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PRELIMINARY ATTATCHMENT

[G.R. No. 125027. August 12, 2002]


ANITA MANGILA, petitioner, vs. COURT OF APPEALS and LORETA GUINA, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition fore review on certiorari under Rule 45 of the Rules of Court, seeking to set
aside the Decision[1] of the Court of Appeals affirming the Decision[2] of the Regional Trial
Court, Branch 108, Pasay City. The trial court upheld the writ of attachment and the declaration
of default on petitioner while ordering her to pay private respondent P109,376.95 plus 18 percent
interest per annum, 25 percent attorneys fees and costs of suit.
The Facts
Petitioner Anita Mangila (petitioner for brevity) is an exporter of sea foods and doing business
under the name and style of Seafoods Products. Private respondent Loreta Guina (private
respondent for brevity) is the President and General Manager of Air Swift International, a single
registered proprietorship engaged in the freight forwarding business.
Sometime in January 1988, petitioner contracted the freight forwarding services of private
respondent for shipment of petitioners products, such as crabs, prawns and assorted fishes, to
Guam (USA) where petitioner maintains an outlet. Petitioner agreed to pay private respondent
cash on delivery. Private respondents invoice stipulates a charge of 18 percent interest per annum
on all overdue accounts. In case of suit, the same invoice stipulates attorneys fees equivalent to
25 percent of the amount due plus costs of suit.[3]
On the first shipment, petitioner requested for seven days within which to pay private
respondent. However, for the next three shipments, March 17, 24 and 31, 1988, petitioner failed
to pay private respondent shipping charges amounting to P109, 376.95.[4]
Despite several demands, petitioner never paid private respondent. Thus, on June 10, 1988,
private respondent filed Civil Case No. 5875 before the Regional Trial Court of Pasay City for
collection of sum of money.
On August 1, 1988, the sheriff filed his Sheriffs Return showing that summons was not served on
petitioner. A woman found at petitioners house informed the sheriff that petitioner transferred her
residence to Sto. Nio, Guagua, Pampanga. The sheriff found out further that petitioner had left
the Philippines for Guam.[5]
Thus, on September 13, 1988, construing petitioners departure from the Philippines as done with
intent to defraud her creditors, private respondent filed a Motion for Preliminary Attachment. On

September 26, 1988, the trial court issued an Order of Preliminary Attachment[6] against
petitioner. The following day, the trial court issued a Writ of Preliminary Attachment.
The trial court granted the request of its sheriff for assistance from their counterparts in RTC,
Pampanga. Thus, on October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga served on
petitioners household help in San Fernando, Pampanga, the Notice of Levy with the Order,
Affidavit and Bond.[7]
On November 7, 1988, petitioner filed an Urgent Motion to Discharge Attachment[8] without
submitting herself to the jurisdiction of the trial court. She pointed out that up to then, she had
not been served a copy of the Complaint and the summons. Hence, petitioner claimed the court
had not acquired jurisdiction over her person.[9]
In the hearing of the Urgent Motion to Discharge Attachment on November 11, 1988, private
respondent sought and was granted a re-setting to December 9, 1988. On that date, private
respondents counsel did not appear, so the Urgent Motion to Discharge Attachment was deemed
submitted for resolution.[10]
The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon filing of
petitioners counter-bond. The trial court, however, did not rule on the question of jurisdiction and
on the validity of the writ of preliminary attachment.
On December 26, 1988, private respondent applied for an alias summons, which the trial court
issued on January 19, 1989.[11] It was only on January 26, 1989 that summons was finally
served on petitioner.[12]
On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of
improper venue. Private respondents invoice for the freight forwarding service stipulates that if
court litigation becomes necessary to enforce collection xxx the agreed venue for such action is
Makati, Metro Manila.[13] Private respondent filed an Opposition asserting that although Makati
appears as the stipulated venue, the same was merely an inadvertence by the printing press
whose general manager executed an affidavit[14] admitting such inadvertence. Moreover, private
respondent claimed that petitioner knew that private respondent was holding office in Pasay City
and not in Makati.[15] The lower court, finding credence in private respondents assertion, denied
the Motion to Dismiss and gave petitioner five days to file her Answer. Petitioner filed a Motion
for Reconsideration but this too was denied.
Petitioner filed her Answer[16] on June 16, 1989, maintaining her contention that the venue was
improperly laid.
On June 26, 1989, the trial court issued an Order setting the pre-trial for July 18, 1989 at 8:30
a.m. and requiring the parties to submit their pre-trial briefs. Meanwhile, private respondent filed
a Motion to Sell Attached Properties but the trial court denied the motion.
On motion of petitioner, the trial court issued an Order resetting the pre-trial from July 18, 1989
to August 24, 1989 at 8:30 a.m..

On August 24, 1989, the day of the pre-trial, the trial court issued an Order[17] terminating the
pre-trial and allowing the private respondent to present evidence ex-parte on September 12, 1989
at 8:30 a.m.. The Order stated that when the case was called for pre-trial at 8:31 a.m., only the
counsel for private respondent appeared. Upon the trial courts second call 20 minutes later,
petitioners counsel was still nowhere to be found. Thus, upon motion of private respondent, the
pre-trial was considered terminated.
On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order terminating
the pre-trial. Petitioner explained that her counsel arrived 5 minutes after the second call, as
shown by the transcript of stenographic notes, and was late because of heavy traffic. Petitioner
claims that the lower court erred in allowing private respondent to present evidence ex-parte
since there was no Order considering the petitioner as in default. Petitioner contends that the
Order of August 24, 1989 did not state that petitioner was declared as in default but still the court
allowed private respondent to present evidence ex-parte.[18]
On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled the
presentation of private respondents evidence ex-parte on October 10, 1989.
On October 10, 1989, petitioner filed an Omnibus Motion stating that the presentation of
evidence ex-parte should be suspended because there was no declaration of petitioner as in
default and petitioners counsel was not absent, but merely late.
On October 18, 1989, the trial court denied the Omnibus Motion.[19]
On November 20, 1989, the petitioner received a copy of the Decision of November 10, 1989,
ordering petitioner to pay respondent P109,376.95 plus 18 percent interest per annum, 25 percent
attorneys fees and costs of suit. Private respondent filed a Motion for Execution Pending Appeal
but the trial court denied the same.
The Ruling of the Court of Appeals
On December 15, 1995, the Court of Appeals rendered a decision affirming the decision of the
trial court. The Court of Appeals upheld the validity of the issuance of the writ of attachment and
sustained the filing of the action in the RTC of Pasay. The Court of Appeals also affirmed the
declaration of default on petitioner and concluded that the trial court did not commit any
reversible error.
Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals denied
the same in a Resolution dated May 20, 1996.
Hence, this petition.
The Issues
The issues raised by petitioner may be re-stated as follows:

I.
WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF
ATTACHMENT WAS IMPROPERLY ISSUED AND SERVED;
II.
WHETHER THERE WAS A VALID DECLARATION OF DEFAULT;
III.
WHETHER THERE WAS IMPROPER VENUE.
IV.
WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS
OBLIGED TO PAY P109, 376.95, PLUS ATTORNEYS FEES.[20]
The Ruling of the Court
Improper Issuance and Service of Writ of Attachment
Petitioner ascribes several errors to the issuance and implementation of the writ of attachment.
Among petitioners arguments are: first, there was no ground for the issuance of the writ since the
intent to defraud her creditors had not been established; second, the value of the properties levied
exceeded the value of private respondents claim. However, the crux of petitioners arguments
rests on the question of the validity of the writ of attachment. Because of failure to serve
summons on her before or simultaneously with the writs implementation, petitioner claims that
the trial court had not acquired jurisdiction over her person and thus the service of the writ is
void.
As a preliminary note, a distinction should be made between issuance and implementation of the
writ of attachment. It is necessary to distinguish between the two to determine when jurisdiction
over the person of the defendant should be acquired to validly implement the writ. This
distinction is crucial in resolving whether there is merit in petitioners argument.
This Court has long settled the issue of when jurisdiction over the person of the defendant should
be acquired in cases where a party resorts to provisional remedies. A party to a suit may, at any
time after filing the complaint, avail of the provisional remedies under the Rules of Court.
Specifically, Rule 57 on preliminary attachment speaks of the grant of the remedy at the
commencement of the action or at any time thereafter.[21] This phrase refers to the date of filing
of the complaint which is the moment that marks the commencement of the action. The reference
plainly is to a time before summons is served on the defendant, or even before summons issues.

In Davao Light & Power Co., Inc. v. Court of Appeals,[22] this Court clarified the actual time
when jurisdiction should be had:
It goes without saying that whatever be the acts done by the Court prior to the acquisition of
jurisdiction over the person of defendant - issuance of summons, order of attachment and writ of
attachment - these do not and cannot bind and affect the defendant until and unless jurisdiction
over his person is eventually obtained by the court, either by service on him of summons or other
coercive process or his voluntary submission to the courts authority. Hence, when the sheriff or
other proper officer commences implementation of the writ of attachment, it is essential that he
serve on the defendant not only a copy of the applicants affidavit and attachment bond, and of
the order of attachment, as explicitly required by Section 5 of Rule 57, but also the summons
addressed to said defendant as well as a copy of the complaint xxx. (Emphasis supplied.)
Furthermore, we have held that the grant of the provisional remedy of attachment involves three
stages: first, the court issues the order granting the application; second, the writ of attachment
issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial
two stages, it is not necessary that jurisdiction over the person of the defendant be first obtained.
However, once the implementation of the writ commences, the court must have acquired
jurisdiction over the defendant for without such jurisdiction, the court has no power and
authority to act in any manner against the defendant. Any order issuing from the Court will not
bind the defendant.[23]
In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and
implemented on October 28, 1988. However, the alias summons was served only on January 26,
1989 or almost three months after the implementation of the writ of attachment.
The trial court had the authority to issue the Writ of Attachment on September 27 since a motion
for its issuance can be filed at the commencement of the action. However, on the day the writ
was implemented, the trial court should have, previously or simultaneously with the
implementation of the writ, acquired jurisdiction over the petitioner. Yet, as was shown in the
records of the case, the summons was actually served on petitioner several months after the writ
had been implemented.
Private respondent, nevertheless, claims that the prior or contemporaneous service of summons
contemplated in Section 5 of Rule 57 provides for exceptions. Among such exceptions are where
the summons could not be served personally or by substituted service despite diligent efforts or
where the defendant is a resident temporarily absent therefrom x x x. Private respondent asserts
that when she commenced this action, she tried to serve summons on petitioner but the latter
could not be located at her customary address in Kamuning, Quezon City or at her new address
in Guagua, Pampanga.[24] Furthermore, respondent claims that petitioner was not even in
Pampanga; rather, she was in Guam purportedly on a business trip.
Private respondent never showed that she effected substituted service on petitioner after her
personal service failed. Likewise, if it were true that private respondent could not ascertain the
whereabouts of petitioner after a diligent inquiry, still she had some other recourse under the
Rules of Civil Procedure.

The rules provide for certain remedies in cases where personal service could not be effected on a
party. Section 14, Rule 14 of the Rules of Court provides that whenever the defendants
whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by leave of
court, be effected upon him by publication in a newspaper of general circulation x x x. Thus, if
petitioners whereabouts could not be ascertained after the sheriff had served the summons at her
given address, then respondent could have immediately asked the court for service of summons
by publication on petitioner.[25]
Moreover, as private respondent also claims that petitioner was abroad at the time of the service
of summons, this made petitioner a resident who is temporarily out of the country. This is the
exact situation contemplated in Section 16,[26] Rule 14 of the Rules of Civil Procedure,
providing for service of summons by publication.
In conclusion, we hold that the alias summons belatedly served on petitioner cannot be deemed
to have cured the fatal defect in the enforcement of the writ. The trial court cannot enforce such a
coercive process on petitioner without first obtaining jurisdiction over her person. The
preliminary writ of attachment must be served after or simultaneous with the service of summons
on the defendant whether by personal service, substituted service or by publication as warranted
by the circumstances of the case.[27] The subsequent service of summons does not confer a
retroactive acquisition of jurisdiction over her person because the law does not allow for
retroactivity of a belated service.
Improper Venue
Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in private
respondents invoice which contains the following:
3. If court litigation becomes necessary to enforce collection, an additional equivalent (sic) to
25% of the principal amount will be charged. The agreed venue for such action is Makati, Metro
Manila, Philippines.[28]
Based on this provision, petitioner contends that the action should have been instituted in the
RTC of Makati and to do otherwise would be a ground for the dismissal of the case.
We resolve to dismiss the case on the ground of improper venue but not for the reason stated by
petitioner.
The Rules of Court provide that parties to an action may agree in writing on the venue on which
an action should be brought.[29] However, a mere stipulation on the venue of an action is not
enough to preclude parties from bringing a case in other venues.[30] The parties must be able to
show that such stipulation is exclusive. Thus, absent words that show the parties intention to
restrict the filing of a suit in a particular place, courts will allow the filing of a case in any venue,
as long as jurisdictional requirements are followed. Venue stipulations in a contract, while
considered valid and enforceable, do not as a rule supersede the general rule set forth in Rule 4
of the Revised Rules of Court.[31] In the absence of qualifying or restrictive words, they should

be considered merely as an agreement on additional forum, not as limiting venue to the specified
place.[32]
In the instant case, the stipulation does not limit the venue exclusively to Makati. There are no
qualifying or restrictive words in the invoice that would evince the intention of the parties that
Makati is the only or exclusive venue where the action could be instituted. We therefore agree
with private respondent that Makati is not the only venue where this case could be filed.
Nevertheless, we hold that Pasay is not the proper venue for this case.
Under the 1997 Rules of Civil Procedure, the general rule is venue in personal actions is where
the defendant or any of the defendants resides or may be found, or where the plaintiff or any of
the plaintiffs resides, at the election of the plaintiff.[33] The exception to this rule is when the
parties agree on an exclusive venue other than the places mentioned in the rules. But, as we have
discussed, this exception is not applicable in this case. Hence, following the general rule, the
instant case may be brought in the place of residence of the plaintiff or defendant, at the election
of the plaintiff (private respondent herein).
In the instant case, the residence of private respondent (plaintiff in the lower court) was not
alleged in the complaint. Rather, what was alleged was the postal address of her sole
proprietorship, Air Swift International. It was only when private respondent testified in court,
after petitioner was declared in default, that she mentioned her residence to be in Better Living
Subdivision, Paraaque City.
In the earlier case of Sy v. Tyson Enterprises, Inc.,[34] the reverse happened. The plaintiff in that
case was Tyson Enterprises, Inc., a corporation owned and managed by Dominador Ti. The
complaint, however, did not allege the office or place of business of the corporation, which was
in Binondo, Manila. What was alleged was the residence of Dominador Ti, who lived in San
Juan, Rizal. The case was filed in the Court of First Instance of Rizal, Pasig. The Court there
held that the evident purpose of alleging the address of the corporations president and manager
was to justify the filing of the suit in Rizal, Pasig instead of in Manila. Thus, the Court ruled that
there was no question that venue was improperly laid in that case and held that the place of
business of Tyson Enterpises, Inc. is considered as its residence for purposes of venue.
Furthermore, the Court held that the residence of its president is not the residence of the
corporation because a corporation has a personality separate and distinct from that of its officers
and stockholders.
In the instant case, it was established in the lower court that petitioner resides in San Fernando,
Pampanga[35] while private respondent resides in Paraaque City.[36] However, this case was
brought in Pasay City, where the business of private respondent is found. This would have been
permissible had private respondents business been a corporation, just like the case in Sy v. Tyson
Enterprises, Inc. However, as admitted by private respondent in her Complaint[37] in the lower
court, her business is a sole proprietorship, and as such, does not have a separate juridical
personality that could enable it to file a suit in court.[38] In fact, there is no law authorizing sole
proprietorships to file a suit in court.[39]

A sole proprietorship does not possess a juridical personality separate and distinct from the
personality of the owner of the enterprise.[40] The law merely recognizes the existence of a sole
proprietorship as a form of business organization conducted for profit by a single individual and
requires its proprietor or owner to secure licenses and permits, register its business name, and
pay taxes to the national government.[41] The law does not vest a separate legal personality on
the sole proprietorship or empower it to file or defend an action in court.[42]
Thus, not being vested with legal personality to file this case, the sole proprietorship is not the
plaintiff in this case but rather Loreta Guina in her personal capacity. In fact, the complaint in the
lower court acknowledges in its caption that the plaintiff and defendant are Loreta Guina and
Anita Mangila, respectively. The title of the petition before us does not state, and rightly so,
Anita Mangila v. Air Swift International, but rather Anita Mangila v. Loreta Guina. Logically
then, it is the residence of private respondent Guina, the proprietor with the juridical personality,
which should be considered as one of the proper venues for this case.
All these considered, private respondent should have filed this case either in San Fernando,
Pampanga (petitioners residence) or Paraaque (private respondents residence). Since private
respondent (complainant below) filed this case in Pasay, we hold that the case should be
dismissed on the ground of improper venue.
Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court,
petitioner expressly stated that she was filing the motion without submitting to the jurisdiction of
the court. At that time, petitioner had not been served the summons and a copy of the complaint.
[43] Thereafter, petitioner timely filed a Motion to Dismiss[44] on the ground of improper venue.
Rule 16, Section 1 of the Rules of Court provides that a motion to dismiss may be filed [W]ithin
the time for but before filing the answer to the complaint or pleading asserting a claim. Petitioner
even raised the issue of improper venue in his Answer[45] as a special and affirmative defense.
Petitioner also continued to raise the issue of improper venue in her Petition for Review[46]
before this Court. We thus hold that the dismissal of this case on the ground of improper venue is
warranted.
The rules on venue, like other procedural rules, are designed to insure a just and orderly
administration of justice or the impartial and evenhanded determination of every action and
proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted
freedom to choose where to file the complaint or petition.[47]
We find no reason to rule on the other issues raised by petitioner.
WHEREFORE, the petition is GRANTED on the grounds of improper venue and invalidity of
the service of the writ of attachment. The decision of the Court of Appeals and the order of
respondent judge denying the motion to dismiss are REVERSED and SET ASIDE. Civil Case
No. 5875 is hereby dismissed without prejudice to refiling it in the proper venue. The attached
properties of petitioner are ordered returned to her immediately.
SO ORDERED.

[G.R. No. 139941. January 19, 2001]

VICENTE B. CHUIDIAN, petitioner, vs. SANDIGANBAYAN (Fifth Division)


and the REPUBLIC OF THE PHILIPPINES, respondents.
DECISION
YNARES-SANTIAGO, J.:
The instant petition arises from transactions that were entered into by the government in the
penultimate days of the Marcos administration. Petitioner Vicente B. Chuidian was alleged to be
a dummy or nominee of Ferdinand and Imelda Marcos in several companies said to have been
illegally acquired by the Marcos spouses. As a favored business associate of the Marcoses,
Chuidian allegedly used false pretenses to induce the officers of the Philippine Export and
Foreign Loan Guarantee Corporation (PHILGUARANTEE), the Board of Investments (BOI)
and the Central Bank, to facilitate the procurement and issuance of a loan guarantee in favor of
the Asian Reliability Company, Incorporated (ARCI) sometime in September 1980. ARCI, 98%
of which was allegedly owned by Chuidian, was granted a loan guarantee of Twenty-Five
Million U.S. Dollars (US$25,000,000.00).
While ARCI represented to Philguarantee that the loan proceeds would be used to establish
five inter-related projects in the Philippines, Chuidian reneged on the approved business plan and
instead invested the proceeds of the loan in corporations operating in the United States, more
particularly Dynetics, Incorporated and Interlek, Incorporated. Although ARCI had received the
proceeds of the loan guaranteed by Philguarantee, the former defaulted in the payments thereof,
compelling Philguarantee to undertake payments for the same. Consequently, in June 1985,
Philguarantee sued Chuidian before the Santa Clara County Superior Court,[1] charging that in
violation of the terms of the loan, Chuidian not only defaulted in payment, but also misused the
funds by investing them in Silicon Valley corporations and using them for his personal benefit.
For his part, Chuidian claimed that he himself was a victim of the systematic plunder
perpetrated by the Marcoses as he was the true owner of these companies, and that he had in fact
instituted an action before the Federal Courts of the United States to recover the companies
which the Marcoses had illegally wrested from him.[2]
On November 27, 1985, or three (3) months before the successful peoples revolt that toppled
the Marcos dictatorship, Philguarantee entered into a compromise agreement with Chuidian
whereby petitioner Chuidian shall assign and surrender title to all his companies in favor of the
Philippine government. In return, Philguarantee shall absolve Chuidian from all civil and
criminal liability, and in so doing, desist from pursuing any suit against Chuidian concerning the
payments Philguarantee had made on Chuidians defaulted loans.
It was further stipulated that instead of Chuidian reimbursing the payments made by
Philguarantee arising from Chuidians default, the Philippine government shall pay Chuidian the
amount of Five Million Three Hundred Thousand Dollars (US$5,300,000.00). Initial payment of
Five Hundred Thousand Dollars (US$500,000.00) was actually received by Chuidian, as well as

succeeding payment of Two Hundred Thousand Dollars (US$200,000.00). The remaining


balance of Four Million Six Hundred Thousand Dollars (US$4,600,000.00) was to be paid
through an irrevocable Letter of Credit (L/C) from which Chuidian would draw One Hundred
Thousand Dollars (US$100,000.00) monthly.[3] Accordingly, on December 12, 1985, L/C No.
SSD-005-85 was issued for the said amount by the Philippine National Bank
(PNB). Subsequently, Chuidian was able to make two (2) monthly drawings from said L/C at the
Los Angeles branch of the PNB.[4]
With the advent of the Aquino administration, the newly-established Presidential
Commission on Good Government (PCGG) exerted earnest efforts to search and recover money,
gold, properties, stocks and other assets suspected as having been illegally acquired by the
Marcoses, their relatives and cronies.
Petitioner Chuidian was among those whose assets were sequestered by the PCGG. On May
30, 1986, the PCGG issued a Sequestration Order [5] directing the PNB to place under its custody,
for and in behalf of the PCGG, the irrevocable L/C (No. SSD-005-85). Although Chuidian was
then residing in the United States, his name was placed in the Department of Foreign Affairs
Hold Order list.[6]
In the meantime, Philguarantee filed a motion before the Superior Court of Santa Clara
County of California in Civil Case Nos. 575867 and 577697 seeking to vacate the stipulated
judgment containing the settlement between Philguarantee and Chuidian on the grounds that: (a)
Philguarantee was compelled by the Marcos administration to agree to the terms of the
settlement which was highly unfavorable to Philguarantee and grossly disadvantageous to the
government; (b) Chuidian blackmailed Marcos into pursuing and concluding the settlement
agreement by threatening to expose the fact that the Marcoses made investments in Chuidians
American enterprises; and (c) the Aquino administration had ordered Philguarantee not to make
further payments on the L/C to Chuidian. After considering the factual matters before it, the said
court concluded that Philguarantee had not carried its burden of showing that the settlement
between the parties should be set aside.[7] On appeal, the Sixth Appellate District of the Court of
Appeal of the State of California affirmed the judgment of the Superior Court of Sta. Clara
County denying Philguarantees motion to vacate the stipulated judgment based on the settlement
agreement.[8]
After payment on the L/C was frozen by the PCGG, Chuidian filed before the United States
District Court, Central District of California, an action against PNB seeking, among others, to
compel PNB to pay the proceeds of the L/C. PNB countered that it cannot be held liable for a
breach of contract under principles of illegality, international comity and act of state, and thus it
is excused from payment of the L/C. Philguarantee intervened in said action, raising the same
issues and arguments it had earlier raised in the action before the Santa Clara Superior Court,
alleging that PNB was excused from making payments on the L/C since the settlement was void
due to illegality, duress and fraud.[9]
The Federal Court rendered judgment ruling: (1) in favor of PNB excusing the said bank
from making payment on the L/C; and (2) in Chuidians favor by denying intervenor
Philguarantees action to set aside the settlement agreement.[10]

Meanwhile, on February 27, 1987, a Deed of Transfer[11] was executed between then
Secretary of Finance Jaime V. Ongpin and then PNB President Edgardo B. Espiritu, to facilitate
the rehabilitation of PNB, among others, as part of the governments economic recovery
program. The said Deed of Transfer provided for the transfer to the government of certain assets
of PNB in exchange for which the government would assume certain liabilities of PNB.
[12]
Among those liabilities which the government assumed were unused commercial L/Cs and
Deferred L/Cs, including SSD-005-85 listed under Dynetics, Incorporated in favor of Chuidian
in the amount of Four Million Four Hundred Thousand Dollars (US$4,400,000.00).[13]
On July 30, 1987, the government filed before the Sandiganbayan Civil Case No. 0027
against the Marcos spouses, several government officials who served under the Marcos
administration, and a number of individuals known to be cronies of the Marcoses, including
Chuidian. The complaint sought the reconveyance, reversion, accounting and restitution of all
forms of wealth allegedly procured illegally and stashed away by the defendants.
In particular, the complaint charged that Chuidian, by himself and/or in conspiracy with the
Marcos spouses, engaged in devices, schemes and stratagems by: (1) forming corporations for
the purpose of hiding and avoiding discovery of illegally obtained assets; (2) pillaging the coffers
of government financial institutions such as the Philguarantee; and (3) executing the court
settlement between Philguarantee and Chuidian which was grossly disadvantageous to the
government and the Filipino people.
In fine, the PCGG averred that the above-stated acts of Chuidian committed in unlawful
concert with the other defendants constituted gross abuse of official position of authority,
flagrant breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust
enrichment, violation of the Constitution and laws of the land.[14]
While the case was pending, on March 17, 1993, the Republic of the Philippines filed a
motion for issuance of a writ of attachment [15] over the L/C, citing as grounds therefor the
following:
(1) Chuidian embezzled or fraudulently misapplied the funds of ARCI acting in a fiduciary
capacity, justifying issuance of the writ under Section 1(b), Rule 57 of the Rules of Court;
(2) The writ is justified under Section 1(d) of the same rule as Chuidian is guilty of fraud in
contracting the debt or incurring the obligation upon which the action was brought, or that he
concealed or disposed of the property that is the subject of the action;
(3) Chuidian has removed or disposed of his property with the intent of defrauding the plaintiff
as justified under Section 1(c) of Rule 57; and
(4) Chuidian is residing out of the country or one on whom summons may be served by
publication, which justifies the writ of attachment prayed for under Section 1(e) of the same
rule.

The Republic also averred that should the action brought by Chuidian before the U.S.
District Court of California to compel payment of the L/C prosper, inspite of the sequestration of

the said L/C, Chuidian can ask the said foreign court to compel the PNB Los Angeles branch to
pay the proceeds of the L/C. Eventually, Philguarantee will be made to shoulder the expense
resulting in further damage to the government. Thus, there was an urgent need for the writ of
attachment to place the L/C under the custody of the Sandiganbayan so the same may be
preserved as security for the satisfaction of judgment in the case before said court.
Chuidian opposed the motion for issuance of the writ of attachment, contending that:
(1) The plaintiffs affidavit appended to the motion was in form and substance fatally defective;
(2) Section 1(b) of Rule 57 does not apply since there was no fiduciary relationship between the
plaintiff and Chuidian;
(3) While Chuidian does not admit fraud on his part, if ever there was breach of contract, such
fraud must be present at the time the contract is entered into;
(4) Chuidian has not removed or disposed of his property in the absence of any intent to defraud
plaintiff;
(5) Chuidians absence from the country does not necessarily make him a non-resident; and
(6) Service of summons by publication cannot be used to justify the issuance of the writ since
Chuidian had already submitted to the jurisdiction of the Court by way of a motion to lift the
freeze order filed through his counsel.

On July 14, 1993, the Sandiganbayan issued a Resolution ordering the issuance of a writ of
attachment against L/C No. SSD-005-85 as security for the satisfaction of judgment. [16] The
Sandiganbayans ruling was based on its disquisition of the five points of contention raised by the
parties.On the first issue, the Sandiganbayan found that although no separate affidavit was
attached to the motion, the motion itself contained all the requisites of an affidavit, and the
verification thereof is deemed a substantial compliance of Rule 57, Section 3 of the Rules of
Court.
Anent the second contention, the Sandiganbayan ruled that there was no fiduciary
relationship existing between Chuidian and the Republic, but only between Chuidian and
ARCI. Since the Republic is not privy to the fiduciary relationship between Chuidian and ARCI,
it cannot invoke Section 1(b) of Rule 57.
On the third issue of fraud on the part of Chuidian in contracting the loan, or in concealing
or disposing of the subject property, the Sandiganbayan held that there was a prima facie case of
fraud committed by Chuidian, justifying the issuance of the writ of attachment. The
Sandiganbayan also adopted the Republics position that since it was compelled to pay, through
Philguarantee, the bank loans taken out by Chuidian, the proceeds of which were fraudulently
diverted, it is entitled to the issuance of the writ of attachment to protect its rights as creditor.
Assuming that there is truth to the governments allegation that Chuidian has removed or
disposed of his property with the intent to defraud, the Sandiganbayan held that the writ of

attachment is warranted, applying Section 1(e) of Rule 57. Besides, the Rules provide for
sufficient security should the owner of the property attached suffer damage or prejudice caused
by the attachment.[17]
Chuidians absence from the country was considered by the Sandiganbayan to be the most
potent insofar as the relief being sought is concerned.[18] Taking judicial notice of the admitted
fact that Chuidian was residing outside of the country, the Sandiganbayan observed that:

x x x no explanation whatsoever was given by him as to his absence from the country,
or as to his homecoming plans in the future. It may be added, moreover, that he has no
definite or clearcut plan to return to the country at this juncture given the manner by
which he has submitted himself to the jurisdiction of the court. [19]
Thus, the Sandiganbayan ruled that even if Chuidian is one who ordinarily resides in the
Philippines, but is temporarily living outside, he is still subject to the provisional remedy of
attachment.
Accordingly, an order of attachment[20] was issued by the Sandiganbayan on July 19, 1993,
ordering the Sandiganbayan Sheriff to attach PNB L/C No. SSD-005-85 for safekeeping
pursuant to the Rules of Court as security for the satisfaction of judgment in Sandiganbayan
Civil Case No. 0027.
On August 11, 1997, or almost four (4) years after the issuance of the order of attachment,
Chuidian filed a motion to lift the attachment based on the following grounds: First, he had
returned to the Philippines; hence, the Sandiganbayans most potent ground for the issuance of
the writ of preliminary attachment no longer existed. Since his absence in the past was the very
foundation of the Sandiganbayans writ of preliminary attachment, his presence in the country
warrants the immediate lifting thereof. Second, there was no evidence at all of initial fraud or
subsequent concealment except for the affidavit submitted by the PCGG Chairman citing mere
belief and information and not on knowledge of the facts. Moreover, this statement is hearsay
since the PCGG Chairman was not a witness to the litigated incidents, was never presented as a
witness by the Republic and thus was not subject to cross-examination.
Third, Chuidian denies that he ever disposed of his assets to defraud the Republic, and there
is nothing in the records that support the Sandiganbayans erroneous conclusion on the
matter. Fourth, Chuidian belied the allegation that he was also a defendant in other related
criminal action, for in fact, he had never been a defendant in any prosecution of any sort in the
Philippines.[21] Moreover, he could not have personally appeared in any other action because he
had been deprived of his right to a travel document by the government.
Fifth, the preliminary attachment was, in the first place, unwarranted because he was not
guilty of fraud in contracting the debt or incurring the obligation. In fact, the L/C was not a
product of fraudulent transactions, but was the result of a US Court-approved
settlement. Although he was accused of employing blackmail tactics to procure the settlement,
the California Supreme Court ruled otherwise. And in relation thereto, he cites as a sixth ground
the fact that all these allegations of fraud and wrongdoing had already been dealt with in actions

before the State and Federal Courts of California. While it cannot technically be considered as
forum shopping, it is nevertheless a form of suit multiplicity over the same issues, parties and
subject matter.[22] These foreign judgments constitute res judicata which warrant the dismissal of
the case itself.
Chuidian further contends that should the attachment be allowed to continue, he will be
deprived of his property without due process. The L/C was payment to Chuidian in exchange for
the assets he turned over to the Republic pursuant to the terms of the settlement in Case No.
575867.Said assets, however, had already been sold by the Republic and cannot be returned to
Chuidian should the government succeed in depriving him of the proceeds of the L/C. Since said
assets were disposed of without his or the Sandiganbayans consent, it is the Republic who is
fraudulently disposing of assets.
Finally, Chuidian stressed that throughout the four (4) years that the preliminary attachment
had been in effect, the government had not set the case for hearing. Under Rule 17, Section 3, the
case itself should be dismissed for laches owing to the Republics failure to prosecute its action
for an unreasonable length of time. Accordingly, the preliminary attachment, being only a
temporary or ancillary remedy, must be lifted and the PNB ordered to immediately pay the
proceeds of the L/C to Chuidian.
Subsequently, on August 20, 1997, Chuidian filed a motion to require the Republic to
deposit the L/C in an interest bearing account.[23] He pointed out to the Sandiganbayan that the
face amount of the L/C had, since its attachment, become fully demandable and
payable. However, since the amount is just lying dormant in the PNB, without earning any
interest, he proposed that it would be to the benefit of all if the Sandiganbayan requires PNB to
deposit the full amount to a Sandiganbayan trust account at any bank in order to earn interest
while awaiting judgment of the action.
The Republic opposed Chuidians motion to lift attachment, alleging that Chuidians absence
was not the only ground for the attachment and, therefore, his belated appearance before the
Sandiganbayan is not a sufficient reason to lift the attachment. Moreover, allowing the foreign
judgment as a basis for the lifting of the attachment would essentially amount to an abdication of
the jurisdiction of the Sandiganbayan to hear and decide the ill gotten wealth cases lodged before
it in deference to the judgment of foreign courts.
In a Resolution promulgated on November 13, 1998, the Sandiganbayan denied Chuidians
motion to lift attachment.[24]
On the same day, the Sandiganbayan issued another Resolution denying Chuidians motion to
require deposit of the attached L/C in an interest bearing account.[25]
In a motion seeking a reconsideration of the first resolution, Chuidian assailed the
Sandiganbayans finding that the issues raised in his motion to lift attachment had already been
dealt with in the earlier resolution dated July 14, 1993 granting the application for the writ of
preliminary attachment based on the following grounds: First, Chuidian was out of the country in
1993, but is now presently residing in the country. Second, the Sandiganbayan could not have

known then that his absence was due to the non-renewal of his passport at the instance of the
PCGG. Neither was it revealed that the Republic had already disposed of Chuidians assets ceded
to the Republic in exchange for the L/C. The foreign judgment was not an issue then because at
that time, said judgment had not yet been issued and much less final. Furthermore, the authority
of the PCGG Commissioner to subscribe as a knowledgeable witness relative to the issuance of
the writ of preliminary attachment was raised for the first time in the motion to lift the
attachment. Finally, the issue of laches could not have been raised then because it was the
Republics subsequent neglect or failure to prosecute despite the passing of the years that gave
rise to laches.[26]
Chuidian also moved for a reconsideration of the Sandiganbayan resolution denying the
motion to require deposit of the L/C into an interest bearing account. He argued that contrary to
the Sandiganbayans pronouncement, allowing the deposit would not amount to a virtual
recognition of his right over the L/C, for he is not asking for payment but simply requesting that
it be deposited in an account under the control of the Sandiganbayan. He further stressed that the
Sandiganbayan abdicated its bounden duty to rule on an issue when it found that his motion will
render nugatory the purpose of sequestration and freeze orders over the L/C. Considering that his
assets had already been sold by the Republic, he claimed that the Sandiganbayans refusal to
exercise its fiduciary duty over attached assets will cause him irreparable injury. Lastly, the
Sandiganbayans position that Chuidian was not the owner but a mere payee-beneficiary of the
L/C issued in his favor negates overwhelming jurisprudence on the Negotiable Instruments Law,
while at the same time obliterating his rights of ownership under the Civil Code.[27]
On July 13, 1999, the Sandiganbayan gave due course to Chuidians plea for the attached L/C
to be deposited in an interest-bearing account, on the ground that it will redound to the benefit of
both parties.
The Sandiganbayan declared the national government as the principal obligor of the L/C
even though the liability remained in the books of the PNB for accounting and monitoring
purposes.
The Sandiganbayan, however, denied Chuidians motion for reconsideration of the denial of
his motion to lift attachment, agreeing in full with the governments apriorisms that:

x x x (1) it is a matter of record that the Court granted the application for writ of
attachment upon grounds other than defendants absence in the Philippine territory. In
its Resolution dated July 14, 1993, the Court found a prima facie case of fraud
committed by defendant Chuidian, and that defendant has recovered or disposed of his
property with the intent of defrauding plaintiff; (2) Chuidians belated presence in the
Philippines cannot be invoked to secure the lifting of attachment. The rule is specific
that it applies to a party who is about to depart from the Philippines with intent to
defraud his creditors. Chuidians stay in the country is uncertain and he may leave at
will because he holds a foreign passport; and (3) Chuidians other ground, sufficiency
of former PCGG Chairman Gunigundos verification of the complaint, has been met
fairly and squarely in the Resolution of July 14, 1993. [28]

Hence, the instant petition for certiorari contending that the respondent Sandiganbayan
committed grave abuse of discretion amounting to lack or excess of jurisdiction when it ruled
that:
1) Most of the issues raised in the motion to lift attachment had been substantially addressed in
the previous resolutions dated July 14, 1993 and August 26, 1998, while the rest were of no
imperative relevance as to affect the Sandiganbayans disposition; and
2) PNB was relieved of the obligation to pay on its own L/C by virtue of Presidential
Proclamation No. 50.

The Rules of Court specifically provide for the remedies of a defendant whose property or
asset has been attached. As has been consistently ruled by this Court, the determination of the
existence of grounds to discharge a writ of attachment rests in the sound discretion of the lower
courts.[29]
The question in this case is: What can the herein petitioner do to quash the attachment of the
L/C? There are two courses of action available to the petitioner:
First. To file a counterbond in accordance with Rule 57, Section 12, which provides:

SEC. 12. Discharge of attachment upon giving counterbond. At anytime after an order
of attachment has been granted, the party whose property has been attached, or the
person appearing on his behalf, may, upon reasonable notice to the applicant, apply to
the judge who granted the order, or to the judge of the court in which the action is
pending, for an order discharging the attachment wholly or in part on the security
given. The judge shall, after hearing, order the discharge of the attachment if a cash
deposit is made, or a counterbond executed to the attaching creditor is filed, on behalf
of the adverse party, with the clerk or judge of the court where the application is
made, in an amount equal to the value of the property attached as determined by the
judge, to secure the payment of any judgment that the attaching creditor may recover
in the action. Upon the filing of such counter-bond, copy thereof shall forthwith be
served on the attaching creditor or his lawyer. Upon the discharge of an attachment in
accordance with the provisions of this section the property attached, or the proceeds of
any sale thereof, shall be delivered to the party making the deposit or giving the
counter-bond, or the person appearing on his behalf, the deposit or counter-bond
aforesaid standing in place of the property so released. Should such counterbond for
any reason be found to be, or become, insufficient, and the party furnishing the same
fail to file an additional counter-bond, the attaching creditor may apply for a new
order of attachment.
or

Second. To quash the attachment on the ground that it was irregularly or improvidently
issued, as provided for in Section 13 of the same Rule:

SEC. 13. Discharge of attachment for improper or irregular issuance. - The party
whose property has been attached may also, at any time either before or after the
release of the attached property, or before any attachment shall have been actually
levied, upon reasonable notice to the attaching creditor, apply to the judge who
granted the order, or to the judge of the court in which the action is pending, for an
order to discharge the attachment on the ground that the same was improperly or
irregularly issued. If the motion be made on affidavits on the part of the party whose
property has been attached, but not otherwise, the attaching creditor may oppose the
same by counter-affidavits or other evidence in addition to that on which the
attachment was made. After hearing, the judge shall order the discharge of the
attachment if it appears that it was improperly or irregularly issued and the defect is
not cured forthwith.
It would appear that petitioner chose the latter because the grounds he raised assail the
propriety of the issuance of the writ of attachment. By his own admission, however, he
repeatedly acknowledged that his justifications to warrant the lifting of the attachment are facts
or events that came to light or took place after the writ of attachment had already been
implemented.
More particularly, petitioner emphasized that four (4) years after the writ was issued, he had
returned to the Philippines. Yet while he noted that he would have returned earlier but for the
cancellation of his passport by the PCGG, he was not barred from returning to the Philippines.
Then he informed the Sandiganbayan that while the case against him was pending, but after the
attachment had already been executed, the government lost two (2) cases for fraud lodged
against him before the U.S. Courts, thus invoking res judicata. Next, he also pointed out that the
government is estopped from pursuing the case against him for failing to prosecute for the
number of years that it had been pending litigation.
It is clear that these grounds have nothing to do with the issuance of the writ of
attachment. Much less do they attack the issuance of the writ at that time as improper or
irregular. And yet, the rule contemplates that the defect must be in the very issuance of the
attachment writ. For instance, the attachment may be discharged under Section 13 of Rule 57
when it is proven that the allegations of the complaint were deceptively framed, [30] or when the
complaint fails to state a cause of action. [31] Supervening events which may or may not justify the
discharge of the writ are not within the purview of this particular rule.
In the instant case, there is no showing that the issuance of the writ of attachment was
attended by impropriety or irregularity. Apart from seeking a reconsideration of the resolution
granting the application for the writ, petitioner no longer questioned the writ itself. For four (4)
long years he kept silent and did not exercise any of the remedies available to a defendant whose
property or asset has been attached. It is rather too late in the day for petitioner to question the
propriety of the issuance of the writ.

Petitioner also makes capital of the two foreign judgments which he claims warrant the
application of the principle of res judicata. The first judgment, in Civil Case Nos. 575867 and
577697 brought by Philguarantee before the Santa Clara Country Superior Court, denied
Philguarantees prayer to set aside the stipulated judgment wherein Philguarantee and Chuidian
agreed on the subject attached L/C. On March 14, 1990, the Court of Appeal of the State of
California affirmed the Superior Courts judgment. The said judgment became the subject of a
petition for review by the California Supreme Court. There is no showing, however, of any final
judgment by the California Supreme Court. The records, including petitioners pleadings, are
bereft of any evidence to show that there is a final foreign judgment which the Philippine courts
must defer to. Hence, res judicata finds no application in this instance because it is a requisite
that the former judgment or order must be final.[32]
Second, petitioner cites the judgment of the United States District Court in Civil Case 862255 RSWL brought by petitioner Chuidian against PNB to compel the latter to pay the L/C. The
said Courts judgment, while it ruled in favor of petitioner on the matter of Philguarantees actionin-intervention to set aside the settlement agreement, also ruled in favor of PNB, to wit:

Under Executive Order No. 1, the PCGG is vested by the Philippine President with
the power to enforce its directives and orders by contempt proceedings. Under
Executive Order No. 2, the PCGG is empowered to freeze any, and all assets, funds
and property illegally acquired by former President Marcos or his close friends and
business associates.
On March 11, 1986, PNB/Manila received an order from the PCGG ordering PNB to
freeze any further drawings on the L/C. The freeze order has remained in effect and
was followed by a sequestration order issued by the PCGG. Subsequently, Chuidians
Philippine counsel filed a series of challenges to the freeze and sequestration orders,
which challenges were unsuccessful as the orders were found valid by the Philippine
Supreme Court. The freeze and sequestration orders are presently in effect. Thus,
under the PCGG order and Executive Orders Nos. 1 and 2, performance by PNB
would be illegal under Philippine Law. Therefore PNB is excused from performance
of the L/C agreement as long as the freeze and sequestration orders remain in
effect. (Underscoring ours)
xxxxxxxxx

Chuidian argues that the fact that the L/C was issued pursuant to a settlement in
California, that the negotiations for which occurred in California, and that two of the
payments were made at PNB/LA, compels the conclusion that the act of prohibiting
payment of the L/C occurred in Los Angeles. However, the majority of the evidence
and Tchacosh and Sabbatino compel the opposite conclusion. The L/C was issued in
Manila, such was done at the request of a Philippine government instrumentality for
the benefit of a Philippine citizen, the L/C was to be performed in the Philippines, all
significant events relating to the issuance and implementation of the L/C occurred in

the Philippines, the L/C agreement provided that the L/C was to be construed
according to laws of the Philippines, and the Philippine government certainly has an
interest in preventing the L/C from being remitted in that it would be the release of
funds that are potentially illgotten gains. Accordingly, the Court finds that the PCGG
orders are acts of state that must be respected by this Court, and thus PNB is excused
from making payment on the L/C as long as the freeze and sequestration orders
remain in effect.[33] (Underscoring ours)
Petitioners own evidence strengthens the governments position that the L/C is under the
jurisdiction of the Philippine government and that the U.S. Courts recognize the authority of the
Republic to sequester and freeze said L/C. Hence, the foreign judgments relied upon by
petitioner do not constitute a bar to the Republics action to recover whatever alleged ill-gotten
wealth petitioner may have acquired.
Petitioner may argue, albeit belatedly, that he also raised the issue that there was no evidence
of fraud on record other than the affidavit of PCGG Chairman Gunigundo. This issue of fraud,
however, touches on the very merits of the main case which accuses petitioner of committing
fraudulent acts in his dealings with the government. Moreover, this alleged fraud was one of the
grounds for the application of the writ, and the Sandiganbayan granted said application after it
found a prima facie case of fraud committed by petitioner.
In fine, fraud was not only one of the grounds for the issuance of the preliminary
attachment, it was at the same time the governments cause of action in the main case.
We have uniformly held that:

x x x when the preliminary attachment is issued upon a ground which is at the same
time the applicants cause of action; e.g., an action for money or property embezzled
or fraudulently misapplied or converted to his own use by a public officer, or an
officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of
his employment as such, or by any other person in a fiduciary capacity, or for a willful
violation of duty, or an action against a party who has been guilty of fraud in
contracting the debt or incurring the obligation upon which the action is brought,the
defendant is not allowed to file a motion to dissolve the attachment under Section 13
of Rule 57 by offering to show the falsity of the factual averments in the plaintiffs
application and affidavits on which the writ was based and consequently that the writ
based thereon had been improperly or irregularly issued the reason being that the
hearing on such a motion for dissolution of the writ would be tantamount to a trial of
the merits of the action. In other words, the merits of the action would be ventilated at
a mere hearing of a motion, instead of at the regular trial.[34] (Underscoring ours)
Thus, this Court has time and again ruled that the merits of the action in which a writ of
preliminary attachment has been issued are not triable on a motion for dissolution of the

attachment, otherwise an applicant for the lifting of the writ could force a trial of the merits of
the case on a mere motion.[35]
It is not the Republics fault that the litigation has been protracted. There is as yet no
evidence of fraud on the part of petitioner. Petitioner is only one of the twenty-three (23)
defendants in the main action. As such, the litigation would take longer than most
cases. Petitioner cannot invoke this delay in the proceedings as an excuse for not seeking the
proper recourse in having the writ of attachment lifted in due time. If ever laches set in, it was
petitioner, not the government, who failed to take action within a reasonable time
period. Challenging the issuance of the writ of attachment four (4) years after its implementation
showed petitioners apparent indifference towards the proceedings before the Sandiganbayan.
In sum, petitioner has failed to convince this Court that the Sandiganbayan gravely abused
its discretion in a whimsical, capricious and arbitrary manner. There are no compelling reasons to
warrant the immediate lifting of the attachment even as the main case is still pending. On the
other hand, allowing the discharge of the attachment at this stage of the proceedings would put in
jeopardy the right of the attaching party to realize upon the relief sought and expected to be
granted in the main or principal action. It would have the effect of prejudging the main case.
The attachment is a mere provisional remedy to ensure the safety and preservation of the
thing attached until the plaintiff can, by appropriate proceedings, obtain a judgment and have
such property applied to its satisfaction.[36] To discharge the attachment at this stage of the
proceedings would render inutile any favorable judgment should the government prevail in the
principal action against petitioner. Thus, the Sandiganbayan, in issuing the questioned
resolutions, which are interlocutory in nature, committed no grave abuse of discretion amounting
to lack or excess of jurisdiction. As long as the Sandiganbayan acted within its jurisdiction, any
alleged errors committed in the exercise of its jurisdiction will amount to nothing more than
errors of judgment which are reviewable by timely appeal and not by special civil action
of certiorari.[37]
Moreover, we have held that when the writ of attachment is issued upon a ground which is at
the same time the applicants cause of action, the only other way the writ can be lifted or
dissolved is by a counterbond, in accordance with Section 12 of the same rule. [38] This recourse,
however, was not availed of by petitioner, as noted by the Solicitor General in his comment.[39]
To reiterate, there are only two ways of quashing a writ of attachment: (a) by filing a
counterbond immediately; or (b) by moving to quash on the ground of improper and irregular
issuance.[40] These grounds for the dissolution of an attachment are fixed in Rule 57 of the Rules
of Court and the power of the Court to dissolve an attachment is circumscribed by the grounds
specified therein.[41] Petitioners motion to lift attachment failed to demonstrate any infirmity or
defect in the issuance of the writ of attachment; neither did he file a counterbond.
Finally, we come to the matter of depositing the Letter of Credit in an interest-bearing
account. We agree with the Sandiganbayan that any interest that the proceeds of the L/C may
earn while the case is being litigated would redound to the benefit of whichever party will
prevail, the Philippine government included. Thus, we affirm the Sandiganbayans ruling that the

proceeds of the L/C should be deposited in an interest bearing account with the Land Bank of the
Philippines for the account of the Sandiganbayan in escrow until ordered released by the said
Court.
We find no legal reason, however, to release the PNB from any liability thereunder. The
Deed of Transfer, whereby certain liabilities of PNB were transferred to the national government,
cannot affect the said L/C since there was no valid substitution of debtor. Article 1293 of the
New Civil Code provides:

Novation which consists in substituting a new debtor in the place of the original one,
may be made without the knowledge or against the will of the latter, but not without
the consent of the creditor. Payment by the new debtor gives him the rights mentioned
in Articles 1236 and 1237.
Accordingly, any substitution of debtor must be with the consent of the creditor, whose
consent thereto cannot just be presumed. Even though Presidential Proclamation No. 50 can be
considered an insuperable cause, it does not necessarily make the contracts and obligations
affected thereby exceptions to the above-quoted law, such that the substitution of debtor can be
validly made even without the consent of the creditor. Presidential Proclamation No. 50 was not
intended to set aside laws that govern the very lifeblood of the nations commerce and
economy. In fact, the Deed of Transfer that was executed between PNB and the government
pursuant to the said Presidential Proclamation specifically stated that it shall be deemed effective
only upon compliance with several conditions, one of which requires that:

(b) the BANK shall have secured such governmental and creditors approvals as may
be necessary to establish the consummation, legality and enforceability of the
transactions contemplated hereby.
The validity of this Deed of Transfer is not disputed. Thus, PNB is estopped from denying
its liability thereunder considering that neither the PNB nor the government bothered to secure
petitioners consent to the substitution of debtors. We are not unmindful that any effort to secure
petitioners consent at that time would, in effect, be deemed an admission that the L/C is valid and
binding. Even the Sandiganbayan found that:

x x x Movant has basis in pointing out that inasmuch as the L/C was issued in his
favor, he is presumed to be the lawful payee-beneficiary of the L/C until such time
that the plaintiff successfully proves that said L/C is ill-gotten and he has no right over
the same.[42]
In Republic v. Sandiganbayan,[43] we held that the provisional remedies, such as freeze orders
and sequestration, were not meant to deprive the owner or possessor of his title or any right to
the property sequestered, frozen or taken over and vest it in the sequestering agency, the
Government or other person.

Thus, until such time that the government is able to successfully prove that petitioner has no
right to claim the proceeds of the L/C, he is deemed to be the lawful payee-beneficiary of said
L/C, for which any substitution of debtor requires his consent. The Sandiganbayan thus erred in
relieving PNB of its liability as the original debtor.
WHEREFORE, in view of all the foregoing, the petition is DISMISSED. The Resolutions
of the Sandiganbayan dated November 6, 1998 and July 2, 1999 are AFFIRMED. The PNB is
DIRECTED to remit to the Sandiganbayan the proceeds of Letter of Credit No. SFD-005-85 in
the amount of U.S. $4.4 million within fifteen (15) days from notice hereof, the same to be
placed under special time deposit with the Land Bank of the Philippines, for the account of
Sandiganbayan in escrow for the person or persons, natural or juridical, who shall eventually be
adjudged lawfully entitled thereto, the same to earn interest at the current legal bank rates. The
principal and its interest shall remain in said account until ordered released by the Court in
accordance with law.
No costs.
SO ORDERED.
G.R. No. 171124

February 13, 2008

ALEJANDRO NG WEE, petitioner,


vs.
MANUEL TANKIANSEE, respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the September 14, 2005 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 90130 and its
January 6, 2006 Resolution2denying the motion for reconsideration thereof.
The facts are undisputed. Petitioner Alejandro Ng Wee, a valued client of Westmont Bank (now
United Overseas Bank), made several money placements totaling P210,595,991.62 with the bank's
affiliate, Westmont Investment Corporation (Wincorp), a domestic entity engaged in the business of
an investment house with the authority and license to extend credit. 3
Sometime in February 2000, petitioner received disturbing news on Wincorp's financial condition
prompting him to inquire about and investigate the company's operations and transactions with its
borrowers. He then discovered that the company extended a loan equal to his total money
placement to a corporation [Power Merge] with a subscribed capital of only P37.5M. This credit
facility originated from another loan of about P1.5B extended by Wincorp to another corporation
[Hottick Holdings]. When the latter defaulted in its obligation, Wincorp instituted a case against it and
its surety. Settlement was, however, reached in which Hottick's president, Luis Juan L. Virata
(Virata), assumed the obligation of the surety.4

Under the scheme agreed upon by Wincorp and Hottick's president, petitioner's money placements
were transferred without his knowledge and consent to the loan account of Power Merge through an
agreement that virtually freed the latter of any liability. Allegedly, through the false representations of
Wincorp and its officers and directors, petitioner was enticed to roll over his placements so that
Wincorp could loan the same to Virata/Power Merge.5
Finding that Virata purportedly used Power Merge as a conduit and connived with Wincorp's officers
and directors to fraudulently obtain for his benefit without any intention of paying the said
placements, petitioner instituted, on October 19, 2000, Civil Case No. 00-99006 for damages with
the Regional Trial Court (RTC) of Manila.6 One of the defendants impleaded in the complaint is
herein respondent Manuel Tankiansee, Vice-Chairman and Director of Wincorp. 7
On October 26, 2000, on the basis of the allegations in the complaint and the October 12, 2000
Affidavit8 of petitioner, the trial court ordered the issuance of a writ of preliminary attachment against
the properties not exempt from execution of all the defendants in the civil case subject, among
others, to petitioner's filing of aP50M-bond.9 The writ was, consequently, issued on November 6,
2000.10
Arguing that the writ was improperly issued and that the bond furnished was grossly insufficient,
respondent, on December 22, 2000, moved for the discharge of the attachment. 11 The other
defendants likewise filed similar motions.12 On October 23, 2001, the RTC, in an Omnibus
Order,13 denied all the motions for the discharge of the attachment. The defendants, including
respondent herein, filed their respective motions for reconsideration 14 but the trial court denied the
same on October 14, 2002.15
Incidentally, while respondent opted not to question anymore the said orders, his co-defendants,
Virata and UEM-MARA Philippines Corporation (UEM-MARA), assailed the same via certiorari under
Rule 65 before the CA [docketed as CA-G.R. SP No. 74610]. The appellate court, however, denied
the certiorari petition on August 21, 2003,16 and the motion for reconsideration thereof on March 16,
2004.17 In a petition for review on certioraribefore this Court, in G.R. No. 162928, we denied the
petition and affirmed the CA rulings on May 19, 2004 for Virata's and UEM-MARA's failure to
sufficiently show that the appellate court committed any reversible error.18We subsequently denied
the petition with finality on August 23, 2004.19
On September 30, 2004, respondent filed before the trial court another Motion to Discharge
Attachment,20 re-pleading the grounds he raised in his first motion but raising the following additional
grounds: (1) that he was not present in Wincorp's board meetings approving the questionable
transactions;21 and (2) that he could not have connived with Wincorp and the other defendants
because he and Pearlbank Securities, Inc., in which he is a major stockholder, filed cases against
the company as they were also victimized by its fraudulent schemes. 22
Ruling that the grounds raised were already passed upon by it in the previous orders affirmed by the
CA and this Court, and that the additional grounds were respondent's affirmative defenses that
properly pertained to the merits of the case, the trial court denied the motion in its January 6, 2005
Order.23
With the denial of its motion for reconsideration,24 respondent filed a certiorari petition before the CA
docketed as CA-G.R. SP No. 90130. On September 14, 2005, the appellate court rendered the
assailed Decision25 reversing and setting aside the aforementioned orders of the trial court and lifting
the November 6, 2000 Writ of Preliminary Attachment26 to the extent that it concerned respondent's
properties. Petitioner moved for the reconsideration of the said ruling, but the CA denied the same in
its January 6, 2006 Resolution.27

Thus, petitioner filed the instant petition on the following grounds:


A.
IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS SHOULD NOT
HAVE GIVEN DUE COURSE TO THE PETITION FOR CERTIORARI FILED BY
RESPONDENT, SINCE IT MERELY RAISED ERRORS IN JUDGMENT, WHICH, UNDER
PREVAILING JURISPRUDENCE, ARE NOT THE PROPER SUBJECTS OF A WRIT OF
CERTIORARI.
B.
MOREOVER, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS
COMMITTED SERIOUS LEGAL ERROR IN RESOLVING FAVORABLY THE GROUNDS
ALLEGED BY RESPONDENT IN HIS PETITION AND (SIC) LIFTING THE WRIT OF
PRELIMINARY ATTACHMENT, SINCE THESE GROUNDS ALREADY RELATE TO THE
MERITS OF CIVIL CASE NO. 00-99006 WHICH, UNDER PREVAILING JURISPRUDENCE,
CANNOT BE USED AS BASIS (SIC) FOR DISCHARGING A WRIT OF PRELIMINARY
ATTACHMENT.
C.
LIKEWISE, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS ERRED
IN SUSTAINING THE ERRORS IN JUDGMENT ALLEGED BY RESPONDENT, NOT ONLY
BECAUSE THESE ARE BELIED BY THE VERY DOCUMENTS HE SUBMITTED AS PROOF
OF SUCH ERRORS, BUT ALSO BECAUSE THESE HAD EARLIER BEEN RESOLVED
WITH FINALITY BY THE LOWER COURT.28
For his part, respondent counters, among others, that the general and sweeping allegation of fraud
against respondent in petitioner's affidavit-respondent as an officer and director of Wincorp allegedly
connived with the other defendants to defraud petitioner-is not sufficient basis for the trial court to
order the attachment of respondent's properties. Nowhere in the said affidavit does petitioner
mention the name of respondent and any specific act committed by the latter to defraud the former. A
writ of attachment can only be granted on concrete and specific grounds and not on general
averments quoting perfunctorily the words of the Rules. Connivance cannot also be based on mere
association but must be particularly alleged and established as a fact. Respondent further contends
that the trial court, in resolving the Motion to Discharge Attachment, need not actually delve into the
merits of the case. All that the court has to examine are the allegations in the complaint and the
supporting affidavit. Petitioner cannot also rely on the decisions of the appellate court in CA-G.R. SP
No. 74610 and this Court in G.R. No. 162928 to support his claim because respondent is not a party
to the said cases.29
We agree with respondent's contentions and deny the petition.
In the case at bench, the basis of petitioner's application for the issuance of the writ of preliminary
attachment against the properties of respondent is Section 1(d) of Rule 57 of the Rules of Court
which pertinently reads:
Section 1. Grounds upon which attachment may issue.-At the commencement of the action
or at any time before entry of judgment, a plaintiff or any proper party may have the property

of the adverse party attached as security for the satisfaction of any judgment that may be
recovered in the following cases:
xxxx
(d) In an action against a party who has been guilty of a fraud in contracting the debt or
incurring the obligation upon which the action is brought, or in the performance thereof.
For a writ of attachment to issue under this rule, the applicant must sufficiently show the factual
circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor's
mere non-payment of the debt or failure to comply with his obligation. 30 The applicant must then be
able to demonstrate that the debtor has intended to defraud the creditor.31 In Liberty Insurance
Corporation v. Court of Appeals,32 we explained as follows:
To sustain an attachment on this ground, it must be shown that the debtor in contracting the
debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the
execution of the agreement and must have been the reason which induced the other party
into giving consent which he would not have otherwise given. To constitute a ground for
attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon
contracting the obligation sued upon. A debt is fraudulently contracted if at the time of
contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case.
Fraud is a state of mind and need not be proved by direct evidence but may be inferred from
the circumstances attendant in each case.33
In the instant case, petitioner's October 12, 2000 Affidavit34 is bereft of any factual statement that
respondent committed a fraud. The affidavit narrated only the alleged fraudulent transaction between
Wincorp and Virata and/or Power Merge, which, by the way, explains why this Court, in G.R. No.
162928, affirmed the writ of attachment issued against the latter. As to the participation of
respondent in the said transaction, the affidavit merely states that respondent, an officer and director
of Wincorp, connived with the other defendants in the civil case to defraud petitioner of his money
placements. No other factual averment or circumstance details how respondent committed a fraud or
how he connived with the other defendants to commit a fraud in the transaction sued upon. In other
words, petitioner has not shown any specific act or deed to support the allegation that respondent is
guilty of fraud.
The affidavit, being the foundation of the writ,35 must contain such particulars as to how the fraud
imputed to respondent was committed for the court to decide whether or not to issue the
writ.36 Absent any statement of other factual circumstances to show that respondent, at the time of
contracting the obligation, had a preconceived plan or intention not to pay, or without any showing of
how respondent committed the alleged fraud, the general averment in the affidavit that respondent is
an officer and director of Wincorp who allegedly connived with the other defendants to commit a
fraud, is insufficient to support the issuance of a writ of preliminary attachment. 37 In the application for
the writ under the said ground, compelling is the need to give a hint about what constituted the fraud
and how it was perpetrated38 because established is the rule that fraud is never presumed. 39 Verily,
the mere fact that respondent is an officer and director of the company does not necessarily give rise
to the inference that he committed a fraud or that he connived with the other defendants to commit a
fraud. While under certain circumstances, courts may treat a corporation as a mere aggroupment of
persons, to whom liability will directly attach, this is only done when the wrongdoing has been clearly
and convincingly established.40
Let it be stressed that the provisional remedy of preliminary attachment is harsh and rigorous for it
exposes the debtor to humiliation and annoyance.41 The rules governing its issuance are, therefore,

strictly construed against the applicant,42 such that if the requisites for its grant are not shown to be
all present, the court shall refrain from issuing it, for, otherwise, the court which issues it acts in
excess of its jurisdiction.43 Likewise, the writ should not be abused to cause unnecessary prejudice. If
it is wrongfully issued on the basis of false or insufficient allegations, it should at once be corrected. 44
Considering, therefore, that, in this case, petitioner has not fully satisfied the legal obligation to show
the specific acts constitutive of the alleged fraud committed by respondent, the trial court acted in
excess of its jurisdiction when it issued the writ of preliminary attachment against the properties of
respondent.
We are not unmindful of the rule enunciated in G.B. Inc., etc. v. Sanchez, et al.,45 that
[t]he merits of the main action are not triable in a motion to discharge an attachment
otherwise an applicant for the dissolution could force a trial of the merits of the case on his
motion.46
However, the principle finds no application here because petitioner has not yet fulfilled the
requirements set by the Rules of Court for the issuance of the writ against the properties of
respondent.47 The evil sought to be prevented by the said ruling will not arise, because the propriety
or impropriety of the issuance of the writ in this case can be determined by simply reading the
complaint and the affidavit in support of the application.
Furthermore, our ruling in G.R. No. 162928, to the effect that the writ of attachment is properly
issued insofar as it concerns the properties of Virata and UEM-MARA, does not affect respondent
herein, for, as correctly ruled by the CA, respondent is "never a party thereto." 48 Also, he is not in the
same situation as Virata and UEM-MARA since, as aforesaid, while petitioner's affidavit detailed the
alleged fraudulent scheme perpetrated by Virata and/or Power Merge, only a general allegation of
fraud was made against respondent.
We state, in closing, that our ruling herein deals only with the writ of preliminary attachment issued
against the properties of respondent-it does not concern the other parties in the civil case, nor affect
the trial court's resolution on the merits of the aforesaid civil case.
WHEREFORE, premises considered, the petition is DENIED. The September 14, 2005 Decision and
the January 6, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 90130 are AFFIRMED.
SO ORDERED.

G.R. No. 166759

November 25, 2009

SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR RESOURCES,
INC.,Petitioners,
vs.
NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and NIKKI
NORLIN SATSATIN, Respondents.
DECISION
PERALTA, J.:

This is a petition for review on certiorari assailing the Decision1 dated November 23, 2004 of the
Court of Appeals (CA) in CA-G.R. SP No. 83595, and its Resolution 2 dated January 18, 2005,
denying petitioners motion for reconsideration.
The factual and procedural antecedents are as follows:
The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario Torres (Mario) each own
adjacent 20,000 square meters track of land situated at Barrio Lankaan, Dasmarias, Cavite,
covered by Transfer Certificate of Title (TCT) Nos. 251267,3 251266,4 and 251265,5 respectively.
Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners mother, Agripina Aledia, if she
wanted to sell their lands. After consultation with her daughters, daughter-in-law, and grandchildren,
Agripina agreed to sell the properties. Petitioners, thus, authorized Nicanor, through a Special Power
of Attorney, to negotiate for the sale of the properties.6
Sometime in 1999, Nicanor offered to sell the properties to Solar Resources, Inc. (Solar). Solar
allegedly agreed to purchase the three parcels of land, together with the 10,000-square-meter
property owned by a certain Rustica Aledia, for P35,000,000.00. Petitioners alleged that Nicanor was
supposed to remit to them the total amount ofP28,000,000.00 or P9,333,333.00 each to Sofia,
Fructosa, and the heirs of Mario.
Petitioners claimed that Solar has already paid the entire purchase price of P35,000,000.00 to
Nicanor in Thirty-Two (32) post-dated checks which the latter encashed/deposited on their respective
due dates. Petitioners added that they also learned that during the period from January 2000 to April
2002, Nicanor allegedly acquired a house and lot at Vista Grande BF Resort Village, Las Pias City
and a car, which he registered in the names of his unemployed children, Nikki Normel Satsatin and
Nikki Norlin Satsatin. However, notwithstanding the receipt of the entire payment for the subject
property, Nicanor only remitted the total amount of P9,000,000.00, leaving an unremitted balance
of P19,000,000.00. Despite repeated verbal and written demands, Nicanor failed to remit to them the
balance of P19,000,000.00.
Consequently, on October 25, 2002, petitioners filed before the regional trial court (RTC) a
Complaint7 for sum of money and damages, against Nicanor, Ermilinda Satsatin, Nikki Normel
Satsatin, and Nikki Norlin Satsatin. The case was docketed as Civil Case No. 2694-02, and raffled to
RTC, Branch 90, Dasmarias, Cavite.
On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ of
Attachment,8 alleging among other things: that respondents are about to depart the Philippines; that
they have properties, real and personal in Metro Manila and in the nearby provinces; that the amount
due them is P19,000,000.00 above all other claims; that there is no other sufficient security for the
claim sought to be enforced; and that they are willing to post a bond fixed by the court to answer for
all costs which may be adjudged to the respondents and all damages which respondents may
sustain by reason of the attachment prayed for, if it shall be finally adjudged that petitioners are not
entitled thereto.
On October 30, 2002, the trial court issued an Order 9 directing the petitioners to post a bond in the
amount ofP7,000,000.00 before the court issues the writ of attachment, the dispositive portion of
which reads as follows:
WHEREFORE, premises considered, and finding the present complaint and motion sufficient in form
and substance, this Court hereby directs the herein plaintiffs to post a bond, pursuant to Section 3,

Rule 57 of the 1997 Rules of Civil Procedure, in the amount of Seven Million Pesos (P7,000,000.00),
before the Writ of Attachment issues.10
On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff, 11 informing the court that
they have already filed an attachment bond. They also prayed that a sheriff be deputized to serve
the writ of attachment that would be issued by the court.
In the Order12 dated November 15, 2002, the RTC granted the above motion and deputized the
sheriff, together with police security assistance, to serve the writ of attachment.
Thereafter, the RTC issued a Writ of Attachment13 dated November 15, 2002, directing the sheriff to
attach the estate, real or personal, of the respondents, the decretal portion of which reads:
WE, THEREFORE, command you to attach the estate, real or personal, not exempt from execution,
of the said defendants, in your province, to the value of said demands, and that you safely keep the
same according to the said Rule, unless the defendants give security to pay such judgment as may
be recovered on the said action, in the manner provided by the said Rule, provided that your legal
fees and all necessary expenses are fully paid.
You shall return this writ with your proceedings indorsed hereon within twenty (20) days from the
date of receipt hereof.
GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day of November, 2002, at Imus for
Dasmarias, Cavite, Philippines.14
On November 19, 2002, a copy of the writ of attachment was served upon the respondents. On the
same date, the sheriff levied the real and personal properties of the respondent, including household
appliances, cars, and a parcel of land located at Las Pias, Manila. 15
On November 21, 2002, summons, together with a copy of the complaint, was served upon the
respondents.16
On November 29, 2002, respondents filed their Answer.17
On the same day respondents filed their answer, they also filed a Motion to Discharge Writ of
Attachment18anchored on the following grounds: the bond was issued before the issuance of the writ
of attachment; the writ of attachment was issued before the summons was received by the
respondents; the sheriff did not serve copies of the application for attachment, order of attachment,
plaintiffs affidavit, and attachment bond, to the respondents; the sheriff did not submit a sheriffs
return in violation of the Rules; and the grounds cited for the issuance of the writ are baseless and
devoid of merit. In the alternative, respondents offered to post a counter-bond for the lifting of the
writ of attachment.19
On March 11, 2003, after the parties filed their respective pleadings, the RTC issued an
Order20 denying the motion, but at the same time, directing the respondents to file a counter-bond, to
wit:
WHEREFORE, premises considered, after the pertinent pleadings of the parties have been taken
into account, the herein defendants are hereby directed to file a counter-bond executed to the
attaching party, in the amount of Seven Million Pesos (P7,000,000.00), to secure the payment of any

judgment that the attaching party may recover in the action, with notice on the attaching party,
whereas, the Motion to Discharge Writ of Attachment is DENIED.
SO ORDERED.21
Thereafter, respondents filed a motion for reconsideration and/or motion for clarification of the above
order. On April 3, 2003, the RTC issued another Order22 which reads:
In view of the Urgent Motion For Reconsideration And/Or Motion For Clarification of the Order of this
Court dated March 11, 2003, denying their Motion to Discharge Writ of Attachment filed by the
defendants through counsel Atty. Franco L. Loyola, the Motion to Discharge Writ of Attachment is
denied until after the defendants have posted the counter-bond in the amount of Seven Million
Pesos (P7,000,000.00).
The defendants, once again, is directed to file their counter-bond of Seven Million Pesos
(P7,000,000.00), if it so desires, in order to discharge the Writ of Attachment.
SO ORDERED.
On December 15, 2003, respondents filed an Urgent Motion to Lift/Set Aside Order Dated March
[11], 2003,23which the RTC denied in an Order24 of even date, the dispositive portion of which reads:
WHEREFORE, premises considered, defendants Urgent Motion to Lift/Set Aside Order Dated
March 23, 2003 (With Manifestation to Dissolve Writ of Attachment) is hereby DENIED for lack of
Merit.
SO ORDERED.
Respondents filed an Urgent Motion for Reconsideration, 25 but it was denied in the Order26 dated
March 3, 2004.
Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and Prohibition with
Preliminary Injunction and Temporary Restraining Order27 under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 83595, anchored on the following grounds:
(1) public respondents committed grave abuse of discretion amounting to lack of or in excess
of jurisdiction in failing to notice that the lower court has no jurisdiction over the person and
subject matter of the complaint when the subject Writ of Attachment was issued;
(2) public respondents committed grave abuse of discretion amounting to lack of or in excess
of jurisdiction in granting the issuance of the Writ of Attachment despite non-compliance with
the formal requisites for the issuance of the bond and the Writ of Attachment. 28
Respondents argued that the subject writ was improper and irregular having been issued and
enforced without the lower court acquiring jurisdiction over the persons of the respondents. They
maintained that the writ of attachment was implemented without serving upon them the summons
together with the complaint. They also argued that the bond issued in favor of the petitioners was
defective, because the bonding company failed to obtain the proper clearance that it can transact
business with the RTC of Dasmarias, Cavite. They added that the various clearances which were
issued in favor of the bonding company were applicable only in the courts of the cities of Pasay,
Pasig, Manila, and Makati, but not in the RTC, Imus, Cavite.29

On November 23, 2003, the CA rendered the assailed Decision in favor of the respondents, finding
grave abuse of discretion amounting to lack of or in excess of jurisdiction on the part of the RTC in
issuing the Orders dated December 15, 2003 and March 3, 2004. The decretal portion of the
Decision reads:
WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed Orders are hereby
nullified and set aside. The levy on the properties of the petitioners pursuant to the Writ of
Attachment issued by the lower court is hereby LIFTED.
SO ORDERED.30
Petitioners filed a Motion for Reconsideration,31 but it was denied in the Resolution32 dated January
18, 2005.
Hence, this petition assigning the following errors:
I.
THE HONORABLE COURT OF APPEALS ERRED IN ORDERING THE LIFTING OF THE WRIT OF
ATTACHMENT PURSUANT TO SECTION 13, RULE 57 OF THE REVISED RULES OF CIVIL
PROCEDURE.
II.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PUBLIC RESPONDENT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF
JURISDICTION IN GRANTING THE WRIT OF ATTACHMENT DESPITE THE BOND BEING
INSUFFICIENT AND HAVING BEEN IMPROPERLY ISSUED.
III.
THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING THE PETITION BY
REASON OF ESTOPPEL, LACHES AND PRESCRIPTION AND IN HOLDING THAT THE WRIT OF
ATTACHMENT WAS IMPROPERLY AND IRREGULARLY ENFORCED IN VIOLATION OF
SECTION 5, RULE 57 OF THE REVISED RULES OF COURT.
IV.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRINCIPLE OF
ESTOPPEL WILL NOT LIE AGAINST RESPONDENTS.
Petitioners maintain that in the case at bar, as in the case of FCY Construction Group, Inc. v. Court
of Appeals,33the only way the subject writ of attachment can be dissolved is by a counter-bond. They
claim that the respondents are not allowed to file a motion to dissolve the attachment under Section
13, Rule 57 of the Rules of Court. Otherwise, the hearing on the motion for the dissolution of the writ
would be tantamount to a trial on the merits, considering that the writ of preliminary attachment was
issued upon a ground which is, at the same time, the applicants cause of action.
Petitioners insist that the determination of the existence of grounds to discharge a writ of attachment
rests in the sound discretion of the lower court. They argue that the Certification 34 issued by the
Office of the Administrator and the Certifications35 issued by the clerks of court of the RTCs of

Dasmarias and Imus, Cavite, would show that the bonds offered by Western Guaranty Corporation,
the bonding company which issued the bond, may be accepted by the RTCs of Dasmarias and
Imus, Cavite, and that the said bonding company has no pending liability with the government.
Petitioners contend that respondents are barred by estoppel, laches, and prescription from
questioning the orders of the RTC issuing the writ of attachment. They also maintain that the issue
whether there was impropriety or irregularity in the issuance of the orders is moot and academic,
considering that the attachment bond questioned by the respondent had already expired on
November 14, 2003 and petitioners have renewed the attachment bond covering the period from
November 14, 2003 to November 14, 2004, and further renewed to cover the period of November
14, 2004 to November 14, 2005.
The petition is bereft of merit.
A writ of preliminary attachment is defined as a provisional remedy issued upon order of the court
where an action is pending to be levied upon the property or properties of the defendant therein, the
same to be held thereafter by the sheriff as security for the satisfaction of whatever judgment that
might be secured in the said action by the attaching creditor against the defendant. 36
In the case at bar, the CA correctly found that there was grave abuse of discretion amounting to lack
of or in excess of jurisdiction on the part of the trial court in approving the bond posted by petitioners
despite the fact that not all the requisites for its approval were complied with. In accepting a surety
bond, it is necessary that all the requisites for its approval are met; otherwise, the bond should be
rejected.37
Every bond should be accompanied by a clearance from the Supreme Court showing that the
company concerned is qualified to transact business which is valid only for thirty (30) days from the
date of its issuance.38However, it is apparent that the Certification39 issued by the Office of the Court
Administrator (OCA) at the time the bond was issued would clearly show that the bonds offered by
Western Guaranty Corporation may be accepted only in the RTCs of the cities of Makati, Pasay, and
Pasig. Therefore, the surety bond issued by the bonding company should not have been accepted
by the RTC of Dasmarias, Branch 90, since the certification secured by the bonding company from
the OCA at the time of the issuance of the bond certified that it may only be accepted in the abovementioned cities. Thus, the trial court acted with grave abuse of discretion amounting to lack of or in
excess of jurisdiction when it issued the writ of attachment founded on the said bond.
Moreover, in provisional remedies, particularly that of preliminary attachment, the distinction between
the issuance and the implementation of the writ of attachment is of utmost importance to the validity
of the writ. The distinction is indispensably necessary to determine when jurisdiction over the person
of the defendant should be acquired in order to validly implement the writ of attachment upon his
person.
This Court has long put to rest the issue of when jurisdiction over the person of the defendant should
be acquired in cases where a party resorts to provisional remedies. A party to a suit may, at any time
after filing the complaint, avail of the provisional remedies under the Rules of Court. Specifically,
Rule 57 on preliminary attachment speaks of the grant of the remedy "at the commencement of the
action or at any time before entry of judgment."40 This phrase refers to the date of the filing of the
complaint, which is the moment that marks "the commencement of the action." The reference plainly
is to a time before summons is served on the defendant, or even before summons issues. 41
In Davao Light & Power Co., Inc. v. Court of Appeals,42 this Court clarified the actual time when
jurisdiction should be had:

It goes without saying that whatever be the acts done by the Court prior to the acquisition of
jurisdiction over the person of defendant x x x issuance of summons, order of attachment and writ
of attachment x x x these do not and cannot bind and affect the defendant until and unless
jurisdiction over his person is eventually obtained by the court, either by service on him of
summons or other coercive process or his voluntary submission to the courts authority. Hence,
when the sheriff or other proper officer commences implementation of the writ of attachment, it is
essential that he serve on the defendant not only a copy of the applicants affidavit and attachment
bond, and of the order of attachment, as explicitly required by Section 5 of Rule 57, but also
thesummons addressed to said defendant as well as a copy of the complaint x x x. (Emphasis
supplied.)
In Cuartero v. Court of Appeals,43 this Court held that the grant of the provisional remedy of
attachment involves three stages: first, the court issues the order granting the application; second,
the writ of attachment issues pursuant to the order granting the writ; and third, the writ is
implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the
defendant be first obtained. However, once the implementation of the writ commences, the court
must have acquired jurisdiction over the defendant, for without such jurisdiction, the court has no
power and authority to act in any manner against the defendant. Any order issuing from the Court
will not bind the defendant.44
Thus, it is indispensable not only for the acquisition of jurisdiction over the person of the defendant,
but also upon consideration of fairness, to apprise the defendant of the complaint against him and
the issuance of a writ of preliminary attachment and the grounds therefor that prior or
contemporaneously to the serving of the writ of attachment, service of summons, together with a
copy of the complaint, the application for attachment, the applicants affidavit and bond, and the
order must be served upon him.
In the instant case, assuming arguendo that the trial court validly issued the writ of attachment on
November 15, 2002, which was implemented on November 19, 2002, it is to be noted that the
summons, together with a copy of the complaint, was served only on November 21, 2002.
At the time the trial court issued the writ of attachment on November 15, 2002, it can validly to do so
since the motion for its issuance can be filed "at the commencement of the action or at any time
before entry of judgment." However, at the time the writ was implemented, the trial court has not
acquired jurisdiction over the persons of the respondent since no summons was yet served upon
them. The proper officer should have previously or simultaneously with the implementation of the writ
of attachment, served a copy of the summons upon the respondents in order for the trial court to
have acquired jurisdiction upon them and for the writ to have binding effect. Consequently, even if
the writ of attachment was validly issued, it was improperly or irregularly enforced and, therefore,
cannot bind and affect the respondents.
Moreover, although there is truth in the petitioners contention that an attachment may not be
dissolved by a showing of its irregular or improper issuance if it is upon a ground which is at the
same time the applicants cause of action in the main case, since an anomalous situation would
result if the issues of the main case would be ventilated and resolved in a mere hearing of a motion.
However, the same is not applicable in the case bar. It is clear from the respondents pleadings that
the grounds on which they base the lifting of the writ of attachment are the irregularities in its
issuance and in the service of the writ; not petitioners cause of action.
1avvphi1

Further, petitioners contention that respondents are barred by estoppel, laches, and prescription
from questioning the orders of the RTC issuing the writ of attachment and that the issue has become

moot and academic by the renewal of the attachment bond covering after its expiration, is devoid of
merit. As correctly held by the CA:
There are two ways of discharging the attachment. First, to file a counter-bond in accordance with
Section 12 of Rule 57. Second[,] [t]o quash the attachment on the ground that it was irregularly or
improvidently issued, as provided for in Section 13 of the same rule. Whether the attachment was
discharged by either of the two ways indicated in the law, the attachment debtor cannot be deemed
to have waived any defect in the issuance of the attachment writ by simply availing himself of one
way of discharging the attachment writ, instead of the other. The filing of a counter-bond is merely a
speedier way of discharging the attachment writ instead of the other way.45
Moreover, again assuming arguendo that the writ of attachment was validly issued, although the trial
court later acquired jurisdiction over the respondents by service of the summons upon them, such
belated service of summons on respondents cannot be deemed to have cured the fatal defect in the
enforcement of the writ. The trial court cannot enforce such a coercive process on respondents
without first obtaining jurisdiction over their person. The preliminary writ of attachment must be
served after or simultaneous with the service of summons on the defendant whether by personal
service, substituted service or by publication as warranted by the circumstances of the case. The
subsequent service of summons does not confer a retroactive acquisition of jurisdiction over her
person because the law does not allow for retroactivity of a belated service. 46
WHEREFORE, premises considered, the petition is DENIED. The Decision and Resolution of the
Court of Appeals dated November 23, 2004 and January 18, 2005, respectively, in CA-G.R. SP No.
83595 are AFFIRMED.
SO ORDERED.

PRELIMINARY INJUNCTION
[G.R. No. 141853. February 7, 2001]

TERESITA V. IDOLOR, petitioner, vs. HON. COURT OF APPEALS, SPS.


GUMERSINDO DE GUZMAN and ILUMINADA DE GUZMAN and
HON. PRUDENCIO CASTILLO, JR., Presiding Judge, Regional Trial
Court, National Capital Judicial Region, Branch 220, Quezon
City, respondents.
DECISION
GONZAGA-REYES, J.:

This is a petition for review on certiorari filed by petitioner Teresita Idolor which
seeks to set aside the decision [1] of the respondent Court of Appeals which reversed the
Order[2]of the Regional Trial Court of Quezon City[3]granting Idolors prayer for the

issuance of a writ of preliminary injunction and the resolution denying petitioners


motion for reconsideration.[4]
On March 21, 1994, to secure a loan of P520,000.00, petitioner Teresita Idolor
executed in favor of private respondent Gumersindo De Guzman a Deed of Real
Estate Mortgage with right of extra-judicial foreclosure upon failure to redeem the
mortgage on or before September 20, 1994.The object of said mortgage is a 200square meter property with improvements located at 66 Ilocos Sur Street, Barangay
Ramon Magsaysay, Quezon City covered by TCT No. 25659.
On September 21, 1996, private respondent Iluminada de Guzman, wife of
Gumersindo de Guzman, filed a complaint against petitioner Idolor before the Office
of the Barangay Captain of Barangay Ramon Magsaysay, Quezon City, which resulted
in a Kasunduang Pag-aayos which agreement is quoted in full [5]:
Kami, ang (mga) may sumbong at (mga) ipinagsusumbong sa usaping binabanggit sa
itaas, ay nagkakasundo sa pamamagitan nito na ayusin ang aming alitan gaya ng
sumusunod:
Na ako si Teresita V. Idolor of legal age ay nakahiram ng halagang P520,000.00
noong September 20, 1994.
Na ang nasabing halaga ay may nakasanlang titulo ng lupa (TCT No. 25659) under
Registry receipt 3420 dated July 15, 1996.
Na ako si Teresita V. Idolor ay humihingi ng 90 days palugit (grace period) to settle
the said amount.
Failure to settle the above account on or before December 21, 1996, I agree to execute
a deed of sale with the agreement to repurchase without interest within one year.
Total amount of P1,233,288.23 inclusive of interest earned.
At nangangako kami na tutupad na tunay at matapat sa mga katakdaan ng pag-aayos
na inilahad sa itaas.
Petitioner failed to comply with her undertaking; thus private respondent
Gumersindo filed a motion for execution before the Office of the Barangay captain
who subsequently issued a certification to file action.

On March 21, 1997, respondent Gumersindo De Guzman filed an extra judicial


foreclosure of the real estate mortgage pursuant to the parties agreement set forth in
the real estate mortgage dated March 21, 1994.
On May 23, 1997, the mortgaged property was sold in a public auction to
respondent Gumersindo, as the highest bidder and consequently, the Sheriffs
Certificate of Sale was registered with the Registry of Deeds of Quezon City on June
23, 1997.
On June 25, 1998, petitioner filed with the Regional Trial Court of Quezon City,
Branch 220, a complaint for annulment of Sheriffs Certificate of Sale with prayer for
the issuance of a temporary restraining order (TRO) and a writ of preliminary
injunction against private respondents, Deputy Sheriffs Marino Cachero and Rodolfo
Lescano and the Registry of Deeds of Quezon City alleging among others alleged
irregularity and lack of notice in the extra-judicial foreclosure proceedings subject of
the real estate mortgage. In the meantime, a temporary restraining order was issued by
the trial court.
On July 28, 1998, the trial court issued a writ of preliminary injunction enjoining
private respondents, the Deputy Sheriffs and the Registry of Deeds of Quezon City
from causing the issuance of a final deed of sale and consolidation of ownership of the
subject property in favor of the De Guzman spouses. The trial court denied the motion
for reconsideration filed by the de Guzman spouses.
Spouses de Guzman filed with the respondent Court of Appeals a petition for
certiorari seeking annulment of the trial courts order dated July 28, 1998 which
granted the issuance of a preliminary injunction.
On September 28, 1999, the respondent court granted the petition and annulled the
assailed writ of preliminary injunction. Teresita Idolor filed her motion for
reconsideration which was denied in a resolution dated February 4, 2000.
Hence this petition for review on certiorari filed by petitioner Teresita V.
Idolor. The issues raised by petitioner are: whether or not the respondent Court of
Appeals erred in ruling (I) that petitioner has no more proprietary right to the issuance
of the writ of injunction, (2) that the Kasunduang Pag-aayos did not ipso facto result
in novation of the real estate mortgage, (3) that the Kasunduang Pag-aayos is merely a
promissory note of petitioner to private respondent spouses; and (4) that the
questioned writ of preliminary injunction was issued with grave abuse of discretion.
The core issue in this petition is whether or not the respondent Court erred in
finding that the trial court committed grave abuse of discretion in enjoining the private

and public respondents from causing the issuance of a final deed of sale and
consolidation of ownership of the subject parcel of land in favor of private
respondents.
Petitioner claims that her proprietary right over the subject parcel of land was not
yet lost since her right to redeem the subject land for a period of one year had neither
lapsed nor run as the sheriffs certificate of sale was null and void; that petitioner and
the general public have not been validly notified of the auction sale conducted by
respondent sheriffs; that the newspaper utilized in the publication of the notice of sale
was not a newspaper of general circulation.
We do not agree.
Injunction is a preservative remedy aimed at protecting substantive rights and
interests.[6] Before an injunction can be issued, it is essential that the following
requisites be present: 1) there must be a right in esse or the existence of a right to be
protected; 2) the act against which the injunction is to be directed is a violation of
such right.[7] Hence the existence of a right violated, is a prerequisite to the granting of
an injunction. Injunction is not designed to protect contingent or future rights. Failure
to establish either the existence of a clear and positive right which should be judicially
protected through the writ of injunction or that the defendant has committed or has
attempted to commit any act which has endangered or tends to endanger the existence
of said right, is a sufficient ground for denying the injunction. [8] The controlling reason
for the existence of the judicial power to issue the writ is that the court may thereby
prevent a threatened or continuous irremediable injury to some of the parties before
their claims can be thoroughly investigated and advisedly adjudicated. [9] It is to be
resorted to only when there is a pressing necessity to avoid injurious consequences
which cannot be remedied under any standard of compensation. [10]
In the instant case, we agree with the respondent Court that petitioner has no more
proprietary right to speak of over the foreclosed property to entitle her to the issuance
of a writ of injunction. It appears that the mortgaged property was sold in a public
auction to private respondent Gumersindo on May 23, 1997 and the sheriffs certificate
of sale was registered with the Registry of Deeds of Quezon City on June 23,
1997. Petitioner had one year from the registration of the sheriffs sale to redeem the
property but she failed to exercise her right on or before June 23, 1998, thus spouses
de Guzman are now entitled to a conveyance and possession of the foreclosed
property. When petitioner filed her complaint for annulment of sheriffs sale against
private respondents with prayer for the issuance of a writ of preliminary injunction on
June 25, 1998, she failed to show sufficient interest or title in the property sought to
be protected as her right of redemption had already expired on June 23, 1998, i.e. two
(2) days before the filing of the complaint. It is always a ground for denying

injunction that the party seeking it has insufficient title or interest to sustain it, and no
claim to the ultimate relief sought - in other words, that she shows no equity. [11] The
possibility of irreparable damage without proof of actual existing right is not a ground
for an injunction.[12]
Petitioners allegation regarding the invalidity of the sheriffs sale dwells on the
merits of the case; We cannot rule on the same considering that the matter should be
resolved during the trial on the merits.
Petitioner next contends that the execution of the Kasunduang Pag-aayos dated
September 21, 1996 between her and spouses de Guzman before the Office of the
Lupon Tagapamayapa showed the express and unequivocal intention of the parties to
novate or modify the real estate mortgage; that a comparison of the real estate
mortgage dated March 21, 1994 and the Kasunduang Pag-aayos dated September 21,
1996 revealed the irreconciliable incompatibility between them, i.e., that under the
first agreement, the amount due was five hundred twenty thousand (P520,000) pesos
only payable by petitioner within six (6) months, after which it shall earn interest at
the legal rate per annum and non-payment of which within the stipulated period,
private respondents have the right to extra-judicially foreclose the real estate mortgage
while under the second agreement, the amount due was one million two hundred thirty
three thousand two hundred eighty eight and 23/100 (P1,233,288.23) inclusive of
interest, payable within 90 days and in case of non payment of the same on or before
December 21, 1996, petitioner should execute a deed of sale with right to repurchase
within one year without interest; that the second agreement Kasunduang Pag-aayos
was a valid new contract as it was duly executed by the parties and it changed the
principal conditions of petitioners original obligations. Petitioner insists that the
Kasunduang Pag-aayos was not a mere promissory note contrary to respondent courts
conclusion since it was entered by the parties before the Lupon Tagapamayapa which
has the effect of a final judgment.[13]
We are not persuaded.
Novation is the extinguishment of an obligation by the substitution or change of
the obligation by a subsequent one which terminates it, either by changing its objects
or principal conditions, or by substituting a new debtor in place of the old one, or by
subrogating a third person to the rights of the creditor. [14] Under the law, novation is
never presumed. The parties to a contract must expressly agree that they are
abrogating their old contract in favor of a new one. [15] Accordingly, it was held that no
novation of a contract had occurred when the new agreement entered into between the
parties was intended to give life to the old one. [16]

A review of the Kasunduang Pag-aayos which is quoted earlier does not support
petitioners contention that it novated the real estate mortgage since the will to novate
did not appear by express agreement of the parties nor the old and the new contracts
were incompatible in all points. In fact, petitioner expressly recognized in the
Kasunduan the existence and the validity of the old obligation where she
acknowledged her long overdue account since September 20, 1994 which was secured
by a real estate mortgage and asked for a ninety (90) days grace period to settle her
obligation on or before December 21, 1996 and that upon failure to do so, she will
execute a deed of sale with a right to repurchase without interest within one year in
favor of private respondents. Where the parties to the new obligation expressly
recognize the continuing existence and validity of the old one, where, in other words,
the parties expressly negated the lapsing of the old obligation, there can be no
novation.[17] We find no cogent reason to disagree with the respondent courts
pronouncement as follows:
In the present case, there exists no such express abrogation of the original
undertaking. The agreement adverted to (Annex 2 of Comment, p.75 Rollo) executed
by the parties on September 21, 1996 merely gave life to the March 21, 1994
mortgage contract which was then more than two years overdue. Respondent
acknowledged therein her total indebtedness in the sum of P1,233,288.23 including
the interests due on the unpaid mortgage loan which amount she promised to liquidate
within ninety (90) days or until December 21, 1996, failing which she also agreed to
execute in favor of the mortgagee a deed of sale of the mortgaged property for the
same amount without interest. Evidently, it was executed to facilitate easy compliance
by respondent mortgagor with her mortgage obligation. It (the September 21, 1996
agreement) is not incompatible and can stand together with the mortgage contract of
March 21, 1994.
A compromise agreement clarifying the total sum owned by a buyer with the view that
he would find it easier to comply with his obligations under the Contract to Sell does
not novate said Contract to Sell (Rillo v. Court of Appeals, 274 SCRA 461 [1997]).
Respondent correctly argues that the compromise agreement has the force and effect
of a final judgment. That precisely is the reason why petitioner resorted to the
foreclosure of the mortgage on March 27, 1997, after her failure to comply with her
obligation which expired on December 21, 1996.
Reliance by private respondent upon Section 417 of the New Local Government Code
of 1991, which requires the lapse of six (6) months before the amicable settlement
may be enforced, is misplaced. The instant case deals with extra judicial foreclosure
governed by ACT No. 3135 as amended.

Notably, the provision in the Kasunduang Pag-aayos regarding the execution of a


deed of sale with right to repurchase within one year would have the same effect as
the extra-judicial foreclosure of the real estate mortgage wherein petitioner was given
one year from the registration of the sheriffs sale in the Registry of property to redeem
the property, i.e., failure to exercise the right of redemption would entitle the
purchaser to possession of the property. It is not proper to consider an obligation
novated by unimportant modifications which do not alter its essence. [18] It bears stress
that the period to pay the total amount of petitioners indebtedness inclusive of interest
amounted to P1,233,288.23 expired on December 21, 1996 and petitioner failed to
execute a deed of sale with right to repurchase on the said date up to the time private
respondents filed their petition for extra-judicial foreclosure of real estate
mortgage. The failure of petitioner to comply with her undertaking in the kasunduan
to settle her obligation effectively delayed private respondents right to extra-judicially
foreclose the real estate mortgage which right accrued as far back as 1994.Thus,
petitioner has not shown that she is entitled to the equitable relief of injunction.
WHEREFORE, the petition is DENIED. The decision of the respondent Court of
Appeals dated September 28, 1999 is hereby AFFIRMED.
SO ORDERED.

[A.M. No. MTJ-00-1250. February 28, 2001]

RIMEO S. GUSTILO, complainant, vs. HON. RICARDO S. REAL, SR.,


Presiding Judge, 2nd Municipal Circuit Trial Court of VictoriasManapla, Negros Occidental, respondent.
R E S O LUTIO N
QUISUMBING, J.:

In a verified complaint[1] dated June 15, 1997, Rimeo S. Gustilo charged


respondent Judge Ricardo S. Real, Sr., of the Municipal Circuit Trial Court of
Victorias-Manapla, Negros Occidental with gross misconduct, gross incompetence,
gross ignorance of the law, and violation of the Anti-Graft and Corrupt Practices Act
relative to Civil Case No. 703-M entitled Weddy C. Libo-on v. Rimeo S. Gustilo, et
al. for recounting of ballots of Precinct Nos. 27 and 27-A, Barangay Punta Mesa,
Manapla, Negros Occidental.
Complainant avers that he was a candidate for punong barangay of Barangay
Punta Mesa, Manapla, Negros Occidental in the May 12, 1997 elections. His lone

opponent was Weddy C. Libo-on, then the incumbent punong barangay and the
representative of the Association of Barangay Captains (ABC) to the Sangguniang
Bayan of Manapla and the Sangguniang Panlalawigan of Negros Occidental. Both
complainant and Libo-on garnered eight hundred nineteen (819) votes during the
elections, resulting in a tie. The breaking of the tie by the Board of Canvassers was in
complainants favor and he was proclaimed duly elected punong barangay of Punta
Mesa, Manapla.[2]
On May 20, 1997, his opponent filed an election protest case, docketed as Civil
Case No. 703-M, before the MCTC of Victorias-Manapla, Negros Occidental. Liboon sought the recounting of ballots in two precincts, preliminary prohibitory
injunction, and damages.
On May 21, 1997, respondent ordered the issuance of summons to the parties and
set the hearing on June 6, 1997.[3]
On May 27, 1997, however, Libo-on filed a motion to advance the hearing to May
29 and 30, 1997.
The next day, respondent granted Libo-ons motion. The hearing was advanced to
May 29 and 30, 1997 cancelling the hearing for June 6, 1997. [4] Complainant avers that
he was not furnished a copy of this Order dated May 28, 1997.
On May 29, 1997, respondent judge issued a temporary restraining order (TRO)
and annulled the proclamation of complainant as the duly elected punong barangay of
Punta Mesa, Manapla.[5] Complainant declares that no copy of this Order dated May
29, 1997 was served on him. That same day, however, he was able to secure copies of
the orders of respondent dated May 28 and May 29, 1997 from the COMELEC
Registrar of Manapla, Negros Occidental and the Department of Interior and Local
Government (DILG). Moreover, it was only in the afternoon of May 29, 1997 that
complainant received a copy of Libo-ons petition in Civil Case No. 703-M and
respondents Order dated May 21, 1997.
On May 30, 1997, complainant took his oath of office as punong barangay.[6] That
same day, he also filed a petition for certiorari before the Regional Trial Court of Silay
City, Negros Occidental, Branch 69 docketed as Special Civil Action No. 1936-69.
On June 5, 1997, the RTC lifted the TRO issued by respondent and declared as
null and void the order nullifying complainants proclamation as duly elected punong
barangay.[7]

Believing that respondent could not decide Civil Case No. 703-M impartially,
complainant moved for his inhibition.
On June 11, 1997, respondent denied complainants motion for inhibition and after
hearing Libo-ons motion for permanent injunction, issued a second TRO to maintain
the status quo between the contending parties.[8]
Complainant argues that by issuing the second TRO, respondent reversed the
order of the RTC of Silay City dated June 5, 1997. He also claims that by preventing
him from assuming office, he was excluded by the DILG from participating in the
election of the Liga ng Mga Barangay on June 14, 1997.
In his Comment, respondent denied the allegations. He claimed that when Libo-on
filed his motion to advance the hearing of the prayer for injunction on May 27, 1997
in Civil Case No. 703-M, complainant was served a copy by registered mail as shown
by the registry receipts attached to said motion. Considering the urgency of the matter
and since there was substantial compliance with due process, he issued the Order of
May 28, 1997 which cancelled the hearing set for June 6, 1997 and advanced it to
May 29 and 30, 1997.
Respondent claims that on May 29, 1997, Libo-on and his counsel appeared but
complainant did not, despite due notice. The hearing then proceeded, with Libo-on
presenting his evidence. As a result, he issued the TRO prayed for and annulled
complainants proclamation. Respondent admits that the Order of May 29, 1997,
particularly the annulment of complainants proclamation, was outside the jurisdiction
of his court. But since the COMELEC ignored Libo-ons petition for correction of
erroneous tabulation and Libo-on had no other remedy under the law, he was
constrained to annul complainants proclamation, which from the very beginning was
illegal. He justified his action by our rulings in Bince, Jr. v. COMELEC, 312 Phil. 316
(1995) and Tatlonghari v. COMELEC, 199 SCRA 849 (1991), which held that a faulty
tabulation cannot be the basis of a valid proclamation.
Respondent also faults the RTC of Silay City for issuing the Order dated June 5,
1997, which lifted the TRO he issued and declared void his nullification of
complainants proclamation. Respondent contends that complainant should first have
exhausted all remedies in his court before resorting to the special civil action
for certiorari with the RTC. The latter court, in turn, should have dismissed the action
for certiorari for failure to exhaust judicial remedies.
With respect to his Order of June 11, 1997, respondent explains that it was never
meant to reverse the Order of the RTC of Silay City dated June 5, 1997. He points out
that both parties in Civil Case No. 703-M were present during the hearing after due

notice. After receiving their evidence, he found that unless a TRO was issued, Libo-on
would suffer a grave injustice and irreparable injury. He submits that absent fraud,
dishonesty, or corruption, his acts, even if erroneous, are not the subject of
disciplinary action.
In its evaluation and recommendation report dated November 29, 1999, the Office
of the Court Administrator (OCA) found that respondents errors were not honest
mistakes in the performance of his duties. Rather, his actions showed a bias in favor of
Libo-on and evinced a pattern to prevent the complainant from assuming office as the
duly elected punong barangay despite his having been proclaimed as such by the
Board of Canvassers. The OCA recommends that respondent be fined P20,000.00 and
warned that a repetition of similar acts in the future will be dealt with more severely.
Supreme Court Administrative Circular No. 20-95 provides:
2. The application for a TRO shall be acted upon only after all parties are heard in
a summary hearing conducted within twenty-four (24) hours after the records are
transmitted to the branch selected by raffle. The records shall be transmitted
immediately after raffle (Emphasis supplied).
xxx
4. With the exception of the provisions which necessarily involve multiple-sala
stations, these rules shall apply to single-sala stations especially with regard to
immediate notice to all parties of all applications for TRO.
The foregoing clearly show that whenever an application for a TRO is filed, the
court may act on the application only after all parties have been notified and heard in a
summary hearing. In other words, a summary hearing may not be dispensed with. [9] In
the instant case, respondent admits that he issued the injunctive writ sought on May
29, 1997 after receiving the applicants evidence ex parte. His failure to abide by
Administrative Circular No. 20-95 in issuing the first TRO is grave abuse of authority,
misconduct, and conduct prejudicial to the proper administration of justice.
Worse, he compounded the infraction by annulling complainants proclamation as
the duly elected punong barangay of Punta Mesa, Manapla and prohibiting him from
assuming office. Respondent admits that his court was not vested with the power or
jurisdiction to annul the proclamation, but seeks to justify his action on the ground
that the proclamation was void ab initio. In so doing, respondent wantonly usurped a
power exclusively vested by law in the COMELEC. [10] A judge is expected to know the
jurisdictional boundaries of courts and quasi-judicial bodies like the COMELEC as
mapped out by the Constitution and statutes and to act only within said limits. A judge

who wantonly arrogates unto himself the authority and power vested in other agencies
not only acts in oppressive disregard of the basic requirements of due process, but also
creates chaos and contributes to confusion in the administration of justice.
Respondent, in transgressing the jurisdictional demarcation lines between his court
and the COMELEC, clearly failed to realize the position that his court occupies in the
interrelation and operation of the countrys justice system. He displayed a marked
ignorance of basic laws and principles. Rule 3.01 of the Code of Judicial Conduct
provides that a judge shall be faithful to the law and maintain professional
competence. By annulling complainants proclamation as the duly elected punong
barangay, despite being aware of the fact that his court had no power to do so, not
only is respondent guilty of grave abuse of authority, he also manifests unfaithfulness
to a basic legal rule as well as injudicious conduct.
Moreover, in willfully nullifying complainants proclamation despite his courts
want of authority, respondent knowingly issued an unjust order.
Note that the RTC of Silay City corrected respondents errors by declaring null and
void his Order dated May 29, 1997. Nonetheless, he compounded his previous errors
of judgment by proceeding to hear Libo-ons motion for permanent injunction and
issuing a second TRO on June 11, 1997 on the ground that extreme urgency and grave
injustice and irreparable injury will arise if no injunctive remedy were granted.
Respondent insists that his act did not reverse the Order of the RTC in Special Civil
Action No. 1936-69, since the second TRO he issued satisfied the notice and hearing
requirements of Circular No. 20-95.
Before an injunctive writ can be issued, it is essential that the following requisites
be present: (1) there must be a right in esse or the existence of a right to be protected;
and (2) the act against which injunction to be directed is a violation of such right.
[11]
The onus probandi is on movant to show that there exists a right to be protected,
which is directly threatened by the act sought to be enjoined. Further, there must be a
showing that the invasion of the right is material and substantial and that there is an
urgent and paramount necessity for the writ to prevent a serious damage. [12]In this case,
complainant had been duly proclaimed as the winning candidate for punong
barangay. He had taken his oath of office. Unless his election was annulled, he was
entitled to all the rights of said office. We do not see how the complainants exercise of
such rights would cause an irreparable injury or violate the right of the losing
candidate so as to justify the issuance of a temporary restraining order to maintain
the status quo. We see no reason to disagree with the finding of the OCA that the
evident purpose of the second TRO was to prevent complainant from participating in
the election of the Liga ng mga Barangay. Respondent must be held liable for
violating Rule 3.02 of the Code of Judicial Conduct which provides that, In every

case, a judge shall endeavor diligently to ascertain the facts and the applicable law
unswayed by partisan interests, public opinion, or fear of criticism.
In a similar case, a judge was fined P5,000.00 for failure to observe the
requirements of Administrative Circular No. 20-95 when he issued a TRO enjoining a
duly proclaimed barangay captain from participating in the elections of officers of the
ABC of Taft, Eastern Samar.[13] Note, however, that in the instant case, the respondents
infractions are not limited to the mere issuance of a restraining order without
conducting the summary conference required by Administrative Circular No. 20-95.
He also annulled the proclamation of the complainant knowing very well that he had
no such authority. When his first restraining order was set aside and nullification of
complainants proclamation was declared null and void by the RTC of Silay City, a
superior court, he again issued a TRO, which showed his partiality to complainants
political rival. Respondent is thus guilty of violating Rules 3.01 and 3.02 of the Code
of Judicial Conduct; knowingly rendering an unjust order; gross ignorance of the law
or procedure; as well as bias and partiality. All of the foregoing are serious charges
under Rule 140, Section 3 of the Rules of Court. We agree with the sanction
recommended by the OCA, finding it to be in accord with Rule 140, Section 10 (A) of
the Rules of Court.
WHEREFORE, this COURT finds respondent judge GUILTY of violating Rules
3.01 and 3.02 of the Code of Judicial Conduct, knowingly rendering an unjust order,
gross ignorance of the law and procedure, and bias and partiality. Accordingly, a fine
of Twenty Thousand Pesos (P20,000.00) is hereby imposed upon respondent with a
STERN WARNING that a repetition of the same or similar acts will be dealt with
more severely.
SO ORDERED.

MICHAEL J. LAGROSAS,
Petitioner,
- versus -

G.R. No. 168637

Present:

QUISUMBING, J., Chairperson,


CARPIO MORALES,
BRISTOL-MYERS SQUIBB (PHIL.), TINGA,
INC./MEAD
JOHNSON
PHIL., VELASCO, JR., and
RICHARD SMYTH as General
BRION, JJ.

Manager and FERDIE SARFATI, as


Medical Sales Director,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - -x
BRISTOL-MYERS SQUIBB (PHIL.), G.R. No. 170684
INC./MEAD JOHNSON PHIL.,
Petitioner,
- versus COURT
OF
APPEALS
and Promulgated:
MICHAEL J. LAGROSAS,
Respondents.
September 12, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.:
Before this Court are two consolidated petitions. The first petition, docketed
as G.R. No. 168637, filed by Michael J. Lagrosas, assails the
Decision[1] dated January 28, 2005 and the Resolution[2] dated June 23, 2005 of the
Court of Appeals in CA-G.R. SP No. 83885. The second petition, docketed as G.R.
No. 170684, filed by Bristol-Myers Squibb (Phil.), Inc./Mead Johnson Phil., assails
the Resolutions[3] dated August 12, 2005 and October 28, 2005 of the Court of
Appeals in CA-G.R. SP No. 83885.
The facts are undisputed.
Michael J. Lagrosas was employed by Bristol-Myers Squibb (Phil.),
Inc./Mead Johnson Phil. from January 6, 1997 until March 23, 2000 as Territory
Manager in its Medical Sales Force Division.[4]
On February 4, 2000, Ma. Dulcinea S. Lim, also a Territory Manager and
Lagrosas former girlfriend, attended a district meeting of territory managers at
McDonalds Alabang Town Center. After the meeting, she dined out with her

friends. She left her car at McDonalds and rode with Cesar R. Menquito, Jr. When
they returned to McDonalds, Lim saw Lagrosas car parked beside her car. Lim told
Menquito not to stop his car but Lagrosas followed them and slammed Menquitos
car thrice.Menquito and Lim alighted from the car. Lagrosas approached them and
hit Menquito with a metal steering wheel lock. When Lim tried to intervene,
Lagrosas accidentally hit her head.
Upon learning of the incident, Bristol-Myers required Lagrosas to explain in
writing why he should not be dismissed for assaulting a co-employee outside of
business hours. While the offense is not covered by the Code of Discipline for
Territory Managers, the Code states that other infractions not provided for herein
shall be penalized in the most appropriate manner at the discretion of management.
[5]
In his memo, Lagrosas admitted that he accidentally hit Lim when she tried to
intervene. He explained that he did not intend to hit her as shown by the fact that
he never left the hospital until he was assured that she was all right.[6]
In the disciplinary hearing that followed, it was established that Lagrosas
and Lim had physical confrontations prior to the incident. But Lagrosas denied
saying that he might not be able to control himself and hurt Lim and her boyfriend
if he sees them together.
On March 23, 2000, Bristol-Myers dismissed Lagrosas effective
immediately.[7] Lagrosas then filed a complaint[8] for illegal dismissal, non-payment
of vacation and sick leave benefits, 13 th month pay, attorneys fees, damages and
fair market value of his Team Share Stock Option Grant.
On February 28, 2002, Labor Arbiter Renaldo O. Hernandez rendered a
Decision[9] in NLRC NCR Case No. 00-03-02821-99, declaring the
dismissal
illegal. He noted that while Lagrosas committed a misconduct, it was not connected
with his work.The incident occurred outside of company premises and office
hours. He also observed that the misconduct was not directed against a co-employee
who just happened to be accidentally hit in the process. Nevertheless, Labor Arbiter
Hernandez imposed a penalty of three months suspension or forfeiture of pay to
remind Lagrosas not to be carried away by the mindless dictates of his
passion. Thus, the Arbiter ruled:
WHEREFORE, premises considered, judgment is hereby [rendered]
finding that respondent company illegally dismissed complainant
thus, ORDERING it:

1) [t]o reinstate him to his former position without loss of seniority rights,
privileges and benefits and to pay him full backwages reckoned from [the] date of
his illegal dismissal on 23 March 2000 including the monetary value of his
vacation/sick leave of 16 days per year reckoned from July 1, 2000 until actually
reinstated, less three (3) months salary as penalty for his infraction;
2) to pay him the monetary equivalent of his accrued and unused
combined sick/vacation leaves as of June 30, 2000 of 16 days x 3 years and 4
months 10 days x P545.45 = P23,636.16 and the present fair market value of his
Team Share stock option grant for eight hundred (800) BMS common shares of
stock listed in the New York Stock Exchange which vested in complainant as of
01 July 1997, provisionally computed as 90% (800 shares x US$40.00 per share x
P43.20/US$ = P1,244,160.00).
3) to pay him Attorneys fee of 10% on the entire computable amount.
All other claims of complainant are dismissed for lack of merit.
SO ORDERED.[10]

On appeal, the National Labor Relations Commission (NLRC) set aside the
Decision of Labor Arbiter Hernandez in its Decision[11] dated September 24,
2002. It held that Lagrosas was validly dismissed for serious misconduct in hitting
his co-employee and another person with a metal steering wheel lock. The gravity
and seriousness of his misconduct is clear from the fact that he deliberately waited
for Lim and Menquito to return to McDonalds. The NLRC also ruled that the
misconduct was committed in connection with his duty as Territory Manager since
it occurred immediately after the district meeting of territory managers.
Lagrosas moved for reconsideration. On May 7, 2003, the NLRC issued a
Resolution[12] reversing its earlier ruling. It ratiocinated that the incident was not
work-related since it occurred only after the district meeting of territory
managers. It emphasized that for a serious misconduct to merit dismissal, it must
be connected with the employees work. The dispositive portion of the Resolution
states:
WHEREFORE, premises considered, We find this time no reason to alter
the Labor Arbiters Decision of February 28, 2002 and hereby affirm the same in
toto. We vacate our previous Decision of September 24, 2002.
SO ORDERED.[13]

Bristol-Myers filed a motion for reconsideration which the NLRC denied in


an Order dated February 4, 2004 in NLRC NCR Case No. 00-03-02821-99 (NLRC
NCR CA No. 031646-02).[14] Later, Labor Arbiter Hernandez issued a writ of
execution.[15] Notices of garnishment were then served upon the Philippine British
Assurance Co., Inc. for the supersedeas bond posted by Bristol-Myers and the
Bank of the Philippine Islands for the balance of the judgment award.[16]
Bristol-Myers moved to quash the writ of execution contending that it timely
filed a petition for certiorari with the Court of Appeals. The appellate court gave
due course to Bristol-Myers petition and issued a temporary restraining order
(TRO)[17] enjoining the enforcement of the writ of execution and notices of
garnishment. Upon the expiration of the TRO, the appellate court issued a writ of
preliminary injunction dated September 17, 2004.[18]
Bristol-Myers then moved to discharge and release the TRO cash bond. It
argued that since it has posted an injunction cash bond, the TRO cash bond should
be legally discharged and released.
On January 28, 2005, the appellate court rendered the following Decision:
WHEREFORE, the petition is GRANTED. The Resolution of May 7,
2003 and the Order of February 4, 2004 in NLRC NCR Case No. [00-03-0282199] (NLRC NCR CA No. [031646-02]), are REVERSED and SET ASIDE. The
public respondent NLRCs Decision dated September 24, 2002 which reversed the
Labor Arbiters decision and in effect sustained the legality of the private
respondents termination and the dismissal of his claim for the fair market value of
the
[Team
Share]
stock
option
grant
is REINSTATED and AFFIRMED,with MODIFICATION that the petitioner
shall pay the private respondent the monetary equivalent of his accrued and
unused combined sick/vacation leave plus ten (10%) percent thereof, as attorneys
fees. The injunction bond and the TRO bond previously posted by the petitioner
are DISCHARGED.
SO ORDERED.[19]

The appellate court considered the misconduct as having been committed in


connection with Lagrosas duty as Territory Manager since it occurred immediately
after the district meeting of territory managers. It also held that the gravity and
seriousness of the misconduct cannot be denied. Lagrosas employed such a degree
of violence that caused damage not only to Menquitos car but also physical injuries
to Lim and Menquito.

Lagrosas filed a motion for reconsideration which the appellate court denied.
In the meantime, Bristol-Myers moved to release the TRO cash bond and
injunction cash bond in view of the Decision dated January 28, 2005. On August
12, 2005, the appellate court denied the motion as premature since the decision is
not yet final and executory due to Lagrosas appeal to this Court.[20]
Bristol-Myers filed a motion for reconsideration. On October 28, 2005, the
appellate court resolved:
WHEREFORE, the
petitioners Motion
[f]or
Reconsideration dated September 6, 2005 is PARTIALLY GRANTED and the
Resolution of August 12, 2005 is RECONSIDERED and SET ASIDE. The
temporary restraining order cash bond in the amount of SIX HUNDRED
THOUSAND PESOS (P600,000.00) which was posted by the petitioners on July
19, 2004 is ordered DISCHARGED and RELEASED to the petitioners.
SO ORDERED.[21]

The appellate court held that upon the expiration of the TRO, the cash bond
intended for it also expired. Thus, the discharge and release of the cash bond for
the expired TRO is proper. But the appellate court disallowed the discharge of the
injunction cash bond since the writ of preliminary injunction was
issued pendente lite. Since there is a pending appeal with the Supreme Court, the
Decision dated January 28, 2005 is not yet final and executory.
Hence, the instant petitions.
In G.R. No. 168637, Lagrosas assigns the following errors:
I.
THE HONORABLE COURT OF APPEALS IN DECLARING THAT THE
TERMINATION OF EMPLOYMENT OF THE PETITIONER-APPELLANT
WAS LEGAL HAD DECIDED A QUESTION OF SUBSTANCE IN A WAY
NOT IN ACCORD WITH THE LABOR LAWS AND JURISPRUDENCE AND
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS, AS TO CALL FOR THE EXERCISE OF THIS HONORABLE
COURTS POWER OF REVIEW AND/OR SUPERVISION.
II.
THE HONORABLE COURT OF APPEALS IN IMPOSING THE PENALTY OF
DISMISSAL, BEING A PENALTY TOO HARSH IN THIS CASE, DECIDED A

QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH THE


LABOR LAWS AND JURISPRUDENCE AND DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS, AS TO
CALL FOR THE EXERCISE OF THIS HONORABLE COURTS POWER OF
REVIEW AND/OR SUPERVISION.[22]

In G.R. No. 170684, Bristol-Myers raises the following issue:


[WHETHER OR NOT THE HONORABLE] COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN DISALLOWING THE RELEASE AND
DISCHARGE OF PETITIONERS INJUNCTION BOND.[23]

Simply put, the basic issues in the instant petitions are: (1) Did the Court of
Appeals err in finding the dismissal of Lagrosas legal? and (2) Did the Court of
Appeals err in disallowing the discharge and release of the injunction cash bond?
On the first issue, serious misconduct as a valid cause for the dismissal of an
employee is defined simply as improper or wrong conduct. It is a transgression of
some established and definite rule of action, a forbidden act, a dereliction of duty,
willful in character, and implies wrongful intent and not mere error of
judgment. To be serious within the meaning and intendment of the law, the
misconduct must be of such grave and aggravated character and not merely trivial
or unimportant.However serious such misconduct, it must, nevertheless, be in
connection with the employees work to constitute just cause for his separation. The
act complained of must be related to the performance of the employees duties such
as would show him to be unfit to continue working for the employer.[24]
Thus, for misconduct or improper behavior to be a just cause for dismissal, it
(a) must be serious; (b) must relate to the performance of the employees duties;
and (c) must show that the employee has become unfit to continue working for the
employer.[25]
Tested against the foregoing standards, it is clear that Lagrosas was not
guilty of serious misconduct. It may be that the injury sustained by Lim was
serious since it rendered her unconscious and caused her to suffer cerebral
contusion that necessitated hospitalization for several days. But we fail to see how
such misconduct could be characterized as work-related and reflective of Lagrosas
unfitness to continue working for Bristol-Myers.

Although we have recognized that fighting within company premises may


constitute serious misconduct, we have also held that not every fight within
company premises in which an employee is involved would automatically warrant
dismissal from service.[26] More so, in this case where the incident occurred outside
of company premises and office hours and not intentionally directed against a coemployee, as hereafter explained.
First, the incident occurred outside of company premises and after office
hours since the district meeting of territory managers which Lim attended at
McDonalds had long been finished. McDonalds may be considered an extension of
Bristol-Myers office and any business conducted therein as within office hours, but
the moment the district meeting was concluded, that ceased too. When Lim dined
with her friends, it was no longer part of the district meeting and considered
official time.Thus, when Lagrosas assaulted Lim and Menquito upon their return, it
was no longer within company premises and during office hours. Second, BristolMyers itself admitted that Lagrosas intended to hit Menquito only. In the
Memorandum[27] datedMarch 23, 2000, it was stated that You got out from your car
holding an umbrella steering wheel lock and proceeded to hit Mr. Menquito. Dulce
tried to intervene, but you accidentally hit her on the head, knocking her
unconscious.[28] Indeed, the misconduct was not directed against a co-employee
who unfortunately got hit in the process. Third, Lagrosas was not performing
official work at the time of the incident. He was not even a participant in the
district meeting. Hence, we fail to see how his action could have reflected his
unfitness to continue working for Bristol-Myers.
In light of Bristol-Myers failure to adduce substantial evidence to prove that
Lagrosas was guilty of serious misconduct, it cannot use this ground to justify his
dismissal. Thus, the dismissal of Lagrosas employment was without factual and
legal basis.
On the second issue, it is settled that the purpose of a preliminary injunction
is to prevent threatened or continuous irremediable injury to some of the parties
before their claims can be thoroughly studied and adjudicated. Its sole aim is to
preserve the status quo until the merits of the case can be heard fully.[29]
A preliminary injunction may be granted only when, among other things, the
applicant, not explicitly exempted, files with the court where the action or
proceeding is pending, a bond executed to the party or person enjoined, in an
amount to be fixed by the court, to the effect that the applicant will pay such party

or person all damages which he may sustain by reason of the injunction or


temporary restraining order if the court should finally decide that the applicant was
not entitled thereto.Upon approval of the requisite bond, a writ of preliminary
injunction shall be issued.[30]
The injunction bond is intended as a security for damages in case it is finally
decided that the injunction ought not to have been granted. Its principal purpose is
to protect the enjoined party against loss or damage by reason of the injunction,
and the bond is usually conditioned accordingly.[31]
In this case, the Court of Appeals issued the writ of preliminary injunction to
enjoin the implementation of the writ of execution and notices of garnishment
pending final resolution of this case or unless the [w]rit is sooner lifted by the
Court.[32]
By its Decision dated January 28, 2005, the appellate court disposed of the
case by granting Bristol-Myers petition and reinstating the Decision
dated September 24, 2002 of the NLRC which dismissed the complaint for
dismissal. It also ordered the discharge of the TRO cash bond and injunction cash
bond. Thus, both conditions of the writ of preliminary injunction were satisfied.
Notably, the appellate court ruled that Lagrosas had no right to the monetary
awards granted by the labor arbiter and the NLRC, and that the implementation of
the writ of execution and notices of garnishment was properly enjoined. This in
effect amounted to a finding that Lagrosas did not sustain any damage by reason of
the injunction. To reiterate, the injunction bond is intended to protect Lagrosas
against loss or damage by reason of the injunction only. Contrary to Lagrosas
claim, it is not a security for the judgment award by the labor arbiter.[33]
Considering the foregoing, we hold that the appellate court erred in
disallowing the discharge and release of the injunction cash bond.
WHEREFORE, the two consolidated petitions are GRANTED. In G.R.
No. 168637, filed by Michael J. Lagrosas, the Decision dated January 28, 2005,
and the Resolution dated June 23, 2005 of the Court of Appeals in CA-G.R. SP No.
83885 are REVERSED. The Resolution dated May 7, 2003, and the Order
dated February 4, 2004 of the NLRC in NLRC NCR Case No. 00-03-02821-99
(NLRC NCR CA No. 031646-02) are REINSTATED and hereby AFFIRMED.

In G.R. No. 170684, filed by Bristol-Myers Squibb (Phil.), Inc./Mead


Johnson Phil., the Resolutions dated August 12, 2005 and October 28, 2005 of the
Court of Appeals in CA-G.R. SP No. 83885 are REVERSED. The injunction cash
bond in the amount of SIX HUNDRED THOUSAND PESOS (P600,000) which
was posted by Bristol-Myers Squibb (Phil.), Inc./Mead Johnson Phil. on September
17, 2004 is hereby ordered DISCHARGED and RELEASED to it.
No pronouncement as to costs.
SO ORDERED.

NELSON JENOSA and his son NIO


G.R. No. 172138
CARLO JENOSA, SOCORRO
CANTO and her son PATRICK
Present:
CANTO, CYNTHIA
APALISOKand her
CARPIO, J., Chairperson,
daughter CYNDY
NACHURA,
APALISOK, EDUARDO
PERALTA,
VARGASand his son CLINT
ABAD, and
EDUARD VARGAS, and NELIA
MENDOZA, JJ.
DURO and her son NONELL
GREGORY DURO,
Petitioners,
- versus REV. FR. JOSE RENE C.
DELARIARTE, O.S.A., in his
capacity as the incumbent Principal of
the High School Department of the
University of San Agustin, and
Promulgated:
theUNIVERSITY OF SAN
AGUSTIN, herein represented by its
September 8, 2010
incumbent President REV. FR.
MANUEL G. VERGARA, O.S.A.,
Respondents.
x--------------------------------------------------x

DECISION
CARPIO, J.:
The Case
This is a petition for review[1] of the 16 June 2005 Decision[2] and 22 March
2006[3] Resolution of the Court of Appeals in CA-G.R. SP No. 78894. In its 16
June 2005 Decision, the Court of Appeals granted the petition of respondents
University of San Augustin (University), represented by its incumbent President
Rev. Fr. Manuel G. Vergara, O.S.A. (University President), and Rev. Fr. Jose Rene
C. Delariarte, O.S.A. (Principal), in his capacity as the incumbent Principal of the
High School Department of the University (respondents) and ordered the dismissal
of Civil Case Nos. 03-27460 and 03-27646 for lack of jurisdiction over the subject
matter. In its 22 March 2006 Resolution, the Court of Appeals denied the motion
for reconsideration of petitioners Nelson Jenosa and his son Nio Carlo Jenosa,
Socorro Canto and her son Patrick Canto, Cynthia Apalisok and her daughter
Cyndy Apalisok, Eduardo Vargas and his son Clint Eduard Vargas, and Nelia Duro
and her son Nonell Gregory Duro (petitioners).
The Facts
On 22 November 2002, some students of the University, among them petitioners
Nio Carlo Jenosa, Patrick Canto, Cyndy Apalisok, Clint Eduard Vargas, and Nonell
Gregory Duro (petitioner students), were caught engaging in hazing outside the
school premises. The hazing incident was entered into the blotter of the Iloilo City
Police.[4]
Thereafter, dialogues and consultations were conducted among the school
authorities, the apprehended students and their parents. During the 28 November
2002 meeting, the parties agreed that, instead of the possibility of being charged
and found guilty of hazing, the students who participated in the hazing incident as
initiators, including petitioner students, would just transfer to another school, while
those who participated as neophytes would be suspended for one month. The

parents of the apprehended students, including petitioners, affixed their signatures


to the minutes of the meeting to signify their conformity.[5] In view of the
agreement, the University did not anymore convene the Committee on Student
Discipline (COSD) to investigate the hazing incident.
On 5 December 2002, the parents of petitioner students (petitioner parents) sent a
letter to the University President urging him not to implement the 28 November
2002 agreement.[6] According to petitioner parents, the Principal, without
convening the COSD, decided to order the immediate transfer of petitioner
students.
On 10 December 2002, petitioner parents also wrote a letter to Mrs. Ida B.
Endonila, School Division Superintendent, Department of Education (DepEd),
Iloilo City, seeking her intervention and prayed that petitioner students be allowed
to take the home study program instead of transferring to another school. [7] The
DepEd asked the University to comment on the letter.[8] The University replied and
attached the minutes of the 28 November 2002 meeting.[9]
On 3 January 2003, petitioners filed a complaint for injunction and damages with
the Regional Trial Court, Branch 29, Iloilo City (trial court) docketed as Civil Case
No. 03-27460.[10] Petitioners assailed the Principals decision to order the immediate
transfer of petitioner students as a violation of their right to due process because
the COSD was not convened.
On 5 February 2003, the trial court issued a writ of preliminary injunction and
directed respondents to admit petitioner students during the pendency of the case.
[11]
The 5 February 2003 Order reads:
WHEREFORE, let [a] Writ of Preliminary Mandatory Injunction
issue. The defendants are hereby directed to allow the plaintiffs minor
children to attend their classes during the pendency of this case, without
prejudice to any disciplinary proceeding to which any or all of them may
be liable.
SO ORDERED.[12]

Respondents filed a motion for reconsideration and asked for the dissolution of the
writ. The trial court denied respondents motion. Respondents complied but with
reservations.
On 25 March 2003, respondents filed a motion to dismiss. Respondents alleged
that the trial court had no jurisdiction over the subject matter of the case and that
petitioners were guilty of forum shopping. On 19 May 2003, the trial court denied
respondents motion. Respondents filed a motion for reconsideration.
On 21 April 2003, petitioners wrote the DepEd and asked that it direct the
University to release the report cards and other credentials of petitioner students.
[13]
On 8 May 2003, the DepEd sent a letter to the University advising it to release
petitioner students report cards and other credentials if there was no valid reason to
withhold the same.[14] On 14 May 2003, the DepEd sent another letter to the
University to follow-up petitioners request.[15] On 20 May 2003, the University
replied that it could not release petitioner students report cards due to their pending
disciplinary case with the COSD.[16]
On 28 May 2003, petitioners filed another complaint for mandatory injunction
praying for the release of petitioner students report cards and other credentials
docketed as Civil Case No. 03-27646.[17]
The trial court consolidated the two cases.[18]
On 17 June 2003, the trial court issued a writ of preliminary injunction and
directed the University to release petitioner students report cards and other
credentials.[19] Respondents filed a motion for reconsideration. Respondents alleged
that they could not comply with the writ because of the on-going disciplinary case
against petitioner students.
On 26 June 2003, the COSD met with petitioners for a preliminary conference on
the hazing incident. On 7 July 2003, the University, through the COSD, issued its
report finding petitioner students guilty of hazing. The COSD also recommended
the exclusion of petitioner students from its rolls effective 28 November 2002.

On 14 July 2003, the trial court issued an Order denying both motions for
reconsideration.[20]
On 1 September 2003, respondents filed a special civil action for certiorari with the
Court of Appeals. Respondents insisted that the trial court had no jurisdiction
over the subject matter of Civil Case Nos. 03-27460 and 03-27646. Respondents
also alleged that petitioners were guilty of forum shopping.

The Ruling of the Court of Appeals


In its 16 June 2005 Decision, the Court of Appeals granted respondents petition
and ordered the trial court to dismiss Civil Case Nos. 03-27460 and 03-27646 for
lack of jurisdiction over the subject matter because of petitioners failure to exhaust
administrative remedies or for being premature. According to the Court of Appeals,
petitioners should have waited for the action of the DepEd or of the University
President before resorting to judicial action. The Court of Appeals held:
From the foregoing, it is clear that the court a quo committed grave [abuse]
of discretion amounting to LACK OF JURISDICTION in
INTERFERING, pre-maturely, with the exclusive and inherent authority of
educational institutions to discipline.
In directing herein petitioners [respondents in this case] to re-admit herein
private respondents [petitioners in this case] and eventually, to release the
report cards and other school credentials, prior to the action of the
President of USA and of the recommendation of the COSD, the court a
quo is guilty of improper judicial intrusion by encroaching into the
exclusive prerogative of educational institutions. [21]

Petitioners filed a motion for reconsideration.[22] In its 22 March 2006 Resolution,


the Court of Appeals denied petitioners motion for lack of merit.
The Issues
Petitioners raise the following issues:

1. Was the Court of Appeals correct in holding that Branch 29 of the


Regional Trial Court of Iloilo City in Civil Case Nos. 03-27460 and
03-27646 did not acquire jurisdiction over the subject matter of this
case for failure of petitioners to exhaust administrative remedies?
2. Was the recommendation/report/order of the Committee on Student
Discipline dated 7 July 2003 valid, and did it justify the order of
exclusion of petitioner students retroactive to 28 November 2002?[23]
The Ruling of the Court
The petition has no merit.
Discipline in education is specifically mandated by the 1987 Constitution which
provides that all educational institutions shall teach the rights and duties of
citizenship, strengthen ethical and spiritual values, develop moral character and
personal discipline.[24] Schools and school administrators have the authority to
maintain school discipline[25] and the right to impose appropriate and reasonable
disciplinary measures.[26] On the other hand, students have the duty and the
responsibility to promote and maintain the peace and tranquility of the school by
observing the rules of discipline.[27]
In this case, we rule that the Principal had the authority to order the immediate
transfer of petitioner students because of the 28 November 2002 agreement.
[28]
Petitioner parents affixed their signatures to the minutes of the 28 November
2002 meeting and signified their conformity to transfer their children to another
school. Petitioners Socorro Canto and Nelia Duro even wrote a letter to inform the
University that they would transfer their children to another school and requested
for the pertinent papers needed for the transfer.[29] In turn, the University did not
anymore convene the COSD. The University agreed that it would no longer
conduct disciplinary proceedings and instead issue the transfer credentials of
petitioner students. Then petitioners reneged on their agreement without any
justifiable reason. Since petitioners present complaint is one for injunction, and
injunction is the strong arm of equity, petitioners must come to court with clean
hands. In University of the Philippines v. Hon. Catungal, Jr.,[30] a case involving
student misconduct, this Court ruled:

Since injunction is the strong arm of equity, he who must apply for it
must come with equity or with clean hands. This is so because among the
maxims of equity are (1) he who seeks equity must do equity, and (2) he
who comes into equity must come with clean hands. The latter is a
frequently stated maxim which is also expressed in the principle that he
who has done inequity shall not have equity. It signifies that a litigant
may be denied relief by a court of equity on the ground that his conduct
has been inequitable, unfair and dishonest, or fraudulent, or deceitful as
to the controversy in issue.[31]

Here, petitioners, having reneged on their agreement without any justifiable reason,
come to court with unclean hands. This Court may deny a litigant relief if his
conduct has been inequitable, unfair and dishonest as to the controversy in issue.
Since petitioners have come to court with inequitable and unfair conduct, we deny
them relief. We uphold the validity of the 28 November 2002 agreement and rule
that the Principal had the authority to order the immediate transfer of petitioner
students based on the 28 November 2002 agreement.

WHEREFORE, we DENY the petition. We AFFIRM the 16 June 2005 Decision


and the 22 March 2006 Resolution of the Court of Appeals.
SO ORDERED.

G.R. No. 179665

April 3, 2013

SOLID BUILDERS, INC. and MEDINA FOODS INDUSTRIES, INC., Petitioners,


vs.
CHINA BANKING CORPORATION, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:

This petition for review on certiorari1 assails the Decision2 dated April 16, 2007 and the
Resolution3 dated September 18, 2007 of the Court of Appeals in CA-G.R. SP No. 81968.
During the period from September 4, 1992 to March 27, 1996, China Banking Corporation (CBC)
granted several loans to Solid Builders, Inc. (SBI), which amounted to P139,999,234.34, exclusive of
interests and other charges. To secure the loans, Medina Foods Industries, Inc. (MFII) executed in
CBCs favor several surety agreements and contracts of real estate mortgage over parcels of land in
the Loyola Grand Villas in Quezon City and New Cubao Central in Cainta, Rizal. 4
Subsequently, SBI proposed to CBC a scheme through which SBI would sell the mortgaged
properties and share the proceeds with CBC on a 50-50 basis until such time that the whole
obligation would be fully paid. SBI also proposed that there be partial releases of the certificates of
title of the mortgaged properties without the burden of updating interests on all loans. 5
In a letter dated March 20, 2000 addressed to CBC, SBI requested the restructuring of its loans, a
reduction of interests and penalties and the implementation of a dacion en pago of the New Cubao
Central property.6
The letter reads:
March 20, 2000
CHINA BANKING CORPORATION
Dasmarinas cor. Juan Luna Sts.
Binondo, Manila
Attn: Mr. George Yap
Account Officer
Dear Mr. Yap,
This is to refer to our meeting held at your office last March 10, 2000.
In this regard, please allow us to call your attention on the following important matters we have
discussed:
1. With respect to the penalties, we are requesting for a reduction in the rates as we
find it onerous considering the big amount of our loan (P218,540,648.00). The
interest together with the penalties that you are imposing is similar to the ones being
charged by private lending institutions, i.e., 4.5%/month total.
2. As I had discussed with you regarding Dacion en Pago, which you categorically
stated that it could be a possibility, we are considering putting our New Cubao
Central (NCC) on Dacion and restructuring our loan with regards to our Loyola Grand
Villas.
Considering that you had stated that our restructuring had not been finalized, we find it timely to
raise these urgent matters and possibly agree on a realistic and workable scheme that we can
incorporate on our final agreement.
Thank you and we strongly hope for your prompt consideration on our request.

Very truly yours,


V. BENITO R. SOLIVEN (Sgd.)
President7
In response, CBC sent SBI a letter dated April 17, 2000 stating that the loans had been completely
restructured effective March 1, 1999 in the amount of P218,540,646.00. On the aspect of interests
and charges, CBC suggested the updating of the obligation to avoid paying interests and
charges.8 The relevant portion of the letter dated April 17, 2000 reads:
First of all, to clarify, the loans restructuring has been finalized and completed on 3/01/99 with the
booking of the Restructured loan of P218,540,646. Only two Amendments of Real Estate Mortgages
remain to be registered to date. Certain documents that we requested from your company since last
year, that could facilitate this amendment have not yet been forwarded to us until now. Nevertheless,
this does not change the fact that the restructuring of the loan has been done with and finalized.
This in turn is with regards to statement[s] no. 1 & 2 of your letter, referring to the interest rates and
penalties. As per our records, the rates are actually the prevailing bank interest rates. In addition,
penalty charges are imposed in the event of non-payment. To avoid experiencing having to pay more
due to the penalty charges, updating of obligations is necessary. Thus, we advise updating of your
obligations to avoid penalty charges. However, should you be able to update both interest and
penalty through a "one-time" payment, we shall present your request to Senior Management for
possible reduction in penalty charges.
Concerning statement no. 3 containing your request for the possible Dacion en Pago of your NCC
properties, as was discussed already in the meeting, it is a concern that has to be discussed with
Senior Management and approved by the Executive Committee before we can commit to you on the
matter. We suggest that your company, Solid Builders, exhaust all possibilities to sell the NCC
properties yourselves because, being a real estate company, Solid has better ways and means of
selling the properties.9
This was followed by another communication from CBC to SBI reiterating, among others, that the
loan has been restructured effective March 1, 1999 upon issuance by SBI of promissory notes in
favor of CBC. The relevant portion of that letter dated May 19, 2000 reads:
Again, in response to your query with regards the issue of the loans restructuring, to reiterate, the
loan restructuring has been finalized and completed on 3/01/99 with the booking of the Restructured
loan ofP231,716,646. The Restructured Loan was effective ever since the new Promissory Note was
signed on the said date.
The interest rates for the loans are actually rates booked since the new Promissory Notes were
effective. Any move of changing it or "re-pricing" the interest is only possible every 90 days from the
booking date, which represents the interest amortization payment dates. No change or "re-pricing" in
interest rates is possible since interest payment/obligations have not yet been paid.
1wphi1

With regards to the possible Dacion en Pago of your NCC properties, as was discussed already in
the meeting, it is a concern that has to be discussed with Senior Management and approved by the
Executive Committee before we can commit to you on the matter. We suggest that your company,
Solid Builders, exhaust all possibilities to sell the NCC properties yourselves because, being a real
estate company, Solid has better ways and means of selling the properties. 10

Subsequently, in a letter dated September 18, 2000, CBC demanded SBI to settle its outstanding
account within ten days from receipt thereof. The letter dated September 18, 2000 reads:
September 18, 2000
SOLID BUILDERS, INC.
V.V. Soliven Bldg., I
EDSA, San Juan, Metro Manila
1wphi1

PN NUMBER

O/S BALANCE

DUE DATE

INTEREST

PN-MK-TS-342924

PHP 89,700,000.00

03/01/2004

04/13/1999

PN-MK-TS-342931

19,350,000.00

03/01/2004

08/05/1999

PN-MK-TS-342948

35,888,000.00

03/01/2004

---------------

PN-MK-TS-342955

6,870,000.00

03/01/2004

---------------

PN-MK-TS-342962

5,533,646.00

03/01/2004

07/26/1999

PN-MK-TS-342979

21,950,000.00

03/01/2004

---------------

PN-MK-TS-342986

3,505,000.00

03/01/2004

08/09/1999

PN-MK-TS-342993

19,455,000.00

03/01/2004

---------------

PN-MK-TS-343002

4,168,000.00

03/01/2004

---------------

PN-MK-TS-343026

12,121,000.00

03/01/2004

---------------

PHP218,540,646.00
================
Greetings!
We refer again to the balances of the abovementioned Promissory Notes amounting to
PHP218,540,646.00 excluding interest, penalties and other charges signed by you jointly and
severally in our favor, which remains unpaid up to this date despite repeated demands for payment.
In view of the strict regulations of Bangko Sentral ng Pilipinas on past due accounts, we regret that
we cannot hold these accounts further in abeyance. Accordingly, we are reiterating our request that
arrangements to have these accounts settled within ten (10) days from receipt hereof, otherwise, we
shall be constrained to refer the matter to our lawyers for collection.
We enclose a Statement of Account as of September 30, 2000 for your reference and guidance.
Very truly yours,
MERCEDES E. GERMAN (Sgd.)
Manager
Loans & Discounts Department H.O.11
On October 5, 2000, claiming that the interests, penalties and charges imposed by CBC were
iniquitous and unconscionable and to enjoin CBC from initiating foreclosure proceedings, SBI and

MFII filed a Complaint "To Compel Execution of Contract and for Performance and Damages, With
Prayer for Writ of Preliminary Injunction and Ex-Parte Temporary Restraining Order" in the Regional
Trial Court (RTC) of Pasig City. The case was docketed as Civil Case No. 68105 and assigned to
Branch 264.12
In support of their application for the issuance of writ of preliminary injunction, SBI and MFII alleged:
IV. APPLICATION FOR PRELIMINARY INJUNCTION WITH EX- PARTE TEMPORARY
RESTRAINING ORDER
A. GROUNDS FOR PRELIMINARY INJUNCTION
1. That SBI and MFII are entitled to the reliefs demanded, among which is
enjoining/restraining the commission of the acts complained of, the continuance of which will
work injustice to the plaintiffs; that such acts are in violation of the rights of plaintiffs and, if
not enjoined/restrained, will render the judgment sought herein ineffectual.
2. That under the circumstances, it is necessary to require, through preliminary injunction,
CBC to refrain from immediately enforcing its letters dated April 17, 2000 and May 19, 2000
and September 18, 2000 during the pendency of this complaint, and
3. That SBI and MFII submit that they are exempt from filing of a bond considering that the
letters dated April 17, 2000, May 19, 2000 and September 18, 2000 are a patent nullity, and
in the event they are not, they are willing to post such bond this Honorable Court may
determine and under the conditions required by Section 4, Rule 58.13
In its Answer and Opposition to the issuance of the writ of preliminary injunction, CBC alleged that to
implement the agreed restructuring of the loan, SBI executed ten promissory notes stipulating that
the interest rate shall be at 18.5% per annum. For its part, MFII executed third party real estate
mortgage over its properties in favor of CBC to secure the payment of SBIs restructured loan. As
SBI was delinquent in the payment of the principal as well as the interest thereon, CBC demanded
settlement of SBIs account.14
After hearing the parties, the trial court issued an Order dated December 14, 2000 granting the
application of SBI and MFII for the issuance of a writ of preliminary injunction. The trial court held
that SBI and MFII were able to sufficiently comply with the requisites for the issuance of an injunctive
writ:
It is well-settled that to be entitled to an injunctive writ, a party must show that: (1) the invasion of
right sought to be protected is material and substantial; (2) the right of complainant is clear and
unmistakable; and, (3) there is an urgent and paramount necessity for the writ to prevent serious
damage.
The Court opines that the above-mentioned requisites have been sufficiently shown by plaintiffs in
this case, accordingly, a writ of preliminary injunction is in order.
The three subject letters, particularly the letter dated September 18, 2000, indicate that the
promissory notes executed by Benito Soliven as President of plaintiff SBI amounted
to P218,540,646.00, excluding interest, penalties and other charges remained unpaid, and demand
that the account be settled within ten days, else defendant bank shall refer the latter to its lawyers for
collection.

The message in the letter is clear: If the account is not settled within the grace period, defendant
bank will resort to foreclosure of mortgage on the subject properties.
The actual or imminent damage to plaintiffs is likewise clear. Considering the number of parcels of
land and area involved, if these are foreclosed by defendant bank, plaintiffs properties and source of
income will be effectively diminished, possibly to the point of closure.
The only issue remaining is whether or not plaintiffs have the right to ask for an injunctive writ in
order to prevent defendant bank from taking over their properties.
Plaintiffs argued that the interest and penalties charged them in the subject letters and attached
statements of account increased during a seven-month period to an amount they described as
"onerous", "usurious" ad "greedy".
They likewise asserted that there were on-going talks between officers of the corporations involved
to treat or restructure the contracts to a dacion en pago, as there was a proposed plan of action by
representatives of plaintiffs during the meetings.
Defendant, on the other hand, sought to explain the increase in the interest as contained in the
promissory notes which were voluntarily and willingly signed by Soliven, therefore, binding on
plaintiffs and that the proposed plan of action is merely an oral contract still in the negotiation stage
and not binding.
The condition on the interest payments as contained in the promissory notes are as follows:
"Interest for the first quarter shall be @ 18.5% P.A. Thereafter, it shall be payable quarterly in arrears
based on three months average rate."
In its Memorandum, defendant bank tried to show that the questioned increase in the interests was
merely in compliance with the above condition. To this Court, the explanation is insufficient. A more
detailed rationalization is required to convince the court of the fairness of the increase in interests
and penalties.
However, the coming explanation may probably be heard only during trial on the merits, and by then
this pending incident or the entire case, may already be moot and academic if the injunctive writ is
not issued.15
The dispositive portion of the trial courts Order dated December 14, 2000 reads:
WHEREFORE, premises considered, the application for issuance of writ of preliminary injunction is
GRANTED.
Defendant CHINA BANKING CORPORATION, its representatives, agents and all persons working in
its behalf are hereby enjoined from enforcing the contents of its letters to plaintiffs dated April 17,
2000, May 19, 2000 and September 18, 2000, particularly the banks legal department or other
counsel commencing collection proceedings against plaintiffs in the amount stated in the letters and
statements of account.
The Writ of Preliminary Injunction shall be issued upon plaintiffs posting of a bond executed to
defendant in the amount of Two Million Pesos (P2,000,000.00) to the effect [that] the plaintiffs will

pay defendant all damages which the latter may sustain by reason of the injunction if it be ultimately
decided that the injunction is unwarranted.16
CBC sought reconsideration but the trial court denied it in an Order 17 dated December 10, 2001.
Subsequently, CBC filed a "Motion to Dissolve Injunction Order" but this was denied in an
Order18 dated November 10, 2003. The trial court ruled that the motion was in the nature of a mere
belated second motion for reconsideration of the Order dated December 14, 2000. It also declared
that CBC failed to substantiate its prayer for the dissolution of the injunctive writ.
Aggrieved, CBC filed a Petition for Certiorari docketed as CA-G.R. SP No. 81968 in the Court of
Appeals where it claimed that the Orders dated December 14, 2000 (granting the application of
petitioners SBI and MFII for the issuance of writ of preliminary injunction), December 10, 2001
(denying reconsideration of the order dated December 14, 2000), and November 10, 2003 (denying
the CBCs motion to dissolve injunction order) were all issued with grave abuse of discretion
amounting to lack of jurisdiction.19
In a Decision dated April 16, 2007, the Court of Appeals found that, on its face, the trial courts Order
dated December 14, 2000 granting the application of SBI and MFII for the issuance of a writ of
preliminary injunction had no basis as there were no findings of fact or law which would indicate the
existence of any of the requisites for the grant of an injunctive writ. It appeared to the Court of
Appeals that, in ordering the issuance of a writ of injunction, the trial court simply relied on the
imposition by CBC of the interest rates to the loans obtained by SBI and MFII. According to the Court
of Appeals, however, the records do not reveal a clear and unmistakable right on the part of SBI and
MFII that would entitle them to the protection of a writ of preliminary injunction. Thus, the Court of
Appeals granted the petition of CBC, set aside the Orders dated December 14, 2000, December 10,
2001, and November 10, 2003 and dissolved the injunctive writ issued by the RTC of Pasig City.20
SBI and MFII filed a motion for reconsideration but it was denied by the Court of Appeals in a
Resolution dated September 18, 2007.
Hence, this petition.
SBI and MFII assert that the Decision dated April 16, 2007 of the Court of Appeals is legally infirm as
its conclusions are contrary to the judicial admissions of CBC. They allege that, in its Answer, CBC
admitted paragraphs 25 and 26 of the Complaint regarding the interests and charges amounting
to P35,093,980.14 andP80,614,525.15, respectively, which constituted more than 50% of the total
obligation of P334,249,151.29 as of February 15, 2000. For SBI and MFII, CBCs admission of
paragraphs 25 and 26 of the Complaint is an admission that the interest rate imposed by CBC is
usurious, exorbitant and confiscatory. Thus, when the Court of Appeals granted the petition of CBC
and ordered the lifting of the writ of preliminary injunction it effectively disposed of the main case,
Civil Case No. 68105, without trial on the merits and rendered moot and academic as it enabled
CBC to foreclose on the mortgages despite the usurious, exorbitant and confiscatory interest rates. 21
SBI and MFII also claim that the Court of Appeals either overlooked or disregarded undisputed and
admitted facts which, if properly considered, would have called for the maintenance and preservation
of the preliminary injunction issued by the trial court. They argue that the Court of Appeals did not
even consider Article 1229 of the Civil Code which provides:
Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly
or irregularly complied with by the debtor. Even if there has been no performance, the penalty may
also be reduced by the courts if it is iniquitous or unconscionable.

For SBI and MFII, the failure of the Court of Appeals to take into account Article 1229 of the Civil
Code and its act of lifting the preliminary injunction "would definitely pave the way for CBCs
unbridled imposition of illegal rates of interest and immediate foreclosure" of the properties of SBI
and MFII "without the benefit of a full blown trial."22
For its part, CBC assails the petition contending that it is not allowed under Rule 45 of the Rules of
Court because it simply raises issues of fact and not issues of law. CBC further asserts that the
Decision of the Court of Appeals is an exercise of sound judicial discretion as it is in accord with the
law and the applicable provisions of this Court.23
The petition fails.
This Court has recently reiterated the general principles in issuing a writ of preliminary injunction in
Palm Tree Estates, Inc. v. Philippine National Bank24:
A preliminary injunction is an order granted at any stage of an action prior to judgment of final order,
requiring a party, court, agency, or person to refrain from a particular act or acts. It is a preservative
remedy to ensure the protection of a partys substantive rights or interests pending the final
judgment in the principal action. A plea for an injunctive writ lies upon the existence of a claimed
emergency or extraordinary situation which should be avoided for otherwise, the outcome of a
litigation would be useless as far as the party applying for the writ is concerned.
At times referred to as the "Strong Arm of Equity," we have consistently ruled that there is no power
the exercise of which is more delicate and which calls for greater circumspection than the issuance
of an injunction. It should only be extended in cases of great injury where courts of law cannot afford
an adequate or commensurate remedy in damages; "in cases of extreme urgency; where the right is
very clear; where considerations of relative inconvenience bear strongly in complainants favor;
where there is a willful and unlawful invasion of plaintiffs right against his protest and remonstrance,
the injury being a continuing one, and where the effect of the mandatory injunction is rather to
reestablish and maintain a preexisting continuing relation between the parties, recently and
arbitrarily interrupted by the defendant, than to establish a new relation."
A writ of preliminary injunction is an extraordinary event which must be granted only in the face of
actual and existing substantial rights. The duty of the court taking cognizance of a prayer for a writ of
preliminary injunction is to determine whether the requisites necessary for the grant of an injunction
are present in the case before it.25 In this connection, a writ of preliminary injunction is issued to
preserve the status quo ante, upon the applicants showing of two important requisite conditions,
namely: (1) the right to be protected exists prima facie, and (2) the acts sought to be enjoined are
violative of that right. It must be proven that the violation sought to be prevented would cause an
irreparable injury.26
Here, SBI and MFII basically claim a right to have their mortgaged properties shielded from
foreclosure by CBC on the ground that the interest rate and penalty charges imposed by CBC on the
loans availed of by SBI are iniquitous and unconscionable. In particular, SBI and MFII assert:
There is therefore an urgent necessity for the issuance of a writ of preliminary injunction or at least a
status quo [order], otherwise, respondent bank will definitely foreclose petitioners properties without
awaiting the trial of the main case on the merits, with said usurious and confiscatory rates of interest
as basis.27
and

There is therefore no legal justification for the Honorable Court of Appeals to lift/dissolve the
injunction issued by the trial court, otherwise, respondent bank on the basis of this illegal
imposition of interest can already foreclose the properties of petitioners and render the whole case
(sans trial on the merits) moot and academic.28
On this matter, the Order dated December 14, 2000 of the trial court enumerates as the first
argument raised by SBI and MFII in support of their application for the issuance of a writ of
preliminary injunction:
1. Their rights basically are for the protection of their properties put up as collateral for the loans
extended by defendant bank to them.29
As debtor-mortgagors, however, SBI and MFII do not have a right to prevent the creditor-mortgagee
CBC from foreclosing on the mortgaged properties simply on the basis of alleged "usurious,
exorbitant and confiscatory rate of interest."30 First, assuming that the interest rate agreed upon by
the parties is usurious, the nullity of the stipulation of usurious interest does not affect the lenders
right to recover the principal loan, nor affect the other terms thereof.31 Thus, in a usurious loan with
mortgage, the right to foreclose the mortgage subsists, and this right can be exercised by the
creditor upon failure by the debtor to pay the debt due. 32
Second, even the Order dated December 14, 2000 of the trial court, which granted the application
for the issuance of a writ of preliminary injunction, recognizes that the parties still have to be heard
on the alleged lack of "fairness of the increase in interests and penalties" during the trial on the
merits.33 Thus, the basis of the right claimed by SBI and MFII remains to be controversial or
disputable as there is still a need to determine whether or not, upon consideration of the various
circumstances surrounding the agreement of the parties, the interest rates and penalty charges are
unconscionable. Therefore, such claimed right cannot be considered clear, actual and subsisting. In
the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of
discretion.34
The Order dated December 10, 2001 also shows the reasoning of the trial court which betrays that
its grant of the application of SBI and MFII for the issuance of a writ of preliminary injunction was not
based on a clear legal right. Said the trial court:
It was likewise shown that plaintiffs SBI and MFII had the clear right and urgency to ask for injunction
because of the issue of validity of the increase in the amount of the loan obligation. 35 (Emphasis
supplied.)
At most, the above finding of the trial court that the validity of the increase in the amount of the loan
obligation is in issue simply amounted to a finding that the rights of SBI and MFII vis--vis that of
CBC are disputed and debatable. In such a case where the complainant-movants right is doubtful or
disputed, the issuance of an injunctive writ is not proper.36
Even assuming that SBI and MFII are correct in claiming their supposed right, it nonetheless
disintegrates in the face of the ten promissory notes in the total amount of P218,540,648.00,
exclusive of interest and penalties, issued by SBI in favor of CBC on March 1, 1999 which until now
remain unpaid despite the maturity of the said notes on March 1, 2004 and CBCs repeated
demands for payment.37 Foreclosure is but a necessary consequence of nonpayment of mortgage
indebtedness.38 As this Court held in Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc.39:
Where the parties stipulated in their credit agreements, mortgage contracts and promissory notes
that the mortgagee is authorized to foreclose the mortgaged properties in case of default by the

mortgagors, the mortgagee has a clear right to foreclosure in case of default, making the issuance of
a Writ of Preliminary Injunction improper. x x x. (Citation omitted.)
In addition, the default of SBI and MFII to pay the mortgage indebtedness disqualifies them from
availing of the equitable relief that is the injunctive writ. In particular, SBI and MFII have stated in
their Complaint that they have made various requests to CBC for restructuring of the loan. 40 The trial
courts Order dated December 14, 2000 also found that SBI wrote several letters to CBC
"requesting, among others, for a reduction of interests and penalties and restructuring of the
loan."41 A debtors various and constant requests for deferment of payment and restructuring of loan,
without actually paying the amount due, are clear indications that said debtor was unable to settle
his obligation.42 SBIs default or failure to settle its obligation is a breach of contractual obligation
which tainted its hands and disqualified it from availing of the equitable remedy of preliminary
injunction.
As SBI is not entitled to the issuance of a writ of preliminary injunction, so is MFII. The accessory
follows the principal. The accessory obligation of MFII as accommodation mortgagor and surety is
tied to SBIs principal obligation to CBC and arises only in the event of SBIs default.
Thus, MFIIs interest in the issuance of the writ of preliminary injunction is necessarily prejudiced by
SBIs wrongful conduct and breach of contract.
Even Article 1229 of the Civil Code, which SBI and MFII invoke, works against them. Under that
provision, the equitable reduction of the penalty stipulated by the parties in their contract will be
based on a finding by the court that such penalty is iniquitous or unconscionable. Here, the trial court
has not yet made a ruling as to whether the penalty agreed upon by CBC with SBI and MFII is
unconscionable. Such finding will be made by the trial court only after it has heard both parties and
weighed their respective evidence in light of all relevant circumstances. Hence, for SBI and MFII to
claim any right or benefit under that provision at this point is premature.
As no clear right that warrants the extraordinary protection of an injunctive writ has been shown by
SBI and MFII to exist in their favor, the first requirement for the grant of a preliminary injunction has
not been satisfied. In the absence of any requisite, and where facts are shown to be wanting in
bringing the matter within the conditions for its issuance, the ancillary writ of injunction must be
struck down for having been rendered in grave abuse of discretion.43 Thus, the Court of Appeals did
not err when it granted the petition for certiorari of CBC and ordered the dissolution of the writ of
preliminary injunction issued by the trial court.
Neither has there been a showing of irreparable injury. An injury is considered irreparable if it is of
such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a
court of law, or where there is no standard by which their amount can be measured with reasonable
accuracy, that is, it is not susceptible of mathematical computation. The provisional remedy of
preliminary injunction may only be resorted to when there is a pressing necessity to avoid injurious
consequences which cannot be remedied under any standard of compensation. 44
In the first place, any injury that SBI and MFII may suffer in case of foreclosure of the mortgaged
properties will be purely monetary and compensable by an appropriate judgment in a proper case
against CBC. Moreover, where there is a valid cause to foreclose on the mortgages, it cannot be
correctly claimed that the irreparable damage sought to be prevented by the application for
preliminary injunction is the loss of the mortgaged properties to auction sale. 45 The alleged
entitlement of SBI and MFII to the "protection of their properties put up as collateral for the loans"
they procured from CBC is not the kind of irreparable injury contemplated by law. Foreclosure of
mortgaged property is not an irreparable damage that will merit for the debtor-mortgagor the

extraordinary provisional remedy of preliminary injunction. As this Court stated in Philippine National
Bank v. Castalloy Technology Corporation46:
All is not lost for defaulting mortgagors whose properties were foreclosed by creditors-mortgagees.
The respondents will not be deprived outrightly of their property, given the right of redemption
granted to them under the law. Moreover, in extrajudicial foreclosures, mortgagors have the right to
receive any surplus in the selling price. Thus, if the mortgagee is retaining more of the proceeds of
the sale than he is entitled to, this fact alone will not affect the validity of the sale but will give the
mortgagor a cause of action to recover such surplus. (Citation omitted.)
The En Banc Resolution in A.M. No. 99-10-05-0, Re: Procedure in Extrajudicial or Judicial
Foreclosure of Real Estate Mortgages, further stacks the odds against SBI and MFII. Issued on
February 20, 2007, or some two months before the Court of Appeals promulgated its decision in this
case, the resolution embodies the additional guidelines intended to aid courts in foreclosure
proceedings, specifically limiting the instances, and citing the conditions, when a writ against
foreclosure of a mortgage may be issued, to wit:
(1) No temporary restraining order or writ of preliminary injunction against the extrajudicial
foreclosure of real estate mortgage shall be issued on the allegation that the loan secured by
the mortgage has been paid or is not delinquent unless the application is verified and
supported by evidence of payment.
(2) No temporary restraining order or writ of preliminary injunction against the extrajudicial
foreclosure of real estate mortgage shall be issued on the allegation that the interest on the
loan is unconscionable, unless the debtor pays the mortgagee at least twelve percent per
annum interest on the principal obligation as stated in the application for foreclosure sale,
which shall be updated monthly while the case is pending.
(3) Where a writ of preliminary injunction has been issued against a foreclosure of mortgage,
the disposition of the case shall be speedily resolved. To this end, the court concerned shall
submit to the Supreme Court, through the Office of the Court Administrator, quarterly reports
on the progress of the cases involving ten million pesos and above.
(4) All requirements and restrictions prescribed for the issuance of a temporary restraining
order/writ of preliminary injunction, such as the posting of a bond, which shall be equal to the
amount of the outstanding debt, and the time limitation for its effectivity, shall apply as well to
a status quo order.47
The guidelines speak of strict exceptions and conditions.48 To reverse the decision of the Court of
Appeals and reinstate the writ of preliminary injunction issued by the trial court will be to allow SBI
and MFII to circumvent the guidelines and conditions provided by the En Banc Resolution in A.M.
No. 99-10-05-0 dated February 20, 2007 and prevent CBC from foreclosing on the mortgaged
properties based simply on the allegation that the interest on the loan is unconscionable. This Court
will not permit such a situation. What cannot be done directly cannot be done indirectly.49
All told, the relevant circumstances in this case show that there was failure to satisfy the requisites
for the issuance of a writ of preliminary injunction. The injunctive writ issued by the trial court should
therefore be lifted and dissolved. That was how the Court of Appeals decided. That is how it should
be.
WHEREFORE, the petition is hereby DENIED.

SO ORDERED.

G.R. No. 172909

March 5, 2014

SPOUSES SILVESTRE O. PLAZA AND ELENA Y. PLAZA, Petitioners,


vs.
GUILLERMO LUSTIVA, ELEODORA VDA. DE MARTINEZ AND VICKY SAYSON
GOLOSENO, Respondents.
DECISION
BRION, J.:
Through a petition for review on certiorari, filed under Rule 45 of the Rules of Court, the petitioners,
spouses Silvestre O. Plaza and Elena Y. Plaza, seek the reversal of the decision dated October 24,
2005 and the Resolution dated April 6, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 59859.
1

THE FACTS
On August 28, 1997, the CA ruled that among the Plaza siblings, namely: Aureliano, Emiliana, Vidal,
Marciano, and Barbara, Barbara was the owner of the subject agricultural land. The decision
became final and executory and Barbara's successors, respondents Guillermo Lustiva, Eleodora
Vda. de Martinez and Vicky Sayson Goloseno, have continued occupying the property.
4

On September 14, 1999, Vidals son and daughter-in-law, the petitioners, filed a Complaint for
Injunction, Damages, Attorneys Fees with Prayer for the Issuance of the Writ of Preliminary
Injunction and/or Temporary Restraining Order against the respondents and the City Government of
Butuan. They prayed that the respondents be enjoined from unlawfully and illegally threatening to
take possession of the subject property. According to the petitioners, they acquired the land from
Virginia Tuazon in 1997; Tuazon was the sole bidder and winner in a tax delinquency sale conducted
by the City of Butuan on December 27, 1996.
In their answer, the respondents pointed out that they were never delinquent in paying the land taxes
and were in fact not aware that their property had been offered for public auction. Moreover, Tuazon,
being a government employee, was disqualified to bid in the public auction, as stated in Section 89
of the Local Government Code of 1991. As Tuazons participation in the sale was void, she could
have not transferred ownership to the petitioners. Equally important, the petitioners merely falsified
the property tax declaration by inserting the name of the petitioners father, making him appear as a
co-owner of the auctioned land. Armed with the falsified tax declaration, the petitioners, as heirs of
their father, fraudulently redeemed the land from Tuazon. Nonetheless, there was nothing to redeem
as the land was not sold. For these irregularities, the petitioners had no right to the Writ of
Preliminary Injunction and/or Temporary Restraining Order prayed for against them.
5

THE RTCS RULING


In its December 14, 1999 order, the Regional Trial Court (RTC) of Butuan City, Branch 5,
reconsidered its earlier order, denied the prayer for a Writ of Preliminary Injunction, and ordered that
the possession and occupation of the land be returned to the respondents. The RTC found that the
auction sale was tainted with irregularity as the bidder was a government employee disqualified in
accordance with Section 89 of the Local Government Code of 1991. The petitioners are not buyers
6

in good faith either. On the contrary, they were in bad faith for having falsified the tax declaration
they redeemed the property with.
THE CAS RULING
Through a petition for review on certiorari under Rule 65, the petitioners challenged the RTCs order
before the CA.
While the petition for review on certiorari was pending before the CA, the petitioners filed an action
for specific performance against the City Government of Butuan. According to the petitioners, they
acquired possession and ownership over the auctioned property when they redeemed it from
Tuazon. The City Government of Butuan must therefore issue them a certificate of sale.
8

In its October 24, 2005 decision, the CA affirmed the RTCs ruling, found the petitioners guilty of
forum shopping, dismissed the case, and referred the case to the Court and to the Integrated Bar of
the Philippines for investigation and institution of the appropriate administrative action. The CA,
after legal analysis, similarly concluded that for being disqualified to bid under Section 89 of the
Local Government Code of 1991, Tuazon never obtained ownership over the property; much less
transmit any proprietary rights to the petitioners. Clearly, the petitioners failed to establish any clear
and unmistakable right enforceable by the injunctive relief.
10

11

On April 6, 2006, the CA rejected the petitioners motion for reconsideration.


THE PARTIES ARGUMENTS
The petitioners filed the present petition for review on certiorari with this Court to challenge the CA
rulings. The petitioners maintain that they did not falsify the tax declaration in acquiring the auctioned
property. Moreover, assuming that Tuazon, the sole bidder, was indeed disqualified from
participating in the public auction, Section 181 of the Local Government Code of 1991 finds
application. Applying the law, it is as if there was no bidder, for which the City Government of Butuan
was to be considered the purchaser of the land in auction. Therefore, when the petitioners bought
the land, they bought it directly from the purchaser - City Government of Butuan - and not from
Tuazon, as redeemers.
12

Also, the respondents may not question the validity of the public auction for failing to deposit with the
court the amount required by Section 267 of the Local Government Code of 1991.
13

Finally, the petitioners argue that they did not commit forum shopping, as the reliefs prayed for in the
present case and in the specific performance case are not the same. In the present case, they
merely impleaded the City Government of Butuan as a nominal party to pay for the value of the land
only if possession of the land was awarded to the respondents. On the other hand, the complaint for
specific performance prayed that the City Government of Butuan execute the necessary certificate of
sale and other relevant documents pertaining to the auction.
The respondents, for their part, reiterate the lower courts findings that there could have been no
legal redemption in favor of the petitioners as the highest bidder was disqualified from bidding.
Moreover, the CA correctly applied the law in finding the petitioners guilty of forum shopping. Most
importantly, the grant of preliminary injunction lies in the sound discretion of the court and the
petitioners failed to show proof that they are entitled to it.

Meanwhile, on August 8, 2013, the RTC dismissed the main action and ordered the petitioners to
pay the respondents attorneys fees and litigation expenses.
14

THE COURTS RULING


We resolve to deny the petition for lack of merit.
The petitioners may not
raise factual issues
The petitioners maintain that they did not falsify the tax declaration they reimbursed the property
with. According to them, the document already existed in 1987, way before they acquired the land in
1997. Contrary likewise to the lower courts finding, they did not purchase the land from Tuazon as
redemptioners; they directly bought the property from the City Government of Butuan.
These factual contests are not appropriate for a petition for review on certiorari under Rule 45. The
Court is not a trier of facts. The Court will not revisit, re-examine, and re-evaluate the evidence and
the factual conclusions arrived at by the lower courts. In the absence of compelling reasons, the
Court will not disturb the rule that factual findings of the lower tribunals are final and binding on this
Court.
15

16

17

Sections 181 and 267 of the Local Government Code of 1991 are inapplicable; these provisions do
not apply to the present case
The petitioners may not invoke Section 181 of the Local Government Code of 1991 to validate their
alleged title. The law authorizes the local government unit to purchase the auctioned property only in
instances where "there is no bidder" or "the highest bid is xxx insufficient." A disqualified bidder is not
among the authorized grounds. The local government also never undertook steps to purchase the
property under Section 181 of the Local Government Code of 1991, presumably because it knew the
invoked provision does not apply.
18

Neither can the Court agree with the petitioners stance that the respondents defense the
petitioners defective title must fail for want of deposit to the court the amount required by Section
267 of the Local Government Code. The provision states:
Section 267. Action Assailing Validity of Tax Sale. - No court shall entertain any action assailing the
validity or any sale at public auction of real property or rights therein under this Title until the
taxpayer shall have deposited with the court the amount for which the real property was sold,
together with interest of two percent (2%) per month from the date of sale to the time of the
institution of the action. The amount so deposited shall be paid to the purchaser at the auction sale if
the deed is declared invalid but it shall be returned to the depositor if the action fails.
Neither shall any court declare a sale at public auction invalid by reason or irregularities or
informalities in the proceedings unless the substantive rights of the delinquent owner of the real
property or the person having legal interest therein have been impaired. [underscores ours; italics
supplied]
A simple reading of the title readily reveals that the provision relates to actions for annulment of tax
sales. The section likewise makes use of terms "entertain" and "institution" to mean that the deposit
requirement applies only to initiatory actions assailing the validity of tax sales. The intent of the
provision to limit the deposit requirement to actions for annulment of tax sales led to the Courts

ruling in National Housing Authority v. Iloilo City, et al. that the deposit requirement is jurisdictional
a condition necessary for the court to entertain the action:
19

As is apparent from a reading of the foregoing provision, a deposit equivalent to the amount of the
sale at public auction plus two percent (2%) interest per month from the date of the sale to the time
the court action is instituted is a condition a "prerequisite," to borrow the term used by the
acknowledged father of the Local Government Code which must be satisfied before the court can
entertain any action assailing the validity of the public auction sale. The law, in plain and unequivocal
language, prevents the court from entertaining a suit unless a deposit is made. xxx. Otherwise
stated, the deposit is a jurisdictional requirement the nonpayment of which warrants the failure of the
action.
xxxx
Clearly, the deposit precondition is an ingenious legal device to guarantee the satisfaction of the tax
delinquency, with the local government unit keeping the payment on the bid price no matter the final
outcome of the suit to nullify the tax sale.
20

The Court would later reiterate the jurisdictional nature of the deposit in Wong v. City of Iloilo, and
pronounce:
21

In this regard, National Housing Authority v. Iloilo City holds that the deposit required under Section
267 of the Local Government Code is a jurisdictional requirement, the nonpayment of which
warrants the dismissal of the action. Because petitioners in this case did not make such deposit, the
RTC never acquired jurisdiction over the complaints.
22

These rulings clearly render inapplicable the petitioners insistence that the respondents should have
made a deposit to the court. The suit filed by the petitioners was an action for injunction and
damages; the issue of nullity of the auction was raised by the respondents themselves merely as a
defense and in no way converted the action to an action for annulment of a tax sale.
The petitioners failed to show clear
and unmistakable rights to be protected
by the writ; the present action has been
rendered moot and academic by the
dismissal of the main action
As the lower courts correctly found, Tuazon had no ownership to confer to the petitioners despite the
latters reimbursement of Tuazons purchase expenses. Because they were never owners of the
property, the petitioners failed to establish entitlement to the writ of preliminary injunction. "[T]o be
entitled to an injunctive writ, the right to be protected and the violation against that right must be
shown. A writ of preliminary injunction may be issued only upon clear showing of an actual existing
right to be protected during the pendency of the principal action. When the complainants right or title
is doubtful or disputed, he does not have a clear legal right and, therefore, the issuance of injunctive
relief is not proper."
23

Likewise, upon the dismissal of the main case by the RTC on August 8, 2013, the question of
issuance of the writ of preliminary injunction has become moot and academic. In Arevalo v. Planters
Development Bank, the Court ruled that a case becomes moot and academic when there is no
more issue between the parties or object that can be served in deciding the merits of the case. Upon
the dismissal of the main action, the question of the non-issuance of a writ of preliminary injunction
automatically died with it. A writ of preliminary injunction is a provisional remedy; it is auxiliary, an
24

adjunct of, and subject to the determination of the main action. It is deemed lifted upon the dismissal
of the main case, any appeal therefrom notwithstanding.
25

The petitioners are guilty


of forum shopping
We agree with the CA that the petitioners committed forum shopping when they filed the specific
performance case despite the pendency of the present case before the CA. In the recent case of
Heirs of Marcelo Sotto, etc., et al. v. Matilde S. Palicte, the Court laid down the three ways forum
shopping may be committed: 1) through litis pendentia filing multiple cases based on the same
cause of action and with the same prayer, the previous case not having been resolved yet; 2)
through res judicata filing multiple cases based on the same cause of action and the same prayer,
the previous case having been finally resolved; and 3) splitting of causes of action filing multiple
cases based on the same cause of action but with different prayers the ground to dismiss being
either litis pendentia or res judicata. "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."
26

27

Noticeable among these three types of forum shopping is the identity of the cause of action in the
different cases filed. Cause of action is "the act or omission by which a party violates the right of
another."
28

The cause of action in the present case (and the main case) is the petitioners claim of ownership of
the land when they bought it, either from the City Government of Butuan or from Tuazon. This
ownership is the petitioners basis in enjoining the respondents from dispossessing them of the
property. On the other hand, the specific performance case prayed that the City Government of
Butuan be ordered to issue the petitioners the certificate of sale grounded on the petitioners
ownership of the land when they had bought it, either from the City Government of Butuan or from
Tuazon. While it may appear that the main relief prayed for in the present injunction case is different
from what was prayed for in the specific performance case, the cause of action which serves as the
basis for the reliefs remains the same the petitioners alleged ownership of the property after its
purchase in a public auction.
Thus, the petitioners' subsequent filing of the specific performance action is forum shopping of the
third kind-splitting causes of action or filing multiple cases based on the same cause of action, but
with different prayers. As the Court has held in the past, "there is still forum shopping even if the
reliefs prayed for in the two cases are different, so long as both cases raise substantially the same
issues."
29

Similarly, the CA correctly found that the petitioners and their counsel were guilty of forum shopping
based on litis pendentia. Not only were the parties in both cases the same insofar as the City
Government of Butuan is concerned, there was also identity of rights asserted and identity of facts
alleged. The cause of action in the specific performance case had already been ruled upon in the
present case, although it was still pending appeal before the CA. Likewise, the prayer sought in the
specific performance case-for the City Government ofButuan to execute a deed of sale in favor of
the petitioners - had been indirectly ruled upon in the present case when the R TC declared that no
certificate of sale could be issued because there had been no valid sale.

WHEREFORE, premises considered, the Court DENIES the petition for review on certiorari. The
decision dated October 24, 2005 and the resolution dated April 6, 2006 of the Court of Appeals in
CA-G.R. SP No. 59859 are hereby AFFIRMED.
1wphi1

SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR.

RECEIVERSHIP
[G.R. No. 135706. October 1, 2004]

SPS.

CESAR
A.
LARROBIS,
JR.
and
LARROBIS, petitioners,
vs. PHILIPPINE
BANK, respondent.

VIRGINIA
S.
VETERANS

DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review of the decision of the Regional Trial Court
(RTC), Cebu City, Branch 24, dated April 17, 1998, and the order denying
petitioners motion for reconsideration dated August 25, 1998, raising pure
questions of law.
[1]

[2]

The following facts are uncontroverted:


On March 3, 1980, petitioner spouses contracted a monetary loan with
respondent Philippine Veterans Bank in the amount of P135,000.00,
evidenced by a promissory note, due and demandable on February 27, 1981,
and secured by a Real Estate Mortgage executed on their lot together with the
improvements thereon.
On March 23, 1985, the respondent bank went bankrupt and was placed
under receivership/liquidation by the Central Bank from April 25, 1985 until
August 1992.
[3]

On August 23, 1985, the bank, through Francisco Go, sent the spouses a
demand letter for accounts receivable in the total amount of P6,345.00 as of
August 15, 1984, which pertains to the insurance premiums advanced by
respondent bank over the mortgaged property of petitioners.
[4]

[5]

On August 23, 1995, more than fourteen years from the time the loan
became due and demandable, respondent bank filed a petition for
extrajudicial foreclosure of mortgage of petitioners property. On October 18,
1995, the property was sold in a public auction by Sheriff Arthur Cabigon with
Philippine Veterans Bank as the lone bidder.
[6]

On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to
declare the extra-judicial foreclosure and the subsequent sale thereof to
respondent bank null and void.
[7]

In the pre-trial conference, the parties agreed to limit the issue to whether
or not the period within which the bank was placed under receivership and
liquidation was a fortuitous event which suspended the running of the ten-year
prescriptive period in bringing actions.
[8]

On April 17, 1998, the RTC rendered its decision, the fallo of which reads:
WHEREFORE, premises considered judgment is hereby rendered dismissing
the complaint for lack of merit. Likewise the compulsory counterclaim of
defendant is dismissed for being unmeritorious.
[9]

It reasoned that:
defendant bank was placed under receivership by the Central Bank from April
1985 until 1992. The defendant bank was given authority by the Central Bank
to operate as a private commercial bank and became fully operational only on
August 3, 1992. From April 1985 until July 1992, defendant bank was
restrained from doing its business. Doing business as construed by Justice
Laurel in 222 SCRA 131 refers to:
.a continuity of commercial dealings and arrangements and contemplates to
that extent, the performance of acts or words or the exercise of some of the
functions normally incident to and in progressive prosecution of the purpose
and object of its organization.

The defendant banks right to foreclose the mortgaged property prescribes in


ten (10) years but such period was interrupted when it was placed under
receivership. Article 1154 of the New Civil Code to this effect provides:
The period during which the obligee was prevented by a fortuitous event from
enforcing his right is not reckoned against him.
In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131,
the Supreme Court said.
Having arrived at the conclusion that a foreclosure is part of a banks activity
which could not have been pursued by the receiver then because of the
circumstances discussed in the Central Bank case, we are thus convinced
that the prescriptive period was legally interrupted by fuerza mayor in 1972 on
account of the prohibition imposed by the Monetary Board against petitioner
from transacting business, until the directive of the Board was nullified in
1981. Indeed, the period during which the obligee was prevented by a caso
fortuito from enforcing his right is not reckoned against him. (Art. 1154, NCC)
When prescription is interrupted, all the benefits acquired so far from the
possession cease and when prescription starts anew, it will be entirely a new
one. This concept should not be equated with suspension where the past
period is included in the computation being added to the period after the
prescription is presumed (4 Tolentino, Commentaries and Jurisprudence on
the Civil Code of the Philippines 1991 ed. pp. 18-19), consequently, when the
closure of the petitioner was set aside in 1981, the period of ten years within
which to foreclose under Art. 1142 of the N.C.C. began to run and, therefore,
the action filed on August 21, 1986 to compel petitioner to release the
mortgage carried with it the mistaken notion that petitioners own suit for
foreclosure has prescribed.
Even assuming that the liquidation of defendant bank did not affect its right to
foreclose the plaintiffs mortgaged property, the questioned extrajudicial
foreclosure was well within the ten (10) year prescriptive period. It is
noteworthy to mention at this point in time, that defendant bank through
authorized Deputy Francisco Go made the first extrajudicial demand to the
plaintiffs on August 1985. Then on March 24, 1995 defendant bank through its
officer-in-charge Llanto made the second extrajudicial demand. And we all
know that a written extrajudicial demand wipes out the period that has already
elapsed and starts anew the prescriptive period. (Ledesma vs. C.A., 224
SCRA 175.)
[10]

Petitioners filed a motion for reconsideration which the RTC denied on


August 25, 1998. Thus, the present petition for review where petitioners
claim that the RTC erred:
[11]

IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS


PUT UNDER RECEIVERSHIP AND LIQUIDATION WAS A FORTUITOUS
EVENT THAT INTERRUPTED THE RUNNING OF THE PRESCRIPTIVE
PERIOD.
II

IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY


RESPONDENT ON PETITIONERS WIPED OUT THE PERIOD THAT HAD
ALREADY ELAPSED.
III

IN DENYING PETITIONERS MOTION FOR RECONSIDERATION OF ITS


HEREIN ASSAILED DECISION.
[12]

Petitioners argue that: since the extra-judicial foreclosure of the real estate
mortgage was effected by the bank on October 18, 1995, which was fourteen
years from the date the obligation became due on February 27, 1981, said
foreclosure and the subsequent sale at public auction should be set aside and
declared null and void ab initio since they are already barred by prescription;
the court a quo erred in sustaining the respondents theory that its having been
placed under receivership by the Central Bank between April 1985 and August
1992 was a fortuitous event that interrupted the running of the prescriptive
period; the court a quos reliance on the case of Provident Savings Bank vs.
Court of Appeals is misplaced since they have different sets of facts; in the
present case, a liquidator was duly appointed for respondent bank and there
was no judgment or court order that would legally or physically hinder or
prohibit it from foreclosing petitioners property; despite the absence of such
legal or physical hindrance, respondent banks receiver or liquidator failed to
foreclose petitioners property and therefore such inaction should bind
respondent bank; foreclosure of mortgages is part of the receivers/liquidators
duty of administering the banks assets for the benefit of its depositors and
creditors, thus, the ten-year prescriptive period which started on February 27,
1981, was not interrupted by the time during which the respondent bank was
placed under receivership; and the Monetary Boards prohibition from doing
business should not be construed as barring any and all business dealings
[13]

[14]

[15]

and transactions by the bank, otherwise, the specific mandate to foreclose


mortgages under Sec. 29 of R.A. No. 265 as amended by Executive Order
No. 65 would be rendered nugatory. Said provision reads:
[16]

Section 29. Proceedings upon Insolvency Whenever, upon examination by the


head of the appropriate supervising or examining department or his examiners
or agents into the condition of any bank or non-bank financial intermediary
performing quasi-banking functions, it shall be disclosed that the condition of
the same is one of insolvency, or that its continuance in business would
involve probable loss to its depositors or creditors, it shall be the duty of the
department head concerned forthwith, in writing, to inform the Monetary Board
of the facts. The Board may, upon finding the statements of the department
head to be true, forbid the institution to do business in the Philippines and
designate the official of the Central Bank or a person of recognized
competence in banking or finance, as receiver to immediately take charge its
assets and liabilities, as expeditiously as possible, collect and gather all the
assets and administer the same for the benefit of its creditors, and represent
the bank personally or through counsel as he may retain in all actions or
proceedings for or against the institution, exercising all the powers necessary
for these purposes including, but not limited to, bringing and foreclosing
mortgages in the name of the bank.
Petitioners further contend that: the demand letter, dated March 24, 1995,
was sent after the ten-year prescriptive period, thus it cannot be deemed to
have revived a period that has already elapsed; it is also not one of the
instances enumerated by Art. 1115 of the Civil Code when prescription is
interrupted; and the August 23, 1985 letter by Francisco Go
demanding P6,345.00, refers to the insurance premium on the house of
petitioners, advanced by respondent bank, thus such demand letter referred
to another obligation and could not have the effect of interrupting the running
of the prescriptive period in favor of herein petitioners insofar as foreclosure of
the mortgage is concerned.
[17]

[18]

Petitioners then prayed that respondent bank be ordered to pay


them P100,000.00 as moral damages, P50,000.00 as exemplary damages
and P100,000.00 as attorneys fees.
[19]

Respondent for its part asserts that: the period within which it was placed
under receivership and liquidation was a fortuitous event that interrupted the
running of the prescriptive period for the foreclosure of petitioners mortgaged
property; within such period, it was specifically restrained and immobilized
from doing business which includes foreclosure proceedings; the extra-judicial

demand it made on March 24, 1995 wiped out the period that has already
lapsed and started anew the prescriptive period; respondent through its
authorized deputy Francisco Go made the first extra-judicial demand on the
petitioners on August 23, 1985; while it is true that the first demand letter of
August 1985 pertained to the insurance premium advanced by it over the
mortgaged property of petitioners, the same however formed part of the latters
total loan obligation with respondent under the mortgage instrument and
therefore constitutes a valid extra-judicial demand made within the
prescriptive period.
[20]

In their Reply, petitioners reiterate their earlier arguments and add that it
was respondent that insured the mortgaged property thus it should not pass
the obligation to petitioners through the letter dated August 1985.
[21]

To resolve this petition, two questions need to be answered: (1) Whether


or not the period within which the respondent bank was placed under
receivership and liquidation proceedings may be considered a fortuitous event
which interrupted the running of the prescriptive period in bringing actions;
and (2) Whether or not the demand letter sent by respondent banks
representative on August 23, 1985 is sufficient to interrupt the running of the
prescriptive period.
Anent the first issue, we answer in the negative.
One characteristic of a fortuitous event, in a legal sense and consequently
in relations to contract, is that its occurrence must be such as to render it
impossible for a party to fulfill his obligation in a normal manner.
[22]

Respondents claims that because of a fortuitous event, it was not able to


exercise its right to foreclose the mortgage on petitioners property; and that
since it was banned from pursuing its business and was placed under
receivership from April 25, 1985 until August 1992, it could not foreclose the
mortgage on petitioners property within such period since foreclosure is
embraced in the phrase doing business, are without merit.
While it is true that foreclosure falls within the broad definition of doing
business, that is:
a continuity of commercial dealings and arrangements and contemplates to
that extent, the performance of acts or words or the exercise of some of the
functions normally incident to and in progressive prosecution of the purpose
and object of its organization.
[23]

it should not be considered included, however, in the acts prohibited whenever


banks are prohibited from doing business during receivership and liquidation
proceedings.
This we made clear in Banco Filipino Savings & Mortgage Bank vs.
Monetary Board, Central Bank of the Philippines where we explained that:
[24]

Section 29 of the Republic Act No. 265, as amended known as the Central
Bank Act, provides that when a bank is forbidden to do business in the
Philippines and placed under receivership, the person designated as receiver
shall immediately take charge of the banks assets and liabilities, as
expeditiously as possible, collect and gather all the assets and administer the
same for the benefit of its creditors, and represent the bank personally or
through counsel as he may retain in all actions or proceedings for or against
the institution, exercising all the powers necessary for these purposes
including, but not limited to, bringing and foreclosing mortgages in the name
of the bank.
[25]

This is consistent with the purpose of receivership proceedings, i.e., to


receive collectibles and preserve the assets of the bank in substitution of its
former management, and prevent the dissipation of its assets to the detriment
of the creditors of the bank.
[26]

When a bank is declared insolvent and placed under receivership, the


Central Bank, through the Monetary Board, determines whether to proceed
with the liquidation or reorganization of the financially distressed bank. A
receiver, who concurrently represents the bank, then takes control and
possession of its assets for the benefit of the banks creditors. A liquidator
meanwhile assumes the role of the receiver upon the determination by the
Monetary Board that the bank can no longer resume business. His task is to
dispose of all the assets of the bank and effect partial payments of the banks
obligations in accordance with legal priority. In both receivership and
liquidation proceedings, the bank retains its juridical personality
notwithstanding the closure of its business and may even be sued as its
corporate existence is assumed by the receiver or liquidator. The receiver or
liquidator meanwhile acts not only for the benefit of the bank, but for its
creditors as well.
[27]

In Provident Savings Bank vs. Court of Appeals, we further stated that:


[28]

When a bank is prohibited from continuing to do business by the Central Bank


and a receiver is appointed for such bank, that bank would not be able to

do new business, i.e., to grant new loans or to accept new deposits.


However, the receiver of the bank is in fact obliged to collect debts owing
to the bank, which debts form part of the assets of the bank. The
receiver must assemble the assets and pay the obligation of the bank
under receivership, and take steps to prevent dissipation of such assets.
Accordingly, the receiver of the bank is obliged to collect pre-existing
debts due to the bank, and in connection therewith, to foreclose
mortgages securing such debts. (Emphasis supplied.)
[29]

It is true that we also held in said case that the period during which the
bank was placed under receivership was deemed fuerza mayor which validly
interrupted the prescriptive period. This is being invoked by the respondent
and was used as basis by the trial court in its decision. Contrary to the
position of the respondent and court a quo however, such ruling does not find
application in the case at bar.
[30]

A close scrutiny of the Provident case, shows that the Court arrived at said
conclusion, which is an exception to the general rule, due to the peculiar
circumstances of Provident Savings Bank at the time. In said case, we stated
that:
Having arrived at the conclusion that a foreclosure is part of a banks business
activity which could not have been pursued by the receiver then because
of the circumstances discussed in the Central Bank case, we are thus
convinced that the prescriptive period was legally interrupted by fuerza
mayor in 1972 on account of the prohibition imposed by the Monetary Board
against petitioner from transacting business, until the directive of the Board
was nullified in 1981. (Emphasis supplied.)
[31]

Further examination of the Central Bank case reveals that the


circumstances of Provident Savings Bank at the time were peculiar because
after the Monetary Board issued MB Resolution No. 1766 on September 15,
1972, prohibiting it from doing business in the Philippines, the banks majority
stockholders immediately went to the Court of First Instance of Manila, which
prompted the trial court to issue its judgment dated February 20, 1974,
declaring null and void the resolution and ordering the Central Bank to desist
from liquidating Provident. The decision was appealed to and affirmed by this
Court in 1981. Thus, the Superintendent of Banks, which was instructed to
take charge of the assets of the bank in the name of the Monetary Board, had
no power to act as a receiver of the bank and carry out the obligations
specified in Sec. 29 of the Central Bank Act.
[32]

In this case, it is not disputed that Philippine Veterans Bank was placed
under receivership by the Monetary Board of the Central Bank by virtue of
Resolution No. 364 on April 25, 1985, pursuant to Section 29 of the Central
Bank Act on insolvency of banks.
[33]

Unlike Provident Savings Bank, there was no legal prohibition imposed


upon herein respondent to deter its receiver and liquidator from performing
their obligations under the law. Thus, the ruling laid down in
the Provident case cannot apply in the case at bar.
There is also no truth to respondents claim that it could not continue doing
business from the period of April 1985 to August 1992, the time it was under
receivership. As correctly pointed out by petitioner, respondent was even able
to send petitioners a demand letter, through Francisco Go, on August 23,
1985 for accounts receivable in the total amount of P6,345.00 as of August
15, 1984 for the insurance premiums advanced by respondent bank over the
mortgaged property of petitioners. How it could send a demand letter on
unpaid insurance premiums and not foreclose the mortgage during the time it
was prohibited from doing business was not adequately explained by
respondent.
Settled is the principle that a bank is bound by the acts, or failure to act of
its receiver. As we held in Philippine Veterans Bank vs. NLRC, a labor case
which also involved respondent bank,
[34]

[35]

all the acts of the receiver and liquidator pertain to petitioner, both having
assumed petitioners corporate existence. Petitioner cannot disclaim liability by
arguing that the non-payment of MOLINAs just wages was committed by the
liquidators during the liquidation period.
[36]

However, the bank may go after the receiver who is liable to it for any
culpable or negligent failure to collect the assets of such bank and to
safeguard its assets.
[37]

Having reached the conclusion that the period within which respondent
bank was placed under receivership and liquidation proceedings does not
constitute a fortuitous event which interrupted the prescriptive period in
bringing actions, we now turn to the second issue on whether or not the extrajudicial demand made by respondent bank, through Francisco Go, on August
23, 1985 for the amount of P6,345.00, which pertained to the insurance
premiums advanced by the bank over the mortgaged property, constitutes a

valid extra-judicial demand which interrupted the running of the prescriptive


period. Again, we answer this question in the negative.
Prescription of actions is interrupted when they are filed before the court,
when there is a written extra-judicial demand by the creditors, and when there
is any written acknowledgment of the debt by the debtor.
[38]

Respondents claim that while its first demand letter dated August 23, 1985
pertained to the insurance premium it advanced over the mortgaged property
of petitioners, the same formed part of the latters total loan obligation with
respondent under the mortgage instrument, and therefore, constitutes a valid
extra-judicial demand which interrupted the running of the prescriptive period,
is not plausible.
The real estate mortgage signed by the petitioners expressly states that:
This mortgage is constituted by the Mortgagor to secure the payment of the
loan and/or credit accommodation granted to the spouses Cesar A. Larrobis,
Jr. and Virginia S. Larrobis in the amount of ONE HUNDRED THIRTY FIVE
THOUSAND (P135,000.00) PESOS ONLY Philippine Currency in favor of the
herein Mortgagee.
[39]

The promissory note, executed by the petitioners, also states that:


FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO
PAY THE PHILIPPINE VETERANS BANK, OR ORDER, AT ITS OFFICE AT
CEBU CITY THE SUM OF ONE HUNDRED THIRTY FIVE THOUSAND
PESOS (P135,000.00), PHILIPPINE CURRENCY WITH INTEREST AT THE
RATE OF FOURTEEN PER CENT (14%) PER ANNUM FROM THIS DATE
UNTIL FULLY PAID.
[40]

Considering that the mortgage contract and the promissory note refer only
to the loan of petitioners in the amount of P135,000.00, we have no reason to
hold that the insurance premiums, in the amount of P6,345.00, which was the
subject of the August 1985 demand letter, should be considered as pertaining
to the entire obligation of petitioners.
In Quirino Gonzales Logging Concessionaire vs. Court of Appeals, we
held that the notices of foreclosure sent by the mortgagee to the mortgagor
cannot be considered tantamount to written extrajudicial demands, which may
validly interrupt the running of the prescriptive period, where it does not
[41]

appear from the records that the notes are covered by the mortgage contract.
[42]

In this case, it is clear that the advanced payment of the insurance


premiums is not part of the mortgage contract and the promissory note signed
by petitioners. They pertain only to the amount of P135,000.00 which is the
principal loan of petitioners plus interest. The arguments of respondent bank
on this point must therefore fail.
As to petitioners claim for damages, however, we find no sufficient basis to
award the same. For moral damages to be awarded, the claimant must
satisfactorily prove the existence of the factual basis of the damage and its
causal relation to defendants acts. Exemplary damages meanwhile, which
are imposed as a deterrent against or as a negative incentive to curb socially
deleterious actions, may be awarded only after the claimant has proven that
he is entitled to moral, temperate or compensatory damages. Finally, as to
attorneys fees, it is demanded that there be factual, legal and equitable
justification for its award. Since the bases for these claims were not
adequately proven by the petitioners, we find no reason to grant the same.
[43]

[44]

[45]

WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch
24, dated April 17, 1998, and the order denying petitioners motion for
reconsideration dated August 25, 1998 are hereby REVERSED and SET
ASIDE. The extra-judicial foreclosure of the real estate mortgage on October
18, 1995, is hereby declared null and void and respondent is ordered to return
to petitioners their owners duplicate certificate of title.
Costs against respondent.
SO ORDERED.

EVELINA G. CHAVEZ and G.R. No. 174356


AIDA CHAVEZ-DELES,
Petitioners, Present:
Carpio, J., Chairperson,
- versus - Brion,
Del Castillo,
Abad, and
Perez, JJ.
COURT OF APPEALS and

ATTY. FIDELA Y. VARGAS, Promulgated:


Respondents.
January 20, 2010
x --------------------------------------------------------------------------------------- x

DECISION
ABAD, J.:
This case is about the propriety of the Court of Appeals (CA), which hears
the case on appeal, placing the property in dispute under receivership upon a claim
that the defendant has been remiss in making an accounting to the plaintiff of the
fruits of such property.
The Facts and the Case
Respondent Fidela Y. Vargas owned a five-hectare mixed coconut land and rice
fields in Sorsogon. Petitioner Evelina G. Chavez had been staying in a remote
portion of the land with her family, planting coconut seedlings on the land and
supervising the harvest of coconut and palay. Fidela and Evelina agreed to divide
the gross sales of all products from the land between themselves. Since Fidela was
busy with her law practice, Evelina undertook to hold in trust for Fidela her half of
the profits.
But Fidela claimed that Evelina had failed to remit her share of the profits and,
despite demand to turn over the administration of the property to Fidela, had
refused to do so. Consequently, Fidela filed a complaint against Evelina and her
daughter, Aida C. Deles, who was assisting her mother, for recovery of possession,
rent, and damages with prayer for the immediate appointment of a receiver before
the Regional Trial Court (RTC) of Bulan, Sorsogon. [1] In their answer, Evelina and
Aida claimed that the RTC did not have jurisdiction over the subject matter of the
case since it actually involved an agrarian dispute.
After hearing, the RTC dismissed the complaint for lack of jurisdiction based on
Fidelas admission that Evelina and Aida were tenants who helped plant coconut
seedlings on the land and supervised the harvest of coconut and palay. As tenants,
the defendants also shared in the gross sales of the harvest. The court threw out
Fidelas claim that, since Evelina and her family received the land already planted
with fruit-bearing trees, they could not be regarded as tenants. Cultivation, said the

court, included the tending and caring of the trees. The court also regarded as
relevant Fidelas pending application for a five-hectare retention and Evelinas
pending protest relative to her three-hectare beneficiary share.[2]
Dissatisfied, Fidela appealed to the CA. She also filed with that court a
motion for the appointment of a receiver. On April 12, 2006 the CA granted the
motion and ordained receivership of the land, noting that there appeared to be a
need to preserve the property and its fruits in light of Fidelas allegation that
Evelina and Aida failed to account for her share of such fruits.[3]
Parenthetically, Fidela also filed three estafa cases with the RTC of Olongapo City
and a complaint for dispossession with the Department of Agrarian Reform
Adjudication Board (DARAB) against Evelina and Aida. In all these cases, Fidela
asked for the immediate appointment of a receiver for the property.
The Issues Presented
Petitioners present the following issues:
1. Whether or not respondent Fidela is guilty of forum shopping
considering that she had earlier filed identical applications for
receivership over the subject properties in the criminal cases she filed
with the RTC of Olongapo City against petitioners Evelina and Aida
and in the administrative case that she filed against them before the
DARAB; and
2. Whether or not the CA erred in granting respondent Fidelas
application for receivership.
The Courts Ruling
One. By forum shopping, a party initiates two or more actions in separate
tribunals, grounded on the same cause, trusting that one or the other tribunal would
favorably dispose of the matter.[4] The elements of forum shopping are the same as
inlitis pendentia where the final judgment in one case will amount
to res judicata in the other. The elements of forum shopping are: (1) identity of
parties, or at least such parties as would represent the same interest in both actions;
(2) identity of rights asserted and relief prayed for, the relief being founded on the
same facts; and (3) 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.[5]
Here, however, the various suits Fidela initiated against Evelina and Aida
involved different causes of action and sought different reliefs. The present civil
action that she filed with the RTC sought to recover possession of the property
based on Evelina and Aidas failure to account for its fruits. The estafa cases she
filed with the RTC accused the two of misappropriating and converting her share in
the harvests for their own benefit. Her complaint for dispossession under Republic
Act 8048 with the DARAB sought to dispossess the two for allegedly cutting
coconut trees without the prior authority of Fidela or of the Philippine Coconut
Authority.
The above cases are similar only in that they involved the same parties and
Fidela sought the placing of the properties under receivership in all of them. But
receivership is not an action. It is but an auxiliary remedy, a mere incident of the
suit to help achieve its purpose. Consequently, it cannot be said that the grant of
receivership in one case will amount to res judicata on the merits of the other
cases. The grant or denial of this provisional remedy will still depend on the need
for it in the particular action.
Two. In any event, we hold that the CA erred in granting receivership over
the property in dispute in this case. For one thing, a petition for receivership under
Section 1(b), Rule 59 of the Rules of Civil Procedure requires that the property or
fund subject of the action is in danger of being lost, removed, or materially injured,
necessitating its protection or preservation. Its object is the prevention of imminent
danger to the property. If the action does not require such protection or
preservation, the remedy is not receivership.[6]
Here Fidelas main gripe is that Evelina and Aida deprived her of her share of
the lands produce. She does not claim that the land or its productive capacity
would disappear or be wasted if not entrusted to a receiver. Nor does Fidela claim
that the land has been materially injured, necessitating its protection and
preservation. Because receivership is a harsh remedy that can be granted only in
extreme situations,[7] Fidela must prove a clear right to its issuance. But she has
not. Indeed, in none of the other cases she filed against Evelina and Aida has that
remedy been granted her.[8]
Besides, the RTC dismissed Fidelas action for lack of jurisdiction over the
case, holding that the issues it raised properly belong to the DARAB. The case

before the CA is but an offshoot of that RTC case. Given that the RTC has found
that it had no jurisdiction over the case, it would seem more prudent for the CA to
first provisionally determine that the RTC had jurisdiction before granting
receivership which is but an incident of the main action.
WHEREFORE, the Court GRANTS the petition. The Resolutions dated
April 12, 2006 and July 7, 2006 of the Court of Appeals in CA-G.R. CV 85552,
are REVERSED and SET ASIDE.
The receivership is LIFTED and the Court of Appeals is directed to resolve
CA-G.R. CV 85552 with utmost dispatch.
SO ORDERED.
ROBERTO A. ABAD
Associate Justice
WE CONCUR

ANA MARIA A. KORUGA,


Petitioner,
- versus TEODORO O. ARCENAS, JR., ALBERT
C. AGUIRRE, CESAR S. PAGUIO,
FRANCISCO A. RIVERA, and THE
HONORABLE COURT OF APPEALS,
THIRD DIVISION,
Respondents.
x-----------------------------x
TEODORO O. ARCENAS, JR., ALBERT
C. AGUIRRE, CESAR S. PAGUIO, and
FRANCISCO A. RIVERA,
Petitioners,

G.R. No. 168332

- versus HON. SIXTO MARELLA, JR., Presiding


Judge, Branch
138, Regional Trial Courtof Makati City,
and ANA MARIA A. KORUGA,
Respondents.

G.R. No. 169053


Present:
YNARES-SANTIAGO, J.,
Chairperson,
CARPIO,*
CORONA,**
NACHURA, and
PERALTA, JJ.
Promulgated:
June 19, 2009

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

DECISION
NACHURA, J.:

Before this Court are two petitions that originated from a Complaint filed by
Ana Maria A. Koruga (Koruga) before the Regional Trial Court (RTC) of Makati
City against the Board of Directors of Banco Filipino and the Members of the
Monetary Board of the Bangko Sentral ng Pilipinas (BSP) for violation of the
Corporation Code, for inspection of records of a corporation by a stockholder, for
receivership, and for the creation of a management committee.
G.R. No. 168332
The first is a Petition for Certiorari under Rule 65 of the Rules of Court,
docketed as G.R. No. 168332, praying for the annulment of the Court of Appeals
(CA) Resolution[1] in CA-G.R. SP No. 88422 dated April 18, 2005 granting the
prayer for a Writ of Preliminary Injunction of therein petitioners Teodoro O.
Arcenas, Jr., Albert C. Aguirre, Cesar S. Paguio, and Francisco A. Rivera (Arcenas,
et al.).
Koruga is a minority stockholder of Banco Filipino Savings and Mortgage
Bank. On August 20, 2003, she filed a complaint before the Makati RTC which
was raffled to Branch 138, presided over by Judge Sixto Marella, Jr.[2] Korugas
complaint alleged:
10. 1 Violation of Sections 31 to 34 of the Corporation
Code (Code) which prohibit self-dealing and conflicts of interest of
directors and officers, thus:
(a)
For engaging in unsafe, unsound, and fraudulent
banking practices that have jeopardized the welfare of the Bank,
its shareholders, who includes among others, the Petitioner, and
depositors. (sic)

(b)
For granting and approving loans and/or loaned
sums
of
money
to
six
(6)
dummy
borrower
corporations (Borrower Corporations) which, at the time of loan
approval, had no financial capacity to justify the loans. (sic)
(c)
For approving and accepting a dacion en pago, or
payment of loans with property instead of cash, resulting to a
diminished future cumulative interest income by the Bank and a
decline in its liquidity position. (sic)
(d)
For knowingly giving favorable treatment to the
Borrower Corporations in which some or most of them have
interests, i.e. interlocking directors/officers thereof, interlocking
ownerships. (sic)
(e)
For employing their respective offices and
functions as the Banks officers and directors, or omitting to
perform their functions and duties, with negligence, unfaithfulness
or abuse of confidence of fiduciary duty, misappropriated or
misapplied or ratified by inaction the misappropriation or
misappropriations, of (sic) almost P1.6 Billion Pesos (sic)
constituting the Banks funds placed under their trust and
administration, by unlawfully releasing loans to the Borrower
Corporations or refusing or failing to impugn these, knowing
before the loans were released or thereafter that the Banks cash
resources would be dissipated thereby, to the prejudice of the
Petitioner, other Banco Filipino depositors, and the public.
10.2 Right of a stockholder to inspect the records of a corporation
(including financial statements) under Sections 74 and 75 of the Code, as
implemented by the Interim Rules;
(a)
Unlawful refusal to allow the Petitioner from
inspecting or otherwise accessing the corporate records of the
bank despite repeated demand in writing, where she is a
stockholder. (sic)
10.3 Receivership and Creation of a Management Committee
pursuant to:
(a)
Rule
Procedure (Rules);

59

of

the

1997

Rules

of

Civil

(b)

Section 5.2 of R.A. No. 8799;

(c)

Rule 1, Section 1(a)(1) of the Interim Rules;

(d)

Rule 1, Section 1(a)(2) of the Interim Rules;

(e)

Rule 7 of the Interim Rules;

(f)

Rule 9 of the Interim Rules; and

(g)
The General Banking Law of 2000 and the New
Central Bank Act.[3]

On September 12, 2003, Arcenas, et al. filed their Answer raising, among
others, the trial courts lack of jurisdiction to take cognizance of the case. They also
filed a Manifestation and Motion seeking the dismissal of the case on the following
grounds: (a) lack of jurisdiction over the subject matter; (b) lack of jurisdiction
over the persons of the defendants; (c) forum-shopping; and (d) for being a
nuisance/harassment suit. They then moved that the trial court rule on their
affirmative defenses, dismiss the intra-corporate case, and set the case for
preliminary hearing.
In an Order dated October 18, 2004, the trial court denied the Manifestation
and Motion, ruling thus:
The result of the procedure sought by defendants Arcenas, et al. (sic) is
for the Court to conduct a preliminary hearing on the affirmative
defenses raised by them in their Answer. This [is] proscribed by the
Interim Rules of Procedure on Intracorporate (sic) Controversies because
when a preliminary hearing is conducted it is as if a Motion to Dismiss
was filed (Rule 16, Section 6, 1997 Rules of Civil Procedure). A Motion
to Dismiss is a prohibited pleading under the Interim Rules, for which
reason, no favorable consideration can be given to the Manifestation and
Motion of defendants, Arcenas, et al.
The Court finds no merit to (sic) the claim that the instant case is a
nuisance or harassment suit.

WHEREFORE, the Court defers resolution of the affirmative defenses


raised by the defendants Arcenas, et al.[4]

Arcenas, et al. moved for reconsideration[5] but, on January 18, 2005, the
RTC denied the motion.[6] This prompted Arcenas, et al. to file before the CA a
Petition for Certiorari and Prohibition under Rule 65 of the Rules of Court with a
prayer for the issuance of a writ of preliminary injunction and a temporary
retraining order (TRO).[7]
On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella
from conducting further proceedings in the case.[8]
On February 22, 2005, the RTC issued a Notice of Pre-trial [9] setting the case
for pre-trial on June 2 and 9, 2005. Arcenas, et al. filed a Manifestation and
Motion[10] before the CA, reiterating their application for a writ of preliminary
injunction.Thus, on April 18, 2005, the CA issued the assailed Resolution, which
reads in part:
(C)onsidering that the Temporary Restraining Order issued by this Court
on February 9, 2005 expired on April 10, 2005, it is necessary that a writ
of preliminary injunction be issued in order not to render ineffectual
whatever final resolution this Court may render in this case, after the
petitioners shall have posted a bond in the amount of FIVE HUNDRED
THOUSAND (P500,000.00) PESOS.
SO ORDERED.[11]

Dissatisfied, Koruga filed this Petition for Certiorari under Rule 65 of the
Rules of Court. Koruga alleged that the CA effectively gave due course to Arcenas,
et al.s petition when it issued a writ of preliminary injunction without factual or
legal basis, either in the April 18, 2005 Resolution itself or in the records of the
case. She prayed that this Court restrain the CA from implementing the writ of
preliminary injunction and, after due proceedings, make the injunction against the
assailed CA Resolution permanent.[12]

In their Comment, Arcenas, et al. raised several procedural and substantive


issues. They alleged that the Verification and Certification against Forum-Shopping
attached to the Petition was not executed in the manner prescribed by Philippine
law since, as admitted by Korugas counsel himself, the same was only a facsimile.
They also averred that Koruga had admitted in the Petition that she never
asked for reconsideration of the CAs April 18, 2005 Resolution, contending that
the Petition did not raise pure questions of law as to constitute an exception to the
requirement of filing a Motion for Reconsideration before a Petition
for Certiorari is filed.
They, likewise, alleged that the Petition may have already been rendered
moot and academic by the July 20, 2005 CA Decision, [13] which denied their
Petition, and held that the RTC did not commit grave abuse of discretion in issuing
the assailed orders, and thus ordered the RTC to proceed with the trial of the case.
Meanwhile, on March 13, 2006, this Court issued a Resolution granting the
prayer for a TRO and enjoining the Presiding Judge of Makati RTC, Branch 138,
from proceeding with the hearing of the case upon the filing by Arcenas, et al. of
aP50,000.00 bond. Koruga filed a motion to lift the TRO, which this Court denied
on July 5, 2006.
On the other hand, respondents Dr. Conrado P. Banzon and Gen. Ramon
Montao also filed their Comment on Korugas Petition, raising substantially the
same arguments as Arcenas, et al.
G.R. No. 169053
G.R. No. 169053 is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, with prayer for the issuance of a TRO and a writ of preliminary
injunction filed by Arcenas, et al.
In their Petition, Arcenas, et al. asked the Court to set aside the
Decision[14] dated July 20, 2005 of the CA in CA-G.R. SP No. 88422, which denied
their petition, having found no grave abuse of discretion on the part of the Makati
RTC. The CA said that the RTC Orders were interlocutory in nature and, thus, may

be assailed by certiorari or prohibition only when it is shown that the court acted
without or in excess of jurisdiction or with grave abuse of discretion. It added that
the Supreme Court frowns upon resort to remedial measures against interlocutory
orders.
Arcenas, et al. anchored their prayer on the following grounds: that, in their
Answer before the RTC, they had raised the issue of failure of the court to acquire
jurisdiction over them due to improper service of summons; that the Koruga action
is a nuisance or harassment suit; that there is another case involving the same
parties for the same cause pending before the Monetary Board of the BSP, and this
constituted forum-shopping; and that jurisdiction over the subject matter of the
case is vested by law in the BSP.[15]
Arcenas, et al. assign the following errors:
I.

THE COURT OF APPEALS, IN FINDING NO GRAVE ABUSE


OF DISCRETION COMMITTED BY PUBLIC RESPONDENT
REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN
ISSUING THE ASSAILED ORDERS, FAILED TO CONSIDER
AND
MERELY
GLOSSED
OVER
THE
MORE
TRANSCENDENT
ISSUES
OF
THE
LACK
OF
JURISDICTION ON THE PART OF SAID PUBLIC
RESPONDENT OVER THE SUBJECT MATTER OF THE
CASE BEFORE IT, LITIS PENDENTIA AND FORUM
SHOPPING, AND THE CASE BELOW BEING A NUISANCE
OR HARASSMENT SUIT, EITHER ONE AND ALL OF
WHICH GOES/GO TO RENDER THE ISSUANCE BY PUBLIC
RESPONDENT OF THE ASSAILED ORDERS A GRAVE
ABUSE OF DISCRETION.

II.

THE FINDING OF THE COURT OF APPEALS OF NO


GRAVE ABUSE OF DISCRETION COMMITTED BY PUBLIC
RESPONDENT REGIONAL TRIAL COURT OF MAKATI,
BRANCH 138, IN ISSUING THE ASSAILED ORDERS, IS
NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THIS HONORABLE COURT.[16]

Meanwhile, in a Manifestation and Motion filed on August 31, 2005, Koruga


prayed for, among others, the consolidation of her Petition with the Petition for
Review on Certiorari under Rule 45 filed by Arcenas, et al., docketed as G.R. No.
169053. The motion was granted by this Court in a Resolution dated September 26,
2005.
Our Ruling
Initially, we will discuss the procedural issue.
Arcenas, et al. argue that Korugas petition should be dismissed for its
defective Verification and Certification Against Forum-Shopping, since only a
facsimile of the same was attached to the Petition. They also claim that the
Verification and Certification Against Forum-Shopping, allegedly executed
in Seattle, Washington, was not authenticated in the manner prescribed by
Philippine law and not certified by the Philippine Consulate in the United States.
This contention deserves scant consideration.
On the last page of the Petition in G.R. No. 168332, Korugas counsel
executed an Undertaking, which reads as follows:
In view of that fact that the Petitioner is currently in the United
States, undersigned counsel is attaching a facsimile copy of the
Verification and Certification Against Forum-Shopping duly signed by
the Petitioner and notarized by Stephanie N. Goggin, a Notary Public for
the Sate (sic) of Washington. Upon arrival of the original copy of the
Verification and Certification as certified by the Office of the Philippine
Consul, the undersigned counsel shall immediately provide duplicate
copies thereof to the Honorable Court.[17]

Thus, in a Compliance[18] filed with the Court on September 5, 2005,


petitioner submitted the original copy of the duly notarized and authenticated
Verification and Certification Against Forum-Shopping she had executed. [19] This
Court noted and considered the Compliance satisfactory in its Resolution dated
November 16, 2005. There is, therefore, no need to further belabor this issue.

We now discuss the substantive issues in this case.


First, we resolve the prayer to nullify the CAs April 18, 2005 Resolution.
We hold that the Petition in G.R. No. 168332 has become moot and
academic. The writ of preliminary injunction being questioned had effectively been
dissolved by the CAs July 20, 2005 Decision. The dispositive portion of the
Decision reads in part:
The case is REMANDED to the court a quo for further
proceedings and to resolve with deliberate dispatch the intra-corporate
controversies and determine whether there was actually a valid service of
summons. If, after hearing, such service is found to have been improper,
then new summons should be served forthwith.[20]

Accordingly, there is no necessity to restrain the implementation of the writ of


preliminary injunction issued by the CA on April 18, 2005, since it no longer
exists.
However, this Court finds that the CA erred in upholding the jurisdiction of,
and remanding the case to, the RTC.
The resolution of these petitions rests mainly on the determination of one
fundamental issue: Which body has jurisdiction over the Koruga Complaint, the
RTC or the BSP?
We hold that it is the BSP that has jurisdiction over the case.
A reexamination of the Complaint is in order.
Korugas Complaint charged defendants with violation of Sections 31 to 34
of the Corporation Code, prohibiting self-dealing and conflict of interest of
directors and officers; invoked her right to inspect the corporations records under
Sections 74 and 75 of the Corporation Code; and prayed for Receivership and
Creation of a Management Committee, pursuant to Rule 59 of the Rules of Civil

Procedure, the Securities Regulation Code, the Interim Rules of Procedure


Governing Intra-Corporate Controversies, the General Banking Law of 2000, and
the New Central Bank Act. She accused the directors and officers of Banco
Filipino of engaging in unsafe, unsound, and fraudulent banking practices, more
particularly, acts that violate the prohibition on self-dealing.
It is clear that the acts complained of pertain to the conduct of Banco
Filipinos banking business. A bank, as defined in the General Banking Law,
[21]
refers to an entity engaged in the lending of funds obtained in the form of
deposits.[22] The banking business is properly subject to reasonable regulation
under the police power of the state because of its nature and relation to the fiscal
affairs of the people and the revenues of the state. Banks are affected with public
interest because they receive funds from the general public in the form of deposits.
It is the Governments responsibility to see to it that the financial interests of those
who deal with banks and banking institutions, as depositors or otherwise, are
protected. In this country, that task is delegated to the BSP, which pursuant to its
Charter, is authorized to administer the monetary, banking, and credit system of
the Philippines. It is further authorized to take the necessary steps against any
banking institution if its continued operation would cause prejudice to its
depositors, creditors and the general public as well.[23]
The law vests in the BSP the supervision over operations and activities of
banks. The New Central Bank Act provides:
Section 25. Supervision and Examination. - The Bangko Sentral
shall have supervision over, and conduct periodic or special
examinations of, banking institutions and quasi-banks, including their
subsidiaries and affiliates engaged in allied activities. [24]

Specifically, the BSPs supervisory and regulatory powers include:


4.1 The issuance of rules of conduct or the establishment of standards
of operation for uniform application to all institutions or functions

covered, taking into consideration the distinctive character of the


operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to
be applied;
4.2 The conduct of examination to determine compliance with laws
and regulations if the circumstances so warrant as determined
by the Monetary Board;
4.3 Overseeing to ascertain that laws and Regulations are complied
with;
4.4 Regular investigation which shall not be oftener than once a
year from the last date of examination to determine
whether an institution is conducting its business on a safe or
sound basis: Provided, That the deficiencies/irregularities found
by or discovered by an audit shall be immediately addressed;
4.5 Inquiring into the solvency and liquidity of the institution (2-D);
or
4.6 Enforcing prompt corrective action.[25]

Koruga alleges that the dispute in the trial court involves the manner with
which the Directors (sic) have handled the Banks affairs, specifically the fraudulent
loans and dacion en pago authorized by the Directors in favor of several dummy
corporations known to have close ties and are indirectly controlled by the
Directors.[26] Her allegations, then, call for the examination of the allegedly
questionable loans. Whether these loans are covered by the prohibition on selfdealing is a matter for the BSP to determine. These are not ordinary intra-corporate
matters; rather, they involve banking activities which are, by law, regulated and
supervised by the BSP. As the Court has previously held:
It is well-settled in both law and jurisprudence that the Central
Monetary Authority, through the Monetary Board, is vested with
exclusive authority to assess, evaluate and determine the condition of
any bank, and finding such condition to be one of insolvency, or that its
continuance in business would involve a probable loss to its depositors
or creditors, forbid bank or non-bank financial institution to do business

in the Philippines; and shall designate an official of the BSP or other


competent person as receiver to immediately take charge of its assets and
liabilities.[27]

Correlatively, the General Banking Law of 2000 specifically deals with loans
contracted by bank directors or officers, thus:
SECTION 36. Restriction on Bank Exposure to Directors,
Officers, Stockholders and Their Related Interests. No director or
officer of any bank shall, directly or indirectly, for himself or as the
representative or agent of others, borrow from such bank nor shall he
become a guarantor, indorser or surety for loans from such bank to
others, or in any manner be an obligor or incur any contractual liability
to the bank except with the written approval of the majority of all the
directors of the bank, excluding the director concerned: Provided, That
such written approval shall not be required for loans, other credit
accommodations and advances granted to officers under a fringe benefit
plan approved by the Bangko Sentral. The required approval shall be
entered upon the records of the bank and a copy of such entry shall be
transmitted forthwith to the appropriate supervising and examining
department of the Bangko Sentral.
Dealings of a bank with any of its directors, officers or
stockholders and their related interests shall be upon terms not less
favorable to the bank than those offered to others.
After due notice to the board of directors of the bank, the office of
any bank director or officer who violates the provisions of this Section
may be declared vacant and the director or officer shall be subject to the
penal provisions of the New Central Bank Act.
The Monetary Board may regulate the amount of loans, credit
accommodations and guarantees that may be extended, directly or
indirectly, by a bank to its directors, officers, stockholders and their
related interests, as well as investments of such bank in enterprises
owned or controlled by said directors, officers, stockholders and
their related interests. However, the outstanding loans, credit
accommodations and guarantees which a bank may extend to each of its
stockholders, directors, or officers and their related interests, shall be
limited to an amount equivalent to their respective unencumbered

deposits and book value of their paid-in capital contribution in the bank:
Provided, however, That loans, credit accommodations and guarantees
secured by assets considered as non-risk by the Monetary Board shall be
excluded from such limit: Provided, further, That loans, credit
accommodations and advances to officers in the form of fringe benefits
granted in accordance with rules as may be prescribed by the Monetary
Board shall not be subject to the individual limit.
The Monetary Board shall define the term related interests.
The limit on loans, credit accommodations and guarantees
prescribed herein shall not apply to loans, credit accommodations and
guarantees extended by a cooperative bank to its cooperative
shareholders.[28]

Furthermore, the authority to determine whether a bank is conducting


business in an unsafe or unsound manner is also vested in the Monetary
Board. The General Banking Law of 2000 provides:

SECTION 56. Conducting Business in an Unsafe or Unsound


Manner. In determining whether a particular act or omission, which is
not otherwise prohibited by any law, rule or regulation affecting banks,
quasi-banks or trust entities, may be deemed as conducting business in
an unsafe or unsound manner for purposes of this Section, the Monetary
Board shall consider any of the following circumstances:
56.1. The act or omission has resulted or may result in material
loss or damage, or abnormal risk or danger to the safety,
stability, liquidity or solvency of the institution;
56.2. The act or omission has resulted or may result in material
loss or damage or abnormal risk to the institution's
depositors, creditors, investors, stockholders or to the
Bangko Sentral or to the public in general;
56.3. The act or omission has caused any undue injury, or has
given any unwarranted benefits, advantage or preference to

the bank or any party in the discharge by the director or


officer of his duties and responsibilities through manifest
partiality, evident bad faith or gross inexcusable
negligence; or
56.4. The act or omission involves entering into any contract or
transaction manifestly and grossly disadvantageous to the
bank, quasi-bank or trust entity, whether or not the director
or officer profited or will profit thereby.
Whenever a bank, quasi-bank or trust entity persists in conducting
its business in an unsafe or unsound manner, the Monetary Board may,
without prejudice to the administrative sanctions provided in Section 37
of the New Central Bank Act, take action under Section 30 of the same
Act and/or immediately exclude the erring bank from clearing, the
provisions of law to the contrary notwithstanding.

Finally, the New Central Bank Act grants the Monetary Board the power to
impose administrative sanctions on the erring bank:

Section 37. Administrative Sanctions on Banks and Quasibanks. - Without prejudice to the criminal sanctions against the culpable
persons provided in Sections 34, 35, and 36 of this Act, the Monetary
Board may, at its discretion, impose upon any bank or quasi-bank,
their directors and/or officers, for any willful violation of its charter or
by-laws, willful delay in the submission of reports or publications
thereof as required by law, rules and regulations; any refusal to permit
examination into the affairs of the institution; any willful making of a
false or misleading statement to the Board or the appropriate supervising
and examining department or its examiners; any willful failure or refusal
to comply with, or violation of, any banking law or any order, instruction
or regulation issued by the Monetary Board, or any order, instruction or
ruling by the Governor; or any commission of irregularities,
and/or conducting business in an unsafe or unsound manner as may
be determined by the Monetary Board, the following administrative
sanctions, whenever applicable:

(a) fines in amounts as may be determined by the Monetary Board


to be appropriate, but in no case to exceed Thirty thousand pesos
(P30,000) a day for each violation, taking into consideration the
attendant circumstances, such as the nature and gravity of the
violation or irregularity and the size of the bank or quasi-bank;

(b) suspension of rediscounting privileges or access to Bangko


Sentral credit facilities;

(c) suspension of lending or foreign exchange operations or


authority to accept new deposits or make new investments;

(d) suspension of interbank clearing privileges; and/or

(e) revocation of quasi-banking license.

Resignation or termination from office shall not exempt such


director or officer from administrative or criminal sanctions.

The Monetary Board may, whenever warranted by circumstances,


preventively suspend any director or officer of a bank or quasi-bank
pending an investigation: Provided, That should the case be not finally
decided by the Bangko Sentral within a period of one hundred twenty
(120) days after the date of suspension, said director or officer shall be
reinstated in his position: Provided, further, That when the delay in the
disposition of the case is due to the fault, negligence or petition of the
director or officer, the period of delay shall not be counted in computing
the period of suspension herein provided.

The above administrative sanctions need not be applied in the


order of their severity.

Whether or not there is an administrative proceeding, if the


institution and/or the directors and/or officers concerned continue with or
otherwise persist in the commission of the indicated practice or
violation, the Monetary Board may issue an order requiring the
institution and/or the directors and/or officers concerned to cease and
desist from the indicated practice or violation, and may further order that
immediate action be taken to correct the conditions resulting from such
practice or violation. The cease and desist order shall be immediately
effective upon service on the respondents.

The respondents shall be afforded an opportunity to defend their


action in a hearing before the Monetary Board or any committee chaired
by any Monetary Board member created for the purpose, upon request
made by the respondents within five (5) days from their receipt of the
order. If no such hearing is requested within said period, the order shall
be final. If a hearing is conducted, all issues shall be determined on the
basis of records, after which the Monetary Board may either reconsider
or make final its order.

The Governor is hereby authorized, at his discretion, to impose


upon banking institutions, for any failure to comply with the
requirements of law, Monetary Board regulations and policies, and/or
instructions issued by the Monetary Board or by the Governor, fines not
in excess of Ten thousand pesos (P10,000) a day for each violation, the
imposition of which shall be final and executory until reversed, modified
or lifted by the Monetary Board on appeal. [29]

Koruga also accused Arcenas, et al. of violation of the Corporation Codes


provisions on self-dealing and conflict of interest. She invoked Section 31 of the
Corporation Code, which defines the liability of directors, trustees, or officers of a
corporation for, among others, acquiring any personal or pecuniary interest in
conflict with their duty as directors or trustees, and Section 32, which prescribes
the conditions under which a contract of the corporation with one or more of its
directors or trustees the so-called self-dealing directors[30] would be valid. She also
alleged that Banco Filipinos directors violated Sections 33 and 34 in approving the
loans of corporations with interlocking ownerships, i.e., owned, directed, or
managed by close associates of Albert C. Aguirre.
Sections 31 to 34 of the Corporation Code provide:

Section 31. Liability of directors, trustees or officers. - Directors


or trustees who wilfully and knowingly vote for or assent to patently
unlawful acts of the corporation or who are guilty of gross negligence or
bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such directors
or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and
other persons.
When a director, trustee or officer attempts to acquire or acquires,
in violation of his duty, any interest adverse to the corporation in respect
of any matter which has been reposed in him in confidence, as to which
equity imposes a disability upon him to deal in his own behalf, he shall
be liable as a trustee for the corporation and must account for the profits
which otherwise would have accrued to the corporation.

Section 32. Dealings of directors, trustees or officers with the


corporation. - A contract of the corporation with one or more of its
directors or trustees or officers is voidable, at the option of such
corporation, unless all the following conditions are present:

1. That the presence of such director or trustee in the board


meeting in which the contract was approved was not necessary to
constitute a quorum for such meeting;

2. That the vote of such director or trustee was not necessary for
the approval of the contract;

3. That the contract is fair and reasonable under the


circumstances; and
4. That in case of an officer, the contract has been previously
authorized by the board of directors.

Where any of the first two conditions set forth in the preceding
paragraph is absent, in the case of a contract with a director or trustee,
such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or
of at least two-thirds (2/3) of the members in a meeting called for the
purpose: Provided, That full disclosure of the adverse interest of the
directors or trustees involved is made at such meeting: Provided,
however, That the contract is fair and reasonable under the
circumstances.

Section 33. Contracts between corporations with interlocking


directors. - Except in cases of fraud, and provided the contract is fair and
reasonable under the circumstances, a contract between two or more
corporations having interlocking directors shall not be invalidated on
that ground alone: Provided, That if the interest of the interlocking
director in one corporation is substantial and his interest in the other
corporation or corporations is merely nominal, he shall be subject to the
provisions of the preceding section insofar as the latter corporation or
corporations are concerned.

Stockholdings exceeding twenty (20%) percent of the outstanding


capital stock shall be considered substantial for purposes of interlocking
directors.

Section 34. Disloyalty of a director. - Where a director, by virtue


of his office, acquires for himself a business opportunity which should
belong to the corporation, thereby obtaining profits to the prejudice of
such corporation, he must account to the latter for all such profits by
refunding the same, unless his act has been ratified by a vote of the
stockholders owning or representing at least two-thirds (2/3) of the
outstanding capital stock. This provision shall be applicable,
notwithstanding the fact that the director risked his own funds in the
venture.

Korugas invocation of the provisions of the Corporation Code is


misplaced. In an earlier case with similar antecedents, we ruled that:
The Corporation Code, however, is a general law applying to all types of
corporations, while the New Central Bank Act regulates specifically
banks and other financial institutions, including the dissolution and
liquidation thereof. As between a general and special law, the latter shall
prevail generalia specialibus non derogant.[31]

Consequently, it is not the Interim Rules of Procedure on Intra-Corporate


Controversies,[32] or Rule 59 of the Rules of Civil Procedure on Receivership, that
would apply to this case. Instead, Sections 29 and 30 of the New Central Bank
Actshould be followed, viz.:
Section 29. Appointment of Conservator. - Whenever, on the basis
of a report submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or a quasi-bank is in a
state of continuing inability or unwillingness to maintain a condition of
liquidity deemed adequate to protect the interest of depositors and

creditors, the Monetary Board may appoint a conservator with such


powers as the Monetary Board shall deem necessary to take charge of
the assets, liabilities, and the management thereof, reorganize the
management, collect all monies and debts due said institution, and
exercise all powers necessary to restore its viability. The conservator
shall report and be responsible to the Monetary Board and shall have the
power to overrule or revoke the actions of the previous management and
board of directors of the bank or quasi-bank.

xxxx

The Monetary Board shall terminate the conservatorship when it


is satisfied that the institution can continue to operate on its own and the
conservatorship is no longer necessary. The conservatorship shall
likewise be terminated should the Monetary Board, on the basis of the
report of the conservator or of its own findings, determine that the
continuance in business of the institution would involve probable loss to
its depositors or creditors, in which case the provisions of Section 30
shall apply.

Section 30. Proceedings in Receivership and Liquidation. Whenever, upon report of the head of the supervising or examining
department, the Monetary Board finds that a bank or quasi-bank:

(a) is unable to pay its liabilities as they become due in the


ordinary course of business: Provided, That this shall not
include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;

(b) has insufficient realizable assets, as determined by the


Bangko Sentral, to meet its liabilities; or

(c) cannot continue in business without involving probable


losses to its depositors or creditors; or

(d) has willfully violated a cease and desist order under


Section 37 that has become final, involving acts or
transactions which amount to fraud or a dissipation of the
assets of the institution; in which cases, the Monetary
Board may summarily and without need for prior
hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit
Insurance Corporation as receiver of the banking
institution.

xxxx

The actions of the Monetary Board taken under this section or


under Section 29 of this Act shall be final and executory, and may
not be restrained or set aside by the court except on petition
for certiorari on the ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as to amount to
lack or excess of jurisdiction. The petition for certiorari may only be
filed by the stockholders of record representing the majority of the
capital stock within ten (10) days from receipt by the board of directors
of the institution of the order directing receivership, liquidation or
conservatorship.

The designation of a conservator under Section 29 of this Act


or the appointment of a receiver under this section shall be vested
exclusively with the Monetary Board. Furthermore, the designation of
a conservator is not a precondition to the designation of a receiver.[33]

On the strength of these provisions, it is the Monetary Board that exercises


exclusive jurisdiction over proceedings for receivership of banks.
Crystal clear in Section 30 is the provision that says the appointment of a
receiver under this section shall be vested exclusively with the Monetary
Board. The term exclusively connotes that only the Monetary Board can resolve
the issue of whether a bank is to be placed under receivership and, upon an
affirmative finding, it also has authority to appoint a receiver. This is further
affirmed by the fact that the law allows the Monetary Board to take action
summarily and without need for prior hearing.

And, as a clincher, the law explicitly provides that actions of the Monetary
Board taken under this section or under Section 29 of this Act shall be final and
executory, and may not be restrained or set aside by the court except on a petition
forcertiorari on the ground that the action taken was in excess of jurisdiction or
with such grave abuse of discretion as to amount to lack or excess of jurisdiction.

From the foregoing disquisition, there is no doubt that the RTC has no
jurisdiction to hear and decide a suit that seeks to place Banco Filipino under
receivership.
Koruga herself recognizes the BSPs power over the allegedly unlawful acts
of Banco Filipinos directors. The records of this case bear out that Koruga, through
her legal counsel, wrote the Monetary Board[34] on April 21, 2003 to bring to its
attention the acts she had enumerated in her complaint before the RTC. The letter
reads in part:
Banco Filipino and the current members of its Board of Directors
should be placed under investigation for violations of banking laws, the
commission of irregularities, and for conducting business in an unsafe or

unsound manner. They should likewise be placed under preventive


suspension by virtue of the powers granted to the Monetary Board under
Section 37 of the Central Bank Act. These blatant violations of banking
laws should not go by without penalty. They have put Banco Filipino, its
depositors and stockholders, and the entire banking system (sic) in
jeopardy.
xxxx
We urge you to look into the matter in your capacity as regulators.
Our clients, a minority stockholders, (sic) and many depositors of Banco
Filipino are prejudiced by a failure to regulate, and taxpayers are
prejudiced by accommodations granted by the BSP to Banco Filipino [35]

In a letter dated May 6, 2003, BSP Supervision and Examination


Department III Director Candon B. Guerrero referred Korugas letter to Arcenas for
comment.[36] On June 6, 2003, Banco Filipinos then Executive Vice President and
Corporate Secretary Francisco A. Rivera submitted the banks comments essentially
arguing that Korugas accusations lacked legal and factual bases.[37]

On the other hand, the BSP, in its Answer before the RTC, said that it had
been looking into Banco Filipinos activities. An October 2002 Report of
Examination (ROE) prepared by the Supervision and Examination Department
(SED) noted certain dacion payments, out-of-the-ordinary expenses, among other
dealings. On July 24, 2003, the Monetary Board passed Resolution No. 1034
furnishing Banco Filipino a copy of the ROE with instructions for the bank to file
its comment or explanation within 30 to 90 days under threat of being fined or of
being subjected to other remedial actions. The ROE, the BSP said, covers
substantially the same matters raised in Korugas complaint. At the time of the
filing of Korugas complaint on August 20, 2003, the period for Banco Filipino to
submit its explanation had not yet expired.[38]
Thus, the courts jurisdiction could only have been invoked after the
Monetary Board had taken action on the matter and only on the ground that the

action taken was in excess of jurisdiction or with such grave abuse of discretion as
to amount to lack or excess of jurisdiction.

Finally, there is one other reason why Korugas complaint before the RTC
cannot prosper. Given her own admission and the same is likewise supported by
evidence that she is merely a minority stockholder of Banco Filipino, she would
not have the standing to question the Monetary Boards action. Section 30 of the
New Central Bank Act provides:

The petition for certiorari may only be filed by the stockholders of


record representing the majority of the capital stock within ten (10) days
from receipt by the board of directors of the institution of the order
directing receivership, liquidation or conservatorship.

All the foregoing discussion yields the inevitable conclusion that the CA
erred in upholding the jurisdiction of, and remanding the case to, the RTC. Given
that the RTC does not have jurisdiction over the subject matter of the case, its
refusal to dismiss the case on that ground amounted to grave abuse of discretion.
WHEREFORE, the foregoing premises considered, the Petition in G.R. No.
168332 is DISMISSED, while the Petition in G.R. No. 169053
is GRANTED. The Decision of the Court of Appeals dated July 20, 2005 in CAG.R. SP No. 88422 is hereby SET ASIDE. The Temporary Restraining Order
issued by this Court on March 13, 2006 is made PERMANENT. Consequently,
Civil Case No. 03-985, pending before the Regional Trial Court of Makati City,
is DISMISSED.
SO ORDERED.

REPLEVIN

[G.R. No. 111080. April 5, 2000]


JOSE S. OROSA and MARTHA P. OROSA, petitioners, vs. HON. COURT
OF APPEALS, FCP CREDIT CORPORATION, respondents.francis
DECISION
YNARES_SANTIAGO, J.:
On December 6, 1984, private respondent FCP Credit Corporation filed a
complaint for replevin and damages in the Regional Trial Court of Manila
against petitioner Jose S. Orosa and one John Doe to recover possession of a
1983 Ford Laser 1.5 Sedan with Motor and Serial No. SUNKBT-14584. The
complaint alleged that on September 28, 1983, petitioner purchased the
subject motor vehicle on installment from Fiesta Motor Sales Corporation. He
executed and delivered to Fiesta Motor Sales Corp. a promissory note in the
sum of P133,824.00 payable in monthly installments. To secure payment,
petitioner executed a chattel mortgage over the subject motor vehicle in favor
of Fiesta Motor Sales Corp. On September 28, 1983, Fiesta Motor Sales
assigned the promissory note and chattel mortgage to private respondent
FCP Credit Corporation. The complaint further alleged that petitioner failed to
pay part of the installment which fell due on July 28, 1984 as well as three (3)
consecutive installments which fell due on August 28, September 28, and
October 28, 1984. Consequently, private respondent FCP Credit Corporation
demanded from petitioner payment of the entire outstanding balance of the
obligation amounting to P106,154.48 with accrued interest and to surrender
the vehicle which petitioner was allegedly detaining. ella
[1]

[2]

After trial, the lower court dismissed private respondent's complaint in a


Decision dated March 25, 1988, the decretal portion of which reads:
WHEREFORE, judgment is rendered for the defendant, and
against the plaintiff:
1) Dismissing the complaint for lack of merit;

2) Declaring that the plaintiff was not entitled to the Writ of


Replevin, issued on January 7,1985, and is now liable to the
defendant for actual damages under the Replevin bond it filed; nigel
3) On defendant's counter-claim, ordering the plaintiff to pay the
defendant the sum of P400,000.00 as moral damages,
P100,000.00 as exemplary damages, and P50,000.00 as, and for,
attorney's fees;
4) Ordering the plaintiff to return to the defendant the subject 1983
Ford Laser Sedan, with Motor or Serial No. SUNKBT-l4584, or its
equivalent, in kind or value, in cash, as of this date, and to pay the
costs.
SO ORDERED. iska
The trial court ruled that private respondent FCP had no reason to file the
present action since petitioner already paid the installments for the months of
July to November 1984, which are the sole bases of the complaint. The lower
court declared that private respondent was not entitled to the writ of replevin,
and was liable to petitioner for actual damages under the replevin bond it filed.
[3]

Ruling on petitioner's counterclaim, the trial court stated that there was no
legal or factual basis for the writ of replevin and that its enforcement by the
sheriff was "highly irregular, and unlawful, done, as it was, under shades of
extortion, threats and force." The trial court ordered private respondent to pay
the sum of P400,000.00 as moral damages; P100,000.00 as exemplary
damages and P50,000.00 as attorney's fees. Private respondent was also
ordered to return to petitioner the 1983 Ford Laser 1.5 Sedan, or its
equivalent, in kind or value in cash, as of date of judgment and to pay the
costs of the suit. rodoflo
[4]

[5]

On June 7, 1988, a "Supplemental Decision" was rendered by the trial court


ordering private respondent's surety, Stronghold Insurance Co., Inc. to jointly
and severally [with private respondent] return to petitioner the 1983 Ford
Laser 1.5 Sedan or its equivalent in kind or in cash and to pay the damages
specified in the main decision to the extent of the value of the replevin bond in
the amount of P210,000.00.
[6]

The surety company filed with the Court of Appeals a petition for certiorari to
annul the Order of the trial court denying its motion for partial reconsideration,

as well as the Supplemental Decision. On the other hand, private respondent


appealed the decision of the RTC Manila to the Court of Appeals.
The surety company's petition for certiorari, docketed as CA-G.R. SP No.
14938, was dismissed by the Court of Appeals' First Division which upheld the
trial court's order of execution pending appeal. On November 6, 1989, this
Court affirmed the Court of Appeals decision, but deleted the order for the
issuance of a writ of execution pending appeal.
[7]

[8]

Meanwhile, in private respondent's appeal, the Court of Appeals' Eighth


Division partially affirmed the ruling of the trial court, in a Decision dated April
19, 1993, the dispositive portion of which reads:
[9]

WHEREFORE, the Decision of 25 March 1988 of the Regional


Trial Court, Branch 3, Manila is hereby AFFIRMED with the
following modifications: brando
(1) The award of moral damages, exemplary damages and
attorney's fees is DELETED;
(2) The order directing plaintiff-appellant FCP Credit Corporation
to return to defendant-appellee Jose S. Orosa the subject 1983
Ford Laser Sedan, with Motor and Serial No. SUNKBT-14584, its
equivalent, in kind or value in cash, as of 25 March 1988, and to
pay the costs is DELETED; and;
(3) Plaintiff-appellant FCP Credit Corporation is ordered to pay
defendant-appellee Jose S. Orosa the amount equivalent to the
value of the fourteen (14) monthly installments made by the latter
to the former on the subject motor vehicle, with interest from the
time of filing of the complaint or from 6 December 1984.
No costs. micks
SO ORDERED.
Hence, this petition for review, on the following assignments of error:

[10]

(1) The Hon. Court of Appeals (former Eighth Division) acted


without or in excess of jurisdiction when it reversed a final
decision dated September 9, 1988, of a co-equal division of the
Hon. Court of Appeals (Special First Division) promulgated in CA

G.R. No. 14938, and which was sustained by the Hon. Supreme
Court in a final decision promulgated in G.R. No. 84979 dated
November 6, 1989 which cases have the same causes of action,
same set of facts, the same parties and the same relief.novero
(2) The Hon. Court of Appeals (former Eighth Division) acted with
grave abuse of discretion and authority when it considered causes
of actions not allege in the complaint and which were raised for
the first time on appeal in deciding this case.
(3) The Hon. Court of Appeals (former Eighth Division) committed
serious error in applying the case of Filinvest Credit Corporation
vs. Ivans Mendez, 152 SCRA 598, as basis in deciding this case
when said case has a different set of facts from this case.
In its first assignment of error, petitioner alleges that the Eighth Division of the
Court of Appeals had no jurisdiction to review the present case since the First
Division of the Court of Appeals already passed upon the law and the facts of
the same. Petitioner alleges that the present appeal involves the same causes
of action, same parties, same facts and same relief involved in the decision
rendered by the First Division and affirmed by this Court in G.R. No. 84979.
[11]

Petitioner's argument is untenable. Jurisdiction is simply the power or


authority to hear a case. The appellate jurisdiction of the Court of Appeals to
review decisions and orders of lower courts is conferred by Batas Pambansa
Blg. 129. More importantly, petitioner cannot now assail the Court of Appeals'
jurisdiction after having actively participated in the appeal and after praying for
affirmative relief.
[12]

Neither can petitioner argue that res judicata bars the determination of the
present case. The two cases involve different subject matters, parties and
seek different reliefs. decision
The petition docketed as CA-G.R. SP No. 14938 was for certiorari with
injunction, brought by Stronghold Insurance Company, Inc. alleging that there
was grave abuse of discretion when the trial court adjudged it liable for
damages without due process, in violation of Rule 60, Section 10 in relation to
Rule 57, Section 20, of the Rules of Court. The surety also questioned the
propriety of the writ of execution issued by the trial court pending appeal.
[13]

On the other hand, CA-G.R. CV No. 25929 was filed by petitioner Orosa
under Rule 45 of the Revised Rules of Court raising alleged errors of law on

the part of the trial court. The subject of the appeal was the main decision,
while the subject of the petition in CA-G.R. SP No. 14938 was the
Supplemental Decision.
We agree with the Court of Appeals that:

[14]

The decisions of the Court of Appeals in CA-G.R. SP No. 14938


and the Supreme Court in G.R. No. 84979 did not pass on the
merits of this case. It merely ruled on the issues of whether
the surety, Stronghold Insurance Co., Inc., can be held jointly
and solidarily liable with plaintiff-appellant and whether
execution pending appeal is proper under the facts and
circumstances of this case. Consequently, this Court is
not marinellaestopped from reviewing the conclusions reached by the
courta quo. (underscoring ours)
In its second assigned error, petitioner posits that the Court of Appeals
committed grave abuse of discretion when it considered causes of actions
which were raised for the first time on appeal.
[15]

True, private respondent submitted issues to the Court of Appeals which were
not raised in the original complaint. Private respondent belatedly pointed out
that:
[16]

1.1. It is pertinent to note that Defendant-Appellee


has waived prior notice and demand in order to be rendered in
default, as in fact the Promissory Note expressly stipulates that
the monthly installments shall be paid on the date they fall
due, without need of prior notice or demand. alonzo
1.2. Said Promissory Note likewise expressly stipulates that a late
payment charge of 2% per month shall be added on each unpaid
installment from maturity thereof until fully paid.
1.3. Of equal significance is the Acceleration Clause in the
Promissory Note which states that if default be made in the
payment of any of the installments or late payment charges
thereon when the same became due and payable, the total
principal sum then remaining unpaid, together with the agreed
late payment charges thereon, shall at once become due and
payable.

Private respondent argued that based on the provisions of the Promissory


Note itself, petitioner incurred in default since, even though there was actual
payment of the installments which fell due on July 28, 1984, as well as the
three installments on August 28 to October 28, 1984, the payments were all
late and irregular. Private respondent also argued that petitioner assigned
the subject car to his daughter without the written consent of the obligee, and
hence, violated the terms of the chattel mortgage. Meritorious as these
arguments are, they come too late in the day. Basic is the rule that matters not
raised in the complaint cannot be raised for the first time on appeal. calr
[17]

[18]

Contrary to petitioner's accusation, the Court of Appeals restricted the


determination of the case to matters alleged in the complaint and raised
during trial. Citing jurisprudence, the Court of Appeals held that "it would be
offensive to the basic rule of fair play, justice and due process" if it considered
issue raised for the first time on appeal.
[19]

[20]

[21]

The Court of Appeals' statement that "under the terms and conditions of the
chattel mortgage, defendant-appellee Jose S. Orosa was already in default,"
was made only to justify the deletion of the trial court's award of moral,
exemplary damages and attorney's fees, in consonance with its finding that
private respondent was motivated by a sincere belief that it had sufficient
basis an acted in good faith when it filed the claim. jojo
[22]

We now come to the matter of moral damages. Petitioner insists that he


suffered untold embarrassment when the complaint was filed against him.
According to petitioner, the car subject of this case was being used by his
daughter, married to Jose Concepcion III, a scion of a prominent family.
Petitioner laments that he assigned the car to his daughter so that she could
"approximate without equaling the status of her in-laws." This being the case,
petitioner experienced anguish and unquantifiable humiliation when he had to
face his daughter's wealthy in-laws to explain the "why and the whats of the
subject case." Petitioner further insists that an award of moral damages is
especially justified since he is no ordinary man, but a businessman of high
social standing, a graduate of De La Salle University and belongs to a well
known family of bankers.
[23]

We must deny the claim. The law clearly states that one may only recover
moral damages if they are the proximate result of the other party's wrongful
act or omission. Two elements are required. First, the act or omission must
be the proximate result of the physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation and similar injury. Second, the act must be wrongful. manikan
[24]

Petitioner maintains that embarrassment resulted when he had to explain the


suit to his daughter's in-laws. However, that could have been avoided had he
not assigned the car to his daughter and had he been faithful and prompt in
paying the installments required. Petitioner brought the situation upon himself
and cannot now complain that private respondent is liable for the mental
anguish and humiliation he suffered.
Furthermore, we agree with the appellate court that when private respondent
brought the complaint, it did so only to exercise a legal right, believing that it
had a meritorious cause of action clearly borne out by a mere perusal of the
promissory note and chattel mortgage. To constitute malicious prosecution,
there must be proof that the prosecution was prompted by a sinister design to
vex and humiliate a person, and that it was initiated deliberately, knowing that
the charges were false and groundless. Such was not the case when the
instant complaint was filed. The rule has always been that moral damages
cannot be recovered from a person who has filed a complaint against another
in good faith. The law always presumes good faith such that any person who
seeks to be awarded damages due to acts of another has the burden of
proving that the latter acted in bad faith or with ill motive. juris
[25]

[26]

[27]

Anent the award of exemplary damages, jurisprudence provides that where a


party is not entitled to actual or moral damages, an award of exemplary
damages is likewise baseless.
[28]

In the matter of attorney's fees, petitioner avers that to prosecute and defend
this case in the lower court and in the appellate court, he incurred expenses
amounting to P50,000.00, and as such, attorney's fees should be granted.
We deny the claim. No premium should be placed on the right to litigate and
not every winning party is entitled to an automatic grant of attorney's fees.
The party must show that he falls under one of the instances enumerated in
Article 2208 of the Civil Code. This, petitioner failed to do. Furthermore,
where the award of moral and exemplary damages is eliminated, so must the
award for attorney's fees be deleted.
[29]

[30]

[31]

[32]

We also agree with the Court of Appeals that the trial court erred when it
ordered private respondent to return the subject car or its equivalent
considering that petitioner had not yet fully paid the purchase price. Verily, to
sustain the trial court's decision would amount to unjust enrichment. The Court
of Appeals was correct when it instead ordered private respondent to return,
not the car itself, but only the amount equivalent to the fourteen installments
actually paid with interest. criminal
[33]

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


Court of Appeals' Decision of April 19, 1993 and its Resolution of July 22,
1993 are AFFIRMED in toto.
No costs.
SO ORDERED.
G.R. No. 148132

January 28, 2008

SMART COMMUNICATIONS, INC., petitioner,


vs.
REGINA M. ASTORGA, respondent.
x---------------------------------------------------x
G.R. No. 151079

January 28, 2008

SMART COMMUNICATIONS, INC., petitioner,


vs.
REGINA M. ASTORGA, respondent.
x---------------------------------------------------x
G.R. No. 151372

January 28, 2008

REGINA M. ASTORGA, petitioner,


vs.
SMART COMMUNICATIONS, INC. and ANN MARGARET V. SANTIAGO, respondents.
DECISION
NACHURA, J.:
For the resolution of the Court are three consolidated petitions for review on certiorari under Rule 45
of the Rules of Court. G.R. No. 148132 assails the February 28, 2000 Decision 1 and the May 7, 2001
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372
question the June 11, 2001 Decision3and the December 18, 2001 Resolution4 in CA-G.R. SP. No.
57065.
Regina M. Astorga (Astorga) was employed by respondent Smart Communications, Incorporated
(SMART) on May 8, 1997 as District Sales Manager of the Corporate Sales Marketing Group/ Fixed
Services Division (CSMG/FSD). She was receiving a monthly salary of P33,650.00. As District Sales
Manager, Astorga enjoyed additional benefits, namely, annual performance incentive equivalent to
30% of her annual gross salary, a group life and hospitalization insurance coverage, and a car plan
in the amount of P455,000.00.5

In February 1998, SMART launched an organizational realignment to achieve more efficient


operations. This was made known to the employees on February 27, 1998.6 Part of the
reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into a
joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated
(SNMI). Since SNMI was formed to do the sales and marketing work, SMART abolished the
CSMG/FSD, Astorgas division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would be
recommended by SMART. SMART then conducted a performance evaluation of CSMG personnel
and those who garnered the highest ratings were favorably recommended to SNMI. Astorga landed
last in the performance evaluation, thus, she was not recommended by SMART. SMART,
nonetheless, offered her a supervisory position in the Customer Care Department, but she refused
the offer because the position carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3, 1998,
SMART issued a memorandum advising Astorga of the termination of her employment on ground of
redundancy, effective April 3, 1998. Astorga received it on March 16, 1998.7
The termination of her employment prompted Astorga to file a Complaint8 for illegal dismissal, nonpayment of salaries and other benefits with prayer for moral and exemplary damages against
SMART and Ann Margaret V. Santiago (Santiago). She claimed that abolishing CSMG and,
consequently, terminating her employment was illegal for it violated her right to security of tenure.
She also posited that it was illegal for an employer, like SMART, to contract out services which will
displace the employees, especially if the contractor is an in-house agency.9
SMART responded that there was valid termination. It argued that Astorga was dismissed by reason
of redundancy, which is an authorized cause for termination of employment, and the dismissal was
effected in accordance with the requirements of the Labor Code. The redundancy of Astorgas
position was the result of the abolition of CSMG and the creation of a specialized and more
technically equipped SNMI, which is a valid and legitimate exercise of management prerogative. 10
In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay the
current market value of the Honda Civic Sedan which was given to her under the companys car plan
program, or to surrender the same to the company for proper disposition. 11 Astorga, however, failed
and refused to do either, thus prompting SMART to file a suit for replevin with the Regional Trial
Court of Makati (RTC) on August 10, 1998. The case was docketed as Civil Case No. 98-1936 and
was raffled to Branch 57.12
Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to state a
cause of action; (iii) litis pendentia; and (iv) forum-shopping. Astorga posited that the regular courts
have no jurisdiction over the complaint because the subject thereof pertains to a benefit arising from
an employment contract; hence, jurisdiction over the same is vested in the labor tribunal and not in
regular courts.13
Pending resolution of Astorgas motion to dismiss the replevin case, the Labor Arbiter rendered a
Decision14dated August 20, 1998, declaring Astorgas dismissal from employment illegal. While
recognizing SMARTs right to abolish any of its departments, the Labor Arbiter held that such right
should be exercised in good faith and for causes beyond its control. The Arbiter found the abolition
of CSMG done neither in good faith nor for causes beyond the control of SMART, but a ploy to
terminate Astorgas employment. The Arbiter also ruled that contracting out the functions performed
by Astorga to an in-house agency like SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules
Implementing the Labor Code.

Accordingly, the Labor Arbiter ordered:


WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be illegal
and unjust. [SMART and Santiago] are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position, without
loss of seniority rights and other privileges, with full backwages, inclusive of allowances and
other benefits from the time of [her] dismissal to the date of reinstatement, which computed
as of this date, are as follows:
(a)

Astorga
BACKWAGES; (P33,650.00 x 4
months)

= P134,600.00

UNPAID SALARIES (February 15,


1998-April 3, 1998
February 15-28, 1998

= P 16,823.00

March 1-31, [1998]

= P 33,650.00

April 1-3, 1998

= P 3,882.69

CAR MAINTENANCE ALLOWANCE


(P2,000.00 x 4)

= P 8,000.00

FUEL ALLOWANCE
= P 14,457.83
(300 liters/mo. x 4 mos. at P12.04/liter)
TOTAL = P211,415.52
xxxx
3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and
exemplary damages in the amount of P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as attorneys fees.
SO ORDERED.15
Subsequently, on March 29, 1999, the RTC issued an Order 16 denying Astorgas motion to dismiss
the replevin case. In so ruling, the RTC ratiocinated that:
Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss.
As correctly pointed out, this case is to enforce a right of possession over a company car
assigned to the defendant under a car plan privilege arrangement. The car is registered in

the name of the plaintiff. Recovery thereof via replevin suit is allowed by Rule 60 of the 1997
Rules of Civil Procedure, which is undoubtedly within the jurisdiction of the Regional Trial
Court.
In the Complaint, plaintiff claims to be the owner of the company car and despite demand,
defendant refused to return said car. This is clearly sufficient statement of plaintiffs cause of
action.
Neither is there forum shopping. The element of litis penden[t]ia does not appear to exist
because the judgment in the labor dispute will not constitute res judicata to bar the filing of
this case.
WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit.
SO ORDERED.17
Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999. 18
Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28, 2000
Decision,19reversed the RTC ruling. Granting the petition and, consequently, dismissing
the replevin case, the CA held that the case is intertwined with Astorgas complaint for illegal
dismissal; thus, it is the labor tribunal that has rightful jurisdiction over the complaint. SMARTs
motion for reconsideration having been denied,20 it elevated the case to this Court, now docketed as
G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal dismissal
case to the National Labor Relations Commission (NLRC). In its September 27, 1999 Decision, 21 the
NLRC sustained Astorgas dismissal. Reversing the Labor Arbiter, the NLRC declared the abolition of
CSMG and the creation of SNMI to do the sales and marketing services for SMART a valid
organizational action. It overruled the Labor Arbiters ruling that SNMI is an in-house agency, holding
that it lacked legal basis. It also declared that contracting, subcontracting and streamlining of
operations for the purpose of increasing efficiency are allowed under the law. The NLRC further
found erroneous the Labor Arbiters disquisition that redundancy to be valid must be impelled by
economic reasons, and upheld the redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside. [Astorga]
is further ordered to immediately return the company vehicle assigned to her. [Smart and
Santiago] are hereby ordered to pay the final wages of [Astorga] after [she] had submitted
the required supporting papers therefor.
SO ORDERED.22
Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999. 23
Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a Decision24 affirming
with modification the resolutions of the NLRC. In gist, the CA agreed with the NLRC that the
reorganization undertaken by SMART resulting in the abolition of CSMG was a legitimate exercise of
management prerogative. It rejected Astorgas posturing that her non-absorption into SNMI was
tainted with bad faith. However, the CA found that SMART failed to comply with the mandatory one-

month notice prior to the intended termination. Accordingly, the CA imposed a penalty equivalent to
Astorgas one-month salary for this non-compliance. The CA also set aside the NLRCs order for the
return of the company vehicle holding that this issue is not essentially a labor concern, but is civil in
nature, and thus, within the competence of the regular court to decide. It added that the matter had
not been fully ventilated before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of the
Decision. On December 18, 2001, the CA resolved the motions, viz.:
WHEREFORE, [Astorgas] motion for reconsideration is hereby PARTIALLY GRANTED.
[Smart] is hereby ordered to pay [Astorga] her backwages from 15 February 1998 to 06
November 1998. [Smarts] motion for reconsideration is outrightly DENIED.
SO ORDERED.25
Astorga and SMART came to us with their respective petitions for review assailing the CA ruling,
docketed as G.R Nos. 151079 and 151372. On February 27, 2002, this Court ordered the
consolidation of these petitions with G.R. No. 148132. 26
In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGAS
DISMISSAL DESPITE THE FACT THAT HER DISMISSAL WAS EFFECTED IN CLEAR
VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE,
CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR HER DISMISSAL.
II
SMARTS REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE
APPEAL AS REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES ASTORGA
TO HER SALARIES DURING THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL
COURT HAS NO JURISDICTION OVER THE COMPLAINT FOR RECOVERY OF A CAR
WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.27
On the other hand, Smart in its Memoranda raises the following issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF
SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISION OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO
CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT
SMART DID NOT COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO
TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.

II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF
LABOR AND EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE
REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS
COMMISSION FINDS APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN THE
SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL.28
IV
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF
SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO
CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT
THE REGIONAL TRIAL COURT DOES NOT HAVE JURISDICTION OVER THE
COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN COMPANY
VEHICLE FROM A FORMER EMPLOYEE WHO WAS LEGALLY DISMISSED.
V
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT
THE SUBJECT OF THE REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR PLAN
PRIVILEGE BUT SIMPLY THE RECOVERY OF A COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT
ASTORGA CAN NO LONGER BE CONSIDERED AS AN EMPLOYEE OF SMART UNDER
THE LABOR CODE.29
The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC of
Makati City allegedly for lack of jurisdiction, which is the issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to repossession of goods or chattels may
recover those goods or chattels from one who has wrongfully distrained or taken, or who wrongfully
detains such goods or chattels. It is designed to permit one having right to possession to recover
property in specie from one who has wrongfully taken or detained the property.30 The term may refer
either to the action itself, for the recovery of personalty, or to the provisional remedy traditionally
associated with it, by which possession of the property may be obtained by the plaintiff and retained
during the pendency of the action.31
That the action commenced by SMART against Astorga in the RTC of Makati City was one for
replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the CA
made the following disquisition, viz.:

[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the
employment package. We doubt that [SMART] would extend [to Astorga] the same car plan
privilege were it not for her employment as district sales manager of the company.
Furthermore, there is no civil contract for a loan between [Astorga] and [Smart].
Consequently, We find that the car plan privilege is a benefit arising out of employeremployee relationship. Thus, the claim for such falls squarely within the original and
exclusive jurisdiction of the labor arbiters and the NLRC.32
We do not agree. Contrary to the CAs ratiocination, the RTC rightfully assumed jurisdiction over the
suit and acted well within its discretion in denying Astorgas motion to dismiss. SMARTs demand for
payment of the market value of the car or, in the alternative, the surrender of the car, is not a labor,
but a civil, dispute. It involves the relationship of debtor and creditor rather than employee-employer
relations.33 As such, the dispute falls within the jurisdiction of the regular courts.
In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the RTC over the replevin suit,
explained:
Replevin is a possessory action, the gist of which is the right of possession in the plaintiff.
The primary relief sought therein is the return of the property in specie wrongfully detained
by another person. It is an ordinary statutory proceeding to adjudicate rights to the title or
possession of personal property. The question of whether or not a party has the right of
possession over the property involved and if so, whether or not the adverse party has
wrongfully taken and detained said property as to require its return to plaintiff, is outside the
pale of competence of a labor tribunal and beyond the field of specialization of Labor
Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in the Replevin Case. The
respective issues raised in each forum can be resolved independently on the other. In fact in
18 November 1986, the NLRC in the case before it had issued an Injunctive Writ enjoining
the petitioners from blocking the free ingress and egress to the Vessel and ordering the
petitioners to disembark and vacate. That aspect of the controversy is properly settled under
the Labor Code. So also with petitioners right to picket. But the determination of the question
of who has the better right to take possession of the Vessel and whether petitioners can
deprive the Charterer, as the legal possessor of the Vessel, of that right to possess in
addressed to the competence of Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of
jurisdiction as laid down by pertinent laws.
The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered the
dismissal of the replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorgas dismissal.
Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal
of an employee. The nature of redundancy as an authorized cause for dismissal is explained in the
leading case ofWiltshire File Co., Inc. v. National Labor Relations Commission,35 viz:

x x x redundancy in an employers personnel force necessarily or even ordinarily refers to


duplication of work. That no other person was holding the same position that private
respondent held prior to termination of his services does not show that his position had not
become redundant. Indeed, in any well organized business enterprise, it would be surprising
to find duplication of work and two (2) or more people doing the work of one person. We
believe that redundancy, for purposes of the Labor Code, exists where the services of an
employee are in excess of what is reasonably demanded by the actual requirements of the
enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a
position or positions may be the outcome of a number of factors, such as overhiring of
workers, decreased volume of business, or dropping of a particular product line or service
activity previously manufactured or undertaken by the enterprise.
The characterization of an employees services as superfluous or no longer necessary and,
therefore, properly terminable, is an exercise of business judgment on the part of the employer. The
wisdom and soundness of such characterization or decision is not subject to discretionary review
provided, of course, that a violation of law or arbitrary or malicious action is not shown. 36
Astorga claims that the termination of her employment was illegal and tainted with bad faith. She
asserts that the reorganization was done in order to get rid of her. But except for her barefaced
allegation, no convincing evidence was offered to prove it. This Court finds it extremely difficult to
believe that SMART would enter into a joint venture agreement with NTT, form SNMI and abolish
CSMG/FSD simply for the sole purpose of easing out a particular employee, such as Astorga.
Moreover, Astorga never denied that SMART offered her a supervisory position in the Customer
Care Department, but she refused the offer because the position carried a lower salary rank and
rate. If indeed SMART simply wanted to get rid of her, it would not have offered her a position in any
department in the enterprise.
Astorga also states that the justification advanced by SMART is not true because there was no
compelling economic reason for redundancy. But contrary to her claim, an employer is not precluded
from adopting a new policy conducive to a more economical and effective management even if it is
not experiencing economic reverses. Neither does the law require that the employer should suffer
financial losses before he can terminate the services of the employee on the ground of
redundancy. 37
We agree with the CA that the organizational realignment introduced by SMART, which culminated in
the abolition of CSMG/FSD and termination of Astorgas employment was an honest effort to make
SMARTs sales and marketing departments more efficient and competitive. As the CA had taken
pains to elucidate:
x x x a careful and assiduous review of the records will yield no other conclusion than that
the reorganization undertaken by SMART is for no purpose other than its declared objective
as a labor and cost savings device. Indeed, this Court finds no fault in SMARTs decision to
outsource the corporate sales market to SNMI in order to attain greater productivity.
[Astorga] belonged to the Sales Marketing Group under the Fixed Services Division
(CSMG/FSD), a distinct sales force of SMART in charge of selling SMARTs
telecommunications services to the corporate market. SMART, to ensure it can respond
quickly, efficiently and flexibly to its customers requirement, abolished CSMG/FSD and
shortly thereafter assigned its functions to newly-created SNMI Multimedia Incorporated, a
joint venture company of SMART and NTT of Japan, for the reason that CSMG/FSD does
not have the necessary technical expertise required for the value added services. By
transferring the duties of CSMG/FSD to SNMI, SMART has created a more competent and
specialized organization to perform the work required for corporate accounts. It is also

relieved SMART of all administrative costs management, time and money-needed in


maintaining the CSMG/FSD. The determination to outsource the duties of the CSMG/FSD to
SNMI was, to Our mind, a sound business judgment based on relevant criteria and is
therefore a legitimate exercise of management prerogative.
Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined towards the
worker and upheld his cause in most of his conflicts with his employer. This favored treatment is
consonant with the social justice policy of the Constitution. But while tilting the scales of justice in
favor of workers, the fundamental law also guarantees the right of the employer to reasonable
returns for his investment.38 In this light, we must acknowledge the prerogative of the employer to
adopt such measures as will promote greater efficiency, reduce overhead costs and enhance
prospects of economic gains, albeit always within the framework of existing laws. Accordingly, we
sustain the reorganization and redundancy program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the mandated one (1) month notice
prior to termination. The record is clear that Astorga received the notice of termination only on March
16, 199839 or less than a month prior to its effectivity on April 3, 1998. Likewise, the Department of
Labor and Employment was notified of the redundancy program only on March 6, 1998. 40
Article 283 of the Labor Code clearly provides:
Art. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor
and Employment at least one (1) month before the intended date thereof x x x.
SMARTs assertion that Astorga cannot complain of lack of notice because the organizational
realignment was made known to all the employees as early as February 1998 fails to persuade.
Astorgas actual knowledge of the reorganization cannot replace the formal and written notice
required by the law. In the written notice, the employees are informed of the specific date of the
termination, at least a month prior to the effectivity of such termination, to give them sufficient time to
find other suitable employment or to make whatever arrangements are needed to cushion the impact
of termination. In this case, notwithstanding Astorgas knowledge of the reorganization, she
remained uncertain about the status of her employment until SMART gave her formal notice of
termination. But such notice was received by Astorga barely two (2) weeks before the effective date
of termination, a period very much shorter than that required by law.
Be that as it may, this procedural infirmity would not render the termination of Astorgas employment
illegal. The validity of termination can exist independently of the procedural infirmity of the
dismissal.41 In DAP Corporation v. CA,42 we found the dismissal of the employees therein valid and
for authorized cause even if the employer failed to comply with the notice requirement under Article
283 of the Labor Code. This Court upheld the dismissal, but held the employer liable for noncompliance with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining Astorgas dismissal and at the same
time, awarding indemnity for violation of Astorga's statutory rights.
However, we find the need to modify, by increasing, the indemnity awarded by the CA to Astorga, as
a sanction on SMART for non-compliance with the one-month mandatory notice requirement, in light
of our ruling in Jaka Food Processing Corporation v. Pacot,43 viz.:

[I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply
with the notice requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect, initiated by an act imputable to
the employee, and (2) if the dismissal is based on an authorized cause under Article 283 but
the employer failed to comply with the notice requirement, the sanction should
be stiffer because the dismissal process was initiated by the employers exercise of his
management prerogative.
We deem it proper to increase the amount of the penalty on SMART to P50,000.00.
As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay
equivalent to at least one (1) month salary or to at least one (1) months pay for every year of
service, whichever is higher. The records show that Astorgas length of service is less than a year.
She is, therefore, also entitled to separation pay equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This assertion
was never rebutted by SMART in the proceedings a quo. No proof of payment was presented by
SMART to disprove the allegation. It is settled that in labor cases, the burden of proving payment of
monetary claims rests on the employer.44 SMART failed to discharge the onus probandi. Accordingly,
it must be held liable for Astorgas salary from February 15, 1998 until the effective date of her
termination, on April 3, 1998.
However, the award of backwages to Astorga by the CA should be deleted for lack of basis.
Backwages is a relief given to an illegally dismissed employee. Thus, before backwages may be
granted, there must be a finding of unjust or illegal dismissal from work. 45 The Labor Arbiter ruled that
Astorga was illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiters ruling and
categorically declared Astorgas dismissal valid. This ruling was affirmed by the CA in its assailed
Decision. Since Astorgas dismissal is for an authorized cause, she is not entitled to backwages. The
CAs award of backwages is totally inconsistent with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The February
28, 2000 Decision and the May 7, 2001 Resolution of the Court of Appeals in CA-G.R. SP. No.
53831 are SET ASIDE. The Regional Trial Court of Makati City, Branch 57 is DIRECTED to proceed
with the trial of Civil Case No. 98-1936 and render its Decision with reasonable dispatch.
On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and 151372
are DENIED. The June 11, 2001 Decision and the December 18, 2001 Resolution in CA-G.R. SP.
No. 57065, are AFFIRMEDwith MODIFICATION. Astorga is declared validly dismissed. However,
SMART is ordered to pay AstorgaP50,000.00 as indemnity for its non-compliance with procedural
due process, her separation pay equivalent to one (1) month pay, and her salary from February 15,
1998 until the effective date of her termination on April 3, 1998. The award of backwages
is DELETED for lack of basis.
SO ORDERED.

KENNETH HAO, Complainant,

A.M. No. P-07-2384


Present:

QUISUMBING, J., Chairperson,


TINGA,
REYES,
LEONARDO-DE CASTRO, and
BRION, JJ.

- versus -

ABE C. ANDRES, Sheriff IV,


Regional Trial Court, Branch
16,Davao City,
Respondent.

Promulgated:
June 18, 2008

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

RESOLUTION
QUISUMBING, J.:
Before us is an administrative complaint for gross neglect of duty, grave
abuse of authority (oppression) and violation of Republic Act No. 3019 [1] filed by
complainant Kenneth Hao against respondent Abe C. Andres, Sheriff IV of the
Regional Trial Court (RTC) of Davao City, Branch 16.
The antecedent facts are as follows:
Complainant Hao is one of the defendants in a civil case for replevin docketed as
Civil Case No. 31, 127-2005[2] entitled Zenaida Silver, doing trade and business
under the name and style ZHS Commercial v. Loreto Hao, Atty. Amado Cantos,
Kenneth Hao and John Does, pending before the RTC of Davao City, Branch 16.
On October 17, 2005, Judge Renato A. Fuentes[3] issued an Order of
Seizure[4] against 22 motor vehicles allegedly owned by the complainant. On the
strength of the said order, Andres was able to seize two of the subject motor
vehicles on October 17, 2005; four on October 18, 2005, and another three
on October 19, 2005, or a total of nine motor vehicles.[5]
In his Affidavit-Complaint[6] against Andres before the Office of the Court
Administrator (OCA), Hao alleged that Andres gave undue advantage
to Zenaida Silver in the implementation of the order and that Andres seized the

nine motor vehicles in an oppressive manner. Hao also averred that Andres was
accompanied by unidentified armed personnel on board a military vehicle which
was excessive since there were no resistance from them. Hao also discovered that
the compound where the seized motor vehicles were placed is actually owned by
Silver.[7]
On October 21, 2005, in view of the approval of the complainants counterreplevin bond, Judge Emmanuel C. Carpio[8] ordered Andres to immediately cease
and desist from further implementing the order of seizure, and to return the seized
motor vehicles including its accessories to their lawful owners.[9]
However, on October 24, 2005, eight of the nine seized motor vehicles were
reported missing. In his report,[10] Andres stated that he was shocked to find that the
motor vehicles were already missing when he inspected it on October 22, 2005.He
narrated that on October 21, 2005, PO3 Rodrigo Despe, one of the policemen
guarding the subject motor vehicles, reported to him that a certain Nonoy entered
the compound and caused the duplication of the vehicles keys.[11] But Andres
claimed the motor vehicles were still intact when he inspected it on October 21,
2005.
Subsequently, Hao reported that three of the carnapped vehicles were recovered by
the police.[12] He then accused Andres of conspiring and conniving with
Atty. Oswaldo Macadangdang (Silvers counsel) and the policemen in
the carnapping of the motor vehicles. Hao also accused Andres of concealing the
depository receipts from them and pointed out that the depository receipts show
that Silver and Atty. Macadangdang were the ones who chose the policemen who
will guard the motor vehicles.
In his Comment[13] dated March 3, 2006, Andres vehemently denied violating Rep.
Act No. 3019 and committing gross neglect of duty.
Andres denied implementing the Order of Seizure in an oppressive manner. He said
he took the vehicles because they were the specific vehicles ordered to be seized
after checking their engine and chassis numbers. Andres likewise denied that he was
accompanied by military personnel in the implementation of the order. He claimed
that he was merely escorted by policemen pursuant to the directive of Police Senior

Supt. Catalino S. Cuy, Chief of the Davao City Police Office. Andres also
maintained that no form of harassment or oppression was committed during the
implementation of the order, claiming that the presence of the policemen was only
for the purpose of preserving peace and order, considering there were 22 motor
vehicles specified in the Order of Seizure. Andres added that he exercised no
discretion in the selection of the policemen who assisted in the implementation of
the order, much less of those who will guard the seized motor vehicles.
Andres disputed the allegation that he neglected his duty to safeguard the seized
vehicles by pointing out that he placed all the motor vehicles under police
watch. He added that the policemen had control of the compound where the seized
motor vehicles were kept.
Andres likewise contended that after the unauthorized duplication of the
vehicles keys was reported to him, he immediately advised the policemen on duty
to watch the motor vehicles closely.[14] He negated the speculations that he was
involved in the disappearance of the seized motor vehicles as he claims to be the
one who reported the incident to the court and the police.
As to the allegation of undisclosed depository receipts, Andres maintained that he
never denied the existence of the depository receipts. He said the existence of the
depository receipts was immediately made known on the same day that the subject
motor vehicles were discovered missing. He even used the same in the filing of
the carnapping case against Silver and her co-conspirators.
Finally, Andres insisted that the guarding of properties under custodia legis by
policemen is not prohibited, but is even adopted by the court. Hence, he prays that
he be held not liable for the loss of the vehicles and that he be relieved of his duty
to return the vehicles.[15]
After the OCA recommended that the matter be investigated, we referred the case
to Executive Judge Renato A. Fuentes for investigation, report and
recommendation.[16]

In his Investigation Report[17] dated September 21, 2006, Judge Fuentes found
Andres guilty of serious negligence in the custody of the nine motor vehicles. He
recommended that Andres be suspended from office.
Judge Fuentes found numerous irregularities in the implementation of the writ
of replevin/order of seizure, to wit: (1) at the time of the implementation of the
writ, Andres knew that the vehicles to be seized were not in the names of any of
the parties to the case; (2) one vehicle was taken without the knowledge of its
owner, a certain Junard Escudero; (3) Andres allowed Atty. Macadangdang to get
a keymaster to duplicate the vehicles keys in order to take one motor vehicle; and
(4) Andres admitted that prior to the implementation of the writ of seizure, he
consulted Silver and Atty. Macadangdang regarding the implementation of the writ
and was accompanied by the latter in the course of the implementation. Judge
Fuentes observed that the motor vehicles were speedily seized without strictly
observing fairness and regularity in its implementation.[18]
Anent the safekeeping of the seized motor vehicles, Judge Fuentes pointed out
several instances where Andres lacked due diligence to wit: (1) the seized motor
vehicles were placed in a compound surrounded by an insufficiently locked seethrough fence; (2) three motor vehicles were left outside the compound; (3) Andres
turned over the key of the gate to the policemen guarding the motor vehicles; (4)
Andres does not even know the full name of the owner of the compound, who was
merely known to him as Gloria; (5) except for PO3 Despe and SPO4
Nelson Salcedo, the identities of the other policemen tapped to guard the
compound were unknown to Andres; (6) Andres also admitted that he only stayed
at least one hour each day from October 19-21, 2005 during his visits to the
compound; and (7) even after it was reported to him that a certain Nonoy entered
the compound and duplicated the keys of the motor vehicles, he did not exert his
best effort to look for that Nonoy and to confiscate the duplicated keys.[19]
Judge Fuentes also observed that Andres appeared to be more or less
accommodating to Silver and her counsel but hostile and uncooperative to the
complainant. He pointed out that Andres depended solely on Silver in the selection
of the policemen who would guard the seized motor vehicles. He added that even
the depository receipts were not turned over to the defendants/third-party claimants
in the replevin case but were in fact concealed from them. Andres also gave

inconsistent testimonies as to whether he has in his possession the depository


receipts.[20]
The OCA disagreed with the observations of Judge Fuentes. It recommended that
Andres be held liable only for simple neglect of duty and be suspended for one (1)
month and one (1) day.[21]
We adopt the recommendation of the investigating judge.
Being an officer of the court, Andres must be aware that there are well-defined
steps provided in the Rules of Court regarding the proper implementation of a writ
of replevin and/or an order of seizure. The Rules, likewise, is explicit on the duty
of the sheriff in its implementation. To recapitulate what should be common
knowledge to sheriffs, the pertinent provisions of Rule 60, of the Rules of Court
are quoted hereunder:
SEC. 4. Duty of the sheriff.Upon receiving such order, the sheriff must
serve a copy thereof on the adverse party, together with a copy of the
application, affidavit and bond, and must forthwith take the property,
if it be in the possession of the adverse party, or his agent, and retain
it in his custody. If the property or any part thereof be concealed in a
building or enclosure, the sheriff must demand its delivery, and if it be
not delivered, he must cause the building or enclosure to be broken open
and take the property into his possession. After the sheriff has taken
possession of the property as herein provided, he must keep it in a
secure place and shall be responsible for its delivery to the party
entitled thereto upon receiving his fees and necessary expenses for
taking and keeping the same. (Emphasis supplied.)
SEC. 6. Disposition of property by sheriff.If within five (5) days after
the taking of the property by the sheriff, the adverse party does not
object to the sufficiency of the bond, or of the surety or sureties thereon;
or if the adverse party so objects and the court affirms its approval of the
applicants bond or approves a new bond, or if the adverse party requires
the return of the property but his bond is objected to and found insufficient
and he does not forthwith file an approved bond, the property shall be
delivered to the applicant. If for any reason the property is not delivered to
the applicant, the sheriff must return it to the adverse party. (Emphasis
supplied.)

First, the rules provide that property seized under a writ of replevin is not to be
delivered immediately to the plaintiff.[22] In accordance with the said rules, Andres
should have waited no less than five days in order to give the complainant an
opportunity toobject to the sufficiency of the bond or of the surety or sureties
thereon, or require the return of the seized motor vehicles by filing a counterbond. This, he failed to do.
Records show that Andres took possession of two of the subject motor
vehicles on October 17, 2005, four on October 18, 2005, and another three
on October 19, 2005. Simultaneously, as evidenced by the depository receipts,
on October 18, 2005, Silver received from Andres six of the seized motor vehicles,
and three more motor vehicles on October 19, 2005. Consequently, there is no
question that Silver was already in possession of the nine seized vehicles
immediately after seizure, or no more than three days after the taking of the
vehicles. Thus, Andres committed a clear violation of Section 6, Rule 60 of the
Rules of Court with regard to the proper disposal of the property.
It matters not that Silver was in possession of the seized vehicles merely for
safekeeping as stated in the depository receipts. The rule is clear that the property
seized should not be immediately delivered to the plaintiff, and the sheriff must
retain custody of the seized property for at least five days. [23] Hence, the act of
Andres in delivering the seized vehicles immediately after seizure to Silver for
whatever purpose, without observing the five-day requirement finds no legal
justification.
In Pardo v. Velasco,[24] this Court held that
Respondent as an officer of the Court is charged with certain
ministerial duties which must be performed faithfully to the letter. Every
provision in the Revised Rules of Court has a specific reason or
objective. In this case, the purpose of the five (5) days is to give a
chance to the defendant to object to the sufficiency of the bond or
the surety or sureties thereon or require the return of the property
by filing a counterbond.[25] (Emphasis supplied.)

In Sebastian v. Valino,[26] this Court reiterated that

Under the Revised Rules of Court, the property seized under a


writ of replevin is not to be delivered immediately to the
plaintiff. The sheriff must retain it in his custody for five days and he
shall return it to the defendant, if the latter, as in the instant case, requires
its return and files a counterbond.[27] (Emphasis supplied.)

Likewise, Andres claim that he had no knowledge that the compound is


owned by Silver fails to convince us. Regardless of who actually owns the
compound, the fact remains that Andres delivered the vehicles to Silver
prematurely. It violates the rule requiring him to safekeep the vehicles in his
custody.[28] The alleged lack of facility to store the seized vehicles is unacceptable
considering that he should have deposited the same in a bonded warehouse. If this
was not feasible, he should have sought prior authorization from the court issuing
the writ before delivering the vehicles to Silver.
Second, it must be stressed that from the moment an order of delivery
in replevin is executed by taking possession of the property specified therein, such
property is in custodia legis. As legal custodian, it is Andres duty to safekeep the
seized motor vehicles. Hence, when he passed his duty to safeguard the motor
vehicles to Silver, he committed a clear neglect of duty.
Third, we are appalled that even after PO3 Despe reported the unauthorized
duplication of the vehicles keys, Andres failed to take extra precautionary
measures to ensure the safety of the vehicles. It is obvious that the vehicles were
put at risk by the unauthorized duplication of the keys of the vehicles. Neither did
he immediately report the incident to the police or to the court. The loss of the
motor vehicles could have been prevented if Andres immediately asked the court
for an order to transfer the vehicles to another secured place as soon as he
discovered the unauthorized duplication. Under these circumstances, even an
ordinary prudent man would have exercised extra diligence. His warning to the
policemen to closely watch the vehicles was insufficient. Andres cannot toss back
to Silver or to the policemen the responsibility for the loss of the motor vehicles
since he remains chiefly responsible for their safekeeping as legal custodian
thereof. Indeed, Andres failure to take the necessary precaution and proper
monitoring of the vehicles to ensure its safety constitutes plain negligence.

Fourth, despite the cease and desist order, Andres failed to return the motor
vehicles to their lawful owners. Instead of returning the motor vehicles
immediately as directed, he opted to write Silver and demand that she put up an
indemnity bond to secure the third-party claims. Consequently, due to his delay, the
eventual loss of the motor vehicles rendered the order to return the seized vehicles
ineffectual to the prejudice of the complaining owners.
It must be stressed that as court custodian, it was Andres responsibility to
ensure that the motor vehicles were safely kept and that the same were readily
available upon order of the court or demand of the parties concerned. Specifically,
sheriffs, being ranking officers of the court and agents of the law, must discharge
their duties with great care and diligence. In serving and implementing court writs,
as well as processes and orders of the court, they cannot afford to err without
affecting adversely the proper dispensation of justice. Sheriffs play an important
role in the administration of justice and as agents of the law, high standards of
performance are expected of them.[29] Hence, his failure to return the motor
vehicles at the time when its return was still feasible constitutes another instance of
neglect of duty.
Fifth, as found by the OCA, we agree that Andres also disregarded the
provisions of Rule 141[30] of the Rules of Court with regard to payment of
expenses.
Under Section 9,[31] Rule 141 of the Rules of Court, the procedure for the
execution of writs and other processes are: First, the sheriff must make an estimate
of the expenses to be incurred by him; Second, he must obtain court approval for
such estimated expenses; Third, the approved estimated expenses shall be
deposited by the interested party with the Clerk of Court and ex officio sheriff;
Fourth, the Clerk of Court shall disburse the amount to the executing sheriff; and
Fifth, the executing sheriff shall liquidate his expenses within the same period for
rendering a return on the writ.
In this case, no estimate of sheriffs expenses was submitted to the court by
Andres. Without approval of the court, he also allowed Silver to pay directly to the
policemen the expenses for the safeguarding of the motor vehicles including their

meals.[32] Obviously, this practice departed from the accepted procedure provided
in the Rules of Court.
In view of the foregoing, there is no doubt that Andres failed to live up to the
standards required of his position. The number of instances that Andres strayed
from the regular course observed in the proper implementation of the orders of the
court cannot be countenanced. Thus, taking into account the numerous times he
was found negligent and careless of his duties coupled with his utter disregard of
legal procedures, he cannot be considered guilty merely of simple negligence. His
acts constitute gross negligence.
As we have previously ruled:
Gross negligence refers to negligence characterized by the want
of even slight care, acting or omitting to act in a situation where
there is a duty to act, not inadvertently but willfully and
intentionally, with a conscious indifference to consequences in so far
as other persons may be affected. It is the omission of that care
which even inattentive and thoughtless men never fail to take on
their own property.[33] (Emphasis supplied.)
Gross neglect, on the other hand, is such neglect from the gravity of
the case, or the frequency of instances, becomes so serious in its
character as to endanger or threaten the public welfare. The term
does not necessarily include willful neglect or intentional official
wrongdoing.[34] (Emphasis supplied.)

Good faith on the part of Andres, or lack of it, in proceeding to properly


execute his mandate would be of no moment, for he is chargeable with the
knowledge that being an officer of the court tasked therefor, it behooves him to
make due compliance. He is expected to live up to the exacting standards of his
office and his conduct must at all times be characterized by rectitude and
forthrightness, and so above suspicion and mistrust as well. [35] Thus, an act of gross
neglect resulting in loss of properties in custodia legis ruins the confidence lodged
by the parties to a suit or the citizenry in our judicial process. Those responsible for
such act or omission cannot escape the disciplinary power of this Court.

Anent the allegation of grave abuse of authority (oppression), we likewise


agree with the observations of the investigating judge. Records show that Andres
started enforcing the writ of replevin/order of seizure on the same day that the
order of seizure was issued. He also admitted that he took the vehicles of persons
who are not parties to the replevin case.[36] He further admitted that he took one
vehicle belonging to a certain Junard Escudero without the latters knowledge and
even caused the duplication of its keys in order that it may be taken by Andres.
[37]
Certainly, these are indications that Andres enforced the order of seizure with
undue haste and without giving the complainant prior notice or reasonable time to
deliver the motor vehicles. Hence, Andres is guilty of grave abuse of authority
(oppression).
When a writ is placed in the hands of a sheriff, it is his duty, in the absence
of any instructions to the contrary, to proceed with reasonable celerity and
promptness to execute it according to its mandate. However, the prompt
implementation of an order of seizure is called for only in instances where there is
no question regarding the right of the plaintiff to the property.[38] Where there is
such a question, the prudent recourse for Andres is to desist from executing the
order and convey the information to his judge and to the plaintiff.
True, sheriffs must comply with their mandated ministerial duty to implement
writs promptly and expeditiously, but equally true is the principle that sheriffs by the
nature of their functions must at all times conduct themselves with propriety and
decorum and act above suspicion. There must be no room for anyone to conjecture
that sheriffs and deputy sheriffs as officers of the court have conspired with any of the
parties to a case to obtain a favorable judgment or immediate execution. The sheriff is
at the front line as representative of the judiciary and by his act he may build or
destroy the institution.[39]
However, as to the charge of graft and corruption, it must be stressed that the
same is criminal in nature, thus, the resolution thereof cannot be threshed out in the
instant administrative proceeding. We also take note that there is a pending
criminal case for carnapping against Andres;[40] hence, with more reason that we
cannot rule on the allegation of graft and corruption as it may preempt the court in
its resolution of the said case.

We come to the matter of penalties. The imposable penalty for gross neglect
of duty is dismissal. While the penalty imposable for grave abuse of authority
(oppression) is suspension for six (6) months one (1) day to one (1) year.[41] Section
55, Rule IV, of the Uniform Rules on Administrative Cases in the Civil
Service provides that if the respondent is found guilty of two or more charges or
counts, the penalty to be imposed should be that corresponding to the most serious
charge or count and the rest shall be considered as aggravating circumstances.
In the instant case, the penalty for the more serious offense which is
dismissal should be imposed on Andres. However, following Sections 53[42] and 54,
[43]
Rule IV of the Uniform Rules on Administrative Cases in the Civil Service, we
have to consider that Andres is a first-time offender; hence, a lighter penalty than
dismissal from the service would suffice. Consequently, instead of imposing the
penalty of dismissal, the penalty of suspension from office for one (1) year without
pay is proper for gross neglect of duty, and another six (6) months should be added
for the aggravating circumstance of grave abuse of authority (oppression).
WHEREFORE, the Court finds Abe C. Andres,
of Davao City, Branch 16, GUILTY of gross neglect of duty
authority (oppression) and is SUSPENDED for one (1) year
without pay. He is also hereby WARNED that a repetition of
offenses in the future shall be dealt with more severely.
SO ORDERED.

Sheriff IV, RTC


and grave abuse of
and six (6) months
the same or similar

ROGER V. NAVARRO,
Petitioner,

G.R. No. 153788

Present:
CARPIO, J., Chairperson,
LEONARDO-DE CASTRO,
BRION,
DEL CASTILLO, and
ABAD, JJ.

- versus -

HON. JOSE L. ESCOBIDO,


Presiding Judge, RTC Branch 37, Promulgated:
Cagayan de Oro City, and KAREN
T. GO, doing business under the November 27, 2009
name KARGO ENTERPRISES,
Respondents.
x --------------------------------------------------------------------------------------- x
DECISION
BRION, J.:
This is a petition for review on certiorari[1] that seeks to set aside the Court of
Appeals (CA) Decision[2] dated October 16, 2001 and Resolution[3] dated May 29,
2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26,
2000[4]and March 7, 2001[5] orders of the Regional Trial Court (RTC), Misamis
Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarros (Navarro)
motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as
Civil Case Nos. 98-599 (first complaint)[6] and 98-598 (second complaint),[7] before
the RTC for replevin and/or sum of money with damages against Navarro. In these

complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of
two (2) motor vehicles in Navarros possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal age,
married to GLENN O. GO, a resident of Cagayan de Oro City and doing
business under the trade name KARGO ENTERPRISES, an entity
duly registered and existing under and by virtue of the laws of the
Republic of the Philippines, which has its business address at Bulua,
Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino,
of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro
City, where he may be served with summons and other processes of the
Honorable Court; that defendant JOHN DOE whose real name and
address are at present unknown to plaintiff is hereby joined as party
defendant as he may be the person in whose possession and custody the
personal property subject matter of this suit may be found if the same is
not in the possession of defendant ROGER NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among
others, buying and selling motor vehicles, including hauling trucks and
other heavy equipment;
3. That for the cause of action against defendant ROGER
NAVARRO, it is hereby stated that on August 8, 1997, the said defendant
leased [from] plaintiff a certain motor vehicle which is more particularly
described as follows
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
as evidenced by a LEASE AGREEMENT WITH OPTION TO
PURCHASE entered into by and between KARGO ENTERPRISES,
then represented by its Manager, the aforementioned GLENN O.
GO, and defendant ROGER NAVARRO xxx; that in accordance with the
provisions of the above LEASE AGREEMENT WITH OPTION TO
PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six
(6) post-dated checks each in the amount of SIXTY-SIX THOUSAND
THREE HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33)

which were supposedly in payment of the agreed rentals; that when


the fifth
and
sixth
checks, i.e. PHILIPPINE
BANK
OF
COMMUNICATIONS CAGAYAN DE ORO BRANCH CHECKS NOS.
017112 and 017113, respectively dated January 8, 1998 and February 8,
1998, were presented for payment and/or credit, the same
were dishonored and/or returned by the drawee bank for the common
reason that the current deposit account against which the said checks
were issued did not have sufficient funds to cover the amounts thereof;
that the total amount of the two (2) checks, i.e. the sum of ONE
HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX
& 66/100 PESOS (P132,666.66) therefore represents the principal
liability of defendant ROGER NAVARRO unto plaintiff on the basis of
the provisions of the above LEASE AGREEMENT WITH RIGHT TO
PURCHASE; that demands, written and oral, were made of
defendant ROGER NAVARRO to pay the amount of ONE HUNDRED
THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100
PESOS (P132,666.66), or to return the subject motor vehicle as also
provided for in the LEASE AGREEMENT WITH RIGHT TO
PURCHASE, but said demands were, and still are, in vain to the great
damage and injury of herein plaintiff; xxx
4. That the aforedescribed motor vehicle has not been the subject of any
tax assessment and/or fine pursuant to law, or seized under an execution
or an attachment as against herein plaintiff;
xxx
8. That plaintiff hereby respectfully applies for an order of the Honorable
Court for the immediate delivery of the above-described motor vehicle
from defendants unto plaintiff pending the final determination of this
case on the merits and, for that purpose, there is attached hereto an
affidavit duly executed and bond double the value of the personal
property subject matter hereof to answer for damages and costs which
defendants may suffer in the event that the order for replevin prayed for
may be found out to having not been properly issued.

The second complaint contained essentially the same allegations as the first
complaint, except that the Lease Agreement with Option to Purchase involved is
dated October 1, 1997 and the motor vehicle leased is described as follows:
Make/Type FUSO WITH MOUNTED CRANE

Serial No. FK416K-510528


Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-dated checks,
each for the amount of P100,000.00, to Karen Go in payment of the agreed
rentals; however, the third check was dishonored when presented for payment.[8]
On October 12, 1998[9] and October 14, 1998,[10] the RTC issued writs of replevin
for both cases; as a result, the Sheriff seized the two vehicles and delivered them
to the possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative defense that the two
complaints stated no cause of action, since Karen Go was not a party to the
Lease Agreements with Option to Purchase (collectively, the lease agreements)
the actionable documents on which the complaints were based.
On Navarros motion, both cases were duly consolidated on December 13, 1999.
In its May 8, 2000 order, the RTC dismissed the case on the ground that the
complaints did not state a cause of action.
In response to the motion for reconsideration Karen Go filed dated May 26,
2000, the RTC issued another order dated July 26, 2000 setting aside the order
of dismissal. Acting on the presumption that Glenn Gos leasing business is a
conjugal property, the RTC held that Karen Go had sufficient interest in his
leasing business to file the action against Navarro. However, the RTC held that
Karen Go should have included her husband, Glenn Go, in the complaint based on
Section 4, Rule 3 of the Rules of Court (Rules).[12] Thus, the lower court ordered
Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff.
[11]

When the RTC denied Navarros motion for reconsideration on March 7, 2001,
Navarro filed a petition for certiorari with the CA, essentially contending that the
RTC committed grave abuse of discretion when it reconsidered the dismissal of
the case and directed Karen Go to amend her complaints by including her
husband Glenn Go as co-plaintiff. According to Navarro, a complaint which failed
to state a cause of action could not be converted into one with a cause of action by
mere amendment or supplemental pleading.

On October 16, 2001, the CA denied Navarros petition and affirmed the RTCs
order.[13] The CA also denied Navarros motion for reconsideration in its resolution
of May 29, 2002,[14] leading to the filing of the present petition.
THE PETITION
Navarro alleges that even if the lease agreements were in the name of
Kargo Enterprises, since it did not have the requisite juridical personality to sue,
the actual parties to the agreement are himself and Glenn Go. Since it was Karen
Go who filed the complaints and not Glenn Go, she was not a real party-ininterest and the complaints failed to state a cause of action.
Navarro posits that the RTC erred when it ordered the amendment of the
complaint to include Glenn Go as a co-plaintiff, instead of dismissing the
complaint outright because a complaint which does not state a cause of action
cannot be converted into one with a cause of action by a mere amendment or a
supplemental pleading. In effect, the lower court created a cause of action for
Karen Go when there was none at the time she filed the complaints.
Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff
drastically changed the theory of the complaints, to his great prejudice. Navarro
claims that the lower court gravely abused its discretion when it assumed that the
leased vehicles are part of the conjugal property of Glenn and Karen Go. Since
Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of the
complaint are her paraphernal properties and the RTC gravely erred when it
ordered the inclusion of Glenn Go as a co-plaintiff.
Navarro likewise faults the lower court for setting the trial of the case in the
same order that required Karen Go to amend her complaints, claiming that by
issuing this order, the trial court violated Rule 10 of the Rules.
Even assuming the complaints stated a cause of action against him, Navarro
maintains that the complaints were premature because no prior demand was made
on him to comply with the provisions of the lease agreements before the
complaints for replevin were filed.

Lastly, Navarro posits that since the two writs of replevin were issued based
on flawed complaints, the vehicles were illegally seized from his possession and
should be returned to him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro to
state that she has no real interest in the subject of the complaint, even if the lease
agreements were signed only by her husband, Glenn Go; she is the owner of
Kargo Enterprises and Glenn Go signed the lease agreements merely as the
manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarros
insistence that Kargo Enterprises is Karen Gos paraphernal property is without
basis. Based on the law and jurisprudence on the matter, all property acquired
during the marriage is presumed to be conjugal property. Finally, Karen Go insists
that her complaints sufficiently established a cause of action against Navarro.
Thus, when the RTC ordered her to include her husband as co-plaintiff, this was
merely to comply with the rule that spouses should sue jointly, and was not meant
to cure the complaints lack of cause of action.
THE COURTS RULING
We find the petition devoid of merit.
Karen Go is the real party-in-interest

The 1997 Rules of Civil Procedure requires that every action must be
prosecuted or defended in the name of the real party-in-interest, i.e., 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.[15]
Interestingly, although Navarro admits that Karen Go is the registered owner of
the business name Kargo Enterprises, he still insists that Karen Go is not a real
party-in-interest in the case. According to Navarro, while the lease contracts were
in Kargo Enterprises name, this was merely a trade name without a juridical
personality, so the actual parties to the lease agreements were Navarro and Glenn
Go, to the exclusion of Karen Go.

As a corollary, Navarro contends that the RTC acted with grave abuse of
discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since this in
effect created a cause of action for the complaints when in truth, there was none.

We do not find Navarros arguments persuasive.

The central factor in appreciating the issues presented in this case is the
business name Kargo Enterprises. The name appears in the title of the Complaint
where the plaintiff was identified as KAREN T. GO doing business under the
name KARGO ENTERPRISES, and this identification was repeated in the first
paragraph of the Complaint. Paragraph 2 defined the business KARGO
ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the
defendant leased from plaintiff a certain motor vehicle that was thereafter
described. Significantly, the Complaint specifies and attaches as its integral part
the Lease Agreement that underlies the transaction between the plaintiff and the
defendant. Again, the name KARGO ENTERPRISES entered the picture as this
Lease Agreement provides:

This agreement, made and entered into by and between:

GLENN O. GO, of legal age, married, with post office address at


xxx, herein referred to as the LESSOR-SELLER; representing
KARGO ENTERPRISES as its Manager,

xxx

thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn


O. Go represented. In other words, by the express terms of this Lease Agreement,
Glenn Go did sign the agreement only as the manager of Kargo Enterprises and
the latter is clearly the real party to the lease agreements.

As Navarro correctly points out, Kargo Enterprises is a sole proprietorship,


which is neither a natural person, nor a juridical person, as defined by Article 44
of the Civil Code:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;


(2) Other corporations, institutions and entities for public interest or
purpose, created by law; their personality begins as soon as they
have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or
purpose to which the law grants a juridical personality, separate and
distinct from that of each shareholder, partner or member.

Thus, pursuant to Section 1, Rule 3 of the Rules, [16] Kargo Enterprises


cannot be a party to a civil action. This legal reality leads to the question: who
then is the proper party to file an action based on a contract in the name of Kargo
Enterprises?

We faced a similar question in Juasing Hardware v. Mendoza,[17] where we


said:

Finally, there is no law authorizing sole proprietorships like


petitioner to bring suit in court. The law merely recognizes the existence
of a sole proprietorship as a form of business organization conducted for
profit by a single individual, and requires the proprietor or owner thereof
to secure licenses and permits, register the business name, and pay taxes
to the national government. It does not vest juridical or legal personality
upon the sole proprietorship nor empower it to file or defend an action in
court.

Thus, the complaint in the court below should have been filed in
the name of the owner of Juasing Hardware. The allegation in the
body of the complaint would show that the suit is brought by such
person as proprietor or owner of the business conducted under the
name and style Juasing Hardware. The descriptive words doing
business as Juasing Hardware may be added to the title of the case, as is
customarily done.[18] [Emphasis supplied.]

This conclusion should be read in relation with Section 2, Rule 3 of the


Rules, which states:

SEC. 2. Parties in interest. A real party in interest is the party who stands
to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit. Unless otherwise authorized by law or
these Rules, every action must be prosecuted or defended in the name of
the real party in interest.

As the registered owner of Kargo Enterprises, Karen Go is the party who


will directly benefit from or be injured by a judgment in this case. Thus, contrary
to Navarros contention, Karen Go is the real party-in-interest, and it is legally

incorrect to say that her Complaint does not state a cause of action because her
name did not appear in the Lease Agreement that her husband signed in behalf of
Kargo Enterprises. Whether Glenn Go can legally sign the Lease Agreement in
his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a
question we do not decide, as this is a matter for the trial court to consider in a
trial on the merits.

Glenn Gos Role in the Case


We find it significant that the business name Kargo Enterprises is in the
name of Karen T. Go,[19] who described herself in the Complaints to be a Filipino,
of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and
doing business under the trade name KARGO ENTERPRISES. [20] That Glenn Go
and Karen Go are married to each other is a fact never brought in issue in the
case. Thus, the business name KARGO ENTERPRISES is registered in the name
of a married woman, a fact material to the side issue of whether Kargo
Enterprises and its properties are paraphernal or conjugal properties. To restate the
parties positions, Navarro alleges that Kargo Enterprises is Karen Gos
paraphernal property, emphasizing the fact that the business is registered solely in
Karen Gos name. On the other hand, Karen Go contends that while the business is
registered in her name, it is in fact part of their conjugal property.
The registration of the trade name in the name of one person a woman does
not necessarily lead to the conclusion that the trade name as a property is hers
alone, particularly when the woman is married. By law, all property acquired
during the marriage, whether the acquisition appears to have been made,
contracted or registered in the name of one or both spouses, is presumed to be
conjugal unless the contrary is proved.[21] Our examination of the records of the
case does not show any proof that Kargo Enterprises and the properties or
contracts in its name are conjugal. If at all, only the bare allegation of Navarro to
this effect exists in the records of the case. As we emphasized in Castro v. Miat:[22]

Petitioners also overlook Article 160 of the New Civil Code. It


provides that all property of the marriage is presumed to be conjugal
partnership, unless it be prove[n] that it pertains exclusively to the
husband or to the wife. This article does not require proof that the
property was acquired with funds of the partnership. The
presumption applies even when the manner in which the property was
acquired does not appear.[23] [Emphasis supplied.]

Thus, for purposes solely of this case and of resolving the issue of whether Kargo
Enterprises as a sole proprietorship is conjugal or paraphernal property, we hold
that it is conjugal property.
Article 124 of the Family Code, on the administration of the conjugal
property, provides:
Art. 124. The administration and enjoyment of the conjugal
partnership property shall belong to both spouses jointly. In case
of disagreement, the husbands decision shall prevail, subject to recourse
to the court by the wife for proper remedy, which must be availed of
within five years from the date of the contract implementing such
decision.
xxx

This provision, by its terms, allows either Karen or Glenn Go to speak and
act with authority in managing their conjugal property, i.e., Kargo Enterprises. No
need exists, therefore, for one to obtain the consent of the other before performing
an act of administration or any act that does not dispose of or encumber their
conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed
by the rules on the contract of partnership in all that is not in conflict with what is
expressly determined in this Chapter or by the spouses in their marriage
settlements.In other words, the property relations of the husband and wife shall be
governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family
Code and, suppletorily, by the spouses marriage settlement and by the rules on

partnership under the Civil Code. In the absence of any evidence of a marriage
settlement between the spouses Go, we look at the Civil Code provision on
partnership for guidance.
A rule on partnership applicable to the spouses circumstances is Article
1811 of the Civil Code, which states:
Art. 1811. A partner is a co-owner with the other partners of specific
partnership property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to any agreement
between the partners, has an equal right with his partners to
possess specific partnership property for partnership purposes; xxx

Under this provision, Glenn and Karen Go are effectively co-owners of


Kargo Enterprises and the properties registered under this name; hence, both have
an equal right to seek possession of these properties. Applying Article 484 of the
Civil Code, which states that in default of contracts, or special provisions, coownership shall be governed by the provisions of this Title, we find further
support in Article 487 of the Civil Code that allows any of the co-owners to bring
an action in ejectment with respect to the co-owned property.
While ejectment is normally associated with actions involving real
property, we find that this rule can be applied to the circumstances of the present
case, following our ruling in Carandang v. Heirs of De Guzman.[24] In this case,
one spouse filed an action for the recovery of credit, a personal property
considered conjugal property, without including the other spouse in the action. In
resolving the issue of whether the other spouse was required to be included as a
co-plaintiff in the action for the recovery of the credit, we said:
Milagros de Guzman, being presumed to be a co-owner of the
credits allegedly extended to the spouses Carandang, seems to be either
an indispensable or a necessary party. If she is an indispensable party,
dismissal would be proper. If she is merely a necessary party, dismissal

is not warranted, whether or not there was an order for her inclusion in
the complaint pursuant to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed
by the rules on the contract of partnership in all that is not
in conflict with what is expressly determined in this
Chapter or by the spouses in their marriage settlements.
This provision is practically the same as the Civil Code provision it
superseded:
Art. 147. The conjugal partnership shall be governed
by the rules on the contract of partnership in all that is not
in conflict with what is expressly determined in this
Chapter.
In this connection, Article 1811 of the Civil Code provides that
[a] partner is a co-owner with the other partners of specific partnership
property. Taken with the presumption of the conjugal nature of the funds
used to finance the four checks used to pay for petitioners stock
subscriptions, and with the presumption that the credits themselves are
part of conjugal funds, Article 1811 makes Quirino and Milagros de
Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de
Guzman may separately bring an action for the recovery thereof. In the
fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we
held that, in a co-ownership, co-owners may bring actions for the
recovery of co-owned property without the necessity of joining all
the other co-owners as co-plaintiffs because the suit is presumed to
have been filed for the benefit of his co-owners. In the latter case and
in that of De Guia v. Court of Appeals, we also held thatArticle 487 of
the Civil Code, which provides that any of the co-owners may bring an
action for ejectment, covers all kinds of action for the recovery of
possession.
In sum, in suits to recover properties, all co-owners are real
parties in interest. However, pursuant to Article 487 of the Civil Code
and relevant jurisprudence, any one of them may bring an action, any

kind of action, for the recovery of co-owned properties. Therefore,only


one of the co-owners, namely the co-owner who filed the suit for the
recovery of the co-owned property, is an indispensable party
thereto. The other co-owners are not indispensable parties. They are
not even necessary parties, for a complete relief can be accorded in the
suit even without their participation, since the suit is presumed to have
been filed for the benefit of all co-owners. [25] [Emphasis supplied.]

Under this ruling, either of the spouses Go may bring an action against
Navarro to recover possession of the Kargo Enterprises-leased vehicles which
they co-own. This conclusion is consistent with Article 124 of the Family Code,
supporting as it does the position that either spouse may act on behalf of the
conjugal partnership, so long as they do not dispose of or encumber the property
in question without the other spouses consent.
On this basis, we hold that since Glenn Go is not strictly an indispensable
party in the action to recover possession of the leased vehicles, he only needs to
be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the
Rules, which states:
Section 4. Spouses as parties. Husband and wife shall sue or be sued
jointly, except as provided by law.

Non-joinder of indispensable parties not


ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action, we
have held in a number of cases[26] that the misjoinder or non-joinder of
indispensable parties in a complaint is not a ground for dismissal of action. As we
stated inMacababbad v. Masirag:[27]
Rule 3, Section 11 of the Rules of Court provides that neither
misjoinder nor nonjoinder of parties is a ground for the dismissal of an
action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither
misjoinder nor non-joinder of parties is ground for

dismissal of an action. Parties may be dropped or added


by order of the court on motion of any party or on its own
initiative at any stage of the action and on such terms as
are just. Any claim against a misjoined party may be
severed and proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy
when a party is left out is to implead the indispensable party at any
stage of the action. The court, either motu proprio or upon the motion
of a party, may order the inclusion of the indispensable party or give the
plaintiff opportunity to amend his complaint in order to
include indispensable parties. If the plaintiff to whom the order to
include the indispensable party is directed refuses to comply with the
order of the court, the complaint may be dismissed upon motion of the
defendant or upon the court's own motion. Only upon unjustified failure
or refusal to obey the order to include or to amend is the action
dismissed.

In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to
join her husband as a party plaintiff is fully in order.
Demand not required prior
to filing of replevin action
In arguing that prior demand is required before an action for a writ of
replevin is filed, Navarro apparently likens a replevin action to an unlawful
detainer.
For a writ of replevin to issue, all that the applicant must do is to file an affidavit
and bond, pursuant to Section 2, Rule 60 of the Rules, which states:
Sec. 2. Affidavit and bond.
The applicant must show by his own affidavit or that of some other
person who personally knows the facts:
(a) That the applicant is the owner of the property claimed,
particularly describing it, or is entitled to the possession thereof;

(b) That the property is wrongfully detained by the adverse party,


alleging the cause of detention thereof according to the best of his
knowledge, information, and belief;
(c) That the property has not been distrained or taken for a tax
assessment or a fine pursuant to law, or seized under a writ of
execution or preliminary attachment, or otherwise placed
under custodia legis, or if so seized, that it is exempt from such
seizure or custody; and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the adverse party in
double the value of the property as stated in the affidavit
aforementioned, for the return of the property to the adverse party if
such return be adjudged, and for the payment to the adverse party of
such sum as he may recover from the applicant in the action.

We see nothing in these provisions which requires the applicant to make a prior
demand on the possessor of the property before he can file an action for a writ of
replevin. Thus, prior demand is not a condition precedent to an action for a writ of
replevin.
More importantly, Navarro is no longer in the position to claim that a prior
demand is necessary, as he has already admitted in his Answers that he had
received the letters that Karen Go sent him, demanding that he either pay his
unpaid obligations or return the leased motor vehicles. Navarros position that a
demand is necessary and has not been made is therefore totally unmeritorious.
WHEREFORE, premises considered, we DENY the petition for review
for lack of merit. Costs against petitioner Roger V. Navarro.
SO ORDERED.
G.R. No. 182963

June 3, 2013

SPOUSES DEO AGNER and MARICON AGNER, Petitioners,


vs.
BPI FAMILY SAVINGS BANK, INC., Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari assailing the April 30, 2007 Decision 1 and May 19, 2008
Resolution2of the Court of Appeals in CAG.R. CV No. 86021, which affirmed the August 11, 2005
Decision3 of the Regional Trial Court, Branch 33, Manila City.
On February 15, 2001, petitioners spouses Deo Agner and Maricon Agner executed a Promissory
Note with Chattel Mortgage in favor of Citimotors, Inc. The contract provides, among others, that: for
receiving the amount of Php834, 768.00, petitioners shall pay Php 17,391.00 every 15th day of each
succeeding month until fully paid; the loan is secured by a 2001 Mitsubishi Adventure Super Sport;
and an interest of 6% per month shall be imposed for failure to pay each installment on or before the
stated due date.4
On the same day, Citimotors, Inc. assigned all its rights, title and interests in the Promissory Note
with Chattel Mortgage to ABN AMRO Savings Bank, Inc. (ABN AMRO), which, on May 31, 2002,
likewise assigned the same to respondent BPI Family Savings Bank, Inc. 5
For failure to pay four successive installments from May 15, 2002 to August 15, 2002, respondent,
through counsel, sent to petitioners a demand letter dated August 29, 2002, declaring the entire
obligation as due and demandable and requiring to pay Php576,664.04, or surrender the mortgaged
vehicle immediately upon receiving the letter.6 As the demand was left unheeded, respondent filed
on October 4, 2002 an action for Replevin and Damages before the Manila Regional Trial Court
(RTC).
A writ of replevin was issued.7 Despite this, the subject vehicle was not seized.8 Trial on the merits
ensued. On August 11, 2005, the Manila RTC Br. 33 ruled for the respondent and ordered petitioners
to jointly and severally pay the amount of Php576,664.04 plus interest at the rate of 72% per annum
from August 20, 2002 until fully paid, and the costs of suit.
Petitioners appealed the decision to the Court of Appeals (CA), but the CA affirmed the lower courts
decision and, subsequently, denied the motion for reconsideration; hence, this petition.
Before this Court, petitioners argue that: (1) respondent has no cause of action, because the Deed
of Assignment executed in its favor did not specifically mention ABN AMROs account receivable
from petitioners; (2) petitioners cannot be considered to have defaulted in payment for lack of
competent proof that they received the demand letter; and (3) respondents remedy of resorting to
both actions of replevin and collection of sum of money is contrary to the provision of Article 1484 9 of
the Civil Code and the Elisco Tool Manufacturing Corporation v. Court of Appeals 10 ruling.
The contentions are untenable.
With respect to the first issue, it would be sufficient to state that the matter surrounding the Deed of
Assignment had already been considered by the trial court and the CA. Likewise, it is an issue of fact
that is not a proper subject of a petition for review under Rule 45. An issue is factual when the doubt
or difference arises as to the truth or falsehood of alleged facts, or when the query invites calibration

of the whole evidence, considering mainly the credibility of witnesses, existence and relevancy of
specific surrounding circumstances, their relation to each other and to the whole, and the
probabilities of the situation.11 Time and again, We stress that this Court is not a trier of facts and
generally does not weigh anew evidence which lower courts have passed upon.
As to the second issue, records bear that both verbal and written demands were in fact made by
respondent prior to the institution of the case against petitioners. 12 Even assuming, for arguments
sake, that no demand letter was sent by respondent, there is really no need for it because petitioners
legally waived the necessity of notice or demand in the Promissory Note with Chattel Mortgage,
which they voluntarily and knowingly signed in favor of respondents predecessor-in-interest. Said
contract expressly stipulates:
In case of my/our failure to pay when due and payable, any sum which I/We are obliged to pay
under this note and/or any other obligation which I/We or any of us may now or in the future owe to
the holder of this note or to any other party whether as principal or guarantor x x x then the entire
sum outstanding under this note shall, without prior notice or demand, immediately become due and
payable. (Emphasis and underscoring supplied)
A provision on waiver of notice or demand has been recognized as legal and valid in Bank of the
Philippine Islands v. Court of Appeals,13 wherein We held:
The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time the
obligor demands the fulfillment of the obligation from the obligee. However, the law expressly
provides that demand is not necessary under certain circumstances, and one of these
circumstances is when the parties expressly waive demand. Hence, since the co-signors expressly
waived demand in the promissory notes, demand was unnecessary for them to be in default. 14
Further, the Court even ruled in Navarro v. Escobido15 that prior demand is not a condition precedent
to an action for a writ of replevin, since there is nothing in Section 2, Rule 60 of the Rules of Court
that requires the applicant to make a demand on the possessor of the property before an action for a
writ of replevin could be filed.
Also, petitioners representation that they have not received a demand letter is completely
inconsequential as the mere act of sending it would suffice. Again, We look into the Promissory Note
with Chattel Mortgage, which provides:
All correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or
notifications of any judicial or extrajudicial action shall be sent to the MORTGAGOR at the address
indicated on this promissory note with chattel mortgage or at the address that may hereafter be
given in writing by the MORTGAGOR to the MORTGAGEE or his/its assignee. The mere act of
sending any correspondence by mail or by personal delivery to the said address shall be valid and
effective notice to the mortgagor for all legal purposes and the fact that any communication is not
actually received by the MORTGAGOR or that it has been returned unclaimed to the MORTGAGEE
or that no person was found at the address given, or that the address is fictitious or cannot be
located shall not excuse or relieve the MORTGAGOR from the effects of such notice. 16 (Emphasis
and underscoring supplied)
The Court cannot yield to petitioners denial in receiving respondents demand letter. To note, their
postal address evidently remained unchanged from the time they executed the Promissory Note with
Chattel Mortgage up to time the case was filed against them. Thus, the presumption that "a letter
duly directed and mailed was received in the regular course of the mail" 17 stands in the absence of
satisfactory proof to the contrary.

Petitioners cannot find succour from Ting v. Court of Appeals18 simply because it pertained to
violation of Batas Pambansa Blg. 22 or the Bouncing Checks Law. As a higher quantum of proof
that is, proof beyond reasonable doubt is required in view of the criminal nature of the case, We
found insufficient the mere presentation of a copy of the demand letter allegedly sent through
registered mail and its corresponding registry receipt as proof of receiving the notice of dishonor.
Perusing over the records, what is clear is that petitioners did not take advantage of all the
opportunities to present their evidence in the proceedings before the courts below. They miserably
failed to produce the original cash deposit slips proving payment of the monthly amortizations in
question. Not even a photocopy of the alleged proof of payment was appended to their Answer or
shown during the trial. Neither have they demonstrated any written requests to respondent to furnish
them with official receipts or a statement of account. Worse, petitioners were not able to make a
formal offer of evidence considering that they have not marked any documentary evidence during
the presentation of Deo Agners testimony.19
Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of proving it; the
burden rests on the defendant to prove payment, rather than on the plaintiff to prove nonpayment.20 When the creditor is in possession of the document of credit, proof of non-payment is not
needed for it is presumed.21 Respondent's possession of the Promissory Note with Chattel Mortgage
strongly buttresses its claim that the obligation has not been extinguished. As held in Bank of the
Philippine Islands v. Spouses Royeca:22
x x x The creditor's possession of the evidence of debt is proof that the debt has not been
discharged by payment. A promissory note in the hands of the creditor is a proof of indebtedness
rather than proof of payment. In an action for replevin by a mortgagee, it is prima facie evidence that
the promissory note has not been paid. Likewise, an uncanceled mortgage in the possession of the
mortgagee gives rise to the presumption that the mortgage debt is unpaid. 23
Indeed, when the existence of a debt is fully established by the evidence contained in the record, the
burden of proving that it has been extinguished by payment devolves upon the debtor who offers
such defense to the claim of the creditor.24 The debtor has the burden of showing with legal certainty
that the obligation has been discharged by payment.25
Lastly, there is no violation of Article 1484 of the Civil Code and the Courts decision in Elisco Tool
Manufacturing Corporation v. Court of Appeals.26
In Elisco, petitioner's complaint contained the following prayer:
WHEREFORE, plaintiffs pray that judgment be rendered as follows:
ON THE FIRST CAUSE OF ACTION
Ordering defendant Rolando Lantan to pay the plaintiff the sum of P39,054.86 plus legal interest
from the date of demand until the whole obligation is fully paid;
ON THE SECOND CAUSE OF ACTION
To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more particularly
described in paragraph 3 of the Complaint, from defendant Rolando Lantan and/or defendants Rina
Lantan, John Doe, Susan Doe and other person or persons in whose possession the said motor
vehicle may be found, complete with accessories and equipment, and direct deliver thereof to

plaintiff in accordance with law, and after due hearing to confirm said seizure and plaintiff's
possession over the same;
PRAYER COMMON TO ALL CAUSES OF ACTION
1. Ordering the defendant Rolando Lantan to pay the plaintiff an amount equivalent to
twenty-five percent (25%) of his outstanding obligation, for and as attorney's fees;
2. Ordering defendants to pay the cost or expenses of collection, repossession, bonding fees
and other incidental expenses to be proved during the trial; and
3. Ordering defendants to pay the costs of suit.
Plaintiff also prays for such further reliefs as this Honorable Court may deem just and equitable
under the premises.27
The Court therein ruled:
The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the
exercise of the others. This limitation applies to contracts purporting to be leases of personal
property with option to buy by virtue of Art. 1485. The condition that the lessor has deprived the
lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in
this case by the filing by petitioner of the complaint for replevin to recover possession of movable
property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle
on August 6, 1986 and thereby deprived private respondents of its use. The car was not returned to
private respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance by
the Court of Appeals of a writ of execution.
Petitioner prayed that private respondents be made to pay the sum of P39,054.86, the amount that
they were supposed to pay as of May 1986, plus interest at the legal rate. At the same time, it
prayed for the issuance of a writ of replevin or the delivery to it of the motor vehicle "complete
with accessories and equipment." In the event the car could not be delivered to petitioner, it was
prayed that private respondent Rolando Lantan be made to pay petitioner the amount of P60,000.00,
the "estimated actual value" of the car, "plus accrued monthly rentals thereof with interests at the
rate of fourteen percent (14%) per annum until fully paid." This prayer of course cannot be granted,
even assuming that private respondents have defaulted in the payment of their obligation. This led
the trial court to say that petitioner wanted to eat its cake and have it too. 28
In contrast, respondent in this case prayed:
(a) Before trial, and upon filing and approval of the bond, to forthwith issue a Writ of Replevin
ordering the seizure of the motor vehicle above-described, complete with all its accessories
and equipments, together with the Registration Certificate thereof, and direct the delivery
thereof to plaintiff in accordance with law and after due hearing, to confirm the said seizure;
(b) Or, in the event that manual delivery of the said motor vehicle cannot be effected to
render judgment in favor of plaintiff and against defendant(s) ordering them to pay to plaintiff,
jointly and severally, the sum ofP576,664.04 plus interest and/or late payment charges
thereon at the rate of 72% per annum from August 20, 2002 until fully paid;

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


(1) the sum of P297,857.54 as attorneys fees, liquidated damages, bonding fees and
other expenses incurred in the seizure of the said motor vehicle; and
(2) the costs of suit.
Plaintiff further prays for such other relief as this Honorable Court may deem just and equitable in
the premises.29
Compared with Elisco, the vehicle subject matter of this case was never recovered and delivered to
respondent despite the issuance of a writ of replevin. As there was no seizure that transpired, it
cannot be said that petitioners were deprived of the use and enjoyment of the mortgaged vehicle or
that respondent pursued, commenced or concluded its actual foreclosure. The trial court, therefore,
rightfully granted the alternative prayer for sum of money, which is equivalent to the remedy of
"exacting fulfillment of the obligation." Certainly, there is no double recovery or unjust enrichment 30 to
speak of.
1wphi1

All the foregoing notwithstanding, We are of the opinion that the interest of 6% per month should be
equitably reduced to one percent (1%) per month or twelve percent (12%) per annum, to be
reckoned from May 16, 2002 until full payment and with the remaining outstanding balance of their
car loan as of May 15, 2002 as the base amount.
Settled is the principle which this Court has affirmed in a number of cases that stipulated interest
rates of three percent (3%) per month and higher are excessive, iniquitous, unconscionable, and
exorbitant.31 While Central Bank Circular No. 905-82, which took effect on January 1, 1983,
effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of
maturity, nothing in the said circular could possibly be read as granting carte blanche authority to
lenders to raise interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets.32 Since the stipulation on the interest rate is void for being contrary to
morals, if not against the law, it is as if there was no express contract on said interest rate; thus, the
interest rate may be reduced as reason and equity demand. 33
WHEREFORE, the petition is DENIED and the Court AFFIRMS WITH MODIFICATION the April 30,
2007 Decision and May 19, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 86021.
Petitioners spouses Deo Agner and Maricon Agner are ORDERED to pay, jointly and severally,
respondent BPI Family Savings Bank, Inc. ( 1) the remaining outstanding balance of their auto loan
obligation as of May 15, 2002 with interest at one percent ( 1 o/o) per month from May 16, 2002 until
fully paid; and (2) costs of suit.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
WE CONCUR:

SUPPORT

[G.R. No. 127578. February 15, 1999]


MANUEL DE ASIS, petitioner, vs. COURT OF APPEALS, HON. JAIME T.
HAMOY, Branch 130, RTC, Kalookan City and GLEN CAMIL
ANDRES DE ASIS represented by her mother/guardian VIRCEL D.
ANDRES, respondents.
DECISION
PURISIMA, J.:

Petition for certiorari under Rule 65 of the Revised Rules of Court seeking to nullify the
decision of the Court of Appeals which affirmed the trial courts Orders, dated November 25,
1993 and February 4, 1994, respectively, denying petitioners Motion to Dismiss the Complaint in
Civil Case No. C-16107, entitled Glen Camil Andres de Asis, etc. vs. Manuel de Asis, and the
motion for reconsideration.
The pertinent facts leading to the filing of the petition at bar are, as follows:
On October 14, 1988, Vircel D. Andres, (the herein private respondent) in her capacity as
the legal guardian of the minor, Glen Camil Andres de Asis, brought an action for maintenance
and support against Manuel de Asis, docketed as Civil Case No. Q-88-935 before the Regional
Trial Court of Quezon City, Branch 94, alleging that the defendant Manuel de Asis (the
petitioner here) is the father of subject minor Glen Camil Andres de Asis, and the former refused
and/or failed to provide for the maintenance of the latter, despite repeated demands.
In his Answer, petitioner denied his paternity of the said minor and theorized that he cannot
therefore be required to provide support for him.
On July 4, 1989, private respondent Vircel D. Andres, through counsel, sent in a
manifestation the pertinent portion of which, reads;

1. That in his proposed Amended Answer, defendant (herein petitioner) has made
a judicial admission/declaration that 1) defendant denies that the said minor
child (Glen Camil) is his child; 2) he (petitioner) has no obligation to the plaintiff
Glen Camil xxx.
2. That with the aforesaid judicial admissions/declarations by the defendant, it
seems futile and a useless exercise to claim support from said defendant.

3. That under the foregoing circumstances it would be more practical that plaintiff
withdraws the complaint against the defendant subject to the condition that the
defendant should not pursue his counterclaim in the above-entitled case, xxx. [1]
By virtue of the said manifestation, both the plaintiff and the defendant agreed to move for
the dismissal of the case. Acting thereupon, the Regional Trial Court a quo issued the following
Order of August 8, 1989, dismissing Civil Case No. Q-88-935 with prejudice, to wit:

Acting on the manifestation of Atty. Romualdo C. delos Santos, counsel for the
defendant, that counsel for the plaintiff Atty. Ismael J. Andres has no objection that
this case be withdrawn provided that the defendant will withdraw the counterclaim, as
prayed for, let the case be dismissed with prejudice.
SO ORDERED.[2]
On September 7, 1995, another Complaint for maintenance and support was brought against
Manuel A. de Asis, this time in the name of Glen Camil Andres de Asis, represented by her legal
guardian/mother, Vircel D. Andres. Docketed as Civil Case No. C-16107 before Branch 130 of
the Regional Trial Court of Kalookan, the said Complaint prayed, thus:

WHEREFORE, premises considered, it is respectfully prayed that judgment be


rendered ordering defendant:
1. To pay plaintiff the sum of not less than P2,000.00 per month for every month since
June 1, 1987 as support in arrears which defendant failed to provide plaintiff shortly
after her birth in June 1987 up to the present;
2. To give plaintiff a monthly allowance of P5,000.00 to be paid in advance on or
before the 5th of each and every month;
3. To give plaintiff by way of support pendente lite, a monthly allowance of P5,000.00
per month, the first monthly allowance to start retroactively from the first day of this
month and the subsequent ones to be paid in advance on or before the 5th of each
succeeding month;
4. To pay the costs of suit.
Plaintiff prays for such other relief just and equitable under the premises. [3]
On October 8, 1993, petitioner moved to dismiss the Complaint on the ground of res
judicata, alleging that Civil Case C-16107 is barred by the prior judgment which dismissed with
prejudice Civil Case Q-88-935.

In the Order dated November 25, 1993 denying subject motion to dismiss, the trial court
ruled that res judicata is inapplicable in an action for support for the reason that renunciation or
waiver of future support is prohibited by law. Petitioners motion for reconsideration of the said
Order met the same fate. It was likewise denied.
Petitioner filed with the Court of Appeals a Petition for Certiorari. But on June 7, 1996, the
Court of Appeals found the said Petition devoid of merit and dismissed the same.
Undaunted, petitioner found his way to this court via the present petition, posing the
question whether or not the public respondent acted with grave abuse of discretion amounting to
lack or excess of jurisdiction in upholding the denial of the motion to dismiss by the trial court,
and holding that an action for support cannot be barred by res judicata.
To buttress his submission, petitioner invokes the previous dismissal of the Complaint for
maintenance and support, Civil Case Q-88-935, filed by the mother and guardian of the minor,
Glen Camil Andres de Asis, (the herein private respondent). In said case, the complainant
manifested that because of the defendants judicial declaration denying that he is the father of
subject minor child, it was futile and a useless exercise to claim support from defendant. Because
of such manifestation, and defendants assurance that he would not pursue his counterclaim
anymore, the parties mutually agreed to move for the dismissal of the complaint. The motion was
granted by the Quezon City Regional Trial Court, which then dismissed the case with prejudice.
Petitioner contends that the aforecited manifestation, in effect, admitted the lack of filiation
between him and the minor child, which admission binds the complainant, and since the
obligation to give support is based on the existence of paternity and filiation between the child
and the putative parent, the lack thereof negates the right to claim for support. Thus, petitioner
maintains that the dismissal of the Complaint by the lower court on the basis of the said
manifestation bars the present action for support, especially so because the order of the trial court
explicitly stated that the dismissal of the case was with prejudice.
The petition is not impressed with merit.
The right to receive support can neither be renounced nor transmitted to a third
person. Article 301 of the Civil Code, the law in point, reads:

Art. 301. The right to receive support cannot be renounced, nor can it be transmitted
to a third person. Neither can it be compensated with what the recipient owes the
obligor. xxx
Furthermore, future support cannot be the subject of a compromise.
Article 2035, ibid, provides, that:

No compromise upon the following questions shall be valid:


(1) The civil status of persons;

(2) The validity of a marriage or legal separation;


(3) Any ground for legal separation
(4) Future support;
(5) The jurisdiction of courts;
(6) Future legitime.
The raison d etre behind the proscription against renunciation, transmission and/or
compromise of the right to support is stated, thus:

The right to support being founded upon the need of the recipient to maintain his
existence, he is not entitled to renounce or transfer the right for this would mean
sanctioning the voluntary giving up of life itself. The right to life cannot be
renounced; hence, support, which is the means to attain the former, cannot be
renounced.
xxx

To allow renunciation or transmission or compensation of the family right of a person


to support is virtually to allow either suicide or the conversion of the recipient to a
public burden. This is contrary to public policy.[4]
In the case at bar, respondent minors mother, who was the plaintiff in the first case,
manifested that she was withdrawing the case as it seemed futile to claim support from petitioner
who denied his paternity over the child. Since the right to claim for support is predicated on the
existence of filiation between the minor child and the putative parent, petitioner would like us to
believe that such manifestation admitting the futility of claiming support from him puts the issue
to rest and bars any and all future complaint for support.
The manifestation sent in by respondents mother in the first case, which acknowledged that
it would be useless to pursue its complaint for support, amounted to renunciation as it severed
the vinculum that gives the minor, Glen Camil, the right to claim support from his putative
parent, the petitioner. Furthermore, the agreement entered into between the petitioner and
respondents mother for the dismissal of the complaint for maintenance and support conditioned
upon the dismissal of the counterclaim is in the nature of a compromise which cannot be
countenanced. It violates the prohibition against any compromise of the right to support.

Thus, the admission made by counsel for the wife of the facts alleged in a motion of
the husband, in which the latter prayed that his obligation to support be extinguished
cannot be considered as an assent to the prayer, and much less, as a waiver of the
right to claim for support.[5]

It is true that in order to claim support, filiation and/or paternity must first be shown between
the claimant and the parent. However, paternity and filiation or the lack of the same is a
relationship that must be judicially established and it is for the court to declare its existence or
absence. It cannot be left to the will or agreement of the parties.

The civil status of a son having been denied, and this civil status, from which the right
to support is derived being in issue, it is apparent that no effect can be given to such a
claim until an authoritative declaration has been made as to the existence of the
cause.[6]
Although in the case under scrutiny, the admission may be binding upon the respondent,
such an admission is at most evidentiary and does not conclusively establish the lack of filiation.
Neither are we persuaded by petitioners theory that the dismissal with prejudice of Civil
Case Q-88-935 has the effect of res judicata on the subsequent case for support. The case
of Advincula vs. Advincula[7] comes to the fore. In Advincula, the minor, Manuela Advincula,
instituted a case for acknowledgment and support against her putative father, Manuel
Advincula. On motion of both parties and for the reason that the plaintiff has lost interest and is
no longer interested in continuing the case against the defendant and has no further evidence to
introduce in support of the complaint, the case was dismissed. Thereafter, a similar case was
instituted by Manuela, which the defendant moved to dismiss, theorizing that the dismissal of the
first case precluded the filing of the second case.
In disposing such case, this Court ruled, thus:

The new Civil Code provides that the allowance for support is provisional because the
amount may be increased or decreased depending upon the means of the giver and
the needs of the recipient (Art. 297); and that the right to receive support cannot be
renounced nor can it be transmitted to a third person; neither can it be compensated
with what the recipient owes the obligator (Art. 301). Furthermore, the right to
support can not be waived or transferred to third parties and future support cannot be
the subject of compromise (Art. 2035; Coral v. Gallego, 38 O.G. 3135, cited in IV
Civil Code by Padilla, p. 648, 1956 Ed.). This being true, it is indisputable that the
present action for support can be brought, notwithstanding the fact the previous case
filed against the same defendant was dismissed. And it also appearing that the
dismissal of Civil Case No. 3553, was not an adjudication upon the merits, as
heretofore shown, the right of herein plaintiff-appellant to reiterate her suit for
support and acknowledgment is available, as her needs arise. Once the needs of
plaintiff arise, she has the right to bring an action for support, for it is only then that
her cause of action accrues.xxx
xxx

It appears that the former dismissal was predicated upon a


compromise. Acknowledgment, affecting as it does the civil status of persons and
future support, cannot be the subject of compromise. (pars. 1 & 4, Art. 2035, Civil
Code). Hence, the first dismissal cannot have force and effect and can not bar the
filing of another action, asking for the same relief against the same defendant.
(emphasis supplied)
Conformably, notwithstanding the dismissal of Civil Case 88-935 and the lower courts
pronouncement that such dismissal was with prejudice, the second action for support may still
prosper.
WHEREFORE, the petition under consideration is hereby DISMISSED and the decision of
the Court of Appeals AFFIRMED. No pronouncement as to costs.
SO ORDERED.

[G.R. No. 128157. September 29, 1999]


PEOPLE
OF THE
PHILIPPINES, plaintiff-appellee,
MANAHAN, alias Maning, defendant-appellant.

vs. MANUEL

DECISION
BELLOSILLO, J.:

MANUEL MANAHAN alias Maning was found guilty of rape and sentenced to death by
the court a quo. He was also ordered to indemnify the victim P50,000.00 as moral damages, pay
the costs, and acknowledge and support the offspring of his indiscretion. [1] This case is now
before us on automatic review.
Complainant Teresita Tibigar, 16 years old, worked at the Espiritu Canteen in Dagupan
City. As a stay-in waitress she slept at the second floor of the canteen. Manuel Manahan is the
brother-in-law of Josefina Espiritu, owner of the canteen. His wife Primadonna is the sister of
Josefina Espiritu. Manuel and Primadonna temporarily reside at the canteen together with the
family of Josefina as Primadonna was then pregnant.
On 5 January 1995, at about two oclock in the morning, Teresita who was asleep was
suddenly awakened when she felt someone beside her. Upon opening her eyes she saw accused
Manuel Manahan as he immediately placed himself on top of her. She tried to shout but the
accused covered her mouth. He then forcibly spread her legs. She cried; she pushed and kicked
him many times in an effort to free herself but the accused proved too strong for her. Soon
enough she became weary and exhausted. Her condition enabled the accused to pursue his

immoral intentions. He lifted her skirt, removed her panty and then inserted his penis into her
vagina. He succeeded in having carnal knowledge of her. After satisfying his lust, the accused
warned the victim not to report the incident to anyone and threatened her that should she squeal
he would kill her and her family.Thereafter, he left her. She was terribly afraid and shaken and
could do nothing but cry until dawn.[2]
Within the month Teresita left the canteen and returned home to her parents in Mangaldan,
Pangasinan. The sexual encounter resulted in her pregnancy. When her parents discovered it and
learned of her story, they brought her to the hospital where she was examined by Dr. Casimero
Bacugan. From there they proceeded to the police station where a statement of Teresita was
taken by SPO1 Isagani L. Ico. Police Chief Inspector Wendy G. Rosario later endorsed the
complaining witness to the Office of the City Prosecutor of Dagupan City for appropriate legal
action.Thereafter, with the assistance of her mother, Teresita filed a criminal complaint accusing
Manuel Manahan alias Maning of rape.[3]
Meanwhile, on 2 October 1995, she gave birth to a healthy baby girl and christened her
Melanie Tibigar.
Accused Manuel Manahan has a different story. He denied having raped Teresita. He
claimed they were lovers. According to him, he met Teresita at the Espiritu Canteen in August
1994 and began courting her. Subsequently, they became sweethearts and their first sexual
intercourse occurred on 27 December 1994 followed by another on 28 December 1994. In the
first week of January 1995 they again had a tryst in the house of Teresitas Aunt Fely, their last
intercourse being on 7 May 1995 in the house of one Maura Manahan-Quinto, his sister.
Manuel further alleged that even after Teresita left the Espiritu Canteen there were several
occasions when they saw each other in front of the DBP in Dagupan City. In one of those
assignations Teresita allegedly told him that she wanted to have the child aborted as her father
might kill her if he discovered she was pregnant, but accused did not agree.
In September 1995, the accused was arrested in connection with the case filed by Teresita
but was later released. We fail to discern from the records the reason for his release. But on 15
March 1996 he was again arrested and detained at the Dagupan City Jail where Estrella, Teresitas
mother, supposedly visited him at least five (5) times to ask about his condition and whether he
was tortured in detention. The accused maintained that Estrella was trying to conceal Teresitas
condition from her father. She purportedly proposed to the accused to sell his land and give the
proceeds to Teresitas father as a form of settlement.
The accused assails in his appeal brief the credibility of the complaining witness. He asserts
that the prosecution failed to prove his guilt beyond reasonable doubt and reiterates that he and
the complaining witness were lovers, and that their sexual congress was consensual.
We have painstakingly reviewed the records and we sustain the conviction of the
accused. The prosecution for rape almost always involves sharply contrasting and irreconcilable
declarations of the victim and the accused. At the heart of almost all rape cases is the issue of
credibility of the witnesses, to be resolved primarily by the trial court which is in a better

position to decide the question, having heard the witnesses and observed their deportment and
manner of testifying. Accordingly, its findings are entitled to the highest degree of respect and
will not be disturbed on appeal in the absence of any showing that the trial court overlooked,
misunderstood or misapplied some facts or circumstances of weight or substance which would
otherwise affect the result of the case. The exception is nowhere perceivable in the present case.
The accused banks heavily on his "sweetheart theory," a usual defense in rape cases, and
vigorously maintains that the sexual intercourse between him and Teresita was but the
culmination of a mutual passion. But we find otherwise primarily because the accused miserably
failed to prove that he and the complaining witness indeed had a romantic liaison as this claim
was categorically denied by her. Moreover, there was no substantial evidence, e.g., love notes,
mementos or pictures, presented to support it.
The testimony of defense witnesses Nelson de Venecia and Arvin Sereban that they used to
see Manuel and Teresita together in front of the DBP in Dagupan City, even if true, did not
confirm that there was indeed an amorous relationship between the two. [4] Likewise, the
testimony of Isabel Remandaban, another defense witness, that she saw the accused and the
complaining witness embracing each other in the house of Maura Manahan-Quinto can hardly be
given weight. The trifling manner by which she answered the questions propounded to her at the
witness stand even prompted the trial court to remark that she was not serious with her
testimony. Thus COURT: This is not a joke. The penalty [for] the accused [if convicted] is death. Do not testify here as
if you are joking, or you will be the one to [be] sen[t] to jail ahead of Manahan. You want to be
sent to jail?
WITNESS: No sir.
COURT: Why are you smiling? This is a serious matter. Put that on record the witness is smiling. Not
serious about her testimony (underscoring supplied).

Ultimately, the trial court disregarded altogether, and rightly so, the testimony of Isabel
Remandaban. To emphasize, the task of assigning values to the testimonies of witnesses in the
stand and weighing their credibility is best left to the trial court which forms first-hand
impressions of the witnesses testifying before it, and therefore more competent to discriminate
between the true and the false. [5] We find no trace of whim or arbitrariness on the court a quo in its assessment
of the testimony of this witness.

Also, Exh. "1" of the defense, a photograph showing Estrella talking to the accused while
carrying Melanie, the offspring of Teresita and Manuel, does not establish anything. As Estrella
explained, she visited the accused in jail not to show him Melanie but to ascertain that he was in
fact incarcerated,[6] and that she only brought the child with her incidentally during her visit because Teresita was
sick at that time and there was no one else to take care of the baby.[7]

Even assuming ex gratia argumenti that the accused and the victim were really lovers, that
fact alone would not negate the commission of rape. A sweetheart cannot be forced to have sex

against her will. Definitely, a man cannot demand sexual gratification from a fiancee and, worse,
employ violence upon her on the pretext of love. Love is not a license for lust.[8]
Equally untenable is the accused's contention that there can be no rape since the prosecution
failed to prove beyond reasonable doubt the element of intimidation. One of the modes of
committing the crime of rape is by having carnal knowledge of a woman
using force and intimidation.Even if we concede the absence of intimidation in this case, the fact
remains that the accused employed force against his victim. Thus, testifying in a clear, definitive
and convincing manner as concluded by the trial court, Teresita established beyond any scintilla
of doubt the presence of force essential in rape Q: What were you doing then when Manuel Manahan accosted you?
A: I was sleeping, then suddenly I felt somebody near me and when I opened my eyes I saw Manuel
Manahan and then he immediately laid on top of me, sir.
Q: How did you come to know that it was Manuel Manahan who went, who laid on top of you?
A: I know him, sir.
Q: What did you do when Manuel Manahan laid on top of you?
A: I was about to shout but he covered my mouth and then he immediately spread my legs, sir.
Q: What did you do when he did that to you?
A: I cried, sir.
Q: Before Manuel Manahan spread your legs, what did you do? Before he was able to spread your
legs?
A: I pushed him and I kicked him several times, sir.
Q: What happened when you pushed him and kicked him several times?
A: I got weakened because he was strong that is why he was able to abuse me, sir.
Q: After Manuel Manahan was able to spread your legs, what did he do?
A: And then he inserted his penis, sir x x x x[9]

Again, during the cross-examination the victim recounted how she was forced to have
sexual intercourse with the accused, thus Q: Did you spread your legs voluntarily or did he force open your legs?
A: He forced me, sir.

Q: What did he do to force open your legs?


A: By the use of his legs, sir.
Q: He did that while he was on top of you?
A: Yes, sir.
Q: What legs did he use, was it the right leg or both legs?
A: Both legs, sir.
Q: You mentioned about crossing his legs and then forced open your legs, will you please demonstrate
how he forced open your legs by the use of this pencil and ballpen illustrate your legs with these
two other ballpens where the legs of Manuel Manahan, will you please demonstrate how he
forced open his legs when you said first he put together his legs and then open your legs, will you
please do it?
A: He went on top of me and he put his legs between my legs and also his legs, sir.
INTERPRETER: Witness demonstrating by spreading both ends of the ballpen.
Q: And then by doing so, by spreading his legs between your legs, he was able to insert his penis?
A: Yes, sir.
Q: At that precise moment when he was on top of you and also your legs, where was the right hand of
Manuel Manahan?
A: He closed my mouth with his right hand.
Q: What about his left hand?
A: He used his left hand in pulling up my dress.
Q: At that precise moment when he was doing the push and pull, was his right hand still with your
mouth?
A: Yes, sir.
Q: What about his left hand after raising your skirt, what was his left hand doing?
A: He was squeezing my neck, sir x x x x
Q: During your direct testimony you mentioned about having resisted him, now, at what precise
moment did you try to resist him?
A: When he went on top of me I struggled, sir.

Q: Were you able to dislodge him from being on top of you?


A: Yes, sir.
COURT: Then what did he do when you were able to dislodge him on top of you?
A: He went again on top of me, sir.
Q: Did you again struggle to resist him or no more?
A: No more because I already felt weak, sir x x x x[10]

Evidently, complainant offered a tenacious resistance to the criminal acts of the accused, but
the serious determination of the latter to accomplish what he intended to do eventually weakened
complainant and shocked her into insensibility. It is quite understandable that, at a tender age of
16 and innocent in the ways of the world, complainant is no match to the accused, a 28-year old
married man endowed with physical strength she could not possibly overcome.
Neither could she shout to alert the other occupants of the house as the accused prevented
her by covering her mouth with his right hand. The accused however claims that complainant
had the opportunity to shout for help at that precise moment he was removing his pants and brief,
but she did not. Suffice it to say, in this connection, that not every victim of a crime can be
expected to act reasonably and conformably with the expectations of mankind. Different people
react to similar situations dissimilarly. While the normal response of a woman about to be defiled
may be to shout and put up a wild struggle, others become virtually catatonic because of the
mental shock they experience and the fear engendered by the unexpected occurrence. Yet it can
never be successfully argued that the latter are any less sexual victims than the former.[11]
The failure of complainant to disclose the outrage on her person to anybody, including her
parents, is due to the threats on her life and that of her family. Indeed, one cannot expect her to
act like an adult or a mature experienced woman who would have the courage and intelligence to
disregard the threat to her life and complain immediately that she had been sexually assaulted. It
is not uncommon for young girls to conceal for sometime the assaults on their virtue because of
the rapists threats to their lives. Delay or vacillation in making a criminal accusation does not
necessarily impair the credibility of the witness if such delay is satisfactorily explained, as in this
case.[12]
In the instant case, the complaining witness may not have even filed the rape charge had she
not become pregnant. This Court has taken cognizance of the fact that many of the victims of
rape never complain or file criminal charges against the rapists. They prefer to bear the ignominy
in painful silence rather than reveal their shame to the world and risk the rapists making good
their threats to kill or hurt their victims.[13]
That accused also asserts that the rape case is a mere face-saving device of the victim to
escape the anger of her father. Again, we are not convinced. It taxes credulity that a
simple barrio lass[14] like the victim, a minor and a mere elementary graduate at that, could contrive such an
unthinkable solution to save herself from the imagined wrath of her father; what is more, concoct such a good rape

story convincing enough to withstand the rigors of cross-examination, and sway the judge to impose on the accused
the extreme penalty of death.

Indeed, it is very unlikely that the victim would make up a story of rape with all its attendant
scandal and humiliation. Considering the modesty and timidity of a typical Filipina, especially
one from the rural areas, it is hard to accept that the victim would fabricate facts which would
seriously cast dishonor on her maidenhood. No young Filipina of decent repute would publicly
admit she had been raped unless that was the truth. It is her natural instinct to protect her
honor. As we have long held, when a woman says that she has been raped, she says in effect all
that is necessary to show that rape has been committed. Her testimony is credible where she has
no motive to testify against the accused.[15]
On the matter of acknowledgment and support of the child, a correction of the view of the
court a quo is in order. Article 345 of The Revised Penal Code provides that persons guilty of
rape shall also be sentenced to "acknowledge the offspring, unless the law should prevent him
from doing so," and "in every case to support the offspring." In the case before us, compulsory
acknowledgment of the child Melanie Tibigar is not proper there being a legal impediment in
doing so as it appears that the accused is a married man. As pronounced by this Court in People
v. Guerrero,[16] "the rule is that if the rapist is a married man, he cannot be compelled to recognize the offspring of
the crime, should there be any, as his child, whether legitimate or illegitimate." Consequently, that portion of the
judgment under review is accordingly deleted. In any case, we sustain that part ordering the accused to support the
child as it is in accordance with law.

Finally, we do not agree with the trial court that the proper penalty to be imposed on the
accused is death, it appearing that the crime committed was merely simple rape, i.e., not
committed with or effectively qualified by any of the circumstances enumerated under Art. 335
of The Revised Penal Code, as amended by Sec. 11, RA 7659, under which the death penalty is
authorized.[17] In this case, the proper imposable penalty should only be reclusion perpetua.
WHEREFORE, the Decision of the Regional Trial Court of Dagupan City, Branch 40,
dated 28 November 1996, convicting accused MANUEL MANAHAN alias Maning of the crime
of rape is AFFIRMED subject however to the modification that the death sentence imposed on
the accused is reduced to reclusion perpetua. The portion of the decision of the trial court
ordering the accused, a married man, to acknowledge the child Melanie Tibigar is DELETED
being contrary to law and jurisprudence.
SO ORDERED.

SPOUSES PRUDENCIO and G.R. No. 163209


FILOMENA LIM,
Petitioners,
Present:
CARPIO, J., Chairperson,
QUISUMBING,*

CHICO-NAZARIO,
- versus - PERALTA, and
ABAD,** JJ.
MA. CHERYL S. LIM,
for herself and on behalf of
her minor children LESTER
EDWARD S. LIM, CANDICE
GRACE S. LIM, and MARIANO Promulgated:
S. LIM, III,
Respondents. October 30, 2009
x --------------------------------------------------------------------------------------- x

DECISION
CARPIO, J.:
The Case

For review[1] is the Decision[2] of the Court of Appeals, dated 28 April 2003,
ordering petitioners Prudencio and Filomena Lim (petitioners) to provide legal
support to respondents Cheryl, Lester Edward, Candice Grace and Mariano III, all
surnamed Lim (respondents).
The Facts
In 1979, respondent Cheryl S. Lim (Cheryl) married Edward Lim (Edward),
son of petitioners. Cheryl bore Edward three children, respondents Lester Edward,
Candice Grace and Mariano III. Cheryl, Edward and their children resided at the
house of petitioners in Forbes Park, Makati City, together with Edwards ailing
grandmother, Chua Giak and her husband Mariano Lim (Mariano). Edwards family
business, which provided him with a monthly salary of P6,000, shouldered the
family expenses. Cheryl had no steady source of income.
On 14 October 1990, Cheryl abandoned the Forbes Park residence, bringing
the children with her (then all minors), after a violent confrontation with Edward

whom she caught with the in-house midwife of Chua Giak in what the trial court
described a very compromising situation.[3]
Cheryl, for herself and her children, sued petitioners, Edward, Chua Giak and
Mariano (defendants) in the Regional Trial Court of Makati City, Branch 140 (trial
court) for support. The trial court ordered Edward to provide monthly support
of P6,000pendente lite.[4]
The Ruling of the Trial Court
On 31 January 1996, the trial court rendered judgment ordering Edward and
petitioners to jointly provide P40,000 monthly support to respondents, with
Edward shouldering P6,000 and petitioners the balance of P34,000 subject to Chua
Giaks subsidiary liability.[5]
The defendants sought reconsideration, questioning their liability. The trial
court, while denying reconsideration, clarified that petitioners and Chua Giak were
held jointly liable with Edward because of the latters inability x x x to give
sufficient support x x x.[6]

Petitioners appealed to the Court of Appeals assailing, among others, their liability
to support respondents. Petitioners argued that while Edwards income is
insufficient, the law itself sanctions its effects by providing that legal support
should be in keeping with the financial capacity of the family under Article 194 of
the Civil Code, as amended by Executive Order No. 209 (The Family Code of the
Philippines).[7]
The Ruling of the Court of Appeals
In its Decision dated 28 April 2003, the Court of Appeals affirmed the trial court.
On the issue material to this appeal, that is, whether there is basis to hold
petitioners, as Edwards parents, liable with him to support respondents, the Court
of Appeals held:

The law on support under Article 195 of the Family Code is clear on this
matter. Parents and their legitimate children are obliged to mutually
support one another and this obligation extends down to the legitimate
grandchildren and great grandchildren.
In connection with this provision, Article 200 paragraph (3) of the
Family Code clearly provides that should the person obliged to give
support does not have sufficient means to satisfy all claims, the other
persons enumerated in Article 199 in its order shall provide the
necessary support. This is because the closer the relationship of the
relatives, the stronger the tie that binds them. Thus, the obligation to
support is imposed first upon the shoulders of the closer relatives and
only in their default is the obligation moved to the next nearer relatives
and so on.[8]

Petitioners sought reconsideration but the Court of Appeals denied their motion in
the Resolution dated 12 April 2004.
Hence, this petition.
The Issue
The issue is whether petitioners are concurrently liable with Edward to provide
support to respondents.
The Ruling of the Court
We rule in the affirmative. However, we modify the appealed judgment by limiting
petitioners liability to the amount of monthly support needed by respondents Lester
Edward, Candice Grace and Mariano III only.
Petitioners Liable to Provide Support
but only to their Grandchildren

By statutory[9] and jurisprudential mandate,[10] the liability of ascendants to provide


legal support to their descendants is beyond cavil. Petitioners themselves admit as
much they limit their petition to the narrow question of when their liability is
triggered, not if they are liable. Relying on provisions [11] found in Title IX of the
Civil Code, as amended, on Parental Authority, petitioners theorize that their
liability is activated only upon default of parental authority, conceivably either by
its termination[12] or suspension[13] during the childrens minority. Because at the
time respondents sued for support, Cheryl and Edward exercised parental authority
over their children,[14] petitioners submit that the obligation to support the
lattersoffspring ends with them.
Neither the text of the law nor the teaching of jurisprudence supports this severe
constriction of the scope of familial obligation to give support. In the first place,
the governing text are the relevant provisions in Title VIII of the Civil Code, as
amended, on Support, not the provisions in Title IX on Parental Authority. While
both areas share a common ground in that parental authority encompasses the
obligation to provide legal support,[15] they differ in other concerns including
the duration of the obligation and its concurrence among relatives of differing
degrees.[16] Thus, although the obligation to provide support arising from parental
authority ends upon the emancipation of the child, [17] the same obligation arising
from spousal and general familial ties ideally lasts during the obligee's
lifetime.. Also, while parental authority under Title IX (and the correlative parental
rights) pertains to parents, passing to ascendants only upon its termination or
suspension, the obligation to provide legal support passes on to ascendants not only
upon default of the parents but also for the latters inability to provide sufficient
support. As we observed in another case raising the ancillary issue of an ascendants
obligation to give support in light of the fathers sufficient means:
Professor Pineda is of the view that grandchildren cannot demand
support directly from their grandparents if they have parents (ascendants
of nearest degree) who are capable of supporting them. This is so
because we have to follow the order of support under Art. 199. We agree
with this view.
xxxx
There is no showing that private respondent is without means to
support his son; neither is there any evidence to prove that petitioner, as

the paternal grandmother, was willing to voluntarily provide for her


grandson's legal support. x x x [18] (Emphasis supplied; internal citations
omitted)

Here, there is no question that Cheryl is unable to discharge her obligation to


provide sufficient legal support to her children, then all school-bound. It is also
undisputed that the amount of support Edward is able to give to
respondents, P6,000 a month, is insufficient to meet respondents basic needs. This
inability of Edward and Cheryl to sufficiently provide for their children shifts a
portion of their obligation to the ascendants in the nearest degree, both in the
paternal (petitioners) and maternal[19]lines, following the ordering in Article 199. To
hold otherwise, and thus subscribe to petitioners theory, is to sanction the
anomalous scenario of tolerating extreme material deprivation of children because
of parental inability to give adequate support even if ascendants one degree
removed are more than able to fill the void.
However, petitioners partial concurrent obligation extends only to
their descendants as this word is commonly understood to refer to relatives, by
blood of lower degree. As petitioners grandchildren by blood, only
respondents Lester Edward, Candice Grace and Mariano III belong to this
category. Indeed, Cheryls right to receive support from the Lim family extends
only to her husband Edward, arising from their marital bond. [20] Unfortunately,
Cheryls share from the amount of monthly support the trial court awarded cannot
be determined from the records. Thus, we are constrained to remand the case to the
trial court for this limited purpose.[21]
Petitioners Precluded from Availing
of the Alternative Option Under
Article 204 of the Civil Code, as Amended
As an alternative proposition, petitioners wish to avail of the option in Article 204
of the Civil Code, as amended, and pray that they be allowed to fulfill their
obligation by maintaining respondents at petitioners Makati residence. The option
is unavailable to petitioners.

The application of Article 204 which provides that


The person obliged to give support shall have the option to fulfill the
obligation either by paying the allowance fixed, or by receiving and
maintaining in the family dwelling the person who has a right to receive
support. The latter alternative cannot be availed of in case there is
a moral or legal obstacle thereto. (Emphasis supplied)

is subject to its exception clause. Here, the persons entitled to receive support are
petitioners grandchildren and daughter-in-law. Granting petitioners the option in
Article 204 will secure to the grandchildren a well-provided future; however, it will
also force Cheryl to return to the house which, for her, is the scene of her husbands
infidelity. While not rising to the level of a legal obstacle, as indeed, Cheryls
charge against Edward for concubinage did not prosper for insufficient evidence,
her steadfast insistence on its occurrence amounts to a moral impediment bringing
the case within the ambit of the exception clause of Article 204, precluding its
application.

WHEREFORE, we DENY the petition. We AFFIRM the Decision of the Court


of Appeals, dated 28 April 2003, and its Resolution dated 12 April 2004 with
the MODIFICATION that petitioners Prudencio and Filomena Lim are liable to
provide support only to respondents Lester Edward, Candice Grace and Mariano
III, all surnamed Lim. We REMAND the case to the Regional Trial Court of
Makati City, Branch 140, for further proceedings consistent with this ruling.
SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

G.R. No. 165166

August 15, 2012

CHARLES GOTARDO, Petitioner,


vs.
DIVINA BULING, Respondent.
VILLARAMA, JR.,*
DECISION
BRION, J.:
We resolve the petition for review on certiorari, 1 filed by petitioner Charles Gotardo, to challenge the
March 5, 2004 decision2 and the July 27, 2004 resolution3 of the Court of Appeals (CA) in CA GR CV
No. 76326. The CA decision ordered the petitioner to recognize and provide legal support to his
minor son, Gliffze 0. Buling. The CA resolution denied the petitioner's subsequent motion for
reconsideration.
FACTUAL BACKGROUND
On September 6, 1995, respondent Divina Buling filed a complaint with the Regional Trial Court
(RTC) of Maasin, Southern Leyte, Branch 25, for compulsory recognition and support pendente
lite, claiming that the petitioner is the father of her child Gliffze. 4
In his answer, the petitioner denied the imputed paternity of Gliffze.5 For the parties failure to
amicably settle the dispute, the RTC terminated the pre-trial proceedings. 6 Trial on the merits
ensued.
The respondent testified for herself and presented Rodulfo Lopez as witness. Evidence for the
respondent showed that she met the petitioner on December 1, 1992 at the Philippine Commercial
and Industrial Bank, Maasin, Southern Leyte branch where she had been hired as a casual
employee, while the petitioner worked as accounting supervisor.7 The petitioner started courting the
respondent in the third week of December 1992 and they became sweethearts in the last week of
January 1993.8 The petitioner gave the respondent greeting cards on special occasions, such as on
Valentines Day and her birthday; she reciprocated his love and took care of him when he was ill. 9
Sometime in September 1993, the petitioner started intimate sexual relations with the respondent in
the formers rented room in the boarding house managed by Rodulfo, the respondents uncle, on
Tomas Oppus St., Agbao, Maasin, Southern Leyte.10 The petitioner rented the room from March 1,
1993 to August 30, 1994.11 The sexual encounters occurred twice a month and became more
frequent in June 1994; eventually, on August 8, 1994, the respondent found out that she was
pregnant.12 When told of the pregnancy, the petitioner was happy and made plans to marry the
respondent.13 They in fact applied for a marriage license.14 The petitioner even inquired about the
costs of a wedding reception and the bridal gown.15 Subsequently, however, the petitioner backed out
of the wedding plans.16
The respondent responded by filing a complaint with the Municipal Trial Court of Maasin, Southern
Leyte for damages against the petitioner for breach of promise to marry.17 Later, however, the
petitioner and the respondent amicably settled the case.18

The respondent gave birth to their son Gliffze on March 9, 1995. 19 When the petitioner did not show
up and failed to provide support to Gliffze, the respondent sent him a letter on July 24, 1995
demanding recognition of and support for their child.20 When the petitioner did not answer the
demand, the respondent filed her complaint for compulsory recognition and support pendente lite.21
The petitioner took the witness stand and testified for himself. He denied the imputed
paternity,22 claiming that he first had sexual contact with the respondent in the first week of August
1994 and she could not have been pregnant for twelve (12) weeks (or three (3) months) when he
was informed of the pregnancy on September 15, 1994. 23
During the pendency of the case, the RTC, on the respondents motion,24 granted a P2,000.00
monthly child support, retroactive from March 1995. 25
THE RTC RULING
In its June 25, 2002 decision, the RTC dismissed the complaint for insufficiency of evidence proving
Gliffzes filiation. It found the respondents testimony inconsistent on the question of when she had
her first sexual contact with the petitioner, i.e., "September 1993" in her direct testimony while "last
week of January 1993" during her cross-testimony, and her reason for engaging in sexual contact
even after she had refused the petitioners initial marriage proposal. It ordered the respondent to
return the amount of support pendente lite erroneously awarded, and to pay P 10,000.00 as
attorneys fees.26
The respondent appealed the RTC ruling to the CA.27
THE CA RULING
In its March 5, 2004 decision, the CA departed from the RTC's appreciation of the respondents
testimony, concluding that the latter merely made an honest mistake in her understanding of the
questions of the petitioners counsel. It noted that the petitioner and the respondent had sexual
relationship even before August 1994; that the respondent had only one boyfriend, the petitioner,
from January 1993 to August 1994; and that the petitioners allegation that the respondent had
previous relationships with other men remained unsubstantiated. The CA consequently set aside the
RTC decision and ordered the petitioner to recognize his minor son Gliffze. It also reinstated the
RTC order granting a P 2,000.00 monthly child support.28
When the CA denied29 the petitioners motion for reconsideration,30 the petitioner filed the present
petition for review on certiorari.
THE PETITION
The petitioner argues that the CA committed a reversible error in rejecting the RTCs appreciation of
the respondents testimony, and that the evidence on record is insufficient to prove paternity.
THE CASE FOR THE RESPONDENT
The respondent submits that the CA correctly explained that the inconsistency in the respondents
testimony was due to an incorrect appreciation of the questions asked, and that the record is replete
with evidence proving that the petitioner was her lover and that they had several intimate sexual
encounters during their relationship, resulting in her pregnancy and Gliffzes birth on March 9, 1995.

THE ISSUE
The sole issue before us is whether the CA committed a reversible error when it set aside the RTCs
findings and ordered the petitioner to recognize and provide legal support to his minor son Gliffze.
OUR RULING
We do not find any reversible error in the CAs ruling.
We have recognized that "[f]iliation proceedings are usually filed not just to adjudicate paternity but
also to secure a legal right associated with paternity, such as citizenship, support (as in this case) or
inheritance. [In paternity cases, the burden of proof] is on the person who alleges that the putative
father is the biological father of the child."31
One can prove filiation, either legitimate or illegitimate, through the record of birth appearing in the
civil register or a final judgment, an admission of filiation in a public document or a private
handwritten instrument and signed by the parent concerned, or the open and continuous possession
of the status of a legitimate or illegitimate child, or any other means allowed by the Rules of Court
and special laws.32 We have held that such other proof of one's filiation may be a "baptismal
certificate, a judicial admission, a family bible in which his name has been entered, common
reputation respecting [his] pedigree, admission by silence, the [testimonies] of witnesses, and other
kinds of proof admissible under Rule 130 of the Rules of Court."33
In Herrera v. Alba,34 we stressed that there are four significant procedural aspects of a traditional
paternity action that parties have to face: a prima facie case, affirmative defenses, presumption of
legitimacy, and physical resemblance between the putative father and the child. 35 We explained that
a prima facie case exists if a woman declares supported by corroborative proof that she had
sexual relations with the putative father; at this point, the burden of evidence shifts to the putative
father.36 We explained further that the two affirmative defenses available to the putative father are:
(1) incapability of sexual relations with the mother due to either physical absence or impotency, or
(2) that the mother had sexual relations with other men at the time of conception. 37
In this case, the respondent established a prima facie case that the petitioner is the putative father of
Gliffze through testimony that she had been sexually involved only with one man, the petitioner, at
the time of her conception.38 Rodulfo corroborated her testimony that the petitioner and the
respondent had intimate relationship.39
On the other hand, the petitioner did not deny that he had sexual encounters with the respondent,
only that it occurred on a much later date than the respondent asserted, such that it was physically
impossible for the respondent to have been three (3) months pregnant already in September 1994
when he was informed of the pregnancy.40 However, the petitioner failed to substantiate his
allegations of infidelity and insinuations of promiscuity. His allegations, therefore, cannot be given
credence for lack of evidentiary support. The petitioners denial cannot overcome the respondents
clear and categorical assertions.
The petitioner, as the RTC did, made much of the variance between the respondents direct
testimony regarding their first sexual contact as "sometime in September 1993" and her crosstestimony when she stated that their first sexual contact was "last week of January 1993," as follows:
ATTY. GO CINCO:

When did the defendant, according to you, start courting you?


A Third week of December 1992.
Q And you accepted him?
A Last week of January 1993.
Q And by October you already had your sexual intercourse?
A Last week of January 1993.
COURT: What do you mean by accepting?
A I accepted his offer of love.41
We find that the contradictions are for the most part more apparent than real, having resulted from
the failure of the respondent to comprehend the question posed, but this misunderstanding was later
corrected and satisfactorily explained. Indeed, when confronted for her contradictory statements, the
respondent explained that that portion of the transcript of stenographic notes was incorrect and she
had brought it to the attention of Atty. Josefino Go Cinco (her former counsel) but the latter took no
action on the matter.42
Jurisprudence teaches that in assessing the credibility of a witness, his testimony must be
considered in its entirety instead of in truncated parts. The technique in deciphering a testimony is
not to consider only its isolated parts and to anchor a conclusion based on these parts. "In
ascertaining the facts established by a witness, everything stated by him on direct, cross and
redirect examinations must be calibrated and considered." 43Evidently, the totality of the respondent's
testimony positively and convincingly shows that no real inconsistency exists. The respondent has
consistently asserted that she started intimate sexual relations with the petitioner sometime in
September 1993.44
Since filiation is beyond question, support follows as a matter of obligation; a parent is obliged to
support his child, whether legitimate or illegitimate.45 Support consists of everything indispensable for
sustenance, dwelling, clothing, medical attendance, education and transportation, in keeping with
the financial capacity of the family.46Thus, the amount of support is variable and, for this reason, no
final judgment on the amount of support is made as the amount shall be in proportion to the
resources or means of the giver and the necessities of the recipient. 47It may be reduced or increased
proportionately according to the reduction or increase of the necessities of the recipient and the
resources or means of the person obliged to support.48
In this case, we sustain the award of P 2,000.00 monthly child support, without prejudice to the filing
of the proper motion in the RTC for the determination of any support in arrears, considering the
needs of the child, Gliffze, during the pendency of this case.
WHEREFORE, we hereby DENY the petition for lack of merit. The March 5, 2004 decision and the
July 27, 2004 resolution of the Court of Appeals in CA GR CV No. 76326 are
hereby AFFIRMED. Costs against the petitioner.
SO ORDERED.

INTERPLEADER
G.R. No. L-23851 March 26, 1976
WACK WACK GOLF & COUNTRY CLUB, INC., plaintiff-appellant,
vs.
LEE E. WON alias RAMON LEE and BIENVENIDO A. TAN, defendants-appellees.
Leonardo Abola for appellant.
Alfonso V. Agcaoli & Ramon A. Barcelona for appellee Lee E. Won.
Bienvenido A. Tan in his own behalf.

CASTRO, C.J.:
This is an appeal from the order of the Court of First Instance of Rizal, in civil case 7656, dismissing
the plaintiff-appellant's complaint of interpleader upon the grounds of failure to state a cause of
action and res judicata.
In its amended and supplemental complaint of October 23, 1963, the Wack Wack Golf & Country
Club, Inc., a non-stock, civic and athletic corporation duly organized under the laws of the
Philippines, with principal office in Mandaluyong, Rizal (hereinafter referred to as the Corporation),
alleged, for its first cause of action, that the defendant Lee E. Won claims ownership of its
membership fee certificate 201, by virtue of the decision rendered in civil case 26044 of the CFI of
Manila, entitled "Lee E. Won alias Ramon Lee vs. Wack Wack Golf & Country Club, Inc." and also by
virtue of membership fee certificate 201-serial no. 1478 issued on October 17, 1963 by Ponciano B.
Jacinto, deputy clerk of court of the said CFI of Manila, for and in behalf of the president and the
secretary of the Corporation and of the People's Bank & Trust Company as transfer agent of the said
Corporation, pursuant to the order of September 23, 1963 in the said case; that the defendant
Bienvenido A. Tan, on the other hand, claims to be lawful owner of its aforesaid membership fee
certificate 201 by virtue of membership fee certificate 201-serial no. 1199 issued to him on July 24,
1950 pursuant to an assignment made in his favor by "Swan, Culbertson and Fritz," the original
owner and holder of membership fee certificate 201; that under its articles of incorporation and bylaws the Corporation is authorized to issue a maximum of 400 membership fee certificates to
persons duly elected or admitted to proprietary membership, all of which have been issued as early
as December 1939; that it claims no interest whatsoever in the said membership fee certificate 201;
that it has no means of determining who of the two defendants is the lawful owner thereof; that it is
without power to issue two separate certificates for the same membership fee certificate 201, or to
issue another membership fee certificate to the defendant Lee, without violating its articles of
incorporation and by-laws; and that the membership fee certificate 201-serial no. 1199 held by the
defendant Tan and the membership fee certificate 201-serial No. 1478 issued to the defendant Lee
proceed from the same membership fee certificate 201, originally issued in the name of "Swan,
Culbertson and Fritz".

For its second cause of action. it alleged that the membership fee certificate 201-serial no. 1478
issued by the deputy clerk of court of court of the CFI of Manila in behalf of the Corporation is null
and void because issued in violation of its by-laws, which require the surrender and cancellation of
the outstanding membership fee certificate 201 before issuance may be made to the transferee of a
new certificate duly signed by its president and secretary, aside from the fact that the decision of the
CFI of Manila in civil case 26044 is not binding upon the defendant Tan, holder of membership fee
certificate 201-serial no. 1199; that Tan is made a party because of his refusal to join it in this action
or bring a separate action to protect his rights despite the fact that he has a legal and beneficial
interest in the subject matter of this litigation; and that he is made a part so that complete relief may
be accorded herein.
The Corporation prayed that (a) an order be issued requiring Lee and Tan to interplead and litigate
their conflicting claims; and (b) judgment. be rendered, after hearing, declaring who of the two is the
lawful owner of membership fee certificate 201, and ordering the surrender and cancellation of
membership fee certificate 201-serial no. 1478 issued in the name of Lee.
In separate motions the defendants moved to dismiss the complaint upon the grounds of res
judicata, failure of the complaint to state a cause of action, and bar by prescription. 1 These motions
were duly opposed by the Corporation. Finding the grounds of bar by prior judgment and failure to state a
cause of action well taken, the trial court dismissed the complaint, with costs against the Corporation.
In this appeal, the Corporation contends that the court a quo erred (1) in finding that the allegations
in its amended and supplemental complaint do not constitute a valid ground for an action of
interpleader, and in holding that "the principal motive for the present action is to reopen the Manila
Case and collaterally attack the decision of the said Court"; (2) in finding that the decision in civil
case 26044 of the CFI of Manila constitutes res judicata and bars its present action; and (3) in
dismissing its action instead of compelling the appellees to interplead and litigate between
themselves their respective claims.
The Corporations position may be stated elsewise as follows: The trial court erred in dismissing the
complaint, instead of compelling the appellees to interplead because there actually are conflicting
claims between the latter with respect to the ownership of membership fee certificate 201, and, as
there is not Identity of parties, of subject-matter, and of cause of action, between civil case 26044 of
the CFI of Manila and the present action, the complaint should not have been dismissed upon the
ground of res judicata.
On the other hand, the appellees argue that the trial court properly dismissed the complaint,
because, having the effect of reopening civil case 26044, the present action is barred by res
judicata.
Although res judicata or bar by a prior judgment was the principal ground availed of by the appellees
in moving for the dismissal of the complaint and upon which the trial court actually dismissed the
complaint, the determinative issue, as can be gleaned from the pleadings of the parties, relates to
the propriety and timeliness of the remedy of interpleader.
The action of interpleader, under section 120 of the Code of Civil Procedure, 2 is a remedy whereby a
person who has personal property in his possession, or an obligation to render wholly or partially, without
claiming any right to either, comes to court and asks that the persons who claim the said personal
property or who consider themselves entitled to demand compliance with the obligation, be required to
litigate among themselves in order to determine finally who is entitled to tone or the one thing. The
remedy is afforded to protect a person not against double liability but against double vexation in respect of
one liability. 3 The procedure under the Rules of Court 4 is the same as that under the Code of Civil

Procedure, 5except that under the former the remedy of interpleader is available regardless of the nature
of the subject-matter of the controversy, whereas under the latter an interpleader suit is proper only if the
subject-matter of the controversy is personal property or relates to the performance of an obligation.

There is no question that the subject matter of the present controversy, i.e., the membership fee
certificate 201, is proper for an interpleader suit. What is here disputed is the propriety and
timeliness of the remedy in the light of the facts and circumstances obtaining.
A stakeholder 6 should use reasonable diligence to hale the contending claimants to court. 7 He need not
await actual institution of independent suits against him before filing a bill of interpleader. 8 He should file
an action of interpleader within a reasonable time after a dispute has arisen without waiting to be sued by
either of the contending claimants. 9 Otherwise, he may be barred by laches 10 or undue delay. 11 But
where he acts with reasonable diligence in view of the environmental circumstances, the remedy is not
barred. 12
Has the Corporation in this case acted with diligence, in view of all the circumstances, such that it
may properly invoke the remedy of interpleader? We do not think so. It was aware of the conflicting
claims of the appellees with respect to the membership fee certificate 201 long before it filed the
present interpleader suit. It had been recognizing Tan as the lawful owner thereof. It was sued by
Lee who also claimed the same membership fee certificate. Yet it did not interplead Tan. It preferred
to proceed with the litigation (civil case 26044) and to defend itself therein. As a matter of fact, final
judgment was rendered against it and said judgment has already been executed. It is not therefore
too late for it to invoke the remedy of interpleader.
It has been held that a stakeholder's action of interpleader is too late when filed after judgment has
been rendered against him in favor of one of the contending claimants, 13 especially where he had
notice of the conflicting claims prior to the rendition of the judgment and neglected the opportunity to
implead the adverse claimants in the suit where judgment was entered. This must be so, because once
judgment is obtained against him by one claimant he becomes liable to the latter. 14 In once case, 15 it was
declared:
The record here discloses that long before the rendition of the judgment in favor of
relators against the Hanover Fire Insurance Company the latter had notice of the
adverse claim of South to the proceeds of the policy. No reason is shown why the
Insurance Company did not implead South in the former suit and have the conflicting
claims there determined. The Insurance Company elected not to do so and that suit
proceeded to a final judgment in favor of relators. The Company thereby became
independently liable to relators. It was then too late for such company to invoke the
remedy of interpleader
The Corporation has not shown any justifiable reason why it did not file an application for
interpleader in civil case 26044 to compel the appellees herein to litigate between themselves their
conflicting claims of ownership. It was only after adverse final judgment was rendered against it that
the remedy of interpleader was invoked by it. By then it was too late, because to he entitled to this
remedy the applicant must be able to show that lie has not been made independently liable to any of
the claimants. And since the Corporation is already liable to Lee under a final judgment, the present
interpleader suit is clearly improper and unavailing.
It is the general rule that before a person will be deemed to be in a position to ask for
an order of intrepleader, he must be prepared to show, among other prerequisites,
that he has not become independently liable to any of the claimants. 25 Tex. Jur. p.
52, Sec. 3; 30 Am. Jur. p. 218, Section 8.

It is also the general rule that a bill of interpleader comes too late when it is filed after
judgment has been rendered in favor of one of the claimants of the fund, this being
especially true when the holder of the funds had notice of the conflicting claims prior
to the rendition of the judgment and had an opportunity to implead the adverse
claimants in the suit in which the judgment was rendered. United Procedures Pipe
Line Co. v. Britton, Tex. Civ. App. 264 S.W. 176; Nash v. McCullum, Tex. Civ. 74 S.W.
2d 1046; 30 Am. Jur. p. 223, Sec. 11; 25 Tex. Jur. p. 56, Sec. 5; 108 A.L.R., note 5, p.
275. 16
Indeed, if a stakeholder defends a suit filed by one of the adverse claimants and allows said suit to
proceed to final judgment against him, he cannot later on have that part of the litigation repeated in
an interpleader suit. In the case at hand, the Corporation allowed civil case 26044 to proceed to final
judgment. And it offered no satisfactory explanation for its failure to implead Tan in the same
litigation. In this factual situation, it is clear that this interpleader suit cannot prosper because it was
filed much too late.
If a stakeholder defends a suit by one claimant and allows it to proceed so far as a
judgment against him without filing a bill of interpleader, it then becomes too late for
him to do so. Union Bank v. Kerr, 2 Md. Ch. 460; Home Life Ins. Co. v. Gaulk, 86 Md.
385, 390, 38 A. 901; Gonia v. O'Brien, 223 Mass. 177, 111 N.E. 787. It is one o the
main offices of a bill of interpleader to restrain a separate proceeding at law by
claimant so as to avoid the resulting partial judgment; and if the stakeholder
acquiesces in one claimant's trying out his claim and establishing it at law, he cannot
then have that part of the litigation repeated in an interpleader suit. 4 Pomeroy's Eq.
Juris. No. 162; Mitfor's Eq. Pleading (Tyler's Ed.) 147 and 236; Langdell's Summary
of Eq. Pleading, No. 162' De Zouche v. Garrizon, 140 Pa. 430, 21 A/450. 17
It is the general rule that a bill of interpleader comes too late when application therefore is
delayed until after judgment has been rendered in favor of one of the claimants of the
fund, and that this is especially true where the holder of the fund had notice of the
conflicting claims prior to the rendition of such judgment and an opportunity to implead
the adverse claimants in the suit in which such judgment was rendered. (See notes and
cases cited 36 Am. Dec. 703, Am. St. Rep. 598, also 5 Pomeroy's Eq. Juris. Sec. 41.)

The evidence in the opinion of the majority shows beyond dispute that the appellant
permitted the Parker county suit to proceed to judgment in favor of Britton with full
notice of the adverse claims of the defendants in the present suit other than the
assignees of the judgment (the bank and Mrs. Pabb) and no excuse is shown why he
did not implead them in the suit. 18
To now permit the Corporation to bring Lee to court after the latter's successful establishment of his
rights in civil case 26044 to the membership fee certificate 201, is to increase instead of to diminish
the number of suits, which is one of the purposes of an action of interpleader, with the possibility that
the latter would lose the benefits of the favorable judgment. This cannot be done because having
elected to take its chances of success in said civil case 26044, with full knowledge of all the fact, the
Corporation must submit to the consequences of defeat.
The act providing for the proceeding has nothing to say touching the right of one,
after contesting a claim of one of the claimants to final judgment unsuccessfully, to
involve the successful litigant in litigation anew by bringing an interpleader action.
The question seems to be one of first impression here, but, in other jurisdictions,

from which the substance of the act was apparently taken, the rule prevails that the
action cannot be resorted to after an unsuccessful trial against one of the claimants.
It is well settled, both by reasons and authority, that one who asks the interposition of
a court of equity to compel others, claiming property in his hands, to interplead, must
do so before putting them to the test of trials at law. Yarborough v. Thompson, 3
Smedes & M. 291 (41 Am. Dec. 626); Gornish v. Tanner, 1 You. & Jer. 333; Haseltine
v. Brickery, 16 Grat. (Va.) 116. The remedy by interpleader is afforded to protect the
party from the annoyance and hazard of two or more actions touching the same
property or demand; but one who, with knowledge of all the facts, neglects to avail
himself of the relief, or elects to take the chances for success in the actions at law,
ought to submit to the consequences of defeat. To permit an unsuccessful defendant
to compel the successful plaintiffs to interplead, is to increase instead of to diminish
the number of suits; to put upon the shoulders of others the burden which he asks
may be taken from his own. ....'
It is urged, however, that the American Surety Company of New York was not in
position to file an interpleader until it had tested the claim of relatrix to final judgment,
and that, failing to meet with success, it promptly filed the interpleader. The reason
why, it urges, it was not in such position until then is that had it succeeded before this
court in sustaining its construction of the bond and the law governing the bond, it
would not have been called upon to file an interpleader, since there would have been
sufficient funds in its hands to have satisfied all lawful claimants. It may be observed,
however, that the surety company was acquainted with all of the facts, and hence
that it simply took its chances of meeting with success by its own construction of the
bond and the law. Having failed to sustain it, it cannot now force relatrix into litigation
anew with others, involving most likely a repetition of what has been decided, or
force her to accept a pro rata part of a fund, which is far from benefits of the
judgment. 19
Besides, a successful litigant cannot later be impleaded by his defeated adversary in an interpleader
suit and compelled to prove his claim anew against other adverse claimants, as that would in effect
be a collateral attack upon the judgment.
The jurisprudence of this state and the common law states is well-settled that a
claimant who has been put to test of a trial by a surety, and has establish his claim,
may not be impleaded later by the surety in an interpleader suit, and compelled to
prove his claim again with other adverse claimants.American Surety Company of
New York v. Brim, 175 La. 959, 144 So. 727; American Surety Company of New York
v. Brim (In Re Lyong Lumber Company), 176 La. 867, 147 So. 18; Dugas v. N.Y.
Casualty Co., 181 La. 322, 159 So. 572; 15 Ruling Case Law, 228; 33 Corpus Juris,
477; 4 Pomeroy's Jurisprudence, 1023; Royal Neighbors of America v. Lowary (D.C.)
46 F2d 565; Brackett v. Graves, 30 App. Div. 162, 51 N.Y.S. 895; De Zouche v.
Garrison, 140 Pa. 430, 21 A. 450, 451;Manufacturer's Finance Co. v. W.I. Jones Co.
141 Ga., 519, 81 S.E. 1033; Hancock Mutual Life Ins. Co. v. Lawder, 22 R.I. 416, 84
A. 383.
There can be no doubt that relator's claim has been finally and definitely established,
because that matter was passed upon by three courts in definitive judgments. The
only remaining item is the value of the use of the land during the time that relator
occupied it. The case was remanded solely and only for the purpose of determining
the amount of that credit. In all other aspects the judgment is final. 20

It is generally held by the cases it is the office of interpleader to protect a party, not
against double liability, but against double vexation on account of one liability. Gonia v.
O'Brien, 223 Mass. 177, 111 N.E. 787. And so it is said that it is too late for the remedy of
interpleader if the party seeking this relef has contested the claim of one of the parties
and suffered judgment to be taken.

In United P.P.I. Co. v. Britton (Tex. Civ. App.) 264 S.W. 576. 578, it was said: 'It is the
general rule that a bill of interpleader comes too late when application therefor is
delayed until after judgment has been rendered in favor of one of the claimants of the
fund, and this is especially true where the holder of the fund had notice of the
conflicting claims prior to the rendition of such judgment and an opportunity to
implead the adverse claimants in the suit in which such judgment was rendered. See
notes and cases cited 35 Am. Dec. 703; 91 An. St. Rep. 598; also 5 Pomeroy's
Equity Jurisprudence No. 41.'
The principle thus stated has been recognized in many cases in other jurisdictions,
among which may be cited American Surety Co. v. O'Brien, 223 Mass. 177, 111 N.E.
787; Phillips v. Taylor, 148 Md. 157, 129 A. 18; Moore v. Hill, 59 Ga. 760,
761; Yearborough v. Thompson, 3 Smedes & M. (11 Miss.) 291, 41 Am. Dec. 626.
See, also, 33 C.J. p. 447, No. 30; Nash v. McCullum, (Tex. Civ. App.) 74 S.W. 2d
1042, 1047.
It would seem that this rule should logically follow since, after the recovery of
judgment, the interpleading of the judgment creditor is in effect a collateral attack
upon the judgment. 21
In fine, the instant interpleader suit cannot prosper because the Corporation had already been made
independently liable in civil case 26044 and, therefore, its present application for interpleader would
in effect be a collateral attack upon the final judgment in the said civil case; the appellee Lee had
already established his rights to membership fee certificate 201 in the aforesaid civil case and,
therefore, this interpleader suit would compel him to establish his rights anew, and thereby increase
instead of diminish litigations, which is one of the purposes of an interpleader suit, with the possiblity
that the benefits of the final judgment in the said civil case might eventually be taken away from him;
and because the Corporation allowed itself to be sued to final judgment in the said case, its action of
interpleader was filed inexcusably late, for which reason it is barred by laches or unreasonable
delay.
ACCORDINGLY, the order of May 28, 1964, dismissing the complaint, is affirmed, at appellant's cost.

G.R. No. 73794 September 19, 1988


ETERNAL GARDENS MEMORIAL PARKS CORPORATION, petitioner,
vs.
FIRST SPECIAL CASES DIVISION INTERMEDIATE APPELLATE COURT and NORTH
PHILIPPINE UNION MISSION OF THE SEVENTH-DAY ADVENTISTS, respondents.

PARAS, J.:

This is a special civil action for certiorari, prohibition and mandamus seeking to set aside the two
resolutions of public respondent First Special Cases Division of the then Intermediate Appellate
Court in AC-G.R. No. 04869 entitled "North Philippine Union Mission of the Seventh Day Adventists
versus Hon. Antonia Corpus-Macandog, Presiding Judge, Branch CXX, Regional Trial Court,
Caloocan City and Eternal Gardens Memorial Park Corporation, (a) dated September 5, 1985 (Rollo,
pp. 21-25) reconsidering its Decision 1 of February 27, 1985 (Rollo, pp. 38-48) and ordering petitioner to
deposit whatever amounts due from it under the Land Development Agreement, and (b) dated February
13, 1986 (Rollo, p. 27) denying for lack of merit petitioner's motion for reconsideration.
Petitioner Eternal Gardens Memorial Parks Corporation and private respondent North Philippine
Union Mission Corporation of the Seventh Day Adventists (MISSION for short) are corporations duly
organized and existing under and by virtue of the laws of the Republic of the Philippines.
They executed a Land Development Agreement (Rollo, pp. 179-182) on October 6, 1976 whereby
the former undertook to introduce and construct at its own expense and responsibility necessary
improvements on the property owned by private respondent into a memorial park to be subdivided
into and sold as memorial plot lots, at a stipulated area and price per lot. Out of the proceeds from
the sale, private respondent is entitled to receive 40% of the net gross collection from the project to
be remitted monthly by petitioner to private respondent through a designated depositary trustee
bank. On the same date private respondent executed in petitioner's favor a Deed of Absolute Sale
with Mortgage (Rollo, pp. 183-186) on the lots with titles involved in the land development project.
The deed was supplemented by a Sale of Real Property with Mortgage and Special Conditions
dated October 28, 1978 (Rollo, pp. 189-194 The amounts totalling about P984,110.82 paid by
petitioner were to be considered as part of the 40% due private respondent under the Land
Development Agreement. All went well until Maysilo Estate asserted its claim of ownership over the
parcel of land in question. Confronted with such conflicting claims, petitioner as plaintiff filed a
complaint for interpleader (Rollo, pp. 169-179) against private respondent MISSION and Maysilo
Estate, docketed as Special Court Case No. C-9556 of the then CFI of Rizal, Branch XII, Caloocan,
alleging among others, that in view of the conflicting claims of ownership of the defendants (herein
private respondent and Maysilo Estate) over the properties subject matter of the contracts, over
which plaintiff corporation (herein petitioner) has no claim of ownership except as a purchaser
thereof, and to protect the interests of plaintiff corporation which has no interest in the subject matter
of the dispute and is willing to pay whoever is entitled or declared to be the owners of said
properties, the defendants should be required to interplead and litigate their several claims between
themselves (Rollo, p. 177).
An order was issued by the presiding judge 2 requiring defendants to interplead on October 22, 1981.
MISSION filed a motion to dismiss dated November 10, 1981 for lack of cause of action but also
presented an answer dated November 12, 1981. The motion to dismiss was denied in an Order dated
January 12, 1982. The heirs of Maysilo Estate filed their own answer dated November 11, 1981 and an
amended answer dated October 20, 1983 thru the estate's special receiver. The heirs of Pedro Banon
filed an "Answer in Intervention with Special and Affirmative Defenses" dated October 24, 1983, while Lilia
B. Sevilla and husband Jose Seelin filed their "Answer in Cross-claim" dated October 31, 1983 (Rollo, p.
30). The heirs of Sofia O'Farrel y Patino, et al. filed their Answer in Intervention dated November 10,
1983.
However, earlier on November 21, 1982, private respondent presented a motion for the placing on
judicial deposit the amounts due and unpaid from petitioner. Acting on such motion, the trial
court 3 denied judicial deposit in its order dated February 13, 1984, the decretal portion of which reads:
PREMISES CONSIDERED, all or the full amount the plaintiff, Eternal Gardens
Memorial Parks Corporation have already paid the North Philippine Union Mission
Corporation of the Seventh Day Adventist is hereby ordered to deposit the same to

this Court within thirty (30) days from receipt of this order considering that real or true
owner of the subject properties in question, due hearing of this court has yet to be
undergone in order to decide as to who is the true owner which is a prejudicial
question. Hence the motion dated November 21, 1983 of the NPUM for the Eternal
Gardens Corporation to deposit the balance due and unpaid is hereby ordered
denied and the opposition thereto dated December 19, 1983 is hereby ordered
granted.
The contract between the Eternal Gardens Corporation and the North Philippine
Union Mission dated October 16, 1976 is ordered and declared ineffective as of
today, February 13, 1984 because the subject matter of the sale is not existing
between the contracting parties until after the question of ownership is resolved by
this court. The court will order the revival of the contract if the North Philippine Union
Mission will win.
If not, the declared winner among the intervenors will be the party to enter into a
contract of sale with the plaintiff as aforementioned. (Rollo, p. 66).
Another order dated October 26, 1984 was issued amending the February 13, 1984 order and
setting aside the order for private respondent's deposit of the amounts it had previously received
from petitioner, thus:
WHEREFORE IN VIEW OF ALL THE FOREGOING CONSIDERATIONS the order of
February 13, 1984, is hereby ordered amended, reconsidered and modified by this
same Court as follows:
(a) The order directing the NORTH PHILIPPINE UNION MISSION CORPORATION
OF SEVENTH-DAY ADVENTISTS to deposit the amounts it received under the
implementation of the LAND DEVELOPMENT AGREEMENT which is not questioned
by the plaintiff, Eternal Gardens, is hereby ordered set aside for the reason that the
titles to ownership, the North Philippine Union Mission Corporation of Seventh Day
Adventists on the lots subject matter of the aforesaid agreement is not established
invalid, and the alleged titles of intervenors are not proven yet by competent
evidence;
(b) The motion to require Eternal Gardens to deposit the balance under the Land
Development Agreement is likewise hereby ordered denied considering the fact the
aforesaid plaintiff had not denied its obligations under the aforesaid contract; and
(c) The trial or hearing is hereby ordered as scheduled to proceed on November 29,
1984 and on December 6, 1984 at 8:30 in the morning per order of this Court dated
October 4, 1984 in order to determine the alleged claims of ownership by the
intervenors and all claims and allegations of each party to the instant" case will be
considered and decided carefully by this court on just and meritorious grounds.
(Rollo, p. 39)
Said Orders were assailed twice in the Intermediate Appellate Court (Court of Appeals) and in the
Supreme Court as follows:
In G.R. No. 73569 it appeared that on January 11, 1985, MISSION filed a motion to dismiss the
Interpleader and the claims of the Maysilo Estate and the Intervenors and to order the Eternal
Gardens to comply with its Land Management with MISSION.

On January 28, 1985, the trial court passed a resolution, the dispositive portion of which reads:
WHEREFORE, premises considered, this Court, after a lengthy, careful judicious
study and perusal of all the stand of each and everyone of all the parties participating
in this case, hereby orders the dismissal of the interpleader, and the interventions
filed by the intervenors, heirs of Pedro Banon, heirs of O'Farrel, heirs of Rivera, heirs
of Maria del Concepcion Vidal, consolidated with the Maysilo Estate as represented
by receiver Arturo Salientes the heirs of Vicente Singson Encarnacion, and Lilia
Sevilla Seeling
This Court likewise orders the plaintiff, Eternal Gardens Memorial Parks Corporation
to comply with the Land Development Agreement dated October 6, 1978, it entered
into with the North Philippine Union Mission Corporation of the Seventh-Day
Adventists. (Rollo. p. 68)
The heirs of the Maysilo Estate moved for reconsideration of the aforementioned order of dismissal,
the hearing of which was requested to be set on February, 28, 1985. However, the trial judge, on
February 14, 1985 issued the following orders:
Considering Motions for Reconsideration filed, the Court resolves that the same be
GRANTED and instead of a hearing of the said motions on February 20, 1985, at
8:30 a.m., a hearing on the merits shall be held. (Rollo, p. 68)
In spite of the February 14, 1985 order, MISSION filed on March 6, 1985 a motion for Writ of
Execution of the resolution of January 28, 1985. This was denied on June 25, 1985. The said court
further set the case for pre-trial and trial on July 18, 1985.
It was elevated on certiorari and mandamus to the Intermediate Appellate Court (Court of Appeals),
docketed as AC-G.R. Sp No. 06696 "North Philippine Union Mission of the Seventh Day Adventists,
vs. Hon. Antonia Corpus-Macandog Presiding Judge, Branch CXX, Regional Trial Court, Caloocan
City, Eternal Gardens Memorial Parks Corporation, and Heirs of Vicente Singson Encarnacion It was
raffled to the Second Special Division. MISSION assailed the February 14, 1985 and June 25, 1985
orders as violative of due process and attended by grave abuse of discretion amounting to lack of
jurisdiction. The petition was however dismissed in the decision of said Appellate Court, promulgated
on December 4, 1985, the dispositive portion of which reads:
WHEREFORE, for want of merit the petition for certiorari and mandamus under
consideration cannot be given due course and is accordingly, DISMISSED, without
any pronouncement, as to costs. The restraining order embodied in Our Resolution
of July 31, 1985, is hereby lifted. (Rollo, G.R. No. 73569 p. 232)
The private respondent challenged the above decision in the Supreme Court in G.R. No. 73569. In
its resolution dated June 11, 1986, the Supreme Court denied the petition for review on certiorari for
lack of merit, as follows:
G.R. No. 73569 (North Philippine Union Mission Corporation of the Seventh Day
Adventists vs. Intermediate Appellate Court, et al.) considering the allegations,
issues, and arguments adduced in the petition for review on certiorari, the Court
Resolved to DENY the same for lack of merit. (Ibid p. 263)
Said resolution has become final and executory on July 16, 1986. (Ibid p. 269)

Earlier in 1983, the heirs of the late spouses Vicente Singson Encarnacion and Lucila Conde filed
Civil Case No. C-11836 for quieting of title with Branch CXXII, Regional Trial Court, Caloocan City,
where petitioner and private respondent were named as defendants.
Said case is still pending in the lower Court.
In the case at bar, G.R. No. 73794, MISSION, herein private respondent filed a petition for certiorari
with the then Intermediate Appellate Court docketed as AC-G.R. No. 04869 praying that the
aforementioned Orders of February 13, 1984 and October 26, 1984 of the Regional Trial Court be
set aside and that an order be issued to deposit in court or in a depositor trustee bank of any and all
payments, plus interest thereon, due the private respondent MISSION under the Land Development
Agreement, said amounts deposited to be paid to whomever may be found later to be entitled
thereto, with costs. (Rollo, G.R. No. 73794 p. 38)
The Intermediate Appelate Court, acting through its First Special Cases Division 4 dismissed the
petition in its decision on February 27, 1985 (Rollo, pp. 38-48). In its Resolution 5 promulgated on
September 5, 1985, the Court however, reversed its decision, thus:
WHEREFORE, the Court reconsiders its decision of February 27, 1986, and sets
aside the questioned portions of the respondent Court's orders of February 13 and
October 26, 1984. The private respondent is hereby ordered to deposit whatever
amounts are due from it under the Land Development Agreement of October 6, 1976
with a reputable bank to be designated by the respondent court to be the depository
trustee of the said amounts to be paid to whoever shall be found entitled thereto. No
costs. (Rollo, p. 25)
Eternal Gardens moved for a reconsideration of the above decision but it was denied for lack of
merit in a resolution promulgated on February 13, 1986, which states:
The private respondent Eternal Gardens Memorial Park Corporation's Motion for
Reconsideration of the Court's resolution promulgated September 5, 1985 requiring it
"to deposit whatever amounts are due from it under the Land Development
Agreement of October 6, 1976 ...," which was strongly opposed by the petitioner
North Philippine Union Mission of the Seventh Day Adventists, is hereby denied for
lack of merit, reiterating as it does, the very same issues and arguments that were
passed upon and considered by the Court in the very same resolution sought to be
reconsidered. (Rollo, p. 27)
Hence, this petition. On July 8,1987, the Third Division of this Court issued the following resolution:
... the court RESOLVED to give due course to this petition and require the parties to
file memoranda.
In the meantime, to avoid possible wastage of funds, the Court RESOLVED to
require the private respondent 6 to DEPOSIT its accruing installments within ten (10)
days from notice with a reputable commercial bank in a savings deposit account, in the
name of the Supreme Court of the Philippines, with the details to be reported or
manifested to this Court within ten (10) days from the time the deposit/deposits are made,
such deposits not to be withdrawn without authority from this Court. (Rollo, p. 162)
Petitioner's Memorandum With Prayer for the Deferment of Time to Make Deposit (Rollo, p. 218-236)
was filed on July 14, 1987. Its prayer was granted for a period of ten (10) days for the purpose, in the

resolution of July 29, 1987 (Rollo, p. 238). Private respondent filed its Opposition to Deferment of
Time to Make Deposit (Rollo, pp. 239-253) on July 24, 1987 to which petitioner filed its Reply to
Opposition on August 4, 1987 (Rollo, pp. 256-267). Both were noted by the Court in its resolution
dated September 7, 1987 (Rollo, p. 270). On August 25, 1987, private respondent filed its Rejoinder
to Petitioner's Reply to Opposition (Rollo, pp. 271-292).
Petitioner filed its Supplemental Memorandum with Reply to Opposition (To Deferment of time to
Make Deposit) on August 31, 1987 (Rollo, pp. 294-313) and a Sur-rejoinder on September 1, 1987
(Rollo, pp. 304-315).
The main issues in this case are:
I
Whether or not respondent Court of Appeals abused its discretion amounting to lack
of jurisdiction in reconsidering its resolution of February 27, 1985 and in requiring
instead in the resolution of September 5, 1985, that petitioner Eternal Gardens
deposit whatever amounts are due from it under the Land Development Agreement
with a reputable bank to be designated by the respondent court.
II
Whether or not the dismissal of AC-G.R. SP No. 06696 (North Philippine Union
Mission of the Seventh Day Adventists vs. Hon. Macandog, et al.) by the Second
Special Cases Division of the IAC which was affirmed by the Supreme Court in G.R.
No. 73569 constitutes a basis for the dismissal of the case at bar on the ground
of res adjudicata.
I
There is no question that courts have inherent power to amend their judgments, to make them
conformable to the law applicable provided that said judgments have not yet attained finality
(Villanueva v. Court of First Instance of Oriental Mindoro, Pinamalayan Branch II, 119 SCRA 288
[1982]). In fact, motions for reconsideration are allowed to convince the courts that their rulings are
erroneous and improper Siy v. Court of Appeals, 138 SCRA 543-544 [1985]; Guerra Enterprises Co.,
Inc. v. CFI of Lanao del Sur (32 SCRA 317 [1970]) and in so doing, said courts are given sufficient
opportunity to correct their errors.
In the case at bar, a careful analysis of the records will show that petitioner admitted among others in
its complaint in Interpleader that it is still obligated to pay certain amounts to private respondent; that
it claims no interest in such amounts due and is willing to pay whoever is declared entitled to said
amounts. Such admissions in the complaint were reaffirmed in open court before the Court of
Appeals as stated in the latter court's resolution dated September 5, 1985 in A.C. G.R. No. 04869
which states:
The private respondent (MEMORIAL) then reaffirms before the Court its original
position that it is a disinterested party with respect to the property now the subject of
the interpleader case ...
In the light of the willingness, expressly made before the court, affirming the
complaint filed below, that the private respondent (MEMORIAL) will pay whatever is

due on the Land Development Agreement to the rightful owner/owners, there is no


reason why the amount due on subject agreement has not been placed in the
custody of the Court. (Rollo, p. 227).
Under the circumstances, there appears to be no plausible reason for petitioner's objections to the
deposit of the amounts in litigation after having asked for the assistance of the lower court by filing a
complaint for interpleader where the deposit of aforesaid amounts is not only required by the nature
of the action but is a contractual obligation of the petitioner under the Land Development Program
(Rollo, p. 252).
As correctly observed by the Court of Appeals, the essence of an interpleader, aside from the
disavowal of interest in the property in litigation on the part of the petitioner, is the deposit of the
property or funds in controversy with the court. it is a rule founded on justice and equity: "that the
plaintiff may not continue to benefit from the property or funds in litigation during the pendency of the
suit at the expense of whoever will ultimately be decided as entitled thereto." (Rollo, p. 24).
The case at bar was elevated to the Court of Appeals on certiorari with prohibitory and mandatory
injunction. Said appellate court found that more than twenty million pesos are involved; so that on
interest alone for savings or time deposit would be considerable, now accruing in favor of the Eternal
Gardens. Finding that such is violative of the very essence of the complaint for interpleader as it
clearly runs against the interest of justice in this case, the Court of Appeals cannot be faulted for
finding that the lower court committed a grave abuse of discretion which requires correction by the
requirement that a deposit of said amounts should be made to a bank approved by the Court. (Rollo,
p.-25)
Petitioner would now compound the issue by its obvious turn-about, presently claiming in its
memorandum that there is a novation of contract so that the amounts due under the Land
Development Agreement were allegedly extinguished, and the requirement to make a deposit of said
amounts in a depositary bank should be held in abeyance until after the conflicting claims of
ownership now on trial before Branch CXXII RTC-Caloocan City, has finally been resolved.
All these notwithstanding, the need for the deposit in question has been established, riot only in the
lower courts and in the Court of Appeals but also in the Supreme Court where such deposit was
required in "the resolution of July 8, 1987 to avoid wastage of funds.
II
The claim that this case should be barred by res judicata is even more untenable.
The requisite of res judicata are: (1) the presence of a final former judgment; (2) the former judgment
was rendered by a court having jurisdiction over the subject matter and the parties; (3) the former
judgment is a judgment on the merits; and (4) there is between the first and the second action
identity of parties, of subject matter, and of causes of action Arguson v. Miclat 135 SCRA 678
[1985]; Carandang v. Venturanza, 133 SCRA 344 [1984]).
There is no argument against the rule that parties should not be permitted to litigate the same issue
more than once and when a right or fact has been judicially tried and determined by a court of
competent jurisdiction, so long as it remains unreversed, it should be conclusive upon the parties
and those in privity with them in law or estate (Sy Kao v. Court of Appeals, 132 SCRA 302 [1984]).

But a careful review of the records shows that there is no judgment on the merits in G.R. No. 73569
and in the case at bar, G.R. No. 73794; both of which deal on mere incidents arising therefrom.
In G.R. No 73569, the issue raised is the propriety of the grant of the motion for reconsideration
without a hearing thereon and the denial of the motion for execution, while in the case at bar, what is
assailed is the propriety of the order of respondent appellant court that petitioner Eternal Gardens
should deposit whatever amounts are due from it under the Land Development Agreement with a
reputable bank to be designated by the Court. In fact, there is a pending trial on the merits in the trial
court which the petitioner insists is a prejudicial question which should first be resolved. Moreover,
while there may be Identity of parties and of subject matter, the Land Development Contract, there is
no Identity of issues as clearly shown by the petitions filed.
PREMISES CONSIDERED, (a) the petition is DISMISSED for lack of merit; (b) this case (together
with all the claims of the intervenors on the merits) is REMANDED to the lower court for further
proceedings; and (c) the resolution of the Third Division of this Court of July 8, 1987 requiring the
deposit by the petitioner (see footnote No. 6) of the amounts contested in a depositary bank
STANDS (the Motion for Reconsideration thereof being hereby DENIED for reasons already
discussed) until after the decision on the merits shall have become final and executory.
SO ORDERED.

SUBHASH C. PASRICHA and


JOSEPHINE A. PASRICHA,
Petitioners,

G.R. No. 136409


Present:

YNARES-SANTIAGO, J.,
Chairperson,
QUISUMBING,*
AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
DON LUIS DISON REALTY, INC., NACHURA, JJ.
.
Respondent.
- versus -

Promulgated:
March 14, 2008
x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking the reversal of the Decision[1] of the Court of Appeals (CA)
dated May 26, 1998 and its Resolution[2] dated December 10, 1998 in CA-G.R. SP
No. 37739 dismissing the petition filed by petitioners Josephine and Subhash
Pasricha.
The facts of the case, as culled from the records, are as follows:
Respondent Don Luis Dison Realty, Inc. and petitioners executed two
Contracts of Lease[3] whereby the former, as lessor, agreed to lease to the latter
Units 22, 24, 32, 33, 34, 35, 36, 37 and 38 of the San Luis Building, located at
1006 M.Y. Orosa cor. T.M. Kalaw Streets, Ermita, Manila. Petitioners, in turn,
agreed to pay monthly rentals, as follows:
For Rooms 32/35:
From March 1, 1991 to August 31, 1991 P5,000.00/P10,000.00
From September 1, 1991 to February 29, 1992 P5,500.00/P11,000.00
From March 1, 1992 to February 28, 1993 P6,050.00/P12,100.00
From March 1, 1993 to February 28, 1994 P6,655.00/P13,310.00
From March 1, 1994 to February 28, 1995 P7,320.50/P14,641.00
From March 1, 1995 to February 28, 1996 P8,052.55/P16,105.10
From March 1, 1996 to February 29, 1997 P8,857.81/P17,715.61
From March 1, 1997 to February 28, 1998 P9,743.59/P19,487.17
From March 1, 1998 to February 28, 1999 P10,717.95/P21,435.89
From March 1, 1999 to February 28, 2000 P11,789.75/P23,579.48[4]
For Rooms 22 and 24:
Effective July 1, 1992 P10,000.00 with an increment of 10% every two years.[5]
For Rooms 33 and 34:
Effective April 1, 1992 P5,000.00 with an increment of 10% every two years.[6]
For Rooms 36, 37 and 38:

Effective when tenants vacate said premises P10,000.00 with an increment of


10% every two years.[7]

Petitioners were, likewise, required to pay for the cost of electric consumption,
water bills and the use of telephone cables.[8]
The lease of Rooms 36, 37 and 38 did not materialize leaving only Rooms 22, 24,
32, 33, 34 and 35 as subjects of the lease contracts. [9] While the contracts were in
effect, petitioners dealt with Francis Pacheco (Pacheco), then General Manager of
private respondent. Thereafter, Pacheco was replaced by Roswinda Bautista (Ms.
Bautista).[10] Petitioners religiously paid the monthly rentals until May 1992.
[11]
After that, however, despite repeated demands, petitioners continuously refused
to pay the stipulated rent. Consequently, respondent was constrained to refer the
matter to its lawyer who, in turn, made a final demand on petitioners for the
payment of the accrued rentals amounting to P916,585.58.[12] Because petitioners
still refused to comply, a complaint for ejectment was filed by private respondent
through its representative, Ms. Bautista, before the Metropolitan Trial Court
(MeTC) of Manila.[13] The case was raffled to Branch XIX and was docketed as
Civil Case No. 143058-CV.
Petitioners admitted their failure to pay the stipulated rent for the leased premises
starting July until November 1992, but claimed that such refusal was justified
because of the internal squabble in respondent company as to the person authorized
to receive payment.[14] To further justify their non-payment of rent, petitioners
alleged that they were prevented from using the units (rooms) subject matter of the
lease contract, except Room 35. Petitioners eventually paid their monthly rent for
December 1992 in the amount of P30,000.00, and claimed that respondent waived
its right to collect the rents for the months of July to November 1992 since
petitioners were prevented from using Rooms 22, 24, 32, 33, and 34. [15] However,
they again withheld payment of rents starting January 1993 because of respondents
refusal to turn over Rooms 36, 37 and 38. [16] To show good faith and willingness to
pay the rents, petitioners alleged that they prepared the check vouchers for their

monthly rentals from January 1993 to January 1994.[17] Petitioners further averred
in their Amended Answer[18] that the complaint for ejectment was prematurely
filed, as the controversy was not referred to the barangay for conciliation.
For failure of the parties to reach an amicable settlement, the pre-trial conference
was terminated. Thereafter, they submitted their respective position papers.
On November 24, 1994, the MeTC rendered a Decision dismissing the complaint
for ejectment.[19] It considered petitioners non-payment of rentals as
unjustified. The court held that mere willingness to pay the rent did not amount to
payment of the obligation; petitioners should have deposited their payment in the
name of respondent company. On the matter of possession of the subject premises,
the court did not give credence to petitioners claim that private respondent failed to
turn over possession of the premises. The court, however, dismissed the complaint
because of Ms. Bautistas alleged lack of authority to sue on behalf of the
corporation.
Deciding the case on appeal, the Regional Trial Court (RTC) of Manila, Branch 1,
in Civil Case No. 94-72515, reversed and set aside the MeTC Decision in this
wise:
WHEREFORE, the appealed decision is hereby reversed and set aside and
another one is rendered ordering defendants-appellees and all persons claiming
rights under them, as follows:
(1) to vacate the leased premised (sic) and restore possession thereof to
plaintiff-appellant;
(2) to pay plaintiff-appellant the sum of P967,915.80 representing the
accrued rents in arrears as of November 1993, and the rents on the
leased premises for the succeeding months in the amounts stated in
paragraph 5 of the complaint until fully paid; and
(3) to pay an additional sum equivalent to 25% of the rent accounts as
and for attorneys fees plus the costs of this suit.
SO ORDERED.[20]

The court adopted the MeTCs finding on petitioners unjustified refusal to pay the
rent, which is a valid ground for ejectment. It, however, faulted the MeTC in
dismissing the case on the ground of lack of capacity to sue. Instead, it upheld Ms.
Bautistas authority to represent respondent notwithstanding the absence of a board
resolution to that effect, since her authority was implied from her power as a
general manager/treasurer of the company.[21]
Aggrieved, petitioners elevated the matter to the Court of Appeals in a petition for
review on certiorari.[22] On March 18, 1998, petitioners filed an Omnibus
Motion[23] to cite Ms. Bautista for contempt; to strike down the MeTC and RTC
Decisions as legal nullities; and to conduct hearings and ocular inspections or
delegate the reception of evidence. Without resolving the aforesaid motion,
on May 26, 1998, the CA affirmed[24] the RTC Decision but deleted the award of
attorneys fees.[25]
Petitioners moved for the reconsideration of the aforesaid decision.
[26]
Thereafter, they filed several motions asking the Honorable Justice Ruben T.
Reyes to inhibit from further proceeding with the case allegedly because of his
close association with Ms. Bautistas uncle-in-law.[27]
In a Resolution[28] dated December 10, 1998, the CA denied the motions for lack of
merit. The appellate court considered said motions as repetitive of their previous
arguments, irrelevant and obviously dilatory.[29] As to the motion for inhibition of
the Honorable Justice Reyes, the same was denied, as the appellate court justice
stressed that the decision and the resolution were not affected by extraneous
matters.[30] Lastly, the appellate court granted respondents motion for execution and
directed the RTC to issue a new writ of execution of its decision, with the
exception of the award of attorneys fees which the CA deleted.[31]
Petitioners now come before this Court in this petition for review
on certiorari raising the following issues:

I.
Whether this ejectment suit should be dismissed and whether petitioners
are entitled to damages for the unauthorized and malicious filing by Rosario (sic)
Bautista of this ejectment case, it being clear that [Roswinda] whether as general
manager or by virtue of her subsequent designation by the Board of Directors as
the corporations attorney-in-fact had no legal capacity to institute the ejectment
suit, independently of whether Director Pacanas Order setting aside the SEC
revocation Order is a mere scrap of paper.
II.
Whether the RTCs and the Honorable Court of Appeals failure and refusal to
resolve the most fundamental factual issues in the instant ejectment case render
said decisions void on their face by reason of the complete abdication by the
RTC and the Honorable Justice Ruben Reyes of their constitutional duty not
only to clearly and distinctly state the facts and the law on which a decision is
based but also to resolve the decisive factual issues in any given case.
III.
Whether the (1) failure and refusal of Honorable Justice Ruben Reyes to inhibit
himself, despite his admission by reason of his silence of petitioners accusation
that the said Justice enjoyed a $7,000.00 scholarship grant courtesy of the unclein-law of respondent corporations purported general manager and (2), worse, his
act of ruling against the petitioners and in favor of the respondent corporation
constitute an unconstitutional deprivation of petitioners property without due
process of law.[32]

In addition to Ms. Bautistas lack of capacity to sue, petitioners insist that


respondent company has no standing to sue as a juridical person in view of the
suspension and eventual revocation of its certificate of registration. [33] They
likewise question the factual findings of the court on the bases of their ejectment
from the subject premises. Specifically, they fault the appellate court for not
finding that: 1) their non-payment of rentals was justified; 2) they were deprived of
possession of all the units subject of the lease contract except Room 35; and 3)
respondent violated the terms of the contract by its continued refusal to turn over
possession of Rooms 36, 37 and 38. Petitioners further prayed that a Temporary
Restraining Order (TRO) be issued enjoining the CA from enforcing its Resolution
directing the issuance of a Writ of Execution. Thus, in a

Resolution[34] dated January 18, 1999, this Court directed the parties to maintain
the status quo effective immediately until further orders.
The petition lacks merit.
We uphold the capacity of respondent company to institute the ejectment
case. Although the Securities and Exchange Commission (SEC) suspended and
eventually revoked respondents certificate of registration on February 16, 1995,
records show that it instituted the action for ejectment on December 15,
1993. Accordingly, when the case was commenced, its registration was not yet
revoked.[35] Besides, as correctly held by the appellate court, the SEC later set aside
its earlier orders of suspension and revocation of respondents certificate, rendering
the issue moot and academic.[36]
We likewise affirm Ms. Bautistas capacity to sue on behalf of the company despite
lack of proof of authority to so represent it. A corporation has no powers except
those expressly conferred on it by the Corporation Code and those that are implied
from or are incidental to its existence. In turn, a corporation exercises said powers
through its board of directors and/or its duly authorized officers and
agents. Physical acts, like the signing of documents, can be performed only by
natural persons duly authorized for the purpose by corporate by-laws or by a
specific act of the board of directors.[37] Thus, any person suing on behalf of the
corporation should present proof of such authority. Although Ms. Bautista initially
failed to show that she had the capacity to sign the verification and institute the
ejectment case on behalf of the company, when confronted with such question, she
immediately presented the Secretarys Certificate[38] confirming her authority to
represent the company.
There is ample jurisprudence holding that subsequent and substantial
compliance may call for the relaxation of the rules of procedure in the interest of
justice.[39] In Novelty Phils., Inc. v. Court of Appeals, [40] the Court faulted the

appellate court for dismissing a petition solely on petitioners failure to timely


submit proof of authority to sue on behalf of the corporation. In Pfizer, Inc. v.
Galan,[41] we upheld the sufficiency of a petition verified by an employment
specialist despite the total absence of a board resolution authorizing her to act for
and on behalf of the corporation. Lastly, in China Banking Corporation v.
Mondragon International Philippines, Inc,[42] we relaxed the rules of procedure
because the corporation ratified the managers status as an authorized signatory. In
all of the above cases, we brushed aside technicalities in the interest of justice. This
is not to say that we disregard the requirement of prior authority to act in the name
of a corporation. The relaxation of the rules applies only to highly meritorious
cases, and when there is substantial compliance. While it is true that rules of
procedure are intended to promote rather than frustrate the ends of justice, and
while the swift unclogging of court dockets is a laudable objective, we should not
insist on strict adherence to the rules at the expense of substantial justice.
[43]
Technical and procedural rules are intended to help secure, not suppress, the
cause of justice; and a deviation from the rigid enforcement of the rules may be
allowed to attain that prime objective, for, after all, the dispensation of justice is
the core reason for the existence of courts.[44]
As to the denial of the motion to inhibit Justice Reyes, we find the same to be in
order. First, the motion to inhibit came after the appellate court rendered the
assailed decision, that is, after Justice Reyes had already rendered his opinion on
the merits of the case. It is settled that a motion to inhibit shall be denied if filed
after a member of the court had already given an opinion on the merits of the case,
the rationale being that a litigant cannot be permitted to speculate on the action of
the court x x x (only to) raise an objection of this sort after the decision has been
rendered.[45] Second, it is settled that mere suspicion that a judge is partial to one of
the parties is not enough; there should be evidence to substantiate the
suspicion. Bias and prejudice cannot be presumed, especially when weighed
against a judges sacred pledge under his oath of office to administer justice without
regard for any person and to do right equally to the poor and the rich. There must

be a showing of bias and prejudice stemming from an extrajudicial source,


resulting in an opinion on the merits based on something other than what the judge
learned from his participation in the case.[46] We would like to reiterate, at this
point, the policy of the Court not to tolerate acts of litigants who, for just about any
conceivable reason, seek to disqualify a judge (or justice) for their own purpose,
under a plea of bias, hostility, prejudice or prejudgment.[47]
We now come to the more substantive issue of whether or not the petitioners may
be validly ejected from the leased premises.
Unlawful detainer cases are summary in nature. In such cases, the elements to be
proved and resolved are the fact of lease and the expiration or violation of its
terms.[48] Specifically, the essential requisites of unlawful detainer are: 1) the fact of
lease by virtue of a contract, express or implied; 2) the expiration or termination of
the possessors 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.[49]
It is undisputed that petitioners and respondent entered into two separate contracts
of lease involving nine (9) rooms of the San Luis Building. Records, likewise,
show that respondent repeatedly demanded that petitioners vacate the premises, but
the latter refused to heed the demand; thus, they remained in possession of the
premises. The only contentious issue is whether there was indeed a violation of the
terms of the contract: on the part of petitioners, whether they failed to pay the
stipulated rent without justifiable cause; while on the part of respondent, whether it
prevented petitioners from occupying the leased premises except Room 35.
This issue involves questions of fact, the resolution of which requires the
evaluation of the evidence presented. The MeTC, the RTC and the CA all found

that petitioners failed to perform their obligation to pay the stipulated rent. It is
settled doctrine that in a civil case, the conclusions of fact of the trial court,
especially when affirmed by the Court of Appeals, are final and conclusive, and
cannot be reviewed on appeal by the Supreme Court.[50] Albeit the rule admits of
exceptions, not one of them obtains in this case.[51]
To settle this issue once and for all, we deem it proper to assess the array of factual
findings supporting the courts conclusion.
The evidence of petitioners non-payment of the stipulated rent is
overwhelming. Petitioners, however, claim that such non-payment is justified by
the following: 1) the refusal of respondent to allow petitioners to use the leased
properties, except room 35; 2) respondents refusal to turn over Rooms 36, 37 and
38; and 3) respondents refusal to accept payment tendered by petitioners.
Petitioners justifications are belied by the evidence on record. As correctly held by
the CA, petitioners communications to respondent prior to the filing of the
complaint never mentioned their alleged inability to use the rooms. [52] What they
pointed out in their letters is that they did not know to whom payment should be
made, whether to Ms. Bautista or to Pacheco.[53] In their July 26 and October 30,
1993 letters, petitioners only questioned the method of computing their electric
billings without, however, raising a complaint about their failure to use the rooms.
[54]
Although petitioners stated in their December 30, 1993 letter that respondent
failed to fulfill its part of the contract,[55] nowhere did they specifically refer to their
inability to use the leased rooms. Besides, at that time, they were already in default
on their rentals for more than a year.
If it were true that they were allowed to use only one of the nine (9) rooms
subject of the contract of lease, and considering that the rooms were intended for a
business purpose, we cannot understand why they did not specifically assert their
right.If we believe petitioners contention that they had been prevented from using

the rooms for more than a year before the complaint for ejectment was filed, they
should have demanded specific performance from the lessor and commenced an
action in court. With the execution of the contract, petitioners were already in a
position to exercise their right to the use and enjoyment of the property according
to the terms of the lease contract.[56] As borne out by the records, the fact is that
respondent turned over to petitioners the keys to the leased premises and
petitioners, in fact, renovated the rooms. Thus, they were placed in possession of
the premises and they had the right to the use and enjoyment of the same. They,
likewise, had the right to resist any act of intrusion into their peaceful possession of
the property, even as against the lessor itself. Yet, they did not lift a finger to
protect their right if, indeed, there was a violation of the contract by the lessor.
What was, instead, clearly established by the evidence was petitioners nonpayment of rentals because ostensibly they did not know to whom payment should
be made. However, this did not justify their failure to pay, because if such were the
case, they were not without any remedy. They should have availed of the
provisions of the Civil Code of the Philippines on the consignation of payment and
of the Rules of Court on interpleader.
Article 1256 of the Civil Code provides:
Article 1256. If the creditor to whom tender of payment has been made
refuses without just cause to accept it, the debtor shall be released from
responsibility by the consignation of the thing or sum due.
Consignation alone shall produce the same effect in the following cases:
xxxx
(4) When two or more persons claim the same right to collect;
x x x x.

Consignation shall be made by depositing the things due at the disposal of a


judicial authority, before whom the tender of payment shall be proved in a proper
case, and the announcement of the consignation in other cases.[57]
In the instant case, consignation alone would have produced the effect of
payment of the rentals. The rationale for consignation is to avoid the performance
of an obligation becoming more onerous to the debtor by reason of causes not
imputable to him.[58] Petitioners claim that they made a written tender of payment
and actually prepared vouchers for their monthly rentals. But that was insufficient
to constitute a valid tender of payment. Even assuming that it was valid tender,
still, it would not constitute payment for want of consignation of the amount. Wellsettled is the rule that tender of payment must be accompanied by consignation in
order that the effects of payment may be produced.[59]
Moreover, Section 1, Rule 62 of the Rules of Court provides:
Section 1. When interpleader proper. Whenever conflicting claims upon the same
subject matter are or may be made against a person who claims no interest
whatever in the subject matter, or an interest which in whole or in part is not
disputed by the claimants, he may bring an action against the conflicting
claimants to compel them to interplead and litigate their several claims among
themselves.

Otherwise stated, an action for interpleader is proper when the lessee does not
know to whom payment of rentals should be made due to conflicting claims on the
property (or on the right to collect). [60] The remedy is afforded not to protect a
person against double liability but to protect him against double vexation in respect
of one liability.[61]
Notably, instead of availing of the above remedies, petitioners opted to
refrain from making payments.

Neither can petitioners validly invoke the non-delivery of Rooms 36, 37 and 38 as
a justification for non-payment of rentals. Although the two contracts embraced the
lease of nine (9) rooms, the terms of the contracts - with their particular reference
to specific rooms and the monthly rental for each - easily raise the inference that
the parties intended the lease of each room separate from that of the others. There
is nothing in the contract which would lead to the conclusion that the lease of one
or more rooms was to be made dependent upon the lease of all the nine (9)
rooms. Accordingly, the use of each room by the lessee gave rise to the
corresponding obligation to pay the monthly rental for the same. Notably,
respondent demanded payment of rentals only for the rooms actually delivered to,
and used by, petitioners.
It may also be mentioned that the contract specifically provides that the lease of
Rooms 36, 37 and 38 was to take effect only when the tenants thereof would vacate
the premises. Absent a clear showing that the previous tenants had vacated the
premises, respondent had no obligation to deliver possession of the subject rooms
to petitioners. Thus, petitioners cannot use the non-delivery of Rooms 36, 37 and
38 as an excuse for their failure to pay the rentals due on the other rooms they
occupied.
In light of the foregoing disquisition, respondent has every right to exercise his
right to eject the erring lessees. The parties contracts of lease contain identical
provisions, to wit:
In case of default by the LESSEE in the payment of rental on the fifth (5 th) day of
each month, the amount owing shall as penalty bear interest at the rate of FOUR
percent (4%) per month, to be paid, without prejudice to the right of the LESSOR
to terminate his contract, enter the premises, and/or eject the LESSEE as
hereinafter set forth;[62]

Moreover, Article 1673[63] of the Civil Code gives the lessor the right to judicially
eject the lessees in case of non-payment of the monthly rentals. A contract of lease
is a consensual, bilateral, onerous and commutative contract by which the owner

temporarily grants the use of his property to another, who undertakes to pay the
rent therefor.[64] For failure to pay the rent, petitioners have no right to remain in
the leased premises.
WHEREFORE, premises considered, the petition is DENIED and the Status
Quo Order dated January 18, 1999 is hereby LIFTED. The Decision of the Court
of Appeals dated May 26, 1998 and its Resolution dated December 10, 1998 in
CA-G.R. SP No. 37739 are AFFIRMED.
SO ORDERED.

G.R. Nos. 154470-71

September 24, 2012

BANK OF COMMERCE, Petitioner,


vs.
PLANTERS DEVELOPMENT BANK and BANGKO SENTRAL NG PILIPINAS, Respondent.
x-----------------------x
G.R. Nos. 154589-90
BANGKO SENTRAL NG PILIPINAS, Petitioner,
vs.
PLANTERS DEVELOPMENT BANK, Respondent.
DECISION
BRION, J.:
Before the Court are two consolidated petitions for review on certiorari under Rule 45,1 on pure
questions of law, filed by the petitioners Bank of Commerce (BOC) and the Bangko Sentral ng
Pilipinas (BSP). They assail the January 10, 2002 and July 23, 2002 Orders (assailed orders) of the
Regional Trial Court (RTC) of Makati City, Branch 143, in Civil Case Nos. 94-3233 and 94-3254.
These orders dismissed (i) the petition filed by the Planters Development Bank (PDB), (ii) the
"counterclaim" filed by the BOC, and (iii) the counter-complaint/cross-claim for interpleader filed
bythe BSP; and denied the BOCs and the BSPs motions for reconsideration.
THE ANTECEDENTS
The Central Bank bills
I. First set of CB bills

The Rizal Commercial Banking Corporation (RCBC) was the registered owner of seven Central
Bank (CB) bills with a total face value of P 70 million, issued on January 2, 1994 and would mature
on January 2, 1995.2 As evidenced by a "Detached Assignment" dated April 8, 1994, 3 the RCBC sold
these CB bills to the BOC.4 As evidenced by another "Detached Assignment"5 of even date, the
BOC, in turn, sold these CB bills to the PDB.6The BOC delivered the Detached Assignments to the
PDB.7
On April 15, 1994 (April 15 transaction), the PDB, in turn, sold to the BOC Treasury Bills worth P 70
million, with maturity date of June 29, 1994, as evidenced by a Trading Order 8 and a Confirmation of
Sale.9 However, instead of delivering the Treasury Bills, the PDB delivered the seven CB bills to the
BOC, as evidenced by a PDB Security Delivery Receipt, bearing a "note: ** substitution in lieu of 0629-94" referring to the Treasury Bills.10Nevertheless, the PDB retained possession of the Detached
Assignments. It is basically the nature of this April 15 transaction that the PDB and the BOC cannot
agree on.
The transfer of the first set of seven CB bills
i. CB bill nos. 45351-53
On April 20, 1994, according to the BOC, it "sold back"11 to the PDB three of the seven CB bills. In
turn, the PDB transferred these three CB bills to Bancapital Development Corporation (Bancap). On
April 25, 1994, the BOC bought the three CB bills from Bancap so, ultimately, the BOC reacquired
these three CB bills,12 particularly described as follows:
Serial No.:

2BB XM 045351
2BB XM 045352
2BB XM 045353

Quantity:

Three (3)

Denomination:

Php 10 million

Total Face Value:


ii. CB bill nos. 45347-50

Php 30 million

On April 20, 1994, the BOC sold the remaining four (4) CB bills to Capital One Equities
Corporation13 which transferred them to All-Asia Capital and Trust Corporation (All Asia). On
September 30, 1994, All Asia further transferred the four CB bills back to the RCBC. 14
On November 16, 1994, the RCBC sold back to All Asia one of these 4 CB bills. When the BSP
refused to release the amount of this CB bill on maturity, the BOC purchased from All Asia this lone
CB bill,15 particularly described as follows:16
Serial No.:

2BB XM 045348

Quantity:

One (1)

Denomination:

Php 10 million

Total Face Value:


Php 10 million
As the registered owner of the remaining three CB bills, the RCBC sold them to IVI Capital and
Insular Savings Bank. Again, when the BSP refused to release the amount of this CB bill on maturity,
the RCBC paid back its transferees, reacquired these three CB bills and sold them to the BOC
ultimately, the BOC acquired these three CB bills.

All in all, the BOC acquired the first set of seven CB bills.
II. Second set of CB bills
On April 19, 1994, the RCBC, as registered owner, (i) sold two CB bills with a total face value of P 20
million to the PDB and (ii) delivered to the PDB the corresponding Detached Assignment. 17 The two
CB bills were particularly described as follows:
Serial No.:

BB XM 045373
BB XM 045374

Issue date:

January 3, 1994

Maturity date:

January 2, 1995

Denomination:

Php 10 million

Total Face value:


Php 20 million
On even date, the PDB delivered to Bancap the two CB bills 18 (April 19 transaction). In turn, Bancap
sold the CB bills to Al-Amanah Islamic Investment Bank of the Philippines, which in turn sold it to the
BOC.19
PDBs move against the transfer of
the first and second sets of CB bills
On June 30, 1994, upon learning of the transfers involving the CB bills, the PDB informed 20 the
Officer-in-Charge of the BSPs Government Securities Department,21 Lagrimas Nuqui, of the PDBs
claim over these CB bills, based on the Detached Assignments in its possession. The PDB
requested the BSP22 to record its claim in the BSPs books, explaining that its non-possession of the
CB bills is "on account of imperfect negotiations thereof and/or subsequent setoff or transfer." 23
Nuqui denied the request, invoking Section 8 of CB Circular No. 28 (Regulations Governing Open
Market Operations, Stabilization of the Securities Market, Issue, Servicing and Redemption of the
Public Debt)24 which requires the presentation of the bond before a registered bond may be
transferred on the books of the BSP.25
In a July 25, 1994 letter, the PDB clarified to Nuqui that it was not "asking for the transfer of the CB
Bills. rather it intends to put the BSP on formal notice that whoever is in possession of said bills is
not a holder in due course," and, therefore the BSP should not make payment upon the presentation
of the CB bills on maturity.26 Nuqui responded that the BSP was "not in a position at that point in time
to determine who is and who is not the holder in due course since it is not privy to all acts and time
involving the transfers or negotiation" of the CB bills. Nuqui added that the BSPs action shall be
governed by CB Circular No. 28, as amended.27
On November 17, 1994, the PDB also asked BSP Deputy Governor Edgardo Zialcita that (i) a
notation in the BSPs books be made against the transfer, exchange, or payment of the bonds and
the payment of interest thereon; and (ii) the presenter of the bonds upon maturity be required to
submit proof as a holder in due course (of the first set of CB bills). The PDB relied on Section 10 (d)
4 of CB Circular No. 28.28 This provision reads:
(4) Assignments effected by fraud Where the assignment of a registered bond is secured by
fraudulent representations, the Central Bank can grant no relief if the assignment has been honored
without notice of fraud. Otherwise, the Central Bank, upon receipt of notice that the assignment is

claimed to have been secured by fraudulent representations, or payment of the bond the payment of
interest thereon, and when the bond is presented, will call upon the owner and the person presenting
the bond to substantiate their respective claims.If it then appears that the person presenting the
bond stands in the position of bonafide holder for value, the Central Bank, after giving the owner an
opportunity to assert his claim, will pass the bond for transfer, exchange or payments, as the case
may be, without further question.
In a December 29, 1994 letter, Nuqui again denied the request, reiterating the BSPs previous stand.
In light of these BSP responses and the impending maturity of the CB bills, the PDB filed 29 with the
RTC two separate petitions for Mandamus, Prohibition and Injunction with prayer for Preliminary
Injunction and Temporary Restraining Order, docketed as Civil Case No. 94-3233 (covering the first
set of CB bills) and Civil Case 94-3254 (covering the second set of CB bills) against Nuqui, the BSP
and the RCBC.30
The PDB essentially claims that in both the April 15 transaction (involving the first set of CB bills) and
the April 19 transaction (involving the second set of CB bills), there was no intent on its part to
transfer title of the CB bills, as shown by its non-issuance of a detached assignment in favor of the
BOC and Bancap, respectively. The PDB particularly alleges that it merely "warehoused" 31 the first
set of CB bills with the BOC, as security collateral.
On December 28, 1994, the RTC temporarily enjoined Nuqui and the BSP from paying the face
value of the CB bills on maturity.32 On January 10, 1995, the PDB filed an Amended Petition,
additionally impleading the BOC and All Asia.33 In a January 13, 1995 Order, the cases were
consolidated.34 On January 17, 1995, the RTC granted the PDBs application for a writ of preliminary
prohibitory injunction.35 In both petitions, the PDB identically prayed:
WHEREFORE, it is respectfully prayed x x x that, after due notice and hearing, the Writs of
Mandamus, Prohibition and Injunction, be issued; (i) commanding the BSP and Nuqui, or whoever
may take her place (a) to record forthwith in the books of BSP the claim of x x x PDB on the [two sets of] CB Bills in
accordance with Section 10 (d) (4) of revised C.B. Circular No. 28; and
(b) also pursuant thereto, when the bills are presented on maturity date for payment, to call (i) x x x
PDB, (ii) x x x RCBC x x x, (iii) x x x BOC x x x, and (iv) x x x ALL-ASIA x x x; or whoever will present
the [first and second sets of] CB Bills for payment, to submit proof as to who stands as the holder in
due course of said bills, and, thereafter, act accordingly;
and (ii) ordering the BSP and Nuqui to pay jointly and severally to x x x PDB the following:
(a) the sum of P 100,000.00, as and for exemplary damages;
(b) the sum of at least P 500,000.00, or such amount as shall be proved at the trial, as and
for attorneys fees;
(c) the legal rate of interest from the filing of this Petition until full payment of the sums
mentioned in this Petition; and
(d) the costs of suit.36

After the petitions were filed, the BOC acquired/reacquired all the nine CB bills the first and second
sets of CB bills (collectively, subject CB bills).
Defenses of the BSP and of the BOC37
The BOC filed its Answer, praying for the dismissal of the petition. It argued that the PDB has no
cause of action against it since the PDB is no longer the owner of the CB bills. Contrary to the PDBs
"warehousing theory,"38 the BOC asserted that the (i) April 15 transaction and the (ii) April 19
transaction covering both sets of CB bills - were valid contracts of sale, followed by a transfer of
title (i) to the BOC (in the April 15 transaction) upon the PDBs delivery of the 1st set of CB bills in
substitution of the Treasury Bills the PDB originally intended to sell, and (ii) to Bancap (in the April 19
transaction) upon the PDBs delivery of the 2nd set of CB bills to Bancap, likewise by way of
substitution.
The BOC adds that Section 10 (d) 4 of CB Circular No. 28 cannot apply to the PDBs case because
(i) the PDB is not in possession of the CB bills and (ii) the BOC acquired these bills from the PDB, as
to the 1st set of CB bills, and from Bancap, as to the 2nd set of CB bills, in good faith and for value.
The BOC also asserted a compulsory counterclaim for damages and attorneys fees.
On the other hand, the BSP countered that the PDB cannot invoke Section 10 (d) 4 of CB Circular
No. 28 because this section applies only to an "owner" and a "person presenting the bond," of which
the PDB is neither. The PDB has not presented to the BSP any assignment of the subject CB bills,
duly recorded in the BSPs books, in its favor to clothe it with the status of an "owner." 39 According to
the BSP
Section 10 d. (4) applies only to a registered bond which is assigned. And the issuance of CB Bills x
x x are required to be recorded/registered in BSPs books. In this regard, Section 4 a. (1) of CB
Circular 28 provides that registered bonds "may be transferred only by an assignment thereon duly
executed by the registered owner or his duly authorized representative x x x and duly recorded on
the books of the Central Bank."
xxxx
The alleged assignment of subject CB Bills in PDBs favor is not recorded/registered in BSPs
books.40(underscoring supplied)
Consequently, when Nuqui and the BSP refused the PDBs request (to record its claim), they were
merely performing their duties in accordance with CB Circular No. 28.
Alternatively, the BSP asked that an interpleader suit be allowed between and among the claimants
to the subject CB bills on the position that while it is able and willing to pay the subject CB bills face
value, it is duty bound to ensure that payment is made to the rightful owner. The BSP prayed that
judgment be rendered:
a. Ordering the dismissal of the PDBs petition for lack of merit;
b. Determining which between/among [PDB] and the other claimants is/are lawfully entitled
to the ownership of the subject CB bills and the proceeds thereof;
c. x x x;

d. Ordering PDB to pay BSP and Nuqui such actual/compensatory and exemplary
damages as the RTC may deem warranted; and
e. Ordering PDB to pay Nuqui moral damages and to pay the costs of the suit. 41
Subsequent events
The PDB agreed with the BSPs alternative response for an interpleader
4. PDB agrees that the various claimants should now interplead and substantiate their respective
claims on the subject CB bills. However, the total face value of the subject CB bills should be
deposited in escrow with a private bank to be disposed of only upon order of the RTC. 42
Accordingly, on June 9, 199543 and August 4, 1995,44 the BOC and the PDB entered into two
separate Escrow Agreements.45 The first agreement covered the first set of CB bills, while the
second agreement covered the second set of CB bills. The parties agreed to jointly collect from the
BSP the maturity proceeds of these CB bills and to deposit said amount in escrow, "pending final
determination by Court judgment, or amicable settlement as to who shall be eventually entitled
thereto."46 The BOC and the PDB filed a Joint Motion,47 submitting these Escrow Agreements for
court approval. The RTC gave its approval to the parties Joint Motion. 48 Accordingly, the BSP
released the maturity proceeds of the CB bills by crediting the Demand Deposit Account of the PDB
and of the BOC with 50% each of the maturity proceeds of the amount in escrow.49
In view of the BOCs acquisition of all the CB bills, All Asia50 moved to be dropped as a respondent
(with the PDBs conformity51), which the RTC granted.52 The RCBC subsequently followed suit.53
In light of the developments, on May 4, 1998, the RTC required the parties to manifest their intention
regarding the case and to inform the court of any amicable settlement; "otherwise, th[e] case shall be
dismissed for lack of interest."54 Complying with the RTCs order, the BOC moved (i) that the case be
set for pre-trial and (ii) for further proceeding to resolve the remaining issues between the BOC and
the PDB, particularly on "who has a better right over the subject CB bills." 55 The PDB joined the BOC
in its motion.56
On September 28, 2000, the RTC granted the BSPs motion to interplead and, accordingly, required
the BOC to amend its Answer and for the conflicting claimants to comment thereon. 57 In October
2000, the BOC filed its Amended Consolidated Answer with Compulsory Counterclaim, reiterating its
earlier arguments asserting ownership over the subject CB bills.58
In the alternative, the BOC added that even assuming that there was no effective transfer of the nine
CB bills ultimately to the BOC, the PDB remains obligated to deliver to the BOC, as buyer in the April
15 transaction and ultimate successor-in-interest of the buyer (Bancap) in the April 19 transaction,
either the original subjects of the sales or the value thereof, plus whatever income that may have
been earned during the pendency of the case.59
That BOC prayed:
1. To declare BOC as the rightful owner of the nine (9) CB bills and as the party entitled to
the proceeds thereof as well as all income earned pursuant to the two (2) Escrow
Agreements entered into by BOC and PDB.

2. In the alternative, ordering PDB to deliver the original subject of the sales transactions or
the value thereof and whatever income earned by way of interest at prevailing rate.
Without any opposition or objection from the PDB, on February 23, 2001, the RTC admitted 60 the
BOCs Amended Consolidated Answer with Compulsory Counterclaims.
In May 2001, the PDB filed an Omnibus Motion,61 questioning the RTCs jurisdiction over the BOCs
"additional counterclaims." The PDB argues that its petitions pray for the BSP (not the RTC) to
determine who among the conflicting claimants to the CB bills stands in the position of the bona fide
holder for value. The RTC cannot entertain the BOCs counterclaim, regardless of its nature,
because it is the BSP which has jurisdiction to determine who is entitled to receive the proceeds of
the CB bills.
The BOC opposed62 the PDBs Omnibus Motion. The PDB filed its Reply.63
In a January 10, 2002 Order, the RTC dismissed the PDBs petition, the BOCs counterclaim and the
BSPs counter-complaint/cross-claim for interpleader, holding that under CB Circular No. 28, it has
no jurisdiction (i) over the BOCs "counterclaims" and (ii) to resolve the issue of ownership of the CB
bills.64 With the denial of their separate motions for Reconsideration,65 the BOC and the BSP
separately filed the present petitions for review on certiorari.66
THE BOCS and THE BSPS PETITIONS
The BOC argues that the present cases do not fall within the limited provision of Section 10 (d) 4 of
CB Circular No. 28, which contemplates only of three situations: first, where the fraudulent
assignment is not coupled with a notice to the BSP, it can grant no relief; second, where the
fraudulent assignment is coupled with a notice of fraud to the BSP, it will make a notation against the
assignment and require the owner and the holder to substantiate their claims; and third, where the
case does not fall on either of the first two situations, the BSP will have to await action on the
assignment pending settlement of the case, whether by agreement or by court order.
The PDBs case cannot fall under the first two situations. With particular regard to the second
situation, CB Circular No. 28 requires that the conflict must be between an "owner" and a "holder,"
for the BSP to exercise its limited jurisdiction to resolve conflicting claims; and the word "owner" here
refers to the registered owner giving notice of the fraud to the BSP. The PDB, however, is not the
registered owner nor is it in possession (holder) of the CB bills.67 Consequently, the PDBs case can
only falls under the third situation which leaves the RTC, as a court of general jurisdiction, with the
authority to resolve the issue of ownership of a registered bond (the CB bills) not falling in either of
the first two situations.
The BOC asserts that the policy consideration supportive of its interpretation of CB Circular No. 28 is
to have a reliable system to protect the registered owner; should he file a notice with the BSP about
a fraudulent assignment of certain CB bills, the BSP simply has to look at its books to determine who
is the owner of the CB bills fraudulently assigned. Since it is only the registered owner who complied
with the BSPs requirement of recording an assignment in the BSPs books, then "the protective
mantle of administrative proceedings" should necessarily benefit him only, without extending the
same benefit to those who chose to ignore the Circulars requirement, like the PDB. 68
Assuming arguendo that the PDBs case falls under the second situation i.e., the BSP has
jurisdiction to resolve the issue of ownership of the CB bills the more recent CB Circular No. 76980 (Rules and Regulations Governing Central Bank Certificates of Indebtedness) already

superseded CB Circular No. 28, and, in particular, effectively amended Section 10 (d) 4 of CB
Circular No. 28. The pertinent provisions of CB Circular No. 769-80 read:
Assignment Affected by Fraud. Any assignment for transfer of ownership of registered certificate
obtained through fraudulent representation if honored by the Central Bank or any of its authorized
service agencies shall not make the Central Bank or agency liable therefore unless it has previous
formal notice of the fraud. The Central Bank, upon notice under oath that the assignment was
secured through fraudulent means, shall immediately issue and circularize a "stop order" against the
transfer, exchange, redemption of the Certificate including the payment of interest coupons. The
Central Bank or service agency concerned shall continue to withhold action on the certificate until
such time that the conflicting claims have been finally settled either by amicable settlement between
the parties or by order of the Court.
Unlike CB Circular No. 28, CB Circular No. 769-80 limited the BSPs authority to the mere issuance
and circularization of a "stop order" against the transfer, exchange and redemption upon sworn
notice of a fraudulent assignment. Under this Circular, the BSP shall only continue to withhold action
until the dispute is ended by an amicable settlement or by judicial determination. Given the more
passive stance of the BSP the very agency tasked to enforce the circulars involved - under CB
Circular No. 769-80, the RTCs dismissal of the BOCs counterclaims is palpably erroneous.
Lastly, since Nuquis office (Government Securities Department) had already been abolished, 69 it can
no longer adjudicate the dispute under the second situation covered by CB Circular No. 28. The
abolition of Nuquis office is not only consistent with the BSPs Charter but, more importantly, with CB
Circular No. 769-80, which removed the BSPs adjudicative authority over fraudulent assignments.
THE PDBS COMMENT
The PDB claims that jurisdiction is determined by the allegations in the complaint/petition and not by
the defenses set up in the answer.70 In filing the petition with the RTC, the PDB merely seeks to
compel the BSP to determine, pursuant to CB Circular No. 28, the party legally entitled to the
proceeds of the subject CB bills, which, as the PDB alleged, have been transferred through
fraudulent representations an allegation which properly recognized the BSPs jurisdiction to
resolve conflicting claims of ownership over the CB bills.
The PDB adds that under the doctrine of primary jurisdiction, courts should refrain from determining
a controversy involving a question whose resolution demands the exercise of sound administrative
discretion. In the present case, the BSPs special knowledge and experience in resolving disputes on
securities, whose assignment and trading are governed by the BSPs rules, should be upheld.
The PDB counters that the BOCs tri-fold interpretation of Section 10 (d) 4 of CB Circular No. 28
sanctions split jurisdiction which is not favored;but even this tri-fold interpretation which, in the
second situation, limits the meaning of the "owner" to the registered owner is flawed. Section 10 (d)
4 aims to protect not just the registered owner but anyone who has been deprived of his bond by
fraudulent representation in order to deter fraud in the secondary trading of government securities.
The PDB asserts that the existence of CB Circular No. 769-80 or the abolition of Nuquis office does
not result in depriving the BSP of its jurisdiction: first, CB Circular No. 769-80 expressly provides that
CB Circular No. 28 shall have suppletory application to CB Circular No. 769-80; and second, the
BSP can always designate an office to resolve the PDBs claim over the CB bills.
Lastly, the PDB argues that even assuming that the RTC has jurisdiction to resolve the issue of
ownership of the CB bills, the RTC has not acquired jurisdiction over the BOCs so-called

"compulsory" counterclaims (which in truth is merely "permissive") because of the BOCs failure to
pay the appropriate docket fees. These counterclaims should, therefore, be dismissed and
expunged from the record.
THE COURTS RULING
We grant the petitions.
At the outset, we note that the parties have not raised the validity of either CB Circular No. 28 or CB
Circular No. 769-80 as an issue. What the parties largely contest is the applicable circular in case of
an allegedly fraudulently assigned CB bill. The applicable circular, in turn, is determinative of the
proper remedy available to the PDB and/or the BOC as claimants to the proceeds of the subject CB
bills.
Indisputably, at the time the PDB supposedly invoked the jurisdiction of the BSP in 1994 (by
requesting for the annotation of its claim over the subject CB bills in the BSPs books), CB Circular
No. 769-80 has long been in effect. Therefore, the parties respective interpretations of the provision
of Section 10 (d) 4 of CB Circular No. 28 do not have any significance unless it is first established
that that Circular governs the resolution of their conflicting claims of ownership. This conclusion is
important, given the supposed repeal or modification of Section 10 (d) 4 of CB Circular No. 28 by the
following provisions of CB Circular No. 769-80:
ARTICLE XI
SUPPLEMENTAL RULES
Section 1. Central Bank Circular No. 28 The provisions of Central Bank Circular No. 28 shall have
suppletory application to matters not specially covered by these Rules.
ARTICLE XII
EFFECTIVITY
Effectivity The rules and regulations herein prescribed shall take effect upon approval by the
Monetary Board, Central Bank of the Philippines, and all circulars, memoranda, or office orders
inconsistent herewith are revoked or modified accordingly. (Emphases added)
We agree with the PDB that in view of CB Circular No. 28s suppletory application, an attempt to
harmonize the apparently conflicting provisions is a prerequisite before one may possibly conclude
that an amendment or a repeal exists.71 Interestingly, however, even the PDB itself failed to submit
an interpretation based on its own position of harmonization.
The repealing clause of CB Circular No. 769-80 obviously did not expressly repeal CB Circular No.
28; in fact, it even provided for the suppletory application of CB Circular No. 28 on "matters not
specially covered by" CB Circular No. 769-80. While no express repeal exists, the intent of CB
Circular No. 769-80 to operate as an implied repeal, 72 or at least to amend earlier CB circulars, is
supported by its text "revoking" or "modif[ying" "all circulars" which are inconsistent with its terms.
At the outset, we stress that none of the parties disputes that the subject CB bills fall within the
category of a certificate or evidence of indebtedness and that these were issued by the Central
Bank, now the BSP. Thus, even without resorting to statutory construction aids, matters involving the
subject CB bills should necessarily be governed by CB Circular No. 769-80. Even granting, however,

that reliance on CB Circular No. 769-80 alone is not enough, we find that CB Circular No. 769-80
impliedly repeals CB Circular No. 28.
An implied repeal transpires when a substantial conflict exists between the new and the prior laws.
In the absence of an express repeal, a subsequent law cannot be construed as repealing a prior law
unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and the old
laws.73 Repeal by implication is not favored, unless manifestly intended by the legislature, or unless it
is convincingly and unambiguously demonstrated, that the laws or orders are clearly repugnant and
patently inconsistent with one another so that they cannot co-exist; the legislature is presumed to
know the existing law and would express a repeal if one is intended. 74
There are two instances of implied repeal. One takes place when the provisions in the two acts on
the same subject matter are irreconcilably contradictory, in which case, the later act, to the extent of
the conflict, constitutes an implied repeal of the earlier one. The other occurs when the later act
covers the whole subject of the earlier one and is clearly intended as a substitute; thus, it will operate
to repeal the earlier law.75
A general reading of the two circulars shows that the second instance of implied repeal is present in
this case. CB Circular No. 28, entitled "Regulations Governing Open Market Operations,
Stabilization of Securities Market, Issue, Servicing and Redemption of Public Debt," is a regulation
governing the servicing and redemption of public debt, including the issue, inscription, registration,
transfer, payment and replacement of bonds and securities representing the public debt. 76 On the
other hand, CB Circular No. 769-80, entitled "Rules and Regulations Governing Central Bank
Certificate of Indebtedness," is the governing regulation on matters 77 (i) involving certificate of
indebtedness78 issued by the Central Bank itself and (ii) which are similarly covered by CB Circular
No. 28.
The CB Monetary Board issued CB Circular No. 28 to regulate the servicing and redemption of
public debt, pursuant to Section 124 (now Section 119 of Republic Act R.A. No. 7653) of the old
Central Bank law79 which provides that "the servicing and redemption of the public debt shall also be
effected through the Bangko Sentral." However, even as R.A. No. 7653 continued to recognize this
role by the BSP, the law required a phase-out of all fiscal agency functions by the BSP, including
Section 119 of R.A. No. 7653.
In other words, even if CB Circular No. 28 applies broadly to both government-issued bonds and
securities and Central Bank-issued evidence of indebtedness, given the present state of law, CB
Circular No. 28 and CB Circular No. 769-80 now operate on the same subject Central Bank-issued
evidence of indebtedness. Under Section 1, Article XI of CB Circular No. 769-80, the continued
relevance and application of CB Circular No. 28 would depend on the need to supplement any
deficiency or silence in CB Circular No. 769-80 on a particular matter.
In the present case, both CB Circular No. 28 and CB Circular No. 769-80 provide the BSP with a
course of action in case of an allegedly fraudulently assigned certificate of indebtedness. Under CB
Circular No. 28, in case of fraudulent assignments, the BSP would have to "call upon the owner and
the person presenting the bond to substantiate their respective claims" and, from there, determine
who has a better right over the registered bond. On the other hand, under CB Circular No. 769-80,
the BSP shall merely "issue and circularize a stop order against the transfer, exchange, redemption
of the [registered] certificate" without any adjudicative function (which is the precise root of the
present controversy). As the two circulars stand, the patent irreconcilability of these two provisions
does not require elaboration. Section 5, Article V of CB Circular No. 769-80 inescapably repealed
Section 10 (d) 4 of CB Circular No. 28.

The issue of BSPs jurisdiction, lay hidden


On that note, the Court could have written finis to the present controversy by simply sustaining the
BSPs hands-off approach to the PDBs problem under CB Circular No. 769-80. However, the
jurisdictional provision of CB Circular No. 769-80 itself, in relation to CB Circular No. 28, on the
matter of fraudulent assignment, has given rise to a question of jurisdiction - the core question of law
involved in these petitions - which the Court cannot just treat sub-silencio.
Broadly speaking, jurisdiction is the legal power or authority to hear and determine a cause. 80 In the
exercise of judicial or quasi-judicial power, it refers to the authority of a court to hear and decide a
case.81 In the context of these petitions, we hark back to the basic principles governing the question
of jurisdiction over the subject matter.
First, jurisdiction over the subject matter is determined only by the Constitution and by law.82 As a
matter of substantive law, procedural rules alone can confer no jurisdiction to courts or administrative
agencies.83 In fact, an administrative agency, acting in its quasi-judicial capacity, is a tribunal of
limited jurisdiction and, as such, could wield only such powers that are specifically granted to it by
the enabling statutes. In contrast, an RTC is a court of general jurisdiction, i.e., it has jurisdiction over
cases whose subject matter does not fall within the exclusive original jurisdiction of any court,
tribunal or body exercising judicial or quasi-judicial functions.84
Second, jurisdiction over the subject matter is determined not by the pleas set up by the defendant in
his answer85 but by the allegations in the complaint,86 irrespective of whether the plaintiff is entitled to
favorable judgment on the basis of his assertions.87 The reason is that the complaint is supposed to
contain a concise statement of the ultimate facts constituting the plaintiff's causes of action. 88
Third, jurisdiction is determined by the law in force at the time of the filing of the complaint. 89
Parenthetically, the Court observes that none of the parties ever raised the issue of whether the BSP
can simply disown its jurisdiction, assuming it has, by the simple expedient of promulgating a new
circular (specially applicable to a certificate of indebtedness issued by the BSP itself), inconsistent
with an old circular, assertive of its limited jurisdiction over ownership issues arising from fraudulent
assignments of a certificate of indebtedness. The PDB, in particular, relied solely and heavily on CB
Circular No. 28.
In light of the above principles pointing to jurisdiction as a matter of substantive law, the provisions of
the law itself that gave CB Circular 769-80 its life and jurisdiction must be examined.
The Philippine Central Bank
On January 3, 1949, Congress created the Central Bank of the Philippines (Central Bank) as a
corporate body with the primary objective of (i) maintaining the internal and external monetary
stability in the Philippines; and (ii) preserving the international value and the convertibility of the
peso.90 In line with these broad objectives, the Central Bank was empowered to issue rules and
regulations "necessary for the effective discharge of the responsibilities and exercise of the powers
assigned to the Monetary Board and to the Central Bank."91Specifically, the Central Bank is
authorized to organize (other) departments for the efficient conduct of its business and whose
powers and duties "shall be determined by the Monetary Board, within the authority granted to the
Board and the Central Bank"92 under its original charter.

With the 1973 Constitution, the then Central Bank was constitutionally made as the countrys central
monetary authority until such time that Congress93 shall have established a central bank. The 1987
Constitution continued to recognize this function of the then Central Bank until Congress, pursuant to
the Constitution, created a new central monetary authority which later came to be known as the
Bangko Sentral ng Pilipinas.
Under the New Central Bank Act (R.A. No. 7653),94 the BSP is given the responsibility of providing
policy directions in the areas of money, banking and credit; it is given, too, the primary objective of
maintaining price stability, conducive to a balanced and sustainable growth of the economy, and of
promoting and maintaining monetary stability and convertibility of the peso. 95
The Constitution expressly grants the BSP, as the countrys central monetary authority, the power of
supervision over the operation of banks, while leaving with Congress the authority to define the
BSPs regulatory powers over the operations of finance companies and other institutions performing
similar functions. Under R.A. No. 7653, the BSPs powers and functions include (i) supervision over
the operation of banks; (ii) regulation of operations of finance companies and non-bank financial
institutions performing quasi banking functions; (iii) sole power and authority to issue currency within
the Philippine territory; (iv) engaging in foreign exchange transactions; (v) making rediscounts,
discounts, loans and advances to banking and other financial institutions to influence the volume of
credit consistent with the objective of achieving price stability; (vi) engaging in open market
operations; and (vii) acting as banker and financial advisor of the government.
1wphi1

On the BSPs power of supervision over the operation of banks, Section 4 of R.A. No. 8791 (The
General Banking Law of 2000) elaborates as follows:
CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL
SECTION 4. Supervisory Powers. The operations and activities of banks shall be subject to
supervision of the Bangko Sentral. "Supervision" shall include the following:
4.1. The issuance of rules of conduct or the establishment of standards of operation for
uniform application to all institutions or functions covered, taking into consideration the
distinctive character of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be applied;
4.2. The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;
4.3. Overseeing to ascertain that laws and regulations are complied with;
4.4. Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or
sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit
shall be immediately addressed;
4.5. Inquiring into the solvency and liquidity of the institution (2-D); or
4.6. Enforcing prompt corrective action. (n)

The Bangko Sentral shall also have supervision over the operations of and exercise regulatory
powers over quasi-banks, trust entities and other financial institutions which under special laws are
subject to Bangko Sentral supervision. (2-Ca)
For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of funds
through the issuance, endorsement or assignment with recourse or acceptance of deposit
substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank Act")
for purposes of relending or purchasing of receivables and other obligations. [emphasis ours]
While this provision empowers the BSP to oversee the operations and activities of banks to
"ascertain that laws and regulations are complied with," the existence of the BSPs jurisdiction in the
present dispute cannot rely on this provision. The fact remains that the BSP already made known to
the PDB its unfavorable position on the latters claim of fraudulent assignment due to the latters own
failure to comply96 with existing regulations:
In this connection, Section 10 (b) 2 also requires that a "Detached assignment will be recognized or
accepted only upon previous notice to the Central Bank x x x." In fact, in a memo dated September
23, 1991 xxx then CB Governor Jose L. Cuisia advised all banks (including PDB) xxx as follows:
In view recurring incidents ostensibly disregarding certain provisions of CB circular No. 28 (as
amended) covering assignments of registered bonds, all banks and all concerned are enjoined to
observe strictly the pertinent provisions of said CB Circular as hereunder quoted:
xxxx
Under Section 10.b. (2)
x x x Detached assignment will be recognized or accepted only upon previous notice to the Central
Bank and its use is authorized only under the following circumstances:
(a) x x x
(b) x x x
(c) assignments of treasury notes and certificates of indebtedness in registered form which
are not provided at the back thereof with assignment form.
(d) Assignment of securities which have changed ownership several times.
(e) x x x
Non-compliance herewith will constitute a basis for non-action or withholding of action on
redemption/payment of interest coupons/transfer transactions or denominational exchange that may
be directly affected thereby. [Boldfacing supplied]
Again, the books of the BSP do not show that the supposed assignment of subject CB Bills was ever
recorded in the BSPs books. [Boldfacing supplied]
However, the PDB faults the BSP for not recording the assignment of the CB bills in the PDBs favor
despite the fact that the PDB already requested the BSP to record its assignment in the BSPs books
as early as June 30, 1994.97

The PDBs claim is not accurate. What the PDB requested the BSP on that date was not the
recording of the assignment of the CB bills in its favor but the annotation of its claim over the CB bills
at the time when (i) it was no longer in possession of the CB bills, having been transferred from one
entity to another and (ii) all it has are the detached assignments, which the PDB has not shown to be
compliant with Section 10 (b) 2 above-quoted. Obviously, the PDB cannot insist that the BSP take
cognizance of its plaint when the basis of the BSPs refusal under existing regulation, which the PDB
is bound to observe, is the PDBs own failure to comply therewith.
True, the BSP exercises supervisory powers (and regulatory powers) over banks (and quasi banks).
The issue presented before the Court, however, does not concern the BSPs supervisory power over
banks as this power is understood under the General Banking Law. In fact, there is nothing in the
PDBs petition (even including the letters it sent to the BSP) that would support the BSPs jurisdiction
outside of CB Circular No. 28, under its power of supervision, over conflicting claims to the proceeds
of the CB bills.
BSP has quasi-judicial powers over a
class of cases which does not include
the adjudication of ownership of the
CB bills in question
In United Coconut Planters Bank v. E. Ganzon, Inc.,98 the Court considered the BSP as an
administrative agency,99 exercising quasi-judicial functions through its Monetary Board. It held:
A quasi-judicial agency or body is an organ of government other than a court and other than a
legislature, which affects the rights of private parties through either adjudication or rule-making. The
very definition of an administrative agency includes its being vested with quasi-judicial powers. The
ever increasing variety of powers and functions given to administrative agencies recognizes the
need for the active intervention of administrative agencies in matters calling for technical knowledge
and speed in countless controversies which cannot possibly be handled by regular courts. A "quasijudicial function" is a term which applies to the action, discretion, etc., of public administrative officers
or bodies, who are required to investigate facts, or ascertain the existence of facts, hold hearings,
and draw conclusions from them, as a basis for their official action and to exercise discretion of a
judicial nature.
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers or
functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is an independent
central monetary authority and a body corporate with fiscal and administrative autonomy, mandated
to provide policy directions in the areas of money, banking and credit. It has power to issue
subpoena, to sue for contempt those refusing to obey the subpoena without justifiable reason, to
administer oaths and compel presentation of books, records and others, needed in its examination,
to impose fines and other sanctions and to issue cease and desist order. Section 37 of Republic Act
No. 7653, in particular, explicitly provides that the BSP Monetary Board shall exercise its discretion
in determining whether administrative sanctions should be imposed on banks and quasi-banks,
which necessarily implies that the BSP Monetary Board must conduct some form of investigation or
hearing regarding the same. [citations omitted]
The BSP is not simply a corporate entity but qualifies as an administrative agency created, pursuant
to constitutional mandate,100 to carry out a particular governmental function.101 To be able to perform
its role as central monetary authority, the Constitution granted it fiscal and administrative autonomy.
In general, administrative agencies exercise powers and/or functions which may be characterized as
administrative, investigatory, regulatory, quasi-legislative, or quasi-judicial, or a mix of these five, as
may be conferred by the Constitution or by statute.102

While the very nature of an administrative agency and the raison d'tre for its creation 103 and
proliferation dictate a grant of quasi-judicial power to it, the matters over which it may exercise this
power must find sufficient anchorage on its enabling law, either by express provision or by necessary
implication. Once found, the quasi-judicial power partakes of the nature of a limited and special
jurisdiction, that is, to hear and determine a class of cases within its peculiar competence and
expertise. In other words, the provisions of the enabling statute are the yardsticks by which the Court
would measure the quantum of quasi-judicial powers an administrative agency may exercise, as
defined in the enabling act of such agency.104
Scattered provisions in R.A. No. 7653 and R.A. No. 8791, inter alia, exist, conferring jurisdiction on
the BSP on certain matters.105 For instance, under the situations contemplated under Section 36, par.
2106 (where a bank or quasi bank persists in carrying on its business in an unlawful or unsafe
manner) and Section 37107 (where the bank or its officers willfully violate the banks charter or bylaws, or the rules and regulations issued by the Monetary Board) of R.A. No. 7653, the BSP may
place an entity under receivership and/or liquidation or impose administrative sanctions upon the
entity or its officers or directors.
Among its several functions under R.A. No. 7653, the BSP is authorized to engage in open market
operations and thereby "issue, place, buy and sell freely negotiable evidences of indebtedness of the
Bangko Sentral" in the following manner.
SEC. 90. Principles of Open Market Operations. The open market purchases and sales of
securities by the Bangko Sentral shall be made exclusively in accordance with its primary objective
of achieving price stability.
xxxx
SEC. 92. Issue and Negotiation of Bangko Sentral Obligations. In order to provide the Bangko
Sentral with effective instruments for open market operations, the Bangko Sentral may, subject to
such rules and regulations as the Monetary Board may prescribe and in accordance with the
principles stated in Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral: Provided, That issuance of such certificates of indebtedness
shall be made only in cases of extraordinary movement in price levels. Said evidences of
indebtedness may be issued directly against the international reserve of the Bangko Sentral or
against the securities which it has acquired under the provisions of Section 91 of this Act, or may be
issued without relation to specific types of assets of the Bangko Sentral.
The Monetary Board shall determine the interest rates, maturities and other characteristics of said
obligations of the Bangko Sentral, and may, if it deems it advisable, denominate the obligations in
gold or foreign currencies.
Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the
Bangko Sentral to which this section refers may be acquired by the Bangko Sentral before their
maturity, either through purchases in the open market or through redemptions at par and by lot if the
Bangko Sentral has reserved the right to make such redemptions. The evidences of indebtedness
acquired or redeemed by the Bangko Sentral shall not be included among its assets, and shall be
immediately retired and cancelled.108 (italics supplied; emphases ours)
The primary objective of the BSP is to maintain price stability.109 The BSP has a number of monetary
policy instruments at its disposal to promote price stability. To increase or reduce liquidity in the
financial system, the BSP uses open market operations, among others. 110 Open market operation is
a monetary tool where the BSP publicly buys or sells government securities 111 from (or to) banks and

financial institutions in order to expand or contract the supply of money. By controlling the money
supply, the BSP is able to exert some influence on the prices of goods and services and achieve its
inflation objectives.112
Once the issue and/or sale of a security is made, the BSP would necessarily make a determination,
in accordance with its own rules, of the entity entitled to receive the proceeds of the security upon its
maturity. This determination by the BSP is an exercise of its administrative powers 113 under the law
as an incident to its power to prescribe rules and regulations governing open market operations to
achieve the "primary objective of achieving price stability." 114 As a matter of necessity, too, the same
rules and regulations facilitate transaction with the BSP by providing for an orderly manner of,
among others, issuing, transferring, exchanging and paying securities representing public debt.
Significantly, when competing claims of ownership over the proceeds of the securities it has issued
are brought before it, the law has not given the BSP the quasi-judicial power to resolve these
competing claims as part of its power to engage in open market operations. Nothing in the BSPs
charter confers on the BSP the jurisdiction or authority to determine this kind of claims, arising out of
a subsequent transfer or assignment of evidence of indebtedness a matter that appropriately falls
within the competence of courts of general jurisdiction. That the statute withholds this power from the
BSP is only consistent with the fundamental reasons for the creation of a Philippine central bank,
that is, to lay down stable monetary policy and exercise bank supervisory functions. Thus, the BSPs
assumption of jurisdiction over competing claims cannot find even a stretched-out justification under
its corporate powers "to do and perform any and all things that may be necessary or proper to carry
out the purposes" of R.A. No. 7653. 115
To reiterate, open market operation is a monetary policy instrument that the BSP employs, among
others, to regulate the supply of money in the economy to influence the timing, cost and availability
of money and credit, as well as other financial factors, for the purpose of stabilizing the price
level.116 What the law grants the BSP is a continuing role to shape and carry out the countrys
monetary policy not the authority to adjudicate competing claims of ownership over the securities it
has issued since this authority would not fall under the BSPs purposes under its charter.
While R.A. No. 7653117 empowers the BSP to conduct administrative hearings and render judgment
for or against an entity under its supervisory and regulatory powers and even authorizes the BSP
Governor to "render decisions, or rulings x x x on matters regarding application or enforcement of
laws pertaining to institutions supervised by the BSP and laws pertaining to quasi-banks, as well as
regulations, policies or instructions issued by the Monetary Board," it is precisely the text of the
BSPs own regulation (whose validity is not here raised as an issue) that points to the BSPs limited
role in case of an allegedly fraudulent assignment to simply (i) issuing and circularizing a "stop
order" against the transfer, exchange, redemption of the certificate of indebtedness, including the
payment of interest coupons, and (ii) withholding action on the certificate.
A similar conclusion can be drawn from the BSPs administrative adjudicatory power in cases of
"willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or
regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor." 118 The
non-compliance with the pertinent requirements under CB Circular No. 28, as amended, deprives a
party from any right to demand payment from the BSP.
In other words, the grant of quasi-judicial authority to the BSP cannot possibly extend to situations
which do not call for the exercise by the BSP of its supervisory or regulatory functions over entities
within its jurisdiction.119

The fact alone that the parties involved are banking institutions does not necessarily call for the
exercise by the BSP of its quasi-judicial powers under the law.120
The doctrine of primary jurisdiction
argues against BSPs purported
authority to adjudicate ownership
issues over the disputed CB bills
Given the preceding discussions, even the PDBs invocation of the doctrine of primary jurisdiction is
misplaced.
In the exercise of its plenary legislative power, Congress may create administrative agencies
endowed with quasi-legislative and quasi-judicial powers. Necessarily, Congress likewise defines the
limits of an agencys jurisdiction in the same manner as it defines the jurisdiction of courts. 121 As a
result, it may happen that either a court or an administrative agency has exclusive jurisdiction over a
specific matter or both have concurrent jurisdiction on the same. It may happen, too, that courts and
agencies may willingly relinquish adjudicatory power that is rightfully theirs in favor of the other. One
of the instances when a court may properly defer to the adjudicatory authority of an agency is the
applicability of the doctrine of primary jurisdiction.122
As early as 1954, the Court applied the doctrine of primary jurisdiction under the following terms:
6. In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative
commissions and boards the power to resolve specialized disputes xxx ruled that Congress in
requiring the Industrial Court's intervention in the resolution of labor-management controversies xxx
meant such jurisdiction to be exclusive, although it did not so expressly state in the law. The Court
held that under the "sense-making and expeditious doctrine of primary jurisdiction ... the courts
cannot or will not determine a controversy involving a question which is within the jurisdiction of an
administrative tribunal, where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience, and services of the administrative tribunal to determine
technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the
purposes of the regulatory statute administered."123 (emphasis ours)
In Industrial Enterprises, Inc. v. Court of Appeals,124 the Court ruled that while an action for rescission
of a contract between coal developers appears to be an action cognizable by regular courts, the trial
court remains to be without jurisdiction to entertain the suit since the contract sought to be rescinded
is "inextricably tied up with the right to develop coal-bearing lands and the determination of whether
or not the reversion of the coal operating contract over the subject coal blocks to [the plaintiff] would
be in line with the countrys national program and objective on coal-development and over-all coalsupply-demand balance." It then applied the doctrine of primary jurisdiction
In recent years, it has been the jurisprudential trend to apply the doctrine of primary jurisdiction in
many cases involving matters that demand the special competence of administrative agencies. It
may occur that the Court has jurisdiction to take cognizance of a particular case, which means that
the matter involved is also judicial in character. However, if the case is such that its determination
requires the expertise, specialized skills and knowledge of the proper administrative bodies because
technical matters or intricate questions of facts are involved, then relief must first be obtained in an
administrative proceeding before a remedy will be supplied by the courts even though the matter is
within the proper jurisdiction of a court. This is the doctrine of primary jurisdiction. It applies "where a
claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim
requires the resolution of issues which, under a regulatory scheme, have been placed within the
special competence of an administrative body."

Clearly, the doctrine of primary jurisdiction finds application in this case since the question of what
coal areas should be exploited and developed and which entity should be granted coal operating
contracts over said areas involves a technical determination by the Bureau of Energy Development
as the administrative agency in possession of the specialized expertise to act on the matter. The
Trial Court does not have the competence to decide matters concerning activities relative to the
exploration, exploitation, development and extraction of mineral resources like coal. These issues
preclude an initial judicial determination. [emphases ours]
The absence of any express or implied statutory power to adjudicate conflicting claims of ownership
or entitlement to the proceeds of its certificates of indebtedness finds complement in the similar
absence of any technical matter that would call for the BSPs special expertise or competence. 125 In
fact, what the PDBs petitions bear out is essentially the nature of the transaction it had with the
subsequent transferees of the subject CB bills (BOC and Bancap) and not any matter more
appropriate for special determination by the BSP or any administrative agency.
In a similar vein, it is well-settled that the interpretation given to a rule or regulation by those charged
with its execution is entitled to the greatest weight by the courts construing such rule or
regulation.126 While there are exceptions127 to this rule, the PDB has not convinced us that a
departure is warranted in this case. Given the non-applicability of the doctrine of primary jurisdiction,
the BSPs own position, in light of Circular No. 769-80, deserves respect from the Court.
Ordinarily, cases involving the application of doctrine of primary jurisdiction are initiated by an action
invoking the jurisdiction of a court or administrative agency to resolve the substantive legal conflict
between the parties. In this sense, the present case is quite unique since the courts jurisdiction was,
originally, invoked to compel an administrative agency (the BSP) to resolve the legal conflict of
ownership over the CB bills - instead of obtaining a judicial determination of the same dispute.
The remedy of interpleader
Based on the unique factual premise of the present case, the RTC acted correctly in initially
assuming jurisdiction over the PDBs petition for mandamus, prohibition and injunction. 128 While the
RTC agreed (albeit erroneously) with the PDBs view (that the BSP has jurisdiction), it, however,
dismissed not only the BOCs/the BSPs counterclaims but the PDBs petition itself as well, on the
ground that it lacks jurisdiction.
This is plain error.
Not only the parties themselves, but more so the courts, are bound by the rule on non-waiver of
jurisdiction.129believes that jurisdiction over the BOCs counterclaims and the BSPs
counterclaim/crossclaim for interpleader calls for the application of the doctrine of primary
jurisdiction, the allowance of the PDBs petition even becomes imperative because courts may raise
the issue of primary jurisdiction sua sponte.130
Of the three possible options available to the RTC, the adoption of either of these two would lead the
trial court into serious legal error: first, if it granted the PDBs petition, its decision would have to be
set aside on appeal because the BSP has no jurisdiction as previously discussed; and second when
it dismissed the PDBs petitions and the BOCs counterclaims on the ground that it lacks jurisdiction,
the trial court seriously erred because precisely, the resolution of the conflicting claims over the CB
bills falls within its general jurisdiction.
Without emasculating its jurisdiction, the RTC could have properly dismissed the PDBs petition but
on the ground that mandamus does not lie against the BSP; but even this correct alternative is no

longer plausible since the BSP, as a respondent below, already properly brought before the RTC the
remaining conflicting claims over the subject CB bills by way of a counterclaim/crossclaim for
interpleader. Section 1, Rule 62 of the Rules of Court provides when an interpleader is proper:
SECTION 1. When interpleader proper. Whenever conflicting claims upon the same subject matter
are or may be made against a person who claims no interest whatever in the subject matter, or an
interest which in whole or in part is not disputed by the claimants, he may bring an action against the
conflicting claimants to compel them to interplead and litigate their several claims among
themselves.
The remedy of an action of interpleader131 is designed to protect a person against double vexation in
respect of a single liability.7 It requires, as an indispensable requisite, that conflicting claims upon the
same subject matter are or may be made against the stakeholder (the possessor of the subject
matter) who claims no interest whatever in the subject matter or an interest which in whole or in part
is not disputed by the claimants.132
Through this remedy, the stakeholder can join all competing claimants in a single proceeding to
determine conflicting claims without exposing the stakeholder to the possibility of having to pay more
than once on a single liability.133
When the court orders that the claimants litigate among themselves, in reality a new action
arises,134 where the claims of the interpleaders themselves are brought to the fore, the stakeholder
as plaintiff is relegated merely to the role of initiating the suit. In short, the remedy of interpleader,
when proper, merely provides an avenue for the conflicting claims on the same subject matter to be
threshed out in an action. Section 2 of Rule 62 provides:
SEC. 2. Order. Upon the filing of the complaint, the court shall issue an order requiring the
conflicting claimants to interplead with one another. If the interests of justice so require, the court
may direct in such order that the subject matter be paid or delivered to the court.
This is precisely what the RTC did by granting the BSPs motion to interplead. The PDB itself
"agreed that the various claimants should now interplead." Thus, the PDB and the BOC
subsequently entered into two separate escrow agreements, covering the CB bills, and submitted
them to the RTC for approval.
In granting the BSPs motion, the RTC acted on the correct premise that it has jurisdiction to resolve
the parties conflicting claims over the CB bills - consistent with the rules and the parties conduct and accordingly required the BOC to amend its answer and for the PDB to comment thereon.
Suddenly, however, the PDB made an about-face and questioned the jurisdiction of the RTC.
Swayed by the PDBs argument, the RTC dismissed even the PDBs petition - which means that it
did not actually compel the BSP to resolve the BOCs and the PDBs claims.
Without the motion to interplead and the order granting it, the RTC could only dismiss the PDBs
petition since it is the RTC which has jurisdiction to resolve the parties conflicting claims not the
BSP. Given that the motion to interplead has been actually filed, the RTC could not have really
granted the relief originally sought in the PDBs petition since the RTCs order granting the BSPs
motion to interplead - to which the PDB in fact acquiesced into - effectively resulted in the dismissal
of the PDBs petition. This is not altered by the fact that the PDB additionally prayed in its petition for
damages, attorneys fees and costs of suit "against the public respondents" because the grant of the
order to interplead effectively sustained the propriety of the BSPs resort to this procedural device.
Interpleader

1. as a special civil action


What is quite unique in this case is that the BSP did not initiate the interpleader suit through an
original complaint but through its Answer. This circumstance becomes understandable if it is
considered that insofar as the BSP is concerned, the PDB does not possess any right to have its
claim recorded in the BSPs books; consequently, the PDB cannot properly be considered even as a
potential claimant to the proceeds of the CB bills upon maturity. Thus, the interpleader was only an
alternative position, made only in the BSPs Answer.135
The remedy of interpleader, as a special civil action, is primarily governed by the specific provisions
in Rule 62 of the Rules of Court and secondarily by the provisions applicable to ordinary civil
actions.136 Indeed, Rule 62 does not expressly authorize the filing of a complaint-in-interpleader as
part of, although separate and independent from, the answer. Similarly, Section 5, Rule 6, in relation
to Section 1, Rule 9 of the Rules of Court137 does not include a complaint-in-interpleader as a
claim,138 a form of defense,139 or as an objection that a defendant may be allowed to put up in his
answer or in a motion to dismiss. This does not mean, however, that the BSPs "countercomplaint/cross-claim for interpleader" runs counter to general procedures.
Apart from a pleading,140 the rules141 allow a party to seek an affirmative relief from the court through
the procedural device of a motion. While captioned "Answer with counter complaint/cross-claim for
interpleader," the RTC understood this as in the nature of a motion,142 seeking relief which essentially
consists in an order for the conflicting claimants to litigate with each other so that "payment is made
to the rightful or legitimate owner"143 of the subject CB bills.
The rules define a "civil action" as "one by which a party sues another for the enforcement or
protection of a right, or the prevention or redress of a wrong." Interpleader may be considered as a
stakeholders remedy to prevent a wrong, that is, from making payment to one not entitled to it,
thereby rendering itself vulnerable to lawsuit/s from those legally entitled to payment.
Interpleader is a civil action made special by the existence of particular rules to govern the
uniqueness of its application and operation. Under Section 2, Rule 6 of the Rules of Court, governing
ordinary civil actions, a partys claim is asserted "in a complaint, counterclaim, cross-claim, third
(fourth, etc.)-party complaint, or complaint-in-intervention." In an interpleader suit, however, a claim
is not required to be contained in any of these pleadings but in the answer-(of the conflicting
claimants)-in-interpleader. This claim is different from the counter-claim (or cross-claim, third partycomplaint) which is separately allowed under Section 5, par. 2 of Rule 62.
2. the payment of docket fees covering BOCs counterclaim
The PDB argues that, even assuming that the RTC has jurisdiction over the issue of ownership of
the CB bills, the BOCs failure to pay the appropriate docket fees prevents the RTC from acquiring
jurisdiction over the BOCs "counterclaims."
We disagree with the PDB.
To reiterate and recall, the order granting the "PDBs motion to interplead," already resulted in the
dismissal of the PDBs petition. The same order required the BOC to amend its answer and for the
conflicting claimants to comment, presumably to conform to the nature of an answer-in interpleader.
Perhaps, by reason of the BOCs denomination of its claim as a "compulsory counterclaim" and the
PDBs failure to fully appreciate the RTCs order granting the "BSPs motion for interpleader" (with
the PDBs conformity), the PDB mistakenly treated the BOCs claim as a "permissive counterclaim"
which necessitates the payment of docket fees.

As the preceding discussions would show, however, the BOCs "claim" - i.e., its assertion of
ownership over the CB bills is in reality just that, a "claim" against the stakeholder and not as a
"counterclaim,"144 whether compulsory145 or permissive. It is only the BOCs alternative prayer (for the
PDB to deliver to the BOC, as the buyer in the April 15 transaction and the ultimate successor-ininterest of the buyer in the April 19 transaction, either the original subjects of the sales or the value
thereof plus whatever income that may have been earned pendente lite) and its prayer for damages
that are obviously compulsory counterclaims against the PDB and, therefore, does not require
payment of docket fees.146
The PDB takes a contrary position through its insistence that a compulsory counterclaim should be
one where the presence of third parties, of whom the court cannot acquire jurisdiction, is not
required. It reasons out that since the RCBC and All Asia (the intervening holders of the CB bills)
have already been dropped from the case, then the BOCs counterclaim must only be permissive in
nature and the BOC should have paid the correct docket fees.
We see no reason to belabor this claim. Even if we gloss over the PDBs own conformity to the
dropping of these entities as parties, the BOC correctly argues that a remedy is provided under the
Rules. Section 12, Rule 6 of the Rules of Court reads:
SEC. 12. Bringing new parties. When the presence of parties other than those to the original action
is required for the granting of complete relief in the determination of a counterclaim or cross-claim,
the court shall order them to be brought in as defendants, if jurisdiction over them can be obtained.
Even then, the strict characterization of the BOCs counterclaim is no longer material in disposing of
the PDBs argument based on non-payment of docket fees.
When an action is filed in court, the complaint must be accompanied by the payment of the requisite
docket and filing fees by the party seeking affirmative relief from the court. It is the filing of the
complaint or appropriate initiatory pleading, accompanied by the payment of the prescribed docket
fee, that vests a trial court with jurisdiction over the claim or the nature of the action. 147 However, the
non-payment of the docket fee at the time of filing does not automatically cause the dismissal of the
case, so long as the fee is paid within the applicable prescriptive or reglementary period, especially
when the claimant demonstrates a willingness to abide by the rules prescribing such payment. 148
In the present case, considering the lack of a clear guideline on the payment of docket fee by the
claimants in an interpleader suit, compounded by the unusual manner in which the interpleader suit
was initiated and the circumstances surrounding it, we surely cannot deduce from the BOCs mere
failure to specify in its prayer the total amount of the CB bills it lays claim to (or the value of the
subjects of the sales in the April 15 and April 19 transactions, in its alternative prayer) an intention to
defraud the government that would warrant the dismissal of its claim. 149
At any rate, regardless of the nature of the BOCs "counterclaims," for purposes of payment of filing
fees, both the BOC and the PDB, properly as defendants-in-interpleader, must be assessed the
payment of the correct docket fee arising from their respective claims. The seminal case of Sun
Insurance Office, Ltd. v. Judge Asuncion150provides us guidance in the payment of docket fees, to
wit:
1. x x x 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. [underscoring
ours]
This must be the rule considering that Section 7, Rule 62 of which reads:
SEC. 7. Docket and other lawful fees, costs and litigation expenses as liens. The docket and other
lawful fees paid by the party who filed a complaint under this Rule, as well as the costs and litigation
expenses, shall constitute a lien or charge upon the subject matter of the action, unless the court
shall order otherwise.
only pertain to the docket and lawful fees to be paid by the one who initiated the interpleader suit,
and who, under the Rules, actually "claims no interest whatever in the subject matter." By
constituting a lien on the subject matter of the action, Section 7 in effect only aims to actually
compensate the complainant-in-interpleader, who happens to be the stakeholder unfortunate enough
to get caught in a legal crossfire between two or more conflicting claimants, for the faultless trouble it
found itself into. Since the defendants-in-interpleader are actually the ones who make a claim - only
that it was extraordinarily done through the procedural device of interpleader - then to them devolves
the duty to pay the docket fees prescribed under Rule 141 of the Rules of Court, as amended. 151
The importance of paying the correct amount of docket fee cannot be overemphasized:
The matter of payment of docket fees is not a mere triviality. These fees are necessary to defray
court expenses in the handling of cases. Consequently, in order to avoid tremendous losses to the
judiciary, and to the government as well, the payment of docket fees cannot be made dependent on
the outcome of the case, except when the claimant is a pauper-litigant. 152
WHEREFORE, premises considered the consolidated PETITIONS are GRANTED. The Planters
Development Bank is hereby REQUIRED to file with the Regional Trial Court its comment or answerin-interpleader to Bank of Commerces Amended Consolidated Answer with Compulsory
Counterclaim, as previously ordered by the Regional Trial Court. The Regional Trial Court of Makati
City, Branch 143, is hereby ORDERED to assess the docket fees due from Planters Development
Bank and Bank of Commerce and order their payment, and to resolve with DELIBERATE DISPATCH
the parties conflicting claims of ownership over the proceeds of the Central Bank bills.
The Clerk of Court of the Regional Trial Court of Makati City, Branch 143, or his duly authorized
representative is hereby ORDERED to assess and collect the appropriate amount of docket fees
separately due the Bank of Commerce and Planters Development Bank as conflicting claimants in
Bangko Sentral ng Pilipinas interpleader suit, in accordance with this decision.
SO ORDERED.

DECLARATORT RELIEF AND SIMILAR REMEDIES

EUFEMIA ALMEDA and


ROMEL ALMEDA,
Petitioners,

G.R. No. 150806


Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CORONA,*
NACHURA, and
REYES, JJ.

- versus -

BATHALA MARKETING
INDUSTRIES, INC.,
Respondent.

Promulgated:
January 28, 2008

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

DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, of the Decision[1] of the Court of Appeals (CA), dated September 3, 2001, in
CA-G.R. CV No. 67784, and its Resolution[2] dated November 19, 2001. The
assailed Decision affirmed with modification the Decision [3] of the Regional Trial
Court (RTC), Makati City, Branch 136, dated May 9, 2000 in Civil Case No. 98411.
Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee,
represented by its president Ramon H. Garcia, renewed its Contract of Lease[4] with
Ponciano L. Almeda (Ponciano), as lessor, husband of petitioner Eufemia and
father of petitioner Romel Almeda. Under the said contract, Ponciano agreed to
lease a portion of the Almeda Compound, located at 2208 Pasong Tamo Street,

Makati City, consisting of 7,348.25 square meters, for a monthly rental


of P1,107,348.69, for a term of four (4) years from May 1, 1997 unless sooner
terminated as provided in the contract.[5] The contract of lease contained the
following pertinent provisions which gave rise to the instant case:
SIXTH It is expressly understood by the parties hereto that the rental rate
stipulated is based on the present rate of assessment on the property, and
that in case the assessment should hereafter be increased or any new tax,
charge or burden be imposed by authorities on the lot and building where
the leased premises are located, LESSEE shall pay, when the rental
herein provided becomes due, the additional rental or charge
corresponding to the portion hereby leased; provided, however, that in
the event that the present assessment or tax on said property should be
reduced, LESSEE shall be entitled to reduction in the stipulated rental,
likewise in proportion to the portion leased by him;
SEVENTH In case an extraordinary inflation or devaluation of
Philippine Currency should supervene, the value of Philippine peso at
the time of the establishment of the obligation shall be the basis of
payment;[6]
During the effectivity of the contract, Ponciano died. Thereafter, respondent
dealt with petitioners. In a letter[7] dated December 29, 1997, petitioners advised
respondent that the former shall assess and collect Value Added Tax (VAT) on its
monthly rentals. In response, respondent contended that VAT may not be imposed
as the rentals fixed in the contract of lease were supposed to include the VAT
therein, considering that their contract was executed on May 1, 1997 when the VAT
law had long been in effect.[8]

On January 26, 1998, respondent received another letter from petitioners


informing the former that its monthly rental should be increased by 73% pursuant
to condition No. 7 of the contract and Article 1250 of the Civil Code. Respondent
opposed petitioners demand and insisted that there was no extraordinary inflation
to warrant the application of Article 1250 in light of the pronouncement of this
Court in various cases.[9]
Respondent refused to pay the VAT and adjusted rentals as demanded by
petitioners but continued to pay the stipulated amount set forth in their contract.

On February 18, 1998, respondent instituted an action for declaratory relief


for purposes of determining the correct interpretation of condition Nos. 6 and 7 of
the lease contract to prevent damage and prejudice. [10] The case was docketed as
Civil Case No. 98-411 before the RTC of Makati.
On March 10, 1998, petitioners in turn filed an action for ejectment,
rescission and damages against respondent for failure of the latter to vacate the
premises after the demand made by the former.[11] Before respondent could file an
answer, petitioners filed a Notice of Dismissal.[12] They subsequently refiled the
complaint before the Metropolitan Trial Court of Makati; the case was raffled to
Branch 139 and was docketed as Civil Case No. 53596.
Petitioners later moved for the dismissal of the declaratory relief case for
being an improper remedy considering that respondent was already in breach of the
obligation and that the case would not end the litigation and settle the rights of the
parties. The trial court, however, was not persuaded, and consequently, denied the
motion.
After trial on the merits, on May 9, 2000, the RTC ruled in favor of
respondent and against petitioners. The pertinent portion of the decision reads:
WHEREFORE, premises considered, this Court renders judgment
on the case as follows:
1) declaring that plaintiff is not liable for the payment of ValueAdded Tax (VAT) of 10% of the rent for [the] use of the leased premises;
2) declaring that plaintiff is not liable for the payment of any
rental adjustment, there being no [extraordinary] inflation or
devaluation, as provided in the Seventh Condition of the lease contract,
to justify the same;
3) holding defendants liable to plaintiff for the total amount
of P1,119,102.19, said amount representing payments erroneously made
by plaintiff as VAT charges and rental adjustment for the months of
January, February and March, 1999; and

4) holding defendants liable to plaintiff for the amount


of P1,107,348.69, said amount representing the balance of plaintiffs
rental deposit still with defendants.
SO ORDERED.[13]
The trial court denied petitioners their right to pass on to respondent the burden of
paying the VAT since it was not a new tax that would call for the application of the
sixth clause of the contract. The court, likewise, denied their right to collect the
demanded increase in rental, there being no extraordinary inflation or devaluation
as provided for in the seventh clause of the contract. Because of the payment made
by respondent of the rental adjustment demanded by petitioners, the court ordered
the restitution by the latter to the former of the amounts paid, notwithstanding the
well-established rule that in an action for declaratory relief, other than a declaration
of rights and obligations, affirmative reliefs are not sought by or awarded to the
parties.
Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with
modification the RTC decision. The fallo reads:
WHEREFORE, premises considered, the present appeal is DISMISSED
and the appealed decision in Civil Case No. 98-411 is hereby
AFFIRMED with MODIFICATION in that the order for the return of the
balance of the rental deposits and of the amounts representing the 10%
VAT and rental adjustment, is hereby DELETED.
No pronouncement as to costs.
SO ORDERED.[14]

The appellate court agreed with the conclusions of law and the application of the
decisional rules on the matter made by the RTC. However, it found that the trial
court exceeded its jurisdiction in granting affirmative relief to the respondent,
particularly the restitution of its excess payment.
Petitioners now come before this Court raising the following issues:
I.
WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS
APPLICABLE TO THE CASE AT BAR.

II.
WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO
PIPE AND FOUNDRY CORP. VS. NAWASA CASE, 161 SCRA 32
AND COMPANION CASES ARE (sic) APPLICABLE IN THE CASE
AT BAR.
III.
WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE
CASE OF DEL ROSARIO VS. THE SHELL COMPANY OF
THE PHILIPPINES, 164 SCRA 562, THE HONORABLE COURT OF
APPEALS SERIOUSLY ERRED ON A QUESTION OF LAW.
IV.
WHETHER OR NOT THE FINDING OF THE HONORABLE COURT
OF APPEALS THAT RESPONDENT IS NOT LIABLE TO PAY THE
10% VALUE ADDED TAX IS IN ACCORDANCE WITH THE
MANDATE OF RA 7716.

V.
WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE
PLAINTIFF-APPELLEE WAS IN BREACH WHEN THE PETITION
FOR DECLARATORY RELIEF WAS FILED BEFORE THE TRIAL
COURT.

In fine, the issues for our resolution are as follows: 1) whether the action for
declaratory relief is proper; 2) whether respondent is liable to pay 10% VAT
pursuant to Republic Act (RA) 7716; and 3) whether the amount of rentals due the
petitioners should be adjusted by reason of extraordinary inflation or devaluation.
Declaratory relief is defined as an action by any person interested in a deed,
will, contract or other written instrument, executive order or resolution, to
determine any question of construction or validity arising from the instrument,
executive order or regulation, or statute, and for a declaration of his rights and
duties thereunder. The only issue that may be raised in such a petition is the
question of construction or validity of provisions in an instrument or
statute. Corollary is the general rule that such an action must be justified, as no
other adequate relief or remedy is available under the circumstances. [15]
Decisional law enumerates the requisites of an action for declaratory relief,
as follows: 1) the subject matter of the controversy must be a deed, will, contract or
other written instrument, statute, executive order or regulation, or ordinance; 2) the
terms of said documents and the validity thereof are doubtful and require judicial
construction; 3) there must have been no breach of the documents in question; 4)
there must be an actual justiciable controversy or the ripening seeds of one between
persons whose interests are adverse; 5) the issue must be ripe for judicial
determination; and 6) adequate relief is not available through other means or other
forms of action or proceeding.[16]
It is beyond cavil that the foregoing requisites are present in the instant case,
except that petitioners insist that respondent was already in breach of the contract
when the petition was filed.
We do not agree.

After petitioners demanded payment of adjusted rentals and in the months that
followed, respondent complied with the terms and conditions set forth in their
contract of lease by paying the rentals stipulated therein. Respondent religiously
fulfilled its obligations to petitioners even during the pendency of the present
suit. There is no showing that respondent committed an act constituting a breach of
the subject contract of lease. Thus, respondent is not barred from instituting before
the trial court the petition for declaratory relief.
Petitioners claim that the instant petition is not proper because a separate action for
rescission, ejectment and damages had been commenced before another court; thus,
the construction of the subject contractual provisions should be ventilated in the
same forum.
We are not convinced.
It is true that in Panganiban v. Pilipinas Shell Petroleum Corporation[17] we held
that the petition for declaratory relief should be dismissed in view of the pendency
of a separate action for unlawful detainer. However, we cannot apply the same
ruling to the instant case. In Panganiban, the unlawful detainer case had already
been resolved by the trial court before the dismissal of the declaratory relief case;
and it was petitioner in that case who insisted that the action for declaratory relief
be preferred over the action for unlawful detainer. Conversely, in the case at bench,
the trial court had not yet resolved the rescission/ejectment case during the
pendency of the declaratory relief petition. In fact, the trial court, where the
rescission case was on appeal, itself initiated the suspension of the proceedings
pending the resolution of the action for declaratory relief.
We are not unmindful of the doctrine enunciated in Teodoro, Jr. v. Mirasol[18] where
the declaratory relief action was dismissed because the issue therein could be
threshed out in the unlawful detainer suit. Yet, again, in that case, there was already
a breach of contract at the time of the filing of the declaratory relief petition. This
dissimilar factual milieu proscribes the Court from applying Teodoro to the instant
case.
Given all these attendant circumstances, the Court is disposed to entertain the
instant declaratory relief action instead of dismissing it, notwithstanding the

pendency of the ejectment/rescission case before the trial court. The resolution of
the present petition would write finis to the parties dispute, as it would settle once
and for all the question of the proper interpretation of the two contractual
stipulations subject of this controversy.
Now, on the substantive law issues.
Petitioners repeatedly made a demand on respondent for the payment of VAT
and for rental adjustment allegedly brought about by extraordinary inflation or
devaluation. Both the trial court and the appellate court found no merit in
petitioners claim. We see no reason to depart from such findings.
As to the liability of respondent for the payment of VAT, we cite with approval the
ratiocination of the appellate court, viz.:
Clearly, the person primarily liable for the payment of VAT is the lessor
who may choose to pass it on to the lessee or absorb the
same. Beginning January 1, 1996, the lease of real property in the
ordinary course of business, whether for commercial or residential use,
when the gross annual receipts exceed P500,000.00, is subject to 10%
VAT. Notwithstanding the mandatory payment of the 10% VAT by the
lessor, the actual shifting of the said tax burden upon the lessee is clearly
optional on the part of the lessor, under the terms of the statute. The
word may in the statute, generally speaking, denotes that it is directory
in nature. It is generally permissive only and operates to confer
discretion. In this case, despite the applicability of the rule under Sec. 99
of the NIRC, as amended by R.A. 7716, granting the lessor the option to
pass on to the lessee the 10% VAT, to existing contracts of lease as of
January 1, 1996, the original lessor, Ponciano L. Almeda did not charge
the lessee-appellee the 10% VAT nor provided for its additional
imposition when they renewed the contract of lease in May 1997.More
significantly, said lessor did not actually collect a 10% VAT on the
monthly rental due from the lessee-appellee after the execution of the
May 1997 contract of lease. The inevitable implication is that the lessor
intended not to avail of the option granted him by law to shift the 10%
VAT upon the lessee-appellee. x x x.[19]

In short, petitioners are estopped from shifting to respondent the burden of paying
the VAT.
Petitioners reliance on the sixth condition of the contract is, likewise,
unavailing. This provision clearly states that respondent can only be held liable
for new taxes imposed after the effectivity of the contract of lease, that is, after
May 1997, and only if they pertain to the lot and the building where the leased
premises are located. Considering that RA 7716 took effect in 1994, the VAT
cannot be considered as a new tax in May 1997, as to fall within the coverage of
the sixth stipulation.
Neither can petitioners legitimately demand rental adjustment because of
extraordinary inflation or devaluation.
Petitioners contend that Article 1250 of the Civil Code does not apply to this
case because the contract stipulation speaks of extraordinary inflation or
devaluation while the Code speaks of extraordinary inflation or deflation. They
insist that the doctrine pronounced in Del Rosario v. The Shell Company,
Phils. Limited[20] should apply.
Essential to contract construction is the ascertainment of the intention of the
contracting parties, and such determination must take into account the
contemporaneous and subsequent acts of the parties. This intention, once
ascertained, is deemed an integral part of the contract.[21]
While, indeed, condition No. 7 of the contract speaks of extraordinary inflation or
devaluation as compared to Article 1250s extraordinary inflation or deflation, we
find that when the parties used the term devaluation, they really did not intend to
depart from Article 1250 of the Civil Code. Condition No. 7 of the contract should,
thus, be read in harmony with the Civil Code provision.
That this is the intention of the parties is evident from petitioners letter [22] dated
January 26, 1998, where, in demanding rental adjustment ostensibly based on
condition No. 7, petitioners made explicit reference to Article 1250 of the Civil
Code, even quoting the law verbatim. Thus, the application of Del Rosario is not

warranted. Rather, jurisprudential rules on the application of Article 1250 should be


considered.
Article 1250 of the Civil Code states:
In case an extraordinary inflation or deflation of the currency stipulated
should supervene, the value of the currency at the time of the
establishment of the obligation shall be the basis of payment, unless there
is an agreement to the contrary.

Inflation has been defined as the sharp increase of money or credit, or both, without
a corresponding increase in business transaction. There is inflation when there is an
increase in the volume of money and credit relative to available goods, resulting in
a substantial and continuing rise in the general price level. [23] In a number of cases,
this Court had provided a discourse on what constitutes extraordinary inflation,
thus:
[E]xtraordinary inflation exists when there is a decrease or increase in the
purchasing power of the Philippine currency which is unusual or beyond
the common fluctuation in the value of said currency, and such increase
or decrease could not have been reasonably foreseen or was manifestly
beyond the contemplation of the parties at the time of the establishment
of the obligation.[24]

The factual circumstances obtaining in the present case do not make out a case of
extraordinary inflation or devaluation as would justify the application of Article
1250 of the Civil Code. We would like to stress that the erosion of the value of the
Philippine peso in the past three or four decades, starting in the mid-sixties, is
characteristic of most currencies. And while the Court may take judicial notice of
the decline in the purchasing power of the Philippine currency in that span of time,
such downward trend of the peso cannot be considered as the extraordinary
phenomenon contemplated by Article 1250 of the Civil Code. Furthermore, absent
an official pronouncement or declaration by competent authorities of the existence
of extraordinary inflation during a given period, the effects of extraordinary
inflation are not to be applied. [25]

WHEREFORE, premises considered, the petition is DENIED. The Decision of


the Court of Appeals in CA-G.R. CV No. 67784, dated September 3, 2001, and its
Resolution dated November 19, 2001, are AFFIRMED.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA Associate Justice

WE CONCUR:

REPUBLIC OF THE PHILIPPINES,


Petitioner,

G.R. No. 154380


Present:

- versus -

Davide, Jr., C.J.,


(Chairman),
Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.

CIPRIANO ORBECIDO III,


Respondent.

Promulgated:
October 5, 2005

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

DECISION
QUISUMBING, J.:

Given a valid marriage between two Filipino citizens, where one party is
later naturalized as a foreign citizen and obtains a valid divorce decree capacitating

him or her to remarry, can the Filipino spouse likewise remarry under Philippine
law?
Before us is a case of first impression that behooves the Court to make a
definite ruling on this apparently novel question, presented as a pure question of
law.
In this petition for review, the Solicitor General assails the Decision[1] dated
May 15, 2002, of the Regional Trial Court of Molave, Zamboanga del Sur, Branch
23 and its Resolution[2] dated July 4, 2002 denying the motion for reconsideration.
The court a quo had declared that herein respondent Cipriano Orbecido III is
capacitated to remarry. The fallo of the impugned Decision reads:
WHEREFORE, by virtue of the provision of the second paragraph of Art. 26 of
the Family Code and by reason of the divorce decree obtained against him by his
American wife, the petitioner is given the capacity to remarry under the
Philippine Law.
IT IS SO ORDERED.[3]

The factual antecedents, as narrated by the trial court, are as follows.


On May 24, 1981, Cipriano Orbecido III married Lady Myros M. Villanueva at the
United Church of Christ in the Philippines in Lam-an, Ozamis City. Their marriage
was blessed with a son and a daughter, Kristoffer Simbortriz V. Orbecido and Lady
Kimberly V. Orbecido.

In 1986, Ciprianos wife left for the United States bringing along their son
Kristoffer. A few years later, Cipriano discovered that his wife had been naturalized
as an American citizen.
Sometime in 2000, Cipriano learned from his son that his wife had obtained
a divorce decree and then married a certain Innocent Stanley. She, Stanley and her
child by him currently live at 5566 A. Walnut Grove Avenue, San Gabriel,
California.
Cipriano thereafter filed with the trial court a petition for authority to remarry
invoking Paragraph 2 of Article 26 of the Family Code. No opposition was filed.
Finding merit in the petition, the court granted the same. The Republic, herein
petitioner, through the Office of the Solicitor General (OSG), sought
reconsideration but it was denied.
In this petition, the OSG raises a pure question of law:
WHETHER OR NOT RESPONDENT CAN REMARRY UNDER ARTICLE 26
OF THE FAMILY CODE[4]

The OSG contends that Paragraph 2 of Article 26 of the Family Code is not
applicable to the instant case because it only applies to a valid mixed marriage; that
is, a marriage celebrated between a Filipino citizen and an alien. The proper
remedy, according to the OSG, is to file a petition for annulment or for legal
separation.[5] Furthermore, the OSG argues there is no law that governs respondents

situation. The OSG posits that this is a matter of legislation and not of judicial
determination.[6]
For his part, respondent admits that Article 26 is not directly applicable to his case
but insists that when his naturalized alien wife obtained a divorce decree which
capacitated her to remarry, he is likewise capacitated by operation of law pursuant
to Section 12, Article II of the Constitution.[7]
At the outset, we note that the petition for authority to remarry filed before the trial
court actually constituted a petition for declaratory relief. In this connection,
Section 1, Rule 63 of the Rules of Court provides:
RULE 63
DECLARATORY RELIEF AND SIMILAR REMEDIES
Section 1. Who may file petitionAny person interested under a deed, will, contract
or other written instrument, or whose rights are affected by a statute, executive
order or regulation, ordinance, or other governmental regulation may, before
breach or violation thereof, bring an action in the appropriate Regional Trial Court
to determine any question of construction or validity arising, and for a declaration
of his rights or duties, thereunder.
...

The requisites of a petition for declaratory relief are: (1) there must be a justiciable
controversy; (2) the controversy must be between persons whose interests are
adverse; (3) that the party seeking the relief has a legal interest in the controversy;
and (4) that the issue is ripe for judicial determination.[8]
This case concerns the applicability of Paragraph 2 of Article 26 to a
marriage between two Filipino citizens where one later acquired alien citizenship,
obtained a divorce decree, and remarried while in the U.S.A. The interests of the

parties are also adverse, as petitioner representing the State asserts its duty to
protect the institution of marriage while respondent, a private citizen, insists on a
declaration of his capacity to remarry. Respondent, praying for relief, has legal
interest in the controversy. The issue raised is also ripe for judicial determination
inasmuch as when respondent remarries, litigation ensues and puts into question
the validity of his second marriage.
Coming now to the substantive issue, does Paragraph 2 of Article 26 of the Family
Code apply to the case of respondent? Necessarily, we must dwell on how this
provision had come about in the first place, and what was the intent of the
legislators in its enactment?

Brief Historical Background


On July 6, 1987, then President Corazon Aquino signed into law Executive
Order No. 209, otherwise known as the Family Code, which took effect on August
3, 1988. Article 26 thereof states:
All marriages solemnized outside the Philippines in accordance with the
laws in force in the country where they were solemnized, and valid there as such,
shall also be valid in this country, except those prohibited under Articles 35, 37,
and 38.

On July 17, 1987, shortly after the signing of the original Family Code,
Executive Order No. 227 was likewise signed into law, amending Articles 26, 36,
and 39 of the Family Code. A second paragraph was added to Article 26. As so
amended, it now provides:

ART. 26. All marriages solemnized outside the Philippines in accordance


with the laws in force in the country where they were solemnized, and valid there
as such, shall also be valid in this country, except those prohibited under Articles
35(1), (4), (5) and (6), 36, 37 and 38.
Where a marriage between a Filipino citizen and a foreigner is validly
celebrated and a divorce is thereafter validly obtained abroad by the alien spouse
capacitating him or her to remarry, the Filipino spouse shall have capacity to
remarry under Philippine law. (Emphasis supplied)

On its face, the foregoing provision does not appear to govern the situation
presented by the case at hand. It seems to apply only to cases where at the time of
the celebration of the marriage, the parties are a Filipino citizen and a foreigner.
The instant case is one where at the time the marriage was solemnized, the parties
were two Filipino citizens, but later on, the wife was naturalized as an American
citizen and subsequently obtained a divorce granting her capacity to remarry, and
indeed she remarried an American citizen while residing in the U.S.A.
Noteworthy, in the Report of the Public Hearings[9] on the Family Code, the
Catholic Bishops Conference of the Philippines (CBCP) registered the following
objections to Paragraph 2 of Article 26:
1.

The rule is discriminatory. It discriminates against those whose spouses


are Filipinos who divorce them abroad. These spouses who are divorced
will not be able to re-marry, while the spouses of foreigners who validly
divorce them abroad can.

2.

This is the beginning of the recognition of the validity of divorce even for
Filipino citizens. For those whose foreign spouses validly divorce them
abroad will also be considered to be validly divorced here and can remarry. We propose that this be deleted and made into law only after more
widespread consultation. (Emphasis supplied.)

Legislative Intent

Records of the proceedings of the Family Code deliberations showed that


the intent of Paragraph 2 of Article 26, according to Judge Alicia Sempio-Diy, a
member of the Civil Code Revision Committee, is to avoid the absurd situation
where the Filipino spouse remains married to the alien spouse who, after obtaining
a divorce, is no longer married to the Filipino spouse.
Interestingly, Paragraph 2 of Article 26 traces its origin to the 1985 case
of Van Dorn v. Romillo, Jr.[10] The Van Dorn case involved a marriage between a
Filipino citizen and a foreigner. The Court held therein that a divorce decree
validly obtained by the alien spouse is valid in the Philippines, and consequently,
the Filipino spouse is capacitated to remarry under Philippine law.
Does the same principle apply to a case where at the time of the celebration
of the marriage, the parties were Filipino citizens, but later on, one of them obtains
a foreign citizenship by naturalization?
The jurisprudential answer lies latent in the 1998 case of Quita v. Court of
Appeals.[11] In Quita, the parties were, as in this case, Filipino citizens when they
got married. The wife became a naturalized American citizen in 1954 and obtained
a divorce in the same year. The Court therein hinted, by way of obiter dictum, that
a Filipino divorced by his naturalized foreign spouse is no longer married under
Philippine law and can thus remarry.
Thus, taking into consideration the legislative intent and applying the rule of
reason, we hold that Paragraph 2 of Article 26 should be interpreted to include

cases involving parties who, at the time of the celebration of the marriage were
Filipino citizens, but later on, one of them becomes naturalized as a foreign citizen
and obtains a divorce decree. The Filipino spouse should likewise be allowed to
remarry as if the other party were a foreigner at the time of the solemnization of
the marriage. To rule otherwise would be to sanction absurdity and injustice.
Where the interpretation of a statute according to its exact and literal import would
lead to mischievous results or contravene the clear purpose of the legislature, it
should be construed according to its spirit and reason, disregarding as far as
necessary the letter of the law. A statute may therefore be extended to cases not
within the literal meaning of its terms, so long as they come within its spirit or
intent.[12]
If we are to give meaning to the legislative intent to avoid the absurd
situation where the Filipino spouse remains married to the alien spouse who, after
obtaining a divorce is no longer married to the Filipino spouse, then the instant
case must be deemed as coming within the contemplation of Paragraph 2 of Article
26.
In view of the foregoing, we state the twin elements for the application of
Paragraph 2 of Article 26 as follows:
1.

There is a valid marriage that has been celebrated between a Filipino


citizen and a foreigner; and

2.

A valid divorce is obtained abroad by the alien spouse capacitating him or


her to remarry.

The reckoning point is not the citizenship of the parties at the time of the
celebration of the marriage, but their citizenship at the time a valid divorce is
obtained abroad by the alien spouse capacitating the latter to remarry.
In this case, when Ciprianos wife was naturalized as an American citizen,
there was still a valid marriage that has been celebrated between her and Cipriano.
As fate would have it, the naturalized alien wife subsequently obtained a valid
divorce capacitating her to remarry. Clearly, the twin requisites for the application
of Paragraph 2 of Article 26 are both present in this case. Thus Cipriano, the
divorced Filipino spouse, should be allowed to remarry.
We are also unable to sustain the OSGs theory that the proper remedy of the
Filipino spouse is to file either a petition for annulment or a petition for legal
separation. Annulment would be a long and tedious process, and in this particular
case, not even feasible, considering that the marriage of the parties appears to have
all the badges of validity. On the other hand, legal separation would not be a
sufficient remedy for it would not sever the marriage tie; hence, the legally
separated Filipino spouse would still remain married to the naturalized alien
spouse.
However, we note that the records are bereft of competent evidence duly submitted
by respondent concerning the divorce decree and the naturalization of respondents
wife. It is settled rule that one who alleges a fact has the burden of proving it and
mere allegation is not evidence.[13]

Accordingly, for his plea to prosper, respondent herein must prove his allegation
that his wife was naturalized as an American citizen. Likewise, before a foreign
divorce decree can be recognized by our own courts, the party pleading it must
prove the divorce as a fact and demonstrate its conformity to the foreign law
allowing it.[14] Such foreign law must also be proved as our courts cannot take
judicial notice of foreign laws. Like any other fact, such laws must be alleged and
proved.[15]Furthermore, respondent must also show that the divorce decree allows
his former wife to remarry as specifically required in Article 26. Otherwise, there
would be no evidence sufficient to declare that he is capacitated to enter into
another marriage.
Nevertheless, we are unanimous in our holding that Paragraph 2 of Article 26 of
the Family Code (E.O. No. 209, as amended by E.O. No. 227), should be
interpreted to allow a Filipino citizen, who has been divorced by a spouse who had
acquired foreign citizenship and remarried, also to remarry. However, considering
that in the present petition there is no sufficient evidence submitted and on record,
we are unable to declare, based on respondents bare allegations that his wife, who
was naturalized as an American citizen, had obtained a divorce decree and had
remarried an American, that respondent is now capacitated to remarry. Such
declaration could only be made properly upon respondents submission of the
aforecited evidence in his favor.
ACCORDINGLY, the petition by the Republic of the Philippines is GRANTED.
The assailed Decision dated May 15, 2002, and Resolution dated July 4, 2002, of

the Regional Trial Court of Molave, Zamboanga del Sur, Branch 23, are
hereby SET ASIDE.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 181303

September 17, 2009

CARMEN DANAO MALANA, MARIA DANAO ACORDA, EVELYN DANAO, FERMINA DANAO,
LETICIA DANAO and LEONORA DANAO, the last two are represented herein by their
Attorney-in-Fact, MARIA DANAO ACORDA, Petitioners,
vs.
BENIGNO TAPPA, JERRY REYNA, SATURNINO CAMBRI and SPOUSES FRANCISCO AND
MARIA LIGUTAN,Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Certiorari under Rule 65 of the Rules of Court, assailing the Orders 1 dated 4
May 2007, 30 May 2007, and 31 October 2007, rendered by Branch 3 of the Regional Trial Court
(RTC) of Tuguegarao City, which dismissed, for lack of jurisdiction, the Complaint of petitioners
Carmen Danao Malana, Leticia Danao, Maria Danao Accorda, Evelyn Danao, Fermina Danao, and
Leonora Danao, against respondents Benigno Tappa, Jerry Reyna, Saturnino Cambri, Francisco
Ligutan and Maria Ligutan, in Civil Case No. 6868.
Petitioners filed before the RTC their Complaint for Reivindicacion, Quieting of Title, and
Damages2 against respondents on 27 March 2007, docketed as Civil Case No. 6868. Petitioners
alleged in their Complaint that they are the owners of a parcel of land covered by Transfer Certificate
of Title (TCT) No. T-1279373 situated in Tuguegarao City, Cagayan (subject property). Petitioners
inherited the subject property from Anastacio Danao (Anastacio), who died intestate. 4 During the
lifetime of Anastacio, he had allowed Consuelo Pauig (Consuelo), who was married to Joaquin
Boncad, to build on and occupy the southern portion of the subject property. Anastacio and
Consuelo agreed that the latter would vacate the said land at any time that Anastacio and his heirs
might need it.5
Petitioners claimed that respondents, Consuelos family members,6 continued to occupy the subject
property even after her death, already building their residences thereon using permanent materials.
Petitioners also learned that respondents were claiming ownership over the subject property.
Averring that they already needed it, petitioners demanded that respondents vacate the same.
Respondents, however, refused to heed petitioners demand.7
Petitioners referred their land dispute with respondents to the Lupong Tagapamayapa of Barangay
Annafunan West for conciliation. During the conciliation proceedings, respondents asserted that they

owned the subject property and presented documents ostensibly supporting their claim of
ownership.
According to petitioners, respondents documents were highly dubious, falsified, and incapable of
proving the latters claim of ownership over the subject property; nevertheless, they created a cloud
upon petitioners title to the property. Thus, petitioners were compelled to file before the RTC a
Complaint to remove such cloud from their title.8 Petitioners additionally sought in their Complaint an
award against respondents for actual damages, in the amount of P50,000.00, resulting from the
latters baseless claim over the subject property that did not actually belong to them, in violation of
Article 19 of the Civil Code on Human Relations.9 Petitioners likewise prayed for an award against
respondents for exemplary damages, in the amount of P50,000.00, since the latter had acted in bad
faith and resorted to unlawful means to establish their claim over the subject property. Finally,
petitioners asked to recover from respondents P50,000.00 as attorneys fees, because the latters
refusal to vacate the property constrained petitioners to engage the services of a lawyer.10
Before respondents could file their answer, the RTC issued an Order dated 4 May 2007 dismissing
petitioners Complaint on the ground of lack of jurisdiction. The RTC referred to Republic Act No.
7691,11 amending Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act of
1980, which vests the RTC with jurisdiction over real actions, where the assessed value of the
property involved exceeds P20,000.00. It found that the subject property had a value of less
than P20,000.00; hence, petitioners action to recover the same was outside the jurisdiction of the
RTC. The RTC decreed in its 4 May 2007 Order that:
The Court has no jurisdiction over the action, it being a real action involving a real property with
assessed value less than P20,000.00 and hereby dismisses the same without prejudice. 12
Petitioners filed a Motion for Reconsideration of the aforementioned RTC Order dismissing their
Complaint. They argued that their principal cause of action was for quieting of title; the accion
reivindicacion was included merely to enable them to seek complete relief from respondents.
Petitioners Complaint should not have been dismissed, since Section 1, Rule 63 of the Rules of
Court13 states that an action to quiet title falls under the jurisdiction of the RTC. 14
In an Order dated 30 May 2007, the RTC denied petitioners Motion for Reconsideration. It reasoned
that an action to quiet title is a real action. Pursuant to Republic Act No. 7691, it is the Municipal Trial
Court (MTC) that exercises exclusive jurisdiction over real actions where the assessed value of real
property does not exceedP20,000.00. Since the assessed value of subject property per Tax
Declaration No, 02-48386 was P410.00, the real action involving the same was outside the
jurisdiction of the RTC.15
Petitioners filed another pleading, simply designated as Motion, in which they prayed that the RTC
Orders dated 4 May 2007 and 30 May 2007, dismissing their Complaint, be set aside. They
reiterated their earlier argument that Section 1, Rule 63 of the Rules of Court states that an action to
quiet title falls under the exclusive jurisdiction of the RTC. They also contended that there was no
obstacle to their joining the two causes of action, i.e., quieting of title and reivindicacion, in a single
Complaint, citing Rumarate v. Hernandez.16 And even if the two causes of action could not be joined,
petitioners maintained that the misjoinder of said causes of action was not a ground for the dismissal
of their Complaint.17
The RTC issued an Order dated 31 October 2007 denying petitioners Motion. It clarified that their
Complaint was dismissed, not on the ground of misjoinder of causes of action, but for lack of
jurisdiction. The RTC dissected Section 1, Rule 63 of the Rules of Court, which provides:

Section 1. Who may file petition. Any person interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any
other governmental regulation may, before breach or violation thereof, bring an action in the
appropriate Regional Trial Court to determine any question of construction or validity arising, and for
a declaration of his rights or duties, thereunder.
An action for the reformation of an instrument, to quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be brought under
this Rule.
The RTC differentiated between the first and the second paragraphs of Section 1, Rule 63 of the
Rules of Court. The first paragraph refers to an action for declaratory relief, which should be brought
before the RTC. The second paragraph, however, refers to a different set of remedies, which
includes an action to quiet title to real property. The second paragraph must be read in relation to
Republic Act No. 7691, which vests the MTC with jurisdiction over real actions, where the assessed
value of the real property involved does not exceed P50,000.00 in Metro Manila and P20,000.00 in
all other places.18 The dispositive part of the 31 October 2007 Order of the RTC reads:
This Court maintains that an action to quiet title is a real action. [Herein petitioners] do not dispute
the assessed value of the property at P410.00 under Tax Declaration No. 02-48386. Hence, it has no
jurisdiction over the action.
In view of the foregoing considerations, the Motion is hereby denied. 19
Hence, the present Petition, where petitioners raise the sole issue of:
I
WHETHER OR NOT THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION
IN DISMISSING THE COMPLAINT OF THE PETITIONERS MOTU PROPRIO. 20
Petitioners statement of the issue is misleading. It would seem that they are only challenging the
fact that their Complaint was dismissed by the RTC motu proprio. Based on the facts and arguments
set forth in the instant Petition, however, the Court determines that the fundamental issue for its
resolution is whether the RTC committed grave abuse of discretion in dismissing petitioners
Complaint for lack of jurisdiction.
The Court rules in the negative.
An action for declaratory relief should be filed by a person interested under a deed, a will, a contract
or other written instrument, and whose rights are affected by a statute, an executive order, a
regulation or an ordinance. The relief sought under this remedy includes the interpretation and
determination of the validity of the written instrument and the judicial declaration of the parties rights
or duties thereunder.21
Petitions for declaratory relief are governed by Rule 63 of the Rules of Court. The RTC correctly
made a distinction between the first and the second paragraphs of Section 1, Rule 63 of the Rules of
Court.
The first paragraph of Section 1, Rule 63 of the Rules of Court, describes the general circumstances
in which a person may file a petition for declaratory relief, to wit:

Any person interested under a deed, will, contract or other written instrument, or whose rights are
affected by a statute, executive order or regulation, ordinance, or any other governmental regulation
may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a declaration of his rights or duties,
thereunder. (Emphasis ours.)
As the afore-quoted provision states, a petition for declaratory relief under the first paragraph of
Section 1, Rule 63 may be brought before the appropriate RTC.
Section 1, Rule 63 of the Rules of Court further provides in its second paragraph that:
An action for the reformation of an instrument, to quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be brought under
this Rule. (Emphasis ours.)
The second paragraph of Section 1, Rule 63 of the Rules of Court specifically refers to (1) an action
for the reformation of an instrument, recognized under Articles 1359 to 1369 of the Civil Code; (2) an
action to quiet title, authorized by Articles 476 to 481 of the Civil Code; and (3) an action to
consolidate ownership required by Article 1607 of the Civil Code in a sale with a right to repurchase.
These three remedies are considered similar to declaratory relief because they also result in the
adjudication of the legal rights of the litigants, often without the need of execution to carry the
judgment into effect.22
To determine which court has jurisdiction over the actions identified in the second paragraph of
Section 1, Rule 63 of the Rules of Court, said provision must be read together with those of the
Judiciary Reorganization Act of 1980, as amended.
It is important to note that Section 1, Rule 63 of the Rules of Court does not categorically require that
an action to quiet title be filed before the RTC. It repeatedly uses the word "may" that an action for
quieting of title "may be brought under [the] Rule" on petitions for declaratory relief, and a person
desiring to file a petition for declaratory relief "may x x x bring an action in the appropriate Regional
Trial Court." The use of the word "may" in a statute denotes that the provision is merely permissive
and indicates a mere possibility, an opportunity or an option.23
In contrast, the mandatory provision of the Judiciary Reorganization Act of 1980, as amended, uses
the word "shall" and explicitly requires the MTC to exercise exclusive original jurisdiction over all civil
actions which involve title to or possession of real property where the assessed value does not
exceed P20,000.00, thus:
Section 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:
xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, 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 exceeds Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever
kind, attorneys fees, litigation expenses and costs: x x x (Emphasis ours.)

As found by the RTC, the assessed value of the subject property as stated in Tax Declaration No.
02-48386 is only P410.00; therefore, petitioners Complaint involving title to and possession of the
said property is within the exclusive original jurisdiction of the MTC, not the RTC.
Furthermore, an action for declaratory relief presupposes that there has been no actual breach of
the instruments involved or of rights arising thereunder.24 Since the purpose of an action for
declaratory relief is to secure an authoritative statement of the rights and obligations of the parties
under a statute, deed, or contract for their guidance in the enforcement thereof, or compliance
therewith, and not to settle issues arising from an alleged breach thereof, it may be entertained only
before the breach or violation of the statute, deed, or contract to which it refers. A petition for
declaratory relief gives a practical remedy for ending controversies that have not reached the state
where another relief is immediately available; and supplies the need for a form of action that will set
controversies at rest before they lead to a repudiation of obligations, an invasion of rights, and a
commission of wrongs.25
Where the law or contract has already been contravened prior to the filing of an action for
declaratory relief, the courts can no longer assume jurisdiction over the action. In other words, a
court has no more jurisdiction over an action for declaratory relief if its subject has already been
infringed or transgressed before the institution of the action. 26
In the present case, petitioners Complaint for quieting of title was filed after petitioners already
demanded and respondents refused to vacate the subject property. In fact, said Complaint was filed
only subsequent to the latters express claim of ownership over the subject property before the
Lupong Tagapamayapa, in direct challenge to petitioners title.
Since petitioners averred in the Complaint that they had already been deprived of the possession of
their property, the proper remedy for them is the filing of an accion publiciana or an accion
reivindicatoria, not a case for declaratory relief. An accion publiciana is a suit for the recovery of
possession, filed one year after the occurrence of the cause of action or from the unlawful
withholding of possession of the realty. An accion reivindicatoria is a suit that has for its object ones
recovery of possession over the real property as owner.27
1avvphi1

Petitioners Complaint contained sufficient allegations for an accion reivindicatoria. Jurisdiction over
such an action would depend on the value of the property involved. Given that the subject property
herein is valued only atP410.00, then the MTC, not the RTC, has jurisdiction over an action to
recover the same. The RTC, therefore, did not commit grave abuse of discretion in dismissing,
without prejudice, petitioners Complaint in Civil Case No. 6868 for lack of jurisdiction.
As for the RTC dismissing petitioners Complaint motu proprio, the following pronouncements of the
Court inLaresma v. Abellana28 proves instructive:
It is axiomatic that the nature of an action and the jurisdiction of a tribunal are determined by the
material allegations of the complaint and the law at the time the action was commenced. Jurisdiction
of the tribunal over the subject matter or nature of an action is conferred only by law and not by the
consent or waiver upon a court which, otherwise, would have no jurisdiction over the subject matter
or nature of an action. Lack of jurisdiction of the court over an action or the subject matter of an
action cannot be cured by the silence, acquiescence, or even by express consent of the parties. If
the court has no jurisdiction over the nature of an action, it may dismiss the same ex mero motu or
motu proprio. x x x. (Emphasis supplied.)
Since the RTC, in dismissing petitioners Complaint, acted in complete accord with law and
jurisprudence, it cannot be said to have done so with grave abuse of discretion amounting to lack or

excess of jurisdiction. An act of a court or tribunal may only be considered to have been committed
in grave abuse of discretion when the same was performed in a capricious or whimsical exercise of
judgment, which is equivalent to lack of jurisdiction. The abuse of discretion must be so patent and
gross as to amount to an evasion of a positive duty or to a virtual refusal to perform a duty enjoined
by law or to act at all in contemplation of law, as where the power is exercised in an arbitrary and
despotic manner by reason of passion or personal hostility.29 No such circumstances exist herein as
to justify the issuance of a writ of certiorari.
IN VIEW OF THE FOREGOING, the instant Petition is DISMISSED. The Orders dated 4 May 2007,
30 May 2007 and 31 October 2007 of the Regional Trial Court of Tuguegarao City, Branch 3,
dismissing the Complaint in Civil Case No. 6868, without prejudice, are AFFIRMED. The Regional
Trial Court is ordered to REMAND the records of this case to the Municipal Trial Court or the court of
proper jurisdiction for proper disposition. Costs against the petitioners.
SO ORDERED.

G.R. No. 202242

April 16, 2013

FRANCISCO I. CHAVEZ, Petitioner,


vs.
JUDICIALAND BAR COUNCIL, SEN. FRANCIS JOSEPH G. ESCUDERO and REP. NIEL C.
TUPAS, JR.,Respondents.
RESOLUTION
MENDOZA, J.:
This resolves the Motion for Reconsideration1 filed by the Office of the Solicitor General (OSG) on
behalf of the respondents, Senator Francis Joseph G. Escudero and Congressman Niel C. Tupas,
Jr. (respondents), duly opposed2 by the petitioner, former Solicitor General Francisco I. Chavez
(petitioner).
By way of recapitulation, the present action stemmed from the unexpected departure of former Chief
Justice Renato C. Corona on May 29, 2012, and the nomination of petitioner, as his potential
successor. In his initiatory pleading, petitioner asked the Court to determine 1] whether the first
paragraph of Section 8, Article VIII of the 1987 Constitution allows more than one (1) member of
Congress to sit in the JBC; and 2] if the practice of having two (2) representatives from each House
of Congress with one (1) vote each is sanctioned by the Constitution.
On July 17, 2012, the Court handed down the assailed subject decision, disposing the same in the
following manner:
WHEREFORE, the petition is GRANTED. The current numerical composition of the Judicial and Bar
Council is declared UNCONSTITUTIONAL. The Judicial and Bar Council is hereby enjoined to
reconstitute itself so that only one (1) member of Congress will sit as a representative in its
proceedings, in accordance with Section 8(1), Article VIII of the 1987 Constitution.
This disposition is immediately executory.
SO ORDERED.

On July 31, 2012, following respondents motion for reconsideration and with due regard to Senate
Resolution Nos. 111,3 112,4 113,5 and 114,6 the Court set the subject motion for oral arguments on
August 2, 2012.7 On August 3, 2012, the Court discussed the merits of the arguments and agreed, in
the meantime, to suspend the effects of the second paragraph of the dispositive portion of the July
17, 2012 Decision which decreed that it was immediately executory. The decretal portion of the
August 3, 2012 Resolution8 reads:
WHEREFORE, the parties are hereby directed to submit their respective MEMORANDA within ten
(10) days from notice. Until further orders, the Court hereby SUSPENDS the effect of the second
paragraph of the dispositive portion of the Courts July 17, 2012 Decision, which reads: "This
disposition is immediately executory."9
Pursuant to the same resolution, petitioner and respondents filed their respective memoranda. 10
Brief Statement of the Antecedents
In this disposition, it bears reiterating that from the birth of the Philippine Republic, the exercise of
appointing members of the Judiciary has always been the exclusive prerogative of the executive and
legislative branches of the government. Like their progenitor of American origins, both the Malolos
Constitution11 and the 1935 Constitution12 vested the power to appoint the members of the Judiciary
in the President, subject to confirmation by the Commission on Appointments. It was during these
times that the country became witness to the deplorable practice of aspirants seeking confirmation of
their appointment in the Judiciary to ingratiate themselves with the members of the legislative body.13
Then, under the 1973 Constitution,14 with the fusion of the executive and legislative powers in one
body, the appointment of judges and justices ceased to be subject of scrutiny by another body. The
power became exclusive and absolute to the Executive, subject only to the condition that the
appointees must have all the qualifications and none of the disqualifications.
Prompted by the clamor to rid the process of appointments to the Judiciary of the evils of political
pressure and partisan activities,15 the members of the Constitutional Commission saw it wise to
create a separate, competent and independent body to recommend nominees to the President.
Thus, it conceived of a body, representative of all the stakeholders in the judicial appointment
process, and called it the Judicial and Bar Council (JBC). The Framers carefully worded Section 8,
Article VIII of the 1987 Constitution in this wise:
Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme
Court composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a
representative of the Congress as ex officio Members, a representative of the Integrated Bar, a
professor of law, a retired Member of the Supreme Court, and a representative of the private sector.
From the moment of the creation of the JBC, Congress designated one (1) representative to sit in
the JBC to act as one of the ex-officio members.16 Pursuant to the constitutional provision that
Congress is entitled to one (1) representative, each House sent a representative to the JBC, not
together, but alternately or by rotation.
In 1994, the seven-member composition of the JBC was substantially altered. An eighth member
was added to the JBC as the two (2) representatives from Congress began sitting simultaneously in
the JBC, with each having one-half (1/2) of a vote. 17
1wphi1

In 2001, the JBC En Banc decided to allow the representatives from the Senate and the House of
Representatives one full vote each.18 It has been the situation since then.
Grounds relied upon by Respondents
Through the subject motion, respondents pray that the Court reconsider its decision and dismiss the
petition on the following grounds: 1] that allowing only one representative from Congress in the JBC
would lead to absurdity considering its bicameral nature; 2] that the failure of the Framers to make
the proper adjustment when there was a shift from unilateralism to bicameralism was a plain
oversight; 3] that two representatives from Congress would not subvert the intention of the Framers
to insulate the JBC from political partisanship; and 4] that the rationale of the Court in declaring a
seven-member composition would provide a solution should there be a stalemate is not exactly
correct.
While the Court may find some sense in the reasoning in amplification of the third and fourth
grounds listed by respondents, still, it finds itself unable to reverse the assailed decision on the
principal issues covered by the first and second grounds for lack of merit. Significantly, the
conclusion arrived at, with respect to the first and second grounds, carries greater bearing in the final
resolution of this case.
As these two issues are interrelated, the Court shall discuss them jointly.
Ruling of the Court
The Constitution evinces the direct action of the Filipino people by which the fundamental powers of
government are established, limited and defined and by which those powers are distributed among
the several departments for their safe and useful exercise for the benefit of the body politic. 19 The
Framers reposed their wisdom and vision on one suprema lex to be the ultimate expression of the
principles and the framework upon which government and society were to operate. Thus, in the
interpretation of the constitutional provisions, the Court firmly relies on the basic postulate that the
Framers mean what they say. The language used in the Constitution must be taken to have been
deliberately chosen for a definite purpose. Every word employed in the Constitution must be
interpreted to exude its deliberate intent which must be maintained inviolate against disobedience
and defiance. What the Constitution clearly says, according to its text, compels acceptance and bars
modification even by the branch tasked to interpret it.
For this reason, the Court cannot accede to the argument of plain oversight in order to justify
constitutional construction. As stated in the July 17, 2012 Decision, in opting to use the singular letter
"a" to describe "representative of Congress," the Filipino people through the Framers intended that
Congress be entitled to only one (1) seat in the JBC. Had the intention been otherwise, the
Constitution could have, in no uncertain terms, so provided, as can be read in its other provisions.
A reading of the 1987 Constitution would reveal that several provisions were indeed adjusted as to
be in tune with the shift to bicameralism. One example is Section 4, Article VII, which provides that a
tie in the presidential election shall be broken "by a majority of all the Members of both Houses of the
Congress, voting separately."20Another is Section 8 thereof which requires the nominee to replace
the Vice-President to be confirmed "by a majority of all the Members of both Houses of the
Congress, voting separately."21 Similarly, under Section 18, the proclamation of martial law or the
suspension of the privilege of the writ of habeas corpus may be revoked or continued by the
Congress, voting separately, by a vote of at least a majority of all its Members." 22 In all these
provisions, the bicameral nature of Congress was recognized and, clearly, the corresponding
adjustments were made as to how a matter would be handled and voted upon by its two Houses.

Thus, to say that the Framers simply failed to adjust Section 8, Article VIII, by sheer inadvertence, to
their decision to shift to a bicameral form of the legislature, is not persuasive enough. Respondents
cannot just lean on plain oversight to justify a conclusion favorable to them. It is very clear that the
Framers were not keen on adjusting the provision on congressional representation in the JBC
because it was not in the exercise of its primary function to legislate. JBC was created to support
the executive power to appoint, and Congress, as one whole body, was merely assigned a
contributory non-legislative function.
The underlying reason for such a limited participation can easily be discerned. Congress has two (2)
Houses. The need to recognize the existence and the role of each House is essential considering
that the Constitution employs precise language in laying down the functions which particular House
plays, regardless of whether the two Houses consummate an official act by voting jointly or
separately. Whether in the exercise of its legislative23 or its non-legislative functions such as inter
alia, the power of appropriation,24 the declaration of an existence of a state of war,25 canvassing of
electoral returns for the President and Vice-President, 26 and impeachment,27 the dichotomy of each
House must be acknowledged and recognized considering the interplay between these two Houses.
In all these instances, each House is constitutionally granted with powers and functions peculiar to
its nature and with keen consideration to 1) its relationship with the other chamber; and 2) in
consonance with the principle of checks and balances, as to the other branches of government.
In checkered contrast, there is essentially no interaction between the two Houses in their
participation in the JBC. No mechanism is required between the Senate and the House of
Representatives in the screening and nomination of judicial officers. Rather, in the creation of the
JBC, the Framers arrived at a unique system by adding to the four (4) regular members, three (3)
representatives from the major branches of government - the Chief Justice as ex-officio Chairman
(representing the Judicial Department), the Secretary of Justice (representing the Executive
Department), and a representative of the Congress (representing the Legislative Department). The
total is seven (7), not eight. In so providing, the Framers simply gave recognition to the Legislature,
not because it was in the interest of a certain constituency, but in reverence to it as a major branch
of government.
On this score, a Member of Congress, Hon. Simeon A. Datumanong, from the Second District of
Maguindanao, submitted his well-considered position28 to then Chief Justice Reynato S. Puno:
I humbly reiterate my position that there should be only one representative of Congress in the JBC in
accordance with Article VIII, Section 8 (1) of the 1987 Constitution x x x.
The aforesaid provision is clear and unambiguous and does not need any further interpretation.
Perhaps, it is apt to mention that the oft-repeated doctrine that "construction and interpretation come
only after it has been demonstrated that application is impossible or inadequate without them."
Further, to allow Congress to have two representatives in the Council, with one vote each, is to
negate the principle of equality among the three branches of government which is enshrined in the
Constitution.
In view of the foregoing, I vote for the proposition that the Council should adopt the rule of single
representation of Congress in the JBC in order to respect and give the right meaning to the abovequoted provision of the Constitution. (Emphases and underscoring supplied)
On March 14, 2007, then Associate Justice Leonardo A. Quisumbing, also a JBC Consultant,
submitted to the Chief Justice and ex-officio JBC Chairman his opinion,29 which reads:

8. Two things can be gleaned from the excerpts and citations above: the creation of the JBC is
intended to curtail the influence of politics in Congress in the appointment of judges, and the
understanding is that seven (7) persons will compose the JBC. As such, the interpretation of two
votes for Congress runs counter to the intendment of the framers. Such interpretation actually gives
Congress more influence in the appointment of judges. Also, two votes for Congress would increase
the number of JBC members to eight, which could lead to voting deadlock by reason of evennumbered membership, and a clear violation of 7 enumerated members in the Constitution.
(Emphases and underscoring supplied)
In an undated position paper,30 then Secretary of Justice Agnes VST Devanadera opined:
As can be gleaned from the above constitutional provision, the JBC is composed of seven (7)
representatives coming from different sectors. From the enumeration it is patent that each category
of members pertained to a single individual only. Thus, while we do not lose sight of the bicameral
nature of our legislative department, it is beyond dispute that Art. VIII, Section 8 (1) of the 1987
Constitution is explicit and specific that "Congress" shall have only "xxx a representative." Thus, two
(2) representatives from Congress would increase the number of JBC members to eight (8), a
number beyond what the Constitution has contemplated. (Emphases and underscoring supplied)
In this regard, the scholarly dissection on the matter by retired Justice Consuelo Ynares-Santiago, a
former JBC consultant, is worth reiterating.31 Thus:
A perusal of the records of the Constitutional Commission reveals that the composition of the JBC
reflects the Commissions desire "to have in the Council a representation for the major elements of
the community." xxx The ex-officio members of the Council consist of representatives from the three
main branches of government while the regular members are composed of various stakeholders in
the judiciary. The unmistakeable tenor of Article VIII, Section 8(1) was to treat each ex-officio
member as representing one co-equal branch of government. xxx Thus, the JBC was designed to
have seven voting members with the three ex-officio members having equal say in the choice of
judicial nominees.
xxx
No parallelism can be drawn between the representative of Congress in the JBC and the exercise by
Congress of its legislative powers under Article VI and constituent powers under Article XVII of the
Constitution. Congress, in relation to the executive and judicial branches of government, is
constitutionally treated as another co-equal branch in the matter of its representative in the JBC. On
the other hand, the exercise of legislative and constituent powers requires the Senate and the House
of Representatives to coordinate and act as distinct bodies in furtherance of Congress role under
our constitutional scheme. While the latter justifies and, in fact, necessitates the separateness of the
two Houses of Congress as they relate inter se, no such dichotomy need be made when Congress
interacts with the other two co-equal branches of government.
It is more in keeping with the co-equal nature of the three governmental branches to assign the
same weight to considerations that any of its representatives may have regarding aspiring nominees
to the judiciary. The representatives of the Senate and the House of Representatives act as such for
one branch and should not have any more quantitative influence as the other branches in the
exercise of prerogatives evenly bestowed upon the three. Sound reason and principle of equality
among the three branches support this conclusion. [Emphases and underscoring supplied]
The argument that a senator cannot represent a member of the House of Representatives in the
JBC and vice-versa is, thus, misplaced. In the JBC, any member of Congress, whether from the

Senate or the House of Representatives, is constitutionally empowered to represent the entire


Congress. It may be a constricted constitutional authority, but it is not an absurdity.
From this score stems the conclusion that the lone representative of Congress is entitled to one full
vote. This pronouncement effectively disallows the scheme of splitting the said vote into half (1/2),
between two representatives of Congress. Not only can this unsanctioned practice cause disorder in
the voting process, it is clearly against the essence of what the Constitution authorized. After all,
basic and reasonable is the rule that what cannot be legally done directly cannot be done indirectly.
To permit or tolerate the splitting of one vote into two or more is clearly a constitutional circumvention
that cannot be countenanced by the Court. Succinctly put, when the Constitution envisioned one
member of Congress sitting in the JBC, it is sensible to presume that this representation carries with
him one full vote.
It is also an error for respondents to argue that the President, in effect, has more influence over the
JBC simply because all of the regular members of the JBC are his appointees. The principle of
checks and balances is still safeguarded because the appointment of all the regular members of the
JBC is subject to a stringent process of confirmation by the Commission on Appointments, which is
composed of members of Congress.
Respondents contention that the current irregular composition of the JBC should be accepted,
simply because it was only questioned for the first time through the present action, deserves scant
consideration. Well-settled is the rule that acts done in violation of the Constitution no matter how
frequent, usual or notorious cannot develop or gain acceptance under the doctrine of estoppel or
laches, because once an act is considered as an infringement of the Constitution it is void from the
very beginning and cannot be the source of any power or authority.
It would not be amiss to point out, however, that as a general rule, an unconstitutional act is not a
law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is
inoperative as if it has not been passed at all. This rule, however, is not absolute. Under the doctrine
of operative facts, actions previous to the declaration of unconstitutionality are legally recognized.
They are not nullified. This is essential in the interest of fair play. To reiterate the doctrine enunciated
in Planters Products, Inc. v. Fertiphil Corporation:32
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity
and fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a
statute prior to a determination of unconstitutionality is an operative fact and may have
consequences which cannot always be ignored. The past cannot always be erased by a new judicial
declaration. The doctrine is applicable when a declaration of unconstitutionality will impose an undue
burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a
declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the
acts done by a municipality in reliance upon a law creating it.33
Under the circumstances, the Court finds the exception applicable in this case and holds that
notwithstanding its finding of unconstitutionality in the current composition of the JBC, all its prior
official actions are nonetheless valid.
Considering that the Court is duty bound to protect the Constitution which was ratified by the direct
action of the Filipino people, it cannot correct what respondents perceive as a mistake in its
mandate. Neither can the Court, in the exercise of its power to interpret the spirit of the Constitution,
read into the law something that is contrary to its express provisions and justify the same as
correcting a perceived inadvertence. To do so would otherwise sanction the Court action of making
amendment to the Constitution through a judicial pronouncement.

In other words, the Court cannot supply the legislative omission. According to the rule of casus
omissus "a case omitted is to be held as intentionally omitted." 34 "The principle proceeds from a
reasonable certainty that a particular person, object or thing has been omitted from a legislative
enumeration."35 Pursuant to this, "the Court cannot under its power of interpretation supply the
omission even though the omission may have resulted from inadvertence or because the case in
question was not foreseen or contemplated."36 "The Court cannot supply what it thinks the legislature
would have supplied had its attention been called to the omission, as that would be judicial
legislation."37
Stated differently, the Court has no power to add another member by judicial construction.
The call for judicial activism fails to stir the sensibilities of the Court tasked to guard the Constitution
against usurpation. The Court remains steadfast in confining its powers in the sphere granted by the
Constitution itself. Judicial activism should never be allowed to become judicial exuberance. 38 In
cases like this, no amount of practical logic or convenience can convince the Court to perform either
an excision or an insertion that will change the manifest intent of the Framers. To broaden the scope
of congressional representation in the JBC is tantamount to the inclusion of a subject matter which
was not included in the provision as enacted. True to its constitutional mandate, the Court cannot
craft and tailor constitutional provisions in order to accommodate all of situations no matter how ideal
or reasonable the proposed solution may sound. To the exercise of this intrusion, the Court declines.
WHEREFORE, the Motion for Reconsideration filed by respondents is hereby DENIED.
The suspension of the effects of the second paragraph of the dispositive portion of the July 17, 2012
Decision of the Court, which reads, "This disposition is immediately executory," is hereby LIFTED.
SO ORDERED.

G.R. No. 181359

August 5, 2013

SPOUSES CLEMENCIO C. SABITSANA, JR. and MA. ROSARIO M. SABITSANA, Petitioners,


vs.
JUANITO F. MUERTEGUI, represented by his Attorney-in-Fact DOMINGO A. MUERTEGUI,
JR., Respondent.
DECISION
DEL CASTILLO, J.:
A lawyer may not, for his own personal interest and benefit, gamble on his client's word, believing it
at one time and disbelieving it the next. He owes his client his undivided loyalty.
Assailed in this Petition for Review on Certiorari1 are the January 25, 2007 Decision2 of the Court of
Appeals (CA) which denied the appeal in CA-G.R. CV No. 79250, and its January 11, 2008
Resolution3 denying petitioners Motion for Reconsideration.4
Factual Antecedents

On September 2, 1981, Alberto Garcia (Garcia) executed an unnotarized Deed of Sale 5 in favor of
respondent Juanito Muertegui6 (Juanito) over a 7,500-square meter parcel of unregistered land (the
lot) located in Dalutan Island, Talahid, Almeira, Biliran, Leyte del Norte covered by Tax Declaration
(TD) No. 1996 issued in 1985 in Garcias name.7
Juanitos father Domingo Muertegui, Sr. (Domingo Sr.) and brother Domingo Jr. took actual
possession of the lot and planted thereon coconut and ipil-ipil trees. They also paid the real property
taxes on the lot for the years 1980 up to 1998.
On October 17, 1991, Garcia sold the lot to the Muertegui family lawyer, petitioner Atty. Clemencio C.
Sabitsana, Jr. (Atty. Sabitsana), through a notarized deed of absolute sale. 8 The sale was registered
with the Register of Deeds on February 6, 1992.9 TD No. 1996 was cancelled and a new one, TD
No. 5327,10 was issued in Atty. Sabitsanas name. Although Domingo Jr. and Sr. paid the real estate
taxes, Atty. Sabitsana also paid real property taxes in 1992, 1993, and 1999. In 1996, he introduced
concrete improvements on the property, which shortly thereafter were destroyed by a typhoon.
When Domingo Sr. passed away, his heirs applied for registration and coverage of the lot under the
Public Land Act or Commonwealth Act No. 141. Atty. Sabitsana, in a letter11 dated August 24, 1998
addressed to the Department of Environment and Natural Resources CENRO/PENRO office in
Naval, Biliran, opposed the application, claiming that he was the true owner of the lot. He asked that
the application for registration be held in abeyance until the issue of conflicting ownership has been
resolved.
On April 11, 2000, Juanito, through his attorney-in-fact Domingo Jr., filed Civil Case No. B-1097 12 for
quieting of title and preliminary injunction, against herein petitioners Atty. Sabitsana and his wife,
Rosario, claiming that they bought the lot in bad faith and are exercising acts of possession and
ownership over the same, which acts thus constitute a cloud over his title. The Complaint 13 prayed,
among others, that the Sabitsana Deed of Sale, the August 24, 1998 letter, and TD No. 5327 be
declared null and void and of no effect; that petitioners be ordered to respect and recognize Juanitos
title over the lot; and that moral and exemplary damages, attorneys fees, and litigation expenses be
awarded to him.
In their Answer with Counterclaim,14 petitioners asserted mainly that the sale to Juanito is null and
void absent the marital consent of Garcias wife, Soledad Corto (Soledad); that they acquired the
property in good faith and for value; and that the Complaint is barred by prescription and laches.
They likewise insisted that the Regional Trial Court (RTC) of Naval, Biliran did not have jurisdiction
over the case, which involved title to or interest in a parcel of land the assessed value of which is
merely P1,230.00.
The evidence and testimonies of the respondents witnesses during trial reveal that petitioner Atty.
Sabitsana was the Muertegui familys lawyer at the time Garcia sold the lot to Juanito, and that as
such, he was consulted by the family before the sale was executed; that after the sale to Juanito,
Domingo Sr. entered into actual, public, adverse and continuous possession of the lot, and planted
the same to coconut and ipil-ipil; and that after Domingo Sr.s death, his wife Caseldita, succeeded
him in the possession and exercise of rights over the lot.
On the other hand, Atty. Sabitsana testified that before purchasing the lot, he was told by a member
of the Muertegui family, Carmen Muertegui Davies (Carmen), that the Muertegui family had bought
the lot, but she could not show the document of sale; that he then conducted an investigation with
the offices of the municipal and provincial assessors; that he failed to find any document, record, or
other proof of the sale by Garcia to Juanito, and instead discovered that the lot was still in the name
of Garcia; that given the foregoing revelations, he concluded that the Muerteguis were merely

bluffing, and that they probably did not want him to buy the property because they were interested in
buying it for themselves considering that it was adjacent to a lot which they owned; that he then
proceeded to purchase the lot from Garcia; that after purchasing the lot, he wrote Caseldita in
October 1991 to inform her of the sale; that he then took possession of the lot and gathered ipil-ipil
for firewood and harvested coconuts and calamansi from the lot; and that he constructed a rip-rap on
the property sometime in 1996 and 1997.
Ruling of the Regional Trial Court
On October 28, 2002, the trial court issued its Decision15 which decrees as follows:
WHEREFORE, in view of the foregoing considerations, this Court finds in favor of the plaintiff and
against the defendants, hereby declaring the Deed of Sale dated 2 September 1981 as valid and
preferred while the Deed of Absolute Sale dated 17 October 1991 and Tax Declaration No. 5327 in
the name of Atty. Clemencio C. Sabitsana, Jr. are VOID and of no legal effect.
The Provincial Assessor and the Municipal Assessor of Naval are directed to cancel Tax Declaration
No. 5327 as void and done in bad faith.
Further, Atty. Clemencio C. Sabitsana, Jr. is ordered to pay plaintiff Juanito Muertigui, represented by
his attorney-in-fact Domingo Muertigui, Jr. the amounts of:
a) P30,000.00 as attorneys fees;
b) P10,000.00 as litigation expenses; and
c) Costs.
SO ORDERED.16
The trial court held that petitioners are not buyers in good faith. Petitioner Atty. Sabitsana was the
Muertegui familys lawyer, and was informed beforehand by Carmen that her family had purchased
the lot; thus, he knew of the sale to Juanito. After conducting an investigation, he found out that the
sale was not registered. With this information in mind, Atty. Sabitsana went on to purchase the same
lot and raced to register the sale ahead of the Muerteguis, expecting that his purchase and prior
registration would prevail over that of his clients, the Muerteguis. Applying Article 1544 of the Civil
Code,17 the trial court declared that even though petitioners were first to register their sale, the same
was not done in good faith. And because petitioners registration was not in good faith, preference
should be given to the sale in favor of Juanito, as he was the first to take possession of the lot in
good faith, and the sale to petitioners must be declared null and void for it casts a cloud upon the
Muertegui title.
Petitioners filed a Motion for Reconsideration18 but the trial court denied19 the same.
Ruling of the Court of Appeals
Petitioners appealed to the CA20 asserting that the sale to Juanito was null and void for lack of
marital consent; that the sale to them is valid; that the lower court erred in applying Article 1544 of
the Civil Code; that the Complaint should have been barred by prescription, laches and estoppel;
that respondent had no cause of action; that respondent was not entitled to an award of attorneys

fees and litigation expenses; and that they should be the ones awarded attorneys fees and litigation
expenses.
The CA, through its questioned January 25, 2007 Decision,21 denied the appeal and affirmed the trial
courts Decision in toto. It held that even though the lot admittedly was conjugal property, the
absence of Soledads signature and consent to the deed did not render the sale to Juanito
absolutely null and void, but merely voidable. Since Garcia and his wife were married prior to the
effectivity of the Family Code, Article 173 of the Civil Code22should apply; and under the said
provision, the disposition of conjugal property without the wifes consent is not void, but merely
voidable. In the absence of a decree annulling the deed of sale in favor of Juanito, the same remains
valid.
The CA added that the fact that the Deed of Sale in favor of Juanito was not notarized could not
affect its validity. As against the notarized deed of sale in favor of petitioners, the CA held that the
sale in favor of Juanito still prevails. Applying Article 1544 of the Civil Code, the CA said that the
determining factor is petitioners good faith, or the lack of it. It held that even though petitioners were
first to register the sale in their favor, they did not do so in good faith, for they already knew
beforehand of Garcias prior sale to Juanito. By virtue of Atty. Sabitsanas professional and
confidential relationship with the Muertegui family, petitioners came to know about the prior sale to
the Muerteguis and the latters possession of the lot, and yet they pushed through with the second
sale. Far from acting in good faith, petitioner Atty. Sabitsana used his legal knowledge to take
advantage of his clients by registering his purchase ahead of them.
Finally, the CA declared that Juanito, as the rightful owner of the lot, possessed the requisite cause
of action to institute the suit for quieting of title and obtain judgment in his favor, and is entitled as
well to an award for attorneys fees and litigation expenses, which the trial court correctly held to be
just and equitable under the circumstances.
The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, the instant appeal is DENIED and the Decision dated October
28, 2002 of the Regional Trial Court, 8th Judicial Region, Branch 16, Naval, Biliran, is hereby
AFFIRMED. Costs against defendants-appellants.
SO ORDERED.23
Issues
Petitioners now raise the following issues for resolution:
I. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE REGIONAL TRIAL
COURT DID NOT HAVE JURISDICTION OVER THE CASE IN VIEW OF THE FACT THAT
THE ASSESSED VALUE OF THE SUBJECT LAND WAS ONLY P1,230.00 (AND STATED
MARKET VALUE OF ONLY P3,450.00).
II. THE COURT OF APPEALS ERRED IN APPLYING ART. 1544 OF THE CIVIL CODE
INSTEAD OF THE PROPERTY REGISTRATION DECREE (P.D. NO. 1529) CONSIDERING
THAT THE SUBJECT LAND WAS UNREGISTERED.
III. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT WAS
ALREADY BARRED [BY] LACHES AND THE STATUTE OF LIMITATIONS.

IV. THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE REGIONAL
TRIAL COURT ORDERING THE PETITIONERS TO PAY ATTORNEYS FEES AND
LITIGATION EXPENSES TO THE RESPONDENT.24
Petitioners Arguments
Petitioners assert that the RTC of Naval, Biliran did not have jurisdiction over the case. They argue
that since the assessed value of the lot was a mere P1,230.00, jurisdiction over the case lies with
the first level courts, pursuant to Republic Act No. 7691,25 which expanded their exclusive original
jurisdiction to include "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."26 Petitioners thus conclude that the Decision in Civil
Case No. B-1097 is null and void for lack of jurisdiction.
Petitioners next insist that the lot, being unregistered land, is beyond the coverage of Article 1544 of
the Civil Code, and instead, the provisions of Presidential Decree (PD) No. 1529 should apply. This
being the case, the Deed of Sale in favor of Juanito is valid only as between him and the seller
Garcia, pursuant to Section 113 of PD 1529;27 it cannot affect petitioners who are not parties thereto.
On the issue of estoppel, laches and prescription, petitioners insist that from the time they informed
the Muerteguis in writing about their purchase of the lot, or in October 1991, the latter did not notify
them of their prior purchase of the lot, nor did respondent interpose any objection to the sale in their
favor. It was only in 1998 that Domingo Jr. showed to petitioners the unnotarized deed of sale.
According to petitioners, this seven-year period of silence and inaction on the Muerteguis part
should be taken against them and construed as neglect on their part to assert their rights for an
unreasonable length of time. As such, their action to quiet title should be deemed barred by laches
and estoppel.
Lastly, petitioners take exception to the award of attorneys fees and litigation expenses, claiming
that since there was no bad faith on their part, such award may not be considered just and equitable
under the circumstances. Still, an award of attorneys fees should remain the exception rather than
the rule; and in awarding the same, there must have been an express finding of facts and law
justifying such award, a requirement that is absent in this case.
Petitioners thus pray for the reversal of the questioned CA Decision and Resolution; the dismissal of
the Complaint in Civil Case No. B-1097; the deletion of the award of attorneys fees and litigation
expenses in respondents favor; and a declaration that they are the true and rightful owners of the
lot.
Respondents Arguments
Respondent, on the other hand, counters that a suit for quieting of title is one whose subject matter
is incapable of pecuniary estimation, and thus falls within the jurisdiction of the RTC. He likewise
insists that Article 1544 applies to the case because there is a clear case of double sale of the same
property to different buyers, and the bottom line thereof lies in petitioners lack of good faith in
entering into the subsequent sale. On the issue of laches/estoppel, respondent echoes the CAs view
that he was persistent in the exercise of his rights over the lot, having previously filed a complaint for
recovery of the lot, which unfortunately was dismissed based on technicality.

On the issue of attorneys fees and litigation expenses, respondent finds refuge in Article 2208 of the
Civil Code,28 citing three instances which fortify the award in his favor petitioners acts compelled
him to litigate and incur expenses to protect his interests; their gross and evident bad faith in
refusing to recognize his ownership and possession over the lot; and the justness and equitableness
of his case.
Our Ruling
The Petition must be denied.
The Regional Trial Court has jurisdiction over the suit for quieting of title.
On the question of jurisdiction, it is clear under the Rules that an action for quieting of title may be
instituted in the RTCs, regardless of the assessed value of the real property in dispute. Under Rule
63 of the Rules of Court,29 an action to quiet title to real property or remove clouds therefrom may be
brought in the appropriate RTC.
It must be remembered that the suit for quieting of title was prompted by petitioners August 24, 1998
letter-opposition to respondents application for registration. Thus, in order to prevent 30 a cloud from
being cast upon his application for a title, respondent filed Civil Case No. B-1097 to obtain a
declaration of his rights. In this sense, the action is one for declaratory relief, which properly falls
within the jurisdiction of the RTC pursuant to Rule 63 of the Rules.
Article 1544 of the Civil Code does not apply to sales involving unregistered land.
Both the trial court and the CA are, however, wrong in applying Article 1544 of the Civil Code. Both
courts seem to have forgotten that the provision does not apply to sales involving unregistered land.
Suffice it to state that the issue of the buyers good or bad faith is relevant only where the subject of
the sale is registered land, and the purchaser is buying the same from the registered owner whose
title to the land is clean. In such case, the purchaser who relies on the clean title of the registered
owner is protected if he is a purchaser in good faith for value. 31
Act No. 3344 applies to sale of unregistered lands.
What applies in this case is Act No. 3344,32 as amended, which provides for the system of recording
of transactions over unregistered real estate. Act No. 3344 expressly declares that any registration
made shall be without prejudice to a third party with a better right. The question to be resolved
therefore is: who between petitioners and respondent has a better right to the disputed lot?
Respondent has a better right to the lot.
The sale to respondent Juanito was executed on September 2, 1981 via an unnotarized deed of
sale, while the sale to petitioners was made via a notarized document only on October 17, 1991, or
ten years thereafter. Thus, Juanito who was the first buyer has a better right to the lot, while the
subsequent sale to petitioners is null and void, because when it was made, the seller Garcia was no
longer the owner of the lot. Nemo dat quod non habet.
The fact that the sale to Juanito was not notarized does not alter anything, since the sale between
him and Garcia remains valid nonetheless. Notarization, or the requirement of a public document
under the Civil Code,33 is only for convenience, and not for validity or enforceability.34 And because it

remained valid as between Juanito and Garcia, the latter no longer had the right to sell the lot to
petitioners, for his ownership thereof had ceased.
Nor can petitioners registration of their purchase have any effect on Juanitos rights. The mere
registration of a sale in ones favor does not give him any right over the land if the vendor was no
longer the owner of the land, having previously sold the same to another even if the earlier sale was
unrecorded.35 Neither could it validate the purchase thereof by petitioners, which is null and void.
Registration does not vest title; it is merely the evidence of such title. Our land registration laws do
not give the holder any better title than what he actually has.36
Specifically, we held in Radiowealth Finance Co. v. Palileo37 that:
Under Act No. 3344, registration of instruments affecting unregistered lands is without prejudice to a
third party with a better right. The aforequoted phrase has been held by this Court to mean that the
mere registration of a sale in ones favor does not give him any right over the land if the vendor was
not anymore the owner of the land having previously sold the same to somebody else even if the
earlier sale was unrecorded.
Petitioners defense of prescription, laches and estoppel are unavailing since their claim is based on
a null and void deed of sale. The fact that the Muerteguis failed to interpose any objection to the sale
in petitioners favor does not change anything, nor could it give rise to a right in their favor; their
purchase remains void and ineffective as far as the Muerteguis are concerned.
The award of attorneys fees and litigation expenses is proper because of petitioners bad faith.
Petitioners actual and prior knowledge of the first sale to Juanito makes them purchasers in bad
faith. It also appears that petitioner Atty. Sabitsana was remiss in his duties as counsel to the
Muertegui family. Instead of advising the Muerteguis to register their purchase as soon as possible to
forestall any legal complications that accompany unregistered sales of real property, he did exactly
the opposite: taking advantage of the situation and the information he gathered from his inquiries
and investigation, he bought the very same lot and immediately caused the registration thereof
ahead of his clients, thinking that his purchase and prior registration would prevail. The Court cannot
tolerate this mercenary attitude. Instead of protecting his clients interest, Atty. Sabitsana practically
preyed on him.
Petitioner Atty. Sabitsana took advantage of confidential information disclosed to him by his client,
using the same to defeat him and beat him to the draw, so to speak. He rushed the sale and
registration thereof ahead of his client. He may not be afforded the excuse that he nonetheless
proceeded to buy the lot because he believed or assumed that the Muerteguis were simply bluffing
when Carmen told him that they had already bought the same; this is too convenient an excuse to
be believed. As the Muertegui family lawyer, he had no right to take a position, using information
disclosed to him in confidence by his client, that would place him in possible conflict with his duty. He
may not, for his own personal interest and benefit, gamble on his clients word, believing it at one
time and disbelieving it the next. He owed the Muerteguis his undivided loyalty. He had the duty to
protect the client, at all hazards and costs even to himself.38
Petitioner Atty. Sabitsana is enjoined to "look at any representation situation from the point of view
that there are possible conflicts, and further to think in terms of impaired loyalty, that is, to evaluate if
his representation in any way will impair his loyalty to a client."39

Moreover, as the Muertegui familys lawyer, Atty. Sabitsana was under obligation to safeguard his
client's property, and not jeopardize it. Such is his duty as an attorney, and pursuant to his general
agency.40
Even granting that Atty. Sabitsana has ceased to act as the Muertegui family's lawyer, he still owed
them his loyalty. The termination of attorney-client relation provides no justification for a lawyer to
represent an interest adverse to or in conflict with that of the former client on a matter involving
confidential information which the lawyer acquired when he was counsel. The client's confidence
once reposed should not be divested by mere expiration of professional employment. 41 This is
underscored by the fact that Atty. Sabitsana obtained information from Carmen which he used to his
advantage and to the detriment of his client.
1wphi1

from the foregoing disquisition, it can be seen that petitioners are guilty of bad faith in pursuing the
sale of the lot despite being apprised of the prior sale in respondent's favor. Moreover, petitioner Atty.
Sabitsana has exhibited a lack of loyalty toward his clients, the Muerteguis, and by his acts,
jeopardized their interests instead of protecting them. Over and above the trial court's and the CA's
findings, this provides further justification for the award of attorney's fees, litigation expenses and
costs in favor of the respondent.
Thus said, judgment must be rendered in favor of respondent to prevent the petitioners' void sale
from casting a cloud upon his valid title.
WHEREFORE, premises considered, the Petition is DENIED. The January 25, 2007 Decision and
the January 11, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 79250 are AFFIRMED.
Costs against petitioners.
SO ORDERED.

G.R. No. 204603

September 24, 2013

REPUBLIC OF THE G.R. No. 204603 PHILIPPINES, represented by THE EXECUTIVE


SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF FOREIGN AFFAIRS, THE
SECRETARY OF NATIONALDEFENSE, THE SECRETARY OF THE INTERIOR AND LOCAL
GOVERNMENT THE SECRETARY OF FINANCE, THE NATIONAL SECURITY ADVISER, THE
SECRETARY OF BUDGET AND MANAGEMENT THE TREASURER OF THE PHILIPPINES, THE
CHIEF OF STAFF OF THE ARMED FORCES OF THE PHILIPPINES, and THE CHIEFOF THE
PHILIPPINE NATIONAL POLICE, Petitioners,
vs.
HERMINIO HARRY ROQUE, MORO CHRISTIAN PEOPLE'S ALLIANCE, FR. JOE DIZON,
RODINIE SORIANO, STEPHANIE ABIERA, MARIA LOURDES ALCAIN, VOLTAIRE ALFEREZ,
CZARINA MAYALTEZ, SHERYL BALOT, RENIZZA BATACAN, EDAN MARRI CAETE, LEANA
CARAMOAN, ALDWIN CAMANCE, RENE DELORINO, PAULYN MAY DUMAN, RODRIGO
FAJARDO III, ANNAMARIE GO, ANNA ARMINDA JIMENEZ, MARY ANN LEE,LUISA
MANALAYSAY, MIGUEL MUSNGI, MICHAEL OCAMPO, NORMAN ROLAND OCANA III,
WILLIAM RAGAMAT, MARICAR RAMOS, CHERRY LOU REYES, MELISSA ANN SICAT,
CRISTINE MAE TABING, VANESSA TORNO, and HON. JUDGE ELEUTERIO L. BATHAN, as
Presiding Judge of Regional Trial Court, Quezon City, Branch 92, Respondents.
RESOLUTION

PERLAS-BERNABE, J.:
Assailed in this petition for certiorari1 are the April 23, 20122 and July 31, 20123 Orders of the
Regional Trial Court of Quezon City, Branch 92(RTC) in Special Civil Action (SCA) No. Q-07-60778,
denying petitioners motion to dismiss (subject motion to dismiss) based on the following grounds:
(a) that the Court had yet to pass upon the constitutionality of Republic Act No. (RA)
9372,4 otherwise known as the "Human Security Act of 2007," in the consolidated cases of Southern
Hemisphere Engagement Network, Inc. v. Anti-Terrorism Council 5 (Southern Hemisphere); and (b)
that private respondents petition for declaratory relief was proper.
The Facts
On July 17, 2007, private respondents filed a Petition6 for declaratory relief before the RTC, assailing
the constitutionality of the following sections of RA 9372: (a) Section 3, 7 for being void for
vagueness;8 (b) Section 7,9for violating the right to privacy of communication and due process and
the privileged nature of priest-penitent relationships; 10 (c)Section 18,11 for violating due process, the
prohibition against ex post facto laws or bills of attainder, the Universal Declaration of Human Rights,
and the International Covenant on Civil and Political Rights, as well as for contradicting Article
12512 of the Revised Penal Code, as amended;13 (d) Section 26,14 for violating the right to travel;15 and
(e) Section 27,16 for violating the prohibition against unreasonable searches and seizures. 17
Petitioners moved to suspend the proceedings,18 averring that certain petitions (SC petitions) raising
the issue of RA 9372s constitutionality have been lodged before the Court. 19 The said motion was
granted in an Order dated October 19, 2007.20
On October 5, 2010, the Court promulgated its Decision21 in the Southern Hemisphere cases and
thereby dismissed the SC petitions.
On February 27, 2012, petitioners filed the subject motion to dismiss, 22 contending that private
respondents failed to satisfy the requisites for declaratory relief. Likewise, they averred that the
constitutionality of RA 9372 had already been upheld by the Court in the Southern Hemisphere
cases.
In their Comment/Opposition,23 private respondents countered that: (a) the Court did not resolve the
issue of RA 9372s constitutionality in Southern Hemisphere as the SC petitions were dismissed
based purely on technical grounds; and (b) the requisites for declaratory relief were met.
The RTC Ruling
On April 23, 2012, the RTC issued an Order24 which denied the subject motion to dismiss, finding
that the Court did not pass upon the constitutionality of RA 9372 and that private respondents
petition for declaratory relief was properly filed.
Petitioners moved for reconsideration25 which was, however, denied by the RTC in an Order dated
July 31, 2012.26 The RTC observed that private respondents have personal and substantial interests
in the case and that it would be illogical to await the adverse consequences of the aforesaid laws
implementation considering that the case is of paramount impact to the Filipino people. 27
Hence, the instant petition.
The Issues Before the Court

The present controversy revolves around the issue of whether or not the RTC gravely abused its
discretion when it denied the subject motion to dismiss.
Asserting the affirmative, petitioners argue that private respondents failed to satisfy the requirements
for declaratory relief and that the Court had already sustained with finality the constitutionality of RA
9372.
On the contrary, private respondents maintain that the requirements for declaratory relief have been
satisfied and that the Court has yet to resolve the constitutionality of RA 9372, negating any grave
abuse of discretion on the RTCs part.
The Courts Ruling
The petition is meritorious.
An act of a court or tribunal can only be considered as with grave abuse of discretion when such act
is done in a capricious or whimsical exercise of judgment as is equivalent to lack of jurisdiction. 28 It is
well-settled that the abuse of discretion to be qualified as "grave" must be so patent or gross as to
constitute an evasion of a positive duty or a virtual refusal to perform the duty or to act at all in
contemplation of law.29 In this relation, case law states that not every error in the proceedings, or
every erroneous conclusion of law or fact, constitutes grave abuse of discretion. 30 The degree of
gravity, as above-described, must be met.
Applying these principles, the Court observes that while no grave abuse of discretion could be
ascribed on the part of the RTC when it found that the Court did not pass upon the constitutionality
of RA 9372 in the Southern Hemisphere cases, it, however, exceeded its jurisdiction when it ruled
that private respondents petition had met all the requisites for an action for declaratory relief.
Consequently, its denial of the subject motion to dismiss was altogether improper.
To elucidate, it is clear that the Court, in Southern Hemisphere, did not make any definitive ruling on
the constitutionality of RA 9372. The certiorari petitions in those consolidated cases were dismissed
based solely on procedural grounds, namely: (a) the remedy of certiorari was improper; 31 (b)
petitioners therein lack locus standi;32 and (c) petitioners therein failed to present an actual case or
controversy.33 Therefore, there was no grave abuse of discretion.
The same conclusion cannot, however, be reached with regard to the RTCs ruling on the sufficiency
of private respondents petition for declaratory relief.
Case law states that the following are the requisites for an action for declaratory relief:
first , the subject matter of the controversy must be a deed, will, contract or other written instrument,
statute, executive order or regulation, or ordinance; second , the terms of said documents and the
validity thereof are doubtful and require judicial construction; third , there must have been no breach
of the documents in question; fourth , there must be an actual justiciable controversy or the "ripening
seeds" of one between persons whose interests are adverse; fifth , the issue must be ripe for judicial
determination; and sixth , adequate relief is not available through other means or other forms of
action or proceeding.34
Based on a judicious review of the records, the Court observes that while the first, 35 second,36 and
third37requirements appear to exist in this case, the fourth, fifth, and sixth requirements, however,
remain wanting.

As to the fourth requisite, there is serious doubt that an actual justiciable controversy or the "ripening
seeds" of one exists in this case.
Pertinently, a justiciable controversy refers to an existing case or controversy that is appropriate or
ripe for judicial determination, not one that is conjectural or merely anticipatory.38 Corollary thereto,
by "ripening seeds" it is meant, not that sufficient accrued facts may be dispensed with, but that a
dispute may be tried at its inception before it has accumulated the asperity, distemper, animosity,
passion, and violence of a full blown battle that looms ahead. The concept describes a state of facts
indicating imminent and inevitable litigation provided that the issue is not settled and stabilized by
tranquilizing declaration.39
A perusal of private respondents petition for declaratory relief would show that they have failed to
demonstrate how they are left to sustain or are in immediate danger to sustain some direct injury as
a result of the enforcement of the assailed provisions of RA 9372. Not far removed from the factual
milieu in the Southern Hemisphere cases, private respondents only assert general interests as
citizens, and taxpayers and infractions which the government could prospectively commit if the
enforcement of the said law would remain untrammeled. As their petition would disclose, private
respondents fear of prosecution was solely based on remarks of certain government officials which
were addressed to the general public.40 They, however, failed to show how these remarks tended
towards any prosecutorial or governmental action geared towards the implementation of RA 9372
against them. In other words, there was no particular, real or imminent threat to any of them. As held
in Southern Hemisphere:
Without any justiciable controversy, the petitions have become pleas for declaratory relief, over
which the Court has no original jurisdiction. Then again, declaratory actions characterized by "double
contingency," where both the activity the petitioners intend to undertake and the anticipated reaction
to it of a public official are merely theorized, lie beyond judicial review for lack of ripeness.
1wphi1

The possibility of abuse in the implementation of RA 9372does not avail to take the present petitions
out of the realm of the surreal and merely imagined. Such possibility is not peculiar to RA 9372 since
the exercise of any power granted by law may be abused. Allegations of abuse must be anchored on
real events before courts may step in to settle actual controversies involving rights which are legally
demandable and enforceable.41 (Emphasis supplied; citations omitted)
Thus, in the same light that the Court dismissed the SC petitions in the Southern Hemisphere cases
on the basis of, among others, lack of actual justiciable controversy (or the ripening seeds of one),
the RTC should have dismissed private respondents petition for declaratory relief all the same.
It is well to note that private respondents also lack the required locus standi to mount their
constitutional challenge against the implementation of the above-stated provisions of RA 9372 since
they have not shown any direct and personal interest in the case. 42 While it has been previously held
that transcendental public importance dispenses with the requirement that the petitioner has
experienced or is in actual danger of suffering direct and personal injury,43 it must be stressed that
cases involving the constitutionality of penal legislation belong to an altogether different genus of
constitutional litigation.44 Towards this end, compelling State and societal interests in the proscription
of harmful conduct necessitate a closer judicial scrutiny of locus standi, 45 as in this case. To rule
otherwise, would be to corrupt the settled doctrine of locus standi, as every worthy cause is an
interest shared by the general public.46
As to the fifth requisite for an action for declaratory relief, neither can it be inferred that the
controversy at hand is ripe for adjudication since the possibility of abuse, based on the abovediscussed allegations in private respondents petition, remain highly-speculative and merely

theorized. It is well-settled that a question is ripe for adjudication when the act being challenged has
had a direct adverse effect on the individual challenging it. 47 This private respondents failed to
demonstrate in the case at bar.
1wphi1

Finally, as regards the sixth requisite, the Court finds it irrelevant to proceed with a discussion on the
availability of adequate reliefs since no impending threat or injury to the private respondents exists in
the first place.
All told, in view of the absence of the fourth and fifth requisites for an action for declaratory relief, as
well as the irrelevance of the sixth requisite, private respondents petition for declaratory relief should
have been dismissed. Thus, by giving due course to the same, it cannot be gainsaid that the RTC
gravely abused its discretion.
WHEREFORE, the petition is GRANTED. Accordingly, the April23, 2012 and July 31, 2012 Orders of
the Regional Trial Court of Quezon City, Branch 92 in SCA No. Q-07-60778 are REVERSED and
SET ASIDE and the petition for declaratory relief before the said court is hereby DISMISSED.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
WE CONCUR:

SOUTHERN HEMISPHERE
ENGAGEMENT NETWORK, G.R. No. 178552
INC., on behalf of the SouthSouth Network (SSN) for NonState
Armed
Group Present:
Engagement,
and
ATTY.
CORONA, C.J.,
SOLIMAN M. SANTOS, JR.,
CARPIO,
Petitioners,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
- versus LEONARDO-DE CASTRO,
BRION,
PERALTA,
ANTI-TERRORISM
BERSAMIN,
COUNCIL,
THE
DEL CASTILLO,
EXECUTIVE SECRETARY,
ABAD,
THE
SECRETARY
OF
VILLARAMA, JR.,
JUSTICE, THE SECRETARY
PEREZ,
OF FOREIGN AFFAIRS,
MENDOZA, and
THE
SECRETARY
OF

NATIONAL DEFENSE, THE


SERENO, JJ.
SECRETARY
OF
THE
INTERIOR AND LOCAL
GOVERNMENT,
THE
SECRETARY OF FINANCE,
THE NATIONAL SECURITY
ADVISER, THE CHIEF OF
STAFF OF THE ARMED
FORCES
OF
THE
PHILIPPINES, AND THE
CHIEF OF THE PHILIPPINE
NATIONAL POLICE,
Promulgated:
Respondents.
October 5, 2010

x ------------------------------x
KILUSANG MAYO UNO
(KMU), represented by its
Chairperson Elmer Labog,
NATIONAL FEDERATION
OF
LABOR
UNIONSKILUSANG MAYO UNO
(NAFLU-KMU), represented
by its National President
Joselito V. Ustarez and
Secretary General Antonio C.
Pascual, and CENTER FOR
TRADE
UNION
AND
HUMAN
RIGHTS,
represented by its Executive
Director Daisy Arago,
Petitioners,
- versus HON. EDUARDO ERMITA,
in his capacity as Executive

G.R. No. 178554

Secretary,
NORBERTO
GONZALES, in his capacity
as Acting Secretary of National
Defense,
HON.
RAUL
GONZALES, in his capacity
as Secretary of Justice, HON.
RONALDO PUNO, in his
capacity as Secretary of the
Interior
and
Local
Government,
GEN.
HERMOGENES ESPERON,
in his capacity as AFP Chief of
Staff,
and
DIRECTOR
GENERAL
OSCAR
CALDERON, in his capacity
as PNP Chief of Staff,
Respondents.
x -----------------------------------x
G.R. No. 178581
BAGONG
ALYANSANG
MAKABAYAN
(BAYAN),
GENERAL
ALLIANCE
BINDING WOMEN FOR
REFORMS,
INTEGRITY,
EQUALITY, LEADERSHIP
AND ACTION (GABRIELA),
KILUSANG MAGBUBUKID
NG
PILIPINAS
(KMP),
MOVEMENT
OF
CONCERNED
CITIZENS
FOR CIVIL LIBERTIES
(MCCCL),
CONFEDERATION
FOR
UNITY,
RECOGNITION
AND ADVANCEMENT OF
GOVERNMENT
EMPLOYEES (COURAGE),

KALIPUNAN
NG
DAMAYANG MAHIHIRAP
(KADAMAY), SOLIDARITY
OF CAVITE WORKERS,
LEAGUE
OF
FILIPINO
STUDENTS
(LFS),
ANAKBAYAN,
PAMBANSANG LAKAS NG
KILUSANG
MAMAMALAKAYA
(PAMALAKAYA),
ALLIANCE
OF
CONCERNED TEACHERS
(ACT),
MIGRANTE,
HEALTH ALLIANCE FOR
DEMOCRACY
(HEAD),
AGHAM,
TEOFISTO
GUINGONA,
JR.,
DR.
BIENVENIDO LUMBERA,
RENATO CONSTANTINO,
JR., SISTER MARY JOHN
MANANSAN OSB, DEAN
CONSUELO PAZ, ATTY.
JOSEFINA
LICHAUCO,
COL. GERRY CUNANAN
(ret.), CARLITOS SIGUIONREYNA, DR. CAROLINA
PAGADUAN-ARAULLO,
RENATO REYES, DANILO
RAMOS,
EMERENCIANA
DE LESUS, RITA BAUA,
REY CLARO CASAMBRE,
Petitioners,
- versus GLORIA
MACAPAGALARROYO, in her capacity as

President and Commander-inChief,


EXECUTIVE
SECRETARY
EDUARDO
ERMITA, DEPARTMENT OF
JUSTICE
SECRETARY
RAUL
GONZALES,
DEPARTMENT
OF
FOREIGN
AFFAIRS
SECRETARY
ALBERTO
ROMULO, DEPARTMENT
OF NATIONAL DEFENSE
ACTING
SECRETARY
NORBERTO
GONZALES,
DEPARTMENT
OF
INTERIOR AND LOCAL
GOVERNMENT
SECRETARY
RONALDO
PUNO. DEPARTMENT OF
FINANCE
SECRETARY
MARGARITO
TEVES,
NATIONAL
SECURITY
ADVISER
NORBERTO
GONZALES,
THE
NATIONAL INTELLIGENCE
COORDINATING AGENCY
(NICA), THE NATIONAL
BUREAU
OF
INVESTIGATION
(NBI),
THE
BUREAU
OF
IMMIGRATION,
THE
OFFICE
OF
CIVIL
DEFENSE,
THE
INTELLIGENCE SERVICE
OF THE ARMED FORCES
OF
THE
PHILIPPINES
(ISAFP), THE ANTI-MONEY
LAUNDERING
COUNCIL
(AMLC), THE PHILIPPINE
CENTER
ON
TRANSNATIONAL CRIME,

THE
CHIEF OF THE
PHILIPPINE
NATIONAL
POLICE
GEN.
OSCAR
CALDERON,
THE
PNP,
including its intelligence and
investigative elements, AFP
CHIEF
GEN.
HERMOGENES ESPERON,
Respondents.
x -----------------------------------x
KARAPATAN,
ALLIANCE
FOR THE ADVANCEMENT
OF
PEOPLES
RIGHTS,
represented herein by Dr.
Edelina de la Paz, and
representing the following
organizations:
HUSTISYA,
represented by Evangeline
Hernandez and also on her
own
behalf;
DESAPARECIDOS,
represented by Mary Guy
Portajada and also on her own
behalf, SAMAHAN NG MGA
EX-DETAINEES LABAN SA
DETENSYON AT PARA SA
AMNESTIYA
(SELDA),
represented
by
Donato
Continente and also on his
own behalf, ECUMENICAL
MOVEMENT FOR JUSTICE
AND
PEACE
(EMJP),
represented by Bishop Elmer
M. Bolocon, UCCP, and
PROMOTION OF CHURCH
PEOPLES
RESPONSE,
represented by Fr. Gilbert
Sabado, OCARM,
Petitioners,

G.R. No. 178890

- versus GLORIA
MACAPAGALARROYO, in her capacity as
President and Commander-inChief,
EXECUTIVE
SECRETARTY
EDUARDO
ERMITA, DEPARTMENT OF
JUSTICE
SECRETARY
RAUL
GONZALEZ,
DEPARTMENT
OF
FOREIGN
AFFAIRS
SECRETARY
ALBERTO
ROMULO, DEPARTMENT
OF NATIONAL DEFENSE
ACTING
SECRETARY
NORBERTO
GONZALES,
DEPARTMENT
OF
INTERIOR AND LOCAL
GOVERNMENT
SECRETARY
RONALDO
PUNO, DEPARTMENT OF
FINANCE
SECRETARY
MARGARITO
TEVES,
NATIONAL
SECURITY
ADVISER
NORBERTO
GONZALES,
THE
NATIONAL INTELLIGENCE
COORDINATING AGENCY
(NICA), THE NATIONAL
BUREAU
OF
INVESTIGATION
(NBI),
THE
BUREAU
OF
IMMIGRATION,
THE
OFFICE
OF
CIVIL
DEFENSE,
THE
INTELLIGENCE SERVICE

OF THE ARMED FORCES


OF
THE
PHILIPPINES
(ISAFP), THE ANTI-MONEY
LAUNDERING
COUNCIL
(AMLC), THE PHILIPPINE
CENTER
ON
TRANSNATIONAL CRIME,
THE
CHIEF OF THE
PHILIPPINE
NATIONAL
POLICE
GEN.
OSCAR
CALDERON,
THE
PNP,
including its intelligence and
investigative elements, AFP
CHIEF
GEN.
HERMOGENES ESPERON,
Respondents.
G.R. No. 179157
x------------------------------------ x
THE INTEGRATED BAR OF
THE PHILIPPINES (IBP),
represented by Atty. Feliciano
M. Bautista, COUNSELS FOR
THE
DEFENSE
OF LIBERTY(CODAL),
SEN. MA. ANA CONSUELO
A.S.
MADRIGAL
and
FORMER
SENATORS
SERGIO OSMEA III and
WIGBERTO E. TAADA,
Petitioners,
- versus EXECUTIVE SECRETARY
EDUARDO ERMITA AND
THE MEMBERS OF THE
ANTI-TERRORISM

COUNCIL (ATC),
Respondents.
x------------------------------------x
BAGONG
ALYANSANG
MAKABAYAN-SOUTHERN
TAGALOG
(BAYAN-ST),
GABRIELA-ST,
KATIPUNAN
NG
MGA
SAMAHYANG
MAGSASAKA-TIMOG
KATAGALUGAN (KASAMATK),
MOVEMENT
OF
CONCERNED
CITIZENS
FOR CIVIL LIBERTIES
(MCCCL),
PEOPLES
MARTYRS, ANAKBAYANST,
PAMALAKAYA-ST,
CONFEDERATION
FOR
UNITY,
RECOGNITION
AND ADVANCEMENT OF
GOVERNMENT
EMPLOYEES (COURAGEST),
PAGKAKAISAT
UGNAYAN
NG
MGA
MAGBUBUKID SA LAGUNA
(PUMALAG), SAMAHAN NG
MGA MAMAMAYAN SA
TABING RILES (SMTR-ST),
LEAGUE
OF
FILIPINO
STUDENTS (LFS), BAYAN
MUNA-ST, KONGRESO NG
MGA MAGBUBUKID PARA
SA
REPORMANG
AGRARYO
KOMPRA,
BIGKIS AT LAKAS NG MGA
KATUTUBO SA TIMOG
KATAGALUGAN

G.R. No. 179461

(BALATIK), SAMAHAN AT
UGNAYAN
NG
MGA
MAGSASAKANG
KABABAIHAN SA TIMOG
KATAGALUGAN
(SUMAMAKA-TK),
STARTER, LOSOS RURAL
POOR
ORGANIZATION
FOR
PROGRESS
&
EQUALITY,
CHRISTIAN
NIO LAJARA, TEODORO
REYES, FRANCESCA B.
TOLENTINO, JANNETTE E.
BARRIENTOS, OSCAR T.
LAPIDA, JR., DELFIN DE
CLARO,
SALLY
P.
ASTRERA, ARNEL SEGUNE
BELTRAN,
Petitioners,
- versus GLORIA
MACAPAGALARROYO, in her capacity as
President and Commander-inChief,
EXECUTIVE
SECRETARY
EDUARDO
ERMITA, DEPARTMENT OF
JUSTICE
SECRETARY
RAUL
GONZALEZ,
DEPARTMENT
OF
FOREIGN
AFFAIRS
SECRETARY
ALBERTO
ROMULO, DEPARTMENT
OF NATIONAL DEFENSE
ACTING
SECRETARY
NORBERTO
GONZALES,
DEPARTMENT
OF

INTERIOR AND LOCAL


GOVERNMEN
T
SECRETARY
RONALDO
PUNO, DEPARTMENT OF
FINCANCE
SECRETARY
MARGARITO
TEVES,
NATIONAL
SECURITY
ADVISER
NORBERTO
GONZALES,
THE
NATIONAL INTELLIGENCE
COORDINATING AGENCY
(NICA), THE NATIONAL
BUREAU
OF
INVESTIGATION
(NBI),
THE
BUREAU
OF
IMMIGRATION,
THE
OFFICE
OF
CIVIL
DEFENSE,
THE
INTELLIGENCE SERVICE
OF THE ARMED FORCES
OF
THE
PHILIPPINES
(ISAFP), THE ANTI-MONEY
LAUNDERING
COUNCIL
(AMLC), THE PHILIPPINE
CENTER
ON
TRANSNATIONAL CRIME,
THE
CHIEF OF THE
PHILIPPINE
NATIONAL
POLICE
GEN.
OSCAR
CALDERON,
THE
PNP,
including its intelligence and
investigative elements, AFP
CHIEF
GEN.
HERMOGENES ESPERON,
Respondents.
x--------------------------------------------------------------------------x

DECISION
CARPIO MORALES, J.:
Before the Court are six petitions challenging the constitutionality of Republic Act
No. 9372 (RA 9372), An Act to Secure the State and Protect our People from
Terrorism, otherwise known as the Human Security Act of 2007,[1] signed into law
onMarch 6, 2007.
Following the effectivity of RA 9372 on July 15, 2007,[2] petitioner Southern
Hemisphere Engagement Network, Inc., a non-government organization, and Atty.
Soliman Santos, Jr., a concerned citizen, taxpayer and lawyer, filed a petition for
certiorari and prohibition on July 16, 2007 docketed as G.R. No. 178552. On even
date, petitioners Kilusang Mayo Uno (KMU), National Federation of Labor
Unions-Kilusang Mayo Uno (NAFLU-KMU), and Center for Trade Union and
Human Rights (CTUHR), represented by their respective officers [3] who are also
bringing the action in their capacity as citizens, filed a petition for certiorari and
prohibition docketed as G.R. No. 178554.
The following day, July 17, 2007, organizations Bagong Alyansang Makabayan
(BAYAN), General Alliance Binding Women for Reforms, Integrity, Equality,
Leadership and Action (GABRIELA), Kilusang Magbubukid ng Pilipinas (KMP),
Movement of Concerned Citizens for Civil Liberties (MCCCL), Confederation for
Unity, Recognition and Advancement of Government Employees (COURAGE),
Kalipunan ng Damayang Mahihirap (KADAMAY), Solidarity of Cavite Workers
(SCW), League of Filipino Students (LFS), Anakbayan, Pambansang Lakas ng
Kilusang Mamamalakaya (PAMALAKAYA), Alliance of Concerned Teachers
(ACT), Migrante, Health Alliance for Democracy (HEAD), and Agham,
represented by their respective officers,[4] and joined by concerned citizens and
taxpayers Teofisto Guingona, Jr., Dr. Bienvenido Lumbera, Renato Constantino,
Jr., Sister Mary John Manansan, OSB, Dean Consuelo Paz, Atty. Josefina
Lichauco, Retired Col. Gerry Cunanan, Carlitos Siguion-Reyna, Dr. Carolina
Pagaduan-Araullo, Renato Reyes, Danilo Ramos, Emerenciana de Jesus, Rita Baua
and Rey Claro Casambre filed a petition for certiorari and prohibition docketed
as G.R. No. 178581.
On August 6, 2007, Karapatan and its alliance member organizations Hustisya,
Desaparecidos, Samahan ng mga Ex-Detainees Laban sa Detensyon at para sa

Amnestiya (SELDA), Ecumenical Movement for Justice and Peace (EMJP), and
Promotion of Church Peoples Response (PCPR), which were represented by their
respective officers[5] who are also bringing action on their own behalf, filed a
petition for certiorari and prohibition docketed as G.R. No. 178890.
On August 29, 2007, the Integrated Bar of the Philippines (IBP), Counsels for the
Defense of Liberty (CODAL),[6] Senator Ma. Ana Consuelo A.S. Madrigal, Sergio
Osmea III, and Wigberto E. Taada filed a petition for certiorari and prohibition
docketed as G.R. No. 179157.
Bagong Alyansang Makabayan-Southern Tagalog (BAYAN-ST), other regional
chapters and organizations mostly based in the Southern Tagalog Region, [7] and
individuals[8] followed suit by filing on September 19, 2007 a petition for certiorari
and prohibition docketed as G.R. No. 179461 that replicates the allegations raised
in the BAYAN petition in G.R. No. 178581.
Impleaded as respondents in the various petitions are the Anti-Terrorism
Council[9] composed of, at the time of the filing of the petitions, Executive
Secretary Eduardo Ermita as Chairperson, Justice Secretary Raul Gonzales as Vice
Chairperson, and Foreign Affairs Secretary Alberto Romulo, Acting Defense
Secretary and National Security Adviser Norberto Gonzales, Interior and Local
Government Secretary Ronaldo Puno, and Finance Secretary Margarito Teves as
members. All the petitions, except that of the IBP, also impleaded Armed Forces of
the Philippines (AFP) Chief of Staff Gen. Hermogenes Esperon and Philippine
National Police (PNP) Chief Gen. Oscar Calderon.
The Karapatan, BAYAN and BAYAN-ST petitions likewise impleaded President
Gloria Macapagal-Arroyo and the support agencies for the Anti-Terrorism Council
like the National Intelligence Coordinating Agency, National Bureau of
Investigation, Bureau of Immigration, Office of Civil Defense, Intelligence Service
of the AFP, Anti-Money Laundering Center, Philippine Center on Transnational
Crime, and the PNP intelligence and investigative elements.
The petitions fail.

Petitioners
improper

resort

to

certiorari

is

Preliminarily, certiorari does not lie against respondents who do not exercise
judicial or quasi-judicial functions. Section 1, Rule 65 of the Rules of Court is
clear:
Section 1. Petition for certiorari.When any tribunal, board or
officer exercising judicial or quasi-judicial functions has acted
without or in excess of its or his jurisdiction, or with grave abuse
of discretion amounting to lack or excess of jurisdiction, and there
is no appeal, nor any plain, speedy, and adequate remedy in the
ordinary course of law, a person aggrieved thereby may file a verified
petition in the proper court, alleging the facts with certainty and
praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require. (Emphasis and
underscoring supplied)

Parenthetically, petitioners do not even allege with any modicum of particularity


how respondents acted without or in excess of their respective jurisdictions, or with
grave abuse of discretion amounting to lack or excess of jurisdiction.
The impropriety of certiorari as a remedy aside, the petitions fail just the same.
In constitutional litigations, the power of judicial review is limited by four exacting
requisites, viz: (a) there must be an actual case or controversy; (b) petitioners must
possess locus standi; (c) the question of constitutionality must be raised at the
earliest opportunity; and (d) the issue of constitutionality must be the lis mota of
the case.[10]
In the present case, the dismal absence of the first two requisites, which are the
most essential, renders the discussion of the last two superfluous.

Petitioners lack locus standi


Locus standi or legal standing requires a personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens the
presentation of issues upon which the court so largely depends for illumination of
difficult constitutional questions.[11]
Anak Mindanao Party-List Group v. The Executive Secretary [12] summarized the
rule on locus standi, thus:
Locus standi or legal standing has been defined as a personal and
substantial interest in a case such that the party has sustained or will
sustain direct injury as a result of the governmental act that is being
challenged. The gist of the question on standing is whether a party
alleges such personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation of
issues upon which the court depends for illumination of difficult
constitutional questions.
[A] party who assails the constitutionality of a statute must have a direct
and personal interest. It must show not only that the law or any
governmental act is invalid, but also that it sustained or is in immediate
danger of sustaining some direct injury as a result of its
enforcement, and not merely that it suffers thereby in some indefinite
way. It must show that it has been or is about to be denied some right or
privilege to which it is lawfully entitled or that it is about to be subjected
to some burdens or penalties by reason of the statute or act complained
of.
For a concerned party to be allowed to raise a constitutional question, it
must show that (1) it has personally suffered some actual or
threatened injury as a result of the allegedly illegal conduct of the
government, (2) the injury is fairly traceable to the challenged action,
and (3) the injury is likely to be redressed by a favorable action.
(emphasis and underscoring supplied.)

Petitioner-organizations assert locus standi on the basis of being suspected


communist fronts by the government, especially the military; whereas individual

petitioners invariably invoke the transcendental importance doctrine and their


status as citizens and taxpayers.
While Chavez v. PCGG[13] holds that transcendental public importance dispenses
with the requirement that petitioner has experienced or is in actual danger of
suffering direct and personal injury, cases involving the constitutionality
of penallegislation belong to an altogether different genus of constitutional
litigation. Compelling State and societal interests in the proscription of harmful
conduct, as will later be elucidated, necessitate a closer judicial scrutiny of locus
standi.
Petitioners have not presented any personal stake in the outcome of the
controversy. None of them faces any charge under RA 9372.
KARAPATAN, Hustisya, Desaparecidos, SELDA, EMJP and PCR, petitioners
in G.R. No. 178890, allege that they have been subjected to close security
surveillance by state security forces, their members followed by suspicious persons
and vehicles with dark windshields, and their offices monitored by men with
military build. They likewise claim that they have been branded as enemies of the
[S]tate.[14]
Even conceding such gratuitous allegations, the Office of the Solicitor General
(OSG) correctly points out that petitioners have yet to show
any connection between the
purported surveillance and the implementation
of RA 9372.
BAYAN, GABRIELA, KMP, MCCCL, COURAGE, KADAMAY, SCW, LFS,
Anakbayan, PAMALAKAYA, ACT, Migrante, HEAD and Agham, petitionerorganizations in G.R. No. 178581, would like the Court to take judicial notice of
respondents alleged action of tagging them as militant organizations fronting for
the Communist Party of the Philippines (CPP) and its armed wing, the National
Peoples Army (NPA). The tagging, according to petitioners, is tantamount to the
effects of proscription without following the procedure under the law.[15] The
petition of BAYAN-ST, et al. in G.R. No. 179461 pleads the same allegations.
The Court cannot take judicial notice of the alleged tagging of petitioners.

Generally speaking, matters of judicial notice have three material


requisites: (1) the matter must be one of common and general
knowledge; (2) it must be well and authoritatively settled and not
doubtful or uncertain; and (3) it must be known to be within the limits
of the jurisdiction of the court. The principal guide in determining what
facts may be assumed to be judicially known is that of notoriety. Hence,
it can be said that judicial notice is limited to facts evidenced by public
records and facts of general notoriety. Moreover, a judicially noticed fact
must be one not subject to a reasonable dispute in that it is either:
(1) generally known within the territorial jurisdiction of the trial
court; or (2) capable of accurate and ready determination by
resorting to sources whose accuracy cannot reasonably be questionable.
Things of common knowledge, of which courts take judicial matters
coming to the knowledge of men generally in the course of the ordinary
experiences of life, or they may be matters which are generally accepted
by mankind as true and are capable of ready and unquestioned
demonstration. Thus, facts which are universally known, and which may
be found in encyclopedias, dictionaries or other publications, are
judicially noticed, provided, they are of such universal notoriety and so
generally understood that they may be regarded as forming part of the
common knowledge of every person. As the common knowledge of man
ranges far and wide, a wide variety of particular facts have been
judicially noticed as being matters of common knowledge. But a court
cannot take judicial notice of any fact which, in part, is dependent
on the existence or non-existence of a fact of which the court has no
constructive knowledge.[16] (emphasis and underscoring supplied.)

No ground was properly established by petitioners for the taking of judicial


notice. Petitioners apprehension is insufficient to substantiate their plea. That no
specific charge or proscription under RA 9372 has been filed against them, three
years after its effectivity, belies any claim of imminence of their perceived threat
emanating from the so-called tagging.
The same is true with petitioners KMU, NAFLU and CTUHR in G.R. No.
178554, who merely harp as well on their supposed link to the CPP and
NPA. They fail to particularize how the implementation of specific provisions of
RA 9372 would result in direct injury to their organization and members.

While in our jurisdiction there is still no judicially declared terrorist organization,


the United States of America[17] (US) and the European Union[18] (EU) have both
classified the CPP, NPA and Abu Sayyaf Group as foreign terrorist
organizations.The Court takes note of the joint statement of Executive Secretary
Eduardo Ermita and Justice Secretary Raul Gonzales that the Arroyo
Administration would adopt the US and EU classification of the CPP and NPA as
terrorist organizations.[19] Such statement notwithstanding, there is yet to be filed
before the courts an application to declare the CPP and NPA organizations as
domestic terrorist or outlawed organizations under RA 9372. Again, RA 9372
has been in effect for three years now. From July 2007 up to the present, petitionerorganizations have conducted their activities fully and freely without any threat of,
much less an actual, prosecution or proscription under RA 9372.
Parenthetically, the Fourteenth Congress, in a resolution initiated by Party-list
Representatives Saturnino Ocampo, Teodoro Casio, Rafael Mariano and
Luzviminda Ilagan,[20] urged the government to resume peace negotiations with the
NDF by removing the impediments thereto, one of which is the adoption of
designation of the CPP and NPA by the US and EU as foreign terrorist
organizations. Considering the policy statement of the Aquino Administration [21] of
resuming peace talks with the NDF, the government is not imminently disposed to
ask for the judicial proscription of the CPP-NPA consortium and its allied
organizations.
More important, there are other parties not before the Court with direct and
specific interests in the questions being raised.[22] Of recent development is the
filing of the first case for proscription under Section 17[23] of RA 9372 by the
Department of Justice before the Basilan Regional Trial Court against the Abu
Sayyaf Group.[24] Petitioner-organizations do not in the least allege any link to
the Abu Sayyaf Group.
Some petitioners attempt, in vain though, to show the imminence of a prosecution
under RA 9372 by alluding to past rebellion charges against them.
In Ladlad v. Velasco,[25] the Court ordered the dismissal of rebellion charges filed in
2006 against then Party-List Representatives Crispin Beltran and Rafael Mariano

of Anakpawis, Liza Maza of GABRIELA, and Joel Virador, Teodoro Casio and
Saturnino Ocampo of Bayan Muna. Also named in the dismissed rebellion charges
were petitioners Rey Claro Casambre, Carolina Pagaduan-Araullo, Renato Reyes,
Rita Baua, Emerencia de Jesus and Danilo Ramos; and accused of being front
organizations for the Communist movement were petitioner-organizations KMU,
BAYAN, GABRIELA, PAMALAKAYA, KMP, KADAMAY, LFS and
COURAGE.[26]
The dismissed rebellion charges, however, do not save the day for petitioners. For
one, those charges were filed in 2006, prior to the enactment of RA 9372, and
dismissed by this Court. For another, rebellion is defined and punished under the
Revised Penal Code. Prosecution for rebellion is not made more imminent by the
enactment of RA 9372, nor does the enactment thereof make it easier to charge a
person with rebellion, its elements not having been altered.
Conversely, previously filed but dismissed rebellion charges bear no relation to
prospective charges under RA 9372. It cannot be overemphasized that three years
after the enactment of RA 9372, none of petitioners has been charged.
Petitioners IBP and CODAL in G.R. No. 179157 base their claim of locus
standi on their sworn duty to uphold the Constitution. The IBP zeroes in on Section
21 of RA 9372 directing it to render assistance to those arrested or detained under
the law.
The mere invocation of the duty to preserve the rule of law does not, however,
suffice to clothe the IBP or any of its members with standing. [27] The IBP failed to
sufficiently demonstrate how its mandate under the assailed statute revolts against
its constitutional rights and duties. Moreover, both the IBP and CODAL have not
pointed to even a single arrest or detention effected under RA 9372.
Former Senator Ma. Ana Consuelo Madrigal, who claims to have been the
subject of political surveillance, also lacks locus standi. Prescinding from the
veracity, let alone legal basis, of the claim of political surveillance, the Court finds
that she has not shown even the slightest threat of being charged under RA
9372. Similarly lacking in locus standi are former Senator Wigberto
Taada and Senator Sergio Osmea III, who cite their being respectively a human

rights advocate and an oppositor to the passage of RA 9372. Outside these


gratuitous statements, no concrete injury to them has been pinpointed.
Petitioners Southern Hemisphere Engagement Network and Atty. Soliman
Santos Jr. in G.R. No. 178552 also conveniently state that the issues they raise are
of transcendental importance, which must be settled early and are of far-reaching
implications, without mention of any specific provision of RA 9372 under which
they have been charged, or may be charged. Mere invocation of human rights
advocacy has nowhere been held sufficient to clothe litigants with locus
standi. Petitioners must show an actual, or immediate danger of sustaining, direct
injury as a result of the laws enforcement . To rule otherwise would be to corrupt
the settled doctrine of locus standi, as every worthy cause is an interest shared by
the general public.
Neither can locus standi be conferred upon individual petitioners
as taxpayers and citizens. A taxpayer suit is proper only when there is an exercise
of the spending or taxing power of Congress,[28] whereas citizen standing must rest
on direct and personal interest in the proceeding.[29]
RA 9372 is a penal statute and does not even provide for any appropriation from
Congress for its implementation, while none of the individual petitioner-citizens
has alleged any direct and personal interest in the implementation of the law.
It bears to stress that generalized interests, albeit accompanied by the assertion of a
public right, do not establish locus standi. Evidence of a direct and personal
interest is key.
Petitioners fail to present an actual case
or controversy
By constitutional fiat, judicial power operates only when there is an actual case or
controversy.
Section 1. The judicial power shall be vested in one Supreme Court and
in such lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the Government. [30] (emphasis
and underscoring supplied.)

As early as Angara v. Electoral Commission,[31] the Court ruled that the power of
judicial review is limited to actual cases or controversies to be exercised after full
opportunity of argument by the parties. Any attempt at abstraction could only lead
to dialectics and barren legal questions and to sterile conclusions unrelated to
actualities.
An actual case or controversy means an existing case or controversy that is
appropriate or ripe for determination, not conjectural or anticipatory, lest the
decision of the court would amount to an advisory opinion.[32]
Information Technology Foundation of the Philippines v. COMELEC [33] cannot be
more emphatic:
[C]ourts do not sit to adjudicate mere academic questions
to
satisfy
scholarly
interest,
however
intellectually
challenging. The controversy must be justiciabledefinite and
concrete, touching on the legal relations of parties having adverse
legal interests. In other words, the pleadings must show an active
antagonistic assertion of a legal right, on the one hand, and a
denial thereof on the other hand; that is, it must concern a real
and not merely a theoretical question or issue. There ought to
be an actual and substantial controversy admitting of specific relief
through a decree conclusive in nature, as distinguished from an
opinion advising what the law would be upon a hypothetical state of
facts. (Emphasis and underscoring supplied)

Thus, a petition to declare unconstitutional a law converting


the Municipality of Makati into a Highly Urbanized City was held to be premature
as it was tacked on uncertain, contingent events. [34] Similarly, a petition that fails to

allege that an application for a license to operate a radio or television station has
been denied or granted by the authorities does not present a justiciable controversy,
and merely wheedles the Court to rule on a hypothetical problem.[35]
The Court dismissed the petition in Philippine Press Institute v. Commission on
Elections[36] for failure to cite any specific affirmative action of the Commission on
Elections to implement the assailed resolution. It refused, in Abbas v. Commission
on Elections,[37] to rule on the religious freedom claim of the therein petitioners
based merely on a perceived potential conflict between the provisions of the
Muslim Code and those of the national law, there being no actual controversy
between real litigants.
The list of cases denying claims resting on purely hypothetical or anticipatory
grounds goes on ad infinitum.

The Court is not unaware that a reasonable certainty of the occurrence of


a perceived threat to any constitutional interestsuffices to provide a basis for
mounting a constitutional challenge. This, however, is qualified by the requirement
that there must be sufficient facts to enable the Court to intelligently adjudicate the
issues.[38]
Very recently, the US Supreme Court, in Holder v. Humanitarian Law Project,
[39]
allowed the pre-enforcement review of a criminal statute, challenged on
vagueness
grounds, since
plaintiffs
faced
a credible
threat
of
prosecution and should not be required to await and undergo a criminal
prosecution as the sole means of seeking relief.[40] The plaintiffs therein filed an
action before a federal court to assail the constitutionality of the material support
statute, 18 U.S.C. 2339B (a) (1),[41]proscribing the provision of material support to
organizations declared by the Secretary of State as foreign terrorist
organizations. They claimed that they intended to provide support for the
humanitarian and political activities of two such organizations.
Prevailing American jurisprudence allows an adjudication on the merits when an
anticipatory petition clearly shows that the challenged prohibition forbids the
conduct or activity that a petitioner seeks to do, as there would then be a
justiciable controversy.[42]
Unlike the plaintiffs in Holder, however, herein petitioners have failed to show that
the
challenged
provisions
of
RA
9372
forbid constitutionally
protected conduct or activity that they seek to do. No demonstrable threat has been
established, much less a real and existing one.
Petitioners obscure allegations of sporadic surveillance and supposedly being
tagged as communist fronts in no way approximate a credible threat of
prosecution. From these allegations, the Court is being lured to render an advisory
opinion,which is not its function.[43]
Without any justiciable controversy, the petitions have become pleas for
declaratory relief, over which the Court has no original jurisdiction. Then again,
declaratory actions characterized by double contingency, where both the activity
the petitioners intend to undertake and the anticipated reaction to it of a public
official are merely theorized, lie beyond judicial review for lack of ripeness.[44]

The possibility of abuse in the implementation of RA 9372 does not avail to take
the present petitions out of the realm of the surreal and merely imagined. Such
possibility is not peculiar to RA 9372 since the exercise of any power granted by
law may be abused.[45] Allegations of abuse must be anchored on real events before
courts may step in to settle actual controversies involving rights which are
legally demandable and enforceable.
A facial invalidation of a statute is allowed
only in free speech cases, wherein certain rules
of constitutional litigation are rightly excepted
Petitioners assail for being intrinsically vague and impermissibly broad the
definition of the crime of terrorism[46] under RA 9372 in that terms like widespread
and extraordinary fear and panic among the populace and coerce the government
to give in to an unlawful demand are nebulous, leaving law enforcement agencies
with no standard to measure the prohibited acts.
Respondents, through the OSG, counter that the doctrines of void-for-vagueness
and overbreadth find no application in the present case since these doctrines apply
only to free speech cases; and that RA 9372 regulates conduct, not speech.
For a jurisprudentially guided understanding of these doctrines, it is imperative to
outline the schools of thought on whether the void-for-vagueness and overbreadth
doctrines are equally applicable grounds to assail a penal statute.
Respondents interpret recent jurisprudence as slanting toward the idea of limiting
the application of the two doctrines to free speech cases. They particularly
cite Romualdez v. Hon. Sandiganbayan[47] and Estrada v. Sandiganbayan.[48]
The Court clarifies.
At issue in Romualdez v. Sandiganbayan was whether the word intervene in
Section 5[49] of the Anti-Graft and Corrupt Practices Act was intrinsically vague and
impermissibly broad. The Court stated that the overbreadth and the vagueness

doctrines have special application only to free-speech cases, and are not
appropriate for testing the validity of penal statutes. [50] It added that, at any rate, the
challenged provision, under which the therein petitioner was charged, is not vague.
[51]

While in the subsequent case of Romualdez v. Commission on Elections,[52] the


Court stated that a facial invalidation of criminal statutes is not appropriate, it
nonetheless proceeded to conduct a vagueness analysis, and concluded that the
therein subject election offense[53] under the Voters Registration Act of 1996, with
which the therein petitioners were charged, is couched in precise language.[54]
The two Romualdez cases rely heavily on the Separate Opinion [55] of Justice
Vicente V. Mendoza in the Estrada case, where the Court found the Anti-Plunder
Law (Republic Act No. 7080) clear and free from ambiguity respecting the
definition of the crime of plunder.
The position taken by Justice Mendoza in Estrada relates these two doctrines to the
concept of a facial invalidation as opposed to an as-applied challenge. He basically
postulated that allegations that a penal statute is vague and overbroad do not justify
a facial review of its validity. The pertinent portion of the Concurring Opinion of
Justice Mendoza, which was quoted at length in the main Estrada decision, reads:
A facial challenge is allowed to be made to a vague statute and to one which
is overbroad because of possible "chilling effect" upon protected speech. The
theory is that "[w]hen statutes regulate or proscribe speech and no readily apparent
construction suggests itself as a vehicle for rehabilitating the statutes in a single
prosecution, the transcendent value to all society of constitutionally protected
expression is deemed to justify allowing attacks on overly broad statutes with no
requirement that the person making the attack demonstrate that his own conduct
could not be regulated by a statute drawn with narrow specificity." The possible
harm to society in permitting some unprotected speech to go unpunished is
outweighed by the possibility that the protected speech of others may be deterred
and perceived grievances left to fester because of possible inhibitory effects of
overly broad statutes.

This rationale does not apply to penal statutes. Criminal statutes have
general in terrorem effect resulting from their very existence, and, if facial
challenge is allowed for this reason alone, the State may well be prevented from

enacting laws against socially harmful conduct. In the area of criminal law, the law
cannot take chances as in the area of free speech.

The overbreadth and vagueness doctrines then have special application


only to free speech cases. They are inapt for testing the validity of penal
statutes. As the U.S. Supreme Court put it, in an opinion by Chief Justice
Rehnquist, "we have not recognized an 'overbreadth' doctrine outside the limited
context of the First Amendment." In Broadrick v. Oklahoma, the Court ruled that
"claims of facial overbreadth have been entertained in cases involving statutes
which, by their terms, seek to regulate only spoken words" and, again, that
"overbreadth claims, if entertained at all, have been curtailed when invoked against
ordinary criminal laws that are sought to be applied to protected conduct." For this
reason, it has been held that "a facial challenge to a legislative act is the most
difficult challenge to mount successfully, since the challenger must establish that no
set of circumstances exists under which the Act would be valid." As for the
vagueness doctrine, it is said that a litigant may challenge a statute on its face only
if it is vague in all its possible applications. "A plaintiff who engages in some
conduct that is clearly proscribed cannot complain of the vagueness of the law as
applied to the conduct of others."

In sum, the doctrines of strict scrutiny, overbreadth, and vagueness are


analytical tools developed for testing "on their faces" statutes in free speech
cases or, as they are called in American law, First Amendment cases. They cannot
be made to do service when what is involved is a criminal statute. With respect to
such statute, the established rule is that "one to whom application of a statute is
constitutional will not be heard to attack the statute on the ground that impliedly it
might also be taken as applying to other persons or other situations in which its
application might be unconstitutional." As has been pointed out, "vagueness
challenges in the First Amendment context, like overbreadth challenges typically
produce facial invalidation, while statutes found vague as a matter of due process
typically are invalidated [only] 'as applied' to a particular
defendant." Consequently, there is no basis for petitioner's claim that this Court
review the Anti-Plunder Law on its face and in its entirety.

Indeed, "on its face" invalidation of statutes results in striking them down
entirely on the ground that they might be applied to parties not before the Court
whose activities are constitutionally protected. It constitutes a departure from the
case and controversy requirement of the Constitution and permits decisions to be
made without concrete factual settings and in sterile abstract contexts. But, as the
U.S. Supreme Court pointed out in Younger v. Harris

[T]he task of analyzing a proposed statute, pinpointing its


deficiencies, and requiring correction of these deficiencies before
the statute is put into effect, is rarely if ever an appropriate task for
the judiciary. The combination of the relative remoteness of the
controversy, the impact on the legislative process of the relief
sought, and above all the speculative and amorphous nature of the
required line-by-line analysis of detailed statutes, . . . ordinarily
results in a kind of case that is wholly unsatisfactory for deciding
constitutional questions, whichever way they might be decided.

For these reasons, "on its face" invalidation of statutes has been described
as "manifestly strong medicine," to be employed "sparingly and only as a last
resort," and is generally disfavored. In determining the constitutionality of a statute,
therefore, its provisions which are alleged to have been violated in a case must be
examined in the light of the conduct with which the defendant is charged.
[56]
(Underscoring supplied.)

The confusion apparently stems from the interlocking relation of


the overbreadth and vagueness doctrines
as
grounds
for
a facial or asapplied challenge against a penal statute (under a claim of violation of due process
of law) or a speech regulation (under a claim of abridgement of the freedom of
speech and cognate rights).
To be sure, the doctrine of vagueness and the doctrine of overbreadth do not
operate on the same plane.
A statute or act suffers from the defect of vagueness when it lacks comprehensible
standards that men of common intelligence must necessarily guess at its meaning
and differ as to its application. It is repugnant to the Constitution in two respects:
(1) it violates due process for failure to accord persons, especially the parties
targeted by it, fair notice of the conduct to avoid; and (2) it leaves law enforcers
unbridled discretion in carrying out its provisions and becomes an arbitrary flexing
of the Government muscle.[57] The overbreadth doctrine, meanwhile, decrees that a
governmental purpose to control or prevent activities constitutionally subject to

state regulations may not be achieved by means which sweep unnecessarily


broadly and thereby invade the area of protected freedoms.[58]
As distinguished from the vagueness doctrine, the overbreadth doctrine assumes
that individuals will understand what a statute prohibits and will accordingly
refrain from that behavior, even though some of it is protected.[59]
A facial challenge is likewise different from an as-applied challenge.
Distinguished from an as-applied challenge which considers only extant facts
affecting real litigants, a facial invalidation is an examination of the entire law,
pinpointing its flaws and defects, not only on the basis of its actual operation to the
parties, but also on the assumption or prediction that its very existence may cause
others not before the court to refrain from constitutionally protected speech or
activities.[60]
Justice Mendoza accurately phrased the subtitle [61] in his concurring opinion that
the vagueness and overbreadth doctrines, as grounds for a facial challenge, are not
applicable to penal laws. A litigant cannot thus successfully mount
a facialchallenge against a criminal statute on either vagueness or overbreadth
grounds.
The allowance of a facial challenge in free speech cases is justified by the aim to
avert the chilling effect on protected speech, the exercise of which should not at all
times be abridged.[62] As reflected earlier, this rationale is inapplicable to plain
penal statutes that generally bear an in terrorem effect in deterring socially harmful
conduct. In fact, the legislature may even forbid and penalize acts formerly
considered innocent and lawful, so long as it refrains from diminishing or
dissuading the exercise of constitutionally protected rights.[63]
The Court reiterated that there are critical limitations by which a criminal statute
may be challenged and underscored that an on-its-face invalidation of penal
statutes x x x may not be allowed.[64]

[T]he rule established in our jurisdiction is, only statutes on free speech,
religious freedom, and other fundamental rights may be facially
challenged. Under no case may ordinary penal statutes be subjected to
a facial challenge. The rationale is obvious. If a facial challenge to a
penal statute is permitted, the prosecution of crimes may be hampered. No
prosecution would be possible. A strong criticism against employing a
facial challenge in the case of penal statutes, if the same is allowed, would
effectively go against the grain of the doctrinal requirement of an existing
and concrete controversy before judicial power may be appropriately
exercised. A facial challenge against a penal statute is, at best, amorphous
and speculative. It would, essentially, force the court to consider third
parties who are not before it. As I have said in my opposition to the
allowance of a facial challenge to attack penal statutes, such a test will
impair the States ability to deal with crime. If warranted, there would be
nothing that can hinder an accused from defeating the States power to
prosecute on a mere showing that, as applied to third parties, the penal
statute is vague or overbroad, notwithstanding that the law is clear as
applied to him.[65] (Emphasis and underscoring supplied)

It is settled, on the other hand, that the application of the overbreadth doctrine is
limited to a facial kind of challenge and, owing to the given rationale of a
facial challenge, applicable only to free speech cases.
By its nature, the overbreadth doctrine has to necessarily apply a facial type of
invalidation in order to plot areas of protected speech, inevitably almost
always under situations not before the court, that are impermissibly swept by the
substantially overbroad regulation. Otherwise stated, a statute cannot be properly
analyzed for being substantially overbroad if the court confines itself only to facts
as applied to the litigants.

The most distinctive feature of the overbreadth technique is that it marks


an exception to some of the usual rules of constitutional
litigation. Ordinarily, a particular litigant claims that a statute is
unconstitutional as applied to him or her; if the litigant prevails, the courts
carve away the unconstitutional aspects of the law by invalidating its
improper applications on a case to case basis. Moreover, challengers to a
law are not permitted to raise the rights of third parties and can only assert
their own interests. In overbreadth analysis, those rules give way;

challenges are permitted to raise the rights of third parties; and the court
invalidates the entire statute "on its face," not merely "as applied for" so
that the overbroad law becomes unenforceable until a properly authorized
court construes it more narrowly. The factor that motivates courts to
depart from the normal adjudicatory rules is the concern with the
"chilling;" deterrent effect of the overbroad statute on third parties not
courageous enough to bring suit. The Court assumes that an overbroad
laws "very existence may cause others not before the court to refrain from
constitutionally protected speech or expression." An overbreadth ruling is
designed to remove that deterrent effect on the speech of those third
parties.[66] (Emphasis in the original omitted; underscoring supplied.)

In restricting the overbreadth doctrine to free speech claims, the Court, in at least
two cases,[67] observed that the US Supreme Court has not recognized an
overbreadth doctrine outside the limited context of the First Amendment, [68] and
that claims of facial overbreadth have been entertained in cases involving statutes
which, by their terms, seek to regulate only spoken words.[69] In Virginia v. Hicks,
[70]
it was held that rarely, if ever, will an overbreadth challenge succeed against a
law or regulation that is not specifically addressed to speech or speech-related
conduct. Attacks on overly broad statutes are justified by the transcendent value to
all society of constitutionally protected expression.[71]
Since a penal statute may only be assailed for
being vague as applied to petitioners, a limited
vagueness analysis of the definition of terrorism in
RA 9372 is legally impermissible absent an actual
or imminent chargeagainst them
While Estrada did not apply the overbreadth doctrine, it did not preclude the
operation of the vagueness test on the Anti-Plunder Law as applied to the therein
petitioner, finding, however, that there was no basis to review the law on its face
and in its entirety.[72] It stressed that statutes found vague as a matter of due
process typically are invalidated only 'as applied' to a particular defendant.[73]

American jurisprudence[74] instructs that vagueness challenges that do not involve


the First Amendment must be examined in light of the specific facts of the case at
hand and not with regard to the statute's facial validity.
For more than 125 years, the US Supreme Court has evaluated defendants claims
that criminal statutes are unconstitutionally vague, developing a doctrine hailed as
among the most important guarantees of liberty under law.[75]
In this jurisdiction, the void-for-vagueness doctrine asserted under the due process
clause has been utilized in examining the constitutionality of criminal statutes. In at
least three cases,[76] the Court brought the doctrine into play in analyzing an
ordinance penalizing the non-payment of municipal tax on fishponds, the crime of
illegal recruitment punishable under Article 132(b) of the Labor Code, and the
vagrancy provision under Article 202 (2) of the Revised Penal Code. Notably, the
petitioners
in
these
three
cases,
similar
to
those
in
the
two Romualdez and Estrada cases, were actually charged with the therein assailed
penal statute, unlike in the present case.
There is no merit in the claim that RA 9372
regulates speech so as to permit a facial
analysis of its validity
From the definition of the crime of terrorism in the earlier cited Section 3 of RA
9372, the following elements may be culled: (1) the offender commits an act
punishable under any of the cited provisions of the Revised Penal Code, or under
any of the enumerated special penal laws; (2) the commission of the predicate
crime sows and creates a condition of widespread and extraordinary fear and panic
among the populace; and (3) the offender is actuated by the desire to coerce the
government to give in to an unlawful demand.
In insisting on a facial challenge on the invocation that the law penalizes speech,
petitioners contend that the element of unlawful demand in the definition of
terrorism[77] must necessarily be transmitted through some form of expression
protected by the free speech clause.

The argument does not persuade. What the law seeks to penalize is conduct, not
speech.
Before a charge for terrorism may be filed under RA 9372, there must first be a
predicate crime actually committed to trigger the operation of the key qualifying
phrases in the other elements of the crime, including the coercion of the
government to accede to an unlawful demand. Given the presence of the first
element, any attempt at singling out or highlighting the communicative component
of the prohibition cannot recategorize the unprotected conduct into a protected
speech.
Petitioners notion on the transmission of message is entirely inaccurate, as it
unduly focuses on just one particle of an element of the crime. Almost every
commission of a crime entails some mincing of words on the part of the offender
like in declaring to launch overt criminal acts against a victim, in haggling on the
amount of ransom or conditions, or in negotiating a deceitful transaction. An
analogy in one U.S. case[78] illustrated that the fact that the prohibition on
discrimination in hiring on the basis of race will require an employer to take down
a sign reading White Applicants Only hardly means that the law should be
analyzed as one regulating speech rather than conduct.
Utterances not elemental but inevitably incidental to the doing of the criminal
conduct alter neither the intent of the law to punish socially harmful conduct nor
the essence of the whole act as conduct and not speech. This holds true a
fortiori in the present case where the expression figures only as an inevitable
incident of making the element of coercion perceptible.
[I]t is true that the agreements and course of conduct here were as in most
instances brought about through speaking or writing. But it has never been
deemed an abridgement of freedom of speech or press to make a course of
conduct illegal merely because the conduct was, in part,
initiated, evidenced, or carried out by means of language, either spoken,
written, or printed. Such an expansive interpretation of the constitutional
guaranties of speech and press would make it practically impossible ever
to enforce laws against agreements in restraint of trade as well as many
other agreements and conspiracies deemed injurious to society.[79] (italics
and underscoring supplied)

Certain kinds of speech have been treated as unprotected conduct, because they
merely evidence a prohibited conduct.[80] Since speech is not involved here, the
Court cannot heed the call for a facial analysis.
IN FINE, Estrada and the other cited authorities engaged in a vagueness analysis
of the therein subject penal statute as applied to the therein petitioners inasmuch as
they were actually charged with the pertinent crimes challenged on vagueness
grounds. The Court in said cases, however, found no basis to review the assailed
penal statute on its face and in its entirety.
In Holder, on the other hand, the US Supreme Court allowed the pre-enforcement
review of a criminal statute, challenged on vagueness grounds, since the therein
plaintiffs faced a credible threat of prosecution and should not be required to
await and undergo a criminal prosecution as the sole means of seeking relief.
As earlier reflected, petitioners have established neither an actual charge nor a
credible threat of prosecution under RA 9372. Even a limited vagueness analysis
of the assailed definition of terrorism is thus legally impermissible. The Court
reminds litigants that judicial power neither contemplates speculative counseling
on a statutes future effect on hypothetical scenarios nor allows the courts to be used
as an extension of a failed legislative lobbying in Congress.
WHEREFORE, the petitions are DISMISSED.

SO ORDERED.

REVIEW OF JUDGMENTS AND FINAL ORDERS OF THE


COMELEC AND COA
G.R. No. 206987

September 10, 2013

ALLIANCE FOR NATIONALISM AND DEMOCRACY (ANAD), Petitioner,


vs.
COMMISSION ON ELECTIONS, Respondent.

DECISION
PEREZ, J.:
Before the Court is a Petition for Certiorari with Urgent Prayer for the Issuance of a Temporary
Restraining Order and Writ of Mandamus, seeking to compel the Commission on Elections
(COMELEC) to canvass the votes cast for petitioner Alliance for Nationalism and Democracy
(ANAD) in the recently held 2013 Party-List Elections.
On 7 November 2012, the COMELEC En Banc promulgated a Resolution canceling petitioners
Certificate of Registration and/or Accreditation on three grounds, to wit: 1
I.
Petitioner ANAD does not belong to, or come within the ambit of, the marginalized and
underrepresented sectors enumerated in Section 5 of R.A. No. 7941 and espoused in the
cases of Ang Bagong Bayani-OFW Labor Party v. Commission on Elections and Ang Ladlad
LGBT Party v. Commission on Elections.
II.
There is no proof showing that nominees Arthur J. Tariman and Julius D. Labandria are
actually nominated by ANAD itself. The Certificate of Nomination, subscribed and sworn to
by Mr. Domingo M.Balang, shows that ANAD submitted only the names of Pastor Montero
Alcover, Jr., Baltaire Q. Balangauan and Atty. Pedro Leslie B. Salva. It necessarily follows,
that having only three (3) nominees, ANAD failed to comply with the procedural requirements
set forth in Section 4, Rule 3 of Resolution No. 9366.
III.
ANAD failed to submit its Statement of Contributions and Expenditures for the 2007 National and
Local Elections as required by Section 14 of Republic Act No. 7166 ("R.A. No. 7166").
ANAD went before this Court challenging the above-mentioned resolution. In Atong Paglaum, Inc. v.
Comelec,2the Court remanded the case to the COMELEC for re-evaluation in accordance with the
parameters prescribed in the aforesaid decision.
In the assailed Resolution dated 11 May 2013,3 the COMELEC affirmed the cancellation of
petitioners Certificate of Registration and/or Accreditation and disqualified it from participating in the
2013 Elections. The COMELEC held that while ANAD can be classified as a sectoral party lacking in
well-defined political constituencies, its disqualification still subsists for violation of election laws and
regulations, particularly for its failure to submit at least five nominees, and for its failure to submit its
Statement of Contributions and Expenditures for the 2007 Elections.
Hence, the present petition raising the issues of whether or not the COMELEC gravely abused its
discretion in promulgating the assailed Resolution without the benefit of a summary evidentiary
hearing mandated by the due process clause, and whether or not the COMELEC erred in finding
that petitioner submitted only three nominees and that it failed to submit its Statement of
Contributions and Expenditures in the 2007Elections.4
We dismiss the petition.

The only question that may be raised in a petition for certiorari under Section 2, Rule 64 of the Rules
of Court is whether or not the COMELEC acted with grave abuse of discretion amounting to lack or
excess of jurisdiction. For a petition for certiorari to prosper, there must be a clear showing of caprice
and arbitrariness in the exercise of discretion.5
"Grave abuse of discretion," under Rule 65, has a specific meaning. It is the arbitrary or despotic
exercise of power due to passion, prejudice or personal hostility; or the whimsical, arbitrary, or
capricious exercise of power that amounts to an evasion or a refusal to perform a positive duty
enjoined by law or to act at all in contemplation of law. For an act to be struck down as having been
done with grave abuse of discretion, the abuse of discretion must be patent and gross. 6
ANAD claims that the COMELEC gravely abused its discretion when it promulgated the assailed
Resolution without giving ANAD the benefit of a summary evidentiary hearing, thus violating its right
to due process. It is to be noted, however, that ANAD was already afforded a summary hearing on23
August 2013, during which Mr. Domingo M. Balang, ANADs president, authenticated documents and
answered questions from the members of the COMELEC pertinent to ANADs qualifications. 7
ANAD, nonetheless, insists that the COMELEC should have called for another summary hearing
after this Court remanded the case to the COMELEC for re-evaluation in accordance with the
parameters laid down in Atong Paglaum, Inc. v. Comelec . This is a superfluity.
ANAD was already given the opportunity to prove its qualifications during the summary hearing of 23
August 2012, during which ANAD submitted documents and other pieces of evidence to establish
said qualifications. In re-evaluating ANADs qualifications in accordance with the parameters laid
down in Atong Paglaum, Inc. v. COMELEC , the COMELEC need not have called another summary
hearing. The Comelec could, as in fact it did,8readily resort to documents and other pieces of
evidence previously submitted by petitioners in re-appraising ANADs qualifications. After all, it can
be presumed that the qualifications, or lack thereof, which were established during the summary
hearing of 23 August2012 continued until election day and even there after.
As to ANADs averment that the COMELEC erred in finding that it violated election laws and
regulations, we hold that the COMELEC, being a specialized agency tasked with the supervision of
elections all over the country, its factual findings, conclusions, rulings and decisions rendered on
matters falling within its competence shall not be interfered with by this Court in the absence of
grave abuse of discretion or any jurisdictional infirmity or error of law.9
As found by the COMELEC, ANAD, for unknown reasons, submitted only three nominees instead of
five, in violation of Sec. 8 of R.A. No. 7941( An Act Providing for the Election of Party-List
Representatives through the Party-List System, and Appropriating Funds Therefor). 10 Such factual
finding of the COMELEC was based on the Certificate of Nomination presented and marked by
petitioner during the 22 and 23 August 2012summary hearings. 11
Compliance with Section 8 of R.A. No. 7941 is essential as the said provision is a safeguard against
arbitrariness. Section 8 of R.A. No. 7941rids a party-list organization of the prerogative to substitute
and replace its nominees, or even to switch the order of the nominees, after submission of the list to
the COMELEC.
1wphi1

In Lokin, Jr. v. Comelec,12 the Court discussed the importance of Sec.8 of R.A. No. 7941 in this wise:
The prohibition is not arbitrary or capricious; neither is it without reason on the part of lawmakers.
The COMELEC can rightly presume from the submission of the list that the list reflects the true will of
the party-list organization. The COMELEC will not concern itself with whether or not the list contains

the real intended nominees of the party-list organization, but will only determine whether the
nominees pass all the requirements prescribed by the law and whether or not the nominees possess
all the qualifications and none of the disqualifications. Thereafter, the names of the nominees will be
published in newspapers of general circulation. Although the people vote for the party-list
organization itself in a party-list system of election, not for the individual nominees, they still have the
right to know who the nominees of any particular party-list organization are. The publication of the
list of the party-list nominees in newspapers of general circulation serves that right of the people,
enabling the voters to make intelligent and informed choices. In contrast, allowing the party-list
organization to change its nominees through withdrawal of their nominations, or to alter the order of
the nominations after the submission of the list of nominees circumvents the voters demand for
transparency. The lawmakers exclusion of such arbitrary withdrawal has eliminated the possibility of
such circumvention.
Moreover, the COMELEC also noted ANADs failure to submit a proper Statement of Contributions
and Expenditures for the 2007 Elections, in violation of COMELEC Resolution No. 9476, viz:
Rule 8, Sec. 3. Form and contents of statements. The statement required in next preceding section
shall be in writing, subscribed and sworn to by the candidate or by the treasurer of the party. It shall
set forth in detail the following:
a. The amount of contribution, the date of receipt, and the full name, profession, business,
taxpayer identification number (TIN) and exact home and business address of the person or
entity from whom the contribution was received; (See Schedule of Contributions Received,
Annex "G")
b. The amount of every expenditure, the date thereof, the full name and exact address of the
person or entity to whom payment was made, and the purpose of the expenditure; (See
Schedule of Expenditures, Annex "H")
A Summary Report of Lawful Expenditure categorized according to the list specified above
shall be submitted by the candidate or party treasurer within thirty (30) days after the day of
the election. The prescribed form for this Summary Report is hereby attached to these Rules
as Annex "H-1."
c. Any unpaid obligation, its nature and amount, the full name and exact home and business
address of the person or entity to whom said obligation is owing; and (See Schedule of
Unpaid Obligations, Annex "I")
d. If the candidate or treasurer of the party has received no contribution, made no
expenditure, or has no pending obligation, the statement shall reflect such fact;
e. And such other information that the Commission may require.
The prescribed form for the Statement of Election Contributions and Expenses is attached to these
Rules as Annex "F." The Schedules of Contributions and Expenditures (Annexes "G" and "H",
respectively) should be supported and accompanied by certified true copies of official receipts,
invoices and other similar documents.
An incomplete statement, or a statement that does not contain all the required information and
attachments, or does not conform to the prescribed form, shall be considered as not filed and shall
subject the candidate or party treasurer to the penalties prescribed by law.

As found by the COMELEC, ANAD failed to comply with the above-mentioned requirements as the
exhibits submitted by ANAD consisted mainly of a list of total contributions from other persons, a list
of official receipts and amounts without corresponding receipts, and a list of expenditures based on
order slips and donations without distinction as to whether the amounts listed were advanced subject
to reimbursement or donated.13 This factual finding was neither contested nor rebutted by ANAD.
We herein take the opportunity to reiterate the well-established principle that the rule that factual
findings of administrative bodies will not be disturbed by the courts of justice except when there is
absolutely no evidence or no substantial evidence in support of such findings should be applied with
greater force when it concerns the COMELEC, as the framers of the Constitution intended to place
the COMELEC created and explicitly made independent by the Constitution itself on a level
higher than statutory administrative organs. The COMELEC has broad powers to ascertain the true
results of the election by means available to it. For the attainment of that end, it is not strictly bound
by the rules of evidence.14
As empowered by law, the COMELEC may motu proprio cancel, after due notice and hearing, the
registration of any party-list organization if it violates or fails to comply with laws, rules or regulations
relating to elections.15Thus, we find no grave abuse of discretion on the part of the COMELEC when
it issued the assailed Resolution dated 11 May 2013.
In any event, the official tally results of the COMELEC show that ANAD garnered 200,972 votes. 16 As
such, even if petitioner is declared qualified and the votes cast for it are canvassed, statistics show
that it will still fail to qualify for a seat in the House of Representatives.
WHEREFORE, premises considered, the Court Resolves to DISMISS the Petition, finding no grave
abuse of discretion on the part of the Commission on Elections.
SO ORDERED.

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