3) since respondent failed to file a Reply,
then all the new matters alleged in the Answer were deemed controverted.[13]

The trial court ruled in favor of petitioner and dismissed the complaint through the
May 12, 1999 Order, the dispositive portion of which reads:

WHEREFORE, premises considered[,] finding defendants Motion For Judgment On

Demurrer To The Evidence to be meritorious[,] the same is hereby GRANTED.
Consequently, considering that the obligation of the defendant to the plaintiff
having been extinguish[ed] by a Dacion en Pago duly executed by said parties, the
instant complaint is hereby DISMISSED, with prejudice. Without Cost.[14]

The Ruling of the Court of Appeals

On appeal, respondent alleged that the trial court gravely erred because the
promissory notes were not covered by the Dacion, and that respondent was able to
prove its causes of action and right to relief by overwhelming preponderance of
evidence. It explained that at the time of execution of the Dacion, the subject of the
promissory notes was the indebtedness of petitioner to Rare Realty and not to the
Bankthe party to the Dacion. It was only in 1989 after Rare Realty defaulted in its
obligation to respondent when the latter enforced the security provided under the
Deed of Assignment by trying to collect from petitioner, because it was only then
that petitioner became directly liable to respondent. It was also for this reason that
the April 3, 1989 Confirmation Statement stated that petitioner had no obligations
to repondent as of December 31, 1988. On the other hand, petitioner claimed that
the Deed of Assignment provided that Rare Realty lost its rights, title, and interest
to directly proceed against petitioner on the promissory notes since these were
transferred to respondent. Petitioner reiterated that the Dacion covered all
conceivable amounts including the promissory notes.[15]

The appellate court ruled that under the Rules of Civil Procedure, the only issue to
be resolved in a demurrer is whether the plaintiff has shown any right to relief under
the facts presented and the law. Thus, it held that the trial court erred when it
considered the Answer which alleged the Dacion, and that its genuineness and due
execution were not at issue. It added that the court a quo should have resolved
whether the two promissory notes were covered by the Dacion, and that since
petitioners demurrer was granted, it had already lost its right to present its
evidence.[16]

The CA found that under the Deed of Assignment, respondent clearly had the right
to proceed against the promissory notes assigned by Rare Realty. Thus, the CA
ruled, as follows:

WHEREFORE, premises considered, the Order dated May 12, 1999 of the Regional
Trial Court, National Capital Judicial Region, Branch 145, Makati City is hereby
REVERSED and SET ASIDE.

Judgment is hereby entered ORDERING [petitioner] Casent Realty [Development]

Corporation to:

1.
pay [respondent] Philbanking Corporation the amount of P300,000.00 with an
interest of 36% per annum and a penalty of 12% for failure to pay the same on its
maturity date, June 27, 1985 as stipulated in Promissory Note No. 84-04;

2.
pay [respondent] Philbanking Corporation the amount of P681,500.00 with an
interest of 18% per annum and a penalty of 12% for failure to pay the same on its
maturity date, June 25, 1985 as stipulated in Promissory Note No. 84-05; and

3.
pay [respondent] Philbanking Corporation, the amount representing 25% of
total amount due as attorneys fee as stipulated in the promissory notes.
SO ORDERED.[17]

Petitioner filed a Motion for Reconsideration[18] which was denied by the CA in its
November 7, 2001 Resolution.[19]

The Issues

WHETHER OR NOT THE COURT OF APPEALS ERRED IN EXCLUDING THE PETITIONERS

AFFIRMATIVE DEFENSES IN ITS ANSWER IN RESOLVING A DEMURRER TO EVIDENCE;
AND

WHETHER OR NOT PETITIONER IS LIABLE TO PAY THE RESPONDENT

In other words, the questions posed by this case are:

1.
Does respondents failure to file a Reply and deny the Dacion and Confirmation
Statement under oath constitute a judicial admission of the genuineness and due
execution of these documents?

2.
Should judicial admissions be considered in resolving a demurrer to evidence?
If yes, are the judicial admissions in this case sufficient to warrant the dismissal of
the complaint?

Petitioner asserts that its obligation to pay under the promissory notes was already
extinguished as evidenced by the Dacion and Confirmation Statement. Petitioner
submits that when it presented these documents in its Answer, respondent should
have denied the same under oath. Since respondent failed to file a Reply, the
genuineness and due execution of said documents were deemed admitted, thus
also admitting that the loan was already paid. On the other hand, respondent states
that while it failed to file a Reply, all the new matters were deemed controverted
pursuant to Section 10, Rule 6 of the Rules of Court. Also, the loan which was
covered by the Dacion refers to another loan of petitioner amounting to PhP
3,921,750 which was obtained directly from the respondent as of August 1986.[20]
Furthermore, petitioner argued that assuming respondent admitted the genuineness
and due execution of the Dacion and Confirmation Statement, said admission was
not all-encompassing as to include the allegations and defenses pleaded in
petitioners Answer.

The Courts Ruling

The petition is partly meritorious.

Rule 33, Section 1 of the 1997 Rules of Civil Procedure provides:

Section 1. Demurrer to evidence.After the plaintiff has completed the presentation

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

In Gutib v. Court of Appeals, we defined a demurrer to evidence as an objection by

one of the parties in an action, to the effect that the evidence which his adversary
produced is insufficient in point of law, whether true or not, to make out a case or
sustain the issue.[21]

What should be resolved in a motion to dismiss based on a demurrer to evidence is

whether the plaintiff is entitled to the relief based on the facts and the law. The
evidence contemplated by the rule on demurrer is that which pertains to the merits
of the case, excluding technical aspects such as capacity to sue.[22] However, the
plaintiffs evidence should not be the only basis in resolving a demurrer to evidence.
The facts referred to in Section 8 should include all the means sanctioned by the
Rules of Court in ascertaining matters in judicial proceedings. These include judicial
admissions, matters of judicial notice, stipulations made during the pre-trial and
trial, admissions, and presumptions, the only exclusion being the defendants
evidence.

Petitioner points out that the defense of Dacion and Confirmation Statement, which
were submitted in the Answer, should have been specifically denied under oath by
respondent in accordance with Rule 8, Section 8 of the Rules of Court:

Section 8. How to contest such documents.When an action or defense is founded

upon a written instrument, copied in or attached to the corresponding pleading as
provided in the preceding section, 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; but the
requirement of an oath does not apply when the adverse party does not appear to

be a party to the instrument or when compliance with an order for an inspection of

the original instrument is refused.

Since respondent failed to file a Reply, in effect, respondent admitted the

genuineness and due execution of said documents. This judicial admission should
have been considered by the appellate court in resolving the demurrer to evidence.
Rule 129, Section 4 of the Rules of Court provides:

Section 4. Judicial admissions.An admission, verbal or written, made by a party in

the course of the proceeding 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.

On appeal to the CA, respondent claimed that even though it failed to file a Reply,
all the new matters alleged in the Answer are deemed controverted anyway,
pursuant to Rule 6, Section 10:

Section 10. Reply.A reply is a pleading, the office or function of which is to deny, or
allege facts in denial or avoidance of new matters alleged by way of defense in the
answer and thereby join or make issue as to such new matters. If a party does not
file such reply, all the new matters alleged in the answer are deemed controverted.

We agree with petitioner. Rule 8, Section 8 specifically applies to actions or defenses

founded upon a written instrument and provides the manner of denying it. It is more
controlling than Rule 6, Section 10 which merely provides the effect of failure to file
a Reply. Thus, where the defense in the Answer is based on an actionable
document, a Reply specifically denying it under oath must be made; otherwise, the
genuineness and due execution of the document will be deemed admitted.[23]
Since respondent failed to deny the genuineness and due execution of the Dacion
and Confirmation Statement under oath, then these are deemed admitted and must
be considered by the court in resolving the demurrer to evidence. We held in
Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc. that [w]hen the
due execution and genuineness of an instrument are deemed admitted because of
the adverse partys failure to make a specific verified denial thereof, the instrument

need not be presented formally in evidence for it may be considered an admitted

fact.[24]

In any case, the CA found that:

From the facts of the case, the genuineness and due execution of the Dacion en
Pago were never put to issue. Genuineness merely refers to the fact that the
signatures were not falsified and/or whether there was no substantial alteration to
the document. While due execution refers to whether the document was signed by
one with authority.[25]
The more important issue now is whether the Dacion and Confirmation Statement
sufficiently prove that petitioners liability was extinguished. Respondent asserts that
the admission of the genuineness and due execution of the documents in question
is not all encompassing as to include admission of the allegations and defenses
pleaded in petitioners Answer. In executing the Dacion, the intention of the parties
was to settle only the loans of petitioner with respondent, not the obligation of
petitioner arising from the promissory notes that were assigned by Rare Realty to
respondent.

We AGREE.

Admission of the genuineness and due execution of the Dacion and Confirmation
Statement does not prevent the introduction of evidence showing that the Dacion
excludes the promissory notes. Petitioner, by way of defense, should have
presented evidence to show that the Dacion includes the promissory notes.

The promissory notes matured in June 1985, and Rare Realty assigned these
promissory notes to respondent through a Deed of Assignment dated August 8,
1986. The Deed of Assignment provides, thus:

Rare Realty Corporation, a corporation duly organized and existing in accordance

with law, with office at 8th Floor Philbanking Building, Ayala Ave., Makati, Metro
Manila (herein called Assignor) in consideration of the sum of THREE MILLION SEVEN
HUNDRED NINETY THOUSAND & 00/100 pesos [PhP 3,790,000.00] and as security
fee or in the payment of the sum, obtained or to be obtained as loan or credit
accommodation of whatever form or nature from the [PHILBANKING] CORPORATION,
with office at Ayala Ave., Makati, Metro Manila (herein called Assignee), including
renewals or extensions of such loan or credit accommodation, now existing or
hereinafter incurred, due or to become due, whether absolute or contingent, direct

or indirect, and whether incurred by the Assignor as principal, guarantor, surety, comaker, or in any other capacity, including interest, charges, penalties, fees,
liquidated damage, collection expenses and attorneys fee, the Assignor hereby
assigns, transfers and conveys to Assignee all its rights, title and interest in and to:
(a) contracts under which monies are or will be due to Assignor, (b) moneys due or
to be due thereunder, or (c) letters of credit and/or proceeds or moneys arising from
negotiations under such credits, all which are herein called moneys or receivables
assigned or assigned moneys or receivables, and are attached, or listed and
described in the Attached Annex A (for contracts) or Annex B (for letters of credit).
[26]

It is clear from the foregoing deed that the promissory notes were given as security
for the loan granted by respondent to Rare Realty. Through the Deed of Assignment,
respondent stepped into the shoes of Rare Realty as petitioners creditor.

Respondent alleged that petitioner obtained a separate loan of PhP 3,921,750. Thus,
when petitioner and respondent executed the Dacion on August 27, 1986, what was
then covered was petitioners loan from the bank. The Dacion provides, thus:

NOW, THEREFORE, in consideration of the foregoing premises, the DEBTOR hereby

transfers and conveys in favor of the BANK by way of Dacion en Pago, the abovedescribed property in full satisfaction of its outstanding indebtedness in the amount
of P3,921,750.00 to the BANK, subject to x x x terms and conditions.[27] (Emphasis
supplied.)

The language of the Dacion is unequivocalthe property serves in full satisfaction of

petitioners own indebtedness to respondent, referring to the loan of PhP 3,921,750.
For this reason, the bank issued a Confirmation Statement saying that petitioner has
no unpaid obligations with the bank as of December 31, 1988.

In 1989, however, Rare Realty defaulted in its payment to respondent. Thus,

respondent proceeded against the security assigned to it, that is, the promissory
notes issued by the petitioner. Under these promissory notes, petitioner is liable for
the amount of PhP 300,000 with an interest of 36% per annum and a penalty of 12%
for failure to pay on the maturity date, June 27, 1985; and for the amount of PhP
681,500 with an interest of 18% per annum and a penalty of 12% for failure to pay
on the maturity date, June 25, 1985.

WHEREFORE, the March 29, 2001 Decision and November 7, 2001 Resolution of the
CA are AFFIRMED. Costs against petitioner.

SO ORDERED.
FIRST DIVISION

B. D. LONG SPAN BUILDERS, INC.,

G.R. No. 169919

Petitioner,

Present:

- versus -

PUNO, C.J., Chairperson,

CARPIO,
CORONA,
LEONARDO-DE CASTRO, and
BERSAMIN, JJ.

R. S. AMPELOQUIO REALTY DEVELOPMENT, INC.,

Promulgated:
Respondent.

September 11, 2009

x-----------------------------------------------------------------------------------------x

DECISION

CARPIO, J.:

The Case

This is a petition for review[1] of the Court of Appeals Decision[2] dated 14 July
2005 and Resolution dated 30 September 2005 in CA-G.R. CV No. 78259. The Court
of Appeals reversed the Decision[3] dated 14 January 2003 of the Regional Trial
Court of Muntinlupa City, Branch 206 (RTC).

The Antecedent Facts

Petitioner B. D. Long Span Builders, Inc. and respondent R. S. Ampeloquio Realty

Development, Inc. are corporations duly organized and existing under the laws of
the Republic of the Philippines.

On 31 July 1999, petitioner and respondent entered into an Agreement wherein

petitioner agreed to render rip rapping construction services at respondents
Ampeloquio International Resort in Ternate, Cavite, for the contract price of P50
million. On the same day, the parties entered into a second Agreement for the same
construction project, stipulating a contract price of P30 million, hence bringing the
total contract price of the project to P80 million. Both Agreements required
petitioner to deposit with respondent a cash bond of one percent (1%) of the
contract price, to be returned to petitioner upon completion of the project. In
compliance, petitioner deposited with respondent a cash bond amounting to
P800,000.

Respondent failed to fulfill its obligations under the Agreements, resulting in the
cancellation of the project. Petitioner demanded the return of the P800,000 cash
bond, but respondent refused to do so. Petitioners legal counsel sent two (2)
demand letters dated 19 April 2002 and 10 May 2002 to respondent, but the latter
still refused to return the P800,000 cash bond.

On 24 September 2002, petitioner (plaintiff) filed with the RTC a complaint for
rescission of contract and damages against respondent (defendant). On 17 October
2002, summons and a copy of the complaint were served on respondent, through its
staff member, Romel Dolahoy.[4]

Respondent failed to file an Answer or any responsive pleading to the complaint.

Upon motion of petitioner, the RTC issued an Order dated 29 November 2002,
declaring respondent in default, and allowing petitioner to present evidence ex
parte.

The Trial Courts Ruling

On 14 January 2003, the RTC rendered a Decision, the dispositive portion of which
reads:

WHEREFORE, finding preponderance of evidence in support of the instant complaint,

the same is granted.

Judgment is rendered declaring the aforesaid contracts entered into by plaintiff with
defendant, both dated July 31, 1999 for the rip rapping construction project at the
Ampeloquio International Resort in Ternate, Cavite, as RESCINDED.

Moreover, defendant corporation is ordered to:

1) Return the amount of P800,000.00 posted by the plaintiff as cash bond with legal
interest accruing thereto from the time of its demand until fully paid;

2) Pay the plaintiff the amount of P50,000.00 as nominal damages;

3) Pay the plaintiff the amount of P100,000.00 as exemplary damages;

4) Pay the plaintiff the amount of P50,000.00 as and by way of attorney's fees; and

5) Pay the cost of suit in the amount of P10,539.00.

SO ORDERED.[5]

The Court of Appeals Ruling

Upon receipt of the RTC decision, respondent filed a Notice of Appeal dated 12
February 2003 with the Court of Appeals. After considering the pleadings filed by
petitioner and respondent, the Court of Appeals rendered judgment[6] which
reversed and set aside the decision of the RTC. The dispositive portion of the Court
of Appeals Decision reads:

WHEREFORE, in view of the foregoing, the decision dated January 14, 2003 of the
Regional Trial Court, Branch 206, Muntinlupa City in Civil Case No. 02-217 is hereby
REVERSED and SET ASIDE.

SO ORDERED.[7]

Petitioner filed a Motion for Reconsideration, but this was denied by the Court of
Appeals in its Resolution of 30 September 2005.[8]

Hence, this appeal.

The Issue

The sole issue for resolution in this case is whether the Court of Appeals erred in
ruling that there was invalid service of summons upon respondent, and hence the
trial court did not acquire jurisdiction over said respondent.

The Courts Ruling

We find the appeal without merit.

Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint. On the
other hand, jurisdiction over the defendants in a civil case is acquired either through
the service of summons upon them or through their voluntary appearance in court
and their submission to its authority.[9] The service of summons is a vital and
indispensable ingredient of due process.[10] As a rule, if defendants have not been
validly summoned, the court acquires no jurisdiction over their person, and a
judgment rendered against them is null and void.[11]

Section 11 of Rule 14 of the 1997 Rules of Civil Procedure states:

SEC. 11. Service upon domestic private juridical entity. When the defendant is a
corporation, partnership or association organized under the laws of the Philippines
with a juridical personality, service may be made on the president, managing
partner, general manager, corporate secretary, treasurer, or in-house counsel.

As a rule, summons should be personally served on the defendant. In case of a

domestic private juridical entity, the service of summons must be made upon an
officer who is named in the statute (i.e., the president, managing partner, general
manager, corporate secretary, treasurer, or in-house counsel), otherwise, the
service is insufficient.[12] The purpose is to render it reasonably certain that the
corporation will receive prompt and proper notice in an action against it or to insure
that the summons be served on a representative so integrated with the corporation
that such person will know what to do with the legal papers served on him.[13]

However, if the summons cannot be served on the defendant personally within a

reasonable period of time, then substituted service may be resorted to. Section 7 of
Rule 14 provides:

SEC. 7. Substituted service. If, for justifiable causes, the defendant cannot be
served within a reasonable time as provided in the preceding section, service may
be effected (a) by leaving copies of the summons at the defendant's residence with
some person of suitable age and discretion then residing therein, or (b) by leaving
the copies at defendant's office or regular place of business with some competent
person in charge thereof.

Nonetheless, the impossibility of prompt personal service must be shown by stating

that efforts have been made to find the defendant personally and that such efforts
have failed.[14] This is necessary because substituted service is in derogation of the
usual method of service. It is a method extraordinary in character and hence may
be used only as prescribed and in the circumstances authorized by statute.[15] The
statutory requirements of substituted service must be followed strictly, faithfully
and fully, and any substituted service other than that authorized by statute is
considered ineffective.[16]

In Orion Security Corporation v. Kalfam Enterprises, Inc.,[17] this Court held that in
case of substituted service, there should be a report indicating that the person who
received the summons in the defendants behalf was one with whom the defendant
had a relation of confidence ensuring that the latter would actually receive the
summons.

In this case, the Return by Process Server provides:

This is to certify that:
On October 17, 2002 at about 11:00 o'clock in the morning, undersigned tried to
cause the service of the Summons together with the attached complaint & its
annexes in the above-entitled case to the defendant at his given address on record.
Mr Romel Dalahoy, a staff of said Realty received the said Summons with the
attached complaint & its annexes as evidenced by the former's signature as
appearing on the original copy of the aforesaid Summons.
Henceforth, the said Summons with the attached complaint & its annexes to Atty.
Evangeline V. Tiongson, Clerk of Court V, this Court, is respectfully returned, DULY
SERVED, by substituted service.
October 17, 2002, Muntinlupa City

Angelito C. Reyes
Process Server[18]

Clearly, the summons was not served personally on the defendant (respondent)
through any of the officers enumerated in Section 11 of Rule 14; rather, summons
was served by substituted service on the defendants staff member, Romel Dolahoy.
Substituted service was resorted to on the servers first attempt at service of
summons, and there was no indication that prior efforts were made to render
prompt personal service on the defendant.

Moreover, nothing on record shows that Romel Dolahoy, the staff member who
received the summons in respondents behalf, shared such relation of confidence
ensuring that respondent would surely receive the summons. Thus, following our
ruling in Orion, we are unable to accept petitioners contention that service on Romel
Dolahoy constituted substantial compliance with the requirements of substituted
service.

Petitioners contention that respondents filing of Notice of Appeal effectively cured

any defect in the service of summons is devoid of merit. It is well-settled that a
defendant who has been declared in default has the following remedies, to wit: (1)
he may, at any time after discovery of the default but before judgment, file a
motion, under oath, to set aside the order of default on the ground that his failure to
answer was due to fraud, accident, mistake or excusable neglect, and that he has a
meritorious defense; (2) if judgment has already been rendered when he discovered
the default, but before the same has become final and executory, he may file a
motion for new trial under Section 1(a) of Rule 37; (3) if he discovered the default
after the judgment has become final and executory, he may file a petition for relief
under Section 2 of Rule 38; and (4) he may also appeal from the judgment rendered
against him as contrary to the evidence or to the law, even if no petition to set
aside the order of default has been presented by him.[19] Thus, respondent, which
had been declared in default, may file a notice of appeal and question the validity of
the trial courts judgment without being considered to have submitted to the trial
courts authority.
WHEREFORE, we DENY the petition. We AFFIRM the Court of Appeals Decision dated
14 July 2005 and Resolution dated 30 September 2005 in CA-G.R. CV No. 78259. Let
the case be REMANDED to the trial court for further proceedings upon valid service
of summons to respondent.

SO ORDERED.
G.R. No. 151932

August 19, 2009

HENRY CHING TIU, CHRISTOPHER HALIN GO, and GEORGE CO, Petitioners,
vs.
PHILIPPINE BANK OF COMMUNICATIONS, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari, under Rule 45 of the Rules of Court,
seeking to annul and set aside the Decision1 dated September 28, 2001, rendered
by the Court of Appeals (CA) in CA-G.R. SP No. 57732, dismissing the petition and
affirming the assailed Orders of the Regional Trial Court (RTC) of Cagayan de Oro
City, Branch 21 in Civil Case No. 99-352, dated December 14, 1999 and January 11,
2000.
The factual and procedural antecedents are as follows:
In June 1993, Asian Water Resources, Inc. (AWRI), represented by herein petitioners,
applied for a real estate loan with the Philippine Bank of Communications (PBCOM)
to fund its purified water distribution business. In support of the loan application,
petitioners submitted a Board Resolution2 dated June 7, 1993. The loan was
guaranteed by collateral over the property covered by Transfer Certificate of Title
No. T-13020.3 The loan was eventually approved.4
In August 1996, AWRI applied for a bigger loan from PBCOM for additional
capitalization using the same Board Resolution, but without any additional real
estate collateral. Considering that the proposed additional loan was unsecured,
PBCOM required all the members of the Board of Directors of AWRI to become
sureties. Thus, on August 16, 1996, a Surety Agreement5 was executed by its
Directors and acknowledged by a notary public on the same date. All copies of the
Surety Agreement, except two, were kept by PBCOM. Of the two copies kept by the
notary public, one copy was retained for his notarial file and the other was sent to
the Records Management and Archives Office, through the Office of the RTC Clerk of
Court.6
Thereafter, on December 16, 1998, AWRI informed the bank of its desire to
surrender and/or assign in its favor, all the present properties of the former to apply
as dacion en pago for AWRIs existing loan obligation to the bank.7 On January 11,
1999, PBCOM sent a reply denying the request. On May 12, 1999, PBCOM sent a
letter to petitioners demanding full payment of its obligation to the bank.8
Its demands having remained unheeded, PBCOM instructed its counsel to file a
complaint for collection against petitioners. The case was docketed as Civil Case No.
99-352.

On July 3, 1999, petitioners filed their Answer. It alleged, among other things, that
they were not personally liable on the promissory notes, because they signed the
Surety Agreement in their capacities as officers of AWRI. They claimed that the
Surety Agreement attached to the complaint as Annexes "A" to "A-2"9 were
falsified, considering that when they signed the same, the words "In his personal
capacity" did not yet appear in the document and were merely intercalated thereon
without their knowledge and consent.10
In support of their allegations, petitioners attached to their Answer a certified
photocopy of the Surety Agreement issued on March 25, 1999 by the Records
Management and Archives Office in Davao City,11 showing that the words "In his
personal capacity" were not found at the foot of page two of the document where
their signatures appeared.12
Because of this development, PBCOMs counsel searched for and retrieved the file
copy of the Surety Agreement. The notarial copy showed that the words "In his
personal capacity" did not appear on page two of the Surety Agreement.13
Petitioners counsel then asked PBCOM to explain the alteration appearing on the
agreement. PBCOM subsequently discovered that the insertion was ordered by the
bank auditor. It alleged that when the Surety Agreement was inspected by the bank
auditor, he called the attention of the loans clerk, Kenneth Cabahug, as to why the
words "In his personal capacity" were not indicated under the signature of each
surety, in accordance with bank standard operating procedures. The auditor then
ordered Mr. Cabahug to type the words "In his personal capacity" below the second
signatures of petitioners. However, the notary public was never informed of the
insertion.14 Mr. Cabahug subsequently executed an affidavit15 attesting to the
circumstances why the insertion was made.
PBCOM then filed a Reply and Answer to Counterclaim with Motion for Leave of
Court to Substitute Annex "A" of the Complaint,16 wherein it attached the duplicate
original copy retrieved from the file of the notary public. PBCOM also admitted its
mistake in making the insertion and explained that it was made without the
knowledge and consent of the notary public. PBCOM maintained that the insertion
was not a falsification, but was made only to speak the truth of the parties
intentions. PBCOM also contended that petitioners were already primarily liable on
the Surety Agreement whether or not the insertion was made, having admitted in
their pleadings that they voluntarily executed and signed the Surety Agreement in
the original form. PBCOM, invoking a liberal application of the Rules, emphasized
that the motion incorporated in the pleading can be treated as a motion for leave of
court to amend and admit the amended complaint pursuant to Section 3, Rule 10 of
the Rules of Court.
On December 14, 1999, the RTC issued an Order17 allowing the substitution of the
altered document with the original Surety Agreement, the pertinent portion of which
reads:
August 16, 1996 attached as Annexes "A" to "A-2" of the reply and answer Resolving
the Motion to Substitute Annexes "A" to "A-2" of the complaint and the opposition

thereto by the defendant, this Court, in the interest of justice, hereby allows the
substitution of said Annexes "A" to "A-2" of the complaint with the duplicate original
of notarial copy of the Agreement dated to counter-claim.
SO ORDERED.
Petitioners filed a motion for reconsideration,18 but it was denied in the Order19
dated January 11, 2000, to wit:
Resolving the motion for reconsideration and the opposition thereto, the Court finds
the motion substantially a reiteration of the opposition to plaintiffs motion.
Additionally, the instant motion for reconsideration treats on evidentiary matter
which can be properly ventilated in the trial proper, hence, there is no cogent
reason to disturb the Courts order of December 14, 1999.
SO ORDERED.
Aggrieved, petitioners sought recourse before the CA via a petition for certiorari
under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 57732.
Petitioners claimed that the RTC acted without or in excess of jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction in denying their
motion for reconsideration and in allowing PBCOM to substitute the altered copy of
the Surety Agreement with the duplicate original notarial copy thereof considering
that the latters cause of action was solely and principally founded on the falsified
document marked as Annexes "A" to "A-2."20
On September 28, 2001, the CA rendered a Decision dismissing the petition for lack
of merit, the decretal portion of which reads:
WHEREFORE, foregoing considered, the instant petition is hereby DENIED DUE
COURSE and, accordingly, DISMISSED for lack of merit. The assailed Orders dated
December 14, 1999 and January 11, 2000 of the Regional Trial Court of Cagayan de
Oro City, Branch 21, are hereby AFFIRMED in toto.
SO ORDERED.21
Hence, the petition assigning the following errors:
I
The COURT committed a reversible error in affirming in toto the order of the lower
court allowing the substitution of the falsified document by relying on the provision
of section 3, rule 10 of the rules of Court.
II

Acting as the court on the petition for certiorari, the court committed a reversible
error having no jurisdiction to rule on the obligation of the petitioners based on the
falsified document
III
The court erred in giving credence to the allegation of respondent bank that from
August 15 to December 9, 1997 asian water resources inc. obtained several
availments of new bigger and additional loans totalLing p2,030,000.00 evidenced by
4 promissory notes marked as annexes "B," "B-1," "B-2" and "B-3."
IV
The court failed to consider the misapplication of the principle of equity
committed by the lower court in ordering the substitution of the falsified
document.22
Petitioners argue that the CA committed a reversible error in affirming the Order of
the RTC allowing the substitution of the document by relying on Section 3, Rule 10
of the Rules of Court. Petitioners assert that the Rules do not allow the withdrawal
and substitution of a "falsified document" once discovered by the opposing party.
Petitioners maintain that PBCOMs cause of action was solely and principally
founded on the alleged "falsified document" originally marked as
Annexes "A" to "A-2." Thus, the "withdrawal" of the document results in the
automatic withdrawal of the whole complaint on the ground that there is no more
cause of action to be maintained or enforced by plaintiff against petitioners. Also,
petitioners argue that if the substitution will be allowed, their defenses that were
anchored on Annexes "A" to "A-2" would be gravely affected. Moreover, considering
that the said document was already removed, withdrawn, and disregarded by the
RTC, the withdrawal and substitution of the document would prevent petitioners
from introducing the falsified documents during the trial as part of their evidence.23
Petitioners submit that the RTC misapplied the principle of equity when it allowed
PBCOM to substitute the document with the original agreement. Petitioners also
claim that the remedy of appeal after the termination of the case in the RTC would
become ineffective and inadequate if the Order of the RTC allowing the "withdrawal"
and "substitution" of the document would not be nullified, because the falsified
document would no longer be found in the records of the case during the appeal.24
Petitioners contend that the CA went beyond the issue raised before it when it
interpreted the provisions of the Surety Agreement, particularly paragraph 4
thereof, and then ruled on the obligations of the parties based on
the document. Petitioners posit that the CA prematurely ruled on petitioners
obligations, considering that their obligations should be determined during trial on
the merits, after the parties have been given the opportunity to present their
evidence in support of their respective claims. Petitioners stress that the CA went
into the merit of the case when it gave credence to the statement of fact of PBCOM

that "From August 15 to December 9, 1997, Asian Water Resources, Inc. obtained
several availments on its additional loans totalling P2,030,000.00 as evidenced by 4
promissory notes marked as Annexes B, B-1, B-2, and B-3. Thus, the conclusion of
the CA in declaring the petitioners liable as sureties violated their right to due
process.25
For its part, PBCOM argues that since the complaint is based on an actionable
document, i.e., the surety agreement, the original or a copy thereof should be
attached to the pleading as an exhibit, which shall be deemed part of the pleading.
Considering that the surety agreement is annexed to the complaint, it is an integral
part thereof and its substitution with another copy is in the nature of a substantial
amendment, which is allowed by the Rules, but with prior leave of court.
Moreover, PBCOM alleges that since the Rules provides that substantial
amendments may be made upon leave of court, the authority of the RTC to allow
the amendment is discretionary. Thus, the CA correctly held that the act of granting
the said substitution was within the clear and proper discretion of the RTC.
The petition is without merit.
As to the substitution of the earlier surety agreement that was annexed to the
complaint with the original thereof, this Court finds that the RTC did not err in
allowing the substitution.
The pertinent rule on actionable documents is found in Section 7, Rule 8 of the
Rules of Court, which provides that when the cause of action is anchored on a
document, its substance must be set forth, and the original or a copy thereof "shall"
be attached to the pleading as an exhibit and deemed a part thereof, to wit:
Section 7. Action or defense based on document. Whenever an action or defense
is based upon a written instrument or document, the substance of such instrument
or document shall be set forth in the pleading, and the original or a copy thereof
shall be attached to the pleading as an exhibit, which shall be deemed to be a part
of the pleading, or said copy may with like effect be set forth in the pleading.
With respect to PBCOMs right to amend its complaint, including the documents
annexed thereto, after petitioners have filed their answer, Section 3, Rule 10 of the
Rules of Court specifically allows amendment by leave of court. The said Section
states:
SECTION 3. Amendments by leave of court. Except as provided in the next
preceding section, substantial amendments may be made only upon leave of court.
But such leave may be refused if it appears to the court that the motion was made
with intent to delay. Orders of the court upon the matters provided in this section
shall be made upon motion filed in court, and after notice to the adverse party, and
an opportunity to be heard.
This Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of
Civil Procedure in Valenzuela v. Court of Appeals,26 thus:

Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the
former rule in such manner that the phrase "or that the cause of action or defense
is substantially altered" was stricken-off and not retained in the new rules. The clear
import of such amendment in Section 3, Rule 10 is that under the new rules, "the
amendment may (now) substantially alter the cause of action or defense." This
should only be true, however, when despite a substantial change or alteration in the
cause of action or defense, the amendments sought to be made shall serve the
higher interests of substantial justice, and prevent delay and equally promote the
laudable objective of the rules which is to secure a "just, speedy and inexpensive
disposition of every action and proceeding."27
The granting of leave to file amended pleading is a matter particularly addressed to
the sound discretion of the trial court; and that discretion is broad, subject only to
the limitations that the amendments should not substantially change the cause of
action or alter the theory of the case, or that it was not made to delay the action.28
Nevertheless, as enunciated in Valenzuela, even if the amendment substantially
alters the cause of action or defense, such amendment could still be allowed when
it is sought to serve the higher interest of substantial justice; prevent delay; and
secure a just, speedy and inexpensive disposition of actions and proceedings.
The courts should be liberal in allowing amendments to pleadings to avoid a
multiplicity of suits and in order that the real controversies between the parties are
presented, their rights determined, and the case decided on the merits without
unnecessary delay. This liberality is greatest in the early stages of a lawsuit,
especially in this case where the amendment was made before the trial of the case,
thereby giving the petitioners all the time allowed by law to answer and to prepare
for trial.29
Furthermore, amendments to pleadings are generally favored and should be
liberally allowed in furtherance of justice in order that every case, may so far as
possible, be determined on its real facts and in order to speed up the trial of the
case or prevent the circuity of action and unnecessary expense. That is, unless
there are circumstances such as inexcusable delay or the taking of the adverse
party by surprise or the like, which might justify a refusal of permission to amend.30
In the present case, there was no fraudulent intent on the part of PBCOM in
submitting the altered surety agreement. In fact, the bank admitted that it was a
mistake on their part to have submitted it in the first place instead of the original
agreement. It also admitted that, through inadvertence, the copy that was attached
to the complaint was the copy wherein the words "IN HIS PERSONAL CAPACITY"
were inserted to conform to the banks standard practice. This alteration was made
without the knowledge of the notary public. PBCOMs counsel had no idea that what
it submitted was the altered document, thereby necessitating the substitution of the
surety agreement with the original thereof, in order that the case would be
judiciously resolved.
Verily, it is a cardinal rule of evidence, not just one of technicality but of substance,
that the written document is the best evidence of its own contents. It is also a
matter of both principle and policy that when the written contract is established as
the repository of the parties stipulations, any other evidence is excluded, and the

same cannot be used to substitute for such contract, or even to alter or contradict
the latter.31 The original surety agreement is the best evidence that could establish
the parties respective rights and obligations. In effect, the RTC merely allowed the
amendment of the complaint, which consequently included the substitution of the
altered surety agreement with a copy of the original.
It is well to remember at this point that rules of procedure are but mere tools
designed to facilitate the attainment of justice. Their strict and rigid application that
would result in technicalities that tend to frustrate rather than promote substantial
justice must always be avoided.32 Applied to the instant case, this not only assures
that it would be resolved based on real facts, but would also aid in the speedy
disposition of the case by utilizing the best evidence possible to determine the
rights and obligations of the party- litigants.
Moreover, contrary to petitioners contention, they could not be prejudiced by the
substitution since they can still present the substituted documents, Annexes "A" to
A-2," as part of the evidence of their affirmative defenses. The substitution did not
prejudice petitioners or delay the action. On the contrary, it tended to expedite the
determination of the controversy. Besides, the petitioners are not precluded from
filing the appropriate criminal action against PBCOM for attaching the altered copy
of the surety agreement to the complaint. The substitution of the documents would
not, in any way, erase the existence of falsification, if any. The case before the RTC
is civil in nature, while the alleged falsification is criminal, which is separate and
distinct from another. Thus, the RTC committed no reversible error when it allowed
the substitution of the altered surety agreement with that of the original.
A Petition for Certiorari under Rule 65 of the Rules of Court is intended for the
correction of errors of jurisdiction only or grave abuse of discretion amounting to
lack or excess of jurisdiction. Its principal office is only to keep the inferior court
within the parameters of its jurisdiction or to prevent it from committing such a
grave abuse of discretion amounting to lack or excess of jurisdiction.33
For a petition for certiorari to prosper, the essential requisites that have to concur
are: (1) the writ is directed against a tribunal, a board or any officer exercising
judicial or quasi-judicial functions; (2) such tribunal, board or officer has acted
without or in excess of jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy and
adequate remedy in the ordinary course of law.341avvphi1
The phrase without jurisdiction means that the court acted with absolute lack of
authority or want of legal power, right or authority to hear and determine a cause or
causes, considered either in general or with reference to a particular matter. It
means lack of power to exercise authority. Excess of jurisdiction occurs when the
court transcends its power or acts without any statutory authority; or results when
an act, though within the general power of a tribunal, board or officer (to do) is not
authorized, and is invalid with respect to the particular proceeding, because the
conditions which alone authorize the exercise of the general power in respect of it
are wanting. Grave abuse of discretion implies such capricious and whimsical
exercise of judgment as to be equivalent to lack or excess of jurisdiction; simply put,
power is exercised in an arbitrary or despotic manner by reason of passion,

prejudice, or personal hostility; and such exercise is so patent or so gross as to

amount to an evasion of a positive duty or to a virtual refusal either to perform the
duty enjoined or to act at all in contemplation of law.35
The present case failed to comply with the above-stated requisites. In the instant
case, the soundness of the RTCs Order allowing the substitution of the document
involves a matter of judgment and discretion, which cannot be the proper subject of
a petition for certiorari under Rule 65. This rule is only intended to correct defects of
jurisdiction and not to correct errors of procedure or matters in the trial courts
findings or conclusions.
However, this Court agrees with the petitioners contention that the CA should not
have made determinations as regards the parties respective rights based on the
surety agreement. The CA went beyond the issues brought before it and effectively
preempted the RTC in making its own determinations. It is to be noted that the
present case is still pending determination by the RTC. The CA should have been
more cautious and not have gone beyond the issues submitted before it in the
petition for certiorari; instead, it should have squarely addressed whether or not
there was grave abuse of discretion on the part of the RTC in issuing the Orders
dated December 14, 1999 and January 11, 2000.
WHEREFORE, premises considered, the petition is DENIED. Subject to the above
disquisitions, the Decision of the Court of Appeals in CA-G.R. SP No. 57732, dated
September 28, 2001, and the Orders of the Regional Trial Court of Cagayan de Oro
City, Branch 21, in Civil Case No. 99-352, dated December 14, 1999 and January 11,
2000, are AFFIRMED.
SO ORDERED.
IRENE SANTE AND REYNALDO SANTE,
Petitioners,

- versus -

HON. EDILBERTO T. CLARAVALL, in his capacity as Presiding Judge of Branch 60,

Regional Trial Court of Baguio City, and VITA N. KALASHIAN,
Respondents.

G.R. No. 173915

Present:

PUNO, C.J., Chairperson,

CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
VILLARAMA, JR., JJ.

Promulgated:

February 22, 2010

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
Before this Court is a petition for certiorari[1] under Rule 65 of the 1997 Rules of
Civil Procedure, as amended, filed by petitioners Irene and Reynaldo Sante assailing
the Decision[2] dated January 31, 2006 and the Resolution[3] dated June 23, 2006
of the Seventeenth Division of the Court of Appeals in CA-G.R. SP No. 87563. The
assailed decision affirmed the orders of the Regional Trial Court (RTC) of Baguio City,
Branch 60, denying their motion to dismiss the complaint for damages filed by
respondent Vita Kalashian against them.
The facts, culled from the records, are as follows:
On April 5, 2004, respondent filed before the RTC of Baguio City a complaint for
damages[4] against petitioners. In her complaint, docketed as Civil Case No. 5794R, respondent alleged that while she was inside the Police Station of Natividad,
Pangasinan, and in the presence of other persons and police officers, petitioner
Irene Sante uttered words, which when translated in English are as follows, How

many rounds of sex did you have last night with your boss, Bert? You fuckin bitch!
Bert refers to Albert Gacusan, respondents friend and one (1) of her hired personal
security guards detained at the said station and who is a suspect in the killing of
petitioners close relative. Petitioners also allegedly went around Natividad,
Pangasinan telling people that she is protecting and cuddling the suspects in the
aforesaid killing. Thus, respondent prayed that petitioners be held liable to pay
moral damages in the amount of P300,000.00; P50,000.00 as exemplary damages;
P50,000.00 attorneys fees; P20,000.00 litigation expenses; and costs of suit.
Petitioners filed a Motion to Dismiss[5] on the ground that it was the Municipal Trial
Court in Cities (MTCC) and not the RTC of Baguio, that had jurisdiction over the case.
They argued that the amount of the claim for moral damages was not more than
the jurisdictional amount of P300,000.00, because the claim for exemplary damages
should be excluded in computing the total claim.
On June 24, 2004,[6] the trial court denied the motion to dismiss citing our ruling in
Movers-Baseco Integrated Port Services, Inc. v. Cyborg Leasing Corporation.[7] The
trial court held that the total claim of respondent amounted to P420,000.00 which
was above the jurisdictional amount for MTCCs outside Metro Manila. The trial court
also later issued Orders on July 7, 2004[8] and July 19, 2004,[9] respectively
reiterating its denial of the motion to dismiss and denying petitioners motion for
reconsideration.
Aggrieved, petitioners filed on August 2, 2004, a Petition for Certiorari and
Prohibition,[10] docketed as CA-G.R. SP No. 85465, before the Court of Appeals.
Meanwhile, on July 14, 2004, respondent and her husband filed an Amended
Complaint[11] increasing the claim for moral damages from P300,000.00 to
P1,000,000.00. Petitioners filed a Motion to Dismiss with Answer Ad Cautelam and
Counterclaim, but the trial court denied their motion in an Order[12] dated
September 17, 2004.
Hence, petitioners again filed a Petition for Certiorari and Prohibition[13] before the
Court of Appeals, docketed as CA-G.R. SP No. 87563, claiming that the trial court
committed grave abuse of discretion in allowing the amendment of the complaint to
increase the amount of moral damages from P300,000.00 to P1,000,000.00. The
case was raffled to the Seventeenth Division of the Court of Appeals.
On January 23, 2006, the Court of Appeals, Seventh Division, promulgated a
decision in CA-G.R. SP No. 85465, as follows:
WHEREFORE, finding grave abuse of discretion on the part of [the] Regional Trial
Court of Baguio, Branch 60, in rendering the assailed Orders dated June 24, 2004
and July [19], 2004 in Civil Case No. 5794-R the instant petition for certiorari is
GRANTED. The assailed Orders are hereby ANNULLED and SET ASIDE. Civil Case No.
5794-R for damages is ordered DISMISSED for lack of jurisdiction.

SO ORDERED.[14]

The Court of Appeals held that the case clearly falls under the jurisdiction of the
MTCC as the allegations show that plaintiff was seeking to recover moral damages
in the amount of P300,000.00, which amount was well within the jurisdictional
amount of the MTCC. The Court of Appeals added that the totality of claim rule used
for determining which court had jurisdiction could not be applied to the instant case
because plaintiffs claim for exemplary damages was not a separate and distinct
cause of action from her claim of moral damages, but merely incidental to it. Thus,
the prayer for exemplary damages should be excluded in computing the total
amount of the claim.
On January 31, 2006, the Court of Appeals, this time in CA-G.R. SP No. 87563,
rendered a decision affirming the September 17, 2004 Order of the RTC denying
petitioners Motion to Dismiss Ad Cautelam. In the said decision, the appellate court
held that the total or aggregate amount demanded in the complaint constitutes the
basis of jurisdiction. The Court of Appeals did not find merit in petitioners posture
that the claims for exemplary damages and attorneys fees are merely incidental to
the main cause and should not be included in the computation of the total claim.
The Court of Appeals additionally ruled that respondent can amend her complaint
by increasing the amount of moral damages from P300,000.00 to P1,000,000.00, on
the ground that the trial court has jurisdiction over the original complaint and
respondent is entitled to amend her complaint as a matter of right under the Rules.
Unable to accept the decision, petitioners are now before us raising the following
issues:
I.
WHETHER OR NOT THERE WAS GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR IN EXCESS OF JURISDICTION ON THE PART OF THE (FORMER) SEVENTEENTH
DIVISION OF THE HONORABLE COURT OF APPEALS WHEN IT RESOLVED THAT THE
REGIONAL TRIAL COURT OF BAGUIO CITY BRANCH 60 HAS JURISDICTION OVER THE
SUBJECT MATTER OF THE CASE FOR DAMAGES AMOUNTING TO P300,000.00;
II.
WHETHER OR NOT THERE WAS GRAVE ABUSE OF DISCRETION ON THE PART OF THE
HONORABLE RESPONDENT JUDGE OF THE REGIONAL TRIAL COURT OF BAGUIO
BRANCH 60 FOR ALLOWING THE COMPLAINANT TO AMEND THE COMPLAINT
(INCREASING THE AMOUNT OF DAMAGES TO 1,000,000.00 TO CONFER
JURISDICTION OVER THE SUBJECT MATTER OF THE CASE DESPITE THE PENDENCY OF
A PETITION FOR CERTIORARI FILED AT THE COURT OF APPEALS, SEVENTH DIVISION,
DOCKETED AS CA G.R. NO. 85465.[15]
In essence, the basic issues for our resolution are:
1)

Did the RTC acquire jurisdiction over the case? and

2)
Did the RTC commit grave abuse of discretion in allowing the
amendment of the complaint?

Petitioners insist that the complaint falls under the exclusive jurisdiction of the
MTCC. They maintain that the claim for moral damages, in the amount of
P300,000.00 in the original complaint, is the main action. The exemplary damages
being discretionary should not be included in the computation of the jurisdictional
amount. And having no jurisdiction over the subject matter of the case, the RTC
acted with grave abuse of discretion when it allowed the amendment of the
complaint to increase the claim for moral damages in order to confer jurisdiction.
In her Comment,[16] respondent averred that the nature of her complaint is for
recovery of damages. As such, the totality of the claim for damages, including the
exemplary damages as well as the other damages alleged and prayed in the
complaint, such as attorneys fees and litigation expenses, should be included in
determining jurisdiction. The total claim being P420,000.00, the RTC has jurisdiction
over the complaint.
We deny the petition, which although denominated as a petition for certiorari, we
treat as a petition for review on certiorari under Rule 45 in view of the issues raised.
Section 19(8) of Batas Pambansa Blg. 129,[17] as amended by Republic Act No.
7691,[18] states:
SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive
original jurisdiction:
xxxx
(8) In all other cases in which the demand, exclusive of interest, damages of
whatever kind, attorneys fees, litigation expenses, and costs or the value of the
property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in
such other cases in Metro Manila, where the demand, exclusive of the
abovementioned items exceeds Two hundred thousand pesos (P200,000.00).
Section 5 of Rep. Act No. 7691 further provides:
SEC. 5. After five (5) years from the effectivity of this Act, the jurisdictional amounts
mentioned in Sec. 19(3), (4), and (8); and Sec. 33(1) of Batas Pambansa Blg. 129 as
amended by this Act, shall be adjusted to Two hundred thousand pesos
(P200,000.00). Five (5) years thereafter, such jurisdictional amounts shall be
adjusted further to Three hundred thousand pesos (P300,000.00): Provided,
however, That in the case of Metro Manila, the abovementioned jurisdictional
amounts shall be adjusted after five (5) years from the effectivity of this Act to Four
hundred thousand pesos (P400,000.00).
Relatedly, Supreme Court Circular No. 21-99 was issued declaring that the first
adjustment in jurisdictional amount of first level courts outside of Metro Manila from
P100,000.00 to P200,000.00 took effect on March 20, 1999. Meanwhile, the second
adjustment from P200,000.00 to P300,000.00 became effective on February 22,
2004 in accordance with OCA Circular No. 65-2004 issued by the Office of the Court
Administrator on May 13, 2004.

Based on the foregoing, there is no question that at the time of the filing of the
complaint on April 5, 2004, the MTCCs jurisdictional amount has been adjusted to
P300,000.00.
But where damages is the main cause of action, should the amount of moral
damages prayed for in the complaint be the sole basis for determining which court
has jurisdiction or should the total amount of all the damages claimed regardless of
kind and nature, such as exemplary damages, nominal damages, and attorneys
fees, etc., be used?
In this regard, Administrative Circular No. 09-94[19] is instructive:
xxxx
2. The exclusion of the term damages of whatever kind in determining the
jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P. Blg. 129, as
amended by R.A. No. 7691, applies to cases where the damages are merely
incidental to or a consequence of the main cause of action. However, in cases
where the claim for damages is the main cause of action, or one of the causes of
action, the amount of such claim shall be considered in determining the jurisdiction
of the court. (Emphasis ours.)
In the instant case, the complaint filed in Civil Case No. 5794-R is for the recovery of
damages for the alleged malicious acts of petitioners. The complaint principally
sought an award of moral and exemplary damages, as well as attorneys fees and
litigation expenses, for the alleged shame and injury suffered by respondent by
reason of petitioners utterance while they were at a police station in Pangasinan. It
is settled that jurisdiction is conferred by law based on the facts alleged in the
complaint since the latter comprises a concise statement of the ultimate facts
constituting the plaintiffs causes of action.[20] It is clear, based on the allegations of
the complaint, that respondents main action is for damages. Hence, the other forms
of damages being claimed by respondent, e.g., exemplary damages, attorneys fees
and litigation expenses, are not merely incidental to or consequences of the main
action but constitute the primary relief prayed for in the complaint.
In Mendoza v. Soriano,[21] it was held that in cases where the claim for damages is
the main cause of action, or one of the causes of action, the amount of such claim
shall be considered in determining the jurisdiction of the court. In the said case, the
respondents claim of P929,000.06 in damages and P25,000 attorneys fees plus
P500 per court appearance was held to represent the monetary equivalent for
compensation of the alleged injury. The Court therein held that the total amount of
monetary claims including the claims for damages was the basis to determine the
jurisdictional amount.
Also, in Iniego v. Purganan,[22] the Court has held:
The amount of damages claimed is within the jurisdiction of the RTC, since it is the
claim for all kinds of damages that is the basis of determining the jurisdiction of

courts, whether the claims for damages arise from the same or from different
causes of action.
xxxx
Considering that the total amount of damages claimed was P420,000.00, the Court
of Appeals was correct in ruling that the RTC had jurisdiction over the case.
Lastly, we find no error, much less grave abuse of discretion, on the part of the
Court of Appeals in affirming the RTCs order allowing the amendment of the original
complaint from P300,000.00 to P1,000,000.00 despite the pendency of a petition for
certiorari filed before the Court of Appeals. While it is a basic jurisprudential
principle that an amendment cannot be allowed when the court has no jurisdiction
over the original complaint and the purpose of the amendment is to confer
jurisdiction on the court,[23] here, the RTC clearly had jurisdiction over the original
complaint and amendment of the complaint was then still a matter of right.[24]
WHEREFORE, the petition is DENIED, for lack of merit. The Decision and Resolution
of the Court of Appeals dated January 31, 2006 and June 23, 2006, respectively, are
AFFIRMED. The Regional Trial Court of Baguio City, Branch 60 is DIRECTED to
continue with the trial proceedings in Civil Case No. 5794-R with deliberate
dispatch.
No costs.
SO ORDERED.