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RULE 6

SO ORDERED.2

SECTION 4

Sometime in 1956, the Air Transportation Office (ATO) took


possession and control of some 4,901 square-meter portion
of Lot 6068, a 10,468 square-meter lot located at Pook
Kalibo, Aklan. Lot 6068 is covered by Original Certificate of
Title No. P-15596 of the Register of Deeds of Aklan in the
names of the private respondents who are heirs of the late
Segundo De la Cruz.

REPUBLIC OF THE PHILIPPINES, represented by the AIR


TRANSPORTATION OFFICE (ATO),
Petitioners,
vs.
LEODIGARIO SARABIA, HERMENIGILDO DE LA CRUZ,
DELIA REBUTAR, MILDRED ROSE, ANITA DE LA CRUZ,
ERLINDA LUCERIO, GEORGIE DE LA CRUZ, FELMA DE
LA CRUZ, FELINO DE LA CRUZ, TERESITA SAMSON,
EVANGELINE COLOMER, Respondents.
DECISION
GARCIA, J.:
Before the Court is this petition for review on certiorari
under Rule 45 of the Rules of Court, assailing the decision 1
dated November 18, 2002 of the Court of Appeals in CAG.R. CV No. 66124, which affirmed the November 26, 1999
decision of the Regional Trial Court at Aklan, Branch 5, in
an expropriation case thereat filed by the petitioner. The
affirmed decision of the trial court dispositively reads:
WHEREFORE, judgment is hereby rendered:
1. Fixing the amount of P800.00 per square meter as just
compensation to be paid by plaintiff to defendants for the
taking of the subject property indicated as Lot 6068-A in the
Sketch Plan (Annex B, complaint) containing an area of
4,901 square meters which is a portion of the bigger parcel
of land covered by Original Certificate of Title No. P-15596.
The aggregate amount shall earn legal interest of 6% per
annum commencing from November 11, 1999 until the
finality of this Decision, thereafter, 12% interest per annum
from the finality of the Decision on the remaining unpaid
amount until full payment.
2. Ordering the defendants to withdraw the amount of
P50,000.00 deposited provisionally with the Land Bank
Kalibo Branch, Kalibo, Aklan, by the Air Transportation
Office under Savings Account No. 0452-1084-45 to be
deducted therefrom the costs of P10,600.00 and balance
shall be deducted from the aggregate amount of the just
compensation; and
3. Declaring the plaintiffs lawful right to retain possession of
the subject property and to appropriate it for the public
purpose it was intended for, i.e., the operations of the
airport control tower, Kalibo crash fire rescue station, airport
terminal and headquarters of the PNP Aviation Security,
upon full payment of the just compensation thereat as fixed
in paragraph 1 hereof.
Plaintiff is directed to pay the costs of P9,600.00
representing the Commissioners fees equivalent to
P800.00 per session for each commissioner, and P1,000.00
to Mr. Remegio M. Bautista as the designated secretary of
the commissioners.

Initially, the ATO utilized the subject occupied portion of Lot


6068 as an airport parking area. In time, several structures
were erected thereon, including the control tower, the
Kalibo crash fire rescue station, the Kalibo airport terminal
and the headquarters of the PNP Aviation Security Group.
In 1995, stores and restaurants made of light materials
were constructed on the area outside the 4,901 squaremeter portion occupied by ATO. In 1997, private
respondents filed a complaint for Recovery of Possession
with Damages before the Municipal Trial Court of Kalibo.
The case, docketed as Civil Case No. 1644, is now pending
in said court. ATO intervened in that case and alleged that
the occupants of the stores and restaurants are its lessees.
Petitioner assured private respondents that they would be
paid the fair market value of the subject land. However, the
parties did not agree on the amount of compensation
therefor.
On June 25, 1998, petitioner Republic of the Philippines,
represented by the Air Transportation Office, filed with the
Regional Trial Court at Aklan an action for the expropriation
of the entire Lot 6068, thereat docketed as Civil Case No.
5543.
On August 6, 1999, the trial court appointed three (3)
commissioners to ascertain the just compensation for the
subject property.
Upon conduct of ocular inspection and hearing, the
commissioners submitted a report to the trial court with the
following recommendation:
NOW THEREFORE, after a brief discussion and in
consideration of the premises herein above presented, the
Commissioners hereby recommends (sic) and fix the value
of 4,901 sq. m. at P800.00 pesos per square meter and the
remaining area of 5,567 square meters at P500.00 per
square meter as offered by the defendants.
On pre-trial, petitioner submitted a sketch plan of Lot 6068,
showing the relative location of the 4,901 square-meter
portion it actually occupied.
During the hearing of September 3, 1999, the trial court
directed petitioner to present evidence to prove that the
remaining portion not actually and physically occupied by
the government is still needed for public purpose. However,
petitioner countered that there is no need to present
evidence thereon considering that almost one-half (1/2) of

the entire property subject of the case has already been in


fact occupied and devoted to public purpose.

passed, puts into issue the character of said possession.


Was it "taking" in the sense of expropriation?

The trial court ignored petitioners posturing and issued an


order3 disposing, as follows:

The expropriation of real property does not include mere


physical entry or occupation of land. The physical entry and
occupation of the property in 1956 should include all the
rights that may be exercised by an owner of the subject
property. Plaintiff-appellant failed to show that it intended to
acquire physical possession but also the legal right to
possess and ultimately to own the subject property.

WHEREFORE, the Court finds and so holds that the


additional area consisting of 5,567 square meters or Lot
6068-B (unshaded portion in Annex "B"- Complaint) is not
needed by the plaintiff for public use or purpose, but only
the shaded portion, Lot 6068-A, containing an area of 4,901
square meters.
SO ORDERED.
Eventually, in a decision dated November 26, 1999, 4 the
trial court adopted the aforestated commissioners report
which fixed the just compensation for the 4,901 squaremeter portion of Lot 6068 at P800.00 per square meter, the
current market value of the property in 1999.
In so adjudging, the trial court relied on Republic vs.
Honorable Lucerito Tagle, et al., 5 and thus fixed the just
compensation for the 4,901 square-meter portion based on
the current market value not at the time of the taking which
was in 1956, but at the time of the issuance of the writ of
possession on November 11, 1999. To the trial court, the
date of the issuance of the writ has to be considered in
fixing the just compensation because the same signified
petitioners proper acquisition and taking of the property
which involves not only physical possession but also the
legal right to possess and own the same.
Unable to accept the trial courts decision for allegedly
being contrary to law and established jurisprudence,
petitioner Republic filed a notice of appeal and record on
appeal, which the trial court approved on January 18, 2000.
Hence, the entire records of the case were transmitted to
the Court of Appeals, whereat the Republics appeal was
docketed as CA-G.R. CV No. 66124.
In the herein assailed decision 6 dated November 18, 2002,
the Court of Appeals AFFIRMED the appealed decision of
the trial court, thus:
WHEREFORE, premises considered, the assailed decision
dated November 26, 1999 of the Regional Trial Court,
Branch 5, Kalibo, Aklan in Civil Case No. 5543 is hereby
AFFIRMED.

Disconsolately, the assailed decision reveals inaction of


plaintiff-appellant in proving its present claim which should
have been done the earliest possible opportunity. It was
stated that:
The plaintiff, despite receipt of copy of aforesaid report and
the expiration of the prescribed period to file any comment
thereto, opted not to file any pleading relative thereto. Upon
the other hand, the defendants interposed no objection to
said report.
Hence, there appears no error in the lower courts ruling
that the "taking" for the purposes of fixing just
compensation be considered on November 11, 1999, the
date of the issuance of the writ of possession, as well as
the lower courts adherence to the recommendation of the
commissioners.
Petitioner moved for a reconsideration of the appellate
courts decision but its motion was denied by said court in
its resolution of April 1, 2003.
Hence, petitioners present recourse.
As we see it, the sole question presented herein involves
the precise time at which just compensation should be
fixed: whether as of the time of actual taking of possession
by the expropriating entity, as insisted by petitioner
Republic, or at the issuance of the writ of possession
pursuant to the expropriation proceedings, as maintained
by the respondents and sustained by both the trial court
and the Court of Appeals.
Before going any further, however, we take exception to the
appellate courts finding that evidence is wanting on the fact
of petitioners taking possession of the disputed 4,901
square-meter portion in 1956.

SO ORDERED.

Petitioner contends that contrary to what the appellate court


found, the taking of the property in 1956 or at least a wide
portion thereof, was adequately established.

In its decision, the appellate court placed emphasis on the


alleged failure of petitioner prove that the "taking" of the
occupied 4,901 square-meter portion of Lot 6068 occurred
in 1956. More specifically, it ruled:

We agree with petitioner Republic that sufficient evidence


exists to prove that the taking occurred sometime in 1956.

Granting that indeed plaintiff-appellants possession took


place in 1956, said possession pertained to a "portion" of
said lot. The admission of plaintiff-appellant that the
encroachment covered a wider and wider area as time

As borne by the records, private respondents Answer and


Pre-Trial Brief contain irrefutable admissions. Thus, in their
Answer,7 respondents declared, among others, as follows:

1. That they admit each and every allegation in paragraphs


1,2,3,4,5 and 6 of the complaint. They admit that the portion
of the land sought to be expropriated which is indicated by
the white shaded of the sketch plan which is attached as
ANNEX "B" of the complaint with an area of 4,901 square
meters, more or less, has been in the possession of the
plaintiff since 1956 up to the present.
Significantly, paragraph 6 of the complaint 8 which is among
those admitted by the respondents, reads:
6. The subject property has been in possession and control
of ATO since 1956 and was initially devoted to parking area.
At present, several structures, are erected on the area, to
wit: the control tower, Kalibo crash fire rescue station, the
Kalibo airport terminal and the headquarters of the
Philippine National Police (PNP) Aviation Security Group.
Also, a part of the lot is leased to concessionaires selling
local products and souvenir items. The remaining portion is
intended for the expansion and other improvement of the
airport.
Besides, respondents no less averred in their Pre-Trial
Brief:9
I. BRIEF STATEMENT OF THE RESPONDENTS CLAIM
1. That the defendants are the owners of that certain parcel
of land located at Pook, Kalibo, Aklan, Philippines, which is
covered by Original Certificate Title No. T-1559-6. A portion
of the land has been occupied by the plaintiff for many
years now which portion of land is indicated on the sketch
plan which is marked Annex "B" of the complaint.
xxx xxx xxx
I1. ADMISSION
xxx xxx xxx
2. That this land has been in the possession of the plaintiff
for many years now without paying any rental to the
defendants. (Emphasis supplied)
xxx xxx xxx
Surely, private respondents admissions in their Answer and
Pre-Trial Brief are judicial admissions which render the
taking of the lot in 1956 conclusive or even immutable. And
well-settled is the rule that an admission, verbal or written,
made by a party in the course of the proceedings in the
same case, does not require proof. 10 A judicial admission is
an admission made by a party in the course of the
proceedings in the same case, for purposes of the truth of
some alleged fact, which said party cannot thereafter
disprove.11 Indeed, an admission made in the pleading
cannot be controverted by the party making such admission
and are conclusive as to him, and that all proofs submitted
by him contrary thereto or inconsistent therewith should be
ignored whether objection is interposed by a party or not. 12

This Court is thus convinced that the taking of the occupied


4,901 square-meter portion of Lot 6068 occurred in 1956.
In the context of the States inherent power of eminent
domain, there is a "taking" when the owner is actually
deprived or dispossessed of his property; where there is a
practical destruction or a material impairment of the value of
his property; or when he is deprived of the ordinary use
thereof.13 There is a "taking" in this sense when the
expropriator enters private property not only for a
momentary period but for a more permanent duration, for
the purpose of devoting the property to a public use in such
a manner as to oust the owner and deprive him of all
beneficial enjoyment thereof.14 After all, ownership "is
nothing without the inherent rights of possession, control
and enjoyment". Where, as here, the owner is deprived of
the ordinary and beneficial use of his property or of its value
by its being diverted to public use, there is taking within the
constitutional sense.15
This brings us to the issue of when the just compensation
for the property taken should be reckoned.
Petitioner argues, and rightly so, that the just compensation
fixed by the trial court based on the market value of the
property after the commencement of the expropriation
proceedings contradicts established jurisprudence that the
value of the property as it was when the government took
possession of the land represents its true value.
In a long line of cases, we have consistently ruled that
compensation for property expropriated must be
determined as of the time the expropriating authority takes
possession thereof and not as of the institution of the
proceedings.16
So it is that in Republic vs. Lara, et al,17 this Court, quoting
from its earlier decision in Provincial Government vs.
Caro,18 ruled:
The value of the property should be fixed as of the date
when it was taken and not the date of the filing of the
proceedings. For where property is taken ahead of the filing
of the condemnation proceedings, the value thereof may be
enhanced by the public purpose for which it is taken; the
entry by the plaintiff upon the property may have
depreciated its value thereby; or, there may have been a
natural increase in the value of the property from the time it
is taken to the time the complaint is filed, due to general
economic conditions. The owner of private property should
be compensated only for what he actually loses; it is not
intended that his compensation shall extend beyond his
loss or injury. And what he loses is only the actual value of
his property at the time it is taken. This is the only way the
compensation to be paid can be truly just; i.e., "just" not
only to the individual whose property is taken, "but to the
public, which is to pay for it" xxx.
The instant case is akin to that of Jose Ma. Ansaldo vs.
Francisco S. Tantuico, Jr. and Baltazar Aquino,19 decided
1990, where two (2) lots of private ownership were taken by
the government and used for the widening of a road more

than 40 years without the benefit of any action of eminent


domain or agreement with its owners, albeit without protest
by the latter. In a decision in that case, penned by then
Chief Justice Andres Narvasa, this Court, citing the earlier
case of Republic vs. PNB,20 wrote:
Normally, of course, where the institution of an expropriation
action precedes the taking of the property subject thereof,
the just compensation is fixed as of the time of the filing of
the complaint. This is so provided by the Rules of Court, the
assumption of possession by the expropriator ordinarily
being conditioned on its deposits with the National or
Provincial Treasurer of the value of the property as
provisionally ascertained by the court having jurisdiction of
the proceedings.
There are instances, however, where the expropriating
agency takes over the property prior to the expropriation
suit, as in this case although, to repeat, the case at bar is
quite extraordinary in that possession was taken by the
expropriator more than 40 years prior to suit. In these
instances, this Court has ruled that the just compensation
shall be determined as of the time of taking, not as of the
time of filing of the action of eminent domain.
xxx xxx xxx
" (W)hen plaintiff takes possession before the institution
of the condemnation proceedings, the value should be fixed
as of the time of the taking of said possession, not of filing
of the complaint and the latter should be the basis for the
determination of the value, when the taking of the property
involved coincides with or is subsequent to, the
commencement of the proceedings. Indeed, otherwise, the
provision of Rule 69, Section 3, directing that compensation
be determined as of the date of the filing of the complaint
would never be operative.
We are not, however, in accord with petitioners assertion
that the just compensation for the entire Lot 6068 should be
fixed in the amount based on its assessed value in 1956.
There is nothing on record that petitioner occupied the
remaining 5,567 square-meter portion of Lot 6068, neither
did it ever present proof that said unoccupied portion is
necessary for public use, except for its self-serving
allegation that said portion is needed for the expansion and
other improvement of the airport.
WHEREFORE, the petition is PARTIALLY GRANTED. The
November 18, 2002 decision of the Court of Appeals in CAG.R CV No. 66124 is MODIFIED in the sense that the
computation of just compensation for the 4,901 squaremeter portion of Lot 6860 should be based on its fair market
value in 1956.
SO ORDERED.

G.R. No. 128099

December 20, 2006

FELIX CAMITAN, FRANCISCO CAMITAN, SEVERO


CAMITAN and VICTORIA CAMITAN, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and THE
FIDELITY INVESTMENT CORPORATION, respondents

DECISION

TINGA, J.:
On 13 December 1967, the spouses Mateo Camitan and
Lorenza Alcazar (spouses Camitan) sold to Fidelity
Investment Corporation (respondent) a parcel of land
covered by Transfer Certificate of Title (TCT) No. T(11982)T-3188 located in Barangay Maunong, Calamba,
Laguna. Upon the execution of the Deed of Absolute Sale,
the spouses Camitan delivered to respondent corporation
(respondent) the owners duplicate certificate of title
(Owners Copy). From then on, respondent has been
paying the real estate taxes due on the property and has
remained in actual physical possession thereof. 1
On 29 December 1993, after the death of the spouses
Camitan, without the knowledge of respondent, the heirs of
the spouses-petitioners herein - filed a petition for the
issuance of a new Owners Copy,2 However, it appears that
respondent was not given notice of such proceedings. The
trial court issued an order of general default. 3 After an ex
parte presentation of evidence by the petitioners, the trial
court granted the petition and directed the Register of
Deeds of Laguna to issue a new Owners Copy, while at the
same time declaring void the first Owners Copy, per its
Order dated 08 March 1995.4
When respondent learned of the petition and order for the
first time in March 1995, it caused the annotation of a notice
of sale on the title of the property. Thereafter, on 26 April
1995, it filed a Notice of Adverse Claim with the Register of
Deeds of Calamba, Laguna.5
In a Petition6 for annulment of judgment and cancellation of
title before the Court of Appeals, respondent argued that
the Order dated 08 March 1995 is null and void, having
been issued by the trial court without jurisdiction since the
Owners Copy of TCT No. T-(11982)T-3188 exists and has
been in its possession, and not lost as petitioners alleged.
Moreover, it claimed that petitioners have no standing to file
the petition, not being the registered owners of the property,
nor persons in interest, since all the rights and interest of
the spouses Camitan had already been transferred to
respondent upon the sale of the property. Respondent
further accused petitioners of perjury; intentionally
suppressing from the trial court the fact that they were not
in possession of the property; and not serving notice on
respondent despite knowledge that it was in actual
possession of the property.7

The Court of Appeals granted the petition and ordered the


annulment of the impugned Order.8 It found that the
Owners Copy is in the possession of respondent since
1967. Thus, petitioners do not own the property, nor do they
have any interest thereon that could have been the subject
of succession. Moreover, the Court of Appeals found that
petitioners committed perjury in executing their Joint
Affidavit of Loss in support of their petition before the trial
court as they made it appear that the Owners Copy was
still in the possession of the spouses Camitan, when in fact,
as early as 1967, the same had already been given to
respondent. Finally, citing Demetriou v. Court of Appeals 9
the Court of Appeals concluded that the trial court could not
have acquired jurisdiction over the petition because the
Owners
Copy was never lost in the first place. 10 Petitioners sought
reconsideration of the Resolution, but the motion was
denied for lack of merit.11
Petitioners now claim that they have no knowledge of the
purported sale and that they were not aware of any claim
whatsoever over the property in question for over twentyseven-(27) years, stressing that property is still registered,
declared for taxation, and realty taxes paid thereon in the
name of the spouses Camitan. 12 They argue that the Court
of Appeals erred in finding that the Owners Copy was not
lost but was in fact in the possession of respondent since
there was no documentary proof to support such
conclusion. According to petitioners, respondent was not
able to present even a photocopy of the Owners Copy to
prove its possession thereof since 1967 and thus the Court
of Appeals did not acquire jurisdiction over the petition for
annulment.13
Petitioners add that respondent is guilty of estoppel and
laches in asserting its alleged rights over the property. The
unexplained concealment for a long time of its possession
of the purported deed of absolute sale and Owners Copy,
and its non-registration of the deed in its name run counter
to the natural course of things and are devoid of credence. 14
Lastly, petitioners allege that the property in question could
be a portion of the land surrendered to the Presidential
Commission on Good Government (PCGG) as part of the
ill-gotten wealth of former President Ferdinand Marcos, and
that the sole purpose of respondents concealment of the
deed of absolute sale is to prevent sequestration thereof.15
On the other hand, respondent argues that its nonregistration of title does not affect its ownership of the
property because by the execution of the deed of absolute
sale, the spouses Camitan had effectively divested
themselves of all the rights, title and interest over the
property. Moreover, save for their bare allegations,
petitioners have not been able to rebut the presumptive
authenticity of the deed of absolute sale. Lastly, respondent
posits that there is no basis for the allegation that the
property in question is part of the former Presidents illgotten wealth.16

Anent the claim that it failed to attach even a photocopy of


the Owners Copy, respondent claims that there is no rule
which requires that the such document should be included
in a petition for annulment of judgment. Besides, petitioners
never disputed respondents possession of the title, but in
fact merely categorized such possession as one in bad
faith. More importantly, the argument that respondents
should have attached the Owners Copy of the title was
raised for the first time in petitioners motion for
reconsideration of this Courts resolution dated 18 June
1997 dismissing the instant petition.17 Finally, respondent
maintains that petitioners are estopped from questioning
the jurisdiction of the Court of Appeals since they actively
participated in the proceedings therein. 18
In a nutshell, the petition presents a very simple question:
Whether the Court of Appeals erred when it ordered the
annulment of the 08 March 1995 Order of the trial court
which directed the Register of Deeds to issue a second
Owners Copy of the title.
The Court of Appeals did not. The petition must be denied.
Annulment of judgment is a recourse equitable in character,
allowed only in exceptional cases as where there is no
available or other adequate remedy.19 An action for
annulment of judgment is grounded only on two
justifications: (1) extrinsic fraud; and (2) lack of jurisdiction
or denial of due process. The purpose of such action is to
have the final and executory judgment set aside so that
there will be a renewal of litigation.20

due hearing, direct the issuance of a new duplicate


certificate, which shall contain a memorandum of
the fact that it is issued in place of the lost
duplicate certificate, but shall in all respects be
entitled to like faith and credit as the original
duplicate, and shall thereafter be regarded as such
for all purposes of this decree.
Thus, before a duplicate certificate of title can be replaced,
the petitioner under the foregoing provision must establish
that the duplicate certificate was lost or destroyed. This
Court has consistently held that a trial court does not
acquire jurisdiction over a petition for the issuance of a new
owners duplicate certificate of title, if the original is in fact
not lost but is in the possession of an alleged buyer. 21 In
other words, the fact of loss of the duplicate certificate is
jurisdictional.
Petitioners question the Court of Appeals Resolution,
claiming that respondent failed to attach to its petition for
annulment of judgment of the Owners Copy itself, or even
a photocopy thereof. Thus, they argue there was no proof
that respondent has been in possession of the duplicate
certificate. That being the situation, the trial court validly
acquired jurisdiction over their petition for issuance of a new
Owners Copy, petitioners conclude.
Respondent, so it appears, did not attach to its petition for
annulment of judgment the Owners Copy of the title. This
lapse, however, does not suffice as basis to set aside the
questioned resolutions of the Court of Appeals.

The annulment of the Order dated 08 March 1995 was


premised on the lack of jurisdiction of the trial court,
apparently brought about by the fact that, as found by the
Court of Appeals, the duplicate certificate of the title was not
lost nor destroyed, but has remained in the possession of
respondent which purchased the real property from the
spouses Camitan in 1967. The Court finds no reason to
disturb the finding of the appellate court.

A review of the records of the case shows that petitioners


never questioned respondents possession of the Owners
Copy, its actual and physical possession and occupation of
the property, as well as its payment of real estate taxes due
on the property.

The petition for issuance of the new Owners Copy before


the trial court was filed pursuant to Presidential Decree No.
1529, otherwise known as the "Property Registration
Decree," Section No. 109 of which provides:

4. On December 13, 1967, the spouses Camitan


sold the Property to petitioner, as documented by a
"Deed of Absolute Sale" dated 13 December 1967,
a copy of which is attached hereto as annex "C".
Pursuant to the said Deed of Absolute Sale,
petitioner paid the purchase price in full.

SEC. 109. Notice and replacement of lost duplicate


certificate.In case of loss or theft of an owners
duplicate certificate of title, due notice under oath
shall be sent by the owner or by someone in his
behalf to the Register of Deeds of the province or
city where the land lies as soon as the loss or theft
is discovered. If a duplicate certificate is lost or
destroyed, or cannot be produced by a person
applying for the entry of a new certificate to him or
for the registration of any instrument, a sworn
statement of the fact of such loss or destruction
may be filed by the registered owner or other
person in interest and registered.
Upon the petition of the registered owner or other
person in interest, the court may, after notice and

In its petition for annulment before the Court of Appeals,


respondent alleged that:

5. Upon the execution of the Deed of Absolute


Sale, the vendors delivered to petitioner the
owners duplicate copy of the Title, which Title has
since been in the possession of petitioner. Also,
since 1967 and to this day, petitioner has been in
actual physical possession and continuous
occupation of the above-described Property.
Moreover, petitioner has been the one paying the
real estate taxes due on the Property.22
While for its part, respondent treated the allegations
perfunctorily in this wise in its Comment:
SPECIFIC DENIALS

xxxx
2.
Private
respondents
deny
specifically
paragraphs 4 and 5 of the said petition for lack of
knowledge and information sufficient to form a
belief as to the truth of falsity of the allegations
contained
therein
and
as
heretofore
substantiated.23
The relevant provisions of the Rules of Court are Sections
10 and 11, Rule 8, which read:
SEC. 10. Specific denial. A defendant must
specify each material allegation of fact the truth of
which he does not admit and, whenever
practicable, shall set forth the substance of the
matters upon which he relies to support his denial.
Where a defendant desires to deny only a part of
an averment, he shall specify so much of it as is
true and material and shall deny only the
remainder. Where a defendant is without
knowledge or information sufficient to form a belief
as to the truth of a material averment made in the
complaint, he shall so state, and this shall have the
effect of a denial. (Emphasis supplied)
SEC.11. Allegation not specifically denied deemed
admitted. Material averment in the complaint,
other than those as to the amount of unliquidated
damages, shall be deemed admitted when not
specifically denied. Allegations of usury in a
complaint to recover usurious interest are deemed
admitted if not denied under oath. (Emphasis
supplied)
Although petitioners put their unmistakably sparse denial of
respondents allegations relative to the execution of the
deed of sale in its favor and its possession of the Owners
Copy under the heading "SPECIFIC DENIALS" and
anteceding it with the adverb "specifically, the same cannot
function as an operative denial within the purview of the
Rules. A denial is not specific simply because it is so
qualified by the defendant. A general denial does not
become specific by the use of the word "specifically." When
the matters of whether the defendant alleges having no
knowledge or information sufficient to form a belief, are
plainly and necessarily within the defendants knowledge,
his alleged ignorance or lack of information
will not be considered as a specific denial. 24 In one case, it
was held that when a respondent makes a "specific denial"
of a material allegation of the petition without setting forth
the substance of the matters relied upon to support its
general denial, when such matters were plainly within its
knowledge and the defendant could not logically pretend
ignorance as to the same, said defendant fails to properly
tender an issue.25 Petitioners "specific denial" in this case is
ineffective and amounts to an admission pursuant to Rule 8,
Sec. 11 of the Rules of Court.
Petitioners make an issue of the lack of material evidence
to support the Court of Appeals conclusion that the Owners

Copy was not lost, because respondent failed to attach the


said Owners Copy or even a photocopy thereof. The
argument is unavailing.
Firstly, there is no need of proof because of petitioners
implied admission thereof.
Secondly, the matter should have been raised in the
proceedings before the Court of Appeals and not before this
Court. Despite various opportunities, petitioners failed to do
so before the Court of Appeals. In fact, it was only in
petitioners Motion for Reconsideration of our
Resolution dated 18 June 1997 dismissing their petition 26
that they claimed that the Court of Appeals committed
"grave error tantamount to lack of jurisdiction thereof when
it declared annulled the contested Order x x x x for lack of
material evidence to support that the said title was lost." 27
We have consistently held that matters, theories or
arguments not brought out in the original proceedings
cannot be considered on review or appeal where they are
raised for the first time.28
Finally, having actively participated in the proceedings
before the Court of Appeals, petitioners can no longer
question its authority.29
Everything considered, the Court of Appeals was satisfied
that the Owners Copy of the TCT No. (T-11982) T-3188 is
not lost, but rather, as admitted by petitioners, it has been in
the possession of another person. We find no reason to
disturb the said finding.
Petitioners other claims, to wit: (i) respondent is guilty of
estoppel and laches in asserting its rights over the property;
(ii) respondent is guilty of fraud and bad faith when it
concealed the possession of the deed of absolute sale of
the property and the Owners Copy, and when it failed to
register and have the title of the property transferred to its
name; and (iii) the property in question could be a part of illgotten wealth surrendered to the PCGG, are immaterial and
irrelevant to the case. Thus, there is no need to dwell on
them. The instant petition merely questions the propriety of
the annulment order on the ground of the trial courts lack of
jurisdiction. Any other issues, such as the ownership of the
property, or the motives for the non-registration of the sale
or the non-transfer of the title are beyond the ambit of the
petition. Besides, the determination of said issues
necessitates a factual inquiry which this Court does not
perform in a petition for review.30
WHEREFORE, the petition is DENIED and the challenged
resolution of the Court of Appeals is AFFIRMED, with costs
against petitioners.
SO ORDERED.

G.R. No. L-9531

May 14, 1958

WARNER BARNES and CO., LTD., plaintiff-appellee,


vs.
GUILLERMO C. REYES, ET AL., defendants-appellants.
Ozaeta,
Lichauco
and
Picazo
Mariano M. de Joya for appellants.

for

appellee.

PARAS, C.J.:
The plaintiff-appellee filed against the defendantsappellants an action for foreclosure of mortgage on August
20, 1954. The deed of mortgage sued upon was attached to
the complaint as Annex "A". After having been granted an
extension, the appellants filed an answer on September 30,
1954, alleging:
1. That they admit paragraph 1 of the complaint;
2. That the defendants are without knowledge or
information sufficient to form a belief as to the truth
of the material averments of the remainder of the
complaint; and
3. That they hereby reserve the right to present an
amended answer with special defenses and
counterclaim.
As the appellants did not file any amended answer, the
appellee moved on November 15, 1954 for judgment on the
pleadings on the ground that the answer failed to tender an
issue. The lower court granted appellee's motion in the
order dated December 28, 1954 and thereafter (on
December 29, 1954) rendered judgment in favor of the
appellee. In granting the motion for judgment on the
pleadings, the lower court held "that the denial by the
defendants of the material allegations of the complaint
under the guise of lack of knowledge is a general denial so
as to entitle the plaintiff to judgment on the pleadings."
In the present appeal taken by the defendants, the question
raised is whether the allegation of want of knowledge or
information as to the truth of the material averments of the
complaint amounts to a mere general denial warranting
judgment on the pleadings or is sufficient to tender a triable
issue.
Section 7 of Rule 9 of the Rules of court, in allowing the
defendant to controvert material averments not within his
knowledge or information, provides that "where the
defendant is without knowledge or information sufficient to
form a belief as to the truth of material averment, he shall
so state and this shall have the effect of a denial. This form
of denial was explained in one case as follows:
Just as the explicit denials of an answer should be
either general or specific, so all denials of
knowledge or information sufficient to form a belief
should refer either generally to all the averments of
the complain" thus intended to be denied, or
specifically to such as are to be denied by that
particular form of plea. The would be so definite

and certain in its allegation that the pleaders'


adversary should not be left in doubt as to what is
admitted, what is denied, and what is covered by
denials of knowledge or information sufficient to
form a belief. Under this form of denial employed
by the defendant, it would be difficult, if not
impossible to convict him of perjury if it should
transpire that some of his denials of knowledge,
etc., were false, for he could meet the charge by
saying that his denials referred only to matters of
which he had in fact no knowledge or information.
(Kirachbaum Eschmann, 98 NE 328, 329-330.).
This is a foreclosure suit. It is alleged that the severally
indebted in the sum of P9,906.88, secured by a mortgage.
A copy of the mortgaged deed was attached and made a
part of the complaint. There are also allegations of partial
payments, defaults in the payment of outstanding balance,
and a covenant to pay interest and attorney's fees. It is hard
to believe that the appellants could not have had knowledge
or information as to the truth or falsity of any of said
allegations. As a copy of the deed of mortgage formed part
of the complaint, it was easy for and within the power of the
appellants, for instance, to determine and so specifically
allege in their answer whether or not they had executed the
alleged mortgage. The appellants could be aided in the
matter by an inquiry or verification as to its registration in
the Registry of Deeds. "An unexplained denial of
information and belief of a matter of records, the means of
information concerning which are within the control of the
pleader, on are readily accessible to him, is evasive and is
insufficient to constitute an effective denial. (41 Am. Juris.,
399, citing Dahlstrom vs. Gemunder, 92, NE 106.)
It is noteworthy that the answer was filed after an extension
granted by the lower court, and that while a reservation was
made to file an amended answer, no such pleading was
presented. If these show anything, it is that the appellants
obviously did not have any defense or wanted to delay the
proceedings.
The form of denial adopted by the appellants, although
allowed by the Rules of Court, must be availed of with
sincerity and in good faith,certainly neither for the
purpose of confusing the adverse party as to what
allegations of the complaint are really put in issue nor for,
the purpose of delay.
. . . no court will permit its process to be trifled with
and its intelligence affronted by the offer of
pleadings which any reasoning person knows can
not possibly be true. . . ."The general rule that the
Court is not bound to accept statements in
pleadings which are, to the common knowledge of
all intelligent persons, untrue, applies just as well to
the provisions of Rule 8(b), 28 U.S.C.A. following
section 723c, as to pleadings under the, State
statute." (Nieman vs. Long, 51 F. Supp. 30, 31.)
This rule, specifically authorizing
defendant has no knowledge
sufficient to form a belief his to
averment and giving such answer

an answer that
or information
the truth of an
is not the effect

of a denial, does not apply where the fact as to


which want of knowledge is asserted is to the
knowledge of the court as plainly and necessarily
within the defendants knowledge that his averment
of ignorance must be palpably untrue. (Icle Plant
Equipment Co. vs. Martocello, D.C. Pa. 1941, 43 F.
Supp. 281.)
Wherefore, the decision appealed from is hereby affirmed
with costs against the appellants. So ordered.

G.R. No. 156474. August 16, 2005

PESANE ANIMAS MONGAO, joined by her husband


BENHUR
MONGAO,
Petitioners,
vs.
PRYCE PROPERTIES CORPORATION, Respondent.

corporation further claimed that the subject property was


one of the two parcels of land it selected for purchase. Said
property covered by TCT No. T-22186 allegedly belonged to
petitioner Mongaos parents but was registered in petitioner
Mongaos name as a trustee thereof.

DECISION
TINGA, J.:
Before the Court is a petition for review on certiorari under
Rule 45 of the Rules of Civil Procedure assailing the
Decision1 of the Court of Appeals in CA-G.R. CV No.
52753, which reversed the trial courts judgment on the
pleadings and remanded the case thereto for trial on the
merits, and the Resolution2 denying petitioners motion for
reconsideration.
The instant petition originated from a complaint for
rescission and damages filed on February 14, 1995 by
petitioners, Spouses Pesane Animas Mongao (hereafter
referred to as petitioner Mongao) and Benhur Mongao,
against respondent Pryce Properties Corporation before the
Regional Trial Court (RTC) in General Santos City.3 The
complaint alleged that petitioner Mongao and respondent
corporation executed a Memorandum of Agreement4 on
December 20, 1993, wherein the former agreed to sell to
the latter for the total price of Five Million Twenty-Eight
Thousand Eight Hundred Pesos (P5,028,800.00) a parcel
of land in Polomolok, South Cotabato covered by Transfer
Certificate of Title (TCT) No. T-221865 registered in the
name of petitioner Mongao only. In accordance with the
terms and conditions of the Memorandum of Agreement,
respondent corporation allegedly paid petitioners the sum of
Five Hundred Fifty Thousand Pesos (P550,000.00) as
earnest money considered as part of the purchase price.
The complaint further alleged that after considerable delay,
respondent corporation offered to pay the balance of the
purchase price by issuing a check payable to petitioner
Mongao and her mother, Nellie Animas, which the former
rejected. Allegedly, respondent corporation continuously
refused to heed petitioners written and oral demands to pay
the balance solely to petitioner Mongao.
The complaint also denied that petitioner Mongao executed
a Deed of Absolute Sale dated November 15, 1994 in favor
of respondent corporation, the registration of which caused
the cancellation of TCT No. T-22186 in the name of
petitioner Mongao and the issuance of TCT No. T-62944. In
addition to petitioners prayer for the rescission of the
Memorandum of Agreement and the Deed of Absolute Sale
and the forfeiture of the earnest money paid by respondent
corporation, the complaint also asked for the award of
moral and exemplary damages and attorneys fees.
Respondent corporation filed an answer and refuted
petitioners allegations with a narration of the factual
antecedents leading to the perfection of the contract of
sale.6 It claimed that sometime in 1993, a certain Pedro
Animas IV approached Sonito N. Mole, an officer of
respondent corporation, and negotiated the sale of
properties belonging to the Animas family which were on
the verge of being foreclosed by the bank. Respondent

Respondent corporation averred that the true agreement


between respondent corporation and the Animas family was
for the former to purchase the two parcels of land belonging
to the late Pedro Animas, father of petitioner Mongao. It
admitted the execution of the Memorandum of Agreement
but qualified that respondent corporation did not pay the
earnest money directly and solely to petitioner Mongao.
Said earnest money was allegedly part of the amount
directly paid by respondent corporation to the Development
Bank of the Philippines in order to redeem certain
properties of the Animas family which were foreclosed and
sold at a public auction.
Respondent corporation averred that petitioner Mongao and
Pedro Animas, Jr., the registered owners of the subject
properties, executed simultaneously the corresponding
Deed of Sale and Memorandum of Agreement after
respondent corporations representative delivered the
checks to the bank as payment for redemption of the
properties. Controversy arose after respondent corporation
had allegedly manifested its intent to complete payments
but petitioner Mongao demanded that payment be made to
her alone to the exclusion of the rest of the Animas family.
Respondent corporation admitted issuing a check in the
amount of Three Million Three Hundred Fifty-Seven Pesos
and Eighty-Seven Centavos (P3,353,357.84) payable to the
order of petitioner Mongao and her mother, Nellie Animas,
which was however refused by petitioner Mongao.
The answer also admitted that due to the demands of both
petitioner Mongao and the Animas family, respondent
corporation was constrained to deposit the payment with
the Clerk of Court of the RTC of Davao City. By way of a
compulsory counterclaim, respondent corporation prayed
that petitioners be adjudged liable for attorneys fees for
their hasty and unjustified institution of the case.
Petitioners moved for judgment on the pleadings on the
ground that the answer admitted the material allegations of
the complaint and, therefore, failed to tender an issue. 7 In
particular, the answer allegedly admitted the existence of
the contract of sale and respondent corporations refusal to
satisfy the unpaid balance of the purchase price despite
demand. Petitioners contended that respondent corporation
cannot avoid rescission by raising the defense that it
contracted with the Animas family and not solely with
petitioner
Mongao.
Petitioners
belied
respondent
corporations claim for consignation by attaching a letter
from the Office of the Clerk of Court of the RTC of Davao
City to the effect that the court could not act on petitioners
motion to deny consignation because the deposit was
transmitted through a mere letter, hence, the case was not
raffled to a particular branch of the court. 8
Respondent corporation opposed petitioners motion for
judgment on the pleadings, arguing that two material
allegations in the complaint, namely: that petitioner Mongao

10

did not execute the Deed of Sale and that petitioner


Mongao was the owner of the subject property, were
disputed in the answer.9
The trial court granted petitioners motion for judgment on
the pleadings and considered the case submitted for
decision. The trial court rendered a Decision10 on November
13, 1995. The dispositive portion thereof reads:
WHEREFORE, premises considered, the Memorandum of
Agreement dated 20 December 1993, as well as the Deed
of Absolute Sale entered into between plaintiff Pesane
Animas Mongao and defendant Pryce Properties
Corporation dated November 15, 1994, are hereby declared
rescinded. As a consequence thereof, Pryce Properties
Corporation is directed to execute a Deed of Reconveyance
of the property covered by TCT No. T-62944 in favor of
Pesane Animas and to pay attorneys fees in the amount of
P50,000.00 as well as costs of suit, by way of damages.
On the other hand plaintiff Pesane Animas Mongao is
likewise directed to return to the defendant Pryce Properties
Corporation, what she had received by virtue of the contract
in the amount of P1,675,442.16, a portion of which may be
compensated to the damages herein awarded pursuant to
Article 1278 of the New Civil Code.
SO ORDERED.11
With the adverse decision, respondent corporation elevated
the case to the Court of Appeals, which reversed the trial
courts Decision and remanded the case for trial on the
merits through its Decision promulgated on March 22,
2001.12 On the main issue of whether or not judgment on
the pleadings was proper, the Court of Appeals ruled in the
negative, finding that there were actual issues raised in the
answer requiring the presentation and assessment of
evidence. The appellate court opined that aside from the
amount of damages claimed by both parties, the following
were also put in issue: (1) the genuineness of the Deed of
Sale purportedly executed by petitioner Mongao, and (2)
the nature of petitioner Mongaos title to the subject
property. The Court of Appeals also ruled against the trial
courts interference with the consignation case pending
before the RTC of Davao City but did not find petitioners
guilty of forum-shopping in filing the action for rescission
despite the pendency of the consignation case with the
RTC of Davao City.
Petitioners moved for the reconsideration of the Court of
Appeals Decision but the same was denied in a Resolution
dated November 25, 2002. Hence, this petition for review,
raising the following issues:
A. WHETHER OR NOT THE MERE DEPOSIT OF A
CHECK PAYABLE TO TWO PERSONS, ONE OF WHOM
IS A THIRD PARTY AND/OR A STRANGER TO THE
TRANSACTION, AND THE RELEASE OF WHICH IS
SUBJECT TO CERTAIN CONDITIONS CONSTITUTES
CONSIGNATION.

B. WHETHER OR NOT JUDGMENT ON THE PLEADINGS


IS PROPER IN THIS CASE.13
The main issue for this Courts resolution is the propriety of
the trial courts judgment on the pleadings on the ground
that respondent corporations allegation did not tender an
issue.
Judgment on the pleadings is governed by Section 1, Rule
34 of the 1997 Rules of Civil Procedure, essentially a
restatement of Section 1, Rule 19 of the 1964 Rules of
Court then applicable to the proceedings before the trial
court. Section 1, Rule 19 of the Rules of Court provides that
where an answer "fails to tender an issue, or otherwise
admits the material allegations of the adverse party's
pleading, the court may, on motion of that party, direct
judgment on such pleading." The answer would fail to
tender an issue, of course, if it does not comply with the
requirements for a specific denial set out in Section 10 14 (or
Section 8)15 of Rule 8; and it would admit the material
allegations of the adverse party's pleadings not only where
it expressly confesses the truthfulness thereof but also if it
omits to deal with them at all.16
Now, if an answer does in fact specifically deny the material
averments of the complaint in the manner indicated by said
Section 10 of Rule 8, and/or asserts affirmative defenses
(allegations of new matter which, while admitting the
material allegations of the complaint expressly or impliedly,
would nevertheless prevent or bar recovery by the plaintiff)
in accordance with Sections 4 17 and 518 of Rule 6, a
judgment on the pleadings would naturally not be proper.19
Thus, there is joinder of issues when the answer makes a
specific denial of the material allegations in the complaint or
asserts affirmative defenses which would bar recovery by
the plaintiff. Where there is proper joinder of issues, the trial
court is barred from rendering judgment based only on the
pleadings filed by the parties and must conduct
proceedings for the reception of evidence. On the other
hand, an answer fails to tender an issue where the
allegations admit the allegations in support of the plaintiffs
cause of action or fail to address them at all. In either case,
there is no genuine issue and judgment on the pleadings is
proper.
Petitioners action for rescission is mainly based on the
alleged breach by respondent corporation of its contractual
obligation under the Memorandum of Agreement when
respondent refused to effect payment of the purchase price
solely to petitioner Mongao. The complaint pertinently
alleged the following:
4. Plaintiff Pesane Animas Mongao is the registered owner
in fee simple of a parcel of land more particularly described
as: . . . .
5. In a Memorandum of Agreement dated 20 December
1993 and entered in the Notarial Register of Atty. Rosalio C.
Cario, as Document No. 75, Page No. 15, Book No. II,
Series of 1993; plaintiff Pesane Animas Mongao agreed to

11

sell the aforesaid parcel of land to defendant (copy of the


Memorandum of Agreement is attached as Annex B);

the parties, the substance of which was not clearly


expressed in the following averments:

6. As earnest money, defendant paid to plaintiff Pesane


Animas Mongao, and in her sole name, the amount of
P550,000.00;

4. Paragraph 7 of the Complaint is denied, the truth of the


matter being those stated in the Special and Affirmative
Defenses in this Answer.

. . . .20

5. Paragraph 8 of the Complaint is denied, the truth of the


matter being that plaintiffs refusal to accept payment was
not justified and was contrary to the earlier understanding
and agreement of the parties.

On the other hand, nothing from the allegations in


respondent corporations answer makes out a proper
joinder of issues. Petitioners cause of action for rescission
is founded mainly on a perfected contract of sale allegedly
entered into between petitioners and respondent
corporation as embodied in the Memorandum of Agreement
attached to the complaint. First, the allegations in
respondent corporations answer do not make out a specific
denial that a contract of sale was perfected between the
parties. Second, respondent corporation does not contest
the due execution and/or genuineness of said
Memorandum of Agreement. In fact, paragraph 1 of the
answer categorically admits paragraph 5 of the complaint,
thus:
1. Paragraphs 1, 2, 3, and 5 of the Complaint are
admitted.21
Paragraph 5 of the complaint referred to above states:
5. In a Memorandum of Agreement dated 20 December
1993 and entered in the Notarial Register of Atty. Rosalio C.
Cario, as Document No. 75, Page No. 15, Book No. II,
Series of 1993; plaintiff Pesane Animas Mongao agreed to
sell the aforesaid parcel of land to defendant (copy of the
Memorandum of Agreement is attached as Annex B); 22
As to how respondent corporation allegedly breached its
contractual obligation under the Memorandum of
Agreement is illustrated by the following averments in the
complaint:
7. Subsequent to the execution of the Memorandum of
Agreement, defendant corporation after considerable delay
offered to pay the balance of the purchase price net of still
undetermined and undisclosed deductions, this time in the
name of both plaintiff Pesane Animas Mongao and that of
her mother;
8. Plaintiff Pesane Animas Mongao justifiably refused to
accept payment under the conditions unilaterally imposed
by defendant corporation;
9. Several demands, both written and oral, were conveyed
by plaintiffs to defendant corporation to pay the balance
immediately, directly and solely to plaintiff Pesane Animas
Mongao, but defendant corporation, in patent breach of its
contractual obligation, refused;23
The answer denied the aforequoted allegations and
asserted that there was an earlier understanding between

6. Paragraph 9 of the Complaint is admitted, except for the


allegation that defendant was in "patent breach of its
contractual obligation, the truth of the matter being that
defendants refusal was in accordance with its contractual
obligation.24
Respondent corporation offered the affirmative defense that
the separate demands of petitioner Mongao and the Animas
family compelled it to issue the check payable to both
petitioner Mongao and her mother, to wit:
16. That in so far as Pedro Animas, Jr., was concerned, he
did not object to payment being made to his brother and/or
mother, but with respect to plaintiff Pesane Animas Mongao,
it was then that the controversy began since plaintiff now
demanded that payment be given to her alone to the
exclusion of the rest of the Animas family.
17. That in order to play safe, defendant issued the check in
the amount of P3,353,357.84, payable to the order of
plaintiff "Pesane Animas Mongao" and the surviving
matriarch of the Animas Family in the person of "Nellie vda.
de Animas". Plaintiff resented this arrangement and refused
to accept payment unless the check was made out to her
alone.
18. That since defendant was now receiving demands from
plaintiff and the rest of the Animas Family (through Nellie
vda. de Animas), defendant became confused on which
was the proper party to receive payment and, on January
18, 1995, the amount of P3,353,357.84 was deposited by
the defendant by way consignment with the Clerk of Court
of the Regional Court, 11th Judicial Region.25
Effectively, the aforequoted averments imply an admission
by respondent corporation that it effected payment contrary
to the express terms of the contract of sale. Nowhere in the
terms of the Memorandum of Agreement does it state that
the payment of the purchase price be tendered to any
person other than petitioner Mongao. The averment virtually
admits petitioners allegation that respondent corporation
committed a breach of its contractual obligation to
petitioners and supports their cause of action for rescission.
Indeed, the drawing of the check payable to the order of
petitioner Mongao and Nellie Vda. de Animas would deprive
petitioner Mongao of the exclusive benefit of the payment,
thereby sharply deviating from the terms of the contract of
sale.

12

As earlier stated, an answer may allege affirmative


defenses which may strike down the plaintiffs cause of
action. An affirmative defense is one which is not a denial of
an essential ingredient in the plaintiffs cause of action, but
one which, if established, will be a good defensei.e. an
"avoidance" of the claim.26 Affirmative defenses include
fraud, statute of limitations, release payment, illegality,
statute of frauds, estoppel, former recovery, discharge in
bankruptcy, and any other matter by way of confession and
avoidance. When the answer asserts affirmative defenses,
there is proper joinder of issues which must be ventilated in
a full-blown trial on the merits and cannot be resolved by a
mere judgment on the pleadings. Allegations presented in
the answer as affirmative defenses are not automatically
characterized as such. Before an allegation qualifies as an
affirmative defense, it must be of such nature as to bar the
plaintiff from claiming on his cause of action. For easy
reference, respondent corporations affirmative defenses
shall be laid out in full:
SPECIAL AND AFFIRMATIVE DEFENSES
9. That, sometime in the latter half of 1993, defendants
officer, Sonito N. Mole, was approached by a real estate
broker who introduced Pedro Animas IV who disclosed that
his family (referring to his mother, brothers and sisters) was
on the verge of permanently losing to the Bank all of their
family properties. The Animas family desperately needed to
sell some of the properties so that the rest could be saved.
Thus, S.N. Mole, as representative of the defendant, and
Pedro Animas IV, as representative of the Animas Family,
discussed and negotiated on what properties would be
purchased and the terms of the purchase.
10. That defendant was shown a sketch plan of what was
referred to therein as the "ANIMAS SUBDIVISION" situated
at Matinao, Polomolok, South Cotabato and its
corresponding "Development Permit" No. 01835 issued on
January 10, 1985, covering TCT Nos. T-22186 and T22188, for a residential subdivision in the name of
applicant/owner "PEDRO ANIMAS", the late father of the
Complainant Pesane Animas Mongao. Because of their
potential as residential subdivision, these very same two (2)
parcels of land at Matinao were the ones defendant chose
to purchase.
11. That, sometime in December, 1993, the defendant,
through S.N. Mole went to General Santos City, bringing
with him the two (2) checks necessary to pay the Bank in
order to redeem the Animas family lands from the Bank, the
written agreements outlining the terms of the purchase by
defendant of the lands, and the deeds of absolute sale for
the lands that defendant intended to purchase.
12. That upon delivery of the checks to the Bank, plaintiff
(and her husband), as well as Pedro Animas, Jr. (the
registered owner of the other land purchased by the
defendant) signed the necessary memoranda of
agreement, as well as the deeds of conveyances (deeds of
absolute sale).

13. That, in the meantime, a Notice of Lis Pendens was


annotated in TCT No. T-22186 regarding Civil Case No.
5195 "FOR: PARTITION" then pending . . . and entitled
"PEDRO ANIMAS VI, Plaintiff, versus NELLIE ANIMAS,
BALDOMERO ANIMAS, EDUARDO ANIMAS, PEDRO
ANIMAS, JR., PEDRO ANIMAS IV, PEDRO ANIMAS V,
MARIVIC ANIMAS, MARINEL ANIMAS LIM and PESANE
ANIMAS, Defendants" and, on May 23, 1994, judgment was
rendered approving the Compromise Agreement, wherein
"the defendants will give plaintiff the amount of ONE
HUNDRED THOUSAND (P100,000.00) PESOS upon the
sale of their Matinao properties in favor of PRYCE INC."
14. That in the middle of November, 1995 the lands subject
of the purchase by the defendant were finally issued
clearances for transfer of title in favor and in the name of
the defendant.
15. That in early December, 1995, plaintiff Pesane Animas
Mongao and the rest of the Animas Family were advised
that defendant was ready to complete payments in
accordance with their Memorandum of Agreement.
16. That in so far as Pedro Animas, Jr., was concerned, he
did not object to payment being made to his brother and/or
mother, but with respect to plaintiff Pesane Animas Mongao,
it was then that the controversy began since plaintiff now
demanded that payment be given to her alone to the
exclusion of the rest of the Animas Family.
17. That in order to play safe, defendant issued the check in
the amount of P3,353,357.84, payable to the order of
plaintiff "Pesane Animas Mongao" and the surviving
matriarch of the Animas Family in the person of "Nellie vda.
de Animas". Plaintiff resented this arrangement and refused
to accept payment unless the check was made out to her
alone.
18. That since defendant was now receiving demands from
plaintiff and the rest of the Animas Family (through Nellie
vda. de Animas), defendant became confused on which
was the proper party to receive payment and, on January
18, 1995, the amount of P3,353,357.84 was deposited by
the defendant by way consignment with the Clerk of Court
of the Regional Court, 11th Judicial Region.
19. The defendant is still ready and willing to cause the
release of said consignment amount (less consignment
fees of the court) to whomsoever that the Court may
adjudge to be the proper party entitled to the amount.
20. That since the start of the negotiations for the purchase
of the lands, it was made clear to the defendant that the
properties were part of the estate of the deceased Judge
Pedro Animas and his surviving wife Nellie vda. de Animas
and that the registered owners (the children) were merely
holding the same in trust for the estate and Nellie vda. de
Animas.
21. That no factual nor legal ground exists to support
plaintiffs claim for rescission of contract.

13

22. That the complaint states no cause of action against the


defendant.

was noted by the Court that the deposit is even conditional,


i.e. it should not be released without a court order.28

23. That this suit actually involves conflicting claims among


members of the same family.27

The records reveal that respondent corporation did not file


any formal complaint for consignation but merely deposited
the check with the Clerk of Court. A formal complaint must
be commenced with the trial court to provide the proper
venue for the determination if there is a valid tender of
payment. Strictly speaking, without the institution of an
action for tender of payment and consignation, the trial
court cannot rule on whether or not respondent was justified
in not effecting payment solely to petitioner Mongao.

In essence, respondent corporation justifies its refusal to


tender payment of the purchase price solely to petitioner
Mongao by alleging that the latter was a mere trustee and
not the beneficial owner of the property subject of the sale
and therefore not the proper party to receive payment. Such
defense cannot prevent petitioners from seeking the
rescission of the contract of sale. The express terms of the
Memorandum of Agreement, the genuineness and due
execution of which are not denied, clearly show that the
contract of sale was executed only between petitioner
Mongao and respondent corporation. Where there is an
apparent repudiation of the trust by petitioner Mongao, such
claim or defense may properly be raised only by the parties
for whose benefit the trust was created. Respondent
corporation cannot assert said defense in order to resist
petitioners claim for rescission where it has been
sufficiently shown by the allegations of the complaint and
answer that respondent corporation has breached its
contractual obligation to petitioners. There being no material
allegation in the answer to resist petitioners claim, the trial
court correctly rendered judgment based on the pleadings
submitted by the parties.

WHEREFORE, the instant petition for review is GRANTED.


The Decision of the Court of Appeals in CA-G.R. CV No.
52753 is REVERSED and SET ASIDE and the Decision of
the Regional Trial Court, Branch 35, General Santos City in
Civil Case No. 5545 is hereby REINSATED. Costs against
respondent.
SO ORDERED.

The Court of Appeals enumerated certain factual


controversies, which it believed can only be resolved after
presentation of evidence, and these are: (1) whether or not
petitioner Mongao executed the Deed of Absolute Sale in
favor of respondent corporation, and (2) whether or not
petitioner Mongao is the sole owner of the subject property.
The Court finds that the determination of these factual
questions is immaterial to the resolution of the main issue of
whether or not there is a valid cause for rescission in light of
respondents implied admissions of certain allegations and
the weakness of the affirmative defenses in the answer. At
the risk of being repetitious, respondent corporations
answer admitted that there was a perfected contract of sale
between respondent and petitioner Mongao and that
respondent corporation refused to tender payment of the
purchase price solely to petitioner Mongao. These
admissions clearly make out a case for rescission of
contract.
On the peripheral issue of whether or not there was proper
consignation of the purchase price with the RTC of Davao
City, the Court adopts the trial courts finding that
respondent corporation did not follow the procedure
required by law, to wit:
On the second issue, the mere consignment or deposit of
the check to the Clerk of Court without observing the
mandatory provisions of Articles 1256 to 1257 of the New
Civil Code, does not produce the effect of payment in order
that the obligor or the defendant herein shall be released
from the obligation, hence, no payment of the unpaid
balance of P3,533,357.84 has actually been made. In fact it

14

G.R. No. 126640

November 23, 2000

SPOUSES MARCELO B. ARENAS and ANITA T. ARENAS,


petitioners,
vs.
THE HON. COURT OF APPEALS, SPOUSES CONRADO
S. ROJAS AND ROSALINA BAUZON ROJAS,
respondents.

After trial, on August 29, 1991, the Municipal Trial Court,


Calasiao, Pangasinan decided against petitioners, to wit:
"Premises considered, the Court hereby renders judgment
in favor of the plaintiff and against the defendant by
ordering the defendant:
"(a) to vacate the premises leased and occupied by
him subject of this case;

DECISION
"(b) to pay the plaintiff litigation expenses in the
amount of P2,000.00 and attorneys fees in the
amount of P10,000.00; and

PARDO, J.:
The Case

"(c) to pay the costs of suit.


1

The case is a petition for review assailing the decision of


the Court of Appeals,2 reversing and setting aside the
decision of the Regional Trial Court, Pangasinan, Branch
39, Lingayen,3 dismissing petitioners complaint for
"Damages, Certiorari with a Writ of Preliminary Injunction
and/or Restraining Order."

"Counterclaim of defendant is dismissed for lack of


evidence."8
In due time, petitioner Arenas appealed the above-quoted
decision to the Regional Trial Court, Dagupan City, Branch
44.9

The Facts
Respondent Rosalina B. Rojas was the co-owner of a twostory building located in Calasiao, Pangasinan.4

The Regional Trial Court denied the appeal and affirmed the
decision of the Municipal Trial Court in toto.
Civil Case No. 16890

Sometime in 1970, respondent Rojas entered into a verbal


contract of lease with petitioner Marcelo B. Arenas over one
stall located at the ground floor of the building, on a month
to month basis. Petitioner Arenas used the leased premises
as an optical clinic.5
In 1990, respondent Rojas wanted to demolish and
reconstruct the building and terminated her lease contract
with petitioner Arenas.

On September 2, 1991, before petitioners Arenas received


a copy of the decision in Civil Case No. 658, they filed with
the Regional Trial Court, Pangasinan, Lingayen an action
for "Damages, Certiorari with a Writ of Preliminary
Injunction and/or Restraining Order" against respondents
Rojas. We quote pertinent parts of the complaint:10

However, petitioners refused to vacate the premises.

"3. That notwithstanding the existence of a contract


between plaintiff Marcelo R. Arenas and defendant
Rosanna Bauzon-Rojas (sic), for the use of said one door
commercial stall, defendant Rosanna Bauzon Rojas (sic)
filed a complaint for ejectment against plaintiff Marcelo R.
Arenas, a copy of which is hereto attached as Annex "A"
hereof;

Civil Case No. 658

xxx

On June 18, 1991, respondent Rojas filed with the


Municipal Trial Court, Calasiao, Pangasinan, a complaint 6
for "Unlawful Detainer and Damages" against petitioner
Arenas. Respondent prayed first, that the petitioner be
ordered to vacate the premises in question; second, that
respondent be allowed to cause the demolition,
reconstruction and renovation of the premises; and third,
that petitioner be ordered to indemnify respondent damages
in the form of litigation expenses and attorneys fees.

"5. That after the filling of said complaint, defendantsspouses conspiring together as husband and wife caused
the removal of the sign board infront (sic) of the clinic of
plaintiffs and dumped gravel and sand infront (sic) of their
stall and fenced off the same preventing the patients and
customers of plaintiffs from coming in;

On June 28, 1991, petitioner Arenas filed his answer 7 to the


complaint and counterclaim for moral damages amounting
to P50,000.00, exemplary damages totaling P30,000.00
and attorneys fees, stating that the case was maliciously
filed.

"15. That due to the unlawful and malicious concerted acts


of defendant spouses, plaintiffs suffered moral damages
amounting to P200,000.00;

On November 19, 1990, respondents sent petitioners a


notice of termination and a demand to vacate the premises
on or before January 2, 1991.

xxx

xxx

"6. That in order to force the ejectment of plaintiffs from their


stall defendants cut off their electric connection;

15

"16. That likewise plaintiffs suffered a net income loss of


P50,000.00 at the rate of P5,000.00 per month;

barred from instituting Civil Case No. 16890. The Court of


Appeals dismissed Civil Case No. 16890, as follows:

"17. That similarly plaintiffs were constrained to engage the


services of undersigned counsel for a fee of P25,000.00."

"WHEREFORE, the decision appealed from is hereby


REVERSED and SET ASIDE and the complaint filed by
plaintiffs-appellees against defendants-appellants is hereby
DISMISSED. With costs against plaintiffs-appellees.

On September 4, 1991, the Regional Trial Court issued a


temporary restraining order 11 enjoining the Municipal Trial
Court, Calasiao, Pangasinan from hearing Civil Case No.
658. The temporary restraining order also directed
respondents to cease and desist from "committing acts of
disturbances" against the stall of petitioners.
On September 13, 1991, invoking the rule against
"multiplicity of suits," respondents moved the trial court to
dismiss the case.12
On September 26, 1991, the trial court denied the motion to
dismiss for lack of merit.13
On October 16, 1991, respondents filed with the trial court
their answer to the complaint with counterclaim, 14 reiterating
their motion to dismiss with an alternative motion to
suspend the proceedings for the reason that the pending
appeal15 raises a prejudicial question.
On December 23, 1991, the trial court issued a resolution 16
stating that it had jurisdiction to hear, try and decide Civil
Case No. 16890.
On August 10, 1992, the trial court decided the case in
favor of petitioners. The trial court reasoned: First, there
was a tacit renewal of the lease and that the defendants
(respondents) maliciously filed the ejectment case (Civil
Case No. 658). Second, respondents acts of "dumping
gravel" and of placing a "no trespassing sign" in front of the
stall rented by plaintiffs (petitioners) were done merely to
harass petitioners and cause damage to their business. The
trial court thus ordered:
"(1) Defendants to pay the plaintiffs actual damages in the
amount of P50,000.00 representing unrealized earnings;
"(2) Defendants to pay the plaintiffs, moral and exemplary
damages in the amount of P15,000.00;

"SO ORDERED."20
On June 27, 1996, petitioners filed with the Court of
Appeals a motion for reconsideration.21
On September 12, 1996, the Court of Appeals denied
petitioners motion for reconsideration for lack of merit.22
Hence, this appeal.23
The Issue
The sole issue raised is whether the causes of action
complained of in the Regional Trial Court 24 were in the
nature of compulsory counterclaims that must be pleaded in
Civil Case No. 658 of the Municipal Trial Court.
Petitioners argue that the acts complained of in Civil Case
No. 16890 arose after the filing of the complaint and the
answer in Civil Case No. 658. Thus, damages arising from
such acts could not be raised therein as compulsory
counterclaims.25
The Courts Ruling
We find the appeal meritorious.
We agree with petitioners that the causes of action pleaded
in Civil Case No. 16890 are different from those in Civil
Case No. 658, and that such causes could not have been
raised as compulsory counterclaims therein.
Nonetheless, we find that the trial court erred in Civil Case
No. 16890 for touching on the propriety of the ejectment
case which was settled in Civil Case No. 658 and affirmed
on appeal in Civil Case No. D-9996.

"(3) Defendants to pay the plaintiffs, attorneys fees of


P6,500.00 plus expenses of litigation of P3,000.00 and to
pay the costs.

We discuss these points seriatim.

"SO ORDERED."17

Rule 11 of the 1997 Rules of Civil Procedure provides:

On August 20, 1992, respondents appealed to the Court of


Appeals.18

"Sec. 8. Existing counterclaim or cross-claim - A compulsory


counterclaim or a cross-claim that a defending party has at
the time he files his answer shall be contained therein."
(underscoring ours)

On June 10, 1996, the Court of Appeals rendered its


decision19 reversing that of the trial court and dismissing
petitioners complaint. The Court of Appeals reasoned that
since petitioners interposed a counterclaim for moral and
exemplary damages in Civil Case No. 658, they were

Not Compulsory Counterclaims

A counterclaim is compulsory where: (1) it arises out of, or


is necessary connected with, the transaction or occurrence
that is the subject matter of the opposing partys claim; 26 (2)

16

it does not require the presence of third parties of whom the


court cannot acquire jurisdiction; and (3) the trial court has
jurisdiction to entertain the claim.27

"Art. 20. Every person who, contrary to law, willfully or


negligently causes damage to another, shall indemnify the
latter for the same.

The following are the tests by which the compulsory nature


of a counterclaim can be determined: (1) Are the issues of
fact and law raised by the claim and counterclaim largely
the same? (2) Would res judicata bar a subsequent suit on
defendants claim absent the compulsory counterclaim rule?
(3) Will substantially the same evidence support or refute
plaintiffs claim as well as defendants counterclaim? (4) Is
there any logical relation between the claim and
counterclaim?28

"Art. 21. Any person who willfully causes loss or injury to


another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the
damage."

We do not agree with the Court of Appeals that the claims in


Civil Case No. 16890 may be pleaded as compulsory
counterclaims in Civil Case No. 658.
First. In Civil Case No. 16890, the damages prayed for
arose not from contract but from quasi-delict.29 They
constitute separate and distinct causes of action.
A cause of action has the following elements: (1) the legal
right of plaintiff, (2) the correlative obligation of the
defendant, and (3) the act or omission of the defendant in
violation of said legal right.30
Cause of Action in Civil Case No. 658
Civil Case No. 658 involves a complaint for unlawful
detainer and damages. In an unlawful detainer case, the
issue is the right to physical possession of the premises or
possession de facto.31 The basis is a contract of lease.
Causes of Action in Civil Case No. 16890
The acts complained of in Civil Case No. 16890 were:
"1. Removal of the signboard in front of the stall of Marcelo
Arenas, which is being used as an eye clinic and the refusal
of Conrado Rojas or his failure to return it;
"2. Dumping of gravel and sand in front of the stall as well
as the fencing of the front of the stall in question thus
effectively preventing patients and customers from coming
in;
"3. Cutting off the electric connection to the eye clinic." 32
We agree with petitioners that the acts complained of were
not founded on the contract of lease but could constitute
violations of the Civil Code provisions on Human Relations,
specifically:
"Art. 19. Every person must, in the exercise of his rights and
in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.

Here, respondents duty to respect petitioners rights is an


obligation sourced not from contract but from quasi-delict.33
Second. In de Leon v. Court of Appeals,34 we held that
"[W]here the issues of the case extend beyond those
commonly involved in unlawful detainer suits, the case is
converted from a mere detainer suit to one incapable of
pecuniary estimation thereby placing it under the exclusive
jurisdiction of the regional trial courts." Verily, since the
municipal trial court could not have taken cognizance of the
claims in Civil Case No. 16890, then such claims could not
be considered as compulsory counterclaims in Civil Case
No. 658.
The fact that the rule on summary procedure governs
ejectment cases emphasizes the point that an action for
damages incapable of pecuniary estimation can not be
pleaded as counterclaims therein. It cannot be
overemphasized that the reason for the rule on summary
procedure is to prevent undue delays in the disposition of
cases. To achieve this, the filing of certain pleadings is
prohibited and the periods for acting on motions as well as
on the case itself are relatively reduced.35
Third. The acts complained of were committed after the
complaint and the answer were filed.36
Trial Court Ruling in Civil Case No. 16890 Erroneous
However, as the Court of Appeals erred, so did the trial
court.
In Civil Case No. 16890, the trial court ruled that the lease
was still subsisting and that the ejectment case was
maliciously brought. It should not have done so. These
issues were already decided in Civil Case No. 658 and
affirmed on appeal in Civil Case No. D-9996. These issues,
stemming from the lease contract are barred by res
judicata.
Res judicata exists when the following elements are
present:
"(a) the former judgment must be final;
"(b) the court which rendered judgment had
jurisdiction over the parties and the subject matter;
"(c) it must be a judgment on the merits;

17

"(d) and there must be between the first and


second actions identity of parties, subject matter,
and cause of action."37
The doctrine of res judicata is a rule which pervades every
well regulated system of jurisprudence and is founded upon
two grounds embodied in various maxims of the common
law, namely: (1) public policy and necessity which makes it
to the interest of the State that there should be an end to
litigation, interest reipublicae ut sit finis litum, and (2) the
hardship on the individual that he should be vexed twice for
the same cause, memo debet bis vexari et eadem causa.38
The decision of the Regional Trial Court, Branch 39,
Lingayen, Pangasinan in Civil Case No. 16890 touched on
matters already decided. There must be an end to
litigation.39 The issue of whether ejectment was proper was
fully and fairly adjudicated in Civil Case No. 658.
Remand Case
Whether or not the acts of respondents complained of in
Civil Case No. 16890 prejudiced petitioners may be
objectively determined by the trial court, independent of the
issues of the propriety of the ejectment and malicious
prosecution.
To settle this, it must be determined whether respondents
committed quasi-delict and acted in bad faith. Malice or bad
faith implies a conscious and intentional design to do a
wrongful act for a dishonest purpose or moral obliquity.40
The determination of whether one acted in bad faith and
whether damages may be awarded is evidentiary in nature.
As a matter of defense, it can be best passed upon after a
full-blown trial on the merits.41 Thus, there is a need to
remand the case to the court of origin.1wphi1
The Fallo
WHEREFORE, the Court GRANTS the petition, and SETS
ASIDE the decision of the Court of Appeals in CA-G. R. CV
No. 40470, dismissing the petition in Civil Case No. 16890.
In lieu thereof, the Court renders judgment setting aside the
decision of the Regional Trial Court, Pangasinan, Branch
39, Lingayen, in Civil Case No. 16890, and REMANDING
the case to the court of origin with instructions that the court
shall hear the case with all deliberate dispatch, limiting itself
to the determination of whether the acts committed by
respondents constitute quasi-delict, entitling petitioners to
the damages prayed for. The trial court shall report to the
Court the progress of the case on a month to month basis.
No costs.
SO ORDERED.

18

G.R. No. 163551

July 18, 2011

DATU KIRAM SAMPACO, substituted by HADJI SORAYA


S.
MACABANDO,
Petitioner,
vs.
HADJI SERAD MINGCA LANTUD, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari of the Court of
Appeals Decision dated August 15, 2003 in CA-G.R. CV
No. 63801 and its Resolution dated May 13, 2004, denying
petitioners motion for reconsideration.
The facts, as stated by the Court of Appeals, are as follows:
On September 14, 1984, respondent Hadji Serad Mingca
Lantud, the plaintiff in the lower court, filed an action to
quiet title with damages1 with the Regional Trial Court
(RTC) of Lanao del Sur, Branch 8, Marawi City (trial court),
against petitioner Datu Kiram Sampaco (deceased), the
defendant in the lower court, who has been substituted by
his heirs, represented by Hadji Soraya SampacoMacabando.2
Respondent alleged in his Complaint3 that he is the owner
in fee simple of a parcel of residential lot located at
Marinaut, Marawi City, with an area of 897 square meters
covered by Original Certificate of Title (OCT) No. P-658. On
August 25, 1984, petitioner Datu Kiram Sampaco, through
his daughter Soraya Sampaco-Macabando with several
armed men, forcibly and unlawfully entered his property and
destroyed the nursery buildings, cabbage seedlings and
other improvements therein worth P10,000.00. On August
30, 1984, Barangay Captain Hadji Hassan Abato and his
councilmen prepared and issued a decision 4 in writing
stating that petitioner Datu Kiram Sampaco is the owner of
the subject parcel of land. Respondent stated that the acts
of petitioner and the said decision of the Barangay Captain
may cast a cloud over or otherwise prejudice his title.
Respondent stated that he and his predecessors-in-interest
have been in open, public and exclusive possession of the
subject property. He prayed that the acts of petitioner and
the decision of Barangay Captain Hadji Hassan Abato and
his councilmen be declared invalid, and that petitioner be
ordered to pay respondent damages in the amount of
P10,000.00 and attorneys fees.
5

In his Answer, defendant Datu Kiram Sampaco, petitioner


herein, denied the material allegations of the Complaint.
Petitioner asserted that he and his predecessors-in-interest
are the ones who had been in open, public, continuous, and
exclusive possession of the property in dispute. Petitioner
alleged that OCT No. P-658 was secured in violation of
laws and through fraud, deception and misrepresentation,
considering that the subject parcel of land is a residential lot
and the title issued is a free patent. Moreover, respondent
and his predecessors-in-interest had never taken actual

possession or occupied the land under litigation. On the


contrary, petitioner has all the evidence of actual
possession and ownership of permanent improvements and
other plants on the land in dispute.
Petitioner filed a counterclaim for actual and moral
damages, and attorney's fees for the unfounded complaint
and prayed for its dismissal. He also sought the
cancellation of respondents OCT No. P-658 and the
reconveyance of the subject parcel of land.
During the trial, respondent Hadji Lantud testified that he
acquired the subject lot from his grandmother, Intumo
Pagsidan, a portion thereof from his grandmothers helper,
Totop Malacop, pursuant to a court decision after litigating
with him.6 Respondent had been residing on the lot for
more than 30 years, applied for a title thereto and was
issued OCT No. P-658. 7 He paid the corresponding real
estate taxes for the land.8 He planted assorted trees and
plants on the lot like bananas, jackfruits, coconuts and
others.9 He testified that he was not aware of the alleged
litigation over the lot before Barangay Captain Hadji Hassan
Abato, although he was furnished a copy of the decision.10
On the other hand, petitioner Datu Kiram Sampaco testified
that the land under litigation is only a portion of the 1,800
square meters of land that he inherited in 1952 from his
father, Datu Sampaco Gubat.11 Since then, he had been in
adverse possession and ownership of the subject lot,
cultivating and planting trees and plants through his
caretaker Hadji Mustapha Macawadib. 12 In 1962, he
mortgaged the land (1,800 square meters) with the
Development Bank of the Philippines, Ozamis branch. 13 He
declared the land (1,800 square meters) for taxation
purposes14 and paid real estate taxes, and adduced in
evidence the latest Tax Receipt No. 1756386 dated
September 15, 19[9]3.15 Petitioner presented four
corroborating witnesses as regards his possession of the
subject property.
After trial on the merits, the trial court rendered a Decision
on March 31, 1999 in favor of petitioner, the dispositive
portion of which reads:
WHEREFORE, premises considered the court is of the
opinion and so holds that the preponderance of evidence is
in favor of the defendant and against the plaintiff. Judgment
is hereby rendered as follows:
1. Dismissing plaintiffs complaint for lack of merit;
2. Declaring Original Certificate of Title No. P-658
(Exh. A) null and void and of no legal effect;
3. Declaring the defendant the absolute or true
owner and possessor of the land in dispute; and
4. Ordering the plaintiff to pay the defendant the
sum of P10,000.00 for attorneys fees plus P500.00
per appearance.16

19

The trial court held that the issuance of respondents title,


OCT No. P-658, was tainted with fraud and irregularities
and the title is, therefore, spurious; hence, it is null and
void, and without any probative value. The finding of fraud
was based on: (1) the Certification issued by Datu Samra
Andam, A/Adm. Assistant II, Natural Resources District No.
XII-3, Marawi City, stating that the data contained in
respondents title were verified and had no record in the
said office; (2) the said Certification was not refuted or
rebutted by respondent; (3) while free patents are normally
issued for agricultural lands, respondents title is a free
patent title issued over a residential land as the lot is
described in the Complaint as a residential lot; and (4)
Yusoph Lumampa, an employee of the local Bureau of
Lands, to whom respondent allegedly entrusted the
paperwork of the land titling, was not presented as a
witness.
Moreover, the trial court stated that respondent failed to
establish with competent and credible evidence that he was
in prior possession of the subject property. No corroborative
witness was presented to further prove his prior
possession.
On the other hand, the trial court stated that petitioner
offered documentary evidence, consisting of a contract of
real estate mortgage of the subject property, tax
declarations, an official tax receipt, and testimonial
evidence to prove that he had been in open, public,
continuous, and lawful possession of the subject property in
the concept of owner.
Respondent appealed the decision of the trial court to the
Court of Appeals.
On August 15, 2003, the Court of Appeals rendered a
Decision reversing the decision of the trial court, the
dispositive portion of which reads:
WHEREFORE:
1. The appeal is granted and the appealed
judgment is hereby totally REVERSED.
2. To quiet his title, plaintiff-appelant Hadji Serad
Mingca Lantud is confirmed the owner of the parcel
of land covered by Original Certificate of Title No.
P-658;
3. The defendant-appellee is ordered to pay
P50,000.00 as attorneys fees to the plaintiffappellant; and

that Section 4719 of the Land Registration Act (Act No. 496)
provides that the certificate of title covering registered land
shall be received as evidence in all courts of the Philippines
and shall be conclusive as to all matters stated therein.
The Court of Appeals stated that the Torrens title has three
attributes: (1) a Torrens title is the best evidence of
ownership over registered land and, unless annulled in an
appropriate proceeding, the title is conclusive on the issue
of ownership; (2) a Torrens title is incontrovertible and
indefeasible upon the expiration of one year from the date
of the entry of the decree of registration; 20 and (3) a Torrens
title is not subject to collateral attack.21
The Court of Appeals held that petitioners counterclaim
filed on October 15, 1984 for cancellation of respondents
original certificate of title issued on May 22, 1981 was filed
beyond the statutory one-year period; hence, petitioners
title had become indefeasible, and cannot be affected by
the decision made by Barangay Captain Hadji Hassan
Abato and his councilmen. Moreover, the appellate court
held that petitioners prayer for the cancellation of
respondents title, OCT No. P-658, through a counterclaim
included in his Answer is a collateral attack, which the law
does not allow, citing Cimafranca v. Court of Appeals22 and
Natalia Realty Corporation v. Valdez.23
The allegation of fraud in securing OCT No. P-658 on the
ground that the property in dispute is a residential lot and
not subject of a free patent was not given weight by the
appellate court as it was supported only by testimonial
evidence that did not show how (by metes and bounds) and
why the property in dispute could not have been the subject
of a free patent. The appellate court stated that a mere
preponderance of evidence is not adequate to prove
fraud;24 it must be established by clear and convincing
evidence.
The Court of Appeals also noted that petitioner claimed that
the subject property is only part of his larger property.
Although petitioner introduced proof of payment of the real
estate taxes of the said property, as well as a previous
mortgage of the property, petitioner did not show that the
disputed property is part of his larger property. Hence, the
appellate court stated that under such circumstances, it
cannot rule that petitioner owned the land under litigation,
since petitioner failed to show that it is part of his larger
property.
The Court of Appeals did not award actual and moral
damages, because respondent failed to prove the amount
of any actual damages sustained, and the instances
enumerated under Article 2219 of the Civil Code warranting
the award of moral damages were not present.

4. Costs against the defendant-appellee.17


Petitioners motion for reconsideration was denied by the
Court of Appeals in its Resolution18 dated May 13, 2004.

However, the Court of Appeals awarded attorney's fees in


the amount of P50,000.00, considering that respondent was
forced to incur expenses to protect his right through the
action to quiet title.

The Court of Appeals held that there is no controversy that


respondent is a holder of a Torrens title; hence, he is the
owner of the subject property. The appellate court stressed

Petitioner filed this petition raising the following issues:

20

I
THE COURT OF APPEALS MISERABLY FAILED
TO CONSIDER THE FACT THAT THE TORRENS
TITLE INVOLVED HEREIN WAS ISSUED
PURSUANT TO A FREE PATENT WHICH COULD
NOT BE VALIDLY ISSUED OVER A PRIVATE
LAND.
II
THE COURT OF APPEALS ERRED IN
DISREGARDING THE FACT THAT AS CERTIFIED
TO BY THE BUREAU OF LANDS ITSELF NO
SUCH FREE PATENT OVER THE SUBJECT
LAND WAS ISSUED BY IT; HENCE, SAID FREE
PATENT IS SPURIOUS.
III
THE COURT OF APPEALS ERRED IN
REVERSING THE DECISION OF THE TRIAL
COURT THAT THE SUBJECT LOT HAD LONG
BEEN OWNED, POSSESSED AND CULTIVATED
BY THE DEFENDANT (PETITIONER HEREIN) OR
HIS
PREDECESSORS-IN-INTEREST
SINCE
TIME IMMEMORIAL IN THE CONCEPT OF AN
OWNER.
IV
THE COURT OF APPEALS ERRED IN RULING
THAT THE PETITIONERS COUNTERCLAIM FOR
CANCELLATION OF RESPONDENTS TITLE IS
BARRED.

of the subject property. Hence, the Court of Appeals erred in


declaring that the subject lot belongs to respondent.
The contention is without merit.
The Torrens title is conclusive evidence with respect to the
ownership of the land described therein, and other matters
which can be litigated and decided in land registration
proceedings.26 Tax declarations and tax receipts cannot
prevail over a certificate of title which is an incontrovertible
proof of ownership.27 An original certificate of title issued by
the Register of Deeds under an administrative proceeding
is as indefeasible as a certificate of title issued under
judicial proceedings.28 However, the Court has ruled that
indefeasibility of title does not attach to titles secured by
fraud and misrepresentation.29
In this case, petitioner alleged in his Answer to respondents
Complaint in the trial court that respondents title, OCT No.
P-658, was secured in violation of the law and through
fraud, deception and misrepresentation, because the
subject parcel of land is a residential lot, which cannot be
subject of a free patent, since only agricultural lands are
subject of a free patent.
The trial court found that "[t]he lot under litigation as clearly
described in the complaint is a residential lot and a free
patent title thereto cannot validly be issued." This finding
was one of the bases for the trial courts declaration that the
issuance of OCT was tainted with fraud and irregularities
and is, therefore, spurious; thus, OCT No. P-658 is null and
void.

The main issue is whether or not the Court of Appeals erred


in sustaining the validity of OCT No. P-658 and confirming
respondent as owner of the property in dispute.

It should be pointed out that the allegation in the Complaint


that the land is residential was made only by respondent,
but the true classification of the disputed land as residential
was not shown to have been made by the President, upon
recommendation by the Secretary of Environment and
Natural Resources, pursuant to Section 9 of
Commonwealth Act No. 141, otherwise known as The
Public Land Act.30 Hence, the trial court erred in concluding
that there was fraud in the issuance of respondents free
patent title on the ground that it covered residential land
based only on the Complaint which stated that the property
was residential land when it was not shown that it was the
President who classified the disputed property as
residential, and OCT No. P-658 itself stated that the free
patent title covered agricultural land. It has been stated that
at present, not only agricultural lands, but also residential
lands, have been made available by recent legislation for
acquisition by free patent by any natural born Filipino
citizen.31 Nevertheless, the fact is that in this case, the free
patent title was granted over agricultural land as stated in
OCT No. P-658.

Petitioner contends that the Court of Appeals erred in


disregarding the fact that the Torrens title was issued to
respondent by virtue of a free patent covering a residential
lot that is private land as it has been acquired by petitioner
through open, public, continuous and lawful possession of
the land in the concept of owner. Petitioner thus prayed for
the cancellation of respondents title and the reconveyance

Moreover, petitioner contends in his petition that the


Certification32 dated July 24, 1987 issued by Datu Samra I.
Andam, A/Adm. Assistant II, Natural Resources District No.
XII-3, Bureau of Lands, Marawi City, certifying that the data
contained in OCT No. P-658 in respondents name had no
records in the said office, showed that respondents Torrens
title was spurious.

V
THE COURT OF APPEALS ERRED IN RULING
THAT THE COUNTERCLAIM IN THE INSTANT
CASE IS A COLLATERAL ATTACK ON
RESPONDENT-PLAINTIFFS TITLE.
VI
THE COURT OF APPEALS ERRED IN DENYING
PETITIONERS
MOTION
FOR
RECONSIDERATION.25

21

The Court holds that the certification, by itself, is insufficient


to prove the alleged fraud. Fraud and misrepresentation, as
grounds for cancellation of patent and annulment of title,
should never be presumed, but must be proved by clear
and convincing evidence, mere preponderance of evidence
not being adequate.33 Fraud is a question of fact which must
be proved.34 The signatory of the certification, Datu Samra
Andam, A/Adm. Assistant II, Natural Resources District No.
XII-3, Marawi City, was not presented in court to testify on
the due issuance of the certification, and to testify on the
details of his certification, particularly the reason why the
said office had no records of the data contained in OCT No.
P-658 or to testify on the fact of fraud, if any.
Thus, the Court holds that the evidence on record is
insufficient to prove that fraud was committed in the
issuance of respondents Torrens title. Hence, respondents
Torrens title is a valid evidence of his ownership of the land
in dispute.
On the other hand, petitioner claims ownership of the
subject lot, which is merely a portion of a larger property
(1,800 square meters) that he allegedly inherited from his
father in 1952, by virtue of open, public and continuous
possession of the land in the concept of owner making it
petitioners private property. Hence, petitioner prays for
reconveyance of the said property.
Article 434 of the Civil Code governs an action for
reconveyance, thus:
Art. 434. In an action to recover, the property must be
identified, and the plaintiff must rely on the strength of his
title and not on the weakness of the defendants claim.
Under Article 434 of the Civil Code, to successfully maintain
an action to recover the ownership of a real property, the
person who claims a better right to it must prove two (2)
things: first, the identity of the land claimed; and second, his
title thereto.35
In regard to the first requisite, in an accion reinvindicatoria,
the person who claims that he has a better right to the
property must first fix the identity of the land he is claiming
by describing the location, area and boundaries thereof.36
In this case, petitioner claims that the property in dispute is
part of his larger property. However, petitioner failed to
identify his larger property by providing evidence of the
metes and bounds thereof, so that the same may be
compared with the technical description contained in the
title of respondent, which would have shown whether the
disputed property really formed part of petitioners larger
property. The appellate court correctly held in its Resolution
dated May 13, 2004 that petitioners claim is solely
supported by testimonial evidence, which did not
conclusively show the metes and bounds of petitioners
larger property in relation to the metes and bounds of the
disputed property; thus, there is no sufficient evidence on
record to support petitioners claim that the disputed
property is part of his larger property.

In regard to the second requisite of title to property, both


petitioner and respondent separately claim that they are
entitled to ownership of the property by virtue of open,
public, continuous and exclusive possession of the same in
the concept of owner. Petitioner claims that he inherited the
subject property from his father in 1952, while respondent
claims that he acquired the property from his grandmother
Intumo Pagsidan, a portion thereof from his grandmothers
helper Totop Malacop pursuant to a court decision after
litigating with him.37 Respondent has OCT No. P-658 to
prove his title to the subject property, while petitioner merely
claims that the property is already his private land by virtue
of his open, public, continuous possession of the same in
the concept of owner.
The Court holds that petitioner failed to prove the requisites
of reconveyance as he failed to prove the identity of his
larger property in relation to the disputed property, and his
claim of title by virtue of open, public and continuous
possession of the disputed property in the concept of owner
is nebulous in the light of a similar claim by respondent who
holds a free patent title over the subject property. As stated
in Ybaez v. Intermediate Appellate Court, 38 it is relatively
easy to declare and claim that one owns and possesses
public agricultural land, but it is entirely a different matter to
affirmatively declare and to prove before a court of law that
one actually possessed and cultivated the entire area to the
exclusion of other claimants who stand on equal footing
under the Public Land Act (Commonwealth Act No. 141, as
amended) as any other pioneering claimants.
Further, petitioner contends that the Court of Appeals erred
in ruling that petitioners counterclaim is time-barred, since
the one-year prescriptive period does not apply when the
person seeking annulment of title or reconveyance is in
possession of the lot, citing Heirs of Simplicio Santiago v.
Heirs of Mariano E. Santiago.39 Petitioner also contends
that the Court of Appeals erred in ruling that the
counterclaim in this case is a collateral attack on
respondents title, citing Cimafranca v. Intermediate
Appellate Court.40 Petitioner cites the case of Heirs of
Simplicio Santiago v. Heirs of Mariano E. Santiago, 41 which
held that a counterclaim can be considered a direct attack
on the title.
The Court notes that the case of Cimafranca v.
Intermediate Appellate Court,42 cited by the Court of
Appeals to support its ruling that the prayer for the
cancellation of respondents title through a counterclaim
included in petitioners Answer is a collateral attack on the
said title, is inapplicable to this case. In Cimafranca,
petitioners therein filed a complaint for Partition and
Damages, and respondents therein indirectly attacked the
validity of the title involved in their counterclaim. Hence, the
Court ruled that a Torrens title cannot be attacked
collaterally, and the issue on its validity can be raised only
in an action expressly instituted for that purpose.
Here, the case cited by petitioner, Heirs of Simplicio
Santiago v. Heirs of Mariano E. Santiago, declared that the
one-year prescriptive period does not apply when the party
seeking annulment of title or reconveyance is in possession
of the lot, as well as distinguished a collateral attack under

22

Section 48 of PD No. 1529 from a direct attack, and held


that a counterclaim may be considered as a complaint or an
independent action and can be considered a direct attack
on the title, thus:

Respondents original certificate of title was issued on May


22, 1981, while the counterclaim was filed by petitioner on
October 15, 1984, which is clearly beyond the one-year
prescriptive period.

The one-year prescriptive period, however, does not apply


when the person seeking annulment of title or
reconveyance is in possession of the lot. This is because
the action partakes of a suit to quiet title which is
imprescriptible. In David v. Malay, we held that a person in
actual possession of a piece of land under claim of
ownership may wait until his possession is disturbed or his
title is attacked before taking steps to vindicate his right,
and his undisturbed possession gives him the continuing
right to seek the aid of a court of equity to ascertain and
determine the nature of the adverse claim of a third party
and its effect on his title.

In fine, the Court of Appeals did not err in confirming that


respondent is the owner of the parcel of land covered by
OCT No. P-658.
WHEREFORE, the petition is DENIED. The Court of
Appeals decision dated August 15, 2003, and its Resolution
dated May 13, 2004 in CA-G.R. CV No. 63801, are hereby
AFFIRMED.
No costs.
SO ORDERED.

xxxx
Section 48 of P.D. 1529, the Property Registration Decree,
provides that a certificate of title shall not be subject to
collateral attack and cannot be altered, modified, or
canceled except in a direct proceeding. An action is an
attack on a title when the object of the action is to nullify the
title, and thus challenge the judgment or proceeding
pursuant to which the title was decreed. The attack is direct
when the object of an action is to annul or set aside such
judgment, or enjoin its enforcement. On the other hand, the
attack is indirect or collateral when, in an action to obtain a
different relief, an attack on the judgment or proceeding is
nevertheless made as an incident thereof.
x x x A counterclaim can be considered a direct attack on
the title. In Development Bank of the Philippines v. Court
Appeals, we ruled on the validity of a certificate of title
despite the fact that the nullity thereof was raised only as a
counterclaim. It was held that a counterclaim is considered
a complaint, only this time, it is the original defendant who
becomes the plaintiff.1avvphi1 It stands on the same
footing and is to be tested by the same rules as if it were an
independent action. x x x43
The above ruling of the court on the definition of collateral
attack under Section 48 of P.D. No. 1529 was reiterated in
Leyson v. Bontuyan,44 Heirs of Enrique Diaz v. Virata, 45
Arangote v. Maglunob,46 and Catores v. Afidchao.47
Based on the foregoing, the Court holds that petitioners
counterclaim for cancellation of respondents title is not a
collateral attack, but a direct attack on the Torrens title of
petitioner. However, the counterclaim seeking for the
cancellation of title and reconveyance of the subject
property has prescribed as petitioner has not proven actual
possession and ownership of the property due to his failure
to prove the identity of his larger property that would show
that the disputed property is a part thereof, and his claim of
title to the subject property by virtue of open, public and
continuous possession in the concept of owner is nebulous
in the light of a similar claim by respondent who holds a
Torrens title to the subject property.

23

G.R. No. 179267

June 25, 2013

JESUS
C.
GARCIA,
Petitioner,
vs.
THE HONORABLE RAY ALAN T. DRILON, Presiding
Judge, Regional Trial Court-Branch 41, Bacolod City, and
ROSALIE JAYPE-GARCIA, for herself and in behalf of
minor children, namely: JO-ANN, JOSEPH EDUARD,
JESSE ANTHONE, all surnamed GARCIA, Respondents.
DECISION
PERLAS-BERNABE, J.:
Hailed as the bastion of Christianity in Asia, the Philippines
boasts of 86.8 million Filipinos- or 93 percent of a total
population of 93.3 million adhering to the teachings of
Jesus Christ.1 Yet, the admonition for husbands to love their
wives as their own bodies just as Christ loved the church
and gave himself up for her 2 failed to prevent, or even to
curb, the pervasiveness of violence against Filipino women.
The National Commission on the Role of Filipino Women
(NCRFW) reported that, for the years 2000-2003, "female
violence comprised more than 90o/o of all forms of abuse
and violence and more than 90% of these reported cases
were committed by the women's intimate partners such as
their husbands and live-in partners."3
Thus, on March 8, 2004, after nine (9) years of spirited
advocacy by women's groups, Congress enacted Republic
Act (R.A.) No. 9262, entitled "An Act Defining Violence
Against Women and Their Children, Providing for Protective
Measures for Victims, Prescribing Penalties Therefor, and
for Other Purposes." It took effect on March 27, 2004. 4
R.A. 9262 is a landmark legislation that defines and
criminalizes acts of violence against women and their
children (VAWC) perpetrated by women's intimate partners,
i.e, husband; former husband; or any person who has or
had a sexual or dating relationship, or with whom the
woman has a common child.5 The law provides for
protection orders from the barangay and the courts to
prevent the commission of further acts of VAWC; and
outlines the duties and responsibilities of barangay officials,
law enforcers, prosecutors and court personnel, social
workers, health care providers, and other local government
officials in responding to complaints of VAWC or requests
for assistance.
A husband is now before the Court assailing the
constitutionality of R.A. 9262 as being violative of the equal
protection and due process clauses, and an undue
delegation of judicial power to barangay officials.

the Regional Trial Court (RTC) of Bacolod City for the


issuance of a Temporary Protection Order (TPO) against
her husband, Jesus C. Garcia (petitioner), pursuant to R.A.
9262. She claimed to be a victim of physical abuse;
emotional, psychological, and economic violence as a result
of marital infidelity on the part of petitioner, with threats of
deprivation of custody of her children and of financial
support.7
Private respondent's claims
Private respondent married petitioner in 2002 when she
was 34 years old and the former was eleven years her
senior. They have three (3) children, namely: Jo-Ann J.
Garcia, 17 years old, who is the natural child of petitioner
but whom private respondent adopted; Jessie Anthone J.
Garcia, 6 years old; and Joseph Eduard J. Garcia, 3 years
old.8
Private respondent described herself as a dutiful and
faithful wife, whose life revolved around her husband. On
the other hand, petitioner, who is of Filipino-Chinese
descent, is dominant, controlling, and demands absolute
obedience from his wife and children. He forbade private
respondent to pray, and deliberately isolated her from her
friends. When she took up law, and even when she was
already working part time at a law office, petitioner
trivialized her ambitions and prevailed upon her to just stay
at home. He was often jealous of the fact that his attractive
wife still catches the eye of some men, at one point
threatening that he would have any man eyeing her killed. 9
Things turned for the worse when petitioner took up an
affair with a bank manager of Robinson's Bank, Bacolod
City, who is the godmother of one of their sons. Petitioner
admitted to the affair when private respondent confronted
him about it in 2004. He even boasted to the household
help about his sexual relations with said bank manager.
Petitioner told private respondent, though, that he was just
using the woman because of their accounts with the bank.10
Petitioner's infidelity spawned a series of fights that left
private respondent physically and emotionally wounded. In
one of their quarrels, petitioner grabbed private respondent
on both arms and shook her with such force that caused
bruises and hematoma. At another time, petitioner hit
private respondent forcefully on the lips that caused some
bleeding. Petitioner sometimes turned his ire on their
daughter, Jo-Ann, who had seen the text messages he sent
to his paramour and whom he blamed for squealing on him.
He beat Jo-Ann on the chest and slapped her many times.
When private respondent decided to leave petitioner, JoAnn begged her mother to stay for fear that if the latter
leaves, petitioner would beat her up. Even the small boys
are aware of private respondent's sufferings. Their 6-yearold son said that when he grows up, he would beat up his
father because of his cruelty to private respondent.11

The Factual Antecedents


On March 23, 2006, Rosalie Jaype-Garcia (private
respondent) filed, for herself and in behalf of her minor
children, a verified petition6 (Civil Case No. 06-797) before

All the emotional and psychological turmoil drove private


respondent to the brink of despair. On December 17, 2005,
while at home, she attempted suicide by cutting her wrist.
She was found by her son bleeding on the floor. Petitioner

24

simply fled the house instead of taking her to the hospital.


Private respondent was hospitalized for about seven (7)
days in which time petitioner never bothered to visit, nor
apologized or showed pity on her. Since then, private
respondent has been undergoing therapy almost every
week and is taking anti-depressant medications. 12
When private respondent informed the management of
Robinson's Bank that she intends to file charges against the
bank manager, petitioner got angry with her for jeopardizing
the manager's job. He then packed his things and told
private respondent that he was leaving her for good. He
even told private respondent's mother, who lives with them
in the family home, that private respondent should just
accept his extramarital affair since he is not cohabiting with
his paramour and has not sired a child with her.13
Private respondent is determined to separate from
petitioner but she is afraid that he would take her children
from her and deprive her of financial support. Petitioner had
previously warned her that if she goes on a legal battle with
him, she would not get a single centavo.14
Petitioner controls the family businesses involving mostly
the construction of deep wells. He is the President of three
corporations 326 Realty Holdings, Inc., Negros Rotadrill
Corporation, and J-Bros Trading Corporation of which he
and private respondent are both stockholders. In contrast to
the absolute control of petitioner over said corporations,
private respondent merely draws a monthly salary of
P20,000.00 from one corporation only, the Negros Rotadrill
Corporation. Household expenses amounting to not less
than P200,000.00 a month are paid for by private
respondent through the use of credit cards, which, in turn,
are paid by the same corporation together with the bills for
utilities.15
On the other hand, petitioner receives a monthly salary of
P60,000.00 from Negros Rotadrill Corporation, and enjoys
unlimited cash advances and other benefits in hundreds of
thousands of pesos from the corporations.16 After private
respondent confronted him about the affair, petitioner
forbade her to hold office at JBTC Building, Mandalagan,
where all the businesses of the corporations are conducted,
thereby depriving her of access to full information about
said businesses. Until the filing of the petition a quo,
petitioner has not given private respondent an accounting of
the businesses the value of which she had helped raise to
millions of pesos.17
Action of the RTC of Bacolod City
Finding reasonable ground to believe that an imminent
danger of violence against the private respondent and her
children exists or is about to recur, the RTC issued a TPO 18
on March 24, 2006 effective for thirty (30) days, which is
quoted hereunder:
Respondent (petitioner herein), Jesus Chua Garcia, is
hereby:

a) Ordered to remove all his personal belongings


from the conjugal dwelling or family home within 24
hours from receipt of the Temporary Restraining
Order and if he refuses, ordering that he be
removed by police officers from the conjugal
dwelling; this order is enforceable notwithstanding
that the house is under the name of 236 Realty
Holdings Inc. (Republic Act No. 9262 states
"regardless of ownership"), this is to allow the
Petitioner (private respondent herein) to enter the
conjugal dwelling without any danger from the
Respondent.
After the Respondent leaves or is removed from
the conjugal dwelling, or anytime the Petitioner
decides to return to the conjugal dwelling to
remove things, the Petitioner shall be assisted by
police officers when re-entering the family home.
The Chief of Police shall also give the Petitioner
police assistance on Sunday, 26 March 2006
because of the danger that the Respondent will
attempt to take her children from her when he
arrives from Manila and finds out about this suit.
b) To stay away from the petitioner and her
children, mother and all her household help and
driver from a distance of 1,000 meters, and shall
not enter the gate of the subdivision where the
Petitioner may be temporarily residing.
c) Not to harass, annoy, telephone, contact or
otherwise communicate with the Petitioner, directly
or indirectly, or through other persons, or contact
directly or indirectly her children, mother and
household help, nor send gifts, cards, flowers,
letters and the like. Visitation rights to the children
may be subject of a modified TPO in the future.
d) To surrender all his firearms including a .9MM
caliber firearm and a Walther PPK and ordering the
Philippine National Police Firearms and Explosives
Unit and the Provincial Director of the PNP to
cancel all the Respondent's firearm licenses. He
should also be ordered to surrender any
unlicensed firearms in his possession or control.
e) To pay full financial support for the Petitioner
and the children, including rental of a house for
them, and educational and medical expenses.
f) Not to dissipate the conjugal business.
g) To render an accounting of all advances,
benefits, bonuses and other cash he received from
all the corporations from 1 January 2006 up to 31
March 2006, which himself and as President of the
corporations and his Comptroller, must submit to
the Court not later than 2 April 2006. Thereafter, an
accounting of all these funds shall be reported to
the court by the Comptroller, copy furnished to the

25

Petitioner, every 15 days of the month, under pain


of Indirect Contempt of Court.

otherwise be declared in Indirect Contempt of


Court;

h) To ensure compliance especially with the order


granting support pendente lite, and considering the
financial resources of the Respondent and his
threat that if the Petitioner sues she will not get a
single centavo, the Respondent is ordered to put
up a BOND TO KEEP THE PEACE in the amount
of FIVE MILLION PESOS, in two sufficient sureties.

b) Respondent shall make an accounting or list of


furniture and equipment in the conjugal house in
Pitimini St., Capitolville Subdivision, Bacolod City
within 24 hours from receipt of the Temporary
Protection Order by his counsel;

On April 24, 2006, upon motion 19 of private


respondent, the trial court issued an amended
TPO,20 effective for thirty (30) days, which included
the following additional provisions:
i) The petitioners (private respondents herein) are
given the continued use of the Nissan Patrol and
the Starex Van which they are using in Negros
Occidental.
j) The petitioners are given the continued use and
occupation of the house in Paraaque, the
continued use of the Starex van in Metro Manila,
whenever they go to Manila.
k) Respondent is ordered to immediately post a
bond to keep the peace, in two sufficient sureties.
l) To give monthly support to the petitioner
provisionally fixed in the sum of One Hundred Fifty
Thousand Pesos (Php 150,000.00) per month plus
rental expenses of Fifty Thousand Pesos (Php
50,000.00) per month until the matter of support
could be finally resolved.
Two days later, or on April 26, 2006, petitioner filed an
Opposition to the Urgent Ex-Parte Motion for Renewal of
the TPO21 seeking the denial of the renewal of the TPO on
the grounds that it did not (1) comply with the three-day
notice rule, and (2) contain a notice of hearing. He further
asked that the TPO be modified by (1) removing one
vehicle used by private respondent and returning the same
to its rightful owner, the J-Bros Trading Corporation, and (2)
cancelling or reducing the amount of the bond from
P5,000,000.00 to a more manageable level at P100,000.00.
Subsequently, on May 23, 2006, petitioner moved 22 for the
modification of the TPO to allow him visitation rights to his
children.
On May 24, 2006, the TPO was renewed and extended yet
again, but subject only to the following modifications prayed
for by private respondent:
a) That respondent (petitioner herein) return the
clothes and other personal belongings of Rosalie
and her children to Judge Jesus Ramos, cocounsel for Petitioner, within 24 hours from receipt
of the Temporary Protection Order by his counsel,

c) Ordering the Chief of the Women's Desk of the


Bacolod City Police Headquarters to remove
Respondent from the conjugal dwelling within eight
(8) hours from receipt of the Temporary Protection
Order by his counsel, and that he cannot return
until 48 hours after the petitioners have left, so that
the petitioner Rosalie and her representatives can
remove things from the conjugal home and make
an inventory of the household furniture, equipment
and other things in the conjugal home, which shall
be submitted to the Court.
d) Deliver full financial support of Php200,000.00
and Php50,000.00 for rental and Php25,000.00 for
clothes of the three petitioners (sic) children within
24 hours from receipt of the Temporary Protection
Order by his counsel, otherwise be declared in
indirect contempt of Court;
e) That respondent surrender his two firearms and
all unlicensed firearms to the Clerk of Court within
24 hours from receipt of the Temporary Protection
Order by his counsel;
f) That respondent shall pay petitioner educational
expenses of the children upon presentation of
proof of payment of such expenses.23
Claiming that petitioner continued to deprive them of
financial support; failed to faithfully comply with the TPO;
and committed new acts of harassment against her and
their children, private respondent filed another application 24
for the issuance of a TPO ex parte. She alleged inter
alia that petitioner contrived a replevin suit against himself
by J-Bros Trading, Inc., of which the latter was purportedly
no longer president, with the end in view of recovering the
Nissan Patrol and Starex Van used by private respondent
and the children. A writ of replevin was served upon private
respondent by a group of six or seven policemen with long
firearms that scared the two small boys, Jessie Anthone
and Joseph Eduard.25
While Joseph Eduard, then three years old, was driven to
school, two men allegedly attempted to kidnap him, which
incident traumatized the boy resulting in his refusal to go
back to school. On another occasion, petitioner allegedly
grabbed their daughter, Jo-Ann, by the arm and threatened
her.26 The incident was reported to the police, and Jo-Ann
subsequently filed a criminal complaint against her father
for violation of R.A. 7610, also known as the "Special
Protection of Children Against Child Abuse, Exploitation and
Discrimination Act."

26

Aside from the replevin suit, petitioner's lawyers initiated the


filing by the housemaids working at the conjugal home of a
complaint for kidnapping and illegal detention against
private respondent. This came about after private
respondent, armed with a TPO, went to said home to get
her and her children's belongings. Finding some of her
things inside a housemaid's (Sheryl Jamola) bag in the
maids' room, private respondent filed a case for qualified
theft against Jamola.27

to provide the petitioner another vehicle which is


the one taken by J Bros Tading;
8) Ordered not to dissipate, encumber, alienate,
sell, lease or otherwise dispose of the conjugal
assets, or those real properties in the name of
Jesus Chua Garcia only and those in which the
conjugal partnership of gains of the Petitioner
Rosalie J. Garcia and respondent have an interest
in, especially the conjugal home located in No. 14,
Pitimini St., Capitolville Subdivision, Bacolod City,
and other properties which are conjugal assets or
those in which the conjugal partnership of gains of
Petitioner Rosalie J. Garcia and the respondent
have an interest in and listed in Annexes "I," "I-1,"
and "I-2," including properties covered by TCT Nos.
T-186325 and T-168814;

On August 23, 2006, the RTC issued a TPO, 28 effective for


thirty (30) days, which reads as follows:
Respondent (petitioner herein), Jesus Chua Garcia, is
hereby:
1) Prohibited from threatening to commit or
committing, personally or through another, acts of
violence against the offended party;

9) Ordered that the Register of Deeds of Bacolod


City and E.B. Magalona shall be served a copy of
this TEMPORARY PROTECTION ORDER and are
ordered not to allow the transfer, sale,
encumbrance or disposition of these above-cited
properties to any person, entity or corporation
without the personal presence of petitioner Rosalie
J. Garcia, who shall affix her signature in the
presence of the Register of Deeds, due to the fear
of petitioner Rosalie that her signature will be
forged in order to effect the encumbrance or sale of
these properties to defraud her or the conjugal
partnership of gains.

2)
Prohibited
from
harassing,
annoying,
telephoning,
contacting
or
otherwise
communicating in any form with the offended party,
either directly or indirectly;
3) Required to stay away, personally or through his
friends, relatives, employees or agents, from all the
Petitioners Rosalie J. Garcia and her children,
Rosalie J. Garcia's three brothers, her mother
Primitiva Jaype, cook Novelita Caranzo, driver
Romeo Hontiveros, laundrywoman Mercedita
Bornales, security guard Darwin Gayona and the
petitioner's other household helpers from a
distance of 1,000 meters, and shall not enter the
gate of the subdivision where the Petitioners are
temporarily residing, as well as from the schools of
the three children; Furthermore, that respondent
shall not contact the schools of the children directly
or indirectly in any manner including, ostensibly to
pay for their tuition or other fees directly, otherwise
he will have access to the children through the
schools and the TPO will be rendered nugatory;
4) Directed to surrender all his firearms including .
9MM caliber firearm and a Walther PPK to the
Court;
5) Directed to deliver in full financial support of
Php200,000.00 a month and Php50,000.00 for
rental for the period from August 6 to September 6,
2006; and support in arrears from March 2006 to
August 2006 the total amount of Php1,312,000.00;
6) Directed to deliver educational expenses for
2006-2007 the amount of Php75,000.00 and
Php25,000.00;
7) Directed to allow the continued use of a Nissan
Patrol with Plate No. FEW 508 and a Starex van
with Plate No. FFD 991 and should the respondent
fail to deliver said vehicles, respondent is ordered

In its Order29 dated September 26, 2006, the trial court


extended the aforequoted TPO for another ten (10) days,
and gave petitioner a period of five (5) days within which to
show cause why the TPO should not be renewed,
extended, or modified. Upon petitioner's manifestation, 30
however, that he has not received a copy of private
respondent's motion to modify/renew the TPO, the trial
court directed in its Order31 dated October 6, 2006 that
petitioner be furnished a copy of said motion. Nonetheless,
an Order32 dated a day earlier, October 5, had already been
issued renewing the TPO dated August 23, 2006. The
pertinent portion is quoted hereunder:
xxxx
x x x it appearing further that the hearing could not yet be
finally terminated, the Temporary Protection Order issued
on August 23, 2006 is hereby renewed and extended for
thirty (30) days and continuously extended and renewed for
thirty (30) days, after each expiration, until further orders,
and subject to such modifications as may be ordered by the
court.
After having received a copy of the foregoing Order,
petitioner no longer submitted the required comment to
private respondent's motion for renewal of the TPO arguing
that it would only be an "exercise in futility."33
Proceedings before the CA

27

During the pendency of Civil Case No. 06-797, petitioner


filed before the Court of Appeals (CA) a petition 34 for
prohibition (CA-G.R. CEB-SP. No. 01698), with prayer for
injunction and temporary restraining order, challenging (1)
the constitutionality of R.A. 9262 for being violative of the
due process and the equal protection clauses, and (2) the
validity of the modified TPO issued in the civil case for
being "an unwanted product of an invalid law."
On May 26, 2006, the appellate court issued a 60-day
Temporary Restraining Order36 (TRO) against the
enforcement of the TPO, the amended TPOs and other
orders pursuant thereto.
Subsequently, however, on January 24, 2007, the appellate
court dismissed36 the petition for failure of petitioner to raise
the constitutional issue in his pleadings before the trial court
in the civil case, which is clothed with jurisdiction to resolve
the same. Secondly, the challenge to the validity
of R.A. 9262 through a petition for prohibition seeking to
annul the protection orders issued by the trial court
constituted a collateral attack on said law.
His motion for reconsideration of the foregoing Decision
having been denied in the Resolution 37 dated August 14,
2007, petitioner is now before us alleging that

V.
THE COURT OF APPEALS SERIOUSLY ERRED IN NOT
DECLARING R.A. No. 9262 AS INVALID AND
UNCONSTITUTIONAL BECAUSE IT ALLOWS AN UNDUE
DELEGATION OF JUDICIAL POWER TO THE BARANGAY
OFFICIALS.38
The Ruling of the Court
Before delving into the arguments propounded by petitioner
against the constitutionality of R.A. 9262, we shall first
tackle the propriety of the dismissal by the appellate court
of the petition for prohibition (CA-G.R. CEB-SP. No. 01698)
filed by petitioner.
As a general rule, the question of constitutionality must be
raised at the earliest opportunity so that if not raised in the
pleadings, ordinarily it may not be raised in the trial, and if
not raised in the trial court, it will not be considered on
appeal.39 Courts will not anticipate a question of
constitutional law in advance of the necessity of deciding
it.40

The Issues

In defending his failure to attack the constitutionality of R.A.


9262 before the RTC of Bacolod City, petitioner argues that
the Family Court has limited authority and jurisdiction that is
"inadequate
to
tackle
the
complex
issue
of
constitutionality."41

I.

We disagree.

THE COURT OF APPEALS ERRED IN DISMISSING THE


PETITION ON THE THEORY THAT THE ISSUE OF
CONSTITUTIONALITY WAS NOT RAISED AT THE
EARLIEST OPPORTUNITY AND THAT, THE PETITION
CONSTITUTES A COLLATERAL ATTACK ON THE
VALIDITY OF THE LAW.

Family Courts have authority and jurisdiction to consider the


constitutionality of a statute.

II.
THE COURT OF APPEALS COMMITTED SERIOUS
ERROR IN FAILING TO CONCLUDE THAT R.A. 9262 IS
DISCRIMINATORY, UNJUST, AND VIOLATIVE OF THE
EQUAL PROTECTION CLAUSE.
III.
THE COURT OF APPEALS COMMITTED GRAVE
MISTAKE IN NOT FINDING THAT R.A. 9262 RUNS
COUNTER TO THE DUE PROCESS CLAUSE OF THE
CONSTITUTION.
IV.
THE COURT OF APPEALS ERRED IN NOT FINDING
THAT THE LAW DOES VIOLENCE TO THE POLICY OF
THE STATE TO PROTECT THE FAMILY AS A BASIC
SOCIAL INSTITUTION.

At the outset, it must be stressed that Family Courts are


special courts, of the same level as Regional Trial Courts.
Under R.A. 8369, otherwise known as the "Family Courts
Act of 1997," family courts have exclusive original
jurisdiction to hear and decide cases of domestic violence
against women and children.42 In accordance with said law,
the Supreme Court designated from among the branches of
the Regional Trial Courts at least one Family Court in each
of several key cities identified.43 To achieve harmony with
the first mentioned law, Section 7 of R.A. 9262 now
provides that Regional Trial Courts designated as Family
Courts shall have original and exclusive jurisdiction over
cases of VAWC defined under the latter law, viz:
SEC. 7. Venue. The Regional Trial Court designated as a
Family Court shall have original and exclusive jurisdiction
over cases of violence against women and their children
under this law. In the absence of such court in the place
where the offense was committed, the case shall be filed in
the Regional Trial Court where the crime or any of its
elements was committed at the option of the complainant.
(Emphasis supplied)
Inspite of its designation as a family court, the RTC of
Bacolod City remains possessed of authority as a court of
general original jurisdiction to pass upon all kinds of cases

28

whether civil, criminal, special proceedings, land


registration, guardianship, naturalization, admiralty or
insolvency.44 It is settled that RTCs have jurisdiction to
resolve the constitutionality of a statute,45 "this authority
being embraced in the general definition of the judicial
power to determine what are the valid and binding laws by
the criterion of their conformity to the fundamental law." 46
The Constitution vests the power of judicial review or the
power to declare the constitutionality or validity of a law,
treaty, international or executive agreement, presidential
decree, order, instruction, ordinance, or regulation not only
in this Court, but in all RTCs.47 We said in J.M. Tuason and
Co., Inc. v. CA48 that, "plainly the Constitution contemplates
that the inferior courts should have jurisdiction in cases
involving constitutionality of any treaty or law, for it speaks
of appellate review of final judgments of inferior courts in
cases where such constitutionality happens to be in issue."
Section 5, Article VIII of the 1987 Constitution reads in part
as follows:
SEC. 5. The Supreme Court shall have the following
powers:
xxx
2. Review, revise, reverse, modify, or affirm on appeal or
certiorari, as the law or the Rules of Court may provide,
final judgments and orders of lower courts in:
a. All cases in which the constitutionality or validity of any
treaty, international or executive agreement, law,
presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question.
xxxx
Thus, contrary to the posturing of petitioner, the issue of
constitutionality of R.A. 9262 could have been raised at the
earliest opportunity in his Opposition to the petition for
protection order before the RTC of Bacolod City, which had
jurisdiction to determine the same, subject to the review of
this Court.
Section 20 of A.M. No. 04-10-11-SC, the Rule on Violence
Against Women and Their Children, lays down a new kind
of procedure requiring the respondent to file an opposition
to the petition and not an answer.49 Thus:
SEC. 20. Opposition to petition. (a) The respondent may
file an opposition to the petition which he himself shall
verify. It must be accompanied by the affidavits of witnesses
and shall show cause why a temporary or permanent
protection order should not be issued.
(b) Respondent shall not include in the opposition any
counterclaim, cross-claim or third-party complaint, but any
cause of action which could be the subject thereof may be
litigated in a separate civil action. (Emphasis supplied)
We cannot subscribe to the theory espoused by petitioner
that, since a counterclaim, cross-claim and third-party

complaint are to be excluded from the opposition, the issue


of constitutionality cannot likewise be raised therein. A
counterclaim is defined as any claim for money or other
relief which a defending party may have against an
opposing party.50 A cross-claim, on the other hand, is any
claim by one party against a co-party arising out of the
transaction or occurrence that is the subject matter either of
the original action or of a counterclaim therein. 51 Finally, a
third-party complaint is a claim that a defending party may,
with leave of court, file against a person not a party to the
action for contribution, indemnity, subrogation or any other
relief, in respect of his opponent's claim.52 As pointed out by
Justice
Teresita
J.
Leonardo-De
Castro,
the
unconstitutionality of a statute is not a cause of action that
could be the subject of a counterclaim, cross-claim or a
third-party complaint. Therefore, it is not prohibited from
being raised in the opposition in view of the familiar maxim
expressio unius est exclusio alterius.
Moreover, it cannot be denied that this issue affects the
resolution of the case a quo because the right of private
respondent to a protection order is founded solely on the
very statute the validity of which is being attacked 53 by
petitioner who has sustained, or will sustain, direct injury as
a result of its enforcement. The alleged unconstitutionality
of R.A. 9262 is, for all intents and purposes, a valid cause
for the non-issuance of a protection order.
That the proceedings in Civil Case No. 06-797 are
summary in nature should not have deterred petitioner from
raising the same in his Opposition. The question relative to
the constitutionality of a statute is one of law which does not
need to be supported by evidence.54 Be that as it may,
Section 25 of A.M. No. 04-10-11-SC nonetheless allows the
conduct of a hearing to determine legal issues, among
others, viz:
SEC. 25. Order for further hearing. - In case the court
determines the need for further hearing, it may issue an
order containing the following:
(a) Facts undisputed and admitted;
(b) Factual and legal issues to be resolved;
(c) Evidence, including objects and documents that
have been marked and will be presented;
(d) Names of witnesses who will be ordered to
present their direct testimonies in the form of
affidavits; and
(e) Schedule of the presentation of evidence by
both parties which shall be done in one day, to the
extent possible, within the 30-day period of the
effectivity of the temporary protection order issued.
(Emphasis supplied)
To obviate potential dangers that may arise concomitant to
the conduct of a hearing when necessary, Section 26 (b) of
A.M. No. 04-10-11-SC provides that if a temporary
protection order issued is due to expire, the trial court may

29

extend or renew the said order for a period of thirty (30)


days each time until final judgment is rendered. It may
likewise modify the extended or renewed temporary
protection order as may be necessary to meet the needs of
the parties. With the private respondent given ample
protection, petitioner could proceed to litigate the
constitutional issues, without necessarily running afoul of
the very purpose for the adoption of the rules on summary
procedure.
In view of all the foregoing, the appellate court correctly
dismissed the petition for prohibition with prayer for
injunction and temporary restraining order (CA-G.R. CEB SP. No. 01698). Petitioner may have proceeded upon an
honest belief that if he finds succor in a superior court, he
could be granted an injunctive relief. However, Section 22(j)
of A.M. No. 04-10-11-SC expressly disallows the filing of a
petition for certiorari, mandamus or prohibition against any
interlocutory order issued by the trial court. Hence, the 60day TRO issued by the appellate court in this case against
the enforcement of the TPO, the amended TPOs and other
orders pursuant thereto was improper, and it effectively
hindered the case from taking its normal course in an
expeditious and summary manner.
As the rules stand, a review of the case by appeal or
certiorari before judgment is prohibited. Moreover, if the
appeal of a judgment granting permanent protection shall
not stay its enforcement,55 with more reason that a TPO,
which is valid only for thirty (30) days at a time, 56 should not
be enjoined.
The mere fact that a statute is alleged to be unconstitutional
or invalid, does not of itself entitle a litigant to have the
same enjoined.57 In Younger v. Harris, Jr.,58 the Supreme
Court of the United States declared, thus:
Federal injunctions against state criminal statutes, either in
their entirety or with respect to their separate and distinct
prohibitions, are not to be granted as a matter of course,
even if such statutes are unconstitutional. No citizen or
member of the community is immune from prosecution, in
good faith, for his alleged criminal acts. The imminence of
such a prosecution even though alleged to be unauthorized
and, hence, unlawful is not alone ground for relief in equity
which exerts its extraordinary powers only to prevent
irreparable injury to the plaintiff who seeks its aid. (Citations
omitted)
The sole objective of injunctions is to preserve the status
quo until the trial court hears fully the merits of the case. It
bears stressing, however, that protection orders are granted
ex parte so as to protect women and their children from
acts of violence. To issue an injunction against such orders
will defeat the very purpose of the law against VAWC.
Notwithstanding all these procedural flaws, we shall not
shirk from our obligation to determine novel issues, or
issues of first impression, with far-reaching implications. We
have, time and again, discharged our solemn duty as final
arbiter of constitutional issues, and with more reason now,
in view of private respondent's plea in her Comment59 to the

instant Petition that we should put the challenge to the


constitutionality of R.A. 9262 to rest. And so we shall.
Intent of Congress in enacting R.A. 9262.
Petitioner claims that since R.A. 9262 is intended to prevent
and criminalize spousal and child abuse, which could very
well be committed by either the husband or the wife, gender
alone is not enough basis to deprive the husband/father of
the remedies under the law.60
A perusal of the deliberations of Congress on Senate Bill
No. 2723,61 which became R.A. 9262, reveals that while the
sponsor, Senator Luisa Pimentel-Ejercito (better known as
Senator Loi Estrada), had originally proposed what she
called a "synthesized measure"62 an amalgamation of two
measures, namely, the "Anti-Domestic Violence Act" and
the "Anti-Abuse of Women in Intimate Relationships Act" 63
providing protection to "all family members, leaving no one
in isolation" but at the same time giving special attention to
women as the "usual victims" of violence and abuse, 64
nonetheless, it was eventually agreed that men be denied
protection under the same measure. We quote pertinent
portions of the deliberations:
Wednesday, December 10, 2003
Senator Pangilinan. I just wanted to place this on record,
Mr. President. Some women's groups have expressed
concerns and relayed these concerns to me that if we are to
include domestic violence apart from against women as
well as other members of the household, including children
or the husband, they fear that this would weaken the efforts
to address domestic violence of which the main victims or
the bulk of the victims really are the wives, the spouses or
the female partners in a relationship. We would like to place
that on record. How does the good Senator respond to this
kind of observation?
Senator Estrada. Yes, Mr. President, there is this group of
women who call themselves "WIIR" Women in Intimate
Relationship. They do not want to include men in this
domestic violence. But plenty of men are also being abused
by women. I am playing safe so I placed here members of
the family, prescribing penalties therefor and providing
protective measures for victims. This includes the men,
children, live-in, common-law wives, and those related with
the family.65
xxx
Wednesday, January 14, 2004
xxxx
The President Pro Tempore. x x x
Also, may the Chair remind the group that there was the
discussion whether to limit this to women and not to families
which was the issue of the AWIR group. The understanding
that I have is that we would be having a broader scope

30

rather than just women, if I remember correctly, Madam


sponsor.
Senator Estrada. Yes, Mr. President.
As a matter of fact, that was brought up by Senator
Pangilinan during the interpellation period.
I think Senator Sotto has something to say to that.
Senator Legarda. Mr. President, the reason I am in support
of the measure. Do not get me wrong. However, I believe
that there is a need to protect women's rights especially in
the domestic environment.
As I said earlier, there are nameless, countless, voiceless
women who have not had the opportunity to file a case
against their spouses, their live-in partners after years, if not
decade, of battery and abuse. If we broaden the scope to
include even the men, assuming they can at all be abused
by the women or their spouses, then it would not equalize
the already difficult situation for women, Mr. President.
I think that the sponsor, based on our earlier conversations,
concurs with this position. I am sure that the men in this
Chamber who love their women in their lives so dearly will
agree with this representation. Whether we like it or not, it is
an unequal world. Whether we like it or not, no matter how
empowered the women are, we are not given equal
opportunities especially in the domestic environment where
the macho Filipino man would always feel that he is
stronger, more superior to the Filipino woman.

Mr. President, this measure is intended to harmonize family


relations and to protect the family as the basic social
institution. Though I recognize the unequal power relations
between men and women in our society, I believe we have
an obligation to uphold inherent rights and dignity of both
husband and wife and their immediate family members,
particularly children.
While I prefer to focus mainly on women, I was compelled
to include other family members as a critical input arrived at
after a series of consultations/meetings with various NGOs,
experts, sports groups and other affected sectors, Mr.
President.
Senator Sotto. Mr. President.
The President Pro Tempore. Yes, with the permission of the
other senators.
Senator Sotto. Yes, with the permission of the two ladies on
the Floor.
The President Pro Tempore. Yes, Sen. Vicente C. Sotto III
is recognized.
Senator Sotto. I presume that the effect of the proposed
amendment of Senator Legarda would be removing the
"men and children" in this particular bill and focus
specifically on women alone. That will be the net effect of
that proposed amendment. Hearing the rationale mentioned
by the distinguished sponsor, Sen. Luisa "Loi" Ejercito
Estrada, I am not sure now whether she is inclined to
accept the proposed amendment of Senator Legarda.

xxxx
The President Pro Tempore. What does the sponsor say?
Senator Estrada. Mr. President, before accepting this, the
committee came up with this bill because the family
members have been included in this proposed measure
since the other members of the family other than women
are also possible victims of violence. While women are
most likely the intended victims, one reason incidentally
why the measure focuses on women, the fact remains that
in some relatively few cases, men also stand to be
victimized and that children are almost always the helpless
victims of violence. I am worried that there may not be
enough protection extended to other family members
particularly children who are excluded. Although Republic
Act No. 7610, for instance, more or less, addresses the
special needs of abused children. The same law is
inadequate. Protection orders for one are not available in
said law.
I am aware that some groups are apprehensive about
granting the same protection to men, fearing that they may
use this law to justify their abusive behavior against women.
However, we should also recognize that there are
established procedures and standards in our courts which
give credence to evidentiary support and cannot just
arbitrarily and whimsically entertain baseless complaints.

I am willing to wait whether she is accepting this or not


because if she is going to accept this, I will propose an
amendment to the amendment rather than object to the
amendment, Mr. President.
xxxx
Senator Estrada. The amendment is accepted, Mr.
President.
The President Pro Tempore. Is there any objection?
xxxx
Senator Sotto. x x x May I propose an amendment to the
amendment.
The President Pro Tempore. Before we act on the
amendment?
Senator Sotto. Yes, Mr. President.
The President Pro Tempore. Yes, please proceed.
Senator Sotto. Mr. President, I am inclined to believe the
rationale used by the distinguished proponent of the

31

amendment. As a matter of fact, I tend to agree. Kung may


maaabuso, mas malamang iyong babae kaysa sa lalake. At
saka iyong mga lalake, puwede na talagang magulpi iyan.
Okey lang iyan. But I cannot agree that we remove the
children from this particular measure.

Equal protection simply requires that all persons or things


similarly situated should be treated alike, both as to rights
conferred and responsibilities imposed. The oft-repeated
disquisition in the early case of Victoriano v. Elizalde Rope
Workers' Union69 is instructive:

So, if I may propose an amendment

The guaranty of equal protection of the laws is not a


guaranty of equality in the application of the laws upon all
citizens of the state. It is not, therefore, a requirement, in
order to avoid the constitutional prohibition against
inequality, that every man, woman and child should be
affected alike by a statute. Equality of operation of statutes
does not mean indiscriminate operation on persons merely
as such, but on persons according to the circumstances
surrounding them. It guarantees equality, not identity of
rights. The Constitution does not require that things which
are different in fact be treated in law as though they were
the same. The equal protection clause does not forbid
discrimination as to things that are different. It does not
prohibit legislation which is limited either in the object to
which it is directed or by the territory within which it is to
operate.

The President Pro Tempore. To the amendment.


Senator Sotto. more than the women, the children are
very much abused. As a matter of fact, it is not limited to
minors. The abuse is not limited to seven, six, 5-year-old
children. I have seen 14, 15-year-old children being abused
by their fathers, even by their mothers. And it breaks my
heart to find out about these things.
Because of the inadequate existing law on abuse of
children, this particular measure will update that. It will
enhance and hopefully prevent the abuse of children and
not only women.
SOTTO-LEGARDA AMENDMENTS
Therefore, may I propose an amendment that, yes, we
remove the aspect of the men in the bill but not the children.
Senator Legarda. I agree, Mr. President, with the Minority
Leader.
The President Pro Tempore. Effectively then, it will be
women AND CHILDREN.
Senator Sotto. Yes, Mr. President.
Senator Estrada. It is accepted, Mr. President.
The President Pro Tempore. Is there any objection?
[Silence] There being none, the amendment, as amended,
is approved.66
It is settled that courts are not concerned with the wisdom,
justice, policy, or expediency of a statute.67 Hence, we dare
not venture into the real motivations and wisdom of the
members of Congress in limiting the protection against
violence and abuse under R.A. 9262 to women and children
only. No proper challenge on said grounds may be
entertained in this proceeding. Congress has made its
choice and it is not our prerogative to supplant this
judgment. The choice may be perceived as erroneous but
even then, the remedy against it is to seek its amendment
or repeal by the legislative. By the principle of separation of
powers, it is the legislative that determines the necessity,
adequacy, wisdom and expediency of any law.68 We only
step in when there is a violation of the Constitution.
However, none was sufficiently shown in this case.
R.A. 9262 does not violate the guaranty of equal protection
of the laws.

The equal protection of the laws clause of the Constitution


allows classification. Classification in law, as in the other
departments of knowledge or practice, is the grouping of
things in speculation or practice because they agree with
one another in certain particulars. A law is not invalid
because of simple inequality. The very idea of classification
is that of inequality, so that it goes without saying that the
mere fact of inequality in no manner determines the matter
of constitutionality. All that is required of a valid
classification is that it be reasonable, which means that the
classification should be based on substantial distinctions
which make for real differences; that it must be germane to
the purpose of the law; that it must not be limited to existing
conditions only; and that it must apply equally to each
member of the class. This Court has held that the standard
is satisfied if the classification or distinction is based on a
reasonable foundation or rational basis and is not palpably
arbitrary. (Emphasis supplied)
Measured against the foregoing jurisprudential yardstick,
we find that R.A. 9262 is based on a valid classification as
shall hereinafter be discussed and, as such, did not violate
the equal protection clause by favoring women over men as
victims of violence and abuse to whom the State extends its
protection.
I. R.A. 9262 rests on substantial distinctions.
The unequal power relationship between women and men;
the fact that women are more likely than men to be victims
of violence; and the widespread gender bias and prejudice
against women all make for real differences justifying the
classification under the law. As Justice McIntyre succinctly
states, "the accommodation of differences ... is the essence
of true equality."70
A. Unequal power relationship between men and women

32

According to the Philippine Commission on Women (the


National Machinery for Gender Equality and Women's
Empowerment), violence against women (VAW) is deemed
to be closely linked with the unequal power relationship
between women and men otherwise known as "genderbased violence". Societal norms and traditions dictate
people to think men are the leaders, pursuers, providers,
and take on dominant roles in society while women are
nurturers, men's companions and supporters, and take on
subordinate roles in society. This perception leads to men
gaining more power over women. With power comes the
need to control to retain that power. And VAW is a form of
men's expression of controlling women to retain power.71
The United Nations, which has long recognized VAW as a
human rights issue, passed its Resolution 48/104 on the
Declaration on Elimination of Violence Against Women on
December 20, 1993 stating that "violence against women is
a manifestation of historically unequal power relations
between men and women, which have led to domination
over and discrimination against women by men and to the
prevention of the full advancement of women, and that
violence against women is one of the crucial social
mechanisms by which women are forced into subordinate
positions, compared with men."72
Then Chief Justice Reynato S. Puno traced the historical
and social context of gender-based violence and
developments in advocacies to eradicate VAW, in his
remarks delivered during the Joint Launching of R.A. 9262
and its Implementing Rules last October 27, 2004, the
pertinent portions of which are quoted hereunder:
History reveals that most societies sanctioned the use of
violence against women. The patriarch of a family was
accorded the right to use force on members of the family
under his control. I quote the early studies:
Traditions subordinating women have a long history rooted
in patriarchy the institutional rule of men. Women were
seen in virtually all societies to be naturally inferior both
physically and intellectually. In ancient Western societies,
women whether slave, concubine or wife, were under the
authority of men. In law, they were treated as property.
The Roman concept of patria potestas allowed the husband
to beat, or even kill, his wife if she endangered his property
right over her. Judaism, Christianity and other religions
oriented towards the patriarchal family strengthened the
male dominated structure of society.
English feudal law reinforced the tradition of male control
over women. Even the eminent Blackstone has been
quoted in his commentaries as saying husband and wife
were one and that one was the husband. However, in the
late 1500s and through the entire 1600s, English common
law began to limit the right of husbands to chastise their
wives. Thus, common law developed the rule of thumb,
which allowed husbands to beat their wives with a rod or
stick no thicker than their thumb.

In the later part of the 19th century, legal recognition of


these rights to chastise wives or inflict corporeal
punishment ceased. Even then, the preservation of the
family was given more importance than preventing violence
to women.
The metamorphosis of the law on violence in the United
States followed that of the English common law. In 1871,
the Supreme Court of Alabama became the first appellate
court to strike down the common law right of a husband to
beat his wife:
The privilege, ancient though it may be, to beat one's wife
with a stick, to pull her hair, choke her, spit in her face or
kick her about the floor, or to inflict upon her like indignities,
is not now acknowledged by our law... In person, the wife is
entitled to the same protection of the law that the husband
can invoke for himself.
As time marched on, the women's advocacy movement
became more organized. The temperance leagues initiated
it. These leagues had a simple focus. They considered the
evils of alcoholism as the root cause of wife abuse. Hence,
they demonstrated and picketed saloons, bars and their
husbands' other watering holes. Soon, however, their
crusade was joined by suffragette movements, expanding
the liberation movement's agenda. They fought for women's
right to vote, to own property, and more. Since then, the
feminist movement was on the roll.
The feminist movement exposed the private invisibility of
the domestic violence to the public gaze. They succeeded
in transforming the issue into an important public concern.
No less than the United States Supreme Court, in 1992
case Planned Parenthood v. Casey, noted:
In an average 12-month period in this country,
approximately two million women are the victims of severe
assaults by their male partners. In a 1985 survey, women
reported that nearly one of every eight husbands had
assaulted their wives during the past year. The [American
Medical Association] views these figures as "marked
underestimates," because the nature of these incidents
discourages women from reporting them, and because
surveys typically exclude the very poor, those who do not
speak English well, and women who are homeless or in
institutions or hospitals when the survey is conducted.
According to the AMA, "researchers on family violence
agree that the true incidence of partner violence is probably
double the above estimates; or four million severely
assaulted women per year."
Studies on prevalence suggest that from one-fifth to onethird of all women will be physically assaulted by a partner
or ex-partner during their lifetime... Thus on an average day
in the United States, nearly 11,000 women are severely
assaulted by their male partners. Many of these incidents
involve sexual assault... In families where wife beating
takes place, moreover, child abuse is often present as well.
Other studies fill in the rest of this troubling picture. Physical
violence is only the most visible form of abuse.

33

Psychological abuse, particularly forced social


economic isolation of women, is also common.

and

Many victims of domestic violence remain with their


abusers, perhaps because they perceive no superior
alternative...Many abused women who find temporary
refuge in shelters return to their husbands, in large part
because they have no other source of income... Returning
to one's abuser can be dangerous. Recent Federal Bureau
of Investigation statistics disclose that 8.8 percent of all
homicide victims in the United States are killed by their
spouses...Thirty percent of female homicide victims are
killed by their male partners.
Finally in 1994, the United States Congress enacted the
Violence Against Women Act.
In the International front, the women's struggle for equality
was no less successful. The United States Charter and the
Universal Declaration of Human Rights affirmed the equality
of all human beings. In 1979, the UN General Assembly
adopted the landmark Convention on the Elimination of all
Forms of Discrimination Against Women (CEDAW). In
1993, the UN General Assembly also adopted the
Declaration on the Elimination of Violence Against Women.
World conferences on the role and rights of women have
been regularly held in Mexico City, Copenhagen, Nairobi
and Beijing. The UN itself established a Commission on the
Status of Women.
The Philippines has been in cadence with the half and full
steps of all these women's movements. No less than
Section 14, Article II of our 1987 Constitution mandates the
State to recognize the role of women in nation building and
to ensure the fundamental equality before the law of women
and men. Our Senate has ratified the CEDAW as well as
the Convention on the Rights of the Child and its two
protocols. To cap it all, Congress, on March 8, 2004,
enacted Rep. Act No. 9262, entitled "An Act Defining
Violence Against Women and Their Children, Providing for
Protective Measures for Victims, Prescribing Penalties
therefor and for other Purposes." (Citations omitted)

abuse and violence and more than 90% of these reported


cases were committed by the women's intimate partners
such as their husbands and live-in partners.73
Recently, the Philippine Commission on Women presented
comparative statistics on violence against women across an
eight-year period from 2004 to August of 2011 with
violations under R.A. 9262 ranking first among the different
VAW categories since its implementation in 2004,74 thus:
Table 1. Annual Comparative Statistics on Violence Against
Women, 2004 - 2011*

2005

2006

2007

2008

2009

927

659

837

811

770

46

26

22

28

27

148

185

147

204

167

536

382

358

445

485

2,335

1,892

1,505

1,307

1,498

37

38

46

18

54

924

1,269

2,387

3,599

5,285

223

199

182

220

208

19

29

30

19

19

102

93

109

109

99

B. Women are the "usual" and "most likely"


victims of violence.
At the time of the presentation of Senate Bill No. 2723,
official statistics on violence against women and children
show that
x x x physical injuries had the highest number of cases at
5,058 in 2002 representing 55.63% of total cases reported
(9,903). And for the first semester of 2003, there were 2,381
reported cases out of 4,354 cases which represent 54.31%.
xxx (T)he total number of women in especially difficult
circumstances served by the Department of Social Welfare
and Development (DSWD) for the year 2002, there are
1,417 physically abused/maltreated cases out of the total of
5,608 cases. xxx (T)here are 1,091 DSWD cases out of a
total number of 3,471 cases for the first semester of 2003.
Female violence comprised more than 90% of all forms of

34

11

16

24

34

152

34

23

28

18

25

constitute a menace to the health of the community." 77 The


mere fact that the legislative classification may result in
actual inequality is not violative of the right to equal
protection, for every classification of persons or things for
regulation by law produces inequality in some degree, but
the law is not thereby rendered invalid.78
C. Gender bias and prejudices

50

59

59

83

703

5,374

4,881

5,729

6,905

9,485

*2011 report covers only from January to August


Source: Philippine National Police Women and Children
Protection Center (WCPC)
On the other hand, no reliable estimates may be obtained
on domestic abuse and violence against men in the
Philippines because incidents thereof are relatively low and,
perhaps, because many men will not even attempt to report
the situation. In the United Kingdom, 32% of women who
had ever experienced domestic violence did so four or five
(or more) times, compared with 11% of the smaller number
of men who had ever experienced domestic violence; and
women constituted 89% of all those who had experienced 4
or more incidents of domestic violence. 75 Statistics in
Canada show that spousal violence by a woman against a
man is less likely to cause injury than the other way around
(18 percent versus 44 percent). Men, who experience
violence from their spouses are much less likely to live in
fear of violence at the hands of their spouses, and much
less likely to experience sexual assault. In fact, many cases
of physical violence by a woman against a spouse are in
self-defense or the result of many years of physical or
emotional abuse.76
While there are, indeed, relatively few cases of violence
and abuse perpetrated against men in the Philippines, the
same cannot render R.A. 9262 invalid.
In a 1960 case involving the violation of a city ordinance
requiring drivers of animal-drawn vehicles to pick up, gather
and deposit in receptacles the manure emitted or
discharged by their vehicle-drawing animals in any public
highways, streets, plazas, parks or alleys, said ordinance
was challenged as violative of the guaranty of equal
protection of laws as its application is limited to owners and
drivers of vehicle-drawing animals and not to those animals,
although not utilized, but similarly pass through the same
streets.
The ordinance was upheld as a valid classification for the
reason that, while there may be non-vehicle-drawing
animals that also traverse the city roads, "but their number
must be negligible and their appearance therein merely
occasional, compared to the rig-drawing ones, as not to

From the initial report to the police through prosecution,


trial, and sentencing, crimes against women are often
treated differently and less seriously than other crimes. This
was argued by then United States Senator Joseph R.
Biden, Jr., now Vice President, chief sponsor of the
Violence Against Women Act (VAWA), in defending the civil
rights remedy as a valid exercise of the U.S. Congress'
authority under the Commerce and Equal Protection
Clauses. He stressed that the widespread gender bias in
the U.S. has institutionalized historic prejudices against
victims of rape or domestic violence, subjecting them to
"double victimization" first at the hands of the offender
and then of the legal system.79
Our own Senator Loi Estrada lamented in her Sponsorship
Speech for Senate Bill No. 2723 that "(w)henever violence
occurs in the family, the police treat it as a private matter
and advise the parties to settle the conflict themselves.
Once the complainant brings the case to the prosecutor, the
latter is hesitant to file the complaint for fear that it might
later be withdrawn. This lack of response or reluctance to
be involved by the police and prosecution reinforces the
escalating, recurring and often serious nature of domestic
violence."80
Sadly, our own courts, as well, have exhibited prejudices
and biases against our women.
In a recent case resolved on March 9, 2011, we fined RTC
Judge Venancio J. Amila for Conduct Unbecoming of a
Judge. He used derogatory and irreverent language in
reference to the complainant in a petition for TPO and PPO
under R.A. 9262, calling her as "only a live-in partner" and
presenting her as an "opportunist" and a "mistress" in an
"illegitimate relationship." Judge Amila even called her a
"prostitute," and accused her of being motivated by
"insatiable greed" and of absconding with the contested
property.81 Such remarks betrayed Judge Amila's prejudices
and lack of gender sensitivity.
The enactment of R.A. 9262 aims to address the
discrimination brought about by biases and prejudices
against women. As emphasized by the CEDAW Committee
on the Elimination of Discrimination against Women,
addressing or correcting discrimination through specific
measures focused on women does not discriminate against
men.82 Petitioner's contention,83 therefore, that R.A. 9262 is
discriminatory and that it is an "anti-male," "husbandbashing,"
and
"hate-men"
law
deserves
scant
consideration. As a State Party to the CEDAW, the
Philippines bound itself to take all appropriate measures "to
modify the social and cultural patterns of conduct of men
and women, with a view to achieving the elimination of

35

prejudices and customary and all other practices which are


based on the idea of the inferiority or the superiority of
either of the sexes or on stereotyped roles for men and
women."84 Justice Puno correctly pointed out that "(t)he
paradigm shift changing the character of domestic violence
from a private affair to a public offense will require the
development of a distinct mindset on the part of the police,
the prosecution and the judges."85

woman with whom the person has or had a sexual or dating


relationship, or with whom he has a common child, or
against her child whether legitimate or illegitimate, within or
without the family abode, which result in or is likely to result
in physical, sexual, psychological harm or suffering, or
economic abuse including threats of such acts, battery,
assault, coercion, harassment or arbitrary deprivation of
liberty. It includes, but is not limited to, the following acts:

II. The classification is germane to the purpose of the law.

A. "Physical Violence" refers to acts that include bodily or


physical harm;

The distinction between men and women is germane to the


purpose of R.A. 9262, which is to address violence
committed against women and children, spelled out in its
Declaration of Policy, as follows:
SEC. 2. Declaration of Policy. It is hereby declared that
the State values the dignity of women and children and
guarantees full respect for human rights. The State also
recognizes the need to protect the family and its members
particularly women and children, from violence and threats
to their personal safety and security.
Towards this end, the State shall exert efforts to address
violence committed against women and children in keeping
with the fundamental freedoms guaranteed under the
Constitution and the provisions of the Universal Declaration
of Human Rights, the Convention on the Elimination of All
Forms of Discrimination Against Women, Convention on the
Rights of the Child and other international human rights
instruments of which the Philippines is a party.
In 1979, the U.N. General Assembly adopted the CEDAW,
which the Philippines ratified on August 5, 1981.
Subsequently, the Optional Protocol to the CEDAW was
also ratified by the Philippines on October 6, 2003. 86 This
Convention mandates that State parties shall accord to
women equality with men before the law 87 and shall take all
appropriate measures to eliminate discrimination against
women in all matters relating to marriage and family
relations on the basis of equality of men and women. 88 The
Philippines likewise ratified the Convention on the Rights of
the Child and its two protocols.89 It is, thus, bound by said
Conventions and their respective protocols.
III. The classification is not limited to existing
conditions only, and apply equally to all members
Moreover, the application of R.A. 9262 is not limited to the
existing conditions when it was promulgated, but to future
conditions as well, for as long as the safety and security of
women and their children are threatened by violence and
abuse.
R.A. 9262 applies equally to all women and children who
suffer violence and abuse. Section 3 thereof defines VAWC
as:
x x x any act or a series of acts committed by any person
against a woman who is his wife, former wife, or against a

B. "Sexual violence" refers to an act which is sexual in


nature, committed against a woman or her child. It includes,
but is not limited to:
a) rape, sexual harassment, acts of
lasciviousness, treating a woman or her
child as a sex object, making demeaning
and
sexually
suggestive
remarks,
physically attacking the sexual parts of the
victim's body, forcing her/him to watch
obscene publications and indecent shows
or forcing the woman or her child to do
indecent acts and/or make films thereof,
forcing the wife and mistress/lover to live
in the conjugal home or sleep together in
the same room with the abuser;
b) acts causing or attempting to cause the
victim to engage in any sexual activity by
force, threat of force, physical or other
harm or threat of physical or other harm or
coercion;
c) Prostituting the woman or child.
C. "Psychological violence" refers to acts or omissions
causing or likely to cause mental or emotional suffering of
the victim such as but not limited to intimidation,
harassment, stalking, damage to property, public ridicule or
humiliation, repeated verbal abuse and marital infidelity. It
includes causing or allowing the victim to witness the
physical, sexual or psychological abuse of a member of the
family to which the victim belongs, or to witness
pornography in any form or to witness abusive injury to pets
or to unlawful or unwanted deprivation of the right to
custody and/or visitation of common children.
D. "Economic abuse" refers to acts that make or attempt to
make a woman financially dependent which includes, but is
not limited to the following:
1. withdrawal of financial support or
preventing the victim from engaging in any
legitimate
profession,
occupation,
business or activity, except in cases
wherein the other spouse/partner objects
on valid, serious and moral grounds as
defined in Article 73 of the Family Code;

36

2. deprivation or threat of deprivation of


financial resources and the right to the use
and enjoyment of the conjugal, community
or property owned in common;
3. destroying household property;
4. controlling the victims' own money or
properties or solely controlling the conjugal
money or properties.
It should be stressed that the acts enumerated in the
aforequoted provision are attributable to research that has
exposed the dimensions and dynamics of battery. The acts
described here are also found in the U.N. Declaration on
the Elimination of Violence Against Women. 90 Hence, the
argument advanced by petitioner that the definition of what
constitutes abuse removes the difference between violent
action and simple marital tiffs is tenuous.
There is nothing in the definition of VAWC that is vague and
ambiguous that will confuse petitioner in his defense. The
acts enumerated above are easily understood and provide
adequate contrast between the innocent and the prohibited
acts. They are worded with sufficient definiteness that
persons of ordinary intelligence can understand what
conduct is prohibited, and need not guess at its meaning
nor differ in its application.91 Yet, petitioner insists92 that
phrases like "depriving or threatening to deprive the woman
or her child of a legal right," "solely controlling the conjugal
or common money or properties," "marital infidelity," and
"causing mental or emotional anguish" are so vague that
they make every quarrel a case of spousal abuse. However,
we have stressed that the "vagueness" doctrine merely
requires a reasonable degree of certainty for the statute to
be upheld not absolute precision or mathematical
exactitude, as petitioner seems to suggest. Flexibility, rather
than meticulous specificity, is permissible as long as the
metes and bounds of the statute are clearly delineated. An
act will not be held invalid merely because it might have
been more explicit in its wordings or detailed in its
provisions.93
There is likewise no merit to the contention that R.A. 9262
singles out the husband or father as the culprit. As defined
above, VAWC may likewise be committed "against a
woman with whom the person has or had a sexual or dating
relationship." Clearly, the use of the gender-neutral word
"person" who has or had a sexual or dating relationship with
the woman encompasses even lesbian relationships.
Moreover, while the law provides that the offender be
related or connected to the victim by marriage, former
marriage, or a sexual or dating relationship, it does not
preclude the application of the principle of conspiracy under
the Revised Penal Code (RPC). Thus, in the case of GoTan v. Spouses Tan,94 the parents-in-law of Sharica Mari L.
Go-Tan, the victim, were held to be proper respondents in
the case filed by the latter upon the allegation that they and
their son (Go-Tan's husband) had community of design and
purpose in tormenting her by giving her insufficient financial
support; harassing and pressuring her to be ejected from
the family home; and in repeatedly abusing her verbally,
emotionally, mentally and physically.

R.A.
9262
is
not
violative
due process clause of the Constitution.

of

the

Petitioner bewails the disregard of R.A. 9262, specifically in


the issuance of POs, of all protections afforded by the due
process clause of the Constitution. Says he: "On the basis
of unsubstantiated allegations, and practically no
opportunity to respond, the husband is stripped of family,
property, guns, money, children, job, future employment and
reputation, all in a matter of seconds, without an inkling of
what happened."95
A protection order is an order issued to prevent further acts
of violence against women and their children, their family or
household members, and to grant other necessary reliefs.
Its purpose is to safeguard the offended parties from further
harm, minimize any disruption in their daily life and facilitate
the opportunity and ability to regain control of their life.96
"The scope of reliefs in protection orders is broadened to
ensure that the victim or offended party is afforded all the
remedies necessary to curtail access by a perpetrator to the
victim. This serves to safeguard the victim from greater risk
of violence; to accord the victim and any designated family
or household member safety in the family residence, and to
prevent the perpetrator from committing acts that jeopardize
the employment and support of the victim. It also enables
the court to award temporary custody of minor children to
protect the children from violence, to prevent their
abduction by the perpetrator and to ensure their financial
support."97
The rules require that petitions for protection order be in
writing, signed and verified by the petitioner 98 thereby
undertaking full responsibility, criminal or civil, for every
allegation therein. Since "time is of the essence in cases of
VAWC if further violence is to be prevented," 99 the court is
authorized to issue ex parte a TPO after raffle but before
notice and hearing when the life, limb or property of the
victim is in jeopardy and there is reasonable ground to
believe that the order is necessary to protect the victim from
the immediate and imminent danger of VAWC or to prevent
such violence, which is about to recur.100
There need not be any fear that the judge may have no
rational basis to issue an ex parte order. The victim is
required not only to verify the allegations in the petition, but
also to attach her witnesses' affidavits to the petition. 101
The grant of a TPO ex parte cannot, therefore, be
challenged as violative of the right to due process. Just like
a writ of preliminary attachment which is issued without
notice and hearing because the time in which the hearing
will take could be enough to enable the defendant to
abscond or dispose of his property,102 in the same way, the
victim of VAWC may already have suffered harrowing
experiences in the hands of her tormentor, and possibly
even death, if notice and hearing were required before such
acts could be prevented. It is a constitutional commonplace
that the ordinary requirements of procedural due process
must yield to the necessities of protecting vital public
interests,103 among which is protection of women and

37

children from violence and threats to their personal safety


and security.

The wording of the pertinent rule, however, does not by any


stretch of the imagination suggest that this is so. It states:

It should be pointed out that when the TPO is issued ex


parte, the court shall likewise order that notice be
immediately given to the respondent directing him to file an
opposition within five (5) days from service. Moreover, the
court shall order that notice, copies of the petition and TPO
be served immediately on the respondent by the court
sheriffs. The TPOs are initially effective for thirty (30) days
from service on the respondent.104

SEC. 11. Reliefs available to the offended party. -- The


protection order shall include any, some or all of the
following reliefs:

Where no TPO is issued ex parte, the court will nonetheless


order the immediate issuance and service of the notice
upon the respondent requiring him to file an opposition to
the petition within five (5) days from service. The date of the
preliminary conference and hearing on the merits shall
likewise be indicated on the notice.105
The opposition to the petition which the respondent himself
shall verify, must be accompanied by the affidavits of
witnesses and shall show cause why a temporary or
permanent protection order should not be issued. 106
It is clear from the foregoing rules that the respondent of a
petition for protection order should be apprised of the
charges imputed to him and afforded an opportunity to
present his side. Thus, the fear of petitioner of being
"stripped of family, property, guns, money, children, job,
future employment and reputation, all in a matter of
seconds, without an inkling of what happened" is a mere
product of an overactive imagination. The essence of due
process is to be found in the reasonable opportunity to be
heard and submit any evidence one may have in support of
one's defense. "To be heard" does not only mean verbal
arguments in court; one may be heard also through
pleadings. Where opportunity to be heard, either through
oral arguments or pleadings, is accorded, there is no denial
of procedural due process.107
It should be recalled that petitioner filed on April 26, 2006
an Opposition to the Urgent Ex-Parte Motion for Renewal of
the TPO that was granted only two days earlier on April 24,
2006. Likewise, on May 23, 2006, petitioner filed a motion
for the modification of the TPO to allow him visitation rights
to his children. Still, the trial court in its Order dated
September 26, 2006, gave him five days (5) within which to
show cause why the TPO should not be renewed or
extended. Yet, he chose not to file the required comment
arguing that it would just be an "exercise in futility,"
conveniently forgetting that the renewal of the questioned
TPO was only for a limited period (30 days) each time, and
that he could prevent the continued renewal of said order if
he can show sufficient cause therefor. Having failed to do
so, petitioner may not now be heard to complain that he
was denied due process of law.
Petitioner next laments that the removal and exclusion of
the respondent in the VAWC case from the residence of the
victim, regardless of ownership of the residence, is virtually
a "blank check" issued to the wife to claim any property as
her conjugal home.108

xxxx
(c) Removing and excluding the respondent from the
residence of the offended party, regardless of ownership of
the residence, either temporarily for the purpose of
protecting the offended party, or permanently where no
property rights are violated. If the respondent must remove
personal effects from the residence, the court shall direct a
law enforcement agent to accompany the respondent to the
residence, remain there until the respondent has gathered
his things and escort him from the residence;
xxxx
Indubitably, petitioner may be removed and excluded from
private respondent's residence, regardless of ownership,
only temporarily for the purpose of protecting the latter.
Such removal and exclusion may be permanent only where
no property rights are violated. How then can the private
respondent just claim any property and appropriate it for
herself, as petitioner seems to suggest?
The
non-referral
to a mediator is justified.

of

VAWC

case

Petitioner argues that "by criminalizing run-of-the-mill


arguments, instead of encouraging mediation and
counseling, the law has done violence to the avowed policy
of the State to "protect and strengthen the family as a basic
autonomous social institution."109
Under Section 23(c) of A.M. No. 04-10-11-SC, the court
shall not refer the case or any issue thereof to a mediator.
The reason behind this provision is well-explained by the
Commentary on Section 311 of the Model Code on
Domestic and Family Violence as follows:110
This section prohibits a court from ordering or referring
parties to mediation in a proceeding for an order for
protection. Mediation is a process by which parties in
equivalent
bargaining
positions
voluntarily
reach
consensual agreement about the issue at hand. Violence,
however, is not a subject for compromise. A process which
involves parties mediating the issue of violence implies that
the victim is somehow at fault. In addition, mediation of
issues in a proceeding for an order of protection is
problematic because the petitioner is frequently unable to
participate equally with the person against whom the
protection order has been sought. (Emphasis supplied)
There
is
no
undue
judicial power to barangay officials.

delegation

of

38

Petitioner contends that protection orders involve the


exercise of judicial power which, under the Constitution, is
placed upon the "Supreme Court and such other lower
courts as may be established by law" and, thus, protests
the delegation of power to barangay officials to issue
protection orders.111 The pertinent provision reads, as
follows:
SEC. 14. Barangay Protection Orders (BPOs); Who May
Issue and How. Barangay Protection Orders (BPOs) refer
to the protection order issued by the Punong Barangay
ordering the perpetrator to desist from committing acts
under Section 5 (a) and (b) of this Act.1wphi1 A Punong
Barangay who receives applications for a BPO shall issue
the protection order to the applicant on the date of filing
after ex parte determination of the basis of the application.
If the Punong Barangay is unavailable to act on the
application for a BPO, the application shall be acted upon
by any available Barangay Kagawad. If the BPO is issued
by a Barangay Kagawad, the order must be accompanied
by an attestation by the Barangay Kagawad that the
Punong Barangay was unavailable at the time of the
issuance of the BPO. BPOs shall be effective for fifteen (15)
days. Immediately after the issuance of an ex parte BPO,
the Punong Barangay or Barangay Kagawad shall
personally serve a copy of the same on the respondent, or
direct any barangay official to effect its personal service.
The parties may be accompanied by a non-lawyer advocate
in any proceeding before the Punong Barangay.
Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.112 On the other hand,
executive power "is generally defined as the power to
enforce and administer the laws. It is the power of carrying
the laws into practical operation and enforcing their due
observance."113
As clearly delimited by the aforequoted provision, the BPO
issued by the Punong Barangay or, in his unavailability, by
any available Barangay Kagawad, merely orders the
perpetrator to desist from (a) causing physical harm to the
woman or her child; and (2) threatening to cause the
woman or her child physical harm. Such function of the
Punong Barangay is, thus, purely executive in nature, in
pursuance of his duty under the Local Government Code to
"enforce all laws and ordinances," and to "maintain public
order in the barangay."114

is reasonable ground to believe that an offense has been


committed and the accused is probably guilty thereof," the
Punong Barangay must determine reasonable ground to
believe that an imminent danger of violence against the
woman and her children exists or is about to recur that
would necessitate the issuance of a BPO. The preliminary
investigation conducted by the prosecutor is, concededly,
an executive, not a judicial, function. The same holds true
with the issuance of a BPO.
We need not even belabor the issue raised by petitioner
that since barangay officials and other law enforcement
agencies are required to extend assistance to victims of
violence and abuse, it would be very unlikely that they
would remain objective and impartial, and that the chances
of acquittal are nil. As already stated, assistance by
barangay officials and other law enforcement agencies is
consistent with their duty to enforce the law and to maintain
peace and order.
Conclusion
Before a statute or its provisions duly challenged are
voided, an unequivocal breach of, or a clear conflict with the
Constitution, not merely a doubtful or argumentative one,
must be demonstrated in such a manner as to leave no
doubt in the mind of the Court. In other words, the grounds
for nullity must be beyond reasonable doubt. 116 In the
instant case, however, no concrete evidence and
convincing arguments were presented by petitioner to
warrant a declaration of the unconstitutionality of R.A. 9262,
which is an act of Congress and signed into law by the
highest officer of the co-equal executive department. As we
said in Estrada v. Sandiganbayan, 117 courts must assume
that the legislature is ever conscious of the borders and
edges of its plenary powers, and passed laws with full
knowledge of the facts and for the purpose of promoting
what is right and advancing the welfare of the majority.
We reiterate here Justice Puno's observation that "the
history of the women's movement against domestic
violence shows that one of its most difficult struggles was
the fight against the violence of law itself. If we keep that in
mind, law will not again be a hindrance to the struggle of
women for equality but will be its fulfillment." 118 Accordingly,
the constitutionality of R.A. 9262 is, as it should be,
sustained.
WHEREFORE, the instant petition for review on certiorari is
hereby DENIED for lack of merit.
SO ORDERED.

We have held that "(t)he mere fact that an officer is required


by law to inquire into the existence of certain facts and to
apply the law thereto in order to determine what his official
conduct shall be and the fact that these acts may affect
private rights do not constitute an exercise of judicial
powers."115
In the same manner as the public prosecutor ascertains
through a preliminary inquiry or proceeding "whether there

39

against him on April 4, 1974, in the Municipal Court of San


Juan, Rizal (Civil Case No. 3773).lwph1.t It was
dismissed on the plaintiffs own motion.
RULE 17 SEC 3
DISMISSAL DUE TO FAULT OF PLAINTIFF
G.R. No. 83545 August 11, 1989
ADELFO
MACEDA,
petitioner,
vs.
HON. COURT OF APPEALS AND CEMENT CENTER,
INC., respondents.
Charles S. Anastacio for petitioner.
F.M. Carpio & Associates for private respondent.

GRI;O-AQUINO, J.:
The issue raised in this case is the jurisdiction of the
metropolitan trial court, in an ejectment case, over the
lessee's counterclaim for the value of improvements
exceeding the court's jurisdictional limit of P20,000. The
Court of Appeals dismissed the counterclaim for lack of
jurisdiction, hence, this petition for review by the lessee,
Adelfo Maceda.
The leased property originally belonged to the spouses
Arturo Victoria and Maxima Monserrat, a maternal aunt of
the petitioner. After the spouses emigrated to the U.S. in
1970, they leased their house and lot in San Juan, Metro
Manila, to the petitioner for P200 per month in 1970. As the
house was old and run down, petitioner proposed to have it
repaired and renovated subject to reimbursement of his
expenses. The lessors allowed him to do so (Exh. 3) and
requested him to send them pictures of the work
accomplished (Exh. 3-a). He made extensive repairs,
tearing down rotten parts of the house, rebuilding and
extending it up to the garage which he converted into a
dining room. He also moved the bathrooms around. The
remodelling job cost P40,000. His aunt and uncle were
pleased with the pictures of the remodelled house and
made plans to reimburse him for his expenditures. But
Maceda did not stop there. In what appears to be an orgy of
building, he introduced more improvements. He constructed
a new driveway, a basketball court and raised the ground
level near the creek, elevated the fence, remodelled the
gate, and landscaped the lawn.
In 1972, Arturo Victoria passed away in the United States.
In 1973, his aunt's attorney-in-fact, Atty. Rustico Zapata, Sr.,
promised to sell the property to him for P125,000 after the
title should have been transferred to his widowed aunt. On
February 12, 1974, Atty. Zapata and a Mr. Gomez visited
the place and informed him that his aunt had sold the
property to Mrs. Gomez so he should vacate it. He refused
to leave. As a result, Atty. Zapata filed an ejectment case

In November 1974, Atty. Zapata informed the petitioner that


the property had been sold to Pablo Zubiri for P145,000. He
was asked to vacate it. Again, he refused. Zubiri filed an
ejectment case against am (Civil Case No. 37781) in the
Municipal Court of San Juan, Rizal. Petitioner insisted that
he was entitled to retain possession of the premises until
his expenses were duly reimbursed to him. The complaint
was dismissed for failure to prosecute.
In 1978 Maxima Monserrat died in the United States.
On December 4, 1981, the property was sold by Zubiri to
Cement Center, Inc. which obtained TCT Nos. 30844 to
30845 for the property. The president of the company
inspected the premises. Maceda was asked to vacate the
property because the company would build a housing
project on it for its employees. Maceda insisted on being
reimbursed for his improvements as the original owners had
promised to do. Formal demands to vacate and for payment
of P4,000 monthly rental from April 15, 1982 were sent to
him by the company. On January 17, 1984, another
ejectment suit was filed against him in the Metropolitan Trial
Court of San Juan, Metro Manila.
In his answer to the complaint, Maceda set up a
counterclaim for P240,000, the alleged value of his
improvements.
In its decision, the Metropolitan Trial Court ordered him to
vacate the premises and pay the plaintiff P2,000 per month
as reasonable compensation for his use of the premises
until he actually vacates, and P5,000 as attorney's fees. It
ordered the plaintiff to pay the defendant P158,000 as the
value of his improvements and repairs, less his accrued
rentals of P64,000 as of December 1985 and the sum of
P12,000 which he had earlier received as partial
reimbursement.
Both parties appealed to the Regional Trial Court. The
Regional Trial Court set aside the inferior court's decision.
On May 19, 1987, it dismissed the ejectment complaint, and
ordered Cement Center to pay Maceda P182,000 for as
necessary and useful improvements (pp. 31-49, Rollo of
CA-G.R. No. 12536).
Cement Center filed a petition for review in the Court of
Appeals (CA-G.R. SP No. 12536). On February 17, 1988,
the Court of Appeals rendered a decision, modifying the
appealed decision, the dispositive part of which leads thus:
PREMISES CONSIDERED, the decision
appealed from is hereby AFFIRMED
insofar as it dismissed the complaint for
ejectment filed by petitioner against private
respondent. However, the, portions of the
decision declaring petitioner (plaintiff)
under obligation to pay private respondent
the sum of P182,200.00 corresponding to

40

the value of the supposed necessary and


useful improvement as well as the
pronouncement therein regarding private
respondent's right of retention hereby SET
ASIDE. With costs against petitioner. (p.
35, Rollo.)
The reason for the Court of Appeals' denial of Maceda's
claim for reimbursement of the cost of his improvements
was that the MTC lacked jurisdiction over the claim which
exceeds P20,000. The Court of Appeals said:
The Regional Trial Court, however, erred
in declaring that petitioner is under
obligation to pay private respondents the
sum
of
P182,200.00
supposedly
corresponding to the value of the
necessary and useful improvements he
had introduced on the leased premises,
with the right of retention until he shall
have been fully reimbursed therefor. The
claim for reimbursement in the total
amount of P240,000.00 was alleged by
private respondent by way of counterclaim
in his answer (pp. 40-41, Records). It is
clear that the amount of counterclaim, is
beyond the jurisdiction of the Metropolitan
Trial Court. Under Section 33, B.P. Blg.
129, the Metropolitan Trial Court shall
have exclusive original jurisdiction over
civil actions where the amount of the
demand does not exceed P20,000.00
exclusive of interest and costs but
inclusive of damages of whatever kind. It
goes without saying that the Regional Trial
Court has no authority to entertain the
counterclaim because it took cognizance
of the case by virtue of its appellate
jurisdiction.
Considering that the Metropolitan Trial
Court did not have jurisdiction to
adjudicate the counterclaim, the decision
of the Regional Trial Court on appeal
giving private respondent the right of
retention is without legal basis. Besides,
the right of retention applies only to a
possessor in good faith under Article 546
of the Civil Code. In lease, the lessee
knows that his occupancy of the premises
continues only during the lifetime of the
lease
contract.
If
he
introduces
improvements thereon, he does so at his
own risk (Imperial Insurance vs. Simon, 14
SCRA 855).lwph1.t The rights of a
lessee in good faith, which do not include
the right of retention, are defined in Article
1678, . . . (pp. 34-35, Rollo.)
In his petition for review of that decision in this Court,
Maceda assails the setting aside of the money judgment or
award for his improvements in the sum of P182,200, and

the rejection of his claim to a right of retention over the


leased premises.
Maceda's petition for review (G.R. No. 83545) has no merit.
The Court of Appeals correctly ruled that the municipal trial
court did not have original jurisdiction over his counterclaim
as it exceeds P20,000. Correspondingly, the regional trial
court did not have appellate jurisdiction over the claim. The
decision of the Municipal Trial Court of San Juan awarding
him P158,000 on his counterclaim, and that of the Regional
Trial Court raising the award to P182,200, were invalid for
lack of jurisdiction. The jurisdiction of the Metropolitan Trial
Court in a civil action for sum of money (Maceda's
counterclaim for the value of his improvements is one such
action) is limited to a demand that "does not exceed twenty
thousand pesos exclusive of interest and costs but inclusive
of damages of whatever kind." (Sec. 33, subpar. 1, B.P. Blg.
129.) A counterclaim in the municipal or city court beyond
that jurisdictional limit may be pleaded only by way of
defense to weaken the plaintiffs claim, but not to obtain
affirmative relief. (Agustin vs. Bacalan, 135 SCRA 340).
Maceda was not a possessor in good faith, i.e., one who
possesses in concept of an owner, hence he had no right to
retain possession of the leased premises pending
reimbursement of his improvements thereon. No mere
lessee can claim to be a possessor in good faith. (Art. 546,
Civil Code; Eusebio vs. IAC, 144 SCRA 154; Laureano vs.
Adil, 72 SCRA 148.)
The promise of the now deceased spouses Arturo Victoria
and Maxima Monserrat, to reimburse Maceda for his
improvements was limited only to the initial remodelling job
which cost P40,000, pictures of which he sent to the
Victorias and which they approved and promised to
reimburse. No similar promise to pay may be implied with
regard to the additional improvements which he made
without their approval and which were evidently intended to
improve them out of their property.
In any event, since the undertaking of the Victorias to
reimburse Maceda for the P40,000 worth of improvements
which he introduced on their property was not recorded on
their title, that promise did not encumber the property nor
bind the purchaser thereof or the successor-in-interest of
the Victorias (Mun. of Victorias vs. CA, 149 SCRA
32).lwph1.t
While it is true that under B.P. Blg. 877 a lessee may not be
ejected on account of the sale or mortgage of the leased
premises, the new owner's need of the premises for the
construction of dwellings for its employees, coupled with the
lessee's failure to pay the rentals since December 1981,
are, to our mind, a legitimate ground for the judicial
ejectment of the lessee.
Maceda's original rental of P200 per month could not be
increased by the new owner, Cement Center, when it
acquired the property on December 5, 1981 until B.P. Blg.
25 allowed a cumulative and compounded 10% yearly
increase effective April 15,1982, and a 20% increase
effective April 15, 1985, pursuant to B.P. Blg. 867 and 887

41

and R.A. 6643. Based on those guidelines, the rentals due


from Maceda from December 4, 1981 were as follows:

WHEREFORE, the petition for review is granted with


respect to the computation of the rentals due from the
petitioner. He is ordered to pay the unpaid rentals of
P32,864.36 for his occupancy of the private respondent's
property from December 1981 to August 14, 1989 plus
P662.36 monthly thereafter until he vacates the premises.
The dismissal of his counterclaim for the value of his
improvements is affirmed. No pronouncement as to costs.
SO ORDERED.

42

aware that CCC had a case pending with the Supreme


Court. The case was docketed as GR No. 119712, entitled
Asset Privatization Trust (APT) v. Court of Appeals and
Continental Cement Corporation.

G.R. No. 155173

November 23, 2004

LAFARGE CEMENT PHILIPPINES, INC., (formerly Lafarge


Philippines,
Inc.),
LUZON
CONTINENTAL
LAND
CORPORATION,
CONTINENTAL
OPERATING
CORPORATION and PHILIP ROSEBERG, petitioners,
vs.
CONTINENTAL CEMENT CORPORATION, GREGORY T.
LIM and ANTHONY A. MARIANO, respondents.

DECISION

PANGANIBAN, J.:
May defendants in civil cases implead in their counterclaims
persons who were not parties to the original complaints?
This is the main question to be answered in this
controversy.
The Case
Before us is a Petition for Review 1 under Rule 45 of the
Rules of Court, seeking to nullify the May 22, 2002 2 and the
September 3, 2002 Orders3 of the Regional Trial Court
(RTC) of Quezon City (Branch 80) in Civil Case No. Q-0041103. The decretal portion of the first assailed Order
reads:
"WHEREFORE, in the light of the foregoing as
earlier stated, the plaintiff's motion to dismiss
claims is granted. Accordingly, the defendants'
claims against Mr. Lim and Mr. Mariano captioned
as their counterclaims are dismissed."4
The second challenged Order denied petitioners' Motion for
Reconsideration.

In anticipation of the liability that the High Tribunal might


adjudge against CCC, the parties, under Clause 2 (c) of the
SPA, allegedly agreed to retain from the purchase price a
portion of the contract price in the amount of
P117,020,846.84 -- the equivalent of US$2,799,140. This
amount was to be deposited in an interest-bearing account
in the First National City Bank of New York (Citibank) for
payment to APT, the petitioner in GR No. 119712.
However, petitioners allegedly refused to apply the sum to
the payment to APT, despite the subsequent finality of the
Decision in GR No. 119712 in favor of the latter and the
repeated instructions of Respondent CCC. Fearful that
nonpayment to APT would result in the foreclosure, not just
of its properties covered by the SPA with Lafarge but of
several other properties as well, CCC filed before the
Regional Trial Court of Quezon City on June 20, 2000, a
"Complaint with Application for Preliminary Attachment"
against petitioners. Docketed as Civil Case No. Q-0041103, the Complaint prayed, among others, that petitioners
be directed to pay the "APT Retained Amount" referred to in
Clause 2 (c) of the SPA.
Petitioners moved to dismiss the Complaint on the ground
that it violated the prohibition on forum-shopping.
Respondent CCC had allegedly made the same claim it
was raising in Civil Case No. Q-00-41103 in another action,
which involved the same parties and which was filed earlier
before the International Chamber of Commerce. After the
trial court denied the Motion to Dismiss in its November 14,
2000 Order, petitioners elevated the matter before the Court
of Appeals in CA-GR SP No. 68688.
In the meantime, to avoid being in default and without
prejudice to the outcome of their appeal, petitioners filed
their Answer and Compulsory Counterclaims ad Cautelam
before the trial court in Civil Case No. Q-00-41103. In their
Answer, they denied the allegations in the Complaint. They
prayed -- by way of compulsory counterclaims against
Respondent CCC, its majority stockholder and president
Gregory T. Lim, and its corporate secretary Anthony A.
Mariano -- for the sums of (a) P2,700,000 each as actual
damages, (b) P100,000,000 each as exemplary damages,
(c) P100,000,000 each as moral damages, and (d)
P5,000,000 each as attorney's fees plus costs of suit.

The Facts
Briefly, the origins of the present controversy can be traced
to the Letter of Intent (LOI) executed by both parties on
August 11, 1998, whereby Petitioner Lafarge Cement
Philippines, Inc. (Lafarge) -- on behalf of its affiliates and
other qualified entities, including Petitioner Luzon
Continental Land Corporation (LCLC) -- agreed to purchase
the cement business of Respondent Continental Cement
Corporation (CCC). On October 21, 1998, both parties
entered into a Sale and Purchase Agreement (SPA). At the
time of the foregoing transactions, petitioners were well

Petitioners alleged that CCC, through Lim and Mariano, had


filed the "baseless" Complaint in Civil Case No. Q-00-41103
and procured the Writ of Attachment in bad faith. Relying on
this Court's pronouncement in Sapugay v. CA, 5 petitioners
prayed that both Lim and Mariano be held "jointly and
solidarily" liable with Respondent CCC.
On behalf of Lim and Mariano who had yet to file any
responsive pleading, CCC moved to dismiss petitioners'
compulsory counterclaims on grounds that essentially

43

constituted the very issues for resolution in the instant


Petition.
Ruling of the Trial Court
On May 22, 2002, the Regional Trial Court of Quezon City
(Branch 80) dismissed petitioners' counterclaims for several
reasons, among which were the following: a) the
counterclaims against Respondents Lim and Mariano were
not compulsory; b) the ruling in Sapugay was not
applicable; and c) petitioners' Answer with Counterclaims
violated procedural rules on the proper joinder of causes of
action.6
Acting on the Motion for Reconsideration filed by
petitioners, the trial court -- in an Amended Order dated
September 3, 20027 -- admitted some errors in its May 22,
2002 Order, particularly in its pronouncement that their
counterclaim had been pleaded against Lim and Mariano
only. However, the RTC clarified that it was dismissing the
counterclaim insofar as it impleaded Respondents Lim and
Mariano, even if it included CCC.
Hence this Petition.8
Issues
In their Memorandum, petitioners raise the following issues
for our consideration:
"[a] Whether or not the RTC gravely erred in
refusing to rule that Respondent CCC has no
personality to move to dismiss petitioners'
compulsory counterclaims on Respondents Lim
and Mariano's behalf.
"[b] Whether or not the RTC gravely erred in ruling
that
(i)
petitioners'
counterclaims against
Respondents Lim and Mariano are not compulsory;
(ii) Sapugay v. Court of Appeals is inapplicable
here; and (iii) petitioners violated the rule on joinder
of causes of action."9
For clarity and coherence, the Court will resolve the
foregoing in reverse order.
The Court's Ruling
The Petition is meritorious.
First Issue:
Counterclaims and Joinder of Causes of Action.

to facilitate the disposition of the whole controversy in a


single action, such that the defendant's demand may be
adjudged by a counterclaim rather than by an independent
suit. The only limitations to this principle are (1) that the
court should have jurisdiction over the subject matter of the
counterclaim, and (2) that it could acquire jurisdiction over
third parties whose presence is essential for its
adjudication.10
A counterclaim may either be permissive or compulsory. It is
permissive "if it does not arise out of or is not necessarily
connected with the subject matter of the opposing party's
claim."11 A permissive counterclaim is essentially an
independent claim that may be filed separately in another
case.
A counterclaim is compulsory when its object "arises out of
or is necessarily connected with the transaction or
occurrence constituting the subject matter of the opposing
party's claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire
jurisdiction."12
Unlike permissive counterclaims, compulsory counterclaims
should be set up in the same action; otherwise, they would
be barred forever. NAMARCO v. Federation of United
Namarco Distributors13 laid down the following criteria to
determine whether a counterclaim is compulsory or
permissive: 1) Are issues of fact and law raised by the claim
and by the counterclaim largely the same? 2) Would res
judicata bar a subsequent suit on defendant's claim, absent
the compulsory counterclaim rule? 3) Will substantially the
same evidence support or refute plaintiff's claim as well as
defendant's counterclaim? 4) Is there any logical relation
between the claim and the counterclaim? A positive answer
to all four questions would indicate that the counterclaim is
compulsory.
Adopted in Quintanilla v. CA14 and reiterated in Alday v.
FGU Insurance Corporation,15 the "compelling test of
compulsoriness"
characterizes
a
counterclaim
as
compulsory if there should exist a "logical relationship"
between the main claim and the counterclaim. There exists
such a relationship when conducting separate trials of the
respective claims of the parties would entail substantial
duplication of time and effort by the parties and the court;
when the multiple claims involve the same factual and legal
issues; or when the claims are offshoots of the same basic
controversy between the parties.
We shall now examine the nature of petitioners'
counterclaims against respondents with the use of the
foregoing parameters.
Petitioners base their counterclaim on the following
allegations:

Petitioners' Counterclaims Compulsory


Counterclaims are defined in Section 6 of Rule 6 of the
Rules of Civil Procedure as "any claim which a defending
party may have against an opposing party." They are
generally allowed in order to avoid a multiplicity of suits and

"Gregory T. Lim and Anthony A. Mariano were the


persons responsible for making the bad faith
decisions for, and causing plaintiff to file this
baseless suit and to procure an unwarranted writ of
attachment, notwithstanding their knowledge that

44

plaintiff has no right to bring it or to secure the writ.


In taking such bad faith actions, Gregory T. Lim
was motivated by his personal interests as one of
the owners of plaintiff while Anthony A. Mariano
was motivated by his sense of personal loyalty to
Gregory T. Lim, for which reason he disregarded
the fact that plaintiff is without any valid cause.
"Consequently, both Gregory T. Lim and Anthony A.
Mariano are the plaintiff's co-joint tortfeasors in the
commission of the acts complained of in this
answer and in the compulsory counterclaims
pleaded below. As such they should be held jointly
and solidarily liable as plaintiff's co-defendants to
those compulsory counterclaims pursuant to the
Supreme Court's decision in Sapugay v. Mobil.
xxx

xxx

xxx

"The plaintiff's, Gregory T. Lim and Anthony A.


Mariano's bad faith filing of this baseless case has
compelled the defendants to engage the services
of counsel for a fee and to incur costs of litigation,
in amounts to be proved at trial, but in no case less
than P5 million for each of them and for which
plaintiff Gregory T. Lim and Anthony A. Mariano
should be held jointly and solidarily liable.
"The plaintiff's, Gregory T. Lim's and Anthony A.
Mariano's actions have damaged the reputations of
the defendants and they should be held jointly and
solidarily liable to them for moral damages of P100
million each.
"In order to serve as an example for the public
good and to deter similar baseless, bad faith
litigation, the plaintiff, Gregory T. Lim and Anthony
A. Mariano should be held jointly and solidarily
liable to the defendants for exemplary damages of
P100 million each." 16
The above allegations show that petitioners' counterclaims
for damages were the result of respondents' (Lim and
Mariano) act of filing the Complaint and securing the Writ of
Attachment in bad faith. Tiu Po v. Bautista 17 involved the
issue of whether the counterclaim that sought moral, actual
and exemplary damages and attorney's fees against
respondents on account of their "malicious and unfounded"
complaint was compulsory. In that case, we held as follows:
"Petitioners' counterclaim for damages fulfills the
necessary requisites of a compulsory counterclaim.
They are damages claimed to have been suffered
by petitioners as a consequence of the action filed
against them. They have to be pleaded in the same
action; otherwise, petitioners would be precluded
by the judgment from invoking the same in an
independent action. The pronouncement in Papa
vs. Banaag (17 SCRA 1081) (1966) is in point:

of the debtor's action, are also compulsory


counterclaim barred by the dismissal of the
debtor's action. They cannot be claimed in a
subsequent action by the creditor against the
debtor."
"Aside from the fact that petitioners' counterclaim
for damages cannot be the subject of an
independent action, it is the same evidence that
sustains petitioners' counterclaim that will refute
private respondent's own claim for damages. This
is an additional factor that characterizes petitioners'
counterclaim as compulsory."18
Moreover, using the "compelling test of compulsoriness,"
we find that, clearly, the recovery of petitioners'
counterclaims is contingent upon the case filed by
respondents; thus, conducting separate trials thereon will
result in a substantial duplication of the time and effort of
the court and the parties.
Since the counterclaim for damages is compulsory, it must
be set up in the same action; otherwise, it would be barred
forever. If it is filed concurrently with the main action but in a
different proceeding, it would be abated on the ground of
litis pendentia; if filed subsequently, it would meet the same
fate on the ground of res judicata.19
Sapugay v. Court of Appeals Applicable to the Case at Bar
Sapugay v. Court of Appeals finds application in the present
case. In Sapugay, Respondent Mobil Philippines filed
before the trial court of Pasig an action for replevin against
Spouses Marino and Lina Joel Sapugay. The Complaint
arose from the supposed failure of the couple to keep their
end of their Dealership Agreement. In their Answer with
Counterclaim, petitioners alleged that after incurring
expenses in anticipation of the Dealership Agreement, they
requested the plaintiff to allow them to get gas, but that it
had refused. It claimed that they still had to post a surety
bond which, initially fixed at P200,000, was later raised to
P700,000.
The spouses exerted all efforts to secure a bond, but the
bonding companies required a copy of the Dealership
Agreement, which respondent continued to withhold from
them. Later, petitioners discovered that respondent and its
manager, Ricardo P. Cardenas, had intended all along to
award the dealership to Island Air Product Corporation.
In their Answer, petitioners impleaded in the counterclaim
Mobil Philippines and its manager -- Ricardo P. Cardenas -as defendants. They prayed that judgment be rendered,
holding both jointly and severally liable for pre-operation
expenses, rental, storage, guarding fees, and unrealized
profit including damages. After both Mobil and Cardenas
failed to respond to their Answer to the Counterclaim,
petitioners filed a "Motion to Declare Plaintiff and its
Manager Ricardo P. Cardenas in Default on Defendant's
Counterclaim."

"Compensatory, moral and exemplary damages,


allegedly suffered by the creditor in consequence

45

Among the issues raised in Sapugay was whether


Cardenas, who was not a party to the original action, might
nevertheless be impleaded in the counterclaim. We
disposed of this issue as follows:
"A counterclaim is defined as any claim for money
or other relief which a defending party may have
against an opposing party. However, the general
rule that a defendant cannot by a counterclaim
bring into the action any claim against persons
other than the plaintiff admits of an exception under
Section 14, Rule 6 which provides that 'when the
presence of parties other than those to the original
action is required for the granting of complete relief
in the determination of a counterclaim or crossclaim, the court shall order them to be brought in
as defendants, if jurisdiction over them can be
obtained.' The inclusion, therefore, of Cardenas in
petitioners' counterclaim is sanctioned by the
rules."20
The prerogative of bringing in new parties to the action at
any stage before judgment is intended to accord complete
relief to all of them in a single action and to avert a duplicity
and even a multiplicity of suits thereby.
In insisting on the inapplicability of Sapugay, respondents
argue that new parties cannot be included in a
counterclaim, except when no complete relief can be had.
They add that "[i]n the present case, Messrs. Lim and
Mariano are not necessary for petitioners to obtain
complete relief from Respondent CCC as plaintiff in the
lower court. This is because Respondent CCC as a
corporation with a separate [legal personality] has the
juridical capacity to indemnify petitioners even without
Messrs. Lim and Mariano."21
We disagree. The inclusion of a corporate officer or
stockholder -- Cardenas in Sapugay or Lim and Mariano in
the instant case -- is not premised on the assumption that
the plaintiff corporation does not have the financial ability to
answer for damages, such that it has to share its liability
with individual defendants. Rather, such inclusion is based
on the allegations of fraud and bad faith on the part of the
corporate officer or stockholder. These allegations may
warrant the piercing of the veil of corporate fiction, so that
the said individual may not seek refuge therein, but may be
held individually and personally liable for his or her actions.
In Tramat Mercantile v. Court of Appeals, 22 the Court held
that generally, it should only be the corporation that could
properly be held liable. However, circumstances may
warrant the inclusion of the personal liability of a corporate
director, trustee, or officer, if the said individual is found
guilty of bad faith or gross negligence in directing corporate
affairs.
Remo Jr. v. IAC23 has stressed that while a corporation is an
entity separate and distinct from its stockholders, the
corporate fiction may be disregarded if "used to defeat
public convenience, justify a wrong, protect fraud, or defend
crime." In these instances, "the law will regard the

corporation as an association of persons, or in case of two


corporations, will merge them into one." Thus, there is no
debate on whether, in alleging bad faith on the part of Lim
and Mariano the counterclaims had in effect made them
"indispensable parties" thereto; based on the alleged facts,
both are clearly parties in interest to the counterclaim.24
Respondents further assert that "Messrs. Lim and Mariano
cannot be held personally liable [because their assailed
acts] are within the powers granted to them by the proper
board resolutions; therefore, it is not a personal decision but
rather that of the corporation as represented by its board of
directors."25 The foregoing assertion, however, is a matter of
defense that should be threshed out during the trial;
whether or not "fraud" is extant under the circumstances is
an issue that must be established by convincing evidence.26
Suability and liability are two distinct matters. While the
Court does rule that the counterclaims against Respondent
CCC's president and manager may be properly filed, the
determination of whether both can in fact be held jointly and
severally liable with respondent corporation is entirely
another issue that should be ruled upon by the trial court.
However, while a compulsory counterclaim may implead
persons not parties to the original complaint, the general
rule -- a defendant in a compulsory counterclaim need not
file any responsive pleading, as it is deemed to have
adopted the allegations in the complaint as its answer -does not apply. The filing of a responsive pleading is
deemed a voluntary submission to the jurisdiction of the
court; a new party impleaded by the plaintiff in a compulsory
counterclaim cannot be considered to have automatically
and unknowingly submitted to the jurisdiction of the court. A
contrary ruling would result in mischievous consequences
whereby a party may be indiscriminately impleaded as a
defendant in a compulsory counterclaim; and judgment
rendered against it without its knowledge, much less
participation in the proceedings, in blatant disregard of
rudimentary due process requirements.
The correct procedure in instances such as this is for the
trial court, per Section 12 of Rule 6 of the Rules of Court, to
"order [such impleaded parties] to be brought in as
defendants, if jurisdiction over them can be obtained," by
directing that summons be served on them. In this manner,
they can be properly appraised of and answer the charges
against them. Only upon service of summons can the trial
court obtain jurisdiction over them.
In Sapugay, Cardenas was furnished a copy of the Answer
with Counterclaim, but he did not file any responsive
pleading to the counterclaim leveled against him.
Nevertheless, the Court gave due consideration to certain
factual circumstances, particularly the trial court's treatment
of the Complaint as the Answer of Cardenas to the
compulsory counterclaim and of his seeming acquiescence
thereto, as evidenced by his failure to make any objection
despite his active participation in the proceedings. It was
held thus:

46

"It is noteworthy that Cardenas did not file a motion


to dismiss the counterclaim against him on the
ground of lack of jurisdiction. While it is a settled
rule that the issue of jurisdiction may be raised
even for the first time on appeal, this does not
obtain in the instant case. Although it was only
Mobil which filed an opposition to the motion to
declare in default, the fact that the trial court denied
said motion, both as to Mobil and Cardenas on the
ground that Mobil's complaint should be considered
as the answer to petitioners' compulsory
counterclaim, leads us to the inescapable
conclusion that the trial court treated the opposition
as having been filed in behalf of both Mobil and
Cardenas and that the latter had adopted as his
answer the allegations raised in the complaint of
Mobil. Obviously, it was this ratiocination which led
the trial court to deny the motion to declare Mobil
and Cardenas in default. Furthermore, Cardenas
was not unaware of said incidents and the
proceedings therein as he testified and was
present during trial, not to speak of the fact that as
manager of Mobil he would necessarily be
interested in the case and could readily have
access to the records and the pleadings filed
therein.
"By adopting as his answer the allegations in the
complaint which seeks affirmative relief, Cardenas
is deemed to have recognized the jurisdiction of
the trial court over his person and submitted
thereto. He may not now be heard to repudiate or
question that jurisdiction."27
Such factual circumstances are unavailing in the
instant case. The records do not show that
Respondents Lim and Mariano are either aware of
the counterclaims filed against them, or that they
have actively participated in the proceedings
involving them. Further, in dismissing the
counterclaims against the individual respondents,
the court a quo -- unlike in Sapugay -- cannot be
said to have treated Respondent CCC's Motion to
Dismiss as having been filed on their behalf.
Rules
on
Permissive
Joinder
of Action or Parties Not Applicable

of

Causes

Respondent CCC contends that petitioners' counterclaims


violated the rule on joinder of causes of action. It argues
that while the original Complaint was a suit for specific
performance based on a contract, the counterclaim for
damages was based on the tortuous acts of respondents. 28
In its Motion to Dismiss, CCC cites Section 5 of Rule 2 and
Section 6 of Rule 3 of the Rules of Civil Procedure, which
we quote:
"Section 5. Joinder of causes of action. A party
may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may
have against an opposing party, subject to the
following conditions:

(a) The party joining the causes of action shall


comply with the rules on joinder of parties; x x x"
Section 6. Permissive joinder of parties. All
persons in whom or against whom any right to
relief in respect to or arising out of the same
transaction or series of transactions is alleged to
exist whether jointly, severally, or in the alternative,
may, except as otherwise provided in these Rules,
join as plaintiffs or be joined as defendants in one
complaint, where any question of law or fact
common to all such plaintiffs or to all such
defendants may arise in the action; but the court
may make such orders as may be just to prevent
any plaintiff or defendant from being embarrassed
or put to expense in connection with any
proceedings in which he may have no interest."
The foregoing procedural rules are founded on practicality
and convenience. They are meant to discourage duplicity
and multiplicity of suits. This objective is negated by
insisting -- as the court a quo has done -- that the
compulsory counterclaim for damages be dismissed, only to
have it possibly re-filed in a separate proceeding. More
important, as we have stated earlier, Respondents Lim and
Mariano are real parties in interest to the compulsory
counterclaim; it is imperative that they be joined therein.
Section 7 of Rule 3 provides:
"Compulsory joinder of indispensable parties. Parties in
interest without whom no final determination can be had of
an action shall be joined either as plaintiffs or defendants."
Moreover, in joining Lim and Mariano in the compulsory
counterclaim, petitioners are being consistent with the
solidary nature of the liability alleged therein.
Second Issue:
CCC's Personality to Move to Dismiss the Compulsory
Counterclaims
Characterizing their counterclaim for damages against
Respondents CCC, Lim and Mariano as "joint and solidary,"
petitioners prayed:
"WHEREFORE, it is respectfully prayed that after
trial judgment be rendered:
"1. Dismissing the complaint in its entirety;
"2. Ordering the plaintiff, Gregory T. Lim and
Anthony A. Mariano jointly and solidarily to pay
defendant actual damages in the sum of at least
P2,700,000.00;
"3. Ordering the plaintiff, Gregory T. Lim and
Anthony A, Mariano jointly and solidarily to pay the
defendants LPI, LCLC, COC and Roseberg:
"a. Exemplary damages of P100 million each;

47

"b. Moral damages of P100 million each; and


"c. Attorney's fees and costs of suit of at least P5
million each.
Other reliefs just and equitable are likewise prayed
for."29
Obligations may be classified as either joint or solidary.
"Joint" or "jointly" or "conjoint" means mancum or
mancomunada or pro rata obligation; on the other hand,
"solidary obligations" may be used interchangeably with
"joint and several" or "several." Thus, petitioners' usage of
the term "joint and solidary" is confusing and ambiguous.
The ambiguity in petitioners' counterclaims notwithstanding,
respondents' liability, if proven, is solidary. This
characterization finds basis in Article 1207 of the Civil Code,
which provides that obligations are generally considered
joint, except when otherwise expressly stated or when the
law or the nature of the obligation requires solidarity.
However, obligations arising from tort are, by their nature,
always solidary. We have assiduously maintained this legal
principle as early as 1912 in Worcester v. Ocampo, 30 in
which we held:
"x x x The difficulty in the contention of the
appellants is that they fail to recognize that the
basis of the present action is tort. They fail to
recognize the universal doctrine that each joint tort
feasor is not only individually liable for the tort in
which he participates, but is also jointly liable with
his tort feasors. x x x
"It may be stated as a general rule that joint tort
feasors are all the persons who command,
instigate,
promote,
encourage,
advise,
countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is
done, if done for their benefit. They are each liable
as principals, to the same extent and in the same
manner as if they had performed the wrongful act
themselves. x x x
"Joint tort feasors are jointly and severally liable for
the tort which they commit. The persons injured
may sue all of them or any number less than all.
Each is liable for the whole damages caused by all,
and all together are jointly liable for the whole
damage. It is no defense for one sued alone, that
the others who participated in the wrongful act are
not joined with him as defendants; nor is it any
excuse for him that his participation in the tort was
insignificant as compared to that of the others. x x
x
"Joint tort feasors are not liable pro rata. The
damages can not be apportioned among them,
except among themselves. They cannot insist upon
an apportionment, for the purpose of each paying
an aliquot part. They are jointly and severally liable
for the whole amount. x x x

"A payment in full for the damage done, by one of


the joint tort feasors, of course satisfies any claim
which might exist against the others. There can be
but satisfaction. The release of one of the joint tort
feasors by agreement generally operates to
discharge all. x x x
"Of course the court during trial may find that some
of the alleged tort feasors are liable and that others
are not liable. The courts may release some for
lack of evidence while condemning others of the
alleged tort feasors. And this is true even though
they are charged jointly and severally."
In a "joint" obligation, each obligor answers only for a part
of the whole liability; in a "solidary" or "joint and several"
obligation, the relationship between the active and the
passive subjects is so close that each of them must comply
with or demand the fulfillment of the whole obligation. 31 The
fact that the liability sought against the CCC is for specific
performance and tort, while that sought against the
individual respondents is based solely on tort does not
negate the solidary nature of their liability for tortuous acts
alleged in the counterclaims. Article 1211 of the Civil Code
is explicit on this point:
"Solidarity may exist although the creditors and the
debtors may not be bound in the same manner and
by the same periods and conditions."
The solidary character of respondents' alleged liability is
precisely why credence cannot be given to petitioners'
assertion. According to such assertion, Respondent CCC
cannot move to dismiss the counterclaims on grounds that
pertain solely to its individual co-debtors. 32 In cases filed by
the creditor, a solidary debtor may invoke defenses arising
from the nature of the obligation, from circumstances
personal to it, or even from those personal to its co-debtors.
Article 1222 of the Civil Code provides:
"A solidary debtor may, in actions filed by the
creditor, avail itself of all defenses which are
derived from the nature of the obligation and of
those which are personal to him, or pertain to his
own share. With respect to those which personally
belong to the others, he may avail himself thereof
only as regards that part of the debt for which the
latter are responsible." (Emphasis supplied).
The act of Respondent CCC as a solidary debtor -- that of
filing a motion to dismiss the counterclaim on grounds that
pertain only to its individual co-debtors -- is therefore
allowed.
However, a perusal of its Motion to Dismiss the
counterclaims shows that Respondent CCC filed it on
behalf of Co-respondents Lim and Mariano; it did not pray
that the counterclaim against it be dismissed. Be that as it
may, Respondent CCC cannot be declared in default.
Jurisprudence teaches that if the issues raised in the
compulsory counterclaim are so intertwined with the
allegations in the complaint, such issues are deemed

48

automatically joined.33 Counterclaims that are only for


damages and attorney's fees and that arise from the filing of
the complaint shall be considered as special defenses and
need not be answered.34
CCC's Motion to Dismiss the Counterclaim on Behalf of
Respondents Lim and Mariano Not Allowed
While Respondent CCC can move to dismiss the
counterclaims against it by raising grounds that pertain to
individual defendants Lim and Mariano, it cannot file the
same Motion on their behalf for the simple reason that it
lacks the requisite authority to do so. A corporation has a
legal personality entirely separate and distinct from that of
its officers and cannot act for and on their behalf, without
being so authorized. Thus, unless expressly adopted by Lim
and Mariano, the Motion to Dismiss the compulsory
counterclaim filed by Respondent CCC has no force and
effect as to them.
In summary, we make the following pronouncements:
1. The counterclaims against Respondents CCC,
Gregory T. Lim and Anthony A. Mariano are
compulsory.
2. The counterclaims may properly implead
Respondents Gregory T. Lim and Anthony A.
Mariano, even if both were not parties in the
original Complaint.
3. Respondent CCC or any of the three solidary
debtors (CCC, Lim or Mariano) may include, in a
Motion to Dismiss, defenses available to their codefendants; nevertheless, the same Motion cannot
be deemed to have been filed on behalf of the said
co-defendants.
4. Summons must be served on Respondents Lim
and Mariano before the trial court can obtain
jurisdiction over them.
WHEREFORE, the Petition is GRANTED and the assailed
Orders REVERSED. The court of origin is hereby
ORDERED to take cognizance of the counterclaims
pleaded in petitioners' Answer with Compulsory
Counterclaims and to cause the service of summons on
Respondents Gregory T. Lim and Anthony A. Mariano. No
costs.
SO ORDERED.

49

G.R. No. 83722 August 9, 1991


MARITA CABANGIS and RODOLFO CABANGIS,
petitioners,
vs.
HON. COURT OF APPEALS and ELVIRA DEVIS
NICANDRO, respondents.
Roberto M. Cabangis for petitioners.
Bugaring, Tugonon & Associates Law Offices for private
respondent.

SO ORDERED.
On appeal to the then Court of First Instance (now Regional
Trial Court) of Manila, Branch VI, the judgment was affirmed
on February 21, 1972. The matter was elevated to the Court
of Appeals which likewise affirmed the decision of the then
Court of First Instance of Manila on November 27, 1980.
On October 15, 1984, the Metropolitan Trial Court of
Manila, Branch VII, granted the motion of the petitioners for
a writ of execution since the said decision had already
become final and executory.

SARMIENTO, J.:p
In this petition for review on certiorari, the petitioners assail
the decision 1 of the Court of Appeals in CA-G.R. CV No.
06586 in so far as it reversed and set aside the order of the
Regional Trial Court (RTC) of Manila, Branch IV, dismissing
the complaint for indemnity of improvements with injunction
filed by the private respondent and docketed as Civil Case
No. 8427921. The dispositive portion of this challenged
decision reads:
WHEREFORE, subject to the findings and
conclusions contained herein, the order
appealed from is hereby REVERSED AND
SET ASIDE insofar as it granted private
defendants motion to dismiss and Affirmed
insofar as it denies the issuance of the writ
of preliminary injunction. Let the records of
the case be remanded to the court below
for further proceedings. No special
pronouncement as to costs.
SO ORDERED.
The antecedent facts are as follows:
In October 1968, the petitioners, Marita and Rodolfo
Cabangis, together with Oscar Cabangis and the deceased
Arturo Cabangis, filed an ejectment 2 case against Gaspar
Devis, the deceased father of the private respondent Elvira
Devis Nicandro, in the then City Court of Manila (now
Metropolitan Trial Court) for non-payment of rents of a
parcel of land situated in Tondo, Manila, owned by the
Cabangises and leased to Devis.
On May 31, 1969, the said court rendered a decision
dispositive portion of which states:

WHEREFORE, judgment on the merits is


hereby rendered for the plaintiffs and
against the defendant, ordering the latter
and all persons claiming right under him to
vacate the premises in question and to
remove
his
construction
thereon
denominated as No. 481 Pealosa St.,
Tondo, Manila, ordering said defendant to
pay the sum of P445.00 as accrued
rentals and the sum of P30.00 a month
from Nov. 1, 1968 until he vacates the said
premises, the further sum of P300.00 as
and for attorney's fees, plus costs.

the

However, on November 27, 1984, before the said writ of


execution could be implemented, herein private respondent
Elvira Nicandro filed, in the Regional Trial Court of Manila
an action 4 for indemnity of improvements with prayer for
the issuance of a writ of preliminary injunction against the
petitioners. Nicandro was asking for reimbursements of the
following improvements made by her father on the
properties:
xxx xxx xxx
4. That the lot before and at the
commencement of the lease and
possession thereof by Gaspar Devis was
swampy and muddy, that during rainy and
high tide seasons, the soil were (sic) being
eroded and washed away;
5. That Gaspar Devis before commencing
the construction of the family residential
house, in good faith pursuant to the lease
agreement filled the lot with truck loads of
big stones, escumbro enclosed the same
with hollow blocks and constructed the
residential house that was finished
sometime in 1955 at the conservative
costs of P150,000.00;
6. That the previous owner of the lot,
leased by Gaspar Devis from the City
Government of Manila, where he
constructed
his
house
was
the
government of the City of Manila, but
which lot was included in the parcel of land
that was transferred to the herein private

50

defendants, by virtue of the Contract of


Exchange, entered into between the
government of the City of Manila and the
herein private defendants, who stepped
into the shoes of the former; 5
xxx xxx xxx
On December 11, 1984, the petitioners Cabangis filed a
motion to dismiss the said complaint for indemnity stating,
among others, that the said complaint is barred by the
statute of limitations.
On March 29, 1985, the trial court dismissed the complaint
and denied Nicandro's motion for preliminary injunction, as
follows:
xxx xxx xxx
Without discussing the grounds relied
upon by the defendant in his motion to
dismiss, the Court, after examining the
pleadings and arguments of the parties
arrived at the conclusion that the plaintiff's
action is designed to alter the dispositive
portion of the decision that has long been
final and executory which provides that the
defendants should vacate the premises
and remove the improvements introduced
thereon, denominated as 481 Pealosa
St., Tondo, Manila. This action of the
plaintiff for indemnification for the
improvements introduced will constitute an
alteration of the said decision. 6
Accordingly, the trial court decreed:
Finding therefore plaintiffs motion for
issuance of a preliminary injunction to be
not meritorious, the same is hereby
denied, and considering the plaintiffs lack
of cause of action against the defendants,
this case is, as it is hereby dismissed,
without pronouncement as to costs. 7
On appeal, however, the respondent appellate court
reversed the said order of dismissal while affirming the
denial of the issuance of a writ of injunction in a decision
dated June 6, 1988.
The respondent court, in its decision, declared:
xxx xxx xxx
Plaintiffs instant action is "not designed to
alter the dispositive portion of the decision
that has long become final and executory."
Plaintiff is not contesting the decision in
the ejectment case against her father. She
is not claiming prior possession much less
ownership of the land as the heir of her

father. She is merely praying in her


complaint for the issuance of a cease-anddesist
injunctive
writ
against the
implementation of the decision in the
ejectment
proceedings
and
the
consequent removal or demolition of her
father's house and improvements on the
lot "until plaintiffs claims for said house
and improvements are paid by the private
defendants" in the principal sum of
P150,000.00. Hence, she did not file an
action for annulment of the judgment in the
ejectment proceedings.
xxx xxx xxx
And her action has not prescribed. Her
cause of action is predicated on Articles
448 and 546 of the Civil Code and hinges
on the father of plaintiffs good or bad faith
as a builder of the house and introducer of
the improvements which converted the lot
from a swampy land into a habitable one.
Payment of indemnity or refund under said
Articles are obligations created by law and
the action therefor should be brought
within ten (10) years from the time right of
action accrues, (Art. 1144, Civil Code).
The plaintiffs right of action accrued only
on December 11, 1984 when private
defendants' filed their motion to dismiss
which, in effect, partook of a rejection of
plaintiffs claim for reimbursement of the
sum of P150,000.00 representing the
value of the house and improvements
which her father had introduced on the
land. 8
The petitioners raise a question of law to justify this Court's
review of the said decision of the respondent court, to wit:
THE HOLDING OF THE COURT OF APPEALS THAT THE
ACTION FOR INDEMNITY HAS NOT PRESCRIBED IS
NOT IN ACCORDANCE WITH THE LAW AND
APPLICABLE DECISIONS OF THIS HONORABLE
SUPREME COURT.
To us, the crucial issues that are to be resolved in this
controversy are:
Whether or not the plaintiff in Civil Case No. 175034, the
private respondent herein, has a cause of action to bring a
suit for indemnity of improvements with injunction against
the petitioners; and if she has,
Whether or not her cause of action has been abandoned,
waived, barred by prescription, or barred by failure to
seasonably set it up as a compulsory counterclaim.
The petition is impressed with merit.

51

The reliance by the respondent Court of Appeals on Articles


448 and 546 of the Civil Code of the Philippines is
misplaced. These provisions have no application to a
contract of lease which is the subject matter of this
controversy. Instead, Article 1678 of the Civil Code applies.
We quote:
Art. 1678. If the lessee makes, in good
faith, useful improvements which are
suitable to the use for which the lease is
intended, without altering the form or
substance of the property leased, the
lessor upon termination of the lease shall
pay the lessee one-half of the value of the
improvements at that time. Should the
lessor refuse to reimburse said amount,
the lessee may remove the improvements,
even though the principal thing may suffer
damage thereby. He shall not, however,
cause any more impairment upon the
property leased than is necessary.
xxx xxx xxx
On the other hand, Article 448 governs the right of
accession while Article 546 pertains to effects of
possession. The very language of these two provisions
clearly manifest their inapplicability to lease contracts. They
provide:
ART. 448. The owner of the land on which
anything has been built, sown or planted in
good faith, shall have the right to
appropriate as his own the works, sowing
or planting, after payment of the indemnity
provided for in articles 546 and 548, or to
oblige the one who built or planted to pay
the price of the land, and the one who
sowed, the proper rent. However, the
builder or planter cannot be obliged to buy
the land if its value is considerably more
than that of the building or trees. In such
case, he shall pay reasonable rent, if the
owner of the land does not choose to
appropriate the building or trees after
proper indemnity. The parties shall agree
upon the terms of the lease and in case of
disagreement, the court shall fix the terms
thereof.
xxx xxx xxx
ART. 546. Necessary expenses shall be
refunded to every possessor; but only the
possessor in good faith may retain the
thing until he has been reimbursed
therefor.
Useful expenses shall be refunded only to
the possessor in good faith with the same
right of retention, the person who has
defeated him in the possession having the

option of refunding the amount of the


expenses or of paying the increase in
value which the thing may have acquired
by reason thereof.
The petitioners do not dispute the contention of the private
respondent that her father, Gaspar Devis, filled the leased
parcel of land with truck loads of big stones or rocks
(escumbro), and enclosed or walled the same with hollow
blocks before constructing a residential house thereon. All
these, being in the nature of expenses which augmented
the value of the land, 9 or increased the income from it, or
improved its productivity, are useful improvements within
the purview of the law. 10
But, it must be remembered, as in fact it is not controverted,
that Gaspar Devis was a lessee by virtue of a lease
contract between him and the City of Manila. As a mere
lessee, he knew that the parcel of land in question was not
his but belonged to the latter. Even the respondent court
conceded this fact when it stated that the private
respondent was "not claiming prior possession, much less
ownership of the land as heir of her father. 11
Thus, the improvements that the private respondent's father
had introduced in the leased premises were done at his
own risk as lessee. The right to indemnity equivalent to onehalf of the value of the said improvements the house, the
filling materials, and the hollow block fence or wall is
governed, as earlier adverted to, by the provisions of Art.
1678, first paragraph of the Civil Code above quoted. But
this right to indemnity exists only if the lessor opts to
appropriate the improvements. 12 The refusal of the lessor
to pay the lessee one-half of the value of the useful
improvements gives rise to the right of removal. On this
score, the commentary of Justice Paras is enlightening.
Note that under the 1st paragraph of Art.
1678, the law on the right of REMOVAL
says that "should the lessor refuse to
reimburse said amount, the lessee may
remove the improvements, even though
the principal thing may suffer thereby."
While the phrase "even though implies that
Art. 1678 always applies regardless of
whether or not the improvements can be
removed without injury to the leased
premises, it is believed that application of
the Article cannot always be done. The
rule is evidently intended for cases where
a true accession takes place as when part
of the land leased is, say, converted into a
fishpond; and certainly not where as easily
removable thing (such as a wooden fence)
has been introduced. There is no doubt
that in a case involving such a detachable
fence, the lessee can take the same away
with
him
when
the
lease
expires. 13
Now then, indeed the private respondent would have a
cause of action against the petitioners for indemnity under
Article 1678 of the Civil Code if the latter had chosen to

52

appropriate the said improvements. However, there is


nothing in the records to indicate that such choice was
made. On the other hand, there is no showing either that
the private respondent manifested her desire to remove
these improvements absent any payment of the required
indemnity. She, or her deceased father, should have
removed the improvements at the time when the lease
expired 14 on July 26, 1968 15, there being no true accession
(the improvements consisting of the house, escumbro and
hollow blocks, being removable without really destroying
the land), or at the time of the filing of the unlawful detainer
case which was on October 19, 1968. 16
Her failure to do so, we rule, constitutes a waiver or
abandonment of her right of removal of the improvements.
But even if there was no abandonment or waiver of her right
of removal, still she could not later file a complaint for the
indemnity of the improvements because that cause of
action had long prescribed, accruing as it did when the
petitioners effectively appropriated the improvements when
the lease expired on July 26, 1968, or even when the
ejectment case was filed on October 19, 1968. The
complaint of the private respondent for indemnity was filed
on November 27, 1984, more than sixteen years from the
accrual of the cause of action. Hence, the complaint was
filed six years after the expiration of the prescriptive period
of ten years as provided in Article 1144, paragraph (2) 17 of
the Civil Code. The obligation of the lessor to indemnify the
lessee is created by law, viz., Article 1678, first paragraph,
of the Civil Code earlier quoted.
In any event, well-established is the doctrine that the
counterclaim for reimbursement of the useful expenses is in
the nature of a compulsory counterclaim and the failure to
set it up in the ejectment suit bars the right to raise it in a
subsequent litigation. 18
WHEREFORE, the petition is GRANTED. The decision of
the respondent Court of Appeals is hereby REVERSED and
the order of the Regional Trial Court dated March 29, 1985
is REINSTATED. Costs against the private respondent.
SO ORDERED.

53

area applied for encroached on the titled property of


respondent based on the final verification plan.

G.R. No. 170483

April 19, 2010

MANUEL C. BUNGCAYAO, SR., represented in this case


by his Attorney-in-fact ROMEL R. BUNGCAYAO, Petitioner,
vs.
FORT ILOCANDIA PROPERTY HOLDINGS, AND
DEVELOPMENT CORPORATION, Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review 1 assailing the 21
November 2005 Decision2 of the Court of Appeals in CAG.R. CV No. 82415.
The Antecedent Facts
Manuel C. Bungcayao, Sr. (petitioner) claimed to be one of
the two entrepreneurs who introduced improvements on the
foreshore area of Calayab Beach in 1978 when Fort
Ilocandia Hotel started its construction in the area.
Thereafter, other entrepreneurs began setting up their own
stalls in the foreshore area. They later formed themselves
into the DSierto Beach Resort Owners Association, Inc.
(DSierto).
In July 1980, six parcels of land in Barrio Balacad (now
Calayad) were transferred, ceded, and conveyed to the
Philippine Tourism Authority (PTA) pursuant to Presidential
Decree No. 1704. Fort Ilocandia Resort Hotel was erected
on the area. In 1992, petitioner and other DSierto members
applied for a foreshore lease with the Community
Environment and Natural Resources Office (CENRO) and
was granted a provisional permit. On 31 January 2002, Fort
Ilocandia Property Holdings and Development Corporation
(respondent) filed a foreshore application over a 14-hectare
area abutting the Fort Ilocandia Property, including the 5hectare portion applied for by DSierto members. The
foreshore applications became the subject matter of a
conflict case, docketed Department of Environment and
Natural Resources (DENR) Case No. 5473, between
respondent and DSierto members. In an undated Order, 3
DENR Regional Executive Director Victor J. Ancheta denied
the foreshore lease applications of the DSierto members,
including petitioner, on the ground that the subject area
applied for fell either within the titled property or within the
foreshore areas applied for by respondent. The DSierto
members appealed the denial of their applications. In a
Resolution4 dated 21 August 2003, then DENR Secretary
Elisea G. Gozun denied the appeal on the ground that the

In a letter dated 18 September 2003,5 respondent, through


its Public Relations Manager Arlene de Guzman, invited the
DSierto members to a luncheon meeting to discuss
common details beneficial to all parties concerned. Atty.
Liza Marcos (Atty. Marcos), wife of Governor Bongbong
Marcos, was present as she was asked by Fort Ilocandia
hotel officials to mediate over the conflict among the parties.
Atty. Marcos offered P300,000 as financial settlement per
claimant in consideration of the improvements introduced,
on the condition that they would vacate the area identified
as respondents property. A DSierto member made a
counter-offer of P400,000, to which the other DSierto
members agreed.
Petitioner alleged that his son, Manuel Bungcayao, Jr., who
attended the meeting, manifested that he still had to consult
his parents about the offer but upon the undue pressure
exerted by Atty. Marcos, he accepted the payment and
signed the Deed of Assignment, Release, Waiver and
Quitclaim6 in favor of respondent.
Petitioner then filed an action for declaration of nullity of
contract before the Regional Trial Court of Laoag, City,
Branch 13 (trial court), docketed as Civil Case Nos. 1289113, against respondent. Petitioner alleged that his son had
no authority to represent him and that the deed was void
and not binding upon him.
Respondent countered that the area upon which petitioner
and the other DSierto members constructed their
improvements was part of its titled property under Transfer
Certificate of Title No. T-31182. Respondent alleged that
petitioners sons, Manuel, Jr. and Romel, attended the
luncheon meeting on their own volition and they were able
to talk to their parents through a cellular phone before they
accepted respondents offer. As a counterclaim, respondent
prayed that petitioner be required to return the amount of
P400,000 from respondent, to vacate the portion of the
respondents property he was occupying, and to pay
damages because his continued refusal to vacate the
property caused tremendous delay in the planned
implementation of Fort Ilocandias expansion projects.
In an Order7 dated 6 November 2003, the trial court
confirmed the agreement of the parties to cancel the Deed
of Assignment, Release, Waiver and Quitclaim and the
return of P400,000 to respondent. Petitioners counsel,
however, manifested that petitioner was still maintaining its
claim for damages against respondent.
Petitioner and respondent agreed to consider the case
submitted for resolution on summary judgment. Thus, in its
Order8 dated 28 November 2003, the trial court considered
the case submitted for resolution. Petitioner filed a motion
for reconsideration, alleging that he manifested in open
court that he was withdrawing his earlier manifestation
submitting the case for resolution. Respondent filed a
Motion for Summary Judgment.

54

The trial court rendered a Summary Judgment 9 dated 13


February 2004.

to recover its possession from any other person to whom


the owner has not transmitted the property, including
petitioner.

The Decision of the Trial Court


The trial court ruled that the only issue raised by petitioner
was his claim for damages while respondents issue was
only his claim for possession of the property occupied by
petitioner and damages. The trial court noted that the
parties already stipulated on the issues and admissions had
been made by both parties. The trial court ruled that
summary judgment could be rendered on the case.
The trial court ruled that the alleged pressure on petitioners
sons could not constitute force, violence or intimidation that
could
vitiate
consent. As
regards
respondents
counterclaim, the trial court ruled that based on the
pleadings and admissions made, it was established that the
property occupied by petitioner was within the titled
property of respondent. The dispositive portion of the trial
courts decision reads:
WHEREFORE, the Court hereby renders judgment
DISMISSING the claim of plaintiff for damages as it is found
to be without legal basis, and finding the counterclaim of the
defendant for recovery of possession of the lot occupied by
the plaintiff to be meritorious as it is hereby GRANTED.
Consequently, the plaintiff is hereby directed to immediately
vacate the premises administratively adjudicated by the
executive department of the government in favor of the
defendant and yield its possession unto the defendant. No
pronouncement is here made as yet of the damages
claimed by the defendant.
SO ORDERED.10
Petitioner appealed from the trial courts decision.
The Decision of the Court of Appeals
In its 21 November 2005 Decision, the Court of Appeals
affirmed the trial courts decision in toto.
The Court of Appeals sustained the trial court in resorting to
summary judgment as a valid procedural device for the
prompt disposition of actions in which the pleadings raise
only a legal issue and not a genuine issue as to any
material fact. The Court of Appeals ruled that in this case,
the facts are not in dispute and the only issue to be
resolved is whether the subject property was within the
titled property of respondent. Hence, summary judgment
was properly rendered by the trial court.
The Court of Appeals ruled that the counterclaims raised by
respondent were compulsory in nature, as they arose out of
or were connected with the transaction or occurrence
constituting the subject matter of the opposing partys claim
and did not require for its adjudication the presence of third
parties of whom the court could not acquire jurisdiction. The
Court of Appeals ruled that respondent was the rightful
owner of the subject property and as such, it had the right

The dispositive portion of the Court of Appeals decision


reads:
WHEREFORE, the assailed decision dated February 13,
2004 of the Regional Trial Court of Laoag City, Branch 13 is
hereby AFFIRMED in toto.
SO ORDERED.11
Thus, the petition before this Court.
The Issues
Petitioner raises the following issues in his Memorandum: 12
1.
Whether
respondents
compulsory; and

counterclaim

is

2. Whether summary judgment is appropriate in


this case.
The Ruling of this Court
The petition has merit.
Compulsory Counterclaim
A compulsory counterclaim is any claim for money or any
relief, which a defending party may have against an
opposing party, which at the time of suit arises out of, or is
necessarily connected with, the same transaction or
occurrence that is the subject matter of the plaintiffs
complaint.13 It is compulsory in the sense that it is within the
jurisdiction of the court, does not require for its adjudication
the presence of third parties over whom the court cannot
acquire jurisdiction, and will be barred in the future if not set
up in the answer to the complaint in the same case. 14 Any
other counterclaim is permissive.15
The Court has ruled that the compelling test of
compulsoriness
characterizes
a
counterclaim
as
compulsory if there should exist a logical relationship
between the main claim and the counterclaim. 16 The Court
further ruled that there exists such a relationship when
conducting separate trials of the respective claims of the
parties would entail substantial duplication of time and effort
by the parties and the court; when the multiple claims
involve the same factual and legal issues; or when the
claims are offshoots of the same basic controversy between
the parties.17
The criteria to determine whether the counterclaim is
compulsory or permissive are as follows:
(a) Are issues of fact and law raised by the claim
and by the counterclaim largely the same?

55

(b) Would res judicata bar a subsequent suit on


defendants claim, absent the compulsory rule?

Section 1, Rule 35 of the 1997 Rules of Civil Procedure


provides:

(c) Will substantially the same evidence support or


refute plaintiffs claim as well as defendants
counterclaim?

Section 1. Summary Judgment for claimant. - A party


seeking to recover upon a claim, counterclaim, or crossclaim or to obtain a declaratory relief may, at any time after
the pleading in answer thereto has been served, move with
supporting affidavits, depositions or admissions for a
summary judgment in his favor upon all or any part thereof.

(d) Is there any logical relations between the claim


and the counterclaim?
A positive answer to all four questions would indicate that
the counterclaim is compulsory.18
In this case, the only issue in the complaint is whether
Manuel, Jr. is authorized to sign the Deed of Assignment,
Release, Waiver and Quitclaim in favor of respondent
without petitioners express approval and authority. In an
Order dated 6 November 2003, the trial court confirmed the
agreement of the parties to cancel the Deed of Assignment,
Release, Waiver and Quitclaim and the return of P400,000
to respondent. The only claim that remained was the claim
for damages against respondent. The trial court resolved
this issue by holding that any damage suffered by Manuel,
Jr. was personal to him. The trial court ruled that petitioner
could not have suffered any damage even if Manuel, Jr.
entered into an agreement with respondent since the
agreement was null and void.
Respondent filed three counterclaims. The first was for
recovery of the P400,000 given to Manuel, Jr.; the second
was for recovery of possession of the subject property; and
the third was for damages. The first counterclaim was
rendered moot with the issuance of the 6 November 2003
Order confirming the agreement of the parties to cancel the
Deed of Assignment, Release, Waiver and Quitclaim and to
return the P400,000 to respondent. Respondent waived and
renounced the third counterclaim for damages. 19 The only
counterclaim that remained was for the recovery of
possession of the subject property. While this counterclaim
was an offshoot of the same basic controversy between the
parties, it is very clear that it will not be barred if not set up
in the answer to the complaint in the same case.
Respondents second counterclaim, contrary to the findings
of the trial court and the Court of Appeals, is only a
permissive counterclaim. It is not a compulsory
counterclaim. It is capable of proceeding independently of
the main case.
The rule in permissive counterclaim is that for the trial court
to acquire jurisdiction, the counterclaimant is bound to pay
the prescribed docket fees. 20 Any decision rendered without
jurisdiction is a total nullity and may be struck down at any
time, even on appeal before this Court. 21 In this case,
respondent did not dispute the non-payment of docket fees.
Respondent only insisted that its claims were all
compulsory counterclaims. As such, the judgment by the
trial court in relation to the second counterclaim is
considered null and void22 without prejudice to a separate
action
which
respondent
may
file
against
petitioner.1avvphi1

Summary judgment has been explained as follows:


Summary judgment is a procedural device resorted to in
order to avoid long drawn out litigations and useless delays.
When the pleadings on file show that there are no genuine
issues of fact to be tried, the Rules allow a party to obtain
immediate relief by way of summary judgment, that is, when
the facts are not in dispute, the court is allowed to decide
the case summarily by applying the law to the material
facts. Conversely, where the pleadings tender a genuine
issue, summary judgment is not proper. A "genuine issue" is
such issue of fact which requires the presentation of
evidence as distinguished from a sham, fictitious, contrived
or false claim. Section 3 of the said rule provides two (2)
requisites for summary judgment to be proper: (1) there
must be no genuine issue as to any material fact, except for
the amount of damages; and (2) the party presenting the
motion for summary judgment must be entitled to a
judgment as a matter of law. A summary judgment is
permitted only if there is no genuine issue as to any
material fact and a moving party is entitled to a judgment as
a matter of law. A summary judgment is proper if, while the
pleadings on their face appear to raise issues, the affidavits,
depositions, and admissions presented by the moving party
show that such issues are not genuine.23
Since we have limited the issues to the damages claimed
by the parties, summary judgment has been properly
rendered in this case.
WHEREFORE, we MODIFY the 21 November 2005
Decision of the Court of Appeals in CA-G.R. CV No. 82415
which affirmed the 13 February 2004 Decision of the
Regional Trial Court of Laoag City, Branch 13, insofar as it
ruled that respondents counterclaim for recovery of
possession of the subject property is compulsory in nature.
We DISMISS respondents permissive counterclaim without
prejudice to filing a separate action against petitioner.
SO ORDERED.

Summary Judgment

56

Plaintiff-appellant moved for reconsideration and new


trial. When this failed, she instituted the present
appeal.1wph1.t

G.R. No. L-22485

March 13, 1968

CONSUELO V. CALO, doing business under the trade


name CVC Lumber Industries, assisted by MARCOS M.
CALO,
plaintiffs-appellants,
vs.
AJAX INTERNATIONAL, INCORPORATED, defendantappellee.
Tranquilino O. Calo, Jr. for plaintiffs-appellants.
Sergio P. Villareal for defendant-appellee.
BENGZON, J.P., J.:
Sometime on May 7, 1959, plaintiff-appellant Calo
ordered from defendant-appellee Ajax International, Inc.,
1,200 ft. of John Shaw wire rope at P2.85 per foot. The
transaction was evidenced by Charge Order No. 37071, for
P3,420.00.
According to plaintiff Calo, when the wire rope was
delivered to Butuan City, the same was found short of 300
ft. Plaintiff then wrote two letters to defendant asking for
either completion of delivery or account adjustment of the
alleged undelivered 300 ft. of wire rope.
On November 20, 1961, a complaint docketed as
Civil Case No. IV-93062 was filed in the Municipal Court of
Manila by one Adolfo Benavides who claimed to have
acquired the outstanding credit account of Calo from
defendant Ajax International, Inc. Charge Order No. 37071
was among those included in the assigned account.
Subsequently, a judgment by default was entered, and a
writ of execution issued, against plaintiff Calo. The latter
resorted to this Court on a petition for certiorari, prohibition
and mandamus.1 We set aside the judgment of default and
writ of execution issued against plaintiff Calo and remanded
the case for further proceedings.
On January 23, 1962, plaintiff Calo, assisted by her
husband, Marcos Calo, filed in the Court of First Instance of
Agusan a complaint against defendant asking (1) that the
latter either effect complete delivery of Charge Order No.
37071 or that she be relieved from paying P855.00 and (2)
that the latter indemnify her for P12,000 as attorney's fees,
damages and expenses of litigation.2 The case was
docketed as Civil Case No. 860.

The dismissal of Civil Case No. 860 by the court a


quo because of the pendency of Civil Case No. IV-93062 in
the municipal court of Manila is predicated on the
supposition that plaintiff's claim is a compulsory counterclaim that should be filed in the latter case. There is no
question that it arises out of the same transaction which is
the basis of the complaint in Civil Case No. IV-93062 and
does not require the presence of third parties over whom
the municipal court of Manila could not acquire jurisdiction.
However, plaintiff's claim is not a compulsory
counterclaim in Civil Case No. IV-93062 for the simple
reason that the amount thereof exceeds the jurisdiction of
the municipal court. The rule that a compulsory
counterclaim not set up is barred, when applied to the
municipal court, presupposes that the amount involved is
within the said court's jurisdiction. Otherwise, as this Court
had already noted in Yu Lay v. Galmes 3 we would come to
the absurd situation where a claim must be filed with the
municipal court which it is prohibited from taking
cognizance of, being beyond its jurisdiction.
Besides, the reason underlying the rule, which is to
settle all related controversies in one sitting only, does not
obtain. For, even if the counterclaim in excess of the
amount cognizable by the inferior court is set up, the
defendant cannot obtain positive relief. The Rules allow this
only for the defendant to prevent plaintiff from recovering
from him.4 This means that should the court find both
plaintiff's complaint and defendant's counterclaim (for an
amount exceeding said court's jurisdiction) meritorious, it
will simply dismiss the complaint on the ground that
defendant has a bigger credit. Since defendant still has to
institute a separate action for the remaining balance of his
counterclaim, the previous litigation did not really settle all
related controversies.
Plaintiff Calo's claim of P12,000.00 not being a
compulsory counterclaim in Civil Case No. VI-93062, it
need not be filed there. The pendency then of said civil
case could not be pleaded in abatement of Civil Case No.
860. Consequently, the lower court erred in dismissing
plaintiff's complaint.
WHEREFORE, the order of dismissal appealed from
is hereby reversed and the case remanded for further
proceedings. Costs against appellee Ajax International, Inc.
So ordered.

Instead of filing an answer, defendant moved for the


dismissal of Civil Case 860 on the ground, inter alia, that
the subject thereof was involved and intimately related to
that in Civil Case No. IV-93062 of the Municipal Court of
Manila. The court a quo sustained the motion and
dismissed the case.

57

G.R. No. L-28589 January 8, 1973


RAFAEL ZULUETA, ET AL., plaintiffs-appellees,
vs.
PAN AMERICAN WORLD AIRWAYS, INC., defendantappellant.
Alfredo L. Benipayo for plaintiffs-appellee Rafael Zulueta
and Carolina Zulueta.
Justo L. Albert for plaintiff-appellee Telly Albert Zulueta.
V.E. del Rosario and Associates and Salcedo, Del Rosario,
Bito, Misa and Lozada for defendant-appellant.
RESOLUTION

CONCEPCION, C.J.:
Both parties in this case have moved for the
reconsideration of the decision of this Court promulgated on
February 29, 1972. Plaintiffs maintain that the decision
appealed from should be affirmed in toto. The defendant, in
turn, prays that the decision of this Court be "set aside ...
with or without a new trial, ... and that the complaint be
dismissed, with costs; or, in the alternative, that the amount
of the award embodied therein be considerably reduced." .
Subsequently to the filing of its motion for reconsideration,
the defendant filed a "petition to annul proceedings and/or
to order the dismissal of plaintiffs-appellees' complaint"
upon the ground that "appellees' complaint actually seeks
the recovery of only P5,502.85 as actual damages,
because, for the purpose of determining the jurisdiction of
the lower court, the unspecified sums representing items of
alleged damages, may not be considered, under the settled
doctrines of this Honorable Court," and "the jurisdiction of
courts of first instance when the complaint in the present
case was filed on Sept. 30, 1965" was limited to cases "in
which the demand, exclusive of interest, or the value of the
property in controversy amounts to more than ten thousand
pesos" and "the mere fact that the complaint also prays for
unspecified moral damages and attorney's fees, does not
bring the action within the jurisdiction of the lower court."
We find no merit in this contention. To begin with, it is not
true that "the unspecified sums representing items or other
alleged damages, may not be considered" for the
purpose of determining the jurisdiction of the court
"under the settled doctrines of this Honorable Court." In
fact, not a single case has been cited in support of this
allegation.

Secondly, it has been held that a clam for moral damages is


one not susceptible of pecuniary estimation. 1 In fact, Article
2217 of the Civil Code of the Philippines explicitly provides
that "(t)hough incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result
of the defendant's wrongful act or omission." Hence, "(n)o
proof pecuniary loss necessary" pursuant to Article 2216
of the same Code "in order that moral ... damages may
be adjudicated." And "(t)he assessment of such damages ...
is left to the discretion of the court" - said article adds "according to the circumstances of each case." Appellees'
complaint is, therefore, within the original jurisdiction of
courts of first instance, which includes "all civil actions in
which the subject of the litigation is not capable of
pecuniary estimation." 2
Thirdly, in its answer to plaintiffs' original and amended
complainants, defendant had set up a counterclaim in the
aggregate sum of P12,000, which is, also, within the
original jurisdiction of said courts, thereby curing the alleged
defect if any, in plaintiffs' complaint. 3
We need not consider the jurisdictional
controversy as to the amount the appellant
sues to recover because the counterclaim
interposed establishes the jurisdiction of
the District Court. Merchants' Heat & Light
Co. v. James B. Clow & Sons, 204 U.S.
286, 27 S. Ct. 285, 51 L. Ed. 488; O. J.
Lewis Mercantile Co. v. Klepner, 176 F.
343 (C.C.A. 2), certiorari denied 216 U.S.
620, 30 S Ct. 575, 54 L. Ed. 641. ... . 4
... courts have said that "when the
jurisdictional amount is in question, the
tendering of a counterclaim in an amount
which in itself, or added to the amount
claimed in the petition, makes up a sum
equal to the amount necessary to the
jurisdiction of this court, jurisdiction is
established, whatever may be the state of
the plaintiff's complaint." American Sheet
& Tin Plate Co. v. Winzeler (D.C.) 227 F.
321, 324. 5
Thus, in Ago v. Buslon, 6 We held:
... . Then, too, petitioner's counterclaim for
P37,000.00 was, also, within the exclusive
original jurisdiction of the latter courts, and
there are ample precedents to the effect
that "although the original claim involves
less than the jurisdictional amount, ...
jurisdiction can be sustained if the
counterclaim (of the compulsory type)"
such as the one set up by petitioner
herein, based upon the damages allegedly
suffered by him in consequence of the
filing of said complaint "exceeds the
jurisdictional amount." (Moore Federal
Practice, 2nd ed. [1948], Vol. 3, p. 41;
Ginsburg vs. Pacific Mutual Life Ins. Co. of
California, 69 Fed. [2d] 97; Home Life Ins.

58

Co. vs. Sipp., 11 Fed. [2d]474; American


Sheet & Tin Plate Co. vs. Winzeler [D.C.],
227 Fed. 321, 324; Brix vs. People's
Mutual Life Ins. Co., 41 P. 2d. 537, 2 Cal.
2d. 446; Emery vs. Pacific Employees Ins.
Co., 67 P. 2d. 1046, 8 Cal. 2d. 663).
Needless to say, having not only failed to question the
jurisdiction of the trial court either in that court or in this
Court, before the rendition of the latter's decision, and even
subsequently thereto, by filing the aforementioned motion
for reconsideration and seeking the reliefs therein prayed
for but, also, urged both courts to exercise jurisdiction
over the merits of the case, defendant is now estopped
from impugning said jurisdiction. 7
Before taking up the specific questions raised in
defendant's motion for reconsideration, it should be noted
that the same is mainly predicated upon the premise that
plaintiffs' version is inherently incredible, and that this Court
should accept the theory of the defense to the effect that
petitioner was off-loaded because of a bomb-scare
allegedly arising from his delay in boarding the aircraft and
subsequent refusal to open his bags for inspection. We
need not repeat here the reasons given in Our decision for
rejecting defendant's contention and not disturbing the
findings of fact of His Honor, the Trial Judge, who had the
decided advantage denied to Us of observing the
behaviour of the witnesses in the course of the trial and
found those of the plaintiffs worthy of credence, not the
evidence for the defense.
It may not be amiss however, to stress the fact that, in his
written report, made in transit from Wake to Manila or
immediately after the occurrence and before the legal
implications or consequences thereof could have been the
object of mature deliberation, so that it could, in a way, be
considered as part of the res gestae Capt. Zentner
stated that Zulueta had been off-loaded "due to drinking"
and "belligerent attitude," thereby belying the story of the
defense about said alleged bomb-scare, and confirming the
view that said agent of the defendant had acted out of
resentment because his ego had been hurt by Mr. Zulueta's
adamant refusal to be bullied by him. Indeed, had there
been an iota of truth in said story of the defense, Capt.
Zentner would have caused every one of the passengers to
be frisked or searched and the luggage of all of them
examined as it is done now before resuming the flight
from Wake Island. His failure to do so merely makes the
artificious nature of defendant's version more manifest.
Indeed, the fact that Mrs. Zulueta and Miss Zulueta were on
board the plane shows beyond doubt that Mr. Zulueta could
not possibly have intended to blow it up.
The defense tries to explain its failure to introduce any
evidence to contradict the testimony of Mr. Zulueta as to
why he had gone to the beach and what he did there,
alleging that, in the very nature of things, nobody else could
have witnessed it. Moreover, the defense insists, inter alia,
that the testimony of Mr. Zulueta is inherently incredible
because he had no idea as to how many toilets the plane
had; it could not have taken him an hour to relieve himself
in the beach; there were eight (8) commodes at the terminal

toilet for men ; if he felt the need of relieving himself, he


would have seen to it that the soldiers did not beat him to
the terminal toilets; he did not tell anybody about the reason
for going to the beach, until after the plane had taken off
from Wake.
We find this pretense devoid of merit. Although Mr. Zulueta
had to look for a secluded place in the beach to relieve
himself, beyond the view of others, defendant's airport
manager, whom Mr. Zulueta informed about it, soon after
the departure of the plane, could have forthwith checked
the veracity of Mr. Zulueta's statement by asking him to
indicate the specific place where he had been in the beach
and then proceeding thereto for purposes of verification.
Then, again, the passenger of a plane seldom knows how
many toilets it has. As a general rule, his knowledge is
limited to the toilets for the class first class or tourist
class in which he is. Then, too, it takes several minutes
for the passengers of big aircrafts, like those flying from the
U.S. to the Philippines, to deplane. Besides, the speed with
which a given passenger may do so depends, largely, upon
the location of his seat in relation to the exit door. He cannot
go over the heads of those nearer than he thereto. Again,
Mr. Zulueta may have stayed in the toilet terminal for some
time, expecting one of the commodes therein to be vacated
soon enough, before deciding to go elsewhere to look for a
place suitable to his purpose. But he had to walk, first, from
the plane to the terminal building and, then, after vainly
waiting therein for a while, cover a distance of about 400
yards therefrom to the beach, and seek there a place not
visible by the people in the plane and in the terminal,
inasmuch as the terrain at Wake Island is flat. What is
more, he must have had to takeoff part, at least, of his
clothing, because, without the facilities of a toilet, he had to
wash himself and, then, dry himself up before he could be
properly attired and walk back the 400 yards that separated
him from the terminal building and/or the plane.
Considering, in addition to the foregoing, the fact that he
was not feeling well, at that time, We are not prepared to
hold that it could not have taken him around an hour to
perform the acts narrated by him.
But, why asks the defendant did he not reveal the
same before the plane took off? The record shows that,
even before Mr. Zulueta had reached the ramp leading to
the plane, Capt. Zentner was already demonstrating at him
in an intemperate and arrogant tone and attitude ("What do
you think you are?), thereby impelling Mr. Zulueta to answer
back in the same vein. As a consequence, there
immediately ensued an altercation in the course of which
each apparently tried to show that he could not be cowed
by the other. Then came the order of Capt. Zentner to offload all of the Zuluetas, including Mrs. Zulueta and the
minor Miss Zulueta, as well as their luggage, their
overcoats and other effects handcarried by them; but, Mr.
Zulueta requested that the ladies be allowed to continue the
trip. Meanwhile, it had taken time to locate his four (4)
pieces of luggage. As a matter of fact, only three (3) of them
were found, and the fourth eventually remained in the
plane. In short, the issue between Capt. Zentner and Mr.
Zulueta had been limited to determining whether the latter
would allow himself to be browbeaten by the former. In the

59

heat of the altercation, nobody had inquired about the


cause of Mr. Zulueta's delay in returning to the plane, apart
from the fact that it was rather embarrassing for him to
explain, in the presence and within the hearing of the
passengers and the crew, then assembled around them,
why he had gone to the beach and why it had taken him
some time to answer there a call of nature, instead of doing
so in the terminal building.
Defendant's motion for reconsideration assails: (1) the
amount of damages awarded as excessive; (2) the
propriety of accepting as credible plaintiffs' theory; (3)
plaintiffs' right to recover either moral or exemplary
damages; (4) plaintiffs' right to recover attorney's fees; and
(5) the non-enforcement of the compromise agreement
between the defendant and plaintiff's wife, Mrs. Zulueta.
Upon the other hand, plaintiffs' motion for reconsideration
contests the decision of this Court reducing the amount of
damages awarded by the trial court to approximately onehalf thereof, upon the ground, not only that, contrary to the
findings of this Court, in said decision, plaintiff had not
contributed to the aggravation of his altercation or incident
with Capt. Zentner by reacting to his provocation with
extreme belligerency thereby allowing himself to be
dragged down to the level on which said agent of the
defendant had placed himself, but, also, because the
purchasing power of our local currency is now much lower
than when the trial court rendered its appealed decision,
over five (5) years ago, on July 5, 1967, which is an
undeniable and undisputed fact. Precisely, for this reason,
defendant's characterization as exorbitant of the aggregate
award of over P700,000 by way of damages, apart from
attorney's fees in the sum of P75,000, is untenable. Indeed,
said award is now barely equivalent to around 100,000 U.
S. dollars.
It further support of its contention, defendant cites the
damages awarded in previous cases to passengers of
airlines, 8 as well as in several criminal cases, and some
cases for libel and slander. None of these cases is,
however, in point. Said cases against airlines referred to
passengers who were merely constrained to take a tourist
class accommodation, despite the fact that they had first
class tickets, and that although, in one of such cases, there
was proof that the airline involved had acted as it did to give
preference to a "white" passenger, this motive was not
disclosed until the trial in court. In the case at bar, plaintiff
Rafael Zulueta was "off-loaded" at Wake Island, for having
dared to retort to defendant's agent in a tone and manner
matching, if not befitting his intemperate language and
arrogant attitude. As a consequence, Capt. Zentner's
attempt to humiliate Rafael Zulueta had boomeranged
against him (Zentner), in the presence of the other
passengers and the crew. It was, also, in their presence
that defendant's agent had referred to the plaintiffs as
"monkeys," a racial insult not made openly and publicly in
the abovementioned previous cases against airlines.
In other words, Mr. Zulueta was off-loaded, not to protect
the safety of the aircraft and its passengers, but to retaliate
and punish him for the embarrassment and loss of face
thus suffered by defendant's agent. This vindictive motive is
made more manifest by the note delivered to Mr. Zulueta by

defendant's airport manager at Wake Island, Mr. Sitton,


stating that the former's stay therein would be "for a
minimum of one week," during which he would be charged
$13.30 per day. This reference to a "minimum of one week"
revealed the intention to keep him there stranded that long,
for no other plane, headed for Manila, was expected within
said period of time, although Mr. Zulueta managed to board,
days later, a plane that brought him to Hawaii, whence he
flew back to the Philippines, via Japan.
Neither may criminal cases, nor the cases for libel and
slander cited in the defendant's motion for reconsideration,
be equated with the present case. Indeed, in ordinary
criminal cases, the award for damages is, in actual practice,
of purely academic value, for the convicts generally belong
to the poorest class of society. There is, moreover, a
fundamental difference between said cases and the one at
bar. The Zuluetas had a contract of carriage with the
defendant, as a common carrier, pursuant to which the
latter was bound, for a substantial monetary consideration
paid by the former, not merely to transport them to Manila,
but, also, to do so with "extraordinary diligence" or "utmost
diligence." 9 The responsibility of the common carrier, under
said contract, as regards the passenger's safety, is of such
a nature, affecting as it does public interest, that it "cannot
be dispensed with" or even "lessened by stipulation, by the
posting of notices, by statements on tickets, or otherwise."
10
In the present case, the defendant did not only fail to
comply with its obligation to transport Mr. Zulueta to Manila,
but, also, acted in a manner calculated to humiliate him, to
chastise him, to make him suffer, to cause to him the
greatest possible inconvenience, by leaving him in a
desolate island, in the expectation that he would be
stranded there for a "minimum of one week" and, in addition
thereto, charged therefor $13.30 a day.
It is urged by the defendant that exemplary damages are
not recoverable in quasi-delicts, pursuant to Article 2231 of
our Civil Code, except when the defendant has acted with
"gross negligence," and that there is no specific finding that
it had so acted. It is obvious, however, that in off-loading
plaintiff at Wake Island, under the circumstances heretofore
adverted to, defendant's agents had acted with malice
aforethought and evident bad faith. If "gross negligence"
warrants the award of exemplary damages, with more
reason is its imposition justified when the act performed is
deliberate, malicious and tainted with bad faith. Thus, in
Lopez v. PANAM, 11 We held:
The rationale behind exemplary or
corrective damages is, as the name
implies, to provide an example or
correction for public good. Defendant
having breached its contracts in bad faith,
the court, as stated earlier, may award
exemplary damages in addition to moral
damages (Articles 2229, 2232, New Civil
Code.)
Similarly, in NWA v. Cuenca, 12 this Court declared that an
award for exemplary damages was justified by the fact that
the airline's "agent had acted in a wanton, reckless and
oppressive manner" in compelling Cuenca, upon arrival at

60

Okinawa, to transfer, over his objection, from the first class,


where he was accommodated from Manila to Okinawa, to
the tourist class, in his trip to Japan, "under threat of
otherwise leaving him in Okinawa," despite the fact that he
had paid in full the first class fare and was issued in Manila
a first class ticket.
Defendant cites Rotea v. Halili, 13 in support of the
proposition that a principal is not liable for exemplary
damages owing to acts of his agent unless the former has
participated in said acts or ratified the same. Said case
involved, however, the subsidiary civil liability of an
employer arising from criminal acts of his employee, and
"exemplary damages ... may be imposed when the crime
was committed with one or more aggravating
circumstances." 14 Accordingly, the Rotea case is not in
point, for the case at bar involves a breach of contract, as
well as a quasi-delict.
Neither may the case of Palisoc v. Brillantes, 15 invoked by
the defendant, be equated with the case at bar. The Palisoc
case dealt with the liability of school officials for damages
arising from the death of a student (Palisoc) due to fist
blows given by another student (Daffon), in the course of a
quarrel between them, while in a laboratory room of the
Manila Technical Institute. In an action for damages, the
head thereof and the teacher in charge of said laboratory
were held jointly and severally liable with the student who
caused said death, for failure of the school to provide
"adequate supervision over the activities of the students in
the school premises," to protect them "from harm, whether
at the hands of fellow students or other parties." Such
liability was predicated upon Article 2180 of our Civil Code,
the pertinent part of which reads:
ART. 2180. The obligation imposed
Article 2176 is demandable not only
one's own acts or omissions, but also
those of persons for whom one
responsible.

by
for
for
is

manager refused to do, thereby impliedly ratifying the offloading of Mr. Zulueta at Wake Island.
It is next urged that, under the contract of carriage with the
defendant, Mr. Zulueta was bound to be present at the time
scheduled for the departure of defendant's plane and that
he had, consequently, violated said contract when he did
not show up at such time. This argument might have had
some weight had defendant's plane taken off before Mr.
Zulueta had shown up. But the fact is that he was ready,
willing and able to board the plane about two hours before it
actually took off, and that he was deliberately and
maliciously off-loaded on account of his altercation with
Capt. Zentner. It should, also, be noted that, although Mr.
Zulueta was delayed some 20 to 30 minutes, the arrival or
departure of planes is often delayed for much longer
periods of time. Followed to its logical conclusion, the
argument adduced by the defense suggests that airlines
should be held liable for damages due to the inconvenience
and anxiety, aside from actual damages, suffered by many
passengers either in their haste to arrive at the airport on
scheduled time just to find that their plane will not take off
until later, or by reason of the late arrival of the aircraft at its
destination.
PANAM impugns the award of attorney's fees upon the
ground that no penalty should be imposed upon the right to
litigate; that, by law, it may be awarded only in exceptional
cases; that the claim for attorney's fees has not been
proven; and that said defendant was justified in resisting
plaintiff's claim "because it was patently exorbitant."
Nothing, however, can be farther from the truth. Indeed
apart from plaintiff's claim for actual damages, the amount
of which is not contested, plaintiffs did not ask any specific
sum by way of exemplary and moral damages, as well as
attorney's fees, and left the amount thereof to the "sound
discretion" of the lower court. This, precisely, is the reason
why PANAM, now, alleges without justification that the
lower court had no jurisdiction over the subject matter of the
present case.

xxx xxx xxx


Lastly,
teachers
or
heads
of
establishments of arts and trades shall be
liable for damages caused by their pupils
and students or apprentices, so long as
they remain in their custody.
xxx xxx xxx
Obviously, the amount of damages warded in the Palisoc
case is not and cannot serve as the measure of the
damages recoverable in the present case, the latter having
been caused directly and intentionally by an employee or
agent of the defendant, whereas the student who killed the
young Palisoc was in no wise an agent of the school.
Moreover, upon her arrival in the Philippines, Mrs. Zulueta
reported her husband's predicament to defendant's local
manager and asked him to forthwith have him (Mr. Zulueta)
brought to Manila, which defendant's aforementioned

Moreover, Article 2208 of our Civil Code expressly


authorizes the award of attorney's fees "when exemplary
damages are awarded," as they are in this case as
well as "in any other case where the court deems it just and
equitable that attorney's fees ... be recovered," and We so
deem it just and equitable in the present case, considering
the "exceptional" circumstances obtaining therein,
particularly the bad faith with which defendant's agent had
acted, the place where and the conditions under which
Rafael Zulueta was left at Wake Island, the absolute refusal
of defendant's manager in Manila to take any step
whatsoever to alleviate Mr. Zulueta's predicament at Wake
and have him brought to Manila which, under their
contract of carriage, was defendant's obligation to
discharge with "extra-ordinary" or "utmost" diligence and,
the "racial" factor that had, likewise, tainted the decision of
defendant's agent, Capt. Zentner, to off-load him at Wake
Island.
As regards the evidence necessary to justify the sum of
P75,000 awarded as attorney's fees in this case, suffice it to

61

say that the quantity and quality of the services rendered by


plaintiffs' counsel appearing on record, apart from the
nature of the case and the amount involved therein, as well
as his prestige as one of the most distinguished members
of the legal profession in the Philippines, of which judicial
cognizance may be taken, amply justify said award, which
is a little over 10% of the damages (P700,000) collectible by
plaintiffs herein. Indeed, the attorney's fees in this case is
proportionally much less than that adjudged in Lopez v.
PANAM 16 in which the judgment rendered for attorney's
fees (P50,000) was almost 20% of the damages (P275,000)
recovered by the plaintiffs therein.
The defense assails the last part of the decision sought to
be reconsidered, in which relying upon Article 172 of our
Civil Code, which provides that "(t)he wife cannot bind the
conjugal partnership without the husband's consent, except
in cases provided by law," and it is not claimed that this is
one of such cases We denied a motion, filed by Mrs.
Zulueta, for the dismissal of this case, insofar as she is
concerned - she having settled all her differences with the
defendant, which appears to have paid her the sum of
P50,000 therefor - "without prejudice to this sum being
deducted from the award made in said decision." Defendant
now alleges that this is tantamount to holding that said
compromise agreement is both effective and ineffective.
This, of course, is not true. The payment is effective, insofar
as it is deductible from the award, and, because it is due (or
part of the amount due) from the defendant, with or without
its compromise agreement with Mrs. Zulueta. What is
ineffective is the compromise agreement, insofar as the
conjugal partnership is concerned. Mrs. Zulueta's motion
was for the dismissal of the case insofar as she was
concerned, and the defense cited in support thereof Article
113 of said Code, pursuant to which "(t)he husband must be
joined in all suits by or against the wife except: ... (2) If they
have in fact been separated for at least one year." This
provision, We held, however, refers to suits in which the
wife is the principal or real party in interest, not to the case
at bar, "in which the husband is the main party in interest,
both as the person principally aggrieved and as
administrator of the conjugal partnership ... he having acted
in this capacity in entering into the contract of carriage with
PANAM and paid the amount due to the latter, under the
contract, with funds of the conjugal partnership," to which
the amounts recoverable for breach of said contract,
accordingly, belong. The damages suffered by Mrs. Zulueta
were mainly an in accident of the humiliation to which her
husband had been subjected. The Court ordered that said
sum of P50,00 paid by PANAM to Mrs. Zulueta be deducted
from the aggregate award in favor of the plaintiffs herein for
the simple reason that upon liquidation of the conjugal
partnership, as provided by law, said amount would have to
be reckoned with, either as part of her share in the
partnership, or as part of the support which might have
been or may be due to her as wife of Rafael Zulueta. It
would surely be inane to sentence the defendant to pay the
P700,000 due to the plaintiffs and to direct Mrs. Zulueta to
return said P50,000 to the defendant.
In this connection, it is noteworthy that, for obvious reasons
of public policy, she is not allowed by law to waive her share

in the conjugal partnership, before the dissolution thereof. 17


She cannot even acquire any property by gratuitous title,
without the husband's consent, except from her
ascendants, descendants, parents-in-law, and collateral
relatives within the fourth degree. 18
It is true that the law favors and encourages the settlement
of litigations by compromise agreement between the
contending parties, but, it certainly does not favor a
settlement with one of the spouses, both of whom are
plaintiffs or defendants in a common cause, such as the
defense of the rights of the conjugal partnership, when the
effect, even if indirect, of the compromise is to jeopardize
"the solidarity of the family" which the
law 19 seeks to protect by creating an additional cause for
the misunderstanding that had arisen between such
spouses during the litigation, and thus rendering more
difficult a reconciliation between them.
It is urged that there is no proof as to the purpose of the trip
of the plaintiffs, that neither is there any evidence that the
money used to pay the plane tickets came from the
conjugal funds and that the award to Mrs. Zulueta was for
her personal suffering or injuries. There was, however, no
individual or specific award in favor of Mrs. Zulueta or any
of the plaintiffs. The award was made in their favor
collectively. Again, in the absence of said proof, the
presumption is that the purpose of the trip was for the
common benefit of the plaintiffs and that the money had
come from the conjugal funds, for, unless there is proof to
the contrary, it is presumed "(t)hat things have happened
according to the ordinary course of nature and the ordinary
habits of life." 20 In fact Manresa maintains 21 that they are
deemed conjugal, when the source of the money used
therefor is not established, even if the purchase had been
made by the wife. 22 And this is the rule obtaining in the
Philippines. Even property registered, under the Torrens
system, in the name of one of the spouses, or in that of the
wife only, if acquired during the marriage, is presumed to
belong to the conjugal partnership, unless there is
competent proof to the contrary. 23
PANAM maintains that the damages involved in the case at
bar are not among those forming part of the conjugal
partnership pursuant to Article 153 of the Civil Code,
reading:
ART. 153. The following are conjugal
partnership property:
(1) That which is acquired by onerous title
during the marriage at the expense of the
common fund, whether the acquisition be
for the partnership, or for only one of the
spouses;
(2) That which is obtained by the industry,
or work, or as salary of the spouses, or of
either of them;
(3) The fruits, rents or interests received or
due during the marriage, coming from the

62

common property or from the exclusive


property of each spouse.
Considering that the damages in question have arisen from,
inter alia, a breach of plaintiffs' contract of carriage with the
defendant, for which plaintiffs paid their fare with funds
presumably belonging to the conjugal partnership, We hold
that said damages fall under paragraph (1) of said Article
153, the right thereto having been "acquired by onerous title
during the marriage ... ." This conclusion is bolstered up by
Article 148 of our Civil Code, according to which:
ART. 148. The following shall be the
exclusive property of each spouse:
(1) That which is brought to the marriage
as his or her own;
(2) That which each acquires, during the
marriage, by lucrative title;
(3) That which is acquired by right of
redemption or by exchange with other
property belonging to only one of the
spouses;
(4) That which is purchased with exclusive
money of the wife or of the husband.
The damages involved in the case at bar do not come
under any of these provisions or of the other provisions
forming part of Chapter 3, Title VI, of Book I of the Civil
Code, which chapter is entitled "Paraphernal Property."
What is more, if "(t)hat which is acquired by right of
redemption or by exchange with other property belonging to
only one of the spouses," and "(t)hat which is purchased
with exclusive money of the wife or of the husband," 24
belong exclusively to such wife or husband, it follows
necessarily that that which is acquired with money of the
conjugal partnership belongs thereto or forms part thereof.
The rulings in Maramba v. Lozano 25 and Perez v. Lantin, 26
cited in defendant's motion for reconsideration, are, in
effect, adverse thereto. In both cases, it was merely held
that the presumption under Article 160 of our Civil Code
to the effect that all property of the marriage belong to the
conjugal partnership does not apply unless it is shown
that it was acquired during marriage. In the present case,
the contract of carriage was concededly entered into, and
the damages claimed by the plaintiffs were incurred, during
marriage. Hence, the rights accruing from said contract,
including those resulting from breach thereof by the
defendant, are presumed to belong to the conjugal
partnership of Mr. and Mrs. Zulueta. The fact that such
breach of contract was coupled, also, with a quasi-delict
constitutes an aggravating circumstance and can not
possibly have the effect of depriving the conjugal
partnership of such property rights.
Defendant insists that the use of conjugal funds to redeem
property does not make the property redeemed conjugal if
the right of redemption pertained to the wife. In the
absence, however, of proof that such right of redemption

pertains to the wife and there is no proof that the


contract of carriage with PANAM or the money paid therefor
belongs to Mrs. Zulueta the property involved, or the
rights arising therefrom, must be presumed, therefore, to
form part of the conjugal partnership.
It is true that in Lilius v. Manila Railroad Co., 27 it was held
that the "patrimonial and moral damages" awarded to a
young and beautiful woman by reason of a scar in
consequence of an injury resulting from an automobile
accident which disfigured her face and fractured her left
leg, as well as caused a permanent deformity, are her
paraphernal property. Defendant cites, also, in support of its
contention the following passage from Colin y Capitant:
No esta resuelta expresamente en la
legislacion espaola la cuestion de si las
indemnizaciones debidas por accidentes
del trabaho tienen la consideracion de
gananciales, o son bienes particulares de
los conyuges.
Inclinan a la solucion de que estas
indemnizaciones deben ser consideradas
como gananciales, el hecho de que la
sociedad pierde la capacidad de
trabajocon el accidente, que a ella le
pertenece, puesto que de la sociedad son
losfrutos de ese trabajo; en cambio, la
consideracion de que igual manera que
losbienes que sustituyen a los que cada
conyuge lleva al matrimonio como
propiostienen el caracter de propios, hace
pensar que las indemnizaciones que
vengana suplir la capacidad de trabajo
aportada por cada conyuge a la sociedad,
debenser juridicamente reputadas como
bienes propios del conyuge que haya
sufrido elaccidente. Asi se llega a la
misma
solucion
aportada
por
la
jurisprudencia francesca. 28
This opinion is, however, undecisive, to say the least. It
should be noted that Colin y Capitant were commenting on
the French Civil Code; that their comment referred to
indemnities due in consequence of "accidentes del trabajo
"resulting in physical injuries sustained by one of the
spouses (which Mrs. Zulueta has not suffered); and that
said commentators admit that the question whether or not
said damages are paraphernal property or belong to the
conjugal partnership is not settled under the Spanish law. 29
Besides, the French law and jurisprudence to which the
comments of Planiol and Ripert, likewise, refer are
inapposite to the question under consideration, because
they differ basically from the Spanish law in the treatment of
the property relations between husband and wife. Indeed,
our Civil Code, like the Spanish Civil Code, favors the
system of conjugal partnership of gains. Accordingly, the
former provides that, "(i)n the absence of marriage
settlements, or when the same are void, the system of
relative community or conjugal partnership of gains ... shall
govern the property relations between" the spouses. 30
Hence, "(a)ll property of the marriage is presumed to belong

63

to the conjugal partnership, unless it be proved that it


pertains exclusively to the husband or to the wife." 31
No similar rules are found in the French Civil Code. What is
more, under the provisions thereof, the conjugal partnership
exists only when so stipulated in the "capitulaciones
matrimoniales" or by way of exception. In the language of
Manresa
Prescindimos de los preceptos de los
Condigos de Francia, Italia, Holanda,
Portugal, Alemania y Suiza, porsue solo
excepcionalmente, o cuando asi se pacta
en las capitulaciones, admiten el sistema
de gananciales. 32
Again, Colin y Capitant, as well as the Lilius case, refer to
damages recovered for physical injuries suffered by the
wife. In the case at bar, the party mainly injured, although
not physically, is the husband.
Accordingly, the other Philippine cases 33 and those from
Louisiana whose civil law is based upon the French Civil
Code cited by the defendant, which similarly refer to
moral damages due to physical injuries suffered by the wife,
are, likewise, inapplicable to the case at bar.
We find, therefore, no plausible reason to disturb the views
expressed in Our decision promulgated on February 29,
1972.
WHEREFORE, the motions for reconsideration abovereferred to should be, as they are hereby denied.

64

The City Court of Cebu subsequently rendered judgment


dismissing the counterclaim and ordering the defendant to
vacate the premises in question and to pay the plaintiff the
sum of P3,887.10 as unpaid back rentals and the sum of
P150.00 as attorney's fees' From this decision, the
defendant filed an appeal with Branch Ill of the Court of
First Instance of Cebu. The case was designated as Civil
Case No. R-12430.
G.R. No. L-46000 March 18, 1985
GLICERIO AGUSTIN (Deceased) as Administrator of the
Intestate Estate of Susana Agustin, petitioner-plaintiffappellant,
vs.
LAUREANO BACALAN and the PROVINCIAL SHERIFF
OF CEBU, respondents-defendants-appellees.

Availing of Republic Act 6031 which does away with trials


de novo in appeals before it, the Court of First Instance
rendered a decision, the dispositive portion of which reads:
WHEREFORE, based on all the foregoing
considerations, the appealed judgment is
hereby set aside. Judgment is hereby
required in favor of the defendant
1. Ordering the plaintiff to pay.

GUTIERREZ, JR., J.:


The precursor of this case was a complaint for ejectment
with damages filed by plaintiff-appellant Agustin, as
adininistrator of the Intestate Estate of Susana Agustin,
against defendant-appellee Bacalan, before the City Court
of Cebu.
Bacalan is a lessee of a one-door ground floor space in a
building owned by the late Susana Agustin. Due to
nonpayment of rentals despite repeated demands an action
to eject him was filed.
In his complaint, the plaintiff-appellant prayed that the
defendant-appellee be ordered to immediately vacate the
place in question, to pay plaintiff-appellant the sum of
P2,300.00 representing arrearages in rentals plus the
corresponding rentals until he actually vacates the place,
attorney's fees, expenses, and costs.
In his answer, the defendant-appellee included a counterclaim alleging that the present action was "clearly
unfounded and devoid of merits, as it is tainted with malice
and bad faith on the part of the plaintiff for the obvious
reason that plaintiff pretty well knows that defendant does
not have any rentals in arrears due to the estate of Susana
Agustin, but notwithstanding this knowledge, plaintiff filed
the present action merely to annoy, vex, embarrass and
inconvenience the defendant." He stated, "That by virtue of
the unwarranted and malicious filing of this action by the
plaintiff against the defendant, the latter suffered, and will
continue to suffer, actual and moral damages in the amount
of no less than P50,000.00; P10,000.00 in concept of
exemplary damages. In addition, defendant has been
compelled to retain the services of undersigned counsel to
resist plaintiffs' reckless, malicious and frivolous claim and
to protect and enforce his rights for which he obligated
himself to pay the further sum of P3,500.00 as attorney's
fees."

a) P10,000.00 as moral
damages;
b)
P5,000.00
exemplary damages;

as

c)
P1,000.00
attorney's fees; and

as

2. With costs against plaintiff.


JUDGMENT REVERSED.
No appeal was taken by the plaintiff-appellant. The decision
lapsed into finality and became executory. A writ of
execution was issued by virtue of which a notice to sell at
public auction real properties belonging to the estate of
Susana Agustin was issued by the Deputy Sheriff to satisfy
judgment in the case. Plaintiff's counsel filed a motion for
reconsideration, confessing his fault and giving the reason
why he failed to perfect the appeal on time. The motion was
denied.
Thereafter, with the aid of new counsel, the plaintiffappellant filed a complaint with Branch V, Court of First
Instance of Cebu, against the defendant and the Deputy
Sheriff of Cebu for the declaration of the nullity of the
above-cited decision of Branch III, Court of First Instance of
Cebu in the ejectment case on the ground that the exercise
of its appellate jurisdiction was null and void from the
beginning for the following reasons:
(a) It grants relief in the total sum of
P16,000.00 (exclusive of costs) distributed
thus:
P10,000.00
damages

as

moral

65

P5,000.00 as exemplary
damages

Civil Case No. 12430 to offset the adverse


effects of failure to appeal.

P1,000.00 as attorney's
fees

Plaintiff-appellant's motion for reconsideration was denied,


prompting him to file an appeal before the Court of Appeals,
which, in a resolution, certified the same to us on the
ground that it involves pure questions of law.

which is clearly beyond the jurisdiction of


the City Court of Cebu; Section 88 of the
Judiciary Act of 1948, as amended by
Rep. Acts Nos. 2613 and 3828, limits the
jurisdiction of the city courts in civil cases
to P10,000.00 as the maximum amount of
the demand (exclusive of interest and
costs);
(b) Moreover, said Decision (Annex "G")
grants moral damages to the defendant in
the sum of P10,000.00 which constitutes a
grave abuse of discretion amounting to
lack of jurisdiction, there being no
evidence to support it and the subject
matter of the suit in Civil Case No. R13504 being purely contractual where
moral damages are not recoverable.
A motion to dismiss was filed by the defendant on the
grounds that the plaintiff has no cause of action and that the
court lacks jurisdiction to declare the nullity of a decision of
another branch of the Court of First Instance of Cebu.
While rejecting the second ground for the motion to dismiss,
the court sustained the defendant and ruled:
Clearly from a reading of the complaint,
the plaintiff seeks the annulment of the
decision rendered by the Third Branch of
this Court because the award exceeded
the jurisdiction amount cognizable by the
City Court of Cebu and the said Branch III
of this Court has no jurisdiction to award
the defendants herein (plaintiff in Civil
Case No. 12430) an amount more than
P10,000.00;
It is the considered opinion of this Court
that this allegation of the herein plaintiff
cannot be availed of as a ground for
annulment of a judgment. It may perhaps,
or at most, be a ground for a petition for
certiorari. But then, the remedy should be
availed of within the reglementary period
to appeal. Nevertheless, even if the
plaintiff did take his cause by certiorari,
just the same, it would have been futile....
xxx xxx xxx
In fine, this Court believes that the present
complaint fails to allege a valid cause of
action as the same is only a clear attempt
at utilizing the remedy for the annulment of
the judgment rendered by this Court in

We ruled in Macabingkil v. People's Homesite and Housing


Corporation (72 SCRA 326, citing Reyes v. Barretto-Datu,
94 Phil. 446, 448-449)Under our rules of procedure, the validity
of a judgment or order of the court, which
has become final and executory, may he
attacked only by a direct action or
proceeding to annul the same, or by
motion in another case if, in the latter
case, the court had no jurisdiction to enter
the order or pronounce the judgment
(section 44, Rule 39 of the Rules of Court).
The first proceeding is a direct attack
against the order or judgment, because it
is not incidental to, but is the main object
of, the proceeding. The other one is the
collateral attack, in which the purpose of
the proceedings is to obtain some relief,
other than the vacation or setting aside of
the judgment, and the attack is only an
incident. (I Freeman on Judgments, sec.
306, pages 607-608.) A third manner is by
a petition for relief from the judgment order
as authorized by the statutes or by the
rules, such as those expressly provided in
Rule 38 of the Rules of Court, but in this
case it is to be noted that the relief is
granted by express statutory authority in
the same action or proceeding in which
the judgment or order was entered ...
The question is thus poised, whether or not the present
action for the annulment of the judgment in the ejectment
case is the proper remedy after it has become final and
executory.
To this procedural dilemma, the solution lies in the
determination of the validity of the judgment sought to be
annulled, for against a void judgment, plaintiff-appellant's
recourse would be proper.
There is no question as to the validity of the court's decision
with respect to the issue of physical possession of property,
the defendant-appellee's right to the same having been
upheld. However, the plaintiff-appellant assails the money
judgment handed down by the court which granted
damages to the defendant-appellee. By reason thereof, he
seeks the declaration of the nullity of the entire judgment.
It is the plaintiff-appellant's contention that moral damages
may not properly be awarded in ejectment cases, the only
recoverable damages therein being the reasonable
compensation for use and occupancy of the premises and

66

the legal measure of damages being the fair rental value of


the property.
Plaintiff-appellant loses sight of the fact that the money
judgment was awarded the defendant-appellee in the
concept of a counterclaim. A defending party may set up a
claim for money or any other relief which he may have
against the opposing party in a counterclaim (Section 6,
Rule 6, Revised Rules of Court). And the court may, if
warranted, grant actual, moral, or exemplary damages as
prayed for. The grant of moral damages, in the case at bar,
as a counterclaim, and not as damages for the unlawful
detention of property must be upheld. However, the amount
thereof is another matter.
Plaintiff-appellant raises the issue of whether or not the
Court of First Instance may, in an appeal, award the
defendant-appellee's counterclaim in an amount exceeding
or beyond the jurisdiction of the court of origin.
It is well-settled that a court has no jurisdiction to hear and
determine a set-off or counterclaim in excess of its
jurisdiction (Section 5, Rule 5, Revised Rules of Court; Ago
v. Buslon, 10 SCRA 202). A counterclaim beyond the court's
jurisdiction may only be pleaded by way of defense, the
purpose of which, however, is only to defeat or weaken
plaintiff's claim, but not to obtain affirmative relief (Section 5,
Rule 5, Revised Rules of Court). Nevertheless, the
defendant-appellee, in the case at bar, set up his claim in
excess of the jurisdiction of the city court as a compulsory
counterclaim. What is the legal effect of such a move?
Pertinent to our disposition of this question is our
pronouncement in the case of Hyson Tan, et al. v. Filipinas
Compania de Seguros, et al., (G.R. No. L-10096, March 23,
1956) later adopted in Pindangan Agricultural Co., Inc. v.
Dans (6 SCRA 14) and the later case of One Heart Club,
Inc. v. Court of Appeals (108 SCRA 416) to wit:
xxx xxx xxx
... An appellant who files his brief and
submits his case to the Court of Appeals
for decision, without questioning the
latter's jurisdiction until decision is
rendered therein, should be considered as
having voluntarily waives so much of his
claim as would exceed the jurisdiction of
said Appellate Court; for the reason that a
contrary rule would encourage the
undesirable
practice
of
appellants
submitting their cases for decision to the
Court of Appeals in expectation of
favorable judgment, but with intent of
attacking its jurisdiction should the
decision be unfavorable. ...
Thus, by presenting his claim voluntarily before the City
Court of Cebu, the defendant-appellee submitted the same
to the jurisdiction of the court. He became bound thereby.
The amount of P10,000.00 being the jurisdictional amount
assigned the City Court of Cebu, whose jurisdiction the

defendant-appellee has invoked, he is thereby deemed to


have waived the excess of his claim beyond P10,000.00. It
is as though the defendant-appellee had set up a
counterclaim in the amount of P10,000.00 only. May the
Court of First Instance then, on appeal, award defendantappellee's counterclaim beyond that amount?
The rule is that a counterclaim not presented in the inferior
court cannot be entertained in the Court of First Instance on
appeal (Francisco, The Revised Rules of Court in the
Philippines, Vol. III, p. 26, citing the cases of Bernardo v.
Genato, 11 Phil. 603 and Yu Lay v. Galmes, 40 Phil. 651).
As explained in Yu Lay v. Galmes "Upon an appeal to a
court of first instance from the judgment of a justice of the
peace, it is not possible, without changing the purpose of
the appeal, to alter the nature of the question raised by the
complaint and the answer in the original action. There can
be no doubt, therefore, of the scope of the doctrine laid
down in the several decisions of the Court. Consequently,
We hold that, upon an appeal to the Court of First Instance,
the plaintiff as well as the defendant cannot file any
pleading or allegation which raises a question essentially
distinct from that raised and decided in the justice of the
peace court. "This rule was reiterated in cases from Ng Cho
Cio v. Ng Diong (1 SCRA 275) to Development Bank of the
Philippines v. Court of Appeals (116 SCRA 636).
Thus, the defendant-appellee's counterclaim beyond
P10,000.00, the jurisdictional amount of the city Court of
Cebu, should be treated as having been deemed waived. It
is as though it has never been brought before trial court. It
may not be entertained on appeal.
The amount of judgment, therefore, obtained by the
defendant-appellee on appeal, cannot exceed the
jurisdiction of the court in which the action began. Since the
trial court did not acquire jurisdiction over the defendant's
counterclaim in excess of the jurisdictional amount, the
appellate court, likewise, acquired no jurisdiction over the
same by its decisions or otherwise. Appellate jurisdiction
being not only a continuation of the exercise of the same
judicial power which has been executed in the court of
original jurisdiction, also presupposes that the original and
appellate courts are capable of participating in the exercise
of the same judicial power (See 2 Am. Jur. 850; Stacey
Cheese Company v. R.E. Pipkin, Appt. 155 NC 394, 71 S.E.
442, 37 LRA 606) It is the essential criterion of appellate
jurisdiction that it revises and corrects the proceedings in a
cause already instituted, and does not create that cause
(See 2 Am. Jur 850 citing Marbury v. Madison, 1 Cranch
US, 137, 2 L. ed. 60).
It is, of course, a well-settled rule that when court
transcends the limits prescribed for it by law and assumes
to act where it has no jurisdiction, its adjudications will be
utterly void and of no effect either as an estoppel or
otherwise (Planas v. Collector of Internal Revenue, 3 SCRA
395; Parades v. Moya, 61 SCRA 526). The Court of First
Instance, in the case at bar, having awarded judgment in
favor of the defendant-appellee in excess of its appellate
jurisdiction to the extent of P6,000.00 over the maximum
allowable award of P10,000.00, the excess is null and void
and of no effect. Such being the case, an action to declare

67

the nullity of the award as brought by the plaintiff-appellant


before the Court of First Instance of Cebu, Branch V is a
proper remedy.
The nullity of such portion of the decision in question,
however, is not such as to affect the conclusions reached
by the court in the main case for ejectment. As held in Vda.
de Pamintuan v. Tiglao (53 Phil. 1) where the amount set
up by the defendant was not proper as a defense and it
exceeded the inferior court's jurisdiction, it cannot be
entertained therein, but the court's jurisdiction over the main
action will remain unaffected. Consequently, the decision
over the main action, in the case at bar, must stand, best
remembering that a counter-claim, by its very nature, is a
cause of action separate and independent from the
plaintiff's claim against the defendant.
WHEREFORE, the decision of the Court of First Instance of
Cebu, Branch III in Civil Case No. R-12430 for ejectment is
hereby DECLARED NULL AND VOID insofar as it awards
damages on the defendant-appellee's counterclaim in
excess of P6,000.00 beyond its appellate jurisdiction. The
decision in all other respects is AFFIRMED. The order of
the Court of First Instance of Cebu, Branch V dismissing
Civil Case No. R-13462 for declaration of nullity of judgment
with preliminary injunction is hereby MODIFIED, Civil Case
No. R-13462 is ordered DISMISSED insofar as the decision
sought to be annulled upholds the defendant's right to
possession of the disputed property. The defendant's
counterclaim for damages is GRANTED to the extent of
TEN THOUSAND (P10,000.00) PESOS. The grant of SIX
THOUSAND (P6,000.00) PESOS in excess of such amount
is hereby declared NULL and VOID, for having been
awarded beyond the jurisdiction of the court.
SO ORDERED.

68

forcible re-entry in the properties and the irresponsible and


reckless filing of the case, they be awarded various types of
damages instead in amounts totaling P2,100,000 plus costs
of suit.9

G.R. No. 170354

June 30, 2006

EDGARDO
PINGA,
Petitioner,
vs.
THE HEIRS OF GERMAN, SANTIAGO represented by
FERNANDO SANTIAGO, Respondents.
DECISION
TINGA, J.:
The constitutional faculty of the Court to promulgate rules of
practice and procedure1 necessarily carries the power to
overturn judicial precedents on points of remedial law
through the amendment of the Rules of Court. One of the
notable changes introduced in the 1997 Rules of Civil
Procedure is the explicit proviso that if a complaint is
dismissed due to fault of the plaintiff, such dismissal is
"without prejudice to the right of the defendant to prosecute
his counterclaim in the same or in a separate action." 2 The
innovation was instituted in spite of previous jurisprudence
holding that the fact of the dismissal of the complaint was
sufficient to justify the dismissal as well of the compulsory
counterclaim.3
In granting this petition, the Court recognizes that the
former jurisprudential rule can no longer stand in light of
Section 3, Rule 17 of the 1997 Rules of Civil Procedure.
The relevant facts are simple enough. Petitioner Eduardo
Pinga was named as one of two defendants in a complaint
for injunction4 filed with Branch 29 of the Regional Trial
Court (RTC)5 of San Miguel, Zamboanga del Sur, by
respondent Heirs of German Santiago, represented by
Fernando Santiago. The Complaint6 dated 28 May 1998
alleged in essence that petitioner and co-defendant Vicente
Saavedra had been unlawfully entering the coco lands of
the respondent, cutting wood and bamboos and harvesting
the fruits of the coconut trees therein. Respondents prayed
that petitioner and Saavedra be enjoined from committing
"acts of depredation" on their properties, and ordered to pay
damages.
In their Amended Answer with Counterclaim, 7 petitioner and
his co-defendant disputed respondents ownership of the
properties in question, asserting that petitioners father,
Edmundo Pinga, from whom defendants derived their
interest in the properties, had been in possession thereof
since the 1930s.8 They alleged that as far back as 1968,
respondents had already been ordered ejected from the
properties after a complaint for forcible entry was filed by
the heirs of Edmundo Pinga. It was further claimed that
respondents application for free patent over the properties
was rejected by the Office of the President in 1971.
Defendants in turn prayed that owing to respondents

By July of 2005, the trial of the case had not yet been
completed. Moreover, respondents, as plaintiffs, had failed
to present their evidence. It appears that on 25 October
2004, the RTC already ordered the dismissal of the
complaint after respondents counsel had sought the
postponement of the hearing scheduled then. 10 However,
the order of dismissal was subsequently reconsidered by
the RTC in an Order dated 9 June 2005, which took into
account the assurance of respondents counsel that he
would give priority to that case.11
At the hearing of 27 July 2005, plaintiffs counsel on record
failed to appear, sending in his stead a representative who
sought the postponement of the hearing. Counsel for
defendants (who include herein petitioner) opposed the
move for postponement and moved instead for the
dismissal of the case. The RTC noted that it was obvious
that respondents had failed to prosecute the case for an
unreasonable length of time, in fact not having presented
their evidence yet. On that ground, the complaint was
dismissed. At the same time, the RTC allowed defendants
"to present their evidence ex-parte."12
Respondents filed a Motion for Reconsideration 13 of the
order issued in open court on 27 July 2005, opting however
not to seek that their complaint be reinstated, but praying
instead that the entire action be dismissed and petitioner be
disallowed
from
presenting
evidence
ex-parte.
Respondents claimed that the order of the RTC allowing
petitioner to present evidence ex-parte was not in accord
with established jurisprudence. They cited cases,
particularly City of Manila v. Ruymann14 and Domingo v.
Santos,15 which noted those instances in which a
counterclaim could not remain pending for independent
adjudication.
On 9 August 2005, the RTC promulgated an order granting
respondents Motion for Reconsideration and dismissing the
counterclaim, citing as the only ground therefor that "there
is no opposition to the Motion for Reconsideration of the
[respondents]."16
Petitioner
filed
a
Motion
for
Reconsideration, but the same was denied by the RTC in
an Order dated 10 October 2005. 17 Notably, respondents
filed an Opposition to Defendants Urgent Motion for
Reconsideration, wherein they argued that the prevailing
jurisprudential rule18 is that "compulsory counterclaims
cannot be adjudicated independently of plaintiffs cause of
action," and "a conversu, the dismissal of the complaint
carries with it the dismissal of the compulsory
counterclaims."19
The matter was elevated to this Court directly by way of a
Petition for Review under Rule 45 on a pure question of
law, the most relevant being whether the dismissal of the
complaint necessarily carries the dismissal of the
compulsory counterclaim.

69

We hold that under Section 3, Rule 17 of the 1997 Rules of


Civil Procedure, the dismissal of the complaint due to the
fault of plaintiff does not necessarily carry with it the
dismissal of the counterclaim, compulsory or otherwise. In
fact, the dismissal of the complaint is without prejudice to
the right of defendants to prosecute the counterclaim.
On a prefatory note, the RTC, in dismissing the
counterclaim, did not expressly adopt respondents
argument that the dismissal of their complaint extended as
well to the counterclaim. Instead, the RTC justified the
dismissal of the counterclaim on the ground that "there is no
opposition to [plaintiffs] Motion for Reconsideration
[seeking the dismissal of the counterclaim]." 20 This
explanation is hollow, considering that there is no
mandatory rule requiring that an opposition be filed to a
motion for reconsideration without need for a court order to
that effect; and, as posited by petitioner, the "failure to file
an opposition to the Plaintiffs Motion for Reconsideration is
definitely not one among the established grounds for
dismissal [of the counterclaim]." 21 Still, the dismissal of the
counterclaim by the RTC betrays at very least a tacit
recognition of respondents argument that the counterclaim
did not survive the dismissal of the complaint. At most, the
dismissal of the counterclaim over the objection of the
defendant (herein petitioner) on grounds other than the
merits of the counterclaim, despite the provisions under
Rule 17 of the 1997 Rules of Civil Procedure, constitutes a
debatable question of law, presently meriting justiciability
through the instant action. Indeed, in reviewing the assailed
orders of the RTC, it is inevitable that the Court consider
whether the dismissal of the complaint, upon motion of the
defendant, on the ground of the failure to prosecute on
plaintiffs part precipitates or carries with it the dismissal of
the pending counterclaims.
Our core discussion begins with Section 3, Rule 17 of the
1997 Rules of Civil Procedure, which states:
SEC. 3. Dismissal due to fault of plaintiff.If, for no
justifiable cause, the plaintiff fails to appear on the date of
the presentation of his evidence in chief on the complaint,
or to prosecute his action for an unreasonable length of
time, or to comply with these Rules or any order of the
court, the complaint may be dismissed upon motion of
defendant or upon the court's own motion, without prejudice
to the right of the defendant to prosecute his counterclaim
in the same or in a separate action. This dismissal shall
have the effect of an adjudication upon the merits, unless
otherwise declared by the court.
The express qualification in the provision that the dismissal
of the complaint due to the plaintiffs fault, as in the case for
failure to prosecute, is without prejudice to the right of the
defendant to prosecute his counterclaim in the same or
separate action. This stands in marked contrast to the
provisions under Rule 17 of the 1964 Rules of Court which
were superseded by the 1997 amendments. In the 1964
Rules, dismissals due to failure to prosecute were governed
by Section 3, Rule 17, to wit:

unreasonable length of time, or to comply with these rules


or any order of the court, the action may be dismissed upon
motion of the defendant or upon the courts own motion.
This dismissal shall have the effect of an adjudication upon
the merits, unless otherwise provided by court.
Evidently, the old rule was silent on the effect of such
dismissal due to failure to prosecute on the pending
counterclaims. As a result, there arose what one authority
on remedial law characterized as "the nagging question of
whether or not the dismissal of the complaint carries with it
the dismissal of the counterclaim." 22 Jurisprudence
construing the previous Rules was hardly silent on the
matter.
In their arguments before the RTC on the dismissal of the
counterclaim, respondents cited in support City of Manila v.
Ruymann,23 Domingo v. Santos,24 Belleza v. Huntington,25
and Froilan v. Pan Oriental Shipping Co.,26 all of which were
decided more than five decades ago. Notably though, none
of the complaints in these four cases were dismissed either
due to the fault of the plaintiff or upon the instance of the
defendant.27
The distinction is relevant, for under the previous and
current incarnations of the Rules of Civil Procedure, it is
Section 3, Rule 17 that governs the dismissals due to the
failure of the plaintiff to prosecute the complaint, as had
happened in the case at bar. Otherwise, it is Section 2, Rule
17, which then, and still is now, covered dismissals ordered
by the trial court upon the instance of the plaintiff. 28 Yet, as
will be seen in the foregoing discussion, a discussion of
Section 2 cannot be avoided as the postulate behind that
provision was eventually extended as well in cases that
should have properly been governed by Section 3.
Even though the cases cited by respondents involved
different factual antecedents, there exists more appropriate
precedents which they could have cited in support of their
claim that the counterclaim should have been dismissed
even if the dismissal of the complaint was upon the
defendants motion and was predicated on the plaintiffs
fault. BA Finance Corp. v. Co29 particularly stands out in that
regard, although that ruling is itself grounded on other
precedents as well. Elucidation of these cases is in order.
On the general effect of the dismissal of a complaint,
regardless of cause, on the pending counterclaims,
previous jurisprudence laid emphasis on whether the
counterclaim was compulsory or permissive in character.
The necessity of such distinction was provided in the 1964
Rules itself, particularly Section 2, Rule 17, which stated
that in instances wherein the plaintiff seeks the dismissal of
the complaint, "if a counterclaim has been pleaded by a
defendant prior to the service upon him of the plaintiffs
motion to dismiss, the action shall not be dismissed against
the defendants objection unless the counterclaim can
remain pending for independent adjudication by the court." 30
The

SEC. 3. Failure to prosecute. If plaintiff fails to appear at


the time of the trial, or to prosecute his action for an

70

vaunted commentaries of Chief Justice Moran, remarking


on Section 2, Rule 17, noted that "[t]here are instances in
which a counterclaim cannot remain pending for
independent adjudication, as, where it arises out of, or is
necessarily connected with, the transaction or occurrence
which is the subject matter of the opposing partys claim." 31
This view expressed in Morans Commentaries was
adopted by the Court in cases where the application of
Section 2, Rule 17 of the 1964 Rules of Court was called
for, such as in Lim Tanhu v. Ramolete,32 and Dalman v. City
Court of Dipolog City.33 The latter case warrants brief
elaboration. Therein, the plaintiff in a civil case for damages
moved for the withdrawal of her own case on the ground
that the dispute had not been referred to the barangay
council as required by law. Over the objection of the
defendant, who feared that her own counterclaim would be
prejudiced by the dismissal, plaintiffs motion was granted,
the complaint and the counterclaim accordingly dismissed
by the trial court. The Court refused to reinstate the
counterclaim, opining without elaboration, "[i]f the civil case
is dismissed, so also is the counterclaim filed therein." 34 The
broad nature of that statement gave rise to the notion that
the mandatory
dismissal of the counterclaim upon dismissal of the
complaint applied regardless of the cause of the complaints
dismissal.35
Notably,
the
qualification
concerning
compulsory
counterclaims was provided in Section 2, Rule 17 of the
1964 Rules, the provision governing dismissals by order of
the court, and not Section 3, Rule 17. As stated earlier,
Section 3, which covered dismissals for failure to prosecute
upon motion of the defendant or upon motu proprio action
of the trial court, was silent on the effect on the
counterclaim of dismissals of such nature.
Spouses Sta. Maria, Jr. v. Court of Appeals,36 decided in
1972, ostensibly supplied the gap on the effect on the
counterclaim of complaints dismissed under Section 3. The
defendants therein successfully moved before the trial court
for the dismissal of the complaint without prejudice and their
declaration in default on the counterclaim after plaintiffs
therein failed to attend the pre-trial. After favorable
judgment was rendered on the counterclaim, plaintiffs
interposed an appeal, citing among other grounds, that the
counterclaim could no longer have been heard after the
dismissal of the complaint. While the Court noted that the
adjudication of the counterclaim in question "does not
depend upon the adjudication of the claims made in the
complaint since they were virtually abandoned by the nonappearance of the plaintiffs themselves," it was also added
that "[t]he doctrine invoked is not available to plaintiffs like
the petitioners, who prevent or delay the hearing of their
own claims and allegations."37 The Court, through Justice
JBL Reyes, noted:
The doctrine that the complaint may not be dismissed if the
counterclaim cannot be independently adjudicated is not
available to, and was not intended for the benefit of, a
plaintiff who prevents or delays the prosecution of his own
complaint. Otherwise, the trial of counterclaims would be

made to depend upon the maneuvers of the plaintiff, and


the rule would offer a premium to vexing or delaying tactics
to the prejudice of the counterclaimants. It is in the same
spirit that we have ruled that a complaint may not be
withdrawn over the opposition of the defendant where the
counterclaim is one that arises from, or is necessarily
connected with, the plaintiffs action and cannot remain
pending for independent adjudication.38
There is no doubt that under the 1964 Rules, the dismissal
of a complaint due to the failure of the plaintiff to appear
during pre-trial, as what had happened in Sta. Maria, fell
within the coverage of Section 3, Rule 17. On the other
hand, Section 2 was clearly limited in scope to those
dismissals sustained at the instance of the plaintiff. 39
Nonetheless, by the early 1990s, jurisprudence was settling
on a rule that compulsory counterclaims were necessarily
terminated upon the dismissal of the complaint not only if
such dismissal was upon motion of the plaintiff, but at the
instance of the defendant as well. Two decisions from that
period stand out in this regard, Metals Engineering
Resources Corp. v. Court of Appeals 40 and International
Container Terminal Services v. Court of Appeals.41
In Metals, the complaint was expunged from the record
after the defendant had filed a motion for reconsideration of
a trial court order allowing the filing of an amended
complaint that corrected a jurisdictional error in the original
complaint pertaining to the specification of the amount of
damages sought. When the defendant was nonetheless
allowed to present evidence on the counterclaim, the
plaintiff assailed such allowance on the ground that the
counterclaim was compulsory and could no longer remain
pending for independent adjudication. The Court, in finding
for the plaintiff, noted that the counterclaim was indeed
compulsory in nature, and as such, was auxiliary to the
proceeding in the original suit and derived its jurisdictional
support therefrom.42 It was further explained that the
doctrine was in consonance with the primary objective of a
counterclaim, which was to avoid and prevent circuitry of
action by allowing the entire controversy between the
parties to be litigated and finally determined in one action,
and to discourage multiplicity of suits. 43 Also, the Court
noted that since the complaint was dismissed for lack of
jurisdiction, it was as if no claim was filed against the
defendant, and there was thus no more leg for the
complaint to stand on.44
In International Container, the defendant filed a motion to
dismiss which was granted by the trial court. The
defendants counterclaim was dismissed as well. The Court
summarized the key question as "what is the effect of the
dismissal of a complaint ordered at the instance of the
defendant upon a compulsory counterclaim duly raised in
its answer."45 Then it ruled that the counterclaim did not
survive such dismissal. After classifying the counterclaim
therein as compulsory, the Court noted that "[i]t is obvious
from the very nature of the counterclaim that it could not
remain pending for independent adjudication, that is,
without adjudication by the court of the complaint itself on
which the counterclaim was based."46

71

Then in 1993, a divided Court ruled in BA Finance that the


dismissal of the complaint for nonappearance of plaintiff at
the pre-trial, upon motion of the defendants, carried with it
the dismissal of their compulsory counterclaim.47 The Court
reiterated the rule that "a compulsory counterclaim cannot
remain pending for independent adjudication by the court
as it is auxiliary to the proceeding in the original suit and
merely derives its jurisdictional support therefrom." 48
Express reliance was made on Metals, International
Container, and even Dalman in support of the majoritys
thesis. BA Finance likewise advised that the proper remedy
for defendants desirous that their counterclaims not be
dismissed along with the main complaint was for them to
move to declare the plaintiffs to be "non-suited" on their
complaint and "as in default" on their compulsory
counterclaim, instead of moving for the dismissal of the
complaint.49
Justice Regalado, joined by Chief Justice Narvasa,
registered a strong objection to the theory of the majority.
They agreed that the trial court could no longer hear the
counterclaim, but only on the ground that defendants
motion to be allowed to present evidence on the
counterclaim was filed after the order dismissing the
complaint had already become final. They disagreed
however that the compulsory counterclaim was necessarily
dismissed along with the main complaint, pointing out that a
situation wherein the dismissal of the complaint was
occasioned by plaintiffs failure to appear during pre-trial
was governed under Section 3, Rule 17, and not Section 2
of the same rule. Justice Regalado, who ironically penned
the decision in Metals cited by the majority, explained:
Turning back to Rule 17, it is readily apparent that Sections
2 and 3 thereof envisage different factual and adjective
situations. The dismissal of the complaint under Section 2 is
at the instance of plaintiff, for whatever reason he is minded
to move for such dismissal, and, as a matter of procedure,
is without prejudice unless otherwise stated in the order of
the court or, for that matter, in plaintiff's motion to dismiss
his own complaint. By reason thereof, to curb any dubious
or frivolous strategy of plaintiff for his benefit or to obviate
possible prejudice to defendant, the former may not dismiss
his complaint over the defendant's objection if the latter has
a compulsory counterclaim since said counterclaim would
necessarily be divested of juridical basis and defendant
would be deprived of possible recovery thereon in that
same judicial proceeding.
Section 3, on the other hand, contemplates a dismissal not
procured by plaintiff, albeit justified by causes imputable to
him and which, in the present case, was petitioner's failure
to appear at the pre-trial. This situation is also covered by
Section 3, as extended by judicial interpretation, and is
ordered upon motion of defendant or motu proprio by the
court. Here, the issue of whether defendant has a pending
counterclaim, permissive or compulsory, is not of
determinative significance. The dismissal of plaintiff's
complaint is evidently a confirmation of the failure of
evidence to prove his cause of action outlined therein,
hence the dismissal is considered, as a matter of evidence,
an adjudication on the merits. This does not, however,
mean that there is likewise such absence of evidence to

prove defendant's counterclaim although the same arises


out of the subject matter of the complaint which was merely
terminated for lack of proof. To hold otherwise would not
only work injustice to defendant but would be reading a
further provision into Section 3 and wresting a meaning
therefrom although neither exists even by mere implication.
Thus understood, the complaint can accordingly be
dismissed, but relief can nevertheless be granted as a
matter of course to defendant on his counterclaim as
alleged and proved, with or without any reservation therefor
on his part, unless from his conduct, express or implied, he
has virtually consented to the concomitant dismissal of his
counterclaim.50
Justice Regalado also adverted to Sta. Maria and noted
that the objections raised and rejected by the Court therein
were the same as those now relied upon by the plaintiff. He
pointed out that Dalman and International Container, both
relied upon by the majority, involved the application of
Section 2, Rule 17 and not Section 3, which he insisted as
the applicable provision in the case at bar.51
The partial dissent of Justice Regalado in BA Finance
proved opportune, as he happened then to be a member of
the Rules of Court Revision Committee tasked with the
revision of the 1964 Rules of Court. Just a few months after
BA Finance was decided, Justice Regalado proposed
before the Committee an amendment to Section 3, Rule 17
that would explicitly provide that the dismissal of the
complaint due to the fault of the plaintiff shall be "without
prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action." The
amendment, which was approved by the Committee, is
reflected in the minutes of the meeting of the Committee
held on 12 October 1993:
[Justice Regalado] then proposed that after the words
"upon the courts own motion" in the 6th line of the draft in
Sec. 3 of Rule 17, the following provision be inserted:
"without prejudice to the right of the defendant to prosecute
his counterclaim in the same or in a separate action." The
Committee agreed with the proposed amendment of Justice
Regalado.
Justice Herrera observed that under Secs. 1 to 3 of Rule
17, it is not the action that is dismissed but the complaint.
He asked whether there is any distinction between
"complaint" and "action." Justice Regalado opined that the
action of the plaintiff is initiated by his complaint.
Justice Feria then suggested that the dismissal be limited to
the complaint[.] Thus, in the 1st line of Sec. 1, the words
"An action" will be changed to "a complaint"; in the 2nd line
of Sec. 2, the words "an action" will be changed to "a
complaint" and in Sec. 3, the word "action" on the 5th line of
the draft will be changed to "complaint." The Committee
agreed with Justice Ferias suggested amendments.
CA Pao believed that there is a need to clarify the
counterclaim that the defendant will prosecute, whether it is
permissive or compulsory or all kinds of counterclaims.

72

Justice Regalado opined that there is no need of making a


clarification because it is already understood that it covers
both counterclaims.52
It is apparent from these minutes that the survival of the
counterclaim despite the dismissal of the complaint under
Section 3 stood irrespective of whether the counterclaim
was permissive or compulsory. Moreover, when the Court
itself approved the revisions now contained in the 1997
Rules of Civil Procedure, not only did Justice Regalados
amendment to Section 3, Rule 17 remain intact, but the
final version likewise eliminated the qualification formerly
offered under Section 2 on "counterclaims that can remain
pending for independent adjudication by the court." 53 At
present, even Section 2, concerning dismissals on motion
of the plaintiff, now recognizes the right of the defendant to
prosecute the counterclaim either in the same or separate
action notwithstanding the dismissal of the complaint, and
without regard as to the permissive or compulsory nature of
the counterclaim.
In his commentaries on the 1997 Rules of Civil Procedure,
Justice Regalado expounds on the effects of the
amendments to Section 2 and 3 of Rule 17:
2. Under this revised section [2], where the plaintiff moves
for the dismissal of his complaint to which a counterclaim
has been interposed, the dismissal shall be limited to the
complaint. Such dismissal shall be without prejudice to the
right of the defendant to either prosecute his counterclaim
in a separate action or to have the same resolved in the
same action. Should he opt for the first alternative, the court
should render the corresponding order granting and
reserving his right to prosecute his claim in a separate
complaint. Should he choose to have his counterclaim
disposed of in the same action wherein the complaint had
been dismissed, he must manifest such preference to the
trial court within 15 days from notice to him of plaintiffs
motion to dismiss. These alternative remedies of the
defendant are available to him regardless of whether his
counterclaim is compulsory or permissive. A similar
alternative procedure, with the same underlying reason
therefor, is adopted in Sec. 6, Rule 16 and Sec. 3 of this
Rule, wherein the complaint is dismissed on the motion of
the defendant or, in the latter instance, also by the court
motu proprio.
xxxx

the authors separate opinion in that case, even before they


were clarified by the present amendments x x x.54
Similarly, Justice Feria notes that "the present rule reaffirms
the right of the defendant to move for the dismissal of the
complaint and to prosecute his counterclaim, as stated in
the separate opinion [of Justice Regalado in BA Finance.]"55
Retired Court of Appeals Justice Herrera pronounces that
the amendment to Section 3, Rule 17 settles that "nagging
question" whether the dismissal of the complaint carries
with it the dismissal of the counterclaim, and opines that by
reason of the amendments, the rulings in Metals
Engineering, International Container, and BA Finance "may
be deemed abandoned."56 On the effect of amendment to
Section 3, Rule 17, the commentators are in general
agreement,57 although there is less unanimity of views
insofar as Section 2, Rule 17 is concerned.58
To be certain, when the Court promulgated the 1997 Rules
of Civil Procedure, including the amended Rule 17, those
previous jural doctrines that were inconsistent with the new
rules incorporated in the 1997 Rules of Civil Procedure
were implicitly abandoned insofar as incidents arising after
the effectivity of the new procedural rules on 1 July 1997.
BA Finance, or even the doctrine that a counterclaim may
be necessarily dismissed along with the complaint, clearly
conflicts with the 1997 Rules of Civil Procedure. The
abandonment of BA Finance as doctrine extends as far
back as 1997, when the Court adopted the new Rules of
Civil Procedure. If, since then, such abandonment has not
been affirmed in jurisprudence, it is only because no proper
case has arisen that would warrant express confirmation of
the new rule. That opportunity is here and now, and we thus
rule that the dismissal of a complaint due to fault of the
plaintiff is without prejudice to the right of the defendant to
prosecute any pending counterclaims of whatever nature in
the same or separate action. We confirm that BA Finance
and all previous rulings of the Court that are inconsistent
with this present holding are now abandoned.
Accordingly, the RTC clearly erred when it ordered the
dismissal of the counterclaim, since Section 3, Rule 17
mandates that the dismissal of the complaint is without
prejudice to the right of the defendant to prosecute the
counterclaim in the same or separate action. If the RTC
were to dismiss the counterclaim, it should be on the merits
of such counterclaim. Reversal of the RTC is in order, and a
remand is necessary for trial on the merits of the
counterclaim.

2. The second substantial amendment to [Section 3] is with


respect to the disposition of the defendants counterclaim in
the event the plaintiffs complaint is dismissed. As already
observed, he is here granted the choice to prosecute that
counterclaim in either the same or a separate action. x x x x

It would be perfectly satisfactory for the Court to leave this


matter at that. Still, an explanation of the reason behind the
new rule is called for, considering that the rationale behind
the previous rule was frequently elaborated upon.

3. With the aforestated amendments in Secs. 2 and 3 laying


down specific rules on the disposition of counterclaims
involved in the dismissal actions, the controversial doctrine
in BA Finance Corporation vs. Co, et al., (G.R. No. 105751,
June 30, 1993) has been abandoned, together with the
apparent confusion on the proper application of said Secs.
2 and 3. Said sections were distinguished and discussed in

Under Act No. 190, or the Code of Procedure in Civil


Actions promulgated in 1901, it was recognized in Section
127(1) that the plaintiff had the right to seek the dismissal of
the complaint at any time before trial, "provided a
counterclaim has not been made, or affirmative relief sought
by the cross-complaint or answer of the defendant." 59 Note
that no qualification was made then as to the nature of the
counterclaim, whether it be compulsory or permissive. The

73

protection of the defendants right to prosecute the


counterclaim was indeed unqualified. In City of Manila,
decided in 1918, the Court explained:
By paragraph 1 [of Section 127], it will be seen that, where
the defendant has interposed a counterclaim, or is seeking
affirmative relief by a cross-complaint, that then, and in that
case, the plaintiff cannot dismiss the action so as to affect
the right of the defendant in his counterclaim or prayer for
affirmative relief. The reason for that exception is clear.
When the answer sets up an independent action against
the plaintiff, it then becomes an action by the defendant
against the plaintiff, and, of course, the plaintiff has no right
to ask for a dismissal of the defendants action.60
Nonetheless, a new rule was introduced when Act No. 190
was replaced by the 1940 Rules of Court. Section 2, Rule
30 of the 1940 Rules specified that if a counterclaim is
pleaded by a defendant prior to the service of the plaintiffs
motion to dismiss, the action shall not be dismissed against
the defendants objection unless the counterclaim can
remain pending for independent adjudication by the court.
This qualification remained intact when the 1964 Rules of
Court was introduced.61 The rule referred only to
compulsory counterclaims, or counterclaims which arise out
of or are necessarily connected with the transaction or
occurrence that is the subject matter of the plaintiffs claim,
since the rights of the parties arising out of the same
transaction should be settled at the same time. 62 As was
evident in Metals, International Container and BA Finance,
the rule was eventually extended to instances wherein it
was the defendant with the pending counterclaim, and not
the plaintiff, that moved for the dismissal of the complaint.
We should not ignore the theoretical bases of the rule
distinguishing compulsory counterclaims from permissive
counterclaims insofar as the dismissal of the action is
concerned. There is a particular school of thought that
informs the broad proposition in Dalman that "if the civil
case is dismissed, so also is the counterclaim filed
therein,"63 or the more nuanced discussions offered in
Metals, International Container, and BA Finance. The most
potent statement of the theory may be found in Metals,64
which proceeds from the following fundamental premises
a compulsory counterclaim must be set up in the same
proceeding or would otherwise be abated or barred in a
separate or subsequent litigation on the ground of auter
action pendant, litis pendentia or res judicata; a compulsory
counterclaim is auxiliary to the main suit and derives its
jurisdictional support therefrom as it arises out of or is
necessarily connected with the transaction or occurrence
that is the subject matter of the complaint; 65 and that if the
court dismisses the complaint on the ground of lack of
jurisdiction, the compulsory counterclaim must also be
dismissed as it is merely ancilliary to the main action and no
jurisdiction remained for any grant of relief under the
counterclaim.
The first point is derived from Section 4, Rule 9, of the 1964
Rules of Court, while the two latter points are sourced from
American jurisprudence. There is no disputing the
theoretical viability of these three points. In fact, the
requirement that the compulsory counterclaim must be set

up in the same proceeding remains extant under the 1997


Rules of Civil Procedure.66 At the same time, other
considerations rooted in actual practice provide a
counterbalance to the above-cited rationales.
Whatever the nature of the counterclaim, it bears the same
integral characteristics as a complaint; namely a cause (or
causes) of action constituting an act or omission by which a
party violates the right of another. The main difference lies
in that the cause of action in the counterclaim is maintained
by the defendant against the plaintiff, while the converse
holds true with the complaint. Yet, as with a complaint, a
counterclaim without a cause of action cannot survive.
It would then seemingly follow that if the dismissal of the
complaint somehow eliminates the cause(s) of the
counterclaim, then the counterclaim cannot survive. Yet that
hardly is the case, especially as a general rule. More often
than not, the allegations that form the counterclaim are
rooted in an act or omission of the plaintiff other than the
plaintiffs very act of filing the complaint. Moreover, such
acts or omissions imputed to the plaintiff are often claimed
to have occurred prior to the filing of the complaint itself.
The only apparent exception to this circumstance is if it is
alleged in the counterclaim that the very act of the plaintiff in
filing the complaint precisely causes the violation of the
defendants rights. Yet even in such an instance, it remains
debatable whether the dismissal or withdrawal of the
complaint is sufficient to obviate the pending cause of
action maintained by the defendant against the plaintiff. 67
These considerations persist whether the counterclaim in
question is permissive or compulsory. A compulsory
counterclaim arises out of or is connected with the
transaction or occurrence constituting the subject matter of
the opposing partys claim, does not require for its
adjudication the presence of third parties, and stands within
the jurisdiction of the court both as to the amount involved
and the nature of the claim.68 The fact that the culpable acts
on which the counterclaim is based are founded within the
same transaction or occurrence as the complaint, is
insufficient causation to negate the counterclaim together
with the complaint. The dismissal or withdrawal of the
complaint does not traverse the boundaries of time to undo
the act or omission of the plaintiff against the defendant, or
vice versa. While such dismissal or withdrawal precludes
the pursuit of litigation
by the plaintiff, either through his/her own initiative or fault, it
would be iniquitous to similarly encumber the defendant
who maintained no such initiative or fault. If the defendant
similarly moves for the dismissal of the counterclaim or
neglects to timely pursue such action, let the dismissal of
the counterclaim be premised on those grounds imputable
to the defendant, and not on the actuations of the plaintiff.
The other considerations supplied in Metals are anchored
on the premise that the jurisdictional foundation of the
counterclaim is the complaint itself. The theory is correct,
but there are other facets to this subject that should be
taken into account as well. On the established premise that
a counterclaim involves separate causes of action than the
complaint even if derived from the same transaction or

74

series of transactions, the counterclaim could have very


well been lodged as a complaint had the defendant filed the
action ahead of the complainant. 69 The terms "ancillary" or
"auxiliary" may mislead in signifying that a complaint
innately possesses more credence than a counterclaim, yet
there are many instances wherein the complaint is trivial but
the counterclaim is meritorious. In truth, the notion that a
counterclaim is, or better still, appears to be merely
"ancillary" or "auxiliary" is chiefly the offshoot of an accident
of chronology, more than anything else.
The formalistic distinction between a complaint and a
counterclaim does not detract from the fact that both of
them embody causes of action that have in their end the
vindication of rights. While the distinction is necessary as a
means to facilitate order and clarity in the rules of
procedure, it should be remembered that the primordial
purpose of procedural rules is to provide the means for the
vindication of rights. A party with a valid cause of action
against another party cannot be denied the right to relief
simply because the opposing side had the good fortune of
filing the case first. Yet this in effect was what had
happened under the previous procedural rule and
correspondent doctrine, which under their final permutation,
prescribed the automatic dismissal of the compulsory
counterclaim upon the dismissal of the complaint, whether
upon the initiative of the plaintiff or of the defendant.
Thus, the present rule embodied in Sections 2 and 3 of
Rule 17 ordains a more equitable disposition of the
counterclaims by ensuring that any judgment thereon is
based on the merit of the counterclaim itself and not on the
survival of the main complaint. Certainly, if the counterclaim
is palpably without merit or suffers jurisdictional flaws which
stand independent of the complaint, the trial court is not
precluded from dismissing it under the amended rules,
provided that the judgment or order dismissing the
counterclaim is premised on those defects. At the same
time, if the counterclaim is justified, the amended rules now
unequivocally protect such counterclaim from peremptory
dismissal by reason of the dismissal of the complaint.
WHEREFORE, the petition is GRANTED. The Orders dated
9 August 2005 and 10 October 2005 of Branch 29, Regional
Trial Court of San Miguel, Zamboanga del Sur in Civil Case
No. 98-012 are SET ASIDE. Petitioners counterclaim as
defendant in Civil Case. No. 98-012 is REINSTATED. The
Regional Trial Court is ORDERED to hear and decide the
counterclaim with deliberate dispatch.
SO ORDERED.

75

Instead, on April 9, 1987, Financial Building filed in the


Regional Trial Court of Makati, Metro Manila, a Complaint 7
for Injunction and Damages with a prayer for Preliminary
Injunction against Forbes Park docketed as Civil Case No.
16540. The latter, in turn, filed a Motion to Dismiss on the
ground that Financial Building had no cause of action
because it was not the real party-in-interest.
G.R. No. 133119

August 17, 2000


On April 28, 1987, the trial court issued a writ of preliminary
injunction against Forbes Park but the Court of Appeals
nullified it and dismissed the complaint in Civil Case No.
16540 altogether. We affirmed the said dismissal in our
Resolution,8 promulgated on April 6, 1988, in G.R. No.
79319 entitled "Financial Building Corporation, et al. vs.
Forbes Park Association, et al."

FINANCIAL BUILDING CORPORATION, petitioner,


vs.
FORBES PARK ASSOCIATION, INC., respondent.
DECISION
DE LEON, JR., J.:
1

Before us is petition for review on certiorari of the Decision


dated March 20, 1998 of the Court of Appeals 2 in CA-GR
CV No. 48194 entitled "Forbes Park Association, Inc. vs.
Financial Building Corporation", finding Financial Building
Corporation (hereafter, Financial Building) liable for
damages in favor of Forbes Park Association, Inc.
(hereafter, Forbes Park), for violating the latters deed of
restrictions on the construction of buildings within the
Forbes Park Village, Makati.
The pertinent facts are as follows:

The then Union of Soviet Socialist Republic (hereafter,


USSR) was the owner of a 4,223 square meter residential
lot located at No. 10, Narra Place, Forbes Park Village in
Makati City. On December 2, 1985, the USSR engaged the
services of Financial Building for the construction of a multilevel office and staff apartment building at the said lot,
which would be used by the Trade Representative of the
USSR.3 Due to the USSRs representation that it would be
building a residence for its Trade Representative, Forbes
Park authorized its construction and work began shortly
thereafter.
On June 30, 1986, Forbes Park reminded the USSR of
existing regulations4 authorizing only the construction of a
single-family residential building in each lot within the
village. It also elicited a reassurance from the USSR that
such restriction has been complied with. 5 Promptly, the
USSR gave its assurance that it has been complying with
all regulations of Forbes Park.6 Despite this, Financial
Building submitted to the Makati City Government a second
building plan for the construction of a multi-level apartment
building, which was different from the first plan for the
construction of a residential building submitted to Forbes
Park.
Forbes Park discovered the second plan and subsequent
ocular inspection of the USSRs subject lot confirmed the
violation of the deed of restrictions. Thus, it enjoined further
construction work. On March 27, 1987, Forbes Park
suspended all permits of entry for the personnel and
materials of Financial Building in the said construction site.
The parties attempted to meet to settle their differences but
it did not push through.

After Financial Buildings case, G.R. No. 79319, was


terminated with finality, Forbes Park sought to vindicate its
rights by filing on October 27, 1989 with the Regional Trial
Court of Makati a Complaint9 for Damages, against
Financial Building, docketed as Civil Case No. 89-5522,
arising from the violation of its rules and regulations. The
damages claimed are in the following amounts: (a)
P3,000,000.00 as actual damages; (b) P1,000,000.00 as
moral damages; (c) P1,000,000.00 as exemplary damages;
and (d) P1,000,000.00 as attorneys fees. 10 On September
26, 1994, the trial court rendered its Decision 11 in Civil Case
No. 89-5522 in favor of Forbes Park and against Financial
Building, the dispositive portion of which reads, to wit:
"WHEREFORE, in view of the foregoing, the Court hereby
renders judgment in favor of the plaintiff and against the
defendant:
(1) Ordering the defendant to remove/demolish the
illegal structures within three (3) months from the
time this judgment becomes final and executory,
and in case of failure of the defendant to do so, the
plaintiff is authorized to demolish/remove the
structures at the expense of the defendant;
(2) Ordering the defendant to pay damages, to wit:
(a) P3,000,000.00 as actual damages by
way of demolition expenses;
(b) P1,000,000.00 as exemplary damages;
(c) P500,000.00 as attorneys fees;
(d) the costs of suit.
SO ORDERED."
Financial Building appealed the said Decision of the trial
court in Civil Case No. 89-5522 by way of a petition for
review on certiorari12 entitled "Financial Building
Corporation vs. Forbes Park Association, Inc." to the Court
of Appeals and docketed therein as CA-GR CV No. 48194.
However, the Court of Appeals affirmed it in its Decision 13

76

dated March 20, 1998, the dispositive portion of which


reads:
"WHEREFORE, the Decision dated September 26, 1994 of
the Regional Trial Court of Makati is AFFIRMED with the
modification that the award of exemplary damages, as well
as attorneys fees, is reduced to fifty thousand pesos
(P50,000.00) each."
Hence, this petition, wherein Financial Building assigns the
following errors:
I. "THE COURT OF APPEALS GRAVELY ERRED
IN NOT DISMISSING THE COMPLAINT FILED BY
RESPONDENT FPA DESPITE THE FACT THAT
ITS ALLEGED CLAIMS AND CAUSES OF
ACTION THEREIN ARE BARRED BY PRIOR
JUDGMENT AND/OR ARE DEEMED WAIVED
FOR ITS FAILURE TO INTERPOSE THE SAME
AS COMPULSORY COUNTERCLAIMS IN CIVIL
CASE NO. 16540;
II. THE COURT OF APPEALS GRAVELY ERRED
IN NOT DISMISSING THE COMPLAINT FILED BY
RESPONDENT FPA AGAINST PETITIONER FBC
SINCE RESPONDENT FPA HAS NO CAUSE OF
ACTION AGAINST PETITIONER FBC;
III. THE COURT OF APPEALS GRAVELY ERRED
IN AWARDING DAMAGES IN FAVOR OF
RESPONDENT FPA DESPITE THE FACT THAT
ON THE BASIS OF THE EVIDENCE ON
RECORD, RESPONDENT FPA IS NOT ENTITLED
THERETO AND PETITIONER FBC IS NOT
LIABLE THEREFOR;
IV. THE COURT OF APPEALS ERRED IN
ORDERING THE DEMOLITION OF THE ILLEGAL
STRUCTURES LOCATED AT NO. 10 NARRA
PLACE,
FORBES
PARK,
MAKATI
CITY,
CONSIDERING THAT THE SAME ARE LOCATED
ON DIPLOMATIC PREMISES"14

same suit involving the same transaction or occurrence,


which gave rise to it.17 To determine whether a counterclaim
is compulsory or not, we have devised the following tests:
(1) Are the issues of fact or law raised by the claim and the
counterclaim largely the same? (2) Would res judicata bar a
subsequent suit on defendants claim absent the
compulsory counterclaim rule? (3) Will substantially the
same evidence support or refute plaintiffs claim as well as
the defendants counterclaim? and (4) Is there any logical
relation between the claim and the counterclaim?
Affirmative answers to the above queries indicate the
existence of a compulsory counterclaim.18
Undoubtedly, the prior Civil Case No. 16540 and the instant
case arose from the same occurrence the construction
work done by Financial Building on the USSRs lot in
Forbes Park Village. The issues of fact and law in both
cases are identical. The factual issue is whether the
structures erected by Financial Building violate Forbes
Parks rules and regulations, whereas the legal issue is
whether Financial Building, as an independent contractor
working for the USSR, could be enjoined from continuing
with the construction and be held liable for damages if it is
found to have violated Forbes Parks rules.
As a result of the controversy, Financial Building seized the
initiative by filing the prior injunction case, which was
anchored on the contention that Forbes Parks prohibition
on the construction work in the subject premises was
improper. The instant case on the other hand was initiated
by Forbes Park to compel Financial Building to remove the
same structures it has erected in the same premises
involved in the prior case and to claim damages for
undertaking the said construction. Thus, the logical relation
between the two cases is patent and it is obvious that
substantially the same evidence is involved in the said
cases.
Moreover, the two cases involve the same parties. The
aggregate amount of the claims in the instant case is within
the jurisdiction of the regional trial court, had it been set up
as a counterclaim in Civil Case No. 16540. Therefore,
Forbes Parks claims in the instant case should have been
filed as a counterclaim in Civil Case No. 16540.

We grant the petition.


First. The instant case is barred due to Forbes Parks failure
to set it up as a compulsory counterclaim in Civil Case No.
16540, the prior injunction suit initiated by Financial Building
against Forbes Park.
A compulsory counterclaim is one which arises out of or is
necessarily connected with the transaction or occurrence
that is the subject matter of the opposing partys claim. 15 If it
is within the jurisdiction of the court and it does not require
for its adjudication the presence of third parties over whom
the court cannot acquire jurisdiction, such compulsory
counterclaim is barred if it is not set up in the action filed by
the opposing party.16
Thus, a compulsory counterclaim cannot be the subject of a
separate action but it should instead be asserted in the

Second. Since Forbes Park filed a motion to dismiss in Civil


Case No. 16540, its existing compulsory counterclaim at
that time is now barred.
A compulsory counterclaim is auxiliary to the proceeding in
the original suit and derives its jurisdictional support
therefrom.19 A counterclaim presupposes the existence of a
claim against the party filing the counterclaim. Hence,
where there is no claim against the counterclaimant, the
counterclaim is improper and it must dismissed, more so
where the complaint is dismissed at the instance of the
counterclaimant.20 In other words, if the dismissal of the
main action results in the dismissal of the counterclaim
already filed, it stands to reason that the filing of a motion to
dismiss the complaint is an implied waiver of the
compulsory counterclaim because the grant of the motion
ultimately results in the dismissal of the counterclaim.

77

Thus, the filing of a motion to dismiss and the setting up of


a
compulsory
counterclaim
are
incompatible
remedies.1wphi1 In the event that a defending party has a
ground for dismissal and a compulsory counterclaim at the
same time, he must choose only one remedy. If he decides
to file a motion to dismiss, he will lose his compulsory
counterclaim. But if he opts to set up his compulsory
counterclaim, he may still plead his ground for dismissal as
an affirmative defense in his answer.21 The latter option is
obviously more favorable to the defendant although such
fact was lost on Forbes Park.
The ground for dismissal invoked by Forbes Park in Civil
Case No. 16540 was lack of cause of action. There was no
need to plead such ground in a motion to dismiss or in the
answer since the same was not deemed waived if it was not
pleaded.22 Nonetheless, Forbes Park still filed a motion to
dismiss and thus exercised bad judgment in its choice of
remedies. Thus, it has no one to blame but itself for the
consequent loss of its counterclaim as a result of such
choice.
Inasmuch as the action for damages filed by Forbes Park
should be as it is hereby dismissed for being barred by the
prior judgment in G.R. No. 79319 (supra) and/or deemed
waived by Forbes Park to interpose the same under the rule
on compulsory counterclaims, there is no need to discuss
the other issues raised by the herein petitioner.
WHEREFORE, the instant petition is hereby GRANTED
and the Decision dated March 20, 1998 of the Court of
Appeals in CA-G.R. CV No. 48194 is hereby REVERSED
and SET ASIDE.
Costs against respondent Forbes Park Association, Inc. .
SO ORDERED.

78

price, are uncertain and imperfect as they


are subject to the following:
a) Defendant's obligation
to pay one half (1/2) of
the total consideration is
conditioned and depends
exclusively on the ability
of the plaintiff to "look for
a place to transfer its
offices and plants from
the land subject hereof
within
One
hundred
twenty days" but should
plaintiff "fail to locate a
place to transfer its
offices and plants from
the land subject hereof
within the said one
hundred and twenty days
"the agreement is merely
subject to an "extension"
upon
terms
and
conditions
to
be
determined and agreed
upon separately and
subsequently; and

G.R. No. 95631 October 28, 1991


METALS ENGINEERING RESOURCES CORPORATION,
petitioner,
vs.
COURT OF APPEALS and PLARIDEL JOSE, respondents.
King, Capuchino, Tan & Associates for petitioner.
Fortunato M. Lira for private respondent.

REGALADO, J.:p
Impugned in this petition for review on certiorari is the
decision of respondent Court of Appeals, dated August 9,
1990, 1 dismissing the special civil action for certiorari and
prohibition filed therein by petitioner corporation.
The appeal herein arose from Civil Case No. 55560 filed by
petitioner corporation against private respondent Plaridel
Jose, for the annulment of an agreement to buy and sell
executed between the parties, before the Regional Trial
Court of Pasig, Branch 160, the complaint 2 alleging, inter
alia, that:

b) The payment of the


remaining fifty percent
(50%) thereof SHALL BE
THE SUBJECT OF A
(ANOTHER) SEPARATE
AGREEMENT
to
be
made
between
the
parties together with the
execution of a Deed of
Absolute Sale.

xxx xxx xxx


2. On October 31, 1987, plaintiff and
defendant executed a document which
was denominated as an "Agreement to
Buy and Sell" in which plaintiff offered to
sell to the defendant and the latter in turn
agreed to buy several parcels of land with
an aggregate area of 6,135 sq. m. . . .
xxx xxx xxx
4. The "Agreement to Buy and Sell", oil its
face, is patently and plainly imperfect and
incomplete as there was and could have
been no meeting of the minds of the
parties in regard to the manner, period and
terms of payment of the purchase price or
consideration which is undeniably an
essential element of the contract.
Consequently, the subject "Agreement",
not having been perfected and completed,
did not contemplate nor did it result to a
binding and enforceable contract to sell. In
fact, as stipulated in paragraphs 3 and 4 of
said "agreement", the terms of sale,
including the payment of the purchase

5. Despite the fact that the subject


"agreement" had not yet been perfected
and completed, defendant prematurely
caused the preparation of a subdivision
plan of the lands into several sub-lots and
offered the same for sale to the public
through an advertisement published in the
issue of the "Manila Bulletin" on November
25, 1987 . . .
6. Thus, on December 24, 1987, plaintiff
wrote a letter to defendant rescinding
and/or withdrawing from the uncompleted
and imperfect "Agreement" and tendered a
check for the amount of P50,000.00
representing full refund of the earnest
money previously delivered by defendant
pursuant to paragraph 2 of said agreement
but defendant refused to accept the same.
xxx xxx xxx

79

8. The refusal of defendant to acnowledge


the imperfection and non-completion of the
"Agreement" and to accept the refund
P50.000.00 as well as his acts of offering
the land for sale to third person and his
annotation of adverse claims in the title
covering the lands are unjustifiable and
great damage and prejudice to plaintiff.
xxx xxx xxx
Private respondent filed his Answer with Counterclaim 3
alleging a compulsory counterclaim on the following
operative facts:
12. Defendant had already spent a
considerable amount for the subdivision of
the subject properties into smaller parcels
of land for resale to a group of buyers, for
the
advertisements
and
promotion
necessary thereto, and other related
expenses;
13. One of the pertinent provisions of the
AGREEMENT (Annex "A") is the schedule
of payments to be paid by the defendant
which provides as follows:
3. Within one hundred
and twenty (120) days
from the execution of this
agreement, the VENDOR
shall look for a place to
transfer its offices and
plant from the land
subject hereof. And once
a place to transfer is
found, the VENDOR shall
inform the VENDEE of
the same. Within fifteen
(15) days from such
notice of the VENDOR to
the VENDEE, the latter
shall immediately pay,
without need of demand
and further notice, to the
former one-half (1/2) of
the total purchase price
of the land . . .
Due to the adamant and unreasonable
posture of the plaintiff, defendant's
timetable to generate funds and profits
was severely stalled and placed at a
standstill to the damage and prejudice of
his investment and financial projection,
which can only be rectified or
compensated by way of tacking into, and
thus extending the agreed period to pay
the said-one-half (1/2) of the purchase
price, the length of time from plaintiffs
notice to rescind (Annex "1") until

defendant complies with its part of the


AGREEMENT (Annex "A") whether
voluntarily, by compromise, or by judicial
compulsion;
14. Defendant suffered further due to the
fact that his reputation has been tarnished
at the very least considering that he could
not pursue his legal and business
commitment with those who have already
transacted with him over the subject
parcels of land;
15. By reason of the present unfounded
and malicious action filed by the plaintiff,
defendant suffered sleepless nights,
serious anxieties, embarrassment and
similar injuries due to the indefensible and
destructive posture of the plaintiff for which
he should be awarded P300,000.00 at
least in moral damages;
16. Due to the patent, wanton and gross
bad faith displayed by the plaintiff in its
dealings with the defendant, the latter
should be awarded at least P100,000.00 in
exemplary damages likewise to be
assessed against the plaintiff;
17. By reason of the present suit,
defendant was furthermore forced to hire
the services of counsel to protect his rights
and interest under the premises, in the
amount of P100,000.00 as and for
attorney's fees aside from the expenses
and cost of litigation which shall be proved
at the trial hereof.
WHEREFORE, it is respectfully prayed
that judgment be rendered in favor of the
defendant dismissing the Complaint and
declaring the AGREEMENT (Annex "AComplaint") with the defendant valid for all
legal intents and purposes and ordering
the plaintiff to honor its provisions except
the term or period of payment of the first
one-half (1/2) of the purchase price, which
should be extended by tacking into the 15day period the length of time mentioned
under paragraph 13 hereof; and for the
damages, plaintiff be ordered to pay
defendant the following:
a) P300,000.00 in moral damages for the
bersmirched reputation, embarrassment,
anguish, anxieties, sleepless nights, and
similar injuries suffered by the defendant
due to the gross and wanton bad faith of
the plaintiff;
b) P100,000.00 in exemplary damages so
that others who similarly inclined to do as

80

what the plaintiff did against the


defendant, should properly be forewarned
and deterred therefrom;
c) P100,000.00 as and for attorney's fees
plus the expenses of litigation proved at
the trial; and
d) Costs."
Before the case could be heard on pre-trial, private
respondent filed a Motion to Expunge the Complaint on the
ground that the same did not specify the amount of
damages sought either in the body or in the prayer of the
complaint, citing in support thereof the then ruling case of
Manchester Development Corporation, et al. vs. Court of
Appeals, et al. 4 and Administrative Circular No. 7 issued by
this Court on March 4, 1988.
In an Order dated December 15, 1988, the trial court
required petitioner to amend its complaint by specifying the
amount of damages prayed for, otherwise the original
complaint shall be dismissed. In compliance therewith,
petitioner filed its Amended Complaint specifying the
amount of damages it seeks to recover from private
respondent.
However, private respondent moved for the reconsideration
of the trial court's aforesaid order with respect to the portion
allowing petitioner to file an amended complaint, stating that
the court did not acquire jurisdiction when the wrong docket
fee was paid, hence the amendment of the complaint did
not vest jurisdiction upon the court; and that for all legal
intents and purposes, no original complaint was filed which
could be the subject of an amendment.
Acting thereon, on April 12, 1989, the trial court issued an
Order 5 granting the motion for reconsideration and
ordering that the complaint be expunged from the record on
the ground that it did not acquire jurisdiction over the case.
Private respondent then filed a Motion to Set Case for
Presentation of Evidence in support of his counterclaim. In
its Opposition, petitioner averred that since private
respondent's counterclaim is compulsory in nature because
it is necessarily connected with and arose out of the same
transaction subject of the complaint, with the dismissal of
petitioner's complaint the compulsory counterclaim can no
longer remain pending for independent adjudication; and
considering further that since petitioner had re-filed its
complaint against private respondent on May 3, 1989
before the Regional Trial Court of Pasig, Branch 168,
docketed therein as Civil Case No. 58126, then private
respondent could easily set up the same compulsory
counterclaim in said later case.
Thereafter, the court a quo issued an Order, 6 dated June
20, 1989, granting private respondent's motion to present
evidence and holding that "a) compulsory counterclaim is a
complaint in itself; that it is a complaint against the plaintiff;
that it is independent in character. It has to be set up in the
answer otherwise it will be waived or barred and it cannot

be invoked in another case, for it would be splitting a cause


of action which is not allowed under the rules." It added that
herein private respondent "correctly insisted that the
compulsory counterclaim should be prosecuted now,
otherwise he cannot invoke his claim in a separate
proceeding because he will be "barred by the dismissal" of
the instant case."
Petitioner filed a Motion for Reconsideration of said order
alleging that a compulsory counterclaim is essentially
ancillary to the main controversy and that, assuming that
private respondent's counterclaim can remain pending for
independent trial, the same would nevertheless be
dismissed for non-payment of any docket fees on the total
amount of the counterclaim. Private respondent filed his
Opposition at the same time attaching thereto a receipt for
the payment of docket fees. In reply, petitioner contended
that the belated payment of the docket fees for the
counterclaim does not have the effect of vesting the trial
court with jurisdiction over the counterclaim. The motion for
reconsideration was denied by the trial court in its Order 7
dated September 29, 1989.
From said order, petitioner filed a special civil action for and
certiorari prohibition with prayer for preliminary injunction
and/or temporary restraining order with respondent Court of
Appeals. Its contentions for the allowance thereof may be
capsulized as follows:
1. Respondent court acted without or in
excess of its jurisdiction and gravely
abused his discretion in granting
respondent Jose's motion to present
evidence on his compulsory counterclaim:
a. The dismissal of the complaint carries
with it the dismissal of the compulsory
counterclaim.
b. Even assuming that respondent Jose's
counterclaim may remain pending for
adjudication independently of the principal
complaint, it should still be dismissed for
failure on the part of respondent to pay
docket fees thereon.
2. Great or irreparable injury and injustice
would result to petitioner if respondent
Jose should be allowed to present
evidence ex parte on his counterclaim
pursuant to respondent court's order
September 29, 1989. 8
Respondent court, in its questioned decision, dismissed the
special civil action for certiorari, stating that since the order
is merely interlocutory in nature and that at most it is merely
an error of judgment, it cannot be corrected by certiorari,
thus:
It is obvious that no jurisdictional error is
involved in this case. If to allow the
respondent to present evidence in support

81

of his counterclaim is a mistake, it is at


most an error of judgment that is not
correctible by certiorari or prohibition.
Such an error can be corrected in an
appeal which may be taken from the
judgment to be rendered on the
counterclaim (Fernando vs. Vasquez, 31
SCRA 288).
Time and again, it has been said that the
function of certiorari and prohibition is to
keep an inferior court within the limits of its
jurisdiction (Enriquez vs. Rivera, 90 SCRA
641). These two extraordinary writs are
not intended to correct every error which
may be committed in the course of a trial.
Finally, the order sought to be annulled is
interlocutory in nature which again cannot
be corrected by certiorari (Perez vs.
Moneta Board, 20 SCRA 592; Layag vs.
Gerardo, 10 SCRA 837). 9
Its motion for reconsideration
petitioner filed the instant petition.

having

been

denied,

Petitioner avers that respondent Court of Appeals gravely


erred (1) in finding that no jurisdictional defect was
committed by the trial court in issuing the order date June
20, 1989 allowing respondent Jose to present evidence in
support of his compulsory counterclaim despite the
dismissal of the complaint; and (2) in holding that the order
of June 20, 1989 cannot be the basis of a petition for
certiorari and prohibition. 10
We find for petitioner.
Private respondent's asseveration that a compulsory
counterclaim is not deemed dismissed just because the
main complaint is dismissed by the court, and that the same
has to be pursued otherwise it will forever be barred on the
ground of res judicata, is at most specious and should be
struck down for lack of merit.
There is no dispute that private respondent's counterclaim
is compulsory in nature since (1) it arises out of, or is
necessarily connected with the transaction or occurrence
that is the subject matter of the opposing party's claim; 2) it
does not require for its adjudication the presence of third
parties over whom the court cannot acquire jurisdiction; and
3) the court has jurisdiction to entertain the claim. And the
rule is that a compulsory counterclaim not set up shall be
barred 11 if not raised on time and the party in error is
precluded from setting it up in a subsequent litigation on the
ground of res judicata, the theory being that what are
barred by prior judgment are not only the matters actually
raised and litigated upon, but also such matters as could
have been raised but were not. 12 In other words, a
compulsory counterclaim cannot be made the subject of a
separate action but should be asserted in the same suit
involving the same transaction or occurrence giving rise to
it. Where the counterclaim is made the subject of a

separate suit, it may be abated upon a plea of auter action


pendant or litis pendentia, and/or dismissed on the ground
of res judicata.13
However, such is not the situation obtaining in the present
action. In the petition before us, private respondent, in his
responsive pleading which is aptly titled "Answer with
Counterclaim," has properly raised a counterclaim against
herein petitioner's claim that the agreement to buy and sell
is imperfect and incomplete. Ironically, the insistence of
private respondent in proceeding with the trial of the case is
premised on the very existence of his counterclaim. Hence,
there can be no res judicata to speak of because a
counterclaim was correctly invoked against herein
petitioner's complaint. In fine, what private respondent is in
effect saying is that his counterclaim should be allowed to
proceed independently of the main action.
For all intents and purposes, such proposition runs counter
to the nature of a compulsory counterclaim in that it cannot
remain pending for independent adjudication by the court.
14 This is because a compulsory counterclaim is auxiliary to
the proceeding in the original suit 15 and derives its
jurisdictional support therefrom, 16 inasmuch as it arises
out of or is necessarily connected with the transaction or
occurrence that is the subject matter of the complaint. It
follows that if the court does not have jurisdiction to
entertain the main action of the case and dismisses the
same, then the compulsory counterclaim, being ancillary to
the principal controversy, must likewise be dismissed 17
since no jurisdiction remained for any grant of relief under
the counterclaim. 18
The aforementioned doctrine is in consonance with the
primary objective of a counterclaim which is to avoid and
prevent circuity of action by allowing the entire controversy
between the parties to be litigated and finally determined in
one action, wherever this can be done with entire justice to
all parties before the court. 19 The philosophy of the rule is
to discourage multiplicity of suits. 20 It will be observed that
the order of the trial court allowing herein private
respondent to proceed wit the presentation of his evidence
in support of the latter's counterclaim is repugnant to the
very purpose and intent of the rule on counterclaims.
Furthermore, it has been held that a counterclaim
presupposes the existence of a claim against the party filing
the counterclaim. Where there is no claim against the
counterclaimant, then the counterclaim is improper and
should be dismissed. 21 The complaint filed by herein
petitioner was dismissed on the ground of lack of
jurisdiction for non-payment of docket fees. By reason of
said dismissal, it is as if no claim was filed against herein
private respondent, hence the counterclaim has no leg to
stand on. In addition, it was at the instance of private
respondent that the complaint was dismissed. In the words
of Justice Abad Santos, "(private respondent) does not
object to the dismissal of the civil case but nonetheless
wants (his) counterclaim therein to subsist. Impossible. A
person cannot eat his cake and have it at the same time. If
the civil case is dismissed, so also is the counterclaim filed
therein." 22

82

American jurisprudence similarly rules that in an action


where defendant's answer set up a counterclaim, the court
was without authority to sever the causes of action by
dismissing the complaint and submitting the counterclaim to
the jury, although the order of dismissal purported to be
without prejudice to the merits of plaintiff's cause of action
upon another trial. 23 This is so because a severance for
trial of a claim or counterclaim may increase the possibility
of inconsistent verdicts and decrease the ability of the court
to resolve such inconsistencies without granting a re-trial in
one or both causes. 24
In the case before us, severing herein private respondent's
counterclaim to compel petitioner to honor the purchase
agreement executed between them, from petitioner's action
to declare null and void the same contract, may result in the
following outcomes:
1) If the same judgment would be rendered in Civil Case
No. 55560 (on the counterclaim) and Civil Case No. 58126
(on the main action which was re-filed) either for the validity
or nullification of the contract, then there would plausibly be
no problem.
2) However, should different and conflicting decisions be
handed down in the two cases, which is not an impossibility,
then this will only serve to complicate the issues that will
arise and the remedies that may be necessitated.
Verily, practical considerations of consistency and economy
likewise command a trial of the counterclaim jointly and
concurrently with the principal controversy. At any rate,
considering that petitioner has re-filed its complaint
involving the same cause of action which is now pending
before another branch of the court, there is nothing to
prevent private respondent from raising the same
counterclaim for adjudication in the subsequent action.

similar pleadings, which shall not be


considered filed until and unless the filing
fee prescribed therefor is paid. . . .
The rule, therefore is made to apply specifically to
permissive
counterclaims
only, thereby excluding
compulsory counterclaims from its purview. 26 This is
because there is no need to pay docketing fees for a
compulsory counterclaim. 27
Finally, we do not ascribe to respondent court's declaration
that the order of dismissal issued by the trial court is merely
interlocutory and, at most, an error of judgment which is not
correctible by certiorari and prohibition. As earlier stated,
the trial court acted without jurisdiction in proceeding with
the hearing on the counterclaim after it had dismissed the
complaint to which the counterclaim attached. It is precisely
to correct the lower court when in the course of proceedings
it acts without jurisdiction or in excess thereof or if the trial
judge otherwise acted with grave abuse of discretion that
the extraordinary writ of certiorari or prohibition is afforded
to parties as a relief. Such a relief is available even in
respect to interlocutory orders. 28
WHEREFORE, the decision appealed from is hereby
REVERSED and SET ASIDE, and judgment is hereby
rendered DISMISSING the compulsory counterclaim of
private respondent in Civil Case No. 55560, without
prejudice to the setting up of the same in Civil Case No.
58126, both of the Regional Trial Court of Pasig, Metro
Manila.
SO ORDERED

It is the submission of herein petitioner that assuming


arguendo that the counterclaim can proceed independently
of the main action, the court did not acquire jurisdiction
thereover for failure of private respondent to pay the
corresponding docket fees. Petitioner maintains that the
ruling in Manchester should likewise apply to compulsory
counterclaims. The argument is incorrect. The rules
regarding payment of docket fees have been summarized
in a subsequent case 25 as follows:
1. It is not simply the filing of the complaint
or appropriate initiatory pleading, but the
payment of the prescribed docket fee, that
vests a trial court with jurisdiction over the
subject matter or nature of the action.
Where the filing of the initiatory pleading is
not accompanied by payment of the
docket fee, the court may allow payment
of the fee within a reasonable time but in
no case beyond the applicable prescriptive
or reglementary period.
2. The same rule applies to permissive
counterclaims, third-party claims and

83

apply to compulsory counterclaims following the ruling in


Santo Tomas University Hospital v. Surla.3 On 4 June
1999, the trial court again reversed itself and recalled its
Order dismissing respondent's counterclaim.

G.R. No. 139018

April 11, 2005

ESTHERLITA
CRUZ-AGANA,
Petitioner,
vs.
HON. JUDGE AURORA SANTIAGO-LAGMAN (In her
capacity as Presiding Judge of Regional Trial Court, Branch
77, Malolos, Bulacan) and B. SERRANO ENTERPRISES,
INC., Respondents.
DECISION
CARPIO, J.:
The Case
This petition for certiorari1 seeks to reverse the Order of the
Regional Trial Court, Branch 77, Malolos, Bulacan ("trial
court"), dated 4 June 1999, recalling its previous Order
dated 25 May 1999 dismissing B. Serrano Enterprises,
Inc.'s ("respondent") counterclaim upon a motion to dismiss
filed by petitioner Estherlita Cruz-Agana ("petitioner").
Antecedent Facts
On 18 March 1996, petitioner filed a Complaint for
annulment of title with prayer for preliminary mandatory
injunction against respondent. Petitioner claims that as the
sole heir of one Teodorico Cruz, she is the sole owner of a
lot covered by Transfer Certificate of Title No. T-3907.
Petitioner further claims that the lot was fraudulently sold to
Eugenio Lopez, Jr. who later on transferred the lot to
respondent. The case was raffled to the Regional Trial
Court, Branch 77, Malolos, Bulacan presided by Judge
Aurora Santiago-Lagman and docketed as Civil Case No.
210-M-96.
Respondent seasonably filed its Answer with compulsory
counterclaim. Petitioner moved to dismiss respondent's
counterclaim for lack of a certificate of non-forum shopping.
In an Order dated 11 March 1999, the trial court denied
petitioner's motion to dismiss respondent's counterclaim.
The trial court reasoned that respondent's counterclaim is
compulsory and therefore excluded from the coverage of
Section 5, Rule 7 of the Rules of Court. Petitioner moved
that the trial court reconsider its Order invoking the
mandatory nature of a certificate of non-forum shopping
under Supreme Court Administrative Circular No. 04-94. 2
On 25 May 1999, the trial court reversed its 11 March 1999
Order and dismissed respondent's counterclaim for lack of
a certificate of non-forum shopping.
Respondent seasonably filed a motion for reconsideration
arguing that Administrative Circular No. 04-94 does not

Petitioner now comes before this Court through Rule 65 of


the 1997 Rules of Civil Procedure.
The Trial Court's Ruling
The trial court found that respondent's counterclaim is
compulsory in nature. The trial court ruled that the filing of a
compulsory counterclaim does not require a certificate of
non-forum shopping. On the effect of Santo Tomas on
Administrative Circular No. 04-94, the trial court explained:
It is settled rule that it is one of the inherent powers
of the court to amend and control its processes and
orders so as to make them conformable to law and
justice. This power includes the right to reverse
itself, specially when in its honest opinion, it has
committed an error or mistake in judgment, and
that to adhere to its decision will cause injustice to
a party litigant.
The Issue
Petitioner raises the following issue:
WHETHER THE TRIAL COURT COMMITTED
GRAVE ABUSE OF DISCRETION IN REFUSING
TO DISMISS RESPONDENT'S COUNTERCLAIM.
The Ruling of the Court
The petition lacks merit.
The issue presented is not novel. This Court has squarely
settled this issue in Santo Tomas University Hospital v.
Surla.3 Writing for the Court, Justice Jose C. Vitug began
his ponencia thus:
Can a compulsory counterclaim pleaded in an
Answer be dismissed on the ground of a failure to
accompany it with a certificate of non-forum
shopping? This question is the core issue
presented for resolution in the instant petition.
Santo Tomas clarified the scope of Administrative Circular
No. 04-94 with respect to counterclaims. The Court pointed
out that this circular is intended primarily to cover "an
initiatory pleading or an incipient application of a party
asserting a claim for relief." The distinction between a
compulsory and a permissive counterclaim is vital in the
application of the circular. The Court explained:
It should not be too difficult, the foregoing rationale
of the circular aptly taken, to sustain the view that
the circular in question has not, in fact, been
contemplated to include a kind of claim which, by

84

its very nature as being auxiliary to the


proceedings in the suit and as deriving its
substantive and jurisdictional support therefrom,
can only be appropriately pleaded in the answer
and not remain outstanding for independent
resolution except by the court where the main case
pends. Prescinding from the foregoing, the proviso
in the second paragraph of Section 5, Rule 8 of the
1997 Rules of Civil Procedure, i.e., that the
violation of the anti-forum shopping rule "shall not
be curable by mere amendment xxx but shall be
cause for the dismissal of the case without
prejudice," being predicated on the applicability of
the need for a certification against forum-shopping,
obviously does not include a claim which cannot be
independently set up.
The Court reiterated this ruling in Ponciano v. Judge
Parentela, Jr.4
Administrative Circular No. 04-94 does not apply to
compulsory counterclaims. The circular applies to initiatory
and similar pleadings. A compulsory counterclaim set up in
the answer is not an "initiatory" or similar pleading. The
initiatory pleading is the plaintiff's complaint. A respondent
has no choice but to raise a compulsory counterclaim the
moment the plaintiff files the complaint. Otherwise,
respondent waives the compulsory counterclaim.5 In short,
the compulsory counterclaim is a reaction or response,
mandatory upon pain of waiver, to an initiatory pleading
which is the complaint.
Petitioner argues, however, that the Court's rulings in Santo
Tomas and Ponciano are "contrary to the mandate of
Administrative Circular No. 04-94" and other procedural
laws.6
Petitioner is mistaken.
The Constitution expressly bestows on this Court the power
to promulgate rules concerning the pleading, practice and
procedure in all courts.7 Procedural matters are within the
sole jurisdiction of this Court to prescribe. Administrative
Circular No. 04-94 is an issuance of this Court. It covers a
matter of procedure. Administrative Circular No. 04-94 is
not an enactment of the Legislature. This Court has the
exclusive jurisdiction to interpret, amend or revise the rules
it promulgates, as long as the rules do not diminish,
increase, or modify substantive rights. This is precisely the
purpose of Santo Tomas as far as Administrative Circular
No. 04-94 is concerned.

A compulsory counterclaim is any claim for money or other


relief, which a defending party may have against an
opposing party, which at the time of suit arises out of, or is
necessarily connected with, the same transaction or
occurrence that is the subject matter of plaintiff's complaint. 8
It is compulsory in the sense that it is within the jurisdiction
of the court, does not require for its adjudication the
presence of third parties over whom the court cannot
acquire jurisdiction, and will be barred in the future if not set
up in the answer to the complaint in the same case. Any
other counterclaim is permissive.
Respondent's counterclaim as set up in its answer states:
3. That because of the unwarranted, baseless,
and unjustified acts of the plaintiff, herein
defendant has suffered and continue to suffer
actual damages in the sum of at least
P400,000,000.00 which the law, equity, and justice
require that to be paid by the plaintiff and further to
reimburse the attorney's fees of P2,000,000.00;9
It is clear that the counterclaim set up by respondent arises
from the filing of plaintiff's complaint. The counterclaim is
so intertwined with the main case that it is incapable of
proceeding independently. The counterclaim will require a
re-litigation of the same evidence if the counterclaim is
allowed to proceed in a separate action. Even petitioner
recognizes that respondent's counterclaim is compulsory.10
A compulsory counterclaim does not require a certificate of
non-forum shopping because a compulsory counterclaim is
not an initiatory pleading.
WHEREFORE, the instant petition is DENIED for lack of
merit. We AFFIRM the Order of the Regional Trial Court,
Branch 77, Malolos Bulacan, dated 4 June 1999 recalling
the Order dated 25 May 1999 which dismissed the
compulsory counterclaim of respondent B. Serrano
Enterprises, Inc.
SO ORDERED.

Petitioner's counsel fails or simply refuses to accept the


distinction between a permissive counterclaim and a
compulsory counterclaim. This distinction was the basis for
the ruling in Santo Tomas and Ponciano. The sole issue for
resolution in the present case is whether respondent's
counterclaim is compulsory or permissive. If it is a
permissive counterclaim, the lack of a certificate of nonforum shopping is fatal. If it is a compulsory counterclaim,
the lack of a certificate of non-forum shopping is immaterial.

85

appealed to this Court 6 but was rebuffed. By decision


rendered on May 31, 1965, this Court affirmed the dismissal
of the declaratory relief suits, holding that the clarity of the
terms of the contract eliminated all occasion for
interpretation thereof.
G.R. No. L-29673 November 12, 1987
THE VISAYAN PACKING CORPORATION, petitioner,
vs.
THE REPARATIONS COMMISSION and THE COURT OF
APPEALS, respondents.

NARVASA, J.:
The proceedings at bar had their origin in an agreement
denominated "Contract of Constitutional Purchase and Sale
of nterparation Goods" entered into between petitioner
Visayan baking Corporation (hereafter, simply VISPAC) and
the
Reparations
Commission
(hereafter,
simply
REPACOM). Subject of the contract were a cannery plant, a
tin manufacturing plant, and three (3) filing boats sold to
VISPAC, for which it bound itself to pay the total price of
P1,135,712.47 in ten (10) equal yearly installments with
interest. 2
Prior to the due date of the first installment, REPACOM sent
VISPAC a written reminder thereof. VISPAC's response was
to file in the Court of First Instance of Manila two (2) special
civil actions for declaratory relief, 3 alleging ambiguity in the
contract between it and REPACOM consisting in the
agreement's failure to clearly state the precise time when
the obligation to pay the first installment of the price would
arise. 4
On the other hand, when VISPAC subsequently failed,
despite several demands, to pay the first installment of the
price (P135,712.47) on what REPACOM deemed to be the
due date, the latter instituted an ordinary civil action for
collection thereof. 5 VISPAC moved to dismiss this
collection suit on the ground of the pendency of the
declaratory relief actions, arguing that until and unless the
latter were resolved, no cause of action could be deemed to
exist in favor of REPACOM for collection of said first
installment. The motion to dismiss was denied; and after
trial, the Court of First Instance rendered judgment dated
March 27, 1963 ordering VISPAC to pay REPACOM the
sum claimed, P135,712.47, with interest at the legal rate
from date of filing of the complaint until fully paid.
VISPAC appealed to the Court of Appeals claiming error on
the part of the Trial Court in not holding that the collection
suit was barred by the pendency of the declaratory relief
cases earlier instituted.
But the declaratory relief actions had been earlier dismissed
by Order of the Court of First Instance dated October 9,
1962, the Court holding that the issues raised would be
necessarily threshed out in the collection suit. VISPAC

VISPAC also received an unfavorable verdict in its appeal


to the Court of Appeals from the decision of the Trial Court
in the collection action against it. That Appellate Court, on
October 2, 1968, promulgated judgment affirming that of the
Court of First Instance. It is this affirmance of the Court of
Appeals that is subject of the instant appeal taken to this
Court by VISPAC. VISPAC's contention is that it was error
on the Appellate Court's part to have affirmed the Trial
Court's decision for the collection of the first installment of
the price due from it under its contract with REPACOM,
because that money claim should have been set up as a
compulsory counterclaim in the declaratory relief action,
and since REPACOM had not done this, but had instead set
it up in a separate suit, the claim had thereby become
barred.
It is indeed the rule, embodied in Section 4, Rule 9 of the
Rules of Court, that a counterclaim not set up shall be
barred if it arises out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the
opposing party's claim and does not require for its
adjudication the presence of third parties of whom the court
cannot acquire jurisdiction. In other words, a compulsory
counterclaim cannot be made the subject of a separate
action but should be asserted in the same suit involving the
same transaction or occurrence giving rise to it. The
omission is not however irremediable or irreversibly fatal.
The Rules provide that when a pleader fails to set up a
counterclaim through oversight, inadvertence, or excusable
negligence, or when justice requires, he may, by leave of
court, set up the counterclaim or crossclaim by amendment
before judgment. 7 Where the counterclaim is made the
subject of a separate suit, it may be abated upon a plea of
auter action pendant or litis pendentia, 8 and/or dismissed
on the ground of res adjudicata. 9 Res adjudicata may be
pleaded as a ground for dismissal if the opposing party's
claim, involving the same transaction or occurrence as the
counterclaim, has already been adjudicated on the merits
by a court of competent jurisdiction, and the judgment has
become final; this, on the theory that what is barred by prior
judgment are not only the matters squarely raised and
litigated, but all such other matters as could have been
raised but were not. 10
Now, there is nothing in the nature of a special civil action
for declaratory relief that proscribes the filing of a
counterclaim based on the same transaction, deed or
contract subject of the complaint. A special civil action is
after an not essentially different from all ordinary civil action,
which is generally governed by Rules 1 to 56 of the Rules
of Court, except that the former deals with a special subject
matter which makes necessary some special regulation. 11
But the Identity between their fundamental nature is such
that the same rules governing ordinary civil suits may and
do apply to special civil actions if not inconsistent with or if
they may serve to supplement the provisions of the peculiar
rules governing special civil actions. 12

86

Ideally, in the case at bar, the separate action for collection


should have been dismissed and set up as a compulsory
counterclaim in the declaratory relief suits, by way of an
amended answer. This was not done. The actions
proceeded separately and were decided on the merits. The
final verdict was that the declaratory relief suits instituted by
VISPAC were unmeritorious, quite without foundation and,
in the light of all the relevant facts, appear to have been
initiated by VISPAC merely to obstruct and delay the
payment of the installments clearly due from it, payment of
which was decreed in the collection suit. Under the
circumstances, and taking account of the not inconsiderable
lenght of time that the case at bar has been pending, it
would be to do violence to substantial justice to pronounce
the proceedings fatally defective for breach of the rule on
compulsory counterclaims. Rules of procedure are after all
laid down in order to attain justice. They cannot be applied
to prevent the achievement of that goal. Form cannot
prevail over substance. 13
WHEREFORE, the petition is dismissed for lack of merit,
with costs against the petitioner.

87

entertained at this time nor may therefore, the


Motion to Dismiss the same be considered. (Rollo,
p. 329; Annex "H", Petition)
G.R. No. 91391

January 24, 1991

FRANCISCO I. CHAVEZ, in his capacity as Solicitor


General,
petitioner
vs.
THE HON. SANDIGANBAYAN (First Division) and JUAN
PONCE ENRILE, respondents.
Ponce Enrile, Cayetano Reyes & Manalastas for private
respondent.

GUTIERREZ, JR., J.:


The petitioner challenges the resolutions dated June 8,
1989 and November 2, 1989 of the Sandiganbayan issued
in Civil Case No. 0033 which granted the motion of private
respondent Juan Ponce Enrile, one of the defendants in the
civil case, to implead the petitioner as additional party
defendant in Enrile's counterclaim in the same civil case
and denied the petitioner's motion for reconsideration.
On July 31, 1987, the Republic of the Philippines, through
the Presidential Commission on Good Government (PCGG)
with the assistance of Solicitor General Francisco Chavez
filed with the respondent Sandiganbayan a complaint
docketed as Civil Case No. 0033 against Eduardo
Cojuangco, Jr. and Juan Ponce Enrile, among others, for
reconveyance, reversion and accounting, restitution and
damages.
After the denial of his motion to dismiss, respondent Enrile
filed his answer with compulsory counterclaim and crossclaim with damages.
The Republic filed its reply to the answer and motion to
dismiss the counterclaim. The motion was opposed by
respondent Enrile.
On January 30, 1989, respondent Sandiganbayan issued a
resolution, to wit:
The resolution of the Motion to Dismiss the
Counterclaim against the Plaintiff government is
deferred until after trial, the grounds relied upon not
appearing to be indubitable.
On the matter of the additional parties (Solicitor
General Chavez, Ex-PCGG Chairman Diaz, former
Commissioners Doromal, Rodrigo, Romero and
Bautista), the propriety of impleading them either
under Sec. 14, Rule 6 or even under Sec. 12 as
third-party defendant requires leave of Court to
determine the propriety thereof. No such leave has
been sought. Consideration thereof cannot be

Respondent Enrile then requested leave from the


Sandiganbayan to implead the petitioner and the PCGG
officials as party defendants for lodging this alleged
"harassment suit" against him.
The motion was granted in a resolution dated June 8, 1989,
to wit:
In respect to defendant Juan Ponce Enrile's
Manifestation and Motion dated February 23, 1989,
praying for leave to implead additional parties to
his counterclaim, the Court, finding reason in the
aforesaid Manifestation and Motion, grants leave to
implead the defendants named in the counterclaim
and admits defendant Juan Ponce Enrile's answer
with counterclaim.
This is without prejudice to the defenses which said
defendants may put forth individually or in
common, in their personal capacities or otherwise.
(Rollo, p. 27)
In a later resolution dated November 2, 1989, respondent
Sandiganbayan denied a motion to reconsider the June 8,
1989 resolution. The dispositive portion of the resolution
states:
WHEREFORE, the Motions for Reconsideration of
the Solicitor General and former PCGG officials
Ramon Diaz, Quintin Doromal, Orlando Romero,
Ramon Rodrigo and Mary Concepcion Bautista are
denied, but, considering these motions as in the
nature of motions to dismiss counterclaim/answers,
resolution of these motions is held in abeyance
pending trial on the merits. (Rollo, p. 31)
Thereafter, all the PCGG officials filed their answer to the
counterclaims invoking their immunity from suits as
provided in Section 4 of Executive Order No. 1. Instead of
filing an answer, the petitioner comes to this Court assailing
the resolutions as rendered with grave abuse of discretion
amounting to lack of jurisdiction.
The lone issue in this petition is the propriety of impleading
the petitioner as additional party defendant in the
counterclaim filed by respondent Enrile in Civil Case No.
0033.
It may be noted that the private respondent did not limit
himself to general averments of malice, recklessness, and
bad faith but filed specific charges that then PCGG
Chairman Jovito Salonga had already cleared the
respondent and yet, knowing the allegations to be false, the
petitioner still filed the complaint. This can be gleaned from
excerpts found in respondent Enrile's Answer with
Compulsory Counterclaim and Cross-Claim:

88

xxx

xxx

xxx

Defendant-in-counterclaim Francisco Chavez was


the Solicitor General who assisted the PCGG in
filing and maintaining the instant Complaint against
Defendant. As the incumbent Solicitor General, he
continues to assist the PCGG in prosecuting this
case.
He is sued in his personal and official capacities.
On or about October 1986, the PCGG, speaking
through the then Chairman, now Senate President,
Hon. Jovito R. Salonga, found and declared that
"not one of the documents left by then President
and Mrs. Ferdinand E. Marcos including the 2,300page evidence turned over to the PCGG by the US
State Department implicates Enrile." Chairman
Salonga stressed that in view of the PCGG's
findings, he refused to yield to the "pressure"
exerted on him to prosecute Defendant.
xxx

xxx

xxx

Notwithstanding the findings of the PCGG that


there was absolutely no evidence linking
Defendant to the illegal activities of former
President and Mrs. Ferdinand E. Marcos, the
PCGG, this time composed of Chairman Ramon
Diaz, the Commissioners Quintin Doromal, Ramon
Rodrigo, Orlando Romero and Mary Concepcion
Bautista, filed the Complaint against Defendant,
among others, on or about 22 July 1987.
Defendant has reasons to believe, and so alleges
that Chairman Diaz, and Commissioners Doromal,
Rodrigo, Romero and Bautista ordered, authorized,
allowed or tolerated the filing of the utterly baseless
complaint against Defendant.
Solicitor General Francisco Chavez assisted or
cooperated in, or induced or instigated, the filing of
this harassment suit against Defendant.
In so ordering, authorizing, allowing and tolerating
the institution of the action against Defendant, all
the aforenamed officers, with malice and in evident
bad faith, and with grave abuse of power and in
excess of their duty and authority, unjustly and
unlawfully obstructed, defeated, violated, impeded
or impaired the constitutional rights and liberties of
Defendant . . . . (Rollo, pp. 260-262)
On the other hand, the petitioner submits that no counterclaim can be filed against him in his capacity as Solicitor
General since he is only acting as counsel for the Republic.
He cites the case of Borja v. Borja, 101 Phil. 911 [1957]
wherein we ruled:
. . . The appearance of a lawyer as counsel for a
party and his participation in a case as such

counsel does not make him a party to the action.


The fact that he represents the interests of his
client or that he acts in their behalf will not hold him
liable for or make him entitled to any award that the
Court may adjudicate to the parties, other than his
professional fees. The principle that a counterclaim
cannot be filed against persons who are acting in
representation of another such as trustees in
their individual capacities (Chambers v. Cameron,
2 Fed. Rules Service, p. 155; 29 F. Supp. 742)
could be applied with more force and effect in the
case of a counsel whose participation in the action
is merely confined to the preparation of the
defense of his client. Appellant, however, asserted
that he filed the counterclaim against said lawyer
not in his individual capacity but as counsel for the
heirs of Quintin de Borja. But as we have already
stated that the existence of a lawyer-client
relationship does not make the former a party to
the action, even this allegation of appellant will not
alter the result We have arrived at (at pp. 924-925)
Thus, the petitioner argues that since he is simply the
lawyer in the case, exercising his duty under the law to
assist the Government in the filing and prosecution of all
cases pursuant to Section 1, Executive Order No. 14, he
cannot be sued in a counterclaim in the same case.
Presiding Justice Francis Garchitorena correctly observed
that there is no general immunity arising solely from
occupying a public office.
The general rule is that public officials can be held
personally accountable for acts claimed to have been
performed in connection with official duties where they have
acted ultra vires or where there is a showing of bad faith.
We ruled in one case:
A number of cases decided by the Court where the
municipal mayor alone was held liable for back
salaries of, or damages to dismissed municipal
employees, to the exclusion of the municipality, are
not applicable in this instance. In Salcedo v. Court
of Appeals (81 SCRA 408 [1978]) for instance, the
municipal mayor was held liable for the back
salaries of the Chief of Police he had dismissed,
not only because the dismissal was arbitrary but
also because the mayor refused to reinstate him in
defiance of an order of the Commissioner of Civil
Service to reinstate.
In Nemenzo v. Sabillano (25 SCRA 1 [1968]), the
municipal mayor was held personally liable for
dismissing a police corporal who possessed the
necessary civil service eligibility, the dismissal
being done without justifiable cause and without
any administrative investigation.
In Rama v. Court of Appeals (G.R. Nos. L-44484,
L-44842, L-44591, L-44894, March 16 1987), the
governor, vice-governor, members of the
Sangguniang Panlalawigan, provincial auditor,

89

provincial treasurer and provincial engineer were


ordered to pay jointly and severally in their
individual and personal capacity damages to some
200 employees of the province of Cebu who were
eased out from their positions because of their
party affiliations. (Laganapan v. Asedillo, 154
SCRA 377 [1987])
Moreover, the petitioner's argument that the immunity
proviso under Section 4(a) of Executive Order No. 1 also
extends to him is not well-taken. A mere invocation of the
immunity clause does not ipso facto result in the charges
being automatically dropped.
In the case of Presidential Commission on Good
Government v. Pea (159 SCRA 556 [1988]) then Chief
Justice Claudio Teehankee, added a clarification of the
immunity accorded PCGG officials under Section 4(a) of
Executive Order No. 1 as follows:
With respect to the qualifications expressed by Mr.
Justice Feliciano in his separate opinion, I just wish
to point out two things: First, the main opinion does
not claim absolute immunity for the members of the
Commission. The cited section of Executive Order
No. 1 provides the Commission's members
immunity from suit thus: "No civil action shall lie
against the Commission or any member thereof for
anything done or omitted in the discharge of the
task contemplated by this order." No absolute
immunity like that sought by Mr. Marcos in his
Constitution for himself and his subordinates is
herein involved. It is understood that the immunity
granted the members of the Commission by virtue
of the unimaginable magnitude of its task to
recover the plundered wealth and the State's
exercise of police power was immunity from liability
for damages in the official discharge of the task
granted the members of the Commission much in
the same manner that judges are immune from suit
in the official discharge of the functions of their
office . . . " (at pp. 581-582)

Immunity from suit cannot institutionalize irresponsibility


and non-accountability nor grant a privileged status not
claimed by any other official of the Republic. (id., at page
586)
Where the petitioner exceeds his authority as Solicitor
General acts in bad faith, or, as contended by the private
respondent, "maliciously conspir(es) with the PCGG
commissioners in persecuting respondent Enrile by filing
against him an evidently baseless suit in derogation of the
latter's constitutional rights and liberties" (Rollo, p. 417),
there can be no question that a complaint for damages may
be filed against him. High position in government does not
confer a license to persecute or recklessly injure another.
The actions governed by Articles 19, 20, 21, and 32 of the
Civil Code on Human Relations may be taken against
public officers or private citizens alike. The issue is not the
right of respondent Enrile to file an action for damages. He
has the right. The issue is whether or not that action must
be filed as a compulsory counterclaim in the case filed
against him.
Under the circumstances of this case, we rule that the
charges pressed by respondent Enrile for damages under
Article 32 of the Civil Code arising from the filing of an
alleged harassment suit with malice and evident bad faith
do not constitute a compulsory counterclaim. To vindicate
his rights, Senator Enrile has to file a separate and distinct
civil action for damages against the Solicitor General.
In the case of Tiu Po v. Bautista, (103 SCRA 388 [1981]),
we ruled that damages claimed to have been suffered as a
consequence of an action filed against the petitioner must
be pleaded in the same action as a compulsory
counterclaim. We were referring, however, to a case filed by
the private respondent against the petitioners or parties in
the litigation. In the present case, the counterclaim was filed
against the lawyer, not against the party plaintiff itself.
To allow a counterclaim against a lawyer who files a
complaint for his clients, who is merely their representative
in court and not a plaintiff or complainant in the case would
lead to mischievous consequences.

Justice Florentino P. Feliciano stated in the same case:


It may be further submitted, with equal respect, that
Section 4 (a) of Executive Order No. 1 was
intended merely to restate the general principle of
the law of public officers that the PCGG or any
member thereof may not be held civilly liable for
acts done in the performance of official duty,
provided that such member had acted in good faith
and within the scene of his lawful authority. It may
also be assumed that the Sandiganbayan would
have jurisdiction to determine whether the PCGG
or any particular official thereof may be held liable
in damages to a private person injured by acts of
such manner. It would seem constitutionally
offensive to suppose that a member or staff
member of the PCGG could not be required to
testify before the Sandiganbayan or that such
members were exempted from complying with
orders of this Court. (at pp. 586- 587)

A lawyer owes his client entire devotion to his genuine


interest, warm zeal in the maintenance and defense of his
rights and the exertion of his utmost learning and ability.
(See Agpalo, Legal Ethics [1980] p. 147 citing Javier v.
Cornejo, 63 Phil. 293 [1936]; In re Tionko, 43 Phil. 191
[1922]; In re: Atty. C. T. Oliva, 103 Phil. 312 [1958]; Lualhati
v. Albert, 57 Phil. 86 [1932]; Toguib v. Tomol, Jr., G.R. Adm.
Case No. 554, Jan. 3, 1969; People v. Macellones, 49
SCRA 529 [1973]; Tan Kui v. Court of Appeals, 54 SCRA
199 [1973]). A lawyer cannot properly attend to his duties
towards his client if, in the same case, he is kept busy
defending himself.
The problem is particularly perplexing for the Solicitor
General.1wphi1 As counsel of the Republic, the Solicitor
General has to appear in controversial and politically
charged cases. It is not unusual for high officials of the
Government to unwittingly use shortcuts in the zealous

90

desire to expedite executive programs or reforms. The


Solicitor General cannot look at these cases with indifferent
neutrality. His perception of national interest and obedience
to instructions from above may compel him to take a stance
which to a respondent may appear too personal and
biased. It is likewise unreasonable to require Government
Prosecutors to defend themselves against counterclaims in
the very same cases they are prosecuting.
As earlier stated, we do not suggest that a lawyer enjoys a
special immunity from damage suits. However, when he
acts in the name of a client, he should not be sued on a
counterclaim in the very same case he has filed only as
counsel and not as a party. Any claim for alleged damages
or other causes of action should be filed in an entirely
separate and distinct civil action.
WHEREFORE, the present petition is GRANTED. The
questioned resolutions of the Sandiganbayan are SET
ASIDE insofar as they allow the counterclaim filed against
the petitioner.
SO ORDERED.

91

Ceralde of the sum of P1,550,000.00. The accusatory


portion of the Information reads as follows:
G.R. No. 102942 April 18, 1997
AMADO F. CABAERO and CARMEN C. PEREZ,
petitioners,
vs.
HON. ALFREDO C. CANTOS in his capacity as Presiding
Judge of the Regional Trial Court of Manila, Br., VII, and
EPIFANIO CERALDE, respondents.

PANGANIBAN, J.:
May the accused-petitioners who were charged with estafa,
file an answer with counterclaim for moral and exemplary
damages plus attorney's fees and litigation expenses
against the private complainant in the same criminal action?
This is the main issue raised in this petition 1 filed under
Rule 65 of the Rules of Court assailing the Orders dated
July 1, 1991, 2 and August 21, 1991, 3 of respondent Judge
"for being contrary to law and (for) having been issued by
the respondent judge in excess of his jurisdiction and with
grave abuse of discretion tantamount to lack of jurisdiction."
4

The Order of July 1, 1991, reads:


THE Answer with Counterclaim filed by the
accused through counsel, dated February
12, 1991, as well as the Opposition
thereto; the Memorandum filed by the
Private Prosecutor, in Support of Motion to
Expunge from the Records And/Or to
Dismiss Answer with Counterclaim; the
Supplement;
and
Comment
on
Supplement, are all ordered expunged
from the Records, considering that this is a
criminal case wherein the civil liability of
the accused (sic) is impliedly instituted
therein.
Petitioners pleaded for reconsideration 5 of said Order but
respondent judge, in the Order of August 21, 1991, denied
their motion, thus:
ACTING
on
the
Motion
for
Reconsideration dated July 17, 1991, of
the accused through counsel, this Court
finds no merit therein, such that said
motion is hereby denied.
The Facts
This petition emanated from Crim. Case No. 90-18826 of
the Regional Trial Court ("RTC") of Manila. Said case
commenced on October 18, 1990, with the filing of an
Information 6 against petitioners charging them with estafa
for allegedly defrauding private respondent Epifanio

That in or about and during the period


comprised between September, 1987 and
October 30, 1987, both dates inclusive, in
the City of Manila, Philippines, the said
accused, conspiring and confederating
together and mutually helping each other,
did then and there wilfully, unlawfully and
feloniously
defraud
one
EPIFANIO
CERALDE in the following manner, to wit:
the said accused induced and succeeded
in inducing the said EPIFANIO CERALDE
to advance the total amount of
P1,550,000.00 to be paid to M.C. Castro
Construction,
Co.
representing
the
purchase price of six (6) parcels of land
located in Pangasinan which the Aqualand
Ventures & Management Corporation, a
joint business venture organized by
accused AMADO F. CABAERO and the
said EPIFANIO CERALDE, purchased
from the said company, with the
understanding that the said amount would
be returned to the said EPIFANIO
CERALDE as soon as the loan for
P1,500,000.00 applied for by the said
Aqualand Ventures & Management
Corporation with Solid Bank, of which said
accused AMADO F. CABAERO is the
Senior Vice-President, is released, but
both accused, once the said loan has (sic)
been approved by the bank, in furtherance
of their conspiracy and falsely pretending
that accused CARMEN C. PEREZ had
been authorized by the said Aqualand
Ventures & Management Corporation to
receive the check for P1,500,000.00 for
and in its own behalf, succeeded in
inducing the cashier of said Solid Bank to
release the same to accused CARMEN C.
PEREZ, thereby enabling her to encash
the aforesaid check, and instead of turning
over the said amount to the said
EPIFANIO CERALDE, accused failed and
refused, and still fail and refuse, to do so
despite repeated demands made to that
effect, and with intent to defraud,
misappropriated,
misapplied
and
converted the said amount to their own
personal use and benefit, to the damage
and prejudice of the said EPIFANIO
CERALDE in the aforesaid amount of
P1,550,000.00, Philippine currency.
Contrary to law.
Arraigned on January 7, 1991, petitioners entered a plea of
not guilty. On February 5, 1991, Atty. Ambrosio Blanco
entered his appearance as private prosecutor. 7

92

The Presiding Judge of the RTC of Manila, Branch IV, Hon.


Elisa R. Israel, in an Order 8 dated February 11, 1991,
inhibited herself "out of delicadeza" from further hearing the
case pursuant to Section 1 of Rule 137 of the Rules of
Court after "considering that the complainant is a relative by
affinity of a nephew of her husband." Thereafter, the case
was reraffled to Branch VII presided over by respondent
Judge Alfredo Cantos.
On April 2, 1991, petitioners filed an Answer with
Counterclaims 9 alleging that the money loaned from
Solidbank mentioned in the Information was duly applied to
the purchase of the six (6) parcels of land in Pangasinan,
and that the filing of said Information was unjustified and
malicious. Petitioners included the following prayer: 10
WHEREFORE, it is respectfully prayed
that after trial judgment be rendered:
1. Dismissing, or quashing the information,
and the civil action impliedly instituted in
the criminal action;
2. Ordering the complaining witness
Ceralde to pay to the accused the
following amounts:
(a) P1,500,000.00
moral damages;

as

(b)
P500,000.00
exemplary damages;

as

(c)
P100,000.00
attorney's fees; and

as

(d)
P20,000.00,
litigation expenses.

as

Accused pray for such other reliefs, legal


and equitable in the premises.
During the initial hearing on April 15, 1991, the prosecution
verbally moved that the answer with counterclaim be
expunged from the records and/or be dismissed. The
respondent judge, after the exchange of arguments
between the prosecution and the defense, gave the
contending parties time to submit a Memorandum and
Comment or Opposition, respectively.
The Memorandum of the private prosecutor justified his
Motion to Expunge the answer with counterclaim for two
reasons: (1) the trial court had no jurisdiction over the
answer with counterclaim for non-payment of the prescribed
docket fees and (2) the "compulsory counterclaim against
complainant is barred for failure to file it before
arraignment." 11
In their Opposition, petitioners argued that this Court in
Javier vs. Intermediate Appellate Court 12 laid down, for
"procedural soundness," the rule that a counterclaim should

be permitted in a criminal action where the civil aspect is


not reserved. Further, inasmuch as petitioners' counterclaim
was compulsory in nature, they were not required to pay
docket fees therefor. Additionally, the Rules do not
specifically provide for the period for filing of counterclaims
in criminal cases, whereas Section 3 of Rule 9 and Section
9 of Rule 6 allow the filing, with leave of court, of a
counterclaim at any time before judgment. Thus, petitioners
contended that their filing was within the proper period. 13
As previously indicated, respondent Judge Cantos granted
the prosecution's motion to expunge in an Order dated July
1, 1991, and denied the petitioners' motion for
reconsideration in an Order dated August 21, 1991.
On the theory that there is no plain, speedy and adequate
remedy in the ordinary course of law, the petitioners,
through counsel, filed this instant petition.
The Issue
The sole issue raised by petitioners is: 14
Whether or not the respondent judge
committed grave abuse of discretion,
amounting to lack or excess of jurisdiction
in ordering that the answer with
counterclaim of the petitioners in Criminal
Case No. 90-88126, together with all
pleadings filed in relation thereto, be
expunged from the records.
Petitioners invoke Section 1, Rule 111 of the Rules on
Criminal Procedure, which provides that unless the
offended party waived, reserved or instituted the civil action
prior to the criminal action, the civil action for recovery of
civil liability is impliedly instituted with the criminal action.
They contend that it is not only a right but an "outright duty"
of the accused to file an answer with counterclaim since
failure to do so shall result in the counterclaim being forever
barred.
Petitioners argue that under Rule 136 of the Rules of Court,
particularly Section 8 thereof, clerks of court are instructed
to "keep a general docket, each page of which shall be
numbered and prepared for receiving all the entries in a
single case, and shall enter therein all cases . . ." Thus,
respondent Judge Cantos allegedly erred in expunging all
records with respect to the Answer with Counterclaim for,
on appeal, "if the records elevated . . . are incomplete and
inaccurate, there arises a grave danger that the ends of
justice and due process shall not be served and instead
frustrated." 15
Petitioners further allege that the Order of July 1, 1991,
failed to resolve the legal issues raised by the parties as it
neglected to state the legal basis therefor, as required by
Section 14, Article VIII of the Constitution, "thereby leaving
the petitioners to speculate on why they were being
deprived of their right to plead and prove their defenses and
counter-claim as far as the civil aspect of the case was
concerned." 16

93

This Court, realizing the significance of the present case,


required on August 3, 1992, the appearance of the Solicitor
General as counsel for respondent court. The Republic's
counsel, in his Manifestation dated December 22, 1992,
cited Javier and sided with petitioners in maintaining that
the instant "petition is meritorous."
Preliminary Matters
Litis Pendentia as a Defense
In his Memorandum dated September 30, 1992, private
respondent belatedly interposes litis pendentia to defeat the
petition. He alleges that the present petition is barred by the
cross-claim of the petitioners against Aqualand Ventures
and Management Corporation, of which petitioners are
stockholders and officers, in Civil Case No. 90-53035 (filed
against both petitioners and the private respondent by
Solidbank on May 14, 1990). Considerations of due process
prevent us from taking up the merits of this argument in
favor of private respondent. 17 This cross-claim was never
raised in the trial court certainly not in the Memorandum
dated April 19, 1991, submitted to the court a quo in support
of respondent Ceralde's motion to expunge the answer with
counterclaim. The Rules 18 require that "(a) motion attacking
a pleading or a proceeding shall include all objections then
available, and all objections not so included shall be
deemed waived." Consequently and ineluctably, the ground
of litis pendentia which was not argued in the court a quo is
deemed waived. 19
The Payment of Filing Fees
Anent filing fees, we agree with petitioners that inasmuch
as the counterclaim is compulsory, there is no necessity to
pay such fees, as the Rules do not require them. This Court
already clarified in Sun Insurance Office, Ltd. (SIOL), vs.
Asuncion 20 the instances when docket fees are required to
be paid to enable the court to acquire jurisdiction:
1. It is not simply the filing of the complaint
or appropriate initiatory pleading, but the
payment of the prescribed docket fee, that
vests a trial court with jurisdiction over the
subject-matter or nature of the action.
Where the filing of the initiatory pleading is
not accompanied by payment of the
docket fee, the court may allow payment
of the fee within a reasonable time but in
no case beyond the applicable prescriptive
or reglementary period.
2. The same rule applies to permissive
counterclaims, third-party claims and
similar pleadings, which shall not be
considered filed until and unless the filing
fee prescribed therefor is paid. The court
may also allow payment of said fee within
a reasonable time but also in no case
beyond its applicable prescriptive or
reglementary period. (Emphasis supplied)

Obviously, no docket fees are required to be paid in


connection with the filing of a compulsory counterclaim.
The
Main
Issue:
Answer with Counterclaim

Propriety

of

In Javier upon which petitioners anchor their thesis, the


Court held that a counterclaim for malicious prosecution is
compulsory in nature; thus, it should be filed in the criminal
case upon the implied institution of the civil action.
The facts in Javier may be summarized as follows:
Leon S. Gutierrez, Jr., private respondent therein, was
charged with violation of BP Blg. 22 before the Regional
Trial Court of Makati. The civil case had not been expressly
reserved, hence it was impliedly instituted with the criminal
action.
Later, Accused Gutierrez filed a complaint for damages
against Private Complainants (Petitioners) Javiers before
the Regional Trial Court of Catarman, Northern Samar,
wherein he alleged that he had been merely inveigled by
the Javiers into signing the very check that was the subject
of the criminal case.
In resolving the question of whether he can raise that claim
in a separate civil action for damages filed by him against
petitioners therein, this Court, speaking through Mr. Justice
Isagani A. Cruz (Ret.), ruled: 21
It was before the Makati court that the
private respondent, as defendant in the
criminal charge of violation of B.P. Blg. 22,
could explain why he had issued the
bouncing check. As the civil action based
on the same act was also deemed filed
there, it was also before that same court
that he could offer evidence to refute the
claim for damages made by the
petitioners. This he should have done in
the form of a counterclaim for damages for
his alleged deception by the petitioners. In
fact, the counterclaim was compulsory
and should have been filed by the private
respondent upon the implied institution of
the civil action for damages in the criminal
action.
A counterclaim is compulsory and is
considered barred if not set up where the
following circumstances are present: (1)
that it arises out of, or is necessarily
connected with the transaction or
occurrence that is the subject matter of the
opposing party's claim; (2) that it does not
require for its adjudication the presence of
third parties of whom the court cannot
acquire jurisdiction, and (3) that the court
has jurisdiction to entertain the claim.

94

All these circumstances are present in the


case before the Regional Trial Court of
Makati.
This being so, it was improper for the
private respondent to file his civil
complaint in the Regional Trial Court of
Northern Samar alleging the very defense
he should be making in the Regional Trial
Court of Makati. It is, of course, not
possible for him now to invoke a different
defense there because he would be
contradicting his own verified complaint in
the Regional Trial Court in Northern
Samar. In effect, therefore, he is arguing
that both courts have jurisdiction to
consider the same claim of deception he is
making in connection with the same
transaction and involving the same parties.
(Emphasis supplied)
In Javier, the accused maintained in his separate action for
damages that he had been inveigled by the private
complainants into signing what was alleged to be a
bouncing check. In the present case, petitioners claim in
their answer with counterclaim that they never personally
benefited from the allegedly defrauded amount nor did they
spend the same for a purpose other than that agreed upon
with Private Respondent Ceralde. Thus, in both cases, the
accused seek recovery of damages for what they perceive
to be malicious prosecution against them.
As categorically recognized in the case of Javier, a claim for
malicious prosecution or "grossly unfounded suit" as a
compulsory counter-claim has no appropriate venue other
than the same criminal case which is alleged to be a
malicious suit. The counterclaim stands on the same footing
and is to be tested by the same rules as if it were an
independent action. 22 A counterclaim is defined as any
claim for money or other relief which a defending party may
have against an opposing party. 23 Compulsory
counterclaim is one which at the time of suit arises out of, or
is necessarily connected with, the same transaction or
occurrence that is the subject matter of plaintiff's complaint.
24
It is compulsory in the sense that if it is within the
jurisdiction of the court, and does not require for its
adjudication the presence of third parties over whom the
court cannot acquire jurisdiction, it must be set up therein,
and will be barred in the future if not set
up. 25
In justifying his Order, Judge Cantos ruled that "this is a
criminal case wherein the civil liability of the accused (sic) is
impliedly instituted therein." This justification begs the
question. Basically, that is the reason why petitioners herein
filed their answer with counterclaim for, apparently, in hiring
a private prosecutor, Private Respondent Ceralde intended
to prosecute his civil claim together with the criminal action.
Hence, as a protective measure, petitioners filed their
counterclaim in the same case. Since under Section 1, Rule
111 26 of the Revised Rules of Court, the civil action which is
deemed impliedly instituted with the criminal action, if not
waived or reserved, includes recovery of indemnity under

the Revised Penal Code, and damages under Article 32,


33, 34 and 2176 of the Civil Code arising from the same act
or omission of the accused, should not the accused have
the right to file a counterclaim in the criminal case?
Obviously, the answer is in the affirmative, as was held in
Javier.
In ruling that an action for damages for malicious
prosecution should have been filed as a compulsory
counterclaim in the criminal action, the Court in Javier
sought to avoid multiplicity of suits. The Court there
emphasized that the civil action for malicious prosecution
should have been filed as a compulsory counterclaim in the
criminal action. The filing of a separate civil action for
malicious prosecution would have resulted in the
presentation of the same evidence involving similar issues
in two proceedings: the civil action impliedly instituted with
the criminal action, and the separate civil action for
damages for malicious prosecution.
Some
Reservations
the Application of Javier

in

The logic and cogency of Javier notwithstanding, some


reservations and concerns were voiced out by members of
the Court during the deliberations on the present case.
These were engendered by the obvious lacuna in the Rules
of Court, which contains no express provision for the
adjudication of a counterclaim in a civil action impliedly
instituted in a criminal case. The following problems were
noted:
1) While the rules on civil procedure 27 expressly recognize
a defendant's entitlement to plead his counterclaim and
offer evidence in support thereof, 28 the rules on criminal
procedure 29 which authorize the implied institution of a civil
action in a criminal case are, in contrast, silent on this
point 30 and do not provide specific guidelines on how such
counterclaim shall be pursued.
2) A judgment in a criminal action is not required to provide
for the award of a counterclaim. Thus, Section 2, Rule 120
of the Rules of Court, states:
Sec. 2. Form and contents of judgment.
xxx xxx xxx
If it is for conviction, the judgment shall
state (a) the legal qualifications of the
offense constituted by the acts committed
by the accused, and the aggravating or
mitigating circumstances attending the
commission thereof, if there are any; (b)
the participation of the accused in the
commission of the offense whether as
principal, accomplice, or accessory after
the fact; (c) the penalty imposed upon the
accused; and (d) the civil liability or
damages caused by the wrongful act to be
recovered from the accused by the
offended party, if there is any, unless the

95

enforcement of the civil liability by a


separate action has been reserved or
waived. (Emphasis supplied)
3) Allowing and hearing counterclaims (and possibly crossclaims and third-party complaints) in a criminal action will
surely delay the said action. The primary issue in a criminal
prosecution that is under the control of state prosecutors is
the guilt of the accused and his civil liability arising from the
same act or omission. 31 Extending the civil action arising
from the same act or omission to counterclaims, crossclaims and third-party complaints, and allowing the accused
and other parties to submit evidence of their respective
claims will complicate the disposition of the criminal case.
4) Adjudication of compulsory counterclaims and/or related
claims or pleadings logically includes the application of
other rules which, by their very nature, apply only to civil
actions. The following matters may be invoked in
connection with the filing of an answer with a counterclaim:
the genuineness and due execution of an actionable
document which are deemed admitted unless specifically
denied under oath; 32 affirmative defenses like res judicata,
prescription and statute of frauds which are deemed waived
by failure to interpose them as affirmative defenses in an
answer; and the failure of a defendant to file an answer
seasonably may result in his default in the civil aspect but
not in the criminal. As a consequence of these matters, the
entry of plea during arraignment will no longer signal joinder
of issues in a criminal action.
5) In an impliedly instituted civil action, an accused is not
sufficiently apprised of the specific basis of the claims
against him. An accused learns of the implied institution of a
civil action from the contents of an information. An
information, however, is filed in behalf of the People of the
Philippines. Hence, it does not contain the ultimate facts
relating to the civil liability of the accused. Section 6, Rule
110 of the Rules of Court, provides:
Sec. 6. Sufficiency of complaint or
information. A complaint or information
is sufficient if it states the name of the
accused; the designation of the offense by
the statute; the acts or omissions
complained of as constituting the offense;
the name of the offended party; the
approximate time of the commission of the
offense; and the place wherein the offense
was committed.
The foregoing section does not mandate the inclusion of the
ultimate facts which can be specifically admitted or denied
in an answer.
6) Because an accused is not sufficiently apprised of the
specific basis of the civil action against him, he may file a
motion for bill of particulars or take advantage of discovery
procedures. The end result, in any case, will be delay and
complication in the criminal action and even confusion
among the parties.

7) The Rules of Court does not specify the reckoning date


for the filing of an answer in an impliedly instituted civil
action. In an ordinary civil action, an answer should be filed
within fifteen (15) days from service of summons. The
concept of summons, however, is alien to a criminal action.
So, when does the 15-day period begin?
8) Moreover, an accused can file his answer with
counterclaim only after the initial hearing, because the
private
complainant
may
still
reserve
his civil action at any time before the prosecution
commences to present evidence. 33 On the other hand, an
answer in an ordinary civil action should be filed before the
start of hearing, because hearing commences only after the
issues have been joined, i.e., after the responsive pleadings
have been filed.
9) Confusion in the application of the rules on civil
procedure will certainly encourage litigants to challenge
before appellate courts interlocutory incidents of the
impliedly instituted civil action. While these challenges are
pending, the criminal actions that demand speedy
resolution, particularly where the accused is denied bail in
capital offenses, will stagnate. Witnesses may disappear or
lose recollection of their intended testimony, and the
prosecutors may lose momentum and interest in the case.
And the accused is effectively deprived of his right to
speedy trial.
10) On top of the above procedural difficulties, some
members of the Court believe that a cause of action for
malicious prosecution may be premature because there is
as yet no finding of such wrongful prosecution. This fact is
precisely what the trial court still has to determine.
By the foregoing discussion, we do not imply any fault in
Javier. The real problem lies in the absence of clear-cut
rules governing the prosecution of impliedly instituted civil
actions and the necessary consequences and implications
thereof. For this reason, the counter-claim of the accused
cannot be tried together with the criminal case because, as
already discussed, it will unnecessarily complicate and
confuse the criminal proceedings. Thus, the trial court
should confine itself to the criminal aspect and the possible
civil liability of the accused arising out of the crime. The
counter-claim (and cross-claim or third party complaint, if
any) should be set aside or refused cognizance without
prejudice to their filing in separate proceedings at the
proper time. 34
At balance, until there are definitive rules of procedure 35 to
govern the institution, prosecution and resolution of the civil
aspect (and the consequences and implications thereof)
impliedly instituted in a criminal case, trial courts should
limit their jurisdiction to the civil liability of the accused
arising from the criminal case.
On the other hand, this Court is only too well aware that the
antecedent case was filed in the Respondent Court on
October 18, 1990. Although it has dragged on for more than
six (6) years now, trial has yet to start because of the herein
procedural question raised on certiorari. In view of this, it is

96

to the best interest of the parties that the trial of the criminal
action should now proceed. The trial has waited too long; it
is time to continue and finish it with all reasonable dispatch.
In fairness to the accused, he may file separate
proceedings to litigate his counterclaim after the criminal
case is terminated and/or in accordance with the new Rules
which may be promulgated as and when they become
effective.
WHEREFORE, premises considered, the questioned
Orders dated July 1, 1991 and August 21, 1991 are hereby
MODIFIED. The counter-claim of the accused is hereby set
aside without prejudice. The Respondent Regional Trial
Court of Manila is DIRECTED to proceed with the trial of
the criminal action and the civil action arising from the
criminal offense that is impliedly instituted therein, with all
judicious dispatch. No. costs.
SO ORDERED.

97

G.R. Nos. 158090

October 4, 2010

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS),


Petitioner,
vs.
HEIRS OF FERNANDO F. CABALLERO, represented by
his daughter, JOCELYN G. CABALLERO, Respondents.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari under
Rule 45 of the Rules of Court seeking to set aside the
Decision1 and the Resolution,2 dated December 17, 2002
and April 29, 2003, respectively, of the Court of Appeals
(CA) in CA-G.R. CV. No. 49300.
The antecedents are as follows:
Respondent Fernando C. Caballero (Fernando) was the
registered owner of a residential lot designated as Lot No.
3355, Ts-268, covered by TCT No. T-16035 of the Register
of Deeds of Cotabato, containing an area of 800 square
meters and situated at Rizal Street, Mlang, Cotabato. On
the said lot, respondent built a residential/commercial
building consisting of two (2) stories.
On March 7, 1968, Fernando and his wife, Sylvia Caballero,
secured a loan from petitioner Government Service
Insurance System (GSIS) in the amount of P20,000.00, as
evidenced by a promissory note. Fernando and his wife
likewise executed a real estate mortgage on the same date,
mortgaging the afore-stated property as security.
Fernando defaulted on the payment of his loan with the
GSIS. Hence, on January 20, 1973, the mortgage covering
the subject property was foreclosed, and on March 26,
1973, the same was sold at a public auction where the
petitioner was the only bidder in the amount of P36,283.00.
For failure of Fernando to redeem the said property within
the designated period, petitioner executed an Affidavit of
Consolidation of Ownership on September 5, 1975.
Consequently, TCT No. T-16035 was cancelled and TCT
No. T-45874 was issued in the name of petitioner.
On November 26, 1975, petitioner wrote a letter to
Fernando, informing him of the consolidation of title in its
favor, and requesting payment of monthly rental in view of
Fernando's continued occupancy of the subject property. In
reply, Fernando requested that he be allowed to repurchase
the same through partial payments. Negotiation as to the
repurchase by Fernando of the subject property went on for
several years, but no agreement was reached between the
parties.

On January 16, 1989, petitioner scheduled the subject


property for public bidding. On the scheduled date of
bidding, Fernando's daughter, Jocelyn Caballero, submitted
a bid in the amount of P350,000.00, while Carmelita
Mercantile Trading Corporation (CMTC) submitted a bid in
the amount of P450,000.00. Since CMTC was the highest
bidder, it was awarded the subject property. On May 16,
1989, the Board of Trustees of the GSIS issued Resolution
No. 199 confirming the award of the subject property to
CMTC for a total consideration of P450,000.00. Thereafter,
a Deed of Absolute Sale was executed between petitioner
and CMTC on July 27, 1989, transferring the subject
property to CMTC. Consequently, TCT No. T-45874 in the
name of GSIS was cancelled, and TCT No. T-76183 was
issued in the name of CMTC.
Due to the foregoing, Fernando, represented by his
daughter and attorney-in-fact, Jocelyn Caballero, filed with
the Regional Trial Court (RTC) of Kabacan, Cotabato a
Complaint3 against CMTC, the GSIS and its responsible
officers, and the Register of Deeds of Kidapawan,
Cotabato. Fernando prayed, among others, that judgment
be rendered: declaring GSIS Board of Trustees Resolution
No. 199, dated May 16, 1989, null and void; declaring the
Deed of Absolute Sale between petitioner and CMTC null
and void ab initio; declaring TCT No. 76183 of the Register
of Deeds of Kidapawan, Cotabato, likewise, null and void
ab initio; declaring the bid made by Fernando in the amount
of P350,000.00 for the repurchase of his property as the
winning bid; and ordering petitioner to execute the
corresponding Deed of Sale of the subject property in favor
of Fernando. He also prayed for payment of moral
damages, exemplary damages, attorney's fees and
litigation expenses.
In his complaint, Fernando alleged that there were
irregularities in the conduct of the bidding. CMTC
misrepresented itself to be wholly owned by Filipino
citizens. It misrepresented its working capital. Its
representative Carmelita Ang Hao had no prior authority
from its board of directors in an appropriate board
resolution to participate in the bidding. The corporation is
not authorized to acquire real estate or invest its funds for
purposes other than its primary purpose. Fernando further
alleged that the GSIS allowed CMTC to bid despite
knowledge that said corporation has no authority to do so.
The GSIS also disregarded Fernando's prior right to buy
back his family home and lot in violation of the laws. The
Register of Deeds of Cotabato acted with abuse of power
and authority when it issued the TCT in favor of CMTC
without requiring the CMTC to submit its supporting papers
as required by the law.
Petitioner and its officers filed their Answer with Affirmative
Defenses and Counterclaim.4 The GSIS alleged that
Fernando lost his right of redemption. He was given the
chance to repurchase the property; however, he did not
avail of such option compelling the GSIS to dispose of the
property by public bidding as mandated by law. There is
also no "prior right to buy back" that can be exercised by
Fernando. Further, it averred that the articles of
incorporation and other papers of CMTC were all in order.
In its counterclaim, petitioner alleged that Fernando owed

98

petitioner the sum of P130,365.81, representing back


rentals, including additional interests from January 1973 to
February 1987, and the additional amount of P249,800.00,
excluding applicable interests, representing rentals
Fernando unlawfully collected from Carmelita Ang Hao from
January 1973 to February 1988.
After trial, the RTC, in its Decision 5 dated September 27,
1994, ruled in favor of petitioner and dismissed the
complaint. In the same decision, the trial court granted
petitioner's counterclaim and directed Fernando to pay
petitioner the rentals paid by CMTC in the amount of
P249,800.00. The foregoing amount was collected by
Fernando from the CMTC and represents payment which
was not turned over to petitioner, which was entitled to
receive the rent from the date of the consolidation of its
ownership over the subject property.
Fernando filed a motion for reconsideration, which was
denied by the RTC in an Order dated March 27, 1995.
Aggrieved by the Decision, respondent filed a Notice of
Appeal.6 The CA, in its Decision dated December 17, 2002,
affirmed the decision of the RTC with the modification that
the portion of the judgment ordering Fernando to pay
rentals in the amount of P249,800.00, in favor of petitioner,
be deleted. Petitioner filed a motion for reconsideration,
which the CA denied in a Resolution dated April 29, 2003.
Hence, the instant petition.
An Ex Parte Motion for Substitution of Party,7 dated July 18,
2003, was filed by the surviving heirs of Fernando, who
died on February 12, 2002. They prayed that they be
allowed to be substituted for the deceased, as respondents
in this case.
Petitioner enumerated the following grounds in support of
its petition:
I
THE HONORABLE COURT OF APPEALS
COMMITTED AN ERROR OF LAW IN HOLDING
THAT GSIS' COUNTERCLAIM, AMONG OTHERS,
OF P249,800.00 REPRESENTING RENTALS
COLLECTED BY PRIVATE RESPONDENT FROM
CARMELITA
MERCANTILE
TRADING
CORPORATION IS IN THE NATURE OF A
PERMISSIVE
COUNTERCLAIM
WHICH
REQUIRED THE PAYMENT BY GSIS OF
DOCKET FEES BEFORE THE TRIAL COURT
CAN ACQUIRE JURISDICTION OVER SAID
COUNTERCLAIM.
II
THE HONORABLE COURT OF APPEALS
COMMITTED AN ERROR OF LAW IN HOLDING
THAT
GSIS'
DOCUMENTARY
EVIDENCE
SUPPORTING ITS CLAIM OF P249,800.00
LACKS PROPER IDENTIFICATION.8

The petition of the GSIS seeks the review of the CA's


Decision insofar as it deleted the trial court's award of
P249,800.00 in its favor representing rentals collected by
Fernando from the CMTC.
In their Memorandum, respondents claim that CMTC
cannot purchase real estate or invest its funds in any
purpose other than its primary purpose for which it was
organized in the absence of a corporate board resolution;
the bid award, deed of absolute sale and TCT No. T-76183,
issued in favor of the CMTC, should be nullified; the trial
court erred in concluding that GSIS personnel have
regularly performed their official duty when they conducted
the public bidding; Fernando, as former owner of the
subject property and former member of the GSIS, has the
preemptive right to repurchase the foreclosed property.
These additional averments cannot be taken cognizance by
the Court, because they were substantially respondents
arguments in their petition for review on certiorari earlier
filed before Us and docketed as G.R. No. 156609. Records
show that said petition was denied by the Court in a
Resolution9 dated April 23, 2003, for petitioners
(respondents herein) failure to sufficiently show that the
Court of Appeals committed any reversible error in the
challenged decision as to warrant the exercise by this Court
of its discretionary appellate jurisdiction. 10 Said resolution
became final and executory on June 9, 2003. 11
Respondents attempt to re-litigate claims already passed
upon and resolved with finality by the Court in G.R. No.
156609 cannot be allowed.
Going now to the first assigned error, petitioner submits that
its counterclaim for the rentals collected by Fernando from
the CMTC is in the nature of a compulsory counterclaim in
the original action of Fernando against petitioner for
annulment of bid award, deed of absolute sale and TCT No.
76183. Respondents, on the other hand, alleged that
petitioner's counterclaim is permissive and its failure to pay
the prescribed docket fees results into the dismissal of its
claim.
To determine whether a counterclaim is compulsory or not,
the Court has devised the following tests: (a) Are the issues
of fact and law raised by the claim and by the counterclaim
largely the same? (b) Would res judicata bar a subsequent
suit on defendants claims, absent the compulsory
counterclaim rule? (c) Will substantially the same evidence
support or refute plaintiffs claim as well as the defendants
counterclaim? and (d) Is there any logical relation between
the claim and the counterclaim? A positive answer to all four
questions would indicate that the counterclaim is
compulsory.12
Tested against the above-mentioned criteria, this Court
agrees with the CA's view that petitioner's counterclaim for
the recovery of the amount representing rentals collected
by Fernando from the CMTC is permissive. The evidence
needed by Fernando to cause the annulment of the bid
award, deed of absolute sale and TCT is different from that
required to establish petitioner's claim for the recovery of
rentals.

99

The issue in the main action, i.e., the nullity or validity of the
bid award, deed of absolute sale and TCT in favor of
CMTC, is entirely different from the issue in the
counterclaim, i.e., whether petitioner is entitled to receive
the CMTC's rent payments over the subject property when
petitioner became the owner of the subject property by
virtue of the consolidation of ownership of the property in its
favor.
The rule in permissive counterclaims is that for the trial
court to acquire jurisdiction, the counterclaimant is bound to
pay the prescribed docket fees.13 This, petitioner did not do,
because it asserted that its claim for the collection of rental
payments was a compulsory counterclaim. Since petitioner
failed to pay the docket fees, the RTC did not acquire
jurisdiction over its permissive counterclaim. The judgment
rendered by the RTC, insofar as it ordered Fernando to pay
petitioner the rentals which he collected from CMTC, is
considered null and void. Any decision rendered without
jurisdiction is a total nullity and may be struck down at any
time, even on appeal before this Court.14
Petitioner further argues that assuming that its counterclaim
is permissive, the trial court has jurisdiction to try and
decide the same, considering petitioner's exemption from all
kinds of fees.
In In Re: Petition for Recognition of the Exemption of the
Government Service Insurance System from Payment of
Legal Fees,15 the Court ruled that the provision in the
Charter of the GSIS, i.e., Section 39 of Republic Act No.
8291, which exempts it from "all taxes, assessments, fees,
charges or duties of all kinds," cannot operate to exempt it
from the payment of legal fees. This was because, unlike
the 1935 and 1973 Constitutions, which empowered
Congress to repeal, alter or supplement the rules of the
Supreme Court concerning pleading, practice and
procedure, the 1987 Constitution removed this power from
Congress. Hence, the Supreme Court now has the sole
authority to promulgate rules concerning pleading, practice
and procedure in all courts.
In said case, the Court ruled that:
The separation of powers among the three co-equal
branches of our government has erected an impregnable
wall that keeps the power to promulgate rules of pleading,
practice and procedure within the sole province of this
Court. The other branches trespass upon this prerogative if
they enact laws or issue orders that effectively repeal, alter
or modify any of the procedural rules promulgated by this
Court. Viewed from this perspective, the claim of a
legislative grant of exemption from the payment of legal
fees under Section 39 of RA 8291 necessarily fails.
Congress could not have carved out an exemption for the
GSIS from the payment of legal fees without transgressing
another equally important institutional safeguard of the
Court's independence fiscal autonomy. Fiscal autonomy
recognizes the power and authority of the Court to levy,
assess and collect fees, including legal fees. Moreover,
legal fees under Rule 141 have two basic components, the

Judiciary Development Fund (JDF) and the Special


Allowance for the Judiciary Fund (SAJF). The laws which
established the JDF and the SAJF expressly declare the
identical purpose of these funds to "guarantee the
independence of the Judiciary as mandated by the
Constitution and public policy." Legal fees therefore do not
only constitute a vital source of the Court's financial
resources but also comprise an essential element of the
Court's fiscal independence. Any exemption from the
payment of legal fees granted by Congress to governmentowned or controlled corporations and local government
units will necessarily reduce the JDF and the SAJF.
Undoubtedly, such situation is constitutionally infirm for it
impairs the Court's guaranteed fiscal autonomy and erodes
its independence.
Petitioner also invoked our ruling in Sun Insurance Office,
Ltd. v. Judge Asuncion,16 where the Court held that:
xxxx
3. Where the trial court acquires jurisdiction over a claim by
the filing of the appropriate pleading and payment of the
prescribed filing fee but, subsequently, the judgment awards
a claim not specified in the pleading, or if specified the
same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the
judgment. It shall be the responsibility of the Clerk of Court
or his duly authorized deputy to enforce said lien and
assess and collect the additional fee.
In Ayala Corporation v. Madayag,17 the Court, in interpreting
the third rule laid down in Sun Insurance Office, Ltd. v.
Judge Asuncion regarding awards of claims not specified in
the pleading, held that the same refers only to damages
arising after the filing of the complaint or similar pleading as
to which the additional filing fee therefor shall constitute a
lien on the judgment.
The amount of any claim for damages, therefore, arising on
or before the filing of the complaint or any pleading should
be specified. While it is true that the determination of certain
damages as exemplary or corrective damages is left to the
sound discretion of the court, it is the duty of the parties
claiming such damages to specify the amount sought on
the basis of which the court may make a proper
determination, and for the proper assessment of the
appropriate docket fees. The exception contemplated as to
claims not specified or to claims although specified are left
for determination of the court is limited only to any damages
that may arise after the filing of the complaint or similar
pleading for then it will not be possible for the claimant to
specify nor speculate as to the amount thereof. (Emphasis
supplied.)1avvphi1
Petitioner's claim for payment of rentals collected by
Fernando from the CMTC did not arise after the filing of the
complaint; hence, the rule laid down in Sun Insurance finds
no application in the present case.
Due to the non-payment of docket fees on petitioner's
counterclaim, the trial court never acquired jurisdiction over

100

it and, thus, there is no need to discuss the second issue


raised by petitioner.
WHEREFORE, the petition is DENIED. The Decision and
the Resolution, dated December 17, 2002 and April 29,
2003, respectively, of the Court of Appeals in CA-G.R. CV.
No. 49300, are AFFIRMED.
SO ORDERED.

G.R. No. 143581

January 7, 2008

101

KOREA TECHNOLOGIES CO., LTD., petitioner,


vs.
HON. ALBERTO A. LERMA, in his capacity as Presiding
Judge of Branch 256 of Regional Trial Court of Muntinlupa
City, and PACIFIC GENERAL STEEL MANUFACTURING
CORPORATION, respondents.
DECISION
VELASCO, JR., J.:
In our jurisdiction, the policy is to favor alternative methods
of resolving disputes, particularly in civil and commercial
disputes. Arbitration along with mediation, conciliation, and
negotiation, being inexpensive, speedy and less hostile
methods have long been favored by this Court. The petition
before us puts at issue an arbitration clause in a contract
mutually agreed upon by the parties stipulating that they
would submit themselves to arbitration in a foreign country.
Regrettably, instead of hastening the resolution of their
dispute, the parties wittingly or unwittingly prolonged the
controversy.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a
Korean corporation which is engaged in the supply and
installation of Liquefied Petroleum Gas (LPG) Cylinder
manufacturing plants, while private respondent Pacific
General Steel Manufacturing Corp. (PGSMC) is a domestic
corporation.
On March 5, 1997, PGSMC and KOGIES executed a
Contract1 whereby KOGIES would set up an LPG Cylinder
Manufacturing Plant in Carmona, Cavite. The contract was
executed in the Philippines. On April 7, 1997, the parties
executed, in Korea, an Amendment for Contract No. KLP970301 dated March 5, 1997 2 amending the terms of
payment. The contract and its amendment stipulated that
KOGIES will ship the machinery and facilities necessary for
manufacturing LPG cylinders for which PGSMC would pay
USD 1,224,000. KOGIES would install and initiate the
operation of the plant for which PGSMC bound itself to pay
USD 306,000 upon the plants production of the 11-kg. LPG
cylinder samples. Thus, the total contract price amounted to
USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of
Lease3 with Worth Properties, Inc. (Worth) for use of
Worths 5,079-square meter property with a 4,032-square
meter warehouse building to house the LPG manufacturing
plant. The monthly rental was PhP 322,560 commencing on
January 1, 1998 with a 10% annual increment clause.
Subsequently, the machineries, equipment, and facilities for
the manufacture of LPG cylinders were shipped, delivered,
and installed in the Carmona plant. PGSMC paid KOGIES
USD 1,224,000.
However, gleaned from the Certificate 4 executed by the
parties on January 22, 1998, after the installation of the
plant, the initial operation could not be conducted as
PGSMC encountered financial difficulties affecting the
supply of materials, thus forcing the parties to agree that

KOGIES would be deemed to have completely complied


with the terms and conditions of the March 5, 1997 contract.
For the remaining balance of USD306,000 for the
installation and initial operation of the plant, PGSMC issued
two postdated checks: (1) BPI Check No. 0316412 dated
January 30, 1998 for PhP 4,500,000; and (2) BPI Check
No. 0316413 dated March 30, 1998 for PhP 4,500,000.5
When KOGIES deposited the checks, these were
dishonored for the reason "PAYMENT STOPPED." Thus, on
May 8, 1998, KOGIES sent a demand letter 6 to PGSMC
threatening criminal action for violation of Batas Pambansa
Blg. 22 in case of nonpayment. On the same date, the wife
of PGSMCs President faxed a letter dated May 7, 1998 to
KOGIES President who was then staying at a Makati City
hotel. She complained that not only did KOGIES deliver a
different brand of hydraulic press from that agreed upon but
it had not delivered several equipment parts already paid
for.
On May 14, 1998, PGSMC replied that the two checks it
issued KOGIES were fully funded but the payments were
stopped for reasons previously made known to KOGIES. 7
On June 1, 1998, PGSMC informed KOGIES that PGSMC
was canceling their Contract dated March 5, 1997 on the
ground that KOGIES had altered the quantity and lowered
the quality of the machineries and equipment it delivered to
PGSMC, and that PGSMC would dismantle and transfer the
machineries, equipment, and facilities installed in the
Carmona plant. Five days later, PGSMC filed before the
Office of the Public Prosecutor an Affidavit-Complaint for
Estafa docketed as I.S. No. 98-03813 against Mr. Dae Hyun
Kang, President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the
latter that PGSMC could not unilaterally rescind their
contract nor dismantle and transfer the machineries and
equipment on mere imagined violations by KOGIES. It also
insisted that their disputes should be settled by arbitration
as agreed upon in Article 15, the arbitration clause of their
contract.
On June 23, 1998, PGSMC again wrote KOGIES reiterating
the contents of its June 1, 1998 letter threatening that the
machineries, equipment, and facilities installed in the plant
would be dismantled and transferred on July 4, 1998. Thus,
on July 1, 1998, KOGIES instituted an Application for
Arbitration before the Korean Commercial Arbitration Board
(KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract
as amended.
On July 3, 1998, KOGIES filed a Complaint for Specific
Performance, docketed as Civil Case No. 98-117 8 against
PGSMC before the Muntinlupa City Regional Trial Court
(RTC). The RTC granted a temporary restraining order
(TRO) on July 4, 1998, which was subsequently extended
until July 22, 1998. In its complaint, KOGIES alleged that
PGSMC had initially admitted that the checks that were
stopped were not funded but later on claimed that it
stopped payment of the checks for the reason that "their

102

value was not received" as the former allegedly breached


their contract by "altering the quantity and lowering the
quality of the machinery and equipment" installed in the
plant and failed to make the plant operational although it
earlier certified to the contrary as shown in a January 22,
1998 Certificate. Likewise, KOGIES averred that PGSMC
violated Art. 15 of their Contract, as amended, by
unilaterally rescinding the contract without resorting to
arbitration. KOGIES also asked that PGSMC be restrained
from dismantling and transferring the machinery and
equipment installed in the plant which the latter threatened
to do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO
arguing that KOGIES was not entitled to the TRO since Art.
15, the arbitration clause, was null and void for being
against public policy as it ousts the local courts of
jurisdiction over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with Compulsory
Counterclaim9 asserting that it had the full right to dismantle
and transfer the machineries and equipment because it had
paid for them in full as stipulated in the contract; that
KOGIES was not entitled to the PhP 9,000,000 covered by
the checks for failing to completely install and make the
plant operational; and that KOGIES was liable for damages
amounting to PhP 4,500,000 for altering the quantity and
lowering the quality of the machineries and equipment.
Moreover, PGSMC averred that it has already paid PhP
2,257,920 in rent (covering January to July 1998) to Worth
and it was not willing to further shoulder the cost of renting
the premises of the plant considering that the LPG cylinder
manufacturing plant never became operational.
After the parties submitted their Memoranda, on July 23,
1998, the RTC issued an Order denying the application for
a writ of preliminary injunction, reasoning that PGSMC had
paid KOGIES USD 1,224,000, the value of the machineries
and equipment as shown in the contract such that KOGIES
no longer had proprietary rights over them. And finally, the
RTC held that Art. 15 of the Contract as amended was
invalid as it tended to oust the trial court or any other court
jurisdiction over any dispute that may arise between the
parties. KOGIES prayer for an injunctive writ was denied. 10
The dispositive portion of the Order stated:
WHEREFORE, in view of the foregoing
consideration, this Court believes and so holds that
no cogent reason exists for this Court to grant the
writ of preliminary injunction to restrain and refrain
defendant from dismantling the machineries and
facilities at the lot and building of Worth Properties,
Incorporated at Carmona, Cavite and transfer the
same to another site: and therefore denies
plaintiffs application for a writ of preliminary
injunction.
On July 29, 1998, KOGIES filed its Reply to Answer and
Answer to Counterclaim.11 KOGIES denied it had altered
the quantity and lowered the quality of the machinery,
equipment, and facilities it delivered to the plant. It claimed
that it had performed all the undertakings under the contract
and had already produced certified samples of LPG

cylinders. It averred that whatever was unfinished was


PGSMCs fault since it failed to procure raw materials due
to lack of funds. KOGIES, relying on Chung Fu Industries
(Phils.), Inc. v. Court of Appeals,12 insisted that the
arbitration clause was without question valid.
After KOGIES filed a Supplemental Memorandum with
Motion to Dismiss13 answering PGSMCs memorandum of
July 22, 1998 and seeking dismissal of PGSMCs
counterclaims, KOGIES, on August 4, 1998, filed its Motion
for Reconsideration14 of the July 23, 1998 Order denying its
application for an injunctive writ claiming that the contract
was not merely for machinery and facilities worth USD
1,224,000 but was for the sale of an "LPG manufacturing
plant" consisting of "supply of all the machinery and
facilities" and "transfer of technology" for a total contract
price of USD 1,530,000 such that the dismantling and
transfer of the machinery and facilities would result in the
dismantling and transfer of the very plant itself to the great
prejudice of KOGIES as the still unpaid owner/seller of the
plant. Moreover, KOGIES points out that the arbitration
clause under Art. 15 of the Contract as amended was a
valid arbitration stipulation under Art. 2044 of the Civil Code
and as held by this Court in Chung Fu Industries (Phils.),
Inc.15
In the meantime, PGSMC filed a Motion for Inspection of
Things16 to determine whether there was indeed alteration
of the quantity and lowering of quality of the machineries
and equipment, and whether these were properly installed.
KOGIES opposed the motion positing that the queries and
issues raised in the motion for inspection fell under the
coverage of the arbitration clause in their contract.
On September 21, 1998, the trial court issued an Order (1)
granting PGSMCs motion for inspection; (2) denying
KOGIES motion for reconsideration of the July 23, 1998
RTC Order; and (3) denying KOGIES motion to dismiss
PGSMCs
compulsory
counterclaims
as
these
counterclaims fell within the requisites of compulsory
counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for
Reconsideration17 of the September 21, 1998 RTC Order
granting inspection of the plant and denying dismissal of
PGSMCs compulsory counterclaims.
Ten days after, on October 12, 1998, without waiting for the
resolution of its October 2, 1998 urgent motion for
reconsideration, KOGIES filed before the Court of Appeals
(CA) a petition for certiorari18 docketed as CA-G.R. SP No.
49249, seeking annulment of the July 23, 1998 and
September 21, 1998 RTC Orders and praying for the
issuance of writs of prohibition, mandamus, and preliminary
injunction to enjoin the RTC and PGSMC from inspecting,
dismantling, and transferring the machineries and
equipment in the Carmona plant, and to direct the RTC to
enforce the specific agreement on arbitration to resolve the
dispute.
In the meantime, on October 19, 1998, the RTC denied
KOGIES urgent motion for reconsideration and directed the

103

Branch Sheriff to proceed with the inspection of the


machineries and equipment in the plant on October 28,
1998.19
Thereafter, KOGIES filed a Supplement to the Petition 20 in
CA-G.R. SP No. 49249 informing the CA about the October
19, 1998 RTC Order. It also reiterated its prayer for the
issuance of the writs of prohibition, mandamus and
preliminary injunction which was not acted upon by the CA.
KOGIES asserted that the Branch Sheriff did not have the
technical expertise to ascertain whether or not the
machineries and equipment conformed to the specifications
in the contract and were properly installed.
On November 11, 1998, the Branch Sheriff filed his Sheriffs
Report21 finding that the enumerated machineries and
equipment were not fully and properly installed.
The Court of Appeals affirmed the trial court and declared
the arbitration clause against public policy
On May 30, 2000, the CA rendered the assailed Decision 22
affirming the RTC Orders and dismissing the petition for
certiorari filed by KOGIES. The CA found that the RTC did
not gravely abuse its discretion in issuing the assailed July
23, 1998 and September 21, 1998 Orders. Moreover, the
CA reasoned that KOGIES contention that the total contract
price for USD 1,530,000 was for the whole plant and had
not been fully paid was contrary to the finding of the RTC
that PGSMC fully paid the price of USD 1,224,000, which
was for all the machineries and equipment. According to the
CA, this determination by the RTC was a factual finding
beyond the ambit of a petition for certiorari.
On the issue of the validity of the arbitration clause, the CA
agreed with the lower court that an arbitration clause which
provided for a final determination of the legal rights of the
parties to the contract by arbitration was against public
policy.
On the issue of nonpayment of docket fees and nonattachment of a certificate of non-forum shopping by
PGSMC, the CA held that the counterclaims of PGSMC
were compulsory ones and payment of docket fees was not
required since the Answer with counterclaim was not an
initiatory pleading. For the same reason, the CA said a
certificate of non-forum shopping was also not required.
Furthermore, the CA held that the petition for certiorari had
been filed prematurely since KOGIES did not wait for the
resolution of its urgent motion for reconsideration of the
September 21, 1998 RTC Order which was the plain,
speedy, and adequate remedy available. According to the
CA, the RTC must be given the opportunity to correct any
alleged error it has committed, and that since the assailed
orders were interlocutory, these cannot be the subject of a
petition for certiorari.
Hence, we have this Petition for Review on Certiorari under
Rule 45.

Petitioner posits that the appellate court committed the


following errors:
a. PRONOUNCING THE QUESTION OF
OWNERSHIP OVER THE MACHINERY AND
FACILITIES AS "A QUESTION OF FACT"
"BEYOND THE AMBIT OF A PETITION FOR
CERTIORARI"
INTENDED
ONLY
FOR
CORRECTION OF ERRORS OF JURISDICTION
OR
GRAVE
ABUSE
OF
DISCRETION
AMOUNTING TO LACK OF (SIC) EXCESS OF
JURISDICTION, AND CONCLUDING THAT THE
TRIAL COURTS FINDING ON THE SAME
QUESTION WAS IMPROPERLY RAISED IN THE
PETITION BELOW;
b. DECLARING AS NULL AND VOID
ARBITRATION CLAUSE IN ARTICLE 15 OF
CONTRACT BETWEEN THE PARTIES
BEING "CONTRARY TO PUBLIC POLICY"
FOR
OUSTING
THE
COURTS
JURISDICTION;

THE
THE
FOR
AND
OF

c. DECREEING PRIVATE RESPONDENTS


COUNTERCLAIMS TO BE ALL COMPULSORY
NOT NECESSITATING PAYMENT OF DOCKET
FEES AND CERTIFICATION OF NON-FORUM
SHOPPING;
d. RULING THAT THE PETITION WAS FILED
PREMATURELY WITHOUT WAITING FOR THE
RESOLUTION
OF
THE
MOTION
FOR
RECONSIDERATION OF THE ORDER DATED
SEPTEMBER 21, 1998 OR WITHOUT GIVING
THE TRIAL COURT AN OPPORTUNITY TO
CORRECT ITSELF;
e. PROCLAIMING THE TWO ORDERS DATED
JULY 23 AND SEPTEMBER 21, 1998 NOT TO BE
PROPER SUBJECTS OF CERTIORARI AND
PROHIBITION FOR BEING "INTERLOCUTORY IN
NATURE;"
f. NOT GRANTING THE RELIEFS AND
REMEDIES PRAYED FOR IN HE (SIC) PETITION
AND, INSTEAD, DISMISSING THE SAME FOR
ALLEGEDLY "WITHOUT MERIT."23
The Courts Ruling
The petition is partly meritorious.
Before we delve into the substantive issues, we shall first
tackle the procedural issues.
The rules on the payment of docket fees for counterclaims
and cross claims were amended effective August 16, 2004
KOGIES strongly argues that when PGSMC filed the
counterclaims, it should have paid docket fees and filed a

The Issues

104

certificate of non-forum shopping, and that its failure to do


so was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of PGSMC
were incorporated in its Answer with Compulsory
Counterclaim dated July 17, 1998 in accordance with
Section 8 of Rule 11, 1997 Revised Rules of Civil
Procedure, the rule that was effective at the time the
Answer with Counterclaim was filed. Sec. 8 on existing
counterclaim or cross-claim states, "A compulsory
counterclaim or a cross-claim that a defending party has at
the time he files his answer shall be contained therein."

Also, appeals from interlocutory orders would open the


floodgates to endless occasions for dilatory motions. Thus,
where the interlocutory order was issued without or in
excess of jurisdiction or with grave abuse of discretion, the
remedy is certiorari.29
The alleged grave abuse of discretion of the respondent
court equivalent to lack of jurisdiction in the issuance of the
two assailed orders coupled with the fact that there is no
plain, speedy, and adequate remedy in the ordinary course
of law amply provides the basis for allowing the resort to a
petition for certiorari under Rule 65.
Prematurity of the petition before the CA

On July 17, 1998, at the time PGSMC filed its Answer


incorporating its counterclaims against KOGIES, it was not
liable to pay filing fees for said counterclaims being
compulsory in nature. We stress, however, that effective
August 16, 2004 under Sec. 7, Rule 141, as amended by
A.M. No. 04-2-04-SC, docket fees are now required to be
paid in compulsory counterclaim or cross-claims.

Neither do we think that KOGIES was guilty of forum


shopping in filing the petition for certiorari. Note that
KOGIES motion for reconsideration of the July 23, 1998
RTC Order which denied the issuance of the injunctive writ
had already been denied. Thus, KOGIES only remedy was
to assail the RTCs interlocutory order via a petition for
certiorari under Rule 65.

As to the failure to submit a certificate of forum shopping,


PGSMCs Answer is not an initiatory pleading which
requires a certification against forum shopping under Sec.
524 of Rule 7, 1997 Revised Rules of Civil Procedure. It is a
responsive pleading, hence, the courts a quo did not
commit reversible error in denying KOGIES motion to
dismiss PGSMCs compulsory counterclaims.

While the October 2, 1998 motion for reconsideration of


KOGIES of the September 21, 1998 RTC Order relating to
the inspection of things, and the allowance of the
compulsory counterclaims has not yet been resolved, the
circumstances in this case would allow an exception to the
rule that before certiorari may be availed of, the petitioner
must have filed a motion for reconsideration and said
motion should have been first resolved by the court a quo.
The reason behind the rule is "to enable the lower court, in
the first instance, to pass upon and correct its mistakes
without the intervention of the higher court." 30

Interlocutory orders proper subject of certiorari


Citing Gamboa v. Cruz,25 the CA also pronounced that
"certiorari and Prohibition are neither the remedies to
question the propriety of an interlocutory order of the trial
court."26 The CA erred on its reliance on Gamboa. Gamboa
involved the denial of a motion to acquit in a criminal case
which was not assailable in an action for certiorari since the
denial of a motion to quash required the accused to plead
and to continue with the trial, and whatever objections the
accused had in his motion to quash can then be used as
part of his defense and subsequently can be raised as
errors on his appeal if the judgment of the trial court is
adverse to him. The general rule is that interlocutory orders
cannot be challenged by an appeal. 27 Thus, in Yamaoka v.
Pescarich Manufacturing Corporation, we held:
The proper remedy in such cases is an ordinary
appeal from an adverse judgment on the merits,
incorporating in said appeal the grounds for
assailing the interlocutory orders. Allowing appeals
from interlocutory orders would result in the sorry
spectacle of a case being subject of a
counterproductive ping-pong to and from the
appellate court as often as a trial court is perceived
to have made an error in any of its interlocutory
rulings. However, where the assailed interlocutory
order was issued with grave abuse of discretion or
patently erroneous and the remedy of appeal
would not afford adequate and expeditious relief,
the Court allows certiorari as a mode of redress. 28

The September 21, 1998 RTC Order directing the branch


sheriff to inspect the plant, equipment, and facilities when
he is not competent and knowledgeable on said matters is
evidently flawed and devoid of any legal support. Moreover,
there is an urgent necessity to resolve the issue on the
dismantling of the facilities and any further delay would
prejudice the interests of KOGIES. Indeed, there is real and
imminent threat of irreparable destruction or substantial
damage to KOGIES equipment and machineries. We find
the resort to certiorari based on the gravely abusive orders
of the trial court sans the ruling on the October 2, 1998
motion for reconsideration to be proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15 of the
Contract, the arbitration clause. It provides:
Article 15. Arbitration.All disputes, controversies,
or differences which may arise between the
parties, out of or in relation to or in connection with
this Contract or for the breach thereof, shall finally
be settled by arbitration in Seoul, Korea in
accordance with the Commercial Arbitration Rules
of the Korean Commercial Arbitration Board. The
award rendered by the arbitration(s) shall be final

105

and binding upon


(Emphasis supplied.)

both

parties

concerned.

Petitioner claims the RTC and the CA erred in ruling that the
arbitration clause is null and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law of the
place where the contract is made governs. Lex loci
contractus. The contract in this case was perfected here in
the Philippines. Therefore, our laws ought to govern.
Nonetheless, Art. 2044 of the Civil Code sanctions the
validity of mutually agreed arbitral clause or the finality and
binding effect of an arbitral award. Art. 2044 provides, "Any
stipulation that the arbitrators award or decision shall be
final, is valid, without prejudice to Articles 2038, 2039 and
2040." (Emphasis supplied.)
Arts. 2038,31 2039,32 and 204033 abovecited refer to
instances where a compromise or an arbitral award, as
applied to Art. 2044 pursuant to Art. 2043, 34 may be voided,
rescinded, or annulled, but these would not denigrate the
finality of the arbitral award.
The arbitration clause was mutually and voluntarily agreed
upon by the parties. It has not been shown to be contrary to
any law, or against morals, good customs, public order, or
public policy. There has been no showing that the parties
have not dealt with each other on equal footing. We find no
reason why the arbitration clause should not be respected
and complied with by both parties. In Gonzales v. Climax
Mining Ltd.,35 we held that submission to arbitration is a
contract and that a clause in a contract providing that all
matters in dispute between the parties shall be referred to
arbitration is a contract.36 Again in Del Monte CorporationUSA v. Court of Appeals, we likewise ruled that "[t]he
provision to submit to arbitration any dispute arising
therefrom and the relationship of the parties is part of that
contract and is itself a contract."37
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the arbitration
must be done in Seoul, Korea in accordance with the
Commercial Arbitration Rules of the KCAB, and that the
arbitral award is final and binding, is not contrary to public
policy. This Court has sanctioned the validity of arbitration
clauses in a catena of cases. In the 1957 case of
Eastboard Navigation Ltd. v. Juan Ysmael and Co., Inc.,38
this Court had occasion to rule that an arbitration clause to
resolve differences and breaches of mutually agreed
contractual terms is valid. In BF Corporation v. Court of
Appeals, we held that "[i]n this jurisdiction, arbitration has
been held valid and constitutional. Even before the approval
on June 19, 1953 of Republic Act No. 876, this Court has
countenanced the settlement of disputes through
arbitration. Republic Act No. 876 was adopted to
supplement the New Civil Codes provisions on
arbitration."39 And in LM Power Engineering Corporation v.
Capitol Industrial Construction Groups, Inc., we declared
that:

Being an inexpensive, speedy and amicable


method of settling disputes, arbitrationalong with
mediation,
conciliation
and
negotiationis
encouraged by the Supreme Court. Aside from
unclogging judicial dockets, arbitration also
hastens the resolution of disputes, especially of the
commercial kind. It is thus regarded as the "wave
of the future" in international civil and commercial
disputes. Brushing aside a contractual agreement
calling for arbitration between the parties would be
a step backward.
Consistent with the above-mentioned policy of
encouraging
alternative
dispute
resolution
methods, courts should liberally construe
arbitration clauses. Provided such clause is
susceptible of an interpretation that covers the
asserted dispute, an order to arbitrate should be
granted. Any doubt should be resolved in favor of
arbitration.40
Having said that the instant arbitration clause is not against
public policy, we come to the question on what governs an
arbitration clause specifying that in case of any dispute
arising from the contract, an arbitral panel will be
constituted in a foreign country and the arbitration rules of
the foreign country would govern and its award shall be
final and binding.
RA 9285 incorporated the
to which we are a signatory

UNCITRAL

Model

law

For domestic arbitration proceedings, we have particular


agencies to arbitrate disputes arising from contractual
relations. In case a foreign arbitral body is chosen by the
parties, the arbitration rules of our domestic arbitration
bodies would not be applied. As signatory to the Arbitration
Rules of the UNCITRAL Model Law on International
Commercial Arbitration41 of the United Nations Commission
on International Trade Law (UNCITRAL) in the New York
Convention on June 21, 1985, the Philippines committed
itself to be bound by the Model Law. We have even
incorporated the Model Law in Republic Act No. (RA) 9285,
otherwise known as the Alternative Dispute Resolution Act
of 2004 entitled An Act to Institutionalize the Use of an
Alternative Dispute Resolution System in the Philippines
and to Establish the Office for Alternative Dispute
Resolution, and for Other Purposes, promulgated on April 2,
2004. Secs. 19 and 20 of Chapter 4 of the Model Law are
the pertinent provisions:
CHAPTER 4 - INTERNATIONAL COMMERCIAL
ARBITRATION
SEC. 19. Adoption of the Model Law on
International
Commercial
Arbitration.
International commercial arbitration shall be
governed by the Model Law on International
Commercial Arbitration (the "Model Law") adopted
by the United Nations Commission on International
Trade Law on June 21, 1985 (United Nations
Document A/40/17) and recommended for

106

enactment by the General Assembly in Resolution


No. 40/72 approved on December 11, 1985, copy
of which is hereto attached as Appendix "A".
SEC. 20. Interpretation of Model Law.In
interpreting the Model Law, regard shall be had to
its international origin and to the need for uniformity
in its interpretation and resort may be made to the
travaux preparatories and the report of the
Secretary General of the United Nations
Commission on International Trade Law dated
March 25, 1985 entitled, "International Commercial
Arbitration: Analytical Commentary on Draft Trade
identified by reference number A/CN. 9/264."
While RA 9285 was passed only in 2004, it nonetheless
applies in the instant case since it is a procedural law which
has a retroactive effect. Likewise, KOGIES filed its
application for arbitration before the KCAB on July 1, 1998
and it is still pending because no arbitral award has yet
been rendered. Thus, RA 9285 is applicable to the instant
case. Well-settled is the rule that procedural laws are
construed to be applicable to actions pending and
undetermined at the time of their passage, and are deemed
retroactive in that sense and to that extent. As a general
rule, the retroactive application of procedural laws does not
violate any personal rights because no vested right has yet
attached nor arisen from them.42
Among the pertinent features of RA 9285 applying and
incorporating the UNCITRAL Model Law are the following:
(1) The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction over
disputes that are properly the subject of arbitration pursuant
to an arbitration clause, and mandates the referral to
arbitration in such cases, thus:
SEC. 24. Referral to Arbitration.A court before
which an action is brought in a matter which is the
subject matter of an arbitration agreement shall, if
at least one party so requests not later than the
pre-trial conference, or upon the request of both
parties thereafter, refer the parties to arbitration
unless it finds that the arbitration agreement is null
and void, inoperative or incapable of being
performed.
(2) Foreign arbitral awards must be confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the
parties in the arbitration clause to be final and binding are
not immediately enforceable or cannot be implemented
immediately. Sec. 3543 of the UNCITRAL Model Law
stipulates the requirement for the arbitral award to be
recognized by a competent court for enforcement, which
court under Sec. 36 of the UNCITRAL Model Law may
refuse recognition or enforcement on the grounds provided
for. RA 9285 incorporated these provisos to Secs. 42, 43,
and 44 relative to Secs. 47 and 48, thus:

SEC. 42. Application of the New York


Convention.The New York Convention shall
govern the recognition and enforcement of arbitral
awards covered by said Convention.
The recognition and enforcement of such arbitral
awards shall be filed with the Regional Trial Court
in accordance with the rules of procedure to be
promulgated by the Supreme Court. Said
procedural rules shall provide that the party relying
on the award or applying for its enforcement shall
file with the court the original or authenticated copy
of the award and the arbitration agreement. If the
award or agreement is not made in any of the
official languages, the party shall supply a duly
certified translation thereof into any of such
languages.
The applicant shall establish that the country in
which foreign arbitration award was made in party
to the New York Convention.
xxxx
SEC. 43. Recognition and Enforcement of Foreign
Arbitral Awards Not Covered by the New York
Convention.The recognition and enforcement of
foreign arbitral awards not covered by the New
York Convention shall be done in accordance with
procedural rules to be promulgated by the
Supreme Court. The Court may, on grounds of
comity and reciprocity, recognize and enforce a
non-convention award as a convention award.
SEC. 44. Foreign Arbitral Award Not Foreign
Judgment.A foreign arbitral award when
confirmed by a court of a foreign country, shall be
recognized and enforced as a foreign arbitral
award and not as a judgment of a foreign court.
A foreign arbitral award, when confirmed by the
Regional Trial Court, shall be enforced in the same
manner as final and executory decisions of courts
of law of the Philippines
xxxx
SEC. 47. Venue and Jurisdiction.Proceedings for
recognition and enforcement of an arbitration
agreement or for vacations, setting aside,
correction or modification of an arbitral award, and
any application with a court for arbitration
assistance and supervision shall be deemed as
special proceedings and shall be filed with the
Regional Trial Court (i) where arbitration
proceedings are conducted; (ii) where the asset to
be attached or levied upon, or the act to be
enjoined is located; (iii) where any of the parties to
the dispute resides or has his place of business; or
(iv) in the National Judicial Capital Region, at the
option of the applicant.

107

SEC. 48. Notice of Proceeding to Parties.In a


special proceeding for recognition and enforcement
of an arbitral award, the Court shall send notice to
the parties at their address of record in the
arbitration, or if any part cannot be served notice at
such address, at such partys last known address.
The notice shall be sent al least fifteen (15) days
before the date set for the initial hearing of the
application.
It is now clear that foreign arbitral awards when confirmed
by the RTC are deemed not as a judgment of a foreign
court but as a foreign arbitral award, and when confirmed,
are enforced as final and executory decisions of our courts
of law.
Thus, it can be gleaned that the concept of a final and
binding arbitral award is similar to judgments or awards
given by some of our quasi-judicial bodies, like the National
Labor Relations Commission and Mines Adjudication
Board, whose final judgments are stipulated to be final and
binding, but not immediately executory in the sense that
they may still be judicially reviewed, upon the instance of
any party. Therefore, the final foreign arbitral awards are
similarly situated in that they need first to be confirmed by
the RTC.
(3) The RTC has jurisdiction to review foreign arbitral
awards
Sec. 42 in relation to Sec. 45 of RA 9285 designated and
vested the RTC with specific authority and jurisdiction to set
aside, reject, or vacate a foreign arbitral award on grounds
provided under Art. 34(2) of the UNCITRAL Model Law.
Secs. 42 and 45 provide:
SEC. 42. Application of the New York
Convention.The New York Convention shall
govern the recognition and enforcement of arbitral
awards covered by said Convention.
The recognition and enforcement of such arbitral
awards shall be filed with the Regional Trial Court
in accordance with the rules of procedure to be
promulgated by the Supreme Court. Said
procedural rules shall provide that the party relying
on the award or applying for its enforcement shall
file with the court the original or authenticated copy
of the award and the arbitration agreement. If the
award or agreement is not made in any of the
official languages, the party shall supply a duly
certified translation thereof into any of such
languages.
The applicant shall establish that the country in
which foreign arbitration award was made is party
to the New York Convention.
If the application for rejection or suspension of
enforcement of an award has been made, the
Regional Trial Court may, if it considers it proper,
vacate its decision and may also, on the

application of the party claiming recognition or


enforcement of the award, order the party to
provide appropriate security.
xxxx
SEC. 45. Rejection of a Foreign Arbitral Award.A
party to a foreign arbitration proceeding may
oppose an application for recognition and
enforcement of the arbitral award in accordance
with the procedures and rules to be promulgated
by the Supreme Court only on those grounds
enumerated under Article V of the New York
Convention. Any other ground raised shall be
disregarded by the Regional Trial Court.
Thus, while the RTC does not have jurisdiction over
disputes governed by arbitration mutually agreed upon by
the parties, still the foreign arbitral award is subject to
judicial review by the RTC which can set aside, reject, or
vacate it. In this sense, what this Court held in Chung Fu
Industries (Phils.), Inc. relied upon by KOGIES is applicable
insofar as the foreign arbitral awards, while final and
binding, do not oust courts of jurisdiction since these arbitral
awards are not absolute and without exceptions as they are
still judicially reviewable. Chapter 7 of RA 9285 has made it
clear that all arbitral awards, whether domestic or foreign,
are subject to judicial review on specific grounds provided
for.
(4) Grounds for judicial review different in domestic and
foreign arbitral awards
The differences between a final arbitral award from an
international or foreign arbitral tribunal and an award given
by a local arbitral tribunal are the specific grounds or
conditions that vest jurisdiction over our courts to review the
awards.
For foreign or international arbitral awards which must first
be confirmed by the RTC, the grounds for setting aside,
rejecting or vacating the award by the RTC are provided
under Art. 34(2) of the UNCITRAL Model Law.
For final domestic arbitral awards, which also need
confirmation by the RTC pursuant to Sec. 23 of RA 876 44
and shall be recognized as final and executory decisions of
the RTC,45 they may only be assailed before the RTC and
vacated on the grounds provided under Sec. 25 of RA
876.46
(5) RTC decision of assailed foreign arbitral award
appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as
the remedy of an aggrieved party in cases where the RTC
sets aside, rejects, vacates, modifies, or corrects an arbitral
award, thus:
SEC. 46. Appeal from Court Decision or Arbitral
Awards.A decision of the Regional Trial Court

108

confirming, vacating, setting aside, modifying or


correcting an arbitral award may be appealed to
the Court of Appeals in accordance with the rules
and procedure to be promulgated by the Supreme
Court.
The losing party who appeals from the judgment of
the court confirming an arbitral award shall be
required by the appellate court to post a
counterbond executed in favor of the prevailing
party equal to the amount of the award in
accordance with the rules to be promulgated by the
Supreme Court.
Thereafter, the CA decision may further be appealed or
reviewed before this Court through a petition for review
under Rule 45 of the Rules of Court.
PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285, PGSMC
must submit to the foreign arbitration as it bound itself
through the subject contract. While it may have misgivings
on the foreign arbitration done in Korea by the KCAB, it has
available remedies under RA 9285. Its interests are duly
protected by the law which requires that the arbitral award
that may be rendered by KCAB must be confirmed here by
the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its
contention that an arbitration clause, stipulating that the
arbitral award is final and binding, does not oust our courts
of jurisdiction as the international arbitral award, the award
of which is not absolute and without exceptions, is still
judicially reviewable under certain conditions provided for
by the UNCITRAL Model Law on ICA as applied and
incorporated in RA 9285.
Finally, it must be noted that there is nothing in the subject
Contract which provides that the parties may dispense with
the arbitration clause.
Unilateral rescission improper and illegal
Having ruled that the arbitration clause of the subject
contract is valid and binding on the parties, and not contrary
to public policy; consequently, being bound to the contract
of arbitration, a party may not unilaterally rescind or
terminate the contract for whatever cause without first
resorting to arbitration.

What this Court held in University of the Philippines v. De


Los Angeles47 and reiterated in succeeding cases, 48 that the
act of treating a contract as rescinded on account of
infractions by the other contracting party is valid albeit
provisional as it can be judicially assailed, is not applicable
to the instant case on account of a valid stipulation on
arbitration. Where an arbitration clause in a contract is
availing, neither of the parties can unilaterally treat the
contract as rescinded since whatever infractions or
breaches by a party or differences arising from the contract
must be brought first and resolved by arbitration, and not
through an extrajudicial rescission or judicial action.
The issues arising from the contract between PGSMC and
KOGIES on whether the equipment and machineries
delivered and installed were properly installed and
operational in the plant in Carmona, Cavite; the ownership
of equipment and payment of the contract price; and
whether there was substantial compliance by KOGIES in
the production of the samples, given the alleged fact that
PGSMC could not supply the raw materials required to
produce the sample LPG cylinders, are matters proper for
arbitration. Indeed, we note that on July 1, 1998, KOGIES
instituted an Application for Arbitration before the KCAB in
Seoul, Korea pursuant to Art. 15 of the Contract as
amended. Thus, it is incumbent upon PGSMC to abide by
its commitment to arbitrate.
Corollarily, the trial court gravely abused its discretion in
granting PGSMCs Motion for Inspection of Things on
September 21, 1998, as the subject matter of the motion is
under the primary jurisdiction of the mutually agreed arbitral
body, the KCAB in Korea.
In addition, whatever findings and conclusions made by the
RTC Branch Sheriff from the inspection made on October
28, 1998, as ordered by the trial court on October 19, 1998,
is of no worth as said Sheriff is not technically competent to
ascertain the actual status of the equipment and
machineries as installed in the plant.
For these reasons, the September 21, 1998 and October
19, 1998 RTC Orders pertaining to the grant of the
inspection of the equipment and machineries have to be
recalled and nullified.
Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue petitioner
raised on whether the total contract price of USD 1,530,000
was for the whole plant and its installation is beyond the
ambit of a Petition for Certiorari.
Petitioners position is untenable.
It is settled that questions of fact cannot be raised in an
original action for certiorari.49 Whether or not there was full
payment for the machineries and equipment and installation
is indeed a factual issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of
discretion is the order of the RTC in resolving the issue on

109

the ownership of the plant when it is the arbitral body


(KCAB) and not the RTC which has jurisdiction and
authority over the said issue. The RTCs determination of
such factual issue constitutes grave abuse of discretion and
must be reversed and set aside.
RTC has interim jurisdiction to protect the rights of the
parties
Anent the July 23, 1998 Order denying the issuance of the
injunctive writ paving the way for PGSMC to dismantle and
transfer the equipment and machineries, we find it to be in
order considering the factual milieu of the instant case.
Firstly, while the issue of the proper installation of the
equipment and machineries might well be under the primary
jurisdiction of the arbitral body to decide, yet the RTC under
Sec. 28 of RA 9285 has jurisdiction to hear and grant
interim measures to protect vested rights of the parties.
Sec. 28 pertinently provides:

(d) Interim or provisional relief is requested by


written application transmitted by reasonable
means to the Court or arbitral tribunal as the case
may be and the party against whom the relief is
sought, describing in appropriate detail the precise
relief, the party against whom the relief is
requested, the grounds for the relief, and the
evidence supporting the request.
(e) The order shall be binding upon the parties.
(f) Either party may apply with the Court for
assistance in implementing or enforcing an interim
measure ordered by an arbitral tribunal.
(g) A party who does not comply with the order
shall be liable for all damages resulting from
noncompliance, including all expenses, and
reasonable attorney's fees, paid in obtaining the
orders judicial enforcement. (Emphasis ours.)

SEC. 28. Grant of interim Measure of Protection.


(a) It is not incompatible with an arbitration
agreement for a party to request, before
constitution of the tribunal, from a Court to grant
such measure. After constitution of the arbitral
tribunal and during arbitral proceedings, a request
for an interim measure of protection, or
modification thereof, may be made with the arbitral
or to the extent that the arbitral tribunal has no
power to act or is unable to act effectivity, the
request may be made with the Court. The arbitral
tribunal is deemed constituted when the sole
arbitrator or the third arbitrator, who has been
nominated, has accepted the nomination and
written communication of said nomination and
acceptance has been received by the party making
the request.

Art. 17(2) of the UNCITRAL Model Law on ICA defines an


"interim measure" of protection as:

(b) The following rules on interim or provisional


relief shall be observed:

(b) Take action that would prevent, or refrain from


taking action that is likely to cause, current or
imminent harm or prejudice to the arbitral process
itself;

Any party may request that provisional relief be


granted against the adverse party.
Such relief may be granted:
(i) to prevent irreparable loss or injury;
(ii) to provide security for the performance
of any obligation;
(iii) to produce or preserve any evidence;
or
(iv) to compel any other appropriate act or
omission.
(c) The order granting provisional relief may be
conditioned upon the provision of security or any
act or omission specified in the order.

Article 17. Power of arbitral tribunal to order interim


measures
xxx xxx xxx
(2) An interim measure is any temporary measure,
whether in the form of an award or in another form,
by which, at any time prior to the issuance of the
award by which the dispute is finally decided, the
arbitral tribunal orders a party to:
(a) Maintain or restore the status quo pending
determination of the dispute;

(c) Provide a means of preserving assets out of


which a subsequent award may be satisfied; or
(d) Preserve evidence that may be relevant and
material to the resolution of the dispute.
Art. 17 J of UNCITRAL Model Law on ICA also grants
courts power and jurisdiction to issue interim measures:
Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an
interim measure in relation to arbitration
proceedings, irrespective of whether their place is
in the territory of this State, as it has in relation to
proceedings in courts. The court shall exercise
such power in accordance with its own procedures

110

in consideration of the
international arbitration.

specific

features

of

In the recent 2006 case of Transfield Philippines, Inc. v.


Luzon Hydro Corporation, we were explicit that even "the
pendency of an arbitral proceeding does not foreclose
resort to the courts for provisional reliefs." We explicated
this way:
As a fundamental point, the pendency of arbitral
proceedings does not foreclose resort to the courts
for provisional reliefs. The Rules of the ICC, which
governs the parties arbitral dispute, allows the
application of a party to a judicial authority for
interim or conservatory measures. Likewise,
Section 14 of Republic Act (R.A.) No. 876 (The
Arbitration Law) recognizes the rights of any party
to petition the court to take measures to safeguard
and/or conserve any matter which is the subject of
the dispute in arbitration. In addition, R.A. 9285,
otherwise known as the "Alternative Dispute
Resolution Act of 2004," allows the filing of
provisional or interim measures with the regular
courts whenever the arbitral tribunal has no power
to act or to act effectively.50
It is thus beyond cavil that the RTC has authority and
jurisdiction to grant interim measures of protection.
Secondly, considering that the equipment and machineries
are in the possession of PGSMC, it has the right to protect
and preserve the equipment and machineries in the best
way it can. Considering that the LPG plant was nonoperational, PGSMC has the right to dismantle and transfer
the equipment and machineries either for their protection
and preservation or for the better way to make good use of
them which is ineluctably within the management discretion
of PGSMC.
Thirdly, and of greater import is the reason that maintaining
the equipment and machineries in Worths property is not to
the best interest of PGSMC due to the prohibitive rent while
the LPG plant as set-up is not operational. PGSMC was
losing PhP322,560 as monthly rentals or PhP3.87M for
1998 alone without considering the 10% annual rent
increment in maintaining the plant.

pursuant to the valid arbitration clause of its contract with


KOGIES.
PGSMC to
machineries

preserve

the

subject

equipment

and

Finally, while PGSMC may have been granted the right to


dismantle and transfer the subject equipment and
machineries, it does not have the right to convey or dispose
of the same considering the pending arbitral proceedings to
settle the differences of the parties. PGSMC therefore must
preserve and maintain the subject equipment and
machineries with the diligence of a good father of a family 51
until final resolution of the arbitral proceedings and
enforcement of the award, if any.
WHEREFORE, this petition is PARTLY GRANTED, in that:
(1) The May 30, 2000 CA Decision in CA-G.R. SP No.
49249 is REVERSED and SET ASIDE;
(2) The September 21, 1998 and October 19, 1998 RTC
Orders in Civil Case No. 98-117 are REVERSED and SET
ASIDE;
(3) The parties are hereby ORDERED to submit themselves
to the arbitration of their dispute and differences arising
from the subject Contract before the KCAB; and
(4) PGSMC is hereby ALLOWED to dismantle and transfer
the equipment and machineries, if it had not done so, and
ORDERED to preserve and maintain them until the finality
of whatever arbitral award is given in the arbitration
proceedings.
No pronouncement as to costs.
SO ORDERED.

Fourthly, and corollarily, while the KCAB can rule on


motions or petitions relating to the preservation or transfer
of the equipment and machineries as an interim measure,
yet on hindsight, the July 23, 1998 Order of the RTC
allowing the transfer of the equipment and machineries
given the non-recognition by the lower courts of the arbitral
clause, has accorded an interim measure of protection to
PGSMC which would otherwise been irreparably damaged.
Fifth, KOGIES is not unjustly prejudiced as it has already
been paid a substantial amount based on the contract.
Moreover, KOGIES is amply protected by the arbitral action
it has instituted before the KCAB, the award of which can
be enforced in our jurisdiction through the RTC. Besides, by
our decision, PGSMC is compelled to submit to arbitration

111

destination. One (1) truck, loaded with 11 bundles or 232


pieces of copper cathodes, failed to deliver its cargo.

RULE 6 SEC 8 CROSS CLAIM


G.R. No. 179446

January 10, 2011

LOADMASTERS CUSTOMS SERVICES, INC., Petitioner,


vs.
GLODEL BROKERAGE CORPORATION and R&B
INSURANCE CORPORATION, Respondents.

Later on, the said truck, an Isuzu with Plate No. NSD-117,
was recovered but without the copper cathodes. Because of
this incident, Columbia filed with R&B Insurance a claim for
insurance indemnity in the amount of P1,903,335.39. After
the requisite investigation and adjustment, R&B Insurance
paid Columbia the amount of P1,896,789.62 as insurance
indemnity.
R&B Insurance, thereafter, filed a complaint for damages
against both Loadmasters and Glodel before the Regional
Trial Court, Branch 14, Manila (RTC), docketed as Civil
Case No. 02-103040. It sought reimbursement of the
amount it had paid to Columbia for the loss of the subject
cargo. It claimed that it had been subrogated "to the right of
the consignee to recover from the party/parties who may be
held legally liable for the loss."2

DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of
the Revised Rules of Court assailing the August 24, 2007
Decision1 of the Court of Appeals (CA) in CA-G.R. CV No.
82822, entitled "R&B Insurance Corporation v. Glodel
Brokerage Corporation and Loadmasters Customs
Services, Inc.," which held petitioner Loadmasters Customs
Services, Inc. (Loadmasters) liable to respondent Glodel
Brokerage Corporation (Glodel) in the amount of
P1,896,789.62 representing the insurance indemnity which
R&B Insurance Corporation (R&B Insurance) paid to the
insured-consignee, Columbia Wire and Cable Corporation
(Columbia).
THE FACTS:
On August 28, 2001, R&B Insurance issued Marine Policy
No. MN-00105/2001 in favor of Columbia to insure the
shipment of 132 bundles of electric copper cathodes
against All Risks. On August 28, 2001, the cargoes were
shipped on board the vessel "Richard Rey" from Isabela,
Leyte, to Pier 10, North Harbor, Manila. They arrived on the
same date.
Columbia engaged the services of Glodel for the release
and withdrawal of the cargoes from the pier and the
subsequent delivery to its warehouses/plants. Glodel, in
turn, engaged the services of Loadmasters for the use of its
delivery trucks to transport the cargoes to Columbias
warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned
by Loadmasters, driven by its employed drivers and
accompanied by its employed truck helpers. Six (6)
truckloads of copper cathodes were to be delivered to
Balagtas, Bulacan, while the other six (6) truckloads were
destined for Lawang Bato, Valenzuela City. The cargoes in
six truckloads for Lawang Bato were duly delivered in
Columbias warehouses there. Of the six (6) trucks en route
to Balagtas, Bulacan, however, only five (5) reached the

On November 19, 2003, the RTC rendered a decision 3


holding Glodel liable for damages for the loss of the subject
cargo and dismissing Loadmasters counterclaim for
damages and attorneys fees against R&B Insurance. The
dispositive portion of the decision reads:
WHEREFORE, all premises considered, the plaintiff having
established by preponderance of evidence its claims
against defendant Glodel Brokerage Corporation, judgment
is hereby rendered ordering the latter:
1. To pay plaintiff R&B Insurance Corporation the
sum of P1,896,789.62 as actual and compensatory
damages, with interest from the date of complaint
until fully paid;
2. To pay plaintiff R&B Insurance Corporation the
amount equivalent to 10% of the principal amount
recovered as and for attorneys fees plus
P1,500.00 per appearance in Court;
3. To pay plaintiff R&B Insurance Corporation the
sum of P22,427.18 as litigation expenses.
WHEREAS, the defendant Loadmasters Customs Services,
Inc.s counterclaim for damages and attorneys fees against
plaintiff are hereby dismissed.
With costs
Corporation.

against

defendant

Glodel

Brokerage

SO ORDERED.4
Both R&B Insurance and Glodel appealed the RTC decision
to the CA.
On August 24, 2007, the CA rendered the assailed decision
which reads in part:

112

Considering that appellee is an agent of appellant Glodel,


whatever liability the latter owes to appellant R&B
Insurance Corporation as insurance indemnity must
likewise be the amount it shall be paid by appellee
Loadmasters.
WHEREFORE, the foregoing considered, the appeal is
PARTLY GRANTED in that the appellee Loadmasters is
likewise held liable to appellant Glodel in the amount of
P1,896,789.62 representing the insurance indemnity
appellant Glodel has been held liable to appellant R&B
Insurance Corporation.
Appellant Glodels appeal to absolve it from any liability is
herein DISMISSED.
SO ORDERED.5
Hence, Loadmasters filed the present petition for review on
certiorari before this Court presenting the following
ISSUES
1. Can Petitioner Loadmasters be held liable to
Respondent Glodel in spite of the fact that the
latter respondent Glodel did not file a cross-claim
against it (Loadmasters)?
2. Under the set of facts established and
undisputed in the case, can petitioner Loadmasters
be legally considered as an Agent of respondent
Glodel?6
To totally exculpate itself from responsibility for the lost
goods, Loadmasters argues that it cannot be considered an
agent of Glodel because it never represented the latter in its
dealings with the consignee. At any rate, it further contends
that Glodel has no recourse against it for its (Glodels)
failure to file a cross-claim pursuant to Section 2, Rule 9 of
the 1997 Rules of Civil Procedure.
Glodel, in its Comment,7 counters that Loadmasters is liable
to it under its cross-claim because the latter was grossly
negligent in the transportation of the subject cargo. With
respect to Loadmasters claim that it is already estopped
from filing a cross-claim, Glodel insists that it can still do so
even for the first time on appeal because there is no rule
that provides otherwise. Finally, Glodel argues that its
relationship with Loadmasters is that of Charter wherein the
transporter (Loadmasters) is only hired for the specific job
of delivering the merchandise. Thus, the diligence required
in this case is merely ordinary diligence or that of a good
father of the family, not the extraordinary diligence required
of common carriers.

R&B Insurance, for its part, claims that Glodel is deemed to


have interposed a cross-claim against Loadmasters
because it was not prevented from presenting evidence to
prove its position even without amending its Answer. As to
the relationship between Loadmasters and Glodel, it
contends that a contract of agency existed between the two
corporations.8
Subrogation is the substitution of one person in the place of
another with reference to a lawful claim or right, so that he
who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or
securities.9 Doubtless, R&B Insurance is subrogated to the
rights of the insured to the extent of the amount it paid the
consignee under the marine insurance, as provided under
Article 2207 of the Civil Code, which reads:
ART. 2207. If the plaintiffs property has been insured, and
he has received indemnity from the insurance company for
the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the
amount paid by the insurance company does not fully cover
the injury or loss, the aggrieved party shall be entitled to
recover the deficiency from the person causing the loss or
injury.
As subrogee of the rights and interest of the consignee,
R&B Insurance has the right to seek reimbursement from
either Loadmasters or Glodel or both for breach of contract
and/or tort.
The issue now is who, between Glodel and Loadmasters, is
liable to pay R&B Insurance for the amount of the indemnity
it paid Columbia.
At the outset, it is well to resolve the issue of whether
Loadmasters and Glodel are common carriers to determine
their liability for the loss of the subject cargo. Under Article
1732 of the Civil Code, common carriers are persons,
corporations, firms, or associations engaged in the
business of carrying or transporting passenger or goods, or
both by land, water or air for compensation, offering their
services to the public.
Based on the aforecited definition, Loadmasters is a
common carrier because it is engaged in the business of
transporting goods by land, through its trucking service. It is
a common carrier as distinguished from a private carrier
wherein the carriage is generally undertaken by special
agreement and it does not hold itself out to carry goods for
the general public.10 The distinction is significant in the
sense that "the rights and obligations of the parties to a
contract of private carriage are governed principally by their
stipulations, not by the law on common carriers."11
In the present case, there is no indication that the
undertaking in the contract between Loadmasters and
Glodel was private in character. There is no showing that
Loadmasters solely and exclusively rendered services to
Glodel.

113

In fact, Loadmasters admitted that it is a common carrier.12


In the same vein, Glodel is also considered a common
carrier within the context of Article 1732. In its
Memorandum,13 it states that it "is a corporation duly
organized and existing under the laws of the Republic of the
Philippines and is engaged in the business of customs
brokering." It cannot be considered otherwise because as
held by this Court in Schmitz Transport & Brokerage
Corporation v. Transport Venture, Inc., 14 a customs broker is
also regarded as a common carrier, the transportation of
goods being an integral part of its business.
Loadmasters and Glodel, being both common carriers, are
mandated from the nature of their business and for reasons
of public policy, to observe the extraordinary diligence in the
vigilance over the goods transported by them according to
all the circumstances of such case, as required by Article
1733 of the Civil Code. When the Court speaks of
extraordinary diligence, it is that extreme measure of care
and caution which persons of unusual prudence and
circumspection observe for securing and preserving their
own property or rights. 15 This exacting standard imposed on
common carriers in a contract of carriage of goods is
intended to tilt the scales in favor of the shipper who is at
the mercy of the common carrier once the goods have been
lodged for shipment.16 Thus, in case of loss of the goods,
the common carrier is presumed to have been at fault or to
have acted negligently.17 This presumption of fault or
negligence, however, may be rebutted by proof that the
common carrier has observed extraordinary diligence over
the goods.
With respect to the time frame of this extraordinary
responsibility, the Civil Code provides that the exercise of
extraordinary diligence lasts from the time the goods are
unconditionally placed in the possession of, and received
by, the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive
them.18
Premises considered, the Court is of the view that both
Loadmasters and Glodel are jointly and severally liable to R
& B Insurance for the loss of the subject cargo. Under
Article 2194 of the New Civil Code, "the responsibility of two
or more persons who are liable for a quasi-delict is
solidary."
Loadmasters claim that it was never privy to the contract
entered into by Glodel with the consignee Columbia or R&B
Insurance as subrogee, is not a valid defense. It may not
have a direct contractual relation with Columbia, but it is
liable for tort under the provisions of Article 2176 of the Civil
Code on quasi-delicts which expressly provide:
ART. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of
this Chapter.

Pertinent is the ruling enunciated in the case of Mindanao


Terminal and Brokerage Service, Inc. v. Phoenix Assurance
Company of New York,/McGee & Co., Inc. 19 where this
Court held that a tort may arise despite the absence of a
contractual relationship, to wit:
We agree with the Court of Appeals that the complaint filed
by Phoenix and McGee against Mindanao Terminal, from
which the present case has arisen, states a cause of action.
The present action is based on quasi-delict, arising from the
negligent and careless loading and stowing of the cargoes
belonging to Del Monte Produce. Even assuming that both
Phoenix and McGee have only been subrogated in the
rights of Del Monte Produce, who is not a party to the
contract of service between Mindanao Terminal and Del
Monte, still the insurance carriers may have a cause of
action in light of the Courts consistent ruling that the act
that breaks the contract may be also a tort. In fine, a liability
for tort may arise even under a contract, where tort is that
which breaches the contract. In the present case, Phoenix
and McGee are not suing for damages for injuries arising
from the breach of the contract of service but from the
alleged negligent manner by which Mindanao Terminal
handled the cargoes belonging to Del Monte Produce.
Despite the absence of contractual relationship between
Del Monte Produce and Mindanao Terminal, the allegation
of negligence on the part of the defendant should be
sufficient to establish a cause of action arising from quasidelict. [Emphases supplied]
In connection therewith, Article 2180 provides:
ART. 2180. The obligation imposed by Article 2176 is
demandable not only for ones own acts or omissions, but
also for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope
of their assigned tasks, even though the former are not
engaged in any business or industry.
It is not disputed that the subject cargo was lost while in the
custody of Loadmasters whose employees (truck driver and
helper) were instrumental in the hijacking or robbery of the
shipment. As employer, Loadmasters should be made
answerable for the damages caused by its employees who
acted within the scope of their assigned task of delivering
the goods safely to the warehouse.
Whenever an employees negligence causes damage or
injury to another, there instantly arises a presumption juris
tantum that the employer failed to exercise diligentissimi
patris families in the selection (culpa in eligiendo) or
supervision (culpa in vigilando) of its employees. 20 To avoid
liability for a quasi-delict committed by its employee, an
employer must overcome the presumption by presenting
convincing proof that he exercised the care and diligence of
a good father of a family in the selection and supervision of
his employee.21 In this regard, Loadmasters failed.

114

Glodel is also liable because of its failure to exercise


extraordinary diligence. It failed to ensure that Loadmasters
would fully comply with the undertaking to safely transport
the subject cargo to the designated destination. It should
have been more prudent in entrusting the goods to
Loadmasters by taking precautionary measures, such as
providing escorts to accompany the trucks in delivering the
cargoes. Glodel should, therefore, be held liable with
Loadmasters. Its defense of force majeure is unavailing.
At this juncture, the Court clarifies that there exists no
principal-agent
relationship
between
Glodel
and
Loadmasters, as erroneously found by the CA. Article 1868
of the Civil Code provides: "By the contract of agency a
person binds himself to render some service or to do
something in representation or on behalf of another, with
the consent or authority of the latter." The elements of a
contract of agency are: (1) consent, express or implied, of
the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3)
the agent acts as a representative and not for himself; (4)
the agent acts within the scope of his authority.22
Accordingly, there can be no contract of agency between
the parties. Loadmasters never represented Glodel. Neither
was it ever authorized to make such representation. It is a
settled rule that the basis for agency is representation, that
is, the agent acts for and on behalf of the principal on
matters within the scope of his authority and said acts have
the same legal effect as if they were personally executed by
the principal. On the part of the principal, there must be an
actual intention to appoint or an intention naturally inferable
from his words or actions, while on the part of the agent,
there must be an intention to accept the appointment and
act on it.23 Such mutual intent is not obtaining in this case.
What then is the extent of the respective liabilities of
Loadmasters and Glodel? Each wrongdoer is liable for the
total damage suffered by R&B Insurance. Where there are
several causes for the resulting damages, a party is not
relieved from liability, even partially. It is sufficient that the
negligence of a party is an efficient cause without which the
damage would not have resulted. It is no defense to one of
the concurrent tortfeasors that the damage would not have
resulted from his negligence alone, without the negligence
or wrongful acts of the other concurrent tortfeasor. As stated
in the case of Far Eastern Shipping v. Court of Appeals,24
X x x. Where several causes producing an injury are
concurrent and each is an efficient cause without which the
injury would not have happened, the injury may be
attributed to all or any of the causes and recovery may be
had against any or all of the responsible persons although
under the circumstances of the case, it may appear that
one of them was more culpable, and that the duty owed by
them to the injured person was not the same. No actor's
negligence ceases to be a proximate cause merely
because it does not exceed the negligence of other actors.
Each wrongdoer is responsible for the entire result and is
liable as though his acts were the sole cause of the injury.

damage. Where the concurrent or successive negligent


acts or omissions of two or more persons, although acting
independently, are in combination the direct and proximate
cause of a single injury to a third person, it is impossible to
determine in what proportion each contributed to the injury
and either of them is responsible for the whole injury. Where
their concurring negligence resulted in injury or damage to
a third party, they become joint tortfeasors and are solidarily
liable for the resulting damage under Article 2194 of the
Civil Code. [Emphasis supplied]
The Court now resolves the issue of whether Glodel can
collect from Loadmasters, it having failed to file a crossclaim against the latter.1avvphi1
Undoubtedly, Glodel has a definite cause of action against
Loadmasters for breach of contract of service as the latter
is primarily liable for the loss of the subject cargo. In this
case, however, it cannot succeed in seeking judicial
sanction against Loadmasters because the records disclose
that it did not properly interpose a cross-claim against the
latter. Glodel did not even pray that Loadmasters be liable
for any and all claims that it may be adjudged liable in favor
of R&B Insurance. Under the Rules, a compulsory
counterclaim, or a cross-claim, not set up shall be barred.25
Thus, a cross-claim cannot be set up for the first time on
appeal.
For the consequence, Glodel has no one to blame but itself.
The Court cannot come to its aid on equitable grounds.
"Equity, which has been aptly described as a justice
outside legality, is applied only in the absence of, and never
against, statutory law or judicial rules of procedure." 26 The
Court cannot be a lawyer and take the cudgels for a party
who has been at fault or negligent.
WHEREFORE, the petition is PARTIALLY GRANTED. The
August 24, 2007 Decision of the Court of Appeals is
MODIFIED to read as follows:
WHEREFORE, judgment is rendered declaring petitioner
Loadmasters Customs Services, Inc. and respondent
Glodel Brokerage Corporation jointly and severally liable to
respondent R&B Insurance Corporation for the insurance
indemnity it paid to consignee Columbia Wire & Cable
Corporation and ordering both parties to pay, jointly and
severally, R&B Insurance Corporation a] the amount of
P1,896,789.62 representing the insurance indemnity; b] the
amount equivalent to ten (10%) percent thereof for
attorneys fees; and c] the amount of P22,427.18 for
litigation expenses.
The cross-claim belatedly prayed for by respondent Glodel
Brokerage Corporation against petitioner Loadmasters
Customs Services, Inc. is DENIED.
SO ORDERED.

There is no contribution between joint tortfeasors whose


liability is solidary since both of them are liable for the total

115

In their answer, the first-named defendants resisted the


allegations in the complaint and denied that the conditions
of the donations had been violated. 2 For their part, the
Orbeta spouses confessed judgment in their answer but
also filed a cross-claim for damages against the other
defendants for involving them in the litigation. 3

G.R. No. 101566 August 17, 1992


HON. FLORENCIO A. RUIZ, JR. SENT OF GOD
FOUNDATION, INC. S OF G FOUNDATION INC., RAUL G.
FORES, SENEN P. VALERO and FATHER ODON DE
CASTRO,
petitioners,
vs.
COURT OF APPEALS, SPOUSES OLEGARIO ORBETA
and SUSANA ROSARIO S. ORBETA, respondents.
Antonio P. Coronel for petitioners.
Eladio B. Samson for private respondents.

CRUZ, J.:
The petitioners fault the respondent court for reversing the
dismissal of a complaint by the trial court and remanding
the case for further proceedings. However, there is an
important antecedent question we must first resolve before
we can go to the merits of this case.
The facts relevant to this petition are briefly narrated.
On September 12, 1976, the Crisologo family donated an
island to the Sent of God Foundation on the condition inter
alia that it would "be used exclusively to provide a monastic
life and experience according to the Rule of St. Benedict
and for such other religious and charitable purposes as may
be determined by the donee." This was followed by a later
donation of other lands, under the same conditions. The
subject properties were later transferred by the Foundation
to the S of G Foundation Inc., which introduced
improvements thereon that, for reasons we do not need to
examine here, it later demolished. On July 29, 1988,
believing that the conditions of the donations had been
violated, the Crisologos filed a complaint for revocation of
the donations and the recovery of the properties donated. 1
Impleaded as defendants were the Sent of God Foundation,
the S of G Foundation, Inc., Raul G. Fores, Senen F.
Valero, and Father Odon de Castro, the last three as
officers of the foundations. Also included were Olegario
Orbeta and his wife, Susana Rosario Orbeta, for their role
in facilitating the donations.

On December 5, 1988, the other defendants filed a motion


to dismiss the complaint on the ground that it did not state a
cause of action and that only the S of G Foundation was a
real party-in-interest. A copy of the motion was furnished
the Orbeta spouses. On January 2, 1989, the trial court
issued an order 4 dismissing the complaint for lack of a
cause of action. The cross-claim was also dismissed
because it "had no more leg to stand on."
On January 12, 1989, the plaintiffs filed a motion for
reconsideration, which was adopted by the Orbeta spouses
in an urgent ex parte manifestation dated February 7, 1989.
This motion was denied on February 8, 1989. The
Crisologos then challenged the order of dismissal before
the Court of Appeals in a petition for certiorari under Rule
65 of the Rules of Court. Docketed as CA-GR No. 16837, it
was dismissed on May 2, 1989, on the ground that the
proper remedy was an ordinary appeal. The appellate court
stressed that "since the petitioner did not appeal from the
questioned order of January 2, 1989, of respondent court
dismissing the complaint, said, order had become final and
executory." 5 This decision became final on May 25, 1989,
and entry of judgment was made on July 11, 1989.
The Orbeta spouses, who had not joined the Crisologos in
CA-GR No. 16837, filed their own petition for certiorari, also
with the Court of Appeals. Docketed as CA-GR No. 17013,
this petition prospered. On September 28, 1990, the
respondent court annulled the dismissal of the complaint by
the trial court and ordered its reinstatement. 6
Reconsideration of this decision was denied on August 27,
1991. The petitioners then came to this Court, raising
several issues which, as will appear presently, are not
decisive of this case.
The crucial question before us is whether the Orbeta
spouses, as cross-claimants in the original complaint, could
still appeal its dismissal in their petition for review.
We think not.
The most important reason is that the order of dismissal
issued by the trial court had already become final and
executory at the time it was sought to be reversed. The
reglementary period for appealing it had already lapsed
when the Crisologos filed their petition for certiorari under
Rule 65. This was correctly dismissed by the Court of
Appeals on the ground, as earlier stated, that the special
civil action was not a substitute for a lost appeal.
When the Orbetas filed their own petition on March 6, 1989,
it was also after the order they were questioning had
already become unappealable. On this score alone, the
present petition must fail. Even as the petition of the
plaintiffs themselves had been earlier dismissed, similar

116

treatment should have been given to the petition of the


Orbetas, who were appealing only as cross-claimants.
A cross-claim is any claim by one party against a co-party
arising out of the transaction or occurrence that is the
subject matter either of the original action or of a counterclaim therein. Such cross-claim may include a claim that the
party against whom it is asserted is or maybe liable to the
cross-claimant for all or part of a claim asserted in the
action against the cross-claimant. 7
The cross-claim in this case stemmed from the alleged
unjust refusal of the donees to return the donated
properties, resulting in the Crisologos filing their complaint
for revocation of the donations. In their cross-claim, the
Orbetas alleged that they were dragged into the
controversy because of the conduct of the petitioners. Their
contention was that they would not have been sued at all
were it not for the failure of the petitioners to comply with
the conditions of the donations.
It is clear that the cross-claim arose from the complaint of
the Crisologos and was not separable from that main
action. It had no independent existence and was based
entirely on that complaint. The cross-claim was defensive in
character because it could prosper only if the plaintiffs
succeeded. As the plaintiffs failed to establish that the
petitioners' refusal was not justified, it necessarily followed
that the private respondents' own cross-claim, which was
based on the same allegation, also had to fail.
In Torres v. Court of Appeals, 8 this Court declared:
In any event, even viewing the situation in
the light most favorable to the Laicos, their
cross-claim on Chivi's warranty to deliver
title to them was so inextricably linked with
and so utterly dependent upon the
success of the complaint of the Sierras for
the repurchase of the land that when the
complaint was dismissed, the cross-claim
could not possibly survive. For as the
cross-claimants themselves alleged, the
cross-defendants would be liable on the
warranty "should the plaintiffs finally obtain
favorable judgment in their favor" (sic).
The warranty became functus oficio after
the Sierras, who turned out after all to
have a free patent title to the land issued
way back in 1932, agreed to transfer and
did transfer said title to the
Laicos first by the deed of sale
executed directly in their favor by the
Sierras on January 17, 1960, and again in
the amicable settlement of the case
between them. The fact that the Laicos
paid P10,000.00 to the Sierras in that
amicable settlement created no liability on
the part of the Chivis: first, because the
latter neither knew nor consented to such
settlement; second, because the Laicos
had already acquired the land directly,
from the Sierras by virtue of the aforesaid

sale of January 17, 1960; and third


because the said sum of P10,000.00 was
not the subject of the cross-claim against
them.
Apropos is the following statement of the
legal principle:
A cross-bill strictly speaking is one brought
by a defendant in an equity suit
against . . . other defendants in the same
suit, touching the matters in question in
the original bill. It is considered as an
auxiliary suit dependent upon the original
bill, and can be sustained only on matters
growing out of the original bill. There is a
well-defined distinction between a crossbill merely defensive in character, and one
seeking affirmative relief. The dismissal of
the original bill carries with it a purely
defensive cross-bill but not one seeking
affirmative relief. (Osius vs. Barton, 88
A.L.R. 394, 402)
The cross-claim in this case was purely
defensive in nature. It arose entirely out of
the complaint and could prosper only if the
plaintiffs succeeded. Hence, under the
principle above enunciated, it could not be
the subject of independent adjudication
once it lost the nexus upon which its life
depended.
The cross-claimants cannot claim more rights than the
plaintiffs themselves, on whose cause of action the crossclaim depended. The dismissal of the complaint divested
the cross-claimants of whatever appealable interest they
might have had before and also made the cross-claim itself
no longer viable.
A party has an appealable interest only when his property
may be diminished, his burdens increased or his rights
prejudiced by the order sought to be reviewed. 9 In the case
at bar, the consequence of the dismissal of the complaint
was the cessation of the cross-claimants' exposure to injury,
which risk would in fact have continued if the Crisologos'
appeal had succeeded. It bears stressing that when the
plaintiffs' petition was dismissed by the Court of Appeals,
the cross-claim lost its basis, which was the dismissed
complaint itself. Earlier, in fact, the dismissal of the crossclaim had already become unappealable when the order
dismissing the complaint became final and executory.
It would be highly irregular to allow the reinstatement of the
appeal lost by the plaintiffs through another appeal made by
the cross-claimants. Not only was the cross-claim defensive
in character and therefore deemed dismissed with the
complaint but, as pointed out by the petitioners, the crossclaimants and the plaintiffs were supposed to be opposing
parties and not in collusion with each other.

117

Our ruling is that the Orbetas, as cross-claimants, had no


personality to pursue a remedy which properly belonged to
the Crisologos who, through their fault or negligence; failed
to employ it. Accordingly, the petition filed by the Orbetas
should have been dismissed outright by the respondent
court on the ground that the cross-claimants were not
proper parties to appeal the dismissal of the complaint.
In view of the foregoing observations, the Court finds it
unnecessary to resolve the issues raised by the herein
petitioners in their assignment of errors.
WHEREFORE, the decision rendered by the respondent
court on September 28, 1990, and its resolution dated
August 27, 1991, are SET ASIDE and the dismissal of Civil
Case No. 313-KC in the Regional Trial Court of Ilocos Sur is
AFFIRMED. No. costs.
SO ORDERED.

118

been in open, continuous and adverse possession of the


property as owner, and not Mendoza and her co-heirs.
Tayao incorporated in his answer, without prior leave of
court, a third-party complaint against the Director of the
Bureau of Lands as third-party defendant, alleging therein
that the free patent issued in favor of Mendoza was void
considering that the subject property covered by said patent
was classified as residential and not agricultural land. As a
consequence, OCT No. RP-4176 covering the same
property was also void.
RULE 6 SEC
COMPLAINT

11

THIRD/FOURTH,

ETC

PARTY

G.R. No. 162733. April 12, 2005


ERASMO
TAYAO,
Petitioners,
vs.
ROSA D. MENDOZA and THE DIRECTOR OF LANDS,
Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review under Rule 45 seeking the
reversal of the Decision1 of the Court of Appeals2 (CA) in
CA-G.R. SP No. 72298, and its Resolution denying
petitioner Erasmo Tayaos motion for reconsideration
thereof.
The Antecedents
On September 10, 1997, private respondent Rosa D.
Mendoza filed a Complaint3 against Tayao in the Municipal
Trial Court (MTC) of Pulilan, Bulacan, for recovery of
possession of real property with damages. She alleged,
inter alia, that when her mother Magdalena Dionisio died
intestate on August 25, 1989, she and her four sisters
inherited a parcel of land, Lot No. 9205, Cadastre 345,
located in Pulilan, Bulacan, covered by Original Certificate
of Title (OCT) No. RP-4176 (T-10871) with an assessed
value of P19,340.00; she caused the relocation survey of
the property and discovered that Tayao had been occupying
a 55-square-meter portion thereof for four (4) years without
having paid any rentals therefor; and she made demands
for Tayao to vacate the property and for reasonable
compensation for his use of the same, but the latter
refused. Mendoza prayed that, after due hearing, judgment
be rendered ordering Tayao to vacate the property and
surrender possession thereof to her, to pay P1,000.00 a
month from the time he took possession of the property
until he vacated the same, as well as attorneys fees.
In his answer to the complaint, Tayao averred that
Mendozas mother and her co-heirs were able to secure the
free patent over the subject property and OCT No. RP4176, through fraud, by alleging that it was private
agricultural property. However, the property was residentialcommercial. According to Tayao, he was the one who had

Tayao prayed that judgment be rendered in his favor, as


follows:
Wherefore, defendant prays that after hearing, judgment be
rendered in his favor:
a) dismissing the complaint filed therein;
b) ordering third-party defendant Director of Lands to cancel
OCT No. RP-4176 (T-10871) in the name of plaintiff for
having been issued fraudulently and contrary to the
statutory policy of free patent, or directing plaintiff to
execute the necessary deed reconveying the contested lot
to and in favor of defendant and his co-heirs; and if still any
of such reliefs is not legally possible, ordering plaintiff to pay
the heirs of Daniel Tayao for the value of the said contested
lot computed at P6,000.00 per square meter or a total of
P330,000.00;
c) ordering plaintiff to pay defendant the sums of
P10,000.00 plus P1,000.00 per appearance in court as
attorneys fees; another P10,000.00 by way of litigation
expenses; P50,000.00 for moral damages; and the costs of
this suit; and
d) granting such other reliefs as are just and equitable in
the premises.4
Public respondent Director of Lands filed a motion to
dismiss the third-party complaint on the following grounds:
I. DEFENDANT - THIRD-PARTY PLAINTIFF FAILED TO
EXHAUST ADMINISTRATIVE REMEDIES.
II. DEFENDANT - THIRD-PARTY PLAINTIFF [HAS] NO
AUTHORITY TO FILE THE INSTANT SUIT AS ACTION
FOR CANCELLATION/REVERSION OF PATENTS ISSUED
OVER PUBLIC LANDS MAY BE INSTITUTED ONLY BY
THE OFFICE OF THE SOLICITOR GENERAL.5
However, the trial court failed to resolve the motion to
dismiss.
On April 30, 2001, the trial court rendered judgment in favor
of Mendoza. The fallo of the decision reads:

119

WHEREFORE, judgment is hereby rendered in favor of


plaintiff and against the defendant, ordering the latter and
all persons claiming rights under him:
1. To vacate the subject 55-square-meter portion of the lot
owned by the heirs of Magdalena C. Dionisio located at
Longos, Pulilan, Bulacan, covered by OCT No. RP-4176 (T10871) and surrender peaceful possession thereof to the
plaintiff;
2. To pay the plaintiff the amount of P1,000.00 a month from
September 1997 until he vacates the said property;
3. To pay plaintiff the amount of P20,000.00 as and by way
of attorneys fees;
4. To pay the cost of suit.
SO ORDERED.6
On appeal to the Regional Trial Court (RTC) of Malolos,
Bulacan, the appealed decision was affirmed with
modification. The trial court held that the matter of whether
the property was residential or not, and whether the free
patent and OCT No. RP-4176 were null and void, can and
should be threshed out by the proper party in a proper
action for that purpose.7
Tayao then filed a petition for review with the CA, assailing
the decision of the trial court on the following claim:
1. THE LOWER COURTS ERRED IN DISREGARDING
THE QUESTION OF NULLITY OF OCT NO. RP-4176 (T10871) ISSUED IN THE NAME OF MAGDALENA
DIONISIO, MOTHER OF RESPONDENT ROSA D.
MENDOZA, COVERING LOT 9205, CAD. 345 THAT WAS
DISCOVERED TO INCLUDE A PORTION OF THE
ADJOINING DOA REMEDIOS TRINIDAD HIGHWAY.
2. THE LOWER COURTS ERRED IN EQUIVOCATING
AND FINALLY AVOIDING DISCUSSION ON THE
QUESTION OF NULLITY DUE TO FRAUD OF THE FREE
PATENT AND TITLE ISSUED IN THE NAME OF THE
MOTHER OF RESPONDENT ROSA D. MENDOZA,
WHICH WAS SPECIFICALLY RAISED IN THE
PETITIONERS ORIGINAL ANSWER AND AMENDED
ANSWER AS AN AFFIRMATIVE DEFENSE TO THE
COMPLAINT FILED IN COURT BY THE SAID
RESPONDENT FOR RECOVERY OF POSSESSION OF
THE CONTESTED LOT.
3. THE LOWER COURTS ERRED IN FAILING TO FIND
AND DISCUSS THAT THE PETITIONER CAN EXERCISE
THE RIGHT TO DEMAND FOR RECONVEYANCE OF THE
CONTESTED LOT FROM RESPONDENT ROSA D.
MENDOZA.8
9

On September 19, 2003, the CA rendered judgment


dismissing the petition and affirming the appealed decision.
Citing the ruling of this Court in Ybaez v. Intermediate
Appellate Court,10 the CA ruled that Tayaos affirmative

defense in his answer to the complaint, where he assailed


the validity of OCT No. RP-4176, constituted a collateral
attack on such title which is proscribed by Section 48 of
Presidential Decree No. 1529. Tayao filed a motion for
reconsideration of the decision, which was denied by the
CA.
In a petition for review with this Court, the petitioner asserts
the following:
1. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT DECLARING THAT THE TORRENS TITLE
OF THE PRIVATE RESPONDENT IS A NULLITY AS IT
ENCROACHED UPON THE REMEDIOS TRINIDAD
NATIONAL HIGHWAY.
2. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT RULING THAT THE ACTION FOR
RECONVEYANCE FILED BY THE RESPONDENTS
AGAINST THE PETITIONER CANNOT PROSPER, AS
THE DEFENSE OF NULLITY OF THE TORRENS TITLE
OF THE RESPONDENT WHICH WAS ACQUIRED
THROUGH FRAUD, WAS RAISED BY THE PETITIONER
IN A THIRD-PARTY COMPLAINT WHICH IS A DIRECT
AND NOT A COLLATERAL ATTACK ON SAID TITLE.
3. THE APPELLATE COURT COMMITTED A REVERSIBLE
ERROR IN NOT RULING THAT THE RIGHT OF THE
PETITIONER OVER THE PROPERTY SUBJECT OF THE
CASE WHICH HE ACQUIRED BY ACQUISITIVE
PRESCRIPTION FOR MORE THAN THIRTY (30) YEARS
IS MUCH SUPERIOR (SIC) THAN THAT OF THE PRIVATE
RESPONDENT, AS HER TITLE IS A NULLITY, HAVING
BEEN ACQUIRED THROUGH FRAUD.11
The issues being interrelated, the Court shall resolve the
same simultaneously.
The petitioner avers that his third-party complaint against
the public respondent was an action for reconveyance, a
direct attack of OCT No. RP-4176. He posits that as
evidenced by the relocation survey plans of two
independent surveyors commissioned by the parties, Lot
No. 9205, Cadastre 345 encroached the Doa Remedios
Trinidad National Highway. He further argues that since the
patent was issued over a portion of the national highway,
such patent is null and void; consequently, OCT No. RP4176 issued based on the said patent is also void. As such,
the Torrens title can be annulled at any time, even by him,
since the patent and title neither binds nor bars anyone.
The petition has no merit.
Section 11, Rule 6 of the 1997 Rules of Civil Procedure
reads:
SEC. 11. Third (fourth, etc.)-party complaint. A third
(fourth, etc.)-party complaint is a claim that a defending
party may, with leave of court, file against a person not a
party to the action, called the third (fourth, etc.)-party
defendant, for contribution, indemnity, subrogation or any
other relief, in respect of his opponents claim. (12a)

120

A third-party complaint is actually a complaint independent


of, and separate and distinct from the plaintiffs complaint.
Were it not for Rule 6, Section 11 of the Rules of Court,
such third-party complaint would have to be filed
independently and separately from the original complaint by
the defendant against the third-party defendant. The
purpose is to avoid circuitry of action and unnecessary
proliferation of law suits and of disposing expeditiously in
one litigation all the matters arising from one particular set
of facts.12 The trial court is vested with discretion whether or
not to allow the defendant to file a third-party complaint. As
such, the defendant has no vested right to file a third-party
complaint.

Finally, the MTC declared that the property is privateagricultural land. The RTC and the CA affirmed the finding
of the trial court. The findings of the MTC, affirmed by the
RTC and CA are conclusive on this Court, absent a
preponderance of evidence that the trial court ignored,
misconstrued or misapplied any cogent facts and
circumstances which, if considered, would warrant a
modification or reversal of the outcome of the case.16
IN LIGHT OF ALL THE FOREGOING, the petition is
DENIED for lack of merit.
SO ORDERED.

Petitioners insistence that his third-party complaint was a


direct attack on the free patent and OCT No. RP-4176
under Sections 48 and 103 of Pres. Decree No. 1529 is
futile.
It appears that the petitioner did not seek leave of court to
file a third-party complaint against the public respondent.
Indeed, the trial court did not even resolve the motion to
dismiss the third-party complaint filed by the public
respondent, and proceeded to render its decision in favor of
the latter. Furthermore, the petitioner failed to raise, in the
RTC, the issue of whether or not his third-party complaint
against the public respondent was proper. Neither did he do
so in the CA. In fact, the petitioner declared in his petition in
the CA that
The petitioner concedes that the lower courts correctly
dismissed the third-party complaint in the petitioners
amended answer against the Director of Lands. The said
third-party complaint indeed partakes of the nature of
proceedings for cancellation of patents and titles issued
under the Republic Land Law and for reversion thereof to
the public domain, which the Solicitor General has the
exclusive authority to initiate.13
In any event, the third-party complaint could not have
prospered, on the additional ground that the petitioner failed
to implead the private respondents three (3) sisters who
were the co-owners of the subject property. They were
indispensable parties to the petitioners action for the
nullification of OCT No. RP-4176 and its derivative title and
the reconveyance of the property to him by the said coowners.14
Whether or not the property is part of the Remedios
Trinidad National Highway or is residential-commercial is a
question of fact. In a petition for review on certiorari under
Rule 45 of the Rules of Court, only questions of law may be
raised. While the Court may resolve questions of fact in
exceptional circumstances, the petitioner in the instant case
has not established any such exceptions to exist. 15
Moreover, the petitioners contention that the property is a
part of the national highway is inconsistent with his
contention in his answer to the complaint and his testimony
before the trial court that the property is "residentialcommercial."

121

entitled against the third-party defendant to contribution,


etc., etc. Otherwise the court can not legally grant leave to
a defendant to file it, because it would not be a third-party
complaint.

G.R. No. L-475

August 31, 1946

ISAAC
CAPAYAS,
ETC.,
petitioner,
vs.
THE COURT OF FIRST INSTANCE OF ALBAY, ET AL.,
respondents.
Ramon
C.
Fernandez
Victorino P. Abrera for respondents.

for

petitioner.

FERIA, J.:
This is a petition for mandamus to compel the respondent
Court of First Instance of Albay to admit the so-called
amended third-party complaint filed by petitioner against
several persons named therein, on the ground that the
refusal of the respondent court to admit the same
constitutes an unlawful neglect of the performance of a duty
specifically enjoined upon it by law, pursuant to Rule 12 of
the Rules of Court, sections 1 and 2 of which read as
follows:
SECTION 1. Claim against one not a party to an
action.When a defendant claims to be entitled
against a person not a party to the action,
hereinafter called the third-party defendant, to
contribution, indemnity, subrogation or any other
relief, in respect of the plaintiff's claim, he may file,
with leave of court, against such person a pleading
which shall state the nature of his claim and shall
be called the third-party complaint.
SEC. 2. Motion for leave.Before the service of
his answer a defendant may move ex parte or,
after the service of his answer, on notice to the
plaintiff, for leave as third-party plaintiff to file a
complaint against a third-party defendant.
Petitioner's contention is untenable.
First. Because from the said provisions it clearly appears
that it is not a court's duty especially enjoined by law to
admit a third-party complaint. Were it a ministerial duty, it
would not be necessary for the defendant to obtain leave of
court to file such complaint; because if the court has the
duty to admit, the defendant has the correlative right to file,
a third-party complaint without necessity of such leave. Of
course, when the law says that a third party complaint may
be filed with leave of court, it refers to a complaint that
alleges facts which prima facie show that the defendant is

In the case of General Taxicab Assn., Inc. vs. O' Shea, U.S.
Court of Appeals, Dist. Court of Columbia, January 15,
1940, the court said: "Against this background of statutes
and decisions, the Supreme Court, in framing Rule 14(a),
chose the language "a defendant may move . . . for leave
as a third-party plaintiff to serve a summons and complaint
upon a person not a party to the action, . . .' and the
language 'if the motion is granted. . . .' We think there can
be no doubt that it was thus intended to make the
impleading of third parties in the Federal practice
discretionary with the trial court. See 1 Moore, op. cit.,
supra, 741: 'Whether a party to an action shall be allowed to
implead an additional party rests in the discretion of the
court. This is in accord with the English, New York and
Wisconsin practices.'" (2 Fed. Rules Service, 14a.15, Case
No. 1.)
Secondly. Because the respondent court would have
committed an error if it had admitted the so-called thirdparty complaint filed by the petitioner against Isidora
Lladoc, Fulgencio Lladoc and Gregorio Navera, since the
facts alleged therein do not show that the petitioner is
entitled to indemnify against them "in respect to plaintiff's
claim." The test to determine whether the claim is, whether
it arises out of the same transaction on which the plaintiff's
claim is based, or the third-party's claim, although arising
out of another or different contract or transaction, is
connected with the plaintiff's claim.
According to the decision in the case of Crim vs.
Lumberman's Mutual Casualty Co. (26 Fed. Supp., 715 [1
Fed. Rules Service, 14a11. Case No. 1]),the test to
determine when a third-party defendant may be impleaded
is whether he could have been joined originally as a
defendant by the plaintiff. But this could be applied only if
there could be asserted against the defendant as the thirdparty defendant, jointly and severally or in the alternatives,
any right to relief arising out of the same transaction. For
example in an action against the surety in a bond, the
surety may bring in as a third party defendant, the principle
who had agreed to indemnify the surety, because the
surety's claim arises out of the same transaction (United
States vs. United States Fidelity and Guaranty Co. vs.
Kolling, U.S. Dist. Ct., D. Minn., February 1, 1940, 2 Fed.
Rules Service 14a.222, Case No. 1). The above test does
not cover all cases in which impleading a third-party may be
and have been allowed, which are also covered by the test
we have laid down in the previous paragraph. Under Rule
14 of Federal Rules of Civil Procedure, which corresponds
to our Rule 12, the bringing in of a third-party defendant is
proper if he would be liable to the plaintiff or to the
defendant for all or part of the plaintiff's claim against the
original defendant, although the third-party defendant's
liability arises out of another transaction. So in the case of
Carbola Chemical Co., Inc. vs Trundle Engineering Co. (U.
S. Dist. Ct., S. D. N. Y., December 26, 1942), it was held
that in an action for breach of contract to render
engineering services and to survey a plant, the defendant

122

was allowed to bring as a third-party defendant, the


manufacturer which sold defendant's equipment to the
plaintiff (7 Fed. Rules Service, 14a.11, Case No. 1). And in
a negligence action by the purchaser of a confection in
which it is alleged that the confection contained a foreign
object, the defendant may bring in the person who supplied
him with the constituent containing the foreign object, as a
third-party defendant (Saunders vs. Southern Dairies, Inc.,
U.S. Dist. Ct., District of Columbia, November 6, 1939 [2
Fed. Rules Service, 14a.226, Case No. 31]).

Rule 12, a defendant can not file a third-party complaint in a


different capacity in which he is being sued; otherwise his
claim against the third-party defendant would not be in
respect to plaintiff's claim. In other words, the would be
third-party defendants can not be made liable to the
petitioner for all or part of the plaintiff's claim against the
petitioner.
Petition is therefore denied with costs against the petitioner.
So ordered.

Another test, provided for by section 4, Rule 12, of our


Rules of Court, is whether the third-party defendant may
assert any defenses which the third-party plaintiff has or
may have to the plaintiff's claim. If he may properly assert
such defenses, then he is a proper third-party defendant;
otherwise he is not and the claim against him can not be
considered as a third-party complaint.
Petitioner's claim for indemnity against Lladoc and others
does neither arise out of the same transaction or the
alleged petitioner's tortuous acts on which plaintiff's action
is based, nor is it based on a different transaction but
connected with the plaintiff's claim. Plaintiff's claim against
petitioner and his co-defendants is, according to the
allegations in the complaint, (a) to recover from them
damages for the palay which have been illegally harvested
from certain lands belonging to the plaintiff, and (b) to
enjoin them from entering said lands and disturbing and
molesting the plaintiff's right of ownership and possession
thereof. Whereas the petitioner's claim against Isidora
Lladoc and others is to recover from the latter the value of
the three parcels of land and their fruits amounting to
P3,200 plus legal interest, for having said Isidora, as
administratrix of the intestate estate of Ceferino Guanzon,
sold said lands in 1927 without authority of the court to
Domingo Imperial, from whom said lands were acquired by
the plaintiff. And in the present case, it is clear that if the socalled third-party complaint be allowed, Isidora Lladoc and
others named therein as third-party defendants could not
assert any defense which the petitioner has or may have to
the plaintiff's claim.
Lastly. Because the causes of action in this complaint
against the petitioner are that "on the month of April, 1944,
the defendants by force, intimidation and threat . . . entered
upon the aforesaid lands (described in the complaint) and
harvested and collected . . . 400 cavanes of palay produced
therefrom"; and that "the defendants persist in their threat to
enter upon said lands with the purpose of disturbing and
molesting the plaintiff's right of ownership and possession
thereof." From these allegations it appears that the
petitioner is being sued in his personal capacity, and not as
administrator of intestate estate of Ceferino Guanzon;
because he was appointed as administrator only on July 1,
1944, according to petitioner's Exhibit A; and it is not within
the powers and duties conferred by law upon an
administrator to do the acts complained of. Being sued in
his individual capacity, it is evident that the petitioner can
not file, in his capacity as administrator of the intestate
estate of Ceferino Guanzon, a third-party complaint against
Isidora Lladoc and others. It requires no elaborate
argument to show that, under the provisions of section 1,

123

G.R. No. L-53969 February 21, 1989


PURIFICACION SAMALA and LEONARDO ESGUERRA,
petitioners,
vs.
HON. LUIS L. VICTOR, CFI of Cavite, Br. II, EMERITA C.
JUMANAN and RICARDO JUMANAN, respondents.
Franco L. Loyola for petitioners.
Jose T Cajulis for respondents.

FERNAN, C.J.:
This is a petition for review on certiorari seeking the
reversal of the decision of the Court of First Instance of
Cavite, Branch II, Cavite City, in Civil Case No. N-2411
entitled: "Emerita C. Jumanan, et al., plaintiffs, v. Felisa R.
Garcia, et al, defendants; Felisa R. Garcia, et al., third-party
plaintiffs, v. Purificacion Samala, et al., third-party
defendants; Purificacion Samala, fourth-party plaintiff, v.
The Imperial Insurance, Inc., fourth-party defendant",
absolving the defendants from any liability and ordering the
third party defendants and fourth party plaintiffs,
Purificacion Samala and Leonardo Esguerra (petitioners
herein) and the fourth party defendant Imperial Insurance,
Inc., jointly and severally to pay to plaintiffs (respondent
herein) the damages mentioned in the decision. 1
The factual background of this case as found by the trial
court is as follows:
At approximately 6:30 o'clock in the
morning of February 7, 1976, plaintiff
Emerita C. Jumanan was riding a
passenger jeepney on her way from her
residence at Binakayan, Kawit, Cavite to
her place of work at the Department (now
Ministry) of Public Information in
Intramuros, Manila, where she was
employed. The said passenger jeepney,
which is owned by defendants Felisa and
Tomas Garcia, was then being driven by
defendant Virgilio Profeta and was bound
for Manila carrying
about twelve
passengers.

While the aforesaid passenger jeepney


where Emerita C. Jumanan was riding was
about to make a left turn on the road just
below the bridge at Barrio Mabolo, Bacoor,
Cavite, a delivery panel of the Luau
restaurant bearing plate No. UH- 41373,
driven
by
Domingo
Medina
was
approaching from the opposite direction
from Manila, followed by the Saint
Raphael Transit passenger bus, owned by
third party defendant Purificacion Samala
and being driven by third party defendant
Leonardo Esguerra. The Saint Raphael
Transit passenger bus was running fast
and after overtaking a vehicle the Saint
Raphael Transit bumped the back portion
of the delivery panel so violently and
strongly causing the delivery panel to
swerve abruptly to the path of the
oncoming passenger jeepney in which
plaintiff Emerita C. Jumanan was on
board. So forceful was the impact of the
collision between the delivery panel and
the passenger jeepney that several
passengers of the jeepney were injured,
including plaintiff Emerita C. Jumanan.
Taken to the National Orthopedic Hospital,
after an emergency treatment at the
Katigbak clinic at Binakayan, Kawit,
Cavite, Emerita C. Jumanan was
examined and found to be suffering from
tenderness and swelling of the right thigh,
tenderness over the left hip, tenderness
over the nape and back of the neck of the
right shoulder; limitation of left extremity,
light limitation of motion of right extremity;
contusion left hip right thigh and fracture of
left inferior ramus of ischium Exhibits D
and D-1). Admitted and treated at the
National Orthopedic Hospital on February
7, 1976, Emerita C. Jumanan was
discharged on a wheel chair on February
20, 1976 and advised to have complete
bed rest for thirty days. 2
Emerita C. Jumanan, assisted by her husband Ricardo
Jumanan, filed before the CFI of Cavite a complaint for
damages arising from physical injuries suffered by her as a
passenger of the jeepney bearing plate No. PUJ-VY-542 '75
allegedly owned and operated by the four-named
defendants, spouses Felisa and Tomas Garcia, Emetiquio
M. Jarin and Juanita Madlangbayan, and driven by the last
named defendant, Virgilio Profeta.
In their separate answers, both Jarin and Madlangbayan
denied liability, claiming they no longer owned the
passenger jeepney at the time of the incident in question,
said ownership having been transferred to the spouses
Garcia. While admitting to be the owners of the passenger
jeepney, the spouses Garcia nonetheless denied liability,
alleging that the vehicular collision complained of was
attributable to the fault and negligence of the owner and

124

driver of the Saint Raphael Transit passenger bus with plate


No. XGY-297 PUB- Phil. '75. Consequently, a third-party
complaint was filed by defendants spouses Garcia and
Virgilio Profeta against Purificacion Samala and Leonardo
Esguerra, owner and driver, respectively, of the Saint
Raphael Transit Bus. The latter defendants, in turn, filed a
fourth-party complaint against the insurer of the Saint
Raphael Transit Bus, Imperial Insurance, Inc., which was
declared in default for failure to appear at the pre-trial
conference.
After trial, respondent Judge rendered a decision in favor of
the defendants, the dispositive portion of which reads:
PREMISES CONSIDERED, judgment is
hereby rendered 1. Absolving defendants Felisa and Tomas
Garcia,
Virgilio
Profeta,
Juanita
Madlangbayan and Emetiquio Jarin from
any liability;
2. Ordering the third party defendants and
fourth party plaintiffs, Purificacion Samala
and Leonardo Esguerra, and the fourth
party defendant Imperial Insurance, Inc.,
jointly and severally, to pay to plaintiffs
Emerita C. Jumanan and Ricardo
Jumanan the following-.
(a) Actual or compensatory damages in
the amount of P 7,958.83;
(b) Moral damages in the amount of P
5,000.00;
(c) Exemplary damages in the amount of P
3,000.00; and
(d) Attorney's fees and expenses of
litigation in the amount of P 2,000.00.
Plus costs of this suit.
SO ORDERED. 3
Third party defendants Purificacion Samala and Leonardo
Esguerra moved to reconsider said decision, but to no avail.
Hence, this appeal by certiorari, therein third party
defendants (petitioners herein) contending that:
1. The lower court erred in holding that the
third-party defendants and fourth party
plaintiff and the fourth party defendant are
jointly and severally liable to pay the claim
of plaintiffs.
2. The third-party defendant and fourthparty plaintiff should be absolved from any
liability since the principal defendants have

been absolved from the claim of plaintiffs,


a matter not appreciated by the lower
court;
3. The lower court erred in not holding that
since plaintiffs' cause of action is based on
culpa contractual against the defendants
only, they cannot recover from the thirdparty defendants fourth-party plaintiffs on
a cause of action based on tort or quasidelict. 4
At issue in this case is the nature and office of a third-party
complaint.
Appellants argue that since plaintiffs filed a complaint for
damages against the defendants on a breach of contract of
carriage, they cannot recover from the third-party
defendants on a cause of action based on quasi-delict. The
third party defendants, they allege, are never parties liable
with respect to plaintiff s claim although they are with
respect to the defendants for indemnification, subrogation,
contribution or other reliefs. Consequently, they are not
directly liable to the plaintiffs. Their liability commences only
when the defendants are adjudged liable and not when they
are absolved from liability as in the case at bar. 5
Quite apparent from these arguments is the misconception
entertained by appellants with respect to the nature and
office of a third party complaint.
Section 16, Rule 6 of the Revised Rules of Court defines a
third party complaint as a "claim that a defending party may,
with leave of court, file against a person not a party to the
action, called the third-party defendant, for contribution,
indemnification, subrogation, or any other relief, in respect
of his opponent's claim." In the case of Viluan vs. Court of
appeals, et al., 16 SCRA 742 [1966], this Court had
occasion to elucidate on the subjects covered by this Rule,
thus:
... As explained in the Atlantic Cost Line R.
Co. vs. U.S. Fidelity & Guaranty Co., 52 F.
Supp. 177 (1943:)
'From the sources of
Rule
146
and
the
decisions herein cited, it
is clear that this rule, like
the admiralty rule, 'covers
two distinct subjects, the
addition
of
parties
defendant to the main
cause of action, and the
bringing in of a third party
for a defendant's remedy
over'. ...
'If
the
third
party
complaint alleges facts
showing a third party's
direct liability to plaintiff

125

on the claim set out in


plaintiffs petition, then
third party 'shall' make
his defenses as provided
in Rule 12 and his
counterclaims
against
plaintiff as provided in
Rule 13. In the case of
alleged direct liability, no
amendment
(to
the
complaint) is necessary
or required. The subjectmatter of the claim is
contained in plaintiff's
complaint, the ground of
third party's liability on
that claim is alleged in
third party complaint, and
third party's defense to
set up in his answer to
plaintiff's complaint. At
that point and without
amendment, the plaintiff
and third party are at
issue as to their rights
respecting the claim.
The provision in the rule
that,
'The
third-party
defendant may assert
any defense which the
third-party plaintiff may
assert to the plaintiffs
claim,' applies to the
other subject, namely, the
alleged liability of third
party defendant. The next
sentence in the rule, 'The
third-party defendant is
bound by the adjudication
of the third party plaintiffs
liability to the plaintiff, as
well as of his own to the
plaintiff or to the thirdparty plaintiff applies to
both subjects. If third
party is brought in as
liable only to defendant
and judgment is rendered
adjudicating
plaintiff's
right to recover against
defendant
and
defendant's rights to
recover against third
party, he is bound by
both adjudications. That
part of the sentence
refers to the second
subject. If third party is
brought in as liable to
plaintiff, then third party is
bound by the adjudication
as between him and
plaintiff. That refers to the

first subject. If third party


is brought in as liable to
plaintiff and also over to
defendant, then third
party is bound by both
adjudications. ....
Under this Rule, a person not a party to an action may be
impleaded by the defendant either (a) on an allegation of
liability to the latter; (b) on the ground of direct liability to the
plaintiff-, or, (c) both (a) and (b). The situation in (a) is
covered by the phrase "for contribution, indemnity or
subrogation;" while (b) and (c) are subsumed under the
catch all "or any other relief, in respect of his opponent's
claim."
The case at bar is one in which the third party defendants
are brought into the action as directly liable to the plaintiffs
upon the allegation that "the primary and immediate cause
as shown by the police investigation of said vehicular
collision between (sic) the Above-mentioned three vehicles
was the recklessness and negligence and lack of
imprudence (sic) of the third-party defendant Virgilio (should
be Leonardo) Esguerra y Ledesma then driver of the
passenger bus." 7 The effects are that "plaintiff and third
party are at issue as to their rights respecting the claim" and
"the third party is bound by the adjudication as between him
and plaintiff." It is not indispensable in the premises that the
defendant be first adjudged liable to plaintiff before the
third-party defendant may be held liable to the plaintiff, as
precisely, the theory of defendant is that it is the third party
defendant, and not he, who is directly liable to plaintiff. The
situation contemplated by appellants would properly pertain
to situation (a) above wherein the third party defendant is
being sued for contribution, indemnity or subrogation, or
simply stated, for a defendant's "remedy over".
Anent appellant's claim that plaintiff who sued on
contractual breach cannot recover on the basis of quasidelict, suffice it to say that as the primary purpose of this
rule is to avoid circuity of action and to dispose of in one
litigation, the entire subject matter arising from a particular
set of fact 8 it is immaterial that the third-party plaintiff
asserts a cause of action against the third party defendant
on a theory different from that asserted by the plaintiff
against the defendant. 9 It has likewise been held that "a
defendant in a contract action may join as third-party
defendants those liable to him in tort for the plaintiff s claim
against him or directly to the plaintiff. 10
The incident complained of having been found to have been
caused by the negligence of appellant Leonardo Esguerra,
driver and employee of co-appellant Purificacion Samala,
no reversible error was committed by the trial court in
adjudging the latter liable to plaintiffs-appellees.
WHEREFORE, the instant appeal by certiorari is hereby
DISMISSED with costs against appellants. This decision is
immediately executory.
SO ORDERED.

126

127