SECOND DIVISION Upon investigation, it was found that the registered owner of the van was
Caravan.19 Caravan is a corporation engaged in the business of organizing travels
G.R. No. 170631, February 10, 2016
CARAVAN TRAVEL AND TOURS INTERNATIONAL,
INC., Petitioner, v. ERMILINDA R. ABEJAR, Respondent.
DECISION
LEONEN, J.:
The plaintiff may first prove the employer's ownership of the vehicle involved in a
mishap by presenting the vehicle's registration in evidence. Thereafter, a
disputable presumption that the requirements for an employer's liability under
Article 21801 of the Civil Code have been satisfied will arise. The burden of
evidence then shifts to the defendant to show that no liability under Article 2180
has ensued. This case, thus, harmonizes the requirements of Article 2180, in
relation to Article 21762 of the Civil Code, and the so-called registered-owner rule
as established in this court's rulings in Aguilar, Sr. v. Commercial Savings
Bank,3Del Carmen, Jr. v. Bacoy,4Filcar Transport Services v.
Espinas,5 and Mendoza v. Spouses Gomez.6
Through this Petition for Review on Certiorari,7 Caravel Travel and Tours
International, Inc. (Caravan) prays that the Decision8 dated October 3, 2005 and
the Resolution9 dated November 29, 2005 of the Court of Appeals Twelfth
Division be reversed and set aside.10
On July 13, 2000, Jesmariane R. Reyes (Reyes) was walking along the west-
bound lane of Sampaguita Street, United Parañaque Subdivision IV, Parañaque
City.11 A Mitsubishi L-300 van with plate number PKM 19512 was travelling
along the east-bound lane, opposite Reyes.13 To avoid an incoming vehicle, the
van swerved to its left and hit Reyes.14 Alex Espinosa (Espinosa), a witness to the
accident, went to her aid and loaded her in the back of the van. 15 Espinosa told the
driver of the van, Jimmy Bautista (Bautista), to bring Reyes to the
hospital.16 Instead of doing so, Bautista appeared to have left the van parked
inside a nearby subdivision with Reyes still in the van.17 Fortunately for Reyes, an
unidentified civilian came to help and drove Reyes to the hospital. 18
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and tours.20 Bautista was Caravan's employee assigned to drive the van as its
service driver.21
Caravan shouldered the hospitalization expenses of Reyes.22 Despite medical
attendance, Reyes died two (2) days after the accident.23
Respondent Ermilinda R. Abejar (Abejar), Reyes' paternal aunt and the person
who raised her since she was nine (9) years old, 24 filed before the Regional Trial
Court of Parañaque a Complaint25 for damages against Bautista and Caravan. In
her Complaint, Abejar alleged that Bautista was an employee of Caravan and that
Caravan is the registered owner of the van that hit Reyes.26
Summons could not be served on Bautista.27 Thus, Abejar moved to drop Bautista
as a defendant.28 The Regional Trial Court granted her Motion.29
After trial, the Regional Trial Court found that Bautista was grossly negligent in
driving the vehicle.30 It awarded damages in favor of Abejar, as follows:
chanRoblesvirtualLawlibrary
WHEREFORE, considering that the [respondent] was able to provide by
preponderance of evidence her cause of action against the defendants, judgment is
hereby rendered ordering defendants JIMMY BAUTISTA and CARAVAN
TRAVEL and TOURS[,] INC., to jointly and solidarity pay the plaintiff, the
following, to wit:
chanRoblesvirtualLawlibrary
1. The amount of P35,000.00 representing actual damages;
2. The amount of P300,000.00 as moral damages;
3. The amount of P30,000.00 as exemplary damages;
4. The amount of P50,000.00 as and by way of attorney's fees; and
5. The cost of suit.
SO ORDERED.31ChanRoblesVirtualawlibrary
Caravan's Motion for Reconsideration32 was denied through the October 20, 2003
Order33 of the Regional Trial Court.
The Court of Appeals affirmed with modification the Regional Trial Court's July
31, 2003 Decision and October 20, 2003 Order, as follows:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the instant appeal is DENIED for lack of
merit. The assailed Decision dated 31 July 2003 and Order dated 20 October 2003
of the Regional Trial Court, City of Para[ñ]aque, Branch 258, in Civil Case No.
00-0447 are AFFIRMEDwith the following MODIFICATIONS:
1. Moral Damages is REDUCED to Php 200,000.00;
2. Death Indemnity of Php 50,000.00 is awarded;
3. The Php 35,000.00 actual damages, Php 200,000.00 moral damages, Php
30,000.00 exemplary damages and Php 50,000.00 attorney's fees shall
earn interest at the rate of 6% per annum computed from 31 July 2003,
the date of the [Regional Trial Court's] decision; and upon finality of this
Decision, all the amounts due shall earn interest at the rate of 12% per
annum, in lieu of 6% per annum, until full payment; and
4. The Php 50,000.00 death indemnity shall earn interest at the rate of
6% per annumcomputed from the date of promulgation of this Decision;
and upon finality of this Decision, the amount due shall earn interest at
the rate of 12% per annum, in lieu of 6% per annum, until full payment.
Costs against [Caravan].
SO ORDERED.34ChanRoblesVirtualawlibrary
Caravan filed a Motion for Reconsideration, but it was denied in the Court of
Appeals' assailed November 29, 2005 Resolution. 35
Hence, this Petition was filed.
Caravan argues that Abejar has no personality to bring this suit because she is not
a real party in interest. According to Caravan, Abejar does not exercise legal or
substitute parental authority. She is also not the judicially appointed guardian or
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the only living relative of the deceased.36 She is also not "the executor or
administrator of the estate of the deceased."37 According to Caravan, only the
victim herself or her heirs can enforce an action based on culpa aquiliana such as
Abejar's action for damages.38
Caravan adds that Abejar offered no documentary or testimonial evidence to
prove that Bautista, the driver, acted "within the scope of his assigned
tasks"39 when the accident occurred.40 According to Caravan, Bautista's tasks only
pertained to the transport of company personnel or products, and when the
accident occurred, he had not been transporting personnel or delivering products
of and for the company.41
Caravan also argues that "it exercised the diligence of a good father of a family in
the selection and supervision of its employees." 42
Caravan further claims that Abejar should not have been awarded moral damages,
actual damages, death indemnity, exemplary damages, and attorney's fees. 43 It
questions the Certificate provided by Abejar as proof of expenses since its
signatory, a certain Julian Peñaloza (Peñaloza), was not presented in court, and
Caravan was denied the right to cross-examine him.44 Caravan argues that the
statements in the Certification constitute hearsay.45 It also contends that based on
Article 2206(3)46 of the Civil Code, Abejar is not entitled to moral damages. 47 It
insists that moral and exemplary damages should not have been awarded to
Abejar because Caravan acted in good faith.48 Considering that moral and
exemplary damages are unwarranted, Caravan claims that the award of attorney's
fees should have also been removed.49
Lastly, Caravan argues that it should not be held solidarily liable with Bautista
since Bautista was already dropped as a party.50
Abejar counters that Caravan failed to provide proof that it exercised the requisite
diligence in the selection and supervision of Bautista.51 She adds that the Court of
Appeals' ruling that Caravan is solidarily liable with Bautista for moral damages,
exemplary damages, civil indemnity ex delicto, and attorney's fees should be
upheld.52 Abejar argues that since Caravan is the registered owner of the van, it is
directly, primarily, and solidarity liable for the tortious acts of its driver. 53
For resolution are the following issues:
First, whether respondent Ermilinda R. Abejar is a real party in interest who may
bring an action for damages against petitioner Caravan Travel and Tours
International, Inc. on account of Jesmariane R. Reyes' death; and
Second, whether petitioner should be held liable as an employer, pursuant to
Article 2180 of the Civil Code.
We deny the Petition.
I disqualified; and
Having exercised substitute parental authority, respondent suffered actual loss and
is, thus, a real party in interest in this case.
In her Complaint, respondent made allegations that would sustain her action for
damages: that she exercised substitute parental authority over Reyes; that Reyes'
death was caused by the negligence of petitioner and its driver; and that Reyes'
death caused her damage.54 Respondent properly filed an action based on quasi-
delict. She is a real party in interest.
Rule 3, Section 2 of the 1997 Rules of Civil Procedure defines a real party in
interest:
chanRoblesvirtualLawlibrary
RULE 3. Parties to Civil Actions
....
SECTION 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.
"To qualify a person to be a real party in interest in whose name an action must be
prosecuted, he [or she] must appear to be the present real owner of the right
sought to be enforced."55 Respondent's capacity to file a complaint against
petitioner stems from her having exercised substitute parental authority over
Reyes.
Article 216 of the Family Code identifies the persons who exercise substitute
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parental authority:
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Art. 216. In default of parents or a judicially appointed guardian, the following
persons shall exercise substitute parental authority over the child in the order
indicated:
(1) The surviving grandparent, as provided in Art. 214; 56
(2) The oldest brother or sister, over twenty-one years of age, unless unfit or
(3) The child's actual custodian, over twenty-one years of age, unless unfit or
disqualified.
Whenever the appointment or a judicial guardian over the property of the child
becomes necessary, the same order of preference shall be observed. (Emphasis
supplied)
Article 233 of the Family Code provides for the extent of authority of persons
exercising substitute parental authority, that is, the same as those of actual parents:
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Art. 233. The person exercising substitute parental authority shall have
the same authority over the person of the child as the parents. (Emphasis supplied)
Both of Reyes' parents are already deceased.57 Reyes' paternal grandparents are
also both deceased.58The whereabouts of Reyes' maternal grandparents are
unknown.59 There is also no record that Reyes has brothers or sisters. It was under
these circumstances that respondent took custody of Reyes when she was a child,
assumed the role of Reyes' parents, and thus, exercised substitute parental
authority over her.60 As Reyes' custodian, respondent exercised the full extent of
the statutorily recognized rights and duties of a parent. Consistent with Article
22061 of the Family Code, respondent supported Reyes' education62 and provided
for her personal needs.63 To echo respondent's words in her Complaint, she treated
Reyes as if she were her own daughter.64
Respondent's right to proceed against petitioner, therefore, is based on two
grounds.
First, respondent suffered actual personal loss. With her affinity for Reyes, it
stands to reason that when Reyes died, respondent suffered the same anguish that
a natural parent would have felt upon the loss of one's child. It is for this injury —
as authentic and personal as that of a natural parent — that respondent seeks to be
indemnified.
Second, respondent is capacitated to do what Reyes' actual parents would have
been capacitated to do.
In Metro Manila Transit Corporation v. Court of Appeals,65Tapdasan, Jr. v.
People,66 and Aguilar, Sr. v. Commercial Savings Bank,67 this court allowed
natural parents of victims to recover damages for the death of their children.
Inasmuch as persons exercising substitute parental authority have the full range of
competencies of a child's actual parents, nothing prevents persons exercising
substitute parental authority from similarly possessing the right to be indemnified
for their ward's death.
We note that Reyes was already 18 years old when she died. Having reached the
age of majority, she was already emancipated upon her death. While parental
authority is terminated upon emancipation,68respondent continued to support and
care for Reyes even after she turned 18.69 Except for the legal technicality of
Reyes' emancipation, her relationship with respondent remained the same. The
anguish and damage caused to respondent by Reyes' death was no different
because of Reyes' emancipation.
In any case, the termination of respondent's parental authority is not an
insurmountable legal bar that precludes the filing of her Complaint. In interpreting
Article 190270 of the old Civil Code, which is substantially similar to the first
sentence of Article 217671 of the Civil Code, this court in The Receiver For North
Negros Sugar Company, Inc. v. Ybañez, et al.72 ruled that brothers and sisters may
recover damages, except moral damages, for the death of their sibling.73 This
court declared that Article 1902 of the old Civil Code (now Article 2176) is broad
enough to accommodate even plaintiffs who are not relatives of the deceased,
thus:74
This Court said: "Article 1902 of the Civil Code declares that any person who by
an act or omission, characterized by fault or negligence, causes damage to another
shall be liable for the damage done ... a person is liable for damage done to
another by any culpable act; and by any culpable act is meant any act which is
blameworthy when judged by accepted legal standards. The idea thus expressed is
undoubtedly broad enough to include any rational conception of liability for the
tortious acts likely to be developed in any society." The word "damage" in said
article, comprehending as it does all that are embraced in its meaning, includes
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any and all damages that a human being may suffer in any and all the
manifestations of his life: physical or material, moral or psychological, mental or
spiritual, financial, economic, social, political, and religious.
It is particularly noticeable that Article 1902 stresses the passive subject of the
obligation to pay damages caused by his fault or negligence. The article does not
limit or specify the active subjects, much less the relation that must exist between
the victim of the culpa aquiliana and the person who may recover damages, thus
warranting the inference that, in principle, anybody who suffers any damage from
culpa aquiliana, whether a relative or not of the victim, may recover damages
from the person responsible therefor[.]75(Emphasis supplied, citations omitted)
II
Respondent's Complaint is anchored on an employer's liability for quasi-delict
provided in Article 2180, in relation to Article 2176 of the Civil Code. Articles
2176 and 2180 read:
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ARTICLE 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.
.....
ARTICLE 2180. The obligation imposed by article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for whom one is
responsible.
The father and, in case of his death or incapacity, the mother, are responsible for
the damages caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons
who are under their authority and live in their company.
The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the branches
in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
The State is responsible in like manner when it acts through a special agent; but
not when the damage has been caused by the official to whom the task done
properly pertains, in which case what is provided in article 2176 shall be
applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices, so long as they
remain in their custody.
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family
to prevent damage. (Emphasis supplied)
Contrary to petitioner's position, it was not fatal to respondent's cause that she
herself did not adduce proof that Bautista acted within the scope of his authority.
It was sufficient that Abejar proved that petitioner was the registered owner of the
van that hit Reyes.
The resolution of this case must consider two (2) rules. First, Article 2180's
specification that "[e]mployers shall be liable for the damages caused by their
employees . . . acting within the scope of their assigned tasks[.]" Second, the
operation of the registered-owner rule that registered owners are liable for death
or injuries caused by the operation of their vehicles.76
These rules appear to be in conflict when it comes to cases in which the employer
is also the registered owner of a vehicle. Article 2180 requires proof of two things:
first, an employment relationship between the driver and the owner; and second,
that the driver acted within the scope of his or her assigned tasks. On the other
hand, applying the registered-owner rule only requires the plaintiff to prove that
the defendant-employer is the registered owner of the vehicle.
The registered-owner rule was articulated as early as 1957 in Erezo, et al. v.
Jepte,77 where this court explained that the registration of motor vehicles, as
required by Section 5(a)78 of Republic Act No. 4136, the Land Transportation and
Traffic Code, was necessary "not to make said registration the operative act by
which ownership in vehicles is transferred, . . . but to permit the use and operation
of the vehicle upon any public highway[.]" 79 Its "main aim . . . is to identify the
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owner so that if any accident happens, or that any damage or injury is caused by
the vehicle on the public highways, responsibility therefor can be fixed on a
definite individual, the registered owner." 80
Erezo notwithstanding, Castilex Industrial Corporation v. Vasquez, Jr.81 relied on
Article 2180 of the Civil Code even though the employer was also the registered
owner of the vehicle.82 The registered-owner rule was not mentioned.
In Castilex, Benjamin Abad (Abad) was a manager of Castilex Industrial
Corporation (Castilex). Castilex was also the registered owner of a Toyota Hi-Lux
pick-up truck. While Abad was driving the pick-up truck, it collided with a
motorcycle driven by Romeo Vasquez (Vasquez). Vasquez died a few days after.
Vasquez's parents filed a case for damages against Abad and Castilex. 83 Castilex
denied liability, arguing that Abad was acting in his private capacity at the time of
the accident.84
This court absolved Castilex of liability, reasoning that it was incumbent upon the
plaintiff to prove that the negligent employee was acting within the scope of his
assigned tasks.85 Vasquez's parents failed to prove this.86 This court outlined the
process necessary for an employer to be held liable for the acts of its employees
and applied the process to the case:
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Under the fifth paragraph of Article 2180, whether or not engaged in any business
or industry, an employer is liable for the torts committed by employees within the
scope of his assigned tasks. But it is necessary to establish the employer-employee
relationship; once this is done, the plaintiff must show, to hold the employer liable,
that the employee was acting within the scope of his assigned task when the tort
complained of was committed. It is only then that the employer may find it
necessary to interpose the defense of due diligence in the selection and
supervision of the employee.
....
Since there is paucity of evidence that ABAD was acting within the scope of the
functions entrusted to him, petitioner CASTILEX had no duty to show that it
exercised the diligence of a good father of a family in providing ABAD with a
service vehicle. Thus, justice and equity require that petitioner be relieved of
vicarious liability for the consequences of the negligence of ABAD in driving its
vehicle. (Emphasis supplied, citations omitted)87ChanRoblesVirtualawlibrary
Aguilar, Sr. v. Commercial Savings Bank recognized the seeming conflict between
Article 2180 and the registered-owner rule and applied the latter.88
In Aguilar, Sr., a Mitsubishi Lancer, registered in the name of Commercial
Savings Bank and driven by the bank's assistant vice-president Ferdinand Borja,
hit Conrado Aguilar, Jr. The impact killed Conrado Aguilar, Jr. His father,
Conrado Aguilar, Sr. filed a case for damages against Ferdinand Borja and
Commercial Savings Bank. The Regional Trial Court found Commercial Savings
Bank solidarity liable with Ferdinand Borja.89
However, the Court of Appeals disagreed with the trial court's Decision and
dismissed the complaint against the bank. The Court of Appeals reasoned that
Article 2180 requires the plaintiff to prove that at the time of the accident, the
employee was acting within the scope of his or her assigned tasks. The Court of
Appeals found no evidence that Ferdinand Borja was acting as the bank's assistant
vice-president at the time of the accident.90
The Court of Appeals' ruling was reversed by this court. 91Aguilar, Sr. reiterated
the following pronouncements made in Erezo in ruling that the bank, as the
registered owner of the vehicle, was primarily liable to the plaintiff:92
The main aim of motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle on the
public highways, responsibility therefor can be fixed on a definite individual, the
registered owner....
....
A victim of recklessness on the public highways is usually without means to
discover or identify the person actually causing the injury or damage. He has no
means other than by a recourse to the registration in the Motor Vehicles Office to
determine who is the owner. The protection that the law aims to extend to him
would become illusory were the registered owner given the opportunity to escape
liability by disproving his ownership.93ChanRoblesVirtualawlibrary
Thus, Aguilar, Sr. concluded:
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In our view, respondent bank, as the registered owner of the vehicle, is primarily
liable for Aguilar, Jr.'s death. The Court of Appeals erred when it concluded that
the bank was not liable simply because (a) petitioner did not prove that Borja was
acting as the bank's vice president at the time of the accident; and (b) Borja had,
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according to respondent bank, already bought the car at the time of the
mishap. For as long as the respondent bank remained the registered owner of the
car involved in the vehicular accident, it could not escape primary liability for the
death of petitioner's son.94 (Emphasis supplied)
Preference for the registered-owner rule became more pronounced in Del Carmen,
Jr. v. Bacoy:95
Without disputing the factual finding of the [Court of Appeals] that Allan was still
his employee at the time of the accident, a finding which we see no reason to
disturb, Oscar Jr. contends that Allan drove the jeep in his private capacity and
thus, an employer's vicarious liability for the employee's fault under Article 2180
of the Civil Code cannot apply to him.
The contention is no longer novel. In Aguilar Sr. v. Commercial Savings Bank, the
car of therein respondent bank caused the death of Conrado Aguilar, Jr. while
being driven by its assistant vice president. Despite Article 2180, we still held the
bank liable for damages for the accident as said provision should defer to the
settled doctrine concerning accidents involving registered motor vehicles, i.e.,
that the registered owner of any vehicle, even if not used for public service, would
primarily be responsible to the public or to third persons for injuries caused the
latter while the vehicle was being driven on the highways or streets. We have
already ratiocinated that:
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The main aim of motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle on the
public highways, responsibility therefor can be fixed on a definite individual, the
registered owner. Instances are numerous where vehicles running on public
highways caused accidents or injuries to pedestrians or other vehicles without
positive identification of the owner or drivers, or with very scant means of
identification. It is to forestall these circumstances, so inconvenient or prejudicial
to the public, that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages or injuries caused
on public highways.96 (Emphasis supplied, citations omitted)
Filcar Transport Services v. Espinas97 stated that the registered owner of a vehicle
can no longer use the defenses found in Article 2180:98
Neither can Filcar use the defenses available under Article 2180 of the Civil Code
- that the employee acts beyond the scope of his assigned task or that it exercised
the due diligence of a good father of a family to prevent damage - because the
motor vehicle registration law, to a certain extent, modified Article 2180 of the
Civil Code by making these defenses unavailable to the registered owner of the
motor vehicle. Thus, for as long as Filcar is the registered owner of the car
involved in the vehicular accident, it could not escape primary liability for the
damages caused to Espinas.99ChanRoblesVirtualawlibrary
Mendoza v. Spouses Gomez100 reiterated this doctrine.
However, Aguilar, Sr., Del Carmen, Filcar, and Mendoza should not be taken to
mean that Article 2180 of the Civil Code should be completely discarded in cases
where the registered-owner rule finds application.
As acknowledged in Filcar, there is no categorical statutory pronouncement in the
Land Transportation and Traffic Code stipulating the liability of a registered
owner.101 The source of a registered owner's liability is not a distinct statutory
provision, but remains to be Articles 2176 and 2180 of the Civil Code:
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While Republic Act No. 4136 or the Land Transportation and Traffic Code does
not contain any provision on the liability of registered owners in case of motor
vehicle mishaps, Article 2176, in relation with Article 2180, of the Civil Code
imposes an obligation upon Filcar, as registered owner, to answer for the damages
caused to Espinas' car.102ChanRoblesVirtualawlibrary
Thus, it is imperative to apply the registered-owner rule in a manner that
harmonizes it with Articles 2176 and 2180 of the Civil Code. Rules must be
construed in a manner that will harmonize them with other rules so as to form a
uniform and consistent system of jurisprudence.103 In light of this, the words used
in Del Carmen are particularly notable. There, this court stated that Article 2180
"should defer to"104 the registered-owner rule. It never stated that Article 2180
should be totally abandoned.
Therefore, the appropriate approach is that in cases where both the registered-
owner rule and Article 2180 apply, the plaintiff must first establish that the
employer is the registered owner of the vehicle in question. Once the plaintiff
successfully proves ownership, there arises a disputable presumption that the
requirements of Article 2180 have been proven. As a consequence, the burden of
proof shifts to the defendant to show that no liability under Article 2180 has
arisen.
This disputable presumption, insofar as the registered owner of the vehicle in
relation to the actual driver is concerned, recognizes that between the owner and
the victim, it is the former that should carry the costs of moving forward with the
evidence. The victim is, in many cases, a hapless pedestrian or motorist with
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hardly any means to uncover the employment relationship of the owner and the
driver, or any act that the owner may have done in relation to that employment.
The registration of the vehicle, on the other hand, is accessible to the public.
Here, respondent presented a copy of the Certificate of Registration105 of the van
that hit Reyes.106 The Certificate attests to petitioner's ownership of the van.
Petitioner itself did not dispute its ownership of the van. Consistent with the rule
we have just stated, a presumption that the requirements of Article 2180 have
been satisfied arises. It is now up to petitioner to establish that it incurred no
liability under Article 2180. This it can do by presenting proof of any of the
following: first, that it had no employment relationship with Bautista; second, that
Bautista acted outside the scope of his assigned tasks; or third, that it exercised the
diligence of a good father of a family in the selection and supervision of
Bautista.107
On the first, petitioner admitted that Bautista was its employee at the time of the
accident.108
On the second, petitioner was unable to prove that Bautista was not acting within
the scope of his assigned tasks at the time of the accident. When asked by the
court why Bautista was at the place of the accident when it occurred, Sally
Bellido, petitioner's accountant and supervisor,109 testified that she did not "have
the personal capacity to answer [the question]" 110 and that she had no knowledge
to answer it:
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COURT : Madam Witness, do you know the reason why your driver,
Jimmy Bautista, at around 10:00 o' clock in the morning of July
13, 2000 was in the vicinity of Barangay Marcelo Green, United
Parañaque Subdivision 4?
WITNESS : I don't have the personal capacity to answer that, Sir.
Q : So you don't have any knowledge why he was there?
A : Yes, Sir.111 (Emphasis supplied) Q : Is it a professional driver's license or non-proffesional [sic] driver's
license?
Sally Bellido's testimony does not affect the presumption that Article 2180's
requirements have been satisfied. Mere disavowals are not proof that suffice to
overturn a presumption. To this end, evidence must be adduced. However, A : Non-professional.
petitioner presented no positive evidence to show that Bautista was acting in his
private capacity at the time of the incident.
Q : You are not sure?
On the third, petitioner likewise failed to prove that it exercised the requisite
diligence in the selection and supervision of Bautista.
COURT : Non professional, professional?
In its selection of Bautista as a service driver, petitioner contented itself with
Bautista's submission of a non-professional driver's license.112 Hence, in Sally
Balledo's cross-examination: A : It's a non-professional.113 (Emphasis supplied)
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Employing a person holding a non-professional driver's license to operate
Q : . . . when he was promoted as service driver, of course, there were another's motor vehicle violates Section 24 of the Land Transportation and Traffic
certain requirements and among other else, you made mention Code, which provides:
about a driver's license. chanRoblesvirtualLawlibrary
SEC. 24. Use of driver's license and badge. — ...

A : Yes, Sir. ....

No owner of a motor vehicle shall engage, employ, or hire any person to operate
Q : Would you be able to show to this Honorable Court whether indeed such motor vehicle, unless the person sought to be employed is a duly licensed
this person did submit a driver's license to your company? professional driver.
Evidently, petitioner did not only fail to exercise due diligence when it selected
Bautista as service driver; it also committed an actual violation of law.
A : Yes, Sir.
To prove that it exercised the required diligence in supervising Bautista, petitioner
presented copies of several memoranda and company rules. 114 These, however,
.... are insufficient because petitioner failed to prove actual compliance. Metro
Manila Transit Corporation v. Court of Appeals115 emphasized that to establish
diligence in the supervision of employees, the issuance of company policies must
Q : Do you recall what kind of driver's license is this? be coupled with proof of compliance:
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Due diligence in the supervision of employees, on the other hand, includes the
A : The Land Transportation Office.
formulation of suitable rules and regulations for the guidance of employees and
the issuance of proper instructions intended for the protection of the public and

8|Page
persons with whom the employer has relations through his or its employees and
the imposition of necessary disciplinary measures upon employees in case of
breach or as may be warranted to ensure the performance of acts indispensable to
the business of and beneficial to their employer. To this, we add that actual
implementation and monitoring of consistent compliance with said rules should be
the constant concern of the employer, acting through dependable supervisors who
should regularly report on their supervisory functions.
In order that the defense of due diligence in the selection and supervision of
employees may be deemed sufficient and plausible, it is not enough to emptily
invoke the existence of said company guidelines and policies on hiring and
supervision. As the negligence of the employee gives rise to the presumption of
negligence on the part of the employer, the latter has the burden of proving that it
has been diligent not only in the selection of employees but also in the actual
supervision of their work. The mere allegation of the existence of hiring
procedures and supervisory policies, without anything more, is decidedly not
sufficient to overcome presumption.
We emphatically reiterate our holding, as a warning to all employers, that "(t)he
mere formulation of various company policies on safety without showing that
they were being complied with is not sufficient to exempt petitioner from liability
arising from negligence of its employees. It is incumbent upon petitioner to show
that in recruiting and employing the erring driver the recruitment procedures and
company policies on efficiency and safety were followed." Paying lip-service to
these injunctions or merely going through the motions of compliance therewith
will warrant stern sanctions from the Court.116(Emphasis supplied, citations
omitted)
For failing to overturn the presumption that the requirements of Article 2180 have
been satisfied, petitioner must be held liable.
III
Petitioner's argument that it should be excused from liability because Bautista was
already dropped as a party is equally unmeritorious. The liability imposed on the
registered owner is direct and primary.117 It does not depend on the inclusion of
the negligent driver in the action. Agreeing to petitioner's assertion would render
impotent the rationale of the motor registration law in fixing liability on a definite
person.
9|Page
Bautista, the driver, was not an indispensable party under Rule 3, Section 7118 of
the 1997 Rules of Civil Procedure. Rather, he was a necessary party under Rule 3,
Section 8.119 Instead of insisting that Bautista — who was nothing more than a
necessary party — should not have been dropped as a defendant, or that petitioner,
along with Bautista, should have been dropped, petitioner (as a co-defendant
insisting that the action must proceed with Bautista as party) could have opted to
file a cross-claim against Bautista as its remedy.
The 1997 Rules of Civil Procedure spell out the rules on joinder of indispensable
and necessary parties. These are intended to afford "a complete determination of
all possible issues, not only between the parties themselves but also as regards to
other persons who may be affected by the judgment." 120
However, while an exhaustive resolution of disputes is desired in every case, the
distinction between indispensable parties and necessary parties delineates a court's
capacity to render effective judgment. As defined by Rule 3, Section 7,
indispensable parties are "[p]arties in interest without whom no final
determination can be had of an action[.]" Thus, their non-inclusion is debilitating:
"the presence of indispensable parties is a condition for the exercise of juridical
power and when an indispensable party is not before the court, the action should
be dismissed."121
In contrast, a necessary party's presence is not imperative, and his or her absence
is not debilitating. Nevertheless, it is preferred that they be included in order that
relief may be complete.
The concept of indispensable parties, as against parties whose inclusion only
allows complete relief, was explained in Arcelona v. Court of Appeals:122
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.
 It was respondent herself who identified the Certificate. She testified that she
A person is not an indispensable party, however, if his interest in the controversy incurred funeral expenses amounting to P35,000.00, that she paid this amount to
or subject matter is separable from the interest of the other parties, so that it will Peñaloza, and that she was present when Peñaloza signed the Certificate:
not necessarily be directly or injuriously affected by a decree which does chanRoblesvirtualLawlibrary
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 [ATTY. Did you incur any expenses?
parties to the action, or if he has no interest in the subject matter of the action. It is LIM] :
not a sufficient reason to declare a person to be an indispensable party that his
presence will avoid multiple litigation.123ChanRoblesVirtualawlibrary
Petitioner's interest and liability is distinct from that of its driver. Regardless of A: Meron po.
petitioner's employer-employee relationship with Bautista, liability attaches to
petitioner on account of its being the registered owner of a vehicle that figures in a
Q: How much did you spend for the death of Jesmarian [sic] Reyes?
mishap. This alone suffices. A determination of its liability as owner can proceed
independently of a consideration of how Bautista conducted himself as a driver.
While certainly it is desirable that a determination of Bautista's liability be made
A: 'Yun pong P35,000.00 na pagpapalibing at saka...
alongside that of the owner of the van he was driving, his non-inclusion in these
proceedings does not absolutely hamper a judicious resolution of respondent's
plea for relief.
Q: You said that you spent P35,000.00. Do you have any evidence or
proof that you spent that amount?
IV

The Court of Appeals committed no reversible error when it awarded actual A: Meron po.
damages to respondent. Respondent's claim for actual damages was based on the
Certificate124 issued and signed by a certain Peñaloza showing that respondent
paid Peñaloza P35,000.00 for funeral expenses. Q: Showing to you this sort of certification. What relation has this...
Contrary to petitioner's claim, this Certificate is not hearsay. Evidence is hearsay
when its probative value is based on the personal knowledge of a person other A: 'Yan po' yung contractor nagumawa.
than the person actually testifying.125 Here, the Certificate sought to establish that
respondent herself paid Peñaloza P35,000.00 as funeral expenses for Reyes'
death:126 Q: Contractor of what?

3. Na ang aking kontrata ay nagkakahalaga ng P35,000-00 [sic] sa lahat ng

nagamit na materiales at labor nito kasama ang lote na ibinayad sa akin A: 'Yan po' yung mismong binilhan ko ng lupa at nitso.
ni Gng. ERMILINDA REYES ABEJAR na siyang aking kakontrata sa
pagsasagawa ng naturang paglilibingan.127 (Emphasis supplied)
....

10 | P a g e

ATTY. LIM There is a signature at the top of the printed name Julian Penalosa
: [sic]. Whose signature is this?
A: 'Yan po' yung mismong contractor.
....
Q: Did you see him sign this?
A: Opo.128 (Emphasis supplied)
Respondent had personal knowledge of the facts sought to be proved by the
Certificate, i.e. that she spent P35,000.00 for the funeral expenses of Reyes. Thus,
the Certificate that she identified and testified to is not hearsay. It was not an error
to admit this Certificate as evidence and basis for awarding P35,000.00 as actual
damages to respondent.
The Court of Appeals likewise did not err in awarding civil indemnity and
exemplary damages.
Article 2206 of the Civil Code provides:
chanRoblesvirtualLawlibrary
ARTICLE 2206. The amount of damages for death caused by a crime or quasi-
delict shall be at least three thousand pesos, even though there may have been
mitigating circumstances[.]
Further, Article 2231 of the Civil Code provides:
chanRoblesvirtualLawlibrary
ARTICLE 2231. In quasi-delicts, exemplary damages may be granted if the
defendant acted with gross negligence.
Both the Court of Appeals and the Regional Trial Court found Bautista grossly
negligent in driving the van and concluded that Bautista's gross negligence was
the proximate cause of Reyes' death. Negligence and causation are factual
issues.129 Findings of fact, when established by the trial court and affirmed by the
Court of Appeals, are binding on this court unless they are patently unsupported
by evidence or unless the judgment is grounded on a misapprehension of
11 | P a g e
facts.130 Considering that petitioner has not presented any evidence disputing the
findings of the lower courts regarding Bautista's negligence, these findings cannot
be disturbed in this appeal. The evidentiary bases for the award of civil indemnity
and exemplary damages stand. As such, petitioner must pay the exemplary
damages arising from the negligence of its driver.131 For the same reasons, the
award of P50,000.00 by way of civil indemnity is justified.132
The award of moral damages is likewise proper.
Article 2206(3) of the Civil Code provides:
chanRoblesvirtualLawlibrary
ARTICLE 2206. The amount of damages for death caused by a crime or quasi-
delict shall be at least three thousand pesos, even though there may have been
mitigating circumstances. In addition:
....
(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the
death of the deceased. (Emphasis supplied)
For deaths caused by quasi-delict, the recovery of moral damages is limited to the
spouse, legitimate and illegitimate descendants, and ascendants of the deceased. 133
Persons exercising substitute parental authority are to be considered ascendants
for the purpose of awarding moral damages. Persons exercising substitute parental
authority are intended to stand in place of a child's parents in order to ensure the
well-being and welfare of a child.134 Like natural parents, persons exercising
substitute parental authority are required to, among others, keep their wards in
their company,135 provide for their upbringing,136 show them love and
affection,137 give them advice and counsel,138 and provide them with
companionship and understanding.139 For their part, wards shall always observe
respect and obedience towards the person exercising parental authority. 140 The law
forges a relationship between the ward and the person exercising substitute
parental authority such that the death or injury of one results in the damage or
prejudice of the other.
Moral damages are awarded to compensate the claimant for his or her actual
injury, and not to penalize the wrongdoer.141 Moral damages enable the injured
party to alleviate the moral suffering resulting from the defendant's actions.142 It
aims to restore — to the extent possible — "the spiritual status quo ante[.]" 143
Given the policy underlying Articles 216 and 220 of the Family Code as well as
the purposes for awarding moral damages, a person exercising substitute parental
authority is rightly considered an ascendant of the deceased, within the meaning
of Article 2206(3) of the Civil Code. Hence, respondent is entitled to moral
damages.
As exemplary damages have been awarded and as respondent was compelled to
litigate in order to protect her interests, she is rightly entitled to attorney's fees. 144
However, the award of interest should be modified. This modification must be
consistent with Nacar v. Gallery Frames,145 in which we ruled:
chanRoblesvirtualLawlibrary
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages, except
when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially
or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot
be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made
(at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 6% per annum from such
finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.146 (Emphasis supplied)
12 | P a g e
WHEREFORE, the Decision of the Court of Appeals dated October 3, 2005
is AFFIRMED with the following MODIFICATIONS: (a) actual damages in
the amount of P35,000.00 shall earn interest at the rate of 6% per annum from the
time it was judicially or extrajudicially demanded from petitioner Caravan Travel
and Tours International, Inc. until full satisfaction; (b) moral damages, exemplary
damages, and attorney's fees shall earn interest at the rate of 6% per annum from
the date of the Regional Trial Court Decision until full satisfaction; and (c) civil
indemnity shall earn interest at the rate of 6% per annum from the date of the
Court of Appeals Decision until full satisfaction.
SO ORDERED.cralawlawlibrary
Carpio, (Chairperson), Brion, Del Castillo, and Mendoza, JJ.,
concur.chanroblesvirtuallawlibrary
Endnotes:
1
CIVIL CODE, art. 2180 provides:
ARTICLE 2180. The obligation imposed by article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for whom one is
responsible.
....
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
....
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family
to prevent damage.
2
CIVIL CODE, art. 2176 provides:
 17
ARTICLE 2176. Whoever by act or omission causes damage to another, there Id.
being fault or negligence, is obliged to pay for the damage done. Such fault or
18
negligence, if there is no pre-existing contractual relation between the parties, is Id.
called a quasi-delict and is governed by the provisions of this Chapter.
19
Rollo, p. 134, Court of Appeals Decision.
3
412 Phil. 834, 839-841 (2001) [Per J. Quisumbing, Second Division].
20
RTC records, pp. 2, Complaint; and 47, Answer with Counterclaim.
4
686 Phil. 799, 817 (2012) [Per J. Del Castillo, First Division].
21
Rollo, p. 134, Court of Appeals Decision.
5
688 Phil. 430, 436-442 (2012) [Per J. Brion, Second Division].
22
Id. at 139.
6
G.R. No. 160110, June 18, 2014, 726 SCRA 505, 518-521 [Per J. Perez, Second
23
Division]. Id. at 134.
7 24
Rollo, pp. 91-131. The Petition was filed pursuant to Rule 45 of the 1997 Rules Id. at 138.cralawred
of Civil Procedure.
25
RTC records, pp. 1-5.
8
Id. at 133-165. The Decision was penned by Associate Justice Celia C. Librea-
26
Leagogo and concurred in by Associate Justices Renato C. Dacudao (Chair) and Id. at 2.cralawred
Lucas P. Bersamin (now Associate Justice of this court) of the Twelfth Division.
27
CA rollo, p. 48, Caravan's Reply Brief.
9
Id. at 166-167. The Resolution was penned by Associate Justice Celia C. Librea-
28
Leagogo and concurred in by Associate Justices Renato C. Dacudao (Chair) and Rollo, p. 138, Court of Appeals Decision.
Lucas P. Bersamin (now Associate Justice of this court) of the Twelfth Division.
29
Rollo, p. 138, Court of Appeals Decision.
10
Id. at 129, Petition for Review on Certiorari.
30
RTC records, p. 447, Regional Trial Court Decision. The trial court included
11
Id. at 134, Court of Appeals Decision. Bautista in the Decision even though it already granted Abejar's motion to drop
him as a defendant.
12
Id.
31
Id. at 449. The case was docketed as Civil Case No. 00-0447. The Decision,
13
TSN, May 31, 2002, p. 948. promulgated on July 31, 2003, was penned by Judge Raul E. De Leon of Branch
258.
14
RTC records, p. 445, Regional Trial Court Decision.
32
Id. at 450-462.
15
Id.
33
Id. at 513.
16
CA rollo, p. 31, Regional Trial Court Decision.
34
Rollo, p. 162, Court of Appeals Decision. The case was docketed as CA-G.R.

13 | P a g e
CV No. 81694.
49
Id. at 50-51.
35
Id. at 166-167, Court of Appeals Resolution.
50
Id. at 43.
36
Id. at 231, Caravan's Memorandum.
51
Id. at 203, Abejar's Memorandum.
37
Id.
52
Id. at 206.
38
Id. at 232.
53
Id. at 207.
39
Id. at 42, Petition for Review on Certiorari.cralawred
54
RTC records, pp. 1-3, Complaint.
40
Id. at 42-43.
55
National Housing Authority v. Magat, 611 Phil. 742, 747 (2009) [Per J. Carpio,
41
Id. at 42. First Division], citing Shipside Inc. v. Court of Appeals, 404 Phil. 981, 998 (2001)
[Per J. Melo, Third Division].
42
Id. at 31.
56
FAMILY CODE, art. 214 provides:
43
Id. at 43.
Art. 214. In case of death, absence or unsuitability of the parents, substitute
44
Id. at 44. parental authority shall be exercised by the surviving grandparent. In case several
survive, the one designated by the court, taking into account the same
45
Id. at 233, Caravan's Memorandum. consideration mentioned in the preceding article, shall exercise the authority.
46 57
CIVIL CODE, art. 2206(3) provides: RTC records, pp. 179, Abejar's Formal Offer of Documentary Exhibits; 187,
Death Certificate of Edwin Cortez issued by the Municipal Civil Registrar of
ARTICLE 2206. The amount of damages for death caused by a crime or quasi- Calamba, Laguna; 188, Death Certificate of Leonora R. Landicho issued by the
delict shall be at least three thousand pesos, even though there may have been Municipal Civil Registrar of Candelaria, Quezon; and 189, Certificate of Death of
mitigating circumstances. In addition: Leonora R. Landicho issued by the Parish of San Pedro Bautista, Candelaria,
Quezon.
....
58
Id. at 179, Abejar's Formal Offer of Documentary Exhibits; 190, Death
(3) The spouse, legitimate and illegitimate descendants and ascendants of the Certificate of Leticia Cortez Reyes issued by the Municipal Civil Registrar of
deceased may demand moral damages for mental anguish by reason of the death Tiong, Quezon; and 191, Certificate of Death of Domingo Estiva Reyes issued by
of the deceased. the City Civil Registrar of Manila.
47 59
Rollo, pp. 45-46, Petition for Review on Certiorari. TSN, April 10, 2002, p. 760.
48 60
Id. at 50. TSN, June 22, 2001, p. 605.

14 | P a g e
61 65
FAMILY CODE, art. 220 provides: 359 Phil. 18, 26-27 (1998) [Per J. Mendoza, Second Division].
66
Art. 220. The parents and those exercising parental authority shall have with the 440 Phil. 864, 880 (2002) [Per J. Callejo, Sr., Second Division].
respect to their unemancipated children on wards the following rights and duties:
67
412 Phil. 834, 835 (2001) [Per J. Quisumbing, Second Division].
(1) To keep them in their company, to support, educate and instruct them by 68
FAMILY CODE, art. 236.
right precept and good example, and to provide for their upbringing in
keeping with their means; 69
Rollo, p. 138, Court of Appeals Decision.
(2) To give them love and affection, advice and counsel, companionship and 70
CIVIL CODE (1889), art. 1902 provides:
understanding;
ARTICLE 1902. Any person who by an act or omission causes damage to another
(3) To provide them with moral and spiritual guidance, inculcate in them by his fault or negligence shall be liable for the damage so done.
honesty, integrity, self- discipline, self-reliance, industry and thrift, stimulate
their interest in civic affairs, and inspire in them compliance with the duties 71
CIVIL CODE, art. 2176, first sentence, provides:
of citizenship;
ARTICLE 2176: Whoever by act or omission causes damage to another, there
(4) To furnish them with good and wholesome educational materials, supervise being fault or negligence, is obliged to pay for the damage done.
their activities, recreation and association with others, protect them from bad
company, and prevent them from acquiring habits detrimental to their 72
133 Phil. 825 (1968) [Per J. Zaldivar, En Banc].
health, studies and morals;
73
Id. at 832-833.
(5) To represent them in all matters affecting their interests;
74
Id. at 831. This court ruled that while Article 1902 of the old Civil Code (now
(6) To demand from them respect and obedience;
Article 2176) does not require any relation between the plaintiff and the victim of
the quasi-delict, Article 2206(3) of the Civil Code does. Hence, the recovery
(7) To impose discipline on them as may be required under the circumstances;
of moral damages requires that the plaintiff is the victim's spouse, legitimate or
and
illegitimate descendant or ascendant (Id. at 833).
(8) To perform such other duties as are imposed by law upon parents and 75
Id. at 831.
guardians.
76
See Filcar Transport Services v. Espinas, 688 Phil. 430, 435 (2012) [Per J.
62
TSN, June 22, 2001, p. 607. Brion, Second Division].
77
63
Id. 102 Phil. 103 (1957) [Per J. Labrador, En Banc].
78
64
RTC records, p. 2, Complaint. TRANSP. & TRAFFIC CODE, sec. 5 provides:

15 | P a g e
 95
SECTION 5. Compulsory Registration of Motor Vehicles. - (a) All motor vehicles 686 Phil. 799 (2012) [Per J. Del Castillo, First Division].
and trailer of any type used or operated on or upon any highway of the Philippines
96
must be registered with the Bureau of Land Transportation for the current year in Id. at 817.
accordance with the provisions of this Act.
97
688 Phil. 430 (2012) [Per J. Brion, Second Division].
79
Erezo, et al. v. Jepte, 102 Phil. 103, 108 (1957) [Per J. Labrador, En Banc].
98
Id. at 441.
80
Id.
99
Id.
81
378 Phil. 1009 (1999) [Per C. J. Davide, Jr., First Division].
100
G.R. No. 160110, June 18, 2014, 726 SCRA 505, 518-521 [Per J. Perez,
82
Id. at 1016-1018. Second Division].
83 101
Id. at 1012-1013. Filcar Transport Services v. Espinas, 688 Phil. 430, 441 (2012) [Per J. Brion,
Second Division].
84
Id. at 1018.
102
Id. at 441-442.
85
Id. at 1022-1023.
103
Spouses Algura v. The Local Government Unit of the City of Naga, 536 Phil.
86
Id. at 1018. 819, 835 (2006) [Per J. Velasco, Jr., Third Division].
87 104
Id. at 1017-1022. Del Carmen, Jr. v. Bacoy, 686 Phil. 799, 817 (2012) [Per J. Del Castillo, First
Division].
88
Aguilar, Sr. v. Commercial Savings Bank, 412 Phil. 834, 839-841 (2001) [Per J.
105
Quisumbing, Second Division]. RTC records, p. 182.
89 106
Id. at 835-837. Id. at 177, Abejar's Formal Offer of Documentary Evidence.
90 107
Id. at 837. A reading of Article 2180 reveals that in order for an employer to be liable for
the acts of its employee, it is required that the employment relationship is
91
Id. at 841. established, that the employee acted within the scope of his or her assigned tasks,
and that the employer failed to exercise the diligence of a good father of a family
92
Aguilar, Sr. v. Commercial Savings Bank, 412 Phil. 834, 839-841 (2001) [Per J. in the selection and supervision of the employee. See Castilex Industrial Corp. v.
Quisumbing, Second Division]. Vasquez, Jr., 378 Phil. 1009, 1017 (1999) [Per C.J. Davide, Jr., First Division]
and Metro Manila Transit Corporation v. Court of Appeals, G.R. No. 104408,
93
Id. at 839-840. June 21, 1993, 223 SCRA 521, 539 [Per J. Regalado, Second Division].
94 108
Id. at 841. RTC records, pp 2, Complaint; and 47, Answer with Counterclaim.

16 | P a g e
 of the claim subject of the action.
109
TSN, September 25, 2002, pp. 1247-1248.
120
Director of Lands v. Court of Appeals, 181 Phil. 432, 440-441 (1979) [Per J.
110
Id. at 1284. Guerrero, First Division].
111 121
Id. at 1284-1285. Lucman v. Malawi, 540 Phil. 289, 302 (2006) [Per J. Tinga, Third Division].
112 122
Id. at 1274-1275. 345 Phil. 250 (1997) [Per J. Panganiban, Third Division].
113 123
Id. at 1273-1275. Id. at 269-270.
114 124
RTC records, pp. 227-229, Caravan's Formal Offer of Evidence. RTC records, p. 186.
115 125
G.R. No. 104408, June 21, 1993, 223 SCRA 521 [Per J. Regalado, Second Valencia v. Atty. Cabanting, 273 Phil. 534, 545 (1991) [Per Curiam, En Banc].
Division].
126
RTC records, pp. 178-179, Abejar's Formal Offer of Documentary Exhibits.
116
Id. at 540-541.
127
Id. at 186, Certificate issued by Julian Peñaloza.
117
Filcar Transport Services v. Espinas, 688 Phil. 430, 439 (2012) [Per J. Brion,
128
Second Division]; Aguilar, Sr. v. Commercial Savings Bank, 412 Phil. 834, 839- TSN, June 22, 2001, pp. 615-616.
841 (2001) [Per J. Quisumbing, Second Division].
129
Kierulf v. Court of Appeals, 336 Phil. 414, 423 (1997) [Per J. Panganiban, Third
118
1997 RULES OF CIV. PROC., Rule 3, sec. 7 provides: Division].
130
RULE 3. Parties to Civil Actions Pangonorom v. People, 495 Phil. 195, 204 (2005) [Per J. Carpio, First
Division], citing China Airlines, Ltd. v. Court of Appeals, 453 Phil. 959, 978
.... (2003) [Per J. Carpio, First Division]; Romago Electric Co., Inc. v. Court of
Appeals, 388 Phil. 964, 974-975 (2000) [Per J. Gonzaga-Reyes, Third
SECTION 7. Compulsory Joinder of Indispensable Parties. — Parties in interest Division]; Austria v. Court of Appeals, 384 Phil. 408, 415 (2000) [Per J.
without whom no final determination can be had of an action shall be joined either Quisumbing, Second Division]; and Halili v. Court of Appeals, 350 Phil. 906, 912
as plaintiffs or defendants. (1998) [Per J. Panganiban, First Division].
119 131
1997 RULES OF CIV. PROC., Rule 3, sec. 8 provides: See Del Carmen, Jr. v. Bacoy, 686 Phil. 799 (2012) [Per J. Del Castillo, First
Division].
RULE 3. Parties to Civil Actions
132
Mendoza v. Casumpang, et al., 684 Phil. 459, 462 (2012) [Per J. Abad, Third
SECTION 8. Necessary Party. — A necessary party is one who is not Division].
indispensable but who ought to be joined as a party if complete relief is to be
133
accorded as to those already parties, or for a complete determination or settlement The Receiver For North Negros Sugar Company, Inc. v. Ybañez, et al., 133

17 | P a g e
Phil. 825, 833 (1968) [Per J. Zaldivar, En Banc].
134
See Murdock, Sr. and Murdock v. Chuidian, 99 Phil. 821, 824 (1956) [Per J. I concur with the ponencia's conclusions that, first, Ermilinda Abejar (Abejar) is
Padilla, En Banc]. a real party in interest and, second, Caravan Travel and Tours International, Inc.
(Caravan) is vicariously liable for damages as Jimmy Bautista (Bautista)'s
135
FAMILY CODE, art. 220(1). employer.
136
FAMILYCODE, art. 220(1). I write this Opinion (1) to express my reservation on the reasoning employed in
resolving the first issue, and (2) to reflect my view on the interplay between
137
FAMILY CODE, art. 220(2). Articles 2176 and 2180 of the Civil Code and the registered owner rule.
138
FAMILY CODE, art. 220(2). In resolving the first issue, the ponencia reasoned out that Abejar is a real party in
interest because she exercised substitute parental authority over the victim,
139
FAMILY CODE, art. 220(2). Jesmariane Reyes (Reyes).1 Having acted as a parent to Reyes, Abejar suffered
actual and personal loss due to her death.2 Furthermore, Abejar was capacitated to
140
FAMILY CODE, art. 220(7). do what Reyes' actual parents would have been capacitated to do. 3 In a number of
cases, the Court allowed natural parents to recover damages for the death of their
141
Kierulf v. Court of Appeals, 336 Phil. 414, 432 (1997) [Per J. Panganiban, Third children.4
Division].
I disagree with the ponencia's reasoning. In my view, Abejar is a real party in
142
Id. interest, not because she exercised substitute parental authority over Reyes, but
because she has an interest in claiming actual and exemplary damages from
143
Id. Caravan.
144
CIVIL CODE, art. 2208 (1) and (2). Parental authority has no bearing on one's status as a real party in interest in
a quasi-delict case. Parental authority refers to the rights and obligations which
145
G.R. No. 189871, August 13, 2013, 703 SCRA 439 [Per J. Peralta, En Banc]. parents have over their children's person and property until their majority
age.5 This authority is granted to parents to facilitate the performance of their
146
Id. at 458. duties to their children.6 If a child has no parents, grandparents, or siblings, the
child's actual custodian shall exercise substitute parental authority over him or
her.7 Moreover, the child's emancipation terminates parental authority.8

On the other hand, real party in interest refers to the person who is entitled to the
avails of the suit.9 He or she stands to be benefited or injured by the
SEPARATE CONCURRING OPINION
judgment.10 The interest involved must be personal and not based on another
person's rights.11
BRION, J.: The fact that Abejar exercised substitute parental authority over Reyes does not
translate to Abejar's legal interest to recover damages for Reyes' death.

18 | P a g e
Furthermore, Abejar's parental authority over Reyes ceased when the latter turned
eighteen. Thus, at the time of her death, Reyes was no longer under Abejar's
parental authority.

Nevertheless, I agree that Abejar is a real party in interest, because she incurred
actual damages when she paid for Reyes' funeral expenses. Courts may also
impose exemplary damages, in addition to compensatory damages, if the
defendant acted with gross negligence.12 In the present case, Bautista's act of
leaving Reyes rather than bringing her to a hospital amounts to gross
negligence.13 Thus, Abejar may recover these damages from Caravan.

On the second point, I discuss the registered owner rule in relation to Articles
2180 and 2176 of the Civil Code. To stress, I agree that Caravan is directly and
primarily liable for damages as Bautista's employer and as the van's registered
owner.

As early as 1957, this Court held in Erezo v. Jepte14 that a vehicle's registered
owner is primarily responsible for the damage caused to another person. The
Revised Motor Vehicle Law15 requires vehicles to be registered before they may
be used in any public highway. The Court stressed that the main purpose of the
registration is to identify the owner so that if any accident happens or damage is
caused on the public highways, responsibility can be fixed on a definite individual
- the registered owner.16

In Filcar Transport Services v. Espinas,17 the Court had the opportunity to discuss
the interplay between Articles 2176 and 2180 of the Civil Code and the registered
owner rule. The Court ruled that the registered owner of a vehicle is deemed the
employer of the vehicle's driver.18 Thus, the vehicle's registered owner is
vicariously liable for the driver's negligent acts pursuant to Articles 2176 and
Article 2180 of the Civil Code.19 The vicarious liability remains with the
registered owner even when the vehicle had been sold to another person before the
accident but the registration has not yet been transferred. 20The Court emphasized
in R. Transport Corporation v. Yu21 that the employer's liability for the negligent
acts of its subordinate is direct and primary.

Based on the foregoing, I concur with the ponencia's

results.chanroblesvirtuallawlibrary

19 | P a g e
PACIFIC REHOUSE CORPORATION, G.R. No. 184036
Inc., and remanded the case for further proceedings. Also assailed is the CA
PACIFIC CONCORDE CORPORATION,
MIZPAH HOLDINGS, INC., FORUM Present: Resolution[3] dated August 5, 2008 denying petitioners motion for reconsideration.
HOLDINGS CORPORATION, and
EAST ASIA OIL COMPANY,INC., CORONA, C.J., Chairperson,
Petitioners, VELASCO, JR., Petitioners initiatory pleading in Civil Case No. 05-178 reveals the
LEONARDO-DE CASTRO, following averments:
- versus - DEL CASTILLO, and
PEREZ, JJ. COMMON ALLEGATIONS FOR ALL CAUSES OF
EIB SECURITIES, INC., ACTION
Respondent. Promulgated:
1. On various dates during the period June 2003 to
October 13, 2010 March 2004, plaintiffs bought 60,790,000 Kuok Properties, Inc.
(KPP) shares of stock through the Philippine Stock Exchange
(PSE). The KPP shares were acquired by plaintiffs through their
broker, defendant EIB.

2. The KPP shares of stock were bought by plaintiffs

x-----------------------------------------------------------------------------------------x at an average price of P0.22 per share.

3. Also on various dates in July and August 2003,

DECISION plaintiffs bought/acquired 32,180,000 DMCI shares of stock
through the PSE. Of these shares, 16,180,000 were likewise
VELASCO, JR., J.: acquired by the plaintiffs through their broker, defendant EIB,
while the remaining 16,000,000 DMCI shares were transferred
The Case from Westlink Global Equities, Inc.

4. The DMCI shares of stock were bought by plaintiffs

Via this Petition for Review on Certiorari under Rule 45, petitioners seek at an average price of P0.38 per share.

reversal of the Decision[1] dated April 11, 2008 of the Court of Appeals (CA) in
CA-G.R. CV No. 87713 which revoked the October 18, 2005 Resolution,[2] a
judgment on the pleadings, of the Regional Trial Court (RTC), Branch 66 in
Makati City, in Civil Case No. 05-178 entitled Pacific Rehouse Corporation,
Pacific Concorde Corporation, Mizpah Holdings, Inc., et al. v. EIB Securities,
5. On 01 April 2004, plaintiffs and defendant EIB
agreed to sell the 60,790,000 KPP shares of plaintiffs to any
party for the price of P0.14 per share. Attached as Annexes A to
A-6 are copies of the notices of sales sent by defendant EIB to
the plaintiffs, which bear the conformity of plaintiffs
representative.

20 | P a g e
 6. As agreed by plaintiffs and defendant, the sale of
the KPP shares of plaintiffs was made with an option on the part
of the plaintiffs to buy back or reacquire the said KPP shares
within a period of thirty (30) days from the transaction date, at
the buy-back price of P0.18 per share (See Annexes A to A-6).
7. When the last day of the 30-day buy back period for
the KPP shares came, plaintiff were undecided on whether or
not to exercise their option to reacquire said shares. Thus,
plaintiffs and defendant EIB agreed that plaintiffs would have
an extended period of until 03 June 2004 to exercise their option
to buy back/reacquire the KKP shares that had been sold.
8. Eventually, plaintiffs decided not to exercise their
option to buy back the KPP shares and did not give any buy-
back instruction/s to their broker, defendant EIB.
9. On various dates in June 2004, without plaintiffs
prior knowledge and consent, defendant EIB sold plaintiffs
32,180,000 DMCI shares of stock for an average price of P0.24
per share. Defendant EIB sold the DMCI shares of plaintiffs for
an average price of only P0.24 per share despite full knowledge
by defendant EIB that the sale would result in a substantial loss
to the plaintiffs of around P4.5 Million since plaintiffs acquired
the DMCI shares at P0.38 per share. (cf. Article 1888, Civil
Code). Attached Annexes B to B-7 are the Sell Confirmation
slips issued by defendant EIB showing the unauthorized sale of
plaintiffs 32,180,000 DMCI shares.
9.1 The proceeds of said DMCI shares sold by
defendant EIB without plaintiffs knowledge and
consent were used by defendant EIB to buy back
61,100,000 KPP shares earlier sold by plaintiffs on 01
April 2004. Attached as Annexes C to C-5 are the Buy
Confirmation slips issued by defendant showing the
unauthorized buy back of KPP shares.
9.2 Defendant EIB sold without authority plaintiffs
32,180,000 DMCI shares and used the proceeds thereof
to buy back 61,000,000 KPP shares because defendant
21 | P a g e
EIB made an unauthorized promise and commitment to
the buyer/s of plantiffs KPP shares in April 2004 that
plaintiffs would buy back the KPP shares.
9.3 Plaintiffs learned of the unauthorized sale of their
32,180,000 DMCI shares and the unauthorized buy
back of 61,000,000 KPP shares only much later. Upon
further inquiry, plaintiffs also learned that all
throughout their business dealings, defendant EIB had
surreptitiously charged and collected from plaintiffs
exorbitant interest amounting to thirty percent (30%) of
all amounts owing from the plaintiffs.
10. On 05 January 2005, plaintiffs wrote to defendant EIB to demand
that their 32,180,000 DMCI shares be transferred to Westlink
Global Equities Inc. (Westlink). Copies of the demand letters,
all dated 05 January 2005, are attached as Annex D to D-4
respectively.
11. Since the 32,180,000 DMCI shares belonging to plaintiffs had
already been sold by defendant EIB without plaintiffs prior
knowledge and consent as early as June 2004, defendant EIB
could not comply with the demand of plaintiffs as stated in their
demand letters dated 05 January 2005.
12. In his letters to the plaintiffs dated 12 January 2005,
defendant EIB admitted having sold the 32,180,000 DMCI
shares of stock of plaintiffs without the latters prior knowledge
and consent. Copies of defendant EIBs letters to plaintiffs, all
dated 12 January 2005, are attached as Annexes E to E-4,
respectively.
12.1 Defendant EIB states in its aforesaid letters that
it sent statements of account to plaintiffs in July 2004.
Defendant EIB claims, albeit erroneously, that since
plaintiffs made no exceptions to the statements of
account, the sale of plaintiffs DMCI shares in June
2004 [was] supposedly validly executed.
 13. Hence, this Complaint.
xxxx
SECOND CAUSE OF ACTION
17. Plaintiffs replead all of the foregoing allegations.
18. The sale by defendant EIB of the 32,180,000 DMCI shares
of plaintiffs was done with malice and fraudulent intent. As
such, defendant should be directed to pay plaintiffs the amount
of at least PhP3,000,000.00 as moral damages.[4]
In response, respondent EIB Securities, Inc. (EIB) submitted its Answer
which contained the following averments:
ADMISSIONS AND DENIALS:
1. Defendant admits the allegations contained in
paragraphs under the heading The Parties. Likewise, defendant
admits the allegations contained in paragraph 1.
2. Paragraph 2 of the Complaint is specifically
denied, the truth of the matter is that the KPP shares of stock
were bought by plaintiffs at an average price of only 18
centavos per share.
3. Paragraph 3 is admitted, qualified, however, that
the remaining 16,000,000 DMCI shares of plaintiffs were
transferred by Westlink Global Equities, Inc. and other
brokerages firms to the defendant primarily to serve as a
collateral in the cash account obligations of the plaintiffs to the
defendant.
4. Paragraph 4 of the Complaint is specifically
denied, the truth of the matter being the DMCI shares of stock
were bought by the plaintiffs at an approximate average price of
only 25 centavos per share.
22 | P a g e
5. Defendant admits paragraph 5 of the Complaint
insofar as the allegation that plaintiffs and defendant agreed to
sell the 60,790,000 KPP share of plaintiffs to any party for the
price of 14 centavos per share, qualified, however, by the
presence of a provision Full Cross to Seller meaning that the
Sellers (who are the plaintiffs) have the obligation to buy back
or reacquire the shares from the buyers.
6. Defendant specifically denies paragraph 6 of the
Complaint, the truth of the matter and as evidenced by the same
Notices of Sale (AnnexA to A-6 of the Complaint), plaintiffs
have no option to buy back or reacquire the said KPP shares, the
nature or kind of transaction agreement is Full Cross to seller
which is an obligation and not merely an option on the part of
the plaintiffs to buy back or reacquire the said KPP shares sold
to buyers.
7. Defendant specifically and vehemently denies the
allegations of paragraphs 7 and 8 of the Complaint. The truth of
the matter is that there was no extension agreed upon by the
parties for the plaintiffs to exercise option to buy back/reacquire
the Kuok Properties, Inc. shares of stocks (KKP). The Contracts
for the sale of KPP shares of stocks as already stated above and
as clearly shown from the same Annexes A to A-6 of the
Complaint was an obligation that there was no extension period
given to the plaintiffs.
8. Defendant also specifically and vehemently denies
the allegations of paragraphs 9 of the Complaint and its sub-
paragraphs. The truth of the matter being that under the trading
rules, honoring ones obligation is a sacred commitment of
stocks and market traders. Considering that in the sale of the
KPP shares there is an obligation as certified by the word Full
Cross to Seller, the KPP shares of stocks that were sold to
buyers have to be bought back 30 days from the transaction date
at the Buy Back Amount of 18 centavos per share and that
plaintiffs and defendant have to honor the said buy back
obligation. Considering, however, that plaintiffs were not
delivering funds to the defendant in order to honor the said buy
back obligation, not to mention the Cash account obligations of
 the plaintiffs to the defendant amounting to more or less 70
Million Pesos, defendant had no more recourse but to buy back
the KPP shares from the buyers by selling the DMCI shares of
the plaintiffs under the defendants possession, and thus,
enforcing the provisions of the Securities Dealing Accounts
Agreements that was signed by the plaintiffs in favor of the
defendant, a copy of which is hereto attached and made an
integral part hereof as Annex 1. Section 7 of the aforesaid
Securities Dealing Accounts Agreements states:
7. Lien
The client agrees that all monies and/or securities
and/or all other property of the Client (plaintiffs) in the
Companys (defendant) custody or control held from
time to time shall be subject to a general lien in favour
of Company for the discharge of all or any
indebtedness of the Client to the Company. The Client
shall not be entitled to withdraw any monies or
securities held by the Company pending the payment in
full to the Company of any indebtedness of the Client
to the Company. The company shall be entitled at
any time and withoutnotice to the Client to retain,
apply, sell or dispose of all or any of the [clients]
property if any such obligation or liability is not
discharged in full by the client when due or on
demand in or towards the payment and discharge of
such obligation or liability and the Company shall
be under no duty to the client as to the price
obtained or any losses or liabilities incurred or
arising in respect of any such sale or
disposal. Subject to the relevant law and regulation on
the matter, the client hereby authorizes the Company,
on his/its behalf, at any time and without notice to the
clients property if any such obligation or liability is not
discharged. [Emphasis in the original.]
[Defendant] specifically denies the allegation of the
plaintiffs that defendant sold the DMCI shares of plaintiffs for
an average price of only 24 centavos for the truth of the matter
23 | P a g e
being the average price those DMCI shares were sold was
P0.2565 centavos per share and likewise, that price was the
controlling market price of DMCI share at the time of the
transaction. Defendant likewise, specifically denies the
allegation that defendant surreptitiously charged and collected
an interest of 30% from the plaintiff for the truth of the matter is
that what defendant did not charge such interest.
Moreoever, and contrary to the allegations of the
Complaint, plaintiffs are fully aware and knowledgeable of the
sale of their DMCI shares as early as June 2004 and that the
proceeds thereof were not even enough to fully pay the buy
back obligation of the plaintiffs to the buyers of KPP shares of
stocks.
Plaintiffs, in order to feign ignorance of the sale of
their DMCI shares had attached in the Complaint various Sales
Confirmations Receipts which were marked thereto as Annexes
B to B-7. Wittingly or unwittingly, plaintiffs attached only the
Receipts that do not bear the corresponding acknowledgement
signatures of their respective officers. As averred by the
defendant, plaintiffs were fully aware and knowledgeable of the
sale of their DMCI shares as early June 2004, and to expose the
real truth, defendant hereto attaches the identical Sales
Confirmation Receipts hereto marked as Annexes 2 to 2-G.
In the same manner that in each and every Sales
Confirmation Receipts (Annexes 2 to 2-G) the following
IMPORTANT NOTICE is written:
All transaction are subject to the rules and
customs of the Exchange and its Clearing House. It is
agreed that all securities shall secure all my/our
liabilities to e.securities and is authorized in their
discretion to all or any of them without notice to
we/us whenever in the opinion of e.securities my/our
account is not properly secured. [Emphasis in the
original.]
Likewise, after each and every transaction, defendant
sent Statement of Accounts showing a detailed transaction that
were entered into and that plaintiffs duly received aforesaid
 Statement of Accounts from the defendants as evidenced by the rejoinder. On October 7, 2005, petitioners moved that the trial court resolve their
signatures of plaintiffs respective officers hereto marked as
Annexes 3 to 3-G. motion for judgment on the pleadings.

In each and every Statements of Accounts the

following Notice is clearly printed therein:
This statement will be considered correct
unless we receive notice in writing of any exceptions
within 5 days from receipt. Please address all
correspondence concerning exceptions to our
OPERATIONS DEPARTMENT. Kindly notify us in
writing of any changes in your address.
Hence, plaintiffs, may have other ulterior motives in
filing this baseless Complaint since they fully knew and
consented almost a year ago of the nature of their transactions
with the defendant.
9. Defendant admits paragraphs 10 to 12 inclusive of
the subparagraphs only to the existence of the plaintiffs demand
letters all dated January 5, 20[0]5, but qualifies that the
aforesaid letters had been answered by the defendant on January
12, 2005. The rest of the allegations are being specifically
denied. In defendants reply to the said letters, defendant clearly
pointed out that plaintiffs had been duly notified of the subject
transactions as early as June 9, 2004. That defendant had
furnished the plaintiffs as early as July 14, 2004 Statements of
Accounts of all their transactions for the period of June 1-20,
2004 which included the sale of the subject shares with a clear
instruction to notify the defendant in writing within five (5) days
from receipt thereof of any exception therein. That if no
correspondence was received by the defendant from the
plaintiffs, the sale shall be considered as validly executed.[5]
The Ruling of the RTC
On October 18, 2005, the RTC rendered its judgment on the pleadings
through a Resolution, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is
hereby rendered directing the defendant [EIB] to return the
plaintiffs [petitioners] 32,180,000 DMCI shares, as of judicial
demand.
On the other hand, plaintiffs are directed to reimburse
the defendant the amount of P10,942,200.00, representing the
buy back price of the 60,790,000 KPP shares of stocks at P0.18
per share.
Defendants Motion to Discharge Writ of Preliminary
Attachment, based on the submitted counter bond issued by
Intra Strata Assurance Corporation is hereby GRANTED.
SO ORDERED.[8]
The trial court found merit in rendering a judgment on the
pleadings: first, the assailed transactions were all documented; second, the
transactions were admitted by the parties; and third, the main issues can be
resolved based on the parties documentary evidence appended to the pleadings.

On July 19, 2005, petitioners registered a Motion for Judgment on the

Pleadings,[6] asserting that EIB materially admitted the allegations of their The RTC, interpreting the agreement agreed upon by the parties, held
complaint by not tendering any genuine issue in its answer. This was that the sale of the Kuok Properties, Inc. (KKP) shares was with a buy-back
[7]
opposed by EIB, with both parties subsequently filing their respective reply and

24 | P a g e
obligation and not an option as petitioners argued. However, it found that, as per
their notices of sale agreements, the collateral for the sale transactions is the same
KKP shares. Thus, it held that EIB erred in selling the DMCI shares instead of the
KKP shares which served as collateral. It ruled that Section 7 of the Securities
Dealings Account Agreement (SDAA) does not apply, since it provided for a
general agreement executed prior to the subsequent and specific agreements
entered into by the parties specifically for the sale and repurchase of the KKP
shares. Thus, the trial court concluded that EIB went beyond its authority in
selling petitioners DMCI shares in order to buy back the KKP shares.
Anent petitioners apparent lack of objection to the account statements
issued by EIB and the sales confirmation receipts covering the sale of DMCI
shares, the RTC viewed it as not constituting ratification by petitioners for said
documents did not disclose the purpose of the sale, applying the rule that any
ambiguity in a written document should be strictly construed against the party
who caused its preparation. In fine, it held that since the parties relation is
fiduciary in nature, with more reason that EIB should have been more forthright in
getting the prior consent of petitioners before selling the DMCI shares.
EIB timely filed its motion for partial reconsideration of the RTC
Resolution dated October 18, 2005. In the meantime, EIB moved to inhibit Judge
Rommel O. Baybay from further handling the case. Both motions of EIB were
opposed by petitioners.
On April 28, 2006, RTC Judge Baybay inhibited himself.[9]
25 | P a g e
Subsequently, on July 26, 2006, the RTC, Branch 66, through its new
Presiding Judge, Joselito C. Villarosa, denied EIBs motion for partial
reconsideration.[10] After oral arguments on June 23, 2006, the RTC affirmed the
propriety of the judgment on the pleadings rendered by Pairing Judge
Baybay. Citing Savellano v. Northwest Airlines,[11] on the strict construal of any
ambiguity on a written document on the party issuing it, the trial court reiterated
its ruling that petitioners are not estopped from assailing the sale by EIB of their
DMCI shares, for the sale confirmation receipts do not disclose the purpose of the
sales made.
The Ruling of the CA
On April 11, 2008, the appellate court rendered the assailed decision,
revoking the RTCs judgment on the pleadings and remanding the case back to the
RTC for further proceedings. The fallo reads:
WHEREFORE, premises considered, the instant
appeal is GRANTED. Accordingly, the Court a quos
Resolution dated 18 October 2005 is REVOKED and SET
ASIDE and this case is ordered remanded to the Court a
quo which is directed to conduct further proceedings
hereof with dispatch.
SO ORDERED.[12]
While EIB raised six issues on appeal, the CA resolvedwhat it considered
the pivotal issuethe propriety of the rendition by the trial court of a judgment on
the pleadings.The CA found that while some material allegations in petitioners
 THE TRIAL COURT WAS CORRECT IN RULING THAT
complaint were admitted by EIB, the latters answer nonetheless raised other PETITIONERS DMCI SHARES COULD NOT BE SOLD BY
genuine issues which it viewed can only be threshed out in a full-blown trial, like RESPONDENT EIB UNDER THE NOTICES OF SALE.
the average price of the KPP shares of stock, the scope of the collaterals stated in III
the Notices of Sale and the monetary claims of the Appellant [EIB] against the
THE TRIAL COURT WAS CORRECT IN HOLDING THAT
Appellees [petitioners].[13] RESPONDENT EIB COULD NOT INVOKE SECTION 7 OF
THE SECURITIES DEALINGS ACCOUNT AGREEMENT
AS BASIS FOR THE SALE OF PETITIONERS DMCI
Petitioners filed their motion for reconsideration, while EIB filed a SHARES.
Manifestation with Motion for Clarification/Deletion which was opposed by
IV
petitioners. In its motion for clarification/deletion, EIB took exception to the
THE TRIAL COURT WAS CORRECT IN HOLDING THAT
appellate courts pronouncement that it (EIB) admitted the sale of petitioners PETITIONERS WERE NOT BARRED BY RATIFICATION,
DMCI shares for the purpose of buying back the KKP shares, which strengthened LACHES OR ESTOPPEL FROM QUESTIONING THE
UNAUTHORIZED SALE OF THEIR DMCI SHARES.
petitioners claim of the nullity of the sale. Both motions were denied by the
assailed resolution issued on August 5, 2008. V

THE TRIAL COURT HAD JURISDICTION OVER THE

CASE FILED BEFORE IT BY PETITIONERS WHO HAD
Thus, we have this petition.
FULLY PAID THE DOCKET FEES ASSESSED BY THE
CLERK OF COURT.
The Issues
VI
I
UNDER PREVAILING JURISPRUDENCE, THE PAIRING
CONTRARY TO THE RULING OF THE COURT OF JUDGE DID NOT COMMIT GRAVE ABUSE OF
APPEALS, THE TRIAL COURT WAS CORRECT IN DISCRETION. IN ANY EVENT, THE APPOINTMENT OF A
RENDERING JUDGMENT ON THE PLEADINGS IN THE PRESIDING JUDGE WHO EVENTUALLY DENIED
CASE BEFORE IT. RESPONDENTS MOTION FOR RECONSIDERATION
RENDERED THE MATTER MOOT AND ACADEMIC.[14]
II

26 | P a g e

The Courts Ruling
We grant the petition.
Threshold Issue: Proper Payment of Docket Fees
EIB asserts that the trial court has no jurisdiction over the complaint on
account of insufficient dockets fees. Although petitioners paid a total of PhP
120,758.80[15] in legal fees with the RTC, EIB argues that what was paid is based
merely on petitioners prayer for moral damages of PhP 3 million, exemplary
damages of PhP 3 million, and attorneys fees of PhP 2 million, but not including
petitioners claim for PhP 4.5 million as actual damages as averred in paragraph 9
of the complaint. Thus, EIB, relying on Manchester Development Corporation v.
Court of Appeals[16] (Manchester) and Sun Insurance Office, Ltd.
Asuncion,[17] maintains that the RTC should not have entertained the case.
It is hornbook law that courts acquire jurisdiction over a case only upon
payment of the prescribed docket fee. A plain reading of the prayer does not show
that petitioners asked for the payment of actual damages of PhP 4.5 million. The
reliefs asked by petitioners in the prayer are:
1. Upon the filing of the Complaint, a writ of preliminary
attachment be issued ex parte against defendant pursuant to
Section 2, Rule 57 of the 1997 Rules of Civil Procedure;
2. After trial, judgment rendered in favor of plaintiffs and
against defendant as follows:
27 | P a g e
On the FIRST CAUSE OF ACTION declaring void the
sale by defendant of the 32,180,000 DMCI shares of stock
of plaintiffs and directing defendant to return to plaintiffs
the latters 32,180,000 DMCI shares of stock, or in the event
the return thereof is not possible, holding defendant liable
under Articles 1888,1889,1909 and other pertinent
provisions of the Civil Code.
On the SECOND CAUSE OF ACTION directing
defendant to pay plaintiffs moral damages in the amount of
at least P3,000,000.00;
On the THIRD CAUSE OF ACTION directing defendant
to pay plaintiffs exemplary damages in the amount of at
least P3,000,000.00; and
On the FOURTH CAUSE OF ACTION directing
defendant to pay plaintiffs attorneys fees in the amount of
P2,000,000.00 and such amounts as may be proven at the
trial as litigation expenses.
Other just and equitable relief are likewise prayed for.[18]
v.
Since the prayer did not ask for the payment of actual damages of PhP
4.5 million, the clerk of court correctly assessed the amount of PhP 120,758.80 as
docket fees based on the total amount of PhP 8 million consisting of PhP 3 million
as moral damages, PhP 3 million as exemplary damages, and PhP 2 million as
attorneys fees.
In disputing the fees paid by petitioners, respondent relies on our ruling
in Manchester, where we said that 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. [19]

EIB insinuates that petitioners, by alleging the substantial loss of PhP 4.5
million from the sale of the DMCI shares but not specifying the amount in their
prayer, circumvented the Manchester ruling to evade the payment of the correct
filing fees. This postulation is incorrect. It is clear that petitioners demanded the
return of the DMCI shares in the prayer of the complaint and NOT the alleged loss
in the value of the shares. If the DMCI shares are returned, then no actual
damages are suffered by petitioners. A recall of the averment in par. 9 of the
complaint shows that the alleged loss of PhP 4.5 million to petitioners resulted
from the sale of DMCI shares at PhP 0.24 per share when they acquired it at PhP
0.38 per share. More importantly, the court was proscribed by
the Manchester ruling from granting actual damages of PhP 4.5 million to
petitioners, because precisely the alleged damages were never sought in the
prayer. Ergo, EIBs attack on the trial courts assumption of jurisdiction must fail.
Procedural Issue: Judgment on the Pleadings
At the outset, we lay stress on the Courts policy that cases should be
promptly and expeditiously resolved. The Rules of Court seeks to abbreviate court
procedure in order to allow the swift disposition of cases. Specifically, special
strategies like demurrer to evidence, judgment on the pleadings, and summary
judgment were adopted to attain this avowed goal. Full-blown trial is dispensed
with and judgment is rendered on the basis of the pleadings, supporting affidavits,
depositions, and admissions of the parties.
28 | P a g e
In the instant petition, the Court is confronted with the propriety of the
judgment on the pleadings rendered by the Makati City RTC. Petitioners claim
such adjudication on said papers and attachments is proper.
The petitioners position is impressed with merit.
Rule 34 of the Rules of Court provides that where an answer fails to
tender an issue or otherwise admits the material allegations of the adverse partys
pleading, the court may, on motion of that party, direct judgment on such
pleading. Judgment on the pleadings is, therefore, based exclusively upon the
allegations appearing in the pleadings of the parties and the annexes, if any,
without consideration of any evidence aliunde.[20]
When what is left are not genuinely issues requiring trial but questions
concerning the proper interpretation of the provisions of some written
contract attached to the pleadings, judgment on the pleadings is proper.[21]
From the pleadings, the parties admitted the following facts:
(1) EIB is the stockbroker of petitioners.
(2) Petitioners and EIB entered into a SDAA, Annex 1 of EIBs answer,
which governed the relationship between petitioners as clients and EIB as
stockbroker. Sec. 7 of the SDAA provides:
7. Lien
The client agrees that all monies and/or securities and/or all
other property of the Client (plaintiffs) in the Companys
(defendant) custody or control held from time to time shall
 be subject to a general lien in favour of Company for the
discharge of all or any indebtedness of the Client to the
Company. The Client shall not be entitled to withdraw any
monies or securities held by the Company pending the
payment in full to the Company of any indebtedness of the
Client to the Company. The company shall be entitled at any
time and without notice to the Client to retain, apply, sell or
dispose of all or any of the [clients] property if any such
obligation or liability is not discharged in full by the client when
due or on demand in or towards the payment and discharge of
such obligation or liability and the Company shall be under no
duty to the client as to the price obtained or any losses or
liabilities incurred or arising in respect of any such sale or
disposal. Subject to the relevant law and regulation on the
matter, the client hereby authorizes the Company, on his/its
behalf, at any time and without notice to the clients property if
any such obligation or liability is not
discharged.[22] (Emphasis supplied.)
It is clear from the SDAA that all monies, securities, and other properties of
petitioners in EIBs custody or control shall be subject to a general lien in favor of
the latter solely for the discharge of all or any indebtedness to EIB.
(3) From June 2003 to March 2004, petitioners, through their broker,
EIB, bought 60,790,000 KKP shares of stock at the Philippine Stock Exchange
(PSE).
(4) On various dates in July and August 2003, petitioners bought
16,180,000 DMCI shares of stock through EIB likewise at the PSE, while
16,000,000 DMCI shares of petitioners were transferred to EIB by Westlink
Global Equities, Inc. Thus, a total of 32,180,000 DMCI shares of stock owned by
petitioners were placed in the custody or control of EIB.
29 | P a g e
(5) On April 1, 2004, petitioners ordered the sale of 60,790,000 KPP
shares to any buyer at the price of PhP 0.14 per share. The KPP shares were
eventually sold at PhP 0.14 per share to interested buyers.
(6) Petitioners failed to reacquire or buy back the KPP shares at PhP 0.18
per share after 30 days from date of transaction.
(7) As petitioners failed to deliver funds to EIB to honor the buy-back
obligation, not to mention the cash account obligations of petitioners in the
amount of PhP 70 million to EIB, EIB had no recourse but to sell the DMCI
shares of petitioners to reacquire the KPP shares.
(8) Thus, on various dates in June 2004, EIB, without petitioners
knowledge and consent, sold petitioners 32,180,000 DMCI shares at the
controlling market price. EIB later sent sales confirmation receipts to petitioners
regarding the sale of their DMCI shares, said receipts containing the common
notice, which reads:
All transaction[s] are subject to the rules and customs
of the Exchange and its Clearing House. It is agreed that all
securities shall secure all my/our liabilities to e.securities and
is authorized in their discretion to sell all or any of them without
notice to we/us whenever in the opinion of e.securities my/our
account is not properly secured.[23] (Emphasis supplied.)
(9) EIB sent statements of accounts to petitioners showing the sale of the
DMCI shares which uniformly contained the following notice:
This statement will be considered correct unless we receive
notice in writing of any exceptions within 5 days from receipt.
Please address all correspondence concerning exceptions to our
 OPERATIONS DEPARTMENT. Kindly notify us in writing of
any changes in your address.[24]
(10) On January 12, 2005, petitioners wrote EIB demanding the return of
the 32,180,000 DMCI shares.
(11) On January 12, 2005, EIB rejected petitioners demand for the return
of the DMCI shares, as those were already sold to cover the buy back of the KPP
shares.
(12) Petitioners prayer is the return of the 32,180,000 DMCI shares by
EIB to them.
The principal issue in petitioners complaint is whether EIB can be
compelled to return DMCI shares to petitioners based on the alleged unauthorized
disposal or sale of said shares to comply with the buy back of the KKP shares.
The threshold issue raised in the answer is the lack of jurisdiction over the
complaint due to the alleged nonpayment of the proper docket fees. Affirmative
defenses presented are that EIB disposed of the DMCI shares pursuant to Sec. 7 of
the SDAA, and the notices of sale, ratification and laches.
Based on the admissions in the pleadings and documents attached, the
Court finds that the issues presented by the complaint and the answer can be
resolved within the four corners of said pleadings without need to conduct further
hearings. As explained by the Court in Philippine National Bank v. Utility
Assurance & Surety Co., Inc.,[25] when what remains to be done is the proper
interpretation of the contracts or documents attached to the pleadings, then
judgment on the pleadings is proper. In the case at bar, the issue of whether the
sale of DMCI shares to effectuate the buy back of the KKP shares is valid can be
decided by the trial court based on the SDAA, Notices of Sale, Sales Confirmation
30 | P a g e
Receipts, the letters of the parties, and other appendages to the pleadings in
conjunction with the allegations or admissions contained in the pleadings without
need of trial. The Makati City RTC is, therefore, correct in issuing the October 18,
2005 Resolution granting the Motion for Judgment on the Pleadings.
The CA nullified the October 18, 2005 Resolution on the ground that
there are other issues that must be resolved during a full-blown trial, ratiocinating
this way:
While it may be true that the Appellant has already
admitted that the sale of the DMCI shares was for the purpose of
buying back the KPP shares and that such admission
strengthened Appellees claim that the sale of the DMCI shares
is a nullity, there were other issues raised by the Appellant that
can only be threshed out during a full blown trial, viz: the
average price of the KPP shares of stock, the scope of the
collaterals stated in the Notices of Sale and the monetary claims
of the Appellant against the Appellees.[26]
To the mind of the Court, these matters are not genuinely triable issues
but actually minor issues or mere incidental questions that can be resolved by
construing the statements embodied in the appendages to the pleadings. The facts
that gave rise to the side issues are undisputed and were already presented to the
trial court rendering trial unnecessary.
On the disparity in the average price of KPP shares of stock, petitioners
claim that the average purchase price of the KPP share is PhP 0.22 per share (par.
2 of the complaint), while EIB claims it is only PhP 0.18 per share (par. 2 of the
answer). The dissimilarity in the acquisition price paid by petitioners for the KPP
 Makati City
shares is a non-issue, since the relief prayed for is the return of the DMCI shares Philippine[s]
and not the KPP shares. Petitioners did not even claim actual damages in the
RE: SALE OF KUOK PROPERTIES INC., (KPP)
prayer of the complaint.
As agreed upon the above mentioned stock will be sold to a
party with the following conditions attached:
On the scope of the collaterals stated in the Notices of Sale, it is clear
from the notices that the collateral is KPP Shares/Property: NUMBER OF SHARES : 15,560,000/SHARES
AMOUNT @ SHARE : PHP 0.14
CHARGES : Sellers Account
BUY BACK DATE : after 30 days (used on transaction date)
April 01, 2004 BUY BACK AMOUNT : PHP 0.18
DATE OF EXECUTION : APRIL 01, 200[4]
PACIFIC REHOUSE CORP. KIND OF TRANSACTION : FULL CROSS TO SELLER
Makati City COLLATERAL : KPP SHARES/PROPERTY
Philippine[s]
RE: SALE OF KUOK PROPERTIES INC., (KPP) For and behalf of EIB Securities.

As agreed upon the above mentioned stock will be sold to a [Signed]

party with the following conditions attached: PAULINE TAN[28]

NUMBER OF SHARES : 5,800,000/SHARES

AMOUNT @ SHARE : PHP 0.14
CHARGES : Sellers Account April 01, 2004
BUY BACK DATE : after 30 days (used on transaction date)
BUY BACK AMOUNT : PHP 0.18 MIZPAH HOLDINGS INC.
DATE OF EXECUTION : APRIL 01, 200[4] Makati City
KIND OF TRANSACTION : FULL CROSS TO SELLER Philippine[s]
COLLATERAL : KPP SHARES/PROPERTY RE: SALE OF KUOK PROPERTIES INC., (KPP)

For and behalf of EIB Securities. As agreed upon the above mentioned stock will be sold to a
party with the following conditions attached:
[Signed]
PAULINE TAN[27] NUMBER OF SHARES : 8,430,000/SHARES
AMOUNT @ SHARE : PHP 0.14
April 01, 2004 CHARGES : Sellers Account
BUY BACK DATE : after 30 days (used on transaction date)
FORUM HOLDINGS CORP. BUY BACK AMOUNT : PHP 0.18

31 | P a g e
 DATE OF EXECUTION : APRIL 01, 200[4] RE: SALE OF KUOK PROPERTIES INC., (KPP)
KIND OF TRANSACTION : FULL CROSS TO SELLER
COLLATERAL : KPP SHARES/PROPERTY As agreed upon the above mentioned stock will be sold to a
party with the following conditions attached:
For and behalf of EIB Securities.
NUMBER OF SHARES : 12,350,000/SHARES
[Signed] AMOUNT @ SHARE : PHP 0.14
PAULINE TAN[29] CHARGES : Sellers Account
BUY BACK DATE : after 30 days (used on transaction date)
April 01, 2004 BUY BACK AMOUNT : PHP 0.18
DATE OF EXECUTION : APRIL 01, 200[4]
REXLON REALTY GROUP INC. KIND OF TRANSACTION : FULL CROSS TO SELLER
Makati City COLLATERAL : KPP SHARES/PROPERTY
Philippine[s]
RE: SALE OF KUOK PROPERTIES INC., (KPP) For and behalf of EIB Securities.

As agreed upon the above mentioned stock will be sold to a [Signed]

party with the following conditions attached: PAULINE TAN[31]

NUMBER OF SHARES : 5,000,000/SHARES April 01, 2004

AMOUNT @ SHARE : PHP 0.14
CHARGES : Sellers Account PACIFIC WIDE REALTY DEVELOPMENT CORP.
BUY BACK DATE : after 30 days (used on transaction date) Makati City
BUY BACK AMOUNT : PHP 0.18 Philippine[s]
DATE OF EXECUTION : APRIL 01, 200[4] RE: SALE OF KUOK PROPERTIES INC., (KPP)
KIND OF TRANSACTION : FULL CROSS TO SELLER
COLLATERAL : KPP SHARES/PROPERTY As agreed upon the above mentioned stock will be sold to a
party with the following conditions attached:
For and behalf of EIB Securities.
NUMBER OF SHARES : 9,000,000/SHARES
[Signed] AMOUNT @ SHARE : PHP 0.14
PAULINE TAN[30] CHARGES : Sellers Account
BUY BACK DATE : after 30 days (used on transaction date)
BUY BACK AMOUNT : PHP 0.18
April 01, 2004 DATE OF EXECUTION : APRIL 01, 200[4]
KIND OF TRANSACTION : FULL CROSS TO SELLER
RECOVERY DEVELOPMENT CORP. COLLATERAL : KPP SHARES/PROPERTY
Makati City
Philippine[s] For and behalf of EIB Securities

32 | P a g e

[Signed]
PAULINE TAN[32]
The determination of the collateral in said notices can easily be made
from the notices itself and Sec. 7 of the SDAA. The KPP shares stated in the
notices refer to the KPP shares owned by the Petitioners and sold to third parties
by EIB. The word Property in the notices is elucidated in the aforementioned Sec.
7 as all monies and/or securities and/or all other property of the Client in the
companys custody or control held from time to time (Clients Property) x x x.
These properties shall be subject to a general lien in favour of the Company for
the discharge of all or any indebtedness and other obligations of the client to
[EIB].[33] Thus, the DMCI shares owned by petitioners are covered by the word
Property in the Notices of Sale.
On the monetary claims by petitioners against EIB, said claims are not a
bar to a judgment on the pleadings. While it was averred by petitioners under par.
9 of the complaint that they suffered a loss of PhP 4.5 million from the sale of the
DMCI shares, the claim for actual damages was not set up as a relief in the prayer
and, therefore, the Manchester doctrine precludes such award to petitioners. Anent
the claim for moral damages of PhP 3 million, exemplary damages of PhP 3
million, and attorneys fees of PhP 2 million, the claim is not proper in a judgment
on the pleadings in the absence of proof.[34] Sans such proof extent on record, the
claim for damages is a non-issue.
33 | P a g e
In sum, there are no genuine issues that cannot be determined based on
the pleadings. Ergo, the assailed October 18, 2005 Resolution of the Makati City
RTC granting judgment on the pleadings is in accord with Rule 34 of the Rules
of Court and settled jurisprudence.
Authority of EIB to Sell DMCI Shares of Petitioners
Petitioners assert the inapplicability of Sec. 7 of the SDAA to their
liability to reacquire the KKP shares, as the DMCI shares were not sold to pay
for their PhP 70 million obligation to EIB but to settle their obligation to the
buyers of their KKP shares.
Petitioners position is impressed with merit. We rule that EIB has no
legal authority to sell the DMCI shares for the purpose or reacquiring the KKP
shares.
Sec. 7 of the SDAA pertains to outstanding obligations or indebtedness of
petitioners to EIB but does not cover any obligation of petitioners to third-party
purchasers to reacquire its KKP shares under the full cross to seller buy-back
obligation subject of the various notices of sale.
Let us scrutinize anew Sec. 7 of the SDAA:
7. Lien
The client agrees that all monies and/or securities and/or all
other property of the Client (plaintiffs) in the Companys
(defendant) custody or control held from time to time shall
be subject to a general lien in favour of Company for the
discharge of all or any indebtedness of the Client to the
Company. The Client shall not be entitled to withdraw any
monies or securities held by the Company pending the payment
 in full to the Company of any indebtedness of the Client to the
Company. The company shall be entitled at any time and authority to do so, for petitioners never gave their consent or permission to the
without notice to the Client to retain, apply, sell or dispose of all sale.
or any of the [clients] property if any such obligation or liability
is not discharged in full by the client when due or on demand in Moreover, Article 1881 of the Civil Code provides that the agent must
or towards the payment and discharge of such obligation or act within the scope of his authority. Pursuant to the authority given by the
liability and the Company shall be under no duty to the client as
to the price obtained or any losses or liabilities incurred or principal, the agent is granted the right to affect the legal relations of his principal
arising in respect of any such sale or disposal. Subject to the by the performance of acts effectuated in accordance with the principals
relevant law and regulation on the matter, the client hereby
authorizes the Company, on his/its behalf, at any time and manifestation of consent.[35] In the case at bar, the scope of authority of EIB as
without notice to the clients property if any such obligation or
agent of petitioners is to retain, apply, sell or dispose of all or any of the clients
liability is not discharged. (Emphasis supplied.)
[petitioners] property, if all or any indebtedness or other obligations of petitioners
to EIB are not discharged in full by petitioners when due or on demand in or
As couched, the lien in favor of EIB attaches to any money, securities, or
towards the payment and discharge of such obligation or liability. The right to sell
properties of petitioners which are in EIBs possession for the discharge of all or
or dispose of the properties of petitioners by EIB is unequivocally confined to
any indebtedness and obligations of petitioners to EIB. For this, petitioners are
payment of the obligations and liabilities of petitioners to EIB and none other.
also barred from withdrawing its assets that are in the possession of EIB pending
Thus, when EIB sold the DMCI shares to buy back the KKP shares, it paid the
full payment by petitioners of their indebtedness to EIB. The above proviso also
proceeds to the vendees of said shares, the act of which is clearly an obligation to
gives EIB the authority to sell or dispose of petitioners securities or properties in
a third party and, hence, is beyond the ambit of its authority as agent. Such act is
its possession to pay for petitioners indebtedness to EIB. It is, thus, evident from
surely illegal and does not bind petitioners as principals of EIB.
the above SDAA provision that said lien and authority granted to EIB to
dispose of petitioners securities or properties in the formers possession apply
As a last-ditch effort, EIB seeks refuge from the notices of sales it issued
only to discharge and pay off petitioners indebtedness to EIB and nothing
to petitioners:
more.
Sec. 7 of the SDAA does not apply to petitioners obligations to third-
Let us scrutinize a typical notice of sale issued to petitioners, thus:
party purchasers of their KKP shares under the full cross to seller obligation, and
certainly EIB could not use said provision for the repurchase of the KKP shares.
RE: SALE OF KUOK PROPERTIES INC. (KPP)
Indubitably, the sale of the DMCI shares made by EIB is null and void for lack of

34 | P a g e
 As agreed upon the above mentioned stock will be sold to a
party with the following conditions attached:
The notices of sale issued by EIB covering the sale of the KKP shares of
NUMBER OF SHARES : x x x/SHARES
AMOUNT @ SHARE : PHP 0.14 petitioners clearly show that the very same KKP shares sold to third parties albeit
CHARGES : Sellers Account under a buy-back arrangement and the Property of petitioners were made the
BUY BACK DATE : After 30 days [based on transaction
Date] collaterals to secure the payment of the reacquisition. Since the possession of the
BUY BACK AMOUNT : PHP 0.18 KKP shares and the Property were placed in EIB, a third party by common
DATE OF EXECUTION : APRIL 1, 200[4]
KIND OF TRANSACTION : FULL CROSS TO SELLER agreement, then the accessory contract in the case at bar is a contract of pledge
COLLATERAL : KPP SHARES/PROPERTY
governed by Arts. 2085 to 2092 of the Civil Code, which are provisions common
For and behalf of EIB Securities. to pledge and mortgage, and Arts. 2093 to 2139 on pledge.
[Signed]
PAULINE TAN
The query is whether or not the pledge on KKP Shares/Property is
valid. The answer is no.
The above notice states that the collateral is KPP Shares/Property. Art. 2085 of the Civil Code provides:

EIB asserts that the word Property refers to all the monies and/or securities and/or Art. 2085. The following requisites are essential to the contracts
of pledge and mortgage:
all other property of petitioners in EIBs custody or control pursuant to Sec. 7 of
(1) That they be constituted to secure the
the SDAA. This postulation is correct. The DMCI shares are included in the word
fulfillment of a principal obligation;
Property under Sec. 7 of the SDAA. However, EIBs theory stops there. As earlier
(2) That the pledgor or mortgator be the
explained, the SDAA, more particularly its Sec. 7, cannot be made the legal basis absolute owner of the thing pledged or mortgaged;
for EIB to sell petitioners properties in its possession or custody to pay petitioners
(3) That the persons constituting the pledge or
obligations to third parties. The SDAA is confined only to obligations of mortgage have the free disposal of their property, and in the
petitioners to EIB and not to third parties like the purchases of the KKP shares. absence thereof, that they be legally authorized for the purpose.

Thus, the sale of the DMCI shares to buy back the KPP shares is illegal and Third persons who are not parties to the principal
obligation may secure the latter by pledging or mortgaging their
ineffective, since it is only answerable for the liabilities of petitioners to EIB and
own property.
no one else.

35 | P a g e

It is indispensable that the pledgor is the absolute owner of the thing pledged
(second element). In the case at bar, the KKP shares were sold to third parties by
EIB at PhP 0.14 and, as a result, petitioners lost their right of ownership over the
KKP shares. Hence, from the time of the sale, petitioners were no longer the
absolute owners of said shares, making the pledge constituted over said KKP
shares null and void.[36]
Also, it is necessary under Art. 2085 that the person constituting the pledge has
the free disposal of his or her property, and in the absence of that free disposal,
that he or she be legally authorized for the purpose (third element). This element
is absent in the case at bar. Petitioners no longer have the free disposal of the KKP
shares when EIB sold said shares at the stock exchange as they are no longer the
owners of the shares. Thus, there was no valid pledge constituted on the KKP
shares.
The notice of sale, assuming it incorporates the accessory contract of pledge,
merely stated Property as collateral in addition to KKP shares. This is a blatant
violation of Art. 2096, which provides that a pledge shall not take effect against
third persons if description of the thing pledged and the date of the pledge do not
appear in a public instrument. The thing pledged must be amply and clearly
described and specifically identified. Evidently, the word Property is vague,
broad, and confusing as to the ownership. Hence, it does not satisfy the
prescription under Art. 2096 of the Code. Worse, the notice of sale is not in a
36 | P a g e
public instrument as required by said legal provision; therefore, the pledge on
property is void and without legal effect.
Moreover, the notices of sale must be construed against EIB. Any ambiguity in a
contract whose terms are susceptible of different interpretations must be read
against the party who drafted it.[37]
The DMCI shares which EIB construed to be included within the ambit of the
word property cannot be considered the thing pledged to secure the buy back of
the KKP shares in view of the vagueness of the word Property and the non-
applicability of the SDAA to the sale of the KKP shares.
Lastly, the appellate court ruled that the affirmative defense of estoppel
was raised by EIB due to the alleged failure of petitioners to object to the sale of
the DMCI shares.
The principle of estoppel rests on the rule that:
[W]here a party, by his or her deed or conduct, has
induced another to act in particular manner, estoppel effectively
bars the former from adopting an inconsistent position, attitude
or course of conduct that causes loss or injury to the latter. The
doctrine of estoppel is based upon the grounds of public policy,
fair dealing, good faith and justice, and its purpose is to forbid
one to speak against his own act, representations, or
commitments to the injury of one whom they were directed and
who reasonably relied thereon.[38]
 The essential elements of estoppel as related to the party estopped are: by petitioners to buy back the KKP shares previously owned by petitioners. All
(1) conduct which amounts to a false representation or concealment of material that these accounts show is the crediting of the proceeds of the sale of DMCI
facts, or, at least, which calculated to convey the impression that the facts are shares to petitioners and nothing more. There was no disclosure of the purpose of
otherwise than, and inconsistent with, those which the party subsequently attempts the sale of the DMCI shares. Clearly, there is no estoppel.
to assert; (2) intention, or at least expectation, that such conduct shall be acted WHEREFORE, the petition is GRANTED. The CA Decision dated
upon by the other party; and (3) knowledge, actual or constructive, of the actual April 11, 2008 in CA-G.R. CV No. 87713 is REVERSED and SET ASIDE. The
facts.[39] RTC Resolution dated October 18, 2005 in Civil Case No. 05-178 is
Reliance by respondent EIB on estoppel is misplaced. The first element hereby REINSTATED.
does not obtain from the factual setting presented by the pleadings, attachments, No costs.
and admissions. There is no allegation that petitioners performed an act which can SO ORDERED.
be considered as false representation that EIB can sell their DMCI shares to
PRESBITERO J. VELASCO, JR.
reacquire the KKP shares, or concealed a material fact. Sec. 7 of the SDAA is Associate Justice
unequivocal that EIB can only sell the shares of petitioners for payment of any WE CONCUR:
indebtedness to EIB. There was no act or concealment on the part of petitioners RENATO C. CORONA
Chief Justice
that made known or conveyed the impression to EIB that it can sell the DMCI Chairperson
shares of petitioners for the latters indebtedness or obligation to a third party in
TERESITA J. LEONARDO-DE CASTRO MARIANO
contravention of EIBs authority under Sec. 7 of the SDAA. Moreover, the second C. DEL CASTILLO Associate Justice Associate Justice
element is also absent. There was no showing that petitioners authorized EIB to
JOSE PORTUGAL PEREZ
pay a third party from the proceeds of the sale of their DMCI shares. Lastly, on Associate Justice
the third element, petitioners had no knowledge of the fact that the proceeds of the CERTIFICATION
sale of DMCI shares were paid to buy back the KPP shares. Reliance of EIB on
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
the sales confirmation receipts[40] issued to petitioners does not help any. The above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.
condition printed on said receipts explicitly states that the securities shall secure
[petitioners] liabilities to e.securities. Even the account statements[41] issued by RENATO C. CORONA
EIB do not reflect the payment of the proceeds of the sale of DMCI shares owned Chief Justice

37 | P a g e
 SECOND DIVISION
[G.R. NO. 152430 : March 22, 2007]
SAMAHANG MAGSASAKA NG 53 HEKTARYA, represented by ELVIRA
M. BALADAD, Petitioner, v.WILFREDO G. MOSQUERA, ROSARIO R.
ROMAN, DANILO M. RELUCIO, and EDGARDO V.
GUEVARRA, Respondents.
DECISION
VELASCO, JR., J.:
This is an appeal to the Court under Rule 45 of the December 14, 2001
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 62583, affirming the
Resolutions of the Office of the President (OP) in OP Case No. 96-116582, and
exempting respondents' 53-hectare land from the Comprehensive Agrarian
Reform Program (CARP) coverage. Also challenged is the CA's February 26,
2002 Resolution2 rejecting petitioner's plea for reconsideration of the CA Decision
now under review.
The Facts
Petitioner Samahang Magsasaka ng 53 Hektarya (Samahan) is an association of
farmer-beneficiaries duly recognized by the Department of Agrarian Reform
(DAR). Petitioner alleged that its members had been cultivating the disputed land
of the case for many years prior to the effectivity of Republic Act No. (R.A.)
6657, otherwise known as the "Comprehensive Agrarian Reform Law"
(CARL).3 Respondents Wilfredo G. Mosquera, Rosario R. Roman, Danilo M.
Relucio, and Edgardo V. Guevarra, on the other hand, are the registered owners of
three parcels of land covered by Transfer Certificate of Title Nos. T-267409, T-
267410, and T-267411, which have an aggregate area of 53.1164 hectares located
in Macabud, Rodriguez (formerly Montalban), Rizal. 4 The disputed land was
previously owned by Philippine Suburban Development Corporation which
planned to develop it as a residential subdivision. In 1979, it was sold to Vinebel
Realties, Inc. through an extrajudicial foreclosure sale. Petitioner alleged that in
38 | P a g e
1994, the landholding was sold to respondents without any DAR clearance, in
violation of Section 6-D of CARL.5
On July 7, 1994, the Municipal Agrarian Reform Officer (MARO) of Rodriguez,
Rizal issued a Notice of Coverage to the disputed land. On February 21, 1995,
respondents applied for exemption from the coverage of CARL based on its
provision in Sec. 10, that is, the property is above 18% slope and unfit for
cultivation.6 In support of the application, respondents presented the certification
from Ruben A. Cabreira, Deputy Land Inspector, Community Environment and
Natural Resources Office, Antipolo, Rizal, certifying that the land was partly
developed, sporadically planted with mangoes, guava, and other seasonal crops,
and with over 18% slope. On March 31 and August 7, 1995,7 the Regional
Director of DAR-Region IV denied respondents' application and Motion for
Reconsideration, respectively. On August 24, 1995, respondents appealed the two
Orders of the Regional Director to the DAR Secretary. On April 19 and July 9,
1996, Sec. Ernesto D. Garilao denied the appeal and respondents' Motion for
Reconsideration, respectively.8 In his April 19, 1996 Order, Sec. Garilao stated:
A review of all the ocular inspection / field investigation reports submitted by
DAR personnel concerned (from the municipal to the central office) reveals that
the subject properties have been consistently described as suitable to agriculture.
Except for the investigation report (dated December 20, 1995) submitted by the
Legal Officer of BALA tasked to inspect the subject properties, all the ocular
inspection teams which inspected/investigated the area recommended for the
coverage under CARP of the subject properties on the ground of the subject
properties' suitability for agriculture and present agricultural development.
xxx
As for the apparently conflicting certifications issued by the Community
Environment and Natural Resources office (CENRO) of Antipolo, Rizal, on
different dates, it is the view of this Office that there is actually no conflict
between the two certifications. This is so because the certification issued by
Deputy Land Inspector Ruben A. Cabreira on October 21, 1994 refers only to one
of the three lots subject of the instant petition (the lot which used to be covered by
TCT No. N-49174 with an area of 16.2204 has.). x x x The certification issued by
Geodetic Engineer III Romulo G. Unciano on January 25, 1995 on the other hand
pertains to all the lots subject of the instant petition, which were described to be
"partly rolling and agricultural in nature," and " planted to fruit-bearing trees."
These two certifications, instead of coming into conflict with one another, actually
complement each other, the first one being a part of the other. Even assuming
arguendo that they are in conflict, it is submitted that between the two
certifications, the second one should prevail since it is not only the latest, [but] it
is also more complete as it refers to all the lots subject of the instant petition. 9
On appeal to the OP, Executive Secretary Ruben D. Torres set aside the DAR
Secretary's Orders and exempted the property from the CARL coverage through
his June 25, 1997 Resolution.10 Petitioner and the DAR subsequently filed a
Motion for Reconsideration. In the meantime, the Department of Agriculture
(DA), through the Bureau of Soil and Water Management, sent two missions to
conduct fieldwork and validate the actual development in the disputed land. The
findings of these missions were allegedly contained in a report transmitted by
Secretary Salvador Escudero III (Escudero Report) to Pres. Fidel V. Ramos. In
sum, the Escudero Report recommended that the disputed land be exempted from
conversion since the general area of the land, including areas with 18% slope, was
physically occupied and actively used for intensive and diversified farming.
On August 14, 1998, the OP denied petitioner's Motion for Reconsideration.11 On
September 23, 1998, petitioner, through Elvira M. Baladad, and the DAR jointly
filed a second Motion for Reconsideration which was denied by the OP in its
December 22, 2000 Resolution.12
Petitioner appealed the Resolutions of the OP to the CA through Rule 43 of the
1997 Rules of Civil Procedure. Petitioner identified the OP's errors, as follows:
1) rejecting the findings of the DAR that the subject landholding was already
agriculturally developed at the time of effectivity of the CARL and suitable for
agricultural purposes;
2) ignoring the findings of the DA contained in the Escudero Report on the
ground that this report was not signed by Sec. Salvador Escudero III himself;
3) holding that the disputed land has more than 18% slope on the basis of a
certification issued by a personnel from the Department of Environment and
39 | P a g e
Natural Resources, who was neither authorized nor competent to make such
determination;
4) disregarding the certification of the MARO of Rodriguez, Rizal that the
landholding was highly agricultural and suitable for cultivation for permanent and
seasonal crops; andcralawlibrary
5) relying on the certifications of the Municipal Development Coordinator,
Housing and Land Use Regulatory Board, Provincial Irrigation Office, and the
Municipal Assessor as bases for granting the exemption applied for, which are
irrelevant for purposes of determining agricultural development and suitability
under Sec. 10 of R.A. 6657.13
The Ruling of the Court of Appeals
The CA ruled that the petitioner was not a real party-in-interest and had no legal
standing to sue. The appellate court held, thus:
Applying the foregoing standards in the case at bar, there is no question petitioner
lacks the legal standing to raise the instant appeal. This conclusion finds support
in the later case of Fortich v. Corona, 289 SCRA 624 [1998] x x x
x x x
Having resolved that the petitioner, not being actual grantee of the land but mere
qualified beneficiary, has no legal standing to sue and is not the real party in
interest. Neither will it be directly affected by the assailed resolutions rendered by
the Office of the President. Consequently, petitioner has no personality to file the
instant appeal. Besides, petitioner is not a juridical person and apropos not
equipped with legal personality to sue or be sued. As a consequence, the authority
of Elvira M. Baladad in filing this case for the petitioner will likewise be
baseless.14
The CA further held that respondents never waived their right to question
petitioner's legal standing, because, in fact, they raised the issue in the CA; and
that they could not be expected to raise the issue in the OP since they obtained a
favorable judgment. On the exemption of the land from CARL, the CA found that
the OP's Resolution was supported by substantial evidence; hence, the CA did not
substitute the OP's findings of fact.15
Petitioner's January 17, 2002 Motion for Reconsideration was then denied by the
CA in its February 26, 2002 Resolution.
The Issues
The parties submit the following issues for our resolution:
WHETHER OR NOT PETITIONERS ARE REAL PARTIES-IN-INTEREST IN
THIS CASE
WHETHER OR NOT THE SUBJECT LANDHOLDING MAY BE EXEMPTED
FROM THE COVERAGE OF THE COMPREHENSIVE AGRARIAN REFORM
WHETHER OR NOT THE PETITION RAISES ONLY QUESTIONS OF FACT
Petitioner argues that the CA committed serious error in holding that it lacked the
legal standing to file an appeal from the OP. It contends that its members, the
Macabud farmers, are entitled to the distribution of the land based on Sec. 22 of
the CARL, to wit:
Sec. 22. Qualified Beneficiaries. The lands covered by the CARP shall be
distributed as much as possible to landless residents of the same barangay, or in
the absence thereof, landless residents of the same municipality in the following
order of priority:
(a) agricultural lessees and share tenants;
(b) regular farm workers;
(c) seasonal farm workers;
(d) other farm workers;
(e) actual tillers or occupants of public lands;
(f) collective or cooperatives of the above beneficiaries; and
(g) others directly working on the land.
40 | P a g e
Petitioner further argues that Fortich v. Corona, cited by the appellate court, did
not rule that qualified beneficiaries are not real parties-in-interest. Petitioner
pointed out that the Court's pronouncement regarding legal standing was allegedly
mere dictum since the crux of the controversy was whether the OP can still
modify its own decision which had already attained finality; and that the Court
found in Fortich that the farmers were merely recommendee farmer-beneficiaries
in contrast to the Macabud farmers in the present case who are qualified and
approved farmer-beneficiaries of the disputed land the fact of which is supported
by the certification issued by the MARO. Petitioner believes that being identified
as CARP beneficiaries entitles the farmers to usufructuary rights over the land
under DAR rules, to wit:
2. Upon verification and validation based on the Application for Purchase and
Farmers Undertakings (FUs), [the MARO shall] inform the qualified ARBs or the
Farmers Cooperative/Association, as the case may be, that they have been
identified to receive the land to give them usufructuary right over the property
(CARP Form No. 19)16
Petitioner argues that the foregoing rule, when read in conjunction with Article
562 of the Civil Code, gives them a right over the land which can be injured by a
judgment of exemption from CARP. It claims that Certificates of Land Ownership
Award (CLOAs) were already generated in the Macabud farmers' names by the
Provincial Agrarian Reform Officer of Rizal, but were not issued to them in view
of the instant case. Also, petitioner contends that respondents are now estopped
from raising the issue of legal standing in view of their failure to question the
same issue at the earliest opportunity, that is, before the OP. 17
Lastly, since petitioner relies on the findings of the DA regarding the suitability of
the land for agriculture for the purpose of the CARP, it then imputes error on the
CA for holding that the DA had no authority to make such a determination.
The Court's Ruling
The petition should be dismissed.
The peculiar circumstances of this case should be noted. This petition originated
from an application for exemption from CARP which was filed by the
respondents before the Regional Director of the DAR. Petitioner entered the
picture when the DAR's Orders were reversed by the OP. Petitioner's lack of
capacity to intervene in the case may not have been an issue before the OP since
in administrative cases, technical rules of procedure are not strictly applied. In
fact, Sec. 50 of R.A. 6657 expressly allows farmer leaders to "represent
themselves, their fellow farmers, or their organization in any proceedings before
the DAR." This right of representation generally continues in appeals in
congruence with the provisions of Rule 3 of the Revised Rules of Court,
specifically:
SECTION 1. Who may be parties; plaintiff and defendant. Only natural or
juridical persons, or entities authorized by law may be parties in a civil action. x x
x interest. In Fortich, the farmers who intervened in the case were mere
SEC. 2. Parties in interest. A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails
of the suit. Unless otherwise authorized by law or these Rules, every action must
be prosecuted or defended in the name of the real party in interest.
SEC. 3. Representatives as parties. Where the action is allowed to be prosecuted
or defended by a representative or someone acting in a fiduciary capacity, the
beneficiary shall be included in the title of the case and shall be deemed to be the
real party in interest. A representative may be a trustee of an express trust, a
guardian, an executor or administrator, or a party authorized by law or these
Rules. x x x
R.A. 6657 allows farmer leaders like Elvira Baladad to represent the Macabud
farmers or their Samahan in the proceedings before the DAR. The law, however,
should be harmonized with the provisions of the Rules of Court. Assuming that
the Macabud farmers are real parties-in-interest as defined by Sec. 2 of Rule 3, the
appeal may be brought by their representative since such is allowed by R.A. 6657.
The action may then be brought by 1) the organization represented by its
authorized representative (Sec. 1) OR 2) the representative with the beneficiaries
identified in the title of the case (Sec. 3). In the first option, the organization
should be duly registered in order to be clothed with juridical personality (Sec. 1).
Admittedly, petitioner Samahan is not registered with the Securities and Exchange
Commission. Thus, it is not a juridical person which can be a party in a case. The
Rules of Court, however, does not prevent the Macabud farmers from filing an
41 | P a g e
appeal since an action may be instituted in the name of their representative with
each farmer-beneficiary identified in the title of the case in accordance with Sec. 3
of Rule 3. Unfortunately, petitioner also failed to comply with this simple
requirement. The petition was brought by the unregistered Samahan represented
by Elvira Baladad without mentioning the members of it. On this score, the
petition can already be dismissed.
More importantly, petitioner is not a real party-in-interest in this case. According
to Sec. 2 of Rule 3 of the Rules of Court, 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. We stand by the ruling in Fortich v. Corona18 that farmer-
beneficiaries, who are not approved awardees of CARP, are not real parties-in-
recommendees. We stated in said case that:
The rule in this jurisdiction is that a real party in interest is a party who would be
benefited or injured by the judgment or is the party entitled to the avails of the
suit. Real interest means a present substantial interest, as distinguished from a
mere expectancy or a future, contingent, subordinate or consequential interest.
Undoubtedly, movants' interest over the land in question is a mere expectancy.
Ergo, they are not real parties in interest.19
In the case at bar, members of petitioner Samahan are mere qualified beneficiaries
of CARP. The certification that CLOAs were already generated in their names,
but were not issued because of the present dispute, does not vest any right to the
farmers since the fact remains that they have not yet been approved as awardees,
actually awarded lands, or granted CLOAs. Respondents cannot be considered
estopped from questioning petitioner's legal standing since petitioner appeared
before the OP after the latter decided in respondents' favor. When the petitioner
appealed the case to the CA, respondents duly questioned the petitioner's capacity
to sue.
It is only unfortunate that petitioner failed to comply with basic procedural
requirements. We must again emphasize that these procedural requisites were
promulgated to ensure fairness and orderly administration of justice. While the
Court sometimes disregards the rules of procedure in the interest of justice, we
find that the present case does not merit such leniency. The requirement that a
party must have real interest in the case is essential in the administration of
justice. Thus, 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.

WHEREFORE, we AFFIRM IN TOTO the December 14, 2001 Decision and the
February 26, 2002 Resolution of the CA, with no costs. SO ORDERED.Endnotes:

42 | P a g e
 SECOND DIVISION
real property, his ancestral home, which was donated to him by his mother,
situated on Quirino Street, Aparri, Cagayan.[2] However, respondent Atty. Calasan
CHANG KEK CHEN, G.R. No. 161685
Petitioner, also has a house and lot in Las Pias, Metro Manila, which he and his family live
Present: in; has a business address at 10/F Manufacturers Building, Plaza Sta. Cruz, 1003
QUISUMBING, J., Chairperson,
- versus - CARPIO, Manila; applied for and received a commission as notary public from the Manila
CARPIO MORALES, Regional Trial Court (RTC); and secured a Community Tax Certificate in Las
TINGA, and
VELASCO, JR., JJ. Pias City, Metro Manila.
SPOUSES ATTY. ELEAZAR S.
CALASAN and LETICIA B. Promulgated:
CALASAN, Respondent Atty. Calasan was the counsel of one Jaime U. Lim, an opponent of
Respondents. July 24, 2007
x-----------------------------------------------------------------------------------------x petitioner. Petitioner alleged that his residence had been damaged by the
corporation of which Jaime U. Lim was president.
DECISION
VELASCO, JR., J.:
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
In this Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules
him, with copies furnished various people, among them high officials of the
of Court, the distinction between actual residence and domicile comes once again
Philippine government. Atty. Calasan then filed criminal cases for libel against
under review.
petitioner in Aparri, Cagayan, among them Crim. Case Nos. 07-1168 and VI-
The Facts
1094, which were dismissed.

Petitioner Ang Kek Chen resides at 1287-1291 Jose Abad Santos

Petitioner responded by filing his own administrative cases against respondent
[1]
Avenue corner Padre Algue Street, Tondo, 1012 Manila. He is not a lawyer, and
Atty. Calasan, among them Administrative Case Nos. 5444 and 6233, alleging
has filed pleadings with this Court on his own behalf.
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
Respondent Atty. Eleazar S. Calasan was born in Aparri, Cagayan on September
in his final memorandum, he made references to what he believed were betrayals
8, 1947. He has been a registered voter in Aparri, Cagayan since 1969. He owns

43 | P a g e
of the attorneys oath by Atty. Calasan, and with repeated calls for Atty. Calasans
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 plaintiffs 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. [5] Respondents
fared no better in their Motion for Reconsideration of that dismissal, as the motion
was denied in the March 20, 2002 Order.[6]
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.
44 | P a g e
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 entered SETTING
ASIDE the trial courts 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 criminal and civil action for damages in cases of
The Issues 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
Petitioner, who is not represented by counsel, presents the issues in the case as article is printed and first published or where any of the
follows: offended parties actually resides at the time of the
commission of the offense x x x (emphasis supplied).

(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 Respondents claim that their actual residence is in Aparri, Cagayan. The trial
decision promulgated on August 12, 2002, ANNEX C of
this Petition, thereby upholding the correct Decision of court made the following findings on the matter:
the respondent Judge that the venue of the out-of-town
complaint for libel is improperly laid. True, plaintiffs are residents and domiciled in Aparri,
Cagayan. In fact, they are registered voters of Aparri,
(B) CONSEQUENTLY, WHETHER OR NOT, the
Cagayan. However, they also admit that they have a
decision ANNEX C of this Petition,
residential house in Las Pias and it is in Las Pias where
was ERRONEOUSLY REVERSED by the Honorable
they stay most of the time due to their profession and
Court of Appeals in its resolutions dated November 21, occupation. In short, plaintiffs are habitual residents of
2004 and January 21, 2004. Las Pias and not in Aparri, Cagayan. Aparri is plaintiffs
legal residence and place of domicile. However, to the
(C) WHETHER OR NOT, the Petition for Certiorari
Courts opinion, plaintiffs actual residence is in Las Pias,
filed by the respondents (then petitioners) can
Metro-Manila [sic] as they are habitually residing thereat
substitute for their LOST APPEAL.[12]
due to their profession and occupation.[13]

When respondents raised this matter to the CA via a petition for certiorari, the
The petition has merit.
findings of the trial court were upheld by the appellate court in its August 12,
2002 Decision, when it said:
This case will be resolved on the core issuethe interpretation and
application of the third paragraph of Article 360 of the Revised Penal Code, the
Petitioners thus appear to have misread the provisions of
portion of which reads: 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

45 | P a g e
 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]
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. Calasans 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 complainants 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
46 | P a g e
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.
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? x x x 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
rulesx x x 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
47 | P a g e
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 ones 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
an inhabitant in a given place, while domicile requires
bodily presence in that place and also an intention to
make it ones domicile.[20]
 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
x x x (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.
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 and Nuval v.
Guray 52 Phil 645, that

There is a difference between domicile

The published matters, subjects of this civil action, are a counter affidavit and residence. Residence is used to indicate a
place of abode, whether permanent or
dated June 9, 2000 and a letter dated June 19, 2000, both from petitioner, neither temporary; domicile denotes a fixed
permanent residence to which when absent,
of which was submitted to persons in Aparri, Cagayan. To prove respondent Atty.
one has the intention of returning. A man may
Calasans residence at the time, which petitioner alleged was No. 8 Galaxy have a residence in one place and a domicile
in another. Residence is not domicile, but
Avenue, Mapayapa Village, Las Pias City, Metro Manila, Atty. Calasans domicile is residence coupled with the
Community Tax Certificates (CTCs) for the years 2000 and 2001 were intention to remain for an unlimited time. A
man can have but one domicile for one and
presented.[21] Respondent Atty. Calasan did not deny that he had such an address the same purpose at any time, but he may
in Las Pias, which is only the import of the CTCs. He claimed that the Las Pias have numerous places of residence. His place
of residence generally is his place of domicile,
residential unit was constructed out of convenience and necessity for his family but is not by any means, necessarily so since
and his profession. There is no denial that he and his family lived at that particular no length of residence without any intention
of remaining will constitute
address during the time of the publication of petitioners documents. That is domicile.[22] (Italics supplied.)
actually enough to qualify it as a residence, even without the intention to maintain
it as legal residence.

48 | P a g e
 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 WHEREFORE, premises considered, the questioned November 21, 2002 Resolution of the CA in CA-

year. As mentioned in Koh, one may have both a residence and a domicile. One G.R. SP No. 70335 is hereby REVERSED and SET ASIDE and its August 12, 2002 Decision

need not abandon ones domicile to acquire a separate residence, if this separate is REINSTATED and AFFIRMED. Consequently, the February 26, 2002 Order of the Aparri, Cagayan RTC,

residence is not intended to be legal residence as well. The ideas of domicile and Branch 8, dismissing the complaint in Civil Case No. 08-418, is likewise hereby AFFIRMED. Costs against

actual residence may even at times refer to one and the same place, but not so in respondents.

this particular case, where there are two particular and distinct places referred to.
SO ORDERED.

Thus, the trial court was correct in dismissing the complaint because it PRESBITERO J. VELASCO, JR.
Associate Justice
found that the offended parties actually resided for the greater part of the year
WE CONCUR:
2000 in Las Pias, even if their legal residence was in Aparri, Cagayan. To
LEONARDO A. QUISUMBING
reiterate, for purposes of determining venue, residence is not synonymous with Associate Justice
Chairperson
domicile. One may reside in a place apart from ones legal residence, without
ANTONIO T. CARPIO CONCHITA CARPIO MORALES
changing domicile, and that residence would constitute actual residence for Associate Justice Associate Justice

purposes of determining venue. DANTE O. TINGA

Associate Justice

ATTESTATION
In passing, it must be noted that petitioner is not a lawyer, and it may be
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to
instructive for him to consult counsel before filing pleadings or praying for results the writer of the opinion of the Courts Division.

that have no legal basis, if for purposes of clarity alone. As for his prayer that
LEONARDO A. QUISUMBING
respondent Atty. Calasan be disbarred, this petition is not the proper remedy for Associate Justice
Chairperson
such. Should he still wish to pursue such an action, he must follow the proper CERTIFICATION

procedure, which would grant respondent Atty. Calasan due process. The fact that Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.
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
REYNATO S. PUNO
at an unfair disadvantage. Chief Justice

49 | P a g e
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. Nos. 159104-05 October 5, 2007
RODOLFO M. CUENCA and CUENCA INVESTMENT CORP., petitioners,
vs.
THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT,
INDEPENDENT REALTY CORP., and UNIVERSAL HOLDINGS
CORP., respondents.
DECISION
VELASCO, JR., J.:
The Case
In this Petition for Review on Certiorari under Rule 45, petitioners assail the
January 6, 2003 Decision1 of the Court of Appeals (CA) in consolidated cases
CA-G.R. CV No. 603382 and CA-G.R. SP No. 496863 which upheld the
jurisdiction of Sandiganbayan over a dispute involving the transfer of stocks and
subscription rights of respondent Universal Holdings Corporation (UHC), a
sequestered company, in favor of petitioners Rodolfo M. Cuenca and Cuenca
Investment Corporation (CIC); and its July 15, 2003 Resolution4 denying
petitioners’ Motion for Reconsideration.5 The consolidated cases originated from
Civil Case No. 91-2721 entitled Rodolfo M. Cuenca, et al. v. Independent Realty
Corp., et al. filed before the Makati City Regional Trial Court (RTC), Branch 61–
–CA-G.R. CV No. 60338 being an appeal from the April 23, 1998 Decision
rendered by the Makati City RTC, and CA-G.R. SP No. 49686 being a special
civil action formerly filed as a petition for certiorari before the Supreme Court,
but was remanded to the CA for a review of the denial of the motion for
intervention filed by respondent Presidential Commission on Good Government
(PCGG).
50 | P a g e
The Facts
Respondent UHC is a wholly owned subsidiary of Independent Realty
Corporation (IRC). UHC had an authorized capital stock of PhP 200,000,000 of
which 401,995 shares worth PhP 40,199,500 were subscribed and PhP 10,050,000
was paid up by IRC. Five stockholders of IRC held qualifying shares in UHC and
served in its Board of Directors. UHC became an inactive holding company until
the later months of 1978.
In 1978, petitioner Rodolfo M. Cuenca and his family’s holding company,
petitioner CIC, negotiated and reached an agreement with respondents IRC and
UHC, whereby petitioners Cuenca and CIC would purchase all the shares of stock
and subscription rights of IRC in UHC for PhP 10,000,000 and assume IRC’s
unpaid subscription of PhP 30,000,000. Petitioners Cuenca and CIC were then the
controlling stockholders of the Construction and Development Corporation of the
Philippines (CDCP), now the Philippine National Construction Corporation
(PNCC), Sta. Ines Melale Forest Products Corporation (Sta. Ines), and Resort
Hotels Corporation (Resort Hotels). In order to build up UHC as his flagship
company, petitioner Cuenca transferred to UHC the shares of stocks in CDCP,
Sta. Ines, and Resort Hotels worth PhP 67,233,405, with UHC assuming Cuenca’s
various bank obligations, some or all of which were secured by pledges or liens on
the stocks.
On October 21, 1978, petitioner Cuenca was elected Chairperson and President of
UHC at a special stockholders’ meeting in accordance with the acquisition plan,
and through UHC, Cuenca continued to control and manage CDCP, Sta. Ines, and
Resort Hotels. Pursuant to the acquisition plan and agreement with IRC, Cuenca
and CIC transferred their shares of stock in CDCP, Sta. Ines, and Resort Hotels to
UHC, which in turn paid PhP 10,000,000 to IRC. In addition, petitioners assumed
IRC’s unpaid subscription of PhP 30,000,000 in UHC. The only remaining matter
to be accomplished was the transfer of the stocks and subscription rights of IRC in
UHC to petitioners, but despite demand, IRC did not comply.
In 1986, the instant controversy between petitioners and respondent IRC was
overtaken by dramatic political events. President Marcos was ousted in a
bloodless revolution and left behind an unbelievably large amount of funds and
assets that were sequestered by the new government of President Aquino through
PCGG. In July 1987, because of Marcos nominee Jose Yao Campos’ sworn
statement, respondent PCGG directed Santos Luis Diego, President of IRC, to
dissolve all the boards of directors of IRC’s fully-owned subsidiaries. A year later,
it turned over IRC and its subsidiary, UHC, to the Asset Privatization Trust (APT)
for rehabilitation, conservation, or disposition, enabling APT to assign one share
of stock in IRC and in each of its 25 subsidiaries, including UHC, to Paterno
Bacani, Jr.
Amidst this state of affairs, petitioners filed the October 2, 1991
Complaint6 against IRC, UHC, APT, and Bacani before the Makati City RTC,
which was docketed as Civil Case No. 91-2721, to compel IRC to transfer all its
stock and subscription rights in UHC to them or order IRC and UHC to return and
re-convey to them all the assets and shares of stock in CDCP, Sta. Ines, and
Resort Hotels that they had transferred to UHC.
The Ruling of the Regional Trial Court
On November 29, 1991, respondents IRC and UHC filed a Joint Motion to
Dismiss7 on the ground of lack of jurisdiction, claiming that the exclusive
jurisdiction was lodged in the Sandiganbayan and not in the RTC. Meanwhile, on
December 9, 1991, respondents IRC and UHC, represented by respondent PCGG,
filed another Motion to Dismiss8 on the ground of litis pendentia as petitioner
Cuenca had a pending case filed by respondent PCGG before the Sandiganbayan
and docketed as Civil Case No. 0016 entitled Republic of the Philippines v.
Rodolfo M. Cuenca, et al., which involved respondent UHC and several other
corporations beneficially owned or controlled by petitioner Cuenca for and in
behalf of the Marcoses. Meanwhile, in the May 14, 1992 Order, the trial court
dismissed the Complaint against APT and Bacani, and dropped them as
defendants on October 16, 1992.9 On March 25, 1993, the trial court, however,
denied both motions to dismiss on the ground that respondent PCGG was not
impleaded in the instant case and that the transaction involved specific
performance of a contract entered into in 1978 before the PCGG came into
existence.
Consequently, on August 19, 1993, respondents IRC and UHC filed their Answer
with Counterclaim.10 Before pre-trial, petitioners sent their Interrogatories11 to
IRC and UHC, which were answered by IRC on July 25, 1994. 12 After
considerable time had elapsed without UHC filing its answer to the
interrogatories, and unsatisfied with IRC’s answer not accomplished, duly signed,
51 | P a g e
and sworn to by a competent and responsible IRC officer as only IRC’s counsel
signed it, petitioners filed on August 30, 1994 a Motion to Compel UHC to
Answer Interrogatories13 to which the trial court issued two related Orders, the
first dated January 17, 1995 directing IRC to submit proper and complete answers
and UHC to answer the interrogatories,14 and the second dated February 10, 1995
granting respondents IRC and UHC an extension of 15 days to file their answers
to the interrogatories.15
On September 29, 1995, petitioners filed a Motion to Declare Defendants in
Default16 for non-compliance with Section 5 of Rule 29,17 Revised Rules of Civil
Procedure. Respondents IRC and UHC filed their respective Answers to
Interrogatories18 on October 17, 1995 or only after the motion to declare them in
default was filed and served. Consequently, the trial court issued its February 7,
1996 Order of default, which also granted petitioners the right to adduce their
evidence ex-parte.19 On September 9, 1996, the trial court likewise denied 20 the
Motion for Reconsideration and/or Lift Order of Default 21 filed by respondents
IRC and UHC.
Subsequently, respondent PCGG filed its Motion for Leave to Intervene with
Motion to Dismiss on December 18, 1996, which was denied by the trial court
only on April 20, 1998.22
Parenthetically, on October 22, 1996, petitioners filed an Urgent Ex-
Parte Application for Receivership which was granted through an October 28,
1996 Order, appointing Jaime C. Laya as UHC’s receiver. After posting the
requisite bond, the trial court issued on November 5, 1996 an Order approving the
bond, and receiver Laya submitted his November 13, 1996 Oath of Office.
Petitioners adduced their evidence and presented the testimonies of petitioner
Rodolfo Cuenca and Lourdes G. Labao, a supervisor of Caval Securities Registry,
Inc., who testified on the transfers of shares of stock of CDCP, Sta. Ines, and
Resort Hotels from Cuenca and CIC to UHC. On March 20, 1998, petitioners filed
their Formal Offer of Exhibits.23
On April 23, 1998, the trial court rendered a Decision in favor of petitioners.
The fallo reads:
 Accordingly, JUDGMENT is hereby rendered in favor of plaintiffs and
as against defendants IRC and UHC, who are hereby ordered to
immediately return and reconvey to plaintiffs all of the shares of stocks
and stock subscriptions in Philippine National Construction Corporation
(formerly known as Construction and Development [Corporation] of the
Philippines), Resort Hotels Corporation and Sta. Ines Melale Forest
Products Corporation, including those transferred by plaintiffs to UHC
such as the 24,780,746 shares in CDCP/PNCC, the 468,062 shares in
Resort Hotels Corporation and the 23,748,932 shares in Sta. Ines Melale
Forest Products Corporation plus all fruits thereof such as stock and cash
dividends and stock splits.
The plaintiffs’ prayer for damages and attorney’s fees are hereby
DENIED.
The counterclaim of defendants UHC and IRC for damages and
attorney’s fees is hereby DENIED for lack of evidence.
The appointment of JAIME C. LAYA as Receiver of defendant UHC is
hereby MAINTAINED until finality of this Decision and full execution
of this Decision or full compliance herewith by defendants. 24
From the adverse Decision, respondents IRC and UHC appealed to the CA, which
was docketed as CA-G.R. CV No. 60338. On the other hand, after the trial court
denied respondent PCGG’s Motion for Reconsideration25 through its July 22,
1998 Order,26 PCGG brought the instant case before this Court in G.R. No. 13516.
Said PCGG special civil action was remanded to the CA and docketed as CA-G.R.
SP No. 49686 entitled Presidential Commission on Good Government (PCGG) v.
Hon. Fernando V. Gorospe, as Presiding Judge RTC of Makati City, Branch 61,
et al. In the petition before the CA, PCGG also assailed the April 20, 1998 Order
of the trial court denying its motion for intervention in Civil Case No. 91-2721.
Thus, the petition for certiorari (CA-G.R. SP No. 49686) and the appeal (CA-G.R.
CV No. 60338) were consolidated.
52 | P a g e
The Ruling of the Court of Appeals
Through its assailed Decision, the appellate court reversed the Makati City RTC’s
Decision, granted the petition filed by PCGG, and dismissed the instant case for
lack of jurisdiction. The appellate court ratiocinated that the Sandiganbayan had
exclusive jurisdiction to hear the instant case involving petitioners and the
sequestered respondents corporations. It held that the recourse of parties,
petitioners in the instant case, who wish to challenge respondent PCGG’s acts or
orders, would be to the Sandiganbayan pursuant to Executive Order No. (EO) 14
issued on May, 7, 1986,27 which ordained that this body alone had the original
jurisdiction over all of respondent PCGG’s cases, civil or criminal, citing PCGG
v. Peña28 as authority. The appellate court applied Republic v.
Sandiganbayan29 on the issue of sequestration by respondent PCGG of UHC,
CIC, and CDCP (now PNCC) against petitioner Cuenca, the Marcos spouses, their
relatives, friends, and colleagues.
The CA applied the doctrine of conclusiveness of judgment that any rule which
had already been authoritatively established in a previous litigation should be
deemed the law of the case between the same parties. As such, the appellate court
adopted the ruling in Republic on the continuing force of the order of
sequestration and concluded that, indeed, respondent UHC is a sequestered
company. The CA did not find merit in petitioners’ contention that sequestration
did not affect their transaction with respondents as it arose before PCGG was
created.
Even if petitioners had initially a cause of action, the CA ruled that the complaint
was certainly affected by the passage of the law charging respondent PCGG with
the performance of certain tasks over the subject matter of the action; and that the
same subject matter had become subject to the new exclusive jurisdiction vested
in the Sandiganbayan at the time petitioners filed the instant case.
Aggrieved, petitioners filed their Motion for Reconsideration30 which was denied
by the assailed July 15, 2003 CA Resolution.31 Hence, they filed this petition for
review.
 The Issues
Petitioners raise the following grounds for our consideration:
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
DISMISSING CIVIL CASE NO. 91-2721 BELOW ON THE GROUND
THAT THE SANDIGANBAYAN HAS EXCLUSIVE JURISDICTION
OVER THE SUBJECT MATTER OF THE CASE.
A.
THE FACT ALONE THAT RESPONDENT UHC MAY
HAVE BEEN SEQUESTERED DID NOT DIVEST THE
REGIONAL TRIAL COURT OF ITS JURISDICTION OVER
THE SUBJECT MATTER OF PETITIONERS’ COMPLAINT
IN CIVIL CASE NO. 91-2721 BELOW.
B.
THE COURT OF APPEALS’ RELIANCE ON THE CASE
OF REPUBLIC VS. SANDIGANBAYAN, 240 SCRA 376 (1995),
IS MISPLACED.
C.
THE COURT OF APPEALS’ APPLICATION OF THE
DOCTRINE OF CONCLUSIVENESS OF JUDGMENT IS
ERRONEOUS.32
The Court’s Ruling
The petition must fail.
The core issue before us is that of jurisdiction. In gist, petitioners argue that UHC
was not sequestered, and even if it was sequestered, the trial court still has the
jurisdiction to hear the case for rescission of contract or specific performance, and
53 | P a g e
conclude that the doctrine of conclusiveness of judgment does not apply in the
instant case.
Issue of Jurisdiction
Jurisdiction is defined as the power and authority of a court to hear, try, and
decide a case.33 Jurisdiction over the subject matter is conferred by the
Constitution or by law while jurisdiction over the person is acquired by his/her
voluntary submission to the authority of the court or through the exercise of its
coercive processes. Jurisdiction over the res is obtained by actual or constructive
seizure placing the property under the orders of the court. 34
We are primarily concerned here with the first kind of jurisdiction, that is,
jurisdiction over the subject matter.
Petitioners contend that even if UHC was indeed sequestered, jurisdiction over the
subject matter of petitioners’ Complaint for enforcement or rescission of contract
between petitioners and respondents belonged to the RTC and not the
Sandiganbayan. Petitioners cited Philippine Amusement and Gaming Corporation
v. Court of Appeals,35involving Philippine Casino Operators Corporation (PCOC)
which was sequestered on March 19, 1986. In said case, this Court held that the
fact of sequestration alone did not automatically oust the RTC of jurisdiction to
decide upon the question of ownership of the disputed gaming and office
equipment as PCGG must be a party to the suit in order that the Sandiganbayan’s
exclusive jurisdiction may be correctly invoked, and as Section 2 36 of EO 14 was
duly applied in PCGG v. Peña37 and PCGG v. Nepomuceno,38 which ineluctably
spoke of respondent PCGG as a party-litigant.
Likewise, petitioners cited Holiday Inn (Phils.), Inc. v. Sandiganbayan,39 which
also involved a sequestered company, New Riviera Hotel and Development Co.,
Inc. (NRHDCI), where this Court held that there is a distinction between an action
for the recovery of ill-gotten wealth, as well as all incidents arising from,
incidental to, or related to such cases, and cases filed by those who wish to
question or challenge respondent PCGG’s acts or orders in such cases vis-à-vis
ordinary civil cases that do not pertain to the Sandiganbayan. As such, petitioners
contend that the instant ordinary civil case for the enforcement or rescission of the
1978 contract between petitioners and respondents UHC and IRC is distinct from
and has absolutely no bearing with the unrelated issue of the sequestration of
respondents UHC and IRC. Thus, petitioners strongly contend that the trial court
indeed had jurisdiction over the instant case. Besides, petitioners point out that
PCGG was not impleaded as a defendant in Civil Case No. 91-2721, and that the
Complaint "does not question the PCGG’s alleged sequestration of respondent
UHC x x x or any other act or order of the PCGG." 40
Sandiganbayan has exclusive jurisdiction over the instant case
A rigorous examination of the antecedent facts and existing records at hand shows
that Sandiganbayan has exclusive jurisdiction over the instant case.
Thus, the petition must fail for the following reasons:
First, it is a fact that the shares of stock of UHC and CDCP, the subject matter of
Civil Case No. 91-2721 before the Makati City RTC, were also the subject matter
of an ill-gotten wealth case, specifically Civil Case No. 0016 before the
Sandiganbayan. In Civil Case No. 91-2721 of the Makati City RTC, petitioners
prayed for a judgment either transferring the UHC shares or restoring and
reconveying the PNCC shares to them. In the event a final judgment is rendered in
said Makati City RTC case in favor of petitioners, then such adjudication tends to
render moot and academic the judgment to be rendered in Sandiganbayan Civil
Case No. 0016 considering that the legal ownership of either the UHC or PNCC
shares would now be transferred to petitioners Rodolfo Cuenca and CIC. Such
adverse judgment would run counter to the rights of ownership of the government
over the UHC and PNCC shares in question. It must be remembered that on
March 21, 1986, a Sworn Statement41 executed by Mr. Jose Y. Campos in
Vancouver, Canada, whereby Mr. Campos, a crony and close business associate
of the deposed President Marcos, named and identified IRC and UHC (a wholly-
owned subsidiary of IRC) as among the several corporations organized,
established, and managed by him and other business associates for and in behalf
of the former President Marcos. Subsequently, the UHC and IRC shares were
surrendered and turned over by Mr. Campos to PCGG, transferring, in effect, the
ownership of the shares to the Government.
Moreover, inasmuch as UHC was impleaded in Civil Case No. 0016 as a
defendant and was listed among the corporations beneficially owned or controlled
by petitioner Cuenca, the issue of the latter’s right to acquire ownership of UHC
54 | P a g e
shares is inexorably intertwined with the right of the Republic of the Philippines,
through PCGG, to retain ownership of said UHC shares.
It must be borne in mind that the Sandiganbayan was created in 1978 pursuant to
Presidential Decree No. (PD) 1606.42 Said law has been amended during the
interim period after the Edsa Revolution of 1986 and before the 1987 Constitution
was drafted, passed, and ratified. Thus, the executive issuances during such period
before the ratification of the 1987 Constitution had the force and effect of laws.
Specifically, then President Corazon C. Aquino issued the following Executive
Orders which amended PD 1606 in so far as the jurisdiction of the Sandiganbayan
over civil and criminal cases instituted and prosecuted by the PCGG is
concerned, viz:
a) EO 1, entitled "Creating the Presidential Commission on Good Government,"
dated February 28, 1986;
b) EO 2, entitled "Regarding the Funds, Moneys, Assets, and Properties Illegally
Acquired or Misappropriated by Former President Ferdinand E. Marcos, Mrs.
Imelda Romualdez Marcos, Their Close Relatives, Subordinates, Business
Associates, Dummies, Agents, or Nominees," dated March 12, 1986;
c) EO 14, entitled "Defining the Jurisdiction over Cases Involving the Ill-gotten
Wealth of Former President Ferdinand E. Marcos, Mrs. Imelda R. Marcos,
Members of their Immediate Family, Close Relatives, Subordinates, Close and/or
Business Associates, Dummies, Agents and Nominees," dated May 7, 1986; and
d) EO 14-A, entitled "Amending Executive Order No. 14," dated August 18,
1986.
Bearing on the jurisdiction of the Sandiganbayan over cases of ill-gotten wealth,
EO 14, Secs. 1 and 2 provide:
SECTION 1. Any provision of the law to the contrary notwithstanding,
the Presidential Commission on Good Government with the assistance
of the Office of the Solicitor General and other government agencies, is
hereby empowered to file and prosecute all cases investigated by it
under Executive Order No. 1, dated February 28, 1986
 and Executive Order No. 2, dated March 12, 1986, as may be
warranted by its findings.
SECTION 2. The Presidential Commission on Good Government
shall file all such cases, whether civil or criminal, with
the Sandiganbayan, which shall have exclusive and original
jurisdiction thereof. (Emphasis supplied.)
Notably, these amendments had been duly recognized and reflected in subsequent
amendments to PD 1606, specifically Republic Act Nos. 797543 and 8249.44
In the light of the foregoing provisions, it is clear that it is the Sandiganbayan and
not the Makati City RTC that has jurisdiction over the disputed UHC and PNCC
shares, being the alleged "ill-gotten wealth" of former President Ferdinand E.
Marcos and petitioner Cuenca. The fact that the Makati City RTC civil case
involved the performance of contractual obligations relative to the UHC shares is
of no importance. The benchmark is whether said UHC shares are alleged to be
ill-gotten wealth of the Marcoses and their perceived cronies. More importantly,
the interests of orderly administration of justice dictate that all incidents affecting
the UHC shares and PCGG’s right of supervision or control over the UHC must
be addressed to and resolved by the Sandiganbayan. Indeed, the law and courts
frown upon split jurisdiction and the resultant multiplicity of suits, which result in
much lost time, wasted effort, more expenses, and irreparable injury to the public
interest.
Second, the UHC shares in dispute were sequestered by respondent PCGG.
Sequestration is a provisional remedy or freeze order issued by the PCGG
designed to prevent the disposal and dissipation of ill-gotten wealth.45 The power
to sequester property means to
place or cause to be placed under [PCGG’s] possession or control said
property, or any building or office wherein any such property or any
records pertaining thereto may be found, including business enterprises
and entities, for the purpose of preventing the destruction of, and
otherwise conserving and preserving the same, until it can be determined,
through appropriate judicial proceedings, whether the property was in
truth ill-gotten. (Silverio v. PCGG, 155 SCRA 60 [1987]).46
55 | P a g e
Considering that the UHC shares were already sequestered, enabling the PCGG to
exercise the power of supervision, possession, and control over said shares, then
such power would collide with the legal custody of the Makati City RTC over the
UHC shares subject of Civil Case No. 91-2721. Whatever the outcome of Civil
Case No. 91-2721, whether from enforcement or rescission of the contract, would
directly militate on PCGG’s control and management of IRC and UHC, and
consequently hamper or interfere with its mandate to recover ill-gotten wealth. As
aptly pointed out by respondents, petitioners’ action is inexorably entwined with
the Government’s action for the recovery of ill-gotten wealth––the subject of the
pending case before the Sandiganbayan. Verily, the transfer of shares of stock of
UHC to petitioners or the return of the shares of stock of CDCP (now PNCC) will
wreak havoc on the sequestration case as both UHC and CDCP are subject of
sequestration by PCGG.
Third, Philippine Amusement and Gaming Corporation and Holiday Inn (Phils.),
Inc.47 are not analogous to the case at bar. The first dealt with ownership of
gaming and office equipment, which is distinct from and will not impact on the
sequestration issue of PCOC. The second dealt with an ordinary civil case for
performance of a contractual obligation which did not in any way affect the
sequestration proceeding of NRHDCI; thus, the complaint-in-intervention of
Holiday Inn (Phils.), Inc. was properly denied for lack of jurisdiction over the
subject matter.
In both cases cited by petitioners, there was a substantial distinction between the
sequestration proceedings and the subject matter of the actions. This does not
prevail in the instant case, as the ownership of the shares of stock of the
sequestered companies, UHC and CDCP, is the subject matter of a pending case
and thus addressed to the exclusive jurisdiction of the Sandiganbayan.
Sec. 2 of EO 14 pertinently provides: "The Presidential Commission on Good
Government shall file all such cases, whether civil or criminal, with the
Sandiganbayan, which shall have exclusive and original jurisdiction thereof."
The above proviso has been squarely applied in Peña,48 where this Court held that
the exclusive jurisdiction conferred on the Sandiganbayan would evidently extend
not only to the principal causes of action, that is, recovery of alleged ill-gotten
wealth, but also to all incidents arising from, incidental to, or related to such
cases, including a dispute over the sale of the shares, the propriety of the issuance
of ancillary writs of relative provisional remedies, and the sequestration of the
shares, which may not be made the subject of separate actions or proceedings in
another forum. Indeed, the issue of the ownership of the sequestered companies,
UHC and PNCC, as well as IRC’s ownership of them, is undeniably related to the
recovery of the alleged ill-gotten wealth and can be squarely addressed via the
exclusive jurisdiction of the Sandiganbayan.
Fourth, while it is clear that the exclusive jurisdiction of the Sandiganbayan only
encompasses cases where PCGG is impleaded, such requirement is satisfied in the
instant case. The appellate court clearly granted PCGG’s petition for certiorari in
CA-G.R. SP No. 49686, assailing the trial court’s denial of its Motion for Leave
to Intervene with Motion to Dismiss. Thus, the trial court’s April 20, 1998 Order
was reversed and set aside by the appellate court through its assailed Decision.
Consequently, PCGG was granted the right to intervene and thus became properly
impleaded in the instant case. Without doubt, the trial court has no jurisdiction to
hear and decide Civil Case No. 91-2721.
Respondent UHC duly sequestered by PCGG
The trial court ruled that respondent PCGG could not stop the transfer of the
shares of respondent UHC in CDCP to petitioners as there was no proof of
sequestration except a writ of sequestration of Cuenca’s stocks in CDCP. On the
other hand, petitioners contend that the appellate court’s reliance on Republic49 is
misplaced. They point out that neither PCGG nor respondent corporations relied
on said case. Besides, petitioners contend that the Court’s statements in said case
did not constitute a ruling but mere references to unproven allegations by PCGG
in its complaint against Cuenca in Sandiganbayan Civil Case No. 0016; and as
such, it cannot be relied upon to hold that UHC was a sequestered corporation. As
it is, petitioners conclude that it was a mere obiter dictum which was not essential
to the disposition of the aforecited case and thus, it is not binding upon the parties
for purposes of res judicata or conclusiveness of judgment.
We are not moved by petitioners’ submission.
While it may be true that in Republic, our statement on Civil Case No. 0016, as
cited by PCGG, refers to the allegations in the complaint filed by PCGG against
petitioner Cuenca,50 we nonetheless stated in said case the fact of the sequestration
of the assets and records of Rodolfo Cuenca, UHC, CIC, CDCP, San Mariano
56 | P a g e
Mining Corp., etc. on May 23, 1986 and July 23, 1987. We took factual notice of
the sequestration of various companies and properties in said case, thus:a
III. Orders of Sequestration issued by PCGG
During 1986 and 1987 numerous orders of sequestration, freezing or
provisional takeover of companies or properties, real or personal, were
issued and implemented. Among those were the orders handed out
against the firms or assets hereunder listed, with the dates of
sequestration, freezing or take-over, to wit:
SUBJECTS/OBJECTS OF SEQUESTRATION DATE
xxxx
i. Assets and records of Rodolfo Cuenca, May 23, 1986,
Universal Holdings Corp., Cuenca July 23, 1987
Investment Corporation, Philippine
National Construction Corp. (formerly
CDCP), San Mariano Mining Corp., etc.51
From the foregoing account, we concluded that UHC had indeed been sequestered
by the PCGG in 1986 and 1987. Consequently, the appellate court properly
applied Republic as basis for its finding that UHC was a sequestered company.
Since the issue of sequestration has been resolved, we see no need to delve into
the issue of conclusiveness of judgment. Suffice it to say that with the
unequivocal finding that UHC was indeed sequestered, then it is the
Sandiganbayan, not the Makati City RTC, that has exclusive jurisdiction over the
subject matter of Civil Case No. 91-2721.
WHEREFORE, the instant petition is DISMISSED for lack of merit. The
January 6, 2003 Decision and July 15, 2003 Resolution of the CA in CA-G.R. CV
No. 60338 and CA-G.R. SP No. 49686 are AFFIRMED in toto. No costs.
SO ORDERED.
Carpio Morales,Acting Chairperson, Tinga, Puno, Ynares-Santiago, JJ., concur.
57 | P a g e