G.R. No.

L-48610 March 31, 1987

SOLEDAD PROVIDO, plaintiff-appellant,

vs.
OCTAVIO ACENAS, NATIONAL DEVELOPMENT CO. and DOLE (PHILIPPINES)
INC., defendants-appellees.

Eliseo P. Vencer II for plaintiff-appellant.

PARAS, J.:

This case was certified to Us by the Court of Appeals in its Resolution promulgated February 20, 1978
in CA-G,R. No. 50069-R 1 as the issues raised therein are purely legal.

Plaintiff-appellant Soledad Provido was granted a homestead patent over Lot No. 58, Pis-247-D, at
Silway 7, Polomolok, South Cotabato, consisting of 79,986 sq.m. which is covered by OCT No. V-19264
issued by the Register of Deeds of Cotabato on October 1, 1954 under the Public Land Act.

On October 15, 1963, Soledad Provido sold said lant to document. In 1966, Acenas sold it to the
National Development Company (NDC for short) which entity in turn leased, it to Dole (Philippines),
Inc., (Dole for short) under a Grower Agreement.

On September 19, 1968, Soledad Provido filed an action against Octavio Acenas docketed as Civil
Case No. 140 (1008) in the Court of first Instance (CFI) of Cotabato, wherein she sought to exercise
her right of repurchase under Sec. 119 of Commonwealth Act No. 141 or the Public Land Act as
amended.

Octavio Acenas filed his answer on November 28, 1968, admitting some and denying other material
allegations and by way of special and/or affirmative defenses alleging among other things that the
complaint states no cause of action and that he no longer owns or holds the property in sale to the NDC
sometime in the year 1966, which in tum leased it to Dole Philippines which now holds the same, which
absolute sale and cession was contained in a deed of sale, but that defendant lost his copy thereof and
inspire diligent efforts, he is unable to procure other copies thereof, hence his inability to attach a copy
of same hereto.2

Soledad Provido filed her answer to the counter-claim on December 6, 1968 and on December 24,
1968, a Motion for Leave to Anend complaint in order to implead NDC and Dole Philippines, attaching
thereto her amended complaint

Both parties who were impleaded in the amended complaint filed their separate Motions to Dismiss on
the grounds that the claim therein set forth had already been extinguished or was barred by the Statute
of Limitations and that the Complaint stated no cause of action.

The court a quo dismissed the case insofar as Dole and NDC are concerned in its Orders dated
September 5, 1970 and September 19, 1970 respectively.

A Motion for Reconsideration of the Orders of Dismissal was filed by plaintiff Soledad Provido which
was denied by the trial court for lack of merit.
Hence this appeal with this lone assigmment of error:

The lower court erred in discussing the complaint on ground of prescription of action.

The main crux on appeal is whether plaintiff-appellant has lost her right to repurchase the homestead
in question as provided for under Sec. 119 of the Public Land Act as amended which reads as follows:

Every conveyance of land acquired under the free patent or homestead provisions, when
proper, shall be subject to repurchase by the applicant, his widow, or his legal heirs, within
a period of five years from the date of conveyance.

It is appellant's contention that she did not lose her right to repurchase since the action to repurchase
filed on September 19, 1968 against defendant-appellee Octavio Acenas, was wen within the five (5)
years period stated in the law. She avers that the filing of the original complaint suspended the running
of the prescriptive period pursuant to Article 1155 of the New Civil Code and although the action against
defendantsappellees NDC & DOLE was actually brought on December 24, 1968, or more than five
years after October 15, 1963, the action is still timely because prescription had ceased to run on
September 19,1968.

Defendants-appellees NDC and DOLE contend otherwise alleging that the Amended Complaint which
had impleaded them was filed only on December 24, 1968, and therefore, already beyond the five-year
period. In other words, appellees aver that the filing of the Amended Complaint should be construed as
the beginning of a new action as of the date of filing of the amendment.

Plaintiff-appellant maintains that NDC is subject to the same conditions that the original buyer had, thus
when NDC bought the land from the original buyer it (NDC) was likewise bound to honor the right of
repurchase of the appellant. She argues that the right of repurchase cannot be avoided by the vendee
through the simple expedient of conveying it to the Government or any of its branches, units or
instrumentalities. This right is a part of public policy. It is the benevolent intention of the State to give
the homesteader every chance to preserve for himself and his family the land that the State granted
him as a reward for his labor in clearing and cultivating it. 3 AppeUant claims that appellee NDC, which
succeeded Acenas, cannot be in a better position than the source of its rights and that the action against
Acenas also interrupts the running of the prescription period against NDC just as well — to maintain
otherwise would enable a succession of vendees to successively put up the defense of prescription to
defeat the right of the vendor, who is not aware of any subsequent sale by the original purchaser.

In controversion, defendants-appellees declare that it is not correct for appellant to say that she had no
knowledge that the lot was already sold to defendant NDC because the sale on December 23, 1963
was registered and a Transfer Certificate of Title No. T-13803, T-2078 was issued in favor of the NDC
on July 9, 19654and knowledge of such sale is presumed from the registration. Plaintiff-appellant
therefore had legal or constructive knowledge that the subject lot was already sold to and owned by
the NDC.

The contentions of plaintiff-appellant Provido merit Our consideration.

Firstly, the original complaint clearly states a cause of action against Acenas, namely, the right given
by the law to the appellant Provido to repurchase the property from the buyer within five (5) years from
the date of the sale. The allegation in the Answer that the NDC had already purchased the same from
Acenas is of no consequence, for it is not the allegations in the answer, but those in the complaint which
determine whether or not the complaint itself states a cause of action.
Secondly, even if We concede that the registration of the sale in favor of the NDC was on July 9, 1965
and that therefore should have been constructively known by appellant the fact is if an original complaint
already states a cause of action in favor of a plaintiff, the subsequent filing of an amended complaint
makes the filing retroact to the time the original complaint was filed. (Pangasinan Transportation Co.
vs. Philippine Farming Co., Ltd., 81 Phil. 273) Thus, insofar as the NDC and Dole are concerned, the
filing of the amended complaint against them (even if they were not the original defendants) was legally
effectuated upon the filing of the original complaint (and therefore within the prescribed prescriptive
period of five years), they having merely stepped into the shoes of their predecessor-in-interest,
Acenas.

Be it noted that the appellees NDC and Dole cannot invoke their rights under their relationship with
their predecessor- ininterest (Acenas) and yet disclaim the effects of said relationship on exactly the
same subject matter when it is to their disadvantage. This is less than fair, eminently less than just.

It is also averred by appellees that appellant cannot now question the validity of the title of the NDC
because an action to repurchase is inconsistent with a denial of defendant's title to the subject matter
thereof. It is not paradoxically so because NDC and Dole were impleaded by plaintiff not necessarily
as an admission of the validity of their titles but because they are indispensable parties to the final
disposition of the lot in question, if during the trial on the merits, appellant's claim will be proven to be
valid.

WHEREFORE, premises considered, the assailed Orders dated September 5, 1970, September 19,
1970 and December 2, 1970 of the trial court are hereby SET ASIDE. Let this case be REMANDED to
the court a quo for trial on the merits.

SO ORDERED.
SECOND DIVISION

[G.R. No. 153777. April 15, 2005]

PLANTERS DEVELOPMENT BANK, petitioner, vs. LZK HOLDINGS and DEVELOPMENT

CORPORATION, respondent.

DECISION

CALLEJO, SR., J.:

This is a petition for review of the Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 61262, ordering the
dismissal of the petition for certiorari of Planters Development Bank and its resolution dismissing the motion
for reconsideration thereof.

The Antecedents

The LZK Holdings and Development Corporation (LHDC) is a duly-organized corporation with principal office at
AGZ Building, Quezon Avenue, San Fernando City, La Union.[2] The Planters Development Bank (PDB) is a banking
institution duly-organized and existing under and by virtue of the laws of the Philippines.[3]

On December 16, 1996, the LHDC, through its Chief Executive Officer, Mrs. Lourdes Z. Korshak, and the PDB
entered into a Loan Agreement[4] whereby the former was extended a credit accommodation in the amount
of P40,000,000.00. The amount was to be used to finance the ongoing construction of the seven-storey AGZ
Building at Quezon Avenue, San Fernando City, La Union.

To secure the loan, the LHDC executed in favor of the PDB a real estate mortgage[5] over the 589-square-meter
lot where the AGZ Building was then being constructed, covered by Transfer Certificate of Title (TCT) No. T-
45337 issued under the name of the LHDC. Subsequently, the latter executed two promissory notes in favor of
the PDB: (1) Promissory Note No. 97-53-029[6] dated February 24, 1997, in the amount of P35,200,000.00
payable on or before February 24, 2012; and (2) Promissory Note No. 97-53-030[7] dated February 24, 1997 in
the amount of P4,800,000.00, also payable on or before February 24, 2012.

Thereafter, the LHDC executed a Deed of Assignment[8] dated October 1, 1997 in favor of the PDB, wherein it
assigned to the latter all its rental incomes from its AGZ Building, the same to be applied as payment of its
obligations.

For non-payment of loan, non-compliance with the terms and conditions of the Deed of Assignment, and failure
to comply with the conditions of the promissory notes, the PDB caused the extra-judicial foreclosure of the real
estate mortgage under Act No. 3135, before Atty. Melchor Abasolo of San Fernando City, La Union, on April 6,
1998.[9]Consequently, a Notice of Sale dated July 16, 1998 was published.[10] On September 21, 1998, the
foreclosed property was sold to the PDB as the highest bidder, and the corresponding Certificate of Sale [11] was
issued in its favor.

On April 5, 1999, the PDB filed with the Regional Trial Court (RTC) of Makati City, Branch 150, a complaint against
the LHDC for Annulment of Extrajudicial Foreclosure, Mortgage Contract, Promissory Notes and for Damages,
docketed as Civil Case No. 99-471.
It was alleged, inter alia, that the real estate mortgage was void because it was executed on December 16, 1996,
a day after TCT No. T-45337 was issued by the Register of Deeds, and two months before the execution of the
promissory notes; the first page was unsigned by the parties; and it never received the proceeds of the loan in
the amount of P40,000,000.00. The LHDC further alleged that it never authorized the PDB to apply the proceeds
of the loan to the personal obligation of Armando Lao and/or his wife Lourdes Korshak. Moreover, the
extrajudicial foreclosure of the real estate mortgage was void because the LHDC did not, in any way, violate the
said deed, and the PDB even failed to take into account the remittances made under the promissory note. The
LHDC also averred that the PDB dealt with it in gross bad faith, and as such is liable for damages and attorneys
fees, and prayed, thus:

WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff LZK and against defendant-
bank, as follows:

1. On the First Cause of Action, declaring as null and void, the real estate mortgage executed on 16 December
1996 by plaintiff LZK;

2. On the Second Cause of Action, declaring as a nullity, Promissory Notes Nos. 97-53-029 and 97-53-030, both
dated 24 February 1997;

3. On the Third Cause of Action, ruling that the extrajudicial foreclosure of Transfer Certificate of Title No. T-
45337, as being void and without legal effect, as well as the Certificate of Sale executed by Notary Public Melchor
Abasolo;

4. On the Fourth Cause of Action, holding defendant-bank liable for moral damages in the amount of not less
than P10,000,000.00;

5. On the Fifth Cause of Action, adjudging exemplary damages against defendant-bank, in the amount
of P500,000.00;

6. On the Sixth Cause of Action, declaring defendant liable for attorneys fees and cost of litigation in favor of
plaintiff LZK, in the amount of P500,000.00, and the additional amount of P5,000.00 for every court attendance
of plaintiff LZKs counsel.

Other reliefs just and equitable under the premises are likewise prayed for.[12]

The PDB filed in due course its answer,[13] traversing the material allegations thereof and interposing a
counterclaim for attorneys fees and costs.

After a reply[14] to the answer had been filed, the LHDC moved[15] that the case be set for a pre-trial
conference,[16]after which the parties submitted their respective pre-trial briefs.[17]

On January 14, 2000, just before the scheduled pre-trial, the LHDC filed a Motion for Leave[18] to file a
Supplemental Complaint[19] to cover occurrences subsequent to the original complaint. It alleged that after the
filing of the original complaint, it agreed in principle to enter into a contract of lease with a prospective lessee,
AMA Computer College, over three floors of the AGZ Building, but the latter required it to first secure the
petitioners consent. The LHDC thus wrote the PDB, requesting its consent to the said lease. However, the latter
gave unreasonable conditions in its reply, thus:
(a) AMA Computer College shall remit to defendant PDB all the stipulated rental deposits and advance rentals;

(b) Plaintiff withdraws or drops the criminal complaint for falsification and perjury against Mr. Mauro Tividad,
an officer of defendant PDB, then pending with the Office of the City Prosecutor of Makati; and

(c) all documents shall be subject to review by defendant-bank.[20]

This prompted the AMA Computer College to back-out from the contract. Furthermore, the PDB wrote each and
every tenant of the LHDC, demanding that they directly remit their respective rentals to it. Worse still, the PDB,
which was leasing a space in the same building for its branch, had ceased paying its rentals, on the pretext that
it was setting-off the same against the loan deficiency of the LHDC. In fact, according to the LHDC, the PDB had
ceased paying its monthly rental of P73,205.00 since November 1999, and that the total amount due in rentals
was P219,615.00.

The LHDC averred that until title to the property had been consolidated to the PDB, it (the LHDC) remained its
owner, and as such is entitled to exercise all the attributes of ownership, including the right to receive rentals
from the tenants of the building. As such, the PDB had no authority to collect the rentals and apply the previous
loan deficiency because the legality and validity of the promissory notes, the real estate mortgage, and the
subsequent extrajudicial foreclosure were in question before the courts. By applying the rentals to the perceived
loan deficiency, the PDB ignored the authority of the court. Moreover, imposition by the PDB of unreasonable
and unfair conditions to the prospective lease of the property to AMA Computer College, the LHDC failed to
realize expected rentals of P43,000,000.00. It was also alleged that as a result of the foregoing acts of the PDB,
the LHDC was entitled to moral damages of not less than P1,000,000.00. The LHDC prayed that judgment be
rendered on its supplemental complaint, thus:

WHEREFORE, it is respectfully prayed that this Honorable Court decide this instant case in favor of plaintiff and
against defendant PDB, by rendering judgment in the following manner:

[a] holding defendant liable to pay compensatory damages in the amount of no less than One Million Two
Hundred Thousand Pesos (P1,200,000.00) in favor of plaintiff;

[b] adjudging defendant as liable to pay the amount of Two Hundred Nineteen Thousand Six Hundred Fifteen
Pesos (P219,615.00), representing rental arrearages for the months of November 1999 to January 2000;

[c] ruling that defendant is liable to pay moral damages in favor of plaintiff in the amount of One Million Pesos
(P1,000,000.00); and

[d] to pay the cost of suit.

Other reliefs just and equitable under the premises are, likewise, prayed for. [21]

On January 17, 2000, the LHDC filed an Urgent Motion for the Issuance of a Temporary Restraining Order and
Writ of Preliminary Injunction,[22] seeking to restrain the PDB from consolidating its title over the foreclosed
property pending the final determination of Civil Case No. 99-471. It averred that the period for redemption had
yet to expire on March 15, 1999.
On January 18, 2000, the PDB jointly opposed [23] the supplemental complaint and urgent motion, contending
that the latter had miserably failed to establish any right in this regard. As to the supplemental complaint, it
argued that what goes against its admission is the fact that the supplemental matters involved therein would
bring into the case new causes of action, distinct from those mentioned in the original complaint. It also pointed
out the lack of verification of the said supplemental complaint.

Meanwhile, after the hearing on the issuance of a writ of preliminary injunction, the trial court issued on March
13, 2000 a Temporary Restraining Order (TRO), effective for 20 days, restraining the PDB from consolidating
ownership over the foreclosed property.[24] Thereafter, the trial court issued on April 3, 2000 an
Order[25] granting the issuance of the writ, and required the LHDC to file a bond of P40,000,000.00.

Despite the injunction, however, the PDB managed to consolidate its title over the foreclosed property.
Consequently, TCT No. T-53253[26] was issued by the Register of Deeds of La Union under its name on May 3,
2000.

On May 9, 2000, the LHDC filed an Omnibus Motion [27] to declare invalid the consolidated title, to cite the PDB
and its counsel for contempt, and to enjoin the latter from taking possession of the property. This was opposed
by the PDB.[28]

On June 2, 2000, the trial court issued an Order[29] invalidating TCT No. T-53253, and enjoining the PDB from
taking possession of the foreclosed property. The motion to cite the PDB and its counsel for contempt of court
was, however, denied.

On July 27, 2000, over the opposition of the PDB, the trial court issued an Order,[30] admitting the supplemental
complaint with this fallo:

Wherefore, as prayed for, plaintiffs supplemental complaint is hereby admitted upon its paying the docket fees
corresponding to the amount prayed in the supplemental complaint with notice of payment to defendant. In
turn, defendant is hereby ordered to plead within (10) days from receipt of said notice of payment.

SO ORDERED.[31]

In admitting the same, the trial court declared:

The Court finds the terms in plaintiffs supplemental complaint to be just and proper; hence, can be permitted
by the Court. The additional causes of action are intimately and necessarily connected to the causes of action
set forth in plaintiffs Complaint dated March 29, 2000 and are proper under the circumstances inasmuch as the
events happened since the filing of the complaint sought to be supplemented.[32]

The PDB moved for a reconsideration of the order, but the trial court denied the motion.

Dissatisfied, the PDB sought redress in the CA via a petition for certiorari, docketed as CA-G.R. SP No.
61262,[33]ascribing to the court a quo grave abuse of discretion in admitting the supplemental complaint. In its
petition, it insisted that the supplemental complaint was improper. It argued that there is nothing to supplement
and the additional causes of action are entirely new, independent, separate and distinct.[34] It prayed that the
orders of the court a quo be set aside and that the supplemental complaint be stricken-off the record.[35]
On December 20, 2001, the CA rendered a Decision,[36] finding that no grave abuse of discretion was committed
by the trial court in admitting the supplemental complaint of the LHDC. In dismissing the petition, the CA
ratiocinated:

In the case at bench, respondent ably demonstrated the connection between the original complaint and the
supplemental complaint. Thus, the original complaint for annulment of extrajudicial foreclosure, mortgage
contract, promissory notes and for damages was founded on the same transaction the loan and contract of
mortgage as security for such loan as that of the supplemental complaint. The original complaint sought the
annulment of the promissory note and the contract of mortgage. On the other hand, the supplemental
complaint alleged petitioners subsequent acts in asserting its rights as such purported obligee and mortgagor.
Thus, the acts complained of under the supplemental complaint, namely: that petitioner imposed unreasonable
conditions in giving its consent to a pending lease agreement between respondent and a third party and that
petitioner demanded that rentals on the property be made directly to it are acts calculated to exercise
petitioners rights, validly or invalidly, as the obligee and mortgagor in the transaction sought to be annulled in
the original complaint.

Conformably, we cannot subscribe to petitioners view that the cause of action raised in the supplemental
complaint substantially changed or that the theory of the case altered the causes of action contained in the
original complaint. If at all, the new allegations in the supplemental complaint sought remedies only for
subsequent acts perpetrated by petitioner to protect its rights or in furtherance of its interests in the transaction
sought to be annulled.

The admission of supplemental pleadings, like their amendment, we must underscore, should be liberally
construed. In the present case, we find justification for allowing the admission of the amended complaint in
order that the real question between the parties be properly and justly threshed out in a single proceeding, and
thus avoid multiplicity of actions. The filing of the supplemental complaint can well be justified to the end that
the real matter in dispute and all matters in the action in dispute between the parties may, as far as possible be
completely determined in a single proceeding. Indeed, what is important is that, as already stated, the basic
allegations of fact in the original and in the supplemental complaints are the same, namely, that petitioner,
without legal justification, foreclosed the property subject of litigation.

In any event, the original complaint and the supplemental complaint, involving as they do kindred causes of
actions and remedies, are proper subjects of joinder of causes of action. It is to be noted, furthermore, that the
admission or rejection of this kind of pleadings is within the sound discretion of the court that will not be
disturbed on appeal in the absence of abuse thereof. In this case, the court clearly acted within the parameters
of its discretion.[37]

As the plea of the PDB for reconsideration there was denied, [38] it now comes to this Court for redress,
contending that:

I. DECIDED IN A WAY NOT IN ACCORD WITH LAW OR WITH APPLICABLE JURISPRUDENCE RENDERED BY THIS
HONORABLE COURT, AND/OR HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION VESTED IN THIS HONORABLE
COURT.
II. COMMITTED ERRORS IN THE FINDINGS OF FACTS OR CONCLUSIONS OF LAW WHICH, IF NOT CORRECTED,
WOULD CAUSE GRAVE AND IRREPARABLE DAMAGE OR INJURY TO PDB; AND

III. COMMITTED GRAVE ABUSE OF DISCRETION IN THE APPRECIATION OF FACTS.[39]

The petitioner reiterates its arguments before the appellate court, claiming that the supplemental complaint
was inappropriate because it introduced causes of action which are entirely new, totally independent, separate
and distinct from those of the original complaint. It argues that a supplemental complaint cannot be used for
the purpose of trying new matter or a new cause of action. Citing case law,[40] it points out that a supplemental
complaint should, as the name implies, supply only deficiencies in aid of an original complaint. It should contain
only causes of action relevant and material to the plaintiffs right and which help or aid the plaintiffs right or
defense. The supplemental complaint must be based on matters arising subsequent to the original complaint
related to the claim or defense presented therein, and founded on the same cause of action. It cannot be used
to try a new matter or a new cause of action.

The original complaint vis--vis the supplemental complaint, the petitioner asseverates, would show a great deal
of difference in their causes of action.

3. In the supplemental complaint of LZK, the latter wishes to supplement the original complaint with the
following additional causes of action:

a. the alleged imposition of unfair and unreasonable conditions by PDB to the impending lease agreement
between LZK and AMA Computer College;

b. the alleged unilateral and unjustified decision of PDB to stop paying its monthly rentals; and

c. the demand of PDB upon the other tenants of the AGZ Building to remit their respective rentals to PDB instead
of paying to LZK.

4. The original complaint (Annex C) sought to be supplemented is for annulment of extrajudicial foreclosure,
mortgage contract, promissory notes and for damages with the following causes of actions:

a. the mortgage is allegedly null and void ab initio, as the mortgagor, LZK, was not the registered owner of the
subject matter thereof, at the time the mortgage was executed on 16 December 1996;

b. the promissory notes are allegedly invalid in view of the claimed lack of valuable consideration;

c. the extrajudicial foreclosure should allegedly be declared as invalid or void form (sic) the very beginning,
inasmuch as LZK allegedly did not violate the terms and conditions of the promissory notes;

d. PDB is allegedly liable to LZK for moral and exemplary damages plus attorneys fees. [41]

7. As discussed above, the original complaint has nothing to do with the additional causes of action alleged in
the supplemental complaint; the latter does not bolster and it does not add anything to the original
complaint. [42]

The petition has no merit.

Section 6, Rule 10 of the Revised Rules of Court prescribes the manner and substance of filing supplemental
pleadings:

SECTION 6. Supplemental Pleadings. Upon motion of a party the court may, upon reasonable notice and upon
such terms as are just, permit him to serve a supplemental pleading setting forth transactions, occurrences or
events which have happened since the date of the pleading sought to be supplemented. The adverse party may
plead thereto within ten (10) days from notice of the order admitting the supplemental pleading.

As its very name denotes, a supplemental pleading only serves to bolster or adds something to the primary
pleading. A supplement exists side by side with the original. It does not replace that which it
supplements.[43] Moreover, a supplemental pleading assumes that the original pleading is to stand and that the
issues joined with the original pleading remained an issue to be tried in the action.[44] It is but a continuation of
the complaint. Its usual office is to set up new facts which justify, enlarge or change the kind of relief with
respect to the same subject matter as the controversy referred to in the original complaint. [45]

The purpose of the supplemental pleading is to bring into the records new facts which will enlarge or change
the kind of relief to which the plaintiff is entitled; hence, any supplemental facts which further develop the
original right of action, or extend to vary the relief, are available by way of supplemental complaint even though
they themselves constitute a right of action.[46]

The parties may file supplemental pleadings only to supply deficiencies in aid of an original pleading, but not to
introduce new and independent causes of action. In Leobrera v. Court of Appeals,[47] the Court ruled that when
the cause of action stated in the supplemental complaint is different from the causes of action mentioned in
the original complaint, the court should not admit the supplemental complaint. However, a broad definition of
causes of action should be applied. As the United States Supreme Court ruled in Smith v. Biggs Boiler Works
Co.: [48]

While a matter stated in a supplemental complaint should have some relation to the cause of action set forth
in the original pleading, the fact that the supplemental pleading technically states a new cause of action should
not be a bar to its allowance but only a factor can be considered by the court in the exercise of its discretion;
and of course, a broad definition of cause of action should be applied here as elsewhere. [49]

In the present case, the issue as to whether the petitioner stopped the payment of rentals and the application
thereof on the perceived loan deficiency of the respondent, is a new matter that occurred after the filing of the
original complaint. However, the relief for damages, the collection of the rentals and the application thereof by
the petitioner to the perceived loan deficiency of the respondent are germane to, and are in fact, intertwined
with the cause of action of nullification of the real estate mortgage and the extrajudicial foreclosure thereof, as
well as the sale at public auction. It is the respondents contention that the petitioner remained liable to it for
rentals, and until title to the property had been lawfully consolidated with the petitioner. The claims of
unrealized income by way of rentals from the AMA Computer College on account of the respondents insistence
that such should be remitted to it, and that the respondent first drop the criminal complaint for falsification and
perjury filed by it against Mauro Tividad, the officer of the petitioner, are, likewise, germane and related to the
respondents claim in its original complaint that it remained the owner of the property despite the sale at public
auction; hence, it is entitled to lease the property and collect the rentals therefrom. By its supplemental
complaint, the respondent merely enlarged its original causes of action on account of events that transpired
after the filing of the original complaint and prayed for additional reliefs. The principal and core issues raised by
the parties in their original pleadings remain the same. There is no showing on record that the petitioner would
be prejudiced by the admission of the supplemental complaint. After all, the petitioner has the right to file a
supplemental answer to the supplemental complaint, conformably to Section 7, Rule 11 of the Revised Rules of
Court which reads:

SEC. 7. Answer to supplemental complaint. A supplemental complaint may be answered within ten (10) days
from notice of the order admitting the same, unless a different period is fixed by the court. The answer to the
complaint shall serve as the answer to the supplemental complaint if no new or supplemental answer is filed.

The trial court cannot, thus, be faulted for admitting the respondents supplemental complaint.

Besides, the admission of the supplemental complaint will better serve the ends of justice. After all, the Rules
of Court were designed to facilitate the administration of justice to the rival claims of the parties in a just, speedy
and inexpensive manner.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioner.

SO ORDERED.
SECOND DIVISION

[G.R. No. 131175. August 28, 2001]

SPOUSES JOVITO VALENZUELA and NORMA VALENZUELA, SPOUSES ALFREDO QUIAZON and BELLA GONZALES
QUIAZON, SPOUSES EDUARDO DE GUZMAN and JULIETA DE GUZMAN, DE GUZMAN DEVELOPMENT
CORPORATION, SKYFREIGHT BROKERAGE, INC., ATTY. ROMULO R. BOBADILA and WEB-HEGG CONSTRUCTION
RESOURCES, INCORPORATED, petitioners, vs. HONORABLE COURT OF APPEALS and SPOUSES MANUEL T. DE
GUIA and LETICIA MARIANO DE GUIA and the REGISTER OF DEEDS OF PARAAQUE CITY, METRO
MANILA, respondents.

DECISION

BUENA, J.:

In resolving the propriety of the amendment of the complaint in the present case, which motion to amend was
filed after the lapse of fifteen years from the filing of the initiatory pleading sought to be amended, this Court
painstakingly considered not only the peculiar circumstances obtaining, but also accorded premium to the legal
truism that adjective law is not the counterfoil of substantive law and that the rules of procedure must not be
perverted into engines of injustice.[1]

Sought to be reversed in the instant petition for review on certiorari is the decision [2] of the Court of Appeals
dated 15 August 1997 in C.A. G.R. SP. No. 44185, which nullified and set aside the orders dated 11 November
1996[3] and 06 February 1997 of the Regional Trial Court (RTC) of Pasay City, Branch 231, in Civil Case No. PQ-
9412-P. The subject orders of the RTC denied private respondents motion to admit amended complaint dated
18 March 1997.

Similarly impugned is the resolution[4] of the Court of Appeals dated 24 October 1997, denying private
respondents motion for reconsideration.

The factual antecedents and proceedings unfold.

On 10 September 1981, herein private respondents spouses Manuel and Leticia De Guia filed a complaint
for specific performance and damages docketed as Civil Case No. PQ-9412-P[5] against herein petitioners
spouses Jovito and Norma Valenzuela before the then Court of First Instance of Rizal in Pasay City. The complaint
prayed, among others, that the Spouses Valenzuela be ordered to execute in favor of private respondents the
necessary deed of sale covering the two (2) parcels of land allegedly subject of a contract to sell between said
parties.

On 16 September 1981, private respondents spouses De Guia, upon discovering that the subject real properties
were sold and transferred by the spouses Valenzuela to herein co-petitioners spouses Alfredo and Bella
Gonzales Quiazon, filed Civil Case No. PQ- 9432-P[6] for annulment of sale, cancellation of title and damages,
against spouses Valenzuela, spouses Quiazon, and the Register of Deeds of Pasay City. In the complaint, private
respondents spouses De Guia prayed specifically for the annulment of the deed of sale executed by the spouses
Valenzuela in favor of the spouses Quiazon, cancellation of TCT Nos. 39396 and 39397 in the name of spouses
Quiazon, and the reinstatement of TCT No. 39142 in the name of the spouses Valenzuela, or in the alternative,
the reconveyance of the subject properties by the spouses Quiazon to spouses Valenzuela.

On 13 October 1981, private respondents spouses De Guia amended their complaint in Civil Case No. PQ-9432-
P impleading Webb-Hegg Construction Resources, Inc. as additional defendant.

On 19 January 1983, spouses De Guia filed in Civil Case No. PQ-9432-P a Motion to Admit Second Amended
Complaint impleading as additional defendant Gerardo Villacorta. Prior to the resolution of such pending
motion, Civil Case No. PQ-9432-P was transferred to the Regional Trial Court of Makati, Branch 133 pursuant to
the Judiciary Reorganization Law (B.P. Blg. 129). As a result of the transfer of the case, Civil Case No. PQ-9432-P
was redocketed as Civil Case No. 2723.

On 20 May 1983, the RTC of Makati, Branch 133 issued an order admitting the second amended complaint.
Upon motion of the defendants therein, however, Civil Case No. 2723 was returned to RTC-Pasay, where herein
private respondents spouses De Guia filed a motion to admit third amended complaint seeking to implead
spouses De Guzman, De Guzman Development Corporation, Skyfreight Brokerage, Inc. and Lawyer Romeo
Bobadilla, as additional defendants.

On 30 May 1984, the RTC-Pasay issued an omnibus order[7] denying the motion to admit the third amended
complaint and declaring as automatically vacated the order of RTC-Makati, Branch 133, which admitted the
second amended complaint. Upon denial of their motion for reconsideration, private respondents spouses De
Guia then filed a petition for certiorari and prohibition before the appellate court, docketed as CA G.R. SP. No.
04518.

On 27 March 1990, after a preliminary hearing on the affirmative defenses of pendency of another action and
splitting a cause of action, the lower court issued an order dismissing the complaint in Civil Case No. PQ-9432-
P. Private respondents spouses De Guia appealed the dismissal of said case before the Court of Appeals which
on 30 March 1994, affirmed the dismissal order of the lower court. Aggrieved, private respondents spouses De
Guia filed a petition before the Supreme Court assailing the decision of the Court of Appeals.

In a Resolution dated 24 July 1995, the High Court dismissed the petition for having been filed beyond the
reglementary period. Private respondents moved to reconsider, which motion the Supreme Court denied via a
resolution dated 30 September 1995.

Upon motion of spouses Quiazon in Civil Case Nos. PQ-9412-P and PQ-9432-P, the lower court issued an order
dated 17 January 1996 directing the cancellation of the Notice of Lis Pendens under Entry No. 81-11596 and
Entry No. 81-12186 and the Adverse Claim under Entry No. 81-11601 on TCT Nos. 39386 and 39397 in the name
of spouses Quiazon. On 02 February 1996, private respondents sought to reconsider the trial courts order.

On 18 March 1996, private respondents filed a motion to admit amended complaint in Civil Case No. PQ-9412-
P. Prior to the resolution of the two pending motions, private respondents filed a motion for the inhibition of
the presiding judge of Branch 117, RTC-Pasay. In an order dated 17 April 1996, the court granted the motion for
inhibition resulting in the re-raffle of Civil Case No. PQ-9412-P to Branch 231, presided by Judge Cesar Z. Ylagan.

In an order dated 11 November 1996, Judge Ylagan denied the motion to admit amended complaint prompting
herein private respondents spouses De Guia to file a motion for reconsideration which the lower court denied.
Private respondents elevated the lower courts order denying the motion to admit amended complaint to the
Court of Appeals.

On 15 August 1997, the Court of Appeals rendered the assailed decision the decretal portion of which declares:

WHEREFORE, the instant petition for certiorari and mandamus is hereby GRANTED. Consequently, the orders
dated November 11, 1996 and February 6, 1997 are SET ASIDE and respondent is ordered to admit petitioners
amended complaint dated March 18, 1997.

On 05 November 1997, the RTC-Pasay, Branch 231 issued an order[8] admitting the amended complaint,
pursuant to the decision of the Court of Appeals dated 15 August 1997. Herein petitioners filed with the lower
court a manifestation with motion to reconsider[9] to the effect that they would file a petition for review on
certiorari before the Supreme Court, to which manifestation private respondents filed an opposition. Petitioners
then filed a reply to the opposition after which the lower court, in an order dated 23 January, decreed that the
admission of the amended complaint and service of summons are hereby held in abeyance until after the
Supreme Court has resolved the case before it which has effectively placed this court on notice.

On 17 December 1997, herein petitioners filed the instant petition where this Court is tasked in the main to
resolve the propriety of the amendment of the complaint in Civil Case No. PQ-9412-P. Petitioners argue, among
others, that the amendment should not be allowed inasmuch as the introduction of amendments to the
complaint in Civil Case No. PQ-9412-P would, in effect, radically and substantially change the cause of action
and theory of the case.

The Court sanctions the amendment of the complaint and resolves to strike down the petition. At this point, a
review of the pertinent provisions regarding amendments is in order. Section 1, Rule 10 of the 1997 Rules of
Civil Procedure explicitly provides:

Section 1. Amendment in general. Pleadings may be amended by adding or striking out an allegation or the
name of any party, or by correcting a mistake in the name of a party or a mistaken or inadequate allegation or
description in any other respect, so that the actual merits of the controversy may speedily be determined,
without regard to technicalities, and in the most expeditious and inexpensive manner. (emphasis ours)

Equally important is Section 3, Rule 10 of the Rules:

Section 3. Amendments by leave of court. Except as provided in the next preceding section, substantial
amendments may be made only upon leave of court. But such leave may be refused if it appears to the court
that the motion was made with intent to delay. Orders of the court upon the matters provided in this section
shall be made upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.

Petitioners contend that the foregoing provisions of the 1997 Rules of Civil Procedure cannot be applied in the
case at bar. We do not agree. Elementary is the rule in this jurisdiction that one does not have a vested right in
procedural rules, thus:

Statutes regulating the procedure of courts will be considered as applicable to actions pending and
undetermined at the time of their passage. Procedural laws are retroactive in that sense and to that
extent. The fact that procedural statutes may somehow affect the litigants rights may not preclude their
retroactive application to pending actions. The retroactive application of procedural laws is not violative of
any right of a person who may feel that he is adversely affected. Nor is the retroactive application of procedural
statutes constitutionally objectionable. The reason is that as a general rule, no vested right may attach to, nor
arise from procedural laws. It has been held that a person has no vested right in any particular remedy, and a
litigant cannot insist on the application to the trial of his case, whether civil or criminal, of any other than the
existing rules of procedure.[10] (emphasis ours)

Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure[11] amended the former rule[12] in such
manner that the phrase or that the cause of action or defense is substantially altered was stricken-off and not
retained in the new rules. The clear import of such amendment in Section 3, Rule 10 is that under the new rules,
the amendment may (now) substantially alter the cause of action or defense. [13] This should only be true,
however, when despite a substantial change or alteration in the cause of action or defense, the amendments
sought to be made shall serve the higher interests of substantial justice, and prevent delay and equally promote
the laudable objective of the rules which is to secure a just, speedy and inexpensive disposition of every action
and proceeding.

Thus, granting arguendo that the amendment of the complaint in Civil Case No. PQ-9432-P would substantially
alter or change the cause of action or defense in said controversy, this Court nonetheless holds that in the higher
interest of substantial justice, the introduction of amendments to the complaint is apropos at this particular
instance to forestall further delay in the resolution of the actual merits of the parties respective claims and
defenses. To reiterate, the Rules of Court seek to eliminate undue reliance on technical rules and to make
litigation as inexpensive, as practicable and as convenient as can be done.[14] Rules of procedure, after all, are
but tools designed to facilitate the attainment of justice, such that when rigid application of the rules tends to
frustrate rather than promote substantial justice, the Supreme Court is empowered to suspend their
operation.[15] This Court will not hesitate to set aside technicalities in favor of what is fair and just.[16]

As the records would readily reveal, the instant case Civil Case No. PQ-9412-P has already dragged and suffered
protracted delay for a span of twenty years, borne by countless legal skirmishes between the party litigants
involving principally entanglement on technical niceties and procedural rules. In fact, the procedural incidents
and interlocutory matters relating to this controversy, to wit, Civil Case No. PQ-9412-P and its related case Civil
Case No. PQ-9432-P, have reached no less than the portals of this Court at least twice first, as to the specific
issue of the propriety of admission of a third amended complaint in Civil Case No. PQ-9432 and second, as to
the particular query on the validity of the dismissal of Civil Case No. PQ-9432-P, on the ground of litis pendentia.

By and large, due to the multifarious procedural incidents involving these two suits, albeit issues concededly not
to be outrightly dismissed as less important, the actual merits of the controversy have yet to reach their full
adjudication, resolution and determination. Under these circumstances, particularly considering the dismissal
of Civil Case No. PQ-9432-P on ground of litis pendentia, the disallowance of the amendment of the complaint
in Civil Case No. PQ-9412-P would, to our mind, necessarily result in an even greater delay in the disposition and
adjudication of the actual merits of the case, which run counter to the hallowed office and cardinal objective of
the Rules to provide, at each possible instance, an expeditious and full resolution of issues involving the
respective rights and liabilities of the parties under substantive law.
True enough, the delay that has so characterized the adjudication of the merits of this case-- which original
complaint was filed practically two decades ago-- has not escaped the attention of this Court. Thus, in the
interest of substantial justice, this Court allows the introduction of amendments to the complaint in Civil Case
No. PQ-9412-P so as to afford the party-litigants the full and genuine opportunity to substantiate their
respective claims and defenses and for the trial court to finally resolve the matters relating to the merits of the
case.

Besides, the defendants sought to be impleaded in Civil Case No. PQ-9412-P are not left without justifiable
recourse. To this end, the law in no uncertain terms provide for the necessary legal implements and the adoption
of effective means and defenses sanctioned by the Rules, wherein both parties in the controversy may very well
advance and protect their respective legal interests. By sanctioning the introduction of amendments to the
complaint, the issues shall at last be viewed, so to speak, in the clear light of day and substantial matters therein
shall not anymore be lost in the abyss of technicalities and procedural jargon.

On this matter, the discourse of the Court of Appeals is elucidating:

With the dismissal of Civil Case No. PQ-9432-P in which petitioners (herein private respondents spouses De Guia)
seek the annulment of the sale made by spouses Valenzuela in favor of spouses Quiazon, complete relief could
be obtained by petitioners only by the admission of the amended complaint. Without the amendment, a
favorable judgment for petitioners would be meaningless, if not futile, as the properties covered by the contract
to sell which they seek to enforce had already been sold to spouses Quiazon, who are among those sought to
be impleaded as additional defendants in the amended complaint.

X X X The inquiry should be as to whether or not the amendment is necessary to enable the parties, particularly
petitioners, to obtain complete relief in just one proceeding. As above stated, the non-inclusion of spouses
Quiazon and others who may have acquired rights or interest in the properties in question will render the relief
originally sought in Civil Case No. PQ-9412-P incomplete without the sale or transfer to spouses Quiazon being
nullified; hence, the need for the amendment. X X X

X X X Needless to state, the court is of the considered opinion that admission of the amended complaint is not
only necessary to afford complete relief to the parties; it will also forestall any further need to institute other
actions or proceedings arising from the transaction subject matter of Civil Case No. PQ-9412-P. X X X

Inasmuch as herein private respondents, in its amended complaint, likewise pray for reconveyance of the real
property, considering that the subject parcels of land were transferred in the name of spouses Quiazon who
notably were not impleaded in the original complaint in Civil Case No. PQ-9412-P, it bears to stress that owners
of property over which reconveyance is asserted are indispensable parties without whom no relief is available
and without whom the court can render no valid judgment.[17]

Additionally, petitioners stubbornly maintain that the principle of res judicata, specifically the doctrine of
conclusiveness of judgment, should find application in the instant case so as to preclude the court from
resolving anew the propriety of the amendment in Civil Case No. PQ-9412-P, which issue, according to
petitioner, was previously passed upon and determined in Civil Case No. PQ-9432-P.

The contention is without basis. Res judicata, either in the concept of bar by former judgment or conclusiveness
of judgment, cannot be applied to the present case.
In Vda. De Cruzo vs. Carriaga, Jr.,[18] this Court speaking through Mr. Justice Florenz Regalado, inked an
enlightening discourse on the subject:

The doctrine of res judicata thus lays down two main rules which may be stated as follows: 1) The judgment or
decree of a court of competent jurisdiction on the merits concludes the parties and their privies to the litigation
and constitutes a bar to a new action or suit involving the same cause of action either before the same or any
other tribunal; and 2) Any right, fact, or matter in issue directly adjudicated or necessarily involved in the
determination of an action before a competent court in which a judgment or decree is rendered on the merits is
conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies
whether or not the claim or demand, purpose or subject matter of the two suits is the same. These two main
rules mark the distinction between the principles governing the two typical cases in which a judgment may
operate as evidence. In speaking of these cases, the first general rule above stated, and which corresponds to
the aforequoted paragraph (b) of Section 49, is referred to as bar by former judgment while the second general
rule, which is embodied in paragraph (c) of the same section, is known as conclusiveness of judgment.

Stated otherwise, when we speak of res judicata in its concept as a bar by former judgment. the judgment
rendered in the first case is an absolute bar to the subsequent action since said judgment is conclusive not only
as to the matters offered and received to sustain that judgment but also as to any other matter which might
have been offered for that purpose and which could have been adjudged therein. This is the concept in which
the term res judicata is more commonly and generally used and in which it is understood as the bar by prior
judgment constituting a ground for a motion to dismiss in civil cases.

On the other hand, the less familiar concept or less terminological usage of res judicata as a rule
on conclusiveness of judgmentrefers to the situation where the judgment in the prior action operates as an
estoppel only as to the matters actually determined therein or which were necessarily included therein.
Consequently, since other admissible and relevant matters which the parties in the second action could properly
offer are not concluded by the said judgment, the same is not a bar to or a ground for dismissal of the second
action.

At bottom, the other elements being virtually the same, the fundamental difference between the rule of res
judicata as a bar by former judgment and as merely a rule on the conclusiveness of judgment is that, in the
first, there is an identity in the cause of action in both cases involved whereas, in the second, the cause of
action in the first case is different from that in the second case. (emphasis ours)

Proceeding from the foregoing disquisition, the principle of res judicata, requires the concurrence of the
following requisites:[19]

a) The former judgment or order must be final;

b) It must be a judgment or order on the merits, that is, it was rendered after a consideration of the evidence
or stipulations submitted by the parties at the trial of the case;

c) It must have been rendered by a court having jurisdiction over the subject matter and the parties; and

d) There must be, between the first and second actions, identity of parties, of subject matter and of cause of
action. This requisite is satisfied if the two actions are substantially between the same parties. (emphasis ours)
For want of the second requisite, to wit, that the judgment must be rendered on the merits, the instant case is
thus removed from the operation of the principle of res judicata. Stated differently, if the judgment is not on
the merits, it cannot be considered as a conclusive adjudication of the controversy. Consequently, a judgment
dismissing an action for want of jurisdiction, or because of the pendency of another action between the same
parties and for the same cause, or a judgment absolving a defendant because he was not served with summons,
or a dismissal on the ground of misjoinder cannot operate as res adjudicata on the merits.[20]

To this end, it must be noted that the dismissal of Civil Case No. PQ-9432-P was due to litis pendentia or the
pendency of another action, obviously referring to Civil Case No. PQ-9412-P. Applying the foregoing doctrines,
the judgment dismissing Civil Case No. PQ-9432-P, on the ground of litis pendentia, cannot be considered an
adjudication on the merits.[21] Clearly then, res judicata cannot apply.

WHEREFORE, premises considered, the assailed decision of the Court of Appeals in C.A. G.R. SP. No. 44185 is
AFFIRMED and the instant petition is DENIED for lack of merit. Accordingly, the Regional Trial Court of Pasay
City-Branch 231, is hereby ordered to admit herein private respondents amended complaint in Civil Case No.
PQ-9412-P, to issue the necessary summons to all impleaded defendants therein and to resolve the case with
dispatch.

SO ORDERED.
THIRD DIVISION

BANCO DE ORO UNIVERSAL BANK, G.R. No. 160354

Petitioner, Present:

PANGANIBAN, Chairman,

SANDOVAL- GUTIERREZ,

- versus - CORONA,

CARPIO MORALES, and

GARCIA, JJ.

THE HON. COURT OF APPEALS and SPS.

GABRIEL G. LOCSIN and MA. GERALDINE R.
Promulgated:
LOCSIN,

Respondents.
August 25, 2005

xx - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -xx

DECISION

CARPIO MORALES, J.:

Subject of the present Petition for Review is the Court of Appeals June 5, 2003 Decision[1] annulling and setting
aside the Orders[2] of the Regional Trial Court (RTC) of Mandaluyong denying respondents spouses Gabriel and
Ma. Geraldine Locsins Motion to Dismiss the complaint of petitioner, Banco de Oro Universal Bank.

The following antecedent facts are not disputed:

 On September 28, 1995, respondents Locsins entered into a Term Loan Agreement (TLA) with petitioner under
which they obtained a loan of P700,000.00 which was secured by a Real Estate Mortgage of their property
covered by TCT No. N-138739 (1st TLA).

On February 29, 1996, the Locsins obtained a 2nd TLA from petitioner in the amount of P800,000.00, to secure
which they executed a Real Estate Mortgage over their property covered by TCT No. 67286. This 2nd TLA was
eventually settled on July 2, 1996, on account of which the mortgage was cancelled and the title was released
on July 8, 1996.

On November 6, 1996, the parties entered into a Credit Line Agreement (CLA) under which the Locsins obtained
a credit line of P2.5 Million, to secure which their business partners, the spouses Juanito and Anita Evidente,
executed a Real Estate Mortgage of their (the Evidentes) properties covered by TCT Nos. N-166336 and N-
166637. Monthly amortization of the obligation appears to have been religiously paid until October of 1997.

The Locsins having failed to comply with their obligation under the CLA, petitioner filed before the Quezon City
Regional Trial Court (RTC) Executive Judge an application dated May 4, 1998 for the extra-judicial foreclosure of
the mortgage which encumbered the Evidente properties under the CLA, as well as the mortgage of the Locsin
property covering TCT N-67286 which secured the 2nd TLA. The application was granted and public auction of
these properties was scheduled, and was actually carried out on July 23, 1998.

The public auction was later nullified, however, on petitioners move, the Locsin property covered by TCT No.
67286 which secured the 2nd TLA having been erroneously included. An amended application for extrajudicial
foreclosure was thus filed by petitioner, this time covering the same Evidente properties and TCT No. 138739,
the property of the Locsins which secured the 1st TLA. Public auction of these properties was scheduled
on August 26, 1998.

Two days before the scheduled public auction or on August 24, 1998, the Locsins filed before the Quezon City
Regional Trial Court (RTC) a complaint against petitioner, the RTC Clerk of Court and Ex-Oficio Sheriff of Quezon
City, and Sheriff VI Marino V. Cahero, for Specific Performance, Tort and Damages with Prayer for the Issuance
of a Temporary Restraining Order (TRO) and a Writ of Preliminary Injunction, docketed as Civil Case No. Q-98-
35337.[3] The pertinent allegations of the Locsins complaint are as follows:

xxx

15. Defendant bank, through its Assistant Vice-President-Combank II, Agnes C. Tuason, told plaintiffs that the
loan valuation of the two aforementioned properties [of the spouses Evidente securing the CLA] is PHP2.5
Million, and this was in fact the amount received by plaintiff from defendant bank . . .

16. The spouses Evidente, through plaintiffs, paid for the monthly installments due on the [CLA] until October,
1997, as evidenced by OR No. 167588 dated October 31, 1997 issued by defendant bank. . . .

17. The spouses Evidente were unable to make subsequent payments and the real estate mortgage over the
Evidente properties was recommended for foreclosure.

xxx
19. . . . [P]laintiffs advised defendant bank that they will be settling their 1st TLA in full and shall be taking the
property covered by TCT No. N-138739 out of the mortgage.

20. However, to the shock of plaintiffs, defendant bank through its Account Officer, Nelia Umbal, refused to
release the said property because the Evidente properties, the mortgage of which secures . . . the CLA
dated November 6, 1996, will be insufficient to cover the balance of the said CLA.

21. Plaintiffs were surprised to learn that defendant bank capriciously, recklessly and oppressively gave a loan
valuation of only PHP900,000.00 for each of [the] two Evidente properties, or a total of PHP1.8 Million. This
valuation is unfair and unreasonable considering that the fair market value of these properties is around PHP5
Million. Furthermore, no reason was given by defendant bank for the sudden and unjust change in the valuation,
which was originally pegged by defendant at PHP2.5 Million.

22. In effect, the mortgaged property covered by TCT No. N-138739, which secures the 1st TLA dated
September 28, 1995, and which has a loan valuation of PHP700,000.00, was also made a collateral for the CLA.
Worse, the whole amount of the loan under the 1st TLA was declared due and demandable, although plaintiffs
faithfully and regularly paid for the monthly amortization there[of].

23. Thus, to complete, rather suspiciously, the security for the CLA which is for PHP2.5 Million, defendant bank
further informed plaintiffs that it would cost them PHP1.4 Million to take the property covered by TCT No. N-
138739 [which secured the first TLA] out of the mortgage, because the deficiency in the CLA secured by the
Evidente properties must also be paid. This amount is preposterous considering that at the time, the remaining
balance of the 1st TLA was only around PHP450,000,00. Moreover, plaintiffs were suffering from financial
difficulties because of the sharp decline of the pesos purchasing power.

xxx

26. Defendant bank filed with the Executive Judge of Quezon City, through public defendants herein, an
Application for Extra-Judicial foreclosure of Real Estate Mortgage under Act No, 3135, as amended, dated May
4, 1998. The application sought the sale in a public auction of the Evidente properties and plaintiffs property
covered byTCT No. 67286 [which secured the second TLA and which TLA had been settled]. . . .

xxx

31. Yet, defendant bank and public defendants allowed the public auction to proceed as scheduled [on July 23,
1998].

xxx

35. In the meantime, without making any effort to cancel the effects of the public auction held on July 23,
1998, defendant bank filed with public defendants an Amended Application for Extra-Judicial Foreclosure of
Real Estate Mortgage under Act No. 3135, as amended. The amended application sought the sale in a public
auction of the same Evidente properties and plaintiffs property covered by TCT No. N-138739 [which secured
the first TLA].

36. Acting upon the said application, public defendants issued another notice of Sheriff Sale dated July 28,
1998which scheduled the public auction of the aforementioned real properties on August 26, 1998 . . .
 37. Plaintiffs property covered by TCT No. N-138739 is erroneously included in the amended application and in
the Notice of the Sheriffs Sale. The said mortgaged property secures the 1st TLA dated September 28, 1995, for
which plaintiffs have faithfully and regularly paid for the monthly amortization due. On the other hand,
defendant bank is foreclosing the said property and the two Evidente properties for alleged failure to pay the
monthly installments due on the CLA dated November 8, 1996.

xxx

38. Furthermore, defendant bank acted in bad faith and in willful breach of its contractual obligations to
plaintiffs in understating the loan valuation of the two Evidente properties, and in effect declaring the
property covered by TCT No. N-133739 [which secured the first TLA] as additional collateral for the said CLA.
(Emphasis and underscoring supplied).

The plaintiffs Locsins thus prayed that:

A. Upon filing of this complaint, a temporary restraining order (TRO) be immediately issued ex-parte, enjoining
defendants, their agents and/or representatives from enforcing the Notice of Sheriffs Sale dated July 28, 1998,
and from proceeding with the scheduled public auction of the properties included therein, particularly plaintiffs
real property covered by TCT No. N-138739, on August 26, 1998, or on any date thereafter, until further orders
from the Honorable Court.

B. After appropriate proceedings, a writ of preliminary injunction be issued, under the same tenor as above,
and upon payment of such bond as may be fixed by the Honorable Court.

C. After trial on the merits, judgment be rendered:

1. On the First Cause of Action, ordering defendant bank to faithfully comply with its obligations under the
1st TLA and the CLA, revert the loan valuation of the two Evidente properties covered by TCTs Nos. N-166336 and
166337 to PHP2.5 Million, and allow plaintiffs to take its property covered by TCT No. N-138739 out of the
mortgage by paying the balance thereon, minus interests and penalties accruing from February 1998;

2. On the First and Second Causes of Action, ordering defendant bank to pay plaintiffs PHP500,000.00 in actual
damages;

3. On the Third Cause of Action, ordering defendant bank to pay plaintiffs PHP1 Million in actual damages;

4. On the Fourth Cause of Action, ordering defendant bank to pay plaintiffs PHP500,000.00 in moral damages;

5. On the Fifth Cause of Action, ordering defendant bank to pay plaintiffs PHP300,000.00 in exemplary
damages;

6. On the Sixth Cause of Action, ordering defendant bank to [pay] plaintiffs PHP200,[000].00 for attorneys fees
and litigation expenses;

7. Making the injunction issued against defendants permanent; and

8. Ordering defendants to pay costs of suit.

Other reliefs which are just and equitable are likewise prayed for.[4] (Emphasis and underscoring in the original;
italics supplied).

Branch 233 of the Quezon City RTC denied the Locsins prayer for the issuance of a TRO, by Order of August 25,
1998.

In its September 8, 1998 ANSWER[5] with Compulsory Counterclaim filed on September 11, 1998, petitioner
denied that its Asst. Vice President Agnes Tuason had told the Locsins that the loan valuation of the Evidente
properties was P2.5 million for it in fact told them that the P2.5 million loan was approved inspite of the
deficiency of the Evidente properties because of their [Locsins] good paying record with [it]. And it denied
(specifically) too the Locsins complaints-allegations in paragraphs 19-25, alleging as follows:

8.2 All the promissory notes signed by [the Locsins] uniformly provide:

Upon the occurrence as to Maker or any Co-Maker of this Promissory Note of any of the following events of
default, the outstanding principal, accrued interest and any other sum payable hereunder or under any related
agreement shall become immediately due and payable without presentment, demand, protest or notice of any
kind (other than notice of the event and fact of default) all of which are hereby expressly waived by the Maker
and all of the Co-Makers, if any:

xxx

3) Failure by the Maker or any Co-Maker to perform or the violation of any provision of this Promissory Note
or any related agreement;

xxx

6) The Maker or any Co-Maker fails to pay any money due under any other agreement, standby letter of credit
or document evidencing, securing, guaranteeing or otherwise relating to indebtedness of the Maker or any Co-
Maker to any other creditor, or there occurs, any event of default or any event which, but for the passage of
time or the giving of notice, or both, would constitute under any such agreement, stand by letter of credit or
document (and which has not been remedied within any applicable grace period):

xxx

8.3 The letter of approval of the P2.5 million loan of [the Locsins] has a cross-default provision, which reads:

3.6 A default on any availment under this credit line facility shall automatically mean a default on [the Locsins]
existing term loan under Promissory Note No. 29-01-9080-95 [covering the first TLA] and vice versa (Emphasis
and underscoring supplied),[6]

on which letter the Locsins affixed their conformity; that in light of the Locsins default in the settlement of their
monthly obligations under the CLA, it sent them a January 7, 1998 demand letter advising them of the Past Due
Status of their promissory note covering the P2.5 million account to thereby automatically mean that [said
promissory note] and the other loan account under [the promissory note covering the 1 st TLA] with an
outstanding balance of P460,652.95 are considered Due and Demandable already; that after a follow up letter
and a final letter of demand, the Locsins requested, by letter of February 26, 1998, that the promissory note
under the 1st TLA and that under the CLA be treated separately and that one of their titles be released upon
payment of P1.8 million; that by letter of March 5, 1998, it advised the Locsins that their request in their
February 26, 1998 letter regarding the release of one of the [two Evidente titles] was approved, subject to the
partial payment on Principal plus all interests and charges amounting to P1,934,465.79 as of March 20, 1998;
that to its March 5, 1998 letter, the Locsins, by letter of March ___, (sic) 1998, replied as follows:

We would like to request for a thirty day extension on the deadline given us today for the payment
of P1,900,000.00, or (sic) the release of one title under PN No. 11-01-0586-96 [covering the CLA] as the person
very much interested in purchasing it has asked us for the same. At the same time we are also going to take out
the property under PN No. 29-01-9080-95 [covering the first TLA], so that only one property under the fire (sic)
account mentioned shall be left mortgaged to your bank.

Thank you for your kind consideration.[7] (Underscoring supplied);

that despite the grant of the Locsins request for extension of 30 days or up to April 20, 1998 to pay P1.9
million as a condition for the release of the title, the Locsins failed to come up therewith; and that the inclusion
of the Locsinsmortgaged title covering the 1st TLA in the amended application for extra-judicial foreclosure was
not erroneous because of the cross-default provisions and acceleration clauses in the loan documents which
[the Locsins] signed.

As Compulsory Counterclaim petitioner alleged that on account of the filing of the baseless and malicious suit,
it was constrained to engage the services of its counsel at an agreed fee of P200,000.00. It thus prayed for the
dismissal of the Locsins complaint and the grant of its counterclaim.

En passant, it does not appear that the Locsins filed a Reply[8] to petitioners Answer with Compulsory
Counterclaim.

On March 26, 1999, the Locsins filed an Omnibus Motion[9] (To Amend the Designation of the Plaintiffs; and to
Admit Supplemental Complaint), which appears to have been granted by the Quezon City RTC. In their
Supplemental Complaint,[10] they repleaded in toto the allegations in their August 24, 1998 Complaint
and additionally alleged that petitioner proceeded with the public auction of the properties covered by the
mortgage in the 1st TLA and the mortgage in the CLA on September 23, 1998, contrary to law.

The Locsins thus prayed in their Supplemental Complaint as follows:

1. Ordering the cancellation of the public auction of TCT Nos. N-138739, N-166336 and N-
166337 on September 23, 1998;

2. Declaring said auction of no legal force and effect; and

3. Granting the following reliefs prayed for by plaintiffs in their [original] Complaint, to wit:

x x x[11] (Emphasis and underscoring supplied).

 By Answer[12] (To Supplemental Complaint) dated June 1, 1999, petitioner admitted that the public auction
(which was originally scheduled on August 26, 1998) did take place on September 23, 1998. It denied, however,
that it was contrary to law.

More than eight months after the Locsins filed their Supplemental Complaint reflecting their prayer for the
nullification of the September 23, 1998 public auction sale or on November 29, 1999, petitioner filed a
complaint against the Locsins before the RTC of Mandaluyong where it was docketed as Civil Case No. MC-99-
935,[13] for Collection of Sum of Money, alleging as follows:

xxx

5. Defendants failed to satisfy their obligations under the . . . Promissory Notes [covering the first TLA & the
CLA] and Plaintiff deemed them in default;

xxx

11. The [amended] extrajudicial sale was conducted on 23 September 1998 and Plaintiff was again declared the
highest bidder . . .

12. The total outstanding obligation of Defendants at the time of the foreclosure was PESOS: FIVE MILLION
TWENTY THREE THOUSAND FOUR HUNDRED NINETY SIX & 64/100 (P5,023.496.64). However, the appraised
value of the properties was only P3,879,406.80 and plaintiff thus submitted a bid of PESOS: THREE MILLION
EIGHT HUNDRED SEVENTY NINE THOUSAND FOUR HUNDRED SIX & 80/100 (P3,879.406.80);

13. After all expenses for the foreclosure and registration of the Certificate of Sale have been deducted from
the aforementioned bid, there still remains an outstanding balance in the amount of PESOS: ONE MILLION ONE
HUNDRED FORTY FOUR THOUSAND EIGHTY NINE & 84/100 (1,144,089.84), EXCLUSIVE OF INTEREST AT THE
RATE OF TWENTY FIVE AND A HALF PERCENT (25.5%) per annum, which Plaintiff is entitled to recover from
Defendants;

14. On 09 February 1999, counsel for plaintiff sent a letter to defendants dated 05 February 1999, demanding
from the latter the payment of said deficiency but Defendants refused and failed and continue to refuse and fail
to pay said obligation . . .

15. Due to Defendants unreasonable refusal and failure to comply with Plaintiffs just demands, Plaintiff was
compelled to institute the present action and to engage the services of counsel to whom it bound itself to pay
the sum of P130,000.00, plus appearance fee of P2,000.00 and other legal costs and expenses.[14] (Emphasis in
the original; underscoring supplied).

Petitioner accordingly prayed in its complaint that the Locsins be ordered to pay it jointly and severally

1. the outstanding obligation in the sum of PESOS: ONE MILLION ONE HUNDRED FORTY FOUR THOUSAND
EIGHTY NINE & 84/100 (1,144,089.84), plus interest thereon at the rate of twenty five and a half percent (25.5%)
per annum from 23 September 1998, the date of the foreclosure sale, until the obligation has been fully paid;
2. attorneys fees in the sum of P130,000.00, plus appearance fee of P2,000.00; and

3. costs of suit and expenses of litigation.

Other just and equitable reliefs under the premises are likewise prayed for. [15] (Emphasis in the original).

To petitioners complaint (for sum of money), the Locsins filed a Motion to Dismiss[16] on the ground that it
should have been raised as compulsory counterclaim in their (the Locsins) complaint (for specific performance,
damages and nullification of the public auction), and by failing to raise it as such, it is now barred by the rules.
To the Motion, petitioner filed its Opposition which merited the Locsins filing of a Reply to Opposition. [17]

Branch 213 of the Mandaluyong RTC denied the Locsins Motion to Dismiss petitioners Complaint, by Order
of September 18, 2000,[18] in this wise:

The motion to dismiss is premised on the ground that plaintiffs claim in the instant case should have been raised
in the previous case, [C]ivil [C]ase No. Q98-35337, wherein plaintiff herein was the defendant, said claim being
a compulsory counterclaim and for failure to raise the same, it is now barred by the rules.

It is noted, however, that the instant case is one for collection of alleged deficiency amount as the proceeds of
the foreclosure sale of defendants properties are not sufficient to cover the entire indebtedness. In effect, such
claim did not arise as a consequence of [C]ivil Case No. 098-353337 but was already existing (sic) even before
the institution of that earlier case.

Without necessarily delving into the veracity of plaintiffs claim but merely considering its origin and nature as
alleged in the complaint, said claim is merely permissive and not compulsory. Thus, such a claim can stand as an
independent action.[19] (Underscoring supplied).

The Locsins Motion for Reconsideration having been denied by the Mandaluyong RTC by Order of March 21,
2001,[20] they appealed to the Court of Appeals which, by the present assailed decision of June 5,
2003,[21]reversed the Orders of the Mandaluyong RTC, it finding that petitioners complaint was a compulsory
counterclaim which should have been raised in its Answer to the Locsins complaint, and having failed to do so,
it is now barred; that litis pendentia and res judicata apply to the case; and that petitioner violated the rule on
forum shopping, hence, the dismissal of its complaint is warranted. Explained the appellate court:

[The Locsins] complaint in Civil Case No. Q-98-35337, pending before Branch 223 of the Regional; Trial Court of
Quezon City asks specific performance by private respondent Banco de Oro of its obligations under the very
same loan agreements covered by Real Estate Mortgages mentioned in private respondents Complaint in Civil
Case No. MC-99-935 before the Mandaluyong City Trial Court. In both cases, the real properties involved are
those covered by TCT Nos. N-138739, [N-166336] and N-166337. The basis of the parties respective complaints
arose from the very same transactions, the Term Loan Agreement, dated September 28, 1995 and the Credit
Line Agreement, dated November 6, 1996. Clearly, there is a logical connection between both claims which
arose from the same transaction and are necessarily connected and it does not require the presence of third
parties for its adjudication. A counterclaim is logically related to the opposing partys claim where separate trials
of each of their respective claims would involve substantial duplication of effort and time by the parties and the
courts.
Moreover, Sec. 2, Rule 9 of the Rules of Court provides:

Sec. 2. Compulsory counterclaim, or cross-claim, not set up barred. - A compulsory counterclaim. or a cross
claim, not set up shall be barred.

Private respondent should have raised its complaint as compulsory counterclaim in the Regional Trial Court of
Quezon City. Failing to do so, it is now barred. The reason for the rule relating to counterclaims is to avoid
multiplicity of suits and to enable the Courts to dispose of the whole matter in controversy in one action, and
adjustment of defendants demand by counterclaim rather than by independent suit. (Reyes vs. Court of Appeals,
38 SCRA 138).

[The Locsins] second argument is that private respondents complaint in Civil Case No. MC-99-935
constitutes litis pendentia, and therefore should have been dismissed by the trial court. For litis pendentia to be
a ground for dismissal of an action, three elements must concur: (a) identity of parties, or at least such parties
who represent the same interest in both actions; (b) identity of rights asserted and relief prayed for being
founded on the same facts; and (c) the identity, with respect to the two preceding particulars in the two cases,
is such that any judgment that may be rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other.

Applying this test, the principle of litis pendentia and res judicata will certainly apply to the instant case, all three
requisites are present. The parties are the same and what is involved in both Civil Case No. Q-98-35337 pending
before the Quezon City Trial Court and Civil Case No. MC-99-935 before the Mandaluyong City Trial Court are
the same subject matter and set of circumstances, which would entail presentation of the same
evidence. Judgment in favor of one of the parties in Civil Case No. Q-9835337 would bar the institution of the
case filed before the Mandaluyong City Trial Court.

Finally, [the Locsins] assert that Civil Case MC-99-935 should be dismissed since private respondent is guilty of
willful and deliberate forum shopping. Jurisprudence has defined forum-shopping as the filing of multiple suits
involving the same parties for the same cause of action, either simultaneously or successively, for the purpose
of obtaining a favorable judgment. Forum shopping exists where the elements of litis pendentia are present,
and where the a final judgment in one case will amount to res judicata in the other. (Heirs of Victorina Motus
Penaverde v. Heirs of Mariano Penaverde, 344 SCRA 69). Thus, there is forum shopping when there exist: a)
identity of parties, or at least such parties as represent the same interest in both actions, b) identity of rights
asserted and relief prayed for, the relief being founded on the same facts, and c) the identity of the two
preceding particulars is such that any judgment rendered in the other action, will amount to res judicata in the
action under consideration. (Prubankers Association vs. Prudential Bank and Trust Company, 302 SCRA 83). As
discussed earlier, the elements of litis pendentia being present and that res judicata will eventually result, a
decision by the Quezon City Trial Court would bar the institution of the Civil Case in the Mandaluyong City Trial
Court for the collection of deficiency claim in the foreclosure sale of the petitioners properties. Private
respondent violated the rule on forum shopping and therefore, the summary dismissal of their action is
warranted.[22] (Italics in the original; underscoring supplied).

Hence, the present Petition for Review on Certiorari,[23] petitioner raising the following assignment of errors:

I. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER BANKS COMPLAINT FOR COLLECTION OF SUM
OF MONEY BASED ON DEFICIENCY CLAIM UNDER CIVIL CASE No. MC-99-935 IS A COMPULSORY COUNTERCLAIM
AND SHOULD HAVE BEEN SET UP BY PETITIONER BANK IN PRIVATE RESPONDENTS COMPLAINT FOR SPECIFIC
PERFORMANCE, TORT AND DAMAGES, AND ANNULMENT OF FORECLOSURE IN CIVIL CASE NO. Q-98-35337.

II. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE IS LITIS PENDENTIA AND THUS, CIVIL CASE No. MC-
99-935 SHOULD BE DISMISSED.

III. THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER BANK IS GUILTY OF FORUM SHOPPING.[24]

Petitioner argues that the Locsins complaint is one based on tort, whereas its complaint before the
Mandaluyong RTC is based on contract and law, hence, the two causes of action are separate and distinct; that
under the test for the determination of whether the counterclaim is compulsory or permissive, its suit before
the RTC of Mandaluyong for collection of deficiency judgment is not a compulsory, but permissive counterclaim
and may, therefore, proceed independently of the Locsins complaint.

Petitioner adds that its claim arises from the loan agreement, whereas the Locsins claim arises from the
annulment of the foreclosure sale; that litis pendentia and res judicata do not apply as grounds for dismissal of
its complaint as a perusal of both complaints reveals different causes of action, and the rights asserted and the
reliefs prayed for are different, and the rule on lis pendens is applicable only when the judgment to be rendered
in the action first instituted will be such that regardless of which party is successful, it will amount to res
judicata as to the second action, it citing Hongkong & Shanghai Bank v. Aldecon & Co.[25]

Citing Enriquez, et al. v. Ramos, et al.,[26] petitioner further argues that an action for collection of a mortgage
loan does not bar another for rescission of the mortgage if such is based on the non-compliance by the
mortgagor of the mortgage contract.

Petitioner further cites Roa v. PH Credit Corporation,[27] wherein this Court ruled that the pendency of a replevin
suit does not bar a proceeding for deficiency claim as there is no identity of subject matter, cause of action and
reliefs prayed for.

Finally, petitioner cites Bangko Silangan Development Bank v. Court of Appeals,[28] wherein this Court held that:

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

While it is true that the two (2) cases are founded in practically the same set of facts, as correctly observed by
the Court of Appeals, it cannot be said that exactly the same evidence are needed to prove the causes of action
in both cases. Thus, in Civil Case No, 91-56185 of the RTC of Manila, the evidence needed to prove that petitioner
sustained damage to its reputation and goodwill is not the same evidence needed in Civil Case No. 221 of the
RTC of Batangas to prove the allegation that a substantial amount of respondent Bausas bank deposit in
petitioners bank was illegally withdrawn without her consent or authority, The RTC of Batangas and the Court
of Appeals, therefore, did not abuse their discretion in denying petitioners motion to dismiss which was based
on the ground of litis pendentia.[29](Emphasis and underscoring supplied).

By their Comment,[30] the Locsins maintain that petitioners claim in Civil Case No. MC-99-935 is logically related
to their claim in Civil Case No. Q-98-35337, as they involve the same parties, rely on the same facts, subject
matter and series of

transactions and, therefore, would entail presentation of the same evidence; that petitioner having failed to set
up its claim as a compulsory counterclaim[31] in Civil Case No. Q-98-35337, it is now barred from setting it up in
Civil Case No. MC-99-935; and that litis pendentia and res judicata proscribe the filing of a separate complaint
by petitioner which is guilty of willful and deliberate forum shopping.

The petition is impressed with merit.

It bears noting that when petitioner filed its Answer with Counterclaim to the Locsins complaint onSeptember
11, 1998, the Real Estate Mortgages covering the 1st TLA and the CLA had not been extrajudicially foreclosed,
the extra-judicial foreclosure having taken place subsequent thereto or on September 23, 1998.

It bears noting too that until after the Locsins allegedly refused and failed to settle the alleged deficiency
amount of their outstanding obligation, despite petitioners February 5, 1999 letter of demand sent to the
Locsins on February 9, 1999, petitioners cause of action had not arisen.

Petitioner could not, therefore, have set its claim subject of its complaint in Civil Case No. MC-99-935 as,
assuming arguendo that it is, a compulsory counterclaim when it filed on September 11, 1998 its Answer with
Compulsory Counterclaim to the Locsins complaint.[32]

The counterclaim must be existing at the time of filing the answer, though not at the commencement of the
action for under Section 3 of the former Rule 10, the counterclaim or cross-claim which a party may aver in his
answer must be one which he may have at the time against the opposing party. That phrase can only have
reference to the time of the answer. Certainly a premature counterclaim cannot be set up in the answer. This
construction is not only explicit from the language of the aforecited provisions but also serves to harmonize the
aforecited sections of Rule 10, with section 4 of the same rule which provides that a counterclaim . . . which
either matured or was acquired by a party after serving his pleading may, with the permission of the court, be
presented as a counterclaim . . . by supplemental pleading before judgment.

Thus a party who fails to interpose a counterclaim although arising out of or is necessarily connected with the
transaction or occurrence of the plaintiffs suit but which did not exist or mature at the time said party files his
answer is not thereby barred from interposing such claim in a future litigation. . .[33] (Emphasis and underscoring
supplied).

While petitioner could have, after the Locsins filed on March 26, 1999 a Supplemental Complaint in Civil Case
No. Q-98-35337, set up, in its Supplemental Answer, its claim subject of Civil Case No. MC-99-935, again
assuming arguendo that it is a Compulsory
Counterclaim, the setting up of such after-acquired counterclaim, is merely permissive, not compulsory.[34]

At all events, even if the claim of petitioner - subject of its complaint in Civil Case No. MC-99-935 is a compulsory
counterclaim which should have been set up in its Answer to the Locsins Supplemental Complaint, technicality
should give way to justice and equity to enable petitioner to pursue its after-acquired claim against the Locsins.

As for the issue of whether petitioners complaint is dismissible on the grounds of litis pendentia or auter action
pendant, and forum shopping, the above-quoted and recited allegations of the pleadings of the parties do not
reflect identity of rights asserted and reliefs sought, as well as basis thereof, to a degree sufficient to give rise
to the abatement of petitioners complaint on any of these grounds.

WHEREFORE, the petition is hereby GRANTED.

The assailed decision of the Court of Appeals is SET ASIDE.

Let the case be REMANDED to the court of origin, Branch 213 of the Regional Trial Court of Mandaluyong, which
is hereby DIRECTED to continue with dispatch the proceedings in Civil Case No. MC-99-935.

No costs.

SO ORDERED.
THIRD DIVISION

ROGELIO ABERCA, RODOLFO BENOSA, NESTOR G.R. No. 166216

BODINO,

NOEL ETABAG, DANILO DELA FUENTE, BELEN

DIAZ-FLORES, MANUEL MARIO GUZMAN,
Present:
ALAN JASMINEZ, EDWIN LOPEZ, ALFREDO
MANSOS, ALEX MARCELINO, ELIZABETH
PROTACIO-MARCELINO,
VELASCO, JR., J., Chairperson,
JOSEPH OLAYER, CARLOS PALMA, MARCO
PALO, PERALTA,

ROLANDO SALUTIN BENJAMIN SEGUNDO, ABAD,

ARTURO TABARA, EDWIN TULALIAN, and
MENDOZA, and
REBECCA TULALIAN,
PERLAS-BERNABE, JJ.
Petitioners,

- versus

MAJ. GEN. FABIAN VER,

COL. FIDEL SINGSON,

COL. GERARDO B. LANTORIA, COL. ROLANDO

ABADILLA,

COL. GALILEO KINTANAR,

LT. COL. PANFILO M. LACSON, MAJ. RODOLFO

AGUINALDO, CAPT. DANILO PIZARRO,

1LT. PEDRO TANGO,

1LT. ROMEO RICARDO,

1LT. RAUL BACALSO,

M/SGT. BIENVENIDO BALABA

and JOHN DOES,

Respondents.\
 Promulgated:

March 14, 2012

DECISION

MENDOZA, J.:

Assailed in this petition is the July 31, 2003 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 43763
and its November 26, 2004 Resolution[2] reversing and setting aside the February 19, 1993 Decision [3] of the
Regional Trial Court, Branch 107, Quezon City (RTC), in Civil Case No. 37487 entitled Rogelio Aberca, et al. v.
Maj. Gen. Fabian Ver, et al. for sum of money and damages.

The Facts

The factual and procedural antecedents were succinctly recited by the CA as follows:

On 25 January 1983, several suspected subversives who were arrested and detained by the military filed a
complaint for damages with the Regional Trial Court of Quezon City against Gen. Fabian Ver, then AFP Chief
of Staff, and the following subordinate officers: Col. Fidel Singson, Col. Gerardo Lantoria, Col. Rolando
Abadilla, Col. Guillermo Kintanar, Lt. Col. Panfilo Lacson, Maj. Rodolfo Aguinaldo, Capt. Danilo Pizarro,
1Lt. Pedro Tango, 1Lt. Romeo Ricardo, 1Lt. Raul Bacalso, M/Sgt. Bienvenido Balaba and John Does. The case
was docketed as Civil Case No. 37487 and assigned to Branch 95.

In their complaint, the plaintiff-appellees alleged that they were arrested and detained by Task Force
Makabansa, a composite group of various intelligence units of the AFP, on the strength of defective search
warrants; that while under detention and investigation, they were subjected to physical and psychological
harm, torture and other brutalities to extort from them confessions and other information that would
incriminate them; and that by reason thereof, they suffered actual and moral damages.

Defendants-appellants, through their counsel, the then Solicitor General Estelito Mendoza, filed a motion to
dismiss on the following grounds: (1) since the privilege of the writ of habeas corpus was then suspended, the
trial court cannot inquire into the circumstances surrounding plaintiffs-appellees arrests; (2) the defendants-
appellants are immune from liability for the reason that they were then performing their official duties; and
(3) the complaint states no cause of action.

In an order dated November 8, 1983, the trial court granted defendants-appellants motion to dismiss and
ordered the case dismissed.
Plaintiffs-appellees filed a motion to reconsider and set aside the order of dismissal. In an order dated May
11, 1984, the trial court declared the order of November 8, 1983 final.

Plaintiffs-appellees again filed a motion for reconsideration of the order dated May 11, 1984. In an order
dated September 21, 1984, the trial court denied the motion for reconsideration.

On March 15, 1985, plaintiffs-appellees went to the Supreme Court on a petition for review on certiorari,
seeking to annul and set aside the orders of the trial court dated November 8, 1983, May 11,
1984and September 21, 1984. The case was docketed as G.R. No. 69866.

While the case was pending in the Supreme Court, the so-called EDSA revolution took place. As a result, the
defendants-appellants lost their official positions and were no longer in their respective office addresses as
appearing in the record. Also, in the meantime, the case was re-raffled to Branch 107.

On April 15, 1988, the Supreme Court rendered a decision annulling and setting aside the assailed orders and
remanded the case to the trial court for further proceedings.

However, trial could not proceed immediately because on June 11, 1988, the record of the case was
destroyed when fire razed the City Hall of Quezon City. It was only on October 9, 1989 when plaintiffs-
appellees sought a reconstitution of the record of the case. The record shows that the petition for
reconstitution was set for hearing on October 27, 1989. However, there is nothing in the record to show that
defendants-appellants or their counsel were notified. For lack of an opposition, the petition for reconstitution
was granted in an order dated March 12, 1990.

On August 15, 1990, plaintiffs-appellees filed a motion praying that defendants-appellants be required to file
their answer. However, the record as reconstituted did not show who are the lawyers of the defendants-
appellants considering that Estelito Mendoza, who had represented them in his capacity as Solicitor General,
was no longer holding that position. Furthermore, defendants-appellants were also no longer occupying the
positions they held at the time the complaint was filed. Thus, in an order dated August 17, 1990, plaintiffs-
appellees were directed to report to the trial court the addresses and whereabouts of defendants-appellants
so that they could be properly notified.

Instead of complying with the order of August 17, 1990, plaintiffs-appellees filed a motion to declare
defendants-appellants in default. The trial court deferred resolution of this motion and instead, it issued an
order on September 10, 1990 directing that a copy of the order dated August 17, 1990 be furnished to new
Solicitor General Francisco Chavez to enable him to take action pursuant to Section 18, Rule 3 of the Rules of
Court, and to former Solicitor General Estelito Mendoza to enable him to give notice as to whether he [would]
continue to represent the defendants-appellants in his private capacity. As it said in its order, the trial court
took this action in view of the change in government and corresponding change in the addresses and
circumstances of the defendants-appellants who may not even be aware of the decision of the Supreme Court
in case G.R. No. L-69866 and of the reconstitution of records in this case xxx.

On October 1, 1990, former Solicitor General Mendoza filed a manifestation informing the trial court that his
appearance as defendants-appellants counsel terminated when he ceased to be Solicitor General and that he
was not representing them in his private capacity. On his part, Solicitor General Chavez finally filed
on December 11, 1990 a notice of withdrawal of appearance, citing Urbano v. Go, where the Supreme Court
said that the Office of the Solicitor General (OSG) is not authorized to represent a public official at any stage
of a criminal case or in a civil suit for damages arising from a felony. The record does not show that
defendants-appellants were furnished a copy of this notice of withdrawal or that they gave their conformity
thereto.

In an order dated December 27, 1990, the trial court denied plaintiffs-appellees motion to declare
defendants-appellants in default, emphatically pointing out that defendants-appellants were not duly
notified of the decision of the Supreme Court. In the same order, the trial court directed plaintiffs-appellees
to comply with the order of August 17, 1990 within ten (10) days from notice, with a warning that the case
[would] be archived and eventually dismissed if plaintiffs-appellees failed to furnish to the court the
addresses of defendants-appellants. Plaintiffs-appellees moved to reconsider the order dated December 27,
1990 but in an order dated February 1, 1991, the trial court denied the motion, stating that without actual
notice of the judgment of the Supreme Court xxx the defendants-appellants herein would not be aware that
they should file a responsive pleading and that, therefore, to consider the defendants-appellants in default
would be tantamount to lack of due process xxx.

For failure of the plaintiffs-appellees to comply with the orders dated August 17, 1990 and December 27,
1990, the trial court dismissed the case without prejudice in its order dated March 7, 1991. Subsequently,
however, in an order dated June 4, 1991, the trial court set aside the order of dismissal and reinstated the
case. It also approved plaintiffs-appellees request to serve the notice to file answer or responsive pleading by
publication.

In a compliance dated September 12, 1991, plaintiffs-appellees informed the trial court that the following
notice was published in the Tagalog newspaper BALITA in its issues of August 29, 1991 and September 5, 1991:

xxxx

No answer was filed by defendants-appellants within the period stated in the notice. On motion of plaintiffs-
appellees, the trial court in its order dated December 5, 1991 declared defendants-appellants in default and
directed plaintiffs-appellees to present their evidence ex-parte.[4]

Ruling of the RTC

On February 19, 1993, the RTC handed down a decision in favor of the petitioners, the dispositive portion of
which reads:

WHEREFORE, judgment is hereby rendered, ordering the following defendants:

1) Maj. General Fabian Ver

2) Col. Fidel Singson

3) Col. Rolando Abadilla

4) Col. Gerardo Lantoria

5) Col. Galileo Kintanar

6) Lt. Col. Panfilo Lacson

7) Maj. Rodolfo Aguinaldo

8) 1Lt. Pedro Tango

9) M/Sgt. Bienvenido Balaba

to pay jointly and severally to EACH of the following plaintiffs:

a) Rodolfo Benosa

b) Manuel Mario Guzman

c) Joseph Olayer

d) Marco Palo

e) Rolando Salutin

the amounts of FIFTY THOUSAND PESOS (₱50,000.00) as temperate or moderate damages; ONE HUNDRED
FIFTY THOUSAND PESOS (₱150,000.00) as moral damages; and ONE HUNDRED FIFTY THOUSAND PESOS
(₱150,000.00) as exemplary damages. Likewise, they are ordered to pay jointly and severally the sum of TWO
HUNDRED THOUSAND PESOS to the plaintiffs counsel.

The claims of the rest of the plaintiffs are denied and thereby dismissed. Likewise, the case against the
following defendants: Capt. Danilo Pizarro, 1Lt. Romeo Ricardo and 1Lt. Raul Bacalso is DISMISSED, and the
said defendants are exonerated from any liability. [5]

Subsequently, respondents Col. Fidel Singson (Col. Singson), Lt. Col. Panfilo M. Lacson (Lt. Col. Lacson), and
Col. Rolando Abadilla (Col. Abadilla) filed their Omnibus Motion praying as follows: 1) that the order of
default dated December 5, 1991 be reversed and set aside; 2) that the decision dated February 19, 1993 be
reversed and set aside; 3) that the entire proceedings be declared null and void; and 4) that they be given
fifteen (15) days from notice to file answer to the complaint and present their evidence. Col. Gerardo B.
Lantoria (Col. Lantoria)filed his own Motion for Reconsideration.

On his part, respondent Maj. Rodolfo Aguinaldo (Maj. Aguinaldo) failed to file a timely notice of appeal so
he filed a Petition for Relief from Judgment praying that the RTC set aside its decision and proceed to try the
case based on the following grounds: 1) the decision was rendered without the benefit of notice in gross
violation of his right to due process; 2) the reconstitution of the records of the case and further proceedings
taken thereon were effected through fraud; and 3) his failure to move for a new trial or to appeal was due to
mistake or excusable negligence.
The Omnibus Motion of Col. Singson, Lt. Col. Lacson and Col. Abadilla; the Motion for Reconsideration of Col.
Gerardo Lantoria; and the Petition for Relief from Judgment of Maj. Aguinaldo were denied by the
RTC.[6]Aggrieved, the said respondents elevated their case to the CA.

Maj. Aguinaldo argued that he was deliberately deprived of the opportunity to be heard and put up his
defense, while Col. Singson, Lt. Col. Lacson and Col. Abadilla presented the following assignment of errors:

THE TRIAL COURT ERRED IN ALLOWING THE OFFICE OF THE SOLICITOR GENERAL (OSG) TO WITHDRAW AS
COUNSEL WITHOUT THE REQUIRED NOTICE TO, AND/OR CONSENT/CONFORMITY OF APPELLANTS.

II

THE TRIAL COURT ERRED IN NOT SETTING ASIDE THE ORDER OF DEFAULT AND/OR THE JUDGMENT BY
DEFAULT AND GRANTING NEW TRIAL.

III

THE TRIAL COURT ERRED IN HOLDING THAT THE OSGS MISTAKES AND NEGLIGENCE ARE BINDING ON THE
DEFENDANTS-APPELLANTS.

IV

THE TRIAL COURT ERRED IN HOLDING THE DEFENDANTS-APPELLANTS SINGSON, ABADILLA AND LACSON
LIABLE FOR THE ALLEGED DAMAGES SUSTAINED BY THE PLAINTIFFS-APPELLANTS (SIC).[7]

The Ruling of the CA

On July 31, 2003, the CA rendered a decision reversing and setting aside the RTC decision and ordering the
case remanded to the RTC for further proceedings. The dispositive portion of the CA decision reads as follows:

WHEREFORE, premises considered, the appeal is hereby GRANTED. The assailed decision dated February 19,
1993 is hereby REVERSED and SET ASIDE. Let the record be REMANDED to the trial court for further
proceedings in accordance with the foregoing disquisition.

SO ORDERED.[8]

The CA ruled, among others, that the RTC committed four (4) errors in declaring the respondents in default
and proceeding to hear the case. The RTC committed its first error when it abandoned the proper modes of
service of notices, orders, resolutions or judgments as the petitioners failed to comply with its order dated
August 17, 1990, directing them to report the addresses and whereabouts of the respondents so that they
could be properly notified.

The second error was the failure of the RTC to avail of substituted service after failing to effect personal
service or service by mail. It perpetrated its third error when it authorized service by publication after
dismissing the case for failure of the petitioners to furnish the current addresses of the respondents. The CA
reasoned out that there was nothing in the rules which would authorize publication of a notice of hearing to
file answer and for what was authorized to be published were summons and final orders and judgments.
The fourth error was committed when the respondents were declared in default because they were not duly
notified and, therefore, were denied due process.

The CA stated that since the RTC failed to notify the respondents of the proceedings undertaken, the latter
were denied the chance to actively participate therein. It explained as follows:

Instead of observing the above precepts by according defendants-appellants every opportunity to ventilate
their side of the controversy, the trial court failed not only to notify them of the proceedings undertaken
relative to the resolution of the case but the chance as well to actively participate therein. It bears stressing
that defendants-appellants were not informed of the reinstatement of the case against them when the High
Tribunal set aside the orders of the trial court dated May 11, 1984, September 21, 1984 and November 8,
1983 dismissing the complaint instituted by plaintiffs-appellees. Likewise, defendants-appellants were not
apprised of the reconstitution of the records of the case which were destroyed by the fire that razed the City
Hall of Quezon City. In the same manner, they were not notified of the withdrawal of the OSG as their official
counsel of record, much less was their consent thereto sought. Finally and most significantly, defendants-
appellants were precluded the chance to file their respective answer or responsive pleadings to the complaint
with the issuance of the order dated December 5, 1991 declaring them in default notwithstanding the
defective service by publication of the courts notice requiring them to file such answer or responsive
pleading.[9]

Not satisfied, the petitioners come to this Court praying for the reversal and setting aside of the CA decision
anchored on the following arguments:

IN REVERSING THE TRIAL COURTS RULINGS DECLARING DEFENDANTS IN DEFAULT AND ALLOWING PLAINTIFFS
TO PRESENT THEIR EVIDENCE EX-PARTE; AND IN NULLIFYING THE TRIAL COURTS JUDGMENT BY DEFAULT, THE
COURT A QUO ACTED CONTRARY TO LAW AND JURISPRUDENCE AND SO FAR DEPARTED FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO WARRANT THE EXERCISE BY THIS COURT OF ITS POWER OF
SUPERVISION.[10]

II

IN HOLDING THAT THE TRIAL COURT ERRED IN DENYING RESPONDENTS MOTION FOR NEW TRIAL TO SET
ASIDE THE JUDGMENT AND PETITION FOR RELIEF FROM JUDGMENT, THE COURT A QUO ACTED CONTRARY
TO LAW AND JURISPRUDENCE, AND SO FAR DEPARTED FROM THE USUAL COURSE OF JUDICIAL PROCEEDINGS
AS TO WARRANT THE EXERCISE BY THIS COURT OF ITS POWER OF SUPERVISION.[11]

The Petitioners Position

The petitioners claim that the RTC did not err in declaring the respondents in default and in allowing them to
present evidence ex- parte; that the respondents were represented by the OSG from 1983 up to December
11, 1990 when the latter withdrew its appearance from the case; that after the respondents had appeared,
thru the OSG, by filing a motion to dismiss, the petitioners were under no obligation to track down the
respondents addresses since the Rules of Court provide that once a litigant is represented by counsel, all
notices, motions and pleadings must be sent to him as counsel of record; that it is a matter of record that the
OSG was furnished copies of all court orders and the petitioners pleadings for the period it remained as the
respondents counsel of record or from 1983 until the OSG withdrew on December 11, 1990; that as counsel
of record, the OSG was duty-bound to file the respondents answer to the complaint within 15 days from
notice that it was reinstated by this Court and the case was remanded to the RTC for further proceedings; and
that despite having received copies of this Courts decision in G.R. No. 69866 on or about April 20, 1988 and
despite having been duly notified of the finality of said decision by means of this Courts Entry of Judgment,
the OSG did not file any answer or seek an extension of time to do so.

The petitioners further argue that as early as May 1988, when this Courts decision became final and
executory and the respondents received notice thereof through their counsel of record, it was incumbent
upon them to have answered the complaint within the period provided by the Rules of Court; that the RTC
was not hasty in declaring the respondents in default for they were given several chances to file their answers
even after their period to do so had already lapsed; that it was the respondents failure to exercise ordinary
prudence in monitoring the progress of this case that placed the petitioners in a difficult situation; that the
respondents in this case cannot seize control of the proceedings or cause them to be suspended indefinitely
by the simple expedient of not filing their answers or by feigning ignorance of the status of the proceedings;
that the rule on service of summons by means of publication applies to service of summons by publication,
not to notices to file answer by publication; that while service of summons by publication entails acquiring
jurisdiction over the person of the defendant, it was already obtained over the respondents in this case by
their voluntary appearance through counsel and their act of filing a motion to dismiss on substantive grounds;
that substituted service was an exercise in futility because the respondents were no longer holding the
positions they were holding at the time the petition was filed and, therefore, could not be reached at the
addresses indicated on the complaint; that the only remaining option was to notify the respondents by
publication; that the RTC did not err in holding that the respondents failed to establish the fraud, accident,
mistake and/or excusable negligence that would warrant the grant of a new trial, or the setting aside of the
judgment and/or petition for relief from judgment; that the negligence of the OSG is binding on the
respondents in the same manner that its initial success in securing the dismissal of the case was binding on
them; and that it would be highly unfair to allow the respondents, who reaped the benefits of the initial
dismissal of the case and never complained then about the OSG, to suddenly complain that they were not
bound by their counsels handling or mishandling of the case.

The Respondents Position

The respondents counter that the CA did not commit a reversible error in reversing and setting aside the
default judgment rendered by the RTC; that the petitioners failed to address four (4) errors committed by the
RTC cited by the CA; that the respondents were deprived of the opportunity to file their answer or responsive
pleadings to the complaint when the RTC issued a default order against them after a defective service of
notice to file answer by publication; that the petitioners invocation of the jurisprudence that a defaulting
party has the burden of showing that he has a meritorious defense does not apply in this case; and that what
should apply is the settled rule that once a denial or deprivation of due process is determined, the RTC is
ousted of its jurisdiction to proceed and its judgment is null and void.
The Courts Ruling

The basic question is whether the constitutional right to procedural due process was properly observed or
was unacceptably violated in this case when the respondents were declared in default for failing to file their
answer within the prescribed period and when the petitioners were allowed to present their evidence ex-
parte.

Section 1, Article III of the 1987 Constitution guarantees that:

No person shall be deprived of life, liberty, or property without due process of law nor shall any person be
denied the equal protection of the law.

Procedural due process is that which hears before it condemns, which proceeds upon inquiry and renders
judgment only after trial. It contemplates notice and opportunity to be heard before judgment is rendered
affecting one's person or property.[12]

Moreover, pursuant to the provisions of Section 5(5) of Article VIII of the 1987 Constitution,[13] the Court
adopted and promulgated the following rules concerning, among others, the protection and enforcement of
constitutional rights, pleading, practice and procedure in all courts:

Rule 13

SEC. 5. Modes of service.Service of pleadings, motions, notices, orders, judgments and other papers shall be
made either personally or by mail.

SEC. 6. Personal service.Service of the papers may be made by delivering personally a copy to the party or his
counsel, or by leaving it in his office with his clerk or with a person having charge thereof. If no person is found
in his office, or his office is not known, or he has no office, then by leaving the copy, between the hours of
eight in the morning and six in the evening, at the partys or counsels residence, if known, with a person of
sufficient age and discretion then residing therein.

SEC. 7. Service by mail.Service by registered mail shall be made by depositing the copy in the office, in a sealed
envelope, plainly addressed to the party or his counsel at his office, if known, otherwise at his residence, if
known, with postage fully prepaid, and with instructions to the postmaster to return the mail to the sender
after ten (10) days if undelivered. If no registry service is available in the locality of either the sender or the
addressee, service may be done by ordinary mail.

SEC. 8. Substituted service.If service of pleadings, motions, notices, resolutions, orders and other papers
cannot be made under the two preceding sections, the office and place of residence of the party or his counsel
being unknown, service may be made by delivering the copy to the clerk of court, with proof of failure of both
personal service and service by mail. The service is complete at the time of such delivery.

The above rules, thus, prescribe the modes of service of pleadings, motions, notices, orders, judgments, and
other papers, namely: (1) personal service; (2) service by mail; and (3) substituted service, in case service
cannot be effected either personally or by mail.
 The Rules of Court has been laid down to insure the orderly conduct of litigation and to protect the
substantive rights of all party litigants. It is for this reason that the basic rules on the modes of service
provided under Rule 13 of the Rules of Court have been made mandatory and, hence, should be strictly
followed. In Marcelino Domingo v. Court of Appeals, [14] the Court wrote:

Section 11, Rule 13 of the Rules of Court states:

SEC. 11. Priorities in modes of service and filing. Whenever practicable, the service and filing of pleadings and
other papers shall be done personally. Except with respect to papers emanating from the court, a resort to
other modes must be accompanied by a written explanation why the service or filing was not done personally.
A violation of this Rule may be cause to consider the paper as not filed.

Section 11 is mandatory. In Solar Team Entertainment, Inc. v. Judge Ricafort, the Court held that:

Pursuant x x x to Section 11 of Rule 13, service and filing of pleadings and other papers must, whenever
practicable, be done personally; and if made through other modes, the party concerned must provide a
written explanation as to why the service or filing was not done personally. x x x

Personal service and filing are preferred for obvious reasons. Plainly, such should expedite action or
resolution on a pleading, motion or other paper; and conversely, minimize, if not eliminate, delays likely to
be incurred if service or filing is done by mail, considering the inefficiency of postal service. Likewise, personal
service will do away with the practice of some lawyers who, wanting to appear clever, resort to the following
less than ethical practices: (1) serving or filing pleadings by mail to catch opposing counsel off-guard, thus
leaving the latter with little or no time to prepare, for instance, responsive pleadings or an opposition; or (2)
upon receiving notice from the post office that the registered parcel containing the pleading of or other paper
from the adverse party may be claimed, unduly procrastinating before claiming the parcel, or, worse, not
claiming it at all, thereby causing undue delay in the disposition of such pleading or other papers.

If only to underscore the mandatory nature of this innovation to our set of adjective rules requiring personal
service whenever practicable, Section 11 of Rule 13 then gives the court the discretion to consider a pleading
or paper as not filed if the other modes of service or filing were resorted to and no written explanation was
made as to why personal service was not done in the first place. The exercise of discretion must, necessarily,
consider the practicability of personal service, for Section 11 itself begins with the clause "whenever
practicable."

We thus take this opportunity to clarify that under Section 11, Rule 13 of the 1997 Rules of Civil Procedure,
personal service and filing is the general rule, and resort to other modes of service and filing, the exception.
Henceforth, whenever personal service or filing is practicable, in light of the circumstances of time, place and
person, personal service or filing is mandatory. Only when personal service or filing is not practicable may
resort to other modes be had, which must then be accompanied by a written explanation as to why personal
service or filing was not practicable to begin with. In adjudging the plausibility of an explanation, a court shall
likewise consider the importance of the subject matter of the case or the issues involved therein, and the
prima facie merit of the pleading sought to be expunged for violation of Section 11. This Court cannot rule
otherwise, lest we allow circumvention of the innovation introduced by the 1997 Rules in order to obviate
delay in the administration of justice.

xxxx

x x x [F]or the guidance of the Bench and Bar, strictest compliance with Section 11 of Rule 13 is mandated.
[Emphasis supplied]

In the case at bench, the respondents were completely deprived of due process when they were declared in
default based on a defective mode of service service of notice to file answer by publication. The rules on
service of pleadings, motions, notices, orders, judgments, and other papers were not strictly followed in
declaring the respondents in default. The Court agrees with the CA that the RTC committed procedural lapses
in declaring the respondents in default and in allowing the petitioners to present evidence ex-parte.

A review of the records discloses that after the Court rendered its April 15, 1988 Decision in G.R. No. 69866,
annulling the RTC orders dated November 8, 1983, May 11, 1984 and September 21, 1984 and ordering the
remand of the case to the RTC for further proceedings, the RTC issued an order [15] dated August 17, 1990
directing the petitioners to report the addresses and whereabouts of the respondents so that they would be
properly notified of the proceedings. This directive was issued by the RTC considering that the respondents
counsel of record, the OSG, could no longer represent them and because the respondents were no longer
holding official government positions because of a change in government brought about by the 1986 EDSA
Revolution. This order was likewise made in response to the motion[16] filed by the petitioners praying that
the respondents be required to file their answer.

Instead of complying with the RTCs directive to report the respondents addresses and whereabouts, the
petitioners filed a motion[17] dated September 4, 1990 to declare the respondents in default. On December
27, 1990, the RTC denied the petitioners default motion because the respondents were not duly notified of
the April 15, 1988 Decision of this Court and the OSG no longer wanted to represent them. The RTC likewise
ordered the petitioners to comply with its August 17, 1990 Order, otherwise, the case would be archived and
eventually dismissed. On February 1, 1991, the RTC denied the petitioners motion for reconsideration and
on March 7, 1991, it issued an order dismissing the case without prejudice.

Surprisingly, on June 4, 1991, the RTC issued an order[18] setting aside its March 7, 1991 Order and reinstating
the case. It directed the petitioners, among others, to cause the publication of a notice on the respondents to
file answer or responsive pleading. After the petitioners complied with the publication requirements, the RTC
issued the order dated December 5, 1991 declaring the respondents in default and directing the petitioners
to present evidence ex-parte.

As correctly observed by the CA, the RTCs August 17, 1990 Order was an attempt to serve a notice to file
answer on the respondents by personal service and/or by mail. These proper and preferred modes of service,
however, were never resorted to because the OSG abandoned them when the petitioners failed to comply
with the August 17, 1990 RTC order requiring them to report the addresses and whereabouts of the
respondents. Nevertheless, there was still another less preferred but proper mode of service available
substituted service - which is service made by delivering the copy to the clerk of court, with proof of failure
of both personal service and service by mail. Unfortunately, this substitute mode of service was not resorted
to by the RTC after it failed to effect personal service and service by mail. Instead, the RTC authorized an
unrecognized mode of service under the Rules, which was service of notice to file answer by publication.

Considering the fact that the OSG could no longer represent the respondents, the RTC should have been more
patient in notifying the respondents through personal service and/or service by mail. It should not have
simply abandoned the preferred modes of service when the petitioners failed to comply with its August 17,
1990order with the correct addresses of the respondents. More so, it should not have skipped the substituted
service prescribed under the Rules and authorized a service of notice on the respondents to file answer by
publication.

In view of the peculiar circumstances surrounding the case, the RTC should have instead directed the
petitioners to exert diligent efforts to notify the respondents either personally or by registered mail. In case
the preferred modes were impractical, the Court should have required the petitioners to at least report in
writing why efforts exerted towards personal service or service by mail failed. In other words, a convincing
proof of an impossibility of personal service or service by mail to the respondents should have been shown
first. The RTC, thus, erred when it ruled that the publication of a notice to file answer to the respondents
substantially cured the procedural defect equivalent to lack of due process. The RTC cannot just abandon the
basic requirement of personal service and/or service by mail.

At any rate, the Court is of the view that personal service to the respondents was practicable under the
circumstances considering that they were well-known persons who used to occupy high government
positions.

To stress, the only modes of service of pleadings, motions, notices, orders, judgments and other papers
allowed by the rules are personal service, service by mail and substituted service if either personal service or
service by mail cannot be made, as stated in Sections 6, 7 and 8 of Rule 13 of the Rules of Court. Nowhere
under this rule is service of notice to file answer by publication is mentioned, much less recognized.

Furthermore, the Court would like to point out that service by publication only applies to service of summons
stated under Rule 14 of the Rules of Court where the methods of service of summons in civil cases are: (1)
personal service;[19] (2) substituted service;[20] and (3) service by publication.[21] Similarly, service by
publication can apply to judgments, final orders and resolutions as provided under Section 9, Rule 13 of the
Rules of Court, as follows:

SEC. 9. Service of judgments, final orders or resolutions. Judgments, final orders or resolutions shall be served
either personally or by registered mail. When a party summoned by publication has failed to appear in the
action, judgments, final orders or resolutions against him shall be served upon him also by publication at the
expense of the prevailing party. [Emphasis supplied]

As correctly ruled by the CA:

Its third error was when it authorized service by publication after initially dismissing the case for failure of
plaintiffs-appellees to furnish the current address of defendants-appellants. There is, however, nothing in the
Rules that authorizes publication of a notice of hearing to file answer. What is authorized to be published are:
(1) summons, and (2) final orders and judgments.

Xxx xxx xxx

The above-quoted provision cannot be used to justify the trial courts action in authorizing service by
publication. Firstly, what was published was not a final order or judgment but a simple order or notice to file
answer. Secondly, even granting that the notice to file answer can be served by publication, it is explicit in
the Rule that publication is allowed only if the defendant-appellant was summoned by publication. The record
is clear that defendants-appellants were not summoned by publication.

On this point, the petitioners argue that the publication was a valid and justified procedure because following
the ruling of the RTC, it was an extra step to safeguard the interest of the defendants done pursuant to the
inherent power of the courts to control its proceedings to make them comfortable to law and justice. The
petitioners further argue that the defendants in a civil case cannot seize control of the proceedings or cause
them to be suspended indefinitely by the simple expedient of not filing their answers or by feigning ignorance
of the proceedings. All these could have been avoided had the defendants not been so inexplicably
complacent and utterly lacking in ordinary prudence.

The Court is not convinced.

As already discussed above, the basic rules on modes of service of pleadings, motions, notices, orders,
judgments, and other papers are mandatory in nature and, therefore, must be strictly observed. The Court is
not unaware of the inherent power of courts to control its proceedings. Nonetheless, the exercise of such
inherent power must not violate basic court procedures. More importantly, it must not disregard ones basic
constitutional right to procedural due process.

This was precisely the reason for the RTCs denial of the petitioners default motion in its August 17, 1990Order,
and for the eventual dismissal of the case in its December 27, 1990 Order.

It must be noted that as the RTC orders stated, the respondents were not notified of the April 15,
1988Decision of this Court, which ordered the re-opening and remanding of this case to the RTC. They were
neither notified of the reconstitution proceedings that took place pertaining to the burned records of the
case. The RTC further stated that the respondents were no longer holding their official government positions
and that they were no longer represented by the OSG on account of the change in government. In other
words, the respondents had no counsel of record and no notice of subsequent proceedings. In short, due
process was absent.

Next, the court records got burned during the June 11, 1988 fire that hit the Quezon City Hall where the
records were kept. On March 12, 1990, the RTC granted the petitioners petition for reconstitution. Again, the
records do not show that the RTC initiated extra efforts to notify the respondents about the reconstitution
proceedings. The entire records of this case tend to show that the respondents were completely out of the
picture until after the promulgation of the RTC decision.

On countless occasions, the Court ruled that, generally, judgments by default are looked upon
with disfavorand are frowned upon as contrary to public policy. An example here would be the case
of Regalado P. Samartino v. Leonor B. Raon,[22] where the Court stated:

The trial court should not have been too rash in declaring petitioner in default, considering it had actual
notice of valid reasons that prevented him from answering. Well-settled is the rule that courts should be
liberal in setting aside orders of default for default judgments are frowned upon, unless in cases where it
clearly appears that the reopening of the case is intended for delay. The issuance of orders of default should
be the exception rather than the rule, to be allowed only in clear cases of obstinate refusal by the defendant
to comply with the orders of the trial court.

Suits should as much as possible be decided on the merits and not on technicalities. In this regard, we have
often admonished courts to be liberal in setting aside orders of default as default judgments are frowned
upon and not looked upon with favor for they may amount to a positive and considerable injustice to the
defendant and the possibility of such serious consequences necessitates a careful examination of the grounds
upon which the defendant asks that it be set aside. Since rules of procedure are mere tools designed to
facilitate the attainment of justice, it is well recognized that this Court is empowered to suspend its operation,
or except a particular case from its operation, when the rigid application thereof tends to frustrate rather
than promote the ends of justice. We are not unmindful of the fact that during the pendency of the instant
petition, the trial court has rendered judgment against petitioners. However, being the court of last resort,
we deem it in the best interest that liberality and relaxation of the Rules be extended to petitioners by setting
aside the order of default issued by the trial court and the consequent default judgment; otherwise, great
injustice would result if petitioners are not afforded an opportunity to prove their claims.

Finally, the Court finds unacceptable the petitioners contention that 1) the respondents were well
represented by counsel from 1983 up to December 1990 and that the respondents were properly notified of
the entire proceedings through their counsel; 2) the respondents counsel was negligent for failing to file an
answer within the prescribed period; and 3) the negligence of the OSG binds the respondents.

The petitioners do not deny the fact that on May 15, 1985, they filed a petition for certiorari before this Court
questioning the RTC orders granting the respondents motion to dismiss and denying their motion for
reconsideration. They do not question the fact that while their petition was pending in this Court, the 1986
EDSA Revolution took place which resulted in the removal of the respondents from their respective high
government offices and the replacement of then Solicitor General Estelito Mendoza (Sol. Gen.
Mendoza). There is likewise no dispute that subsequently, on April 15, 1988, this Court rendered its decision
annulling the subject RTC orders and remanding the case to the RTC for further proceedings. The case was
then re-raffled to another branch.

Clearly from the above circumstances, there was no longer any lawyer-client relationship between the OSG
and the respondents at the time the decision of the Court dated April 15, 1988 was promulgated because,
admittedly, after the 1986 EDSA Revolution, the respondents were no longer occupying their respective
government positions and Sol. Gen. Mendoza, who represented them, was no longer the Solicitor General.
 In fact, in compliance with the RTCs order dated September 10, 1990,[23] former Solicitor General Mendoza
submitted a manifestation[24] that his legal representation for the respondents was deemed terminated when
he ceased to be the Solicitor General and that he was not representing the respondents in his private capacity.
For his part, on December 11, 1990, the incumbent Solicitor General at that time, Solicitor General Francisco
Chavez (Sol. Gen. Chavez), filed a notice of withdrawal of appearance for the respondents citing the case
of Urbano v. Chavez,[25] where the Court ruled that the OSG is not authorized to represent a public official at
any stage of a criminal case or in a civil suit for damages arising from a felony. The records do not show any
proof that the respondents were furnished a copy of this notice of withdrawal or whether or not they gave
their conformity thereto.

Contrary to the petitioners position, while it is true that Sol. Gen. Chavez filed a notice of withdrawal only
on December 11, 1990, the respondents were in effect no longer represented by counsel as early as April 15,
1988when the Courts decision was rendered, or much earlier, right after the 1986 EDSA Revolution due to the
change in government. The Court cannot subscribe to the petitioners argument that there was negligence or
mistake on the part of the OSG considering that Sol. Gen. Mendoza ceased to hold office due to the EDSA
Revolution while Sol. Gen. Chavez withdrew his representation because of the prohibition in Urbano v.
Chavez. Definitely, Sol. Gen. Mendozas cessation from holding office and Sol. Gen. Chavezs withdrawal of
representation in the unique scenario of this case are not equivalent to professional delinquency or
ignorance, incompetency or inexperience or negligence and dereliction of duty. Hence, there is no negligence
of counsel in this case. After the 1986 EDSA Revolution, the respondents were practically left without counsel.

As a final point, this Court commiserates with the petitioners plight and cry for justice. They should not be
denied redress of their grievances. The Court, however, finds Itself unable to grant their plea because the
fundamental law clearly provides that no person shall be deprived of life, liberty and property without due
process of law.

WHEREFORE, the petition is DENIED.

SO ORDERED.
SECOND DIVISION

[G.R. No. 114331. May 27, 1997]

CESAR E. A. VIRATA, petitioner, vs. THE HONORABLE SANDIGANBAYAN and THE REPUBLIC OF THE
PHILIPPINES, respondents.

DECISION

TORRES, JR., J.:

In times past, when due process was more of a myth - empty accusations have had its day. In a more enlightened
age, a sage was heard to say - Strike me if you must, but hear me first! We have come a long way, indeed, for in
our time one who is required to answer for an alleged wrong must at least know what is it all about.

This is the case before Us.

In this case, petitioner Cesar E. A. Virata (Virata, for brevity) is one of the defendants in Civil Case No. 0035,
entitled Republic of the Philippines versus Benjamin (Kokoy) Romualdez, et. al.. The case, which was filed by the
Presidential Commission on Good Government in behalf of the Republic of the Philippines (Republic, for
brevity) against fifty three persons (53)[1] including Virata, involves the recovery of ill-gotten wealth amassed by
the defendants during the twenty year reign of former President Ferdinand Marcos.

The complaint against the defendants was amended three times. The last amended complaint filed with the
Sandiganbayan, hereafter known as the expanded Second Amended Complaint, states, inter alia, the following
relevant allegations against petitioner Virata:

V. SPECIFIC AVERMENTS OF DEFENDANTS ILLEGAL ACTS

xxx.

14. Defendants Benjamin (Kokoy) Romualdez and Juliette Gomez Romualdez, acting by themselves and/or in
unlawful concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos, and taking undue advantage of
their relationship, influence and connection with the latter Defendant spouses, engaged in devises, schemes
and strategems to unjustly enrich themselves at the expense of plaintiff and the Filipino people, among others:

xxx

(b) gave MERALCO undue advantage (i) by effecting the increase of power rates with automatic authority to
tack into the consumers electric bills the so-called purchase and currency adjustment, and (ii) with the active
collaboration of Defendant Cesar E. A. Virata, by reducing the electric franchise tax from 5% to 2% of gross
receipts and the tariff duty on fuel oil imports by public utilities from 20% to 10%, resulting in substantial savings
for MERALCO but without any significant benefit to the consumers of electric power and loss of millions of pesos
in much needed revenues to the government;

xxx
(g) secured, in a veiled attempt to justify MERALCOs anomalous acquisition of the electric cooperatives, with
the active collaborations of Defendants Cesar E. A. Virata, Juanito R. Remulla, Isidro Rodriguez, Jose C.
Hernandez, Pedro Dumol, Ricardo C. Galing, Francisco C. Gatmaitan, Mario D. Camacho and the rest of the
Defendants, the approval by Defendant Ferdinand E. Marcos and his cabinet of the so-called Three-Year
Program for the Extension of MERALCOs Services to Areas Within the 60-Kilometer Radius of Manila, which
required government capital investment amounting to millions of pesos;

xxx

(m) manipulated, with the support, assistance and collaboration of Philguarantee officials led by Chairman Cesar
E. A. Virata and the senior managers of FMMC/PNI Holdings Incorporated led by Jose S. Sandejas, Jr., Jose M.
Mantecon and Kurt S. Bachman, Jr., among others, the formation of Erectors Holdings, Inc. without infusing
additional capital solely for the purpose of making it assume the obligation of Erectors Incorporated with
Philguarantee in the amount of P527,387,440.71 with insufficient securities/collaterals just to enable Erectors
Inc. to appear viable and to borrow more capitals, so much so that its obligation with Philguarantee has reached
a total of more than P2 Billion as of June 30, 1987.

xxx

17. The following Defendants acted as dummies, nominees and/or agents by allowing themselves (i) to be used
as instruments in accumulating ill-gotten wealth through government concessions, orders and/or policies
prejudicial to plaintiff, or (ii) to be incorporators, directors or members of corporations beneficially held and/or
controlled by Defendants Ferdinand E. Marcos, Imelda R. Marcos, Benjamin (Kokoy) T. Romualdez and Julliette
Gomez Romualdez in order (to) conceal and prevent recovery of assets illegally obtained: xxx Cesar E. A. Virata
xxx.

xxx

18. The acts of Defendants, singly or collectively, and/or in unlawful concert with one another, constitute gross
abuse of official position and authority, flagrant breach of public trust and fiduciary obligations, acquisition of
unexplained wealth, brazen abuse of right and power, unjust enrichment, violation of the Constitution and laws
of the Republic of the Philippines, to the grave and irreparable damage of Plaintiff and the Filipino people." [2]

Asserting that the foregoing allegations are vague and are not averred with sufficient definiteness as to enable
him to effectively prepare his responsive pleading, petitioner Virata filed a motion for a bill of particulars on
January 31, 1992.

In a Resolution promulgated on 4 August 1992, the Sandiganbayan partially granted the said motion by
requiring the Republic to submit a bill of particulars concerning the charges against petitioner Virata stated only
in paragraph 17 (acting as dummy, nominee and/or agent) and paragraph 18 (gross abuse of authority and
violation of laws and the Constitution) of the expanded Second Amended Complaint. However, as to the other
charges, namely: 1) Viratas alleged active collaboration in the reduction of electric franchise tax and the tariff
duty on fuel oil imports, as stated in paragraph 14 b (ii),2) his active collaboration in securing the approval by
Ferdinand Marcos of the Three Year Program for the Extension of MERALCOs Services to Areas within the 60
Kilometer Radius of Manila, mentioned in paragraph 14 g, and 3) his support, assistance and collaboration in
the formation of Erectors Holdings Incorporated as reflected in paragraph 14 m of the expanded Second
Amended Complaint, the Sandiganbayan declared that these accusations are clear and specific enough to allow
Virata to submit an intelligent responsive pleading, hence, the motion for a bill of particulars respecting the
foregoing three charges was denied.

In view of the Sandiganbayans order of August 4, 1992 requiring the Republic to amplify the charges in
paragraphs 17 and 18 of the expanded Second Amended Complaint, the Republic through the Office of the
Solicitor General submitted the bill of particulars dated October 22, 1992, hereafter called as the Limited Bill of
Particulars, which was signed by a certain Ramon A. Felipe IV, who was designated in the bill of particulars as
private counsel, the relevant portion of which provides that:

xxx

1. Defendant Virata, while being one of the members of the Central Banks Monetary Board, approved Resolution
No. 2320 dated December 14, 1973, allowing the Benpres Corporation, Meralco Securities Corporation (MSC)
and Manila Electric Company (MERALCO) to refinance/restructure their outstanding loan obligations, a
sweetheart or behest accommodation which enabled Meralco Foundation, Inc. to acquire ownership and
control of Manila Electric Company. Meralco Foundation, Inc. was then controlled by the Marcos-Romualdez
Group with Benjamin (Kokoy) Romualdez being the beneficial owner and, thereby, expanding the said groups
accumulation of ill-gotten wealth.

2. On July 11, 1978 defendant Virata representing the Republic of the Philippines as Finance Minister, executed
an Agreement with the Manila Electric Company (MERALCO) whereby the government agreed to buy the parcels
of land, improvements and facilities known as Gardner Station Unit No. 1, Gardner Station Unit No. 2, Snyder
Station Unit No. 1, Snyder Station Unit No. 2 and Malaya Station Unit No. 1 for One Billion One Hundred Million
Pesos (P1,100,000,000.00), a transaction which was so disadvantageous to the government and most favorable
to MERALCO which gained a total ofP206.2 million. As a result of this transaction, MERALCO is relieved of its
heavy burden in servicing its foreign loans which were assumed by the government. Furthermore, the
agreement clearly showed the sweetheart deal and favors being given by the government to MERALCO which
was then owned/and or controlled by Benjamin Romualdez representing the Marcos-Romualdez group, when
it provided that the sale is subject to the reservation of rights, leases and easements in favor of Philippine
Petroleum Corp., First Philippine Industrial Corp. (formerly MERALCO Securities Industrial Corp.) and Pilipinas
Shell Petroleum Corp. insofar as the same are presently in force and applicable. This enabled the Marcos-
Romualdez Group to further accumulate and expand the ill-gotten wealth and plunder the nation.

3. At the meeting of the Board of Directors of the Philippine Export and Foreign Loan Guarantee Corp. held on
September 16, 1983 defendant Virata acting as Chairman, together with the other members of the board,
approved the request of Erectors, Inc., a Benjamin Romualdez owned and/or controlled corporation, for a
guarantee to cover 100 % of its proposed behest loan of US $33.5 Million under the Central Bank Consolidated
Foreign Borrowing Program with the Philippine National Bank, Development Bank of the Philippines, Interbank,
Philippine Commercial International Bank and Associated Bank as conduit banks, to refinance Erectors, Inc.s
short term loans guaranteed by Philguarantee, which at present forms part of the governments huge foreign
debt. Such act of defendant Virata was a flagrant breach of public trust as well as a violation of his duty to
protect the financial condition and economy of the country against, among others, abuses and corruption. [3]
On 3 December 1992, a motion to strike out the Limited Bill of Particulars and to defer the filing of the answer
was filed by Virata on the grounds that the Limited Bill of Particulars avers for the first time new actionable
wrongs allegedly committed by him in various official capacities and that the allegations therein do not indicate
that Virata acted as dummy, nominee or agent but rather as a government officer, acting as such in his own
name. This motion was not acted upon by the Sandiganbayan.

Way back on September 1, 1992, Virata, who was dissatisfied with the Sandiganbayan Resolution of August 4,
1992, filed a petition for certiorari (G.R. No. 106527) with this Court questioning the Sandiganbayan s denial of
his motion for a bill of particulars as regards the first three charges stated in paragraph 14 b(ii), paragraph
14g and paragraph 14m of the expanded Second Amended Complaint. The petition was granted by this Court
in our decision promulgated on April 6, 1993. Accordingly, the Sandiganbayan Resolution of August 4, 1992 to
the extent that it denied the motion for a bill of particulars with respect to the first three (3) charges was set
aside and the Republic was required by this Court to submit to Virata a bill of particulars containing the facts
prayed for by the latter insofar as to these first three (3) actionable wrongs are concerned.[4]

On August 20, 1993, the Office of the Solicitor General (OSG) filed a manifestation and motion dated August 18,
1993 alleging, inter alia, that the OSG and PCGG agreed that the required bill of particulars would be filed by
the PCGG since the latter is the investigating body which has the complete records of the case, hence, in a better
position to supply the required pleading. The Sandiganbayan took note of this manifestation in a Resolution
dated August 26, 1993. On the basis of this arrangement, the PCGG submitted the bill of particulars dated
November 3, 1993, which was apparently signed by a certain Reynaldo G. Ros, who was named in the bill of
particulars as deputized prosecutor of the PCGG. This bill of particulars, which incorporates by reference the
Limited Bill of Particulars of October 22, 1992, states, inter alia:

xxx

1. On the Specific Averments of Defendants Illegal Acts a (i) [paragraph 14 b (ii) of the expanded Second
Amended Complaint]

Immediately after defendants Ferdinand E. Marcos and Benjamin Kokoy Romualdez took complete control of
Meralco and its subsidiaries, defendant Ferdinand E. Marcos issued Presidential Decree No. 551 on September
11, 1974 which effected the reduction of electric franchise tax being paid by Meralco from 5% to 2% as well as
lowered tariff duty of fuel oil imports from 20% to 10% and allowed Meralco to retain 3% reduction in franchise
tax rates thereby allowing it to save as much as P258 million as of December 31, 1992.

Defendant Cesar Virata then Minister of Finance, supported PD 551 and in fact issued the guidelines on its
implementation which were heavily relied upon by the Board of Energy in its questioned ruling dated 25
November 1982 by allowing Meralco to continue charging higher electric consumption rates despite their
savings from the aforesaid reduction of franchise tax without any significant benefit to the consumers of electric
power and resulting in the loss of millions of pesos in much needed revenues to the government.

2. On the Specific Averments of Defendants Illegal Acts a (ii) [par. 14g of the expanded Second Amended
Complaint]

Defendant Cesar E.A. Virata, then Prime Minester [sic], caused the issuance of a confidential memorandum
dated October 12, 1982 to then President Ferdinand E. Marcos informing the latter of the recommendation of
the cabinet of the so called Three Year Program for the Extension of Meralco Services of Areas within the 60
Kilometer Radius of Manila in order to justify Meralcos anomalous acquisition of electric cooperatives and which
later required the Monetary Board and Philguarantee then headed by defendant Virata to recommend the
restructuring of Meralcos foreign and local obligation which led to the extending of loan accommodations by
the Development Bank of the Philippines and Philippine National Bank in favor of Meralco.

3. On the Specific Averments of Defendants Illegal Acts a (iii) [par. 14m of the expanded Second Amended
Complaint]

Defendant Cesar Virata, as Chairman of Philguarantee and the Senior Managers of FMMC/PNI Holdings Inc. led
by Jose S. Sandejas, J. Jose N. Mantecon and Kurt S. Bachmann, Jr., supported and assisted the formation of
Erectors Holdings, Inc. for the purpose of making it assume the obligation of Erectors Inc. with Philguarantee in
the amount of P527,387,440.71 without sufficient securities/collateral and despite this outstanding obligation,
defendant Virata, as Chairman of Philguarantee, approved the Erectors Inc. Applications for loan guarantees
that reached more than P2 Billion as of June 30, 1987.

4. On the Specific Averments of Defendants Illegal Acts a (iv) [par. 17 of the expanded Second Amended
Complaint]

Plaintiff, hereby incorporates by reference plaintiffs Limited Bill of Particulars previously submitted to this
Honorable Court with the qualification that defendant Cesar Virata merely acted as agent.[5]

Consequently, Virata filed on November 23, 1993 his comment on the bill of particulars with motion to dismiss
the expanded Second Amended Complaint. He alleges that both the bills of particulars dated October 22, 1992
and November 3, 1993 are pro forma and should be stricken off the records. According to him, the bill of
particulars dated November 3, 1993 is merely a rehash of the assertions made in the expanded Second Amended
Complaint, hence, it is not the bill of particulars that is required by this Court in the previous case of Virata vs.
Sandiganbayan, et. al. (G.R. No. 106527). Furthermore, a reading of the Limited Bill of Particulars dated October
22, 1992 shows that it alleges new imputations which are immaterial to the charge of being a dummy, nominee
or agent, and that Virata acted, not as a dummy, nominee or agent of his co-defendants as what is charged in
the complaint, but as a government officer of the Republic. Virata also questions the authority of PCGG and its
deputized prosecutor to file the bill of particulars in behalf of the Republic. He asserts that the legal
representation of the Republic by the OSG is mandated by law and that the Sandiganbayan, through its
Resolution dated August 26, 1993, should not have allowed the OSG to abdicate its duty as the counsel of record
for the Republic.

The Republic filed its Opposition to Viratas Comment to Bill of Particulars on December 17, 1993. Subsequently,
Virata filed his Reply to Opposition on January 18, 1994.

After considering the relevant pleadings and motions submitted by the parties, the Sandiganbayan, in a
Resolution of February 16, 1994, admitted the bill of particulars submitted by the Republic and ordered Virata
to file his responsive pleading to the expanded Second Amended Complaint. The relevant portion of the
Resolution states as follows:

In the resolution of this incident, We find that the bill of particulars, filed by the plaintiff on November 3, 1993
in compliance with the Supreme Courts directive, appears to have substantially set out additional averments
and particulars which were not previously alleged in the Expanded Amended Complaint. We likewise consider
these additional averments and particulars to be sufficient enough to enable defendant Virata to frame his
responsive pleading or answer and that what he feels are still necessary in preparing for trial should be obtained
by various modes of discovery, such as interrogatories, depositions, etc. A bill of particulars is sufficient if
matters constituting the causes of action have already been specified with sufficient particularity and which
matters are within the moving partys knowledge. It cannot be utilized to challenge the sufficiency of the claim
asserted.

Simplicity of pleading is the idea of modern procedure, hence, evidentiary facts and details should not be
allowed to clutter a complaint as much as possible, consistent with the right of the moving party to compel
disclosure in instances where it is beyond cavil that He cannot adequately frame a responsive pleading. In the
instant case, the bill of particulars submitted by the plaintiff, in Our considered opinion, is sufficient and
adequate enough to fulfill its mission.[6]

Dissatisfied, Virata filed this instant petition for certiorari under Rule 65 of the Rules of Court to challenge the
foregoing Resolution of the Sandiganbayan.

The issues to be resolved in the instant case are as follows:

1. WHETHER OR NOT THE SANDIGANBAYAN COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN ADMITTING THE BILL OF PARTICULARS SUBMITTED BY THE REPUBLIC.

2. WHETHER OR NOT THE OFFICE OF THE SOLICITOR GENERAL AND THE PCGG ARE AUTHORIZED BY LAW TO
DEPUTIZE A COUNSEL TO FILE THE BILL OF PARTICULARS IN BEHALF OF THE REPUBLIC.

Petitioner maintains the view that the allegations in the bill of particulars of November 3, 1993 remain vague,
general and ambiguous, and the purported illegal acts imputed to Virata have not been averred with
sufficient definiteness so as to inform Virata of the factual and legal basis thereof.

Respecting the Limited Bill of Particulars dated October 22, 1992, which amplifies paragraphs 17 and 18 of the
expanded Second Amended Complaint, Virata reiterates his basic arguments that the Limited Bill of Particulars
fails to provide the relevant and material averments sought to be clarified by him and that it asserts for the first
time new matters allegedly committed by him in different official capacities, to wit: a) as a member of the
Central Bank Monetary Board, he, with the other Monetary Board members, approved Resolution No. 2320
dated December 14, 1973 regarding the restructuring of the loans of Benpres Corporation, Meralco Securities
Corporation, and the Manila Electric Company, b) as Finance Minister, he executed an agreement with Manila
Electric Company in connection with the sale of lands and facilities of the Gardner Station Unit No. 1, Gardner
Station Unit No. 2, Snyder Station Unit No. 1, Snyder Station Unit No. 2, and Malaya Station Unit No. 1, and, c)
as Chairman of the Board of Directors of the Philippine Export and Foreign Loan Guarantee Corporation,
approved the request of Erector, Incorporated, for a guarantee to cover 100% of its proposed behest loan of US
$ 33.5 Million under the Central Bank Consolidated Foreign Borrowing Program. He argues that the thrust of
paragraphs 17 and 18 of the expanded Second Amended Complaint is the charge that Virata acted as dummy,
nominee and/or agent, however, the foregoing allegations in the Limited Bill of Particulars do not indicate that
he acted as dummy, nominee or agent, but rather, as a government officer.
Invoking Section 3, Rule 17 of the Rules of Court, Virata argued that both the bills of particulars submitted by
the Republic did not follow the Rules of Court and the orders of the Sandiganbayan and this Honorable Court,
as such, the failure to comply with these legal orders is a ground for dismissal of the action. Additionally, it is
asserted that under Rule 12, Section 1(c) of the Rules of Court, if an order of the court for a bill of particulars is
not obeyed, it may order the striking out of the pleading to which the motion was directed. Accordingly, Virata
prayed for the striking out of the bills of particulars dated October 22, 1992 and November 3, 1993 and the
dismissal of the expanded Second Amended Complaint in so far as he is concerned.

We find the instant petition meritorious.

The rule is that a complaint must contain the ultimate facts constituting plaintiffs cause of action. A cause of
action has the following elements, to wit: (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to
violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff
or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an
action for recovery of damages.[7] As long as the complaint contains these three elements, a cause of action
exists even though the allegations therein are vague, and dismissal of the action is not the proper remedy when
the pleading is ambiguous because the defendant may ask for more particulars.As such, Section 1, Rule 12 of
the Rules of Court, provides, inter alia, that a party may move for more definite statement or for a bill of
particulars of any matter which is not averred with sufficient definiteness or particularity to enable him properly
to prepare his responsive pleading or to prepare for trial. Such motion shall point out the defects complained
of and the details desired. Under this Rule, the remedy available to a party who seeks clarification of any issue
or matter vaguely or obscurely pleaded by the other party, is to file a motion, either for a more definite
statement or for a bill of particulars.[8] An order directing the submission of such statement or bill, further, is
proper where it enables the party movant intelligently to prepare a responsive pleading, or adequately to
prepare for trial.[9]

A bill of particulars is a complementary procedural document consisting of an amplification or more

particularized outline of a pleading, and being in the nature of a more specific allegation of the facts recited in
the pleading.[10] It is the office of the bill of particulars to inform the opposite party and the court of the precise
nature and character of the cause of action or defense which the pleader has attempted to set forth and thereby
to guide his adversary in his preparations for trial, and reasonably to protect him against surprise at the trial.[11] It
gives information of the specific proposition for which the pleader contends, in respect to any material and
issuable fact in the case, and it becomes a part of the pleading which it supplements.[12] It has been held that a
bill of particulars must inform the opposite party of the nature of the pleaders cause of action or defense, and
it must furnish the required items of the claim with reasonable fullness and precision.[13]Generally, it will be held
sufficient if it fairly and substantially gives the opposite party the information to which he is entitled, as required
by the terms of the application and of the order therefor. It should be definite and specific and not contain
general allegations and conclusions. It should be reasonably certain and as specific as the circumstances will
allow.[14]

Guided by the foregoing rules and principles, we are convinced that both the bill of particulars dated November
3, 1993 and the Limited Bill of Particulars of October 22, 1992 are couched in such general and uncertain terms
as would make it difficult for petitioner to submit an intelligent responsive pleading to the complaint and to
adequately prepare for trial.

Let us examine the bill of particulars dated November 3, 1993:

1. The first paragraph of the foregoing bill of particulars provides that (I)mmediately after defendants Ferdinand
E. Marcos and Benjamin Kokoy Romualdez took control of Meralco and its subsidiaries, defendant Ferdinand E.
Marcos issued Presidential Decree No. 551 on September 11, 1974 which effected the reduction of electric
franchise tax being paid by Meralco from 5% to 2% as well as lowered tariff duty of fuel oil imports from 20% to
10% and allowed Meralco to retain the 3% reduction in franchise tax rates thereby allowing it to save as much
as P258 million as of December 31, 1992. Further, it is stated that (D)efendant Cesar Virata then Minister of
Finance, supported PD 551 and in fact issued the guidelines on its implementation which were heavily relied
upon by the Board of Energy in its questioned ruling dated 25 November 1982 by allowing Meralco to continue
charging higher electric consumption rates despite their savings from the aforesaid reduction of franchise tax
without any significant benefit to the consumers of electric power and resulting in the loss of millions of pesos
in much needed revenues to the government.

The abovequoted paragraph of the said bill of particulars is supposed to be the amplification of the charge
against Virata stated in paragraph 14(b) of the expanded Second Amended Complaint-which is his alleged active
collaboration in the reduction of electric franchise tax and tariff duty of fuel oil imports. Yet, a careful perusal of
the said paragraph shows that nothing is said about his alleged active collaboration in reducing the taxes. Aside
from the bare assertion that he supported PD 551 and issued the guidelines on its implementation, the bill of
particulars is disturbingly silent as to what are the particular acts of Virata that establish his active collaboration
in the reduction of taxes. The allegation that he supported PD 551 and issued its implementing guidelines is an
insufficient amplification of the charge because the same is but a general statement bereft of any particulars. It
may be queried-how did Virata support PD 551? What were the specific acts indicating his support? What were
these implementing guidelines issued by him and when were they issued? In supporting PD 551 and in issuing
its implementing guidelines, what law or right, if there is any, is violated by Virata? It is worthy to note that,
until now, PD 551 has not been declared unconstitutional. In fact, this Court upheld its validity in the case of
Philippine Consumer Foundation, Inc. vs. Board of Energy and Meralco.[15]

2. In the second paragraph of the said bill of particulars, it is alleged that (D)efendant Cesar E.A. Virata, then
Prime Minester [sic], caused the issuance of a confidential memorandum dated October 12, 1982 to then
President Ferdinand E. Marcos informing the latter of the recommendation of the cabinet of the so called Three
Year Program for the Extension of Meralco Services of Areas within the 60 Kilometer Radius of Manila in order
to justify Meralcos anomalous acquisition of electric cooperatives and which later required the Monetary Board
and Philguarantee then headed by defendant Virata to recommend the restructuring of Meralcos foreign and
local obligation which led to the extending of loan accommodation by the Development Bank of the Philippines
and Philippine National Bank in favor of Meralco.

The foregoing allegation purportedly amplifies the charge stated in paragraph 14 (g) of the expanded Second
Amended Complaint, that is-Viratas active collaboration in securing the approval by Ferdinand Marcos and his
cabinet of the Three Year Program for the Extension of Meralcos Services within the Manila Area. However, just
like the first paragraph of the said bill of particulars, this Court finds that the second paragraph failed to set forth
particularly or specifically the charge against Virata. It is an incomplete or floating disclosure of material facts
replete with generalizations and indefinite statements which seemingly ends to nowhere. There are certain
matters alleged that need to be clarified and filled up with details so that Virata can intelligently and fairly
contest them and raise them as cogent issues, to wit: a) In causing the issuance of the said memorandum, what
law, duty or right, if there is any, is violated by Virata?; b) What was the recommendation of the cabinet
regarding the Three Year Program? The Republic should have at least furnish the substantial or important
features of the recommendation; c) What were these electric cooperatives? Were these cooperatives the same
as those enumerated in paragraph 14(e) of the expanded Second Amended Complaint?[16]Why was the
acquisition of these cooperatives anomalous?; and d) What were Viratas specific acts as the head of
Philguarantee which led to the restructuring of Meralcos obligation? What was his participation in
recommending the restructuring of Meralcos obligation? What were these foreign and local obligations? How
much of the obligation was recommended for restructuring? What were the loan accommodations given in
favor of Meralco? When were they given and how much were involved in the transaction?

3. Regarding the third paragraph of the said bill of particulars, We find the same as a mere recast or restatement
of the charge set forth in paragraph 14 (m) of the expanded Second Amended Complaint, which is Viratas alleged
support, assistance and collaboration in the formation of Erectors Holding, Incorporated. The said paragraph of
the bill of particulars states that (D)efendant Cesar Virata, as Chairman of Philguarantee and the Senior
Managers of FMMC/PNI Holdings Inc. led by Jose S. Sandejas, J. Jose N. Mantecon and Kurt S. Bachmann, Jr.
supported and assisted the formation of Erectors Holdings, Inc. for the purpose of making it assume the
obligation of Erectors Inc. with Philguarantee in the amount of P527,387,440.71 without sufficient
securities/collateral and despite this outstanding obligation, defendant Virata, as Chairman of Philguarantee,
approved the Erectors Inc. Applications for loan guarantees that reached more than P2 Billion as of June 30,
1987.

Clearly from the foregoing allegation, the Republic failed miserably to amplify the charge against Virata because,
instead of supplying the pertinent facts and specific matters that form the basis of the charge, it only
made repetitive allegations in the bill of particulars that Virata supported and assisted the formation of the
corporation concerned, which is the very same charge or allegation in paragraph 14 (m) of the expanded Second
Amended Complaint which requires specifications and unfailing certainty. As such, the important question as to
what particular acts of Virata that constitute support and assistance in the formation of Erectors Holding,
Incorporated is still left unanswered, a product of uncertainty.

We now take a closer look at the Limited Bill of Particulars dated October 22, 1992.

The said bill of particulars was filed by the Republic to amplify the charge of Viratas being a dummy, nominee
or agent stated in paragraphs 17 and 18 of the expanded Second Amended Complaint. In the subsequent bill of
particulars dated November 3, 1993, the said charge was qualified by the Republic in the sense that Virata
allegedly acted only as an agent. Let us consider each paragraph of the said bill of particulars:

1. The first paragraph of the Limited Bill of Particulars states that (D)efendant Virata, while being one of the
members of the Central Banks Monetary Board, approved Resolution No. 2320 dated December 14, 1973,
allowing the Benpres Corporation, Meralco Securities Corp. (MSC) and Manila Electric Company (MERALCO) to
refinance/restructure their outstanding loan obligations, a sweetheart or behest accommodation which
enabled Meralco Foundation, Inc. to acquire ownership and control of Manila Electric Company. It is stated
further that Meralco Foundation, Inc. was then controlled by the Marcos-Romualdez Group with Benjamin
(Kokoy) Romualdez being the beneficial owner and, thereby, expanding the said groups accumulation of ill
gotten wealth.

It is apparent from the foregoing allegations that the Republic did not furnish Virata the following material
matters which are indispensable for him to be placed in such a situation wherein he can properly be informed
of the charges against him: a) Did Virata, who was only one of the members of the Board, act alone in approving
the Resolution? Who really approved the Resolution, Virata or the Monetary Board?; b) What were these
outstanding loan obligations of the three corporations concerned? Who were the creditors and debtors of these
loan obligations? How much were involved in the restructuring of the loan obligations? What made the
transaction a sweetheart or behest accommodation?; and c) How was the acquisition of MERALCO by Meralco
Foundation, Inc. related to the Resolution restructuring the loan obligations of the three corporations?

2. The second paragraph provides that (O)n July 11, 1978 defendant Virata representing the Republic of the
Philippines as Finance Minister, executed an Agreement with the Manila Electric Co. (MERALCO) whereby the
government agreed to buy the parcels of land, improvements and facilities known as Gardner Station Unit No.
1, Gardner Station Unit No. 2, Snyder Station Unit No. 1, Snyder Station Unit No. 2 and Malaya Station Unit No.
1 for One Billion One Hundred Million Pesos (P1,100,000,000.00), a transaction which was so disadvantageous
to the government and most favorable to MERALCO which gained a total of P206.2 million; that (A)s a result of
this transaction, MERALCO was relieved of its heavy burden in servicing its foreign loans which were assumed
by the government; that xxx, the agreement clearly showed the sweetheart deal and favors being given by the
government to MERALCO which was then owned and/or controlled by Benjamin Romualdez representing the
Marcos-Romualdez group, when it provided that the sale is subject to the reservation of rights, leases and
easements in favor of Philippine Petroleum Corp., First Philippine Industrial Corp. (formerly MERALCO Securities
Industrial Corp.) and Pilipinas Shell Petroleum Corp. insofar as the same are presently in force and applicable.

There are certain matters in the foregoing allegations which lack in substantial particularity. They are broad and
definitely vague which require specifications in order that Virata can properly define the issues and formulate
his defenses. The following are the specific matters which the Republic failed to provide, to wit: a) What made
the transaction disadvantageous to the government? The allegation that it was disadvantageous is a conclusion
of law that lacks factual basis. How did MERALCO gain the P206.2 million? The Republic should have provided
for more specifics how was the transaction favorable to MERALCO?; b) What were these foreign obligations of
MERALCO which were assumed by the government? Who were the creditors in these obligations? When were
these obligations contracted? How much were involved in the assumption of foreign obligations by the
government?; and c) By the presence of the provision of the contract quoted by the Republic, what made the
agreement a sweetheart deal? The allegation that the agreement is a sweetheart deal is a general statement
that needs further amplification.

3. The third paragraph states that (A)t the meeting of the Board of Directors of the Philippine Export and Foreign
Loan Guarantee Corp. held on September 16, 1983 defendant Virata acting as Chairman, together with the other
members of the board, approved the request of Erectors Inc., a Benjamin Romualdez owned and/or controlled
corporation, for a guarantee to cover 100% of its proposed behest loan of US$ 33.5 Million under the Central
Bank Consolidated Foreign Borrowing Program with the Philippine National Bank, Development Bank of the
Philippines, Interbank, Philippine Commercial International Bank and Associated Bank as conduit banks, to
refinance Erectors, Inc.s short term loans guaranteed by Philguarantee, which at present forms part of the
governments huge foreign debt; that (S)uch act of defendant Virata was a flagrant breach of public trust as well
as a violation of his duty to protect the financial condition and economy of the country against, among others,
abuses and corruption.

In like manner, the foregoing paragraph contains incomplete and indefinite statement of facts because it fails
to provide the following relevant matters: a) What was this $33.5 million proposed behest loan? What were its
terms? Who was supposed to be the grantor of this loan?; b) What were these short term loans? Who were the
parties to these transactions? When were these transacted? How was this $ 33.5 million behest loan related to
the short term loans?

Furthermore, as correctly asserted by petitioner Virata, the Limited Bill of Particulars contains new matters
which are not covered by the charge that Virata acted as agent of his co-defendants in the expanded Second
Amended Complaint.Apparently, as may be examined from the three paragraphs of the Limited Bill of
Particulars, Virata, in so doing the acts, can not be considered as an agent of any of his co-defendants, on the
contrary, the factual circumstances stated in the said bill of particulars indicate that Virata acted on behalf of
the government, in his official capacity as a government officer. This observation is established by the allegations
that Virata acted as a member of the Central Bank Monetary Board, as chairman of the Board of Directors of
the Philippine Export and Foreign Loan Guarantee Corporation, and, when he executed the Agreement with
Meralco on July 7, 1978 concerning the sale of certain properties, he acted as the Finance Minister of the
government and as a representative of the Republic in the contract. In performing the said acts, he, therefore,
acted as an agent of the government, not as an agent of his co-defendants, which is the charge against him in
the expanded Second Amended Complaint. Accordingly, the allegations in the Limited Bill of Particulars are
irrelevant and immaterial to the charge that Virata acted as an agent of his co-defendants.

As clearly established by the foregoing discussion, the two bills of particulars filed by the Republic failed to
properly amplify the charges leveled against Virata because, not only are they mere reiteration or repetition of
the allegations set forth in the expanded Second Amended Complaint, but, to the large extent, they contain
vague, immaterial andgeneralized assertions which are inadmissible under our procedural rules.

It must be remembered that in our decision promulgated on April 6, 1993 (G.R. No. 106527), We required the
Republic to submit a bill of particulars concerning the first three charges against Virata averred in paragraphs
14 b(ii), 14 g, and 14 m of the expanded Second Amended Complaint, on the other hand, as regards the charges
stated in paragraphs 17 and 18 of the said complaint, the Republic was ordered to file the required bill of
particulars by the Sandiganbayan through its Resolution dated August 4, 1992. The Republic purportedly
complied with these orders by filing the questioned bill of particulars dated November 3, 1993 and the Limited
Bill of Particulars of October 22, 1992. However, as shown by the above discussion, the two bills of particulars
were not the bills of particulars which fully complied with the Rules of Court and with the orders of the
Sandiganbayan and this Court.

As such, in view of the Republics failure to obey this Courts directive of April 6, 1993 (G.R. No. 106527) and the
Sandiganbayans order of August 4, 1992 to file the proper bill of particulars which would completely amplify the
charges against Virata, this Court deems it just and proper to order the dismissal of the expanded Second
Amended Complaint, in so far as the charges against Virata are concerned. This action is justified by Section 3,
Rule 17 of the Rules of Court, which provides that:

Section 3. Failure to prosecute. - If plaintiff fails to appear at the time of the trial, or to prosecute his action for
an unreasonable length of time, or to comply with these rules or any order of the court, the action may be
dismissed upon motion of the defendant or upon the courts own motion. This dismissal shall have the effect of
an adjudication upon the merits, unless otherwise provided by court. (italics ours)

Regarding the second issue of the instant case, Virata contends that the Presidential Commission on Good
Government is not authorized by law to deputize a counsel to prepare and file pleadings in behalf of the
Republic. Neither can the Office of the Solicitor General validly deputize an outside counsel to completely take
over the case for the Republic. According to petitioner, only the Office of the Solicitor General is mandated by
law to act counsel for the Republic. Thus, the bill of particulars filed for the Republic by private counsel or
deputized prosecutor of the PCGG is unauthorized.

This contention is devoid of merit.

We are of the opinion that the Limited Bill of Particulars dated October 22, 1992 signed by Ramon Felipe IV and
the Bill of Particulars dated November 3, 1993 signed by Reynaldo Ros are valid pleadings which are binding
upon the Republic because the two lawyer-signatories are legally deputized and authorized by the Office of the
Solicitor Generaland the Presidential Commission on Good Government to sign and file the bills of particulars
concerned.

Realizing that it can not adequately respond to this Courts order of April 6 1993 (G.R. No. 106527) requiring the
Republic to submit the bill of particulars concerning the first three charges against Virata, the Office of the
Solicitor deemed it better to seek the help of the Presidential Commission on Good Government by availing the
services of the latters lawyer who would directly file the required bill of particulars in behalf of the Republic. This
circumstance prompted the Office of the Solicitor General to manifest before the Sandiganbayan on August 20,
1993 that it would be the PCGG which would file the required bill of particulars and move that it be excused
from doing so as the PCGG, being in-charge of investigating the case, was in a better position than the
OSG. Armed with this authority given by the OSG, the PCGG, through one of its deputized prosecutors, Reynaldo
Ros, filed the bill of particulars dated November 3, 1993 to amplify the first three charges against Virata stated
in paragraphs 14 b(ii), 14g, and 14 m of the expanded Second Amended Complaint.

The action of the OSG in seeking the assistance of the PCGG is not without legal basis. The Administrative Code
of 1987, which virtually reproduces the powers and functions of the OSG enumerated in P.D. No. 478 (The Law
Defining the Powers and Functions of the Office of the Solicitor General), provides, inter alia, that:

Section 35. Powers and Functions. xxx.

It (the OSG) shall have the following specific powers and functions:

xxx
(8) Deputize legal officers of government departments, bureaus, agencies and offices to assist the Solicitor
General and appear or represent the Government in cases involving their respective offices, brought before the
courts and exercise supervision and control over such legal officers with respect to such cases.

(9) Call on any department, bureau, office, agency, or instrumentality of the Government for such service
assistance and cooperation as may be necessary in fulfilling its functions and responsibilities and for this purpose
enlist the services of any government official or employee in the pursuit of his task. xxx. [17]

Contrary to Viratas contention, the Solicitor General did not abdicate his function and turn over the handling of
the instant case to the PCGG. Nowhere in the manifestation and motion filed by the OSG on August 20, 1993 is
there an iota or indication that the OSG is withdrawing from the case and that the PCGG is taking over its
prosecution. What the OSG did was merely to call the PCGG for assistance and authorize it to respond to the
motion for a bill of particulars filed by Virata. The OSG was impelled to act this way because of the existence of
the special circumstance that the PCGG, which has the complete records of the case and being in charge of its
investigation, was more knowledgeable and better informed of the facts of the case than the OSG.

The authority, therefore, of Attorney Reynaldo Ros to sign and submit in behalf of the Republic the bill of
particulars dated November 3, 1993 is beyond dispute because 1) he was duly deputized by the PCGG in
pursuance to its power to prosecute cases of ill-gotten wealth under Executive Order No. 14 of May 14, 1986, 2)
the OSG empowered the PCGG to file the bill of particulars as evidenced by the OSGs manifestation and motion
filed on August 20, 1993, and 3) there was no abdication of OSGs duty by giving the PCGG the authority to file
the bill of particulars.

On the other hand, the deputation of Ramon Felipe IV by the Solicitor General to sign and file the Limited Bill of
Particulars is based on Section 3 of Presidential Decree No. 478, which provides that:

Section 3. The Solicitor General may, when necessary and after consultation with the Government entity
concerned, employ, retain, and compensate on a contractual basis, in the name of the Government,
such attorneys and experts or technical personnel as he may deem necessary to assist him in the discharge of
his duties. The compensation and expenses may be charged to the agency or office in whose behalf the services
have to be rendered. (italics ours)

The Solicitor General is mandated by law to act as the counsel of the Government and its agencies in any
litigation and matter requiring the services of a lawyer. In providing the legal representation for the
Government, he is provided with vast array of powers, which includes the power to retain and compensate
lawyers on contractual basis, necessary to fulfill his sworn duty with the end view of upholding the interest of
the Government. Thus, the Solicitor General acted within the legal bounds of its authority when it
deputized Attorney Felipe IV to file in behalf of the Republic the bill of particulars concerning the charges stated
in paragraph 17 and 18 of the expanded Second Amended Complaint.

At any rate, whether or not the lawyer-signatories are duly deputized would not be decisive in the resolution of
this case considering that the two bills of particulars filed by the Republic are mere scraps of paper which
miserably failed to amplify the charges against Virata. For the Republics failure to comply with the courts order
to file the required bill of particulars that would completely and fully inform Virata of the charges against him,
the dismissal of the action against him is proper based on Section 3, Rule 17 of the Revised Rules of Court and
the relevant jurisprudence thereon.[18] Simple justice demands that as stated earlier, petitioner must know what
the complaint is all about. The law requires no less.

Although this Court is aware of the Governments laudable efforts to recover ill-gotten wealth allegedly taken
by the defendants, this Court, however, cannot shrink from its duty of upholding the supremacy of the law under
the aegis of justice and fairness. This Court in dismissing the action against the petitioner has rightfully adhered
in the unyielding tenet - principia, non homines - the rule of law, not of men.

ACCORDINGLY, the instant petition is hereby GRANTED and the expanded Second Amended Complaint, in so
far as petitioner Virata is concerned, is hereby ordered DISMISSED.

SO ORDERED.
THIRD DIVISION

[G.R. No. 141255. June 21, 2005]

LUCIANO ELLO and GAUDIOSA ELLO, petitioners, vs. THE COURT OF APPEALS, SPRINGFIELD DEVELOPMENT
CORPORATION, and CONSTANTINO G. JARAULA, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for certiorari[1] assailing the (1) Resolution[2] dated May 31, 1999 of the Court of Appeals
in CA-G.R. SP No. 49904 dismissing outright the petition for review filed by spouses Luciano and Gaudiosa Ello,
petitioners herein, on the ground that they failed to incorporate therein the affidavit of proof of service required
under Section 11 in relation to Section 13, Rule 13 of the 1997 Rules of Civil Procedure, as amended; and (2)
Resolution dated October 8, 1999 denying their motion for reconsideration.

In their petition, petitioners averred that on May 15, 1996, Springfield Development Corporation and
Constantino G. Jaraula, respondents herein, jointly filed with the Municipal Trial Court in Cities (MTCC), Branch
4, Cagayan de Oro City, a complaint against them for forcible entry with application for preliminary mandatory
injunction, docketed as Civil Case No. 96-May-346.

The complaint alleges inter alia that respondent Springfield Development Corporation is the owner and actual
possessor of Lot No. 19-C[3] covered by Transfer Certificate of Title (TCT) No. T-92571, while respondent
Constantino Jaraula is the owner and actual possessor of Lot No. 2291-B covered by TCT No. T-63088, both
situated at Gusa, Cagayan de Oro City. The two lots adjoin each other and were originally parts of Lot No. 2291,
a 12-hectare lot which has been developed by respondents as the Mega Heights Subdivision. In January, March
and April of 1996, petitioner spouses Luciano and Gaudiosa Ello and their hired personnel surreptitiously and
stealthily occupied respondents lots, built a make-shift shed under the trees, and fenced the area they occupied.
Respondents then demanded that petitioners and their hired personnel vacate the area but they refused.
Instead, they threatened and prevented respondents from developing their lots into a subdivision. The matter
reached the barangay but the parties failed to reach an amicable settlement. Thus, the Barangay Lupon
Tagapamayapa issued a Certificate to File Action. Respondents prayed that petitioners be ordered to vacate the
lots and to remove the improvements they constructed thereon.[4]

Petitioners, in their answer, specifically denied respondents allegations, claiming that they have been in
possession of the disputed lots for over thirty (30) years; that the Department of Agrarian Reform Adjudication
Board (DARAB), in its Decision dated October 5, 1995 in DARAB Case No. 305, declared that the lots are covered
by the Comprehensive Agrarian Reform Program (CARP) and petitioners are among the identified beneficiaries
thereof; that the said Decision has become final and executory; and that, therefore, the MTCC has no jurisdiction
over respondents complaint for forcible entry.

On December 4, 1996, the MTCC rendered its Decision dismissing the complaint, thus:

WHEREFORE, in view of the foregoing consideration and for failure of the plaintiffs to establish by
preponderance of evidence that they have brought the instant case within one year from entry of defendant,
and in view of the fact that the land is subject matter of a DARAB Case No. 305, the court believes that it has no
jurisdiction to try the instant case and, therefore, orders the dismissal of the same. The counterclaim filed by
the defendants is also dismissed for lack of merit.

SO ORDERED.[5]

On appeal, the Regional Trial Court (RTC), Branch 17, Cagayan de Oro City, in its Decision dated August 5, 1998,
reversed the MTCC Decision, thus:

WHEREFORE, premises considered, the Decision of the lower court in Civil Case No. 96-May-346 of Branch 4,
Municipal Trial Court in Cities, Cagayan de Oro City, rendered on December 4, 1996, is hereby ordered reversed
and set aside, and this court hereby finds a case in favor of the plaintiffs and against the defendants, and hereby
orders the defendants Luciano Ello and Gaudiosa Ello, their agents and privies to vacate Lots Nos. 19-C and
2291-B within ninety (90) days and deliver the same to the plaintiffs Springfield Development Corporation and
Constantino Jaraula, and to refrain from ever disturbing and interrupting the plaintiffs in their rightful and
feaceful possession and enjoyment of the parcels of land subject-matter of this case.

Costs against the defendants.

SO ORDERED.[6]

The RTC held in part:

The fact that the defendants are now occupying Lots. Nos. 19-C and 2291-B without any concrete permanent
improvement within the area is a testament that they only entered the same recently. And to this effect was
the testimony of Architect Richard Tan, project manager of Mega Heights Subdivision, who explained that prior
to January, 1996, the defendants were nowhere to be found in Lots Nos. 19-C and 2291-B.

It is, therefore, the considered view of the court that the filing of the instant action for forcible entry in May,
1996 was done within one (1) year from the time of entry by the defendants in Lots Nos. 19-C and 2291-B. The
court is morally convinced that while the defendants were in possession and occupation of Lot No. 2525 for
many years, they have recently expanded their occupation and possession to Lots Nos. 19-C and 2291-B, lots
adjacent to and adjoining Lot No. 2525. x x x.

On the second issue, the court is likewise of the considered view that the lower court has jurisdiction over this
case. The court is morally convinced that the Decision of DARAB dated October 5, 1995 has become moot and
academic with the payment and relocation of the occupants of Lot No. 2291 (Exhibits F, G, H, and I), even before
the DARAB Decision was rendered. The exclusion of the defendants from the payment of compensation is
consistent with the findings of the lower court that the heirs of Nicholas Capistrano believes that the area
occupied by the defendant is in excess of Lot 2291 per testimony of Engr. Belen and defendant Luciano Ello. This
is once more supported by the notes from CENRO (Exhibits 6 and 6-A) which show that defendants are
occupants and possessors of Lot No. 2525. Apparently, the DAR had the same thing in mind because the
defendants were not included in the original listing of actual occupants of Lot No. 2291.

On October 22, 1998, petitioners filed with the Court of Appeals a petition for review, docketed as CA-G.R. SP
No. 49904.
In a minute Resolution dated May 31, 1999,[7] the petition was dismissed outright on the ground that it does not
contain the affidavit of service required by Section 11 in relation to Section 13, Rule 13 of the 1997 Rules of Civil
Procedure, as amended.

Petitioners, through the Public Attorneys Office, promptly filed a motion for reconsideration attaching therewith
the affidavit of service dated June 17, 1999, executed by Gabriel M. Manasan. In his affidavit, Manasan stated
that he is the messenger of the Public Attorneys Office, Cagayan de Oro City which directed him to file with the
Court of Appeals through the mail the petition for review in CA-G.R. SP No. 49904, LUCIANO CIANO ELLO and
GAUDIOSA ELLO, Petitioners, versus SPRINGFIELD DEVT. CORP. and CONSTANTINO JARAULA, Respondents; that
on October 21, 1998, he personally served copies of the petition to the Law Office of respondents counsel Atty.
Constantino Jaraula at No. 12th St., Nazareth, Cagayan de Oro City and to the RTC, Branch 4, Cagayan de Oro
City, per the stamped receipt indicated in their own copy of the petition;[8] and that the following day, October
22, 1998, he mailed copies thereof to the Court of Appeals per postal Registry Receipt No. 36680 attached to
his affidavit.[9]

In their motion for reconsideration, petitioners averred that they failed to append to their petition the affidavit
of service due to an excusable oversight considering the time constraint in filing the petition with its voluminous
annexes; that they have a meritorious case as evidenced by the final Decision in DARAB Case No. 305 declaring
them as CARP beneficiaries of the disputed property; and that there would be a denial of substantial justice if
their petition would be dismissed merely by reason of technicality.[10] Citing previous rulings of this Court[11] that
procedural rules should be liberally construed in order to promote substantial justice, petitioners prayed that
the affidavit of proof of service attached to their motion be admitted and that their petition be given due course.

Still unconvinced, the Court of Appeals, in its Resolution dated October 8, 1999, denied petitioners motion for
reconsideration, invoking this Courts ruling in Solar Team Entertainment, Inc. vs. Judge Ricafort[12] that strictest
compliance with Section 11 of Rule 13 is mandated.[13]

Petitioners now come to us via the instant petition for certiorari assailing the twin minute Resolutions of the
Court of Appeals. They allege that the said court acted with grave abuse of discretion amounting to lack of
jurisdiction by persisting in dismissing their petition for review solely on technical grounds without regard
whatsoever to the substantial merit of their cause and the resulting injustice that could be created
thereby.[14] They pray that the challenged Resolutions be annulled and that their petition be given due course.

Respondents, in their comment on the petition, counter that the Court of Appeals, in issuing the assailed
Resolutions, properly exercised its discretion. They contend that petitioners, by failing to attach to their petition
the required affidavit of service, only succeeded in demonstrating their contempt for the Rules and the
Honorable Supreme Courts directive in Solar Team Entertainment, Inc. vs. Judge Ricafort.[15]

The issue here is whether the Court of Appeals gravely abused its discretion when it dismissed outright
petitioners petition for review on the sole technical ground that it does not contain the affidavit of service as
required by Section 11 in relation to Section 13, Rule 13 of the 1997 Rules of Civil Procedure, as amended.

Sections 3 and 5, Rule 13 of the 1997 Rules of Civil Procedure, as amended, prescribe two modes
of filing and service of pleadings, motions, notices, orders, judgments and other papers. These are: (a) by
personal delivery, governed by Section 6 of the same Rule; and (b) by mail, under Section 7 thereof. If service
cannot be done either personally or by mail, substituted service may be resorted to pursuant to Section 8 of the
same Rule.

However, Section 11 of Rule 13 requires that whenever practicable, the filing of pleadings and other papers in
court, as well as the service of said papers on the adverse party or his counsel, must be done personally. But if
such filing and service were through a different mode, the party concerned must submit a written
explanation why they were not done personally. Section 11 provides:

SEC. 11. Priorities in modes of service and filing. Whenever practicable, the service and filing of pleadings and
other papers shall be done personally. Except with respect to papers emanating from the court, a resort to other
modes must be accompanied by a written explanation why the service or filing was not done personally. A
violation of this Rule may be cause to consider the paper as not filed. (n)

In relation to Section 11, Section 13 provides:

SEC. 13. Proof of service. Proof of personal service shall consist of a written admission of the party served, or
the official return of the server, or the affidavit of the party serving, containing a full statement of the date,
place and manner of service. If the service is by ordinary mail, proof thereof shall consist of an affidavit of the
person mailing of facts showing compliance with Section 7 of this Rule. If service is made by registered mail,
proof shall be made by such affidavit and the registry receipt issued by the mailing office. The registry return
card shall be filed immediately upon its receipt by the sender, or in lieu thereof the unclaimed letter together
with the certified or sworn copy of the notice given by the postmaster to the addressee. (10a) (Underscoring
supplied)

Section 11 is a new provision incorporated in the 1997 Rules of Civil Procedure, as amended, prescribing the
mode of filing and service of pleadings, motions and other papers. In Solar Team Entertainment, Inc. vs. Judge
Ricafort (supra), we explained that the primary objective of this new provision is to foil the mischief of delay,
thus:

Personal service and filing are preferred for obvious reasons. Plainly, such should expedite action or resolution
on a pleading, motion or other paper; and conversely, minimize, if not eliminate, delays likely to be incurred if
service or filing is done by mail, considering the inefficiency of the postal service. Likewise, personal service will
do away with the practice of some lawyers who, wanting to appear clever, resort to the following less than
ethical practices: (1) serving or filing pleadings by mail to catch opposing counsel off-guard, thus leaving the
latter with little or no time to prepare, for instance, responsive pleadings or an opposition; or (2) upon receiving
notice from the post office that the registered parcel containing the pleading of or other paper from the adverse
party may be claimed, unduly procrastinating before claiming the parcel, or worse, not claiming it at all, thereby
causing undue delay in the disposition of such pleading or other papers.

The requirement under Section 11 is mandatory. Any violation of this Rule may be cause for the court to
consider the paper as not filed.

However, such discretionary power of the court must be exercised properly and reasonably, taking into account
the following factors: (1) the practicability of personal service; (2) the importance of the subject matter of the
case or the issues involved therein; and (3) the prima facie merit of the pleading sought to be expunged for
violation of Section 11. Thus, we stressed in Solar :
If only to underscore the mandatory nature of this innovation to our set of adjective rules requiring personal
service whenever practicable, Section 11 of Rule 13 then gives the court the discretion to consider a pleading
or paper as not filed if the other modes of service or filing were resorted to and no written explanation was
made as to why personal service was not done in the first place. The exercise of discretion must, necessarily,
consider the practicability of personal service, for Section 11 itself begins with the clause whenever
practicable.

We thus take this opportunity to clarify that under Section 11, Rule 13 of the Rules of Civil Procedure,
personal service and filing is the general rule, and resort to other modes of service and filing, the
exception. Henceforth, whenever personal service or filing is practicable, in light of the circumstances of time,
place and person, personal service or filing is mandatory. Only when personal service or filing is not
practicable may resort to other modes be had, which must then be accompanied by a written explanation as
to why personal service or filing was not practicable to begin with. In adjudging the plausibility of an
explanation, a court shall likewise consider the importance of the subject matter of the case or the issues
involved therein, and the prima facie merit of the pleading sought to be expunged for violation of Section
11. x x x. (Underscoring supplied)

In the present case, there is no question that petitioners violated Section 11 of Rule 13 by failing to append the
affidavit of service to their petition for review filed with the Court of Appeals. We note, though, that petitioners,
upon receipt of the Court of Appeals challenged Resolution dismissing outright their petition due to such
omission, promptly filed a motion for reconsideration, readily acknowledging their procedural lapse and
attaching therewith the required affidavit of service.

Significantly, Gabriel Manasans affidavit of service shows that the petition for review was filed with the Court
of Appeals in Manila through registered mail. This mode of filing is permitted under Section 11 of Rule 13 since
it s obviously impractical for petitioners and their counsel, who are all residents of Cagayan de Oro City, to
personally file their petition in Manila. As to the service of copies of the petition, Manasan personally served
the same on respondents counsel and the RTC in Cagayan de Oro City, thus fully complying with Section 11.

Clearly, Manasans affidavit of service is a substantial compliance with the requirement under Section 11. It bears
stressing that petitioners procedural lapse in not appending such affidavit to their petition did not in any way
thwart the laudable objective of Section 11 as stated in Solar, i.e., to quell the lawyers unethical practice of
deliberately resorting to delays in the filing and service of pleadings, motions and other papers. Indeed, the
evil sought to be prevented by the new rule is absent here. Also, there is absolutely no indication from
petitioners omission that they demonstrated their contempt for the Rules and our directive in Solar, as claimed
by respondents.

Moreover, we note that the Court of Appeals, despite petitioners motion for reconsideration showing
compliance with Section 11, still denied the same, without taking into account the importance of the issues
raised in the petition.

It must be stressed that the findings of fact of the MTCC and the RTC are diametrically opposed from each
other. The MTCC found that for many years before respondents filed the complaint for forcible entry,
petitioners have been in possession of the disputed property awarded to them by the CARP. On the contrary,
the RTC found that they are not CARP beneficiaries.
In their petition for review before the Court of Appeals, petitioners ascribed to the RTC the following errors:

1. In ruling that the filing of the forcible entry complaint was within one (1) year from petitioners entry on the
subject land.

2. In finding that respondents are the owners in fee simple of the subject land; and

3. In ruling that the Decision in DARAB Case No. 305 has become moot and academic.

The assigned errors are purely factual in nature which only the Court of Appeals can determine. By dismissing
the petition outright would absolutely foreclose the resolution of these errors. Clearly, justice would be better
served if the Court of Appeals resolves the factual issues raised in the petition.

In Sebastian vs. Morales,[16] we ruled that rules of procedure must be faithfully followed except only when for
persuasive reasons, they may be relaxed to relieve a litigant of an injustice not commensurate with his failure
to comply with the prescribed procedure, which exception is present here.

In fine, we hold that the Court of Appeals, in issuing its assailed Resolutions, acted with grave abuse of discretion
amounting to lack or excess of jurisdiction.

WHEREFORE, the instant petition for certiorari is hereby GRANTED. The challenged Resolutions dated May 31,
1999 and October 8, 1999 of the Court of Appeals in CA-G.R. SP No. 49904 are ANNULLED and SET ASIDE. The
petition for review is ordered REINSTATED.

SO ORDERED.
FIRST DIVISION

COCA COLA BOTTLERS PHILS., INC., G.R. No. 144180

NATALE J. DICOSMO, STEVE HEATH,
MARY CHUA, ALBERTO FAJARDO, JESS
BANGSIL, LITO GARCIA, NOEL ROXAS,
CHITO ENRIQUEZ, FREDERICK KERULF,
ARMANDO CANLAS and DANILO DAUZ, Present:

Petitioners,

- versus - PANGANIBAN, CJ

Chairperson

YNARES-SANTIAGO,

RODOLFO CABALO, JUANITO GERONA, AUSTRIA-MARTINEZ,

LUIS GERONA, LUIS DE OCAMPO and
CALLEJO, SR., and
MARIO NILO MECUA,
CHICO-NAZARIO, JJ.
Respondents.

Promulgated:

January 30, 2006

x--------------------------------------------------x
DECISION

CHICO-NAZARIO, J.:

Before Us is a petition for review on certiorari questioning the Resolution[1] of the Court of Appeals dated 25
April 2000 which dismissed petitioners original action of certiorari filed therein. Being questioned as well is the
Resolution[2] dated 12 July 2000 which dismissed petitioners motion for reconsideration.

The present controversy finds its genesis in an illegal dismissal case filed by herein respondents against
petitioners, the facts of which are narrated by the Labor Arbiter in his Decision dated 26 November 1998, viz:

Complainants aver that they have been under the employ of respondent company for more than ten (10) to
thirteen (13) years as follows:

NAME DATE HIRED DATE DISMISSED

1. Rodolfo G. Cabalo June 6, 1983 June 16, 1996

2. Juanito E. Gerona May 15, 1983 Oct. 2, 1996

3. Luis T. Ocampo May 1, 1984 July 10, 1996

4. Mario Nilo Mecua July 30, 1985 Dec. 16, 1995

as route helper, cargadors or pahinantes, accompanying the salesmen/drivers in their deliveries to sari-sari
stores, restaurants, groceries, supermarkets that they were all under the supervision and control of respondent
Company which provided them with the tools, equipment and other working material; that they worked
exclusively at the plants, sales offices, delivery truck and/or respondent Companys premises.
Respondent Company maintains that being one of the largest softdrink manufacturer in the country, it employs
a sizeable workforce all over the country; that due to the fluctuating and variable conditions in the market, e.g.,
unusually high volume of work and unexpected shortages in manpower complement, the Company at times is
constrained to augment its workforce so as to cope with operational needs; that in order to meet its fluctuating
operational needs, the Company engages the services of workers apart from its regular workforce for its
different plants; that the engagement of such services is necessarily on a temporary basis due to the temporary
nature of the operational needs of the Company lasting for a limited period; that if, for example, the Company
anticipates or actually experiences an unusually high volume of work or an unexpected shortage of manpower
in any of its plants or sales offices arising from variable economic factors, it engages the services of outside
workers to temporarily complement its regular workforce in the said plants or sales offices; that as part of its
adaptive operational measures, the Company engaged the services of workers on a temporary basis for a limited
period of five (5) months; that pursuant to the workers arrangement with the Company, their services were
automatically terminated upon the expiration of the five-month period agreed upon by the parties. Hence, the
said workers employment with the Company ceased thereafter; that complainants have now filed the present
Complaint claiming that they worked in the Company and should, therefore, have achieved regular employment
status in the Company; that however, other than their self-serving assertions, there is no document on record
that will support complainants alleged service periods with the Company.[3]

The case before the Labor Arbiter was decided in favor of herein petitioners for lack of evidence as to the
existence of an employer-employee relationship. The dispositive portion of the decision reads:

WHEREFORE, complainants having failed to establish their claimed employer-employee relationship with the
respondent corporation by CLEAR and CONVINCING competent evidence, the Complaint is hereby
ordered DISMISSED.[4]

On appeal to the National Labor Relations Commission (NLRC) by the respondents, the NLRC declared that any
decision it will render on the matter will border on prematurity as there is dearth of evidence on both sides of
the fence to allow this forum to judiciously decide the case meritoriously. [5] It added that (t)he issue of
employer-employee relationship has not been fully threshed out in the proceedings a quo,[6] thus, under the
circumstances, it was left with no option except to remand this case to the Labor Arbiter a quo for further
proceedings with the sole objective of fully threshing out the issue of employer-employee
relationship.[7] The dispositive portion of the NLRC decision states:
PREMISES CONSIDERED, the appealed decision is hereby SET ASIDE and the records of this case is hereby
REMANDED to the Arbitration Branch of origin for further proceedings to thresh out the issue of employer-
employee relationship. In this regard, exhaustive efforts should be exerted to serve summons
on Lipercon Services, Inc., being co-respondent.[8]

Petitioners moved for reconsideration of the aforequoted decision which motion was denied by the NLRC on 29
December 1999.[9]

Aggrieved, petitioners sought relief before the Court of Appeals via a petition for certiorari dated 26 March
2000. In a Resolution dated 25 April 2000, the Seventh Division of the Court of Appeals dismissed the petition. It
held:

For failure to comply with Sec. 11, Rule 13 of the 1997 Rules of Civil Procedure and for failure to attach certified
true copy of the assailed NLRC Resolution dated December 29, 1999 as required under Sec. 1, Rule 65 of the
Rules of Court, the petition is DISMISSED.[10]

Petitioners motion for reconsideration was denied on 12 July 2000, the Court of Appeals holding that:

Petitioners contend that they faithfully complied with Section 1, Rule 65 of the Rules of Court which requires
the petition to be accompanied by a certified true copy of the judgment, order or resolution subject
thereof. However, a review of the records indubitably shows that this requirement had not been complied with
regarding the assailed NLRC Resolution dated December 29, 1999 which was neither a certified true copy nor a
duplicate original thereof, but a mere photocopy.

WHEREFORE, there being no cogent reason or basis to reconsider Our previous Resolution, the Motion for
Reconsideration is hereby DENIED.[11]

Petitioners are now before us on petition for review, assigning as errors the following:
I.

THE COURT OF APPEALS SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING
THE C.A. PETITION NOTWITHSTANDING THE FACTS THAT:

A. PETITIONERS REQUESTED FOR CERTIFIED TRUE COPIES OF THE 30 SEPTEMBER 1999DECISION

AND 29 DECEMBER 1999 RESOLUTION BOTH ISSUED BY THE NLRC BUT ONLY CERTIFIED XEROX COPIES WERE
GIVEN

B. PETITIONERS REQUESTED THE HONORABLE COURT OF APPEALS TO FURNISH THEM WITH

CERTIFIED TRUE COPIES OF THE QUESTIONED FIRST AND SECOND RESOLUTIONS BUT LIKE THE NLRC, THE
HONORABLE COURT OF APPEALS ONLY GAVE CERTIFIED XEROX COPIES.

II.

THE COURT OF APPEALS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS IN
THAT IT ISSUED THE FIRST AND SECOND RESOLUTIONS IN VIOLATION OF THE RULE ON LIBERAL CONSTRUCTION
OF THE RULES OF COURT

On The First Issue:

The Court of Appeals based its denial of the petition on Section 1, Rule 65 of the Rules of Court which provides
that any petition filed under Rule 65 should be accompanied by a certified true copy of the judgment, order or
resolution subject thereof and that, in this particular case, the petition was not so accompanied by a certified
true copy of the NLRC resolution dated 29 December 1999 but only by a mere photocopy.

The problem presented is not novel. In fact, it is a fairly recurrent one in petitions for certiorari of NLRC decisions
as it seems to be the practice of the NLRC to issue certified xerox copies only instead of certified true
copies.[12]We have, however, put an end to this issue in Quintano v. NLRC[13] when we declared that there is no
substantial distinction between a photocopy or a Xerox copy and a true copy for as long as the photocopy is
certified by the proper officer of the court, tribunal, agency or office involved or his duly-authorized
representative and that the same is a faithful reproduction of the original. We held therein:
The submission of the duplicate original or certified true copy of judgment, order, resolution or ruling subject
of a petition for certiorari is essential to determine whether the court, body or tribunal, which rendered the
same, indeed, committed grave abuse of discretion. The provision states that either a legible duplicate original
or certified true copy thereof shall be submitted. If what is submitted is a copy, then it is required that the same
is certified by the proper officer of the court, tribunal, agency or office involved or his duly-authorized
representative. The purpose for this requirement is not difficult to see. It is to assure that such copy is a faithful
reproduction of the judgment, order, resolution or ruling subject of the petition.

xxxx

Indeed, for all intents and purposes, a certified Xerox copy is no different from a certified true copy of the
original document. The operative word in the term certified true copy under Section 3, Rule 46 of the Rules of
Court is certified. The word means made certain. It comes from the Latin word certificare meaning, to make
certain. Thus, as long as the copy of the assailed judgment, order, resolution or ruling submitted to the court
has been certified by the proper officer of the court, tribunal, agency or office involved or his duly-authorized
representative and that the same is a faithful reproduction thereof, then the requirement of the law has been
complied with. It is presumed that, before making the certification, the authorized representative had compared
the Xerox copy with the original and found the same a faithful reproduction thereof. [14]

A perusal of the attached NLRC Decision easily discloses that it is not a mere photocopy but is, in fact,
a certified photocopy of said decision. Each page of the decision has been certified by the NLRC Third Divisions
Deputy Clerk of Court, Atty. Catalino R. Laderas, who is undoubtedly a proper officer to make the said
certification.[15] Moreover, there seems to be no question that the attached copy of the NLRC decision is a
faithful reproduction thereof.

The Court of Appeals, however, zeroed in on the copy of the NLRC Resolution denying petitioners motion for
reconsideration. As correctly pointed out by it, said copy is neither a certified true copy nor a certified photocopy
of the NLRC resolution but seems to be a mere photocopy of the duplicate original copy sent to petitioners
counsel.

On The Second Issue:

The petition filed before the Court of Appeals did not contain an explanation as to why service upon the Office
of the Solicitor General (0SG) and Atty. Omar M.C. Alam, counsel for respondents, was not made personally,
albeit an affidavit of service by registered mail was attached thereto. The failure to make such written
explanation, in violation of Section 11, Rule 13 of the 1997 Rules of Court, was the second ground for the
dismissal of the petition.

Section 11, Rule 13 states:

SEC. 11. Priorities in modes of service and filing. Whenever practicable, the service and filing of pleadings and
other papers shall be done personally. Except with respect to papers emanating from the court, a resort to other
modes must be accompanied by a written explanation why the service or filing was not done personally. A
violation of this Rule may be cause to consider the paper as not filed.

The requirement for personal service is mandatory such that Section 11, Rule 13 gives the court the discretion
to consider a pleading or paper as not filed if the other modes of service of filing were resorted to and no written
explanation was made as to why personal service was not done.[16] In the seminal case of Solar Team
Entertainment, Inc. v. Judge Ricafort,[17] we stressed that strictest compliance with Section 11 of Rule 13 is
mandated beginning one (1) month from the promulgation of said decision; i.e. one month from 05 August
1998.

The subject petition was filed on 26 March 2000. Petitioners explain, however, that their omission was due to
inadvertence and was not a product of any malevolent scheme to prejudice respondents in any way. Thus, the
evil sought to be avoided by the requirement of an explanation to curb the practice of delaying the receipt of a
pleading by a party through the simple expedient of serving the same by mail was not present. Petitioners thus
pray for a liberal construction of the provision in question following Section 6, Rule 1 of the Rules of Court.[18]

We are not persuaded.

In Solar,[19] as reiterated in the recent case of Ello v. Court of Appeals,[20] we explained that the courts
discretionary power to consider a pleading or paper as not filed for violation of Section 11, Rule 13 must be
exercised properly and reasonably, taking into account the following factors: (1) the practicability of personal
service; (2) the importance of the subject matter of the case or the issues involved therein; and (3) the prima
faciemerit of the pleading sought to be expunged for violation of Section 11.
We find that the Court of Appeals did not err in dismissing the petition for failure to observe the requirement
of a written explanation why service was not made personally to the OSG and to Atty. Omar M.C. Alam, counsel
for respondents.

First, it cannot be said that serving the petition on the OSG and Atty. Alam through personal service was not
practical nor realistic under the circumstances. We note that the office of petitioners counsel, the firm
of BocoboRondain Mendiola Cruz and Formoso, is in Pasig City while that of the OSG is in Makati City and that
of Atty. Alam is in Quezon City. Considering that the law firm has for its client one of the biggest corporations in
the country, it is safe to presume precisely because of the absence of an explanation why service was not made
personally that the Pasig firm has in its employ enough people to effect personal service. Moreover, the NLRC
Resolution denying petitioners motion for reconsideration was received by their counsel on 10 February
2000.[21]Petitioners, therefore, had until 11 April 2000 within which to file their petition for certiorari. From the
records of the case, the petition was filed as early as 29 March 2000. Thus, petitioners had all the time in the
world to serve their petition upon the OSG and respondents counsel by personal service and their failure to do
so becomes inexcusable under the circumstances.

We have also considered the fact that the issue presented before the Court of Appeals is not one of first
impression nor is it of such importance as to justify the relaxation of the rules of court on the ground of
inadvertence. Likewise, from a reading of the petition, it does not appear that petitioners have a prima
facie case. It is to be recalled that the sole issue presented by the Court of Appeals is whether or not the NLRC,
under the facts of the case, gravely abused its discretion in vacating and setting aside the decision of the Labor
Arbiter and remanding the case to the arbitral branch of origin for further proceedings. In Sevillana v. I.T.
(International) Corp.,[22] we had already enunciated that the NLRC is not precluded by the rules to allow the
parties to submit additional evidence to prove their respective claims even on appeal or to order the remand of
the case to the administrative agency concerned for further study and investigation upon such issues.

IN SUM, we stress that petitioners claim of inadvertence as their reason for their failure to provide a written
explanation why service of their petition was not made personally cannot and does not justify its omission. Such
inadvertence does not constitute excusable negligence especially since said rule had already been in effect for
three years before petitioners filed their petition before the Court of Appeals.[23] That petitioners blithely expect
this Court to turn a blind eye to their procedural blunder underscores their utter disregard of the requirement
in Section 11, Rule 13. Verily, such disregard of the rule cannot justly be rationalized by harking on the policy of
liberal construction and substantial compliance.[24] To paraphrase Solar, if any controversy regarding a violation
of Section 11 of Rule 13 were to be indiscriminately resolved under Section 6 of Rule 1 or Alonso
v. Villamor[25] and other analogous cases, then Section 11 would become meaningless and its sound purpose
negated.[26]
WHEREFORE, premises considered, the instant petition is DENIED. The Resolutions of the Court of Appeals
dated 25 April 2000 and 12 July 2000, respectively, are AFFIRMED. With costs.

SO ORDERED.
SECOND DIVISION

[G.R. No. 158407. January 17, 2005]

FILOMENA DOMAGAS, petitioner, vs. VIVIAN LAYNO JENSEN, respondent.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari, under Rule 45 of the Rules of Court, of the Decision[1] of the Court of
Appeals (CA) in CA-G.R. CV No. 73995, which affirmed the Decision[2] of the Regional Trial Court (RTC) of
Dagupan City, Branch 44, in Civil Case No. 2000-0244-D, which declared null and void the decision of the
Municipal Trial Court (MTC) of Calasiao, Pangasinan in Civil Case No. 879.[3]

The antecedent facts follow.

On February 19, 1999, petitioner Filomena Domagas filed a complaint for forcible entry against respondent
Vivian Jensen before the MTC of Calasiao, Pangasinan. The petitioner alleged in her complaint that she was the
registered owner of a parcel of land covered by Original Certificate of Title (OCT) No. P-30980, situated in
Barangay Buenlag, Calasiao, Pangasinan, and with an area of 827 square meters. On January 9, 1999 the
respondent, by means of force, strategy and stealth, gained entry into the petitioners property by excavating a
portion thereof and thereafter constructing a fence thereon. As such, the petitioner was deprived of a 68-square
meter portion of her property along the boundary line. The petitioner prayed that, after due proceedings,
judgment be rendered in her favor, thus:

3. And, after trial, judgment be rendered:

a) DECLARING the writ of Preliminary Mandatory Injunction and Writ of Preliminary Injunction permanent;

b) ORDERING defendant, his representatives, agents and persons acting under her, to vacate the portion of the
property of the plaintiff occupied by them and to desist from entering, excavating and constructing in the said
property of the plaintiff described in paragraph 2 hereof and/or from disturbing the peaceful ownership and
possession of the plaintiff over the said land, pending the final resolution of the instant action;

c) ORDERING defendant to pay reasonable rental at FIVE THOUSAND (P5,000.00) PESOS per month from January
9, 1999 up to the time she finally vacates and removes all constructions made by her in the property of the
plaintiff and up to the time she finally restores the said property in the condition before her illegal entry,
excavation and construction in the property of the plaintiff;

d) ORDERING defendant to pay actual damages in the amount of TWENTY THOUSAND (P20,000.00) PESOS;
moral damages in the amount of TWENTY THOUSAND (P20,000.00) PESOS; attorneys fees of THIRTY THOUSAND
(P30,000.00) PESOS in retainers fee and ONE THOUSAND FIVE HUNDRED (P1,500.00) PESOS per court
appearance fee; exemplary damages in the amount of TWENTY THOUSAND (P20,000.00) PESOS, and, costs.

Plaintiff further prays for other reliefs and remedies just and equitable in the premises. [4]
The case was docketed as Civil Case No. 879. The summons and the complaint were not served on the
respondent because the latter was apparently out of the country. This was relayed to the Sheriff by her (the
respondents) brother, Oscar Layno, who was then in the respondents house at No. 572 Barangay Buenlag,
Calasiao, Pangasinan. The Sheriff left the summons and complaint with Oscar Layno, who received the same. [5]

Nonetheless, on May 17, 1999, the court rendered judgment ordering the respondent and all persons occupying
the property for and in the latters behalf to vacate the disputed area and to pay monthly rentals therefor,
including actual damages, attorneys fees, and exemplary damages. The fallo of the decision reads:

1) Ordering the defendant, her representatives, agents and persons acting under her, to vacate the 68-square
meters which she encroached upon;

2) Ordering the defendant to pay a monthly rental of P1,000.00 to the plaintiff;

3) To pay plaintiff actual damages of P20,000.00; attorneys fees of P15,000.00 and exemplary damages in the
amount of P20,000.00 plus the costs.

SO ORDERED.[6]

The respondent failed to appeal the decision. Consequently, a writ of execution was issued on September 27,
1999.

On August 16, 2000, the respondent filed a complaint against the petitioner before the RTC of Dagupan City for
the annulment of the decision of the MTC in Civil Case No. 879, on the ground that due to the Sheriffs failure to
serve the complaint and summons on her because she was in Oslo, Norway, the MTC never acquired jurisdiction
over her person. The respondent alleged therein that the service of the complaint and summons through
substituted service on her brother, Oscar Layno, was improper because of the following: (a) when the complaint
in Civil Case No. 879 was filed, she was not a resident of Barangay Buenlag, Calasiao, Pangasinan, but of Oslo,
Norway, and although she owned the house where Oscar Layno received the summons and the complaint, she
had then leased it to Eduardo Gonzales; (b) she was in Oslo, Norway, at the time the summons and the complaint
were served; (c) her brother, Oscar Layno, was merely visiting her house in Barangay Buenlag and was not a
resident nor an occupant thereof when he received the complaint and summons; and (d) Oscar Layno was never
authorized to receive the summons and the complaint for and in her behalf. [7]

The respondent further alleged that the MTC had no jurisdiction over the subject matter of the complaint in
Civil Case No. 879 because the petitioner, the plaintiff therein, failed to show prior possession of the property.
She further claimed that the alleged forcible entry was simply based on the result of the survey conducted by
Geodetic Engineer Leonardo de Vera showing that the property of the respondent encroached on that of the
petitioner.

The respondent filed a Manifestation dated August 31, 2000, and appended thereto the following: (a) a
copy[8] of her passport showing that she left the country on February 17, 1999; (b) a copy[9] of the Contract of
Lease dated November 24, 1997, executed by her and Eduardo D. Gonzales over her house for a period of three
(3) years or until November 24, 2000; (c) her affidavit[10] stating, inter alia, that she owned the house at Barangay
Buenlag, Calasiao, Pangasinan, which she leased to Eduardo Gonzales; that she was married to Jarl Jensen, a
citizen of Norway, on August 23, 1987 and had resided in Norway with her husband since 1993; that she arrived
in the Philippines on December 31, 1998, but left on February 17, 1999; she returned to the Philippines on July
30, 2000 and learned, only then, of the complaint against her and the decision of the MTC in Civil Case No. 879;
her brother Oscar Layno was not a resident of the house at Barangay Buenlag; and that she never received the
complaint and summons in said case; (d) the affidavit[11] of Oscar Layno declaring that sometime in April 1999,
he was in the respondents house to collect rentals from Eduardo Gonzales; that the Sheriff arrived and served
him with a copy of the summons and the complaint in Civil Case No. 879; and that he never informed the
respondent of his receipt of the said summons and complaint; (e) an affidavit [12] of Eduardo Gonzales stating
that he leased the house of the respondent and resided thereat; the respondent was not a resident of the said
house although he (Gonzales) allowed the respondent to occupy a room therein whenever she returned to the
Philippines as a balikbayan; and that Oscar Layno was not residing therein but only collected the rentals.

In her answer to the complaint, the petitioner alleged that the respondent was a resident of Barangay Buenlag,
Calasiao, Pangasinan and was the owner of the subject premises where Oscar Layno was when the Sheriff served
the summons and complaint; that the service of the complaint and summons by substituted service on the
respondent, the defendant in Civil Case No. 879, was proper since her brother Oscar Layno, a resident and
registered voter of Barangay. Buenlag, Calasiao, Pangasinan, received the complaint and summons for and in
her behalf.

The petitioner appended the following to her answer: (a) a copy[13] of the Deed of Absolute Sale executed by
Jose Layno in her favor, dated August 26, 1992, showing that the respondent was a resident of Barangay
Buenlag, Calasiao, Pangasinan; (b) a Real Estate Mortgage[14] executed by the respondent, dated February 9,
1999 showing that she was a resident of Barangay Buenlag, Calasiao, Pangasinan; (c) the Joint Affidavit [15] of
Vicenta Peralta and Orlando Macalanda, both residents of Barangay Buenlag, Calasiao, Pangasinan, declaring
that the respondent and her brother Oscar Layno were their neighbors; that the respondent and her brother
had been residents of Barangay Buenlag since their childhood; that although the respondent left the country on
several occasions, she returned to the Philippines and resided in her house at No. 572 located in the said
barangay; and (d) the Voters Registration Record[16] of Oscar Layno, approved on June 15, 1997.

After due proceedings, the trial court rendered a decision in favor of the respondent. The dispositive portion
reads:

WHEREFORE, judgment is rendered in favor of plaintiff Vivian Layno Jensen and against defendant Filomena
Domagas, as follows:

1. The Decision of the Municipal Trial Court of Calasiao, Pangasinan in Civil Case No. 879, entitled Filomena
Domagas versus Vivian Layno Jensen is declared null and void, for lack of jurisdiction over the person of the
plaintiff and the subject matter.

2. Defendant Filomena Domagas is ordered to pay plaintiff, the following:

a.) Actual damages, representing litigation expenses in the amount of P50,000.00;

b.) Attorneys fees in the amount of P50,000.00;

c.) Moral Damages in the amount of P50,000.00;

d.) Exemplary Damages in the amount of P50,000.00; and

e.) Costs of suit.

SO ORDERED.[17]

The trial court declared that there was no valid service of the complaint and summons on the respondent, the
defendant in Civil Case No. 879, considering that she left the Philippines on February 17, 1999 for Oslo, Norway,
and her brother Oscar Layno was never authorized to receive the said complaint and summons for and in her
behalf.

The petitioner appealed the decision to the CA which, on May 6, 2003, rendered judgment affirming the
appealed decision with modifications. The CA ruled that the complaint in Civil Case No. 879 was one for
ejectment, which is an action quasi in rem. The appellate court ruled that since the defendant therein was
temporarily out of the country, the summons and the complaint should have been served via extraterritorial
service under Section 15 in relation to Section 16, Rule 14 of the Rules of Court, which likewise requires prior
leave of court. Considering that there was no prior leave of court and none of the modes of service prescribed
by the Rules of Court was followed by the petitioner, the CA concluded that there was really no valid service of
summons and complaint upon the respondent, the defendant in Civil Case No. 879.

Hence, the present petition.

The petitioner assails the decision of the CA, alleging that the appellate court erred in holding that the
respondents complaint for ejectment is an action quasi in rem. The petitioner insists that the complaint for
forcible entry is an action in personam; therefore, substituted service of the summons and complaint on the
respondent, in accordance with Section 7, Rule 14 of the Rules of Court, is valid. The petitioner, likewise, asserts
that Oscar Layno is a resident and a registered voter of Barangay Buenlag, Calasiao, Pangasinan; hence, the
service of the complaint and summons on the respondent through him is valid.

The respondent, on the other hand, asserts that the action for forcible entry filed against her was an action quasi
in rem, and that the applicable provision of the Rules of Court is Section 15 of Rule 14, which calls for
extraterritorial service of summons.

The sole issue is whether or not there was a valid service of the summons and complaint in Civil Case No. 879
on the respondent herein who was the defendant in the said case. The resolution of the matter is anchored on
the issue of whether or not the action of the petitioner in the MTC against the respondent herein is an action
in personam or quasi in rem.

The ruling of the CA that the petitioners complaint for forcible entry of the petitioner against the respondent in
Civil Case No. 879 is an action quasi in rem, is erroneous. The action of the petitioner for forcible entry is a real
action and one in personam.

The settled rule is that the aim and object of an action determine its character. [18] Whether a proceeding is in
rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these
only.[19] A proceeding in personam is a proceeding to enforce personal rights and obligations brought against
the person and is based on the jurisdiction of the person, although it may involve his right to, or the exercise of
ownership of, specific property, or seek to compel him to control or dispose of it in accordance with the mandate
of the court.[20] The purpose of a proceeding in personam is to impose, through the judgment of a court, some
responsibility or liability directly upon the person of the defendant. [21] Of this character are suits to compel a
defendant to specifically perform some act or actions to fasten a pecuniary liability on him. [22] An action in
personam is said to be one which has for its object a judgment against the person, as distinguished from a
judgment against the propriety to determine its state. It has been held that an action in personam is a
proceeding to enforce personal rights or obligations; such action is brought against the person. As far as suits
for injunctive relief are concerned, it is well-settled that it is an injunctive act in personam.[23] In Combs v.
Combs,[24] the appellate court held that proceedings to enforce personal rights and obligations and in which
personal judgments are rendered adjusting the rights and obligations between the affected parties is
in personam. Actions for recovery of real property are in personam.[25]

On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the property of
such persons to the discharge of the claims assailed.[26] In an action quasi in rem, an individual is named as
defendant and the purpose of the proceeding is to subject his interests therein to the obligation or loan
burdening the property.[27]Actions quasi in rem deal with the status, ownership or liability of a particular
property but which are intended to operate on these questions only as between the particular parties to the
proceedings and not to ascertain or cut off the rights or interests of all possible claimants. The judgments therein
are binding only upon the parties who joined in the action.[28]

Section 1, Rule 70 of the Rules of Court provides:

Section 1. Who may institute proceedings, and when. - Subject to the provisions of the next succeeding section,
a person deprived of the possession of any land or building in force, intimidation, threat, strategy, or stealth, or
a lessor, vendor, vendee, or other person against whom the possession of any land or building is unlawfully
withheld after the expiration or termination of the right to hold possession by virtue of any contract, express or
implied, or the legal representatives or assigns of any such lessor, vendor, vendee, or other person, may, at any
time within one (1) year after such unlawful deprivation or withholding of possession, bring an action in the
proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession,
or any person or persons claiming under them, for the restitution of such possession, together with damages
and costs.

Under Section 15, Rule 70 of the said Rule, the plaintiff may be granted a writ of preliminary prohibition or
mandatory injunction:

Sec. 15. Preliminary Injunction. The court may grant preliminary injunction, in accordance with the provisions of
Rule 58 hereof, to prevent the defendant from committing further acts of dispossession against the plaintiff.

A possessor deprived of his possession through forcible entry or unlawful detainer may, within five (5) days from
the filing of the complaint, present a motion in the action for forcible entry or unlawful detainer for the issuance
of a writ of preliminary mandatory injunction to restore him in his possession. The court shall decide the motion
within thirty (30) days from the filing thereof.

If, after due proceedings, the trial court finds for the plaintiff, it shall then render judgment in his or her favor,
thus:
Sec. 17. Judgment. If, after trial, the court finds that the allegations of the complaint are true, it shall render
judgment in favor of the plaintiff for the restitution of the premises, the sum justly due as arrears of rent or as
reasonable compensation for the use and occupation of the premises, attorneys fees and costs. If it finds that
said allegations are not true, it shall render judgment for the defendant to recover his costs. If a counterclaim is
established, the court shall render judgment for the sum found in arrears from either party and award costs as
justice requires.

From the aforementioned provisions of the Rules of Court and by its very nature and purpose, an action for
unlawful detainer or forcible entry is a real action and in personam because the plaintiff seeks to enforce a
personal obligation or liability on the defendant under Article 539 of the New Civil Code, [29] for the latter to
vacate the property subject of the action, restore physical possession thereof to the plaintiff, and pay actual
damages by way of reasonable compensation for his use or occupation of the property. [30]

As gleaned from the averments of the petitioners complaint in the MTC, she sought a writ of a preliminary
injunction from the MTC and prayed that the said writ be made permanent. Under its decision, the MTC ordered
the defendant therein (the respondent in this case), to vacate the property and pay a monthly rental
of P1,000.00 to the plaintiff therein (the petitioner in this case).

On the issue of whether the respondent was validly served with the summons and complaint by the Sheriff on
April 5, 1999, the petitioner asserts that since her action of forcible entry against the respondent in Civil Case
No. 879 was in personam, summons may be served on the respondent, by substituted service, through her
brother, Oscar Layno, in accordance with Section 7, Rule 14 of the Rules of Court. The petitioner avers that Oscar
Layno, a person of suitable age and discretion, was residing in the house of the respondent on April 5, 1999. She
avers that the fact that the house was leased to and occupied by Eduardo Gonzales was of no moment.
Moreover, the Sheriff is presumed to have performed his duty of properly serving the summons on the
respondent by substituted service.

The contention of the petitioner has no merit.

In Asiavest Limited v. Court of Appeals,[31] the Court had the occasion to state:

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try
and decide the case. Jurisdiction over the person of a resident defendant who does not voluntarily appear in
court can be acquired by personal service of summons as provided under Section 7, Rule 14 of the Rules of
Court. If he cannot be personally served with summons within a reasonable time, substituted service may be
made in accordance with Section 8 of said Rule. If he is temporarily out of the country, any of the following
modes of service may be resorted to: (a) substituted service set forth in Section 8; (2) personal service outside
the country, with leave of court; (3) service by publication, also with leave of court; or (4) any other manner the
court may deem sufficient.[32]

Thus, any judgment of the court which has no jurisdiction over the person of the defendant is null and void. [33]

In the present case, the records show that the respondent, before and after his marriage to Jarl Jensen on August
23, 1987, remained a resident of Barangay Buenlag, Calasiao, Pangasinan. This can be gleaned from the Deed of
Absolute Sale dated August 26, 1992 in which she declared that she was a resident of said barangay. Moreover,
in the Real Estate Mortgage Contract dated February 9, 1999, ten days before the complaint in Civil Case No.
879 was filed, the petitioner categorically stated that she was a Filipino and a resident of Barangay Buenlag,
Calasiao, Pangasinan. Considering that the respondent was in Oslo, Norway, having left the Philippines on
February 17, 1999, the summons and complaint in Civil Case No. 879 may only be validly served on her through
substituted service under Section 7, Rule 14 of the Rules of Court, which reads:

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

Strict compliance with the mode of service is required in order that the court may acquire jurisdiction over the
person of the defendant.[34] The statutory requirement of substituted service must be followed faithfully and
strictly and any substituted service other than that authorized by the statute is rendered ineffective. [35] As the
Court held in Hamilton v. Levy:[36]

The pertinent facts and circumstances attendant to the service of summons must be stated in the proof of
service or Officers Return; otherwise, any substituted service made in lieu of personal service cannot be upheld.
This is necessary because substituted service is in derogation of the usual method of service. It is a method
extraordinary in character and hence may be used only as prescribed and in the circumstances authorized by
statute. Here, no such explanation was made. Failure to faithfully, strictly, and fully comply with the
requirements of substituted service renders said service ineffective.[37]

In Keister v. Narcereo,[38] the Court held that the term dwelling house or residence are generally held to refer to
the time of service; hence, it is not sufficient to leave the summons at the formers dwelling house, residence or
place of abode, as the case may be. Dwelling house or residence refers to the place where the person named in
the summons is living at the time when the service is made, even though he may be temporarily out of the
country at the time. It is, thus, the service of the summons intended for the defendant that must be left with
the person of suitable age and discretion residing in the house of the defendant. Compliance with the rules
regarding the service of summons is as much important as the issue of due process as of jurisdiction.[39]

The Return of Service filed by Sheriff Eduardo J. Abulencia on the service of summons reads:

Respectfully returned to the court of origin the herein summons and enclosures in the above-entitled case, the
undersigned caused the service on April 5, 1999.

Defendant Vivian Layno Jensen is out of the country as per information from her brother Oscar Layno, however,
copy of summons and enclosures was received by her brother Oscar Layno on April 5, 1999 as evidenced by his
signature appearing in the original summons.

Calasiao, Pangasinan, April 6, 1999.

(Sgd.)

EDUARDO J. ABULENCIA

Junior Process Server[40]

As gleaned from the said return, there is no showing that as of April 5, 1999, the house where the Sheriff found
Oscar Layno was the latters residence or that of the respondent herein. Neither is there any showing that the
Sheriff tried to ascertain where the residence of the respondent was on the said date. It turned out that the
occupant of the house was a lessor, Eduardo Gonzales, and that Oscar Layno was in the premises only to collect
the rentals from him. The service of the summons on a person at a place where he was a visitor is not considered
to have been left at the residence or place or abode, where he has another place at which he ordinarily stays
and to which he intends to return.[41]

The Voters Registration Record of Oscar Layno dated June 15, 1997 wherein he declared that he was a resident
of No. 572 Barangay Buenlag, Calasiao, Pangasinan, as well as the Joint Affidavit of Vicenta Peralta and Orlando
Macasalda cannot prevail over the Contract of Lease the respondent had executed in favor of Eduardo Gonzales
showing that the latter had resided and occupied the house of the respondent as lessee since November 24,
1997, and the affidavit of Eduardo Gonzales that Oscar Layno was not residing in the said house on April 5, 1999.

In sum, then, the respondent was not validly served with summons and the complaint in Civil Case No. 879 on
April 5, 1999, by substituted service. Hence, the MTC failed to acquire jurisdiction over the person of the
respondent; as such, the decision of the MTC in Civil Case No. 879 is null and void.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. No costs.

SO ORDERED.
SECOND DIVISION

G.R. No. 70661 April 9, 1987

FILMERCO COMMERCIAL CO., INC., SPOUSES JAIME and ANA MARIA MIGUEL, petitioners,
vs.
HON. INTERMEDIATE APPELLATE COURT; HON. TEOFILO GUADIZ, JR., in his official capacity as Presiding Judge
of Regional Trial Court, National Capital Judicial Region, Branch 147, Makati Metro Manila; PIOQUINTO
VILLAPANA, in his official capacity as Deputy Sheriff of the Office of the Provincial Sheriff, National Capital
Judicial Region, Makati, Metro Manila; and BANK OF THE PHILIPPINE ISLANDS, respondents.

Tomacruz, Manguiat & Associates for petitioners.

GUTIERREZ, JR., J.:

The main issue in this petition is whether or not the petitioners were served valid summons so as to bring their
within the jurisdiction of the court.

Filmerco Commercial Co., Inc., (Filmerco) obtained two separate loans from the Bank of Philippine Islands (BPI)
on November 26, 1982 and December 26, 1982 respectively. As security for the payment of the obligation stated
in the promissory notes, spouses Jaime and Ana Maria Miguel executed a deed of continuing suretyship wherein
the Miguels bound themselves jointly and solidarily with Filmerco for the payment of the latter's obligation
under the loan-accounts.

The loans remained outstanding even after they became due and demandable. Hence, on May 5,1983, BPI filed
a complaint docketed as Civil Case No. 2807 for recovery of a sum of money against Filmerco and spouses Jaime
and Ana Maria Miguel before the Regional Trial Court of Makati, Rizal.

Upon motion of the plaintiff, the defendants were d in default for failure to file an answer within the
reglementary period. The plaintiff was then allowed to present its evidence ex-parte after which the lower court
on June 11, 1984 rendered a decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiff and against the
defendants, ordering the latter to pay, jointly and severally, the former:

a) the sum of P308,525.17 plus 10% interest per annum and 12% penalty fee per annum from May 21, 1984
until the amount is fully paid;

b) the sum equivalent to 20% of the total amount due as and for attorney's fees;

c) to pay the costs of suit. (p.52, Rollo)

On the ground that the period to appeal expired without any decision having been appealed, the plaintiff filed
a motion for execution of judgment before the lower court. This motion was granted and a writ of execution
was issued against Filmerco and the Miguels.
Pursuant to the writ of execution, respondent Sheriff Villapana levied on and attached alleged properties of
Filmerco and the Miguels. These properties were scheduled for sale on September 20, 1984.

On September 25, 1984, the defendants filed a motion to set aside the decision, writ of execution, notice of
levy/attachment and to restrain the holding of the auction sale. The motion was premised on the ground that
the court had no jurisdiction over the defendants because no valid summons was served on them.

On November 26, 1984, after opposition to motion, reply, rejoinder and sub-rejoinder had been duly submitted,
the lower court issued an order denying the aforesaid motion.

On December 3, 1984, while the public auction of the attached properties was in progress, the defendants filed
a motion for reconsideration of the November 26, 1984 order.

Without waiting for the resolution of the aforesaid motion for reconsideration, the defendants filed with the
Intermediate Appellate Court a petition for certiorari and prohibition, injunction and preliminary restraining
order against the lower court's decision and orders.

The appellate court dismissed the petition. A motion for reconsideration was likewise denied.

Hence, this petition.

The petitioners submit that no valid summons was served upon them. Therefore, they contend that the lower
court had not acquired jurisdiction over their persons thus resulting in the nullity of its decision.

According to the sheriff's return dated September 7, 1983, summons and copy of the complaint were not served
on the petitioners at 31 Sta. Escolastica Street, Pasay City, their given principal place of business and had to be
returned to the court unserved for the reason that the "defendants have already vacated the premises and/or
addresses more than a year ago and no definite information could be had regarding their present whereabouts."
Three separate summons for each of the defendants were addressed to 31 Sta. Scholastics Street, Pasay City,
Metro Manila.

Upon motion of the private respondent (plaintiff in the case) the lower court issued alias summons.

According to the sheriff's return dated March 31, 1984, summons were duly served upon "defendant-spouses
Jaime and Ana Maria Miguel at No. 18, Yuchengco Drive, Pacific Malayan Village, Alabang, Muntinlupa, Metro
Manila, thru Mrs. Angle Morger, a person residing therein of suitable age and discretion to receive service of
that nature and who received the said court processes for and in behalf of the defendants but refused to sign."
It was noted therein that the defendant spouses are "duly served" but that the other defendant Filmerco
was "not and could not be served"and the summons pertaining to it was " returned unserved."

Petitioner spouses, Jaime and Ana Maria Miguel contend that the substituted service of summons upon their
persons thru Mrs. Angle Morger at No. 18 Yuchengco Drive, Pacific Malayan Village, Alabang, Muntinlupa, Metro
Manila was in- valid for the following reasons: (1) at the time of the service they were not residents of the said
address, and (2) Mrs. Angle Morger was not authorized to receive papers or documents for them. They
submitted affidavits of Angle Morger to prove their point.
There can be no dispute that service of summons upon the defendant is necessary in order that a court may
acquire jurisdiction over his person. Any judgment without such service in the absence of a valid waiver is null
and void. (Keister v. Navarro, 77 SCRA 209).

Pursuant to Section 7, Rule 14 of the Revised Rules of court, summons must be served on the defendant.
However, when the defendant cannot be served personally within a reasonable time after efforts to locate him
have failed, substituted service may be made.

In the case at bar, there is no question that personal service of summons upon the defendants could not be
made because they moved out from their given address and their whereabouts were unknown as indicated in
the sheriff's return. Hence, the court resorted to substituted service of summons provided for under Section 8,
Rule 14 of the Revised Rules of Court:

SEC. 8. Substituted service. — If the defendant cannot be served within a reasonable time as provided in the
preceding section, service may be effected (a) by leaving copies of the summons at the defendant's dwelling
house or residence with some person of suitable age and discretion then residing therein, or (b) by leaving the
copies at defendant's office or regular place of business with some competent person in charge thereof.

In the case of Keister v. Navarro (supra), we construed this rule as follows:

xxx xxx xxx

... [U]nder the controlling decisions, the statutory requirements of substituted service must be followed strictly,
faithfully and fully, and any substituted service other than that authorized by the statute is considered
ineffective. (Ibid., pp. 1053-1054).

Indeed, the constitutional requirement of due process requires that the service be such as may be reasonably
expected to give the desired notice to the party of the claim against him. (Perkins v. Dizon, 69 Phil. 186; Dy Reyes
v. Ortega, 16 SCRA 903)

xxx xxx xxx

... The terms "dwelling house" or "residence" are generally held to refer to the time of service, hence it is not
sufficient "to leave the copy at defendant's former dwelling house, residence, or place of abode, as the case
may be, after his removal therefrom." (72 C.J.S. 1059) They refer to the place where the person named in the
summons is living at the time when the service is made, even though he may be temporarily out of the country
at the time. Similary, the terms "office" or "regular place of business" refer to the office or place of business of
defendant at the time of service. ... (at p. 215)

Applying these principles to the case at bar, we find that no valid service of summons upon the defendant
spouses could be effected thru Mrs. Angle Morger. In her affidavits, Mrs. Morger manifested that she and her
husband are the bona fide residents of 18 Yuchengco Drive, Pacific Malayan Village, Alabang, Metro Manila; that
they leased the said premises from the owner thereof as evidenced by a contract of lease dated August 8, 1983;
that they have been occupying the premises since September 1, 1983; that on March 31, 1984, Sheriff Villapana
attempted to serve the official summons and a copy of a complaint against spouses Jaime and Ana Maria Miguel
and Filmerco Commercial Inc.; that she informed the sheriff that the Miguels do not reside in the place and that
neither was said residence the dwelling place of the Miguel spouses; that she does not know Filmerco, Inc.; that
despite the fact that she informed the sheriff that she is not authorized by the spouses and Filmerco to receive
any papers for them, the sheriff left, leaving some documents with her maid, Daday Lopez; that she did not affix
her signature on the documents being then served by the sheriff nor did the maid affix hers; that the documents
left by the sheriff with the maid were not even ascertained nor read by the affiant. Mrs. Morger's manifestation
is not refuted or rebutted.

Obviously, the address No. 18 Yuchengco Drive, Pacific Malayan Village, Alabang, Muntinlupa, Metro Manila
was neither the "residence" nor the "dwelling house" of the petitioners at the time summons was served upon
them as contemplated by the Rules.

Moreover, Angle Morger is not a proper person with whom the copies of the summons could be left. The sheriff
's return indicates that she refused to sign the summons and the same was returned to the court unsigned. This
fact adds credence to Angle Morger's manifestation about her informing the sheriff that she was not authorized
to receive papers in behalf of the defendant-spouses and that she refused to receive them. We ruled in the case
earlier cited:

xxx xxx xxx

... [T]he rule designates the persons to whom copies of the process may be left. The rule presupposes that such
a relation of confidence exists between the person with whom the copy is left and the defendant and therefore,
assumes that such person win deliver the process to defendant or in some way give notice thereof. (Keister v.
Navarro, supra)

Mrs. Morger's manifestation negates any close relationship between herself and the defendant-spouses to
qualify her as representative of the former to receive summons in their behalf.

The private respondent merely relies on the sheriff's return that summons was duly served on the spouses and
states that to disregard the return would be disastrous as "self-serving affidavits" would be preferred over the
presumption of regularity in the discharge of official functions. It urges that the sheriff's return should be given
credence over the affidavit.

A sheriff's certification that he duly served summons on a defendant does not necessarily mean that he validly
served the summons. In this particular case, there is a strong showing that Mr. and Mrs. Jaime Miguel are
notresidents of 18 Yuchengco Drive, Pacific Malayan Village, Alabang, Muntinlupa. The respondent, itself, states
that the spouses are hiding to escape their obligations. Sworn statements of Mrs. Angle Morger assert that she
and her husband are lessees of the premises and are the actual residents therein. The respondents claim these
statements are self-serving. Whether self-serving or not, the fact remains that Mrs. Morger was seen by the
sheriff as the then person in that house. The respondents have absolutely no grounds, other than suspicions,
for their contention that the Miguels and not the Morgers are the actual residents at that address.

In the light of these facts, the appellate court's reliance on the sheriff's return that summons upon defendant-
spouses thru Angle Morger was "duly served" in consonance with the principle of presumption in favor of
regularity of performance of official functions of a public officer (Section 5, Rule 13, Rules of Court) has no basis.
With regards to the petitioner corporation, the sheriff's return categorically states that the alias summons was
not served upon the corporation. Moreover, the private respondent filed a motion to declare defendant-
spouses Jaime and Ana Maria Miguel alone, in default without including the petitioner corporation (Annex E, p.
64, Rollo)

These facts not withstanding the trial court declared all the defendants in default and rendered a decision also
against the petitioner corporation. This decision was affirmed by the appellate court which applied the doctrine
of piercing the veil of corporate fiction. The appellate court stated:

The records disclose that petitioner-spouses are both directors of respondent-Corporation being the majority
stockholder of FILMERCO (Annex "A," Comment). The records, also, reveal that both petitioner-spouses and
petitioner-corporation were impleaded as party defendants in the civil case filed before the lower court. Hence,
petitioner-corporation cannot now claim to have been improperly served with summons. This Court, therefore,
finds justifiable reason for the lower court's order piercing the veil of corporate fiction. ... (p. 56, rollo)

We have already found that there was no valid summons effected upon petitioner-spouses. Since, the appellate
court considered service of summons upon the petitioner-spouses as constituting service of summons upon the
petitioner-corporation, the inevitable conclusion is that no valid summons could have been effected upon the
petitioner-corporation.

Moreover, even if we assume that there was valid service of summons upon the petitioner-spouses, it does not
necessarily follow that there was also valid service of summons upon the petitioner-corporation.

We have explained the doctrine of piercing the veil of corporate fiction in the following manner:

The doctrine that a corporation is a legal entity distinct and separate from the members and stockholders who
compose it is recognized and respected in all cases which are within reason and the law. (Borja v. Vasquez, 74
Phil. 56), When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the
evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly
or generally the perpetration of knavery or crime, (Koppel Phil. v. Yatco, 77 Phil. 496; Lidell & Co. v. Collector,
G.R. No. L-9687, June 30, 1961; Commissioner v. Norton & Harrison Company, G.R. No. L- 17618, Aug. 31, 1964;
and Guevarra, Phil. Corp. Law, 1961 ed., p. 7) the veil with which the law covers and isolates the corporation
from the members or stockholders who compose it will be drifted to allow for its consideration merely as an
aggregation of individuals. (Villa Rey Transit, Inc. v. Ferrer, 25 SCRA 845-857).

In effect, this doctrine refers to determination of liability and not to determination of jurisdiction.

This is so because the doctrine of piercing the veil of corporate fiction comes to play only during the trial of the
case after the court has already acquired jurisdiction over the corporation. Hence, before this doctrine can be
applied, based on the evidence to be presented, it is imperative that the court must first have jurisdiction over
the corporation. For the court to acquire jurisdiction over a domestic corporation such as the
petitionercorporation, summons must be served upon it through the officers of the corporation enumerated in
Section 13, Rule 14 of the Revised Rules of Court. There is not even a semblance of any effort to serve summons
upon an officer as such Since, the summons intended for the petitioner-corporation was "not and could not be
served" as certified in the sheriff's return, the lower court never acquired jurisdiction over the petitioner-
corporation. It follows that the judgment against the petitioner-corporation is null and void
The allegations that the petitioners deliberately concealed their whereabouts to escape the payment of just and
valid obligations appear to have some basis. However, allegations such as these do not justify the appellate
court's upholding a judgment wherein the trial court has not acquired jurisdiction over the persons of the
defendants.

The private respondent has chosen to employ a procedure which is strictly in personam. As indicated in the
cases of Citizens Surety and Insurance, Inc. v. Melencio-Herrera (38 SCRA 369) and Magdalena Estate, Inc. v.
Nieto (125 SCRA 758) it is also possible to use proceedings in rem or quasi in rem to achieve the same desired
ends. There may be other ways which, if utilized, would insure that the courts acquire jurisdiction over
defendants in recovery of money cases but the shortcut method approved by the respondent court is not one
of them.

WHEREFORE, the instant petition is hereby GRANTED. The lower court's decision in Civil Case No. 2807 is SET
ASIDE. The case is remanded to the trial court for proper service of summons and trial.

SO ORDERED.
SECOND DIVISION

[G.R. No. 146593. October 26, 2001]

UNITED COCONUT PLANTERS BANK, petitioner, vs. ROBERTO V. ONGPIN, respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari of the decision, dated December 27, 2000, of the Court of
Appeals,[1] setting aside the orders, dated April 19, 1999 and October 13, 1999, of the Regional Trial Court,
Branch 133, Makati City in Civil Case No. 95-1594 entitled United Coconut Planters Bank v. Roberto V. Ongpin.

The facts are as follows:

On November 17, 1994, Philippine Apparel, Inc. (PAI) entered into a credit agreement with petitioner United
Coconut Planters Bank for a case-to-case credit line in the amount of US$500,000.00. Respondent Roberto V.
Ongpin, then controlling stockholder of PAI, signed as surety, binding himself jointly and severally liable with
PAI for the same amount. PAI availed of the credit line by drawing on short-term loans and opening letters of
credit for the importation of goods, which amounted to US$650,986.34 or P16,526,653.00.[2]

As PAI failed to pay its obligations, petitioner filed a complaint against respondent Ongpin with the Regional
Trial Court, Branch 133, Makati to enforce his obligation as surety of PAI. Petitioner sought the issuance of a
writ of preliminary attachment on the following grounds: (1) respondent, in fraud of creditors, had transferred
residence to Hongkong; (2) his obligation was not covered by any collateral; and (3) PAI and its officers, including
respondent, with intent to defraud, did not disclose the fact that the Bureau of Customs had claims against PAI
for unpaid customs duties and taxes in the amount of P284,010,387.00, which fact could have affected
petitioners decision whether to grant the loan to PAI.

On November 10, 1995, the trial court issued an order granting petitioners prayer for the issuance of a writ of
preliminary attachment. On November 16, 1995, a writ of attachment and a notice of garnishment were issued
by the trial court, addressed to the president and corporate secretary of the Dominion Asian Equities garnishing
8,315,600 shares of stock belonging to respondent.[3]

On November 21, 1995, respondent, making a special appearance through counsel, moved to dismiss the
complaint and to quash the writ of attachment and garnishment on the ground that the trial court had no
jurisdiction over the person of respondent, the summons prepared on October 30, 1995 having been unserved
as of November 17, 1995. The trial court denied the urgent motion as well as respondents subsequent motion
for reconsideration.[4]

On May 24, 1996, respondent filed a petition for certiorari in the Court of Appeals assailing the orders of the
trial court. During the pendency of the petition, on May 27, 1996, petitioner filed with the trial court a Motion
for Leave to Serve Summons Through Publication. Its motion was granted, but the publication was held in
abeyance on October 2, 1996. On the same date, petitioner entered into an agreement with TODAY for the
publication of the summons on October 4, 11, and 18, 1996. Petitioner received the trial courts order at the
close of office hours on October 3, 1996. Attempts to prevent the publication by requesting the trial court
through telephone to inform the newspaper publisher of its order and informing the newspaper itself of the
same proved futile, as nobody in the court was contacted by petitioner while the telephone lines of the
newspaper were busy. As a result, TODAY published the summons on October 4, 1996. It was only on October
8, 1996 that petitioner was able to inform the newspaper of the October 2, 1996 order and to request the latter
to hold in abeyance further publication of the summons.[5]

On February 27, 1997, the Court of Appeals promulgated its decision, the dispositive portion of which states:

THE FOREGOING CONSIDERED, the issuance of a Writ of Attachment together with the Notice of Garnishment
is hereby validated: but the implementation of the Writ of Attachment/Garnishment is prohibited until after the
Court shall have acquired jurisdiction over the person of the petitioner, either through voluntary appearance or
service of summons.

SO ORDERED.[6]

On March 19, 1997, petitioner filed a motion for reconsideration with the appeals court insofar as it held that
the trial court had no jurisdiction on the person of petitioner and for this reason suspended implementation of
the writ of attachment/garnishment. However, the Court of Appeals denied petitioners motion.

On August 1, 1997, petitioner filed a petition for certiorari with this Court. Again, during the pendency of the
case, petitioner filed with the trial court on August 15, 1997 another Motion to Serve Summons through
Publication with Leave of Court. In the meantime, on August 27, 1997, this Court issued a resolution dismissing
petitioners petition for review on certiorari for failure of petitioner to comply with procedural requirements.[7]

On November 27, 1997, Deputy Sheriff Glenn B. Parra, together with Atty. Rodulfo Baculi, Jr., representative of
petitioner, went to the PILTEL office at the Bankers Center Building, Ayala Avenue, Makati City to serve summons
on respondent, who was then the chairman of the board of PILTEL and was expected to attend a board meeting
on that day. Upon arrival, they asked the receptionist, Arlene Cuenco, if respondent would attend the meeting.
Cuenco conferred with Anne V. Morallo, executive secretary of the president of PILTEL, who then called
respondents office at the BA Lepanto Building, Paseo de Roxas Ave., Makati City. Morallo was informed that
respondent was not going to attend the meeting. Nevertheless, Sheriff Parra and Atty. Baculi waited until 11:30
a. m. They proceeded to respondents office at the BA Lepanto Building when respondent failed to appear at the
board meeting. The security guard at BA Lepanto told them that respondent was holding office at the 14th floor,
but when they reached the said floor, they were told by a member of the Internal Security Personnel that
respondent was not known at that place.

In the afternoon of the same day, Sheriff Parra returned to the PILTEL office to serve the summons on
respondent. There, he met for the first time Anne V. Morallo, who told him that she was authorized to receive
court processes for and on behalf of respondent even though the latter was not holding office in the building.
Morallo was so advised by Atty. Joseph Santiago, Chief of the Legal Department of PILTEL. Thus, Sheriff Parra
served the summons on Morallo who received it accordingly. However, when Morallo tried to forward the court
process to respondent, the latters lawyer, Atty. David S. Narvasa, refused to receive it. [8]

After serving summons through Morallo, Sheriff Parra then implemented the writ of attachment by serving
notices of garnishment on the following: (1) Stock Transfer Office - FEBTC; (2) Professional Stock Transfer; (3)
Stock Transfer Services; (4) The Corporate Secretary, Belle Corp., Tagaytay Highlands; and (5) International
Exchange Bank, Head Office and all branches thereof.[9]

On December 4, 1997, respondent filed with the trial court an Urgent Omnibus Motion: (a) to Dismiss; (b) for
Prohibition of the Implementation of the Writ of Attachment dated 16 November 1995; (c) for Quashal of the
Notice of Garnishment dated 27 November 1997; and (d) for Release of Properties attached thereby. On April
19, 1999, the trial court denied respondents motion for lack of merit. Respondents motion for reconsideration
was likewise denied on October 13, 1999.

Consequently, respondent filed a petition for certiorari with application for a Temporary Restraining Order and
Writ of Preliminary Injunction in the Court of Appeals. The Court of Appeals promulgated its decision on
December 27, 2000, annulling and setting aside the orders of the trial court, dated April 19, 1999 and October
13, 1999, on the ground that PILTEL was not the regular place of business of respondent and that, even if it was,
Morallo could not be considered a competent person in charge of respondents office, as she was the executive
secretary of the president of PILTEL and not of respondent. Hence, this petition for review under Rule 45 of the
Revised Rules of Civil Procedure.[10]

Petitioner makes the following assignment of errors:

THE COURT OF APPEALS ERRED IN ANNULLING THE ORDERS OF THE TRIAL COURT DATED 19 APRIL 1999 AND
13 OCTOBER 1999 BECAUSE:

I. RESPONDENT ONGPIN, AFTER FIVE LONG YEARS OF SPECIAL APPEARANCE, SHOULD BE DEEMED TO HAVE
VOLUNTARILY SUBJECTED HIMSELF TO THE JURISDICTION OF THE TRIAL COURT.

II. THE SUBSTITUTED SERVICE OF SUMMONS ON RESPONDENT ONGPIN ON 27 NOVEMBER 1997 WAS VALID,
CONSIDERING THAT:

A. RESPONDENT ONGPIN, AT THE TIME OF SUBSTITUTED SERVICE OF SUMMONS, WAS CHAIRMAN OF THE
BOARD OF DIRECTORS OF PILTEL WHOSE OFFICES SHOULD BE CONSIDERED HIS REGULAR PLACE OF BUSINESS.

B. MS. ANNE V. MORALLO, THE EXECUTIVE SECRETARY OF THE PRESIDENT OF PILTEL WAS NOT ONLY
AUTHORIZED TO RECEIVE SUMMONS AND COURT PROCESSES ON BEHALF OF RESPONDENT ONGPIN, BUT WAS
ALSO A COMPETENT PERSON TO RECEIVE SUMMONS.

C. THE ONLY REASON WHY MS. ANNE V. MORALLO DID NOT TRANSMIT THE SUMMONS TO RESPONDENT
ONGPIN WAS THAT RESPONDENT ONGPINS COUNSEL, ALSO THE LEGAL COUNSEL OF PILTEL, ADVISED HER TO
KEEP IT.

This assignment of errors boils down to the following questions: (1) whether or not respondent Ongpins
continuous special appearances before the court for five years may be deemed voluntary appearance as
contemplated by the Revised Rules on Civil Procedure on acquisition of jurisdiction over the person of
defendant; and (2) whether or not the substituted service of summons on Anne V. Morallo, executive secretary
of the president of PILTEL, was valid.
First. Petitioner maintains that the trial court had already acquired jurisdiction over the person of respondent
Ongpin by virtue of the numerous appearances by his counsel and respondents undeniable knowledge of the
complaint against him.

This contention has no merit. A party who makes a special appearance in court challenging the jurisdiction of
said court based on the ground, e. g., invalidity of the service of summons, cannot be considered to have
submitted himself to the jurisdiction of the court.[11] In fact, in La Naval Drug Corp. vs. Court of Appeals,[12] this
Court ruled that even the assertion of affirmative defenses aside from lack of jurisdiction over the person of the
defendant cannot be considered a waiver of the defense of lack of jurisdiction over such person.

In the present case, although respondent had indeed filed numerous pleadings, these pleadings were precisely
for the purpose of contesting the jurisdiction of the court over the person of respondent on the ground that
there was no valid service of summons on him. It would be absurd to hold that respondent, by making such
appearance, thereby submitted himself to the jurisdiction of the court.

Petitioner cites the ruling in Macapagal v. Court of Appeals[13] for its contention that the feigned unawareness
of a defendant is equivalent to voluntary appearance. The facts of Macapagal are, however, different from the
facts of this case. In that case, this Court considered the petitioner to have been validly served summons based
on its findings that summons was served on the legal counsel of the two corporations and its officers and
directors. Petitioners defense that at the time of the service of summons he was no longer connected with both
corporations, having resigned from them before such service, was dismissed by this Court as flimsy. The finding
of this Court on the feigned unawareness of petitioner was based on the fact that Philfinances woes were widely
publicized. This, together with counsels authority to receive service of summons on behalf of petitioner, was
the basis for this Courts ruling that jurisdiction over the person of the latter had already been acquired by the
trial court.

In contrast, summons in this case was served on the executive secretary of the president of PILTEL, a company
which is not a party to the present action. Respondent Ongpin, through counsel, entered numerous special
appearances in court precisely to question the courts jurisdiction over his person either due to failure to serve
summons or to an invalid service of summons on him. Jurisdiction cannot be acquired over the person of
respondent even if he knows of the case against him unless he is validly served with summons. [14]

Second. Petitioner contends that the Court of Appeals erred in ruling that (1) substituted service of summons
at the PILTEL office where respondent sits as chairman of the board is invalid as the PILTEL office is not his
regular place of business; and (2) Anne V. Morallo, the executive secretary of PILTELs president, was not
authorized to receive the summons on behalf of respondent Ongpin as she was not his executive secretary but
that of the presidents.

We think no error was incurred by the Court of Appeals in this ruling. Rule 14, 7 of the 1997 Revised Rules of
Civil Procedure provides that if, for justifiable causes, personal service cannot be effected on defendant, service
may be effected (a) by leaving copies of the summons at the defendants residence with some person of suitable
age and discretion residing therein, or (b) by leaving the copies at defendants office or regular place of business
with some competent person in charge thereof.[15] The word office or the phrase regular place of business refers
to the office or place of business of the defendant at the time of service. The rule specifically designates the
persons to whom copies of the process should be left. In Mapa vs. Court of Appeals,[16] substituted service of
summons in a person claiming to be authorized to receive service of summons in behalf of the corporation was
held to be invalid as far as jurisdiction over the person of the chairman of the board was concerned inasmuch
as he was not holding office in the corporation but in his residence. Thus, it does not necessarily follow that the
regular place of business of a chairman of the board of directors is the same as the address of the corporation
as it is possible for him to hold office elsewhere.

In the case at bar, the corporation (PILTEL), where substituted summons was served and of which respondent
was the chairman of the board, was not even a party to the present suit. Respondent was sued in his personal
capacity as surety for PAI. Even from the initial inquiries made by the sheriff and petitioners representative in
the office of PILTEL, it was evident that respondent was not holding office there. Indeed, Morallo, executive
secretary of the PILTEL, had to call respondents secretary at the BA Lepanto Building, Paseo de Roxas, to find
out whether he was attending the board meeting to be held on that day. Thus, the process server already knew
that respondent was not holding office at the PILTEL office but somewhere else.

As the PILTEL office is not respondents regular place of business, it cannot therefore be said that Anne V.
Morallo, the person who received the service of summons in behalf of respondent, was authorized to receive
service of process on behalf of respondent.

Third. It is not clear whether respondent could be personally served with summons because he had transferred
residence to Hongkong. Thus in its complaint, petitioner alleged that respondents address was either at ATA
Capital Corporation, 3404 1 Exchange Square, #8 Connaught Place, Central Hongkong or South China Morning,
Post Center #22 Tai Fat Street, Taipo Industrial Estate, Taipo, New Territories, Hongkong. But later, it tried to
personally serve summons on respondent at the PILTEL office, where he served as chairman of the board of
directors. When respondent failed to attend the meeting, the process server proceeded to the BA Lepanto
Building, Paseo de Roxas, Makati City, where, as the process server learned from Morallo, respondent was
allegedly holding office.

Under the Rules, if a defendant is a non-resident and his property in the Philippines had been attached, service
may, by leave of court, be effected outside the Philippines or by publication in a newspaper of general
circulation.[17] In the same manner, if the whereabouts of the defendant is unknown and cannot be ascertained
by diligent inquiry, service may, by leave of court, likewise be effected by publication in a newspaper of general
circulation.[18] In this case, the plaintiff must show that the address of defendant is unknown and cannot be
ascertained by diligent inquiry.[19]

It is clear that petitioner is not without remedy under the Revised Rules of Civil Procedure to enforce the writ
of attachment through a valid service of summons. If, indeed, respondent is no longer a resident of the
Philippines, petitioner still can, by leave of court, serve summons by publication, as it in fact tried to do. The
records show that petitioner attempted to serve summons by publication, but later abandoned its effort and
for some reason attempted personal service instead.

If, on the other hand, respondent is a resident and petitioner cannot determine the correct address of
respondent, petitioner only needs to show that respondents address is unknown and cannot be ascertained by
diligent inquiry. Upon compliance with this requirement, it can validly serve summons by publication in a
newspaper of general circulation.
Petitioner cannot fall back on allegations of knowledge of respondent to avoid complying with the standards
and guidelines set by the Rules. What we said in Oate v. Abrogar[20]bears repeating in this case:

... More important than the need for insuring success in the enforcement of the writ is the need for affirming a
principle on that most fundamental of all requisites the jurisdiction of the court issuing attachment over the
person of the defendant. It may be that the same result would follow from requiring that a new writ be served
all over again. The symbolic significance of such an act, however, is that it would affirm our commitment to the
rule of law.

WHEREFORE, the decision of the Court of Appeals is affirmed. No pronouncement as to costs.

SO ORDERED.