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CANETE vs GEUINO ICE CO., INC.

FACTS: Petitioners filed a complaint for cancellation of title to property. Petitioners alleged that said titles are spurious,
fictitious and were issued "under mysterious circumstances," considering that the holders thereof including their
predecessors-in-interest were never in actual, adverse and physical possession of the property, rendering them
ineligible to acquire title to the said property under the Friar Lands Act. 8 Petitioners also sought to nullify Original
Certificate of Title (OCT) No. 614 from which the foregoing titles sought to be cancelled originated or were derived.
Respondent Genuino Ice Co., Inc. filed a motion to dismiss on the ground that the complaint states no cause of action
because petitioners are not real parties-in-interest; that no relief may be granted as a matter of law; and that petitioners
failed to exhaust administrative remedies, but it was denied by the trial court. Respondent moved for reconsideration but
the same was denied. Petitioners filed a "Second Amended Complaint" which sought to annul, in addition to the titles
already alleged in the original complaint, another 4 titles to property. The second Amended complaint stated that the
petitioners and their predecessors-in-interest are among those who have been in actual, adverse, peaceful and continuous
possession in concept of owners of unregistered parcels of land situated at Sitio Mabilog, Barangay Culiat, Quezon City,
Metro Manila. That the above-described real property is a portion of a friar land known as "Piedad Estate," which
property is intended for distribution among the bona fide occupants thereof pursuant to the Friar Lands Act.
Respondent moved to dismiss the Second Amended Complaint on the following grounds: a) The complaint states no
cause of action because: (1) on the allegations alone, plaintiffs (petitioners) are not real parties in interest who may bring
suit to cancel defendants' (including respondent) titles; (2) based on the allegations and prayer of the complaint, no relief,
as a matter of law, may be granted; b) Prescription has set in. The trial court denied respondent's motion to dismiss the
Second Amended Complaint. Its motion for reconsideration was likewise denied hence respondent filed a petition for
certiorari with the Court of Appeals. The appellate court granted respondent's petition for certiorari and dismissed
petitioners' Second Amended Complaint for failure to state a cause of action.
ISSUE: WON the second amended complaint stated the ultimate facts.
HELD: The basic rules of proper pleading and procedure require that every pleading shall contain in a methodical and
logical form, a plain, concise and direct statement of the ultimate facts on which the party pleading relies for his claim or
defense, as the case may be, omitting the statement of mere evidentiary facts. And in all averments of fraud or mistake,
the circumstances constituting fraud or mistake must be stated with particularity.
"Ultimate facts" means the essential facts constituting the plaintiff's cause of action, or such facts as are so essential
that they cannot be stricken out without leaving the statement of the cause of action inadequate. "Cause of action" has
been defined as an act or omission of one party in violation of the legal right or rights of the other; and its essential
elements are: 1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; 2) an
obligation on the part of the named defendant to respect or not to violate such right; and 3) an act or omission on the part
of the named defendant violative of the right of the plaintiff or constituting a breach of the obligation of defendant to the
plaintiff for which the latter may maintain an action for recovery of damages. If these elements are not extant, the
complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action. In the resolution
of a motion to dismiss based on failure to state a cause of action, only the facts alleged in the complaint as well as its
annexes must be considered. The test in such case is whether a court can render a valid judgment on the complaint based
upon the facts alleged and pursuant to the prayer therein.
Corollarily, the question of whether or not a complaint states a cause of action against a defendant or the action is
premature is one of law. The trial court can consider all the pleadings filed, including annexes, motions and the evidence
on record. However in so doing, the trial court does not rule on the truth or falsity of such documents. It merely includes
such documents in the hypothetical admission. Any review of a finding of lack of cause of action based on these
documents would not involve a calibration of the probative value of such pieces of evidence but would only limit itself to
the inquiry of whether the law was properly applied given the facts and these supporting documents. Therefore, what
would inevitably arise from such a review are pure questions of law, and not questions of fact. The trial court must
likewise apply relevant statutes and jurisprudence in determining whether the allegations in a complaint establish a cause
of action. While it focuses on the complaint, a court clearly cannot disregard decisions material to the proper
appreciation of the questions before it. In resolving a motion to dismiss, every court must take cognizance of decisions
this Court has rendered because they are proper subjects of mandatory judicial notice. The said decisions, more
importantly, form part of the legal system, and failure of any court to apply them shall constitute an abdication of its duty
to resolve a dispute in accordance with law, and shall be a ground for administrative action against an inferior court
magistrate.
Considering the foregoing, it is not difficult to see the need for particularity and incipient substantiation in the
petitioners' Second Amended Complaint.
First, their initial claim that OCT 614 of which all the other subject titles are derivatives is null and void, has been
proven wrong. OCT 614 did legally exist and was previously issued in the name of the Philippine Government in 1910
under the provisions of Act 496.
Second, the Ad Hoc Committee of the then Ministry of Natural Resources, which was specifically tasked to investigate
the historical background of the Piedad Estate, found that as early as the period prior to the Second World War, all lots in
the Piedad Estate had already been disposed of.
Third, the Piedad Estate has been placed under the Torrens system of land registration, which means that all lots therein
are titled.
Fourth, as held in the Balicudiong case, one who acquires land under the Friar Lands Act, as well as his successors-in-
interest, may not claim successional rights to purchase by reason of occupation from time immemorial, which means that
petitioners' claimed actual, adverse, peaceful and continuous possession of the subject property is really of no moment
unless it is shown that their predecessors-in-interest were actual settlers and occupants at the time said lands were
acquired by the Government, and whose rights were not disregarded even though they were in occupation of the same
before the government acquired the land; yet, no period of time in relation to adverse possession is alleged.
Petitioners' Second Amended Complaint betrays no more than an incomplete narration of facts unsupported by
documentary or other exhibits; the allegations therein partake of conclusions of law unsupported by a particular averment
of circumstances that will show why or how such inferences or conclusions were arrived at. It is replete with sweeping
generalizations and inferences derived from facts that are not found therein. While there are allegations of fraud upon the
claim that the subject titles were fictitious, spurious and obtained under "mysterious circumstances," the same are not
specific to bring the controversy within the trial court's jurisdiction. There is no explanation or narration of facts as
would show why said titles are claimed to be fictitious or spurious, contrary to the requirement of the Rules that the
circumstances constituting fraud must be stated with particularity; otherwise, the allegation of fraud would simply be an
unfounded conclusion of law. In the absence of specific averments, the complaint is defective, for it presents no basis
upon which the court should act, or for the defendant to meet it with an intelligent answer.

TEXTILE MILLS, INC., vs CA, INTERNATIONAL CORPORATE BANK, INC.


FACTS:In an action for the collection of a sum of money that was filed by the private respondent against petitioner in
the Regional Trial Court of Makati, Metro Manila, it was alleged that for valuable consideration, defendant executed in
favor of, and delivered to ICB Promissory Note No. TL-0532-80, whereby defendant obligated itself to pay plaintiff on
November 16, 1980 the sum of Twelve Million Pesos (P12,000,000.00) and with interest thereon at the rate of 16% per
annum. The promissory note, Annex 'A', expressly stipulates that in case of non-payment when due, defendant shall pay
plaintiff an additional amount equal to 3% per month of the amount due as liquidated damages and a further sum equal to
10% thereof as attorney's fees."
An answer to the complaint was filed by petitioner. The petitioner denied liability and alleged that one Julio Tan had
no authority to negotiate and obtain a loan on its behalf. While defendant specifically denied the aforestated promissory
note alleged in the complaint, the answer was not verified. For this reason, the trial court rendere judgment in favor of
ICB and against Imperial Textile Mills, Inc. Petitioner brought an appeal to the Court of Appeals. In its decision, the CA
affirmed the judgment appealed from with costs against petitioner. A motion for reconsideration of said decision was
likewise denied by the appellate court.
ISSUE: WON
HELD: No rule is more settled than that in an action based on a written instrument attached to the complaint, if the
defendant fails to specifically deny under oath the genuineness and due execution of the instrument, the same is deemed
admitted.
Section 7, Rule 8 of the Rules of Court is explicit in that there are two ways of pleading an actionable document,
namely: (a) by alleging the substance of such written instrument in the pleading and attaching a copy thereof to the
pleading; and (b) by copying the instrument in the pleading. The complaint in the present case complied with the first
situation under paragraph (a). The complaint alleged the substance of the promissory note subject of the litigation and a
copy of the promissory note was attached. There is no question likewise that the petitioner failed to specifically deny
under oath the genuineness and due execution of the promissory note subject of the complaint. By its omission, petitioner
clearly admitted the genuineness and due execution of the document and that the party whose signature appears thereon
had indeed signed the same and that he has the authority to sign the same and that the agreement between the parties is
what was in words and figures in the document. Defenses which are inconsistent with the due execution and genuineness
of the written instrument are cut-off by such admission.
The claim of petitioner is that its failure to specifically deny under oath the actionable document does not prevent it
from showing that one Julio Tan was not authorized to enter into the transaction and to sign the promissory note for and
in behalf of the petitioner. But precisely, the petitioner is a party to the instrument represented by Julio Tan so that it may
not now deny the authority of Julio Tan to so represent it. The due execution and genuineness of the document have
thereby been conclusively established.

GUEVARRA vs ATTY. EALA


FACTS: Joselano Guevarra filed a Complaint for Disbarment before the Integrated Bar of the Philippines (IBP)
Committee on Bar Discipline (CBD) against Atty. Jose Emmanuel M. Eala a.k.a. Noli Eala (respondent) for "grossly
immoral conduct and unmitigated violation of the lawyer's oath.In his complaint, Guevarra stated that he first met
respondent in January 2000 when his (complainant's) then-fiancee Irene Moje (Irene) introduced respondent to him as
her friend who was married to Marianne (sometimes spelled "Mary Ann") Tantoco with whom he had three
children.After his marriage to Irene complainant noticed that Irene had been receiving from respondent cellphone calls,
as well as messages some of which read "I love you," "I miss you," or "Meet you at Megamall."
Complainant also noticed that Irene habitually went home very late at night or early in the morning of the following
day, and sometimes did not go home from work. When he asked about her whereabouts, she replied that she slept at her
parents' house in Binangonan, Rizal or she was busy with her work. Then, he saw Irene and respondent together on two
occasions. On the second occasion, he confronted them following which Irene abandoned the conjugal house. The
complainant went uninvited to Irene's birthday celebration at which he saw her and respondent celebrating with her
family and friends. Out of embarrassment, anger and humiliation, he left the venue immediately. Following that incident,
Irene went to the conjugal house and hauled off all her personal belongings, pieces of furniture, and her share of the
household appliances.
Complainant later found, in the master's bedroom, a folded social card bearing the words "I Love You" on its face,
which card when unfolded contained a handwritten letter dated on the day of his wedding to Irene. Complainant soon
saw respondent's car and that of Irene constantly parked at No. 71-B 11th Street, New Manila where, as he was to later
learn sometime in April 2001, Irene was already residing. He also learned still later that when his friends saw Irene on or
about January 18, 2002 together with respondent during a concert, she was pregnant. In his ANSWER, respondent
admitted having sent the I LOVE YOU card on which the above-quoted letter was handwritten.
In the complaint, Guevarra stated that Respondent and Irene were even FLAUNTING THEIR ADULTEROUS
RELATIONSHIP as they attended social functions together. In respondents answer, Respondent specifically denies
having ever flaunted an adulterous relationship with Irene as alleged in paragraph 14 of the Complaint, the truth of the
matter being that their relationship was low profile and known only to the immediate members of their respective
families, and that Respondent, as far as the general public was concerned, was still known to be legally married to Mary
Anne Tantoco.
In the complaint, it was stated that Respondent's adulterous conduct with the complainant's wife and his apparent
abandoning or neglecting of his own family, demonstrate his gross moral depravity, making him morally unfit to keep his
membership in the bar. He flaunted his aversion to the institution of marriage, calling it a "piece of paper." In his answer,
Respondent specifically denies the allegations in paragraph 15 of the Complaint regarding his adulterous relationship and
that his acts demonstrate gross moral depravity thereby making him unfit to keep his membership in the bar, the reason
being that Respondent's relationship with Irene was not under scandalous circumstances.
In his complaint, it was also stated that Respondent's grossly immoral conduct runs afoul of the Constitution and the
laws he, as a lawyer, has been sworn to uphold. In pursuing obsessively his illicit love for the complainant's wife, he
mocked the institution of marriage, betrayed his own family, broke up the complainant's marriage, commits adultery with
his wife, and degrades the legal profession. In his answer, Respondent specifically denies the allegations in paragraph 19
of the Complaint, the reason being that under the circumstances the acts of Respondent with respect to his purely
personal and low profile special relationship with Irene is neither under scandalous circumstances nor tantamount to
grossly immoral conduct as would be a ground for disbarment pursuant to Rule 138, Section 27 of the Rules of Court.
To respondent's ANSWER, complainant filed a REPLY, alleging that Irene gave birth to a girl and Irene named
respondent in the Certificate of Live Birth as the girl's father. Complainant attached to the REPLY, a copy of a Certificate
of Live Birth bearing Irene's signature and naming respondent as the father of her daughter Samantha Irene Louise Moje
who was born on February 14, 2002 at St. Luke's Hospital.Complainant's REPLY merited a REJOINDER WITH
MOTION TO DISMISS from respondent in which he denied having "personal knowledge of the Certificate of Live Birth
attached to the complainant's Reply." Respondent moved to dismiss the complaint due to the pendency of a civil case
filed by complainant for the annulment of his marriage to Irene, and a criminal complaint for adultery against respondent
and Irene which was pending before the Quezon City Prosecutor's Office.
After investigation, IBP-CBD Investigating Commissioner found the charge against respondent sufficiently proven.
She recommended that respondent be disbarred for violating Rule 1.01 of Canon 1 of the Code of Professional
Responsibility. The IBP Board of Governors, however, annulled and set aside the Recommendation of the Investigating
Commissioner and accordingly dismissed the case for lack of merit. Hence, the present petition of complainant before
this Court, filed pursuant to Section 12 (c), Rule 139 of the Rules of Court.
ISSUE: WON
HELD: As the IBP-CBD Investigating Commissioner observed: While it may be true that the love letter and the news
item published in the Manila Standard even taken together do not sufficiently prove that respondent is carrying on an
adulterous relationship with complainant's wife, there are other pieces of evidence on record which support the
accusation of complainant against respondent. It should be noted that in his Answer, respondent through counsel made
the following statements to wit: "Respondent specifically denies having [ever] flaunted an adulterous relationship with
Irene as alleged in paragraph [14] of the Complaint, the truth of the matter being [that] their relationship was low profile
and known only to immediate members of their respective families, and Respondent specifically denies the allegations in
paragraph 19 of the complaint, the reason being that under the circumstances the acts of the respondents with respect to
his purely personal and low profile relationship with Irene is neither under scandalous circumstances nor tantamount to
grossly immoral conduct . . ." These statements of respondent in his Answer are an admission that there is indeed a
"special" relationship between him and complainant's wife, Irene, [which] taken together with the Certificate of Live
Birth of Samantha Louise Irene Moje sufficiently prove that there was indeed an illicit relationship between respondent
and Irene which resulted in the birth of the child "Samantha". In the Certificate of Live Birth of Samantha it should be
noted that complainant's wife Irene supplied the information that respondent was the father of the child. Given the fact
that the respondent admitted his special relationship with Irene there is no reason to believe that Irene would lie or make
any misrepresentation regarding the paternity of the child. It should be underscored that respondent has not categorically
denied that he is the father of Samantha Louise Irene Moje.
Indeed, from respondent's ANSWER, he does not deny carrying on an adulterous relationship with Irene, "adultery"
being defined under Art. 333 of the Revised Penal Code as that "committed by any married woman who shall have
sexual intercourse with a man not her husband and by the man who has carnal knowledge of her, knowing her to be
married, even if the marriage be subsequently declared void." (Italics supplied) What respondent denies is having
flaunted such relationship, he maintaining that it was "low profile and known only to the immediate members of their
respective families." In other words, respondent' denial is a negative pregnant, a denial pregnant with the admission of
the substantial facts in the pleading responded to which are not squarely denied. It was in effect an admission of the
averments it was directed at. Stated otherwise, a negative pregnant is a form of negative expression which carries with it
in affirmation or at least an implication of some kind favorable to the adverse party. It is a denial pregnant with an
admission of the substantial facts alleged in the pleading. Where a fact is alleged with qualifying or modifying language
and the words of the allegation as so qualified or modified are literally denied, it has been held that thequalifying
circumstances alone are denied while the fact itself is admitted.
A negative pregnant too is respondent's denial of having "personal knowledge" of Irene's daughter Samantha Louise
Irene Moje's Certificate of Live Birth. In said certificate, Irene named respondent a "lawyer," 38 years old as the
child's father. And the phrase "NOT MARRIED" is entered on the desired information on "DATE AND PLACE OF
MARRIAGE." A comparison of the signature attributed to Irene in the certificate with her signature on the Marriage
Certificate shows that they were affixed by one and the same person. As the Investigating Commissioner noted,
respondent never denied being the father of the child.
Without doubt, the adulterous relationship between respondent and Irene has been sufficiently proven by more than
clearly preponderant evidence that evidence adduced by one party which is more conclusive and credible than that of
the other party and, therefore, has greater weight than the other which is the quantum of evidence needed in an
administrative case against a lawyer. Atty. Eala is liable for grossly immoral conduct and for violation of the lawyer's
oath he took before admission to practice law.

PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM PLASTICS, INC. vs SWEET LINES,
INC., DAVAO VETERANS ARRASTRE AND PORT SERVICES, INC. and HON. COURT OF APPEALS
FACTS: A maritime suit 1 was commenced on May 12, 1978 by herein petitioner Philippine American General Insurance
Co., Inc. (Philamgen) and Tagum Plastics, Inc. (TPI) against private respondents Sweet Lines, Inc. (SLI) and Davao
Veterans Arrastre and Port Services, Inc. (DVAPSI), along with S.C.I. Line (The Shipping Corporation of India Limited)
and F.E. Zuellig, Inc., as co-defendants in the court a quo, seeking recovery of the cost of lost or damaged shipment plus
exemplary damages, attorney's fees and costs allegedly due to defendants' negligence.
The vessel SS `VISHVA YASH' belonging to or operated by the foreign common carrier, took on board at Baton
Rouge, LA, two (2) consignments of cargoes for shipment to Manila and later for transhipment to Davao City, consisting
of 600 bags Low Density Polyethylene 631 and another 6,400 bags Low Density Polyethylene 647, both consigned to
the order of Far East Bank and Trust Company of Manila, with arrival notice to Tagum Plastics, Inc., Madaum, Tagum,
Davao City. Said cargoes were covered, respectively, by Bills of Lading Nos. 6 and 7 issued by the foreign common
carrier. The necessary packing or Weight List, as well as the Commercial Invoices accompanied the shipment. The
cargoes were likewise insured by the Tagum Plastics Inc. with plaintiff Philippine American General Insurance Co., Inc.
The said vessel arrived at Manila and discharged its cargoes in the Port of Manila for transhipment to Davao City. For
this purpose, the foreign carrier awaited and made use of the services of the vessel called M/V 'Sweet Love' owned and
operated by defendant interisland carrier.
Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These were commingled with similar
cargoes belonging to Evergreen Plantation and also Stanfilco. The shipment(s) were discharged from the interisland
carrier into the custody of the consignee. A later survey conducted on July 8, 1977, upon the instance of the plaintiff,
shows that the cargo covered by Bill of Lading No. 25 or (2)6, supposed to contain 6,400 bags of Low Density
Polyethylene 647 originally inside 160 pallets, there were delivered to the consignee 5,413 bags in good order condition.
The survey shows shortages, damages and losses. Of the 600 bags of Low Density Polyethylene 631, the survey
conducted on the same day shows an actual delivery to the consignee of only 507 bags in good order
condition.Therefore, of said shipment totalling 7,000 bags, originally contained in 175 pallets, only a total of 5,820 bags
were delivered to the consignee in good order condition, leaving a balance of 1,080 bags. Such loss from this particular
shipment is what any or all defendants may be answerable.
Before trial, a compromise agreement was entered into between petitioners, as plaintiffs, and defendants S.C.I. Line
and F.E. Zuellig, upon the latter's payment of P532.65 in settlement of the claim against them. Whereupon, the trial court
in its order granted plaintiffs' motion to dismiss grounded on said amicable settlement and the case as to S.C.I. Line and
F.E. Zuellig was consequently "dismissed with prejudice and without pronouncement as to costs."The trial court
thereafter rendered judgment in favor of herein petitioners. On this point, in denying petitioner's motion for
reconsideration, the Court of Appeals resolved that although the bills of lading were not offered in evidence, the
litigation obviously revolves on such bills of lading which are practically the documents or contracts sued upon, hence,
they are inevitably involved and their provisions cannot be disregarded in the determination of the relative rights of the
parties thereto.Due to the reversal on appeal by respondent court of the trial court's decision on the ground of
prescription, in effect dismissing the complaint of herein petitioners, and the denial of their motion for reconsideration,
petitioners filed the instant petition for review on certiorari.
On the first issue, petitioners contend that it was error for the Court of Appeals to reverse the appealed decision on
the supposed ground of prescription when SLI failed to adduce any evidence in support thereof and that the bills of
lading said to contain the shortened periods for filing a claim and for instituting a court action against the carrier were
never offered in evidence.
ISSUE: WON the prescriptive period is valid and legal
HELD: Respondent court correctly passed upon the matter of prescription, since that defense was so considered and
controverted by the parties. This issue may accordingly be taken cognizance of by the court even if not inceptively raised
as a defense so long as its existence is plainly apparent on the face of relevant pleadings. In the case at bar, prescription
as an affirmative defense was seasonably raised by SLI in its answer, except that the bills of lading embodying the same
were not formally offered in evidence, thus reducing the bone of contention to whether or not prescription can be
maintained as such defense and, as in this case, consequently upheld on the strength of mere references thereto.
As petitioners are suing upon SLI's contractual obligation under the contract of carriage as contained in the bills of
lading, such bills of lading can be categorized as actionable documents which under the Rules must be properly pleaded
either as causes of action or defenses, 18 and the genuineness and due execution of which are deemed admitted unless
specifically denied under oath by the adverse party. The rules on actionable documents cover and apply to both a cause
of action or defense based on said documents. In the present case and under the aforestated assumption that the time limit
involved is a prescriptive period, respondent carrier duly raised prescription as an affirmative defense in its answer
setting forth paragraph 5 of the pertinent bills of lading which comprised the stipulation thereon by parties, to wit:
Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if container shows exterior
signs of damage or shortage. Claims for non-delivery, misdelivery, loss or damage must be filed within 30 days from
accrual. Suits arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted within 60 days from
date of accrual of right of action. Failure to file claims or institute judicial proceedings as herein provided constitutes
waiver of claim or right of action. In no case shall carrier be liable for any delay, non-delivery, misdelivery, loss of
damage to cargo while cargo is not in actual custody of carrier."
Petitioners' failure to specifically deny the existence, much less the genuineness and due execution, of the
instruments in question amounts to an admission. Judicial admissions, verbal or written, made by the parties in the
pleadings or in the course of the trial or other proceedings in the same case are conclusive, no evidence being required to
prove the same, and cannot be contradicted unless shown to have been made through palpable mistake or that no such
admission was made. Moreover, when the due execution and genuineness of an instrument are deemed admitted because
of the adverse party's failure to make a specific verified denial thereof, the instrument need not be presented formally in
evidence for it may be considered an admitted fact. Even granting that petitioners' averment in their reply amounts to a
denial, it has the procedural earmarks of what in the law on pleadings is called a negative pregnant, that is, a denial
pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied. It is in
effect an admission of the averment it is directed to. 25 Thus, while petitioners objected to the validity of such agreement
for being contrary to public policy, the existence of the bills of lading and said stipulations were nevertheless impliedly
admitted by them.
We find merit in respondent court's comments that petitioners failed to touch on the matter of the non-presentation of
the bills of lading in their brief and earlier on in the appellate proceedings in this case, hence it is too late in the day to
now allow the litigation to be overturned on that score, for to do so would mean an over-indulgence in technicalities.
Hence, for the reasons already advanced, the non-inclusion of the controverted bills of lading in the formal offer of
evidence cannot, under the facts of this particular case, be considered a fatal procedural lapse as would bar respondent
carrier from raising the defense of prescription. Petitioners' feigned ignorance of the provisions of the bills of lading,
particularly on the time limitations for filing a claim and for commencing a suit in court, as their excuse for non-
compliance therewith does not deserve serious attention.In the case at bar, there is neither any showing of compliance by
petitioners with the requirement for the filing of a notice of claim within the prescribed period nor any allegation to that
effect. It may then be said that while petitioners may possibly have a cause of action, for failure to comply with the
above condition precedent they lost whatever right of action they may have in their favor or, taken in another sense, that
remedial right or right to relief had prescribed.

FERRER vs HON. ERICTA


FACTS: On January 26, 1975, plaintiff-spouses and their daughter sued defendant-spouses and their 16-year old son for
damages arising from an accident that occurred on December 31, 1970. The complaint alleged that defendants Mr. and
Mrs. Francis Pfleider, residents of Bayawan, Negros Oriental, were the owners or operators of a Ford pick-up car; that at
about 5:00 o'clock in the afternoon of December 31, 1970, in the streets of Bayawan, Negros Oriental, their son,
defendant Dennis Pfleider, who was then only sixteen (16) years of age, without proper official authority, drove the
above-described vehicle, without due regard to traffic rules and regulations, and without taking the necessary precaution
to prevent injury to persons or damage to property, and as a consequence the pickup car was overturned, resulting in
physical injuries on plaintiffs' daughter who was a passenger therein, which injuries paralyzed her and required medical
treatment and confinement at different hospitals for more than two (2) years.
Defendants filed their answer, putting up the affirmative defense that their son exercised due care in driving the car
and and alleging that Annette Ferrer and the other persons aboard said vehicle were not passengers in the strict sense of
the term, but were merely joy riders and that, consequently, defendants had no obligation whatsoever to plaintiffs.
At the pre-trial, only plaintiffs-petitioners and their counsel were present. Consequently, defendants-private
respondents were declared in default and the plaintiffs-petitioners were allowed to present their evidence ex parte. The
petitioners moved that they be granted an extension of ten (10) days to present her evidence, which was granted by the
court a quo. The presentation of petitioners' evidence was later continued by the trial court, when the deposition of
Annette Ferrer was submitted by petitioners and admitted by the trial court. Private respondents filed a motion to "set
aside the order of default and subsequent pleadings" on the ground that "defendants' failure to appear for pre-trial was
due to accident or excusable neglect," This was opposed by petitioners on the ground that the said pleading was not
under oath, contrary to the requirements of Sec. 3, Rule 18 of the Rules, and that it was not accompanied by an affidavit
of merit showing that the defendants have a good defense. In view of this, the motion of private respondents was denied
by respondent Judge. On the same date, respondent Judge rendered judgment against private respondents, finding that
the minor, Dennis Pfleider, was allowed by his parents to operate a Ford pick-up car and because of his reckless
negligence caused the accident in question, resulting in injuries to Annette.
Private respondents filed a Motion for Reconsideration 1 of the decision and of the order denying the motion to set
aside order of default, based on the following grounds: (1) the complaint states no cause of action insofar as Mr. and Mrs.
Pfleider are concerned because it does not allege that at the time of the mishap, defendant Dennis Pfleider was living
with them, the fact being that at such time he was living apart from them, hence, there can be no application of Article
2180 of the Civil Code, upon which parents' liability is premised; and (2) that the complaint shows on its face "that it
was filed only on January 6, 1975, or after the lapse of MORE THAN FOUR YEARS from the date of the accident on
December 31, 1970", likewise appearing from the complaint and, therefore, the action has already prescribed under
Article 1146 of the Civil Code. A Supplemental Motion for Reconsideration was subsequently filed by defendants-
private respondents, alleging that their defense of prescription has not been waived and may be raised even at such stage
of the proceedings because on the face of the complaint, as well as from the plaintiff's evidence, their cause of action had
already prescribed.
The Opposition to the above supplemental motion interposed by plaintiffs-petitioners averred that: (a) the defense of
prescription had been waived while the defense that the complaint states no cause of action "is available only at any time
not later than the trial and prior to the decision"; (b) inasmuch as defendants have been declared in default for failure to
appear at the pretrial conference, they have lost their standing in court and cannot be allowed to adduce evidence nor to
take part in the trial, in accordance with Section 2 of Rule 18 of the Rules of Court; and (c) the motion and supplemental
motion for reconsideration are pro forma because the defenses raised therein have been previously raised and passed
upon by respondent court in resolving defendants' motion to set aside order of default. Being pro forma, said motion and
supplemental motion do not suspend the running of the thirty-day period to appeal, which was from August 5, 1975,
when defendants received a copy of the decision, to September 4, 1975, and hence the decision has already become final
and executory. (. Plaintiffs opposed the motion, invoking Section 2, Rule 9 which provides that "defenses and objections
not pleaded in the motion to dismiss or answer are deemed waived.")
Respondent judge, without setting aside the order of default, issued an order absolving defendants from any liability
on the grounds that: (a) the complaint states no cause of action because it does not allege that Dennis Pfleider was living
with his parents at the time of the vehicular accident, considering that under Article 2180 of the Civil Code, the father
and, in case of his death or incapacity the mother, are only responsible for the damages caused by their minor children
who live in their company; and (b) that the defense of prescription is meritorious, since the complaint was filed more
than four (4) years after the date of the accident, and the action to recover damages based on quasi-delict prescribes in
four (4 years. Hence, the instant petition for mandamus
ISSUE: WON the defense of prescription had been deemed waived by private respondents' failure to allege the same in
their answer.
HELD: A complaint may be dismissed in the course of the proceedings on the ground of prescription, although such
defense was not raised in the answer, where plaintiff's own allegation in the complaint shows clearly that the action had
prescribed. Such circumstance removes this case from the rule under Sec. 2, Rule 9 regarding waiver of defenses by
failure to plead the same.
In the present case, there is no issue of fact involved in connection with the question of prescription. The complaint
alleges that the accident which caused the injuries sustained by plaintiff Annette Ferrer occurred on December 31, 1970.
It is undisputed that the action for damages was only filed on January 6, 1976. Actions for damages arising from physical
injuries because of a tort must be filed within four years. The four-year period begins from the day the quasi-delict is
committed or the date of the accident.

SPS. PONCIANO vs HON. PARENTELA & SPS. CLAMOSA


FACTS: Private respondents Ildefonso and Leonora Clamosa filed a complaint for a sum of money and damages with the
Regional Trial Court of Trece Martires City against petitioners Claro and Gloria Ponciano for unpaid cost of labor and
materials incurred by them in repairing petitioners house in San Roque, Cavite. Petitioners filed a motion to dismiss the
complaint for failure to state a cause of action, but the same was denied by the trial court. Then, petitioners filed their
answer with compulsory counterclaim, claiming that they have paid the total contract price agreed upon; that despite this,
the work of private respondents was defective; and that private respondents abandoned the renovation before it was
completed. Petitioners asserted that they are entitled to be paid P250,000 to complete the renovation, and damages.
Upon motion of private respondents, the trial court ordered that petitioners counterclaim be stricken off from the
record for failure to comply with Administrative Circular No. 04-94, which requires an affidavit of non-forum shopping
for all initiatory pleadings in all courts. Petitioners filed a motion for reconsideration, arguing, among others, that since
their counterclaim is compulsory in nature, it is not an initiatory pleading and therefore, does not fall within the scope of
Administrative Circular No. 04-94. However, the trial court denied petitioners motion for reconsideration. Petitioners
questioned the trial courts orders before this Court by means of a special civil action for certiorari under Rule 65 of the
1997 Revised Rules of Civil Procedure. The Courts Second Division denied the petition for lack of merit, holding that
the administrative circular invoked provides clearly that strict compliance with its mandate is imposed upon all initiatory
pleadings, and that "the complaint and other initiatory pleadings referred to and subject of this Circular are the original
civil complaint, counterclaim, cross-claim, third (fourth, etc.) party complaint, or complaint-in-intervention, petition, or
application wherein a party asserts his claim or relief.
Thereafter, petitioners filed an "Answer with Amended Compulsory Counterclaim," wherein the amendment
consisted of the addition of a certification under oath in compliance with the Administrative Circular No. 04-94. Initially,
the trial court admitted the "Answer with Amended Compulsory Counterclaim". However, after the filing of a motion for
reconsideration by private respondents, the court reconsidered its action and expunged the amended compulsory
counterclaim from the records, ruling that it is contemptible to admit defendants Amended Compulsory Counterclaim
after the Honorable Supreme Court had dismissed the petition for certiorari questioning the Order of this Court striking-
off from the record defendants compulsory counterclaim for not complying with Administrative Circular No. 04-94.
On certiorari under Rule 65, petitioners maintain that this Court did not rule that the dismissal of petitioners
compulsory counterclaim for non-compliance with Administrative Circular No. 04-94 was with prejudice. Consequently,
petitioners assert that they should be permitted to re-file their compulsory counterclaim provided that they comply with
such circular.
ISSUES: WON an answer which asserts a compulsory counterclaim must include a certificate of non-forum shopping
HELD: No. Administrative Circular No. 04-94 does not apply to compulsory counterclaims. Administrative Circular No.
04-94 was issued by this Court in order to prevent the undesirable practice of forum-shopping, which exists when, as a
result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in
another, or when he institutes two or more actions or proceedings grounded on the same cause, on the chance that one or
the other court would make a favorable disposition.
A compulsory counterclaim is any claim for money or other relief which a defending party may have against an
opposing party, which at the time of suit arises out of, or is necessarily connected with, the same transaction or
occurrence that is the subject matter of plaintiffs complaint. It is compulsory in the sense that if it is within the
jurisdiction of the court, and does not require for its adjudication the presence of third parties over whom the court
cannot acquire jurisdiction, it must be set up therein, and will be barred in the future if not set up.
In the case at bar, there is no doubt that the counterclaims pleaded by petitioners in their answers are compulsory in
nature. The filing of a separate action by petitioners would only result in the presentation of the same evidence.
Petitioners need not file a certification of non-forum shopping since their claims are not initiatory in character, and
therefore, are not covered by the provisions of Administrative Circular No. 04-94.

FAUSTINO GOJO vs. SEGUNDO GOYALA and ANTONINA ALMOGUERA


FACTS: Appellee Segundo Goyala together with his now deceased wife Antonina Almoguera, who was also named
respondent or defendant in the complaint or petition, sold to appellant by a "Deed of Pacto de Retro Sale" a certain parcel
of agricultural land having an area of approximately two and one-half hectares for P750.00, the repurchase to be made,
according to the deed, within one year. It also appears from said deed that on July 4, 1951, the vendee paid another
P100.00 as addition to the purchase price. About ten (10) years after the execution of the said document, or on April 12,
1961, to be precise, the vendee filed with the Court of First Instance of Sorsogon the present case against the vendors by
way of a petition for consolidation of ownership of the land described and involved in the "Deed of Pacto de Retro Sale."
In his petition, the vendee, herein appellant, alleged, that the date for repurchase, May 26, 1952, having expired and the
vendors not having been able to repurchase the same under the terms and conditions of the agreement, the ownership
over the land involved had become consolidated in him; and that for the purpose of recording in the Registry of Property
the said consolidation of ownership, it was necessary that a judicial order be issued to that effect and accordingly prayed
for such an order.
Appellee Segundo Goyala filed an opposition or answer to the petition. He therein alleged that his wife Antonina
Almoguera had died in the year 1959 and denied the allegation in the petition regarding the pacto de retro sale, "the fact
of the matter being," according to him, "that on May 26, 1951, the respondents obtained a cash loan of P750.00 from the
petitioner payable in one year without interest; that only on July 26, 1951, Dolores Goyala, daughter of the respondents,
obtained from the petitioner the sum of P50.00 to be added and credited to the account of the respondents; and then on
August 25, 1951, the said Dolores Goyala received from the petitioner another amount of P10.00 to be added to and
credited to the account of the respondents, (so that) the total loan of the respondents from the petitioner aggregates
P810.00 Philippine Currency" and that to guarantee the payment of the said loan, the respondents executed a mortgage in
favor of the petitioner on a parcel of coconut land described in Annex A of the petition, hence, although the deed was
executed or drawn in the form of a pacto de retro sale, the true and real intention of the parties thereto was that the same
was a mere mortgage to secure the payment of the original loan of P750.00 together with the additional amount received
thereafter, making a total loan of P810.00, payable within one year without interest. He further alleged that in the
evening of May 26, 1952, he and his wife went to the house of the petitioner and tendered to him the sum of P810.00 to
pay the debt, but said petitioner refused to receive the same and to cancel the document of mortgage, Annex A.
Counsel for respondent Goyala filed a manifestation informing the trial court that the named defendant (respondent)
Antonina Almoguera was already dead, and that her surviving nearest kin are her children, namely: Leonor, Pedro,
Juliana, Dolores, Valentina, Soledad, Penya, Mamerta, Salvador, Genesa, Felipe and Elegio all surnamed Goyala
with residences at Bulan, Sorsogon. The trial court required the plaintiff to submit an amended Complaint substituting
therein for one of the defendants, Antonina Almoguera, now deceased her successors in interest as party defendants,
within the reglementary period. Appellee Goyala filed a motion to dismiss the complaint or petition on the ground that
notwithstanding the lapse of 43 days after appellant's receipt of a copy of the above-quoted order of the trial court, said
appellant had failed and neglected to submit the amended complaint required of him. The motion was opposed by
appellant. The trial court dismissed the complaint without prejudice. Then, appellee filed a motion to declare appellant in
default in respect of said appellee's counterclaim, contained in his answer (opposition) to the dismissed complaint
(petition) of appellant. This motion was granted by the trial court and Let the defendant Segundo Goyala submit his
evidence before the Clerk of Court, who is hereby commissioned to receive the same. The Clerk of Court received the
evidence of appellee in respect of his counterclaim and, thereafter, the trial court rendered favorable judgment on
appellee's counterclaim. Dissatisfied with the decision referred to, appellant appealed to the Court of Appeals which,
upon its finding that the said appeal involves purely questions of law, certified the same to this Court for resolution.
ISSUE: (1) WON the said counterclaim "falls within the category of compulsory counterclaim" which does not call for
an independent answer as the complaint already denies its material allegation.
(2) WON the dismissal of the complaint in this case without prejudice carried with it the dismissal of the said
counterclaim
HELD: (1) YES. It is now settled that a plaintiff who fails or chooses not to answer a compulsory counterclaim may not
be declared in default, principally because the issues raised in the counterclaim are deemed automatically joined by the
allegations of the complaint. In the instant case, there can be no doubt that appellant's counterclaim was a compulsory
one inasmuch as it arises out of or is necessarily connected with transaction or occurrence that is the subject matter of the
complaint; the complaint alleged that the right of appellee to repurchase the property in question had already expired and
asked for an order of consolidation; on the other hand, appellant's counterclaim was for reformation of the deed claiming
that it was only a mortgage. Thus the counterclaim was clearly inconsistent with and directly controverted the whole
theory and basic allegations of the complaint. In consequence, appellant's complaint stood as the answer to appellee's
counterclaim; hence, the incorrectness of the trial court's order declaring the appellant in default in regard to said
counterclaim is evident.
(2) NO. Regarding the dismissal of petitioner's complaint, We hold also, that the trial court committed reversible
error in ordering the same. It is true that under Section 3 of Rule 17, a complaint may be dismissed for failure to
prosecute if the plaintiff fails to comply with an order of the court, but it is obvious that the said provision cannot apply
when the order supposedly ignored is a void one, as in this case. Here, the trial court ordered petitioner to amend the
complaint only because it was informed that one of the defendants had died, the court directing that the plaintiff should
name the heirs of the deceased as defendants in lieu of said deceased. Such an order runs counter to the ruling in Case-as
vs. Rosales, et al. (L-18707, February 28, 1967) that an order of the trial court directing the surviving plaintiff to amend
the complaint was a void order inasmuch as there was no obligation on said plaintiff to amend his complaint. When
certain of the parties to a civil case died and due notice thereof was given to the trial court, it devolved on the said court
to order, not the amendment of the complaint, but the appearance of the legal representatives of the deceased in
accordance with the procedure and manner outlined in Rule 3, Section 17 of the Rules of Court.
In line with the principle underlying Sec. 2 of Rule 17, it is not proper to dismiss a complaint when a compulsory
counterclaim has been pleaded by defendant. The reason is obvious. Under the cited provision, the right of the plaintiff to
move for the dismissal of an action after the defendant has filed his answer is qualified by the clause providing that: "If a
counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiff's motion to dismiss, the
action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for
independent adjudication by the court." With this limitation, the power of the court to dismiss the complaint upon motion
of plaintiff, which is usually without prejudice, is not purely discretionary. The purpose of Section 2, Rule 17, Revised
Rules of Court is to avoid multiplicity of suits over the same matter which would necessarily entail unnecessary expense
and, what is worse, possibility of conflict and inconsistency in the resolution of the same question. The same
considerations would obtain, if the defendant were the one to ask for dismissal. The best interests of justice require that
conflicting claims regarding the same matter should be decided on one single proceeding.

LIAM LAW vs. OLYMPIC SAWMILL CO. and ELINO LEE CHI
FACTS: Plaintiff loaned P10,000.00, without interest, to defendant partnership and defendant Elino Lee Chi, as the
managing partner. The loan became ultimately due on January 31, 1960, but was not paid on that date, with the debtors
asking for an extension of three months, or up to April 30, 1960. On March 17, 1960, the parties executed another loan
document. Payment of the P10,000.00 was extended to April 30, 1960, but the obligation was increased by P6,000.00.
Defendants again failed to pay their obligation by April 30, 1960 and, on September 23, 1960, plaintiff instituted this
collection case. Defendants admitted the P10,000.00 principal obligation, but claimed that the additional P6,000.00
constituted usurious interest.
Upon application of plaintiff, the Trial Court issued a writ of Attachment on real and personal properties of
defendants located at Karanglan, Nueva Ecija. After the Writ of Attachment was implemented, proceedings before the
Trial Court versed principally in regards to the attachment. Then, an Order was issued by the Trial Court stating that
"after considering the manifestation of both counsel in Chambers, the Court hereby allows both parties to simultaneously
submit a Motion for Summary Judgment. The plaintiff filed his Motion for Summary Judgment on January 31, 1961,
while defendants filed theirs on February 2, 1961. The Trial Court rendered decision ordering defendants to pay plaintiff
"the amount of P10,000.00 plus the further sum of P6,000.00 by way of liquidated damages . . . with legal rate of interest
on both amounts from April 30, 1960." It is from this judgment that defendants have appealed.
ISSUE: WON the claim of usury should have been deemed admitted by plaintiff as it was "not denied specifically and
under oath"
HELD: NO. Section 9 of the Usury Law (Act 2655) provided: The person or corporation sued shall file its answer in
writing under oath to any complaint brought or filed against said person or corporation before a competent court to
recover the money or other personal or real property, seeds or agricultural products, charged or received in violation of
the provisions of this Act. The lack of taking an oath to an answer to a complaint will mean the admission of the facts
contained in the latter."
The foregoing provision envisages a complaint filed against an entity which has committed usury, for the recovery of
the usurious interest paid. In that case, if the entity sued shall not file its answer under oath denying the allegation of
usury, the defendant shall be deemed to have admitted the usury. The provision does not apply to a case, as in the
present, where it is the defendant, not the plaintiff, who is alleging usury.
Moreover, for sometime now, usury has been legally non-existent. Interest can now be charged as lender and
borrower may agree upon. The Rules of Court in regards to allegations of usury, procedural in nature, should be
considered repealed with retroactive effect. "Statutes regulating the procedure of the courts will be construed as
applicable to actions pending and undetermined at the time of their passage. Procedural laws are retrospective in that
sense and to that extent." ". . . Section 24(d), Republic Act No. 876, known as the Arbitration Law, which took effect on
19 December 1953, and may be retroactively applied to the case at bar because it is procedural in nature . . ."

SPS. MELITON vs CA & ZIGA


FACTS: Private respondent Nelia Ziga, in her own behalf and as attorney-in-fact of Alex A. Ziga and Emma A. Ziga-Siy,
filed a complaint, in the RTC of Naga City, against herein petitioner Lydia Meliton for rescission of a contract of lease
over a parcel of land situated at Elias Angeles Street, Naga City. Alleged as grounds therefor were said petitioner's
failure, as lessee, to deposit the one month rental and to pay the monthly rentals due; her construction of a concrete wall
and roof on the site of a demolished house on the leased premises without the lessor's written consent; and her
unauthorized sublease of the leased property to a third party.
etitioner Lydia Meliton filed an answer to the complaint denying the material averments thereof and setting up three
counterclaims for recovery of the value of her kitchenette constructed on the leased parcel of land and which was
demolished by private respondent, in the amount of P34,000.00; the value of the improvements introduced in the
kitchenette to beautify it, in the amount of P10,000.00, plus the value of the furniture and fixtures purchased for use in
the kitchenette in the amount of P23,000.00; and moral damages in the amount of P20,000.00 aside from attorney's fees
of P50,000.00 and P250.00 per court appearance, with litigation expenses in the amount of P1,000.00. 3
The trial court, on motion of private respondent contending that her cause of action had already become moot and
academic by the expiration of the lease contract, dismissed the complaint. The counterclaims of petitioner Lydia Meliton
were also dismissed for non-payment of the docket fees, ergo the trial court's holding that thereby it had not acquired
jurisdiction over the same. Petitioners Lydia Meliton and Virgilio Meliton filed a complaint against private respondent
for recovery of the same amounts involved and alleged in their counterclaims in the previous civil case which was
likewise assigned to Branch 27 of the same trial court. The private respondent filed a motion to dismiss the complaint on
the ground that the cause of action therein was barred by prior judgment in the previous civil case, the order of dismissal
wherein was already rendered. The court below denied private respondent's motion to dismiss the complaint on the
ground that the dismissal of the petitioner's counterclaims in the previous Civil Case is not an adjudication on the merits
as the court did not acquire jurisdiction over the counterclaims for failure of petitioner Lydia Meliton to pay the docket
fees, hence the said dismissal does not constitute a bar to the filing of the later complaint.
Private respondent's motion for reconsideration of the foregoing order was denied by the lower court for lack of
merit. Dissatisfied therewith, private respondent file a petition for certiorari with this Court. The Sc referred this case to
the Court of Appeals for proper determination and disposition pursuant to Section 9, paragraph 1 of B.P. Blg. 129. In its
decision, the Court of Appeals granted the petition holding that the respondents' counterclaim against the petitioner in
Civil Case No. RTC 88-1480 is a compulsory counterclaim, it having (arisen) out of or being necessarily connected with
the transaction or occurrence subject matter of the petitioner's complaint. The failure of the respondents to seek a
reconsideration of the dismissal of their counterclaim or to take an appeal therefrom rendered the dismissal final. Such
dismissal barred the prosecution of their counterclaim by another action.
ISSUES: (1) WON the counterclaims of petitioners are compulsory in nature
(2) WON petitioners, having failed to seek reconsideration of or to take an appeal from the order of dismissal of their
counterclaims, are already barred from asserting the same in another action.
HELD: (1) YES. Considering Section 4 of Rule 9 of the Rules of Court, 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 party's
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. It has been postulated that while a number of criteria
have been advanced for the determination of whether the counterclaim is compulsory or permissive, the "one compelling
test of compulsoriness" is the logical relationship between the claim alleged in the complaint and that in the
counterclaim, that is, where conducting separate trials of the respective claims of the parties would entail a substantial
duplication of effort and time, as where they involve many of the same factual and/or legal issues.
The phrase "logical relationship" is given meaning by the purpose of the rule which it was designed to implement.
Thus, a counterclaim is logically related to the opposing party's claim where, as already stated, separate trials of each of
their respective claims would involve a substantial duplication of effort and time by the parties and the courts. Where
multiple claims involve many of the same factual issues, or where they are offshoots of the same basic controversy
between the parties, fairness and considerations of convenience and of economy require that the counterclaimant be
permitted to maintain his cause of action.
In the aforesaid Civil Case No. 88-1480, all the requisites of a compulsory counterclaim are present. The
counterclaims, as this term is now broadly defined, are logically related to the complaint. Private respondent's complaint
was for rescission of the contract of lease due to petitioner Lydia Meliton's breach of her obligations under the said
contract. On the other hand, petitioner's counterclaims were for damages for unlawful demolition of the improvements
she introduced pursuant to her leasehold occupancy of the premises, as well as for the filing of that civil suit which is
contended to be clearly unfounded. Both the claims therein of petitioners and private respondent arose from the same
contract of lease. The rights and obligations of the parties, as well as their potential liability for damages, emanated from
the same contractual relation. Petitioners' right to claim damages for the unlawful demolition of the improvements they
introduced on the land was based on their right of possession under the contract of lease which is precisely the very same
contract sought to be rescinded by private respondent in her complaint. The two actions are but the consequences of the
reciprocal obligations imposed by law upon and assumed by the parties under their aforesaid lease contract. That contract
of lease pleaded by private respondent constitutes the foundation and basis relied on by both parties for recovery of their
respective claims. The relationship between petitioners' counterclaims and private respondent's complaint is substantially
the same as that which exists between a complaint for recovery of land by the owner and the claim for improvements
introduced therein by the possessor.
As we have ruled, in actions for ejectment or for recovery of possession of real property, it is well settled that the
defendant's claims for the value of the improvements on the property or necessary expenses for its preservation are
required to be interposed in the same action as compulsory counterclaims. In such cases, it is the refusal of the defendant
to vacate or surrender possession of the premises that serves as the vital link in the chain of facts and events, and which
constitutes the transaction upon which the plaintiff bases his cause of action. It is likewise an "important part of the
transaction constituting the subject matter of the counterclaim" of defendant for the value of the improvements or the
necessary expenses incurred for the preservation of the property. They are offshoots of the same basic controversy
between the parties, that is, the right of either to the possession of the property.
(2) NO. It is indeed the rule, embodied in Section 4, Rule 9 of the Rules of Court, that a counterclaim not set up shall
be barred if it arises out of or is necessarily connected with the transaction or occurrence that is the subject matter of the
opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot
acquire jurisdiction. However, said rule is not applicable to the case at bar. Contrary to the claim of private respondent, it
cannot be said that herein petitioners failed to duly interpose their causes of action as counterclaims in the previous
action. Petitioners' claims were duly set up as counterclaims in the prior case but the same were dismissed by reason of
non-payment of docket fees. The ruling of respondent Court of Appeals to the effect that the failure of petitioners to
appeal or to move for reconsideration of the said order of dismissal bars them from asserting their claims in another
action cannot be upheld.
Firstly, where a compulsory counterclaim is made the subject of a separate suit, it may be abated upon a plea of auter
action pendant or litis pendentia and/or dismissed on the ground of res judicata, 13 depending on the stage or status of
the other suit. Both defenses are unavailing to private respondents. The present action cannot be dismissed either on the
ground of litis pendentia since there is no other pending action between the same parties and for the same cause, nor on
the ground of res judicata. In order that a prior judgment will constitute a bar to a subsequent case, the following
requisites must concur: (1) the judgment must be final; (2) the judgment must have been rendered by a court having
jurisdiction over the subject matter and the parties; (3) the judgment must be on the merits; and (4) there must be
between the first and second actions, identity of parties, of subject matter, and of causes of action.
The first case, Civil Case No. RTC 88-1480, was dismissed upon motion of private respondent, plaintiff therein,
under Section 2 of Rule 17. Dismissal thereunder is without prejudice, except when otherwise stated in the motion to
dismiss or when stated to be with prejudice in the order of the court. The order of dismissal of the first case was
unqualified, hence without prejudice and, therefore, does not have the effect of an adjudication on the merits. On a parity
of rationale, the same rule should apply to a counterclaim duly interposed therein and which is likewise dismissed but not
on the merits thereof. Moreover, in the same order of dismissal of the complaint, the counterclaims of herein petitioners
were dismissed by reason of the fact that the court a quo had not acquired jurisdiction over the same for non-payment of
the docket fees. On that score, the said dismissal was also without prejudice, since a dismissal on the ground of lack of
jurisdiction does not constitute res judicata, there having been no consideration and adjudication of the case on the
merits. The dismissal of the case without prejudice indicates the absence of a decision on the merits and leaves the
parties free to litigate the matter in a subsequent action as though the dismissal action had not been commenced. The
discontinuance of a case not on the merits does not bar another action on the same subject matter. Evidently, therefore,
the prior dismissal of herein petitioners' counterclaims is not res judicata and will not bar the filing of another action
based on the same causes of action.
Under the Rules, there is no need to pay docket fee for a compulsory counterclaim. The ruling in Manchester applies
specifically to permissive counterclaims only, thereby excluding compulsory counterclaims from its purview, and that
was the ruling of the court below to which the litigants therein submitted. Had the trial court correctly specified that
petitioners' counterclaims were compulsory, petitioners could have objected to the dismissal sought by private
respondent on the ground that said counterclaims could not remain pending for independent adjudication. This, is one
case where it is necessary to heed the injunction that the rules of procedure are not to be applied in a rigid and technical
sense. After all, rules of procedure are used only to help secure substantial justice. They cannot be applied to prevent the
achievement of that goal. Form cannot and should not prevail over substance. Absent a specific requirement for stringent
application, the Rules of Court are to be liberally construed to the end that no party shall be deprived of his day in court
on technicalities. The courts in our jurisdiction are tribunals both of law and equity. Hence, under the antecedents of this
case, we are persuaded that even if only to approximate that desirable measure of justice we are sworn to dispense, this
controversy should be resolved on the merits.

KOREA TECHNOLOGIES vs HON. LERMA


FACTS: Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in the supply and
installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while private respondent Pacific General
Steel Manufacturing Corp. (PGSMC) is a domestic corporation. PGSMC and KOGIES executed a Contract whereby
KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona, Cavite. The contract was executed in the
Philippines. The parties executed, in Korea, an Amendment for Contract, amending the terms of payment. The contract
and its amendment stipulated that KOGIES will ship the machinery and facilities necessary for manufacturing LPG
cylinders for which PGSMC would pay USD 1,224,000. KOGIES would install and initiate the operation of the plant for
which PGSMC bound itself to pay USD 306,000 upon the plant's production of the 11-kg LPG cylinder samples. Thus,
the total contract price amounted to USD 1,530,000.
PGSMC entered into a Contract of Lease with Worth Properties, Inc. (Worth) for use of Worth's 5,079-square meter
property with a 4,032-square meter warehouse building to house the LPG manufacturing plant. The monthly rental was
PhP322,560 commencing on January 1, 1998 with a 10% annual increment clause. Subsequently, the machineries,
equipment, and facilities for the manufacture of LPG cylinders were shipped, delivered, and installed in the Carmona
plant. PGSMC paid KOGIES USD 1,224,000. However, gleaned from the Certificate executed by the parties, after the
installation of the plant, the initial operation could not be conducted as PGSMC encountered financial difficulties
affecting the supply of materials, thus forcing the parties to agree that KOGIES would be deemed to have completely
complied with the terms and conditions of the contract. For the remaining balance of USD306,000 for the installation
and initial operation of the plant, PGSMC issued two postdated checks: (1) BPI Check No. 0316412 dated January 30,
1998 for PhP4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for PhP4,500,000. 5
When KOGIES deposited the checks, these were dishonored for the reason "PAYMENT STOPPED." Thus, KOGIES
sent a demand letter to PGSMC threatening criminal action for violation of Batas Pambansa Blg. 22 in case of
nonpayment. On the same date, the wife of PGSMC's President faxed a letter to KOGIES' President who was then
staying at a Makati City hotel. She complained that not only did KOGIES deliver a different brand of hydraulic press
from that agreed upon but it had not delivered several equipment parts already paid for. PGSMC replied that the two
checks it issued KOGIES were fully funded but the payments were stopped for reasons previously made known to
KOGIES. PGSMC informed KOGIES that PGSMC was canceling their Contract on the ground that KOGIES had altered
the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would
dismantle and transfer the machineries, equipment, and facilities installed in the Carmona plant. Five days later, PGSMC
filed before the Office of the Public Prosecutor an Affidavit-Complaint for Estafa docketed as I.S. No. 98-03813 against
Mr. Dae Hyun Kang, President of KOGIES.
KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor
dismantle and transfer the machineries and equipment on mere imagined violations by KOGIES. It also insisted that their
disputes should be settled by arbitration as agreed upon in Article 15, the arbitration clause of their contract. PGSMC
again wrote KOGIES reiterating the contents of its letter threatening that the machineries, equipment, and facilities
installed in the plant would be dismantled and transferred. Thus, KOGIES instituted an Application for Arbitration before
the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as amended.
KOGIES filed a Complaint for Specific Performance, against PGSMC before the Muntinlupa City Regional Trial
Court (RTC). The RTC granted a temporary restraining order (TRO) which was subsequently extended. In its complaint,
KOGIES alleged that PGSMC had initially admitted that the checks that were stopped were not funded but later on
claimed that it stopped payment of the checks for the reason that "their value was not received" as the former allegedly
breached their contract by "altering the quantity and lowering the quality of the machinery and equipment" installed in
the plant and failed to make the plant operational although it earlier certified to the contrary as shown in a January 22,
1998 Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their Contract, as amended, by unilaterally
rescinding the contract without resorting to arbitration. KOGIES also asked that PGSMC be restrained from dismantling
and transferring the machinery and equipment installed in the plant which the latter threatened to do on July 4, 1998.
PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since Art. 15, the arbitration
clause, was null and void for being against public policy as it ousts the local courts of jurisdiction over the instant
controversy.
PGSMC filed its Answer with Compulsory Counterclaim 9 asserting that it had the full right to dismantle and
transfer the machineries and equipment because it had paid for them in full as stipulated in the contract; that KOGIES
was not entitled to the PhP9,000,000 covered by the checks for failing to completely install and make the plant
operational; and that KOGIES was liable for damages amounting to PhP4,500,000 for altering the quantity and lowering
the quality of the machineries and equipment. Moreover, PGSMC averred that it has already paid PhP2,257,920 in rent
(covering January to July 1998) to Worth and it was not willing to further shoulder the cost of renting the premises of the
plant considering that the LPG cylinder manufacturing plant never became operational.
The RTC issued an Order denying the application for a writ of preliminary injunction, reasoning that PGSMC had
paid KOGIES USD 1,224,000, the value of the machineries and equipment as shown in the contract such that KOGIES
no longer had proprietary rights over them. And finally, the RTC held that Art. 15 of the Contract as amended was invalid
as it tended to oust the trial court or any other court jurisdiction over any dispute that may arise between the parties.
KOGIES' prayer for an injunctive writ was denied. KOGIES filed before the Court of Appeals (CA) a petition for
certiorari seeking annulment of the RTCs orders. The CA affirmed the trial court and declared the arbitration clause
against public policy.
ISSUE: WON private respondents counterclaims are all compulsory not necessitating payment of docket fees and
certification of non-forum shopping.
HELD: NO. KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket fees and
filed a certificate of non-forum shopping, and that its failure to do so was a fatal defect. We disagree with KOGIES. As
aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim
dated July 17, 1998 in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was
effective at the time the Answer with Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states, "A
compulsory counterclaim or a cross-claim that a defending party has at the time he files his answer shall be contained
therein."
On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it was not
liable to pay filing fees for said counterclaims being compulsory in nature. We stress, however, that effective August 16,
2004 under Sec. 7, Rule 141, as amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in
compulsory counterclaim or cross-claims. As to the failure to submit a certificate of forum shopping, PGSMC's Answer
is not an initiatory pleading which requires a certification against forum shopping under Sec. 5 24 of Rule 7, 1997
Revised Rules of Civil Procedure. It is a responsive pleading, hence, the courts a quo did not commit reversible error in
denying KOGIES' motion to dismiss PGSMC's compulsory counterclaims.

GAJUDO vs TRADERS ROYAL BANK


FACTS: Petitioners filed a complaint before the RTC of Quezon City, against respondent Traders Royal Bank, the City
Sheriff of Quezon City and the Register of Deeds of Quezon City. 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 the 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, the 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.
The respondent bank 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. 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 the 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.
The petitioners re-filed the complaint with the same Court. 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 the 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. Supposing that all the defendants had filed their answer, petitioners filed a motion to set case for pre-
trial, which motion was, however, denied by the Trial Court on the ground that [respondent] bank has not yet filed its
answer. The petitioners filed a motion for reconsideration, thereunder alleging that they received by registered mail, a
copy of the bank's answer with counterclaim, which copy was attached to the motion. 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 a motion to declare the bank in default, thereunder alleging that no answer has been
filed despite the service of summons. "Thus, upon proof that petitioners had indeed served the bank with a copy of said
motion, the Trial Court issued an Order of default against the bank. The Trial Court rendered the new questioned partial
decision. The 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. Respondent bank
appealed the Partial Decision to the CA. During the pendency of that appeal, Ceroferr Realty Corporation and/or Cesar
and/or Lorna Roque filed a Manifestation with Motion asking the CA to discharge them as parties, because the case
against them had already been dismissed on the basis of their Compromise Agreement with petitioners. The CA issued a
Resolution 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 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.
The CA ruled in favor of respondent bank. 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." 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 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. Moreover, petitioners failed to prove that the bank had agreed to sell the
property back to them. 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.
ISSUE: WON the CA 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. (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.)
HELD: NO.

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." 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. Moreover, parties must rely on the strength of their own evidence, not upon the weakness of
the defense offered by their opponent. 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 with preponderant evidence required under Section 1 of Rule 133.
Regarding judgments by default, it was explained 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."

SPS. LAUS vs CA
FACTS: Private respondent Consuelo P. Torres filed against "Loredo Alfaro-Laus and John Doe" a complaint for the
collection of a sum of money. The defendants in the said case are the petitioners in the instant petition. The complaint
alleges that petitioner Loreto Alfaro-Laus executed a promissory note in favor of the private respondent under which the
former undertook to pay the latter the amount of Sixty-Six Thousand Pesos (P66,000.00) after three (3) months from the
date thereof. Upon maturity of the said promissory note, however, only Eleven Thousand Pesos (P11,000.00) was paid;
despite the receipt of a demand letter from the private respondent, petitioners made no further payments. Thus, the
former filed the aforementioned complaint praying for the payment of the unpaid balance of P55,000.00 "plus interest at
the rate of ten per cent (10%), compounded monthly beginning February 21, 1989, and twenty-five per cent (25%) of the
entire amount due for and as attorney's fees, such being in accordance with the terms and conditions set forth in the
promissory note."
Deputy Sheriff Romero S. Cruz proceeded to the petitioners' address at 122 Molave Park Subdivision, Paraaque,
Metro Manila to serve the summons and a copy of the complaint. Failing to serve the summons personally upon the
petitioners after waiting for ten (10) minutes, he resorted to a substituted service through one Josephine Areola, who
purportedly represented herself to be the maid of the said petitioners. On the same date, Deputy Sheriff Cruz executed
and filed a return. The petitioners did not file any answer. Consequently, upon motion of the private respondent, the trial
court issued an order declaring the former in default and setting the ex parte presentation of the private respondent's
evidence. The petitioners claim that they received this 29 December 1989 Order only on 22 January 1990.
The trial court rendered a judgment by default against the petitioners; it ordered the latter to pay the private
respondent the amount P55,000.00 at the rate of 10%. Before receiving a copy of the 22 January 1990 decision,
petitioners, by way of a special appearance, filed a motion to dismiss the case for lack of jurisdiction over their persons.
They allege that the service of summons was ineffective because it was not indicated in the return that the sheriff had
first exerted efforts to serve the same personally before resorting to substituted service. The trial court denied the motion
to dismiss for lack of merit on the ground that it had already rendered a judgment by default on 24 January 1990.
Petitioners received a copy of this order on 24 March 1990. In the meantime, the trial court issued a writ of execution.
Public respondent Deputy Sheriff Nilo Cabang, pursuant to a writ of execution issued by the trial court, levied upon
petitioners' properties consisting of a 1983 Mitsubishi Galant Sedan and a men's ring. Petitioners filed a motion for
reconsideration and they reiterated therein the contention that the trial court did not acquire jurisdiction over their
persons because of the defective service of summons and further avers that Josephine Areola, the person who supposedly
received the summons is not even known to the defendants. It turned out from their investigation that said Josephine
Areola was just a guest of one of their maid (sic) who stayed for only about a week. Furthermore Josephine Areola was
just a child of about ten to eleven years old and would not be expected to know what to do with the documents handed to
her. The trial court denied the petitioners' motion for reconsideration and held that there was a proper service of
summons because contrary to Loreto Alfaro-Laus' statement that Areola was a guest of their maid for a week, it was
proven that Areola was in fact the very person who, on 3 July 1989, received the demand letter sent by the private
respondent.
Petitioners filed with the Court of Appeals a petition for certiorari, prohibition and injunction with application for a
restraining order to set aside the trial court's Orders and to dismiss the case. Petitioners insisted therein that the trial court
committed grave abuse of discretion and a grave error in denying their motion to dismiss and the motion to reconsider
said denial despite the lack of jurisdiction over their persons. They likewise challenged the denial of such motion to
dismiss which was based solely on the ground that a judgment by default had already been rendered. The respondent
Court of Appeals promulgated its decision denying the petition for lack of merit. It ruled that it was the defendants-
petitioners who erred in filing a motion to dismiss at that late stage of the proceedings. A motion to dismiss on the
ground that the Court has no jurisdiction over the person of the defendants is proper only when made within the
reglementary period for filing a responsive pleading and before such responsive pleading is filed. In this case, the
defendants-petitioners' motion to dismiss was filed five (5) months after the complaint was filed and only after a default
judgment had already been rendered by the respondent Court. Thus, it was rather too late in the day for the defendants-
petitioners' motion to dismiss to be considered by the respondent Court. In the proper exercise of its sound judicial
discretion, the respondent Court did not err in denying the motion to dismiss on the ground that a judgment by default
had already been rendered. Respondent sheriff Nilo Cabang sold at a public auction the levied men's ring an oval
diamond set in yellow gold to the private respondent for P140,000.00, and the Galant car to Atty. Leonardo Perez, Jr.,
counsel for the latter, for P180,000.00. Both were the highest bidders. The MR was denied.
ISSUE: WON the trial court acquired jurisdiction over the persons of the petitioners by virtue of the substituted service
of summons
HELD: NO. Since the petitioners did not voluntarily submit to the jurisdiction of the trial court, proper service of
summons became imperative. If the service effected in the case at bar was, as claimed by the petitioners, invalid, the trial
court acquired no jurisdiction over their persons. In such an instance, the order of default, judgment by default and writ
of execution issued by the trial court would be null and void. . . . Since the substituted service of summons in this case
was not validly effected, the trial court did not acquire jurisdiction over the persons of the petitioners. The order of
default, the judgment by default, the writ of execution issued by it, as well as the auction sale of the petitioners'
properties levied on execution are, therefore, all null and void. The general rule in this jurisdiction is that summons must
be personally served; pursuant to Section 7, Rule 14 of the Revised Rules of Court, such personal service is to be
accomplished by "handing a copy thereof to the defendant in person, or, if he refuses to receive it, by tendering it to
him." However, if this mode of service cannot be effected within a reasonable time, substituted service may be resorted
to under Section 8 of the same Rule.
A perusal of the sheriff's return in the case at bar readily reveals that it does not (a) indicate the impossibility of
service of summons within a reasonable time, (b) specify the efforts exerted to locate the petitioners and (c) state that it
was served on a person of sufficient age and discretion residing therein. The fact of the matter is that as disclosed in his
testimony taken in connection with the motion for reconsideration, and the affidavit he prepared in conjunction with such
hearing. Deputy Sheriff Cruz resorted to a substituted service on his first and only attempt to effect a personal
service. Upon being informed that the petitioners were not around at that time, he immediately resorted to a substituted
service through Josephine Areola, a person whose age he did not even know or attempt to discover. He did not even
inquire about the whereabouts of the petitioners, the time they were expected to return home, the hours of the day they
could be contacted at their house or the location of their offices, if any, in order that he could faithfully comply with the
requirement of personal service. It is all too obvious that no earnest efforts were exerted by Deputy Sheriff Cruz to effect
the personal service of summons.
Both parties agree that the petitioners were the defendants in Civil Case No. Q-89-3327. However, petitioner Loreto
Alfaro-Laus is erroneously mentioned in the complaint as Loredo. On the other hand, petitioner Pepito Laus, the husband
of Loreto, is merely designated as JOHN DOE. The latter was impleaded as a co-defendant presumably on the theory
that the liability sought to be enforced is a conjugal partnership liability. In short, Loreto's husband was sued as an
indispensable party; it is clear that the trial court treated him as such when in its decision, ordered the defendants, not just
Loreto, to pay the adjudged amounts. The sheriff's return of service indisputably discloses that no summons was even
attempted to be served on petitioner Pepito Laus. Sheriff Cruz unequivocally states therein that the "duplicate copy of the
same together with the complaint and its annexes was duly served upon defendant Loredo (sic) Laus of 122 Molave Park
Subd. Paraaque M. M. thru JOSEPHINE AREOLA, maid of Loredo Daus (sic) of same address. Neither Deputy Sheriff
Cruz nor the private respondent had volunteered additional information to the effect that at some other time, summons
was in fact served on Pepito Laus. Accordingly, the trial court never acquired jurisdiction over his person. And yet, while
it concedes in its 29 December 1989 Order that the substituted service of summons was valid only for Loreto, it declared
the defendants and not only her in default. The court could have easily avoided this misdoing if it only examined
the records before issuing the order. On this score alone, the judgment by default is fatally flawed.
Some further comments, en passant, on the ratiocination of the respondent Court are in order. It is not accurate for the
latter to have said that the petitioners' motion to dismiss was not filed seasonably because it was filed beyond the
reglementary period provided in the Revised Rules of Court. Such a conclusion would doubtless be correct if there was a
valid service of summons. If, however, a defendant has not been properly summoned, the period to file a motion to
dismiss for lack of jurisdiction over his person does not commence to run until he voluntarily submits to the jurisdiction
of the court, since the court has no jurisdiction to adjudicate the controversy as to him until such time. In this case,
petitioners did not voluntarily submit to the jurisdiction of the trial court. Consequently, the period to file a responsive
pleading did not even commence to run.
In the first place, it is axiomatic that a void judgment can never become final and executory and may even be assailed
or impugned at any time. An action to declare the nullity of a void judgment does not prescribe. 41 Secondly, the motion
to dismiss in this case was filed before the petitioners received a copy of the decision by default. Since the said motion is
based on the lack of jurisdiction over the persons of the petitioners which, if true in fact, We have found it to be so
would result in the nullification not only of the default order but of the decision as well, then for all legal intents and
purposes, the latter was covered by the motion. This was precisely the orientation of the trial court when it allowed the
parties to submit evidence to support the motion to reconsider the Order of 5 March 1990 denying the motion to dismiss.
It would certainly not have gone that far if it thought otherwise for by then, the decision had already become final. Its
suggestion that the petitioners should have filed a motion to set aside the order of default on the ground that they had
failed to file the answer on grounds of fraud, accident, mistake or excusable negligence or a motion for new trial or a
petition for relief from judgment, is untenable for it begs the question. Besides, as shown above, petitioners' failure to file
the answer was not based on any of these grounds, but stood on the void service of summons.

MARIANO DE GUIA vs DE GUIA et. al


FACTS: Plaintiffs Mariano De Guia, Apolonia De Guia, Tomasa De Guia and Irene Manuel filed with the court below a
complaint for partition against defendants Ciriaco, Leon, Victorina and Pablo De Guia. They alleged that the real
properties therein described were inherited by plaintiffs and defendants from their predecessors-in-interest, and that the
latter unjustly refused to have the properties subdivided among them. Shortly after defendants filed their traverse, an
amended complaint was admitted by the lower court, in which plaintiff Tomasa De Guia was impleaded as one of the
defendants for the reason that she had become an unwilling co-plaintiff.
The Branch Clerk of Court issued a Notice setting the case for pre-trial conference on June 18, 1992 at 8:30 a.m. Copies
of said notices were sent by registered mail to parties and their counsel. It turned out that both defendants and counsel
failed to attend the pre-trial conference. Hence, upon plaintiffs' motion, defendants were declared as in default and
plaintiffs were allowed to present their evidence ex-parte.
Defendants filed their Motion for Reconsideration which declared them as in default. They explained therein that
they received the Notice of pre-trial only in the afternoon of June 18, 1992, giving them no chance to appear for such
proceeding in the morning of that day. The Motion was opposed by plaintiffs who pointed out that per Postal Delivery
Receipt, defendants' counsel actually received his copy of the Notice on June 17, 1992 or one day before the date of pre-
trial. Citing Section 2, Rule 13 of the Rules of Court, plaintiffs further urged that counsel's receipt of the said notice on
June 17, 1992 was sufficient to bind defendants who received said notice on the next day. Finally, they faulted
defendants for failing to support their Motion for Reconsideration with an affidavit of merit showing among others that
they had a meritorious defense. The plaintiffs' motion for reconsideration was denied and judgment was rendered
ordering the partition of the controverted parcels of land. The CA sustained respondents' claim that the trial court had
improperly declared them in default. It held that the Notice of pretrial received by their counsel a day before the hearing
did not bind the clients, because the Rules of Court in effect at the time mandated separate service of such Notice upon
the parties and their counsel.
ISSUE: WON the trial court erred in declaring respondents in default
HELD: When the present dispute arose in 1992, the applicable rule was Section 1, Rule 20 of the pre-1997 Rules of Civil
Procedure, which provided as follows: SECTION 1. Pre-trial mandatory. In any action after the last pleading has been
filed, the court shall direct the parties and their attorneys to appear before it for a conference. Hence, before being
declared non-suited or considered in default, parties and their counsel must be shown to have been served with notice of
the pretrial conference. Moreover, if served only on the counsel, the notice must expressly direct him or her to inform the
client of the date, the time and the place of the pretrial conference. The absence of such notice renders the proceedings
void, and the judgment rendered therein cannot acquire finality and may be attacked directly or collaterally. In this case,
respondents received the notice on the afternoon of June 18, 1994, or after the pretrial scheduled on the morning of that
day. Moreover, although the Notice was also sent to their counsel, it did not contain any imposition or directive that he
inform his clients of the pretrial conference. The Notice merely stated: "You are hereby notified that the above-entitled
case will be heard before this court on the 18th day of June, 1992, at 8:30 a.m. for pre-trial."
Such belated receipt of the notice, which was not attributable to respondents, amounted to a lack of notice. Thus, the
lower court erred in declaring them in default and in denying them the opportunity to fully ventilate and defend their
claim in court. Of course, this situation would not have arisen under Section 3, Rule 18 of the 1997 Rules of Civil
Procedure. It specifically provides that notice of pretrial shall be served on counsel, who is charged with the duty of
notifying the client. Considering the milieu of the present case, however, such amended proviso is not applicable.
Granting that respondents' Manifestation and Motion to Lift the Order of Default was pro forma, this issue has
become moot, not only because the trial court had denied such Motion, but also because what was appealed was the
judgment rendered by the lower court. For the same reason, we must also reject petitioners' insistence that an affidavit of
merit was absent. In any case, there was no need to attach an affidavit of merit to the Motion, as the defenses of
respondents had been set out in their Answer.

SPS. LORBES vs CA, DELOS REYES, CRUZ (p. 147)


FACTS: Petitioners spouses Octavio and Epifania Lorbes where the registered owners of a parcel of land located in
Antipolo, Rizal. The said property was mortgage to Florencio and Nestor Carlos for 150,000.00. Anout a year later, the
mortgaged loan was increased to 500,000.00. Fearing for the foreclosure of the property, petitioners asked their son-in-
law, herein private respondent Ricardo delos Reyes, for help in redeeming their property. Private respondent delos Reyes
solicited the assistance of private respondent Josefina Cruz. It was agreed that petitioners will sign a Deed of Sale
conveying the mortgaged property in favor of private respondent Cruz and Cruz will apply for a housing loan with Land
Bank of the Philippines using the subject property as collateral. The proceeds of the loan will be paid to the Carloses as
mortgagees and to other expenses in relation thereto. Moreover, the monthly amortization on the housing loan which was
supposed to be deducted from the salary of private respondent Cruz will be reimbursed by private respondent delos
Reyes. Cruz's loan had been approved. Sometime in 1993, petitioners notified private respondent delos Reyes that they
were ready to redeem the subject property but the offer was refused. Consequently, petitioners filed a complaint for
reformation of instrument and damages.
In the complaint, petitioners claimed that the deed was merely a formality to meet the requirements of the bank for
the housing loan, and that the real intention of the parties in securing the loan was to apply the proceeds thereof for the
payment of the mortgage obligation. They alleged that the deed of sale did not reflect the true intention of the parties,
and that the transaction was not an absolute sale but an equitable mortgage, considering that the price of the sale was
inadequate considering the market value of the subject property and because they continued paying the real estate taxes
thereto even after the execution of the said deed of sale.
the trial court issued a temporary restraining order enjoining private respondents from ejecting petitioners from the
premises of the disputed property; this was soon replaced by a writ of preliminary injunction. Summons and a copy of
the complaint were served upon private respondents on August 1, 1994. Private respondents filed their answer beyond
the reglementary period. Thus, on September 5, 1994, petitioners filed a motion to declare private respondents in default,
which the trial court granted by the trial court. Thus, petitioners presented their evidence ex parte. Private respondents
filed a motion to lift order of default and to strike out evidence presented ex parte, but it was denied by the trial court.
The trial court rendered judgment in favor of petitioners, upon finding that: (1) the Deed of Absolute Sale did not reflect
the true intention of the parties, and (2) the transaction entered into between petitioners and Cruz was not an absolute
sale but an equitable mortgage, considering that the price stated in the Deed of Absolute Sale was insufficient compared
to the value of the property, petitioners are still in possession of the property, and petitioners had continued to pay the
real estate taxes thereon after the execution of the said deed of sale.
On appeal, the Court of Appeals reversed the decision of the trial court. The Court of Appeals held that the
reformation of the Deed of Absolute Sale in the instant case is improper because there is no showing that such instrument
failed to express the true intention of the parties by reason of mistake, fraud, inequitable conduct, or accident in the
execution thereof. 6 To the Court of Appeals, the transaction was unmistakably a contract of sale, as evidenced by the
numerous supporting documents thereto, such as the Contract to Sell dated June 1992, Affidavit of Waiver/Assignment
dated August 14, 1992, Receipt of Partial Advance Payment dated September 9, 1992, and Transfer Certificate of Title
No. 229891 issued in the name of private respondent Cruz. Going over the indicators giving rise to a presumption of
equitable mortgage cited in the decision of the RTC, the Court of Appeals held: (1) inadequacy of price is material only
in a sale with right to repurchase, which is not the case with herein petitioners and Cruz; moreover, the estimate of the
market value of the property came only from the bare testimony of petitioner Octavio Lorbes, (2) petitioners' remaining
in possession of the property resulted only from their refusal to vacate the same despite the lawful demands of private
respondent Cruz, and (3) there was no documentary evidence that petitioners continued paying the taxes on the disputed
property after the execution of the Deed of Absolute Sale.
ISSUE: WON respondent court erred in ruling that by declaring private respondents in default they were denied due
process of law
HELD: YES. The Court ruled that well-settled is the rule that courts should be liberal in setting aside orders of
default for judgments of default are frowned upon, unless in cases where it clearly appears that the reopening of the case
is intended for delay. The issuance of orders of default should be the exception rather than the rule, to be allowed only in
clear cases of obstinate refusal by the defendant to comply with the orders of the trial court. Under the factual milieu of
this case, the RTC was indeed remiss in denying private respondents' motion to lift the order of default and to strike out
the evidence presented by petitioners ex parte, especially considering. that an answer was filed, though out of time. We
thus sustain the holding of the Court of Appeals that the default order of the RTC was immoderate and in violation of
private respondents' due process rights. However, we do not think that the violation was of a degree as to justify a
remand of the proceedings to the trial court, first, because such relief was not prayed for by private respondents, and
second, because the affirmative defenses and evidence that private respondents would have presented before the RTC
were capably ventilated before respondent court, and were taken into account by the latter in reviewing the correctness of
the evaluation of petitioners' evidence by the RTC and ultimately, in reversing the decision of the RTC. This is evident
from the discussions in the decision of the Court of Appeals, which cited with approval a number of private respondents'
arguments and evidence, including the documents annexed to their opposition to the issuance of a writ of preliminary
injunction filed with the RTC. To emphasize, the reversal of respondent court was not simply on due process grounds but
on the merits, going into the issue of whether the transaction was one of equitable mortgage or of sale, and so we find
that we can properly take cognizance of the substantive issue in this case, while of course bearing in mind the inordinate
manner by which the RTC issued its default order.
To the merit of this case, the court ruled that the presence of even one of the circumstances laid out in Article
1602, and not a concurrence of the circumstances therein enumerated, suffices to construe a contract of sale to be one of
equitable mortgage. This is simply in consonance with the rule that the law favors the least transmission of property
rights. Applying the foregoing considerations to the instant case, the Court finds that the true intention between the
parties for executing the Deed of Absolute Sale was not to convey ownership of the property in question but merely to
secure the housing loan of Cruz, in which petitioners had a direct interest since the proceeds thereof were to be
immediately applied to their outstanding mortgage obligation to the Carloses. The facts further bear out that petitioners
remained in possession of the disputed property after the execution of the Deed of Absolute Sale and the transfer of
registered title to Cruz in October 1992. Copies of realty tax receipts attached to the record also show that petitioners
continued paying for the taxes on the property for the period 1992 to 1994, or after the property was supposed to have
been sold to Cruz. From the above, the Court is satisfied that enough of the circumstances set out in Article 1602 of the
Civil Code are attendant in the instant case, as to show that the true arrangement between petitioners and private
respondent Cruz was an equitable mortgage.

DR. LUNA vs JUDGE MIRAFUENTE


FACTS: Judge Eduardo H. Mirafuente of the Municipal Trial Court of Buenavista, Marinduque, respondent, is charged
with Grave Misconduct and Conduct Prejudicial to the Best Interest of the Service, Violation of the Rules on Summary
Procedure in Special Cases and Gross Ignorance of the Law by Dr. Jose S. Luna (Dr. Luna) arising from respondent's act
of giving due course to the belatedly filed and unverified answer of the defendants in a complaint for unlawful detainer.
Dr. Luna filed a complaint for unlawful detainer against Florencio Sadiwa and Alex Sadiwa (the defendants) with the
MTC of Buenavista, Marinduque presided by respondent. The defendants filed an unverified answer to the complaint,
seven (7) days beyond the reglementary period of ten (10) days from the service of the summons on them. Then, Dr.
Luna's counsel filed a Motion for Judgment, invoking Section 6 of the Revised Rule on Summary Procedure, to which
motion the defendants did not file any opposition. The respondent denied the motion. Dr. Luna later filed an Urgent
Manifestation relative to the said order of respondent which the latter treated as a motion for reconsideration and which
he denied. Hence, arose the present administrative complaint against respondent, Dr. Luna asserting that as the
defendants' answer was unverified and belatedly filed, respondent should have motu proprio or on motion of the
plaintiffs rendered judgment as warranted by the facts alleged in the complaint, following Section 6 of the Revised Rule
on Summary Procedure.
In his Comment, respondent explains that his admission of the defendants' unverified, belatedly filed answer was
premised on "the spirit of justice and fair play, which underlie[s] every court litigation and serves as the bedrock to
preserve the trust and faith of parties litigants in the judicial system;" that the admission was proper because the delay
was negligible, it involving only four (4) days as June 13 to 15, 2003 were non-working holidays (per presidential
proclamation in connection with the Independence Day celebration); that the defendants might have believed that the
period to file answer was 15 days, which is the usual or common period to file an answer; and that the delay was also
excusable as defendants acted pro se, without the benefit of legal assistance, and not dilatory. The respondent contends
that, assuming arguendo that he erred in denying Dr. Luna's Motion for Judgment, a judge may not be held
administratively liable for every erroneous order or decision, for to hold otherwise would render judicial office untenable
as no one called upon to try the facts or interpret the law in the process of administering the law can be infallible in his
judgment. Besides, respondent adds, there is a judicial remedy to correct the error.
For ignorance of the law, the Office of the Court Administrator, by Report and Recommendation, recommends that
respondent be faulted and ordered to pay a fine in the amount of P11,000.00, with stern warning that a repetition of the
same or similar act shall be dealt with more severely. The office of a judge exists for one solemn end to promote the
ends of justice by administering it speedily and impartially. A judge is the visible representation of the law and justice.
These are self-evident dogmas which do not even have to be emphasized, but to which this Court is wont to advert when
members of the judiciary commit legal faux pas, hopefully only through unwitting error or inattention. Delay in the
disposition of cases undermines the people's faith and confidence in the judiciary. Hence, judges are enjoined to decide
cases with dispatch. Such a requirement is especially demanded in forcible entry and unlawful detainer cases.
For forcible entry and unlawful detainer cases involve perturbation of social order, which must be restored as
promptly as possible, such that technicalities or details of procedure which may cause unnecessary delays should
carefully be avoided. That explains why the Revised Rule on Summary Procedure which governs ejectment, among other
cases, lays down procedural safeguards to guarantee expediency and speedy resolution.
ISSUE: WON
HELD: Respondent's act of admitting the belated answer violated Section 6 of the above-quoted Revised Rule on
Summary Procedure, however, which violation is classified as less serious charge 15 under Section 9 of Rule 140, as
amended by A.M. No. 01-8-10-SC 16 (Violation of Supreme Court rules, directives and circulars). Respecting
respondent's admission of the unverified answer of the defendants, while paragraph (B) of Section 3 of the Revised Rule
on Summary Procedure requires that "all pleadings shall be verified," the requirement is formal, not jurisdictional. The
court may order the correction of the pleading if the verification is lacking or act on the pleading although it is not
verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with in order that
the end of justice may thereby be served.
Respondent's act, albeit a disregard of procedural rules, does not, however, constitute grave misconduct. Neither does
it constitute gross ignorance of the law. Gross ignorance transcends a simple error in the application of legal provisions.
In the absence of fraud, dishonesty or corruption, the acts of a judge in his judicial capacity are generally not subject to
disciplinary action, even though such acts are erroneous. For liability for ignorance of the law to attach, the assailed
order, decision or actuation of the judge in the performance of official duties must not only be found to be erroneous but,
most importantly, it must be established that the issuance thereof was actuated by bad faith, dishonesty, hatred or some
other like motive. Any of such circumstances does not obtain in the instant case. That respondent granted complainant's
motion for inhibition just to erase any nagging doubts on his impartiality and fairness negates malice or any like motive
on his part.
After considering the appreciation by respondent of the fact that the defendants filed a belated and unverified answer
without the assistance of counsel, and the lack of showing of malice, corrupt motives or the like on his part, this Court
finds that, as in the above-cited Ruperto case, the penalty may be as it is hereby mitigated to severe reprimand.

BAUTISTA & ROSEL vs MAYA-MAYA COTTAGES, INC


FACTS: Spouses Rafael and Ligaya Bautista, petitioners herein, are the registered owners of a 3,856-square meter lot
located at Natipuan, Nasugbu, Batangas, On May 13, 1996, Maya-Maya Cottages, Inc. (MMCI), respondent, filed with
the Regional Trial Court (RTC) of Nasugbu, Batangas a complaint for cancellation of petitioners' title and damages, with
application for a preliminary injunction. Respondent alleged inter alia that "without any color of right and through
dubious means," petitioners were able to obtain OCT No. P-1436 in their names.
On May 29, 1996, petitioners filed a motion to dismiss the complaint on the ground that it does not state a cause of
action. They averred that respondent is a private corporation, hence, disqualified under the Constitution 2 from acquiring
public alienable lands except by lease. Respondent cannot thus be considered a real party in interest.
In its Order dated August 30, 1996, the trial court granted the motion to dismiss, holding that since the property is an
alienable public land, respondent is not qualified to acquire it except by lease. Thus, it has no cause of action.
Respondent then filed a motion for reconsideration with motion for leave to file an amended complaint for quieting of
title. Respondent alleged that the technical description in petitioners' title does not cover the disputed lot. Thereupon,
petitioners filed their opposition, contending that the amended complaint does not also state a cause of action and if
admitted, respondent's theory of the case is substantially modified. The trial court issued an Order denying petitioners'
motion to dismiss, thus, reversing its Order and the complaint.
Petitioners then filed with the Court of Appeals a special civil action for certiorari and prohibition. They alleged that the
amended complaint does not cure the defect in the original complaint which does not state a cause of action. Clearly, in
admitting respondent's amended complaint, the trial court committed grave abuse of discretion amounting to lack or
excess of jurisdiction. The CA rendered a Decision dismissing the petition for certiorari and prohibition.
Petitioners filed a motion for reconsideration but was denied by the IAC.
ISSUE: WON the Court of Appeals erred in holding that the trial court did not commit grave abuse of discretion
amounting to lack or excess of jurisdiction in admitting respondent's amended complaint.
HELD: NO. Section 2, Rule 10 of the 1997 Rules of Civil Procedure, as amended, provides:
"SEC. 2. Amendments as a matter of right. A party may amend his pleading once as a matter of right at any time
before a responsive pleading is served or, in the case of a reply, at any time within ten (10) days after it is served."
Section 2, Rule 10 of the 1997 Rules of Civil Procedure clearly shows that before the filing of any responsive pleading, a
party has the absolute right to amend his pleading, regardless of whether a new cause of action or change in theory is
introduced. It is settled that a motion to dismiss is not the responsive pleading contemplated by the Rule. Records show
that petitioners had not yet filed a responsive pleading to the original complaint. What they filed was a motion to dismiss.
It follows that respondent, as a plaintiff, may file an amended complaint even after the original complaint was ordered
dismissed, provided that the order of dismissal is not yet final, as in this case. Verily, the Court of Appeals correctly held
that in issuing the assailed Order admitting the amended complaint, the trial court did not gravely abuse its discretion.
Hence, neither certiorari nor prohibition would lie.

ALPINE LENDING INVESTORS & ONG vs CORPUZ (p. 167)


FACTS: This case stemmed from a complaint for replevin filed with the said court by Estrella Corpuz, respondent,
against Alpine Lending Investors (Alpine), one of the petitioners herein, and Zenaida Lipata. The complaint alleges that
Zenaida was respondent's former neighbor. Pretending to help respondent in securing a Garage Franchise from the Land
Transportation Office (LTO), Zenaida took from her the original registration papers of her vehicle, a Toyota Tamaraw
FX. Zenaida, using respondent's registration papers in representing herself as the owner of the vehicle, was able to
retrieve it from Richmond Auto Center where it was being repaired. Thereafter, Zenaida disappeared with the vehicle.
Respondent then reported the incident to the LTO Muntinlupa City Branch. There, she was informed that Zenaida
mortgaged her vehicle with petitioner Alpine. The LTO showed respondent the Chattel Mortgage Contract bearing her
forged signature.
Forthwith, respondent informed Alpine about the spurious mortgage and demanded the release of her vehicle. Alpine
promised to comply with her request on condition that Zenaida should first be charged criminally. Respondent then
caused the filing with the Metropolitan Trial Court of Caloocan City complaints for falsification of private document and
estafa against Zenaida. Eventually, a warrant of arrest was issued against her. Respondent informed Alpine about these
developments, but the latter still refused to turn over the vehicle to her. Instead of filing an answer to respondent's
complaint, Alpine submitted to the RTC a motion to dismiss on the ground that it is not a juridical person, hence, not a
proper party in the case. The RTC denied Alpine's motion to dismiss. Alpine then filed a motion for reconsideration, but
it was denied. The RTC then directed respondent to file her amended complaint within ten (10) days. However,
respondent filed her Amended Complaint with an accompanying Motion to Admit Amended Complaint two (2) days late.
Nonetheless, the RTC admitted the amended complaint.
Alpine filed a Motion to Expunge respondent's motion to admit amended complaint on the ground that the latter
motion was not accompanied by a notice of hearing. In her Comment on Alpine's motion to expunge, respondent averred
that her contested motion need not be accompanied by a notice of hearing as it is a "non-litigated motion." The RTC
denied Alpine's motion to expunge for lack of merit. Alpine moved for a reconsideration, but this was denied. Hence, this
petition.
ISSUE: WON the trial court erred in admitting respondent's amended complaint.
HELD: NO. Sections 1 and 2, Rule 10 of the 1997 Rules of Civil Procedure, as amended, provide: SEC. 1. Amendments
in general. Pleadings may be amended by adding or striking an allegation or the name of any party, or by correcting a
mistake in the name of a party or a mistaken or inadequate allegation or description in any other respect, so that the
actual merits of the controversy may speedily be determined, without regard to technicalities, and in the most expeditious
and inexpensive manner.
SEC. 2. Amendments as a matter of right. A party may amend his pleading once as a matter of right at any time
before a responsive pleading is served or, in the case of a reply, at any time within ten (10) days after it is served.
What petitioner Alpine filed in the civil case was a motion to dismiss, not an answer. Settled is the rule that a motion
to dismiss is not a responsive pleading for purposes of Section 2, Rule 10. As no responsive pleading had been filed,
respondent could amend her complaint as a matter of right. Following this Court's ruling in Breslin v. Luzon Stevedoring
Co., 2 considering that respondent has the right to amend her complaint, it is the correlative duty of the trial court to
accept the amended complaint; otherwise, mandamus would lie against it. In other words, the trial court's duty to admit
the amended complaint was purely ministerial. In fact, respondent should not have filed a motion to admit her amended
complaint. It has always been the policy of this Court to be liberal in allowing amendments to pleadings in order that the
real controversies between or among the parties may be presented and cases be decided on the merits without delay.

PHIL. PORTS AUTHORITY (PPA) vs WILLIAM GOTHONG & ABOITIZ (WG&A), INC
FACTS: Petitioner William Gothong & Aboitiz, Inc. (WG&A), is a duly organized domestic corporation engaged in the
shipping industry. Respondent Philippine Ports Authority (PPA), upon the other hand, is a government-owned and
controlled company created and existing by virtue of the provisions of P.D. No. 87 and mandated under its charter to
operate and administer the country's sea port and port facilities.
After the expiration of the lease contract of Veterans Shipping Corporation over the Marine Slip Way in the North
Harbor, petitioner WG&A requested respondent PPA for it to be allowed to lease and operate the said facility. Thereafter,
then President Estrada issued a memorandum addressed to the Secretary of the Department of Transportation and
Communication (DOTC) and the General Manager of PPA, stating to the effect that in a meeting, the Economic
Coordinating Council (ECC) has approved the request of petitioner WG&A to lease the Marine Slip Way from January 1
to June 30, 2001 or until such time that respondent PPA turns over its operations to the winning bidder for the North
Harbor Modernization Project. Pursuant to the said Memorandum, a Contract of Lease was prepared by respondent PPA.
The said contract was eventually conformed to and signed by the petitioner company, through its President/Chief
Executive Officer Endika Aboitiz, Jr. Thereafter, in accordance with the stipulations made in the lease agreement, PPA
surrendered possession of the Marine Slip Way in favor of the petitioner.
However, believing that the said lease already expired on June 30, 2001, respondent PPA subsequently sent a letter to
petitioner WG&A dated November 12, 2001 directing the latter to vacate the contested premises not later than November
30, 2001 and to turnover the improvements made therein pursuant to the terms and conditions agreed upon in the
contract. In response, petitioner WG&A wrote PPA urging the latter to reconsider its decision to eject the former. Said
request was denied by the PPA via a letter. Petitioner WG&A commenced an Injunction suit before the Regional Trial
Court of Manila. Petitioner claims that the PPA unjustly, illegally and prematurely terminated the lease contract. It
likewise prayed for the issuance of a temporary restraining order to arrest the evacuation. In its complaint, petitioner also
sought recovery of damages for breach of contract and attorney's fees. Then, petitioner WG&A amended its complaint
for the first time. The complaint was still denominated as one for Injunction with prayer for TRO. In the said amended
pleading, the petitioner incorporated statements to the effect that PPA is already estopped from denying that the correct
period of lease is "until such time that the North Harbor Modernization Project has been bidded out to and operations
turned over to the winning bidder. It likewise included, as its third cause of action, the additional relief in its prayer, that
should the petitioner be forced to vacate the said facility, it should be deemed as entitled to be refunded of the value of
the improvements it introduced in the leased property.
Following the first amendment in the petitioner's complaint, respondent PPA submitted its answer. Meanwhile, the
TRO sought by the former was denied by the trial court. Petitioner later moved for the reconsideration of the said Order.
Shortly thereafter, petitioner filed a Motion to Admit Attached Second Amended Complaint. This time, however, the
complaint was already captioned as one for Injunction with Prayer for Temporary Restraining Order and/or Writ of
Preliminary Injunction and damages and/or for Reformation of Contract. Also, it included as its fourth cause of action
and additional relief in its prayer, the reformation of the contract as it failed to express or embody the true intent of the
contracting parties. The admission of the second amended complaint met strong opposition from the respondent PPA. It
postulated that the reformation sought for by the petitioner constituted substantial amendment, which if granted, will
substantially alter the latter's cause of action and theory of the case. The respondent judge issued an Order denying the
Admission of the Second Amended Complaint. Petitioner filed a motion for reconsideration of the aforesaid order but the
same was again denied.
Respondent WG&A then filed a petition for certiorari with the CA seeking the nullification of the aforementioned
RTC orders. The CA granted respondent's petition, thereby setting aside the RTC orders and directing the RTC to admit
respondent's second amended complaint pursuant to Section 3, Rule 10 of the 1997 Rules of Civil Procedure. Petitioner
moved for reconsideration but the same was denied. Hence, the present petition
ISSUE: WON the CA erred in ruling that the RTC committed grave abuse of discretion when it denied the admission of
the second amended complaint.
HELD: NO. The RTC applied the old Section 3, Rule 10 of the Rules of Court: Section 3. Amendments by leave of
court. after the case is set for hearing, substantial amendments may be made only upon leave of court. But such leave
may be refused if it appears to the court that the motion was made with intent to delay the action or that the cause of
action or defense is substantially altered. Orders of the court upon the matters provided in this section shall be made
upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.
instead of the provisions of the 1997 Rules of Civil Procedure, amending Section 3, Rule 10, to wit: SECTION 3.
Amendments by leave of court. Except as provided in the next preceding section, substantial amendments may be made
only upon leave of court. But such leave may be refused if it appears to the court that the motion was made with intent to
delay. Orders of the court upon the matters provided in this section shall be made upon motion filed in court, and after
notice to the adverse party, and an opportunity to be heard.
Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former rule in such manner that
the phrase "or that the cause of action or defense is substantially altered" was stricken-off and not retained in the new
rules. The clear import of such amendment in Section 3, Rule 10 is that under the new rules, " the amendment may (now)
substantially alter the cause of action or defense." This should only be true, however, when despite a substantial change
or alteration in the cause of action or defense, the amendments sought to be made shall serve the higher interests of
substantial justice, and prevent delay and equally promote the laudable objective of the rules which is to secure a "just,
speedy and inexpensive disposition of every action and proceeding." The application of the old Rules by the RTC almost
five years after its amendment by the 1997 Rules of Civil Procedure patently constitutes grave abuse of discretion.

AZOLLA FARMS & YUSECO vs CA & SAVINGS BANK OF MANILA


FACTS: Petitioner Francis R. Yuseco, Jr., is the Chairman, President and Chief Operating Officer of petitioner Azolla
Farms International Philippines (Azolla Farms), a corporation duly organized under existing laws and engaged in the
development, exploitation, production, manufacturing, promotion, marketing, and sale of natural, organic minerals,
including its by-products, with the ultimate objective of utilizing said products for the promotion of food production. In
1982, Azolla Farms undertook to participate in the National Azolla Production Program wherein it will purchase all the
Azolla produced by the Azolla beneficiaries in the amount not exceeding the peso value of all the inputs provided to
them. The project also involves the then Ministry of Agriculture, the Kilusang Kabuhayan at Kaunlaran, and the
Kiwanis. To finance its participation, petitioners applied for a loan with Credit Manila, Inc., which the latter endorsed to
its sister company, respondent Savings Bank of Manila (Savings Bank). The Board of Directors of Azolla Farms,
meanwhile, passed a board resolution authorizing Yuseco to borrow from Savings Bank in an amount not exceeding
P2,200,000.00.
The loan having been approved, Yuseco executed a promissory note, promising to pay Savings Bank the sum of
P1,400,000.00 on or before September 13, 1983. The net proceeds of P1,225,443.31 was released to FNCB Finance, the
mortgagee of a 548-square meter lot with residential house owned by Yuseco. With the release of the proceeds, FNCB
Finance released the mortgage, and in turn, the property was mortgaged to Savings Bank as collateral for the loan.
Yuseco and Francisco Bargas also executed an assignment of their shares of stock in Azolla Farms as additional security.
Yuseco then executed two other promissory notes both for the amount of P300,000.00.
However, the Azolla Farms project collapsed. Blaming Savings Bank, petitioners Yuseco and Azolla Farms filed with
the RTC of Manila a complaint for damages. In essence, their complaint alleges that Savings Bank unjustifiably refused
to promptly release the remaining P300,000.00 which impaired the timetable of the project and inevitably affected the
viability of the project resulting in its collapse, and resulted in their failure to pay off the loan. Thus, petitioners pray for
P1,000,000.00 as actual damages, among others. Respondent Savings Bank filed its Answer denying the allegations in
the complaint. It contends that there was evidence that Yuseco was using the loan proceeds for expenses totally unrelated
to the project and they decided to withhold the remaining amount until Yuseco gave the assurance that the diversion of
the funds will be stopped. Respondent bank believed that the 90-day interval between the two tranches could not have
impaired the operation of the project, and petitioners' subsequent receipt of the proceeds confirmed their agreement to
the terms of the loan.
Trial ensued. After respondent, as defendant, rested its case, petitioners filed a Motion to Admit Amended Complaint
alleging that the testimony of defense witness Jesus Venturina raised the issue of the invalidity of the promissory notes
and the real estate mortgage. Petitioners sought the amendment of the complaint to conform to the issues and evidence
presented. Their Amended Complaint contains the following amendments: That defendant bank acts in unilaterally
reducing the agreed amount of P4,000,000.00 to P2,000,000.00 and in unreasonably delay the release of P300,000.00
novated the promissory notes and also novated the real estate mortgage executed by plaintiff Francis R. Yuseco, Jr.; and
in their prayer, petitioners seek that the promissory notes and real estate mortgage be declared novated, invalid and
unenforceable. Petitioners also amended the actual damages sought, increasing it to P5,000,000.00.
In their motion to amend complaint, petitioners allege that: During the direct examination of defendant bank's
witness Jesus Venturina, he testified and identified various documents relating to the invalid and illegal foreclosure on
plaintiff Francis R. Yuseco, Jr.'s real property subject of the real estate mortgage and marked and adopted as Exhibit N
for the plaintiffs. Moreover, he testified and identified the promissory notes, marked and adopted as Exhibits L, M and Q
for the plaintiffs evidencing the incomplete and invalid consideration of the said mortgage. As a result of the testimony
thus given and the documents adduced during said hearing, the issue of the foreclosure on said property has been raised
which, therefore, necessitates that the pleadings in this case, the complaint, be amended to conform to the issues raised
and the evidence presented. Respondent objected to petitioners' motion, but the trial court granted the motion and
admitted the Amended Complaint. The Court of Appeals, however, ruled that the trial court should not have admitted the
Amended Complaint because it altered petitioners' cause of action. Apparently, the Court of Appeals treated petitioners'
amendment of the complaint as one involving amendments after the case is set for hearing under Section 3, Rule 10 of
the Rules of Court, which is not however applicable to the present case.
ISSUE: WON the trial court erred in admitting petitioners' amended complaint.
HELD: NO. The amendment of the complaint was made pursuant to Section 5, Rule 10 of the Rules of Court, governing
amendment of pleadings to conform to evidence, to wit: SEC. 5. Amendment to conform to or authorize presentation of
evidence. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be
treated in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary
to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time,
even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected
to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be
amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the
objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his
action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such
evidence.
In Mercader vs. Development Bank of the Phils. (Cebu Branch), the Court explained that the foregoing provision
envisions two scenarios first, when evidence is introduced on an issue not alleged in the pleadings and no objection
was interjected and second, when evidence is offered on an issue not alleged in the pleadings but this time an objection
was interpolated. In cases where an objection is made, the court may nevertheless admit the evidence where the adverse
party fails to satisfy the court that the admission of the evidence would prejudice him in maintaining his defense upon the
merits, and the court may grant him a continuance to enable him to meet the new situation created by the evidence. As
can be gleaned from the records, it was petitioners' belief that respondent's evidence justified the amendment of their
complaint. The trial court agreed thereto and admitted the amended complaint. On this score, it should be noted that
courts are given the discretion to allow amendments of pleadings to conform to the evidence presented during the trial.
Verily, the trial court cannot be faulted for admitting the amended complaint as it had the discretion to do so.
However, whether the evidence introduced by respondent, indeed, supported the finding that the promissory notes,
the real estate mortgage and the foreclosure sale, are invalid, is a different matter altogether. As alleged by petitioners,
the testimony of respondent's witness, Jesus Venturina, established the novation of the promissory notes and the real
estate mortgage, and the illegality of the foreclosure of petitioner Yuseco's property. The trial court agreed with
petitioners, ruling that there was a novation of the promissory notes and real estate mortgage, which rendered them
unenforceable. The Court of Appeals disagreed with the trial court and held that there was no novation, hence, the
promissory notes and the real estate mortgage are valid and binding. We agree with the appellate court.

SWAGMAN HOTELS AND TRAVEL, INC vs CA & CHRISTIAN


FACTS: Petitioner Swagman Hotels and Travel, Inc., through Atty. Leonor L. Infante and Rodney David Hegerty, its
president and vice-president, respectively, obtained from private respondent Neal B. Christian loans evidenced by three
promissory notes. Each of the promissory notes is in the amount of US$50,000 payable after three years from its date
with an interest of 15% per annum payable every three months. In a letter, Christian informed the petitioner corporation
that he was terminating the loans and demanded from the latter payment in the total amount of US$150,000 plus unpaid
interests in the total amount of US$13,500. Private respondent Christian filed with the RTC of Baguio City, a complaint
for a sum of money and damages against the petitioner corporation, Hegerty, and Atty. Infante. The complaint alleged as
follows: the petitioner, as well as its president and vice-president obtained loans from him in the total amount of
US$150,000 payable after three years, with an interest of 15% per annum payable quarterly or every three months. For a
while, they paid an interest of 15% per annum every three months in accordance with the three promissory notes.
However, starting January 1998 until December 1998, they paid him only an interest of 6% per annum, instead of 15%
per annum, in violation of the terms of the three promissory notes. Thus, Christian prayed that the trial court order them
to pay him jointly and solidarily the amount of US$150,000 representing the total amount of the loans; US$13,500
representing unpaid interests from January 1998 until December 1998; P100,000 for moral damages; P50,000 for
attorney's fees; and the cost of the suit.
The petitioner corporation, together with its president and vice-president, filed an Answer raising as defenses lack of
cause of action and novation of the principal obligations. According to them, Christian had no cause of action because
the three promissory notes were not yet due and demandable. Since the petitioner corporation was experiencing huge
losses due to the Asian financial crisis, Christian agreed (a) to waive the interest of 15% per annum, and (b) accept
payments of the principal loans in installment basis, the amount and period of which would depend on the state of
business of the petitioner corporation. Thus, the petitioner paid Christian capital repayment in the amount of US$750 per
month from January 1998 until the time the complaint was filed in February 1999. The petitioner and its co-defendants
then prayed that the complaint be dismissed and that Christian be ordered to pay P1 million as moral damages; P500,000
as exemplary damages; and P100,000 as attorney's fees.
The trial court rendered a decision declaring the first two promissory notes dated 7 August 1996 and 14 March 1997
as already due and demandable and that the interest on the loans had been reduced by the parties from 15% to 6% per
annum. It then ordered the petitioner corporation to pay Christian the amount of $100,000 representing the principal
obligation covered by the first two promissory notes, "plus interest of 6% per month thereon until fully paid, with all
interest payments already paid by the defendant to the plaintiff to be deducted therefrom. When the instant case was filed
on February 2, 1999, none of the promissory notes was due and demandable. As of this date however, the first and the
second promissory notes have already matured. Hence, payment is already due. Under Section 5 of Rule 10 of the 1997
Rules of Civil Procedure, a complaint which states no cause of action may be cured by evidence presented without
objection. Thus, even if the plaintiff had no cause of action at the time he filed the instant complaint, as defendants'
obligation are not yet due and demandable then, he may nevertheless recover on the first two promissory notes in view of
the introduction of evidence showing that the obligations covered by the two promissory notes are now due and
demandable. On appeal, the CA denied petitioner's appeal and affirmed in toto the decision of the trial court. It ruled that
in the case at bench, while it is true that appellant Swagman raised in its Answer the issue of prematurity in the filing of
the complaint, appellant Swagman nonetheless failed to object to appellee Christian's presentation of evidence to the
effect that the promissory notes have become due and demandable. The afore-quoted rule allows a complaint which
states no cause of action to be cured either by evidence presented without objection or, in the event of an objection
sustained by the court, by an amendment of the complaint with leave of court. MR was denied.
ISSUE: WON a complaint that lacks a cause of action at the time it was filed be cured by the accrual of a cause of action
during the pendency of the case.
HELD:
Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil Procedure, is the act or omission by which
a party violates the right of another. Its essential elements are as follows: 1. A right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; 2. An obligation on the part of the named defendant to respect or
not to violate such right; and 3. Act or omission on the part of such defendant in violation of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for
recovery of damages or other appropriate relief. It is, thus, only upon the occurrence of the last element that a cause of
action arises, giving the plaintiff the right to maintain an action in court for recovery of damages or other appropriate
relief.
When the complaint for a sum of money and damages was filed with the trial court on 2 February 1999, no cause of
action has as yet existed because the petitioner had not committed any act in violation of the terms of the three
promissory notes as modified by the renegotiation in December 1997. Without a cause of action, the private respondent
had no right to maintain an action in court, and the trial court should have therefore dismissed his complaint. Despite its
finding that the petitioner corporation did not violate the modified terms of the three promissory notes and that the
payment of the principal loans were not yet due when the complaint was filed, the trial court did not dismiss the
complaint, citing Section 5, Rule 10 of the 1997 Rules of Civil Procedure.
According to the trial court, and sustained by the Court of Appeals, this Section allows a complaint that does not state
a cause of action to be cured by evidence presented without objection during the trial. Thus, it ruled that even if the
private respondent had no cause of action when he filed the complaint for a sum of money and damages because none of
the three promissory notes was due yet, he could nevertheless recover on the first two promissory notes, which became
due during the pendency of the case in view of the introduction of evidence of their maturity during the trial. Such
interpretation of Section 5, Rule 10 of the 1997 Rules of Civil Procedure is erroneous.
Amendments of pleadings are allowed under Rule 10 of the 1997 Rules of Civil Procedure in order that the actual
merits of a case may be determined in the most expeditious and inexpensive manner without regard to technicalities, and
that all other matters included in the case may be determined in a single proceeding, thereby avoiding multiplicity of
suits. 12 Section 5 thereof applies to situations wherein evidence not within the issues raised in the pleadings is presented
by the parties during the trial, and to conform to such evidence the pleadings are subsequently amended on motion of a
party. Thus, a complaint which fails to state a cause of action may be cured by evidence presented during the trial.
However, the curing effect under Section 5 is applicable only if a cause of action in fact exists at the time the complaint
is filed, but the complaint is defective for failure to allege the essential facts. For example, if a complaint failed to allege
the fulfillment of a condition precedent upon which the cause of action depends, evidence showing that such condition
had already been fulfilled when the complaint was filed may be presented during the trial, and the complaint may
accordingly be amended thereafter.
It thus follows that a complaint whose cause of action has not yet accrued cannot be cured or remedied by an
amended or supplemental pleading alleging the existence or accrual of a cause of action while the case is pending. Such
an action is prematurely brought and is, therefore, a groundless suit, which should be dismissed by the court upon proper
motion seasonably filed by the defendant. The underlying reason for this rule is that a person should not be summoned
before the public tribunals to answer for complaints which are immature. that unless the plaintiff has a valid and
subsisting cause of action at the time his action is commenced, the defect cannot be cured or remedied by the acquisition
or accrual of one while the action is pending, and a supplemental complaint or an amendment setting up such after-
accrued cause of action is not permissible. Hence, contrary to the holding of the trial court and the Court of Appeals, the
defect of lack of cause of action at the commencement of this suit cannot be cured by the accrual of a cause of action
during the pendency of this case arising from the alleged maturity of two of the promissory notes.

YOUNG vs SPS. SY
FACTS: There are two cases that are consolidated. Both petitions originated from a Complaint for Nullification of
Second Supplemental Extra-judicial Settlement, Mortgage, Foreclosure Sale and Tax Declaration filed by the petitioner
with the RTC. Genalyn D. Young (petitioner), in her Complaint, alleged that the extra-judicial partition executed by her
natural mother, Lilia Dy Young which adjudicated an unregistered parcel of land solely in favor of the latter, is
unenforceable, since at the time of the execution, she (petitioner) was only 15 years old and no court approval had been
procured; that the partition had been registered with the Register of Deeds; that Lilia Dy obtained a loan from spouses
Manuel Sy and Victoria Sy (respondents) and mortgaged the subject property; that the property was foreclosed and sold
to the highest bidder, respondent Manuel Sy; that a Certificate of Sale for this purpose had been registered with the
Register of Deeds; and that, thereafter, respondents obtained in their name a tax declaration over the property in question.
The petitioner filed with the RTC a Motion to Admit Supplemental Complaint, attaching the Supplemental Complaint
wherein petitioner invoked her right, as co-owner, to exercise the legal redemption. The RTC denied the Motion.
Petitioner filed a Petition for Certiorari and Mandamus under Rule 65 of the Rules of Court. The CA promulgated its
Decision denying the Petition for Certiorari and Mandamus and held that the cause of action of the petitioner in the
Supplemental Complaint is entirely different from the original complaint; that the Supplemental Complaint did not
merely supply its deficiencies; and that, at any rate, in the event the trial court issues an adverse ruling, the petitioner can
still appeal the same, hence, the petition under Rule 65 is not proper.
While the Petition for Certiorari and Mandamus (re: Supplemental Complaint) was pending in the CA, trial in the
RTC continued. On the day before the hearing slated for, the petitioner filed a Motion to Cancel Hearing, alleging that
she was indisposed. On the day of the hearing, respondents, through counsel, objected to the postponement and moved
for the dismissal of the case for non-suit. The RTC sustained the objection and dismissed the complaint. The RTC denied
the petitioner's Motion for Reconsideration. Then, the RTC issued an Order correcting the first Order due to a
typographical error. The petitioner filed a Notice of Appeal questioning the foregoing RTC Orders. The CA rendered a
Decision in favor of the petitioner, reversing and setting aside the RTC Orders. The respondents filed their Motion for
Reconsideration, and based on the records before the Court, this case is still pending in the CA. On top of the foregoing
appeal, the petitioner, four months after filing her Notice of Appeal to the CA, filed with the CA a Petition for Certiorari
under Rule 65 to annul the same RTC Orders that comprise the subject matter of the ordinary appeal. The CA denied the
Petition for Certiorari and held that the dismissal of the case by the RTC on the ground of non prosequitur has the effect
of an adjudication upon the merits; that an order of dismissal, whether right or wrong, is a final order that may constitute
an error of judgment correctible by ordinary appeal and not by certiorari; that the petitioner actually chose the mode of
ordinary appeal by filing a Notice of Appeal; and that since the remedy of appeal was available, then the petition for
certiorari, being an extraordinary remedy, must fail.
ISSUE: WON the denial of the Motion to Admit Supplemental Complaint is proper.
HELD:
The courts a quo held that the Supplemental Complaint constituted a substantial amendment of the original
complaint; that the relief prayed for in the former is inconsistent with the latter; and that the causes of action of both are
likewise different. This is incorrect. Section 6, Rule 10 of the Revised Rules of Court provides: SECTION 6.
Supplemental Pleadings. Upon motion of a party the court may, upon reasonable notice and upon such terms as are
just, permit him to serve a supplemental pleading setting forth transactions, occurrences or events which have happened
since the date of the pleading sought to be supplemented. The adverse party may plead thereto within ten (10) days from
notice of the order admitting the supplemental pleading.
As its very name denotes, a supplemental pleading only serves to bolster or add something to the primary pleading. A
supplement exists side by side with the original. It does not replace that which it supplements. Moreover, a supplemental
pleading assumes that the original pleading is to stand and that the issues joined with the original pleading remained an
issue to be tried in the action. It is but a continuation of the complaint. Its usual office is to set up new facts which justify,
enlarge or change the kind of relief with respect to the same subject matter as the controversy referred to in the original
complaint. The purpose of the supplemental pleading is to bring into the records new facts which will enlarge or change
the kind of relief to which the plaintiff is entitled; hence, any supplemental facts which further develop the original right
of action, or extend to vary the relief, are available by way of supplemental complaint even though they themselves
constitute a right of action.
In this case, the consolidation of title over the subject property in the name of respondent Manuel Sy and the issue as
to whether it precluded petitioner as alleged co-owner from exercising the right of legal redemption, are new matters that
occurred after the filing of the original complaint. The relief prayed for in the Supplemental Complaint, which is the
exercise of the right of legal redemption accorded to co-owners of property, is germane to and intertwined with the cause
of action in the Complaint for the nullification of the "Second Supplemental to the Extrajudicial Partition" on the ground
that it lacked the approval of a guardianship court. The petitioner's right to redeem the property is dependent on the
nullification of the partition which is the subject of the original complaint. Unless the partition is nullified or declared
without any force or effect, the petitioner will not be considered a co-owner of the property and, consequently, she will
be unable to exercise any right of legal redemption under Article 1620 of the Civil Code granted to co-owners of
property. The right of legal redemption as co-owner is conferred by law and is merely a natural consequence of co-
ownership. Hence, the petitioner's cause of action for legal redemption as embodied in her Supplemental Complaint
stems directly from and is an extension of her rights as co-owner of the property subject of the Complaint.
Furthermore, the evidence required to prove petitioner's right of legal redemption in the Supplemental Complaint will
be exactly the same evidence required to prove the nullification of the partition in the Complaint. If a separate action is
filed for the subject covered by the Supplemental Complaint, there will be multiplicity of suits. Should a separate
complaint be filed before the nullification of the partition, the same would be dismissed for being premature pending the
resolution of the Complaint for nullification. After all, the respondents have the right to file a supplemental answer to the
Supplemental Complaint, conformably with Section 7, Rule 11 of the Rules of Court which reads:
SEC. 7. Answer to supplemental complaint. A supplemental complaint may be answered within ten (10) days from
notice of the order admitting the same, unless a different period is fixed by the court. The answer to the complaint shall
serve as the answer to the supplemental complaint if no new or supplemental answer is filed.
In affirming the RTC's denial of the admission of the Supplemental Complaint, the CA rationalized that "[i]n the
event that the lower court rules in favor of petitioner, then there is no need for her to file a petition to exercise the right of
redemption. On the other hand, should the trial court issue[ ] an adverse ruling then petitioner can still appeal the same.
The petition for certiorari is therefore not proper." This is not proper. As the petitioner correctly pointed out, even if the
trial court decides in her favor, the redemption period would have lapsed and would not form a part of the decision since
it was not prayed for, much less alleged in the original complaint. In such a case, the respondents could oppose the
exercise of the right to redeem since it would not have been included in the decision over the original complaint. And
should the trial court issue an adverse ruling, the petitioner can only appeal what is included in the ruling which is
limited to the denial of the prayer for the nullification of the partition. Naturally, such a decision would not concern any
right of redemption.

VIRATA vs SANDIGANBAYAN
FACTS: Petitioner is among the forty-four (44) co-defendants of Benjamin (Kokoy) Romualdez in a complaint filed by
the Republic of the Philippines with the respondent Sandiganbayan. The complaint was amended thrice, the last
amendment thereto is denominated as the Second Amended Complaint, as expanded per the Court-Approved
Manifestation/Motion. Petitioner moved to dismiss the said case, insofar as he is concerned, on various grounds
including the failure of the expanded Second Amended Complaint to state a cause of action. The motion was denied and
so was his bid to have such denial reconsidered. He then came to this Court via a special civil action for certiorari
imputing upon the respondent Sandiganbayan the commission of grave abuse 'of discretion in, inter alia, finding that the
complaint sufficiently states a cause of action against him. We overruled the said contention and upheld the ruling of the
Sandiganbayan. However, We stated: "No doubt is left in Our minds that the questioned expanded Second Amended
Complaint is crafted to conform to a well-planned outline that forthwith focuses one's attention to the asserted right of
the State, expressly recognized and affirmed by the 1987 Constitution (Section 15, Art XI), and its corresponding duty,
(Bataan Shipyard & Engineering Co., Inc. vs. PCGG, 150 SCRA 181, 207) to recover ill-gotten wealth from the
defendants named therein; the alleged schemes and devises used and the manipulations made by them to amass such ill-
gotten wealth, which are averred first generally and then specifically; and the extent of the reliefs demanded and prayed
for. However, as shown above, the maze of unnecessary literary embellishments may indeed raise some doubts on the
sufficiency of the statement of material operative facts to flesh out the causes of action. Be that as it may, We are,
nevertheless, convinced that the questioned pleading has sufficiently shown viable causes of action.
If petitioners perceive some ambiguity or vagueness therein, the remedy is not a motion to dismiss. An action should
not be dismissed upon a mere ambiguity, indefiniteness or uncertainty, for these are not grounds for a motion to dismiss,
but rather for a bill of particulars. Petitioner was thus compelled to go back to the Sandiganbayan. However, insisting
that he "could not prepare an intelligent and adequate pleading in view of the general and sweeping allegations against
him in the Second Amended Complaint as expanded," while at the same time remaining "steadfast in his position
maintaining his posture of innocence," petitioner filed a Motion For a Bill of Particulars. He alleges therein that on the
basis of the general and sweeping allegations in the Second Amended Complaint. The plaintiff, Republic of the
Philippines, asserts four (4) alleged "actionable wrongs" against the herein petitioner.
Petitioner claims, however, that insofar as he is concerned, the "foregoing allegations and the purported illegal acts
imputed to them as well as the alleged causes of actions are vague and ambiguous. They are not averred with sufficient
definiteness or particularity as would enable defendant Virata to properly prepare his answer or responsive pleading." He
therefore prays that "in accordance with Rule 12 of the Rules of Court, plaintiff be directed to submit a more definite
statement or a bill of particulars on the matters mentioned above which are not averred with sufficient definiteness or
particularity." In its Comment, the plaintiff Republic of the Philippines opposed the motion. The respondent
Sandiganbayan (Second Division) partially granted the Motion for a Bill of Particulars. We are of the considered opinion
that the foregoing charges in the Expanded Complaint are clear, definite and specific enough to allow defendant-movant
to prepare an intelligent responsive pleading or to prepare for trial. In short, of the four (4) actionable wrongs enumerated
in the Motion for a Bill of Particulars, the Sandiganbayan favorably acted only with respect to the fourth. Not satisfied
with the partial grant of the motion, petitioner filed the instant petition under Rule 65 of the Revised Rules of Court
contending that the Sandiganbayan acted with grave abuse of its discretion amounting to lack or excess of jurisdiction in
not totally granting his Motion for a Bill of Particulars.
ISSUE: WON the Sandiganbayan acted with grave abuse of its discretion amounting to lack or excess of jurisdiction in
not totally granting his Motion for a Bill of Particulars.
HELD: YES. As this Court enunciated in Tan vs. Sandiganbayan: "It is the office or function, as well as the object or
purpose, of a bill of particulars to amplify or limit a pleading, specify more minutely and particularly a claim or defense
set up and pleaded in general terms, give information, not contained in the pleading, to the opposite party and the court
as to the precise nature, character, scope, and extent of the cause of action or defense relied on by the pleader, and
apprise the opposite party of the case which he has to meet, to the end that the proof at the trial may be limited to the
matters specified, and in order that surprise at, and needless preparation for, the trial may be avoided, and that the
opposite party may be aided in framing his answering pleading and preparing for trial. It has also been stated that it is the
function or purpose of a bill of particulars to define, clarify, particularize, and limit or circumscribe the issues in the case,
to expedite the trial, and assist the court. A general function or purpose of a bill of particulars is to prevent injustice or do
justice in the case when that cannot be accomplished without the aid of such a bill. It is not the office of a bill of
particulars to supply material allegations necessary to the validity of a pleading, or to change a cause of action or defense
stated in the pleading, or to state a cause of action or defense other than the one stated. Also it is not the office or
function, or a proper object, of a bill of particulars to set forth the pleader's theory of his cause of action or a rule of
evidence on which he intends to rely, or to furnish evidential information whether such information consists of evidence
which the pleader proposes to introduce or of facts which constitute a defense or offset for the other party or which will
enable the opposite party to establish an affirmative defense not yet pleaded." The phrase "to enable him properly to
prepare his responsive pleading . . ." in Section 1 of Rule 12 implies not just the opportunity to properly prepare a
responsive pleading but also, and more importantly, to prepare an intelligent answer. Thus, in Tan vs. Sandiganbayan,
this Court also said: The complaint for which a bill for a more definite statement is sought, need only inform the
defendant of the essential (or ultimate) facts to enable him, the defendant to prepare an intelligent answer . . . ." The
proper preparation of an intelligent answer requires information as to the precise nature, character, scope and extent of
the cause of action in order that the pleader may be able to squarely meet the issues raised, thereby circumscribing them
within determined confines and, preventing surprises during the trial, and in order that he may set forth his defenses
which may not be so readily availed of if the allegations controverted are vague, indefinite, uncertain or are mere general
conclusions. The latter task assumes added significance because defenses not pleaded (save those excepted in Section 2,
Rule 9 of the Revised Rules of Court and, whenever appropriate, the defense of prescription) 27 in a motion to dismiss or
in the answer are deemed waived.
We have carefully, scrutinized the paragraphs of the expanded Second Amended Complaint subject of the
petitioner's motion for a bill of particulars and find the same to be couched in general terms and wanting in definiteness
or particularity. It is precisely for this reason that We indirectly suggested in the said decision that the petitioner's remedy
is to file a motion for a bill of particulars and not a motion to dismiss. Thus, the basis of the distinction made by the
respondent Sandiganbayan between the allegations in support of the first three (3) "actionable wrongs" and those in
support of the fourth is as imperceptible as it is insignificant in the light of its admission that the ruling in Tantuico
possesses "a semblance of relevance to the factual setting of the instant incident." As We see it, there exists not only a
semblance but a striking similarity in the crafting of the allegations between the causes of action against Tantuico and
those against the petitioner. And, as already stated, such allegations are general and suffer from a lack of definiteness and
particularity. As a matter of fact, paragraphs 2, 7, 9 and 17 four of the five paragraphs of the complaint in Civil Case
No. 0035 which was resolved in Tantuico are likewise involved in the instant case. Tantuico's applicability to the
instant case is thus ineluctable and the propriety of the motion for a bill of particulars under Section 1, Rule 12 of the
Revised Rules of Court is beyond dispute. We also find the Sandiganbayan's conclusion that "the matters which
defendant-movant seeks are evidentiary in nature and, being within his intimate or personal knowledge, may be denied
of admitted by him or if deemed necessary, be the subject of other forms of discovery," to be without basis as to the first
aspect and gratuitous as to the second. The above disquisition's indubitably reveal that the matters sought to be averred
with particularity are not evidentiary in nature. Since the issues have not as yet been joined and no evidence has so far
been adduced by the parties the Sandiganbayan was in no position to conclude that the matters which the. petitioner
seeks are "within his intimate or personal knowledge."

SAW vs CA
FACTS: A collection suit with preliminary attachment was filed by Equitable Banking Corporation against Freeman, Inc.
and Saw Chiao Lian, its President and General Manager. The petitioners moved to intervene, alleging that (1) the loan
transactions between Saw Chiao Lian and Equitable Banking Corp. were not approved by the stockholders representing
at least 2/3 of corporate capital; (2) Saw Chiao Lian had no authority to contract such loans; and (3) there was collusion
between the officials of Freeman, Inc. and Equitable Banking Corp. in securing the loans. The motion to intervene was
denied, and the petitioners appealed to the Court of Appeals.
Meanwhile, Equitable and Saw Chiao Lian entered into a compromise agreement which they submitted to and was
approved by the lower court. But because it was not complied with, Equitable secured a writ of execution, and two lots
owned by Freeman, Inc. were levied upon and sold at public auction to Freeman Management and Development Corp.
The Court of Appeals sustained the denial of the petitioners' motion for intervention, holding that "the compromise
agreement between Freeman, Inc., through its President, and Equitable Banking Corp. will not necessarily prejudice
petitioners whose rights to corporate assets are at most inchoate, prior to the dissolution of Freeman, Inc.And
intervention under Sec. 2, Rule 12 of the Revised Rules of Court is proper only when one's right is actual, material, direct
and immediate and not simply contingent or expectant." It also ruled against the petitioners' argument that because they
had already filed a notice of appeal, the trial judge had lost jurisdiction over the case and could no longer issue the writ
of execution.
ISSUE: WON the CA erred in holding that the petitioners cannot intervene because their rights as stockholders of
Freeman are merely inchoate and not actual, material, direct and immediate prior to the dissolution of the corporation.
HELD: NO. To allow intervention, [a] it must be shown that the movant has legal interest in the matter in litigation, or
otherwise qualified; and [b] consideration must be given as to whether the adjudication of the rights of the original
parties may be delayed or prejudiced, or whether the intervenor's rights may be protected in a separate proceeding or not.
Both requirements must concur as the first is not more important than the second. The interest which entitles a person to
intervene in a suit between other parties must be in the matter in litigation and of such direct and immediate character
that the intervenor will either gain or lose by the direct legal operation and effect of the judgment. Otherwise, if persons
not parties of the action could be allowed to intervene, proceedings will become unnecessarily complicated, expensive
and interminable. And this is not the policy of the law.
The words "an interest in the subject" mean a direct interest in the cause of action as pleaded, and which would put the
intervenor in a legal position to litigate a fact alleged in the complaint, without the establishment of which plaintiff could
not recover. Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural,
consequential and collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the
management of the corporation and to share in the profits thereof and in the properties and assets thereof on dissolution,
after payment of the corporate debts and obligations. While a share of stock represents a proportionate or aliquot interest
in the property of the corporation, it does not vest the owner thereof with any legal right or title to any of the property, his
interest in the corporate property being equitable or beneficial in nature. Shareholders are in no legal sense the owners of
corporate property, which is owned by the corporation as a distinct legal person.
On the second assignment of error, the respondent court correctly noted that the notice of appeal was filed by the
petitioners in 1988, upon the denial of their motion to intervene, and the writ of execution was issued by the lower court
in 1989. The petitioners' appeal could not have concerned the "whole" case (referring to the decision) because the
petitioners "did not appeal the decision as indeed they cannot because they are not parties to the case despite their being
stockholders of respondent Freeman, Inc." They could only appeal the denial of their motion for intervention as they
were never recognized by the trial court as party litigants in the main case. Intervention is "an act or proceeding by which
a third person is permitted to become a party to an action or proceeding between other persons, and which results merely
in the addition of a new party or parties to an original action, for the purpose of hearing and determining at the same time
all conflicting claims which may be made to the subject matter in litigation.
It is not an independent proceeding, but an ancillary and supplemental one which, in the nature of things, unless
otherwise provided for by the statute or Rules of Court, must be in subordination to the main proceeding.5 It may be laid
down as a general rule that an intervenor is limited to the field of litigation open to the original parties. In the case at bar,
there is no more principal action to be resolved as a writ of execution had already been issued by the lower court and the
claim of Equitable had already been satisfied. The decision of the lower court had already become final and in fact had
already been enforced. There is therefore no more principal proceeding in which the petitioners may intervene. The
Court observes that even with the denial of the petitioners' motion to intervene, nothing is really lost to them.1wphi1
The denial did not necessarily prejudice them as their rights are being litigated in the case now before the Securities and
Exchange Commission and may be fully asserted and protected in that separate proceeding.
ABERCA vs VER
FACTS: Several suspected subversives who were arrested and detained by the military filed a complaint for damages
with the RTC of Quezon City against Gen. Fabian Ver, then AFP Chief of Staff, and other subordinate officers. In their
complaint, the plaintiff-appellees alleged that they were arrested and detained by Task Force Makabansa, a composite
group of various intelligence units of the AFP, on the strength of defective search warrants; that while under detention
and investigation, they were subjected to physical and psychological harm, torture and other brutalities to extort from
them confessions and other information that would incriminate them; and that by reason thereof, they suffered actual and
moral damages. Defendants-appellants, through their counsel, the then Solicitor General Estelito Mendoza, filed a
motion to dismiss on the following grounds: (1) since the privilege of the writ of habeas corpus was then suspended, the
trial court cannot inquire into the circumstances surrounding plaintiffs-appellees arrests; (2) the defendants-appellants are
immune from liability for the reason that they were then performing their official duties; and (3) the complaint states no
cause of action.
The trial court granted defendants-appellants motion to dismiss and ordered the case dismissed. Plaintiffs-appellees
filed a motion to reconsider and set aside the order of dismissal. However, the trial court declared the order final.
Plaintiffs-appellees again filed a motion for reconsideration of the order but the trial court denied the motion for
reconsideration. Plaintiffs-appellees went to the Supreme Court on a petition for review on certiorari, seeking to annul
and set aside the orders of the trial court. While the case was pending in the Supreme Court, the so-called EDSA
revolution took place. As a result, the defendants-appellants lost their official positions and were no longer in their
respective office addresses as appearing in the record. Also, in the meantime, the case was re-raffled to Branch 107. The
Supreme Court rendered a decision annulling and setting aside the assailed orders and remanded the case to the trial
court for further proceedings. However, trial could not proceed immediately because the record of the case was destroyed
when fire razed the City Hall of Quezon City. It was only when plaintiffs-appellees sought a reconstitution of the record
of the case. The record shows that the petition for reconstitution was set for hearing. However, there is nothing in the
record to show that defendants-appellants or their counsel were notified. For lack of an opposition, the petition for
reconstitution was granted.
Plaintiffs-appellees filed a motion praying that defendants-appellants be required to file their answer. However, the
record as reconstituted did not show who are the lawyers of the defendants-appellants considering that Estelito Mendoza,
who had represented them in his capacity as Solicitor General, was no longer holding that position. Furthermore,
defendants-appellants were also no longer occupying the positions they held at the time the complaint was filed. Thus,
plaintiffs-appellees were directed to report to the trial court the addresses and whereabouts of defendants-appellants so
that they could be properly notified. Instead of complying with the order, plaintiffs-appellees filed a motion to declare
defendants-appellants in default. The trial court deferred resolution of this motion and instead, it issued an order
directing that a copy of the order be furnished to new Solicitor General Francisco Chavez to enable him to take action
pursuant to Section 18, Rule 3 of the Rules of Court, and to former Solicitor General Estelito Mendoza to enable him to
give notice as to whether he [would] continue to represent the defendants-appellants in his private capacity. As it said in
its order, the trial court took this action in view of the change in government and corresponding change in the addresses
and circumstances of the defendants-appellants who may not even be aware of the decision of the Supreme Court in case
G.R. No. L-69866 and of the reconstitution of records in this case
Former Solicitor General Mendoza filed a manifestation informing the trial court that his appearance as defendants-
appellants counsel terminated when he ceased to be Solicitor General and that he was not representing them in his
private capacity. On his part, Solicitor General Chavez finally filed a notice of withdrawal of appearance, citing Urbano
v. Go, where the Supreme Court said that the Office of the Solicitor General (OSG) is not authorized to represent a
public official at any stage of a criminal case or in a civil suit for damages arising from a felony. The record does not
show that defendants-appellants were furnished a copy of this notice of withdrawal or that they gave their conformity
thereto. The trial court denied plaintiffs-appellees motion to declare defendants-appellants in default, emphatically
pointing out that defendants-appellants were not duly notified of the decision of the Supreme Court. In the same order,
the trial court directed plaintiffs-appellees to comply with the order of August 17, 1990 within ten (10) days from notice,
with a warning that the case [would] be archived and eventually dismissed if plaintiffs-appellees failed to furnish to the
court the addresses of defendants-appellants. Plaintiffs-appellees moved to reconsider the order dated December 27,
1990 but in an order dated February 1, 1991, the trial court denied the motion, stating that without actual notice of the
judgment of the Supreme Court xxx the defendants-appellants herein would not be aware that they should file a
responsive pleading and that, therefore, to consider the defendants-appellants in default would be tantamount to lack of
due process xxx.
For failure of the plaintiffs-appellees to comply with the orders, the trial court dismissed the case without prejudice in
its order dated March 7, 1991. Subsequently, however, in an order, the trial court set aside the order of dismissal and
reinstated the case. It also approved plaintiffs-appellees request to serve the notice to file answer or responsive pleading
by publication. plaintiffs-appellees informed the trial court that the following notice was published in the Tagalog
newspaper BALITA. No answer was filed by defendants-appellants within the period stated in the notice. On motion of
plaintiffs-appellees, the trial court in its order declared defendants-appellants in default and directed plaintiffs-appellees
to present their evidence ex-parte. the RTC handed down a decision in favor of the petitioners.
Respondents Col. Fidel Singson (Col. Singson), Lt. Col. Panfilo M. Lacson (Lt. Col. Lacson), and Col. Rolando
Abadilla (Col. Abadilla) filed their Omnibus Motion praying as follows: 1) that the order of default dated December 5,
1991 be reversed and set aside; 2) that the decision be reversed and set aside; 3) that the entire proceedings be declared
null and void; and 4) that they be given fifteen (15) days from notice to file answer to the complaint and present their
evidence. Col. Gerardo B. Lantoria (Col. Lantoria) filed his own Motion for Reconsideration. On his part, respondent
Maj. Rodolfo Aguinaldo (Maj. Aguinaldo) failed to file a timely notice of appeal so he filed a Petition for Relief from
Judgment praying that the RTC set aside its decision and proceed to try the case based on the following grounds: 1) the
decision was rendered without the benefit of notice in gross violation of his right to due process; 2) the reconstitution of
the records of the case and further proceedings taken thereon were effected through fraud; and 3) his failure to move for
a new trial or to appeal was due to mistake or excusable negligence. RTC denied their motions. The respondents elevated
their case to the CA. the CA rendered a decision reversing and setting aside the RTC decision and ordering the case
remanded to the RTC for further proceedings.
The CA ruled, among others, that the RTC committed four (4) errors in declaring the respondents in default and
proceeding to hear the case. The RTC committed its first error when it abandoned the proper modes of service of notices,
orders, resolutions or judgments as the petitioners failed to comply with its order dated August 17, 1990, directing them
to report the addresses and whereabouts of the respondents so that they could be properly notified. The second error was
the failure of the RTC to avail of substituted service after failing to effect personal service or service by mail. It
perpetrated its third error when it authorized service by publication after dismissing the case for failure of the petitioners
to furnish the current addresses of the respondents. The CA reasoned out that there was nothing in the rules which would
authorize publication of a notice of hearing to file answer and for what was authorized to be published were summons
and final orders and judgments. The fourth error was committed when the respondents were declared in default because
they were not duly notified and, therefore, were denied due process. The CA stated that since the RTC failed to notify the
respondents of the proceedings undertaken, the latter were denied the chance to actively participate therein.
ISSUE: WON the constitutional right to procedural due process was properly observed or was unacceptably violated in
this case when the respondents were declared in default for failing to file their answer within the prescribed period and
when the petitioners were allowed to present their evidence ex-parte.
HELD:
The above rules, thus, prescribe the modes of service of pleadings, motions, notices, orders, judgments, and other
papers, namely: (1) personal service; (2) service by mail; and (3) substituted service, in case service cannot be effected
either personally or by mail. The Rules of Court has been laid down to insure the orderly conduct of litigation and to
protect the substantive rights of all party litigants. It is for this reason that the basic rules on the modes of service
provided under Rule 13 of the Rules of Court have been made mandatory and, hence, should be strictly followed. Section
11, Rule 13 of the Rules of Court states: SEC. 11. Priorities in modes of service and filing. Whenever practicable, the
service and filing of pleadings and other papers shall be done personally. Except with respect to papers emanating from
the court, a resort to other modes must be accompanied by a written explanation why the service or filing was not done
personally. A violation of this Rule may be cause to consider the paper as not filed. Section 11 is mandatory.
Pursuant to Section 11 of Rule 13, service and filing of pleadings and other papers must, whenever practicable, be
done personally; and if made through other modes, the party concerned must provide a written explanation as to why the
service or filing was not done personally. If only to underscore the mandatory nature of this innovation to our set of
adjective rules requiring personal service whenever practicable, Section 11 of Rule 13 then gives the court the discretion
to consider a pleading or paper as not filed if the other modes of service or filing were resorted to and no written
explanation was made as to why personal service was not done in the first place. The exercise of discretion must,
necessarily, consider the practicability of personal service, for Section 11 itself begins with the clause "whenever
practicable." We thus take this opportunity to clarify that under Section 11, Rule 13 of the 1997 Rules of Civil Procedure,
personal service and filing is the general rule, and resort to other modes of service and filing, the exception. Henceforth,
whenever personal service or filing is practicable, in light of the circumstances of time, place and person, personal
service or filing is mandatory. Only when personal service or filing is not practicable may resort to other modes be had,
which must then be accompanied by a written explanation as to why personal service or filing was not practicable to
begin with. In adjudging the plausibility of an explanation, a court shall likewise consider the importance of the subject
matter of the case or the issues involved therein, and the prima facie merit of the pleading sought to be expunged for
violation of Section 11. This Court cannot rule otherwise, lest we allow circumvention of the innovation introduced by
the 1997 Rules in order to obviate delay in the administration of justice.
In the case at bench, the respondents were completely deprived of due process when they were declared in default
based on a defective mode of service service of notice to file answer by publication. The rules on service of pleadings,
motions, notices, orders, judgments, and other papers were not strictly followed in declaring the respondents in default.
The Court agrees with the CA that the RTC committed procedural lapses in declaring the respondents in default and in
allowing the petitioners to present evidence ex-parte. Instead of complying with the RTCs directive to report the
respondents addresses and whereabouts, the petitioners filed a motion to declare the respondents in default. As correctly
observed by the CA, the RTCs Order was an attempt to serve a notice to file answer on the respondents by personal
service and/or by mail. These proper and preferred modes of service, however, were never resorted to because the OSG
abandoned them when the petitioners failed to comply with the August 17, 1990RTC order requiring them to report the
addresses and whereabouts of the respondents. Nevertheless, there was still another less preferred but proper mode of
service available substituted service - which is service made by delivering the copy to the clerk of court, with proof of
failure of both personal service and service by mail. Unfortunately, this substitute mode of service was not resorted to by
the RTC after it failed to effect personal service and service by mail. Instead, the RTC authorized an unrecognized mode
of service under the Rules, which was service of notice to file answer by publication.
In view of the peculiar circumstances surrounding the case, the RTC should have instead directed the petitioners to
exert diligent efforts to notify the respondents either personally or by registered mail. In case the preferred modes were
impractical, the Court should have required the petitioners to at least report in writing why efforts exerted towards
personal service or service by mail failed. In other words, a convincing proof of an impossibility of personal service or
service by mail to the respondents should have been shown first. The RTC, thus, erred when it ruled that the publication
of a notice to file answer to the respondents substantially cured the procedural defect equivalent to lack of due process.
The RTC cannot just abandon the basic requirement of personal service and/or service by mail. To stress, the only modes
of service of pleadings, motions, notices, orders, judgments and other papers allowed by the rules are personal service,
service by mail and substituted service if either personal service or service by mail cannot be made, as stated in Sections
6, 7 and 8 of Rule 13 of the Rules of Court. Nowhere under this rule is service of notice to file answer by publication is
mentioned, much less recognized.
Its third error was when it authorized service by publication after initially dismissing the case for failure of plaintiffs-
appellees to furnish the current address of defendants-appellants. There is, however, nothing in the Rules that authorizes
publication of a notice of hearing to file answer. What is authorized to be published are: (1) summons, and (2) final
orders and judgments.

MARINDUQUE MINING vs CA & NAPOCOR


FACTS: NAPOCOR filed a complaint for expropriation against petitioners for the construction of the AGUS VI
Kauswagan 69 KV Transmission Line Project. NAPOCOR sought to expropriate 7,875 square meters of petitioners
property. Petitioners filed their answer with counterclaim and alleged that the expropriation should cover not only 7,875
square meters but the entire parcel of land. Petitioners claimed that the expropriation would render the remaining portion
of their property valueless and unfit for whatever purpose. The trial court fixed the fair market value of the 7,875-square
meter lot at P115 per square meter. The trial court also directed the commissioners to submit a report and determine the
fair market value of the dangling area, consisting of 58,484 square meters, affected by the installation of NAPOCORs
transmission lines. NAPOCOR filed a motion for reconsideration. In its Order, the trial court denied NAPOCORs
motion. The trial court declared that the dangling area consisted of 48,848.87 square meters and fixed its fair market
value at P65 per square meter. The trial court ruled that petitioners are entitled to consequential damages because
NAPOCORs expropriation impaired the value of the dangling area and deprived petitioners of the ordinary use of their
property.
NAPOCOR filed a motion for reconsideration. The trial court denied the motion for being moot and academic
because NAPOCOR filed a Notice of Appeal of the 19 March 2002 Supplemental Decision. Petitioners moved for the
execution of the trial courts Decision Supplemental Decision. The trial court partially granted petitioners motion and,
issued the writ of execution. Petitioners filed a motion to strike out or declare as not filed the notice of appeal; to declare
the supplemental decision as final and executory; and to issue the corresponding writ of execution thereon. Petitioners
argued that NAPOCOR violated Section 11, Rule 13 of the Rules of Court because NAPOCOR filed and served the
notice of appeal by registered mail. According to petitioners, NAPOCOR had all the vehicles and manpower to
personally serve and file the notice of appeal. NAPOCOR opposed petitioners motion and alleged that its legal office is
severely undermanned with only one vehicle and one employee, acting as secretary, handling 300 active cases in
Mindanao. NAPOCOR also added that it was highly irregular for petitioners to question its mode of service and filing
only at this stage of the proceedings because since the inception of the case, NAPOCOR had resorted to registered mail
instead of personal service.
The trial court granted petitioners motion and denied NAPOCORs notice of appeal. The trial court gave more
credence to petitioners allegations and declared that NAPOCORs explanation was a patent violation of the Rules. The
trial court considered the notice of appeal as not filed at all and, since the period of appeal had already expired, declared
the Supplemental Decision final and executory. NAPOCOR filed a motion for reconsideration. The trial court denied
NAPOCORs motion. NAPOCOR filed a special civil action for certiorari with a prayer for a temporary restraining order
before the Court of Appeals. NAPOCOR argued that the trial court acted without or in excess of jurisdiction and gravely
abused its discretion when it denied NAPOCORs notice of appeal of the Supplemental Decision on the sole ground that
it was not filed and served personally. The Court of Appeals ruled in NAPOCORs favor and set aside the trial courts
Orders. The Court of Appeals also ordered the trial court to give due course to NAPOCORs appeal. The Court of
Appeals declared that the trial court acted whimsically and capriciously when it denied the notice of appeal and declared
the Supplemental Decision final and executory. The Court of Appeals noted that service by registered mail was
previously resorted to by both parties and yet, this was the first time petitioners questioned NAPOCORs mode of service.
The Court of Appeals added that the trial court should have given due course to NAPOCORs appeal because of the large
amount of public funds involved considering the significant disparity between the area sought to be expropriated and the
dangling area. The Court of Appeals also said that the Rules should be liberally construed to effect substantial justice.
MR was denied.
ISSUE: WON NAPOCORs failure to comply with Section 11, Rule 13 of the Rules of Court.
HELD: Under Section 11, Rule 13 of the Rules, personal service of pleadings and other papers is the general rule while
resort to the other modes of service and filing is the exception. When recourse is made to the other modes, a written
explanation why service or filing was not done personally becomes indispensable. If no explanation is offered to justify
resorting to the other modes, the discretionary power of the court to expunge the pleading comes into play.
Under Section 11, Rule 13 of the 1997 Rules of Civil Procedure, personal service and filing is the general rule, and
resort to other modes of service and filing, the exception. Henceforth, whenever personal service or filing is practicable,
in light of the circumstances of time, place and person, personal service or filing is mandatory. Only when personal
service or filing is not practicable may resort to other modes be had, which must then be accompanied by a written
explanation as to why personal service or filing was not practicable to begin with. In adjudging the plausibility of an
explanation, a court shall likewise consider the importance of the subject matter of the case or the issues involved
therein, and the prima facie merit of the pleading sought to be expunged for violation of Section 11.
In this case, NAPOCOR complied with the Rules. NAPOCORs notice of appeal sufficiently explained why the
notice of appeal was served and filed by registered mail due to lack of manpower to effect personal service. This
explanation is acceptable for it satisfactorily shows why personal service was not practicable. Moreover, the Court of
Appeals correctly considered the importance of the issue involved in the case. Therefore, the Court of Appeals did not err
when it ruled that the trial court acted with grave abuse of discretion in the issuance of the 15 May 2002 and 24 June
2002 Orders.
The order of expropriation may be appealed by any party by filing a record on appeal. In this case, since the trial
court fully and finally resolved all conceivable issues in the complaint for expropriation, there was no need for
NAPOCOR to file a record on appeal. In its Decision, the trial court already determined NAPOCORs authority to
exercise the power of eminent domain and fixed the just compensation for the property sought to be expropriated.
NAPOCOR filed a motion for reconsideration. But after the trial court denied the motion, NAPOCOR did not appeal the
decision anymore. Then, in its Supplemental Decision, the trial court fixed the just compensation for the dangling area.
NAPOCOR filed a motion for reconsideration and the trial court denied the motion. NAPOCOR then filed a notice of
appeal. At this stage, the trial court had no more issues to resolve and there was no reason why the original records of the
case must remain with the trial court. Therefore, there was no need for NAPOCOR to file a record on appeal because the
original records could already be sent to the appellate court. Moreover, petitioners did not raise this issue in their motion
to strike out or declare as not filed the notice of appeal dated April 2, 2002; to declare the supplemental decision as final
and executory; and to issue the corresponding writ of execution thereon before the trial court. It is settled that an issue
not raised during the trial could not be raised for the first time on appeal as to do so would be offensive to the basic rules
of fair play, justice, and due process.

DELOS SANTOS vs ELIZALDE


FACTS: Petitioners filed a Complaint for Quieting of Title, Damages and Attorneys Fees before the Kalibo, Aklan RTC,
involving four (4) adjoining lots located in Boracay Island, Malay, Aklan. An amended complaint was thereafter filed.
Petitioners claimed the aforementioned lots as their inheritance from the late Mariano delos Santos, their common
ascendant, either by their own right or by right of representation. Petitioners alleged that the late Mariano delos Santos
was the original owner of the lots. On the other hand, respondents spouses Fred and Joan Elizalde, the first set of
intervenors before the trial court, claimed that they purchased the from the heirs of Leonardo delos Santos, he being the
rightful and exclusive owner of the said lots. Respondents Gloria Martin, Domingo Casimero, Sergio Casimero, Abundio
Casimero, and Teodoro Casimero, the second set of intervenors before the trial court, claimed ownership over Lots 393-
B and 394-E, as heirs of Tomasa Prado, who also allegedly owned said lots. Respondents Rosita delos Santos-Flores and
Jesus delos Santos, the third set of intervenors and two of the three legitimate children of the late Leonardo delos Santos,
claimed 2/3 of the disputed lots as their rightful inheritance. Respondents delos Santos alleged that they did not sell nor
assign their share in the property to anyone, including respondent Fred Elizalde.
The Trial court dismissed the complaint filed by the plaintiffs as well as the complaint in intervention filed by the
second set of intervenors Casimeros, et al. for lack of merit and ruled that the first intervenor are the lawful owners of the
lots. Thus, petitioners and respondent Fred Elizalde filed their separate Notices of Appeal. The CA issued Notice to File
Brief, requiring petitioners and respondent Elizalde to file their briefs within forty-five (45) days from receipt of said
notice. Petitioners filed by registered mail a Motion for Extension of Time to File Brief for Plaintiffs-Appellants. In their
motion, petitioners admitted having received a copy of the Notice to File Brief; thus, they prayed for an extension of
forty-five (45) days. Petitioners filed another motion for extension, seeking another forty five (45)-day extension, within
which to file their brief. Then, respondents Fred Elizalde, Jesus delos Santos, and Rosita delos Santos-Flores filed a Joint
Manifestation and Motion, whereby respondent Elizalde abandoned his appeal by virtue of an amicable settlement
between the parties through Agreement. They agreed to swap and re-adjust the areas adjudged by the trial court in their
favor, without prejudice to a final judgment by the CA. In addition, Elizalde moved that his appeal be considered as
withdrawn and that he be excused from filing an appellants brief.
Petitioners filed an Ex-Parte Motion for Final Extension of Period to File Brief for Plaintiffs-Appellants, seeking an
extension of thirty (30) days within which to file their brief. In sum, petitioners had a total extension of one hundred
eighty (180) days when they filed a motion for extension before the CA for the first time. Respondents delos Santos
opposed the foregoing motions for extension and moved for the dismissal of the appeal for petitioners failure to file the
required appellants brief. However, petitioners, through their former counsel Atty. Napoleon M. Victoriano, filed an Ex-
Parte Motion to Withdraw Appeal. Said motion sought the withdrawal of the appeal on the ground that petitioners and
respondents delos Santos entered into an amicable settlement, denominated as an Undertaking. , the Undertaking was
signed by 39 of the 46 petitioners. The CA issued a decision considering then withdrawn. Thereafter, an Entry of
Appearance was filed by Atty. Cesar T. Verano, allegedly in representation of petitioners. The entry contained the solitary
conformity of petitioner Vicente delos Santos. On the same day, petitioners filed a Motion for Reconsideration of
Decision with Prayer for Reinstatement of Appeal, which was verified solely by petitioner Vicente delos Santos. In their
Motion for Reconsideration, petitioners alleged that: (1) they did not have any knowledge of the promulgation of the
assailed Decision of the CA; (2) they never entered into any amicable settlement with respondents delos Santos; (3) their
alleged signatures in the Agreement were forged; and (4) they never authorized their former counsel, Atty. Victoriano, to
withdraw their appeal.
Thereafter, an Entry of Appearance[22] was filed on June 17, 1999 by Atty. Cesar T. Verano, allegedly in
representation of petitioners. The entry contained the solitary conformity of petitioner Vicente delos Santos. On the same
day, petitioners filed a Motion for Reconsideration of Decision with Prayer for Reinstatement of Appeal, which was
verified solely by petitioner Vicente delos Santos. In their Motion for Reconsideration, petitioners alleged that: (1) they
did not have any knowledge of the promulgation of the assailed Decision of the CA; (2) they never entered into any
amicable settlement with respondents delos Santos; (3) their alleged signatures in the May 27, 1997 Agreement were
forged; and (4) they never authorized their former counsel, Atty. Victoriano, to withdraw their appeal. Petitioners
subsequently filed a Reply (To Opposition) refuting the allegations made by respondents delos Santos; and attached to
the reply a handwritten note in Filipino,[26] stating that: (1) the signatories did not sign the alleged Agreement; (2) they
did not receive a single centavo of the money alleged in the Agreement; (3) they did not authorize Atty. Victoriano to
withdraw their appeal; and (4) Atty. Victoriano did not furnish them a copy of the Decision of the CA.
ISSUE:
HELD: The abovementioned fifteen (15)-day period begins to run upon receipt of notice of the decision or final order
appealed from. Such period has been considered to begin upon receipt of notice by the counsel of record, which is
considered notice to the parties. Service of judgment on the party is prohibited and is not considered the official receipt
of the judgment. To reiterate, service upon the parties counsels of record is tantamount to service upon the parties
themselves, but service upon the parties themselves is not considered service upon their lawyers. The reason is simple
the parties, generally, have no formal education or knowledge of the rules of procedure, specifically, the mechanics of an
appeal or availment of legal remedies; thus, they may also be unaware of the rights and duties of a litigant relative to the
receipt of a decision. More importantly, it is best for the courts to deal only with one person in the interest of orderly
procedureeither the lawyer retained by the party or the party him/herself if s/he does not intend to hire a lawyer. Even
assuming that petitioners had replaced Atty. Victoriano prior to his receipt of the assailed Decision, the reglementary
period for filing a Motion for Reconsideration would still be reckoned from his receipt of the Decision.
The Court stressed that [s]eldom have we condoned late filing of notices of appeal, and only in very exceptional
instances to better serve the ends of justice; and also emphasized that the liberal application of the rules is confined to
situations where technicalities were dispensed with, our decisions were not meant to undermine the force and effectivity
of the periods set by law. But we hasten to add that in those rare cases where procedural rules were not stringently
applied, there always existed a clear need to prevent the commission of a grave injustice. In the instant case, there is no
exceptional circumstance to justify the disregard of the reglementary period for filing a motion for reconsideration.
Hence, petitioners position is devoid of merit.
ISSUE: WON the CA erred in dismissing the appeal for petitioners failure to file an appellants brief.
HELD: NO. the assailed Decision did not dismiss the case solely on the basis of the motion to withdraw filed by their
former counsel. To reiterate, the Decision stated that [f]or failure to file their respective appellants briefs, and in
accordance with the prayer in the Joint Manifestation and Motion, and in the Ex-Parte Motion to Withdraw Appeal, the
appeal should be dismissed, and considered as withdrawn (emphasis supplied). Section 7 of Rule 44 of the Rules of
Court provides forty-five (45) days from receipt of notice within which to file an appellants brief, while Section 12
declares that an extension of time for filing of briefs shall not be allowed except for a good and sufficient cause. The
general rule is that motions for extension of time to file an appellants brief shall not be granted except for a good cause.
No such justification is present in this case.Petitioners failure to apprise themselves of the status of their case during its
pendency before the CA is inexcusable. Moreover, their former counsels failure or neglect to file the required appellants
brief shall bind them.

UNITED PULP AND PAPER CO., INC vs UNITED PULP AND PAPER CHAPTER-FEDERATION OF FREE
WORKERS
FACTS: United Pulp and Paper Co., Inc., petitioner, implemented a "Promotions Policy"3 that recognizes the excellent
and meritorious work performance of deserving employees during the last twelve (12) months. Teodorico Simbulan was
promoted from Welder I to Welder II with the corresponding pay class (PC) movement from PC V to PC VIII. For and in
behalf of Simbulan, United Pulp and Paper Chapter-Federation of Free Workers, respondent, questioned the regularity or
correctness of the salary increase granted by petitioner. Invoking Section 1, Article XVII of the collective bargaining
agreement (CBA),5 respondent maintains that Simbulan is entitled to a 5% salary increase (for every pay class
movement) because such salary increase does not exceed the salary rates of other incumbents. Respondent also contends
that petitioner is guilty of discrimination against Simbulan since other employees, like Enrique Cruz and Joselito de
Castro who were previously promoted, enjoy the 5% salary increase for their pay class movements. The controversy was
submitted to the grievance machinery, but the parties failed to reach an acceptable settlement. Thus, the matter was
elevated to a panel of Voluntary Arbitrators of the National Conciliation and Mediation Board (NCMB), III at San
Fernando, Pampanga.
The Voluntary Arbitrators rendered a Decision holding that the promotional increase in the case of union employees
is 5% compounded for every pay class jump unless the effect of such increase will be such as to cause the promoted
employees salary to exceed that of the lowest paid incumbent in the same position as that to which the employee is
being promoted, in which case the promotional increase shall be limited to not less than 3%. Consequently, in the case of
the subject employee, Teodorico Simbulan, since there is no showing that, for the second and third jumps in his
promotion, his salary would have exceeded that of the lowest paid incumbent in the pertinent position if granted a 5%
promotional increase, he is entitled to a salary increase of 5%+5%+5%, compounded for each pay class, effective as of
the said date.
Petitioner filed a motion for reconsideration but was denied by the Voluntary Arbitrators. Petitioner filed with the
Court of Appeals a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, as amended, assailing the
Decision and Resolution of the Voluntary Arbitrators. The Appellate Court dismissed the petition outright for being
insufficient in form because (1) the verification and certification of non-forum shopping was signed only by counsel for
the petitioner corporation, rather than by a duly-authorized officer thereof; (2) The affidavit of service is inadequate, as
the registry receipts evidencing mailing of copies of the petition to the respondent were not attached; and (3) Absence of
the mandatory written explanation required under Sec. 11, Rule 13, 1997 Rules of Civil Procedure to explain why
personal service upon the respondents of copies of the petition was not resorted to. petitioner filed a motion for
reconsideration but was denied by the Appellate Court.
ISSUE: WON the CA seriously erred in dismissing its petition for review on mere technicalities.
HELD: NO. Section 5, Rule 7 of the same Rules provides that it is the plaintiff or principal party who shall certify under
oath in the complaint or other initiatory pleading that he has not commenced any action involving the same issues in any
court, tribunal or quasi-judicial agency. Here, only petitioners counsel signed the certification against forum-shopping.
There is no showing that he was authorized by the petitioner company to represent the latter and to sign the certification.
the petition is flawed as the certificate of non-forum shopping was signed only by counsel and not by the party." The rule
requires that it should be the plaintiff or principal party who should sign the certification, otherwise, this requirement
would easily be circumvented by the signature of every counsel representing corporate parties.
Moreover, petitioners failure to attach with the petition a written explanation why the service or filing was not done
personally violates Section 11, Rule 13 of the same Rules.11 We have ruled that where no explanation is offered to
justify the service of pleadings by other modes, the discretionary power of the court to expunge the pleading becomes
mandatory. 12 Thus, the Court of Appeals correctly considered the petition as not having been filed, in view of
petitioners failure to present a written explanation why it failed to effect personal service of its petition for review.

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