SECOND DIVISION

[G.R. No. 150780. May 5, 2006.]

NESTLE PHILIPPINES, INC., petitioner, vs. FY SONS,

INCORPORATED, respondent.

DECISION

CORONA, J : p

This is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 57299
dated January 11, 2001 which in turn affirmed with modification the decision of
Branch 57 of the Regional Trial Court (RTC) of Makati City in Civil Case No. 90-
3169, 2 as well as the CA's resolution 3 dated November 14, 2001 which denied
petitioner's motion for reconsideration.
The antecedent facts follow.
Petitioner is a corporation engaged in the manufacture and distribution of all
Nestle products nationwide. Respondent, on the other hand, is a corporation
engaged in trading, marketing, selling and distributing food items to restaurants
and food service outlets. On December 23, 1998, petitioner and respondent
entered into a distributorship agreement (agreement) whereby petitioner would
supply its products for respondent to distribute to its food service outlets. A deed
of assignment was also executed by respondent in favor of petitioner on
December 13, 1988, assigning the time deposit of a certain Calixto Laureano in
the amount of P500,000 to secure respondent's credit purchases from petitioner.
A special power of attorney was likewise executed by Laureano authorizing the
respondent to use the time deposit as collateral.
The areas covered by the agreement were Baguio, Dagupan, Angeles, Bulacan,
Pampanga, Urdaneta, La Union, Tarlac and Olongapo. At the end of 1989, the
agreement expired and the parties executed a renewal agreement on January 22,
1990. A supplemental agreement was executed on June 27, 1990, to take effect
on July 1, 1990.
On July 2, 1990, petitioner fined respondent P20,000 for allegedly selling 50
cases of Krem-Top liquid coffee creamer to Lu Hing Market, a retail outlet in
Tarlac. This was purportedly proscribed by the agreement. Respondent paid the
fine. In September 1990, Krem-Top liquid coffee creamer was sold to Augustus
Bakery and Grocery, an act again allegedly in violation of the agreement.
Petitioner imposed a P40,000 fine which respondent refused to pay. TCDcSE

On October 19, 1990, respondent, through counsel, wrote petitioner to complain

about the latter's breaches of their agreement and the various acts of bad faith
committed by petitioner against respondent. Respondent demanded the payment
of damages. In turn, on November 5, 1990, petitioner sent respondent a demand
letter and notice of termination, alleging that the latter had outstanding accounts
of P995,319.81. When the alleged accounts were not settled, petitioner applied
the P500,000 time deposit as partial payment.
Respondent filed a complaint for damages against petitioner, alleging bad
faith. 4 According to respondent:
. . . [petitioner] made representations and promises of rendering support,
including marketing support, assignment of representatives by way of
assistance in its development efforts, and assurances of income in a
marketing area not previously developed. Thus, [respondent] was lured
into executing a distributorship agreement with the [petitioner]. . . .
[Respondent] thereby invested huge sums of money, time and efforts to
abide by such distributorship agreement, and to develop market areas
for [petitioner's] products. Thereafter, the [petitioner] breached the
distributorship agreement by committing various acts of bad faith such
as: failing to provide promotional support; deliberately failing to promptly
supply the [respondent] with the stocks for its orders; intentionally
diminishing the [respondent's] sales by supporting a non-distributor; and
concocting falsified charges to cause the termination of the
distributorship agreement without just cause. By such termination,
[petitioner] would be able to obtain the market gains made by
[respondent] at the latter's own efforts and expenses. When [respondent]
complained to [petitioner] about the latter's acts of bad faith, the latter
terminated the agreement on the allegation that [respondent] did not pay
its accounts. [Petitioner] also seized [respondent's] time deposit
collateral without basis; penalized [respondent] with monetary penalty for
the concocted charge; and unilaterally suspended the supply of stocks to
[respondent]. 5
Respondent sought actual damages of P1,000,000, moral damages of P200,000,
exemplary damages of P100,000, attorney's fees of P100,000, plus the return of
the P500,000 time deposit and costs of suit. In its answer, petitioner interposed a
counterclaim for P495,319.81 representing the balance of respondent's overdue
accounts, with interest of 2% per month from the date of default until fully paid,
moral damages of P100,000, exemplary damages of P200,000, attorney's fees of
P120,000 and costs of suit.
In a decision dated November 10, 1997, the Makati City RTC ruled in favor of the
respondent:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and against the defendant ordering the defendant to
pay plaintiff the following:
1. The amount of P1,000,000.00 as actual damages sustained by
the plaintiff by reason of the unwarranted and illegal acts of
the defendant in terminating the distributorship agreement;
2. The amount of P100,000.00 as exemplary damages;
3. The amount of P100,000.00 as attorney's fees;
The plaintiff however, is hereby ordered to pay the defendant the amount
of P53,214,26 (sic) which amount has been established as the amount
the defendant is entitled from the plaintiff.
Three-fourths costs against the defendant.
SO ORDERED. 6
Petitioner appealed the decision to the CA. On January 11, 2001, the CA
rendered a decision affirming the RTC's decision with modification:
WHEREFORE, the judgment appealed from is AFFIRMED with the
following MODIFICATIONS: (1) the actual damages is INCREASED
from P1,000,000.00 to P1,500,000.00; 7 and (2) the amount of
P53,214.26 payable by the appellee to the appellant is DELETED. CTSDAI

SO ORDERED. 8
Both the CA and the RTC found, among others, that petitioner indeed failed to
provide support to respondent, its distributor; that petitioner unjustifiably refused
to deliver stocks to respondent; that the imposition of the P20,000 fine was void
for having no basis; that petitioner failed to prove respondent's alleged
outstanding obligation; that petitioner terminated the agreement without sufficient
basis in law or equity and in bad faith; and that petitioner should be held liable for
damages.
Hence this petition raising the following grounds:
(1)
THE [CA] COMMITTED A GRAVE ERROR IN LAW WHEN IT RULED
THAT: "THE RATIOCINATIONS OF THE APPELLANT AS TO THE
APPELLEE'S ALLEGED VIOLATION OF THE CONTRACT ARE THUS
WEAK AND UNCONVINCING" AND "THE APPELLEE'S ALLEGED
NON-PAYMENT AND OUTSTANDING BALANCE OF P995,319.81
WAS NOT SUFFICIENTLY PROVEN" DESPITE THE FACT THAT
FLORENTINO YUE, JR., THE MANAGER OF THE RESPONDENT
 ADMITTED IN OPEN COURT IN ANSWER TO THE QUESTION OF
THEN PRESIDING JUDGE PHINNY C. ARAQUIL THAT THE
DISTRIBUTORSHIP AGREEMENT WAS TERMINATED BY YOUR
PETITIONER BECAUSE OF THE UNPAID BALANCE OF THE
RESPONDENT OF AROUND P900,000.00.
(2)
THE [CA] COMMITTED A GRAVE ERROR IN LAW IN DISREGARDING
THE TESTIMONY OF THE WITNESS FOR THE PETITIONER,
CRISTINA RAYOS WHO PREPARED THE STATEMENT OF
ACCOUNT (EXHIBIT 11) ON THE GROUNDS THAT SHE WAS NOT
INVOLVED IN THE DELIVERY AS SHE WAS ONLY IN CHARGE OF
THE RECORDS AND DOCUMENTS OF ALL ACCOUNTS
RECEIVABLES AS PART OF HER DUTIES AS CREDIT AND
COLLECTION MANAGER CONSIDERING THAT THE EVIDENCE
PRESENTED WAS AN EXCEPTION TO THE HEARSAY RULE UNDER
SECTION 45 (SIC), RULE 130, OF THE REVISED RULES ON
EVIDENCE.
(3)
THE [CA] COMMITTED A GRAVE ERROR IN LAW IN AWARDING TO
THE RESPONDENT ACTUAL DAMAGES IN THE AMOUNT OF
P1,000,000.00 AND ORDERING THE REFUND OF THE AMOUNT OF
P500,000.00 REPRESENTING THE TIME DEPOSIT OF THE
RESPONDENT WHICH WAS ASSIGNED AS SECURITY FOR THE
RESPONDENT'S CREDIT LINE BECAUSE THE PETITIONER HAD
THE RIGHT TO TERMINATE THE DISTRIBUTORSHIP AGREEMENT
UNDER ART. 1191 OF THE CIVIL CODE AND PARAGRAPHS 5 AND
22 OF THE DISTRIBUTORSHIP AGREEMENT BECAUSE OF THE
FAILURE OF THE RESPONDENT TO SETTLE ITS ACCOUNT IN THE
AMOUNT OF P995,319.81 AND THAT THE EVIDENCE SUBMITTED
BY THE RESPONDENT ON THE ALLEGED ACTUAL DAMAGES IT
SUSTAINED AS A RESULT OF THE TERMINATION OF THE
DISTRIBUTORSHIP AGREEMENT (EXHIBIT 5) AND COMPANION
EXHIBITS WERE MERELY SPECULATIVE AND DID NOT HAVE
PROBATIVE VALUE. STcADa

(4)
THE [CA] COMMITTED A GRAVE ERROR IN LAW FOR NOT
AWARDING TO THE PETITIONER ITS COUNTERCLAIM. 9
On the first issue, petitioner asserts that respondent's witness, Florentino Yue, Jr.,
a director and officer of respondent corporation, admitted in open court that the
respondent had an unpaid obligation to petitioner in the amount of "around
P900,000." 10
Respondent counters that this statement was merely in answer to the question of
the presiding judge on what ground petitioner supposedlyterminated the
agreement. The witness was not being asked, nor was he addressing, the truth
of such ground. In fact, this witness later testified that "(petitioner) wrote us back
saying that they (had) terminated my contract and that I owe(d) them something
like P900,000." 11
Petitioner's argument is palpably without merit and deserves scant consideration.
It quoted Mr. Yue's statement in isolation from the rest of his testimony and took
it out of context. Obviously, Yue's statement cannot be considered a judicial
admission that respondent had an unpaid obligation of P900,000 and that the
agreement had been terminated for this reason.
On the second issue, petitioner argues that the CA should not have disregarded
the testimony of petitioner's witness, Cristina Rayos, who prepared the statement
of account on the basis of the invoices and delivery orders corresponding to the
alleged overdue accounts of respondent. 12 The CA ruled that petitioner was not
able to prove that respondent indeed had unpaid accounts, saying, among others,
that the testimony of Rayos constituted incompetent evidence:

. . . the appellee's alleged non-payment and outstanding balance of

P995,319.81 was not sufficiently proven.
xxx xxx xxx
Anyway, the appellant's Statement of Account showing such alleged
unpaid balance is undated, and it does not show receipt thereof by the
appellee, and when, if such indeed was received. Moreover, there are no
supporting documents to sustain such unpaid accounts. The witness for
the appellant who prepared the Statement, Cristina Rayos, in fact
admitted that the Invoices corresponding to the alleged overdue
accounts are not signed. Her explanation was that there were DO's or
Delivery Orders covering the transactions. However, she did not identify
the signatures appearing on the Delivery Orders marked as Exhibits "13-
A", "14-A", "15-A" and "16-A" as the persons who received the goods for
the appellant. In any case, she could not have identified the same, for
she was not involved in the delivery, as she is only in charge of the
records and documents on all accounts receivables as part of her duties
as Credit and Collection Manager. 13
Petitioner contends that the testimony of Rayos was an exception to the hearsay
rule under Section 43, Rule 130 of the Rules of Court: 14
Entries in the course of business. Entries made at, or near the time of
the transactions to which they refer, by a person deceased, or unable to
testify, who was in a position to know the facts therein stated, may be
 received as prima facie evidence, if such person made the entries in his
professional capacity or in the performance of duty and in the ordinary or
regular course of business or duty. aCATSI

Petitioner's contention has no merit.

The provision does not apply to this case because it does not involve entries
made in the course of business. Rayos testified on a statement of account she
prepared on the basis of invoices and delivery orders which she, however, knew
nothing about. She had no personal knowledge of the facts on which the
accounts were based since, admittedly, she was not involved in the delivery of
goods and was merely in charge of the records and documents of all accounts
receivable as part of her duties as credit and collection manager. 15 She thus
knew nothing of the truth or falsity of the facts stated in the invoices and delivery
orders, i.e., whether such deliveries were in fact made in the amounts and on the
dates stated, or whether they were actually received by respondent. She was not
even the credit and collection manager during the period the agreement was in
effect. 16 This can only mean that she merely obtained these documents from
another without any personal knowledge of their contents.
The foregoing shows that Rayos was incompetent to testify on whether or not the
invoices and delivery orders turned over to her correctly reflected the details of
the deliveries made. Thus, the CA correctly disregarded her testimony.
Furthermore, the invoices and delivery orders presented by petitioner were self-
serving. Having generated these documents, petitioner could have easily
fabricated them. Petitioner's failure to present any competent witness to identify
the signatures and other information in those invoices and delivery orders cast
doubt on their veracity.
Petitioner next argues that respondent did not deny during the trial that it
received the goods covered by the invoices and was therefore deemed to have
admitted the same. 17 This argument cannot be taken seriously. From the very
beginning, respondent's position was that petitioner concocted falsified charges
of non-payment to justify the termination of their agreement. 18 In no way could
respondent be deemed to have admitted those deliveries.
On the third issue, petitioner questions the award of actual damages in the
amount of P1,000,000 and the refund of the P500,000 time deposit, contending
that it validly terminated the agreement because of respondent's failure to pay its
overdue accounts.
As discussed above, the CA declared that petitioner was not able to prove that
respondent had unpaid accounts, thus debunking the claim of a valid termination.
The CA also held petitioner guilty of various acts which violated the provisions of
the agreement. 19 Consequently, for petitioner's breach of the agreement, the CA
awarded actual damages to respondent in the amount of P1,000,000. Petitioner,
other than claiming that it validly terminated the agreement, did not challenge the
findings of the CA that it committed various violations of the agreement. Hence,
there was legal basis for the grant of actual damages. HDIaET

Petitioner asserts that the documentary evidence presented by respondent to

prove actual damages in the amount of P4,246,015.60 should not have been
considered because respondent's complaint only prayed for an award of
P1,000,000. It further contends that the court acquires jurisdiction over the claim
only upon payment of the prescribed docket fee. 20
Indeed, a court acquires jurisdiction over the claim of damages upon payment of
the correct docket fees. 21 In this case, it is not disputed that respondent paid
docket fees based on the amounts prayed for in its complaint. Respondent
adduced evidence to prove its losses. It was proper for the CA and the RTC to
consider this evidence and award the sum of P1,000,000. Had the courts below
awarded a sum more than P1,000,000, which was the amount prayed for, an
additional filing fee would have been assessed and imposed as a lien on the
judgment. 22 However, the courts limited their award to the amount prayed for.
Both the RTC and CA found that respondent had satisfactorily proven the factual
bases for the damages adjudged against the petitioner. This is a factual matter
binding and conclusive upon this Court. 23 It is well-settled that
. . . findings of fact of the trial court, when affirmed by the Court of
Appeals, are binding upon the Supreme Court. This rule may be
disregarded only when the findings of fact of the Court of Appeals are
contrary to the findings and conclusions of the trial court, or are not
supported by the evidence on record. But there is no ground to apply this
exception to the instant case. This Court will not assess all over again
the evidence adduced by the parties particularly where as in this case
the findings of both the trial court and the Court of Appeals completely
coincide. 24
Likewise, the determination of the amount of damages commensurate with
the factual findings upon which it is based is primarily the task of the trial
court. 25 Considering that the amount adjudged is not excessive, we affirm its
correctness.
Moreover, given that petitioner was not able to prove that respondent had unpaid
accounts in the amount of P995,319.81, the seizure of the P500,000 time deposit
was improper. As a result, the refund of this amount with interest is also called for.
Finally, petitioner's counterclaims are necessarily without merit. It failed to prove
the alleged outstanding accounts of respondent. Accordingly, it is not entitled to
the supposed unpaid balance of P495,319.81 with interest.
Petitioner, being at fault and in bad faith, and there being no proof that
respondent was guilty of any wrongdoing, cannot claim moral and exemplary
damages and attorney's fees from respondent.
In fine, we find no error in the assailed decision and resolution of the CA. We
therefore affirm them.
WHEREFORE, the petition is hereby DENIED for lack of merit. The decision of
the Court of Appeals dated January 11, 2001 and resolution dated November 14,
2001 in CA-G.R. CV No. 57299 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
(Nestle Philippines, Inc. v. FY Sons, Inc., G.R. No. 150780, [May 5, 2006], 523
|||

PHIL 293-304)

[G.R. No. 131127. June 8, 2000.]

ALFONSO T. YUCHENGCO, petitioner, vs. REPUBLIC OF THE

PHILIPPINES, PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT, ESTATE OF FERDINAND E. MARCOS, PRIME
HOLDINGS, INC. ESTATE OF RAMON U. COJUANGCO AND
IMELDA O. COJUANGCO,respondents.

Quisumbing Torres & Evangelista for petitioner.

The Solicitor General for public respondent.
Balbino V. Diego for Imelda Marcos.
Siguion Reyna Montecillo & Ongsiako for respondents Cojuangco.

SYNOPSIS

On July 16, 1987, the Republic of the Philippines filed with the Sandiganbayan a
complaint for recession, reconveyance, restitution, accounting and damages
against Ferdinand E. Marcos, Imelda Marcos and Prime Holdings, Inc. (PHI).
Alleging ownership of the properties of the Marcoses sought to be forfeited by
the Republic, petitioner Alfonso T. Yuchengco filed a motion for intervention and
complaint-in-intervention on August 11, 1988 impleading the Republic, the
Presidential Commission on Good Government (PCGG), Ferdinand E. Marcos,
Imelda Marcos and PHI as defendants-in-intervention. Petitioner paid a docket
fee of P400.00. Later, the petitioner amended its complainant-in-intervention to
implead Imelda Cojuangco and the Estate of Ramon U. Cojuangco as additional
defendants-in-intervention. After the Sandiganbayan admitted the amended
complaint-in-intervention, the Republic and the PHI filed their answers-in-
intervention. Thereafter, the Estate of Ramon Cojuangco and Imelda O.
Cojuangco filed a motion to dismiss the amended complaint-in-intervention on
the ground, among others, that the petitioner did not pay the correct docket fees,
in violation of the doctrine laid down in Manchester Development Corporation, et
al. vs. Court of Appeals. Contrarily, petitioner claimed that no docket fees are
payable to the Sandiganbayan pursuant to Section 11 of Presidential Decree No.
1606, as amended. Subsequently, petitioner also filed an amended motion for
early resolution to avoid prescription of action. He also moved that he be allowed
to post a bond to answer for whatever docket fees he may be held to pay. The
Sandiganbayan, however, denied petitioner's motion to post bond and it ordered
petitioner to pay the balance of the docket fee in the amount of P14,425.00.
Petitioner paid with reservation. On June 11, 1996, petitioner moved that the
amount of P14,425.00 be refunded to him, insisting that the proceedings in the
Sandiganbayan should be free of charge. However, on October 9, 1996, the
Sandiganbayan issued a resolution granting the motion to dismiss. Hence, this
petition.
The Court held that the ruling that the timely filing of correct docket fees is
jurisdictional is all too familiar. It should be noted, however, that the
pronouncements of this Court on the matter have always been influenced by the
peculiar legal and equitable circumstances surrounding each case. Equitable
considerations are equally significant. Unlike the basis of the Manchester ruling,
there was no evidence in the present case that the petitioner tried to evade the
payment of correct fees or in any way tried to mislead the Sandiganbayan court
and its employees. On the contrary, petitioner paid dues and asked the
Sandiganbayan what are the correct docket fees, if the dues paid are not
accurate. When the Sandiganbayan came out with its own computation,
petitioner paid the corrected amount. Petitioner's position that subsequent
amendments to PD 1606 did not expressly repeal Section 11 thereof was
untenable. Petitioner failed to appreciate that the expansion of the
Sandiganbayan's jurisdiction to include civil cases impliedly amended the same
and Section 1, Rule IV, Part I of the Revised Rules of the Sandiganbayan.
Moreover, the Supreme Court enjoys exclusive power to promulgate the rules on
pleading, practice, and procedure. Hence, Rule 141, Section 7(a), of the Rules of
Court applies to petitioner's complaint and/or amended complainants-in-
intervention.aDIHCT

Petitioner was ordered to submit to the Sandiganbayan the value of the

properties it seeks to recover and to pay the proper docket fees therefor within
thirty (30) days upon determination thereof.
 SYLLABUS

1. REMEDIAL LAW, CIVIL PROCEDURE; PAYMENT OF DOCKET FEES; THE

RULING THAT THE TIMELY FILING OF CORRECT DOCKET FEES IS
JURISDICTIONAL WAS INFLUENCED BY PECULIAR LEGAL AND
EQUITABLE CIRCUMSTANCES SURROUNDING EACH CASE. The ruling
that the timely filing of correct docket fees is jurisdictional is all too familiar. It
should be noted, however, that the pronouncements of this Court on the matter
have always been influenced by the peculiar legal and equitable circumstances
surrounding each case. For instance, the Lazaro v. Eudencia ruling was in
accordance with the then applicable law, i.e., Section 76 of Act No. 190 as
amended by Act No. 3615. In Malimit v. Degamo, this Court ruled that the date of
payment of docket fees and not the date of mailing is considered the date of filing
of a petition for quo warranto. In Garcia v. Vasquez, this Court initially stated that
a docket fee must be paid for a second will executed by the same decedent.
Subsequently, on a motion for reconsideration, this Court reversed itself and held
that the initial payment for the first will presented for probate was sufficient
compliance. This Court was even more liberal in Magaspi v. Ramolete, where the
docket fee was paid upon the filing of the complaint. It turned out later, after the
complaint was amended, that the payment was insufficient. This Court ruled that
under the circumstances, the case was docketed upon the first payment and the
trial court already acquired jurisdiction. However, the correct fee based on the
amended complaint was required to be paid.
2. ID.; ID.; ID.; ID.; MANCHESTER DEVELOPMENT CORPORATION V.
COURT OF APPEALS; COURT ACQUIRES JURISDICTION OVER ANY CASE
UPON PAYMENT OF PRESCRIBED DOCKET FEE. In the instant case, the
Sandiganbayan adhered strictly to the rule enunciated in Manchester
Development Corporation v. Court of Appeals, to wit: "The Court acquires
jurisdiction over any case only upon the payment of the prescribed docket fee.
Any amendment of the complaint or similar pleading will not thereby vest
jurisdiction in the Court, much less the payment of the docket fee based on the
amounts sought in the amended pleading. The ruling in the Magaspi case,
insofar as it is inconsistent with this pronouncement is overturned and reversed."
In Manchester, this Court stated that the allegation in the body of the complaint of
damages suffered in the amount of P78,000,000.00, and the omission of a
specific prayer for that amount, was intended for no other purpose than to evade
the payment of correct filing fees if not to mislead the docket clerk in the
assessment of the correct fee. The ruling was intended to put a stop to such an
irregularity.
3. ID.; ID.; ID.; ID.; ID.; ID.; NOT APPLICABLE IN CASE AT BAR. While we
are inclined to sustain the ruling that correct filing fees in civil cases must be paid
in all courts, including the Sandiganbayan, this does not preclude a ruling that, in
this case, the petitioner acted in justifiable good faith. There was ample reason
for uncertainty and doubt on the intervenor's part not merely as to the
correctness of the amount to be paid but whether or not docket fees should be
paid at all. Equitable considerations are equally significant. Unlike the basis of
the Manchester ruling, there is no evidence in the present case that the petitioner
tried to evade the payment of correct fees or in any way tried to mislead that
court and its employees. On the contrary, petitioner paid dues and asked the
Sandiganbayan what are the correct docket fees, if the dues paid are not
accurate. When Sandiganbayan came out with its own computation, petitioner
paid the corrected amount.
4. ID.; ID.; ID.; ID.; SUN INSURANCE OFFICE LTD. V. ASUNCION; PAYMENT
OF CORRECT DOCKET FEE WITHIN A REASONABLE TIME BUT IN NO
CASE BEYOND THE APPLICABLE PRESCRIPTIVE OR REGLEMENTARY
PERIOD WAS ALLOWED. We also note that the Manchester ruling did not
become the final statement on the matter. In Sun Insurance Office
Ltd. vs. Asuncion, the Court ruled: "In the present case, a more liberal
interpretation of the rules is called for considering that, unlike Manchester, private
respondent demonstrated his willingness to abide by the rules by paying the
additional docket fees as required." In the said case, the payment of the correct
fee within "a reasonable time" but in no case beyond its applicable prescriptive or
reglementary period was allowed.
5. ID.; ID.; ID.; ID.; MAXIMO TACAY, ET AL. VS. REGIONAL TRIAL COURT OF
TAGUM, ET AL.; COURT MADE SOME DISTINCTIONS BETWEEN
COMPLAINT THAT SETS OUT PURELY MONEY CLAIM AND THE PLEADING
THAT DOES NOT SPECIFY THE AMOUNT. In another case decided
afterManchester, this Court made some more distinctions: Two situations may
arise. One is where the complaint or similar pleading sets out a claim purely for
money or damages and there is no precise statement of the amounts being
claimed. In this event the rule is that the pleading will "not be accepted nor
admitted, or shall otherwise be expunged from the record." In other words, the
complaint or pleading may be dismissed or the claims as to which the amounts
are unspecified may be expunged, although as aforestated the Court may, on
motion, permit amendment of the complaint and payment of the fees provided
the claim has not in the meantime become time-barred. The other is where the
pleading does specify the amount of every claim, but the fees paid are
insufficient; and here again, the rule now is that the court may allow a reasonable
time for the payment of the prescribed fees, or the balance thereof, and upon
such payment, the defect is cured and the court may properly take cognizance of
the action, unless in the meantime prescription has set in and consequently
barred the right of action.
6. ID.; ID.; ID.; ID.; ID.; ACTIONS THAT INVOLVES REAL PROPERTY.
Where the action involves real property and a related claim for damages as well,
the legal fees shall be assessed on the basis of both (a) the value of the property
and (b) the total amount of related damages sought. The Court acquires
jurisdiction over the action if the filing of the initiatory pleading is accompanied by
the payment of the requisite fees, or, if the fees are not paid at the time of the
filing of the pleading, as of the time of full payment of the fees within such
reasonable time as the court may grant, unless, of course, prescription has set in
in the meantime. But where . . . the fees prescribed for an action involving real
property have been paid, but the amounts of certain of the related damages
(actual, moral and nominal) being demanded are unspecified, the action may not
be dismissed. The Court undeniably has jurisdiction over the action involving the
real property, acquiring it upon the filing of the complaint or similar pleading and
payment of the prescribed fee. And it is not divested of that authority by the
circumstance that it may not have acquired jurisdiction over the accompanying
claims for damages because of lack of specification thereof. What should be
done is simply to expunge those claims for damages as to which no amounts are
stated, which is what the respondent Court did, or allow, on motion, a reasonable
time for the amendment of the complaint so as to allege the precise amount of
each item of damages and accept payment of the requisite fees therefor within
the relevant prescriptive period. The rule is not as simple and uncomplicated
as Manchester makes it appear. There are other determining circumstances,
equally important. The timely filing of correct docket fees is jurisdictional, but as
shown by our decisions, considerations of law and equity come into the picture.

7. ID.; ID.; ID.; ACTIONS OF SANDIGANBAYAN CLEARLY CALL FOR

APPLICATION OF EQUITABLE CONSIDERATIONS; CASE AT BAR. Indeed,
the actions of the Sandiganbayan clearly call for the application of equitable
considerations. On February 17, 1989, it admitted the complaint-in-intervention.
Answers thereto were filed by PHI and the Cojuangcos. On June 11, 1993, the
Sandiganbayan admitted the amended complaint-in-intervention. More important,
the lower court denied the motions to dismiss filed by respondents questioning
the incorrect payment of docket fees in its resolutions dated April 17, 1995,
March 29, 1996 and May 7, 1996. Petitioner was thus led into believing, long
before the ten year prescriptive period expired, that its complaint-in-intervention
would stay admitted. However, the Sandiganbayan on October 9, 1996 and
October 6, 1997 issued the Resolutions now before us in this petition for review.
Petitioner's complaint was dismissed for non-payment of the prescribed docket
fees, without obvious regard to the implications of the reversal of its earlier
rulings. Moreover, on October 27, 1994, petitioner filed a motion for the
resolution of the issue on correct docket fees. When no decision was forthcoming,
petitioner on March 31, 1995 filed a motion to post bond to answer for whatever
additional fees that may be assessed later. On April 17, 1995, the
Sandiganbayan decided to defer the resolution of respondents' motions to
dismiss until trial. Petitioner even elevated the inaction of the Sandiganbayan to
the Supreme Court on a petition forcertiorari but this was dismissed for being
premature. It can thus be seen that, far from committing the irregularity illustrated
in Manchester, petitioner did the opposite in this case. caEIDA

8. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONSTRUCTIVE TRUST;

PRESENT IN CASE AT BAR. Considering that petitioner seeks to recover
properties, the ownership and possession of which he was allegedly deprived
through fraud, duress and/or coercion, we hold that, assuming hypothetically
these averments to be true, the legal relationship of constructive trust was
present among the parties concerned in the said transactions. Constructive trust
is that created by reason of equity to answer the demands of justice and prevent
unjust enrichment. It arises against one, who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which he ought not, in
equity and good conscience, hold.
9. ID.; ID.; ID.; ACTIONS THEREON PRESCRIBE AFTER TEN YEARS.
Correspondingly, actions thereon prescribed after ten (10) years as provided by
Article 1144 of the Civil Code: "The following actions must be brought within ten
(10) years from the time the right of action accrues: 1. Upon a written contract;
2. Upon an obligation created by law; 3. Upon a judgment." (Italics provided).
10. REMEDIAL LAW; CIVIL PROCEDURE; PRESCRIPTION OF ACTIONS;
SANDIGANBAYAN'S BELATED ACTION ON THE ISSUE OF ASSESSMENT
OF DOCKET FEES TOLLED THE RUNNING OF PRESCRIPTIVE PERIOD.
Under normal circumstances, petitioner's cause of action should have prescribed
on February 26, 1996, a month before petitioner was ordered by the
Sandiganbayan to pay docket fees or two months before the docket fees were
actually paid in the corrected amount of P14,825.00. However, we hold that said
payment could not be construed as belatedly made such as to foreclose the
prosecution of his claims. It should be noted that when the issue on docket fees
was raised, petitioner submitted the determination of the same to the sound
discretion of the Sandiganbayan. As earlier stated, he sought for the immediate
resolution of this issue as early as October 27, 1994. In the alternative, petitioner
proposed to post a bond to answer for the docket fees, if such are payable. He
even filed a petition for certiorari, docketed as G.R. No. 123264, to seek an early
resolution of this issue. Clearly, petitioner did not sleep on his rights, and
prescription has not set in to bar his right to seek judicial relief. The essence of
the statute of limitations is to prevent fraudulent claims arising from unwarranted
length of time and not to defeat actions asserted on the honest belief that they
were sufficiently submitted for judicial determination. To punish petitioner for
public respondent's failure to timely decide an issue pivotal to the success of his
case would be setting a bad precedent. It would give the courts unbridled power
and an unfair weapon to frustrate the filing of actions. We hold that public
respondent's belated action after prolonged inaction on the issue of petitioner's
payment of docket fees is a supervening event beyond the independent will and
control of petitioner that tolled the running of the prescriptive period. Article 1154
of the Civil Code is applicable by parallelism, to wit: "The period during which the
obligee was prevented by fortuitous event from enforcing his right is not reckoned
against him."
11. ID.; ID.; PAYMENT OF DOCKET FEES; COURT CAN IMMEDIATELY CALL
PLAINTIFF'S ATTENTION IF ITS CLERK OF COURT FINDS DIFFICULTY IN
DETERMINING THE CORRECT DOCKET FEES FROM MERE READING OF
COMPLAINT. [E]quity and the extraordinary circumstances surrounding the
present case necessitate this ruling. For among the parties in the case at bar, the
Sandiganbayan is the most equipped to afford petitioner the opportunity to
present his claims. Not only that, but going back to the pronouncements of this
Court in Sun Insurance Office, Ltd. (SIOL) v.Asuncion, where we recognized that
the sufficiency of the docket fees is a matter for the determination of the clerk of
court and/or his duly authorized docket clerk or clerk in-charge, the
Sandiganbayan could have immediately drawn petitioner's attention if its clerk of
court found difficulty in determining the amount of chargeable docket fees from a
reading of the complaint. Even in the celebrated case of Manchester
Development Corporation v. Court of Appeals, the trial court directed the plaintiff
therein to rectify the flaws in its amended complaint. That way, not only could the
Sandiganbayan have seasonably resolved the issues on docket fees but it could
very well have timely settled petitioner's dilemma on what to do and what was
required to preserve his rights. Courts are mandated to promptly administer
justice. Having the inherent power to amend and control the processes and
orders, to make them conformable to law and justice we have the avowed duty to
uphold the right of all persons to a speedy disposition of their cases and avert the
precipitate loss of rights.
12. ID.; ID.; ID.; PARTIES FILING CIVIL ACTIONS BEFORE THE
SANDIGANBAYAN ARE LIABLE TO PAY THE REQUIRED DOCKET FEES.
While it may be argued that petitioner could have very well amended his
complaint and alleged the monetary values of the properties he seeks to recover
to comply with Rule 141, Section 7(a) of the Rules of Court, we find, pro hac vice,
that petitioner acted in good faith when he contended that proceedings before the
Sandiganbayan are free of charge. The present rule must, however, be stressed:
parties filing civil actions before the Sandiganbayan are liable to pay the required
docket fees. The situation only differs in the case at bar because of petitioner's
honest conviction manifested in his filing of a reservation for the payments he
made, after having been ordered by the Sandiganbayan on March 29, 1996 to
pay the balance of P14,425.00 and after the court denied his motion to post bond
pending final resolution of the motion to dismiss. Be that as it may, petitioner's
position that subsequent amendments to P.D. 1606 did not expressly repeal
Section 11 thereof is untenable. Petitioner failed to appreciate that the expansion
of the Sandiganbayan's jurisdiction to include civil cases impliedly amended the
same and Section 1, Rule IV, Part I of the Revised Rules of the Sandiganbayan.
Moreover, the Supreme Court enjoys exclusive power to promulgate the rules on
pleading, practice, and procedure. In addition,Republic Act No. 7975 amended
Section 9 of P.D. 1606 to read as follows: "Rules of Procedure. The Rules of
Court promulgated by the Supreme Court shall apply to all cases and
proceedings filed with the Sandiganbayan. . . ." Hence, Rule 141 Section 7(a) of
the Rules of Court applies to petitioner's complaint and/or amended complaints-
in-intervention.
13. ID.; STATUTORY CONSTRUCTION; STATUTES REGULATING THE
PROCEDURE OF THE COURTS ARE APPLICABLE TO ACTIONS PENDING
AND UNDETERMINED AT THE TIME OF THEIR PASSAGE. Petitioner
argues that R.A. 7975, having been promulgated on March 30, 1995 should not
be retroactively applied. This is not so, as statute regulating the procedure of the
courts are applicable to actions pending and undetermined at the time of their
passage, thus, retrospective in such sense and to that extent.

DECISION

YNARES-SANTIAGO, J : p

This is a petition for review to set aside the Resolution of the Sandiganbayan
dated October 9, 1996 1 dismissing petitioner's Amended-complaint-in-
intervention and the subsequent Resolution dated October 6, 1997 2 denying
petitioner's motion for reconsideration.dctai

The issue in this petition is whether or not, under the undisputed circumstances
at bar, the Sandiganbayan may dismiss the complaint-in-intervention for alleged
failure to pay the correct amount of docket fees on time.
On July 16, 1987, the Republic of the Philippines (hereinafter, the Republic) filed
with the Sandiganbayan a complaint for Rescission, Reconveyance, Restitution,
Accounting and Damages against Ferdinand E. Marcos, Imelda Marcos and
Prime Holdings, Inc. (hereinafter, PHI), docketed as Civil Case No. 0002.
Alleging ownership of the properties of the Marcoses sought to be forfeited by
the Republic, petitioner Yuchengco filed a motion for intervention and complaint-
in-intervention on August 11, 1988, impleading the Republic, the Presidential
Commission on Good Government (PCGG), Ferdinand E. Marcos, Imelda
Marcos and PHI as defendants-in-intervention. 3 Petitioner paid a docket fee of
P400.00.

On February 17, 1989, the Sandiganbayan issued a Resolution granting the

motion for intervention and admitting the complaint-in-
intervention. 4 TheRepublic filed a motion for reconsideration on March 14, 1989,
which petitioner opposed.
On February 9, 1990, the Sandiganbayan denied the Republic's motion for
reconsideration. 5 Hence, the Republic and the PCGG, on behalf of PHI, filed an
answer to the complaint-in-intervention dated June 19, 1990 and November 2,
1990, respectively.
Meanwhile, PHI filed a Manifestation and Motion, stating that Imelda Cojuangco
and the Estate of Ramon U. Cojuangco claim ownership of PHI. Thus, on May 31,
1993, petitioner moved for leave to admit amended complaint-in-intervention to
implead the said claimants. 6
On June 11, 1993, the Sandiganbayan, in open court, admitted the amended
complaint-in-intervention. 7 Consequently, amended answers-in-intervention were
filed by the Republic and the PHI on July 2, 1993.
On the other hand, the Estate of Ramon Cojuangco and Imelda O. Cojuangco
(hereinafter, the Cojuangcos) filed a motion to dismiss 8 the amended complaint-
in-intervention, dated August 25, 1993, on the ground of failure to state a cause
of action and lack of jurisdiction of the Sandiganbayan over the case, inasmuch
as petitioner did not pay the correct docket fees. They argued that the amended-
complaint-in-intervention failed to state the amount of the claim or the value of
the property subject of the complaint, in violation of the doctrine laid down
in Manchester Development Corporation, et al. v. Court of Appeals. 9
On September 6, 1993, petitioner filed a second amended complaint-in-
intervention with motion for leave. Later, on September 28, 1993, he also
opposed the motion to dismiss filed by PHI and the Cojuangcos on September
28, 1993. 10
PHI and the Cojuangcos filed a reply 11 alleging that since the amended
complaint-in-intervention is substantially an action for the recovery of ownership
and possession of shareholdings in the Philippine Telecommunications
Investment Corporation (PTIC), Section 7 (a) of Rule 141 of the Rules of Court
applies, to wit:
SECTION 7. Clerks of Regional Trial Courts.
(a) For filing an action or a permissive counter-claim or money claim
against an estate not based on judgment, or for filing with leave of court
 a third-party, fourth-party, etc. complaint, or a complaint in
intervention . . . if . . . the stated value of the property in litigation is:
1. Not more than P20,000.00 P120.00
2. More than P20,000.00 but less than P40,000.00 150.00
3. P40,000.00 or more but less than P60,000.00 200.00
4. P60,000.00 or more but less than P80,000.00 250.00
5. P80,000.00 or more but less than P100,000.00 400.00
6. P100,000.00 or more but less than P150,000.00 600.00
7. For each P1,000.00 in excess of P150,000.00 5.00
Further, respondents PHI and the Cojuangcos contend that as the action seeks
to litigate the ownership and disposition of properties consisting of subject shares,
the amount of docket fees must be based on the total value of the same.
Petitioner filed a rejoinder 12 dated November 29, 1993, maintaining that no
docket fees are payable to the Sandiganbayan, pursuant to Section 11
ofPresidential Decree No. 1606, as amended, which provides:
Proceedings free of charge. All proceedings in the Sandiganbayan
shall be conducted at no cost to the complainant and/or his witnesses.
In their sur-rejoinder filed on January 28, 1994, 13 respondents PHI and the
Cojuangcos countered that the reason for the above-quoted Section 11 ofP.D.
1606 is that the jurisdiction of the Sandiganbayan at the time of its enactment
was limited to criminal actions. With the expansion of the Sandiganbayan's
jurisdiction to include civil cases, the payment of docket fees has become a
jurisdictional requirement.
On February 8, 1994, 14 petitioner replied that the Sandiganbayan has no power
or discretion to ignore or amend the provision in Section 11 of P.D. 1606 simply
on the basis of public policy. Petitioner points out that Executive Order No.
14 issued by President Corazon C. Aquino did not amend the said provision,
hence, payment of docket fees in the Sandiganbayan is legally without basis.
On September 21, 1994, petitioner re-filed his second amended complaint-in-
intervention 15 with motion to admit, wherein he sought to include Y Realty
Corporation as co-plaintiff-in-intervention and to join Imelda R. Marcos as the
representative of the Estate of Ferdinand Marcos.
On October 11, 1994, PHI and the Cojuangcos opposed the motion to admit
second amended complaint-in-intervention, 16 contending that jurisdictional
issues should first be resolved before the most recent motion is considered.
A motion for early resolution 17 was filed by petitioner on October 27, 1994. He
averred that since the main issues in the motion to dismiss filed by PHI and the
Cojuangcos dwell on payment of docket fees and the amount thereof, which may
possibly involve the jurisdiction of the Sandiganbayan, and it is unclear whether
the filing of the complaint-in-intervention tolled the running of the 10-year
prescriptive period, there is a need for the Sandiganbayan to resolve the motion
to dismiss as soon as possible.
On March 31, 1995, petitioner moved that he be allowed to post a bond, 18 to
answer for whatever docket fees he may be held to pay, with the prayer that the
running of the prescriptive period be deemed tolled pending the resolution by the
Sandiganbayan of the motion to dismiss.
In a Resolution dated April 17, 1995, 19 the Sandiganbayan deferred the
resolution of the motion to dismiss until trial, as the grounds raised therein do not
appear to be indubitable.
Meanwhile, PHI and the Cojuangcos opposed petitioner's motion to post bond on
the ground that the same should not be construed as a substitute for the actual
payment of the proper docket fees, because payment of docket fees should not
be subject to any contingency. 20
On the other hand, petitioner moved for the partial reconsideration of the
Resolution dated April 17, 1995 insofar as the deferment of the issue on payment
of docket fees and the amount thereof. In the alternative, petitioner prayed that
his motion to post bond be granted. 21 PHI and the Cojuangcos also moved for
the reconsideration of the April 17, 1995 Resolution. 22
Meanwhile, petitioner prayed for the denial of the motion to dismiss in view of the
passage of Republic Act No. 7975 23 which, like Executive Order 14, did not
amend Section 11 of P.D. 1606. 24
In the meantime, petitioner filed a petition for certiorari before this Court,
docketed as G.R. No. 123264, 25 assailing public respondent's decision to defer
adjudication on the issues raised in PHI's and the Cojuangcos' motion to dismiss.
The petition for certiorari was dismissed by this Court for being premature. 26
On March 29, 1996, the Sandiganbayan issued a Resolution denying petitioner's
motion to post bond and ordering petitioner (plaintiff-in-intervention therein) to
pay the balance of the docket fee in the amount of P14,425.00. 27 Petitioner paid
with reservation. 28
PHI and the Cojuangcos filed a motion for reconsideration, 29 arguing that the
Sandiganbayan erred in the computation of the docket fees and in allowing
petitioner to pay additional docket fees beyond the prescriptive period. They
again invoked Rule 141, Section 7 (a) of the Rules of Court and averred that the
PTIC, registered in the name of PHI, has a stated value of P1.6 billion.
Accordingly, as petitioner claims to own 31% of PTIC, which has a more recent
value of P1,078,260,896.56, he should be made to pay at least the sum of
P5,391,154.35.
On May 7, 1996, 30 the Sandiganbayan denied PHI's and the Cojuangcos' motion
for reconsideration of its April 17, 1995 Resolution.
Thereafter, respondents PHI and the Cojuangcos filed their answer to the
amended complaint-in-intervention. 31
On June 11, 1996, petitioner moved that the amount of P14,425.00 be refunded
to him, 32 insisting that proceedings in the Sandiganbayan should be free of
charge.
The Sandiganbayan, on October 9, 1996, issued the assailed resolution granting
the motion to dismiss and denying petitioner's motion to admit second amended
complaint-in-intervention. 33
Petitioner filed a motion for reconsideration 34 dated October 30, 1996, and PHI
and the Cojuangcos filed their opposition. 35 The Republic filed a
manifestation 36 dated December 24, 1996 adopting the arguments raised by PHI
and the Cojuangcos.
On October 6, 1997, the Sandiganbayan denied petitioner's motion for
reconsideration. 37 Hence this petition.
As earlier stated, the main issue to be resolved in the case at bar is whether or
not petitioner is barred from asserting his alleged causes of action against
respondents by reason of non-payment of the proper docket fees.
The Sandiganbayan cited several cases spanning from 1932 to 1987 to the effect
that it is not simply the filing of the complaint or appropriate initiatory pleading,
but the payment of the prescribed docket fee, that vests the trial court with
jurisdiction over the subject matter or nature of the action. 38
The ruling that the timely filing of correct docket fees is jurisdictional is all too
familiar. It should be noted, however, that the pronouncements of this Court on
the matter have always been influenced by the peculiar legal and equitable
circumstances surrounding each case. For instance, the Lazarov.
Eudencia 39 ruling was in accordance with the then applicable law, i.e., Section
76 of Act No. 190 as amended by Act No. 3615. In Malimit v. Degamo,40 this
Court ruled that the date of payment of docket fees and not the date of mailing is
considered the date of filing of a petition for quo warranto. In Garcia v.
Vasquez, 41 this Court initially stated that a docket fee must be paid for a second
will executed by the same decedent. Subsequently, on a motion for
reconsideration, this Court reversed itself and held that the initial payment for the
first will presented for probate was sufficient compliance. This Court was even
more liberal in Magaspi v. Ramolete, 42 where the docket fee was paid upon the
filing of the complaint. It turned out later, after the complaint was amended, that
the payment was insufficient. This Court ruled that under the circumstances, the
case was docketed upon the first payment and the trial court already acquired
jurisdiction. However, the correct fee based on the amended complaint was
required to be paid. cdll

In the instant case, the Sandiganbayan adhered strictly to the rule enunciated
in Manchester Development Corporation v. Court of Appeals, 43 to wit:
The Court acquires jurisdiction over any case only upon the payment of
the prescribed docket fee. Any amendment of the complaint or similar
pleading will not thereby vest jurisdiction in the Court, much less the
payment of the docket fee based on the amounts sought in the amended
pleading. The ruling in the Magaspi case, insofar as it is inconsistent with
this pronouncement is overturned and reversed.
In Manchester, this Court stated that the allegation in the body of the complaint of
damages suffered in the amount of P78,000,000.00, and the omission of a
specific prayer for that amount, was intended for no other purpose than to evade
the payment of correct filing fees if not to mislead the docket clerk in the
assessment of the correct fee. The ruling was intended to put a stop to such an
irregularity. In the case at bar, however, we note that there is no such irregularity
or attempt to mislead in the instant petition before us.
We also note that the Manchester ruling did not become the final statement on
the matter. In Sun Insurance Office Ltd. v. Asuncion, 44 the Court ruled:
In the present case, a more liberal interpretation of the rules is called for
considering that, unlike Manchester, private respondent demonstrated
his willingness to abide by the rules by paying the additional docket fees
as required.
In the said case, the payment of the correct fee within "a reasonable time" but in
no case beyond its applicable prescriptive or reglementary period was allowed. In
another case 45 decided after Manchester, this Court made some more
distinctions:
Two situations may arise. One is where the complaint or similar pleading
sets out a claim purely for money or damages and there is no precise
statement of the amounts being claimed. In this event the rule is that the
pleading will "not be accepted nor admitted, or shall otherwise be
expunged from the record." In other words, the complaint or pleading
may be dismissed or the claims as to which the amounts are unspecified
may be expunged, although as aforestated the Court may, on motion,
permit amendment of the complaint and payment of the fees provided
the claim has not in the meantime become time-barred. The other is
where the pleading does specify the amount of every claim, but the fees
 paid are insufficient; and here again, the rule now is that the court may
allow a reasonable time for the payment of the prescribed fees, or the
balance thereof, and upon such payment, the defect is cured and the
court may properly take cognizance of the action, unless in the
meantime prescription has set in and consequently barred the right of
action.
Where the action involves real property and a related claim for damages
as well, the legal fees shall be assessed on the basis of both (a) the
value of the property and (b) the total amount of related damages sought.
The Court acquires jurisdiction over the action if the filing of the initiatory
pleading is accompanied by the payment of the requisite fees, or, if the
fees are not paid at the time of the filing of the pleading, as of the time of
full payment of the fees within such reasonable time as the court may
grant, unless, of course, prescription has set in the meantime. But
where . . . the fees prescribed for an action involving real property have
been paid, but the amounts of certain of the related damages (actual,
moral and nominal) being demanded are unspecified, the action may not
be dismissed. The Court undeniably has jurisdiction over the action
involving the real property, acquiring it upon the filing of the complaint or
similar pleading and payment of the prescribed fee. And it is not divested
of that authority by the circumstance that it may not have acquired
jurisdiction over the accompanying claims for damages because of lack
of specification thereof. What should be done is simply to expunge those
claims for damages as to which no amounts are stated, which is what
the respondent Court did, or allow, on motion, a reasonable time for the
amendment of the complaint so as to allege the precise amount of each
item of damages and accept payment of the requisite fees therefor within
the relevant prescriptive period.
The rule is not as simple and uncomplicated as Manchester makes it appear.
There are other determining circumstances, equally important. The timely filing of
correct docket fees is jurisdictional, but as shown by our decisions,
considerations of law and equity come into the picture. This situation likewise
obtains in the case at bar.
The Sandiganbayan Law itself, Presidential Decree No. 1606, provides:
SECTION 11. Proceedings free of charge. All proceedings in the
Sandiganbayan shall be conducted at no cost to the complainant and/or
his witnesses.
Petitioner points out that when former President Corazon C. Aquino
issued Executive Order No. 14 in 1986 which expanded the Sandiganbayan's
jurisdiction to include civil cases, she did not repeal or amend Section 11 of P.D.
1606 on filing fees.
Similarly, when Congress in 1994 enacted Republic Act No. 7975 further
strengthening the functional and structural organization of the Sandiganbayan, it
did not amend the provision on non-payment of fees even as it amended or
repealed several sections of the original law. When Congress in 1997
passed Republic Act No. 8429 further amending P.D. 1606, it did not touch the
section on non-payment of court fees. If Congress in repealing various parts
of P.D. 1606 did not touch Section 11, what is the basis of the Sandiganbayan's
ruling on repeal or amendment?
In the resolution submitted to us for review, the Sandiganbayan emphasized that
when P.D. No. 1606 was issued, the jurisdiction of the anti-graft court was limited
to criminal actions. The Sandiganbayan now tries civil cases. While we are
inclined to sustain the ruling that correct filing fees in civil cases must be paid in
all courts, including the Sandiganbayan, this does not preclude a ruling that, in
this case, the petitioner acted in justifiable good faith. There was ample reason
for uncertainty and doubt on the intervenor's part not merely as to the
correctness of the amount to be paid but whether or not docket fees should be
paid at all.
Equitable considerations are equally significant. Unlike the basis of
the Manchester ruling, there is no evidence in the present case that the petitioner
tried to evade the payment of correct fees or in any way tried to mislead that
court and its employees. On the contrary, petitioner paid dues and asked the
Sandiganbayan what are the correct docket fees, if the dues paid are not
accurate. When Sandiganbayan came out with its own computation, petitioner
paid the corrected amount.
Correctly, petitioner asserted that the Sandiganbayan's resolution, assuming it
was correct, was not something that could have been reasonably anticipated by
the ordinary litigant.
Indeed, the actions of the Sandiganbayan clearly call for the application of
equitable considerations. On February 17, 1989, it admitted the complaint-in-
intervention. Answers thereto were filed by PHI and the Cojuangcos. On June 11,
1993, the Sandiganbayan admitted the amended complaint-in-intervention. More
important, the lower court denied the motions to dismiss filed by respondents
questioning the incorrect payment of docket fees in its resolutions dated April 17,
1995, March 29, 1996 and May 7, 1996. Petitioner was thus led into believing,
long before the ten year prescriptive period expired, that its complaint-in-
intervention would stay admitted.
However, the Sandiganbayan on October 9, 1996 and October 6, 1997 issued
the Resolutions now before us in this petition for review. Petitioner's complaint
was dismissed for non-payment of the prescribed docket fees, without obvious
regard to the implications of the reversal of its earlier rulings.
Moreover, on October 27, 1994, petitioner filed a motion for the resolution of the
issue on correct docket fees. When no decision was forthcoming, petitioner on
March 31, 1995 filed a motion to post bond to answer for whatever additional
fees that may be assessed later. On April 17, 1995, the Sandiganbayan decided
to defer the resolution of respondents' motions to dismiss until trial. Petitioner
even elevated the inaction of the Sandiganbayan to the Supreme Court on a
petition for certiorari but this was dismissed for being premature. It can thus be
seen that, far from committing the irregularity illustrated in Manchester, petitioner
did the opposite in this case.
More specifically, petitioner's alleged causes of action before the Sandiganbayan
constitute the following:
1. Claims on the 6% stockholdings in PTIC which he alleged to
have bought from Gregorio Romulo and Leonides Virata but
were purportedly transferred to the Ramon U. Cojuangco
group by coercion, duress and force majeure (Martial Law);
2. Claims on the 25% shares of General Telephone & Electronics
Corporation (GTE) in Philippine Telecommunications
Investment Corporation (PTIC) which petitioner was
prevented from acquiring by virtue of a "put and call"
agreement with GTE;
3. (Alternative Third Cause of Action) Claims on the 4.6% shares in
PTIC.
Considering that petitioner seeks to recover properties, the ownership and
possession of which he was allegedly deprived through fraud, duress and/or
coercion, we hold that, assuming hypothetically these averments to be true, the
legal relationship of constructive trust was present among the parties concerned
in the said transactions. Constructive trust is that created by reason of equity to
answer the demands of justice and prevent unjust enrichment. It arises against
one, who, by fraud, duress or abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity and good conscience, hold. 46
Correspondingly, actions thereon prescribe after ten (10) years as provided by
Article 1144 of the Civil Code:

The following actions must be brought within ten (10) years from the time
the right of action accrues:
1. Upon a written contract;
2. Upon an obligation created by law;
3. Upon a judgment.
 (Emphasis provided).
Under normal circumstances, petitioner's cause of action should have prescribed
on February 26, 1996, a month before petitioner was ordered by the
Sandiganbayan to pay docket fees or two months before the docket fees were
actually paid in the corrected amount of P14,825.00. However, we hold that said
payment could not be construed as belatedly made such as to foreclose the
prosecution of his claims.
It should be noted that when the issue on docket fees was raised, petitioner
submitted the determination of the same to the sound discretion of the
Sandiganbayan. As earlier stated, he sought for the immediate resolution of this
issue as early as October 27, 1994. In the alternative, petitioner proposed to post
a bond to answer for the docket fees, if such are payable. He even filed a petition
for certiorari, docketed as G.R. No. 123264, to seek an early resolution of this
issue.
Clearly, petitioner did not sleep on his rights, and prescription has not set in to
bar his right to seek judicial relief. The essence of the statute of limitations is to
prevent fraudulent claims arising from unwarranted length of time and not to
defeat actions asserted on the honest belief that they were sufficiently submitted
for judicial determination.
To punish petitioner for public respondent's failure to timely decide an issue
pivotal to the success of his case would be setting a bad precedent. It would give
trial courts unbridled power and an unfair weapon to frustrate the filing of actions.
We hold that public respondent's belated action after prolonged inaction on the
issue of petitioner's payment of docket fees is a supervening event beyond the
independent will and control of petitioner that tolled the running of the prescriptive
period. Article 1154 of the Civil Code is applicable by parallelism, to wit:
The period during which the obligee was prevented by fortuitous event
from enforcing his right is not reckoned against him.
As earlier stated, equity and the extraordinary circumstances surrounding the
present case necessitate this ruling. For among the parties in the case at bar, the
Sandiganbayan is the most equipped to afford petitioner the opportunity to
present his claims. Not only that, but going back to the pronouncements of this
Court in Sun Insurance Office, Ltd. (SIOL) v. Asuncion, 47 where we recognized
that the sufficiency of the docket fees is a matter for the determination of the
clerk of court and/or his duly authorized docket clerk or clerk in-charge, the
Sandiganbayan could have immediately drawn petitioner's attention if its clerk of
court found difficulty in determining the amount of chargeable docket fees from a
reading of the complaint. Even in the celebrated case of Manchester
Development Corporation v. Court of Appeals, 48 the trial court directed the
plaintiff therein to rectify the flaws in its amended complaint. That way, not only
could the Sandiganbayan have seasonably resolved the issues on docket fees
but it could very well have timely settled petitioner's dilemma on what to do and
what was required to preserve his rights.
Courts are mandated to promptly administer justice. Having the inherent power to
amend and control the processes and orders, to make them conformable to law
and justice 49 we have the avowed duty to uphold the right of all persons to a
speedy disposition of their cases and avert the precipitate loss of rights.
While it may be argued that petitioner could have very well amended his
complaint and alleged the monetary values of the properties he seeks to recover
to comply with Rule 141, Section 7(a) of the Rules of Court, we find, pro hac vice,
that petitioner acted in good faith when he contended that proceedings before the
Sandiganbayan are free of charge. The present rule must, however, be stressed:
parties filing civil actions before the Sandiganbayan are liable to pay the required
docket fees. The situation only differs in the case at bar because of petitioner's
honest conviction manifested in his filing of a reservation for the payments he
made, after having been ordered by the Sandiganbayan on March 29, 1996 to
pay the balance of P14,425.00 and after the court denied his motion to post bond
pending final resolution of the motion to dismiss.
Be that as it may, petitioner's position that subsequent amendments 50 to PD
1606 did not expressly repeal Section 11 thereof is untenable. Petitioner failed to
appreciate that the expansion of the Sandiganbayan's jurisdiction to include civil
cases impliedly amended the same and Section 1, Rule IV, Part I of the Revised
Rules of the Sandiganbayan. Moreover, the Supreme Court enjoys exclusive
power to promulgate the rules on pleading, practice, and procedure.
In addition, Republic Act No. 7975 51 amended Section 9 of P.D. 1606 to read as
follows:
Rules of Procedure. The Rules of Court promulgated by the Supreme
Court shall apply to all cases and proceedings filed with the
Sandiganbayan. . . .
Hence, Rule 141 Section 7(a) of the Rules of Court applies to petitioner's
complaint and/or amended complaints-in-intervention.
Petitioner argues that R.A. 7975, having been promulgated on March 30, 1995
should not be retroactively applied. This is not so, as statutes regulating the
procedure of the courts are applicable to actions pending and undetermined at
the time of their passage, thus, retrospective in such sense and to that extent. 52
As a final note, petitioner's manifestation that he is withdrawing some of the
causes of action alleged in his complaints-in-intervention and the subsequent
amendments thereto should be addressed to the Sandiganbayan for proper
determination and action. This should be taken into consideration by the
Sandiganbayan in determining anew the docket fees payable by petitioner.
WHEREFORE, premises considered, the petition is partially GRANTED. The
questioned Resolutions are SET ASIDE. Petitioner is ordered to submit to public
respondent Sandiganbayan the value of the properties he seeks to recover and
to pay the proper docket fees therefor within thirty (30) days upon determination
thereof either by the Sandiganbayan or its clerk of court, which in turn is directed
to act with dispatch on the matter. SO ORDERED.
L

||| (Yuchengco v. Republic, G.R. No. 131127, [June 8, 2000], 388 PHIL 1039-1064)

[G.R. No. 75919. May 7, 1987.]

MANCHESTER DEVELOPMENT CORPORATION, ET

AL., petitioners, vs. COURT OF APPEALS,
CITYLAND DEVELOPMENTCORPORATION, STEPHEN ROXAS,
ANDREW LUISON, GRACE LUISON and JOSE DE
MAISIP, respondents.

Tanjuatco, Oreta and Tanjuatco for petitioners.

Pecabar Law Offices for private respondents.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; NON-PAYMENT OF DOCKET FEE;

RENDERS NULL AND VOID AND COMPLAINTS AND SUBSEQUENT
PROCEEDINGS WHERETO. The rule is well-settled "that a case is deemed
filed only upon payment of the docket fee regardless of the actual date offiling
in court." Thus, in the present case the trial court did not acquire jurisdiction over
the case by the payment of only P410.00 as docket fee. Neither can the
amendment of the complaint thereby vest jurisdiction upon the Court. For all legal
purposes there is no such original complaint that was duly filed which could be
amended. Consequently, the order admitting the amended complaint and all
subsequent proceedings and actions taken by the trial court are null and void.
The Court acquires jurisdiction over any case only upon payment of the
prescribed docket fee. An amendment of the complaint or similar pleading will not
thereby vest jurisdiction in the Court, much less the payment of the docket fee
based on the amounts sought in the amended pleading. cdasia
2. ID.; ID.; COMPLAINT; CONTENTS; AMOUNT OF MANDAMUS MUST BE
SPECIFIED NOT ONLY IN THE BODY BUT ALSO IN THE PRAYER. All
complaints, petitions, answers and other similar pleadings should specify the
amount of damages being prayed for not only in the body of the pleading but also
in the prayer, and said damages shall be considered in the assessment of the
filing fees in any case. Any pleading that fails to comply with this requirement
shall not be accepted nor admitted, or shall otherwise be expunged from the
record. The court acquires jurisdiction over any upon payment of the prescribed
docket fee.

RESOLUTION

GANCAYCO, J .:

Acting on the motion for reconsideration of the resolution of the Second

Division of January 28, 1987 and another motion to refer the case to and to be
heard in oral argument by the Court En Banc filed by petitioners, the motion to
refer the case to the Court en banc is granted but the motion to set the case for
oral argument is denied.
Petitioners in support of their contention that the filing fee must be assessed on
the basis of the amended complaint cite the case of Magaspi vs.
Ramolete. 1 They contend that the Court of Appeals erred in ruling that the filing
fee should be levied by considering the amount of damages sought in the original
complaint.
The environmental facts of said case differ from the present in that
1. The Magaspi case was an action for recovery of ownership and
possession of a parcel of land with damages, 2 while the present case is an
action for torts and damages and specific performance with prayer for temporary
restraining order, etc. 3
2. In the Magaspi case, the prayer in the complaint seeks not only the
annulment of title of the defendant to the property, the declaration ofownership
and delivery of possession thereof to plaintiffs but also asks for the
payment of actual, moral, exemplary damages and attorney's fees arising
therefrom in the amounts specified therein. 4 However, in the present case, the
prayer is for the issuance of a writ of preliminary prohibitory injunction during the
pendency of the action against the defendants' announced forfeiture of the
sum of P3 Million paid by the plaintiffs for the property in question, to attach such
property of defendants that may be sufficient to satisfy any judgment that may be
rendered, and after hearing, to order defendants to execute a
contract of purchase and sale of the subject property and annul defendants'
illegal forfeiture of the money ofplaintiff, ordering defendants jointly and severally
to pay plaintiff actual, compensatory and exemplary damages as well as
25% of said amounts as may be proved during the trial as attorney's fees and
declaring the tender of payment of the purchase price of plaintiff valid and
producing the effectof payment and to make the injunction permanent. The
amount of damages sought is not specified in the prayer although the body of the
complaint alleges the total amount of over P78 Million as damages suffered by
plaintiff. 5
3. Upon the filing of the complaint there was an honest difference of opinion as to
the nature of the action in the Magaspi case. The complaint was considered as
primarily an action for recovery of ownership and possession of a parcel of land.
The damages stated were treated as merely ancillary to the main cause of action.
Thus, the docket fee of only P60.00 and P10.00 for the sheriff's fee were paid. 6
In the present case there can be no such honest difference of opinion. As may be
gleaned from the allegations of the complaint as well as the designation thereof,
it is both an action for damages and specific performance. The docket fee paid
upon filing of complaint in the amount only ofP410.00 by considering the action to
be merely one for specific performance where the amount involved is not
capable of pecuniary estimation is obviously erroneous. Although the total
amount of damages sought is not stated in the prayer of the complaint yet it is
spelled out in the body of the complaint totalling in the amount of P78,750,000.00
which should be the basis of assessment of the filing fee. prll

4. When this under-assessment of the filing fee in this case was brought to the
attention of this Court together with similar other cases an investigation was
immediately ordered by the Court. Meanwhile plaintiff through another counsel
with leave of court filed an amended complaint on September 12, 1985 for the
inclusion of Philips Wire and Cable Corporation as co-plaintiff and by eliminating
any mention of the amount of damages in the body of the complaint. The prayer
in the original complaint was maintained. After this Court issued an order on
October 15, 1985 ordering the re-assessment of the docket fee in the present
case and other cases that were investigated, on November 12, 1985 the
trial court directed plaintiffs to rectify the amended complaint by stating the
amounts which they are asking for. It was only then that plaintiffs specified the
amount of damages in the body of the complaint in the reduced
amount of P10,000,000.00. 7 Still no amount of damages were specified in the
prayer. Said amended complaint was admitted.
On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to
pay the amount of P3,104.00 as filing fee covering the damages alleged in the
original complaint as it did not consider the damages to be merely ancillary or
incidental to the action for recovery of ownership and possession of real
property. 8 An amended complaint was filed by plaintiff with leave of court to
include the government of the Republic as defendant and reducing the
amount of damages, and attorney's fees prayed for to P100,000.00. Said
amended complaint was also admitted. 9
In the Magaspi case, the action was considered not only one for
recovery of ownership but also for damages, so that the filing fee for the
damages should be the basis of assessment. Although the payment of the
docketing fee of P60.00 was found to be insufficient, nevertheless, it was held
that since the payment was the result of an "honest difference of opinion as to
the correct amount to be paid as docket fee" the court "had acquired jurisdiction
over the case and the proceedings thereafter had were proper and
regular." 10 Hence, as the amended complaint superseded the original complaint,
the allegations of damages in the amended complaint should be the basis of the
computation of the filing fee. 11
In the present case no such honest difference of opinion was possible as the
allegations of the complaint, the designation and the prayer show clearly that it is
an action for damages and specific performance. The docketing fee should be
assessed by considering the amount of damages as alleged in the original
complaint. cdtai

As reiterated in the Magaspi case the rule is well-settled "that a case is deemed
filed only upon payment of the docket fee regardless of the actual date of filing
in court." 12 Thus, in the present case the trial court did not acquire jurisdiction
over the case by the payment of only P410.00 as docket fee. Neither can the
amendment of the complaint thereby vest jurisdiction upon the Court. 13 For all
legal purposes there is no such original complaint that was duly filed which could
be amended. Consequently, the order admitting the amended complaint and all
subsequent proceedings and actions taken by the trial court are null and void.
The Court of Appeals therefore, aptly ruled in the present case that the
basis of assessment of the docket fee should be the amount of damages sought
in the original complaint and not in the amended complaint.
The Court cannot close this case without making the observation that it frowns at
the practice of counsel who filed the original complaint in this caseof omitting any
specification of the amount of damages in the prayer although the amount of over
P78 million is alleged in the body of the complaint. This is clearly intended for no
other purpose than to evade the payment of the correct filing fees if not to
mislead the docket clerk in the assessmentof the filing fee. This fraudulent
practice was compounded when, even as this Court had taken cognizance of the
anomaly and ordered an investigation, petitioner through another counsel filed an
amended complaint, deleting all mention of the amount of damages being asked
for in the body of the complaint. It was only when in obedience to the
order of this Court of October 18, 1985, the trial court directed that the
amount ofdamages be specified in the amended complaint, that petitioners'
counsel wrote the damages sought in the much reduced
amount of P10,000,000.00 in the body of the complaint but not in the prayer
thereof. The design to avoid payment of the required docket fee is obvious.

The Court serves warning that it will take drastic action upon a repetition of this
unethical practice.cdrep

To put a stop to this irregularity, henceforth all complaints, petitions, answers and
other similar pleadings should specify the amount of damages being prayed for
not only in the body of the pleading but also in the prayer, and said damages
shall be considered in the assessment of the filing fees in any case. Any pleading
that fails to comply with this requirement shall not be accepted nor admitted, or
shall otherwise be expunged from the record.
The Court acquires jurisdiction over any case only upon the payment of the
prescribed docket fee. An amendment of the complaint or similar pleading will not
thereby vest jurisdiction in the Court, much less the payment of the docket fee
based on the amounts sought in the amended pleading. The ruling in the
Magaspi case 14 in so far as it is inconsistent with this pronouncement is
overturned and reversed.
WHEREFORE, the motion for reconsideration is denied for lack of merit. SO
ORDERED.
(Manchester Development Corp. v. Court of Appeals, G.R. No. 75919
|||

(Resolution), [May 7, 1987], 233 PHIL 579-586)

[G.R. Nos. 79937-38. February 13, 1989.]

SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS AND

D.J. WARBY, petitioners, vs. HON. MAXIMIANO C. ASUNCION,
Presiding Judge, Branch 104, Regional Trial Court, Quezon
City and MANUEL CHUA UY PO TIONG, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Offices for
petitioners.
Tanjuatco, Oreta, Tanjuatco, Berenguer & Sanvicente Law Offices for private
respondent.

SYLLABUS
1. STATUTES; PROCEDURAL LAWS; APPLIED RETROSPECTIVELY.
Private respondent claims that the ruling in Manchester (149 SCRA 562) cannot
apply retroactively to Civil Case No. Q-41177 for at the time said civil case was
filed in court there was no such Manchester ruling as yet. Further, private
respondent avers that what is applicable is the ruling of this Court in Magaspi v.
Ramolete, wherein this Court held that the trial court acquired jurisdiction over
the case even if the docket fee paid was insufficient. The contention
that Manchester cannot apply retroactively to this case is untenable. Statutes
regulating the procedure of the courts will be construed as applicable to actions
pending and undetermined at the time of their passage. Procedural laws are
retrospective in that sense and to that extent.
2. REMEDIAL LAW; JURISDICTION; VESTS IN COURTS UPON PAYMENT OF
THE PRESCRIBED DOCKET FEES. It is not simply the filing of the complaint
or appropriate initiatory pleading, but the payment of the prescribed docket fee,
that vests a trial court with jurisdiction over the subject- matter or nature of the
action. Where the filing of the initiatory pleading is not accompanied by payment
of the docket fee, the court may allow payment of the fee within a reasonable
time but in no case beyond the applicable prescriptive or reglementary period.
3. ID.; ID.; PERMISSIVE COUNTERCLAIMS AND THIRD-PARTY CLAIMS; NOT
CONSIDERED FILED UNLESS PRESCRIBED DOCKET FEE IS PAID. The
same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee
prescribed therefor is paid. The court may also allow payment of said fee within a
reasonable time but also in no case beyond its applicable prescriptive or
reglementary period.
4. ID.; ID.; PAYMENT OF ADDITIONAL FEE REQUIRED WHERE JUDGMENT
AWARDS CLAIM NOT SPECIFIED IN THE PLEADING. Where the trial court
acquires jurisdiction over a claim by the filing of the appropriate pleading and
payment of the prescribed filing fee but, subsequently, the judgment awards a
claim not specified in the pleading, or if specified the same has been left for
determination by the court, the additional filing fee therefor shall constitute a lien
on the judgment.

DECISION

GANCAYCO, J : p
Again the Court is asked to resolve the issue of whether or not a court acquires
jurisdiction over a case when the correct and proper docket fee has not been
paid.
On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity)
filed a complaint with the Regional Trial Court of Makati, Metro Manila for the
consignation of a premium refund on a fire insurance policy with a prayer for the
judicial declaration of its nullity against private respondent Manuel Uy Po Tiong.
Private respondent was declared in default for failure to file the required answer
within the reglementary period. cdasia

On the other hand, on March 28, 1984, private respondent filed a complaint in
the Regional Trial Court of Quezon City for the refund of premiums and the
issuance of a writ of preliminary attachment which was docketed as Civil Case
No. Q-41177, initially against petitioner SIOL, and thereafter including E.B.
Philipps and D.J. Warby as additional defendants. The complaint sought, among
others, the payment of actual, compensatory, moral, exemplary and liquidated
damages, attorney's fees, expenses of litigation and costs of the suit. Although
the prayer in the complaint did not quantify the amount of damages sought said
amount may be inferred from the body of the complaint to be about Fifty Million
Pesos (P50,000,000.00).
Only the amount of P210.00 was paid by private respondent as docket fee which
prompted petitioners' counsel to raise his objection. Said objection was
disregarded by respondent Judge Jose P. Castro who was then presiding over
said case.
Upon the order of this Court, the records of said case together with twenty-two
other cases assigned to different branches of the Regional Trial Court of Quezon
City which were under investigation for under-assessment of docket fees were
transmitted to this Court. The Court thereafter returned the said records to the
trial court with the directive that they be re-raffled to the other judges in Quezon
City, to the exclusion of Judge Castro. Civil Case No. Q-41177 was re-raffled to
Branch 104, a sala which was then vacant.
On October 15, 1985, the Court en banc issued a Resolution in Administrative
Case No. 85-10-8752-RTC directing the judges in said cases to reassess the
docket fees and that in case of deficiency, to order its payment. The Resolution
also requires all clerks of court to issue certificates of re-assessment of docket
fees. All litigants were likewise required to specify in their pleadings the amount
sought to be recovered in their complaints.
On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No.
Q-41177 was temporarily assigned, issued an order to the Clerk of Court
instructing him to issue a certificate of assessment of the docket fee paid by
private respondent and, in case of deficiency, to include the same in said
certificate.
On January 7, 1984, to forestall a default, a cautionary answer was filed by
petitioners. On August 30, 1984, an amended complaint was filed by private
respondent including the two additional defendants aforestated.
Judge Maximiano C. Asuncion, to whom Civil Case No. Q- 41177 was thereafter
assigned, after his assumption into office on January 16, 1986, issued a
Supplemental Order requiring the parties in the case to comment on the Clerk of
Court's letter-report signifying her difficulty in complying with the Resolution of
this Court of October 15, 1985 since the pleadings filed by private respondent did
not indicate the exact amount sought to be recovered. On January 23, 1986,
private respondent filed a "Compliance" and a "Re-Amended Complaint" stating
therein a claim of "not less than P10,000,000.00 as actual compensatory
damages" in the prayer. In the body of the said second amended complaint
however, private respondent alleges actual and compensatory damages and
attorney's fees in the total amount of about P44,601,623.70.
On January 24, 1986, Judge Asuncion issued another Order admitting the
second amended complaint and stating therein that the same constituted proper
compliance with the Resolution of this Court and that a copy thereof should be
furnished the Clerk of Court for the reassessment of the docket fees. The
reassessment by the Clerk of Court bases on private respondent's claim of "not
less than P10,000,000.00 as actual and compensatory damages" amounted to
P39,786.00 as docket fee. This was subsequently paid by private respondent.
Petitioners then filed a petition for certiorari with the Court of Appeals questioning
the said order of Judge Asuncion dated January 24, 1986.
On April 24, 1986, private respondent filed a supplemental complaint alleging an
additional claim of P20,000,000.00 as damages so the total claim amounts to
about P64,601,623.70. On October 16, 1986, or some seven months after filing
the supplemental complaint, the private respondent paid the additional docket fee
of P80,396.00. 1
On August 13, 1987, the Court of Appeals rendered a decision ruling, among
others, as follows:
"WHEREFORE, judgment is hereby rendered:
1. Denying due course to the petition in CA-G.R. SP No. L-09715 insofar
as it seeks annulment of the order.
(a) denying petitioners' motion to dismiss the complaint, as amended,
and
 (b) granting the writ of preliminary attachment, but giving due course to
the portion thereof questioning the reassessment of the docketing fee,
and requiring the Honorable respondent Court to reassess the docketing
fee to be paid by private respondent on the basis of the amount of
P25,401,707.00." 2
Hence, the instant petition.
During the pendency of this petition and in conformity with the said judgment of
respondent court, private respondent paid the additional docket fee of
P62,432.90 on April 28, 1988. 3
The main thrust of the petition is that the Court of Appeals erred in not finding
that the lower court did not acquire jurisdiction over Civil Case No. Q-41177 on
the ground of non-payment of the correct and proper docket fee. Petitioners
allege that while it may be true that private respondent had paid the amount of
P182,824.90 as docket fee as herein-above related, and considering that the
total amount sought to be recovered in the amended and supplemental complaint
is P64,601,623.70 the docket fee that should be paid by private respondent is
P257,810.49, more or less. Not having paid the same, petitioners contend that
the complaint should be dismissed and all incidents arising therefrom should be
annulled. In support of their theory, petitioner cite the latest ruling of the Court
in Manchester Development Corporation vs. CA, 4 as follows:
"The Court acquires jurisdiction over any case only upon the payment of
the prescribed docket fee. An amendment of the complaint or similar
pleading will not thereby vest jurisdiction in the Court, much less the
payment of the docket fee based on the amounts sought in the amended
pleading. The ruling in the Magaspi Case in so far it is inconsistent with
this pronouncement is overturned and reversed."
On the other hand, private respondent claims that the ruling
in Manchester cannot apply retroactively to Civil Case No. Q-41177 for at the
time said civil case was filed in court there was no such Manchester ruling as yet.
Further, private respondent avers that what is applicable is the ruling of this Court
in Magaspi v. Ramolete, 5 wherein this Court held that the trial court acquired
jurisdiction over the case even if the docket fee paid was insufficient.

The contention that Manchester cannot apply retroactively to this case is

untenable. Statutes regulating the procedure of the courts will be construed as
applicable to actions pending and undetermined at the time of their passage.
Procedural laws are retrospective in that sense and to that extent. 6
In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full
amount of the docket fee is an indispensable step for the perfection of an appeal.
In a forcible entry and detainer case before the justice of the peace court of
Manaoag, Pangasinan, after notice of a judgment dismissing the case, the
plaintiff filed a notice of appeal with said court but he deposited only P8.00 for the
docket fee, instead of P16.00 as required, within the reglementary period of
appeal of five (5) days after receiving notice of judgment. Plaintiff deposited the
additional P8.00 to complete the amount of the docket fee only fourteen (14)
days later. On the basis of these facts, this court held that the Court of First
Instance did not acquire jurisdiction to hear and determine the appeal as the
appeal was not thereby perfected.
In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to
become a Filipino citizen by sending it through registered mail to the Office of the
Solicitor General in 1953 but the required filing fee was paid only in 1956, barely
5-1/2 months prior to the filing of the petition for citizenship. This Court ruled that
the declaration was not filed in accordance with the legal requirement that such
declaration should be filed at least one year before the filing of the petition for
citizenship. Citing Lazaro, this Court concluded that the filing of petitioner's
declaration of intention on October 23, 1953 produced no legal effect until the
required filing fee was paid on May 23, 1956. llcd

In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were
applied. It was an original petition for quo warranto contesting the right to office of
proclaimed candidates which was mailed, addressed to the clerk of the Court of
First Instance, within the one-week period after the proclamation as provided
therefor by law. 10 However, the required docket fees were paid only after the
expiration of said period. Consequently, this Court held that the date of such
payment must be deemed to be the real date of filing of aforesaid petition and not
the date when it was mailed.
Again, in Garica vs. Vasquez, 11 this Court reiterated the rule that the docket fee
must be paid before a court will act on a petition or complaint. However, we also
held that said rule is not applicable when petitioner seeks the probate of several
wills of the same decedent as he is not required to file a separate action for each
will but instead he may have other wills probated in the same special proceeding
then pending before the same court.
Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case
is deemed filed only upon payment of the docket fee regardless of the actual
date of its filing in court. Said case involved a complaint for recovery of
ownership and possession of a parcel of land with damages filed in the Court of
First Instance of Cebu. Upon the payment of P60.00 for the docket fee and
P10.00 for the sheriff's fee, the complaint was docketed as Civil Case No. R-
11882. The prayer of the complaint sought that the Transfer Certificate of Title
issued in the name of the defendant be declared as null and void. It was also
prayed that plaintiff be declared as owner thereof to whom the proper title should
be issued, and that defendant be made to pay monthly rentals of P3,500.00 from
June 2, 1948 up to the time the property is delivered to plaintiff, P500,000.00 as
moral damages, attorney's fees in the amount of P250,000.00, the costs of the
action and exemplary damages in the amount of P500,000.00.
The defendant then filed a motion to compel the plaintiff to pay the correct
amount of the docket fee to which an opposition was filed by the plaintiff alleging
that the action was for the recovery of a parcel of land so the docket fee must be
based on its assessed value and that the amount of P60.00 was the correct
docketing fee. The trial court ordered the plaintiff to pay P3,140.00 as filing fee.
The plaintiff then filed a motion to admit the amended complaint to include the
Republic as the defendant. In the prayer of the amended complaint the
exemplary damages earlier sought was eliminated. The amended prayer merely
sought moral damages as the court may determine, attorney's fees of
P100,000.00 and the costs of the action. The defendant filed an opposition to the
amended complaint. The opposition notwithstanding, the amended complaint
was admitted by the trial court. The trial court reiterated its order for the payment
of the additional docket fee which plaintiff assailed and then challenged before
this Court. Plaintiff alleged that he paid the total docket fee in the amount of
P60.00 and that if he had to pay the additional fee it must be based on the
amended complaint.
The question posed, therefore, was whether or not the plaintiff may be
considered to have filed the case even if the docketing fee paid was not sufficient.
In Magaspi, We reiterated the rule that the case was deemed filed only upon the
payment of the correct amount for the docket fee regardless of the actual date of
the filing of the complaint; that there was an honest difference of opinion as to the
correct amount to be paid as docket fee in that as the action appears to be one
for the recovery of property the docket fee of P60.00 was correct; and that as the
action is also for damages, We upheld the assessment of the additional docket
fee based on the damages alleged in the amended complaint as against the
assessment of the trial court which was based on the damages alleged in the
original complaint.LLjur

However, as aforecited, this Court

overturned Magaspi in Manchester. Manchester involves an action for torts and
damages and specific performance with a prayer for the issuance of a temporary
restraining order, etc. The prayer in said case is for the issuance of a writ of
preliminary prohibitory injunction during the pendency of the action against the
defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for
the property in question, the attachment of such property of defendants that may
be sufficient to satisfy any judgment that may be rendered, and, after hearing, the
issuance of an order requiring defendants to execute a contract of purchase and
sale of the subject property and annual defendants' illegal forfeiture of the money
of plaintiff. It was also prayed that the defendants be made to pay the plaintiff,
jointly and severally, actual, compensatory and exemplary damages as well as
25% of said amounts as may be proved during the trial for attorney's fees. The
plaintiff also asked the trial court to declare the tender of payment of the
purchase price of plaintiff valid and sufficient for purpose of payment, and to
make the injunction permanent. The amount of damages sought is not specified
in the prayer although the body of the complaint alleges the total amount of over
P78 Million allegedly suffered by plaintiff.
cdrep

Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for
the docket fee based on the nature of the action for specific performance where
the amount involved is not capable of pecuniary estimation. However, it was
obvious from the allegation of the complaint as well as its designation that the
action was one for damages and specific performance. Thus, this court held the
plaintiff must be assessed the correct docket fee computed against the amount of
damages of about P78 Million, although the same was not spelled out in the
prayer of the complaint.
Meanwhile, plaintiff through another counsel, with leave of court, filed a amended
complaint on September 12, 1985 by the inclusion of another co-plaintiff and
eliminating any mention of the amount of damages in the body of the complaint.
The prayer in the original complaint was maintained.
On October 15, 1985, this Court ordered the re-assessment of the docket fee in
the said case and other cases that were investigated. On November 12, 1985 the
trial court directed the plaintiff to rectify the amended complaint by stating the
amounts which they were asking for. This plaintiff did as instructed. In the body of
the complaint the amount of damages alleged was reduced to P10,000,000.00
but still no amount of damages was specified in the prayer. Said amended
complaint was admitted.
Applying the principle in Magaspi that "the case is deemed filed only upon
payment of the docket fee regardless of the actual date of filing in court," this
Court held that the trial court did not acquire jurisdiction over the case by
payment of only P410.00 for the docket fee. Neither can the amendment of the
complaint thereby vest jurisdiction upon the Court. For all legal purposes they
was no such original complaint duly filed which could be amended. Consequently,
the order admitting the amended complaint and all subsequent proceedings and
actions taken by the trial court were declared null and void. 13
The present case, as above discussed, is among the several cases of under-
assessment of docket fee which were investigated by this Court together
with Manchester. The facts and circumstances of this case are similar
to Manchester. In the body of the original complaint, the total amount of damages
sought amounted to about P50 Million. In the prayer, the amount of damages
asked for was not stated. The action was for the refund of the premium and the
issuance of the writ of preliminary attachment with damages. The amount of only
P210.00 was paid for the docket fee. On January 23, 1986, private respondent
filed an amended complaint wherein in the prayer it is asked that he be awarded
no less than P10,000,000.00 as actual and exemplary damages but in the body
of the complaint the amount of his pecuniary claim is approximately
P44,601,623.70. Said amended complaint was admitted and the private
respondent was reassessed the additional docket fee of P39,786.00 based on
his prayer of not less than P10,000,000.00 in damages, which he paid.

On April 24, 1986, private respondent filed a supplemental complaint alleging an

additional claim of P20,000,000.00 in damages so that his total claim is
approximately P64,601,620.70. On October 16, 1986, private respondent paid an
additional docket fee of P80,396.00. After the promulgation of the decision of the
respondent court on August 31, 1987 wherein private respondent was ordered to
be reassessed for additional docket fee, and during the pendency of this petition,
and after the promulgation of Manchester, on April 28, 1988, private respondent
paid an additional docket fee on P62,132.92. Although private respondent
appears to have paid a total amount of P182,824.90 for the docket fee
considering the total amount of this claim in the amended and supplemental
complaint amounting to about P64,601,620.70, petitioner insists that private
respondent must pay a docket fee of P257,810.49.
The principle in Manchester could very well be applied in the present case. The
pattern and the intent to defraud the government of the docket fee due it is
obvious not only in the filing of the original complaint but also in the filing of the
second amended complaint.
However, in Manchester, petitioner did not pay any additional docket fee until the
case was decided by this Court on May 7, 1987. Thus, inManchester, due to the
fraud committed on the government, this Court held that the court a quo did not
acquire jurisdiction over the case and that the amended complaint could not have
been admitted inasmuch as the original complaint was null and void.
In the present case, a more liberal interpretation of the rules is called for
considering that, unlike Manchester, private respondent demonstrated his
willingness to abide by the rules by paying the additional docket fees as required.
The promulgation of the decision in Manchester must have had that sobering
influence on private respondent who thus paid the additional docket fee as
ordered by the respondent court. It triggered his change for stance by
manifesting his willingness to pay such additional docket fee as may be ordered.
Nevertheless, petitioners contend that the docket fee that was paid is still
insufficient considering the total amount of the claim. This is a matter which the
clerk of court of the lower court and/or his duly authorized docket clerk or clerk in-
charge should determine and, thereafter, it any amount is found due, he must
require the private respondent to pay the same.
Thus, the Court rules as follows:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but
the payment of the prescribed docket fee, that vests a trial court with jurisdiction
over the subject matter or nature of the action. Where the filing of the initiatory
pleading is not accompanied by payment of the docket fee, the court may allow
payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and
similar pleadings, which shall not be considered filed until and unless the filing
fee prescribed therefor is paid. The court may also allow payment of said fee
within a reasonable time but also in no case beyond its applicable prescriptive or
reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but, subsequently,
the judgment awards a claim not specified in the pleading, or if specified the
same has been left for determination by the court, the additional filing fee therefor
shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of
Court or his duly authorized deputy to enforce said lien and assess and collect
the additional fee.liblex

WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of
the court a quo is hereby instructed to reassess and determine the additional
filing fee that should be paid by private respondent considering the total amount
of the claim sought in the original complaint and the supplemental complaint as
may be gleaned from the allegations and the prayer thereof and to require private
respondent to pay the deficiency, if any, without pronouncement as to costs.
SO ORDERED.
(Sun Insurance Office, Ltd. v. Asuncion, G.R. Nos. 79937-38, [February 13,
|||

1989], 252 PHIL 280-292)

[G.R. No. 151242. June 15, 2005.]

PROTON PILIPINAS CORPORATION, AUTOMOTIVE

PHILIPPINES, ASEA ONE CORPORATION and
AUTOCORP, petitioners, vs. BANQUE NATIONALE DE
PARIS, 1 respondent.
 DECISION

CARPIO MORALES, J : p

It appears that sometime in 1995, petitioner Proton Pilipinas Corporation (Proton)

availed of the credit facilities of herein respondent, Banque Nationale de Paris
(BNP). To guarantee the payment of its obligation, its co-petitioners Automotive
Corporation Philippines (Automotive), Asea One Corporation (Asea) and
Autocorp Group (Autocorp) executed a corporate guarantee 2 to the extent of
US$2,000,000.00. BNP and Proton subsequently entered into three trust receipt
agreements dated June 4, 1996, 3 January 14, 1997, 4 and April 24, 1997. 5
Under the terms of the trust receipt agreements, Proton would receive imported
passenger motor vehicles and hold them in trust for BNP. Proton would be free to
sell the vehicles subject to the condition that it would deliver the proceeds of the
sale to BNP, to be applied to its obligations to it. In case the vehicles are not sold,
Proton would return them to BNP, together with all the accompanying documents
of title.
Allegedly, Proton failed to deliver the proceeds of the sale and return the unsold
motor vehicles.
Pursuant to the corporate guarantee, BNP demanded from Automotive, Asea
and Autocorp the payment of the amount of US$1,544,984.40 6representing
Proton's total outstanding obligations. These guarantors refused to pay, however.
Hence, BNP filed on September 7, 1998 before the Makati Regional Trial Court
(RTC) a complaint against petitioners praying that they be ordered to pay (1)
US$1,544,984.40 plus accrued interest and other related charges thereon
subsequent to August 15, 1998 until fully paid and (2) an amount equivalent to 5%
of all sums due from petitioners as attorney's fees.
The Makati RTC Clerk of Court assessed the docket fees which BNP paid at
P352,116.30 7 which was computed as follows: 8
First Cause of Action $844,674.07
Second Cause of Action 171,120.53
Third Cause of Action 529,189.80

$1,544,984.40
5% as Attorney's Fees $77,249.22

TOTAL $1,622,233.62
 Conversion rate to peso x 43

TOTAL P69,756,000.00 (round-off)
Computation based on Rule 141:
COURT JDF
P69,756,000.00 P69,606,000.00
- 150,000.00 x .003

69,606,000.00 208,818.00
x .002 + 450.00

139,212.00 P209,268.00
+ 150.00

P139,362.00
LEGAL: P139,362.00
+ 209,268.00

P348,630.00 x 1% = P3,486.30
P139,362.00
+ 209,268.00
3,486.00

P352,116.30 Total fees paid by the plaintiff
To the complaint, the defendants-herein petitioners filed on October 12, 1998 a
Motion to Dismiss 9 on the ground that BNP failed to pay the correct docket fees
to thus prevent the trial court from acquiring jurisdiction over the case. 10 As
additional ground, petitioners raised prematurity of the complaint, BNP not having
priorly sent any demand letter. 11
By Order 12 of August 3, 1999, Branch 148 of the Makati RTC denied petitioners'
Motion to Dismiss, viz:
Resolving the first ground relied upon by the defendant, this court
believes and so hold that the docket fees were properly paid. It is the
 Office of the Clerk of Court of this station that computes the correct
docket fees, and it is their duty to assess the docket fees correctly, which
they did.EICSTa

Even granting arguendo that the docket fees were not properly paid, the
court cannot just dismiss the case. The Court has not yet ordered (and it
will not in this case) to pay the correct docket fees, thus the Motion to
dismiss is premature, aside from being without any legal basis.
As held in the case of National Steel Corporation vs. CA, G.R. No.
123215, February 2, 1999, the Supreme Court said:
xxx xxx xxx
Although the payment of the proper docket fees is a jurisdictional
requirement, the trial court may allow the plaintiff in an action to
pay the same within a reasonable time within the expiration of
applicable prescription or reglementary period. If the plaintiff fails
to comply with this requirement, the defendant should timely raise
the issue of jurisdiction or else he would be considered in
estoppel. In the latter case, the balance between appropriate
docket fees and the amount actually paid by the plaintiff will be
considered a lien or (sic) any award he may obtain in his favor.
As to the second ground relied upon by the defendants, in that a review
of all annexes to the complaint of the plaintiff reveals that there is not a
single formal demand letter for defendants to fulfill the terms and
conditions of the three (3) trust agreements.
In this regard, the court cannot sustain the submission of defendant. As
correctly pointed out by the plaintiff, failure to make a formal demand for
the debtor to pay the plaintiff is not among the legal grounds for the
dismissal of the case. Anyway, in the appreciation of the court, this is
simply evidentiary.
xxx xxx xxx
WHEREFORE, for lack of merit, the Motion to Dismiss interposed by the
defendants is hereby DENIED. 13 (Underscoring supplied)
Petitioners filed a motion for reconsideration 14 of the denial of their Motion to
Dismiss, but it was denied by the trial court by Order 15 of October 3, 2000.
Petitioners thereupon brought the case on certiorari and mandamus 16 to the
Court of Appeals which, by Decision 17 of July 25, 2001, denied it in this wise:
. . . Section 7(a) of Rule 141 of the Rules of Court excludes interest
accruing from the principal amount being claimed in the pleading in the
computation of the prescribed filing fees. The complaint was submitted
for the computation of the filing fee to the Office of the Clerk of Court of
the Regional Trial Court of Makati City which made an assessment that
 respondent paid accordingly. What the Office of the Clerk of Court did
and the ruling of the respondent Judge find support in the decisions of
the Supreme Court in Ng Soon vs. Alday and Tacay vs. RTC of Tagum,
Davao del Norte. In the latter case, the Supreme Court explicitly ruled
that "where the action is purely for recovery of money or damages, the
docket fees are assessed on the basis of the aggregate amount claimed,
exclusive only of interests and costs."
Assuming arguendo that the correct filing fees was not made, the rule is
that the court may allow a reasonable time for the payment of the
prescribed fees, or the balance thereof, and upon such payment, the
defect is cured and the court may properly take cognizance of the action
unless in the meantime prescription has set in and consequently barred
the right of action. Here respondent Judge did not make any finding, and
rightly so, that the filing fee paid by private respondent was insufficient.
On the issue of the correct dollar-peso rate of exchange, the Office of
the Clerk of Court of the RTC of Makati pegged it at P43.21 to US$1. In
the absence of any office guide of the rate of exchange which said court
functionary was duty bound to follow, the rate he applied is
presumptively correct. THADEI

Respondent Judge correctly ruled that the matter of demand letter is

evidentiary and does not form part of the required allegations in a
complaint. Section 1, Rule 8 of the 1997 Rules of Civil Procedure
pertinently provides:
"Every pleading shall contain in a methodical and logical form, a
plain, concise and direct statement of the ultimate facts on which
the party pleading relies for his claim or defense, as the case may
be, omitted the statement of mere evidentiary facts."
Judging from the allegations of the complaint particularly paragraphs 6,
12, 18, and 23 where allegations of imputed demands were made upon
the defendants to fulfill their respective obligations, annexing the
demand letters for the purpose of putting up a sufficient cause of action
is not required.
In fine, respondent Judge committed no grave abuse of discretion
amounting to lack or excess of jurisdiction to
warrant certiorari and mandamus.18 (Underscoring supplied)
Their Motion for Reconsideration 19 having been denied by the Court of
Appeals, 20 petitioners filed the present petition for review on certiorari 21 and
pray for the following reliefs:
WHEREFORE, in view of all the foregoing, it is most respectfully prayed
of this Honorable Court to grant the instant petition by REVERSING and
SETTING ASIDE the questioned Decision of July 25, 2001 and the
Resolution of December 18, 2001 for being contrary to law,
 to Administrative Circular No. 11-94 and Circular No. 7 and instead
direct the court a quo to require Private Respondent Banque to pay the
correct docket fee pursuant to the correct exchange rate of the dollar to
the peso on September 7, 1998 and to quantify its claims for interests on
the principal obligations in the first, second and third causes of actions in
its Complaint in Civil Case No. 98-2180. 22 (Underscoring supplied)
Citing Administrative Circular No. 11-94, 23 petitioners argue that BNP failed to
pay the correct docket fees as the said circular provides that in the assessment
thereof, interest claimed should be included. There being an underpayment of
the docket fees, petitioners conclude, the trial court did not acquire jurisdiction
over the case.
Additionally, petitioners point out that the clerk of court, in converting BNP's
claims from US dollars to Philippine pesos, applied the wrong exchange rate of
US $1 = P43.00, the exchange rate on September 7, 1998 when the complaint
was filed having been pegged at US $1 = P43.21. Thus, by petitioners'
computation, BNP's claim as of August 15, 1998 was actually
P70,096,714.72, 24 not P69,756,045.66.

Furthermore, petitioners submit that pursuant to Supreme Court Circular No.

7, 25 the complaint should have been dismissed for failure to specify the amount
of interest in the prayer.
Circular No. 7 reads:
TO: JUDGES AND CLERKS OF COURT OF THE COURT OF TAX
APPEALS, REGIONAL TRIAL COURTS,
METROPOLITAN TRIAL COURTS IN CITIES,
MUNICIPAL TRIAL COURTS, MUNICIPAL CIRCUIT
TRIAL COURTS, SHARI'A DISTRICT COURTS; AND THE
INTEGRATED BAR OF THE PHILIPPINES
SUBJECT: ALL COMPLAINTS MUST SPECIFY AMOUNT OF
DAMAGES SOUGHT NOT ONLY IN THE BODY OF THE
PLEADING, BUT ALSO IN THE PRAYER IN ORDER TO
BE ACCEPTED AND ADMITTED FOR FILING. THE
AMOUNT OF DAMAGES SO SPECIFIED IN THE
COMPLAINT SHALL BE THE BASIS FOR ASSESSING
THE AMOUNT OF THE FILING FEES. IaEHSD

In Manchester Development Corporation vs. Court of Appeals, No. L-

75919, May 7, 1987, 149 SCRA 562, this Court condemned the practice
of counsel who in filing the original complaint omitted from the prayer
any specification of the amount of damages although the amount of over
P78 million is alleged in the body of the complaint. This Court observed
that "(T)his is clearly intended for no other purpose than to evade the
 payment of the correct filing fees if not to mislead the docket clerk, in the
assessment of the filing fee. This fraudulent practice was compounded
when, even as this Court had taken cognizance of the anomaly and
ordered an investigation, petitioner through another counsel filed an
amended complaint, deleting all mention of the amount of damages
being asked for in the body of the complaint. . . ."
For the guidance of all concerned, the WARNING given by the court in
the afore-cited case is reproduced hereunder:
"The Court serves warning that it will take drastic action upon a
repetition of this unethical practice.
To put a stop to this irregularity, henceforth all complaints,
petitions, answers and other similar pleadings should specify
the amount of damages being prayed for not only in the body
of the pleading but also in the prayer, and said damages
shall be considered in the assessment of the filing fees in
any case. Any pleading that fails to comply with this
requirement shall not be accepted nor admitted, or shall
otherwise be expunged from the record.
The Court acquires jurisdiction over any case only upon the
payment of the prescribed docket fee. An amendment of the
complaint or similar pleading will not thereby vest jurisdiction in
the Court, much less the payment of the docket fee based on the
amount sought in the amended pleading. The ruling in the
Magaspi case (115 SCRA 193) in so far as it is inconsistent with
this pronouncement is overturned and reversed."
Strict compliance with this Circular is hereby enjoined.
Let this be circularized to all the courts hereinabove named and to the
President and Board of Governors of the Integrated Bar of the
Philippines, which is hereby directed to disseminate this Circular to all its
members.
March 24, 1988.
(Sgd). CLAUDIO TEEHANKEE
Chief Justice
(Emphasis and underscoring supplied)
On the other hand, respondent maintains that it had paid the filing fee which was
assessed by the clerk of court, and that there was no violation of Supreme Court
Circular No. 7 because the amount of damages was clearly specified in the
prayer, to wit:
2. On the FIRST CAUSE OF ACTION
 (c) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS
EIGHT HUNDRED FORTY FOUR THOUSAND SIX HUNDRED
SEVENTY FOUR AND SEVEN CENTS (US$ 844,674.07), plus accrued
interests and other related charges thereon subsequent to August 15,
1998, until fully paid; and (ii) an amount equivalent to 5% of all sums due
from said Defendant, as and for attorney's fees;
3. On the SECOND CAUSE OF ACTION
(d) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS
ONE HUNDRED TWENTY AND FIFTY THREE CENTS
(US$171,120.53), plus accrued interests and other related charges
thereon subsequent to August 15, 1998 until fully paid; and (ii) an
amount equivalent to 5% of all sums due from said Defendant, as and
for attorney's fees;
DHAcET

4. On the THIRD CAUSE OF ACTION

(e) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS
FIVE HUNDRED TWENTY NINE THOUSAND ONE HUNDRED
EIGHTY NINE AND EIGHTY CENTS (US$529,189.80), plus accrued
interests and other related charges thereon subsequent to August 15,
1998 until fully paid; and (ii) an amount equivalent to 5% or all sums due
from said Defendant, as and for attorney's fees;
5. On ALL THE CAUSES OF ACTION
Defendants AUTOMOTIVE CORPORATION PHILIPPINES, ASEA ONE
CORPORATION and AUTOCORP GROUP to be ordered to pay Plaintiff
BNP the aggregate sum of (i) US DOLLARS ONE MILLION FIVE
HUNDRED FORTY FOUR THOUSAND NINE HUNDRED EIGHTY
FOUR AND FORTY CENTS (US$1,544,984.40) (First through Third
Causes of Action), plus accrued interest and other related charges
thereon subsequent to August 15, 1998 until fully paid; and (ii) an
amount equivalent to 5% of all sums due from said Defendants, as and
for attorney's fees. 26
Moreover, respondent posits that the amount of US$1,544,984.40 represents not
only the principal but also interest and other related charges which had accrued
as of August 15, 1998. Respondent goes even further by suggesting that in light
of Tacay v. Regional Trial Court of Tagum, Davao del Norte 27 where the
Supreme Court held,
Where the action is purely for the recovery of money or damages, the
docket fees are assessed on the basis of the aggregate amount
claimed,exclusive only of interests and costs. 28 (Emphasis and
underscoring supplied),
it made an overpayment.
When Tacay was decided in 1989, the pertinent rule applicable was Section 5 (a)
of Rule 141 which provided for the following:
SEC. 5. Clerks of Regional Trial Courts. (a) For filing an action or
proceeding, or a permissive counter-claim or cross-claim not arising out
of the same transaction subject of the complaint, a third-party complaint
and a complaint in intervention and for all services in the same, if the
sum claimed, exclusive of interest, of the value of the property in
litigation, or the value of the estate, is:
1. Less than P5,000.00 P32.00
2. P5,000.00 or more but less than P10,000.00 48.00
3. P10,000.00 or more but less than P20,000.00 64.00
4. P20,000.00 or more but less than P40,000.00 80.00
5. P40,000.00 or more but less than P60,000.00 120.00
6. P60,000.00 or more but less than P80,000.00 160.00
7. P80,000.00 or more but less than P150,000.00 200.00
8. And for each P1,000.00 in excess of P150,000.00 4.00
9. When the value of the case cannot be estimated 400.00
10. When the case does not concern property
(naturalization, adoption, legal separation, etc.) 64.00
11. In forcible entry and illegal detainer cases appealed
from inferior courts 40.00
If the case concerns real estate, the assessed value thereof shall be
considered in computing the fees. cSIHCA

In case the value of the property or estate or the sum claim is less or
more in accordance with the appraisal of the court, the difference of fees
shall be refunded or paid as the case may be.
When the complaint in this case was filed in 1998, however, as correctly pointed
out by petitioners, Rule 141 had been amended by Administrative Circular No.
11-94 29 which provides:
BY RESOLUTION OF THE COURT, DATED JUNE 28, 1994,
PURSUANT TO SECTION 5 (5) OF ARTICLE VIII OF THE
CONSTITUTION, RULE 141, SECTION 7 (a) AND (d), and SECTION 8
(a) and (b) OF THE RULES OF COURT ARE HEREBY AMENDED TO
READ AS FOLLOWS:
RULE 141
LEGAL FEES
 xxx xxx xxx
Sec. 7. Clerks of Regional Trial Courts
(a) For filing an action or a permissive counterclaim or money claim
against an estate not based on judgment, or for filing with leave of court
a third-party, fourth-party, etc. complaint, or a complaint in intervention,
and for all clerical services in the same, if the total sum
claimed, inclusiveof interest, damages of whatever kind, attorney's
fees, litigation expenses, and costs, or the stated value of the
property in litigation, is:
1. Not more than P100,000.00 P400.00
2. P100,000.00, or more but not more than P150,000.00 600.00
3. For each P1,000.00 in excess of P150,000.00 5.00
xxx xxx xxx
Sec. 8. Clerks of Metropolitan and Municipal Trial Courts
(a) For each civil action or proceeding, where the value of the subject
matter involved, or the amount of the demand, inclusive of interest,
damages or whatever kind, attorney's fees, litigation expenses, and
costs, is:
1. Not more than P20,000.00 P120.00
2. More than P20,000.00 but not more than P100,000.00 400.00
3. More than P100,000.00 but not more than P200,000.00 850.00
(Emphasis and underscoring supplied)
The clerk of court should thus have assessed the filing fee by taking into
consideration "the total sum claimed, inclusive of interest, damages of whatever
kind, attorney's fees, litigation expenses, and costs, or the stated value of the
property in litigation." Respondent's and the Court of Appeals' reliance then
on Tacay was not in order.
Neither was, for the same reason, the Court of Appeals' reliance on
the 1989 case of Ng Soon v. Alday, 30 where this Court held:
. . . The failure to state the rate of interest demanded was not
fatal not only because it is the Courts which ultimately fix the same, but
alsobecause Rule 141, Section 5(a) of the Rules of Court, itemizing
the filing fees, speaks of "the sum claimed, exclusive of interest."
This clearly implies that the specification of the interest rate is not
that indispensable.
Factually, therefore, not everything was left to "guesswork" as
respondent Judge has opined. The sums claimed were ascertainable,
 sufficient enough to allow a computation pursuant to Rule 141, section
5(a).
Furthermore, contrary to the position taken by respondent Judge, the
amounts claimed need not be initially stated with mathematical
precision. The same Rule 141, section 5(a) (3rd paragraph), allows
an appraisal "more or less." 31 Thus:

"In case the value of the property or estate or the sum claimed is less or
more in accordance with the appraisal of the court, the difference of fee
shall be refunded or paid as the case may be."
In other words, a final determination is still to be made by the Court, and
the fees ultimately found to be payable will either be additionally paid by
the party concerned or refunded to him, as the case may be. The above
provision clearly allows an initial payment of the filing fees corresponding
to the estimated amount of the claim subject to adjustment as to what
later may be proved.
". . . there is merit in petitioner's claim that the third paragraph of Rule
141, Section 5(a) clearly contemplates a situation where an amount is
alleged or claimed in the complaint but is less or more than what is later
proved. If what is proved is less than what was claimed, then a refund
will be made; if more, additional fees will be exacted. Otherwise stated,
what is subject to adjustment is the difference in the fee and not the
whole amount" (Pilipinas Shell Petroleum Corp., et als., vs. Court of
Appeals, et als., G.R. No. 76119, April 10, 1989). 32 (Emphasis and
underscoring supplied) IaEACT

Respecting the Court of Appeals' conclusion that the clerk of court did not err
when he applied the exchange rate of US$1 = P43.00 "[i]n the absence of any
office guide of the rate of exchange which said court functionary was duty bound
to follow,[hence,] the rate he applied is presumptively correct," the same does not
lie. The presumption of regularity of the clerk of court's application of the
exchange rate is not conclusive. 33 It is disputable. 34 As such, the presumption
may be overturned by the requisite rebutting evidence. 35 In the case at bar,
petitioners have adequately proven with documentary evidence 36 that the
exchange rate when the complaint was filed on September 7, 1998 was US$1 =
P43.21.
In fine, the docket fees paid by respondent were insufficient.
With respect to petitioner's argument that the trial court did not acquire
jurisdiction over the case in light of the insufficient docket fees, the same does
not lie.
True, in Manchester Development Corporation v. Court of Appeals, 37 this Court
held that the court acquires jurisdiction over any case only upon the payment of
the prescribed docket fees, 38 hence, it concluded that the trial court did not
acquire jurisdiction over the case.
It bears emphasis, however, that the ruling in Manchester was clarified in Sun
Insurance Office, Ltd. (SIOL) v. Asuncion 39 when this Court held that in the
former there was clearly an effort to defraud the government in avoiding to pay
the correct docket fees, whereas in the latter the plaintiff demonstrated his
willingness to abide by paying the additional fees as required.
The principle in Manchester could very well be applied in the present
case. The pattern and the intent to defraud the government of the docket
fee due it is obvious not only in the filing of the original complaint but
also in the filing of the second amended complaint.
However, in Manchester, petitioner did not pay any additional docket fee
until the case was decided by this Court on May 7,
1987. Thus, inManchester, due to the fraud committed on the
government, this Court held that the court a quo did not acquire
jurisdiction over the case and that the amended complaint could
not have been admitted inasmuch as the original complaint was
null and void.
In the present case, a more liberal interpretation of the rules is
called for considering that, unlike Manchester, private respondent
demonstrated his willingness to abide by the rules by paying the
additional docket fees as required. The promulgation of the decision
inManchester must have had that sobering influence on private
respondent who thus paid the additional docket fee as ordered by the
respondent court. It triggered his change of stance by manifesting his
willingness to pay such additional docket fee as may be ordered.
Nevertheless, petitioners contend that the docket fee that was paid is still
insufficient considering the total amount of the claim. This is a matter
which the clerk of court of the lower court and/or his duly authorized
docket clerk or clerk in charge should determine and, thereafter, if any
amount is found due, he must require the private respondent to pay the
same.
Thus, the Court rules as follows:
1. It is not simply the filing of the complaint or appropriate initiatory
pleading, but the payment of the prescribed docket fee, that vests a trial
court with jurisdiction over the subject-matter or nature of the action.
Where the filing of the initiatory pleading is not accompanied by payment
of the docket fee, the court may allow payment of the fee within a
reasonable time but in no case beyond the applicable prescriptive or
reglementary period.
 2. The same rule applies to permissive counterclaims, third-party claims
and similar pleadings, which shall not be considered filed until and
unless the filing fee prescribed therefor is paid. The court may also allow
payment of said fee within a reasonable time but also in no case beyond
its applicable prescriptive or reglementary period. ASHaTc

3. Where the trial court acquires jurisdiction over a claim by the filing of
the appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading,
or if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It
shall be the responsibility of the Clerk of Court or his duly authorized
deputy to enforce said lien and assess and collect the additional
fee. 40 (Emphasis and underscoring supplied)
The ruling in Sun Insurance Office was echoed in the 2005 case of Heirs of
Bertuldo Hinog v. Hon. Achilles Melicor: 41
Plainly, while the payment of the prescribed docket fee is a jurisdictional
requirement, even its non-payment at the time of filing does not
automatically cause the dismissal of the case, as long as the fee is paid
within the applicable prescriptive or reglementary period, more so when
the party involved demonstrates a willingness to abide by the rules
prescribing such payment. Thus, when insufficient filing fees were
initially paid by the plaintiffs and there was no intention to defraud
the government, the Manchester rule does not apply. (Emphasis and
underscoring supplied; citations omitted)
In the case at bar, respondent merely relied on the assessment made by the
clerk of court which turned out to be incorrect. Under the circumstances, the clerk
of court has the responsibility of reassessing what respondent must pay within
the prescriptive period, failing which the complaint merits dismissal.
Parenthetically, in the complaint, respondent prayed for "accrued interest . . .
subsequent to August 15, 1998 until fully paid." The complaint having been filed
on September 7, 1998, respondent's claim includes the interest from August 16,
1998 until such date of filing.
Respondent did not, however, pay the filing fee corresponding to its claim for
interest from August 16, 1998 until the filing of the complaint on September 7,
1998. As priorly discussed, this is required under Rule 141, as amended
by Administrative Circular No. 11-94, which was the rule applicable at the time.
Thus, as the complaint currently stands, respondent cannot claim the interest
from August 16, 1998 until September 7, 1998, unless respondent is allowed by
motion to amend its complaint within a reasonable time and specify the precise
amount of interest petitioners owe from August 16, 1998 to September 7,
1998 42 and pay the corresponding docket fee therefor.
With respect to the interest accruing after the filing of the complaint, the same
can only be determined after a final judgment has been handed down.
Respondent cannot thus be made to pay the corresponding docket fee
therefor. Pursuant, however, to Section 2, Rule 141, as amended
byAdministrative Circular No. 11-94, respondent should be made to pay
additional fees which shall constitute a lien in the event the trial court adjudges
that it is entitled to interest accruing after the filing of the complaint.
Sec. 2. Fees as lien. Where the court in its final judgment awards a
claim not alleged, or a relief different or more than that claimed in the
pleading, the party concerned shall pay the additional fees which shall
constitute a lien on the judgment in satisfaction of said lien. The clerk of
court shall assess and collect the corresponding fees.
In Ayala Corporation v. Madayag, 43 in interpreting the third rule laid down in Sun
Insurance regarding awards of claims not specified in the pleading, this Court
held that the same refers only to damages arising after the filing of the
complaint or similar pleading as to which the additional filing fee therefor
shall constitute a lien on the judgment.
. . . The amount of any claim for damages, therefore, arising on or before
the filing of the complaint or any pleading should be specified. While it is
true that the determination of certain damages as exemplary or
corrective damages is left to the sound discretion of the court, it is the
duty of the parties claiming such damages to specify the amount sought
on the basis of which the court may make a proper determination, and
for the proper assessment of the appropriate docket fees. The
exception contemplated as to claims not specified or to claims
although specified are left for determination of the court is limited
only to any damages that may arise after the filing of the complaint
or similar pleading for then it will not be possible for the claimant to
specify nor speculate as to the amount thereof. 44 (Emphasis and
underscoring supplied; citation omitted) DaIACS

WHEREFORE, the petition is GRANTED in part. The July 25, 2001 Decision and
the December 18, 2001 Resolution of the Court Appeals are hereby MODIFIED.
The Clerk of Court of the Regional Trial Court of Makati City is ordered to
reassess and determine the docket fees that should be paid by respondent, BNP,
in accordance with the Decision of this Court, and direct respondent to pay the
same within fifteen (15) days, provided the applicable prescriptive or
reglementary period has not yet expired. Thereafter, the trial court is ordered to
proceed with the case with utmost dispatch. SO ORDERED.
(Proton Pilipinas Corp. v. Banque Nationale de Paris, G.R. No. 151242, [June
|||

15, 2005], 499 PHIL 247-267)

 [G.R. No. 146611. February 6, 2007.]

TANCREDO REDEA, petitioner, vs. HON. COURT OF

APPEALS and LEOCADIO REDEA, respondents.

DECISION

GARCIA, J : p

In this special civil action for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure, petitioner Tancredo Redea (Tancredo, hereafter) seeks the
annulment and setting aside of the Resolution 1 dated April 28, 2000 of the
Court of Appeals in CA-G.R. CV No. 59641, as reiterated in its Resolution2 of
November 16, 2000, denying the petitioner's motion for reconsideration.
The present controversy sprung from an action for partition filed by petitioner
Tancredo against his older half-brother, herein private respondent Leocadio
Redea (Leocadio, for brevity) before the then Court of First Instance (now
Regional Trial Court [RTC]) of San Pablo City, Laguna, and thereat docketed as
Civil Case No. S-241 which was subsequently inherited by Branch 33 of the RTC,
Siniloan, Laguna.
The basic complaint for partition alleges that plaintiff Tancredo and defendant
Leocadio are both sons of one Maximo Redea: Tancredo, by Maximo's
marriage to Magdalena Fernandez, and Leocadio, by Maximo's previous
marriage to Emerenciana Redea. The complaint further alleged that the parties'
common father, Maximo, left several pieces of realty, to wit: a residential lot at M.
Calim Street, Famy, Laguna; a riceland at Poroza, Famy, Laguna; and another
parcel of land at Maate, also in Famy, Laguna.
In a decision 3 dated August 20, 1997, the trial court, based on the evidence
presented, confined the partition to only the property actually pertaining to the
estate of the parties' deceased father and co-owned by them, namely, the parcel
of land at Maate, and accordingly rendered judgment as follows:
WHEREFORE, premises considered, judgment is hereby rendered
ordering the defendant [now respondent Leocadio] to partition only the
property located at Maate, Famy, Laguna after plaintiff's [Tancredo's]
reimbursement of the expenses incurred by the defendant in relation to
the said lot. However, partition cannot be effected with regard to
properties located at M. Calim Street, Famy, Laguna and the property
located at Poroza, Famy, Laguna, as the same belong to the defendant.
No pronouncement as to costs. aSTAcH
 SO ORDERED. (Words in brackets supplied)
On December 11, 1997, petitioner filed with the trial court a Notice of
Appeal. 4 The court gave due course to the notice and directed the elevation of
the records of the case to the CA whereat petitioner's appeal was docketed
as CA-G.R. CV No. 59641.
On September 28, 1998, the CA issued a resolution directing petitioner, as
appellant, to file his appellant's brief. Evidently, the period for filing the brief was
even extended by the CA.
On March 9, 1999, there being no appellant's brief filed within the extended
period, the CA issued a resolution 5 considering the appeal abandoned and
accordingly dismissing the same. The dismissal resolution reads:
For failure of plaintiff-appellant [now petitioner] to file the required brief
within the extended period, the instant appeal is hereby
consideredABANDONED and accordingly DISMISSED, pursuant to
Section 1(e), Rule 50, 1997 Rules of Civil Procedure.
On November 8, 1999 or eight (8) months after the CA issued the above
resolution, petitioner filed a motion for reconsideration 6 thereof. In a
resolution 7 of November 25, 1999, the CA denied the motion.
Then, on December 28, 1999, in the same CA-G.R. CV No. 59641, petitioner
filed a Petition for Relief 8 bearing date December 27, 1999, anchored on Section
2, 9 Rule 38 of the 1997 Rules of Civil Procedure. In that pleading, petitioner
prays the CA to set aside its dismissal resolution of March 9, 1999,supra,
reinstate his appeal and grant him a fresh period of forty-five (45) days from
notice within which to file his appellant's brief.
In the herein assailed Resolution 10 dated April 28, 2000, the CA denied the
aforementioned Petition for Relief , thus:
WHEREFORE, the petition for relief dated 27 December 1999 is hereby
DENIED.
SO ORDERED.
Explains the CA in said resolution:
Petition for relief is not among the remedies available in the Court of
Appeals. In fact, authorities in remedial law (noted authors Regalado,
Herrera, and Feria) are one in their commentaries that these petitions
are filed with the trial courts. Not one of them has advanced an opinion
or comment that this equitable relief can be obtained in the Court of
Appeals. Under Rule 47, an annulment of judgment or final orders and
resolutions may be filed before this court based on the ground of
extrinsic fraud which seems to be the premise of the petition. Perhaps it
 is worth looking into by the petitioner if the factual basis of the present
petition for relief may qualify as an extrinsic fraud, under Rule 47.
Petitioner's motion for reconsideration of the above-mentioned resolution was
likewise denied by the CA in its equally challenged Resolution 11 of November
16, 2000, wherein the appellate court further wrote:
Under the 1964 Rules of Court, there was only one court where a
petition for relief may be filed the Court of First Instance, now the
Regional Trial Court. Section 1 thereof governs a petition to Court of
First Instance for relief from judgment of inferior court while Section 2
thereof governs petition to Court of First Instance for relief from judgment
or other proceeding thereof. The 1997 Rules of Civil Procedure has
altered the said precept. Now, it must be filed before the Municipal Trial
Courts or Metropolitan Trial Courts for judgments or final orders or other
proceedings taken in said courts, and in the same case. And for
judgment, order, or other proceedings in the Regional Trial Court, it must
be filed in the same Regional Trial Court which rendered the judgment or
final order, or other proceedings taken and in the same case. In other
words, under the present rule, such a petition may be filed in the same
court which rendered the judgment or final order, or proceedings taken
and in the same case. This is in accordance with uniform procedure rule
for Municipal and Regional Trial Courts. aCSEcA

The above construction to limit the term "any court" to Municipal Trial
Court and Regional Trial Court and not to include the Court of
Appeals finds support in Section 7 of the Rules which states:
Sec. 7. Procedure where the denial of an appeal is set aside.
Where the denial of an appeal is set aside, the lower court
shall be required to give due course to the appeal and to
elevate the record of the appealed case as if a timely and
proper appeal had been made.
Significantly, there is no specific provision in both the 1964 and 1997
Rules of Court making the petition under Rule 38, applicable in the Court
of Appeals. The procedure in the Court of Appeals from Rule 44 to Rule
55 with the exception of Rule 45 which pertains to the Supreme Court,
identifies the remedies available before said court such as annulment of
judgment or final orders and resolution (Rule 47); motion for
reconsideration (Rule 52); and, new trial, (Rule 53). Nowhere is petition
for relief under Rule 38 mentioned.
But even as the CA stood firm on its stand that a petition for relief from denial of
appeal is not among the remedies available before the CA itself, the appellate
court, in the same Resolution of November 16, 2000, left the final determination
of the question to this Court, thus:
 Parenthetically, the main question presented herein is novel in that there
is yet no definite and definitive jurisprudence from the Supreme Court.
Perhaps, the case will clarify this gray area in our adjective law for
guidance of the Bench and Bar. The issue should be elevated to that
Tribunal.
Presently, petitioner is now before this Court via the instant recourse on his
submission that the CA committed grave abuse of discretion when it
I
. . . RULED THAT A PETITION FOR RELIEF IS NOT AN AVAILABLE
REMEDY IN THE COURT OF APPEALS.
II
. . . REFUSED TO GRANT THE PETITION DESPITE A CLEAR
SHOWING THAT (A) PETITIONER, BY REASON OF FRAUD AND
MISTAKE, WAS PREVENTED FROM PROSECUTING HIS APPEAL,
AND (B) PETITIONER HAS A GOOD AND SUBSTANTIAL CAUSE OF
ACTION AGAINST PRIVATE RESPONDENT.
We DISMISS.
In Hagonoy Market Vendor Association v. Municipality of Hagonoy, Bulacan, G.R.
No. 137621, February 6, 2002, then Associate Justice, now Chief Justice
Reynato S. Puno, reminded us that
Laws are of two (2) kinds: substantive and procedural. Substantive laws,
insofar as their provisions are unambiguous, are rigorously applied to
resolve legal issues on the merits. In contrast, courts generally frown
upon an uncompromising application of procedural laws so as not to
subvert substantial justice. Nonetheless, it is not totally uncommon for
courts to decide cases based on a rigid application of the so-called
technical rules of procedure as these rules exist for the orderly
administration of justice.
From the petition, it is clear that this Court is called upon to relax the application
of procedural rules, or suspend them altogether, in favor of petitioner's
substantial rights. There is no doubt as to the power of this Court to do that. In a
fairly recent case, we reiterated:
The Court has often stressed that rules of procedure are merely tools
designed to facilitate the attainment of justice. They were conceived and
promulgated to effectively aid the court in the dispensation of justice.
Courts are not slaves to or robots of technical rules, shorn of judicial
discretion. In rendering justice, courts have always been, as they ought
to be, conscientiously guided by the norm that on the balance,
technicalities take a backseat against substantive rights, and not the
other way around. Thus, if the application of the Rules would tend to
 frustrate rather than promote justice, it is always within our power to
suspend the rules or except a particular case from its operation. 12

The Rules itself expressly states in Section 2 of Rule 1 that the rules shall be
liberally construed in order to promote their object and to assist the parties in
obtaining just, speedy and inexpensive determination of every action and
proceeding. Courts, therefore, not only have the power but the duty to construe
and apply technical rules liberally in favor of substantive law and substantial
justice. Furthermore, this Court, unlike courts below, has the power not only to
liberally construe the rules, but also to suspend them, in favor of substantive law
or substantial rights. Such power inherently belongs to this Court, which is
expressly vested with rule-making power by no less than the Constitution. 13
It is equally settled, however, that this Court's power to liberally construe and
even to suspend the rules, presupposes the existence of substantial rights in
favor of which, the strict application of technical rules must concede. The facts
are borne out by the records pertaining to petitioner's purported undivided share
in the property at M. Calim Street, Famy, Laguna, and the property in Poroza
clearly showed that these two properties had been subject of an agreement (Exh.
"1") whereby petitioner recognized respondent's rights to said properties. This
fact binds this Court, there being nothing on record with the trial court as to the
herein alleged fraud against the petitioner. Upon thorough deliberation of the
supposed substantial rights claimed by the petitioner with the court below, the
Court finds no cogent basis to favorably rule on the merits of the appeal even if it
may be given due course which is indispensable to justify this Court in
considering this case as an exception to the rules.
The present case will have to be decided in accordance with existing rules of
procedure. We apply the settled principle that petition for relief under Rule 38 of
the Rules of Court is of equitable character, allowed only in exceptional cases as
when there is no other available or adequate remedy. 14Hence, a petition for
relief may not be availed of where a party has another adequate remedy
available to him, which is either a motion for new trial or appeal from the adverse
decision of the lower court, and he is not prevented from filing such motion or
taking the appeal. The rule is that relief will not be granted to a party who seeks
to be relieved from the effect of the judgment when the loss of the remedy at law
is due to his own negligence, or a mistaken mode of procedure; otherwise, the
petition for relief will be tantamount to reviving the right of appeal which has
already been lost either because of inexcusable negligence or due to a mistake
in the mode of procedure taken by counsel. 15
Under Section 2 of Rule 38, supra, of the Rules of Court, a party prevented from
taking an appeal from a judgment or final order of a court by reason of fraud,
accident, mistake or excusable negligence, may file in the same court and in the
same case a petition for relief praying that his appeal be given due course. This
presupposes, of course, that no appeal was taken precisely because of any of
the aforestated reasons which prevented him from appealing his case. Hence, a
petition for relief under Rule 38 cannot be availed of in the CA, the latter being a
court of appellate jurisdiction. For sure, under the present Rules, petitions for
relief from a judgment, final order or other proceeding rendered or taken should
be filed in and resolved by the court in the same case from which the petition
arose. Thus, petition for relief from a judgment, final order or proceeding involved
in a case tried by a municipal trial court shall be filed in and decided by the same
court in the same case, just like the procedure followed in the present Regional
Trial Court. 16
Here, the record shows that petitioner in fact filed a Notice of Appeal with the trial
court, which the latter granted in its order of December 11, 1997 and ordered the
elevation of the records to the CA. In turn, the CA, in its resolution of September
28, 1998, required the petitioner, thru his former counsel, Atty. Geminiano
Almeda, to file his appellant's brief. But petitioner failed to comply. Consequently,
in its resolution of March 9, 1999, the CA considered the appellant's appeal as
ABANDONED and DISMISSED the same. AIHaCc

Additionally, after the dismissal of his appeal, petitioner filed with the CA a motion
for reconsideration of the dismissal resolution. Unfortunately, however, the
motion was filed very much late on November 8, 1999. Expectedly, in its
resolution 17 of November 25, 1999, the CA denied the motion for reconsideration,
to wit:
The last day to file a motion for reconsideration was on 06 April 1999
and as of 18 October 1999 no such motion was ever filed; in fact on 19
October 1999 the court resolved that an entry of judgment may now be
issued. The motion for reconsideration, however, pleas for leniency on
account of his former lawyer's inefficiency and negligence in that he
failed to appeal the case. This is not well taken.
His former lawyer's lack of fidelity and devotion to his client in the
discharge of his duty of perfecting the appeal on time without
demonstrating fraud, accident, mistake or excusable negligence cannot
be a basis for judicial relief. The client has to bear the adverse
consequences of the inexcusable mistake or negligence of his counsel
or of the latter's employee and may not be heard to complain that the
result of the litigation might have been different had he proceeded
differently (Inocando v. Inocando, 100 Phil. 266)
WHEREFORE, the motion is hereby DENIED.
Petitioner presents himself as a mere farmer seeking the Court's leniency to the
point of disregarding the rules on reglementary period for filing pleadings. But he
fails to point out any circumstance which might lead the Court to conclude that
his station in life had in any way placed his half-brother in a more advantageous
position. As we see it, petitioner failed to show diligence in pursuing his cause.
His condition as a farmer, by itself alone, does not excuse or exempt him from
being vigilant on his right. He cannot lay the blame solely on his former lawyer. It
is settled that clients are bound by the mistakes, negligence and omission of their
counsel. 18 While, exceptionally, a client may be excused from the failure of his
counsel, the circumstances obtaining in this case do not convince the Court to
take exception.
In seeking exemption from the above rule, petitioner claims that he will suffer
deprivation of property without due process of law on account of the gross
negligence of his previous counsel. To him, the negligence of his former counsel
was so gross that it practically resulted to fraud because he was allegedly placed
under the impression that the counsel had prepared and filed his appellant's brief.
He thus prays the Court reverse the CA and remand the main case to the court
of origin for new trial.
Admittedly, this Court has relaxed the rule on the binding effect of counsel's
negligence and allowed a litigant another chance to present his case (1) where
the reckless or gross negligence of counsel deprives the client of due process of
law; (2) when application of the rule will result in outright deprivation of the
client's liberty or property; or (3) where the interests of justice so require. 19 None
of these exceptions obtains here.
For a claim of counsel's gross negligence to prosper, nothing short of clear
abandonment of the client's cause must be shown. Here, petitioner's counsel
failed to file the appellant's brief. While this omission can plausibly qualify as
simple negligence, it does not amount to gross negligence to justify the
annulment of the proceedings below. SDATEc

In Legarda v. Court of Appeals, 20 where the Court initially held that the counsel's
failure to file pleadings at the trial court and later on appeal amounted to gross
negligence, the Court, on motion of the respondent therein, granted
reconsideration and applied the general rule binding the litigant to her counsel's
negligence. In said case, the Court noted that the proceedings which led to the
filing of the petition "were not attended by any irregularity." The same observation
squarely applies here.
To recapitulate, petitioner is not entitled to relief under Rule 38, Section 2 of the
Rules of Court. He was not prevented from filing his notice of appeal by fraud,
accident, mistake or excusable negligence, as in fact he filed one. The relief
afforded by Rule 38 will not be granted to a party who seeks to be relieved from
the effects of the judgment when the loss of the remedy of law was due to his
own negligence, or a mistaken mode of procedure for that matter; otherwise, the
petition for relief will be tantamount to reviving the right of appeal which has
already been lost, either because of inexcusable negligence or due to a mistake
of procedure by counsel. 21 The Rules allow a petition for relief only when there is
no other available remedy, and not when litigants, like the petitioner, lose a
remedy by negligence.
On a final note, the extraordinary writ of certiorari may be issued only where it is
clearly shown that there is patent and gross abuse of discretion as to amount to
an evasion of positive duty or to virtual refusal to perform a duty enjoined by law,
or to act at all in contemplation of law, as where the power is exercised in an
arbitrary and despotic manner by reason of passion or personal hostility. 22 The
Court finds no such abuse of discretion in this case.
WHEREFORE, the instant petition is DISMISSED and the assailed resolutions of
the CA are AFFIRMED. No pronouncement as to costs. SO ORDERED.
(Redea v. Court of Appeals, G.R. No. 146611, [February 6, 2007], 543 PHIL
|||

358-371)

SECOND DIVISION

[G.R. No. 139596. January 24, 2006.]

CHARLES CU-UNJIENG, petitioner, vs.

HON. COURT OF APPEALS and UNION BANK OF THE
PHILIPPINES, respondents.

Emmanuel O. Tansingco for petitioner.

Macalino and Associates for private respondent.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; APPEALS; STATUTORY NATURE

THEREOF EXPLAINED. Doctrinally entrenched is the pronouncement that the
right to appeal is merely statutory and a party seeking to avail of that right must
comply with the statute or rules.
2. ID.; ID.; ID.; MANDATORY AND JURISDICTIONAL REQUIREMENT FOR
PAYMENT OF DOCKET AND OTHER FEES WITHIN THE PRESCRIBED
PERIOD, JUSTIFIED. Well-settled is the rule that payment of the docket and
other legal fees within the prescribed period is both mandatory and jurisdictional,
noncompliance with which is fatal to an appeal. For, to stress, appeal is not a
matter of right, but a mere statutory privilege. An ordinary appeal from a decision
or final order of the RTC to the CA must be made within fifteen (15) days from
notice. And within this period, the full amountof the appellate court docket and
other lawful fees must be paid to the clerk of the court which rendered the
judgment or final order appealed from. Time and again, this Court has
consistently held that full payment of docket fees within the prescribed period is
mandatory for the perfection of an appeal. Without such payment, the appeal is
not perfected and the appellate court does not acquire jurisdiction to entertain the
appeal, thereby rendering the decision sought to be appealed final and executory.
For sure, nonpayment of the appellate court docket and other lawful fees within
the reglementary period as provided under Section 4, Rule 41, supra, is a ground
for the dismissal of an appeal under Section 1 (c) of Rule 50.
3. ID.; ID.; ID.; ID.; RULES OF PROCEDURE MAY BE RELAXED ONLY FOR
PERSUASIVE AND WEIGHTY REASONS; NOT APPLICABLE IN CASE AT
BAR. True, the rules may be relaxed but only for persuasive and weighty
reasons, to relieve a litigant of an injustice commensurate with his failure to
comply with the prescribed procedure. So it is that in La Salette College vs.
Victor Pilotin, we held: Notwithstanding the mandatory nature of the
requirement of payment of appellate docket fees, we also recognize that its strict
application is qualified by the following: first, failure to pay those fees within the
reglementary period allows only discretionary, not automatic, dismissal; second,
such power should be used by the court in conjunction with its exercise of sound
discretion in accordance with the tenets of justice and fair play, as well as with a
great deal of circumspection in consideration of all attendant circumstances.
Then, too, in Mactan Cebu International Airport Authority (MCIAA) vs. Mangubat,
we held that late payment of docket fees may be admitted when the party
showed willingness to abide by the Rules by immediately paying the required
fees. Mactan, however, cannot be a source of comfort for herein petitioner. For
there, the appellate docket fees were paid six (6) days after the timely filing of the
notice of appeal. Unlike in Mactan, payment of the appellate docket fees in this
case was effected by petitioner only after four (4) months following the
expiration of the reglementary period to take an appeal. With the reality obtaining
in this case that payment of the appellate docket fees was belatedly made four (4)
months after the lapse of the period for appeal, it appears clear to us that
the CA did not acquire jurisdiction over petitioner's appeal except to order its
dismissal, as it rightfully did. Thus, the September 1, 1998 decision of the RTC
has passed to the realm of finality and became executory by operation of law.
We must emphasize that invocation of substantial justice is not a magical
incantation that will automatically compel this Court to suspend procedural rules.
Rules of procedure are not to be belittled or dismissed simply because their non-
observance may have resulted in prejudice to a party's substantive rights. Like all
rules, they are required to be followed.
 DECISION

GARCIA, J : p

By this petition for review on certiorari, petitioner Charles Cu-Unjieng seeks the
reversal of the following issuances of the Court of Appeals (CA) in CA-G.R. CV
No. 8177-B-UDK, entitled Charles Cu-Unjieng, plaintiff-appellant vs. Union
Bank of the Philippines, et al., defendants-appellees, to wit:
1. Resolution 1 dated May 10, 1999, dismissing, for non-
payment of docket and other lawful fees, petitioner's appeal from
an earlier decisionof the Regional Trial Court at Malolos, Bulacan
which dismissed his complaint for specific performance and
damages against respondent Union Bank of the Philippines and
others; and
2. Resolution 2 dated July 30, 1999 which denied petitioner's Motion
for Reconsideration and ordered expunged the appeal brief
thereto attached.
The facts:
Respondent Union Bank of the Philippines (UBP) is the owner of a
parcel of agricultural land with an area of 218,769 square meters situated in
Barangay Sta. Maria, San Miguel, Bulacan and registered in its name under
Transfer Certificate of Title (TCT) No. TC-1062 of the
Registry of Deeds ofBulacan.
Sometime in January 1994, UBP caused the posting on the bulletin boards of its
branch offices of a three-page list of acquired realty assets available for sale to
interested parties. Included in said list was the aforementioned parcel of land,
offered to be sold for P2,200,000.00.
Petitioner, through a letter 3 dated April 11, 1994 and addressed to Joselito P.
Valera, manager of UBP's Acquired Assets Department, offered to buy the
subject property for a lesser amount of P2,078,305.50, payable as follows: 50%
as down payment with the balance to be paid in equal monthly installments over
a period of two (2) years. Petitioner explained that his offer for an amount lesser
than UBP's asking price was on account of five (5) tenants occupying the subject
land who were allegedly demanding P500,000.00 to voluntarily vacate the same.
As proof of his interest to buy the property, petitioner tendered PCIB Check No.
565827 for P103,915.27, purportedly representing 10% of the 50% down
payment as earnest money or deposit. UBP acknowledged receipt thereof by
way of Union Bank Receipt No. 495081 dated April 11, 1994. DIESaC
On August 30, 1994, petitioner wrote a follow-up letter to UBP inquiring on the
status of his offer to buy the subject premises. 4
Via a reply-letter dated August 31, 1994, the manager of UBP's Acquired Assets
Department advised petitioner that his offer to purchase is yet to be acted upon
because the bank was still awaiting the opinion of its legal division regarding the
sale of "CARPable" agricultural assets acquired by the bank. 5
As it turned out, UBP rejected petitioner's offer as shown by the fact that in
another letter 6 dated December 19, 1994, the bank informed petitioner that his
offer could not be favorably acted upon on account of the legal division's opinion
that sales of lands covered by the Comprehensive Agrarian Reform Law without
prior Department of Agrarian Reform (DAR) approval are considered null and
void. Accordingly, UBP advised petitioner to pick up the refund of his
P103,915.27 "earnest money" at the bank's disbursing unit.
Unable to accept UBP's rejection of his offer, petitioner, through counsel, made a
formal demand 7 for the bank to comply with its obligation to transfer and deliver
the title of the subject property to him by executing the proper
deed of conveyance, under the terms and conditions set forth in his April 11,
1994 offer.
Responding thereto, UBP, thru its counsel, Atty. Luzano, in a letter 8 dated July
19, 1995, reiterated the bank's rejection of petitioner's offer as "the land
being carpable could only be disposed of by the bank either thru Voluntary Offer
to Sell (VOS) or compulsory acquisition, the procedure ofwhich is outlined in Sec.
16" of Republic Act (RA) No. 6657.
It was against the foregoing backdrop of events that, on February 6, 1997, in the
Regional Trial Court (RTC) at Malolos, Bulacan, petitioner filed his complaint 9 in
this case for Specific Performance and Damages against UBP, impleading as co-
defendant in the suit the Register of Deeds of Bulacan. Docketed as Civil Case
No. 80-M-97 and raffled to Branch 9 of the court, the complaint principally sought
UBP's compliance with an alleged perfected contract of sale between it and
petitioner relative to the parcel of land in question. More specifically, the
complaint prays for a judgment ordering UBP to:
a) accept payments from the plaintiff [petitioner] for the sale of the
Property in accordance with the terms and conditions of the letter
dated 11 April 1994;
b) execute a Deed of Absolute Sale over the Property covered by TCT
No. TC 1062 of the Registry of Deeds of the Province of Bulacan
upon the plaintiff's full payment of the amount of Two Million
Seventy Eight Thousand Three Hundred Five & 50/100
(P2,078,305.50), failing in which, the deputy sheriff should be
ordered to execute such deed and the Registry of Deeds to
 cancel the title of the Bank and issue a new one in favor of the
plaintiff;
c) pay plaintiff the sum of Five Hundred Thousand Pesos
(P500,000.00) as moral damages;
d) pay plaintiff the sum of Five Hundred Thousand Pesos
(P500,000.00) as exemplary damages;
e) pay plaintiff the sum of Four Hundred Thousand Pesos
(P400,000.00) as attorney's fees; and
f) pay the costs of the suit.
Other reliefs, just and equitable under the premises, are likewise
respectfully prayed for.
After due proceedings, the trial court, in a decision dated September 1,
1998, 10 upon a finding that no perfected contract of sale transpired between the
parties, dismissed petitioner's complaint for lack of sufficient cause of action, thus:
WHEREFORE, on the basis of the evidence adduced and the
laws/jurisprudence applicable thereon, judgment is hereby rendered
DISMISSING the complaint in the above entitled case for
want of sufficient cause of action as well as the defendant's counterclaim
for damages and attorney's fees for lack of proof to warrant the same.
However, defendant Union Bank of the Philippines is ordered to
reimburse plaintiff Charles Cu-Unjieng the amount of P103,915.27
representing the face value of PCIBank Check No. 565827 tendered by
the latter to the former as purported "earnest money", with interest
thereon at the prevailing rates of interest periodically bestowed by UBP
to its savings depositors from April 11, 1994, through the succeeding
years, and until the full amount thereof shall have been delivered to the
plaintiff.
No pronouncement as to costs.
SO ORDERED. DEcITS

With his motion for reconsideration having been denied, petitioner filed with the
trial court a Notice of Appeal 11 therein making known that he is taking an appeal
from the adverse decision to the CA. Acting thereon, the trial court issued an
Order 12 directing the elevation of the records of the case to the CA, whereat
petitioner's appeal was docketed as CA-G.R. CV No. 8177-B-UDK.
As things would have it, in the herein first assailed Resolution dated May 10,
1999, the CA dismissed petitioner's appeal for nonpayment of the required
docket and other lawful appeal fees, to wit:
 For failure of the appellant [petitioner] to pay the docket and other lawful
fees (Sec. 4, Rule 41, 1997 Rules of Civil Procedure),
the Court Resolved to DISMISS the appeal pursuant to Sec. 1(c), Rule
50 of the same Rule.
SO ORDERED. 13
Petitioner filed a Motion for Reconsideration, attaching thereto his appellant's
brief. However, in a subsequent Resolution dated July 30, 1999, 14 the
appellate court denied the motion and even expunged from the record the
appellant's brief thereto attached:
Acting on the motion of the plaintiff-appellant [petitioner] for a
reconsideration of the Resolution of May 10, 1999, which dismissed the
appeal for the reason stated therein, and considering the opposition
interposed thereto by defendant-appellee [respondent] Union
Bank of the Philippines and it appearing that the filing of the
notice of appeal of November 5, 1988, was not accompanied by the full
and correct payment of the corresponding appellate court docket and
other lawful fees, and for such tardiness of more than four (4) months,
the Court resolved to DENY the motion for reconsideration and the
attached brief thereto ordered EXPUNGED.
In Pedrosa vs. Hill, 257 SCRA 373, the Supreme Court,
citing Rodillas vs. Commission on Elections (245 SCRA 702 aptly said:
. . . the mere filing of the notice of appeal was not enough. It
should be accompanied by the payment of the correct
amount of appeal fee. In other words, the payment of the full
amount of the docket fee is an indispensable step for the
perfection of an appeal. In both original and appellate cases,
the court acquires jurisdiction over the case only upon the
payment of the prescribed docket fees. Well-rooted is the
principle that perfection of an appeal within the statutory or
reglementary period is not only mandatory but also jurisdictional
and failure to do so renders the questioned decision final and
executory, and deprives the appellate court or body of jurisdiction
to alter the final judgment much less to entertain the appeal. This
requirement of an appeal fee is by no means a mere
technicality of law or procedure. It is an essential requirement
without which the decision appealed from would become final and
executory, as if no appeal was filed at all.
SO ORDERED.
Undaunted, petitioner is now with us via the present recourse seeking a
relaxation of procedural rules and ultimately the reversal and setting aside ofthe
assailed twin resolutions of the appellate court.
Petitioner would have the Court view his failure to pay the appeal docket fees on
time as a non-fatal lapse, or a non-jurisdictional defect which the CAshould have
ignored in order to attain substantial justice. Further, petitioner passes the blame
to the RTC clerk of court who allegedly made the erroneous
computation of docket fees.

We are not persuaded.

Doctrinally entrenched is the pronouncement that the right to appeal is merely
statutory and a party seeking to avail of that right must comply with the statute or
rules. 15
Rule 41, Section 4, of the 1997 Rules of Civil Procedure provides:
SEC. 4. Appellate court docket and other lawful fees. Within the
period for taking an appeal, the appellant shall pay to the
clerk of the courtwhich rendered the judgment or final order appealed
from, the full amount of the appellate court docket and other lawful fees.
Proof of paymentof said fees shall be transmitted to the
appellate court together with the original record or the record on appeal.
Well-settled is the rule that payment of the docket and other legal fees within the
prescribed period is both mandatory and jurisdictional, 16noncompliance with
which is fatal to an appeal. For, to stress, appeal is not a matter of right, but a
mere statutory privilege. 17
An ordinary appeal from a decision or final order of the RTC to the CA must be
made within fifteen (15) days from notice. 18 And within this period, the full
amount of the appellate court docket and other lawful fees must be paid to the
clerk of the court which rendered the judgment or final order appealed from.
Time and again, this Court has consistently held that full payment of docket fees
within the prescribed period is mandatory for the perfection of an appeal. Without
such payment, the appeal is not perfected and the appellate court does not
acquire jurisdiction to entertain the appeal, thereby rendering the decision sought
to be appealed final and executory. 19
For sure, nonpayment of the appellate court docket and other lawful fees within
the reglementary period as provided under Section 4, Rule 41, supra, is a ground
for the dismissal of an appeal under Section 1(c) of Rule 50, to wit:
SECTION 1. Grounds for dismissal of appeal. An appeal may be
dismissed by the Court of Appeals, on its own motion or on that of the
appellee, on the following grounds:
xxx xxx xxx
 c. Failure of the appellant to pay the docket and other lawful fees as
provided in section 4 of Rule 41; . . .
This Court has invariably sustained the CA's dismissal on technical grounds
under the aforequoted provision unless considerations of equity and substantial
justice present cogent reasons to hold otherwise. True, the rules may be relaxed
but only for persuasive and weighty reasons, to relieve a litigant of an injustice
commensurate with his failure to comply with the prescribed procedure. 20 So it is
that in La Salette College vs. Victor Pilotin, 21we held:
Notwithstanding the mandatory nature of the
requirement of payment of appellate docket fees, we also recognize that
its strict application is qualified by the following: first, failure to pay those
fees within the reglementary period allows only discretionary, not
automatic, dismissal; second, such power should be used by the court in
conjunction with its exercise of sound discretion in accordance with the
tenets of justice and fair play, as well as with a great
deal of circumspection in consideration of all attendant circumstances
Then, too, in Mactan Cebu International Airport Authority (MCIAA) vs.
Mangubat, 22 we held that late payment of docket fees may be admitted when the
party showed willingness to abide by the Rules by immediately paying the
required fees. Mactan, however, cannot be a source of comfort for herein
petitioner. For there, the appellate docket fees were paid six (6) days after the
timely filing of the notice of appeal. Unlike in Mactan, paymentof the appellate
docket fees in this case was effected by petitioner only after four (4) months
following the expiration of the reglementary period to take an appeal.
With the reality obtaining in this case that payment of the appellate docket fees
was belatedly made four (4) months after the lapse of the period for appeal, it
appears clear to us that the CA did not acquire jurisdiction over petitioner's
appeal except to order its dismissal, 23 as it rightfully did. Thus, the September 1,
1998 decision of the RTC has passed to the realm of finality and became
executory by operation of law.
We must emphasize that invocation of substantial justice is not a magical
incantation that will automatically compel this Court to suspend procedural rules.
Rules of procedure are not to be belittled or dismissed simply because their non-
observance may have resulted in prejudice to a party's substantive rights. Like all
rules, they are required to be followed. So it must be here.
WHEREFORE, petition is DENIED and the assailed resolutions dated May 10,
1999 and July 30, 1999 of the Court of Appeals AFFIRMED.
Costs against petitioner. SO ORDERED.
C
 (Cu-Unjieng v. Court of Appeals, G.R. No. 139596, [January 24, 2006], 515
|||

PHIL 568-578)

THIRD DIVISION

[G.R. No. 162772. March 14, 2008.]

MERLIZA A. MUOZ, petitioner, vs. PEOPLE OF THE

PHILIPPINES, respondent.

DECISION

AUSTRIA-MARTINEZ, J : p

By way of a Petition for Review on Certiorari under Rule 45 of the Rules

of Court, Merliza A. Muoz (petitioner) assails the November 19, 2003
Resolution 1 of the Court of Appeals (CA) sustaining her conviction for
violation of Batas Pambansa Bilang 22 (B.P. Blg. 22); and the March 10, 2004
CA Resolution 2 denying her Motion for Reconsideration.
The antecedent facts are as stated by the trial courts.
Petitioner is the wife of Ludolfo P. Muoz Jr. (Ludolfo), owner and
operator of L.P. Munoz Construction (Muoz Construction). On August 3,
2000, Ludolfo took a loan of P500,000.00, at 5% interest, from Sunwest
Construction and Development Corporation (Sunwest). Ludolfo issued to
Sunwest a Development Bank of the Philippines (DBP) check, postdated
September 3, 2000, for P500,000.00. 3
On September 3, 2000, Ludolfo sought an extension of his loan by
replacing the DBP check with Rizal Commercial Banking Corporation (RCBC)
Check No. 0000057285 for P500,000.00, drawn by petitioner 4 and postdated
December 3, 2000. Sunwest accepted the replacement check.5
On February 5, 2001 Sunwest deposited the RCBC check with the
Bank of the Philippine Islands (BPI), Legaspi City, 6 which presented it to the
drawee bank RCBC, but the latter dishonored the check for insufficiency of
funds. 7 Thus, on February 8, 2001, Sunwest sent by registered mail a letter
addressed to Ludolfo, informing him of the dishonor of the RCBC check and
demanding that he make good the check or pay the amount thereof within five
days from receipt of said notice. 8 The letter was received on the same day by
Eden Barnedo at the postal address "L.P. Muoz, Jr. [sic] Construction,
Fernando Avenue, Doa Maria Subd., Daraga, Albay." 9 cHCIDE

On March 14, 2001, Sunwest sent by registered mail another letter, this
time addressed to petitioner, informing her of the dishonor of the RCBC check
and demanding that she pay the said check within five days from receipt of
the letter. 10 The letter was received on March 20, 2001 by Eden Barnedo at
the postal address, "Fernando Avenue, Doa Maria Subd., Daraga, Albay". 11
In her March 20, 2001 reply to Sunwest, petitioner explained that
Sunwest and Muoz Construction had mutual claims against each other:
Muoz Construction had a claim against Sunwest for P10,000,000.00,
including a 15% advance payment, for two river control projects, while
Sunwest had a claim against Muoz Construction for P500,000.00. Given that
the claim of Muoz Construction was bigger than that of Sunwest, petitioner
treated the first claim as having automatically offset, covered or paid the
second claim as represented by the amount of the RCBC check. This explains
why petitioner did "not give emphasis" anymore to the RCBC check, the
amount of which she considered as having been already settled. Petitioner
reminded Sunwest that it was made aware of the offsetting of the amount of
the RCBC check as early as February 15, 2001. 12
Upon a criminal complaint 13 filed by Elizaldy S. Co, Sunwest president,
an Information 14 was filed by the City Prosecutor before the Municipal Trial
Court in Cities (MTCC), Legaspi City, charging petitioner with violation of B.P.
Blg. 22. Petitioner entered a plea of "Not Guilty." 15
After trial, the MTCC rendered a Decision dated August 19,
2003, 16 finding petitioner guilty beyond reasonable doubt of the crime
charged, and sentencing her to pay a fine of P200,000.00; to pay Sunwest
P500,000.00, representing the amount of RCBC Check No. 0000057285, plus
interest thereon at the rate of 12% per annum computed from April 23, 2001,
the date of the filing of the information, until fully paid; and to pay the costs. 17
On appeal by petitioner, the Regional Trial Court (RTC), Legaspi City,
in a Decision dated October 16, 2003, affirmed the MTCC Decision in toto. 18
Petitioner filed a Petition for Review with the CA but the latter dismissed
it outright in the November 19, 2003 Resolution assailed herein, citing the
following grounds:
(a) Failure to attach or incorporate an Affidavit of Service as
required under Section 13, Rule 13 in relation to Section 3, Rule 42 of
the 1997 Rules of Civil Procedure, as amended; and ETHSAI

(b) Failure to furnish copy of the petition and its annexes to the
Office of the Solicitor General which is the counsel of the People of the
Philippines. 19
 With the denial by the CA of her Motion for Reconsideration, petitioner
is now before the Court raising the following issues:
Whether or not the Fifth Division of the Court of Appeals gravely
erred in dismissing the petition for review filed by herein petitioner
purely on technical grounds.
Whether or not the court a quo gravely erred in convicting the
petitioner notwithstanding the fact that the criminal complaint was filed
by an unauthorized representative of the private complainant
corporation.
Whether or not the court a quo gravely erred in convicting the
petitioner notwithstanding the fact that the prosecution failed to prove
the element of knowledge of insufficiency of funds in or credit with the
drawee bank on the part of the petitioner.
Whether or not the court a quo gravely erred when it held the
petitioner civilly liable notwithstanding the absence of authority of
Elizaldy S. Co to file the instant case for and in behalf of the private
complainant corporation. 20
The Court finds no merit in the Petition.
Except in criminal cases in which the penalty imposed is reclusion
perpetua or death, an appeal is not a matter of right but of sound judicial
discretion. It may be availed of only in the manner provided by law and the
rules. 21
Rule 42 prescribes the following requirements for the filing with the CA
of a petition for review from a decision of the RTC:
Section 1. How appeal taken; time for filing. A party desiring to
appeal from a decision of the Regional Trial Court rendered in the
exercise of its appellate jurisdiction may file a verified petition for
review with the Court of Appeals, paying at the same time to the clerk
of said Court the corresponding docket and other lawful fees,
depositing the amount of P500.00 for costs, and furnishing the
Regional Trial Court and the adverse party with a copy of the petition.
The petition shall be filed and served within fifteen (15) days from
notice of the decision sought to be reviewed or of the denial of
petitioner's motion for new trial or reconsideration filed in due time after
judgment. Upon proper motion and the payment of the full amount of
the docket and other lawful fees and the deposit for costs before the
expiration of the reglementary period, the Court of Appeals may grant
an additional period of fifteen (15) days only within which to file the
petition for review. No further extension shall be granted except for the
most compelling reason and in no case to exceed fifteen (15) days.
(Emphasis supplied.) AHEDaI
 Clearly, therefore, the timeliness of a petition depends not only on its
seasonable filing but also on the prompt service of copy thereof on the
adverse party and the RTC. Thus, the petition must be accompanied by proof
of service as prescribed under Rule 13, viz:
Section 13. Proof of service. Proof of personal service shall
consist of a written admission of the party served, or the official return
of the server, or the affidavit of the party serving, containing a full
statement of the date, place and manner of service. If the service is by
ordinary mail, proof thereof shall consist of an affidavit of the person
mailing of facts showing compliance with section 7 of this Rule. If
service is made by registered mail, proof shall be made by such
affidavit and the registry receipt issued by the mailing office. The
registry return card shall be filed immediately upon its receipt by the
sender, or in lieu thereof the unclaimed letter together with the certified
or sworn copy of the notice given by the postmaster to the addressee.
Failure to serve copy of the petition on the adverse party or to show
proof of service thereof is a fatal defect, 22 for which the petition can be
dismissed under Section 3, Rule 42, thus:
Section 3. Effect of failure to comply with requirements. The
failure of the petitioner to comply with any of the foregoing
requirements regarding the payment of the docket and other lawful
fees, the deposit for costs, proof of service of the petition, and the
contents of and the documents which should accompany the petition
shall be sufficient ground for the dismissal thereof.
In the present case, petitioner failed to serve copy of her petition on the
Solicitor General as counsel of the adverse party, the People of the
Philippines. 23 Hence, the CA did not commit any reversible error in
dismissing her petition. 24
Petitioner did not even show substantial compliance with the
requirement of service of pleading. 25 Although she served copy of her
Petition for Review on Assistant City Prosecutor Catalino C. Serrano, the
latter was no longer counsel of the adverse party when the case was brought
to the CA, nor was he specifically deputized or designated by the Solicitor
General to represent him or receive notices for him. 26 Hence, service on the
Assistant City Prosecutor did not amount to service on the Solicitor
General. 27
However, petitioner argues that, rather than dismiss her petition, the CA
should have advised her to correct the deficiency or taken the initiative of
furnishing the Solicitor General with a copy of the petition and requiring the
latter to comment on it. 28 Furthermore, petitioner appeals for liberality in the
treatment of her appeal, so that it may be decided on the merits rather than on
technicality. 29
aCHcIE
 It is true that oftentimes the Court applied the rules with flexibility in
order that the merits of a case will be fully adjudicated upon, notwithstanding
its technical imperfections. 30 But what impels the Court to do so is neither a
party's empty invocations of liberality nor its mechanical correction of the
imperfections. 31 Rather, only a clear showing of prima facie merit of the
petition will persuade the Court to take the extraordinary effort of setting aside
its rules to give way to the imperfect petition. 32 After all, the rationale for
liberality is to bring to light the merits of the petition, unobstructed by mere
deficiencies in its form, such that if the petition has not an iota of merit in it,
then there is nothing for the Court to bring to light at all.
In the present case, while upon motion for reconsideration, petitioner
supplied what were lacking in her petition for review filed with the CA, 33 she
utterly failed to convince the Court that the substantial grounds cited therein
far transcend its technical deficiencies as would justify the resolution of her
petition on its merits rather than form.
A cursory assessment of the arguments of petitioner is necessary.
First, petitioner insists that the criminal case filed against her, as well as
the civil case that was deemed instituted with it, should have been dismissed
for lack of authority of Elizaldy Co to file the same on behalf of Sunwest, the
payee of the RCBC check. 34
The issue of whether a corporate officer may bring suit on behalf of his
corporation for violation of B.P. Blg. 22 is not novel. In Tam Wing Tak v.
Makasiar, 35 the Court affirmed the dismissal of a criminal case for violation
of B.P. Blg. 22 for lack of authority of the private complainant, thus:
Second, it is not disputed in the instant case that Concord, a
domestic corporation, was the payee of the bum check, not petitioner.
Therefore, it is Concord, as payee of the bounced check, which is the
injured party. Since petitioner was neither a payee nor a holder of the
bad check, he had neither the personality to sue nor a cause of action
against Vic Ang Siong. Under Section 36 of the Corporation Code,
read in relation to Section 23, it is clear that where a corporation
is an injured party, its power to sue is lodged with its board of
directors or trustees. Note that petitioner failed to show any proof
that he was authorized or deputized or granted specific powers by
Concord's board of director to sue Victor And Siong for and on
behalf of the firm. Clearly, petitioner as a minority stockholder
and member of the board of directors had no such power or
authority to sue on Concord's behalf. . . . 36 (Emphasis supplied)
We applied the same rule just recently to Ilusorio v. Ilusorio, 37 which
involved a criminal complaint for robbery and qualified trespass. DcCITS
 However, it bears emphasis that in both cases, the deficiency in the
complaint was challenged by the accused at the preliminary investigation
stage, or before he entered a plea upon arraignment. On the contrary, in the
present case, petitioner questioned the authority of Elizaldy Co after
arraignment and completion of the prosecution's presentation of evidence.
Thus, she is barred from raising such objection under Section 9, Rule 117 of
the Rules of Court, to wit:
Section 9. Failure to move to quash or to allege any ground
therefor. The failure of the accused to assert any ground of a motion
to quash before he pleads to the complaint or information, either
because he did not file a motion to quash or failed to allege the same
in said motion, shall be deemed a waiver of any objections except
those based on the grounds provided for in paragraphs (a), (b), (g),
and (i) of section 3 of this Rule.
The deficiency in the complaint/information arising from the lack of
authority of Elizaldy Co was not jurisdictional. It did not detract from the
unquestioned authority of the Assistant City Prosecutor to file the Information,
nor impair the jurisdiction of the MTCC to act on the same. 38
Second, petitioner harps on the purported lack of notice to her of the
dishonor of the RCBC check. This contention flies in the face of documentary
evidence consisting of the March 20, 2001 letter of petitioner to Sunwest
where she expressly acknowledged receiving the March 14, 2001 notice of
dishonor of the RCBC check. 39
In fine, for deficiency in form and for lack of showing that her appeal to
the CA was meritorious, the petition for review of petitioner was correctly
dismissed by the CA.
WHEREFORE, the petition is DENIED. Costs against petitioner. SO
ORDERED.
||| (Muoz v. People, G.R. No. 162772, [March 14, 2008], 572 PHIL 258-270)

[G.R. No. 173956. August 6, 2008.]

FRISCO F. SAN JUAN, petitioner, vs. THE SANDIGANBAYAN

and THE PEOPLE OF THE PHILIPPINES, respondents.

DECISION
YNARES-SANTIAGO, J : p

This petition for certiorari under Rule 65 of the Rules of Court assails
the February 6, 2006 Resolution 1 of the Sandiganbayan in Criminal Case No.
27808 granting the prosecution's Manifestation with Motion for Additional
Marking of Documentary Exhibits and the June 21, 2006 Resolution 2 denying
the motions for reconsideration separately filed by petitioner and his co-
accused. aDSAEI

Petitioner Frisco F. San Juan, in his capacity as Chairman of the Public

Estates Authority (PEA), together with 26 other accused, composed of PEA
Board of Directors, PEA Officers, Officers of the Commission on Audit and the
contractor of Central Boulevard Project (now the President Diosdado
Macapagal Boulevard), Jesusito D. Legaspi, were charged before the
Sandiganbayan with violation of Sec. 3 (e) of Republic Act No. 3019 3in an
Information which reads:
That in or about the period from April 1999 to August 2002, in
Metro Manila, Philippines, and within the jurisdiction of this Honorable
Court, accused public officials of the Public Estates Authority (PEA),
namely: CARLOS P. DOBLE, former General Manager (with Salary
Grade 30) and ex-oficio member of the PEA Board, BENJAMIN V.
CARIO, PEA General Manager (with Salary Grade 30) and ex-oficio
member of the Board, and other responsible public officials of PEA,
namely: FRISCO FRANCISCO SAN JUAN, former Chairman of the
Board, CARMELITA DE LEON-CHAN, DANIEL T. DAYAN,
SALVADOR P. MALBAROSA, LEO V. PADILLA and ELPIDIO G.
DAMASO, all former members of the Board, ERNEST FREDERICK O.
VILLAREAL, Chairman of the Board, and JOEMARI D. GEROCHI,
ANGELITO M. VILLANUEVA, MARTIN S. SANCIEGO, JR., and
RODOLFO T. TUAZON, all Board members, JAIME R. MILLAN,
Assistant General Manager, MANUEL R. BERIA, JR., Deputy
General Manager for Operations & Technical Services and Chairman
of the Ad Hoc Committee responsible for the bidding and award of the
construction contract for the President Diosdado Macapagal Boulevard
Project, THERON VICTOR V. LACSON, Deputy General Manager for
Finance, Legal and Administration and member of the Ad Hoc
Committee, BERNARDO T. VIRAY, Manager for Technical Services
Department and member of the Ad Hoc Committee, RAPHAEL
POCHOLO A. ZORILLA, Project Management Officer, ERNESTO L.
ENRIQUEZ, Senior Corporate Attorney and member of the Ad Hoc
Committee, and CRISTINA AMPOSTA-MORTEL, Department
Manager, Legal Department, and other responsible public officials of
the Commission on Audit (COA), namely: MANUELA E. DELA PAZ,
State Auditor V, ARTURO S. LAYUG, State Auditor V and Chief of the
Technical Services Audit Division A, Technical Services Office,
BENILDA E. MENDOZA, Supervising Technical Audit Specialist,
 EPIFANIO L. PUREZA, Assistant Chief of the Technical Services Audit
Division A, JOSE G. CAPISTRANO, Technical Audit Specialist II, and
MA. CECILIA A. DELA RAMA, Technical Audit Specialist I, all of whom
were public officials during the times material to the subject offense,
while said public officials were occupying their respective positions as
just stated, acting in such capacity and committing the subject offense
in relation to office and while in the performance of their functions and
duties, with manifest partiality and evident bad faith (or at the very least,
gross inexcusable negligence), conspiring and confederating with
accused JESUSITO D. LEGASPI, a private contractor doing business
under the name of J.D. Legaspi Construction, did then and there,
willfully, unlawfully and criminally give unwarranted benefits, advantage
and preference to accused JESUSITO D. LEGASPI, through the
commission of numerous illegal related acts all pertaining to the
President Diosdado Macapagal Boulevard Project, such as (but not
limited to) the bidding out of the said project and illegally awarding the
same to accused JESUSITO D. LEGASPI's J.D. Legaspi Construction
and approving the award of the project to, as well as the Construction
Agreement with, J.D. Legaspi Construction despite the lack of
compliance with the mandatory requirements and procedure for
bidding, even if no funds are yet available to finance the project,
without the requisite certificate of availability of funds and without
complying with the mandatory conditions imposed by the Office of the
President of the approval thereof, per Memorandum dated 29 January
2000 from the Office of the Executive Secretary, Malacaang, and
approving/allowing several improper variation/change orders and
overruns to be implemented without the requisite presidential approval
and the appropriate funds, recognizing, affirming and causing the
implementation of the just-mentioned void contract, allowing and
paying or causing the allowance and payment of several claims of
accused JESUSITO D. LEGASPI for initial contract price, contract
price adjustment, variation orders, overruns and other claims even
when the same were clearly improper, illegal and without the requisite
presidential approval, thereby paving the way for accused JESUSITO
D. LEGASPI to claim and receive undue payments from the
Government totaling millions of pesos in improper overprice, thereby
causing undue injury and grave damage to the government in the
aggregate amount of at least FIVE HUNDRED THIRTY TWO MILLION
NINE HUNDRED TWENTY-SIX THOUSAND FOUR HUNDRED
TWENTY AND 39/100 PESOS (P532,926,420.39), more or less,
constituting the total illegal overprice paid to accused JESUSITO D.
LEGASPI for the subject Project.
CONTRARY TO LAW. 4
When arraigned on January 21, 2005, petitioner and his co-accused
pleaded "not guilty".
 The People, represented by the Office of the Special Prosecutor (OSP),
filed its pre-trial brief with proposed Exhibits A to HHHH dated March 16, 2005.
Petitioner filed his pre-trial brief on June 23, 2005.
Thereafter, the Sandiganbayan issued a Pre-Trial Order, 5 the pertinent
portions of which state: CcHDSA

The Prosecution reserves the right to present additional

documentary evidence, although this reservation was objected to by
the accused on the ground that it violates their constitutional right. 6
xxx xxx xxx
Accused Frisco F. San Juan reserves the right to present additional
documentary evidence. 7
xxx xxx xxx
This Pre-Trial Order shall bind the parties, limit the issues and control
the course of the trial, unless modified by the Court to prevent manifest
injustice.
SO ORDERED. 8
On November 10, 2005, trial commenced with the OSP presenting
Karen Villamil as its first witness, without prejudice to the signing of the Pre-
Trial Order by the parties.
At the scheduled hearing on January 24, 2006, instead of proceeding
with the presentation of its evidence, the OSP filed a manifestation with
motion for additional marking of documentary exhibits. 9 EaSCAH

Petitioner filed an Opposition 10 alleging that the motion fails to comply

with the three (3) day notice rule, thus, it is fatally defective which must be
dismissed outright; that the prosecution's attempt to introduce additional
evidence after Pre-Trial has been completed, without petitioner having been
confronted by such evidence, violates petitioner's fundamental rights under
the Constitution; that petitioner's right to due process has been violated by the
presentation of the prosecution's "additional evidence" when such pieces of
evidence ought to have been presented during the pre-trial of the case; that
the prosecution failed to show "good cause" in order for the "additional
evidence" to be accepted, since only those pieces of evidence which are
identified and marked are allowed by the court.
On February 6, 2006, the Sandiganbayan issued the herein assailed
Resolution 11 granting the motion of the OSP, the pertinent portion of which
reads:
Acting on the Prosecution's Manifestation with Motion for
Additional Marking of Documentary Exhibits dated January 23, 2006,
with the comments and/or oppositions thereto separately filed by
 accused: (1) Layug, (2) de Leon-Chan, (3) Pureza and Capistrano, (4)
Legaspi, (5) Padilla, (6) Beria, Millan, Viray and Zorilla, (7) San Juan,
and (8)Amposta-Mortel, the Court resolves to GRANT the
aforementioned motion but only insofar as to allow additional marking
of documentary exhibits which have been sufficiently described in the
said motion, over the objection of the defense, in order to give the
Prosecution the opportunity to fully present its case, and considering
that the Pre-Trial Order has not been signed by the parties. The
defense may register their objections to the documentary exhibits at
the time that the same are introduced in evidence. As prayed for, the
prosecution may present the additional documents enumerated in its
aforesaid motion for marking, and the same shall be included in its list
of exhibits in the Amended Pre-Trial Order to be issued by the
Court. 12
Petitioner and his co-accused filed separate motions for reconsideration
but were denied by the Sandiganbayan in its June 21, 2006 Resolution, 13 the
pertinent portions of which state: aICcHA

While it is true that pre-trial has already been terminated,

records show that, before the Pre-Trial Order dated November 7, 2005
was issued, the Court made clear to all the parties, considering the
numerous documentary evidence sought to be marked and presented
by the parties, that the said Order was "without prejudice to the
comment [on the Pre-Trial Order] of the prosecution and the accused;"
that is, the Court may still accept any modification of the said Order
from both the prosecution and the accused. Upon request of the
parties, the Court gave the prosecution and the accused a period of
time "to file a formal manifestation with respect to some changes they
would like to propose in the Pre-Trial Order" notwithstanding the
commencement of the trial. 14
xxx xxx xxx
Apparent from the foregoing is the fact that while the pre-trial
has effectively been terminated, the Court gave both the prosecution
and the accused the opportunity to submit comments to the Pre-Trial
Order or to modify their submissions or in some instances, even to
withdraw the stipulations they made during the pre-trial. The Court's
position is consistent with the exercise of its discretion to decide how
best to dispense justice in accordance with the circumstances of the
proceedings before it. The decision to grant the prosecution's motion
for additional marking of documentary exhibits is another exercise of
this judicial prerogative, which prerogative was made known to the
parties in the Pre-Trial Order dated November 7, 2005, when the Court
stated that such was subject to modification "in order to prevent
manifest injustice."
 The guidelines on the conduct of the pre-trial, including A.M. No.
03-1-09-SC, were prescribed by the Honorable Supreme Court to
"abbreviate court proceedings, ensure prompt disposition of cases and
decongest court dockets." The Court does not mean to disregard or
ignore these guidelines but the Court is compelled to take into
consideration, in the interest of substantial justice, the various
submissions of both the prosecution and the accused mentioned
above in connection with the agreements reached by the parties that
they be allowed to submit their comments on the pre-trial order, even
while the trial had begun so as not to delay the proceedings.
WHEREFORE, in view of the foregoing, the instant Motions for
Reconsideration of the accused-movants are hereby DENIED for lack
of merit.
SO ORDERED. 15
Hence, this petition.
The issues for resolution are: (1) whether the Sandiganbayan gravely
abused its discretion when it granted OSP's motion for additional marking of
exhibits; and (2) whether the admission of the "additional evidence"
constitutes a violation of petitioner's constitutional right to due process. HCISED

The petition lacks merit.

Section 4, Rule 15 of the Rules of Court, reads:
SEC. 4. Hearing of motion. Except for motions which the
court may act upon without prejudicing the rights of the adverse party,
every written motion shall be set for hearing by the applicant.
Every written motion required to be heard and the notice of the
hearing thereof shall be served in such a manner as to ensure its
receipt by the other party at least three (3) days before the date of
hearing, unless the court for good cause sets the hearing on shorter
notice.
While it is true that any motion that does not comply with the
requirements of Rule 15 should not be accepted for filing and, if filed, is not
entitled to judicial cognizance, however, this Court has likewise held that
where a rigid application of the rule will result in a manifest failure or
miscarriage of justice, technicalities may be disregarded in order to resolve
the case. 16 Besides, in the exercise of its equity jurisdiction, the court may
disregard procedural lapses, so that a case may be resolved on its merits
based on the evidence presented by the parties. 17 Moreover, under the
above-cited Rule, the Court is granted the authority to set the hearing on
shorter notice upon showing of good cause.
In the instant case, petitioner was served with the Manifestation with
Motion for Additional Marking of Documentary Exhibits on January 24, 2006,
or two days prior to the scheduled hearing date on January 26,
2006. 18 Although the three-day notice rule was not complied with, the
Sandiganbayan allowed the motion based on good cause, i.e., that the
markings of the additional documentary evidence at this period was due to the
sheer volume of the supporting documents to the disbursement vouchers and
the fact that such supporting documents were only recently completed and
secured. 19
This Court allows a liberal construction of this rule where the interest of
substantial justice will be served and where the resolution of the motion is
addressed solely to the sound and judicious discretion of the court, 20 as in
the instant case. Thus, the Sandiganbayan correctly held that:
Apparent from the foregoing is the fact that while the pre-trial
has effectively been terminated, the Court gave both the prosecution
and the accused the opportunity to submit comments to the Pre-Trial
Order or to modify their submissions or in some instances, even to
withdraw the stipulations they made during the pre-trial. The Court's
position is consistent with the exercise of its discretion to decide
how best to dispense justice in accordance with the
circumstances of the proceedings before it. The decision to grant
the prosecution's motion for additional marking of documentary
exhibits is another exercise of this judicial prerogative, which
prerogative was made known to the parties in the Pre-Trial Order
dated November 7, 2005, when the Court stated that such was
subject to modification "in order to prevent manifest
injustice. 21 (Emphasis supplied) HcaDTE

There is likewise no merit to petitioner's contention that his right to due

process was violated when the OSP's motion was granted. In its Resolution of
February 6, 2006, the Sandiganbayan declared, thus:
[T]he Court resolves to GRANT the aforementioned motion but
only insofar as to allow additional marking of documentary exhibits
which have been sufficiently described in the said motion, over the
objection of the defense, in order to give the Prosecution the
opportunity to fully present its case, and considering that the Pre-Trial
Order has not been signed by the parties. The defense may register
their objections to the documentary exhibits at the time that the same
are introduced in evidence. . . . 22
In its Resolution dated June 21, 2006, the Sandiganbayan also held
that:
While it is true that pre-trial has already been terminated,
records show that, before the Pre-Trial Order dated November 7, 2005
was issued, the Court made clear to all the parties, considering the
numerous documentary evidence sought to be marked and presented
 by the parties, that the said Order was "without prejudice to the
comment [on the Pre-Trial Order] of the prosecution and the accused;"
that is, the Court may still accept any modification of the said Order
from both the prosecution and the accused. Upon request of the
parties, the Court gave the prosecution and the accused a period of
time "to file a formal manifestation with respect to some changes they
would like to propose in the Pre-Trial Order" notwithstanding the
commencement of the trial. 23
Thus, petitioner can still file his objections to the documentary evidence
during trial on the merits of the case.
Finally, there is no basis to petitioner's contention that the additional
pieces of documentary evidence were "surprise evidence" because during the
filing of their respective pre-trial briefs, both parties have made reservations to
present additional documentary and testimonial evidence, as may be
necessary in the course of the trial; 24 such reservations were incorporated in
the Pre-Trial Order.
WHEREFORE, the Petition for Certiorari is DISMISSED. The February
6, 2006 Resolution of the Sandiganbayan in Criminal Case No. 27808
granting OSP's Manifestation with Motion for Additional Marking of
Documentary Exhibits, and the June 21, 2006 Resolution denying the motion
for reconsideration, are AFFIRMED. THIcCA

SO ORDERED.
(San Juan v. Sandiganbayan, G.R. No. 173956, [August 6, 2008], 583 PHIL
|||

309-320)

[G.R. No. 171827. September 17, 2008.]

TERESITA MONZON, petitioner, vs. SPS. JAMES & MARIA

ROSA NIEVES RELOVA and SPS. BIENVENIDO & EUFRACIA
PEREZ,respondents.

ADDIO PROPERTIES, INC., intervenor.

DECISION

CHICO-NAZARIO, J : p
 This is a Petition for Review on Certiorari assailing the Decision 1 of the
Court of Appeals dated 27 September 2005 and its Resolution dated 7 March
2006 in CA-G.R. CV No. 83507 affirming the Decision of the Regional Trial
Court (RTC) of Tagaytay City, Branch 18.
The factual and procedural antecedents of this case are as follows:
On 18 October 2000, the spouses James and Maria Rosa
Nieves Relova and the spouses Bienvenido and Eufracia Perez, respondents
before this Court, filed against Atty. Ana Liza Luna, Clerk of Court of Branch
18 of the RTC of Tagaytay City, and herein petitioner Teresita Monzon an
initiatory pleading captioned as a Petition for Injunction. The case, which was
filed before the same Branch 18 of the RTC of Tagaytay City, was docketed
as Civil Case No. TG-2069. STADIH

In their Petition for Injunction, respondents alleged that on 28

December 1998, Monzon executed a promissory note in favor of
the spousesPerez for the amount of P600,000.00, with interest of five percent
per month, payable on or before 28 December 1999. This was secured by a
300-square meter lot in Barangay Kaybagal, Tagaytay City. Denominated as
Lot No. 2A, this lot is a portion of Psu-232001, covered by Tax Declaration No.
98-008-1793. On 31 December 1998, Monzon executed a Deed of Absolute
Sale over the said parcel of land in favor of the spouses Perez.
Respondents also claim in their Petition for Injunction that on 29 March
1999, Monzon executed another promissory note, this time in favor of
the spouses Relova for the amount of P200,000.00 with interest of five
percent per month payable on or before 31 December 1999. This loan was
secured by a 200 square meter lot, denominated as Lot No. 2B, another
portion of the aforementioned Psu-232001 covered by Tax Declaration No.
98-008-1793. On 27 December 1999, Monzon executed a Deed of
Conditional Sale over said parcel of land in favor of the spousesRelova. EITcaD

On 23 October 1999, the Coastal Lending Corporation extrajudicially

foreclosed the entire 9,967-square meter property covered by Psu-232001,
including the portions mortgaged and subsequently sold to respondents.
According to the Petition for Injunction, Monzon was indebted to the Coastal
Lending Corporation in the total amount of P3,398,832.35. The winning bidder
in the extrajudicial foreclosure, Addio Properties Inc., paid the amount of
P5,001,127.00, thus leaving a P1,602,393.65 residue. According to
respondents, this residue amount, which is in the custody of Atty. Luna as
Branch Clerk of Court, should be turned over to them pursuant to Section 4,
Rule 68 of the Revised Rules of Civil Procedure. Thus, respondents pray in
their Petition for Injunction for a judgment (1) finding Monzon liable to
the spouses Perez in the amount of P1,215,000.00 and to
the spouses Relova in the amount of P385,000.00; (2) ordering Atty. Luna to
deliver said amounts to respondents; and (3) restraining Atty. Luna from
delivering any amount to Monzon pending such delivery in number (2).
Monzon, in her Answer, claimed that the Petition for Injunction should
be dismissed for failure to state a cause of action.
Monzon likewise claimed that respondents could no longer ask for the
enforcement of the two promissory notes because she had already performed
her obligation to them by dacion en pago as evidenced by the Deed of
Conditional Sale and the Deed of Absolute Sale. She claimed that petitioners
could still claim the portions sold to them if they would only file the proper civil
cases. As regards the fund in the custody of Atty. Luna, respondents cannot
acquire the same without a writ of preliminary attachment or a writ of
garnishment in accordance with the provisions of Rule 57 and Section 9 (c),
Rule 39 of the Revised Rules of Civil Procedure.
On 5 December 2001, the RTC, citing the absence of petitioner and her
counsel on said hearing date despite due notice, granted an oral Motion by
the respondents by issuing an Order allowing the ex parte presentation of
evidence by respondents. 2 aTICAc

On 1 April 2002, the RTC rendered a Decision in favor of respondents.

The pertinent portions of the Decision are as follows:
That [petitioner] Teresita Monzon owes [herein respondents]
certain sums of money is indisputable. Even [Monzon] have admitted
to this in her Answer. [Respondents] therefore are given every right to
get back and collect whatever amount they gave [Monzon] together
with the stipulated rate of interest.
Likewise, it has been established that [petitioner]
Teresita Monzon has the amount of P1,602,393.65 in the possession
of the Clerk of Court, Atty. Ana Liza M. Luna. This amount, as is
heretofore stated, represented the balance of the foreclosure sale of
[Monzon's] properties.
By way of this petition, [respondents] would want to get said
amount so that the same can be applied as full payment of [petitioner's]
obligation. That the amount should be divided between the
[respondents] in the amount they have agreed between themselves;
[respondent]spouses Relova to receive the amount of P400,000.00,
while the spouses Perez shall get the rest.cSEAHa

WHEREFORE, judgment is hereby rendered ordering the . . .

Clerk of Court, Atty. Ana Liza M. Luna, to deliver unto [herein
respondents] the amount of P1,602,393.65 plus whatever interest she
may received if and when the said amount has been deposited in any
banking institution. 3
 The Decision also mentioned that the Order allowing the ex
parte presentation of evidence by respondents was due to the continuous and
incessant absences of petitioner and counsel. 4
On 25 April 2002, Monzon filed a Notice of Appeal, which was approved
by the trial court. Monzon claims that the RTC gravely erred in rendering its
Decision immediately after respondents presented their evidence ex
parte without giving her a chance to present her evidence, thereby violating
her right to due process of law.
On 14 June 2002, Addio Properties, Inc. filed before the trial court a
Motion for Intervention, which was granted by the same court on 12 July 2002.
On 27 September 2005, the Court of Appeals rendered the assailed
Decision dismissing the appeal. According to the Court of
Appeals,Monzon showed tepid interest in having the case resolved with
dispatch. She, thus, cannot now complain that she was denied due process
when she was given ample opportunity to defend and assert her interests in
the case. The Court of Appeals reminded Monzon that the essence of due
process is reasonable opportunity to be heard and submit evidence in support
of one's defense. What the law proscribes is lack of opportunity to be
heard. Monzon's Motion for Reconsideration was denied in a Resolution dated
7 March 2006.
On 27 March 2006, Monzon filed the instant Petition for Review
on Certiorari under Rule 45 of the Rules of Court.
Monzon claims anew that it was a violation of her right to due process
of law for the RTC to render its Decision immediately after respondents
presented their evidence ex parte without giving her a chance to present her
evidence. Monzon stresses that she was never declared in default by the trial
court. The trial court should have, thus, set the case for hearing for the
reception of the evidence of the defense. She claims that she never waived
her right to present evidence.
Monzon argues that had she been given the opportunity to present her
evidence, she would have proven that (1) respondents' Exhibit A (mortgage of
land to the spouses Relova) had been novated by respondent's Exhibit B
(sale of the mortgage land to the spouses Relova); (2) respondents' Exhibit C
(mortgage of land to the spouses Perez) had been novated by respondent's
Exhibit B (sale of the mortgage land to thespouses Perez); and (3) having
executed Exhibits "B" and "D", Monzon no longer had any obligation towards
respondents. TaDCEc

The Order by the trial court which allowed respondents to present their
evidence ex parte states:
 In view of the absence of [Monzon] as well as her counsel
despite due notice, as prayed for by counsel for by [respondents
herein], let the reception of [respondent's] evidence in this case be held
ex-parte before a commissioner who is the clerk of court of this Court,
with orders upon her to submit her report immediately upon completion
thereof. 5
It can be seen that despite the fact that Monzon was not declared in
default by the RTC, the RTC nevertheless applied the effects of a default
order upon petitioner under Section 3, Rule 9 of the Rules of Court:
SEC. 3. Default; declaration of. If the defending party fails to
answer within the time allowed therefor, the court shall, upon motion of
the claiming party with notice to the defending party, and proof of such
failure, declare the defending party in default. Thereupon, the court
shall proceed to render judgment granting the claimant such
relief as his pleading may warrant, unless the court in its
discretion requires the claimant to submit evidence. Such
reception of evidence may be delegated to the clerk of court.
(a) Effect of order of default. A party in default shall be
entitled to notice of subsequent proceedings but not to take part
in the trial.
In his book on remedial law, former Justice Florenz D. Regalado writes
that failure to appear in hearings is not a ground for the declaration of a
defendant in default:
Failure to file a responsive pleading within the reglementary
period, and not failure to appear at the hearing, is the sole ground
for an order of default (Rosario, et al. vs. Alonzo, et al., L-17320, June
29, 1963), except the failure to appear at a pre-trial conference
wherein the effects of a default on the part of the defendant are
followed, that is, the plaintiff shall be allowed to present evidence ex
parte and a judgment based thereon may be rendered against the
defendant (Section 5, Rule 18). 6 Also, a default judgment may be
rendered, even if the defendant had filed his answer, under the
circumstance in Sec. 3(c), Rule 29. 7
Hence, according to Justice Regalado, the effects of default are
followed only in three instances: (1) when there is an actual default for failure
to file a responsive pleading; (2) failure to appear in the pre-trial conference;
and (3) refusal to comply with modes of discovery under the circumstance in
Sec. 3 (c), Rule 29. THEDcS

In Philippine National Bank v. De Leon, 8 we held:

We have in the past admonished trial judges against issuing
precipitate orders of default as these have the effect of denying a
litigant the chance to be heard, and increase the burden of needless
 litigations in the appellate courts where time is needed for more
important or complicated cases. While there are instances when a
party may be properly defaulted, these should be the exception
rather than the rule, and should be allowed only in clear cases of
obstinate refusal or inordinate neglect to comply with the orders
of the court (Leyte vs. Cusi, Jr., 152 SCRA 496; Tropical Homes,
Inc. vs. Hon. Villaluz, et al., G.R. No. L-40628, February 24, 1989).
It is even worse when the court issues an order not denominated as an
order of default, but provides for the application of effects of default. Such
amounts to the circumvention of the rigid requirements of a default order, to
wit: (1) the court must have validly acquired jurisdiction over the person of the
defendant either by service of summons or voluntary appearance; (2) the
defendant failed to file his answer within the time allowed therefor; and (3)
there must be a motion to declare the defendant in default with notice to the
latter. 9 In the case at bar, petitioner had not failed to file her answer. Neither
was notice sent to petitioner that she would be defaulted, or that the effects of
default shall be imposed upon her. "Mere non-appearance of defendants at an
ordinary hearing and to adduce evidence does not constitute default, when
they have already filed their answer to the complaint within the reglementary
period. It is error to default a defendant after the answer had already been
filed. It should be borne in mind that the policy of the law is to have every
litigant's case tried on the merits as much as possible; it is for this reason that
judgments by default are frowned upon". 10
Does this mean that defendants can get away with failing to attend
hearings despite due notice? No, it will not. We agree with petitioner that such
failure to attend, when committed during hearing dates for the presentation of
the complainant's evidence, would amount to the waiver of such defendant's
right to object to the evidence presented during such hearing, and to cross-
examine the witnesses presented therein. However, it would not amount to a
waiver of the defendant's right to present evidence during the trial dates
scheduled for the reception of evidence for the defense. It would be an
entirely different issue if the failure to attend of the defendant was on a
hearing date set for the presentation of the evidence of the defense, but such
did not occur in the case at bar. IcHTED

In view of the foregoing, we are, therefore, inclined to remand the case

to the trial court for reception of evidence for the defense. Before we do so,
however, we need to point out that the trial court had committed another error
which we should address to put the remand in its proper perspective. We refer
to Monzon's argument as early as the Answer stage that respondents' Petition
for Injunction had failed to state a cause of action.
 Section 4, Rule 68 of the Rules of Court, which is the basis of
respondent's alleged cause of action entitling them to the residue of the
amount paid in the foreclosure sale, provides as follows:
SEC. 4. Disposition of proceeds of sale. The amount realized
from the foreclosure sale of the mortgaged property shall, after
deducting the costs of the sale, be paid to the person foreclosing the
mortgage, and when there shall be any balance or residue, after
paying off the mortgage debt due, the same shall be paid to junior
encumbrancers in the order of their priority, to be ascertained by
the court, or if there be no such encumbrancers or there be a balance
or residue after payment to them, then to the mortgagor or his duly
authorized agent, or to the person entitled to it.
However, Rule 68 governs the judicial foreclosure of mortgages. Extra-
judicial foreclosure of mortgages, which was what transpired in the case at
bar, is governed by Act No. 3135, 11 as amended by Act No. 4118, 12 Section
6 of Republic Act No. 7353, Section 18 of Republic Act No. 7906, and Section
47 of Republic Act No. 8791. A.M. No. 99-10-05-0, issued on 14 December
1999, provides for the procedure to be observed in the conduct of an
extrajudicial foreclosure sale. Thus, we clarified the different types of sales
in Supena v. dela Rosa, 13 to wit:
Any judge, worthy of the robe he dons, or any lawyer, for that
matter, worth his salt, ought to know that different laws apply to
different kinds of sales under our jurisdiction. We have three different
types of sales, namely: an ordinary execution sale, a judicial
foreclosure sale, and an extrajudicial foreclosure sale. An ordinary
execution sale is governed by the pertinent provisions of Rule 39 of the
Rules of Court on Execution, Satisfaction and Effect of Judgments.
Rule 68 of the Rules, captioned Foreclosure of Mortgage, governs
judicial foreclosure sales. On the other hand, Act No. 3135, as
amended by Act No. 4118, otherwise known as "An Act to Regulate
the Sale of Property under Special Powers Inserted in or Annexed to
Real Estate Mortgages", applies in cases of extrajudicial foreclosure
sales of real estate mortgages.aTIAES

Unlike Rule 68, which governs judicial foreclosure sales, neither Act No.
3135 as amended, nor A.M. No. 99-10-05-0 grants to junior encumbrancers
the right to receive the balance of the purchase price. The only right given to
second mortgagees in said issuances is the right to redeem the foreclosed
property pursuant to Section 6 of Act No. 3135, as amended by Act No. 4118,
which provides:
Sec. 6. Redemption. In all cases in which an extrajudicial
sale is made under the special power hereinbefore referred to, the
debtor, his successors in interest or any judicial creditor or judgment
creditor of said debtor, or any person having a lien on the property
 subsequent to the mortgage or deed of trust under which the
property is sold, may redeem the same at any time within the term
of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of sections four
hundred and sixty-four to four hundred and sixty-six, 14 inclusive, of the
Code of Civil Procedure, in so far as these are not inconsistent with
this Act.
Even if, for the sake of argument, Rule 68 is to be applied to
extrajudicial foreclosure of mortgages, such right can only be given to second
mortgagees who are made parties to the (judicial) foreclosure. While a second
mortgagee is a proper and in a sense even a necessary party to a proceeding
to foreclose a first mortgage on real property, he is not an indispensable party,
because a valid decree may be made, as between the mortgagor and the first
mortgagee, without regard to the second mortgage; but the consequence of a
failure to make the second mortgagee a party to the proceeding is that the lien
of the second mortgagee on the equity of redemption is not affected by the
decree of foreclosure. 15
A cause of action is the act or omission by which a party violates the
right of another. 16 A cause of action exists if the following elements are
present: (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and (3) an act or omission on
the part of such defendant violative of the right of plaintiff or constituting a
breach of the obligation of defendant to the plaintiff for which the latter may
maintain an action for recovery of damages. 17 In view of the foregoing
discussions, we find that respondents do not have a cause of action against
Atty. Ana Liza Luna for the delivery of the subject amounts on the basis of
Section 4, Rule 68 of the Rules of Court, for the reason that the foregoing
Rule does not apply to extrajudicial foreclosure of mortgages. aSTAIH

In Katon v. Palanca, Jr., 18 we held that where prescription, lack of

jurisdiction or failure to state a cause of action clearly appears from the
complaint filed with the trial court, the action may be dismissed motu
proprio, even if the case has been elevated for review on different grounds.
However, while the case should indeed be dismissed insofar as Atty. Luna is
concerned, the same is not necessarily true with respect to Monzon. Other
than respondents' prayer that the amount due to respondents be delivered by
Atty. Luna to them, they also pray for a judgment declaringMonzon liable for
such amounts. Said prayer, as argued by Monzon herself, may constitute a
cause of action for collection of sum of money against Monzon.
The rule is now settled that a mortgage creditor may elect to waive his
security and bring, instead, an ordinary action to recover the indebtedness
with the right to execute a judgment thereon on all the properties of the debtor
including the subject matter of the mortgage, subject to the qualification that if
he fails in the remedy elected by him, he cannot pursue further the remedy he
has waived. 19
However, due to the fact that construing respondents' Petition for
Injunction to be one for a collection of sum of money would entail a waiver by
the respondents of the mortgage executed over the subject properties, we
should proceed with caution before making such construction. We, therefore,
resolve that upon the remand of this case to the trial court, respondents
should be ordered to manifest whether the Petition for Injunction should be
treated as a complaint for the collection of a sum of money.
If respondents answer in the affirmative, then the case shall proceed
with the presentation of the evidence for the defense. If Monzon would be
successful in proving her defense of dacion en pago, there would, in effect, be
a double sale of the mortgaged properties: the same properties were sold to
both respondents and to herein intervenor Addio Properties, Inc. If, pursuant
to the rules on double sales, respondents are entitled to the properties, their
remedy is to file the proper action to recover possession. If, pursuant to said
rules, Addio Properties, Inc. is entitled to the properties, respondents' remedy
is to file an action for damages against Monzon.
If respondents answer in the negative, the case shall be dismissed,
without prejudice to the exercise of respondents' rights as mortgage creditors.
If respondents' mortgage contract was executed before the execution of the
mortgage contract with Addio Properties, Inc., respondents would be the first
mortgagors. Pursuant to Article 2126 20 of the Civil Code, they would be
entitled to foreclose the property as against any subsequent possessor
thereof. If respondents' mortgage contract was executed after the execution of
the mortgage contract with Addio Properties, Inc., respondents would be the
second mortgagors. As such, they are entitled to a right of redemption
pursuant to Section 6 of Act No. 3135, as amended by Act No. 4118.
WHEREFORE, the Decision of the Court of Appeals dated 27
September 2005 and its Resolution dated 7 March 2006 are REVERSED and
SET ASIDE. The Petition for Injunction in Civil Case No. TG-2069 is hereby
ordered DISMISSED insofar as Atty. Ana Liza Luna is concerned. The
Petition for Injunction in Civil Case No. TG-2069, insofar as petitioner
Teresita Monzon is concerned, is ordered REMANDED to the Regional Trial
Court of Tagaytay City for further proceedings. Upon such remand, the
Regional Trial Court of Tagaytay City shall issue an Order to respondents,
thespouses James and Maria Rosa Nieves Relova and
the spouses Bienvenido and Eufracia Perez, to manifest whether the Petition
for Injunction should be treated as a complaint for the collection of a sum of
money. TSIEAD
 If respondents answer in the affirmative, the Regional Trial Court shall
set the case for hearing for the presentation of the evidence for the defense. If
respondents answer in the negative, the case shall be dismissed, without
prejudice to the exercise of respondents' rights as mortgage creditors. No
costs. SO ORDERED.
(Monzon v. Spouses Relova, G.R. No. 171827, [September 17, 2008], 587 PHIL
|||

289-306)

[G.R. No. 170750. April 7, 2009.]

HEIRS OF TOMAS DOLLETON, HERACLIO ORCULLO,

REMEDIOS SAN PEDRO, HEIRS OF BERNARDO
MILLAMA, HEIRS OF AGAPITO
VILLANUEVA, HEIRS OF HILARION GARCIA, SERAFINA SP
ARGANA, and HEIRS OF MARIANO
VILLANUEVA, petitioners, vs. FIL-ESTATE MANAGEMENT INC.,
ET AL. AND THE REGISTER OF DEEDS OF LAS PIAS
CITY, respondents.

DECISION

CHICO-NAZARIO, J : p

This is a Petition for Review on Certiorari under Rule 45 of the

Rules of Court, assailing (1) the Decision 1 dated 16 September 2005,
rendered by the Court of Appeals in CA-G.R. CV No. 80927, which affirmed
the Resolutions 2 dated 8 September 2000 and 30 June 2003, of the Regional
Trial Court (RTC), Branch 253, of Las Pias City, dismissing the Complaints
in Civil Cases No. LP-97-0228, No. LP-97-0229, No. LP-97-0230, No. LP-97-
0231, No. LP-97-0236, No. LP-97-0237, No. LP-97-0238, and No. LP-97-
0239; and (2) the Resolution dated 9 December 2005 of the same court
denying petitioners' Motion for Reconsideration. DaIAcC

In October 1997, petitioners Heirs of Tomas Dolleton, 3 Heraclio Orcullo,

Remedios San Pedro, et al., 4 Heirs of Bernardo Millama, et
al., 5Heirs of Agapito Villanueva, et al., 6 Heirs of Hilarion Garcia, et
al., 7 Serafina SP Argana, et al., 8 and Heirs of Mariano Villanueva, et
al. 9 filed before the RTC separate Complaints for Quieting of Title and/or
Recovery of Ownership and Possession with Preliminary
Injunction/Restraining Order and Damages against respondents Fil-
Estate Management Inc., Spouses Arturo E. Dy and Susan Dy, Megatop
Realty Development, Inc., 10 and the Register of Deeds of Las Pias. The
Complaints, which were later consolidated, were docketed as follows:
1. Civil Case No. L-97-0228, which was filed by
the Heirs of Tomas Dolleton covering a parcel of land with an
area of 17,681 square meters, located in Magasawang Mangga,
Barrio Pugad Lawin, Las Pias, Rizal under Psu-235279
approved by the Director of the Bureau of Lands on 20 February
1959;
2. Civil Case No. L-97-0229, which was filed by Heraclio Orcullo
covering two (2) parcels of land with the total areas of 14,429
square meters and 2,105 square meters, respectively, located in
Magasawang Mangga, Barrio Pugad Lawin, Las Pias, Rizal
under Lots 1 and 2, Psu-169404 approved by the Director of the
Bureau of Lands on 4 December 1959;
3. Civil Case No. L-97-0230, which was filed by Remedios San Pedro, et
al., covering a parcel of land with an area of 17,159 square
meters, located in Barrio Pugad Lawin, Las Pias, Rizal under
Psu-96901 approved by the Director of the Bureau of Lands on 21
July 1933;
4. Civil Case No. L-97-0231, which was filed by the Heirs of Bernardo
Millama, et al., covering a parcel of land with an area of 23,359
square meters, located in Magasawang Mangga, Barrio Pugad
Lawin, Las Pias, Rizal under Psu-96905 approved by the
Director of the Bureau ofLands on 16 January 1933; SDITAC

5. Civil Case No. L-97-0236, which was filed by the Heirs of Agapito
Villanueva covering a parcel of land with an area of 10,572
square meters, located in Magasawang Mangga, Barrio Pugad
Lawin, Las Pias, Rizal;
6. Civil Case No. L-97-0237, which was filed by the Heirs of Hilarion
Garcia, et al., covering a parcel of land with an area of 15,372
square meters, located in Magasawang Mangga, Barrio Pugad
Lawin, Las Pias, Rizal under Psu-96920 approved by the
Director of the Bureau of Lands on 16 January 1933;
7. Civil Case No. L-97-0238, which was filed by Serafina SP Argana, et
al., covering a parcel of land with an area of 29,391 square
meters, located in Magasawang Mangga, Barrio Pugad Lawin,
Las Pias, Rizal under Psu-96909 approved by the Director of the
Bureau of Lands on 18 January 1933; and
8. Civil Case No. L-97-0239, which was filed by the Heirs of Mariano
Villanueva, et al., covering a parcel of land with an area of 7,454
square meters, located in Magasawang Mangga, Barrio Pugad
 Lawin, Las Pias, Rizal under Psu-96910 approved by the
Director of the Bureau ofLands on 16 January 1933.
The eight Complaints 11 were similarly worded and contained
substantially identical allegations. Petitioners claimed in their Complaints that
they had been in continuous, open, and exclusive possession of the afore-
described parcels of land (subject properties) for more than 90 years until they
were forcibly ousted by armed men hired by respondents in 1991. They had
cultivated the subject properties and religiously paid the real estate taxes for
the same. Respondents cannot rely on Transfer Certificates of Title (TCTs)
No. 9176, No. 9177, No. 9178, No. 9179, No. 9180, No. 9181 and No.
9182, 12 issued by the Registry of Deeds of Las Pias in their names, to
support their claim over the subject properties since, petitioners averred, the
subject properties were not covered by said certificates. Petitioners also
alleged that said TCTs, purportedly derived from Original Certificate of Title
(OCT) No. 6122, issued in favor of Jose Velasquez, were spurious. ACIDTE

To support their narration of facts, petitioners cited Vda. de Cailles v.

Mayuga 13 and Orosa v. Migrino, 14 which both involved the parcel ofland
referred to as Lot 9, Psu-11411, Amd-2. In these cases, the Court adjudicated
said piece of land to Dominador Mayuga, who later transferred it to Marciano
Villanueva, who sold it to Nicolas Orosa. Pending a controversy between
the Heirs of Nicolas Orosa and Jose Velasquez, Delta Motors Corporation
somehow acquired the rights over their conflicting claims to the land and
managed to obtain certificates of title over the same. Delta Motors
Corporation sold the land to Goldenrod, Inc., which finally transferred it to a
consortium composed of respondents, Peaksun Enterprises and Export
Corporation, and Elena Jao.
Petitioners stressed, however, that in Vda. de Cailles and Orosa, the
land that was transferred was Lot 9, Psu-11411, Amd-2, measuring 53
hectares, which was only a portion of the entire Lot 9, Psu-11411, with a total
area of 119.8 hectares. And respondents' TCTs, derived from OCT No. 6122
in the name of Jose Velasquez, covered only 26.44 hectares or roughly
half of Lot 9, Psu-11411, Amd-2. Petitioners averred that the subject
properties were not included in the 53 hectares of Lot 9, Psu-11411,
adjudicated to Dominador Mayuga.
Petitioners thus sought from the RTC that an order be issued enjoining
respondents from making any developments on the subject properties, and
that after hearing, judgment be rendered as follows:
A. [Herein respondents] be ordered to recognize the rights of [herein
petitioners]; to vacate the subject lot and peacefully surrender
possession thereof to [petitioners]; and that Transfer Certificate of Title
Numbers 9176, 9177, 9178, 9179, 9180 and 9182 be cancelled by the
 Register of Deeds for Las Pias, Metro Manila, insofar as they are or
may be utilized to deprive [petitioners] of the possession and
ownership of said lot.
B. Making the preliminary injunctions permanent.
C. An order be issued directing [respondents] to pay [petitioners] the
sums of: HTSIEa

a. P500,000.00 as moral damages;

b. P150,000.00 as exemplary damages;
c. P100,000.00 as attorney's fees; and,
d. Cost of suit.
[Petitioners] further pray for such other affirmative reliefs as are deemed
just and equitable in the premises. 15
Respondents filed before the RTC a Motion to Dismiss and Opposition
to Application for a Temporary Restraining Order/Writ of Preliminary
Injunction. 16 They moved for the dismissal of the eight Complaints on the
grounds of (1) prescription; (2) laches; (3) lack of cause of action; and (4)res
judicata. 17
Respondents argued that the Complaints sought the annulment of the
certificates of title that were issued in their names. Section 32 ofPresidential
Decree No. 1529, otherwise known as the Property Registration
Decree, 18 provides that the decree of registration and the certificateof title
issued pursuant thereto can only be nullified on the ground of fraud within one
year after the entry of such decree of registration. Respondents' TCTs could
be traced back to the decree/s of registration entered in 1966/1967, which
resulted in the issuance of OCT No. 6122 in the name of Jose Velasquez,
respondents' predecessor-in-interest. Hence, the filing of the Complaints only
in October 1997 was made beyond the prescription period for assailing a
decree of registration and/or the certificate of title issued pursuant thereto.
Additionally, petitioners' Complaints were actions for reconveyance of the
subject properties based on implied trust, the filing of which prescribes after
10 years from the time said properties were first registered under the Torrens
system, in accordance with Articles 1144 and 1456 of the Civil Code. 19 Since
the subject properties were first registered in 1966/1967, then the actions for
their reconveyance, instituted only in 1997 or 30 years later, should be
dismissed on the ground of prescription. 20
Respondents also contended that petitioners were guilty of laches.
Despite their alleged possession of the subject properties for 90 years,
petitioners failed to take any steps to oppose the land registration cases
involving the same properties or to seek the nullification of the
decrees ofregistration and certificates of title which were entered and issued
as early as 1966 and 1967. 21
Moreover, respondents maintained that the Complaints should be
dismissed for failure to state a cause of action. Even assuming that petitioners
were able to prove their allegations of longtime possession and
payment of realty taxes on the subject properties, and to submit a sketch
plan of the same, these cannot defeat a claim of ownership over the
parcels of land, which were already registered under the Torrens system in
the name of respondents and the other consortium members. 22 cCEAHT

Lastly, respondents insisted that the Complaints should be dismissed

on the ground of res judicata. 23 By virtue of the decided cases Vda. de
Cailles and Orosa, which petitioners themselves cited in their Complaints, any
claims to all portions of Lot 9, Psu 11411, Amd-2 are barred by res judicata. In
said cases, respondents' predecessors-in-interest were declared
owners of Lot 9, Psu 11411, Amd-2. Respondents also referred to a
Decision 24 dated 17 December 1991 rendered by the Metropolitan Trial Court
(MTC) of Las Pias, Branch 79, in Civil Case No. 3271, entitled Heirsof Benito
Navarro v. Fil-Estate Management Inc. 25 In its Decision, the MTC declared
that therein plaintiffs were not in possession of the land, which it found to
belong to respondent Fil-Estate Management Inc.
On 11 June 1998, the Heirs of Jose Velasquez (intervenors) filed a
Motion for Intervention with Leave of Court and a Complaint-in-Intervention,
alleging that the subject properties, covered by TCTs No. 9176, No. 9177, No.
9178, No. 9179, No. 9180, and No. 9181, were once owned by the Spouses
Jose Velasquez and Loreto Tiongkiao. Without settling the conjugal
partnership after the death of his wife Loreto Tiongkiao, and without obtaining
the intervenors' consent, Jose Velasquez, together with J.V. Development
Corporation, Delta Motors Corporation, and Nicolas Orosa, transferred all
their rights to the subject properties to Goldenrod, Inc., from which
respondents acquired the same. The intervenors sought the cancellation and
nullification of respondents' certificates of title insofar as their mother's share
in the subject properties was concerned. 26
On 8 September 2000, the RTC issued a Resolution 27 in Civil Case No.
LP-97-0228 granting respondents' Motion to Dismiss. The trial court
determined that the subject properties were already registered in the
names of respondents, and that petitioners were unable to prove by clear and
convincing evidence their title to the said properties. The dispositive
part of the RTC Resolution reads: AScHCD

On the basis of the foregoing reasons alone, the instant complaint

should immediately be DISMISSED. Accordingly, the prayer for a
temporary restraining order and preliminary injunction is DENIED. This,
 however, is without prejudice to the complaint-in-intervention filed by
intervenors over the disputed properties, their undivided interests being
intertwined and attached to the disputed properties wherever it goes and
whoever is in possession of the same, their right to bring action to
pursue the same being imprescriptible. 28
On 12 August 2002, respondents filed a Motion for
Clarification 29 asking the RTC whether the order of dismissal of Civil Case No.
LP-97-0228, included Civil Cases No. LP-97-0229, No. LP-97-0230, No. LP-
97-0231, No. LP-97-0236, No. LP-97-0237, No. LP-97-0238, and No. LP-97-
0239. In a Resolution 30 dated 30 June 2003, the RTC reiterated its
Resolution dated 8 September 2000 dismissing the
Complaint of petitioners Heirs ofTomas Dolleton in Civil Case No. LP-97-0228;
and declared that the other cases Civil Cases No. LP-97-0229, No. LP-97-
0230, No. LP-97-0231, No. LP-97-0236, No. LP-97-0237, No. LP-97-0238,
and No. LP-97-0239 were similarly dismissed since they involved the same
causes of action as Civil Case No. LP-97-0228.
On 9 July 2003, petitioners filed a consolidated Notice of Appeal
questioning the 30 June 2003 Resolution of the RTC. 31 They accordingly filed
an appeal of the said Resolution of the trial court with the Court of Appeals,
docketed as CA-G.R. CV No. 80927.
In its Decision dated 16 September 2005 in CA-G.R. CV No. 80927, the
Court of Appeals denied petitioners' appeal and affirmed the RTC Resolutions
dated 8 September 2000 and 30 June 2003. The appellate court found that
respondents' titles to the subject properties were indefeasible because they
were registered under the Torrens system. Thus, petitioners could not say
that any claim on the subject properties casts a cloud on their title when they
failed to demonstrate a legal or an equitable title to the same. The
Court of Appeals also ruled that petitioners' actions had already prescribed.
Section 32 of Presidential Decree No. 1529 requires that an action assailing a
certificate of title should be filed within one year after its issuance. Moreover,
actions assailing fraudulent titles should be filed within 10 years after the said
titles were issued. The appellate court further decreed that the cases for
quieting of title should be dismissed based on the allegation of petitioners
themselves that the parcels of land covered by respondents' certificates of title
were not the subject properties which petitioners claimed as their own. 32 ScAaHE

Petitioners filed a Motion for Reconsideration of the afore-mentioned

Decision, 33 which the Court of Appeals denied in a Resolution dated 9
December 2005. 34
Hence, the present Petition, where petitioners made the following
assignment of errors:
I
 THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT
AFFIRMED THE RESOLUTION OF THE COURT A QUO, DATED
SEPTEMBER 8, 2000 AND THE RESOLUTION DATED JUNE 30, 2003,
BASED PURELY ON THE TECHNICALITY OF THE LAW RATHER
THAN THE LAW THAT PROTECT[S] THE PROPERTY
RIGHTS OF THE PETITIONERS WHO WERE FORCIBLY EVICTED
FROM THEIR RESPECTIVE LANDHOLDINGS BY THE
USED (sic) OF BRUTE FORCE OF ARMED MEN ON THE
BASIS OF THE TITLES OF THE PRIVATE RESPONDENTS, IN
VIOLATION OF THEIR PROPERTY RIGHTS AND OF DUE PROCESS.
II
THAT THE COURT OF APPEALS GRAVELY ERRED WHEN IT
AFFIRMED THE RESOLUTION OF THE COURT A QUO, DESPITE
THE FACT THAT A FULL BLOWN HEARING ON THE MERIT[S] IS
NECESSARY TO DETERMINE THE ACTUAL LOCATION ON THE
ACTUAL GROUND [OF] THE LOTS COVERED BY THE PRIVATE
RESPONDENT (sic) TITLES, LOTS COVERED BY ITS TITLES ARE
MORE THAN THREE HUNDRED (300 m) METERS AWAY TO THE
WEST-NORTHWEST FROM THE CONSOLIDATED LOTS OF THE
HEREIN PETITIONERS AND THEREFORE PRIVATE RESPONDENTS
BRUTAL ACTION IN FORCIBLY EVICTING THE PETITIONERS FROM
THEIR RESPECTIVE LANDHOLDINGS BY THE USED (sic) OF BRUTE
FORCE OF ARMED MEN, ARE PURELY
CASES OF LANDGRABBING. 35
This Petition is meritorious.
The main issue in this case is whether the RTC properly granted
respondents' motion to dismiss. This Court finds that the trial court erred in
dismissing petitioners' Complaints. TEDHaA

Complaints sufficiently stated a

cause of action.
Respondents seek the dismissal of petitioners' Complaints for failure to
state a cause of action. Even assuming as true that the subject properties
have been in the possession of petitioners and their predecessors-in-interest
for 90 years; that petitioners have been paying the realty taxes thereon; and
that petitioners are able to submit a sketch plan of the subject properties,
respondents maintain that their ownership of the subject properties,
evidenced by certificates of title registered in their names, cannot be defeated.
This contention is untenable.
Respondents mistakenly construe the allegations in petitioners'
Complaints. What petitioners alleged in their Complaints was that while the
subject properties were not covered by respondents' certificates of title,
nevertheless, respondents forcibly evicted petitioners therefrom. Hence, it is
not simply a question of whether petitioners' possession can defeat
respondents' title to registered land. Instead, an initial determination has to be
made on whether the subject properties were in fact covered by respondents'
certificates of title.
Section 2, Rule 2 of the Rules of Civil Procedure defines a
cause of action as the act or omission by which a party violates the
right ofanother. Its essential elements are as follows: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; (2)
an obligation on the part of the named defendant to respect or not to violate
such right; and (3) an act or omission on the part of such defendant in
violation of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff, for which the latter may maintain an
action for recovery of damages or other appropriate relief. 36
The elementary test for failure to state a cause of action is whether the
complaint alleges facts which if true would justify the relief demanded. The
inquiry is into the sufficiency, not the veracity, of the material allegations. If the
allegations in the complaint furnish sufficient basis on which it can be
maintained, it should not be dismissed regardless of the defense that may be
presented by the defendant. 37 ESHAcI

This Court is convinced that each of the Complaints filed by petitioners

sufficiently stated a cause of action. The Complaints alleged that petitioners
are the owners of the subject properties by acquisitive prescription. As owners
thereof, they have the right to remain in peaceful possession of the said
properties and, if deprived thereof, they may recover the same. Section
428 of the Civil Code provides that:
Article 428. The owner has the right to enjoy and dispose of a thing
without other limitations than those established by law.
The owner has also a right of action against the holder and
possessor of the thing in order to recover it.
Petitioners averred that respondents had violated their rights as owner of the
subject properties by evicting the former therefrom by means offorce and
intimidation. Respondents allegedly retained possession of the subject
properties by invoking certificates of title covering other parcelsof land.
Resultantly, petitioners filed the cases before the RTC in order to recover
possession of the subject properties, to prevent respondents from using their
TCTs to defeat petitioners' rights of ownership and possession over said
subject properties, and to claim damages and other reliefs that the court may
deem just and equitable.
The Court notes that petitioners' prayer for the
cancellation of respondents' certificates of title are inconsistent with their
allegations. Petitioners prayed for in their Complaints that, among other reliefs,
judgment be rendered so that "Transfer Certificate of Title Numbers 9176,
9177, 9178, 9179, 9180, 9181, and 9182 be cancelled by the
Register of Deeds for Las Pias, Metro Manila, insofar as they are or may be
utilized to deprive plaintiffs of possession and ownership of said lot." Yet,
petitioners also made it plain that the subject properties, of which respondents
unlawfully deprived them, were not covered by respondents' certificates of title.
It is apparent that the main concern of petitioners is to prevent respondents
from using or invoking their certificates of title to deprive petitioners of their
ownership and possession over the subject properties; and not to assert a
superior right to the land covered by respondents' certificates of title.
Admittedly, while petitioners can seek the recovery of the subject properties,
they cannot ask for the cancellation of respondents' TCTs since petitioners
failed to allege any interest in the land covered thereby. Still, the other reliefs
sought by petitioners, i.e., recovery of the possession of the subject properties
and compensation for the damages resulting from respondents' forcible
taking of their property, are still proper.
aIcDCH

Petitioners' Complaints should not have been dismissed despite the

seeming error made by petitioners in their prayer. To sustain a motion to
dismiss for lack of cause of action, the complaint must show that the claim for
relief does not exist, rather than that a claim has been defectively stated, or
is ambiguous, indefinite or uncertain. 38
Complaints are not barred by
prescription and laches.
In their Motion to Dismiss, respondents argued that petitioners' cases
were barred by prescription, in accordance with Section 32 of the Property
Registration Decree and Articles 1144 (2) and 1456 of the Civil Code.
Respondents relied on the premise that the actions instituted by petitioners
before the RTC were for the reopening and review of the
decree of registration and reconveyance of the subject properties. HCATEa

Section 32 of the Property Registration Decree provides that a

decree of registration may be reopened when a person is deprived of land or
an interest therein by such adjudication or confirmation obtained by actual
fraud. On the other hand, an action for reconveyance respects the
decree of registration as incontrovertible but seeks the transfer of property,
which has been wrongfully or erroneously registered in other persons' names,
to its rightful and legal owners, or to those who claim to have a better
right. 39 In both instances, the land of which a person was deprived should be
the same land which was fraudulently or erroneously registered in another
person's name, which is not the case herein, if the Court considers the
allegations in petitioners' Complaints.
 As previously established, petitioners' main contention is that the
subject properties from which they were forcibly evicted were not covered by
respondents' certificates of title. Stated differently, the subject properties and
the land registered in respondents' names are not identical. Consequently,
petitioners do not have any interest in challenging the registration of the land
in respondents' names, even if the same was procured by fraud.
While petitioners improperly prayed for the cancellation of respondents'
TCTs in their Complaints, there is nothing else in the said Complaints that
would support the conclusion that they are either petitions for reopening and
review of the decree of registration under Section 32 of the Property
Registration Decree or actions for reconveyance based on implied trust under
Article 1456 of the Civil Code. Instead, petitioners' Complaints may be said to
be in the nature of an accion reivindicatoria, an action for
recovery of ownership and possession of the subject properties, from which
they were evicted sometime between 1991 and 1994 by respondents.
An accion reivindicatoria may be availed of within 10 years from
dispossession. 40 There is no showing that prescription had already set in
when petitioners filed their Complaints in 1997.
Furthermore, the affirmative defense of prescription does not
automatically warrant the dismissal of a complaint under Rule 16 of the
Rulesof Civil Procedure. An allegation of prescription can effectively be used
in a motion to dismiss only when the Complaint on its face shows that indeed
the action has already prescribed. 41 If the issue of prescription is one
involving evidentiary matters requiring a full-blown trial on the merits, it cannot
be determined in a motion to dismiss. 42 In the case at bar, respondents must
first be able to establish by evidence that the subject properties are indeed
covered by their certificates of title before they can argue that any remedy
assailing the registration of said properties or the issuance of the
certificates of title over the same in the names of respondents or their
predecessors-in-interest has prescribed.
Neither can the Court sustain respondents' assertion that petitioners'
Complaints were barred by laches.
Laches has been defined as the failure of or neglect, for an
unreasonable and unexplained length of time, to do that which by exercising
due diligence, could or should have been done earlier; or to assert a right
within reasonable time, warranting a presumption that the party entitled
thereto has either abandoned it or declined to assert it. Thus, the
doctrine of laches presumes that the party guilty of negligence had the
opportunity to do what should have been done, but failed to do so. Conversely,
if the said party did not have the occasion to assert the right, then, he cannot
be adjudged guilty of laches. Laches is not concerned with the mere
lapse of time; rather, the party must have been afforded an opportunity to
pursue his claim in order that the delay may sufficiently constitute laches. 43
Again, going back to petitioners' chief claim that the subject properties
are distinct from the land covered by respondents' certificates of title, then,
petitioners would have no standing to oppose the registration of the latter
property in the names of respondents or their predecessors-in-interest, or to
seek the nullification of the certificates of title issued over the same.
AScTaD

It also appears from the records that the RTC did not conduct a hearing
to receive evidence proving that petitioners were guilty of laches. Well-settled
is the rule that the elements of laches must be proven positively. Laches is
evidentiary in nature, a fact that cannot be established by mere allegations in
the pleadings and cannot be resolved in a motion to dismiss. At this stage,
therefore, the dismissal of petitioners' Complaints on the ground of laches is
premature. Those issues must be resolved at the trial of the case on the
merits, wherein both parties will be given ample opportunity to prove their
respective claims and defenses. 44
Complaints are not barred by
res judicata.
Lastly, respondents argued in their Motion to Dismiss that petitioners'
Complaints are barred by res judicata, citing Vda. de Cailles andOrosa.
Likewise, petitioners are barred from instituting any case for
recovery of possession by the MTC Decision in Civil Case No. 3271.
Res judicata refers to the rule that a final judgment or decree on the
merits by a court of competent jurisdiction is conclusive of the rights ofthe
parties or their privies in all later suits on all points and matters determined in
the former suit. Res judicata has two concepts: (1) "bar by prior judgment" as
enunciated in Rule 39, Section 47 (b) of the Rules of Civil Procedure; and (2)
"conclusiveness of judgment" in Rule 39, Section 47 (c).
There is "bar by prior judgment" when, as between the first case where
the judgment was rendered, and the second case that is sought to be barred,
there is identity of parties, subject matter, and causes of action. But where
there is identity of parties and subject matter in the first and second cases,
but no identity of causes of action, the first judgment is conclusive only as to
those matters actually and directly controverted and determined and not as to
matters merely involved therein. There is "conclusiveness of judgment". Under
the doctrine of conclusiveness ofjudgment, facts and issues actually and
directly resolved in a former suit cannot again be raised in any future case
between the same parties, even if the latter suit may involve a different claim
or cause of action. The identity of causes of action is not required but merely
identity of issues. 45
DSacAE
 Vda. de Cailles and Orosa cannot bar the filing of petitioners'
Complaints before the RTC under the doctrine of conclusiveness of judgment,
since they involve entirely different subject matters. In both cases, the subject
matter was a parcel of land referred to as Lot 9 Psu-11411 Amd-2, while
subject matter of the petitioners' Complaints are lots which are not included in
the said land.
It follows that the more stringent requirements of res judicata as "bar by
prior judgment" will not apply to petitioners' Complaints. In Vda. de Cailles, the
Court confirmed the ownership of Dominador Mayuga over a 53-hectare
parcel of land located in Las Pias, Rizal, more particularly referred to as Lot
9, Psu-11411, Amd-2. The Court also recognized that Nicolas Orosa was
Dominador Mayuga's successor-in-interest. However, the judgment in said
case was not executed because the records of the Land Registration
Authority revealed that the property had previously been decreed in
favor of Jose T. Velasquez, to whom OCT No. 6122 was issued. During the
execution proceedings, Goldenrod Inc. filed a motion to intervene, the
granting of which by the trial court was challenged in Orosa. The Court held
in Orosa that Goldenrod, Inc., despite having acquired the opposing
rights of Nicolas Orosa and Jose T. Velasquez to the property sometime in
1987, no longer had any interest in the same as would enable it to intervene
in the execution proceedings, since it had already sold its interest in February
1989 to the consortium composed ofrespondents, Peaksun Enterprises and
Export Corporation, and Elena Jao.
The adjudication of the land to respondents' predecessors-in-interest
in Vda. de Cailles and Orosa is not even relevant to petitioners' Complaints.
According to petitioners' allegations in their Complaints, although the subject
properties were derived from the 119.8-hectare parcelof land referred to as
Lot 9, Psu-11411, they are not included in the 53-hectare portion thereof,
specifically identified as Lot 9, Psu-11411, Amd-2, subject of Vda. de
Cailles and Orosa. This was the reason why petitioners had to cite Vda. de
Cailles and Orosa: to distinguish the subject properties from the land acquired
by respondents and the other members of the consortium. There clearly being
no identity of subject matter andof parties, then, the rulings of this Court
in Vda. de Cailles and Orosa do not bar by prior judgment Civil Cases No. LP-
97-0228, No. LP-97-0229, No. LP-97-0230, No. LP-97-0231, No. LP-97-0236,
No. LP-97-0237, No. LP-97-0238, and No. LP-97-0239 instituted by
petitioners in the RTC.
The Court is aware that petitioners erroneously averred in their
Complaints that the subject properties "originated from Psu-11411, Lot 9,
Amd-2", instead of stating that the said properties originated from Psu-11411,
Lot 9. However, this mistake was clarified in later allegations in the same
Complaints, where petitioners stated that "Psu-114, Lot 9
consists of 1,198,017 square meters", or 119.8 hectares when converted,
while Psu-11411, Lot 9, Amd-2 referred to a 53-hectare parcel. Petitioners
pointed out that in Vda. de Cailles and Orosa, the Court acknowledged "the
ownership [of respondents' predecessor-in-interest] only over a fifty-three (53)
hectare parcel, more particularly referred to as Lot 9 Psu-11411, Amd-2."
Thus, petitioners argued that the rights which respondents acquired from
Mayuga and Orosa "cover[ed] only 531,449 square meters or 53
hectares of Psu-11411, Lot 9. They do not extend to the latter's other
portion of 1,198,017 square meters part of which [petitioners] had been
occupying until they were forcibly evicted by [respondents]." Accordingly, the
single statement in the Complaints that the subject properties originated from
Lot 9, Psu-11411, Amd-2, is an evident mistake which cannot prevail over the
rest of the allegations in the same Complaints. DaIAcC

Similarly, the Decision dated 17 December 1991 of the MTC in Civil

Case No. 3271 cannot bar the filing of petitioners' Complaints before the RTC
because they have different subject matters. The subject matter in Civil Case
No. 3271 decided by the MTC was the parcel of land covered by TCTs No.
9176, No. 9177, No. 9178, No. 9179, No. 9180, and No. 9181, in the
name of respondents and the other consortium members; while, according to
petitioners' allegations in their Complaints, the subject matters in Civil Cases
No. LP-97-0228, No. LP-97-0229, No. LP-97-0230, No. LP-97-0231, No. LP-
97-0236, No. LP-97-0237, No. LP-97-0238, and No. LP-97-0239, before the
RTC, are the subject properties which are not covered by respondents'
certificates of title.
The MTC, in its 17 December 1991 Decision in Civil Case No. 3271
found that:
The subject parcels of land are covered by (TCT) Nos. 9176, 9177,
9178, 9179, [9180], [9181] and 9182 (Exhs. "1" to "7", Defendants) all
issued in the name of defendant Fil-Estate Management, Inc. It
appears from the evidence presented that defendant Fil-
Estate purchased the said property from Goldenrod, Inc. It also appears
from the evidence that the subject property at the time of the purchase
was then occupied by squatters/intruders. By reason thereof, the
Municipality of Las Pias conducted in 1989 a census of all
structures/shanties on subject property. Those listed in the census were
relocated by defendant, which relocation program started in 1990 up to
the present. Interestingly, however, all ofthe plaintiffs herein except
the Almas, were not listed as among those in
possession of defendant's land as of November 1989.
xxx xxx xxx
In fine, plaintiffs have not clearly established their
right of possession over the property in question. They claim
 ownership, but no evidence was ever presented to prove such fact. They
claim possession from time immemorial. But the Census prepared by
Las Pias negated this posture.46 (Emphasis provided.)
The determination by the MTC that petitioners were not occupants of the
parcels of land covered by TCTs No. 9176, No. 9177, No. 9178, No. 9179, No.
9180, and No. 9181 cannot bar their claims over another parcel of land not
coveredby the said TCTs. It should also be noted that
petitionersHeirs of Agapito Villanueva do not appear to be plaintiffs in Civil
Case No. 3271 and, therefore, cannot be bound by the MTC Decision therein.
In all, this Court pronounces that respondents failed to raise a proper
ground for the dismissal of petitioners' Complaints. Petitioners' claims and
respondents' opposition and defenses thereto are best ventilated in a trial on
the merits of the cases.
IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The
Decision dated 16 September 2005 and Resolution dated 9 December
2005 of the Court of Appeals in CA-G.R. CV No. 80927 are REVERSED and
SET ASIDE. Let the records of the case be remanded for further proceedings
to the Regional Trial Court, Branch 253, of Las Pias City, which is hereby
ordered to try and decide the case with deliberate speed. SO ORDERED.
(Heirs of Dolleton v. Fil-Estate Management, Inc., G.R. No. 170750, [April 7,
|||

2009], 602 PHIL 781-806)

[G.R. No. 109073. October 20, 1999.]

EDUARDO BALAGTAS, petitioner, vs. COURT OF APPEALS,

THE CEBU CITY POLICE STATION SUPERINTENDENT, THE
SUB-STATION COMMANDER OF PARDO, POLICE
SUBSTATION, CEBU CITY, SPO-3 FIDEL PAYLARAN, ET
AL., respondents.

Zosa & Quijano Law Offices for petitioner.

Maria Elena F. Ballera and Salas Villareal Velasco & Tan for A. Apostol.
The Solicitor General for respondents.

SYNOPSIS

The officers of Danao Police Station and Pardo Sub-Station took Rutchel Apostol
from the house of Eduardo Balagtas without any warrant of arrest. Petitioner
Balagtas, acting on behalf of Rutchel, initiated a special proceeding for habeas
corpus before the Regional Trial Court of Cebu City. The Regional Trial Court of
origin rendered a decision dismissing the complaint for lack of cause of action
since it has been shown that Rutchel was under the care and custody of her
parents and not being illegally detained by the respondents. Eduardo Balagtas
appealed to the Court of Appeals. The Court of Appeals came out with a decision
affirming the decision below. Undaunted, the petitioner found his way to this
Court via the present petition for certiorari.
EaIDAT

According to the Court, the petitioner failed to substantiate his petition for habeas
corpus. The facts clearly indicated that Rutchel was not forcibly detained or
abducted by her mother. She voluntarily went with her mother after the latter
persuaded her to return to their home. There was no amount of force employed
on her, which would amount to deprivation of her liberty. The petition was
dismissed for lack of merit.

SYLLABUS

1. POLITICAL LAW; BILL OF RIGHTS; HABEAS CORPUS, AFFORDS

PROMPT RELIEF FROM UNLAWFUL IMPRISONMENT. Habeas
corpus embraces so broad a dimension. In one-case, this Court held that:
". . . habeas corpus, aside from being thorough and complete, affords prompt
relief from unlawful imprisonment of any kind, and under all circumstances. . . "
(Cf. People ex rel Livingston vs. Wyatt, 186 N.Y. 383; 79 N.E. 330)" (Pepito Lao
Alfonso, et al. v. Mirtiniano Vivo, March 31, 1966, G.R. No. L-20801, 16 SCRA
510, 517)
2. REMEDIAL LAW; CIVIL PROCEDURE; REAL PARTY IN INTEREST,
DEFINED; WHEN NOT PRESENT; CASE AT BAR. The trial Court did not
acquire jurisdiction over the person of Rutchel's mother (Mrs. Angeles Apostol)
since she was not impleaded as defendant and neither did she intervene in the
case as required by the Rules. No judgment could be pronounced against her;
otherwise, she would be deprived of the rudiments of due process. Petitioner has
no cause of action against her and therefore, the respondent Court correctly
dismissed the Petition. If the suit is not brought in the name of or against the real
party in interest, a motion to dismiss may be filed on the ground that the
Complaint states no cause of action (Sec. 1 (g), Rule 16). The respondents
sufficiently explained that they conducted police surveillance and merely acted
upon the directive of the PNP officials who, in turn, performed their duties as
requested by Rutchel's mother. A real party in interest is the party who could be
benefited or injured by the judgment or the party entitled to the avails of the suit.
Then too, in Bautista v. Barredo, et al., G.R. No. 20653, April 30, 1965, 13 SCRA
744, 746, the Court held: "In dismissing the case against defendant Jose M.
Barredo the court a quo took the view that he could not be impleaded on the
basis of the judgment rendered in Civil Case No. 1636 for the reason that he was
not a party therein upon the theory "that an action on the judgment cannot be
maintained against one not a party or not bound by it. . . " In Filipinas Ind. Corp.,
et al. v. San Diego, G.R. No. 22347, May 27, 1968, it was held that the foregoing
rule is mandatory. Again, in another case, the Court ruled thus: ". . . and as Ayala
y Cia, Alfonso Zobel and the Dizons were the only ones impleaded as parties-
defendants, the judgment was made effective exclusively against them. . . "
(Republic v. Ayala y Cia, et al., G.R. L-20950, May 31, 1965). EcaDCI

DECISION

PURISIMA, J : p

This is a Petition for Certiorari under Rule 65 of the Revised Rules of Court
assailing the Decision of the Court of Appeals 1 in CA G.R. SP No. 28155, dated
January 26, 1993, affirming the Decision of Branch 11, 7th Judicial Region,
Regional Trial Court of Cebu, dismissing the petition in Special Proceeding Case
No. 3328-CEB, entitled "In the Matter of the Petition for Habeas Corpus of
Rutchel Apostol". LLjur

The pertinent facts are as follows:

On November 18, 1991, the officers of Danao Police Station and Pardo Sub-
Station took Rutchel Apostol from the house of Eduardo Balagtas without any
warrant of arrest.
On December 4, 1991, the petitioner, acting on behalf of Rutchel Apostol,
initiated special proceedings for habeas corpus, docketed as Spec. Proc. Case
No. 3328-CEB before the Regional Trial Court of Cebu City. He theorized that
sometime in May 1991, Rutchel started to reside with him in Cebu City because
of her desire to undertake spiritual studies at the Chaitanya Mission. On the
same day, the trial Court issued an order directing the public respondents to
bring the body of Rutchel before it on December 9, 1991, at 10:40 P.M., and to
show cause why Rutchel Apostol had been deprived of her liberty and/or
petitioner was denied rightful custody of Rutchel.
On December 9, 1991, the public respondents did not produce the body of
Rutchel Apostol. As a result, the Trial Court issued another Order giving them
five (5) days to submit their opposition to the petition, and resetting the hearing to
December 27, 1991, at 10:00 A.M.
On December 27, 1991, the respondents explained in their Comment that Mrs.
Angeles Apostol, Rutchel's mother, sought police assistance from the
Metropolitan Command Headquarters of the Philippine National Police to locate
Rutchel and thereafter, persuaded her to return to their home in Iloilo City. She
brought with her a copy of a police blotter that Rutchel left their home on August
15, 1991.
Responding to the same, there was conducted a police surveillance which
unearthed that Rutchel was living with the petitioner in Pardo, Cebu City. Thereat,
Mrs. Angeles met Rutchel and talked to her, after which the two returned to Iloilo
City.
Meanwhile, the trial Court reset the hearing on January 14, 1992 and ordered
Rutchel's parents to produce her body but the latter failed to do so. The trial
Court then granted Rutchel's parents until February 14, 1992 to comply with the
directive but, instead, counsel for respondents presented a telegram signed by
Dr. Gustillo stating that Rutchel was undergoing psychiatric treatment and her
condition did not allow her to travel and attend the scheduled hearing in Cebu
City.
The next thing the trial court did was to appoint Nena R. Buenconsejo, a court
personnel, as commissioner to determine the veracity of the telegram. The said
commissioner reported:
". . . After a short while, Miss Rutchel Apostol appeared. From my
observation, she look a bit pale but physically healthy, well-groomed and
very accommodating. . . .
In few hours, Dr. Gustillo, the psychiatrist arrived. After the amenities, we
informed Dr. Gustillo why we were there that day. Then the questioning
begun. LLphil

The undersigned asked Miss Apostol whether she is held against her will
in their home to which she answered in the affirmative. When asked
whether she's free to go out, she said she can but only if she has a
companion. She said that she has freedom but not the freedom of doing
what she wants and likes to do. When further asked what does she
wants and likes to do. When further asked what does she like, being
there in their house or somewhere else, she said that she prefers the
Chaitanya Mission. The undersigned also asked her whether she is fit to
go to Cebu City and show herself in Court on February 28, 1992, the
next scheduled hearing, she answered "yes" and she wants to. When
questioned whether she is under treatment, she said "no". However, the
psychiatrist said that she has been undergoing psychotherapy, a
treatment which do not prescribe medicines, but only deals in
psychology. In short, is just talking with the patient, listening to her
problems and ideas and in the process, advicing and helping her. The
psychiatrist called this psychotherapy. According to him psychiatry deals
in two things, the objective and subjective observations. Miss Rutchel
Apostol argued and insisted that there was no mention of her being
 under treatment, that the psychiatrist is merely her and her mother's
mediator. But when asked by the doctor to confirm to the truth that she
once admitted that she suffered depression which sometimes made her
contemplate suicide, she confirmed to the truth of the matter but
qualified that she is coping with the situation.
At this point, the undersigned sought the psychiatrist's opinion on Miss
Apostol's fitness to travel to Cebu City and show herself in Court on
February 28, 1992, the psychiatrist said that as of that time, he would not
advice her to. However, he said that in about four (4) weeks time from
February 22, 1992, Ms. Apostol may do so. The psychiatrist believes
that Ms. Apostol may not be able to cope with the stress yet because of
the different factors that may ensue.
Before the investigation ended, Ms. Rutchel Apostol offered three
(3) conditions to her mother which her mother rejected, namely:
1. That she be allowed to go to the mission in Cebu for one (1) month;
2. That when summer classes will open, she will enroll and be allowed to visit the
Chaitanya Mission in Iloilo; and
3. That after she will finish her college course, she will be left free to go where she
pleases." 2
On March 25, 1992, the Regional Trial Court of origin rendered a Decision
dismissing the Complaint for lack of cause of action since it has been shown that
Rutchel Apostol was under the care and custody of her parents and not being
illegally detained by the respondents." 3

On August 11, 1992, Eduardo Balagtas took an appeal to the Court of Appeals,
docketed as CA-G.R. SP. No. 28155, asseverating:
"Although the original respondents were the policemen who forcibly took
away Rutchel Apostol from the Chaitanya Mission, and whom the
petitioner believed were in custody of Rutchel Apostol, the petition was
deemed amended when the policemen in their comment to the petition
alleged that it is the parents of Rutchel Apostol who are now in actual
custody of Rutchel Apostol and the parents of Rutchel Apostol admitted
that they are in custody of Rutchel Apostol and submitted themselves to
the jurisdiction of this Honorable Court by allowing the Commissioner
appointed by this Honorable Court to examine Rutchel Apostol in their
house in Iloilo City.
xxx xxx xxx
It is to be stressed that since Rutchel Apostol is now 19 years of age,
she has now reached the age of majority and is now emancipated from
parental control:
 ARTICLE 234. Emancipation takes place by the
attainment of majority. Unless otherwise provided,
majority commences at the age of eighteen years." cdasia

Since Rutchel Apostol has reached the age of majority, the parents of
Rutchel Apostol cannot keep her in their custody against her will:
"xxx xxx xxx
In a case, the petitioner asked for writ of habeas corpus to return
his daughter, who had already reached the age of majority, to her
parental home which she left without his consent as father nor the
consent of her mother. In denying the application, the Supreme
Court held: 'There can be no question that parental authority,
which includes the right to custody, terminates upon a child
reaching the age of majority, at which age the child acquires the
right, power and privilege to control his person (articles 314 and
137, Civil Code). This right to control one's person includes the
right to choose a separate place of residence and the persons in
whose company he desires to live. The freedom is incompatible
with custody; no one can be said to have freedom to control his
person and at the same time continue subject to someone's
custody. As habeas corpus applies only in cases where the
rightful custody of a person is denied to another (section 1, Rule
102, Rules of Court), petitioner herein would be entitled thereto
only if the right to custody of his daughter is reserved to him by
law.
Emancipation by majority is always absolute as to one's person;
there is no provision in the law that limits it in any case. Article
317 refers to control over property. Article 321 is not an exception
to the effects of emancipation by attainment of the age of majority;
it is a limitation of the right of an emancipated daughter to leave
the home of her parents if she is living with them, in the interest of
public decorum (2 Manresa, 786-787). It can not, therefore, be
said that the daughter, who after majority continues to live with
her parents, remains under her parents custody. The right to
freedom and control of one's person is a natural right; no
limitation thereto can be imposed or inferred, except by express
provision of law. The prohibition for daughters from leaving their
parental homes, if they live in company with their parents, is a
limitation of a natural right and can not be enlarged beyond its
very limited scope; it can not be extended by interpretation into a
sort of parental authority with its corresponding concomitant of
custody. Custody ends with emancipation, and the mere fact that
she may have live with them cannot be considered as a
continuation of revival of the custody, which had definitely
terminated upon her emancipation.' (V-B, Francisco, The Revised
 Rules of Court In the Philippines, 696 citing Dy Pico v. Ricardo,
47 O.G. 5232)
The parents of Rutchel Apostol should be ordered to discharge Rutchel
Apostol from their custody:
'When prisoner discharged if no appeal. When the court or
judge has examined into the cause of the caption and restraint of
the prisoner, and is satisfied that he is unlawfully imprisoned or
restrained, he shall forthwith order his discharge from
confinement, but such discharge shall not be effective until a copy
of the order has been served on the officer or person detaining
the prisoner does not desire to appeal, (sic) the petitioner shall be
forthwith release.' Section 15, Rule 102)" 4
On January 26, 1993, the Fifth Division of the Court of Appeals came out with a
Decision 5 affirming the Decision below, ratiocinating as follows:
". . . Petitioner has failed to establish a cause of action against the
respondent members of the Philippine National Police of the Danao
Police Station and the PARDO Sub-Station, Cebu City Police Station.
There is no showing that respondents ever detained or are restraining
Rutchel Apostol, in whose behalf the petition for habeas corpus is
purportedly filed. It is the burden of the petitioner to substantiate by clear
and convincing evidence that Rutchel is under the custody or is
unlawfully detained and restrained of her liberty by the respondents.
Petitioner's evidence failed to prove this; and the petition should be
dismissed (Ngaya-an vs. Balweg, 200 SCRA 149).
In this case, respondents presented the mother of Rutchel Apostol, who
affirmed in court that the respondents merely responded to her request
for assistance in locating her daughter, who voluntarily returned home
with her to Iloilo City on the day that she was located. Although the
Commissioner's report tends to show that she still wishes to join the
Chaitanya Mission in Cebu City and that she is presently in the house of
her parents, where she is not free to do what she wants and likes to do,
the parents are not named as respondents in this case. The fact that the
mother Angeles Apostol, testified in behalf of herein respondents does
not make the parents a party to this special proceeding, nor justify the
issuance of an order directed against parties not properly impleaded.
The thrust of the petitioner's complaint is that Rutchel Apostol was
forcibly taken and abducted on November 18, 1991 and that
respondents continue to detain her at the Pardo Police Sub-station
and/or Danao Police Station. The essential allegations of the petition
were not proven, and the petition was correctly dismissed." 6
Undaunted, the petitioner found his way to this Court via the present Petition
for Certiorari, assigning as lone error, that: LexLib
"THE RESPONDENT COURT ERRED IN DISMISSING THE PETITION ON THE
GROUND OF TECHNICALITY THAT THE MOTHER OF RUTCHEL APOSTOL WHO
IS ILLEGALLY DETAINING HER WAS NOT FORMALLY IMPLEADED AS A
RESPONDENT IN THIS CASE." 7
The petition is not impressed with merit.
To begin with, habeas corpus embraces so broad a dimension. In one case, this
Court held that:
". . . habeas corpus, aside from being thorough and complete, affords
prompt relief from unlawful imprisonment of any kind, and under all
circumstances. . . ." (Cf. People ex rel Livingston vs. Wyatt, 186 N.Y.
383; 79 N.E. 330)" (Pepito Lao Alfonso et. al., v. Mirtiniano Vivo, March
31, 1966, G. R. No. L-20801, 16 SCRA 510, 517)
However, explicit is the following provision of the Revised Rules of Court:
Section 2, Rule 3. A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to
the avails of the suit. Unless otherwise authorized by law or these Rules,
every action must be prosecuted or defended in the name of the real
party in interest.
The trial Court did not acquire jurisdiction over the person of Rutchel's mother
(Mrs. Angeles Apostol) since she was not impleaded as defendant and neither
did she intervene in the case as required by the Rules. No judgment could be
pronounced against her; otherwise, she would be deprived of the rudiments of
due process.
Petitioner has no cause of action against her and therefore, the respondent Court
correctly dismissed the Petition. If the suit is not brought in the name of or
against the real party in interest, a motion to dismiss may be filed on the ground
that the Complaint states no cause of action (Sec. 1(g), Rule 16). The
respondents sufficiently explained that they conducted police surveillance and
merely acted upon the directive of the PNP officials who, in turn, performed their
duties as requested by Rutchel's mother.
A real party in interest is the party who could be benefited or injured by the
judgment or the party entitled to the avails of the suit.
Then too, in Bautista v. Barredo, et al., G.R. No. 20653, April 30, 1965, 13 SCRA
744, 746, the Court held:
"In dismissing the case against defendant Jose M. Barredo the court a
quo took the view that he could not be impleaded on the basis of the
judgment rendered in Civil Case No. 1636 for the reason that he was not
a party therein upon the theory "that an action on the judgment cannot
be maintained against one not a party or not bound by it. . . ."
In Filipinas Ind. Corp., et al. v. San Diego, G.R. No. 22347, May 27, 1968, it was
held that the foregoing rule is mandatory. Again, in another case, the Court ruled
thus:
". . . and as Ayala y Cia, Alfonso Zobel and the Dizons were the only
ones impleaded as parties-defendants, the judgment was made effective
exclusively against them. . . ." (Republic v. Ayala y Cia, et. al, G. R. L-
20950, May 31, 1965)
Assuming arguendo that the mother of Rutchel was impleaded, still the petitioner
failed to substantiate the petition for habeas corpus. The facts clearly indicate
that Rutchel is on her right mind, not to mention her being one of the topnotchers
in the Midwifery Licensure Examination given by the Professional Regulations
Commission. She was not forcibly detained or abducted by her mother, the fact
being that she voluntarily went with her mother after the latter persuaded her to
return to their home in Iloilo City. There was no amount of force employed on her,
which would amount to deprivation of liberty.

In light of the attendant circumstances at bar, the Court deems it unnecessary to

pass upon the other questions raised by petitioner. prcd

WHEREFORE, the Petition is DISMISSED for lack of merit, and the Decision of
the Court of Appeals in CA G.R. SP No. 28155 affirming the Decision of Branch
11 of the Regional Trial Court of Cebu AFFIRMED. No pronouncement as to
costs. SO ORDERED.
(Balagtas v. Court of Appeals, G.R. No. 109073, [October 20, 1999], 375 PHIL
|||

480-490)

[G.R. No. 165142. December 10, 2007.]

EDUARDO L. RAYO, petitioner, vs. METROPOLITAN BANK

AND TRUST COMPANY and BRANCH 223 OF THE REGIONAL
TRIAL COURT OF QUEZON CITY, respondents.

DECISION

QUISUMBING, J : p

Before us is a petition for review assailing the Resolutions dated June 15,
2004 1 and August 23, 2004 2 of the Court of Appeals in CA-G.R. SP No. 83895
for annulment of judgment.
The pertinent facts are undisputed.
Midas Diversified Export Corp. (Midas), thru its president, Mr. Samuel U. Lee,
obtained six (6) loans from private respondent Metropolitan Bank and Trust
Company (Metrobank), amounting to P588,870,000 as evidenced by promissory
notes. To secure the payment of an P8,000,000 loan, Louisville Realty &
Development Corporation (Louisville), thru its president, Mr. Samuel U. Lee,
executed in favor of Metrobank, a real estate mortgage over three parcels of land
situated at No. 40 Timog Ave., Brgy. Laging Handa, Quezon City, with all the
buildings and improvements thereon. The properties are covered by Transfer
Certificates of Title (TCT) Nos. N-163455, N-166349 and N-166350 issued by the
Registry of Deeds of Quezon City.
When the debtor-mortgagor failed to pay, Metrobank extra-judicially foreclosed
the real estate mortgage in accordance with Act No. 3135, 3 as amended.
Thereafter, in a public auction, Metrobank was the highest bidder. A Certificate of
Sale 4 dated December 11, 2000 was duly registered with the Registry of Deeds
of Quezon City on December 13, 2000. When Louisville refused to turn over the
real properties, on March 17, 2001, Metrobank filed before the Regional Trial
Court (RTC), Branch 223, Quezon City, an ex parte petition 5 for the issuance of
a writ of possession docketed as LRC Case No. Q-13915(01). After presentation
of evidence ex parte, the RTC granted the petition in an Order 6 dated July 5,
2001, the dispositive portion of which reads as follows: HTAIcD

WHEREFORE, in consideration of the foregoing premises, the instant

petition is hereby GRANTED. Upon the filing of a bond in the amount of
ONE HUNDRED THOUSAND PESOS ([P]100,000.00), let a Writ of
Possession over the properties covered by Transfer Certificates of Title
Nos. N-163455, N-166349 & N-166350 issue in favor of the petitioner
METROPOLITAN BANK & TRUST COMPANY to be implemented by
the Deputy Sheriff of Branch 223, Regional Trial Court of Quezon City by
placing the petitioner in possession over the parcels of land with all its
improvements.
SO ORDERED. 7
On September 24, 2001, Metrobank posted the required bond. Consequently, a
writ of possession was issued on October 9, 2001. This was partially
implemented as to TCT No. N-163455, as evidenced by the Turn-Over
Receipt 8 dated December 13, 2002. The writ over the two remaining properties,
under TCT Nos. N-166349 and N-166350, were subsequently implemented as
evidenced by the Turn-Over Receipt 9 dated December 3, 2003.
Meanwhile, on April 3, 2002, petitioner Eduardo L. Rayo filed a
complaint 10 docketed as Civil Case No. Q02-46514 against Metrobank for
Nullification of Real Estate Mortgage Contract(s) and Extrajudicial Foreclosure
Sale, in the RTC, Branch 99, Quezon City.
On May 13, 2004, petitioner Rayo filed with the Court of Appeals a Petition 11 for
Annulment of Judgment on the ground of "absolute lack of due process."
Petitioner alleged that his predecessor, Louisville, was not notified of the
proceedings and that Section 7 12 (ex parte motion or petition for the issuance of
a writ of possession) of Act No. 3135 is unconstitutional.
On June 15, 2004, the Court of Appeals denied the petition for lack of merit. The
Court of Appeals ruled that petitioner is neither the registered owner nor the
successor-in-interest of the registered owner; hence, not a real party-in-interest.
It also ruled that there is no basis to challenge the constitutionality of Section 7 of
Act No. 3135, as amended as it constitutes a collateral attack against said
provision. Further, petitioner availed of the wrong remedy in filing Civil Case No.
Q02-46514. Petitioner sought reconsideration, but was likewise denied.
Petitioner now comes before us raising the following as primary issue:
WHETHER OR NOT SECTION 7 OF ACT NO. 3135 IS CONTRARY TO
THE DUE PROCESS PROVISION OF THE PHILIPPINE
CONSTITUTION CONSIDERING THAT SUCH SECTION 7 OF THE
LAW PROVIDES OR ALLOWS, ACCORDING TO THIS HONORABLE
COURT, FOR AN EX-PARTE PROCEEDING WHICH IS A "JUDICIAL
PROCEEDING BROUGHT FOR THE BENEFIT OF ONE PARTY ONLY,
AND WITHOUT NOTICE TO, OR CONSENT BY ANY PERSON
ADVERSELY INTERESTED" "OR A PROCEEDING WHEREIN
RELIEF IS GRANTED WITHOUT AN OPPORTUNITY FOR THE
PERSON AGAINST WHOM THE RELIEF IS SOUGHT TO BE
HEARD," AS HELD IN THE CASE OF GOVERNMENT SERVICE
INSURANCE SYSTEM VS. COURT OF APPEALS, 169 SCRA 244 @
255, JANUARY 20, 1989. 13 CHcETA

He also raises the following as secondary issues:

I.
WHETHER OR NOT THE PETITIONER HAS THE LEGAL
PERSONALITY TO SEEK THE ANNULMENT OF JUDGMENT IN [THE]
SUBJECT LRC CASE NO. Q-13915(01).
II.
WHETHER OR NOT PRIVATE RESPONDENT VIOLATED THE RULE
AGAINST FORUM-SHOPPING WHEN IT DID NOT INFORM THE
HONORABLE BRANCH 223 OF THE REGIONAL TRIAL COURT OF
QUEZON CITY REGARDING THE FILING OF CIVIL CASE NO. Q-02-
46514 FOR NULLIFICATION OF REAL ESTATE MORTGAGE
CONTRACT AND THE EXTRA-JUDICIAL FORECLOSURE SALE OF
THE SAME SUBJECT REAL PROPERTIES AND THE PENDENCY OF
THE SAME BEFORE THE HONORABLE BRANCH 99 OF THE SAME
REGIONAL TRIAL COURT. 14
Stated simply, the issues raised are: (1) Does petitioner have the legal
personality in the annulment of judgment proceedings? (2) Is Section 7 of Act No.
3135, as amended, unconstitutional? (3) Is respondent guilty of forum-shopping?
Petitioner insists that contrary to the ruling of the Court of Appeals, he has the
legal personality to institute the annulment of judgment case against Metrobank,
considering that the March 25, 2002 deed of assignment he entered into with
Louisville and Winston Linwy L. Chua makes him a co-assignee over the subject
real properties.
For its part, Metrobank claims that it was not a party to the deed of assignment
among Louisville, Chua and petitioner, hence, it has no privity of contract with
petitioner Rayo. Moreover, Metrobank points out that the real properties had
already been extrajudicially foreclosed when petitioner and his assignors
executed the deed of assignment.
Under Section 2, 15 Rule 3 of the Rules of Court, every action must be
prosecuted or defended in the name of the real party-in-interest, or one "who
stands to be benefited or injured by the judgment in the suit." 16 A real party-in-
interest is one with "a present substantial interest" which means such interest of
a party in the subject matter of the action as will entitle him, under the
substantive law, to recover if the evidence is sufficient, or that he has the legal
title to demand. 17cCTESa

Now, is petitioner Rayo a real party-in-interest? Initially, we recognized herein

petitioner as the co-assignee of the subject real properties as shown in the March
25, 2002 deed of assignment. However, while petitioner would be injured by the
judgment in this suit, we find that petitioner has no present substantial interest to
institute the annulment of judgment proceedings and nullify the order granting the
writ of possession.
First, there was no violation of petitioner's right to constitutional due process. In a
long line of cases, 18 we have consistently ruled that the issuance of a writ of
possession in favor of the purchaser in a foreclosure sale of a mortgaged
property under Section 7 of Act No. 3135, as amended is a ministerial duty of the
court. The purchaser of the foreclosed property, upon ex parte application and
the posting of the required bond, has the right to acquire possession of the
foreclosed property during the 12-month redemption period and with more
reason, after the expiration of the redemption period.
An ex parte petition for the issuance of a writ of possession under Section 7 of
Act No. 3135 is not, strictly speaking, a "judicial process" as contemplated in
Article 433 19 of the Civil Code. It is a judicial proceeding for the enforcement of
one's right of possession as purchaser in a foreclosure sale. It is not an ordinary
suit filed in court, by which one party "sues another for the enforcement of a
wrong or protection of a right, or the prevention or redress of a wrong." It is a
non-litigious proceeding authorized in an extrajudicial foreclosure of mortgage
pursuant to Act No. 3135, as amended, and is brought for the benefit of one party
only, and without notice to, or consent by any person adversely interested. It is a
proceeding where the relief is granted without requiring an opportunity for the
person against whom the relief is sought to be heard. No notice is needed to be
served upon persons interested in the subject property. 20
Second, in the deed of assignment, petitioner also acknowledged that the subject
real properties were already sold at various extrajudicial foreclosure sales and
bought by Metrobank. Clearly, petitioner recognized the prior existing right of
Metrobank as the mortgagee-purchaser over the subject real properties. 21 Actual
knowledge of a prior mortgage with Metrobank is equivalent to notice of
registration 22 in accordance with Article 2125 23 of the Civil Code. Conformably
with Articles 1312 24 and 2126 25 of the Civil Code, a real right or lien in favor of
Metrobank had already been established, subsisting over the properties until the
discharge of the principal obligation, whoever the possessor(s) of the land might
be. 26 As petitioner is not a party whose interest is adverse to that of Louisville,
there was no bar to the issuance of a writ of possession to Metrobank. It does not
matter that petitioner was not specifically named in the writ of possession nor
notified of such proceedings.

Third, we also note that petitioner availed of the wrong remedy in filing Civil Case
No. Q02-46514, for nullification of real estate mortgage and extrajudicial
foreclosure sale, more than six (6) months after the issuance of the writ of
possession considering the mandate of Section 8 27 of Act No. 3135, as
amended. Hence, even petitioner's action for annulment of judgment cannot
prosper as it cannot be a substitute for a lost remedy. AaIDHS

Now, petitioner is challenging the constitutionality of Section 7 of Act No. 3135,

as amended. He avers that Section 7 violates the due process clause because,
by the mere filing of an ex parte motion in the proper cadastral court, the
purchaser in a foreclosure sale is allowed to obtain possession of the foreclosed
property during the redemption period.
The Court of Appeals ruled that petitioner's attempt to challenge the
constitutionality of Section 7 of Act No. 3135, as amended, constitutes a
collateral attack that is not allowed. We fully agree with the appellate court's
ruling. For reasons of public policy, the constitutionality of a law cannot be
attacked collaterally. 28
With regard to forum-shopping; forum-shopping is the filing of multiple suits
involving the same parties for the same cause of action, either simultaneously or
successively, for the purpose of obtaining a favorable judgment. It exists where
the elements of litis pendentia are present or where a final judgment in one case
will amount to res judicata in another. 29 The issuance of the writ of possession
being a ministerial function, and summary in nature, it cannot be said to be a
judgment on the merits. It is only an incident in the transfer of title. Hence, a
separate case for annulment of mortgage and foreclosure sale cannot be barred
by litis pendentia or res judicata. 30 Clearly, insofar as LRC Case No. Q-13915(01)
and Civil Case No. Q02-46514 are concerned, Metrobank is not guilty of forum-
shopping.
WHEREFORE, the petition is DENIED for lack of merit.
(Rayo v. Metropolitan Bank and Trust Co., G.R. No. 165142, [December 10,
|||

2007], 564 PHIL 528-540)

[G.R. No. 121165. September 26, 2006.]

HON. DOMINADOR F. CARILLO, Presiding Judge, R.T.C. XI-19

Digos, Davao del Sur, BONIFACIO J. GUYOT, Clerk of Court
and Provincial Sheriff of Davao del Sur, ALFREDO C. SENOY,
Deputy Prov. Sheriff assigned to R.T.C. XI-19 Digos, Davao del
Sur, MARCOS D. RISONAR, JR., Registrar of Deeds of Davao
del Sur, and MARIA GONZALES, petitioners, vs. HON. COURT
OF APPEALS, MARIA PAZ DABON and ROSALINA
DABON, respondents.

RESOLUTION

QUISUMBING, J : p

For review on certiorari is the Decision 1 dated February 22, 1995 of the Court of
Appeals in CA-G.R. SP No. 23687, which annulled and set aside the judgment
and orders of the Regional Trial Court (RTC) of Digos, Davao del Sur, Branch 19,
in Civil Case No. 2647, Maria Gonzales v. Priscilla Manio and Jose Manio.
The facts as culled from the records are as follows:
On April 2, 1990, petitioner Maria Gonzales filed a complaint against the spouses
Priscilla and Jose Manio with the RTC of Digos, Davao del Sur, Branch 19.
Gonzales sought the execution of the deed of sale in her favor for the property
she bought from Priscilla Manio. She also asked for damages and attorney's fees.
Gonzales alleged that on April 26, 1988, she paid P10,000 to Priscilla as
downpayment on the P400,000 purchase price of the lot with improvements,
since Priscilla had a special power of attorney from her son, Aristotle, the owner
of the land. They also agreed that the balance would be paid within three months
after the execution of the deed of sale. Yet, after the lapse of the period and
despite repeated demands, Priscilla did not execute the deed of sale. Thus,
Gonzales filed an action for specific performance against the spouses Priscilla
and Jose Manio.
For failure to file an Answer, the Manios were declared in default and Gonzales
was allowed to present evidence ex parte.
After trial, the court rendered judgment in favor of Gonzales, which we quote
verbatim:
WHEREFORE, premises considered, it is hereby ordered that judgment
is rendered in favor of plaintiff and against defendants, ordering
defendants:
1) To execute the final deed of sale and transfer of the property
mentioned in paragraph 4 above to plaintiff, or should the
defendant refuse to execute the deed of sale, the Clerk of
Court be directed to execute the same upon plaintiff's
depositing of the sum of P390,000.00 with the Clerk of
Court as complete and valid payment thereof to defendant
Priscilla Manio;
2) To pay plaintiff the sum of P100,000.00 for moral damages and
P50,000.00 for exemplary damages;
3) To pay plaintiff the sum of P50,000.00 for attorney's fees plus
P700.00 per appearances of plaintiff's counsel before this
Honorable Court as appearance fees;
4) To pay plaintiff the sum of P5,000.00 as litigation expenses.
SO ORDERED. 2
Gonzales deposited with the Clerk of Court the P390,000 balance of the price
and filed a motion for execution. 3 She later withdrew the motion because the trial
court's decision was not properly served on the defendants. After numerous
delays, the sheriff finally personally served a copy of the decision on Priscilla on
August 4, 1990, at the ungodly hour of 12:00 midnight at Sitio Wilderness,
Barangay Mount Carmel, Bayugan, Agusan del Sur. 4
Since there was no appeal, the trial court's decision became final and executory.
But the writ of execution was not served upon the defendants, since according to
the Sheriff's Return, the defendants could not be located. The sheriff, likewise,
informed the trial court that the money judgment could be readily satisfied by the
petitioner's cash deposit should the trial court grant the motion to release the
cash deposit filed by Gonzales. 5
Subsequently, Gonzales filed a motion asking that the Clerk of Court be directed
to be the one to execute a deed of conveyance. Gonzales also filed a motion to
withdraw the cash deposit for the balance of the price to offset the award of
damages. The trial court granted both motions but later modified the amount to
P207,800.
On October 29, 1990, Gonzales filed a petition for the nullification of the Owner's
Duplicate Certificate of Title No. 16658 and asked that a new certificate be
issued in her name to give effect to the deed of conveyance since Priscilla
refused to relinquish the owner's duplicate copy.
Consequently, the trial court declared the owner's duplicate copy of TCT No.
16658 void, and directed the City Civil Registrar to issue a new certificate of title
in favor of Gonzales. The orders were reiterated in subsequent orders and TCT
No. T-23690 was issued under the name of Gonzales.
On December 14, 1990, herein respondents Maria Paz Dabon and Rosalina
Dabon, claiming to have bought the aforementioned lot from Aristotle Manio filed
before the Court of Appeals a petition for annulment of judgment and orders of
the RTC in Civil Case No. 2647. The case was docketed as CA G.R. SP No.
23687, entitled "Maria Paz Dabon and Rosalina Dabon v. Hon. Dominador F.
Carillo, Presiding Judge, RTC Branch 19, Digos, Davao del Sur; Bonifacio J.
Guyot, Clerk of Court and Provincial Sheriff of Davao del Sur; Alfredo C. Senoy,
Deputy Prov. Sheriff assigned to RTC Br. 19, Digos, Davao del Sur; Marcos D.
Risonar, Jr., Registrar of Deeds of Davao del Sur; and Maria Gonzales." The
Dabons alleged therein that the judgment of the trial court was void ab
initio because of lack of jurisdiction over their persons, as the real parties in
interest, and that they were fraudulently deprived of their right to due process.
They also prayed for a Temporary Restraining Order and for Preliminary
Prohibitory Injunction against Gonzales. They gave the trial court a notice of their
action for the annulment of the judgment and subsequent orders in Civil Case No.
2647. 6
Meanwhile, Gonzales filed before the trial court a motion for the issuance of a
writ of possession. The Dabons filed an opposition on the following grounds: (1)
The writ of possession cannot be enforced because the defendants named in the
writ, the Manios, were no longer in possession of the property; (2) They had
bought the lot with the improvements therein and had taken possession, although
they had not yet registered their ownership with the Register of Deeds; and (3)
The court did not acquire jurisdiction over them as the real parties in interest. ScAaHE

On December 17, 1990, the Court of Appeals, without giving due course to the
petition, issued a resolution restraining the trial court from implementing its
Decision dated June 19, 1990 7 and its subsequent orders thereto in Civil Case
No. 2647 until further notice from the Court of Appeals. It also required Gonzales
to file her Comment. 8
The Court of Appeals in a resolution denied the application for preliminary
injunction and appointed a commissioner to receive evidence of the parties. 9
Following the Commissioner's report, the Court of Appeals found that (1) the
contract of sale between Gonzales and Priscilla was unenforceable because the
sale was evidenced by a handwritten note which was vague as to the amount
and which was not notarized; (2) the trial court did not acquire jurisdiction over
the indispensable parties; and (3) the proceedings were attended with fraud. The
Court of Appeals nullified the judgment of the RTC in Civil Case No. 2647 and
cancelled TCT No. T-23690. The dispositive portion of said judgment reads as
follows:
WHEREFORE, premises considered, the questioned decision, dated
June 19, 1990 (and all orders arising therefrom), of the Regional Trial
Court (Branch 19) in Digos, Davao del Sur is hereby ANNULLED and
SET ASIDE and the Transfer Certificate of Title No. T-23690 which
was issued thereafter declared null and void and ordered canceled.
Costs against the private respondent.
SO ORDERED. 10
On July 17, 1995, Gonzales' Motion for Reconsideration was denied. Hence, the
instant petition, assigning the following errors:
I
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING
THAT THE PURCHASE OF THE DISPUTED PROPERTY BY
PETITIONER MARIA GONZALES FROM ARISTOTLE MANIO THRU
THE LATTER'S MOTHER AND ATTORNEY-IN-FACT WAS A VALID
CONTRACT AS BETWEEN THE CONTRACTING PARTIES.
II
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING
THAT PETITIONER MARIA GONZALES WAS IN GOOD FAITH IN
BUYING THE DISPUTED PROPERTY FROM ARISTOTLE MANIO
THRU THE LATTER'S MOTHER AND ATTORNEY-IN-FACT.
III
THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING
IN THE INSTANT CASE THE DOCTRINE IN DOUBLE SALE UNDER
ARTICLE 1544 OF THE CIVIL CODE OF THE PHILIPPINES.
IV
 THE HONORABLE COURT OF APPEALS GRAVELY FAILED TO
APPRECIATE THE FACT THAT PRIVATE RESPONDENTS'
[PETITIONERS BELOW] CLAIM IS HIGHLY INCREDIBLE,
IMPROBABLE, AND FRAUDULENT.
V
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING
THAT PRIVATE RESPONDENTS MARIA PAZ DABON AND
ROSALINA DABON HAVE NO RIGHT TO BRING THE INSTANT SUIT.
VI
COROLLARILY, THE HONORABLE COURT OF APPEALS ERRED IN
NOT SUSTAINING PETITIONER MARIA GONZALES' [PRIVATE
RESPONDENT BELOW] CLAIM FOR DAMAGES AGAINST THE
PRIVATE RESPONDENTS [PETITIONERS BELOW]. 11
Simply, the threshold issues in this petition are: (1) whether the Court of Appeals
erred in declaring the sale of the land to Gonzales by Priscilla invalid; (2) whether
there was basis to annul the judgment of the RTC; and (3) whether the Dabons
could file the action for annulment of judgment.
We shall discuss the issues jointly.
Prefatorily, we note that named as petitioners are Presiding Judge Dominador
Carillo; Bonifacio Guyot, Alfredo Senoy, Clerk of Court and Deputy Sheriff of the
same court, respectively; Marcos D. Risonar, Registrar of Deeds of Davao del
Sur; and Maria Gonzales. In our view, petitioner Gonzales apparently had
impleaded Judge Carillo, Guyot, Senoy and Risonar in this petition by merely
reversing the designation of said public officers among the respondents below in
the Court of Appeals, as now among the petitioners herein. Since they are not
interested parties and would not benefit from any of the affirmative reliefs sought,
only Maria Gonzales remains as the genuine party-petitioner in the instant case.

We now come to the main issues: (1) Was there sufficient basis to annul the
judgment in Civil Case No. 2647? (2) Are the Dabons proper parties to file the
petition for annulment of judgment?
Petitioner Gonzales contends that the respondents do not have standing before
the Court of Appeals to file a petition for annulment of the judgment in Civil Case
No. 2647 because respondents were not parties therein. Petitioner maintains that
respondents have no right that could be adversely affected by the judgment
because they are not the owners of the property. Petitioner claims that the Court
of Appeals should have applied the doctrine of double sale to settle the issue of
ownership and declare her the true owner of the property. Petitioner concludes
that respondents not being the owners and are not real parties in interest in
the complaint for specific performance have no right to bring the action for
annulment of the judgment. According to petitioner Gonzales, she did not
implead Aristotle as defendant in Civil Case No. 2647 since a decision against
Priscilla, Aristotle's attorney-in-fact, would bind Aristotle also.
Respondents (Maria Paz and Rosalina Dabon) now insist that they are parties in
interest as buyers, owners and possessors of the contested land and that they
had been fraudulently deprived of their day in court during the proceedings in the
trial court in Civil Case No. 2647. They have no remedy in law other than to file a
case for the annulment of judgment of the trial court in said case.
Petitioner Gonzales should be reminded of Section 3 of Rule 3 of the Rules on
Civil Procedure which explicitly states that an action should be brought against
the real party in interest, 12 and in case the action is brought against the agent,
the action must be brought against an agent acting in his own name and for the
benefit of an undisclosed principal without joining the principal, except when the
contract involves things belonging to the principal. 13 The real party in interest is
the party who would be benefited or injured by the judgment or is the party
entitled to the avails of the suit. We have held that in such a situation, an
attorney-in-fact is not a real party in interest and that there is no law permitting an
action to be brought by and against an attorney-in-fact. 14
Worth stressing, the action filed by Gonzales before the RTC is for specific
performance to compel Priscilla to execute a deed of sale, involving real property
which, however, does not belong to Priscilla but to Aristotle Manio, the son of
Priscilla. The complaint only named as defendant Priscilla, joined by her spouse,
yet Priscilla had no interest on the lot and can have no interest whatever in any
judgment rendered. She was not acting in her own name, nor was she acting for
the benefit of an undisclosed principal. The joinder of all indispensable parties is
a condition sine qua non of the exercise of judicial powers, and the absence of
indispensable party renders all subsequent actions of the court null and void for
want of authority to act, not only as to the absent parties but even as to those
present. 15 Accordingly, the failure to implead Aristotle Manio as defendant
renders all proceedings in the Civil Case No. 2647, including the order granting
the cancellation of TCT No. 16658 and issuance of a new title, null and void.
It is settled that a person need not be a party to the judgment sought to be
annulled. 16 What is essential is that he can prove his allegation that the
judgment was obtained by fraud or collusion and he would be adversely affected
thereby, 17 because if fully substantiated by preponderance of evidence, those
allegations could be the basis for annulment of the assailed judgment.
In the present case, even if respondents were not parties to the specific
performance case, any finding that there was extrinsic fraud in the institution of
the complaint, i.e. exclusion of the real party in interest, and collusion between
petitioner and Sheriff Senoy, would adversely affect the respondents' ownership
and thus, could be their basis for annulment of the judgment.
Pertinently, Section 2 of Rule 47 of the Rules on Civil Procedure explicitly
provides the two grounds for annulment of judgment, namely: extrinsic fraud and
lack of jurisdiction. 18
There is extrinsic fraud when a party has been prevented by fraud or deception
from presenting his case. Fraud is extrinsic where it prevents a party from having
a trial or from presenting his entire case to the court, or where it operates upon
matters pertaining not to the judgment itself but to the manner in which it is
procured. The overriding consideration when extrinsic fraud is alleged is that the
fraudulent scheme of the prevailing litigant prevented a party from having his day
in court. 19 It must be distinguished from intrinsic fraud which refers to acts of a
party at a trial which prevented a fair and just determination of the case, and
which could have been litigated and determined at the trial or adjudication of the
case. 20
In its Decision dated February 22, 1995, the Court of Appeals found that indices
of fraud attended the case before the trial court: First, the plaintiff deliberately
excluded the Dabons as party to the case despite knowledge that the Dabons
had alleged that they had bought the land from Aristotle.Second, the Sheriff's
Return was suspiciously served on a Saturday, at midnight, on August 4,
1990. Third, the trial court ordered the plaintiff to deposit the full payment of
property, but subsequently ordered its withdrawal. Lastly, there was no notice
given to the person named in the certificate of title which Gonzales wanted to be
annulled. DETcAH

Of the indices of fraud cited by the Court of Appeals, the failure to comply with
the notification requirement in the petition for the cancellation of title amounts to
extrinsic fraud. Under the Property Registration Decree, all parties in interest
shall be given notice. 21 There is nothing in the records that show Gonzales
notified the actual occupants or lessees of the property. Further, the records
show that Gonzales had known of the sale of the land by Aristotle to the Dabons
and despite her knowledge, the former did not include the Dabons in her petition
for the annulment of title. Deliberately failing to notify a party entitled to notice
also constitutes extrinsic fraud. 22 This fact is sufficient ground to annul the order
allowing the cancellation of title in the name of Gonzales.
Likewise, under Rule 47, a judgment is void for lack of jurisdiction over the
persons of the real parties in interest, i.e., Aristotle Manio and the Dabons.
Lastly, petitioner insists that the contract of sale between her and Priscilla was
valid and enforceable because under the provision on double sale, 23she owned
the land because she bought the lot on April 26, 1988, while the same was
allegedly sold to the Dabons on October 19, 1989. In our view, the doctrine on
double sale holds no relevance in this case. The pertinent article of the Civil
Code provides:
ART. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in possession; and in the absence thereof; to
the person who presents the oldest title, provided there is good faith.
Otherwise stated, where it is immovable property that is the subject of a double
sale, ownership shall be transferred (1) to the person acquiring it who in good
faith first recorded it in the Registry of Property; (2) in default thereof, to the
person who in good faith was first in possession; and (3) in default thereof, to the
person who presents the oldest title, provided there is good faith. The
requirement of the law is two-fold: acquisition in good faith and registration in
good faith. 24
At this juncture, we must emphasize that the action for annulment of judgment
under Rule 47 of the Rules of Court does not involve the merits of the final order
of the trial court. 25 The issue of whether before us is a case of double sale is
outside the scope of the present petition for review. The appellate court only
allowed the reception of extraneous evidence to determine extrinsic fraud. To
determine which sale was valid, review of evidence is necessary. This we cannot
do in this petition. An action for annulment of judgment is independent of the
case where the judgment sought to be annulled is rendered 26 and is not an
appeal of the judgment therein. 27
The extraneous evidence presented to the appellate court cannot be used to
supplant the evidence in the records of the specific performance case because
the extraneous evidence was not part of the records on the merits of the case.
Again, the extraneous evidence was only allowed merely to prove the allegations
of extrinsic fraud. Accordingly, we hold that the issue of ownership of the subject
real property cannot be addressed in this petition for review.
Annulment of judgment is not a relief to be granted indiscriminately by the courts.
It is a recourse equitable in character and allowed only in exceptional cases as
where there is no available or other adequate remedy. 28 This case falls under
said exception. In this case, where it was found that the trial court did not have
jurisdiction over the real parties in interest, and that notices were deliberately not
given, amount to extrinsic fraud. The Court of Appeals did not err in granting the
annulment of the judgment in Civil Case No. 2647 and the orders subsequent
thereto, for lack of jurisdiction and extrinsic fraud.

WHEREFORE, the petition is DENIED for lack of merit.

(Carillo v. Court of Appeals, G.R. No. 121165, [September 26, 2006], 534 PHIL
|||

154-170)

[G.R. Nos. 121662-64. July 6, 1999.]

VLASON ENTERPRISES CORPORATION, petitioner, vs. COURT

OF APPEALS and DURAPROOF SERVICES, represented by its
General Manager, Cesar Urbino Sr., respondents.

Angara Abello Concepcion Regala & Cruz for petitioner.

Edgardo Q. Galope for private respondent.

SYNOPSIS

Ruling that the judgment sought to be reviewed has become final and executory,
the Court of Appeals ordered the Regional Trial Court to take appropriate action
on the urgent ex parte motion for issuance of a writ of execution filed by private
respondent. Pursuant thereto, the Regional Trial Court of Manila issued a writ of
possession thus placing private respondent in possession of petitioner's barge
Lawin. Hence, this petition.
The case filed by private respondent with the trial court involved multiple
defendants. Several defendants entered into a compromise agreement with
private respondent. A compromise agreement is immediately final and executory.
As to these defendants therefore, the trial court Decision had become final.
Nevertheless, said decision cannot be said to have attained finality as to
petitioner, which was not a party to the compromise. Moreover, petitioner filed a
Motion for Reconsideration two days before the lapse of the reglementary period
to appeal. Execution shall issue as matter of right upon the expiration of the
period to appeal if no appeal has been duly perfected.
The sheriff's return showed that the president of petitioner corporation was
served summons through his secretary. A summons addressed to a corporation
and served on the secretary of the President binds that corporation. The
secretary however, should be an employee of the corporation sought to be
summoned. In the case at bar, the secretary was not an employee of petitioner
but of Vlasons Shipping, Inc. Acting under the impression that petitioner had
been placed under its jurisdiction, the trial court dispensed with the service on
petitioner of new summons for the subsequent amendments of the petition. But
the first service of summons on petitioner was invalid. Thus, the trial court never
acquired jurisdiction over the petitioner. Not having been validly served summons,
it would be legally impossible to declare petitioner to be in default. A default
judgment cannot affect the rights of a party who was never declared in
default.HTDcCE

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; WHEN DOES A

JUDGMENT BECOME FINAL. A judgment becomes "final and executory" by
operation of law. Its finality becomes a fact when the reglementary period to
appeal lapses, and no appeal is perfected within such period.
2. ID.; ID.; ID.; ID.; DEPENDENT ON DATE OF RECEIPT OF COPY OF
JUDGMENT OF EACH DEFENDANT. The admiralty case filed by private
respondent with the trial court involved multiple defendants. This being the case,
it necessarily follows that the period of appeal of the February 18, 1991 RTC
Decision depended on the date a copy of the judgment was received by each of
the defendants. Elsewise stated, each defendant had a different period within
which to appeal, depending on the date of receipt of the Decision.
3. ID.; ID.; ID.; ID.; DEPENDENT ON DATE OF COMPROMISE AGREEMENT.
Omega, Singkong Trading Co. and M/V Star Ace chose to enter into a
compromise agreement with private respondent. As to these defendants, the trial
court Decision had become final, and a writ of execution could be issued against
them. Doctrinally, a compromise agreement is immediately final and executory.
4. ID.; ID.; ID.; EFFECT ON PETITIONER WHO FILED MOTION FOR
RECONSIDERATION AND NOT PARTY TO COMPROMISE. Petitioner,
however, is not in the same situation. Said Decision cannot be said to have
attained finality as to the petitioner, which was not a party to the compromise.
Moreover, petitioner filed a timely Motion for Reconsideration with the trial court,
thirteen days after it received the Decision or two days before the lapse of the
reglementary period to appeal. A motion for reconsideration tolls the running of
the period to appeal. Thus, as to petitioner, the trial court Decision had not
attained finality.
5. ID.; ID.; MOTIONS; NOTICE OF TIME AND PLACE OF HEARING,
MANDATORY. The Court has consistently held that a motion which does not
meet the requirements of Sections 4 and 5 of Rule 15 of the Rules of Court is
considered a worthless piece of paper, which the clerk of court has no right to
receive and the trial court has no authority to act upon. Service of a copy of a
motion containing a notice of the time and the place of hearing of that motion is a
mandatory requirement, and the failure of movants to comply with these
requirements renders their motions fatally defective.
6. ID.; ID.; ID.; ID.; EXCEPTIONS. However, there are exceptions to the strict
application of this rule. These exceptions are as follows: ". . . Liberal construction
of this rule has been allowed by this Court in cases (1) where a rigid application
will result in a manifest failure or miscarriage of justice; especially if a party
successfully shows that the alleged defect in the questioned final and executory
judgment is not apparent on its face or from the recitals contained therein; (2)
where the interest of substantial justice will be served; (3) where the resolution of
the motion is addressed solely to the sound and judicious discretion of the court;
and (4) where the injustice to the adverse party is not commensurate [to] the
degree of his thoughtlessness in not complying with the procedure prescribed."
7. ID.; ID.; ID.; ID.; ID.; CASE AT BAR. The present case falls under the first
exception. Petitioner was not informed of any cause of action or claim against it.
All of a sudden, the vessels which petitioner used in its salvaging business were
levied upon and sold in execution to satisfy a supposed judgment against it. To
allow this to happen simply because of a lapse in fulfilling the notice requirement
which, as already said, was satisfactorily explained would be a manifest
failure or miscarriage of justice.
8. ID.; ID.; ID.; ID.; AN INTEGRAL COMPONENT OF DUE PROCESS
REQUIREMENT. A notice of hearing is conceptualized as an integral
component of procedural due process intended to afford the adverse parties a
chance to be heard before a motion is resolved by the court. Through such notice,
the adverse party is permitted time to study and answer the arguments in the
motion. TcSaHC

9. ID.; ID.; ID.; ID.; LACK OF NOTICE CURED BY RECEIPT OF COPY OF

MOTION IN OPEN COURT. Circumstances in the case at bar show that
private respondent was not denied procedural due process, and that the very
purpose of a notice of hearing had been served. On the day of the hearing, Atty.
Desierto did not object to the said Motion for lack of notice to him; in fact, he was
furnished in open court with a copy of the motion and was granted by the trial
court thirty days to file his opposition to it. These circumstances clearly justify a
departure from the literal application of the notice of hearing rule. In other cases,
after the trial court learns that a motion lacks such notice, the prompt resetting of
the hearing with due notice to all the parties is held to have cured the defect.
10. ID.; PROCEDURAL RULES; LIBERALLY CONSTRUED. Verily, the notice
requirement is not a ritual to be followed blindly. Procedural due process is not
based solely on a mechanistic and literal application that renders any deviation
inexorably fatal. Instead, procedural rules are liberally construed to promote their
objective and to assist in obtaining a just, speedy and inexpensive determination
of any action and proceeding.
11. ID.; ACTIONS; SUMMONS TO CORPORATIONS; RECEIPT BY
SECRETARY OF CORPORATION'S PRESIDENT, BINDING. A corporation
may be served summons through its agents or officers who under the Rules are
designated to accept service of process. A summons addressed to a corporation
and served on the secretary of its president binds that corporation. This is based
on the rationale that service must be made on a representative so integrated with
the corporation sued, that it is safe to assume that said representative had
sufficient responsibility and discretion to realize the importance of the legal
papers served and to relay the same to the president or other responsible officer
of the corporation being sued. The secretary of the president satisfies this
criterion. This rule requires, however, that the secretary should be an employee
of the corporation sought to be summoned. Only in this manner can there be an
assurance that the secretary will "bring home to the corporation [the] notice of the
filing of the action" against it.
12. ID.; ID.; ID.; ID.; SECRETARY IN CASE AT BAR NOT AN EMPLOYEE OF
CORPORATION; SERVICE NOT VALID; PIERCING OF VEIL OF CORPORATE
ENTITY NOT RESORTED TO. In the present case, Bebero was the secretary
of Angliongto, who was president of both VSI and petitioner, but she was an
employee of VSI, not of petitioner. The piercing of the corporate veil cannot be
resorted to when serving summons. Doctrinally, a corporation is a legal entity
distinct and separate from the members and stockholders who compose it.
However, when the corporate fiction is used as a means of perpetrating a fraud,
evading an existing obligation, circumventing a statute, achieving or perfecting a
monopoly or, in generally perpetrating a crime, the veil will be lifted to expose the
individuals composing it. None of the foregoing exceptions has been shown to
exist in the present case. Quite the contrary, the piercing of the corporate veil in
this case will result in manifest injustice. This we cannot allow. Hence, the
corporate fiction remains.
13. ID.; ID.; ID.; AMENDED PLEADINGS; ANOTHER SUMMONS NOT NEEDED
WHERE DEFENDANTS ALREADY APPEARED IN ORIGINAL COMPLAINT.
Although it is well-settled that an amended pleading supersedes the original one,
which is thus deemed withdrawn and no longer considered part of the record, it
does not follow ipso facto that the service of a new summons for amended
petitions or complaints is required. Where the defendants have already appeared
before the trial court by virtue of a summons on the original complaint, the
amended complaint may be served upon them without need of another summons,
even if new causes of action are alleged. After it is acquired, a court's jurisdiction
continues until the case is finally terminated. Conversely, when defendants have
not yet appeared in court and no summons has been validly served, new
summons for the amended complaint must be served on them. It is not the
change of cause of action that gives rise to the need to serve another summons
for the amended complaint, but rather the acquisition of jurisdiction over the
persons of the defendants. If the trial court has not yet acquired jurisdiction over
them, a new service of summons for the amended complaint is required.

14. ID.; ID.; ID.; ID.; PARTY NOT PREVIOUSLY SERVED MUST BE SERVED
WITH NEW SUMMONS ON AMENDED PLEADING; CASE AT BAR. In this
case, the trial court obviously labored under the erroneous impression that
petitioner had already been placed under its jurisdiction since it had been served
summons through the secretary of its president. Thus, it dispensed with the
service on petitioner of new summons for the subsequent amendments of the
Petition. We have already ruled, however, that the first service of summons on
petitioner was invalid. Therefore, the trial court never acquired jurisdiction, and
the said court should have required a new service of summons for the amended
Petitions.
15. ID.; ID.; AMENDMENT OF PLEADINGS; LIBERALLY ALLOWED. The
judicial attitude has always been favorable and liberal in allowing amendments to
pleadings. Pleadings shall be construed liberally so as to render substantial
justice to the parties and to determine speedily and inexpensively the actual
merits of the controversy with the least regard to technicalities.
16. ID.; ID.; PLEADINGS; INCLUSION OF ALL PARTIES IN COMPLAINT, A
FORMAL REQUIREMENT, NON-INCLUSION OF SOME, NOT FATAL. The
inclusion of the names of all the parties in the title of a complaint is a formal
requirement under Section 3, Rule 7. However, the rules of pleadings require
courts to pierce the form and go into the substance, and not to be misled by a
false or wrong name given to a pleading. The averments in the complaint, not the
title, are controlling. Although the general rule requires the inclusion of the names
of all the parties in the title of a complaint, the non-inclusion of one or some of
them is not fatal to the cause of action of a plaintiff, provided there is a statement
in the body of the petition indicating that a defendant was made a party to such
action.
17. ID.; ID.; ID.; ID.; ID.; CASE AT BAR. Private respondent claims that
petitioner has always been included in the caption of all the Petitions it filed,
which included Antonio Sy, field manager of petitioner. We checked and noted
that in the caption and the body of the Amended Petition and Second Amended
Petition with Supplemental Petition, Antonio Sy was alleged to be representing
Med Line Philippines, not petitioner. Because it was private respondent who was
responsible for the errors, the Court cannot excuse it from compliance, for such
action will prejudice petitioner, who had no hand in the preparation of these
pleadings. In any event, we reiterate that, as a general rule, mere failure to
include the name of a party in the title of a complaint is not fatal by itself.
18. ID.; ID.; JUDGMENT; MUST CONFORM TO PLEADINGS AND THEORY OF
ACTION. The general rule is allegata et probata a judgment must conform
to the pleadings and the theory of the action under which the case was tried. But
a court may also rule and render judgment on the basis of the evidence before it,
even though the relevant pleading has not been previously amended, so long as
no surprise or prejudice to the adverse party is thereby caused.
19. ID.; ID.; ID.; ID.; JURISDICTION OVER PERSON, INDISPENSABLE. In
the case at bar, the liability of petitioner was based not on any allegation in the
four Petitions filed with the trial court, but on the evidence presented ex parte by
the private respondent. Since the trial court had not validly acquired jurisdiction
over the person of petitioner, there was no way for the latter to have validly and
knowingly waived its objection to the private respondent's presentation of
evidence against it.
20. ID.; ID.; DEFAULT; JUDGMENT BY DEFAULT; PARTY MUST HAVE
SUBMITTED ITSELF TO JURISDICTION OF COURT; CASE AT BAR. The
reception of evidence ex parte against a non-defaulting party is procedurally
indefensible. Without a declaration that petitioner is in default as required in
Section 1, Rule 18, the trial court had no authority to order the presentation of
evidence ex parte against petitioner to render judgment against it by default. The
trial judge must have thought that since it failed to appear despite summons and
was in default, it effectively waived any objection to the presentation of evidence
against it. This rule, however, would have applied only if petitioner had submitted
itself to the jurisdiction of the trial court. The latter correctly declared, in the
Resolution just cited, that the default judgment against the former had been
improvidently rendered.
21. ID.; ID.; NONPAYMENT OF DOCKET FEES WILL NOT PREVENT COURT
FROM HOLDING PARTY LIABLE FOR DAMAGES; JURISDICTION OVER
PERSON REQUIRED. Had the trial court validly acquired jurisdiction over
petitioner, nonpayment of docket fees would not have prevented it from holding
petitioner liable for damages. The Court, in Manchester Development
Corporation v. Court of Appeals, ruled that a court acquires jurisdiction over any
case only upon the payment of the prescribed docket fee, not upon the
amendment of the complaint or the payment of the docket fees based on the
amount sought in the amended pleading. This ruling, however, was modified
in Sun Insurance Office, Ltd. v. Asuncion, which added: "3. Where the trial court
acquires jurisdiction over a claim [through] the filing of the appropriate pleading
and payment of the prescribed filing fee but, subsequently, the judgment awards
a claim not specified in the pleading, or if specified the same has been left for
determination by the court, the additional filing fee therefor shall constitute a lien
on the judgment. It shall be the responsibility of the Clerk of Court or his duly
authorized deputy to enforce said lien and assess and collect the additional fee."
Filing fees for damages and awards that cannot be estimated constitute liens on
the awards finally granted by the trial court. Their nonpayment alone, is not a
ground for the invalidation of the award.
22. ID.; ID.; DEFAULT; DECLARATION OR ORDER OF DEFAULT;
PUNISHMENT FOR UNNECESSARY DELAY IN JOINING ISSUES. A
declaration or order of default is issued as a punishment for unnecessary delay in
joining issues. In such event, defendants lose their standing in court, they cannot
expect the trial court to act upon their pleadings, and they are not entitled to
notice of the proceeding until the final termination of the case. Thus, the trial
court proceeds with the reception of the plaintiff's evidence upon which a default
judgment is rendered.
23. ID.; ID.; ID.; JUDGMENT BY DEFAULT; SHALL NOT EXCEED AMOUNT
OR DIFFERENT IN KIND FROM THAT PRAYED FOR. Section 1 of Rule 18
provides that after the defendant has been declared in default, "the court shall
proceed to receive the plaintiff's evidence and render judgment granting him such
relief as the complaint and the facts proven may warrant." The reliefs that may be
granted, however, are restricted by Section 5, which provides that a judgment
entered against a party in default shall not exceed the amount or be different in
kind from that prayed for. aDCIHE

24. ID.; ID.; ID.; ID.; CLAIMANT MUST STILL PROVE CLAIM; DEFENDANTS
MERELY WAIVED RIGHT TO BE HEARD AND PRESENT EVIDENCE. In
other words, under Section 1, a declaration of default is not an admission of the
truth or the validity of the plaintiff's claims. The claimant must still prove his claim
and present evidence. In this sense the law gives defaulting parties some
measure of protection because plaintiffs, despite the default of defendants, are
still required to substantiate their allegations in the complaint. The judgment of
default against defendants who have not appeared or filed their answers does
not imply a waiver of all their rights, except their right to be heard and to present
evidence in their favor. Their failure to answer does not imply their admission of
the facts and the causes of action of the plaintiffs, because the latter are required
to adduce evidence to support their allegations.
25. ID.; ID.; ID.; ID.; ID.; COURT NOT ALLOWED TO RECEIVE EVIDENCE TO
SHOW RELIEF NOT SOUGHT. Moreover, the trial court is not allowed by the
Rules to receive evidence that tends to show a relief not sought or specified in
the pleadings. The plaintiff cannot be granted an award greater than or different
in kind from that specified in the complaint.
26. ID.; ID.; ID.; ID.; ID.; ID.; DISTINGUISHED FROM DEFENDANT WHO FILED
ANSWER BUT ABSENT DURING TRIAL. This case should be distinguished,
however, from that of defendants, who filed an answer but were absent during
trial. In that case, they can be held liable for an amount greater than or different
from that originally prayed for, provided that the award is warranted by the
proven facts. This rule is premised on the theory that the adverse party failed to
object to evidence relating to an issue not raised in the pleadings.
27. ID.; ID.; ID.; ID.; ID.; CASE AT BAR. The latter rule, however, is not
applicable to the instant case. Admittedly, private respondent presented evidence
that would have been sufficient to hold petitioner liable for damages. However, it
did not include in its amended Petitions any prayer for damages against
petitioner. Therefore, the trial court could not have validly held the latter liable for
damages even if it were in default.
28. ID.; ID.; JUDGMENT; EXECUTION; NOT ALLOWED WHERE JUDGMENT
HAS NOT BECOME FINAL AND EXECUTORY. Section 1 of Rule 39 provides
that execution shall issue only upon a judgment that finally disposes of the action
or proceeding. Such execution shall issue as a matter of right upon the expiration
of the period to appeal it, if no appeal has been duly perfected. In the present
case, however, we have already shown that the trial court's Decision has not
become final and executory against petitioner. In fact, the judgment does not
even bind it. Obviously, Respondent Court committed serious reversible errors
when it allowed the execution of the said judgment against petitioner.

DECISION

PANGANIBAN, J : p

Summons to a domestic or resident corporation should be served on officers,

agents or employees, who are responsible enough to warrant the presumption
that they will transmit to the corporation notice of the filing of the action against it.
Rules on the service of motions should be liberally construed in order to promote
the ends of substantial justice. A rigid application that will result in the manifest
injustice should be avoided. A default judgment against several defendants
cannot affect the rights of one who was never declared in default. In any event,
such judgment cannot include an award not prayed for in the complaint, even if
proven ex parte. LLphil

The Case
These principles were used by this Court in resolving this Petition for Review on
Certiorari before us, assailing the July 19, 1993 Decision 1 and the August 15,
1995 Resolution, 2 both promulgated by the Court of Appeals. The assailed
Decision disposed as follows: 3
"ACCORDINGLY, in view of the foregoing disquisitions, all the three (3)
consolidated petitions for certiorari are hereby GRANTED.
THE assailed Order of respondent Judge Arsenio Gonong of the
Regional Trial Court of Manila, Branch 8, dated April 5, 1991, in the first
petition for certiorari (CA-G.R. SP No. 24669); the assailed Order of
Judge Bernardo Pardo, Executive Judge of the Regional Trial Court of
Manila, Branch 8, dated July 6, 1992, in the second petition for certiorari
(CA-G.R. SP No. 28387); and finally, the assailed order or Resolution en
banc of the respondent Court of Tax Appeals Judges Ernesto Acosta,
Ramon de Veyra and Manuel Gruba, under date of October 5, 1992, in
the third petition for certiorari (CA-G.R. SP No. 29317) are all hereby
NULLIFIED and SET ASIDE thereby giving way to the entire
decision dated February 18, 1991 of the respondent Regional Trial Court
of Manila, Branch 8, in Civil Case No. 89-51451 which
remains valid, final and executory, if not yet wholly executed.
The writ of preliminary injunction heretofore issued by this Court on
March 6, 1992 and reiterated on July 22, 1992 and this date against the
named respondents specified in the dispositive portion of the judgment
of the respondent Regional Trial Court of Manila, Branch 8 in the first
petition for certiorari, which remains valid, existing and enforceable, is
hereby MADE PERMANENT without prejudice (1) to the [private
respondent's] remaining unpaid obligations to the herein party-
intervenor in accordance with the Compromise Agreement or in
connection with the decision of the respondent lower court in CA-G.R.
SP No. 24669 and (2) to the government, in relation to the forthcoming
decision of the respondent Court of Tax Appeals on the amount of taxes,
charges, assessments or obligations that are due, as totally secured and
fully guaranteed payment by the [private respondent's] bond, subject to
the relevant rulings of the Department of Finance and other prevailing
laws and jurisprudence."
The assailed Resolution ruled:
"ACCORDINGLY, in the light of the foregoing disquisitions, as well as
considering these clarifications, the three (3) motions aforementioned
are hereby DENIED."
The Facts
Poro Point Shipping Services, then acting as the local agent of Omega Sea
Transport Company of Honduras & Panama, a Panamanian company, (hereafter
referred to as Omega), requested permission for its vessel M/V Star Ace, which
had engine trouble, to unload its cargo and to store it at the Philippine Ports
Authority (PPA) compound in San Fernando, La Union while awaiting
transshipment to Hongkong. The request was approved by the Bureau of
Customs. 4 Despite the approval, the customs personnel boarded the vessel
when it docked on January 7, 1989, on suspicion that it was the hijacked M/V
Silver Med owned by Med Line Philippines Co., and that its cargo would be
smuggled into the country. 5 The district customs collector seized said vessel and
its cargo pursuant to Section 2301, Tariff and Customs Code. A notice of hearing
of SFLU Seizure Identification No. 3-89 was served on its consignee, Singkong
Trading Co. of Hongkong, and its shipper, Dusit International Co., Ltd. of
Thailand.
While seizure proceedings were ongoing, La Union was hit by three typhoons,
and the vessel ran aground and was abandoned. On June 8, 1989, its authorized
representative, Frank Cadacio, entered into a salvage agreement with private
respondent to secure and repair the vessel at the agreed consideration of $1
million and "fifty percent (50%) [of] the cargo after all expenses, cost and
taxes." 6
Finding that no fraud was committed, the District Collector of Customs, Aurelio M.
Quiray, lifted the warrant of seizure on July 16, 1989. 7 However, in a Second
Indorsement dated November 11, 1989, then Customs Commissioner Salvador
M. Mison declined to issue a clearance for Quiray's Decision; instead, he
forfeited the vessel and its cargo in accordance with Section 2530 of the Tariff
and Customs Code. 8 Accordingly, acting District Collector of Customs John S.
Sy issued a Decision decreeing the forfeiture and the sale of the cargo in favor of
the government. 9
To enforce its preferred salvor's lien, herein Private Respondent Duraproof
Services filed with the Regional Trial Court of Manila a Petition for Certiorari,
Prohibition and Mandamus 10 assailing the actions of Commissioner Mison and
District Collector Sy. Also impleaded as respondents were PPA Representative
Silverio Mangaoang, and Med Line Philippines, Inc.
On January 10, 1989, private respondent amended its Petition 11 to include
former District Collector Quiray; PPA Port Manager Adolfo Ll. Amor Jr.; Petitioner
Vlason Enterprises as represented by its president, Vicente Angliongto; Singkong
Trading Company as represented by Atty. Eddie Tamondong; Banco Du Brasil;
Dusit International Co., Inc.; Thai-Nan Enterprises Ltd. and Thai-United Trading
Co., Ltd. 12 In both Petitions, private respondent plainly failed to include any
allegation pertaining to petitioner, or any prayer for relief against it.
Summonses for the amended Petition were served on Atty. Joseph Capuyan for
Med Line Philippines: Angliongto (through his secretary, Betty Bebero), Atty.
Tamondong and Commissioner Mison. 13 Upon motion of the private respondent,
the trial court allowed summons by publication to be served upon the alien
defendants who were not residents and had no direct representatives in the
country. 14
On January 29, 1990, private respondent moved to declare respondents in
default, but the trial court denied the motion in its February 23, 1990
Order, 15 because Mangaoang and Amor had jointly filed a Motion to Dismiss,
while Mison and Med Line had moved separately for an extension to file a similar
motion. 16 Later it rendered an Order dated July 9, 1990, giving due course to the
motions to dismiss filed by Mangaoang and Amor on the ground of litis pendentia,
and by the commissioner and district collector of customs on the ground of lack
of jurisdiction. 17 In another Order, the trial court dismissed the action against
Med Line Philippines on the ground of litis pendentia. 18
On two other occasions, private respondent again moved to declare the following
in default: petitioner, Quiray, Sy and Mison on March 26, 1990; 19and Banco Du
Brazil, Dusit International Co., Inc., Thai-Nan Enterprises Ltd. and Thai-United
Trading Co., Ltd. on August 24, 1990. 20 There is no record, however, that the
trial court acted upon the motions. On September 18, 1990, petitioner filed
another Motion for leave to amend the petition,21 alleging that its counsel failed to
include the following "necessary and/or indispensable parties": Omega
represented by Cadacio; and M/V Star Acerepresented by Capt. Nahon Rada,
relief captain. Aside from impleading these additional respondents, private
respondent also alleged in the Second (actually, third) Amended Petition 22 that
the owners of the vessel intended to transfer and alienate their rights and
interests over the vessel and its cargo, to the detriment of the private
respondent. cda

The trial court granted leave to private respondent to amend its Petition, but only
to exclude the customs commissioner and the district collector. 23Instead, private
respondent filed the "Second Amended Petition with Supplemental Petition"
against Singkong Trading Company; and Omega andM/V Star Ace, 24 to which
Cadacio and Rada filed a Joint Answer. 25
Declared in default in an Order issued by the trial court on January 23, 1991,
were the following: Singkong Trading Co., Commissioner Mison, M/V Star
Ace and Omega. 26 Private respondent filed, and the trial court granted, an ex
parte Motion to present evidence against the defaulting respondents. 27Only
private respondent, Atty. Tamondong, Commissioner Mison, Omega and M/V
Star Ace appeared in the next pretrial hearing; thus, the trial court declared the
other respondents in default and allowed private respondent to present evidence
against them. 28 Cesar Urbino, general manager of private respondent, testified
and adduced evidence against the other respondents, including herein petitioner.
As regards petitioner, he declared: "Vlason Enterprises represented by Atty. Sy
and Vicente Angliongto thru constant intimidation and harassment of utilizing the
PPA Management of San Fernando, La Union . . . further delayed, and [private
respondent] incurred heavy overhead expenses due to direct and incidental
expenses . . . causing irreparable damages of about P3,000,000 worth of ship
tackles, rigs, and appurtenances including radar antennas and apparatuses,
which were taken surreptitiously by persons working for Vlason Enterprises or its
agents[.]" 29
On December 29, 1990, private respondent and Rada, representing Omega,
entered into a Memorandum of Agreement stipulating that Rada would write and
notify Omega regarding the demand for salvage fees of private respondent; and
that if Rada did not receive any instruction from his principal, he would assign the
vessel in favor of the salvor. 30
On February 18, 1991, the trial court disposed as follows:
"WHEREFORE, IN VIEW OF THE FOREGOING, based on the
allegations, prayer and evidence adduced, both testimonial and
documentary, the Court is convinced, that, indeed,
defendants/respondents are liable to [private respondent] in the amount
as prayed for in the petition for which it renders judgment as follows:
1. Respondent M/V Star Ace, represented by Capt. Nahum Rada, [r]elief
[c]aptain of the vessel and Omega Sea Transport Company, Inc.,
represented by Frank Cadacio[,] is ordered to refrain from
alienating or [transferring] the vessel M/V Star Ace to any third
parties;

2. Singkong Trading Company to pay the following:

a. Taxes due the government;
b. Salvage fees on the vessel in the amount of $1,000,000.00
based on . . . Lloyd's Standard Form of Salvage
Agreement;
c. Preservation, securing and guarding fees on the vessel in the
amount of $225,000.00;
d. Maintenance fees in the amount of P2,685,000.00;
e. Salaries of the crew from August 16, 1989 to December 1989
in the amount of $43,000.00 and unpaid salaries from
January 1990 up to the present;
f. Attorney's fees in the amount of P656,000.00;
3. [Vlason] Enterprises to pay [private respondent] in the amount of
P3,000,000 00 for damages;
4. Banco [Du] Brazil to pay [private respondent] in the amount of
$300,000.00 in damages; and finally,
 5. Costs of [s]uit." cda

Subsequently, upon the motion of Omega, Singkong Trading Co. and private
respondent, the trial court approved a Compromise Agreement 31among the
movants, reducing by 20 percent the amounts adjudged. For their part,
respondents-movants agreed not to appeal the Decision. 32 On March 8, 1991,
private respondent moved for the execution of judgment, claiming that the trial
court Decision had already become final and executory. 33 The Motion was
granted 34 and a Writ of Execution was issued. 35 To satisfy the Decision, Sheriffs
Jorge Victorino, Amado Sevilla and Dionisio Camagon were deputized on
March 13, 1991 to levy and to sell on execution the defendant's vessel and
personal property.
On March 14, 1991, petitioner filed, by special appearance, a Motion for
Reconsideration on the grounds that it was allegedly not impleaded as a
defendant, served summons or declared in default; that private respondent was
not authorized to present evidence against it in default; that the judgment in
default was fatally defective, because private respondent had not paid filing fees
for the award; and that private respondent had not prayed for such
award. 36 Private respondent opposed the Motion, arguing that it was a mere
scrap of paper due to its defective notice of hearing.
On March 18, 1991, the Bureau of Customs also filed an ex parte Motion to recall
the execution, and to quash the notice of levy and the sale on
execution. 37 Despite this Motion, the auction sale was conducted on March 21,
1991 by Sheriff Camagon, with private respondent submitting the winning
bid. 38 The trial court ordered the deputy sheriffs to cease and desist from
implementing the Writ of Execution and from levying on the personal property of
the defendants. 39 Nevertheless, Sheriff Camagon issued the corresponding
Certificate of Sale on March 27, 1991. 40
On April 12, 1991, 41 private respondent filed with the Court of Appeals (CA) a
Petition for Certiorari and Prohibition to nullify the cease and desist orders of the
trial court. 42 Respondent Court issued on April 26, 1991 a Resolution which
reads: 43
"MEANWHILE, in order to preserve the status quo and so as not to
render the present petition moot and academic, a TEMPORARY
RESTRAINING ORDER is hereby ISSUED enjoining the respondent
Judge, the Honorable Arsenio M. Gonong, from enforcing and/or
implementing the Orders dated 22 March 1991 and 5 April 1991 which
ordered respondent Sheriff to cease and desist from implementing the
writ of execution and the return thereof, the quashing of the levy . . . on
[the] execution [and sale] of the properties levied upon and sold at public
auction by the Sheriff, for reason of grave abuse of discretion and in
excess of jurisdiction, until further orders from this Court.
cdll
 "WITHIN ten (10) days from notice hereof, respondents [petitioner
included] are also required to SHOW CAUSE why the prayer for a writ of
preliminary injunction should not be granted."
On May 8, 1991, petitioner received from Camagon a notice to pay private
respondent P3 million to satisfy the trial court Decision. Not having any
knowledge of the CA case to which it was not impleaded, petitioner filed with the
trial court a Motion to Dismiss ex abutandi ad cautelam on the grounds that (1)
the Petition of private respondent stated no cause of action against it, (2) the trial
court had no jurisdiction over the case, and (3) litis pendentia barred the suit. 44
On May 10, 1991, Camagon levied on petitioner's properties, which were
scheduled for auction later on May 16, 1991. Specific descriptions of the
properties are as follows: 45
"a). Motor Tugboat "DEN DEN" ex Emerson-I
Length: 35.67 ms. Breadth: 7:33 ms.
Depth: 3.15 ms. Gross Tons: 205.71
Net tons: 67.78 Official Number 213551
Material: Steel Class License: CWL
License No. 4424"
b) Barge "FC99" ex YD-153
Length: 34.15 ms. Breadth: 15.85 ms.
Depth: 2.77 ms. Gross Tons: 491.70
Net Tons: 491.70 Official Number 227236
Material: Steel Class License: CWL
License No. 83-0012
c) Barge "LAWIN" ex "Sea-Lion 2"
Length: 66.92 ms. Breadth: 11.28 ms.
Depth: 4.52 ms. Gross Tons: 1,029.56
Net Tons: 1,027/43 Official Number 708069
Material: Steel Class License: Coastwise
License No: 81-0059"
Petitioner also filed a special appearance before the CA. It prayed for the lifting of
the levy on its properties or, alternatively, for a temporary restraining order
against their auction until its Motion for Reconsideration was resolved by the trial
court. 46cdtai
Acting on petitioner's Motion for Reconsideration, the trial court reversed its
Decision of February 18, 1991, holding in its May 22, 1991 Resolution as
follows: 47
". . . [T]hat . . . Motion For Reconsideration [of the petitioner] was filed on
March 14, 1991 (See: page 584, records, Vol. 2) indubitably showing
that it was seasonably filed within the 15-day time-frame. Therefore, . . .
said default-judgment ha[d] not yet become final and executory when the
Writ of Execution was issued on March 13, 1991 . . . The rules [provide]
that [the e]xecution shall issue as a matter of right upon the expiration of
the period of appeal from a judgment if no appeal has been duly
perfected (Sec. 1, R-39, RRC). That being the case, VEC has all the
right to file as it did . . . the aforementioned reconsideration motion
calling [the] attention of the Court and pointing therein its supposed error
and its correction if, indeed, any [error was] committed. It is in this light
that this Court made an in-depth reflection and assessment of the
premises or reasons raised by [petitioner], and after a re-examination of
the facts and evidence spread on the records, it has come to the
considered conclusion that the questioned default-judgment has been
improvidently issued. By the records, the claim of [private respondent]
that his January 29, 1990 Ex-Parte Motion To Declare Defendants In
Default (pp. 174-177, records, Vol. 1) including VEC had been granted is
belied by the February 23, 1990 Order (pp. 214-215, records, ibid) par. 2,
thereof, reading to wit:
'By the foregoing, for reasons stated thereunder respectively, this
Court, in the exercise of its judicious discretion, in the sense that
the rules should be liberally construed in order to promote their
object and to assist the parties, resolves to DENY petitioner's
Motion to have the Commissioner of Customs AND OTHER
ENUMERATED RESPONDENTS DECLARED IN DEFAULT
[Emphasis ours].
Not even [private respondent'[s] November 23, 1990 'Ex-Parte Motion To
Present [Evidence] Against Defaulting Defendants' (page 489, records,
Vol. 2) [can] be deemed as a remedy of the fact that there never was
issued an order of default against respondents including [petitioner] VEC.
Having thus established that there [had] been no order of default against
VEC as contemplated by Sec. 1, Rule 18, in relation to Sec. 9, Rule 13,
Revised Rules of Court, there could not have been any valid default-
judgment rendered against it. The issuance of an order of default is a
condition sine qua non in order [that] a judgment by default be clothed
with validity. Further, records show that this Court never had authorized
[private respondent] to adduce evidence ex-parte against [petitioner]
VEC. In sum, the February 18, 1991 decision by default is null and void
as against [petitioner] VEC. With this considered conclusion of nullity of
said default judgment in question, this Court feels there is no more need
for it to resolve Arguments I-A & I-B, as well as III-A & III-B, of the March
 14, 1991 Motion for Reconsideration. The Court agrees, however, with
said discussions on the non-compliance [with] Sec. 2, Rule 7 (Title of
Complaint) and Sec. I, Rule 8 on the requirement of indicating in the
complaint the ultimate facts on which the party pleading relies for his
claim of defense [] which is absent in the January 9, Amended Petition
(pp. 122-141, records, Vol. I) [] for it merely mentioned [petitioner]
VEC in par. 5 thereof and no more. It abides, likewise, with [Argument]
III-B that the Decision in suit award[ed] amounts never asked for in
instant petition as regards VEC (Sec. 5, Rule 18, RRC). . . . .
WHEREFORE, in view of the foregoing consideration, and as prayed for,
the February 18, 1991 Judgment by Default is hereby reconsidered and
SET ASIDE."
On June 26, 1992, then Executive Judge Bernardo P. Pardo 48 of the Regional
Trial Court of Manila issued an Order 49 annulling the Sheriff's Report/Return
dated April 1, 1991, and all proceedings taken by Camagon.
The CA granted private respondent's Motion to file a Supplemental Petition
impleading petitioner in CA-GR 24669. 50 In view of the rampant pilferage of the
cargo deposited at the PPA compound, private respondent obtained from the
appellate court a Writ of Preliminary Injunction dated March 6, 1992. The Writ
reads: 51
"ACCORDINGLY, in view of the foregoing disquisitions, the urgent
verified motion for preliminary injunction dated February 11, 1992 is
hereby GRANTED. Therefore, let a writ of preliminary injunction forthwith
issue against the respondents and all persons or agents acting in their
behalf, enjoining them not to interfere in the transferring of the
aforementioned vessel and its cargoes, or in removing said cargoes . . .
from [the] PPA compound." cdll

On September 15, 1992, Sheriff Amado Sevilla seized petitioner's motor

tugboat Den Den by virtue of the Order 52 dated April 3, 1992, issued by the RTC
of Manila, Branch 26. 53
On August 6, 1992, the CA consolidated CA-GR SP No. 28387 54 with CA-GR
SP No. 24669. 55 The Court of Tax Appeals issued on October 5, 1992, a
Resolution in CTA Case Nos. 4492, 4494 and 4500, which disposed as follows:
"Confirming the order in open court on October 5, 1992, the Court
hereby RESOLVES to:
1. Order Respondent Commissioner of Customs to assign or detail [a]
sufficient number of customs police and guards aboard, and around the
vicinity of, the vessel 'M/V Star Ace' now in anchor at Mariveles, Bataan
or elsewhere, in order to ensure its safety during the pendency of these
cases;
 2. Direct him to assign personnel and/or representatives to conduct an
inventory of part of the vessel's cargo now in the possession of Mr.
Cesar S. Urbino, Sr. at 197 Heroes del '96 Street, Caloocan City, which
inventory may be participated in by all the parties interested in said
cargo."
To enjoin the CTA from enforcing said Order, private respondent filed before the
Court of Appeals another Petition for Certiorari, 56 which was later also
consolidated with CA-GR SP No. 24669.
On July 19, 1993, the CA rendered the assailed Decision. Petitioner filed (1) a
Motion for Clarification, praying for a declaration that the trial court Decision
against it was not valid; and (2) a partial Motion for Reconsideration, seeking to
set aside the assailed Decision insofar as the latter affected it.
On July 5, 1995, the Court of Appeals issued the following Resolution: 57

"Pending resolution of the motions for reconsideration, filed by Vlason

Enterprises Corporation and Banco [Du] Brazil, and considering [private
respondent's] Motion for Entry of Judgment with respect to respondent
PPA having already been granted by this Court as far back as June 17,
1994, pursuant to the resolution of the Supreme Court dated December
8, 1993 in G.R. No. 111270-72 (Philippine Ports Authority vs. Court of
Appeals, et al.) informing the parties in said case that the judgment
sought to be reviewed has now become final and executory, the lower
court may now takeappropriate action on the urgent ex-parte motion for
issuance of a writ of execution, filed by [private respondent] on July 15,
1994." cdrep

On August 28, 1995, the Regional Trial Court of Manila, Branch 26, issued a Writ
of Possession which resulted in private respondent taking possession of
petitioner's barge Lawin (formerly Sea Lion 2) on September 1, 1995. 58
Hence, this Petition. 59
Ruling of the Respondent Court
As already adverted to, Respondent Court granted the Petition for Certiorari of
the private respondent, which was consolidated with the latter's two other
Petitions. The court a quo issued the following rulings:
1. The trial court had jurisdiction over the salvor's claim or admiralty case
pursuant to Batas Pambansa Bilang 129.
2. Since the Decision of the trial court became final and executory, never
having been disputed or appealed to a higher court, the trial judge
committed grave abuse of discretion in recalling the Writ of
Execution and in quashing the levy and the execution of the sale
of M/V Star Aceand its cargo.
 * 2. Such acts constituted an alteration or a modification of a final and
executory judgment and could never be justified under law and
jurisprudence.
3. Civil Case 59-51451 dealt only with the salvor's claim without passing
upon the legality or the validity of the undated Decision of the
Commissioner of Customs in the seizure proceeding.
4. Petitioner and his co-respondents could not invoke the jurisdiction of a
court to secure affirmative relief against their opponent and, after
failing to obtain such relief, question the court's jurisdiction.
5. Petitioner had no recourse through any of the following judicially
accepted means to question the final judgment:
a. a petition for relief from judgment under Rule 38,
b. a direct action to annul and enjoin the enforcement of the
questioned judgment, and
c. a collateral attack against the questioned judgment which
appears void on its face.
6. A court which has already acquired jurisdiction over a case cannot be
ousted by a coequal court; the res in this case the vessel and
its cargo were placed under the control of the trial court ahead
of the CTA.
7. The admiralty Decision had attained finality while the issue of the
validity of the seizure proceedings was still under
determination. cdlex

In the assailed Resolution, Respondent Court clarified that there was no need to
serve summons anew on petitioner, since it had been served summons when the
Second Amended Petition (the third) was filed; and that petitioner's Motion for
Reconsideration was defective and void, because it contained no notice of
hearing addressed to the counsel of private respondent in violation of Rule 16,
Section 4 of the Rules of Court.
"To this second motion, [private respondent] contends that there was no
need to serve summons anew to VEC when the second amended
petition was filed impleading VEC, pursuant to the ruling of the Supreme
Court in Asiatic Travel Corp. vs. CA (164 SCRA 623); and that finally,
the decision of the court a quo o[n] February 18, 1991 became final and
executory, notwithstanding the timely filing of the motion for
reconsideration of VEC for the reason that the said motion for
reconsideration was defective or void, there being no notice of hearing
addressed to the counsel of petitioner. In fact, no motion such as this
instant one can be acted upon by the Court without proof of service of
the notice thereof, pursuant to Rule 16, Section 4 of the Rules of Court.
 xxx xxx xxx
"Finally, we should never lose sight of the fact that the instant petition
for certiorari is proper only to correct errors of jurisdiction committed by
the lower court, or grave abuse of discretion which is tantamount to lack
of jurisdiction. Where the error is not one of jurisdiction but an error of
law or of fact which is a mistake of judgment, appeal is the remedy
(Salas vs. Castro, 216 SCRA 198). Here, respondents failed to appeal.
Hence, the decision dated February 18, 1991 of the lower court has long
become final, executory and unappealable. We do not and cannot
therefore review the instant case as if it were on appeal and direct
actions on these motions. While the proper remedy is appeal, the action
for certiorari will not be entertained. Indeed, certiorari is not a
substitute for lapsed appeal.
"At any rate, the decision dated July 19, 1993 of this Court on the main
petition for certiorari is not yet final (except with respect to respondent
PPA), the Bureau of Customs having filed a petition for certiorari and
prohibition, under Rule 65 of the Rules of Court, with the Supreme Court,
necessitating prudence on Our part to await its final verdict." 60
Assignment of Errors
Before us, petitioner submits the following assignment of errors on the part of
Respondent Court: 61
"I
The Court of Appeals committed serious error in ruling that the entire
decision of the trial court in Civil Case No. 89-51451 dated 18 February
1991 became final and executory because it 'was never disputed or
appealed'.
"A. VEC filed a motion for reconsideration of the said decision two days
before deadline, which motion was granted by the trial court.
"B. The trial court correctly granted VEC's motion for reconsideration and
set aside the 18 February 1991 decision . . . against VEC, for: cdasia

1. The trial court never acquired jurisdiction over the person of

VEC as to enable it to render any judgment against it:
"(i) VEC was not impleaded as a respondent in Civil Case
No. 89-51451;
'(ii) Summons was not served on VEC;
"2. The trial court improperly rendered judgment by default
against VEC;
'(i) The trial court never issued an order of default against
VEC;
 (ii) The trial court never authorized ex-parte presentation of
evidence against VEC.
"3. The Judgment by default was fatally defective because:
"(i) No filing fee was paid by [private respondent] for the
staggering amount of damages awarded by the trial
court.
"(ii) The 18 February 1991 decision violates the Revised
Rules of Court, which prescribe that a judgment by
default cannot decree a relief not prayed for.
"II
Since the 18 February 1991 Decision in Civil Case No. 89-51451 is void
as against VEC, the recall of the writ of execution was valid, as far as
VEC is concerned."
The Court believes that the issues can be simplified and restated as follows: cdrep

1. Has the February 18, 1991 RTC Decision become final and
executory in regard to petitioner?
2. Did the trial court acquire jurisdiction over the petitioner?
3. Was the RTC default judgment binding on petitioner?
4. Was the grant of damages against petitioner procedurally proper?
5. Was private respondent entitled to a writ of execution?
This Court's Ruling
The petition is meritorious.
First Issue: Finality of the RTC Decision
A judgment becomes "final and executory" by operation of law. Its finality
becomes a fact when the reglementary period to appeal lapses, and no appeal is
perfected within such period. 62 The admiralty case filed by private respondent
with the trial court involved multiple defendants. This being the case, it
necessarily follows that the period of appeal of the February 18, 1991 RTC
Decision depended on the date a copy of the judgment was received by each of
the defendants. Elsewise stated, each defendant had a different period within
which to appeal, depending on the date of receipt of the Decision. 63
Omega, Singkong Trading Co. and M/V Star Ace chose to enter into a
compromise agreement with private respondent. As to these defendants, the trial
court Decision had become final, and a writ of execution could be issued against
them. 64 Doctrinally, a compromise agreement is immediately final and
executory. 65 aisadc
Petitioner, however, is not in the same situation. Said Decision cannot be said to
have attained finality as to the petitioner, which was not a party to the
compromise. Moreover, petitioner filed a timely Motion for Reconsideration with
the trial court, thirteen days after it received the Decision or two days before the
lapse of the reglementary period to appeal. A motion for reconsideration tolls the
running of the period to appeal. 66 Thus, as to petitioner, the trial court decision
had not attained finality.
Exception to the Rule on Notice of Hearing
Respondent Court and private respondent argue that, although timely filed,
petitioner's Motion for Reconsideration was a mere scrap of paper, because (1) it
did not contain a notice of hearing addressed to the current counsel of private
respondent, and (2) the notice of hearing addressed to and served on private
respondent's deceased counsel was not sufficient. Admittedly, this Motion
contained a notice of hearing sent to Atty. Jesus C. Concepcion who, according
to private respondent, had already died and had since been substituted by its
new counsel, Atty. Domingo Desierto. Therefore, the appellate court ruled that
the said Motion did not toll the reglementary period to appeal and that the trial
court Decision became final.
This Court disagrees. Rule 15 of the Rules of Court states:
"SECTION 4. Notice. Notice of a motion shall be served by the
applicant to all parties concerned, at least three (3) days before the
hearing thereof, together with a copy of the motion, and of any affidavits
and other papers accompanying it. The court, however, for good cause
may hear a motion on shorter notice, specially on matters which the
court may dispose of on its own motion.
SECTION 5. Contents of notice. The notice shall be directed to the
parties concerned, and shall state the time and place for the hearing of
the motion." 67
Ideally, the foregoing Rule requires the petitioner to address and to serve on the
counsel of private respondent the notice of hearing of the Motion for
Reconsideration. The case at bar, however, is far from ideal. First, petitioner was
not validly summoned and it did not participate in the trial of the case in the lower
court; thus, it was understandable that petitioner would not be familiar with the
parties and their counsels. Second, Atty. Desierto entered his appearance only
as collaborating counsel, 68 who is normally not entitled to notices even from this
Court. Third, private respondent made no manifestation on record that Atty.
Concepcion was already dead. Besides, it was Atty. Concepcion who signed the
Amended Petition, wherein petitioner was first impleaded as respondent and
served a copy thereof. Naturally, petitioner's attention was focused on this
pleading, and it was within its rights to assume that the signatory to such
pleading was the counsel for private respondent. cdt

The Court has consistently held that a motion which does not meet the
requirements of Sections 4 and 5 of Rule 15 of the Rules of Court is considered a
worthless piece of paper, which the clerk of court has no right to receive and the
trial court has no authority to act upon. Service of a copy of a motion containing a
notice of the time and the place of hearing of that motion is a mandatory
requirement, and the failure of movants to comply with these requirements
renders their motions fatally defective. 69 However, there are exceptions to the
strict application of this rule. These exceptions are as follows: 70
". . . Liberal construction of this rule has been allowed by this Court in
cases (1) where a rigid application will result in a manifest failure or
miscarriage of justice; 71 especially if a party successfully shows that the
alleged defect in the questioned final and executory judgment is not
apparent on its face or from the recitals contained therein; (2) where the
interest of substantial justice will be served; 72 (3) where the resolution of
the motion is addressed solely to the sound and judicious discretion of
the court; 73 and (4) where the injustice to the adverse party is not
commensurate [to] the degree of his thoughtlessness in not complying
with the procedure prescribed." 74
The present case falls under the first exception. Petitioner was not informed of
any cause of action or claim against it. All of a sudden, the vessels which
petitioner used in its salvaging business were levied upon and sold in execution
to satisfy a supposed judgment against it. To allow this to happen simply
because of a lapse in fulfilling the notice requirement which, as already said,
was satisfactorily explained would be a manifest failure or miscarriage of
justice.
A notice of hearing is conceptualized as an integral component of procedural due
process intended to afford the adverse parties a chance to be heard before a
motion is resolved by the court. Through such notice, the adverse party is
permitted time to study and answer the arguments in the motion.
Circumstances in the case at bar show that private respondent was not denied
procedural due process, and that the very purpose of a notice of hearing had
been served. On the day of the hearing, Atty. Desierto did not object to the said
Motion for lack of notice to him; in fact, he was furnished in open court with a
copy of the motion and was granted by the trial court thirty days to file his
opposition to it. These circumstances clearly justify a departure from the literal
application of the notice of hearing rule. 75 In other cases, after the trial court
learns that a motion lacks such notice, the prompt resetting of the hearing with
due notice to all the parties is held to have cured the defect. 76
Verily, the notice requirement is not a ritual to be followed blindly. Procedural due
process is not based solely on a mechanistic and literal application that renders
any deviation inexorably fatal. Instead, procedural rules are liberally construed to
promote their objective and to assist in obtaining a just, speedy and inexpensive
determination of any action and proceeding. 77 For the foregoing reasons, we
believe that Respondent Court committed reversible error in holding that the
Motion for Reconsideration was a mere scrap of paper. llcd

Second Issue: Jurisdiction Over Petitioner

Service of Summons on a Corporations
The sheriff's return shows that Angliongto who was president of petitioner
corporation, through his secretary Betty Bebero, was served summons on
January 18, 1990. 78 Petitioner claims that this service was defective for two
reasons: (1) Bebero was an employee of Vlasons Shipping, Inc., which was an
entity separate and distinct from Petitioner Vlason Enterprises Corporation (VEC);
and (2) the return pertained to the service of summons for the amended Petition,
not for the "Second Amended Petition with Supplemental Petition," the latter
pleading having superseded the former.
A corporation may be served summons through its agents or officers who under
the Rules are designated to accept service of process. A summons addressed to
a corporation and served on the secretary of its president binds that
corporation. 79 This is based on the rationale that service must be made on a
representative so integrated with the corporation sued, that it is safe to assume
that said representative had sufficient responsibility and discretion to realize the
importance of the legal papers served and to relay the same to the president or
other responsible officer of the corporation being sued. 80 The secretary of the
president satisfies this criterion. This rule requires, however, that the secretary
should be an employee of the corporation sought to be summoned. Only in this
manner can there be an assurance that the secretary will "bring home to the
corporation [the] notice of the filing of the action" against it.
In the present case, Bebero was the secretary of Angliongto, who was president
of both VSI and petitioner, but she was an employee of VSI, not of petitioner. The
piercing of the corporate veil cannot be resorted to when serving
summons. 81 Doctrinally, a corporation is a legal entity distinct and separate from
the members and stockholders who compose it. However, when the corporate
fiction is used as a means of perpetrating a fraud, evading an existing obligation,
circumventing a statute, achieving or perfecting a monopoly or, in generally
perpetrating a crime, the veil will be lifted to expose the individuals composing it.
None of the foregoing exceptions has been shown to exist in the present case.
Quite the contrary, the piercing of the corporate veil in this case will result in
manifest injustice. This we cannot allow. Hence, the corporate fiction remains. Cdpr
 Effect of Amendment of Pleadings on Jurisdiction
Petitioner claims that the trial court did not acquire jurisdiction over it, because
the former had not been served summons anew for the Second Amended
Petition or for the Second Amended Petition with Supplemental Petition. In the
records, it appears that only Atty. Tamondong, counsel for Singkong Trading,
was furnished a copy of the Second Amended Petition. 82 The corresponding
sheriff's return indicates that only Omega, M/V Star Ace and Capt. Rada were
served summons and copies of said Petition. 83
We disagree. Although it is well-settled that an amended pleading supersedes
the original one, which is thus deemed withdrawn and no longer considered part
of the record, it does not follow ipso facto that the service of a new summons for
amended petitions or complaints is required. Where the defendants have already
appeared before the trial court by virtue of a summons on the original complaint,
the amended complaint may be served upon them without need of another
summons, even if new causes of action are alleged. 84 After it is acquired, a
court's jurisdiction continues until the case is finally terminated. Conversely, when
defendants have not yet appeared in court and no summons has been validly
served, new summons for the amended complaint must be served on them. 85 It
is not the change of cause of action that gives rise to the need to serve another
summons for the amended complaint, but rather the acquisition of jurisdiction
over the persons of the defendants. If the trial court has not yet acquired
jurisdiction over them, a new service of summons for the amended complaint is
required.

In this case, the trial court obviously labored under the erroneous impression that
petitioner had already been placed under its jurisdiction since it had been served
summons through the secretary of its president. Thus, it dispensed with the
service on petitioner of new summons for the subsequent amendments of the
Petition. We have already ruled, however, that the first service of summons on
petitioner was invalid. Therefore, the trial court never acquired jurisdiction, and
the said court should have required a new service of summons for the amended
Petitions.cdlex

Impleading a Party in the Title of the Complaint

Petitioner further claims that the trial court failed to acquire jurisdiction to render
judgment against it because (1) the title of the three Petitions filed by private
respondent never included petitioner as a party-defendant, in violation of Rule 7;
and (2) the Petitions failed to state any allegation of ultimate facts constituting a
cause of action against petitioner.
We disagree with petitioner on the first ground. The judicial attitude has always
been favorable and liberal in allowing amendments to pleadings. Pleadings shall
be construed liberally so as to render substantial justice to the parties and to
determine speedily and inexpensively the actual merits of the controversy with
the least regard to technicalities. 86
The inclusion of the names of all the parties in the title of a complaint is a formal
requirement under Section 3, Rule 7. However, the rules of pleadings require
courts to pierce the form and go into the substance, and not to be misled by a
false or wrong name given to a pleading. The averments in the complaint, not the
title, are controlling. Although the general rule requires the inclusion of the names
of all the parties in the title of a complaint, the non-inclusion of one or some of
them is not fatal to the cause of action of a plaintiff, provided there is a statement
in the body of the petition indicating that a defendant was made a party to such
action.
Private respondent claims that petitioner has always been included in the caption
of all the Petitions it filed, which included Antonio Sy, field manager of petitioner.
We checked and noted that in the caption and the body of the Amended Petition
and Second Amended Petition with Supplemental Petition, Antonio Sy was
alleged to be representing Med Line Philippines, not petitioner. Because it was
private respondent who was responsible for the errors, the Court cannot excuse
it from compliance, for such action will prejudice petitioner, who had no hand in
the preparation of these pleadings. In any event, we reiterate that, as a general
rule, mere failure to include the name of a party in the title of a complaint is not
fatal by itself.
LLjur

Stating a Cause of Action in the Complaint

The general rule is allegata et probata a judgment must conform to the
pleadings and the theory of the action under which the case was tried. 87But a
court may also rule and render judgment on the basis of the evidence before it,
even though the relevant pleading has not been previously amended, so long as
no surprise or prejudice to the adverse party is thereby caused. 88
In the case at bar, the liability of petitioner was based not on any allegation in the
four Petitions filed with the trial court, but on the evidence presented ex parte by
the private respondent. Since the trial court had not validly acquired jurisdiction
over the person of petitioner, there was no way for the latter to have validly and
knowingly waived its objection to the private respondent's presentation of
evidence against it.
Third Issue: Judgment By Default
The trial court Decision holding petitioner liable for damages is basically a default
judgment. In Section 18, judgment by default is allowed under the following
condition: 89
 "SECTION 1. Judgment by default. If the defendant fails to answer
within the time specified in these rules, the court shall, upon motion of
the plaintiff and proof of such failure, declare the defendant in default.
Thereupon the court shall proceed to receive the plaintiff's evidence and
render judgment granting him such relief as the complaint and the facts
proven may warrant . . . ."
Thus, it becomes crucial to determine whether petitioner was ever declared in
default, and whether the reception of evidence ex parte against it was
procedurally valid.
Petitioner Was Never Declared In Default
Petitioner insists that the trial court never declared it in default. LLphil

We agree. The trial court denied the January 29, 1990 Motion of private
respondent to declare all the defendants in default, but it never acted on the
latter's subsequent Motion to declare petitioner likewise. During the pretrial on
January 23, 1993, the RTC declared in default only "Atty. Eddie Tamondong, as
well as the other defendants Hon. Salvador Mison, M/V Star Ace, Omega Sea
Transport Co., Inc. of Panama and Singkong Trading Co., [but] despite . . . due
notice to them, [they] failed to appear." 90 Even private respondent cannot
pinpoint which trial court order held petitioner in default.
More important, the trial court, in its Resolution dated May 22, 1991, admitted
that it never declared petitioner in default, viz.:
". . . It is in this light that this [c]ourt made an in-depth reflection and
assessment of the premises or reasons raised by [petitioner] VEC[;] and
after a re-examination of the facts and evidence spread on the records, it
has come to the considered conclusion that the questioned default-
judgment has been improvidently issued. [Based on] the records, the
claim of [private respondent] that [its] January 29, 1990 Ex-Parte Motion
to Declare Defendants In Default (pp. 174-177, records, Vol. 1) including
VEC had been granted is belied by the February 23, 1990 Order (pp.
214-215, records,ibid) par. 2, thereof, . . .
xxx xxx xxx
Not even petitioner's November 23, 1990 "Ex-Parte Motion To Present
Evidence Against Defaulting Defendants" (page 489, records, Vol. 2)
[can] be deemed as a remedy [for] the fact that there never was issued
an order of default against respondents including [petitioner] VEC.
Having thus established that there ha[d] been no order of default against
VEC as contemplated by Sec. 1, Rule 18, in relation to Sec. 9, Rule 13,
Revised Rules of Court, there could not have been any valid default
judgment rendered against it. The issuance of an order [o]f default is a
condition sine qua non in order [that] a judgment by default be clothed
with validity. Further, records show that this [c]ourt never had authorized
 [private respondent] to adduce evidence ex-parte against [Petitioner]
VEC. In sum, the February 18, 1991 decision by default is null and void
as against [Petitioner] VEC. . . ."
prLL

The aforementioned default judgment refers to the February 18, 1989 Decision,
not to the Order finding petitioner in default as contended by private respondent.
Furthermore, it is a legal impossibility to declare a party-defendant to be in
default before it was validly served summons.
Trial Court Did Not Allow
Presentation of Evidence
Ex Parte Against Petitioner
The Order of December 10, 1990, which allowed the presentation of evidence ex
parte against the defaulting defendants, could not have included petitioner,
because the trial court granted private respondent's motion praying for the
declaration of only the foreign defendants in default. So too, private
respondent's ex parte Motion to present evidence referred to the foreign
defendants only. 91
Furthermore, the reception of evidence ex parte against a non-defaulting party is
procedurally indefensible. Without a declaration that petitioner is in default as
required in Section 1, Rule 18, the trial court had no authority to order the
presentation of evidence ex parte against petitioner to render judgment against it
by default. The trial judge must have thought that since it failed to appear despite
summons and was in default, it effectively waived any objection to the
presentation of evidence against it. This rule, however, would have applied only if
petitioner had submitted itself to the jurisdiction of the trial court. The latter
correctly declare, in the Resolution just cited, that the default judgment against
the former had been improvidently rendered. cdasia

Fourth Issue: Awards Not Paid and Prayed For

Additional Filing Fees as
Lien on the Judgment
Had the trial court validly acquired jurisdiction over petitioner, nonpayment of
docket fees would not have prevented it from holding petitioner liable for
damages. The Court, in Manchester Development Corporation v. Court of
Appeals, 92 ruled that a court acquires jurisdiction over any case only upon the
payment of the prescribed docket fee, not upon the amendment of the complaint
or the payment of the docket fees based on the amount sought in the amended
pleading. This ruling, however, was modified in Sun Insurance Office,
Ltd. v. Asuncion, 93 which added:
"3. Where the trial court acquires jurisdiction over a claim [through] the
filing of the appropriate pleading and payment of the prescribed filing fee
but, subsequently, the judgment awards a claim not specified in the
 pleading, or if specified the same has been left for determination by the
court, the additional filing fee therefor shall constitute a lien on the
judgment. It shall be the responsibility of the Clerk of Court or his duly
authorized deputy to enforce said lien and assess and collect the
additional fee."
Filing fees for damages and awards that cannot be estimated constitute liens on
the awards finally granted by the trial court. Their nonpayment alone is not a
ground for the invalidation of the award.
Judgment by Default Cannot
Grant Relief Not Prayed For
A declaration or order of default is issued as a punishment for unnecessary delay
in joining issues. In such event, defendants lose their standing in court, they
cannot expect the trial court to act upon their pleadings, and they are not entitled
to notice of the proceeding until the final termination of the case. 94 Thus, the trial
court proceeds with the reception of the plaintiff's evidence upon which a default
judgment is rendered.

Section 1 of Rule 18 provides that after the defendant has been declared in
default, "the court shall proceed to receive the plaintiff's evidence and render
judgment granting him such relief as the complaint and the facts proven may
warrant." The reliefs that may be granted, however, are restricted by Section 5,
which provides that a judgment entered against a party in default shall not
exceed the amount or be different in kind from that prayed for.
In other words, under Section 1, a declaration of default is not an admission of
the truth or the validity of the plaintiff's claims. 95 The claimant must still prove his
claim and present evidence. In this sense the law gives defaulting parties some
measure of protection because plaintiffs, despite the default of defendants, are
still required to substantiate their allegations in the complaint. The judgment of
default against defendants who have not appeared or filed their answers does
not imply a waiver of all their rights, except their right to be heard and to present
evidence in their favor. Their failure to answer does not imply their admission of
the facts and the causes of action of the plaintiffs, because the latter are required
to adduce evidence to support their allegations. cda

Moreover, the trial court is not allowed by the Rules to receive evidence that
tends to show a relief not sought or specified in the pleadings. 96 The plaintiff
cannot be granted an award greater than or different in kind from that specified in
the complaint. 97
This case should be distinguished, however, from that of defendants, who filed
an answer but were absent during trial. In that case, they can be held liable for
an amount greater than or different from that originally prayed for, provided that
the award is warranted by the proven facts. This rule is premised on the theory
that the adverse party failed to object to evidence relating to an issue not raised
in the pleadings.
The latter rule, however, is not applicable to the instant case. Admittedly, private
respondent presented evidence that would have been sufficient to hold petitioner
liable for damages. However, it did not include in its amended Petitions any
prayer for damages against petitioner. Therefore, the trial court could not have
validly held the latter liable for damages even if it were in default.
Fifth Issue: Execution of Final Judgment
Section 1 of Rule 39 provides that execution shall issue only upon a judgment
that finally disposes of the action or proceeding. Such execution shall issue as a
matter of right upon the expiration of the period to appeal it, if no appeal has
been duly perfected. 98
In the present case, however, we have already shown that the trial court's
Decision has not become final and executory against petitioner. In fact, the
judgment does not even bind it. Obviously, Respondent Court committed serious
reversible errors when it allowed the execution of the said judgment against
petitioner.
WHEREFORE, the appeal is hereby GRANTED, and the assailed Decision and
Resolution of the Court of Appeals are REVERSED and SET ASIDE insofar as
they affect petitioner. The levy and the sale on execution of petitioner's properties
are declared NULL and VOID. Said properties are ordered RESTORED to
petitioner. No pronouncement as to costs. SO ORDERED.
(Vlason Enterprises Corp. v. Court of Appeals, G.R. Nos. 121662-64, [July 6,
|||

1999], 369 PHIL 269-311)

[G.R. No. 157447. April 29, 2005.]

NEMENCIO C. EVANGELISTA, PASCUAL G. QUINTO, LUIS B.

BUENA, EUSEBIA V. TABLADA, CANUTO G. TISBE, DAVID R.
CARULLO, SOFONIAS E. COLEGADO, FELIX B. BUENA,
TORIBIO C. EVANGELISTA, LEBRADA A. NICOLAS, ALECIA J.
RAMOS, MILA G. DE LOS REYES, SALVADOR I. DE LA
TORRE, MOISES CRUZ, RUFINO INFANTE, ALICIA
ASTROLOGO, TRINIDAD LUMIQUED, LUZMINIDA QUINIQUINI,
& TEODORA C. TEMERAS, petitioners, vs. CARMELINO M.
SANTIAGO, respondent.
 DECISION

CHICO-NAZARIO, J : p

In this Petition for Review under Rule 45 of the Rules of Court, petitioners pray
for the reversal of the Decision of the Court of Appeals in CA-G.R. CV No.
64957, 1 affirming the Order of the Regional Trial Court (RTC) of San Mateo,
Rizal, Branch 77, in Civil Case No. 1220, 2 dismissing petitioners' Complaint for
declaration of nullity of Original Certificate of Title (OCT) No. 670 and all other
titles emanating therefrom.
In their Complaint, petitioners alleged that they occupied and possessed parcels
of land, located in Sitio Panayawan, Barangay San Rafael, Montalban (now
Rodriquez), Province of Rizal (Subject Property), by virtue of several Deeds of
Assignment, dated 15 April 1994 and 02 June 1994, executed by a certain
Ismael Favila y Rodriguez. 3
According to the Deeds of Assignment, the Subject Property was part of a vast
tract of land called "Hacienda Quibiga," which extended to Paraaque, Las Pias,
Muntinlupa, Cavite, Batangas, Pasay, Taguig, Makati, Pasig, Mandaluyong,
Quezon City, Caloocan, Bulacan, and Rizal; awarded to Don Hermogenes
Rodriguez by the Queen of Spain and evidenced by a Spanish title. Ismael Favila
claimed to be one of the heirs and successors-in-interest of Don Hermogenes
Rodriguez. Acting as Attorney-in-Fact pursuant to a Special Power of Attorney
executed by his "mga kapatid" on 25 February 1965, Ismael Favila signed the
aforementioned Deeds of Assignment, assigning portions of the Subject Property
to the petitioners, each portion measuring around 500 to 1,000 square meters, in
exchange for the labor and work done on the Subject Property by the petitioners
and their predecessors. 4
Petitioners came by information that respondent was planning to evict them from
the Subject Property. Two of the petitioners had actually received notices to
vacate. Their investigations revealed that the Subject Property was included in
Transfer Certificates of Titles (TCTs) No. 53028, No. 281660, No. N-39258 and
No. 205270, all originating from OCT No. 670, and now in the name of
respondent. 5
OCT No. 670 was issued in the name of respondent's mother, Isabel Manahan y
Francisco, and three other individuals, pursuant to Decree No. 10248, dated 13
February 1913, in Case No. 8502 of the Court of Land Registration of the
Philippine Islands. The whole property covered by OCT No. 670 was
subsequently adjudicated in favor of Isabel Manahan Santiago (formerly Isabel
Manahan y Francisco). Consequently, OCT No. 670 was cancelled and TCT No.
T-53028 was issued exclusively in the name of Isabel Manahan Santiago. On 28
December 1968, Isabel Manahan Santiago executed a Deed of Donation
transferring the property to her son, respondent herein, who subsequently
secured TCTs No. 281660, No. N-39258 and No. 205270 in his own name. 6
Petitioners filed with the trial court, on 29 April 1996, an action for declaration of
nullity of respondent's certificates of title on the basis that OCT No. 670 was fake
and spurious. Among the defects of OCT No. 670 pointed out by petitioners were
that: (1) OCT No. 670 was not signed by a duly authorized officer; (2) Material
data therein were merely handwritten and in different penmanships; (3) OCT No.
670 was not printed on the Official Form used in 1913, the year it was issued; (4)
It failed to indicate the Survey Plan which was the basis of the Technical
Description of the property covered by the title; (5) Decree No. 10248 referred to
in OCT No. 670 was issued only on 11 April 1913, while OCT No. 670 was
issued earlier, on 13 February 1913; and (6) Decree No. 10248 was issued over
a property other than the one described in OCT No. 670, although also located in
the Province of Rizal. 7
Respondent filed his Answer with Prayer for Preliminary Hearing on the
Affirmative Defenses on 03 July 1996. According to respondent, "[t]he allegations
in the Complaint would readily and patently show that the same are flimsy,
fabricated, malicious, without basis in law and in fact. . . " 8
As an affirmative defense, respondent claimed that the petitioners had no legal
capacity to file the Complaint, and thus, the Complaint stated no cause of action.
Since OCT No. 670 was genuine and authentic on its face, then OCT No. 670
and all of respondent's land titles derived therefrom, are incontrovertible,
indefeasible and conclusive against the petitioners and the whole world. 9
Citing the consolidated cases of Director of Forestry, et al. v. Hon. Emmanuel M.
Muoz, et al. and Pinagcamaligan Indo-Agro Development Corporation v. Hon.
Macario Peralta, Jr., et al., 10 respondent argued that the Spanish title, on which
petitioners based their claim, was neither indefeasible nor
imprescriptible. Moreover, Presidential Decree (P.D.) No. 892, which took effect
on 16 February 1976, required all holders of Spanish titles or grants to apply for
registration of their lands under Republic Act No. 496, otherwise known as the
Land Registration Act, 11 within six months from effectivity of the decree. After the
given period, Spanish titles could no longer be used as evidence of land
ownership in any registration proceedings under the Torrens System. 12
Respondent also raised the affirmative defense of prescription. He pointed out
that any action against his certificates of title already prescribed, especially with
regard to OCT No. 670, which was issued in 1913 or more than 83 years prior to
the filing of the Complaint by the petitioners. At the very least, respondent
contended, "it must be presumed that the questioned land titles were issued by
the public officials concerned in the performance of their regular duties and
functions pursuant to the law." 13
Even assuming arguendo that the petitioners entered and occupied the Subject
Property, they did so as mere intruders, squatters and illegal occupants, bereft of
any right or interest, since the Subject Property was already covered by Torrens
certificates of title in the name of respondent and his predecessors-in-interest. 14
Lastly, respondent denied knowing the petitioners, much less, threatening to
evict them. In fact, petitioners were not included as defendants in Civil Case No.
783 entitled, "Carmelino M. Santiago v. Remigio San Pascual, et al.," which
respondent instituted before the same trial court against squatters occupying the
Subject Property. In its decision, dated 01 July 1992, the trial court held that
"there is no doubt that the plaintiff (respondent herein) is the owner of the land
involved in this case on which the defendants have built their houses and
shanties. . . ." Although the decision in Civil Case No. 783 was appealed to the
Court of Appeals, it had become final and executory for failure of the defendants-
appellants therein to file their appellants' brief. 15
In the instant case, the trial court held a preliminary hearing on the affirmative
defenses as prayed for by the respondent. During said hearing, petitioners
presented their lone witness, Engineer Placido Naval, a supposed expert on land
registration laws. In response to questions from Honorable Judge Francisco C.
Rodriguez of the trial court, Engineer Naval answered that a parcel of land titled
illegally would revert to the State if the Torrens title was cancelled, and that it was
the State, through the Office of the Solicitor General, that should file for the
annulment or cancellation of the title. Respondent, on the other hand, did not
present any evidence but relied on all the pleadings and documents he had so
far submitted to the trial court. 16
After the preliminary hearing, the trial court issued the questioned Order, dated
05 February 1999, dismissing petitioners' Complaint. Pertinent portions of the
Order of the trial court read: SEcITC

After considering the testimonial and documentary evidence presented,

this Court is inclined not to grant plaintiffs (sic) prayer. Finding credence
and giving weight to plaintiffs (sic) lone but "expert witness", it is crystal
clear that, to quote:
1. "a parcel of land titled illegally will revert to the State
2. it is the State who must file the corresponding case of
annulment of title through the Office of the Solicitor
General, and
3. a land illegally titled in the name of private individual, the State
through the Office of the Solicitor General should file the
 corresponding case for cancellation of title." (TSN August
26, 1997).
The above quoted testimony is straight from horse (sic) mouth so to
speak as this was the testimony of the plaintiffs (sic) expert witness. And
judging from the said testimony alone aforecited, plaintiffs (sic) cause [of
action] is bound to fail. "Plaintiffs (sic) own testimony" wrote "finis" to
their case. From the record, this case was initiated and filed by private
individuals, Nemencio Evangelista, et. al., contradicting their witness (sic)
testimony. To reiterate, this Court finds credence to the testimony of the
plaintiffs (sic) witness, i.e., is (sic) the State through the Office of the
Solicitor General who must initiate and file a case of this nature when
title to a land is being claimed to be obtained through fraud and allegedly
spurious.
The opinion of this Court anent the testimony of the witness is not
without basis. Explicit is the pronouncement of the Supreme Court in the
recent case of Heirs of Marciano Nagano v. Court of Appeals, to wit:
An action for reversion has to be instituted by the Solicitor
General pursuant to Section 101, Commonwealth Act No. 141.
(282 SCRA 43). SEACTH

As to the documentary evidence, having gone through with the "Deed of

Assignment/s" purportedly executed by and between a certain Ismael
Favila y Rodriguez and the plaintiffs, which is the principal if not the only
basis of plaintiffs claim ownership and possession of the subject parcel
of land, the same does not hold water in a manner of speaking, for being
self-serving. "Assignor Ismael Favila y Rodriguez" claimed in said Deed
that he is the Attorney-in-Fact by virtue of an alleged Special Power of
Attorney executed in his favor by his "mga kapatid" on February 23,
1965, but said Special Power of Attorney was not presented before this
Court, thus there arises a doubt as to its existence and execution not to
mention doubt on the existence of his "mga kapatid" who as alleged
executed said Special Power Attorney (sic) in his favor.
Even if this Court granting arguendo would admit the authenticity of said
"Deeds of Assignment/s", that will not alter the outcome of the pending
incident/s before this Court. Why? Because the said "Deed of
Assignment/s" which were based on Spanish title have lost their
evidentiary value pursuant to the Presidential Decree No. 892 i.e.
"DISCONTINUANCE OF THE SPANISH MORTGAGE SYSTEM OF
REGISTRATION AND OF THE USE OF SPANISH TITLES AS
EVIDENCE IN LAND REGISTRATION PROCEEDINGS."
xxx xxx xxx
There is no need to elaborate on the above-cited provisions of PD
892 as they are self-explanatory. Suffice it to say that there is no
 showing, that plaintiffs complied with the said law i.e. to "apply for
registration of their lands under Act No. 496, otherwise known as the
Land Registration Act, within six (6) months from the effectivity of this
decree (February 16, 1976). Thereafter, Spanish titles cannot be used
as evidence of land ownership in any registration proceedings under the
Torrens System."
This being the case and likewise being clear that plaintiffs were not the
lawful owners of the land subject of this case, for they did not comply
withPD 892, the said plaintiffs do not have the legal standing to bring
before this Court the instant complaint. . . .
Moreover, the principal issue in this case is for the declaration of nullity
of defendant's title, which has nothing to do with plaintiffs (sic) claim of
ownership and possession even if we set aside, albeit momentarily, the
truth that plaintiffs (sic) claim were based on barred Spanish Title/s, and
thus plaintiffs were never the owners of the parcel of land subject of this
case.
Further, defendants (sic) title especially so with the mother title OCT 670
was entered and issued in 1913 or more than Eighty Three (83) years
ago, the same not having been questioned by any party. Only now that it
is being questioned, but sad to say, plaintiffs who are on the offensive
and relying on their lone expert witness, instead of bolstering their case,
unwittingly sealed their fate. . . . 17
After the trial court denied petitioners' Motion for Reconsideration in its Order,
dated 20 July 1999, 18 petitioners appealed both Orders of the trial court to the
Court of Appeals.
The Court of Appeals, in its Decision, dated 29 July 2002, 19 affirmed the Order
of the trial court, dated 05 February 1999, dismissing petitioners' Complaint. The
Court of Appeals denied petitioners' Motion for Reconsideration in its Resolution,
dated 14 February 2003. 20
Thus, petitioners filed this Petition for Review 21 under Rule 45 of the Rules of
Court, raising the following issues and praying for the reversal of the
aforementioned Decision of the Court of Appeals affirming the Order of dismissal
of the trial court:
cDTIAC

I. Whether the lower court's dismissal of the petitioners' complaint should

be proscribed by the rules of evidence it being based inter alia on
Engr. Naval's testimony, which was indisputably not based on
facts but conclusion of law.
II. Whether the lower court's dismissal of petitioners' complaint should be
proscribed by the rules of evidence it being done sans ample
evidence except bare allegations of respondent.
 III. Whether the provision of P.D. 892, i.e., Spanish titles cannot be used
as evidence of land ownership in any registration proceedings
under the Torrens system, holds of an exception.
IV. Whether an action for quieting of title, specifically where petitioners
are in possession of subject land, can be subject of prescription.
In his Comment, 22 the respondent, for the most part, reiterated the findings of
the trial court and the Court of Appeals.
The Court believes that the trial court rightfully dismissed petitioners' Complaint,
but for reasons different from those relied upon by the trial court and the Court of
Appeals.
According to the respondent, petitioners had no legal capacity to file the
Complaint, and thus, the Complaint filed before the trial court stated no cause of
action.
Before anything else, it should be clarified that "the plaintiff has no legal capacity
to sue" 23 and "the pleading asserting the claim states no cause of action" 24 are
two different grounds for a motion to dismiss or are two different affirmative
defenses. Failure to distinguish between "the lack of legal capacity to sue" from
"the lack of personality to sue" is a fairly common mistake. The difference
between the two is explained by this Court inColumbia Pictures, Inc. v. Court of
Appeals: 25
Among the grounds for a motion to dismiss under the Rules of Court are
lack of legal capacity to sue and that the complaint states no cause of
action. Lack of legal capacity to sue means that the plaintiff is not in the
exercise of his civil rights, or does not have the necessary qualification to
appear in the case, or does not have the character or representation he
claims. On the other hand, a case is dismissible for lack of personality to
sue upon proof that the plaintiff is not the real party-in-interest, hence
grounded on failure to state a cause of action. The term "lack of capacity
to sue" should not be confused with the term "lack of personality to sue."
While the former refers to a plaintiff's general disability to sue, such as
on account of minority, insanity, incompetence, lack of juridical
personality or any other general disqualifications of a party, the latter
refers to the fact that the plaintiff is not the real party-in-interest.
Correspondingly, the first can be a ground for a motion to dismiss based
on the ground of lack of legal capacity to sue; whereas the second can
be used as a ground for a motion to dismiss based on the fact that the
complaint, on the face thereof, evidently states no cause of action. TaDIHc

In the present case, this Court may assume that the respondent is raising the
affirmative defense that the Complaint filed by the petitioners before the trial
court stated no cause of action because the petitioners lacked the personality to
sue, not being the real party-in-interest. It is the respondent's contention that only
the State can file an action for annulment of his certificates of title, since such an
action will result in the reversion of the ownership of the Subject Property to the
State.
The affirmative defense that the Complaint stated no cause of action, similar to a
motion to dismiss based on the same ground, requires ahypothetical
admission of the facts alleged in the Complaint. In the case of Garcon v.
Redemptorist Fathers, 26 this Court laid down the rules as far as this ground for
dismissal of an action or affirmative defense is concerned:
It is already well-settled by now that, in a motion to dismiss a complaint
based on lack of cause of action, the question submitted to the court for
determination is the sufficiency of the allegations of fact made in the
complaint to constitute a cause of action, and not on whether these
allegations of fact are true, for said motion must hypothetically admit the
truth of the facts alleged in the complaint; that the test of the sufficiency
of the facts alleged in the complaint is whether or not, admitting the facts
alleged, the court could render a valid judgment upon the same in
accordance with the prayer of said complaint. Stated otherwise, the
insufficiency of the cause of action must appear in the face of the
complaint in order to sustain a dismissal on this ground, for in the
determination of whether or not a complaint states a cause of action,
only the facts alleged therein and no other matter may be considered,
and the court may not inquire into the truth of the allegations, and find
them to be false before a hearing is had on the merits of the case; and it
is improper to inject in the allegations of the complaint facts not alleged
or proved, and use these as basis for said motion.
In resolving whether or not the Complaint in the present case stated a cause of
action, the trial court should have limited itself to examining the sufficiency of the
allegations in the Complaint. It was proscribed from inquiring into the truth of the
allegations in the Complaint or the authenticity of any of the documents referred
or attached to the Complaint, since these are deemed hypothetically admitted by
the respondent. The trial court evidently erred in making findings as to the
authenticity of the Deeds of Assignment executed by Ismael Favila in favor of
petitioners on 15 April 1994 and 02 June 1994; and questioning the existence
and execution of the Special Power of Attorney in favor of said Ismael Favila by
his siblings on 25 February 1965. These matters may only be resolved after a
proper trial on the merits.
Petitioners alleged in their Complaint, and respondent hypothetically admitted
that: (1) Petitioners' predecessors-in-interest, in the concept of owners, had been
in actual, physical, open, continuous and adverse possession of the Subject
Property against the whole world since time immemorial; (2) The Subject
Property was part of the vast tract of land called "Hacienda Quibiga" awarded to
Don Hermogenes Rodriguez by the Queen of Spain by virtue of a Spanish title;
(3) Ismael Favila, an heir and successor-in-interest of Don Hermogenes
Rodriguez, acting as Attorney-in-Fact pursuant to a Special Power of Attorney
executed by his "mga kapatid" on 25 February 1965, executed Deeds of
Assignment covering the Subject Property in favor of petitioners; (4) Petitioners
still occupied and possessed the Subject Property, on which their houses were
erected, when they discovered that the Subject Property was already covered by
Torrens certificates of title in the name of respondent; and (5) That petitioners
filed the Complaint to prevent their eviction by the respondent. To determine
whether these allegations are sufficient to constitute a cause of action, it is
important for this Court to establish first the nature of petitioners' action. acHDTA

Indeed, petitioners' Complaint filed before the trial court was captioned as an
action for declaration of nullity of respondent's certificates of title. However, the
caption of the pleading should not be the governing factor, but rather the
allegations therein should determine the nature of the action, because even
without the prayer for a specific remedy, the courts may nevertheless grant the
proper relief as may be warranted by the facts alleged in the Complaint and the
evidence introduced. 27
The trial court believed that petitioners' action was ultimately one for reversion of
the Subject Property to the public domain. Based on the testimony of Engineer
Naval and the case of Nagao v. Court of Appeals, 28 it declared that the State,
represented by the Office of the Solicitor General, is the party-in-interest in an
action for cancellation of a certificate of title illegally issued in the name of a
private individual, because the eventual effect of such cancellation is the
reversion of the property to the State.
The Court disagrees in this pronouncement of the trial court, and calls for a far
closer review of its decision in Nagao v. Court of Appeals, 29 wherein the Court
held that
It is then clear from the allegations in the complaint that private
respondents claim ownership of the 2,250 square meter portion for
having possessed it in the concept of an owner, openly, peacefully,
publicly, continuously and adversely since 1920. This claim is an
assertion that the lot is private land, or that even assuming it was part of
the public domain, private respondents had already acquired imperfect
title thereto under Section 48(b) of C.A. No. 141, otherwise known as the
Public Land Act, as amended by R.A. No. 1942. . . .
Under Section 48, a subject lot is, for all legal intents and purposes,
segregated from the public domain, because the beneficiary is
"conclusively presumed to have performed all the conditions essential to
a Government grant and shall be entitled to a certificate of title under the
provisions of this chapter."
 Consequently, merely on the basis of the allegations in the complaint,
the lot in question is apparently beyond the jurisdiction of the Director of
the Bureau of Lands and could not be the subject of a Free Patent.
Hence, dismissal of private respondents' complaint was premature and
trial on the merits should have been conducted to thresh out evidentiary
matters.
It would have been entirely different if the action were clearly for
reversion, in which case, it would have to be instituted by the Solicitor
General pursuant to Section 101 of C.A. No. 141, which provides:
Sec. 101. All actions for the reversion to the Government of lands
of the public domain or improvements thereon shall be instituted
by the Solicitor General or the officer acting in his stead, in the
proper courts, in the name of the [Republic] of the Philippines.
In the more recent case of Heirs of Ambrocio Kionisala v. Heirs of Honorio
Dacut, 30 the difference between an action for declaration of nullity of land titles
from an action for reversion was more thoroughly discussed as follows: IEAaST

An ordinary civil action for declaration of nullity of free patents and

certificates of title is not the same as an action for reversion. The
difference between them lies in the allegations as to the character of
ownership of the realty whose title is sought to be nullified. In an action
for reversion, the pertinent allegations in the complaint would admit State
ownership of the disputed land. Hence, in Gabila vs. Barriga [41 SCRA
131], where the plaintiff in his complaint admits that he has no right to
demand the cancellation or amendment of the defendant's title because
even if the title were canceled or amended the ownership of the land
embraced therein or of the portion affected by the amendment would
revert to the public domain, we ruled that the action was for reversion
and that the only person or entity entitled to relief would be the Director
of Lands.
On the other hand, a cause of action for declaration of nullity of free
patent and certificate of title would require allegations of the plaintiff's
ownership of the contested lot prior to the issuance of such free patent
and certificate of title as well as the defendant's fraud or mistake, as the
case may be, in successfully obtaining these documents of title over the
parcel of land claimed by plaintiff. In such a case, the nullity arises
strictly not from the fraud or deceit but from the fact that the land is
beyond the jurisdiction of the Bureau of Lands to bestow and whatever
patent or certificate of title obtained therefore is consequently void ab
initio. The real party-in-interest is not the State but the plaintiff who
alleges a pre-existing right of ownership over the parcel of land in
question even before the grant of title to the defendant. . . .
In their Complaint, petitioners never alleged that the Subject Property was part of
the public domain. On the contrary, petitioners asserted title over the Subject
Property by virtue of their actual, physical, open, continuous and adverse
possession thereof, in the concept of owners, by themselves and through their
predecessors-in-interest, since time immemorial. The Deeds of Assignment
executed in their favor and attached to their Complaint referred to a Spanish title
granted by the Queen of Spain to their predecessor-in-interest, Don Hermogenes
Rodriguez. Clearly, petitioners are asserting private title over the Subject
Property, and consequently, their action could not be one for reversion.
In their instant Petition, petitioners further averred that rather than an action for
nullity of respondent's certificates of title, theirs was more appropriately an action
to remove a cloud on or to quiet their title over the Subject Property.
Article 476 of the Civil Code, on removal of a cloud on or quieting of title,
provides that:
Art. 476. Whenever there is a cloud on title to real property or any
interest therein, by reason of any instrument, record, claim,
encumbrance or proceeding which is apparently valid or effective but is
in truth and in fact invalid, ineffective, voidable, or unenforceable, and
may be prejudicial to said title, an action may be brought to remove such
cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon
title to real property or any interest therein.
Respondent's certificates of title over the Subject Property appeared valid or
effective; but according to the petitioners, they were fake, spurious and/or
fraudulent, and a cloud on their title to the same property that needed to be
removed. A cloud on title has been defined as follows: DCHaTc

Cloud on Title. A cloud on title is an outstanding instrument, record,

claim, encumbrance or proceeding which is actually invalid or
inoperative, but which may nevertheless impair or affect injuriously the
title to property. The matter complained of must have a prima
facie appearance of validity or legal efficacy. The cloud on title is a
semblance of title which appears in some legal form but which is in fact
unfounded. The invalidity or inoperativeness of the instrument is not
apparent on the face of such instrument, and it has to be proved by
extrinsic evidence. . . 31
Even as this Court agrees with the petitioners that their action was one for
removal of a cloud on or quieting of title, it does arrive at the same conclusion as
the trial court and the Court of Appeals that petitioners had no personality to file
the said action, not being the parties-in-interest, and their Complaint should be
dismissed for not stating a cause of action.
According to Article 477 of the Civil Code, the plaintiff, in an action to remove a
cloud on or to quiet title, must have legal or equitable title to, or interest in, the
real property which is the subject matter of the action. 32 Petitioners failed to
establish in their Complaint that they had any legal or equitable title to, or
legitimate interest in, the Subject Property so as to justify their right to file an
action to remove a cloud on or to quiet title.
Title to real property refers to that upon which ownership is based. It is the
evidence of the right of the owner or the extent of his interest, by which means he
can maintain control and, as a rule, assert right to exclusive possession and
enjoyment of the property. 33
In their Complaint, petitioners claimed title to the Subject Property by virtue of
their actual and continuous possession of the same since time immemorial, by
themselves and through their predecessors-in-interest. Yet, the Deeds of
Assignment executed by Ismael Favila in their favor, attached to and an integral
part of their Complaint, revealed that petitioners' predecessors-in-interest based
their right to the Subject Property on the Spanish title awarded to Don
Hermogenes Rodriguez.
There existed a contradiction when petitioners based their claim of title to the
Subject Property on their possession thereof since time immemorial, and at the
same time, on the Spanish title granted to Don Hermogenes Rodriguez.
Possession since time immemorial carried the presumption that the land
had never been part of the public domain or that it had been private property
even before the Spanish conquest. 34 If the Subject Property was already private
property before the Spanish conquest, then it would have been beyond the
power of the Queen of Spain to award or grant to anyone.
The title to and possession of the Subject Property by petitioners' predecessors-
in-interest could be traced only as far back as the Spanish title of Don
Hermogenes Rodriguez. Petitioners, having acquired portions of the Subject
Property by assignment, could acquire no better title to the said portions than
their predecessors-in-interest, and hence, their title can only be based on the
same Spanish title.
Respondent maintained that P.D. No. 892 prevents petitioners from invoking the
Spanish title as basis of their ownership of the Subject Property. P.D. No.
892 strengthens the Torrens system by discontinuing the system of registration
under the Spanish Mortgage Law, and by categorically declaring all lands
recorded under the latter system, not yet covered by Torrens title, unregistered
lands. It further provides that within six months from its effectivity, all holders of
Spanish titles or grants should apply for registration of their land under what is
now P.D. No. 1529, otherwise known as theLand Registration Decree. Thereafter,
Spanish titles can no longer be used as evidence of land ownership in any
registration proceedings under the Torrens system. 35 Indubitably, P.D. No.
892 divests the Spanish titles of any legal force and effect in establishing
ownership over real property. DHEcCT

P.D. No. 892 became effective on 16 February 1976. The successors of Don
Hermogenes Rodriguez had only until 14 August 1976 to apply for a Torrens title
in their name covering the Subject Property. In the absence of an allegation in
petitioners' Complaint that petitioners' predecessors-in-interest complied with P.D.
No. 892, then it could be assumed that they failed to do so. Since they failed to
comply with P.D. No. 892, then the successors of Don Hermogenes Rodriguez
were already enjoined from presenting the Spanish title as proof of their
ownership of the Subject Property in registration proceedings.
Registration proceedings under the Torrens system do not create or vest title, but
only confirm and record title already created and vested. 36 By virtue of P.D. No.
892, the courts, in registration proceedings under the Torrens system, are
precluded from accepting, confirming and recording a Spanish title. Reason
therefore dictates that courts, likewise, are prevented from accepting and
indirectly confirming such Spanish title in some other form of action brought
before them (i.e., removal of cloud on or quieting of title), only short of ordering
its recording or registration. To rule otherwise would open the doors to the
circumvention of P.D. No. 892, and give rise to the existence of land titles,
recognized and affirmed by the courts, but would never be recorded under the
Torrens system of registration. This would definitely undermine the Torrens
system and cause confusion and instability in property ownership that P.D. No.
892 intended to eliminate.
Petitioners argued that the Spanish title may still be presented as proof of
ownership on the basis of the exception provided in the fourth whereas clause
of P.D. No. 892, which reads:
WHEREAS, Spanish titles to lands which have not yet been brought
under the operation of the Torrens system, being subject to prescription,
are now ineffective to prove ownership unless accompanied by proof of
actual possession; . . .
Since Petitioners alleged that they were in actual possession of the Subject
Property, then they could still present the Spanish title as evidence of their
ownership of the Subject Property. 37
This Court cannot sustain petitioners' argument. Actual proof of possession only
becomes necessary because, as the same whereas clause points out, Spanish
titles are subject to prescription. A holder of a Spanish title may still lose his
ownership of the real property to the occupant who actually possesses the same
for the required prescriptive period. 38 Because of this inherent weakness of a
Spanish title, the applicant for registration of his Spanish title under the Torrens
system must also submit proof that he is in actual possession of the real property,
so as to discount the possibility that someone else has acquired a better title to
the same property by virtue of prescription.
Moreover, legislative intent must be ascertained from a consideration of the
statute as a whole, and not just a particular provision alone. A word or phrase
taken in the abstract may easily convey a meaning quite different from the one
actually intended and evident when the word or phrase is considered with those
with which it is associated. An apparently general provision may have a limited
application if read together with other provisions of the statute. 39
The fourth whereas clause of P.D. No. 892 should be interpreted and
harmonized with the other provisions of the whole statute. 40 Note that the tenor
of the whole presidential decree is to discontinue the use of Spanish titles and to
strip them of any probative value as evidence of ownership. It had clearly set a
deadline for the filing of applications for registration of all Spanish titles under the
Torrens system (i.e., six months from its effectivity or on 14 August 1976), after
which, the Spanish titles may no longer be presented to prove ownership. HDIaET

All holders of Spanish titles should have filed applications for registration of their
title on or before 14 August 1976. In a land registration proceeding, the applicant
should present to the court his Spanish title plus proof of actual possession of the
real property. However, if such land registration proceeding was filed and
initiated after 14 August 1976, the applicant could no longer present his Spanish
title to the court to evidence his ownership of the real property, regardless of
whether the real property was in his actual possession.
Therefore, the fact that petitioners were in actual possession of the Subject
Property when they filed the Complaint with the trial court on 29 April 1996 does
not exclude them from the application of P.D. No. 892, and their Spanish title
remain inadmissible as evidence of their ownership of the Subject Property,
whether in a land registration proceeding or in an action to remove a cloud on or
to quiet title.
The preceding discussion does not bar holders of Spanish titles from claiming
ownership of the real property on some other basis, such as those provided in
either the Land Registration Decree 41 or the Public Land Act. 42 Petitioners
though failed to allege any other basis for their titles in their Complaint aside from
possession of the Subject Property from time immemorial, which this Court has
already controverted; and the Spanish title, which is already ineffective to prove
ownership over the Subject Property.
Therefore, without legal or equitable title to the Subject Property, the petitioners
lacked the personality to file an action for removal of a cloud on, or quieting of,
title and their Complaint was properly dismissed for failing to state a cause of
action. In view of the dismissal of the case on this ground, it is already
unnecessary for this Court to address the issue of prescription of the action. EcDSHT
Wherefore, this Court DENIES the instant petition and AFFIRMS the Decision of
the Court of Appeals, dated 29 July 2002, and the Order of the Regional Trial
Court of San Mateo, Rizal, Branch 77, dated 05 February 1999, dismissing
petitioners' Complaint for failure to state a cause of action. SO ORDERED.
||| (Evangelista v. Santiago, G.R. No. 157447, [April 29, 2005], 497 PHIL 269-297)

[G.R. No. 131277. February 2, 1999.]

SPOUSES FRANCISCO AND ANGELA C. TANKIKO AND

SPOUSES ISAIAS AND ANITA E. VALDEHUEZA, petitioners, vs.
JUSTINIANO CEZAR, EUGENIO ENDAN, BONIFACIO ACLE,
EUSEBIO ANTIG, JULIO ASENERO, PILAR ARBOLADURA,
JUANA BALISTOY, APOLINARIO BAHADE, REMEGIO
CAGADAS, TEODORO CAGANTAS, ALEJANDRO DE LA
CERNA, NILO DE LA CRUZ, REMEDIOS F. COLLERA,
TERESITA COLLERA, ANASTACIO DAGANDARA, HEIRS OF
SOTERO ESCOLANA REPRESENTED BY LUZ ESCOLANA,
HEIRS OF FELICISIMO EXCLAMADO REPRESENTED BY
ALFREDO EXCLAMADO, CARLOS GOMEZ, ELEUTERIO
GUIWAN, HEIRS OF TEODORO JANDAYAN REPRESENTED
BY MARINA ANAYA VDA. DE JANDAYAN, HEIRS OF
GUILLERMO NARISMA, IGNACIO OPAON, ANTONIO PALMA,
ELADIO RAAGAS, HEIRS OF MARTIN RODRIGUEZ
REPRESENTED BY LUZMINDA RODRIGUEZ ABEJARON,
RUFINO SUMAMPONG, HEIRS OF ASUNCION TACDER
REPRESENTED BY EUSEBIO ANTIG, DOMINGO TORDILLO,
LUCIANO UAYAN and JULIO WALAG, respondents.

Tamondong Fragante Pooten & Associates for petitioners.

Llego & Llego Office for private respondents.

SYNOPSIS

Herein respondents are miscellaneous sales patent applicants of the respective

portions of a lot occupied by them. They filed an action for reconveyance before
the RTC upon learning that the said lot had been titled in the name of Patricio
Salcedo in accordance with a decision of the Cadastral Court, and now in the
name of herein petitioners after several conveyances. Respondents contested in
that action the existence of the cadastral court's ruling and instead cited the
decision of Judge Eulalio Rosete dated April 18, 1980 in Civil Case No. 6759
involving the neighboring lot which made observation that there was no record
showing that the cadastral court had rendered a decision adjudicating the lot in
question in favor of Patricio Salcedo. On the contrary, it was the decision
rendered in Expediente Catastro rendered on December 19, 1940 which was
found showing that the said lots were declared public lands The RTC dismissed
the action for reconveyance and declared herein petitioners as owners of the
property. The Court of Appeals (CA) set aside the RTC decision and declared
that since the property in dispute is still part of the public domain, respondents
are not the proper parties to file an action for reconveyance, as they are not
owners thereof but only applicants for sales patent. However, equitable
considerations persuaded the CA to allow respondents to remain on the land in
question, so that future litigation may be avoided. TAECaD

The Supreme Court held that the circumstances of this case do not justify the
exercise of equity jurisdiction that would allow a suit to be filed by one who is not
a real party in interest. Equity is invoked only when the plaintiff, on the basis of
the action filed and the relief sought, has a clear right that he seeks to enforce, or
that would obviously be violated if the action filed were to be dismissed for lack of
standing. In the present dispute, only the State can file a suit for reconveyance of
a public land. Therefore, not being the owners of the land but mere applicants for
sale patents thereon. Respondents have no personality to file the suit. Neither
will they be directly affected by the judgment in such suit.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; EQUITY JURISDICTION; INVOKED

ONLY WHEN PLAINTIFF HAS A CLEAR RIGHT THAT WOULD BE VIOLATED
IF THE ACTION FILED IS DISMISSED FOR LACK OF STANDING; CASE AT
BAR. Equity is invoked only when the plaintiff, on the basis of the action filed
and the relief sought, has a clear right that he seeks to enforce, or that would
obviously be violated if the action filed were to be dismissed for lack of standing.
In the present case, respondents have no clear enforceable right, since their
claim over the land in question is merely inchoate and uncertain. Admitting that
they are only applicants for sales patents on the land, they are not and they do
not even claim to be owners thereof. In fact, there is no certainty that their
applications would even be ruled upon favorably, considering that some of the
applications have been pending for more than ten years already.
2. ID.; ID.; REAL PARTY IN INTEREST; ONLY THE GOVERNMENT MAY
INSTITUTE ACTION TO RECOVER OWNERSHIP OF PUBLIC LAND. It is
evident that respondents are not the real parties in interest. Because they admit
that they are not the owners of the land but mere applicants for sales patents
thereon, it is daylight clear that the land is public in character and that it should
revert to the State. This being the case, Section 101 of the Public Land Act
categorically declares that only the government may institute an action to recover
ownership of a public land. cDCaTH

3. ID.; ID.; ID.; DEFINED. Under Section 2, Rule 3 of the Rules of Court, every
action must be prosecuted or defended in the name of the real party in interest. It
further defines a "real party in interest" as one who stands to be benefited or
injured by the judgment in the suit. In Joya v. Presidential Commission on Good
Government, this Court explained that "legal standing means a personal and
substantial interest in the case such that the party has sustained or will sustain
direct injury as a result of . . . the act being challenged. The term 'interest' is
material interest, an interest in issue and to be affected by the decree, as
distinguished from mere interest in the question involved, or a mere incidental
interest. Moreover, the interest of the party must be personal and not one based
on a desire to vindicate the constitutional right of some third and unrelated party."
4. ID.; ID.; ID.; SUIT FILED BY PERSONS NOT PARTY IN INTEREST MUST
BE DISMISSED ON THE GROUND THAT THE COMPLAINT STATES NO
CAUSE OF ACTION. Clearly, a suit filed by a person who is not a party in
interest must be dismissed. Thus, in Lucas v. Durian, the Court affirmed the
dismissal of a Complaint filed by a party who alleged that the patent was
obtained by fraudulent means and, consequently, prayed for the annulment of
said patent and the cancellation of a certificate of title. The Court declared that
the proper party to bring the action was the government, to which the property
would revert. Likewise affirming the dismissal of a Complaint for failure to state a
cause of action, the Court in Nebrada v. Heirs of Alivionoted that the plaintiff,
being a mere homestead applicant, was not the real party in interest to institute
an action for reconveyance. HADTEC

5. ID.; ID.; EQUITY; CAN ONLY SUPPLEMENT THE LAW BUT NOT
SUPPLANT IT. Indeed, "[f]or all its conceded merits, equity is available only in
the absence of law and not as its replacement. Equity is described as justice
without legality, which simply means that it cannot supplant although it may, as
often happens, supplement the law." To grant respondents standing in the
present case is to go against the express language of the law. Equity cannot give
them this privilege. Equity can only supplement the law, not supplant it. STcADa

DECISION

PANGANIBAN, J : p

Equity may be invoked only in the absence of law; it may supplement the law, but
it can neither contravene nor supplant it. aisadc
 Statement of the Case
This principle is stressed by this Court in granting the Petition for Review
on Certiorari before us seeking the nullity of the April 16, 1997 Decision of the
Court of Appeals 1 in CA-GR CV No. 50025 and its October 13, 1997 Resolution
denying reconsideration. The dispositive portion of the assailed Decision reads
as follows:
"WHEREFORE, the foregoing considered, the appealed decision is SET
ASIDE and another one entered allowing plaintiffs-appellants to stay in
the premises pending final termination of the administrative proceedings
for cancellation of defendants-appellees' titles and final termination of
the action for reversion and annulment of title. Let notice of lis
pendens be annotated on Original Certificate of Title Nos. T-55515 and
T-55516.
"Let a copy of this decision be furnished to the Director of Lands and the
Office of the Solicitor General for the administrative investigation of
plaintiff-appellant's complaint and [for] the eventual filing of the petition
for the cancellation of defendants-appellees' title [to] be initiated,
expedited if still pending, and resolved without further delay." 2
By the foregoing disposition, the Court of Appeals effectively reversed the
February 9, 1995 Decision 3 of the Regional Trial Court of Misamis Oriental,
Branch 17, which disposed:
"WHEREFORE, premises considered, the complaint filed in this case
against the defendants by the plaintiffs should be, as it is hereby ordered,
DISMISSED, for lack of merit. Accordingly, the defendants are hereby
declared as owners of the property in litigation as evidenced by their
certificates of title covering their respective portions of Lot No. 3714 and
the plaintiffs, who are now possessing and occupying said parcel of land,
are hereby ordered to vacate the same within ninety (90) days, so that
the defendants can take possession of their respective portions and
enjoy the same as owners thereof.
"The counter-claims are, likewise, dismissed for failure to prove the
same. Costs against the plaintiffs." 4
Hence, this recourse to this Court. 5
The Facts
As found by the Court of Appeals, the facts of the case are as follows:
". . . Plaintiffs-appellants [herein respondents] are the actual occupants
and residents of a portion [of land] consisting of 1 ha. 7552 sq. m.
(Appellants' Brief, p. 28, Rollo) of the controverted lot, Lot No. 3714 of
the Cadastral Survey of Cagayan [(]Cadastral Case No. 18, L.R.C. Rec.
No. 1562[)] with the improvements thereon, situated in the Barrio of
Lapasan, City of Cagayan de Oro . . . containing an area of ONE
HUNDRED TWENTY SIX THOUSAND ONE HUNDRED AND TWELVE
(126,112) SQUARE METERS, more or less (Exhibit '2'; Records, pp. 12-
13).
"Plaintiffs-appellants are miscellaneous sales patent applicants of their
respective portions of the aforedescribed lot occupied by them [(]some
as far back as 1965[)] and have been religiously paying taxes on the
property. The action for reconveyance with damages filed before the
Regional Trial Court, Misamis Oriental, Cagayan de Oro City springs
from the fact that the lot in question [(]Lot 3714[)] had been titled under
Original Certificate of Title No. O-740 issued by the then Land
Registration Commission on December 13, 1977 in the name of Patricio
Salcedo married to Pilar Nagac. Said OCT was issued pursuant to
Decree of Registration No. N-168305 in accordance with a decision of
the Cadastral Court in Cadastral Case No. 18, LRC Cad. Rec. No. 1562
dated August 6, 1941 penned by the Hon. Lope Consing (Pre-Trial Brief
for Defendant Spouses Francisco and Angela Tankiko and Spouses
Isaias and Anita Valdehueza, Records, p. 258). Subsequently, separate
titles (Transfer Certificates of Title NO. T-55515 and T-55516) were
issued to defendant-appellee Tankiko after the latter purchased Lots
3714-B, 3714-C of the subdivision plan from the Heirs of Patricio
Salcedo represented by Atty. Godofredo Cabildo, their attorney-in-fact.
In turn, defendant-appellee Francisco Tankiko sold Lot 3714-C to
defendant-appellees Isaias and Anita Valdehuesa.

"Plaintiff-appellants contest the existence of the Consing decision and

cite the decision of the Hon. Eulalio Rosete dated April 18, 1980 [in] Civil
Case No. 6759 involving the neighboring lot (Lot No. 3715) likewise
(formerly) covered by OCT O-740 which makes the following observation
regarding Lot 3714:
'There is no record showing that a decision has been rendered in
Cadastral Case No. 18; G.L.T.O Record No. 1562 adjudicating
Lots Nos. 3714 and 3715 in favor of Patricio Salcedo married to
Pilar Nagac. (Exh UU and VV). If there was such a decision it
would have been with the records of the Land Registration
Commission inasmuch [as] the decree was issued only on
December 13, 1977 so that decision was still available on that
date.
'On the contrary, it was the decision rendered in Epediente (sic)
Catastro No. 18, G.L.R.P Record No. 1562, entitled,
'Commonwealth De Pilipinas, Solicitante, Antonia Abaday, et al.
Reclamantes,' rendered on December 19, 1940 which was found.
This decision shows that Lots Nos. 3714 and 3715 were declared
 public lands. (Exh. WW-2). Said decision, rendered by Judge
Ricardo Summers, reads, among others.
'xxx xxx xxx
Lote No. 3714 Declarado terreno publico por haber sido
reclamado unicamente por los Directores de Terrenos y Montes.
Lote No. 3715 Declarado toreno publico por haber sido
reclamado unificamente porlos Directores de Terrenos y Montes.
(Exh. WW-2-A).
. . . ' (Underscoring Supplied).
xxx xxx xxx
'The Court notes that Original Certificate of Title No. [O-]740
covers not only Lot 3715, but also Lot No. 3714, a parcel of land
which has been occupied and [is] now being used by the Don
Mariano Marcos Polytechnic College. Before this College, the
Misamis Oriental School of Arts and Trades, has been occupying
and using the Lot No. 3714 since before the war. This lot was also
declared public land by the Cadastral Court in Expediente
Catastro No. 18 G.L.R.O. Record No. 1562, because only the
Directors of Land and Forestry were the claimants (Exh. WW-2-A).
It would seem therefore that Original Certificate of Title No. [O-
]740 is likewise void ab initio as regards this lot. But, this Court
cannot make any pronouncement on this lot because it has not
been admitted for determination.'
(Records, pp. 41-43)
"In the course of the presentation plaintiffs' evidence in this appealed
case, the parties submitted a stipulation of facts (Records, pp. 392, 427,
429) wherein the parties admitted the existence of Civil Case No. 6646,
Regional Trial Court Branch 24, Misamis Oriental; and the Decision-
Adjudicando Lotes No Controvertidos rendered by Judge Ricardo
Summers in Expediente Cat. No. 18 G.L.R.O. Rec. No. 1562 on
December 14, 1940 which shows on page 6 thereof that Lot 3714 was
'declarado terreno publico'. However[,] defendants asserted that Lot
3714 was subsequently adjudicated to and ordered registered in the
name of Patricio Salcedo pursuant to Decree of Registration No. 168305
issued on August 6, 1941 by Judge Lope Consing but the Original
Certificate of Title No. O-740 was actually issued only on December 13,
1977. Parties further stipulated to the existence of Civil Case No. 6759
referring to the neighboring Lot 3715 and the decision rendered
therein supra declaring null and void Original Certificate of Title No. O-
740 as regards Lot No. 3715 and containing the opinion that OCT-O740
was likewise void respecting Lot No. 3714; the existence of Civil Case
No. 89-243 entitled Heirs of Bartolome Calderon, et al. vs. Salcedo, et al.
 which was terminated by a Judgment on Compromise Agreement
recognizing Miscellaneous Sales Patent No. 4744 in favor of the Heirs of
Bartolome Calderon over a 750 square meter portion of the land covered
by OCT No. O-740; the existence of tax declarations and tax receipts of
the plaintiff; the existence of OCT No. O-740 over Lot 3714, Subdivision
Plan of Patricio Salcedo over Lot 3714, Extra-judicial Settlement of [the]
Estate of Patricio Salcedo, and the Special Power of Attorney in favor of
Atty. Godofredo Cabildo as attorney-in-fact of the Salcedos (pp. 4298-
430, Record)." 6
Ruling of the Court of Appeals
The Court of Appeals (CA) found that Patricio Salcedo did not acquire any right
or title over the disputed land and, consequently, did not transmit any registrable
title to herein petitioners. Never presented as evidence was any copy of the
Consing Decision, which had allegedly authorized the Decree of Registration of
the property in favor of Patricio Salcedo. Evidence also shows that the land that
Patricio Salcedo succeeded in registering in his name had been previously
declared public land on December 19, 1940, in Expediente Cat. No. 18 penned
by Judge Ricardo Summers. Under the Regalian Doctrine, no public land can be
acquired by private persons without a grant from the government; since
petitioners did not present any evidence that Patricio Salcedo had acquired the
property from the government as a favored recipient by homestead, free
patent or sales patent said property could not have been acquired by him. LLphil

As the property in dispute is still part of the public domain, respondents are not
the proper parties to file an action for reconveyance, as they are not owners of
the land, but only applicants for sales patent thereon. However, equitable
considerations persuaded the CA to allow plaintiffs-appellants to remain on the
land in question, so that future litigation may be avoided.
Statement of the Issues
In their Memorandum, petitioners claim that the CA erred in its ruling on the
following issues:
"1. Respondents' legal personality to sue;
2. Decree of Registration;
3. Petitioners as innocent purchasers for value;
4. Allowing respondents to stay in the premises; and
5. Prescription." 7
This Court believes that the pivotal issue in this case is whether the private
respondents may be deemed the proper parties to initiate the present suit.
The Court's Ruling
The petition is meritorious.
Main Issue: Personality to Sue
Although the respondents had no personality to file the action for reconveyance
with damages, the Court of Appeals still ruled that the particular circumstances of
this case necessitated the exercise of equity jurisdiction, in order to avoid leaving
unresolved the matter of possession of the land in question.
On the other hand, petitioners insist that respondents had no legal capacity to file
the Complaint, because they were not the owners of the land but mere applicants
for sales patent thereon. Therefore, petitioners argue that respondents, not being
the real parties in interest, have no legal standing to institute the Complaint in the
trial court.
We agree with petitioners. The Court is not persuaded that the circumstances of
this case justify the exercise of equity jurisdiction that would allow a suit to be
filed by one who is not a real party in interest.
First, equity is invoked only when the plaintiff, on the basis of the action filed and
the relief sought, has a clear right that he seeks to enforce, or that would
obviously be violated if the action filed were to be dismissed for lack of standing.
In the present case, respondents have no clear enforceable right, since their
claim over the land in question is merely inchoate and uncertain. Admitting that
they are only applicants for sales patents on the land, they are not and they do
not even claim to be owners thereof. In fact, there is no certainty that their
applications would even be ruled upon favorably, considering that some of the
applications have been pending for more than ten years already.
Second, it is evident that respondents are not the real parties in interest.
Because they admit that they are not the owners of the land but mere applicants
for sales patents thereon, it is daylight clear that the land is public in character
and that it should revert to the State. This being the case,Section 101 of the
Public Land Act categorically declares that only the government may institute an
action to recover ownership of a public land. 8 InSumail v. CFI, 9 a case involving
facts identical to the present controversy, the Court held that a private party had
no personality to institute an action for reversion of a parcel of land to the public
domain, viz.:
"Under section 101 above reproduced, only the Solicitor General or the
officer acting in his stead may bring the action for reversion.
Consequently, Sumail may not bring such action or any action which
would have the effect of cancelling a free patent and the corresponding
certificate of title issued on the basis thereof, with the result that the land
covered thereby will again form part of the public domain. Furthermore,
there is another reason for withholding legal personality from Sumail. He
does not claim the land to be his private property. . . . Consequently,
 even if the parcel were declared reverted to the public domain, Sumail
does not automatically become owner thereof. He is a mere public land
applicant like others who might apply for the same."
Under Section 2, Rule 3 of the Rules of Court, 1 0 every action must be
prosecuted or defended in the name of the real party in interest. It further defines
a "real party in interest" as one who stands to be benefited or injured by the
judgment in the suit. In Joya v. Presidential Commission on Good Government,
this Court explained that "legal standing means a personal and substantial
interest in the case such that the party has sustained or will sustain direct injury
as a result of . . . the act being challenged. The term 'interest' is material interest,
an interest in issue and to be affected by the decree, as distinguished from mere
interest in the question involved, or a mere incidental interest. Moreover, the
interest of the party must be personal and not one based on a desire to vindicate
the constitutional right of some third and unrelated party." 11

Clearly, a suit filed by a person who is not a party in interest must be dismissed.
Thus, in Lucas v. Durian, 12 the Court affirmed the dismissal of a Complaint filed
by a party who alleged that the patent was obtained by fraudulent means and,
consequently, prayed for the annulment of said patent and the cancellation of a
certificate of title. The Court declared that the proper party to bring the action was
the government, to which the property would revert. Likewise affirming the
dismissal of a Complaint for failure to state a cause of action, the Court
in Nebrada v. Heirs of Alivio 13 noted that the plaintiff, being a mere homestead
applicant, was not the real party in interest to institute an action for reconveyance.
In Gabila v. Bariga, 14 the Court further declared:
"The present motion to dismiss is actually predicated on Section 1(g),
Rule 16 of the Revised Rules of Court, i.e., failure of the complaint to
state a cause of action, for it alleged in paragraph 12 thereof that the
plaintiff admits that he has no right to demand the cancellation or
amendment of the defendant's title, because, even if the said title were
cancelled or amended, the ownership of the land embraced therein, or
the portion thereof affected by the amendment would revert to the public
domain. In his amended complaint, the plaintiff makes no pretense at all
that any part of the land covered by the defendant's title was privately
owned by him or by his predecessors-in-interest. Indeed, it is admitted
therein that the said land was at all times a part of the public domain until
December 18, 1964, when the government issued a title thereon in favor
of the defendant. Thus, if there is any person or entity in relief, it can only
by the government."
Verily, the Court stressed that "[i]f the suit is not brought in the name of or against
the real party in interest, a motion to dismiss may be filed on the ground that the
complaint states no cause of action.'' 15 In fact, a final judgment may be
invalidated if the real parties in interest are not included. This was underscored
by the Court in Arcelona v. CA, 16 in which a final judgment was nullified because
indispensable parties were not impleaded.
In the present dispute, only the State can file a suit for reconveyance of a public
land. Therefore, not being the owners of the land but mere applicants for sales
patents thereon, respondents have no personality to file the suit. Neither will they
be directly affected by the judgment in such suit.
Indeed, "[f]or all its conceded merits, equity is available only in the absence of
law and not as its replacement. Equity is described as justice without legality,
which simply means that it cannot supplant although it may, as often happens,
supplement the law." 17 To grant respondents standing in the present case is to
go against the express language of the law. Equity cannot give them this
privilege. Equity can only supplement the law, not supplant it.
Having resolved that the respondents have no legal standing to sue and are not
the real parties in interest, we find no more necessity to take up the other issues.
They shall become important only if a proper suit is instituted by the solicitor
general in the future.
WHEREFORE, the petition is hereby GRANTED and the assailed Decision is
REVERSED and SET ASIDE. The Complaint filed in Civil Case No. 91-241
before the Regional Trial Court of Misamis Oriental, Branch 17, is DISMISSED.
No costs. SO ORDERED.
(Spouses Tankiko v. Cezar, G.R. No. 131277, [February 2, 1999], 362 PHIL
|||

184-196)

[G.R. No. 136433. December 6, 2006.]

ANTONIO B. BALTAZAR, petitioner, vs. HONORABLE

OMBUDSMAN, EULOGIO M. MARIANO, JOSE D. JIMENEZ, JR.,
TORIBIO E. ILAO, JR. and ERNESTO R.
SALENGA, respondents.

DECISION

VELASCO, JR., J : p

The Case
Ascribing grave abuse of discretion to respondent Ombudsman, this Petition for
Review on Certiorari, 1 under Rule 45 pursuant to Section 27 of RA 6770, 2 seeks
to reverse and set aside the November 26, 1997 Order 3 of the Office of the
Special Prosecutor (OSP) in OMB-1-94-3425 duly approved by then
Ombudsman Aniano Desierto on August 21, 1998, which recommended the
dismissal of the Information 4 in Criminal Case No. 23661 filed before the
Sandiganbayan against respondents Pampanga Provincial Adjudicator Toribio E.
Ilao, Jr., Chief Legal Officer Eulogio M. Mariano and Legal Officer Jose D.
Jimenez, Jr. (both of the DAR Legal Division in San Fernando, Pampanga), and
Ernesto R. Salenga. The petition likewise seeks to set aside the October 30,
1998 Memorandum 5 of the OSP duly approved by the Ombudsman on
November 27, 1998 which denied petitioner's Motion for
Reconsideration. 6 Previously, the filing of the Information against said
respondents was authorized by the May 10, 1996 Resolution 7 and October 3,
1996 Order 8 of the Ombudsman which found probable cause that they granted
unwarranted benefits, advantage, and preference to respondent Salenga in
violation of Section 3 (e) of RA 3019. 9
The Facts
Paciencia Regala owns a seven (7)-hectare fishpond located at Sasmuan,
Pampanga. Her Attorney-in-Fact Faustino R. Mercado leased the fishpond for
PhP 230,000.00 to Eduardo Lapid for a three (3)-year period, that is, from August
7, 1990 to August 7, 1993. 10 Lessee Eduardo Lapid in turn sub-leased the
fishpond to Rafael Lopez for PhP 50,000.00 during the last seven (7) months of
the original lease, that is, from January 10, 1993 to August 7,
1993. 11 Respondent Ernesto Salenga was hired by Eduardo Lapid as fishpond
watchman (bante-encargado). In the sub-lease, Rafael Lopez rehired respondent
Salenga.
Meanwhile, on March 11, 1993, respondent Salenga, through a certain Francis
Lagman, sent his January 28, 1993 demand letter 12 to Rafael Lopez and
Lourdes Lapid for unpaid salaries and non-payment of the 10% share in the
harvest.
On June 5, 1993, sub-lessee Rafael Lopez wrote a letter to respondent Salenga
informing the latter that for the last two (2) months of the sub-lease, he had given
the rights over the fishpond to Mario Palad and Ambit Perez for PhP
20,000.00. 13 This prompted respondent Salenga to file a Complaint14 before the
Provincial Agrarian Reform Adjudication Board (PARAB), Region III, San
Fernando, Pampanga docketed as DARAB Case No. 552-P'93 entitled Ernesto R.
Salenga v. Rafael L. Lopez and Lourdes L. Lapid for Maintenance of Peaceful
Possession, Collection of Sum of Money and Supervision of Harvest. The
Complaint was signed by respondent Jose D. Jimenez, Jr., Legal Officer of the
Department of Agrarian Reform (DAR) Region III Office in San Fernando,
Pampanga, as counsel for respondent Salenga; whereas respondent Eulogio M.
Mariano was the Chief Legal Officer of DAR Region III. The case was assigned
to respondent Toribio E. Ilao, Jr., Provincial Adjudicator of DARAB, Pampanga.
On May 10, 1993, respondent Salenga amended his complaint. 15 The
amendments included a prayer for the issuance of a temporary restraining order
(TRO) and preliminary injunction. However, before the prayer for the issuance of
a TRO could be acted upon, on June 16, 1993, respondent Salenga filed a
Motion to Maintain Status Quo and to Issue Restraining Order 16 which was set
for hearing on June 22, 1993. In the hearing, however, only respondent Salenga
with his counsel appeared despite notice to the other parties. Consequently,
the ex-parte presentation of respondent Salenga's evidence in support of the
prayer for the issuance of a restraining order was allowed, since the motion was
unopposed, and on July 21, 1993, respondent Ilao, Jr. issued a TRO. 17
Thereafter, respondent Salenga asked for supervision of the harvest, which the
board sheriff did. Accordingly, defendants Lopez and Lapid received their
respective shares while respondent Salenga was given his share under protest.
In the subsequent hearing for the issuance of a preliminary injunction, again, only
respondent Salenga appeared and presented his evidence for the issuance of
the writ.IaCHTS

Pending resolution of the case, Faustino Mercado, as Attorney-in-Fact of the

fishpond owner Paciencia Regala, filed a motion to intervene which was granted
by respondent Ilao, Jr. through the November 15, 1993 Order. After the trial,
respondent Ilao, Jr. rendered a Decision on May 29, 1995 dismissing the
Complaint for lack of merit; but losing plaintiff, respondent Salenga, appealed the
decision before the DARAB Appellate Board.
Complaint Before the Ombudsman
On November 24, 1994, pending resolution of the agrarian case, the instant case
was instituted by petitioner Antonio Baltazar, an alleged nephew of Faustino
Mercado, through a Complaint-Affidavit 18 against private respondents before the
Office of the Ombudsman which was docketed as OMB-1-94-3425
entitled Antonio B. Baltazar v. Eulogio Mariano, Jose Jimenez, Jr., Toribio Ilao, Jr.
and Ernesto Salenga for violation of RA 3019. Petitioner charged private
respondents of conspiracy through the issuance of the TRO in allowing
respondent Salenga to retain possession of the fishpond, operate it, harvest the
produce, and keep the sales under the safekeeping of other private respondents.
Moreover, petitioner maintains that respondent Ilao, Jr. had no jurisdiction to hear
and act on DARAB Case No. 552-P'93 filed by respondent Salenga as there was
no tenancy relation between respondent Salenga and Rafael L. Lopez, and thus,
the complaint was dismissible on its face.
Through the December 14, 1994 Order, 19 the Ombudsman required private
respondents to file their counter-affidavits, affidavits of their witnesses, and other
controverting evidence. While the other respondents submitted their counter-
affidavits, respondent Ilao, Jr. instead filed his February 9, 1995 motion to
dismiss, February 21, 1995 Reply, and March 24, 1995 Rejoinder.
Ombudsman's Determination of Probable Cause
On May 10, 1996, the Ombudsman issued a Resolution 20 finding cause to bring
respondents to court, denying the motion to dismiss of respondent Ilao, Jr., and
recommending the filing of an Information for violation of Section 3 (e) of RA
3019. Subsequently, respondent Ilao, Jr. filed his September 16, 1996 Motion for
Reconsideration and/or Re-investigation 21 which was denied through the
October 3, 1996 Order. 22 Consequently, the March 17, 1997 Information 23 was
filed against all the private respondents before the Sandiganbayan which was
docketed as Criminal Case No. 23661.
Before the graft court, respondent Ilao, Jr. filed his May 19, 1997 Motion for
Reconsideration and/or Re-investigation which was granted through the August
29, 1997 Order. 24 On September 8, 1997, respondent Ilao, Jr. subsequently filed
his Counter-Affidavit 25 with attachments while petitioner did not file any reply-
affidavit despite notice to him. The OSP of the Ombudsman conducted the re-
investigation; and the result of the re-investigation was embodied in the assailed
November 26, 1997 Order 26 which recommended the dismissal of the complaint
in OMB-1-94-3425 against all private respondents. Upon review, the
Ombudsman approved the OSP's recommendation on August 21, 1998.
Petitioner's Motion for Reconsideration 27 was likewise denied by the OSP
through the October 30, 1998 Memorandum 28 which was approved by the
Ombudsman on November 27, 1998. Consequently, the trial prosecutor moved
orally before the Sandiganbayan for the dismissal of Criminal Case No. 23661
which was granted through the December 11, 1998 Order. 29
Thus, the instant petition is before us. cSHIaA

The Issues
Petitioner raises two assignments of errors, to wit:
THE HONORABLE OMBUDSMAN ERRED IN GIVING DUE COURSE A
MISPLACED COUNTER-AFFIDAVIT FILED AFTER THE
TERMINATION OF THE PRELIMINARY INVESTIGATION AND/OR
THE CASE WAS ALREADY FILED BEFORE THE SANDIGANBAYAN.
ASSUMING OTHERWISE, THE HONORABLE OMBUDSMAN
LIKEWISE ERRED IN REVERSING HIS OWN RESOLUTION WHERE
IT WAS RESOLVED THAT ACCUSED AS PROVINCIAL AGRARIAN
ADJUDICATOR HAS NO JURISDICTION OVER A COMPLAINT
WHERE THERE EXIST [sic] NO TENANCY RELATIONSHIP
CONSIDERING [sic] COMPLAINANT IS NOT A TENANT BUT A
"BANTE-ENCARGADO" OR WATCHMAN-OVERSEER HIRED FOR A
 SALARY OF P3,000.00 PER MONTH AS ALLEGED IN HIS OWN
COMPLAINT. 30
Before delving into the errors raised by petitioner, we first address the preliminary
procedural issue of the authority and locus standi of petitioner to pursue the
instant petition.
Preliminary Issue: Legal Standing
Locus standi is defined as "a right of appearance in a court of justice . . . on a
given question." 31 In private suits, standing is governed by the "real-parties-in
interest" rule found in Section 2, Rule 3 of the 1997 Rules of Civil Procedure
which provides that "every action must be prosecuted or defended in the name of
the real party in interest." Accordingly, the "real-party-in interest" is "the party who
stands to be benefited or injured by the judgment in the suit or the party entitled
to the avails of the suit." 32 Succinctly put, the plaintiffs' standing is based on their
own right to the relief sought.
The records show that petitioner is a non-lawyer appearing for himself and
conducting litigation in person. Petitioner instituted the instant case before the
Ombudsman in his own name. In so far as the Complaint-Affidavit filed before the
Office of the Ombudsman is concerned, there is no question on his authority and
legal standing. Indeed, the Office of the Ombudsman is mandated to "investigate
and prosecute on its own or on complaint by any person, any act or omission
of any public officer or employee, office or agency, when such act or omission
appears to be illegal, unjust, improper or inefficient (emphasis supplied)." 33 The
Ombudsman can act on anonymous complaints and motu proprio inquire into
alleged improper official acts or omissions from whatever source, e.g., a
newspaper. 34 Thus, any complainant may be entertained by the Ombudsman for
the latter to initiate an inquiry and investigation for alleged irregularities.

However, filing the petition in person before this Court is another matter. The
Rules allow a non-lawyer to conduct litigation in person and appear for oneself
only when he is a party to a legal controversy. Section 34 of Rule 138 pertinently
provides, thus:
SEC. 34. By whom litigation conducted. In the court of a justice of the
peace a party may conduct his litigation in person, with the aid of an
agent or friend appointed by him for that purpose, or with the aid of an
attorney. In any other court, a party may conduct his litigation
personallyor by aid of an attorney, and his appearance must be
either personal or by a duly authorized member of the bar (emphases
supplied).
Petitioner has no legal standing
Is petitioner a party or a real party in interest to have the locus standi to pursue
the instant petition? We answer in the negative. TSEAaD

While petitioner may be the complainant in OMB-1-94-3425, he is not a real party

in interest. Section 2, Rule 3 of the 1997 Rules of Civil Procedure stipulates, thus:
SEC. 2. Parties in interest. A real party in interest is the party who
stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit. Unless otherwise authorized by law or
these Rules, every action must be prosecuted or defended in the name
of the real party in interest.
The same concept is applied in criminal and administrative cases.
In the case at bar which involves a criminal proceeding stemming from a civil
(agrarian) case, it is clear that petitioner is not a real party in interest. Except
being the complainant, the records show that petitioner is a stranger to the
agrarian case. It must be recalled that the undisputed owner of the fishpond is
Paciencia Regala, who intervened in DARAB Case No. 552-P'93 through her
Attorney-in-Fact Faustino Mercado in order to protect her interest. The motion for
intervention filed by Faustino Mercado, as agent of Paciencia Regala, was
granted by respondent Provincial Adjudicator Ilao, Jr. through the November 15,
1993 Order in DARAB Case No. 552-P'93.
Agency cannot be further delegated
Petitioner asserts that he is duly authorized by Faustino Mercado to institute the
suit and presented a Special Power of Attorney 35 (SPA) from Faustino Mercado.
However, such SPA is unavailing for petitioner. For one, petitioner's principal,
Faustino Mercado, is an agent himself and as such cannot further delegate his
agency to another. Otherwise put, an agent cannot delegate to another the same
agency. The legal maxim potestas delegata non delegare potest; a power once
delegated cannot be re-delegated, while applied primarily in political law to the
exercise of legislative power, is a principle of agency. 36 For another, a re-
delegation of the agency would be detrimental to the principal as the second
agent has no privity of contract with the former. In the instant case, petitioner has
no privity of contract with Paciencia Regala, owner of the fishpond and principal
of Faustino Mercado.
Moreover, while the Civil Code under Article 1892 37 allows the agent to appoint
a substitute, such is not the situation in the instant case. The SPA clearly
delegates the agency to petitioner to pursue the case and not merely as a
substitute. Besides, it is clear in the aforecited Article that what is allowed is a
substitute and not a delegation of the agency.
Clearly, petitioner is neither a real party in interest with regard to the agrarian
case, nor is he a real party in interest in the criminal proceedings conducted by
the Ombudsman as elevated to the Sandiganbayan. He is not a party who will be
benefited or injured by the results of both cases.
Petitioner: a stranger and not an injured private complainant
Petitioner only surfaced in November 1994 as complainant before the
Ombudsman. Aside from that, not being an agent of the parties in the agrarian
case, he has no locus standi to pursue this petition. He cannot be likened to an
injured private complainant in a criminal complaint who has direct interest in the
outcome of the criminal case.
More so, we note that the petition is not pursued as a public suit with petitioner
asserting a "public right" in assailing an allegedly illegal official action, and doing
so as a representative of the general public. He is pursuing the instant case as
an agent of an ineffective agency.
Petitioner has not shown entitlement to judicial protection
Even if we consider the instant petition as a public suit, where we may consider
petitioner suing as a "stranger," or in the category of a "citizen," or "taxpayer," still
petitioner has not adequately shown that he is entitled to seek judicial protection.
In other words, petitioner has not made out a sufficient interest in the vindication
of the public order and the securing of relief as a "citizen" or "taxpayer"; more so
when there is no showing that he was injured by the dismissal of the criminal
complaint before the Sandiganbayan. TEaADS

Based on the foregoing discussion, petitioner indubitably does not have locus
standi to pursue this action and the instant petition must be forthwith dismissed
on that score. Even granting arguendo that he has locus standi, nonetheless,
petitioner fails to show grave abuse of discretion of respondent Ombudsman to
warrant a reversal of the assailed November 26, 1997 Order and the October 30,
1998 Memorandum.
First Issue: Submission of Counter-Affidavit
The Sandiganbayan, not the Ombudsman, ordered re-investigation
On the substantive aspect, in the first assignment of error, petitioner imputes
grave abuse of discretion on public respondent Ombudsman for allowing
respondent Ilao, Jr. to submit his Counter-Affidavit when the preliminary
investigation was already concluded and an Information filed with the
Sandiganbayan which assumed jurisdiction over the criminal case. This
contention is utterly erroneous.
The facts clearly show that it was not the Ombudsman through the OSP who
allowed respondent Ilao, Jr. to submit his Counter-Affidavit. It was the
Sandiganbayan who granted the prayed for re-investigation and ordered the OSP
to conduct the re-investigation through its August 29, 1997 Order, as follows:
 Considering the manifestation of Prosecutor Cicero Jurado, Jr. that
accused Toribio E. Ilao, Jr. was not able to file his counter-affidavit in
the preliminary investigation, there appears to be some basis for
granting the motion of said accused for reinvestigation.
WHEREFORE, accused Toribio E. Ilao, Jr. may file his counter-affidavit,
with documentary evidence attached, if any, with the Office of the
Special Prosecutor within then (10) days from today. The prosecution
is ordered to conduct a reinvestigation within a period of thirty (30)
days. 38(Emphases supplied.)
As it is, public respondent Ombudsman through the OSP did not exercise any
discretion in allowing respondent Ilao, Jr. to submit his Counter-Affidavit. The
OSP simply followed the graft court's directive to conduct the re-investigation
after the Counter-Affidavit of respondent Ilao, Jr. was filed. Indeed, petitioner did
not contest nor question the August 29, 1997 Order of the graft court. Moreover,
petitioner did not file any reply-affidavit in the re-investigation despite notice.
Re-investigation upon sound discretion of graft court
Furthermore, neither can we fault the graft court in granting the prayed for re-
investigation as it can readily be seen from the antecedent facts that respondent
Ilao, Jr. was not given the opportunity to file his Counter-Affidavit. Respondent
Ilao, Jr. filed a motion to dismiss with the Ombudsman but such was not resolved
before the Resolution finding cause to bring respondents to trial was issued.
In fact, respondent Ilao, Jr.'s motion to dismiss was resolved only through the
May 10, 1996 Resolution which recommended the filing of an Information.
Respondent Ilao, Jr.'s Motion for Reconsideration and/or Re-investigation was
denied and the Information was filed with the graft court.
Verily, courts are given wide latitude to accord the accused ample opportunity to
present controverting evidence even before trial as demanded by due process.
Thus, we held in Villaflor v. Vivar that "[a] component part of due process in
criminal justice, preliminary investigation is a statutory and substantive right
accorded to the accused before trial. To deny their claim to a preliminary
investigation would be to deprive them of the full measure of their right to due
process." 39
Second Issue: Agrarian Dispute
Anent the second assignment of error, petitioner contends that DARAB Case No.
552-P'93 is not an agrarian dispute and therefore outside the jurisdiction of the
DARAB. He maintains that respondent Salenga is not an agricultural tenant but a
mere watchman of the fishpond owned by Paciencia Regala. Moreover,
petitioner further argues that Rafael Lopez and Lourdes Lapid, the respondents
in the DARAB case, are not the owners of the fishpond. CAaSHI

Nature of the case determined by allegations in the complaint

This argument is likewise bereft of merit. Indeed, as aptly pointed out by
respondents and as borne out by the antecedent facts, respondent Ilao, Jr. could
not have acted otherwise. It is a settled rule that jurisdiction over the subject
matter is determined by the allegations of the complaint. 40 The nature of an
action is determined by the material averments in the complaint and the
character of the relief sought, 41 not by the defenses asserted in the answer or
motion to dismiss. 42 Given that respondent Salenga's complaint and its
attachment clearly spells out the jurisdictional allegations that he is an
agricultural tenant in possession of the fishpond and is about to be ejected from it,
clearly, respondent Ilao, Jr. could not be faulted in assuming jurisdiction as said
allegations characterize an agricultural dispute. Besides, whatever defense
asserted in an answer or motion to dismiss is not to be considered in resolving
the issue on jurisdiction as it cannot be made dependent upon the allegations of
the defendant.

Issuance of TRO upon the sound discretion of hearing officer

As regards the issuance of the TRO, considering the proper assumption of
jurisdiction by respondent Ilao, Jr., it can be readily culled from the antecedent
facts that his issuance of the TRO was a proper exercise of discretion. Firstly, the
averments with evidence as to the existence of the need for the issuance of the
restraining order were manifest in respondent Salenga's Motion to Maintain
Status Quo and to Issue Restraining Order, 43 the attached Police Investigation
Report, 44 and Medical Certificate. 45 Secondly, only respondent Salenga
attended the June 22, 1993 hearing despite notice to parties. Hence, Salenga's
motion was not only unopposed but his evidence adduced ex-parte also
adequately supported the issuance of the restraining order.
Premises considered, respondent Ilao, Jr. has correctly assumed jurisdiction and
properly exercised his discretion in issuing the TRO as respondent Ilao, Jr.
aptly maintained that giving due course to the complaint and issuing the TRO do
not reflect the final determination of the merits of the case. Indeed, after hearing
the case, respondent Ilao, Jr. rendered a Decision on May 29, 1995 dismissing
DARAB Case No. 552-P'93 for lack of merit.
Court will not review prosecutor's determination of probable cause
Finally, we will not delve into the merits of the Ombudsman's reversal of its initial
finding of probable cause or cause to bring respondents to trial. Firstly, petitioner
has not shown that the Ombudsman committed grave abuse of discretion in
rendering such reversal. Secondly, it is clear from the records that the initial
finding embodied in the May 10, 1996 Resolution was arrived at before the filing
of respondent Ilao, Jr.'s Counter-Affidavit. Thirdly, it is the responsibility of the
public prosecutor, in this case the Ombudsman, to uphold the law, to prosecute
the guilty, and to protect the innocent. Lastly, the function of determining the
existence of probable cause is proper for the Ombudsman in this case and we
will not tread on the realm of this executive function to examine and assess
evidence supplied by the parties, which is supposed to be exercised at the start
of criminal proceedings. In Perez v. Hagonoy Rural Bank, Inc., 46 as cited
in Longos Rural Waterworks and Sanitation Association, Inc. v. Hon.
Desierto, 47 we had occasion to rule that we cannot pass upon the sufficiency or
insufficiency of evidence to determine the existence of probable cause. 48
WHEREFORE, the instant petition is DENIED for lack of merit, and the
November 26, 1997 Order and the October 30, 1998 Memorandum of the Office
of the Special Prosecutor in Criminal Case No. 23661 (OMB-1-94-3425) are
hereby AFFIRMED IN TOTO, with costs against petitioner. SO ORDERED.
||| (Baltazar v. Mariano, G.R. No. 136433, [December 6, 2006], 539 PHIL 131-147)

[G.R. No. 118910. July 17, 1995.]

KILOSBAYAN, INCORPORATED, JOVITO R. SALONGA,

CIRILO A. RIGOS, ERME CAMBA , EMILIO C. CAPULONG, JR.,
JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO
SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, REFAEL G.
FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN,
QUINTIN S. DOROMAL, SEN. FREDDIE WEBB, SEN.
WIGBERTO TAADA, REP. JOKER P. ARROYO, petitioners, vs.
MANUEL L. MORATO, in his capacity as Chairman of the
Philippine Charity Sweepstakes Office, and the PHILIPPINE
GAMING MANAGEMENT CORPORATION, respondents.

Jovito R. Salonga, Fernando Santiago and Emilio C . Capulong, Jr., for the
petitioners.
Renato L. Cayetano, Eleazar Reyes for private respondent PGMC.
The Solicitor General for public respondent.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; "LAW OF THE CASE"; DOCTRINE

APPLICABLE ONLY WHEN A CASE IS BEFORE A COURT A SECOND TIME
AFTER A RULING BY AN APPELLATE COURT. Petitioners argue that inquiry
into their right to bring this suit is barred by the doctrine of "law of the case." We
do not think this doctrine is applicable considering the fact that while this case is
a sequel to G.R. No. 113375, it is not its continuation. The doctrine applies only
when a case is before a court a second time after a ruling by an appellate court.
2. ID.; ID.; ID.; DEFINITION. "Law of the case" has been defined as the
opinion delivered on a former appeal. More specifically, it means that whatever is
once irrevocably established as the controlling legal rule of decision between the
same parties in the same case continues to be the law of the case, whether
correct on general principles or not, so long as the facts on which such decision
was predicated continue to be the facts of the case before the court.
3. ID.; ID.; "LAW OF THE CASE" DIFFERENTIATED FROM RES JUDICATA.
As this Court explained in another case, "The law of the case, as applied to a
former decision of an appellate court, merely expresses the practice of the courts
in refusing to reopen what has been decided. It differs fromres judicata in that the
conclusiveness of the first judgment is not dependent upon its finality. The first
judgment is generally, if not universally, not final. It relates entirely to questions of
law, and is confined in its operation to subsequent proceedings in the same
case." (Municipality of Daet v. Court of Appeals, 93 SCRA 503, 521 [1979])
4. ID.; ID.; "LAW OF THE CASE"; DOCTRINE WILL NOT APPLY WHERE THE
PARTIES ARE THE SAME BUT THE CASES ARE DIFFERENT. It follows
that since the present case is not the same one litigated by the parties before
in G.R. No. 113375, the ruling there cannot in any sense be regarded as "the law
of this case." The parties are the same but the cases are not.
5. ID.; ID.; RULE ON CONCLUSIVENESS OF JUDGMENT OR PRECLUSION
OF ISSUES; DOCTRINE CONSTRUED. Nor is inquiry into petitioners' right to
maintain this suit foreclosed by the related doctrine of "conclusiveness of
judgment." According to the doctrine, an issue actually and directly passed upon
and determined in a former suit cannot again be drawn in question in any future
action between the same parties involving a different cause of action. (Pealosa
v. Tuason, 22 Phil. 303, 313 [1912]; Heirs of Roxas v. Galido, 108 Phil. 582
[1960])
6. ID.; ID.; ID.; DOCTRINE DOES NOT APPLY TO ISSUES OF LAW. It has
been held that the rule on conclusiveness of judgment or preclusion of issues or
collateral estoppel does not apply to issues of law, at least when substantially
unrelated claims are involved. (Montana v. United States, 440 U.S. 147, 162, 59
L. Ed. 2d 210, 222 [1979]; BATOR MELTZER, MISHKIN AND SHAPIRO, THE
FEDERAL COURTS AND THE FEDERAL SYSTEM 1058, n. 2 [3rd Ed., 1988])
7. ID.; ID.; ID.; ID. This exception to the General Rule of Issue Preclusion is
authoritatively formulated in Restatement of the Law 2d, on Judgments, as
follows: Sec. 28. Although an issue is actually litigated and determined by a valid
and final judgment, and the determination is essential to the judgment, relitigation
of the issue in a subsequent action between the parties is not precluded in the
following circumstances: . . . (2) The issue is one of law and (a) the two actions
involve claims that are substantially unrelated, or (b) a new determination is
warranted in order to take account of an intervening change in the applicable
legal context or otherwise to avoid inequitable administration of the laws.
8. ID.; ID.; ID.; ID.; QUESTION WHETHER PETITIONERS HAVE STANDING
TO QUESTION THE EQUIPMENT LEASE AGREEMENT (ELA), A LEGAL
QUESTION. The question whether petitioners have standing to question the
Equipment Lease Agreement or ELA is a legal question. As will presently be
shown, the ELA, which petitioners seek to declare invalid in this proceeding, is
essentially different from the 1993 Contract of Lease entered into by the PCSO
with the PGMC. Hence the determination in the prior case (G.R. No. 113375) that
petitioners had standing to challenge the validity of the 1993 Contract of Lease of
the parties does not preclude determination of their standing in the present suit.
9. ID.; ID.; RULE ON STANDING AND REAL PARTY-IN-INTEREST,
DIFFERENTIATED. The difference between the rule on standing and real
party-in-interest has been noted by authorities thus: "It is important to note . . .
that standing because of its constitutional and public policy underpinnings, is very
different from questions relating to whether a particular plaintiff is the real party-
in-interest or has capacity to sue. Although all three requirements are directed
towards ensuring that only certain parties can maintain an action, standing
restrictions require a partial consideration of the merits, as well as broader policy
concerns relating to the proper role of the judiciary in certain areas.
(FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328 [1985])
Standing is a special concern in constitutional law because in some cases suits
are brought not by parties who have been personally injured by the operation of a
law or by official action taken, but by concerned citizens, taxpayers or voters who
actually sue in the public interest. Hence the question in standing is whether such
parties have "alleged such a personal stake in the outcome of the controversy as
to assure that concrete adverseness which sharpens the presentation of issues
upon which the court so largely depends for illumination of difficult constitutional
questions." (Baker v. Carr, 369 U.S. 7 L. Ed. 2d 633 [1962]) On the other hand,
the question as to "real party-in-interest" is whether he is "the party who would be
benefited or injured by the judgment, or the 'party entitled to the avails of the
suit.'" (Salonga v. Warner Barnes & Co., Ltd., 88 Phil 125, 131 [1951])
10. ID.; ID.; REAL PARTIES-IN-INTEREST IN ANNULMENT OF CONTRACTS
ARE PARTIES TO THE AGREEMENT. In actions for the annulment of
contracts, such as this action, the real parties are those who are parties to the
agreement or are bound either principally or subsidiarily or are prejudiced in their
rights with respect to one of the contracting parties and can show the detriment
which would positively result to them from the contract even though they did not
intervene in it (Ibaez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912]), or
who claim a right to take part in a public bidding but have been illegally excluded
from it. (See De la Lara Co., Inc. v. Secretary of Public Works and
Communications, G.R. No. L-13460, Nov. 28, [1958])
11. ID.; ID.. ID.; PARTIES WITH PRESENT SUBSTANTIAL INTEREST;
"PRESENT SUBSTANTIAL INTEREST," CONSTRUED. These are parties
with "a present substantial interest, as distinguished from a mere expectancy or
future, contingent, subordinate, or consequential interest. The phrase 'present
substantial interest' more concretely is meant such interest of a party in the
subject matter of action as will entitle him, under the substantive law, to recover if
the evidence is sufficient, or that he has the legal title to demand and the
defendant will be protected in a payment to or recovery by him." (1 MORAN,
COMMENTS ON THE RULES OF COURT 154-155 [1979])
12. ID.; ID.; ID.; PARTIES WITHOUT PRESENT SUBSTANTIAL INTEREST IN
THE EQUIPMENT LEASE AGREEMENT, NOT ENTITLED TO BRING SUIT
FOR ANNULMENT; CASE AT BAR. But petitioners do not have such present
substantial interest in the ELA as would entitle them to bring this suit. Denying to
them the right to intervene will not leave without remedy any perceived illegality
in the execution of government contracts. Questions as to the nature or validity of
public contracts or the necessity for a public bidding before they may be made
can be raised in an appropriate case before the Commission on Audit or before
the Ombudsman. The Constitution requires that the Ombudsman and his
deputies, "as protectors of the people shall act promptly on complaints filed in
any form or manner against public officials or employees of the government, or
any subdivision, agency or instrumentality thereof including government-owned
or controlled corporations." (Art. XI, 12) In addition, the Solicitor General is
authorized to bring an action for quo warranto if it should be thought that a
government corporation, like the PCSO, has offended against its corporate
charter or misused its franchise. (Rule 66, Sec. 2 [a] [d] For reasons set for, we
hold that petitioner have no cause against respondents and therefore their
petition should be dismissed.
13. CIVIL LAW; OBLIGATIONS AND CONTRACTS; EQUIPMENT LEASE
AGREEMENT, A LEASE CONTRACT. The features of the old Contract of
Lease have been removed in the present ELA. While the rent is still expressed in
terms of percentage (it is now 4.3% of the gross receipts from the sale of tickets)
in the ELA, the PGMC is now guaranteed a minimum rent of P35,000.00 a year
per terminal in commercial operation. (Par. 2) The PGMC is thus assured of
payment of the rental. The PCSO now bears all losses because the operation of
the system is completely in its hands. This feature of the new contract negates
any doubt that it is anything but a lease agreement. In this case the rental has to
be expressed in terms of percentage of the revenue of the PCSO because
rentals are treated in the charter of the agency (R.A. No. 1169, Sec. 6[C]) as
"operating expenses" and the allotment for "operating expenses" is a percentage
of the net receipts. We hold that the ELA is a lease contract and that it contains
none of the features of the former contract which were considered "badges of a
joint venture agreement" To further find fault with the new contract would be to
cavil and expose the opposition to the contract to be actually an opposition to
lottery under any and all circumstances. But "[t]he morality of gambling is not a
justiciable issue. Gambling is not illegal per se. . . It is left to Congress to deal
with the activity as it sees fit." (Magtajas v. Pryce Properties Corp. Inc., 234
SCRA 255, 268 [1994]. Cf. Lim v. Pacquing, G.R. No. 115044, Jan. 27, 1995) In
the case of lottery, there is no dispute that, to enable the Philippine Charity
Sweepstakes Office to raise funds for charity, Congress authorized the Philippine
Charity Sweepstakes Office (PCSO) to hold or conduct lotteries under certain
conditions.

14. REMEDIAL LAW; COURTS; WILL GENERALLY NOT INTERFERE WITH

MATTERS OF BUSINESS JUDGMENT. Petitioners reply that to obviate the
possibility that the rental would not exceed 15% of the net receipts what the
respondents should have done was not to agree on a minimum fixed rental of
P35,000.00 per terminal in commercial operation. This is a matter of business
judgment which, in the absence of a clear and convincing showing that it was
made in grave abuse of discretion of the PCSO, this Court is not inclined to
review.
15. ID.; EVIDENCE; PRESUMPTIONS; GOVERNMENT IS PRESUMED TO
HAVE ACTED IN GOOD FAITH IN TAKING CONTRACTS; CASE AT BAR.
By virtue of the provision on upgrading of equipment, petitioners claim, the
parties can change their entire agreement and thereby, by "clever means and
devices," enable the PGMC to "actually operate, manage, control and supervise
the conduct and holding of the on-line lottery system," considering that as found
in the first decision, "the PCSO had neither funds of its own nor the expertise to
operate and manage an on-line lottery." The claim is speculative. It is just as
possible to speculate that after sometime operating the lottery system the PCSO
will be able to accumulate enough capital to enable it to buy its own equipment
and gain expertise. As for expertise, after three months of operation of the on-line
lottery, there appears to be no complaint that the PCSO is relying on others,
outside its own personnel, to run the system. In any case as in the construction
of statutes, the presumption is that in making contracts the government has
acted in good faith. The doctrine that the possibility of abuse is not a reason for
denying power to the government holds true also in cases involving the validity of
contracts made by it.
16. CIVIL LAW; OBLIGATIONS AND CONTRACTS; LEASE CONTRACTS,
DEFINED. A contract of lease, as this is defined in Civil law, may call for some
form of collaboration or association between the parties since lease is a
"consensual, bilateral, onerous and commutative contract by which one person
binds himself to grant temporarily the use of a thing or the rendering of some
service to another who undertakes to pay some rent, compensation or price." (5
PADILLA, CIVIL CODE 611 [6TH Ed 1974]).
17. ADMINISTRATIVE LAW; PHILIPPINE CHARITY SWEEPSTAKES OFFICE
(RA 1169); NOT PROHIBITED FROM HOLDING OR CONDUCTING LOTTERY
"IN COLLABORATION, ASSOCIATION OR JOINT VENTURE" WITH ANOTHER
PARTY; PROHIBITION REFERS TO INVESTMENT IN BUSINESS ENGAGED
IN LOTTERIES AND SIMILAR ACTIVITIES. The charter of the PCSO does
not absolutely prohibit it from holding or conducting lottery "in collaboration,
association or joint venture" with another party. What the PCSO is prohibited
from doing is to invest in a business engaged in sweepstakes races, lotteries and
similar activities, and it is prohibited from doing so whether in "collaboration,
association or joint venture" with others or "by itself." The reason for this is that
these are competing activities and the PCSO should not invest in the business of
a competitor. When parsed, it will be seen that 1 grants the PCSO authority to do
any of the following: (1) to hold or conduct charity sweepstakes races, lotteries
and similar activities; and/or (2) toinvest whether "by itself or in collaboration,
association or joint venture with any person, association, company entity" in any
"health and welfare-related investments, programs, projects and activities which
may be profit oriented," except "the activities mentioned in the preceding
paragraph (A)," i.e., sweepstakes races, lotteries and similar activities. The
PCSO is prohibited from investing activities mentioned in the preceding
paragraph (A)" because, as already stated, these are competing activities. The
subject matter of 1(B) is the authority of the PCSO to invest in certain projects for
profit in order to enable it to expand its health medical assistance and charitable
grants. The exception in the law refers to investment in businesses engaged in
sweepstakes races, lotteries and similar activities. The limitation applies not only
when the investment is undertaken by the PCSO "in collaboration, association or
joint venture" but also when made by the PCSO alone, "by itself." The prohibition
can not apply to the holding of a lottery by the PCSO itself. Otherwise, what it is
authorize to do in par. (A) would be negated by what is prohibited by par. (B). To
harmonize pars. (A) and (B), the latter must be read as referring to the authority
of the PCSO to invest in the business of others. Put in another way, the
prohibition in 1(B) is not so much against the PCSO entering into any
collaboration, association or joint venture with others as against the PCSO
investing in the business of another franchise holder which would directly
compete with PCSO's own charity sweepstakes races, lotteries or similar
activities. The prohibition applies whether the PCSO makes the investment alone
or with others.
18. ID.; ID.; MAY ENTER INTO EQUIPMENT LEASE CONTRACT WITHOUT
PUBLIC BIDDING. Finally the question is whether the ELA is subject to public
bidding. In justifying the award of the contract to the PGMC without public bidding,
the PCSO invokes E.O. No. 301. E.O. No. 301, Sec. 1 applies only to contracts
for the purchase of supplies, materials and equipment. It does not refer to
contracts of lease of equipment like the ELA. The provisions on lease are found
in Secs. 6 and 7 but they refer to the lease of privately-owned buildings or
spaces for government use or of government-owned buildings or spaces for
private use, and these provisions do not require public bidding. It is thus difficult
to see how E.O. No. 301can be applied to the ELA when the only feature of the
ELA that may be thought of as close to a contract of purchase and sale is the
option to buy given to the PCSO. An option to buy is not of course a contract of
purchase and sale.
PADILLA, J., concurring opinion:
1. REMEDIAL LAW; SUPREME COURT; DUTY TO APPLY THE LAW
IRRESPECTIVE OF PERSONAL CONVICTION OF MEMBER. It is the duty of
the Supreme Court to apply the laws enacted by Congress and approved by the
President, (unless they are violative of the Constitution) even if such laws run
counter to a Member's personal conviction that gambling should be totally
prohibited by law.
2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; LEASE, DEFINED. A
lease is a contract whereby one of the parties binds himself to give to another the
enjoyment or use of a thing for a price certain and for a period which may be
definite or indefinite (Article 1643, Civil Code).
3. ID.; ID.; ID.; LESSOR OF EQUIPMENT, FREE TO DEMAND AMOUNT OF
RENTALS. It would appear from the above legal provision that the ELA is truly
a straight contract of lease. That the parties to the ELA have stipulated on flexible
rentals does not render it less of a lease contract and more of a joint venture.
Surely, the PGMC as owner of the leased equipment is free to demand the
amount of rentals it deems commensurate for the use thereof and, as long as
PCSO agrees to the amount of such rentals, as justifying an adequate net return
to it, then the contract is valid and binding between the parties thereto. This is the
essence of freedom to enter into contracts.
4. ADMINISTRATIVE LAW; PHILIPPINE CHARITY SWEEPSTAKES OFFICE;
EQUIPMENT LEASE AGREEMENT (ELA), A STRAIGHT LEASE EQUIPMENT.
Petitioners have not cited any law which prevents such stipulations to be
included in contracts of lease or which changes the nature of such agreement
from a lease to some other juridical relation. In fact, such stipulations are
common in leases of real estate for commercial purposes. A ruling that would
prevent PCSO from entering into such lease agreement for the operation by
PCSO of the lottery would defeat the intent of the law to raise, from such lotto
operations, funds for charitable institutions and government civic projects,
because an outright purchase by PCSO of the lottery equipment appears next to
impossible or at least not feasible costwise considering the capital equipment
involved. In enacting the law creating the PCSO, Congress, to be sure, did not
intend to make it impossible for PCSO to attain its given purposes. A rigid
interpretation of the restriction on "association, collaboration, and joint venture"
will result in such impossibility. Neither can petitioners' argument that certain
provisions in the ELA will ensure PGMC's continued participation and interest in
the lottery operations provide enough grounds for granting the petition in this
case. Such arguments are based on speculations devoid of any material or
concrete factual basis. In sum, the ELA constitutes, in my view, a straight lease
agreement of equipment between PCSO and PGMC. Such an agreement is, as
far as PCSO's charter is concerned, validly and lawfully entered into.
5. REMEDIAL LAW; SUPREME COURT; SHOULD NOT PREEMPT
JUDGMENT OF COMMISSION ON AUDIT (COA) ON MATTERS WITHIN ITS
JURISDICTION; ISSUE ON NECESSITY OF PUBLIC BIDDING IN ELA, WITHIN
COA'S JURISDICTION. On the allegation of lack of public bidding on the ELA,
the Commission on Audit (COA) has yet to resolve a case where the issue of the
validity of the ELA due to lack of public bidding has been squarely raised. This
matter surfaced during the hearing of the present case. Needless to say, the
Court should not preempt the determination and judgment of the COA on matters
which are within its primary jurisdiction under the Constitution.
6. POLITICAL LAW; ISSUE AS TO WHETHER ELA IS GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT, A POLITICAL QUESTION.
As to whether or not the ELA is grossly disadvantageous to the government, it
should be stressed that the matter involves, basically, a policy-determination by
the executive branch which this Court should not ordinarily reverse or substitute
with its own judgment, in keeping with the time honored doctrine of separation of
powers.
FELICIANO, J., dissenting opinion:

1. ADMINISTRATIVE LAW; PHILIPPINE CHARITY SWEEPSTAKES OFFICE;

PROHIBITION AGAINST HOLDING OR CONDUCTING LOTTERY IN
COLLABORATION, ASSOCIATION OR JOINT VENTURE WITH ANOTHER
PARTY; VIEW EXPRESSED BY THE INDIVIDUAL LEGISLATOR WHO
CRAFTED QUESTIONED PROVISION SHOULD AT LEAST BE ENTITLED TO
A STRONG PRESUMPTION OF CORRECTNESS. I turn first to the novel
argument made in the majority opinion that the charter of PCSO
does not "prohibit [] it from holding or conducting lottery in collaboration,
association or joint venture with another party." That opinion argues that "what
[PCSO] is prohibited from doing is to invest in a business engaged in
sweepstakes races, lotteries and similar activities" which are "competing
activities and the PCSO should not invest in the business of a competitor." In so
doing, my learned brother Mendoza, J . purports to controvert and overturn the
reading that the majority of this Court, through Mr. Justice Davide, Jr., in the
firstKilosbayan case gave to the relevant provisions of the PCSO charter. It so
happens that the critical language in the relevant PCSO charter provision that
is, the "except" clause in Section 1 (B) of the PCSO charter as amended by B.P.
Blg. 42 was crafted by the then Assemblyman Hilario G. Davide, Jr. during the
deliberations in the Interim Batasan Pambansa on the bill that became B.P. Blg.
42. It is impliedly contended by the majority that the intent of an individual
legislator should not be regarded as conclusive as to the "collect" interpretation
of the provision of a statute. This is true enough, as a general proposition, for it is
the intent of the legislative body as manifested in the language used by the
legislature that must be examined and applied by this Court. However, it seems
to me that the view expressed by an individual legislator who eventually comes to
sit in this Court as to the meaning to be given to words crafted by himself should,
at the very least, be regarded as entitled to a strong presumption of correctness.
Put a little differently, I respectfully submit that in a situation such as that
presented in this case, a strong presumption arises that the interpretation given
by Mr. Justice Davide, Jr. and approved and adopted by the majority of the Court
in the first Kilosbayan case faithfully reflected the intent of the legislative body as
a whole.
2. ID.; ID.; ID.; INTENT CLEARLY DISCERNIBLE IN WORDS USED BY
LEGISLATURE. Fortunately, in the present case, it is not necessary to take
the word of Mr. Justice Davide, Jr. as to what the intent of the legislative body
was in respect of Section 1 (B) of the present PCSO charter. For that intent is
clearly discernible in the very words used by the legislative body itself. Examining
the actual text of Section 1 (B), it will be noted that what PCSO has been
authorized to do is not simply "to invest whether by itself or in collaboration,
association or joint venture ' in any health and welfare-related investments,
programs, projects and activities which may be profit-oriented . . ." Rather, the
PCSO has been authorized "to engage in health and welfare-related investments,
programs, projects and activities which may be profit-oriented.
3. ID.; ID.; ID.; CONSTRUED. The "except" clause in Section 1 (B), is not
designed as a non-competition provision, nor as a measure intended to prevent
PCSO from putting its money in enterprises competing with PCSO. What the law
seeks thereby to avoid, rather, is the PCSO sharing or franchising out its
exclusive authority to hold and conduct sweepstakes races, lotteries and similar
activities by collaborating or associating or entering into joint ventures with other
persons or entities not government-owned and legislatively chartered like the
PCSO is. The prohibition against PCSO sharing its authority with others is
designed, among other things, to prevent diversion to other uses of revenue
streams that should go solely to the charitable and welfare-related purposes
specified in PCSO's charter. It will be seen that without the "except" clause
inserted at the initiative of former Assemblyman Davide, Jr., Section 1(B) would
be so comprehensively worded as to permit PCSO precisely to share its
exclusive right to hold and conduct sweepstakes races, lotteries and the like. It is
this "except" clause which prevents such sharing or lending or farming out the
PCSO "franchise" "by itself or in collaboration, association or joint venture with
any person, association, company or entity, whether domestic or foreign,except
for the activities mentioned in the preceding paragraph (A) . . ." This "except"
clause thus operates, as it were, as a renvoi clause which refers back to Section
1 (A) and in this manner avoids the necessity of simultaneously amending the
text of Section 1 (A). The textual location, in other words, of the "except" clause
offers no support for the new-found and entirely original interpretation offered in
the majority opinion.
4. ID.; ID.; EQUIPMENT LEASE AGREEMENT (ELA); PUBLIC BIDDING, A
NECESSARY PREREQUISITE; CASE AT BAR. I consider next the question
of whether the "Equipment Lease Agreement" (ELA) is subject to public bidding.
PCSO refers to Executive Order No. 301 dated 26 July 1987 in seeking to justify
the award of the ELA to the PGMC without public bidding. In accepting the
contentions of PCSO, the majority opinion relies basically on two (2) propositions.
The first of these is that Executive Order No. 301, Section 1 refers to contracts
of purchase and sale [only]. The second proposition offered is that the use of the
term "supplies" "cannot be limited so as to exclude 'materials' and 'equipment'
without defeating the purpose for which these exceptions are made." The first
proposition finds no basis in the actual language used in the operative paragraph
of Section 1 of Executive Order No. 301 setting out the general rule ". . . no
contract for public services or for furnishing supplies, materials and equipment to
the governmentor any of its branches, agencies or instrumentalities shall be
renewed or entered into without public bidding, except under any of the following
situations: . . . It is worthy of special note that the above opening paragraph
does not even use the words "purchase and sale" or "buy and sell"; theactual
term used is "furnishing . . . equipment to the government." The term "furnishing"
can scarcely be limited to sales to the government but must instead be held to
embraced any contract which provides the government with either title to or use
of equipment. A contrary view can only result in serious emasculation
of Executive Order No. 301. It is common place knowledge that equipment
leases (especially "financial leases" involving expensive capital equipment) are
often substitutes for or equivalents of purchase and sale contracts, given the
multifarious credit and tax constraints operating in the market place. Thus the
above first proposition fails to take into account actual commercial practice
already reflected in our present commercial and tax law. The second proposition
similarly requires one who must interpret and apply the provisions of Section 1 of
Executive Order No. 310 to disregard the actual language used in that Order.
For Executive Order No. 301 uses done (3) distinguishable terms "supplies,"
"materials" and "equipment." These terms are not always used simultaneously
in Executive Order No. 301. In some places, only "supplies" is used; in other
places, only "materials" is employed; and in still other places, the term
"equipment" is used alongside with, but separately from, both of the other two (2)
terms. To say that "supplies," "materials" and "equipment" are merely
synonymous or fungible would appear too casual a treatment of the actual
language of Executive Order No. 301. The fundamental difficulty with the above
two (2) propositions is this: that public bidding is precisely the standard and best
way of ensuring that a contract by which the government seeks to provide itself
with supplies or materials or equipment is in fact the most advantageous to
government. It is true enough that public bidding may be inconvenient and time
consuming; but it is still the only method of procurement so far invented by man
by which the government could reasonably expect to keep relatively honest those
who would contract with it. This is the basic reason why competition through
public bidding is the general rule and not the exception.
5. ID.; ID.; JOINT VENTURE NOT CONVERTED INTO AN ORDINARY
EQUIPMENT LEASE AGREEMENT BY SIMPLE REARRANGEMENT OF
WORDS AND PARAGRAPHS. I would address finally the question of whether
or not the original contract between PCSO and PGMC which the Court in the
firstKilosbayan case found to be a joint venture, has been so substantially
changed as to have been effectively converted from a joint venture arrangement
to an ordinary equipment lease agreement. The majority of the Court have
concluded that the ELA has been effectively "purged" of the characteristics of a
joint venture arrangement and that it should now be regarded as lawful under the
provisions of the revised PCSO charter. It is suggested, with respect that the
burden of showing that the elements found by the Court in the
first Kilosbayan case to constitute the prohibited "collaboration, association or
joint venture" have truly (and not simply ostensibly) been expunged from the
relationship between PCSO and PGMC rests, not on Kilosbayan nor on this
Court, but rather on PCSO and PGMC. It is respectfully submitted further that
that burden has not been adequately discharged in the present case by the
simple re-arrangement of words and paragraphs of the old contract considering
that the reality of the re-arrangement is controverted by the commercial terms of
the new contract.
6. ID.; ID.; ID.; RENTAL IS NOT EXPRESSED IN TERMS OF A FIXED AND
ABSOLUTE FIGURE. I begin with the natare and form of the rental provisions
of the ELA. The rental payable by PCSO as lessee of equipment and other
assets owned by PGMC as lessor, is fixed at a specified percentage, 4.3% of the
gross revenues accruing to PCSO out of or in connection with the operation of
such equipment and assets. The rental payable is not, in other words, expressed
in terms of a fixed and absolute figure, although a floor amount per leased
terminal is set. Instead, the actual total amount of the rental rises and falls from
month to month as the revenues grow or shrink in volume. I respectfully suggest
that thereby the lessor or the facilities leased has acquired a legal interest either
in the business of the lessee PCSO that is conducted through the operation of
such facilities and equipment, or at least in the income stream of PCSO
originating from such operation. In the commercial world, a rental provision cast
in terms of a fixed participation in the gross revenues of the lessee, signals
substantial economic interest in the business of such lessee. Such a provision
cannot be regarded as compatible with an "ordinary" equipment rental agreement.
On the other hand, it is of the very substance of a commercial joint venture and
of economic collaboration or association. The assertion that the 4.3% rental rate
is "well within the maximum of 15% net receipt fixed by law" is entirely
meaningless insofar as explaining the structure of the rental provision and the
reasonableness thereof is concerned. In the second place, it is child's play for an
accountant to convert absolute figures representing operating expenses [actual
or budgeted] into a percentage of "net receipts [actual or expected]"; there is
nothing in Section 6 (C) of the PCSO charter that either requires or justifies the
adoption of the rental provision found both in the old contract and in the ELA
giving PGMC a fixed share in gross revenues. The explanation offered by the
Solicitor General is unfortunately merely contrived; its acceptance depends on
lack of familiarity with elementary accounting concepts.

7. ID.; ID.; APPROPRIATE RECOURSE TO THE LEGISLATIVE AUTHORITY

TO VENTILATE LEGAL RESTRICTIONS ON ITS REVISED CHARTER. The
PCSO appears sincerely convinced that the legal restrictions placed upon its
operations by the actual text of Section 1 (B) of its revised charter prevent it from
realizing the kinds and volume of revenues that it needs for charitable and health
and welfare-oriented programs. In this situation, the appropriate recourse is not
to make light of nor to conjure away those legal restrictions but rather to go to the
legislative authority and there ask for further amendment of its charter. In that
same forum, the petitioners may in turn ventilate their own concerns and deeply
felt convictions.
REGALADO, J., dissenting opinion:
1. REMEDIAL LAW; ACTIONS; "LAW OF THE CASE" DOCTRINE; PURPOSE.
Even in American law, the "law of the case" doctrine was essentially designed
to express the practice of courts generally to refuse to reopen what has been
decided and, thereby, to emphasize the rule that the final judgment of the highest
court is a final determination of the rights of the parties. That is the actual and
basic role that it was conceived to play in judicial determinations, just like the
rationale for the doctrines of res judicataand conclusiveness of judgment.
2. ID.; ID.; ID.; MAY ARISE FROM AN ORIGINAL HOLDING OF A HIGHER
COURT ON A WRIT OF CERTIORARI. The "law of the case" may also arise
from an original holding of a higher court on a writ of certiorari, and is binding not
only in subsequent appeals or proceedings in the same case, but also in a
subsequent suit between the same parties. Furthermore, since in our jurisdiction
an original action for certiorari to control and set aside a grave abuse of official
discretion can be commenced in the Supreme Court itself, it would be absurd
that for its ruling therein to constitute the law of the case, there must first be a
remand to a lower court which naturally could not be the court of origin from
which the postulated second appeal should be taken.
3. ID.; ID.; ID.; ID.; WITH SAME BINDING EFFECT WITH THAT OF AN
APPEALED CASE. What I wish to underscore is that where, as in the instant
case, the holding of this highest Court on a specific issue was handed down in an
original action for certiorari, it has the same binding effect as it would have had if
promulgated in a case on appeal.
4. ID.; ID.; CAUSE OF ACTION; CONCEPT THEREOF IN PUBLIC INTEREST
CASES SHOULD DIFFER FROM PRIVATE INTEREST LITIGATIONS. It is
true that a right of action is the right or standing to enforce a cause of action. For
its purposes, the majority urges the adoption of the standard concept of a real
party in interest based on his possession of a cause of action. It could not have
failed to perceive, but nonetheless refuses to concede that the concept of a
cause of action in public interest cases should not be straitjacketed within its
usual narrow confines in private interest litigations.
5. ID.; ID.; REAL PARTY-IN-INTEREST; NO DEFINED RULE FOR ITS
DETERMINATION. There is no clearly defined rule by which one may
determine who is or is not real party in interest, nor has there been found any
concise definition of the term. Who is the real party in interest depends on the
peculiar facts of each separate case, and one may be a party in interest and yet
not be the sole real party in interest.
6. ID.; ID.; ID.; ABSENCE OF REMEDIAL MEASURE, AVAILABLE TO
PERSONS NOT REAL PARTIES-IN-INTEREST IN QUESTIONING
GOVERNMENT CONTRACTS. If the majority would have its way in this case,
there would be no available judicial remedy against irregularities or excesses in
government contracts for lack of a party with legal standing or capacity to sue.
The legal dilemma or vacuum is supposedly remediable under a suggestion
submitted in the majority opinion. The majority has apparently forgotten its own
argument that in the present case petitioners are not the real parties, hence they
cannot avail of any remedial right to file a complaint or suit. It is, therefore, highly
improbable that the Commission on Audit would deign to deal with those whom
the majority says are strangers to the contract. Again, should this Court now
sustain the assailed contract, of what avail would be the suggested recourse to
the Ombudsman? Finally, it is a perplexing suggestion that petitioners ask the
Solicitor General to bring a quo warranto suit, either in propria persona or ex
relatione, not only because one has to contend with that official's own views or
personal interests but because he is himself the counsel for respondents in this
case. Any proposed remedy must take into account not only the legalities in the
case but also the realities of life.
7. ID.; ID.; JUDGMENT; CHANGE OF MEMBERSHIP OF MEMBERS OF
COURT, NOT GROUND TO REEXAMINE RULING. The majority believes
that in view of the retirement and replacement of two members of the Court, it is
time to reexamine the ruling in the first lotto case. A previous judgment of the
Court may, of course, be revisited but if the ostensible basis is the change of
membership and known positions of the new members anent an issue pending in
a case in the Court, it may not sit well with the public as a judicious policy. This
would be similar to the situation where a judgment promulgated by the Court is
held up by a motion for reconsideration and which motion, just because the
present Rules do not provide a time limit for the resolution thereof, stays
unresolved until the appointment of members sympathetic thereto. Thus, the
unkind criticisms of "magistrate shopping" or "court packing" levelled by
disgruntled litigants is not unknown to this Court.
8. ID.; ID.; "LAW OF THE CASE" DOCTRINE; ISSUE ON RIGHT OF
PETITIONER TO FILE AND MAINTAIN ACTION QUESTIONING LEGALITY OF
GOVERNMENT CONTRACTS, FORECLOSED BY COURT'S JUDGMENT IN
FIRST LOTTO CASE. I hold the view that the matter of the right of petitioners
to file and maintain this action whether the objection thereto is premised on
lack of locus standi or right of action has already been foreclosed by our
judgment in the first lotto case, G.R. No. 113375. If the majority refuses to
recognize such right under the "law of the case" principle, I see no reason why
that particular issue can still be ventilated now as a survivor of the doctrinal
effects of res judicata.
9. ID.; ID.; ID.; REMOVAL AND REPLACEMENT OF SOME OBJECTIONABLE
TERMS OF CONTRACT DOES NOT EXTINGUISH IDENTITY OF SUBJECT
MATTER IN BOTH CASES. It is undeniable that in that case and the one at
bar, there is identity of parties, subject matter and cause of action. Evidently, the
judgment in G.R. No. 113375 was rendered by a court of competent jurisdiction,
it was an adjudication on the merits, and has long become final and executory.
There is, to be sure, an attempt to show that the subject matter in the first action
is different from that in the instant case, since the former was the original contract
and the latter is the supposed expanded contract. I am not persuaded by the
proffered distinction. The removal and replacement of some objectionable terms
of a contract, which nevertheless continues to operate under the same basis,
with on thesame property, for the same purpose, and through
the same contracting parties does not suffice to extinguish the identity of the
subject matter in both cases. This would be to exalt form over substance.
Furthermore, respondents themselves admitted that the new contract is actually
the same as the original one, with just some variants in the terms of the latter to
eliminate those which were objected to. The contrary assumption now being
floated by respondents would create chaos in our remedial and contractual laws,
open the door to fraud, and subvert the rules on the finality of judgments.
10. ID.; ID.; CONCLUSIVENESS OF JUDGMENT; ALL ISSUES FINALLY
ADJUDGED SHALL BE CONCLUSIVE BETWEEN PARTIES ON APPEAL;
CASE AT BAR. Even assuming purely ex hypothesi that the amended terms
in the expanded lease agreement created a discrete set of litigable violations of
the statutory charter of the Philippine Charity Sweepstakes Office, thereby
collectively resulting in a disparate actionable wrong or delict, that would merely
constitute at most a difference in the causes of action in the former and the
present cases. Under Section 49(c), Rule 39 of the Rules of Court, we would still
have a situation of collateral estoppel, better known in this jurisdiction as
conclusiveness of judgment. Hence, all relevant issues finally adjudged in the
prior judgment shall be conclusive between the parties in the case now before us
and that definitely includes at the very least the adjudgment therein that
petitioners have the locus standi or the right to sue respondents on the contracts
concerned.
DAVIDE, JR., J., dissenting opinion:
1. REMEDIAL LAW; SUPREME COURT; SUDDEN REVERSAL OF RULING
PUTS TO JEOPARDY THE FAITH AND CONFIDENCE OF THE PEOPLE IN
THE CERTAINTY AND STABILITY OF THE PRONOUNCEMENTS OF THIS
COURT. I am disturbed by the sudden reversal of our rulings in Kilosbayan,
Inc., et al. vs. Guingona, et al. (hereinafter referred to as the first lotto case)
regarding the application or interpretation of the exception clause in paragraph B,
Section 1 of the Charter of the PCSO (R.A. No. 1169), as amended by B.P. Blg.
442, and on the issue of locus standi of the petitioners to question the contract of
lease involving the on-line lottery system entered into between the Philippine
Charity Sweepstakes Office (PCSO) and the Philippine Gaming Management
Corporation (PGMC). Such reversal upsets the salutary doctrines of the law of
the case, res judicata, and stare decisis. It puts to jeopardy the faith and
confidence of the people, specially the lawyers and litigants, in the certainty and
stability of the pronouncements of this Court. It opens the floodgates to endless
litigations for reexamination of such pronouncements and weakens this Court's
judicial and moral authority to demand from lower courts obedience thereto and
to impose sanctions for their opposite conduct.
2. ADMINISTRATIVE LAW; PHILIPPINE CHARITY SWEEPSTAKES OFFICE;
CANNOT HOLD AND CONDUCT CHARITY SWEEPSTAKES RACES,
LOTTERIES AND OTHER SIMILAR ACTIVITIES IN COLLABORATION,
ASSOCIATION OR JOINT VENTURE WITH ANY OTHER PARTY. In the first
lotto case, this Court also emphatically ruled that the language of Section 1
of R.A. No. 1169, as amended by B.P. Blg. 42, is indisputably clear that with
respect to this [PCSO's] franchise or privilege "to hold and conduct charity
sweepstakes races, lotteries and other similar activities," the
PCSO cannot exercise it "in collaboration, association or joint venture" with any
other party. This is the unequivocal meaning and import of the phrase "except for
the activities mentioned in the preceding paragraph (A)," namely, "charity
sweepstakes races, lotteries and other similar activities."
3. REMEDIAL LAW; ACTIONS; UNDER THE PRINCIPLE OF EITHER THE LAW
OF THE CASE OR RES JUDICATA, THE PCSO AND PGMC ARE BOUND BY
THE RULING IN THE FIRST LOTTO CASE ON THE LOCUS STANDI OF THE
PETITIONERS AND INTERPRETATION OF THE EXCEPTION CLAUSE IN
PARAGRAPH B, SECTION 1 OF R.A. 1169, AS AMENDED FOR FAILING TO
MOVE FOR ITS RECONSIDERATION. The PCSO and the PGMC never
challenged our application or interpretation of the exception clause and our
definitions of the terms collaboration, association, and joint venture. On the
contrary, they unconditionally accepted the same by not asking for
reconsideration of our decision in the first lotto case. Under the principle of either
the law of the case or res judicata the PCSO and the PGMC are bound by the
ruling in the first lotto case on the locus standi of the petitioners and the
application or interpretation of the exception clause in paragraph B, Section 1
of R.A. No. 1169, as amended. Moreover, that application or interpretation has
been laid to rest under the doctrine of stare decisis and has also become part of
our legal system pursuant to Article 8 of the Civil Code which provides: "Judicial
decisions applying or interpreting the laws or the constitution shall form part of
the legal system of the Philippines."
4. ID.; ID.; LAW OF CASE; CONSTRUED. The principle of the law of the
case "is necessary as a matter of policy to end litigation. There would be no end
to a suit if every obstinate litigant could, by repeated appeals, compel a court to
listen to criticisms on their opinions, or speculate on chances from changes in its
members."
5. ID.; ID.; ID.; DOCTRINE APPLIES WHERE THE SECOND CASE IS BUT A
SEQUEL TO AND CONTINUATION OF THE FIRST LOTTO CASE. It is,
however, contended that the law of the case is inapplicable because that doctrine
applies only when a case is before an appellate court a second time after its
remand to a lower court. While indeed the statement may be correct, it
disregards the fact that this case is nothing but a sequel to and is, therefore, for
all intents and purposes, a continuation of the first lotto case. By their conduct,
the parties admitted that it is, for which reason the PGMC and the PCSO
submitted in the first lotto case a copy of the ELA in question, and the petitioners
commenced the instant petition also in the said case. Our resolution that the
validity of the ELA could not be decided in the said case because the decision
therein had become final does not detract from the fact that this case is but a
continuation of the first lotto case or a new chapter in the raging controversy
between the petitioners, on the one hand, and the PCSO and the PGMC, on the
other, on the operation of the on-line lottery system.
6. ID.; ID.; CONCLUSIVENESS OF JUDGMENT; APPLICABLE TO CASE AT
BAR WHERE THE CONTRACT IN QUESTION IS NOT DIFFERENT FROM OR
UNRELATED TO THE FIRST NULLIFIED CONTRACT. Equally unacceptable
is the majority opinion's rejection of the related doctrine of conclusiveness of
judgment on the ground that the question of standing is a legal question, as this
case involves a different or unrelated contract. The legal question of locus
standi which was resolved in favor of the petitioners in the first lotto case is the
same in this case and in every subsequent case which would involve contracts
relating or incidental to the conduct or holding of lotteries by the PCSO in
collaboration, association, or joint venture with any person, association, company,
or entity. And, the contract in question is not different from or unrelated to the first
nullified contract, for it is nothing but a substitute for the latter. Respondent
Morato was even candid enough to admit that no new and separate public
bidding was conducted for the ELA in question because the PCSO was of the
belief that the public bidding for the nullified contract was sufficient.
7. ID.; ID.; PRECLUSION OF ISSUES OR COLLATERAL ESTOPPEL; DOES
NOT APPLY TO CASE AT BAR WHERE ISSUE INVOLVED IS ONE OF LAW.
Its reliance on the ruling in Montana vs. United States that preclusion of issues
or collateral estoppel does not apply to issues of law, at least when substantially
unrelated claims are involved, is misplaced. For one thing, the question of the
petitioners' legal standing in the first lotto case and in this case is one and the
same issue of law. For another, these cases involve the same and not
substantially unrelated subject matter, viz., the second contract between the
PCSO and the PGMC on the operation of the on-line lottery system. The majority
opinion likewise failed to consider that in the very authority it cited regarding the
exception to the rule of issue preclusion (Restatement of Law, 2d Judgments S.
28), the second illustration stated therein is subject to this NOTE: "The doctrine
of the stare decisis may lead the court to refuse to reconsider the question of
sovereign immunity," which simply means that stare decisis is an effective bar to
a re-examination of a prior judgment.
8. ID.; ID.; DOCTRINE OF STARE DECISIS; CONSTRUED; ABANDONMENT
THEREOF NOT WARRANTED IN CASE AT BAR. The doctrine of stare
decisis embodies the legal maxim that a principle or rule of law which has been
established by the decision of a court of controlling jurisdiction will be followed in
other cases involving a similar situation. It is founded on the necessity for
securing certainty and stability in the law and does not require identity or privity of
parties. This is explicitly fleshed out in Article 8 of the Civil Code which provides
that decisions applying or interpreting the laws orthe constitution shall form part
of the legal system. Such decisions "assume the same authority as the statute
itself and, until authoritatively abandoned, necessarily become, to the extent that
they are applicable, the criteria which must control the actuations not only of
those called upon to abide thereby but also of those in duty bound to enforce
obedience thereto." Abandonment thereof must be based only on strong and
compelling reasons which I do not find in this case otherwise, the becoming
virtue of predictability which is expected from this Court would be immeasurably
affected and the public's confidence in the stability of its solemn pronouncements
diminished.
9. ID.; ID.; RES JUDICATA; ASPECTS. The doctrine of res judicata has dual
aspects: (1) as a bar to the prosecution of a second action upon the same claim,
demand, or cause of action; and (2) as preclusion to the relitigation of particular
facts or issues in another action between the same parties on a different claim or
cause of action.
10. ID.; ID.; ID.; CONSTRUED. Public policy, judicial orderliness, economy of
judicial time, and the interest of litigants as well as the peace and order of society,
all require that stability should be accorded judgments; that controversies once
decided on their merits shall remain in repose; that inconsistent judicial decisions
shall not be made on the same set of facts; and that there be an end to litigation
which, without the said doctrine, would be endless. It not only puts an end to
strife, but recognizes that certainty in legal relations must be maintained. It
produces certainty as to individual rights and gives dignity and respect to judicial
proceedings.
11. ID.; ID.; RULE ON REAL PARTY-IN-INTEREST SUBORDINATE TO
DOCTRINE OF LOCUS STANDI. In public law the rule of real party-in-interest
is subordinated to the doctrine of locus standi. The majority opinion declares that
the real issue in this case is not whether the petitioners have locus standi but
whether they are the real parties-in-interest. This proposition is a bold move to
set up a bar to taxpayer's suits or cases invested with public interest by requiring
strict compliance with the rule on real-party-in-interest in ordinary civil action,
thereby effectively subordinating to that rule the doctrine of locus standi. I am not
prepared to be a party to that proposition. First. Friendenthal, et al., whose book
is cited in the majority opinion in its discussion of the rule on real party in interest
and the doctrine of locus standi, admit that there is a difference between the two,
between the two, and that the former is not strictly applicable in public law cases.
Second. The attempt to use the real-party-in-interest rule is to resurrect the
abandoned restrictive application of locus standi, This Court, speaking through
the constitutionalist nonpareil, Justice and later Chief Justice Enrique Fernando,
has already declared in Tan vs. Macapagal that as far as a taxpayer's suit is
concerned, this Court is not devoid of discretion as to whether or not it should be
entertained. Third. Such attempt directly or indirectly restricts the exercise of the
judicial authority of this Court in an original action and there had been many in
the past to determine whether or not there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. Only a very limited few may qualify, under the
real-party-in-interest rule, to bring actions to question acts or contracts tainted
with such vice. Where, because of fear of reprisal, undue pressure, or even
connivance with the parties benefited by the contracts or transactions, the so-
called real-party-in-interest chooses not to sue, the patently unconstitutional and
illegal contracts or transactions will be placed beyond the scrutiny of this Court,
to the irreparable damage of the Government, and prejudice to public interest
and the general welfare.

12. STATUTORY CONSTRUCTION; LAWS; LEGISLATIVE AMENDMENT;

AUTHOR THEREOF, BEST AUTHORITY ON INTENTION OR RATIONALE OF
AMENDMENT. Before I take up the defined issues, I find it necessary to meet
squarely the majority opinion's interpretation of paragraph B, Section 1 of R.A.
No. 1169, as amended. This is, of course, on the assumption that this Court may
now disregard the doctrines of the law of the case, res judicata, and stare decisis.
I respectfully submit that the best authority on the intention or rationale of a
legislative amendment is its author. Fortunately, I happened to be the author of
the exception clause in said provision. The language of that clause is very short
and simple, and the elaboration given therefor, as earlier shown, is equally short
and simple. The sponsor of the measure, then Assemblyman, now Congressman,
Ronaldo Zamora did not even ask for an explanation or clarification; he readily
accepted the amendment. Nobody from the floor interpellated me for an
explanation or clarification. I regret then to say that neither the letter nor the spirit
of the exception clause in paragraph B supports the interpretation proposed in
the majority opinion. The reason given in the majority opinion for the alleged
prohibition from investing in "activities mentioned in the preceding paragraph (A)"
(i.e., the holding or conducting of charity sweepstakes races, lotteries, and other
similar activities) is that "these are competing activities." In that aspect alone, the
majority opinion has clearly misconstrued the exception clause. The prohibition is
not direct against such activities, since they are in fact the franchised primary
activities of the PCSO. What is prohibited is the conduct or holding thereof "in
collaboration, association or joint venture with any person, association, company,
or entity, whether domestic or foreign." In the first lotto case, this Court explained
the principal reasons for such prohibition. If the purpose of the prohibition in the
exception clause is indeed to prevent competition, it would be with more reason
that no other person, natural or juridical, should be allowed to share on the
PCSO's franchise to hold and conduct lotteries. In short, the argument in the
majority opinion sustains the rationale of the prohibition.
13. ADMINISTRATIVE LAW; PHILIPPINE CHARITY SWEEPSTAKES OFFICE
(PCSO); EQUIPMENT LEASE CONTRACT (ELA), A JOINT VENTURE
CONTRACT; DELETION OF PROVISIONS WHICH HOWEVER DID NOT
AFFECT THE INDIVISIBILITY OF COMMUNITY OF INTEREST ON THE ON-
LINE LOTTERY SYSTEM DOES NOT TRANSFORM CONTRACT TO ONE OF
LEASE. I am not persuaded. To my mind, the parties only performed a
surgery on the nullified contract by merely deleting therefrom provisions which
this Court had considered in the first lotto case to be badges of a joint venture
contract and by engrafting some modifications on rental, which include an option
to purchase. The PGMC and the PCSO conveniently forgot that per this Court's
findings in the first lotto case, they had an indivisible community of interest
in conception, birth, and growth of the on-line lottery and that each is wed to the
other for better or for worse. The surgery affected only the post-natal activities of
the union, but not the indivisibility of their community of interest at conception and
at the birth of the on-line lottery system. Put differently, it only separated one
from the other from bed and board but did not dissolve the bonds of such
indivisibility or community of interest. This was confirmed by respondent Morato
when he candidly confessed in his letter to the COA Chairman that: [I]t is
apparent that the lease of the needed equipment through negotiations is the
most advantageous to the Government since so many studies, plans and
procedures had already been worked out with PGMC since October 1993 as a
result of the previous bidding (Sec. 1. e, Executive Order No. 301 [1987]).
14. ID.; ID.; ID.; ID.; RENTAL CLAUSE. Even on the face of the new ELA, the
elements of the proscribed joint venture or, at the very least, collaboration or
association, can be detected, albeit they are hidden behind the skirt of the
following: (a) the Rental Clause; (b) the upgrading provision under the Repair
Services Clause; and (c) the details of what are embraced in the term Lottery
Equipment and Accessories subject of the contract, which are found in Annex "A"
of the ELA. The Rental Clause provides for a flexible rate based on a percentage
of the gross amount of ticket sales, payable bi-weekly, with an annual minimum
rental fixed at P35,000.00 per terminal in commercial operation, any shortfall of
which shall be paid out of the proceeds of the current ticket sales. This is an
unusually novel arrangement which insures and guarantees the PGMC full
participation in the gross proceeds of ticket sales even if, ultimately, a draw could
mean losses to the PCSO. The rental clause is, indeed, a subtle scheme to
unconditionally guaranty PGMC's share in the profits.
15. ID.; ID.; ID.; ID.; UPGRADING CLAUSE. It should be stressed here that in
the old contract the upgrading clause is under facilities, which include among
other things all capital equipment, computers, terminals, and softwares. Under
the upgrading provision, new equipment may be used; the number of terminals
may be increased; and new terms and conditions, including rates of "rentals" and
the purchase price in case of exercise of the option to buy, may be agreed upon.
This makes the ELA not just a sweetheart contract, but one which will preserve
the parties' indivisible union and community of interest, thereby giving further
credence to this Court's observation in the first lotto case that each is wed to the
other for better or for worse.
16. ID.; ID.; ID.; ID.; EQUIPMENT. It may be observed that the
term facilities in the old contract included all capital equipment but excluded
"technology, intellectual property rights, knowhow, processes and systems." As
this Court found in the first lotto case, there was a separate provision on the
PGMC's obligations (1) to train PCSO and other local personnel and (2) to effect
the transfer of technology and other expertise. Clearly, the inclusion of
"technology, intellectual property rights, knowhow, processes and systems" in the
term Equipment was a ploy to hide, again, the continuing indispensable
collaboration of the PGMC in the conduct of the on-line lottery business.
17. ID.; ID.; ID.; PUBLIC BIDDING, A PREREQUISITE. Even assuming that
the subject ELA is not a joint venture contract, still it must be nullified for having
been entered into without public bidding and for being grossly disadvantageous
to the Government. The opening paragraph of E.O. No. 298, series of 1940, of
President Manuel L. Quezon, entitled "Prohibiting the Automatic Renewal of
Contracts, Requiring Public Bidding Before Entering Into New Contracts,
Providing Exceptions Therefor," states that . . . contracts for public services or for
furnishing of supplies, materials, and equipment to the Government be submitted
to public bidding. This was restated in E.O. No. 301 of President Corazon C.
Aquino, entitled "Decentralizing Actions on Government Negotiated Contracts,
Lease Contracts and Records Disposals, " whose Section 1 reads in part that . . .
no contract for public services or for furnishing supplies, materials and equipment
to the government or any of its branches, agencies or instrumentalities shall be
renewed or entered into without public bidding, except under any of the following
situations. It is clear that Sections 1 and 2 of Executive Order No. 301 refer to
contracts for public services, or furnishing supplies, materials, and equipment to
the government. In no uncertain terms, the Executive Order itself distinguishes
the terms supplies, materials, and equipment from each other, i.e., it did not
intend to consider them as synonymous terms. If such were the intention, there
would have been no need to enumerate them separately and to limit
subparagraphs (a), (b), and (e) to supplies; subparagraph (c) to materials, and
subparagraph (f) to all three (supplies, materials and equipment). The specific
mention of supplies in subparagraphs (a), (b), and (e) was clearly intended to
exclude therefrom materials and equipment, and the specific mention
of materials in subparagraph (c) was likewise intended to
exclude supplies and equipment. Expressio unius est exclusio alterius. Elsewise
stated, the Executive Order leaves no room for a construction that
confuses supplies with materials or equipment or either of the last two with the
first or with each other. Besides, subparagraph (e) of Section 1 unequivocally
refers to a contract of purchase of supplies. The ELA in question is not a contract
of purchase of supplies. The parties themselves proclaim to the whole world and
solemnly represent to this Court that it is a contract of lease of equipment. They
titled it, in bold big letters, "EQUIPMENT LEASE AGREEMENT," and devote the
first clause thereof to EQUIPMENT. Accordingly, since the ELA is not a contract
of purchase of supplies, we are unable to understand why the DOJ applied
Section 1(e) of E.O. No. 301 to exempt the ELA from the public-bidding
requirement.
18. ID.; ID.; ID.; NOT COVERED BY COA RULES AND REGULATION FOR
PREVENTION OF IRREGULAR, UNNECESSARY, EXCESSIVE AND
EXTRAVAGANT EXPENDITURES. The submission of the petitioners that the
ELA violates paragraph 4.3 of the COA Rules and Regulations for the Prevention
of Irregular, Unnecessary, Excessive, and Extravagant Expenditures is not
persuasive. The said paragraph covers Lease Purchase contracts. The ELA in
question hardly qualifies as a lease purchase contract because there is no
perfected agreement to purchase (sale) but only an option on the part of PCSO
to purchase the equipment for P25 million. It is, in fact, an option which is not
supported by a separate and distinct consideration, hence, not really binding
upon the PGMC.
19. CIVIL LAW; OBLIGATIONS AND CONTRACTS; OPTIONAL CONTRACT,
CONSTRUED. An optional contract is a privilege existing in one person, for
which he had paid a consideration, which gives him the right to buy certain
specified property from another person, if he chooses, at any time within the
agreed period, at a fixed price. Said contract is separate and distinct contract
from the contract which the parties may enter into upon the consummation of the
option. The second paragraph of Article 1479 of the Civil Code expressly
provides that "[a]n accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promisor if the promise supported by
a consideration distinct from the price."

20. ADMINISTRATIVE LAW; PHILIPPINE CHARITY SWEEPSTAKES OFFICE

(PCSO); EQUIPMENT LEASE CONTRACT (ELA); CONTRACT GROSSLY
DISADVANTAGEOUS TO THE PCSO. A comparison between the nullified
contract and the assailed ELA to prove that the latter is grossly disadvantageous
to the PCSO is not at all hampered by any perceived difficulty. For all the
representations, duties, obligations, and responsibilities, as well as the automatic
loss of its ownership over the facilities without any further consideration in favor
of the PCSO after the expiration of only eight years, the PGMC gets only a so-
called rental of 4.9% of gross receipts from ticket sales, payable net of taxes
required by law to be withheld, which may, however, be drastically reduced, or in
extreme cases, totally obliterated because the PGMC bears "all risks if the
revenue from ticket sales, on an annualized basis, are insufficient to pay the
entire prize money." Under the assailed ELA, however, the PGMC is entitled to
receive a flexible rental equivalent to 4.3% of the gross ticket sale (or only 0.6%
lower than it was entitled to under the old contract) for the use of its on-line
lottery systemequipment (as distinguished from facilities in the old contract),
which does not anymore include the nationwide telecommunications network,
without any assumption of business risks and the obligations (1) to keep the
facilities in safe condition and if necessary, to upgrade, replace, and improve
them from time to time as technology develops, and bear all expenses relating
thereto; (2) to undertake advertising and promotions campaign; (3) to bear all
taxes, amusements, or other charges imposed on the activities covered by the
contract; (4) to pay the premiums for third party or comprehensive insurance on
the facilities: (5) to pay all expenses for water, light, fuel, lubricants, electric
power, gas, and other utilities used and necessary for the operation of the
facilities; and to pay the salaries and related costs of skilled and qualified
personnel for administrative and technical operations and maintenance crew.
The PGMC is also given thereunder a special privilege of receiving P25 million
as purchase price for the equipment at the expiration of eight years should the
PCSO exercise its option to purchase. Unlike in the old contract where nothing
may at all be due the PGMC of the event that the ticket sales, computed on an
annual basis, are insufficient to pay the entire prize money, under the new ELA
the PCSO is under obligation to pay rental equivalent to 4.3% of the gross
receipts from ticket sales, the aggregate amount of which per year should not be
less than the minimum annual rental of P35,000.00 per terminal in commercial
operation. Any shortfall shall be paid out of the proceeds of the then current ticket
sales after payment of prizes and agents' commissions but prior to any other
payments, allocations, or disbursements. The grossness of the disadvantage to
the PCSO is all too obvious, and why the PCSO accepted such unreasonable,
unconscionable, and inequitable terms and conditions confounds as.
VITUG, J., concurring opinion:
1. REMEDIAL LAW; COURTS; JUDICIAL POWER, DEFINED. "Judicial
power," is such authority and duty of courts of justice "to settle actual
controversies involving rights which are legally demandable and enforceable and
to determine whether or not there has been a grave abuse of discretion,
amounting to lack or excess of jurisdiction, on the part of any branch or
instrumentality of the Government. I take it that the provision of Article VIII,
Section 1, Constitution has not been intended to unduly mutate, let alone to
disregard, the long established rules on locus standi. Neither has it been meant, I
most respectfully submit, to do away with the principle of separation of powers
and its essential incident such as by, in effect, conferring omnipotence on, or
allowing an intrusion by, the courts in respect to purely political decisions, the
exercise of which is explicitly vested elsewhere, and subordinate to that of their
own the will of either the Legislative Department of the Executive Department
both co-equal, independent and coordinate branches, along with the Judiciary, in
our system of government. Again, if it were otherwise, there indeed would be
truth to the charge, in the words of some constitutionalist, that "judicial tyranny"
has been institutionalized by the 1987 Constitution, an apprehension which
should, I submit, rather be held far from truth and reality.
2. ID.; ACTIONS; LOCUS STANDI, RULE THEREON NOT DISREGARDED BY
CONSTITUTIONAL DEFINITION OF JUDICIAL POWER. I most humbly
reiterate the separate opinion I have made in Kilosbayan, Inc., et al., vs. Teofisto
Guingona, Sr., etc., et al. (G.R. No. 113375, promulgated on 05 May 1994). Back
to the core of the petition, however, the matter of the legal standing of petitioners
in their suit assailing the subject-contract appears to me, both under substantive
law and the rules of procedure, to still be an insuperable issue. I have gone over
carefully the pleadings submitted in G.R. No. 118910, and I regret my inability to
see anything new that can convince me to depart from the view I have expressed
on it in G.R. No. 113375.

DECISION

MENDOZA, J : p

As a result of our decision in G.R. No. 113375 (Kilosbayan, Incorporated v.

Guingona, 232 SCRA 110 (1994) invalidating the Contract of Lease between the
Philippine Charity Sweepstakes Office (PCSO) and the Philippine Gaming
Management Corp. (PGMC) on the ground that it had been made in violation of
the charter of the PCSO, the parties entered into negotiations for a new
agreement that would be "consistent with the latter's [PCSO] charter . . . and
conformable to this Honorable Court's aforesaid Decision." cdasia

On January 25, 1995 the parties signed an Equipment Lease Agreement

(thereafter called ELA) whereby the PGMC leased on-line lottery equipment and
accessories to the PCSO in consideration of a rental equivalent to 4.3 % of the
gross amount of ticket sale derived by the PCSO from the operation of the lottery
which in no case shall be less than an annual rental computed at P35,000.00 per
terminal in Commercial Operation. The rental is to be computed and paid bi-
weekly. In the event the bi-weekly rentals in any year fall short of the annual
minimum fixed rental thus computed, the PCSO agrees to pay the deficiency out
of the proceeds of its current ticket sales. (Pars. 1-2)
Under the law, 30% of the net receipts from the sale of tickets is alloted to charity.
(R.A. No. 1169, Sec. 6 [B])
The term of the leases is eight (8) years, commencing from the start of
commercial operation of the lottery equipment first delivered to the lessee
pursuant to the agreed schedule. (Par. 3) cdtai

In the operation of the lottery, the PCSO is to employ its own personnel.
(Par. 5) It is responsible for the loss of, or damage to, the equipment from any
cause and for the cost of their maintenance and repair. (Pars. 7-8)
Upon the expiration of the leases, the PCSO has the option to purchase
the equipment for the sum of P25 million.
A copy of the ELA was submitted to the Court by the PGMC in
accordance with its manifestation in the prior case. cdt

On February 21, 1995 this suit was filed seeking to declare the ELA
invalid on the ground that it is substantially the same as the Contract of Lease
nullified in the first case. Petitioners argue:
1. THE AMENDED ELA IS NULL AND VOID SINCE IT IS BASICALLY
OR SUBSTANTIALLY THE SAME AS OR SIMILAR TO THE OLD
LEASE CONTRACT AS REPRESENTED AND ADMITTED BY
RESPONDENTS PGMC AND PCSO.
2. ASSUMING ARGUENDO, THAT THE AMENDED ELA IS
MATERIALLY DIFFERENT FROM THE OLD LEASES CONTRACT,
THE AMENDED ELA IS NEVERTHELESS NULL AND VOID FOR
BEING INCONSISTENT WITH AND VIOLATIVE OF PCSO'S CHARTER
AND THE DECISION OF THIS HONORABLE COURT OF MAY 5,
1995. aisadc

3. THE AMENDED EQUIPMENT LEASE AGREEMENT IS NULL AND

VOID FOR BEING VIOLATIVE OF THE LAW ON PUBLIC BIDDING OF
CONTRACTS FOR FURNISHING SUPPLIES, MATERIALS AND
EQUIPMENT TO THE GOVERNMENT, PARTICULARLY E.O. NO.
301 DATED 26 JULY 1987 AND E.O. NO. 298 DATED 12 AUGUST
1940 AS AMENDED, AS WELL AS THE "RULES AND REGULATIONS
FOR THE PREVENTION OF IRREGULAR, UNNECESSARY,
EXCESSIVE OR EXTRAVAGANT (IUEE) EXPENDITURE
PROMULGATED UNDER COMMISSION ON AUDIT CIRCULAR NO.
85-55-A DATED SEPTEMBER 8, 1985, CONSIDERING THAT IT WAS
AWARDED AND EXECUTED WITHOUT THE PUBLIC BIDDING
REQUIRED UNDER SAID LAWS AND COA RULES AND
REGULATIONS, IT HAS NOT BEEN APPROVED BY THE PRESIDENT
 OF THE PHILIPPINES, AND IT IS NOT MOST ADVANTAGEOUS TO
THE GOVERNMENT.
4. THE ELA IS VIOLATIVE OF SECTION 2 (2), ARTICLE IX-D OF
THE 1987 CONSTITUTION IN RELATION TO THE COA CIRCULAR
NO. 85-55-A.
The PCSO and PGMC filed a separate comments in which they question the
petitioners' standing to bring suit. They maintain (1) that the ELA is a different
lease contract with none of the vestiges of a joint venture in the Contract of
Lease nullified in the prior case; (2) that the ELA did not have to be submitted to
a public bidding because it fell within the exception provided in E.O. No. 301, Sec.
1 (e); (3) that the power to determine whether the ELA is advantageous to the
government is vested in the Board of Directors of the PCSO; (4) that for the lack
of funds the PCSO cannot purchase its own on-line lottery equipment and has
had to enter into a lease contract; (5) that what petitioners are actually seeking in
this suit is to further their moral crusade and political agenda, using the Court as
their forum.cdta

For the reason set forth below, we hold that petitioners have no cause
against respondents and therefore their petition should be dismissed.
I. PETITIONERS' STANDING
The Kilosbayan, Inc. is an organization described in its petition as
"composed of civic-spirited citizens, pastors, priests, nuns and lay leaders
who are committed to the cause of truth, justice, and national renewal." Its
trustees are also suing in their individual and collective capacities as
"taxpayers and concerned citizens." The other petitioners (Sen. Freddie Webb,
Sen. Wigberto Taada and Rep. Joker P. Arroyo) are members of the
Congress suing as such and as "taxpayer and concerned citizens."

Respondents question the right of petitioners to bring this suit on the

ground that, not being parties to the contract of lease which they seek to
nullify, they have no personal and substantial interest likely to be injured by
the enforcement of the contract. Petitioners on the other hand contend that
the ruling in the previous case sustaining their standing to challenge the
validity of the first contract for the operation of lottery is now the "law of the
case" and therefore the question of their standing can no longer be
reopened. cdasia

Neither the doctrine of stare decisis nor that of "law of the case", nor
that of conclusive of judgment poses a barrier to a determination of
petitioners' right to maintain this suit.
Stare decisis is usually the wise policy. But in this case, concern for
stability in decisional law does not call for adherence to what has recently
 been laid down as the rule. The previous ruling sustaining petitioners'
intervention may itself be considered a departure from settled rulings on "real
parties in interest" because no constitutional issues were actually involved.
Just five years before that ruling this Court had denied standing to a party who,
in questioning the validity of another form of lottery, claimed the right to sue in
the capacity of taxpayer, citizen and member of the Bar. (Valmonte v.
Philippine Charity Sweepstakes, G.R. No. 78716, Sept . 22, 1987) Only
recently this Court held that members of Congress have standing to question
the validity of presidential veto on the ground that, if true, the illegality of the
veto would impair their prerogatives as members of Congress. Conversely if
the complaint is not grounded on the impairment of the powers of Congress,
legislators do not have standing to question the validity of any law or official
action. (Philippine Constitution Association v. Enriquez, 235 SCRA 506 [1994])
There is an additional reason for a reexamination of the ruling on standing. The
voting on petitioners' standing in the previous case was a narrow one, with seven
(7) members sustaining petitioners' standing and six (6) denying petitioners' right
to bring the suit. The majority was thus a tenuous one that is not likely to be
maintained in any subsequent litigation. In addition, there have been changes in
the membership of the Court, with the retirement of Justices Cruz and Bidin and
the appointment of the writer of this opinion and Justice Francisco. Given this fact
it is hardly tenable to insist on the maintenance of the ruling as to petitioners'
standing. cdta

Petitioners argue that inquiry into their right to bring this suit is barred by the
doctrine of "law of the case." We do not think this doctrine is applicable
considering the fact that while this case is a sequel to G.R. No. 113375, it is not
its continuation: The doctrine applies only when a case is before a court a
second time after a ruling by an appellate court. Thus in People v. Pinuila, 103
Phil. 992, 999 (1958), it was stated:
"'Law of the case' has been defined as the opinion delivered on a former
appeal. More specifically, it means that whatever is once irrevocably
established as the controlling legal rule of decision between the same
parties in the same case continues to be the law of these case, whether
correct on general principles or not, so long as the facts on which such
decision was predicated continue to be facts of the case before the
court." (21 C.J.S. 330)
"It may be stated as a rule of general application that, where the
evidence on a second or succeeding appeal is substantially the same as
that on the first or preceding appeal, all matters, questions, points, or
issues adjudicated on the prior appeal are the law of the case on all
subsequent appeals and will not be considered or re-adjudicated therein.
(5 C.J.S. 1267)cdasia
 "In accordance with the general rule stated in Section 1821, where after
a definite determination, the court has remanded the cause for further
action below, it will refuse to examine question other than those arising
subsequently to such determination and remand, or other than the
propriety of the compliance with its mandate; and if the court below has
proceeded in substantial conformity to the directions of the appellate
court, its action will not be questioned on a second appeal . . . .
"As a general rule a decision on a prior appeal of the same is held to be
the law of the case whether that decision is right or wrong, the remedy of
the party deeming himself aggrieved to seek a rehearing. (5 C.J.S. 1276-
77)
"Questions necessarily involved in the decision on a former appeal will
be regarded as the law of the case on a subsequent appeal, although
the questions are not expressly treated in the opinion of the court, as the
presumption is that all the facts in the case bearing on the point decided
have received due consideration whether all or none of them are
mentioned in the opinion. (5 C.J.S. 1286-87)" cdtai

As this Court explained in another case. "The law of the case, as

applied to a former decision of an appellate court, merely expresses the
practice of the courts in refusing to reopen what has been decided. It differs
from res judicata in that the conclusiveness of the first judgment is not
dependent upon its finality. The first judgment is generally, if not universally,
not final. It relates entirely to questions of law, and is confined in its operation
to subsequent proceedings in the same case . . . ." (Municipality of Daet v.
Court of Appeals, 93 SCRA 503, 521 [1979])
It follows that since the present case is not the same one litigated by
the parties before in G.R. No. 113375, the ruling there cannot in any sense be
regarded as "the law of this case." The parties are the same but the cases are
not.
Nor is inquiry into petitioners' right to maintain this suit foreclosed by the
related doctrine of "conclusiveness of judgment." 1 According to the doctrine,
an issue actually and directly passed upon the and determined in a former suit
cannot again be drawn in question in any future action between the same
parties involving a different cause of action. (Pealosa v. Tuason, 22 Phil. 303,
313 (1912); Heirs of Roxas v. Galido, 108. 582 [1960]) cdt

It has been held that the rule on conclusiveness of judgment or preclusion of

issues or collateral estoppel does not apply to issues of law, at least when
substantially unrelated claims are involved. (Montana v. United States, 440 U.S.
147, 162, 59 L. Ed. 2d 210, 222 [1979]; BATOR, MELTZER, MISHKIN AND
SHAPIRO, THE FEDERAL COURTS AND THE FEDERAL SYSTEM 1058, n. 2
[3rd Ed., 1988]) Following this ruling it was held inCommissioner v. Sunnen, 333
U.S. 591, 92 L. Ed. 898 (1947) that where a taxpayer assigned to his wife
interest in a patent in 1928 and in a suit it was determined that the money paid to
his wife for the years 1929-1931 under the 1928 assignment was not part of his
taxable income, this determination is not preclusive in a second action for
collection of taxes on amounts to his wife under another deed of assignment for
other years (1937 to 1941). For income tax purposes what is decided with
respect to one contract is not conclusive as to any other contract which was not
then in issue, however similar or identical it may be. The rule on collateral
estoppel, it was held, "must be confined to situations where the matter raised in
the second suit is identical in all respects with that decided in the first preceding
and where the controlling facts and applicable legal rules remain unchanged."
(333 U.S. at 599-600, 92 L. Ed. at 907) Consequently, "if the relevant facts in the
two cases are separate, even though they may be similar or identical, collateral
estoppel does not govern the legal issues which occur in the second case. Thus
the second proceeding may involve an instrument or transaction identical with
but, in a form separable from, the one dealt with in the first proceeding. In that
situation a court is free in the second proceeding to make an independent
examination of the legal matters at issue. . . ." (333 U.S. at 601, 92 L. Ed. at 908)
This exception to the General Rule of the Issue Preclusion is authoritatively
formulated in Restatement of the Law 2d, on Judgments, as follows:
Sec. 28. Although an issue is actually litigated and determined by a valid
and final judgment, and the determination is essential to the judgment,
relitigation of the issue in a subsequent action between the parties is not
precluded in the following circumstances: cdasia

xxx xxx xxx

(2) The issue is one of law and (a) the two actions involve claims that are
substantially unrelated, or (b) a new determination is warranted in order
to take account of an intervening change in the applicable legal context
or otherwise to avoid inequitable administration of the laws; . . .
Illustration:
xxx xxx xxx
2. A brings an action against the municipality of B for tortious injury. The
court sustain B's defense of sovereign immunity and dismisses the
action. Several years later A brings the second action against B for an
unrelated tortious injury occurring after the dismissal. The judgment in
the first action is not conclusive on the question whether the defense
immunity is available to B. Note: The doctrine of stare decisis may lead
the court to refuse to reconsider the question of sovereign immunity. See
Sec. 29, Comment i.
The question whether the petitioners have standing to question the
Equipment Lease Agreement or ELA is a legal question. As will presently be
shown, the ELA, which petitioners seek to declare invalid in this proceeding, is
 essentially different from the 1993 Contract of Lease entered into by the
PCSO with the PGMC. Hence the determination in the prior case (G.R. No.
113375) that the petitioner had standing to challenge the validity of the 1993
Contract of Lease of the parties does not preclude determination of their
standing in the present suit.

Not only is petitioners' standing a legal issue that may be determined

again in this case. It is, strictly speaking, not even the issue in this case, since
standing is a concept in constitutional law and here no constitutional question
is actually involved. The issue in this case is whether petitioners are the "real
parties-in-interest" within the meaning of Rule 3, Sec. 2 of the Rules of Court
which requires that "Every action must be prosecuted and defended in the
name of the real party-in-interest."
The difference between the rule on standing and real party-in-interest has been
noted by authorities thus: "It is important to note . . . that standing because of its
constitutional and public policy underpinnings, is very different from questions
relating to whether a particular plaintiff is the real party-in-interest or has capacity
to sue. Although all three requirements are directed towards ensuring that only
certain parties can maintain an action, standing restrictions require a partial
consideration of the merits, as well as broader policy concerns relating to the
proper role of the judiciary in certain areas. (FRIEDENTHAL, KANE AND
MILLER, CIVIL PROCEDURE 328 [1985]) aisadc

Standing is a special concern in constitutional law because in some cases suits

are brought not by parties who have been personally injured by the operation of a
law or by official action taken, but by concerned citizens, taxpayers or voters who
actually sue in the public interest. Hence the question in standing is whether such
parties have "alleged such a personal stake in the outcome of the controversy as
to assure that concrete adverseness which sharpens the presentation of issues
upon which the court so largely depends for illumination of difficult constitutional
questions." (Baker v. Carr, 369 U.S. 186, 7 L. Ed. 2d 633 (1962))
Accordingly, in Valmonte v. Philippine Charity Sweepstakes Office, G.R. No.
78716, Sept. 22, 1987, standing was denied to a petitioner who sought to declare
a form of lottery known as Instant Sweepstakes invalid because, as the Court
held:
Valmonte brings the suit as a citizen, lawyer, taxpayer and father of
three (3) minor children. But nowhere in his petition does petitioner claim
that his rights and privileges as a lawyer or citizen have been directly
and personally injured by the operation of the Instant Sweepstakes. The
interest of the person assailing the constitutionality of a statute must be
direct and personal. He must be able to show, not only the law is invalid,
but also that he has sustained or is in immediate danger of sustaining
 some direct injury as a result of its enforcement, and not merely that he
suffers thereby in some indefinite way. It must appear that the person
complaining has been or is about to be denied some right or privilege to
which he is lawfully entitled or that he is about to be subjected to some
burdens or penalties by reason of the statute complained of. cdta

We apprehend no difference between the petitioner in Valmonte and

the present petitioners. Petitioners do not in fact show what particularized
interest they have for bringing this suit. It does not detract from the high
regard for petitioners as civic leaders to say that their interest falls short of
that required to maintain an action under the Rule 3, Sec. 2.
It is true that the present action involves not a mere contract between private
individuals but one made by a government corporation. There is, however, no
allegation that the public funds are being misspent so as to make this action a
public one and justify relaxation of the requirement that an action must be
prosecuted in the name of the real party-in-interest. (Valmonte v. PCSO, supra;
Bugnay Const.and Dev. Corp. v. Laron, 176 SCRA 240 [1989])
On the other hand, the question as to "real party-in-interest" is whether he is "the
party who would be benefited or injured by the judgment, or the 'party entitled to
the avails of the suit.'" (Salonga v. Warner Barnes & Co., Ltd., 88 Phil. 125, 131
[1951])cdasia

Petitioners invoke the following Principles and State Policies set forth in
Art. II of the Constitution:
The maintenance of peace and order, the protection of life, liberty, and
property, and the promotion of the general welfare are essential for the
employment by all the people of the blessings of democracy. (Sec. 5)
The natural and primary right and duty of the parents in the rearing of the
youth for civic efficiency and the development of moral character shall
receive the support of the Government. (Sec. 12) cdtai

The State recognizes the vital role of the youth in nation-building and
shall promote their physical, moral, spiritual, intellectual, and social well-
being. It shall inculcate in the youth patriotism and nationalism, and
encourage their involvement in public and civic affairs. (Sec. 13)
The state shall give priority to education, science and technology, arts,
culture, and sports to foster patriotism and nationalism, accelerate social
progress, and promote total human liberation and development. (Sec. 17)
(Memorandum for Petitioners, p. 7) cdt

These are not, however, self executing provisions, the disregard of which can
give rise to a cause of action in the courts. They do not embody judicially
enforceable constitutional rights but guidelines for legislation.
Thus, while constitutional policies are invoked, this case involves basically
questions of contract law. More specifically, the question is whether petitioners
have legal right which has been violated.
In action for annulment of contracts such as this action, the real parties are those
who are parties to the agreement or are bound either principally or subsidiarily or
are prejudiced in their rights with respect to one of the contracting parties and
can show the detriment which would positively result to them from the contract
even though they did no intervene in it (Ibaez v. Hongkong & Shanghai Bank,
22 Phil. 572 [1912]), or who claim a right to take part in a public bidding but have
been illegally excluded from it. (See De la Lara Co., Inc. v. Secretary of Public
Works and Communications, G.R. No. L-13460, Nov. 28, 1958)
These are parties with "a present substantial interest, as distinguished from a
mere expectancy or future, contingent, subordinate, or consequential interest . . . .
The phrase 'present substantial interest' more concretely is meant such interest
of a party in the subject matter of action as will entitle him, under the substantive
law, to recover if the evidence is sufficient, or that he has the legal title to
demand and the defendant will be protected in a payment by him." (1 MORAN,
COMMENTS ON THE RULES OF COURT 154-155 (1979) ) Thus, in Gonzales v.
Hechanova, 118 Phil. 1065 (1963) petitioner's right to question the validity of a
government contract for the importation of rice was sustained because he was a
rice planter with substantial production, who had a right under the law to sell to
the government. cdasia

But petitioners do not have such present substantial interest in the ELA as would
entitle them to bring this suit. Denying to them the right to intervene will not leave
without remedy any perceived illegality in the execution of government contracts.
Question as to the nature or validity of public contracts or the necessity for a
public bidding before they may be made can be raised in an appropriate case
before the Commission on Audit or before the Ombudsman. The
Constitution requires that the Ombudsman and his deputies, "as protectors of the
people shall act promptly on complaints filed in any form or manner against
public officials or employees of the government, or any subdivision, agency or
instrumentality thereofincluding government-owned or controlled corporations."
(Art. XI , Sec. 12) In addition, the Solicitor General is authorized to bring an
action for quo warranto if it should be thought that a government corporation, like
the PCSO, has offended against its corporate charter or misused its franchise.
(Rule 66, Sec. 2 (a) (d))
We now turn to the merits of petitioners' claim constituting their cause of action.
II. THE EQUIPMENT LEASE AGREEMENT
This Court ruled in the previous case that the Contract of Leases, which
the PCSO had entered into two with the PGMC on December 17, 1993 for the
operation of an on-line lottery system, was actually a joint venture agreement
or, at the very least, a contract involving "collaboration or association" with
another party and for that reason, was void. The Court noted the following
features of the contract: cdt

(1) The PCSO had neither funds nor expertise to operate the on-line
lottery system so that it would be dependent on the PGMC for the operation of
the lottery system.
(2) The PGMC would exclusively bear all costs and expenses for
printing tickets, payment of salaries and wages of personnel, advertising and
promotion and other expenses for the operation of the lottery system. Mention
was made of the provision, which the Court considered "unusual in a lessor-
lessee relationship but inherent in a joint venture," for the payment of the
rental not at a fixed amount but at a certain percentage (4.9%) of the gross
receipts from the sale of tickets, and the possibility that "nothing may be due
demandable at all because the PGMC binds itself to 'bear all risks if the
revenue from the ticket sales, on an annualized basis, are insufficient to pay
the entire prize money.'" (232 SCRA at 147)
(3) It was only after the term of the contract that PCSO personnel would
be ready to operate the lottery system themselves because it would take the
entire eight-year term of the contract for the technology transfer to be
completed. In the view of the Court, this meant that for the duration of the
contract, the PGMC would actually be the operator of the lottery system, and
not simply the lessor of equipment. aisadc

The Court considered the Contract of Lease to be actually a joint

venture agreement. From another angle, it said that the arrangement,
especially the provision that all the risks were for the account of the PGMC,
was in effect a lease by the PCSO of its franchise to the PGMC.

These features of the old Contract of Lease have been removed in the
present ELA. While the rent is still expressed in terms of percentage (it is now
4.3% of the gross receipts from the sale of the tickets) in the ELA, the PGMC
is now guaranteed a minimum rent of P35,000.00 a year per terminal in
commercial operation. (Par. 2) The PGMC is thus assured of payment of the
rental. Thus par. 2 of the ELA provides:
2. RENTAL
During the effectivity of this Agreement and the term of this lease as
provided in paragraph 3 hereof, LESSEE shall pay rental to
LESSOR equivalent to FOUR POINT THREE PERCENT (4.3%)
of the gross amount of ticket sales from all the LESSEE's on-line
lottery operations in the Territory, which rental shall be computed
and payable bi-weekly net of withholding taxes on income, if any:
 provided that, in no case shall the annual aggregate rentals per
year during the term of the leases be less than the annual
minimum fixed rental computed at P35,000.00 per terminal in
commercial operation per annum, provided, further that the
annual minimum fixed rental shall be reduced pro-rata for the
number of days during the year that a terminal is not in
commercial operation due to repairs or breakdown. In the event
the aggregate bi-weekly rentals in any year falls short of the
annual minimum fixed rental computed at P35,000.00 per terminal
in commercial operation, the LESSEE shall pay such shortfall
from out of the proceeds of the then current ticket sales from
LESSEE's on-line lottery in the Territory (after payment first of
prizes and agents' commissions but prior to any other payments,
allocations or disbursements) until said shortfall shall have been
fully settled, but without prejudice to the payment to LESSOR of
the then current bi-weekly rentals in accordance with the
provisions of the first sentence of this paragraph 2.
The PCSO now bears all losses because the operation of the system is
completely in its hands. This feature of the new contract negates any doubt that it
is anything but a lease agreement.
It is contended that the rental of 4.3% is substantially the same as the 4.9% in
the old contract because the reduction is negligible especially now that the PCSO
assumes all business risks and risk of loss of, or damage to, equipment.
Petitioners allege that: aisadc

PGMC's annual minimum rental is P35,000.00 per terminal or a total of

P70,000,000.00 per annum considering that there are 2,000 terminals
per the amended ELA. In order to meet the amount, based on the 4.3%
rental arrangement without shortfall, the gross ticket sales must amount
to at least P1,627,906,977.00. Multiplying this amount by 4.9 % we get
the 4.9% rental fee fixed under the old lease contract and the product is
P79,767,442 .00. Deducting from this amount the sum of
P70,000,000.00 representing the annual minimum rental under the
amended ELA, we get the figure of P9,767,442 which is equivalent to
the .06% difference between the rental under the old lease contract and
under the amended ELA.
This amount of P9,767,442.00 cannot possibly cover the costs,
expenses and obligations shouldered by PGMC under the old leases
contract but which are now to be borne by the PCSO under the new ELA,
not to mention the additional P25 million that the PCSO has to pay the
PGMC if the former exercises its option to purchase the equipment at
the end of the lease period under the amended ELA.
(Petition, p. 37) cdt
 To be sure there is nothing unusual in fixing the rental as a certain
percentage of the gross receipts. The lease of space in commercial buildings,
for example, involves the payment of a certain percentage of the receipts in
rental. Under the Civil Code (Art. 1643) the only requirement is that the rental
be a "price certain." Petitioners do not claim here that the rental is not "price
certain," simply because it is expressed as a certain percentage of the total
gross amount of ticket sales.
Indeed it is not alone the fact that in the old contract the rental was
expressed in terms of percentage of the net proceeds from the sale of tickets
which was held to be characteristics of a joint venture agreement. It was the
fact that, in the prior case, the PGMC assumed, in addition, all risks of loss
from the operation of the lottery, with the distinct possibility that nothing might
be due it. In the view of the Court possibility belied claims that the PGMC had
no participation in the lottery other than being merely the lessor of equipment.
In the new contract the rental is also expressed in terms of percentage
of the gross proceeds from ticket sales because the allocation of the receipts
under the charter of the PCSO is also expressed in percentage, to wit: 55% is
set aside for prizes; 30% for contribution to charity; and 15% for operating
expenses and capital expenditure. (R.A. No. 1169, Sec. 6) As the Solicitor
General points out in his Comment filed in behalf of the PCSO: aisadc

In the PCSO charter, operating cost are reflected as a percentage of the

net receipts (which is defined as gross receipts less ticket printing costs
which shall not exceed 2% and the 1% granted to the Commission on
Higher Education under Republic Act No. 7722). The mandate of the law
is that the operating costs, which include payments for any leased
equipment, cannot exceed 15% of net receipts, or 14.55% of gross
receipts. The following conclusions are therefore evident:
a. The 4.3% rental rate for the equipment is well within the
maximum of 15% net receipts fixed by law;
b. To obviate any violation of the law, it is best to express large
operating costs for budgetary purposes as a percentage of
either gross or net receipts, specifically since the amount of
gross receipts can only be estimated.
c. Large fixed sums of money for major operating costs, such as
fixed rental for equipment, can very well exceed the
maximum percentages fixed by law, specifically if actual
gross receipts are lower than estimates for budgetary
purposes.
d. The problem of budgeting based on estimates is even more
difficult when new projects are involved, as is the case in
the on-line lottery.
 (PCSO's Comment, pp. 18-20) cdt

Petitioners reply that to obviate the possibility that the rental would not
exceed 15% of the net receipts what the respondents should have done was
not to agree on a minimum fixed rental of P35,000.00 per terminal in
commercial operation . This is a matter of business judgment which, in the
absence of a clear and convincing showing that it was made in grave abuse of
discretion of the PCSO, this Court is not inclined to review. In this case the
rental has to be expressed in terms of percentage of the revenue of the PCSO
because rental are treated in the charter of the agency (R.A. No. 1169, Sec. 6
(C)) as "operating expenses" and the allotment for "operating expenses" is a
percentage of the net receipts.
The ELA also provides:
8. REPAIR SERVICES aisadc

LESSEE shall bear the costs of maintenance and necessary repairs,

except those repairs to correct defective workmanship or replace
defective materials used in the manufacture of Equipment
discovered after delivery of the Equipment, in which the case
LESSOR shall bear the costs of such repairs and, if necessary,
the replacements. The LESSEE may at any time during the term
of the lease, request the LESSOR to upgrade the equipment
and/or increase the number of terminals, in which case the
LESSEE and LESSOR shall agree on an arrangement mutually
satisfactory to both of them, upon such terms as may be mutually
agreed upon.
By virtue of this provision on upgrading of equipment, petitioners claim, the
parties can change their entire agreement and thereby, by "clever means and
devices," enable the PGMC to "actually operate, manage, control and supervise
the conduct and holding of the on-line lottery," considering that as found in the
first decision, "the PCSO had neither funds of its own nor the expertise to operate
and manage an on-line lottery."
The claim is speculative. It is just as possible to speculate that after sometime
operating the lottery system the PCSO will be able to accumulate enough capital
to enable it to buy its own equipment and gain expertise. As for expertise, after
three months of operation of the on-line lottery, there appears to be no complaint
that the PCSO is relying on others, outside its own personnel, to run the system.
In any case as in the construction of statutes, the presumption is that in making
contracts the government has acted in good faith. The doctrine that the possibility
of abuse is not a reason for denying power to the government holds true also in
cases involving the validity of contacts made by it.cdta

Finally, because the term "Equipment" is defined in the ELA as

including "technology, intellectual property rights, know-how processes and
 systems," it is claimed that these items could only be transferred to the PCSO
by the PGMC training PCSO personnel and this was found in the first case to
be a badge of a joint venture.
Like the argument based on the upgrading of equipment, we think this
contention is also based on speculation rather than on fact or experience.
Evidence is needed to show that the transfer of technology would involve the
PCSO and its personnel in prohibited or collaboration with the PGMC within
the contemplation of the law.
A contract of lease, as this is defined in Civil law, may call for some
form of collaboration or association between the parties since lease is a
"consensual, bilateral, onerous and commutative contract by which one
person binds himself to grant temporarily the use of a thing or the rendering of
some service to another who undertakes to pay some rent, compensation or
price." (5 PADILLA, CIVIL CODE 611 (6TH ED. 1974)). The lessor of a
commercial building, it may be assumed, would be interested in the success
of its tenants. But it is untenable to contend that this is what the charter of the
PCSO contemplates in prohibiting it from entering into "collaboration or
association" with any party. It may be added that even if the PCSO purchases
its own equipment, it still needs the assistance of the PGMC in the initial
phase or operation. cdt

We hold that the ELA is a lease contract and that it contains none of the features
of the former contract which were considered "badges of a joint venture
agreement." To further find fault with the new contract would be to cavil and
expose the opposition to the contract to be actually an opposition to lottery under
any and all circumstances. But "[t]he morality of gambling is not a justifiable issue.
Gambling is not illegal per se . . . . It is left to Congress to deal with activity as it
sees fit." (Magtajas v. Pryce Properties Corp. Inc., 234 SCRA 255, 268
(1994). Cf . Lim v. Pacquing, G.R. No. 115044, Jan. 27, 1995) In the case of
lottery, there is no dispute that, to enable the Philippine Charity Sweepstakes
Office to raise funds for charity, Congress authorized the Philippine Charity
Sweepstakes Office (PCSO) to hold or conduct lotteries under certain conditions.
We therefore now consider whether under the charter of the PCSO any contract
for the operation of an on-line lottery system, which involves any form of
collaboration or association, is prohibited.
III. THE INTERPRETATION of SEC. 1 OF R.A. 1169
In G.R. No. 113375 it was held that the PCSO does not have the power to enter
into any contract which would involve it in any form of "collaboration, association
or joint venture" for the holding of sweepstakes races, lotteries and other similar
activities. This interpretation must be reexamined especially in determining
whether petitioners have a cause of action.
We hold that the charter of the PCSO doe not absolutely prohibit it from holding
or conducting lottery "in collaborating, association or joint venture" with another
party. What the PCSO is prohibited from doing is to invest in a business engaged
in sweepstakes races, lotteries and similar activities, and it is prohibited from
doing so whether in "collaboration, association or joint venture" with others or "by
itself." The reason for that is that these are competing activities and the PCSO
should not invest in the business of a competitor.
It will be helpful to quote the pertinent provisions of R.A. No. 1169, as
amended by B.P. Blg. 42: cdta

Sec. 1. The Philippine Charity Sweepstakes Office. The Philippine

Charity Sweepstakes Office, hereinafter designated the Office, shall be
the principal government agency for raising and providing for funds for
heath programs, medical assistance and services and charities of
national character, and as such shall have the general powers conferred
in section thirteen of Act Numbered One Thousand Four Hundred Fifty-
Nine, as amended, and shall have the authority:
A. To hold and conduct charity sweepstakes races, lotteries and other
similar activities, in such frequency and manner, as shall be determined,
and subject to such rules and regulations as shall be promulgated by the
Board of Directors.
B. Subject to the approval of the Minister of Human Settlements, to
engage in heath and welfare-related investments, programs, projects
and activities which may be profit-oriented, by itself or in collaboration,
association or joint venture with any person, association, company or
entity, whether domestic or foreign, except for the activities mentioned in
the preceding paragraph (A), for the purpose of providing for permanent
and continuing sources for health programs, including the expansion of
existing ones, medical assistance and services, and/or charitable grants:
Provided, That such investments will not compete with the private sector
in the areas where the investments are adequate as may be determined
by the National Economic and Development Authority. aisadc

When parsed, it will be seen that Sec. 1 grants the PCSO authority to do any of
the following: (1) to hold or conduct charity sweepstakes races, lotteries and
similar activities; and/or (2) to invest whether "by itself or in collaboration,
association or joint venture with any person, association, company or entity" in
any "health and welfare-related investments, programs, projects and activities
which may be profit oriented," except "the activities mentioned in the preceding
paragraph (A)," i.e., sweepstakes races, lotteries and similar activities. The
PCSO is prohibited from investing in "activities mentioned in the preceding
paragraph (A)" because, as already stated, these are competing activities.
The subject of Sec. 1 (B) is the authority of the PCSO to invest in certain projects
for the profit in order to enable it to expand its health programs, medical
assistance and charitable grants. The exception in the law refers to investments
in businesses engaged in sweepstakes races, lotteries and similar activities. The
limitation applies not only when the investments is undertaken by the PCSO "in
collaboration, association or joint venture" but also when made by the PCSO
alone, "by itself." The prohibition can not apply to the holding of a lottery by the
PCSO itself. Otherwise when it is authorized to do in par. (A) would be negated
by what is prohibited by par. (B).
To harmonize pars. (A) and (B), the latter must be read as referring to
the authority of the PCSO to invest in the business of others. Put in another
way, the prohibition in Sec. 1 (B) is not so much against the PCSO entering
into any collaboration, association or joint venture with others as against the
PCSO investing in the business of another franchise holder which would
directly compete with PCSO's own charity sweepstakes races, lotteries or
similar activities. The prohibition applies whether the PCSO makes the
investment alone or with others. cdt

The contrary construction given to Sec. 1 in the previous decision is

based on remarks made by then Assemblyman, now Mr. Justice, Davide
during the deliberations on what later became B.P. Blg. 42, amending R.A. No.
1169. It appears, however, that the remark were made in connection with a
proposal to give the PCSO the authority "to engage in any and all
investments." It was to provide exception with regard to the type of
investments which the PCSO is authorized to make that the Davide
amendment was adopted. It is reasonable to suppose that the members of the
Batasan Pambansa, in approving the amendment, understood it as referring
to the exception to par (B) of Sec. 1 giving the PCSO the power to make
investments. Had it been their intention to prohibit the PCSO from entering
into any collaboration, association or joint venture with others even in
instances when the sweepstakes races, lotteries or similar activities are
operated by it ("itself"), they would have made the amendment not in par. (B),
but in par. (A), of Sec. 1, as the logical place for the amendment.
The following excerpt 2 from the record of the discussion on
Parliamentary Bill No. 622, which became B.P. Blg. 422, bears out this
conclusion:
MR. ZAMORA.
On the same page, starting from line 18 until line 23, delete the entire
paragraph from "b. to engage in any and all investments. . . ." until
the words "charitable grants" on line 23 and in lieu thereof insert
the following: cdasia
 SUBJECT TO THE APPROVAL OF THE MINISTER OF HUMAN
SETTLEMENTS, TO ENGAGE IN HEALTH-ORIENTED
INVESTMENTS, PROGRAMS, PROJECTS AND ACTIVITIES
WHICH MAY BE PROFIT-ORIENTED, BY ITSELF OR IN A
COLLABORATION, ASSOCIATION, OR JOINT VENTURE WITH
ANY PERSON, ASSOCIATION, COMPANY OR ENTITY,
WHETHER DOMESTIC OR FOREIGN, FOR THE PURPOSE OF
PROVIDING FOR PERMANENT AND CONTINUING SOURCES
OF FUNDS FOR HEALTH PROGRAMS, INCLUDING THE
EXPANSION OF EXISTING ONES AND/OR CHARITABLE
GRANTS.
I move for approval of the amendment, Mr. Speaker.
MR. DAVIDE.
Mr. Speaker.
THE SPEAKER.
The gentleman from Cebu is recognized.
MR. DAVIDE.
May I introduce an amendment to the committee amendment? The
amendment would be to insert after "foreign" in the amendment
just read the following: EXCEPT FOR THE ACTIVITY IN LETTER
(A) ABOVE. aisadc

When it is a joint venture or in collaboration with any other entity

such collaboration or joint venture must not include activity letter
(a) which is the holding and conducting of sweepstakes races,
lotteries and other similar acts.
MR. ZAMORA.
We accept the amendment, Mr. Speaker.
MR. DAVIDE.
Thank you Mr. Speaker. cdtai

THE SPEAKER.
Is there any objection to the amendment? (Silence) The amendment, as
amended, is approved.
MR. ZAMORA.
Continuing the line, Mr. Speaker, after "charitable grants" change the
period (.) into a semi-colon (;) and add the following
proviso: PROVIDED, THAT SUCH INVESTMENTS, PROGRAMS,
PROJECTS AND ACTIVITIES SHALL NOT COMPETE WITH
THE PRIVATE SECTOR IN AREAS WHERE THE PRIVATE
INVESTMENTS ARE ADEQUATE.
May I read the whole paragraph, Mr. speaker.
MR. DAVIDE.
May I introduce an amendment after "adequate". The intention of the
amendment is not to leave the determination of whether it is
adequate or not to anybody. And my amendment is to add after
"adequate" the words AS MAY BE DETERMINED BY THE
NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY. As
a matter of fact, it will strengthen the authority to invest in these
areas, provided that the determination of whether the private
sector's activity is already adequate must be determined by the
National Economic and Development Authority.
MR. ZAMORA.
Mr. Speaker, the committee accepts the proposed amendment.
MR. DAVIDE.
Thank you, Mr. Speaker. aisadc

THE SPEAKER.
May the sponsor now read the entire paragraph?
MR. ZAMORA.
May I read the paragraph, Mr. Speaker.
"Subject to the Minister of Human Settlements, to engage in
health and welfare-oriented investment programs, projects, and
activities which may be profit-oriented, by itself or in collaboration,
association or joint venture with any person, association,
company or entity, whether domestic or foreign, EXCEPT FOR
THE ACTIVITIES MENTIONED IN PARAGRAPH (a) for the
purpose of providing for permanent and continuing sources of
funds for health programs, including the expansion of existing
ones, medical assistance and services and/or charitable grants:
PROVIDED THAT SUCH INVESTMENTS, HEALTH PROGRAMS,
PROJECTS AND ACTIVITIES SHALL NOT COMPETE WITH
THE PRIVATE SECTOR IN AREAS WHERE THE PRIVATE
INVESTMENTS ARE ADEQUATE AS MAY BE DETERMINED
BY THE NATIONAL AND ECONOMIC DEVELOPMENT
AUTHORITY."

THE SPEAKER.
Is there any objection to the amendment? aisadc

MR. PELAEZ.
Mr. Speaker.
THE SPEAKER.
The Gentleman from Misamis Oriental is recognized.
 MR. PELAEZ.
Mr. Speaker, may I suggest that in that proviso, we remove "health
programs, projects and activities," because the proviso refers only
to investments activities "provided that such investments will
not compete with the private sector in areas where the
investments are adequate . . ." aisadc

MR. ZAMORA.
It is accepted, Mr. Speaker.
THE SPEAKER.
Is there any objection?
MR. PELAEZ.
Mr. Speaker, may I propose an improvement to the amendment of the
Gentlemen from Cebu, just for style, I would suggest the insertion
of the word PRECEDING before the word "paragraph." The
phrase will read "the PRECEDING paragraph." aisadc

MR. ZAMORA.
It is accepted, Mr. Speaker.
THE SPEAKER.
Very well. Is there any objection to the committee amendment, as
amended? (Silence) The Chair hears none; the amendment is
approved.
The construction given to Sec. 1 in the previous decision is insupportable in light
of both the text of Sec. 1 and the deliberations of the Batasang Pambansa which
enacted the amendatory law. aisadc

IV. REQUIREMENT OF PUBLIC BIDDING

Finally the question is whether the ELA is subject to public bidding. In
justifying the award of the contract to the PGMC without public bidding, the
PCSO invokes E.O. No. 301, which states in pertinent part:
Sec. 1. Guidelines for Negotiated Contracts. Any provision of the law,
decree, executive order or other issuances to the contrary
notwithstanding, no contract for public services or for furnishing supplies,
materials and equipment to the government or any of its branches,
agencies or instrumentalities shall be renewed or entered into without
public bidding, except under any of the following situations. cdasia

a. Whenever the supplies are urgently needed to meet an emergency

which may be involve the loss of, or danger to, life and/or property:
b. Whenever the supplies are to be used in connection with a project or
activity which cannot be delayed without causing detriment to the
public service;
 c. Whenever the materials are sold by an exclusive distributor or
manufacturer who does not have sub-dealers selling at lower
prices and for which no suitable substitute can be obtained
elsewhere at more advantageous terms to the government; cdtai

d. Whenever the supplies under procurement have been unsuccessfully

placed on bid for at least two consecutive times, either due to lack
of bidders or the offers received in each instance were exorbitant
or non-conforming to specifications:
e. In cases where it is apparent that the requisition of the need supplies
through negotiated purchase is most advantageous to the
government to be determined by the Department Head
concerned; and
f. Whenever the purchase is made from an agency of the government. cdt

Petitioners point out that while the general rule requiring public bidding covers
"contract[s] for public services or for
furnishing supplies, materialsand equipment" to the government or to any of its
branches, agencies or instrumentalities, the exceptions in pars. (a), (b), (d), (e),
and (f) refer to contracts for the furnishing of supplies only, while par. (c) refers to
the furnishing of materials, only. They argue that as the general rule covers the
furnishing of "supplies, materials and equipment," the reference in the exceptions
to the furnishing of "supplies" must be understood as excluding the furnishing of
any of the other items, i.e. "materials" and "equipment."
E.O. No. 301, Sec. 1 applies only to contracts for the purchase of supplies,
materials and equipment. It does not refer to contracts of lease of equipment like
the ELA. The provisions on lease are found in Secs. 6 and 7 but they refer to the
lease of privately-owned buildings or spaces for government use or of
government-owned buildings or spaces for private use, and these provisions do
not require public bidding. These provisions state:
Sec. 6. Guidelines for Lease Contracts. Any provision of law, decree,
executive order or other issuances to the contrary notwithstanding, the
Department of Public Works and Highways (DPWH), with respect to the
leasing of privately-owned buildings or spaces for government use or of
government-owned buildings or space for private use, shall formulate
uniform standards or guidelines for determining the reasonableness of
the terms of lease contracts and of rental rates involved.
aisadc

Sec. 7. Jurisdiction Over Lease Contracts. The heads of agency

intending to rent privately-owned buildings or spaces for their use, or to
lease out government-owned buildings or spaces for private use, shall
have authority to determine the reasonableness of the terms of the lease
and the rental rates thereof, and to enter in such leases contracts
without need of prior approval by higher authorities, subject to
 compliance with the uniform standards or guidelines established
pursuant to Section 6 hereof by the DPWH and to the audit jurisdiction of
COA or its duly authorized representative in accordance with existing
rules and regulations.
It thus difficult to see how E.O. No. 301 can be applied to the ELA when the
only feature of the ELA that may be thought of as close to a contract of
purchase and sale is the option to buy given to the PCSO. An option to buy is
not of course a contract of purchase and sale.
Even assuming that Sec. 1 of E.O. 301 applies to lease contracts, the reference
to "supplies" in the exceptions can not strictly construed to exclude the furnishing
of "materials" and "equipment" without defeating the purpose for which these
exceptions are made. For example, par. (a) excepts from the requirement of
public bidding the furnishing of "supplies" which are "urgently needed to meet an
emergency which may involve the loss of, or danger to, life and/or property."
Should rescue operations during a calamity, such as an earthquake, require the
use of heavy equipment, either by purchase or lease, no one can insist that there
should first be a public bidding before the equipment may be purchased or
leased because the heavy equipment is not a "supply" and Sec. 1 (a) is limited to
the furnishing of "supplies" that are urgently needed. cdta

Petitioners contend that in any event the contract in question is not the "most
advantageous to the government." Whether the making of the present ELA
meets this condition is not to be judged by a comparison, line by line, of its
provisions with those of the old contract which this Court found to be in reality a
joint venture agreement. In some respects the old contracts would be more
favorable to the government because the PGMC assumed many of the risks and
burdens incident to the operation of the on-line lottery system, while under the
ELA it is freed from these burdens. That is because the old contract was a joint
venture agreement. The ELA, on the other hand, is a lease contract, with the
PCSO, as lessee, bearing solely the risks and burdens of operating the on-line
lottery system.
It is paradoxical that in their effort to show that the ELA is a joint venture
agreement and not a lease contract, petitioners point to contractual provisions
whereby the PGMC assumed risk and losses which might conceivably be
incurred in the operation of the lottery system, but to show that the present
lease agreement is not the most advantageous arrangement that can be
obtained, the very absence of these features of the old contract which made it
a joint venture agreement, is criticized.
Indeed the question is not whether compared with the former joint
venture agreement the present lease contract is "[more] advantageous to the
government." The question is whether under the circumstances, the ELA is
the most advantageous contract that could be obtained compared with similar
 lease agreements which the PCSO could have made with other parties.
Petitioners have not shown that more favorable terms could have been
obtained by the PCSO or that at any rate the ELA, which the PCSO
concluded with the PGMC, is disadvantageous to the government. cdasia

For the foregoing reasons, we hold:
(1) that petitioners have neither standing to bring this suit nor substantial interest
to make them real parties in interest within the meaning of Rule 3, Sec. 2;
(2) that a determination of the petitioners' right to bring this suit is not precluded
or barred by the decision in the prior case between the parties; cdtai

(3) that the Equipment Lease Agreement of January 25, 1995 is valid as a lease
contract under the Civil Code and is not contrary to the charter of the Philippine
Charity Sweepstakes Office;
(4) that under Sec. 1 (A) of its charter (R.A. 1169), the Philippine Charity
Sweepstakes Office has authority to enter into a contract for the holding of an on-
line lottery, whether alone or in association, collaboration or joint venture with
another party, so long as it itself holds or conducts such lottery; and
(5) That the Equipment Lease Agreement in question did not have to be
submitted to the public bidding as a condition for its validity.aisadc

WHEREFORE, the Petition for Prohibition, Review and/or Injunction

seeking to declare the Equipment Lease Agreement between the Philippine
Charity Sweepstakes Office and the Philippine Gaming Management Corp.
invalid is DISMISSED. SO ORDERED.
(Kilosbayan, Inc. v. Morato, G.R. No. 118910, [July 17, 1995], 316 PHIL 652-
|||

791)

[G.R. No. 161065. April 15, 2005.]

EUFEMIO C. DOMINGO, CELSO D. GANGAN, PACASIO S.

BANARIA, SOFRONIO B. URSAL, ALBERTO P. CRUZ, MARIA
L. MATIB, RACHEL U. PACPACO, ANGELO G. SANCHEZ, and
SHERWIN A. SIP-AN, petitioners, vs. HON. GUILLERMO N.
CARAGUE, in his capacity as Chairman, Commission on Audit,
HON. EMMANUEL M. DALMAN and HON. RAUL C. FLORES, in
their capacities as Commissioners, Commission on
Audit, respondents.
 DECISION

SANDOVAL-GUTIERREZ, J : p

Judicial power is the power to hear and decide cases pending between parties
who have the right to sue in courts of law and equity. 1 Corollary to this dictum is
the principle of locus standi of a litigant. He who is directly affected and whose
interest is immediate and substantial has the standing to sue. Thus, a party must
show a personal stake in the outcome of the case or an injury to himself that can
be redressed by a favorable decision in order to warrant an invocation of the
court's jurisdiction and justify the exercise of judicial power on his behalf.
Assailed in this petition for certiorari is the legality of Resolution No. 2002-05 of
the Commission on Audit (COA) providing for Organizational Restructuring Plan.
The above-named petitioners basically alleged therein that this Plan is
intrinsically void for want of an enabling law authorizing COA to undertake the
same and providing for the necessary standards, conditions, restrictions,
limitations, guidelines, and parameters. Petitioners further alleged that in initiating
such Organizational Restructuring Plan without legal authority, COA committed
grave abuse of discretion amounting to lack or excess of jurisdiction.
At this point, it is pertinent to state that the COA is a quasi-judicial body and that
its decision, order or ruling may be brought to the Supreme Court oncertiorari by
the aggrieved party. 2
Petitioners Eufemio C. Domingo, Celso C. Gangan, Pascasio S. Banaria are
retired Chairmen, while Sofronio B. Ursal, and Alberto P. Cruz are retired
Commissioners of COA. All claim "to maintain a deep-seated abiding interest in
the affairs of COA," 3 especially in its Organizational Restructuring Plan, as
concerned taxpayers.
The other petitioners are incumbent officers or employees of COA. Maria L.
Matib and Angelo G. Sanchez are State Auditor III and State Auditor II,
respectively, assigned to the Cordillera Administrative Region (CAR). Prior to the
implementation of the questioned COA Organizational Restructuring Plan, they
were Resident Auditors and later Audit Team Leaders. Petitioner Rachel U.
Pacpaco is a State Auditor III assigned to CAR and a Team Supervisor, while
petitioner Sherwin A. Sipi-an is a State Auditor I also assigned at the CAR. These
petitioners claim that they were unceremoniously divested of their
designations/ranks as Unit Head, Team Supervisor, and Team Leader upon
implementation of the COA Organizational Restructuring Plan without just cause
and without due process, in violation of Civil Service Law. Moreover, they were
deprived of their respective Representation and Transportation Allowances
(RATA), thus causing them undue financial prejudice. EHaASD
Petitioners now invoke this Court's judicial power to strike down the COA
Organizational Restructuring Plan for being unconstitutional or illegal.
Initially, for our resolution is the issue of whether petitioners have the legal
standing to institute the instant petition.
Petitioners invoke our ruling in Chavez v. Public Estates Authority, 4 Agan, Jr. v.
Philippine International Air Terminals Co., Inc., 5 and Information Technology
Foundation of the Philippines v. Commission on Elections 6 that where the
subject matter of a case is a matter of public concern and imbued with public
interest, then this fact alone gives them legal standing to institute the instant
petition. Petitioners contend that the COA Organizational Restructuring Plan is
not just a mere reorganization but a revamp or overhaul of the COA, with a
"spillover effect" upon its audit performance. This will have an impact upon the
rest of the government bodies subject to its audit supervision, thus, should be
treated as a matter of transcendental importance. Consequently, petitioners' legal
standing should be recognized and upheld.
Respondents, through the Office of the Solicitor General (OSG), counter that
petitioners have no legal standing to file the present petition since following our
ruling in Kilusang Mayo Uno Labor Center v. Garcia, Jr., 7 they have not shown
"a personal stake in the outcome of the case" or an actual or potential injury that
can be redressed by our favorable decision. Petitioners themselves admitted that
"they do not seek any affirmative relief nor impute any improper or improvident
act against the said respondents" and "are not motivated by any desire to seek
affirmative relief from COA or from respondents that would redound to their
personal benefit or gain." It is clear then that petitioners failed to show any
"present substantial interest" in the outcome of this case, citing Kilosbayan v.
Morato. 8 Nor may petitioners claim that as taxpayers, they have legal standing
since nowhere in their petition do they claim that public funds are being spent in
violation of law or that there is a misapplication of the taxpayers' money, as we
ruled in Dumlao v. Comelec. 9
Petitioners' reliance upon our rulings in Chavez, 10 Agan, Jr., 11 and Information
Technology Foundation 12 is flawed.
In Chavez, we ruled that the petitioner has legal standing since he is a taxpayer
and his purpose in filing the petition is to compel the Public Estate Authority (PEA)
to perform its constitutional duties with respect to: (a) the right of the citizens to
information on matters of public concern; and (b) the application of a
constitutional provision intended to insure the equitable distribution of alienable
lands of the public domain among Filipino citizens. The thrust of the first is to
compel PEA to disclose publicly information on the sale of Government lands
worth billions of pesos, as mandated by the Constitution and statutory law. The
thrust of the second is to prevent PEA from alienating hundreds of hectares of
alienable lands of the public domain, thereby compelling it to comply with a
constitutional duty to the nation. We held that these matters are of transcendental
public importance.13
In Agan, Jr., we held that petitioners have legal standing as they have a direct
and substantial interest to protect. By the implementation of the PIATCO
contracts, they stand to lose their source of livelihood, a property right zealously
protected by the Constitution. Such financial prejudice on their part is sufficient to
confer upon them the requisite locus standi. 14
In Information Technology Foundation, there were two reasons why petitioners'
standing was recognized. First, the nation's political and economic future virtually
hangs in the balance, pending the outcome of the 2004 elections. Accordingly,
the award for the automation of the electoral process was a matter of public
concern, imbued with public interest. Second, the individual petitioners, as
taxpayers, asserted a material interest in seeing to it that public funds are
properly used.
Here, petitioners have not shown any direct and personal interest in the COA
Organizational Restructuring Plan. There is no indication that they have
sustained or are in imminent danger of sustaining some direct injury as a result of
its implementation. In fact, they admitted that "they do not seek any affirmative
relief nor impute any improper or improvident act against the respondents" and
"are not motivated by any desire to seek affirmative relief from COA or from
respondents that would redound to their personal benefit or gain." Clearly, they
do not have any legal standing to file the instant suit.
We are well aware of the averments of petitioners Matib, Pacpaco, Sanchez, and
Sipi-An that they were demoted and unceremoniously divested of their previous
designations as Unit Head, Team Supervisor, or Team Leader; that they were
deprived of their RATA; that they were relegated to being mere Team Members,
entitled to only a reimbursable transportation allowance; and that they were
denied due process.
Such averments lack merit. Actually, they were not demoted. Under Section 11,
Rule VII of the Omnibus Rules Implementing Book V of the Administrative Code
of 1987, a demotion is the movement from one position to another involving the
issuance of an appointment with diminution in duties, responsibilities, status, or
rank which may or may not involve reduction in salary. 15 A demotion by
assigning an employee to a lower position in the same service which has a lower
rate of compensation is tantamount to removal, if no cause is shown for it. 16
Here, there have been no new appointments issued to Matib, Pacpaco, Sanchez,
and Sipi-An under the COA Organizational Restructuring Plan. Thus, their
contention that they have been demoted is baseless.
Moreover, the change in their status from COA auditors (receiving monthly RATA)
to COA auditors (receiving only reimbursable RATA) cannot be attributed to the
COA Organizational Restructuring Plan but to the implementation of the Audit
Team Approach (ATAP), pursuant to COA Resolution No. 96-305 dated April 16,
1996.
Under the ATAP, an audit team, not a resident auditor, is deployed to conduct an
audit. An audit team may be composed of two (2) or more members under an
Audit Team Leader. Whenever practicable, an Audit Team Supervisor supervises
at least three (3) audit teams. The composition of an audit team is not permanent.
Hence, an Audit Team Member may be designated or assigned as an Audit
Team Leader for one assignment and subsequently as a Team Member in
another engagement. The designation depends upon the position or rank of the
one who is designated as an Audit Team Leader. Thus, a State Auditor III who
may have been assigned as an Audit Team Leader in one engagement may find
himself relegated to being an Audit Team Member in another engagement, if a
State Auditor IV or State Auditor V is designated as the Audit Team Leader.

Pursuant to the COA Organizational Restructuring Plan, the COA issued

Memorandum No. 2002-034 17 providing for the guidelines regarding the
payment of RATA, thus:
1. All holders of State Auditor IV position shall be entitled to fixed
commutable RATA wherever they are assigned.
2. Henceforth, only State Auditors IV shall be assigned as new Unit
Heads or Team Leaders.
3. State Auditors below State Auditor IV assigned as Unit Heads or
Team Leaders who have been receiving fixed RATA shall
continue to be designated as such and to receive the RATA until
relieved of the designation for incompetence, inefficiency, or
misconduct.
All others who collect RATA on reimbursable basis, including those paid
on a daily basis under COA Resolution No. 99-007 dated June 7, 1999,
are likewise entitled thereto.
Matib, Pacpaco, Sanchez, and Sipi-An are not qualified to be Audit Team
Leaders or to receive fixed monthly RATA since none of them holds the rank or
position of State Auditor IV. But this does not mean that they are not entitled to
receive reimbursable RATA if they are designated as Audit Team Leaders. It is
clear from the text of the said COA Memorandum that the principle of non-
diminution of benefits has been upheld. SETaHC
Thus, in the implementation of the COA Organizational Restructuring Plan, we
fail to see how petitioners could have sustained personal injury as they have not
shown to have a personal stake therein. Accordingly, they are wanting in legal
standing to institute the instant petition. Corollarily, we find no reason to delve
into the constitutionality or legality of the COA Organizational Restructuring Plan.
WHEREFORE, the petition is DISMISSED. No pronouncement as to costs.
SO ORDERED.
||| (Domingo v. Carague, G.R. No. 161065, [April 15, 2005], 496 PHIL 341-349)

[G.R. No. 159794. December 19, 2006.]

MACLARING M. LUCMAN, in his capacity as the Manager of

the LAND BANK OF THE PHILIPPINES, Marawi
City, petitioner, vs. ALIMATAR MALAWI, ABDUL-KHAYER
PANGCOGA, SALIMATAR SARIP, LOMALA CADAR, ALIRIBA
S. MACARAMBON and ABDUL USMAN, respondents.

DECISION

TINGA, J : p

This is a petition for review challenging the decision of the trial court, affirmed by
the Court of Appeals, granting the petition for mandamus filed by herein
respondents, Barangay Chairmen (or Punong Barangay) of several barangays in
the province of Lanao del Sur.
The petition for mandamus filed by respondents before the trial court is rooted in
their claim that they were deprived of their Internal Revenue Allotment (IRA) for
the 2nd and 3rd quarters of 1997. Respondents further alleged that these same
funds were released by petitioner as Manager of Land Bank of the Philippines
(LBP), the depositary bank, to third persons.
There were originally six (6) petitioners when the Petition for Mandamus with
Prayer for Writ of Preliminary Mandatory Injunction was filed by now respondents
before the court of origin. They were Alimatar Malawi, Abdulkhayr Pangcoga,
Salimatar Sarip, Lomala Cadar, Aliriba S. Macarambon and Abdul Usman who
were the incumbent barangay chairmen of Bubong Ngingir (Kabasaran), Ilian,
Linindingan, Mapantao-Ingod, Paigoay and Rangiran, respectively, all from the
Municipality of Pagayawan, Lanao del Sur. 1 All of them were the incumbent
barangay chairmen of their respective barangays prior to the 12 May 1997
barangay elections. The elections on 12 May 1997 in the aforesaid barangays
resulted in a failure of elections. Thereafter, the special elections held in these
barangays likewise resulted in a failure of elections. 2 Consequently, respondents
remained in office in a holdover capacity pursuant to the provisions of Sec. 1
of R.A. No. 6679 3 and Comelec Resolution No. 2888 dated February 5, 1997. 4
Beginning with the second quarter of 1997, LBP was selected as the government
depository bank for the IRAs of the abovementioned barangays. 5Being a new
government depositary bank for the IRA funds, the authorized public officials had
to open new accounts in behalf of their government units with the proper LBP
branch from which they could withdraw the IRAs. 6
After the failed 12 May 1997 elections, respondents attempted to open their
respective barangays' IRA bank accounts but were refused by petitioner because
respondents needed to show their individual certifications showing their right to
continue serving as Barangay Chairmen and the requisite Municipal Accountant's
Advice giving respondents the authority to withdraw IRA deposits. 7 The
requirement for the Accountant's Advice stemmed from Commission on Audit
Circular No. 94-004. 8
Respondents were eventually allowed to open accounts for their barangays
except for Lomala Cadar and Abdul Usman of barangays Mapantao-Ingud and
Rangiran, respectively, because the accounts for these barangays were
previously opened by two persons who presented themselves as the duly
proclaimed Barangay Chairmen for these same barangays. 9
In any event, all respondents were not allowed to withdraw the IRA funds from
the opened accounts, owing to the absence of the requisite Accountant's
Advice. 10
Then on 4 August 1997, five (5) other persons presented themselves before
petitioner as the newly proclaimed Punong Barangays of the five barangays
concerned, 11 each of them presenting a certification of his election as Punong
Barangay issued by the provincial director of the DILG-ARMM and another
Certification issued by the Local Government Operations Officer attesting, among
others, to the revocation of the certification previously issued to
respondents. 12 Without verifying the authenticity of the certifications presented
by these third persons, petitioner proceeded to release the IRA funds for the 2nd
and 3rd quarters of 1997 to them. 13
Respondents thus filed on 11 August 1997 a special civil action
for Mandamus with Application for Preliminary Mandatory Injunction docketed as
Civil Case No. 11-106, to compel petitioner to allow them to open and maintain
deposit accounts covering the IRAs of their respective barangays and to
withdraw therefrom. 14 The case was raffled to the Regional Trial Court (RTC) of
Lanao del Sur, Branch 11. 15
At the trial respondents Sarip, Cadar, Pangcoga and Usman testified that they
were duly elected chairpersons of their respective barangays and continued as
such in a holdover capacity until their re-election on 30 August 1997. They
testified further that despite presenting the corresponding documents, petitioner
refused to allow the withdrawal of the funds. 16
Respondent Macarambon testified that he was the incumbent chairperson of
Barangay Paigoay prior to the 12 May 1997 elections and that due to the failure
of elections, he continued to occupy his position in a holdover capacity until he
was succeeded by his wife upon the latter's election to the same post. He
testified on petitioner's refusal to release the money to him despite his
submission of the Accountant's Advice. 17
For failure to appear at the scheduled hearing on 20 April 1999, petitioner was
held as in default and respondents were allowed to present evidenceex parte.
Petitioner's Motion for Reconsideration of the Order declaring him as in default
was granted. 18
After failing again to appear on the given time for him to adduce evidence,
another Order was issued wherein petitioner was deemed to have waived his
right to present evidence. The Order was lifted on petitioner's Motion for
Reconsideration. Instead of presenting evidence, petitioner filed on 10 November
1999 a Motion to Dispense or Waive Presentation of Evidence wherein he
represented that the prayers in the complaint had already been complied
with. 19 The RTC granted petitioner's motion through an Order dated 24
September 1999. 20
Thereafter, the RTC rendered a Decision 21 dated 8 October 1999 commanding
petitioner to pay respondents, except respondent Alimatar Malawiwho failed to
testify, the IRAs of their respective barangays "even without the Accountant's
Advice." 22 The dispositive portion of the Decision reads, to wit:
WHEREFORE, premises all considered, the instant petition is hereby
granted. Accordingly, Mr. Maclaring M. Lucman, Manager of the Land
Bank of the Philippines, Marawi City branch, is hereby ordered to pay
the following: 23
1. Aliriba Macarambon, the 2nd Quarter IRA of Paigoay,
Pagayawan in the sum of P48,200.00;
2. Salimatar Sarip of Linindingan the
2nd Quarter IRA P54,220.00
3rd Quarter IRA P54,220.00
3. Lomala S. Cadar of Mapantao the
2nd Quarter IRA P54,320.00
 3rd Quarter IRA P54,320.00
4. Abdulkhay Pangcoga of Ilian the
2nd Quarter IRA P53,361.00
3rd Quarter IRA P53,361.00
5. Abdul Usman of Rangiran the
2nd Quarter IRA P51,185.00
3rd Quarter IRA P51,185.00
even without the Accountant's Advice and the subsequent IRAs until
their term of office shall have expired.
SO ORDERED. 24
The RTC gave no credence to petitioner's assertion of payment to the rightful
barangay officers, there having been no testimonial or documentary evidence
proferred in substantiation thereof. 25 It considered petitioner's refusal to present
evidence as a "silence" that equates to an admission of respondents'
allegations. 26 Furthermore, the RTC relied on the testimonies and certifications
adduced by respondents in holding that they were occupying their positions in a
holdover capacity 27 and that by virtue thereof, they had "the perfect right to
continue performing the duties and functions of their positions including the
withdrawal of funds of their respective barangays." 28
The Court of Appeals 29 affirmed the RTC's Decision in toto. Hence, this petition.
Petitioner argues that respondents have no cause of action against him since
they failed to present valid certifications showing their respective right to continue
serving as Punong Barangay as well as the requisite Municipal Accountant's
Advice. Petitioner also asserts that the LBP Marawi Branch had already released
the contested IRAs to the Barangay Treasurers who were acting in conjunction
with the duly recognized Punong Barangays, thereby making the petition
for mandamus moot and academic. 30 These are factual issues that are generally
beyond the review of this Court.
Petitioner adds that respondents have no legal personality to institute the petition
for mandamus in their own names since the IRAs rightfully belong to the
respective barangays and not to them and that their respective barangays
already received the claimed IRAs in this instant case. 31
For the proper adjudication of the present petition, two related core issues have
to be resolved. First, what is the cause of action alleged in the initiatory pleading
filed by respondents before the trial court? Second, are there indispensable
parties which were not impleaded?
Although the pleading filed before the lower court was denominated as a Petition
for Mandamus With Prayer For Writ of Preliminary Injunction, the allegations
thereof indicate that it is an action for specific performance, particularly to compel
petitioner to allow withdrawal of funds from the accounts of the barangays
headed by respondents with the LBP, Marawi Branch. Thus, the Petition alleged:
"12. Despite the opening of deposit accounts for the barangays
mentioned in the preceding paragraph, respondent, without any valid or
lawful cause, failed and refused, and still fails and refuses, to allow the
withdrawal of the funds or IRA of the said barangays as evidenced by
the WITHDRAWAL CHECKS (attached as Annexes "D" to "D-3" hereof)
of said barangays which were refused payment when presented to the
Land Bank on August 4, 1997." 32

From the records of the case, it appears that the shares of the barangays in the
IRA had already been remitted by the Department of Budget and Management
(DBM) to the LBP Marawi Branch where they were kept in the accounts opened
in the names of the barangays.
By virtue of the deposits, there exists between the barangays as depositors and
LBP a creditor-debtor relationship. Fixed, savings, and current deposits of money
in banks and similar institutions are governed by the provisions concerning
simple loan. 33 In other words, the barangays are the lenders while the bank is
the borrower.
This Court elucidated on the matter in Guingona, Jr., et al. v. The City Fiscal of
Manila, et al., 34 citing Serrano v. Central Bank of the Philippines, 35 thus:
Bank deposits are in the nature of irregular deposits. They are really
loans because they earn interest. All kinds of bank deposits, whether
fixed, savings, or current are to be treated as loans and are to be
covered by the law on loans (Art. 1980, Civil Code; Gullas v. Phil.
National Bank, 62 Phil. 519). Current and savings deposits are loans to a
bank because it can use the same. The petitioner here in making time
deposits that earn interest with respondent Overseas Bank of Manila
was in reality a creditor of the respondent Bank and not a depositor. The
respondent Bank was in turn a debtor of petitioner. Failure of the
respondent Bank to honor the time deposit is failure to pay its
obligation as a debtor and not a breach of trust arising from a
depository's failure to return the subject matter of the deposit. (Emphasis
supplied.) 36
The relationship being contractual in nature, mandamus is therefore not an
available remedy since mandamus does not lie to enforce the performance of
contractual obligations. 37
This brings us to the second core issue.
The IRA funds for which the bank accounts were created belong to the
barangays headed by respondents. The barangays are the only lawful recipients
of these funds. Consequently, any transaction or claim involving these funds can
be done only through the proper authorization from the barangays as juridical
entities.
The determination, therefore, of whether or not the IRA funds were unlawfully
withheld or improperly released to third persons can only be determined if the
barangays participated as parties to this action. These questions cannot be
resolved with finality without the involvement of the barangays. After all, these
controversies involve funds rightfully belonging to the barangays. Hence, the
barangays are indispensable parties in this case.
An indispensable party is defined as parties-in-interest without whom there can
be no final determination of an action. 38 The nature of an indispensable party
was thoroughly discussed in Arcelona v. Court of Appeals, 39 to quote:
An indispensable party is a party who has such an interest in the
controversy or subject matter that a final adjudication cannot be made, in
his absence, without injuring or affecting that interest, a party who has
not only an interest in the subject matter of the controversy, but also has
an interest of such nature that a final decree cannot be made without
affecting his interest or leaving the controversy in such a condition that
its final determination may be wholly inconsistent with equity and good
conscience. It has also been considered that an indispensable party is a
person in whose absence there cannot be a determination between the
parties already before the court which is effective, complete, or equitable.
Further, an indispensable party is one who must be included in an action
before it may properly go forward. aHSTID

A person is not an indispensable party, however, if his interest in the

controversy or subject matter is separable from the interest of the other
parties, so that it will not necessarily be directly or injuriously affected by
a decree which does complete justice between them. Also, a person is
not an indispensable party if his presence would merely permit complete
relief between him and those already parties to the action, or if he has no
interest in the subject matter of the action. It is not a sufficient reason to
declare a person to be an indispensable party that his presence will
avoid multiple litigation. 40
In Arcelona, the Court also dwelt on the consequences of failure to include
indispensable parties in a case, categorically stating that the presence of
indispensable parties is a condition for the exercise of juridical power 41 and
when an indispensable party is not before the court, the action should be
dismissed. 42 The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the
absent parties but even as to those present. 43
The joinder of indispensable parties is mandatory. Without the presence of
indispensable parties to the suit, the judgment of the court cannot attain real
finality. Strangers to a case are not bound by the judgment rendered by the
court. 44
Clearly, this case was not initiated by the barangays themselves. Neither did the
barangay chairmen file the suit in representation of their respective barangays.
Nothing from the records shows otherwise. On this score alone, the case in the
lower court should have been dismissed.
Even if the barangays themselves had filed the case, still it would not prosper.
The case involves government funds and as such, any release therefrom can
only be done in accordance with the prevailing rules and procedures.
The Government Accounting and Auditing Manual (GAAM) provides that the
local treasurers shall maintain the depositary accounts in the name of their
respective local government units with banks. 45 Under the Local Government
Code, the treasurer is given the power, among others, to: (1) keep custody of
barangay funds and properties; and (2) disburse funds in accordance with the
financial procedures provided by the Local Government Code. 46 The same
manual defines disbursements as constituting all cash paid out during a given
period either in currency or by check. 47
Sec. 344 of the Local Government Code further provides for the following
requirements in cases of disbursements, to wit:
Sec. 344. No money shall be disbursed unless the local budget officer
certifies to the existence of appropriation that has been legally made for
the purpose, the local accountant has obligated said appropriation, and
the local treasurer certifies to the availability of funds for the purpose.
Vouchers and payrolls shall be certified to and approved by the head of
the department or office who has administrative control of the fund
concerned, as to the validity, propriety, and legality of the claim involved.
Except in cases of disbursements involving regularly recurring
administrative expenses . . . approval of the disbursement voucher by
the local chief executive himself shall be required whenever local funds
are disbursed.
Thus, as a safeguard against unwarranted disbursements, certifications are
required from: (a) the local budget officer as to the existence and validity of the
appropriation; (b) the local accountant as to the legal obligation incurred by the
appropriation; (c) the local treasurer as to the availability of funds; and (d) the
local department head as to the validity, propriety and legality of the claim
against the appropriation. 48
Further, the GAAM provides for the basic requirements applicable to all classes
of disbursements that shall be complied with, to wit:
a) Certificate of Availability of Fund. Existence of lawful
appropriation, the unexpended balance of which, free from other
obligations, is sufficient to cover the expenditure, certified as
available by an accounting officer or any other official required to
accomplish the certificate.
Use of moneys appropriated solely for the specific purpose for which
appropriated, and for no other, except when authorized by law or
by a corresponding appropriating body.
b) Approval of claim or expenditure by head of office or his duly
authorized representative.
c) Documents to establish validity of claim. Submission of
documents and other evidences to establish the validity and
correctness of the claim for payment.
d) Conformity of the expenditure to existing laws and regulations.
e) Proper accounting treatment. 49
This prescribed legal framework governing the release and disbursement of IRA
funds to the respective barangays disabuses from the notion that a barangay
chairman, relying solely on his authority as a local executive, has the right to
demand physical possession of the IRA funds allocated by the national
government to the barangay. The right to demand for the funds belongs to the
local government itself through the authorization of their Sanggunian. 50
One final note. There is no conclusive proof from the records showing that the
IRA funds for the 2nd and 3rd quarters of the barangays concerned remitted by
the DBM had already been withdrawn from the LBP Marawi Branch. Considering
the implications of this action of possibly depriving several local government units
of their IRAs, the Court took the initiative to request the COMELEC to issue
certifications on who were the duly elected chairmen of the barangays concerned.
The COMELEC issued to this Court a list of the elected barangay chairmen
which confirmed the re-election of respondents as barangay chairmen of their
respective barangays. 51 If withdrawals were indeed made, whether by the
respondents or by impostors, the matter deserves to be investigated since public
funds are involved. Accordingly, we refer the matter to the Department of Interior
and Local Government (DILG) for investigation and appropriate action. ICcaST

WHEREFORE, premises considered, the petition is GRANTED. The assailed

Decisions of the Court of Appeals and the Regional Trial Court are REVERSED
and SET ASIDE. The Petition for Mandamus filed before the Regional Trial Court
is ordered DISMISSED.
The alleged withdrawals of deposits representing the Internal Revenue
Allotments for the 2nd and 3rd Quarters of 1997 of the barangays concerned
from the Land Bank of the Philippines, Marawi Branch, are referred to the DILG
for investigation and appropriate action. The DILG is hereby DIRECTED to
INFORM the Court of the result of its investigation within thirty (30) days from the
completion thereof.
No pronouncement as to costs. SO ORDERED.
||| (Lucman v. Malawi, G.R. No. 159794, [December 19, 2006], 540 PHIL 289-306)

[G.R. No. 144891. May 27, 2004.]

RAMON A. GONZALES, petitioner, vs. PHILIPPINE

AMUSEMENT AND GAMING CORPORATION, SPORTS AND
GAMES ENTERTAINMENT CORPORATION, BEST WORLD
GAMING AND ENTERTAINMENT CORPORATION, BELLE JAI-
ALAI CORPORATION, and FILIPINAS GAMING
ENTERTAINMENT TOTALIZATOR CORPORATION, respondents.

DECISION

CARPIO MORALES, J : p

At bar is a special civil action for prohibition assailing the constitutionality of the
creation of the Philippine Amusement and Gaming Corporation (PAGCOR) as
well as the "grant of franchises" by PAGCOR to 1) Sports and Games
Entertainment Corporation (SAGE) to engage in internet gambling, 2) Best World
Gaming and Entertainment Corporation (BEST WORLD) to engage in
computerized bingo gaming, and 3) Belle Jai-alai Corporation (BELLE) and
Filipinas Gaming Entertainment Totalizator Corporation (FILGAME) to engage in
jai-alai operations.
Ramon A. Gonzales, as a citizen, taxpayer and member of the Philippine Bar,
filed on September 28, 2000 the instant Petition 1 as a class suit underSection 12,
Rule 3 of the Rules of Court 2 seeking to restrain PAGCOR from continuing its
operations and prohibit it and its co-respondents from enforcing: (1) the "Grant of
an Authority and Agreement for the Operation of Sports Betting and Internet
Gambling" 3 executed between PAGCOR and SAGE; (2) the "Grant of Authority
to Operate Computerized Bingo Games" 4 between PAGCOR and BEST
WORLD; and (3) the "Agreement" 5 among PAGCOR, BELLE and FILGAME to
conduct jai-alai operations.
In compliance with this Court's Resolution of October 18, 2000, respondents filed
their respective comments on the petition, to which petitioner filed corresponding
replies.
In Del Mar v. Phil. Amusement and Gaming Corp., et al., 6 this Court, by Decision
of November 29, 2000, enjoined PAGCOR, BELLE, and FILGAME from
managing, maintaining and operating jai-alai games, and from enforcing the
agreement entered into by them for that purpose. 7
Their motions for reconsideration of said decision in Del Mar having been
denied, 8 PAGCOR, BELLE and FILGAME filed motions for clarification which
this Court, by Resolution of August 24, 2001, resolved in this wise:
WHEREFORE, . . . the Court resolves (a) to partially GRANT the
motions for clarification insofar as it is prayed that Philippine Amusement
and Gaming Corporation (PAGCOR) has a valid franchise to, but only by
itself (i.e., not in association with any other person or entity) operate,
maintain and/or manage the game of jai-alai, and (b) to DENY the
motions insofar as respondents would also seek a reconsideration of the
Court's decision of 29 November 2000 that has, since then, (i) enjoined
the continued operation, maintenance, and/or management of jai-alai
games by PAGCOR in association with its co-respondents Belle Jai-Alai
Corporation and/or Filipinas Gaming Entertainment Totalizator
Corporation and (ii) held to be without force and effect the agreement of
17 June 1999 among said respondents. HCaDIS

SO ORDERED. 9 (Emphasis supplied)

Respondents BELLE and FILGAME thus filed on December 6, 2001 a
Manifestation stating that:
1. Respondents [BELLE] and FILGAME were impleaded in the instant
petition by reason of the "Agreement", dated 17 June 1999, which they
executed with Philippine Amusement and Gaming Corporation
("PAGCOR").
2. However, the said "Agreement" was already declared invalid by the
Supreme Court (en banc) in the consolidated cases of Del Mar vs.
PAGCOR, et al. [G.R. No. 138298] and Sandoval vs. PAGCOR, et al.
[G.R. No. 138982] through its "Resolution" dated 16 August 2001, which
has already become final and executory.
[3]. Considering that there is no more privity of contract between
PAGCOR, [BELLE] and FILGAME, it is respectfully submitted that the
participation of respondents [BELLE] and FILGAME is no longer
warranted. Thus, there is no more necessity for respondents [BELLE]
 and FILGAME to file a memorandum in the instant case. 10 (Emphasis
supplied)
In its Comment on the petition at bar filed on March 29, 2001, BEST WORLD
stated that it had "been unable to operate its bingo terminals and bingo games
since its closure and shut down by PAGCOR and DILG" pursuant to a
Memorandum dated October 19, 2000 issued by then President Joseph Ejercito
Estrada. 11 A copy of said Memorandum addressed to the Chairman of PAGCOR,
which was attached to BEST WORLD's Comment, reads:
MEMORANDUM FROM THE PRESIDENT
TO : The Chairman
Philippine Amusements and Gaming Corporation
(PAGCOR)
SUBJECT : CLOSURE OF CERTAIN PAGCOR FACILITIES AND
OUTLETS
DATE : 19 October 2000
You are hereby directed to take immediate steps to close down all
PAGCOR facilities and outlets in Jai-alai, on-line bingo and internet
casino gaming. ATcaEH

For this purpose, you are authorized to secure the support of the
Philippine National Police and all concerned local government units.
I expect an initial report on the implementation of this directive, through
the Executive Secretary, within 48 hours from receipt hereof.
For direct and immediate compliance.
(SGD. Joseph E. Estrada) 12 (Emphasis supplied)
This Court, by Resolution of August 13, 2001, granted the motion of Attys. Jose
Salvador M. Rivera, E. Hans S. Santos and Agnes H. Maranan of Rivera Santos
and Maranan to withdraw as counsel for BEST WORLD "for the reason that
despite diligent effort on its part, counsel has been unable to get in touch or
communicate with its principal client." 13
The petition having been given due course by Resolution of September 19, 2001,
the parties were required to submit their respective Memoranda. Only
respondents PAGCOR and SAGE submitted their Memoranda, on December 6,
2001 14 and January 24, 2002, 15 respectively.
Gonzales having failed to file his Memorandum within the prescribed period, this
Court which, in the meantime, was informed of the alleged demise of Gonzales,
required by Resolution of July 29, 2002 1) respondents to confirm the death of
Gonzales, and 2) the parties to manifest whether they were still interested in
prosecuting the petition, or whether supervening events had rendered it moot
and academic. 16
On September 10, 2002, Attys. Manuel B. Imbong and Jo Aurea M. Imbong filed
a Motion for Substitution stating, among other things, that (1) Gonzales died on
January 17, 2002; (2) his heirs are not interested to pursue and prosecute the
present special civil action or be substituted as petitioners herein; and (3) the
petition was instituted by Gonzales as a class suit in behalf of "all Filipino citizens,
taxpayers and members of the Philippine Bar" and, as such, survives his death.
They thus pray that as they are among the "Filipino citizens, taxpayers and
members of the Philippine Bar" for whom the herein class suit was instituted and
are both capable of prosecuting the instant case, they be substituted as
petitioners in lieu of Gonzales and that they be given thirty days from notice
within which to file their memorandum. 17
By Resolution of December 9, 2002, this Court required respondents to file their
Comments on the Motion for Substitution filed by Attys. Imbong and Imbong.
In their separate Comments, 18 respondents PAGCOR and SAGE both argue
that, among others things, movants Attys. Imbong and Imbong may not be
substituted for Gonzales as the former are neither legal representatives nor heirs
of the latter within the purview of Section 16, Rule 3 of the Rules of Court which
reads:
Sec. 16. Death of party, duty of counsel. Whenever a party to a
pending action dies, and the claim is not thereby extinguished, it shall be
the duty of his counsel to inform the court within thirty (30) days after
such death of the fact thereof, and to give the name and address of his
legal representative or representatives. Failure of counsel to comply with
this duty shall be a ground for disciplinary action.
EDCIcH

The heirs of the deceased may be allowed to be substituted for the

deceased, without requiring the appointment of an executor or
administrator and the court may appoint a guardian ad litem for the
minor heirs.
The court shall forthwith order said legal representative or
representatives to appear and be substituted within a period of thirty (30)
days from notice.
If no legal representative is named by the counsel for the deceased party,
or if the one so named shall fail to appear within the specified period, the
court may order the opposing party, within a specified time, to procure
the appointment of an executor or administrator for the estate of the
deceased and the latter shall immediately appear for and on behalf of
the deceased. The court charges in procuring such appointment, if
defrayed by the opposing party, may be recovered as costs. (16a, 17a)
(Emphasis supplied)
Respondents PAGCOR and SAGE further argue that neither Gonzales nor
movants have substantiated the allegation that the instant case is a class suit as
defined under Section 12, Rule 3 of the Rules of Court. Hence, so said
respondents argue, the petition should be considered a personal action which
was extinguished with the death of Gonzales.
The criteria for determining whether an action survives the death of a plaintiff or
petitioner was elucidated upon in Bonilla v. Barcena 19 as follows:
. . . The question as to whether an action survives or not depends on the
nature of the action and the damage sued for. If the causes of action
which survive the wrong complained [of] 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. . . . 20 (Emphasis supplied)
In claiming standing to bring the instant suit, Gonzales necessarily asserted
"a personal and substantial interest in the case" such that he "has sustained or
will sustain direct injury as a result of the governmental act that is being
challenged." 21 A reading of the allegations in the petition readily shows that
Gonzales' alleged interest does not involve any claim to money or property which
he could have assigned to another or transmitted to his heirs. Rather, he claimed
to be vindicating his rights as a citizen, taxpayer and member of the bar. Being
personal and non-transferable in nature, any interest that he might have had in
the outcome of this case cannot be deemed to have survived his death.

Movants argue, however, that "unless the herein substitution is allowed, the
citizens and taxpayers represented by Gonzales in this class suit will be denied
due process." 22 From this argument as well as their averment that they are
"among the 'Filipino citizens and taxpayers and member[s] of the Philippine Bar'
for whom the herein class suit was instituted and are interested to pursue this
case," 23 it is evident that movants are not asserting any right or interest
transmitted to them by the death of Gonzales, but are seeking to protect
their own individual interests as members of the classes alleged to have been
represented by Gonzales.
As such, the more proper procedure would have been for them to file a Motion
for Intervention as expressly provided for in Section 12, Rule 3 of the Rules of
Court, and not a Motion for Substitution under Section 17 of the same rule.
Ideally, such a Motion for Intervention should be filed before the possibility of
abatement is raised by the death of the named/representative party (or parties) to
the class suit; or where such is not possible, within a reasonable time from the
death of the named or representative party.
Considering that movants, as former law partners of Gonzales, could not have
been unaware of the latter's death on January 17, 2002, respondents rightly
question the timeliness of the Motion for Substitution, it having been filed almost
eight months thereafter, or only on September 10, 2002.
But even if this Court were to consider the Motion for Substitution as a
seasonably filed Motion for Intervention, still the instant petition would have to be
dismissed for being moot and academic. ATESCc

The Petition in essence raises two substantive issues. First, whether Presidential
Decree (P.D.) 1869, as amended (the PAGCOR Charter), is unconstitutional for
having been issued pursuant to an unlawful exercise of legislative power by then
President Ferdinand E. Marcos. Second, whether the contracts entered into by
PAGCOR with its co-respondents are void for being undue delegations by
PAGCOR of its franchise 24 to operate and maintain gambling casinos, sports,
gaming pools and the like.
The second issue has already been raised in the Del Mar cases, 25 this Court
ruling that PAGCOR "has a valid franchise to, but only by itself (i.e., not in
association with any other person or entity) operate, maintain and/or manage the
game of jai-alai," and that, consequently, the Agreement of June 17, 1999 among
PAGCOR, BELLE and FILGAME was without force and effect. This ruling was
recently reiterated in Jaworski v. Phil. Amusement and Gaming Corp. 26 where
This Court held:
In the case at bar, PAGCOR executed an agreement with SAGE
whereby the former grants the latter the authority to operate and
maintain sports betting stations and Internet gaming operations. In
essence, the grant of authority gives SAGE the privilege to actively
participate, partake and share PAGCOR's franchise to operate a
gambling activity. The grant of franchise is a special privilege that
constitutes a right and a duty to be performed by the grantee. The
grantee must not perform its activities arbitrarily and whimsically but
must abide by the limits set by its franchise and strictly adhere to its
terms and conditionalities. A corporation as a creature of the State is
presumed to exist for the common good. Hence, the special privileges
and franchises it receives are subject to the laws of the State and the
limitations of its charter. There is therefore a reserved right of the State
to inquire how these privileges had been employed, and whether they
have been abused.
While PAGCOR is allowed under its charter to enter into operator's
and/or management contracts, it is not allowed under the same charter
to relinquish or share its franchise, much less grant a veritable franchise
to another entity such as SAGE. PAGCOR can not delegate its power in
view of the legal principle of delegata potestas delegare non potest,
inasmuch as there is nothing in the charter to show that it has been
 expressly authorized to do so. In Lim v. Pacquing, the Court clarified that
"since ADC has no franchise from Congress to operate the jai-alai, it
may not so operate even if it has a license or permit from the City Mayor
to operate the jai-alai in the City of Manila." By the same token, SAGE
has to obtain a separate legislative franchise and not "ride on"
PAGCOR's franchise if it were to legally operate on-line Internet
gambling.
WHEREFORE, in view of all the foregoing, the instant petition is
GRANTED. The "Grant of Authority and Agreement to Operate Sports
Betting and Internet Gaming" executed by PAGCOR in favor of SAGE is
declared NULL and VOID.
SO ORDERED. 27 (Emphasis supplied; citations omitted)
The first issue has likewise been rendered moot and academic.
In assailing the constitutionality of P.D. 1869, petitioner does not point to any
inconsistency between it and the present Constitution. Instead, it questions its
issuance as an illegal exercise of legislative powers by then President Marcos.
Thus, petitioner argues that: (1) P.D. 1416, which gives the President continuing
authority to reorganize the national government and is the basis ofP.D. 1869, is
an undue delegation to the President of the legislative power to create public
offices; (2) P.D. 1869 is an undue delegation of legislative power to the President
to create PAGCOR, a public corporation, and empowering it to grant franchises;
(3) Proclamation 1081 declaring martial lawand authorizing the President to issue
decrees is unconstitutional, hence P.D. 1416 and P.D. 1869 issued pursuant
thereto are likewise unconstitutional; and (4) the 1973 Constitution was not
validly ratified, hence it could not have legitimized Proclamation 1081.
Petitioner's arguments come almost thirty years too late. As he himself was
aware, the issues surrounding the effectivity of Proclamation 1081, the force and
effectivity of the 1973 Constitution, and the former President's legislative powers
under Martial Law and the 1973 Constitution were settled in the cases
of Javellana v. Executive Secretary, 28 Aquino, Jr. v. Enrile, 29 Aquino,
Jr. v. Commission on Elections, 30 and Legaspi v. Minister of Finance. 31While
legal scholars may continue to debate the wisdom and reasoning of these
decisions, their objective existence and historical impact on the Philippine legal
system cannot seriously be questioned. IAcDET

Indeed, while petitioner made several poignant observations regarding the

jurisprudence in the foregoing cases, this Court is unable to accept his invitation
to re-examine said cases for the simple reason that the power conferred on it
by the Constitution is limited to the adjudication of actual controversies and the
determination of whether a branch or instrumentality of the government has
acted with grave abuse of discretion amounting to lack or excess of
jurisdiction. 32 Even with its expanded jurisdiction, it is beyond the powers of this
Court to re-write history.
To be sure, the People Power Revolution of 1986 put an end to both the
dictatorship of Mr. Marcos and the 1973 Constitution. At the same time, the
ratification of the 1987 Constitution and the convening of the first Congress on
July 27, 1987 have restored the separation of legislative and executive
powers. 33 There is, therefore, no longer any occasion for this Court to pass upon
the validity of the late dictator's exercise of lawmaking powers.
Furthermore, Section 3, Article XVIII of the Constitution expressly provides:
Sec. 3. All existing laws, decrees, executive orders, proclamations,
letters of instructions, and other executive issuances not inconsistent
with this Constitution shall remain operative until amended, repealed or
revoked. (Emphasis supplied)
Since petitioner did not endeavor to show that P.D. 1869 itself is inconsistent
with the Constitution, his prayer that PAGCOR be enjoined from continuing its
operations and doing acts in furtherance of its existence must necessarily be
denied.
Movants may derive some satisfaction in the knowledge that Gonzales' prayer
that respondents be enjoined from enforcing the "Agreement" among PAGCOR,
BELLE and FILGAME to conduct jai-alai operations and the "Grant of an
Authority and Agreement for the Operation of Sports Betting and Internet
Gambling" between PAGCOR and SAGE had been granted, albeit in the
separate aforementioned cases of Del Mar and Jaworski.
WHEREFORE, the instant Petition is hereby DISMISSED.
(Gonzales v. Philippine Amusement and Gaming Corp., G.R. No. 144891, [May
|||

27, 2004], 473 PHIL 582-596)

[G.R. Nos. 159669 & 163521. March 12, 2007.]

UNITED OVERSEAS BANK PHILS. (formerly WESTMONT

BANK), petitioner, vs. ROSEMOOR MINING & DEVELOPMENT
CORP. and DRA. LOURDES PASCUAL, respondents.

DECISION

TINGA, J :
p
 We resolve these two consolidated cases which, though with distinct
courts of origin, pertain to issues stemming from the same loan transaction.
The antecedent facts follow.
Respondent Rosemoor Mining and Development Corporation
(Rosemoor), a Philippine mining corporation with offices at Quezon City,
applied for and was granted by petitioner Westmont Bank 1 (Bank) a credit
facility in the total amount of P80 million consisting of P50,000,000.00 as long
term loan and P30,000,000.00 as revolving credit line. 2
To secure the credit facility, a lone real estate mortgage agreement was
executed by Rosemoor and Dr. Lourdes Pascual (Dr. Pascual), Rosemoor's
president, as mortgagors in favor of the Bank as mortgagee in the City of
Manila. 3 The agreement, however, covered six (6) parcels of land located in
San Miguel, Bulacan 4 (Bulacan properties), all registered under the name of
Rosemoor, 5 and two (2) parcels of land 6 situated in Gapan, Nueva Ecija
(Nueva Ecija properties), owned and registered under the name of Dr.
Pascual. 7
Rosemoor subsequently opened with the Bank four (4) irrevocable
Letters of Credit (LCs) totaling US$1,943,508.11. 8 To cover payments by the
Bank under the LCs, Rosemoor proceeded to draw against its credit facility
and thereafter executed promissory notes amounting collectively to
P49,862,682.50. 9 Two (2) other promissory notes were also executed by
Rosemoor in the amounts of P10,000,000.00 and P3,500,000.00, respectively,
to be drawn from its revolving credit line. 10
Rosemoor defaulted in the payment of its various drawings under the
LCs and promissory notes. In view of the default, the Bank caused the
extrajudicial foreclosure of the Nueva Ecija properties on 22 May 1998 and
the Bulacan properties on 10 August 1998. The Bank was the highest bidder
on both occasions. 11
On 8 October 1999, the Bank caused the annotation of the Notarial
Certificate of Sale covering the Nueva Ecija properties on the certificates of
title concerned. Later, on 16 March 2001, the Notarial Certificate of Sale
covering the Bulacan properties was annotated on the certificates of title of
said properties. 12
The foregoing facts led to Rosemoor's filing of separate complaints
against the Bank, one before the Regional Trial Court of Manila (Manila RTC)
and the other before the Regional Trial Court of Malolos, Bulacan (Malolos
RTC). aSIATD

The Manila Case (G.R. No. 163521)

 On 5 August 1998, Rosemoor and Dr. Pascual filed a Complaint,
originally captioned as one for "Damages, Accounting and Release of Balance
of Loan and Machinery and for Injunction" before the Manila
RTC. 13 Impleaded as defendants were the Bank and Notary Public Jose
Sineneng, whose office was used to foreclose the mortgage. 14 The complaint
was twice amended, the caption eventually reflecting an action for
"Accounting, Specific Performance and Damages." 15 Through the
amendments, Pascual was dropped as a plaintiff while several officers of the
Bank were included as defendants. 16
The Bank moved for the dismissal of the original and amended
complaints on the ground that the venue had been improperly laid. 17 The
motion was denied by the trial court through an Omnibus Resolution dated 24
January 2000. 18
Rosemoor's prayer in the Second Amended Complaint, which was filed
in November of 1999, reads as follows:
WHEREFORE, plaintiff Rosemoor Mining & Development
Corporation respectfully prays that, after trial of the issues, this court
promulgate judgment
1. Directing Westmont to render an accounting of the loan
account of Rosemoor under the Long Term Loan Facility and the
Revolving Credit Line at least up to the dates of foreclosure of
Rosemoor's mortgaged properties on May 22, 1998 and August 18,
1998, showing among others (a) the sums of money paid by Rosemoor
or otherwise debited from its deposit account in payment of the loans it
had obtained from Westmont to cover the cost of the machinery to be
imported under the Unpaid LCs and under LC No. 97-058 for the tiling
plant, as well as for working capital, and (b) all interests, penalties and
charges imposed on the loans pertaining to the Unpaid LCs and LC No.
97-058 and for which Westmont had foreclosed Rosemoor's and Dra.
Pascual's real estate mortgage; (c) the amount of import and customs
duties, demurrage, storage and other fees which Rosemoor had paid
or which was otherwise debited from Rosemoor's deposit account, in
connection with the importation of the tiling plant and as a
consequence of the non-release thereof by Westmont;
2. Ordering all the defendants jointly and severally to pay to
Rosemoor, by way of actual damages, the dollar equivalent of the
amounts in (1) (a), (b) and (c) at the exchange rate prevailing at the
time of the opening of the LCs;
3. Ordering defendants jointly and severally to pay to Rosemoor
actual damages for operational losses suffered by Rosemoor due to its
failure to use the tiling plant which Westmont had refused to release to
Rosemoor, in such amount as may be proven at the trial;
 4. Directing the defendants jointly and severally to pay, by way
of correction for the public good, exemplary damages in the amount of
P500,000.00 each;
5. Ordering defendants jointly and severally to indemnify
Rosemoor in the sum of P350,000.00, representing attorney's fees and
litigation expenses incurred by Rosemoor for the protection and
enforcement of its rights and interests.
Plaintiff prays for further and other relief as may be just and
equitable under the circumstances. 19
On 15 August 2002, the Bank filed another motion to dismiss the
Second Amended Complaint on the ground of forum-shopping since,
according to it, Rosemoor had filed another petition earlier on 11 March 2002
before the Malolos RTC. 20 The Bank contended that as between the action
before the Manila RTC and the petition before the Malolos RTC, there is
identity of parties, rights asserted, and reliefs prayed for, the relief being
founded on the same set of facts. The Bank further claimed that any judgment
that may be rendered in either case will amount to res judicata in the other
case. 21 Still, the Manila RTC denied the motion to dismiss. 22 It also denied
the Bank's motion for reconsideration of the order of denial. 23
The Bank challenged the Manila RTC's denial of the Bank's second
motion to dismiss before the Court of Appeals, through a petition forcertiorari.
The appellate court dismissed the petition in a Decision dated 26 February
2004. 24 The Bank filed a motion for reconsideration which, however, was
denied through a Resolution dated 30 April 2004. 25
In the Petition for Review on Certiorari in G.R. No. 163521, the Bank
argues that the Court of Appeals erred in holding that no forum-shopping
attended the actions brought by Rosemoor. 26
The Malolos Case (G.R. No. 159669)
After the complaint with the Manila RTC had been lodged, on 11 March
2002, Rosemoor and Dr. Pascual filed another action against the Bank, this
time before the Malolos RTC. Impleaded together with the Bank as
respondent was the Register of Deeds for the Province of Bulacan in the
Petition for Injunction with Damages, with Urgent Prayer for Temporary
Restraining Order and/or Preliminary Injunction. 27
In the Malolos case, Rosemoor and Dr. Pascual alleged that the
redemption period for the Bulacan properties would expire on 16 March 2002.
They claimed that the threatened consolidation of titles by the Bank is illegal,
stressing that the foreclosure of the real estate mortgage by the Bank was
fraudulent and without basis, 28 as the Bank had made them sign two blank
forms of Real Estate Mortgage and several promissory notes also in blank
forms. It appeared later, according to Rosemoor and Dr. Pascual, that the two
Real Estate Mortgage blank forms were made as security for two loans, one
for P80 million and the other for P48 million, when the total approved loan was
only for P80 million. The Bank later released only the amount of P10 million
out of the P30 million revolving credit line, to the prejudice of Rosemoor, they
added. 29
The Petition's prayer reads as follows:
WHEREFORE, premises considered, it is most respectfully
prayed that this Honorable Court
1. Issue ex-parte a temporary restraining order before the
matter could be heard on notice to restrain and enjoin respondent
BANK from proceeding with its threatened consolidation of its titles
over the subject properties of petitioner Rosemoor in San Miguel,
Bulacan covered by TCT Nos. 42132; 42133; 42134; 42135; 42136
and RT 34569 (T-222448) on March 16, 2002 or at any time thereafter;
that the respondent Register of Deeds for the Province of Bulacan be
enjoined and restrained from registering any document(s) submitted
and/or to be submitted by respondent BANK consolidating its titles
over the above-named properties of petitioner Rosemoor in San Miguel,
Bulacan; and likewise, that the Register of Deeds for the province of
Bulacan be restrained and enjoined from canceling the titles of
Rosemoor over its properties, namely, TCT Nos. 42132; 42133; 42134;
42135; 42136 and RT 34569 (T-222448);
2. That after due notice, a writ of preliminary injunction be
issued upon the posting of a bond in such amount as may be fixed by
this Court;
3. That after due hearing and trial, judgment be rendered in
favor of petitioners and against respondent BANK
a. Permanently enjoining respondent BANK from proceeding with
the consolidation of its titles to the subject properties of
Rosemoor covered by TCT Nos. 42132; 42133; 42134;
42135; 42136 and RT 34569 (T-222448); and permanently
restraining respondent Register of Deeds for the Province
of Bulacan from registering any document(s) submitted
and/or to be submitted by respondent BANK consolidating
its titles over the above-named properties of petitioner
Rosemoor in San Miguel, Bulacan; and likewise, that the
Register of Deeds for the province of Bulacan be
restrained and enjoined from cancelling the titles of
Rosemoor over its properties, namely, TCT Nos. 42132;
42133; 42134; 42135; 42136 and RT 34569 (T-222448);
 b. Declaring the foreclosures of Real Estate Mortgages on the
properties of petitioners Rosemoor and Dra. Pascual to be
null and void;
c. Recognizing the ownership in fee simple of the petitioners over
their properties above-mentioned;
d. Awarding to petitioners the damages prayed for, including
attorney's fees and costs and expenses of litigation.IaSAHC

Petitioners pray for such other reliefs and remedies as may be

deemed just and equitable in the premises. 30
As it did before the Manila RTC, the Bank filed a motion to dismiss on
26 March 2002 on the ground that Rosemoor had engaged in forum-shopping,
adverting to the pending Manila case. 31 The Bank further alleged that Dr.
Pascual has no cause of action since the properties registered in her name
are located in Nueva Ecija. The Malolos RTC denied the motion to dismiss in
an Order dated 13 May 2002. 32 In the same Order, the Malolos RTC directed
the Bank to file its answer to the petition within five (5) days from notice. 33
Despite receipt of the Order on 21 May 2002, the Bank opted not to file
its answer as it filed instead a motion for reconsideration on 5 June
2002. 34 Meanwhile, Rosemoor and Dr. Pascual moved to declare the Bank in
default for its failure to timely file its answer. 35 On 10 September 2002, the
Malolos RTC issued an order denying the Bank's motion for reconsideration
for lack of merit and at the same time declaring the Bank in default for failure
to file its answer. 36
Hence, the Bank filed a second petition for certiorari before the Court of
Appeals, where it assailed the Orders dated 13 May 2002 and 10 September
2002 of the Malolos RTC. During the pendency of this petition for certiorari,
the Malolos RTC decided the Malolos case on the merits in favor of
Rosemoor. 37 The decision in the Malolos case was also appealed to the
Court of Appeals. 38 Based on these developments, the appellate court
considered the prayer for preliminary injunction as moot and academic and
proceeded with the resolution of the petition, by then docketed as CA-G.R. SP
No. 73358, on the merits. The appellate court dismissed the petition in a
Decision dated 20 June 2003. 39 Undaunted, the Bank filed the petition in G.R.
No. 159669 before this Court.
The two petitions before this Court have been consolidated. We find
one common issue in G.R. No. 159669 and G.R. No. 163521 whether
Rosemoor committed forum-shopping in filing the two cases against the Bank.
The other issues for resolution were raised in G.R. No. 159669, pertaining as
they do to the orders issued by the Malolos RTC. These issues are whether
the action to invalidate the foreclosure sale was properly laid with the Malolos
RTC even as regards the Nueva Ecija properties; whether it was proper for
the Malolos RTC to declare the Bank in default; and whether it was proper for
the Malolos RTC to deny the Bank's motion to dismiss through a minute
resolution. 40
Forum-Shopping
The central issue in these consolidated cases is whether Rosemoor
committed forum-shopping in filing the Malolos case during the pendency of
the Manila case.
The essence of forum-shopping is the filing of multiple suits involving
the same parties for the same cause of action, either simultaneously or
successively, for the purpose of obtaining a favorable judgment. 41 The
elements of forum-shopping are: (a) identity of parties, or at least such parties
as represent the same interests in both actions; (b) identity of rights asserted
and reliefs prayed for, the reliefs being founded on the same facts; and (c) the
identity with respect to the two preceding particulars in the two cases is such
that any judgment rendered in the pending cases, regardless of which party is
successful, amount to res judicata in the other case. 42
As to the existence of identity of parties, several bank officers and
employees impleaded in the Amended Complaint in the Manila case were not
included in the Malolos case. These bank officers and employees were sued
in Manila in their personal capacity. A finding of negligence or bad faith in their
participation in the preparation and execution of the loan agreement would
render them personally liable. Dr. Pascual, on the other hand, was included
as petitioner only in the Malolos case because it involved properties
registered in her name. As correctly pointed out by the Court of Appeals, Dr.
Pascual is a real party-in-interest in the Malolos case because she stood to
benefit or suffer from the judgment in the suit. Dr. Pascual, however, was not
included as plaintiff in the Manila case because her interest therein was not
personal but merely in her capacity as officer of Rosemoor. SCEDAI

As regards the identity of rights asserted and reliefs prayed for, the
main contention of Rosemoor in the Manila case is that the Bank had failed to
deliver the full amount of the loan, as a consequence of which Rosemoor
demanded the remittance of the unreleased portion of the loan and payment
of damages consequent thereto. 43 In contrast, the Malolos case was filed for
the purpose of restraining the Bank from proceeding with the consolidation of
the titles over the foreclosed Bulacan properties because the loan secured by
the mortgage had not yet become due and demandable. 44 While the right
asserted in the Manila case is to receive the proceeds of the loan, the right
sought in the Malolos case is to restrain the foreclosure of the properties
mortgaged to secure a loan that was not yet due.
 Moreover, the Malolos case is an action to annul the foreclosure sale
that is necessarily an action affecting the title of the property sold. 45 It is
therefore a real action which should be commenced and tried in the province
where the property or part thereof lies. 46 The Manila case, on the other hand,
is a personal action 47 involving as it does the enforcement of a contract
between Rosemoor, whose office is in Quezon City, and the Bank, whose
principal office is in Binondo, Manila. 48 Personal actions may be commenced
and tried where the plaintiff or any of the principal plaintiffs resides, or where
the defendants or any of the principal defendants resides, at the election of
the plaintiff. 49
It was subsequent to the filing of the Manila case that Rosemoor and Dr.
Pascual saw the need to secure a writ of injunction because the consolidation
of the titles to the mortgaged properties in favor of the Bank was in the offing.
But then, this action can only be commenced where the properties, or a
portion thereof, is located. Otherwise, the petition for injunction would be
dismissed for improper venue. Rosemoor, therefore, was warranted in filing
the Malolos case and cannot in turn be accused of forum-shopping.
Clearly, with the foregoing premises, it cannot be said that respondents
committed forum-shopping.
Action to nullify foreclosure sale of
mortgaged properties in Bulacan and
Nueva Ecija before the Malolos RTC
The Bank challenges the Malolos RTC's jurisdiction over the action to
nullify the foreclosure sale of the Nueva Ecija properties along with the
Bulacan properties. This question is actually a question of venue and not of
jurisdiction, 50 which, if improperly laid, could lead to the dismissal of the
case. 51
The rule on venue of real actions is provided in Section 1, Rule 4 of the
1997 Rules of Civil Procedure, which reads in part:
Section 1. Venue of Real Actions. Actions affecting title to or
possession of real property, or interest therein, shall be commenced
and tried in the proper court which has jurisdiction over the area
wherein the real property involved, or a portion thereof, is situated.
xxx xxx xxx
The venue of the action for the nullification of the foreclosure sale is
properly laid with the Malolos RTC although two of the properties together
with the Bulacan properties are situated in Nueva Ecija. Following the above-
quoted provision of the Rules of Court, the venue of real actions affecting
properties found in different provinces is determined by the singularity or
plurality of the transactions involving said parcels of land. Where said parcels
are the object of one and the same transaction, the venue is in the court of
any of the provinces wherein a parcel of land is situated. 52
Ironically, the Bank itself correctly summarized the applicable
jurisprudential rule in one of the pleadings before the Court. 53 Yet the Bank
itself has provided the noose on which it would be hung. Resorting to
deliberate misrepresentation, the Bank stated in the same pleading that "the
Bulacan and Nueva Ecija [p]roperties were not the subject of one single
real estate mortgage contract." 54
In the present case, there is only one proceeding sought to be nullified
and that is the extra-judicial mortgage foreclosure sale. And there is only one
initial transaction which served as the basis of the foreclosure sale and that is
the mortgage contract. Indeed, Rosemoor, through Dr. Pascual, executed a
lone mortgage contract where it undertook to "mortgage the land/real property
situated in Bulacan and Nueva Ecija," with the list of mortgaged properties
annexed thereto revealing six (6) properties in Bulacan and two (2) properties
in Nueva Ecija subject of the mortgage.
This apparent deliberate misrepresentation cannot simply pass without
action. The real estate mortgage form supplied to Rosemoor is the Bank's
standard pre-printed form. Yet the Bank perpetrated the misrepresentation.
Blame must be placed on its doorstep. But as the Bank's pleading was
obviously prepared by its counsel, the latter should also share the blame. A
lawyer shall not do any falsehood, nor consent to the doing of any in court;
nor shall he mislead, or allow the Court to be misled by any artifice. 55 Both
the Bank's president and counsel should be made to explain why they should
not be sanctioned for contempt of court. EaDATc

Propriety of Default Order

The Court of Appeals did not touch upon the soundness or
unsoundness of the order of default although it is one of the orders assailed
by the Bank. However, the silence of the appellate court on the issue does not
improve the legal situation of the Bank.
To recall, the Bank filed a motion to dismiss the Malolos case. The
Malolos RTC denied the motion in an Order dated 13 May 2002. 56 In the
same Order, the Malolos RTC directed the Bank to file its answer to the
petition within five (5) days from the receipt of the Order. 57 The Bank received
a copy of the Order on 21 May 2002. Instead of filing an answer, the Bank
filed a motion for reconsideration but only on 5 June 2002. 58
The motion for reconsideration 59 could not have tolled the running of
the period to answer for two reasons. One, it was filed late, nine (9) days after
the due date of the answer. Two, it was a mere rehash of the motion to
dismiss; hence, pro forma in nature. Thus, the Malolos RTC did not err in
declaring the Bank in default.
Deviation from the Prescribed
Content of an Order
Denying a Motion to Dismiss
Finally, the Bank questions the Malolos RTC's Order dated 13 May
2002 denying its motion to dismiss on the ground that it is contrary to law and
jurisprudence because it had failed to apprise the Bank of the legal basis for
the denial.
The Bank adverts to the content requirement of an order denying a
motion to dismiss prescribed by Sec. 3, Rule 16 of the Rules of Court. The
Court in Lu Ym v. Nabua 60 made a thorough discussion on the matter, to
quote:
Sec. 3, Rule 16 of the Rules provides:
Sec. 3. Resolution of motion. After the hearing, the court may
dismiss the action or claim, deny the motion or order the
amendment of the pleading.
The court shall not defer the resolution of the motion for the
reason that the ground relied upon is not indubitable.
In every case, the resolution shall state clearly and distinctly the
reasons therefor.
xxx xxx xxx
Further, it is now specifically required that the resolution
on the motion shall clearly and distinctly state the reasons
therefor. This proscribes the common practice of perfunctorily
dismissing the motion for "lack of merit." Such cavalier
dispositions can often pose difficulty and misunderstanding on
the part of the aggrieved party in taking recourse therefrom and
likewise on the higher court called upon to resolve the same,
usually on certiorari. 61
The questioned order of the trial court denying the motion to
dismiss with a mere statement that there are justiciable questions
which require a full blown trial falls short of the requirement of Rule 16
set forth above. Owing to the terseness of its expressed justification,
the challenged order ironically suffers from undefined breadth which is
a hallmark of imprecision. With its unspecific and amorphous thrust,
the issuance is inappropriate to the grounds detailed in the motion to
dismiss. AEDHST

While the requirement to state clearly and distinctly the reasons

for the trial court's resolutory order under Sec. 3, Rule 16 of the Rules
 does call for a liberal interpretation, especially since jurisprudence
dictates that it is decisions on cases submitted for decision that are
subject to the stringent requirement of specificity of rulings under Sec.
1, Rule 36 62 of the Rules, the trial court's order in this case leaves too
much to the imagination. (Emphasis supplied.) 63
The assailed order disposed of the motion to dismiss in this wise:
xxx xxx xxx
After a careful scrutiny of the grounds cited in the Motion to
Dismiss and the arguments en contra contained in the Opposition
thereto and finding the Motion to Dismiss to be not well taken as
grounds cited are not applicable to the case at bar, the Court
hereby DENIES the instant Motion to Dismiss.
xxx xxx xxx 64
Clearly, the subject order falls short of the content requirement as
expounded in Lu Ym v. Nabua. Despite the aberration, however, the Bank
was not misled, though it could have encountered difficulties or inconvenience
because of it. Comprehending, as it did, that the Malolos RTC did not share
its position that Rosemoor had engaged in forum-shopping, it went to great
lengths to impress upon the Court of Appeals that there was indeed forum-
shopping on Rosemoor's part. But the appellate court did not likewise agree
with the Bank as it soundly debunked the forum-shopping charge. In fact, the
same forum-shopping argument has been fully ventilated before the Court but
we are utterly unimpressed as we made short shrift of the argument earlier on.
In the ultimate analysis, therefore, the trial court's blunder may be overlooked
as it proved to be harmless.
WHEREFORE, the Decisions of the Court of Appeals dated 26
February 2004 in CA-G.R. SP No. 76934 and dated 20 June 2003 in CA-G.R
SP No. 73358 are AFFIRMED. Petitioner United Overseas Bank, Phils. and
its counsel, Siguion Reyna Montecillo & Ongsiako Law Offices, are given ten
(10) days from notice to EXPLAIN why they should not be held in contempt of
court for making a misrepresentation before the Court as adverted to in this
Decision.
Cost against petitioner. SO ORDERED.
(United Overseas Bank Phils. v. Rosemoor Mining & Development Corp., G.R.
|||

Nos. 159669 & 163521, [March 12, 2007], 547 PHIL 38-57)

[G.R. No. 112905. February 3, 2000.]

THE HEIRS OF PEDRO LOPEZ, EUGENIO LOPEZ DE LEON,

PASCUAL LOPEZ DE LEON, ANTONIO GUICO LOPEZ,
 FORTUNATO GUICOLOPEZ, MIGUEL GUICO LOPEZ,
ERLINDA LOCERO LOPEZ, TING LOPEZ DE LEON, RUFINA
LAYAO LOPEZ, LUISITA LOPEZ DE LEON,
MACARIO LOPEZ DE LEON, FELISA LOPEZ DE LEON,
PRINTIS L. DE LEON, FLOVIANA LOPEZ VELASCO,
LOURDES LOPEZ DE LEON, LAGRIMAS LOPEZ DE LEON,
ROSARIO LOPEZ DE LEON,
RESURRECCION LOPEZ DE LEON and
RICARDA LOPEZ DE LEON, petitioners,vs. HONESTO
C. DE CASTRO, MARIA SOCORRO DE CASTRO married to
ANTONIO PERIGRINA, FRANCISCO DE CASTRO,
FAUSTINODE CASTRO, EPIFANIA C. VDA. DE CASTRO, and
their successors-in-interest, respondents.

Valdez, Domondon & Associates for petitioners.

Augusto F. del Rosario for private respondents.

SYNOPSIS

This is a petition for review on certiorari filed by petitioners assailing the

Decision of the Court of Appeals dismissing their appeal. Petitioners contended
that the Court of Appeals erred in not holding that they are rightfully and legally
entitled to the lots in question.IAETDc

Petitioners alleged that upon the filing of their application for registration with the
CFI of Cavite, Branch III, Cavite City, said court acquired jurisdiction over
the res because land registration proceedings are in rem and, therefore, the
CFI of Cavite, Branch IV at Tagaytay City could not have acquired jurisdiction
over the same res by virtue of respondents' application for registration.
Contending that the decision of the CFI of Cavite, Branch III, on April 19, 1971
declaring that title to the land belonged to petitioners had become final and
executory on June 18, 1980, they asserted that they were the lawful
owners of the land. They claimed that the said decision, while promulgated
subsequent to the issuance of the certificate of title in the names of the
respondents, should be executed and that the certificate of title issued to the
latter should be nullified.
The private respondents interposed the defenses of prescription, laches and/or
estoppel and failure to state a cause of action.
A proceeding in rem, such as land registration proceedings, requires constructive
seizure of the land as against all persons, including the state, who have rights to
or interests in the property. Constructive seizure of the land for registration is
effected through publication of the application for registration and
service of notice to affected parties. Consequently, when private respondents
filed their own application for registration of the same parcel of land, strictly
speaking, the Tagaytay City branch could no longer entertain the application for
registration as the res involved had been constructively seized by the Cavite City
branch of the same court. The Court was not persuaded that the registration
proceedings instituted by private respondents should be nullified by reason of the
fact that the Cavite City branch of the same court was already proceeding with
another registration case for the same piece of land.
In land registration proceedings, all interested parties are obliged to take
care of their interests and to zealously pursue their objective of registration on
account of the rule that whoever first acquires title to a piece of land shall prevail.
Hence, even though an applicant precedes another, he may not be deemed to
have priority of right to register title. As such, while his application is being
processed, an applicant is duty-bound to observe vigilance and to take care that
his right or interest is duly protected. Petitioners failed to exercise the due
diligence required of them as applicants for land registration.
The Court found petitioners guilty of laches. They let almost seven (7) years to
pass from discovery that the land was already registered in the nameof private
respondents before they acted to revive what already was a dormant judgment.
The Court, therefore, dismissed the petition.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; VENUE; PROCEDURAL AND MAY

BE WAIVED. Venue is procedural, not jurisdictional, and hence may be
waived. It is meant to provide convenience to the parties, rather than restrict their
access to the courts as it relates to the place of trial. Thus, the last
paragraph of Section 51 of Rep. Act No. 296 provided that in land registration
cases, the Secretary of Justice, who was then tasked with the administration and
supervision of all courts, may transfer land registration courts "to any other place
more convenient to the parties." This implied that Land Registration Case No.
299 could be retained in the Cavite City branch of the CFI if it would be
convenient to the applicants who had been used to transacting business with that
branch; the case did not have to be transferred to Tagaytay City. Parenthetically,
Circular No. 46 dated July 3, 1963 that then Secretary of Justice Juan R. Liwag
addressed to all CFI judges and clerks of court in line with the
enforcement of Rep. Act No. 3947, merely quotes Section 6 thereof. Said circular
does not elucidate on whether cases should be transferred to the branches that
had territorial jurisdiction over them.
2. ID.; ID.; FACTUAL ISSUES MAY NO LONGER BE RAISED BEFORE THE
SUPREME COURT. We take note of petitioners' allegation in their reply
memorandum that in the registration proceedings filed by private respondents,
"what was published in the Official Gazette was the description of a bigger
tract of land that includes the smaller lot actually applied for by respondents."
That factual allegation could have had its impact before the trial court in an action
for reconveyance on the ground of fraud in the acquisition of title but not before
this Court where factual issues may no longer be raised.
3. CIVIL LAW; LAND REGISTRATION PROCEEDINGS; REQUIRES
CONSTRUCTIVE SEIZURE OF LAND AGAINST ALL PERSONS WHO HAVE
RIGHTS TO OR INTEREST IN PROPERTY; CONSTRUCTIVE
SEIZURE OF LAND; HOW EFFECTED. Compliance with the
requirement of notice and publication had the effect of notifying all persons
interested in the proceedings including the herein private respondents. As this
Court said in Aguilar v. Caoagdan: . . . it is true that appellants were not
personally notified of the pendency of the present registration case even if they
were actually occupying, as they claim, portions of the land, but such procedural
defect cannot affect the jurisdiction of the court because registration proceedings
have the nature ofactions in rem. . . .. A proceeding in rem, such as land
registration proceedings, requires constructive seizure of the land as against all
persons, including the state, who have rights to or interests in the property.
Constructive seizure of the land for registration is effected through
publication ofthe application for registration and service of notice to affected
parties. Consequently, when private respondents filed their own application for
registration of the same parcel of land, strictly speaking, the Tagaytay City
branch could no longer entertain the application for registration as
the resinvolved had been constructively seized by the Cavite City branch of the
same court. In hindsight, this complication of two applications for registration
having been filed for one and the same tract of land could have been avoided
had Land Registration Case No. 299 been transferred to the Tagaytay City
branch of the same court where it rightfully belonged, upon the effectivity of Rep.
Act No. 3947. Be that as it may, the Court is not persuaded that the registration
proceedings instituted by private respondents should be nullified by reason of the
fact that the Cavite City branch of the same court was already proceeding with
another registration case for the same piece of land.
4. ID.; ID.; WHOEVER FIRST ACQUIRES TITLE TO THE LAND SHALL
PREVAIL; RULE REFERS TO DATE OF CERTIFICATION OF TITLE AND NOT
DATE OFFILING OF APPLICATION FOR REGISTRATION OF TITLE. In land
registration proceedings, all interested parties are obliged to take care of their
interests and to zealously pursue their objective of registration on account of the
rule that whoever first acquires title to a piece of land shall prevail. To illustrate,
where more than one certificate of title is issued over the land, the person holding
a prior certificate is entitled to the land as against a person who relies on a
subsequent certificate. It should be stressed that said rule refers to the
date of the certificate of title and not to the date offiling of the application for
registration of title. Hence, even though an applicant precedes another, he may
not be deemed to have priority of right to register title. As such, while his
application is being processed, an applicant is duty-bound to observe vigilance
and to take care that his right or interest is duly protected.
5. ID.; ID.; APPLICANTS FOR LAND REGISTRATION MUST EXERCISE DUE
DILIGENCE TO PROTECT THEIR RIGHTS. Petitioners failed to exercise the
due diligence required of them as applicants for land registration. In the same
way that publication of their application for registration was supposed to have
rendered private respondents on constructive notice of such application, the
publication of notice in the land registration proceedings initiated by private
respondents had the same effect of notice upon petitioners. Petitioners were thus
presumed to have been notified of the land registration proceedings filed by
private respondents in the Tagaytay City branch of the Cavite CFI thereby
providing them with the opportunity to file an opposition thereto. The fact that an
interlocutory matter in Land Registration Case No. 299 had to be resolved by
both the Court of Appeals and this Court did not in any way mean that petitioners
should no longer exercise due diligence to protect their right or interest in the
said proceedings. On the contrary, they were bound to exercise such diligence
with vigor especially because as early as April 19, 1971, they already had a
judgment in their favor. The record does not show why petitioners did not have
actual knowledge of the registration proceedings instituted by private
respondents. However, the lack of such knowledge in fact raises a doubt as to
the veracity of their claim that they were in possession of the land. If indeed they
possessed the property, even if through an administrator, as diligent owners, the
threat to their ownership could not have escaped them considering that the
property is in a rural community where news travels fast.

6. ID.; LACHES; PETITIONERS WERE GUILTY THEREOF IN CASE AT BAR.

Even granting that petitioners did not really have actual knowledge ofprivate
respondents' application for registration, yet after discovering that the land was
already registered in the name of private respondents, petitioners should have
immediately sought recourse in law to protect their rights. As it turned out, they
let almost seven (7) years to pass from such discovery before they acted to
revive what already was a dormant judgment. Hence, they filed the separate
action "for execution of judgment and cancellation of titles" of private
respondents because more than five (5) years had elapsed since the
promulgation of the decision directing the issuance of a decree of registration.
Under these circumstances, the inevitable conclusion is that petitioners
neglected for an unreasonable and unexplained length of time to do that which,
by exercising due diligence, they could or should have done earlier. They
neglected or omitted to assert a right within a reasonable time, warranting the
presumption that they either had abandoned or declined to assert it. In short,
they were guilty oflaches.
7. ID.; ID.; REMEDIES OF AGGRIEVED APPLICANT WHERE LAND WAS
WRONGFULLY AND ERRONEOUSLY REGISTERED IN ANOTHER NAME;
REMEDIES ARE DESIGNED TO MAKE UP FOR FAILURE OF APPLICANT TO
REGISTER HIS TITLE TO PROPERTY, NOT NECESSARILY TO RESTORE
OWNERSHIP THAT HE HAD ALLOWED BY INACTION TO BE VESTED IN
ANOTHER PERSON. The doctrine of stale demands or laches is based on
grounds of public policy which requires, for the peace of society, the
discouragement of stale claims and is principally a question of the inequity or
unfairness of permitting a right or claim to be enforced or asserted. Land
registration proceedings entails a race against time and non-observance oftime
constraints imposed by law exposes an applicant to the loss of registration rights
if not to the deleterious effects of the application of the doctrine of laches. An
applicant for registration has but a one-year period from the issuance of the
decree of registration in favor of another applicant, within which to question the
validity of the certificate of title issued pursuant to such decree. Once the one-
year period has lapsed, the title to the land becomes indefeasible. While the law
grants the aggrieved applicant certain remedial measures, these are designed to
make up for his failure to register his title to the property and not necessarily to
restore ownership and/or title that he had allowed by inaction to be vested in
another person. aDSHIC

8. ID.; ID.; A COMPLAINT WITH PROPER ALLEGATION OF FRAUD COUPLED

WITH PROOF THEREOF COULD CAUSE THE
INDEFEASIBILITY OFPERSON'S TITLE TO PROPERTY. The wrong
appellation of petitioners' complaint shall not mislead this Court as, in the
determination of the natureof a complaint, its averments rather than its title, are
the proper gauges. A reading of the allegations of the complaint in Civil Case No.
TG-1028 betrays petitioners' true intention in filing the case. In paragraph
15 of the complaint, petitioners alleged that they were "unduly deprived of their
ownership and lawful possession of the land . . . due to the wrongful
registration of the subject land in the name of the defendants by means of fraud
and misrepresentations." Except for this general statement, the issue of fraud or
misrepresentation is not alleged with particularity in the complaint. This is
unfortunate because, if filed within the time set by law, a complaint with the
proper allegation of fraud coupled with proof thereof could cause the loss of the
indefeasibility of private respondents' title to the property. It is established that if
fraud attended the acquisition of title under the Torrens System, such title cannot
be used as a means to perpetuate fraud against the rightful owner of real
property.
9. ID.; ID.; AGGRIEVED APPLICANTS FOR LAND REGISTRATION CANNOT
SEEK PROTECTION UNDER PROVISIONS OF THE RULES OF COURT
WHICH ARE MERELY SUPPLETORY TO SPECIAL LAWS GOVERNING THE
SAME. The inevitable conclusion is that petitioners were cognizant all the
while ofthe futility of their attempt to cancel the title of private respondents under
the law. Hence, they indirectly and collaterally attacked the land title duly issued
to private respondents on the theory that the revival of the dormant judgment in
their favor could result in the realization of their objective ofnullifying such title.
However, aggrieved applicants for land registration cannot seek protection under
the provisions of the Rules of Court which are merely suppletory to special laws
governing land registration proceedings.
10. ID.; ID.; INDEFEASIBILITY OF PERSON'S TITLE OVER THE PROPERTY
SHOULD NOT GET IN THE WAY OF AN ADMINISTRATIVE
INVESTIGATION OFPOSSIBLE OMISSION OR NEGLECT OF OFFICIAL DUTY.
There is a need for an explanation why the officials of the then Land
Registration Commission caused the publication of the notice of hearing in
private respondents' application for registration notwithstanding that the same
office had already published the notice of hearing as regards petitioners'
application for registration of the same parcel of land. It is within the
power ofthese officials to determine whether or not the same parcel of land is the
subject of two applications for registration. The indefeasibility of private
respondents' title over the property should not get in the way of an administrative
investigation of possible omission or neglect of official duty. This Court cannot let
such malfeasance or misfeasance in office pass unnoticed lest the integrity of the
Torrens System of land registration be undermined. EHSTDA

DECISION

YNARES-SANTIAGO, J : p

In this case, the two applications for registration of the same parcel of land were
filed twelve years apart in different branches of the same Court ofFirst Instance,
but a certificate of title was issued in one case while the other is still pending
appeal. cdtai

The applicants in the earlier case are now before this Court on a petition for
review on certiorari. They assert that the decision ordering the issuanceof a
decree of registration in their favor, while promulgated subsequent to the
issuance of the certificate of title in the names of the second applicants, should
be "executed" and that the certificate of title issued to the latter should be nullified.
The facts of the case are as follows:
On July 25, 1956, Pedro Lopez, et al. filed an application for the registration of a
69-hectare parcel of land in Tagaytay City with the Court of First
Instance of Cavite, Branch III under Land Registration Case No. 299 and LRC
Record No. 11617. On January 29, 1957, the court issued an order ofgeneral
default, excepting only the Director of Lands.
On June 24, 1957, Assistant Fiscal Jose M. Legaspi, representing the
Municipality of Silang, Cavite, filed a motion to lift the order of general default and
submitted an opposition on behalf of the municipality. The opposition was later
amended on September 16, 1966 alleging that a portion of the land applied for
which the municipality had leased to private persons had been its patrimonial
property since 1930 or earlier. The municipality further alleged that in a
registration case entitled "Mariano Lopez de Leon v. Municipality of Silang" (CA-
G.R. No. 8161-R), the Court of Appeals found that the applicants had never been
in possession of the land sought to be registered.
In its answer to the amended opposition, the applicants claimed that a part of the
whole tract of land they sought to register was their inheritance, which includes
Lot No. 2 of plan PSU-51901 with an area of 119 hectares. However, it had to be
excluded in the application for registration of the 69-hectare land in Cavite upon
the recommendation of the Chief Surveyor of the General Land Registration
Office because it is located in the province ofLaguna. Similarly, Lot No. 1 of PSU-
51901 that lies within Tagaytay City had been excluded from the registration
proceedings under G.L.R.O. Rec. No. 53498 or Land Registration Case No. 2201
in the Court of First Instance of Laguna. 1
Nevertheless, the municipality filed a motion to dismiss the application for original
registration of Lot No. 1 on the ground of res judicata. The applicants, on the
other hand, contended that the principle of res judicata is not applicable because
the subject matter of CA-G.R. No. 8161-R
(Mariano Lopez de Leon v. Municipality of Silang) was Lot No. 2 or the
portion of the land in Laguna.
On February 7, 1969, the lower court issued an order denying the motion to
dismiss for lack of merit on the ground that the oppositor municipality had no
personality to intervene considering that Lot No. 1 was outside of its territorial
limits. The lower court held:
". . . . Even if said land was communal property of the
Municipality of Silang, by virtue of its incorporation into (the)
city of Tagaytay it became the property of the latter. Hence, the
Municipality of Silang has no personality to appear in this (sic)
 proceedings. If any right of action exists, it accrues in favor of the
City of Tagaytay and the same should be pursued by the said city." 2

The oppositor municipality filed a motion for reconsideration of the said order. On
July 23, 1970, the court issued an order stating that "in order not to impede
whatever action the movant" might take against the order of February 7, 1969,
said motion should be denied. On January 12, 1971, the applicants filed a motion
praying that the clerk of court be commissioned to receive evidence for them it
appearing that the order of July 23, 1970 had become final and executory "by
virtue of which the Municipality of Silang no longer ha(d) any personality to
appear in these proceedings." 3 The court granted said motion and directed the
clerk of court to submit a report on the matter.
In his report dated April 15, 1971, Clerk of Court Rolando D. Diaz stated that
since time immemorial, Micaela, Fernando, Ciriaco and Catalino, all
surnamed De los Reyes, owned and possessed the parcel of land in question.
On November 3, 1870, they sold the land to Ambrocio Carrillo Trinidad and
Francisco Dimaranan. On September 15, 1892, the property passed in
ownership to Pedro Lopez de Leon, Sr. and Maxima Carrillo Trinidad, the
daughter and sole heir of Ambrocio Carrillo Trinidad. Pedro and Maxima
remained in possession of the property until their death when their children,
applicants Pedro Lopez, Mariano Lopez de Leon, Pastor Lopez de Leon,
Eulogio Lopez, Clara Lopez, Ricarda Lopez and Rosario Lopez took over
ownership and possession thereof. Upon their death, their
respective heirs succeeded over the property and, on February 25, 1971, they
partitioned it. The agricultural property was under the supervision of Domingo
Opea who planted portions thereof to rice and other agricultural products.

The clerk of court thus recommended that the court confirm its order of general
default, approve his report, and register the property in the namesof the
applicants in accordance with the extrajudicial partition of the property. 4
On April 19, 1971, the court 5 accordingly rendered a decision approving the
report of the clerk of court and ordering that once the decision becomes final, the
corresponding decree of registration of title be issued in favor of the applicants. 6
The oppositor Municipality of Silang interposed an appeal from the said
decision of the land registration court to the Court of Appeals. On May 2, 1979,
the Court of Appeals rendered a Decision 7 dismissing the appeal "for
lack of personality of the oppositor-appellant Municipality of Silang to interfere in
the registration proceedings below." 8 Undaunted, the oppositor municipality filed
with this Court a petition for review on certioraridocketed as G.R. No. 51054
(Municipality of Silang v.Court of Appeals) which was denied on September 19,
1979. The municipality's motion for reconsideration was likewise denied with
finality for lack of merit on October 24, 1979. 9 On November 9, 1979, judgment
was entered in the said case. 10
Meanwhile, in the course of examining the records for the purpose of issuing the
decree of registration in favor of Pedro Lopez, et al., the Land Registration
Commission discovered that Lot No. 1, plan Psu-51901 had been decreed in
favor of private respondents Honesto de Castro, et al. 11
Further investigation revealed that sometime in 1967, 12 Honesto de Castro, et al.
filed before the Court of First Instance of Cavite, Branch IV in Tagaytay City, an
application for the registration of the same parcel of land under Land Registration
Case No. TG-95 and LRC Rec. No. N-33292. The case was called for hearing on
March 18, 1968. Eight (8) days later or on March 26, 1968, the
court 13 promulgated a decision adjudicating the land located at Barrio Iruhin,
Tagaytay City, more particularly described as Plan Psu-51901-Amd., in
favor of said applicants and directing that upon the finality of the decision, the
corresponding decree of registration be issued. 14 The ruling of the court was
based on its finding that one Hermogenes Orte, who originally owned the land
sought to be registered, sold it in 1932 to Marciano de Castro. The deed
evidencing said sale was destroyed during the Japanese
occupation. De Castro continued possession of the land until his death on April
26, 1940. His wife Epifania and their children named Maria Socorro, Francisco,
Honesto, Romualdo, Felicitacion, Faustino and Felixberto continued
possession of the property who declared the land for assessment and taxation
purposes in Cabuyao, Laguna. However, upon learning that the property lies in
Tagaytay City, the applicants declared it in their names in said city. cdll

The cause of the conflicting claims over the same land was never explained
because the head of the geodetic engineers of the Land Registration
Commission did not appear in court in Land Registration Case No. 299. Hence,
on August 19, 1981, the CFI of Cavite, Branch III 15 issued an order declaring that
the court had lost jurisdiction to hear the case, without, however, dismissing the
case.
Seven (7) years later, or on June 28, 1988, the heirs of Pedro Lopez, et al. filed a
complaint "for execution of judgment and cancellation of land titles ofthe
defendants and their successors-in-interest" before the Regional Trial
Court of Cavite, Branch 18, at Tagaytay City. Docketed as Civil Case No. TG-
1028, the complaint named as defendants Honesto C. de Castro, Maria
Socorro de Castro married to Antonio Perigrina, Francisco de Castro "widow,"
Faustino de Castro, Felixberto de Castro, Epifania C. Vda. de Castro and their
successors-in-interest.
The complaint alleged the facts pertinent to enforce the judgment of April 19,
1971. The plaintiffs, petitioners herein, alleged further that, upon the filing of their
application for registration with the CFI of Cavite, Branch III at Cavite City, said
court acquired jurisdiction over the res because land registration proceedings
are in rem and therefore, the CFI of Cavite, Branch IV at Tagaytay City could not
have acquired jurisdiction over the same resby virtue of De Castros' application
for registration. They claimed that no less than this Court had recognized the
jurisdiction of Branch III in Cavite City when it passed upon the correctness of the
lower court's ruling in favor of Pedro Lopez, et al. Contending that the
decision of Branch III on April 19, 1971 declaring that title to the land belonged
to Pedro Lopez, et al. had become final and executory on June 18, 1980, they
asserted that they were the lawful owners of the land. However, they had been
unduly deprived ownership and possession thereof on account of its "wrongful
registration" in the name of the defendants "by means of fraud and
misrepresentation." As a result of their undue deprivation of ownership,
possession and enjoyment of the property notwithstanding that the
question of ownership had been settled in their favor, plaintiffs claimed that they
suffered actual and moral damages. Claiming that the judgment sought to be
executed had not been barred by the statute of limitations, they prayed as follows:
WHEREFORE, plaintiffs pray for the judgment to effect:
1. Execution of judgment of the decision of the then Court of First
Instance (CFI) Branch III, Cavite, dated April 19, 1971 by the Hon.
Judge Alfredo Catolico which became final on June 18, 1980;
2. Ordering the National Land Titles and Deeds Registration
Administration and the Register of Deeds of Tagaytay City to
cancel the titles of the land in question under the names of the
defendants and their successors in interest and that new title to
the same parcel of land be issued to plaintiffs;
3. Ordering all the occupants of the questioned land to vacate the
premises and deliver possession thereof to the plaintiffs;
4. Ordering the defendants and/or their successors in interest to pay
plaintiffs or its (sic) heirs and/or successors in interest actual
damages (in) the amount of P200,000.00 or the amount that may
be proven during the hearing and trial of this case;
5. Ordering the defendants and/or their successors in interest to pay
plaintiffs the sum of P200,000.00 for and as attorney's fees;
6. To pay plaintiffs exemplary damages in the amount of P100,000.00 or
the sum that may be proven during the trial;
7. Ordering the defendants to pay the costs of suit.
Plaintiffs further pray for such other reliefs just and proper under the
premises. 16
In their answer with compulsory counterclaim, the defendants interposed the
defenses of prescription, laches and/or estoppel and failure to state a
cause of action. They averred that they were no longer the owners of the
property as it had been sold "absolutely and unconditionally to innocent third
parties for valuable consideration and in good faith." They contended that in
view of the indefeasibility of their title to the property, even the title of their
successors-in-interest can not be subject to collateral attack. They claimed that
Branch III of the CFI in Cavite should have "remanded" the records of LRC Case
No. 299 or LRC Record No. 11617 to the same CFI branch in Tagaytay City to
which the "legal and proper jurisdiction to hear and decide that particular case
belonged." They asserted that the complaint should have been directed by the
plaintiffs against the Assurance Fund under the provisions of P.D. No. 1529.
Alleging that the "very precipitate and wrongful suit" caused them mental anguish,
serious anxiety, social humiliation and similar injury, they claimed moral
damages of P500,000.00, nominal damages of P100,000.00 and attorney's
fees of P300,000.00.
On May 21, 1990, the RTC of Cavite, Branch 18 in Tagaytay City 17 rendered the
decision in Civil Case No. TG-1028 dismissing the complaint for being "improper
and premature." The court likewise dismissed the defendants' counterclaims for
"their dearth of sufficient legal, factual and evidentiary support." 18
The lower court held that the decision of Branch III that became final on June 18,
1980, could not be enforced against defendants considering that they were not
parties in LRC Record No. 11617. Neither could it order the cancellation of the
titles issued to defendants because the LRC and/or the
Register of Deeds of Tagaytay City had not been impleaded as parties to the
case and therefore the court did not acquire jurisdiction over them.
The lower court held further that because the case was covered by Act No.
496 and/or P.D. No. 1529 which are special laws, Section 6, Rule 39 of the
Rules of Court on execution of judgment by independent action cannot be
invoked. The court also ruled that:
Treating the second issue raised by plaintiffs, the then Court of First
Instance of Cavite, Branch IV, or this Court, validly acquired jurisdiction
over the case filed by defendants Honesto de Castro, et al., in LRC Case
No. TG-95. The records show that herein defendants as petitioner(s) in
that case, complied with all the jurisdictional requirements of law,
conferring jurisdiction upon this Court to try that case and lent validly (sic)
upon its proceedings. As admitted by the plaintiffs themselves, this Court
was not aware of the existence of LRC Record No. 11617, pending
before the other Branch of this Court, in the same manner that they, or
the plaintiffs themselves, did not also know the existence of LRC Case
No. TG-95 before this Court. This Court is assured that good faith
pervaded among the parties concerned, in the conduct of its
 proceedings, all procedural requirements having been punctiliously
complied with and no irregularity or breach of law having been
committed. So that the decision rendered by this Court in that case is
valid and subsisting, for all intents and purposes and can be nullified
only under circumstances and through procedures mandated by law.
Hence, the corresponding decree of registration issued in TG-95 and the
original certificates of titles issued to defendants in consequence thereof,
are all valid and binding until declared otherwise, in a case directly
assailing their validity, and of course, by a competent court. And by
express provision of law, the same are insulated from any collateral
attack. 19

The court concluded that the complaint was in the nature of a collateral attack on
the validity of the certificate of title issued in favor of the defendants and their
successors-in-interest because, "(b)y its caption and averments, the
validity of the title in question, is not directly assailed."
LibLex

Petitioners filed a motion for reconsideration of said decision, which was denied
on May 29, 1991. It reiterated that the plaintiffs' failure to implead the
Administrator of the NLRDRA, the Register of Deeds of Tagaytay City and the
possessors of the property in question was a fatal procedural error because they
were indispensable parties over which the court should acquire jurisdiction. Their
inclusion as defendants in the case was necessary in order that their title to the
property could be directly attacked. Petitioners should have availed of the
remedy provided by Section 32 of P.D. No. 1529and their failure to observe that
law was a "colossal error" because once issued, a certificate of title becomes
indefeasible, "completely insulated from any form of collateral attack assailing its
validity." 20
Petitioners sought recourse before the Court of Appeals, which dismissed the
appeal on November 29, 1993. 21 Stressing the indefeasibility of title under the
Torrens System of land registration, the Court of Appeals echoed the lower
court's ruling that the decree of registration in favor ofrespondents cannot be
reopened or set aside in a "collateral proceeding such as the one in the case at
bar which has for its objective the execution ofa judgment which apparently has
become dormant, thus appellants' insistence that it be revived." Citing Article
1544 of the Civil Code on sale ofproperty to different vendees which it opined
had a "persuasive influence" in the resolution of the appeal, it held that "in case
land has been registered in the name of two different persons, the earlier in date
(of registration) shall prevail." Nonetheless, emphasizing that the land in question
has been transferred to a third person, the Court of Appeals ruled that the title
issued in favor of respondents should be "maintained in their status quo, until the
proper court shall have determined their priorities, and the equities resulting
therefrom." 22
Consequently, petitioners filed the instant petition for review on certiorari under
Rule 45 of the Rules of Court, raising the following assignment oferrors:
1. THE RESPONDENT COURT OF APPEALS COMMITTED A
SERIOUS REVERSIBLE ERROR WHEN IT FAILED TO RULE
ON THE VITAL AND PIVOTAL ISSUE THAT THE TRIAL COURT
(CFI TAGAYTAY CITY, BRANCH IV), HAS NO JURISDICTION
OVER THE SUBSEQUENT LAND REGISTRATION CASE FILED
BY THE APPLICANTS BELOW, PRIVATE RESPONDENTS
HEREIN, AND IN DECREEING THE REGISTRATION OF TITLE
OVER THE SAID LOTS WHICH WERE ALREADY PREVIOUSLY
THE SUBJECT OF REGISTRATION PROCEEDINGS BY
ANOTHER COURT (CFI CAVITE, BRANCH III) IN A PREVIOUS
LAND REGISTRATION CASE IN FAVOR OF THE
PETITIONERS HEREIN WHICH WAS SUSTAINED BY THE
COURT OF APPEALS AND EVEN BY THIS HONORABLE
COURT.
2. THE RESPONDENT COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR WHEN IT LIKEWISE FAILED TO
RESOLVE THE ISSUE OF THE PROPRIETY OF THE INSTANT
ACTION FILED BY THE PETITIONERS FOR
EXECUTION OF JUDGMENT OF CFI BRANCH III, WHICH IS
EQUIVALENT TO A REVIVAL OF THE JUDGMENT.
3. THE RESPONDENT COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR IN MERELY RELYING ON THE
DOCTRINE OFINDEFEASIBILITY OF TITLE, COLLATERAL
ATTACK ON THE RESPONDENTS' TITLES, AND PRIORITY IN
THE REGISTRATION AND ISSUANCE OFTHE TITLES IN
FAVOR OF THE RESPONDENTS, WHICH RELIANCE ARE
MISPLACED AND UNAVAILING IN VIEW OF THE
LACK OF JURISDICTIONOF THE LOWER COURT TO TAKE
COGNIZANCE OF THE LAND REGISTRATION CASE FILED BY
THE PRIVATE RESPONDENTS AND TO ISSUE THE
DECREE OF REGISTRATION.
4. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
HOLDING THAT THE PETITIONERS CANNOT DIVEST
PRIVATE RESPONDENTS OFTHE DISPUTED LOTS BY FILING
THE INSTANT ACTION FOR EXECUTION OF JUDGMENT AND
ASSAILING THE VALIDITY OF RESPONDENTS' TITLES.
5. THE RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
NOT HOLDING THAT THE PETITIONERS ARE RIGHTFULLY
AND LEGALLY ENTITLED TO THE LOTS IN QUESTION.
In all cases where the authority to proceed is conferred by a statute and the
manner of obtaining jurisdiction is mandatory, the same must be strictly complied
with, or the proceedings will be utterly void. 23
When petitioners applied for the registration of Lot No. 1 before the CFI in Cavite
City in 1956, the governing law then as regards the matter ofjurisdiction was
the Judiciary Act of 1948 or Republic Act No. 296. Section 52 of that law
providing for the permanent stations of district judges or judges of Courts of First
Instance stated that for the Seventh Judicial District that included the
province of Cavite, there would be two judges in Cavite City. 24 The law did not
create other branches of the CFI in the province of Cavite outside of the
City of Cavite.
It was on June 22, 1963 when Republic Act No. 3749 took effect that a CFI
branch in Tagaytay City was set up. 25 That amendment to Republic Act No.
296 provided that four judges would preside "over the Courts of First
Instance of the Province of Cavite and the Cities of Cavite, Tagaytay and Trece
Martires" who would be "judges of the first, second, third and fourth
branches" of that court. Because the rule has always been that the court having
territorial jurisdiction over the property should take cognizance of its
registration, 26 upon the creation of the Tagaytay City branch, petitioners'
application for registration should have been transferred to that court inasmuch
as the property involved is located in that city.
It appears, however, that the Cavite City branch remained the
venue of petitioners' application for registration, apparently on account of the
following provision of Rep. Act No. 3749:
SEC. 6. Wherever an additional branch or branches of the Court of First
Instance is or are established in this Act in the same place where there
is an existing court or courts of first instance, all cases already filed in
the latter court or courts shall be heard, tried and decided by such latter
court or courts.
Notably, the law is not clear on whether or not the phrase "in the same place"
refers to the judicial district/province or the place where a branch ofthe court is
stationed. Hence, considering the general rule that once a court acquires
jurisdiction over a case it remains with that court until its full termination, 27 the
phrase "in the same place" should be interpreted as referring to the
province of Cavite. The Cavite City branch of the CFI of Cavite thus correctly
retained jurisdiction over the application for registration because there was no
jurisdictional question involved in the proceedings in Land Registration Case No.
299. What was in question was whether the Cavite City branch of the Cavite CFI
was the proper venue for said case upon the creation of the Tagaytay City
branch. As this Court once said:
 Venue and jurisdiction are entirely distinct matters. Jurisdiction may not
be conferred by consent or waiver upon a court which otherwise would
have no jurisdiction over the subject-matter of an action; but the
venue of an action as fixed by statute may be changed by the
consent of the parties and an objection that the plaintiff brought his suit
in the wrong county may be waived by the failure of the defendant to
make a timely objection. In either case, the court may render a valid
judgment. Rules as to jurisdiction can never be left to the consent or
agreement of the parties, whether or not a prohibition exists against their
alteration. 28
Venue is procedural, not jurisdictional, and hence may be waived. It is meant to
provide convenience to the parties, rather than restrict their access to the courts
as it relates to the place of trial. 29 Thus, the last paragraph of Section 51 of Rep.
Act No. 296 provided that in land registration cases, the Secretary of Justice,
who was then tasked with the administration and supervision of all courts, may
transfer land registration courts "to any other place more convenient to the
parties." This implied that Land Registration Case No. 299 could be retained in
the Cavite City branch of the CFI if it would be convenient to the applicants who
had been used to transacting business with that branch; the case did not have to
be transferred to Tagaytay City. Parenthetically, Circular No. 46 dated July 3,
1963 that then Secretary of Justice Juan R. Liwag addressed to all CFI judges
and clerks ofcourt in line with the enforcement of Rep. Act No. 3947, merely
quotes Section 6 thereof. Said circular does not elucidate on whether cases
should be transferred to the branches that had territorial jurisdiction over them.
Petitioners' claim that this Court had "sustained" the jurisdiction of the Cavite City
branch of the CFI over Land Registration Case No. 299 in G.R. No. 51054 is
incorrect. To be sure, the principal issue raised in the petition for review
on certiorari in G.R. No. 51054 was the personality of the Municipality of Silang to
file an opposition to the application for land registration. While this Court upheld
the lower court's ruling on that issue, such affirmance in no way implied that the
issue of jurisdiction was likewise resolved. It is only now that the same issue is
brought to light for resolution.
As regards the jurisdiction of the Tagaytay City branch over the land registration
proceedings instituted by private respondents, the order of general default issued
in Land Registration Case No. 299 is of relevance. When the Cavite City
branch of the CFI issued an order of default, it is presumed to have regularly
performed its task in accordance with law especially with regard to notice
requirements. Act No. 496 provided that after the court shall have set the
application for initial hearing the following procedure should be observed:
 SEC. 31. Upon receipt of the order of the court setting the time for initial
hearing of the application from the clerk of the Court of First Instance,
the Chief of the General Land Registration Office shall cause a notice
thereof to be published twice, in successive issues of the Official Gazette,
in the English language. The notice shall be issued by order of the court,
attested by the Chief of the General Land Registration Office, and shall
be in form substantially as follows: . . .. 30
The general order of default of January 29, 1957 stated as follows:
It appearing from the certificate of the Chief of the General Land
Registration Office and the return of the Sheriff, attached to the
record of this case, that the notice relative to the application in said case
was duly published, posted, and served in accordance with law; and that
the time allowed for entering appearance and filing answers expired at
9:30 A.M. on the 29th day of January, 1957, for which date said case
was duly set for hearing by the Court;
And it further appearing from said record that no person has appeared
as respondent in the case filed an answer within the time for that
purpose allowed, with the exception of the Director of Lands represented
by Asst. Provincial Fiscal Jose M. Legaspi;
All persons, except those herein above named, are hereby declared to
be in default in the above-entitled case, and it is ordered that a general
default be recorded in said case, and that the application therein be
taken as confessed by all the world, except the persons hereinabove
named.
It is so ordered. 31
On January 24, 1957, the Municipality of Silang filed a motion to lift said general
order of default and to admit its opposition to the registration. 32 This fact
supports the presumption that the officials concerned performed their duties
regularly because it implies notice, whether actual or constructive, on the
part of said municipality that a land registration proceedings had been filed with
respect to Lot No. 1.
Compliance with the requirement of notice and publication had the
effect of notifying all persons interested in the proceedings including the herein
private respondents. As this Court said in Aguilar v. Caoagdan:
. . . it is true that appellants were not personally notified of the
pendency of the present registration case even if they were actually
occupying, as they claim, portions of the land, but such procedural
defect cannot affect the jurisdiction of the court because registration
proceedings have the nature of actions in rem. . . .. 33
A proceeding in rem, such as land registration proceedings, requires constructive
seizure of the land as against all persons, including the state, who have rights to
or interests in the property. 34 Constructive seizure of the land for registration is
effected through publication of the application for registration and
service of notice to affected parties. 35 Consequently, when private respondents
filed their own application for registration of the same parcel of land, strictly
speaking, the Tagaytay City branch could no longer entertain the application for
registration as the res involved had been constructively seized by the Cavite City
branch of the same court. In hindsight, this complication of two applications for
registration having been filed for one and the same tract of land could have been
avoided had Land Registration Case No. 299 been transferred to the Tagaytay
City branch of the same court where it rightfully belonged, upon the
effectivity of Rep. Act No. 3947.
Be that as it may, the Court is not persuaded that the registration proceedings
instituted by private respondents should be nullified by reason of the fact that the
Cavite City branch of the same court was already proceeding with another
registration case for the same piece of land. cdll

In land registration proceedings, all interested parties are obliged to take

care of their interests and to zealously pursue their objective of registration on
account of the rule that whoever first acquires title to a piece of land shall prevail.
To illustrate, where more than one certificate of title is issued over the land, the
person holding a prior certificate is entitled to the land as against a person who
relies on a subsequent certificate. 36 It should be stressed that said rule refers
to the date of the certificate of title and not to the date of filing of the application
for registration of title. Hence, even though an applicant precedes another, he
may not be deemed to have priority of right to register title. As such, while his
application is being processed, an applicant is duty-bound to observe vigilance
and to take care that his right or interest is duly protected.
Petitioners failed to exercise the due diligence required of them as applicants for
land registration. In the same way that publication of their application for
registration was supposed to have rendered private respondents on constructive
notice of such application, the publication of notice in the land registration
proceedings initiated by private respondents had the same effect of notice upon
petitioners. Petitioners were thus presumed to have been notified of the land
registration proceedings filed by private respondents in the Tagaytay City
branch of the Cavite CFI thereby providing them with the opportunity to file an
opposition thereto.
The fact that an interlocutory matter in Land Registration Case No. 299 had to be
resolved by both the Court of Appeals and this Court did not in any way mean
that petitioners should no longer exercise due diligence to protect their right or
interest in the said proceedings. On the contrary, they were bound to exercise
such diligence with vigor especially because as early as April 19, 1971, they
already had a judgment in their favor. The record does not show why petitioners
did not have actual knowledge of the registration proceedings instituted by
private respondents. However, the lack ofsuch knowledge in fact raises a doubt
as to the veracity of their claim that they were in possession of the land. If indeed
they possessed the property, even if through an administrator, as diligent owners,
the threat to their ownership could not have escaped them considering that the
property is in a rural community where news travels fast.
Even granting that petitioners did not really have actual knowledge of private
respondents' application for registration, yet after discovering that the land was
already registered in the name of private respondents, petitioners should have
immediately sought recourse in law to protect their rights. As it turned out, they
let almost seven (7) years to pass from such discovery before they acted to
revive what already was a dormant judgment. Hence, they filed the separate
action "for execution of judgment and cancellation of titles" of private
respondents because more than five (5) years had elapsed since the
promulgation of the decision directing the issuance of a
decree of registration. 37 Under these circumstances, the inevitable conclusion is
that petitioners neglected for an unreasonable and unexplained length of time to
do that which, by exercising due diligence, they could or should have done earlier.
They neglected or omitted to assert a right within a reasonable time, warranting
the presumption that they either had abandoned or declined to assert it. 38 In
short, they were guilty of laches.
The doctrine of stale demands or laches is based on grounds of public policy
which requires, for the peace of society, the discouragement of stale claims and
is principally a question of the inequity or unfairness of permitting a right or claim
to be enforced or asserted. 39 Land registration proceedings entails a race
against time and non-observance of time constraints imposed by law exposes an
applicant to the loss of registration rights if not to the deleterious effects of the
application of the doctrine of laches. An applicant for registration has but a one-
year period from the issuanceof the decree of registration in favor of another
applicant, within which to question the validity of the certificate of title issued
pursuant to such decree. Once the one-year period has lapsed, the title to the
land becomes indefeasible. While the law grants the aggrieved applicant certain
remedial measures, these are designed to make up for his failure to register his
title to the property and not necessarily to restore ownership and/or title that he
had allowed by inaction to be vested in another person.
In Javier v. Court of Appeals, 40 the Court set out these remedies as follows:
. . .. The basic rule is that after the lapse of one (1) year, a
decree of registration is no longer open to review or attack although its
issuance is attended with actual fraud. This does not mean however that
the aggrieved party is without a remedy at law. If the property has not yet
passed to an innocent purchaser for value, an action for reconveyance is
still available. The decree becomes incontrovertible and can no longer
 be reviewed after one (1) year from the date of the decree so that the
only remedy of the landowner whose property has been wrongfully or
erroneously registered in another's name is to bring an ordinary action in
court for reconveyance, which is an action in personam and is always
available as long as the property has not passed to an innocent third
party for value. If the property has passed into the hands of an innocent
purchaser for value, the remedy is an action for damages. . . .
In Spouses Eduarte v. Court of Appeals, 41 the Court also said:
. . . it has been held that the proper recourse of the true owner of the
property who was prejudiced and fraudulently dispossessed of the same
is to bring an action for damages against those who caused or employed
the fraud, and if the latter are insolvent, an action against the
Treasurer of the Philippines may be filed for recovery of damages
against the Assurance Fund.

In filing the action for execution of judgment and cancellation of titles, petitioners
must have realized that only the remedy of filing an action for damages was
available to them. Otherwise, they could have filed an action for
reconveyance of the property. Of course, petitioners cleverly clothed their
complaint as one for execution of judgment under the provisions of the
Rules of Court. Clearly, such procedural strategy was a bid to revive the
decision of the lower court ordering the issuance of a decree of registration in
their names. In other words, petitioners availed of procedural remedies provided
for by the Rules of Court as it appeared that because of the lapse of time, they
would not benefit from remedies prescribed by land registration laws.
The wrong appellation of petitioners' complaint shall not mislead this Court as, in
the determination of the nature of a complaint, its averments rather than its title,
are the proper gauges. 42 A reading of the allegations of the complaint in Civil
Case No. TG-1028 betrays petitioners' true intention in filing the case. In
paragraph 15 of the complaint, petitioners alleged that they were "unduly
deprived of their ownership and lawful possession ofthe land . . . due to the
wrongful registration of the subject land in the name of the defendants by
means of fraud and misrepresentations." Except for this general statement, the
issue of fraud or misrepresentation is not alleged with particularity in the
complaint. 43 This is unfortunate because, if filed within the time set by law, a
complaint with the proper allegation of fraud coupled with proof thereof could
cause the loss of the indefeasibility ofprivate respondents' title to the property. It
is established that if fraud attended the acquisition of title under the Torrens
System, such title cannot be used as a means to perpetuate fraud against the
rightful owner of real property. 44
We take note of petitioners' allegation in their reply memorandum that in the
registration proceedings filed by private respondents, "what was published in the
Official Gazette was the description of a bigger tract of land that includes the
smaller lot actually applied for by respondents." 45 That factual allegation could
have had its impact before the trial court in an action for reconveyance on the
ground of fraud in the acquisition of title but not before this Court where factual
issues may no longer be raised.
The inevitable conclusion therefore is that petitioners were cognizant all the
while of the futility of their attempt to cancel the title of private respondents under
the law. Hence, they indirectly and collaterally attacked the land title duly issued
to private respondents on the theory that the revival of the dormant judgment in
their favor could result in the realization of their objective of nullifying such title.
However, aggrieved applicants for land registration cannot seek protection under
the provisions of the Rules of Court which are merely suppletory to special laws
governing land registration proceedings.
The resolution of the instant petition cannot be complete without a word on the
manner by which officials of the then Land Registration Commission ignored the
lower court's order to explain the conflicting claims of ownership over the same
property. Particularly, there is a need for an explanation why they caused the
publication of the notice of hearing in private respondents' application for
registration notwithstanding that the same office had already published the
notice of hearing as regards petitioners' application for registration of the same
parcel of land. It is within the power of these officials to determine whether or not
the same parcel of land is the subject of two applications for registration. The
indefeasibility of private respondents' title over the property should not get in the
way of an administrative investigation of possible omission or neglect of official
duty. This Court cannot let such malfeasance or misfeasance in office pass
unnoticed lest the integrity of the Torrens System of land registration be
undermined.
WHEREFORE, the instant petition for review is DENIED, and the
dismissal of Civil Case No. TG-1028 is AFFIRMED. Let a copy of this Decision
be furnished the Department of Justice so that an investigation against officials
who were responsible for the publication of two notices of hearing of an
application for registration of the same parcel of land may be conducted and the
guilty officials duly sanctioned.
SO ORDERED.
(Heirs of Lopez v. De Castro, G.R. No. 112905, [February 3, 2000], 381 PHIL
|||

591-618)

[G.R. No. L-27033. October 31, 1969.]

 POLYTRADE CORPORATION, plaintiff-appellee, vs.
VICTORIANO BLANCO, defendant-appellant.

Paredes, Poblador, Cruz & Nazareno for plaintiff-appellee.

Isidro T . Almeda and Mario T . Benzuela for defendant-appellant.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; VENUE; VENUE IN PERSONAL

ACTIONS. Section 2(b), Rule 4 of the Rules of Court on venue of personal
actions triable by courts of first instance provides that such actions may be
commenced and tried where the defendant or any of the defendants resides or
may be found, or where the plaintiff or any of the plaintiffs resides, at the election
of the plaintiff." Qualifying this provision is Sec. 3 of the same Rules which states
that venue may be stipulated by written agreement of the parties.
2. ID., ID., ID., ID; VENUE PROPERLY LAID IN THE COURT WHERE
DEFENDANT RESIDES WHERE THERE IS NO STIPULATION TO THE
CONTRARY. Where no such stipulation to sue and be sued exclusively in the
Manila courts appears in the contracts covering the first two causes of action, the
general rule set forth in Sec. 2(b), Rule 4 governs, and as to said two causes of
action, venue was properly laid in Bulacan, the province of defendant's
residence. cdasia

3. ID.; ID.; ID.; ID.; STIPULATION OF THE PARTIES IN INSTANT CASE,

MERELY PERMISSIVE WHICH DOES NOT TRANSFER THE VENUE OF THE
ACTION; REASON. An accurate reading of the stipulation, " the parties agree
to sue and be sued in the Courts of Manila," does not preclude the filing of suits
in the residence of plaintiff or defendant. The plain meaning is that the
defendants merely consented to be sued in Manila. Qualifying or restrictive
words which would indicate that Manila and Manila alone is the venue are totally
absent therefrom. We cannot read into that clause that plaintiff and defendant
bound themselves to file suits with respect to the last two transactions in question
only or exclusively in Manila. For, that agreement did not change or transfer
venue. It simply is permissive. The parties solely agreed to add the courts of
Manila as tribunals to which they may resort. They did not waive their right to
pursue remedy in the courts specifically mentioned in Sec. 2(b) of Rule
4. Renuntiatio non praesumitur.
4. CIVIL LAW; DAMAGES; ATTORNEY'S FEES AS LIQUIDATED DAMAGES;
AMOUNT RECOVERABLE BY THE LITIGANT JUDGMENT CREDITOR AND
NOT BY COUNSEL. The attorney's fees of 25% of the total principal
indebtedness are in the nature of liquidated damages and not, strictly speaking,
the attorney's fees recoverable as between attorney and client spoken of and
regulated by the Rules of Court. As long as this stipulation, called a penal clause,
does not contravene law, morals, or public order, it is strictly binding upon
defendant. The attorneys' fees so provided are awarded in favor of the litigant,
not his counsel. It is the litigant, not counsel, who is the judgment creditor entitled
to enforce the judgment by execution. The governing law is Article 2227 of the
Civil Code.
5. ID.; ID.; ID.; ID.; FACTORS THAT AID IN DETERMINING INIQUITY OR
UNCONSCIONABLENESS, NOT APPLICABLE. The reasonableness of the
attorney's fees that are awarded in favor of the litigant and are governed by
Article 2227 of the Civil Code are not strictly viewed in the light of such factors as
the amount and character of the services rendered, the nature and importance of
the litigation, and the professional character and the social standing of the
attorney. These factors may be an aid in the determination of the iniquity or
unconscionableness of attorneys' fees as liquidated damages.
6. ID.; ID.; ID.; ATTORNEYS' FEES AWARDED IN CASE AT BAR, NOT
INIQUITOUS OR UNCONSCIONABLE. The attorneys' fees awarded in the
amount of P51,961.63 in the instant case is not iniquitous or unconscionable
under the following circumstances: Plaintiff's lawyers concededly are of high
standing. More important is that the case should not have gone to court, it could
have been easily obligations. Defendant raises no defense nor does he deny the
principal liability. The writ of attachment issued upon defendant's properties
yielded no more than P400, and the continued maintenance by defendant of the
suit is plainly intended for delay.

DECISION

SANCHEZ, J : p

Suit before the Court of First Instance of Bulacan on four causes of

action to recover the purchase price of rawhide delivered by plaintiff to
defendant. 1 Plaintiff corporation has its principal office and place of business
in Makati, Rizal. Defendant is a resident of Meycauayan, Bulacan. Defendant
moved to dismiss upon the ground of improper venue. He claims that by
contract suit may only be lodged in the courts of Manila. The Bulacan court
overruled him. He did not answer the complaint. In consequence, a default
judgment was rendered against him on September 21, 1966, thus:
 "WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against defendant ordering defendant to pay plaintiff the following
amounts:
First Cause of Action P60,845.67, with interest thereon at
1% a month from May 9, 1965 until the full amount is paid.
Second Cause of Action P51,952.55, with interest
thereon at 1% a month from March 30, 1965 until the full amount is
paid.
Third Cause of Action P53,973.07, with interest thereon
at 1% a month from July 3, 1965 until the full amount is paid.
Fourth Cause of Action P41,075.22, with interest thereon
at 1% a month 2 until the full amount is paid.cdphil

In addition, defendant shall pay plaintiff attorney's fees

amounting to 25% of the principal amount due in each cause of
action, and the costs of the suit. The amount of P400.00 shall be
deducted from the total amount due plaintiff in accordance with this
judgment."
Defendant appealed.
1. The forefront question is whether or not venue was properly laid in the
province of Bulacan where defendant is a resident.
Section 2(b), Rule 4 of the Rules of Court on venue of personal actions triable by
courts of first instance and this is one provides that such "actions may be
commenced and tried where the defendant or any of the defendants resides or
may be found, or where the plaintiff or any of the plaintiffs resides, at the election
of the plaintiff." Qualifying this provision in Section 3 of the same Rule which
states that venue may be stipulated by written agreement "By written
agreement of the parties the venue of an action may be changed or transferred
from one province to another."
Defendant places his case upon Section 3 of Rule 4 just quoted. According to
defendant, plaintiff and defendant, by written contracts covering the four causes
of action, stipulated that: "The parties agree to sue and be sued in the Courts of
Manila." This agreement is valid. 3 Defendant says that because of such
covenant he can only be sued in the courts of Manila. We are thus called upon to
shake meaning from the terms of the agreement just quoted.
But first to the facts. No such stipulation appears in the contracts covering the
first two causes of action. The general rule set forth in Section 2(b), Rule 4,
governs, and as to said two causes of action, venue was properly laid in Bulacan,
the province of defendant's residence.
The stipulation adverted to is only found in the agreements covering the third and
fourth causes of action. An accurate reading, however, of the stipulation, "The
parties agree to sue and be sued in the Courts of Manila," does not preclude the
filing of suits in the residence of plaintiff or defendant. The plain meaning is that
the parties merely consented to be sued in Manila. Qualifying or restrictive words
which would indicate that Manila and Manila alone is the venue are totally absent
therefrom. We cannot read into that clause that plaintiff and defendant bound
themselves to file suits with respect to the last two transactions in question only
or exclusively in Manila. For, that agreement did not change or transfer venue. It
simply is permissive. The parties solely agreed to add the courts of Manila as
tribunals to which they may resort. They did not waive their right to pursue
remedy in the courts specifically mentioned in Section 2(b) of Rule 4. Renuntiatio
non praesumitur.
Illuminating on this point is Engel vs. Shubert Theatrical Co., 151 N.Y.S. 593, 594.
And this, became there the stipulation as to venue is along lines similar to the
present. Said stipulation reads: "In case of dispute, both contracting parties agree
to submit to the jurisdiction of the Vienna courts." And the ruling is: "By the
clause in question the parties do not agree to submit their disputes to the
jurisdiction of the Viennese court, and to those courts only. There is nothing
exclusive in the language used. They do agree to submit to the Viennese
jurisdiction, but they say not a word in restriction of the jurisdiction of courts
elsewhere; and whatever may be said on the subject of the legality of contracts
to submit controversies to courts of certain jurisdictions exclusively, it is entirely
plain that such agreements should be strictly construed, and should not be
extended by implication."
Venue here was properly laid.
2. Defendant next challenges the lower court's grant to plaintiff of interest at the
rate of one per centum per month. Defendant says that no such stipulation as to
right of interest appears in the sales confirmation orders which provided:
"TERMS 60 days after delivery with interest accruing on postdated cheques
beyond 30 days." The flaw in this argument lies in that the interest and the rate
thereof are expressly covenanted in the covering trust receipts executed by
defendant in favor of plaintiff, as follows: "All obligations of the undersigned under
this agreement of trust shall bear interest at the rate of one per centum (1%) per
month from the date due until paid."
On this score, we find no error.
3. Defendant protests the award of attorneys' fees which totals
P51,961.63, i.e., 25% of the total principal indebtedness of P207,846.51
(exclusive of interest). Defendant's thesis is that the foregoing sum is "exorbitant
and unconscionable."
To be borne in mind is that the attorneys' fees here provided is not, strictly
speaking, the attorneys' fees recoverable as between attorney and client spoken
of and regulated by the Rules of Court. Rather, the attorneys' fees here are in the
nature of liquidated damages and the stipulation therefor is aptly called a penal
clause. 4 It has been said that so long as such stipulation does not contravene
law, morals, or public order, it is strictly binding upon defendant. 5 The attorneys'
fees so provided are awarded in favor of the litigant, not his counsel. It is the
litigant, not counsel, who is the judgment creditor entitled to enforce the judgment
by execution. 6
The governing law then is Article 2227 of the Civil Code, viz.: "Liquidated
damages, whether intended as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable." For this reason, we do not
really have to strictly view the reasonableness of the attorneys' fees in the light of
such factors as the amount and character of the services rendered, the nature
and importance of the litigation, and the professional character and the social
standing of the attorney. We do concede, however, that these factors may be an
aid in the determination of the iniquity or unconscionableness of attorneys' fees
as liquidated damages. cdrep

May the attorneys' fees (P51,961.63) here granted be tagged as iniquitous or

unconscionable? Upon the circumstances, our answer is in the negative.
Plaintiff's lawyers concededly are of high standing. More important is that this
case should not have gone to court. It could have been easily avoided had
defendant been faithful in complying with his obligations. It is not denied that the
rawhide was converted into leather and sold by defendant. He raises no defense.
In fact, he did not even answer the complaint in the lower court, and was thus
declared in default. Nor does he deny the principal liability. Add to all these the
fact that the writ of attachment issued below upon defendant's properties yielded
no more than P400 and the picture is complete. The continued maintenance by
defendant of the suit is plainly intended for delay. The attorneys' fees awarded
cannot be called iniquitous or unconscionable.
In the very recent case of Universal Motor Corporation vs. Dy Hian Tat (1969), 28
SCRA 161, 170, we allowed attorneys' fees in the form of liquidated damages at
the rate of 25% of the total amount of the indebtedness. Here, the trial court has
already reduced the attorneys' fees from the stipulated 25% "of the total amount
involved, principal and interest, then unpaid" to only 25% of the principal amount
due. There is no reason why such judgment should be disturbed.
FOR THE REASON GIVEN, the appealed judgment is hereby affirmed, except
that interest granted, in reference to the fourth cause of action, should start from
March 24, 1965.
Costs against defendant-appellant. So ordered.
(Polytrade Corp. v. Blanco, G.R. No. L-27033, [October 31, 1969], 140 PHIL
|||

604-610)

[G.R. No. 160053. August 28, 2006.]

SPS. RENATO & ANGELINA LANTIN, petitioners, vs. HON.

JANE AURORA C. LANTION, Presiding Judge of the Regional
Trial Court of Lipa City, Fourth Judicial Region, Branch 13,
PLANTERS DEVELOPMENT BANK, ELIZABETH C. UMALI,
ALICE PERCE, JELEN MOSCA, REGISTER OF DEEDS FOR
LIPA CITY, BATANGAS, THE CLERK OF COURT and EX-
OFFICIO SHERIFF OF THE REGIONAL TRIAL COURT OF
BATANGAS, respondents.

DECISION

QUISUMBING, J : p

This is a petition for certiorari assailing the orders dated May 15, 2003 1 and
September 15, 2003 2 in Civil Case No. 2002-0555 issued by public respondent,
Presiding Judge Jane Aurora C. Lantion, of the Regional Trial Court (RTC) of
Lipa City, Batangas.
The facts of the case are as follows:
Petitioners Renato and Angelina Lantin took several peso and dollar loans from
respondent Planters Development Bank and executed several real estate
mortgages and promissory notes to cover the loans. They defaulted on the
payments so respondent bank foreclosed the mortgaged lots. The foreclosed
properties, in partial satisfaction of petitioners' debt, were sold at a public auction
where the respondent bank was the winning bidder. On November 8, 2003,
petitioners filed against Planters Development Bank and its officers Elizabeth
Umali, Alice Perce and Jelen Mosca (private respondents), a Complaint for
Declaration of Nullity and/or Annulment of Sale and/or Mortgage, Reconveyance,
Discharge of Mortgage, Accounting, Permanent Injunction, and Damages with
the RTC of Lipa City, Batangas. Petitioners alleged that only their peso loans
were covered by the mortgages and that these had already been fully paid,
hence, the mortgages should have been discharged. They challenged the validity
of the foreclosure on the alleged non-payment of their dollar loans as the
mortgages did not cover those loans.
Private respondents moved to dismiss the complaint on the ground of improper
venue since the loan agreements restricted the venue of any suit in Metro Manila.
On May 15, 2003, the respondent judge dismissed the case for improper venue.
Petitioners sought reconsideration. They argued that the trial court in effect
prejudged the validity of the loan documents because the trial court based its
dismissal on a venue stipulation provided in the agreement. The motion for
reconsideration was denied and the lower court held that the previous order did
not touch upon the validity of the loan documents but merely ruled on the
procedural issue of venue. EcHTDI

Petitioners now come before us alleging that:

I
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
IN HOLDING THAT THE VENUE STIPULATIONS IN THE "REAL
ESTATE MORTGAGE" AND "PROMISSORY NOTES" FALL WITHIN
THE PURVIEW OF SECTION 4(B) OF RULE 4 OF THE 1997 RULES
OF CIVIL PROCEDURE IN THAT IT LIMITED THE VENUE OF
ACTIONS TO A DEFINITE PLACE.
II
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
IN NOT FINDING THAT THE MERE USE OF THE WORD
"EXCLUSIVELY" DOES NOT, BY ITSELF, MEAN THAT SUCH
STIPULATIONS AUTOMATICALLY PROVIDE FOR AN "EXCLUSIVE
VENUE", AS CONTEMPLATED BY SECTION 4(B) OF RULE 4 OF THE
1997 RULES OF CIVIL PROCEDURE, SPECIALLY WHEN THE
TENOR OR LANGUAGE OF THE ENTIRE VENUE STIPULATION
CLEARLY PROVIDES OTHERWISE.
III
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
IN DISREGARDING THE FACT THAT HEREIN PETITIONERS'
COMPLAINT INVOLVES SEVERAL CAUSES OF ACTION WHICH
DO NOT ARISE SOLELY FROM THE "REAL ESTATE MORTGAGE"
AND "PROMISSORY NOTES" AND WHICH OTHER CAUSES OF
ACTION MAY BE FILED IN OTHER VENUES UNDER SECTIONS 1
AND 2 OF RULE 4 OF THE 1997 RULES OF CIVIL PROCEDURE.
IV
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
 IN DISREGARDING THE PRINCIPLE THAT THE RULE ON VENUE OF
ACTIONS IS ESTABLISHED FOR THE CONVENIENCE OF THE
PLAINTIFFS. 3
The main issue in the present petition is whether respondent judge committed
grave abuse of discretion when she dismissed the case for improper venue. aEHASI

Petitioners contend that, since the validity of the loan documents were squarely
put in issue, necessarily this meant also that the validity of the venue stipulation
also was at issue. Moreover, according to the petitioners, the venue stipulation in
the loan documents is not an exclusive venue stipulation under Section 4(b) of
Rule 4 of the 1997 Rules of Civil Procedure. 4 The venue in the loan agreement
was not specified with particularity. Besides, petitioners posit, the rule on venue
of action was established for the convenience of the plaintiff, herein petitioners.
Further, petitioners also contend that since the complaint involves several causes
of action which did not arise solely from or connected with the loan documents,
the cited venue stipulation should not be made to apply.
Private respondents counter that, in their complaint, petitioners did not assail the
loan documents, and the issue of validity was merely petitioners' afterthought to
avoid being bound by the venue stipulation. They also aver that the venue
stipulation was not contrary to the doctrine in Unimasters,5 which requires that a
venue stipulation employ categorical and suitably limiting language to the effect
that the parties agree that the venue of actions between them should be laid only
and exclusively at a definite place. According to private respondents, the
language of the stipulation is clearly exclusive.
At the outset, we must make clear that under Section 4 (b) of Rule 4 of the 1997
Rules of Civil Procedure, the general rules on venue of actions shall not apply
where the parties, before the filing of the action, have validly agreed in writing on
an exclusive venue. The mere stipulation on the venue of an action, however, is
not enough to preclude parties from bringing a case in other venues. The parties
must be able to show that such stipulation isexclusive. 6 In the absence of
qualifying or restrictive words, the stipulation should be deemed as merely an
agreement on an additional forum, not as limiting venue to the specified place. 7
The pertinent provisions of the several real estate mortgages and promissory
notes executed by the petitioner respectively read as follows:
18. In the event of suit arising out of or in connection with this mortgage
and/or the promissory note/s secured by this mortgage, the parties
hereto agree to bring their causes of auction (sic) exclusively in the
proper court of Makati, Metro Manila or at such other venue chosen by
the Mortgagee, the Mortgagor waiving for this purpose any other
venue. 8 (Emphasis supplied.) HCaEAT
 I/We further submit that the venue of any legal action arising out of this
note shall exclusively be at the proper court of Metropolitan Manila,
Philippines or any other venue chosen by the BANK, waiving for this
purpose any other venue provided by the Rules of Court. 9 (Emphasis
supplied.)
Clearly, the words "exclusively" and "waiving for this purpose any other venue"
are restrictive and used advisedly to meet the requirements.
Petitioners claim that effecting the exclusive venue stipulation would be
tantamount to a prejudgment on the validity of the loan documents. We note
however that in their complaint, petitioners never assailed the validity of the
mortgage contracts securing their peso loans. They only assailed the terms and
coverage of the mortgage contracts. What petitioners claimed is that their peso
loans had already been paid thus the mortgages should be discharged, and that
the mortgage contracts did not include their dollar loans. In our view, since the
issues of whether the mortgages should be properly discharged and whether
these also cover the dollar loans, arose out of the said loan documents, the
stipulation on venue is also applicable thereto.
Considering all the circumstances in this controversy, we find that the respondent
judge did not commit grave abuse of discretion, as the questioned orders were
evidently in accord with law and jurisprudence.
WHEREFORE, the petition is DISMISSED. The assailed orders dated May 15,
2003 and September 15, 2003 of the Regional Trial Court of Lipa City, Batangas,
in Civil Case No. 2002-0555 are AFFIRMED.
Costs against petitioners. SO ORDERED.
(Spouses Lantin v. Lantion, G.R. No. 160053, [August 28, 2006], 531 PHIL 318-
|||

324)

[G.R. No. 173979. February 12, 2007.]

AUCTION IN MALINTA, INC., petitioner, vs. WARREN

EMBES LUYABEN, respondent.

DECISION

YNARES-SANTIAGO, J : p

Assailed in this petition for review under Rule 45 of the Rules of Court is the May
31, 2005 Decision 1 of the Court of Appeals in CA-G.R. CV No. 78456, which
held that venue was properly laid before the Regional Trial Court of Bulanao,
Tabuk, Kalinga (Kalinga RTC), and reversed the trial court's September 3, 2002
Resolution 2 dismissing the complaint of respondent Warren Embes
Lubayen in Civil Case No. 511, on the ground of improper venue.
The facts show that on October 24, 2001, respondent, a resident of Magsaysay,
Tabuk, Kalinga, filed with the Kalinga RTC a complaint 3 for damages against
petitioner Auction in Malinta, Inc., a corporation with business address at Malinta,
Valenzuela City, and engaged in public auction of heavy equipments, trucks, and
assorted machineries. Respondent alleged that in an auction conducted by
petitioner on May 29, 2001, he was declared the highest bidder for a wheel
loader T.C.M. 75B, series no. 3309. On June 7, 2001, respondent tendered the
payment for the said item but petitioner could no longer produce the loader. It
offered a replacement but failed to deliver the same up to the filing of the
complaint. Hence, respondent instituted this case to recover actual, moral, and
exemplary damages plus attorney's fees.
Petitioner filed a motion to dismiss on the ground of improper venue. It argued
that the correct venue is the RTC of Valenzuela City pursuant to the
stipulation in the Bidders Application and Registration Bidding Agreement which
states that:
ALL COURT LITIGATION PROCEDURES SHALL BE
CONDUCTED IN THE APPROPRIATE COURTS OF VALENZUELA
CITY, METRO MANILA. 4
In a Resolution dated September 3, 2002, the Kalinga RTC held that the clear
intention of the parties was to limit the venue to the proper court of Valenzuela
City and thus dismissed respondent's complaint on the ground of improper
venue. 5
Aggrieved, respondent appealed to the Court of Appeals which reversed the
Resolution of the Kalinga RTC and reinstated the complaint. The dispositive
portion thereof, reads:
WHEREFORE, the Resolution appealed from is hereby REVERSED and
SET ASIDE. The case is remanded to the RTC which is ordered to
reinstate plaintiff's complaint for damages.
IDAaCc

SO ORDERED. 6
Petitioner's motion for reconsideration was denied; hence, the instant petition.
The sole issue is whether the stipulation in the parties' Bidders Application and
Registration Bidding Agreement effectively limited the venue of the instant case
exclusively to the proper court of Valenzuela City.
The Court rules in the negative.
The general rule on the venue of personal actions, as in the instant case for
damages 7 filed by respondent, is embodied in Section 2, Rule 4 of the Rules of
Court. It provides:
Sec. 2. Venue of Personal Actions. All other actions may be
commenced and tried where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants
resides, or in the case of a nonresident defendant, where he may be
found, at the election of the plaintiff.
The aforequoted rule, however, finds no application where the parties, before the
filing of the action, have validly agreed in writing on an exclusive venue. 8 But the
mere stipulation on the venue of an action is not enough to preclude parties from
bringing a case in other venues. It must be shown that such stipulation is
exclusive. In the absence of qualifying or restrictive words, such as "exclusively"
and "waiving for this purpose any other venue, " 9 "shall only" preceding the
designation of venue, 10 "to the exclusion of the other courts," 11 or words of
similar import, the stipulation should be deemed as merely an agreement on an
additional forum, not as limiting venue to the specified place. 12
This has been the rule since the 1969 case of Polytrade Corporation v.
Blanco. 13 It was held therein that the clause "[t]he parties agree to sue and be
sued in the Courts of Manila," does not preclude the filing of suits in the court
which has jurisdiction over the place of residence of the plaintiff or the defendant.
The plain meaning of the said provision is that the parties merely consented to be
sued in Manila considering that there are no qualifying or restrictive words which
would indicate that Manila, and Manila alone, is the agreed venue. It simply is
permissive and the parties did not waive their right to pursue remedy in the
courts specifically mentioned in Section 2 of Rule 4 of the Rules of Court. 14
The Polytrade doctrine was further applied in the case of Unimasters
Conglomeration, Inc. v. Court of Appeals, 15 which analyzed the various
jurisprudence rendered after the Polytrade case. In Unimasters, we held that a
stipulation stating that "[a]ll suits arising out of this Agreement shall be filed
with/in the proper Courts of Quezon City," 16 is only permissive and does not limit
the venue to the Quezon City courts. As explained in the said case:
In other words, unless the parties make very clear, by employing
categorical and suitably limiting language, that they wish the venue of
actions between them to be laid only and exclusively at a definite place,
and to disregard the prescriptions of Rule 4, agreements on venue are
not to be regarded as mandatory or restrictive, but merely permissive, or
complementary of said rule. The fact that in their agreement the parties
specify only one of the venues mentioned in Rule 4, or fix a place for
their actions different from those specified by said rule, does not, without
more, suffice to characterize the agreement as a restrictive one. There
 must, to repeat, be accompanying language clearly and categorically
expressing their purpose and design that actions between them be
litigated only at the place named by them, regardless of the general
precepts of Rule 4; and any doubt or uncertainty as to the parties'
intentions must be resolved against giving their agreement a restrictive
or mandatory aspect. Any other rule would permit of individual,
subjective judicial interpretations without stable standards, which could
well result in precedents in hopeless inconsistency. 17
The rule enunciated in Unimasters and Polytrade was reiterated in subsequent
cases where the following agreements on venue were likewise declared to be
merely permissive and do not limit the venue to the place specified therein, to wit:
1. "If court litigation becomes necessary to enforce collection, an
additional equivalent (sic) to 25% of the principal amount will be charged.
The agreed venue for such action is Makati, Metro Manila,
Philippines." 18
2. "In case of litigation hereunder, venue shall be in the City Court or
Court of First Instance of Manila as the case may be for determination of
any and all questions arising thereunder." 19
Then too, the doctrine that absent qualifying or restrictive words, the venue shall
either be that stated in the law or rule governing the action or the one
agreed in the contract, was applied to an extra-judicial foreclosure sale under Act
No. 3135. 20 In Langkaan Realty Development, Inc. v. United Coconut Planters
Bank, 21 where the provision on the venue employed the word "shall" to refer to
the place where the foreclosure will be held, the Court ruled that said provision
"lack(s) qualifying or restrictive words to indicate the exclusivity of the agreed
forum," and therefore "the stipulated place is considered only as an additional,
not a limiting venue." 22 The said stipulation reads:
It is hereby agreed that in case of foreclosure of this mortgage under Act
3135, as amended, and Presidential Decree No. 385, the auction sale
shall be held at the capital of the province, if the property is within the
territorial jurisdiction of the province concerned, or shall be held in the
city, if the property is within the territorial jurisdiction of the city
concerned. 23
In the instant case, the stipulation in the parties' agreement, i.e., "all Court
litigation procedures shall be conducted in the appropriate Courts of Valenzuela
City, Metro Manila," evidently lacks the restrictive and qualifying words that will
limit venue exclusively to the RTC of Valenzuela City. Hence, the Valenzuela
courts should only be considered as an additional choice of venue to those
mentioned under Section 2, Rule 4 of the Rules of Court. Accordingly, the
present case for damages may be filed with the (a) RTC of Valenzuela City as
stipulated in the bidding agreement; (b) RTC of Bulanao, Tabuk, Kalinga which
has jurisdiction over the residence of respondent (plaintiff); or with the (c) RTC of
Valenzuela City which has jurisdiction over the business address of petitioner
(defendant). The filing of the complaint in the RTC of Bulanao, Tabuk, Kalinga, is
therefore proper, respondent being a resident of Tabuk, Kalinga.
The case of Hoechst Philippines, Inc. v. Torres, 24 promulgated in 1978, and
invoked by petitioner in its motion to dismiss, had already been superseded by
current decisions on venue. In the said case, the Court construed the proviso:
"[i]n case of any litigation arising out of this agreement, the venue of action shall
be in the competent courts of the Province of Rizal," 25 as sufficient to limit the
venue to the proper court of Rizal. However,in Supena v. De la Rosa, 26 we ruled
that Hoechst had been rendered obsolete by recent jurisprudence applying the
doctrine enunciated in Polytrade.
In sum, we find that the Court of Appeals correctly declared that venue in the
instant case was properly laid with the RTC of Bulanao, Tabuk, Kalinga.
WHEREFORE, the petition is DENIED. The May 31, 2005 Decision of the Court
of Appeals in CA-G.R. CV No. 78456 which reversed the September 3, 2002
Resolution of the Regional Trial Court of Bulanao, Tabuk, Kalinga; reinstated the
complaint in Civil Case No. 511; and remanded the case to the said court, is
AFFIRMED. Costs against petitioner. SO ORDERED.
(Auction in Malinta, Inc. v. Luyaben, G.R. No. 173979, [February 12, 2007], 544
|||

PHIL 500-506)

[G.R. No. 146594. June 10, 2002.]

REBECCA T. CABUTIHAN, petitioner, vs. LANDCENTER

CONSTRUCTION & DEVELOPMENT
CORPORATION, respondent.

Prospero A. Anave for petitioner.

Francisco E. Antonio for respondent.

SYNOPSIS

Petitioner filed an action for specific performance with damages against the
respondent before the Regional Trial Court of Pasig City praying, inter alia, that
the respondent be ordered to execute the necessary deeds of transfer and
conveyance of a portion of a property situated in Kay-biga, Paraaque, Metro
Manila covered under TCT No. S-30409, corresponding to 36.5 percent of its
total area, as compensation for the undertakings she and her companions had
performed and accomplished in favor of the respondent. The RTC, however,
dismissed the complaint on grounds of improper venue, non-joinder of necessary
parties, and nonpayment of the proper docket fees. Hence this petition.
Actions affecting title to or possession of real property or an interest therein (real
actions) shall be commenced and tried in the proper court that has territorial
jurisdiction over the area where the real property is situated. On the other hand,
all other actions (personal actions) shall be commenced and tried in the proper
courts where the plaintiff or any of the principal plaintiffs resides or where the
defendant or any of the principal defendants resides. In the present case,
petitioner sought payment of her services in accordance with the undertaking the
parties signed. Breach of contract gives rise to a cause of action for specific
performance or for rescission.
The Court held that neither a misjoinder nor a non-joinder of parties is a ground
for the dismissal of an action because parties may be dropped or added by order
of the court, on motion of any party or on the court's own initiative at any stage of
the action. The RTC should have ordered the joinder of such party, and non-
compliance with the said order would have been ground for dismissal of the
action. Moreover, the non-inclusion of a necessary party does not prevent the
court from proceeding with the action, and the judgment rendered therein shall
be without prejudice to the rights of such party.
Anent the non-filing of appropriate docket fee, the Court clarified that the Rule
requiring that the assessed value of the real estate, subject of an action, should
be considered in computing the filing fees, does not apply to an action for specific
performance which is classified as an action not capable of pecuniary estimation,
such as the case at bar. The Court granted the petition and ordered the remand
of the case to the court of origin.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; VENUE OF ACTIONS; RULE;

BREACH OF CONTRACT GIVES RISE TO A CAUSE OF ACTION FOR
SPECIFIC PERFORMANCE OR FOR RESCISSION; CASE AT BAR.
Sections 1 and 2, Rule 4 of the Rules of Court provide an answer to the issue of
venue. Actions affecting title to or possession of real property or an interest
therein (real actions), shall be commenced and tried in the proper court that has
territorial jurisdiction over the area where the real property is situated. On the
other hand, all other actions, (personal actions) shall be commenced and tried in
the proper courts where the plaintiff or any of the principal plaintiffs resides or
where the defendant or any of the principal defendants resides. In the present
case, petitioner seeks payment of her services in accordance with the
undertaking the parties signed. Breach of contract gives rise to a cause of action
for specific performance or for rescission. If petitioner had filed an action in
rem for the conveyance of real property, the dismissal of the case would have
been proper on the ground of lack of cause of action.
2. ID.; ID.; CIVIL ACTIONS; PARTIES; MISJOINDER AND NON-JOINDER OF
PARTIES NOT A GROUND FOR DISMISSAL OF AN ACTION; REASON;
NECESSARY PARTIES; NON-INCLUSION THEREOF DOES NOT PREVENT
THE COURT FROM PROCEEDING WITH THE ACTION; CASE AT BAR.
Neither a misjoinder nor a non-joinder of parties is a ground for the dismissal of
an action. Parties may be dropped or added by order of the court, on motion of
any party or on the court's own initiative at any stage of the action. The RTC
should have ordered the joinder of such party, and noncompliance with the said
order would have been ground for dismissal of the action. Although the
Complaint prayed for the conveyance of the whole 36.5 percent claim without
impleading the companions of petitioner as party-litigants, the RTC could have
separately proceeded with the case as far as her 20 percent share in the claim
was concerned, independent of the other 16.5 percent. This fact means that her
companions are not indispensable parties without whom no final determination
can be had. At best, they are mere necessary parties who ought to be impleaded
for a complete determination or settlement of the claim subject of the action. The
non-inclusion of a necessary party does not prevent the court from proceeding
with the action, and the judgment rendered therein shall be without prejudice to
the rights of such party.
3. ID.; ID.; DOCKET FEES; ASSESSED VALUE OF REAL ESTATE, SUBJECT
OF AN ACTION, NOT CONSIDERED IN THE COMPUTATION THEREOF
WHERE ACTION IS NOT CAPABLE OF PECUNIARY ESTIMATION; CASE AT
BAR. Petitioner insists that the value of the real property, which was the
subject of the contract, has nothing to do with the determination of the correct
docket or filing fees. The RTC ruled that although the amount of damages sought
had not been specified in the body of the Complaint, one can infer from the
assessed value of the disputed land that it would amount to P50 million. Hence,
when compared to this figure, the P210 paid as docket fees would appear paltry.
We hold that the trial court and respondent used technicalities to avoid the
resolution of the case and to trifle with the law. True, Section 5, Rule 141 of the
Rules of Court requires that the assessed value of the real estate, subject of an
action, should be considered in computing the filing fees. But the Court has
already clarified that the Rule does not apply to an action for specific
performance, which is classified as an action not capable of pecuniary estimation.
4. ID.; ID.; ID.; PAYMENT THEREOF WITHIN REASONABLE TIME, ALLOWED
BUT IN NO CASE BEYOND REGLEMENTARY PERIOD. Besides, if during
the course of the trial, petitioner's 20 percent claim on the Fourth Estate
Subdivision can no longer be satisfied and the payment of its monetary
equivalent is the only solution left, Sunlife Insurance Office,
Ltd. v. Asuncion holds as follows: "Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court may allow payment of the
fee within a reasonable time but in no case beyond the applicable prescriptive or
reglementary period."

DECISION

PANGANIBAN, J : p

Breach of contract gives rise to a cause of action for specific performance or for
rescission. A suit for such breach is not capable of pecuniary estimation; hence,
the assessed value of the real estate, subject of the said action, should not be
considered in computing the filing fees. Neither a misjoinder nor a non-joinder of
parties is a ground for dismissal of an action, because parties may be dropped or
added at any stage of the proceedings.
The Case
Before us is a Petition for Review on Certiorari under Rule 45, assailing the
Orders dated September 8, 2000 and November 21, 2000, promulgated by the
Regional Trial Court (RTC) of Pasig City, Branch 263. 1 The first assailed Order
disposed as follows:
"WHEREFORE, foregoing premises considered, this Court hereby
resolves to dismiss the instant complaint." 2
Reconsideration was denied in the second challenged Order. 3
The Facts
Culled from the pleadings, the facts of this case are as follows.
On December 3, 1996, herein respondent Landcenter Construction &
Development Corporation, represented by Wilfredo B. Maghuyop entered into
an Agreement 4 with Petitioner Rebecca Cabutihan. The Agreement stipulates:
"WHEREAS, [respondent corporation], . . . is the absolute owner, . . . of
a parcel of land situated at Kay-biga, Paraaque, Metro Manila covered
under Transfer Certificate of Title No. (S-30409) (partially cancelled by
TCT Nos. 110001 to 110239) and particularly described as follows:
'A parcel of land (Plan Psu-80206, Case No. 290, G.L.R.O.
Record No. 2291), situated in the Barrio of Kay-biga, Municipality
of Paraaque, Province of Rizal. Bounded on the NE., by
properties of Eulogio Cruz and Isidro Alano; on the E., by property
 of Justo Bernardo; on the SE., by properties of Marcelo Nofuente
and Lorenzo Molera; on the SW., by properties of Higino and
Pedro P. Lopez; on the W., by property of Odon Rodriguez; and
on the NW., by properties of Evaristo de los Santos and Pastor
Leonardo . . . ; containing an area of ONE HUNDRED SEVEN
THOUSAND AND FORTY SEVEN (107,047) SQUARE METERS,
more or less.'
"WHEREAS, [respondent corporation] decided to engage the assistance
of [petitioner] and . . . herein called the FACILITATOR for the purpose of
facilitating and arranging the recovery of the property in question, as well
as the financing of such undertakings necessary in connection thereto;
"WHEREFORE, premises considered and of the mutual covenants of
the parties, they have agreed, as follows:
1. The FACILITATOR undertakes to effect the recovery of the
property subject hereof, including the financing of the undertaking,
up to the registration of the same in the name of [respondent
corporation], except any and all taxes due;
2. The FACILITATOR shall be responsible for whatever
arrangements necessary in relation to the squatters presently
occupying [a] portion of the property, as well as the legitimate
buyers of lots thereof;
3. As compensation for the undertaking of the FACILITATOR,
[she] shall be entitled to Twenty [Percent] (20%) of the total area
of the property thus recovered for and in behalf of [respondent
corporation].

xxx xxx xxx." 5

Armed with Board Resolution No. 01, Series of 1997, 6 which had authorized her
to represent the corporation, Luz Baylon Ponce entered into a February 11, 1997
Deed of Undertaking with a group composed of petitioner, Wenifredo P. Forro,
Nicanor Radan Sr. and Atty. Prospero A. Anave. The Deed states the following:
"WHEREAS, the UNDERTAKER [respondent corporation] solicited,
engaged and hereby voluntarily acknowledges the assistance of certain
persons, in recovering, arranging and financing the undertaking up to
completion/consummation of the same;
"WHEREAS, the UNDERTAKER freely, voluntarily, unconditionally and
irrevocably agreed, committed and undertook to compensate . . . said
persons, in the manner, specified hereinbelow;
 "WHEREFORE, considering the foregoing premises, and the mutual
covenants of the parties, the UNDERTAKER hereby unconditionally and
irrevocably [c]ommit[s] and [u]ndertake[s], as follows:
"1. To pay or compensate the following persons, based on the gross
area of the afore-described parcel of land or gross proceeds of the sale
thereof, as the case may be, to wit:
Rebecca T. Cabutihan 20%
Wenifredo P. Forro 10%
Nicanor Radan, Sr. 4%
Atty. Prospero A. Anave 2.5%
T O T A L 36.5%
"2. Execute a Deed of Assignment unto and in favor of each of the
persons above-mentioned corresponding to their respective shares in
the subject parcel of land or in the proceeds thereof;
"3. This Undertaking as well as the Deed of Assignment above-stated
shall be effective and binding upon the heirs, successors-in-interest,
assigns or designates of the parties herein." 7
An action for specific performance with damages was filed by petitioner on
October 14, 1999 before the RTC of Pasig City, Branch 263. She alleged:
"[6.] [Petitioner] accomplished her undertakings under the subject
Agreement and the Undertaking. So in a letter dated 18 April 1997, . . . ,
[respondent corporation] was informed accordingly thereof.
Simultaneously, [petitioner] demanded upon [respondent corporation] to
execute the corresponding Deed of Assignment of the lots in the subject
property, as compensation for the services rendered in favor of the
[respondent corporation]. The subject letter was duly received and
acknowledged receipt, by then Acting Corporate Secretary of the
[respondent corporation].
"[7.] [Respondent corporation] failed and refused to act on . . . said
demand of [petitioner]. Hence, [she] sent a letter dated May 8, 1997, to
the Register of Deeds for Paraaque, to inform . . . said Office of . . . [her]
claim . . . ;
"[8.] . . . [T]he subject property was already transferred to and registered
in the name of [respondent corporation] under Transfer Certificate of
Title No. -123917-, of the Registry of Deeds for Paraaque City . . . ;
xxx xxx xxx
"[10.] With . . . said title of the property now in the possession of the
[respondent corporation], [petitioner] is apprehensive that the more that
[she] will not be able to obtain from [respondent corporation], compliance
 with the aforestated Agreement and Undertaking, to the extreme
detriment and prejudice of [petitioner] and her group, . . . ;
xxx xxx xxx
"[12.] Then in a letter, 8 dated 10 September 1999, [petitioner] through
counsel sent to [respondent corporation] a Formal Demand, to comply
with its obligation . . . but . . . [respondent corporation] did not heed the
demand. . . . ." 9
Petitioner prayed, inter alia, that respondent corporation be ordered to execute
the appropriate document assigning, conveying, transferring and delivering the
particular lots in her favor. The lots represented compensation for the
undertakings she performed and accomplished, as embodied in the Agreement.
Respondent then filed a Motion to Dismiss, alleging the following:
"5. Because of the troubled situation obtaining at the management level
of [respondent corporation], the sale between [respondent corporation]
and PCIB regarding the Fourth Estate Subdivision was not registered
with the Register of Deeds office, although [respondent corporation]
continued holding the deed of sale over the Fourth Estate Subdivision.
"6. A group of persons led by one Wilfredo Maghuyop, including herein
[petitioner], Wenifredo Forro, Nicanor Radan, and others, taking
advantage of the management mess at [respondent corporation], tried to
grab ownership of the [respondent corporation], and with use of fraud,
cheat, misrepresentation and theft of vital documents from the office of
[respondent corporation], succeeded in filing with the Securities and
Exchange Commission false papers and documents purporting to show
that the Articles of Incorporation of [respondent corporation] had been
amended, installing Maghuyop as president of [respondent corporation].
It was on these occasions that [petitioner] and her companions . . ., with
use of fraud, stealth, tricks, deceit and cheat succeeded in letting Luz
Baylon Ponce sign a so-called 'Deed of Undertaking' by virtue of which
[respondent corporation] is duty-bound to give to [petitioner], Forro,
Radan and Atty. Prospero Anave 36.5% of the land area of the Fourth
Estate Subdivision as compensation for alleged services and expenses
made by these people in favor of [respondent corporation]. They also
caused said . . . Maghuyop to sign an 'Agreement' with [petitioner]
expressing an obligation on the part of [respondent corporation] to give a
big part of the land . . . to [petitioner]. These 'Agreement' and 'Deed of
Undertaking' are being made by herein [petitioner] as her causes of
action in the present case.
"Wilfredo Maghuyop was a stranger to [respondent corporation], and he
was an impostor used by [petitioner] and her companions to barge into
the management of [respondent corporation] for the purpose of stealing
and creating an obligation against [respondent corporation] in their favor.
 "7. But Luz Baylon Ponce, whose signature appears on the instrument
denominated as 'Deed of Undertaking,' vehemently denies that she
signed said instrument freely and voluntarily. She says that Wenifredo
Forro and Nicanor Radan were once real estate agents of [respondent
corporation] who promised to help sell lots from her project Villaluz II
Subdivision located [in] Malibay, Pasay City. According to Luz Baylon
Ponce, the Board of Directors of [respondent corporation] negotiated
with Forro and Radan for the latter to sell units/lots of Villaluz II
Subdivision, and to help obtain a financier who would finance for the
expenses for the reconstitution of the lost title of the Fourth Estate
Subdivision situated [in] Sucat, Paraaque City. Shortly thereafter, these
two men resigned from [respondent corporation] as agents, after they
manipulated the signing of . . . said 'Deed of Undertaking' by Luz Baylon
Ponce on February 11, 1997. The latter is an old woman 80 years of age.
She is weak, has . . . poor sight, and is feeble in her mental ability. Forro
and Radan inserted the 'Deed of Undertaking' among the papers
intended for application for reconstitution of [respondent corporation's]
title which these men caused Luz Baylon Ponce to sign, and she
unknowingly signed the 'Deed of Undertaking.' . . . ." 10
In the Motion, respondent sought the dismissal of the Complaint on the grounds
of (1) improper venue, (2) lack of jurisdiction over the subject matter, and (3)
nonpayment of the proper docket fees. Specifically, it contended:
"8. That venue is improperly laid
xxx xxx xxx
"(b) In other words, the present case filed by [petitioner] is for her
recovery (and for her companions) of 36.5% of [respondent corporation's]
land (Fourth Estate Subdivision) or her interest therein. . . . therefore, . . .
the present case filed . . . is a real action or an action in rem.
"(c) . . . [Following] Section 1, Rule 4 of the Rules of Court, as
amended . . . the present case should have been filed by [petitioner] with
the proper court in Paraaque City which has jurisdiction over the . . .
Fourth Estate Subdivision because said subdivision is situated in
Paraaque City. Since [petitioner] filed the present case with this . . .
[c]ourt in Pasig City, she chose a wrong venue . . . .
xxx xxx xxx
"9. That the [c]ourt has no jurisdiction over the subject matter of
the claim
xxx xxx xxx
"(c) . . . Wenifredo P. Forro, Nicanor Radan, Sr. and Atty. Prospero A.
Anave are not named as plaintiffs in the complaint. [Petitioner] . . . is not
named as representative of Forro, Radan and Anave by virtue of a
 Special Power of Attorney or other formal written authority. According to
the Rules, where the action is allowed to be prosecuted or defended by
a representative or someone acting in a fiduciary capacity, the
beneficiary shall be included in the title of the case and shall be deemed
to be the real party in interest (Sec. 3, Rule 3, Rules of Court, as
amended . . . ).
xxx xxx xxx
"10. That a condition precedent for filing the claim has not been
complied with
xxx xxx xxx
(b) Obviously, [petitioner] has not paid the docket or filing fees on the
value of her land claim . . . . Thirty-six percent (36%) . . . is
P180,000,000.00, . . . ." 11
Ruling of the Trial Court
The RTC ruled that the allegations in the Complaint show that its primary
objective was to recover real property. Equally important, the prayer was to
compel respondent to execute the necessary deeds of transfer and conveyance
of a portion of the property corresponding to 36.5 percent of its total area or, in
the alternative, to hold respondent liable for the value of the said portion, based
on the prevailing market price. The RTC further ruled that, since the suit would
affect the title to the property, it should have been instituted in the trial court
where the property was situated. 12

Furthermore, the action was filed only by petitioner. There was no allegation that
she had been authorized by Forro, Radan and Anave to represent their
respective shares in the compensation.
Finally, since this case was an action in rem, it was imperative for petitioner to
pay the appropriate docket or filing fees equivalent to the pecuniary value of her
claim, a duty she failed to discharge. Consequently, following Manchester
Development Corp. v. Court of Appeals, 13 the trial court never acquired
jurisdiction over the case.
Hence, this Petition. 14
Issues
In her Memorandum, petitioner phrases the issue in this wise:
"Whether or not the dismissal of the [C]omplaint was in accordance with
the pertinent law and jurisprudence on the matter." 15
She argues that the RTC erred in dismissing her Complaint on the grounds of (1)
improper venue, (2) non-joinder of necessary parties, and (3) non-payment of
proper docket fees.
This Court's Ruling
The Petition is meritorious.
First Issue:
Proper Venue
Maintaining that the action is in personam, not in rem, petitioner alleges that the
venue was properly laid. The fact that "she ultimately sought the conveyance of
real property" not located in the territorial jurisdiction of the RTC of Pasig is, she
claims, an anticipated consequence and beyond the cause for which the action
was instituted.
On the other hand, the RTC ruled that since the primary objective of petitioner
was to recover real property even though her Complaint was for specific
performance and damages her action should have been instituted in the trial
court where the property was situated, in accordance withCommodities Storage
& Ice Plant Corp. v. Court of Appeals. 16
We agree with petitioner. Sections 1 and 2, Rule 4 of the Rules of Court provide
an answer to the issue of venue. 17 Actions affecting title to or possession of real
property or an interest therein (real actions), shall be commenced and tried in the
proper court that has territorial jurisdiction over the area where the real property
is situated. On the other hand, all other actions, (personal actions) shall be
commenced and tried in the proper courts where the plaintiff or any of the
principal plaintiffs resides or where the defendant or any of the principal
defendants resides.
In Commodities Storage cited earlier, petitioner spouses obtained a loan secured
by a mortgage over their land and ice plant in Sta. Maria, Bulacan. Because they
had failed to pay the loan, the mortgage was foreclosed and the ice plant
auctioned. Before the RTC of Manila, they sued the bank for damages and for
the fixing of the redemption period. Since the spouses ultimately sought
redemption of the mortgaged property, the action affected the mortgage debtor's
title to the foreclosed property; hence, it was a real action. 18 Where the action
affects title to the property, it should be instituted in the trial court where the
property is situated. 19
In National Steel Corp. v. Court of Appeals, 20 the Court held that "an action in
which petitioner seeks the execution of a deed of sale of a parcel of land in his
favor . . . has been held to be for the recovery of the real property and not for
specific performance since his primary objective is to regain the ownership and
possession of the parcel of land."
However, in La Tondea Distillers, Inc. v. Ponferrada, 21 private respondents filed
an action for specific performance with damages before the RTC of Bacolod City.
The defendants allegedly reneged on their contract to sell to them a parcel of
land located in Bago City a piece of property which the latter sold to petitioner
while the case was pending before the said RTC. Private respondent did not
claim ownership but, by annotating a notice of lis pendens on the title, recognized
defendants' ownership thereof. This Court ruled that the venue had properly been
laid in the RTC of Bacolod, even if the property was situated in Bago.
In Siasoco v. Court of Appeals, 22 private respondent filed a case for specific
performance with damages before the RTC of Quezon City. It alleged that after it
accepted the offer of petitioners, they sold to a third person several parcels of
land located in Montalban, Rizal. The Supreme Court sustained the trial court's
order allowing an amendment of the original Complaint for specific performance
with damages. Contrary to petitioners' position that the RTC of Quezon City had
no jurisdiction over the case, as the subject lots were located in Montalban, Rizal,
the said RTC had jurisdiction over the original Complaint. The Court reiterated
the rule that a case for specific performance with damages is a personal action
which may be filed in a court where any of the parties reside.
A close scrutiny of National Steel and Ruiz reveals that the prayers for the
execution of a Deed of Sale were not in any way connected to a contract, like the
Undertaking in this case. Hence, even if there were prayers for the execution of a
deed of sale, the actions filed in the said cases were not for specific performance.
In the present case, petitioner seeks payment of her services in accordance with
the undertaking the parties signed. Breach of contract gives rise to a cause of
action for specific performance or for rescission. 23 If petitioner had filed an
action in rem for the conveyance of real property, the dismissal of the case would
have been proper on the ground of lack of cause of action.
Second Issue:
Non-Joinder of Proper Parties
Petitioner claims that she was duly authorized and empowered to represent the
members of her group and to prosecute their claims on their behalfvia a Special
Power of Attorney executed by Forro, Radan and Anave. Besides, she argues
that the omission of her companions as plaintiffs did not prevent the RTC from
proceeding with the action, because whatever judgment would be rendered
would be without prejudice to their rights. In the alternative, she avers that the
trial court may add or drop a party or parties at any stage of the action and on
such terms as are just.
The RTC ruled that there was no allegation anywhere in the records that
petitioner had been authorized to represent Forro, Radan and Anave, who were
real parties-in-interest with respect to their respective shares of the 36.5 percent
claim. Such being the case, the trial court never acquired jurisdiction over the
subject matter of their claims.
Again, we side with petitioner. Neither a misjoinder nor a non-joinder of parties is
a ground for the dismissal of an action. Parties may be dropped or added by
order of the court, on motion of any party or on the court's own initiative at any
stage of the action. 24 The RTC should have ordered the joinder of such party,
and noncompliance with the said order would have been ground for dismissal of
the action.
Although the Complaint prayed for the conveyance of the whole 36.5 percent
claim without impleading the companions of petitioner as party-litigants, the RTC
could have separately proceeded with the case as far as her 20 percent share in
the claim was concerned, independent of the other 16.5 percent. This fact means
that her companions are not indispensable parties without whom no final
determination can be had. 25 At best, they are mere necessary parties who ought
to be impleaded for a complete determination or settlement of the claim subject
of the action. 26 The non-inclusion of a necessary party does not prevent the
court from proceeding with the action, and the judgment rendered therein shall
be without prejudice to the rights of such party. 27
Third Issue:
Correct Docket Fees
Petitioner insists that the value of the real property, which was the subject of the
contract, has nothing to do with the determination of the correct docket or filing
fees.
The RTC ruled that although the amount of damages sought had not been
specified in the body of the Complaint, one can infer from the assessed value of
the disputed land that it would amount to P50 million. Hence, when compared to
this figure, the P210 paid as docket fees would appear paltry.
We hold that the trial court and respondent used technicalities to avoid the
resolution of the case and to trifle with the law. True, Section 5, Rule 141 of the
Rules of Court requires that the assessed value of the real estate, subject of an
action, should be considered in computing the filing fees. But the Court has
already clarified that the Rule does not apply to an action for specific
performance, 28 which is classified as an action not capable of pecuniary
estimation. 29
Besides, if during the course of the trial, petitioner's 20 percent claim on the
Fourth Estate Subdivision can no longer be satisfied and the payment of its
monetary equivalent is the only solution left, Sunlife Insurance Office, Ltd. v.
Asuncion 30 holds as follows: "Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court may allow payment of the
fee within a reasonable time but in no case beyond the applicable prescriptive or
reglementary period."
WHEREFORE, the Petition is hereby GRANTED, and the assailed Orders
REVERSED and SET ASIDE. The case is REMANDED to the court of origin
which is ordered to PROCEED with deliberate speed in disposing of the case. No
costs. SO ORDERED.
(Cabutihan v. Landcenter Construction & Development Corp., G.R. No. 146594,
|||

[June 10, 2002], 432 PHIL 927-943)

[G.R. No. 161026. October 24, 2005.]

HYATT ELEVATORS AND ESCALATORS

CORPORATION, petitioner, vs. GOLDSTAR ELEVATORS, PHIL
S., INC., respondent.

DECISION

PANGANIBAN, J : p

Well established in our jurisprudence is the rule that the residence of a

corporation is the place where its principal office is located, as stated in its
Articles of Incorporation.
The Case
Before us is a Petition for Review 1 on Certiorari, under Rule 45 of the Rules of
Court, assailing the June 26, 2003 Decision 2 and the November 27, 2003
Resolution 3 of the Court of Appeals (CA) in CA-GR SP No. 74319. The decretal
portion of the Decision reads as follows:
"WHEREFORE, in view of the foregoing, the assailed Orders dated May
27, 2002 and October 1, 2002 of the RTC, Branch 213, Mandaluyong
City in Civil Case No. 99-600, are hereby SET ASIDE. The said case is
hereby ordered DISMISSED on the ground of improper venue." 4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The Facts
The relevant facts of the case are summarized by the CA in this wise:
"Petitioner [herein Respondent] Goldstar Elevator Philippines, Inc.
(GOLDSTAR for brevity) is a domestic corporation primarily engaged in
the business of marketing, distributing, selling, importing, installing, and
maintaining elevators and escalators, with address at 6th Floor, Jacinta
II Building, 64 EDSA, Guadalupe, Makati City.
"On the other hand, private respondent [herein
petitioner] Hyatt Elevators and Escalators Company (HYATT for brevity)
is a domestic corporation similarly engaged in the business of selling,
installing and maintaining/servicing elevators, escalators and parking
equipment, with address at the 6th Floor, Dao I Condominium, Salcedo
St., Legaspi Village, Makati, as stated in its Articles of Incorporation.
"On February 23, 1999, HYATT filed a Complaint for unfair trade
practices and damages under Articles 19, 20 and 21 of the Civil Code of
the Philippines against LG Industrial Systems Co. Ltd. (LGISC) and LG
International Corporation (LGIC), alleging among others, that: in 1988, it
was appointed by LGIC and LGISC as the exclusive distributor of
LG elevators and escalators in the Philippines under a 'Distributorship
Agreement'; . . . LGISC, in the latter part of 1996, made a proposal to
change the exclusive distributorship agency to that of a joint venture
partnership; while it looked forward to a healthy and fruitful negotiation
for a joint venture, however, the various meetings it had with LGISC and
LGIC, through the latter's representatives, were conducted in utmost bad
faith and with malevolent intentions; in the middle of the negotiations, in
order to put pressures upon it, LGISC and LGIC terminated the
Exclusive Distributorship Agreement; . . . [A]s a consequence, [HYATT]
suffered P120,000,000.00 as actual damages, representing loss of
earnings and business opportunities, P20,000,000.00 as damages for its
reputation and goodwill, P1,000,000.00 as and by way of exemplary
damages, and P500,000.00 as and by way of attorney's fees. AaDSTH

"On March 17, 1999, LGISC and LGIC filed a Motion to Dismiss raising
the following grounds: (1) lack of jurisdiction over the persons of
defendants, summons not having been served on its resident agent; (2)
improper venue; and (3) failure to state a cause of action. The [trial]
court denied the said motion in an Order dated January 7, 2000.
"On March 6, 2000, LGISC and LGIC filed an Answer with Compulsory
Counterclaim ex abundante cautela. Thereafter, they filed a 'Motion for
Reconsideration and to Expunge Complaint' which was denied.
"On December 4, 2000, HYATT filed a motion for leave of court to
amend the complaint, alleging that subsequent to the filing of the
complaint, it learned that LGISC transferred all its organization, assets
and goodwill, as a consequence of a joint venture agreement with Otis
Elevator Company of the USA, to LG Otis Elevator Company (LG OTIS,
for brevity). Thus, LGISC was to be substituted or changed to LG OTIS,
its successor-in-interest. Likewise, the motion averred
that . . . GOLDSTAR was being utilized by LG OTIS and LGIC in
perpetrating their unlawful and unjustified acts againstHYATT.
Consequently, in order to afford complete relief, GOLDSTAR was to be
additionally impleaded as a party-defendant. Hence, in the Amended
Complaint, HYATT impleaded . . . GOLDSTAR as a party-defendant,
and all references to LGISC were correspondingly replaced with LG
OTIS.
"On December 18, 2000, LG OTIS (LGISC) and LGIC filed their
opposition to HYATT's motion to amend the complaint. It argued that: (1)
the inclusion of GOLDSTAR as party-defendant would lead to a change
in the theory of the case since the latter took no part in the negotiations
which led to the alleged unfair trade practices subject of the case; and
(b) HYATT's move to amend the complaint at that time was dilatory,
considering that HYATTwas aware of the existence of GOLDSTAR for
almost two years before it sought its inclusion as party-defendant.
"On January 8, 2001, the [trial] court admitted the Amended Complaint.
LG OTIS (LGISC) and LGIC filed a motion for reconsideration thereto
but was similarly rebuffed on October 4, 2001.
"On April 12, 2002, . . . GOLDSTAR filed a Motion to Dismiss the
amended complaint, raising the following grounds: (1) the venue was
improperly laid, as neither HYATT nor defendants reside in
Mandaluyong City, where the original case was filed; and (2) failure to
state a cause of action against [respondent], since the amended
complaint fails to allege with certainty what specific ultimate
acts . . . Goldstar performed in violation of . . . Hyatt's rights. In the Order
dated May 27, 2002, which is the main subject of the present petition,
the [trial] court denied the motion to dismiss, ratiocinating as follows:
'Upon perusal of the factual and legal arguments raised by the
movants-defendants, the court finds that these are substantially
the same issues posed by the then defendant LG Industrial
System Co. particularly the matter dealing [with] the issues of
improper venue, failure to state cause of action as well as this
court's lack of jurisdiction. Under the circumstances obtaining, the
court resolves to rule that the complaint sufficiently states a cause
of action and that the venue is properly laid. It is significant to note
that in the amended complaint, the same allegations are adopted
as in the original complaint with respect to
the Goldstar Philippines to enable this court to adjudicate a
complete determination or settlement of the claim subject of the
action it appearing preliminarily as sufficiently alleged in the
plaintiff's pleading that said Goldstar Elevator Philippines Inc., is
being managed and operated by the same Korean officers of
defendants LG-OTIS Elevator Company and LG International
Corporation.'
"On June 11, 2002, [Respondent] GOLDSTAR filed a motion for
reconsideration thereto. On June 18, 2002, without waiving the grounds
 it raised in its motion to dismiss, [it] also filed an 'Answer Ad Cautelam'.
On October 1, 2002, [its] motion for reconsideration was denied.
"From the aforesaid Order denying . . . Goldstar's motion for
reconsideration, it filed the . . . petition for certiorari [before the CA]
alleging grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the [trial] court in issuing the assailed Orders
dated May 27, 2002 and October 1, 2002." 5
Ruling of the Court of Appeals
The CA ruled that the trial court had committed palpable error amounting to
grave abuse of discretion when the latter denied respondent's Motion to Dismiss.
The appellate court held that the venue was clearly improper, because none of
the litigants "resided" in Mandaluyong City, where the case was filed.
According to the appellate court, since Makati was the principal place of business
of both respondent and petitioner, as stated in the latter's Articles of Incorporation,
that place was controlling for purposes of determining the proper venue. The fact
that petitioner had abandoned its principal office in Makati years prior to the filing
of the original case did not affect the venue where personal actions could be
commenced and tried.
Hence, this Petition. 6
The Issue
In its Memorandum, petitioner submits this sole issue for our consideration:
"Whether or not the Court of Appeals, in reversing the ruling of the
Regional Trial Court, erred as a matter of law and jurisprudence, as well
as committed grave abuse of discretion, in holding that in the light of the
peculiar facts of this case, venue was improper[.]" 7
This Court's Ruling
The Petition has no merit.
Sole Issue:
Venue
The resolution of this case rests upon a proper understanding of Section 2 of
Rule 4 of the 1997 Revised Rules of Court:
"Sec. 2. Venue of personal actions. All other actions may be
commenced and tried where the plaintiff or any of the principal plaintiff
resides, or where the defendant or any of the principal defendant resides,
or in the case of a non-resident defendant where he may be found, at
the election of the plaintiff."
Since both parties to this case are corporations, there is a need to clarify the
meaning of "residence." The law recognizes two types of persons: (1) natural and
(2) juridical. Corporations come under the latter in accordance with Article 44(3)
of the Civil Code. 8
Residence is the permanent home the place to which, whenever absent for
business or pleasure, one intends to return. 9 Residence is vital when dealing
with venue. 10 A corporation, however, has no residence in the same sense in
which this term is applied to a natural person. This is precisely the reason why
the Court in Young Auto Supply Company v. Court of Appeals 11 ruled that "for
practical purposes, a corporation is in a metaphysical sense a resident of the
place where its principal office is located as stated in the articles of
incorporation." 12 Even before this ruling, it has already been established that the
residence of a corporation is the place where its principal office is established. 13

This Court has also definitively ruled that for purposes of venue, the term
"residence" is synonymous with "domicile." 14 Correspondingly, the Civil Code
provides:
"Art. 51. When the law creating or recognizing them, or any other
provision does not fix the domicile of juridical persons, the same shall be
understood to be the place where their legal representation is
established or where they exercise their principal functions." 15
It now becomes apparent that the residence or domicile of a juridical person is
fixed by "the law creating or recognizing" it. Under Section 14(3) of the
Corporation Code, the place where the principal office of the corporation is to be
located is one of the required contents of the articles of incorporation, which shall
be filed with the Securities and Exchange Commission (SEC).
In the present case, there is no question as to the residence of respondent. What
needs to be examined is that of petitioner. Admittedly, 16 the latter's principal
place of business is Makati, as indicated in its Articles of Incorporation. Since the
principal place of business of a corporation determines its residence or domicile,
then the place indicated in petitioner's articles of incorporation becomes
controlling in determining the venue for this case.
Petitioner argues that the Rules of Court do not provide that when the plaintiff is
a corporation, the complaint should be filed in the location of its principal office as
indicated in its articles of incorporation. 17 Jurisprudence has, however, settled
that the place where the principal office of a corporation is located, as stated in
the articles, indeed establishes its residence. 18 This ruling is important in
determining the venue of an action by or against a corporation, 19 as in the
present case.
Without merit is the argument of petitioner that the locality stated in its Articles of
Incorporation does not conclusively indicate that its principal office is still in the
same place. We agree with the appellate court in its observation that the
requirement to state in the articles the place where the principal office of the
corporation is to be located "is not a meaningless requirement. That proviso
would be rendered nugatory if corporations were to be allowed to simply
disregard what is expressly stated in their Articles of Incorporation." 20
Inconclusive are the bare allegations of petitioner that it had closed its Makati
office and relocated to Mandaluyong City, and that respondent was well aware of
those circumstances. Assuming arguendo that they transacted business with
each other in the Mandaluyong office of petitioner, the fact remains that, in law,
the latter's residence was still the place indicated in its Articles of Incorporation.
Further unacceptable is its faulty reasoning that the ground for the CA's dismissal
of its Complaint was its failure to amend its Articles of Incorporation so as to
reflect its actual and present principal office. The appellate court was clear
enough in its ruling that the Complaint was dismissed because the venue had
been improperly laid, not because of the failure of petitioner to amend the latter's
Articles of Incorporation.
Indeed, it is a legal truism that the rules on the venue of personal actions are
fixed for the convenience of the plaintiffs and their witnesses. Equally settled,
however, is the principle that choosing the venue of an action is not left to a
plaintiff's caprice; the matter is regulated by the Rules of Court. 21Allowing
petitioner's arguments may lead precisely to what this Court was trying to avoid
in Young Auto Supply Company v. CA: 22 the creation of confusion and untold
inconveniences to party litigants. Thus enunciated the CA:
". . . . To insist that the proper venue is the actual principal office and not
that stated in its Articles of Incorporation would indeed create confusion
and work untold inconvenience. Enterprising litigants may, out of some
ulterior motives, easily circumvent the rules on venue by the simple
expedient of closing old offices and opening new ones in another place
that they may find well to suit their needs." 23
We find it necessary to remind party litigants, especially corporations, as follows:
"The rules on venue, like the other procedural rules, are designed to
insure a just and orderly administration of justice or the impartial and
evenhanded determination of every action and proceeding. Obviously,
this objective will not be attained if the plaintiff is given unrestricted
freedom to choose the court where he may file his complaint or petition.
"The choice of venue should not be left to the plaintiff's whim or caprice.
He may be impelled by some ulterior motivation in choosing to file a
case in a particular court even if not allowed by the rules on venue." 24
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and
Resolution AFFIRMED. Costs against petitioner. SO ORDERED.
S
 (Hyatt Elevators and Escalators Corp. v. Goldstar Elevators Phils. Inc., G.R. No.
|||

161026, [October 24, 2005], 510 PHIL 467-477)

[G.R. No. 161685. July 24, 2007.]

ANG KEK CHEN, petitioner, vs. SPOUSES ATTY. ELEAZAR S.

CALASAN and LETICIA B. CALASAN, respondents.

DECISION

VELASCO, JR., J : p

In this Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules
of Court, the distinction between "actual residence" and "domicile" comes once
again under review.
The Facts
Petitioner Ang Kek Chen resides at 1287-1291 Jose Abad Santos Avenue corner
Padre Algue Street, Tondo, 1012 Manila. 1 He is not a lawyer, and has filed
pleadings with this Court on his own behalf.
Respondent Atty. Eleazar S. Calasan was born in Aparri, Cagayan on September
8, 1947. He has been a registered voter in Aparri, Cagayan since 1969. He owns
real property, his ancestral home, which was donated to him by his mother,
situated on Quirino Street, Aparri, Cagayan. 2 However, respondent Atty.
Calasan also has a house and lot in Las Pias, Metro Manila, which he and his
family live in; has a business address at 10/F Manufacturers Building, Plaza Sta.
Cruz, 1003 Manila; applied for and received a commission as notary public from
the Manila Regional Trial Court (RTC); and secured a Community Tax Certificate
in Las Pias City, Metro Manila.cCSEaA

Respondent Atty. Calasan was the counsel of one Jaime U. Lim, an opponent of
petitioner. Petitioner alleged that his residence had been damaged by the
corporation of which Jaime U. Lim was president.
While Atty. Calasan was acting as counsel for Jaime Lim, petitioner wrote a letter
and filed a counter-affidavit which respondent Atty. Calasan believed maligned
him, with copies furnished various people, among them high officials of the
Philippine government. Atty. Calasan then filed criminal cases for libel against
petitioner in Aparri, Cagayan, among them Crim. Case Nos. 07-1168 and VI-
1094, which were dismissed.
Petitioner responded by filing his own administrative cases against respondent
Atty. Calasan, among them Administrative Case Nos. 5444 and 6233, alleging
serious gross misconduct on the part of Atty. Calasan and praying for his
disbarment. It is noted that even among his pleadings in this particular case,
even in his final memorandum, he made references to what he believed were
betrayals of the attorney's oath by Atty. Calasan, and with repeated calls for Atty.
Calasan's disbarment.
On December 4, 2001, respondents spouses Atty. Eleazar S. Calasan and
Leticia B. Calasan filed a complaint for damages with the Aparri, Cagayan RTC
against petitioner and his spouse for alleged malicious imputations against Atty.
Calasan made by petitioner, and it was docketed as Civil Case No. 08-418. 3
On January 8, 2002, petitioner filed a Motion to Dismiss on the following grounds:
(1) that the court had no jurisdiction over the subject matter of the claim; (2) that
the venue was improperly laid; (3) that the pleading asserting the claim stated no
cause of action; (4) that a condition precedent for filing claim had not been
complied with; (5) that the claim was barred by the statute of limitations; and (6)
that the claim or demand set forth in plaintiff's pleadings had been abandoned or
otherwise extinguished. 4
In the February 26, 2002 Order, the Aparri, Cagayan RTC, Branch 8 dismissed
the complaint on the ground that the venue had been improperly
laid. 5Respondents fared no better in their Motion for Reconsideration of that
dismissal, as the motion was denied in the March 20, 2002 Order. 6 DIETcC

The Case in the Court of Appeals

Respondents brought the matter to the Court of Appeals (CA) via a Petition
for Certiorari under Rule 65, dated April 5, 2002. 7 This was docketed as CA-G.R.
SP No. 70335.
Respondents raised one issue in their petition, thus:
RESPONDENT JUDGE ACTED WITHOUT OR IN EXCESS OF
JURISDICTION AND IN DISMISSING THE COMPLAINT FOR
ALLEGED IMPROPER VENUE AND THERE IS NO OTHER
ADEQUATE, PLAIN AND SPEEDY REMEDY IN THE ORDINARY
COURSE OF LAW OTHER THAN THIS PETITION. 8
In a Decision promulgated on August 12, 2002, the Special Fifth Division of the
CA dismissed the petition for lack of merit. 9
On August 26, 2002, respondents filed their Motion for Reconsideration 10 of the
CA Decision, which was granted by the CA in its November 21, 2002 Resolution,
the dispositive portion of which reads as follows:
WHEREFORE, the motion for reconsideration is hereby GRANTED. Our
decision dated August 12, 2002 is SET ASIDE and a new one
 enteredSETTING ASIDE the trial court's order dated February 26, 2002
and March 20, 2002. The trial Judge is hereby ORDERED to proceed
with the trial of Civil Case no. 08-418 with utmost dispatch.
SO ORDERED. 11
Dissatisfied with the result, Ang Kek Chen filed the present petition on March 5,
2004.
The Issues
Petitioner, who is not represented by counsel, presents the issues in the case as
follows:
(A) WHETHER OR NOT, the Petition for Certiorari was CORRECTLY
DISMISSED by the Honorable Court of Appeals in CA G.R. SP
No. 70335 in its decision promulgated on August 12,
2002, ANNEX "C"of this Petition, thereby upholding the correct
Decision of the respondent Judge that the venue of the out-of-
town complaint for libel is improperly laid.aIDHET

(B) CONSEQUENTLY, WHETHER OR NOT, the decision ANNEX

"C" of this Petition, was ERRONEOUSLY REVERSED by the
Honorable Court of Appeals in its resolutions dated November 21,
2004 and January 21, 2004.
(C) WHETHER OR NOT, the Petition for Certiorari filed by the
respondents (then petitioners) can substitute for their LOST
APPEAL. 12
The petition has merit.
This case will be resolved on the core issue the interpretation and application
of the third paragraph of Article 360 of the Revised Penal Code, the portion of
which reads:
The criminal and civil action for damages in cases of written defamations
as provided for in this chapter, shall be filed simultaneously or separately
with the Court of First Instance of the province or city where the libelous
article is printed and first published or where any of the offended
partiesactually resides at the time of the commission of the offense . . .
(emphasis supplied).
Respondents claim that their actual residence is in Aparri, Cagayan. The trial
court made the following findings on the matter:
True, plaintiffs are residents and domiciled in Aparri, Cagayan. In fact,
they are registered voters of Aparri, Cagayan. However, they also admit
that they have a residential house in Las Pias and it is in Las Pias
where they stay most of the time due to their profession and occupation.
In short, plaintiffs are habitual residents of Las Pias and not in Aparri,
 Cagayan. Aparri is plaintiffs' legal residence and place of domicile.
However, to the Court's opinion, plaintiffs' actual residence is in Las
Pias, Metro-Manila [sic] as they are habitually residing thereat due to
their profession and occupation. 13
When respondents raised this matter to the CA via a petition for certiorari, the
findings of the trial court were upheld by the appellate court in its August 12,
2002 Decision, when it said:
Petitioners thus appear to have misread the provisions of Article 360 of
the Revised Penal Code, as amended, when they filed their criminal and
civil complaints in Aparri, Cagayan. Clearly, the civil and criminal
complaint should be filed in the Regional Trial Court of Manila, where
petitioners reside or where the article was first printed or published. But
since petitioners opted to choose place of residence, we shall now
discussed [sic] where petitioners properly resides [sic]. In procedural law,
specifically for purposes of venue it has been held that the residence of
a person is his personal, actual or physical habitation or his actual
residence or place of abode, which may not necessarily be his legal
residence or domicile provided he resides therein with continuity and
consistency. Applying this, petitioners clearly were residents of Manila
for they have a residential house in Las Pias where they stay thereat
due to their profession and occupation. 14 cDCIHT

The CA noted the findings of the other Aparri RTC branches in the dismissals of
criminal cases for libel filed by respondents against petitioner to conclude that
respondents had their actual residence in Las Pias.
In Criminal Case No. 07-1168 decided by the Aparri Cagayan RTC, Branch 7,
the trial court, despite finding that Atty. Calasan's domicile was in Aparri,
Cagayan, dismissed the criminal information against petitioner, stating, thus:
Under the circumstances, therefore, the situation of private complainant
does not fall within the conceptual meaning of the term "residence" as
explained in the cases mentioned above. His situation is that he owns a
house in Aparri and comes home at least once a month. However, his
presence in the place of his residence, although consistent, is admittedly
not continuous. For this reason, the complainant's stay at his house in
Aparri may only be considered as occasional or intermittent. The
requirement is that his stay in his place of abode must not only be
consistent but also continuous. Therefore, his stay in Aparri is not
"residence" for purposes of determining venue in libel cases. 15
In Criminal Case No. VI-1094 decided by the Aparri, Cagayan RTC, Branch 6,
the trial court likewise dismissed the information against petitioner, holding that:
The Court does not believe that the offended party is only temporarily
residing in Manila for the following reasons: Seventy percent of his cases
are cases in Metro Manila; he has his law office in Metro Manila but he
 has none in Aparri, Cagayan; he and his family reside in Las Pinas [sic]
though he has an ancestral house in Aparri, Cagayan. His presence in
Aparri is seldom, while he is most of the time in Metro Manila. The
offended party, therefore, is actually residing in Las Pinas [sic] and he
should have filed the libel case in Las Pinas [sic], Metro Manila. 16

Considering the foregoing findings of these trial courts, as well as the findings of
the Aparri, Cagayan RTC, Branch 8 in Civil Case No. 08-418, the CA found that
respondents were residents of Las Pias. ITSacC

However, upon a Motion for Reconsideration from respondents, the CA set aside
its earlier Decision, its findings reading as follows:
We have closely examined the records and we find that petitioners'
residence is in Aparri, Cagayan.
As stated, an individual does not lose the domicile even if he has lived
and maintained residences in different places. Residence, it bears
repeating, implies a factual relationship to a given place for various
purposes. The absence from legal residence or domicile to pursue a
profession, to study or to do other things of a temporary or semi
permanent nature does no [sic] constituent loss of residence. Thus, the
assertion by the trial court that they could not have been a resident [sic]
of Aparri, Cagayan is misplaced. 17
The CA erred in its findings.
The trial court did not find that respondents were not residents of Aparri,
Cagayan. It specifically stated that they were in fact "residents and domiciled in
Aparri, Cagayan." 18
The crucial distinction that must be made is between "actual residence" and
"domicile." The case of Garcia Fule v. Court of Appeals had already made the
distinction in 1976. The pertinent portion of the case reads as follows:
But, the far-ranging question is this: What does the term "resides"
mean? . . . We lay down the doctrinal rule that the term "resides"
connotes ex vi termini "actual residence" as distinguished from "legal
residence or domicile." This term "resides," like the terms "residing" and
"residence," is elastic and should be interpreted in the light of the object
or purpose of the statute or rule in which it is employed. In the
application of venue statutes and rules . . . residence rather
than domicile is the significant factor. Even where the statute uses the
word "domicile" still it is construed as meaning residence and not
domicile in the technical sense. Some cases make a distinction between
the terms "residence" and "domicile" but as generally used in statutes
fixing venue, the terms are synonymous, and convey the same meaning
as the term "inhabitant." In other words, "resides" should be viewed or
 understood in its popular sense, meaning the personal, actual or
physical habitation of a person, actual residence or place of abode. It
signifies physical presence in a place and actual stay thereat. In this
popular sense, the term means merely residence, that is personal
residence, not legal residence or domicile. Residence simply requires
bodily presence as an inhabitant in a given place, while domicile requires
bodily presence in that place and also an intention to make it one's
domicile. No particular length of time of residence is required though;
however, the residence must be more than temporary. 19
It is clear that in granting respondents' Motion for Reconsideration, the CA
accepted the argument of respondent Atty. Calasan that "residence" is
synonymous with "domicile."
In Saludo, Jr. v. American Express International, Inc., the term "residence" was
equated with "domicile" as far as election law was concerned. However the case
also stated that:
for purposes of venue, the less technical definition of "residence" is
adopted. Thus, it is understood to mean as "the personal, actual or
physical habitation of a person, actual residence or place of abode. It
signifies physical presence in a place and actual stay thereat. In this
popular sense, the term means merely residence, that is, personal
residence, not legal residence or domicile. Residence simply requires
bodily presence as aninhabitant in a given place, while domicile requires
bodily presence in that place and also an intention to make it one's
domicile." 20
aTIEcA

There is clearly a distinction between the two terms, "residence" and "domicile,"
which shall be applied in this civil action for damages.
Art. 360 of the Revised Penal Code does not use the term "domicile" in providing
for venue in the filing of the criminal case and the civil action for damages. The
applicable clause of Art. 360 in this case states that "where any of the offended
parties actually resides at the time of the commission of the offense . . .
(emphasis supplied)." It is thus essential to determine where the offended parties,
the respondents in this case, actually resided during the year 2000, the time of
the commission of the offense.
The published matters, subjects of this civil action, are a counter affidavit dated
June 9, 2000 and a letter dated June 19, 2000, both from petitioner, neither of
which was submitted to persons in Aparri, Cagayan. To prove respondent Atty.
Calasan's residence at the time, which petitioner alleged was No. 8 Galaxy
Avenue, Mapayapa Village, Las Pias City, Metro Manila, Atty. Calasan's
Community Tax Certificates (CTCs) for the years 2000 and 2001 were
presented. 21 Respondent Atty. Calasan did not deny that he had such an
address in Las Pias, which is only the import of the CTCs. He claimed that the
Las Pias residential unit was constructed out of convenience and necessity for
his family and his profession. There is no denial that he and his family lived at
that particular address during the time of the publication of petitioner's documents.
That is actually enough to qualify it as a residence, even without the intention to
maintain it as legal residence.
Respondents' legal residence or domicile has been established as being in Aparri,
Cagayan. The finding of the trial court that the actual residence of respondents
was in Las Pias is not inconsistent with the establishment of respondents'
domicile in Aparri. To state that respondents' actual residence was in Las Pias
does not mean that they have abandoned their legal residence. The case of Koh
v. Court of Appeals stated:
This Court held in the case of Uytengsu vs. Republic, 50 O.G. 4781,
October 1954, reversing its previous stand in Larena v. Ferrer, 61 Phil.
36 andNuval v. Guray 52 Phil 645, that
"There is a difference between domicile and residence.
Residence is used to indicate a place of abode, whether
permanent or temporary; domicile denotes a fixed permanent
residence to which when absent, one has the intention of
returning. A man may have a residence in one place and a
domicile in another. Residence is not domicile, but domicile is
residence coupled with the intention to remain for an unlimited
time. A man can have but one domicile for one and the same
purpose at any time, but he may have numerous places of
residence. His place of residence generally is his place of
domicile, but is not by any means, necessarily so since no length
of residence without any intention of remaining will constitute
domicile." 22 (Italics supplied.)
In respondents' case, they maintained a residence in Las Pias in the year 2000,
and their domicile in Aparri, Cagayan which was maintained year after year. As
mentioned in Koh, one may have both a residence and a domicile. One need not
abandon one's domicile to acquire a separate residence, if this separate
residence is not intended to be legal residence as well. The ideas of "domicile"
and "actual residence" may even at times refer to one and the same place, but
not so in this particular case, where there are two particular and distinct places
referred to.
Thus, the trial court was correct in dismissing the complaint because it found that
the offended parties actually resided for the greater part of the year 2000 in Las
Pias, even if their legal residence was in Aparri, Cagayan. To reiterate, for
purposes of determining venue, "residence" is not synonymous with "domicile."
One may reside in a place apart from one's legal residence, without changing
domicile, and that residence would constitute "actual residence" for purposes of
determining venue.
In passing, it must be noted that petitioner is not a lawyer, and it may be
instructive for him to consult counsel before filing pleadings or praying for results
that have no legal basis, if for purposes of clarity alone. As for his prayer that
respondent Atty. Calasan be disbarred, this petition is not the proper remedy for
such. Should he still wish to pursue such an action, he must follow the proper
procedure, which would grant respondent Atty. Calasan due process. The fact
that petitioner, who is not an attorney, was allowed to plead his case before this
Court does not exempt him from proper procedure, which would put opposing
lawyers at an unfair disadvantage.
WHEREFORE, premises considered, the questioned November 21, 2002
Resolution of the CA in CA-G.R. SP No. 70335 is hereby REVERSED and SET
ASIDE and its August 12, 2002 Decision is REINSTATED and AFFIRMED.
Consequently, the February 26, 2002 Order of the Aparri, Cagayan RTC, Branch
8, dismissing the complaint in Civil Case No. 08-418, is likewise hereby
AFFIRMED. Costs against respondents. SO ORDERED.
(Ang Kek Chen v. Spouses Calasan, G.R. No. 161685, [July 24, 2007], 555
|||

PHIL 115-127)

[G.R. No. 148332. September 30, 2003.]

NATIONAL DEVELOPMENT COMPANY, petitioner, vs. MADRIG

AL WAN HAI LINES CORPORATION, respondent.

The Government Corporate Counsel for petitioner.

Roldan and Associates for respondent.

SYNOPSIS

The National Shipping Corporation of the Philippines (NSCP) is a wholly-owned

subsidiary of petitioner. Private respondent acquired in a public bidding
petitioner's stock ownership in NSCP, as well as its three vessels. Subsequently,
respondent received from the US Department of Treasury, Internal Revenue
Service (US IRS), a notice of final assessment against NSCP for deficiency taxes
on gross transportation income derived from US sources. Anxious that the delay
in the payment of the deficiency taxes may hamper its shipping operations
overseas, respondent assumed and paid petitioner's tax liabilities. For petitioner's
refusal to reimburse respondent of the amount it paid to the US IRS, the latter
filed a complaint against the former for reimbursement and damages. The trial
court ruled in favor of respondent. On appeal, the Court of Appeals affirmed the
trial court's decision with modification. Hence, this petition.
ATcaEH

In denying the petition, the Supreme Court ruled that petitioner has the obligation
to reimburse respondent. The terms of the parties' contract are clear and
unequivocal. Petitioner gave a warranty as to the ownership of the object of sale
and against any lien and encumbrance. A tax liability was then a potential lien
upon NSCP's marine vessels. Being in bad faith for having failed to inform
respondent of such potential lien, petitioner breached its warranty and should,
therefore, be held liable for the resulting damage, i.e., reimbursement for the
amounts paid by petitioner to the US IRS. Justice and equity require that
petitioner be held liable for NSCP'S tax liabilities and reimburse respondent for
the amounts it paid. It would be unjust enrichment on the part of petitioner to be
relieved of the obligation.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT OF ADHESION;

DEFINED. A contract of adhesion is one in which one of the parties imposes a
ready-made form of contract, which the other party may accept or reject, but
which the latter cannot modify. In other words, in such contract, the terms therein
are fixed by one party, and the other party has merely "to take it, or leave it."
Thus, it can be struck down as void and unenforceable for being subversive of
public policy, especially when the will of the dominant party is imposed upon the
weaker party and the latter is denied the opportunity to bargain on equal footing.
2. ID.; ID.; ID.; NOT STRICTLY AGAINST THE LAW. It must be stressed,
however, that contracts of adhesion are not strictly against the law. In Ong Yiu vs.
Court of Appeals and Pan American World Airways, Inc. vs. Intermediate
Appellate Court, we held that contracts of adhesionwherein one party imposes
a ready-made form of contract on the otherare not entirely prohibited. The
other party is free to reject it entirely; if he adheres, he gives his consent.
Nevertheless, the inequality of bargaining positions and the resulting impairment
of the other party's freedom to contract necessarily call upon us to exercise our
mandate as a court of justice and equity. Indeed, we have ruled that contracts of
such nature "obviously call for greater strictness and vigilance on the part of the
courts of justice with a view to protecting the weaker party from abuses and
imposition and prevent their becoming traps for the unwary."
3. ID.; ID.; SALES; CONTRACT OF SALE; THE PHRASE "AS IS, WHERE IS"
BASIS, CONSTRUED. In Hian vs. Court of Tax Appeals, we had the occasion
to construe the phrase "as is, where is" basis, thus: "We cannot accept the
contention in the Government's Memorandum of March 31, 1976 that Condition
No. 5 in the Notice of Sale to the effect that 'The abovementioned articles (the
tobacco) are offered for sale `AS IS' and the Bureau of Customs gives no
warranty as to their condition' relieves the Bureau of Customs of liability for the
storage fees in dispute. As we understand said Condition No. 5, it refers to
the physical condition of the tobacco and not to the legal situation in which it was
at the time of the sale, as could be implied from the right of inspection to
prospective bidders under Condition No. 1..... The phrase "as is, where is" basis
pertains solely to the physicalcondition of the thing sold, not to its legal situation.
In the case at bar, the US tax liabilities constitute a potential lien which applies to
NSCP's legal situation, not to its physical aspect. Thus, respondent as a buyer:
has no obligation to shoulder the same.
4. ID.; PRINCIPLE OF UNJUST ENRICHMENT, APPLIED IN CASE AT BAR.
The case at bar calls to mind the principle of unjust enrichment Nemo cum
alterius detrimento locupletari potest. No person shall be allowed to enrich
himself unjustly at the expense of others. . . Justice and equity thus oblige that
petitioner be held liable for NSCP's tax liabilities and reimburse respondent for
the amounts it paid. It would be unjust enrichment on the part of petitioner to be
relieved of that obligation.

DECISION

SANDOVAL-GUTIERREZ, J : p

Before us is a petition for review on certiorari 1 assailing the Decision of the Court
of Appeals dated May 21, 2001 in CA-G.R. CV No. 66026, affirming with
modification the Decision dated August 6, 1999 of the Regional Trial Court,
Branch 62, Makati City, in Civil Case No. 96-558 for sum of money and damages.
The factual antecedents are:
The National Development Company, petitioner, is a government-owned and
controlled corporation created and existing under Commonwealth Act No. 182,
as amended by Presidential Decree No. 1648.
The National Shipping Corporation of the Philippines (NSCP) is a wholly-
owned subsidiary of petitioner offering shipping services for containerized cargo
between the Far East ports and the U.S. West Coast. 2
On March 1, 1993, petitioner's Board of Directors approved the privatization plan
of the NSCP. 3 In May 1993, the Board offered for sale to the public its one
hundred percent (100%) stock ownership in NSCP worth P150,000.00, as well as
its three (3) ocean-going vessels (M/V National Honor,
M/VNational Pride and M/V National Dignity). 4
Consequently, petitioner released to the public an Information
Package 5 containing NSCP's background, assets, operational and financial
status. Attached thereto is NSCP's Financial Statements covering the period from
December 1990 up to 1992. SDIaCT

The Information Package likewise contained the Negotiated Sale

Guidelines which embodied the terms and conditions of the proposed sale.
Attached thereto is a Proposed Letter Form 6 wherein bidders were advised to
submit their bids to be specified in the same form. Petitioner's desired price for
the NSCP shares of stock and the vessels was Twenty-Six Million Seven
Hundred Fifty Thousand US Dollars ($26,750,000.00). 7
During the public bidding on May 7, 1993, the lone bidder was herein
respondent, Madrigal Wan Hai Lines Corporation, a domestic
privatecorporation duly organized and existing under the Philippine laws with
principal office in Manila. Mr. Willie J. Uy, respondent's Consultant, submitted a
bid of $15 million through the Proposal Letter Form. 8
The respondent's bid was rejected by petitioner and the Commission on Audit.
But since there was no other bidder, petitioner entered into a negotiated sale with
respondent. 9 After several negotiations, respondent increased its offer to $18.5
million which was accepted by petitioner. The negotiated sale was then approved
by petitioner's Board of Directors on August 26, 1993, the President of the
Philippines on September 28, 1993, the Committee on Privatization on October 7,
1993, and the Commission on Audit on February 2, 1994. 10
Accordingly, on February 11, 1994, petitioner issued a Notice of Award to
respondent of the sale of the NSCP shares and vessels for $18.5 million. 11On
March 14, 1994, petitioner and respondent executed the corresponding Contract
of Sale, 12 and the latter acquired NSCP, its assets, personnel, records and its
three (3) vessels. 13
On September 22, 1994, respondent was surprised to receive from the US
Department of Treasury, Internal Revenue Service (US IRS), a Notice of Final
Assessment against NSCP for deficiency taxes on gross transportation income
derived from US sources for the years ending 1990, 1991 and 1992. 14 The tax
assessment was based on Section 887 of the US Internal Revenue Code
imposing a 4% tax on gross transportation income of any
foreign corporation derived from US sources. 15
Anxious that the delay in the payment of the deficiency taxes may hamper its
shipping operations overseas, respondent, on October 14, 1994, assumed and
paid petitioner's tax liabilities, including the tax due for the year 1993, in the total
amount of $671,653.00. These taxes were incurred prior to respondent's take-
over of NSCP's management. 16 Respondent likewise paid the additional amount
of $16,533.10 as penalty for late payment.17
Eventually, respondent demanded from petitioner reimbursement for the
amounts it paid to the US IRS. But petitioner refused despite repeated demands.
Hence, on March 20, 1996, respondent filed with the Regional Trial Court (RTC),
Branch 62, Makati City a complaint 18 against petitioner for reimbursement and
damages, docketed as Civil Case No. 96-558.
On August 6, 1999, the RTC rendered a Decision 19 in favor of respondent and
against petitioner. The trial court found, among others, that even before the sale,
petitioner knew that NSCP had tax liabilities with the US IRS, yet it did not inform
respondent about it. The dispositive portion of the RTC Decision reads:
"WHEREFORE, premises considered, judgment is hereby rendered as
follows:

(1) defendant (now petitioner) to pay plaintiff (now respondent), to wit:

a. US $671,653, US $14,415.87, and US $2,117.23 or their peso
equivalent at the time of payment;
b. 6% interest of the above-mentioned amounts per annum from
the time of the filing of the complaint until the same shall
have been fully paid;
c. P100,000.00 as exemplary damages;
d. P100,000.00 as attorney's fees;
(2) The Counterclaims of the defendant dated August 20, 1996 is
DISMISSED." 20
Upon appeal, the Court of Appeals rendered a Decision 21 on May 21, 2001
affirming the trial court's judgment with modification, thus:
"WHEREFORE, upon the premises, the Decision appealed from is
AFFIRMED with the MODIFICATION that the award of exemplary
damages is DELETED and the award of attorney's fees is REDUCED to
P20,000.00. cSATDC

"SO ORDERED." 22
The Court of Appeals held:
"We concur with the trial court in ordering defendant-appellant (now
petitioner) to reimburse plaintiff-appellee (now respondent) the
deficiency taxes it paid to the US IRS, and quote with favor its well-
written ratiocination as follows:
 'In its effort to extricate itself from liability, defendant further
argues that the sale with the plaintiff was on 'CASH, AS-WHERE-
IS' basis and that plaintiff, as an offeror, was responsible for
informing itself with respect to any and all conditions regarding the
NSCP shares and vessels which may in any manner affect the
offer price or the nature of offeror's proposal (Exhs. 8, 8-A to A-B).
'The above-mentioned contracts form part of the NSCP's
Negotiated Sale Guidelines dated March 1993 prepared by NSCP
and required by NDC (now petitioner) to be attached with the
Proposal Letter Form, which was also prepared by NSCP, and
submitted to NDC by bidders. These contracts are ready-made
form of contracts, the preparation of which was left entirely to the
NSCP. Their nature is that of a contract of adhesion. A contract of
adhesion may be struck down as void and unenforceable, for
being subversive of public policy, when the weaker party is
imposed upon in dealing with the dominant bargaining party and
is reduced to the alternative of taking it or leaving it, completely
deprived of the opportunity to bargain on equal footing (Saludo,
Jr. vs. Court of Appeals, 207 SCRA 498 [1992]). In the case at
bar, the acceptance of the Negotiated Sale Guidelines and
submission thereof together with the Proposal Letter Form by a
prospective buyer is a required formality of the bidding. Under the
circumstance, the plaintiff, in taking such contracts, may not be
deemed to have been given the opportunity to bargain on equal
footing.'" 23
Petitioner now comes to us via the instant petition, ascribing to the Court of
Appeals the following error:
"THE COURT OF APPEALS ERRED IN CONCURRING WITH THE
TRIAL COURT IN ORDERING HEREIN PETITIONER TO REIMBURSE
RESPONDENT THE DEFICIENCY TAXES IT PAID TO THE US IRS." 24
Petitioner contends that contrary to the findings of both lower courts, the
Negotiated Sale Guidelines and the Proposal Letter Form are mere invitations to
bid. As such, they are not contracts and should be treated as mere offer or
proposal to prospective buyers of the NSCP shares and marine vessels. 25
Petitioner further stresses that the sale was on an "AS IS, WHERE IS"
basis. 26 By accepting the terms and conditions of the sale, respondent, in effect,
accepted the risk of an "AS IS, WHERE IS" arrangement wherein the latter is
charged with caution under the principle of caveat emptor. 27 Pursuant to the
Negotiated Sale Guidelines and the Proposal Letter Form, respondent should
have apprised itself of the financial status and liabilities of NSCP and its marine
vessels. Therefore, for its predicament, respondent should not fault petitioner. 28
For its part, respondent maintains that the Court of Appeals did not commit any
error in its challenged Decision. The Negotiated Sale Guidelines and the
Proposal Letter Form constitute a contract of adhesion because the buyer was
required to submit its bid through a pro forma proposal letter. 29The offer to
bidders was on a "take it, or leave it" basis, leaving no room for argument or
negotiation, except as to the price. 30 Being a contract of adhesion, it should be
strictly construed against the seller, herein petitioner. 31
Respondent also contends that under Articles 19, 32 20 33 and 21 34 of the Civil
Code, petitioner had then the legal duty to disclose its tax liabilities. Records
show that respondent repeatedly inquired from petitioner about such
matter. 35 Instead of telling the truth, petitioner made several assurances that the
NSCP was a clean, lien-free going concern and profitable entity. 36 In fact, under
Section 7.01 of the Negotiated Sale Guidelines, petitioner made a warranty
against any lien or encumbrance. 37 CHATcE

In this petition, the issues for our resolution are:

(1) Whether the Negotiated Sale Guidelines and the Proposal
Letter Form constitute a contract of adhesion; and
(2) Whether petitioner is legally bound to reimburse respondent for
the amounts it paid corresponding to the former's tax
liabilities to the US IRS.
On the first issue, we agree with both lower courts that the Negotiated Sale
Guidelines and the Proposal Letter Form constitute a contract of adhesion.
A contract of adhesion is one in which one of the parties imposes a ready-made
form of contract, which the other party may accept or reject, but which the latter
cannot modify. In other words, in such contract, the terms therein are fixed by
one party, and the other party has merely "to take it, or leave it." 38 Thus, it can
be struck down as void and unenforceable for being subversive of public policy,
especially when the will of the dominant party is imposed upon the weaker party
and the latter is denied the opportunity to bargain on equal footing. 39
It must be stressed, however, that contracts of adhesion are not strictly against
the law. In Ong Ku vs. Court of Appeals 40 and Pan American World Airways,
Inc. vs. Intermediate Appellate Court, 41 we held that contracts of adhesion
wherein one party imposes a ready-made form of contract on the other are not
entirely prohibited. The other party is free to reject it entirely; if he adheres, he
gives his consent.
Nevertheless, the inequality of bargaining positions and the resulting impairment
of the other party's freedom to contract necessarily call upon us to exercise our
mandate as a court of justice and equity. Indeed, we have ruled that contracts of
such nature "obviously call for greater strictness and vigilance on the part of the
courts of justice with a view to protecting the weaker party from abuses and
imposition and prevent their becoming traps for the unwary." 42
In the case at bar, the Negotiated Sale Guidelines and Proposal Letter Form fit
the characteristics of a contract of adhesion. On their very face, these documents
show that petitioner NDC had control over the terms and conditions of the sale.
The Negotiated Sale Guidelines provides:
"4.0 PREPARATION OF OFFERS
4.01 Offerors shall use the 'Proposal Letter Form for Sale of
NSCP and Vessels' provided herein.
4.02 All offers should be accompanied by: . . . (b) the Negotiated
Sale Guidelines duly signed by the offeror or authorized
representative in every page thereof . . ..
xxx xxx xxx
14.0 OTHER PROVISIONS
14.01 NDC and APT reserve the right in their discretion to reject
any and all offers, to waive any formality therein and of
these guidelines, and to consider only such offer as may
be advantageous to the National Government.
NDC and APT may, at their discretion require additional
information and/or documents from any offeror.
14.02 NDC and APT reserve the right to amend the Guidelines
prior to the submission of offers . . ..
xxx xxx xxx
14.05 Violation of any of these terms and conditions shall cause
the cancellation of the award and the automatic forfeiture
of the deposit. 43 (Emphasis ours)
The Proposal Letter Form provides that the bidder is bound by the Negotiated
Sale Guidelines, thus:
"It is understood that:
1. We accept and undertake without any reservations whatsoever that, if
this offer to purchase the vessels and NSCP shares is accepted, we
shall be subjected to all the terms and conditions issued by the NDC and
APT including those outlined in the March, 1993 Information
Memorandum and the Negotiated Sale Guidelines for the sale of NSCP
and the three vessels.
xxx xxx xxx
 5. We represent and warrant that: (i) we have examined and understood
the Information Package, (ii) we accept the conditions of the March,
1993 Negotiated Sale Guidelines, including the right of NDC and APT to
reject any and all offers without thereby creating any liability in our
favor . . .." 44 (Emphasis ours)
Clearly, respondent had hardly any say in the terms and conditions expressed in
the Negotiated Sale Guidelines. Other than the price of the offer, respondent was
left with little or no alternative at all but to comply with its terms. Thus, the trial
court correctly found:
"The above-mentioned contracts form part of NSCP's Negotiated Sale
Guidelines dated March 1993 prepared by NSCP and required by NDC
to be attached with the Proposal Letter Form, which was also prepared
by NSCP, and submitted to NDC by bidders. These contracts are ready-
made form of contracts, the preparation of which was left entirely to the
NSCP. Their nature is that of a contract of adhesion. . . .. In the case at
bar, the acceptance of the Negotiated Sale Guidelines and submission
thereof together with the Proposal Letter Form by a prospective buyer is
a required formality of the bidding. Under this circumstance, the plaintiff,
in taking such contracts, may not be deemed to have been given the
opportunity to bargain on equal footing." 45 (Emphasis ours)

Being a contract of adhesion, we reiterate that it is our duty to apply a strict

construction of its terms upon the party who made the same 46 and to construe
any ambiguity in such contract against its author. 47 It is public policy to protect a
party (herein respondent) against oppressive and onerous conditions. 48
We are not impressed by petitioner's argument that the Negotiated Sale
Guidelines was a mere "invitation to bid." 49 On the contrary, the Contract of Sale
itself provides that it is an integral part or "applicable to this Contract," thus:
"8. All of the terms and conditions of (a) the March 1993 NDC
Information Memorandum and Negotiated Sale Guidelines, including the
amendments thereto, more particularly those contained in NDC's letter
to A. P. Madrigal Steamship Co. Inc. dated May 4, 1993, and (b) the
Notice of Award dated February 11, 1993 are hereby incorporated herein
by reference and shall insofar as they are not inconsistent with the terms
and conditions hereof, be applicable to this Contract." 50 (Emphasis ours)
We now determine whether petitioner is obliged under the law and the contract to
reimburse respondent for the amounts it paid corresponding to the former's US
tax liabilities. We quote with approval the trial court's findings affirmed by the
Court of Appeals, thus:
"From the foregoing facts, there is no doubt that during the negotiation
for the sale of defendant's (now petitioner's) shares of stocks and three
 (3) ocean-going vessels, NSCP was already aware of an impending
assessment by the US government on NSCP's gross transportation
income derived from US sources. The exchanges of communications
(Exhibits D, E, F, G, H and I) between NSCP and US IRS are glaring
proof of NSCP's prior knowledge of a possible assessment or additional
taxes. Moreover, in the Partial Printout of NSCP's Unaudited Financial
Statements for the Year ending December 31, 1993 (Exhibit V), NSCP
made provisions for US taxes as follows: for the year ending 1993, US
$3,919,018.81 (Exh. V-2), and for the years ending 1990-1992, US
$11,736,192.64 (Exh. V-3). Exhibit V is a clear indication that, indeed,
NSCP had prior knowledge of such deficiency taxes, and in fact,
recognized the same even though there was no final assessment yet
from the US IRS. 51
xxx xxx xxx
"The Partial Printout of NSCP's Unaudited Financial Statements for the
Year ending December 1993 (Exhs. 2, 2-A to 2-B or Exhs. V, V-2 to V-3),
true to the word of the defendant (now petitioner), carries provisions for
US taxes. The problem, however, with this evidence is there is no
showing that this had been furnished the plaintiff (now respondent). On
the contrary, plaintiff vehemently asserts having been denied by
defendant access to the latter's accounting books and financial
statements. Basic in the law of evidence that he who asserts the
affirmative of the allegation has the burden of proving it (Geraldez vs. CA,
230 SCRA 320). The defendant has failed to prove that the pertinent
statement made in this document or the document itself had been
disclosed to the plaintiff .
"The Unaudited Financial Statements of NSCP (Exhs. 3, 3-A and 3-B),
which allegedly includes the subject US taxes among NSCP's Trade
Payable and Accrued Expenses and Dividends, does not clearly indicate
the said taxes. The Trade Payable and Accrued Expenses and
Dividends as including the said taxes is vague or unequivocal on the
matter. By mere reading of it, one would not have the slightest inkling or
suspicion that such taxes exist as among NSCP's
liabilities." 52 (Emphasis ours)
There is no dispute that petitioner was aware of its US tax liabilities considering
its numerous communications with the agents of the United States Internal
Revenue Service, just prior to the sale of NSCP and the marine vessels to
respondent. 53 The NSCP itself made an ambiguous contingent provision in its
Unaudited Financial Statements for the year ending December 1993, thereby
indicating its awareness of a possible US tax assessment.54 It bears stressing
that petitioner did not convey such information to respondent despite its
inquiries. 55 Obviously, such concealment constitutes bad faith on its part. Bad
faith "implies a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity; it . . . contemplates a state of mind
affirmatively operating with furtive design or ill will." 56
We see no reason to disturb the factual findings of both the trial court and Court
of Appeals which petitioner does not dispute. Absent any showing that such
findings were reached arbitrarily or without sufficient basis, the same must be
respected and binding upon us. 57
That petitioner has the obligation to reimburse respondent is likewise clear under
the Negotiated Sale Guidelines, which provides:
"7.0 OFFEROR'S RESPONSIBILITY
7.01 . . .. Seller gives no warranty regarding the sale of the shares
and assets except for a warranty on ownership and against any
liens or encumbrances, and the offeror shall not be relieved of his
obligation to make the aforesaid examinations and
verifications." 58 (Emphasis ours)
The terms of the parties' contract are clear and unequivocal. The seller (petitioner
NDC) gives a warranty as to the ownership of the object of sale andagainst any
lien and encumbrance. A tax liability of $688,186.10 was then a potential lien
upon NSCP's marine vessels. Being in bad faith for having failed to inform the
buyer, herein respondent, of such potential lien, petitioner breached its warranty
and should, therefore, be held liable for the resulting damage, i.e.,
reimbursement for the amounts paid by petitioner to the US IRS.
The Negotiated Sale Guidelines further provides:
"2.0 TERMS OF SALE
2.01 The sale of the NSCP and the three vessels shall be strictly
on "CASH, AS IS-WHERE IS" basis." 59 (Emphasis ours)
In Hian vs. Court of Tax Appeals, 60 we had the occasion to construe the
phrase "as is, where is" basis, thus:
"We cannot accept the contention in the Government's Memorandum of
March 31, 1976 that Condition No. 5 in the Notice of Sale to the effect
that 'The above-mentioned articles (the tobacco) are offered for sale 'AS
IS' and the Bureau of Customs gives no warranty as to their condition'
relieves the Bureau of Customs of liability for the storage fees in dispute.
As we understand said Condition No. 5, it refers to the physical
condition of the tobacco and not to the legal situation in which it was at
the time of the sale, as could be implied from the right of inspection to
prospective bidders under Condition No. 1. . . .." (Emphasis ours)
The phrase "as is, where is" basis pertains solely to the physical condition of the
thing sold, not to its legal situation. In the case at bar, the US tax liabilities
constitute a potential lien which applies to NSCP's legal situation, not to its
physical aspect. Thus, respondent as a buyer, has no obligation to shoulder the
same.
The case at bar calls to mind the principle of unjust enrichment Nemo cum
alterius detrimento locupletari potest. No person shall be allowed to enrich
himself unjustly at the expense of others. This principle of equity has been
enshrined in our Civil Code, Article 22 of which provides:
"Art. 22. Every person who through an act or performance by another or
by any other means, acquires or comes into possession of something at
the expense of the latter without just or legal ground, shall return the
same to him."
Justice and equity thus oblige that petitioner be held liable for NSCP's tax
liabilities and reimburse respondent for the amounts it paid. It would be unjust
enrichment on the part of petitioner to be relieved of that obligation.
The deletion of the award of exemplary damages and reduction of the attorney's
fees by the Court of Appeals are not challenged by either of the parties. At any
rate, we find no error in its ruling quoted hereunder:
"However, we find no basis for the grant of exemplary damages which
can be granted only in addition to moral, temperate, liquidated or
compensatory damages (Art. 2229, Civil Code of the Philippines), none
of which was awarded or deserved in this case. The trial court merely
granted plaintiff's prayer in its main cause of action for reimbursement of
taxes plaintiff paid to the U.S. Since no actual or moral damages was
awarded, there is no legal basis for the award of exemplary damages
which may only be granted in addition thereto (Scott Consultants and
Resources Development Corp. Inc. vs. CA, 242 SCRA 393).
xxx xxx xxx
"Anent the award of attorney's fees, we find it excessive, considering
that the instant case is a simple action for reimbursement and did not
involve extensive litigation. Nothing precludes the appellate courts from
reducing the award of attorney's fees when it is found to be
unconscionable or excessive under the circumstances (Brahm Industries
Inc. vs. NLRC, 280 SCRA 828). Thus, the award of attorney's fees is
reduced to P20,000.00." 61
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of
Appeals if AFFIRMED. SO ORDERED.
(National Development Company v. Madrigal Wan Hai Lines Corp., G.R. No.
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148332, [September 30, 2003], 458 PHIL 1038-1056)