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G.R. No. 219815, September 14, 2016 - J.O.S. MANAGING BUILDERS,

INC. AND EDUARDO B. OLAGUER, Petitioners, v. UNITED OVERSEAS
BANK PHILIPPINES (FORMERLY KNOWN AS WESTMONT BANK),
EMMANUEL T. MANGOSING AND DAVID GOH CHAI ENG,
Respondents. : SEPTEMBER 2016 - PHILIPPINE SUPREME COURT
JURISPRUDENCE

J.O.S. MANAGING BUILDERS, INC. AND EDUARDO B.

OLAGUER, Petitioners, v.UNITED OVERSEAS BANK PHILIPPINES
(FORMERLY KNOWN AS WESTMONT BANK), EMMANUEL T.
MANGOSING AND DAVID GOH CHAI ENG, Respondents.

DECISION

JARDELEZA, J.:

Before us is a Petition for Review1assailing the October 7, 20142 and July 20,
20153 Orders of the Regional Trial Court (RTC) of Quezon City (RTC-QC),
Branch 87 (RTC Br. 87) in Civil Case No. Q-11-69413. The first Order
dismissed the petition for contempt filed by J.O.S. Managing Builders, Inc.
(J.O.S.) and Eduardo B. Olaguer4 (collectively, petitioners) against United
Overseas Bank Philippines (UOBP), Emmanuel T. Mangosing and David
Goh Chai Eng5 (collectively, respondents) on the ground of mootness. The
second Order expunged petitioners' motion for reconsideration of the
October 7, 2014 Order from the record of the case due to violation of the
three-day notice rule on motions.

Facts

On September 10, 1999, petitioners filed a Petition for Annulment of

Extrajudicial Foreclosure Sale (annulment case) against UOBP and Atty.
Ricardo F. De Guzman in RTC-QC.6 The case was raffled to RTC-QC,
Branch 98 (RTC Br. 98) and docketed as Civil Case No. Q-99-38701.7 On
May 17, 2000, RTC Br. 98 issued a writ of preliminary injunction (2000 writ)
against respondents prohibiting them from: (a) consolidating title to the
subject properties; and (b) committing any acts prejudicial to
petitioners.8 Eventually, on June 12, 2008, it also issued a decision annulling
the extrajudicial foreclosure and public auction sale of the
properties.9Respondents filed an appeal to the Court of Appeals (CA)
docketed as CA-G.R. CV No. 92414.10

On May 5, 2008, while the annulment case was still pending, respondents
sold the properties to Onshore Strategic Assets, Inc.11 Thus, petitioners filed
a Petition to Declare Respondents in Contempt of Court12 (contempt case) in
RTC-QC. The case was docketed as Civil Case No. Q-11-69413 and raffled
to RTC, Branch 220 (RTC Br. 220). Petitioners averred that respondents'
sale of the properties constitutes indirect contempt of court because it was
done in violation of the 2000 writ issued by RTC Br. 98. Additionally, they
prayed that respondents be ordered to pay actual, moral and exemplary
damages including attorney's fees and cost of suit.

Respondents filed a Motion to Dismiss on the ground of failure to state a

cause of action. They countered that the sale of the properties did not violate
the 2000 writ because petitioners did not plead that the sale was prejudicial
to them. Further, the petition did not allege that respondents consolidated
title to the properties. RTC Br. 220 denied the motion to dismiss.
Respondents moved for reconsideration, but it was denied.13 They elevated
the case to the CA via a petition for certiorari, but the CA also dismissed it.14

Respondents then filed an Answer Ad Cautelam15 in RTC Br. 220, contending

that the 2000 writ merely prohibited UOBP from consolidating title to the
properties and did not enjoin it from selling or transferring them to any person
or entity.16Respondents also asserted that the sale is not prejudicial to the
interest of petitioners because the 1997 Rules of Civil Procedure (the Rules)
recognizes and allows transfers pendente lite.17 By way of counterclaim,
respondents prayed that petitioners be ordered to pay moral and exemplary
damages and attorney's fees.18

In another turn of events, the contempt case was re-raffled to RTC Br.
87.19 On May 8, 2014, respondents filed its second motion to dismiss.20 They
argued that the decision of RTC Br. 98 in the annulment case was reversed
by the CA in its Decision dated November 28, 2013. They claimed that the
CA's dismissal of the annulment case automatically dissolved or set aside
the 2000 writ because a writ of preliminary injunction is merely ancillary to
the main case.21 Therefore, the contempt case which seeks to punish them
for the alleged violation of the 2000 writ had become moot and
academic.22 Petitioners opposed the motion but RTC Br. 87, in its first
assailed Order, granted respondent's motion and dismissed the case. It ruled
that "the writ of preliminary injunction was rendered moot and academic with
the [CA's dismissal of the annulment case] on the merits, which in effect
automatically terminated the writ of preliminary injunction issued therein,
even if an appeal is taken from said judgment."23

Petitioners filed a Motion for Reconsideration24 (MR) of the order of dismissal.

Respondents filed a Motion to Expunge25cralawred the MR on the ground
that petitioners violated the three-day notice rule under Section 4, Rule 15 of
the Rules. Respondents alleged that the hearing for petitioners' MR was set
on November 7, 2014 but they received the notice only on November 6 or
one (1) day before the scheduled hearing. In its second assailed Order, RTC
Br. 87 granted respondent's motion to expunge.26

Petitioners now directly seek recourse to us via this petition for review
on certiorariraising the following issues:

1. Whether RTC Br. 87 erred in expunging petitioners' MR from the

record of the case;

2. Whether RTC Br. 87 erred in giving due course to respondents' motion

to dismiss filed after their answer ad cautelam; and cralawlawlibrary

3. Whether RTC Br. 87 erred in dismissing the contempt case on the

ground of mootness.

Petitioners pray that we set aside the October 7, 2014 and July 20, 2015
Orders of RTC Br. 87, declare respondents guilty of contempt of court, and
order them to pay damages.27

Our Ruling

We partially grant the petition and reverse the challenged Orders of RTC Br.
87.

At the outset, we find no merit in the claim of respondents that petitioners'

direct resort to us violates the hierarchy of courts. Section 2(c), Rule 41 of
the Rules provides that in all cases where only questions of law are raised or
involved, the appeal shall be before us.28 Petitioners question the grant of
due course to respondents' motion to dismiss filed after the filing of their
Answer Ad Cautelam, the grant of respondents' motion to dismiss the
contempt case on the ground of mootness, and the grant of respondents'
motion to expunge petitioners' MR on the ground of violation of the three-day
notice rule. In order to resolve these issues, we need not examine or
evaluate the evidence of the parties, but rely solely on what the law provides
on the given set of undisputed facts.29 Consequently, petitioners' remedy for
assailing the correctness of the Orders of RTC Br. 87, involving as it does a
pure question of law, indeed lies with us.30

RTC Br. 87 erred when it granted

respondent's motion to expunge
petitioner's MR from the records.

Section 4, Rule 15 of the Rules, provides that:

Sec. 4. Hearing of motion. — Except for motions which the court

may act upon without prejudicing the rights of the adverse party,
every written motion shall be set for hearing by the applicant.

Every written motion required to be heard and the notice of the

hearing thereof shall be served in such a manner as to ensure
its receipt by the other party at least three (3) days before the
date of hearing, unless the court for good cause sets the hearing
on shorter notice.

The general rule is that the three-day notice requirement in motions under
Section 4 of the Rules is mandatory. It is an integral component of
procedural due process. The purpose of the three-day notice requirement,
which was established not for the benefit of the movant but rather for the
adverse party, is to avoid surprises upon the latter and to grant it sufficient
time to study the motion and to enable it to meet the arguments interposed
therein.31

In Cabrera v. Ng,32 the facts of which are analogous to the present petition,
we held that the three-day notice requirement is not a hard-and-fast rule. A
liberal construction of the procedural rules is proper where the lapse in the
literal observance of a rule of procedure has not prejudiced the adverse party
and has not deprived the court of its authority.33 We ruled:

It is undisputed that the hearing on the motion for

reconsideration filed by the spouses Cabrera was reset by the
RTC twice with due notice to the parties; it was only on October
26, 2007 that the motion was actually heard by the RTC. At that
time, more than two months had passed since the respondent
received a copy of the said motion for reconsideration on August
21, 2007. The respondent was thus given sufficient time to study
the motion and to enable him to meet the arguments interposed
therein. Indeed, the respondent was able to file his opposition
thereto on September 20, 2007.
 Notwithstanding that the respondent received a copy of the said
motion for reconsideration four days after the date set by the
spouses Cabrera for the hearing thereof, his right to due
process was not impinged as he was afforded the chance to
argue his position. Thus, the RTC erred in denying the spouses
Cabrera's motion for reconsideration based merely on their
failure to comply with the three-day notice requirement.34

Thus, the test is the presence of opportunity to be heard, as well as to have

time to study the motion and meaningfully oppose or controvert the grounds
upon which it is based.35 When the adverse party had been afforded such
opportunity, and has been indeed heard through the pleadings filed in
opposition to the motion, the purpose behind the three-day notice
requirement is deemed realized. In such case, the requirements of
procedural due process are substantially complied with.36

Here, respondents claimed to have actually received the notice for the
November 7, 2014 hearing only on November 6, 2014.37On the supposed day
of hearing, however, RTC Br. 87 issued a Constancia38 resetting the hearing
to December 5, 2014. Thereafter, on November 11, 2014, respondent filed a
motion to expunge petitioners' MR.39 Clearly, respondents' right to due
process was not violated as they were able to oppose petitioner's MR in the
form of their motion to expunge.

RTC Br. 87 did not err in giving due

course to respondents' motion to
dismiss.

Petitioners fault RTC Br. 87 for giving due course to respondents' motion to
dismiss. Respondents filed their second motion to dismiss almost one (1)
year and six (6) months after they submitted their Answer Ad
Cautelam.40 Thus, petitioners aver that respondents violated Section 1, Rule
16 of the Rules, stating that a motion to dismiss must be filed "within the time
for but before filing the answer to the complaint or pleading asserting a
claim."

Petitioners are incorrect. In Obando v. Figueras,41 we held that the period to

file a motion to dismiss depends upon the circumstances of the case:

x x x Section 1 of Rule 16 of the Rules of Court requires that, in

general, a motion to dismiss should be filed within the
reglementary period for filing a responsive pleading. Thus, a
 motion to dismiss alleging improper venue cannot be
entertained unless made within that period.

However, even after an answer has been filed, the Court has
allowed a defendant to file a motion to dismiss on the
following grounds: (1) lack of jurisdiction, (2) litis pendentia,
(3) lack of cause of action, and (4) discovery during trial of
evidence that would constitute a ground for
dismissal.Except for lack of cause of action or lack of
jurisdiction, the grounds under Section 1 of Rule 16 may be
waived. If a particular ground for dismissal is not raised or if no
motion to dismiss is filed at all within the reglementary period, it
is generally considered waived under Section 1, Rule 9 of the
Rules.

Applying this principle to the case at bar, the respondents did

not waive their right to move for the dismissal of the civil case
based on Petitioner Obando's lack of legal capacity. It must be
pointed out that it was only after he had been convicted of
estafa through falsification that the probate court divested
him of his representation of the Figueras estates. It was
only then that this ground became available to the
respondents. Hence, it could not be said that they waived it
by raising it in a Motion to Dismiss filed after their Answer
was submitted. Verily, if the plaintiff loses his capacity to
sue during the pendency of the case, as in the present
controversy, the defendant should be allowed to file a
motion to dismiss, even after the lapse of the reglementary
period for filing a responsive pleading.42 (Emphasis supplied.)

In the same manner, respondents' motion to dismiss was based on an event

that transpired after it filed its Answer Ad Cautelam. Consequently, there
was no violation of Section 1, Rule 16 of the Rules as they could not have
possibly raised it as an affirmative defense in their answer.

While RTC Br. 87 did not err in giving due course to respondents' motion to
dismiss, the propriety of granting it is an entirely different matter.

RTC Br. 87 erred when it dismissed

the contempt case for being moot and
academic.
In their motion to dismiss, respondents advance that the CA's reversal of
RTC Br. 98's ruling is a supervening event that renders the contempt case
moot and academic. They argue that it would now be absurd to restrain
UOBP from exercising its rights under the Deed of Real Estate Mortgage
when it was found to have proceeded lawfully in the foreclosure proceedings.
Respondents maintain that it would be illogical to hold them in contempt for a
lawful act.43

RTC Br. 87 agreed,44 citing the cases of Golez v. Leonidas45 and Buyco v.
Baraquia,46 where we held that a writ of preliminary injunction is deemed
lifted upon dismissal of the main case, its purpose as a provisional remedy
having been served, despite the filing of an appeal.

We are not persuaded. A case is moot when it ceases to present a justiciable

controversy by virtue of supervening events so that a declaration thereon
would be of no practical value.47 Courts decline jurisdiction over it as there is
no substantial relief to which petitioner will be entitled and which will anyway
be negated by the dismissal of the petition.48 Here, the consequent
dissolution of the 2000 writ did not render the contempt case moot and
academic. Foremost, RTC Br. 87's reliance in Golez and Buyco is misplaced.
As correctly pointed out by petitioners, the facts and circumstances in the
two cases differ from the present petition. In Golezand Buyco, the alleged
acts in violation of the writ of preliminary injunction were committed AFTER
the writ was lifted upon the dismissal of the main action, such that a case for
contempt on the ground of violation of the writ would be unavailing. In the
case before us, the sale of the properties—which is the act alleged to be in
violation of the 2000 writ—was conducted while the 2000 writ was
still subsisting. In fact, the 2000 writ was issued on May 17, 2000, while the
sale was made on May 5, 2008. RTC Br. 98 annulled the sale in favor of
petitioners on June 12, 2008.49

The reversal by the CA of the ruling of RTC Br. 98 in the annulment case and
the automatic dissolution of the 2000 writ will not protect respondents from
an action ascribing a violation of the 2000 writ, which was committed while it
was still in full force and effect. In Lee v. Court of Appeals,50 we explained
that:

An injunction or restraining order which is not void must be

obeyed while it remains in full force and effect, and has not been
overturned, that is, in general, until the injunction or restraining
order has been set aside, vacated, or modified by the court
which granted it, or until the order or decree awarding it has
been reversed on appeal or error. The injunction must be
 obeyed irrespective of the ultimate validity of the order, and no
matter how unreasonable and unjust the injunction may be in its
terms. Defendant cannot avoid compliance with the commands,
or excuse his violation, of the injunction by simply moving to
dissolve it, or by the pendency of a motion to modify it. The fact
that an injunction or restraining order has been dissolved or
terminated, or has expired, does not necessarily protect a
person in a proceeding against him for a violation of the
injunction or order while it was in force, as by acts between
granting of the injunction and its termination, at least where the
proceeding is one to punish for a criminal contempt.51

Notably, this is not to say that respondents are already guilty of indirect
contempt. Whether respondents violated the 2000 writ is not for us to decide.
Section 5, Rule 71 of the Rules provides that where the charge for indirect
contempt has been committed against a Regional Trial Court or a court of
equivalent or higher rank, or against an officer appointed by it, the charge
may be filed with such court. Here, the petition for indirect contempt was
correctly filed with the RTC. The contempt case was however dismissed
while it was only in the pre-trial stage and clearly before the parties could
present their evidence. Proceedings for indirect contempt of court require
normal adversarial procedures. It is not summary in character. The
proceedings for the punishment of the contumacious act committed outside
the personal knowledge of the judge generally need the observance of all the
elements of due process of law, that is, notice, written charges, and an
opportunity to deny and to defend such charges before guilt is adjudged and
sentence imposed.52

In this regard, we cannot grant petitioners' prayer to declare respondents

guilty of contempt of court and order them to pay damages.

WHEREFORE, the petition is PARTIALLY GRANTED. The October 7, 2014

and July 20, 2015 Orders of the Regional Trial Court of Quezon City, Branch
87 in Civil Case No. Q-11-69413 are hereby REVERSED. The case
is REMANDED to the court a quo for continuance of the trial of the case.

SO ORDERED.

Velasco, Jr., (Chairperson), Peralta, Perez,and Reyes, JJ., concur.

2

G.R. No. 185145 February 5, 2014

SPOUSES VICENTE AFULUGENCIA and LETICIA AFULUGENCIA, Petitioners,

vs.
METROPOLITAN BANK & TRUST CO. and EMMANUEL L. ORTEGA, Clerk of Court,
Regional Trial Court and Ex-Officio Sheriff, Province of Bulacan, Respondents.

DECISION

DEL CASTILLO, J.:

Section 6,1 Rule 25 of the Rules of Court (Rules) provides that "a party not served with written
interrogatories may not be compelled by the adverse party to give testimony in open court, or to
give a deposition pending appeal." The provision seeks to prevent fishing expeditions and
needless delays. Its goal is to maintain order and facilitate the conduct of trial.

Assailed in this Petition for Review on Certiorari2are the April 15, 2008 Decision3 of the Court of
Appeals (CA) in CA-G.R. SP No. 99535 which dismissed petitioners' Petition for Certiorari for
lack of merit and its October 2, 2008 Resolution4denying petitioners' Motion for
Reconsideration.5

Factual Antecedents

Petitioners, spouses Vicente and Leticia Afulugencia, filed a Complaint6 for nullification of
mortgage, foreclosure, auction sale, certificate of sale and other documents, with damages,
against respondents Metropolitan Bank & Trust Co. (Metrobank) and Emmanuel L. Ortega
(Ortega) before the Regional Trial Court (RTC) of Malolos City, where it was docketed as Civil
Case No. 336-M-2004 and assigned to Branch 7.

Metrobank is a domestic banking corporation existing under Philippine laws, while Ortega is the
Clerk of Court and Ex-Officio Sheriff of the Malolos RTC.

After the filing of the parties’ pleadings and with the conclusion of pre-trial, petitioners filed a
Motion for Issuance of Subpoena Duces Tecum Ad Testificandum7 to require Metrobank’s
officers8 to appear and testify as the petitioners’ initial witnesses during the August 31, 2006
hearing for the presentation of their evidence-in-chief, and to bring the documents relative to
their loan with Metrobank, as well as those covering the extrajudicial foreclosure and sale of
petitioners’ 200-square meter land in Meycauayan, Bulacan covered by Transfer Certificate of
Title No. 20411 (M). The Motion contained a notice of hearing written as follows:

NOTICE

The Branch Clerk of Court

Regional Trial Court
Branch 7, Malolos, Bulacan

Greetings:
 Please submit the foregoing motion for the consideration and approval of the
Hon. Court immediately upon receipt hereof.

(signed)
Vicente C. Angeles9

Metrobank filed an Opposition10 arguing that for lack of a proper notice of hearing, the Motion
must be denied; that being a litigated motion, the failure of petitioners to set a date and time for
the hearing renders the Motion ineffective and pro forma; that pursuant to Sections 1 and 611 of
Rule 25 of the Rules, Metrobank’s officers – who are considered adverse parties – may not be
compelled to appear and testify in court for the petitioners since they were not initially served
with written interrogatories; that petitioners have not shown the materiality and relevance of the
documents sought to be produced in court; and that petitioners were merely fishing for
evidence.

Petitioners submitted a Reply12 to Metrobank’s Opposition, stating that the lack of a proper
notice of hearing was cured by the filing of Metrobank’s Opposition; that applying the principle
of liberality, the defect may be ignored; that leave of court is not necessary for the taking of
Metrobank’s officers’ depositions; that for their case, the issuance of a subpoena is not
unreasonable and oppressive, but instead favorable to Metrobank, since it will present the
testimony of these officers just the same during the presentation of its own evidence; that the
documents sought to be produced are relevant and will prove whether petitioners have paid
their obligations to Metrobank in full, and will settle the issue relative to the validity or invalidity
of the foreclosure proceedings; and that the Rules do not prohibit a party from presenting the
adverse party as its own witness.

Ruling of the Regional Trial Court

On October 19, 2006, the trial court issued an Order13 denying petitioners’ Motion for Issuance
of Subpoena Duces Tecum Ad Testificandum, thus:

The motion lacks merit.

As pointed out by the defendant bank in its opposition, the motion under consideration is a
mere scrap of paper by reason of its failure to comply with the requirements for a valid notice of
hearing as specified in Sections 4 and 5 of Rule 15 of the Revised Rules of Court. Moreover,
the defendant bank and its officers are adverse parties who cannot be summoned to testify
unless written interrogatories are first served upon them, as provided in Sections 1 and 6, Rule
25 of the Revised Rules of Court.

In view of the foregoing, and for lack of merit, the motion under consideration is hereby
DENIED.

SO ORDERED.14

Petitioners filed a Motion for Reconsideration15pleading for leniency in the application of the
Rules and claiming that the defective notice was cured by the filing of Metrobank’s Opposition,
which they claim is tantamount to notice. They further argued that Metrobank’s officers – who
are the subject of the subpoena – are not party-defendants, and thus do not comprise the
adverse party; they are individuals separate and distinct from Metrobank, the defendant
corporation being sued in the case.
In an Opposition16 to the Motion for Reconsideration, Metrobank insisted on the procedural
defect of improper notice of hearing, arguing that the rule relative to motions and the
requirement of a valid notice of hearing are mandatory and must be strictly observed. It added
that the same rigid treatment must be accorded to Rule 25, in that none of its officers may be
summoned to testify for petitioners unless written interrogatories are first served upon them.
Finally, it said that since a corporation may act only through its officers and employees, they
are to be considered as adverse parties in a case against the corporation itself.

In another Order17 dated April 17, 2007, the trial court denied petitioners’ Motion for
Reconsideration. The trial court held, thus:

Even if the motion is given consideration by relaxing Sections 4 and 5, Rule 15 of the Rules of
Court, no such laxity could be accorded to Sections 1 and 6 of Rule 25 of the Revised Rules of
Court which require prior service of written interrogatories to adverse parties before any
material and relevant facts may be elicited from them more so if the party is a private
corporation who could be represented by its officers as in this case. In other words, as the
persons sought to be subpoenaed by the plaintiffs-movants are officers of the defendant bank,
they are in effect the very persons who represent the interest of the latter and necessarily fall
within the coverage of Sections 1 and 6, Rule 25 of the Revised Rules of Court.

In view of the foregoing, the motion for reconsideration is hereby denied.

SO ORDERED.18

Ruling of the Court of Appeals

Petitioners filed a Petition for Certiorari19 with the CA asserting this time that their Motion for
Issuance of Subpoena Duces Tecum Ad Testificandum is not a litigated motion; it does not
seek relief, but aims for the issuance of a mere process. For these reasons, the Motion need
not be heard. They likewise insisted on liberality, and the disposition of the case on its merits
and not on mere technicalities.20 They added that Rule 2121 of the Rules requires prior notice
and hearing only with respect to the taking of depositions; since their Motion sought to require
Metrobank’s officers to appear and testify in court and not to obtain their depositions, the
requirement of notice and hearing may be dispensed with. Finally, petitioners claimed that the
Rules – particularly Section 10,22 Rule 132 – do not prohibit a party from presenting the adverse
party as its own witness.

On April 15, 2008, the CA issued the questioned Decision, which contained the following
decretal portion:

WHEREFORE, the petition is DISMISSED for lack of merit. The assailed orders dated October
19, 2006 and April 17, 2007 in Civil Case No. 336-M-2004 issued by the RTC, Branch 7,
Malolos City, Bulacan, are AFFIRMED. Costs against petitioners.

SO ORDERED.23

The CA held that the trial court did not commit grave abuse of discretion in issuing the assailed
Orders; petitioners’ Motion is a litigated motion, especially as it seeks to require the adverse
party, Metrobank’s officers, to appear and testify in court as petitioners’ witnesses. It held that a
proper notice of hearing, addressed to the parties and specifying the date and time of the
hearing, was required, consistent with Sections 4 and 5,24 Rule 15 of the Rules.
The CA held further that the trial court did not err in denying petitioners’ Motion to secure a
subpoena duces tecum/ad testificandum, ratiocinating that Rule 25 is quite clear in providing
that the consequence of a party’s failure to serve written interrogatories upon the opposing
party is that the latter may not be compelled by the former to testify in court or to render a
deposition pending appeal. By failing to serve written interrogatories upon Metrobank,
petitioners foreclosed their right to present the bank’s officers as their witnesses.

The CA declared that the justification for the rule laid down in Section 6 is that by failing to
seize the opportunity to inquire upon the facts through means available under the Rules,
petitioners should not be allowed to later on burden Metrobank with court hearings or other
processes. Thus, it held:

x x x Where a party unjustifiedly refuses to elicit facts material and relevant to his case by
addressing written interrogatories to the adverse party to elicit those facts, the latter may not
thereafter be compelled to testify thereon in court or give a deposition pending appeal. The
justification for this is that the party in need of said facts having foregone the opportunity to
inquire into the same from the other party through means available to him, he should not
thereafter be permitted to unduly burden the latter with courtroom appearances or other
cumbersome processes. The sanction adopted by the Rules is not one of compulsion in the
sense that the party is being directly compelled to avail of the discovery mechanics, but one of
negation by depriving him of evidentiary sources which would otherwise have been accessible
to him.25

Petitioners filed their Motion for Reconsideration,26 which the CA denied in its assailed October
2, 2008 Resolution. Hence, the present Petition.

Issues

Petitioners now raise the following issues for resolution:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERRORS IN

REQUIRING NOTICE AND HEARING (SECS. 4 AND 5, RULE 15, RULES OF
COURT) FOR A MERE MOTION FOR SUBPOENA OF RESPONDENT
BANK’S OFFICERS WHEN SUCH REQUIREMENTS APPLY ONLY TO
DEPOSITION UNDER SEC. 6, RULE 25, RULES OF COURT.

II

THE COURT OF APPEALS COMMITTED (REVERSIBLE) ERROR IN

HOLDING THAT THE PETITIONERS MUST FIRST SERVE WRITTEN
INTERROGATORIES TO RESPONDENT BANK’S OFFICERS BEFORE THEY
CAN BE SUBPOENAED.27

Petitioners’ Arguments

Praying that the assailed CA dispositions be set aside and that the Court allow the issuance of
the subpoena duces tecum/ad testificandum, petitioners assert that the questioned Motion is
not a litigated motion, since it seeks not a relief, but the issuance of process. They insist that a
motion which is subject to notice and hearing under Sections 4 and 5 of Rule 15 is an
application for relief other than a pleading; since no relief is sought but just the process of
subpoena, the hearing and notice requirements may be done away with. They cite the case of
Adorio v. Hon. Bersamin,28 which held that –

Requests by a party for the issuance of subpoenas do not require notice to other parties to the
action. No violation of due process results by such lack of notice since the other parties would
1âwphi 1

have ample opportunity to examine the witnesses and documents subpoenaed once they are
presented in court.29

Petitioners add that the Rules should have been liberally construed in their favor, and that
Metrobank’s filing of its Opposition be considered to have cured whatever defect the Motion
suffered from.

Petitioners likewise persist in the view that Metrobank’s officers – the subject of the Motion – do
not comprise the adverse party covered by the rule; they insist that these bank officers are
mere employees of the bank who may be called to testify for them.

Respondents’ Arguments

Metrobank essentially argues in its Comment30that the subject Motion for the issuance of a
subpoena duces tecum/ad testificandum is a litigated motion, especially as it is directed toward
its officers, whose testimony and documentary evidence would affect it as the adverse party in
the civil case. Thus, the lack of a proper notice of hearing renders it useless and a mere scrap
of paper. It adds that being its officers, the persons sought to be called to the stand are
themselves adverse parties who may not be compelled to testify in the absence of prior written
interrogatories; they are not ordinary witnesses whose presence in court may be required by
petitioners at any time and for any reason.

Finally, Metrobank insists on the correctness of the CA Decision, adding that since petitioners
failed up to this time to pay the witnesses’ fees and kilometrage as required by the Rules,31 the
issuance of a subpoena should be denied.

Our Ruling

The Court denies the Petition.

On the procedural issue, it is quite clear that Metrobank was notified of the Motion for Issuance
of Subpoena Duces Tecum Ad Testificandum; in fact, it filed a timely Opposition thereto. The
technical defect of lack of notice of hearing was thus cured by the filing of the Opposition.32

Nonetheless, contrary to petitioners’ submission, the case of Adorio cannot apply squarely to
this case. In Adorio, the request for subpoena duces tecum was sought against bank officials
who were not parties to the criminal case for violation of Batas Pambansa Blg. 22. The situation
is different here, as officers of the adverse party Metrobank are being compelled to testify as
the calling party’s main witnesses; likewise, they are tasked to bring with them documents
which shall comprise the petitioners’ principal evidence. This is not without significant
consequences that affect the interests of the adverse party, as will be shown below.

As a rule, in civil cases, the procedure of calling the adverse party to the witness stand is not
allowed, unless written interrogatories are first served upon the latter. This is embodied in
Section 6, Rule 25 of the Rules, which provides –
Sec. 6. Effect of failure to serve written interrogatories.

Unless thereafter allowed by the court for good cause shown and to prevent a failure of justice,
a party not served with written interrogatories may not be compelled by the adverse party to
give testimony in open court, or to give a deposition pending appeal.

One of the purposes of the above rule is to prevent fishing expeditions and needless delays; it
is there to maintain order and facilitate the conduct of trial. It will be presumed that a party who
does not serve written interrogatories on the adverse party beforehand will most likely be
unable to elicit facts useful to its case if it later opts to call the adverse party to the witness
stand as its witness. Instead, the process could be treated as a fishing expedition or an attempt
at delaying the proceedings; it produces no significant result that a prior written interrogatories
might bring.

Besides, since the calling party is deemed bound by the adverse party’s testimony,33 compelling
the adverse party to take the witness stand may result in the calling party damaging its own
case. Otherwise stated, if a party cannot elicit facts or information useful to its case through the
facility of written interrogatories or other mode of discovery, then the calling of the adverse
party to the witness stand could only serve to weaken its own case as a result of the calling
party’s being bound by the adverse party’s testimony, which may only be worthless and instead
detrimental to the calling party’s cause.

Another reason for the rule is that by requiring prior written interrogatories, the court may limit
the inquiry to what is relevant, and thus prevent the calling party from straying or harassing the
adverse party when it takes the latter to the stand.

Thus, the rule not only protects the adverse party from unwarranted surprises or harassment; it
likewise prevents the calling party from conducting a fishing expedition or bungling its own
case. Using its own judgment and discretion, the court can hold its own in resolving a dispute,
and need not bear witness to the parties perpetrating unfair court practices such as fishing for
evidence, badgering, or altogether ruining their own cases. Ultimately, such unnecessary
processes can only constitute a waste of the court’s precious time, if not pointless
entertainment.

In the present case, petitioners seek to call Metrobank’s officers to the witness stand as their
initial and main witnesses, and to present documents in Metrobank’s possession as part of their
principal documentary evidence. This is improper. Petitioners may not be allowed, at the
incipient phase of the presentation of their evidence-in-chief at that, to present Metrobank’s
officers – who are considered adverse parties as well, based on the principle that corporations
act only through their officers and duly authorized agents34 – as their main witnesses; nor may
they be allowed to gain access to Metrobank’s documentary evidence for the purpose of
making it their own. This is tantamount to building their whole case from the evidence of their
opponent. The burden of proof and evidence falls on petitioners, not on Metrobank; if
petitioners cannot prove their claim using their own evidence, then the adverse party
Metrobank may not be pressured to hang itself from its own defense.

It is true that under the Rules, a party may, for good cause shown and to prevent a failure of
justice, be compelled to give testimony in court by the adverse party who has not served written
interrogatories. But what petitioners seek goes against the very principles of justice and fair
play; they would want that Metrobank provide the very evidence with which to prosecute and
build their case from the start. This they may not be allowed to do.
Finally, the Court may not turn a blind eye to the possible consequences of such a move by
petitioners. As one of their causes of action in their Complaint, petitioners claim that they were
not furnished with specific documents relative to their loan agreement with Metrobank at the
time they obtained the loan and while it was outstanding. If Metrobank were to willingly provide
petitioners with these documents even before petitioners can present evidence to show that
indeed they were never furnished the same, any inferences generated from this would certainly
not be useful for Metrobank. One may be that by providing petitioners with these documents,
Metrobank would be admitting that indeed, it did not furnish petitioners with these documents
prior to the signing of the loan agreement, and while the loan was outstanding, in violation of
the law.

With the view taken of the case, the Court finds it unnecessary to further address the other
issues raised by the parties, which are irrelevant and would not materially alter the conclusions
arrived at.

WHEREFORE, the Petition is DENIED. The assailed April 15, 2008 Decision and October 2,
2008 Resolution of the Court of Appeals in CA-G.R. SP No. 99535 are AFFIRMED.

SO ORDERED.

SECOND DIVISION
FAUSTO R. PREYSLER, JR., G.R. No. 171872
Petitioner,
Present:

CARPIO, J., Chairperson,

NACHURA,
PERALTA,
- versus - ABAD, and
MENDOZA, JJ.

MANILA SOUTHCOAST
DEVELOPMENT CORPORATION, Promulgated:
Respondent.
June 28, 2010

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

DECISION

CARPIO, J.:
The Case

This petition for review[1] assails the 22 November 2005 Decision[2] and the 3
March 2006 Resolution[3] of the Court of Appeals in CA-G.R. SP No. 89621.

The Facts

On 15 January 2002, petitioner Fausto R. Preysler, Jr. (petitioner) filed with the
Municipal Trial Court (MTC) of Batangas a complaint for forcible entry against
respondent Manila Southcoast Development Corporation (respondent). The
subject matter of the complaint is a parcel of land with an area of 21,922
square meters located in Sitio Kutad, Barangay Papaya, Nasugbu,
Batangas. The disputed land, covered by Transfer Certificate of Title (TCT) No.
TF-1217[4] in the name of petitioner, is also within the property covered by TCT
No. T-72097[5] in the name of respondent.[6] TCT No. T-72097 covers three
contiguous parcels of land with an aggregate area of 86,507,778 square
meters.

On 13 December 2002, the MTC ruled in favor of petitioner and ordered

respondent to vacate the disputed land covered by TCT No. TF-1217 in the
name of petitioner and to return the possession of the land to
petitioner.[7] Respondent appealed to the Regional Trial Court (RTC). In its
Decision dated 22 January 2004, the RTC, Branch 14, Nasugbu, Batangas
reversed the MTC decision and dismissed petitioners complaint.
Petitioner received the RTC Decision on 9 February 2004 and thereafter filed a
Motion for Reconsideration, which was set for hearing on 26 February 2004.
Petitioner sent a copy of the Motion for Reconsideration to respondents
counsel by registered mail on 23 February 2004.During the 26 February 2004
scheduled hearing of the motion, the RTC judge reset the hearing to 2 April
2004 because the courts calendar could not accommodate the hearing of the
motion. All the parties were notified of the schedule for the next hearing.

Meanwhile, it was only on 3 March 2004, or 6 days after the scheduled hearing
on 26 February 2004, that respondents counsel received a copy of petitioners
Motion for Reconsideration.

The rescheduled hearing on 2 April 2004 was again reset on 7 May 2004
because the RTC judge was on official leave. The 7 May 2004 hearing was
further reset to 6 August 2004. After the hearing, respondent filed its Motion
to Dismiss dated 9 August 2004,[8] claiming that non-compliance with the
three-day notice rule did not toll the running of the period of appeal, which
rendered the decision final.
On 4 October 2004, the RTC issued an Order, denying petitioners Motion for
Reconsideration for failure to appeal within the 15 days reglementary period
and declaring the 22 January 2004 Decision as final and executory. The RTC
ruled that petitioners Motion for Reconsideration was fatally flawed for failure
to observe the three-day notice rule. Petitioner filed an Omnibus Motion for
Reconsideration of the Order dated 4 October 2004. In its Order dated 22
February 2005, the RTC dismissed the Omnibus Motion. Petitioner then filed a
petition for certiorari with the Court of Appeals, alleging that the RTC
committed grave abuse of discretion in dismissing the Motion for
Reconsideration and Omnibus Motion for petitioners alleged failure to observe
the three-day notice rule.

The Ruling of the Court of Appeals

In its Decision dated 22 November 2005, the Court of Appeals dismissed the
petition. The Court of Appeals held that the three-day notice rule under
Sections 4, 5, and 6 of Rule 15 of the Rules of Court is mandatory and non-
compliance therewith is fatal and renders the motionpro forma. As found by
the RTC, petitioners Motion for Reconsideration dated 12 February 2004 was
received by respondent only on 3 March 2004, or six days after the scheduled
hearing on 26 February 2004. Furthermore, the Court of Appeals held that all
violations of Sections 4, 5, and 6 of Rule 15 which render the purpose of the
notice of hearing of the motion nugatory are deemed fatal.

Petitioner moved for reconsideration, which the Court of Appeals denied in

itsResolution dated 3 March 2006. Hence, this petition for review.

The Issues

In his petition for review, petitioner submits that:

 I

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN AFFIRMING THE RULING OF

THE PUBLIC RESPONDENT THAT PETITIONER HAD VIOLATED THE THREE-DAY NOTICE
RULE DESPITE THE FACTS THAT:

A) PRIVATE RESPONDENT WAS DULY HEARD ON THE MOTION FOR

RECONSIDERATION, HAD OPPORTUNITY TO OPPOSE, AND
ACTUALLY OPPOSED SAID MOTION.

B) PRIVATE RESPONDENT WAS NOT PREJUDICED BY THE ALLEGED

DEFECT OF THE MOTION.

C) THE PURPOSE OF THE THREE-DAY NOTICE RULE WAS

SUFFICIENTLY ACHIEVED.

D) THE ALLEGED FAILURE OF PETITIONER TO COMPLY WITH

SECTION 4, RULE 15 WAS CURED BY THE FACT THAT THE PUBLIC
RESPONDENT RESET SEVERAL TIMES THE HEARING OF THEMOTION,
AND THE PRIVATE RESPONDENT WAS PROPERLY NOTIFIED THEREOF
AND OPPOSED SAID MOTION.

E) PETITIONER HAD AN EXTREMELY MERITORIOUS CASE.

II

THE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING ON THE ISSUE OF THE
ALLEGED DEFECT OF THE PETITIONERS OMNIBUS MOTION, THEREBY AFFIRMING
THE ERRONEOUS COMPUTATION OF THE THREE-DAY NOTICE BY THE RESPONDENT
TRIAL JUDGE.

III

THE COURT OF APPEALS ERRED IN NOT RESOLVING THE MERITS OF THE

PETITIONERS MOTION FOR RECONSIDERATION FILED BEFORE THE PUBLIC
RESPONDENT.[9]

The Ruling of the Court

We find the petition meritorious.

In upholding the RTC Order denying petitioners Motion for Reconsideration,
the Court of Appeals relied mainly on petitioners alleged violation of the notice
requirements under Sections 4, 5, and 6, Rule 15 of the Rules of Court which
read:

SECTION 4. Hearing of motion. Except for motions which the court may act upon
without prejudicing the rights of the adverse party, every written motion shall be
set for hearing by the applicant.

Every written motion required to be heard and the notice of the hearing thereof
shall be served in such a manner as to ensure its receipt by the other party at least
three (3) days before the date of hearing, unless the court for good cause sets the
hearing on shorter notice.

SECTION 5. Notice of hearing. The notice of hearing shall be addressed to all parties
concerned, and shall specify the time and date of the hearing which must not be
later than ten (10) days after the filing of the motion.

SECTION 6. Proof of service necessary. No written motion set for hearing shall be
acted upon by the court without proof of service thereof.

The three-day notice rule is not absolute. A liberal construction of the

procedural rules is proper where the lapse in the literal observance of a rule of
procedure has not prejudiced the adverse party and has not deprived the court
of its authority.[10] Indeed, Section 6, Rule 1 of the Rules of Court provides that
the Rules should be liberally construed in order to promote their objective of
securing a just, speedy and inexpensive disposition of every action and
proceeding. Rules of procedure are tools designed to facilitate the attainment
of justice, and courts must avoid their strict and rigid application which would
result in technicalities that tend to frustrate rather than promote substantial
justice.[11]
In Somera Vda. De Navarro v. Navarro,[12]the Court held that there was
substantial compliance of the rule on notice of motions even if the first notice
was irregular because no prejudice was caused the adverse party since the
motion was not considered and resolved until after several postponements of
which the parties were duly notified.[13]

Likewise, in Jehan Shipping Corporation v. National Food Authority,[14] the

Court held that despite the lack of notice of hearing in a Motion for
Reconsideration, there was substantial compliance with the requirements of
due process where the adverse party actually had the opportunity to be heard
and had filed pleadings in opposition to the motion. The Court held:

This Court has indeed held time and again, that under Sections 4 and 5 of Rule 15 of
the Rules of Court, mandatory is the requirement in a motion, which is rendered
defective by failure to comply with the requirement. As a rule, a motion without a
notice of hearing is considered pro forma and does not affect the reglementary
period for the appeal or the filing of the requisite pleading.

As an integral component of the procedural due process, the three-day notice

required by the Rules is not intended for the benefit of the movant. Rather, the
requirement is for the purpose of avoiding surprises that may be sprung upon the
adverse party, who must be given time to study and meet the arguments in the
motion before a resolution of the court. Principles of natural justice demand that
the right of a party should not be affected without giving it an opportunity to be
heard.

The test is the presence of opportunity to be heard, as well as to have time to

study the motion and meaningfully oppose or controvert the grounds upon which
it is based.x x x

A close perusal of the records reveal that the trial court gave petitioner ten days
within which to comment on respondents Motion for Reconsideration. Petitioner
filed its Opposition to the Motion on November 26, 2001. In its 14-page Opposition,
it not only pointed out that the Motion was defective for not containing a notice of
hearing and should then be dismissed outright by the court; it also ventilated its
substantial arguments against the merits of the Motion and of the Supplemental
 Motion for Reconsideration. Notably, its arguments were recited at length in the
trial courts January 8, 2002 Joint Resolution. Nevertheless, the court proceeded to
deny the Motions on the sole ground that they did not contain any notice of hearing.

The requirement of notice of time and hearing in the pleading filed by a party is
necessary only to apprise the other of the actions of the former. Under the
circumstances of the present case, the purpose of a notice of hearing was
served.[15] (Emphasis supplied)

In this case, the Court of Appeals ruled that petitioner failed to comply with the
three-day notice rule. However, the Court of Appeals overlooked the fact that
although respondent received petitioners Motion for Reconsideration six days
after the scheduled hearing on 26 February 2004, the said hearing was reset
three (3) times with due notice to the parties. Thus, it was only on 6 August
2004, or more than five months after respondent received a copy of petitioners
Motion for Reconsideration, that the motion was heard by the RTC. Clearly,
respondent had more than sufficient time to oppose petitioners Motion for
Reconsideration. In fact, respondent did oppose the motion when it filed
its Motion to Dismiss dated 9 August 2004. In view of the circumstances of this
case, we find that there was substantial compliance with procedural due
process. Instead of dismissing petitioners Motion for Reconsideration based
merely on the alleged procedural lapses, the RTC should have resolved the
motion based on the merits.

Furthermore, the RTC likewise erred in dismissing petitioners Omnibus Motion

for allegedly failing to comply with the three-day notice requirement. The RTC
found that the notice of hearing of petitioners Omnibus Motion which was set
to be heard on 12 November 2004 was received by respondent on 9 November
2004. The RTC held that the service of the notice of hearing was one day short
of the prescribed minimum three days notice.

We disagree. Section 4 of Rule 15 provides that [e]very written motion

required to be heard and the notice of the hearing thereof shall be served in
such a manner as to ensure its receipt by the other party at least three (3)
days before the date of the hearing, unless the court for good cause sets the
hearing on shorter notice. Thus, the date of the hearing should be at least three
days after receipt of the notice of hearing by the other parties. In this case, the
petitioners Omnibus Motion was set for hearing on 12 November 2004. Thus,
to comply with the notice requirement, respondent should have received the
notice of the hearing at least three days before 12 November 2004, which is 9
November 2004. Clearly, respondents receipt on 9 November 2004 (Tuesday)
of the notice of hearing of the Omnibus Motion which was set to be heard on
12 November 2004 (Friday), was within the required minimum three-days
notice. As explained by Retired Justice Jose Y. Feria in his book, Civil Procedure
Annotated, when the notice of hearing should be given:

The ordinary motion day is Friday. Hence, the notice should be served by Tuesday
at the latest, in order that the requirement of the three days may be complied
with.

If notice be given by ordinary mail, it should be actually received by Tuesday, or if

not claimed from the post office, the date of the first notice of the postmaster
should be at least five (5) days before Tuesday.[16](Emphasis supplied)

WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 22

November 2005 and the Resolution dated 3 March 2006 of the Court of
Appeals in CA-G.R. SP No. 89621. We REMAND the case to the Regional Trial
Court, Branch 14, Nasugbu, Batangas to resolve petitioners Motion for
Reconsideration and Omnibus Motion on the merits.

SO ORDERED.
4

SECOND DIVISION

KKK FOUNDATION, INC., G.R. No. 163785

Petitioner,
Present:

QUISUMBING, J., Chairperson,

- versus - CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
HON. ADELINA CALDERON-BARGAS, in
her capacity as Presiding Judge of the
REGIONAL TRIAL COURT, Branch 78 of
Morong, Rizal, SHERIFF IV SALES T.
BISNAR, THE REGISTER OF DEEDS FOR Promulgated:
MORONG, RIZAL, and IMELDA A.
ANGELES,
Respondents.

December 27, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
 DECISION
QUISUMBING, J.:

In this petition for review under Rule 45 of the Rules of Court, petitioner
urges this Court to reverse and set aside the Decision[1] dated November 28,
2003, and the Resolution[2] dated May 26, 2004, of the Court of Appeals in CA-
G.R. SP No. 73965.

The antecedent facts are as follows:

On March 1, 2002, petitioner KKK Foundation, Inc. filed a complaint for

Annulment of Extra-judicial Foreclosure of Real Estate Mortgage and/or
Nullification of Sheriffs Auction Sale and Damages with Prayer for the Issuance
of Temporary Restraining Order and/or Writ of Preliminary
Injunction.[3] Petitioner alleged that: (1) the auction sale was made with fraud
and/or bad faith since there was no public bidding; (2) the sheriff did not post
the requisite Notice of Sheriffs Sale; (3) the petition for extrajudicial
foreclosure was fatally defective since it sought to foreclose properties of two
different entities; (4) the foreclosed properties were awarded and sold to
Imelda A. Angeles for an inadequate bid of only P4,181,450; and (5) the auction
sale involved eight parcels of land covered by individual titles but the same
were sold en masse.

On March 7, 2002, Judge Adelina Calderon-Bargas issued a temporary

restraining order preventing Angeles from consolidating her ownership to the
foreclosed properties. On even date, petitioner and Angeles executed a
Compromise Agreement wherein petitioner agreed to pay Angeles the bid
price of the eight parcels of land within 20 days. The parties then filed a Motion
to Approve Compromise Agreement.[4]

On April 1, 2002, petitioner filed an Urgent Ex-Parte Motion to Recall

Compromise Agreement[5] since the other property owner and other trustees
of petitioner were not consulted prior to the signing of the agreement. Angeles
opposed the motion.

On May 2, 2002, Judge Calderon-Bargas issued an Order,[6] which reads

in part:
xxxx
 Record shows that the Urgent Ex-Parte Motion to Recall Compromise
Agreement and Motion to Approve Compromise Agreement both failed to comply
with Sec[s]. 4 and 5, Rule 15 of the Civil Procedure. Both proceedings have no
specific date of hearing. The reason why the Motion to Approve Compromise
Agreement up to now has not yet been acted upon was that it has no date of
hearing.

WHEREFORE, the Urgent Ex-Parte Motion to Recall Compromise Agreement

and the Motion to [Approve] Compromise Agreement are considered mere scrap[s]
of paper.

SO ORDERED.

In its Decision[7] dated June 28, 2002, the trial court approved the
Compromise Agreement, as follows:
The parties, duly assisted by their respective counsels, submitted before this
Court a Compromise Agreement, as follows:

xxxx

[1.] The plaintiff shall pay to the defendant, Imelda Angeles, the amount of
P5,500,000.00representing the bid price for all the eight titles (TCT Nos. M-
95417, 95419, 95418, 95420, 95421, 50889, 50890 and 50893) subject of
the auction sale dated March 7, 2001 plus whatever taxes [and/or]
assessments and expenses of the public auction as prescribed under Act
3135, within twenty (20) days from the signing of this compromise
agreement. Said payment shall be considered full settlement of all
obligations stated under that Real Estate Mortgage, dated July 15, 1997and
that Deed of Assumption of Mortgage dated August 11, 1999.

2. Upon the payment of the afore-stated amount, the defendant shall make,
sign, execute and deliver to the plaintiff a Certificate of Deed of Redemption
of all the above titles, and shall surrender and deliver to the plaintiff all the
eight titles mentioned above. The defendant shall also make, sign, execute
and deliver to the plaintiff a Deed of Cancellation of Mortgage annotated at
the back of all the eight titles above-mentioned. The defendant shall also
return to the plaintiff all checks issued by the plaintiff to the defendant as
payment of its obligations.

xxxx

Finding the Compromise Agreement quoted above to be not contrary to

law, morals, good customs and public policy, the same is hereby APPROVED.

xxxx
 Angeles then moved for the issuance of a writ of execution.
On September 9, 2002, the trial court required petitioner to comment on the
motion within ten (10) days.[8] On October 3, 2002, the trial court directed the
Clerk of Court to issue a writ of execution.[9] On the same date, the trial court
received petitioners Motion for Extension of Time to File Comment with Entry
of Appearance which was denied on October 10, 2002.[10] Petitioner then
moved for reconsideration of the October 3, 2002 Order.

Petitioner came to the Court of Appeals via petition

for certiorari alleging that Judge Calderon-Bargas committed grave abuse of
discretion amounting to lack or excess of jurisdiction when: (1) she issued the
October 3, 2002 and the October 10, 2002 Orders even before petitioner could
file its comment; (2) she granted the Motion for Issuance of Writ of Execution
although it lacked the requisite notice of hearing; and (3) the writ of execution
changed the tenor of the decision dated June 28, 2002.

In dismissing the petition, the appellate court ruled that petitioner was
not deprived of due process when the trial court issued the October 3, 2002 and
the October 10, 2002 Orders since it was given sufficient time to file its
comment. The appellate court did not rule on the second and third issues after
noting that petitioners motion for reconsideration of the October 3, 2002 Order
had not yet been resolved by the trial court. It did not resolve the issues even
after the trial court denied petitioners motion for reconsideration on December
12, 2003,[11] ratiocinating that the trial courts denial of petitioners motion for
reconsideration did not operate to reinstate the petition because at the time it
was filed, petitioner had no cause of action.

In the instant petition before us, petitioner alleges that the appellate
court seriously erred:
I.

IN NOT HOLDING THAT PETITIONER WAS DENIED THE REQUISITE PROCEDURAL DUE
PROCESS WHEN PUBLIC RESPONDENT ISSUED THE QUESTIONED ORDERS OF
OCTOBER 3, 2002 AND OCTOBER 10, 2002 EVEN BEFORE PETITIONER COULD FILE
ITS COMMENT AND IN FURTHER ISSUING THE WRIT OF EXECUTION EVEN BEFORE
THE RESOLUTION OF THE PETITIONERS MOTION FOR RECONSIDERATION OF THE
ORDER OF OCTOBER 3, 2002.

II.
 IN NOT HOLDING THAT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION WHEN IT GRANTED PRIVATE RESPONDENTS MOTION FOR ISSUANCE OF
WRIT OF EXECUTION ALTHOUGH THE SAME WAS FILED WITHOUT AN
ACCOMPANYING NOTICE OF HEARING.

III.

IN NOT HOLDING THAT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION IN NOT HOLDING THAT EVEN ASSUMING THAT THE DECISION
RENDERED IN ACCORDANCE WITH THE COMPROMISE AGREEMENT IS VALID AND
BINDING UPON THE PETITIONER, THE WRIT OF EXECUTION ISSUED PURSUANT
THERETO IS VOID AS IT VARIES THE TENOR OF THE JUDGMENT.[12]

Simply, the issues are whether the trial court seriously erred: (1) in
issuing the October 3, 2002 and the October 10, 2002 Orders without awaiting
petitioners comment; (2) in granting the Motion for Issuance of Writ of
Execution although it lacked the requisite notice of hearing; and (3) in issuing
the writ of execution since it varied the tenor of the decision dated June 28,
2002.

Petitioner contends that it was denied due process when the trial court
granted Angeless Motion for Issuance of Writ of Execution on October 3, 2002,
despite its receipt of petitioners Motion for Extension of Time to File Comment
with Entry of Appearance on the same day. Further, Sheriff Sales
T. Bisnar served upon petitioner the Notice to Settle and/or Pay the
Compromise Judgment Amount although its motion for reconsideration of the
October 3, 2002 Order was still pending. Petitioner also argues that Angeless
Motion for Issuance of Writ of Execution lacked the requisite notice of hearing.
Finally, petitioner claims that the writ of execution varied the tenor of the
decision dated June 28, 2002.

Respondent Angeles counters that petitioner was not denied due process
since it was given ten (10) days to comment on the Motion for Issuance of Writ of
Execution which period had lapsed without petitioner filing any comment.
Petitioner filed its Motion for Extension of Time to File Comment with Entry of
Appearance only after the reglementary period had expired. Angeles further
contends that the Motion for Issuance of Writ of Execution contained the
requisite notice of hearing. Finally, she argues that the writ of execution did not
vary the tenor of the decision dated June 28, 2002.
 On the first issue, we note that in its September 9, 2002 Order, the trial
court gave petitioner ten (10) days to file its comment to Angeless Motion for
Issuance of Writ of Execution. While petitioner claims that it received the Order
only on September 21, 2002, Angeles counters that petitioner received it
on September 12, 2002. We are more inclined to believe Angeless allegation
since the trial court itself declared in its Order dated October 10, 2002 that the
Order dated September 9, 2002 was personally served upon petitioner
on September 12, 2002.[13]Thus, petitioner had until September 22, 2002 within
which to file its comment or to request for an extension of time. Consequently,
petitioners motion for extension and comment were not seasonably filed and
such procedural lapse binds petitioner.

Anent the second issue, we have consistently held that a motion which
does not meet the requirements of Sections 4 and 5 of Rule 15[14] of the Rules of
Court is considered a worthless piece of paper, which the Clerk of Court has no
right to receive and the trial court has no authority to act upon. [15] Service of a
copy of a motion containing a notice of the time and the place of hearing of that
motion is a mandatory requirement, and the failure of movants to comply with
these requirements renders their motions fatally defective. However, there are
exceptions to the strict application of this rule. These exceptions are: (1) where
a rigid application will result in a manifest failure or miscarriage of justice
especially if a party successfully shows that the alleged defect in the questioned
final and executory judgment is not apparent on its face or from the recitals
contained therein; (2) where the interest of substantial justice will be served; (3)
where the resolution of the motion is addressed solely to the sound and
judicious discretion of the court; and (4) where the injustice to the adverse party
is not commensurate with the degree of his thoughtlessness in not complying
with the procedure prescribed.[16]

A notice of hearing is an integral component of procedural due process to

afford the adverse parties a chance to be heard before a motion is resolved by
the court. Through such notice, the adverse party is given time to study and
answer the arguments in the motion.[17] Records show that while Angeless
Motion for Issuance of Writ of Execution contained a notice of hearing, it did not
particularly state the date and time of the hearing. However, we still find that
petitioner was not denied procedural due process. Upon receiving the Motion
for Issuance of Writ of Execution, the trial court issued an Order
dated September 9, 2002 giving petitioner ten (10) days to file its comment. The
trial court ruled on the motion only after the reglementary period to file
comment lapsed. Clearly, petitioner was given time to study and comment on
the motion for which reason, the very purpose of a notice of hearing had been
achieved.

The notice requirement is not a ritual to be followed blindly. Procedural

due process is not based solely on a mechanical and literal application that
renders any deviation inexorably fatal.Instead, procedural rules are liberally
construed to promote their objective and to assist in obtaining a just, speedy and
inexpensive determination of any action and proceeding.[18]

On the last issue, we note that the Compromise Agreement approved by

the trial court in its Decision dated June 28, 2002 merely provided that
petitioner would pay Angeles the bid price of P5,500,000, for the eight parcels
of land subject of the auction sale, within twenty (20) days. Upon payment,
Angeles would execute a Certificate of Deed of Redemption and a Deed of
Cancellation of Mortgage, and surrender to petitioner the titles to the eight
parcels of land. Nevertheless, when the trial court issued the writ of execution,
the writ gave Sheriff Bisnar the option to allow the consolidation of the subject
real properties in favor of the defendant Imelda Angeles.[19]

Undoubtedly, the writ of execution imposed upon petitioner an

alternative obligation which was not included or contemplated in the
Compromise Agreement. While the complaint originally sought to restrain
Angeles from consolidating her ownership to the foreclosed properties, that
has been superseded by the Compromise Agreement. Therefore, the writ of
execution which directed Sheriff Bisnarto cause the Register of Deeds of
Morong, Rizal, to allow the consolidation of the subject real properties in favor
of the defendant Imelda Angeles is clearly erroneous because the judgment
under execution failed to provide for consolidation.

Because the writ of execution varied the terms of the judgment and
exceeded them, it had no validity. The writ of execution must conform to the
judgment which is to be executed, as it may not vary the terms of the judgment
it seeks to enforce. Neither may it go beyond the terms of the judgment sought
to be executed. Where the execution is not in harmony with the judgment
which gives it life and exceeds it, it has pro tanto no validity.[20]
 WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision
dated November 28, 2003 and the Resolution dated May 26, 2004 of the Court
of Appeals in CA-G.R. SP No. 73965 are MODIFIED such that the writ of
execution issued on October 11, 2002 by Judge Adelina Calderon-Bargas is
declared NULL and VOID.

Let this case be REMANDED to the Regional Trial Court of Morong, Rizal,
Branch 78, which is hereby ORDERED to issue another writ of execution against
petitioner KKK Foundation, Inc., in conformity with the Decision dated June 28,
2002 of the trial court. This is without prejudice to filing a new motion for
consolidation by respondent Angeles.

No pronouncement as to costs.

SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 201601 March 12, 2014

MARYLOU CABRERA, Petitioner,

vs.
FELIX NG, Respondent.

DECISION

REYES, J.:

Before this Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court
seeking to annul and set aside the Decision2dated October 21, 2009 and the Resolution3dated
March 26, 2012 of the Court of Appeals (CA) in CA-G.R. SP No. 03392. The CA denied the
petition for certiorari filed by Marylou Cabrera (petitioner), which assailed the Order4dated
December 19, 2007 of the Regional Trial Court (RTC) of Mandaue City, Branch 56, in Civil
Case No. MAN-4773.

The Facts
On February 14, 2004, Felix Ng (respondent) filed a complaint for sum of money with the RTC
against the petitioner and her husband Marionilo Cabrera (spouses Cabrera), alleging that the
latter issued to him the following: (1) Metrobank Check No. 0244694 dated June 30, 2002 for
the amount of Thirty-One Thousand Pesos (₱31,000.00); (2) Metrobank Check No. 0244674
dated August 9, 2002 for the amount of Thirty-Eight Thousand Seventy-Four Pesos and
Seventy-Six Centavos (₱38,074.76); and (3) Metrobank Check No. 0244745 dated August 15,
2005 for Two Million Five Hundred Thousand Pesos (₱2,500,000.00). That when presented for
payment, the said checks were all dishonored as the accounts from which they had been drawn
were already closed.

The spouses Cabrera admitted that they issued Metrobank Check No. 0244694 and Metrobank
Check No. 0244674 to the respondent and that the same were dishonored when presented for
payment. However, they claimed that they paid the respondent the amount represented by the
said checks through the latter’s son Richard Ng. Further, they deny having issued Metrobank
Check No. 0244745 to the respondent, alleging that the said check was forcibly taken from
them by Richard Ng.

On August 7, 2007, the RTC rendered a Decision,5 which ordered the spouses Cabrera to pay
the respondent the following: (1) Two Million Five Hundred Sixty-Nine Thousand Seventy-Four
Pesos (₱2,569,074.00) plus legal interest from inception of the obligation until fully paid; (2)
moral damages in the amount of Fifty Thousand Pesos (₱50,000.00); (3) attorney’s fees of
Twenty Thousand Pesos (₱20,000.00); and (4) litigation expenses in the amount of Ten
Thousand Pesos (₱10,000.00).

On August 8, 2007, the spouses Cabrera received a copy of the RTC Decision dated August 7,
2007. On August 14, 2007, the spouses Cabrera filed with the RTC a motion for
reconsideration,6 which they set for hearing on August 17, 2007. On even date, the spouses
Cabrera sent a copy of their motion for reconsideration to the respondent thru registered mail; it
was actually received by the respondent on August 21, 2007.

The said motion for reconsideration, however, was not heard on August 17, 2007 as the new
acting presiding judge of the said court had just assumed office. On August 28, 2007, the RTC
issued a notice,7 which set the said motion for reconsideration for hearing on September 25,
2007.

On September 20, 2007, the respondent filed an opposition8 to the motion for reconsideration
filed by the spouses Cabrera. The respondent alleged that the said motion for reconsideration
is a mere scrap of paper since it violated the three-day notice requirement. The respondent
pointed out that the spouses Cabrera sent to him a copy of their motion for reconsideration,
which was set for hearing on August 17, 2007, via registered mail on August 14, 2007; that he
actually received a copy thereof only on August 21, 2007 – four days after the scheduled
hearing thereon.

It appears that the scheduled hearing of the spouses Cabrera’s motion for reconsideration on
September 25, 2007 did not push through. Consequently, on September 26, 2007, the RTC
issued another notice,9 which set the said motion for reconsideration for hearing on October 26,
2007.

On October 26, 2007, the RTC issued an Order,10which directed the parties to file their
additional pleadings, after which the motion for reconsideration filed by the spouses Cabrera
would be deemed submitted for resolution.
On December 19, 2007, the RTC issued an Order11 which denied the motion for reconsideration
filed by the spouses Cabrera. The RTC pointed out that the spouses Cabrera violated Section
4, Rule 15 of the Rules of Court, which mandates that every motion required to be heard should
be served by the movant in such a manner as to ensure its receipt by the other party at least
three days before the date of hearing. Thus:

After a meticulous scrutiny of the records of this case, the court opines that the motion was filed
beyond the reglementary three (3)[-]day period.

As the records bear out, the instant motion was mailed to the plaintiff’s counsel on August 14[,
2007] and was set for hearing on August 17, 2007. However, the copy of said motion had
reached plaintiff’s side and a copy of which was received by plaintiff’s counsel only on August
17, 2007[,] four (4) days late after it was supposed to be heard. Hence, a clear blatant
violations [sic] of the rule on notice and hearing.12

The RTC further opined that a motion, which fails to comply with the three-day notice
requirement is a mere scrap of paper; it is not entitled to judicial cognizance and would not toll
the running of the reglementary period for filing the requisite pleadings. Accordingly, the RTC
held, its Decision dated August 7, 2007 had already become final for failure of the spouses
Cabrera to comply with the three-day notice requirement.

The petitioner then filed a petition for certiorari13with the CA, alleging that the RTC gravely
abused its discretion in denying her motion for reconsideration. The petitioner pointed out that
the RTC did not actually conduct a hearing on her motion for reconsideration on August 17,
2007;

that her motion for reconsideration was actually heard on October 26, 2007, after the
respondent had already filed his opposition thereto. Thus, the petitioner claimed, the issue of
her failure to comply with the three-day notice requirement had already been rendered moot. In
any case, the petitioner asserted, the RTC should have resolved her motion for reconsideration
on its merits rather than simply denying it on mere technicality.

On October 21, 2009, the CA, by way of the assailed Decision,14 denied the petition for certiorari
filed by the petitioner. The CA opined that the RTC did not abuse its discretion in denying the
motion for reconsideration filed by the spouses Cabrera since it merely applied the three-day
notice requirement under Section 4, Rule 15 of the Rules of Court. Thus:

It appears that petitioner’s Motion for Reconsideration was set for hearing on 17 August 2007.
A copy thereof was mailed to private respondent on 14 August 2007, and private respondent
actually received his copy only on 21 August 2007 or four (4) days after the set date of hearing;
and thus, depriving him of the opportunity to oppose the motion. Respondent court, therefore,
correctly held that such motion violated the three (3)-day notice rule; the essence of due
process. Respondent court had applied said rule to the given situation, and of no doubt, mere
adherence to the rules cannot be considered grave abuse of discretion on the part of the
respondent court. x x x.15(Citation omitted)

The petitioner sought a reconsideration of the Decision dated October 21, 2009 but it was
denied by the CA in its Resolution16 dated March 26, 2012.

Hence, the instant petition.

The Issue
The sole issue to be resolved by the Court is whether the CA erred in affirming the RTC Order
dated December 19, 2007, which denied the motion for reconsideration filed by the spouses
Cabrera.

The Court’s Ruling

The petition is meritorious.

Sections 4 and 5, Rule 15 of the Rules of Court provide that:

Sec. 4. Hearing of motion. – Except for motions which the court may act upon without
prejudicing the rights of the adverse party, every written motion shall be set for hearing by the
applicant.

Every written motion required to be heard and the notice of the hearing thereof shall be served
in such a manner as to ensure its receipt by the other party at least three (3) days before the
date of hearing, unless the court for good cause sets the hearing on shorter notice.

Sec. 5. Notice of hearing. – The notice of hearing shall be addressed to all parties concerned,
and shall specify the time and date of the hearing which must not be later than ten (10) days
after the filing of the motion. (Emphasis ours)

The general rule is that the three-day notice requirement in motions under Sections 4 and 5 of
the Rules of Court is mandatory. It is an integral component of procedural due process.17"The
purpose of the three-day notice requirement, which was established not for the benefit of the
movant but rather for the adverse party, is to avoid surprises upon the latter and to grant it
sufficient time to study the motion and to enable it to meet the arguments interposed therein."18

"A motion that does not comply with the requirements of Sections 4 and 5 of Rule 15 of the
Rules of Court is a worthless piece of paper which the clerk of court has no right to receive and
which the court has no authority to act upon."19 "Being a fatal defect, in cases of motions to
reconsider a decision, the running of the period to appeal is not tolled by their filing or
pendency."20

Nevertheless, the three-day notice requirement is not a hard and fast rule. When the adverse
party had been afforded the opportunity to be heard, and has been indeed heard through the
pleadings filed in opposition to the motion, the purpose behind the three-day notice requirement
is deemed realized. In such case, the requirements of procedural due process are substantially
complied with. Thus, in Preysler, Jr. v. Manila Southcoast Development Corporation,21 the Court
ruled that:

The three-day notice rule is not absolute. A liberal construction of the procedural rules is proper
where the lapse in the literal observance of a rule of procedure has not prejudiced the adverse
party and has not deprived the court of its authority. Indeed, Section 6, Rule 1 of the Rules of
Court provides that the Rules should be liberally construed in order to promote their objective of
securing a just, speedy and inexpensive disposition of every action and proceeding. Rules of
procedure are tools designed to facilitate the attainment of justice, and courts must avoid their
strict and rigid application which would result in technicalities that tend to frustrate rather than
promote substantial justice.
In Somera Vda. De Navarro v. Navarro, the Court held that there was substantial compliance of
the rule on notice of motions even if the first notice was irregular because no prejudice was
caused the adverse party since the motion was not considered and resolved until after several
postponements of which the parties were duly notified.

Likewise, in Jehan Shipping Corporation v. National Food Authority, the Court held that despite
the lack of notice of hearing in a Motion for Reconsideration, there was substantial compliance
with the requirements of due process where the adverse party actually had the opportunity to
be heard and had filed pleadings in opposition to the motion. The Court held:

This Court has indeed held time and again, that under Sections 4 and 5 of Rule 15 of the Rules
of Court, mandatory is the requirement in a motion, which is rendered defective by failure to
comply with the requirement. As a rule, a motion without a notice of hearing is considered pro
forma and does not affect the reglementary period for the appeal or the filing of the requisite
pleading.

As an integral component of the procedural due process, the three-day notice required by the
Rules is not intended for the benefit of the movant. Rather, the requirement is for the purpose
of avoiding surprises that may be sprung upon the adverse party, who must be given time to
study and meet the arguments in the motion before a resolution of the court. Principles of
1âw phi 1

natural justice demand that the right of a party should not be affected without giving it an
opportunity to be heard.

The test is the presence of opportunity to be heard, as well as to have time to study the motion
and meaningfully oppose or controvert the grounds upon which it is based. x x x22

(Emphasis supplied and citations omitted)

It is undisputed that the hearing on the motion for reconsideration filed by the spouses Cabrera
was reset by the RTC twice with due notice to the parties; it was only on October 26, 2007 that
the motion was actually heard by the RTC. At that time, more than two months had passed
since the respondent received a copy of the said motion for reconsideration on August 21,
2007. The respondent was thus given sufficient time to study the motion and to enable him to
meet the arguments interposed therein. Indeed, the respondent was able to file his opposition
thereto on September 20, 2007.

Notwithstanding that the respondent received a copy of the said motion for reconsideration four
days after the date set by the spouses Cabrera for the hearing thereof, his right to due process
was not impinged as he was afforded the chance to argue his position. Thus, the R TC erred in
denying the spouses Cabrera's motion for reconsideration based merely on their failure to
comply with the three-day notice requirement.

WHEREFORE, in consideration of the foregoing disquisitions, the instant petition is GRANTED.

The Decision dated October 21, 2009 and the Resolution dated March 26, 2012 of the Court of
Appeals in CA-G.R. SP No. 03392, are hereby REVERSED and SET ASIDE. The case is
hereby REMANDED to the Regional Trial Court of Mandaue City, Branch 56, to resolve the
Motion for Reconsideration filed by the spouses Cabrera on the merits within five (5) days from
the finality of this Decision.

SO ORDERED.
6

G.R. No.182157 August 17, 2015

ANLUD METAL RECYCLING CORPORATION, as represented by ALFREDO A.

DY, Petitioner,
vs.
JOAQUIN ANG, Respondent.

DECISION

SERENO, CJ:

We resolve the Petition for Review 1 filed by petitioner Anlud Metal Recycling Corporation,
which assails the Decision and Resolution of the Court of Appeals (CA) in CA-G.R. SP No.
97124. 2The CA affirmed the Decision and Order of the Regional Trial Court (RTC) in Criminal
Case No. 12691-2004-C 3 dismissing the charge of estate against respondent Joaquin Ang; 4

The antecedent facts are as follows:

San Miguel Packaging Products-Metal Closures Lithography Plant (SMC-MCLP) allegedly

awarded petitioner an exclusive contract to purchase its aluminum-and tin-based scrap
materials from 20 March 2003 to 31 January 2004. However, on 23 January 2004, the
President of Anlud Metal Recycling Corporation Found that SMC-MCLP’s employee Conrado
Alday had allowed Nenita B. Dela Cruz to load

scrap materials in two trucks! owned by respondent Ang, which were then operated by his truck
drivers Edjanel Jose Paniergo and Renato Bagauana.

Based on the narration of petitioner, Dela Cruz pretended to be an agent of Anlud Metal
Recycling Corporation when she arranged for the transport of the scrap materials. She had
allegedly coordinated the hauling with Alday, who was then working for SMC-MCLP. Alday
purportedly allowed the trucks driven by Paniergo and Bagaua to enter the plant and load the
scrap materials in the cargoes based on a false representation that the transaction was
authorized by petitioner. Fortunately, the two trucks was not able to leave the premises of
SMC-MCLP.

Petitioner lodged a Complaint for attempted estafa through falsification of commercial/private

document against Alday, Dela Cruz, Paniergo, Bagaua, and respondent Ang. Subsequently,
the Investigating Prosecutor caused the filing with the RTC of an Information for estafa under
Article 315, paragraph 2( a) of the Revised Penal Code, which reads as follows: 5

That on or about January 23, 2004 at Brgy. Canlubang, in the City of Calamba and within the
jurisdiction of this Honorable Court, the above-named accused, conspiring, confederating and
mutually helping one another, with intent to defraud by means of fraudulent acts executed prior
to or simultaneously with the commission of the fraud, did then there unlawfully, willfully and
feloniously pretend to possess business or imaginary transactions by claiming that he has the
authority from complainant Anlud Metal Recycling Corporation to withdraw from San Miguel
Corp - Metal Closure Lithography Plant (SMC MCLP), when in truth and in fact they were not
and as a consequence, they were able to withdraw thirty (30) metric tons of Aluminum Scraps
from the said SMC-MCLP estimated at more than ₱500,000 using the name of Anlud Metal
Recycling Corporation (ANLUD), which was charged to the latter's account, to its damage and
prejudice in the amount of PS00,000.

CONTRARY TO LAW.

The RTC issued a Warrant of Arrest 6 on 26 October 2004 against Ang and his co-accused.
Thereafter, respondent filed a Petition for Reinvestigation and a Motion for Preliminary
Investigation before the City Prosecutor's Office. He also filed with the RTC an Urgent Motion to
Suspend Proceedings Pending Reinvestigation and to Recall Order of Arrest Against Accused
Movant Joaquin Ang. 7

In its Order dated 20 January 2005, 8 the RTC denied the motion filed by Ang. It ruled that his
allegations were not supported by evidence; and that based on the facts of the case, there was
a reasonable ground to engender a well-founded belief that he had committed estafa.

In contrast, on 3 February 2005, the City Prosecutor's Office issued its Resolution on
Reconsideration 9 absolving respondent from the offense charged. It discussed that although he
owned the trucks that carried the scrap materials, the theory of conspiracy had no foundation
absent any proof that he had performed any overt act of estafa. It also highlighted the fact that
he was not present at the time of the incident. As a result, the City Prosecutor's Office filed an
Amended Information, 10 which no longer included him as an accused.

Petitioner bewailed the dropping of respondent from the charge. Thus, it filed with the
Department of Justice (DOJ) a Petition for Review, which the latter granted. 11 According to the
DOJ, respondent could not be considered innocent of estafa, since (1) his denial was self-
serving; (2) he owned the trucks used in loading the scrap materials; (3) he failed to adduce
exculpatory evidence showing that it was Dela Cruz who had commanded the use of his trucks;
( 4) the drivers of the trucks were respondent's own; and (5) it can be inferred from the action of
the truck drivers that they received instructions from him. Respondent filed a Motion for
Reconsideration, but to no avail. 12 Thus, a Second Amended Information 13 was filed with the
RTC, which already named Ang as one of the accused. On 16 June 2006, respondent sought
judicial relief by filing an Omnibus Motion to Determine Probable Cause and to Defer Issuance
of Warrant of Arrest Until Determination of Probable Cause Is Completed (Omnibus
Motion). 14 Petitioner filed its Comment/Opposition 15 thereto on 7 July 2006. ·

This time around, the court took a different stance. In its Decision dated 18 September 2006,
the RTC dismissed the case against respondent for want of probable cause. It explained that
mere ownership of the trucks did not make respondent a co-conspirator for estafa. For
conspiracy to be appreciated against Ang, the trial court required proof showing that he knew of
the crime, consented to its commission, or performed any of its elements.

Petitioner filed a Motion for Reconsideration 16and a Motion for Inhibition, 17 but both were
denied through the RTC Order dated 3 October 2006. 18 The court reiterated in its ruling that "in
the resolution of the judicial determination of probable cause, the court is not bound and cannot
be bound by the findings of the Secretary of Justice in the existence of probable cause and
hold the accused for trial." 19

Unrelenting, petitioner questioned the dismissal of Ang's criminal case before the CA. In its
Decision dated 4 December 2007, and subsequent Resolution dated 13 March 2008, the CA
gave due course to the Petition for Certiorari 20 notwithstanding that Anlud Metal Recycling
Corporation had appealed without the participation of the Office of the Solicitor General (OSG),
which was supposed to act on behalf of the People of the Philippines.
However, the petition failed on the merits. Petitioner had argued before the CA that the RTC
should not have entertained respondent's Omnibus Motion, because its Notice of Hearing was
addressed only to the public prosecutor and not to petitioner. The CA rejected this argument
and ruled that the "absence of a notice to a private prosecutor although the public prosecutor
has been notified is a matter that is for a trial judge to consider in his sound discretion." 21

Petitioner also failed to dispute the RTC's ruling to exclude Ang as an accused in the crime of
estafa. According to the CA, since the trial court had conducted an independent evaluation, the
fact alone that the latter reversed its earlier finding of probable cause did not amount to grave
abuse of discretion; and any error of the RTC was an error of judgment not correctible by
certiorari.

Aggrieved, petitioner filed the instant petition before this Court and raised the following
contentions: (1) the RTC had no jurisdiction to determine probable cause; (2) it abused its
discretion when it entertained respondent's Omnibus Motion for determination of probable
cause despite a defective Notice of Hearing; and (3) it erred in dismissing the charge of estafa
against Ang. In turn, respondent filed a Comment, 22 which included the issue of petitioner's
standing to file this appeal without the participation of the OSG. Petitioner submitted its
Reply 23 to refute the allegations of respondent.

RULING OF THE COURT

Petitioner has no personality to appeal the dismissal of the criminal case for estafa before this
Court. Before the Court proceeds with the substantive issues in this case, the procedural issue
of petitioner's personality to appeal the dismissal of the criminal case merits preliminary
attention.

Petitioner argues that since the CA has already ruled upon this issue, without respondent filing
a partial appeal, then the latter has already lost its right to question the standing of Anlud ·Metal
Recycling Corporation. This argument is unmeritorious. In the past, the Court has motu propre
ascertained the standing of a private offended party to appeal the dismissal of a criminal case.24

In any event, respondent cannot be considered to have waived its argument regarding the
personality of petitioner to file the instant appeal. In his Comment, respondent cites Republic v.
Partisala 25 and asserts that petitioner has no right to appeal the dismissal of the criminal case
absent the participation of the OSG. In its Reply, petitioner responds by quoting the ruling of the
CA, viz: 26

As argued by petitioner, citing the case of Perez v. Hagonoy Rural Bank, Inc., the petitioner, as
private complainant, has legal personality to impugn the dismissal of the criminal case against
the private respondent under Rule 65. As private offended party, the petitioner has an interest
in the civil aspect of the case; thus, it may file a special civil action for certiorari and prosecute
the same in its own name without making the People of the Philippines a party. While it is only
the Solicitor General who may bring or defend actions in behalf of the Republic of the
Philippines, or represent the People or State in criminal proceedings pending in the Supreme
Court and the Court of Appeals, the private offended party retains the right to bring a special
civil action for certiorari in his own name in criminal proceedings before the courts of law.

Notably, both positions taken by the parties are supported by jurisprudence. It is then proper for
this Court to clarify the standing of a private offended party - in this case, petitioner - to appeal
the dismissal of the criminal case against the accused, who in this case is respondent.
The real party in interest in a criminal case is the People of the Philippines. Hence, if the
criminal case is dismissed by the trial court, the criminal aspect of the case must be instituted
by the Solicitor General on behalf of the State. 27

As a qualification, however, this Court recognizes that the private offended party has an interest
in the civil aspect of the case. 28Logically, the capability of the private complainant to question
the dismissal of the criminal proceedings is limited only to questions relating to the civil aspect
of the case. 29 It should ideally be along this thin framework that we may entertain questions
regarding the dismissals of criminal cases instituted by private offended parties. Enlarging this
scope may result in wanton disregard of the OSG's personality, as well as the clogging of our
dockets, which this Court is keen to avoid. Therefore, the litmus test in ascertaining the
personality of herein petitioner lies in whether or not the substance of the certiorari action it
instituted in the CA referred to the civil aspect of the case. 30

Here in this Rule 45 petition, petitioner argues that the RTC erred when it concluded that "there
is no evidence of conspiracy against private respondent Ang." Petitioner goes on to enumerate
circumstances that collectively amount to a finding that based on probable cause, respondent
conspired with the accused in defrauding Anlud Metal Recycling Corporation.: 31

Clearly, petitioner mainly disputes the RTC's finding of want of probable cause to indict Ang as
an accused for estafa. This dispute refers, though, to the criminal, and not the civil, aspect of
the case. In Jimenez v. Sorongon 32 we similarly ruled:

In this case, the petitioner has no legal personality to assail the dismissal of the criminal case
since the main issue raised by the petitioner involved the criminal aspect of the case, i.e., the
existence of probable cause. The petitioner did not appeal to protect his alleged pecuniary
interest as an offended party of the crime, but to cause the reinstatement of the criminal action
against the respondents. This involves the right to prosecute which pertains exclusively to the
People, as represented by the OSG. (Emphasis supplied)

Given that nowhere in the pleadings did petitioner even briefly discuss the civil liability of
respondent, this Court holds that Anlud Metal Recycling Corporation lacks the requisite legal
standing to appeal the discharge of respondent Ang from the Information for estafa. On this
ground alone, the petition already fails. 33

Nonetheless, this Court has already acknowledged the interest of substantial justice, grave
error committed by the judge, and lack of due process as veritable grounds to allow appeals to
prosper despite the non participation of the OSG. 34 But as will be discussed below, petitioner
has failed to demonstrate that the petition falls under any of these exceptions.

The RTC may conduct a judicial determination of probable cause.

Petitioner explains that there are two determinations of probable cause: the first is for the
purpose of filing a criminal information in the court, and the second is for the issuance of a
warrant of arrest. Petitioner submits that since the first kind is executive in nature, then the RTC
had absolutely no jurisdiction to determine the existence of probable cause to hold respondent
as an accused in the crime of estafa.

Hence, for petitioner, the RTC grievously erred when it gave due course to the Omnibus Motion
of respondent, which questioned the determination of probable cause by the prosecutor.
Respondent counters this argument by alleging that the RTC may resolve issues brought
before it pursuant to the power of the court to administer justice.
Petitioner's interpretation of the rules on the determination of probable cause is inaccurate.
Although courts must respect the executive determination of probable cause, 35 the trial courts
may still independently determine probable cause. They are not irrevocably bound to the
determination of probable cause by the prosecutor and the DOJ. 36

The trial court actually has the following options upon the filing of a criminal information: ( 1)
immediately dismiss the case if the evidence on record clearly fails to establish probable cause;
(2) issue a warrant of arrest if it finds probable cause; and (3) order the prosecutor to present
additional evidence within five days from notice in case of doubt as to the existence of probable
cause. 37 These options are provided in Rule 112, Section 6 (a) of the Rules of Court, which
reads:

SECTION 6. When warrant of arrest may issue.-" (a) By the Regional Trial Court. -" Within ten (
10) days from the filing of the complaint or information, the judge shall personally evaluate the
resolution of the prosecutor and its supporting evidence. He may immediately dismiss the case
if the evidence on record clearly fails to establish probable cause. If he finds probable cause,
he shall issue a warrant of arrest, or a commitment order if the accused has already been
arrested pursuant to a warrant issued by the judge who conducted the preliminary investigation
or when the complaint or information was filed pursuant to Section 7 of this Rule. In case of
doubt on the existence of probable cause, the judge may order the prosecutor to present
additional evidence within five (5) days from notice and the issue must be resolved by the court
within thirty (30) days from the filing of the complaint of information. (Emphasis supplied)

Indeed, the RTC is allowed to dismiss the charge of estafa against Ang notwithstanding the
executive determination of probable cause by the prosecutor. If we were to construe otherwise,
we would be contradicting the basic principle that "once an information is filed in RTC, any
disposition of the case rests already in the sound discretion of the court." 38

Rule 15, Section 5 of the Rules of Court was substantially complied with.

Citing Rule 15, Section 5 of the Rules of Court, petitioner regards the Notice of Hearing
appended to respondent's Omnibus Motion as defective. This is because the notice was
addressed only to the public prosecutor and the clerk of court, and not to the private offended
party - petitioner herein. 39

By having a defective Notice of Hearing, petitioner concludes that the Omnibus Motion was a
mere scrap of paper, which the RTC should have instantly disregarded. Thus, when the RTC,
as affirmed by the CA, gave due course to the motion, petitioner believes that its right to due
process was oppressed.

Petitioner correctly argues that a notice of hearing must be addressed to all the parties
concerned; 40 and that failure to comply with this directive results in a motion that should be
treated as a mere scrap of paper. 41 However, this general requirement of a valid notice of
hearing is one of those procedural rules that admit of various exceptions. 42

In Jehan Shipping Corporation v. National Food Authority, 43 the Court considered the defect in
the notice of hearing as cured, since the adverse party had the opportunity to be heard and had
filed pleadings in opposition to the motion. In particular, the adverse party was able to argue the
procedural defects and even ventilate substantial arguments.

This same application has already been echoed in our past decisions. 44 In those cases, the
Court observes that the real purpose behind the requirement of notice of hearing is to afford the
adverse parties a chance to be heard before a motion is resolved by the court. 45 The test is the
presence of the opportunity to be heard, as well as to have time to study the motion and
meaningfully oppose or controvert the grounds upon which it is based. 46 Considering the
circumstances of the present case, . we believe that procedural due process has substantially
been complied with.

Petitioner filed a Comment/Opposition on 7 July 2006 specifically to oppose the supposedly

defective Omnibus Motion filed by respondent on 16 June 2006. In that pleading, petitioner
raised the incompleteness of the Notice of Hearing and likewise argued about the substantive
merits - that probable cause existed to indict Ang as an accused. Thereafter, the RTC
scheduled the hearing for the judicial determination of probable cause on 16 August 2006, but
the hearing was later rescheduled on 30 August 2006. 47 Only after these proceedings had
transpired did the trial court issue its assailed Decision on 18 September 2006 finding a want of
probable cause to hold Ang for trial for the crime of estafa. Thereafter, petitioner filed a Motion
for Reconsideration on 2 October 2006, which the RTC denied in its Order dated 3 October
2006.

Based on the sequence of events mentioned above, it is clear that petitioner was given an
opportunity to be heard. It advanced its opposition to the Omnibus Motion when it filed its
Comment/Opposition on 7 July 2006 and later on in its Motion for Reconsideration dated 2
October 2006. From these facts, we conclude that Rule 15, Section 5 of the Rules of Court on
notice of hearing was substantially complied with. Consequently, this Court cannot agree with
petitioner that the latter's right to due process has been denied. In any event, petitioner cannot
anchor the reversal of the finding of want of probable cause on the mere pretext that the
Omnibus Motion filed by respondent was just a scrap of paper as it contained a defective
Notice of Hearing. The judicial determination of probable cause may proceed even if the
accused does not file a pertinent motion. As adverted to earlier, the RTC may immediately
dismiss the case if the evidence on record clearly fails to establish probable cause. 48

The RTC did not exceed its jurisdiction when it dismissed the charge of estafa against
respondent for want of probable cause.

In the main, petitioner questions the ruling of the CA, which dismissed its Petition for Certiorari.
The CA held that the RTC did not commit an error of jurisdiction when the latter ruled that the
prosecution failed to establish probable cause against respondent.

Ordinarily, the detennination of probable cause is not lodged with this Court. 49 We emphasize
that the viewpoint we follow must conform to the nature of reviewing a CA decision, which was
rendered under Rule 65 of the Rules of Court.

In Hao v. People, [[50] ] we explained that in this situation, the Court is confronted with the
question of whether the CA correctly determined the presence or absence of grave abuse of
discretion on the part of the trial court, and not on the basis of whether the latter's assessment
of the incidents before it was strictly legally correct. To recall, grave abuse of discretion exists
when there is an arbitrary or despotic exercise of power due to passion, prejudice or personal
hostility; or a whimsical, arbitrary or capricious exercise of power that amounts to an evasion of
or a refusal to perform a positive duty enjoined by law or to act at all in contemplation of law. 51

In this case, the CA no longer dealt with the particular exhibits relied upon by the RTC to
conclude the absence of probable cause to indict Ang as an accused in the case for estafa. In
its rulings, the RTC reasoned as follows: 52
The fact that the accused is the owner of the truck that carried the objects of the crime cannot
make him a co-conspirator in the execution of the crime of estafa. An affirmation of this
supposition (sic) open a floodgate for charges against people, whose only fault was being
owners of vehicle used in the commission of the crime.

xxxx

Upon review and examination of the prosecution evidence in the judicial determination of
probable cause, there is total absence of any prosecution evidence in their documents
(Annexes "A-1" to "A-9") and witnesses' affidavits (Exhibits "A" & "B") where this Court can
logically surmised nor inferred (sic) from any of the proven acts of any of the other accused that
Accused Joaquin Ang was in conspiracy with the other accused in their common criminal unity
and intent to defraud Anlud.

There was nothing from these documents and affidavits that Accused Joaquin Ang committed,
executed or implied any act leading to a conclusion that he knew the commission of the crime
or performed any of the elements of the offense to establish that he acted in unison with the
other accused. There was no proof that he benefited from the effects of the crime. There was
no proof that he gave his consent to the commission of the alleged crime.

In view of this (sic) findings, this Court agrees with the observation of the Office of the City
Prosecutor of Calamba City in their Resolution on Reconsideration dated 22 September 2004
that absolved Accused Joaquin Ang. To quote their logic and ratio:

The bone of movant's contention dwells on the theory of conspiracy which was the basis of his
inclusion as one of the accused. Indubitably, accused Renato Bagaua and Edjanel Jose were
the assigned drivers of his trucks with plate number UUG 787 and TJL 632 that were chanced
upon by the complainant loading scrap materials inside the premises of San Miguel
Corporation-Metal Closure Lithography Plant (SMC-MCLP) sometime in January 23, 2004. A
careful perusal of the evidence adduced by the parties will clearly show that moving was not
around at the premises of SMC MCLP during the time that the other respondents were loading
scrap materials on his truck Neither that he executed any act leading to a conclusion that he
has knowledge thereof or performed any of the elements of the offense charged to show that
he acted in unison with the accused. There is also no proof that he benefited, in any manner,
from the effects of the crime or gave his consent to the commission thereof.

Based on the explanation of the RTC, this Court holds that the CA was correct in not finding
grave abuse of discretion on the part of the trial court. In referring to the extant facts, the
1âw phi 1

arguments of the parties, as well as logic and law, the RTC did not whimsically, arbitrarily, or
capriciously ascertain the absence of probable cause.

Probable cause, albeit requiring less evidence than that which would justify a conviction,
nevertheless implies the probability of guilt and requires more than bare suspicion. 53 Given that
Ang was implicated in the conspiracy, the trial court correctly looked into whether respondent
performed any overt act as direct or indirect contribution to the execution of the crime planned
to be committed. 54

As held by the RTC, apart from owning the trucks, no other link has been established by the
prosecution to hold respondent as a conspirator in the hauling of the scrap materials. Even in
the instant petition,55 petitioner harps only on Ang being engaged in scrap trading, owning the
trucks, and employing the accused as his truck drivers. Without more, none of these depicts
any overt act of respondent connected to the accomplishment of estafa.
 Petitioner relies on the Memorandum submitted by Ang before the Office of the Provincial
Prosecutor of Calamba, Laguna, on 25 September 2004 to argue that respondent admitted his
complicity in the transaction. He purportedly admitted to the crime when he pleaded: 56

Worse, Alfredo (petitioner's representative) went beyond the bounds of fairness and good faith
by maliciously and recklessly accusing the poor truck drivers Edjanel and Renato of the crime
when all they did was to drive the truck for their employer who had negotiated with San Miguel
for the purchase of the scrap material.

This issue was already raised by petitioner in the proceedings below. Unfortunately, neither the
RTC nor the CA discussed this matter.

Based on our own appreciation then, we find that nowhere in the above-quoted passage is it
indicated that respondent specifically made a factual admission that he had instructed his
drivers to go to the plant, misrepresent that they were from Anlud Metal Recycling Corporation,
and coordinate the hauling of the scrap materials with Alday and Dela Cruz. An admission must
be clear; and in this instance, it must take into account the unwavering position of Ang that he
did not conspire with any of the accused in their alleged scheme to haul scrap materials with
the use of his trucks. 57

All told, we are not inclined to disturb the conclusions of the RTC, as these are based on the
evidence on record. Neither are we in disagreement with the CA, which remarked that the
dismissal of the criminal action against Ang is "not fatal to the cause of the public prosecution
because such quashal appears to have been issued at the initial stage of the criminal trial
process." 58 Considering the foregoing, we rule to sustain the judgments of the courts a quo.

WHEREFORE, the Petition for Review filed by Anlud Metal Recycling Corporation is DENIED.
The Court of Appeals Decision dated 4 December 2007 and subsequent Resolution dated 13
March 2008 in CA G.R. SP. No. 97124, affirming the Regional Trial Court Decision dated 18
September 2006 and Order dated 3 October 2006 in Criminal Case No. 12691-04-C are
AFFIRMED.

SO ORDERED.

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 SECOND DIVISION

[ G.R. No. 216566, February 17, 2016 ]

MAGELLAN AEROSPACE CORPORATION, PETITIONER, VS.

PHILIPPINE AIR FORCE, RESPONDENT.

DECISION
MENDOZA, J.:
In this petition[1] for review on certiorari under Rule 45 of the Rules of
Court, petitioner Magellan Aerospace Corporation (MAC) seeks the
review of the November 18, 2013 Decision[2] and January 26, 2015
Resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 96589,
insofar as they sustained the February 14, 2011 Order[4] of the Regional
Trial Court, Branch 211, Mandaluyong City (RTC), in dismissing the
complaint[5] filed by MAC against the respondent, Philippine Air Force
(PAF).

The Antecedents

On September 18, 2008, PAF contracted Chervin Enterprises, Inc.

(Chervin) for the overhaul of two T76 aircraft engines in an agreement
denominated as "Contract for the Procurement of Services and
Overhaul of Two (2) OV10 Engines."[6] Due to its lack of technical
capability to effect the repair and overhaul required by PAF, Chervin
commissioned MAC to do the work for US$364,577.00. MAC, in turn,
outsourced the overhaul service from another subcontractor, National
Flight Services, Inc. (NFSI). Eventually, the engines were overhauled
and delivered to the PAF. Satisfied with the service, PAF accepted the
overhauled engines.[7]

On December 15, 2008, MAC demanded from Chervin the payment of

US$264,577.00 representing the balance of the contract price. In a
letter to the Trade Commission of the Canadian Embassy, dated
December 21, 2009, PAF confirmed that it had already released to
Chervin the amount of P23,760,000.00, on November 7, 2008, as
partial payment for the overhaul service, and that it withheld the
amount of P2,376,000.00 as retention fund.[8]

Notwithstanding the release of funds to Chervin, MAC was not paid for
the services rendered despite several demands. Unpaid, MAC
demanded from PAF the release of the retained amount. In a letter,
dated March 3, 2010, however, PAF rejected the demand and informed
MAC that the amount could not be released as it was being held in trust
for Chervin.[9]

On July 6, 2010, MAC filed a complaint[10] for sum of money before the
RTC against Chervin together with its Managing Director, Elvi T. Sosing
(Sosing), and the PAF. It prayed that Chervin be ordered to pay the
amount of US$264,577.00, plus 12% legal interest from January 15,
2009 until full payment; that in the event of failure of Chervin to pay
the amount claimed, PAF be ordered to pay the said amount with
interest and to release the retained amount of P2,376,000.00 plus
attorneys fees and litigation expenses amounting to P500,000.00; and
that the defendants pay the costs of suit. MAC alleged that Chervin
merely acted as an agent of PAF.

On August 24, 2010, PAF moved to dismiss the complaint averring that
its contract with Chervin was one for repair and overhaul and not for
agency; that it was never privy to any contract between Chervin and
MAC; and that it already paid Chervin on January 22, 2009, and on
July 13, 2010 in full settlement of its obligations.[11]

Chervin also asked the RTC to dismiss the complaint against them
asserting that MAC had no capacity to sue because of its status as a
nonresident doing business in the Philippines without the required
license, and that no disclosure was made that it was suing on an
isolated transaction which would mean that the real party-in-interest
was not MAC, but NFSI.[12]

On February 14, 2011, the RTC granted both motions to dismiss and
ordered the dismissal of the complaint filed by MAC. The decretal
portion of the said order reads:
WHEREFORE, finding defendants CHERVIN ENTERPRISES,
INC. AND ELVI T. SOSING, and public defendant PHILIPPINE
AIR FORCE'S motions to be impressed with merit, the same are
hereby GRANTED.

SO ORDERED.[13]

Aggrieved, MAC appealed before the CA.

On November 18, 2013, the CA partly granted MAC's appeal by

reversing the RTC order of dismissal of the complaint against Chervin
and Sosing. It, however, affirmed the dismissal of the complaint against
PAF. The CA explained that MAC failed to show that PAF had a
correlative duty of paying under the overhauling contract as it was
obvious that the contract was executed only between MAC and Chervin.
Thus, the CA disposed:

We PARTIALLY GRANT the appeal, and REVERSE the Order

dated 14 February 2011 of the Regional Trial Court, Branch 211,
Mandaluyong City, insofar as it dismissed the Complaint against
defendants-appellees Chervin Enterprises, Inc., and Elvi T. Sosing.
We REMAND the case to the RTC for the continuation of proceedings
against said defendants-appellees.

IT IS SO ORDERED.[14]

MAC moved for a partial reconsideration of the decision but its motion
was denied by the CA in its January 26, 2015 Resolution.

Persistent, MAC filed this petition citing the following

 GROUNDS IN SUPPORT OF THE PETITION

I. THE COURT OF APPEALS ERRED IN RULING THAT THE

COMPLAINT DOES NOT STATE A CAUSE OF ACTION
AGAINST RESPONDENT PAF, WHEN THE COMPLAINT
CLEARLY AND SUFFICIENTLY ALLEGED ULTIMATE
FACTS THAT WILL SHOW AND SUPPORT SUCH
CAUSE OF ACTION.

II. THE COURT OF APPEALS DECIDED IN A MANNER

CONTRARY TO LEGAL PRECEDENT WHEN IT RULED
THAT THERE WAS NO AGENCY RELATIONSHIP
BETWEEN RESPONDENT PAF AND CHERVIN/SOSING,
AND DISMISSED THE COMPLAINT BASED ON
FAILURE TO STATE A CAUSE OF ACTION.

III. THE COURT OF APPEALS DECIDED IN A MANNER

CONTRARY TO LAW AND LEGAL PRECEDENT WHEN
IT FAILED TO CONSIDER THAT RESPONDENT PAF'S
MOTION TO DISMISS VIOLATED THE MANDATORY
RULE ON NOTICE FOR MOTIONS AND SHOULD NOT
HAVE BEEN TAKEN COGNIZANCE BY THE RTC IN THE
FIRST PLACE.[15]

MAC prays that its complaint against PAF be reinstated and that this
Court rule that (1) the CA erred in finding that the complaint against
PAF failed to sufficiently state a cause of action; (2) the conclusion of
the CA that no agency relationship existed between PAF and Chervin is
premature as such conclusion can only be had after the trial on the
merits is conducted; and (3) PAF violated the three-day notice rule
relative to the motion to dismiss filed before the RTC.

The Court's Ruling

The Court denies the petition.

Cause of action is defined as an act or omission by which a party

violates a right of another.[16] In pursuing that cause, a plaintiff must
first plead in the complaint a "concise statement of the ultimate or
essential facts constituting the cause of action."[17] In particular, the
plaintiff must show on the face of the complaint that there exists a legal
right on his or her part, a correlative obligation of the defendant to
respect such right, and an act or omission of such defendant in violation
of the plaintiffs rights.[18]

Such a complaint may, however, be subjected to an immediate

challenge. Under Section 1(g), Rule 16 of the Rules of Court (Rules), the
defendant may file a motion to dismiss "[w]ithin the time for but before
filing the answer to the complaint or pleading asserting a claim"
anchored on the defense that the pleading asserting the claim stated no
cause of action.[19]

In making such challenge, the defendant's issue is not whether a

plaintiff will ultimately prevail, but whether the claimant is entitled to
offer evidence to support the claims.[20] It has nothing to do with the
merits of the case. "Whether those allegations are true or not is beside
the point, for their truth is hypothetically admitted by the
motion."[21] The inquiry is then limited only into the sufficiency, not the
veracity of the material allegations.[22] Thus, if the allegations in the
complaint furnish sufficient basis on which it can be maintained, it
should not be dismissed regardless of the defense that may be
presented by the defendants.[23] Conversely, the dismissal of the
complaint is permitted if the allegations stated therein fail to show that
plaintiff is entitled to relief.

Accordingly, the survival of the complaint against a Rule 16 challenge

depends upon the sufficiency of the averments made. In determining
whether an initiatory pleading sufficiently pleads, the test applied is
whether the court can render a valid judgment in accordance with the
prayer if the truth of the facts alleged is admitted.[24]

In this case, MAC seeks the Court's attention to the following

allegations in the complaint as cited in the petition:
5. On or about 18 September 2008, defendant PAF contracted
defendant Chervin for the overhaul of two (2) T76 aircraft engines, with
serial numbers GE-00307 and GE-00039, respectively.

6. Defendant Chervin did not and does not have the capacity, technical
skilled personnel or tools to directly perform the overhaul of aircraft
engines. In order to perform the overhaul services, defendant Chervin
and its Managing Director/Proprietor, defendant Sosing, acting for and
on behalf or for the benefit of defendant PAF, commissioned plaintiff to
perform the services and to overhaul the subject aircraft engines for the
price of US$364,577.00.

xxx

10. Meanwhile, on or about 7 November 2008, defendant PAF released

the amount of Twenty Three Million Seven Hundred Sixty Thousand
Pesos (£23,760,000.00) to its agents, defendants Chervin and Sosing,
as payment of 90% of the total price of the overhaul services. Defendant
PAF retained a 10% retention fund in the amount of Two Million Three
Hundred Seventy Six Thousand Pesos (P2,376,000.00). A copy of
defendant PAF's letter dated 21 December 2009 to Trade
Commissioner of the Canadian Embassy, affirming the PAF's release
and retention of the aforestated sums of money, is attached hereto as
Annex "I".

11. However, notwithstanding defendant PAF's release of funds

covering 90% payment for the repair of the subject aircraft engines,
defendant PAF's agents - defendants Chervin and Sosing - did not pay
plaintiff for the services rendered, leaving an indebtedness to plaintiff
in the amount of Two Hundred Sixty Four Thousand Five Hundred
Seventy Seven US Dollars (US$264,577.00).
 xxx

18. Meanwhile, plaintiff also sent to defendant PAF - as the principal of

defendants Chervin and Sosing, and the beneficiary of plaintiffs
overhaul and repair services which were commissioned by defendants
Chervin and Sosing for and on its behalf - a demand letter dated 26
January 2010, demanding the release of the 10% retention amount of
Two Million Three Hundred Seventy Six Thousand Pesos
(P2,376,000.00) directly to plaintiff, as partial payment of the amount
owed to it. A copy of plaintiffs demand letter to defendant PAF is
attached hereto as Annex "M".

19. However, in a reply letter dated 3 March 2010, defendant PAF

rejected plaintiffs demand, alleging that 'the amount of retention
money (P2,376,000.00) withheld by the PAF is kept in trust for Chervin
Enterprises who is the owner thereof. A copy of defendant PAF's reply
letter dated 3 March 2010 is attached hereto as Annex "N".

20. As defendants Chervin's and Sosing's principal, defendant PAF

must comply with all the obligations which its agents, defendants
Chervin and Sosing, may have contracted within the scope of their
authority (Article 1910, Civil Code of the Philippines). These obligations
include paying plaintiff in full for the overhaul and repair services
performed on defendant PAF's aircraft engines, which services were
commissioned by defendants Chervin and Sosing for and on behalf of
defendant PAF.

21. Hence, as the principal of defendants Chervin and Sosing, and the
beneficiary of plaintiffs overhaul and repair services, defendant PAF
must be made answerable for defendants Chervin's and Sosing's failure
to pay plaintiff. Therefore, as an alternative cause of action in the event
that the First Cause of Action is not and/or cannot be fully satisfied by
defendants Chervin and Sosing, defendant PAF must be held liable for
the outstanding amount of Two Hundred Sixty Four Thousand Five
Hundred Seventy Seven US Dollars (US$264,577.00), plus 12% legal
interest thereon from 15 January 2009 until full payment is received.[25]
In essence, MAC asserts that the allegations stating that Chervin "acted
for and in behalf of a "principal," PAF, in tapping its services for the
overhaul of the aircraft engines, completed with the requirements of
sufficiency in stating its cause of action against PAF. MAC claims that
its allegation of Chervin being "mere agents" of PAF in the overhaul
contract, establishes clearly, under the premise of admitting them as
true for purposes of a Rule 16 challenge, its entitlement to recover from
PAF, the latter being the "principal" and "beneficiary."

The Court is not persuaded.

The standard used in determining the sufficiency of the allegations is

not as comprehensive as MAC would want to impress.

The assumption of truth (commonly known as hypothetical admission

of truth), accorded under the test, does not cover all the allegations
pleaded in the complaint. Only ultimate facts or those facts which the
expected evidence will support[26] are considered for purposes of the
test.[27] It does not cover legal conclusions or evidentiary facts.

The reason for such a rule is quite simple. The standard requires that
"[e]very pleading shall contain in a methodical and logical form, a plain,
concise and direct statement of the ultimate facts on which the party
pleading relies for his claim or defense, as the case may be, omitting the
statement of mere evidentiary facts."[28] Thus, trial courts need not
overly stretch its limits in considering all allegations just because they
were included in the complaint. Evidently, matters that are required
and expected to be sufficiently included in a complaint and, thus,
accorded the assumption of truth, exclude those that are mere legal
conclusions, inferences, evidentiary facts, or even unwarranted
deductions.

In this case, the averment that Chervin acted as PAF's mere agents in
subsequently contracting MAC to perform the overhauling services is
not an ultimate fact. Nothing can be found in the complaint that can
serve as a premise of PAF's status as the principal in the contract
between Chervin and MAC. No factual circumstances were alleged that
could plausibly convince the Court that PAF was a party to the
subsequent outsourcing of the overhauling services. Not even in the
annexes can the Court find any plausible basis for the assertion of MAC
on PAF's status as a principal. Had MAC went beyond barren words
and included in the complaint essential supporting details, though not
required to be overly specific, this would have permitted MAC to
substantiate its claims during the trial and survive the Rule 16
challenge. In short, factual circumstances serving as predicates were
not provided, to add to MAC's barren statement concerning PAF's
liability.

What MAC entirely did was to state a mere conclusion of law, if not, an
inference based on matters not stated in the pleading. To clarify, a mere
allegation that PAF, as a principal of Chervin, can be held liable for
nonpayment of the amounts due, does not comply with the ultimate
fact rule. Without the constitutive factual predicates, any assertion
could never satisfy the threshold of an ultimate fact.

Not being an ultimate fact, the assumption of truth does not apply to
the aforementioned allegation made by MAC concerning PAF.
Consequently, the narrative that PAF can be held liable as a principal in
the agreement between Chervin and MAC cannot be considered in the
course of applying the sufficiency test used in Section 1(g) Rule 16. It,
therefore, produces no link to the alleged PAF's correlative duty to pay
the amounts being claimed by MAC - a necessary element of a cause of
action that must be found in the pleading.

Lacking that essential link, and after hypothetically admitting the truth
of all the allegations other than those that are ought to be excluded for
not being ultimate facts, it is demonstrable that the CA correctly ruled
for the dismissal of the complaint on the ground of MAC s failure to
state its cause of action against PAF.

The foregoing discussion makes plain that the CA did not act
prematurely in dismissing the complaint. To reiterate, in a motion to
dismiss filed under Section 1(g) of Rule 16, the issue is not whether the
plaintiff is entitled to relief. Instead, the issue is simply whether the
plaintiff, on the basis of the allegations hypothetically admitted as true,
can be permitted to substantiate the claims during the trial. The trial
court only passes upon the issue on the basis of the allegations in the
complaint assuming them to be true and does not make any inquiry
into the truth of the allegations or a declaration that they are false.[29]

Perhaps, the CA might have been misunderstood as, indeed, the tenor
of its decision apparently gave an untimely conclusion that no agency
relationship existed. Be that as it may, this Court affirms the findings of
the CA - that the order of dismissal of MAC s complaint against PAF is
proper.

Proceeding now to whether PAF violated the three-day notice rule

relative to its motion to dismiss filed before the RTC, it has been
repeatedly held that the three 3-day notice requirement in motions
under Sections 4 and 5, Rule 15 of the Rules of Court as mandatory for
being an integral component of procedural due process.[30] Just like any
other rule, however, this Court has permitted its relaxation subject, of
course, to certain conditions. Jurisprudence provides that for liberality
to be applied, it must be assured that the adverse party has been
afforded the opportunity to be heard through pleadings filed in
opposition to the motion. In such a way, the purpose behind the three-
day notice rule is deemed realized. In Anama v. Court of
Appeals,[31] the Court explained:

In Somera Vda. De Navarro v. Navarro, the Court held that there was
substantial compliance of the rule on notice of motions even if the first
notice was irregular because no prejudice was caused the adverse party
since the motion was not considered and resolved until after several
postponements of which the parties were duly notified.

Likewise, in Jehan Shipping Corporation v. National Food Authority,

the Court held that despite the lack of notice of hearing in a motion for
reconsideration, there was substantial compliance with the
requirements of due process where the adverse party actually had the
opportunity to be heard and had filed pleadings in opposition to the
motion. The Court held:

This Court has indeed held time and again, that under Sections 4 and 5
of Rule 15 of the Rules of Court, mandatory is the requirement in a
motion, which is rendered defective by failure to comply with the
requirement. As a rule, a motion without a notice of hearing is
considered pro forma and does not affect the reglementary period for
the appeal or the filing of the requisite pleading.[32]

Here, the Court agrees with the observations of the OSG, representing
PAF. Indeed, it is a matter of record that during the August 21, 2010
scheduled hearing, MAC's counsel did not object to receiving the copy
of PAF's motion to dismiss on the same day. What that counsel did
instead was to ask for a period of 15 days within which to file its
comment/opposition to the said motion which the RTC granted. On
September 14, 2010, MAC filed its Opposition.[33]

Clearly, MAC was afforded the opportunity to be heard as its opposition

to the motion to dismiss was considered by the RTC in resolving the
issue raised by PAF. Objectively speaking, the spirit behind the three
(3)-day notice requirement was satisfied.

One Final Note

The Court has observed that Chervin was allowed and considered
qualified to bid despite the fact that it had no technical capability to
provide the services required by the PAF. It is quite disturbing that after
Chervin's initial subcontracting agreement with MAC, another layer of
subcontractor entered the scene so that the overhaul and repair could
be completed. Moreover, it appears that the subcontractors engaged by
Chervin are foreign entities.

These arrangements appear to be non-compliant with the rules on

subcontracting particularly on disclosure and the limits on the
participation of foreign entities. Under the Government Procurement
Policy Board (GPPB) Manual of Procedures for the Procurement of
Goods and Services, subcontracting rules are laid down as follows:

Generally, a supplier may be allowed to subcontract a portion of the

contract or project. However, the supplier should not be allowed to
subcontract a material or significant portion of the contract or project,
which portion must not exceed twenty percent (20%) of the total
project cost. The bidding documents must specify what are considered
as significant/material component(s) of the project. All
subcontracting arrangements must be disclosed at the time of
bidding, and subcontractors must be identified in the bid
submitted by the supplier. Any subcontracting arrangements
made during project implementation and not disclosed at the
time of the bidding shall not be allowed. The subcontracting
arrangement shall not relieve the supplier of any liability or obligation
under the contract. Moreover, subcontractors are obliged to comply
with the provisions of the contract and shall be jointly and severally
liable with the principal supplier, in case of breach thereof, in so far as
the portion of the contract subcontracted to it is
concerned. Subcontractors are also bound by the same
nationality requirement that applies to the principal
suppliers.[34]

[Emphases Supplied]

Were the above stated rules adhered to? As the Court has no time
and resources to probe into the matter, it is in the interest of the
public that separate investigations be conducted by the Office of
the Ombudsman and the Commission on Audit to find out if the
provisions in the Government Procurement Reform Act
(Procurement Law) and its implementing rules and regulations
on subcontracting and participation of foreign suppliers of
services were complied with.
 If warranted by any initial finding of irregularities, appropriate
charges should be filed against the responsible officers.

WHEREFORE, the petition is DENIED.

The Office of the Ombudsman and the Commission on Audit are

hereby ordered to investigate and find out if the provisions in the
Procurement Law and its implementing rules and regulations on
subcontracting and participation of foreign bidders were
complied with and file the appropriate charges, if warranted.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

AQUALAB PHILIPPINES, INC., G.R. No. 182673

Petitioner,
- versus -
Present:

HEIRS OF MARCELINO PAGOBO,

CARPIO, J., Chairperson,
namely: PELAGIO PAGOBO,
GONZALO PAGOBO, ANIANA CHICO-NAZARIO,
PAGOBO, ALFREDO SALVADOR,
VELASCO, JR.,
SAMUEL PAGOBO, REMEDIOS
PAGOBO, VALENTINA PAGOBO, NACHURA, and
JONATHAN PAGOBO, VIRGILIO
PERALTA, JJ.
PAGOBO, FELISA YAYON, SIMPLICIO
YAYON, BARTOLOME YAYON,
BERNARDINA YAYON, and ISIDRA
YAYON; HEIRS OF HILARION
PAGOBO, namely:PABLO PAGOBO,
ALFREDO PAGOBO, FELIX PAGOBO,
RUFINA P. DAHIL, BRIGIDA P.
GODINEZ, HONORATA P. GODINEZ,
MAXIMO PAGOBO, ADRIANA
PAGOBO, CECILIA PAGOBO, LILIA
PAGOBO, CRESCENCIO PAGOBO,
ROBERTO PAGOBO, ALFONSO
PAGOBO, CANDIDO PAGOBO,
BARTOLOME PAGOBO, ELPIDIO
PAGOBO, PEDRO PAGOBO, ROGELIO
PAGOBO, SHIRLEY P. CAETE,
MILAGROS PAGOBO, JUANITO
PAGOBO, JR., ANTONIO PAGOBO,
IRENEA PAGOBO, and ANIANO P.
WAGWAG; HEIRS OF ANTONIO
PAGOBO, namely: GAUDENCIO
PAGOBO, LOTITA PAGOBO, ERNESTO
PAGOBO, ROMANA P. DANIL, FELISA
PAGOBO, CARMEN PAGOBO, and
SALUD PAGOBO; HEIRS OF MAXIMO
PAGOBO, namely: RAMON PAGOBO,
RODULFO PAGOBO, CRIPSIN
PAGOBO, and URBANO
PAGOBO; HEIRS OF DONATA
PAGOBO WAGWAG, namely: FELISA
WAGWAG, ANASTACIO WAGWAG,
FILDEL WAGWAG, and NEMESIA
WAGWAG; HEIR OF AQUILINA
PAGOBO: VICTOR PAGOBO; HEIRS
OF JUANITO PAGOBO EYAS, namely:
MARCELO P. EYAS, ROCHI P. FLORES,
and ORDIE P. FLORES; HEIRS OF
CATALINA PAGOBO,
namely: RESTITUTO PAGOBO,
CARLINA P. TALINGTING, TEOFILO P.
TALINGTING, and JUANITO P.
TALINGTING,
Respondents.
 Promulgated:

October 5, 2009
x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

The Case

In this Petition for Review on Certiorari under Rule 45, Aqualab

Philippines, Inc. (Aqualab) assails the March 15, 2007 Decision[1] and April 22,
2008 Resolution[2] of the Court of Appeals (CA) in CA-G.R. CV No. 58540, which
reversed the September 30, 1997 Order[3] of the Regional Trial Court (RTC),
Branch 53 in Lapu-lapu City, Cebu. The RTC dismissed Civil Case No. 4086-L
for Partition, Declaration of Nullity of Documents, Cancellation of Transfer
Certificate of Titles, Reconveyance with Right of Legal Redemption, Damages
and Attorneys Fees filed by respondents.

The Facts
 Subject of the complaint initiated by respondents are Lots 6727-Q and
6727-Y of the Opon Cadastre, situated in Punta Engao, Lapu-
lapu City, Mactan Island, Cebu, particularly described as follows:

LOT NO. 6727-Q

A parcel of land (Lot 6727-Q of the subdivision on plan (LRC) Psd-

117050, being a portion of Lot 6727 of the Cadastral Survey of Opon, L.R.C.
(GLRO) Cad. Rec. No. 1004), situated in the Barrio of Punta Engao, City
of Lapu-lapu, Island of Mactan x x x containing an area of ONE THOUSAND
(1,000) SQUARE METERS, more or less.All points referred to are indicated
on the plan and marked on the ground as follows: x x x date of the original
survey, Aug. 1927 Dec. 1928, and that of the subdivision survey, Aug. 7, and
10, 1963, and Sept. 27 and 30, 1967.

LOT NO. 6727-Y

A parcel of land (Lot 6727-Y of the subdivision on plan (LRC) Psd-

117050, being a portion of Lot 6727 of the Cadastral Survey of Opon, L.R.C.
(GLRO) Cad. Rec. No. 1004), situated in the Barrio of Punta Engao, City
of Lapu-lapu, Island of Mactan x x x containing an area of SIXTEEN
THOUSAND ONE HUNDRED SIXTY SEVEN (16,167) SQUARE
METERS, more or less. All points referred to are indicated on the plan and
marked on the ground as follows: x x x date of the original survey, Aug. 1927
Dec. 1928, and that of the subdivision survey, Aug. 7, and 10, 1963, and Sept.
27 and 30, 1967.

Lot 6727-Q and Lot 6727-Y used to form part of Lot 6727 owned by
respondents great grandfather, Juan Pagobo, covered by Original Certificate of
Title No. (OCT) RO-2246[4] containing an area of 127,436 square meters.

Lot 6727 was once covered by Juan Pagobos homestead application.

Upon his death on January 18, 1947,[5] his homestead application continued to
be processed culminating in the issuance on December 18, 1969 of Homestead
Patent No. 128470 for Lot 6727. On the basis of this homestead patent, OCT
RO-2246 was issued in the name of Juan Pagobo.Apparently, from the
description of the subdivision lots of Lot 6727, particularly those of subject Lots
6727-Q and 6727-Y above, and even before the issuance of OCT RO-2246, the
mother Lot 6727 was surveyed in 1963 and 1967 and eventually subdivided into
34 subdivision lots denominated as Lots 6727-A to 6727-HH.
 Incidentally, on the same date that OCT RO-2246 was issued covering
Lot 6727, OCT RO-1277[6] was likewise issued also covering Lot 6727 in the
name of the late Juan Pagobo also pursuant to Homestead Patent No.
128470. Subsequently, however, on August 10, 1977, OCT RO-1277 was
canceled for being null and void pursuant to an Order issued on August 4, 1977
by the Court of First Instance in Lapu-lapu City in view of the issuance of OCT
RO-2246.[7]

Shortly after OCT RO-1277 and OCT RO-2246 were issued, subject Lots
6727-Q and 6727-Y were subsequently sold to Tarcela de Espina who then
secured Transfer Certificate of Title No. (TCT) 3294[8]therefor on April 21,
1970. The purchase by Tarcela de Espina of subject Lot 6727-Y from the heirs
of Juan Pagobo and subject Lot 6727-Q from one Antonio Alcantara was duly
annotated on the Memorandum of Incumbrances of both OCT RO-1277[9]and
OCT RO-2246.[10]

Subsequently, Tarcela de Espina sold subject lots to Rene Espina who

was issued, on September 28, 1987, TCT 17830[11] for Lot 6727-Q and TCT
17831[12] for Lot 6727-Y. Thereafter, Rene Espina sold subject lots to Anthony
Gaw Kache, who in turn was issued TCT 17918[13] and TCT
18177,[14]respectively, on November 9, 1987.Finally, Aqualab acquired subject
lots from Anthony Gaw Kache and was issued TCT 18442[15] and TCT
18443,[16]respectively, on May 4, 1988.
On August 10, 1994, respondents, alleging that Aqualab has
disturbed their peaceful occupation of subject lots in 1991, filed a
Complaint[17] for Partition, Declaration of Nullity of Documents, Cancellation
of Transfer Certificate of Titles, Reconveyance with Right of Legal Redemption,
Damages and Attorneys Feesagainst Aqualab, the Register of Deeds of Lapu-
Lapu City, Cebu, and, for being unwilling co-plaintiffs and alleged refusal to
have subject lots partitioned, the Heirs of Bernabe Pagobo, namely: Anastacio
Pagobo, Demetrio Pagobo, Felix Pagobo, Olympia P. Tampus, Damasa Pagobo,
Salud P. Maloloy-on, Candida Pagobo, and Adriana P. Mahusay.

The Complaint pertinently alleged that:

 ALLEGATIONS COMMON TO ALL CAUSE OF ACTION

4. Plaintiffs are the absolute and legal owners and rightful possessors
of Lot [no.] 6727-Q and Lot no. 6727-Y.These are ancestral lands which are
part of a bigger parcel of land, registered in the name of the plaintiffs great
grandfather Juan Pagobo and more particularly described as follows:

xxxx

5. Ownership and Possession by plaintiffs [sic] predecessors-in-

interest, and plaintiffs herein, respectively, over the said land, have been
peaceful, continuous [sic] open, public and adverse, since the year 1936 or
even earlier. Their peaceful possession was disturbed only in 1991 as
hereinafter described.

xxxx

15. In the records with the office of the Registry of Deeds of Lapu-
Lapu City, Lot No. 6727 of the Opon Cadastre has been subdivided in to
THIRTY-FOUR (34) lots and are denominated as Lots Nos. 6727-A to 6727-
HH, respectively, as per subdivision plan, a machine copy of which is hereto
attached and marked as Annex A hereof.

16. Defendants Anastacio Pagobo, x x x are the surviving children and

grandchildren, respectively, of the late BERNABE PAGOBO and are herein
joined as party-defendants for being unwilling co-plaintiffs; and also because
despite demands by plaintiffs upon these aforenamed defendants for the
partition of the aforesaid land, the latter refused and still refuses to have the
same partitioned.

FIRST CAUSE OF ACTION AGAINST DEFENDANT

AQUALAB PHILIPPINES, INC. AND SANTIAGO TANCHAN, JR.

17. Sometime in 1991, defendant Aqualab Philippines Inc. represented

by Santiago Tanchan, Jr., claiming ownership of Lot Nos. 6727-Q and 6727-
Y, forcibly entered, and without any court Order, and against the will of the
plaintiffs, said Lot no. 6727-Q and Lot no. 6727-Y. The truth of the matter is
that these defendants despite full knowledge that absolute and legal ownership
of Lot no. 6727-Q and Lot no. 6727-Y belonged to plaintiffs, and despite
knowledge that peaceful, public and adverse possession were being
continuously exercised by plaintiff over said land for a period in excess of
THIRTY (30) years, did there and then, by the use of fraud and
misrepresentation and without informing the plaintiffs, caused the transfer into
the name of defendant Aqualab Philippines Inc., Lot no. 6727-Q and Lot no.
6727-Y, consisting of an area of ONE THOUSAND (1,000) SQUARE
 METERS and SIXTEEN THOUSAND ONE HUNDRED SIXTY SEVEN
(16,167) SQUARE METERS, respectively. Lots No. 6727-Q and Lot no.
6727-Y are presently covered by Transfer Certificate of Titles No. 18442 and
CTC No. 18443, respectively, copies of which are hereto attached as Annexes
B and C, respectively.

18. The defendants entered into transactions of the lands subject matter
of this case, without the knowledge of plaintiffs and their predecessors-in-
interest, and defendants did so despite full knowledge that ownership of said
lands belonged to plaintiffs and their predecessors-in-interest; and that
defendants entered into said transactions despite full knowledge by them and
their predecessors-in-interest that the lots was [sic] covered by a homestead
patent and as such cannot be alienated within twenty-five (25) years from its
issuance on February 10, 1970.

SECOND CAUSE OF ACTION

xxxx

20. Granting, without necessarily admitting, that the transaction

entered into by the defendants are legal and binding; Plaintiffs then have not
been duly notified of the said sale and therefore, have the right to redeem the
same under Article 1620 in relation to Article 1623 of the New Civil Code,
and also under Commonwealth Acts [sic] No. 141, as amended.[18]

On August 26, 1994, the heirs of Bernabe Pagobo filed their

Answer,[19]asserting that subject Lot 6727-Y was owned by their predecessor
Bernabe Pagobo as evidenced by Tax Declaration No. (TD) 00520.[20] They
maintained that even before the Second World War and before the death of Juan
Pagobo on January 18, 1947, Bernabe Pagobo already had possession of
subject Lot 6727-Y which was the portion assigned to him.Moreover, they
contended that respondents never made any demands for partition of
subject Lot 6727-Y.

On September 12, 1994, Aqualab filed its Motion to Dismiss [21] on the
grounds of: (1) prescription of the action for declaration of nullity of documents,
cancellation of transfer certificates of title, and reconveyance; and (2) no cause
of action for partition and legal redemption of the mother title of subject
lots, i.e., OCT RO-2246 had already been subdivided and several conveyances
made of the subdivided lots.
 Ruling of the Trial Court

By Order dated September 30, 1997, the RTC granted Aqualabs motion
and dismissed respondents complaint, disposing as follows:

Wherefore, in the light of the foregoing considerations, defendant

Aqualabs motion to dismiss, being impressed with merit, is hereby
granted. The complaint in the above-entitled case is hereby dismissed.

SO ORDERED. [22]

In granting Aqualabs motion to dismiss, the trial court ruled that

prescription has set in. Moreover, the trial court held that Aqualab is an innocent
purchaser for value and, thus, its rights are protected by law. Finally, it
concluded that legal redemption or reconveyance was no longer available to
respondents.

Undaunted, respondents appealed the above dismissal to the CA. The

parties thereafter filed their respective briefs.

Ruling of the Appellate Court

The CA saw things differently. On March 15, 2007, it rendered the

assailed decision, reversing the September 30, 1997 Order of dismissal by the
RTC, declaring the sale of subject lots as null and void, and remanding the case
to the trial court for partition proceedings. The fallo reads:

WHEREFORE, in view of the foregoing premises, the Order of the

Regional Trial Court dismissing the instant Complaint for Partition,
Declaration of Nullity of Documents, Cancellation of Transfer Certificates of
Title, Reconveyance with Right of Legal Redemption, Damages and
Attorneys Fees, and other Reliefs is REVERSED and SET ASIDE, and the
instant appeal is GRANTED, hereby declaring the sale of the homestead and
TCT Nos. 18442 and 18443 under the name of Aqualab null and void, and
ordering the Register of Deeds for the City of Lapu-lapu to cancel both
 certificates of title and to issue new certificates of title over Lots 6727-Q and
6727-Y under the name of appellants, and let this case be REMANDED to the
trial court for the presentation of evidence on the claim for partition and for
damages.

SO ORDERED.[23]

The CA resolved the following issues: (1) the propriety of the dismissal
of the complaint by the RTC; and, (2) whether respondents have the right to
redeem subject lots. The CA ruled that the trial court erred in dismissing the
complaint as the sale of subject lots to Tarcela de Espina was void, thus making
the subsequent conveyances ineffective and no titles were validly
transferred.Moreover, it ruled that Aqualab is not an innocent purchaser for
value, and held that respondents, as heirs of the homestead grantee, never lost
their valid title to the subject lots.

Through the equally assailed April 22, 2008 Resolution, the CA denied
Aqualabs motion for reconsideration.

Hence, we have this petition.

The Issues

(A)

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A

RADICAL DEPARTURE FROM THE USUAL AND ACCEPTED
COURSE OF JUDICIAL PROCEEDINGS THAT WOULD WARRANT
THE REVERSAL OF THE COURT OF APPEALS DECISION

(B)
WHETHER OR NOT THE COMPLAINT SHOULD BE DISMISSED
COMPLAINT [SIC] ON THE GROUND OF LACK OF CAUSE OF
ACTION

(C)

WHETHER OR NOT THE TRANSFERS OF THE DISPUTED PROPERTY

TO HEREIN PETITIONERS PREDECESSORS-IN-INTEREST WERE
VIOLATIVE OF THE FIVE (5) YEAR PROHIBITIVE PERIOD UNDER
SECTION 118 OF THE PUBLIC LAND ACT SO AS TO WARRANT
THEIR NULLIFICATION

(D)

WHETHER OR NOT THE PETITIONER IS AN INNOCENT PURCHASER

IN GOOD FAITH

(E)

WHETHER OR NOT THE RESPONDENTS CAUSE OF ACTION HAS

PRESCRIBED WARRANTING THE DISMISSAL OF THEIR
COMPLAINT ON THE GROUND OF PRESCRIPTION

(F)

WHETHER OR NOT THE RESPONDENTS COMPLAINT

CONSTITUTES A COLLATERAL ATTACK AGAINST THE TITLES OF
HEREIN PETITIONERS PREDECESSORS-IN-INTEREST
WARRANTING THE DISMISSAL THEREOF

(G)

WHETHER OR NOT THE RESPONDENTS APPEAL BEFORE THE

COURT OF APPEALS SHOULD HAVE BEEN DISMISSED IN VIEW OF
THE RESPONDENTS ADMISSION THAT THE CONVEYANCE OF THE
DISPUTED PROPERTY TO HEREIN PETITIONER WAS VALID
 (H)

WHETHER OR NOT THE COURT OF APPEALS DEPRIVED THE

PETITIONER OF ITS PROPERTY WITHOUT DUE PROCESS OF LAW
WHEN IT NULLIFIED THE PETITIONERS TITLE AND OWNERSHIP
OVER SUBJECT PROPERTY WITHOUT TRIAL THEREBY DEPRIVING
THE PETITIONER OF ITS PROPERTY WITHOUT DUE PROCESS OF
LAW[24]

The Courts Ruling

The petition is partly meritorious.

The core issues raised in the instant petition are factual in nature and can
be summed up into two: first, whether the action of respondents is barred by
prescription; and second, whether Aqualab is an innocent purchaser for value.

Hypothetical Admission of Factual Allegations

in the Complaint by Filing a Motion to Dismiss

In filing a motion to dismiss, the movant hypothetically admits the truth

of the material and relevant facts alleged and pleaded in the complaint. The
court, in resolving the motion to dismiss, must consider such hypothetical
admission, the documentary evidence presented during the hearing thereof, and
the relevant laws and jurisprudence bearing on the issues or subject matter of
the complaint.

Dismissal by Trial Court on Prescription and

Finding Defendant an Innocent Purchaser for Value

The trial court ruled that prescription has set in, since respondents alleged
in the complaint fraud and misrepresentation in procuring the transfer of subject
lots, and such transfer was made on April 21, 1970, while the instant complaint
was filed only on August 10, 1994, or a little over 24 years.Relying
on Buenaventura v. Court of Appeals,[25] where the Court held that an action for
reconveyance of title due to fraud is susceptible to prescription either within four
or 10 years, the trial court held that the instant action is definitely barred. It also
ruled that even if a constructive trust was created as averred by respondents,
still, the instant action has prescribed for a constructive trust prescribes in 10
years, relying on Tenio-Obsequio v. Court of Appeals.[26]

Moreover, the trial court, also relying on Tenio-Obsequio, agreed with

Aqualabs assertion that it was an innocent purchaser for value, which merely
relied on the correctness of the TCTs covering subject lots, i.e., TCT 17918 and
TCT 18177 in the name of Anthony Gaw Kache, and, as such, Aqualab, as
vendee, need not look beyond the certificate of title and investigate the title of
the vendor appearing on the face of said titles.

Finally, the trial court concluded that respondents cannot invoke legal
redemption under Article 1620 in relation to Art. 1623 of the Civil Code and
under Commonwealth Act No. (CA) 141, as amended,[27] for Lot 6727 had
already been divided into subdivision lots, the subject of numerous
transactions.Besides, it reasoned that legal redemption under CA 141 is only
applicable to cases of proper conveyance of a land covered by a homestead
patent, but not, as in the instant case, when the conveyances were assailed to be
improper.

Aqualab Hypothetically Admitted the Fraudulent Conveyances

and Respondents Possession of Subject Lots

Respondents aver that they are the absolute and lawful owners of subject
properties, i.e., Lots 6727-Q and 6727-Y, over which they have had actual
possession since 1936 or earlier until sometime in 1991, when Aqualab
disturbed such possession.[28] While the records show that respondents did not
have in their names the certificate of titles over subject lots, the factual assertion
of open, peaceful, public, and adverse possession is hypothetically admitted by
Aqualab.
 Moreover, respondents allege that the conveyances of subject lots were
fraudulently made in violation of the restrictions on alienation of homesteads
under CA 141, and that said conveyances were made without their knowledge
and, thus, asserting their right to redeem the subject properties in line with the
policy of CA 141 that the homestead should remain with the grantee and his
family.[29] The alleged fraudulent conveyances were likewise hypothetically
admitted by Aqualab.

On the other hand, Aqualabs co-defendants, the heirs of Bernabe Pagobo,

to respondents complaint, filed their Answer asserting possession and ownership
over subject Lot 6727-Y by submitting TD 00520 to prove payment of the real
estate tax thereon. However, on the allegation of disturbance of possession and
fraudulent conveyances without knowledge of respondents, the heirs of Bernabe
Pagobo merely maintained that they had no knowledge and information
sufficient to form a belief as to the truth thereof.

It is, thus, clear that by filing its motion to dismiss, Aqualab

hypothetically admitted the veracity of respondents continuous possession of
subject lots until 1991 when Aqualab disturbed such possession. Aqualab
likewise hypothetically admitted the fraudulent and illegal conveyances of
subject lots.

In its Motion to Dismiss, Aqualab moved for the dismissal of respondents

complaint on the ground of prescription, that it is an innocent purchaser for value
whose rights are protected by law, and that the complaint failed to state a cause
of action for partition and legal redemption.

Prescription Is Not Apparent

on the Face of the Complaint
 From the foregoing premises, the trial court erred in finding
prescription.Prescription, as a ground for a motion to dismiss, is adequate when
the complaint, on its face, shows that the action has already prescribed.[30] Such
is not the case in this instance. Respondents have duly averred continuous
possession until 1991 when such was allegedly disturbed by Aqualab. Being in
possession of the subject lotshypothetically admitted by Aqualabrespondents
right to reconveyance or annulment of title has not prescribed or is not time-
barred.

Verily, an action for annulment of title or reconveyance based on fraud is

imprescriptible where the plaintiff is in possession of the property subject of the
acts.[31] And the prescriptive period for the reconveyance of fraudulently
registered real property is 10 years, reckoned from the date of the issuance of
the certificate of title, if the plaintiff is not in possession.[32] Thus, one who is in
actual possession of a piece of land on a claim of ownership thereof may wait
until his possession is disturbed or his title is attacked before taking steps to
vindicate his right.[33]

In the instant case, as hypothetically admitted, respondents were in

possession until 1991, and until such possession is disturbed, the prescriptive
period does not run. Since respondents filed their complaint in 1994, or three
years after their possession was allegedly disturbed, it is clear that prescription
has not set in, either due to fraud or constructive trust.

Besides, if the plaintiff, as the real owner of the property, remains in

possession of the property, the prescriptive period to recover title and possession
of the property does not run against him. In such a case, an action for
reconveyance, if nonetheless filed, would be in the nature of a suit for quieting
of title, an action that is imprescriptible.[34]

Thus, the trial courts reliance on Buenaventura[35] and Tenio-

Obsequio[36]for prescription on the right of reconveyance due to fraud and
constructive trust, respectively, is misplaced, for in both cases, the plaintiffs
before the trial court were not in possession of the lots subject of their action.
Aqualab Not an Innocent Purchaser for Value Due to the Hypothetically
Admitted Respondents Possession of Subject Lots

In the instant case, again based on the hypothetically admitted allegations

in the complaint, it would appear that Anthony Gaw Kache, Aqualabs
predecessor-in-interest, was not in possession of subject lots. Such a fact should
have put Aqualab on guard relative to the possessors (respondents) interest over
subject lots. A buyer of real property that is in the possession of a person other
than the seller must be wary, and a buyer who does not investigate the rights of
the one in possession can hardly be regarded as a buyer in good faith.[37]

Having hypothetically admitted respondents possession of subject lots,

Aqualab cannot be considered, in the context of its motion to dismiss, to be an
innocent purchaser for value or a purchaser in good faith. Moreover, the defense
of indefeasibility of a Torrenstitle does not extend to a transferee who takes it
with notice of a flaw in the title of his transferor.[38]

The Complaint Sufficiently

States a Cause of Action

Upon the foregoing disquisitions, it is abundantly clear to the Court that

respondents complaint sufficiently stated, under the premises, a cause of
action. Not lost on us is the fact that the RTC dismissed the complaint of
respondents on the grounds of prescription and in the finding that Aqualab is
an innocent purchaser for value of the subject lots.Quoting Philippine Bank of
Communications v. Trazo,[39] the Court said in Bayot v. Court of Appeals[40] that:

A cause of action is an act or omission of one party in violation of the

legal right of the other. A motion to dismiss based on lack of cause of action
hypothetically admits the truth of the allegations in the complaint. The
allegations in a complaint are sufficient to constitute a cause of action against
the defendants if, hypothetically admitting the facts alleged, the court can
render a valid judgment upon the same in accordance with the prayer
therein. A cause of action exists if the following elements are present,
namely: (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.[41]

Indeed, to sustain a motion to dismiss for lack of cause of action, the

complaint must show that the claim for relief does not exist rather than that a
claim has been defectively stated or is ambiguous, indefinite, or
uncertain.[42] However, a perusal of respondents Complaint before the RTC, in
light of Aqualabs motion to dismiss which hypothetically admitted the truth of
the allegations in the complaint, shows that respondents action before the RTC
has sufficiently stated a cause of action. Hypothetically admitting fraud in the
transfers of subject lots, which indisputably were first transferred in apparent
violation of pertinent provisions in CA 141 prohibiting alienation of homesteads
within five years from the grant of the homestead patent, and the continuing
possession of respondents until 1991 of the subject lots, the action for
reconveyance and nullification filed in 1994 not only sufficiently stated a cause
of action but also has not yet prescribed.

Given the findings above, the trial court gravely committed an error of
judgment in granting Aqualabs motion to dismiss.

The appellate court was, thus, correct insofar as it reversed and set aside
the September 30, 1997 Order of dismissal of the trial court. Unfortunately,
however, it went further, for it did not merely remand the case for further
proceedings, i.e., for trial on the merits, but it also resolved and decided the case
in favor of respondents without going into a full-blown trial on the merits. This
violated Aqualabs right to due process.
 The CA Committed Reversible Error
in Deciding the Case on the Merits

The CA reversibly erred when it decided the case on the merits when what
was appealed thereto was a dismissal of the case through a motion to
dismiss.There was no trial on the merits. Thus, its resolution of the case on the
merits had no factual basis. The lynchpins in the resolution of the motion to
dismiss are in the issues of prescription and whether Aqualab is an innocent
purchaser for value. On these two issues we ruled, as discussed above, that based
on the motion to dismiss, the allegations in the complaint, and the pieces of
documentary evidence on record, prescription has not yet set in and that Aqualab
is apparently not a purchaser in good faith for, as hypothetically admitted,
respondents had possession over subject lots until 1991.

Such hypothetical admission, however, is not equivalent to or constitutive

of a judicial admission, for, after all, Aqualab has not yet filed its Answer. It
was, therefore, erroneous for the CA to decide the case on the merits. And much
less can the CA rule that Aqualab did not controvert respondents allegation of
disturbance in their possession. It was a hypothetically admitted fact but not the
factual finding of the trial court.

The Parties Assertions and Allegations

Still Have to Be Proved by Trial on the Merits

First, the assertion of respondents that they had possession until 1991, a
factual issue, still had to be established on trial.Indeed, he who asserts a fact has
the burden of proving it. So, too, the contention of being an innocent purchaser
for value by Aqualab still has yet to be determined through a trial on the
merits. The hypothetical admission applied against a defendant is relied upon by
the court only to resolve his motion to dismiss. Verily, the burden of proving the
purchasers good faith lies in the one who asserts the sameit is not enough to
invoke the ordinary presumption of good faith.[43]
 And if Aqualab is found to be truly an innocent purchaser for value, its
rights as such is protected by law; more so in situations where there have been
a series of transfers of the subject lots, in which case, respondents rights, if any,
will be for damages from those who perpetrated the fraudulent conveyances.

No Factual and Legal Bases for the

Cancellation of Certificates of Title

Second, and corollary to the first, given that there is no judicial factual
finding that Aqualab is not an innocent purchaser for value, it is legally and
factually without bases for the appellate court to order the cancellation of the
certificates of title covering subject lots in the name of Aqualab.

Third, the issues of reconveyance or redemptive rights of respondents and

their action for partition have to be resolved by the trial court in light of its
eventual findings from a trial on the merits of the instant case.

We, thus, hold that the instant case should proceed to trial for the parties
to adduce their respective evidence to support their contrary positions in the
defense of their asserted rights.

WHEREFORE, this petition is hereby PARTIALLY GRANTED. The CAs

Decision dated March 15, 2007 and Resolution dated April 22, 2008 in CA-G.R.
CV No. 58540 are hereby REVERSED and SET ASIDE. The RTCs Order dated
September 30, 1997 dismissing Civil Case No. 4086-L is
likewise REVERSED and SET ASIDE.The instant case is hereby REINSTATED, and
petitioner Aqualab is REQUIREDwithin the period available pursuant to Section
4 of Rule 16, 1997 Revised Rules of Civil Procedure TO FILE its answer before
the trial court. The trial court is ordered to proceed with dispatch to the trial
on the merits.

No costs.

SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

THE MUNICIPALITY OF HAGONOY, G.R. No. 168289

BULACAN, represented by the HON.
FELIX V. OPLE, Municipal Mayor, and
FELIX V. OPLE, in his personal capacity,
Petitioners, Present:

- versus - CORONA, J., Chairperson,

VELASCO, JR.,

HON. SIMEON P. DUMDUM, JR., in his NACHURA,

capacity as the Presiding Judge of the PERALTA, and
REGIONAL TRIAL COURT, BRANCH 7,
CEBU CITY; HON. CLERK OF COURT & EX-
 OFFICIO SHERIFF of the REGIONAL TRIAL MENDOZA, JJ.
COURT of CEBU CITY; HON. CLERK OF
COURT & EX-OFFICIO SHERIFF of the
REGIONAL TRIAL COURT of BULACAN
and his DEPUTIES; and EMILY ROSE GO
KO LIM CHAO, doing business under the
name and style KD SURPLUS,
Respondents.

Promulgated:

March 22, 2010

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

DECISION

PERALTA, J.:

This is a Joint Petition[1] under Rule 45 of the Rules of Court brought by the
Municipality of Hagonoy, Bulacan and its former chief executive, Mayor Felix
V. Ople in his official and personal capacity, from the January 31, 2005
Decision[2] and the May 23, 2005 Resolution[3] of the Court of Appeals in CA-
G.R. SP No. 81888.The assailed decision affirmed the October 20,
2003 Order[4] issued by the Regional Trial Court of Cebu City, Branch 7 in Civil
Case No. CEB-28587 denying petitioners motion to dismiss and motion to
discharge/dissolve the writ of preliminary attachment previously issued in the
case. The assailed resolution denied reconsideration.

The case stems from a Complaint[5] filed by herein private respondent Emily
Rose Go Ko Lim Chao against herein petitioners, the Municipality of Hagonoy,
Bulacan and its chief executive, Felix V. Ople (Ople) for collection of a sum of
money and damages. It was alleged that sometime in the middle of the year
2000, respondent, doing business as KD Surplus and as such engaged in buying
and selling surplus trucks, heavy equipment, machinery, spare parts and
related supplies, was contacted by petitioner Ople. Respondent had entered
into an agreement with petitioner municipality through Ople for the delivery
of motor vehicles, which supposedly were needed to carry out certain
developmental undertakings in the municipality.Respondent claimed that
because of Oples earnest representation that funds had already been allocated
for the project, she agreed to deliver from her principal place of business
in Cebu City twenty-one motor vehicles whose value totaled P5,820,000.00. To
prove this, she attached to the complaint copies of the bills of lading showing
that the items were consigned, delivered to and received by petitioner
municipality on different dates.[6] However, despite having made several
deliveries, Ople allegedly did not heed respondents claim for payment. As of
the filing of the complaint, the total obligation of petitioner had already
totaled P10,026,060.13 exclusive of penalties and damages. Thus, respondent
prayed for full payment of the said amount, with interest at not less than 2%
per month, plus P500,000.00 as damages for business losses, P500,000.00 as
exemplary damages, attorneys fees of P100,000.00 and the costs of the suit.

On February 13, 2003, the trial court issued an Order[7] granting respondents
prayer for a writ of preliminary attachment conditioned upon the posting of a
bond equivalent to the amount of the claim. On March 20, 2003, the trial court
issued the Writ of Preliminary Attachment[8] directing the sheriff to attach the
estate, real and personal properties of petitioners.
Instead of addressing private respondents allegations, petitioners filed a
Motion to Dismiss[9] on the ground that the claim on which the action had been
brought was unenforceable under the statute of frauds, pointing out that there
was no written contract or document that would evince the supposed
agreement they entered into with respondent. They averred that contracts of
this nature, before being undertaken by the municipality, would ordinarily be
subject to several preconditions such as a public bidding and prior approval of
the municipal council which, in this case, did not obtain. From this, petitioners
impress upon us the notion that no contract was ever entered into by the local
government with respondent.[10] To address the claim that respondent had
made the deliveries under the agreement, they advanced that the bills of
lading attached to the complaint were hardly probative, inasmuch as these
documents had been accomplished and handled exclusively by respondent
herself as well as by her employees and agents.[11]

Petitioners also filed a Motion to Dissolve and/or Discharge the Writ of

Preliminary Attachment Already Issued,[12] invoking immunity of the state from
suit, unenforceability of the contract, and failure to substantiate the allegation
of fraud.[13]
On October 20, 2003, the trial court issued an Order[14] denying the two
motions.Petitioners moved for reconsideration, but they were denied in an
Order[15]dated December 29, 2003.

Believing that the trial court had committed grave abuse of discretion in issuing
the two orders, petitioners elevated the matter to the Court of Appeals via a
petition for certiorari under Rule 65. In it, they faulted the trial court for not
dismissing the complaint despite the fact that the alleged contract was
unenforceable under the statute of frauds, as well as for ordering the filing of
an answer and in effect allowing private respondent to prove that she did make
several deliveries of the subject motor vehicles. Additionally, it was likewise
asserted that the trial court committed grave abuse of discretion in not
discharging/dissolving the writ of preliminary attachment, as prayed for in the
motion, and in effect disregarding the rule that the local government is
immune from suit.

On January 31, 2005, following assessment of the parties arguments, the Court
of Appeals, finding no merit in the petition, upheld private respondents claim
and affirmed the trial courts order.[16] Petitioners moved for reconsideration,
but the same was likewise denied for lack of merit and for being a mere scrap
of paper for having been filed by an unauthorized counsel.[17] Hence, this
petition.

In their present recourse, which raises no matter different from those passed
upon by the Court of Appeals, petitioners ascribe error to the Court of Appeals
for dismissing their challenge against the trial courts October 20 and December
29, 2003 Orders. Again, they reason that the complaint should have been
dismissed at the first instance based on unenforceability and that the motion
to dissolve/discharge the preliminary attachment should have been granted.[18]

Commenting on the petition, private respondent notes that with respect to the
Court of Appeals denial of the certiorari petition, the same was rightly done, as
the fact of delivery may be properly and adequately addressed at the trial of
the case on the merits; and that the dissolution of the writ of preliminary
attachment was not proper under the premises inasmuch as the application
for the writ sufficiently alleged fraud on the part of petitioners. In the same
breath, respondent laments that the denial of petitioners motion for
reconsideration was rightly done by the Court of Appeals, because it raised no
new matter that had not yet been addressed.[19]

After the filing of the parties respective memoranda, the case was deemed
submitted for decision.

We now rule on the petition.

 To begin with, the Statute of Frauds found in paragraph (2), Article 1403
of the Civil Code,[20] requires for enforceability certain contracts enumerated
therein to be evidenced by some note or memorandum. The term Statute of
Frauds is descriptive of statutes that require certain classes of contracts to be
in writing; and that do not deprive the parties of the right to contract with
respect to the matters therein involved, but merely regulate the formalities of
the contract necessary to render it enforceable.[21]

In other words, the Statute of Frauds only lays down the method by
which the enumerated contracts may be proved. But it does not declare them
invalid because they are not reduced to writing inasmuch as, by law, contracts
are obligatory in whatever form they may have been entered into, provided all
the essential requisites for their validity are present.[22] The object is to prevent
fraud and perjury in the enforcement of obligations depending, for evidence
thereof, on the unassisted memory of witnesses by requiring certain
enumerated contracts and transactions to be evidenced by a writing signed by
the party to be charged.[23] The effect of noncompliance with this requirement
is simply that no action can be enforced under the given contracts. [24] If an
action is nevertheless filed in court, it shall warrant a dismissal under Section
1(i),[25] Rule 16 of the Rules of Court, unless there has been, among others, total
or partial performance of the obligation on the part of either party.[26]

It has been private respondents consistent stand, since the inception of

the instant case that she has entered into a contract with petitioners. As far as
she is concerned, she has already performed her part of the obligation under
the agreement by undertaking the delivery of the 21 motor vehicles contracted
for by Ople in the name of petitioner municipality. This claim is well
substantiated at least for the initial purpose of setting out a valid cause of
action against petitioners by copies of the bills of lading attached to the
complaint, naming petitioner municipality as consignee of the
shipment. Petitioners have not at any time expressly denied this allegation
and, hence, the same is binding on the trial court for the purpose of ruling on
the motion to dismiss. In other words, since there exists an indication by way
of allegation that there has been performance of the obligation on the part of
respondent, the case is excluded from the coverage of the rule on dismissals
based on unenforceability under the statute of frauds, and either party may
then enforce its claims against the other.

No other principle in remedial law is more settled than that when a

motion to dismiss is filed, the material allegations of the complaint are deemed
to be hypothetically admitted.[27] This hypothetical admission, according
to Viewmaster Construction Corporation v. Roxas[28] and Navoa v. Court of
Appeals,[29] extends not only to the relevant and material facts well pleaded in
the complaint, but also to inferences that may be fairly deduced from
them. Thus, where it appears that the allegations in the complaint furnish
sufficient basis on which the complaint can be maintained, the same should
not be dismissed regardless of the defenses that may be raised by the
defendants.[30] Stated differently, where the motion to dismiss is predicated on
grounds that are not indubitable, the better policy is to deny the motion
without prejudice to taking such measures as may be proper to assure that the
ends of justice may be served.[31]

It is interesting to note at this point that in their bid to have the

case dismissed,petitioners theorize that there could not have been a contract
by which the municipality agreed to be bound, because it was not shown that
there had been compliance with the required bidding or that the municipal
council had approved the contract. The argument is flawed. By invoking
unenforceability under the Statute of Frauds, petitioners are in effect
acknowledging the existence of a contract between them and private
respondent only, the said contract cannot be enforced by action for being non-
compliant with the legal requisite that it be reduced into writing. Suffice it to
say that while this assertion might be a viable defense against respondents
claim, it is principally a matter of evidence that may be properly ventilated at
the trial of the case on the merits.
 Verily, no grave abuse of discretion has been committed by the trial
court in denying petitioners motion to dismiss this case. The Court of Appeals
is thus correct in affirming the same.

We now address the question of whether there is a valid reason to deny

petitioners motion to discharge the writ of preliminary attachment.

Petitioners, advocating a negative stance on this issue, posit that as a

municipal corporation, the Municipalityof Hagonoy is immune from suit, and
that its properties are by law exempt from execution and garnishment. Hence,
they submit that not only was there an error committed by the trial court in
denying their motion to dissolve the writ of preliminary attachment; they also
advance that it should not have been issued in the first place. Nevertheless,
they believe that respondent has not been able to substantiate her allegations
of fraud necessary for the issuance of the writ.[32]

Private respondent, for her part, counters that, contrary to petitioners

claim, she has amply discussed the basis for the issuance of the writ of
preliminary attachment in her affidavit; and that petitioners claim of immunity
from suit is negated by Section 22 of the Local Government Code, which vests
municipal corporations with the power to sue and be sued. Further, she
contends that the arguments offered by petitioners against the writ of
preliminary attachment clearly touch on matters that when ruled upon in the
hearing for the motion to discharge, would amount to a trial of the case on the
merits.[33]

The general rule spelled out in Section 3, Article XVI of the Constitution
is that the state and its political subdivisions may not be sued without their
consent.Otherwise put, they are open to suit but only when they consent to
it. Consent is implied when the government enters into a business contract, as
it then descends to the level of the other contracting party; or it may be
embodied in a general or special law[34] such as that found in Book I, Title I,
Chapter 2, Section 22 of the Local Government Code of 1991, which vests local
government units with certain corporate powers one of them is the power to
sue and be sued.

Be that as it may, a difference lies between suability and liability. As held

in City of Caloocan v. Allarde,[35] where the suability of the state is conceded
and by which liability is ascertained judicially, the state is at liberty to
determine for itself whether to satisfy the judgment or not. Execution may not
issue upon such judgment, because statutes waiving non-suability do not
authorize the seizure of property to satisfy judgments recovered from the
action. These statutes only convey an implication that the legislature will
recognize such judgment as final and make provisions for its full
satisfaction.Thus, where consent to be sued is given by general or special law,
the implication thereof is limited only to the resultant verdict on the action
before execution of the judgment.[36]

Traders Royal Bank v. Intermediate Appellate

[37] [38]
Court, citing Commissioner of Public Highways v. San Diego, is instructive
on this point. In that case which involved a suit on a contract entered into by
an entity supervised by the Office of the President, the Court held that while
the said entity opened itself to suit by entering into the subject contract with a
private entity; still, the trial court was in error in ordering the garnishment of
its funds, which were public in nature and, hence, beyond the reach of
garnishment and attachment proceedings. Accordingly, the Court ordered that
the writ of preliminary attachment issued in that case be lifted, and that the
parties be allowed to prove their respective claims at the trial on the
merits. There, the Court highlighted the reason for the rule, to wit:

The universal rule that where the State gives its consent to be sued by
private parties either by general or special law, it may limit claimants action only up
to the completion of proceedings anterior to the stage of execution and that the
power of the Courts ends when the judgment is rendered, since government funds
and properties may not be seized under writs of execution or garnishment to satisfy
such judgments, is based on obvious considerations of public policy. Disbursements
 of public funds must be covered by the corresponding appropriations as required by
law. The functions and public services rendered by the State cannot be allowed to
be paralyzed or disrupted by the diversion of public funds from their legitimate and
specific objects. x x x[39]

With this in mind, the Court holds that the writ of preliminary
attachment must be dissolved and, indeed, it must not have been issued in the
very first place. While there is merit in private respondents position that she,
by affidavit, was able to substantiate the allegation of fraud in the same way
that the fraud attributable to petitioners was sufficiently alleged in the
complaint and, hence, the issuance of the writ would have been justified. Still,
the writ of attachment in this case would only prove to be useless and
unnecessary under the premises, since the property of the municipality may
not, in the event that respondents claim is validated, be subjected to writs of
execution and garnishment unless, of course, there has been a corresponding
appropriation provided by law.[40]

Anent the other issues raised by petitioners relative to the denial of their
motion to dissolve the writ of attachment, i.e., unenforceability of the contract
and the veracity of private respondents allegation of fraud, suffice it to say that
these pertain to the merits of the main action. Hence, these issues are not to
be taken up in resolving the motion to discharge, lest we run the risk of
deciding or prejudging the main case and force a trial on the merits at this stage
of the proceedings.[41]

There is one final concern raised by petitioners relative to the denial of

their motion for reconsideration. They complain that it was an error for the
Court of Appeals to have denied the motion on the ground that the same was
filed by an unauthorized counsel and, hence, must be treated as a mere scrap
of paper.[42]
 It can be derived from the records that petitioner Ople, in his personal
capacity, filed his Rule 65 petition with the Court of Appeals through the
representation of the law firm Chan Robles & Associates. Later on, municipal
legal officer Joselito Reyes, counsel for petitioner Ople, in his official capacity
and for petitioner municipality, filed with the Court of Appeals a Manifestation
with Entry of Appearance[43] to the effect that he, as counsel, was adopting all
the pleadings filed for and in behalf of [Oples personal representation] relative
to this case.[44]

It appears, however, that after the issuance of the Court of Appeals

decision, only Oples personal representation signed the motion for
reconsideration.There is no showing that the municipal legal officer made the
same manifestation, as he previously did upon the filing of the
petition.[45] From this, the Court of Appeals concluded that it was as if
petitioner municipality and petitioner Ople, in his official capacity, had never
moved for reconsideration of the assailed decision, and adverts to the ruling
in Ramos v. Court of Appeals[46]and Municipality of Pililla, Rizal v. Court of
Appeals[47] that only under well-defined exceptions may a private counsel be
engaged in lawsuits involving a municipality, none of which exceptions obtains
in this case.[48]

The Court of Appeals is mistaken. As can be seen from the manner in

which the Manifestation with Entry of Appearance is worded, it is clear that
petitioner municipalitys legal officer was intent on adopting, for both the
municipality and Mayor Ople, not only the certiorari petition filed with the
Court of Appeals, but also all other pleadings that may be filed thereafter by
Oples personal representation, including the motion for reconsideration
subject of this case. In any event, however, the said motion for reconsideration
would warrant a denial, because there seems to be no matter raised therein
that has not yet been previously addressed in the assailed decision of the Court
of Appeals as well as in the proceedings below, and that would have otherwise
warranted a different treatment of the issues involved.
 WHEREFORE, the Petition is GRANTED IN PART. The January 31, 2005
Decision of the Court of Appeals in CA-G.R. SP No. 81888 is AFFIRMED insofar
as it affirmed the October 20, 2003 Decision of the Regional Trial Court of Cebu
City, Branch 7 denying petitioners motion to dismiss in Civil Case No. CEB-
28587. The assailed decision is REVERSED insofar as it affirmed the said trial
courts denial of petitioners motion to discharge the writ of preliminary
attachment issued in that case. Accordingly, the August 4, 2003 Writ of
Preliminary Attachment issued in Civil Case No. CEB-28587 is ordered lifted.

SO ORDERED.