PHILIPPINE BANK OF COMMUNICATIONS v. SPOUSES JOSE C.
GO
and ELVY T. GO (G.R. No. 175514, February 14, 2011)
This is a petition for review on certiorari under Rule 45 filed by petitioner Philippine
Bank of Communications (PBCom) seeking to set aside the July 28, 2006 Decision,[1] and the
November 27, 2006 Resolution[2]of the Court of Appeals (CA) in CA G.R. CV No. 77714. The
CA decision reversed and set aside the January 25, 2002 Decision of the Regional Trial
Court, Branch 42, Manila (RTC), which granted the motion for summary judgment and
rendered judgment on the basis of the pleadings and attached documents.
THE FACTS
On September 30, 1999, respondent Jose C. Go (Go) obtained two loans from
PBCom, evidenced by two promissory notes, embodying his commitment
pay P17,982,222.22 for the first loan, and P80 million for the second loan, within a ten-year
period from September 30, 1999 to September 30, 2009. [3]
To secure the two loans, Go executed two (2) pledge agreements, both
dated September 29, 1999, covering shares of stock in Ever Gotesco Resources and
Holdings, Inc. The first pledge, valued at P27,827,122.22, was to secure payment of the first
loan, while the second pledge, valued at P70,155,100.00, was to secure the second loan.[4]
Two years later, however, the market value of the said shares of stock plunged to
less than P0.04 per share. Thus, PBCom, as pledgee, notified Go in writing on June 15, 2001,
that it was renouncing the pledge agreements.[5]
Later, PBCom filed before the RTC a complaint[6] for sum of money with prayer for
a writ of preliminary attachment against Go and his wife, Elvy T. Go (Spouses Go), docketed
as Civil Case No. 01-101190.PBCom alleged that Spouses Go defaulted on the two (2)
promissory notes, having paid only three (3) installments on interest paymentscovering the
months of September, November and December 1999. Consequently, the entire balance of
the obligations of Go became immediately due and demandable. PBCom made repeated
demands upon Spouses Go for the payment of said obligations, but the couple imposed
conditions on the payment, such as the lifting of garnishment effected by the Bangko Sentral
ng Pilipinas (BSP) on Gos accounts.[7]
Spouses Go filed their Answer with Counterclaim[8] denying the material allegations
in the complaint and stating, among other matters, that:
8. The promissory note referred to in the complaint
expressly state that the loan obligation is payable within the period of ten
(10) years. Thus, from the execution date of September 30, 1999, its due
date falls on September 30, 2009 (and not 2001 as erroneously stated in
the complaint). Thus, prior to September 30, 2009, the loan obligations
cannot be deemed due and demandable.
In conditional obligations, the acquisition of rights, as well as the
to extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition. (Article 1181, New
Civil Code)
9. Contrary to the plaintiffs proferrence, defendant Jose
C. Go had made substantial payments in terms of his monthly payments.
There is, therefore, a need to do some accounting works (sic) to reconcile
the records of both parties.
10. While demand is a necessary requirement to consider
the defendant to be in delay/default, such has not been complied with by
the plaintiff since the former is not aware of any demand made to him by
the latter for the settlement of the whole obligation.
11. Undeniably, at the time the pledge of the shares of
stock were executed, their total value is more than the amount of the loan
or at the very least, equal to it. Thus, plaintiff was fully secured insofar as
its exposure is concerned.
12. And even assuming without conceding, that the
present value of said shares x x x went down, it cannot be considered as
something permanent since the prices of stocks in the market either
increases (sic) or decreases (sic) depending on the market forces. Thus,
it is highly speculative for the plaintiff to consider said shares to have
suffered tremendous decrease in its value. More so, it is unfair for the
plaintiff to renounce or abandon the pledge agreements.
On September 28, 2001, PBCom filed a verified motion for summary
judgment[9] anchored on the following grounds:
 I. MATERIAL AVERMENTS OF THE COMPLAINT
ADMITTED BY DEFENDANT-SPOUSES IN THEIR ANSWER TO
OBVIATE THE NECESSITY OF TRIAL RULING OF THE COURT OF APPEALS
In its Decision dated July 28, 2006, the CA reversed and set aside the assailed judgment of
II. NO REAL DEFENSES AND NO GENUINE ISSUES
AS TO ANY MATERIAL FACT WERE TENDERED BY THE the RTC, denied PBComs motion for summary judgment, and ordered the remand of the
DEFENDANT-SPOUSES IN THEIR ANSWER records to the court of origin for trial on the merits. The dispositive portion of the decision
III. PLANTIFFS CAUSES OF ACTIONS ARE states:
SUPPORTED BY VOLUNTARY ADMISSIONS AND AUTHENTIC
DOCUMENTS WHICH MAY NOT BE CONTRADICTED.[10]
WHEREFORE, premises considered, the assailed judgment of
the Regional Trial Court, Branch 42 of Manila in Civil Case No. 01-101190
is hereby REVERSED and SET ASIDE, and a new one entered denying
PBCom contended that the Answer interposed no specific denials on the material averments plaintiff-appellees motion for summary judgment. Accordingly, the records
of the case are hereby remanded to the court of origin for trial on the merits.
in paragraphs 8 to 11 of the complaint such as the fact of default, the entire amount being
already due and demandable by reason of default, and the fact that the bank had made SO ORDERED.[16]

repeated demands for the payment of the obligations.[11]

The CA could not agree with the conclusion of the RTC that Spouses Go admitted paragraphs

Spouses Go opposed the motion for summary judgment arguing that they had tendered 3, 4 and 7 of the complaint. It found the supposed admission to be insufficient to justify a

genuine factual issues calling for the presentation of evidence.[12] rendition of summary judgment in the case for sum of money, since there were other
allegations and defenses put up by Spouses Go in their Answer which raised genuine issues

The RTC granted PBComs motion in its Judgment[13] dated January 25, 2002, the dispositive on the material facts in the action.[17]

portion of which states:

The CA agreed with Spouses Go that paragraphs 3 and 4 of the complaint merely dwelt on
WHEREFORE, in view of all the foregoing, judgment is rendered
for the plaintiff and against the defendants ordering them to pay plaintiff the fact that a contract of loan was entered into by the parties, while paragraph 7 simply
jointly and severally the following: emphasized the terms of the promissory notes executed by Go in favor of PBCom. The fact
1. The total amount of P117,567,779.75, plus of default, the amount of the outstanding obligation, and the existence of a prior demand,
interests and penalties as stipulated in the two
promissory notes; which were all material to PBComs claim, were hardly admitted[18] by Spouses Go in their
Answer and were, in fact, effectively questioned in the other allegations in the Answer.[19]
2. A sum equivalent to 10% of the amount involved in
this case, by way of attorneys fees; and
PBComs motion for reconsideration was denied in a resolution [20] dated November 27, 2006.
3. The costs of suit.

SO ORDERED.[14]
Thus, this petition for review.
THE ISSUES

Spouses Go moved for a reconsideration but the motion was denied in an

I
order[15] dated March 20, 2002.
 WHETHER THE COURT OF APPEALS ERRED OR ACTED IN GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK, OR EXCESS OF
JURISDICTION IN RULING THAT THERE EXISTS A GENUINE ISSUE
AS TO MATERIAL FACTS IN THE ACTION IN SPITE OF THE
UNEQUIVOCAL ADMISSIONS MADE IN THE PLEADINGS BY
RESPONDENTS; AND
II
WHETHER THE COURT OF APPEALS ERRED OR ACTED IN GRAVE
ABUSE OF JURISDICTION [DISCRETION] IN HOLDING THAT ISSUES
WERE RAISED ABOUT THE FACT OF DEFAULT, THE AMOUNT OF
THE OBLIGATION, AND THE EXISTENCE OF PRIOR DEMAND, EVEN
WHEN THE PLEADING CLEARLY POINTS TO THE CONTRARY.
Petitioner PBComs
Position: Summary
judgment was proper, as
there were no genuine
issues raised as to any
material fact.
PBCom argues that the material averments in the complaint categorically admitted by
Spouses Go obviated the necessity of trial. In their Answer, Spouses Go admitted the
allegations in paragraphs 3 and 4 of the Complaint pertaining to the security for the loans and
the due execution of the promissory notes,[21] and those in paragraph 7 which set forth the
acceleration clauses in the promissory note. Their denial of paragraph 5 of the Complaint
pertaining to the Schedules of Payment for the liquidation of the two promissory notes did not
constitute a specific denial required by the Rules.[22]
Even in the Comment[23] of Spouses Go, the clear, categorical and unequivocal admission of
paragraphs 3, 4, and 7 of the Complaint had been conceded. [24]
PBCom faults the CA for having formulated non-existent issues pertaining to the fact
of default, the amount of outstanding obligation and the existence of prior demand, none of
which is borne by the pleadings or the records.[25]
The Spouses Go, PBCom argues, cannot negate or override the legal effect of the
acceleration clauses embodied in each of the two promissory notes executed by Go.
Moreover, the non-payment of arrearages constituting default was admitted by Go in his
letters to PBCom dated March 3 and April 7, 2000, respectively.[26] Therefore, by such default,
they have lost the benefit of the period in their favor, pursuant to Article 1198 [27] of the Civil
Code.
Further, PBCom claims that its causes of action are supported by authentic
documents and voluntary admissions which cannot be contradicted. It cites the March 3
and April 7, 2000 letters of Go requesting deferment of interest payments on his past due loan
obligations to PBCom, as his assets had been placed under attachment in a case filed by the
BSP.[28] PBCom emphasizes that the said letters, in addition to its letters of demand duly
acknowledged and received by Go, negated their claim that they were not aware of any
demand having been made.[29]
Respondent spouses
position: Summary
judgment was not proper.
The core contention of Spouses Go is that summary judgment was not proper under the
attendant circumstances, as there exist genuine issues with respect to the fact of default, the
amount of the outstanding obligation, and the existence of prior demand, which were duly
questioned in the special and affirmative defenses set forth in the Answer. Spouses Go agree
with the CA that the admissions in the pleadings pertained to the highlight of the terms of the
contract. Such admissions merely recognized the existence of the contract of loan and
emphasized its terms and conditions.[30] Moreover, although they admitted paragraphs 3, 4,
and 7, the special and affirmative defenses contained in the Answer tendered genuine issues
which could only be resolved in a full-blown trial.[31]
On the matter of specific denial, Spouses Go posit that the Court decisions cited by
PBCom[32] do not apply on all fours in this case. Moreover, the substance of the repayment
schedule was not set forth in the complaint. It, therefore, follows that the act of attaching copies
to the complaint is insufficient to secure an implied admission. Assuming arguendo that it was
impliedly admitted, the existence of said schedule and the promissory notes would not
immediately make private respondents liable for the amount claimed by PBCom.[33] Before
respondents may be held liable, it must be established, first, that they indeed defaulted; and
second, that the obligations has remained outstanding.[34]
Spouses Go also state that although they admitted paragraphs 3, 4 and 7 of the
Complaint, the fact of default, the amount of outstanding obligation and the existence of prior
demand were fully questioned in the special and affirmative defenses.[35]
RULING OF THE COURT
The Court agrees with the CA that [t]he supposed admission of defendants-appellants on the
x x x allegations in the complaint is clearly not sufficient to justify the rendition of summary
judgment in the case for sum of money, considering that there are other allegations embodied
and defenses raised by the defendants-appellants in their answer which raise a genuine issue
as to the material facts in the action.[36]
The CA correctly ruled that there exist genuine issues as to three material facts, which have
to be addressed during trial: first, the fact of default; second, the amount of the outstanding
obligation, and third, the existence of prior demand.
Under the Rules, following the filing of pleadings, if, on motion of a party and after hearing, the
pleadings, supporting affidavits, depositions and admissions on file show that, except as to
the amount of damages, there is no genuine issue as to any material fact, and that the moving
party is entitled to a judgment as a matter of law,[37] summary judgment may be rendered. This
rule was expounded in Asian Construction and Development Corporation v. Philippine
Commercial International Bank,[38] where it was written:
Under Rule 35 of the 1997 Rules of Procedure, as amended,
except as to the amount of damages, when there is no genuine issue as
to any material fact and the moving party is entitled to a judgment as a
matter of law, summary judgment may be allowed. [39] Summary or
accelerated judgment is a procedural technique aimed at weeding out
sham claims or defenses at an early stage of litigation thereby avoiding the
expense and loss of time involved in a trial.[40]
Under the Rules, summary judgment is appropriate when there
are no genuine issues of fact which call for the presentation of evidence in
a full-blown trial. Even if on their face the pleadings appear to raise issues,
when the affidavits, depositions and admissions show that such issues are
not genuine, then summary judgment as prescribed by the Rules must
ensue as a matter of law. The determinative factor, therefore, in a motion
for summary judgment, is the presence or absence of a genuine issue as
to any material fact.
A genuine issue is an issue of fact which requires the
presentation of evidence as distinguished from a sham, fictitious, contrived
or false claim. When the facts as pleaded appear uncontested or
undisputed, then there is no real or genuine issue or question as to the
facts, and summary judgment is called for. The party who moves for
summary judgment has the burden of demonstrating clearly the absence
of any genuine issue of fact, or that the issue posed in the complaint is
patently unsubstantial so as not to constitute a genuine issue for trial. Trial
courts have limited authority to render summary judgments and may do so
only when there is clearly no genuine issue as to any material fact. When
the facts as pleaded by the parties are disputed or contested, proceedings
for summary judgment cannot take the place of trial. [41] (Underscoring
supplied.)
Juxtaposing the Complaint and the Answer discloses that the material facts here
are not undisputed so as to call for the rendition of a summary judgment. While the denials of
Spouses Go could have been phrased more strongly or more emphatically, and the Answer
more coherently and logically structured in order to overthrow any shadow of doubt that such
denials were indeed made, the pleadings show that they did in fact raise material issues that
have to be addressed and threshed out in a full-blown trial.
PBCom anchors its arguments on the alleged implied admission by Spouses Go resulting from
their failure to specifically deny the material allegations in the Complaint, citing as
precedent Philippine Bank of Communications v. Court of Appeals,[42] and Morales v. Court of possible. Failing such standard, allegations made in pleadings are not to be taken as stand-
Appeals. Spouses Go, on the other hand, argue that although admissions were made in the alone catchphrases in the interest of accuracy. They must be contextualized and interpreted
Answer, the special and affirmative defenses contained therein tendered genuine issues. in relation to the rest of the statements in the pleading.

Under the Rules, every pleading must contain, in a methodical and logical form, a plain,
In Spouses Gaza v. Lim, the Court ruled that the CA erred in declaring that the petitioners
concise and direct statement of the ultimate facts on which the party pleading relies for his
therein impliedly admitted respondents' allegation that they had prior and continuous
claim or defense, as the case may be, omitting the statement of mere evidentiary facts. [43]
possession of the property, as petitioners did in fact enumerate their special and affirmative
defenses in their Answer. They also specified therein each allegation in the complaint being
To specifically deny a material allegation, a defendant must specify each material allegation
denied by them. The Court therein stated:
of fact the truth of which he does not admit, and whenever practicable, shall set forth the
The Court of Appeals held that spouses Gaza, petitioners, failed
substance of the matters upon which he relies to support his denial. Where a defendant to deny specifically, in their answer, paragraphs 2, 3 and 5 of the complaint
for forcible entry quoted as follows:
desires to deny only a part of an averment, he shall specify so much of it as is true and material
xxx xxx xxx
and shall deny only the remainder. Where a defendant is without knowledge or information
2. That plaintiffs are the actual and joint
sufficient to form a belief as to the truth of a material averment made in the complaint, he shall occupants and in prior continuous physical possession
since 1975 up to Nov. 28, 1993 of a certain commercial
so state, and this shall have the effect of a denial.[44]
compound described as follows:
A certain parcel of land situated in Bo. Sta.
Rule 8, Section 10 of the Rules of Civil Procedure contemplates three (3) modes of specific Maria, Calauag, Quezon. Bounded on the N., & E., by
Julian de Claro; on the W., by Luis Urrutia. Containing
denial, namely: 1) by specifying each material allegation of the fact in the complaint, the truth an area of 5,270 square meters, more or less. Declared
of which the defendant does not admit, and whenever practicable, setting forth the substance under Ramon J. Lim's Tax Dec. No. 4576 with an Ass.
Value of P26,100.00
of the matters which he will rely upon to support his denial; (2) by specifying so much of an
3. That plaintiffs have been using the premises
averment in the complaint as is true and material and denying only the remainder; (3) by mentioned for combined lumber and copra business.
Copies of plaintiffs' Lumber Certificate of Registration
stating that the defendant is without knowledge or information sufficient to form a belief as to No. 2490 and PCA Copra Business Registration No.
the truth of a material averment in the complaint, which has the effect of a denial. [45] 6265/76 are hereto attached as Annexes "A" and "B"
respectively; the Mayor's unnumbered copra dealer's
permit dated Dec. 31, 1976 hereto attached as Annex
"C";
The purpose of requiring the defendant to make a specific denial is to make him disclose the
xxx xxx xxx
matters alleged in the complaint which he succinctly intends to disprove at the trial, together
5. That defendants' invasion of plaintiffs'
with the matter which he relied upon to support the denial. The parties are compelled to lay premises was accomplished illegally by detaining
their cards on the table.[46] plaintiffs' caretaker Emilio Herrera and his daughter
inside the compound, then proceeded to saw the chain
that held plaintiffs' padlock on the main gate of the
compound and then busted or destroyed the padlock
Again, in drafting pleadings, members of the bar are enjoined to be clear and concise in their
that closes the backyard gate or exit. Later, they forcibly
language, and to be organized and logical in their composition and structure in order to set opened the lock in the upstairs room of plaintiff Agnes J.
Lim's quarters and defendants immediately filled it with
forth their statements of fact and arguments of law in the most readily comprehensible manner
 other occupants now. Copy of the caretaker's (Emilio
Herrera) statement describing in detail is hereto
attached as Annex "D";
xxx xxx xxx.7
The Court of Appeals then concluded that since petitioners did not
deny specifically in their answer the above-quoted allegations in the
complaint, they judicially admitted that Ramon and Agnes Lim,
respondents, "were in prior physical possession of the subject property,
and the action for forcible entry which they filed against private
respondents (spouses Gaza) must be decided in their favor. The defense
of private respondents that they are the registered owners of the subject
property is unavailing."
We observe that the Court of Appeals failed to consider paragraph
2 of petitioners' answer quoted as follows:
2. That defendants specifically deny the
allegations in paragraph 2 and 3 of the complaint for
want of knowledge or information sufficient to form a
belief as to the truth thereof, the truth of the matter being
those alleged in the special and affirmative defenses of
the defendants;"8
Clearly, petitioners specifically denied the allegations contained in
paragraphs 2 and 3 of the complaint that respondents have prior and
continuous possession of the disputed property which they used for their
lumber and copra business. Petitioners did not merely allege they have no
knowledge or information sufficient to form a belief as to truth of those
allegations in the complaint, but added the following:
SPECIAL AND AFFIRMATIVE DEFENSES
That defendants hereby reiterate, incorporate
and restate the foregoing and further allege:
5. That the complaint states no cause of action;
"From the allegations of plaintiffs, it appears that
their possession of the subject property was not
supported by any concrete title or right, nowhere in the
complaint that they alleged either as an owner or lessee,
hence, the alleged possession of plaintiffs is questionable
from all aspects. Defendants Sps. Napoleon Gaza and
Evelyn Gaza being the registered owner of the subject
property has all the right to enjoy the same, to use it, as
an owner and in support thereof, a copy of the transfer
certificate of title No. T-47263 is hereto attached and
marked as Annex "A-Gaza" and a copy of the Declaration
of Real Property is likewise attached and marked as
Annex "B-Gaza" to form an integral part hereof;
6. That considering that the above-entitled case
is an ejectment case, and considering further that the
complaint did not state or there is no showing that the
matter was referred to a Lupon for conciliation under the
provisions of P.D. No. 1508, the Revised Rule on
Summary Procedure of 1991, particularly Section 18
thereof provides that such a failure is jurisdictional, hence
subject to dismissal;
7. That the Honorable Court has no jurisdiction
over the subject of the action or suit;
The complaint is for forcible entry and the
plaintiffs were praying for indemnification in the sum
of P350,000.00 for those copra, lumber, tools, and
machinery listed in par. 4 of the complaint
and P100,000.00 for unrealized income in the use of the
establishment, considering the foregoing amounts not to
be rentals, Section 1 A (1) and (2) of the Revised Rule on
Summary Procedure prohibits recovery of the same,
hence, the Honorable Court can not acquire jurisdiction
over the same. Besides, the defendants Napoleon Gaza
and Evelyn Gaza being the owners of those properties
cited in par. 4 of the complaint except for those copra and
two (2) live carabaos outside of the subject premises,
plaintiffs have no rights whatsoever in claiming damages
that it may suffer, as and by way of proof of ownership of
said properties cited in paragraph 4 of the complaint
attached herewith are bunche[s] of documents to form an
integral part hereof;
8. That plaintiffs' allegation that Emilio Herrera
was illegally detained together with his daughter was not
true and in support thereof, attached herewith is a copy of
said Herrera's statement and marked as Annex "C-Gaza."
xxx xxx xxx.9
The above-quoted paragraph 2 and Special and Affirmative
Defenses contained in petitioners' answer glaringly show that petitioners did
not admit impliedly that respondents have been in prior and actual physical
possession of the property. Actually, petitioners are repudiating vehemently
respondents' possession, stressing that they (petitioners) are the registered
owners and lawful occupants thereof.
Respondents' reliance on Warner Barnes and Co., Ltd. v.
Reyes10 in maintaining that petitioners made an implied admission in their
answer is misplaced. In the cited case, the defendants' answer merely
alleged that they were "without knowledge or information sufficient to form
a belief as to the truth of the material averments of the remainder of the
complaint" and "that they hereby reserve the right to present an amended
answer with special defenses and counterclaim."11 In the instant
case, petitioners enumerated their special and affirmative defenses in their
answer. They also specified therein each allegation in the complaint being
denied by them. They particularly alleged they are the registered owners
 and lawful possessors of the land and denied having wrested possession of and conditions embodied in the two (2) obligations cannot be deemed due and
the premises from the respondents through force, intimidation, threat, promissory notes;[48] demandable.
strategy and stealth. They asserted that respondents' purported possession
is "questionable from all aspects." They also averred that they own all the In conditional obligations, the acquisition of
personal properties enumerated in respondents' complaint, except the two rights, as well as the extinguishment or loss
carabaos. Indeed, nowhere in the answer can we discern an implied of those already acquired, shall depend
admission of the allegations of the complaint, specifically the allegation that upon the happening of the event which
petitioners have priority of possession. constitutes the condition. (Article 1181, New
Civil Code)
Thus, the Court of Appeals erred in declaring that herein
petitioners impliedly admitted respondents' allegation that they have prior
9. Contrary to the plaintiffs preference,
and continuous possession of the property.[47] (Underscoring supplied.)
defendant Jose C. Go has made substantial
payments in terms of his monthly payments.
There is therefore, a need to do some
In this case, as in Gaza, the admissions made by Spouses Go are to be read and taken accounting works (sic) just to reconcile the
records of both parties.
together with the rest of the allegations made in the Answer, including the special and
10. While demand is a necessary
affirmative defenses.
requirement to consider the defendant to be
in delay/default, such has not been
complied with by the plaintiff since the
For instance, on the fact of default, PBCom alleges in paragraph 8 of the Complaint that Go former is not aware of any demand made to
defaulted in the payment for both promissory notes, having paid only three interest him by the latter for the settlement of the
whole obligation.
installments covering the months of September, November, and December 1999.
11. Undeniably, at the time the pledge of the
shares of stocks were executed, their total
In paragraph 6 of the Answer, Spouses Go denied the said allegation, and further alleged in value is more than the amount of the loan,
or at the very least, equal to it. Thus, plaintiff
paragraphs 8 to 13 that Go made substantial payments on his monthly loan amortizations. was fully secured insofar as its exposure is
concerned.[49]

The portions of the pleadings referred to are juxtaposed below:
Complaint
8. The defendant defaulted in the payment
of the obligations on the two (2) promissory
notes (Annexes A and B hereof) as he has
paid only three (3) installments on interests
(sic) payments covering the months of
September, November and December,
1999, on both promissory notes,
respectively. As a consequence of the
default, the entire balance due on the
obligations of the defendant to plaintiff on
both promissory notes immediately became
due and demandable pursuant to the terms
12. And even assuming without conceding,
that the present value of said shares has
went (sic) down, it cannot be considered as
Answer
something permanent since, the prices of
stocks in the market either increases (sic) or
6. Defendants deny the allegations in (sic) decreases depending on the market
paragraphs 8, 9, 10 and 11 of the Complaint; forces. Thus, it is highly speculative for the
plaintiff to consider said shares to have
xxx suffered tremendous decrease in its value.
Moreso (sic), it is unfair for the plaintiff to
8. The promissory notes referred to in the
renounce or abandon the pledge
complaint expressly state that the loan
agreements.
obligation is payable within the period of ten
(10) years. Thus, from the execution date
of September 30, 1999, its due date falls on
September 3o, 2009 (and not 2001 as
erroneously stated in the complaint). Thus,
prior to September 30, 2009, the loan
 13. As aptly stated, it is not aware of any
termination of the pledge agreement
initiated by the plaintiff.
Moreover, in paragraph 10 of the Answer, Spouses Go also denied the existence of prior
demand alleged by PBCom in paragraph 10 of the Complaint. They stated therein that they
Complaint
9. Defendants outstanding obligations
under the two (2) promissory notes as
of May 31, 2001 are: P21,576,668.64
(Annex A) and P95,991,111.11 (Annex B),
or a total of P117,567,779.75. Copy of the
Statement of Account is hereto attached
as Annex E hereof.[51]
Answer
9. Contrary to the plaintiffs preference,
defendant Jose C. Go has made substantial
payments in terms of his monthly payments.
There is therefore, a need to do some
accounting works just to reconcile the
records of both parties.[52]

were not aware of any demand made by PBCom for the settlement of the whole obligation.
Both sections are quoted below:
Complaint
10. Plaintiff made repeated demands from
(sic) defendant for the payment of the
obligations which the latter acknowledged
to have incurred however, defendant
imposed conditions such as [that] his
[effecting] payments shall depend upon the
lifting of garnishment effected by the
Bangko Sentral on his accounts.
Photocopies of defendants communication
dated March 3, 2000 and April 7, 2000, with
plaintiff are hereto attached as Annexes
F and Ghereof, as well as its demand to pay
dated April 18, 2000. Demand by plaintiff is
hereto attached as Annex
Hhereof.[50] [Emphases supplied]
Answer
10. While demand is a necessary
requirement to consider the defendant to be
in delay/default, such has not been
complied with by the plaintiff since the
former is not aware of any demand made to
him by the latter for the settlement of the
whole obligation.
Clearly then, when taken within the context of the entirety of the pleading, it becomes apparent
that there was no implied admission and that there were indeed genuine issues to be
addressed.
As to the attached March 3, 2000 letter, the Court is in accord with the CA when it wrote:
The letter dated March 3, 2000 is insufficient to support the
material averments in PBComs complaint for being equivocal and capable
of different interpretations. The contents of the letter do not address all the
issues material to the banks claim and thus do not conclusively establish
the cause of action of PBCom against the spouses Go. As regards the
letter dated April 7, 2000, the trial court itself ruled that such letter
addressed to PBCom could not be considered against the defendants-
appellants simply because it was not signed by defendant-appellant Jose
Go.
Notably, the trial court even agreed with the defendant-appellants
on the following points:

The alleged default and outstanding obligations

Finally, as to the amount of the outstanding obligation, PBCom alleged in paragraph 9 of the
Complaint that the outstanding balance on the couples obligations as of May 31, 2001
was P21,576,668.64 for the first loan and P95,991,111.11, for the second loan or a total
of P117,567,779.75.
In paragraph 9 of the Answer, however, Spouses Go, without stating any specific amount,
averred that substantial monthly payments had been made, and there was a need to reconcile
the accounting records of the parties.
are based on the Statement of Account. This Court
agrees with the defendants that since the substance of
the document was not set forth in the complaint although
a copy thereof was attached thereto, or the said
document was not set forth verbatim in the pleading, the
rule on implied admission does not apply.[53]
It must also be pointed out that the cases cited by PBCom do not apply to this case. Those
two cases involve denial of lack of knowledge of facts so plainly and necessarily within [the
knowledge of the party making such denial] that such averment of ignorance must be palpably
untrue.[54] Also, in both cases, the documents denied were the same documents or deeds
sued upon or made the basis of, and attached to, the complaint.
 it, a categorical and express denial must be made. In such a case, the
In Philippine Bank of Communications v. Court of Appeals,[55] the Court ruled that the occurrence or non-occurrence of the facts alleged may be said to be within
defendants contention that it had no truth or information sufficient to form a belief as to the the partys knowledge. In short, the petitioner herein could have simply
expressly and in no uncertain terms denied the allegation if it were untrue.
truth of the deed of exchange was an invalid or ineffectual denial pursuant to the Rules of It has been held that when the matters of which a defendant alleges of
Court,[56] as it could have easily asserted whether or not it had executed the deed of exchange having no knowledge or information sufficient to form a belief, are plainly
and necessarily within his knowledge, his alleged ignorance or lack of
attached to the petition. Citing Capitol Motors Corporations v. Yabut,[57]the Court stated that: information will not be considered as specific denial. His denial lacks the
element of sincerity and good faith, hence, insufficient. [62]
x x x The rule authorizing an answer to the effect that the
defendant has no knowledge or information sufficient to form a belief as to
the truth of an averment and giving such answer the effect of a denial, Borrowing the phraseology of the Court in the Capitol Motors case, clearly, the fact of the
does not apply where the fact as to which want of knowledge is asserted, parties having executed the very documents sued upon, that is, the deed of exchange, deed
is so plainly and necessarily within the defendants knowledge that his
averment of ignorance must be palpably untrue. [58] or mortgage or promissory note, is so plainly and necessarily within the knowledge of the
denying parties that any averment of ignorance as to such fact must be palpably untrue.
The Warner Barnes case cited above sprung from a suit for foreclosure of mortgage, where
the document that defendant denied was the deed of mortgage sued upon and attached to In this case, however, Spouses Go are not disclaiming knowledge of the transaction or the
the complaint. The Court then ruled that it would have been easy for the defendants to execution of the promissory notes or the pledge agreements sued upon. The matters in
specifically allege in their answer whether or not they had executed the alleged mortgage. contention are, as the CA stated, whether or not respondents were in default, whether there
was prior demand, and the amount of the outstanding loan. These are the matters that the
Similarly, in Capitol Motors, the document denied was the promissory note sued upon and
parties disagree on and by which reason they set forth vastly different allegations in their
attached to the complaint. In said case, the Court ruled that although a statement of lack of
pleadings which each will have to prove by presenting relevant and admissible evidence
knowledge or information sufficient to form a belief as to the truth of a material averment in
during trial.
the complaint was one of the modes of specific denial contemplated under the Rules,
paragraph 2 of the Answer in the said case was insufficient to constitute a specific
Furthermore, in stark contrast to the cited cases where one of the parties disclaimed
denial.[59] Following the ruling in the Warner Barnes case, the Court held that it would have
knowledge of something so patently within his knowledge, in this case, respondents Spouses
been easy for defendant to specifically allege in the Answer whether or not it had executed
Go categorically stated in the Answer that there was no prior demand, that they were not in
the promissory note attached to the Complaint.[60]
default, and that the amount of the outstanding loan would have to be ascertained based on
official records.
In Morales v. Court of Appeals,[61] the matter denied was intervenors knowledge of the
plaintiffs having claimed ownership of the vehicle in contention. The Court therein stated:
WHEREFORE, the petition is DENIED.
Yet, despite the specific allegation as against him, petitioner, in
his Answer in Intervention with Counterclaim and Crossclaim, answered
the aforesaid paragraph 11, and other paragraphs, merely by saying that SO ORDERED.
he has no knowledge or information sufficient to form a belief as to its truth.
While it may be true that under the Rules one could avail of this statement
as a means of a specific denial, nevertheless, if an allegation directly and
specifically charges a party to have done, performed or committed a
particular act, but the latter had not in fact done, performed or committed
 [G.R. No. 139884. February 15, 2001]
SPOUSES OCTAVIO and EPIFANIA LORBES, petitioners, vs. COURT OF APPEALS,
RICARDO DELOS REYES and JOSEFINA CRUZ, respondents.
DECISION
GONZAGA-REYES, J.:
This petition for review on certiorari arose from an action for reformation of instrument
and damages originally filed with the Regional Trial Court of Antipolo, Rizal, Branch 74, the
decision on which was reviewed and reversed by the Third Division of the Court of Appeals.
Petitioners were the registered owners of a 225-square meter parcel of land located in
Antipolo, Rizal covered by Transfer Certificate of Title No. 165009. Sometime in August 1991,
petitioners mortgaged this property to Florencio and Nestor Carlos in the amount of
P150,000.00.
About a year later, the mortgage obligation had increased to P500,000.00 and fearing
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
agreed to redeem the property but because he allegedly had no money then for the purpose
he solicited the assistance of private respondent Josefina Cruz, a family friend of the delos
Reyeses and an employee of the Land Bank of the Philippines.
It was agreed that petitioners will sign a deed of sale conveying the mortgaged property
in favor of private respondent Cruz and thereafter, Cruz will apply for a housing loan with Land
Bank, using the subject property as collateral. It was further agreed that out of the proceeds
of the loan, P500,000.00 will be paid to the Carloses as mortgagees, and any such balance
will be applied by petitioners for capital gains tax, expenses for the cancellation of the
mortgage to the Carloses, transfer of title to Josefina Cruz, and registration of a mortgage in
favor of Land Bank.[1] 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.
On September 29, 1992, the Land Bank issued a letter of guarantee in favor of the
Carloses, informing them that Cruzs loan had been approved. On October 22, 1992, Transfer
Certificate of Title No. 165009 was cancelled and Transfer Certificate of Title No. 229891 in
the name of Josefina Cruz was issued in lieu thereof.[2] On November 25, 1992, the mortgage
was discharged.
Sometime in 1993, petitioners notified private respondent delos Reyes that they were
ready to redeem the property but the offer was refused. Aggrieved, petitioners filed on July
22, 1994 a complaint for reformation of instrument and damages with the RTC of Antipolo,
Rizal, docketed as Civil Case No. 94-3296.
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.[3] 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. Petitioners averred that they did not see any reason why private
respondents would retract from their original agreement other than that they (petitioners) and
the members of their family resigned en masse from the Mahal Namin Organization, of which
private respondent delos Reyes was the president and chairman of the board of directors,
and private respondent Cruz was the treasurer. In the same complaint, they demanded moral
damages, exemplary damages, and attorneys fees.
On July 29, 1996, 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 reglamentary period, or only on
September 1, 1994. Thus, on September 5, 1994, petitioners filed a motion to declare private
respondents in default, which the trial court granted in an order dated September 16,
1994. On September 30 of the same year, petitioners presented their evidence ex
parte before the trial court. The principal witness presented was petitioner Octavio Lorbes,
whose testimony was corroborated by his son, Atty. Salvador Lorbes.
On October 12, 1994, private respondents filed a motion to lift order of default and to
strike out evidence presented ex parte, which the court denied in an order dated October 26,
1994.
On June 20, 1995, the trial court rendered judgment in favor of petitioners, upon finding
that: (1) the Deed of Absolute Sale dated October 21, 1992 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. As explained by the trial court in its decision:
The foregoing uncontroverted facts clearly show that the transaction entered into between
the plaintiffs and the defendants is not an absolute sale but merely an equitable mortgage
as the sale was executed in order to secure a loan from a certain bank to save the property
from the danger of foreclosure and to use it as collateral thereof for bank loan purposes and
that the same does not reflect the real intention of the parties in executing the said Deed of
Sale. The court notes that at the time the transaction and the Deed of Absolute Sale was
executed by the plaintiffs sometime in 1992, the prevailing market value of the lot alone was
P400,000.00 per square meter such that the lot alone consisting of 255 square meters,
excluding the house and improvements thereon would already cost more than a million
pesos already hence, the consideration of P600,000.00 in the said Deed of Sale is
considerably insufficient compared to the value of the property. Further, the plaintiffs are still
in possession of the subject property and had been paying the realty taxes thereon even
after the execution of the sale and the transfer of the title from the plaintiffs to defendant
Josephine Cruz which clearly evinces the true badge of the transaction which occurred
between the plaintiffs and defendants as that of an equitable mortgage and not an absolute
sale and that the plaintiffs were only compelled to enter into the said transaction of sale with
the defendants as the former were in extreme need of money in order to redeem their only
conjugal property and to save it from being foreclosed for non-payment of the mortgage
obligation and that it was never the intention of the plaintiffs to sell the property to the
defendants, as it was their agreement that plaintiffs can redeem the property or any member
of the family thereof, when they become financially stable. [4]
The dispositive portion of the trial courts decision thus provides:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the
plaintiffs and against the defendants, ordering the latter jointly and severally, as follows:
1. To reconvey the subject property to the plaintiffs upon payment of the price
stipulated in the contract of sale;
2. To pay plaintiffs the sum of P50,000.00 as moral damages;
3. To pay plaintiffs the sum of P50,000.00 as and by way of attorneys fees plus
P1,000.00 per court appearance;
4. To pay the costs of suit.
SO ORDERED.[5]
The Court of Appeals reversed the above decision, finding that private respondents were
denied due process by the refusal of the trial court to lift the order of default against them,
and that the transaction between petitioners and Cruz was one of absolute sale, not of
equitable mortgage. It also held the RTC decision to be constitutionally infirm for its failure to
clearly and distinctly state the facts and the law on which it is based.
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.
In its decision, the Court of Appeals also pointed out that under the usual arrangement
of pacto de retro the vendor of the property is a debtor of the vendee, and the property is used
as security for his obligation. In the instant case, the mortgage creditors (the Carloses) are
third persons to the Deed of Absolute Sale.
This petition raises three issues before the Court: (1) whether respondent court erred in
ruling that the Deed of Absolute Sale dated October 21, 1992 was an equitable mortgage, (2)
whether respondent court erred in ruling that by declaring private respondents in default they
were denied due process of law, and (3) whether respondent court erred in ruling that the trial
courts decision violates the constitutional requirement that it should clearly and distinctly state
the facts and the law on which it is based.[7]
We shall first deal with the second and third issues, these being preliminary matters.
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.[8] 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.[9]
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. [10] 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.
As regards the third issue, we reverse for being unfounded the holding of the Court of
Appeals since the RTC decision, some parts of which we even reproduced in our earlier
discussions, clearly complied with the constitutional requirement to state clearly and distinctly
the facts and the law on which it was based.
Thus, the one issue essential to the resolution of this case is the nature of the transaction
between petitioners and private respondent Cruz concerning the subject parcel of land. Did
the parties intend for the contested Deed of Absolute Sale to be a bona fideand absolute
conveyance of the property, or merely an equitable mortgage?
On the outset, it must be emphasized that there is no conclusive test to determine
whether a deed absolute on its face is really a simple loan accommodation secured by a
mortgage.[11] The decisive factor in evaluating such agreement is the intention of the parties,
as shown not necessarily by the terminology used in the contract but by all the surrounding
circumstances, such as the relative situation of the parties at that time, the attitude, acts,
conduct, declarations of the parties, the negotiations between them leading to the deed, and
generally, all pertinent facts having a tendency to fix and determine the real nature of their
design and understanding. As such, documentary and parol evidence may be submitted and
admitted to prove the intention of the parties.[12]
The conditions which give way to a presumption of equitable mortgage, as set out in
Article 1602 of the Civil Code, apply with equal force to a contract purporting to be one of
absolute sale.[13] Moreover, 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. [14] This is simply in consonance with the
rule that the law favors the least transmission of property rights. [15]
Thus, under Article 1602 of the Civil Code, a contract shall be presumed to be an
equitable mortgage when --- (a) the price of a sale with right to repurchase is unusually
inadequate; (b) the vendor remains in possession as lessee or otherwise; (c) upon or after
the expiration of the right of repurchase another instrument extending the period of
redemption or granting a new period is executed; (d) the purchaser retains for himself a part
of the purchase price; (e) the vendor binds himself to pay the taxes on the thing sold; and, (f)
in any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
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.
It is not disputed that before the execution of the Deed of Absolute Sale petitioners
mortgage obligation to the Carloses was nearing maturity and they were in dire need of money
to meet the same. Hence, they asked for the help of their son-in-law delos Reyes who in turn
requested Cruz to take out a housing loan with Land Bank. Since collateral is a standard
requirement of banks in giving out loans, it was made to appear that the subject property was
sold to Cruz so she can declare the same as collateral for the housing loan. This was simply
in line with the basic requirement in our laws that the mortgagor be the absolute owner of the
property sought to be mortgaged.[16] Consistent with their agreement, as soon as the housing
loan was approved, the full amount of the proceeds were immediately turned over to
petitioners, who promptly paid P500,000.00 therefrom to the Carloses in full satisfaction of
their mortgage obligation. The balance was spent by petitioners in transferring title to the
property to Cruz and registering the new mortgage with Land Bank.
Understandably, the Deed of Absolute Sale and its supporting documents do not reflect
the true arrangement between the parties as to how the loan proceeds are to be actually
applied because it was not the intention of the parties for these documents to do so. The sole
purpose for preparing these documents was to satisfy Land Bank that the requirement of
collateral relative to Cruzs application for a housing loan was met.
Were we to accept, as respondent court had, that the loan that Cruz took out with Land
Bank was indeed a housing loan, then it is rather curious that Cruz kept none of the loan
proceeds but allowed for the bulk thereof to be immediately applied to the payment of
petitioners outstanding mortgage obligation. It also strains credulity that petitioners, who were
exhausting all means to save their sole conjugal real property from being foreclosed by the
Carloses, would concurrently part with the same in favor of Cruz.
Such urgent prospect of foreclosure helps to explain why petitioners would subscribe to
an agreement like the Deed of Absolute Sale in the herein case, which on its face represents
their unconditional relinquishment of ownership over their property.Passing upon previous
similar situations the Court has declared that while it was true that plaintiffs were aware of the
contents of the contracts, the preponderance of the evidence showed however that they
signed knowing that said contracts did not express their real intention, and if they did so
notwithstanding this, it was due to the urgent necessity of obtaining funds. Necessitous men
are not, truly speaking, free men; but to answer a present emergency, will submit to any terms
that the crafty may impose upon them.[17]
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. Cruz made no demand on petitioners to vacate the subject premises
until March 19, 1994;[18] interestingly, this was two days after petitioners signified their
intention to redeem the property by paying the full amount of P600,000.00.[19] On this basis,
the finding of respondent court that petitioners remained in possession of the property only
because they refused to vacate on Cruzs demand is not accurate because the records reflect
that no such demand was made until more than a year since the purported sale of the
property.
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, [20] 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.
That a transfer certificate of title was issued in favor of private respondent Cruz also
does not import conclusive evidence of ownership or that the agreement between the parties
was one of sale. As was stated in Oronce vs. Court of Appeals,[21] citing Macapinlac vs.
Gutierrez Repide[22]
xxx it must be borne in mind that the equitable doctrine xxx to the effect that any
conveyance intended as security for a debt will be held in effect to be a mortgage, whether
so actually expressed in the instrument or not, operates regardless of the form of the
agreement chosen by the contracting parties as the repository of their will. Equity looks
through the form and considers the substance; and no kind of engagement can be adopted
which will enable the parties to escape from the equitable doctrine to which reference is
made. In other words, a conveyance of land, accompanied by registration in the name of the
transferee and the issuance of a new certificate, is no more secured from the operation of
the equitable doctrine than the most informal conveyance that could be devised.
Before we fully set aside this issue, it will be recalled that the instant petition originated
as a complaint for reformation filed before the RTC of Antipolo, Rizal. The Court of Appeals
found petitioners action for reformation unmeritorious because there was no showing that the
failure of the deed of sale to express the parties true intention was because of mistake, fraud,
inequitable conduct, or accident.[23] Indeed, under the facts of the present case, reformation
may not be proper for failure to fully meet the requisites in Article 1359 of the Civil Code, and
because as the evidence eventually bore out the contested Deed of Absolute Sale was not
intended to reflect the true agreement between the parties but was merely to comply with the
collateral requirements of Land Bank. However, the fact that the complaint filed by petitioners
before the trial court was categorized to be one for reformation of instrument should not
preclude the Court from passing upon the issue of whether the transaction was in fact an
equitable mortgage as the same has been squarely raised in the complaint and had been the
subject of arguments and evidence of the parties. Thus we have held that it is not the caption
of the pleading but the allegations therein that determine the nature of the action, and the
Court shall grant relief warranted by the allegations and the proof even if no such relief is
prayed for.[24]
Finally, on the award of damages. Considering the due process flaws that attended the
default judgment of the RTC, and applying the rule adopted by this Court that in instances
where no actual damages are adjudicated the awards for moral and exemplary damages may
be reduced,[25] we reduce the award for moral damages in the instant case from P50,000.00
to P30,000.00. At the same time, we sustain the award of attorneys fees in the amount of
P50,000.00, it being clear that petitioners were compelled to incur expenses and undergo the
rigors of litigation to recover their property.
WHEREFORE, the decision of the Court of Appeals is REVERSED and SET
ASIDE. The decision of the Regional Trial Court of Antipolo, Rizal is REINSTATED, with the
MODIFICATION that the award of moral damages is reduced to P30,000.00, and in all other
respects AFFIRMED. Costs against private respondents.
SO ORDERED.
G.R. No. L-40491 May 28, 1975
SEGUNDO AMANTE, petitioner,
vs.
HON. DELFIN VIR. SUNGA, in his capacity as Presiding Judge of the Court of First
Instance of Camarines Sur, Branch No. I, and VIGAAN AGRICULTURAL
DEVELOPMENT CORPORATION, respondents.
Pedro N. Belmi for petitioner.
Eriberto J. Fante for respondents.
ANTONIO, J.:ñé+.£ªwph!1
This case raises in issue the validity of the Order dated February 14, 1975 of respondent
Judge of the Court of First Instance of Camarines Sur, Branch I, setting aside its Order of
December 6, 1974, granting petitioner an extension of fifteen (15) days from December 9,
1974 within which to file his answer to the complaint in Civil Case No. 7799 (Vigaan
Agricultural Development Corporation vs. Segundo Amante) and declaring the petitioner in
default, notwithstanding the fact that said party had already filed his answer.
It appears that the petitioner, on December 2, 1974, filed a written motion with the trial court
requesting for an extension of fifteen (15) days from December 9, 1974, within which to file
his answer. Although it is not disputed that a copy of said motion was furnished the counsel
for the plaintiff, the said pleading appears to have been addressed only to the Clerk of
Court, with the request that said official submit the motion to the Court for its consideration
and resolution immediately upon receipt thereof.
On December 6, 1974, the trial court granted, the motion. Petitioner, however, on December
10, 1974, filed a "Motion for Bill of Particulars". Copy of this motion was appropriately
addressed to the counsel of plaintiff, informing him that petitioner will submit the said motion
to the, court for its consideration and resolution at 8:30 a.m. on December 23, 1974.
In the meantime, on December 11, 1974, private respondent corporation, as plaintiff in said
case, filed a motion to set aside the trial court's Order of December 6, 1974, alleging that
the notice in petitioner's motion of December 2, 1974 was defective for non-compliance with
Section 5 of Rule 15 of the Revised Rules of Court, and praying that the defendant be
declared in default.
The aforecited motions of the petitioner and of the corporation were set for hearing on
February 7, 1975. On said date, after the respondent corporation showed to the petitioner
its Articles of Incorporation, the latter agreed to withdraw his Motion for Bill of Particulars,
leaving the private respondent's motion for resolution by the Court.
On the same date (February 7, 1975.), petitioner filed his answer with counterclaim to the
complaint. The court a quo, however, on February, 14, 1975, on the basis of its opinion that
the notice in the motion of petitioner for the extension of the period within which to file an
answer was defective because of its alleged failure to comply with the requirements of
Section 5 of Rule 15 of the Revised Rules of Court, set aside its Order of December 6,
1974, declared petitioner in default and authorized the Clerk of Court to receive the
evidence of the plaintiff.
In view of the legal issue involved, this Court considered the Comment of respondent
corporation as its Answer. As the matter was already amply discussed in the pleadings, this
case was deemed submitted for decision.
We grant certiorari and set aside the trial court's Order of February 14, 1975.
1. The motion for extension of time within which a party may plead is not a litigated motion
where notice to the adverse party is necessary to afford the latter an opportunity to resist
the application,1 but an ex parte motion "made to the court in behalf of one or the other of
the parties to the action, in the absence and usually without the knowledge of the other
party or parties."2 As "a general rule, notice of motion is required where a party has a right
to resist the relief sought by the motion and principles of natural justice demand that his
rights be not affected without an opportunity to be heard..." 3
It has been said that "ex parte motions are frequently permissible in procedural matters, and
also in situations and under circumstances of emergency; and an exception to a rule
requiring notice is sometimes made where notice or the resulting delay might tend to defeat
the objection of the motion."4
Section 1 of Rule 11 of the Revised Rules of Court authorizes the trial court to permit the
submission of an answer even after the time fixed in the rules for its presentation. The
granting of extension to plead is a matter addressed to the sound discretion of the court. 5 In
some cases the court allowed the defendant to file his answer "even after the time fixed for
their presentation."6
Thus We have set aside orders of default where defendant's failure to answer on time was
excusable.7
In the case at bar, respondent private corporation was not deprived of any substantial right
by reason of the alleged defect of notice in petitioner's motion praying for an extension of
the time to plead. There are motions that may be heard and granted ex parte, and a motion
for extension of time to file an answer belongs to such class.8 It was, therefore, error for the
court a quo to set aside its Order granting extension to petitioner within which to file his
pleading.
2. Moreover, petitioner had filed a Motion for Bill of Particulars on December 10, 1974, and
under the Rules "after service of the bill of particulars ... or after denial of his motion, the
moving party shall have the same time to serve his responsive pleading, if any is permitted
by these rules, as that to which he was entitled at the time of serving his motion, but not less
than five (5) days in any event." (Section 1 [b], Rule 12, Revised Rules of Court.) The
pendency of the motion for a bill of particulars, therefore, interrupts the period within which
to file a responsive pleading, and movant should have, after notice of the denial of his
motion, the same time to serve his answer "as that to which he was entitled at the time of
serving his motion." 9

It is true that petitioner, on February 7, 1975, withdrew his Motion for a Bill of Particulars, but
on the same date he also filed his answer.

In the attendant circumstances, We cannot perceive how the interests of justice was served
and promoted by the precipitate action of the trial court. A default judgment does not
pretend to be based on the merits of the controversy. Its existence is justified by
expediency. It may, however, amount to a positive and considerable injustice to the
defendant. The possibility of such serious consequences necessarily requires a careful
examination of the circumstances under which a default order was issued. And when no
real injury would result to the interests of the plaintiff by the reopening of the case, the only
objection to such action would, therefore, be solely on a technicality. On such an infirm
foundation, it would be a grievous error to sacrifice the substantial rights of a litigant. For the
rules should be liberally construed in order to promote their objective in assisting the parties
in obtaining just, speedy and inexpensive determination of their cases.

WHEREFORE, the default order of February 14, 1975, as well as the Order of March 14,
1975, denying petitioner's motion for reconsideration, is hereby set aside, and this case is
ordered remanded to the court of origin for further proceedings. Costs against private
respondent.
NORBERTO ALTRES, et al., v. CAMILO G. EMPLEO, et al. (G.R. No. 180986, December
10, 2008) promotion and/or qualifications had been properly addressed. The same Resolution enjoined

all officers of the said Office to put off the transmission of all appointments to the CSC, therein

Assailed via petition for review on certiorari are the Decision dated February 2, 2007 [1] and making it clear that non-compliance therewith would be met with administrative action.

Order dated October 22, 2007[2] of Branch 3 of the Regional Trial Court (RTC) of Iligan City,

which denied petitioners petition for mandamus praying for a writ commanding the city Respondent city accountant Empleo did not thus issue a certification as to availability

accountant of Iligan, Camilo G. Empleo (Empleo), or his successor in office, to issue a of funds for the payment of salaries and wages of petitioners, as required by Section 1(e)(ii),

certification of availability of funds in connection with their appointments, issued by then Iligan Rule V of CSC Memorandum Circular No. 40, Series of 1998 reading:

City Mayor Franklin M. Quijano (Mayor Quijano), which were pending approval by the Civil xxxx
e. LGU Appointment. Appointment in local government units for submission to
Service Commission (CSC). the Commission shall be accompanied, in addition to the
common requirements, by the following:

xxxx
Sometime in July 2003, Mayor Quijano sent notices of numerous vacant career positions in
ii. Certification by the Municipal/City Provincial Accountant/Budget Officer that
the city government to the CSC. The city government and the CSC thereupon proceeded to funds are available. (Emphasis and underscoring supplied)
publicly announce the existence of the vacant positions. Petitioners and other applicants

submitted their applications for the different positions where they felt qualified.

And the other respondents did not sign petitioners position description forms.
Toward the end of his term or on May 27, June 1, and June 24, 2004, Mayor Quijano issued
appointments to petitioners. The CSC Field Office for Lanao del Norte and Iligan City disapproved the

appointments issued to petitioners invariably due to lack of certification of availability of funds.

In the meantime, the Sangguniang Panglungsod issued Resolution No. 04-

242[3] addressed to the CSC Iligan City Field Office requesting a suspension of action on the On appeal by Mayor Quijano, CSC Regional Office No. XII in Cotabato City, by
processing of appointments to all vacant positions in the plantilla of the city government as Decision of July 30, 2004,[5] dismissed the appeal, it explaining that its function in approving
of March 19, 2004 until the enactment of a new budget. appointments is only ministerial, hence, if an appointment lacks a requirement prescribed by

the civil service law, rules and regulations, it would disapprove it without delving into the
The Sangguniang Panglungsod subsequently issued Resolution No. 04- reasons why the requirement was not complied with.
266[4] which, in view of its stated policy against midnight appointments, directed the officers
of the City Human Resource Management Office to hold in abeyance the transmission of all Petitioners thus filed with the RTC of Iligan City the above-stated petition for
appointments signed or to be signed by the incumbent mayor in order to ascertain whether mandamus against respondent Empleo or his successor in office for him to issue a
these had been hurriedly prepared or carefully considered and whether the matters of
certification of availability of funds for the payment of the salaries and wages of petitioners, Petitioners filed a Compliance Report dated February 18, 2008[10] to which they

and for his co-respondents or their successors in office to sign the position description forms. attached 18 copies of (a) a verification and certification, (b) an affidavit of service, and (c)

photocopies of counsels Integrated Bar of the Philippines (IBP) official receipt for the year

As stated early on, Branch 3 of the Iligan RTC denied petitioners petition for 2008 and his privilege tax receipt for the same year.

mandamus. It held that, among other things, while it is the ministerial duty of the city

accountant to certify as to the availability of budgetary allotment to which expenses and Respondents duly filed their Comment,[11] alleging technical flaws in petitioners

obligations may properly be charged under Section 474(b)(4) of Republic Act No. petition, to which Comment petitioners filed their Reply[12] in compliance with the Courts

7160,[6] otherwise known as the Local Government Code of 1991, the city accountant cannot Resolution dated April 1, 2008.[13]

be compelled to issue a certification as to availability of funds for the payment of salaries and

wages of petitioners as this ministerial function pertains to the city treasurer. In so holding, The lone issue in the present petition is whether it is Section 474(b)(4) or Section

the trial court relied on Section 344 of the Local Government Code of 1991 the pertinent 344 of the Local Government Code of 1991 which applies to the requirement of certification

portion of which provides: of availability of funds under Section 1(e)(ii), Rule V of CSC Memorandum Circular Number

40, Series of 1998. As earlier stated, the trial court ruled that it is Section 344. Petitioners
Sec. 344. Certification and Approval of Vouchers. No money shall
be disbursed unless the local budget officer certifies to the existence of posit, however, that it is Section 474(b)(4) under which it is the ministerial duty of the
appropriation that has been legally made for the purpose, the local
city accountant to issue the certification, and not Section 344 which pertains to the ministerial
accountant has obligated said appropriation, and the
local treasurer certifies to the availability of funds for the purpose. x x x function of the city treasurer to issue the therein stated certification.
x (Underscoring supplied)

A discussion first of the technical matters questioned by respondents is in order.

Petitioners filed a motion for reconsideration [7] in which they maintained only their

prayer for a writ of mandamus for respondent Empleo or his successor in office to issue a Respondents assail as defective the verification and certification against forum

certification of availability of funds for the payment of their salaries and wages. The trial court shopping attached to the petition as it bears the signature of only 11 out of the 59 petitioners,

denied the motion by Order of October 22, 2007,[8] hence, the present petition. and no competent evidence of identity was presented by the signing petitioners. They thus
move for the dismissal of the petition, citing Section 5, Rule 7 [14] vis a vis Section 5, Rule

By Resolution of January 22, 2008,[9] this Court, without giving due course to the 45[15] of the 1997 Rules of Civil Procedure and Docena v. Lapesura[16] which held that the

petition, required respondents to comment thereon within ten (10) days from notice, and at certification against forum shopping should be signed by all the petitioners or plaintiffs in a

the same time required petitioners to comply, within the same period, with the relevant case and that the signing by only one of them is insufficient as the attestation requires

provisions of the 1997 Rules of Civil Procedure. personal knowledge by the party executing the same. [17]
 Petitioners, on the other hand, argue that they have a justifiable cause for their
inability to obtain the signatures of the other petitioners as they could no longer be contacted
or are no longer interested in pursuing the case.[18] Petitioners plead substantial compliance,
citing Huntington Steel Products, Inc., et al. v. NLRC[19] which held, among other things, that
while the rule is mandatory in nature, substantial compliance under justifiable circumstances
is enough.
Petitioners position is more in accord with recent decisions of this Court.
In Iglesia ni Cristo v. Ponferrada,[20] the Court held:
The substantial compliance rule has been applied by this Court in
a number of cases: Cavile v. Heirs of Cavile, where the Court sustained the
validity of the certification signed by only one of petitioners because he is
a relative of the other petitioners and co-owner of the properties in
dispute; Heirs of Agapito T. Olarte v. Office of the President of the
Philippines, where the Court allowed a certification signed by only two
petitioners because the case involved a family home in which all the
petitioners shared a common interest; Gudoy v. Guadalquiver, where the
Court considered as valid the certification signed by only four of the nine
petitioners because all petitioners filed as co-owners pro indiviso a
complaint against respondents for quieting of title and damages, as such,
they all have joint interest in the undivided whole; and DAR v. Alonzo-
Legasto, where the Court sustained the certification signed by only one of
the spouses as they were sued jointly involving a property in which they
had a common interest.[21] (Italics in the original, underscoring supplied)
Very recently, in Tan, et al. v. Ballena, et al.,[22] the verification and certification
against forum shopping attached to the original petition for certiorari filed with the Court of
Appeals was signed by only two out of over 100 petitioners and the same was filed one day
beyond the period allowed by the Rules. The appellate court initially resolved to dismiss the
original petition precisely for these reasons, but on the therein petitioners motion for
reconsideration, the appellate court ordered the filing of an amended petition in order to
include all the original complainants numbering about 240. An amended petition was then
filed in compliance with the said order, but only 180 of the 240 original complainants signed
the verification and certification against forum shopping. The Court of Appeals granted the
motion for reconsideration and resolved to reinstate the petition.
In sustaining the Court of Appeals in Tan, the Court held that it is a far better and
more prudent course of action to excuse a technical lapse and afford the parties a review of
the case to attain the ends of justice, rather than dispose of the case on technicality and cause
grave injustice to the parties, giving a false impression of speedy disposal of cases while
actually resulting in more delay, if not a miscarriage of justice.
The Court further discoursed in Tan:
Under justifiable circumstances, we have already allowed the
relaxation of the requirements of verification and certification so that the
ends of justice may be better served. Verification is simply intended to
secure an assurance that the allegations in the pleading are true and
correct and not the product of the imagination or a matter of speculation,
and that the pleading is filed in good faith; while the purpose of the
aforesaid certification is to prohibit and penalize the evils of forum
shopping.
In Torres v. Specialized Packaging Development Corporation, we
ruled that the verification requirement had been substantially complied with
despite the fact that only two (2) out of the twenty-five (25) petitioners have
signed the petition for review and the verification. In that case, we held that
the two signatories were unquestionably real parties-in-interest, who
undoubtedly had sufficient knowledge and belief to swear to the truth of the
allegations in the Petition.
In Ateneo de Naga University v. Manalo, we also ruled that there
was substantial compliance with the requirement of verification when only
one of the petitioners, the President of the University, signed for and on
behalf of the institution and its officers.
Similarly, in Bases Conversion and Development Authority v. Uy,
we allowed the signature of only one of the principal parties in the case
despite the absence of a Board Resolution which conferred upon him the
authority to represent the petitioner BCDA.
In the present case, the circumstances squarely involve a
verification that was not signed by all the petitioners therein. Thus, we see
 no reason why we should not uphold the ruling of the Court of Appeals in
reinstating the petition despite the said formal defect. constitute substantial compliance with the Rules considering, among other things, that the

petitioners were husband and wife, and that the subject property was their residence which
On the requirement of a certification of non-forum shopping, the
well-settled rule is that all the petitioners must sign the certification of non- was alleged in their verified petition to be conjugal. [25]
forum shopping. The reason for this is that the persons who have signed
the certification cannot be presumed to have the personal knowledge of the
other non-signing petitioners with respect to the filing or non-filing of any
action or claim the same as or similar to the current petition. The rule, With respect to petitioners non-presentation of any identification before the notary
however, admits of an exception and that is when the petitioners
public at the time they swore to their verification and certification attached to the petition,
show reasonable cause for failure to personally sign the certification. The
petitioners must be able to convince the court that the outright dismissal of suffice it to state that this was cured by petitioners compliance [26] with the Courts Resolution
the petition would defeat the administration of justice.
of January 22, 2008[27] wherein they submitted a notarized verification and certification
In the case at bar, counsel for the respondents disclosed that most
of the respondents who were the original complainants have since sought bearing the details of their community tax certificates. This, too, is substantial
employment in the neighboring towns of Bulacan, Pampanga compliance. The Court need not belabor its discretion to authorize subsequent compliance
and Angeles City. Only the one hundred eighty (180) signatories were then
available to sign the amended Petition for Certiorari and the accompanying with the Rules.
verification and certification of non-forum shopping.[23]

For the guidance of the bench and bar, the Court restates in capsule form the

In the present case, the signing of the verification by only 11 out of the 59 petitioners jurisprudential pronouncements already reflected above respecting non-compliance with the

already sufficiently assures the Court that the allegations in the pleading are true and correct requirements on, or submission of defective, verification and certification against forum

and not the product of the imagination or a matter of speculation; that the pleading is filed in shopping:

good faith; and that the signatories are unquestionably real parties-in-interest who

undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in 1) A distinction must be made between non-compliance with the requirement on or

the petition. submission of defective verification, and non-compliance with the requirement on or

submission of defective certification against forum shopping.

With respect to petitioners certification against forum shopping, the failure of the

other petitioners to sign as they could no longer be contacted or are no longer interested in 2) As to verification, non-compliance therewith or a defect therein does not

pursuing the case need not merit the outright dismissal of the petition without defeating the necessarily render the pleading fatally defective. The court may order its submission or

administration of justice. The non-signing petitioners are, however, dropped as parties correction or act on the pleading if the attending circumstances are such that strict compliance

to the case. with the Rule may be dispensed with in order that the ends of justice may be served
thereby.[28]
In fact, even Docena[24] cited by respondents sustains petitioners position. In that

case, the certification against forum shopping was signed by only one of the petitioning
3) Verification is deemed substantially complied with when one who has ample
spouses. The Court held that the certification against forum shopping should be deemed to
knowledge to swear to the truth of the allegations in the complaint or petition signs the
verification, and when matters alleged in the petition have been made in good faith or are true The Court had repeatedly clarified the distinction between a question of law and a

and correct.[29] question of fact. A question of law exists when the doubt or controversy concerns the correct

application of law or jurisprudence to a certain set of facts; or when the issue does not call for

4) As to certification against forum shopping, non-compliance therewith or a defect an examination of the probative value of the evidence presented, the truth or falsehood of

therein, unlike in verification, is generally not curable by its subsequent submission or facts being admitted.[36] A question of fact, on the other hand, exists when the doubt or

correction thereof, unless there is a need to relax the Rule on the ground of substantial difference arises as to the truth or falsehood of facts or when the query invites calibration of

compliance or presence of special circumstances or compelling reasons. [30] the whole evidence considering mainly the credibility of the witnesses, the existence and

relevance of specific surrounding circumstances, as well as their relation to each other and

5) The certification against forum shopping must be signed by all the plaintiffs or to the whole, and the probability of the situation. [37] When there is no dispute as to fact, the

petitioners in a case;[31] otherwise, those who did not sign will be dropped as parties to the question of whether the conclusion drawn therefrom is correct is a question of law. [38]

case. Under reasonable or justifiable circumstances, however, as when all the plaintiffs or

petitioners share a common interest and invoke a common cause of action or defense, the In the case at bar, the issue posed for resolution does not call for the reevaluation

signature of only one of them in the certification against forum shopping substantially complies of the probative value of the evidence presented, but rather the determination of which of the

with the Rule.[32] provisions of the Local Government Code of 1991 applies to the Civil Service Memorandum

Circular requiring a certificate of availability of funds relative to the approval of petitioners

6) Finally, the certification against forum shopping must be executed by the party- appointments.

pleader, not by his counsel.[33] If, however, for reasonable or justifiable reasons, the party-

pleader is unable to sign, he must execute a Special Power of Attorney [34] designating his AT ALL EVENTS, respondents contend that the case has become moot and

counsel of record to sign on his behalf. academic as the appointments of petitioners had already been disapproved by the

CSC. Petitioners maintain otherwise, arguing that the act of respondent Empleo in not issuing

And now, on respondents argument that petitioners raise questions of fact which are the required certification of availability of funds unduly interfered with the power of

not proper in a petition for review on certiorari as the same must raise only questions of appointment of then Mayor Quijano; that the Sangguniang Panglungsod Resolutions relied

law. They entertain doubt on whether petitioners seek the payment of their salaries, and upon by respondent Empleo constituted legislative intervention in the mayors power to

assert that the question of whether the city accountant can be compelled to issue a appoint; and that the prohibition against midnight appointments applies only to presidential

certification of availability of funds under the circumstances herein obtaining is a factual appointments as affirmed in De Rama v. Court of Appeals.[39]

issue.[35]
The Court finds that, indeed, the case had been

The Court holds that indeed petitioners are raising a question of law. rendered moot and academic by the final disapproval of petitioners appointments by

the CSC.

The mootness of the case notwithstanding, the Court resolved to rule on its
merits in order to settle the issue once and for all, given that the contested action is
one capable of repetition[40] or susceptible of recurrence.
The pertinent portions of Sections 474(b)(4) and 344 of the Local Government Code
of 1991 provide:
Section 474. Qualifications, Powers and Duties.
xxxx
(b) The accountant shall take charge of both the accounting and internal
audit services of the local government unit concerned and shall:
xxxx
(4) certify to the availability of budgetary allotment to which
expenditures and obligations may be properly charged. (Emphasis and
underscoring supplied)
xxxx
Sec. 344. Certification and Approval of Vouchers. No money shall
be disbursed unless the local budget officer certifies to the existence
of appropriation that has been legally made for the purpose, the local
accountant has obligated said appropriation, and the local treasurer
certifies to the availability of funds for the purpose. x x x (Emphasis and
underscoring supplied)
Petitioners propound the following distinctions between Sections 474(b)(4) and 344
of the Local Government Code of 1991:
(1) Section 474(b)(4) speaks of certification of availability of
budgetary allotment, while Section 344 speaks of certification of availability
of funds for disbursement;
(2) Under Section 474(b)(4), before a certification is issued, there
must be an appropriation, while under Section 344, before a certification is
issued, two requisites must concur: (a) there must be an appropriation
legally made for the purpose, and (b) the local accountant has obligated
said appropriation;
(3) Under Section 474(b)(4), there is no actual payment involved
because the certification is for the purpose of obligating a portion of the
appropriation; while under Section 344, the certification is for the purpose
of payment after the local accountant had obligated a portion of the
appropriation;
(4) Under Section 474(b)(4), the certification is issued if there is
an appropriation, let us say, for the salaries of appointees; while under
Section 344, the certification is issued if there is an appropriation and the
same is obligated, let us say, for the payment of salaries of employees. [41]
Respondents do not squarely address the issue in their Comment.
Section 344 speaks of actual disbursements of money from the local treasury in
payment of due and demandable obligations of the local government unit. The disbursements
are to be made through the issuance, certification, and approval of vouchers. The full text of
Section 344 provides:
Sec. 344. Certification and Approval of Vouchers. No money shall
be disbursed unless the local budget officer certifies to the existence of
appropriation that has been legally made for the purpose, the local
accountant has obligated said appropriation, and the local treasurer
certifies to the availability of funds for the purpose. Vouchers and payrolls
shall be certified to and approved by the head of the department or office
who has administrative control of the fund concerned, as to validity,
propriety, and legality of the claim involved. Except in cases of
disbursements involving regularly recurring administrative expenses such
as payrolls for regular or permanent employees, expenses for light, water,
telephone and telegraph services, remittances to government creditor
agencies such as GSIS, SSS, LDP, DBP, National Printing Office,
Procurement Service of the DBM and others, approval of the disbursement
voucher by the local chief executive himself shall be required whenever
local funds are disbursed.
In cases of special or trust funds, disbursements shall be
approved by the administrator of the fund.
In case of temporary absence or incapacity of the department
head or chief of office, the officer next-in-rank shall automatically perform
 his function and he shall be fully responsible therefor. (Italics and
underscoring supplied) of appointees to positions in the plantilla of the local government unit, as required under

Section 1(e)(ii), Rule V of CSC Memorandum Circular Number 40, Series of 1998, a

requirement before the CSC considers the approval of the appointments.

Voucher, in its ordinary meaning, is a document which shows that services have

been performed or expenses incurred.[42] When used in connection with disbursement of

In fine, whenever a certification as to availability of funds is required
money, it implies the existence of an instrument that shows on what account or by what
for purposes other than actual payment of an obligation which requires disbursement of
authority a particular payment has been made, or that services have been performed which
money, Section 474(b)(4) of the Local Government Code of 1991 applies, and it is the
entitle the party to whom it is issued to payment.[43]
ministerial duty of the city accountant to issue the certification.

Section 344 of the Local Government Code of 1991 thus applies only
WHEREFORE, the Court declares that it is Section 474(b)(4), not Section 344, of
when there is already an obligation to pay on the part of the local government unit, precisely
the Local Government Code of 1991, which applies to the requirement of certification of
because vouchers are issued only when services have been performed or expenses incurred.
availability of funds under Section 1(e)(ii), Rule V of Civil Service Commission Memorandum
The requirement of certification of availability of funds from the city treasurer under
Circular Number 40, Series of 1998.
Section 344 of the Local Government Code of 1991 is for the purpose of facilitating the

approval of vouchers issued for the payment of services already rendered to, and expenses

incurred by, the local government unit. SO ORDERED.

The trial court thus erred in relying on Section 344 of the Local Government Code of

1991 in ruling that the ministerial function to issue a certification as to availability of funds for

the payment of the wages and salaries of petitioners pertains to the city treasurer. For at the

time material to the required issuance of the certification, the appointments issued to

petitioners were not yet approved by the CSC, hence, there were yet no services performed

to speak of. In other words, there was yet no due and demandable obligation of the local

government to petitioners.

Section 474, subparagraph (b)(4) of the Local Government Code of 1991, on the

other hand, requires the city accountant to certify to the availability of budgetary allotment to

which expenditures and obligations may be properly charged.[44] By necessary implication, it

includes the duty to certify to the availability of funds for the payment of salaries and wages
G.R. No. 190814 October 9, 2013
MICHELLE LANA BROWN- ARANETA, for herself and representing her minor
daughters, ARABELLA MARGARITA B. ARANET A and A V ANGELINAMYKAELA B.
ARANETA, Petitioners,
vs.
JUAN IGNACIO ARANETA, Respondent.
DECISION
VELASCO, J.:
The Case
Assailed and sought to be set aside in this Petition for Review on Certiorari under Rule 45
are the May 11, 2009 Decision1 of the Court of Appeals (CA) in CA-G .R. SP No. 105442
and its Resolution2 of December28, 2009 denying petitioner's motion for reconsideration of
said decision.
The assailed decision ordered the dismissal of Civil Case No. 08-023 of the Regional Trial
Court (RTC), Branch 207 in Muntinlupa City and nullified all the issuances it made in that
case, a petition for protection order under Republic Act No. (RA) 9262, otherwise known as
the Anti-Violence Against Women and Their Children Act of 2004, commenced by petitioner
Michelle Lana Brown-Araneta (Michelle) against respondent Juan Ignacio Araneta (Juan
Ignacio) before that court.
The facts
On April 14, 2000, Juan Ignacio and Michelle were married in Las Vegas, Nevada, USA.
The union produced two (2) children, namely: Arabella Margarita (Ara) and Avangelina
Mykaela (Ava), born on February 22, 2003 and April 15, 2005, respectively. After a little
over seven years of disharmonious relationship, husband and wife separated. Since the
couple’s estrangement and de facto separation, Ara and Ava have remained in Michelle’s
custody.
In November 2007 before the RTC of Makati City, Juan Ignacio filed, pursuant to A.M. No.
03-04-04-SC3 or The Rule on Custody of Minors and Writ of Habeas Corpus in Relation to
Custody of Minors (Rule on Custody of Minors), a Petition for the Custody of the Minors
Arabella Margarita Araneta and Avangelina Mykaela Araneta (Petition for Custody), with
prayer for visitation rights against Michelle and her mother, Glenda B. Santos (Santos).
Docketed as SP PROC. Case No. M-6543, this petition was eventually raffled to Branch 60
of the Makati City RTC (Makati RTC), presided over by Judge Marissa Macaraig-Guillen
(Judge Macaraig-Guillen).
1. Immediately issue a Provisional Order granting [him]visitation rights with respect
to the minors [Ava and Ara] x x x during the pendency of these proceedings;
2. Immediately issue an ex parte Hold Departure Order preventing the departure of
[both] minors x x x from the country; and
3. After appropriate proceedings, render judgment granting him joint custody, or
alternatively, granting him permanent visitation rights, over both his legitimate
children x x x.4
To facilitate service of summons, Juan Ignacio, via a Motion and Urgent Manifestation of
November 27, 2007, would inform the Makati RTC that Michelle and Santos may have
transferred to No. 408 Anonas Street, Ayala Alabang Village, Muntinlupa City (Anonas
residence), an address different from what he provided in his basic petition, referring to the
Molave Drive residence in the same village. In her Officer’s Return dated December 10,
2007,5process server Linda Fallorin stated the following: (1) she initially attempted to serve
the summons upon Michelle and Santos on December 7,2007 at the Anonas residence,
only to be told by one Roberto Anonas, who refused to receive the summons, that both
were out at that time; and (2) on December 10, 2007, she was finally able to serve the
summons upon Michelle and Santos by substituted service through the driver of Santos’
husband.
On December 18, 2007, Juan Ignacio moved for the issuance of provisional visitorial order.
After a hearing on this motion, the Makati RTC issued on December 21, 2007 an
Order7 allowing Juan Ignacio to visit her daughters on Christmas Day and New Year’s Day.
The visiting grant came after the court, taking stock of the Officer’s Return, declared that it
has acquired jurisdiction over the person of Michelle, but despite being given the opportunity
to file a responsive pleading, she has failed to do so.
Christmas and New Year’s Day 2008 came and went, but Juan Ignacio was unable to see
his little girls in those days for reasons of little materiality to this narration.
On January 2, 2008, Michelle filed in SP PROC. Case No. M-6543 a Motion to Admit
Answer and an Answer (with Affirmative Defenses and With Very Urgent Ex-Parte Motion
for Issuance of Protection Order).8
In her Motion to Admit Answer, Michelle acknowledged learning from her mother about the
delivery of the summons and a copy of the petition for custody to their Anonas Residence.
She, however, disregarded said summons thinking, so she claimed, that it was improperly
served upon her person. It was, she added, only upon learning of the issuance of the
provisional order of visitation rights that she gathered enough courage to come out to
present her side.9
In her Answer, on the other hand, Michelle owned up sole responsibility for the decision not
to allow her husband to see their daughters. In support of her plea for the dismissal of his
petition for custody, the denial of visitation rights pendente lite, and in the meanwhile the ex
parte issuance in her favor of a temporary protection order (TPO), 10 she recounted in lurid
details incidents characterizing the painful life she and her children allegedly had to endure
from her husband whom she tagged as a drug user, sexual pervert, emotionally unstable
and temperamental, among other names. In her words, Juan Ignacio’s "wild, decadent,
irresponsible lifestyle makes him unfit to exercise parental authority and even enjoy
visitation rights."11
During the January 4, 2008 hearing on Michelle’s prayer for a TPO, Judge Macaraig-Guillen
expressed her bent to maintain her jurisdiction over SP PROC. Case No. M-6543 and her
disinclination to issue the desired TPO. In her Order of even date, she directed that the
ensuing observations she earlier made be entered into the records:
1. She is not inclined to issue a [TPO] in favor of respondent at this time because
she initially questioned the jurisdiction of this Court over her person and only
resorted to this Urgent Ex-Parte Motion for a Protective Order after she realized
that the Court had every intention of maintaining jurisdiction over this case x x x. It
was emphasized that the Court does not issue Protective Orders over a person
who has not bothered to appear in Court x x x. Until the respondent herself shows
up in order to recognize the jurisdiction of this Court over her and in order to
substantiate the allegations in her Urgent Motion, there is no basis for this Court to
address the matters contained in the said Urgent Ex-Parte Motion.
2. Secondly, x x x even assuming for the sake of argument that the petitioner is, as
respondent described him to be, temperamental, violent, a habitual drug user and
a womanizer, these qualities cannot, per se, prevent him from exercising visitation
rights over his children because these are rights due to him inherently, he being
their biological father.12
During the same hearing, the Makati RTC granted Juan Ignacio visitation rights on one (1)
Saturday and Sunday in January 2008 considering that he was unable to see his children
on the days granted under the December 21, 2007 Order.
Subsequently, by its Order of January 21, 2008, as would later be effectively reiterated by
another Order 13 of March 7, 2008, the Makati RTC resolved to deny admission of Michelle’s
answer to the petition for custody and declared her in default, pertinently disposing thusly:
WHEREFORE, in view of the foregoing, respondent Araneta’s Motion to Admit Answer of
January 2, 2008 is herein DENIED for lack of merit.
Because of respondent Araneta’s failure to file her responsive pleading within the
reglementary period, x x x respondent Araneta isherein declared in DEFAULT in this
proceedings.
As a consequence of this ruling, x x x the petitioner is allowed to present evidence ex-parte
to substantiate the allegation in his Petition x x x.14
On January 21, 2008 also, Michelle interposed a Motion to Withdraw Urgent Ex-Parte
Motion for Protective Order, there pointing out that no right of Juan Ignacio, if any, will be
affected if the said urgent motion is withdrawn or expunged from her answer. And obviously
to sway the Makati RTC’s mind of the resulting insignificance of such withdrawal, if
approved, Michelle cited the ensuing observation thus made by the court during the hearing
on January 4, 2008:
COURT:
Well, I agree, she should really appear but whether or not she should really appear here
and substantiate her allegations for the issuance of a protective order as far as I am
concerned is irrelevant insofar as the enforcement of petitioner’s visitation rights are
concerned, this case is for custody, this is not a case for the issuance of protective orders
that is only a counter manifestation that she is seeking.15
It is upon the foregoing set of events and proceedings that Michelle, on March 25, 2008,
instituted, pursuant to RA 9262, a Petition For Temporary and Permanent Protection
Order16 (Petition for Protection Order) before the RTC in Muntinlupa City, docketed as Civil
Case No. 08-023.Thereat, Michelle claimed, among other things, that in the course of their
marriage, Juan Ignacio made her and their children engage in sexual acts inimical to their
emotional, physical and psychological development and well-being; that he engaged in
perverted sexual acts with friends, victimizing her and the children; that he has consistently
failed and refused to support their family; and that he has a violent temper and was
consistently harassing and threatening her to get sole custody of the children. Michelle
volunteered the information that, per her therapist, she is suffering from Battered Woman’s
Syndrome.17
In the verification portion of her petition for protection order, Michelle stated that "there is x x
x a pending petition for the custody of our children in the [RTC] Br. 60, Makati City, x x x
Civil Case No. M-6543."18
The following events and proceedings then transpired:
1. On March 31, 2008, the Muntinlupa RTC granted Michelle’s prayer for a TPO
which, at its most basic, ordered Juan Ignacio (1) to stay away at a specified
distance from Michelle and the children, inclusive of their present residence and
other places they frequent; and (2) to desist from calling or otherwise
communicating with Michelle.
(2) On April 14, 2008, Juan Ignacio filed in Civil Case No. M-6543 a "Motion to
Dismiss Petition with Prayer to Lift [TPO]"19 anchored on several grounds,
foremost of which are the following: (a) litis pendentia, Juan Ignacio noting in this
regard that the Makati RTC is competent to grant in its SP PROC. Case No. M-
6543 the very same reliefs Michelle seeks in Civil Case No. M-6543, pursuant to
Sections 17 and 18 of the Rule on Custody of Minors;20 (b) in view of item (a)
above, the Makati RTC, having first assumed jurisdiction over identical subject
matters, issues and parties, does so to the exclusion of the Muntinlupa RTC; and
(c) Michelle’s act of filing her petition for protection order before the Muntinlupa
RTC constitutes, under the premises, forum shopping, a practice proscribed owing
to the possibility of different courts arriving at conflicting decisions. Juan Ignacio
would in fact stress that the TPO thus issued by the Muntinlupa RTC directing him
 to stay at least a kilometer away from his children already conflicted with the
Makati RTC-issued provisional orders granting him visitation rights over them.
(3) By Order of May 12, 2008, the Muntinlupa RTC, conceding the exclusionary
effect of the assumption at the first instance by the Makati RTC of jurisdiction on
the issue of custody on Ava and Ara and the likelihood of the issuance by either
court of clashing decisions, partially granted Juan Ignacio’s motion to dismiss and
accordingly modified the TPO issued on March 31, 2008. As thus modified, the
protection order, or to be precise, the reliefs provided in favor of Michelle in said
TPO shall exclude from its coverage the orders issued by the Makati RTC in the
exercise of its jurisdiction on the pending custody case.
In another Order of June 30, 2008, the Muntinlupa RTC denied Juan Ignacio’s
Motion for Reconsideration of the earlier May 12, 2008 Order on the ground that
such a motion is a prohibited pleading.21
(4) Meanwhile, Michelle, in connection with certain orders of the Makati RTC in the
custody case, denying her motion to admit answer and its jurisdictional issue
pronouncements, went to the CA on certiorari via a petition docketed as CA-G.R.
SP No. 103392.
On August 28, 2008, in CA-G.R. SP No. 103392, the CA rendered a judgment finding partly
for Michelle, as petitioner, it being the appellate court’s determination that the substituted
service of summons upon her in the custody suit was defective and irregular. Accordingly,
the period within which Michelle was to file an answer, so the CA declared, did not start to
run and, hence, the denial by the Makati RTC of her motion to admit answer in the custody
case and corollarily, its holding that she is in default, by virtue of its Orders dated January
21, 2008 and March 7, 2008, were unwarranted and ought to be nullified. Neither of the
parties appealed the foregoing Decision. The CA Decision, thus, became final. The fallo of
the said CA Decision reads:
WHEREFORE, the foregoing considered, the instant petition is hereby PARTLY GRANTED.
Accordingly, the assailed Orders of 21January 2008 and 7 March 2008 are REVERSED and
SET ASIDE while the Orders of 29 February 2008 and 31 March 2008, in so far as the
denial of petitioner’s Motion for Inhibition is concerned, are AFFIRMED. No costs.
SO ORDERED.22
Partly, the CA wrote:
x x x The pivotal issue x x x is whether the Makati RTC had acquired jurisdiction over the
person of the petitioner, and if so, whether the disposition of the respondent Makati RTC
judge in declaring her in default has factual and legal basis. Admittedly, the summons and
the copy of the petition were not personally served upon the petitioner as explicitly required
under Section 5 of A.M. No. 03-04-04-SC x x x.
Indeed, the records would show that the summons and the petition were served upon the
petitioner x x x by substituted service as they were received by x x x a certain Nilo Santos at
said Anonas residence, an address belatedly supplied by private respondent himself.
However, x x x petitioner had actually been informed of such substituted service sometime
in the second week of December 2007 and that she had opted to simply disregard the same
since she had thought that such service is invalid x x x.
Despite the fact that she had known of the existence of the petition a quo and the fact that
the service of summons had been made upon her by substituted service, petitioner made a
decision whether it be an informed one or not, not to move for its dismissal on the ground of
lack of jurisdiction over her person x x x. It was only upon the issuance of the Provisional
Order that she had opted to participate in the proceeding by filing her responsive pleading to
the petition. Unfortunately though, the respondent Makati RTC judge denied her motion to
admit and declared her in default on the basis of its disquisition that the failure of the
petitioner to file her responsive pleading is not due to excusable negligence or other
circumstances beyond her control.
Still and all, it cannot be denied that the trial court, previous to or at the time the petitioner
had filed her responsive pleading, has yet to acquire jurisdiction over the person of the
latter. The Rule on Custody of Minors specifically requires that service of summons be
made personally on the respondent and yet the trial court served the same upon the person
of the petitioner by substituted service without proof of exhaustion of means to personally
serve the same or the impossibility thereof to warrant the extraordinary method of
substituted service.
Surely, while the Rule on Custody of Minors provides that the Rules of Court shall apply
suppletorily in custody proceedings, the express provision requiring personal service and
the very nature of custody cases should have caused the respondent judge x x x to adhere
to the evident intention of the rules, that is to have both parties in a custody case participate
therein.
Regrettably, the respondent judge, relying on the Officer’s Return x x x, precipitately
declared x x x that the trial court had already acquired jurisdiction over the person of the
petitioner. x x x
Sadly though, respondent judge, in grave abuse of discretion, assumed jurisdiction over the
person of the petitioner and proceeded to act on the petition. Worse, x x x the respondent
judge denied the motion to admit filed by the petitioner and declared the latter in default.
While the petitioner had already submitted herself to the jurisdiction of the trial court by way
of her voluntary act of filing a responsive pleading to the petition a quo, the period to file
said responsive pleading, as already stated, in so far as the petitioner is concerned has yet
to commence, and thus, the filing of her motion to admit answer cannot plausibly be
considered as to have been filed beyond the reglementary period. In this light, the denial of
said motion and the issuance of the default order are unwarranted and are reversible errors
of jurisdiction x x x.23 (Emphasis added.)
(5) From the adverse May 12, 2008 and June 30, 2008 Orders of the Muntinlupa RTC in
Civil Case No. M-6543, Juan Ignacio also repaired to the CA on a petition for certiorari.
Docketed as CA-G.R. SP. No. 105442, the petition prayed that the Muntinlupa RTC be
enjoined from further taking cognizance of Michelle’s protection order petition as the said
case will infringe or intrude upon the Makati RTC’s disposition of the custody case.24
Michelle opposed and sought the dismissal of the certiorari petition on the ground that it is a
prohibited pleading under Sec. 22(j) of RA 9262.
Eventually, the CA issued, on May 11, 2009, the assailed Decision which, on one hand,
found Michelle guilty of forum shopping, a sufficient cause for summary dismissal of a case,
but viewed, on the other, Juan Ignacio’s petition for certiorari as a prohibited pleading which,
ordinarily, would then render it dismissible. In the veritable clash under the premises of the
effects of forum shopping and the rule on prohibited pleading, the CA nonetheless ruled for
Juan Ignacio, as petitioner, pertinently disposing as follows:
ACCORDINGLY, the petition is GIVEN DUE COURSE. Civil Case No. 08-023 is ORDERED
DISMISSED and all issuances made by RTC, Branch 207, Muntinlupa City, are declared
void. The RTC Branch 60, Makati City is DIRECTED to proceed with the case with
dispatch.25
The CA extricated itself from the foregoing legal bind on the basis of the following
ratiocination and the plausible suppositions interjected thereat:
In resolving the present petition, the Court had to consider two (2) things. First, pursuant to
Section 22 (j) of A.M. No. 04-10-11-SC, a petition for certiorari against any interlocutory
order issued by a family court is a prohibited pleading. Accordingly, if this Court were to
strictly follow [said] Section 22 (j) x x x, then the present petition for certiorari must be
dismissed. Second, the Private Respondent had first moved that the Makati RTC issue a
TPO and that when her motion was denied, she filed a petition before the Muntinlupa RTC
asking that the said court issue a TPO. In short, the Private Respondent committed forum-
shopping. And when forum-shopping is committed, the case(s) must be dismissed with
prejudice.
Thus, it falls upon this Court to balance the conflict.
This Court notes that the Muntinlupa RTC tried to balance out the conflicting jurisdictional
issues with the Makati RTC by stating in its first assailed Order that the reliefs provided in
favor of herein private respondent in the TPO x x x are modified, to exclude from its
coverage those Orders issued by the Makati Court in the exercise of its jurisdiction on the
pending custody case. Be that as it may, the Muntinlupa RTC itself recognized the
jurisdiction of the Makati RTC and that the case before it would, in fact, impinge upon the
jurisdiction of the latter court when it stated that the disposition on the matter by this Court
may result in the possibility of conflicting decisions/orders. In short, the Muntinlupa RTC
itself acknowledges the fact that any future issuances, including its eventual decision on the
petition before it, would affect the custody case pending before the Makati RTC and might
even result to conflicting decisions.
Thus, in the interest of judicial stability, it is incumbent upon this Court to ensure that this
eventuality will not come to pass.
xxxx
To test the argument that a petition for certiorari is an absolutely prohibited pleading, let us
push the present case to its logical extreme.
What if a woman claiming to be a battered wife leaves one of her children with her parents
and another with a sibling of hers? She then went to another place, transferred residency,
and filed a petition for TPO. Her parents and sibling, who reside in another locality, likewise
files a petition for TPO in behalf of the grandchild and nephew/niece entrusted]in their
custody. x x x What if the family courts refuse consolidation? Is the man devoid of any
remedy and would have to spend his time shuttling between three (3) localities since a
petition for certiorari is a prohibited pleading?
What if the woman went to another locality purposely in order to find a friendly venue x x x?
Again, if we are to strictly construe Section22 (j) of A.M. No. 04-10-11-SC that man would
just have to bear the consequences since he cannot seek the extraordinary writ of certiorari.
Or, what if both of the spouses do not reside within the court’s jurisdiction, but the judge
refuses to grant a motion to dismiss due to his zeal? What remedy would a man have since
he cannot resort to a petition for certiorari?
The rules are not sacrosanct. If they go in the way of the smooth and orderly administration
of justice, then magistrates should apply their best judgment. If not, courts would be so
hideously bound or captives to the stern and literal provisions of the law that they
themselves would, wittingly or otherwise, become administrators of injustice.
On the one hand, this Court hereby notes that Private Respondent herself recognizes the
jurisdiction of the Makati RTC to issue a TPO. It was only after the Makati RTC denied her
prayer for a TPO when she filed a petition before the Muntinlupa RTC asking for the
issuance of a TPO. It is thus highly disturbing that the Private Respondent sought another
forum in order to try to obtain a favorable judgment. Thus, as aptly pointed out by the
Petitioner, some sort of forum-shopping was committed.
On the other hand, if the Court were to dismiss the present petition on the ground that a
petition for certiorari is a prohibited pleading, it would have to close its eyes to the fact that
the Private Respondent willfully committed forum-shopping. To dismiss the present petition
would, in effect, "reward" her for this negative act. This, the Court cannot countenance.
xxxx
Accordingly, x x x Civil Case No. 08-023 must not be allowed to proceed any further.
Imperatively, to ensure that the jurisdiction of the Makati RTC remains unshackled, all of the
issuances of the Muntinlupa RTC should, by all means, be nullified. 26 (Emphasis added.)
The CA denied Michelle’s motion for reconsideration per its equally assailed Resolution of
December 28, 2009.
Aggrieved, Michelle, for herself and for her minor daughters, filed the instant recourse, her
submissions revolving on the twin issues of forum shopping and the prohibition under Sec.
22 of the Rule on Violence Against Women and Children27 against the filing of petitions for
certiorari to defeat TPOs issued to promote the protection of victims of violence against
women and their children.
Michelle presently argues that the assailed Decision of the CA is based on an erroneous
appreciation of the facts of the case. To her, there was no forum shopping when she filed
her Petition for Protection Order in the Muntinlupa RTC while the custody case was pending
in the Makati RTC. Her stated reason: the absence in both cases of identity of parties and
rights asserted, on top of which the reliefs sought and prayed for are different and not
founded on the same set of facts.
To downplay the application of the litis pendentia principle, she argues that it was
impossible for her to apply for and secure a protective order under RA 9262 in the custody
case before the Makati RTC being, first, a respondent, not a petitioner in the Makati case;
and second, the venue for an application for protection order is, under RA 9262, the place
where the woman or the offended party resides, which in her case is Muntinlupa. 28
Michelle would invite attention to her having withdrawn her motion for protective order in the
custody case before the Makati RTC before she filed her Petition for Protective Order with
the Muntinlupa RTC. Additionally, she points to the CA’s Decision of August 28, 2008 in CA-
G.R. SP No. 103392 (2008 CA Decision), which held that the Makati RTC did not acquire
jurisdiction over her so that all issuances of the Makati RTC were void. All these, Michelle
claims, argue against the existence of litis pendentia.
The Issue
The issue to be resolved in this case is whether or not petitioner, in filing her Petition for
Protection Order before the Muntinlupa RTC, violated the rule on forum shopping, given the
pendency of the respondent’s Petition for Custody before the Makati RTC and considering
incidentally that she filed said petition for protection order after the Makati RTC had denied
her application for protection order in the custody case.
The Court’s Ruling
Before anything else, however, the Court wishes to point out disturbing developments in this
proceeding which ought not to be swept under the rug on the simplistic pretext that they
may not be determinative of the outcome of this case. But first, some basic premises on
record.
First, as correctly stated in this petition, Michelle withdrew her Ex Parte Motion for Issuance
of Protective Order in the custody case prior to her filing of her Petition for Protection Order
with the Muntinlupa RTC. It should be made clear, however, that she filed said motion to
withdraw on January 21, 2008, or after the Makati RTC, in its Order dated January 4,2008,
had, for all intents and purposes, denied the said ex parte motion. To recapitulate, the
Makati RTC judge made it of record that she was not inclined to issue a protective order in
favor of a person, i.e., petitioner Michelle, who has not bothered to appear in court, even
assuming, she adds, that the person against whom the protection order is directed, i.e.,
Juan Ignacio, is prone to violence, a drug user and a womanizer.
Second, there is absolutely nothing in the 2008 CA Decision declaring that all issuances of
the Makati RTC were void. In order to bolster her position that the rule against forum
shopping was not breached in this case, Michelle matter-of-factly alleged in this recourse
that since in the 2008 CA Decision it was ruled that the Makati RTC did not acquire
jurisdiction over her person due to the irregularity in the service of summons, then "all the
issuances or orders of the Makati RTC in the custody case were void;" 29 and "therefore,
there was no litis pendentia to begin with since the RTC of Makati City Branch 60 had no
jurisdiction from the start."30
For perspective, the 2008 CA Decision did not rule that the Makati RTC did not acquire
jurisdiction over Michelle. Quite the contrary. As a matter of record, the CA in that
disposition found and thus declared Michelle to have voluntarily submitted herself to the
jurisdiction of the Makati RTC when she filed her Answer in SP. PROC. Case No. 6543 on
January 2, 2008.But to be precise about things, the CA in that 2008 Decision found, as
having been tainted with of grave abuse of discretion, only that part of the Makati RTC’s
disposition denying Michelle’s motion to admit answer for belated filing and the consequent
default order. Along this line, the CA merely nullified the Makati RTC’s Orders dated
January 21, 2008 and March 7, 2008 which declared Michelle in default and denied her
motion for reconsideration, respectively. The ensuing excerpts of the 2008 CA Decision
speak for themselves:
Sadly though, respondent judge, in grave abuse of discretion, assumed jurisdiction over the
person of the petitioner and proceeded to act on the petition. Worse, without due regard to
the plain intention of the rule in ensuring the adjudication of the controversy surrounding a
custody case based on its merits, the respondent judge denied the motion to admit filed by
the petitioner and declared the latter in default. While the petitioner had already submitted
herself to the jurisdiction of the trial court by way of her voluntary act of filing a responsive
pleading to the petition a quo, the period to file said responsive pleading, as already stated,
in so far as the petitioner is concerned has yet to commence, and thus, the filing of her
motion to admit answer cannot plausibly be considered as to have been filed beyond the
reglementary period. In this light, the denial of said motion and the issuance of the default
order are unwarranted and are reversible errors of jurisdiction, therefore correctible by a writ
of certiorari. (Emphasis supplied.)
xxxx
WHEREFORE, the foregoing considered, the instant petition is hereby PARTLY GRANTED.
Accordingly, the assailed Orders of 21January 2008 and 7 March 2008 are REVERSED and
SET ASIDE while the Orders of 29 February 2008 and 31 March 2008, in so far as the
denial of petitioner’s Motion for Inhibition is concerned, are AFFIRMED. No costs.
SO ORDERED.31
Withal, the Court finds it downright offensive and utterly distasteful that petitioner raised the
following as one of the issues in this appellate proceeding:
Whether or not the petitioners are guilty of forum-shopping when the Petition for Custody of
private respondent Araneta was dismissed by the Court of Appeals on the ground that the
RTC of Makati City Branch60 did not acquire jurisdiction because the summons was not
served personally upon herein Petitioner Michelle Lana Brown Araneta. 32 (Emphasis
supplied.)
Petitioner’s above posture smacks of bad faith, taken doubtless to deceive and mislead the
Court. Indeed, nothing in either the body or the fallo of the 2008 CA Decision would yield the
conclusion that the petition for custody is being dismissed, as petitioner unabashedly would
have the Court believe.
Was there forum shopping? Did petitioner forum shop?
A circumstance of forum shopping occurs when, as a result or in anticipation of an adverse
decision in one forum, a party seeks a favorable opinion in another forum through means
other than appeal or certiorari by raising identical causes of action, subject matter and
issues. Stated a bit differently, forum shopping is the institution of two or more actions
involving the same parties for the same cause of action, either simultaneously or
successively, on the supposition that one or the other court would come out with a favorable
disposition.33 An indicium of the presence of, or the test for determining whether a litigant
violated the rule against, forum shopping is where the elements of litis pendentia are
present or where a final judgment in one case will amount to res judicata in the other case. 34
Litis pendentia,35 as a ground for the dismissal of a civil suit, refers to that situation wherein
another action is pending between the same parties for the same cause of action, such that
the second action becomes vexatious and unnecessary.36 For the bar of litis pendentia to be
invoked, the concurring requisites must be present: (1) identity of parties, or at least such
parties as represent the same interests in both actions; (2) identity of rights asserted and
relief prayed for, the relief being founded on the same facts; and (3) the identity of the two
preceding particulars is such that any judgment rendered in the pending case, regardless of
which party is successful would amount to res judicata in the other.37
Thus, it has been held that there is forum shopping (1) whenever as a result of an adverse
decision in one forum, a party seeks a favorable decision (other than by appeal or certiorari)
in another; or (2) if, after he has filed a petition before the Supreme Court, a party files
another before the CA since in such case said party deliberately splits appeals "in the hope
that even as one case in which a particular remedy is sought is dismissed, another
case(offering a similar remedy) would still be open"; or (3) where a party attempts to obtain
a preliminary injunction in another court after failing to obtain it from the original court.38
The evil sought to be avoided by the rule against forum shopping is the rendition by two
competent tribunals of two separate and contradictory decisions. Unscrupulous party
litigants, taking advantage of a variety of competent tribunals, may repeatedly try their luck
in several different fora until a favorable result is reached. To avoid the resultant confusion,
the Court adheres to the rules against forum shopping, and a breach of these rules results
in the dismissal of the case.39
Considering the above doctrinal pronouncements on forum shopping, We find all the
badges of this deplorable, docket-clogging practice present in this case.
As a result or in anticipation of an adverse ruling of the Makati RTC,
petitioner sought the favorable opinion of the Muntinlupa RTC
As discussed above, the presiding judge of the Makati RTC, in the custody case, made of
record that she was not inclined to issue a protection order in favor of Michelle because she
did not bother to appear in Court and that the allegations against Juan Ignacio cannot, per
se, prevent him from exercising visitation rights over his children. After this adverse ruling,
Michelle sought the favorable opinion of the Muntinlupa RTC by filing an independent
Petition for Protection Order.
The cases have identical parties
Clearly, the Petition for Custody and the Petition for Protection Order have the same parties
who represent the same interests. The fact that Avaand Ara, who are parties in the Petition
for Protection Order, are not impleaded in the Petition for Custody is of no moment because
they are precisely the very subjects of the Petition for Custody and their respective rights
are represented by their mother, Michelle. In a long line of cases on forum shopping, the
Court has held that absolute identity of the parties is not required, it being enough that there
is substantial identity of the parties40 or at least such parties represent the same interests in
both actions. It does not matter, as here, that in the Petition for Custody, Juan Ignacio is the
petitioner and Michelle is the respondent while in the Petition for Protection Order, their
roles are reversed. That a party is the petitioner in one case and at the same time, the
respondent in the other case does not, without more, remove the said cases from the ambit
of the rules on forum shopping. So did the Court hold, for example in First Philippine
International Bank v. Court of Appeals, that forum shopping exists even in cases like this
where petitioners or plaintiffs in one case were impleaded as respondents or defendants in
another.41Moreover, this Court has constantly held that the fact that the positions of the
parties are reversed, i.e., the plaintiffs in the first case are the defendants in the second
case or vice versa, does not negate the identity of parties for purposes of determining
whether the case is dismissible on the ground of litis pendentia.42
The rights asserted and reliefs prayed for are based on the same facts
Further, the rights asserted and reliefs prayed for in Civil Case No. 08-023 are practically
based on the same facts and are so intertwined with that in SP. PROC. Case No. 6543,
such that any judgment rendered in the pending cases, regardless of which party is
successful, will amount to res judicata.
In the custody case, Juan Ignacio mainly asserted his right, as father, to visit his children
and enjoy joint custody over them. He prayed for a judgment granting him joint custody, or
alternatively, permanent visitation rights over Ava and Ara.
In disposing of the custody case, the Makati RTC is expected, following the rationale behind
the issuance of the Rule on Custody of Minors, to consider, among others, the best interest
of the children,43 any threat or danger of physical, mental, sexual or emotional violence
which endangers their safety and best interest, their health, safety and welfare, 44 any history
of child or spousal abuse by the person seeking custody, 45 habitual use of alcohol,
dangerous drugs or regulated substances,46 marital misconduct,47 and the most suitable
physical, emotional, spiritual, psychological and educational environment for the holistic
development and growth of the minor.48
Michelle’s answer and motion for issuance of protection order in the custody case contained
allegations of psychological, sexual, emotional and economic abuse she and her children
suffered at the hands of Juan Ignacio to defeat his asserted right to have joint custody over
Ava and Ara and as argument that the grant of visitation rights in his favor will not be in the
best interest of the children. These allegations of abuse were in substance the very same
ones she made in her Petition for Protection Order.
Juan Ignacio’s rights and reliefs prayed for are dependent on and, to be sure, would be
predicated on the question of whether or not granting him the desired custody or at least
visitations rights over the children are in their best interest. In deciding this issue, the Makati
RTC will definitely have to reckon with and make a finding on Michelle’s allegations of
psychological, sexual, emotional and economic abuse.
Similarly, the Muntinlupa RTC must necessarily consider and make a determination based
on the very same facts and allegations on whether or not Michelle shall be entitled to the
relief she prayed for in her own petition, in particular, a permanent protection order against
Juan Ignacio.
Elements of litis pendentia are present and any judgment
in the pending cases would amount to res judicata
Any judgment rendered in the pending cases, regardless of which party is successful, would
amount to res judicata. Consider: If the Makati RTC were to grant Juan Ignacio’s petition for
custody, this would necessarily mean that it would be in the best interest of the children if he
were allowed to visit and spend time with them and that granting Juan Ignacio visitation
rights would not pose any danger or threat to the children.
On the other hand, a grant by the Muntinlupa RTC of Michelle’s prayer for a permanent
protection order would presuppose at the minimum that it would be to the children’s best
interest if Juan Ignacio is directed to keep away from them, necessary implying that he is
unfit even to visit Araand Ava. Conversely, if Juan Ignacio’s Petition for Custody were
denied, then it would mean that the Makati RTC gave weight and credence to Michelle’s
allegations of abuse and found them to be in the best interest of the children to bar Juan
Ignacio from visiting them. Thus, the Muntinlupa RTC should have no ground to deny
Michelle’s Petition for Protection Order pending before it.
The evil sought to be avoided by the rule against
forum shopping is present in this case
The grave mischief sought to be avoided by the rule against forum shopping, i.e., the
rendition by two competent tribunals of two separate and contradictory decisions, is well-
nigh palpable in this case. If the Muntinlupa RTC were to rule that Michelle was entitled to a
Protection Order, this would necessarily conflict with any order or decision from the Makati
RTC granting Juan Ignacio visitation rights over Ava and Ara. As aptly pointed out by Juan
Ignacio in his Comment such a conflict had already occurred, as the TPO issued by the
Muntinlupa RTC actually conflicted with the Orders issued by the Makati RTC granting Juan
Ignacio temporary visitation rights over his children. There now exists an Order from the
Muntinlupa RTC which, among others, directed Juan Ignacio to stay at least one (1)
kilometer away from Ava and Ara, even as the Makati RTC recognized, in two (2) separate
Orders, that he had the right, albeit temporarily to see his children. 49
In fact, Michelle was very much aware of the possible conflicts between the orders of Makati
RTC and Muntinlupa RTC. In her Opposition (to Urgent Motion for Immediate Enforcement
of Visitation Orders dated December 21, 2007 and January 4, 2008), she recognized that
the granting of visitation rights in favor of Juan Ignacio would conflict the TPO and,
therefore, the Makati Court would be rendering a conflicting decision with that of the
Muntinlupa RTC, viz:
x x x There is therefore, no conflict of jurisdiction in this case but since the petitioner filed a
Petition for Certiorari in the Court of Appeals, which includes the issue of custody, we
submit that the matter of custody pendente lite including visitation, should not and can not
be resolved by this Honorable Court without conflicting with the Temporary Protection Order
of a co-equal court, the RTC of Muntinlupa City. x x xx
xxx
If the petitioner is granted visitation rights, the Honorable Court, with due respect would be
allowing him to violate the TPO against him; the Honorable Court would then be rendering a
conflicting decision.50 (Emphasis supplied.)
No less than the Muntinlupa RTC itself recognized the resulting aberration of its orders
conflicting with that/those of the Makati RTC. As it were, the former, in its Order of May 12,
2008, resolving Juan Ignacio’s Motion to Dismiss with Prayer to Lift Temporary Protection
Order, categorically stated that there may be orders in the protection order case that would
possibly conflict with the orders issued by the Makati RTC in the custody case. So it was
that to address these possible conflicts, the Muntinlupa RTC partially granted Juan Ignacio’s
Motion to Dismiss by modifying the reliefs provided under the TPO by excluding from its
coverage those orders issued by the Makati RTC in the exercise of its jurisdiction over the
custody case. Pursuant to the foregoing Order of the Muntinlupa RTC, the December 21,
2007 and January 4, 2008 Orders of the Makati RTC, granting Juan Ignacio visitation rights
on Christmas Day and New Year’s Day and one (1) Saturday and Sunday in January 2008,
are not covered by the reliefs under the TPO. Hence, despite the TPO directing Juan
Ignacio to stay at least one (1) kilometer away from Ava and Ara, Juan Ignacio would still
have the right to see his children by virtue of the orders issued by the Makati RTC granting No costs.
him temporary visitation rights. The said Muntinlupa RTC Order reads:
SO ORDERED.
Based on the pleadings filed, this (Muntinlupa) Court holds that since the Makati Court first
acquired jurisdiction over the issue of custody, the latter continues to exercise it, so that any
disposition on the matter by this Court may result in the possibility of conflicting
decisions/orders.

Wherefore, this Court partially grants respondent’s Motion to Dismiss insofar as those
matters covered by A.M. No. 03-04-04-SC, Rule on Custody of Minors and Writ of Habeas
corpus in Relation to Custody of Minors are concerned, which are within the jurisdiction of
the Makati Court, but continues to take cognizance on matters not included therein (A.M.
No. 03-04-04-SC) but within the protective mantle of R.A. No. 9262.

Consequently, the reliefs provided in favor of the petitioner in the Temporary Protection
Order dated March 31, 2008 are modified, to exclude from its coverage those Orders issued
by the Makati Court in the exercise of its jurisdiction on the pending custody case.

The motions to lift the temporary protection order (except on those matter stated above) and
to cite petitioner in contempt of court are denied for lack of merit. 51 (Emphasis supplied.)

Verily, the Muntinlupa RTC was aware that its issuances and its eventual final disposition on
the Petition for Protection Order would affect the custody case before the Makati RTC, if not
totally clash with the latter court’s decision. We agree with the CA’s ensuing observation:

This Court notes that the Muntinlupa RTC tried to balance out the conflicting jurisdictional
issues with the Makati RTC by stating in its first assailed Order that the reliefs provided in
favor of herein private respondent in the TPO dated March 31, 2008 are modified, to
exclude from its coverage those Orders issued by the Makati Court in the exercise of its
jurisdiction on the pending custody case. Be that as it may, the Muntinlupa RTC itself
recognized the jurisdiction of the Makati RTC and that the case before it would, in fact,
impinge upon the jurisdiction of the latter court when it stated that the disposition on the
matter by this Court may result in the possibility of conflicting decisions/orders. In short, the
Muntinlupa RTC itself acknowledges the fact that any future issuances, including its
eventual decision on the petition before it, would affect the custody case pending before the
Makati RTC and might even result to conflicting decisions. Thus, in the interest of judicial
stability, it is incumbent upon this Court to ensure that this eventuality will not come to
pass.52

Civil Case No. 08-023 should, thus, be dismissed with prejudice for being a clear case of
forum shopping.

WHEREFORE, premises considered, the appealed May 11, 2009Decision and the
December 28, 2009 Resolution of the Court of Appeals in C A-G.R. SP. No. 105442,
particularly insofar as these ordered the dismissal or subject Civil Case No. 08-023 and the
nullification of the orders made in that case, are hereby AFFIRMED.
G.R. No. 174564 February 12, 2014
1. JOSEPHINE SOLANO [P]238,680.00

ATTY. EMMANUEL D. AGUSTIN, JOSEPHINE SOLANO, ADELAIDA FERNANDEZ, 2. ADELAIDA FERNANDEZ [P]238,680.00
ALEJANDRO YUAN, JOCELYN LAV ARES, MARY JANE OLASO, MELANIE BRIONES,
ROWENA PATRON, MA. LUISA CRUZ, SUSAN TAPALES, RUSTY BAUTISTA, and 3. ALEJANDRO YUAN [P]238,680.00
JANET YUAN, Petitioners,
vs. 4. JOCELYN LAVARES [P]238,680.00
ALEJANDRO CRUZ-HERRERA, Respondent.
5. MARY JANE OLASO [P]238,680.00

DECISION 6. MELANIE BRIONES [P]238,680.00

REYES, J.: 7. ROWENA PATRON [P]238,680.00

8. MA. LUISA CRUZ [P]238,680.00

This is a petition for review on certiorari1 assailing the Resolution2 dated September 30,
2005 of the Court of Appeals (CA) in CA-G.R. SP No. 85556 which approved the joint 9. SUSAN TAPALES [P]238,680.00
compromise agreement executed by respondent Alejandro Cruz-Herrera (Herrera) and the
former employees of Podden International Philippines, Inc. (Podden), namely: Josephine 10. RUSTY BAUTISTA [P]238,680.00
Solano, Adelaida Fernandez,· Alejandro Yuan, Jocelyn Lavares, Mary Jane Olaso, Melanie
Briones, Rowena Patron, Ma. Luisa Cruz, Susan Tapales, Rusty Bautista, and Janet Yuan 11. JANET YUAN [P]238,680.00
(complainants).
TOTAL [P]2,625,480.00

The Antecedents
Respondent Herrera was the President of Podden while complainants were assemblers
and/or line leader assigned at the production department. 3 In 1993, the complainants were
terminated from employment due to financial reverses. Upon verification, however, with the
Department of Labor and Employment, no such report of financial reverses or even
retrenchment was filed. This prompted the complainants to file a complaint for illegal
dismissal, monetary claims and damages against Podden and Herrera.4 They engaged the
services of Atty. Emmanuel D. Agustin (Atty. Agustin) to handle the case 5 upon the verbal
agreement that he will be paid on a contingency basis at the rate of ten percent (10%) of the
final monetary award or such amount of attorney’s fees that will be finally determined.
[Podden and Herrera] are further ordered to pay complainants their money claims
representing their underpayment of wages, 13th month pay, premium pay for holidays and
rest days and service incentive leave pay to be computed by the Fiscal Examiner of the
Research, Information and Computation Unit of the Commission in due time.
[Podden and Herrera] are furthermore ordered to pay each complainant the amount of
[P]40,000.00 as moral and exemplary damages, as well as ten (10%) of the total awards as
attorney’s fee.
SO ORDERED.7

Proceedings before the Labor Arbiter

The complainants, thru Atty. Agustin, obtained a favorable ruling before the Labor Arbiter
(LA) who disposed as follows in its Decision6 dated September 27, 1998, to wit:
WHEREFORE, premises considered, [Podden and Herrera] are hereby directed/ordered to
immediately reinstate the complainants to their former positions without loss of seniority
rights and other privileges with full backwages from date of dismissal up to actual date of
reinstatement which as of this month is more or less in the amount as follows:
No appeal was taken from the foregoing judgment hence, on February 2, 1999, a motion for
execution was filed. The motion was set for a hearing on February 10, 1999 but was reset
twice upon the parties’ request for the purpose of exploring the possibility of settlement. 8
On March 20, 1999, Herrera filed a Manifestation and Motion to deny issuance of the writ
stating, among others, that Podden ceased operations on December 1, 1994 or almost four
years before judgment was rendered by the LA on the illegal dismissal complaint and that
nine of the eleven employees have executed Waivers and Quitclaims rendering any
execution of the judgment inequitable.9

AMOUNT On July 20, 1999, the Computation and Examination Unit of the National Labor Relations
COMPLAINANT [P]238,680.00=([P]135.00/day x 26 days Commission (NLRC) released the computation of the total monetary award granted by the
= [P]3,510/mo. x 68 mos.) LA amounting to ₱3,358,441.84.10
Atty. Agustin opposed Herrera’s motion and argued that the issuance of a writ of execution
is ministerial because the LA decision has long been final and executory there being no
appeal taken therefrom. He further claimed that the alleged Waivers and Quitclaims were
part of a scheme adopted by Podden to evade its liability and defraud the complainants. 11
Resolving the conflict, the LA issued its Order12 dated May 15, 2000 denying the motion for
the issuance of a writ of execution. The LA sustained as valid the Waivers and Quitclaims
signed by all and not just nine of the complainants, based on the following findings:
A cursory examination of the records reveal[s] that complainants, all eleven (11) of them,
had indeed executed their respective waiver and quitclaim thru an instrument entitled
"Pagtalikod sa Karapatang Maghabol" absolving [Podden and Herrera] from any and all
liabilities that may arise against the latter to these cases. The instruments were signed by
the complainants and sworn to before Notary Public Amparo G. Ocampo. Considering the
fact that the complainants, through their common counsel, received a copy of the Decision
in these cases on December 28, 1998, it could only be supposed that as of that date they
signed the instrument of waiver and quitclaim on March 2, 1999, April 8, 1999 and March
31, 2000, they were already properly apprised about the decision having been issued in
their favor, more particularly the contents thereof, by their esteemed counsel. The fact that
complainants would execute such waiver and quitclaim, notwithstanding, only shows the
spontaneity and voluntariness of their deed.
Moreover, and as the instrument of waiver and quitclaim would show, the letter was written
in the vernacular of Filipino language. Complainants who are all presumed to be
knowledgeable about the national language could not have been misled with respect to the
real meaning and plain import of the words used in the instrument. That complainants
meant and understood what they signed in the instrument is best shown by the fact that in
the subsequent hearings scheduled to take up the motion for writ of execution and the
opposition thereto (considering the relative importance of the matters raised and substantial
awards to the complainants)[,] complainants have failed to show up in any of them. 13
Accordingly, the quitclaims were held to have superseded the matter of issuing a writ of
execution. Anent Atty. Agustin’s fees, the LA held that he is entitled to ten percent (10%) of
the total monetary award obtained by the complainants from the compromise agreement.
The order disposed thus:
WHEREFORE, premises considered, the motion for writ of execution is denied on [the]
ground that complainants have already settled their cases with [Podden and Herrera].
On account of the settlement, however, [Podden and Herrera] are hereby ordered to pay
complainants’ counsel ten (10%) percent of the amount received by complainants as
attorney’s fees.
SO ORDERED.14
Ruling of the NLRC
On appeal, the NLRC reversed the LA Order dated May 15, 2000 for the reason that it
unlawfully amended, altered and modified the final and executory LA Decision dated
September 27, 1998. The quitclaims were also held invalid based on the unconscionably
low amount received by each of the complainants thereunder which ranged between
₱10,000.000 and ₱20,000.00 as against the judgment award of ₱238,680.00 for each
individual complainant. This factor was found by the NLRC to be a clear proof that the
quitclaims were indeed wangled from the unsuspecting complainants. The NLRC
Resolution15 dated May 7, 2003 thus held:
WHEREFORE, the appeal is GRANTED. The Order a quo of May 15, 2000 is hereby
reversed and set aside and a new one entered ordering the Labor Arbiter a quo to
immediately issue the corresponding writ of execution for the enforcement of the decision
rendered in this case.
The quitclaims executed by the complainants are hereby nullified. However, any amount
received by the complainants under the quitclaims shall be deducted from the award due
each of them.
SO ORDERED.16
The NLRC reiterated the foregoing judgment in the Order 17 dated May 31, 2004 which
denied Podden and Herrera’s motion for reconsideration. On August 13, 2004, the NLRC
issued an Entry of Judgment declaring that its Order dated May 31, 2004 has become final
and executory on June 20, 2004.18
Ruling of the CA
On August 6, 2004, Herrera filed a petition for certiorari before the CA assailing the
issuances of the NLRC. During the pendency of the petition or on August 30, 2005, a joint
compromise agreement was submitted to the CA narrating as follows:
WHEREAS, the parties have discussed their differences; claims, counterclaims and other
issues in the above-entitled cases and have decided to amicably and mutually settle the
same;
WHEREAS, the parties have agreed that [Herrera] shall pay each of the [complainants]
immediately upon the signing of the Joint Compromise Agreement the amount of Php
35,000.00 to each;
WHEREAS, the parties have agreed that [Herrera] shall pay the costs of the suit and
attorney’s fees of [the complainants] equivalent to 10% (ten percent) of the total settlement
agreement;
WHEREAS, the parties, their heirs, and assigns, agree to have the present case dismissed
WITH PREJUDICE, immediately; x x x.19
In its assailed Resolution20 dated September 30, 2005, the CA found the joint compromise
agreement consistent with law, public order and public policy, and consequently stamped its
approval thereon and entered judgment in accordance therewith, viz:
Finding the above terms and conditions not contrary to law, public order and public policy,
the parties’ prayer that the foregoing joint compromise agreement be approved and the
extant case be dismissed with prejudice is GRANTED and the agreement ADMITTED.
Judgment is hereby entered in accordance thereto.
Parties are enjoined to strictly comply with this judgment on compromise.
SO ORDERED.21
Atty. Agustin moved for the reconsideration of the foregoing resolution but his motion was
denied in the CA Resolution22 dated September 8, 2006.
Displeased, Atty. Agustin, with the complainants named as his co-petitioners, interposed the
present recourse contending that the resolutions of the CA violated the principle of res
judicata because they amended and altered the final and executory LA Decision dated
September 27, 1998 and NLRC Resolution dated May 7, 2003 on the basis of an
unconscionable compromise agreement that was executed without his knowledge and
consent. Atty. Agustin prays that the joint compromise agreement be set aside, the LA
Decision dated September 27, 1998 executed and Herrera ordered to pay him ₱335,844.18
as attorney’s fees pursuant to the final and executory monetary award originally obtained by
the complainants before the LA.
Our Ruling
We deny the petition.
The petition is dismissible outright for being accompanied by a defective certification of non-
forum shopping having been signed by Atty. Agustin instead of the complainants as the
principal parties.
It has been repeatedly emphasized that in the case of natural persons, the certification
against forum shopping must be signed by the principal parties themselves and not by the
attorney.23 The purpose of the rule rests mainly on practical sensibility. As explained in
Clavecilla v. Quitain:24
x x x [T]he certification (against forum shopping) must be signed by the plaintiff or any of the
principal parties and not by the attorney. For such certification is a peculiar personal
representation on the part of the principal party, an assurance given to the court or other
tribunal that there are no other pending cases involving basically the same parties, issues
and causes of action.
x x x Obviously it is the petitioner, and not always the counsel whose professional services
have been retained for a particular case, who is in the best position to know whether he or it
actually filed or caused the filing of a petition in that case. Hence, a certification against
forum shopping by counsel is a defective certification. 25
The Court has espoused leniency and overlooked such procedural misstep in cases bearing
substantial merit complemented by the written authority or general power of attorney
granted by the parties to the actual signatory.26However, no analogous justifiable reasons
exist in the case at bar neither do the claims of Atty. Agustin merit substantial consideration
to justify a relaxation of the rule.
It is apparent that the complainants did not seek the instant review because they have
already settled their dispute with Herrera before the CA. It is Atty. Agustin’s personal resolve
to pursue this recourse premised on his unwavering stance that the joint compromise
agreement signed by the complainants was inequitable and devious as they were denied
the bigger monetary award adjudged by a final and executory judgment.
Atty. Agustin ought to be reminded that his professional relation with his clients is one of
agency under the rules thereof "[t]he acts of an agent are deemed the acts of the principal
only if the agent acts within the scope of his authority." 27 It is clear that under the
circumstances of this case, Atty. Agustin is acting beyond the scope of his authority in
questioning the compromise agreement between the complainants, Podden and Herrera.
It is settled that parties may enter into a compromise agreement without the intervention of
their lawyer.28 This precedes from the equally settled rule that a client has an undoubted
right to settle a suit without the intervention of his lawyer for he is generally conceded to
have the exclusive control over the subject-matter of the litigation and may, at any time
before judgment, if acting in good faith, compromise, settle, and adjust his cause of action
out of court without his attorney’s intervention, knowledge, or consent, even though he has
agreed with his attorney not to do so. Hence, the absence of a counsel’s knowledge or
consent does not invalidate a compromise agreement. 29
Neither can a final judgment preclude a client from entering into a compromise. Rights may
be waived through a compromise agreement, notwithstanding a final judgment that has
already settled the rights of the contracting parties provided the compromise is shown to
have been voluntarily, freely and intelligently executed by the parties, who had full
knowledge of the judgment. Additionally, it must not be contrary to law, morals, good
customs and public policy.30
In the present case, the allegations of vitiated consent proffered by Atty. Agustin are all
presumptions and suppositions that have no bearing as evidence. There is no proof that the
complainants were forced, intimidated or defrauded into executing the quitclaims. On the
contrary, the LA correctly observed that, based on the following facts, the complainants
voluntarily entered into and fully understood the contents and effect of the quitclaims, to wit:
(1) they have already received a copy and hence aware of the LA Decision dated
September 27, 1998 when they signed the quitclaims on March 2, 1999, April 8, 1999 and
March 31, 2000; (2) the quitclaims were written in Filipino language which is known to and
understood by the complainants; (3) none of the complainants attended the hearings on the
motion for execution of the LA Decision dated September 27, 1998; (4) they were consistent
in their manifestations before the NLRC and the CA that they have already settled their
claims against Podden and Herrera hence, their request for the termination of the appeals
filed by Atty. Agustin before the said tribunals.
Furthermore, it is the complainants themselves who can impugn the consideration of the
compromise as being unconscionable31 but no such repudiation was manifested before the
Court or the courts a quo.
The ruling in Unicane Workers Union-CLUP v. NLRC32 cited by Atty. Agustin is not
applicable to the facts at hand. The circumstances which led the Court to annul the
quitclaim in Unicane are not attendant in the present case. In Unicane, the attorney-in-fact
who signed the quitclaim in behalf of the employees exceeded the scope of his authority
thus prejudicing the latter. Consequently, it was ruled that the quitclaim did not bind the
employees. No akin situation exists in the case at bar.
Further, Atty. Agustin’s claim for his unpaid attorney’s fees cannot nullify the subject joint
compromise agreement.33
A compromise agreement is binding only between its privies and could not affect the rights
of third persons who were not parties to the agreement. One such third party is the lawyer
who should not be totally deprived of his compensation because of the compromise
subscribed by the client. Otherwise, the terms of the compromise agreement will be set
aside, and the client shall be bound to pay the fees agreed upon with his lawyer. If the
adverse party settled the suit in bad faith, he will be made solidarily liable with the client for
the payment of such fees. The following discussions in Gubat v. National Power
Corporation34 elaborate on this matter, viz:
As the validity of a compromise agreement cannot be prejudiced, so should not be the
payment of a lawyer’s adequate and reasonable compensation for his services should the
suit end by reason of the settlement. The terms of the compromise subscribed to by the
client should not be such that will amount to an entire deprivation of his lawyer’s fees,
especially when the contract is on a contingent fee basis. In this sense, the compromise
settlement cannot bind the lawyer as a third party. A lawyer is as much entitled to judicial
protection against injustice or imposition of fraud on the part of his client as the client is
against abuse on the part of his counsel. The duty of the court is not only to ensure that a
lawyer acts in a proper and lawful manner, but also to see to it that a lawyer is paid his just
fees.
Even if the compensation of a counsel is dependent only upon winning a case he himself
secured for his client, the subsequent withdrawal of the case on the client’s own volition
should never completely deprive counsel of any legitimate compensation for his
professional services. In all cases, a client is bound to pay his lawyer for his services. The
determination of bad faith only becomes significant and relevant if the adverse party will
likewise be held liable in shouldering the attorney’s fees. 35 (Citations omitted)
There is truth to Atty. Agustin’s argument that the compromise agreement did not include or
affect his attorney’s fees granted in the final and executory LA Decision dated September
27, 1998. Attorney’s fees become vested right when the order awarding those fees
becomes final and executory and any compromise agreement removing that right must
include the lawyer’s participation if it is to be valid against him. 36
However, equity dictates that an exception to such rule be made in this case with the end in
view that the fair share of litigants to the benefits of a suit be not displaced by a contract for
legal services.
It must be noted that the complainants were laborers who desired to contest their dismissal
for being illegal.1âwphi1 With no clear means to pay for costly legal services, they hired
Atty. Agustin whose remuneration was subject to the success of the illegal dismissal suit.
Before a judgment was rendered in their favor, however, the company closed down and
settlement of the suit for an amount lesser than their monetary claims, instead of execution
of the favorable judgment, guaranteed the atonement for their illegal termination. To make
the complainants liable for the ₱335,844.18 attorney’s fees adjudged in the LA Decision of
September 27, 1998 would be allowing Atty. Agustin to get a lion’s share of the
₱385,000.0037 received by the former from the compromise agreement that terminated the
suit; to allow that to happen will contravene the raison d'être for contingent fee
arrangements.
Contingent fee arrangements "are permitted because they redound to the benefit of the poor
client and the lawyer ‘especially in cases where the client has meritorious cause of action,
but no means with which to pay for legal services unless he can, with the sanction of law,
make a contract for a contingent fee to be paid out of the proceeds of the litigation.
Oftentimes, the contingent fee arrangement is the only means by which the poor and
helpless can seek redress for injuries sustained and have their rights vindicated.’" 38
Further, a lawyer is not merely the defender of his client’s cause. He is also, first and
foremost, an officer of the court and participates in the fundamental function of
administering justice in society. It follows that a lawyer’s compensation for professional
services rendered is subject to the supervision of the court in order to maintain the dignity
and integrity of the legal profession to which he belongs. 39 "[L]awyering is not a
moneymaking venture and lawyers are not merchants. Law advocacy, it has been stressed,
is not capital that yields profits. The returns it births are simple rewards for a job done or
service rendered."40
More importantly, Atty. Agustin was not totally deprived of his fees. Under the joint
settlement agreement, he is entitled to receive ten percent (10%) of the total settlement. We
find the said amount reasonable considering that the nature of the case did not involve
complicated legal issues requiring much time, skill and effort.
It cannot be said that Herrera negotiated for the compromise agreement in bad faith. It
remains undisputed that Podden has ceased operations on December 1, 1994 or almost
four years before the LA Decision dated September 27, 1998 was rendered. 41 In view
thereof, the implementation of the award became unfeasible and a compromise settlement
was more beneficial to the complainants as it assured them of reparation, albeit at a
reduced amount. This was the same situation prevailing at the time when Herrera
manifested and reiterated before the CA that a concession has been reached by the parties.
Thus, the motivating force behind the settlement was not to deprive or prejudice Atty.
Agustin of his fees, but rather the inability of a dissolved corporation to fully abide by its
adjudged liabilities and the certainty of payment on the part of the complainants.

Also, collusion between complainants and Herrera cannot be inferred from the fact that Atty.
Agustin obtained lesser attorney’s fees under the compromise agreement as against that
which he could have gained if the LA Decision dated September 27, 1998 was executed.
Unless there is a showing that the complainants actually received an amount higher than
that stated in the settlement agreement, it cannot be said that Atty. Agustin was unlawfully
prejudiced. There is no proof submitted supporting such inference.

Under the above circumstances, Herrera cannot be made solidarily liable for Atty. Agustin’s
fees which, as a rule, are the personal obligation of his clients, the complainants. However,
pursuant to his undertaking in the joint compromise agreement, Herrera is solely bound to
compensate Atty. Agustin at the rate of ten percent (10%) of the total settlement
agreement.42

Since the entire provisions of the joint compromise agreement are not available in the
records and only the relevant portions thereof were quoted in the CA Resolution dated
September 30, 2005, the Court deems it reasonable to impose a period of ten (10) days
within which Herrera should fulfill his obligation to Atty. Agustin.

WHEREFORE, premises considered, the petition is hereby DENIED. The Resolution dated
September 30, 2005 of the Court of Appeals in CA-G.R. SP No. 85556 is AFFIRMED.

Pursuant to his undertaking in the joint compromise agreement, respondent Alejandro Cruz-
Herrera is ORDERED to pay, give, deliver to Atty. Emmanuel D. Agustin ten percent (10%)
of the total settlement agreement within a period of ten (10) days from notice hereof. Both of
them are hereby REQUIRED to report compliance with the foregoing order within a period
of five days thereafter.

SO ORDERED.
G.R. No. 192571 April 22, 2014
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST,
MARIA OLIVIA T. YABUT-MISA, TERESITA C. BERNARDO, AND ALLAN G.
ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
RESOLUTION
PERLAS-BERNABE, J.:
For resolution is respondent Pearlie Ann Alcaraz's (Alcaraz) Motion for Reconsideration
dated August 23, 2013 of the Court's Decision dated July 23, 2013 (Decision). 1
At the outset, there appears to be no substantial argument in the said motion sufficient for
the Court to depart from the pronouncements made in the initial ruling. But if only to address
Akaraz's novel assertions, and to so placate any doubt or misconception in the resolution of
this case, the Court proceeds to shed light on the matters indicated below.
A. Manner of review.
Alcaraz contends that the Court should not have conducted a re-weighing of evidence since
a petition for review on certiorari under Rule 45 of the Rules of Court (Rules) is limited to the
review of questions of law. She submits that since what was under review was a ruling of
the Court of Appeals (CA) rendered via a petition for certiorari under Rule 65 of the Rules,
the Court should only determine whether or not the CA properly determined that the
National Labor Relations Commission (NLRC) committed a grave abuse of discretion.
The assertion does not justify the reconsideration of the assailed Decision.
A careful perusal of the questioned Decision will reveal that the Court actually resolved the
controversy under the above-stated framework of analysis. Essentially, the Court found the
CA to have committed an error in holding that no grave abuse of discretion can be ascribed
to the NLRC since the latter arbitrarily disregarded the legal implication of the attendant
circumstances in this case which should have simply resulted in the finding that Alcaraz was
apprised of the performance standards for her regularization and hence, was properly a
probationary employee. As the Court observed, an employee’s failure to perform the duties
and responsibilities which have been clearly made known to him constitutes a justifiable
basis for a probationary employee’s non-regularization. As detailed in the Decision, Alcaraz
was well-apprised of her duties and responsibilities as well as the probationary status of her
employment:
(a) On June 27, 2004, [Abbott Laboratories, Philippines (Abbott)] caused the
publication in a major broadsheet newspaper of its need for a Regulatory Affairs
Manager, indicating therein the job description for as well as the duties and
responsibilities attendant to the aforesaid position; this prompted Alcaraz to submit
her application to Abbott on October 4, 2004;
(b) In Abbott’s December 7, 2004 offer sheet, it was stated that Alcaraz was to be
employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which
specifically stated, inter alia, that she was to be placed on probation for a period of
six (6) months beginning February 15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbott’s employment offer, Bernardo sent her
copies of Abbott’s organizational structure and her job description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where [Allan G.
Almazar] informed her that she had to implement Abbott’s Code of Conduct and
office policies on human resources and finance and that she would be reporting
directly to [Kelly Walsh];
(f) Alcaraz was also required to undergo a training program as part of her
orientation;
(g) Alcaraz received copies of Abbott’s Code of Conduct and Performance
Modules from [Maria Olivia T. Yabut-Misa] who explained to her the procedure for
evaluating the performance of probationary employees; she was further notified
that Abbott had only one evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company
and had admitted to have an "extensive training and background" to acquire the
necessary skills for her job.2
Considering the foregoing incidents which were readily observable from the records, the
Court reached the conclusion that the NLRC committed grave abuse of discretion, viz.:
[I]n holding that Alcaraz was illegally dismissed due to her status as a regular and not a
probationary employee, the Court finds that the NLRC committed a grave abuse of
discretion.
To elucidate, records show that the NLRC based its decision on the premise that Alcaraz’s
receipt of her job description and Abbott’s Code of Conduct and Performance Modules was
not equivalent to being actually informed of the performance standards upon which she
should have been evaluated on. It, however, overlooked the legal implication of the other
attendant circumstances as detailed herein which should have warranted a contrary finding
that Alcaraz was indeed a probationary and not a regular employee – more particularly the
fact that she was well-aware of her duties and responsibilities and that her failure to
adequately perform the same would lead to her non-regularization and eventually, her
termination.3
Consequently, since the CA found that the NLRC did not commit grave abuse of discretion
and denied the certiorari petition before it, the reversal of its ruling was thus in order.
At this juncture, it bears exposition that while NLRC decisions are, by their nature, final and
executory4 and, hence, not subject to appellate review,5 the Court is not precluded from
considering other questions of law aside from the CA’s finding on the NLRC’s grave abuse
of discretion. While the focal point of analysis revolves on this issue, the Court may deal
with ancillary issues – such as, in this case, the question of how a probationary employee is
deemed to have been informed of the standards of his regularization – if only to determine if
the concepts and principles of labor law were correctly applied or misapplied by the NLRC
in its decision. In other words, the Court’s analysis of the NLRC’s interpretation of the
environmental principles and concepts of labor law is not completely prohibited in – as it is
complementary to – a Rule 45 review of labor cases.
Finally, if only to put to rest Alcaraz’s misgivings on the manner in which this case was
reviewed, it bears pointing out that no "factual appellate review" was conducted by the Court
in the Decision. Rather, the Court proceeded to interpret the relevant rules on probationary
employment as applied to settled factual findings. Besides, even on the assumption that a
scrutiny of facts was undertaken, the Court is not altogether barred from conducting the
same. This was explained in the case of Career Philippines Shipmanagement, Inc. v.
Serna6 wherein the Court held as follows:
Accordingly, we do not re-examine conflicting evidence, re-evaluate the credibility of
witnesses, or substitute the findings of fact of the NLRC, an administrative body that has
expertise in its specialized field. Nor do we substitute our "own judgment for that of the
tribunal in determining where the weight of evidence lies or what evidence is credible." The
factual findings of the NLRC, when affirmed by the CA, are generally conclusive on this
Court.
Nevertheless, there are exceptional cases where we, in the exercise of our discretionary
appellate jurisdiction may be urged to look into factual issues raised in a Rule 45 petition.
For instance, when the petitioner persuasively alleges that there is insufficient or
insubstantial evidence on record to support the factual findings of the tribunal or court a quo,
as Section 5, Rule 133 of the Rules of Court states in express terms that in cases filed
before administrative or quasi-judicial bodies, a fact may be deemed established only if
supported by substantial evidence.7(Emphasis supplied)
B. Standards for regularization;
conceptual underpinnings.
Alcaraz posits that, contrary to the Court’s Decision, one’s job description cannot by and of
itself be treated as a standard for regularization as a standard denotes a measure of
quantity or quality. By way of example, Alcaraz cites the case of a probationary salesperson
and asks how does such employee achieve regular status if he does not know how much he
needs to sell to reach the same.
The argument is untenable.
First off, the Court must correct Alcaraz’s mistaken notion: it is not the probationary
employee’s job description but the adequate performance of his duties and responsibilities
which constitutes the inherent and implied standard for regularization. To echo the
fundamental point of the Decision, if the probationary employee had been fully apprised by
his employer of these duties and responsibilities, then basic knowledge and common sense
dictate that he must adequately perform the same, else he fails to pass the probationary trial
and may therefore be subject to termination.8
The determination of "adequate performance" is not, in all cases, measurable by
quantitative specification, such as that of a sales quota in Alcaraz’s example. It is also
hinged on the qualitative assessment of the employee’s work; by its nature, this largely rests
on the reasonable exercise of the employer’s management prerogative. While in some
instances the standards used in measuring the quality of work may be conveyed – such as
workers who construct tangible products which follow particular metrics, not all standards of
quality measurement may be reducible to hard figures or are readily articulable in specific
pre-engagement descriptions. A good example would be the case of probationary
employees whose tasks involve the application of discretion and intellect, such as – to name
a few – lawyers, artists, and journalists. In these kinds of occupation, the best that the
employer can do at the time of engagement is to inform the probationary employee of his
duties and responsibilities and to orient him on how to properly proceed with the same. The
employer cannot bear out in exacting detail at the beginning of the engagement what he
deems as "quality work" especially since the probationary employee has yet to submit the
required output. In the ultimate analysis, the communication of performance standards
should be perceived within the context of the nature of the probationary employee’s duties
and responsibilities.
The same logic applies to a probationary managerial employee who is tasked to supervise a
particular department, as Alcaraz in this case.1âwphi1 It is hardly possible for the employer,
at the time of the employee’s engagement, to map into technical indicators, or convey in
precise detail the quality standards by which the latter should effectively manage the
department. Factors which gauge the ability of the managerial employee to either deal with
his subordinates (e.g., how to spur their performance, or command respect and obedience
from them), or to organize office policies, are hardly conveyable at the outset of the
engagement since the employee has yet to be immersed into the work itself. Given that a
managerial role essentially connotes an exercise of discretion, the quality of effective
management can only be determined through subsequent assessment. While at the time of
engagement, reason dictates that the employer can only inform the probationary managerial
employee of his duties and responsibilities as such and provide the allowable parameters
for the same. Verily, as stated in the Decision, the adequate performance of such duties and
responsibilities is, by and of itself, an implied standard of regularization.
In this relation, it bears mentioning that the performance standard contemplated by law
should not, in all cases, be contained in a specialized system of feedbacks or evaluation.
The Court takes judicial notice of the fact that not all employers, such as simple businesses
or small-scale enterprises, have a sophisticated form of human resource management, so
much so that the adoption of technical indicators as utilized through "comment cards" or
"appraisal" tools should not be treated as a prerequisite for every case of probationary
engagement. In fact, even if a system of such kind is employed and the procedures for its
implementation are not followed, once an employer determines that the probationary
employee fails to meet the standards required for his regularization, the former is not
precluded from dismissing the latter. The rule is that when a valid cause for termination
exists, the procedural infirmity attending the termination only warrants the payment of
nominal damages. This was the principle laid down in the landmark cases of Agabon v.
NLRC9 (Agabon) and Jaka Food Processing Corporation v. Pacot10 (Jaka). In the assailed
Decision, the Court actually extended the application of the Agabon and Jaka rulings to
breaches of company procedure, notwithstanding the employer’s compliance with the
statutory requirements under the Labor Code.11 Hence, although Abbott did not comply with
its own termination procedure, its non-compliance thereof would not detract from the finding
that there subsists a valid cause to terminate Alcaraz’s employment. Abbott, however, was
penalized for its contractual breach and thereby ordered to pay nominal damages.

As a final point, Alcaraz cannot take refuge in Aliling v. Feliciano 12 (Aliling) since the same is
not squarely applicable to the case at bar. The employee in Aliling, a sales executive, was
belatedly informed of his quota requirement. Thus, considering the nature of his position,
the fact that he was not informed of his sales quota at the time of his engagement changed
the complexion of his employment. Contrarily, the nature of Alcaraz's duties and
responsibilities as Regulatory Affairs Manager negates the application of the foregoing.
Records show that Alcaraz was terminated because she (a) did not manage her time
effectively; (b) failed to gain the trust of her staff and to build an effective rapport with them;
(c) failed to train her staff effectively; and (d) was not able to obtain the knowledge and
ability to make sound judgments on case processing and article review which were
necessary for the proper performance of her duties.13 Due to the nature and variety of these
managerial functions, the best that Abbott could have done, at the time of Alcaraz's
engagement, was to inform her of her duties and responsibilities, the adequate performance
of which, to repeat, is an inherent and implied standard for regularization; this is unlike the
circumstance in Aliling where a quantitative regularization standard, in the term of a sales
quota, was readily articulable to the employee at the outset. Hence, since the
reasonableness of Alcaraz's assessment clearly appears from the records, her termination
was justified. Bear in mind that the quantum of proof which the employer must discharge is
only substantial evidence which, as defined in case law, means that amount of relevant
evidence as a reasonable mind might accept as adequate to support a conclusion, even if
other minds, equally reasonable, might conceivably opine otherwise. 14 To the Court's mind,
this threshold of evidence Abbott amply overcame in this case.

All told, the Court hereby denies the instant motion for reconsideration and thereby upholds
the Decision in the main case.

WHEREFORE, the motion for reconsideration dated August 23, 2013 of the Court's
Decision dated July 23, 2013 in this case is hereby DENIED.

SO ORDERED.
G.R. No. L-21486 May 14, 1966 Then again both the trial court and the Court of Appeals found as a fact that the bus was
running quite fast immediately before the accident. Considering that the tire which exploded
LA MALLORCA and PAMPANGA BUS COMPANY, petitioner, was not new — petitioner describes it as "hindi masyadong kalbo," or not so very worn out
vs. — the plea of caso fortuito cannot be entertained.1äwphï1.ñët
VALENTIN DE JESUS, MANOLO TOLENTINO and COURT OF APPEALS, respondents.
The second issue raised by petitioner is already a settled one. In this jurisdiction moral
Manuel O. Chan for petitioners. damages are recoverable by reason of the death of a passenger caused by the breach of
Sixto T. Antonio for respondents. contract of a common carrier, as provided in Article 1764, in relation to Article 2206, of the
Civil Code. These articles have been applied by this Court in a number of cases, among
them Necesito, etc. vs. Paras, et al., L-10605-06, June 30, 1958; Mercado vs. Lira, L-
MAKALINTAL, J.: 13328-29, Sept. 29, 1961; Villa-Rey Transit vs. Bello, L-18957, April 23, 1963.

La Mallorca and Pampanga Bus Company, Inc., commonly known as La Mallorca- Wherefore, the judgment appealed from is affirmed, with costs against petitioners.
Pambusco, filed this appeal by certiorari from the decision of the Court of Appeals which
affirmed that rendered by the Court of First Instance of Bulacan in its civil case No. 2100,
entitled "Valentin de Jesus and Manolo Tolentino vs. La Mallorca-Pambusco." The court a
quo sentenced the defendant, now petitioner, "to pay to plaintiffs the amount of P2,132.50
for actual damages; P14,400.00 as compensatory damages; P10,000.00 to each plaintiff by
way of moral damages; and P3,000.00 as counsel fees."

Two errors are attributed to the appellate Court: (1) "in sustaining the decision (of the
court a quo) holding that the petitioners were liable for the accident which was caused by a
blow-out of one of the tires of the bus and in not considering the same as caso fortuito," and
(2) in holding petitioners liable for moral damages.

The suit arose by reason of the death of Lolita de Jesus, 20-year old daughter of Valentin
de Jesus and wife of Manolo Tolentino, in a head-on collision between petitioner's bus, on
which she was a passenger, and a freight truck traveling in the opposite direction, in a barrio
in Marilao Bulacan, in the morning of October 8, 1959. The immediate cause of the collision
was the fact that the driver of the bus lost control of the wheel when its left front tire
suddenly exploded.

Petitioner maintains that a tire blow-out is a fortuitous event and gives rise to no liability for
negligence, citing the rulings of the Court of Appeals in Rodriguez vs. Red Line
Transportation Co., CA-G.R. No. 8136, December 29, 1954, and People vs. Palapad, CA-
G.R. No. 18480, June 27, 1958. These rulings, however, not only are not not binding on this
Court but were based on considerations quite different from those that obtain in the at bar.
The appellate Court there made no findings of any specified acts of negligence on the part
of the defendants and confined itself to the question of whether or not a tire blow-out, by
itself alone and without a showing as to the causative factors, would generate liability. In the
present case, the cause of the blow-out was known. The inner tube of the left front tire,
according to petitioner's own evidence and as found by the Court of Appeals "was pressed
between the inner circle of the left wheel and the rim which had slipped out of the wheel."
This was, said Court correctly held, a mechanical defect of the conveyance or a fault in its
equipment which was easily discoverable if the bus had been subjected to a more thorough,
or rigid check-up before it took to the road that morning.
G.R. No. 174385 February 20, 2013
REPUBLIC OF THE PHILIPPINES, Petitioner,
vs.
HON. RAMON S. CAGUIOA, Presiding Judge, Branch 74, Regional Trial Court, Third
Judicial Region, Olongapo City, META TRANS TRADING INTERNATIONAL
CORPORATION, and HUNDRED YOUNG SUBIC INTERNATIONAL, INC., Respondents.
DECISION
BRION, J.:
We resolve in this petition for certiorari and prohibition 1 (the present petition) the challenge
to the August 11, 2005 and July 5, 2006 orders2 of respondent Judge Ramon S. Caguioa,
Regional Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 102-0-05. The
August 11, 2005 order granted the motion to intervene filed by private respondents
Metatrans Trading International Corporation and Hundred Young Subic International, Inc.,
while the July 5, 2006 order denied the motion for reconsideration and the motion to
suspend the proceedings filed by the petitioner Republic of the Philippines (Republic).
The Factual Antecedents
On March 14, 2005,3 Indigo Distribution Corporation and thirteen other petitioners
(collectively referred to as lower court petitioners) filed before the respondent judge a
petition for declaratory relief with prayer for temporary restraining order (TRO) and
preliminary mandatory injunction4 against the Honorable Secretary of Finance, et al. The
petition sought to nullify the implementation of Section 6 of Republic Act (R.A.) No. 9334,
otherwise known as "AN ACT INCREASING THE EXCISE TAX RATES IMPOSED ON
ALCOHOL AND TOBACCO PRODUCTS, AMENDING FOR THE PURPOSE SECTIONS
131, 141, 142, 143, 144, 145 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE
OF 1997, AS AMENDED," as unconstitutional. Section 6 of R.A. No. 9334, in part, reads:
SEC. 6. Section 131 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:
SEC. 131. Payment of Excise Taxes on Imported Articles. –
(A) Persons Liable. – x x x.
xxxx
The provision of any special or general law to the contrary notwithstanding, the
importation of cigars and cigarettes, distilled spirits, fermented liquors and wines
into the Philippines, even if destined for tax and duty-free shops, shall be subject to
all applicable taxes, duties, charges, including excise taxes due thereon. This shall
apply to cigars and cigarettes, distilled spirits, fermented liquors and wines brought
directly into the duly chartered or legislated freeports of the Subic Special Economic
and Freeport Zone, created under Republic Act No. 7227; the Cagayan Special
Economic Zone and Freeport, created under Republic Act No. 7922; and the Zamboanga
City Special Economic Zone, created under Republic Act No. 7903, and such other
freeports as may hereafter be established or created by law: Provided, further, That
importations of cigars and cigarettes, distilled spirits, fermented liquors and wines made
directly by a government- owned and operated duty-free shop, like the Duty-Free
Philippines (DFP), shall be exempted from all applicable duties only[.] [emphasis ours;
italics supplied]
The lower court petitioners are importers and traders duly licensed to operate inside the
Subic Special Economic and Freeport Zone (SSEFZ).
By way of background, Congress enacted, in 1992, R.A. No. 7227, otherwise known as
"The BASES CONVERSION AND DEVELOPMENT ACT OF 1992," which provided, among
others, for the creation of the SSEFZ, as well as the Subic Bay Metropolitan
Authority (SBMA). Pursuant to this law, the SBMA granted the lower court petitioners
Certificates of Registration and Tax Exemption. The certificates allowed them to engage in
the business of import and export of general merchandise (including alcohol and tobacco
products) and uniformly granted them tax exemptions for these importations.
On January 1, 2005, Congress passed R.A. No. 9334. Based on Section 6 of R.A. No.
9334, the SBMA issued a Memorandum on February 7, 2005 directing its various
departments to require importers in the SSEFZ to pay the applicable duties and taxes on
their importations of tobacco and alcohol products before these importations are cleared
and released from the freeport. The memorandum prompted the lower court petitioners to
bring before the RTC their petition for declaratory relief (Civil Case No. 102-0- 05). The
petition included a prayer for the issuance of a writ of preliminary injunction and/or a TRO to
enjoin the Republic (acting through the SBMA) from enforcing the challenged memorandum.
On May 4, 2005,5 the respondent judge granted the lower court petitioners’ application for
preliminary injunction despite the Republic’s opposition, and on May 11, 2005, he issued the
preliminary injunction.
The Republic filed before this Court a petition for certiorari and prohibition – docketed in
this Court as G.R. No. 168584 – to annul the respondent judge’s order and the writ issued
pursuant to this order. The petition asked for the issuance of a TRO and/or a writ of
preliminary injunction. By motion dated July 21, 2005 filed before the lower court, the
Republic asked the respondent judge to suspend the proceedings pending the resolution of
G.R. No. 168584.
On August 5, 2005, the private respondents (in the present petition now before us) filed
before the respondent judge motions for leave to intervene and to admit complaints-in-
intervention. They also asked in these motions that the respondent judge extend to them the
effects and benefits of his May 4, 2005 order, in the lower court petitioners’ favor, and the
subsequently issued May 11, 2005 writ of preliminary mandatory injunction.
Without acting on the Republic’s motion to suspend the proceedings, the respondent judge
granted on August 11, 2005 the private respondents’ motions and complaints-in-
intervention. The respondent judge found the private respondents to be similarly situated as
the lower court petitioners; they stood, too, to be adversely affected by the implementation
of R.A. No. 9334.
The Republic moved to reconsider6 the respondent judge’s August 11, 2005 order, arguing
that it had been denied due process because it never received copies of the private
respondents’ motions and complaints-in-intervention.
On July 5, 2006, the respondent judge denied the Republic’s motion for reconsideration and
the previously filed motion to suspend the proceedings. The respondent judge held that all
of the parties in the case had been duly notified per the records. To justify the denial of the
motion to suspend the proceedings, the respondent judge pointed to the absence of any
restraining order in G.R. No. 168584. The Republic responded to the respondent judge’s
actions by filing the present petition.
The Petition
The present petition charges that the respondent judge acted with manifest partiality and
with grave abuse of discretion when he issued his August 11, 2005 and July 5, 2006 orders.
In particular, the Republic contends that the respondent judge violated its right to due
process when he peremptorily allowed the private respondents’ motions and complaints-in-
intervention and proceeded with their hearing ex parte despite the absence of any prior
notice to it. The Republic maintains that it never received any notice of hearing, nor any
copy of the questioned motions and complaints-in-intervention.7
Further, the Republic posits that the respondent judge abused his discretion when he
extended to the private respondents the benefits of the preliminary injunction earlier issued
to the lower court petitioners under the same ₱1,000,000.00 bond the lower court
petitioners posted. The Republic labels this action as a violation of Section 4, Rule 58 of the
Rules of Court, claiming at the same time that the bond is manifestly disproportionate to the
resulting damage the Republic stood to incur considering the number of the original and the
additional lower court petitioners.8
Finally, in support of its prayer for the issuance of a TRO and/or a writ of preliminary
injunction, the Republic stresses that the assailed orders continue to cause it multi-million
tax losses. It justifies its prayer for the respondent judge’s inhibition by pointing to the latter’s
act of continuously allowing parties to intervene despite the absence of notice and to the
inclusion of non-parties to the original case.
During the pendency of the present petition, the Court en banc partially granted the
Republic’s petition in G.R. No. 168584. By a Decision9 dated October 15, 2007, this Court
set aside and nullified the respondent judge’s order of May 4, 2005 and the subsequent May
11, 2005 writ of preliminary injunction. On January 15, 2008, the Court denied with finality
the lower court petitioners’ motion for reconsideration.10
The Respondent’s Position
In their defense, the private respondents point to the procedural defects in the petition,
specifically: first, the petition was filed out of time, arguing that the Republic only had 53
remaining days to file the petition from notice of the denial of its motion for reconsideration,
maintaining that the 60-day period within which to file the petition is counted from the notice
of the denial of the August 11, 2005 order; second, the petition did not comply with the rules
on proof of filing and service; third, the Republic failed to properly serve their counsel of
record a copy of the petition; and fourth, the Republic did not observe the hierarchy of
courts in filing the instant petition.11
The private respondents further contend that the respondent judge correctly allowed their
complaints-in-intervention as the matter of intervention is addressed to the courts’
discretion; as noted in the assailed orders, the records show that the notice of hearing was
addressed to all of the parties in the original case.12
Finally, on the Republic’s prayer for prohibition, the private respondents maintain that
prohibition is improper since this Court, in G.R. No. 168584, denied the Republic’s prayer
for a writ of prohibition, noting that the respondent judge had been suspended, pending
resolution of this petition.13
The Court’s Ruling
We resolve to PARTLY GRANT the petition.
Relaxation of procedural rules for compelling reasons
We disagree with the private respondents’ procedural objections.
First, we find that the present petition was filed within the reglementary period. Contrary to
the private respondents’ position, the 60- day period within which to file the petition
for certiorari is counted from the Republic’s receipt of the July 5, 2006 order denying the
latter’s motion for reconsideration. Section 4, Rule 65 of the Rules of Court is clear on this
point – "In case a motion for reconsideration or new trial is timely filed, whether such
motion is required or not, the sixty (60) day period shall be counted from notice of the
denial of said motion."14 We find too that the present petition complied with the rules on
proof of filing and service of the petition. Attached to the petition – in compliance with
Sections 12 and 13, Rule 13 of the Rules of Court – are the registry receipts and the
affidavit of the person who filed and served the petition by registered mail.
Second, while the principle of hierarchy of courts does indeed require that recourses should
be made to the lower courts before they are made to the higher courts, 15 this principle is not
an absolute rule and admits of exceptions under well-defined circumstances. In several
cases, we have allowed direct invocation of this Court’s original jurisdiction to issue writs
of certiorari on the ground of special and important reasons clearly stated in the
petition;16when dictated by public welfare and the advancement of public policy; when
demanded by the broader interest of justice; when the challenged orders were patent
nullities;17 or when analogous exceptional and compelling circumstances called for and
justified our immediate and direct handling of the case. 18
The Republic claims that the respondent judge violated and continues to violate its right to
due process by allowing the private respondents and several others to intervene in the
case sans notice to the Republic; by extending to them the benefit of the original injunction
without the requisite injunction bond applicable to them as separate injunction applicants;
and by continuing to suspend the Republic’s right to collect excise taxes from the private
respondents and from the lower court petitioners, thus adversely affecting the government’s
revenues. To our mind, the demonstrated extent of the respondent judge’s actions and their
effects constitute special and compelling circumstances calling for our direct and immediate
attention.
Lastly, under our rules of procedure,19 service of the petition on a party, when that party is
represented by a counsel of record, is a patent nullity and is not binding upon the party
wrongfully served.20 This rule, however, is a procedural standard that may admit of
exceptions when faced with compelling reasons of substantive justice manifest in the
petition and in the surrounding circumstances of the case. 21 Procedural rules can bow to
substantive considerations through a liberal construction aimed at promoting their objective
of securing a just, speedy and inexpensive disposition of every action and proceeding. 22
The Republic has consistently and repeatedly maintained that it never received a copy of
the motions and complaints-in-intervention, as evidenced by the certification of the Docket
Division of the Office of the Solicitor General (OSG); it learned of the private respondents’
presence in this case only after it received copies of the assailed orders, and it even had to
inquire from the lower court for the private respondents’ addresses. Although their counsels
did not formally receive any copy of the petition, the private respondents themselves
admitted that they received their copy of the present petition. The records show that the
Republic subsequently complied with the rules on service when, after the private
respondents’ comment, the Republic served copies of its reply and memorandum to the
respondents’ counsel of record.
Under these circumstances, we are satisfied with the Republic’s explanation on why it failed
to initially comply with the rule on service of the present petition; its subsequent compliance
with the rule after being informed of the presence of counsels of record sufficiently warrants
the rule’s relaxed application.23 The lack of a proper service – unlike the situation when the
Republic was simply confronted with already-admitted complaints-in-intervention – did not
result in any prejudice; the private respondents themselves were actually served with, and
duly received, their copies of the present petition, allowing them to comment and to be
heard on the petition.
The Republic was denied due process; the respondent judge issued the assailed
orders with grave abuse of discretion
Due process of law is a constitutionally guaranteed right reserved to every
litigant.1âwphi1 Even the Republic as a litigant is entitled to this constitutional right, in the
same manner and to the same extent that this right is guaranteed to private litigants. The
essence of due process is the opportunity to be heard, logically preconditioned on prior
notice, before judgment is rendered.24
A motion for intervention, like any other motion, has to comply with the mandatory
requirements of notice and hearing, as well as proof of its service,25 save only for those that
the courts can act upon without prejudice to the rights of the other parties. 26 A motion which
fails to comply with these requirements is a worthless piece of paper that cannot and should
not be acted upon.27 The reason for this is plain: a movant asks the court to take a specific
course of action, often contrary to the interest of the adverse party and which the latter must
then be given the right and opportunity to oppose.28 The notice of hearing to the adverse
party thus directly services the required due process as it affords the adverse party the
opportunity to properly state his agreement or opposition to the action that the movant asks
for.29 Consequently, our procedural rules provide that a motion that does not afford the
adverse party this kind of opportunity should simply be disregarded.30
The notice requirement is even more mandatory when the movant asks for the issuance of
a preliminary injunction and/or a TRO. Under Section 5, Rule 58 of the Rules of Court, no
preliminary injunction shall be granted without a hearing and without prior notice to the party
sought to be enjoined. The prior notice under this requirement is as important as the
hearing, as no hearing can meaningfully take place, with both parties present or
represented, unless a prior notice of the hearing is given.
Additionally, in the same way that an original complaint must be served on the defendant, a
copy of the complaint-in-intervention must be served on the adverse party with the requisite
proof of service duly filed prior to any valid court action. Absent these or any reason duly
explained and accepted excusing strict compliance, the court is without authority to act on
such complaint; any action taken without the required service contravenes the law and the
rules, and violates the adverse party’s basic and constitutional right to due process.
In the present case, records show that the OSG had never received – contrary to the private
respondents’ claim – a copy of the motions and complaints-in-intervention.31 The Republic
duly and fully manifested the irregularity before the respondent judge.32 Thus, the mere
statement in the assailed orders that the parties were duly notified is insufficient on the face
of the appropriate manifestation made and the supporting proof that the Republic submitted.
In these lights, the motions and complaints-in-intervention cannot but be mere scraps of
paper that the respondent judge had no reason to consider; in admitting them despite the
absence of prior notice, the respondent judge denied the Republic of its right to due
process.
While we may agree with the private respondents’ claim that the matter of intervention is
addressed to the sound discretion of the court, 33 what should not be forgotten is the
requirement that the exercise of discretion must in the first place be "sound." In other words,
the basic precepts of fair play and the protection of all interests involved must always be
considered in the exercise of discretion. Under the circumstances of the present case, these
considerations demand that the original parties to the action, which include the Republic,
must have been properly informed to give them a chance to protect their interests. These
interests include, among others, the protection of the Republic’s revenue-generating
authority that should have been insulated against damage through the filing of a proper
bond. Thus, even from this narrow view that does not yet consider the element of fair play,
the private respondents’ case must fail; judicial discretion cannot override a party litigant’s
right to due process.

All told, the respondent judge acted with grave abuse of discretion warranting the issuance
of the corrective writ of certiorari. Grave abuse of discretion arises when a lower court or
tribunal violates the Constitution or grossly disregards the law or existing
jurisprudence.34 The term refers to such capricious and whimsical exercise of judgment
equivalent to lack of jurisdiction, as when the act amounts to an evasion of a positive duty or
to a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law
.35 The respondent judge so acted so that the orders he issued should be declared void and
of no effect.

Petition for prohibition and prayer for inhibition are denied for having been mooted by
subsequent events

On November 9, 2006, the Republic filed an administrative case against the respondent
judge for gross ignorance of the law, manifest partiality and conduct prejudicial to the best
interest of the service. The case, docketed as A.M. No. RTJ-07-2063, is likewise related to
Civil Case No. 102-0-05 that underlie the present petition. By a decision dated June 26,
2009, and while this case was still pending, this Court found the respondent judge guilty of
gross ignorance of the law and conduct prejudicial to the best interest of the service. The
Court accordingly dismissed the respondent judge from the service.

In light of these supervening events, the Court sees no reason to resolve the other matters
raised in this petition for being moot.

WHEREFORE, under these premises, we PARTIALLY GRANT the petition. We GRANT the
writ of certiorari and accordingly SET ASIDE the orders dated August 11, 2005 and July 5,
2006 of respondent Judge Ramon S. Caguioa in Civil Case No. 102-0-05 for being NULL
and VOID. We DISMISS the prayer for writ of prohibition on the ground of mootness. Costs
against Metatrans Trading International Corporation and Hundred Young Subic
International, Inc.

SO ORDERED.
MARINDUQUE MINING AND INDUSTRIAL CORPORATION and INDUSTRIAL
ENTERPRISES, INC. v. COURT OF APPEALS and
NATIONAL POWER CORPORATION (G.R. No. 161219, October 6, 2008)
DECISION
CARPIO, J.:
The Case
This petition for review[1] seeks the reversal of the 27 February 2003 Decision[2] and 17
November 2003 Resolution[3] of the Court of Appeals in CA-G.R. SP No. 72402. In its 27
February 2003 Decision, the Court of Appeals set aside the 15 May 2002[4] and 24 June
2002[5] Orders of Judge Mamindiara P. Mangotara, Presiding Judge of the Regional Trial
Court of Lanao del Norte, Branch 1, Iligan City (trial court), and ordered the trial court to give
due course to respondent National Power Corporations (NAPOCOR) appeal. In its 17
November 2003 Resolution, the Court of Appeals denied the motion for reconsideration of
petitioners Marinduque Mining and Industrial Corporation and Industrial Enterprises, Inc.
(petitioners).
The Facts
On 1 June 1999, NAPOCOR filed a complaint[6] 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 covered by Transfer
Certificate of Title Nos. T-955 and T-956.[7]
Petitioners filed their answer[8] 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.
In its 5 December 2001 Decision,[9] the trial court fixed the fair market value of the 7,875-
square meter lot at P115 per square meter.[10] 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 dated 4 February 2002,[11] the trial
court denied NAPOCORs motion.
In its 19 March 2002 Supplemental Decision,[12] 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. In its Order dated 24 June 2002,[13] the trial
court denied the motion for being moot and academic because on 2 April 2002, NAPOCOR
filed a Notice of Appeal[14] of the 19 March 2002 Supplemental Decision.
On the other hand, petitioners moved for the execution of the trial courts 5 December
2001 Decision and 19 March 2002 Supplemental Decision. In its 26 April 2002 Order, the trial
court partially granted petitioners motion and, on 2 May 2002, issued the writ of execution for
the 5 December 2001 Decision.
On 29 April 2002, petitioners filed a 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. Petitioners argued that NAPOCOR
violated Section 11, Rule 13[15] 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.
 appeal and declared the 19 March 2002 Supplemental Decision final and executory.The

Court of Appeals noted that service by registered mail was previously resorted to by both
NAPOCOR opposed petitioners motion and alleged that its legal office is severely
parties and yet, this was the first time petitioners questioned NAPOCORs mode of
undermanned with only one vehicle and one employee, acting as secretary, handling 300
service. The Court of Appeals added that the trial court should have given due course
active cases in Mindanao. NAPOCOR also added that it was highly irregular for petitioners to
to NAPOCORs appeal because of the large amount of public funds involved considering the
question its mode of service and filing only at this stage of the proceedings because since the
significant disparity between the area sought to be expropriated and the dangling area.The
inception of the case, NAPOCOR had resorted to registered mail instead of personal service.
Court of Appeals also said that the Rules should be liberally construed to effect substantial
justice.

In its 15 May 2002 Order, the trial court granted petitioners motion and Petitioners filed a motion for reconsideration. In its 17 November 2003 Resolution, the Court
denied NAPOCORs notice of appeal. The trial court gave more credence to petitioners of Appeals denied petitioners motion.
allegations and declared that NAPOCORs explanation was a patent violation of the
Hence, this petition.
Rules. The trial court considered the notice of appeal as not filed at all and, since the period

of appeal had already expired, declared its 19 March 2002 Supplemental Decision final The Issues

and executory.
Petitioners raise the following issues:

NAPOCOR filed a motion for reconsideration.[16] In its 24 June 2002 Order, the trial court
1. Whether the Court of Appeals erred in ruling that the trial courts issuance of the
denied NAPOCORs motion.
15 May 2002 and 24 June 2002 Orders was attended with grave abuse of

On 23 August 2002, NAPOCOR filed a special civil action for certiorari with a prayer for a discretion amounting to lack of jurisdiction; and

temporary restraining order before the Court of Appeals. NAPOCOR argued that the trial court
2. Whether the Court of Appeals erred in ruling that the 19 March
acted without or in excess of jurisdiction and gravely abused its discretion when it
2002 Supplemental Decision is not final and executory.
denied NAPOCORs notice of appeal of the 19 March 2002 Supplemental Decision on the
sole ground that it was not filed and served personally. The Ruling of the Court

The Ruling of the Court of Appeals The petition has no merit.

In its 27 February 2003 Decision, the Court of Appeals ruled in NAPOCORs favor and set
aside the trial courts 15 May 2002 and 24 June 2002 Orders. The Court of Appeals also On NAPOCORs failure to comply with Section 11,

ordered the trial court to give due course to NAPOCORs appeal. The Court of Appeals Rule 13 of the Rules of Court

declared that the trial court acted whimsically and capriciously when it denied the notice of
Petitioners maintain that the trial court had the wide latitude of discretion to consider the notice In this case, NAPOCOR complied with the Rules. NAPOCORs notice of appeal sufficiently
of appeal as not filed at all because NAPOCOR failed to comply with the Rules. 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

On the other hand, NAPOCOR argues that the Rules allow resort to other modes of service
why personal service was not practicable. [22] Moreover, the Court of Appeals correctly
and filing as long as the pleading was accompanied by a written explanation why service or
considered the importance of the issue involved in the case. Therefore, the Court of Appeals
filing was not done personally.NAPOCOR maintains that it complied with the Rules because
did not err when it ruled that the trial court acted with grave abuse of discretion in the issuance
the notice of appeal contained an explanation why NAPOCOR resorted to service and filing
of the 15 May 2002 and 24 June 2002 Orders.
by registered mail due to lack of manpower to effect personal service. [17] NAPOCOR also

insists that petitioners are estopped from questioning its mode of service and filing because On NAPOCORs failure to file a record on appeal

since the inception of the case, NAPOCOR had resorted to registered mail and yet, petitioners
Petitioners maintain that NAPOCORs appeal should be dismissed because NAPOCOR failed
only raised this issue when the notice of appeal was filed.
to file a record on appeal and consequently, it failed to comply with the material data rule. [23]

Under Section 11, Rule 13 of the Rules, personal service of pleadings and other papers is
NAPOCOR argues that in this case the filing of a record on appeal is superfluous because
the general rule while resort to the other modes of service and filing is the exception. When
the trial court had nothing else to resolve as the 19 March 2002 Supplemental Decision finally
recourse is made to the other modes, a written explanation why service or filing was not done
disposed of the case. Moreover, NAPOCOR states that petitioners only raised this issue in
personally becomes indispensable.[18] If no explanation is offered to justify resorting to the
petitioners comment before the Court of Appeals.
other modes, the discretionary power of the court to expunge the pleading comes into play. [19]
No record on appeal shall be required except in special proceedings and other cases of
In Solar Team Entertainment, Inc. v. Ricafort,[20] we ruled:
multiple or separate appeals where the law or the Rules of Court so require. [24] The reason

for multiple appeals in the same case is to enable the rest of the case to proceed in the event

We thus take this opportunity to clarify that under Section 11, Rule 13 of that a separate and distinct issue is resolved by the trial court and held to be final.[25] In such
the 1997 Rules of Civil Procedure, personal service and filing is the general
a case, the filing of a record on appeal becomes indispensable since only a particular incident
rule, and resort to other modes of service and filing, the
exception. Henceforth, whenever personal service or filing is practicable, in of the case is brought to the appellate court for resolution with the rest of the proceedings
light of the circumstances of time, place and person, personal service or
filing is mandatory. Only when personal service or filing is not practicable remaining within the jurisdiction of the trial court.
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 Jurisprudence recognizes the existence of multiple appeals in a complaint for expropriation
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 because there are two stages in every action for expropriation.[26] The first stage is concerned
issues involved therein, and the prima facie merit of the pleading sought to with the determination of the authority of the plaintiff to exercise the power of eminent domain
be expunged for violation of Section 11.[21]
and the propriety of its exercise in the context of the facts involved in the suit. [27] The order

of expropriation may be appealed by any party by filing a record on appeal. [28] The
second stage is concerned with the determination by the court of the just compensation for

the property sought to be expropriated.[29] A second and separate appeal may be taken from
this order fixing the just compensation.[30]

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 5 December 2001 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 19 March

2002 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.[31]

WHEREFORE, we DENY the petition. We AFFIRM the 27 February 2003 Decision and 17

November 2003 Resolution of the Court of Appeals in CA-G.R. SP No. 72402.

SO ORDERED.
G.R. No. L-55697 February 26, 1981
JESUS O. TUAZON and LUZ P. TUAZON, petitioners,
vs.
THE HONORABLE CONRADO M. MOLINA, JUDGE OF THE COURT OF FIRST
INSTANCE OF MANILA and JOSEPH ROQUE, respondents.
This is a petition for certiorari seeking the following relief:
WHEREFORE, Petitioners respectfully pray this Honorable Supreme
Court:
1. For issuance of an Order requiring the Clerk of Court of the Court of
First Instance of the City of Manila to certify to this Honorable Court a
copy of the Order of October 29, 1980, issued in Civil Case No. 95668
between your Petitioners and respondent Joseph Roque, and of the
Order denying the former's Motion for Reconsideration, that the same
may be reviewed by the Court;
2. That the Honorable Conrado M. Molina and his agents/representatives,
the City Sheriff of Manila, be ordered to refrain from further proceeding in
the matter here sought to be reviewed until further order of this court;
3. That after hearing the parties, a judgment be rendered declaring the
Order of October 29, 1980 and the resulting Writ of Execution, to be null
and void, and conceding to the Petitioners such further and other reliefs
and remedies in the opinion of the Court they are justly and equitably
entitled, with costs.
Manila, December 15, 1980. 1
The petition alleges that a decision dated January 31, 1979 was rendered by the
respondent judge, Hon. Conrado M. Molina, in Civil Case No. 95668 of the Court of First
Instance of Manila where the petitioners were among the defendants and the respondent,
Joseph Roque, the plaintiff therein: that the decision was being served to the office of the
petitioners' counsel on March 9, 1979 but because the said counsel was out of the country
and in view of the refusal of the person in the of office to receive the copy of the decision,
the serving officer asked that the fact that counsel was abroad be noted on the face of the
notice of decision; that the serving officer did not leave a copy of the decision at the office of
petitioner's counsel but intimitated that he would come back at the expected date of arrival
of said counsel to serve his copy; that the aforesaid serving officer never went back to the
office of petitioners' counsel to deliver a copy of the decision; that the serving officer did not
serve a copy of the decision to the petitioners themselves; that on August 18, 1980 the
counsel of the respondent Joseph Roque filed a motion for execution of the decision; that
on August 20, 1980 the petitioners filed an opposition to the motion for execution,
contending that since they have never been served with a copy of the decision either
personally or through their counsel, the said decision can never attain finality and cannot be
the object of a motion for execution; that on September 4, 1980, the respondent Joseph
Roque filed a reply to the opposition; that on September 24, 1980 the petitioners filed a
rejoinder to the plaintiff's reply; that on October 29, 1980 the respondent judge issued an
order granting the motion for execution of the decision; that on November 17, 1980 the
petitioner filed a motion for reconsideration of the order granting the motion for execution;
that unknown to the petitioners even as of October 29, 1980 a writ of execution was issued
in the case; that pursuant to the aforesaid writ of execution the City Sheriff of Manila through
his deputies actually made levies on both personal and real properties of the petitioners;
that moreover on December 12, 1980 the City Sheriff of Manila, through his deputies,
served the petitioners with a notice of auction scheduled to take place on December 19,
1980 covering the properties levied upon; and that also on December 12, 1980 the
petitioners' motion for reconsideration of the order dated October 29, 1980 was resolved
belatedly and adversely by the respondent judge. 2
Upon being ordered to comment, the private respondent through counsel manifested on
December 23, 1980 that he is adopting his "Reply to Opposition" dated September 4, 1980,
Annex "C" of the petition, as his comment to the petition. 3
The aforesaid "Reply to Opposition" alleged that there was valid service of the copy of the
decision on March 9, 1979 through counsel because the Deputy Sheriff served a copy of the
decision on one Josephine A. Serrano, an employee of Atty. Arsenio O. de Leon; that the
refusal of Josephine A. Serrano to receive a copy of the decision was of no moment or
meaning; that Atty. de Leon was inexcusably negligent When he left for abroad without
making provisions on who should Manage his law office and how: and that the judgment
has become final and executory. 4
The record discloses that Josephine A. Serrano, the person on whom the sheriff attempted
to serve a copy of the decision in Civil Case No. 95668 of the Court of First Instance of
Manila, was not an employee of Atty. Arsenio O. de Leon, counsel of the petitioners.
Josephine A. Serrano was the Assistant Manager of the Prompt Service and she was
instructed by Atty. de Leon not to "receive in the absence of the other associates any
pleading which may require immediate action for him". She was only requested "the favor of
attending to incoming mails and/or court pleadings being served to his office" for the reason
that "the Secretary of the law office was absent." 5
The attempt of the Deputy Sheriff to serve a copy of the decision on Josephine A. Serrano
was not a valid service under Section 4, Rule 13, Revised Rules of Court which provides
that the service should be made on "the party or his attorney, or by leaving it in his office
with his clerk or with a person having charge thereof."
Josephine A. Serrano was neither a clerk of Atty. Arsenio O. de Leon nor in charge of his
office.
It does not appear that the Deputy Sheriff made any attempt to serve a copy of the decision
on any of the associates of Atty. de Leon. There is no showing that the said Deputy Sheriff
left a copy of the decision at the party's or attorney's residence with a person of sufficient
discretion to receive the same.
The decision has not become final and executory. It should be properly served on the
counsel of the petitioners.

WHEREFORE, the petition for certiorari is hereby granted and the order of execution of the
decision in Civil Case No. 95668 dated October 29, 1980 and the writ of execution issued
pursuant thereto are set aside. Let the said decision be immediately served on the counsel
of the petitioners.

SO ORDERED
G.R. No. 203039 September 11, 2013
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC
WORKS AND HIGHWAYS (DPWH), Petitioner,
vs.
BANK OF THE PHILIPPINE ISLANDS (BPI), Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 assailing the Decision2 dated 14 September 2011
and Resolution3 dated 06 August 2012 of the Court of Appeals in CA-G.R. CV No. 79843,
affirming the Order4 dated 03 February 2003 of the Regional Trial Court of Las Piñas City in
Civil Case No. LP 98-0031.
The Antecedent Facts
On 12 February 1998, the Department of Public Works and Highways (DPWH) filed with the
Regional Trial Court, National Capital Region, Las Piñas City, Branch 275 (trial court), a
case for expropriation against portions of the properties of Bank of the Philippine Islands
(BPI) and of Bayani Villanueva (Villanueva) situated in Pamplona, Las Piñas City. DPWH
needed 281 square meters of BPI’s lot covered by Transfer Certificate of Title (TCT) No. T-
59156 and 177 square meters from Villanueva’s lot covered by TCT No. T-64556 for the
construction of the Zapote-Alabang Fly-Over.5
Neither BPI nor Villanueva objected to the propriety of the expropriation;6 hence, the trial
court constituted a Board of Commissioners to determine the just compensation. 7 In their
Report dated 29 September 1998,8 the Board of Commissioners recommended the amount
of ₱40,000.00 per square meter as the fair market value. On 25 November 1998, the trial
court in its Decision set the fair market value at ₱40,000.00 per square meter: 9
The property of BPI, which was affected, consists of 281 square meters and that of
Defendant Villanueva consists of 177 square meters. Hence the amount to be awarded to
the defendants shall be computed as follows:
BPI – 281 sq. meters x ₱40,000.00 =
₱11,240,000.00; and
Villanueva – 177 sq. meters x ₱40,000.00 =
₱7,080,000.00
Considering that the plaintiff has deposited the amount of ₱632,250.00 with respect to the
property of BPI, the latter should receive the amount of ₱10,607,750.00.
With respect to Defendant Villanueva, the plaintiff deposited the provisional amount of
₱2,655,000.00, hence, the remaining amount to be paid is ₱4,425,000.00.
WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering the plaintiff
Republic of the Philippines as represented by the Department of Public Works and
Highways to pay defendant Bank of the Philippine Islands the amount of TEN MILLION SIX
HUNDRED SEVEN THOUSAND AND SEVEN HUNDRED FIFTY PESOS(₱10,607,750.00)
and Defendant Bayani Villanueva the amount of FOUR MILLION FOUR HUNDRED
TWENTY FIVE THOUSAND(₱4,425,000.00), as just compensation for their properties
which were expropriated.10
On 15 December 1998, the acting branch clerk of court issued a Certification11 stating that:
x x x the Decision in this case dated November 25, 1998 has become FINAL, EXECUTORY
and UNAPPEALABLE as of December 11, 1998 considering that the Office of the Solicitor
General failed to file any Notice of Appeal or Motion for Reconsideration despite receipt of a
copy thereof on November 26, 1998.
This certification is being issued upon the request of Atty. Jansen Rodriguez for whatever
legal purpose it may serve.
Meanwhile, BPI filed on 16 December 1998 a Motion for Partial New Trial 12 to determine the
just compensation of its building, which was not included in the Decision dated 25
November 1998 that fixed the just compensation for the parcels of land. In the motion, BPI
claimed that its motion was timely filed since it received a copy of the Decision on
01December 1998.13 The trial court granted partial new trial in an Order dated06 January
1999.
Due to the failure of counsel for petitioner, despite notice, to appear during the scheduled
hearing for the determination of the just compensation of the building, the trial court allowed
BPI to present its evidence ex-parte.14 On 01 September 1999, the trial court admitted the
exhibits presented by BPI.15On the same day, the trial court also appointed as
commissioner the Officer-In-Charge of the trial court, Leticia B. Agbayani (Agbayani), and
ordered her to conduct an ocular inspection of the building. 16Agbayani reported the following
findings:
a) That the undersigned found out that a new building was constructed and a
picture of said building is hereto attached and made as an integral part hereof as
Annex "A" and;
b) That the building was moved back when it was constructed to conform with the
requirement of the Building Code; and
c) Improvements were introduced around the building.17
In its Decision dated 10 September 1999,18 the trial court held that just compensation for the
building was due and ordered petitioner to pay BPI the amount of ₱2,633,000.00. The
dispositive portion of the Decision reads:
WHEREFORE, IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering the
plaintiff Republic of the Philippines represented by the Department of Public Works and
Highways to pay defendant Bank of the Philippine Island (sic) the amount of TWOMILLION
SIX HUNDRED THIRTY THREE [THOUSAND] PESOS(PH₱2,633,000.00).19
Petitioner moved for the reconsideration20 of the 10 September 1999Decision on the ground
that the proceeding fixing the just compensation of the building is null and void for not
complying with the mandatory procedure set forth in Sections 5 to 8 of Rule 67 of the Rules
of Court.21
After due hearing, the trial court granted on 14 February 2000 petitioner’s motion for
reconsideration and ordered that the Decision dated10 September 1999 be set aside and
vacated.22 From this order, BPI filed a motion for reconsideration,23 on the ground that there
was substantial compliance with the Rules. The trial court denied BPI’s motion for
reconsideration.24
On 19 September 2000, the trial court appointed Atty. Edgar Allan C. Morante, the branch
clerk of court, as the chairman of the Board of Commissioners, and gave petitioner and BPI
ten days to submit their respective nominees and their oaths of office.25 On 28 September
2000, BPI nominated Roland Savellano (Savellano), and submitted his oath of office. 26
Instead of submitting its nominee, petitioner filed on 13 October 2000a Manifestation and
Motion27 objecting to the propriety of paying just compensation for BPI’s building and
praying that BPI’s claim for additional just compensation be denied. Petitioner claimed that
the building was never taken by the government.28 In support, petitioner attached a letter
dated 12 September 2000 from the DPWH, addressed to the Solicitor General. The letter
states, in part:
x x x the original plan affecting the subject property was not implemented. The width of the
sidewalk at the premises under consideration was actually reduced from 2.50 m to 2.35 m x
x x to avoid the costly structure of that bank.29
opposition,30
In its BPI claimed that it was not aware that the original plan was not
implemented. It received no correspondence from the DPWH on the matter, except for the
letter dated 12 August 1997 from DPWH addressed to BPI, stating in part that:
We regret to inform you that adjustment of the RROW limit of our project along this section
is not possible as it will affect the effective width of the sidewalk designated at 2.50 m.
wide.31 (Emphasis in the original)
BPI also argued that even "if a 3-meter setback is observed, only 75%of the old building
could be utilized x x x and cutting the support system of the building x x x would affect the
building’s structural integrity."32
On 07 May 2001, the trial court denied33 petitioner’s motion dated 09October 2000, and
ruled that the demolition of the old building of BPI can be construed as a consequential
damage suffered by BPI as a result of the expropriation. Petitioner was thus ordered to
submit its nominee to the Board of Commissioners.
Petitioner nominated Romulo C. Gervacio (Gervacio), the Officer-In-Charge of the City
Assessor’s Office in Las Piñas City. The Board thus constituted, the trial court ordered the
Commissioners to submit their recommendation.
Commissioner for BPI Savellano recommended the amount of ₱2,633,000.00, which was
based on the appraisal conducted by an independent professional business and property
consultant.34 On the other hand, Commissioner for petitioner Gervacio recommended the
amount of ₱1,905,600.00, which was the market value indicated on the tax declaration of
said building. The Commissioner’s Report35 presented both the recommendations of
Savellano and Gervacio for the trial court’s consideration.
The Trial Court’s Ruling
The trial court issued the Order36 dated 03 February 2003, adopting the recommendation of
Gervacio of ₱1,905,600.00, thus:
The Court approves the Recommendation dated October 22, 2001of ONE MILLION NINE
HUNDRED FIVE THOUSAND SIXHUNDRED PESOS (₱1,905,600.00) by Commissioner
ROMULO C.GERVACIO as the just compensation of the building of the Bank of the
Philippine Islands (BPI) Zapote affected by the construction of the Zapote-Alabang Fly-over,
it appearing that such amount is the existing market value of the property pursuant to the
Declaration by BPI as the market value of the building affected by the project as contained
in Tax Declaration D-006-02044.
Let the same amount be paid by the Republic of the Philippines through the Department of
Public Works and Highways as the just compensation for the property. 37
Petitioner filed an appeal with the Court of Appeals docketed as CA-G.R. CV No. 79843.38
The Court of Appeals’ Ruling
On 14 September 2011, the Court of Appeals dismissed the appeal and affirmed the order
of the trial court. The relevant portions of the decision state:
We cannot sustain plaintiff-appellant’s proposition that the decision dated November 25,
1998 has already attained finality there being no appeal filed within the reglementary period
as provided in Section 3, Rule41 of the 1997 Rules of Civil Procedure.
Pursuant to Section 1, Rule 37 of the Rules of Civil Procedure, the period within which an
aggrieved party may move the trial court to set aside the judgment or final order and file a
motion for new trial is within the period to file an appeal, which is fifteen (15) days from
receipt of the judgment or final order. It is explicit from the stated provision that the fifteen
day period to file a motion for new trial will start to run from receipt of judgment or final
order. A judgment, final order or resolution shall be served upon a party either personally or
through registered mail. Moreover, Section 13 of Rule 13 of the Rules of Civil Procedure
specifically provides for the proof of service of judgments, final orders or resolution x x x.
xxxx
Guided by the foregoing provisions of law, the crucial fact in which the finality of the decision
dated November 25, 1998 with respect to defendant-appellee, depends in the determination
of the date of its receipt of the copy of the said decision in order to ascertain whether its
motion for partial new trial was filed within the 15-day period allowed by law.
In this case, records bear that a copy of the decision dated November 25, 1998, ordering
the payment of just compensation for the expropriated land was received in behalf of
defendant Bayani Villanueva on the same day of its promulgation. A copy of the said
decision was also served upon plaintiff-appellant through the OSG on November 26,
1998.However, there is no showing, that defendant-appellee through its counsel received a
copy of the trial court’s decision on a definite date. No official return nor affidavit of the party
serving the decision was attached to there cords of the case. Neither was the presence of a
registry receipt issued by the mailing office nor a registry return card containing the date of
receipt of the decision be found among its records. Since there was no showing as to the
exact date of receipt of defendant-appellee of the said decision, the running of the period of
15 days within which to file a motion for new trial did not begin to run. Therefore, the filing of
defendant-appellee of a motion for partial new trial on December 16, 1998 was never
delayed but timely filed thus preventing the decision dated November 25, 1998from
attaining finality as against them. Moreover, We find the admission of defendant-appellee in
its brief filed on June 2, 2005, that it received a copy of the trial court’s decision on
December 1, 1998,sufficient to comply with the requirement of a written admission of a party
served with a judgment as provided in Sec. 13 of Rule 13, of the Rules of Civil Procedure. It
should also be noted that the certification issued by Edgar Allan C. Morante, the acting clerk
of court, as to the finality of judgment as of December 11, 1998 will not stand against
defendant-appellee because the 15-day period to file an appeal will only start to commence
upon the receipt of the decision which is on December 1,1998. Counting the 15-day period
from the first of December, the period within which to file an appeal will expire on December
16, 1998. Thus, the trial court did not err in granting the motion for partial new trial of the
defendant-appellee as the same was amply filed with the reglementary period prescribed by
law.
Flyover, We find the ruling of Republic of the Philippines through the DPWH vs. CA and
Rosario R. Reyes appropriate to apply in this case, to wit:
Petitioner contends that no consequential damages may be awarded as the remaining lot
was not "actually taken" by the DPWH, and to award consquential damages for the lot
which was retained by the owner is tantamount to unjust enrichment on the part of the latter.
Petitioner’s contention is unmeritorious.
No actual taking of the remaining portion of the real property is necessary to grant
consequential damages. If as a result of the expropriation made by petitioner, the remaining
lot (i.e., the 297-square meter lot) of private respondent suffers from an impairment or
decrease in value, consequential damages may be awarded to private respondent.
WHEREFORE, in view of the foregoing considerations, the instant appeal is hereby
DISMISSED. The assailed order of the Regional Trial Court of Las Piñas, Branch 275 dated
February 3, 2003 is AFFIRMED in toto.39(Emphasis and underscoring supplied; italicization
in the original.)
Petitioner filed a Motion for Reconsideration.40 This was denied by the appellate court in a
Resolution dated 06 August 2012.41
The Issues
The issues for our resolution are: (1) whether the trial court’s Decision dated 25 November
1998 had become final and executory before BPI filed its motion for partial new trial; and (2)
whether the award of additional just compensation for BPI’s building in the amount fixed
therefor is unfounded and without legal basis.
The Court’s Ruling
We find the appeal unmeritorious.
On whether BPI’s motion for partial new
trial was filed out of time

Petitioner contends that the trial court’s Decision dated 25 November 1998 had already
Having settled that the motion for partial new trial was timely filed, We now rule that the trial
become final and executory as of 11 December 1998, as stated in the Certification 42 issued
court did not lose its jurisdiction when it conducted subsequent proceedings determining just
by the acting branch clerk of court. On the other hand, BPI asserts that its motion for partial
compensation and later on directed plaintiff-appellant to pay additional just compensation in
new trial filed on 16 December 1998 was timely filed because it received a copy of the
the amount of ₱1,905,600.00 for the building of defendant-appellee.
Decision on 01 December 1998.

Lastly, as to the argument of plaintiff-appellant that the award of additional just

Petitioner argues that the Court of Appeals erred in holding that the 25 November 1998
compensation for the building of defendant-appellee is erroneous and without legal basis
Decision did not become final and executory for BPI on 11December 1998. It argues that
because the building was never taken by the government in the expropriation proceeding
the appellate court erred in reckoning the 15-day reglementary period from a mere
conducted by the trial court nor was it affected by the construction of the Zapote-Alabang
admission of the date of receipt by BPI. Petitioner further argues that the Certification issued
by the acting branch clerk of the trial court enjoys a presumption of regularity and that BPI
had not been able to overcome the presumption. Both the trial and appellate courts found
that BPI’s motion for partial new trial was filed on time.
A perusal of the Certification reveals that it certifies that the 25 November 1998 Decision
had already become final, executory and unappealable as to petitioner:
x x x the Decision in this case dated November 25, 1998 has become FINAL, EXECUTORY
and UNAPPEALABLE as of December 11, 1998 considering that the Office of the Solicitor
General failed to file any Notice of Appeal or Motion for Reconsideration despite receipt of a
copy thereof on November 26, 1998.
This certification is being issued upon the request of Atty. Jansen Rodriguez for whatever
legal purpose it may serve.43 (Emphasis supplied)
There can be no other reading of this certificate that would be supported by the record.
Section 9 of Rule 13 of the Rules of Court states that judgments, final orders or resolutions
shall be served either personally or by registered mail. Section 13 of the same Rule
provides what consists proof of service:
Proof of personal service shall consist of a written admission of the party served, or the
official return of the server, or the affidavit of the party serving, containing a full statement of
the date, place and manner of service. x x x If service is made by registered mail, proof shall
be made by such affidavit and the registry receipt issued by the mailing office. The registry
return card shall be filed immediately upon its receipt by the sender x x x.
A careful review of the record shows the absence of any proof that the Decision of 25
November 1998 was served upon BPI. Hence, the Court of Appeals correctly held that
absent any proof of service to BPI of the Decision, the period of 15 days within which to file
its motion for partial new trial did not begin to run against BPI. However, BPI’s admission
that it received a copy of the Decision on 01 December 1998 is binding on it, and was
correctly considered by the Court of Appeals as the reckoning date to count the 15-day
period.
On whether the award of additional just
compensation and the amount fixed therefor
was unfounded and without legal basis
Eminent domain is the authority and right of the State, as sovereign, to take private property
for public use upon observance of due process of law and payment of just
compensation.44 The State’s power of eminent domain is limited by the constitutional
mandate that private property shall not be taken for public use without just compensation.45
Just compensation is the full and fair equivalent of the property sought to be expropriated. 46
The general rule is that the just compensation to which the owner of the condemned
property is entitled to is the market value.47 Market value is that sum of money which a
person desirous but not compelled to buy, and an owner willing but not compelled to sell,
would agree on as a price to be paid by the buyer and received by the seller. The general
rule, however, is modified where only a part of a certain property is expropriated.48 In such a
case, the owner is not restricted to compensation for the portion actually taken, he is also
entitled to recover the consequential damage, if any, to the remaining part of the property. 49
In this case, petitioner questions the appellate court’s Decision affirming the trial court’s
Order of 03 February 2003 granting additional just compensation for consequential
damages for BPI’s building. Petitioner contends that BPI’s building was "never taken" by
petitioner, and that to award consequential damages for the building was unfounded and
without legal basis. In support of its contention, petitioner relies on the letter dated12
September 2000 of the DPWH to the Office of the Solicitor General50 stating that the
proposed sidewalk of 2.50 meters was reduced to 2.35meters, thus leaving BPI’s building
intact.
Petitioner’s argument is untenable.
No actual taking of the building is necessary to grant consequential damages.
Consequential damages are awarded if as a result of the expropriation, the remaining
property of the owner suffers from an impairment or decrease in value. 51 The rules on
expropriation clearly provide a legal basis for the award of consequential damages. Section
6 of Rule 67 of the Rules of Court provides:
x x x The commissioners shall assess the consequential damages to the property not taken
and deduct from such consequential damages the consequential benefits to be derived by
the owner from the public use or public purpose of the property taken, the operation of its
franchise by the corporation or the carrying on of the business of the corporation or person
taking the property. But in no case shall the consequential benefits assessed exceed the
consequential damages assessed, or the owner be deprived of the actual value of his
property so taken.
In B.H. Berkenkotter & Co. v. Court of Appeals,52 we held that:
To determine just compensation, the trial court should first as certain the market value of the
property, to which should be added the consequential damages after deducting therefrom
the consequential benefits which may arise from the expropriation. If the consequential
benefits exceed the consequential damages, these items should bed is regarded altogether
as the basic value of the property should be paid in every case.
We quote with approval the ruling of the Court of Appeals:
Lastly, as to the argument of plaintiff-appellant that the award of additional just
compensation for the building of defendant-appellee is erroneous and without legal basis
because the building was never taken by the government in the expropriation proceeding
conducted by the trial court nor was it affected by the construction of the Zapote-Alabang
Flyover, We find the ruling of Republic of the Philippines through the DPWH vs. CA and
Rosario R. Reyes appropriate to apply in this case, to wit:

Petitioner contends that no consequential damages may be awarded as the remaining lot
was not "actually taken" by the DPWH, and to award consequential damages for the lot
which was retained by the owner is tantamount to unjust enrichment on the part of the latter.

Petitioner’s contention is unmeritorious.

No actual taking of the remaining portion of the real property is necessary to grant
consequential damages. If as a result of the expropriation made by petitioner, the remaining
lot (i.e., the 297-square meter lot) of private respondent suffers from an impairment or
decrease in value, consequential damages may be awarded to private
respondent.53(Italicization in the original)

Petitioner would also have us review the bases of the courts below in awarding just
compensation for the building for consequential damages. The uniform findings of the trial
court and the appellate court are entitled to the greatest respect. They are binding on the
Court in the absence of a strong showing by petitioner that the courts below erred in
appreciating the established facts and in drawing inferences from such facts.54 We find no
cogent reason to deviate from this.

The Court would like to stress that there is a stark absence in the records of any proof that
DPWH communicated its amended plan to BPI or to the trial court. On the other hand, the
trial court found that BPI was not notified of the reduction and had relied only on the DPWH
letter dated 12 August 1997 saying that it was not possible to reduce the width of the
sidewalk. Petitioner had actively participated in the expropriation proceedings of the portion
of BPI’s lot according to the original plan, the decision for which was promulgated on 25
November 1998. The trial court had also ruled that additional just compensation for the
building was in order in its Decision dated 10 September 1999, from which petitioner moved
for reconsideration but only as to the procedure in the determination of the amount. Further,
the records show that by 07 September 1999, when Officer-In-Charge Agbayani conducted
an ocular inspection, a new building had already been constructed replacing the old one;
whereas the amended plan was communicated by DPWH to the OSG only in September
2000,when the trial court was constituting anew the Board of Commissioners to determine
the amount of just compensation for the building. The findings of the lower courts are borne
by the records. Hence, there was proper basis for the determination of just compensation
for the building for consequential damages.

WHEREFORE, we DENY the petition. We AFFIRM the Court of Appeals’ Decision dated 14
September 2011 and Resolution dated 06 August 2012 in CA-G.R. CV No. 79843.

SO ORDERED.
VICTORINA (VICTORIA) ALICE LIM LAZARO v. BREWMASTER INTERNATIONAL,
INC., (G.R. No. 182779, August 23, 2010)
Before the Court is a petition for review on certiorari of the Court of Appeals (CA)
Decision[1] dated September 4, 2007 and Resolution dated January 31, 2008, which awarded
the amount sought by respondent in its Complaint. As held by the CA, to grant the relief
prayed for by respondent is, in the words of Section 6 of the Revised Rule on Summary
Procedure, the judgment warranted by the facts alleged in the complaint.
Respondent, Brewmaster International, Inc., is a marketing company engaged in selling and
distributing beer and other products of Asia Brewery, Inc. On November 9, 2005, it filed a
Complaint for Sum of Money against Prescillo G. Lazaro (Prescillo) and petitioner, Victorina
(also known as Victoria) Alice Lazaro, with the Metropolitan Trial Court (MeTC) of Makati City.
The complaint alleged as follows:
6. During the period from February 2002 to May 2002, defendants obtained
on credit from plaintiff beer and other products in the total amount of ONE
HUNDRED THIRTY EIGHT THOUSAND FIVE HUNDRED TWO PESOS
AND NINETY TWO CENTAVOS (Php 138,502.92), evidenced by sales
invoices photocopies of which are hereto attached as Annexes A, A-1 to A-
11,
7. Despite repeated demands, defendants have failed and refused, and up
to now, still fail and refuse to pay their aforesaid obligation to plaintiff in the
amount of ONE HUNDRED THIRTY EIGHT THOUSAND FIVE HUNDRED
TWO PESOS AND NINETY TWO CENTAVOS (Php 138,502.92) as
evidenced by the demand letters dated 21 April 2003, 12 May 2003, 5
August 2003 and 17 August 2005, photocopies of which are hereto
attached as Annexes B, C, C-1, D, D-1, D-2, and E, E-1,
8. Under the terms of the sales invoices, defendants agreed that in case of
litigation, the venue shall only be at the proper courts of Makati City and to
pay 24% interest on all overdue accounts.
WHEREFORE, it is respectfully prayed that judgment be rendered in favor
of plaintiff and against the defendants, ordering the latter to pay the sum of
Php138,502.92 representing plaintiffs claim and the sum of Php33,240.00
as interest.
Plaintiff prays for such other or further relief and remedies that are just and
equitable in the premises.[2]
Annexes A, A-1 to A-11 are photocopies of sales invoices[3] indicating the amount of the
goods purchased and showing that they were sold to TOTAL and received by a certain Daniel
Limuco.
Prescillo filed an answer with counterclaim, denying any knowledge of the obligation
sued upon. According to Prescillo, he and petitioner had lived separately since January 15,
2002 and he never authorized petitioner to purchase anything from respondent. He pointed
out that the purchaser of the items, as borne out by the sales invoices attached to the
complaint, was Total, which should have been the one sued by respondent.[4]
Petitioner, in her own answer with counterclaims, likewise denied having transacted
with respondent, and averred that the documents attached to the complaint showed that it
was Total which purchased goods from respondent. [5]
On June 14, 2006, during the scheduled preliminary conference, petitioner and her
co-defendant did not appear. Hence, the MeTC declared the case submitted for decision. [6]
On August 22, 2006, the MeTC dismissed the complaint, ratiocinating that
respondent, as plaintiff, failed to meet the burden of proof required to establish its claim by
preponderance of evidence. The court a quonoted that the sales invoices attached to the
complaint showed that the beer and the other products were sold to Total and were received
by a certain Daniel Limuco; they did not indicate, in any way, that the goods were received
by petitioner or her husband.[7]
Respondent elevated the case to the Regional Trial Court (RTC) through a notice of
appeal. Attached to its Memorandum was additional evidence, showing that it transacted with
petitioner and her husband, who were then the operators and franchisees of the Total
gasoline station and convenience store where the subject goods were delivered, and that
Daniel Limuco was their employee.[8]
Unmoved, the RTC found no reversible error in the assailed decision. It agreed with the MeTC
that respondent failed to submit any evidence proving that petitioner and her husband were
liable for the obligation. The RTC disregarded the documents attached to the memorandum
on the ground that admission of such additional evidence would be offensive to the basic rule
of fair play and would violate the other partys right to due process. Thus, the RTC affirmed
the assailed decision in toto.[9]
Respondent then went to the CA through a petition for review. There, it succeeded in obtaining
a judgment in its favor. Applying Section 7[10] of the Revised Rule on Summary Procedure, in
conjunction with Section 6[11]thereof, the CA held that judgment should have been rendered
as may be warranted by the facts alleged in the complaint considering that both defendants
failed to appear during the preliminary conference. The appellate court said that by instead
referring to the sales invoices and bypassing [the] ultimate facts [alleged in the complaint],
the MeTC contravened the evident purposes of the [Revised] Rule on Summary
Procedure directing that the judgment be based on the allegations of the complaint, which
were, firstly, to avoid delay and, secondly, to consider the non-appearance at the preliminary
conference as an admission of the ultimate facts. The CA judiciously pronounced that:
In fact, evidentiary matters (like the sales invoices attached to the
complaint) were not yet to be considered as of that early stage of the
proceedings known under the Rule on Summary Procedure as the
preliminary conference. The evidentiary matters and facts are to be
required only upon the termination of the preliminary conference and only
if further proceedings become necessary to establish factual issues defined
in the order issued by the court. (citing Section 9, Rule on Summary
Procedure)
Thus, finding the amount claimed to be warranted by the allegations in the complaint, the CA,
in its September 4, 2007 Decision, reversed the trial courts decision and ordered petitioner
and her husband to pay the said amount plus interests, thus:
WHEREFORE, the DECISION DATED MARCH 12, 2007 is REVERSED
AND SET ASIDE.
The respondents are ORDERED to pay, jointly and severally, to the
petitioner the amount of P138,502.92, plus interest of 6% per annum from
the filing of the complaint until this judgment becomes final and executory,
and 12% per annum upon finality of this judgment until full payment.
The respondents are also ORDERED to pay the costs of suit.
SO ORDERED.[12]
Petitioner filed a motion for reconsideration of the said Decision but the same was
denied by the CA in its January 31, 2008 Resolution. [13]
Petitioner submits the following issues to this Court for resolution:
Petitioner respectfully submits that the Honorable Court of Appeals erred
in the interpretation of Section 6 of the Revised Rules of Summary
Procedure when it reversed the Decision of the RTC, Branch 162 of Makati
in Civil Case [N]o. 06-944.
Petitioner further submits that the Court of Appeals erred in giving relief to
the private respondent despite the lack of cause of action in its complaint
against the petitioner herein.[14]
Petitioner contends that the Revised Rule on Summary Procedure does not warrant
the automatic grant of relief in favor of the plaintiff when the complaint fails to state a cause
of action. She avers that respondents complaint fails to state a cause of action; hence, no
relief can be given to respondent. Petitioner points out that the sales invoices formed part of
the complaint and should be considered in determining whether respondent has a cause of
action against her. Consideration of the said sales invoices, she avers, would show that there
is no contractual relationship between her and respondent; the invoices did not indicate in
any way that petitioner was liable for the amount stated therein.
Petitioner is correct in saying that no relief can be awarded to respondent if its
complaint does not state a cause of action. Indeed, if the complaint does not state a cause of
action, then no relief can be granted to the plaintiff and it would necessarily follow that the
allegations in the complaint would not warrant a judgment favorable to the plaintiff.
 The basic requirement under the rules of procedure is that a complaint must make
a plain, concise, and direct statement of the ultimate facts on which the plaintiff relies for his
claim.[15] Ultimate facts mean the important and substantial facts which either directly form the
basis of the plaintiffs primary right and duty or directly make up the wrongful acts or omissions
of the defendant.[16] They refer to the principal, determinative, constitutive facts upon the
existence of which the cause of action rests. The term does not refer to details of probative
matter or particulars of evidence which establish the material elements. [17]
The test of sufficiency of the facts alleged in a complaint to constitute a cause of
action is whether, admitting the facts alleged, the court could render a valid judgment upon
the same in accordance with the prayer of the petition or complaint.[18] To determine whether
the complaint states a cause of action, all documents attached thereto may, in fact, be
considered, particularly when referred to in the complaint. [19] We emphasize, however, that
the inquiry is into the sufficiency, not the veracity of the material allegations in the
complaint.[20] Thus, consideration of the annexed documents should only be taken in the
context of ascertaining the sufficiency of the allegations in the complaint.
Petitioner argues that the complaint fails to state a cause of action since reference
to the sales invoices attached to and cited in paragraph six of
the Complaint shows that it was not her who purchased and received the goods from
respondent.
Contrary to petitioners stance, we find that the Complaint sufficiently states a cause
of action. The following allegations in the complaint adequately make up a cause of action for
collection of sum of money against petitioner: (1) that petitioner and her husband obtained
beer and other products worth a total of P138,502.92 on credit from respondent; and (2) that
they refused to pay the said amount despite demand.
As correctly held by the CA, the sales invoices are not actionable documents. They
were not the bases of respondents action for sum of money but were attached to the
Complaint only to provide details on the alleged transactions. They were evidentiary in nature
and not even necessary to be stated or cited in the Complaint.
At any rate, consideration of the attached sales invoices would not change our
conclusion. The sales invoices, naming Total as the purchaser of the goods, do not absolutely
foreclose the probability of petitioner being liable for the amounts reflected thereon. An invoice
is nothing more than a detailed statement of the nature, quantity, and cost of the thing sold
and has been considered not a bill of sale. [21] Had the case proceeded further, respondent
could have presented evidence linking these sales invoices to petitioner.
In Pea v. Court of Appeals,[22] petitioners therein likewise argued that the sales
invoices did not show that they had any involvement in the transactions covered by the same.
What the Court said in reply to this argument bolsters our view in this petition:
Although it appears in the other sales invoices that the petitioners
were the salespersons who brokered the sales of the products covered by
the said sales invoices to the vendees therein named, the said entries
are not conclusive of the extent and the nature of the involvement of the
petitioners in the sales of the products under the said sales invoices which
are not absolutely binding. They may be explained and put to silence by
all the facts and circumstances characterizing the true import of the
dealings to which they refer. The facts contained in the said sales invoices
may be contradicted by oral testimony.[23]
WHEREFORE, premises considered, the Court of Appeals Decision dated
September 4, 2007 and Resolution dated January 31, 2008 are AFFIRMED.
SO ORDERED.
G.R. No. 75919 May 7, 1987
MANCHESTER DEVELOPMENT CORPORATION, ET AL., petitioners,
vs.
COURT OF APPEALS, CITY LAND DEVELOPMENT CORPORATION, STEPHEN
ROXAS, ANDREW LUISON, GRACE LUISON and JOSE DE MAISIP, respondents.
Acting on the motion for reconsideration of the resolution of the Second Division of January
28,1987 and another motion to refer the case to and to be heard in oral argument by the
Court En Banc filed by petitioners, the motion to refer the case to the Court en banc is
granted but the motion to set the case for oral argument is denied.
Petitioners in support of their contention that the filing fee must be assessed on the basis of
the amended complaint cite the case of Magaspi vs. Ramolete. 1 They contend that the
Court of Appeals erred in that the filing fee should be levied by considering the amount of
damages sought in the original complaint.
The environmental facts of said case differ from the present in that —
1. The Magaspi case was an action for recovery of ownership and possession of a parcel of
land with damages.2While the present case is an action for torts and damages and specific
performance with prayer for temporary restraining order, etc.3
2. In the Magaspi case, the prayer in the complaint seeks not only the annulment of title of
the defendant to the property, the declaration of ownership and delivery of possession
thereof to plaintiffs but also asks for the payment of actual moral, exemplary damages and
attorney's fees arising therefrom in the amounts specified therein. 4However, in the present
case, the prayer is for the issuance of a writ of preliminary prohibitory injunction during the
pendency of the action against the defendants' announced forfeiture of the sum of P3
Million paid by the plaintiffs for the property in question, to attach such property of
defendants that maybe sufficient to satisfy any judgment that maybe rendered, and after
hearing, to order defendants to execute a contract of purchase and sale of the subject
property and annul defendants' illegal forfeiture of the money of plaintiff, ordering
defendants jointly and severally to pay plaintiff actual, compensatory and exemplary
damages as well as 25% of said amounts as maybe proved during the trial as attorney's
fees and declaring the tender of payment of the purchase price of plaintiff valid and
producing the effect of payment and to make the injunction permanent. The amount of
damages sought is not specified in the prayer although the body of the complaint alleges
the total amount of over P78 Million as damages suffered by plaintiff. 5
3. Upon the filing of the complaint there was an honest difference of opinion as to the nature
of the action in the Magaspi case. The complaint was considered as primarily an action for
recovery of ownership and possession of a parcel of land. The damages stated were treated
as merely to the main cause of action. Thus, the docket fee of only P60.00 and P10.00 for
the sheriff's fee were paid. 6
In the present case there can be no such honest difference of opinion. As maybe gleaned
from the allegations of the complaint as well as the designation thereof, it is both an action
for damages and specific performance. The docket fee paid upon filing of complaint in the
amount only of P410.00 by considering the action to be merely one for specific performance
where the amount involved is not capable of pecuniary estimation is obviously erroneous.
Although the total amount of damages sought is not stated in the prayer of the complaint yet
it is spelled out in the body of the complaint totalling in the amount of P78,750,000.00 which
should be the basis of assessment of the filing fee.
4. When this under-re assessment of the filing fee in this case was brought to the attention
of this Court together with similar other cases an investigation was immediately ordered by
the Court. Meanwhile plaintiff through another counsel with leave of court filed an amended
complaint on September 12, 1985 for the inclusion of Philips Wire and Cable Corporation as
co-plaintiff and by emanating any mention of the amount of damages in the body of the
complaint. The prayer in the original complaint was maintained. After this Court issued an
order on October 15, 1985 ordering the re- assessment of the docket fee in the present
case and other cases that were investigated, on November 12, 1985 the trial court directed
plaintiffs to rectify the amended complaint by stating the amounts which they are asking for.
It was only then that plaintiffs specified the amount of damages in the body of the complaint
in the reduced amount of P10,000,000.00. 7 Still no amount of damages were specified in
the prayer. Said amended complaint was admitted.
On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to pay the
amount of P3,104.00 as filing fee covering the damages alleged in the original complaint as
it did not consider the damages to be merely an or incidental to the action for recovery of
ownership and possession of real property. 8 An amended complaint was filed by plaintiff
with leave of court to include the government of the Republic as defendant and reducing the
amount of damages, and attorney's fees prayed for to P100,000.00. Said amended
complaint was also admitted. 9
In the Magaspi case, the action was considered not only one for recovery of ownership but
also for damages, so that the filing fee for the damages should be the basis of assessment.
Although the payment of the docketing fee of P60.00 was found to be insufficient,
nevertheless, it was held that since the payment was the result of an "honest difference of
opinion as to the correct amount to be paid as docket fee" the court "had acquired
jurisdiction over the case and the proceedings thereafter had were proper and
regular." 10 Hence, as the amended complaint superseded the original complaint, the
allegations of damages in the amended complaint should be the basis of the computation of
the filing fee. 11
In the present case no such honest difference of opinion was possible as the allegations of
the complaint, the designation and the prayer show clearly that it is an action for damages
and specific performance. The docketing fee should be assessed by considering the
amount of damages as alleged in the original complaint.
As reiterated in the Magaspi case the rule is well-settled "that a case is deemed filed only
upon payment of the docket fee regardless of the actual date of filing in court . 12 Thus, in
the present case the trial court did not acquire jurisdiction over the case by the payment of
only P410.00 as docket fee. Neither can the amendment of the complaint thereby vest
jurisdiction upon the Court. 13 For an legal purposes there is no such original complaint that
was duly filed which could be amended. Consequently, the order admitting the amended
complaint and all subsequent proceedings and actions taken by the trial court are null and
void.

The Court of Appeals therefore, aptly ruled in the present case that the basis of assessment
of the docket fee should be the amount of damages sought in the original complaint and not
in the amended complaint.

The Court cannot close this case without making the observation that it frowns at the
practice of counsel who filed the original complaint in this case of omitting any specification
of the amount of damages in the prayer although the amount of over P78 million is alleged
in the body of the complaint. This is clearly intended for no other purpose than to evade the
payment of the correct filing fees if not to mislead the docket clerk in the assessment of the
filing fee. This fraudulent practice was compounded when, even as this Court had taken
cognizance of the anomaly and ordered an investigation, petitioner through another counsel
filed an amended complaint, deleting all mention of the amount of damages being asked for
in the body of the complaint. It was only when in obedience to the order of this Court of
October 18, 1985, the trial court directed that the amount of damages be specified in the
amended complaint, that petitioners' counsel wrote the damages sought in the much
reduced amount of P10,000,000.00 in the body of the complaint but not in the prayer
thereof. The design to avoid payment of the required docket fee is obvious.

The Court serves warning that it will take drastic action upon a repetition of this unethical
practice.

To put a stop to this irregularity, henceforth all complaints, petitions, answers and other
similar pleadings should specify the amount of damages being prayed for not only in the
body of the pleading but also in the prayer, and said damages shall be considered in the
assessment of the filing fees in any case. Any pleading that fails to comply with this
requirement shall not bib accepted nor admitted, or shall otherwise be expunged from the
record.

The Court acquires jurisdiction over any case only upon the payment of the prescribed
docket fee. An amendment of the complaint or similar pleading will not thereby vest
jurisdiction in the Court, much less the payment of the docket fee based on the amounts
sought in the amended pleading. The ruling in the Magaspi case 14 in so far as it is
inconsistent with this pronouncement is overturned and reversed.

WHEREFORE, the motion for reconsideration is denied for lack of merit.

SO ORDERED.
THE HEIRS OF THE LATE RUBEN REINOSO, SR., v. COURT OF APPEALS, In favor of herein plaintiffs and against defendant Jose Guballa:
PONCIANO TAPALES, JOSE GUBALLA, and FILWRITERS GUARANTY ASSURANCE
CORPORATION (G.R. No. 116121, July 18, 2011)
1. For the death of Ruben Reinoso, Sr. ₱30,000.00
Before the Court is a petition for review assailing the May 20, 1994 Decision [1] and
2. Loss of earnings (monthly income at the time of death 120,000.00
June 30, 1994 Resolution[2] of the Court of Appeals (CA), in CA-G.R. CV No. 19395, which
(₱2,000.00 Court used ₱1,000.00 only per month (or
set aside the March 22, 1988 Decision of the Regional Trial Court, Branch 8, Manila (RTC) for ₱12,000.00 only per year) & victim then being 55 at death
had ten (10) years life expectancy
non-payment of docket fees. The dispositive portion of the CA decision reads:

IN VIEW OF ALL THE FOREGOING, the decision appealed from

is SET ASIDE and REVERSED and the complaint in this case is ordered 3. Mortuary, Medical & funeral expenses and all 15,000.00
DISMISSED. incidental expenses in the wake in serving those who
condoled..

No costs pronouncement. 4. Moral damages .. 50,000.00

5. Exemplary damages 25,000.00

SO ORDERED.
6. Litigation expenses . 15,000.00

7. Attorneys fees 25,000.00

The complaint for damages arose from the collision of a passenger jeepney and a truck at
Or a total of ₱250,000.00
around 7:00 oclock in the evening of June 14, 1979 along E. Rodriguez Avenue, Quezon
For damages to property:
City. As a result, a passenger of the jeepney, Ruben Reinoso, Sr. (Reinoso), was killed. The
passenger jeepney was owned by Ponciano Tapales (Tapales) and driven by Alejandro
Santos (Santos), while the truck was owned by Jose Guballa (Guballa) and driven by Mariano In favor of defendant Ponciano Tapales and against defendant Jose
Guballa:
Geronimo (Geronimo).

1. Actual damages for repair is already awarded to

On November 7, 1979, the heirs of Reinoso (petitioners) filed a complaint for
damages against Tapales and Guballa. In turn, Guballa filed a third party complaint against
Filwriters Guaranty Assurance Corporation (FGAC) under Policy Number OV-09527.
defendant-cross-claimant Ponciano Tapales by Br. 9,
RTC-Malolos, Bulacan (Vide: Exh. 1-G-Tapales); hence,
cannot recover twice.
2. Compensatory damages (earnings at ₱150.00 per day) ₱9,000.00
and for two (2) months jeepney stayed at the repair shop.

3. Moral damages ... 10,000.00

On March 22, 1988, the RTC rendered a decision in favor of the petitioners and
against Guballa. The decision in part, reads: 4. Exemplary damages . 10,000.00

5. Attorneys fees 15,000.00

or a total of ₱44,000.00 SO ORDERED.[3]

Under the 3rd party complaint against 3rd party defendant Filwriters
Guaranty Assurance Corporation, the Court hereby renders judgment in
favor of said 3rd party plaintiff by way of 3rd party liability under policy No.
OV-09527 in the amount of ₱50,000.00 undertaking plus ₱10,000.00 as
and for attorneys fees.
On appeal, the CA, in its Decision dated May 20, 1994, set aside and reversed the RTC
decision and dismissed the complaint on the ground of non-payment of docket fees pursuant
to the doctrine laid down in Manchester v. CA.[4] In addition, the CA ruled that since
prescription had set in, petitioners could no longer pay the required docket fees. [5]

For all the foregoing, it is the well considered view of the Court that Petitioners filed a motion for reconsideration of the CA decision but it was denied in a
plaintiffs, defendant Ponciano Tapales and 3rd Party plaintiff Jose Guballa
established their claims as specified above, respectively. Totality of resolution dated June 30, 1994.[6] Hence, this appeal, anchored on the following
evidence preponderance in their favor.

JUDGMENT GROUNDS:

WHEREFORE, in view of the foregoing, judgment is hereby rendered as A. The Court of Appeals MISAPPLIED THE RULING of the Supreme
follows: Court in the case of Manchester Corporation vs. Court of Appeals to
this case.

In favor of plaintiffs for the death of Ruben Reinoso, Sr.₱250,000.00;

B. The issue on the specification of the damages appearing in the
prayer of the Complaint was NEVER PLACED IN ISSUE BY ANY OF
In favor of defendant Ponciano Tapales due to damage of his THE PARTIES IN THE COURT OF ORIGIN (REGIONAL TRIAL COURT)
passenger jeepney.₱44,000.00; NOR IN THE COURT OF APPEALS.

In favor of defendant Jose Guballa under Policy No. OV- C. The issues of the case revolve around the more substantial issue
09527....₱60,000.00; as to the negligence of the private respondents and their culpability
to petitioners.[7]

The petitioners argue that the ruling in Manchester should not have been applied
All the specified accounts with 6% legal rate of interest per annum
from date of complaint until fully paid (Reformina vs. Tomol, 139 SCRA retroactively in this case, since it was filed prior to the promulgation of
260; and finally;
the Manchester decision in 1987. They plead that though this Court stated that failure to state
the correct amount of damages would lead to the dismissal of the complaint, said doctrine
Costs of suit. should be applied prospectively.
 opportunity to fully ventilate their cases on the merits. In the case of La Salette College v.
Pilotin,[13] the Court stated:
Moreover, the petitioners assert that at the time of the filing of the complaint in 1979, they
were not certain of the amount of damages they were entitled to, because the amount of the
lost income would still be finally determined in the course of the trial of the case. They claim Notwithstanding the mandatory nature of the requirement of payment of
appellate docket fees, we also recognize that its strict application is
that the jurisdiction of the trial court remains even if there was failure to pay the correct filing qualified by the following: first, failure to pay those fees within the
fee as long as the correct amount would be paid subsequently. reglementary period allows only discretionary, not automatic,
dismissal; second, such power should be used by the court in conjunction
with its exercise of sound discretion in accordance with the tenets of justice
and fair play, as well as with a great deal of circumspection in consideration
of all attendant circumstances.[14]
Finally, the petitioners stress that the alleged defect was never put in issue either in the RTC
or in the CA.

The Court finds merit in the petition. While there is a crying need to unclog court dockets on the one hand, there is, on
the other, a greater demand for resolving genuine disputes fairly and equitably, [15] for it is far
better to dispose of a case on the merit which is a primordial end, rather than on a technicality
The rule is that payment in full of the docket fees within the prescribed period is that may result in injustice.
mandatory.[8] In Manchester v. Court of Appeals,[9] it was held that a court acquires jurisdiction
over any case only upon the payment of the prescribed docket fee. The strict application of
this rule was, however, relaxed two (2) years after in the case of Sun Insurance Office, Ltd. In this case, it cannot be denied that the case was litigated before the RTC and said
v. Asuncion,[10] wherein the Court decreed that where the initiatory pleading is not trial court had already rendered a decision. While it was at that level, the matter of non-
accompanied by the payment of the docket fee, the court may allow payment of the fee within payment of docket fees was never an issue. It was only the CA which motu propio dismissed
a reasonable period of time, but in no case beyond the applicable prescriptive or reglementary the case for said reason.
period. This ruling was made on the premise that the plaintiff had demonstrated his willingness
Considering the foregoing, there is a need to suspend the strict application of the
to abide by the rules by paying the additional docket fees required. [11] Thus, in the more recent
rules so that the petitioners would be able to fully and finally prosecute their claim on the
case of United Overseas Bank v. Ros,[12] the Court explained that where the party does not
merits at the appellate level rather than fail to secure justice on a technicality, for, indeed, the
deliberately intend to defraud the court in payment of docket fees, and manifests its
general objective of procedure is to facilitate the application of justice to the rival claims of
willingness to abide by the rules by paying additional docket fees when required by the court,
contending parties, bearing always in mind that procedure is not to hinder but to promote the
the liberal doctrine enunciated in Sun Insurance Office, Ltd., and not the strict regulations set
administration of justice.[16]
in Manchester, will apply. It has been on record that the Court, in several instances, allowed
the relaxation of the rule on non-payment of docket fees in order to afford the parties the
 The Court also takes into account the fact that the case was filed before
the Manchester ruling came out. Even if said ruling could be applied retroactively, liberality
should be accorded to the petitioners in view of the recency then of the ruling. Leniency
because of recency was applied to the cases of Far Eastern Shipping Company v. Court of
Appeals[17] and Spouses Jimmy and Patri Chan v. RTC of Zamboanga.[18] In the case
ofMactan Cebu International Airport Authority v. Mangubat (Mactan),[19] it was stated that
the intent of the Court is clear to afford litigants full opportunity to comply with the new rules
and to temper enforcement of sanctions in view of the recency of the changes introduced by
the new rules. In Mactan, the Office of the Solicitor General (OSG) also failed to pay the
correct docket fees on time.
We held in another case:
x x x It bears stressing that the rules of procedure are merely
tools designed to facilitate the attainment of justice. They were
conceived and promulgated to effectively aid the court in the
dispensation of justice.Courts are not slaves to or robots of technical
rules, shorn of judicial discretion. In rendering justice, courts have
always been, as they ought to be, conscientiously guided by the norm
that, on the balance, technicalities take a backseat against substantive
rights, and not the other way around. Thus, if the application of the
Rules would tend to frustrate rather than promote justice, it is always
within the power of the Court to suspend the Rules, or except a
particular case from its operation.[20]
The petitioners, however, are liable for the difference between the actual fees paid
and the correct payable docket fees to be assessed by the clerk of court which shall constitute
a lien on the judgment pursuant to Section 2 of Rule 141 which provides:
SEC. 2. Fees in lien. Where the court in its final judgment
awards a claim not alleged, or a relief different from, or more than that
claimed in the pleading, the party concerned shall pay the additional
fees which shall constitute a lien on the judgment in satisfaction of said
lien. The clerk of court shall assess and collect the corresponding fees.
As the Court has taken the position that it would be grossly unjust if petitioners claim
would be dismissed on a strict application of the Manchester doctrine, the appropriate action,
under ordinary circumstances, would be for the Court to remand the case to the CA.
Considering, however, that the case at bench has been pending for more than 30 years and
the records thereof are already before this Court, a remand of the case to the CA would only
unnecessarily prolong its resolution. In the higher interest of substantial justice and to spare
the parties from further delay, the Court will resolve the case on the merits.
The facts are beyond dispute. Reinoso, the jeepney passenger, died as a result of
the collision of a jeepney and a truck on June 14, 1979 at around 7:00 oclock in the evening
along E. Rodriguez Avenue, Quezon City. It was established that the primary cause of the
injury or damage was the negligence of the truck driver who was driving it at a very fast pace.
Based on the sketch and spot report of the police authorities and the narration of
the jeepney driver and his passengers, the collision was brought about because the truck
driver suddenly swerved to, and encroached on, the left side portion of the road in an attempt
to avoid a wooden barricade, hitting the passenger jeepney as a consequence. The analysis
of the RTC appears in its decision as follows:
Perusal and careful analysis of evidence adduced as well as
proper consideration of all the circumstances and factors bearing on the
issue as to who is responsible for the instant vehicular mishap convince
and persuade this Court that preponderance of proof is in favor of plaintiffs
and defendant Ponciano Tapales. The greater mass of evidence spread
on the records and its influence support plaintiffs plaint including that of
defendant Tapales.
The Land Transportation and Traffic Rule (R.A. No. 4136), reads
as follows:
Sec. 37. Driving on right side of highway. Unless a
different course of action is required in the interest of the safety
and the security of life, person or property, or because of
unreasonable difficulty of operation in compliance therewith,
every person operating a motor vehicle or an animal drawn
vehicle on highway shall pass to the right when meeting persons
 or vehicles coming toward him, and to the left when overtaking
persons or vehicles going the same direction, and when turning
to the left in going from one highway to another, every vehicle
shall be conducted to the right of the center of the intersection of
the highway.
Having in mind the foregoing provision of law, this Court is
convinced of the veracity of the version of the passenger jeepney driver
Alejandro Santos, (plaintiffs and Tapales witness) that while running on
lane No. 4 westward bound towards Ortigas Avenue at between 30-40
kms. per hour (63-64 tsn, Jan. 6, 1984) the sand & gravel truck from the
opposite direction driven by Mariano Geronimo, the headlights of which the
former had seen while still at a distance of about 30-40 meters from the
wooden barricade astride lanes 1 and 2, upon reaching said wooden block
suddenly swerved to the left into lanes 3 and 4 at high speed napakabilis
po ng dating ng truck. (29 tsn, Sept. 26, 1985) in the process hitting them
(Jeepney passenger) at the left side up to where the reserve tire was in an
oblique manner pahilis (57 tsn, Sept. 26, 1985). The jeepney after it was
bumped by the truck due to the strong impact was thrown resting on its
right side while the left side was on top of the Bangketa (side walk). The
passengers of the jeepney and its driver were injured including two
passengers who died. The left side of the jeepney suffered considerable
damage as seen in the picture (Exhs. 4 & 5-Tapales, pages 331-332,
records) taken while at the repair shop.
The Court is convinced of the narration of Santos to the effect that
the gravel & sand truck was running in high speed on the good portion of
E. Rodriguez Avenue (lane 1 & 2) before the wooden barricade and (having
in mind that it had just delivered its load at the Corinthian Gardens) so that
when suddenly confronted with the wooden obstacle before it had to avoid
the same in a manner of a reflex reaction or knee-jerk response by forthwith
swerving to his left into the right lanes (lanes 3 & 4). At the time of the
bumping, the jeepney was running on its right lane No. 4 and even during
the moments before said bumping, moving at moderate speed thereon
since lane No. 3 was then somewhat rough because being repaired also
according to Mondalia who has no reason to prevaricate being herself one
of those seriously injured. The narration of Santos and Mondalia are
convincing and consistent in depicting the true facts of the case untainted
by vacillation and therefore, worthy to be relied upon. Their story is forfeited
and confirmed by the sketch drawn by the investigating officer Pfc. F.
Amaba, Traffic Division, NPD, Quezon City who rushed to the scene of the
mishap (Vide: Resolution of Asst fiscal Elizabeth B. Reyes marked as
Exhs. 7, 7-A, 7-B-Tapales, pp. 166-168, records; the Certified Copy found
on pages 598-600, ibid, with the attached police sketch of Pfc. Amaba,
marked as Exh. 8-Tapales on page 169, ibid; certified copy of which is on
page 594, ibid) indicating the fact that the bumping indeed occurred at lane
No. 4 and showing how the gavel & sand truck is positioned in relation to
the jeepney. The said police sketch having been made right after the
accident is a piece of evidence worthy to be relied upon showing the true
facts of the bumping-occurrence. The rule that official duty had been
performed (Sec.5(m), R-131, and also Sec. 38, R-a30, Rev. Rules of
Court) there being no evidence adduced and made of record to the
contrary is that said circumstance involving the two vehicles had been the
result of an official investigation and must be taken as true by this Court.[21]
While ending up on the opposite lane is not conclusive proof of fault in automobile
collisions,[22] the position of the two vehicles, as depicted in the sketch of the police officers,
clearly shows that it was the truck that hit the jeepney. The evidentiary records disclosed that
the truck was speeding along E. Rodriguez, heading towards Santolan Street, while the
passenger jeepney was coming from the opposite direction. When the truck reached a certain
point near the Meralco Post No. J9-450, the front portion of the truck hit the left middle side
portion of the passenger jeepney, causing damage to both vehicles and injuries to the driver
and passengers of the jeepney. The truck driver should have been more careful, because, at
that time, a portion of E. Rodriguez Avenue was under repair and a wooden barricade was
placed in the middle thereof.
The Court likewise sustains the finding of the RTC that the truck owner, Guballa,
failed to rebut the presumption of negligence in the hiring and supervision of his
employee. Article 2176, in relation to Article 2180 of the Civil Code, provides:
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by
the provisions of this Chapter.
xxxx
Art. 2180. The obligation imposed by Art. 2176 is demandable not
only for ones own acts or omissions but also for those of persons for
whom one is responsible.
xxxx
 Employers shall be liable for the damage caused by their
WHEREFORE, the petition is GRANTED. The May 20, 1994 Decision and June 30,
employees and household helpers acting within the scope of their
assigned tasks even though the former are not engaged in any business 1994 Resolution of the Court of Appeals are REVERSED and SET ASIDE and the March 22,
or industry.
1988 Decision of the Regional Trial Court, Branch 8, Manila, is REINSTATED.

xxxx

The responsibility treated of in this article shall cease when the

SO ORDERED.
persons herein mentioned prove that they observed all the diligence of a
good father of a family to prevent damage.

Whenever an employees negligence causes damage or injury to another, there instantly

arises a presumption juris tantum that the employer failed to exercise diligentissimi patris
families in the selection or supervision of his employee. [23] Thus, in the selection of
prospective employees, employers are required to examine them as to their qualification,
experience and service record. With respect to the supervision of employees, employers
must formulate standard operating procedures, monitor their implementation, and impose
disciplinary measures for breaches thereof. These facts must be shown by concrete proof,
including documentary evidence.[24]Thus, the RTC committed no error in finding that the
evidence presented by respondent Guballa was wanting. It ruled:

x x x. As expected, defendant Jose Guballa, attempted to

overthrow this presumption of negligence by showing that he had
exercised the due diligence required of him by seeing to it that the driver
must check the vital parts of the vehicle he is assigned to before he leaves
the compound like the oil, water, brakes, gasoline, horn (9 tsn, July 17,
1986); and that Geronimo had been driving for him sometime in 1976 until
the collision in litigation came about (5-6 tsn, ibid); that whenever his trucks
gets out of the compound to make deliveries, it is always accompanied with
two (2) helpers (16-17 tsn, ibid). This was all which he considered as
selection and supervision in compliance with the law to free himself from
any responsibility. This Court then cannot consider the foregoing as
equivalent to an exercise of all the care of a good father of a family in the
selection and supervision of his driver Mariano Geronimo. [25]
G.R. No. 148154 December 17, 2007
REPUBLIC OF THE PHILIPPINES, represented by the Presidential Commission on
Good Government (PCGG), petitioner,
vs.
SANDIGANBAYAN (Second Division) and FERDINAND R. MARCOS, JR. (as executor
of the estate of FERDINAND E. MARCOS), respondents.
RESOLUTION
QUISUMBING, J.:
The propriety of filing and granting of a motion for a bill of particulars filed for the estate of a
defaulting and deceased defendant is the main issue in this saga of the protracted legal
battle between the Philippine government and the Marcoses on alleged ill-gotten wealth.
This special civil action for certiorari1 assails two resolutions of the Sandiganbayan ("anti-
graft court" or "court") issued during the preliminary legal skirmishes in this 20-year
case:2 (1) the January 31, 2000 Resolution3 which granted the motion for a bill of particulars
filed by executor Ferdinand R. Marcos, Jr. (respondent) on behalf of his father's estate and
(2) the March 27, 2001 Resolution4 which denied the government's motion for
reconsideration.
From the records, the antecedent and pertinent facts in this case are as follows:
The administration of then President Corazon C. Aquino successively sued former
President Ferdinand E. Marcos and former First Lady Imelda Romualdez-Marcos (Mrs.
Marcos), and their alleged cronies or dummies before the anti-graft court to recover the
alleged ill-gotten wealth that they amassed during the former president's 20-year rule.
Roman A. Cruz, Jr. (Cruz), then president and general manager of the Government Service
Insurance System (GSIS); president of the Philippine Airlines (PAL); chairman and
president of the Hotel Enterprises of the Philippines, Inc., owner of Hyatt Regency Manila;
chairman and president of Manila Hotel Corporation; and chairman of the Commercial Bank
of Manila (CBM), is the alleged crony in this case.
On July 21, 1987, the Presidential Commission on Good Government (PCGG), through the
Office of the Solicitor General, filed a Complaint5 for reconveyance, reversion, accounting,
restitution and damages alleging that Cruz and the Marcoses stole public assets and
invested them in several institutions here and abroad. Specifically, Cruz allegedly
purchased, in connivance with the Marcoses, assets whose values are disproportionate to
their legal income, to wit: two residential lots and two condominiums in Baguio City; a
residential building in Makati; a parcel of land and six condominium units in California, USA;
and a residential land in Metro Manila. The PCGG also prayed for the payment of moral
damages of P50 billion and exemplary damages of P1 billion.
On September 18, 1987, Cruz filed an Omnibus Motion to Dismiss, strike out averments in
the complaint, and for a bill of particulars.6
On April 18, 1988, the court ordered that alias summonses be served on the Marcoses who
were then in exile in Hawaii.7 The court likewise admitted the PCGG's Expanded
Complaint8 dated April 25, 1988, then denied Cruz's omnibus motion on July 28, 1988 after
finding that the expanded complaint sufficiently states causes of action and that the matters
alleged are specific enough to allow Cruz to prepare a responsive pleading and for trial. 9 On
September 15, 1988, Cruz filed his answer ad cautelam.10
On November 10, 1988, the alias summonses on the Marcoses were served at 2338 Makiki
Heights, Honolulu, Hawaii.11 The Marcoses, however, failed to file an answer and were
accordingly declared in default by the anti-graft court on April 6, 1989.12 In Imelda R.
Marcos, et al. v. Garchitorena, et al.,13 this Court upheld the validity of the Marcoses' default
status for failure to file an answer within 60 days from November 10, 1988 when the alias
summonses were validly served in their house address in Hawaii.
On September 29, 1989, former President Marcos died in Hawaii. He was substituted by his
estate, represented by Mrs. Marcos and their three children, upon the motion of the
PCGG.14
On July 13, 1992, Mrs. Marcos filed a Motion to Set Aside Order of Default, 15 which was
granted by the anti-graft court on October 28, 1992.16 In Republic v. Sandiganbayan,17 this
Court affirmed the resolution of the anti-graft court, ruling that Mrs. Marcos had a
meritorious defense, and that failure of a party to properly respond to various complaints
brought about by the occurrence of circumstances which ordinary prudence could not have
guarded against, such as being barred from returning to the Philippines, numerous civil and
criminal suits in the United States, deteriorating health of her husband, and the complexities
of her legal battles, is considered as due to fraud, accident and excusable negligence. 18
On September 6, 1995, Mrs. Marcos filed her answer,19 arguing that the former President
Marcos' wealth is not ill-gotten and that the civil complaints and proceedings are void for
denying them due process. She also questioned the legality of the PCGG's acts and asked
for P20 billion moral and exemplary damages and P10 million attorney's fees.
On January 11, 1999, after pre-trial briefs had been filed by Cruz, the PCGG, and Mrs.
Marcos, the court directed former President Marcos' children to appear before it or it will
proceed with pre-trial and subsequent proceedings.20
On March 16, 1999, respondent filed a Motion for Leave to File a Responsive Pleading as
executor of his late father's estate.21 The PCGG opposed the motion, citing as ground the
absence of a motion to set aside the default order or any order lifting the default status of
former President Marcos.22
On May 28, 1999, the court granted respondent's motion:
xxxx
The Court concedes the plausibility of the stance taken by the Solicitor General
that the default Order binds the estate and the executor for they merely derived
 their right, if any, from the decedent. Considering however the complexities of this
case, and so that the case as against the other defendants can proceed smoothly
as the stage reached to date is only a continuation of the pre-trial proceedings, the
Court, in the interest of justice and conformably with the discretion granted to it
under Section 3 of Rule 9 of the Rules of Court hereby accords affirmative relief to
the prayer sought in the motion.
Accordingly, Ferdinand R. Marcos, Jr.[,] as executor of the [estate of] deceased
defendant Ferdinand E. Marcos[,] is granted a period of ten (10) days from receipt
of this Resolution within which to submit his Responsive Pleading.
x x x x23
Respondent asked for three extensions totaling 35 days to file an answer. The court granted
the motions and gave him until July 17, 1999 to file an answer. But instead of filing an
answer, respondent filed on July 16, 1999, a Motion For Bill of Particulars, 24 praying for
clearer statements of the allegations which he called "mere conclusions of law, too vague
and general to enable defendants to intelligently answer."
The PCGG opposed the motion, arguing that the requested particulars were evidentiary
matters; that the motion was dilatory; and that it contravened the May 28, 1999 Resolution
granting respondent's Motion for Leave to File a Responsive Pleading. 25
The anti-graft court, however, upheld respondent, explaining that the allegations against
former President Marcos were vague, general, and were mere conclusions of law. It pointed
out that the accusations did not specify the ultimate facts of former President Marcos'
participation in Cruz's alleged accumulation of ill-gotten wealth, effectively preventing
respondent from intelligently preparing an answer. It noted that this was not the first time the
same issue was raised before it, and stressed that this Court had consistently ruled in favor
of the motions for bills of particulars of the defendants in the other ill-gotten wealth cases
involving the Marcoses.
The fallo of the assailed January 31, 2000 Resolution reads:
WHEREFORE, the defendant-movant's motion for bill of particulars is hereby GRANTED.
Accordingly, the plaintiff is hereby ordered to amend pars. 9 and Annex "A", 12 (a)
to (e), and 19 in relation to par-3 of the PRAYER, of the Expanded Complaint, to
allege the ultimate facts indicating the nature, manner, period and extent of
participation of Ferdinand E. Marcos in the acts referred to therein, and the amount
of damages to be proven during trial, respectively, within fifteen (15) days from
receipt of this resolution[.]
SO ORDERED.26
Not convinced by petitioner's Motion for Reconsideration, 27 the court ruled in the assailed
March 27, 2001 Resolution that the motion for a bill of particulars was not dilatory
considering that the case was only at its pre-trial stage and that Section 1,28 Rule 12 of the
1997 Rules of Civil Procedure allows its filing.
In urging us to nullify now the subject resolutions, petitioner, through the PCGG, relies on
two grounds:
i.
The motion for bill of particulars contravenes section 3, rule 9 of the 1997 rules
[OF] civil procedure.
ii.
The motion for bill of particulars is patently dilatory and bereft of any basis. 29
Invoking Section 3,30 Rule 9 of the 1997 Rules of Civil Procedure, petitioner argues that
since the default order against former President Marcos has not been lifted by any court
order, respondent cannot file a motion for a bill of particulars. Petitioner stresses that
respondent did not file a motion to lift the default order as executor of his father's estate;
thus, he and the estate cannot take part in the trial.
Petitioner also contends that respondent was granted leave to file an answer to the
expanded complaint, not a motion for a bill of particulars. The anti-graft court should not
have accepted the motion for a bill of particulars after he had filed a motion for leave to file
responsive pleading and three successive motions for extension as the motion for a bill of
particulars is dilatory. Petitioner insists that respondent impliedly admitted that the complaint
sufficiently averred factual matters with definiteness to enable him to properly prepare a
responsive pleading because he was able to prepare a draft answer, as stated in his second
and third motions for extension. Petitioner adds that the factual matters in the expanded
complaint are clear and sufficient as Mrs. Marcos and Cruz had already filed their respective
answers.
Petitioner also argues that if the assailed Resolutions are enforced, the People will suffer
irreparable damage because petitioner will be forced to prematurely divulge evidentiary
matters, which is not a function of a bill of particulars. Petitioner maintains that paragraph
12, subparagraphs a to e,31 of the expanded complaint "illustrate the essential acts
pertaining to the conspirational acts" between Cruz and former President Marcos. Petitioner
argues that respondent erroneously took out of context the phrase "unlawful concert" from
the rest of the averments in the complaint.
Respondent, for his part, counters that this Court had compelled petitioner in several ill-
gotten wealth cases involving the same issues and parties to comply with the motions for
bills of particulars filed by other defendants on the ground that most, if not all, of the
allegations in the similarly worded complaints for the recovery of alleged ill-gotten wealth
consisted of mere conclusions of law and were too vague and general to enable the
defendants to intelligently parry them.
Respondent adds that it is misleading for the Government to argue that the default order
against his father stands because the May 28, 1999 Resolution effectively lifted it;
otherwise, he would not have been called by the court to appear before it and allowed to file
a responsive pleading. He stresses that the May 28, 1999 Resolution remains effective for
all intents and purposes because petitioner did not file a motion for reconsideration.
Respondent likewise denies that his motion for a bill of particulars is dilatory as it is
petitioner's continued refusal to submit a bill of particulars which causes the delay and it is
petitioner who is "hedging, flip-flopping and delaying in its prosecution" of Civil Case No.
0006. His draft answer turned out "not an intelligent" one due to the vagueness of the
allegations. He claims that petitioner's actions only mean one thing: it has no specific
information or evidence to show his father's participation in the acts of which petitioner
complains.
In its Reply,32 petitioner adds that the acts imputed to former President Marcos were acts
that Cruz committed in conspiracy with the late dictator, and which Cruz could not have
done without the participation of the latter. Petitioner further argues that conspiracies need
not be established by direct evidence of the acts charged but by a number of indefinite acts,
conditions and circumstances.
In a nutshell, the ultimate issue is: Did the court commit grave abuse of discretion
amounting to lack or excess of jurisdiction in granting respondent's motion for a bill of
particulars as executor of former President Marcos' estates considering that the deceased
defendant was then a defaulting defendant when the motion was filed?
We rule in the negative, and dismiss the instant petition for utter lack of merit.
Under the Rules of Court, a defending party may be declared in default, upon motion and
notice, for failure to file an answer within the allowable period. As a result, the defaulting
party cannot take part in the trial albeit he is entitled to notice of subsequent proceedings. 33
The remedies against a default order are: (1) a motion to set aside the order of default at
any time after discovery thereof and before judgment on the ground that the defendant's
failure to file an answer was due to fraud, accident, mistake or excusable neglect and that
the defendant has a meritorious defense; (2) a motion for new trial within 15 days from
receipt of judgment by default, if judgment had already been rendered before the defendant
discovered the default, but before said judgment has become final and executory; (3) an
appeal within 15 days from receipt of judgment by default; (4) a petition for relief from
judgment within 60 days from notice of judgment and within 6 months from entry thereof;
and (5) a petition for certiorari in exceptional circumstances. 34
In this case, former President Marcos was declared in default for failure to file an answer.
He died in Hawaii as an exile while this case was pending, since he and his family fled to
Hawaii in February 1986 during a people-power revolt in Metro Manila. His representatives
failed to file a motion to lift the order of default. Nevertheless, respondent, as executor of his
father's estate, filed a motion for leave to file a responsive pleading, three motions for
extensions to file an answer, and a motion for bill of particulars all of which were granted by
the anti-graft court.
Given the existence of the default order then, what is the legal effect of the granting of the
motions to file a responsive pleading and bill of particulars? In our view, the effect is that the
default order against the former president is deemed lifted.
Considering that a motion for extension of time to plead is not a litigated motion but an ex
parte one, the granting of which is a matter addressed to the sound discretion of the court;
that in some cases we have allowed defendants to file their answers even after the time
fixed for their presentation; that we have set aside orders of default where defendants'
failure to answer on time was excusable; that the pendency of the motion for a bill of
particulars interrupts the period to file a responsive pleading; and considering that no real
injury would result to the interests of petitioner with the granting of the motion for a bill of
particulars, the three motions for extensions of time to file an answer, and the motion with
leave to file a responsive pleading, the anti-graft court has validly clothed respondent with
the authority to represent his deceased father. The only objection to the action of said court
would be on a technicality. But on such flimsy foundation, it would be erroneous to sacrifice
the substantial rights of a litigant. Rules of procedure should be liberally construed to
promote their objective in assisting the parties obtain a just, speedy and inexpensive
determination of their case.35
While it is true that there was no positive act on the part of the court to lift the default order
because there was no motion nor order to that effect, the anti-graft court's act of granting
respondent the opportunity to file a responsive pleading meant the lifting of the default order
on terms the court deemed proper in the interest of justice. It was the operative act lifting the
default order and thereby reinstating the position of the original defendant whom respondent
is representing, founded on the court's discretionary power to set aside orders of default.
It is noteworthy that a motion to lift a default order requires no hearing; it need be under
oath only and accompanied by an affidavit of merits showing a meritorious defense. 36 And it
can be filed "at any time after notice thereof and before judgment." Thus, the act of the court
in entertaining the motions to file a responsive pleading during the pre-trial stage of the
proceedings effectively meant that respondent has acquired a locus standi in this case. That
he filed a motion for a bill of particulars instead of an answer does not pose an issue
because he, as party defendant representing the estate, is allowed to do so under the Rules
of Court to be able to file an intelligent answer. It follows that petitioner's filing of a bill of
particulars in this case is merely a condition precedent to the filing of an answer.
Indeed, failure to file a motion to lift a default order is not procedurally fatal as a defaulted
party can even avail of other remedies mentioned above.
As default judgments are frowned upon, we have been advising the courts below to be
liberal in setting aside default orders to give both parties every chance to present their case
fairly without resort to technicality.37 Judicial experience shows, however, that resort to
motions for bills of particulars is sometimes intended for delay or, even if not so intended,
actually result in delay since the reglementary period for filing a responsive pleading is
suspended and the subsequent proceedings are likewise set back in the meantime. As
understood under Section 1 of Rule 12, mentioned above, a motion for a bill of particulars
must be filed within the reglementary period for the filing of a responsive pleading to the
pleading sought to be clarified. This contemplates pleadings which are required by the
Rules to be answered under pain of procedural sanctions, such as default or implied
admission of the facts not responded to.38
But as defaulted defendants are not actually thrown out of court because the Rules see to it
that judgments against them must be in accordance with the law and competent evidence,
this Court prefers that the lifting of default orders be effected before trial courts could
receive plaintiffs' evidence and render judgments. This is so since judgments by default may
result in considerable injustice to defendants, necessitating careful and liberal examination
of the grounds in motions seeking to set them aside. The inconvenience and complications
associated with rectifying resultant errors, if defendant justifies his omission to seasonably
answer, far outweigh the gain in time and dispatch of immediately trying the case. 39 The fact
that former President Marcos was in exile when he was declared in default, and that he later
died still in exile, makes the belated filing of his answer in this case understandably
excusable.
The anti-graft court required the Marcos siblings through its January 11, 1999 Order 40 to
substitute for their father without informing them that the latter was already declared in
default. They were unaware, therefore, that they had to immediately tackle the matter of
default. Respondent, who stands as the executor of their father's estate, could assume that
everything was in order as far as his standing in court was concerned. That his motion for
leave to file a responsive pleading was granted by the court gave him credible reason not to
doubt the validity of his legal participation in this case. Coupled with his intent to file an
answer, once his motion for a bill of particulars is sufficiently answered by petitioner, the
circumstances abovementioned warrant the affirmation of the anti-graft court's actions now
being assailed.
As to the propriety of the granting of the motion for a bill of particulars, we find for
respondent as the allegations against former President Marcos appear obviously couched in
general terms. They do not cite the ultimate facts to show how the Marcoses acted "in
unlawful concert" with Cruz in illegally amassing assets, property and funds in amounts
disproportionate to Cruz's lawful income, except that the former President Marcos was the
president at the time.
The pertinent allegations in the expanded complaint subject of the motion for a bill of
particulars read as follows:
11. Defendant Roman A. Cruz, Jr. served as public officer during the Marcos
administration. During his . . . incumbency as public officer, he acquired assets,
funds and other property grossly and manifestly disproportionate to his salaries,
lawful income and income from legitimately acquired property.
12. . . . Cruz, Jr., in blatant abuse of his position as Chairman and General
Manager of the Government Service Insurance System (GSIS), as President and
Chairman of the Board of Directors of the Philippine Airlines (PAL), and as
Executive Officer of the Commercial Bank of Manila, by himself and/or in unlawful
concert with defendants Ferdinand E. Marcos and Imelda R. Marcos, among
others:
(a) purchased through Arconal N.V., a Netherland-Antilles Corporation, a lot and
building located at 212 Stockton St., San Francisco, California, for an amount
much more than the value of the property at the time of the sale to the gross and
manifest disadvantageous (sic) to plaintiff.
GSIS funds in the amount of $10,653,350.00 were used for the purchase when
under the right of first refusal by PAL contained in the lease agreement with Kevin
Hsu and his wife, the owners of the building, a much lower amount should have
been paid.
For the purchase of the building, defendant Cruz allowed the intervention of Sylvia
Lichauco as broker despite the fact that the services of such broker were not
necessary and even contrary to existing policies of PAL to deal directly with the
seller. The broker was paid the amount of $300,000.00 resulting to the prejudice of
GSIS and PAL.
(b) Converted and appropriated to . . . own use and benefit funds of the
Commercial Bank of Manila, of which he was Executive Officer at the time.
He caused the disbursement from the funds of the bank of among others, the
amount of P81,152.00 for personal services rendered to him by one Brenda
Tuazon.
(c) Entered into an agency agreement on behalf of the Government Service
Insurance System with the Integral Factors Corporation (IFC), to solicit insurance,
and effect reinsurance on behalf of the GSIS, pursuant to which agreement, IFC
effected a great part of its reinsurance with INRE Corporation, which, was a non-
insurance company registered in London[,] with defendant . . . Cruz, Jr., as one of
its directors.
IFC was allowed to service accounts emanating from government agencies like the
Bureau of Buildings, Philippine National Oil Corporation, National Power
Corporation, Ministry of Public Works and Highways which under the laws are
required to insure with and deal directly with the GSIS for their insurance needs.
The intervention of IFC to service these accounts caused the reduction of premium
paid to GSIS as a portion thereof was paid to IFC.
(d) Entered into an agreement with the Asiatic Integrated Corporation (AIC)
whereby the GSIS ceded, transferred, and conveyed property consisting of five (5)
adjoining parcels of land situated in Manila covered by Transfer Certificates of Title
(TCT) Nos. 49853, 49854, 49855 and 49856 to AIC in exchange for AIC property
known as the Pinugay Estate located at Tanay, Rizal, covered by TCT No. 271378,
under terms and conditions grossly and manifestly disadvantageous to the
government.
The appraised value of the GSIS parcels of land was P14,585,600.00 as of June
25, 1971 while the value of the Pinugay Estate was P2.00 per square meter or a
 total amount of P15,219,264.00. But in the barter agreement, the Pinugay Estate
was valued at P5.50 per square meter or a total of P41,852,976.00, thus GSIS had
to pay AIC P27,287,976.00, when it was GSIS which was entitled to payment from
AIC for its failure to pay the rentals of the GSIS property then occupied by it.
(e) purchased three (4) (sic) additional Airbus 300 in an amount much more than
the market price at the time when PAL was in deep financial strain, to the gross
and manifest disadvantage of Plaintiff.
On October 29, 1979, defendant Cruz, as President and Chairman of the Board of
Directors of . . . (PAL) authorized the payment of non-refundable deposit of U.S.
$200,000.00 even before a meeting of the Board of Directors of PAL could
deliberate and approve the purchase.41
In his motion for a bill of particulars, respondent wanted clarification on the specific nature,
manner and extent of participation of his father in the acquisition of the assets cited above
under Cruz; particularly whether former President Marcos was a beneficial owner of these
properties; and the specific manner in which he acquired such beneficial control.
Also, respondent wanted to know the specific nature, manner, time and extent of support,
participation and collaboration of his father in (1) Cruz's alleged "blatant abuse" as GSIS
president and general manager, PAL president and chairman of the board, and executive
officer of the CBM; (2) the purchase of a lot and building in California using GSIS funds and
Cruz's allowing Lichauco as broker in the sale of the lot and building contrary to PAL
policies; (3) Cruz's appropriating to himself CBM funds; (4) Cruz's disbursement of P81,152
CBM funds for personal services rendered to him by Tuazon; (5) Cruz's entering into an
agency agreement for GSIS with IFC to solicit, insure, and effect reinsurance of GSIS, as
result of which IFC effected a great part of its reinsurance with INRE Corporation, a London-
registered non-insurance company, of which Cruz was one of the directors; (6) Cruz's
allowing IFC to service the accounts emanating from government agencies which were
required under the law to insure and deal directly with the GSIS for their insurance needs;
(7) the GSIS-AIC agreement wherein GSIS ceded and conveyed to AIC five parcels of land
in Manila in exchange for AIC's Pinugay Estate in Tanay, Rizal; (8) PAL's purchase of three
Airbus 300 jets for a higher price than the market price; and (9) if former President Marcos
was connected in any way to IFC and INRE Corporation. Respondent likewise asked, what
is the specific amount of damages demanded?
The 1991 Virata-Mapa Doctrine42 prescribes a motion for a bill of particulars, not a motion to
dismiss, as the remedy for perceived ambiguity or vagueness of a complaint for the
recovery of ill-gotten wealth,43 which was similarly worded as the complaint in this case.
That doctrine provided protective precedent in favor of respondent when he filed his motion
for a bill of particulars.
While the allegations as to the alleged specific acts of Cruz were clear, they were vague
and unclear as to the acts of the Marcos couple who were allegedly "in unlawful concert
with" the former. There was no factual allegation in the original and expanded complaints on
the collaboration of or on the kind of support extended by former President Marcos to Cruz
in the commission of the alleged unlawful acts constituting the alleged plunder. All the
allegations against the Marcoses, aside from being maladroitly laid, were couched in
general terms. The alleged acts, conditions and circumstances that could show the
conspiracy among the defendants were not particularized and sufficiently set forth by
petitioner.
That the late president's co-defendants were able to file their respective answers to the
complaint does not necessarily mean that his estate's executor will be able to file an equally
intelligent answer, since the answering defendants' defense might be personal to them.
In dismissing this petition, Tantuico, Jr. v. Republic44 also provides us a cogent
jurisprudential guide. There, the allegations against former President Marcos were also
conclusions of law unsupported by factual premises. The particulars prayed for in the
motion for a bill of particulars were also not evidentiary in nature. In that case, we ruled that
the anti-graft court acted with grave abuse of discretion amounting to lack or excess of
jurisdiction in denying an alleged crony's motion for a bill of particulars on a complaint with
similar tenor and wordings as in the case at bar.
Likewise we have ruled in Virata v. Sandiganbayan45 (1993) that Tantuico's applicability to
that case was "ineluctable," and the propriety of the motion for a bill of particulars under
Section 1, Rule 12 of the Revised Rules of Court was beyond dispute. 46
In 1996, in the similar case of Republic v. Sandiganbayan (Second Division),47 we also
affirmed the resolutions of the Sandiganbayan granting the motion for a bill of particulars of
Marcos' alleged crony, business tycoon Lucio Tan. 48
Phrases like "in flagrant breach of public trust and of their fiduciary obligations as public
officers with grave and scandalous abuse of right and power and in brazen violation of the
Constitution and laws," "unjust enrichment," "embarked upon a systematic plan to
accumulate ill-gotten wealth," "arrogated unto himself all powers of government," are easy
and easy to read; they have potential media quotability and they evoke passion with literary
flair, not to mention that it was populist to flaunt those statements in the late 1980s. But they
are just that, accusations by generalization. Motherhood statements they are, although now
they might be a politically incorrect expression and an affront to mothers everywhere,
although they best describe the accusations against the Marcoses in the case at bar.
In Justice Laurel's words, "the administration of justice is not a matter of guesswork." 49 The
name of the game is fair play, not foul play. We cannot allow a legal skirmish where, from
the start, one of the protagonists enters the arena with one arm tied to his back. 50 We must
stress anew that the administration of justice entails a painstaking, not haphazard,
preparation of pleadings.
The facile verbosity with which the legal counsel for the government flaunted the accusation
of excesses against the Marcoses in general terms must be soonest refurbished by a bill of
particulars, so that respondent can properly prepare an intelligent responsive pleading and
so that trial in this case will proceed as expeditiously as possible. To avoid a situation where
its pleadings may be found defective, thereby amounting to a failure to state a cause of
action, petitioner for its part must be given the opportunity to file a bill of particulars. Thus,
we are hereby allowing it to supplement its pleadings now, considering that amendments to
pleadings are favored and liberally allowed especially before trial.

Lastly, the allowance of the motion for a more definite statement rests with the sound
discretion of the court. As usual in matters of a discretionary nature, the ruling of the trial
court will not be reversed unless there has been a palpable abuse of discretion or a clearly
erroneous order.51 This Court has been liberal in giving the lower courts the widest latitude
of discretion in setting aside default orders justified under the right to due process principle.
Plain justice demands and the law requires no less that defendants must know what the
complaint against them is all about.52

What is important is that this case against the Marcoses and their alleged crony and dummy
be decided by the anti-graft court on the merits, not merely on some procedural faux pas. In
the interest of justice, we need to dispel the impression in the individual respondents' minds
that they are being railroaded out of their rights and properties without due process of law.

WHEREFORE, finding no grave abuse of discretion on the part of the Sandiganbayan in

granting respondent's Motion for Bill of Particulars, the petition is DISMISSED. The
Resolutions of the Sandiganbayan dated January 31, 2000 and March 27, 2001 in Civil
Case No. 0006 are AFFIRMED. Petitioner is ordered to prepare and file a bill of particulars
containing the ultimate facts as prayed for by respondent within twenty (20) days from
notice.

SO ORDERED.
EDGARDO PINGA v. THE HEIRS OF GERMAN TINGA (G.R. No. 170354, June 30, 2006)
had already been ordered ejected from the properties after a complaint for forcible entry was

The constitutional faculty of the Court to promulgate rules of practice and filed by the heirs of Edmundo Pinga. It was further claimed that respondents application for

procedure[1] necessarily carries the power to overturn judicial precedents on points of free patent over the properties was rejected by the Office of the President in 1971. Defendants

remedial law through the amendment of the Rules of Court. One of the notable changes in turn prayed that owing to respondents forcible re-entry in the properties and the

introduced in the 1997 Rules of Civil Procedure is the explicit proviso that if a complaint is irresponsible and reckless filing of the case, they be awarded various types of damages

dismissed due to fault of the plaintiff, such dismissal is without prejudice to the right of the instead in amounts totaling P2,100,000 plus costs of suit.[9]

defendant to prosecute his counterclaim in the same or in a separate action.[2] The innovation
By July of 2005, the trial of the case had not yet been completed. Moreover, respondents, as
was instituted in spite of previous jurisprudence holding that the fact of the dismissal of the
plaintiffs, had failed to present their evidence. It appears that on 25 October 2004, the RTC
complaint was sufficient to justify the dismissal as well of the compulsory counterclaim. [3]
already ordered the dismissal of the complaint after respondents counsel had sought the

In granting this petition, the Court recognizes that the former jurisprudential rule can postponement of the hearing scheduled then. [10] However, the order of dismissal was

no longer stand in light of Section 3, Rule 17 of the 1997 Rules of Civil Procedure. subsequently reconsidered by the RTC in an Order dated 9 June 2005, which took into

account the assurance of respondents counsel that he would give priority to that case. [11]
The relevant facts are simple enough. Petitioner Eduardo Pinga was named as one of two

defendants in a complaint for injunction[4] filed with Branch 29 of the Regional Trial Court At the hearing of 27 July 2005, plaintiffs counsel on record failed to appear, sending

(RTC)[5] of San Miguel, Zamboanga del Sur, by respondent Heirs of German Santiago, in his stead a representative who sought the postponement of the hearing. Counsel for

represented by Fernando Santiago. The Complaint [6] dated 28 May 1998 alleged in essence defendants (who include herein petitioner) opposed the move for postponement and moved

that petitioner and co-defendant Vicente Saavedra had been unlawfully entering the coco instead for the dismissal of the case. The RTC noted that it was obvious that respondents

lands of the respondent, cutting wood and bamboos and harvesting the fruits of the coconut had failed to prosecute the case for an unreasonable length of time, in fact not having

trees therein. Respondents prayed that petitioner and Saavedra be enjoined from committing presented their evidence yet. On that ground, the complaint was dismissed. At the same time,

acts of depredation on their properties, and ordered to pay damages. the RTC allowed defendants to present their evidence ex-parte.[12]

In their Amended Answer with Counterclaim,[7] petitioner and his co-defendant disputed Respondents filed a Motion for Reconsideration[13] of the order issued in open court

respondents ownership of the properties in question, asserting that petitioners father, on 27 July 2005, opting however not to seek that their complaint be reinstated, but praying

Edmundo Pinga, from whom defendants derived their interest in the properties, had been in instead that the entire action be dismissed and petitioner be disallowed from presenting

possession thereof since the 1930s.[8] They alleged that as far back as 1968, respondents evidence ex-parte. Respondents claimed that the order of the RTC allowing petitioner to
present evidence ex-parte was not in accord with established jurisprudence. They cited
cases, particularly City of Manila v. Ruymann[14] and Domingo v. Santos,[15] which noted
those instances in which a counterclaim could not remain pending for independent
adjudication.
On 9 August 2005, the RTC promulgated an order granting respondents Motion for
Reconsideration and dismissing the counterclaim, citing as the only ground therefor that there
is no opposition to the Motion for Reconsideration of the [respondents]. [16] Petitioner filed a
Motion for Reconsideration, but the same was denied by the RTC in an Order dated 10
October 2005.[17] Notably, respondents filed an Opposition to Defendants Urgent Motion for
Reconsideration, wherein they argued that the prevailing jurisprudential rule [18] is that
compulsory counterclaims cannot be adjudicated independently of plaintiffs cause of action,
and a conversu, the dismissal of the complaint carries with it the dismissal of the compulsory
counterclaims.[19]
The matter was elevated to this Court directly by way of a Petition for Review under
Rule 45 on a pure question of law, the most relevant being whether the dismissal of the
complaint necessarily carries the dismissal of the compulsory counterclaim.
We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Procedure, the
dismissal of the complaint due to the fault of plaintiff does not necessarily carry with it the
dismissal of the counterclaim, compulsory or otherwise. In fact, the dismissal of the complaint
is without prejudice to the right of defendants to prosecute the counterclaim.
On a prefatory note, the RTC, in dismissing the counterclaim, did not expressly adopt
respondents argument that the dismissal of their complaint extended as well to the
counterclaim. Instead, the RTC justified the dismissal of the counterclaim on the ground that
there is no opposition to [plaintiffs] Motion for Reconsideration [seeking the dismissal of the
counterclaim].[20] This explanation is hollow, considering that there is no mandatory rule
requiring that an opposition be filed to a motion for reconsideration without need for a court
order to that effect; and, as posited by petitioner, the failure to file an opposition to the Plaintiffs
Motion for Reconsideration is definitely not one among the established grounds for dismissal
[of the counterclaim].[21] Still, the dismissal of the counterclaim by the RTC betrays at very
least a tacit recognition of respondents argument that the counterclaim did not survive the
dismissal of the complaint. At most, the dismissal of the counterclaim over the objection of
the defendant (herein petitioner) on grounds other than the merits of the counterclaim, despite
the provisions under Rule 17 of the 1997 Rules of Civil Procedure, constitutes a debatable
question of law, presently meriting justiciability through the instant action. Indeed, in reviewing
the assailed orders of the RTC, it is inevitable that the Court consider whether the dismissal
of the complaint, upon motion of the defendant, on the ground of the failure to prosecute on
plaintiffs part precipitates or carries with it the dismissal of the pending counterclaims.
Our core discussion begins with Section 3, Rule 17 of the 1997 Rules of Civil
Procedure, which states:
SEC. 3. Dismissal due to fault of plaintiff.If, for no justifiable cause,
the plaintiff fails to appear on the date of the presentation of his evidence
in chief on the complaint, or to prosecute his action for an unreasonable
length of time, or to comply with these Rules or any order of the court, the
complaint may be dismissed upon motion of defendant or upon the court's
own motion, without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. This dismissal shall have
the effect of an adjudication upon the merits, unless otherwise declared by
the court.
The express qualification in the provision that the dismissal of the complaint due to the The distinction is relevant, for under the previous and current incarnations of the

plaintiffs fault, as in the case for failure to prosecute, is without prejudice to the right of the Rules of Civil Procedure, it is Section 3, Rule 17 that governs the dismissals due to the failure

defendant to prosecute his counterclaim in the same or separate action. This stands in of the plaintiff to prosecute the complaint, as had happened in the case at bar. Otherwise, it

marked contrast to the provisions under Rule 17 of the 1964 Rules of Court which were is Section 2, Rule 17, which then, and still is now, covered dismissals ordered by the trial

superseded by the 1997 amendments. In the 1964 Rules, dismissals due to failure to court upon the instance of the plaintiff.[28] Yet, as will be seen in the foregoing discussion, a

prosecute were governed by Section 3, Rule 17, to wit: discussion of Section 2 cannot be avoided as the postulate behind that provision was

eventually extended as well in cases that should have properly been governed by Section 3.
SEC. 3. Failure to prosecute. If plaintiff fails to appear at the time of the
trial, or to prosecute his action for an unreasonable length of time, or to
comply with these rules or any order of the court, the action may be
dismissed upon motion of the defendant or upon the courts own motion. Even though the cases cited by respondents involved different factual antecedents, there
This dismissal shall have the effect of an adjudication upon the merits,
unless otherwise provided by court. exists more appropriate precedents which they could have cited in support of their claim that

Evidently, the old rule was silent on the effect of such dismissal due to failure to prosecute on the counterclaim should have been dismissed even if the dismissal of the complaint was upon

the pending counterclaims. As a result, there arose what one authority on remedial law the defendants motion and was predicated on the plaintiffs fault. BA Finance Corp. v.

characterized as the nagging question of whether or not the dismissal of the complaint carries Co[29] particularly stands out in that regard, although that ruling is itself grounded on other

with it the dismissal of the counterclaim.[22] Jurisprudence construing the previous Rules was precedents as well. Elucidation of these cases is in order.

hardly silent on the matter.

On the general effect of the dismissal of a complaint, regardless of cause, on the pending

In their arguments before the RTC on the dismissal counterclaims, previous jurisprudence laid emphasis on whether the counterclaim was

of the counterclaim, respondents cited in support City of Manila v.Ruymann,[23] Domingo v. compulsory or permissive in character. The necessity of such distinction was provided in the

Santos,[24] Belleza v. Huntington,[25] and Froilan v. Pan Oriental Shipping Co.,[26] all of which 1964 Rules itself, particularly Section 2, Rule 17, which stated that in instances wherein the

were decided more than five decades ago. Notably though, none of the complaints in these plaintiff seeks the dismissal of the complaint, if a counterclaim has been pleaded by a

four cases were dismissed either due to the fault of the plaintiff or upon the instance of the defendant prior to the service upon him of the plaintiffs motion to dismiss, the action shall not

defendant.[27] be dismissed against the defendants objection unless the counterclaim can remain pending

for independent adjudication by the court.[30] The


vaunted commentaries of Chief Justice Moran, remarking on Section 2, Rule 17, noted that
[t]here are instances in which a counterclaim cannot remain pending for independent
adjudication, as, where it arises out of, or is necessarily connected with, the transaction or
occurrence which is the subject matter of the opposing partys claim. [31]
This view expressed in Morans Commentaries was adopted by the Court in cases where the
application of Section 2, Rule 17 of the 1964 Rules of Court was called for, such as in Lim
Tanhu v. Ramolete,[32] and Dalman v. City Court of Dipolog City.[33] The latter case warrants
brief elaboration. Therein, the plaintiff in a civil case for damages moved for the withdrawal of
her own case on the ground that the dispute had not been referred to the barangay council
as required by law. Over the objection of the defendant, who feared that her own counterclaim
would be prejudiced by the dismissal, plaintiffs motion was granted, the complaint and the
counterclaim accordingly dismissed by the trial court. The Court refused to reinstate the
counterclaim, opining without elaboration, [i]f the civil case is dismissed, so also is the
counterclaim filed therein.[34] The broad nature of that statement gave rise to the notion that
the mandatory dismissal of the counterclaim upon dismissal of the complaint applied
regardless of the cause of the complaints dismissal.[35]
Notably, the qualification concerning compulsory counterclaims was provided in Section 2,
Rule 17 of the 1964 Rules, the provision governing dismissals by order of the court, and not
Section 3, Rule 17. As stated earlier, Section 3, which covered dismissals for failure to
prosecute upon motion of the defendant or upon motu proprio action of the trial court, was
silent on the effect on the counterclaim of dismissals of such nature.
Spouses Sta. Maria, Jr. v. Court of Appeals,[36] decided in 1972, ostensibly supplied the gap
on the effect on the counterclaim of complaints dismissed under Section 3. The defendants
therein successfully moved before the trial court for the dismissal of the complaint without
prejudice and their declaration in default on the counterclaim after plaintiffs therein failed to
attend the pre-trial. After favorable judgment was rendered on the counterclaim, plaintiffs
interposed an appeal, citing among other grounds, that the counterclaim could no longer have
been heard after the dismissal of the complaint. While the Court noted that the adjudication
of the counterclaim in question does not depend upon the adjudication of the claims made in
the complaint since they were virtually abandoned by the non-appearance of the plaintiffs
themselves, it was also added that [t]he doctrine invoked is not available to plaintiffs like the
petitioners, who prevent or delay the hearing of their own claims and allegations.[37] The
Court, through Justice JBL Reyes, noted:
The doctrine that the complaint may not be dismissed if the
counterclaim cannot be independently adjudicated is not available to,
and was not intended for the benefit of, a plaintiff who prevents or
delays the prosecution of his own complaint. Otherwise, the trial of
counterclaims would be made to depend upon the maneuvers of the
plaintiff, and the rule would offer a premium to vexing or delaying tactics to
the prejudice of the counterclaimants. It is in the same spirit that we have
ruled that a complaint may not be withdrawn over the opposition of the
defendant where the counterclaim is one that arises from, or is necessarily
connected with, the plaintiffs action and cannot remain pending for
independent adjudication.[38]
There is no doubt that under the 1964 Rules, the dismissal of a complaint due to the
failure of the plaintiff to appear during pre-trial, as what had happened in Sta. Maria, fell within
the coverage of Section 3, Rule 17. On the other hand, Section 2 was clearly limited in scope
to those dismissals sustained at the instance of the plaintiff. [39] Nonetheless, by the early
1990s, jurisprudence was settling on a rule that compulsory counterclaims were necessarily
terminated upon the dismissal of the complaint not only if such dismissal was upon motion of as compulsory, the Court noted that [i]t is obvious from the very nature of the counterclaim

the plaintiff, but at the instance of the defendant as well. Two decisions from that period stand that it could not remain pending for independent adjudication, that is, without adjudication by

out in this regard, Metals Engineering Resources Corp. v. Court of the court of the complaint itself on which the counterclaim was based.[46]

Appeals[40] and International Container Terminal Services v. Court of Appeals.[41]

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

In Metals, the complaint was expunged from the record after the defendant had filed for nonappearance of plaintiff at the pre-trial, upon motion of the defendants, carried with it

a motion for reconsideration of a trial court order allowing the filing of an amended complaint the dismissal of their compulsory counterclaim. [47] The Court reiterated the rule that a

that corrected a jurisdictional error in the original complaint pertaining to the specification of compulsory counterclaim cannot remain pending for independent adjudication by the court as

the amount of damages sought. When the defendant was nonetheless allowed to present it is auxiliary to the proceeding in the original suit and merely derives its jurisdictional support

evidence on the counterclaim, the plaintiff assailed such allowance on the ground that the therefrom.[48] Express reliance was made on Metals, International Container, and

counterclaim was compulsory and could no longer remain pending for independent even Dalman in support of the majoritys thesis. BA Finance likewise advised that the proper

adjudication. The Court, in finding for the plaintiff, noted that the counterclaim was indeed remedy for defendants desirous that their counterclaims not be dismissed along with the main

compulsory in nature, and as such, was auxiliary to the proceeding in the original suit and complaint was for them to move to declare the plaintiffs to be non-suited on their complaint

derived its jurisdictional support therefrom.[42] It was further explained that the doctrine was in and as in default on their compulsory counterclaim, instead of moving for the dismissal of the

consonance with the primary objective of a counterclaim, which was to avoid and prevent complaint.[49]

circuitry of action by allowing the entire controversy between the parties to be litigated and

finally determined in one action, and to discourage multiplicity of suits.[43] Also, the Court Justice Regalado, joined by Chief Justice Narvasa, registered a strong objection to

noted that since the complaint was dismissed for lack of jurisdiction, it was as if no claim was the theory of the majority. They agreed that the trial court could no longer hear the

filed against the defendant, and there was thus no more leg for the complaint to stand on. [44] counterclaim, but only on the ground that defendants motion to be allowed to present

evidence on the counterclaim was filed after the order dismissing the complaint had already
In International Container, the defendant filed a motion to dismiss which was granted
become final. They disagreed however that the compulsory counterclaim was necessarily
by the trial court. The defendants counterclaim was dismissed as well. The Court summarized
dismissed along with the main complaint, pointing out that a situation wherein the dismissal
the key question as what is the effect of the dismissal of a complaint ordered at the instance
of the complaint was occasioned by plaintiffs failure to appear during pre-trial was governed
of the defendant upon a compulsory counterclaim duly raised in its answer.[45] Then it ruled

that the counterclaim did not survive such dismissal. After classifying the counterclaim therein
under Section 3, Rule 17, and not Section 2 of the same rule. Justice Regalado, who ironically
penned the decision in Metals cited by the majority, explained:
Turning back to Rule 17, it is readily apparent that Sections 2
and 3 thereof envisage different factual and adjective situations. The
dismissal of the complaint under Section 2 is at the instance of
plaintiff, for whatever reason he is minded to move for such dismissal,
and, as a matter of procedure, is without prejudice unless otherwise
stated in the order of the court or, for that matter, in plaintiff's motion
to dismiss his own complaint. By reason thereof, to curb any dubious or
frivolous strategy of plaintiff for his benefit or to obviate possible prejudice
to defendant, the former may not dismiss his complaint over the
defendant's objection if the latter has a compulsory counterclaim since said
counterclaim would necessarily be divested of juridical basis and defendant
would be deprived of possible recovery thereon in that same judicial
proceeding.
Section 3, on the other hand, contemplates a dismissal not
procured by plaintiff, albeit justified by causes imputable to him and
which, in the present case, was petitioner's failure to appear at the
pre-trial. This situation is also covered by Section 3, as extended by
judicial interpretation, and is ordered upon motion of defendant
or motu proprio by the court. Here, the issue of whether defendant
has a pending counterclaim, permissive or compulsory, is not of
determinative significance. The dismissal of plaintiff's complaint is
evidently a confirmation of the failure of evidence to prove his cause
of action outlined therein, hence the dismissal is considered, as a
matter of evidence, an adjudication on the merits. This does not,
however, mean that there is likewise such absence of evidence to
prove defendant's counterclaim although the same arises out of the
subject matter of the complaint which was merely terminated for lack
of proof. To hold otherwise would not only work injustice to defendant
but would be reading a further provision into Section 3 and wresting
a meaning therefrom although neither exists even by mere
implication. Thus understood, the complaint can accordingly be
dismissed, but relief can nevertheless be granted as a matter of course to
defendant on his counterclaim as alleged and proved, with or without any
reservation therefor on his part, unless from his conduct, express or
implied, he has virtually consented to the concomitant dismissal of his
counterclaim.[50]
Justice Regalado also adverted to Sta. Maria and noted that the objections raised and
rejected by the Court therein were the same as those now relied upon by the plaintiff. He
pointed out that Dalman and International Container, both relied upon by the majority,
involved the application of Section 2, Rule 17 and not Section 3, which he insisted as the
applicable provision in the case at bar.[51]
The partial dissent of Justice Regalado in BA Finance proved opportune, as he happened
then to be a member of the Rules of Court Revision Committee tasked with the revision of
the 1964 Rules of Court. Just a few months after BA Finance was decided, Justice Regalado
proposed before the Committee an amendment to Section 3, Rule 17 that would explicitly
provide that the dismissal of the complaint due to the fault of the plaintiff shall be without
prejudice to the right of the defendant to prosecute his counterclaim in the same or in a
separate action. The amendment, which was approved by the Committee, is reflected in the
minutes of the meeting of the Committee held on 12 October 1993:
[Justice Regalado] then proposed that after the words upon the
courts own motion in the 6th line of the draft in Sec. 3 of Rule 17, the
following provision be inserted: without prejudice to the right of the
defendant to prosecute his counterclaim in the same or in a separate
action. The Committee agreed with the proposed amendment of
Justice Regalado.
Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not the
action that is dismissed but the complaint. He asked whether there is any
distinction between complaint and action. Justice Regalado opined that the
action of the plaintiff is initiated by his complaint.
Justice Feria then suggested that the dismissal be limited to the
complaint[.] Thus, in the 1st line of Sec. 1, the words An action will be
changed to a complaint; in the 2nd line of Sec. 2, the words an action
will be changed to a complaint and in Sec. 3, the word action on the
5th line of the draft will be changed to complaint. The Committee
agreed with Justice Ferias suggested amendments.
CA Pao believed that there is a need to clarify the counterclaim that
the defendant will prosecute, whether it is permissive or compulsory
or all kinds of counterclaims.
Justice Regalado opined that there is no need of making a
clarification because it is already understood that it covers both
counterclaims.[52]

It is apparent from these minutes that the survival of the counterclaim despite the dismissal
of the complaint under Section 3 stood irrespective of whether the counterclaim was
permissive or compulsory. Moreover, when the Court itself approved the revisions now
contained in the 1997 Rules of Civil Procedure, not only did Justice Regalados amendment
to Section 3, Rule 17 remain intact, but the final version likewise eliminated the qualification
formerly offered under Section 2 on counterclaims that can remain pending for independent
adjudication by the court.[53] At present, even Section 2, concerning dismissals on motion of
the plaintiff, now recognizes the right of the defendant to prosecute the counterclaim either in
the same or separate action notwithstanding the dismissal of the complaint, and without
regard as to the permissive or compulsory nature of the counterclaim.
In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado expounds on
the effects of the amendments to Section 2 and 3 of Rule 17:
2. Under this revised section [2], where the plaintiff moves for the dismissal
of his complaint to which a counterclaim has been interposed, the dismissal
shall be limited to the complaint. Such dismissal shall be without prejudice
to the right of the defendant to either prosecute his counterclaim in a
separate action or to have the same resolved in the same action. Should
he opt for the first alternative, the court should render the corresponding
order granting and reserving his right to prosecute his claim in a separate
complaint. Should he choose to have his counterclaim disposed of in the
same action wherein the complaint had been dismissed, he must manifest
such preference to the trial court within 15 days from notice to him of
plaintiffs motion to dismiss. These alternative remedies of the defendant
are available to him regardless of whether his counterclaim is
compulsory or permissive. A similar alternative procedure, with the same
underlying reason therefor, is adopted in Sec. 6, Rule 16 and Sec. 3 of this
Rule, wherein the complaint is dismissed on the motion of the defendant or,
in the latter instance, also by the court motu proprio.
xxxx
2. The second substantial amendment to [Section 3] is with respect to the
disposition of the defendants counterclaim in the event the plaintiffs
complaint is dismissed. As already observed, he is here granted the choice
to prosecute that counterclaim in either the same or a separate action. x x
xx
3. With the aforestated amendments in Secs. 2 and 3 laying down
specific rules on the disposition of counterclaims involved in the
dismissal actions, the controversial doctrine in BA Finance
Corporation vs. Co, et al., (G.R. No.105751, June 30, 1993) has been
abandoned, together with the apparent confusion on the proper
application of said Secs. 2 and 3. Said sections were distinguished and
discussed in the authors separate opinion in that case, even before they
were clarified by the present amendments x x x.[54]
Similarly, Justice Feria notes that the present rule reaffirms the right of the defendant to move
for the dismissal of the complaint and to prosecute his counterclaim, as stated in the separate
opinion [of Justice Regalado in BA Finance.][55] Retired Court of Appeals Justice Herrera
pronounces that the amendment to Section 3, Rule 17 settles that nagging question whether
the dismissal of the complaint carries with it the dismissal of the counterclaim, and opines that
by reason of the amendments, the rulings in Metals Engineering, International Container,
and BA Finance may be deemed abandoned.[56] On the effect of amendment to Section 3,
Rule 17, the commentators are in general agreement, [57] although there is less unanimity of
views insofar as Section 2, Rule 17 is concerned.[58]
To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the
amended Rule 17, those previous jural doctrines that were inconsistent with the new rules
incorporated in the 1997 Rules of Civil Procedure were implicitly abandoned insofar as
incidents arising after the effectivity of the new procedural rules on 1 July 1997. BA Finance,
or even the doctrine that a counterclaim may be necessarily dismissed along with the
complaint, clearly conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA
Finance as doctrine extends as far back as 1997, when the Court adopted the new Rules of
Civil Procedure. If, since then, such abandonment has not been affirmed in jurisprudence, it
is only because no proper case has arisen that would warrant express confirmation of the
new rule. That opportunity is here and now, and we thus rule that the dismissal of a complaint
due to fault of the plaintiff is without prejudice to the right of the defendant to prosecute any
pending counterclaims of whatever nature in the same or separate action. We confirm that BA
Financeand all previous rulings of the Court that are inconsistent with this present holding are
now abandoned.
Accordingly, the RTC clearly erred when it ordered the dismissal of the counterclaim, since
Section 3, Rule 17 mandates that the dismissal of the complaint is without prejudice to the
right of the defendant to prosecute the counterclaim in the same or separate action. If the
RTC were to dismiss the counterclaim, it should be on the merits of such counterclaim.
Reversal of the RTC is in order, and a remand is necessary for trial on the merits of the
counterclaim.
It would be perfectly satisfactory for the Court to leave this matter at that. Still, an explanation
of the reason behind the new rule is called for, considering that the rationale behind the
previous rule was frequently elaborated upon.
Under Act No. 190, or the Code of Procedure in Civil Actions promulgated in 1901,
it was recognized in Section 127(1) that the plaintiff had the right to seek the dismissal of the
complaint at any time before trial, provided a counterclaim has not been made, or affirmative
relief sought by the cross-complaint or answer of the defendant.[59] Note that no qualification
was made then as to the nature of the counterclaim, whether it be compulsory or permissive.
The protection of the defendants right to prosecute the counterclaim was indeed unqualified.
In City of Manila, decided in 1918, the Court explained:
By paragraph 1 [of Section 127], it will be seen that, where the
defendant has interposed a counterclaim, or is seeking affirmative relief by
a cross-complaint, that then, and in that case, the plaintiff cannot dismiss
the action so as to affect the right of the defendant in his counterclaim or
prayer for affirmative relief. The reason for that exception is clear. When the
answer sets up an independent action against the plaintiff, it then
becomes an action by the defendant against the plaintiff, and, of
course, the plaintiff has no right to ask for a dismissal of
the defendants action.[60]
Nonetheless, a new rule was introduced when Act No. 190 was replaced by the 1940 Rules
of Court. Section 2, Rule 30 of the 1940 Rules specified that if a counterclaim is pleaded by
a defendant prior to the service of the plaintiffs motion to dismiss, the action shall not be
dismissed against the defendants objection unless the counterclaim can remain pending for
independent adjudication by the court. This qualification remained intact when the 1964 Rules
of Court was introduced.[61] The rule referred only to compulsory counterclaims, or
counterclaims which arise out of or are necessarily connected with the transaction or
occurrence that is the subject matter of the plaintiffs claim, since the rights of the parties
arising out of the same transaction should be settled at the same time. [62] As was evident
in Metals, International Container and BA Finance, the rule was eventually extended to
instances wherein it was the defendant with the pending counterclaim, and not the plaintiff,
that moved for the dismissal of the complaint.
We should not ignore the theoretical bases of the rule distinguishing compulsory
counterclaims from permissive counterclaims insofar as the dismissal of the action is
concerned. There is a particular school of thought that informs the broad proposition
in Dalman that if the civil case is dismissed, so also is the counterclaim filed therein, [63] or the
more nuanced discussions offered in Metals, International Container, and BA Finance. The It would then seemingly follow that if the dismissal of the complaint somehow eliminates the

most potent statement of the theory may be found in Metals,[64] which proceeds from the cause(s) of the counterclaim, then the counterclaim cannot survive. Yet that hardly is the case,

following fundamental premisesa compulsory counterclaim must be set up in the same especially as a general rule. More often than not, the allegations that form the

proceeding or would otherwise be abated or barred in a separate or subsequent litigation on counterclaim are rooted in an act or omission of the plaintiff other than the plaintiffs

the ground of auter action pendant, litis pendentia or res judicata; a compulsory counterclaim very act of filing the complaint. Moreover, such acts or omissions imputed to the

is auxiliary to the main suit and derives its jurisdictional support therefrom as it arises out of plaintiff are often claimed to have occurred prior to the filing of the complaint itself. The

or is necessarily connected with the transaction or occurrence that is the subject matter of the only apparent exception to this circumstance is if it is alleged in the counterclaim that

complaint;[65] and that if the court dismisses the complaint on the ground of lack of jurisdiction, the very act of the plaintiff in filing the complaint precisely causes the violation of the

the compulsory counterclaim must also be dismissed as it is merely ancilliary to the main defendants rights. Yet even in such an instance, it remains debatable whether the

action and no jurisdiction remained for any grant of relief under the counterclaim. dismissal or withdrawal of the complaint is sufficient to obviate the pending cause of

action maintained by the defendant against the plaintiff. [67]

The first point is derived from Section 4, Rule 9, of the 1964 Rules of Court, while the two latter

points are sourced from American jurisprudence. There is no disputing the theoretical viability These considerations persist whether the counterclaim in question is permissive or

of these three points. In fact, the requirement that the compulsory counterclaim must be set compulsory. A compulsory counterclaim arises out of or is connected with the transaction or

up in the same proceeding remains extant under the 1997 Rules of Civil Procedure. [66] At the occurrence constituting the subject matter of the opposing partys claim, does not require for

same time, other considerations rooted in actual practice provide a counterbalance to the its adjudication the presence of third parties, and stands within the jurisdiction of the court both

above-cited rationales. as to the amount involved and the nature of the claim. [68] The fact that the culpable acts on

which the counterclaim is based are founded within the same transaction or occurrence as the

Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint, is insufficient causation to negate the counterclaim together with the complaint. The

complaint; namely a cause (or causes) of action constituting an act or omission by which a dismissal or withdrawal of the complaint does not traverse the boundaries of time to undo the

party violates the right of another. The main difference lies in that the cause of action in the act or omission of the plaintiff against the defendant, or vice versa. While such dismissal or

counterclaim is maintained by the defendant against the plaintiff, while the converse holds true withdrawal precludes the pursuit of litigation

with the complaint. Yet, as with a complaint, a counterclaim without a cause of action cannot

survive.
by the plaintiff, either through his/her own initiative or fault, it would be iniquitous to similarly previous procedural rule and correspondent doctrine, which under their final permutation,

encumber the defendant who maintained no such initiative or fault. If the defendant similarly prescribed the automatic dismissal of the compulsory counterclaim upon the dismissal of the

moves for the dismissal of the counterclaim or neglects to timely pursue such action, let the complaint, whether upon the initiative of the plaintiff or of the defendant.

dismissal of the counterclaim be premised on those grounds imputable to the defendant, and

not on the actuations of the plaintiff. Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable

disposition of the counterclaims by ensuring that any judgment thereon is based on the merit
The other considerations supplied in Metals are anchored on the premise that the jurisdictional
of the counterclaim itself and not on the survival of the main complaint. Certainly, if the
foundation of the counterclaim is the complaint itself. The theory is correct, but there are other
counterclaim is palpably without merit or suffers jurisdictional flaws which stand independent
facets to this subject that should be taken into account as well. On the established premise
of the complaint, the trial court is not precluded from dismissing it under the amended rules,
that a counterclaim involves separate causes of action than the complaint even if derived from
provided that the judgment or order dismissing the counterclaim is premised on those defects.
the same transaction or series of transactions, the counterclaim could have very well been
At the same time, if the counterclaim is justified, the amended rules now unequivocally protect
lodged as a complaint had the defendant filed the action ahead of the complainant.[69] The
such counterclaim from peremptory dismissal by reason of the dismissal of the complaint.
terms ancillary or auxiliary may mislead in signifying that a complaint innately possesses more

credence than a counterclaim, yet there are many instances wherein the complaint is trivial WHEREFORE, the petition is GRANTED. The Orders dated 9 August 2005 and 10 October

but the counterclaim is meritorious. In truth, the notion that a counterclaim is, or better still, 2005 of Branch 29, Regional Trial Court of San Miguel, Zamboanga del Sur in Civil Case No.

appears to be merely ancillary or auxiliary is chiefly the offshoot of an accident of chronology, 98-012 are SET ASIDE. Petitioners counterclaim as defendant in Civil Case. No. 98-012 is

more than anything else. REINSTATED. The Regional Trial Court is ORDERED to hear and decide the counterclaim

with deliberate dispatch.

The formalistic distinction between a complaint and a counterclaim does not detract from the
SO ORDERED.
fact that both of them embody causes of action that have in their end the vindication of rights.

While the distinction is necessary as a means to facilitate order and clarity in the rules of

procedure, it should be remembered that the primordial purpose of procedural rules is to

provide the means for the vindication of rights. A party with a valid cause of action against

another party cannot be denied the right to relief simply because the opposing side had the

good fortune of filing the case first. Yet this in effect was what had happened under the
SANTO TOMAS UNIVERSITY HOSPITAL, petitioner vs. CESAR ANTONIO Y. SURLA
and EVANGELINE SURLA, respondents.
[G.R. No. 129718. August 17, 1998]
DECISION
VITUG, J.:
Can a compulsory counterclaim pleaded in an Answer be dismissed on the ground of a
failure to accompany it with a certificate of non-forum shopping? This question is the core
issue presented for resolution in the instant petition.
First, a factual background.
On 26 December 1995, respondent spouses filed a complaint for damages against
petitioner Santo Tomas University Hospital with the Regional Trial Court of Quezon City
predicated on an allegation by the spouses that their son, Emmanuel Cesar Surla, while
confined at the said hospital for having been born prematurely, had accidentally fallen from
his incubator on 16 April 1995 possibly causing serious harm on the child. The case was
raffled and assigned to Branch 226 of the Regional Trial Court of Quezon City, presided over
by the Hon. Leah S. Domingo-Regala, and there docketed Civil Case No. Q-95-25977.
On 28 February 1996, petitioner hospital filed its Answer with Compulsory Counterclaim
asserting that respondents still owed to it the amount of P82,632.10 representing hospital bills
for Emmanuels confinement at the hospital and making a claim for moral and exemplary
damages, plus attorneys fees, by reason of the supposed unfounded and malicious suit filed
against it.
On 21 March 1996, petitioner received a copy of respondents Reply to Counterclaim,
dated 12 March 1996, that sought, inter alia, the dismissal of petitioners counterclaim for its
non-compliance with Supreme Court Administrative Circular No. 04-94 requiring that a
complaint and other initiatory pleadings, such as a counterclaim, cross-claim, third (fourt, etc.)
party complaint, be accompanied with a certificate of non-forum shopping.
In its Rejoinder to respondents Reply to Counterclaim, petitioner contended that the
subject circular should be held to refer only to a permissive counterclaim, an initiatory pleading
not arising out of, nor necessarily connected with, the subject matter of the plaintiffs claim but
not to a compulsory counterclaim spawned by the filing of a complaint and so intertwined
therewith and logically related thereto that it verily could not stand for independent
adjudication.Petitioner concluded that, since its counterclaim was compulsory in nature, the
subject circular did not perforce apply to it.[1]
In its Order of 22 March 1996, the trial court dismissed petitioners counterclaim,it held:
Administrative Circular No. 04-94 provides; among others:
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 on (sic)
relief.
It will be noted that the counterclaim does not distinguish whether the same should be
permissive or compulsory, hence this Court finds that the counterclaim referred to in said
Circular covers both kinds.
WHEREFORE, the counterclaim of defendant is hereby DISMISSED. Let the pre-trial of this
case be set on May 14, 1996 at 2:00 oclock in the afternoon xxx[2]
On 16 April 1996, petitioner filed before the same court an Omnibus Motion seeking a
clarification of the courts Order of 14 March 1996 denying respondents Reply to Counterclaim
and reconsideration of the 22nd March 1996 Order dismissing the compulsory
counterclaim.[3] On 22 April 1996, petitioner received a copy of the courts Order, dated 16
April 1996, which pertinently read:
WHEREFORE, the Order dated March 14, 1996 is hereby clarified as follows:
xxxxxxxxx
The Reply to counterclaim filed by counsel for plaintiffs is hereby NOTED.
SO ORDERED.
"The Motion for Reconsideration of this Courts Order dated March 22, 1996 is hereby
DENIED. The pre-trial conference set on May 14, 1996 will go on as scheduled. [4]
Petitioner forthwith elevated the matter to the Court of Appeals by way of a special civil action
for certiorari under Rule 65, Revised Rules of Court, asseverating grave abuse of discretion
by public respondent in dismissing the compulsory counterclaim and in espousing the view
that Administrative Circular No. 04-94 should apply even to compulsory counterclaims.
The Court of Appeals, in its Decision promulgated on 12 March 1997, dismissed the
petition for certiorari; it opined:
x x x the Supreme Court circular aforequoted requires without equivocation that to the
original civil complaint, counterclaim, cross-claim, third (fourth,etc.) party complainant, or
complaint-in-intervention, petition, or application wherein a party asserts his claim for relief
to be filed in all courts and agencies other than the Supreme Court and the Court of Appeals
must be annexed and simultaneously filed therewith the required certification under oath to
avoid forum shopping or multiple filing of petitions and complaints. Non-compliance
therewith is a cause for the dismissal of the complainant, petition, application or other
initiatory pleading. Included in such initiatory pleading is the defendants counterclaim,
permissive or compulsory.
A counterclaim partakes of the nature of a complaint and/or a cause of action against the
plaintiff in a case x x x, only this time it is the original defendant who becomes the plaintiff. It
stands on the same footing and is tested by the same rules as if it were an independent
action.[5]
 In its present recourse, petitioner contends that
The Court of Appeals (has) committed serious, evident and palpable error in ruling that:
5.1 THE SPECIAL CIVIL ACTION OF CERTIORARI UNDER RULE 65 OF THE REVISED
RULES OF COURT IS UNAVAILING. THE DISMISSAL OF THE COMPULSORY
COUNTERCLAIM BEING A FINAL ORDER, THE PETITIONER SHOULD HAVE TAKEN
AN APPEAL THEREFROM; AND
5.2 ADMINISTRATIVE CIRCULAR NO. 04-94 OF THIS HONORABLE COURT
LIKEWISE APPLIES TO BOTH KINDS OF COUNTERCLAIMS, PERMISSIVE AND
COMPULSORY.[6]
The petition is partly meritorious.
The appellate court ruled that the dismissal of the counterclaim, being a final order,
petitioners remedy was to appeal therefrom and, such appeal being then available, the special
civil action for certiorari had been improperly filed.
The concept of a final judgment or order, distinguished form an interlocutory issuance,
is that the former decisively puts to a close, or disposes of a case or a disputed issue leaving
nothing else to be done by the court in respect thereto. Once that judgment or order is
rendered, the adjudicative task of the court is likewise ended on the particular matter
involved.[7] An order is interlocutory, upon the other hand, if its effects would only be
provisional in character and would still leave substantial proceedings to be further had by the
issuing court in order to put the controversy to rest.[8]
The order of the trial court dismissing petitioners counterclaim was a final order since
the dismissal, although based on a technicality, would require nothing else to be done by the
court with respect to the specific subject except only to await the possible filing during the
reglementary period of a motion for reconsideration or the taking of an appeal therefrom.
As a rule, errors of judgment, as well as of procedure, neither relating to the jurisdiction
of the court nor involving grave abuse of discretion, are not reviewable by the extraordinary
remedy of certiorari.[9] As long as a court acts within its jurisdiction and does not gravely abuse
its discretion in the exercise thereof, any supposed error committed by it will amount to nothing
more than an error of judgment reviewable by a timely appeal and not assailable by a special
civil action for certiorari.[10] This rule however, is not a rigid and inflexible technicality. This
Court has not too infrequently given due course to a petition for certiorari, even when the
proper remedy would have been an appeal, where valid and compelling considerations could
warrant such a recourse.[11] Certiorari has been deemed to be justified, for instance, in order
to prevent irreparable damage and injury to a party where the trial judge has capriciously and
whimsically exercised his judgment, or where an ordinary appeal would simply be inadequate
to relieve a party from the injurious effects of the judgment complained of.[12]
In the case at bar, an appeal from the dismissal of the counterclaim, although not totally
unavailable, could have well been ineffective, if not futile, as far as petitioner is concerned
since no single piece of evidence has yet been presented by it, the opportunity having been
foreclosed by the trial court, on the dismissed counterclaim which could form part of the
records to be reviewed by the appellate court. The object of procedural law is not to cause an
undue protraction of the litigation, but to facilitate the adjudication of conflicting claims and to
serve, rather than to defeat, the ends of justice.[13]
The opinion of this Court on the next issue persuades it to accept, tested by the
foregoing disquisition, the instant petition for its consideration.
The pertinent provisions of Administrative Circular No. 04-94 provide:
1 The plaintiff, petitioner, applicant or principal party seeking relief in the complaint, petition,
application or other initiatory pleading shall certify under oath in such original pleading, or in
a sworn certification annexed thereto and simultaneously filed therewith, to the truth of the
following facts and undertakings: (a) he has not theretofore commenced any other action or
proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any
other tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is
pending in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (c) if
there is any such action or proceeding which is either pending or may have been
terminated, he must state the status thereof; and (d) if he should thereafter learn that a
similar action or proceeding has been filed or is pending before the Supreme Court, the
Court of Appeals or any other tribunal or agency, he undertakes to report that fact within five
(5) days therefrom to the court or agency wherein the original pleading and sworn
certification contemplated here have been filed.
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 for relief. (Emphasis supplied)
It bears stressing, once again, that the real office of Administrative Circular No. 04-94,
made effective on 01 April 1994, is to curb the malpractice commonly referred to also as
forum-shopping. It is an act of a party against whom an adverse judgment has been rendered
in one forum of seeking and possibly getting a favorable opinion in another forum, other than
by appeal or the special civil action of certiorari, or the institution of two or more actions or
proceedings grounded on the same cause on the supposition tha tone or the other court would
make a favorable disposition.[14] The language of the circular distinctly suggests that it is
primarily intended to cover an initiatory pleading or an incipient application of a party asserting
a claim for relief.[15]
It should not be too difficult, the foregoing rationale of the circular aptly taken, to sustain
the view that the circular in question has not, in fact, been contemplated to include a kind of
claim which, by its very nature as being auxiliary to the proceedings in the suit and as deriving
its substantive and jurisdictional support therefrom, can only be appropriately pleaded in the
answer and not remain outstanding for independent resolution except by the court where the
main case pends. Prescinding from the foregoing, the provisio in the second paragraph of
Section 5, Rule 8 of the 1997 Rules on Civil Procedure, i.e., that the violation of the anti-forum
shopping rule shall not be curable by mere amendment x x x but shall be cause for the
dismissal of the case without prejudice, being predicated on the applicability of the need for
a certification against forum shopping, obviously does not include a claim which cannot be
independently set up.
 Petitioner, nevertheless, is entitled to a mere partial relief. The so called counterclaim of
petitioner really consists of two segregative parts: (1) for unpaid hospital bills of respondents
son, Emmanuel Surla, in the total amount of P82,632.10; and (2) for damages, moral and
exemplary, plus attorneys fees by reason of the alleged malicious and unfounded suit filed
against it.[16] It is the second, not the first, claim that the Court here refers to as not being
initiatory in character and thereby not covered by the provisions of Administrative Circular No.
04-94.
WHEREFORE, the appealed decision is hereby modified in that the claim for moral,
exemplary damages and attorneys fees in Civil Case No. Q-95-25977 of petitioner is ordered
reinstated. The temporary restraining order priorly issued by this Court is lifted. No costs.
SO ORDERED.
ASIAS EMERGING DRAGON CORPORATION v. DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS, SECRETARY LEANDRO R. MENDOZA
and MANILAINTERNATIONAL AIRPORT AUTHORITY (G.R. No. 169914)
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS and MANILA INTERNATIONAL
AIRPORT AUTHORITY v. HON. COURT OF APPEALS and SALACNIB BATERINA (G.R.
No. 174166, April 18, 2008)
This Court is still continuously besieged by Petitions arising from the awarding of the
Ninoy Aquino International Airport International Passenger Terminal III (NAIA IPT III) Project
to the Philippine International Air Terminals Co., Inc. (PIATCO), despite the promulgation by
this Court of Decisions and Resolutions in two cases, Agan, Jr. v. Philippine International Air
Terminals Co., Inc.[1] and Republic v. Gingoyon,[2] which already resolved the more basic and
immediate issues arising from the said award. The sheer magnitude of the project, the
substantial cost of its building, the expected high profits from its operations, and its remarkable
impact on the Philippine economy, consequently raised significant interest in the project from
various quarters.
Once more, two new Petitions concerning the NAIA IPT III Project are before this Court. It is
only appropriate, however, that the Court first recounts its factual and legal findings
in Agan and Gingoyon to ascertain that its ruling in the Petitions at bar shall be consistent and
in accordance therewith.
Agan, Jr. v. Philippine International
Air Terminals Co., Inc. (G.R. Nos.
155001, 155547, and 155661)
Already established and incontrovertible are the following facts in Agan:
In August 1989, the [Department of Trade and Communications
(DOTC)] engaged the services of Aeroport de Paris (ADP) to conduct a
comprehensive study of the Ninoy Aquino International Airport (NAIA) and
determine whether the present airport can cope with the traffic development
up to the year 2010. The study consisted of two parts: first, traffic forecasts,
capacity of existing facilities, NAIA future requirements, proposed master
plans and development plans; and second, presentation of the preliminary
design of the passenger terminal building. The ADP submitted a Draft Final
Report to the DOTC in December 1989.
Some time in 1993, six business leaders consisting of John
Gokongwei, Andrew Gotianun, Henry Sy, Sr., Lucio Tan, George Ty and
Alfonso Yuchengco met with then President Fidel V. Ramos to explore the
possibility of investing in the construction and operation of a new
international airport terminal. To signify their commitment to pursue the
project, they formed the Asias Emerging Dragon Corp. (AEDC) which was
registered with the Securities and Exchange Commission (SEC)
on September 15, 1993.
On October 5, 1994, AEDC submitted an unsolicited proposal to
the Government through the DOTC/[Manila International Airport Authority
(MIAA)] for the development of NAIA International Passenger Terminal III
(NAIA IPT III) under a build-operate-and-transfer arrangement pursuant to
RA 6957 as amended by RA 7718 (BOT Law).
On December 2, 1994, the DOTC issued Dept. Order No. 94-832
constituting the Prequalification Bids and Awards Committee (PBAC) for
the implementation of the NAIA IPT III project.
On March 27, 1995, then DOTC Secretary Jose Garcia endorsed
the proposal of AEDC to the National Economic and Development Authority
(NEDA). A revised proposal, however, was forwarded by the DOTC to
NEDA on December 13, 1995. On January 5, 1996, the NEDA Investment
Coordinating Council (NEDA ICC) - Technical Board favorably endorsed
the project to the ICC - Cabinet Committee which approved the same,
subject to certain conditions, on January 19, 1996. On February 13, 1996,
the NEDA passed Board Resolution No. 2 which approved the NAIA IPT III
project.
On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication
in two daily newspapers of an invitation for competitive or comparative
proposals on AEDCs unsolicited proposal, in accordance with Sec. 4-A of
RA 6957, as amended.The alternative bidders were required to submit
three (3) sealed envelopes on or before 5:00 p.m. of September 20,
1996. The first envelope should contain the Prequalification Documents,
the second envelope the Technical Proposal, and the third envelope the
Financial Proposal of the proponent.
On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing
the availment of the Bid Documents and the submission of the comparative
bid proposals. Interested firms were permitted to obtain the Request for
Proposal Documents beginning June 28, 1996, upon submission of a
written application and payment of a non-refundable fee of P50,000.00
(US$2,000).
The Bid Documents issued by the PBAC provided among others
that the proponent must have adequate capability to sustain the financing
requirement for the detailed engineering, design, construction, operation,
and maintenance phases of the project. The proponent would be evaluated
based on its ability to provide a minimum amount of equity to the project,
and its capacity to secure external financing for the project.
On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting
all bidders to a pre-bid conference on July 29, 1996.
On August 16, 1996, the PBAC issued PBAC Bulletin No. 3
amending the Bid Documents. The following amendments were made on
the Bid Documents:
a. Aside from the fixed Annual Guaranteed Payment,
the proponent shall include in its financial
proposal an additional percentage of gross
revenue share of the Government, as follows:
i. First 5 years 5.0%
ii. Next 10 years 7.5%
iii. Next 10 years 10.0%
b. The amount of the fixed Annual Guaranteed
Payment shall be subject of the price
challenge. Proponent may offer an Annual
Guaranteed Payment which need not be of
equal amount, but payment of which shall start
upon site possession.
c. The project proponent must have adequate capability
to sustain the financing requirement for the
detailed engineering, design, construction,
and/or operation and maintenance phases of
the project as the case may be. For purposes
of pre-qualification, this capability shall be
measured in terms of:
i. Proof of the availability of the project
proponent and/or the consortium to
provide the minimum amount of
equity for the project; and
ii. a letter testimonial from reputable banks
attesting that the project proponent
and/or the members of the
consortium are banking with them,
that the project proponent and/or the
members are of good financial
standing, and have adequate
resources.
d. The basis for the prequalification shall be the proponents
compliance with the minimum technical and financial
requirements provided in the Bid Documents and the
[Implementing Rules and Regulations (IRR)] of the BOT
Law. The minimum amount of equity shall be 30% of
the Project Cost.
e. Amendments to the draft Concession Agreement shall be
issued from time to time. Said amendments shall only
cover items that would not materially affect the
preparation of the proponents proposal.
On August 29, 1996, the Second Pre-Bid Conference was held
where certain clarifications were made. Upon the request of prospective
bidder Peoples Air Cargo & Warehousing Co., Inc (Paircargo), the PBAC
warranted that based on Sec. 11.6, Rule 11 of the Implementing Rules and
Regulations of the BOT Law, only the proposed Annual Guaranteed
Payment submitted by the challengers would be revealed to AEDC, and
that the challengers technical and financial proposals would remain
confidential. The PBAC also clarified that the list of revenue sources
contained in Annex 4.2a of the Bid Documents was merely indicative and
that other revenue sources may be included by the proponent, subject to
approval by DOTC/MIAA. Furthermore, the PBAC clarified that only those
fees and charges denominated as Public Utility Fees would be subject to
regulation, and those charges which would be actually deemed Public
Utility Fees could still be revised, depending on the outcome of PBACs
query on the matter with the Department of Justice.
In September 1996, the PBAC issued Bid Bulletin No. 5, entitled
Answers to the Queries of PAIRCARGO as Per Letter Dated September 3
and 10, 1996. Paircargos queries and the PBACs responses were as
follows:
1. It is difficult for Paircargo and Associates to meet the required
minimum equity requirement as prescribed in Section 8.3.4 of
the Bid Documents considering that the capitalization of each
member company is so structured to meet the requirements and
needs of their current respective business
undertaking/activities. In order to comply with this equity
requirement, Paircargo is requesting PBAC to just allow each
member of (sic) corporation of the Joint Venture to just execute
 an agreement that embodies a commitment to infuse the
required capital in case the project is awarded to the Joint
Venture instead of increasing each corporations current
authorized capital stock just for prequalification purposes.
In prequalification, the agency is interested in ones financial
capability at the time of prequalification, not future or potential
capability.
A commitment to put up equity once awarded the project is not
enough to establish that present financial capability. However,
total financial capability of all member companies of the
Consortium, to be established by submitting the respective
companies audited financial statements, shall be acceptable.
2. At present, Paircargo is negotiating with banks and other
institutions for the extension of a Performance Security to the
joint venture in the event that the Concessions Agreement (sic)
is awarded to them. However, Paircargo is being required to
submit a copy of the draft concession as one of the documentary
requirements. Therefore, Paircargo is requesting that theyd (sic)
be furnished copy of the approved negotiated agreement
between the PBAC and the AEDC at the soonest possible time.
A copy of the draft Concession Agreement is included in the Bid
Documents. Any material changes would be made known to
prospective challengers through bid bulletins. However, a final
version will be issued before the award of contract.
The PBAC also stated that it would require AEDC to sign
Supplement C of the Bid Documents (Acceptance of Criteria and Waiver of
Rights to Enjoin Project) and to submit the same with the required Bid
Security.
On September 20, 1996, the consortium composed of Peoples Air
Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds
Services, Inc. (PAGS) and Security Bank Corp. (Security Bank)
(collectively, Paircargo Consortium) submitted their competitive proposal to
the PBAC. On September 23, 1996, the PBAC opened the first envelope
containing the prequalification documents of the Paircargo Consortium. On
the following day, September 24, 1996, the PBAC prequalified the
Paircargo Consortium.
On September 26, 1996, AEDC informed the PBAC in writing of
its reservations as regards the Paircargo Consortium, which include:
a. The lack of corporate approvals and financial capability of
PAIRCARGO;
b. The lack of corporate approvals and financial capability of
PAGS;
c. The prohibition imposed by RA 337, as amended (the General
Banking Act) on the amount that Security Bank could
legally invest in the project;
d. The inclusion of Siemens as a contractor of the PAIRCARGO
Joint Venture, for prequalification purposes; and
e. The appointment of Lufthansa as the facility operator, in view
of the Philippine requirement in the operation of a public
utility.
The PBAC gave its reply on October 2, 1996, informing AEDC that
it had considered the issues raised by the latter, and that based on the
documents submitted by Paircargo and the established prequalification
criteria, the PBAC had found that the challenger, Paircargo, had
prequalified to undertake the project. The Secretary of the DOTC approved
the finding of the PBAC.
The PBAC then proceeded with the opening of the second
envelope of the Paircargo Consortium which contained its Technical
Proposal.
On October 3, 1996, AEDC reiterated its objections, particularly
with respect to Paircargos financial capability, in view of the restrictions
imposed by Section 21-B of the General Banking Act and Sections 1380
and 1381 of the Manual Regulations for Banks and Other Financial
Intermediaries. On October 7, 1996, AEDC again manifested its objections
and requested that it be furnished with excerpts of the PBAC meeting and
the accompanying technical evaluation report where each of the issues
they raised were addressed.
On October 16, 1996, the PBAC opened the third envelope
submitted by AEDC and the Paircargo Consortium containing their
respective financial proposals. Both proponents offered to build the NAIA
Passenger Terminal III for at least $350 million at no cost to the government
and to pay the government: 5% share in gross revenues for the first five
years of operation, 7.5% share in gross revenues for the next ten years of
operation, and 10% share in gross revenues for the last ten years of
operation, in accordance with the Bid Documents. However, in addition to
the foregoing, AEDC offered to pay the government a total of P135 million
as guaranteed payment for 27 years while Paircargo Consortium offered to
pay the government a total of P17.75 billion for the same period.
Thus, the PBAC formally informed AEDC that it had accepted the
price proposal submitted by the Paircargo Consortium, and gave AEDC 30
working days or until November 28, 1996 within which to match the said
bid, otherwise, the project would be awarded to Paircargo.

As AEDC failed to match the proposal within the 30-day period,
then DOTC Secretary Amado Lagdameo, on December 11, 1996, issued
a notice to Paircargo Consortium regarding AEDCs failure to match the
proposal.
On February 27, 1997, Paircargo Consortium incorporated into
Philippine International Airport Terminals Co., Inc. (PIATCO).
AEDC subsequently protested the alleged undue preference
given to PIATCO and reiterated its objections as regards the
prequalification of PIATCO.
On April 11, 1997, the DOTC submitted the concession
agreement for the second-pass approval of the NEDA-ICC.
On April 16, 1997, AEDC filed with the Regional Trial Court of
Pasig a Petition for Declaration of Nullity of the Proceedings, Mandamus
and Injunction against the Secretary of the DOTC, the Chairman of the
PBAC, the voting members of the PBAC and Pantaleon D. Alvarez, in his
capacity as Chairman of the PBAC Technical Committee.
xxxx
On July 9, 1997, the DOTC issued the notice of award for the
project to PIATCO.
On July 12, 1997, the Government, through then DOTC Secretary
Arturo T. Enrile, and PIATCO, through its President, Henry T. Go, signed
the Concession Agreement for the Build-Operate-and-Transfer
Arrangement of the Ninoy Aquino International Airport Passenger Terminal
III (1997 Concession Agreement). x x x.
On November 26, 1998, the Government and PIATCO signed an
Amended and Restated Concession Agreement (ARCA). x x x.
Subsequently, the Government and PIATCO signed three
Supplements to the ARCA. The First Supplement was signed on August
27, 1999; the Second Supplement on September 4, 2000; and the Third
Supplement on June 22, 2001(collectively, Supplements).
xxxx
Meanwhile, the MIAA which is charged with the maintenance and
operation of the NAIA Terminals I and II, had existing concession contracts
with various service providers to offer international airline airport services,
such as in-flight catering, passenger handling, ramp and ground support,
aircraft maintenance and provisions, cargo handling and warehousing, and
other services, to several international airlines at the NAIA. x x x.
On September 17, 2002, the workers of the international airline
service providers, claiming that they stand to lose their employment upon
the implementation of the questioned agreements, filed before this Court a
petition for prohibition to enjoin the enforcement of said agreements.
On October 15, 2002, the service providers, joining the cause of
the petitioning workers, filed a motion for intervention and a petition-in-
intervention.
On October 24, 2002, Congressmen Salacnib Baterina, Clavel
Martinez and Constantino Jaraula filed a similar petition with this Court.
On November 6, 2002, several employees of the MIAA likewise
filed a petition assailing the legality of the various agreements.
On December 11, 2002, another group of Congressmen, Hon.
Jacinto V. Paras, Rafael P. Nantes, Eduardo C. Zialcita, Willie B. Villarama,
Prospero C. Nograles, Prospero A. Pichay, Jr., Harlin Cast Abayon and
Benasing O. Macaranbon, moved to intervene in the case as Respondents-
Intervenors. They filed their Comment-In-Intervention defending the validity
of the assailed agreements and praying for the dismissal of the petitions.
During the pendency of the case before this Court, President
Gloria Macapagal Arroyo, on November 29, 2002, in her speech at the
2002 Golden Shell Export Awards at Malacaang Palace, stated that she
will not honor (PIATCO) contracts which the Executive Branchs legal
offices have concluded (as) null and void.[3]
The Court first dispensed with the procedural issues raised in Agan, ruling that (a)
the MIAA service providers and its employees, petitioners in G.R. Nos. 155001 and 155661,
had the requisite standing since they had a direct and substantial interest to protect by reason
of the implementation of the PIATCO Contracts which would affect their source of
livelihood;[4] and (b) the members of the House of Representatives, petitioners in G.R. No.
155547, were granted standing in view of the serious legal questions involved and their impact
on public interest.[5]
As to the merits of the Petitions in Agan, the Court concluded that:
 In sum, this Court rules that in view of the absence of the requisite
financial capacity of the Paircargo Consortium, predecessor of respondent
PIATCO, the award by the PBAC of the contract for the construction,
operation and maintenance of the NAIA IPT III is null and void. Further,
considering that the 1997 Concession Agreement contains material and
substantial amendments, which amendments had the effect of converting
the 1997 Concession Agreement into an entirely different agreement from
the contract bidded upon, the 1997 Concession Agreement is similarly null
and void for being contrary to public policy. The provisions under Sections
4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession
Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA,
which constitute a direct government guarantee expressly prohibited by,
among others, the BOT Law and its Implementing Rules and Regulations
are also null and void. The Supplements, being accessory contracts to the
ARCA, are likewise null and void.[6]
Hence, the fallo of the Courts Decision in Agan reads:
WHEREFORE, the 1997 Concession Agreement, the Amended
and Restated Concession Agreement and the Supplements thereto are set
aside for being null and void.[7]
In a Resolution[8] dated 21 January 2004, the Court denied with finality the Motions
for Reconsideration of its 5 May 2003 Decision in Agan filed by therein respondents PIATCO
and Congressmen Paras, et al., and respondents-intervenors.[9] Significantly, the Court
declared in the same Resolution that:
This Court, however, is not unmindful of the reality that the
structures comprising the NAIA IPT III facility are almost complete and that
funds have been spent by PIATCO in their construction. For the
government to take over the said facility, it has to compensate
respondent PIATCO as builder of the said
structures. The compensation must be just and in accordance with
law and equity for the government can not unjustly enrich itself at the
expense of PIATCO and its investors.[10] (Emphasis ours.)
It is these afore-quoted pronouncements that gave rise to the Petition in Gingoyon.
Republic v. Gingoyon (G.R. No.
166429)
According to the statement of facts in Gingoyon:
After the promulgation of the rulings in Agan, the NAIA 3 facilities
have remained in the possession of PIATCO, despite the avowed intent of
the Government to put the airport terminal into immediate operation. The
Government and PIATCO conducted several rounds of negotiation
regarding the NAIA 3 facilities. It also appears that arbitral proceedings
were commenced before the International Chamber of Commerce
International Court of Arbitration and the International Centre for the
Settlement of Investment Disputes, although the Government has raised
jurisdictional questions before those two bodies.
Then, on 21 December 2004, the Government filed a Complaint for
expropriation with the Pasay City Regional Trial Court (RTC), together with
an Application for Special Raffle seeking the immediate holding of a special
raffle. The Government sought upon the filing of the complaint the issuance
of a writ of possession authorizing it to take immediate possession and
control over the NAIA 3 facilities. The Government also declared that it had
deposited the amount of P3,002,125,000.00 (3 Billion) in Cash with the
Land Bank of the Philippines, representing the NAIA 3 terminals assessed
value for taxation purposes.
The case was raffled to Branch 117 of the Pasay City RTC,
presided by respondent judge Hon. Henrick F. Gingoyon (Hon. Gingoyon).
On the same day that the Complaint was filed, the RTC issued
an Order directing the issuance of a writ of possession to the Government,
authorizing it to take or enter upon the possession of the NAIA 3 facilities.
Citing the case of City of Manila v. Serrano, the RTC noted that it had the
ministerial duty to issue the writ of possession upon the filing of a complaint
for expropriation sufficient in form and substance, and upon deposit made
by the government of the amount equivalent to the assessed value of the
property subject to expropriation. The RTC found these requisites present,
particularly noting that [t]he case record shows that [the Government has]
deposited the assessed value of the [NAIA 3 facilities] in the Land Bank of
the Philippines, an authorized depositary, as shown by the certification
attached to their complaint. Also on the same day, the RTC issued a Writ
of Possession. According to PIATCO, the Government was able to take
possession over the NAIA 3 facilities immediately after the Writ of
Possession was issued.
However, on 4 January 2005, the RTC issued another Order designed to
supplement its 21 December 2004 Order and the Writ of Possession. In
the 4 January 2005 Order, now assailed in the present petition, the RTC
noted that its earlier issuance of its writ of possession was pursuant to
Section 2, Rule 67 of the 1997 Rules of Civil Procedure. However, it was
observed that Republic Act No. 8974 (Rep. Act No. 8974), otherwise known
as An Act to Facilitate the Acquisition of Right-of-Way, Site or Location for
National Government Infrastructure Projects and For Other Purposes and
its Implementing Rules and Regulations (Implementing Rules) had
amended Rule 67 in many respects.
There are at least two crucial differences between the respective
procedures under Rep. Act No. 8974 and Rule 67. Under the statute, the
Government is required to make immediate payment to the property owner
upon the filing of the complaint to be entitled to a writ of possession,
whereas in Rule 67, the Government is required only to make an initial
deposit with an authorized government depositary. Moreover, Rule 67
prescribes that the initial deposit be equivalent to the assessed value of the
property for purposes of taxation, unlike Rep. Act No. 8974 which provides,
as the relevant standard for initial compensation, the market value of the
property as stated in the tax declaration or the current relevant zonal
valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and
the value of the improvements and/or structures using the replacement cost
method.
The very next day after the issuance of the assailed 4 January
2005 Order, the Government filed an Urgent Motion for Reconsideration,
which was set for hearing on 10 January 2005. On 7 January 2005, the
RTC issued another Order, the second now assailed before this Court,
which appointed three (3) Commissioners to ascertain the amount of just
compensation for the NAIA 3 Complex. That same day, the Government
filed a Motion for Inhibition of Hon. Gingoyon.
The RTC heard the Urgent Motion for
Reconsideration and Motion for Inhibition on 10 January 2005. On the
same day, it denied these motions in an Omnibus Order dated 10 January
2005. This is the third Order now assailed before this Court. Nonetheless,
while the Omnibus Order affirmed the earlier dispositions in the 4 January
2005 Order, it excepted from affirmance the superfluous part of
the Order prohibiting the plaintiffs from awarding concessions or leasing
any part of [NAIA 3] to other parties.
Thus, the present Petition for Certiorari and Prohibition under Rule 65
was filed on 13 January 2005. The petition prayed for the nullification of the
RTC orders dated 4 January 2005, 7 January 2005, and 10 January 2005,
and for the inhibition of Hon. Gingoyon from taking further action on the
expropriation case. A concurrent prayer for the issuance of a temporary
restraining order and preliminary injunction was granted by this Court in
a Resolution dated 14 January 2005.[11]

Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974

and Section 10 of the Implementing Rules, the RTC made key qualifications
to its earlier issuances. First, it directed the Land Bank of the Philippines,
Baclaran Branch (LBP-Baclaran), to immediately release the amount of
US$62,343,175.77 to PIATCO, an amount which the RTC characterized as The Court resolved the Petition of the Republic of the Philippines and Manila
that which the Government specifically made available for the purpose of
International Airport Authority in Gingoyon in this wise:
this expropriation; and such amount to be deducted from the amount of just
compensation due PIATCO as eventually determined by the RTC. Second,
the Government was directed to submit to the RTC a Certificate of In conclusion, the Court summarizes its rulings as follows:
Availability of Funds signed by authorized officials to cover the payment of
just compensation. Third, the Government was directed to maintain,
preserve and safeguard the NAIA 3 facilities or perform such as acts or
(1) The 2004 Resolution in Agan sets the base requirement that
activities in preparation for their direct operation of the airport terminal,
has to be observed before the Government may take over the NAIA 3, that
pending expropriation proceedings and full payment of just compensation.
there must be payment to PIATCO of just compensation in accordance with
However, the Government was prohibited from performing acts of
law and equity. Any ruling in the present expropriation case must be
ownership like awarding concessions or leasing any part of [NAIA 3] to conformable to the dictates of the Court as pronounced in the Agan cases.
other parties.
 (2) Rep. Act No. 8974 applies in this case, particularly insofar as
it requires the immediate payment by the Government of at least the
proffered value of the NAIA 3 facilities to PIATCO and provides certain
valuation standards or methods for the determination of just compensation.
(3) Applying Rep. Act No. 8974, the implementation of Writ of
Possession in favor of the Government over NAIA 3 is held in abeyance
until PIATCO is directly paid the amount of P3 Billion, representing the
proffered value of NAIA 3 under Section 4(c) of the law.
(8) There is no basis for the Court to direct the inhibition of Hon.
Gingoyon.
All told, the Court finds no grave abuse of discretion on the part of
the RTC to warrant the nullification of the questioned orders. Nonetheless,
portions of these orders should be modified to conform with law and the
pronouncements made by the Court herein.[12]

The decretal portion of the Courts Decision in Gingoyon thus reads:

(4) Applying Rep. Act No. 8974, the Government is authorized to
start the implementation of the NAIA 3 Airport terminal project by
performing the acts that are essential to the operation of the NAIA 3 as an WHEREFORE, the Petition is GRANTED in PART with respect to
international airport terminal upon the effectivity of the Writ of Possession, the orders dated 4 January 2005 and 10 January 2005 of the lower
subject to the conditions above-stated. As prescribed by the Court, such court. Said orders are AFFIRMED with the following MODIFICATIONS:
authority encompasses the repair, reconditioning and improvement of the
complex, maintenance of the existing facilities and equipment, installation
of new facilities and equipment, provision of services and facilities
1) The implementation of the Writ of Possession dated 21
pertaining to the facilitation of air traffic and transport, and other services
December 2004 is HELD IN ABEYANCE, pending payment by petitioners
that are integral to a modern-day international airport.
to PIATCO of the amount of Three Billion Two Million One Hundred Twenty
Five Thousand Pesos (P3,002,125,000.00), representing the proffered
value of the NAIA 3 facilities;
5) The RTC is mandated to complete its determination of the just
compensation within sixty (60) days from finality of this Decision. In doing
so, the RTC is obliged to comply with the standards set under Rep. Act No.
2) Petitioners, upon the effectivity of the Writ of Possession, are
8974 and its Implementing Rules. Considering that the NAIA 3 consists of
authorized [to] start the implementation of the Ninoy Aquino International
structures and improvements, the valuation thereof shall be determined
Airport Pasenger Terminal III project by performing the acts that are
using the replacements cost method, as prescribed under Section 10 of the
essential to the operation of the said International Airport Passenger
Implementing Rules.
Terminal project;

(6) There was no grave abuse of discretion attending the

3) RTC Branch 117 is hereby directed, within sixty (60) days from
RTC Order appointing the commissioners for the purpose of determining
finality of this Decision, to determine the just compensation to be paid to
just compensation. The provisions on commissioners under Rule 67 shall
PIATCO by the Government.
apply insofar as they are not inconsistent with Rep. Act No. 8974, its
Implementing Rules, or the rulings of the Court in Agan.

The Order dated 7 January 2005 is AFFIRMED in all respects

subject to the qualification that the parties are given ten (10) days from
(7) The Government shall pay the just compensation fixed in the
finality of this Decision to file, if they so choose, objections to the
decision of the trial court to PIATCO immediately upon the finality of the
appointment of the commissioners decreed therein.
said decision.
 The Temporary Restraining Order dated 14 January 2005 is
hereby LIFTED.
No pronouncement as to costs.[13]
Motions for Partial Reconsideration of the foregoing Decision were filed by
therein petitioners Republic and MIAA, as well as the three other parties who sought to
intervene, namely, Asakihosan Corporation, Takenaka Corporation, and Congressman
Baterina.
In a Resolution dated 1 February 2006, this Court denied with finality the Motion for
Partial Reconsideration of therein petitioners and remained faithful to its assailed Decision
based on the following ratiocination:
Admittedly, the 2004 Resolution in Agan could be construed as
mandating the full payment of the final amount of just compensation before
the Government may be permitted to take over the NAIA 3. However, the
Decision ultimately rejected such a construction, acknowledging the public
good that would result from the immediate operation of the NAIA 3. Instead,
the Decision adopted an interpretation which is in consonance with Rep.
Act No. 8974 and with equitable standards as well, that allowed the
Government to take possession of the NAIA 3 after payment of the
proffered value of the facilities to PIATCO. Such a reading is substantially
compliant with the pronouncement in the 2004 Agan Resolution, and is in
accord with law and equity. In contrast, the Governments position, hewing
to the strict application of Rule 67, would permit the Government to acquire
possession over the NAIA 3 and implement its operation without having to
pay PIATCO a single centavo, a situation that is obviously unfair. Whatever
animosity the Government may have towards PIATCO does not acquit it
from settling its obligations to the latter, particularly those which had already
been previously affirmed by this Court.[14]
The Court, in the same Resolution, denied all the three motions for intervention of
Asakihosan Corporation, Takenaka Corporation, and Congressman Baterina, and ruled as
follows:
We now turn to the three (3) motions for intervention all of which
were filed after the promulgation of the Courts Decision. All three (3)
motions must be denied. Under Section 2, Rule 19 of the 1997 Rules of
Civil Procedure the motion to intervene may be filed at any time before
rendition of judgment by the court. Since this case originated from an
original action filed before this Court, the appropriate time to file the
motions-in-intervention in this case if ever was before and not
after resolution of this case. To allow intervention at this juncture would be
highly irregular. It is extremely improbable that the movants were unaware
of the pendency of the present case before the Court, and indeed none of
them allege such lack of knowledge.
Takenaka and Asahikosan rely on Mago v. Court of
Appeals wherein the Court took the extraordinary step of allowing the
motion for intervention even after the challenged order of the trial court had
already become final. Yet it was apparent in Mago that the movants therein
were not impleaded despite being indispensable parties, and had not even
known of the existence of the case before the trial court, and the effect of
the final order was to deprive the movants of their land. In this case, neither
Takenaka nor Asahikosan stand to be dispossessed by reason of the
Courts Decision. There is no palpable due process violation that would
militate the suspension of the procedural rule.
Moreover, the requisite legal interest required of a party-in-intervention has
not been established so as to warrant the extra-ordinary step of allowing
intervention at this late stage. As earlier noted, the claims of Takenaka and
Asahikosan have not been judicially proved or conclusively established as
fact by any trier of facts in this jurisdiction. Certainly, they could not be
considered as indispensable parties to the petition for certiorari. In the case
of Representative Baterina, he invokes his prerogative as legislator to
curtail the disbursement without appropriation of public funds to
compensate PIATCO, as well as that as a taxpayer, as the basis of his legal
standing to intervene. However, it should be noted that the amount which
 the Court directed to be paid by the Government to PIATCO was derived
from the money deposited by the Manila International Airport Authority, an
agency which enjoys corporate autonomy and possesses a legal
personality separate and distinct from those of the National Government
and agencies thereof whose budgets have to be approved by Congress.
It is also observed that the interests of the movants-in-intervention
may be duly litigated in proceedings which are extant before lower courts.
There is no compelling reason to disregard the established rules and permit
the interventions belatedly filed after the promulgation of the Courts
Decision.[15]
Asias Emerging Dragon
Corporation v. Department of
Transportation and
Communications
and Manila International Airport Au
thority (G.R. No. 169914)
Banking on this Courts declaration in Agan that the award of the NAIA IPT III Project to
PIATCO is null and void, Asias Emerging Dragon Corporation (AEDC) filed before this Court
the present Petition for Mandamusand Prohibition (with Application for Temporary
Restraining Order), praying of this Court that:
(1) After due hearing, judgment be rendered commanding the
Respondents, their officers, agents, successors, representatives or
persons or entities acting on their behalf, to formally award the NAIA-APT
[sic] III PROJECT to Petitioner AEDC and to execute and formalize with
Petitioner AEDC the approved Draft Concession Agreement embodying
the agreed terms and conditions for the operation of the NAIA-IPT III
Project and directing Respondents to cease and desist from awarding the
NAIA-IPT Project to third parties or negotiating into any concession contract
with third parties.
(2) Pending resolution on the merits, a Temporary Restraining Order be
issued enjoining Respondents, their officers, agents, successors or
representatives or persons or entities acting on their behalf from
negotiating, re-bidding, awarding or otherwise entering into any concession
contract with PIATCO and other third parties for the operation of the NAIA-
IPT III Project.
Other relief and remedies, just and equitable under the premises,
are likewise prayed for.[16]
AEDC bases its Petition on the following grounds:
I. PETITIONER AEDC, BEING THE RECOGNIZED AND
UNCHALLENGED ORIGINAL PROPONENT, HAS THE
EXCLUSIVE, CLEAR AND VESTED STATUTORY RIGHT TO
THE AWARD OF THE NAIA-IPT III PROJECT;
II. RESPONDENTS HAVE A STATUTORY DUTY TO PROTECT
PETITIONER AEDC AS THE UNCHALLENGED ORIGINAL
PROPONENT AS A RESULT OF THE SUPREME COURTS
NULLIFICATION OF THE AWARD OF THE NAIA-IPT III
PROJECT TO PIATCO[; and]
III. RESPONDENTS HAVE NO LEGAL BASIS OR AUTHORITY
TO TAKE OVER THE NAIA-IPT III PROJECT, TO THE
EXCLUSION OF PETITIONER AEDC, OR TO AWARD THE
PROJECT TO THIRD PARTIES.[17]
At the crux of the Petition of AEDC is its claim that, being the recognized and unchallenged
original proponent of the NAIA IPT III Project, it has the exclusive, clear, and vested statutory
right to the award thereof.However, the Petition of AEDC should be dismissed for lack of
merit, being as it is, substantially and procedurally flawed.
SUBSTANTIVE INFIRMITY
A petition for mandamus is governed by Section 3 of Rule 65 of the Rules of Civil Procedure,
which reads
SEC. 3. Petition for mandamus. When any tribunal, corporation,
board, officer or person unlawfully neglects the performance of an act which
the law specifically enjoins as a duty resulting from an office, trust, or
station, or unlawfully excludes another from the use and enjoyment of a
right or office to which such other is entitled, and there is no other plain,
speedy and adequate remedy in the ordinary course of law, the person
aggrieved thereby may file a verified petition in the proper court, alleging
the facts with certainty and praying that judgment be rendered commanding
the respondent, immediately or some other time to be specified by the
court, to do the act required to be done to protect the rights of the petitioner,
and to pay the damages sustained by the petitioner by reason of the
wrongful acts of the respondent.
It is well-established in our jurisprudence that only specific legal rights are
enforceable by mandamus, that the right sought to be enforced must be certain and clear,
and that the writ will not issue in cases where the right is doubtful. Just as fundamental is the
principle governing the issuance of mandamus that the duties to be performed must be such
as are clearly and peremptorily enjoined by law or by reason of official station.[18]
A rule long familiar is that mandamus never issues in doubtful cases. It requires a showing of
a complete and clear legal right in the petitioner to the performance of ministerial acts. In
varying language, the principle echoed and reechoed is that legal rights may be enforced
by mandamus only if those rights are well-defined, clear and certain. Otherwise,
the mandamus petition must be dismissed.[19]
The right that AEDC is seeking to enforce is supposedly enjoined by Section 4-A of Republic
Act No. 6957,[20] as amended by Republic Act No. 7718, on unsolicited proposals, which
provides
SEC. 4-A. Unsolicited proposals. Unsolicited proposals for
projects may be accepted by any government agency or local government
unit on a negotiated basis: Provided, That, all the following conditions are
met: (1) such projects involve a new concept or technology and/or are not
part of the list of priority projects, (2) no direct government guarantee,
subsidy or equity is required, and (3) the government agency or local
government unit has invited by publication, for three (3) consecutive weeks,
in a newspaper of general circulation, comparative or competitive
proposals and no other proposal is received for a period of sixty (60)
working days: Provided, further, That in the event another proponent
submits a lower price proposal, the original proponent shall have the right
to match the price within thirty (30) working days.
In furtherance of the afore-quoted provision, the Implementing Rules and Regulations (IRR)
of Republic Act No. 6957, as amended by Republic Act No. 7718, devoted the entire Rule 10
to Unsolicited Proposals, pertinent portions of which are reproduced below
Sec. 10.1. Requisites for Unsolicited Proposals. Any Agency/LGU
may accept unsolicited proposals on a negotiated basis provided that all
the following conditions are met:
a. the project involves a new concept or technology and/or is not
part of the list of priority projects;
b. no direct government guarantee, subsidy or equity is required;
and
c. the Agency/LGU concerned has invited by publication, for three
(3) consecutive weeks, in a newspaper of general circulation, comparative
or competitive proposals and no other proposal is received for a period of
sixty (60) working days. In the event that another project proponent submits
a price proposal lower than that submitted by the original proponent, the
latter shall have the right to match said price proposal within thirty (30)
working days. Should the original proponent fail to match the lower price
proposal submitted within the specified period, the contract shall be
awarded to the tenderer of the lowest price. On the other hand, if the
original project proponent matches the submitted lowest price within the
specified period, he shall be immediately be awarded the project.
xxxx

Sec. 10.6. Evaluation of Unsolicited Proposals. The Agency/LGU
is tasked with the initial evaluation of the proposal. The Agency/LGU shall:
1) appraise the merits of the project; 2) evaluate the qualification of the
proponent; and 3) assess the appropriateness of the contractual
arrangement and reasonableness of the risk allocation. The Agency/LGU
is given sixty (60) days to evaluate the proposal from the date of submission
of the complete proposal. Within this 60-day period, the Agency/LGU, shall
advise the proponent in writing whether it accepts or rejects the
proposal. Acceptance means commitment of the Agency/LGU to
pursue the project and recognition of the proponent as the original
proponent. At this point, the Agency/LGU will no longer entertain
other similar proposals until the solicitation of comparative
proposals. The implementation of the project, however, is still contingent
primarily on the approval of the appropriate approving authorities
consistent with Section 2.7 of these IRR, the agreement between the
original proponent and the Agency/LGU of the contract terms, and the
approval of the contract by the [Investment Coordination Committee (ICC)]
or Local Sanggunian.
xxxx
Sec. 10.9. Negotiation With the Original Proponent. Immediately
after ICC/Local Sanggunians clearance of the project, the
Agency/LGU shall proceed with the in-depth negotiation of the project
scope, implementation arrangements and concession agreement, all
of which will be used in the Terms of Reference for the solicitation of
comparative proposals. The Agency/LGU and the proponent are given
ninety (90) days upon receipt of ICCs approval of the project to conclude
negotiations. The Agency/LGU and the original proponent shall negotiate
in good faith. However, should there be unresolvable differences
during the negotiations, the Agency/LGU shall have the option to
reject the proposal and bid out the project. On the other hand, if the
negotiation is successfully concluded, the original proponent shall
then be required to reformat and resubmit its proposal in accordance
with the requirements of the Terms of Reference to facilitate
comparison with the comparative proposals. The Agency/LGU shall
validate the reformatted proposal if it meets the requirements of the
TOR prior to the issuance of the invitation for comparative proposals.
xxxx
Sec. 10.11. Invitation for Comparative Proposals. The
Agency/LGU shall publish the invitation for comparative or competitive
proposals only after ICC/Local Sanggunian issues a no objection clearance
of the draft contract. The invitation for comparative or competitive
proposals should be published at least once every week for three (3) weeks
in at least one (1) newspaper of general circulation. It shall indicate the
time, which should not be earlier than the last date of publication, and place
where tender/bidding documents could be obtained. It shall likewise
explicitly specify a time of sixty (60) working days reckoned from the date
of issuance of the tender/bidding documents upon which proposals shall
be received.Beyond said deadline, no proposals shall be accepted. A pre-
bid conference shall be conducted ten (10) working days after the issuance
of the tender/bidding documents.
Sec. 10.12. Posting of Bid Bond by Original Proponent. The
original proponent shall be required at the date of the first date of the
publication of the invitation for comparative proposals to submit a bid
bond equal to the amount and in the form required of the challengers.
Sec. 10.13. Simultaneous Qualification of the Original Proponent.
The Agency/LGU shall qualify the original proponent based on the
provisions of Rule 5 hereof, within thirty (30) days from start of
negotiation. For consistency, the evaluation criteria used for qualifying the
original proponent should be the same criteria used for qualifying the
original proponent should be the criteria used in the Terms of Reference
for the challengers.
xxxx
Sec. 10.16. Disclosure of the Price Proposal. The disclosure of
the price proposal of the original proponent in the Tender Documents will
be left to the discretion of the Agency/LGU. However, if it was not disclosed
in the Tender Documents, the original proponents price proposal should be
revealed upon the opening of the financial proposals of the
challengers. The right of the original proponent to match the best
proposal within thirty (30) working days starts upon official
notification by the Agency/LGU of the most advantageous financial
proposal. (Emphasis ours.)
In her sponsorship speech on Senate Bill No. 1586 (the precursor of Republic Act No. 7718),
then Senator (now President of the Republic of the Philippines) Gloria Macapagal-Arroyo
explained the reason behind the proposed amendment that would later become Section 4-A
of Republic Act No. 6957, as amended by Republic Act No. 7718:
The object of the amendment is to protect proponents which have
already incurred costs in the conceptual design and in the preparation of
 the proposal, and which may have adopted an imaginative method of
construction or innovative concept for the proposal. The amendment also recognition of the proponent as the original proponent. Upon acceptance then of the
aims to harness the ingenuity of the private sector to come up with solutions
to the countrys infrastructure problems.[21] unsolicited proposal, the original proponent is recognized as such but no award is yet made

to it. The commitment of the agency/LGU upon acceptance of the unsolicited proposal is to

It is irrefragable that Section 4-A of Republic Act No. 6957, as amended by Republic Act No. the pursuit of the project, regardless of to whom it shall subsequently award the same. The

7718, and Section 10 of its IRR, accord certain rights or privileges to the original proponent acceptance of the unsolicited proposal only precludes the agency/LGU from entertaining

of an unsolicited proposal for an infrastructure project. They are meant to encourage private other similar proposals until the solicitation of comparative proposals.

sector initiative in conceptualizing infrastructure projects that would benefit the

public. Nevertheless, none of these rights or privileges would justify the automatic award of Consistent in both the statutes and the IRR is the requirement that invitations be

the NAIA IPT III Project to AEDC after its previous award to PIATCO was declared null and published for comparative or competitive proposals. Therefore, it is mandatory that a public

void by this Court in Agan. bidding be held before the awarding of the project. The negotiations between the agency/LGU

and the original proponent, as provided in Section 10.9 of the IRR, is for the sole purpose of

The rights or privileges of an original proponent of an unsolicited proposal for an coming up with draft agreements, which shall be used in the Terms of Reference (TOR) for

infrastructure project are never meant to be absolute. Otherwise, the original proponent can the solicitation of comparative proposals. Even at this point, there is no definite commitment

hold the Government hostage and secure the award of the infrastructure project based solely made to the original proponent as to the awarding of the project. In fact, the same IRR

on the fact that it was the first to submit a proposal. The absurdity of such a situation becomes provision even gives the concerned agency/LGU, in case of unresolvable differences during

even more apparent when considering that the proposal is unsolicited by the the negotiations, the option to reject the original proponents proposal and just bid out the

Government. The rights or privileges of an original proponent depends on compliance with project.

the procedure and conditions explicitly provided by the statutes and their IRR.
Generally, in the course of processing an unsolicited proposal, the original proponent

An unsolicited proposal is subject to evaluation, after which, the government agency is treated in much the same way as all other prospective bidders for the proposed

or local government unit (LGU) concerned may accept or reject the proposal outright. infrastructure project. It is required to reformat and resubmit its proposal in accordance with

the requirements of the TOR.[22] It must submit a bid bond equal to the amount and in the

Under Section 10.6 of the IRR, the acceptance of the unsolicited proposal by the form required of the challengers.[23] Its qualification shall be evaluated by the concerned

agency/LGU is limited to the commitment of the [a]gency/LGU to pursue the project and agency/LGU, using evaluation criteria in accordance with Rule 5 [24] of the IRR, and which

shall be the same criteria to be used in the TOR for the challengers. [25] These requirements
ensure that the public bidding under Rule 10 of IRR on Unsolicited Proposals still remain in
accord with the three principles in public bidding, which are: the offer to the public, an
opportunity for competition, and a basis for exact comparison of bids.[26]
The special rights or privileges of an original proponent thus come into play only
when there are other proposals submitted during the public bidding of the infrastructure
project. As can be gleaned from the plain language of the statutes and the IRR, the original
proponent has: (1) the right to match the lowest or most advantageous proposal within 30
working days from notice thereof, and (2) in the event that the original proponent is able to
match the lowest or most advantageous proposal submitted, then it has the right to be
awarded the project. The second right or privilege is contingent upon the actual exercise by
the original proponent of the first right or privilege. Before the project could be awarded to the
original proponent, he must have been able to match the lowest or most advantageous
proposal within the prescribed period. Hence, when the original proponent is able to timely
match the lowest or most advantageous proposal, with all things being equal, it shall enjoy
preference in the awarding of the infrastructure project.
This is the extent of the protection that Legislature intended to afford the original
proponent, as supported by the exchange between Senators Neptali Gonzales and Sergio
Osmea during the Second Reading of Senate Bill No. 1586:
Senator Gonzales:
xxxx
The concept being that in case of an unsolicited proposal and nonetheless
public bidding has been held, then [the original proponent] shall, in
effect, be granted what is the equivalent of the right of first refusal by
offering a bid which shall equal or better the bid of the winning bidder
within a period of, let us say, 30 days from the date of bidding.
Senator Osmea:
xxxx
To capture the tenor of the proposal of the distinguished Gentleman, a
subsequent paragraph has to be added which says, IF THERE IS A
COMPETITIVE PROPOSAL, THE ORIGINAL PROPONENT SHALL
HAVE THE RIGHT TO EQUAL THE TERMS AND CONDITIONS OF THE
COMPETITIVE PROPOSAL.
In other words, if there is nobody who will submit a competitive proposal,
then nothing is lost. Everybody knows it, and it is open and transparent. But
if somebody comes in with another proposal and because it was the idea
of the original proponent that proponent now has the right to equal the
terms of the original proposal.
SENATOR GONZALES:
That is the idea, Mr. President. Because it seems to me that it is utterly
unfair for one who has conceived an idea or a concept, spent and invested
in feasibility studies, in the drawing of plans and specifications, and the
project is submitted to a public bidding, then somebody will win on the basis
of plans and specifications and concepts conceived by the original
proponent. He should at least be given the right to submit an
equalizing bid. x x x.[27] (Emphasis ours.)
As already found by this Court in the narration of facts in Agan, AEDC failed to match
the more advantageous proposal submitted by PIATCO by the time the 30-day working period
expired on 28 November 1996;[28] and, without exercising its right to match the most
advantageous proposal, it cannot now lay claim to the award of the project.
The bidding process as to the NAIA IPT III Project was already over after the award
thereof to PIATCO, even if eventually, the said award was nullified and voided. The
nullification of the award to PIATCO did not revive the proposal nor re-open the

bidding. AEDC cannot insist that this Court turn back the hands of time and award the NAIA
IPT III Project to it, as if the bid of PIATCO never existed and the award of the project to
PIATCO did not take place. Such is a simplistic approach to a very complex problem that is
the NAIA IPT III Project.
In his separate opinion in Agan, former Chief Justice Artemio V. Panganiban noted
that [T]here was effectively no public bidding to speak of, the entire bidding process having
been flawed and tainted from the very outset, therefore, the award of the concession to
Paircargos successor Piatco was void, and the Concession Agreement executed with the
latter was likewise void ab initio. x x x.[29] (Emphasis ours.) In consideration of such a
declaration that the entire bidding process was flawed and tainted from the very beginning,
then, it would be senseless to re-open the same to determine to whom the project should
have been properly awarded to. The process and all proposals and bids submitted in
participation thereof, and not just PIATCOs, were placed in doubt, and it would be foolhardy
for the Government to rely on them again. At the very least, it may be declared that there was
a failure of public bidding.[30]
In addition, PIATCO is already close to finishing the building of the structures
comprising NAIA IPT III,[31] a fact that this Court cannot simply ignore. The NAIA IPT III Project
was proposed, subjected to bidding, and awarded as a build-operate-transfer (BOT) project. A
BOT project is defined as
A contractual arrangement whereby the project proponent undertakes
the construction, including financing, of a given infrastructure facility,
and the operation and maintenance thereof. The project proponent
operates the facility over a fixed term during which it is allowed to charge
facility users appropriate tolls, fees, rentals, and charges not exceeding
those proposed in its bid or as negotiated and incorporated in the contract
to enable the project proponent to recover its investment, and operating
and maintenance expenses in the project. The project
proponent transfers the facility to the government agency or local
government unit concerned at the end of the fixed term that shall not
exceed fifty (50) years. This shall include a supply-and-operate situation
which is a contractual arrangement whereby the supplier of equipment and
machinery for a given infrastructure facility, if the interest of the
Government so requires, operates the facility providing in the process
technology transfer and training to Filipino nationals. [32] (Emphasis ours.)
The original proposal of AEDC is for a BOT project, in which it undertook
to build, operate, and transfer to the Government the NAIA IPT III facilities. This is clearly no
longer applicable or practicable under the existing circumstances. It is undeniable that the
physical structures comprising the NAIA IPT III Project are already substantially built, and
there is almost nothing left for AEDC to construct. Hence, the project could no longer be
awarded to AEDC based on the theory of legal impossibility of performance.
Neither can this Court revert to the original proposal of AEDC and award to it only
the unexecuted components of the NAIA IPT III Project. Whoever shall assume the obligation
to operate and maintain NAIA IPT III and to subsequently transfer the same to the
Government (in case the operation is not assumed by the Government itself) shall have to do
so on terms and conditions that would necessarily be different from the original proposal of
AEDC. It will no longer include any undertaking to build or construct the structures. An
amendment of the proposal of AEDC to address the present circumstances is out of the
question since such an amendment would be substantive and tantamount to an entirely new
proposal, which must again be subjected to competitive bidding.
AEDCs offer to reimburse the Government the amount it shall pay to PIATCO for the
NAIA IPT III Project facilities, as shall be determined in the ongoing expropriation proceedings
before the RTC of Pasay City, cannot restore AEDC to its status and rights as the project
proponent. It must be stressed that the law requires the project proponent to undertake the
construction of the project, including financing; financing, thus, is but a component of the
construction of the structures and not the entirety thereof.
If the PIATCO contracts are junked altogether as I think they
should be, should not AEDC automatically be considered the winning
bidder and therefore allowed to operate the facility? My answer is a stone-
cold No. AEDC never won the bidding, never signed any contract, and
never built any facility. Why should it be allowed to automatically step in
and benefit from the greed of another?[33]

Moreover, this reimbursement arrangement may even result in the unjust enrichment
The claim of AEDC to the award of the NAIA IPT III Project, after the award thereof
of AEDC. In its original proposal, AEDC offered to construct the NAIA IPT III facilities for $350
to PIATCO was set aside for being null and void, grounded solely on its being the original
million or P9 billion at that time.In exchange, AEDC would share a certain percentage of the
proponent of the project, is specious and an apparent stretch in the interpretation of Section
gross revenues with, and pay a guaranteed annual income to the Government upon operation
4-A of Republic Act No. 6957, as amended by Republic Act No. 7718, and Rule 10 of the IRR.
of the NAIA IPT III. In Gingoyon, the proferred value of the NAIA IPT III facilities was already

determined to be P3 billion. It seems improbable at this point that the balance of the value of
In all, just as AEDC has no legal right to the NAIA IPT III Project, corollarily, it has
said facilities for which the Government is still obligated to pay PIATCO shall reach or
no legal right over the NAIA IPT III facility. AEDC does not own the NAIA IPT III facility, which
exceed P6 billion. There is thus the possibility that the Government shall be required to pay
this Court already recognized in Gingoyon as owned by PIATCO; nor does AEDC own the
PIATCO an amount less than P9 billion. If AEDC is to reimburse the Government only for the
land on which NAIA IPT III stands, which is undisputedly owned by the Republic through the
said amount, then it shall acquire the NAIA IPT III facilities for a price less than its original
Bases Conversion Development Authority (BCDA). AEDC did not fund any portion of the
proposal of P9 billion. Yet, per the other terms of its original proposal, it may still recoup a
construction of NAIA IPT III, which was entirely funded by PIATCO. AEDC also does not have
capital investment of P9 billion plus a reasonable rate of return of investment. A change in
any kind of lien over NAIA IPT III or any kind of legal entitlement to occupy the facility or the
the agreed value of the NAIA IPT III facilities already built cannot be done without a
land on which it stands. Therefore, nothing that the Government has done or will do in relation
corresponding amendment in the other terms of the original proposal as regards profit sharing
to the project could possibly prejudice or injure AEDC. AEDC then does not possess any legal
and length of operation; otherwise, AEDC will be unjustly enriched at the expense of the
personality to interfere with or restrain the activities of the Government as regards NAIA IPT
Government.
III. Neither does it have the legal personality to demand that the Government deliver or sell to

it the NAIA IPT III facility despite the express willingness of AEDC to reimburse the
Again, as aptly stated by former Chief Justice Panganiban, in his separate opinion
Government the proferred amount it had paid PIATCO and complete NAIA IPT III facility at
in Agan:
its own cost.

AEDC invokes the Memorandum of Agreement, purportedly executed between the
DOTC and AEDC on 26 February 1996, following the approval of the NAIA IPT III Project by
the National Economic Development Authority Board in a Resolution dated 13 February 1996,
which provided for the following commitments by the parties:
a. commitment of Respondent DOTC to target mid 1996 as the time frame
for the formal award of the project and commencement of site
preparation and construction activities with the view of a partial
opening of the Terminal by the first quarter of 1998;
b. commitment of Respondent DOTC to pursue the project envisioned in
the unsolicited proposal and commence and conclude as soon as
possible negotiations with Petitioner AEDC on the BOT contract;
c. commitment of Respondent DOTC to make appropriate arrangements
through which the formal award of the project can be affected[;]
d. commitment of Petitioner AEDC to a fast track approach to project
implementation and to commence negotiations with its financial
partners, investors and creditors;
e. commitment of Respondent DOTC and Petitioner AEDC to fast track
evaluation of competitive proposals, screening and eliminating
nuisance comparative bids;[34]
It is important to note, however, that the document attached as Annex E to the Petition of
AEDC is a certified photocopy of records on file. This Court cannot give much weight to said
document considering that its existence and due execution have not been established. It is
not notarized, so it does not enjoy the presumption of regularity of a public document. It is not
even witnessed by anyone. It is not certified true by its supposed signatories, Secretary Jesus
B. Garcia, Jr. for DOTC and Chairman Henry Sy, Sr. for AEDC, or by any government agency
having its custody. It is certified as a photocopy of records on file by an Atty. Cecilia L.
Pesayco, the Corporate Secretary, of an unidentified corporation.
Even assuming for the sake of argument, that the said Memorandum of Agreement,
is in existence and duly executed, it does little to support the claim of AEDC to the award of
the NAIA IPT III Project. The commitments undertaken by the DOTC and AEDC in the
Memorandum of Agreement may be simply summarized as a commitment to comply with the
procedure and requirements provided in Rules 10 and 11 of the IRR. It bears no commitment
on the part of the DOTC to award the NAIA IPT III Project to AEDC. On the contrary, the
document includes express stipulations that negate any such government obligation. Thus,
in the first clause,[35] the DOTC affirmed its commitment to pursue, implement and complete
the NAIA IPT III Project on or before 1998, noticeably without mentioning that such
commitment was to pursue the project specifically with AEDC. Likewise, in the second
clause,[36] it was emphasized that the DOTC shall pursue the project under Rules 10 and 11
of the IRR of Republic Act No. 6957, as amended by Republic Act No. 7718. And most
significantly, the tenth clause of the same document provided:
10. Nothing in this Memorandum of Understanding shall be understood,
interpreted or construed as permitting, allowing or authorizing the
circumvention of, or non-compliance with, or as waiving, the
provisions of, and requirements and procedures under, existing
laws, rules and regulations.[37]
AEDC further decries that:
24. In carrying out its commitments under the DOTC-AEDC MOU,
Petitioner AEDC undertook the following activities, incurring in the process
tremendous costs and expenses.
 a. pre-qualified 46 design and contractor firms to assist in the
NAIA-IPT III Project;
b. appointed a consortium of six (6) local banks as its financial
advisor in June 1996;
c. hired the services of GAIA South, Inc. to prepare the Project
Description Report and to obtain the Environmental
Clearance Certificate (ECC) for the NAIA-IPT III Project;
d. coordinated with the Airline Operators Association, Bases
Conversion Development Authority, Philippine Air Force,
Bureau of Customs, Bureau of Immigration, relative to
their particular requirements regarding the NAIA-IPT III
[P]roject; and
e. negotiated and entered into firm commitments with Ital Thai,
Marubeni Corporation and Mitsui Corporation as equity
partners.[38]
While the Court may concede that AEDC, as the original proponent, already
expended resources in its preparation and negotiation of its unsolicited proposal, the mere
fact thereof does not entitle it to the instant award of the NAIA IPT III Project. AEDC was
aware that the said project would have to undergo public bidding, and there existed the
possibility that another proponent may submit a more advantageous bid which it cannot
match; in which case, the project shall be awarded to the other proponent and AEDC would
then have no means to recover the costs and expenses it already incurred on its unsolicited
proposal. It was a given business risk that AEDC knowingly undertook.
Additionally, the very defect upon which this Court nullified the award of the NAIA
not be financially qualified to undertake the NAIA IPT III Project. Based on AEDCs own
IPT III Project to PIATCO similarly taints the unsolicited proposal of AEDC. This Court found
submissions
Paircargo Consortium financially disqualified after striking down as incorrect the PBACs
only P150,000,000.00,[40] which
assessment of the consortiums financial capability. According to the Courts ratio in Agan:
Consortium was capable of investing in the NAIA IPT III Project, and even far less that what
As the minimum project cost was estimated to be
US$350,000,000.00 or roughly P9,183,650,000.00, the Paircargo
Consortium had to show to the satisfaction of the PBAC that it had the
ability to provide the minimum equity for the project in the amount of at
least P2,755,095,000.00.
xxxx
Thus, the maximum amount that Security Bank could validly
invest in the Paircargo Consortium is only P528,525,656.55, representing
15% of its entire net worth. The total net worth therefore of the Paircargo
Consortium, after considering the maximum amounts that may be validly
invested by each of its members is P558,384,871.55 or only 6.08% of the
project cost, an amount substantially less than the prescribed minimum
equity investment required for the project in the amount
of P2,755,095,000.00 or 30% of the project cost.
The purpose of pre-qualification in any public bidding is to
determine, at the earliest opportunity, the ability of the bidder to undertake
the project. Thus, with respect to the bidders financial capacity at the pre-
qualification stage, the law requires the government agency to examine and
determine the ability of the bidder to fund the entire cost of the project by
considering the maximum amounts that each bidder may invest in the
project at the time of pre-qualification.
xxxx
Thus, if the maximum amount of equity that a bidder may invest
in the project at the time the bids are submitted falls short of the
minimum amounts required to be put up by the bidder, said bidder should
be properly disqualified. Considering that at the pre-qualification stage, the
maximum amounts which the Paircargo Consortium may invest in the
project fell short of the minimum amounts prescribed by the PBAC, we hold
that Paircargo Consortium was not a qualified bidder. Thus the award of
the contract by the PBAC to the Paircargo Consortium, a disqualified
bidder, is null and void.[39]
Pursuant to the above-quoted ruling, AEDC, like the Paircargo Consortium, would
to the Government, it had then a paid-in capital of
was less than the P558,384,871.55 that Paircargo
this Court prescribed as the minimum equity investment required for the project in the amount
of P2,755,095,000.00 or 30% of the project cost. AEDC had not sufficiently demonstrated that
it would have been financially qualified to undertake the project at the time of submission
of the bids.
Instead, AEDC took pains to present to this Court that allowing it to take over and
operate NAIA IPT III at present would be beneficial to the Government. This Court must point
out, however, that AEDC is precisely making a new proposal befitting the current status of the
NAIA IPT III Project, contrary to its own argument that it is merely invoking its original BOT
proposal. And it is not for this Court to evaluate AEDCs new proposal and assess whether it
would truly be most beneficial for the Government, for the same is an executive function rather
than judicial, for which the statutes and regulations have sufficiently provided standards and
procedures for evaluation.
It can even be said that if the award of the NAIA IPT III Project was merely a matter
of choosing between PIATCO and AEDC (which it is not), there could be no doubt that
PIATCO is more qualified to operate the structure that PIATCO itself built and PIATCOs offer
of P17.75 Billion in annual guaranteed payments to the Government is far better that AEDCs
offer of P135 Million.
Hence, AEDC is not entitled to a writ of mandamus, there being no specific, certain,
and clear legal right to be enforced, nor duty to be performed that is clearly and peremptorily
enjoined by law or by reason of official station.
PROCEDURAL LAPSES
In addition to the substantive weaknesses of the Petition of AEDC, the said Petition
also suffers from procedural defects.
AEDC revived its hope to acquire the NAIA IPT III Project when this Court
promulgated its Decision in Agan on 5 May 2003. The said Decision became final and
executory on 17 February 2004 upon the denial by this Court of the Motion for Leave to File
Second Motion for Reconsideration submitted by PIATCO. It is this Decision that declared the
award of the NAIA IPT III Project to PIATCO as null and void; without the same, then the
award of the NAIA IPT III Project to PIATCO would still subsist and other persons would
remain precluded from acquiring rights thereto, including AEDC. Irrefutably, the present claim
of AEDC is rooted in the Decision of this Court in Agan. However, AEDC filed the Petition at
bar only 20 months after the promulgation of the Decision in Agan on 5 May 2003.
It must be emphasized that under Sections 2 and 3, Rule 65 of the revised Rules of
Civil Procedure, petitions for prohibition and mandamus, such as in the instant case, can only
be resorted to when there is no other plain, speedy and adequate remedy for the party in the
ordinary course of law.
In Cruz v. Court of Appeals,[41] this Court elucidates that
Although Rule 65 does not specify any period for the filing of a petition for
certiorari and mandamus, it must, nevertheless, be filed within a
reasonable time. In certiorari cases, the definitive rule now is that such
reasonable time is within three months from the commission of the
complained act. The same rule should apply to mandamus cases.
 The unreasonable delay in the filing of the In Agan,[43] it was noted that on 16 April 1997, the AEDC instituted before the RTC
petitioner's mandamus suit unerringly negates any claim that the
application for the said extraordinary remedy was the most expeditious and of Pasig City Civil Case No. 66213, a Petition for the Declaration of Nullity of the
speedy available to the petitioner. (Emphasis ours.)
Proceedings, Mandamus and Injunction, against the DOTC Secretary and the PBAC

Chairman and members.

As the revised Rules now stand, a petition for certiorari may be filed within 60 days

from notice of the judgment, order or resolution sought to be assailed. [42] Reasonable time for
In Civil Case No. 66213, AEDC prayed for:
filing a petition for mandamusshould likewise be for the same period. The filing by the AEDC
i) the nullification of the proceedings before the DOTC-PBAC, including its
of its petition for mandamus 20 months after its supposed right to the project arose is evidently
decision to qualify Paircargo Consortium and to deny Petitioner
beyond reasonable time and negates any claim that the said petition for the extraordinary writ AEDCs access to Paircargo Consortiums technical and financial
bid documents;
was the most expeditious and speedy remedy available to AEDC.
ii) the protection of Petitioner AEDCs right to match considering the void
challenge bid of the Paircargo Consortium and the denial by
DOTC-PBAC of access to information vital to the effective
AEDC contends that the reasonable time within which it should have filed its petition exercise of its right to match;

should be reckoned only from 21 September 2005, the date when AEDC received the letter iii) the declaration of the absence of any other qualified proponent
submitting a competitive bid in an unsolicited proposal.[44]
from the Office of the Solicitor General refusing to recognize the rights of AEDC to provide

the available funds for the completion of the NAIA IPT III Project and to reimburse the costs
Despite the pendency of Civil Case No. 66213, the DOTC issued the notice of award
of the structures already built by PIATCO. It has been unmistakable that even long before
for the NAIA IPT III Project to PIATCO on 9 July 1997. The DOTC and PIATCO also executed
said letter especially when the Government instituted with the RTC of Pasay City
on 12 July 1997 the 1997 Concession Agreement. AEDC then alleges that:
expropriation proceedings for the NAIA IPT III on 21 December 2004 that the Government

would not recognize any right that AEDC purportedly had over the NAIA IPT III Project and
k) On September 3, 1998, then Pres. Joseph Ejercito Estrada convened a
meeting with the members of the Board of Petitioner AEDC to convey his
that the Government is intent on taking over and operating the NAIA IPT III itself.
desire for the dismissal of the mandamus case filed by Petition AEDC and
in fact urged AEDC to immediately withdraw said case.

Another strong argument against the AEDCs Petition is that it is already barred l) The Presidents direct intervention in the disposition of this mandamus
case was a clear imposition that Petitioner AEDC had not choice but to
by res judicata. accept. To do otherwise was to take a confrontational stance against the
most powerful man in the country then under the risk of catching his ire,
which could have led to untold consequences upon the business interests
of the stakeholders in AEDC. Thus, Petitioner AEDC was constrained to
 agree to the signing of a Joint Motion to Dismiss and to the filing of the all liabilities, direct or indirect, whether criminal or civil, which arose in
same in court. connection with the instant case.

m) Unbeknownst to AEDC at that time was that simultaneous with the 4. The parties agree to bear the costs, attorneys fees and other
signing of the July 12, 1997 Concession Agreement, the DOTC and expenses they respectively incurred in connection with the instant
PIATCO executed a secret side agreement grossly prejudicial and case. (Emphasis ours.)
detrimental to the interest of Government. It stipulated that in the event that
the Civil Case filed by AEDC on April 16, 1997 is not resolved in a manner
favorable to the Government, PIATCO shall be entitled to full
reimbursement for all costs and expenses it incurred in order to obtain the AEDC, however, invokes the purported pressure exerted upon it by then President
NAIA IPT III BOT project in an amount not less than One Hundred Eighty
Million Pesos (Php 180,000,000.00). This was apparently the reason why Joseph E. Estrada, the alleged fraud committed by the DOTC, and paragraph 2 in the afore-
the President was determined to have AEDCs case dismissed immediately.
quoted Joint Motion to Dismiss to justify the non-application of the doctrine of res judicata to
n) On February 9, 1999, after the Amended and Restated Concession
Agreement (hereinafter referred to as ARCA) was signed without Petitioner its present Petition.
AEDCs knowledge, Petitioner AEDC signed a Joint Motion to Dismiss upon
the representation of the DOTC that it would provide AEDC with a copy of
the 1997 Concession Agreement. x x x.[45] The elements of res judicata, in its concept as a bar by former judgment, are as

follows: (1) the former judgment or order must be final; (2) it must be a judgment or order on

On 30 April 1999, the RTC of Pasig City issued an Order dismissing with the merits, that is, it was rendered after a consideration of the evidence or stipulations

prejudice Civil Case No. 66213 upon the execution by the parties of a Joint Motion to submitted by the parties at the trial of the case; (3) it must have been rendered by a court

Dismiss. According to the Joint Motion to Dismiss having jurisdiction over the subject matter and the parties; and (4) there must be, between

the first and second actions, identity of parties, of subject matter and of cause of action. [46] All
The parties, assisted by their respective counsel, respectfully
state: of the elements are present herein so as to bar the present Petition.

1. Philippine International Air Terminals Company, Inc. (PIATCO)

and the respondents have submitted to petitioner, through the Office of the
Executive Secretary, Malacaang, a copy of the Concession Agreement First, the Order of the RTC of Pasig City, dismissing Civil Case No. 66213, was
which they executed for the construction and operation of the Ninoy Aquino
International Airport International Passenger Terminal III Project (NAIA IPT issued on 30 April 1999. The Joint Motion to Dismiss, deemed a compromise agreement,
III Project), which petitioner requested.
once approved by the court is immediately executory and not appealable. [47]
2. Consequently, the parties have decided to amicably
settle the instant case and jointly move for the dismissal thereof without
any of the parties admitting liability or conceding to the position taken by Second, the Order of the RTC of Pasig City dismissing Civil Case No. 66213
the other in the instant case.
pursuant to the Joint Motion to Dismiss filed by the parties constitutes a judgment on the
3. Petitioner, on the other hand, and the respondents, on the other
hand, hereby release and forever discharge each other from any and merits.
 criminal or civil, arising from the case, after AEDC was furnished with a copy of the 1997

The Joint Motion to Dismiss stated that the parties were willing to settle the case Concession Agreement between the DOTC and PIATCO. This complete waiver was the

amicably and, consequently, moved for the dismissal thereof. It also contained a provision in reciprocal concession of the parties that puts to an end the present litigation, without any

which the parties the AEDC, on one hand, and the DOTC Secretary and PBAC, on the other residual right in the parties to litigate the same in the future. Logically also, there was no more

released and forever discharged each other from any and all liabilities, whether criminal or need for the parties to admit to any liability considering that they already agreed to absolutely

civil, arising in connection with the case. It is undisputable that the parties entered into a discharge each other therefrom, without necessarily conceding to the others position. For

compromise agreement, defined as a contract whereby the parties, by making reciprocal AEDC, it was a declaration that even if it was not conceding to the Governments position, it

concessions, avoid a litigation or put an end to one already commenced. [48] Essentially, it is was nonetheless waiving any legal entitlement it might have to sue the Government on

a contract perfected by mere consent, the latter being manifested by the meeting of the offer account of the NAIA IPT III Project. Conversely, for the Government, it was an avowal that

and the acceptance upon the thing and the cause which are to constitute the contract. Once even if it was not accepting AEDCs stance, it was all the same relinquishing its right to file

an agreement is stamped with judicial approval, it becomes more than a mere contract binding any suit against AEDC in connection with the same project. That none of the parties admitted

upon the parties; having the sanction of the court and entered as its determination of the liability or conceded its position is without bearing on the validity or binding effect of the

controversy, it has the force and effect of any other judgment. [49] Article 2037 of the Civil Code compromise agreement, considering that these were not essential to the said compromise.

explicitly provides that a compromise has upon the parties the effect and authority of res

judicata. Third, there is no question as to the jurisdiction of the RTC of Pasig City over the

subject matter and parties in Civil Case No. 66213. The RTC can exercise original jurisdiction

Because of the compromise agreement among the parties, there was accordingly a over cases involving the issuance of writs of certiorari, prohibition, mandamus, quo

judicial settlement of the controversy, and the Order, dated 30 April 1999, of the RTC of Pasig warranto, habeas corpus and injunction.[51] To recall, the Petition of AEDC before the RTC of

City was no less a judgment on the merits which may be annulled only upon the ground of Pasig City was for the declaration of nullity of proceedings, mandamus and injunction. The

extrinsic fraud.[50] Thus, the RTC of Pasig City, in the same Order, correctly granted the RTC of Pasig City likewise had jurisdiction over the parties, with the voluntary submission by

dismissal of Civil Case No. 66213 with prejudice. AEDC and proper service of summons on the DOTC Secretary and the PBAC Chairman and

members.

A scrutiny of the Joint Motion to Dismiss submitted to the RTC of Pasig City would

reveal that the parties agreed to discharge one another from any and all liabilities, whether
 Lastly, there is, between Civil Case No. 66213 before the RTC of Pasig City and the
Petition now pending before this Court, an identity of parties, of subject matter, and of causes
of action.
There is an identity of parties. In both petitions, the AEDC is the petitioner. The
respondents in Civil Case No. 66213 are the DOTC Secretary and the PBAC Chairman and
members. The respondents in the instant Petition are the DOTC, the DOTC Secretary, and
the Manila International Airport Authority (MIAA). While it may be conceded that MIAA was
not a respondent and did not participate in Civil Case No. 66213, it may be considered a
successor-in-interest of the PBAC. When Civil Case No. 66213 was initiated, PBAC was then
in charge of the NAIA IPT III Project, and had the authority to evaluate the bids and award
the project to the one offering the lowest or most advantageous bid. Since the bidding is
already over, and the structures comprising NAIA IPT III are now built, then MIAA has taken
charge thereof. Furthermore, it is clear that it has been the intention of the AEDC to name as
respondents in their two Petitions the government agency/ies and official/s who, at the
moment each Petition was filed, had authority over the NAIA IPT III Project.
There is an identity of subject matter because the two Petitions involve none other
than the award and implementation of the NAIA IPT III Project.
There is an identity of cause of action because, in both Petitions, AEDC is asserting
the violation of its right to the award of the NAIA IPT III Project as the original proponent in
the absence of any other qualified bidders. As early as in Civil Case No. 66213, AEDC already
sought a declaration by the court of the absence of any other qualified proponent submitting
a competitive bid for the NAIA IPT III Project, which, ultimately, would result in the award of
the said project to it.
AEDC attempts to evade the effects of its compromise agreement by alleging that it
was compelled to enter into such an agreement when former President Joseph E. Estrada
asserted his influence and intervened in Civil Case No. 66213. This allegation deserves scant
consideration. Without any proof that such events did take place, such statements remain
mere allegations that cannot be given weight. One who alleges any defect or the lack of a
valid consent to a contract must establish the same by full, clear and convincing evidence,
not merely by preponderance thereof.[52] And, even assuming arguendo, that the consent of
AEDC to the compromise agreement was indeed vitiated, then President Estrada was
removed from office in January 2001. AEDC filed the present Petition only on 20 October
2005. The four-year prescriptive period, within which an action to annul a voidable contract
may be brought, had already expired.[53]
The AEDC further claims that the DOTC committed fraud when, without AEDCs
knowledge, the DOTC entered into an Amended and Restated Concession Agreement
(ARCA) with PIATCO. The fraud on the part of the DOTC purportedly also vitiated AEDCs
consent to the compromise agreement. It is true that a judicial compromise may be set aside
if fraud vitiated the consent of a party thereof; and that the extrinsic fraud, which nullifies a
compromise, likewise invalidates the decision approving it. [54] However, once again, AEDCs
allegations of fraud are unsubstantiated. There is no proof that the DOTC and PIATCO
willfully and deliberately suppressed and kept the information on the execution of the ARCA
from AEDC. The burden of proving that there indeed was fraud lies with the party making
such allegation. Each party must prove his own affirmative allegations. The burden of proof
lies on the party who would be defeated if no evidence were given on either side. In this

jurisdiction, fraud is never presumed.[55]

It is also irrelevant to the legal position of AEDC that the Government asserted

in Agan that the award of the NAIA IPT III Project to PIATCO was void. That the Government
Moreover, a judicial compromise may be rescinded or set aside on the ground of
eventually took such a position, which this Court subsequently upheld, does not affect AEDCs
fraud in accordance with Rule 38 of the Rules on Civil Procedure on petition for relief from

judgment. Section 3 thereof prescribes the periods within which the petition for relief must be commitments and obligations under its judicially-approved compromise agreement in Civil

filed: Case No. 66213, which AEDC signed willingly, knowingly, and ably assisted by legal counsel.
SEC. 3. Time for filing petition; contents and verification. A
petition provided for in either of the preceding sections of this Rule must
be verified, filed within sixty (60) days after the petitioner learns of the
judgment, final order or other proceeding to be set aside, and not more In addition, it cannot be said that there has been a fundamental change in the
than six (6) months after such judgment or final order was entered, or
such proceeding was taken, and must be accompanied with affidavits Governments position since Civil Case No. 66213, contrary to the allegation of AEDC. The
showing the fraud, accident, mistake or excusable negligence relied upon,
and the facts constituting the petitioners good and substantial cause of Government then espoused that AEDC is not entitled to the award of the NAIA IPT III
action or defense, as the case may be.
Project. The Government still maintains the exact same position presently. That the

Government eventually reversed its position on the validity of its award of the project to
According to this Courts ruling in Argana v. Republic,[56] as applied to a judgment

based on compromise, both the 60-day and six-month reglementary periods within which to PIATCO is not inconsistent with its position that neither should AEDC be awarded the project.

file a petition for relief should be reckoned from the date when the decision approving the

compromise agreement was rendered because such judgment is considered immediately For the foregoing substantive and procedural reasons, the instant Petition of AEDC
executory and entered on the date that it was approved by the court. In the present case, the
should be dismissed.
Order of the RTC of Pasig City granting the Joint Motion to Dismiss filed by the parties in Civil

Case No. 66213 was issued on 30 April 1999, yet AEDC only spoke of the alleged fraud which Republic of the Philippines v. Court
of Appeals and Baterina (G.R. No.
vitiated its consent thereto in its Petition before this Court filed on 20 October 2005, more than
174166)
six years later.

As mentioned in Gingoyon, expropriation proceedings for the NAIA IPT III was
It is obvious that the assertion by AEDC of its vitiated consent to the Joint Motion to
instituted by the Government with the RTC of Pasay City, docketed as Case No. 04-
Dismiss Civil Case No. 66213 is nothing more than an after-thought and a desperate attempt
0876CFM. Congressman Baterina, together with other members of the House of
to escape the legal implications thereof, including the barring of its present Petition on the
Representatives, sought intervention in Case No. 04-0876CFM by filing a Petition for
ground of res judicata.
Prohibition in Intervention (with Application for Temporary Restraining Order and Writ of
Preliminary Injunction). Baterina, et al. believe that the Government need not file
expropriation proceedings to gain possession of NAIA IPT III and that PIATCO is not entitled
to payment of just compensation, arguing thus
A) Respondent PIATCO does not own Terminal III because BOT
Contracts do not vest ownership in PIATCO. As such, neither PIATCO nor
FRAPORT are entitled to compensation.
B) Articles 448, ET SEQ., of the New Civil Code, as regards
builders in good faith/bad faith, do not apply to PIATCOs Construction of
Terminal III.
C) Article 1412(2) of the New Civil Code allows the Government
to demand the return of what it has given without any obligation to comply
with its promise.
D) The payment of compensation to PIATCO is unconstitutional,
violative of the Build-Operate-Transfer Law, and violates the Civil Code and
other laws. [57]
On 27 October 2005, the RTC of Pasay City issued an Order admitting the Petition
in Intervention of Baterina, et al., as well as the Complaint in Intervention of Manuel L. Fortes,
Jr. and the Answer in Intervention of Gina B. Alnas, et al. The Republic sought
reconsideration of the 27 October 2005 Order of the RTC of Pasay City, which, in an Omnibus
Order dated 13 December 2005, was denied by the RTC of Pasay City as regards the
intervention of Baterina, et al. and Fortes, but granted as to the intervention of Alnas, et al. On
22 March 2006, Baterina, et al. filed with the RTC of Pasay City a Motion to Declare in Default
and/or Motion for Summary Judgment considering that the Republic and PIATCO failed to file
an answer or any responsive pleading to their Petition for Prohibition in Intervention.
In the meantime, on 19 December 2005, the Courts Decision in Gingoyon was
promulgated. Baterina also filed a Motion for Intervention in said case and sought
reconsideration of the Decision therein. However, his Motion for Intervention was denied by
this Court in a Resolution dated 1 February 2006.
On 27 March 2006, the RTC of Pasay City issued an Order and Writ of Execution,
the dispositive portion of which reads
WHEREFORE, let a writ of execution be issued in this case
directing the Sheriff of this court to immediately implement the Order dated
January 4, 2005 and January 10, 2005, as affirmed by the Decision of the
Supreme Court in G.R. No. 166429 in the above-entitled case dated
December 19, 2005, in the following manner:
1. Ordering the General Manager, the Senior Assistant General
Manager and the Vice President of Finance of the Manila International
Airport Authority (MIAA) to immediately withdraw the amount
of P3,002,125,000.00 from the above-mentioned Certificates of US Dollar
Time Deposits with the Land Bank of the Philippines, Baclaran Branch;
2. Ordering the Branch Manager, Land Bank of the Philippines,
Baclaran Branch to immediately release the sum of P3,002,125,000.00 to
PIATCO;
Return of Service of the Writs shall be made by the Sheriff of this
court immediately thereafter;[58]
The RTC of Pasay City, in an Order, dated 15 June 2006, denied the Motions for
Reconsideration of its Order and Writ of Execution filed by the Government and
Fortes. Baterina, meanwhile, went before the Court of Appeals via a Petition
for Certiorari and Prohibition (With Urgent Prayer for the Issuance of a Temporary Restraining the trial court; or it is clarified that PIATCO categorically disputes the proferred value for NAIA

Order and Writ of Preliminary Injunction), docketed as CA-G.R. No. 95539, assailing the Terminal 3. The TRO was to be effective for 30 days. Two days later, on 26 August 2006, the

issuance, in grave abuse of discretion, by the RTC of Pasay City of its Orders dated 27 March Republic filed with the Court of Appeals an Urgent Motion to Lift Temporary Restraining Order,

2006 and 15 June 2006 and Writ of Execution dated 27 March 2006. which the appellate court scheduled for hearing on 5 September 2006.

During the pendency of CA-G.R. No. 95539 with the Court of Appeals, the RTC of While the Urgent Motion to lift the TRO was still pending with the Court of Appeals,

Pasay City issued an Order, dated 7 August 2006, denying the Urgent Manifestation and the Republic already filed the present Petition for Certiorari and Prohibition With Urgent

Motion filed by the Republic in which it relayed willingness to comply with the Order and Writ Application for a Temporary Restraining Order and/or Writ of Preliminary Injunction, attributing

of Execution dated 27 March 2006, provided that the trial court shall issue an Order expressly to the Court of Appeals grave abuse of discretion in granting the TRO and seeking a writ of

authorizing the Republic to award concessions and lease portions of the NAIA IPT III to prohibition against the Court of Appeals to enjoin it from giving due course to Baterinas

potential users. The following day, on 8 August 2006, the RTC of Pasay City issued an Order Petition in CA-G.R. No. 95539. The Republic thus raises before this Court the following

denying the intervention of Baterina, et al. and Fortes in Case No. 04-0876CFM. In a third arguments:

Order, dated 9 August 2006, the RTC of Pasay City directed PIATCO to receive the amount
I
of P3,002,125,000.00 from the Land Bank of the Philippines, Baclaran Branch.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO AN EXCESS OR LACK OF
JURISDICTION WHEN IT GRANTED THE TEMPORARY RESTRAINING
By 24 August 2006, the Republic was all set to comply with the 9 August 2006 Order ORDER.
of the RTC of Pasay City. Hence, the representatives of the Republic and PIATCO met before A. THIS HONORABLE COURTS DECISION IN
GINGOYON CONSTITUTES THE LAW OF THE CASE.
the RTC of Pasay City for the supposed payment by the former to the latter of the proferred

amount. However, on the same day, the Court of Appeals, in CA G.R. No. 95539, issued a B. THE TRO IS IN DIRECT CONTRAVENTION OF
THIS COURTS DECISION WICH HAD ATTAINED
Temporary Restraining Order (TRO) enjoining, among other things, the RTC of Pasay City FINALITY.

from implementing the questioned Orders, dated 27 March 2006 and 15 June 2006, or from II

otherwise causing payment and from further proceeding with the determination of just THE REPUBLIC IS SUFFERING IRREPARABLE DAMAGE.

compensation in the expropriation case involved herein, until such time that petitioners motion III

to declare in default and motion for partial summary judgment shall have been resolved by
THE COURT OF APPEALS MUST BE PROHIBITED FROM GIVING DUE
COURSE TO A PETITION THAT IS DEFECTIVE IN FORM AND (c) CA-G.R. SP No. 95539 be ORDERED DISMISSED.
SUBSTANCE.
Other just and equitable reliefs are likewise prayed for.[60]
A. PRIVATE RESPONDENT HAS NO LEGAL
STANDING.

1. THIS HONORABLE COURT HAS RULED On 4 September 2006, the Republic filed a Manifestation and Motion to Withdraw
THAT PRIVATE RESPONDENT HAS NO
LEGAL STANDING. Urgent Motion to Lift Temporary Restraining Order with the Court of Appeals stating, among

2. PRIVATE RESPONDENT HAS LOST HIS other things, that it had decided to withdraw the said Motion as it had opted to avail of other
STANDING AS AN INTERVENOR.
options and remedies. Despite the Motion to Withdraw filed by the Government, the Court of
B. PRIVATE RESPONDENT FAILED TO
Appeals issued a Resolution, dated 8 September 2006, lifting the TRO it issued, on the basis
DEMONSTRATE THAT HE IS ENTITLED TO THE
INJUNCTIVE RELIEFS PRAYED FOR. of the following

C. THE BOND POSTED IS INSUFFICIENT.

IV
GRANTING ARGUENDO THAT PRIVATE RESPONDENTS PETITION IS
SUFFICIENT IN FORM AND SUBSTANCE, THE SAME HAS BECOME
MOOT AND ACADEMIC.
A. THE MOTION TO DECLARE IN DEFAULT AND/OR
MOTION FOR PARTIAL SUMMARY JUDGMENT HAS
ALREADY BEEN RESOLVED.
B. PIATCO HAS CATEGORICALLY DISPUTED THE
PROFFERED VALUE FOR NAIA TERMINAL III.[59]
In view of the pronouncement of the Supreme Court in the
Gingoyon case upholding the right of PIATCO to be paid the proferred
value in the amount of P3,002,125,000.00 prior to the implementation of
the writ of possession issued by the trial court on December 21, 2004 over
the NAIA Passenger Terminal III, and directing the determination of just
compensation, there is no practical and logical reason to maintain the
effects of the Temporary Restraining Order contained in our Resolution
dated August 24, 2006. Thus, We cannot continue restraining what has
been mandated in a final and executory decision of the Supreme Court.
WHEREFORE, Our Resolution dated 24 August 2006 be SET
ASIDE. Consequently, the Motion to Withdraw the Motion to Lift the
Temporary Restraining Order is rendered moot and academic.[61]

The Republic prays of this Court that: There being no more legal impediment, the Republic tendered on 11 September

2006 Land Bank check in the amount of P3,002,125,000.00 representing the proferred value
(a) Pending the determination of the merits of this petition, a
temporary restraining order and/or a writ of preliminary injunction be of NAIA IPT III, which was received by a duly authorized representative of PIATCO.
ISSUED restraining the Court of Appeals from implementing the writ of
preliminary injunction in CA-G.R. SP No. 95539 and proceeding in said
case such as hearing it on September 5, 2006. After both parties have been
heard, the preliminary injunction be MADE PERMANENT; On 27 December 2006, the Court of Appeals rendered a Decision in CA G.R. No.

(b) The Resolution date 24 August 2006 of the Court of Appeals 95539 dismissing Baterinas Petition.
be SET ASIDE; and
 [F]. In the alternative, to:

i. SET ASIDE the trial courts Order dated 08 August

The latest developments before the Court of Appeals and the RTC of Pasay City 2006 denying Private Respondents motion for
intervention in the expropriation case, and
render the present Petition of the Republic moot.
ii. Should this Honorable Court lend credence to the
argument of the Solicitor General in its Comment dated
20 April 2006 that there are issues as to material fact that
Nonetheless, Baterina, as the private respondent in the instant Petition, presented his own
require presentation of evidence, to REMAND the
prayer that a judgment be rendered as follows: resolution of the legal issues raised by Private
Respondent to the trial court consistent with this
Honorable Courts holding in the Gingoyon
A. For this Honorable Court, in the exercise of its judicial discretion Resolution that the interests of the movants-in-
to relax procedural rules consistent with Metropolitan Traffic Command v. intervention [meaning Takenaka, Asahikosan, and
Gonong and deem that justice would be better served if all legal herein Private Respondent] may be duly litigated in
issues involved in the expropriation case and in Baterina are resolved in proceedings which are extant before the lower
this case once and for all, to DECLARE that: courts.[62]

i. TERMINAL 3, as a matter of law, is public property

and thus not a proper object of eminent domain
proceedings; and In essence, Baterina is opposing the expropriation proceedings on the ground that

ii. PIATCO, as a matter of law, is merely the builder of NAIA IPT III is already public property. Hence, PIATCO is not entitled to just compensation
TERMINAL 3 and, as such, it may file a claim for
for NAIA IPT III. He is asking the Court to make a definitive ruling on this matter considering
recovery on quantum meruit with the Commission on
Audi[t] for determination of the amount thereof, if any.
that it was not settled in either Agan or Gingoyon.
B. To DIRECT the Regional Trial Court of Pasay City, Branch
117 to dismiss the expropriation case;
We disagree. Contrary to Baterinas stance, PIATCOs entitlement to just and
C. To DISMISS the instant Petition and DENY The Republics
application for TRO and/or writ of preliminary injunction for lack of merit; equitable consideration for its construction of NAIA IPT III and the propriety of the Republics

D. To DECLARE that the P3 Billion (representing the proferred resort to expropriation proceedings were already recognized and upheld by this Court
value of TERMINAL 3) paid to PIATCO on 11 September 2006 as funds
held in trust by PIATCO for the benefit of the Republic and subject to the in Agan and Gingoyon.
outcome of the proceedings for the determination of recovery on quantum
meruit due to PIATCO, if any.

E. To DIRECT the Solicitor General to disclose the evidence it The Courts Decisions in both Agan and Gingoyon had attained finality, the former
has gathered on corruption, bribery, fraud, bad faith, etc., to this Honorable
on 17 February 2004 and the latter on 17 March 2006.
Court and the Commission on Audit, and to DECLARE such evidence to
be admissible in any proceeding for the determination of any compensation
due to PIATCO, if any.
 This Court already made an unequivocal pronouncement in its Resolution dated 21
January 2004 in Agan that for the Government of the Republic to take over the NAIA IPT III
facility, it has to compensate PIATCO as a builder of the structures; and that [t]he
compensation must be just and in accordance with law and equity for the government cannot
unjustly enrich itself at the expense of PIATCO and its investors. [63] As between the Republic
and PIATCO, the judgment on the need to compensate PIATCO before the Government may
take over NAIA IPT III is already conclusive and beyond question.
Hence, in Gingoyon, this Court declared that:
This pronouncement contains the fundamental premises which
permeate this decision of the Court. Indeed, Agan, final and executory as
it is, stands as governing law in this case, and any disposition of the present
petition must conform to the conditions laid down by the Court in its
2004 Resolution.
xxxx
The pronouncement in the 2004 Resolution is especially
significant to this case in two aspects, namely: (i) that PIATCO must
receive payment of just compensation determined in accordance with
law and equity; and (ii) that the government is barred from taking over
NAIA 3 until such just compensation is paid. The parties cannot be
allowed to evade the directives laid down by this Court through any mode
of judicial action, such as the complaint for eminent domain.
It cannot be denied though that the Court in the 2004 Resolution
prescribed mandatory guidelines which the Government must observe
before it could acquire the NAIA 3 facilities. Thus, the actions of respondent
judge under review, as well as the arguments of the parties must, to merit
affirmation, pass the threshold test of whether such propositions are in
accord with the 2004 Resolution.[64]
The Court then, in Gingoyon, directly addressed the issue on the appropriateness of
the Republics resort to expropriation proceedings:
The Government has chosen to resort to expropriation, a
remedy available under the law, which has the added benefit of an
integrated process for the determination of just compensation and the
payment thereof to PIATCO.We appreciate that the case at bar is
a highly unusual case, whereby the Government seeks to expropriate a
building complex constructed on land which the State already owns. There
is an inherent illogic in the resort to eminent domain on property already
owned by the State. At first blush, since the State already owns the property
on which NAIA 3 stands, the proper remedy should be akin to an action for
ejectment.
However, the reason for the resort by the Government to
expropriation proceedings is understandable in this case. The 2004
Resolution, in requiring the payment of just compensation prior to the
takeover by the Government of NAIA 3, effectively precluded it from
acquiring possession or ownership of the NAIA 3 through the unilateral
exercise of its rights as the owner of the ground on which the facilities stood.
Thus, as things stood after the 2004 Resolution, the right of the
Government to take over the NAIA 3 terminal was preconditioned by lawful
order on the payment of just compensation to PIATCO as builder of the
structures.
xxxx
The right of eminent domain extends to personal and real
property, and the NAIA 3 structures, adhered as they are to the soil, are
considered as real property. The public purpose for the expropriation is also
beyond dispute. It should also be noted that Section 1 of Rule 67 (on
Expropriation) recognizes the possibility that the property
sought to be expropriated may be titled in the name of the Republic
of the Philippines, although occupied by private individuals, and in
such case an averment to that effect should be made in the complaint. The
instant expropriation complaint did aver that the NAIA 3 complex stands on
 a parcel of land owned by the Bases Conversion Development Authority,
another agency of [the Republic of the Philippines].
Admittedly, eminent domain is not the sole judicial recourse by
which the Government may have acquired the NAIA 3 facilities while
satisfying the requisites in the 2004 Resolution. Eminent domain though
may be the most effective, as well as the speediest means by which
such goals may be accomplished. Not only does it enable immediate
possession after satisfaction of the requisites under the law, it also has a
built-in procedure through which just compensation may be ascertained.
Thus, there should be no question as to the propriety of eminent domain
proceedings in this case.
Still, in applying the laws and rules on expropriation in the case at
bar, we are impelled to apply or construe these rules in accordance with
the Courts prescriptions in the 2004 Resolution to achieve the end effect
that the Government may validly take over the NAIA 3 facilities. Insofar as
this case is concerned, the 2004 Resolution is effective not only as a legal
precedent, but as the source of rights and prescriptions that must be
guaranteed, if not enforced, in the resolution of this petition. Otherwise, the
integrity and efficacy of the rulings of this Court will be severely
diminished.[65] (Emphasis ours.)
The Court, also in Gingoyon, categorically recognized PIATCOs ownership over the
structures it had built in NAIA IPT III, to wit:
There can be no doubt that PIATCO has ownership rights
over the facilities which it had financed and constructed. The 2004
Resolution squarely recognized that right when it mandated the payment
of just compensation to PIATCO prior to the takeover by the Government
of NAIA 3. The fact that the Government resorted to eminent domain
proceedings in the first place is a concession on its part of PIATCOs
ownership. Indeed, if no such right is recognized, then there should be no
impediment for the Government to seize control of NAIA 3 through ordinary
ejectment proceedings.
xxxx
Thus, the property subject of expropriation, the NAIA 3
facilities, are real property owned by PIATCO. x x x (Emphasis ours.)[66]
It was further settled in Gingoyon that the expropriation proceedings shall be held
in accordance with Republic Act No. 8974,[67] thus:
Unlike in the case of Rule 67, the application of Rep. Act No. 8974 will not
contravene the 2004 Resolution, which requires the payment of just
compensation before any takeover of the NAIA 3 facilities by the
Government. The 2004 Resolution does not particularize the extent such
payment must be effected before the takeover, but it unquestionably
requires at least some degree of payment to the private property owner
before a writ of possession may issue. The utilization of Rep. Act No. 8974
guarantees compliance with this bare minimum requirement, as it assures
the private property owner the payment of, at the very least, the proffered
value of the property to be seized. Such payment of the proffered value to
the owner, followed by the issuance of the writ of possession in favor of the
Government, is precisely the schematic under Rep. Act No. 8974, one
which facially complies with the prescription laid down in the 2004
Resolution.
And finally, as to the determination of the amount due PIATCO, this Court ruled
in Gingoyon that:
Under Rep. Act No. 8974, the Government is required to
immediately pay the owner of the property the amount equivalent to the
sum of (1) one hundred percent (100%) of the value of the property based
on the current relevant zonal valuation of the [BIR]; and (2) the value of the
improvements and/or structures as determined under Section 7. As stated
above, the BIR zonal valuation cannot apply in this case, thus the amount
subject to immediate payment should be limited to the value of the subjected to judicial review using the standards enumerated under Section
improvements and/or structures as determined under Section 7, with 5 of Rep. Act No. 8974.[68]
Section 7 referring to the implementing rules and regulations for the
equitable valuation of the improvements and/or structures on the land.
Under the present implementing rules in place, the valuation of the
improvements/structures are to be based using the replacement cost
method. However, the replacement cost is only one of the factors to be
considered in determining the just compensation. Gingoyon constitutes as the law of the case for the expropriation proceedings,

docketed as Case No. 04-0876CFM, before the RTC of Pasay City. Law of the case has been

In addition to Rep. Act No. 8974, the defined in the following manner
2004 Resolution in Agan also mandated that the payment of just
compensation should be in accordance with equity as well. Thus, in
ascertaining the ultimate amount of just compensation, the duty of the trial By "law of the case" is meant that "whatever is once irrevocably established
court is to ensure that such amount conforms not only to the law, such as as the controlling legal rule or decision between the same parties in the
Rep. Act No. 8974, but to principles of equity as well. same case continues to be the law of the case" so long as the "facts on
which such decision was predicated continue to be the facts of the case
before the court" (21 C.J.S. 330). And once the decision becomes final, it
Admittedly, there is no way, at least for the present, to immediately is binding on all inferior courts and hence beyond their power and authority
ascertain the value of the improvements and structures since such to alter or modify (Kabigting vs. Acting Director of Prisons, G.R. L-15548,
valuation is a matter for factual determination. Yet Rep. Act No. 8974 October 30, 1962).[69]
permits an expedited means by which the Government can immediately
take possession of the property without having to await precise
determination of the valuation. Section 4(c) of Rep. Act No. 8974 states
A ruling rendered on the first appeal, constitutes the law of the case, and, even if erroneous,
that in case the completion of a government infrastructure project is of
utmost urgency and importance, and there is no existing valuation of the it may no longer be disturbed or modified since it has become final long ago. [70]
area concerned, the implementing agency shall immediately pay the
owner of the property its proferred value, taking into consideration the
standards prescribed in Section 5 [of the law]. The proffered value may
strike as a highly subjective standard based solely on the intuition of the
government, but Rep. Act No. 8974 does provide relevant standards by The extensive excerpts from Gingoyon demonstrate and emphasize that the Court
which proffered value should be based, as well as the certainty of judicial had already adjudged the issues raised by Baterina, which he either conveniently overlooked
determination of the propriety of the proffered value.
or stubbornly refused to accept.

In filing the complaint for expropriation, the Government alleged

to have deposited the amount of P3 Billion earmarked for expropriation,
representing the assessed value of the property. The making of the deposit, The general rule precluding the relitigation of material facts or questions which were
including the determination of the amount of the deposit, was undertaken
under the erroneous notion that Rule 67, and not Rep. Act No. 8974, is the in issue and adjudicated in former action are commonly applied to all matters essentially
applicable law. Still, as regards the amount, the Court sees no impediment connected with the subject matter of the litigation. Thus, it extends to questions necessarily
to recognize this sum of P3 Billion as the proffered value under Section 4(b)
of Rep. Act No. 8974. After all, in the initial determination of the proffered involved in an issue, and necessarily adjudicated, or necessarily implied in the final
value, the Government is not strictly required to adhere to any
judgment, although no specific finding may have been made in reference thereto, and
predetermined standards, although its proffered value may later be
although such matters were directly referred to in the pleadings and were not actually or WHEREFORE, in view of the foregoing:
formally presented. Under this rule, if the record of the former trial shows that the judgment

could not have been rendered without deciding the particular matter, it will be considered as
a. The Petition in G.R. No. 169914 is hereby DISMISSED for lack of merit; and
having settled that matter as to all future actions between the parties and if a judgment
necessarily presupposes certain premises, they are as conclusive as the judgment

itself. Reasons for the rule are that a judgment is an adjudication on all the matters which are b. The Petition in G.R. No. 174166 is hereby likewise DISMISSED for being moot

essential to support it, and that every proposition assumed or decided by the court leading up and academic.

to the final conclusion and upon which such conclusion is based is as effectually passed upon
No costs.
as the ultimate question which is finally solved.[71]

SO ORDERED.

Since the issues Baterina wishes to raise as an intervenor in Case No. 04-0876CFM
were already settled with finality in both Agan and Gingoyon, then there is no point in still

allowing his intervention. His Petition-in-Intervention would only be a relitigation of matters

that had been previously adjudicated by no less than the Highest Court of the land. And, in

no manner can the RTC of Pasay City in Case No. 04-0876CFM grant the reliefs he prayed

for without departing from or running afoul of the final and executory Decisions of this Court
in Agan and Gingoyon.

While it is true that when this Court, in a Resolution dated 1 February 2006,

dismissed the Motions for Intervention in Gingoyon, including that of Baterina, it also observed

that the interests of the movants-in-intervention may be duly litigated in proceedings which

are extant before the lower courts. This does not mean, however, that the said movants-in-

interest were assured of being allowed as intervenors or that the reliefs they sought as such

shall be granted by the trial courts. The fate of their intervention still rests on their interest or

legal standing in the case and the merits of their arguments.

 [G.R. No. 161135. April 8, 2005]
SWAGMAN HOTELS AND TRAVEL, INC., petitioner, vs. HON. COURT OF APPEALS,
and NEAL B. CHRISTIAN, respondents.
DECISION
DAVIDE, JR., C.J.:
May 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? This is the basic issue raised
in this petition for the Courts consideration.
Sometime in 1996 and 1997, 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 dated 7 August 1996, 14 March 1997, and 14 July 1997. 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.[1] In a letter dated 16 December 1998, 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.[2]
On 2 February 1999, private respondent Christian filed with the Regional Trial Court of
Baguio City, Branch 59, a complaint for a sum of money and damages against the petitioner
corporation, Hegerty, and Atty. Infante. The complaint alleged as follows: On 7 August 1996,
14 March 1997, and 14 July 1997, 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 attorneys fees; and the cost of the suit.[3]
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. In December 1997, 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 attorneys fees.[4]
In due course and after hearing, the trial court rendered a decision [5] on 5 May 2000
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 promissory notes dated 7
August 1996 and 14 March 1997, 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.
The trial court ratiocinated in this wise:
(1) There was no novation of defendants obligation to the plaintiff. Under Article 1292 of the
Civil Code, there is an implied novation only if the old and the new obligation be on every
point incompatible with one another.
The test of incompatibility between the two obligations or contracts, according to an
imminent author, is whether they can stand together, each one having an independent
existence. If they cannot, they are incompatible, and the subsequent obligation novates the
first (Tolentino, Civil Code of the Philippines, Vol. IV, 1991 ed., p. 384). Otherwise, the old
obligation will continue to subsist subject to the modifications agreed upon by the parties.
Thus, it has been written that accidental modifications in an existing obligation do not
extinguish it by novation. Mere modifications of the debt agreed upon between the parties
do not constitute novation. When the changes refer to secondary agreement and not to the
object or principal conditions of the contract, there is no novation; such changes will
produce modifications of incidental facts, but will not extinguish the original obligation. Thus,
the acceptance of partial payments or a partial remission does not involve novation (id., p.
387). Neither does the reduction of the amount of an obligation amount to a novation
because it only means a partial remission or condonation of the same debt.
In the instant case, the Court is of the view that the parties merely intended to change the
rate of interest from 15% per annum to 6% per annum when the defendant started paying
$750 per month which payments were all accepted by the plaintiff from January 1998
onward. The payment of the principal obligation, however, remains unaffected which means
that the defendant should still pay the plaintiff $50,000 on August 9, 1999, March 14, 2000
and July 14, 2000.
(2) 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.
(3) Individual defendants Rodney Hegerty and Atty. Leonor L. Infante can not be held
personally liable for the obligations contracted by the defendant corporation it being clear
that they merely acted in representation of the defendant corporation in their capacity as
General Manager and President, respectively, when they signed the promissory notes as
evidenced by Board Resolution No. 1(94) passed by the Board of Directors of the defendant
corporation (Exhibit 4).[6]
In its decision[7] of 5 September 2003, the Court of Appeals denied petitioners appeal
and affirmed in toto the decision of the trial court, holding as follows:
In the case at bench, there is no incompatibility because the changes referred to by
appellant Swagman consist only in the manner of payment. . . .
Appellant Swagmans interpretation that the three (3) promissory notes have been novated
by reason of appellee Christians acceptance of the monthly payments of US$750.00 as
capital repayments continuously even after the filing of the instant case is a little bit strained
considering the stiff requirements of the law on novation that the intention to novate must
appear by express agreement of the parties, or by their acts that are too clear and
unequivocal to be mistaken. Under the circumstances, the more reasonable interpretation of
the act of the appellee Christian in receiving the monthly payments of US$750.00 is that
appellee Christian merely allowed appellant Swagman to pay whatever amount the latter is
capable of. This interpretation is supported by the letter of demand dated December 16,
1998 wherein appellee Christian demanded from appellant Swagman to return the principal
loan in the amount of US$150,000 plus unpaid interest in the amount of US$13,500.00
...
Appellant Swagman, likewise, contends that, at the time of the filing of the complaint,
appellee Christian ha[d] no cause of action because none of the promissory notes was due
and demandable.
Again, We are not persuaded.
...
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 Christians 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 (Herrera, Remedial Law, Vol.
VII, 1997 ed., p. 108).[8]
Its motion for reconsideration having been denied by the Court of Appeals in its
Resolution of 4 December 2003,[9] the petitioner came to this Court raising the following
issues:
I. WHERE THE DECISION OF THE TRIAL COURT DROPPING TWO DEFENDANTS HAS
BECOME FINAL AND EXECUTORY, MAY THE RESPONDENT COURT OF APPEALS
STILL STUBBORNLY CONSIDER THEM AS APPELLANTS WHEN THEY DID NOT
APPEAL?
II. WHERE THERE IS NO CAUSE OF ACTION, IS THE DECISION OF THE LOWER
COURT VALID?
III. MAY THE RESPONDENT COURT OF APPEALS VALIDLY AFFIRM A DECISION OF
THE LOWER COURT WHICH IS INVALID DUE TO LACK OF CAUSE OF ACTION?
IV. WHERE THERE IS A VALID NOVATION, MAY THE ORIGINAL TERMS OF
CONTRACT WHICH HAS BEEN NOVATED STILL PREVAIL?[10]
The petitioner harps on the absence of a cause of action at the time the private
respondents complaint was filed with the trial court. In connection with this, the petitioner
raises the issue of novation by arguing that its obligations under the three promissory notes
were novated by the renegotiation that happened in December 1997 wherein the private
respondent agreed to waive the interest in each of the three promissory notes and to accept
US$750 per month as installment payment for the principal loans in the total amount of
US$150,000. Lastly, the petitioner questions the act of the Court of Appeals in considering
Hegerty and Infante as appellants when they no longer appealed because the trial court had
already absolved them of the liability of the petitioner corporation.
On the other hand, the private respondent asserts that this petition is a mere ploy to
continue delaying the payment of a just obligation. Anent the fact that Hegerty and Atty.
Infante were considered by the Court of Appeals as appellants, the private respondent finds
it immaterial because they are not affected by the assailed decision anyway.
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.[11]
 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.
It is undisputed that the three promissory notes were for the amount of P50,000 each
and uniformly provided for (1) a term of three years; (2) an interest of 15 % per annum,
payable quarterly; and (3) the repayment of the principal loans after three years from their
respective dates. However, both the Court of Appeals and the trial court found that a
renegotiation of the three promissory notes indeed happened in December 1997 between the
private respondent and the petitioner resulting in the reduction not waiver of the interest from
15% to 6% per annum, which from then on was payable monthly, instead of quarterly. The
term of the principal loans remained unchanged in that they were still due three years from
the respective dates of the promissory notes. Thus, at the time the complaint was filed with
the trial court on 2 February 1999, none of the three promissory notes was due yet; although,
two of the promissory notes with the due dates of 7 August 1999 and 14 March 2000 matured
during the pendency of the case with the trial court. Both courts also found that the petitioner
had been religiously paying the private respondent US$750 per month from January 1998
and even during the pendency of the case before the trial court and that the private
respondent had accepted all these monthly payments.
With these findings of facts, it has become glaringly obvious that 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, which reads:
Section 5. Amendment to conform to or authorize presentation of evidence. When issues
not raised by the pleadings are tried with the 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 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 with liberality if the
presentation of the merits of the action and the ends of substantial justice will be subserved
thereby. The court may grant a continuance to enable the amendment to be made.
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 dated 7 August 1996 and 14 March 1997, 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.[13] Thus, in Roces v. Jalandoni,[14] this
Court upheld the trial court in taking cognizance of an otherwise defective complaint which
was later cured by the testimony of the plaintiff during the trial. In that case, there was in fact
a cause of action and the only problem was the insufficiency of the allegations in the
complaint. This ruling was reiterated in Pascua v. Court of Appeals.[15]
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. [16]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.
As this Court eloquently said in Surigao Mine Exploration Co., Inc. v. Harris:[17]
It is a rule of law to which there is, perhaps, no exception, either at law or in equity, that to
recover at all there must be some cause of action at the commencement of the suit. As
observed by counsel for appellees, there are reasons of public policy why there should be
no needless haste in bringing up litigation, and why people who are in no default and
against whom there is yet no cause of action should not be summoned before the public
tribunals to answer complaints which are groundless. We say groundless because if the
action is immature, it should not be entertained, and an action prematurely brought is a
groundless suit.
It is true that an amended complaint and the answer thereto take the place of the originals
which are thereby regarded as abandoned (Reynes vs. Compaa General de Tabacos
[1912], 21 Phil. 416; Ruyman and Farris vs. Director of Lands [1916], 34 Phil., 428) and that
the complaint and answer having been superseded by the amended complaint and answer
thereto, and the answer to the original complaint not having been presented in evidence as
an exhibit, the trial court was not authorized to take it into account. (Bastida vs. Menzi & Co.
[1933], 58 Phil., 188.) But in none of these cases or in any other case have we held that if a
right of action did not exist when the original complaint was filed, one could be created by
filing an amended complaint. In some jurisdictions in the United States what was termed an
imperfect cause of action could be perfected by suitable amendment (Brown vs. Galena
Mining & Smelting Co., 32 Kan., 528; Hooper vs. City of Atlanta, 26 Ga. App., 221) and this
is virtually permitted in Banzon and Rosauro vs. Sellner ([1933], 58 Phil., 453); Asiatic
Potroleum [sic] Co. vs. Veloso ([1935], 62 Phil., 683); and recently in Ramos vs. Gibbon (38
Off. Gaz., 241). That, however, which is no cause of action whatsoever cannot by
amendment or supplemental pleading be converted into a cause of action: Nihil de re
accrescit ei qui nihil in re quando jus accresceret habet.
We are therefore of the opinion, and so hold, 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. (Emphasis ours).
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 on 7 August 1999 and 14 March 2000.
Anent the issue of novation, this Court observes that the petitioner corporation argues
the existence of novation based on its own version of what transpired during the renegotiation
of the three promissory notes in December 1997. By using its own version of facts, the
petitioner is, in a way, questioning the findings of facts of the trial court and the Court of
Appeals.
As a rule, the findings of fact of the trial court and the Court of Appeals are final and
conclusive and cannot be reviewed on appeal to the Supreme Court[18] as long as they are
borne out by the record or are based on substantial evidence. [19] The Supreme Court is not a
trier of facts, its jurisdiction being limited to reviewing only errors of law that may have been
committed by the lower courts. Among the exceptions is when the finding of fact of the trial
court or the Court of Appeals is not supported by the evidence on record or is based on a
misapprehension of facts. Such exception obtains in the present case. [20]
This Court finds to be contrary to the evidence on record the finding of both the trial
court and the Court of Appeals that the renegotiation in December 1997 resulted in the
reduction of the interest from 15% to 6% per annum and that the monthly payments of US$750
made by the petitioner were for the reduced interests.
It is worthy to note that the cash voucher dated January 1998 [21] states that the payment
of US$750 represents INVESTMENT PAYMENT. All the succeeding cash vouchers describe
the payments from February 1998 to September 1999 as CAPITAL REPAYMENT. [22] All
these cash vouchers served as receipts evidencing private respondents acknowledgment of
the payments made by the petitioner: two of which were signed by the private respondent
himself and all the others were signed by his representatives. The private respondent even
identified and confirmed the existence of these receipts during the hearing. [23] Significantly,
cognizant of these receipts, the private respondent applied these payments to the three
consolidated principal loans in the summary of payments he submitted to the court. [24]
Under Article 1253 of the Civil Code, if the debt produces interest, payment of the
principal shall not be deemed to have been made until the interest has been covered. In this
case, the private respondent would not have signed the receipts describing the payments
made by the petitioner as capital repayment if the obligation to pay the interest was still
subsisting. The receipts, as well as private respondents summary of payments, lend credence
to petitioners claim that the payments were for the principal loans and that the interests on
the three consolidated loans were waived by the private respondent during the undisputed
renegotiation of the loans on account of the business reverses suffered by the petitioner at
the time.
There was therefore a novation of the terms of the three promissory notes in that the
interest was waived and the principal was payable in monthly installments of US$750.
Alterations of the terms and conditions of the obligation would generally result only in
modificatory novation unless such terms and conditions are considered to be the essence of
the obligation itself.[25] The resulting novation in this case was, therefore, of the modificatory
type, not the extinctive type, since the obligation to pay a sum of money remains in force.
Thus, since the petitioner did not renege on its obligation to pay the monthly installments
conformably with their new agreement and even continued paying during the pendency of the
case, the private respondent had no cause of action to file the complaint. It is only upon
petitioners default in the payment of the monthly amortizations that a cause of action would
arise and give the private respondent a right to maintain an action against the petitioner.
Lastly, the petitioner contends that the Court of Appeals obstinately included its
President Infante and Vice-President Hegerty as appellants even if they did not appeal the
trial courts decision since they were found to be not personally liable for the obligation of the
petitioner. Indeed, the Court of Appeals erred in referring to them as defendants-appellants;
nevertheless, that error is no cause for alarm because its ruling was clear that the petitioner
corporation was the one solely liable for its obligation. In fact, the Court of Appeals
affirmed in toto the decision of the trial court, which means that it also upheld the latters ruling
that Hegerty and Infante were not personally liable for the pecuniary obligations of the
petitioner to the private respondent.
In sum, based on our disquisition on the lack of cause of action when the complaint for
sum of money and damages was filed by the private respondent, the petition in the case at
bar is impressed with merit.
WHEREFORE, the petition is hereby GRANTED. The Decision of 5 September 2003 of
the Court of Appeals in CA-G.R. CV No. 68109, which affirmed the Decision of 5 May 2000
of the Regional Trial Court of Baguio, Branch 59, granting in part private respondents
complaint for sum of money and damages, and its Resolution of 4 December 2003, which
denied petitioners motion for reconsideration are hereby REVERSED and SET ASIDE. The
complaint docketed as Civil Case No. 4282-R is hereby DISMISSED for lack of cause of
action.
No costs.
SO ORDERED.
ALPINE LENDING INVESTORS and/or ROGELIO L. ONG v. ESTRELLA CORPUZ (G.R.
No. 157107, November 24, 2006) Instead of filing an answer to respondents complaint, Alpine submitted to the RTC a motion

For our resolution is the instant petition for review on certiorari assailing the Order to dismiss on the ground that it is not a juridical person, hence, not a proper party in the case.

dated December 13, 2002 of the Regional Trial Court (RTC), Branch 121, Caloocan City in

Civil Case No. C-20124. In an Order dated September 2, 2002, the RTC denied Alpines motion to dismiss.

This case stemmed from a complaint for replevin filed with the said court by Estrella Corpuz, Alpine then filed a motion for reconsideration, but it was denied. The RTC then directed

respondent, against Alpine Lending Investors (Alpine), one of the petitioners herein, and respondent to file her amended complaint within ten (10) days.

Zenaida Lipata, docketed as Civil Case No. C-20124. The complaint alleges that Zenaida was

respondents former neighbor. Pretending to help respondent in securing a Garage Franchise However, respondent filed her Amended Complaint with an accompanying Motion to Admit

from the Land Transportation Office (LTO), Zenaida took from her the original registration Amended Complaint two (2) days late. Nonetheless, in an Order dated December 13, 2002,

papers of her vehicle, a Toyota Tamaraw FX with Plate No. UMR 660. Zenaida, using the RTC admitted the amended complaint.

respondents 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 On January 3, 2003, Alpine filed a Motion to Expunge respondents motion to admit amended

disappeared with the vehicle. Respondent then reported the incident to the LTO Muntinlupa complaint on the ground that the latter motion was not accompanied by a notice of hearing.

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 In her Comment on Alpines motion to expunge, respondent averred that her contested motion

signature. need not be accompanied by a notice of hearing as it is a non-litigated motion.

Forthwith, respondent informed Alpine about the spurious mortgage and demanded the On January 24, 2003, the RTC denied Alpines motion to expunge for lack of merit. Alpine

release of her vehicle. Alpine promised to comply with her request on condition that Zenaida moved for a reconsideration, but this was denied in an Order dated January 28, 2003.

should first be charged criminally.

Hence, this petition.

Respondent then caused the filing with

the Metropolitan Trial Court of Caloocan City complaints for falsification of private document The core issue here is whether the trial court erred in admitting respondents

and estafa against Zenaida. Eventually, a warrant of arrest was issued against amended complaint.

her. Respondent informed Alpine about these developments, but the latter still refused to turn

over the vehicle to her. The question is not novel.

 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.

As earlier mentioned, what petitioner Alpine filed in Civil Case No. C-20124 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.[1] As no responsive pleading had
been filed, respondent could amend her complaint in Civil Case No. C-20124 as a matter of

right. Following this Courts 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 courts 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.

WHEREFORE, the petition is DENIED. The challenged Order of the RTC, Branch

121, Caloocan City dated December 13, 2002, in Civil Case No. C-20124
is AFFIRMED. Costs against petitioners.

SO ORDERED.
MARIO SIASOCO, et al., vs. COURT OF APPEALS; HON. MARCELINO F. BAUTISTA,
JR., Presiding Judge, Branch 215, Regional Trial Court, Quezon City; and the
IGLESIA NI CRISTO[G.R. No. 132753. February 15, 1999]
DECISION
PANGANIBAN, J.:
Notwithstanding the filing of a responsive pleading by one defendant, the complaint may
still be amended once, as a matter of right, by the plaintiff in respect to claims against the
non-answering defendant(s). The Court also reiterates that certiorari is not the proper remedy
to contest a lower courts final adjudication, since appeal is available as a recourse.
Statement of the Case
Petitioners assail the February 25, 1998 Decision [1] of the Court of Appeals[2] in CA-GR
SP No. 45451, the dispositive portion of which reads:
WHEREFORE, [the] foregoing considered, the present petition for certiorari is hereby
DENIED for lack of merit. The Temporary Restraining Order issued by this Court on
December 17, 1997 is hereby lifted. Petitioners are given six (6) days from receipt of this
decision within which to file their answer. The motion for oral argument filed by respondent
is rendered moot. Respondent court is ordered to proceed and resolve the case with
deliberate speed.[3]
The foregoing disposition affirmed two Orders of the Regional Trial Court (RTC) of
Quezon City, Branch 215, dated August 11, 1997 and September 11, 1997 in Civil Case No.
Q-97-29960.[4] The first Order (1) admitted the Amended Complaint; (2) dropped Defendant
Carissa Homes Development and Properties, Inc. (hereafter referred to as Carissa) from the
Complaint; and (3) denied the Motion to Declare Defendants Siasoco et al. (herein
petitioners) in Default. The second Order denied the Motion for Suspension filed by
defendants and directed them to file their answer to plaintiffs Amended Complaint.
Undaunted, petitioners seek recourse in this Court.[5]
The Facts
Petitioners were the registered owners of nine parcels of land located in Montalban,
Rizal. In December 1994, they began to offer the subject properties for sale. Subsequently,
Iglesia ni Cristo (INC) negotiated with the petitioners, but the parties failed to agree on the
terms of the purchase. More than a year later, both parties revived their discussions. In a
letter dated December 16, 1996, petitioners made a final offer to the INC. The latters counsel
sent a reply received by Petitioner Mario Siasoco on December 24, 1996, stating that the offer
was accepted, but that the INC was not amenable to your proposal to an undervaluation of
the total consideration. In their letter dated January 8, 1997, petitioners claimed that the INC
had not really accepted the offer, adding that, prior to their receipt of the aforementioned reply
on December 24, 1996, they had already contracted with Carissa for the sale of the said
properties due to the absence of any response to their offer from INC.
Maintaining that a sale had been consummated, INC demanded that the corresponding
deed be executed in its favor. Petitioners refused. The ensuing events were narrated by the
Court of Appeals, as follows:
On January 14, 1997, private respondent filed a civil suit for [s]pecific [p]erformance and
[d]amages against petitioners and Carissa Homes and Development & Properties, Inc.
docketed as Civil Case No. Q-97-29960.
Petitioners filed therein a Motion to Dismiss on the ground of improper venue and lack of
capacity to sue.
Carissa Homes filed its answer to the complaint on February 24, 1997.
Pending resolution of petitioners Motion to Dismiss, private respondent negotiated with
Carissa Homes which culminated in the purchase of the subject properties of Carissa
Homes by private respondent.
On April 24, 1997, private respondent filed an [A]mended [C]omplaint, dropping Carissa
Homes as one of the defendants and changing the nature of the case to a mere case for
damages.
Petitioners filed a Motion to Strike Out Amended Complaint, contending that the complaint
cannot be amended without leave of court, since a responsive pleading has been filed.
On August 11, 1997, the first assailed order denying petitioners Motion to Strike Out
Amended Complaint was rendered.
On August 31, 1997, petitioners filed a Motion for Suspension of Proceeding pending the
resolution [by] the respondent court of the Motion to Dismiss earlier filed.
On September 11, 1997, the second assailed order denying petitioners Motion to Suspend
Proceeding was rendered[;] the Order reads:
Filed also last September 1, 1997 [was] a Motion for Suspension by the defendant Siasoco
thru their counsel Atty. Clara Dumandang-Singh. Although the court could not consider the
motion filed because it violates the new rules on personal service, in the interest of justice,
the court will resolve the motion. In the resolution of this court dated August 11, 1997, it
state[d] that defendants [were being] given a period of five (5) days within which to file [an]
answer to the Amended Complaint. The defendants here obviously refer to the defendants
Mario Siasoco, et. al. In the Motion for Suspension filed by the defendants Siasoco, et al.,
the latter insist on the court resolving the motion to dismiss. As stated in the resolution, the
motion to dismiss is now moot and academic because of the Amended Complaint from
Specific Performance with Damages to just Damages. For this court to resolve the Motion to
Dismiss xxx the first complaint, would be an exercise in futility. The main complaint now is
damages and no longer Specific Performance with damages which [was] actually what the
Resolution dated August 11, 1997 [was] all about. Be that as it may, the court gives
defendants Siasoco, et al. fifteen (15) days from receipt of this Order to file their respective
Answers to the Amended Complaint, not from the receipt of the resolution of the Motion to
Dismiss which will not be forthcoming.
Ruling of the Court of Appeals
The Court of Appeals (CA) ruled that although private respondent could no longer
amend its original Complaint as a matter of right, it was not precluded from doing so with
leave of court. Thus, the CA concluded that the RTC had not acted with grave abuse of
discretion in admitting private respondents Amended Complaint.
Petitioners argued that the trial court where the original Complaint for specific
performance had been filed was not the proper venue. Debunking petitioners argument, the
CA explained that the RTC nevertheless had jurisdiction over the said Complaint.The CA also
held that the Amended Complaint did not substantially alter private respondents cause of
action, since petitioners were not being asked to answer a legal obligation different from that
stated in the original Complaint.
Assignment of Errors
In their Memorandum, petitioners submit, for the consideration of this Court, the
following issues:[6]
A.
Whether or not the respondent Court of Appeals gravely erred in holding that the
respondent Judges admission of INCs Amended Complaint was proper.
B.
Whether or not the respondent Court of Appeals gravely erred in affirming respondent
Judges denial of petitioners Motion for Suspension.
C.
Whether or not the respondent Court of Appeals gravely erred in refusing to hear
petitioners application for a temporary restraining order and writ of preliminary
injunction.
Simply stated, the question is: did the CA err in affirming the two Orders of the RTC
which had allowed the Amended Complaint?
The Courts Ruling
The petition is devoid of merit. We sustain the Court of Appeals, but for reasons different
from those given in the assailed Decision.
Preliminary Issue: Propriety of Certiorari
In their Petition and Memorandum, Mario Siasoco et al. emphasize that the instant suit
was commenced pursuant to Rule 65 of the 1997 Rules of Procedure and allege that
Respondent Court of Appeals committed grave abuse of discretion in issuing the challenged
Decision dated February 25, 1998 xxx. This is a procedural error. For the writ
of certiorari under Rule 65 to issue, the petitioner must show not only that the lower court
acted with grave abuse of discretion, but also that there is no appeal, or any other plain,
speedy, and adequate remedy in the ordinary course of law.[7] Since the questioned CA
Decision was a disposition on the merits, and since said Court has no remaining issue to
resolve, the proper remedy available to petitioners was a petition for review under Rule 45,
not Rule 65. Furthermore, as a general rule, certiorari under Rule 65 cannot issue unless the
lower court, through a motion for reconsideration, has been given an opportunity to correct
the imputed error.[8] Although there are recognized exceptions to this rule, petitioners do not
claim that this case is one of them. For this procedural lapse, the instant petition should be
dismissed outright.
Nonetheless, inasmuch as the Petition was filed within the 15-day period provided under
Rule 45, and considering the importance of the issue raised and the fact that private
respondent did not question the propriety of the instant Petition, the Court treated the action
as a petition for review (not certiorari) under Rule 45 in order to accord substantial justice to
the parties. We will thus proceed to discuss the substantive issue.
Main Issue: Admission of Amended Complaint
Petitioners argue that the lower courts erred in admitting the Amended Complaint. Under
the Rules, a party may amend his pleading once as a matter of right at any time before a
responsive pleading is served xxx.[9] When private respondent filed its Amended Complaint,
Carissa, the other party-defendant in the original Complaint, had already filed its
Answer. Because a responsive pleading had been submitted, petitioners contend that private
respondent should have first obtained leave of court before filing its Amended Complaint. This
it failed to do. In any event, such leave could not have been granted, allegedly because the
amendment had substantially altered the cause of action.
 This argument is not persuasive. It is clear that plaintiff (herein court.[14] In the present case, however, the RTC had jurisdiction because the original
private respondent) can amend its complaint once, as a matter of right, before a responsive Complaint involved specific performance with damages. In La Tondea Distillers v.
pleading is filed.[10] Contrary to the petitioners contention, the fact that Carissa had already Ponferrada,[15] this Court ruled that a complaint for specific performance with damages is a
filed its Answer did not bar private respondent from amending its original Complaint once, as personal action and may be filed in the proper court where any of the parties reside, viz.:
a matter of right, against herein petitioners. Indeed, where some but not all the defendants
have answered, plaintiffs may amend their Complaint once, as a matter of right, in respect to Finally, [w]e are not also persuaded by petitioners argument that venue should be lodged in
claims asserted solely against the non-answering defendants, but not as to claims asserted Bago City where the lot is situated. The complaint is one for specific performance with
against the other defendants.[11] damages. Private respondents do not claim ownership of the lot but in fact [recognize the]
The rationale for the aforementioned rule is in Section 3, Rule 10 of the Rules of Court, title of defendants by annotating a notice of lis pendens. In one case, a similar complaint for
which provides that after a responsive pleading has been filed, an amendment may be specific performance with damages involving real property, was held to be a personal
rejected when the defense is substantially altered. [12] Such amendment does not only action, which may be filed in the proper court where the party resides. Not being an action
prejudice the rights of the defendant; it also delays the action. In the first place, where a party involving title to or ownership of real property, venue, in this case, was not improperly laid
has not yet filed a responsive pleading, there are no defenses that can be before the RTC of Bacolod City.[16]
altered. Furthermore, the Court has held that [a]mendments to pleadings are generally
favored and should be liberally allowed in furtherance of justice in order that every case may WHEREFORE, the Petition is hereby DENIED. Costs against petitioners.
so far as possible be determined on its real facts and in order to speed the trial of cases or
prevent the circuity of action and unnecessary expense, unless there are circumstances such SO ORDERED.
as inexcusable delay or the taking of the adverse party by surprise or the like, which might
justify a refusal of permission to amend.[13]
In the present case, petitioners failed to prove that they were prejudiced by private
respondents Amended Complaint. True, Carissa had already filed its own
Answer. Petitioners, however, have not yet filed any. Moreover, they do not allege that their
defense is similar to that of Carissa. On the contrary, private respondents claims against the
latter and against petitioners are different. Against petitioners, whose offer to sell the subject
parcels of land had allegedly been accepted by private respondent, the latter is suing for
specific performance and damages for breach of contract. Although private respondent could
no longer amend, as a matter of right, its Complaint against Carissa, it could do so against
petitioners who, at the time, had not yet filed an answer.
The amendment did not prejudice the petitioners or delay the
action. Au contraire, it simplified the case and tended to expedite its disposition. The
Amended Complaint became simply an action for damages, since the claims for specific
performance and declaration of nullity of the sale have been deleted.

RTC Had Jurisdiction

Petitioners also insist that the RTC of Quezon City did not have jurisdiction over the
original Complaint; hence, it did not have any authority to allow the amendment. They
maintain that the original action for specific performance involving parcels of land in
Montalban, Rizal should have been filed in the RTC of that area. Thus, they chide the CA for
allegedly misunderstanding the distinction between territorial jurisdiction and venue, thereby
erroneously holding that the RTC had jurisdiction over the original Complaint, although
the venue was improperly laid.
We disagree. True, an amendment cannot be allowed when the court has no jurisdiction
over the original Complaint and the purpose of the amendment is to confer jurisdiction on the
G.R. No. L-37730 November 14, 1933
GREGORIO ARANETA, INC., plaintiff-appellee,
vs.
LYRIC FILM EXCHANGE, INC., defendant-appellant.
Plaintiff is the owner of a building in the City of Manila which defendant rented from the 1st
of February, 1929, until the 31st of December, 1931, at a monthly rental of P1,500. The
building was used as a cine theatre.
Towards the end of May, 1931, a piece of metal covering the walls fell down and disclosed
that the wall was rotten and that the theatre was in too dangerous a condition for use. The
facts were reported by defendant to the owner, while the City Engineer ordered the theatre
closed until proper repairs had been made.
Plaintiff at once inspected the building and hired a contractor to make the necessary repairs
which were done in some thirteen working days and within thirty days of the receipt of notice
of the bad condition of the building.
When defendant was notified that the premises were repaired, if formally notified plaintiff
that it regarded the contract as cancelled, and this suit was immediately instituted for the
unexpired portion of the contract of lease.
Shortly after the discovery of the condition of the building, defendant removed its equipment
and machinery from the building and has not again occupied it. Defendant claims that it
notified plaintiff under was not kept in proper repair, defendant regarded the contract of
lease for the premises as rescinded.
Plaintiff claims that it never got such letter and did not know of the intention of the defendant
to claim that the lease had been cancelled until it received a copy of an extract of a especial
director's meeting of defendant corporation held on July 14, 1931.
After trial the Court of First Instance of Manila held that defendant had no right to cancel the
contract of lease and gave judgment for seven months rental as provided for in the contract
of lease.
From that decision defendant appeals and makes the following assignments of error:
1. The trial court erred in not finding that the leased premises were in a
dangerously ruinous condition when vacated by defendant.
2. The trial court erred in not finding that the contract of lease was rescinded by
defendant both expressly and by implication from the acts of the latter.
3. The trial court erred in ruling that defendant had no right to rescind the contract
of lease when the premises were in such a dangerously ruinous condition, as to
make them unfit for the purpose for which they had been intended.
4. The trial court erred in refusing to allow defendant to present evidence to prove
that Exhibit G, I, and L, signed and sent by Guillermo Garcia Bosque, were neither
authorized nor ratified by defendant and did not bind the same.
5. The trial court erred in ordering defendant to pay to plaintiff "future rents" for the
period from June 1, 1931, to December 31, 1931, in the total sum of P10,500.
6. The trial court erred in holding plaintiff from the defendant's cross-complaint, and
falling to award the full measure of damages to defendant.
There can be no question that on and after May 27, 1931, the premises were, until repaired,
in a too dangerously ruinous condition to be utilized for the purpose of the lease. Both
parties could be seriously condemned had they attempted to hold public exhibitions in the
theatre in the condition in which it was, as a catastrophe might well have taken place. But
such an express finding is not necessary for a proper resolution of the question at issue.
As to the second assignment of error, there can be no question that defendant attempted to
rescind the contract. It may well doubted that the letter of May 28, 1931, was ever in fact
mailed, but defendant removed its property from the premises and never again occupied
them for the purpose of giving an exhibition. It also promptly notified plaintiff of its position
after the July 14th director's meeting.
The third assignment of error reaches the heart of the controversy, and the correct answer
is found in construing article 1558 of the Civil Code, together with article 6 of the contract
and the facts of the case. Article 1558 of the Code reads as follows:
ART. 1558. If, during the lease, it should be necessary to make any urgent repair
upon the thing leased which cannot be postponed until the expiration thereof, the
lessee shall be obliged to permit the work, even though it be very annoying to him,
and even if during such repairs he may be deprived of a part of the estate.
If the work of making the repairs should continue more than forty days, the price of
the lease shall be reduced in proportion to the time and to the part of the estate of
which the lessee is deprived.
If the work should be such a nature that the part which the lessee and his family
required for their dwelling becomes uninhabitable, he may rescind the contract.
The contract provision, translated, reads:
Sixth. The party of the second part shall receive the building in its present state;
and all painting, repairs, and any other works to be done on the building from the
 commencement of the contract and during the period thereof shall be for the
account of the party of the second part, with the exception of repairs due to force
majeure or to keep the building in a serviceable state.
The repairs took less than forty days, and the place was not a dwelling. Under the lease
contract, if the premises, for any cause, became unfit for the purpose of exhibiting pictures,
it was the duty of plaintiff to repair it at its own expense. This, plaintiff has done. There is
nothing in the contract nor is there a provision of the Civil Code, that gives the defendant the
right to cancel the contract on the facts of this case. The third assignment of error cannot
therefore be sustained, which virtually disposes of the entire case.
Plaintiff in its complaint recited three letters, the pertinent parts of which, translated, read:
No authorities are cited by the appellant to the effect that it is incumbent upon the owner to
constantly inspect the premises and that if he fails to do so or through error of judgment fails
to make repairs before the damage is material, the lessee has a cause of action. This is
contrary to universal practice, as the lessee is in possession and if repairs are necessary,
which it is the duty of the owner to make, the lessee should call the owner to make the
necessary repairs. If the owner then fails to perform his duty, action would lie. In this case
when the lessee in possession notified the owner of the bad condition of the building, the
owner promptly made the necessary repairs. There is therefore no basis for the
counterclaim, and the sixth assignment of error cannot be sustained.
The judgment appealed from is affirmed. Costs against appellant. So ordered.

. . . We shall abide by our signed contract. (Exh. G.)

. . . We agree to continue paying you the rent in accordance with our agreement
but we shall try to sublease the cinematograph to another person . . . . (Exh. I.)

. . . although we do not make use of the building, we shall pay the rents up to the
end of this year in accordance with our contract ... . As regards the rents
corresponding to the months of June to December, we shall monthly pay them as
we have been doing until now. (Exhibit L.)

and when the defendant tendered testimony to show that the party who signed those letters
was not authorized by defendant, the trial court refused to receive the testimony on the
ground that the letters having been set out in the complaint and not denied in the answer,
section 103 of the Code of Civil Procedure controlled.

In this, the trial court was in error. Plaintiff was suing on the written contract of lease, not on
these letters. They might have some evidential value, but evidence, even in writing, does
not necessarily have a proper place in the pleadings. However, even granting that such
ruling of the trial court was incorrect, plaintiff has not been harmed thereby because of our
view of the case it is immaterial whether or not such letters were authorized.lawphil.net

As to the fifth assignment of error, defendant had claimed that the contract was rescinded
and that it had notified plaintiff in writing to that effect. Plaintiff thereupon brought this suit,
which is virtually a suit for specific performance, and the claim for rentals from the date of
the filing of the suit to December 31, 1931, is therefore not premature. In any event, it error
had been committed, it has been cured by proof.

Defendant also presented a cross-complaint for alleged loss of profit due to imperfect
condition of the building from May 27, 1931, to December 31, 1931, under paragraph 2 of
article 1554 of the Civil Code, which reads:

2. To make thereon, during the lease, all repairs necessary in order to keep it in
serviceable condition for the purpose for which it was intended.