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KOREA EXCHANGE BANK, petitioner, vs. HON. ROGELIO C.

GONZALES, in his capacity as Presiding Judge of Branch 50 of


the Regional Trial Court of Pampanga, PHI-HAN DEVELOPMENT, INC., LOURDES DE MESA MENDOZA, MENELEO
MENDOZA, ANTUSA DE MESA MAGNO, FRANCISCO MAGNO, TEODORO DE MESA, FIRMO DE MESA and
MERCEDES DE MESA, respondents.
DECISION
CALLEJO, SR., J.:
For review in these consolidated petitions is the Joint Decision [1] of the Court of Appeals (CA) in CA-G.R. SP Nos. 46194 and
46436, as well as its Order[2] dated February 28, 2000 denying the motion for reconsideration thereof.
The Antecedents
The Phi-Han Development, Inc. (PHDI) is a domestic corporation organized primarily for the purpose of engaging in the real
estate business.[3] Teodoro de Mesa and his siblings, namely, Antusa de Mesa Magno and Lourdes de Mesa Mendoza, were among its
original incorporators and members of its board of directors. Jae Il Aum, a Korean national, was the president of the corporation, while
Lourdes Mendoza served as its corporate secretary and treasurer.[4]
On September 5, 1996, or barely a year after its operations began, the PHDI, together with Teodoro de Mesa, Antusa Magno and
Lourdes Mendoza, filed a complaint in the Regional Trial Court (RTC) of Guagua, Pampanga, against Jae Il Aum and the Korea
Exchange Bank (KEB), a foreign banking corporation licensed to do business in the Philippines.
The plaintiffs alleged therein that through the machination of Jae Il Aum, KEB granted a loan to the PHDI in the amount of
US$500,000.00, with the condition that the said loan be deposited with the KEB in the name of PHDI. Thereafter, the plaintiffs executed
a real estate mortgage over their properties located in Lubao, Pampanga. As security for the said loan, PHDI deposited the said amount
under its name with the KEB in two accounts, namely, Dollar Account No. 5311000486 and Peso Account No. 5311000487. Per
Resolution No. 12-10-95 of the PHDI Board of Directors, the only authorized signatories to all applications for withdrawals from the said
accounts were Jae Il Aum and Lourdes Mendoza. Jae Il Aum withdrew US$160,000.00 from the said account on February 15, 1996 by
forging the signature of Lourdes Mendoza. He was again able to withdraw from the separate accounts, leaving US$163,000.00 as the
balance thereof. It was further alleged that Jae Il Aum could not have withdrawn the said deposits without the connivance of the KEB.
Moreover, the defendants failure to heed demands for an accounting of the said withdrawals and for the restitution of the said amounts
constituted large scale estafa for which they are liable for exemplary and moral damages. [5] The case was docketed as Civil Case No.
G-3012 and raffled to Branch 49 of the court.
On September 13, 1996, the KEB filed a Motion to Dismiss [6] the complaint on the ground,[7] among others, that the case was
within the exclusive jurisdiction of the Securities and Exchange Commission (SEC). On December 5, 1996, the trial court issued an
Order denying the motion. The KEB filed a motion for reconsideration of the courts decision which was, however, denied.
The KEB filed a petition for certiorari and prohibition with the CA for the nullification of the orders of the RTC. The case was
docketed as CA-G.R. SP No. 43363.[8] On March 17, 1999, the CA dismissed the petition. The KEB filed a motion for reconsideration,
which was denied by the appellate court on July 22, 1999. It then filed a petition for review on certiorari in this Court, docketed as G.R.
No. 139460.[9]
Meanwhile, on April 2, 1997, the KEB filed a Complaint[10] against Lourdes Mendoza, Meneleo Mendoza, Antusa Magno,
Francisco Magno, Teodoro de Mesa, Firmo de Mesa, Mercedes de Mesa Magno and the PHDI (PHDI, et al.) before the RTC of
Guagua, Pampanga, for sum of money and reformation of real estate mortgage executed by PHDI in its favor. The case was docketed
as Civil Case No. G-3119 and was raffled to Branch 50 of the court.
The KEB alleged therein that on January 15, 1996, it extended a loan to the PHDI in the sum of US$500,000.00, payable within
one year, with interest at 3 months London Interbank Offering Rate (LIBOR) + 2% per annum, evidenced by a promissory note
executed by Jae Il Aum and Lourdes Mendoza, president and treasurer, respectively, for and in behalf of the PHDI, with Antusa Magno
and Teodoro de Mesa acting as witnesses. Jae Il Aum and Lourdes Mendoza were authorized by resolution of the Board of Directors of
PHDI to sign documents and other papers and mortgage corporate assets. To secure the payment of the said loan, Lourdes Mendoza
and her siblings, Antusa de Mesa Magno, Firmo de Mesa, Meneleo Mendoza and Mercedes de Mesa, executed a real estate mortgage
over 14 parcels of land they owned in common, under a Special Power of Attorney executed by them in favor of Teodoro, Lourdes and
Antusa. However, the real estate mortgage failed to express the true intent and agreement of the parties therein because the debtors

appearing therein were Lourdes de Mesa Mendoza, Antusa de Mesa Magno, Mercedes de Mesa and Firmo de Mesa, whereas the true
agreement was to bind only PHDI as the debtor. It was further alleged that PHDI, et al. had not paid the loan of US$500,000.00 and the
increment thereof despite demands therefor.
The KEB prayed that, after due proceedings, judgment be rendered in its favor, ordering the reformation of the said real estate
mortgage by designating the PHDI as the debtor; ordering PHDI, et al., jointly and severally, to pay US$500,000.00, with interest
thereon at the rate of the LIBOR for a three-month loan plus 2%, compounded monthly; 10% of the total amount due as interest as
withholding tax on the interest; 20% of the total amount due as attorneys fees; and costs of suit. The KEB, likewise, prayed that the
properties mortgaged be foreclosed and sold in case of failure to pay the said loan and its increment within 90 days from notice of the
judgment.[11] The KEB appended to its complaint a copy of the real estate mortgage and the secretarys certificate containing the
resolution of the Board of Directors.
The PHDI, et al. filed a motion to dismiss [12] the complaint on the ground of forum shopping, asserting that the KEB should have
filed its counterclaim for the reformation of the real estate mortgage and the collection of US$500,000.00, including increment and
damages in Civil Case No. G-3012. They averred that since the KEB sought the collection of the US$500,000.00 loan which was
referred to in paragraphs 2 and 3 of their complaint in Civil Case No. G-3012, the essential elements of litis pendentia were present;
hence, the trial court should dismiss the complaint.
The KEB opposed[13] the motion, contending that the complaint in Civil Case No. G-3012 involved corporate fraud; hence, the RTC
had no jurisdiction over the action in the said case, and as such, could not interpose any counterclaims therein. The KEB, likewise,
averred that litis pendentia may be involved only when the RTC had jurisdiction over the action in Civil Case No. G-3012. Moreover, the
actions in Civil Case Nos. G-3012 and G-3119 were unrelated.
On July 23, 1997, the RTC issued an Order[14] denying the motion to dismiss, holding that the essential requirements of litis
pendentia were not present, and that the grounds invoked therein were not indubitable.
Thereafter, PHDI, et al. filed, in due course, their answer [15] with counterclaims in Civil Case No. G-3119 where they denied being
indebted to the KEB. By way of special and affirmative defenses, they alleged that they were deceived by Jae Il Aum, in connivance
with the KEB, into agreeing to secure a loan of US$500,000.00 from the latter with their properties as security therefor to be used for
the development of their properties into a housing project; the US$500,000.00 loan of the PHDI was deposited in Account No.
5311000487 and Account No. 5311000486 with the KEB. Jae Il Aum was able to withdraw the amount of US$160,000.00 from the dollar
account of PHDI based on an application for withdrawal bearing the forged signature of Lourdes Mendoza. Believing that Jae Il Aum
could not validly withdraw from the said account without her presence, Lourdes de Mesa Mendoza signed applications for the
withdrawals from the said accounts, authorizing Jae Il Aum to make the said withdrawals. Jae Il Aum was then able to withdraw the rest
of the deposits of the PHDI. It was thus alleged that the acts of the plaintiff and Jae Il Aum constituted large scale estafa, and that he
had been charged with large scale estafa in Criminal Case Nos. 4085 and 4092 in the RTC of Pampanga. The aforementioned
unauthorized withdrawals could not have been made possible without the indispensable cooperation of the authorized and/or
responsible officer/s of the KEB.[16] Moreover, the loan of the PHDI should be extinguished under the principle of set-off or
compensation. By way of counterclaims, PHDI, et al., repleaded by reference all the allegations in their special and affirmative defenses
as part thereof, and alleged that by reason of the foregoing acts of the KEB and Jae Il Aum, they suffered shame and humiliation.
The PHDI, et al., prayed that the complaint be dismissed and, by way of counterclaim, that the KEB be ordered to
pay P500,000.00 as moral damages, P500,000.00 as exemplary damages to deter like-minded foreigners from victimizing Filipinos,
and P100,000.00 as attorneys fees, plus the cost of suit.[17]
On September 12, 1997, the KEB filed two motions: (1) a motion in Civil Case No. G-3119 to dismiss the counterclaims of the
PHDI, et al. for their failure to attach in their answer with counterclaims a certification of non-forum shopping as mandated by Supreme
Court Administrative Circular No. 04-94 (now Section 5, Rule 7 of the Rules of Court); [18] and (2) a motion in Civil Case No. G-3012 to
dismiss the complaint for forum shopping.[19]
In its motion to dismiss the counterclaims in Civil Case No. G-3119, the KEB alleged that the causes of action of the PHDI, et al.
as plaintiffs in Civil Case No. G-3012 for the collection of US$160,000.00 and damages, and their claim in Civil Case No. G-3119 for the
set-off of the said amount against its claim of US$500,000.00 were identical; hence, their counterclaims should be dismissed for forum
shopping and, consequently, their complaint in Civil Case No. G-3012 should likewise be dismissed.
The PHDI, et al. opposed the motion to dismiss their complaint in Civil Case No. G-3012 alleging that the KEB failed to include
forum shopping as a ground in its motion to dismiss their complaint; hence, is bound by the omnibus motion rule. They further alleged
that their complaint could not be dismissed on the ground of forum shopping based on their counterclaims in their answer to the

complaint, since they filed their answer and counterclaim after filing their complaint in Civil Case No. G-3012. [20] Besides, the trial court
had already denied their motion to dismiss the complaint in Civil Case No. G-3119 on its finding that there was no litis pendentia.
The PHDI, et al. also opposed the motion to dismiss[21] their counterclaims in Civil Case No. G-3119, on the ground that the
causes of action in Civil Case No. G-3012 and their counterclaims in Civil Case No. G-3119 were unrelated. They asserted that the
subject matter, causes of action and the issues in the two cases were different.
On October 14, 1997, the trial court issued an Order [22] in Civil Case No. G-3012 denying the KEBs motion to dismiss the
complaint, on its finding that the causes of action of the PHDI in Civil Case No. G-3012 were different from those in their counterclaim in
Civil Case No. G-3119. The trial court also denied the motion (in Civil Case No. G-3119) to dismiss the counterclaims of the PHDI, et
al., on its finding that the reliefs prayed for by the latter did not include the collection of US$160,000.00 from the KEB; hence, there was
no forum shopping. The KEBs respective motions for reconsideration of the orders of dismissal in Civil Case Nos. G-3119 and G-3012
were denied by the trial courts, per the Orders dated October 24, 1997[23] and November 14, 1997.[24]
The KEB filed a petition for certiorari, prohibition and mandamus against the PHDI, et al., in the CA, assailing the October 13 and
24, 1997 Orders of the trial court in Civil Case No. G-3119. The case was docketed as CA-G.R. SP No. 46194.
The KEB also filed a petition for certiorari, prohibition and mandamus with the CA on January 6, 1998, assailing the RTCs Orders
dated October 24 and November 14, 1997 in Civil Case No. G-3012. The case was docketed as CA-G.R. SP No. 46436. The two
petitions were consolidated.
Meanwhile, the KEB filed its answer to the counterclaims of the PHDI, et al., in Civil Case No. G-3119 for moral and exemplary
damages.[25] It alleged, inter alia, that only the consent of the PHDI, through its signatories, was required for any withdrawal, and that all
such withdrawals were made with the knowledge and consent of Lourdes de Mesa Mendoza, with her genuine signatures; [26] that the
trial court had no jurisdiction over the counterclaims for moral and exemplary damages since the controversy involved corporate fraud
which, under Subsection (a), Section 5 of Presidential Decree No. 902-A, was within the exclusive jurisdiction of the SEC; and that the
counterclaims for moral and exemplary damages should be dismissed because of the pendency of Civil Case No. G-3012 which
involved the same parties, the same rights, the same reliefs, the same issues, and the same causes of action, insofar as the complaint
in Civil Case No. G-3012 and the counterclaim in this case were concerned. Moreover, there was no certification against forum
shopping as required by Section 3, Rule 7 of the Rules of Court. They further insisted that all the withdrawals were authorized and
made on the basis of genuine signatures; that PHDI, being a corporation and an artificial person, had no feelings, and, as such, moral
damages could not be recovered from it; that it had all along acted in good faith; and that if PHDI, et al., hired the services of counsel,
the attorneys fees should be for their own account, since they unjustifiably refused to pay.[27]
On January 27, 2000, the CA rendered a Joint Decision [28] in CA-G.R. SP Nos. 46194 and 46436. The CA affirmed the assailed
orders of the RTC in Civil Case No. G-3012, dismissing the petition in CA-G.R. SP No. 46436 but partially giving due course to and
granting the petition in CA-G.R. SP No. 46194, by dismissing the counterclaims of the respondents for moral and exemplary damages
in Civil Case No. G-3119 on the ground of forum shopping. The CA declared that the counterclaims of the PHDI, et al., for moral and
exemplary damages in Civil Case No. G-3119, were merely permissive; hence, they were mandated to append thereto a certification of
non-forum shopping.
The CA anchored its decision on the rulings of this Court in Santo Tomas University Hospital v. Surla[29] and Valencia v. Court of
Appeals.[30] However, the CA did not order the dismissal of the complaint in Civil Case No. G-3012, on its finding that the RTC did not
commit grave abuse of its discretion in not ordering the dismissal of the same. Besides, the trial court had already dismissed the
counterclaims of the PHDI, et al., for moral and exemplary damages in Civil Case No. G-3119.[31]
Following the denial of its motion for reconsideration, the KEB, now the petitioner, filed with this Court, a consolidated petition for
review on certiorari against PHDI, et al., the respondents, alleging that the CA erred (a) in not ordering the dismissal of the counterclaim
of the latter in Civil Case No. G-3119 for their failure to append a certificate of non-forum shopping, and (b) in not dismissing the
complaint in Civil Case No. G-3012 for forum shopping.[32]
As the issues in this case are interrelated, the Court shall delve into and resolve them simultaneously.
The petitioner avers that the respondents are guilty of forum shopping because they sought to recover US$160,000.00 by way of
set-off in their counterclaims in Civil Case No. G-3119, pending in Branch 50 of the RTC of Guagua, Pampanga, the same amount they
sought to recover in their complaint in Civil Case No. G-3012 pending in Branch 49 of the said court. The petitioner asserts that the
respondents also sought to recoverP500,000.00 in moral damages, and P500,000.00 as exemplary damages in Civil Case No. G-3012,
which are the same amounts the respondents sought to collect from the petitioner in their counterclaims in Civil Case No. G-3119. The

petitioner notes that although the respondents alleged set-off of the US$160,000.00 in their special and affirmative defenses, they,
however, repleaded and incorporated, by way of reference, the said allegations in their counterclaims for moral and exemplary
damages and attorneys fees; hence, the claim of set-off or compensation of the respondents was a counterclaim. The respondents
were, thus, mandated to append a certificate of non-forum shopping to their counterclaims as mandated by Section 5, Rule 7 of the
Rules of Court, but failed to do so. The petitioner avers that there is identity of causes of action, issues and reliefs prayed for in the
complaint of the respondents in Civil Case No. G-3012, and their counterclaims for set-off or compensation of the US$160,000.00,
moral damages of P500,000.00 and P500,000.00 as exemplary damages in Civil Case No. G-3119. As such, the petitioner insists that
the respondents were guilty of forum shopping, for which reason their complaint in Civil Case No. G-3012 should be dismissed.
The respondents, for their part, refute the contentions of the petitioner and maintain that their claim for set-off or
compensation[33] in Civil Case No. G-3119 is a counterclaim but is compulsory in nature; hence, there was no need for them to append
a certificate of non-forum shopping. The respondents also allege that the petitioner itself is guilty of forum shopping because instead of
filing counterclaims against them in Civil Case No. G-3012, it filed a complaint for reformation of the real estate mortgage and for the
collection of US$500,000.00 and, in case of refusal or failure of the respondents to pay the said amount of US$500,000.00 for the
judicial foreclosure of the real estate mortgage, docketed as Civil Case No. G-3119. The respondents assert that, by praying for the
dismissal of their complaint in Civil Case No. G-3012 and their counterclaims in Civil Case No. G-3119, the petitioner could win in both
instances without due process of law.
The Courts Ruling
A counterclaim, as now used and understood, includes both set-off and recoupment and is broader than both; it includes equitable
demands and secures to the defendant full relief which is a separate action at law and would have secured him on the same state of
facts being substantially a cross-action by the defendant against the plaintiff.[34]
A set-off (compensacion) is a money demand by the defendant against the plaintiff arising upon contract and constituting a debt
independent of and unconnected with the cause of actions set forth in the complaint, and may be used to offset a plaintiffs claim but not
to recover affirmatively. As in the case with recoupment, set-off may be used to offset a plaintiffs claim but not to recover affirmatively.
This is similar to the English rule which was first authorized by an English statute in 1729.
A recoupment (reconvencion) differs from a counterclaim (contrarreclamacion) in that, under a counterclaim, the defendant may
have an affirmative judgment where he is able to prove a demand in excess of the plaintiffs demand, whereas in the case of
recoupment, whatever the damages proved by the defendant, they can go only to reduce or extinguish the claim against him.
Recoupment must arise out of the contract or transaction upon which the plaintiffs claim is founded. Recoupment is of French origin
and means the cutting back of the plaintiffs claim by the defendant. It thus implies an admission of the plaintiffs claim.
In Lopez v. Gloria and Sheriff of Leyte,[35] the Court ruled that for set-off or recoupment to be considered as a counterclaim, the
following must concur: (1) the same be essentially a genuine action of the defendant against the plaintiff; (2) the same should have as
its object to neutralize, wholly or partially, that which the plaintiff is trying to obtain; (3) the same does not have for its object to destroy
directly the action of the plaintiff; and (4) the same ought not to pray for a positive remedy distinct from the payment of money.
The Court explained that under the first requisite, independent of any other consideration, a genuine action is constituted by the
defendant which could be employed separately against the plaintiff. On the second requisite, the Court declared that the defendant
admits the facts upon which the action of the plaintiff is based. The second requisite is absent if the defendant bases his claim on facts
which directly destroy the action or cause of action of the plaintiff. In such a case, the claim of the defendant would only be a special
defense.[36] On the third requisite, set-off or recoupment may be merely a defense and not a counterclaim if it only tends to oppose or to
destroy the action of the plaintiff.
After consideration of the material allegations of the answer of the respondents in Civil Case No. G-3119, we believe that the
respondents claim of set-off or compensation of the US$160,000.00 against the claim of US$500,000.00 of the petitioner against the
respondents is a counterclaim. The respondents admit in their complaint in Civil Case No. G-3012 and in their answer in Civil Case No.
G-3119 that they secured a loan from the petitioner in the amount of US$500,000.00, but maintain that they are not liable for the
payment of the said loan because the petitioner, in connivance with Jae Il Aum, had withdrawn not only US$160,000.00 but the entire
deposit of US$500,000.00 from the peso and dollar accounts of respondent PHDI without the consent of the respondents. The latter did
not seek to recover affirmatively from the petitioner.
However, we do not agree with the contention of the respondents that their counterclaims are compulsory in nature. Section 7,
Rule 5 of the Rules of Court reads:

Sec. 7. Compulsory counterclaim. A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is
connected with the transaction or occurrence constituting the subject matter of the opposing partys claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction. Such a counterclaim must be within the jurisdiction of the court both as to the
amount and the nature thereof, except that in an original action before the Regional Trial Court, the counterclaim may be considered compulsory
regardless of the amount.
As correctly held by the CA, the counterclaim of the respondents for moral and exemplary damages against the petitioner is
permissive. So is the respondents claim of a set-off or compensation of the US$160,000.00 which they sought in Civil Case No. G-3012
against the US$500,000.00 claimed by the petitioner against the respondents in Civil Case No. G-3119.
As the Court held in Yulienco v. Court of Appeals:[37]
A counterclaim is defined as any claim for money or other relief which a defending party may have against an opposing party. A counterclaim is
compulsory if (a) it arises out of, or is necessarily connected with, the transaction or occurrence which is the subject matter of the opposing partys
claim; (b) it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and (c) the court has
jurisdiction to entertain the claim. 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 criteria or tests by which the compulsory or permissive nature of specific counterclaims can be determined are as follows:
(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 the counterclaim? [38]
In the present case, the issues of fact and law raised by the petitioner in its complaint in Civil Case No. G-3119, and in the
counterclaims of the respondents for the set-off of not only the US$160,000.00 but the entirety of the deposits of the respondent PHDI
of US$500,000.00, and for moral and exemplary damages, are not identical or even largely the same. In the complaint of the petitioner
in Civil Case No. G-3119, the issue is whether the loan of US$500,000.00 was secured by respondent PHDI from the petitioner, and
whether the respondents failed to pay the same and its increment despite the petitioners demands. On the other hand, the issues in the
respondents counterclaims for set-off of the amount of US$160,000.00 are the following: whether the signature of respondent Lourdes
Mendoza appearing on the said withdrawal application was forged; whether the petitioner connived with Jae Il Aum when the latter
withdrew the said amount from the accounts of respondent PHDI; whether the petitioner and Jae Il Aum are obliged to pay the said
amount to the respondent PHDI; and whether the obligations of the respondent to pay their loan of US$500,000.00 is extrajudicial pro
tanto. Any judgment of the court on the complaint of the petitioner in Civil Case No. G-3119 would not bar any suit on the respondents
counterclaim. The evidence of the petitioner on its claim in its complaint, and that of the respondents on their counterclaims are thus
different. There is, likewise, no logical relation between the claim of the petitioner and the counterclaim of the respondents. Hence, the
counterclaim of the respondents is an initiatory pleading, which requires the respondents to append thereto a certificate of non-forum
shopping. Their failure to do so results to the dismissal of their counterclaim without prejudice.[39]
The general rule is that compliance with the certificate of forum shopping is separate from and independent of the avoidance of
the act of forum shopping itself. Forum shopping is a ground for summary dismissal of both initiatory pleadings without prejudice to the
taking of appropriate action against the counsel or party concerned.[40]
Case law has it that there is forum shopping when, between an action pending before the court and another one, there exist:
(a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in the other action
will, regardless of which party is successful, amount to res judicata in the action under consideration. [41]
Otherwise stated, there is forum shopping where a litigant sues the same party against whom another action or actions for the
alleged violation of the same right and the enforcement of the same relief is/are still pending. The defense of litis pendentia in one case
is a bar to the other/others; and, a final judgment is one that would constitute res judicata and thus would cause the dismissal of the
rest. Absolute identity of parties is not required. It is enough that there is substantial identity of parties. [42] It is enough that the party
against whom the estoppel is set up is actually a party to the former case. [43] There is identity of causes of action if the same evidence

will sustain the second action. The principle applies even if the relief sought in the two cases may be different. [44] Forum shopping
consists of filing multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the
purpose of obtaining a favorable judgment.[45]
What is truly important to consider, the Court ruled in Golangco v. Court of Appeals,[46] is the vexation caused the courts and
parties-litigants who ask different courts and/or administrative agencies to rule on the same or restated causes and/or grant the same or
substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different courts upon
the same issues. In Yupangco Cotton Mills, Inc. v. Court of Appeals,[47] the Court ruled that for forum shopping to exist, both actions
must involve the same transactions, the same circumstances; and the actions must also raise identical causes of actions, subject
matter and issues. Forum shopping is an act of malpractice that is prohibited and considered as trifling with the court. It is an improper
conduct which tends to degrade the administration of justice. But there is no forum shopping where two different orders or questions,
two different causes of action and issues are raised, and two objectives are sought.[48]
In this case, in interposing their counterclaim for set-off of the US$160,000.00 against their loan of US$500,000.00 in Civil Case
No. G-3119, as well as the counterclaims for P500,000.00 as moral damages, andP500,000.00 as exemplary damages, the
respondents thereby engaged in forum shopping. As gleaned from the material averments of their complaint in Civil Case No. G-3012,
the respondents, who are the plaintiffs therein, claimed that Jae Il Aum, who was the president of respondent PHDI, withdrew
US$160,000.00 from the deposit accounts of the said respondent with the petitioner; that such withdrawal application bore the forged
signature of respondent Lourdes Mendoza; and that the authorized office/officers of the petitioner connived with Jae Il Aum in
consummating the withdrawal. The respondents prayed that the petitioner and Jae Il Aum be ordered to pay, jointly and severally, the
said amount, plus P500,000.00 as moral damages and P500,000.00 as exemplary damages based on their claim that the petitioner, a
corporation incorporated in Korea, and Jae Il Aum, a Korean national, victimized the respondents, who are Filipinos. The respondents
merely restated and repleaded the same allegations in their counterclaims in Civil Case No. G-3119, and prayed that the aforesaid
amount of US$160,000.00 be set-off against their loan of US$500,000.00 which was being claimed by the petitioner in the said case, in
addition to awards for P500,000.00 as moral damages, and P500,000.00 as exemplary damages against the petitioner for allegedly
victimizing Filipinos in their country. The threshold issues common to and decisive of the complaint in Civil Case No. G-3012 and the
counterclaim for set-off in Civil Case No. G-3119 are whether the signature of respondent Lourdes Mendoza on the application for
withdrawal of US$160,000.00 was forged, and whether the petitioner connived with Jae Il Aum in the alleged fraudulent withdrawal of
the said amount. The evidence of the respondents as plaintiffs in Civil Case No. G-3012 is the same evidence that they will have to
adduce as plaintiffs on their counterclaim for set-off in Civil Case No. G-3119. Any judgment of the RTC of Guagua, Pampanga, Branch
49, in Civil Case No. G-3012 will, likewise, resolve the threshold issue in the respondents counterclaim for set-off in Civil Case No. G3119. That Jae Il Aum is not a party in Civil Case No. G-3119 is not important; that the respondents did not pray in their counterclaim
that the petitioner pay to them the US$160,000.00 withdrawn by Jae Il Aum is, likewise, not a bar to the application of the principle
of litis pendentia.
It must be stressed, however, that the dismissal of the complaint of the respondents against the petitioner in Civil Case No. G3012 is without prejudice to the continuation of the case against Jae Il Aum.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The complaint of the respondents against the petitioner in Civil
Case No. G-3012 is DISMISSED without prejudice to the continuation thereof against the defendant Jae Il Aum. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 128464

June 20, 2006

REV. LUIS AO-AS, REV. JOSE LAKING, EUSQUICIO GALANG, REV. ISABELO MONONGGIT, REV. EDWINO
MERCADO, REV. DANIEL PONDEVIDA, REV. TEODORICO TARAN and DR. BENJAMIN GALAPIA, Petitioners,
vs.
HON. COURT OF APPEALS, THOMAS P. BATONG, JUANITO BASALONG, AUGUSTO CATANGI, PAUL GARCIA,
QUIDO RIVERA, VICTORIO Y. SAQUILAYAN and DANILO ZAMORA, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Certiorari under Rule 45 of the Rules of Court to seek the reversal of the Court of Appeals
Decision1 dated 10 October 1996 in favor of respondents [hereinafter referred to as the Batong group] and
Resolution2 dated 3 March 1997 denying the Motion for Reconsideration of the herein petitioners [hereinafter referred
to as the Ao-As group].
The Court of Appeals found the facts to be as follows:
The Lutheran Church in the Philippines (hereinafter referred to as the LCP) is a religious organization duly registered
with the Securities and Exchange Commission on May 8, 1967. Its members are comprised of the Lutheran clergymen
and the local Lutheran congregations in the Philippines which, at the time of its incorporation, was divided into three
districts, namely: the North Luzon District (hereinafter referred to as the NLD); the South Luzon District (hereinafter
referred to as the SLD); [and] the Mindanao district (hereinafter referred to as the MDD).
The governing body of the LCP is its national board of directors (hereinafter referred to as the LCP Board) which was
originally composed of seven (7) members serving a term of two years. Six members of the LCP Board are elected
separately in district conferences held in each district, with two members representing each district the elected
district president becomes the clergy representative to the LCP Board and the other is a lay representative to the LCP
Board. The seventh member of the Board is the National President of the LCP who is elected at large in a national
convention held in October of every even-numbered year.
During the 1976 LCP national convention, a resolution was passed dividing the North Luzon district (NLD) into two
districts: the NLD Highland District (NLHD) and the NLD Lowland District (NLLD) -- thereby increasing the number of
directors from seven (7) to nine (9). Again in the 1984 LCP national convention, a resolution was passed creating
another district, namely, the Visayan Islands District (VID) thereby increasing further the number of directors to eleven
(11). Both resolutions were passed pursuant to Section 2 of Article 7 of the LCP By-Laws which provides that: "LCP in
convention may form additional districts as it sees fit".
Since the addition of two or more districts, an eleven (11) member board of directors representing the five (5) districts
managed the LCP without any challenge from the membership until several years later when certain controversies
arose involving the resolutions of the Board terminating the services of the LCP business manager and corporate
treasurer since 1979, Mr. Eclesio Hipe.
The termination of Mr. Hipe sparked a series of intracorporate complaints lodged before the Securities and Exchange
Commission (SEC). For the first time, the legality of the eleven (11) member Board was put in issue as being in excess
of the number of directors provided in the Articles of Incorporation since no amendments were made thereto to reflect
the increase.

Aside from the present case, SEC-SICD Case no. 3556 entitled "Excelsio Hipe, et. al. vs. Thomas Batong, et. al." and
SEC-SICD Case No. 3524, "Domingo Shambu, et. al. vs. Thomas Batong, et. al." respectively, sought to declare null and
void Board Resolution Nos. LCP-BD-6-89 and LCP-BD-7-89; and SEC-SICD Case No. 3550 entitled "The Lutheran Church
in the Philippines vs. Exclesio Hipe" which sought to recover the corporate records still in the possession of Mr. Hipe.
[The members of the Batong group] are the duly elected board of directors of the LCP at the time of the filing of SECSICD Case No. 3857. On the other hand, [the Ao-As group] have served in various capacities as directors or officers of
the LCP.
On August 17, 1990, [the Ao-As group] filed SEC-SICD Case No. 3857 for accounting and damages with prayer for
preliminary injunction and appointment of a management committee asserting the following causes of action:
"First, the alleged non-liquidation and/or non-accounting of a part of the proceeds of the La Trinidad land
transaction in the amount of P64,000.00 by petitioner Thomas Batong;
Second, the alleged non-liquidation and/or unaccounting of cash advances in the aggregate amount
ofP323,750.00 by petitioner Thomas Batong;
Third, the alleged dissipation and/or unaccounting of the LCP general fund in the amount of 4.8 million;
Fourth, the non-registration of the Leyte land purchased with LCP funds by petitioner Victorio Saquilayan;
Fifth, severance of church-partnership relationship with Lutheran Church-Missouri Synod (LCMS); and
Sixth, the transfer of LCP corporate books from the Sta. Mesa office to the Caloocan office."
During the hearings on the application for creation of a management committee, [the Batong group] filed an Urgent
Motion to Suspend the Proceedings of the Case in view of an amicable settlement agreed upon by the parties entitled
"A FORMULA FOR CONCORD". However, notwithstanding the FORMULA FOR CONCORD, the SEC-SICD denied [the
Batong groups] motion to suspend proceedings.
On January 23, 1992, petitioners filed a Motion to Dismiss alleging again the FORMULA OF CONCORD. Again, the SECSICD denied [the Batong groups] motion.
Subsequently, on September 3, 1992, the SEC-SICD Hearing Officer after the presentation of the parties respective
evidence, issued an Order creating a management committee. Said Order reads, in part:
" x x x All board resolutions and/or management actions or decisions passed and approved by them are deemed null
and void ab initio for they were passed, and approved by an illegally constituted Board of Directors. . . And worse,
several resolutions or Boards actions are not only (deemed) null and void but have caused irreparable damage to the
corporation such as the termination of all LCP staff and employee (LCP-BD-29-90); dissolution of LCP Business Office
(LCP-BD-37-90); termination of the partner-church relationship between the LCP and the Lutheran Church Missouri
Synod which is the major benefactor and source of funds of LCP (LCP-BD-28-90); forcible taking of almost all official
records and equipment of LCP by respondent Thomas B. Batong and transferring the (same) from the LCP business
office; acquisition of some lands using the corporate funds were in the name of some person other than the LCP; and
various cash advances of corporate funds by the respondents are not liquidated up to the present.
WHEREFORE, premises considered, A MANAGEMENT COMMITTEE is hereby created to undertake the management of
the Lutheran Church in the Philippines until such time that new members of the LCP Board of Directors shall have been
elected and qualified in the election to be called and conducted by the Management Committee in accordance with the
LCPs Articles of Incorporation and By-Laws preferably in October 1992."
On September 14, 1992, [the Batong group] filed their Motion for Reconsideration which was subsequently denied in
an Order dated September 23, 1992.

On September 23, 1992, [the Batong group] filed with the SEC En Banc a Petition for Certiorari with prayer for a
temporary restraining order alleging that the SEC-SIDC acted with grave abuse of discretion in creating the
management committee.
Shortly thereafter, on September 29, 1992, the following were appointed to the management committee: Atty. Puno as
Chairman; and private respondents Jose Laking, Eduardo Ladlad, Romeo Celiz as members. However, Atty. Puno later
resigned and was replaced by Atty. Oscar Almazan who was appointed as Chairman. After the death of Romeo Celiz, he
was replaced by private respondent Luis Ao-As.
On October 6, 1992, [the Ao-As group] filed a motion for issuance of a writ of preliminary injunction seeking to enjoin
[the Batong group] not only from continuing to act as LCP board of directors but also from calling a national convention
to elect new set of officers and members of the Board as provided in the LCP Constitution and By-Laws.
On October 16, 1992, the SEC-SIDC ordered the issuance of a writ of preliminary injunction prohibiting [the Batong
group] from "acting as a board of directors or officers of Lutheran Church in the Philippines, Inc. (LCP) and from holding
any convention or general or special membership meeting as well as election of the members of the LCP board of
directors, until further orders".
The [the Batong group] allege that the SEC-SIDC management committee used the Order dated October 16, 1992 to
carry out ultra vires acts, more specifically: (i) to take control of and closing down church buildings; (ii) to evict LCP
clergymen from their church parsonages; (iii) to ordain and appoint new clergymen to replace incumbent members of
the church hierarchy. In at least one case which has reached this Court, CA-G.R. No. 34504, it was found that:
"On August 13, 1993, [members of the Ao-As group] Oscar Almazan, James Cerdenola, Edgar Balunsat and Edwino
Mercado, together with armed security guards, acting in behalf of LCP, forcibly took possession of the houses occupied
by [the Batong group]. In view of the latters refusal to leave the premises, they permanently padlocked the main gate
of the compound confining [the Batong group] and their families therein and prevented the ingress and egress thereto.
Later the [Batong group] left their houses due to the alleged intimidation and threats employed by the [Ao-As group].
Thereafter, the latter entered the dwelling and took possession of the same."
However, even before the creation of the management committee, the LCP national convention had already been
called in a Board meeting held on September 26, 1991 at the Lutheran Hospice, Quezon City. Hence, by the time the
writ of preliminary injunction was issued, all notices had already been received by all local congregations and
convention delegates had likewise already been chosen to attend the national convention.
Thus, the 17th LCP National Convention was held on October 26 to 30, 1992 as earlier scheduled at the Immanuel
Lutheran Church and School, Tugatong, Malabon, Metro-Manila. The list of official delegates to the Convention is shown
in pages 32 to 33 of the Convention Records.
During the 17th LCP National Convention, the delegates representing the majority of the members which comprised
the three districts (North Luzon, South Luzon and Mindanao) issued a "Manifesto" to initiate by themselves the election
for a new set of church leaders because the incumbent directors were enjoined to act as a board. In the election, the
following were elected as LCP officers, namely:
President -- Rev. Victorino Saquilayan
Vice-President -- Rev. Juanito Basalong
Secretary -- Rev. Charlito Mercado
Treasurer -- Rev. Benjamin Lasegan
Similarly, prior to the issuance of the writ of preliminary injunction and the appointment of the management
committee, the SLD (South Luzon District) of LCP already held its district conference on august 26 to 28, 1992 which
elected, among other of its officers, the SLD Lay Representative pursuant to the LCP Constitution and By Laws. The
following were elected:

SLD President and


Clergy Representative : Rev. Elmer Banes
SLD Lay Representative: Roman Moscoso
The district conference for NLD was likewise held before the issuance of the writ of preliminary injunction on October 7
to 9, 1992. In said convention, the local congregations and clergymen executed a manifesto expressing their own
opposition to the appointment of a management committee.
[The Batong group] then filed with the SEC En Banc a Supplemental Petition dated November 13, 1992 alleging the
supervening events in the case which took place after the filing of the original petition on September 23, 1992.
Subsequent to the 17th LCP national convention of October 1992, a special convention was called by the SEC
Management Committee on January 25 to 29, 1993 at Cagayan de Oro City to elect a different set of officers for LCP.
[The Batong group] allege that the required notices were not sent to several local congregations and even fewer LCP
members were permitted by [the Ao-As group] to attend the special convention as evidenced by the list of official
delegates contained in the minutes of the special convention.
On July 21, 1993, [the Batong Group] filed a Second Supplement to its petition for certiorari in the SEC En Banc
alleging the supervening events and seeking the review of an Order of the Hearing Officer dated June 9, 1993 which
enlisted the aid of the Secretary of the Department of Interior and Local Government and the PNP Director General to
enforce the writ of preliminary injunction.
Pending the resolution of the above-mentioned petitions, the management committee took control of several church
properties, replaced clergymen from their parsonages and froze all bank accounts in the name of LCP.
[The Batong group] then filed a Petition for Mandamus and Damages with Prayer for Preliminary Mandatory Injunction
on August 19, 1993 seeking to unfreeze the bank accounts and recover the seized buildings.
All of the aforementioned petitioners (sic) were denied by the SEC En Banc. A motion for reconsideration was filed but
the same was likewise denied.3
The Batong group then filed a Petition for Review with the Court of Appeals seeking to annul the Decision of the
Securities and Exchange Commission En Banc. In said Petition, the Batong group alleged that the Ao-As group
persisted in carrying out ultra vires and illegal acts, to wit:
(a) Private respondent Luis L. Ao-As, purportedly on the strength of a board action held at Baguio on February
22-24, 1994 and of the assailed Order dated October 16, 1992, closed the premises of the Gloria Dei School
after school year 1993-1994 in an attempt to take-over the management and operations of the said school.
The closure of the Gloria Dei School is the subject of SEC Case No. 05-93-4463.
(b) On February 1, 1994, Rev. Eduardo Ladlad, acting as President of the LCP, executed a Contract to Sell with
Solid Gold Realty Corporation whereby he agreed to sell a portion of LCPs property in Cavite with an area of
7,218 square meters at a price of P1,000 per square meter or a total of P7,218,000 with a down payment
of P1,000,000.
(c) Upon application of the [Ao-As group], the SEC-SIDC issued an Order dated June 1, 1994 ex parte and on
June 14, 1994 at around 7 p.m., a certain Rev. Laking, using the Order of the SEC-SIDC dated June 1, 1994 and
October 16, 1992 writ of preliminary injunction, entered the premises of the Abatan Hospital located in
Baguias, Benguet Province, took over the management and control of the Abatan Hospital and forced the
pastor previously assigned therein Pastor Laapniten to leave his post simply because Pastor Lapniten is
identified with the Saquilayan Group.4
On 30 June 1994, the Batong group filed with the Court of Appeals a motion for the issuance of a Temporary
Restraining Order and/or Preliminary Injunction. On 12 July 1994, the Court of Appeals issued a Temporary Restraining
Order to enjoin the Ao-As group "from implementing the contract to sell between the Lutheran church in the Philippines
(LCP) and Solid Gold Realty Corporation and from selling, transferring, assigning and/or disposing of any other property

of the LCP; to enjoin the Ao-As group and/or those officers elected in their convention from enforcing or implementing
the Order dated October 16, 1992 and the writ of preliminary injunction issued in SEC Case 3857."
On 22 September 1994, the Batong group filed a Motion/ Manifestation to cite Eduardo Ladlad, Harry Roa, James
Cerdenola and Luis Ao-As in contempt of court, alleging that the latter, on 15 September 1994, entered the Olongapo
Lutheran Church with six armed men and there and then padlocked the main gate of the church. Consequently, Rev.
Elmer Baes, the assigned overseer at said church, was barred from entering the premises on 17 September 1994.
On 10 October 1996, the Court of Appeals ruled in favor of the Batong group, disposing the petition as follows:
WHEREFORE, the petition is hereby granted. The Decision dated August 25, 1993 of the SEC En Banc is hereby
RECONSIDERED and SET-ASIDE and the Orders of the SEC-SIDC dated September 3, 1992 and October 16, 1992 are
hereby ANNULLED and SET ASIDE. The SEC is hereby directed to conduct a new election of the directors of the LCP
consistent with the provisions of the Corporation Code.5
Hence, this petition, where the Ao-As group brings forth the following issues to be resolved by this Court:
I.
Whether or not the Court of Appeals gravely erred in utterly ignoring and disregarding all the evidence adduced by
[the Ao-As group], and in making findings of facts contradicted by the evidence on record and not supported by any
evidence whatsoever.
II.
Whether or not the Court of Appeals reversibly erred in ruling that SEC-SICD Case No. 3857 is a case of forum
shopping.
III.
Whether or not the Court of Appeals committed reversible error in declaring as invalid the manner of elections of the
Board of Directors of the Lutheran Church in the Philippines as provided for in its By-Laws.
IV.
Whether or not the Court of Appeals committed reversible error in ruling that the SEC-SICD had no jurisdiction to call
for a special election of the Board of Directors of the Lutheran Church in the Philippines. 6
In addition to the prayer to reverse the 10 October 1996 Decision and 3 March 1997 Resolution of the Court of
Appeals, and the revival of Resolution of the SEC En Banc in SEC-EB Case No. 330 and the Order of the SEC-SIDC in
Case No. 3857, the Ao-As group prays for the following:
1. x x x x
2. Declaring the Board of Directors elected at the National Convention called by the Management Committee
on January 25-27, 1993 in Cagayan de Oro as the legitimate members of the Board of LCP;
3. Declaring all acts and resolutions passed by the Batong group invalid and of no legal effect; and
4. Ordering the Batong group to return all the properties seized from the LCP and to refrain from the
representing the LCP.7
The Ao-As group did not commit willful and deliberate forum shopping in the filing of SEC-SIDC Case No. 3857.
Since a ruling upholding the Court of Appeals on the issue of forum shopping would render all the other issues in this
petition moot, we resolve to pass upon the same at the onset.

The Ao-As group claims that the Court of Appeals reversibly erred in ruling that SEC-SICD Case No. 3857 is a case of
forum shopping. The Court of Appeals had ruled:
Finally, SEC-SICD Case No. 3857 is a clear case of forum shopping. The acts of [the Batong group], as embodied in
several board resolutions, have already been raised and passed upon in other cases pending at the time the [Ao-As
group] instituted the present controversy.
The board resolutions denominated as LCP-BD-29-90 and LCP-BD-37-90 authorizing the dissolution of the LCP
business office and termination of the employees connected therewith was the subject of NLRC CASE NOS. 03-0193590 and 04-01979-90 pending before the National Labor Relations Commission.
The board resolution denominated as LCP-BD-28-90 authorizing the transfer of the LCP corporate records from the Sta.
Mesa Office to the Caloocan Office was the subject of Civil Case No. 133394-CV and 131879-CV pending before the
Metropolitan Trial Court of Manila, Branches 20 and 21 and subsequently dismissed in view of the FORMULA OF
CONCORD entered into between the parties.
On the other hand, the legality of the composition of the eleven-member LCP Board was already the subject matter of
SICD Case No. 3524 which was appealed to the SEC En Banc and docketed as SEC Case No. 352.
SEC Case No. 3857 is not the first case where the [Ao-As group], or those with similar interests, have asked for the
appointment of a management committee. In SEC Case 3556 entitled "Exclesio Hipe and Lutheran Church of the
Philippines v. Thomas Batong, et al.", in a motion dated June 18, 1991, private respondent Exclesio Hipe prayed for the
appointment of a management committee for LCP. In an Order dated August 15, 1991, the SEC-SICD ruled that the
Motion for the Appointment of a Management Committee and Accounting filed by the petitioners cannot be given due
course considering that the same is one of the incidents in SEC Case No. 3857 entitled Rev. Luis Ao-As, et al. vs.
Thomas Batong now pending in the sala of Hon. Elpidio Salgado". Petitioners knew that similar petitions have been
previously commenced because Atty. Oscar Almazan who is also a co-counsel in the case was the counsel of record in
SEC Case No. 3556 and the other cases.
Clearly, the act of the [Ao-as group] in filing multiple petitions involving the same issues constitutes forum shopping
and should be sanctioned with dismissal. x x x8
SEC-SICD Case No. 3857 is a petition for accounting with prayer for the appointment of a management committee and
the issuance of a writ of injunction. The Ao-As group claims that the issue involved in the case is whether the Ao-As
group is entitled to an accounting and to the creation of a management committee due to the Batong groups alleged
dissipation and waste of the assets of the LCP, and the subject matter is the act of dissipation and waste committed by
the Batong group. On the other hand:
1. NLRC Cases No. 03-01935-90 and 04-01979-90 pending before the National Labor Relations Commission, is
a case for illegal termination, which allegedly "obviously involves a different cause of action";
2. The cases pending before Branches 20 and 21 of the Municipal Trial Court of Manila, docketed as Civil Cases
No. 133394-CV and 131879-CV, respectively, are actions for forcible entry and unlawful detainer; and
3. SEC-SICD Case No. 3556 puts in issue the validity of LCP Board resolutions LCP-BD-6-89 and LCP-BD-7-89,
where what are involved are the incidents resulting from the issuance of the resolutions the unjust
termination of Mr. Exclesio Hipe as LCP Business Manager and treasurer and the illegal appointment of one
Hildelberto Espejo in his place. SEC-SIDC Case No. 3524 puts in issue the legality of the composition of the
eleven-member LCP Board. These are allegedly different issues from that of SEC-SIDC Case No. 3857 where
the acts of respondents are claimed to the basis of a prayer for accounting and appointment of a management
committee.
As elucidated above, the causes of action under SEC-SIDC Case No. 3857 are the following:
First, the alleged non-liquidation and/or non-accounting of a part of the proceeds of the La Trinidad land
transaction in the amount of P64,000.00 by petitioner Thomas Batong;

Second, the alleged non-liquidation and/or unaccounting of cash advances in the aggregate amount
ofP323,750.00 by petitioner Thomas Batong;
Third, the alleged dissipation and/or unaccounting of the LCP general fund in the amount of 4.8 million;
Fourth, the non-registration of the Leyte land purchased with LCP funds by petitioner Victorio Saquilayan;
Fifth, severance of church-partnership relationship with Lutheran Church-Missouri Synod (LCMS); and
Sixth, the transfer of LCP corporate books from the Sta. Mesa office to the Caloocan office.
The elements of forum shopping are: (a) identity of parties, or at least such parties as represent the same interests in
both actions; (b) identity of rights asserted and the relief prayed for, the relief being founded on the same facts; and
(c) the identity of the two preceding particulars, such that any judgment rendered in the other action will, regardless of
which party is successful, amount to res judicata in the action under consideration. 9
Otherwise stated, there is forum shopping where a litigant sues the same party against whom another action or
actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending. The
defense of litis pendentia in one case is a bar to the other/others; and, a final judgment is one that would constitute
res judicata and thus would cause the dismissal of the rest. Absolute identity of the parties is not required. It is enough
that there is substantial identity of the parties. It is enough that the party against whom the estoppel is set up is
actually a party to the former case. There is identity of causes of action if the same evidence will sustain the second
action. The principle applies even if the relief sought in the two cases may be different. Forum shopping consists of
filing multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for
the purpose of obtaining a favorable judgment.10
As the present jurisprudence now stands, forum shopping can be committed in three ways: (1) filing multiple cases
based on the same cause of action and with the same prayer, the previous case not having been resolved yet (litis
pendentia); (2) filing multiple cases based on the same cause of action and the same prayer, the previous case having
been finally resolved (res judicata); and (3) filing multiple cases based on the same cause of action but with different
prayers (splitting of causes of action, where the ground for dismissal is also either litis pendentia or res judicata 11 ). If
the forum shopping is not considered willful and deliberate, the subsequent cases shall be dismissed without prejudice
on one of the two grounds mentioned above. However, if the forum shopping is willful and deliberate, both (or all, if
there are more than two) actions shall be dismissed with prejudice. 12lavvphi1.net
The six grounds originally relied upon by the Ao-As group in SEC-SICD Case No. 3857 are entirely different from the
causes of action in NLRC Cases No. 03-01935-90 and 04-01979-90, Civil Cases No. 133394-CV and 131879-CV, and
SEC-SICD Cases No. 3556 and 3524. It is true that the causes of action in the latter cases were included as additional
grounds in SEC-SICD Case No. 3857 for the appointment of the management committee and for accounting "of all
funds, properties and assets of LCP which may have come into their possession during their incumbency as officers
and/or directors of LCP."13 However, the creation of a management committee and the prayer for accounting could not
have been asked for in the labor (NLRC Cases No. 03-01935-90 and 04-01979-90) and forcible entry (Civil Cases No.
133394-CV and 131879-CV) cases.
As regards the other SEC Cases, though, the Ao-As group could have indeed prayed for the creation of the
management committee and the accounting of the funds of the LCP. In fact, as stated by the Court of Appeals, the
petitioner in SEC-SICD Case No. 3556 had prayed for the appointment of a management committee in a motion dated
18 June 1991. This motion, however, was subsequent to the filing of SEC-SICD Case No. 3857 on 17 August 1990, for
which reason the SEC-SICD ruled that such motion cannot be given due course considering that it was one of the
incidents of SEC-SIDC Case No. 3857. In effect, the SEC-SIDC had denied the subsequent motion on the ground of litis
pendentia. But should SEC-SICD Case No. 3857, which contains the earlier prayer to create a management committee,
be likewise dismissed? Following the rules set forth in the preceding paragraphs, it would depend on whether the
different SEC cases constitute willful and deliberate forum shopping on the part of Ao-As group.
We hold that this is not a case of willful and deliberate forum shopping and, hence, the SEC-SICD Case No. 3857, which
contains the earlier prayer to create a management committee, should not be dismissed. The reason for this is the
strict evidentiary requirement needed to grant a prayer to create a management committee. The power of the SEC 14 to

create a management committee is found in Section 6(d) of Presidential Decree No. 902-A, as amended, which
provides:
Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:
d) To create and appoint a management committee, board or body upon petition or motu propio to undertake the
management of corporations, partnerships or other associations not supervised or regulated by other government
agencies in appropriate cases when there is imminent danger of dissipation, loss, wastage or destruction of assets or
other properties or paralization of business operations of such corporations or entities which may be prejudicial to the
interest of the minority stockholders, parties-litigants or the general public.
Evidently, it should be difficult to deduce the "imminent danger of dissipation, loss, wastage or destruction of assets or
other properties" from an allegation of a single act of previous misappropriation or dissipation on the part of the
Batong group. It is often only when the previous misappropriations and dissipations have become extensive and out of
control that it can be candidly said that there is an imminent danger of further dissipation. The Ao-As group cannot be
faulted therefore for not praying for the creation of a management committee in the first couple of cases it filed with
the SEC, and neither can they be faulted for using the causes of action in previously filed cases to prove their
allegation of imminent dissipation. We cannot rule out the possibility that the danger of imminent dissipation of the
corporate assets became apparent only in the acts of the respondents subsequent to the filing of the first two SEC
cases.
The creation of a management committee is not warranted by the facts of the case.
The Ao-As group claims that the Court of Appeals "unceremoniously disregarded all the undisputed testimonial and
documentary evidence presented before the SEC,"15 and strongly pointed to their evidence which "clearly show the
dissipation, wastage and loss of LCP funds and assets."16 These pieces of evidence supposedly proved the following:
1. The alleged anomaly concerning the sale of the land and the purchase of another land, both located in La
Trinidad. The La Trinidad Land Transaction, the proceeds whereof were allegedly unliquidated, was testified to
by petitioner Ao-As and Mr. Excelsio Hipe before the SEC-SICD in a hearing conducted on 11 September 1990.
2. Unliquidated cash advances and unaccounted funds. Petitioners presented evidence to prove the failure of
respondent Batong to liquidate cash advances and account for P4,000,000 of LCP funds.
3. Purchase of Leyte Land in the name of respondent Saquilayan with LCP funds. Respondent LCP VicePresident Victorio Y. Saquilayan allegedly purchased a parcel of land in Albuera, Leyte in his name, using LCP
funds. Respondent Saquilayan subsequently donated to the LCP, and explained that the purchase in his name
was upon advice of LCPs lawyers to comply with the rulings in Republic of the Philippines v. Hon. Arsenio M.
Gonong17 and Republic of the Philippines v. Iglesia Ni Cristo.18
4. Severance of partner-church relationship between the LCP and the LCMS. Respondents issued LCP Board
Resolution No. LCP-BD-28-90 severing all relations with the Lutheran Church-Missouri Synod (LCMS), allegedly
in violation of LCP Board Resolution No. LCP-BD-33-70 which stated that "all actions taken by LCP in convention
can only be amended, modified and changed by LCP in convention."
5. Taking of LCP Books of Account. Respondent Batong, accompanied by members of the LCP Board and about
15 armed security guards allegedly barged into the premises of the LCP in Old Sta. Mesa, Manila, and removed
all of the official records and documents of the LCP (including the books of account, official receipts, check and
journal vouchers, official papers and titles to property) and had the same relocated to his residence in
Caloocan City and to the offices of Immanuel Lutheran Church in Malabon.
The Court of Appeals had ruled:
Nothing in [Ao-As groups] evidence presented in support for their application for a management committee showed
an impending or imminent danger of dissipation of funds. In the assailed SEC-SICD Order dated September 3, 1992,
the appointment of a management committee was justified because of "acquisition of some lands using the corporate

funds . . . in the name of some person other than the LCP, and various cash advances of corporate funds by the
respondents not liquidated up to the present".
The SEC-SICD Order refers to the La Trinidad and Leyte land transactions and the alleged non-liquidation or
unaccountability of cash advances and other funds which constitutes the four causes of action alleged in the petition.
[The Ao-As group] admit[s] that the La Trinidad Land transactions [were] consummated in 1984 while the Leyte
transaction was made in 1989. Both occurred prior to the Commencement (sic) of the present petition in 1990.
Similarly, the alleged unliquidated cash advances referred to accumulated funds long withdrawn in the past by Dr.
Thomas Batong "(in varying amounts) for personal, travel and other miscellaneous purposes, all in the aggregate
amount of not less than P 323,750.00". And the alleged unaccounted funds referred to the "trial balance of LCP as of
September 15, 1989".
Notably, the remaining two causes of action in the aforementioned petition do not involve dissipation of funds, namely:
(i) the severance of partner-church relationship between LCP and Lutheran Church-Missouri Synod; and (ii) the transfer
of corporate books from the Sta. Mesa Office to Caloocan City.
All of the grounds relied upon by [the Ao-As group] pertain to past delinquencies for which there are other available
remedies such as accounting and reconveyance. The [Ao-As group] did not allege, much less prove, any present or
imminent loss or destruction of LCP properties and assets. At best, it expresses merely a general apprehension for
possible mismanagement by respondent on the basis of the aforementioned past transactions.
It must be stressed that the appointment of a management committee inevitably results in the drastic summary
removal of all directors and officers of LCP. Clearly, the appointment of a management committee is not justified due
to the failure of only two (2) of the LCP Board members to liquidate past cash advances and other transactions
involving corporate property and funds.
Where the corporation is solvent, a receiver will not be appointed because of past misconduct and a subsequent mere
apprehension of a future misdoing, where the present situation and the prospects for the future are not such as to
warrant a receivership. x x x"
Significantly, the SEC En Banc even pointed out that: "the question of whether or not the [Batong group] have to
account for all funds, properties and assets of LCP which may come into their possession as directors and/or officers of
LCP is still to be resolved by the hearing officer after trial on the merits."
Under prevailing law, the SEC-SICD should have refused the appointment of a management committee.
"It is the general rule that a receiver (or a management committee) will not be appointed unless it appears that the
appointment is necessary either to prevent fraud, or to save the property from fraud or threatened destruction, or at
least in case of solvent corporation x x x. The burden of proof is a heavy one which requires a clear showing that an
emergency exists.
"x x x Similarly, a receiver (or a management committee) should not be appointed in an action by a minority
stockholder against corporate officers for an accounting where the corporation is solvent and going concern and a
receiver is not necessary to preserve the corporate property pending the accounting".
Furthermore, a management committee should not be created when there was an adequate remedy available to
private respondents for the liquidation of unaccounted funds. 19
The Court of Appeals went on to rule that the members of the Ao-As group "have not positively shown that the said
funds are unaccounted for,"20 and analyzed the evidence presented by the Ao-As group to illustrate that the
unaccounted funds were only P1,572.43, "which may be attributable to adjustment errors but certainly not a case of
misappropriation or misuse."21
The Ao-As group maintains that the unaccounted funds amount to around P4.8 million, and claim that if the Court of
Appeals "had only given the [the Ao-As group] a chance to prove their allegations (concerning acts committed by
respondents subsequent to the creation of the management committee), then it would have confirmed the earlier

determination made by the SEC-SICD regarding the necessity for the creation of the management committee." 22 It
further asseverates:
20. The acts constituting [the Ao-As groups] six causes of action in the petition filed with the SEC-SICD (the La Trinidad
land transaction, the unliquidated cash advances, the unaccounted funds amounting to P4.8 million, the Leyte land
transaction, the severance of the sister-church relationship and forcible removal of the LCP books of account) could not
be characterized merely as "past delinquencies". The six causes of action and the subsequent acts of the [Batong
group], after the filing of the petition with the SEC-SICD, clearly show a continuing and deliberate scheme of the
dissipation and wastage of LCP properties and assets, which if unrestricted would cause further destruction of LCP
assets and paralyzation of its operations, as it had already done. The creation of the Management Committee was,
therefore, perfectly legal and justified. And the ruling of respondent Court of Appeals that these acts do not justify its
appointment is, [the Ao-As group] humbly submit, reversible error.
21. In addition, the CA Decision also declared that "in any event, the past anomalies were only done by some of the
Batong group." This is erroneous. Under the By-Laws of the LCP, the Board of Directors is in charge of the
disbursement of funds. Sections 1 and 2 of Article 6 of the LCP By-Laws state:
"Section 1. The President of the LCP shall be given the following executive powers and supervisory duties:
xxx xxx xxx
b. The President together with two other members of the LCP Board of Directors, may authorize the release of
surplus funds in emergencies or in cases of sudden need.
xxx xxx xxx
Section 2. The Board of Directors of the LCP
xxx xxx xxx
c. The Board of Directors shall prepare the annual budget of the LCP.
d. The Board of Directors shall be responsible for the annual auditing of all the LCP Properties and may initiate
special auditing at any time."
22. From the foregoing, it is clear that respondent Batong did not act alone, but in concert with the other members of
the LCP Board. The creation of the management committee was therefore justified.
23. The CA Decision also noted that since there were other remedies available to the petitioners to correct these
anomalies, the creation of the management committee was unjustified. [The Ao-As group] again humbly submit again
(sic) that respondent Court of Appeals erred when it made this statement. The LCP management committee was
created precisely because of the extreme urgency that [mere] caused by the continued dissipation, loss and wastage
of LCP funds and assets by the Batong group. If [the Ao-As group] were to avail of these so-called available remedies
then by the time a decision is to be rendered in these "available remedies" the assets and funds of the LCP would have
indubitably been lost forever since the dissipation, loss and wastage were then, and still is, an on going process.
Consequently, it is clearly unreasonable for respondent Court of Appeals to declare that the [Ao-As group] should have
first availed of these so-called remedies.23
Even without delving into the analysis of the prosecution evidence concerning the six causes of action and the alleged
acts subsequent to these six causes of action, it is already appropriate for us to rule that the facts as they appear to us
now do not warrant the creation of a management committee.
Refusal to allow stockholders (or members of a non-stock corporation) to examine books of the company is not a
ground for appointing a receiver (or creating a management committee) since there are other adequate remedies,
such as a writ of mandamus.24 Misconduct of corporate directors or other officers is not a ground for the appointment
of a receiver where there are one or more adequate legal action against the officers, where they are solvent, or other
remedies.25

The appointment of a receiver for a going corporation is a last resort remedy, and should not be employed when
another remedy is available. Relief by receivership is an extraordinary remedy and is never exercised if there is an
adequate remedy at law or if the harm can be prevented by an injunction or a restraining order. Bad judgment by
directors, or even unauthorized use and misapplication of the companys funds, will not justify the appointment of a
receiver for the corporation if appropriate relief can otherwise be had. 26
The fact that the President of the LCP needs the concurrence of only two other directors to authorize the release of
surplus funds plainly contradicts the conclusion of conspiracy among the presently 11-man board. Neither does the
fact that the Board of Directors of the LCP prepares the annual budget and the annual auditing of properties of the LCP
justify the conclusion that the alleged acts of respondent Batong was done in concert with the other directors. There
should have been evidence that such dissipation took place with the knowledge and express or implied consent of
most or the entire board. Good faith is always presumed. 27 As it is the obligation of one who alleges bad faith to prove
it, so should he prove that such bad faith was shared by all persons to whom he attributes the same. The last resort
remedy of replacing the entire board, therefore, with a management committee, is uncalled for.
The Court of Appeals erred in declaring as invalid the manner of elections of the Board of Directors of the LCP as
provided in its By-Laws.
The Ao-As group stresses that the Court of Appeals committed reversible error in declaring as invalid the manner of
elections of the Board of Directors of the Lutheran Church in the Philippines as provided in its By-Laws. The Court of
Appeals ruled:
The Court notes that the LCP By-Laws provide for a special procedure for the election of its directors. This was the
procedure followed by both the [Batong group] and the [Ao-As group].
"Section 2. Composition of the Board of Directors of LCP.
a. The Board of Directors shall be composed of the President of LCP and the President and lay representative of
each District.
b. Newly elected members of the LCP Board of Directors shall assume their positions immediately after LCP
conventions or the October LCP Board of Directors meeting in the year in which they are elected."
However, Section 24 of the Corporation Code provides that "[a]t all elections of directors or trustees, there must be
present, either in person or by representative to act by written proxy, x x x if there be no capital stock, a majority of
the members entitled to vote."
It is clear from Section 24 that in the election of the trustees of a non-stock corporation, it is necessary that at least "a
majority of the members entitled to vote" must be present at the meeting held for the purpose. It follows that trustees
cannot be elected by zones or regions, each zone or region electing independently and separately a member of the
board of trustees of the corporation, such method being violative of Section 24. (SEC Opinions, Jan. 30, 1969, April 1,
1981). The election of the directors by district or regions as provided in the LCP By-Laws where a majority of the
members are not present is inconsistent with the Corporation [Code] and must be struck down as invalid.
Consequently, the directors elected by district cannot be considered as bona fide directors. Even the election of LCP
officers in the SEC-SICD sponsored national convention of the LCP must be considered as invalid. 28
As argued by the Ao-As group, however, the validity of the LCP By-Laws providing for a special procedure in the
election of the LCP Board of Directors was never put in issue, either by the Ao-As group or the Batong group. The Court
of Appeals, therefore, should have refrained from passing upon such issue, motu propio. According to Rule 51, Section
8 of the Rules of Court, which pertains to matters which may be decided on appeal:
Sec. 8. Questions that may be decided. No error which does not affect the jurisdiction over the subject matter or the
validity of the judgment appealed from or the proceedings therein will be considered unless stated in the assignment
of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court
may pass upon plain errors and clerical errors.

The ruling of the SEC En Banc setting aside the SEC-SICD determination that LCP Board of Directors was illegally
constituted has therefore become final and executory, subject to the determination by the SEC-SICD of the seven
members that should comprise the Board, as likewise provided in said Decision. 29
Even the Batong group agrees with the Ao-As group on the validity of the by-laws provision concerning the election of
the directors by districts:
[The Batong group] respectfully submit[s] that the matter of how the directors or other leaders of a church shall be
chosen is a matter of ecclesiastical law or custom which is outside the jurisdiction of civil courts. Hence, even
assuming arguendo, that the mode of election of the LCP is not strictly in accordance with the Corporation Code, it was
improper for the Securities and Exchange Commission to apply the provisions of the said Code to the LCP. 30
In any case, the stipulation in the By-Laws is not contrary to the Corporation Code. Section 89 of the Corporation Code
pertaining to non-stock corporations provides that "(t)he right of the members of any class or classes (of a non-stock
corporation) to vote may be limited, broadened or denied to the extent specified in the articles of incorporation or the
by-laws."31 This is an exception to Section 6 of the same code where it is provided that "no share may be deprived of
voting rights except those classified and issued as preferred or redeemable shares, unless otherwise provided in this
Code."32 The stipulation in the By-Laws providing for the election of the Board of Directors by districts is a form of
limitation on the voting rights of the members of a non-stock corporation as recognized under the aforesaid Section
89. Section 24, which requires the presence of a majority of the members entitled to vote in the election of the board
of directors, applies only when the directors are elected by the members at large, such as is always the case in stock
corporations by virtue of Section 6.
WHEREFORE, the Decision of the Court of Appeals annulling and setting aside the order to create a management
committee is thereby AFFIRMED, with the MODIFICATION that every subsequent election of the directors of Lutheran
Church in the Philippines shall henceforth be in accordance with the By-Laws and Articles of Incorporation of the same.
Costs against petitioners.
SO ORDERED.

PHILIPPINE AIRLINES, INC., G.R. No. 143088


MANOLO AQUINO, JORGE
MA. CUI, JR. and PATRICIA Present:
CHIONG,
Petitioners, PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ,
CORONA,
-versus- AZCUNA, and
GARCIA, JJ.
Promulgated:
FLIGHT ATTENDANTS AND
STEWARDS ASSOCIATION OF
THE PHILIPPINES (FASAP) and January 24, 2006
LEONARDO BHAGWANI,
Respondents.
x----------------------------------------------------------------------------------------x

DECISION
AZCUNA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court presents a recurring question regarding the
Courts requirement of a certification of non-forum shopping.
Petitioners Philippine Airlines, Inc. (PAL) and Manolo Aquino, Jorge Ma. Cui, Jr. and Patricia Chiong, in their capacity as
Executive Vice-President Administration and Services, Manager International Cabin Crew and Assistant Vice-President
Cabin Services, respectively, are before the Court seeking the reversal of the resolution of the Court of Appeals in C.A.
G.R. No. SP-56850, dated January 31, 2000, dismissing their appeal and the resolution of May 11, 2000, denying the
motion for reconsideration.
The facts on the conflict between PAL and respondents Flight Attendants and Stewards Association of the Philippines
(FASAP) and Leonardo Bhagwani are not necessary for the Courts resolution of the petition. It is enough to state that
on May 14, 1997 FASAP and Leonardo Bhagwani filed a complaint for unfair labor practice, illegal suspension and
illegal dismissal against petitioners before the Labor Arbiter of the National Labor Relations Commission (NLRC). The
Labor Arbiter rendered a decision holding that PAL committed unfair labor practice and illegal dismissal of Bhagwani
and, consequently, ordered the payment of damages. The NLRC later modified the decision by setting aside the finding
that PAL was guilty of unfair labor practice, but affirming the rest of the decision.
What is relevant to the case is the subsequent appeal to the Court of Appeals. When petitioners filed a petition for
certiorari against the decision with the Court of Appeals, it was accompanied by a Certification of Non-Forum Shopping
executed by Cesar R. Lamberte and Susan Del Carmen, Vice-President Human Resources and Assistant Vice-President
Cabin Services of PAL, respectively, who are not parties to the case. The certification, however, was without proof that
the two affiants had authority to sign in behalf of petitioners. As a result, the Court of Appeals dismissed the case for
failure to show the authority of affiants to sign for PAL and for failure of the other petitioners to join in the execution of
the certification. A motion for reconsideration was filed with a Secretarys Certificate attached evidencing that affiants
Cesar R. Lamberte and Susan Del Carmen have been authorized by Board Resolution No. 00-02-03 to initiate and/or
cause to be filed on behalf of PAL petitions and pleadings in all labor-related cases. As to the other petitioners, it was
argued that they are mere nominal parties so that their failure to execute the certification does not justify dismissal of
the petition. Despite this submission, the Court of Appeals denied the motion for reconsideration. Hence, the case is
now before this Court.
The petition is without merit.
The necessity for a certification of non-forum shopping in filing petitions for certiorari is found in Rule 65, Section 1, in
relation to Rule 46, Section 3 of the Rules of Court. These provisions require it to be executed by the corresponding
petitioner or petitioners. As no distinction is made as to which party must execute the certificate, this requirement is
made to apply to both natural and juridical entities.[1] When the petitioner is a corporation, the certification should be
executed by a natural person. Furthermore, not just any person can be called upon to execute the certification,
although such a person may have personal knowledge of the facts to be attested to.[2]
This Court has explained that a corporation has no power except those conferred on it by the Corporation Code and
those that are implied or incidental to its existence. The exercise of these powers is done through the board of
directors and/or duly authorized officers and agents. Given these corporate features, the power of a corporation to sue
in any court is generally lodged with the board of directors. The board, in turn, can delegate the physical acts needed
to sue, which may be performed only by natural persons, to its attorneys-in-fact by a board resolution, if not already
authorized under the corporate by-laws.[3]

Thus, only individuals vested with authority by a valid board resolution may sign the certificate of non-forum shopping
in behalf of a corporation. In addition, the Court has required that proof of said authority must be attached. Failure to
provide a certificate of non-forum shopping is sufficient ground to dismiss the petition. Likewise, the petition is subject
to dismissal if a certification was submitted unaccompanied by proof of the signatorys authority.[4]
The petition filed with the Court of Appeals had a certification of non-forum shopping executed by Cesar R. Lamberte
and Susan Del Carmen. The certification, however, was without proof of authority to sign. When a motion for
reconsideration was filed, a Secretarys Certificate was submitted as proof that the board of directors of PAL had
authorized the two to execute the certificate. Nonetheless, the Court finds that this belated submission is an
insufficient compliance with the certification requirement.
This Court has allowed the reinstatement of petitions that were dismissed due to lack of proof of authority to sign the
certification upon its subsequent submission, saying that this amounted to
substantial compliance. The rationale was that the signatories, at the time of execution of the certification, were in fact
authorized to sign, although proof of their authority was lacking.[5]
This is not what happened in this case. A perusal of the Secretarys Certificate submitted reveals that the authority to
cause the filing of the petition was granted on February 15, 2000.[6] The petition, on the other hand, was filed on
January 24, 2000 and was dismissed by the Court of Appeals on January 31, 2000. This means that at the time the
certification was signed, Cesar R. Lamberte and Susan Del Carmen were not duly authorized by the Board of Directors
of PAL and, consequently, their signing and attestations were not in representation of PAL. This effectively translates to
a petition that was filed without a certification at all as none was issued by PAL, the principal party to the case.
The required certification of non-forum shopping must be valid at the time of filing of the petition. An invalid certificate
cannot be remedied by the subsequent submission of a Secretarys Certificate that vests authority only after the
petition had been filed.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.

ADOLFO S. AZCUNA
Associate Justice
WE CONCUR:

REYNATO S. PUNO
Chairperson

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA


Associate Justice Associate Justice

CANCIO C. GARCIA
Associate Justice

ATTESTATION
I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

REYNATO S. PUNO
Associate Justice
Chairperson, Second Division

CAGAYAN VALLEY DRUG CORPORATION vs. CIR G.R. No. 151413 February 13, 2008
FACTS: Petitioner, a corporation duly organized and existing under Philippine laws, is a duly licensed retailer of medicine
and other pharmaceutical products. Sometime in 1995, it granted 20% sales discounts to qualified senior citizens on
purchases of medicine pursuant to RA No. 7432 and its implementing rules and regulations. In compliance with Revenue
Regulation No. 2-94, petitioner treated the 20% sales discounts granted to qualified senior citizens in 1995 as deductions
from the gross sales in order to arrive at the net sales, instead of treating them as tax credit as provided by Section 4 of
RA 7432. On December 27, 1996, however, petitioner filed with the Bureau of Internal Revenue (BIR) a claim for tax
refund/tax credit of the full amount of the 20% sales discount it granted to senior citizens for the year 1995, allegedly
totaling to PhP 123,083 in accordance with Sec. 4 of RA 7432. The BIRs inaction on petitioners claim for refund/tax credit
compelled petitioner to file a petition for review before the CTA. On April 26, 2000, the CTA rendered a Decision
dismissing the petition for review for lack of merit. Aggrieved, petitioner elevated the matter before the CA. On August 31,
2000, the CA issued the assailed Resolution dismissing the petition on procedural grounds. The CA held that the person
who signed the verification and certification of absence of forum shopping, a certain Jacinto J. Concepcion, President of
petitioner, failed to adduce proof that he was duly authorized by the board of directors to do so. Hence, this petition.
ISSUE: WON petitioners president can sign the subject verification and certification sans the approval of its Board of
Directors.
RULING: With respect to a juridical person, Sec. 4, Rule 7 on verification and Sec. 5, Rule 7 on certification against forum
shopping are silent as to who the authorized signatory should be. Said rules do not indicate if the submission of a board
resolution authorizing the officer or representative is necessary. In Philippine Airlines v. Flight Attendants and Stewards
Association of the Philippines , SC ruled that only individuals vested with authority by a valid board resolution may sign
the certificate of non-forum shopping on behalf of a corporation. The action can be dismissed if the certification was
submitted unaccompanied by proof of the signatorys authority. SC believes that appending the board resolution to the
complaint or petition is the better procedure to obviate any question on the authority of the signatory to the verification and
certification. The required submission of the board resolution is grounded on the basic precept that corporate powers are
exercised by the board of directors, and not solely by an officer of the corporation. Hence, the power to sue and be sued
in any court or quasi-judicial tribunal is necessarily lodged with the said board. In the case at bar, the petitioner
substantially complied with Secs. 4 and 5, Rule 7 of the 1997 Revised Rules on Civil Procedure. First, the requisite board
resolution has been submitted albeit belatedly by petitioner. Second, the ruling in Lepanto with the rationale that the
President of petitioner is in a position to verify the truthfulness and correctness of the allegations in the petition. Third, the
President of petitioner has signed the complaint before the CTA at the inception of this judicial claim for refund or tax
credit.
UNIVERSITY OF THE EAST, ET AL. v. ANALIZA F. PEPANIO ET. AL., G.R. No. 193897, January 23, 2013
Labor Law; Remedial Law; Service by registered mail. For completeness of service by registered mail, the reckoning
period starts either (a) from the date of actual receipt of the mail by the addressee or (b) after five days from the date he
received the first notice from the postmaster. There must be a conclusive proof, however, that the registry notice was
received by or at least served on the addressee before the five-day period begins to run.
Here, the records fail to show that Atty. Mison in fact received the alleged registry notice from the post office on March 22,
2005 that required him to claim his mail Respondents have not presented a copy of the receipt evidencing that notice. The
Court has no choice but to consider the registry return receipt bearing the date April 4, 2005 which showed the date of
Atty. Misons receipt of a copy of the LA Decision a conclusive proof of service on that date. Reckoned from April 4, UE
filed its appeal to the NLRC on time.
xxxx

Remedial Law; Verification and certification against non-forum shopping. As a general rule, the Board of Directors or
Board of Trustees of a corporation must authorize the person who signs the verification and certification against non
forum shopping of its petition. But the Court has held that such authorization is not necessary when it is self-evident that
the signatory is in a position to verify the truthfulness and correctness of the allegations in the petition. Here the
verification and certification were signed by petitioner Dean Javier who, based on the given facts of the case, was in a
position to verify the truthfulness and correctness of the allegations in the petition.
FACTS:

DECS required college faculty members to have a master's degree as a minimum educational qualification for acquiring regular status.

1994 UE and its union executed a CBA with effect up to 1999 which provided that UE shall extend only semester-to-semester appointments to
college faculty staffs who did not possess the minimum qualifications.

UE hired the two respondents on a semester-to-semester basis to teach in its college. They could not qualify for probationary or regular status because
they lacked postgraduate degrees.

The two enrolled in graduate studies but failed to finish it.

UE extended probationary appointments to Bueno and Pepanio.

The Dean of the UE College of Arts and Sciences, sent notices to probationary faculty members, reminding them of the expiration of the
probationary status of those lacking in postgraduate qualification

Pepanio replied that she was enrolled at the PUP.

Bueno later wrote UE, demanding that it consider her a regular employee based on her six-and-a-half-year service. Pepanio cited her 3.5 years service.

Respondents filed cases of illegal dismissal against the school before the LA.

LA: Bueno and Pepanio were regular employees, given that they taught at UE for at least four semesters under the old CBA. The new CBA could not
deprive them of the employment benefits they already enjoyed.
UE appealed to the NLRC.

Bueno and Pepanio questioned the timeliness of the appeal to the NLRC. They pointed to the postmasters certification that its office received the mail
containing the LAs Decision on March 17, 2005 and "informed the Office of Atty. Mison right away but they only got the letter on April 4, 2005." Bueno
and Pepanio claim that the 10-day period for appeal should be counted from March 22, 2005, five days after the postmasters first notice to Atty. Mison
to claim his mail.

NLRC ruled that old CBA did not automatically confer permanent status to Bueno and Pepanio. They still had to meet the standards for permanent
employment provided under the Manual of Regulations and the Joint Order mentioned above.

CA reinstated the LAs Decision by reason of technicality. It held that the 10-day period for appeal already lapsed when UE filed it on April 14, 2005
since the reckoning period should be counted five days from March 17, when the postmaster gave notice to UEs legal counsel to claim his mail or
from March 22, 2005.

Respondents: petition should be denied since it failed to enclose a certification from the UE Board of Trustees, authorizing petitioner Dean
Javier to sign the verification and CNFS.

Issues/ruling
WON UEs failure to enclose a certification from the UE Board of Trustees to execute the verification and certification of non-forum
shopping was fatal
The BOD or Board of Trustees of a CORP must authorize the person who signs the verification and certification against non-forum shopping of its
petition. But the Court has held that such authorization is not necessary when it is self-evident that the signatory is in a position to verify the
truthfulness and correctness of the allegations in the petition.
The verification and certification were signed by petitioner Dean Javier who, based on the given facts of the case, was "in a position to verify the
truthfulness and correctness of the allegations in the petition."

WON UE filed a timely appeal to the NLRC from the Decision of the LA;
Bueno and Pepanio contend that UE filed its appeal to the NLRC beyond the required 10-day period. They point out that thepostmaster gave notice to
Atty. Mison on March 17, 2005 to claim his mail that contained the LA Decision. He was deemed in receipt of that decision five days after the notice
or on March 22, 2005. UE had 10 days from the latter date or until April 1, 2005 within which to file its appeal from that decision.
UE: period of appeal should be counted from April 4, 2005, the date appearing on the registry return receipt of the mail addressed to its counsel.
For completeness of service by registered mail, the reckoning period starts either
(a) from the date of actual receipt of the mail by the addressee or
(b) after five days from the date he received the first notice from the postmaster.
There must be a conclusive proof, however, that the registry notice was received by or at least served on the addressee before the five-day period
begins to run.
The records fail to show that Atty. Mison in fact received the alleged registry notice from the post office on March 22, 2005 that required him to claim his
mail. The Court has no choice but to consider the registry return receipt bearing the date April 4, 2005 which showed the date of Atty. Misons
receipt of a copy of the LA Decision a conclusive proof of service on that date.
Reckoned from April 4, UE filed its appeal to the NLRC on time.

WON UE illegally dismissed Bueno and Pepanio.


Respondents argue that UE hired them when what was in force was the 1994 CBA between UE and the faculty union. Escorpizo v. University of
Baguio a school CBA must be read in conjunction with statutory and administrative regulations governing faculty qualifications.

UE gave respondents Bueno and Pepanio more than ample opportunities to acquire the postgraduate degree required of them.

FIRST DIVISION
[G.R. No. 151098. March 21, 2006.]
ERLINDA GAJUDO, FERNANDO GAJUDO, JR., ESTELITA GAJUDO, BALTAZAR GAJUDO and DANILO ARAHAN CHUA, petitioners,
vs. TRADERS ROYAL BANK, 1 respondent.
DECISION
PANGANIBAN, C.J p:
The mere fact that a defendant is declared in default does not automatically result in the grant of the prayers of the plaintiff. To win, the
latter must still present the same quantum of evidence that would be required if the defendant were still present. A party that defaults is
not deprived of its rights, except the right to be heard and to present evidence to the trial court. If the evidence presented does not
support a judgment for the plaintiff, the complaint should be dismissed, even if the defendant may not have been heard or allowed to
present any countervailing evidence.
The Case
Before us is a Petition for Review 2 under Rule 45 of the Rules of Court, assailing the June 29, 2001 Decision 3 and December 6, 2001
Resolution 4 of the Court of Appeals (CA) in CA-G.R. CV No. 43889. The CA disposed as follows:
"UPON THE VIEW WE TAKE OF THIS CASE, THUS, the partial judgment appealed from, must be, as it hereby is, VACATED and SET
ASIDE, and another one entered DISMISSING the complaint at bench. Without costs." 5
The assailed Resolution denied petitioners' Motion for Reconsideration 6 for lack of merit.
The Facts
The CA narrated the facts as follows:
"[Petitioners] filed a complaint before the Regional Trial Court of Quezon City, Branch 90, against [respondent] Traders Royal Bank, the
City Sheriff of Quezon City and the Register of Deeds of Quezon City. Docketed thereat as Civil Case No. Q-41203, the complaint
sought the annulment of the extra-judicial foreclosure and auction sale made by [the] city sheriff of Quezon City of a parcel of land
covered by TCT No. 16711 of the Register of Deeds of Quezon City, the conventional redemption thereof, and prayed for damages and
the issuance of a writ of preliminary injunction.
"The complaint alleged that in mid 1977[, Petitioner] Danilo Chua obtained a loan from [respondent] bank in the amount of P75,000.00
secured by a real estate mortgage over a parcel of land covered by TCT No. 16711, and owned in common by the [petitioners]; that
when the loan was not paid, [respondent] bank commenced extra-judicial foreclosure proceedings on the property; that the auction sale

of the property was set on 10 June 1981, but was reset to 31 August 1981, on [Petitioner Chua's] request, which, however, was made
without the knowledge and conformity of the other [petitioners]; that on the re-scheduled auction sale, [the] Sheriff of Quezon City sold
the property to the [respondent] bank, the highest bidder therein, for the sum of P24,911.30; that the auction sale was tainted with
irregularity because, amongst others, the bid price was shockingly or unconscionably, low; that the other [petitioners] failed to redeem
the property due to their lack of knowledge of their right of redemption, and want of sufficient education; that, although the period of
redemption had long expired, [Petitioner] Chua offered to buy back, and [respondent] bank also agreed to sell back, the foreclosed
property, on the understanding that Chua would pay [respondent] bank the amount of P40,135.53, representing the sum that the bank
paid at the auction sale, plus interest; that [Petitioner] Chua made an initial payment thereon in the amount of P4,000.00, covered by
Interbank Check No. 09173938, dated 16 February 1984, duly receipted by [respondent] bank; that, in a sudden change of position,
[respondent] bank wrote Chua, on 20 February 1984, asking that he could repurchase the property, but based on the current market
value thereof; and that sometime later, or on 22 March 1984, [respondent] bank wrote Chua anew, requiring him to tender a new offer to
counter the offer made thereon by another buyer. TSaEcH
"Traversing [petitioners'] complaint, [respondent] bank, upon 05 July 1984, filed its answer with counterclaim, thereunder asserting that
the foreclosure sale of the mortgaged property was done in accordance with law; and that the bid price was neither unconscionable, nor
shockingly low; that [petitioners] slept on their rights when they failed to redeem the property within the one year statutory period; and
that [respondent] bank, in offering to sell the property to [Petitioner] Chua on the basis of its current market price, was acting
conformably with law, and with legitimate banking practice and regulations.
"Pre-trial having been concluded, the parties entered upon trial, which dragged/lengthened to several months due to postponements.
Upon 11 June 1988, however, a big conflagration hit the City Hall of Quezon City, which destroyed, amongst other things, the records of
the case. After the records were reconstituted, [petitioners] discovered that the foreclosed property was sold by [respondent] bank to the
Ceroferr Realty Corporation, and that the notice of lis pendens annotated on the certificate of title of the foreclosed property, had
already been cancelled. Accordingly, [petitioners], with leave of court, amended their complaint, but the Trial Court dismissed the case
'without prejudice' due to [petitioners'] failure to pay additional filing fees.
"So, upon 11 June 1990, [petitioners] re-filed the complaint with the same Court, whereat it was docketed as Civil Case No. 90-5749,
and assigned to Branch 98: the amended complaint substantially reproduced the allegations of the original complaint. But [petitioners]
this time impleaded as additional defendants the Ceroferr Realty Corporation and/or Cesar Roque, and Lorna Roque, and included an
additional cause of action, to wit: that said new defendants conspired with [respondent] bank in [canceling] the notice of lis pendens by
falsifying a letter sent to and filed with the office of the Register of Deeds of Quezon City, purportedly for the cancellation of said notice.
"Summons was served on [respondent] bank on 26 September 1990, per Sheriff's Return dated 08 October 1990. Supposing that all the
defendants had filed their answer, [petitioners] filed, on 23 October 1991, a motion to set case for pre-trial, which motion was, however,
denied by the Trial Court in its Order of 25 October 1991, on the ground that [respondent] bank has not yet filed its answer. On 13
November 1991[, petitioners] filed a motion for reconsideration, thereunder alleging that they received by registered mail, on 19 October
1990, a copy of [respondent] bank's answer with counterclaim, dated 04 October 1990, which copy was attached to the motion. In its
Order of 14 November 1991, the trial Court denied for lack of merit, the motion for reconsideration, therein holding that the answer with
counterclaim filed by [respondent] bank referred to another civil case pending before Branch 90 of the same Court.
"For this reason, [petitioners] filed on 02 December 1991 a motion to declare [respondent] bank in default, thereunder alleging that no
answer has been filed despite the service of summons on it on 26 September 1990.
"On 13 December 1991, the Trial Court declared the motion submitted for resolution upon submission by [petitioners] of proof of service
of the motion on [respondent] bank.
"Thus, on 16 January 1992, upon proof that [petitioners] had indeed served [respondent] bank with a copy of said motion, the Trial
Court issued an Order of default against [respondent] bank.
"Upon 01 December 1992, on [petitioners'] motion, they were by the Court allowed to present evidence ex parte on 07 January 1993,
insofar as [respondent] bank was concerned.
"Thereafter, or on 08 February 1993, the Trial Court rendered the new questioned partial decision. 7

"Aggrieved, [respondent] bank filed a motion to set aside [the] partial decision by default against Traders Royal Bank and admit
[respondent] Traders Royal Bank's . . . Answer with counterclaim: thereunder it averred, amongst others, that the erroneous filing of said
answer was due to an honest mistake of the typist and inadvertence of its counsel. DETcAH
"The [trial court] thumbed down the motion in its Order of 26 July 1993." 8
Respondent bank appealed the Partial Decision 9 to the CA. During the pendency of that appeal, Ceroferr Realty Corporation and/or
Cesar and/or Lorna Roque filed a Manifestation with Motion 10 asking the CA to discharge them as parties, because the case against
them had already been dismissed on the basis of their Compromise Agreement 11 with petitioners. On May 14, 1996, the CA issued a
Resolution 12 granting Ceroferr et al.'s Manifestation with Motion to discharge movants as parties to the appeal. The Court, though,
deferred resolution of the matters raised in the Comment 13 of respondent bank. The latter contended that the Partial Decision had
been novated by the Compromise Agreement, whose effect of res judicata had rendered that Decision functus officio.
Ruling of the Court of Appeals
The CA ruled in favor of respondent bank. Deemed, however, to have rested on shaky ground was the latter's "Motion to Set Aside
Partial Decision by Default Against Traders Royal Bank and Admit Defendant Traders Royal Bank's Answer." 14 The reasons offered by
the bank for failing to file an answer were considered by the appellate court to be "at once specious, shallow and sophistical and can
hardly be dignified as a 'mistake' or 'excusable negligence,' which ordinary prudence could not have guarded against." 15
In particular, the CA ruled that the erroneous docket number placed on the Answer filed before the trial court was not an excusable
negligence by the bank's counsel. The latter had a bounden duty to be scrupulously careful in reviewing pleadings. Also, there were
several opportunities to discover and rectify the mistake, but these were not taken. Moreover, the bank's Motion to Set Aside the Partial
Decision and to Admit [the] Answer was not accompanied by an affidavit of merit. These mistakes and the inexcusable negligence
committed by respondent's lawyer were binding on the bank.

On the issue of whether petitioners had convincingly established their right to relief, the appellate court held that there was no ground to
invalidate the foreclosure sale of the mortgaged property. First, under Section 3 of Act No. 3135, an extrajudicial foreclosure sale did not
require personal notice to the mortgagor. Second, there was no allegation or proof of noncompliance with the publication requirement
and the public posting of the notice of sale, provided under Act No. 3135, as amended. Third, there was no showing of inadequacy of
price as no competent evidence was presented to show the real market value of the land sold or the readiness of another buyer to offer
a price higher than that at which the property had been sold.
Moreover, petitioners failed to prove that the bank had agreed to sell the property back to them. After pointing out that the redemption
period had long expired, respondent's written communications to Petitioner Chua only showed, at most, that the former had made a
proposal for the latter to buy back the property at the current market price; and that Petitioner Chua was requested to make an offer to
repurchase the property, because another buyer had already made an offer to buy it. On the other hand, respondent noted that the
Interbank check for P4,000 was for "deposit only." Thus, there was no showing that the check had been issued to cover part of the
repurchase price.
The appellate court also held that the Compromise Agreement had not resulted in the novation of the Partial Decision, because the two
were not incompatible. In fact, the bank was not even a party to the Agreement. Petitioners' recognition of Ceroferr's title to the
mortgaged property was intended to preclude future litigation against it.
Hence this Petition. 16
Issues
In their Memorandum, petitioners raise the following issues:
"1. Whether or not the Respondent Court of Appeals erred in failing to apply the provisions of Section 3, Rule 9 of the 1997 Rules of
Civil Procedure [and in applying instead] the rule on preponderance of evidence under Section 1, Rule 133 of the Rules of Court.
EITcaH

"2. Whether or not the respondent appellate court failed to apply the conventional redemption rule provided for under Article 1601 of the
New Civil Code.
"3. Whether or not this Honorable Court can exercise its judicial prerogative to evaluate the findings of facts." 17
The first issue is one of law and may be taken up by the Court without hindrance, pursuant to Section 1 of Rule 45 of the Rules of Court.
18 The second and the third issues, however, would entail an evaluation of the factual findings of the appellate court, a function
ordinarily not assumed by this Court, unless in some excepted cases. The Court will thus rule on the first issue before addressing the
second and the third issues jointly.
The Court's Ruling
The Petition has no merit.
First Issue:
Quantum of Proof
Petitioners challenge the CA Decision for applying Section 3 of Rule 9 of the Rules of Court, rather than Section 1 of Rule 133 of the
same Rules. In essence, petitioners argue that the quantum of evidence for judgments flowing from a default order under Section 3 of
Rule 9 is not the same as that provided for in Section 1 of Rule 133.
For ease of discussion, these two rules will be reproduced below, starting with Section 3 of Rule 9 of the Rules of Court:
"Sec. 3. Default; declaration of. If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of
the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the
court shall proceed to render judgment granting the claimant such relief as his pleading may warrant, unless the court in its discretion
requires the claimant to submit evidence. Such reception of evidence may be delegated to the clerk of court.
"(a) Effect of order of default. A party in default shall be entitled to notice of subsequent proceedings but not to take part in the trial.
"(b) Relief from order of default. A party declared in default may at any time after notice thereof and before judgment file a motion
under oath to set aside the order of default upon proper showing that his failure to answer was due to fraud, accident, mistake or
excusable negligence and that he has a meritorious defense. In such case, the order of default may be set aside on such terms and
conditions as the judge may impose in the interest of justice.
"(c) Effect of partial default. When a pleading asserting a claim states a common cause of action against several defending parties,
some of whom answer and the others fail to do so, the court shall try the case against all upon the answers thus filed and render
judgment upon the evidence presented.
"(d) Extent of relief to be awarded. A judgment rendered against a party in default shall not exceed the amount or be different in kind
from that prayed for nor award unliquidated damages.
"(e) Where no defaults allowed. If the defending party in an action for annulment or declaration of nullity of marriage or for legal
separation fails to answer, the court shall order the prosecuting attorney to investigate whether or nor a collusion between the parties
exists, and if there is no collusion, to intervene for the State in order to see to it that the evidence submitted is not fabricated."
We now quote Section 1 of Rule 133:
"SECTION 1. Preponderance of evidence, how determined. In civil cases, the party having the burden of proof must establish his
case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved
lies, the court may consider all the facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their
means and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or
improbability of their testimony, their interest or want of interest, and also their personal credibility so far as the same may legitimately
appear upon the trial. The court may also consider the number of witnesses, though the preponderance is not necessarily with the
greater number."

Between the two rules, there is no incompatibility that would preclude the application of either one of them. To begin with, Section 3 of
Rule 9 governs the procedure which the trial court is directed to take when a defendant fails to file an answer. According to this
provision, the court "shall proceed to render judgment granting the claimant such relief as his pleading may warrant," subject to the
court's discretion on whether to require the presentation of evidence ex parte. The same provision also sets down guidelines on the
nature and extent of the relief that may be granted. In particular, the court's judgment "shall not exceed the amount or be different in kind
from that prayed for nor award unliquidated damages." CTaSEI
As in other civil cases, basic is the rule that the party making allegations has the burden of proving them by a preponderance of
evidence. 19 Moreover, parties must rely on the strength of their own evidence, not upon the weakness of the defense offered by their
opponent. 20 This principle holds true, especially when the latter has had no opportunity to present evidence because of a default order.
Needless to say, the extent of the relief that may be granted can only be as much as has been alleged and proved 21 with preponderant
evidence required under Section 1 of Rule 133.
Regarding judgments by default, it was explained in Pascua v. Florendo 22 that complainants are not automatically entitled to the relief
prayed for, once the defendants are declared in default. Favorable relief can be granted only after the court has ascertained that the
relief is warranted by the evidence offered and the facts proven by the presenting party. In Pascua, this Court ruled that ". . . it would be
meaningless to require presentation of evidence if every time the other party is declared in default, a decision would automatically be
rendered in favor of the non-defaulting party and exactly according to the tenor of his prayer. This is not contemplated by the Rules nor
is it sanctioned by the due process clause." 23
The import of a judgment by default was further clarified in Lim Tanhu v. Ramolete. 24 The following disquisition is most instructive:
"Unequivocal, in the literal sense, as these provisions [referring to the subject of default then under Rule 18 of the old Rules of Civil
Procedure] are, they do not readily convey the full import of what they contemplate. To begin with, contrary to the immediate notion that
can be drawn from their language, these provisions are not to be understood as meaning that default or the failure of the defendant to
answer should 'be interpreted as an admission by the said defendant that the plaintiff's cause of action find support in the law or that
plaintiff is entitled to the relief prayed for.' . . . .
xxx xxx xxx
"Being declared in default does not constitute a waiver of rights except that of being heard and of presenting evidence in the trial court. .
...
"In other words, a defaulted defendant is not actually thrown out of court. While in a sense it may be said that by defaulting he leaves
himself at the mercy of the court, the rules see to it that any judgment against him must be in accordance with law. The evidence to
support the plaintiff's cause is, of course, presented in his absence, but the court is not supposed to admit that which is basically
incompetent. Although the defendant would not be in a position to object, elementary justice requires that only legal evidence should be
considered against him. If the evidence presented should not be sufficient to justify a judgment for the plaintiff, the complaint must be
dismissed. And if an unfavorable judgment should be justifiable, it cannot exceed in amount or be different in kind from what is prayed
for in the complaint." 25

In sum, while petitioners were allowed to present evidence ex parte under Section 3 of Rule 9, they were not excused from establishing
their claims for damages by the required quantum of proof under Section 1 of Rule 133. Stated differently, any advantage they may have
gained from the ex parte presentation of evidence does not lower the degree of proof required. Clearly then, there is no incompatibility
between the two rules.
Second and Third Issues:
Review of the Evidence
Petitioners urge this Court to depart from the general rule that the lower courts' findings of fact are not reviewable in a petition for review.
26 In support of their plea, they cite the conflicting findings of the trial and the appellate courts, as well as the alleged conjectures and
surmises made by the CA in arriving at its Decision. cCESaH

Indeed, the differences between the findings of the two courts a quo, leading to entirely disparate dispositions, is reason enough for this
Court to review the evidence in this case. 27 Whether the CA indulged in surmises and conjectures when it issued the assailed Decision
will thus be determined.
At the outset, it behooves this Court to clarify the CA's impression that no evidence was presented in the case which might have
contributed to petitioners' challenge to its Decision. The appellate court's observation was based on the notation by the lower court's
clerk of court that there were no separate folders for exhibits and transcripts, because "there was no actual hearing conducted in this
case." 28
True, there was no hearing conducted between petitioners and respondent, precisely because the latter had been declared in default,
and petitioners had therefore been ordered to present their evidence ex parte. But the absence of a hearing did not mean that no
evidence was presented. The Partial Decision dated February 8, 1993, in fact clearly enumerated the pieces of evidence adduced by
petitioners during the ex parte presentation on January 7, 1993. The documentary evidence they presented consisted of the following:
1. A copy of respondent bank's Petition for the extrajudicial foreclosure and auction sale of the mortgaged parcel of land 29
2. The Certificate of Sale that was a consequence of the foreclosure sale 30
3. A Statement of Account dated February 15, 1984, showing Petitioner Chua's outstanding debt in the amount of P40,135.53 31
4. A copy of the Interbank check dated February 16, 1984, in the amount of P4,000 32
5. The Official Receipt issued by the bank acknowledging the check 33
6. The bank's letter dated February 20, 1984, advising Petitioner Chua of the sale of the property at an extrajudicial public auction; the
lapse of the period of redemption; and an invitation to purchase the property at its current market price 34
7. Another letter from the bank dated March 22, 1984, inviting Petitioner Chua to submit, within five days, an offer to buy the same
property, which another buyer had offered to buy 35
8. A copy of the Notice of Lis Pendens, the filing of which was done after that of the Amended Complaint 36
9. A copy of the title showing the inscription of the Notice of Lis Pendens 37
10. A copy of the Absolute Deed of Sale to Cerrofer 38
11. A copy of a letter dated August 29, 1986, made and signed by petitioners' counsel, requesting the cancellation of the Notice of Lis
Pendens 39
12. A copy of a page of the Memorandum of Encumbrance from TCT No. (314341) 7778/T-39 40
Having clarified this matter, we proceed to review the facts.
Petitioners do not deny that the one-year period for legal redemption had already lapsed when respondent bank supposedly offered to
sell the property in question. The records clearly show that the Certificate of Sale following the extrajudicial public auction of the
property was registered on June 21, 1982, the date from which the legal redemption period was to be reckoned. 41 Petitioners insist,
though, that they had the right to repurchase the property through conventional redemption, as provided under Article 1601 of the Civil
Code, worded as follows:
"ART. 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon."
It is true that the one-year period of redemption provided in Act No. 3135, as amended the law under which the property here was
sold in a foreclosure sale is only directory and, as such can be extended by agreement of the parties. 42 However, it has also been
held that for legal redemption to be converted into conventional redemption, two requisites must be established: 1) voluntary agreement

of the parties to extend the redemption period; and 2) the debtor's commitment to pay the redemption price on a fixed date. 43 Thus,
assuming that an offer was made to Petitioner Chua to buy back the property after the lapse of the period of legal redemption,
petitioners needed to show that the parties had agreed to extend the period, and that Petitioner Chua had committed to pay the
redemption price on a fixed date.
The letters sent by the bank to Petitioner Chua on February 20 and March 22, 1984, do not convincingly show that the parties arrived at
a firm agreement for the repurchase of the property. What can be gleaned from the February 20 letter is that Petitioner Chua proposed
to pay the redemption price for the property, but that the bank refused to accede to his request, because the one-year redemption
period had already lapsed. 44 The bank, though, had offered to sell back the property to him at the current market value. Indeed, an
examination of his earlier letter of February 17, 1984, readily reveals that he expressed willingness to settle his account with the bank,
but that his "present financial situation precludes [him] from effecting an immediate settlement . . . ." 45
On the other hand, the letter dated March 22, 1984, clearly states that ". . . the Bank rejected [his] request to redeem said property due
to [the] lapse of [the] one (1) year legal redemption period." 46 Nonetheless, he was "[invited] to submit an offer to buy the same
property in five (5) days from receipt [of the letter]." 47 Petitioner Chua was also informed that the bank had received an offer to
purchase the foreclosed property. As to the P4,000 check enclosed in his proposal dated February 17, 1984, as a token of his good
faith, he was advised that the amount was still outstanding in the books of the bank and could be claimed by him if he thought the
invitation was not feasible. cAECST
More important, there was no showing that petitioners had committed to pay the redemption price on a fixed date. True, Petitioner Chua
had attempted to establish a previous agreement to repurchase the property for less than its fair market value. He had submitted in
evidence a Statement of Account 48 dated February 15, 1984, showing a balance of P40,135.53; the Interbank check dated February
16, 1984, for P4,000, which was deposited to the account of respondent bank; 49 and the Official Receipt for the check. 50
Granting that these documents evinced an agreement, petitioners were still unable to establish a firm commitment on their part to pay
the redemption price on a fixed date. On the contrary, the February 17 letter of Petitioner Chua to the bank clearly manifested that he
was not capable of paying the account immediately. For this reason, he proposed to pay in "three or four installments" without a
specification of dates for the payments, but with a plea for a reduction of the interest charges. That proposal was rejected.
Indeed, other than the Interbank check marked "for deposit" by respondent bank, no other evidence was presented to establish that
petitioners had offered to pay the alleged redemption price of P40,135.53 on a fixed date. For that matter, petitioners have not shown
that they tendered payment of the balance and/or consigned the payment to the court, in order to fulfill their part of the purported
agreement. These remedies are available to an aggrieved debtor under Article 1256 of the Civil Code, 51 when the creditor unjustly
refuses to accept the payment of an obligation.
The next question that presents itself for resolution is the propriety of the CA's ruling vacating the Partial Decision of the regional trial
court (RTC) and dismissing the case. To recall, the RTC had resolved to withhold a ruling on petitioners' right to redeem conventionally
and/or order the reconveyance of the property in question, pending a determination of the validity of the sale to Cerrofer Realty
Corporation and Spouses Cesar and Lorna Roque. The trial court, however, granted the prayer for damages against respondent bank.
The RTC ruled as follows:
"The evidence presented by [petitioners] in so far as the cause of action against [respondent] Traders Royal Bank is concerned are
preponderant to support the claims of the [petitioners]. However, in view of the fact that the property subject matter of this case has
already been conveyed to defendant Cerrofer Realty Corporation thus the issue as to whether or not the said conveyance or sale is valid
is sill pending between the [petitioners] and [respondents] Cerrofer Realty Corporation and Cesar Roque and Lorna Roque. Hence, this
Court resolves to grant the prayer for damages against Traders Royal Bank.
"The claims of the [petitioners] as against [respondent] Traders Royal Bank having been established and proved by evidence, judgment
is hereby rendered ordering [respondent] Traders Royal Bank to pay [petitioners] actual damage or the market value of the land in
question in the sum of P500,000.00; the sum of P70,000.00 as compensatory damages; the sum of P200,000.00 to the heirs of
[petitioner] Danilo Chua; and attorney's fees in the sum of P30,000.00." 52

In the light of the pending issue as to the validity of the sale of the property to the third parties (Cerrofer Realty Corporation and
Spouses Roque), the trial court properly withheld judgment on the matter and thus left the prayer for damages as the sole issue for
resolution.
To adjudge damages, paragraph (d) of Section 3 of Rule 9 of the Rules of Court provides that a judgment against a party in default
"shall not exceed the amount or be different in kind from that prayed for nor award unliquidated damages." The proscription against the
award of unliquidated damages is significant, because it means that the damages to be awarded must be proved convincingly, in
accordance with the quantum of evidence required in civil cases.
Unfortunately for petitioners, the grant of damages was not sufficiently supported by the evidence for the following reasons.
First, petitioners were not deprived of their property without cause. As correctly pointed out by the CA, Act No. 3135, as amended, does
not require personal notice to the mortgagor. 53 In the present case, there has been no allegation much less, proof of
noncompliance with the requirement of publication and public posting of the notice of sale, as required by Act No. 3135. Neither has
there been competent evidence to show that the price paid at the foreclosure sale was inadequate. 54 To be sure, there was no ground
to invalidate the sale. ESCTaA
Second, as previously stated, petitioners have not convincingly established their right to damages on the basis of the purported
agreement to repurchase. Without reiterating our prior discussion on this point, we stress that entitlement to actual and compensatory
damages must be proved even under Section 3 of Rule 9 of the Rules of Court. The same is true with regard to awards for moral
damages and attorney's fees, which were also granted by the trial court.
In sum, petitioners have failed to convince this Court of the cogency of their position, notwithstanding the advantage they enjoyed in
presenting their evidence ex parte. Not in every case of default by the defendant is the complainant entitled to win automatically.
WHEREFORE, this Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioners.
SO ORDERED.
Ynares-Santiago, Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.

Footnotes
1.The Court of Appeals was included in the Petition as a respondent. However, the CA was omitted by this Court from the title of the
case, because it need not be impleaded in petitions for review, under Section 4 of Rule 45 of the Rules of Court.
||| (Gajudo v. Traders Royal Bank, G.R. No. 151098, [March 21, 2006], 519 PHIL 791-812)

Gajudo vs. Traders Royal Bank (485 SCRA 108)


o There is no incompatibility between Rule 9, Sec 3 and Rule 133, Sec 1 that would preclude the application of
either one of them. Rule 9, Sec 3 governs the procedure which the trial court is directed to take when a
defendant fails to file an answer. According to the provision, the court shall proceed to render judgment
granting the claimant such relief as his pleading may warrant, subject to the courts discretion on whether to
require the presentation of evidence ex parte. The same provision also sets down guidelines on the nature and
extent of the relief that may be granted. In particular, the courts judgment shall not exceed the amount or
be different in kind from that prayed for nor award unliquidated damages.

Vlason Enterprises Corp. vs. CA (330 SCRA 26) o Service of a copy of a motion containing the time and place of hearing
of that motion is a mandatory requirement, and failure of the movants to comply with these requirements renders their
motions fatally defective. o However, there are exceptions to this rule where liberal construction has been allowed in
cases: 1. Where a rigid application will result in a manifest failure or miscarriage of justice; especially if a party
successfully shows that the alleged defect in the questioned final and executory judgment is not apparent on its face
or from the recitals contained therein; 2. Where the interest of substantial justice will be served; 3. Where the
resolution of the motion is addressed solely to the sound and judicious discretion of the court; and 4. Where the
injustice to the adverse party is not commensurate to the degree of his thoughtlessness in not complying with the
procedure prescribed.