1. [1999V140] VIVENCIO M. RUIZ, EMILIO D. CASTELLANES and BLAS A.

MIRANDA, petitioners,
vs. THE COURT OF APPEALS, and PEDRO V. GARCIA, as represented by his legal representative,
MA. LUISA G. MAGPAYO, respondents.1999 Feb 253rd DivisionG.R. No. 116909D E C I S I O N

PURISIMA, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
seeking review of the 26 November 1993 Decision1 [Annex "B," Petition; Rollo, pp. 36-42.] and 02
September 1994 Resolution2 [Annex "A," Petition; Rollo, p. 34.] of the Court of Appeals3 [Seventeenth
Division. Composed of Justices Alfredo L. Benipayo (Chairman), Ricardo P. Galvez (ponente) and Eubulo
G. Verzola (member)] in CA-G.R. CV No. 34360.

The late Pedro V. Garcia was a businessman with substantial shareholdings in V. C. Ponce Co., Inc.
consisting of shares of stock and real properties. Sometime in 1977, an internal conflict developed and
besieged the company, engendering suits between respondent Garcia and V.C. Ponce Co., Inc. over the
former's funds and assets.

On March 10, 1977, respondent Pedro V. Garcia engaged the legal services of herein petitioners, Attys.
Vivencio M. Ruiz and Emilio D. Castellanes, and an Agreement denominated as a Contract of
Retainership4 [Annex "A ," CA Records, pp. 51-52.] was executed by them, the pertinent portion of
which, reads:

" CONTRACT OF RETAINERSHIP

I, PEDRO V. GARCIA, of legal age, amrried to Remedios T. Garcia and residing at #100 Adelita Chioco St.,
Phase II, B.F. Homes, Paraaque, Metro Manila, do hereby declare and certify that I have engaged and
retained, as I do hereby retain and engage, the services of Atty. V. M. RUIZ and his associate, E.D.
CASTELLANES as my counsel to handle, protect and prosecute all cases involving my rights and interests
and that of my family in the 370,000 shares of stocks which we own in the V. C. Ponce Co., Inc.,
especially the case I have filed against Vicente C. Ponce before the Securities and Exchange Commission
(SEC Case No. 001451, Series of 1977), all other related and allied cases, both civil and criminal, which
may be assigned to and accepted by him or which have been specifically endorsed to him and now
pending before the courts and other venues.

Xxx xxx xxx

and IN CONSIDERATION of the services of the said attorney, I do hereby assign and transfer to him, his
heirs, executors and assigns, forever, fifteen (15%) percent of all my/our shares of stock aforesaid, fully
paid, evidenced by Certificate of Stock Nos. 003, 010, and 004, issued by the Corporation in our
respective names x x x and of all the benefits and dividends due but not declared and paid on said
shares from 1963 up to the execution of this retainership, including any/all monies and assets due us
and other recoverables, for me and my family, and, in addition, I further agree to pay the said attorney a
yearly retainership fee of P24,000.00 per annum in twelve (12) equal monthly payments of P2,000.00
each, payable on or before the 5th of every ensuing month starting April 1977.
Accordingly, the petitioners handled Civil Case Nos. 14297 and 17713 which were consolidated before
Branch 13 of the Court of First Instance in Pasig, Rizal. Civil Case No. Pq-6596 was before Branch 29, of
the Court of First Instance in Pasay City.

On July 22, 1982, Pablo V. Garcia unilaterally terminated the said Contract of Retainership on the alleged
ground that the petitioners, his lawyers, failed to settle amicably his (Garcia) differences with V. C.
Ponce Co., Inc. Petitioners were paid attorney's fees up to the month of July, 1982. Thereafter, the
petitioners Ruiz and Castellanes manifested their withdrawal as counsel for Pedro V. Garcia and moved
that their attorney's lien be put on record,5 [Annex "E," CA Record, p. 24.] in the cases involved. Such
motion was granted by the trial court.

On February 9, 1984, petitioners Ruiz and Castellanes brought their action "For Collection of Sum of
Money and for Specific Performance", docketed as Civil Case No. 6465 before Branch 140, of the
Regional Trial Court in Makati City.

On September 27, 1990, while the said case was pending before the said lower court of origin, Pedro V.
Garcia died. And so, on October 4, 1990, after notifying the trial court of the demise of their client,
counsel moved for the dismissal of the case, invoking Section 21, Rule 3 of the Rules of Court.6 [Rollo, p.
19; 1964 Rules of Court.]

On February 8, 1991, the lower court issued an Order dismissing petitioners' complaint, stating that:

" x x x the Court is of the opinion and so holds that the present action is one for recovery of money or
interest in whatever recovery the deceased defendant may obtain in cases for which the plaintiff's
services were contracted; and that plaintiff's client, the herein defendant, died before final judgment in
this case, hence, Section 21 of Rule 3 of the Rules of Court applies ."

On appeal, the Court of Appeals handed down its challenged Decision, disposing, thus:

"WHEREFORE, the Order appealed from is herby MODIFIED to read, as follows:

'In view of the foregoing, the motion to dismiss and the supplemental motion are hereby granted. Civil
Case No. 6364 is hereby DISMISSED in accordance with Section 21, Rule 3 of the Rules of Court, and the
notice of lis pendens annotated in T.C.T. No. 64567 is hereby ordered cancelled.

No pronouncement as to cost."

With the denial of their motion for reconsideration, petitioners found their way to this Court via the
present Petition; theorizing, that:

I.

RESPONDENT COURT ERRED IN FINDING THAT THE INSTANT CASE FOR RECOVERY OF ATTORNEY'S
PROFESSIONAL FEES WHICH HAD NOT BEEN ADJUDICATED BY FINAL PRONOUNCEMENT IS ABATED BY
THE DEATH OF THE DEFENDANT-CLIENT AND SHOULD THEREFORE BE DISMISSED IN ACCORDANCE WITH
SECTION 21, RULE 3 OF THE RULES OF COURT.
II.

RESPONDENT COURT ERRED IN NOT TAKING JUDICIAL NOTICE OF THE DECISION OF THE THEN
INTERMEDIATE APPELLATE COURT IN AC-G.R. NO. SP-05291 FINDING THE INSTANT CASE ONE FOR
RECOVERY OF LAND OR AN INTEREST THEREIN;

III.

RESPONDENT COURT ERRED IN FINDING THAT THE INSTANT CASE IS ONE "TO COMPEL THE CLIENT-
DEFENDANT TO RECOGNIZE FOREMOST THE EXISTENCE OF THE ATTORNEY-CLIENT RELATIONSHIP AFTER
IT WAS SEVERRED AND AS A CONSEQUENCE, INCIDENTALLY CLAIM PAYMENT OF THEIR PROFESSIONAL
FEES.

The pivot of inquiry here is: Whether or not the case at bar has survived the death of the private
respondent, Pedro V. Garcia.

It is petitioners' theory that the action they brought below was, among others, for the enforcement of
their charging lien in Civil Case Nos. 14297 and 17713, and Civil Case No. Pq-6596; which involved a
claim over the real properties litigated upon, and therefore, an action which survived the death of their
client, Pedro V. Garcia.

Section 21, Rule 3 of the Rules of Court7 [1964 Rules of Court.] provides:

"Where claims does not survive - When the action is for recovery of money, debt or interest thereon,
and the defendant dies before final judgment in the Court of First Instance, it shall be dismissed to be
prosecuted in the manner especially provided in these rules.

To begin with, the aforequoted provision of law was modified by the enactment of the 1997 Civil
Procedure, Section 20, Rule 3 of which, reads:

" When the action is for recovery of money arising from contract, express or implied, and the defendant
dies before final entry of final judgment in the court in which the action was pending at the time of such
death, it shall not be dismissed but shall be allowed to continue until entry of final judgment. A
favorable judgment obtained by the plaintiff therein shall be enforced in the manner especially provided
in these Rules for prosecuting claims against the estate of a deceased person.

It is a fundamental rule in legal hermeneutics that "statutes regulating the procedure of the courts will
be construed as applicable to actions pending and undetermined at the time of the passage,"8 [Atlas vs.
Court of Appeals, 201 SCRA 51.] Considering that the case under scrutiny was passed upon by the lower
courts under the old rule, it follows that the old rule governs.

Under the plain language of Section 21, Rule 3 of B.P. 129, it is beyond cavil that "if the defendant dies
before the Court of First Instance or the Regional Trial Court has rendered a judgment, the action is
dismissed and the plaintiff is required to file a money claim against the estate of the deceased. But if the
defendant dies after the said court has rendered a judgment and pending appeal, the action is not
dismissed and the deceased defendant is substituted by his executor or administrator or legal heirs."9
[Paredes vs. Moya, 61 SCRA 526.]

To determine whether the action survives or not, the Court ruling in Bonilla vs. Barcena (71 SCRA 491)
comes to the fore, thus:

"The question as to whether an action survives or not depends on the nature of the action and the
damage sued for (Iron Gate Bank vs. Brady, 184 U.S. 665, 22 SCT, 46 L.ed 739). In the cause of action
which survive, the wrong complained affects primarily and principally property and property rights, the
injuries to the person being merely incidental, while in the causes of action which do not survive, the
injury complained of is to the person, the property and rights of property affected being incidental."

The core of petitioners' argument is that action should not be dismissed since their complaint involves
not just monetary claim but also real properties, as well..

Petitioners' contention is untenable. While they maintain that what they are claiming include real
properties, their Complaint is captioned as "For Collection of Money and for Specific Performance."
Obviously, the petitioners themselves, who are lawyers, believed that their cause of action against the
private respondent is in the nature of actio in personam.

"Actio in personam is a personal action seeking redress against a particular person. Personal actions are
such whereby a man claims a debt, or personal duty, or damages in lieu thereof."10 [R.S. Vasan (Ed.),
Latin Words and Phrases for Lawyers.] In the present case, petitioners seek to recover attorney's fees
from private respondent for professional services they rendered to the latter. Attorney's fee is basically
a compensation.11 [7 Am Jur 2d, "Attorneys At Law," 327, p. 340, citing Central R. & Banking Co. vs.
Petters, 113 US 116.] In its ordinary sense, "the term (compensation) applies not only to salaries, but to
compensation by fees for specific service." 12 [Kuenzle & Streiff Inc. vs. Commissioner of Internal
Revenue, 120 Phil. 1099.]

Viewed in proper perspective, an action to recover attorney's fees is basically a monetary claim, which
under Section 21, Rule 3 of B.P. 129 is an action that does not survive. Such is the fate of Civil Case No.
6465.

Petitioners theorize that the inclusion of real properties as part of the attorney's fees private
respondent owe them, converted the action into one that survives or at the very least, split the action
into one that did not survive, with respect to the monetary obligation, and which survived, with respect
to the real properties of the deceased.

In Harden vs. Harden, 20 SCRA 706, the Court ruled that an action for the satisfaction of attorney's fees
is founded on a personal obligation which does not survive the death of the defendant before
adjudication.13 [Climaco vs. Siy Uy, 19 SCRA 858.]

As enunciated in Bonila, the litmus test in determining what action survives and what does not depends
on the nature of the action and not on the object or kind of property sought to be recovered.
All things studiedly considered, we are of the opinion, and, so hold, that the respondent Court of
Appeals erred not in affirming the decision of the court a quo.

WHEREFORE, the Petition is hereby DENIED; and the decision of the Court of Appeals in CA-G.R. CV No.
34360 AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED.

Romero (Chairman), Panganiban, and Gonzaga-Reyes, JJ., concur.

Vitug, J., on official business abroad.

2. [1999V468] SPOUSES AUGUSTO HONTIVEROS and MARIA HONTIVEROS, petitioners vs.

REGIONAL TRIAL COURT, Branch 25, Iloilo City and SPOUSES GREGORIO HONTIVEROS and
TEODORA AYSON, respondents.1999 Jun 292nd DivisionG.R. No. 125465D E C I S I O N

MENDOZA, J.:

On December 3, 1990, petitioners, the spouses Augusto and Maria Hontiveros, filed a complaint for
damages against private respondents Gregorio Hontiveros and Teodora Ayson before the Regional Trial
Court of Iloilo City, Branch 25, where it was docketed as Civil Case No. 19504. In said complaint,
petitioners alleged that they are the owners of a parcel of land, in the town of Jamindan, Province of
Capiz, as shown by OCT No. 0-2124, issued pursuant to the decision of the Intermediate Appellate Court,
dated April 12, 1984, which modified the decision of the Court of First Instance of Capiz, dated January
23, 1975, in a land registration case1 [Docketed as Land Registration Case No. N-581-25, LRC Rec. No.
288.] filed by private respondent Gregorio Hontiveros; that petitioners were deprived of income from
the land as a result of the filing of the land registration case; that such income consisted of rentals from
tenants of the land in the amount of P66,000.00 per year from 1968 to 1987, and P595,000.00 per year
thereafter; and that private respondents filed the land registration case and withheld possession of the
land from petitioners in bad faith.2 [See Amended Complaint; Petition, Annex A; Rollo, pp. 28-30.]

In their answer, private respondents denied that they were married and alleged that private respondent
Hontiveros was a widower while private respondent Ayson was single. They denied that they had
deprived petitioners of possession of and income from the land. On the contrary, they alleged that
possession of the property in question had already been transferred to petitioners on August 7, 1985, by
virtue of a writ of possession, dated July 18, 1985, issued by the clerk of court of the Regional Trial Court
of Capiz, Mambusao, the return thereof having been received by petitioners counsel; that since then,
petitioners have been directly receiving rentals from the tenants of the land; that the complaint failed to
state a cause of action since it did not allege that earnest efforts towards a compromise had been made,
considering that petitioner Augusto Hontiveros and private respondent Gregorio Hontiveros are
brothers; that the decision of the Intermediate Appellate Court in Land Registration Case No. N-581-25
was null and void since it was based upon a ground which was not passed upon by the trial court; that
petitioners claim for damages was barred by prescription with respect to claims before 1984; that there
were no rentals due since private respondent Hontiveros was a possessor in good faith and for value;
and that private respondent Ayson had nothing to do with the case as she was not married to private
respondent Gregorio Hontiveros and did not have any proprietary interest in the subject property.
Private respondents prayed for the dismissal of the complaint and for an order against petitioners to pay
damages to private respondents by way of counterclaim, as well as reconveyance of the subject land to
private respondents.3 [See Amended Answer; Petition, Annex B; Rollo, pp. 31-35.]

On May 16, 1991, petitioners filed an Amended Complaint to insert therein an allegation that "earnest
efforts towards a compromise have been made between the parties but the same were unsuccessful."

In due time, private respondents filed an Answer to Amended Complaint with Counterclaim, in which
they denied, among other things, that earnest efforts had been made to reach a compromise but the
parties were unsuccessful.

On July 19, 1995, petitioners moved for a judgment on the pleadings on the ground that private
respondents answer did not tender an issue or that it otherwise admitted the material allegations of
the complaint.4 [Petition, Annex C; Rollo, pp. 36-46.] Private respondents opposed the motion alleging
that they had denied petitioners claims and thus tendered certain issues of fact which could only be
resolved after trial.5 [Petition, Annex H.]

On November 23, 1995, the trial court denied petitioners motion. At the same time, however, it
dismissed the case on the ground that the complaint was not verified as required by Art. 151 of the
Family Code and, therefore, it did not believe that earnest efforts had been made to arrive at a
compromise. The order of the trial court reads:6 [Id., Annex E.]

The Court, after an assessment of the diverging views and arguments presented by both parties, is of
the opinion and so holds that judgment on the pleadings is inappropriate not only for the fact that the
defendants in their answer, particularly in its paragraph 3 to the amended complaint, specifically denied
the claim of damages against them, but also because of the ruling in De Cruz vs. Cruz, G.R. No. 27759,
April 17, 1970 (32 SCRA 307), citing Rili vs. Chunaco, 98 Phil. 505, which ruled that the party claiming
damages must satisfactorily prove the amount thereof and that though the rule is that failure to
specifically deny the allegations in the complaint or counter-claim is deemed an admission of said
allegations, there is however an exception to it, that is, that when the allegations refer to the amount of
damages, the allegations must still be proved. This ruling is in accord with the provision of Section 1,
Rule 9 of the Rules of Court.

That while the plaintiffs in their amended complaint allege that earnest efforts towards a compromise
with the defendants were made, the fact is that their complaint was not verified as provided in Article
151 of the Family Code. Besides, it is not believed that there were indeed earnest efforts made to patch
up and/or reconcile the two feuding brothers, Gregorio and Augusto, both surnamed Hontiveros.

The submission of the plaintiffs that, assuming no such earnest efforts were made, the same is not
necessary or jurisdictional in the light of the ruling in Rufino Magbaleta, et al., petitioners, vs. Hon.
Arsenio M. Gonong, et al., respondents, No. L-44903, April 22, 1977, is, to the mind of this Court, not
applicable to the case at bar for the fact is the rationale in that case is not present in the instant case
considering these salient points:

a) Teodora Ayson, the alleged wife of defendant Gregorio Hontiveros and allegedly not a member of the
Hontiveros Family, is not shown to be really the wife of Gregorio, a fact which Gregorio also denied in
their verified answer to the amended complaint;

b) Teodora Ayson has not been shown to have acquired any proprietary right or interest in the land that
was litigated by Gregorio and Augusto, unlike in the cited case of Magbaleta where it was shown that a
stranger to the family acquired certain right;

c) In the decision rendered by the appellate court no mention was made at all of the name of Teodora
Ayson as part-awardee of Lot 37 that was adjudged to Gregorio other than himself who was therein
described as a widower. Moreover, Teodora was never mentioned in said decision, nor in the amended
complaint and in the amended motion for judgment on the pleadings that she ever took any part in the
act or transaction that gave rise to the damages allegedly suffered by the plaintiffs for which they now
claim some compensation.

WHEREFORE, in the light of all the foregoing premises, the Court orders, as it hereby orders, the
dismissal of this case with cost against the plaintiffs.

SO ORDERED.

Petitioners moved for a reconsideration of the order of dismissal, but their motion was denied.7 [Id.,
Annex F.] Hence, this petition for review on certiorari. Petitioners contend:

I. THE REGIONAL TRIAL COURT PALPABLY ERRED IN DISMISSING THE COMPLAINT ON THE GROUND THAT
IT DOES NOT ALLEGE UNDER OATH THAT EARNEST EFFORTS TOWARD A COMPROMISE WERE MADE
PRIOR TO THE FILING THEREOF AS REQUIRED BY ARTICLE 151 OF THE FAMILY CODE.

II. THE REGIONAL TRIAL COURT PALPABLY ERRED IN NOT DENYING THE MOTION FOR JUDGMENT ON
THE PLEADINGS AND ORDERING A TRIAL ON THE MERITS.

Private respondents raise a preliminary question. They argue that petitioners should have brought this
case on appeal to the Court of Appeals since the order of the trial court judge was actually a decision on
the merits. On the other hand, even if petition for certiorari were the proper remedy, they contend that
the petition is defective because the judge of the trial court has not been impleaded as a respondent.8
[Comment/Answer, pp. 1-2; Rollo, pp. 60-61.]

Private respondents contention is without merit. The petition in this case was filed pursuant to Rule 45
of the Rules of Court. As explained in Atlas Consolidated Mining and Development Corporation v. Court
of Appeals:9 [201 SCRA 51, 58-59 (1991)]

Under Section 5, subparagraph (2)(e), Article VIII of the 1987 Constitution, the Supreme Court is vested
with the power to review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the
Rules of Court may provide, final judgments and orders of lower courts in all cases in which only an error
or question of law is involved. A similar provision is contained in Section 17, fourth paragraph,
subparagraph (4) of the Judiciary Act of 1948, as amended by Republic Act No. 5440. And, in such cases
where only questions of law are involved, Section 25 of the Interim Rules and Guidelines implementing
Batas Pambansa Blg. 129, in conjunction with Section 3 of Republic Act No. 5440, provides that the
appeal to the Supreme Court shall be taken by petition for certiorari which shall be governed by Rule 45
of the Rules of Court.

The rule, therefore, is that direct appeals to this Court from the trial court on questions of law have to
be through the filing of a petition for review on certiorari. It has been held that:

x x x when a CFI (RTC) adjudicates a case in the exercise of its original jurisdiction, the correct mode of
elevating the judgment to the Court of Appeals is by ordinary appeal, or appeal by writ of error,
involving merely the filing of a notice of appeal - except only if the appeal is taken in special proceedings
and other cases wherein multiple appeals are allowed under the law, in which even the filing of a record
on appeal is additionally required. Of course, when the appeal would involve purely questions of law or
any of the other cases (except criminal cases as stated hereunder) specified in Section 5(2), Article X of
the Constitution, it should be taken to the Supreme Court by petition for review on certiorari in
accordance with Rules 42 and 45 of the Rules of Court.

By way of implementation of the aforestated provisions of law, this Court issued on March 9, 1990
Circular No. 2-90, paragraph 2 of which provides:

2. Appeals from Regional Courts to the Supreme Court. Except in criminal cases where the penalty
imposed is life imprisonment or reclusion perpetua, judgments of regional trial courts may be appealed
to the Supreme Court only by petition for review on certiorari in accordance with Rule 45 of the Rules of
Court in relation to Section 17 of the Judiciary Act of 1948, as amended, this being the clear intendment
of the provision of the Interim Rules that (a)ppeals to the Supreme Court shall be taken by petition for
certiorari which shall be governed by Rule 45 of the Rules of Court.

Under the foregoing considerations, therefore, the inescapable conclusion is that herein petitioner
adopted the correct mode of appeal in G.R. No. 88354 by filing with this Court a petition to review on
certiorari the decision of the Regional Trail Court of Pasig in Civil Case No. 25528 and raising therein
purely questions of law.

In Meneses v. Court of Appeals, it was held:10 [237 SCRA 484, 491-492 (1994)]

It must also be stressed that the trial courts order of 5 June 1992 dismissing the petitioners complaint
was, whether it was right or wrong, a final order because it had put an end to the particular matter
resolved, or settled definitely the matter therein disposed of and left nothing more to be done by the
trial court except the execution of the order. It is a firmly settled rule that the remedy against such order
is the remedy of appeal and not certiorari. That appeal may be solely on questions of law, in which case
it may be taken only to this Court; or on questions of fact and law, in which case the appeal should be
brought to the Court of Appeals. Pursuant to Murillo v. Consul, the appeal to this Court should be by
petition for review on certiorari in accordance with Rule 45 of the Rules of Court.

As private respondents themselves admit, the order of November 23, 1995 is a final order from which an
appeal can be taken. It is final in the sense that it disposes of the pending action before the court and
puts an end to the litigation so that nothing more was left for the trial court to do.11 [Allied Free
Workers Union v. Judge Estipona, 113 Phil. 748 (1961)] Furthermore, as the questions raised are
questions of law, petition for review on certiorari is the proper mode of appeal. These questions are: (1)
whether after denying petitioners motion for judgment on the pleadings, the trial court could dismiss
their complaint motu proprio for failure to comply with Art. 151 of the Family Code which provides that
no suit between members of the same family shall prosper unless it appears from the complaint, which
must be verified, that earnest efforts towards a compromise have been made but the same have failed;
and (2) whether Art. 151 applies to this case. These questions do not require an examination of the
probative value of evidence presented and the truth or falsehood of facts asserted which questions of
fact would entail.12 [See Roman Catholic Archbishop of Manila v. Court of Appeals, 258 SCRA 195, 199
(1996)]

On the other hand, petitioners contend that the trial court erred in dismissing the complaint when no
motion to that effect was made by any of the parties. The} point out that, in opposing the motion for
judgment on the pleadings, private respondents did not seek the dismissal of the case but only the
denial of petitioners motion. Indeed, what private respondents asked was that trial be held on the
merits.

Of course, there are instances when the trial court may order the dismissal of the case even without a
motion to that effect filed by any of the parties. In Baja v. Macandog,13 [158 SCRA 391, 396-397 (1986)]
this Court mentioned these cases, to wit:

The court cannot dismiss a case motu proprio without violating the plaintiffs right to be heard, except in
the following instances: if the plaintiff fails to appear at the time of the trial; if he fails to prosecute his
action for an unreasonable length of time; or if he fails to comply with the rules or any order of the
court; or if the court finds that it has no jurisdiction over the subject matter of the suit.

However, none of these exceptions appears in this case.

Moreover, the trial court itself found that "judgment on the pleadings is inappropriate not only for the
fact that [private respondents] in their answer . . . specifically denied the claim of damages against
them, but also because of the [rule] . . . that the party claiming damages must satisfactorily prove the
amount thereof. . . ." Necessarily, a trial must be held.

Rule 19 of the Rules of Court provides:14 [Now Rule 34 of the 1997 Rules of Civil Procedure.]

SECTION 1. Judgment on the pleadings. Where an answer fails to tender an issue, or otherwise admits
the material allegation of the adverse partys pleading, the court may, on motion of the party, direct
judgment on such pleading. But in actions for annulment of marriage or for legal separation the material
facts alleged in the complaint shall always be proved.

Under the rules, if there is no controverted matter in the case after the answer is filed, the trial court
has the discretion to grant a motion for judgment on the pleadings filed by a party.15 [1 V. J. Francisco,
The Revised Rules of Court in the Philippines 1033 (1973)] Where there are actual issues raised in the
answer, such as one involving damages, which require the presentation of evidence and assessment
thereof by the trial court, it is improper for the judge to render judgment based on the pleadings
alone.16 [Rocamora v. RTC, Cebu (Branch VIII), 167 SCRA 615 (1988); 1 M. V. Moran, Comment on the
Rules of Court 538 (1967)] In this case, aside from the amount of damages, the following factual issues
have to be resolved, namely, (1) private respondent Teodora Aysons participation and/or liability, if
any, to petitioners and (2) the nature, extent, and duration of private respondents possession of the
subject property. The trial court, therefore, correctly denied petitioners motion for judgment on the
pleadings.

However, the trial court erred in dismissing petitioners complaint on the ground that, although it
alleged that earnest efforts had been made toward the settlement of the case but they proved futile,
the complaint was not verified for which reason the trial court could not believe the veracity of the
allegation.

The absence of the verification required in Art. 151 does not affect the jurisdiction of the court over the
subject matter of the complaint. The verification is merely a formal requirement intended to secure an
assurance that matters which are alleged are true and correct. If the court doubted the veracity of the
allegations regarding efforts made to settle the case among members of the same family, it could simply
have ordered petitioners to verify them. As this Court has already ruled, the court may simply order the
correction of unverified pleadings or act on it and waive strict compliance with the rules in order that
the ends of justice may be served.17 [See Vda. de Gabriel v. Court of Appeals, 264 SCRA 137 (1996); Sy v.
Habicon-Garayblas, 228 SCRA 644 (1993); Buenaventura v. Halili, 149 SCRA 22 (1987)] Otherwise, mere
suspicion or doubt on the part of the trial court as to the truth of the allegation that earnest efforts had
been made toward a compromise but the parties efforts proved unsuccessful is not a ground for the
dismissal of an action. Only if it is later shown that such efforts had not really been exerted would the
court be justified in dismissing the action. Thus, Art. 151 provides:

No suit between members of the same family shall prosper unless it should appear from the verified
complaint or petition that earnest efforts toward a compromise have been made, but that the same
have failed. It if is shown that no such efforts were in fact made, the case must be dismissed.

This rule shall not apply to cases which may not be the subject of compromise under the Civil Code.

Moreover, as petitioners contend, Art. 151 of the Family Code does not apply in this case since the suit
is not exclusively among family members. Citing several cases18 [Magbaleta v. Gonong, 76 SCRA 511
(1977); Gayon v. Gayon, 36 SCRA 104 (1970); Mendez v. Eugenia, 80 SCRA 82 (1977); Gonzales v. Lopez,
160 SCRA 346 (1988); Guerrero v. RTC, Ilocos Norte, Br. XVI, 229 SCRA 274 (1994)] decided by this Court,
petitioners claim that whenever a stranger is a party in a case involving family members, the requisite
showing of earnest efforts to compromise is no longer mandatory. They argue that since private
respondent Ayson is admittedly a stranger to the Hontiveros family, the case is not covered by the
requirements of Art. 151 of the Family Code.

We agree with petitioners. The inclusion of private respondent Ayson as defendant and petitioner Maria
Hontiveros as plaintiff takes the case out of the ambit of Art. 151 of the Family Code. Under this
provision, the phrase "members of the same family" refers to the husband and wife, parents and
children, ascendants and descendants, and brothers and sisters, whether full or half-blood.19 [Family
Code, Art. 150.] As this Court held in Guerrero v. RTC, Ilocos Norte, Br. XVI:20 [229 SCRA 274, 278
(1994)]

As early as two decades ago, we already ruled in Gayon v. Gayon that the enumeration of "brothers and
sisters" as members of the same family does not comprehend "sisters-in-law." In that case, then Chief
Justice Concepcion emphasized that "sisters-in-law" (hence, also "brothers-in-law") are not listed under
Art. 217 of the New Civil Code as members of the same family. Since Art. 150 of the Family Code repeats
essentially the same enumeration of "members of the family," we find no reason to alter existing
jurisprudence on the mater. Consequently, the court a quo erred in ruling that petitioner Guerrero,
being a brother-in-law of private respondent Hernando, was required to exert earnest efforts towards a
compromise before filing the present suit.

Religious relationship and relationship by affinity are not given any legal effect in this jurisdiction.21 [1
A. M. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines 504 (1990)]
Consequently, private respondent Ayson, who is described in the complaint as the spouse of respondent
Hontiveros, and petitioner Maria Hontiveros, who is admittedly the spouse of petitioner Augusto
Hontiveros, are considered strangers to the Hontiveros family, for purposes of Art. 151.

Petitioners finally question the constitutionality of Art. 151 of the Family Code on the ground that it in
effect amends the Rules of Court. This, according to them, cannot be done since the Constitution
reserves in favor of the Supreme Court the power to promulgate rules of pleadings and procedure.
Considering the conclusion we have reached in this case, however, it is unnecessary for present
purposes to pass upon this question. Courts do not pass upon constitutional questions unless they are
the very lis mota of the case.

WHEREFORE, the petition is GRANTED and the Order, dated November 23, 1995 of the Regional Trial
Court of Iloilo City, Branch 25 is SET ASIDE and the case is remanded to the trial court for further
proceedings not inconsistent with this decision.

SO ORDERED.

Bellosillo (Chairman), Puno, Quisumbing, and Buena, JJ., concur.

3. [1999V829] REPUBLIC OF THE PHILIPPINES, represented by the SECRETARY OF AGRICULTURE,

petitioner, vs. THE HON. COURT OF APPEALS, HON. VIVENCIO A. BANTUGAN, Presiding Judge
of the Regional Trial Court, Brach 55, Alaminos, Pangasinan, and HEIRS OF ZENAIDA BUSTRIA-
 TIGNO, represented by CAMILO TIGNO, respondents.1999 Sep 302nd DivisionG.R. No.
122269D E C I S I O N

MENDOZA, J.:

For review is the decision1 [Per Associate Justice Eduardo G. Montenegro and concurred in by Associate
Justices Jorge S. Imperial and Jose C. De La Rama.] of the Court of Appeals, dated October 4, 1995, in CA-
G.R. SP No. 34013, dismissing a petition filed by the Republic of the Philippines for the annulment of the
decision of the Regional Trial Court of Alaminos, Pangasinan, which declared private respondents to be
the absolute owners of a piece of land in Barangay Malacapas, Dasol, Pangasinan. The government, as
petitioner, prays that the aforesaid decision of the trial court rendered in Civil Case No. A-1759, be
annulled.

The facts are stated in the following portion of the decision of the Court of Appeals:

Sometime in 1957, one Matias Bustamante filed with the then CFI of Pangasinan an application for
registration under Act No. 496, as amended, of a tract of land containing an area of 880,000 square
meters, more or less, situated in Barangay Malacapas, Dasol, Pangasinan.

Both the Director of Forestry and the Director of Fisheries filed oppositions to the aforecited application,
alleging among others, that 'said parcel of land, with the exception of 97,525 square meters, is a part of
the Timber Land Block "A" Land Classification Project 44, which is converted into fish ponds.' Isidro
Bustria [private respondents' predecessor-in-interest] and Julian Bustria, also opposed the said
application for the land registration, alleging that they 'have in the year 1943 occupied in good faith
their respective portions having a total area of fifty (50) hectares, more or less x x x converted their
respective portions into fish ponds x x x and actually possessed and occupied their respective portions x
x x exclusively against all persons, except the Director of Forestry & Director of Fishery.' After trial, the
lower court rendered a Decision in favor of applicant Bustamante.

On appeal to this Honorable Court, docketed as CA-G.R. No. 30058-R, it was found that 783, 275 square
meters of the land applied for were accretions added to applicant Bustamante's riceland of 9.7525
hectares, and that said accretion was caused by the sea on the southward portion of said riceland. This
Honorable Court then ruled:

This being so, the said accretion belongs - not to the riparian owner - but the State. All lands thrown up
by the sea and formed upon the shores, belong to he national domain and are for public use, in
accordance with the provisions of the Law on Waters of August 3, 1866 (Insular Government vs.
Aldecoa, 19 Phil. 505) (p. 20, Decision, November 16, 1967).

Thus, modifying the judgment of the lower court, this Honorable Court rendered a Decicision on
November 16, 1967, disposing:

IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby modified so that only 9.7525 of the
land applied for is hereby adjudicated and ordered to be registered in the name of the applicant, the
remaining area being hereby declared land of the public domain belonging to the Republic of the
Philippines, without prejudice to whatever rights oppositors Isidro Bustria and Julian Bustria may have
acquired over portions of the area thus declared as land of the public domain, with costs against
applicant.

SO ORDERED.

When brought up on certiorari to the Supreme Court, the foregoing Judgment was affirmed in toto in
the Resolution in G.R. No. L-18605 dated February 29, 1968.

It is relevant to state at this point that the parcel of land that is presently the subject of the dispute in
the instant case, Lot No. 7764, CAD 624-D (Portion) [Psu-155696, Lot 3 (Portion)], forms part of the
above-mentioned parcel of land declared by this Honorable Court as belonging to he public domain,
classified/zonified land available for fispond development, per L.C. Map No. 3175, approved on June 24,
1984, under administrative Order No. 4-1829 (Annex 'D', Petition). The subject lot contains an area of
49,999 square meters, more or less. This lot has been leased to Mr. Porfirio Morado by the [Republic of
the Philippines], represented by the Secretary of Agriculture, for a period of twenty-five (25) years, or up
to December 31, 2013, under Fishpond Lease Agreement No. 5132, dated August 17, 1989 (Annex 'E',
Petition).

On July 6, 1988, however, the late Zenaida Bustria [daughter of Isidro Bustria] filed a complaint against
Porfirio Morado in the Regional Trial Court of Alaminos, Pangasinan, Branch 55, for ownership and
possession over the lot in question [docketed as Civil Case No. A-1759]. Herein petitioner, the Republic
of the Philippines, was not made a party to that suit.

In her complaint, Zenaida Bustria claimed absolute ownership and quiet and peaceful possession of
several lots under PSU-155696 surveyed in the name of her father, Isidro Bustria. She further asserted
that said Porfirio Morado maliciously applied for a fishpond permit with the Bureau of Fisheries and
Aquatic Resources over Lot 3 thereof (the subject lot), well-knowing that said lot had always been
occupied, possessed and worked by her and her predecessors-in-interest.

Porfirio Morado denied the allegations in the complaint, claiming that the lot in question is part of the
public domain which he developed and converted into a fishpond. Due, however, to Porfirio Morado's
and his counsel's failure to appear at the pre-trial and subsequent court hearings, the trial court
subsequently declared Porfirio Morado 'as in default.'

On December 17, 1991, respondent Judge rendered a decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered:

(a) Declaring the plaintiff as the exclusive and absolute owner of the land in question stated in
paragraph 4 of the Complaint and entitled to the exclusive and quiet possession of the said land; and

(b) Ordering the defendant to pay the plaintiff the amount of P15,000.00 as attorney's fees and the sum
of P500.00 per day of hearing of the counsel, plus costs.
(Annex 'A', Petition)

On January 23, 1992, Porfirio Morado filed a Petition for Relief from Judgment which was denied on July
21, 1992 for lack of merit.

On July 8, 1992, a writ of execution was issued, and it was implemented by Sheriffs Manuel O. de Asis
and Sheriff Cesar A. Gines. Spouses Porfirio Morado and Juliana Morado thereafter filed with this
Honorable Court a Petition for Certiorari with Writ of Preliminary Injuction, docketed as CA-G.R. No.
28932. In a Resolution dated December 11, 1992, the Petition was denied for lack of merit. The related
Motion for Reconsideration was denied in the Resolution dated February 18, 1993. (Rollo, pp. 107-112)
2 [Rollo, pp. 27-30.]

April 19, 1994, petitioner, invoking 9 of B.P. Blg. 129,3 [The Judiciary Reorganization Act of 1980.] filed
with the Court of Appeals a petition for the annulment of the trial court's decision, dated December 17,
1991. Petitioner alleged that the land in question is within the classified/zonified alienable and
disposable land for fishpond development, per L.C. Map No. 3175 approved on June 24, 1984, under
Administrative Order No. 4-1829 and that since the land formed part of the public domain, the Bureau
of Fisheries and Aquatic Resources (BFAR) has jurisdiction over its disposition in accordance with P.D.
No. 704, 4.

On October 4, 1995 the Court of Appeals rendered a decision dismissing the petition.4 [Rollo, p. 32.]

Hence, this petition for review.

The judgment rendered in a case may be annulled on any of the following grounds: (a) the judgment is
void for want of jurisdiction or for lack of due process of law; or (b) it was obtained through extrinsic
fraud.5 [Santiago v. Ceniza, 5 SCRA 494 (1962); Mercado v. Ubay, 187 SCRA 719 (1990); Ruiz v. Court of
Appeals, 201 SCRA 577 (1991); Regidor v. Court of Appeals, 219 SCRA 530 (1993); Santos v. Court of
Appeals, 224 SCRA 673 (1993); LapuLapu Development & Housing Corp. v. Risos, 261 SCRA 517 (1996).]
The question in this case is whether the decision of the Regional Trial Court is void on any of these
grounds. The preliminary question, however, is whether the government can bring such action even
though it was not a party to the action in which the decision sought to be annulled was rendered.

We shall deal with these questions in inverse order.

First, is the question whether petitioner has personality to bring the action below. To begin with, an
action to recover a parcel of land is in personam. As such, it is binding only between the parties thereto,
as this Court explained in Ching v. Court of Appeals,6 [181 SCRA 9, 15-16 (1990).] viz:

An action to redeem, or to recover title to or possession of, real property is not an action in rem or an
action against the whole world, like a land registration proceeding or the probate of a will; it is an action
in personam, so much so that a judgment therein is binding only upon the parties properly impleaded
and duly heard or given an opportunity to be heard. Actions in personam and actions in rem differ in
that the former are directed against specific persons and seek personal judgments, while the latter are
directed against the thing or property or status of a person and seek judgments with respect thereto as
against the whole world. An action to recover a parcel of land is a real action but it is an action in
personam, for it binds a particular individual only although it concerns the right to a tangible thing.

The appellate court, holding that the proceedings before the trial court were in personam, ruled that
since petitioner was not a party to Civil Case No. A-1759, it is not a real party-in-interest and, therefore,
has no personality to bring the action for annulment of the judgment rendered in that case. The
appellate court said:

Private respondents are correct. Civil Case No. A-1759 was purely for "Ownership and Possession". The
decision sought to be annulled is solely "between the private respondents [the Bustrias] and Porfirio
Morado" (Rollo, p. 142.). Petitioner Republic was not a party in the case and is not bound by the
judgment rendered therein.

It is settled, a real party-in-interest is one who stands to be benefited or injured by the judgment in the
suit (Salonga vs. Warner Barnes & Co., Ltd., 88 Phil. 128; University of the Philippines Board of Regents
vs. Ligot-Telan, 227 SCRA 342; Tampingco vs. Intermediate Appellate Court, 207 SCRA 652; Republic vs.
Sandiganbayan, 203 SCRA 310; Travelwide Associated Sales, Inc. vs. Court of appeals, 199 SCRA 205).

Petitioner Republic not being a party, and the judgment not being in rem, it does not stand to be
benefited or injured by the judgment sought. Petitioner Republic can on its own, and even without
resorting to this petition for annulment of judgment, institute the proper action to assert its claim that
the "subject lot is a land forming part of the public domain" (Rollo, p. 145). It need not seek the
annulment of the subject judgment, in Civil Case No. A-1759 in which it was not a party and involves
merely a question of ownership and possession between plaintiffs Zenaida B. Bustria and defendant
Porfirio Morado and which decision is not binding on it, to be able to assert its claim or interest in the
property. It is clear for this reason that petitioner is not a real party-in-interest (Section 2, Rule 3,
Revised rules of Court).7 [Rollo, pp. 31-32.]

The appellate court is in error. In Islamic Da'wah Council of the Phils. v. Court of Appeals,8 [178 SCRA
178 (1989).]8 this Court held that a party claiming ownership of a parcel of land which is the subject of
foreclosure proceedings has a sufficient interest to bring an action for annulment of the judgment
rendered in the foreclosure proceedings even though it was not a party in such proceedings. It was held:

[A] person need not be a party to the judgment sought to be annulled. What is essential is that he can
prove his allegation that the judgment was obtained by the use of fraud and collusion and he would be
adversely affected thereby.

In this present case it is true that the heirs of Araneta are not parties to the foreclosure case. Neither are
they principally nor secondarily bound by the judgment rendered therein. However, in their petition
filed with the Court of Appeals they alleged fraud and connivance perpetuated by and between the Da
Silvas and the Council as would adversely affect them. This allegation, if fully subsantiated by
preponderance of evidence, could be the basis for the annulment of Civil Case No. Q-43476.9 [Id., at
186.]
This ruling was reiterated in Top Management Programs Corp. v. Court of Appeals.10 [222 SCRA 763
(1993).]

The next question is whether the Regional Trial Court had jurisdiction to declare the land in question to
belong to private respondent. The government asserts that the lot is within the "classified/zonified
alienable and disposable land for fishpond developent," hence, it is part of the public domain;11 [Rollo,
pp. 13 and 61.] that under P.D. No. 704, 4, jurisdiction over its disposition is vested in the BFAR; that
unlike agricultural land, public lands which are declared suitable for fishpond purposes may only be
disposed of by way of license, concession, or lease; and that possession thereof, no matter how long,
cannot ripen into private ownership.12 [Rollo, pp. 13 and 61.]

On the other hand, private respondents do not deny that Isidro Bustria, to whom they trace their
ownership, previously filed a fishpond application with the BFAR over the disputed land.13 [Rollo, pp. 66
and 86.] Neither do they deny that the disputed land formed part of the public domain. They insist,
however, that P.D. No. 704 applies only to "lands suitable for fishpond purposes" while the land in
dispute is already a "fully developed fishpond." They assert ownership of the subject lot through open
and continuous possession of their predecessor-in-interest since the Second World War.14 [Rollo, p. 90.]

We agree with petitioner. The State clearly stands to be adversely affected by the trial court's
disposition of inalienable public land.

The land involved in this case was classified as public land suitable for fishpond development.15 [Rollo,
p. 61] In controversies involving the disposition of public land, the burden of overcoming the
presumption of state ownership of lands of the public domain lies upon the private claimant.16
[Republic v. Register of Deeds of Quezon City, 244 SCRA 537 (1995).] Private respondents have not
discharged this burden.

The fact that the land in dispute was transformed into a "fully developed fishpond" does not mean that
it has lost its character as one declared "suitable for fishpond purposes" under the decree. By applying
for a fishpond permit with BFAR, Isidro Bautista admitted the character of the land as one suitable for
fishpond development since the disposition of such lands is vested in the BFAR. Consequently, private
respondents, as his successors-in-interests, are estopped from claiming otherwise.

It is settled under the Public Land Law17 [C.A. No. 141, 48(b).] that alienable public land held by a
possessor, personally or through his predecessor-in-interest, openly, continuously, and exclusively for 30
years is ipso jure converted to private property by the mere lapse of time.18 [Director of Land v.
Bengzon, 152 SCRA 369 (1987); Director of Lands v. Court of Appeals, 158 SCRA 568 (1988); De Ocsio v.
Court of Appeals, 170 SCRA 729 (1989); Director of Lands v. Iglesia Ni Kristo, 200 SCRA 606 (1991).]
However, only public lands classified as agricultural19 [CONST., Art. XII, 3.] are alienable. Lands declared
for fishery purposes are not alienable20 [CONST., Art. XII, 2; Presidential Decree No. 704, 23.] and their
possession, no matter how long continued, cannot ripen into ownership.

Since the disposition of lands declared suitable for fishpond purposes fall within the jurisdiction of the
BFAR, in accordance with P.D. No 704, 4,21 [Jurisdiction of the Bureau. - The Bureau shall have
jurisdiction and responsibility in the management, conservation, development, protection, utilization
and disposition of all fishery and aquatic resources of the country except municipal waters which shall
be under the municipal or city government concerned: Provided, that fish pens and seaweed culture in
municipal centers shall be under the jurisdiction of the Bureau: Provided, further, That all municipal or
city ordinances and resolutions affecting fishing and fisheries and any disposition thereunder shall be
submitted to the Secretary for appropriate action and shall have full force and affect only upon his
approval. The Bureau shall also have the authority to regulate and supervise the production, capture
and gathering of fish and fishery/aquatic products.

The Bureau shall prepare and implement, upon approval of the Fishery Industry Development Council, a
Fishery Industry Development Program.] the trial court's decision, dated December 17, 1991, is null and
void. The trial court has no jurisdiction to make a disposition of inalienable public land. If, as claimed,
Porfirio Morado secured a fishpond permit through fraud and misrepresentation, private respondent's
sole recourse, if any, is to secure the annulment of the same before the BFAR and apply for a new one in
their favor, provided that they are qualified therefor. What they did, however, was not only to bring
their action in the wrong forum but to ask to be declared owners of the land in dispute.

WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals, Ninth Division, in CA-
G.R. SP No. 34013, dated October 4, 1995, is REVERSED AND SET ASIDE. The decision of Regional Trial
Court of Alaminos, Pangasinan, Branch 55, in Civil Case No. A-1759 is hereby declared NULL AND VOID.

SO ORDERED.

Bellosillo, J., (Chairman), Quisumbing, and Buena, JJ., concur.

4. 1999R1180] REYNALDO T. COMETA and STATE INVESTMENT TRUST, INC., petitioners, vs.
COURT OF APPEALS, HON. GEORGE MACLI-ING, in his capacity as Presiding Judge, Regional
Trial Court, Quezon City, Branch 100, REYNALDO S. GUEVARRA and HONEYCOMB BUILDERS,
INC., respondents.1999 Dec 292nd DivisionG.R. No. 124062R E S O L U T I O N

MENDOZA, J.:

Petitioners move for a reconsideration of the decision in this case. They contend (1) that the complaint
and its annexes show that petitioners acted with probable cause and without malice in charging private
respondent Reynaldo Guevarra with falsification of public documents, and (2) that the non-inclusion in
the civil case for malicious prosecution of the government prosecutors who directed the filing in court of
the criminal case shows the existence of probable cause and the absence of malice.

Contending that the prosecution of private respondent Guevarra for falsification was grounded on
probable cause, they cite our ruling in Martinez vs. United Finance Corporation,[1] where a plaintiff's
complaint for malicious prosecution was dismissed upon showing that the same complaint contained
the following allegations: (1) a preliminary investigation was conducted by the fiscal; (2) despite
plaintiff's opposition, an information was filed by the fiscal; (3) plaintiff was acquitted of the offense
charged.
On the other hand, private respondents argue in their Opposition to petitioners' motion for
reconsideration that the absence of probable cause is sufficiently alleged in their complaint that
petitioners' criminal action against private respondent Guevarra had no basis in fact and in law as well as
by virtue of the trial court's dismissal of the criminal case for falsification of public documents on private
respondent Guevarra's demurrer to the evidence.

We have carefully considered the parties' arguments and now resolve to grant petitioners' motion for
reconsideration.

The facts are set forth at pages 1 to 6 of the decision in this case and are hereby incorporated into this
resolution by reference.

Since petitioners seek the dismissal of the complaint against them on the ground that it does not state a
sufficient cause of action, the question for determination is whether, taking the facts alleged in the
complaint and its annexes to be true, they constitute a cause of action, and not whether these
allegations of facts are true.[2] As stated in our decision in this case, a complaint for malicious
prosecution states a cause of action if it alleges the following: (1) that the defendant was himself the
prosecutor or that at least the prosecution was instituted at his instance; (2) that the prosecution finally
terminated in the acquittal of the plaintiff; (3) that in bringing the action the prosecutor acted without
probable cause; and (4) that the prosecutor was actuated by malice, i.e. by improper and sinister
motives.[3]

Does the complaint in this case allege these as facts? The complaint alleges in relevant parts:

12. Sometime in 1989, while SIHI's appeal from the order of the lower court was still pending with the
appellate courts, SIHI and Cometa filed a criminal case against Guevara for falsification of Public
Documents which was docketed in the Office of the Provincial Fiscal of Makati, Metro Manila, entitled
"State Investment House, Inc. vs. Reynaldo S. Guevara", I.S. No. 89-3747. The basis of the aforesaid case
filed by the defendants against Guevara is a supposed Affidavit of Undertaking dated September 9, 1987
which had allegedly been submitted by the plaintiffs with the (HLURB) in connection with its application
of a License to Sell its townhouse units in the RSG Condominium-Gueventville II. According to the
defendants, the Affidavit of Undertaking is a forgery because the signature therein purporting to be that
of Cometa is not Cometa's signature.

13. After the parties had submitted their respective Affidavits, the Office of the Makati Provincial Fiscal
dismissed the case filed by the defendants against Guevara. Notwithstanding this, the defendants
appealed to the Department of Justice and the latter reversed the dismissal of the case by the Makati
Provincial Fiscal and ordered the filing of the corresponding information in court. Consequently, a
criminal information was filed against Guevara in the Regional Trial Court of Makati, Metro Manila. The
case was raffled to Branch 61 of the said court and docketed therein as Criminal Case No. 90-3018
entitled "People of the Philippines, Plaintiff, vs. Reynaldo s. Guevara, Accused".

14. Upon the filing of the information, a Warrant of Arrest was issued against Guevara. Guevara posted
the necessary bail bond and the warrant for his arrest was lifted.
15. After Guevara had been arraigned and after he had entered a plea of not guilty, the prosecution
represented by a private prosecutor hired by the defendants, presented its evidence against Guevara.
The principal evidence submitted by the prosecution consists of the sworn testimony of Cometa to the
effect that Guevara had submitted the forged document with the HLURB in connection with HBI's
application for the issuance of a License to Sell the condominium units in the RSG Condominium-
Gueventville II.

16. After the prosecution had rested its case, Guevara filed a Motion to Dismiss on a Demurrer to the
Evidence, contending that all the evidence submitted by the prosecution do not suffice to show that he
had committed the crime for which he has been accused.

17. On March 26, 1992, the Regional Trial Court of Makati issued an order, granting Guevara's Motion
to Dismiss on a Demurrer to the Evidence and ordered the dismissal of the criminal case for falsification
of public documents against him. A copy of the said order is herewith attached and made an integral
part hereof as Annex "A"

18. Based on the evidence presented by the defendants against Guevara in the aforesaid criminal case
and based on the order of the Regional Trial Court of Makati dismissing the case against Guevara, it is
clear that the defendants had maliciously prosecuted Guevara, to his and HBI's embarassment, damage
and prejudice. The criminal case filed by the defendants against Guevara had absolutely no basis in fact
and in law. Quite clearly, defendants had filed the aforesaid case with the sole intent of harassing and
pressuring Guevara, in his capacity as Chairman of GIDC, to give in to their illicit and malicious desire to
appropriate the remaining unsold properties of GIDC and/or to influence the appellate courts to decide
in their favor, their appeal of the lower court's decision in the GIDC case.

The first two requisites are sufficiently alleged in the complaint. We may also take as sufficiently
pleaded the fourth requisite, i.e., malice. As stated in the original decision in this case, a general
averment of malice is sufficient in view of Rule 8, 5 of the Rules of Civil Procedure. Accordingly, the
allegation in par. 18 that petitioners filed the criminal case for the purpose of harassing and pressuring
Guevarra, in his capacity as chairman of Guevent Industrial Development Corporation (GIDC), to give in
to their illicit and malicious desire to appropriate the remaining unsold properties of the corporation,
may be considered sufficient.

The question, however, is whether the third requisite, i.e., that the prosecutor acted without probable
cause, has been sufficiently alleged. To be sure, lack of probable cause is an element separate and
distinct from that of malice. It follows, therefore, that one cannot be held liable in damages for
maliciously instituting a prosecution where he acted with probable cause.

Obviously, a determination that there was no probable cause cannot be made to rest solely on the fact
that the trial court, acting on private respondent Guevarra's demurrer to evidence, dismissed the
criminal prosecution, just as it cannot be made to turn on the fact that the Department of Justice
reversed the fiscal's findings and ordered the criminal case against private respondent Guevarra to be
filed in court. The first would transform all acquittals into veritable countersuits for malicious
prosecution. On the other hand, the second would result in the dismissal of all complaints for malicious
prosecutions.[4]

Accordingly, the inquiry should be whether sufficient facts are alleged showing that in bringing the
criminal action, the defendant in the civil action for malicious prosecution acted without probable cause.
This Court has ruled that for purposes of malicious prosecution, "probable cause" means "such facts and
circumstances as would excite the belief, in a reasonable mind, acting on the facts within the knowledge
of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted."[5] In
this case, even if we consider the allegations in the complaint as true, as well as the order of the trial
court annexed thereto, we do not find the same sufficient to establish the absence of probable cause.

On the contrary, tested by the definition of what constitutes "probable cause," the prosecution evidence
shows probable cause for believing that private respondent Guevarra was indeed responsible for the
forgery of the Letter of Undertaking (Exh. N). As summarized by the trial court in its order of March 26,
1992, the evidence of the prosecution is as follows:

To prove that the subject UNDERTAKING (Exhibit "N") is falsified, the prosecution presented the
testimony of complaining witness REYNALDO COMETA to prove that as President of the STATE
INVESTMENT he did not execute the document of undertaking and thus, the subject document (Exhibit
"N") is falsified and his signature thereat is not his signature. To corroborate the testimony of COMETA,
the NBI handwriting expert LUZVIMINDA C. SABADO, submitted the questioned Documents Report No.
278-688 dated 21 June 1988 to show that the signature above the name of COMETA in the subject
undertaking (Exhibit "N") and the specimen signatures of COMETA WERE not written by one and the
same person (Exhibit "Y").

To prove that accused falsified and/or caused the falsification of the subject undertaking (Exhibit "N"),
the prosecution presented the records of the HOUSING BOARD which include the "Official Form" letter-
application (Exhibit "J") submitted by accused together with the required documents enumerated
therein which supposedly included the undertaking to release mortgage. The testimony of a HOUSING
BOARD official, Ms. Floredeliza Manuel was presented to testify as an official of the HOUSING BOARD
the standard procedure is that the BOARD requires from applicants for authority such as that applied for
by accused, the following requirements were quoted by the prosecution in page 5 of their OPPOSITION
and reproduced hereunder:

Q Can you recall some of the requirements?

A Well, we require a memorandum of agreement between the HLURB, the bank, and a memorandum
of agreement executed by the bank, the developer and the Owner and HLURB. We also require if the
title is clean so we require an affidavit to the effect that it is free from any encumbrances and then we
also require a bank because it is under escrow, so there is a trustee bank because all the money will be
deposited in the bank. And if the property is mortgaged then we require an affidavit of undertaking
from any banking or financing institution or if it is mortgaged with the private person then we also
require an affidavit of undertaking from that person, sir. (TSN, 24 July 1991, pp. 6-7; emphasis added).
Q Now, you said that if the property covered by an application for a license to sell is mortgaged, your
office required the submission of an affidavit of undertaking?

A Yes, sir.

Q If there is no affidavit of undertaking, what action is taken on the application?

A We will not recommend that for approval, sir. (TSN, 24 July 1991, p. 13)

The documentary evidence marked from Exhibits "A" to "EE" is mostly the corporate papers and titles of
the GUEVENT and HONEYCOMB to prove that accused GUEVARRA is an incorporator, stockholder,
director and officer of the said corporations except for Exhibits involving the subject documents to be
segregated in the later findings.

It is true that in dismissing the criminal case against private respondent, the trial court found that "there
is neither direct nor circumstantial evidence to prove that accused is the author of this falsified
document (Exh. N)" and for this reason ordered:

WHEREFORE, premises above considered, for failure of the prosecution to establish a prima facie case
against accused, the MOTION TO DISMISS is hereby GRANTED, and the charge against accused
REYNALDO GUEVARRA for Falsification of Public Documents is hereby DISMISSED without
pronouncement as to costs.

According to the trial court, the circumstantial evidence presented by the prosecution did not add up to
a prima facie case against the accused.[6] It adverted to the fact that the forged Letter of Undertaking
was dated September 9, 1987, while private respondent Guevarra's application, with documents
attached to it, was dated September 3, 1987. In this circumstance, the trial court thought it was not
clear that the accused was responsible for sending the document dated September 9, 1987 and,
therefore, the legal presumption that the possessor of a forged instrument is also the forger did not
apply. Moreover, the trial court noted that the accused, through an affidavit, had represented to the
Housing and Land Use Regulatory Board that the property, subject of the application, was
unencumbered. Hence, there was no need for the accused to submit a letter of undertaking since such
was required only if the property was mortgaged.

For this reason, the trial court ruled that the evidence for the prosecution did not establish "a prima
facie case against accused [private private respondent Reynaldo Guevarra]." However, prima facie
evidence is different from probable cause. Prima facie evidence requires a degree or quantum of proof
greater than probable cause. "[It] denotes evidence which, if unexplained or uncontradicted, is sufficient
to sustain a prosecution or establish the facts, as to counterbalance the presumption of innocence and
warrant the conviction of the accused."[7] On the other hand, probable cause for the filing of an
information merely means "reasonable ground for belief in the existence of facts warranting the
proceedings complained of, or an apparent state of facts found to exist upon reasonable inquiry which
would induce a reasonably intelligent and prudent man to believe that the accused person has
committed the crime."[8] What is needed to bring an action in court is simply probable cause, not prima
facie evidence.[9] In the terminology of the Rules of Criminal Procedure,[10] what is required for
bringing a criminal action is only such evidence as is sufficient to "engender a well founded belief as to
the facts of the commission of a crime and the respondent's probable guilt thereof."

The finding of the trial court in the criminal case does not imply lack of probable cause in bringing the
case. To the contrary, its findings, as shown above, clearly show that petitioners had reasonable ground
to believe that private respondent Guevarra was responsible for the forged Letter of Undertaking (Exh.
N) which was submitted to the HLURB in connection with the application of the Honeycomb Builders Inc.
for a license to sell units at the RSG Condominium Guentville II Subdivision. It is noteworthy that in pars.
6 to 8 of their complaint, private respondents admitted that the properties were mortgaged to
petitioner SITI. A letter of undertaking by the mortgagee was thus needed for the issuance of a license
to sell to HBI.

We, therefore, hold that the complaint in this case fails to state a cause of action against petitioners.

WHEREFORE, petitioners' motion for reconsideration is GRANTED, the decision of the Court of Appeals is
REVERSED, and the complaint against petitioners in Civil Case Q-93-15691 is DISMISSED for failure to
state a cause of action.

SO ORDERED.

5. [1999V854] SULPICIA VENTURA, petitioner, vs. HON. FRANCIS J. MILITANTE, in His Capacity as
Presiding Judge, Regional Trial Court, 7th Judicial District, Branch XII, Cebu City; and JOHN UY,
respondents.1999 Oct 51st DivisionG.R. No. 63145D E C I S I O N

[The case was reraffled to the ponente on August 2, 1999.]

PUNO, J.:

This is a Petition for Certiorari assailing the Order1 [Annex "K" of the Petition, Rollo, p. 36.] of public
respondent directing her to file an Answer to the Complaint for a Sum of Money with Damages filed by
private respondent after denying her Motion to Dismiss.2 [Annex "B" of the Petition, Rollo, p. 16.
Petitioner's Motion for Reconsideration was also denied.]

There is no dispute as to the following relevant facts:

Private respondent filed a Complaint for a Sum of Money and Damages against petitioner which reads:

"REPUBLIC OF THE PHILIPPINES

COURT OF FIRST INSTANCE OF CEBU

14th Judicial District

BRANCH ____

MR. JOHN UY, Proprietor of Cebu Textar Auto Supply, Plaintiff, - versus - CIVIL CASE NO. R-21968
For: SUM OF MONEY AND DAMAGES

ESTATE OF CARLOS NGO as

represented by surviving

spouse Ms. SULPICIA VENTURA,

Defendant.

Oo - - - - - - - - - - - - - - - - - - - - - - - -///

"COMPLAINT

"PLAINTIFF, thru counsel, unto this Honorable Court, most respectfully states that:

"1. He is of legal age, Filipino and proprietor of Cebu Textar Auto Supply whose postal address is at 177
Leon Kilat St., Cebu City, while the defendant is an estate of Carlos Ngo as represented by surviving
spouse Ms. Sulpicia Ventura with residence and postal address at-Back [sic] of Chong Hua Hospital, Cebu
City where summons and other processes of the Court could be effected;

"2. During the lifetime of Carlos Ngo he was indebted with the plaintiff in the amount of P48,889.70 as
evidenced by the hereto attached statement marked as Annexes A and A-1 which account was obtained
by him for the benefit of his family;

"3. Said obligation is already due and demandable and the defendant thru Ms. Ventura who is ostensibly
taking care of the properties/estate of deceased Carlos Ngo, refused, failed and neglected and still
continues to refuse, fail and neglect to pay despite repeated demands;

"4. As a consequence of the refusal to pay the plaintiff was compelled to retain the services of counsel
with whom he contracted to pay P10,000.00 as attorney's fees. Upon institution of this complaint, he
has further incurred initial litigation expenditures in the sum of P4,000.00.

"WHEREFORE, this Honorable Court is most respectfully prayed to render judgment for the plaintiff by-

"1. Ordering the defendant to pay the plaintiff the sum of P48,889.70 plus interest until the obligation is
fully paid;

"2. Ordering the defendant to pay the plaintiff the amount of P10,000.00 as attorney's fees plus
P4,000.00 as reimbursement of the initial litigation expenditures.

"FURTHER plaintiff prays for such other relief or remedy in accordance with law, justice and equity.

"Cebu City, Philippines, March 29, 1982.

"x x x"3 [Annex "A" of the Petition, Rollo, pp. 13-15.]

Petitioner moved to dismiss the foregoing complaint on the ground that "the estate of Carlos Ngo has
no legal personality," the same being "neither a natural nor legal person in contemplation of law"4
[Annex "B" of the Petition, Rollo, p. 16.].

In his Opposition to Motion to Dismiss,5 [Annex "C" of the Petition, Rollo, pp. 17-18.] petitioner insisted
that since "the money claim subject of this case actually represents the costs of automotive spare
parts/replacements contracted by deceased Carlos Ngo during his lifetime for the benefit/business of
the family x x x the conjugal partnership x x x shall be accountable for the payment thereof."6 [Annex
"C" of the Petition, Rollo, p. 17.] Subsequently, private respondent's counsel manifested that he is
poised to "amend the complaint in order to state the correct party defendant that he intends to sue in
this case"7 [Annex "D", Rollo, p. 19.]. The public respondent gave private respondent fifteen (15) days to
make the amendment.

Petitioner filed a Motion for Reconsideration8 [Annex "E" of the Petition, Rollo, pp. 20-22.] of the order
of public respondent permitting private respondent to amend his complaint. First, she argued that the
action instituted by the private respondent to recover P48,889.70, representing the unpaid price of the
automotive spare parts purchased by her deceased husband during his lifetime, is a money claim which,
under Section 21, Rule 3 of the Revised Rules of Court, does not survive, the same having been filed
after Carlos Ngo had already died. Second, she claimed that the public respondent never acquired
jurisdiction over the subject matter of the case which, being an action to recover a sum of money from a
deceased person, may only be heard by a probate court.

Private respondent opposed the foregoing motion.9 [Annex "F" of the Petition, Rollo, pp. 26-27.] He
insisted that petitioner, being the wife of the deceased Carlos Ngo, is liable to pay the obligation which
benefited their family.

Public respondent issued an Order giving private respondent twenty four (24) hours to file his amended
complaint "so that the Court can determine for itself whether there is really a cause of action against the
defendant who would be substituted to the Estate of Carlos Ngo," considering that "it would seem from
the arguments of counsel for plaintiff x x x that the debt incurred by the deceased Carlong [sic] Ngo was
in behalf of the conjugal partnership so that the wife of Carlos Ngo might be liable to pay the
obligation".10 [Annex "G", Rollo, p. 28.]

Private respondent then filed his Amended Complaint11 [Annex "H", Rollo, pp. 29-30.] with the new
allegations underscored therein as follows:

"REPUBLIC OF THE PHILIPPINES

COURT OF FIRST INSTANCE OF CEBU

14th Judicial District

BRANCH XII

MR. JOHN UY, Proprietor of Cebu Textar Auto Supply, Plaintiff,

- versus - CIVIL CASE NO. R-21968

For: SUM OF MONEY AND

MS. SULPICIA VENTURA, DAMAGES

Defendant.

Oo - - - - - - - - - - - - - - - - - - - - - - -x

"AMENDED COMPLAINT

"PLAINTIFF thru counsel, unto this Honorable Court most respectfully states that:

"1. x x x

"2. During the lifetime of Carlos Ngo he and his wife, the defendant herein are indebted with the
plaintiff in the amount of P48,889.70 as evidenced by the hereto attached statement marked as
Annexes A and A-1 which account was obtained for the benefit of their family and is being confirmed by
their son Roy Ngo per his signature marked as Annex "A-2";

"3. x x x

"4. For several times, the defendant had concealed herself in her house when the plaintiff's
representative went to her residence to collect payment of the said account;

"5. x x x

"x x x."12 [Ibid.]

Petitioner filed a Comment to Plaintiff's Amended Complaint.13 [Annex "I", Rollo, pp. 32-33.] She
reiterated that whether the unsecured debt was contracted by her husband alone or as a charge against
the conjugal partnership of gains, it cannot be denied that her husband was now deceased, the said
debt does not survive him, the conjugal partnership of gains is terminated upon the death of one of the
spouses, and the debts and charges against the conjugal partnership of gains may only be paid after an
inventory is made in the appropriate testate or intestate proceeding.

Private respondent filed a Rejoinder to Defendant's Comment.14 [Annex "J", Rollo, pp. 34-35.] He
countered that the defendant in his amended complaint was now petitioner and that she was not
deceased, hence the inapplicability of the legal rules on the abatement of money claims in case the
defendant dies pending their prosecution.

Public respondent issued the herein assailed order which reads as follows:

"ORDER

"This case is called today to deal on the motion for reconsideration of the order of this Court dated
November 16, 1982 denying the motion of the defendant to dismiss the complaint.
"In its order of November 16, 1982, the Court in the interest of justice advised the plaintiff to make the
proper amendment so that the proper party defendant may be impleaded considering that the motion
to dismiss then was anchored on the ground that the estate of Carlos Ngo was not a natural nor juridical
person, hence it could not be sued. On December 23, 1982, the plaintiff amended its complaint and this
time the defendant is already Sulpicia Ventura. The defendant now argues that even the amended
complaint would show that this is really a collection of a debt of the conjugal partnership of deceased
Carlong [sic] Ngo and his wife.

"Perusing the amended complaint, the Court finds that in Paragraph 2 the allegation states: "During the
lifetime of Carlos Ngo, he and his wife, the defendant, are indebted with the plaintiff in the amount of
P48,689.70, (sic) etc.," so that the indebtedness was incurred by Carlos Ngo and defendant Sulpicia
Ventura and since Carlos Ngo is now dead that will not preclude the plaintiff from filing a case against
the living defendant, Sulpicia Ventura.

"WHEREFORE, the motion for reconsideration is hereby DENIED and the defendant may file her answer
within fifteen (15) days from today.

"IT IS SO ORDERED."15 [Annex "K", Rollo, p. 36.]

Petitioner scurried to this Court praying that the foregoing order of the public respondent be set aside
and the amended complaint of private respondent, ordered dismissed.16 [Rollo, p. 12.]

We grant the petition.

First. Sec. 1, Rule 3 of the Revised Rules of Court provided that "only natural or judicial persons, or
entities authorized by law may be parties in a civil action". This was the rule in 1982 at the time that
private respondent filed his complaint against petitioner. In 1997, the rules on civil procedure were
revised, but Sec. 1, Rule 3 remained largely unaltered, except for the change of the word, "judicial" to
"juridical".

Parties may be either plaintiffs or defendants. The plaintiff in an action is the party complaining, and a
proper party plaintiff is essential to confer jurisdiction on the court.17 [59 Am Jur 2d, Sec. 19, p. 407.] In
order to maintain an action in a court of justice, the plaintiff must have an actual legal existence, that is,
he, she or it must be a person in law and possessed of a legal entity as either a natural or an artificial
person, and no suit can be lawfully prosecuted save in the name of such a person.18 [Ibid.]

The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes a
judicial proceeding, to name the proper party defendant to his cause of action.19 [59 Am Jur 2d, Sec. 41,
p. 438.] In a suit or proceeding in personam of an adversary character, the court can acquire no
jurisdiction for the purpose of trial or judgment until a party defendant who actually or legally exists and
is legally capable of being sued, is brought before it.20 [Id., Sec. 42, p. 439.] It has even been held that
the question of the legal personality of a party defendant is a question of substance going to the
jurisdiction of the court and not one of procedure.21 [Ibid.]
The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving spouse
Ms. Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the same on the ground that the
defendant as named in the complaint had no legal personality. We agree.

Neither a dead person nor his estate may be a party plaintiff in a court action. A deceased person does
not have such legal entity as is necessary to bring action so much so that a motion to substitute cannot
lie and should be denied by the court.22 [59 Am Jur 2d, Sec. 20, p. 407, citing Robertson v. Brown, 75 ND
109, 25 NW 2d 781.] An action begun by a decedent's estate cannot be said to have been begun by a
legal person, since an estate is not a legal entity; such an action is a nullity and a motion to amend the
party plaintiff will not likewise lie, there being nothing before the court to amend.23 [Id., p. 408, citing
Estate of Schoeller v. Becker, 33 Conn Supp 79, 360 A2d 905.] Considering that capacity to be sued is a
correlative of the capacity to sue, to the same extent, a decedent does not have the capacity to be sued
and may not be named a party defendant in a court action.24 [59 Am Jur 2d, Sec. 42, p. 440, citing
Bricker v. Borah (5th Dist) 127III App 3d 722, 82 III Dec. 707, 469 NE2d 241; Jacobson v. Union Story
Trust & Sav. Bank (Iowa) 338 NW2d 161; Cromwell v. Ripley, 11 Md App 173, 273 A2d 218; Chandler v.
Dunlop, 311 Mass 1, 39 NE2d 969; Thompson v. Peck, 320 Pa 27, 181 A 597; Gillespie v. Johnson, 157 W
Va 904, 209 SE 2d 143.]

Second. It is clear that the original complaint of private respondent against the estate of Carlos Ngo was
a suit against Carlos Ngo himself who was already dead at the time of the filing of said complaint. At that
time, and this, private respondent admitted, no special proceeding to settle his estate had been filed in
court. As such, the trial court did not acquire jurisdiction over either the deceased Carlos Ngo or his
estate.

To cure this fatal defect, private respondent amended his original complaint. In his amended complaint,
private respondent deleted the estate of Carlos Ngo and named petitioner as the defendant. When
petitioner, in her comment to the amended complaint, reasoned that the conjugal partnership of gains
between her and Carlos Ngo was terminated upon the latter's death and that the debt which he
contracted, assuming it was a charge against the conjugal property, could only be paid after an
inventory is made in the appropriate testate or intestate proceeding, private respondent simply
reiterated his demand that petitioner pay her husband's debt which, he insisted, redounded to the
benefit of everyone in her family.

It is true that amendments to pleadings are liberally allowed in furtherance of justice, in order that every
case may so far as possible be determined on its real facts, and in order to speed the trial of causes or
prevent the circuitry of action and unnecessary expense.25 [Regalado, Florenz D., Remedial Law
Compendium, Volume One, 1997 edition, p. 181, citing Cese v. GSIS, 109 Phil. 306, 309 (1960).] But
amendments cannot be allowed so as to confer jurisdiction upon a court that never acquired it in the
first place.26 [Rosario and Untalan v. Carangdang, et al., 96 Phil. 845 (1955), cited in Campos Rueda
Corporation v. Bautista, 6 SCRA 240, 244 (1962).] When it is evident that the court has no jurisdiction
over the person and the subject matter and that the pleading is so fatally defective as not to be
susceptible of amendment, or that to permit such amendment would radically alter the theory and the
nature of the action, then the court should refuse the amendment of the defective pleading and order
the dismissal of the case.27 [Alvarez, et al. v. Commonwealth of the Phil., et al., 65 Phil. 302, 315-316
(1938).]

Moreover, as correctly argued by petitioner, the conjugal partnership terminates upon the death of
either spouse.28 [Art. 175, Civil Code; Art. 126, Family Code.] After the death of one of the spouses, in
case it is necessary to sell any portion of the conjugal property in order to pay outstanding obligations of
the partnership, such sale must be made in the manner and with the formalities established by the Rules
of Court for the sale of the property of deceased persons.29 [Tolentino, Arturo M., Commentaries and
Jurisprudence on the Civil Code of the Philippines, Volume One with the Family Code of the Philippines,
1990 edition, p. 463.] Where a complaint is brought against the surviving spouse for the recovery of an
indebtedness chargeable against said conjugal property, any judgment obtained thereby is void.30
[Francisco, Vicente J., The Revised Rules of Court in the Philippines, Special Proceedings, Volume V-B,
1970 edition, p. 182, citing Calma v. Tanedo, 66 Phil. 594, 598 (1938).] The proper action should be in
the form of a claim to be filed in the testate or intestate proceedings of the deceased spouse.31
[Tolentino, supra.]

In many cases as in the instant one, even after the death of one of the spouses, there is no liquidation of
the conjugal partnership. This does not mean, however, that the conjugal partnership continues.32 [Id.,
p. 466.]And private respondent cannot be said to have no remedy. Under Sec. 6, Rule 78 of the Revised
Rules of Court, he may apply in court for letters of administration in his capacity as a principal creditor of
the deceased Carlos Ngo if after thirty (30) days from his death, petitioner failed to apply for
administration or request that administration be granted to some other person.

WHEREFORE, the instant petition for certiorari is GRANTED. The Amended Complaint filed by private
respondent is HEREBY DISMISSED.

SO ORDERED.

6. [1999V483] ESTER JANE VIRGINIA F. ALMORA and ALBERT F. ALMORA, petitioners, vs. HON.
COURT OF APPEALS, ORLANDO PERALTA and RUDY PERALTA, respondents.1999 Jul 23rd
DivisionG.R. No. 116151D E C I S I O N

GONZAGA-REYES, J.:

Before us for review on certiorari is the decision of respondent Court of Appeals in CA G.R. CV No.
28239, promulgated on June 6, 1994,1 [Penned by Justice Ramon Mabutas, Jr., with the concurrence of
Justices Arturo B. Buena and Jainal D. Rasul.] which reversed the decision of the court a quo2 [Civil Case
No. 533-R, Regional Trial Court of Baguio City, Branch 6, presided over by Judge Ruben C. Ayson.] and
dismissed the complaint in an accion publiciana with damages filed by herein petitioners.

Briefly, the antecedents of the case are:

On February 13, 1985, petitioners filed a complaint against private respondents Orlando Peralta and
Rudy Peralta with the Regional Trial Court in Baguio City. In their complaint, petitioners sought the
recovery of possession of a parcel of land located in Abatan, Buguias, Benguet, with an area of about
830 square meters, which was occupied by herein private respondents.3 [Rollo, 51.] As found by the
lower court, the disputed property is public land, such being a part of the Mount Data National
Reservation Park, over which Ben Almora, the late father of petitioners, was granted an occupancy
permit by the Bureau of Forestry, and over which Ben Almora and petitioners herein have consistently
paid real property taxes since the propertys declaration in 1945 until 1987.4 [Ibid., 11, 52.]

As borne out by the evidence of plaintiffs-petitioners in the lower court, the land covered by the
occupancy permit was subsequently divided into two lots, the southern portion of which was
denominated as Lot A with an area of one hectare, and the northern portion of which was called Lot B,
with an area of four hectares.5 [Ibid., 8. Office of the President Decision No. 1039, s. 1974 (see
subsequent discussion) discloses that Ben Almora "filed an application for a special use permit of Lots A
and B, which was granted under Permit No. 9143-F. In 1932, the permit was cancelled for the reason
that the land is needed for forest protection purposes. In 1935, Almora was granted Private Camp
Permit No. Cs-28-J for Lot A only with an area of 5,305 square meters. This permit, which expired in the
same year (1935), was renewed under Pc-53 in 1948, covering the same lot (Lot A). Almora was never
again permitted to occupy Lot B."] It is not controverted that on May 30, 1958, Ben Almora leased the
disputed property and the building situated thereon in favor of Federico Peralta, the now deceased
father of private respondents, as evidenced by a Contract of Lease, in which Ben Almora represented
himself to be the "true and lawful owner" of the leased property,6 [Ibid., 8-10.] and in which Federico
Peralta acknowledged the said true and lawful ownership of Ben Almora.7 [Ibid.] The Contract of Lease
likewise contained a stipulation that if the lessee faithfully and continuously pays the monthly rentals for
a period of three years, he will become the lawful and exclusive owner of the building subject of the
lease, but excluding the lot which shall continue to be rented thereafter.8 [Ibid.]

As presented in evidence by petitioners, Federico Peralta failed to pay the rentals as they fell due, thus
prompting Ben Almora to file a case for unlawful detainer and recovery of unpaid rentals against Peralta
with the Municipal Trial Court of Buguias, Benguet. The MTC ruled in favor of Almora, ordering Peralta
to vacate the premises of the leased property and to pay the arrears in rentals. The MTC decision was
affirmed by the defunct Court of First Instance of Baguio and Benguet on December 29, 1972, which
decision on appeal became final and executory, no appeal having been interposed to the Court of
Appeals or Supreme Court.9 [Ibid., 10.]

Inspite of said decision, the Peraltas refused to vacate the premises of the disputed property; rather,
they continued to occupy it even when the house of Federico Peralta standing thereon was burned
down on January 14, 1971. When Federico Peralta died, his three children, namely, Orlando, Rodolfo
and Milagros, built their respective houses on the lot and continued to occupy the same. Before his
death, Ben Almora sold the land in question, covered by and forming part of the property declared
under Tax Declaration No. 9577, together with his other lands, to his children, petitioners herein,
through a Deed of Sale of Unregistered Lands dated August 1, 1981.10 [Ibid.]

Private respondents did not dispute the fact of the lease between Ben Almora and their father, Federico
Peralta, but contended that their father, along with the other lessees of Lots A and B, ceased to pay
rentals upon learning that Ben Almora had no title to the lands he was leasing out, but was merely
issued an occupancy permit by the Bureau of Forestry.11 [Ibid., 10-11.] They also pointed out that the
permit granted to Ben Almora embodied specific restrictions against the alienation or subletting of the
subject property.12 [Ibid., 11.] On August 12, 1959, after refusing to pay rentals, Federico Peralta filed a
Miscellaneous Sales Application of his own with the Bureau of Lands, over the portion of Lot A that he
was occupying. The other lessees followed suit.13 [Ibid.]

These conflicting claims to occupy and use the disputed lots reached the Secretary of Agriculture and
Natural Resources (SANR) and the Office of the President for resolution. Per Decision No. 1039 dated
July 18, 1974, series of 1974, the Office of the President decided in favor of Federico Peralta and the
other lessees-applicants, upholding their right to also file applications for permits to occupy and use the
respective portions occupied by them as against the claim of Ben Almora that he already owned the said
properties by virtue of prescription, and directing that Almora and all the occupants of the land be
allowed to continue their occupation thereof upon the issuance of occupancy permits by the Bureau of
Forest Development.14 [Ibid., 12; Office of the President Decision No. 1039, s. 1974, 4.]

On April 30, 1990, the Regional Trial Court in Baguio City rendered a decision in favor of plaintiffs,
petitioners herein, in Civil Case No. 533-R ordering private respondents to vacate the premises of the
property and to restore the possession thereof to petitioners, on the basis of Ben Almoras and
plaintiffs actual physical possession and occupation of the property prior to defendants and the latters
predecessor-in-interest, Federico Peralta. In upholding plaintiffs-petitioners claim, the court a quo
stated:

"Plaintiffs and their predecessor-in-interest Ben Almora entered, occupied, improved and possessed the
land in question way back in 1945 whereas defendants and their predecessor-in-interest Federico
Peralta took possession of the land in question only by May 30, 1958 when Federico Peralta leased the
same from Ben Almora. The prior possession of plaintiffs and their predecessor-in-interest Ben Almora,
therefore, antedates that of defendants by about 13 years. More, defendants entry and possession of
the land in question was by virtue of a lease from plaintiffs and therefore cannot be said even as adverse
possession at the inception. A lessee clearly cannot deny the ownership of his lessor (Tui vs. CA, 37 SCRA
99)."15 [Ibid., 13.]

The RTC went on to stress that its decision is focused solely on the issue of who has prior possession of
the land in question, and does not, nor is it meant to, impede on the jurisdiction of the Director of Lands
to alienate, sell or dispose of public lands, such as the one in dispute, under the provisions of
Commonwealth Act No. 141, or the Public Land Act, as amended.16 Ibid., 15.] It further held, citing
Pitargue vs. Sorilla17 [92 Phil. 5.17] and Reynoso vs. Court of Appeals18 [170 SCRA 546.], that the fact
that the Bureau of Lands has jurisdiction to alienate and dispose of public lands does not deprive regular
courts, particularly the RTC, of the jurisdiction to determine who is in actual prior possession for the
purpose of preventing breaches of the peace and disorder, and the same is not considered as interfering
with the function of the Bureau of Lands.19 [Rollo, 14-15.]

The Court of Appeals reversed the decision of the RTC, instead giving credence to the following
arguments of defendants, private respondents herein:
1. Plaintiffs failed to establish their claim that they and their predecessor-in-interest are the lawful and
absolute owners of the disputed land, in the light of the clear finding of the lower court and of the Office
of the President that Ben Almora was merely granted an occupancy permit thereon, which permit "does
not confer upon the permittee any right of alienation."20 [Ibid., 19-20.]

The Court of Appeals also upheld the argument of private respondents that "considering xxx that
(Federico Peralta) was prohibited to lease or alienate the same, it follows that he was guilty of bad faith
in representing himself as the owner of the said land, and naturally as a necessary consequence, the said
contract of lease can only be viewed as nothing but a null and void instrument from the beginning and
without force and effect whatsoever insofar as the land is concerned. As a further consequence, the said
deed of sale executed by Ben Almora in favor of the plaintiffs is likewise a nullity and without force and
effect insofar as Lots A and B are concerned for the same reason that Ben Almora was not the real
owner thereof xxx ."21 [Ibid., 20.]

2. The question of prior possession has already been resolved in the unlawful detainer case filed by Ben
Almora against Federico Peralta in October 1960, which was decided in favor of Almora, and which
decision was affirmed on appeal by the then Court of First Instance of Baguio and Benguet in Civil Case
No. 1783, on December 29, 1972. As argued by private respondents, the decision in the earlier case
would have been sufficient to oust the Peraltas from possession of the land had the said decision been
implemented by way of a writ of execution within the prescribed period of five years from the date of its
finality.22 [Ibid., 24-25; Sec. 6, Rule 39, Rules of Court.] However, Ben Almora did not avail of his right to
have the decision executed accordingly; neither did he seek to have the judgment revived within the
next five years following the lapse of the first five years.23 [Ibid., Id.] Resultantly, the claim is deemed to
have been abandoned and Ben Almoras successors-in-interest cannot be allowed to recover the
property through this belated accion publiciana for the reason that such is barred by res judicata.

Private respondents further argued that the issue of lawful possession was likewise put to rest by the
Decision of the Office of the President, which declared that

" xxx the only just and equitable solution to this case is to allow (Ben) Almora and his brother and all the
occupants of Lots A and B to continue their respective occupation of the same upon the issuance of the
necessary permits by the Bureau of Forest Development. xxx

xxx Ben Almora and his brother Galap Almora and the appelllants Cobcobo, Aquisio, Mangali, Garcia,
(Federico) Peralta and Basilio and the Benguet Development Co., Inc. are hereby ordered to file their
respective applications for the necessary permits for the use or occupation of the lots on which their
houses or improvements are situated."24 [Decision of the Office of the President No. 1039, s. 1974, 4-5.]

3. Plaintiffs-petitioners are guilty of forum-shopping, for instituting numerous actions in various courts
to recover possession of the disputed property. In addition to the unlawful detainer case above-
discussed which Ben Almora and plaintiffs failed to have executed, it was also Ben Almora who filed the
petition with the Director of Forestry seeking the ejectment of Federico Peralta and the other lessees of
the land in question, which petition triggered a thorough investigation that finally culminated in the
Decision of the Office of the President No. 1039, s. 1974, rendered on July 15, 1974, and which has since
become final and executory.25 [Rollo, 26.] Yet another action was filed by Ben Almora in the Municipal
Trial Court of Atok-Buguias, Benguet, entitled Ben Almora vs. Federico Peralta, Rudy Peralta, et. al., for
forcible entry and unlawful detainer with preliminary prohibition and mandatory injunction.26 [Ibid.]
The complaint was dismissed in an Order of Dismissal dated February 11, 1978, which order Ben Almora
questioned on appeal to the Court of First Instance of Baguio and Benguet as Civil Case No. 378. The CFI,
in turn, rendered a decision on April 18, 1979, affirming in toto the Order of Dismissal of the MTC.27
[Ibid.] It is the contention of herein private respondents that the case at bar, an accion publiciana
instituted 27 years since the execution of the lease contract in 1958, and involving substantially the
same parties, seeks to recover possession over the disputed property on the basis of the same claim of
ownership and right of possession as has been asserted and ruled upon in the above-adverted cases.

In its decision, the Court of Appeals also took note of the fact that petitioners herein failed to file their
appellees brief in the said Court within the prescribed period, a matter which the CA treated as "(giving)
rise to a presumption that the appellants brief bore the torch of truth --- and therefore should be given
full faith and credence". The Court pointed out that this rule "rests on the universal principle of human
conduct which leads us to repel an unfounded imputation of claim (Wheat vs. Croom, 7 Ala. 349)" and
that "such principle (on tacit admission) also stands aloft under the canopy of Section 32, Rule 130 of
the New Rules on Evidence."28 [Ibid., 18.]

In this petition for review on certiorari, petitioners raise the following grounds:

"1. The Hon. Court of Appeals seriously erred in not considering the evidence as to the ownership and
lawful possession of petitioners predecessor-in-interest over the land in controversy;

2. The Hon. Court of Appeals committed a serious error in disregarding the uncontroverted evidence of
the petitioners and taking as gospel truth all the arguments and misrepresentations of the private
respondents herein; and

3. The Hon. Court of Appeals failed to consider in the rendition of its decision the evidence and the law
applicable on the matter.

In the course of this appeal, private respondents brought up several procedural matters which we
summarize as follows: (1) the petition was filed out of time, resulting in this Courts failure to acquire
jurisdiction and take cognizance of the appeal;29 [Ibid., 76; Comment of Private Respondents, 2, citing
Gutierrez vs. Court of Appeals, G.R. No. L-25972, November 26, 1968; Roman Catholic Bishop of
Tuguegarao vs. Director of Lands, 34 Phil. 623; Estateof Cordova vs. Albado, 34 Phil. 920; Miranda vs.
Guanzon, 92 Phil. 168.] (2) no motion for reconsideration was filed in the Court of Appeals, thus
depriving the said court of an opportunity to correct any errors as it may have made;30 [Ibid.] and (3)
the petition raises questions of fact which are not the proper subject of review in a petition for review
under Rule 45.

The records bear that the decision of the Court of Appeals was received by petitioners on June 14, 1994,
and that on June 29, 1994, petitioners filed a motion for extension of time with this Court, praying for an
additional 15 days within which to file a petition for review.31 [Ibid.] Inasmuch as this Petition was filed
by registered mail on July 13, 1994, We find that the petition was filed with this Court in due time.

Private respondents next contend that this Petition should not be given due course for failure of
petitioners to file a motion for reconsideration of the decision of the Court of Appeals, thus depriving
respondent court of the opportunity to correct on reconsideration such errors as it may have
committed.32 [Ibid.] Rule 45, Section 1 of the Rules of Court, however, distinctly provides that

"A party may appeal by certiorari from a judgment of the Court of Appeals, by filing with the Supreme
Court a petition for certiorari within fifteen (15) days from notice of judgment, or of the denial of his
motion for reconsideration filed in due time."

The conjunctive "or" clearly indicates that the 15-day reglementary period for the filing of a petition for
certiorari under Rule 45 commences either from notice of the questioned judgment or from notice of
denial of the appellants motion for reconsideration.33 [In Refugia vs. Court of Appeals, 258 SCRA 347, if
a motion for reconsideration is filed during the 15-day reglementary period, the losing party has only the
remaining period within which to file a petition for review.] A prior motion for reconsideration is not
indispensable for a petition for review on certiorari under Rule 45 to prosper. The reliance of private
respondents in the cases cited in their Comment34 [Rollo, 76; Confederation of Citizens Labor Union
(CCLU) vs. NLRC, 60 SCRA 450; Sy It vs. Tiangco, 4 SCRA 436; Del Pilar Transit, Inc. vs. Public Service
Commission, 31 SCRA 372.] is unfounded, for all of these cases addressed petitions for certiorari
grounded on grave abuse of discretion, or what is now known as special civil action of certiorari under
Rule 65 of the Rules of Court. For such action to commence, the Rules require that the petitioner be left
with "no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law."35 [Sec. 1,
Rule 65, Rules of Court.] A motion for reconsideration of an assailed decision is deemed a plain and
adequate remedy provided by law.36 [Solis vs. National Labor Relations Commission, 263 SCRA 629.]

Where, under Rule 45, certiorari is resorted to as a mode of appeal, the indispensability of a motion for
reconsideration is negated, and the party aggrieved may validly file a petition for review on certiorari
with the Supreme Court within 15 days from notice of judgment of the Court of Appeals.

Thirdly, in their assignment of errors, petitioners would have us appreciate and rule upon evidence of
ownership and lawful possession of their predecessor-in-interest over the land in question which,
allegedly, was disregarded by respondent court in the rendition of its decision. In other words,
petitioners seek to involve us in a re-evaluation of the factual veracity and probative value of the
evidence they submitted in the lower court, contrary to the dictates of Rule 45 that only questions of
law may be raised and resolved on petition.37 [Sec. 2(2), Rule 45, Rules of Court; Engineering and
Machinery Corporation vs. Court of Appeals, 252 SCRA 156.] Absent any whimsical or capricious exercise
of judgment, and unless the lack of any basis for the conclusions made by the lower courts be amply
demonstrated, the Supreme Court will not disturb such factual findings.38 [Taedo vs. Court of Appeals,
252 SCRA 80.]

Be that as it may, We do not feel precluded from expressing our displeasure at petitioners action in
raising for our review these questions of fact and charging respondent court of misappreciating the
evidence in the light of their failure to file an appellees brief with respondent court, which brief would
have been the proper vehicle for presenting petitioners arguments. Neither did petitioners file a motion
for reconsideration before assailing the decision of the respondent court on certiorari, a fact which,
while not detrimental to this Petitions being given due course, is gravely indicative of petitioners
disinterest in pursuing its case in the Court of Appeals, and of availing of all the remedies accorded them
by law. For the alleged failure of respondent court to accord petitioners their desired relief, petitioners
have only themselves to blame.

Having set aside these procedural issues, We proceed to evaluate the merits of this Petition.

Petitioners would have us reverse the decision of respondent court and affirm the ruling of the RTC of
Baguio City, i.e., to restore possession of the property to plaintiffs-petitioners on the basis of prior
possession thereof, and pending the Bureau of Lands determination as to who among the various
applicants is entitled to the land.

It is not controverted that the possession of plaintiffs-petitioners antedated that of private respondents
by 13 years, their predecessor-in-interest, Ben Almora, having entered the land in question in 1945
while Federico Peralta leased the land from Ben Almora only in 1958.

This leads us to the question: Do private respondents hold a better right of possession over the property
than petitioners, who had prior possession thereof?

We hold in the affirmative. A perusal of the entire records of the case shows that Federico Peralta was
granted an occupancy permit over the disputed property by the Bureau of Forestry. In the Order
denying Ben Almoras motion for reconsideration of Decision No. 1039, s. 1974, supra, the Office of the
President declared:

"But even assuming that the motion for reconsideration of Almora was filed within the reglamentary
period, this Office still finds no compelling reason to disturb its decision. As regards the claim of Almora
that he has acquired ownership over the disputed lots by virtue of his alleged possession thereof for
more than thirty years, this Office maintains that in order to acquire a land by acquisitive prescription
the possession and occupation must be in the concept of owner: open, continuous, exclusive and
notorious. (Molina vs. De Bacud, L-20195, April 27, 1967, 19 SCRA 1956)

The possession of the Almoras of the contested lots was not exclusive and was in fact interrupted by the
adverse possessions of the other claimants who were similarly granted occupancy permits by the Bureau
of forestry (now Bureau of Forest Development). mphasis supplied)

In view of the foregoing, the instant motion for reconsideration is hereby denied."39 [Records of the
Case, 45-46.]

The granting of the occupancy permits was raised in the Answer dated June 3, 198540 [Ibid., 19.] and
Memorandum dated August 15, 1985,41 [Ibid., 41-44; Memorandum (in support of motion to dismiss
incident to preliminary hearing on the affirmative defenses), 1-4.] respectively, of defendants-private
respondents filed in the RTC of Baguio City, and was not denied by plaintiffs-petitioners in their Reply
dated June 21, 1985,42 [Ibid., 25.42] also filed in the aforecited court, which acknowledged the granting
of such permits but alleged that the same was done in unlawful collaboration with officers of the Bureau
of Forest Development. Such granting of permits was also mentioned in the Decision of the RTC of
Baguio City,43 [Rollo, 52.] and in the Decision of the Court of Appeals.44 [Ibid., 8.]

The issuance of an occupancy permit to Federico Peralta as a claimant in the administrative case vested
upon him and private respondents, as his successors-in-interest, possessory rights over the land in
dispute to the exclusion of all others, except the State and such persons as may hold legal and equitable
title under law. Such issuance also resulted in the dispossession of petitioners and the tacit cancellation
of petitioners permit over the same land, to the extent of the property covered by the permit issued to
Peralta, as the fact of possession cannot be recognized at the same time in two different persons.45
[Art. 538, Civil Code.]

It is also not disputed that Federico Peralta filed a Miscellaneous Sales Application over the disputed
property upon learning that such land, as he was then leasing from Ben Almora, was not owned by
Almora. This Court has, time and again, recognized the possessory rights of a sales applicant over a
public land before the approval of his application.46 [See Pitargue vs. Sorilla, 92 Phil. 5; Lequigan vs.
Katalbas, 105 Phil. 645; Reynoso vs. Court of Appeals, 170 SCRA 546.] In Reynoso vs. Court of Appeals,
170 SCRA 546, citing Pitargue vs. Sorilla, 92 Phil. 5, We held that-

" xxx even pending the investigation of, and resolution on, an application by a bona fide occupant, xxx
by the priority of (the occupants) application and record of his entry, he acquires a right to the
possession of the public land he applied for against any other public land applicant, which right may be
protected by the possessory action of forcible entry or by any other suitable remedy that our rules
provide."

As the present possessors of the property, by virtue of a permit to ocupy granted by the governmental
authority vested with the power to issue the same, prior to the perfection of a sales application over the
same property, private respondents possessory rights are preferred over anyone elses, and clearly
surpass the claim of petitioners of prior possession, which has long since terminated.

Neither may we accord credence to petitioners claim of ownership of the disputed land. Petitioners
source this claim of ownership from Executive Order No. 180, dated May 10, 1956, and Executive Order
No. 87, series of 1967, which grant to all Igorot vegetable farmers occupying farm lots within the Mount
Data National Park Reservation and Central Cordillera Forest Reserve an opportunity to acquire the lots
they are cultivating. Under the provisions of said Executive Orders, all interested and qualified persons
shall file applications for grant of title in accordance with the Public Land Act and subject to the approval
of a screening committee composed of government representatives.47 [See Executive Order No. 180, s.
1956; Secs. 1-3, Executive Order No. 87, s. 1967.]

Firstly, recovery upon claim of ownership has no place in an accion publiciana. Where the object of the
parties is to recover dominion over the property as owner, the appropriate action to file is an accion
reinvindicatoria, and not a plenary action to recover possession as the case herein, which involves
restitution of possession only, when the cause of dispossession is not among those covered by the
grounds for forcible entry and unlawful detainer, or when possession has been lost for more than one
year and can no longer be maintained under Rule 70 of the Rules of Court.48 [Del Rosario vs. Celosia, 26
Phil. 404; Sec. 1, Rule 70, Rules of Court.]

Secondly, and granting arguendo that this Court may lawfully pass upon the issue of ownership, there is
no indication in the records that Ben Almora or petitioners filed the necessary application for grant of
title over the disputed land. Plaintiffs-petitioners cannot possibly rely on acquisitive prescription as the
means by which they obtained ownership over the land,49 [Under the provisions of Sec. 48(b) of
Commonwealth Act No. 141, as amended, or the Public Land Act, public agricultural lands may be
acquired through open, continuous, exclusive and notorious possession and occupation under a bona
fide claim of acquisition of ownership.] as the Executive Orders clearly lay down a procedure for
application for, and award of title to, properties in the Mount Data National Reservation Park.

IN VIEW OF THE FOREGOING, the Petition is DENIED and the Decision of the Court of Appeals dismissing
the Complaint in Civil No. 533-R is hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

7. [1999V899] ALEXANDER G. ASUNCION, petitioner, vs. EDUARDO B. EVANGELISTA and COURT

OF APPEALS, respondents.1999 Oct 131st DivisionG.R. No. 133491D E C I S I O N

PUNO, J.:

This is a petition for review of the Decision of the respondent Court of Appeals1 [CA-G.R. CV No. 49743.]
rescinding the Memorandum of Agreement of the parties and assessing against the petitioner damages
in the amount of P32,644,420.55.

These are the relevant facts.

Since 1970, private respondent has been operating a piggery on his landholdings in Barangay Loma de
Gato, Marilao, Bulacan.2 [TSN dated July 24, 1987, p. 6.] Until 1980, he operated the piggery under the
trade name Embassy Farms as a single proprietorship.3 [Id., p. 14.] In October 1981, private respondent,
his wife, Epifania C. Evangelista, and three (3) others, namely, Angel L. Santos, Jr., Amando C. Martin and
Teofilo J. Mesina, organized Embassy Farms, Inc. and registered it with the Securities and Exchange
Commission.4 [Ibid., Articles of Incorporation of Embassy Farms, Inc. marked as Exh. "A" for Plaintiff and
as Exh. "4-A" for Defendant.]

Private respondent was the majority stockholder of the corporation, with ninety percent (90%) of the
shares in his name. He also served as its president and chief executive officer. Its principal office was
established at the piggery facility that had been existing on the landholdings of private respondent in
Barangay Loma de Gato, Marilao, Bulacan, consisting of about 104,447 sq. m.5 [Articles of
Incorporation, supra.]

On September 9, 1980, private respondent borrowed five hundred thousand pesos (P500,000.00) from
Paluwagan ng Bayan Savings and Loan Association to use as working capital for Embassy Farms. He
executed a real estate mortgage on three of his properties in Barangay Loma de Gato, Marilao, Bulacan
as security for the loan.6 [Real Estate Mortgage marked as Exh. "18".]

On November 4, 1981, private respondent mortgaged ten (10) titles more in favor of PAIC Savings and
Mortgage Bank, formerly First Summa Savings and Mortgage Bank, as security for a loan he obtained
from it in the amount of one million seven hundred twelve thousand pesos (P1,712,000.00).7 [Mortgage
marked as Exh. "16".]

On February 16, 1982, private respondent obtained another loan in the amount of eight hundred forty
four thousand six hundred twenty five and seventy eight centavos (P844,625.78) from Mercator Finance
Corporation. The loan was secured by a real estate mortgage8 [Mortgage marked as Exh. "17".] on five
(5) other landholdings of private respondent, all situated in Bulacan. Private respondent obtained these
personal loans to provide himself working capital to run the farm and sustain its operations. His
aggregate debt exposure totaled three million fifty six thousand six hundred twenty five and seventy
eight centavos (P3,056,625.78).

Private respondent defaulted in his loan payments. Of the PAIC loan that should have been paid on an
equal quarterly amortization basis for three (3) years from October 31, 1981, eight (8) quarterly
amortizations totaling one million five hundred one thousand nine hundred eighty eight and eight
centavos (P1,501,988.08) fell due by January 12, 1984. Against this overdue amount, only two hundred
eighty thousand seven hundred forty eight and fifty one centavos (P280,748.51) was remitted by private
respondent.9 [Letter dated September 12, 1984 signed by Emily R. Varua, Senior Vice President,
Marketing Group, PAIC Savings & Mortgage Bank marked as Annex "H".]

By June 1984, private respondent's aggregate debt had ballooned to almost six million pesos
(P6,000,000.00)10 [The exact amount of P5,998,955.65 can be found on page 2 of the Memorandum of
Agreement, marked as Exh. "15" for Defendant and as Exh. "C" for Plaintiff. This was confirmed by
private respondent during the direct examination conducted by his counsel in this wise:

"Q........I will call your attention to the second whereas clause of the Memorandum of Agreement x x x
which reads: 'Whereas, Eduardo Evangelista has personal loans with the institution herein below
enumerated, correspondingly, with the amount of indebtedness inclusive of interest up to June 30, 1984
and the total of which is P5,998,955.65.' Was that your indebtedness with these financial institutions x x
x?

"A........Yes, sir as far as I can remember that was the correct figure." (TSN dated July 24, 1987, p. 7)] in
overdue principal payments, interests, penalties and other financial charges.

On August 2, 1984, petitioner and private respondent executed a Memorandum of Agreement

containing the following terms and conditions:

"MEMORANDUM OF AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

"This Memorandum of Agreement made and executed this ___ day of July, 1984, here in _______,
Metro Manila, by and between -

"ALEXANDER G. ASUNCION, of legal age, Filipino, married to Perlita Asuncion, and resident of No. 7 A.
Lake Street, San Juan, Metro Manila, hereinafter referred to as AGA;

"- and -

"EDUARDO B. EVANGELISTA, of legal age, Filipino, married to Epifania C. Evangelista, and resident of No.
113 R. Terona Street, BF Homes, Paranaque, Metro Manila, hereinafter referred to as EBE.

"WITNESSETH:

"WHEREAS, EBE is the registered and absolute owner of nineteen (19) parcels of agricultural lands with
an aggregate area of 104,447 square meters more or less, all situated in LOMA DE GATO, Marilao,
Bulacan, hereinbelow enumerated by the covering certificates of title and the corresponding area as
follows:

"x x x

"WHEREAS, EBE is likewise the controlling interest of 90% to 100% of the paid-in equity of EMBASSY
FARMS, INC., which corporation is the registered owner of a piggery, situated in the above enumerated
real properties, with stocks, equipment and facilities as shown in the inventory thereof as of July 4,
1984, hereto attached as Schedule "A" and made an integral part hereof;

"WHEREAS, EBE has personal loans with the institutions herein below enumerated correspondingly with
the amount of indebtedness, inclusive of interest, up to June 30, 1984:

"a) PAIC BANK . . . . . . . . P2,758,968.49

"b) PALUWAGAN SAVINGS BANK

...1. CB-IBRD .......- P558,110.44

...2. Comm'l loan ...- P835,863.76

1,393,974.20

"c) MERCATOR FINANCE CORP. 1,846,012.96

TOTAL P5,998,955.65

"WHEREAS, EBE has offered to AGA and the latter has accepted the transfer to him by EBE, of the whole
of EBE's controlling interest in EMBASSY FARMS, INC. as well as all of his above enumerated parcels of
real property together with any and all improvements thereon subject to the following terms and
conditions:

"NOW, THEREFORE, for and in consideration of the foregoing, the parties herein agree as follows:
"1) That EBE hereby cedes, transfers and conveys unto AGA all of his above enumerated parcels of real
property together with any and all improvements thereon, and in connection with such transfer, hereby
undertakes to execute, sign and deliver any and all documents appropriate for the same, either in favor
of AGA or his nominees;

"2) That EBE hereby likewise cedes, transfers and conveys in a manner absolute and irrevocable any and
all of his shares [of] stocks in the aforesaid EMBASSY FARMS, INC., outstanding [in] his name in the
books of incorporation, as well as any and all rights, interests and participation in the said corporation
by reason of such shares [of] stocks or otherwise, EBE shall, within a reasonable time, from signing
hereof, cause to be so transferred to AGA or his nominee such shares of stocks in said corporation as are
held on record by 3rd parties, until the total of such shares so transferred shall constitute 90% of the
paid-in equity of said corporation;

"3) That upon signing hereof, AGA shall pay EBE the sum of P1,000,000.00 and the further amount of
P500,000.00 within a period of 90 days from and after such signing;

"4) That AGA shall upon signing hereof, make available, as and for operating expenses of the farm or
piggery the sum of P300,000.00 to be followed by amount of P300,000.00 within 30 days from such
signing and 60 days thereafter, the amount of P150,000.00;

"5) AGA shall assume all of the aforestated obligations of EBE with the institution aforementioned and in
connection therewith, he shall make available for payment to PALUWAGAN SAVINGS BANK, upon
signing of this 'MEMORANDUM OF AGREEMENT', the amount of P100,000.00, representing 50% of the
amount required by the said bank for the restructuring of the aforestated loan of EBE therewith;

"6) That also upon signing of these presents, AGA shall make available for payment to MERCATOR
FINANCE CORPORATION the amount of P100,000.00 representing 50% of the amount required by the
latter for restructuring of the aforesaid obligation to it of EBE;

"7) That upon signing of this agreement, EBE shall make available for payment to PALUWAGAN SAVINGS
BANK the amount of P100,000.00 and the same amount to MERCATOR FINANCE CORPORATION
corresponding to the other halves of the aforestated amount called for by the said institution in the
preceding paragraphs 5 and 6 hereof;

"8) That upon signing hereof, EBE shall cause the turn-over to AGA of the effective control and
management of the aforesaid piggery, from EMBASSY FARMS, over which EBE hereby warrants to have
effective control up to and until such turnover to AGA;

"9) EBE hereby warrants not only free and marketable titles to the shares (of) stock of EMBASSY FARMS,
INC. that he transfers hereby but also effective control, amounting to ownership of the other shares of
stock of such corporation which are outstanding in the books of said corporation in the name of 3rd
parties, which shares of stock he could always dispose of therefore [sic] any time and in any manner he
may deem proper;
"10) EBE shall secure supplier's credit and feed ingredients, veterinary supplies, etc. up to P500,000.00
and over a period of three (3) months in order to be able to augment the effective operation of the
farm;

"11) Within 90 days from signing of this agreement, AGA shall make available for the farm P250,000.00,
payable to him within one year from and after the grant of the same, with stated interest of 24% per
annum, the proceeds of which to be utilized exclusively for the operation of the farm;

"12) That within a reasonable time from signing of this agreement, AGA shall organize and register a
corporation (thereafter referred to as new corporation) with authorized capital stock of exactly
P10,000,000.00 with P1,000,000.00 worth of paid-in shares of stock thereof, to be allocated or assigned
to EBE [sic] said corporation shall, upon its registration take over all the rights and liabilities of AGA
hereunder saving the one stipulated in paragraph no. ___ hereof;

"13) On or before November 1984, AGA shall pay EBE P144,941.88 plus interest at 24% per annum in
payment of the feed ingredients, mixed feeds and veterinary supplies mentioned in Schedule "A" which
EBE makes available to aforesaid piggery. He shall likewise reimburse to EBE on or before January 1985,
the amount of P200,000.00 with interest at 24% per annum representing advances of the latter to
PALUWAGAN SAVINGS BANK and MERCATOR FINANCE CORPORATION pursuant to paragraph 7 above;

"14) That in connection with the aforesaid P1,000,000.00 worth of shares [of] stock in the new
corporation, stipulated above to be allocated or assigned to EBE, the parties hereby agree that within
eighteen (18) months from and after such assignment or allotment, AGA shall acquire, at par, from EBE
50% thereof, with reservation to acquire the other 50% within a period of 30 months after such
allotment, with premium of 50% of par value, if the commitments or targets mentioned in paragraph 17
herein shall have been met;

"15) That for the operation of the farm or piggery, the parties hereby agree that EBE shall serve as
President and Chief Executive thereof, at a stated monthly salary of P15,000.00; Alberto M. Ladores as
General Manager at P10,000.00 a month, V. Gregorio as Comptroller at P3,500.00 a month;

"16) The parties herein likewise agree to pay, when able, compensation to the following the amounts
correspondingly indicated. Thus -

a) V.S. Abadia - Chairperson of the Board at P 10,000.00

b) A.G. Asuncion

c) V.M. de Vera

d) E. Ll. Umali

"17) Being senior operating officers of the farm, EBE and A.M. Ladores, shall submit to AGA, their
respective position charter plans and programs for the farm for the next three (3) years, within 30 to 45
days after signing hereof, substantially in the form hereto attached as Schedule "B";
"18) That within the next three (3) months, an Agribusiness Management Company which includes a
feedmilling operations shall be established. The officers thereof shall be Alexander G. Asuncion as
Chairman, Vicente M. de Vera as Vice-Chairman, Edgardo Ll. Umali as Treasurer, Eduardo B. Evangelista
as President and General Manager, and Alberto M. Ladores as Executive Vice-President. This
management company shall be contracted for providing the over-all management of EMBASSY FARMS.
EDUARDO B. EVANGELISTA and ALBERTO M. LADORES will have shares in the company and shall form
the executive management team of said company, for which they will be remunerated in terms of salary
and profit sharing.

"IN WITNESS WHEREOF, the parties have hereunto affixed their signatures this 2nd day of August, 1984.

(Sgd.) ALEXANDER G. ASUNCION

(Sgd.) EDUARDO B. EVANGELISTA

SIGNED IN THE PRESENCE OF:

(Sgd.) VIOLETA S. ABADIA

(Sgd.) ALBERTO M. LADORES

x x x".11 [Marked as Exh. "C" for Plaintiff and as Exh. "1" for Defendant.]

Upon the execution of the Memorandum of Agreement, petitioner paid private respondent one million
pesos (P1,000,000.00) in compliance with paragraph 3 thereof. Although this was unreceipted, private
respondent admitted receiving the same when he testified in open court.12 [Private respondent
testified, thus:

"ATTY. COMIA

"Q........What is the truth now in your honest opinion. How much was actually all in all paid by Alexander
Asuncion the plaintiff in this case on account of this memorandum of agreement.

"x x x

"WITNESS

"A........He has been claiming he has spent around P3,000,000.00 but payments for this amount were
made to several parties and not to me. All I received from him as downpayment per memorandum of
agreement is more than P1M, I think P1.5M or P1.25M, your Honor." (TSN dated July 27, 1987, p. 39)

"ATTY. COMIA:

"Q........Last time you testified that you have received from the plaintiff in this case under the
memorandum of agreement a sum between P1,500,000.00 to P1,750,000.00?

"A........More or less as downpayment under the memorandum of agreement.

"Q........Was this paid to you just after the signing of the memorandum of agreement?

"A........On three occasions after the signing of the memorandum of agreement, sir." (TSN dated July 28,
1987, p. 14)]

In further compliance with paragraph 3, petitioner paid to private respondent the amount of five
hundred thousand pesos (P500,000.00) within a ninety-day (90) period in four (4) disbursements, to wit:

Date of Payment

Voucher No

Actual Recipient of the Money

Amount Paid

Aug. 15, 1984

3468.13 [Exh. "X", signed by Victoria Gregorio, the treasurer of Embassy Farms, Inc., who received the
amount in behalf of private respondent; signature is marked as Exh. "X-1".]

Victoria Gregorio (for private respondent)

P100,000.00

Aug. 23, 1984

3504.14 [Exh. "BB", also signed by Victoria Gregorio for private respondent; signature marked as Exh.
"BB-1".]

Victoria Gregorio (for private respondent)

P100,000.00

Aug. 29, 1984

3547.15 [Exh. "CC" signed by Victoria Gregorio for private respondent; signature marked as Exh. "CC-1".]

Victoria Gregorio (for private respondent)

P100,000.00

Sept. 26, 1984

3765.16 [Exh. "S". The voucher bears the signature of private respondent, marked as Exh. "S-1".]

Private Respondent

P200,000.00
Total P500,000.00

In compliance with paragraph 4 of the Memorandum of Agreement, petitioner paid private respondent
three hundred thousand pesos (P300,000.00),17 [Cash Voucher No. 0003 dated July 13, 1984 marked as
Exh. "V", signed by private respondent; signature marked as Exh. "V-1".] upon its signing on August 2,
1984.

The second installment, in the like amount of three hundred thousand pesos (P300,000.00) which
became due between August 2, 1984 and September 2, 1984, was supposed to be remitted by
petitioner to private respondent for the purpose of financing the operations of the piggery pursuant to
the Memorandum. Instead, petitioner agreed to pay to PAIC Savings & Mortgage Bank the following
amounts, to wit:

Date of Payment

Voucher No.

Actual Recipient of the Money

Amount Paid

Aug. 8, 1984

3224.18 [Exh. "T".]

PAIC Savings & Mortgage Bank

P200,000.00 19 [PAIC Savings & Mortgage Bank Receipt No. 11279-A dated August 9, 1984 marked as
Exh. "I".]

Aug. 27, 1984

3310.20 [Exh. "U".]

PAIC Savings & Mortgage Bank

P100,000.00 21 [PAIC Savings & Mortgage Bank Receipt No. 11405-A dated August 28, 1984 marked as
Exh. "H".]

in order to facilitate the restructuring of private respondent's loans with said bank. It is significant to
note that under the Memorandum of Agreement, petitioner agreed to shoulder only the loan
restructuring fees required by Paluwagan ng Bayan Savings and Loan Association Bank and Mercator
Finance Corporation.22 [Paragraph Nos. 5 and 6 of the Memorandum of Agreement.] Nonetheless,
petitioner made the above payment in view of the letter of PAIC Savings & Mortgage Bank dated July 6,
1984 approving private respondent's request for the restructuring of his loan.
A third installment in the amount of one hundred fifty thousand pesos (P150,000.00) which was due
between September 2, 1984 and November 2, 1984 was paid by petitioner to private respondent in the
following tranches:

Date of Payment

Voucher No.

Actual Recipient of Money

Amount Paid

Sept. 19, 1984

DV No. 370723 [Exh. "AA", signed by Victoria Gregorio for private respondent; signature marked as Exh.
"AA-1".]

Victoria Gregorio (for Embassy Farms)

P 20,000.00

Sept. 26, 1984

DV No. 377024 [Exh. "Z", signed by private respondent; signature marked as Exh. "Z-1".]

Private Respondent

P 30,000.00

Oct. 16, 1984

DV No. 387825 [Exh. "DD", signed by private respondent; signature marked as Exh. "DD-1".]

Private Respondent

P100,000.00

Aside from paying the aforesaid amount of three hundred thousand pesos (P300,000.00) to PAIC Savings
& Mortgage Bank in compliance with paragraph 5 of the Memorandum of Agreement requiring
petitioner to assume the loan obligations of private respondent, petitioner also paid four hundred
thousand pesos (P400,000.00) in favor of Paluwagan ng Bayan Savings and Loan Association for the
restructuring of private respondent's26 [Disbursement Voucher No. 4284 dated December 26, 1984
marked as Exh. "KK". An employee of Paluwagan ng Bayan Savings and Loan Association signed the
voucher to prove receipt of the amount; signature marked as Exh. "KK-1".] loan and one hundred
thousand pesos (P100,000.00)27 [Disbursement Voucher No. 4047 dated November 9, 1984 marked as
Exh. "EE", signed by private respondent; signature marked as Exh. "EE-1".] for the restructuring of his
loan with Mercator Finance Corporation.
In substantial compliance with paragraph 11 wherein petitioner was further obligated to provide credit
in the amount of two hundred fifty thousand pesos (P250,000.00) to be exclusively spent for the
operations of the piggery but payable to him within one (1) year from the grant thereof with stated
interest of 24% per annum, petitioner made available two hundred thousand pesos (P200,000.00).28
[Cash Voucher No. 0004 dated July 13, 1984 marked as Exh. "W", signed by private respondent;
signature marked as Exh. "W-1".]

Under paragraph 13, petitioner paid one hundred forty four thousand nine hundred forty one pesos and
eighty eight centavos (P144,941.88) for feed ingredients, mixed feeds and veterinary supplies included
in the inventory turned over by private respondent to petitioner. Petitioner made the payment in the
following tranches:

Date of Payment

Disbursement/Cash Voucher

Actual Recipient of the Money

Amount Paid

March 28, 1985

DV No. 476029 [Exh. "FF", signed by private respondent; signature marked as Exh. "FEU-1".29

private respondent

P 37,000.00

July 30, 1985

DV No. 26630 [Exh. "GG", signed by private respondent; signature marked as Exh. "GG-1".]

private respondent

P 30,000.00

Aug. 9, 1985

DV No. 33731 [Exh. "HH". The signature of R. Tamaliga, driver of private respondent who received the
amount in his behalf, is marked as Exh. "HH-1".]

R. Tamaliga (for private respondent)

P 30,000.00

Aug. 16, 1985

DV No. 37932 [Exh. "II", signed by R. Tamaliga for private respondent; signature marked as Exh. "II-1".]
R. Tamaliga (for private respondent)

P 30,000.00

Aug. 23, 1985

DV No. 41133 [Exh. "JJ", signed by R. Tamaliga for private respondent; signature marked as Exh. "JJ-1".]

R. Tamaliga (for private respondent)

P 17,941.88

TOTAL P144,941.88

Over and above all the foregoing amounts paid by petitioner to private respondent in accordance with
his undertakings under the Memorandum of Agreement, he also paid management bonuses to private
respondent, Vicente M. de Vera and Edgardo Ll. Umali, in the amounts of fifty thousand pesos
(P50,000.00), thirty thousand pesos (P30,000.00) and twenty thousand pesos (P20,000.00),
respectively.34 [Disbursement Voucher No. 3640 dated September 13, 1984 marked as Exh. "Y", signed
by private respondent; signature marked as Exh. "Y-1".] The total amount thus paid by petitioner to
private respondent and invested in Embassy Farms, Inc. as of August 1985, or in a span of a year from
the time that they executed the Memorandum of Agreement, was three million one hundred ninety
four thousand nine hundred forty one and eighty eight centavos (P3,194,941.88).

For his part, private respondent was obligated under the Memorandum of Agreement to "execute, sign
and deliver any and all documents" necessary for the transfer and conveyance of several parcels of land
he owned but mortgaged with the banks and financial institutions and to "cede, transfer and convey in a
manner absolute and irrevocable any and all of his shares of stocks in Embassy Farms, Inc." as well as
"cause to be so transferred to petitioner or his nominee such shares of stock until they constitute 90% of
the paid-in equity of said corporation"35 [Paragraph Nos. 1 and 2 of the Memorandum of Agreement.]
By December 1985, however, more than a year after the signing of the Memorandum of Agreement, the
landholdings of private respondent which were mortgaged to Paluwagan ng Bayan Savings and Loan
Association, PAIC Savings and Mortgage Bank and Mercator Finance Corporation still remained titled in
his name. Neither did he inform said mortgagees of the transfer of his lands. As to the shares of stock, it
was incumbent upon private respondent to endorse and deliver them to petitioner so he could also
have them transferred in his name, but private respondent never did. He refused to honor his
obligations under the Memorandum of Agreement and even countered with a demand letter of his own.
He accused petitioner of having failed to restructure his loans with Paluwagan ng Bayan Savings and
Loan Association, PAIC Savings and Mortgage Bank and Mercator Finance Corporation and blamed him
for the foreclosure of his landholdings, including the piggery site of Embassy Farms, Inc.

On April 10, 1986, petitioner filed in the Regional Trial Court a complaint for rescission of the
Memorandum of Agreement with a prayer for damages.36 [Docketed as Civil Case No. 53335 and raffled
to Branch 70, Regional Trial Court, Pasig, Metro Manila.]
On July 1, 1994, the trial court rendered judgment in favor of private respondent. It ruled:

"The principal issue in this case is whether it is [petitioner] or [private respondent] who reneged on their
obligations under the Memorandum of Agreement.

"Based upon the pleadings and the evidence, it is clear that [petitioner] failed to comply with his
undertaking under paragraph 5 of the Memorandum of Agreement to assume all of the obligations of
[private respondent] with the PAIC Bank, the Paluwagan Savings Bank and the Mercator Finance
Corporation amounting in the aggregate to P5,998,955.65. In addition [petitioner] also failed to comply
with his obligations under paragraph 12 and 18 of the Agreement x x x.

"x x x

"The Memorandum of Agreement is essentially a contract of sale where [private respondent] agreed to
sell his nineteen parcels of land and his shares in Embassy Farms, in consideration, among others, of the
assumption by [petitioner] of [private respondent's] loans with three financial institutions. As a matter
of law and practice, it is incumbent upon the vendee to first comply with his obligations under the
contract of sale before he can demand performance by the vendor. In a contract of sale, the vendor is
not required to deliver the thing sold until the price is paid. x x x

"Consequently, since [petitioner], at the time of the commencement of the action, had admittedly not
complied with his obligations under the Agreement, he had no right to demand compliance on the part
of [private respondent] with the latter's obligations or to ask rescission with damages. If there is
anybody who has the right to seek rescission and ask for damages, it is certainly [private respondent] -
the injured party - who in fact has opted for rescission. Accordingly, the Court holds that [private
respondent] is entitled to rescission of the Agreement.

"x x x

"Since it was [petitioner] who failed to perform his obligations as vendee under the Agreement and
there is no showing that [private respondent] refused or was not in a position to comply with is own
undertakings, the latter is entitled to recover damages. The evidence shows that [private respondent]
actually formally demanded compliance by [petitioner] with his obligations in a letter dated January 31,
1986."37 [Decision of the Regional Trial Court dated July 1, 1994, pp. 6-8, Rollo, pp. 167-169.]

The dispositive portion of the foregoing decision reads as follows:

"WHEREFORE, this Court hereby declares the Memorandum of Agreement dated 2 August 1984
rescinded and of no further force and effect.

"This Court likewise orders the payment by the plaintiff to the defendant of the following:

"(1) P32,644,420.55 as actual or compensatory damages arising from the rescission of the Memorandum
of Agreement with legal rate of interest at 6% per annum until fully paid;
"(2) P887,300.00 for the repayment of the loan granted by the defendant to the plaintiff, with interest at
the stipulated rate of 36% per annum until fully paid; and

"(3) P100,000.00 as attorney's fees.

"No pronouncement as to costs.

"SO ORDERED."38 [Id., p. 11, Rollo, p. 172.]

On July 12, 1994, a copy of the decision of the trial court was sent by registered mail to petitioner's
counsel of record, Atty. Romeo Z. Comia.

However, unknown to petitioner, Atty. Comia died while the case was still pending in the trial court.

On August 25, 1994, private respondent filed in the trial court a Notice of Death of petitioner's counsel,
with a request that a copy of its decision be personally served on petitioner.

On August 31, 1994, the trial court issued an Order stating that the registry receipt evidencing the
mailing of a copy of its decision to petitioner did not bear any date. It nonetheless denied the motion of
private respondent for personal service of a copy of its decision on petitioner.

On September 12, 1994, private respondent filed by registered mail a Motion for Execution.

On September 28, 1994, the trial court granted said motion.

On October 3, 1994, private respondent filed an Ex Parte Motion for Appointment of Special Sheriff.
Accordingly, Deputy Sheriff Solminio de las Armas was appointed by the trial court.

On October 6, 1994, the trial court issued a writ of execution against petitioner.

On October 20, 1994, petitioner filed in the trial court a Notice of Appeal, Substitution of Counsel, and
an Urgent Motion to Recall the Order of Execution and Quash the Writ of Execution.

On October 28, 1994, the trial court issued an Order suspending the execution of its decision.

On November 9, 1994, the trial court issued an Order stopping the execution proceedings and approving
petitioner's appeal.

Both petitioner and private respondent repaired to the Court of Appeals. Petitioner prayed for the
reversal of the decision of the trial court while private respondent assailed the last two orders of the
trial court dated October 28 and November 9, 1994.

On February 2, 1998, respondent Court of Appeals affirmed the decision of the trial court and ordered
its immediate execution. The orders dated October 28 and November 9, 1994 halting execution
proceedings were nullified. The respondent Court of Appeals held, first, as concerns the undated registry
receipt:
"The rule that if no date appears in the registry receipt there is no period within which to reckon the
fifteen-day reglementary period to appeal is however subject to waiver. The motion for a writ of
execution and the corresponding order for the enforcement of the writ of execution were duly served
upon [petitioner] yet he failed to question the irregularity before filing a notice of appeal."39 [Decision,
supra, p. 12, Rollo, p. 69.]

and second, as concerns the nature of the Memorandum of Agreement:

"[Petitioner] contended that the MOA is actually a joint venture agreement.

"x x x

"The element that there be mutual right of control is wanting in the MOA entered into between
[petitioner] and [private respondent]. Under Condition No. 9, [private respondent] shall transfer the
effective control, amounting to ownership of the Embassy Farms, Inc. to [petitioner]. The creation of a
new company by [petitioner] under Conditions No. 12 and 15 wherein [private respondent] was to be
appointed as President and Chief Executive does not partake of the nature of joint venture by
[petitioner] as the absolute owner and [private respondent] who is to be remunerated only in terms of
salaries and profit sharing, the later being a usual fringe benefit in private associations.

"Instead, the MOA is akin to a contract of sale as correctly held by the trial court x x x.

"x x x."40 [Id., pp. 12-13, Rollo, pp. 69-70.]

On February 2, 1998, petitioner filed a Motion for Reconsideration of the foregoing decision.

On March 17, 1998, private respondent filed an Opposition thereto with an Ex-parte Motion for Issuance
of a Writ of Attachment.

On April 17, 1998, respondent Court of Appeals issued a Resolution41 [Rollo, p. 75.] denying petitioner's
Motion for Reconsideration and noting private respondent's Ex-Parte Motion for Issuance of a Writ of
Attachment.

Hence this petition raising the following issues:

"1. WHETHER OR NOT THE JULY 1, 1994 DECISION OF THE REGIONAL TRIAL COURT WAS ALREADY FINAL
AND EXECUTORY WHEN ASUNCION FILED HIS NOTICE OF APPEAL.

"2. WHETHER OR NOT THE MEMORANDUM OF AGREEMENT EXECUTED BETWEEN ASUNCION AND
EVANGELISTA WAS IN THE NATURE OF A CONTRACT OF SALE OR A JOINT VENTURE.

"3. WHETHER IT WAS ASUNCION OR EVANGELISTA WHO FIRST RENEGED OR FAILED TO COMPLY WITH
HIS CORRESPONDING OBLIGATIONS UNDER THE MEMORANDUM OF AGREEMENT."42 [Petition dated
May 15, 1998, p. 12, Rollo, p. 19.]

The petition is meritorious.

One. The respondent Court of Appeals erred in holding that the decision of the trial court dated July 1,
1994 had become final and executory. It is established that petitioner was not aware of his counsel's
death while the case was pending in the trial court. He could not have known, therefore, that a copy of
the trial court's decision was sent by registered mail to his counsel. Indeed, it was private respondent
who notified the trial court of the death of petitioner's counsel and who requested that a copy of the
decision be served personally to petitioner. His request was, however, denied.

While petitioner was furnished a copy of the decision by mail, the registry receipt evidencing its date of
mailing did not bear a date. There was, therefore, no date from which to reckon the reglementary
period to appeal. That petitioner received a copy of the motion and order for writ of execution should
not be taken as a waiver of his right to appeal. Not only is petitioner a non-lawyer who could not be
expected to know the legal consequences of the motion and the order, but the case is of such merit that
it deserves a liberal interpretation of the rules in the interest of justice.

Two. The respondent Court of Appeals ruled that the Memorandum of Agreement was a contract of sale
whereby private respondent sold his piggery, Embassy Farms, Inc., with the land on which it stood and
his shares of stock therein, in consideration of the monetary equivalent of his aggregate debt obligations
to be assumed and paid by petitioner. It found that petitioner failed to assume private respondent's
loans with Paluwagan ng Bayan Savings & Loan Association, PAIC Savings & Mortgage Bank and
Mercator Finance Corporation. Consequently, rescission of the Memorandum of Agreement was
ordered and private respondent was awarded more than thirty two million pesos (P32,000,000.00) in
compensatory damages, which included the alleged proceeds from the sale of hogs during the period of
time that private respondent was replaced as president and chief executive officer as well as the value
of his landholdings which were foreclosed because of his failure to pay his debt obligations with the said
banks.

After a meticulous perusal of the voluminous records of this case, we hold that the respondent Court of
Appeals grossly misappreciated the facts and the applicable law. Under the Memorandum of
Agreement, it was the obligation of private respondent to cede and convey, in a manner absolute and
irrevocable, his real properties and stockholdings in the farm in favor of petitioner in exchange for,
among others, the outright payment by petitioner of a lump sum, the continuous operation of the
piggery at his expense and the assumption by petitioner of all the financial obligations of private
respondent upon their restructuring. The records show that while petitioner paid private respondent
the stipulated lump sum and gave more money for the restructuring of private respondent's loans and
for the continued operation of Embassy Farms, Inc., private respondent never executed a deed of sale
with assumption of mortgage over his landholdings, and although he endorsed in blank his certificates of
stock, he never delivered them to petitioner to effectuate their valid transfer.

Private respondent admitted in open court that he refused to comply with his twin obligations to
execute the necessary documents of conveyance for the mortgaged parcels of land and to deliver the
certificates of stock in Embassy Farms in favor of petitioner. He stated on the witness stand, thus:

"ATTY. MECIAS:
"Q........Now, there is also a mention of nineteen (19) parcels of land as being owned by you as situated
in Don Marigato, Marilao, Bulacan and do you know where are the certificates of title over these parcels
of land?

"WITNESS:

"A........This certificate of title mentioned these are all in the possession of PAEC Bank and MERCATOR
Finance Corporation.

"ATTY. MECIAS:

"Q........Were there any titles given or delivered to Paluwagan Savings Bank?

"A........There was one (1), but when I was about to pay the loan they were returned to me.

"Q........In paragraph 1 of Exhibit 'C' you undertook to cede, transfer and convey to Asuncion, the
plaintiff the execution of said parcels of property together with improvements in connection with such
transfer you undertook to execute, sign and deliver the whole document appropriate on the same in
favor of the plaintiff Asuncion or his nominees. Did you actually execute and sign, deliver that document
as mentioned here?

"A........May I have an [sic] specific document. What kind of document?

"Q........Appropriate conveyance of sale?

"A........The only document I know which mention (sic) here is the memorandum of agreement which we
sign together with the plaintiff.

"ATTY. MECIAS:

"Q........I am referring to the document which you have to execute in favor of Alexander G. Asuncion to
cede, transfer and convey those property. Did you execute the document?

"WITNESS:

"A ........I did not.

"Q........What was your reason for not executing those documents?

"A........I did hold on to convey those documents particularly the stock certificate because I was waiting
for the plaintiff Asuncion to comply with his obligation to assume all my loan with the three (3) financial
institutions."43 [TSN dated March 1, 1990, pp. 9-11.]

It is specious for private respondent to justify his refusal to execute the deed of conveyance on the
alleged petitioner's failure to assume his loans with the three financial institutions. It is an established
fact that petitioner made, in behalf of private respondent, loan payments in the amount of four hundred
thousand pesos (P400,000.00) to Paluwagan ng Bayan Savings and Loan Association, one hundred
thousand pesos (P100,000.00) to Mercator Finance Corporation and three hundred thousand pesos
(P300,000.00) to PAIC Savings & Mortgage Bank. These payments, which were made in addition to
outright sums of money given by petitioner to private respondent and to the farm for its operation,
prove petitioner's willingness and readiness to assume private respondent's obligations.

It is true that petitioner stopped making further loan payments to the banks, causing them to foreclose
private respondent's mortgaged properties. He could hardly, however, be faulted for stopping his
further exposure, considering that private respondent has reneged with his obligation to cede his lands
and his shareholdings.

Private respondent is clearly obliged under the Memorandum of Agreement to execute the deed of
conveyance with assumption of mortgage in favor of petitioner. Had such deed been executed, the
interests of both petitioner and private respondent would have been simultaneously secured, the
former, as regards his ownership rights over the subject lands sold to him, and the latter, as regards the
substitution, in his place, of petitioner as the new debtor in his loan obligations with Paluwagan ng
Bayan Savings and Loan Association, PAIC Savings and Mortgage Bank and Mercator Finance
Corporation. Private respondent, however, failed and refused, despite demands, to execute this legal
document. It follows that petitioner could not be faulted when he desisted from further paying private
respondent's debts.

It strikes us as strange that the respondent court failed to appreciate these facts which were established
by overwhelming evidence. The very evidence of the private respondent showed that petitioner did
make the payments for the restructuring of the former's debts. In light of these payments, private
respondent errs in insisting that petitioner cannot be said to have assumed his loan obligations because
petitioner never executed a formal assumption of mortgage. It is private respondent's obligation under
the Memorandum of Agreement to execute a deed of sale with assumption of mortgage, and he cannot
insist that it was petitioner's obligation to execute a formal assumption of mortgage independent of and
distinct from the deed of sale. Under private respondent's inequitous thesis, petitioner would have
shelled out millions of pesos to pay his loans and save his lands from foreclosure, only to leave him with
nothing in exchange therefor.

Three. The impugned Decision rests on the conclusion that the parties' Memorandum of Agreement is a
contract of sale where a price certain is paid in exchange for a determinate thing that is sold and
delivered. An examination of the Memorandum of Agreement, however, will show that it constitutes
not a mere isolated, simple, short-term business deal calling for the outright sale and purchase of land
and shares of stocks belonging to private respondent, but a set of chronological, reciprocal and
conditional obligations that both petitioner and private respondent must faithfully comply with to
ensure the full enforcement of all its stipulations.

The Memorandum of Agreement does not merely stipulate that petitioner has purchased private
respondent's landholdings and shares of stock in Embassy Farms, Inc. for the price equivalent to private
respondent's total outstanding loans which petitioner shall assume. The Memorandum of Agreement
spells out a much more complicated, long-term business arrangement involving the transfer of Embassy
Farms, Inc. to petitioner, the restructuring of private respondent's loans, the financing by petitioner of
the continued operations of the piggery, the organization of a new corporation to replace Embassy
Farms, Inc. as well as an agribusiness management company, all at the expense of petitioner, and the
payment of specified compensation packages to certain officers of Embassy Farms, Inc. In fine,
petitioner and private respondent entered into what the law regards as reciprocal obligations. Of such
specie of legal contracts, Tolentino says:

"x x x Reciprocity arises from identity of cause, and necessarily the two obligations are created at the
same time.

"Reciprocal obligations, therefore, are those which arise from the same cause, and in which each party is
a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of
the other. They are to be performed simultaneously, so that the performance of one is conditioned
upon the simultaneous fulfillment of the other."44 [Tolentino, Arturo, Commentaries and Jurisprudence
on the Civil Code of the Philippines, Volume Four, 1985 edition, p. 175.]

Article 1191 of the Civil Code governs the situation where there is non-compliance by one party in case
of reciprocal obligations. It provides:

"The power to rescind the obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.

"The injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if
the latter should become impossible.

"The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period.

"This is understood to be without prejudice to the rights of third persons who have acquired the thing,
in accordance with articles 1385 and 2388 and the Mortgage Law."

The effect of rescission is also provided in the Civil Code in Article 1385:

"Rescission creates the obligation to return the things which were the object of the contract, together
with their fruits, and the price with its interest, consequently, it can be carried out only when he who
demands rescission can return whatever he may be obligated to restore.

"Neither shall rescission take place when the things which are the object of the contract are legally in
the possession of third persons who did not act in bad faith.

"In this case, indemnity for damages may be demanded from the persons causing the loss."

Private respondent admitted in open court that petitioner paid him the initial sum of one million pesos
(P1,000,000.00) upon the signing of the Memorandum of Agreement as well as various sums of money
as fees for the restructuring of his loans. Thereupon, private respondent was obligated to execute a
deed of sale with assumption of mortgage, both in compliance with the Memorandum of Agreement
and to ensure the legal efficacy of petitioner's promise to assume his loan obligations.

We find that private respondent failed to perform his substantial obligations under the Memorandum of
Agreement. Hence, petitioner sought the rescission of the Memorandum of Agreement and ceased
infusing capital into the piggery business of private respondent. Private respondent later justified his
refusal to execute any deed of sale and deliver the certificates of stock by accusing petitioner of having
failed to assume his debts. We hold that private respondent's insistence that petitioner execute a formal
assumption of mortgage independent and separate from his own execution of a deed of sale is legally
untenable, considering that a recorded real estate mortgage is a lien inseparable from the property
mortgaged and until discharged, it follows the property.45 [Id., Volume Five, 1992 edition, p. 555.] In his
testimony, private respondent stated that he would be committing economic suicide if he executed a
deed of sale because he would then be transferring his lands to petitioner without the latter first
assuming his loan obligations. This posturing is puerile. Even without a formal assumption of mortgage,
the mortgage follows the property whoever the possessor may be. It is an elementary principle in civil
law that a real mortgage subsists notwithstanding changes of ownership and all subsequent purchases
of the property must respect the mortgage, whether the transfer to them be with or without the
consent of the mortgagee.46 [Ibid.]

Four. Prescinding from these premises, we hold that the award of thirty two million six hundred forty-
four thousand four hundred twenty pesos and fifty five centavos (P32,644,420.55) in damages to private
respondent is totally baseless. The trial court and the respondent court computed the award in the
following manner:

"x x x [T]his Court finds that [private respondent] is entitled to the following actual damages:

"I. ........LAND

Value of Land Mortgaged to and Foreclosed by Mercator

P2,726,100.00

Less: Mortgage as of 8/2/84

1,846,012.96

P 880,087.04

Value of Land Mortgaged to and Foreclosed by PAIC

6,736,180.00

Less: Mortgage as of 8/2/84

2,758,968.49

P3,977,211.04
II. ........STOCKS AND FACILITIES

Livestock

Feedmill Machinery

Feed Ingredients

P2,889,998.00

70,000.00

144,941.88

Less: Payments made

103,941.88

41,000.00

Feed Mixer

2,128.00

Drugs Inventory

35,258.00

III. ........EARNINGS OF EMBASSY FARMS

27,748,738.00

P35,644,420.55

"From the aforesaid aggregate amount of P35,644,420.55 should be deducted the payments made by
[petitioner] totaling P3,000,000.00. Thus, the net effect is that [private respondent] is entitled to the
amount of P32,644,420.55, with interest at the legal rate of 6% until fully paid.

"In addition, [private respondent] is entitled to be paid the amount of P500,000.00 which he granted as
a loan to [petitioner] outside of the Memorandum of Agreement. What is due to [private respondent]
after deducting the payments made by [petitioner] and adding the interest is as follows:

Loan of [private respondent] to [petitioner]

P500,000.00

Less: Payments made

270,000.00
P230,000.00

Add: Stipulated interest (36% p.a. up to 1/31/93

540,000.00

Add: Stipulated interest up to 6/30/94

117,300.00

657,300.00

P887,300.00

"The circumstances of this case indicate that [petitioner] acted in a wanton, fraudulent, reckless or
malevolent manner within the purview of Article 2232 of the Civil Code. Despite the fact that
[petitioner] had not performed his obligations as a vendee, he pre-empted [private respondent] by filing
this action for rescission, ousted [private respondent] as a director of Embassy Farms, Inc., transferred
the shares of [private respondent] to himself and his nominees, and assumed full control and
management of Embassy Farms, Inc. until he was enjoined by Court in an order issued by then Presiding
Judge Zenaida Baltazar dated July 30, 1987. Considering the bad faith and malevolence shown by
[petitioner] in his conduct towards [private respondent] in the performance of his obligations under the
Memorandum of Agreement, this Court, by way of example and correction for the public good, holds
that [private respondent] is entitled to exemplary damages in the amount of P500,000.00.

"This Court likewise finds that [private respondent] is entitled to attorney's fees and expenses of
litigation. Considering the complexity and difficulty of this case and the protracted proceedings, this
Court awards attorney's fees and expenses of litigation in the amount of P350,000.00,"47 [Decision of
the Regional Trial Court dated July 1, 1994, pp. 6-11, Rollo, pp. 167-172.]

summarized in the following dispositive portion:

"WHEREFORE, this Court hereby declares the Memorandum of Agreement dated 2 August 1984
rescinded and of no further force and effect.

"This Court likewise orders the payment by the plaintiff to the defendant of the following:

"(1) P32,644,420.55 as actual or compensatory damages arising from the rescission of the Memorandum
of Agreement with legal rate of interest at 6% per annum until fully paid;

"(2) P887,300.00 for the repayment of the loan granted by the defendant to the plaintiff, with interest at
the stipulated rate of 36% per annum until fully paid; and

"(3) P100,000.00 as attorney's fees.

"No pronouncement as to costs.

"SO ORDERED."48 [Id., p. 11, Rollo, p. 172.]

We, therefore, strike down the foregoing award of actual or compensatory damages and attorney's fees.

Petitioner was further ordered to pay twenty seven million seven hundred forty-eight thousand seven
hundred thirty eight pesos (P27,748,738.00) representing earnings of Embassy Farms, Inc. as additional
compensatory damages. The only piece of evidence supporting the award is private respondent's Exh.
"29"49 [Defendant's Formal Offer of Documentary Evidence, p. 82; entitled, "SALES OF HOGS STARTING
ON JULY 4, 1984 WHEN ALEXANDER G. ASUNCION (AGA) ASSIGNED MS. VICKY GREGORIO AS HIS
COMPTROLLER AT EMBASSY FARMS, INC. AT LOMA DE GATO, MARILAO, BULACAN WHICH WAS
TWENTY-NINE (29) DAYS EARLIER THAN THE SCHEDULED TURN OVER (AUGUST 2, 1984) TO HIM BY
EDUARDO B. EVANGELISTA (EBE) OF THE EFFECTIVE CONTROL AND MANAGEMENT OF SAID FARM",
dated November 21, 1990.] which was signed as certified correct by no one else but private respondent.
It bore no reference to any receipt, voucher or any other document signed by petitioner or anyone in his
behalf, and it even states that it was Vicky Gregorio, not private respondent, who was present during
the alleged sales of hogs at the piggery. Exh. "29" was duly objected to and its contents vehemently
denied by petitioner but to no avail. This Court cannot countenance the grant of such an unjustified and
unconscionable amount of damages on the basis of nothing but a self-serving and hearsay document. As
we have ruled in the case of Lufthansa German Airlines vs. CA, et al.:50 [243 SCRA 600, 615 (1995), citing
Dichoso v. CA, 192 SCRA 169 (1990)and Hua Liong Electric Corp. v. Reyes, 145 SCRA 713 (1986).
Lufthansa is cited in Del Rosario v. Court of Appeals, 267 SCRA 158, 170-171 (1997)]

"Actual or compensatory damages cannot be presumed, but must be duly proved and proved with
reasonable degree of certainty. A court cannot rely on speculations, conjectures or guesswork as to the
fact and the amount of damages, but must depend upon competent proof that they have (been)
suffered and on evidence of the actual amount thereof."

Neither may this Court allow the grant of damages corresponding to the value of the land foreclosed by
private respondent's creditors upon the latter's failure to make his loan payments. Private respondent,
in his amended counterclaim, prayed for the rescission of the Memorandum of Agreement. In case of
rescission, while damages may be assessed in favor of the prejudiced party, only those kinds of damages
consistent with the remedy of rescission may be granted, keeping in mind that had the parties opted for
specific performance, other kinds of damages would have been called for which are absolutely distinct
from those kinds of damages accruing in the case of rescission. The vintage but still sound teaching of
the case of Rios and Reyes v. Jacinto, Palma y Hermanos, S.C.,51 [49 Phil. 7, 12-13 (1926)] a 1926 case, is
apropos:

"x x x [A]n obligation may be resolved if one of the obligors fails to comply with that which is incumbent
upon him; and it is declared that the person prejudiced may elect between exacting the fulfillment of
the obligation (specific performance) and its resolution, with compensation for damage and payment of
interest in either case. x x x It will be noted that he is not entitled to pursue both of these inconsistent
remedies; and slight advertence to the logic of the situation will teach us that, in estimating the
damages to be awarded in case of rescission, those elements of damages only can be admitted that are
compatible with the idea of rescission; and of course in estimating the damages to be awarded in case
the lessor elects for specific performance only those elements of damages can be admitted which are
compatible with the conception of specific performance. It follows that damages which would only be
consistent with the conception of specific performance cannot be awarded in an action where rescission
is sought.

"x x x Now it is an inseparable incident of resolution or rescission that the parties are bound to restore
to each the thing which has been the subject matter of the contract, precisely as in the situation where a
decree of nullity is granted. In the common case of the resolution of a contract of sale for failure of the
purchaser to pay the stipulated price, the seller is entitled to be restored to the possession of the thing
sold, if it has already been delivered. But he cannot have both the thing sold and the price which was
agreed to be paid, for the resolution of the contract has the effect of destroying the obligation to pay
the price. Similarly, in the case of the resolution, or rescission of a contract of lease, the lessor is entitled
to be restored to the possession of the leased premises, but he cannot have both the possession of the
leased premises for the remainder of the term and the rent which the other party had contracted to
pay. The termination of the lease has the effect of destroying the obligation to pay rent for the future."

Compensatory damages consisting of the value of private respondent's foreclosed landholdings would
have been proper in case he resorted to the remedy of specific performance, not rescission. Since his
counterclaim prayed for the rescission of the Memorandum of Agreement, it was grave error on the
part of the respondent court to have enforced said agreement by ordering petitioner to pay him the
value of the landholdings.

This Court holds, in fine, that the Memorandum of Agreement entered into by petitioner and private
respondent should indeed be rescinded. As aforediscussed, the respondent appellate court erred in
assessing damages against petitioner for his refusal to fully pay private respondent's overdue loans.
Such refusal was justified, considering that private respondent was the first to refuse to deliver to
petitioner the lands and certificates of stock that were the consideration for the almost six million pesos
in debt that petitioner was to assume and pay.

Five. Nevertheless, neither is petitioner entitled to recover the amount of P3,194,941.88 that he spent
as lump sum payment, as feeds and veterinary costs for the continued operation of the piggery and as
loan restructuring fees. Mutual restitution is required in rescission, but this presupposes that both
parties may be restored in their original situation.52 [Grace Park Engineering Co., Inc. v. Dimaporo, 107
SCRA 266 273 (1981)] In this case, it cannot be gainsaid that an essential part of the consideration of the
amount of P3,194,941.88 paid by the petitioner was taking over the effective management of Embassy
Farms, Inc. Mutual restitution would require, thus, that petitioner restore private respondent in the
effective management of said corporation and that private respondent return said amount to petitioner.
This, however, has been rendered impossible by the foreclosure of the landholdings of private
respondent and the shutdown of the piggery's operations. Private respondent has lost in his venture,
and while he is not blameless for his unfortunate fate, to still order him to remit a considerable amount
of money without receiving anything in return would certainly run counter to the essence of rescission
as a remedy in equity.53 [Tolentino, supra, pp. 570-571.]
WHEREFORE, the instant petition for review is hereby GRANTED. The Decision of the Court of Appeals
dated February 2, 1998 is REVERSED and SET ASIDE. The Memorandum of Agreement entered into by
petitioner and private respondent on August 2, 1984 is hereby DECLARED RESCINDED. No damages. No
costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

8. G.R. No. 191388 March 9, 2011

ASIA UNITED BANK, CHRISTINE T. CHAN, and FLORANTE C. DEL MUNDO, Petitioners,
vs.
GOODLAND COMPANY, INC., Respondent.

DECISION

DEL CASTILLO, J.:

The costly consequence of forum shopping should remind the parties to ever be mindful against
abusing court processes.

Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court assailing the
Decision2 dated June 5, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 90114, as well as its
Resolution3 dated February 17, 2010, which denied a reconsideration of the assailed Decision. The
dispositive portion of the appellate courts Decision reads:

WHEREFORE, the appeal is GRANTED and the appealed Order dated March 15, 2007 is
REVERSED and SET ASIDE. In lieu thereof, another is entered ordering the DENIAL of appellee
banks motion to dismiss and directing the REINSTATEMENT of appellants complaint as well as the
REMAND of the case to the trial court for further proceedings.

SO ORDERED.4

Factual Antecedents

Respondent Goodland Company, Inc. (Goodland) executed a Third Party Real Estate Mortgage
(REM) over two parcels of land located in the Municipality of Sta. Rosa, Laguna and covered by
Transfer Certificates of Title (TCT) Nos. 3216725 and 3216736 in favor of petitioner Asia United Bank
(AUB). The mortgage secured the obligation amounting to P250 million of Radiomarine Network, Inc.
(RMNI), doing business as Smartnet Philippines, to AUB. The REM was duly registered on March 8,
2001 in the Registry of Deeds of Calamba, Laguna.7
Goodland then filed a Complaint8 docketed as Civil Case No. B-6242 before Branch 25 of the
Regional Trial Court (RTC) of Bian, Laguna for the annulment of the REM on the ground that the
same was falsified and done in contravention of the parties verbal agreement (Annulment Case).

While the Annulment Case was pending, RMNI defaulted in the payment of its obligation to AUB,
prompting the latter to exercise its right under the REM to extrajudicially foreclose the mortgage. It
filed its Application for Extrajudicial Foreclosure of Real Estate Mortgage under Act No. 3135, as
amended with the Office of the Executive Judge of the RTC of Bian, Laguna on October 19,
2006.9 The mortgaged properties were sold in public auction to AUB as the highest bidder. It was
issued a Certificate of Sale, which was registered with the Registry of Deeds of Calamba on
November 23, 2006.

Before AUB could consolidate its title, Goodland filed on November 28, 2006 another
Complaint10 docketed as Civil Case No. B-7110 before Branch 25 of the RTC of Bian, Laguna,
against AUB and its officers, petitioners Christine Chan and Florante del Mundo. This Complaint
sought to annul the foreclosure sale and to enjoin the consolidation of title in favor of AUB (Injunction
Case). Goodland asserted the alleged falsified nature of the REM as basis for its prayer for
injunction.

A few days later, AUB consolidated its ownership over the foreclosed properties and obtained new
titles, TCT Nos. T-65703111 and 657032,12in its name from the Registry of Deeds of Calamba.

Petitioners then filed on December 11, 2006 a Motion to Dismiss with Opposition to a Temporary
Restraining Order in the Injunction Case.13 They brought to the trial courts attention Goodlands
forum shopping given the pendency of the Annulment Case. They argued that the two cases both
rely on the alleged falsification of the real estate mortgage as basis for the reliefs sought.

Ruling of the Regional Trial Court (Injunction Case)

On March 15, 2007, the trial court acted favorably on petitioners motion and dismissed the
Injunction Case with prejudice on the grounds of forum shopping and litis pendentia.14 The trial court
explained that the Injunction Case and the Annulment Case are both founded on the same
transactions, same essential facts and circumstances, and raise substantially the same issues. The
addition of the application for a writ of preliminary injunction does not vary the similarity between the
two cases. The trial court further noted that Goodland could have prayed for injunctive relief as
ancillary remedy in the Annulment Case. Finally, the trial court stated that any judgment in the
Annulment Case regarding the validity of the REM would constitute res judicata on the Injunction
Case.

Ruling of the Court of Appeals15 (Injunction Case)

Goodland appealed16 the same to the CA.

Meanwhile, AUB filed an Ex-Parte Application for Writ of Possession on December 18, 2006, which
was granted on March 15, 2007. The writ was issued on March 26, 2007 and AUB obtained
possession of the foreclosed properties on April 2, 2007.

On June 5, 2009, the CA promulgated its assailed Decision, which ruled in favor of Goodland and
ordered the reinstatement of the Injunction Case in the trial court.17
The CA rejected petitioners contention that Goodlands appeal raised pure questions of law,18 which
are within the jurisdiction of the Supreme Court under Rule 45.19 Instead, it found Goodlands Rule
41 appeal to be proper because it involved both questions of fact and of law. The CA held that a
question of fact existed because petitioners themselves questioned in their Brief the veracity of
Goodlands Certification of Non-Forum Shopping.20

The CA conceded that Goodlands Brief failed to comply with the formal requirements, which are all
grounds for the dismissal of the appeal,21 e.g., failure of the appellant to serve and file the required
number of copies of its brief on all appellees and absence of page references to the record.
However, it relaxed the rules so as to completely resolve the rights and obligations of the parties.
The CA, however, warned Goodland that its future lapses will be dealt with more severely.22

The CA further ruled against petitioners argument that the delivery of the foreclosed properties to
AUBs possession has rendered Goodlands appeal moot. It explained that the Injunction Appeal
involving the annulment of extrajudicial foreclosure sale can proceed independently of petitioners
application for a writ of possession.23

The CA then concluded that Goodland was not guilty of forum shopping when it initiated the
Annulment and Injunction Cases. The CA held that the reliefs sought in the two cases were different.
The Annulment Case sought the nullification of the real estate mortgage, while the Injunction Case
sought the nullification of the foreclosure proceedings as well as to enjoin the consolidation of title in
favor of petitioners.24 The CA further held that aside from the difference in reliefs sought, the two
cases were independent of each other because the facts or evidence that supported their respective
causes of action were different. The acts which gave rise to the Injunction Case (i.e., the extrajudicial
foreclosure proceedings) occurred long after the filing of the Annulment Case.25

The appellate court also held that any decision in either case will not constitute res judicata on the
other. It explained that the validity of the real estate mortgage has no "automatic bearing" on the
validity of the extrajudicial foreclosure proceedings.26

Moreover, according to the CA, the fact that Goodland stated in its Certification of Non-Forum
Shopping in the Injunction Case that the Annulment Case was pending belied the existence of forum
shopping.27

Petitioners filed a Motion for Reconsideration28 on July 2, 2009, which was denied in the assailed
Resolution of February 17, 2010.29

Hence, the instant petition.

Ruling in G.R. No. 190231 (Annulment Case)

Contemporaneously with the proceedings of the Injunction Case, the earlier Annulment Case (Civil
Case No. B-6242) was also dismissed by the trial court on the ground of forum shopping on August
16, 2007.30

Goodland filed an appeal31 of the dismissal to the CA, which appeal was granted. The CA ordered on
August 11, 2009 the reinstatement of the Annulment Case in the trial court.32

AUB then filed with this Court a Petition for Review,33 docketed as G.R. No. 190231 and entitled Asia
United Bank and Abraham Co v. Goodland Company, Inc.
On December 8, 2010, the Courts First Division reversed the CA ruling and resolved the appeal in
AUBs favor.34The sole issue resolved by the Court was whether Goodland committed willful and
deliberate forum shopping by filing Civil Case Nos. B-6242 (Annulment Case) and B-7110 (Injunction
Case). The Court ruled that Goodland committed forum shopping because both cases asserted
lavvphil

non-consent to the mortgage as the only basis for seeking the nullification of the REM, as well as the
injunction of the foreclosure. When Goodland did not notify the trial court of the subsequent filing of
the injunction complaint, Goodland revealed its "furtive intent to conceal the filing of Civil Case No.
B-7110 for the purpose of securing a favorable judgment." Thus, the Court concluded that the trial
court was correct in dismissing the annulment case with prejudice. The dispositive portion of the said
Resolution reads as follows:

WHEREFORE, the petition is hereby GRANTED. The August 11, 2009 decision and November 10,
2009 resolution of the Court of Appeals in CA-GR CV No. 9126[9] are REVERSED and SET ASIDE.
The August 16, 2007 and December 5, 2007 orders of the Regional Trial Court of Bian, Laguna,
Branch 25 in Civil Case No. B-6242 are REINSTATED.35

Goodland filed a Motion for Reconsideration36 but the same was denied with finality in the Courts
Resolution dated January 19, 2011.

Issue37

The parties present several issues for the Courts resolution. Most of these address the procedural
infirmities that attended Goodlands appeal to the CA, making such appeal improper and dismissible.
The crux of the case, however, lies in the issue of whether the successive filing of the Annulment
and Injunction Cases constitute forum shopping.

Petitioners Arguments

Petitioners maintain that Goodland is guilty of forum shopping because it sought in the Annulment
Case to annul the REM on the ground that it was falsified and unlawfully filled-out; while in the
Injunction Case, Goodland wanted to nullify the foreclosure sale arising from the same REM on the
ground that the REM was falsified and unlawfully filled-out. Clearly, Goodlands complaints rise and
fall on the issue of whether the REM is valid. This requires the presentation of the same evidence in
the Annulment and Injunction Cases.38

Goodlands Arguments

Goodland counters that it did not commit forum shopping because the causes of action for the
Injunction and Annulment Cases are different. The Annulment Case is for the annulment of REM;
while the Injunction Case is for the annulment of the extrajudicial foreclosure sale. Goodland argues
that any judgment in the Annulment Case, regardless of which party is successful, would not amount
to res judicata in the Injunction Case.39

Our Ruling

We grant the petition.

There is forum shopping "when a party repetitively avails of several judicial remedies in different
courts, simultaneously or successively, all substantially founded on the same transactions and the
same essential facts and circumstances, and all raising substantially the same issues either pending
in or already resolved adversely by some other court."40 The different ways by which forum shopping
may be committed were explained in Chua v. Metropolitan Bank & Trust Company:41

Forum shopping can be committed in three ways: (1) filing multiple cases based on the same cause
of action and with the same prayer, the previous case not having been resolved yet (where the
ground for dismissal is litis pendentia); (2) filing multiple cases based on the same cause of action
and the same prayer, the previous case having been finally resolved (where the ground for dismissal
is res judicata); and (3) filing multiple cases based on the same cause of action, but with different
prayers (splitting causes of action, where the ground for dismissal is also either litis pendentia or res
judicata).

Common in these types of forum shopping is the identity of the cause of action in the different cases
filed. Cause of action is defined as "the act or omission by which a party violates the right of
another."42

The cause of action in the earlier Annulment Case is the alleged nullity of the REM (due to its
allegedly falsified or spurious nature) which is allegedly violative of Goodlands right to the
mortgaged property. It serves as the basis for the prayer for the nullification of the REM. The
Injunction Case involves the same cause of action, inasmuch as it also invokes the nullity of the
REM as the basis for the prayer for the nullification of the extrajudicial foreclosure and for injunction
against consolidation of title. While the main relief sought in the Annulment Case (nullification of the
REM) is ostensibly different from the main relief sought in the Injunction Case (nullification of the
extrajudicial foreclosure and injunction against consolidation of title), the cause of action which
serves as the basis for the said reliefs remains the same the alleged nullity of the REM. Thus,
what is involved here is the third way of committing forum shopping, i.e., filing multiple cases based
on the same cause of action, but with different prayers. As previously held by the Court, 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.43

There can be no determination of the validity of the extrajudicial foreclosure and the propriety of
injunction in the Injunction Case without necessarily ruling on the validity of the REM, which is
already the subject of the Annulment Case. The identity of the causes of action in the two cases
entails that the validity of the mortgage will be ruled upon in both, and creates a possibility that the
two rulings will conflict with each other. This is precisely what is sought to be avoided by the rule
against forum shopping.

The substantial identity of the two cases remains even if the parties should add different grounds or
legal theories for the nullity of the REM or should alter the designation or form of the action. The
well-entrenched rule is that "a party cannot, by varying the form of action, or adopting a different
method of presenting his case, escape the operation of the principle that one and the same cause of
action shall not be twice litigated."44

The CA ruled that the two cases are different because the events that gave rise to them are
different. The CA rationalized that the Annulment Case was brought about by the execution of a
falsified document, while the Injunction Case arose from AUBs foreclosure based on a falsified
document. The distinction is illusory. The cause of action for both cases is the alleged nullity of the
REM due to its falsified or spurious nature. It is this nullity of the REM which Goodland sought to
establish in the Annulment Case. It is also this nullity of the REM which Goodland asserted in the
Injunction Case as basis for seeking to nullify the foreclosure and enjoin the consolidation of title.
Clearly, the trial court cannot decide the Injunction Case without ruling on the validity of the
mortgage, which issue is already within the jurisdiction of the trial court in the Annulment Case.
The recent development in Asia United Bank v. Goodland Company, Inc.,45 which involved
substantially the same parties and the same issue is another reason for Goodlands loss in the
instant case. The issue that Goodland committed deliberate forum shopping when it successively
filed the Annulment and Injunction Cases against AUB and its officers was decided with finality
therein. This ruling is conclusive on the petitioners and Goodland considering that they are
substantially the same parties in that earlier case.

Given our ruling above that the Injunction Case ought to be dismissed for forum shopping, there is
no need to rule further on the procedural infirmities raised by petitioners against Goodlands appeal.

WHEREFORE, premises considered, the Petition is GRANTED. The June 5, 2009 Decision of the
Court of Appeals and its February 17, 2010 Resolution in CA-G.R. CV No. 90114 are hereby
REVERSED and SET ASIDE. The March 15, 2007 Order of Branch 25 of the Regional Trial Court of
Bian, Laguna DISMISSING Civil Case No. B-7110 is hereby REINSTATED and AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 192217 March 2, 2011

DANILO L. PAREL, Petitioner,

vs.
HEIRS OF SIMEON PRUDENCIO, Respondents.

DECISION

VELASCO, JR., J.:

This Petition for Review on Certiorari under Rule 45 assails the February 4, 2010 Decision1 and April
22, 2010 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 105709, which affirmed the
Orders dated February 15, 2008 and July 31, 2008, respectively, of the Regional Trial Court (RTC),
Branch 60 in Baguio City, in Civil Case No. 2493-R for recovery of possession and damages.

The Facts

A complaint for recovery of possession and damages was filed by Simeon Prudencio (Simeon)
against Danilo Parel (Danilo) with the RTC in Baguio City.

Simeon alleged that he was the owner of a two-story house at No. 61 Forbes Park National
Reservation in Baguio City. Simeon allowed Danilo and his parents to live on the ground floor of the
house since his wife was the elder sister of Danilos father, Florentino.3

In November 1985, Simeon needed the whole house back and thus informed Danilo and his parents
that they had to vacate the place. Danilos parents acceded to Simeons demand. Danilo, however,
remained in the house with his family despite repeated demands on him to surrender the premises.
This development drove Simeon to institute an action for recovery of possession and damages.4
Danilo offered a different version of events. He maintained that the land on which Simeons house
was constructed was in his father Florentinos name. He explained that his father Florentino, who
had by then passed away, did not have enough funds to build a house and thus made a deal with
Simeon for them to just contribute money for the construction of a house on Florentinos land.
Florentino and Simeon were, thus, co-owners of the house of which Simeon claims sole ownership.5

The Ruling of the Trial Court

On December 15, 1993, the RTC ruled in favor of Danilo. The dispositive portion of the RTC
Decision reads:

WHEREFORE, premises considered, the Court hereby declares that the house erected at [No.] 61
DPS Compound, Baguio City is owned in common by the late Florentino Parel and herein plaintiff
Simeon Prudencio and as such the plaintiff cannot evict the defendant as heirs of the deceased
Florentino Parel from said property, nor to recover said premises from herein defendant.

Likewise, the plaintiff is ordered to:

(a) pay the defendant in the total sum of P20,000.00 for moral and actual damages;

(b) pay the defendant P20,000.00 in Attorneys fees and P3,300 in appearance fees;

(c) pay the costs of this suit.

SO ORDERED.6

The Ruling of the Appellate Court

On March 31, 2000, the CA, on Simeons appeal, rendered a Decision7 reversing the RTC Decision
as follows:

WHEREFORE, the decision appealed from is hereby SET ASIDE and a new one is entered
declaring plaintiff-appellant as the new owner of the residential building at 61 Forbes Park National
Reservation, near DPD Compound, Baguio City; appellee is ordered to surrender possession of the
ground floor thereof to appellant immediately.

Further, appellee is hereby ordered to pay appellant P2,0000/month [sic] for use or occupancy
thereof from April 1988 until the former actually vacates the same, and the sum of P50,000.00 as
attorneys fees. And costs of suit.

SO ORDERED.

Danilo challenged the CA Decision before this Court via an appeal by certiorari under Rule 45 of the
Rules of Court.

On April 19, 2006, this Court issued its Decision8 in G.R. No. 146556, affirming the CA Decision.

On May 9, 2007, Simeon sought to enforce this Courts April 19, 2006 Decision and thus filed a
Motion for Issuance of Writ of Execution.9
On June 19, 2007, Danilo filed his Comment10 on Simeons Motion for Issuance of Writ of Execution.
He prayed that the PhP 2,000 monthly rental he was ordered to pay be computed from April 1988 to
March 1994 only since he had vacated the premises by April 1994.

On February 15, 2008, the RTC ruled as quoted below:

WHEREFORE, premises considered, let a Writ of Execution be issued to enforce the decision of the
Court in the above-entitled case.11

A Motion for Reconsideration of the February 15, 2008 RTC Order was filed by Danilo.

On July 31, 2008, the RTC issued another Order12 denying the motion. The dispositive portion of the
Order is quoted below:

WHEREFORE, premises duly considered, the Motion for Reconsideration is hereby denied for lack
of merit. Let a Writ of Execution be issued to enforce the decision of the Court in the above-entitled
case.

SO ORDERED.

On February 5, 2009, the RTC ordered the following:

Furthermore, the decision in the above-entitled case has already become final and executory. To
reiterate, this Court, much less the defendant, cannot modify the decision of the higher courts which
has now become final and executory. The defendant is bound by the said decision and he cannot
alter the same nor substitute his own interpretation thereof.

WHEREFORE, the foregoing premises considered, the Motion filed by the defendant is DENIED.
The Court reiterates its order dated July 31, 2008 for the issuance of a Writ of Execution to enforce
the decision of the Court in the instant case.

SO ORDERED.13

On February 23, 2009, Danilo filed a Supplemental Petition with Urgent Motion for Issuance of
Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the RTC from enforcing
the judgment against Danilo for him to pay PhP 2,000 in monthly rentals from April 1994 onwards.

On August 23, 2010, this Court issued a Resolution requiring Simeon to file his Comment on
Danilos Petition for Review on Certiorari.

On October 28, 2010, Simeon filed his Comment before Us. He argued that the RTC and CA
correctly ruled that the prayer for a reduction of back rentals should be denied, since Danilo never
turned over possession of the subject premises to him.

The Issues

Whether the CA committed an error of law in upholding the RTC Order dated February 15, 2008.
 II

Whether the Court of Appeals committed an error of law in upholding the RTC Order dated July 31,
2008

The Ruling of This Court

Danilo questions the following order of the CA:

Further, appellee is hereby ordered to pay appellant P2,0000/month [sic] for use or occupancy
thereof from April 1988 until the former actually vacates the same, and the sum of P50,000.00 as
attorneys fees. And costs of suit.14

We resolve to grant the petition.

Danilo argues that he vacated the subject premises in April 1994 and claims that he stated this fact
in his Comment on Simeons Motion for Issuance of Writ of Execution dated May 9, 2007 and in his
Motion for Reconsideration before this Court on June 12, 2006. He, thus, argues that the monthly
rentals he should pay should only be from April 1988 to March 1994. He alleges that the CA
committed an error in law in upholding the RTC Orders dated February 15, 2008 and July 31, 2008.

The questioned February 15, 2008 RTC Order stated:

x x x The defendant should have filed his comment on any appropriate pleading before the Court or
in the Supreme Court at the time when he actually vacated the premises, but he did not. Perhaps,
still hoping that the decision of the higher courts would be in his favor. All told, the defendant never
intended to surrender the premises to the plaintiff even after he vacated it in April 1994. For this
reason, he should now suffer the consequences.

It must be reiterated that this Court cannot now modify the decision of the higher courts which has
now become final and executory.15

On July 31, 2008, the RTC ruled:

While the alleged supervening facts and circumstances which changed the situation of the parties in
the instant case occurred before finality of the judgment, as in Morta vs. Bagagnan, the factual
backdrop in the aforecited jurisprudence does not call for its application in the present case. In the
cited case, the complainants have been ousted from the subject premises pursuant to the decision
of the DARAB in two cases involving the same parcel of lot before the decision of the Supreme
Court attained finality. In the case at bar, defendant claims to have vacated the subject premises as
early as April 1994. This allegation however was belied by the fact that he did not turn[over] the
premises to the plaintiff, a fact which has been stipulated by the parties. Defendant did not effectively
and completely relinquish possession of the subject premises to the plaintiff thereby depriving the
latter of effective possession and beneficial use thereof. To reiterate, defendant never intended to
surrender the premises to the plaintiff even after he vacated it in 1994. Defendants failure to
seasonably bring to the attention of either the Court of Appeals or the Supreme Court of the
supposed change in the circumstances of the parties cannot be excused. Had the Court of Appeals
or the Supreme Court been seasonably informed of such fact, the appellate Courts would have
considered the same in their respective decisions. It must be noted that defendant had more than
enough time from April 1994 to June 2006, a total of 12 years, within which he could have informed
the two appellate Courts of the supposed change in the circumstances of the parties, but he did not.
He only belatedly informed the Supreme Court in its motion for reconsideration after the latter Court
issued it decision, in the hope of reducing the full payment of back rentals.16 1avvphi1

It is true that Danilo should have brought to the Courts attention the date he actually left the subject
premises at an earlier time. The RTC is also correct in ruling that the judgment involved was already
final and executory. However, it would be inequitable to order him to pay monthly rentals "until he
actually vacates" when it has not been determined when he actually vacated the ground floor of
Simeons house. He would be paying monthly rentals indefinitely.

The RTC should have determined via hearing if Danilos allegation were true and accordingly
modified the period Danilo is to be held accountable for monthly rentals.

Unjustified delay in the enforcement of a judgment sets at naught the role of courts in disposing
justiciable controversies with finality.17 Once a judgment becomes final and executory, all the issues
between the parties are deemed resolved and laid to rest. All that remains is the execution of the
decision which is a matter of right.18

Banaga v. Majaducon,19 however, enumerates the instances where a writ of execution may be
appealed:

1) the writ of execution varies the judgment;

2) there has been a change in the situation of the parties making execution inequitable or
unjust;

3) execution is sought to be enforced against property exempt from execution;

4) it appears that the controversy has never been subject to the judgment of the court;

5) the terms of the judgment are not clear enough and there remains room for interpretation
thereof; or

6) it appears that the writ of execution has been improvidently issued, or that it is defective in
substance, or is issued against the wrong party, or that the judgment debt has been paid or
otherwise satisfied, or the writ was issued without authority;

In these exceptional circumstances, considerations of justice and equity dictate that there be some
mode available to the party aggrieved of elevating the question to a higher court. That mode of
elevation may be either by appeal (writ of error or certiorari), or by a special civil action of certiorari,
prohibition, or mandamus.

The instant case falls under one of the exceptions cited above. The fact that Danilo has left the
property under dispute is a change in the situation of the parties that would make execution
inequitable or unjust.

Moreover, there are exceptions that have been previously considered by the Court as meriting a
relaxation of the rules in order to serve substantial justice. These are: (1) matters of life, liberty,
honor or property; (2) the existence of special or compelling circumstances; (3) the merits of the
case; (4) a cause not entirely attributable to the fault or negligence of the party favored by the
suspension of the rules; (5) a lack of any showing that the review sought is merely frivolous and
dilatory; and (6) the other party will not be unjustly prejudiced thereby.20 We find that Danilos
situation merits a relaxation of the rules since special circumstances are involved; to determine if his
allegation were true would allow a final resolution of the case.

Applicable, too, is what Sec. 5, Rule 135 of the Rules of Court states as one of the powers of a
court:

Section 5. Inherent powers of the courts.3/4 Every court shall have power:

xxxx

(g) To amend and control its process and orders so as to make them conformable to law and justice.

Thus, the Court ruled in Mejia v. Gabayan:21

x x x The inherent power of the court carries with it the right to determine every question of fact and
law which may be involved in the execution. The court may stay or suspend the execution of its
judgment if warranted by the higher interest of justice. It has the authority to cause a modification of
the decision when it becomes imperative in the higher interest of justice or when supervening events
warrant it. The court is also vested with inherent power to stay the enforcement of its decision based
on antecedent facts which show fraud in its rendition or want of jurisdiction of the trial court apparent
on the record. (Emphasis supplied.)

The writ of execution sought to be implemented does not take into consideration the circumstances
that merit a modification of judgment. Given that there is a pending issue regarding the execution of
judgment, the RTC should have afforded the parties the opportunity to adduce evidence to
determine the period within which Danilo should pay monthly rentals before issuing the writ of
execution in the instant case. Should Danilo be unable to substantiate his claim that he vacated the
premises in April 1994, the period to pay monthly rentals should be until June 19, 2007, the date he
informed the CA that he had already left the premises.

WHEREFORE, the petition is GRANTED. The CA Decision in CA-G.R. SP No. 105709 is hereby
SET ASIDE. The RTC, Branch 60 in Baguio City is ORDERED to determine the actual date
petitioner left the subject premises before issuing the writ of execution in Civil Case No. 2493-R that
will be based on the resolution of said issue.

SO ORDERED.

SECOND DIVISION

SPS. VICENTE DIONISIO G.R. No. 178159

AND ANITA DIONISIO,
Petitioner, Present:

CARPIO, J., Chairperson,

- versus - VELASCO, JR.,*
DEL CASTILLO,**
ABAD, and
 MENDOZA, JJ.
WILFREDO LINSANGAN,
Respondent. Promulgated:

March 2, 2011
x --------------------------------------------------------------------------------------- x

DECISION
ABAD, J.:

The case is about a) amendments in the complaint that do not alter the cause
of action and b) the effect in an unlawful detainer action of the tolerated
possessors assignment of his possession to the defendant.

The Facts and the Case

Gorgonio M. Cruz (Cruz) owned agricultural lands in San Rafael, Bulacan,

that his tenant, Romualdo San Mateo (Romualdo) cultivated. Upon Romualdos
death, his widow, Emiliana, got Cruzs permission to stay on the property provided
she would vacate it upon demand.

In September 1989 spouses Vicente and Anita Dionisio (the Dionisios)

bought the property from Cruz.[1] In April 2002, the Dionisios found out that
Emiliana had left the property and that it was already Wilfredo Linsangan
(Wilfredo) who occupied it under the strength of a Kasunduan ng Bilihan ng
Karapatan[2] dated April 7, 1977.

The Dionisios wrote Wilfredo on April 22, 2002, demanding that he vacate
the land but the latter declined, prompting the Dionisios to file an eviction
suit[3] against him before the Municipal Trial Court (MTC) of San Rafael,
Bulacan. Wilfredo filed an answer with counterclaims in which he declared that he
had been a tenant of the land as early as 1977.

At the pre-trial, the Dionisios orally asked leave to amend their

complaint. Despite initial misgivings over the amended complaint, Wilfredo asked
for time to respond to it. The Dionisios filed their amended complaint on August
5, 2003; Wilfredo maintained his original answer.

The MTC issued a pre-trial order[4] specifying the issues. For the plaintiffs:
(1) whether or not the defendant can be ejected from the property and (2) whether
or not the plaintiffs are entitled to reasonable rent for the use of the property,
damages, and attorneys fees. For the defendant: (1) whether or not the MTC has
jurisdiction to try this case; (2) whether or not the defendant can be ejected from
the questioned property; and (3) whether or not the defendant is entitled to
damages and attorneys fees.

On May 3, 2004 the MTC rendered judgment, ordering Wilfredo to vacate

the land and remove his house from it. Further, the MTC ordered Wilfredo to pay
the Dionisios P3,000.00 a month as reasonable compensation for the use of the
land and P20,000.00 as attorneys fees and to pay the cost of suit.

On appeal,[5] the Regional Trial Court (RTC) of Malolos, Bulacan, affirmed

the MTC decision, holding that the case was one for forcible entry. On
review,[6] however, the Court of Appeals (CA) rendered judgment on July 6, 2006,
reversing the decisions of the courts below, and ordering the dismissal of the
Dionisios action. The CA held that, by amending their complaint, the Dionisios
effectively changed their cause of action from unlawful detainer to recovery of
possession which fell outside the jurisdiction of the MTC. Further, since the
amendment introduced a new cause of action, its filing on August 5, 2003 marked
the passage of the one year limit from demand required in ejectment suits. More,
since jurisdiction over actions for possession depended on the assessed value of the
property and since such assessed value was not alleged, the CA cannot determine
what court has jurisdiction over the action.

The Issues Presented

The issues presented in this case are:

1. Whether or not the Dionisios amendment of their complaint

effectively changed their cause of action from one of ejectment to one of recovery
of possession; and
 2. Whether or not the MTC had jurisdiction over the action before it.

The Rulings of the Court

One. An amended complaint that changes the plaintiffs cause of action is

technically a new complaint. Consequently, the action is deemed filed on the date
of the filing of such amended pleading, not on the date of the filing of its original
version. Thus, the statute of limitation resumes its run until it is arrested by the
filing of the amended pleading. The Court acknowledges, however, that an
amendment which does not alter the cause of action but merely supplements or
amplifies the facts previously alleged, does not affect the reckoning date of filing
based on the original complaint. The cause of action, unchanged, is not barred by
the statute of limitations that expired after the filing of the original complaint.[7]

Here, the original complaint alleges that the Dionisios bought the land from
Cruz on September 30, 1989; that Romualdo used to be the lands tenant; that
when he died, the Dionisios allowed his widow, Emiliana, to stay under a promise
that she would leave the land upon demand; that in April 2002 the Dionisios
discovered on visit to the land that Emiliana had left it and that Wilfredo now
occupied it under a claim that he bought the right to stay from Emiliana under a
Kasunduan ng Bilihan ng Karapatan; that the Dionisios did not know of and
gave no consent to this sale which had not been annotated on their title; that the
Dionisios verbally told Wilfredo to leave the property by April 31, 2002; that their
lawyer reiterated such demand in writing on April 22, 2002; that Wilfredo did not
heed the demand; that the Dionisios wanted to get possession so they could till the
land and demolish Wilfredos house on it; that Wilfredo did not give the Dionisios
just share in the harvest; and that the Dionisios were compelled to get the services
of counsel for P100,000.00.

The amended complaint has essentially identical allegations. The only new
ones are that the Dionisios allowed Emiliana, Romualdos widow to stay out of
their kindness, tolerance, and generosity; that they went to the land in April 2002,
after deciding to occupy it, to tell Emiliana of their plan; that Wilfredo cannot deny
that Cruz was the previous registered owner and that he sold the land to the
Dionisios; and that a person occupying anothers land by the latters tolerance or
permission, without contract, is bound by an implied promise to leave upon
demand, failing which a summary action for ejectment is the proper remedy.

To determine if an amendment introduces a different cause of action, the test

is whether such amendment now requires the defendant to answer for a liability or
obligation which is completely different from that stated in the original
complaint.[8] Here, both the original and the amended complaint required Wilfredo
to defend his possession based on the allegation that he had stayed on the land after
Emiliana left out of the owners mere tolerance and that the latter had demanded
that he leave. Indeed, Wilfredo did not find the need to file a new answer.

Two. Wilfredo points out that the MTC has no jurisdiction to hear and
decide the case since it involved tenancy relation which comes under the
jurisdiction of the DARAB.[9] But the jurisdiction of the court over the subject
matter of the action is determined by the allegations of the complaint. [10] Besides,
the records show that Wilfredo failed to substantiate his claim that he was a tenant
of the land. The MTC records show that aside from the assertion that he is a
tenant, he did not present any evidence to prove the same. To consider evidence
presented only during appeal is offensive to the idea of fair play.

The remaining question is the nature of the action based on the allegations of
the complaint. The RTC characterized it as an action for forcible entry, Wilfredo
having entered the property and taken over from widow Emiliana on the sly. The
problem with this characterization is that the complaint contained no allegation that
the Dionisios were in possession of the property before Wilfredo occupied it either
by force, intimidation, threat, strategy, or stealth, an element of that kind of
eviction suit.[11] Nowhere in the recitation of the amended complaint did the
Dionisios assert that they were in prior possession of the land and were ousted
from such possession by Wilfredos unlawful occupation of the property.

Is the action one for unlawful detainer? An action is for unlawful detainer if
the complaint sufficiently alleges the following: (1) initially, the defendant has
possession of property by contract with or by tolerance of the plaintiff; (2)
eventually, however, such possession became illegal upon plaintiffs notice to
defendant, terminating the latters right of possession; (3) still, the defendant
remains in possession, depriving the plaintiff of the enjoyment of his property; and
(4) within a year from plaintiffs last demand that defendant vacate the property,
the plaintiff files a complaint for defendants ejectment.[12] If the defendant had
possession of the land upon mere tolerance of the owner, such tolerance must be
present at the beginning of defendants possession.[13]

Here, based on the allegations of the amended complaint, the Dionisios

allowed Emiliana, tenant Romualdos widow, to stay on the land for the meantime
and leave when asked to do so. But, without the knowledge or consent of the
Dionisios, she sold her right of tenancy to Wilfredo. When the Dionisios visited
the land in April 2002 and found Wilfredo there, they demanded that he leave the
land. They did so in writing on April 22, 2002 but he refused to leave. The
Dionisios filed their eviction suit within the year.

It is pointed out that the original complaint did not allege that the Dionisios
tolerated Emilianas possession of the land after her husband died, much less did
it allege that they tolerated Wilfredos possession after he took over from
Emiliana. But the rules do not require the plaintiff in an eviction suit to use the
exact language of such rules. The Dionisios alleged that Romualdo used to be the
lands tenant and that when he died, the Dionisios allowed his widow, Emiliana, to
stay under a promise that she would leave upon demand. These allegations clearly
imply the Dionisios tolerance of her stay meantime that they did not yet need
the land.

As for Wilfredo, it is clear from the allegations of the complaint that

Emiliana assigned to him her right to occupy the property. In fact that assignment
was in writing. Consequently, his claim to the land was based on the Dionisios
tolerance of the possession of Emiliana and, impliedly, of all persons claiming
right under her.

True, the Kasunduan ng Bilihan ng Karapatan under which Emiliana

transferred her tenancy right to Wilfredo appears to have been executed in 1977,
years before Cruz sold the land to the Dionisios, implying that Wilfredo had
already been in possession of the property before the sale. But what is controlling
in ascertaining the jurisdiction of the court are the allegations of the
complaint. The Dionisios alleged in their complaint that they were the ones who
allowed Emiliana (and all persons claiming right under her) to stay on the land
meantime that they did not need it. The MTC and the RTC gave credence to the
Dionisios version. The Court will respect their judgment on a question of fact.

WHEREFORE, the Court GRANTS the petition, REVERSES and SETS

ASIDE the Decision of the Court of Appeals in CA-G.R. SP 92643 dated July 6,
2006, and REINSTATES the Decision of the Municipal Trial Court of San Rafael,
Bulacan, in Civil Case 1160-SRB-2003 dated May 3, 2004.

SO ORDERED.
SECOND DIVISION

SPOUSES ANTONIO F. ALAGAR G.R. No. 171870

AND AURORA ALAGAR,
Petitioner, Present:

CARPIO, J., Chairperson,

- versus - CARPIO MORALES,*
PERALTA,
ABAD, and
MENDOZA, JJ.
PHILIPPINE NATIONAL BANK,
Respondent. Promulgated:

March 16, 2011

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

DECISION
ABAD, J.:

This case is about a) a claim that the defendant is estopped from questioning
the validity of a writ of execution that he subsequently complied with; b) an
assertion that a supplemental petition cannot elevate to the higher court those
orders of the lower court that were issued more than 60 days earlier; and c) a
contention that the petition was not one for mandamus which is the proper remedy
when the trial court refuses to give due course to an appeal.
 The Facts and the Case

On April 14, 1992 petitioner spouses Antonio and Aurora Alagar (the
Alagars) got a personal loan of P500,000.00 from respondent Philippine National
Bank (PNB), secured by a mortgage over a 368-square meter lot on General Luna
Street in Vigan, Ilocos Sur.[1] The Alagars subsequently increased their loan
to P1,700,000.00 and later to P2,900,000.00 with corresponding amendments to
the mortgage.

Meanwhile, in 1995 PNB gave New Taj Resources, Inc., a corporation

owned by the Alagars, a loan of P9,300,000.00, secured by a mortgage on an
8,086-square meter lot in Pantay Daya, Vigan, Ilocos Sur. The Alagars also
executed a joint and solidary agreement that bound them with other persons to pay
the corporate loan to the bank.[2]

After a few years, the Alagars outstanding balance on their personal loan
with PNB rose to P4,003,134.36 as of May 31, 1997. In the face of this, they
negotiated with the bank and requested the condonation of interests so they could
settle their debt. Meantime they paid the bank P3,900,000.00 while awaiting
approval of their request. When the bank granted it, the Alagars paid the balance
of P330,221.50 and sought the release of the General Luna title to them. The bank
refused, however, citing the Alagars other unsettled account.

On January 12, 2001 the Alagars filed a petition for mandamus[3] before the
Regional Trial Court (RTC) of Vigan, Ilocos Sur to compel PNB to release the
General Luna title to them. They claimed that PNB had no reason to retain the title
since they already paid their personal loan. They insisted that the unsettled account
cited by PNB referred to the corporate loan of New Taj Resources, Inc. which was
secured by the Pantay Daya title. The Alagars claimed moral and exemplary
damages for having been deprived of the use and enjoyment of their property.

In its answer,[4] PNB alleged that the petition did not state a cause of action
since mandamus is not the proper remedy for compelling the performance of
contractual obligations. Further, the bank had the right to retain the General Luna
title since, as solidary debtors in the corporate loan, which had then become due,
the Alagars still had an outstanding obligation with the bank. The mortgage
contract between PNB and the Alagars provided that the property on General Luna
was to secure, not only their personal loan, but also any and all other obligations
of the Mortgagors to the Mortgagees of whatever kind and nature.

At the trial, the Alagars presented their evidence and on June 26, 2001
formally offered their documentary exhibits. The RTC set PNBs presentation of
its evidence on July 30, 2001 but its counsel failed to appear. Consequently, the
RTC deemed PNB to have waived presentation of evidence and submitted the case
for decision. It appears, however, that on the day of the hearing, the PNB branch
manager in Vigan wrote the RTC a letter, explaining that the bank could not come
to the hearing due to the retirement of its counsel of record. PNB asked the court
for 60 days within which to find another lawyer.[5]

On August 6, 2001 Atty. Benjamin V. Sotero entered his appearance as

PNBs new counsel. He then filed a motion for reconsideration asking that PNB
be allowed to present evidence. He set the motion for hearing on September 17,
2001. On August 7, 2001 the RTC denied PNBs motion on the ground that it
violated Sections 3[6] and 5[7] of Rule 15 of the Rules of Court.[8] PNB failed to
accompany its motion with supporting affidavits and other papers and set it for
hearing more than 10 days after its filing.

Subsequently, Atty. Sotero failed to appear during the hearing on September

17, 2001 that he himself set for the banks motion for reconsideration. This
prompted the trial court to issue another order on that date,[9] reiterating its earlier
order submitting the case for decision. The trial court also noted that PNB did not
react to its August 7, 2001 order that was sent to it by registered mail.

On October 5, 2001 PNB filed an omnibus motion for reconsideration of the

orders of July 30, August 7, and September 17, 2001. The bank again asked for an
opportunity to present evidence in support of its defense. In an order dated
October 29, 2001,[10] the trial court denied the omnibus motion for its failure to
state when the bank received the questioned orders. Moreover, the trial court
rejected counsels excuse for not reacting to the August 7, 2001 order. Counsel
claimed that he had to attend to other urgent legal matters of equal importance.
 On January 15, 2002 the trial court rendered judgment [11] in favor of the
Alagars. It held that, although the pleading was denominated as a petition
for mandamus, its allegations actually made out a case for specific performance.
Since the Alagars personal loan had already been fully paid, the real estate
mortgage had nothing more to secure, such that both law and equity required that
the collateral given to secure it be released to the owners.

PNB filed a motion for new trial or for reconsideration. It asserted in

addition to its arguments on the merit of the case that the RTC had no jurisdiction
over the issue of whether or not the controversial stipulation in the mortgage
contract was valid and binding. The only issues presented by the pleadings were:
1) whether or not the petition stated a cause of action; (2) whether or not the title
should be released to the Alagars upon full payment of their personal loan; and (3)
whether or not the Alagars were entitled to damages.

Meanwhile, PNB filed a special civil action of certiorari before the Court of
Appeals (CA) in CA-G.R. SP 68661, seeking to annul and set aside the trial court
orders of August 7 (which denied PNBs motion for reconsideration due to
technical defects), September 17 (reiterating the August 7 order when PNBs
counsel failed to show up at the hearing he set for its motion for reconsideration),
and October 29, 2001 (which denied as unmeritorious PNBs omnibus motion for
reconsideration). Since the trial court had in the meantime already rendered a
decision in the case, however, on March 20, 2002 the CA dismissed the petition for
being moot and academic.[12]

On March 25, 2002 the RTC issued an order, denying PNBs motion for new
trial or for reconsideration for failing to raise new matters and violating the 10-day
hearing schedule rule. This prompted PNB to file a notice of appeal. The RTC
issued an order on April 29, 2002, however, denying due course to the appeal on
the ground that the bank filed it beyond the required 15-day period. The court said
that, since PNBs motion for new trial or reconsideration was pro forma, it did not
toll the running of the period to appeal.

Meantime, on motion of the Alagars, the trial court caused the issuance on
June 4, 2002 of a writ of execution against the bank.[13] This prompted the PNB to
file on June 13, 2002 a special civil action of certiorari in CA-G.R. SP 71116,
assailing the RTCs March 25, April 29, and June 4, 2002 orders as well as the writ
of execution that it issued.[14] In a parallel move, PNB asked the trial court to
quash the writ of execution, claiming that it was improvidently issued and that, as a
matter of judicial courtesy, it should await the CA action on the banks petition
before it.

On July 17, 2002 the RTC denied PNBs urgent motion to quash the
writ. The court said that issuing the writ was a ministerial duty after its decision
became final and executory. Further, the CA had not issued any restraining order
against the RTC.[15] PNB moved for reconsideration of this last order but the RTC
denied the same on September 16, 2002.[16] Thus, an alias writ of execution was
issued, compelling PNB to abide by it in full.[17]

Later, the Alagars asked the RTC by motion to order the cancellation of the
mortgage annotated on its title, alleging that this was a necessary and logical
consequence of the implementation of the writ of execution. The RTC granted the
motion on August 4, 2003, stating that although the dispositive part of the decision
did not say so, the order to release the General Luna title necessarily included with
it the cancellation of the mortgage.[18]

Again, PNB sought reconsideration of the RTCs August 4, 2003 order and
the quashal of the second writ of execution.[19] In response, the Alagars filed a
petition to cite the PNB for indirect contempt for failing to release the mortgage.
PNB opposed the petition. On October 21, 2003[20] the RTC granted PNBs
motion for reconsideration and dismissed the Alagars petition for indirect
contempt. At the same time, however, it ordered the amendment of the dispositive
part of its January 15, 2002 decision to read as follows:

Wherefore, finding the allegations in the Complaint proven

by competent and preponderant evidence, the Court hereby renders
judgment in favor of the plaintiffs as follows:

1. Ordering the defendant Philippine National Bank

(PNB), Vigan, Ilocos Sur Branch, through its Manager, Mrs. Rosalia
A. Quilala to release Original Certificate of Title No. 0-3576 in the
name of Spouses Antonio F. Alagar and Aurora J. Alagar to the
plaintiffs herein;
 2. Ordering defendant PNB to pay same plaintiffs the
amount of P1,825.00 as actual damages;
3. Ordering the defendant to pay the plaintiffs the
amount of P100,000.00 as moral damages, P50,000.00 as exemplary
damages and P30,000.00 as attorneys fees;
4. ORDERING THE DEFENDANT TO EXECUTE THE
DEED SUFFICIENT IN LAW TO CANCEL THE MORTGAGE IN
FAVOR OF THE PLAINTIFF-SPOUSES ANTONIO ALAGAR
AND AURORA ALAGAR AND TO DELIVER SAID DEED TO
THE LATTER;
5. AS AN ALTERNATIVE, SHOULD THE
DEFENDANT FAIL OR REFUSE TO COMPLY WITH THE
HEREINABOVE ORDER NO. 4, THE DEPUTY SHERIFF OF
THIS COURT, MR. TERENCIO FLORENDO IS HEREBY
APPOINTED TO EXECUTE THE DEED OF CANCELLATION
OF THE MORTGAGE IN SUIT IN BEHALF OF THE
DEFENDANT PNB FOR REGISTRATION IN THE REGISTRY
OF DEEDS OF ILOCOS SUR.

The counterclaim not having been proven, the same is

dismissed.[21]

The Alagars filed a motion for reconsideration of the above insofar as it

granted PNBs motion for reconsideration of the August 4, 2003 order and motion
to dismiss the petition for indirect contempt. On December 18, 2003 the RTC
issued an order,[22]granting the Alagars motion for reconsideration and reinstating
its August 4, 2003 order that directed the issuance of a writ of execution. The
order also deleted paragraphs 4 and 5 of the amended dispositive portion of the
decision, thus reinstating the original version.

PNB moved for reconsideration of the RTCs December 18, 2003 order and
prayed that the proceedings be held in abeyance in view of CA-G.R. SP 71116
which was pending before the CA. But the RTC denied the motion on March 11,
2004, stating that it had the inherent power to amend its decision to make it
conform to law and justice. It also declined to hold matters in abeyance since the
RTC had not been amply informed about the CA action and since there was no
possibility that the issues before the CA would be rendered moot if the proceedings
below continued.[23]
 In view of the trial courts conflicting directives, PNB filed a motion for
clarification of the March 11, 2004 order. Further, on June 3, 2004 it also filed a
supplemental petition[24] in CA-G.R. SP 71116, assailing all the RTC actions and
orders subsequent to the filing of the original petition. On June 14, 2004 the RTC
issued an order,[25] resolving PNBs motion for clarification and recalling in the
meantime the writ of execution that it issued on August 4, 2003. It also deleted
paragraph 5 of the amended dispositive portion of its decision but retained
paragraph 4 ordering PNB to execute a deed of cancellation of mortgage in favor
of the Alagars.

On September 30, 2005 the CA rendered judgment in CA-G.R. SP 71116,

annulling and setting aside all the RTCs orders beginning March 25, 2002, when
the RTC denied as pro forma PNBs motion for reconsideration of its January 12,
2002 decision. The CA held that the motion was not pro forma and, therefore, it
tolled the running of the period to appeal. PNB did not belatedly file its notice of
appeal, as it still had three days to elevate the trial courts decision to the
CA. Consequently, the decision did not become final and executory and could not
be the subject of a writ of execution.[26]

Moreover, said the CA, the trial court gravely abused its discretion when it
substantially amended its decision which, by its own ruling, had already become
final and executory. Inasmuch as the RTC decision merely ordered the PNB to
release the mortgaged title to the Alagars, the additional order directing the bank to
cancel and release the mortgage constituted on that title cannot be regarded as a
simple clerical correction since it would substantially prejudice PNBs rights as
mortgagee.[27]

The Alagars filed a motion for reconsideration of the decision but the CA
denied it for lack of merit,[28] hence this petition for review.

The Issues Presented

The case presents the following issues:

 1. Whether or not the CA erred in failing to rule that PNB was estopped
from assailing the validity of the writ of execution after it had been implemented;

2. Whether or not the CA erred in failing to rule that it could no longer

nullify the RTCs orders that PNB assailed by supplemental petition beyond 60
days from the issuance of such orders; and

3. Whether or not the CA erred in failing to rule that PNBs petition

before it was not the proper remedy for assailing the order that denied due course
to its appeal.

The Rulings of the Court

FIRST. The Alagars contend that the issue of whether the RTC validly
issued a writ of execution in the case had become moot since PNB willingly
obeyed the writ, returned the General Luna title to the Alagars, and paid them the
damages that the RTC awarded in its decision. Going further, the Alagars argue
that the full implementation of the writ foreclosed any question concerning the
validity of the decision itself.[29]

But the execution of a judgment pending an action in a higher court

essentially challenging its finality cannot be deemed an abandonment of that
action. The rules grant parties the right to question by special civil actions those
orders and rulings that inferior courts issue with grave abuse of discretion. That
the PNB complied with the writ of execution after its several attempts to stop it
cannot be deemed a voluntary abandonment of its action before the CA. PNB had
no choice but to obey the RTC orders, given that the CA did not then deem it
appropriate to issue a restraining order. And PNB did not relent in pursuing its
action before the CA. Besides, the Alagars did not raise this issue of estoppel
before the CA. Consequently, they cannot raise the same for the first time before
the Court.

SECOND. The Alagars point out that PNB can no longer question the RTC
orders that were issued from July 17, 2002 onwards since more than 60 days had
elapsed when PNB challenged their validity by supplemental petition in CA-G.R.
SP 71116. These orders have thus become final under Rule 65 of the Rules of
Court.[30]
 Again, the Alagars did not raise this issue before the CA. Indeed, they did
not file a comment on the supplemental petition despite having been required to do
so. They also failed to mention it in their memorandum before the
CA.[31] Consequently, the Court cannot adjudicate the issue.

Besides, the RTCs subsequent orders were founded on the assumption that
it correctly denied for being pro forma PNBs motion for reconsideration of its
decision. All such orders assumed that the RTC decision had become final and
executory. As it turned out, however, the CA held that PNB filed a valid motion
for reconsideration, that it filed a timely appeal after the motion was denied, and
that, therefore, the RTC decision had not become final and executory.

THIRD. Finally, the Alagars assert that PNB availed of the wrong remedy
when it filed a special civil action of certioraribefore the CA rather than one
of mandamus to compel the RTC to give due course to its notice of appeal after the
latter held that itspro forma motion for reconsideration did not toll the period of
appeal which had then already elapsed.[32]

But a reading of PNBs allegations in its petition in CA-G.R. SP 71116

shows that its action was not only for certiorari and prohibition but also
for mandamus. The bank alleged that by its whimsical, capricious and arbitrary
actions the RTC deprived the PNB of its appeal, leaving it with no other plain,
speedy, and adequate remedy in the ordinary course of law. The PNB petition also
specifically prayed the CA to direct the trial court to give due course to its
appeal.[33] Following the rule that the nature of an action is determined by the
allegations of the pleading and the character of the relief sought, it is unmistakable
that CA-G.R. SP 71116 was also a petition for mandamus.

The Alagars fail to show any reversible error in the CAs decision. That
courts finding that PNBs motion for reconsideration was not pro forma and,
therefore, tolled the running of PNBs period to appeal, is supported by the
evidence on record. The motion for reconsideration specified the RTCs findings
and conclusions in its decision that PNB thought to be contrary to law. The latter
even raised new arguments, not previously considered by the trial court, which
even the latter recognized in its assailed March 25, 2002 order. From all
indications, the motion for reconsideration complied with requirements of Sections
1 and 2, Rule 37 of the Rules of Court.[34] Thus, it was grave abuse of discretion
for the trial court to have simply concluded that the motion was pro forma and did
not toll the running of the period to appeal. The RTC should have given due
course to PNBs appeal.

WHEREFORE, the Court DISMISSES the petition and AFFIRMS the

decision of the Court of Appeals in CA G.R. SP 71116 dated September 30, 2005
in its entirety. The petitioner spouses Antonio and Aurora Alagar are further
ordered to RETURNto respondent PNB OCT 0-3576, as well as the amount
of P181,825.00 and all other amounts that they received under the Alias Writ of
Execution dated October 22, 2002.

SO ORDERED.
SECOND DIVISION

LINDA M. CHAN KENT, G.R. No. 185758

represented by ROSITA
MANALANG, Present:
Petitioner,
CARPIO, J., Chairperson,
VELASCO, JR.,
- versus - PERALTA,
ABAD, and
MENDOZA, JJ.

DIONESIO C. MICAREZ,
SPOUSES ALVARO E.
MICAREZ & PAZ
MICAREZ, and THE
REGISTRY OF DEEDS, Promulgated:
DAVAO DEL NORTE,
Respondents. March 9, 2011
x ----------------------------------------------------------------------------------------x

DECISION
MENDOZA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the
July 17, 2008 Order[1] of the Regional Trial Court of Panabo City, Branch
34 (RTC), dismissing the complaint for recovery of property filed by petitioner
Linda M. Chan Kent(petitioner), docketed as Civil Case No. 13-2007, and its
November 21, 2008, Order[2] denying her motion for reconsideration.

The Facts

This petition draws its origin from a complaint for recovery of real property
and annulment of title filed by petitioner, through her younger sister and authorized
representative, Rosita Micarez-Manalang (Manalang), before the RTC. Petitioner
is of Filipino descent who became a naturalized American citizen after marrying an
American national in 1981. She is now a permanent resident of the United States of
America (USA).

In her complaint, petitioner claimed that the residential lot in Panabo City,
which she purchased in 1982, was clandestinely and fraudulently conveyed and
transferred by her parents, respondent spouses Alvaro and Paz Micarez (Spouses
Micarez), in favor of her youngest brother, respondent Dionesio
Micarez (Dionesio), to her prejudice and detriment. She alleged that sometime in
1982, she asked her parents to look for a residential lot somewhere in Poblacion
Panabo where the Spouses Micarez would build their new home. Aware that there
would be difficulty in registering a real property in her name, she being married to
an American citizen, she arranged to pay for the purchase price of the residential
lot and register it, in the meantime, in the names of Spouses Micarez under an
implied trust. The title thereto shall be transferred in her name in due time.

Thus, on October 20, 1982, a deed of absolute sale was executed between
Spouses Micarez and the owner, Abundio Panganiban, for the 328 square meter
residential lot covered by Transfer Certificate of Title (TCT) No. T-25833.
Petitioner sent the money which was used for the payment of the lot. TCT No. T-
25833 was cancelled upon the registration of the deed of sale before the Registry
of Deeds of Davao del Norte. In lieu thereof, TCT No. T-38635 was issued in the
names of Spouses Micarez onJanuary 31, 1983.

Sometime in 2005, she learned from Manalang that Spouses Micarez sold
the subject lot to Dionesio on November 22, 2001and that consequently, TCT T-
172286 was issued in her brothers name on January 21, 2002.

At the end, petitioner prayed that she be declared as the true and real owner
of the subject lot; that TCT No. T-172286 be cancelled; and that a new one be
issued in her name.[3]

Considering that all the respondents are now also permanent residents of
the USA, summons was served upon them by publication per RTC
Order[4] dated May 17, 2007. Meanwhile, the respondents executed two special
powers of attorney[5] both dated August 3, 2007 before the Consulate General of
the Philippines in Los Angeles, California, U.S.A., authorizing their counsel, Atty.
Richard C. Miguel (Atty. Miguel), to file their answer in Civil Case No. 13-2007
and to represent them during the pre-trial conference and all subsequent hearings
with power to enter into a compromise agreement. By virtue thereof, Atty. Miguel
timely filed his principals answer denying the material allegations in the
complaint.

After the parties had filed their respective pre-trial briefs, and the issues in
the case had been joined, the RTC explored the possibility of an amicable
settlement among the parties by ordering the referral of the case to the Philippine
Mediation Center (PMC). On March 1, 2008, Mediator Esmeraldo O. Padao,
Sr. (Padao) issued a Mediators Report[6] and returned Civil Case No. 13-2007 to
the RTC allegedly due to the non-appearance of the respondents on the scheduled
conferences before him. Acting on said Report, the RTC issued an order on May
29, 2009 allowing petitioner to present her evidence ex parte.[7]

Later, Padao clarified, through a Manifestation,[8] dated July 15, 2008, that it
was petitioner, represented by Atty. Benjamin Utulle (Atty. Utulle), who did not
attend the mediation proceedings set on March 1, 2008, and not Atty. Miguel,
counsel for the respondents and their authorized representative. Padao explained
that Atty. Miguel inadvertently affixed his signature for attendance purposes on the
column provided for the plaintiffs counsel in the mediators report. In light of this
development, the RTC issued the assailed Order[9] dated July 17, 2008 dismissing
Civil Case No. 13-2007. The pertinent portion of said order reads:

Being so, the Order dated May 29, 2008 is hereby corrected.
For plaintiffs and her counsels failure to appear during the
mediation proceeding, this instant case is hereby ordered
DISMISSED.

SO ORDERED.

Petitioner, through her counsel, filed a motion for reconsideration[10] to set

aside the order of dismissal, invoking the relaxation of the rule on non-appearance
in the mediation proceedings in the interest of justice and equity. Petitioner urged
the trial court not to dismiss the case based merely on technicalities contending that
litigations should as much as possible be decided on the merits. Resolving the
motion in its second assailed Order[11] dated November 21, 2008, the RTC ruled
that it was not proper for the petitioner to invoke liberality inasmuch as the
dismissal of the civil action was due to her own fault. The dispositive portion of
said order reads:

WHEREFORE, there being no cogent reason to depart from

our earlier Order, this instant motion for reconsideration is
hereby ordered DENIED.

SO ORDERED.[12]

The denial prompted the petitioner to file this petition directly with this
Court claiming that the dismissal of the case was not in accordance with applicable
law and jurisprudence.

ISSUES

1. WITH ALL DUE RESPECT, THE HONORABLE COURT A

QUO GRAVELY ERRED IN DISMISSING THE CASE
SIMPLY ON THE REASON THAT PLAINTIFF FAILED TO
 APPEAR DURING THE MEDIATION PROCEEDING,
ALTHOUGH PRESENT FOR TWO (2) TIMES.

2. IS THE EXCUSABLE AND EXPLAINED FAILURE TO

ATTEND THE MEDIATION PROCEEDING FOR TWO (2)
TIMES OR SETTINGS, OUT OF THE FOUR (4) SCHEDULED
SETTINGS, BY THE PLAINTIFF A GROUND TO DISMISS
THE CASE UNDER THE SUPREME COURTS
ADMINISTRATIVE CIRCULAR NO. 20-2002?

The pivotal issue in this case is whether the RTC erred in dismissing Civil
Case No. 13-2007 due to the failure of petitioners duly authorized representative,
Manalang, and her counsel to attend the mediation proceedings under the
provisions of A.M. No. 01-10-5-SC-PHILJA and 1997 Rules on Civil Procedure.

Petitioner claims that the dismissal of the case was unjust because her
representative, Manalang, and her counsel, Atty. Etulle, did not deliberately snub
the mediation proceedings. In fact, Manalang and Atty. Etulle twice attended the
mediation conferences onJanuary 19, 2008 and on February 9, 2008. On both
occasions, Manalang was present but was not made to sign the attendance sheet
and was merely at the lobby waiting to be called by Atty. Etulle upon arrival of
Atty. Miguel. Manalang and Atty. Etulle only left PMC at 11:00 oclock in the
morning when Atty. Miguel had not yet arrived.[13]

Petitioner, however, admits that her representative and counsel indeed failed
to attend the last scheduled conference on March 1, 2008, when they had to attend
some urgent matters caused by the sudden increase in prices of commodities.[14]

In the interest of justice, the Court grants the petition.

A.M. No. 01-10-5-SC-PHILJA dated October 16, 2001, otherwise known as

the Second Revised Guidelines for the Implementation of Mediation Proceedings,
was issued pursuant to par. (5), Section 5, Article VII of the 1987 Constitution
mandating this Court to promulgate rules providing for a simplified and
inexpensive procedure for the speedy disposition of cases. Also, Section 2(a), Rule
18 of the 1997 Rules of Civil Procedure, as amended, requires the courts to
consider the possibility of an amicable settlement or of submission to alternative
modes of resolution for the early settlement of disputes so as to put an end to
litigations. The provisions of A.M. No. 01-10-5-SC-PHILJA pertinent to the case
at bench are as follows:

9. Personal appearance/Proper authorizations

Individual parties are encouraged to personally appear for

mediation. In the event they cannot attend, their representatives
must be fully authorized to appear, negotiate and enter into a
compromise by a Special Power of Attorney. A corporation shall,
by board resolution, fully authorize its representative to appear,
negotiate and enter into a compromise agreement.

12. Sanctions

Since mediation is part of Pre-Trial, the trial court shall

impose the appropriate sanction including but not limited
tocensure, reprimand, contempt and such other sanctions as are
provided under the Rules of Court for failure to appear for pre-
trial, in case any or both of the parties absent himself/themselves,
or for abusive conduct during mediation proceedings.
[Underscoring supplied]

To reiterate, A.M. No. 01-10-5-SC-PHILJA regards mediation as part of

pre-trial where parties are encouraged to personally attend the proceedings. The
personal non-appearance, however, of a party may be excused only when the
representative, who appears in his behalf, has been duly authorized to enter into
possible amicable settlement or to submit to alternative modes of dispute
resolution. To ensure the attendance of the parties, A.M. No. 01-10-5-SC-PHILJA
specifically enumerates the sanctions that the court can impose upon a party who
fails to appear in the proceedings which includes censure, reprimand, contempt,
and even dismissal of the action in relation to Section 5, Rule 18 of the Rules of
Court.[15] The respective lawyers of the parties may attend the proceedings and, if
they do so, they are enjoined to cooperate with the mediator for the successful
amicable settlement of disputes[16] so as to effectively reduce docket congestion.

Although the RTC has legal basis to order the dismissal of Civil Case No.
13-2007, the Court finds this sanction too severe to be imposed on the petitioner
where the records of the case is devoid of evidence of willful or flagrant disregard
of the rules on mediation proceedings. There is no clear demonstration that the
absence of petitioners representative during mediation proceedings on March 1,
2008 was intended to perpetuate delay in the litigation of the case. Neither is it
indicative of lack of interest on the part of petitioner to enter into a possible
amicable settlement of the case.

The Court notes that Manalang was not entirely at fault for the cancellation
and resettings of the conferences. Let it be underscored that respondents
representative and counsel, Atty. Miguel, came late during the January 19
and February 9, 2008conferences which resulted in their cancellation and the final
resetting of the mediation proceedings to March 1, 2008. Considering the
circumstances, it would be most unfair to penalize petitioner for the neglect of her
lawyer.

Assuming arguendo that the trial court correctly construed the absence of
Manalang on March 1, 2008 as a deliberate refusal to comply with its Order or to
be dilatory, it cannot be said that the court was powerless and virtually without
recourse. Indeed, there are other available remedies to the court a quo under A.M.
No. 01-10-5-SC-PHILJA, apart from immediately ordering the dismissal of the
case. If Manalangs absence upset the intention of the court a quo to promptly
dispose the case, a mere censure or reprimand would have been sufficient for
petitioners representative and her counsel so as to be informed of the courts
intolerance of tardiness and laxity in the observation of its order. By failing to do
so and refusing to resuscitate the case, the RTC impetuously deprived petitioner of
the opportunity to recover the land which she allegedly paid for.
 Unless the conduct of the party is so negligent, irresponsible, contumacious,
or dilatory as for non-appearance to provide substantial grounds for dismissal, the
courts should consider lesser sanctions which would still achieve the desired end.
The Court has written inconsiderate dismissals, even if without prejudice, do not
constitute a panacea nor a solution to the congestion of court dockets, while they
lend a deceptive aura of efficiency to records of the individual judges, they merely
postpone the ultimate reckoning between the parties. In the absence of clear lack
of merit or intention to delay, justice is better served by a brief continuance, trial
on the merits, and final disposition of the cases before the court.[17]

It bears emphasis that the subject matter of the complaint is a valuable parcel
of land measuring 328 square meters and that petitioner had allegedly spent a lot of
money not only for the payment of the docket and other filing fees but also for the
extra-territorial service of the summons to the respondents who are now permanent
residents of the U.S.A. Certainly, petitioner stands to lose heavily on account of
technicality. Even if the dismissal is without prejudice, the refiling of the case
would still be injurious to petitioner because she would have to pay again all the
litigation expenses which she previously paid for. The Court should afford party-
litigants the amplest opportunity to enable them to have their cases justly
determined, free from constraints of technicalities.[18]Technicalities should take a
backseat against substantive rights and should give way to the realities of the
situation. Besides, the petitioner has manifested her interest to pursue the case
through the present petition. At any rate, it has not been shown that a remand of the
case for trial would cause undue prejudice to respondents.

In the light of the foregoing, the Court finds it just and proper that petitioner
be allowed to present her cause of action during trial on the merits to obviate
jeopardizing substantive justice. Verily, the better and more prudent course of
action in a judicial proceeding is to hear both sides and decide the case on the
merits instead of disposing the case by technicalities. What should guide judicial
action is the principle that a party-litigant is to be given the fullest opportunity to
establish the merits of his complaint or defense rather than for him to lose life,
liberty or property on technicalities.[19] The ends of justice and fairness would best
be served if the issues involved in the case are threshed out in a full-blown trial.
Trial courts are reminded to exert efforts to resolve the matters before them on the
merits and to adjudge them accordingly to the satisfaction of the parties, lest in
hastening the proceedings, they further delay the resolution of the cases.

WHEREFORE, the petition is GRANTED. Civil Case No. 13-2007 is

hereby REINSTATED and REMANDED to
theRegional Trial Court of Panobo City, Branch 34 for referral back to the
Philippine Mediation Center for possible amicable settlement or for other
proceedings.

SO ORDERED.
SECOND DIVISION

HEIRS OF MARILOU K. SANTIAGO, G.R. No. 174034

represented by DENNIS K. SANTIAGO,
LOURDES K. SANTIAGO and
EUFEMIA K. SANTIAGO,
Petitioners, Present:

CARPIO, J., Chairperson,

- versus - VELASCO, JR.,*
PERALTA,
ABAD, and
MENDOZA, JJ.
ALFONSO AGUILA,
Respondent. Promulgated:

March 9, 2011
x --------------------------------------------------------------------------------------- x

DECISION
ABAD, J.:

This case is about the dismissal of a petition for review after it was filed
within the 30-day extension that the petitioners originally asked since the appellate
court later granted them only a 15-day extension.

The Facts and the Case

Petitioner heirs of Marilou K. Santiago owned a 25,309-square meter

coconut land that respondent Alfonso Aguila (Aguila) tenanted. For allegedly
cutting down five coconut trees in violation of the Coconut Preservation Act of
1995 and depriving the heirs of their share in the harvest, the latter filed an
ejectment suit against him before the Provincial Agrarian Reform Adjudicator
(PARAD). Aguila resisted the action.

On May 31, 2000 the PARAD ruled that Aguila deliberately failed to pay his
rents. Thus, it terminated the tenancy relationship and ordered him to vacate the
property and pay petitioners their past shares in the harvest. Aguila appealed on
June 16, 2005 to the Department of Agrarian Reform Adjudication Board
(DARAB), which set aside the PARADs decision and ordered the execution of a
new leasehold contract between the parties. On March 3, 2006 the DARAB denied
petitioner heirs motion for reconsideration.

Since petitioner heirs received a copy of the DARAB resolution denying

their motion for reconsideration on March 6, 2006, they had until March 21 within
which to file a petition for review with the Court of Appeals (CA). On March 15,
2006 they filed with the CA a motion for extension of 30 days or until April 20,
2006 within which to file their petition. The heirs filed their petition for review on
April 20, 2006, the last day of the extension they sought.

Eight days later or on April 28, 2006 the CA granted petitioner heirs an
extension of only 15 days or up to April 5, 2006 within which to file their
petition.[1] The consequence of this was that the petition they earlier filed went
beyond the allowed extension. Further, the CA also found the special power of
attorney (SPA) attached to the petition defective in that it empowered petitioner
Eufemia K. Santiago (Eufemia) as attorney-in-fact of a Dennis Matubis, who was
not a petitioner, when Eufemia was supposed to stand as attorney-in-fact for
petitioner Dennis K. Santiago. For these reasons, the CA dismissed the
petition. Petitioner heirs moved for reconsideration but the CA denied their motion
on August 7, 2006, prompting them to come to this Court on a petition for review.

The Issue Presented

The issue in this case is whether or not the CA erred in dismissing petitioner
heirs petition for review under Rule 43 for having been filed out of time.

The Courts Rulings

1. Regarding the defective SPA, petitioner heirs explained that it was an

honest mistake because Dennis Matubis (who appeared not to be a party in the
case) and petitioner Dennis K. Santiago are one and the same person. Since Aguila
has offered no proof to counter the truth of this assertion and since the CA did not
require the heirs to substantiate it, the Court may presume such assertion to be
true. Besides, the CA cannot altogether throw out the entire petition for this reason
since all the petitioners have a common interest in the success of the suit and since
the petition was validly verified with respect to the rest of them.

2. Although it is within the CAs discretion to grant or not to grant a

motion for extension, such discretion should be exercised wisely and
prudently. The rules regulating the filing of motions for extension of time to file
certain pleadings are intended to promote the speedy disposition of cases in the
interest of justice, not throw out such pleadings on pure technicality.

Here, on March 15, 2006 petitioner heirs filed their motion for extension of
30 days (counted from March 21 when the original period was to run out) within
which to file their petition. If the CA would want to deny that extension or shorten
it to only 15 days up to April 5, 2006, it had technically at least 20 days (from
March 15 to April 4) within which to so warn petitioners that they might have a
chance to finish up and file their petition. Yet, it did not. While the parties have
no right to expect the CA to grant their motion for extension, they have a right to
expect reasonableness from it.
 Technically the CA waited 44 days up to April 28, 2006 before acting on the
motion that petitioners filed on March 15, 2006. The CA knew, when it reduced to
only 15 days the extension asked of it, that such reduced extension had already
come to pass 23 days earlier on April 5, 2006. Surely, the CA did not expect
petitioners to still be able to cope with the reduced extension. Since the rules allow
the CA to grant an extra 15-day extension for the most compelling reason, the
CA ought to have given petitioners reasonable notice that it did not regard its
ground sufficiently compelling. The CA gave petitioner heirs absolutely no chance
to file a timely petition.

What is more, when the CA acted on the motion for extension on April 28,
2006 the petition was already at hand, having been filed earlier on April 20. The
CA cannot pretend that it had been waiting with bated breath to have a look at the
petition and that, consequently, it could only grant a shorter extension for its
filing. Indeed, the CA did not dismiss the petition outright when it did not get the
same by April 5, its desired deadline. The CA got the petition on April 20, 2006
but waited eight days more or until April 28, 2006 before looking at it. So what
was the point in its denying the longer extension when it was not ready to act
promptly on the petition?

Procedural rules are intended to facilitate the administration of justice, not

frustrate it. It is always better that a case is decided on the merits rather than
disposed of because of procedural infirmities. Considering that the case involves
tenancy relations and possession of agricultural landholding and that PARAD and
DARAB have made conflicting findings, a review of the case by the CA was
clearly in order.

WHEREFORE, the Court GRANTS the petition, SETS ASIDE the Court
of Appeals resolutions in CA-G.R. SP 93935 dated April 28, 2006 and August 7,
2006 and DIRECTS it to give due course to the petition of petitioner Heirs of
Marilou K. Santiago and adjudicate it on its merits.

SO ORDERED.
 SINDICO v. Diaz
Facts: Virgilio Sindico, is the registered owner of a parcel of land, which he let the
spouses Eulalio and Concordia Sombrea cultivate, without him sharing in the produce,
as his "assistance in the education of his cousins" including defendant Felipe Sombrea.

After the death of the Eulalio Sombrea, Felipe continued to cultivate the lot.

On June 20, 1993, Sindico requested Felipes wife for the return of the possession of
the lot but the latter requested time to advise her husband.

Repeated demands for the return of the possession of the lot remained unheeded,
forcing Sindico to file a civil case before the RTC against the spouses Sombrea for
Accion Reivindicatoria with Preliminary Mandatory Injunction.

The defendants filed a Motion to Dismiss, alleging that the RTC has no jurisdiction over
their person and that as the subject matter of the case is an agricultural land which is
covered by the Comprehensive Agrarian Reform Program (CARP) of the government,
the case is within the exclusive original jurisdiction of the DARAB in accordance with
Section 50 of Republic Act 6657 (THE COMPREHENSIVE AGRARIAN REFORM LAW
OF 1988)

The plaintiff filed an Opposition alleging that the case does not involve an agrarian
dispute, there being no tenancy relationship or leasehold agreement with the
defendants.

The RTC of Iloilo granted the Motion to Dismiss

As their Motion for Reconsideration was denied by the trial court, the plaintiffs, herein
petitioners, lodged the present Petition for Review on Certiorari.

Issue: Whether or not the Department of Agrarian Reform Adjudication Board (DARAB)
has original and exclusive jurisdiction over the case at bar.

Held: No. Jurisdiction over the subject matter is determined by the allegations of the
complaint. It is not affected by the pleas set up by the defendant in his answer or in a
motion to dismiss, otherwise, jurisdiction would be dependent on his whims.

The allegations in petitioners complaint show that the action is one for recovery of
possession, not one which involves an agrarian dispute.
Section 3(d) of RA 6657 or the CARP Law defines "agrarian dispute" over which the
DARAB has exclusive original jurisdiction as:

(d) any controversy relating to tenurial arrangements, whether leasehold, tenancy,

stewardship or otherwise, over lands devoted to agriculture, including disputes
concerning farmworkers associations or representation of persons in negotiating, fixing,
maintaining, changing or seeking to arrange terms or conditions of such tenurial
arrangements including any controversy relating to compensation of lands acquired
under this Act and other terms and conditions of transfer of ownership from landowners
to farmworkers, tenants and other agrarian reform beneficiaries, whether the disputants
stand in the proximate relation of farm operator and beneficiary, landowner and tenant,
or lessor and lessee.

Since petitioners action is one for recovery of possession and does not involve an
agrarian dispute, the RTC has jurisdiction over it.