Contents

General Principles ....................................................................................................................................... 10

Bustos v. Lucero, G.R. No. L-2068, October 20, 1948 ......................................................................... 10
Primicias v. Ocampo, G.R. No. L-6120, June 30, 1953 ........................................................................ 12
Neypes v. Court of Appeals, G.R. No. 141524, September 14, 2005 .................................................. 13
Alvero v. de la Rosa, G.R. No. L-286, March 29, 1946......................................................................... 15
Basic Concepts ........................................................................................................................................ 16
Jose v. Javellana, G.R. No. 158239, January 25, 2012 ......................................................................... 16
Samahan ng mga Manggagawa sa Hyatt v. Hon. Magsalin, G.R. No. 172303, June 6, 2011 .............. 19
Panay Railways, Inc. v. Heva Management, G.R. No. 154061, January 25, 2012 ............................... 22
Tan v. Court of Appeals, G.R. No. 136368, January 16, 2002 ............................................................. 24
B. Philippine Courts ............................................................................................................................. 28
Nature ..................................................................................................................................................... 28
Phil. Carpet Manufaturing v. Tagyamon, G.R. No. 191475, December 11, 2013 ............................... 28
U.S. v. Tamparong, 31 Phil. 321 (1915) ............................................................................................... 30
Hierarchy of Courts ................................................................................................................................. 32
Rayos v. City of Manila, G.R. No. 196063, December 14, 2011 .......................................................... 32
United Claimants Assoc. v. NEA, G.R. No. 187107, January 31, 2012 ................................................. 33
Ernesto Dy v. Hon. Palamos, G.R. No. 196200, September 11, 2013 ................................................. 37
C. Jurisdiction of Different Courts ....................................................................................................... 39
Key Principles .......................................................................................................................................... 39
Jurisdiction Definition ............................................................................................................................. 39
Home Guaranty Corp. v. R-II Builders, G.R. No. 192649, March 9, 2011 ............................................ 39
Jurisdiction v. Venue ........................................................................................................................... 44
Davao Light v. Court of Appeals, G.R. No. 111685, August 20, 2001 .................................................. 44
Nocum v. Lucio Tan, G.R. No. 145022, September 23, 2005 .............................................................. 46
Determined by the allegations in the complaint ................................................................................ 49
Padlan v. Dinglasan, G.R. No. 180321, March 20, 2013 ...................................................................... 49
Residual power/jurisdiction ................................................................................................................ 51
Gonzales v. Quirico Pe, G.R. No. 167398, August 9, 2011 .................................................................. 51
 Doctrine of primary jurisdiction .......................................................................................................... 55
Bagunu v. Spouses Aggabao, G.R. No. 186487, August 15, 2011 ....................................................... 55
Omictin v. Court of Appeals, G.R. No. 148004, January 22, 2007....................................................... 57
Agra, et al v. COA, G.R. No. 167807, December 6, 2011 ..................................................................... 60
Spouses Fajardo v. Flores, G.R. No. 167891, January 15, 2010 .......................................................... 62
Adherence of jurisdiction........................................................................................................................ 64
Aruego v. Court of Appeals, G.R. No. 112193, March 13, 1996 ........................................................ 64
Barrameda v. Rural Bank of Canaman, G.R. No. 176260, November 24, 2010 ................................ 66
Cabili v. Hon. Balindong, A.M. No. RTJ-10-22252, September 6, 2011............................................... 69
Villamor v. Salas, G.R. No. 101041, November 13, 1991 .................................................................... 70
Heirs of Marasigan v. Marasigan, G.R. No. 156078, March 14, 2008 ................................................. 72
Republic v. Bantigue Point Development, G.R. No. 162322, March 14, 2012 .................................... 78
Tijam v. Sibonghanoy, L-21450, April 15, 1968 ................................................................................... 83
De Herrera v. Bernardo, G.R. No. 170251, June 1, 2011 .................................................................... 85
Megan Sugar Corp. v. RTC of Iloilo, G.R. No. 170352, June 1, 2011 ................................................... 88
Manchester Development v. Court of Appeals, G.R. No. 75919, May 7, 1987 .................................. 90
Nestle Phils. v. FY Sons, G.R. No. 150789, May 5, 2006 ...................................................................... 92
Sun Insurance v. Asuncion, G.R. Nos. 79937-38, February 13, 1989 .................................................. 93
Phil. First Insurance v. Paramount Gen. Insurance, G.R. No. 165147, July 9, 2008 ............................ 95
Antonino v. Register of Deeds, G.R. No. 185663, June 20, 2012 ........................................................ 97
Unicapital v. Consing, G.R. Nos. 175277 & 175285, September 11, 2013 ........................................ 102
1. Kinds of Jurisdiction ...................................................................................................................... 107
a. General Jurisdiction Regional Trial Court...................................................................................... 107
Durisol Phil. v. Court of Appeals, G.R. No. 121106, February 20, 2002 ............................................ 107
f. Exclusive Original Jurisdiction Shariah District Court.................................................................... 109
Montaner v. Shari’ah District Court, G.R. No. 174975, January 20, 2009......................................... 109
g. Concurrent/Confluent/Coordinate Jurisdiction ............................................................................ 114
Vera v. Hon. Arca, G.R. No. L-25721, May 26, 1969 ......................................................................... 114
Mendoza v. Mayor Villas, G.R. No. 187256, February 23, 2011 ...................................................... 116
CREBA v. DAR Secretary, G.R. 183409, June 18, 2010 ...................................................................... 120
2. Manner of Acquiring Jurisdiction .................................................................................................. 124
a. Over Subject Matter...................................................................................................................... 124
 Allied Domecq Phil. v. Hon. Villon, G.R. No. 156264, September 30, 2004 ...................................... 124
Padlan v. Dinglasan, G.R. No. 180321, March 20, 2013 SUPRA ........................................................ 126
Guy v. Court of Appeals, G.R. No. 165849, December 10, 2007 ....................................................... 126
Barayuga v. Adventist University, G.R. No. 168008, August 17, 2011 .............................................. 130
Ursua v. Republic, G.R. No. 178193, January 24, 2012 ..................................................................... 132
City of Dumaguete v. Philippine Ports Authority, G.R. No. 168973, August 24, 2011 ...................... 146
Republic v. Bantigue Point Development, G.R. No. 162322, March 14, 2012 SUPRA ...................... 154
b. Over the Case ................................................................................................................................ 154
People of the Philippines v. Hon. Garfin, G.R. No. 153176, March 29, 2004.................................... 154
c. Over the Issue ............................................................................................................................... 159
Lazo v. Republic Surety, G.R. No. L-27365, January 30, 1970 ........................................................... 159
Buce v. Court of Appeals, G.R. No. 136913, May 12, 2000 ............................................................... 161
Mercader v. DBP, G.R. No. 130699, May 12, 2000 ........................................................................... 163
Victoria v. Court of Appeals, G.R. No. 147550, January 26, 2005 ..................................................... 167
d. Over the Person or Party .............................................................................................................. 171
Plaintiff .................................................................................................................................................. 171
Cesar v. Hon. Ricafort-Bautista, G.R. No. 136415, October 31, 2006 ............................................... 172
Defendant ............................................................................................................................................. 174
Herrera-Felix v. Court of Appeals, G.R. No. 143736, August 11, 2004 ............................................. 175
JAPRL Dev. Corp. v. Security Bank, G.R. No. 190107, June 6, 2011 .................................................. 177
Rapid City Realty v. Villa, G.R. No. 184197, February 11, 2010 ........................................................ 179
Allan Co v. Cordero, G.R. No. 164703, May 4, 2010 ......................................................................... 182
Lhuillier v. British Airways, G.R. No. 171092, March 15, 2010.......................................................... 185
3. by voluntary submission ............................................................................................................... 192
Rodriguez vs. Alikpala, G.R. No. L-38314, June 25, 1974 .................................................................. 192
e. Over the Res .................................................................................................................................. 194
Midgely v. Hon. Fernando, G.R. No. L-34314, May 13, 1975 ............................................................ 194
Perkins v. Dizon, G.R. No. 46631, November 16, 1939 ..................................................................... 200
Macahilig v. Heis of Magalit, G.R. No. 141423, November 15, 2000 ................................................ 205
See: Joya v. Judge Marquez, G.R. No. 162416, January 31, 2006 .................................................... 209
RULE 1 ....................................................................................................................................................... 210
Section 1................................................................................................................................................ 210
 Alvero v. de la Rosa, G.R. No. L-286, March 29, 1946 (Supra.) ......................................................... 210
Primicias v. Ocampo, G.R. No. L-6120, June 30, 1953 ...................................................................... 213
Sec. 2. In what courts applicable ..................................................................................................... 216
Sec. 4. In what cases not applicable ................................................................................................ 216
GSIS v. Villaviza, G.R. No. 180291, July 27, 2010 .............................................................................. 216
Reyes v. Barrios, G.R. No. 172841, December 15, 2010 ................................................................... 218
Sec. 3. Cases governed ....................................................................................................................... 221
Kinds of Civil Actions in the Rules of Court ....................................................................................... 221
Special Civil Action .............................................................................................................................. 221
DBM v. Manila’s Finest Retirees, G.R. No. 169466, May 9, 2007 ..................................................... 221
Amberti v. Court of Appeals, G.R. No. 79981, 2 April 1991 .............................................................. 224
C. Kinds of Civil Actions as to Cause ...................................................................................................... 227
Real Actions........................................................................................................................................... 227
Fortune Motors v. Court of Appeals, G.R. No. 76431, October 16, 1989 ..................................... 227
See Rule 4, Sec. 1 – Venue of real actions .................................................................................. 228
Personal Actions................................................................................................................................ 229
Chua v. Total Office Products, G.R. No. 152808, September 30, 2005 .................................. 229
Paderanga v. Hon. Buissan and Elumba Industries, G.R. No. L-49475, September 28, 1993 ........... 231
See Rule 4, Sec. 2 ............................................................................................................................ 233
Mixed Actions..................................................................................................................................... 234
De la Cruz v. El Seminario De la Archdioceses de Manila, G.R. No. L-5402, January 28, 1911
.......................................................................................................................................................... 234
Emergency Loan Pawnshop v. Court of Appeals, G.R. No. 129184, February 28, 2001 ................... 235
Kinds of Civil Actions as to Object .................................................................................................. 236
Action in Personam........................................................................................................................... 236
Spouses Yu v. Pacleb, G.R. No. 172172, February 24, 2009 .................................................... 236
Ching v. Court of Appeals, G.R. No. L-59731, January 11, 1990 ....................................................... 240
Action in Rem ..................................................................................................................................... 242
Licaros v. Licaros, G.R. No. 150656, April 29, 2003 ........................................................................... 242
Gomez v. Court of Appeals, G.R. No. 127692, March 10, 2004 .............................................. 245
Action Quasi in Rem.......................................................................................................................... 249
Spouses Yu v. Pacleb, G.R. No. 172172, February 24, 2009 (Supra.) .................................... 249
 Asiavest Ltd. v. Court of Appeals and Heras, G.R. No. 128803, September 25, 1998....................... 252
Mixed Action ......................................................................................................................................... 258
BA Finance v. Court of Appeals and Reyes, G.R. No. 102998, July 5, 1996 ...................................... 258
Kinds of Actions as to Place of Filing of Complaint ..................................................................... 261
Sec. 5. Commencement of action ......................................................................................................... 261
Board of Liquidators, Trustee of Land Settlement and Devt Corp v. Zulueta, G.R. No. L-30738, July 30,
1982 ...................................................................................................................................................... 262
Sotelo vs. Dizon, 67 Phil. 537; ........................................................................................................... 265
Cabrera vs. Tiano, 8 SCRA 582 .......................................................................................................... 266
Manchester Development v. Court of Appeals, G.R. No. 75919, May 7, 1987 (Supra.) .................... 267
Nestle Phils. v. FY Sons, G.R. No. 150780, May 5, 2006 .................................................................... 269
Sun Insurance v. Asuncion, G.R. Nos. 79937-38, February 13, 1989 ................................................ 270
Phil. First Insurance v. Paramount Gen. Insurance, G.R. No. 165147, July 9, 2008 .......................... 272
Home Guaranty Corp. v. R-II Home Guaranty Corp. v. R-II Builders, G.R. No. 192649, March 9, 2011
(Supra.) .............................................................................................................................................. 275
Unicapital v. Consing, G.R. Nos. 175277 & 175285, September 11, 2013........................................ 279
Sec. 6. Construction ........................................................................................................................... 281
Anama v. Phil. Savings Bank, G.R. No. 187021, January 25, 2012......................................... 281
Tan v. Court of Appeals, G.R. No. 130314, September 22, 1998 ...................................................... 287
Baylon v. Fact-finding Intelligence, G.R. No. 150870, December 11, 2002 ...................................... 291
Republic v. Kenrick Development, G.R. No. 149567, August 8, 2006 ................................................ 295
Building Care Corp. v. Macaraeg, G.R. No. 198357, December 10, 2012 ......................................... 299
Uy v. Chua, G.R. No. 183965, September 18, 2009 .......................................................................... 302
Llamas v. Court of Appeals, G.R. No. 149588, August 16, 2010 ....................................................... 306
RULE 2- CAUSE OF ACTION .................................................................................................................. 309
Sec. 1. Ordinary civil actions, basis of ............................................................................................ 309
Turner v. Lorenzo Shipping, G.R. No. 157479, November 24, 2010...................................... 309
Sec. 2. Cause of action, defined ........................................................................................................ 314
Heirs of Ypon v. Ricaforte, G.R. No. 198680, July 8, 2013........................................................ 314
Swagman Hotels v. Court of Appeals, G.R. No. 161135, April 8, 2005 ............................................. 315
Joseph v. Bautista, G.R. No. L-41423, February 23, 1989 ................................................................. 319
Sec. 3. One suit for a single cause of action.......................................................................................... 321
 Phil. Bank of Comm. v. Lim, G.R. No. 158138, April 12, 2005 ........................................................... 321
Sec. 4. Splitting a single cause of action; effect of ........................................................................ 324
Chua v. Metrobank, G.R. No. 182311, August 19, 2009 ........................................................... 324
Chu v. Spouses Cunanan, G.R. No. 156185, September 12, 2011..................................................... 330
Pantranco v. Standard Insurance, G.R. No. 140746, March 16, 2005 .............................................. 334
Umale v. Canoga Park, G.R. No. 167246, July 20, 2011 .................................................................... 336
Spouses Plaza v. Lustiva, G.R. No. 172909, March 5, 2014............................................................... 339
Bayang v. Court of Appeals, G.R. No. L-53564, February 27, 1987................................................... 341
De Larena v. Villanueva, G.R. No. L-29155, November 5, 1928 ........................................................ 343
Blossom & Company v. Manila Gas Corp., G.R. No. L-32958, November 8, 1930 ............................ 346
See:Danfoss v. Continental Cement, G.R. No. 143788, September 9, 2005 ..................................... 350
Bank of America v. American Realty, G.R. No. 133876, December 29, 1999 ................................... 353
Alandale Sportsline v. Good Development Corp, G.R. No. 164521, December 18, 2008.................. 358
Enriquez v. Ramos, G.R. No. L-16797, February 27, 1963 ................................................................. 362
Tarnate v. Garcia, G.R. No. L-26266, December 29, 1972 ................................................................ 363
Sec. 5. Joinder of causes of action ........................................................................................................ 364
See: Sec. 6, Rule 3............................................................................................................................. 365
Ada v. Baylon, G.R. No. 182435, August 13, 2012 ............................................................................ 365
Pantranco v. Standard Insurance, G.R. No. 140746, March 16, 2005 (Supra.) ................................. 372
Union Glass Corp. v. SEC, G.R. No. 64013, November 28, 1983 ....................................................... 374
Flores v. Hon. Mallare-Philipps, G.R. No. L-66620, September 24, 1986 .......................................... 376
Genesis Investment v. Heirs of Ebarasabal, G.R. No. 181622, November 20, 2013 ......................... 379
Uniwide Holdings v. Cruz, G.R. No. 171456, August 9, 2007 ............................................................ 381
Unicapital v. Consing, G.R. Nos. 175277 & 175285, September 11, 2013........................................ 383
Iniego v. Hon. Purganan, G.R. No. 166876, March 24, 2006 ............................................................ 387
Sec. 6, Rules of Procedure on Small Claims (A.M. 08-8-7-SC, October 27, 2009) ............................. 390
Sec. 6. Misjoinder of causes of action ............................................................................................. 390
Ada v. Baylon, G.R. No. 182435, August 13, 2012 (Supra.)..................................................... 390
RULE 3 ....................................................................................................................................................... 395
Sec. 1. Who may be parties; plaintiff and defendant .................................................................. 395
Art. 44, Civil Code .......................................................................................................................... 395
Arts. 1772 & 1768, Civil Code...................................................................................................... 395
 Secs. 21 & 122, Corporation Code .............................................................................................. 395
Art. 242 (3), Labor Code ............................................................................................................... 396
-Estate of deceased (See: Limjoco v. Instestate Estate, G.R. No. L-770, April 27, 1948).... 396
-Roman Catholic church (See:Barlin vs. Ramirez, G.R. No. L-2832, Nov. 24, 1906) .......... 401
Ventanilla Enterprises v. Hon. Lazaro, G.R. No. L-53856, August 21, 1980 .................................... 406
Chiang Kai Shek School v. Court of Appeals, G.R. No. 58028, April 18, 1989 ....................... 408
Sec. 1 (d) & (g), Rule 16 ................................................................................................................ 409
Sec. 2. Parties in interest.................................................................................................................. 410
Stronghold Insurance v. Cuenca, G.R. No. 173297, March 6, 2013........................................ 410
Mayor Dagdag v. Tongnawa, G.R. Nos. 161166-67, February 3, 2005................................. 414
Spouses Oco v. Limbaring, G.R. No. 161298, January 31, 2006 ............................................. 417
Uy v. Court of Appeals, G.R. No. 120465, September 9, 1999 ................................................. 420
Goco v. Court of Appeals, G.R. No. 157449, April 6, 2010 ........................................................ 424
Tampico v. Intermediate Appellate Court, G.R. No. 76225, March 31, 1992 ....................... 427
Salonga v. Warner, Barnes, G.R. No. L-2246, January 31, 1951 ............................................ 428
Sec. 1 (g), Rules of Court ................................................................................................................. 431
Sec. 3. Representatives as parties .................................................................................................. 431
Ang v. Ang, G.R. No. 186993, August 22, 2012 ......................................................................... 431
Ching v. Court of Appeals, G.R. No. L-59731, January 11, 1990 (Supra.) ............................. 435
MIA v. Rivera Village, G.R. No. 143870, September 30, 2005 ................................................ 438
Sec. 4. Spouses as parties ................................................................................................................. 442
Carandang v. Heirs of de Guzman, G.R. No. 160347, November 29, 2006 ........................... 442
Sec. 5. Minor or incompetent persons........................................................................................... 448
Sec. 6. Permissive joinder of parties ............................................................................................. 449
Flores v. Hon. Mallare-Philipps, G.R. No. L-66620, September 24, 1986 (Supra.).............. 449
Sec. 7. Compulsory joinder of indispensable parties ................................................................. 451
Boston Equity v. Court of Appeals, G.R. No. 173946, June 19, 2013 ...................................... 451
Malazarte v. Court of Appeals, G.R. No. 166519, March 31, 2009 ......................................... 459
Quilatan v. Heirs of Quilatan, G.R. No. 183059, August 28, 2009 .......................................... 461
Metrobank v. Hon. Alejo, G.R. No. 141970, September 10, 2001 ........................................... 463
Guy v. Guy, G.R. No. 189486, September 5, 2012 ..................................................................... 467
Monis v. Velasco, G.R. No. 169276, June 16, 2009 .................................................................... 472
Sec. 8. Necessary party ..................................................................................................................... 476
Chua v. Torres, G.R. No. 151900, August 30, 2005 ........................................................................ 476
Seno v. Mangubat, G.R. No. 44339, December 2, 1987............................................................ 480
Wee v. Castro, G.R. No. 176405, August 20, 2008 .................................................................... 485
Mayor of Parañaque v. Ebio, G.R. No. 178411, June 23, 2010 ................................................ 489
Sec. 10. Unwilling co-plaintiff .......................................................................................................... 492
Emata v. IAC, G.R. No. L-72714, June 29, 1989 ......................................................................... 492
Sec. 11. Misjoinder and non-joinder of parties ............................................................................ 495
Boston Equity v. Court of Appeals, G.R. No. 173946, June 19, 2013 (Supra.) ...................... 495
Leonis Navigation v. Villamater, G.R. No. 179169, March 3, 2010 ........................................ 503
Sec. 12. Class suit ................................................................................................................................ 505
Juana Complex v. Fil-Estate Land, G.R. No. 152272, March 5, 2012 ...................................... 505
Newsweek, Inc. v. IAC, G.R. No. L-63559, May 30, 1986 ........................................................... 508
Mathay v. Consolidated Bank, G.R. No. L-23136, August 26, 1974 ........................................ 510
Borlasa v. Polistico, G.R. No. L-22909, January 28, 1925 .............................................................. 517
(See: Ibañez v. Roman Catholic Church, 12 Phil. 227) ............................................................. 518
Llana v. NLRC, G.R. No. 111014, May 31, 1996 ......................................................................... 521
Sec. 13. Alternative Defendants ...................................................................................................... 524
Insurance Company v. US Lines, G.R. No. L-21839 April 30, 1968......................................... 525
Sec. 14. Unknown identity or name of defendant ........................................................................ 527
See: Sec. 14, Rule 14 ......................................................................................................................... 527
Sec. 15. Entity without juridical personality as defendant ........................................................ 527
See: Sec. 8, Rule 14 ........................................................................................................................... 528
Sec. 16. Death of party; duty of counsel ......................................................................................... 528
Saligumba v. Palanog, G.R. No. 143365, December 4, 2008 .................................................. 528
Hon. Sumaliag v. Spouses Literato, G.R. No. 149787, June 18, 2008 ..................................... 533
Sec. 17. Death or separation of a party who is a public officer ................................................. 538
Commissioner v. Jardin, G.R. No. 141834, July 30, 2007 ......................................................... 538
Sec. 18. Incompetency or incapacity .............................................................................................. 539
Sec. 19. Transfer of Interest ............................................................................................................. 539
Associated Bank v. Spouses Pronstroller, G.R. No. 148444, September 3, 2009 ................ 539
Sec. 20. Action on contractual and money claims ........................................................................ 541
 See: Sec. 5, Rule 86; ......................................................................................................................... 541
Sec. 7, Rule 39 .................................................................................................................................. 541
Gabriel v. Pagaygay, G.R. No. 146989, February 7, 2007 ....................................................... 541
Sec. 21. Indigent party......................................................................................................................... 545
Sec. 22. Notice to the Solicitor General .............................................................................................. 545
RULE 4- VENUE OF ACTIONS................................................................................................................ 545
Sec. 1. Venue of real actions ............................................................................................................. 545
Fortune Motors v. Court of Appeals, G.R. No. 76431, October 16, 1989 (Supra.) ........................ 545
Paglaum Management v. Union Bank, G.R. No. 179018, June 18, 2012 ....................................... 547
Ochoa v. China Bank, G.R. No. 192877, March 23, 2011 ............................................................... 550
Sec. 2. Venue of personal actions ................................................................................................... 552
Ang v. Ang, G.R. No. 186993, August 22, 2012 (Supra.) .......................................................... 552
Araneta v. Court of Appeals, G.R. No. 154096, August 22. 2008 ...................................................... 555
Emergency Loan Pawnshop v. Court of Appeals, G.R. No. 129184, February 28, 2001 ................... 559
Hyatt Elevators v. Goldstar, G.R. No. 161026, October 24, 2005 ..................................................... 560
Sec. 3. Venue of actions against non-residents............................................................................ 563
Time, Inc. v. Reyes, G.R. No. L-28882, May 31, 1971 ................................................................ 563
Sec. 4. When Rule not applicable.................................................................................................... 567
Union Bank v. Maunlad Homes, G.R. No. 190071, August 5, 2012 ........................................ 567
Pilipino Telephone v. Tecson, G.R. No. 156966, May 7, 2004 ........................................................... 569
Ochoa v. China Bank, G.R. No. 192877, March 23, 2011 (Supra.) .................................................... 571
Republic v. Glasgow Credit, G.R. No. 170281, January 18, 2008 ...................................................... 572
RULE 5- UNIFORM PROCEDURE IN TRIAL COURTS......................................................................... 574
Sec. 1. Uniform procedure .............................................................................................................. 574
Sec. 2. Meaning of terms ..................................................................................................................... 574
Revised Rule on Summary Procedure........................................................................................... 574
Sec. De Lima v. Gatdula, G.R. No. 204528, February 19, 2013 .............................................. 574
Rule of Procedure for Small Claims Cases ................................................................................ 579
A.L. Ang v. Mondejar, G.R. No. 200804, January 22, 2014 ....................................................... 579
RULE 6- KINDS OF PLEADINGS ............................................................................................................ 581
Sec. 1. Pleadings defined .................................................................................................................. 581
Sec. 2. Pleadings allowed ................................................................................................................. 581
 Sec. 3. Complaint ............................................................................................................................... 581
Sec. 4. Answer .................................................................................................................................... 581
Sec 5. Defenses ................................................................................................................................... 581
See: Rule 8, Sec. 10. Specific Denial ................................................................................................. 581
Rule 16, Sec. 6. Pleading grounds as affirmative defenses ............................................................... 582
PBCom v. Spouses Go, G.R. No. 175514, February 14, 2011 ............................................................ 582
BPI v. Spouses Royeca, G.R. No. 176664, July 21, 2008 .................................................................... 589
Sec. 6. Counterclaim ............................................................................................................................. 592
Lafarge Cement v. Continental, G.R. No. 155173, November 23, 2004 ........................................... 592
Yulienco v. Court of Appeals, G.R. No. 131692, June 10, 1999 ......................................................... 598
Sec. 7. Compulsory Counterclaim ......................................................................................................... 600
See: Rule 11, Sec. 8 – Existing counterclaim or cross-claim......................................................... 601
Rule 9, Sec. 2 – Compulsory counterclaim, or cross-claim not set up barred............................. 601
Lafarge Cement v. Continental, G.R. No. 155173, November 23, 2004 (Supra.) .............................. 601
Mercado v. Court of Appeals, G.R. No. 169576, October 17, 2008 .................................................. 607
Calibre Traders v. Bayer, G.R. No. 161431, October 13, 2010 .......................................................... 609
Dio v. Subic Bay, G.R. No. 189532, June 11, 2014 ............................................................................. 615
Cabaero v. Hon. Cantos, G.R. No. 102942, April 18, 1997 ................................................................ 619
Sec. 8. Cross-claim ............................................................................................................................. 624
See: Rule 9, Sec. 2............................................................................................................................. 624

Case Digests

General Principles
Bustos v. Lucero, G.R. No. L-2068, October 20, 1948
Facts: The case is a resolution of a motion for reconsideration filed by Bustos after the Court dismissed
his special civil action of mandamus to remand the criminal case against him to the court of origin so
that accused Bustos can cross-examine the complainant and his witnesses as to the testimony they gave
during the preliminary investigation. The justice of the peace denied his motion after the prosecution
objected and invoked Section 11, Rule 108 of the Rules of Court. The Court held that “the constitutional
right of an accused to be confronted by the witnesses against him does not apply to preliminary
hearings; nor will the absence of a preliminary examination be an infringement of his right to confront
witnesses. As a matter of fact, preliminary investigation may be done away with entirely without
infringing the constitutional right of an accused under the due process clause to a fair trial.”

Bustos contends that his right to confront witnesses is a substantive right which procedural rules like
Section 11, Rule 108 cannot impair or diminish

Issue: WON section 11 of Rule 108 of the Rules of Court infringes section 13, Article VIII, of the
Constitution

HELD: No. Dismissed.

Section 11 of Rule 108, like its predecessors, is an adjective law and not a substantive law or substantive
right. Substantive law creates substantive rights and the two terms in this respect may be said to be
synonymous. Substantive rights is a term which includes those rights which one enjoys under the legal
system prior to the disturbance of normal relations. (60 C. J., 980.) Substantive law is that part of the law
which creates, defines and regulates rights, or which regulates the rights and duties which give rise to a
cause of action; that part of the law which courts are established to administer; as opposed to adjective
or remedial law, which prescribes the method of enforcing rights or obtains redress for their invasion.
(36 C. J., 27; 52 C. J. S., 1026.)

As applied to criminal law, substantive law is that which declares what acts are crimes and prescribes
the punishment for committing them, as distinguished from the procedural law which provides or
regulates the steps by which one who commits a crime is to be punished. (22 C. J. S., 49.) Preliminary
investigation is eminently and essentially remedial; it is the first step taken in a criminal prosecution.

As a rule of evidence, section 11 of Rule 108 is also procedural. Evidence — which is "the mode and
manner of proving the competent facts and circumstances on which a party relies to establish the fact in
dispute in judicial proceedings" — is identified with and forms part of the method by which, in private
law, rights are enforced and redress obtained, and, in criminal law, a law transgressor is punished.
Criminal procedure refers to pleading, evidence and practice. (State vs. Capaci, 154 So., 419; 179 La.,
462.) The entire rules of evidence have been incorporated into the Rules of Court. We can not tear down
section 11 of Rule 108 on constitutional grounds without throwing out the whole code of evidence
embodied in these Rules.

In Beazell vs. Ohio, 269 U. S., 167, 70 Law. ed., 216, the United States Supreme Court said:

"Expressions are to be found in earlier judicial opinions to the effect that the constitutional limitation
may be transgressed by alterations in the rules of evidence or procedure. And there may be procedural
changes which operate to deny to the accused a defense available under the laws in force at the time of
the commission of his offense, or which otherwise affect him in such a harsh and arbitrary manner as to
fall within the constitutional prohibition. But it is now well settled that statutory changes in the mode of
trial or the rules of evidence, which do not deprive the accused of a defense and which operate only in a
limited and unsubstantial manner to his disadvantage, are not prohibited. A statute which, after
indictment, enlarges the class of persons who may be witnesses at the trial, by removing the
disqualification of persons convicted of felony, is not an ex post facto law. Nor is a statute which
changes the rules of evidence after the indictment so as to render admissible against the accused
evidence previously held inadmissible, or which changes the place of trial, or which abolishes a court for
hearing criminal appeals, creating a new one in its stead.

The curtailment of the right of an accused in a preliminary investigation to cross-examine the witnesses
who had given evidence for his arrest is of such importance as to offend against the constitutional
inhibition. As we have said in the beginning, preliminary investigation is not an essential part of due
process of law. It may be suppressed entirely, and if this may be done, mere restriction of the privilege
formerly enjoyed thereunder can not be held to fall within the constitutional prohibition.

While section 11 of Rule 108 denies to the defendant the right to cross-examine witnesses in a
preliminary investigation, his right to present his witnesses remains unaffected, and his constitutional
right to be informed of the charges against him both at such investigation and at the trial is unchanged.
In the latter stage of the proceedings, the only stage where the guaranty of due process comes into play,
he still enjoys to the full extent the right to be confronted by and to cross-examine the witnesses against
him. The degree of importance of a preliminary investigation to an accused may be gauged by the fact
that this formality is frequently waived.

The distinction between "remedy" and "substantive right" is incapable of exact definition. The
difference is somewhat a question of degree. (Dexter vs. Edmands, 89 F., 467; Beazell vs. Ohio, supra.) It
is difficult to draw a line in any particular case beyond which legislative power over remedy and
procedure can pass without touching upon the substantive rights of parties affected, as it is impossible
to fix that boundary by general condition. (State vs. Pavelick, 279 P., 1102.) This being so, it is inevitable
that the Supreme Court in making rules should step on substantive rights, and the Constitution must be
presumed to tolerate if not to expect such incursion as does not affect the accused in a harsh and
arbitrary manner or deprive him of a defense, but operates only in a limited and unsubstantial manner
to his disadvantage. For the Court's power is not merely to compile, revise or codify the rules of
procedure existing at the time of the Constitution's approval. This power is "to promulgate rules
concerning pleading, practice, and procedure in all courts," which is a power to adopt a general,
complete and comprehensive system of procedure, adding new and different rules without regard to
their source and discarding old ones.

Primicias v. Ocampo, G.R. No. L-6120, June 30, 1953

FACTS: Petitioner invokes his right to the assistance of assessors to consider the questions of fact
involved in the two criminal cases against him. The assistance of assessors is in accordance with the
provisions of the Revised Charter of Manila but the lower court denied the motion holding that the
promulgation of the Rules of Court by the Supreme Court which expressly omitted the portions of the
Code of Civil Procedure regarding assessors is an express repeal. Petitioner argues that the right to trial
with the assistance of assessors is a substantive right which cannot impaired by this court in the exercise
of its rule-making power.
ISSUE: WON the assistance of assessors is a substantive right

HELD: Yes. Granted petition

"Rules of procedure should be distinguished from substantive law. A substantive law creates, defines or
regulates rights concerning life, liberty or property, or the powers of agencies or instrumentalities for
the administration of public affairs, whereas rules of procedure are provisions prescribing the method
by which substantive rights may be enforced in courts of justice." (Moran, Comments on the Rules of
Court, Vol. I, 1952 ed., p. 4.)

The trial with the aid of assessors as granted by section 154 of the Code of Civil Procedure and section
2477 of the old Charter of Manila are parts of substantive law and as such are not embraced by the rule
making power of the Supreme Court. This is so because in said section 154 this matter is referred to as a
right given by law to a party litigant. Section 2477 of the Administrative Code of 1917 is couched in such
a manner that a similar right is implied when invoked by a party litigant. It says that the aid may be
invoked in the manner provided in the Code of Civil Procedure. And this right has been declared
absolute and substantial by this Court in several cases where the aid of assessors had been invoked
(Berbari vs. Concepcion, et al., 40 Phil., 320; Colegio de San Jose vs. Sison, 54 Phil., 344).

There is a point in the claim that the provisions concerning trial by assessors embodied in the Code of
Civil Procedure are not wholly substantive but portions thereof are remedial such as those which refer
to the method of summoning assessors, enforcing their attendance, excusing them from attendance,
their compensation, oath, duties and effect of dissent from the opinion of the judge, as to which no
cogent reason is seen for their non-incorporation if the intent is not to eliminate them from the Rules of
Court. This is true; but it is likewise true that because said remedial provisions are inextricably
interwoven with the substantive part, it must have been deemed wise and proper to leave them as they
were for reasons of coordination and expediency, it being a truism that the one cannot be detached
from the other. Ubi jus ibi remedium. Remedial measures are but implementary in character and they
must be appended to the portion of the law to which they belong. Mention should be made here that
not all of the provisions appearing in the Code of Civil Procedure are remedial in nature, such as those
pertaining to prescription, the requisites for making a will, and the succession of the estate of an
adopted child, which are admittedly substantive in character and for that reason were not incorporated
in the Rules of Court. To this group belong the provisions under consideration.

Neypes v. Court of Appeals, G.R. No. 141524, September 14, 2005

FACTS: The Court of Appeals upheld the denial by the RTC of petitioner’s notice of appeal because it was
filed 8 days late. The CA held that that the 15-day period to appeal should have been reckoned from
March 3, 1998 or the day they received the February 12, 1998 order dismissing their complaint.
According to the appellate court, the order was the “final order” appealable under the Rules.

Neypes contends that they had seasonably filed their notice of appeal with the RTC. They argued that
the 15-day reglementary period to appeal started to run only on July 22, 1998 since this was the day
they received the final order of the trial court denying their motion for reconsideration. When they
filed their notice of appeal on July 27, 1998, only five days had elapsed and they were well within the
reglementary period for appeal.

ISSUE: WON the appeal was filed within the reglementary period

HELD: Yes. Granted petition.

In National Waterworks and Sewerage Authority and Authority v. Municipality of Libmanan,[23]

however, we declared that appeal is an essential part of our judicial system and the rules of procedure
should not be applied rigidly. This Court has on occasion advised the lower courts to be cautious about
not depriving a party of the right to appeal and that every party litigant should be afforded the amplest
opportunity for the proper and just disposition of his cause, free from the constraint of technicalities.

In de la Rosa v. Court of Appeals,[24] we stated that, as a rule, periods which require litigants to do
certain acts must be followed unless, under exceptional circumstances, a delay in the filing of an appeal
may be excused on grounds of substantial justice. There, we condoned the delay incurred by the
appealing party due to strong considerations of fairness and justice.

In setting aside technical infirmities and thereby giving due course to tardy appeals, we have not been
oblivious to or unmindful of the extraordinary situations that merit liberal application of the Rules. In
those situations where technicalities were dispensed with, our decisions were not meant to undermine
the force and effectivity of the periods set by law. But we hasten to add that in those rare cases where
procedural rules were not stringently applied, there always existed a clear need to prevent the
commission of a grave injustice. Our judicial system and the courts have always tried to maintain a
healthy balance between the strict enforcement of procedural laws and the guarantee that every litigant
be given the full opportunity for the just and proper disposition of his cause.

The Supreme Court may promulgate procedural rules in all courts.[26] It has the sole prerogative to
amend, repeal or even establish new rules for a more simplified and inexpensive process, and the
speedy disposition of cases. In the rules governing appeals to it and to the Court of Appeals, particularly
Rules 42,[27] 43[28] and 45,[29] the Court allows extensions of time, based on justifiable and compelling
reasons, for parties to file their appeals. These extensions may consist of 15 days or more.

To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal
their cases, the Court deems it practical to allow a fresh period of 15 days within which to file the notice
of appeal in the Regional Trial Court, counted from receipt of the order dismissing a motion for a new
trial or motion for reconsideration. [30]

Henceforth, this “fresh period rule” shall also apply to Rule 40 governing appeals from the Municipal
Trial Courts to the Regional Trial Courts; Rule 42 on petitions for review from the Regional Trial Courts to
the Court of Appeals; Rule 43 on appeals from quasi-judicial agencies[31] to the Court of Appeals and
Rule 45 governing appeals by certiorari to the Supreme Court.[32] The new rule aims to regiment or
make the appeal period uniform, to be counted from receipt of the order denying the motion for new
trial, motion for reconsideration (whether full or partial) or any final order or resolution.

We thus hold that petitioners seasonably filed their notice of appeal within the fresh period of 15 days,
counted from July 22, 1998 (the date of receipt of notice denying their motion for reconsideration).

Alvero v. de la Rosa, G.R. No. L-286, March 29, 1946

FACTS: Alvero’s appeal of the decision of the lower court against him in a civil case of double sale was
dismissed because he failed to file the appeal bond.

On November 28, 1945, Fredesvindo S. Alvero was notified of said decision; and on December 27, 1945,
he filed a petition for reconsideration and new trial, which was denied on January 3, 1946; and of said
order he was notified on January 7, 1946. On January 8, 1946, Fredesvindo S. Alvero filed his notice of
appeal and record on' appeal simultaneously in the lower court, without filing the P60 appeal bond.

On January 14, 1946, Jose R. Victoriano filed a petition to dismiss the appeal, and at the same time,
asked for the execution of the judgment. On January 15, 1946, Fredesvindo S. Alvero filed an opposition
to said motion to dismiss, alleging that on the very same day, January 15, 1946, said appeal bond for P60
had been actually filed, and alleged as an excuse, for not filing the said appeal bond, in due time, the
illness of his lawyer's wife, who died on January 10, 1946, and buried the following day.

ISSUE: WON the appeal bond was filed on time

Correct: 1935 1987 Congress has a plenary power to repeal and supplement the Supreme court rules of
procedure . Creates substantive right.
HELD: No. Dismissed.

Rules of courts, promulgated by authority of law, have the force and effect of law; and rules of court
prescribing the time within which certain acts must be done, or certain proceedings taken, are
considered absolutely indispensable to the prevention of needless delays and to the orderly and speedy
discharge of judicial business. (Shioji vs. Harvey, 43 Phil., 333.)

Strict compliance with the rules of court has been held mandatory and imperative, so that failure to pay
the docket fee in the Supreme Court, within the period fixed for that purpose, will cause the dismissal of
the appeal. (Salaveria vs. Albindo, 39 Phil., 922.)

In the same manner, on failure of the appellant in a civil case to serve his brief, within the time
prescribed by said rules, on motion of the appellee and notice to the appellant, or on its own motion,
the court may dismiss the appeal. (Shioji vs. Harvey, 43 Phil., 333.)

Unfortunately, counsel for petitioner has created a difficult situation. In his motion for reconsideration
and new trial, dated December 27, 1945, he did not point out specifically the findings or conclusions in
the judgment, which are not supported by the evidence or which are contrary to law, making express
reference to the pertinent evidence or legal provisions, as expressly required by Rule 37, section 2,
paragraph (c) of the Rules of Court. Motions of that kind have been considered as motions pro forma
intended merely to delay the proceeding, and, as such, they cannot and will not interrupt or suspend
the period of time for the perfection of the appeal. (Valdez vs. Jugo, 74 Phil., 49, and Reyes vs. Court of
Appeals and Bautista, 74 Phil., 235.) Hence, the period for perfecting herein petitioner's appeal
commenced from November 28, 1945, when he was notified of the judgment rendered in the case, and
expired on December 28, 1945; and, therefore, his notice of appeal and record on appeal filed on
January 8, 1946, were filed out of time, and much more so his appeal bond, which was only filed on
January 15, 1946.

Basic Concepts
Jose v. Javellana, G.R. No. 158239, January 25, 2012
FACTS: Jose’s mother and Javellana executed a conditional deed of sale. When the mother died, Jose
refused to execute a deed of sale and started dumping filling materials on the property. Javellana filed a
complaint for specific performance but the lower court granted Jose’s motion to dismiss for lack of
cause of action. But on appeal, the Court of Appeals reversed the dismissal after Javellana filed a motion
for reconsideration. Jose assails the CA’s decision contending that the denial of the MR is not appealable
and the appeal was filed out of time. Priscilla Jose insists that Javellana filed his notice of appeal out of
time. She points out that he received a copy of the June 24, 1999 order on July 9, 1999, and filed his
motion for reconsideration on July 21, 1999 (or after the lapse of 12 days); that the RTC denied his
motion for reconsideration through the order of June 21, 2000, a copy of which he received on July 13,
2000; that he had only three days from July 13, 2000, or until July 16, 2000, within which to perfect an
appeal; and that having filed his notice of appeal on July 19, 2000, his appeal should have been
dismissed for being tardy by three days beyond the expiration of the reglementary period.

Jose also argues that Javellana was forum shopping because he filed the petition for review while the
appeal was still pending

ISSUE: WON the denial of the motion for reconsideration of the dismissal was appealable and if the
appeal was filed on time. WON Javellana is guilty of forum shopping

HELD: The denial of the MR is a final order and is appealable. The appeal was filed on time pursuant to
the Neypes fresh period rule. No forum shopping.

The denial of Javellana’s motion for reconsideration left nothing more to be done by the RTC because it
confirmed the dismissal of Civil Case No. 79-M-97. It was clearly a final order, not an interlocutory one.

The distinction between a final order and an interlocutory order is well known. The first disposes of the
subject matter in its entirety or terminates a particular proceeding or action, leaving nothing more to be
done except to enforce by execution what the court has determined, but the latter does not completely
dispose of the case but leaves something else to be decided upon. An interlocutory order deals with
preliminary matters and the trial on the merits is yet to be held and the judgment rendered. The test
to ascertain whether or not an order or a judgment is interlocutory or final is: does the order or
judgment leave something to be done in the trial court with respect to the merits of the case? If it does,
the order or judgment is interlocutory; otherwise, it is final.

And, secondly, whether an order is final or interlocutory determines whether appeal is the correct
remedy or not. A final order is appealable, to accord with the final judgment rule enunciated in Section
1, Rule 41 of the Rules of Court to the effect that “appeal may be taken from a judgment or final order
that completely disposes of the case, or of a particular matter therein when declared by these Rules to
be appealable;”[23] but the remedy from an interlocutory one is not an appeal but a special civil action
for certiorari. The explanation for the differentiation of remedies given in Pahila-Garrido v. Tortogo is
apt:

xxx The reason for disallowing an appeal from an interlocutory order is to avoid multiplicity of appeals in
a single action, which necessarily suspends the hearing and decision on the merits of the action during
the pendency of the appeals. Permitting multiple appeals will necessarily delay the trial on the merits of
the case for a considerable length of time, and will compel the adverse party to incur unnecessary
expenses, for one of the parties may interpose as many appeals as there are incidental questions raised
by him and as there are interlocutory orders rendered or issued by the lower court. An interlocutory
order may be the subject of an appeal, but only after a judgment has been rendered, with the ground
for appealing the order being included in the appeal of the judgment itself.

The remedy against an interlocutory order not subject of an appeal is an appropriate special civil action
under Rule 65, provided that the interlocutory order is rendered without or in excess of jurisdiction or
with grave abuse of discretion. Then is certiorari under Rule 65 allowed to be resorted to.

Indeed, the Court has held that an appeal from an order denying a motion for reconsideration of a
final order or judgment is effectively an appeal from the final order or judgment itself; and has expressly
clarified that the prohibition against appealing an order denying a motion for reconsideration
referred only to a denial of a motion for reconsideration of an interlocutory order.

Fresh Period Rule

The fresh period rule may be applied to this case, for the Court has already retroactively extended the
fresh period rule to “actions pending and undetermined at the time of their passage and this will not
violate any right of a person who may feel that he is adversely affected, inasmuch as there are no vested
rights in rules of procedure.”[27] According to De los Santos v. Vda. de Mangubat:[28]

Procedural law refers to the adjective law which prescribes rules and forms of procedure in order that
courts may be able to administer justice. Procedural laws do not come within the legal conception of a
retroactive law, or the general rule against the retroactive operation of statues ― they may be given
retroactive effect on actions pending and undetermined at the time of their passage and this will not
violate any right of a person who may feel that he is adversely affected, insomuch as there are no vested
rights in rules of procedure.

The “fresh period rule” is a procedural law as it prescribes a fresh period of 15 days within which an
appeal may be made in the event that the motion for reconsideration is denied by the lower court.
Following the rule on retroactivity of procedural laws, the "fresh period rule" should be applied to
pending actions, such as the present case.

Forum Shopping
Forum shopping is the act of a party litigant against whom an adverse judgment has been rendered in
one forum 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 or supposition that one or the other court would make a favorable disposition. Forum
shopping happens when, in the two or more pending cases, there is identity of parties, identity of rights
or causes of action, and identity of reliefs sought. Where the elements of litis pendentia are present,
and where a final judgment in one case will amount to res judicata in the other, there is forum shopping.
For litis pendentia to be a ground for the dismissal of an action, there must be: (a) identity of the parties
or at least such as to represent the same interest in both actions; (b) identity of rights asserted and relief
prayed for, the relief being founded on the same acts; and (c) the identity in the two cases should be
such that the judgment which may be rendered in one would, regardless of which party is successful,
amount to res judicata in the other.

For forum shopping to exist, both actions must involve the same transaction, same essential facts and
circumstances and must raise identical causes of action, subject matter and issues. Clearly, it does not
exist where different orders were questioned, two distinct causes of action and issues were raised, and
two objectives were sought.

The remedies of appeal and certiorari under Rule 65 are mutually exclusive and not alternative or
cumulative. This is a firm judicial policy. The petitioner cannot hedge her case by wagering two or more
appeals, and, in the event that the ordinary appeal lags significantly behind the others, she cannot post
facto validate this circumstance as a demonstration that the ordinary appeal had not been speedy or
adequate enough, in order to justify the recourse to Rule 65. This practice, if adopted, would sanction
the filing of multiple suits in multiple fora, where each one, as the petitioner couches it, becomes a
“precautionary measure” for the rest, thereby increasing the chances of a favorable decision. This is the
very evil that the proscription on forum shopping seeks to put right. In Guaranteed Hotels, Inc. v. Baltao,
the Court stated that the grave 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
strictly to the rules against forum shopping, and any violation of these rules results in the dismissal of
the case.

In this case, the appeal and the petition for certiorari actually sought different objectives. In his appeal
in C.A.-G.R. CV No. 68259, Javellana aimed to undo the RTC’s erroneous dismissal of Civil Case No. 79-M-
97 to clear the way for his judicial demand for specific performance to be tried and determined in due
course by the RTC; but his petition for certiorari had the ostensible objective “to prevent (Priscilla) from
developing the subject property and from proceeding with the ejectment case until his appeal is finally
resolved,” as the CA explicitly determined in its decision in C.A.-G.R. SP No. 60455.[34]

Nor were the dangers that the adoption of the judicial policy against forum shopping designed to
prevent or to eliminate attendant. The first danger, i.e., the multiplicity of suits upon one and the same
cause of action, would not materialize considering that the appeal was a continuity of Civil Case No. 79-
M-97, whereas C.A.-G.R. SP No. 60455 dealt with an independent ground of alleged grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the RTC. The second danger, i.e., the
unethical malpractice of shopping for a friendly court or judge to ensure a favorable ruling or judgment
after not getting it in the appeal, would not arise because the CA had not yet decided C.A.-G.R. CV No.
68259 as of the filing of the petition for certiorari.

Samahan ng mga Manggagawa sa Hyatt v. Hon. Magsalin, G.R. No. 172303, June 6,
2011
FACTS: The case is a consolidation of two petitions, one is a petition for certiorari for the CA’s dismissal
of petitioner’s petition for review for being the wrong remedy and the second petition assails the CA’s
deletion of the financial assistance awarded by the VA.

A union officer, Caragdag, was dismissed by the hotel for serious misconduct after committing 3
different acts of misconduct within a 12 month period. The VA held the dismissal was valid and ordered
the hotel to pay financial assistance of 100K to the dismissed employee. On appeal, the CA affirmed the
dismissal but deleted the award of financial assistance because the grant of separation pay or other
financial assistance to an employee dismissed for just cause is based on equity and is a measure of social
justice, awarded to an employee who has been validly dismissed if the dismissal was not due to serious
misconduct or causes that reflected adversely on the moral character of the employee.

ISSUE: whether the CA erred in dismissing outright the petition for certiorari filed before it on the
ground that the same is an improper mode of appeal; and second, whether the CA erred in deleting the
award of financial assistance in the amount of P100,000.00 to Caragdag.

HELD:

On the first issue, petitioner argues that because decisions rendered by voluntary arbitrators are issued
under Title VII-A of the Labor Code, they are not covered by Rule 43 of the 1997 Rules of Civil Procedure,
as amended, by express provision of Section 2 thereof. Section 2, petitioner points out, expressly
provides that Rule 43 “shall not apply to judgments or final orders issued under the Labor Code of the
Philippines.” Hence, a petition for certiorari under Rule 65 is the proper remedy for questioning the
decision of the Voluntary Arbitrator, and petitioner having availed of such remedy, the CA erred in
declaring that the petition was filed out of time since the petition was filed within the sixty (60)-day
reglementary period.

On the other hand, respondent maintains that the CA acted correctly in dismissing the petition for
certiorari for being the wrong mode of appeal. It stresses that Section 1 of Rule 43 clearly states that it
is the governing rule with regard to appeals from awards, judgments, final orders or resolutions of
voluntary arbitrators. Respondent contends that the voluntary arbitrators authorized by law include the
voluntary arbitrators appointed and accredited under the Labor Code, as they are considered as
included in the term “quasi-judicial instrumentalities.”
In the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v. Bacungan,[26] we repeated
the well-settled rule that a decision or award of a voluntary arbitrator is appealable to the CA via
petition for review under Rule 43. We held that:

The question on the proper recourse to assail a decision of a voluntary arbitrator has already
been settled in Luzon Development Bank v. Association of Luzon Development Bank Employees, where
the Court held that the decision or award of the voluntary arbitrator or panel of arbitrators should
likewise be appealable to the Court of Appeals, in line with the procedure outlined in Revised
Administrative Circular No. 1-95 (now embodied in Rule 43 of the 1997 Rules of Civil Procedure), just like
those of the quasi-judicial agencies, boards and commissions enumerated therein, and consistent with
the original purpose to provide a uniform procedure for the appellate review of adjudications of all
quasi-judicial entities.

“The provisions may be new to the Rules of Court but it is far from being a new law. Section 2, Rules 42
of the 1997 Rules of Civil Procedure, as presently worded, is nothing more but a reiteration of the
exception to the exclusive appellate jurisdiction of the Court of Appeals, as provided for in Section 9,
Batas Pambansa Blg. 129, as amended by Republic Act No. 7902:

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions,
including the Securities and Exchange Commission, the Employees’ Compensation Commission and the
Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442,
as amended, the provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph
(4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

“The Court took into account this exception in Luzon Development Bank but, nevertheless, held that the
decisions of voluntary arbitrators issued pursuant to the Labor Code do not come within its ambit x x x”

Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil Procedure, as amended,
provide:

SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the Court of Tax
Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial
agency in the exercise of its quasi-judicial functions. Among these agencies are the x x x, and voluntary
arbitrators authorized by law.

xxxx

SEC. 3. Where to appeal. - An appeal under this Rule may be taken to the Court of Appeals within the
period and in the manner therein provided, whether the appeal involves questions of fact, of law, or
mixed questions of fact and law.

SEC. 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from notice of the award,
judgment, final order or resolution, or from the date of its last publication, if publication is required by
law for its effectivity, or of the denial of petitioner’s motion for new trial or reconsideration duly filed in
accordance with the governing law of the court or agency a quo. x x x. (Emphasis supplied.)

Hence, upon receipt on May 26, 2003 of the Voluntary Arbitrator’s Resolution denying petitioner’s
motion for reconsideration, petitioner should have filed with the CA, within the fifteen (15)-day
reglementary period, a petition for review, not a petition for certiorari.

Petitioner insists on a liberal interpretation of the rules but we find no cogent reason in this case to
deviate from the general rule. Verily, rules of procedure exist for a noble purpose, and to disregard such
rules in the guise of liberal construction would be to defeat such purpose. Procedural rules are not to be
disdained as mere technicalities. They may not be ignored to suit the convenience of a party. Adjective
law ensures the effective enforcement of substantive rights through the orderly and speedy
administration of justice. Rules are not intended to hamper litigants or complicate litigation. But they
help provide for a vital system of justice where suitors may be heard following judicial procedure and in
the correct forum. Public order and our system of justice are well served by a conscientious observance
by the parties of the procedural rules.

Financial assistance

The grant of separation pay or some other financial assistance to an employee dismissed for just causes
is based on equity.[29] In Phil. Long Distance Telephone Co. v. NLRC,[30] we ruled that severance
compensation, or whatever name it is called, on the ground of social justice shall be allowed only when
the cause of the dismissal is other than serious misconduct or for causes which reflect adversely on the
employee’s moral character. The Court succinctly discussed the propriety of the grant of separation pay
in this wise:

We hold that henceforth separation pay shall be allowed as a measure of social justice only in
those instances where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a
fellow worker, the employer may not be required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather
than punishing the erring employee for his offense. And we do not agree that the punishment is his
dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of
course it has. Indeed, if the employee who steals from the company is granted separation pay even as
he is validly dismissed, it is not unlikely that he will commit a similar offense in his next employment
because he thinks he can expect a like leniency if he is again found out. This kind of misplaced
compassion is not going to do labor in general any good as it will encourage the infiltration of its ranks
by those who do not deserve the protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives blameless and
not simply because they happen to be poor. This great policy of our Constitution is not meant for the
protection of those who have proved they are not worthy of it, like the workers who have tainted the
cause of labor with the blemishes of their own character.[31]

Here, Caragdag’s dismissal was due to several instances of willful disobedience to the reasonable
rules and regulations prescribed by his employer. The Voluntary Arbitrator pointed out that according
to the hotel’s Code of Discipline, an employee who commits three different acts of misconduct within a
twelve (12)-month period commits serious misconduct. He stressed that Caragdag’s infractions were
not even spread in a period of twelve (12) months, but rather in a period of a little over a month.
Records show the various violations of the hotel’s rules and regulations were committed by Caragdag.
He was suspended for violating the hotel policy on bag inspection and body frisking. He was likewise
suspended for threatening and intimidating a superior while the latter was counseling his staff. He was
again suspended for leaving his work assignment without permission. Evidently, Caragdag’s acts
constitute serious misconduct.

In Piedad v. Lanao del Norte Electric Cooperative, Inc.,[32] we ruled that a series of irregularities
when put together may constitute serious misconduct, which under Article 282 of the Labor Code, as
amended, is a just cause for dismissal.

Caragdag’s dismissal being due to serious misconduct, it follows that he should not be entitled to
financial assistance. To rule otherwise would be to reward him for the grave misconduct he committed.
We must emphasize that social justice is extended only to those who deserve its compassion.[33]

Panay Railways, Inc. v. Heva Management, G.R. No. 154061, January 25, 2012
FACTS: The present Petition stems from the dismissal by the Regional Trial Court (RTC) of Iloilo City of a
Notice of Appeal for petitioner’s failure to pay the corresponding docket fees. In 1990, the properties of
Panay Railway were sold in an extrajudicial foreclosure to Traders Royal Bank. But in 1994, petitioner
realized that the extrajudicial foreclosure included some excluded properties in the mortgage contract.
Hence, PRI filed a complaint against respondent. On July 18, 1997, the lower court dismissed the
complaint holding that the Manifestation and Motion filed by petitioner was a judicial admission of
TRB’s ownership of the disputed properties. On 11 August 1997, petitioner filed a Notice of Appeal
without paying the necessary docket fees. Immediately thereafter, respondents filed a Motion to
Dismiss Appeal on the ground of nonpayment of docket fees. In its Opposition, petitioner alleged that
its counsel was not yet familiar with the revisions of the Rules of Court that became effective only on 1
July 1997. Its representative was likewise not informed by the court personnel that docket fees needed
to be paid upon the filing of the Notice of Appeal. Furthermore, it contended that the requirement for
the payment of docket fees was not mandatory. It therefore asked the RTC for a liberal interpretation of
the procedural rules on appeals.
On 29 September 1997, the RTC issued an Order[8] dismissing the appeal citing Sec. 4 of Rule 41[9] of
the Revised Rules of Court. Petitioner thereafter moved for a reconsideration of the Order[10] alleging
that the trial court lost jurisdiction over the case after the former had filed the Notice of Appeal.
Petitioner also alleged that the court erred in failing to relax procedural rules for the sake of substantial
justice.

On 28 January 1998, petitioner filed with the Court of Appeals (CA) a Petition for Certiorari and
Mandamus under Rule 65 alleging that the RTC had no jurisdiction to dismiss the Notice of Appeal, and
that the trial court had acted with grave abuse of discretion when it strictly applied procedural rules.
The CA held that the RTC had no jurisdiction to dismiss the appeal. But prior to the promulgation of the
CA’s decision, the SC issued (A.M.) No. 00-2-10-SC which took effect on 1 May 2000, amending Rule 4,
Sec. 7 and Sec. 13 of Rule 41 of the 1997 Revised Rules of Court. The circular expressly provided that
trial courts may, motu proprio or upon motion, dismiss an appeal for being filed out of time or for
nonpayment of docket and other lawful fees within the reglementary period. Subsequently, Circular No.
48-2000[13] was issued on 29 August 2000 and was addressed to all lower courts.

By virtue of the amendment to Sec. 41, the CA upheld the questioned Orders of the trial court by issuing
the assailed Amended Decision[14] in the present Petition granting respondents’ Motion for
Reconsideration.

ISSUE: WON procedural rules should be relaxed in this case

HELD: No.

Statutes and rules regulating the procedure of courts are considered applicable to actions pending and
unresolved at the time of their passage. Procedural laws and rules are retroactive in that sense and to
that extent. The effect of procedural statutes and rules on the rights of a litigant may not preclude their
retroactive application to pending actions. This retroactive application does not violate any right of a
person adversely affected. Neither is it constitutionally objectionable. The reason is that, as a general
rule, no vested right may attach to or arise from procedural laws and rules. It has been held that “a
person has no vested right in any particular remedy, and a litigant cannot insist on the application to the
trial of his case, whether civil or criminal, of any other than the existing rules of procedure.”[16] More so
when, as in this case, petitioner admits that it was not able to pay the docket fees on time. Clearly, there
were no substantive rights to speak of when the RTC dismissed the Notice of Appeal.

The argument that the CA had the exclusive jurisdiction to dismiss the appeal has no merit. When this
Court accordingly amended Sec. 13 of Rule 41 through A.M. No. 00-2-10-SC, the RTC’s dismissal of the
action may be considered to have had the imprimatur of the Court. Thus, the CA committed no
reversible error when it sustained the dismissal of the appeal, taking note of its directive on the matter
prior to the promulgation of its Decision.

As early as 1932, in Lazaro v. Endencia,[17] we have held that the payment of the full amount of the
docket fees is an indispensable step for the perfection of an appeal. The Court acquires jurisdiction over
any case only upon the payment of the prescribed docket fees.[18]
Moreover, the right to appeal is not a natural right and is not part of due process. It is merely a statutory
privilege, which may be exercised only in accordance with the law.[19]

We have repeatedly stated that the term “substantial justice” is not a magic wand that would
automatically compel this Court to suspend procedural rules. Procedural rules are not to be belittled or
dismissed simply because their non-observance may result in prejudice to a party’s substantive rights.
Like all other rules, they are required to be followed, except only for the most persuasive of reasons
when they may be relaxed to relieve litigants of an injustice not commensurate with the degree of their
thoughtlessness in not complying with the procedure prescribed.[20]

We cannot consider counsel’s failure to familiarize himself with the Revised Rules of Court as a
persuasive reason to relax the application of the Rules. It is well-settled that the negligence of counsel
binds the client. This principle is based on the rule that any act performed by lawyers within the scope of
their general or implied authority is regarded as an act of the client. Consequently, the mistake or
negligence of the counsel of petitioner may result in the rendition of an unfavorable judgment against it.

Tan v. Court of Appeals, G.R. No. 136368, January 16, 2002

FACTS: In a civil action for reformation of a deed of absolute sale into an equitable mortgage, the lower
court rendered a decision on June 4, 1991 reforming the contract into an equitable mortgage and
ordering Tan to redeem the property from Magdangal within 120 days from finality of judgment. On
September 28, 1995, the CA affirmed the RTC decision and became final and executor on October 21,
1995. The decision was entered in the Book of Entries of Judgement on March 13, 1996. On June 10,
1996, the trial court allowed the petitioner to redeem the lot in question. It ruled that the 120-day
redemption period should be reckoned from the date of Entry of Judgment in the appellate court or
from March 13, 1996. But the appellate court set aside the ruling of the trial court, applying the 1997
Rules of Civil Procedure as to the execution of final judgments.

ISSUE: WON the CA erred in applying the 1997 Rules to the case

HELD: Yes.

From 1991-1996, the years relevant to the case at bar, the rule that governs finality of judgment is Rule
51 of the Revised Rules of Court. Its sections 10 and 11 provide that “If no appeal or motion for new
trial or reconsideration is filed within the time provided in these Rules, the judgment or final resolution
shall forthwith be entered by the clerk in the book of entries of judgments. The date when the
judgment or final resolution becomes executory shall be deemed as the date of its entry. Except where
the judgment or final order or resolution, or a portion thereof, is ordered to be immediately executory,
the motion for its execution may only be filed in the proper court after its entry.”

On April 18, 1994, this Court issued Circular No. 24-94, which took effect on June 1, 1994, provides that
“Execution shall issue as a matter of right, on motion, upon a judgment or order that disposes of the
action or proceeding upon expiration of the period to appeal therefrom if no appeal has been duly
perfected. If the appeal has been duly perfected and finally resolved, such execution may forthwith be
applied for in the lower court from which the action originated, on motion of the judgment obligee,
submitting therewith certified true copies of the judgment or judgments or the final order or orders
sought to be enforced and of the entry thereof, with notice to the adverse party. The appellate court
may, on motion in the same case, when the interest of justice so requires, direct the court of origin to
issue the writ of execution.”

The 1997 Revised Rules of Civil Procedure, however, amended the rule on finality of judgment by
providing in section 1, Rule 39 as follows

“Section 1. Execution upon judgments or final orders. – Execution shall issue as a matter of right, on
motion, upon a judgment or order that disposes of the action or proceeding upon the expiration of the
period to appeal therefrom if no appeal has been duly perfected. (1a)

If the appeal has been duly perfected and finally resolved, the execution may forthwith be applied for in
the court of origin, on motion of the judgment obligee, submitting therewith certified true copies of the
judgment or judgments or final order or orders sought to be enforced and of the entry thereof, with
notice to the adverse party.

The appellate court may, on motion in the same case, when the interest of justice so requires, direct the
court of origin to issue the writ of execution.”

The rationale of the new rule is explained by retired Justice F.D. Regalado as follows:[12]

“1. The term ‘final order’ is used in two senses depending on whether it is used on the issue of
appealability or on the issue of binding effect. For purposes of appeal, an order is “final” if it disposes of
the action, as distinguished from an interlocutory order which leaves something to be done in the trial
court with respect to the merits of the case (De la Cruz, et al. vs. Paras, et al., L-41053, Feb. 27, 1976).
For purposes of binding effect or whether it can be subject of execution, an order is ‘final’ or executory
after the lapse of the reglementary period to appeal and no appeal has been perfected (see Perez, et al.
vs. Zulueta, L-10374, Sept. 30, 1959; cf. Denso [Phil.], Inc. vs. IAC, et al., G.R. No. 75000, Feb. 27, 1987;
Montilla vs. CA, et al., L-47968, May 9, 1988).

2. On the aspect of appealability, these revised Rules use the adjective ‘final’ with respect to orders
and resolutions, since to terminate a case the trial courts issue orders while the appellate courts and
most of the quasi-judicial agencies issue resolutions. Judgments are not so qualified since the use of the
so-called interlocutory judgments is not favored in this jurisdiction, while the categorization of an order
or a resolution for purposes of denoting that it is appealable is to distinguish them from interlocutory
orders or resolutions. However, by force of extended usage the phrase ‘final and executory judgment’ is
sometimes used and tolerated, although the use of ‘executory’ alone would suffice. These observations
also apply to the several and separate judgments contemplated in Rule 36, or partial judgments which
totally dispose of a particular claim or severable part of the case, subject to the power of the court to
suspend or defer action on an appeal from or further proceedings in such special judgment, or as
provided by Rule 35 on the matter of partial summary judgments which are not considered as
appealable (see Sec. 4, Rule 35 and the explanation therein).
The second paragraph of this section is an innovation in response to complaints over the delay caused
by the former procedure in obtaining a writ of execution of a judgment, which has already been
affirmed on appeal, with notice to the parties. As things then stood, after the entry of judgment in the
appellate court, the prevailing party had to wait for the records of the case to be remanded to the court
of origin when and where he could then move for the issuance of a writ of execution. The intervening
time could sometimes be substantial, especially if the court a quo is in a remote province, and could also
be availed of by the losing party to delay or thwart actual execution.

On these considerations, the Supreme Court issued Circular No. 24-94, dated April 18, 1994, approving
and promulgating in advance this amended Section 1 of Rule 39 and declaring the same effective as of
June 1, 1994.

Under the present procedure, the prevailing party can secure certified true copies of the judgment or
final order of the appellate court and the entry thereof, and submit the same to the court of origin with
and to justify his motion for a writ of execution, without waiting for its receipt of the records from the
appellate court. That motion must be with notice to the adverse party, with a hearing when the
circumstances so require, to enable him to file any objection thereto or bring to the attention of said
court matters which may have transpired during the pendency of the appeal and which may have a
bearing on the execution sought to enforce the judgment.

The third paragraph of this section, likewise a new provision, is due to the experience of the appellate
courts wherein the trial court, for reasons of its own or other unjustifiable circumstances, unduly delays
or unreasonably refuses to act on the motion for execution or issue the writ therefor. On motion in the
same case while the records are still with the appellate court, or even after the same have been
remanded to the lower court, the appellate court can direct the issuance of the writ of execution since
such act is merely in the enforcement of its judgment and which it has the power to require.”

It is evident that if we apply the old rule on finality of judgment, petitioner redeemed the subject
property within the 120-day period of redemption reckoned from the appellate court’s entry of
judgment. The appellate court, however, did not apply the old rule but the 1997 Revised Rules of Civil
Procedure. In fine, it applied the new rule retroactively and we hold that given the facts of the case at
bar this is an error.

There is no dispute that rules of procedure can be given retroactive effect. This general rule, however,
has well-delineated exceptions. We quote author Agpalo:[13]

“9.17. Procedural laws.

Procedural laws are adjective laws which prescribe rules and forms of procedure of enforcing rights or
obtaining redress for their invasion; they refer to rules of procedure by which courts applying laws of all
kinds can properly administer justice. They include rules of pleadings, practice and evidence. As applied
to criminal law, they provide or regulate the steps by which one who commits a crime is to be punished.
The general rule that statutes are prospective and not retroactive does not ordinarily apply to
procedural laws. It has been held that “a retroactive law, in a legal sense, is one which takes away or
impairs vested rights acquired under laws, or creates a new obligation and imposes a new duty, or
attaches a new disability, in respect of transactions or considerations already past. Hence, remedial
statutes or statutes relating to remedies or modes of procedure, which do not create new or take away
vested rights, but only operate in furtherance of the remedy or confirmation of rights already existing,
do not come within the legal conception of a retroactive law, or the general rule against the retroactive
operation of statutes.” The general rule against giving statutes retroactive operation whose effect is to
impair the obligations of contract or to disturb vested rights does not prevent the application of statutes
to proceedings pending at the time of their enactment where they neither create new nor take away
vested rights. A new statute which deals with procedure only is presumptively applicable to all actions –
those which have accrued or are pending.

Statutes regulating the procedure of the courts will be construed as applicable to actions pending and
undetermined at the time of their passage. Procedural laws are retroactive in that sense and to that
extent. The fact that procedural statutes may somehow affect the litigants’ rights may not preclude
their retroactive application to pending actions. The retroactive application of procedural laws is not
violative of any right of a person who may feel that he is adversely affected. Nor is the retroactive
application of procedural statutes constitutionally objectionable. The reason is that as a general rule no
vested right may attach to, nor arise from, procedural laws. It has been held that “a person has no
vested right in any particular remedy, and a litigant cannot insist on the application to the trial of his
case, whether civil or criminal, of any other than the existing rules of procedure.”

9.18. Exceptions to the rule.

The rule that procedural laws are applicable to pending actions or proceedings admits certain
exceptions. The rule does not apply where the statute itself expressly or by necessary implication
provides that pending actions are excepted from its operation, or where to apply it to pending
proceedings would impair vested rights. Under appropriate circumstances, courts may deny the
retroactive application of procedural laws in the event that to do so would not be feasible or would
work injustice. Nor may procedural laws be applied retroactively to pending actions if to do so would
involve intricate problems of due process or impair the independence of the courts.”

We hold that section 1, Rule 39 of the 1997 Revised Rules of Procedure should not be given retroactive
effect in this case as it would result in great injustice to the petitioner. Undoubtedly, petitioner has the
right to redeem the subject lot and this right is a substantive right. Petitioner followed the procedural
rule then existing as well as the decisions of this Court governing the reckoning date of the period of
redemption when he redeemed the subject lot. Unfortunately for petitioner, the rule was changed by
the 1997 Revised Rules of Procedure which if applied retroactively would result in his losing the right to
redeem the subject lot. It is difficult to reconcile the retroactive application of this procedural rule with
the rule of fairness. Petitioner cannot be penalized with the loss of the subject lot when he faithfully
followed the laws and the rule on the period of redemption when he made the redemption. The subject
lot may only be 34,829 square meters but as petitioner claims, “it is the only property left behind by
their father, a private law practitioner who was felled by an assassin’s bullet.”[14]

Petitioner fought to recover this lot from 1988. To lose it because of a change of procedure on the date
of reckoning of the period of redemption is inequitous. The manner of exercising the right cannot be
changed and the change applied retroactively if to do so will defeat the right of redemption of the
petitioner which is already vested.

B. Philippine Courts
Nature
Phil. Carpet Manufaturing v. Tagyamon, G.R. No. 191475, December 11, 2013
FACTS: Respondents are employees of petitioner who were affected by petitioner’s retrenchment and
voluntary retirement programs. The employees filed a complaint for illegal dismissal invoking the SC
ruling in Philippine Carpet Employees Association (PHILCEA) v. Hon. Sto. Tomas (Philcea case), as to the
validity of the company’s retrenchment program. The LA upheld the dismissal and so did the NLRC on
appeal holding that the employees voluntarily retired and the complaint is a mere afterthought and that
the principle of laches applies. The CA however reversed the LA and NLRC and refused to apply the
principle of laches, because the case was instituted prior to the expiration of the prescriptive period set
by law which is four years. It stressed that said principle cannot be invoked earlier than the expiration of
the prescriptive period. The CA ordered reinstatement with full backwages. Hence the instant case.
Petitioner contends that the Philcea case decided by this Court and relied upon by the CA in the assailed
decision was based on erroneous factual findings, inapplicable financial statement, as well as erroneous
analysis of such financial statements. They, thus, implore the Court to revisit the cited case in order to
dispense with substantial justice.

ISSUE: WON the principle of laches apply; WON there is stare decisis

HELD: No.

Laches

Laches has been defined as the failure or neglect for an unreasonable and unexplained length of time to
do that which by exercising due diligence, could or should have been done earlier, thus, giving rise to a
presumption that the party entitled to assert it either has abandoned or declined to assert it.30 It has
been repeatedly31 held by the Court that:

x x x Laches is a doctrine in equity while prescription is based on law. Our courts are basically courts of
law not courts of equity. Thus, laches cannot be invoked to resist the enforcement of an existing legal
right. x x x Courts exercising equity jurisdiction are bound by rules of law and have no arbitrary
discretion to disregard them. In Zabat Jr. v. Court of Appeals x x x, this Court was more emphatic in
upholding the rules of procedure. We said therein:
As for equity which has been aptly described as a "justice outside legality," this is applied only in the
absence of, and never against, statutory law or, as in this case, judicial rules of procedure. Aequetas
nunguam contravenit legis. The pertinent positive rules being present here, they should preempt and
prevail over all abstract arguments based only on equity.

Thus, where the claim was filed within the [four-year] statutory period, recovery therefore cannot be
barred by laches. Courts should never apply the doctrine of laches earlier than the expiration of time
limited for the commencement of actions at law."32

An action for reinstatement by reason of illegal dismissal is one based on an injury to the complainants’
rights which should be brought within four years from the time of their dismissal pursuant to Article
114633 of the Civil Code. Respondents’ complaint filed almost 3 years after their alleged illegal dismissal
was still well within the prescriptive period. Laches cannot, therefore, be invoked yet.34 To be sure,
laches may be applied only upon the most convincing evidence of deliberate inaction, for the rights of
laborers are protected under the social justice provisions of the Constitution and under the Civil Code.

Stare Decisis

Under the doctrine of stare decisis, when a court has laid down a principle of law as applicable to a
certain state of facts, it will adhere to that principle and apply it to all future cases in which the facts are
substantially the same, even though the parties may be different.36 Where the facts are essentially
different, however, stare decisis does not apply, for a perfectly sound principle as applied to one set of
facts might be entirely inappropriate when a factual variant is introduced.37

The question, therefore, is whether the factual circumstances of this present case are substantially the
same as the Philcea case.

We answer in the affirmative.

This case and the Philcea case involve the same period which is March to April 2004; the issuance of
Memorandum to employees informing them of the implementation of the cost reduction program; the
implementation of the voluntary retirement program and retrenchment program, except that this case
involves different employees; the execution of deeds of release, waiver, and quitclaim, and the
acceptance of separation pay by the affected employees.

We find no reason to depart from the above conclusions which are based on the Court’s examination of
the evidence presented by the parties therein. As the respondents here were similarly situated as the
union members in the Philcea case, and considering that the questioned dismissal from the service was
based on the same grounds under the same circumstances, there is no need to relitigate the issues
presented herein. In short, we adopt the Court’s earlier findings that there was no valid ground to
terminate the employees.

A closer look at petitioners’ arguments would show that they want the Court to re-examine our decision
in the Philcea case allegedly on the ground that the conclusions therein were based on erroneous
interpretation of the evidence presented.
Indeed, in Abaria v. National Labor Relations Commission,39 although the Court was confronted with
the same issue of the legality of a strike that has already been determined in a previous case, the Court
refused to apply the doctrine of stare decisis insofar as the award of backwages was concerned because
of the clear erroneous application of the law. We held therein that the Court abandons or overrules
precedents whenever it realizes that it erred in the prior decision.40 The Court’s pronouncement in that
case is instructive:

The doctrine though is not cast in stone for upon a showing that circumstances attendant in a particular
case override the great benefits derived by our judicial system from the doctrine of stare decisis, the
Court is justified in setting it aside. For the Court, as the highest court of the land, may be guided but is
not controlled by precedent. Thus, the Court, especially with a new membership, is not obliged to follow
blindly a particular decision that it determines, after re-examination, to call for a rectification.41

Waivers, Releases and Quitclaims

"As a rule, deeds of release and quitclaim cannot bar employees from demanding benefits to which they
are legally entitled or from contesting the legality of their dismissal. The acceptance of those benefits
would not amount to estoppel."45 To excuse respondents from complying with the terms of their
waivers, they must locate their case within any of three narrow grounds: (1) the employer used fraud or
deceit in obtaining the waivers; (2) the consideration the employer paid is incredible and unreasonable;
or (3) the terms of the waiver are contrary to law, public order, public policy, morals, or good customs or
prejudicial to a third person with a right recognized by law.46 The instant case falls under the first
situation.

As the ground for termination of employment was illegal, the quitclaims are deemed illegal as the
employees’ consent had been vitiated by mistake or fraud. The law looks with disfavor upon quitclaims
and releases by employees pressured into signing by unscrupulous employers minded to evade legal
responsibilities.47 The circumstances show that petitioner’s misrepresentation led its employees,
specifically respondents herein, to believe that the company was suffering losses which necessitated the
implementation of the voluntary retirement and retrenchment programs, and eventually the execution
of the deeds of release, waiver and quitclaim.48

U.S. v. Tamparong, 31 Phil. 321 (1915)

FACTS: The defendants were convicted by the justice of the peace of Baguio for having played the game
of chance called "monte" in violation of Ordinance No. 35. They appealed to the Court of First Instance,
where they were again tried and convicted upon the same charge. An appeal was allowed to this court
because the validity of Ordinance No, 35 was drawn in question during the trial of the cause in the court
below.

ISSUE/s1. Whether or not Ordinance No. 35 is valid

2. Whether or not the Supreme Court is required under the law to examine the evidence forthe purpose
of determining the guilt or innocence of the defendants

HOLDING/s1. Yes, Ordinance No. 35 is valid.

2. No. Although the SC wrote that Act No. 1627 does not explicitly limit their powers from examining
issues of facts, it likewise does not expressly authorize them to do so. The SC, nevertheless, interpreted that the law
was NOT framed to confer them the said power.

RATIO/s1. For the issue at hand, the SC merely wrote, “The first question is answered in the affirmative
by this court in the case of the United States vs. Joson (26 Phil. 01). The cases are on all fours, and a
further discussion of this branch of the case is unnecessary.” Nothing more.

2.1 The SC has revisited prior laws to ascertain the intention of the framers of the amended section of
Act No. 1627; the latter being ambiguous in the sense that it did not explicitly allow nor prohibit SC to
examine issues of facts on appeals. The SC found, in light of former practices and from further understanding
the circumstances in which the framers of the amended law were subject to, that the amendment was
not meant to confer in them the jurisdiction of reviewing questions of fact.

.2.2 The SC further distinguished their holding from Loeb vs. Columbia Township Trustees, and Boise
Artesian Hot and Cold Water Co., Ltd. vs. Boise City . These two latter cases were taken to the US SC
directly from the circuit courts as writs of error, (not as appeals) where the US SC does not only have
jurisdiction to review constitutional questions but also every other question properly arising.

2.3 In at least fourteen other cases, the SC has showed that the ruling for this issue in the last 10 years
has remained uniform. And that the court, since its organization, never held that it had the power to
review facts touching guilt of an accused person, ONLY as to when the appeal involved the validity or
constitutionality of a statute or the constitutionality of a municipal or township ordinance.

PRINCIPLE:

It is urged that as the civil-law term "appeal" is used in section 43 (supra), we must apply the same rule
of construction that the courts in England and the United States have ,almost uniformly applied to the
same term and thus derive an unqualified review of both the law and the facts. This doubtless would be
a correct position in some jurisdictions in the American Union, as there the technical civil-law meaning
of the term "appeal" is followed. The reason for so doing is set forth in the case of Nashville Ry. & Light
Co. v. Bunn (168 Fed. Rep., 862), wherein the court said:

"The distinction between a ’writ of error,’ which brings up the record in an action of law for a review of
questions of law only, and an ’appeal,’ which involves a rehearing upon both the facts and the law, is
vital. These remedies have their origin and functions in the inherent difference between courts of law
and courts of equity, differences which are recognized in the Constitution of the United States and the
laws of Congress. The ’writ of error’ is a common law writ, and searches the record for errors of law in
the final judgment of a common-law court. If error is found, the judgment awards a venire facias de
novo. The ’appeal’ is a procedure which comes to us from the civil law along with the fundamentals
which go to make up the jurisprudence of a court of equity. Its office is to remove the entire cause, and
it subjects the transcript to a scrutiny of fact and law and is in substance a new trial."
Under the system of procedure which obtains in the Philippine Islands, both legal and equitable relief is
dispensed in the same tribunal. We have no courts of law and courts of equity as they are known and
distinguished in England and the United States. All cases (law and equity) are presented and tried in the
same manner, including their final disposition in the Supreme Court. Therefore, the word "appeal," as
used in section 43 (supra), does not necessarily imply the removal of the cause from one tribunal to
another in its entirety, subjecting the facts, as well as the law, to a review or a retrial, but it is to be
interpreted by the ordinary rules of construction.

The intention of the framers of General Orders No. 58 is the law. In order to ascertain that intention the
provisions of the order must be construed in the light of existing law and the circumstances at the time
of its promulgation.

Hierarchy of Courts
Rayos v. City of Manila, G.R. No. 196063, December 14, 2011
FACTS: The case is a petition for review on certiorari and declaratory relief against the decision of the
RTC which denied the motion to dismiss filed by petitioner in an expropriation case. The motion to
dismiss invoked the grounds that (1) Ordinance No. 7949 passed by the City of Manila authorizing the
mayor to expropriate said properties is unconstitutional and (2) the cases of Lagcao v. Labra and Jesus Is
Lord Christian School Foundation, Inc. v. Municipality (now City) of Pasig, Metro Manila apply squarely to
the present case. The trial court denied the motion to dismiss unconvinced that the doctrine of stare
decisis is applicable

ISSUE: WON stare decisis applies

HELD: No. Denied

An order denying a motion to dismiss is interlocutory and not appealable.12 An order denying a motion
to dismiss does not finally dispose of the case, and in effect, allows the case to proceed until the final
adjudication thereof by the court. As such, it is merely interlocutory in nature and thus, not appealable

Clearly, no appeal, under Rule 45 of the Rules of Court, may be taken from an interlocutory order. In
case of denial of an interlocutory order, the immediate remedy available to the aggrieved party is to file
a special civil action for certiorari under Rule 65 of the Rules of Court.

Even if the Court treats the present petition as a petition for certiorari under Rule 65, which is the
proper remedy to challenge the order denying the motion to dismiss, the same must be dismissed for
violation of the principle of hierarchy of courts. This well-settled principle dictates that petitioners
should file the petition for certiorari with the Court of Appeals, and not directly with this Court.

Indeed, this Court, the Court of Appeals and the Regional Trial Courts exercise concurrent jurisdiction to
issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
14
injunction. However, such concurrence in jurisdiction does not give petitioners unbridled freedom of
choice of court forum.15 In Heirs of Bertuldo Hinog v. Melicor,16 citing People v. Cuaresma,17 the Court
held:
 This Court’s original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court
with Regional Trial Courts and with the Court of Appeals. This concurrence of jurisdiction
is not, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained
freedom of choice of the court to which application therefor will be directed. There is after all a
hierarchy of courts. That hierarchy is determinative of the venue of appeals, and also serves as a general
determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for
that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs
against first level (“inferior”) courts should be filed with the Regional Trial Court, and those against the
latter, with the Court of Appeals. A direct invocation of the Supreme Court’s original jurisdiction to
issue these writs should be allowed only when there are special and important reasons therefor,
clearly and specifically set out in the petition. This is [an] established policy. It is a policy necessary to
prevent inordinate demands upon the Court’s time and attention which are better devoted to those
matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court’s docket.
(Emphasis supplied.)

In short, to warrant a direct recourse to this Court, petitioners must show exceptional and compelling
reasons therefor, clearly and specifically set out in the petition. This petitioners failed to do.

Petitioners merely rehashed the arguments in their motion to dismiss, which consist mainly of
unsubstantiated allegations. Petitioners invoke the cases of Lagcao v. Labra18 and Jesus Is Lord Christian
School Foundation, Inc. v. Municipality (now City) of Pasig, Metro Manila19 in challenging the
constitutionality of Ordinance No. 7949 without, however, showing clearly the applicability and
similarity of those cases to the present controversy. Neither did petitioners explain why Ordinance No.
7949 is repugnant to the Constitution. Nor did petitioners specifically and sufficiently set forth any
extraordinary and important reason to justify direct recourse to this Court.20

Likewise, assuming the present petition is one for declaratory relief,21 as can be gleaned from the
caption of the petition, this Court has only appellate, not original, jurisdiction over such a petition. While
this Court may treat a petition for declaratory relief as one for prohibition22 or mandamus, over which
this Court exercises original jurisdiction,23 it must be stressed that this special treatment is undertaken
only in cases with far reaching implications and transcendental issues that need to be resolved.

United Claimants Assoc. v. NEA, G.R. No. 187107, January 31, 2012
FACTS: This is an original action for Injunction to restrain and/or prevent the implementation of
Resolution Nos. 46 and 59, dated July 10, 2003 and September 3, 2003, respectively, otherwise known
as the National Electrification Administration (NEA) Termination Pay Plan, issued by respondent NEA
Board of Administrators (NEA Board).

ISSUE: WON the petitioners violated the hierarchy of courts

Petitioners raise the following issues:

1. The NEA Board has no power to terminate all the NEA employees;
 2. Executive Order No. 119 did not grant the NEA Board the power to terminate all NEA
employees; and
3. Resolution Nos. 46 and 59 were carried out in bad faith.

On the other hand, respondents argue in their Comment dated August 20, 2009 that:

1. The Court has no jurisdiction over the petition;

2. Injunction is improper in this case given that the assailed resolutions of the NEA Board
have long been implemented; and
3. The assailed NEA Board resolutions were issued in good faith.

HELD: Dismissed

Respondents essentially argue that petitioners violated the principle of hierarchy of courts,
pursuant to which the instant petition should have been filed with the Regional Trial Court first rather
than with this Court directly.

We explained the principle of hierarchy of courts in Mendoza v. Villas,[1] stating:

In Chamber of Real Estate and Builders Associations, Inc. (CREBA) v. Secretary of Agrarian Reform, a
petition for certiorari filed under Rule 65 was dismissed for having been filed directly with the Court,
violating the principle of hierarchy of courts, to wit:

Primarily, although this Court, the Court of Appeals and the Regional Trial Courts have concurrent
jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction, such concurrence does not give the petitioner unrestricted freedom of choice of court forum.
In Heirs of Bertuldo Hinog v. Melicor, citing People v. Cuaresma, this Court made the following
pronouncements:

This Court’s original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court with
Regional Trial Courts and with the Court of Appeals. This concurrence of jurisdiction is not, however, to
be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of
the court to which application therefor will be directed. There is after all a hierarchy of courts. That
hierarchy is determinative of the venue of appeals, and also serves as a general determinant of the
appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial hierarchy
most certainly indicates that petitions for the issuance of extraordinary writs against first level
(“inferior”) courts should be filed with the Regional Trial Court, and those against the latter, with the
Court of Appeals. A direct invocation of the Supreme Court’s original jurisdiction to issue these writs
should be allowed only when there are special and important reasons therefor, clearly and specifically
set out in the petition. This is [an] established policy. It is a policy necessary to prevent inordinate
demands upon the Court’s time and attention which are better devoted to those matters within its
exclusive jurisdiction, and to prevent further over-crowding of the Court’s docket. (Emphasis supplied.)

Evidently, the instant petition should have been filed with the RTC. However, as an exception to
this general rule, the principle of hierarchy of courts may be set aside for special and important reasons.
Such reason exists in the instant case involving as it does the employment of the entire plantilla of NEA,
more than 700 employees all told, who were effectively dismissed from employment in one swift stroke.
This to the mind of the Court entails its attention.

Moreover, the Court has made a similar ruling in National Power Corporation Drivers and
Mechanics Association (NPC-DAMA) v. National Power Corporation (NPC).[2] In that case, the NPC-
DAMA also filed a petition for injunction directly with this Court assailing NPC Board Resolution Nos.
2002-124 and 2002-125, both dated November 18, 2002, directing the termination of all employees of
the NPC on January 31, 2003. Despite such apparent disregard of the principle of hierarchy of courts, the
petition was given due course. We perceive no compelling reason to treat the instant case differently.

The Remedy of Injunction Is still Available

In Funa v. Executive Secretary,[3] the Court passed upon the seeming moot issue of the appointment of
Maria Elena H. Bautista (Bautista) as Officer-in-Charge (OIC) of the Maritime Industry Authority
(MARINA) while concurrently serving as Undersecretary of the Department of Transportation and
Communications. There, even though Bautista later on was appointed as Administrator of MARINA, the
Court ruled that the case was an exception to the principle of mootness and that the remedy of
injunction was still available, explaining thus:

A moot and academic case is one that ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical use or value. Generally,
courts decline jurisdiction over such case or dismiss it on ground of mootness. However, as we held in
Public Interest Center, Inc. v. Elma, supervening events, whether intended or accidental, cannot prevent
the Court from rendering a decision if there is a grave violation of the Constitution. Even in cases where
supervening events had made the cases moot, this Court did not hesitate to resolve the legal or
constitutional issues raised to formulate controlling principles to guide the bench, bar, and public.

As a rule, the writ of prohibition will not lie to enjoin acts already done. However, as an exception to the
rule on mootness, courts will decide a question otherwise moot if it is capable of repetition yet evading
review.

Similarly, in the instant case, while the assailed resolutions of the NEA Board may have long been
implemented, such acts of the NEA Board may well be repeated by other government agencies in the
reorganization of their offices. Petitioners have not lost their remedy of injunction.

The Power to Reorganize Includes the Power to Terminate

The meat of the controversy in the instant case is the issue of whether the NEA Board had the power to
pass Resolution Nos. 46 and 59 terminating all of its employees.

This must be answered in the affirmative.

In Betoy v. The Board of Directors, National Power Corporation,[4] the Court upheld the dismissal of all
the employees of the NPC pursuant to the EPIRA Law. In ruling that the power of reorganization includes
the power of removal, the Court explained:

[R]eorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by

reason of economy or redundancy of functions. It could result in the loss of one’s position through
removal or abolition of an office. However, for a reorganization for the purpose of economy or to make
the bureaucracy more efficient to be valid, it must pass the test of good faith; otherwise, it is void ab
initio.

Evidently, the termination of all the employees of NEA was within the NEA Board’s powers and may not
successfully be impugned absent proof of bad faith.

Petitioners Failed to Prove that the NEA Board Acted in Bad Faith

Congress itself laid down the indicators of bad faith in the reorganization of government offices in Sec. 2
of RA 6656, an Act to Protect the Security of Tenure of Civil Service Officers and Employees in the
Implementation of Government Reorganization, to wit:

Section 2. No officer or employee in the career service shall be removed except for a valid cause and
after due notice and hearing. A valid cause for removal exists when, pursuant to a bona fide
reorganization, a position has been abolished or rendered redundant or there is a need to merge, divide,
or consolidate positions in order to meet the exigencies of the service, or other lawful causes allowed by
the Civil Service Law. The existence of any or some of the following circumstances may be considered as
evidence of bad faith in the removals made as a result of reorganization, giving rise to a claim for
reinstatement or reappointment by an aggrieved party:

(a) Where there is a significant increase in the number of positions in the new staffing pattern of the
department or agency concerned;

(b) Where an office is abolished and other performing substantially the same functions is created;

(c) Where incumbents are replaced by those less qualified in terms of status of appointment,
performance and merit;

(d) Where there is a reclassification of offices in the department or agency concerned and the
reclassified offices perform substantially the same function as the original offices;

(e) Where the removal violates the order of separation provided in Section 3 hereof. (Emphasis
supplied.)

It must be noted that the burden of proving bad faith rests on the one alleging it. As the Court
ruled in Culili v. Eastern Telecommunications, Inc.,[5] “According to jurisprudence, ‘basic is the principle
that good faith is presumed and he who alleges bad faith has the duty to prove the same.’ ” Moreover,
in Spouses Palada v. Solidbank Corporation,[6] the Court stated, “Allegations of bad faith and fraud must
be proved by clear and convincing evidence.”

Here, petitioners have failed to discharge such burden of proof.

Ernesto Dy v. Hon. Palamos, G.R. No. 196200, September 11, 2013

FACTS: Dy executed a chattel mortgage over MV Pilar with Orix Metro Leasing and Finance Corporation.
Orix filed the Complaint and Petition for Extrajudicial Foreclosure. Orix later assigned its interest to
Colorado Shipyard. The RTC ruled in favor of Dy holding that the foreclosure was premature since the
loan had been restructured and ordered the Shipyard to return of the vessel to Dy. Dy filed a motion for
execution. However, the vessel had sustained severe damage and deterioration and had sunk in the
shipyard because of its exposure to the elements. Dy demands that the vessel be returned to him in the
same condition that it had been at the time it was wrongfully seized by respondent or, should it no
longer be possible, that another vessel replace the MV Pilar. The RTC granted the motion for execution
but denied the return of the vessel in the same state in which it was taken.

ISSUE: (1) whether petitioner was justified in resorting directly to this Court via a petition for certiorari
under Rule 65; and (2) whether petitioner is entitled to the return of M/V Pilar-I in the same condition
when it was seized by respondent.

HELD:

Petitioner argues that his situation calls for the direct invocation of this Court’s jurisdiction in the
interest of justice. Moreover, as pointed out by the RTC, what is involved is a judgment of the Court
which the lower courts cannot modify. Hence, petitioner deemed it proper to bring this case
immediately to the attention of this Court. Lastly, petitioner claims that the present case involves a
novel issue of law – that is, whether in an action to recover, a defendant in wrongful possession of the
subject matter in litigation may be allowed to return the same in a deteriorated condition without any
liability.

Respondent, on the other hand, contends that the petition should have been filed with the CA, following
the doctrine of hierarchy of courts. It pointed out that petitioner failed to state any special or important
reason or any exceptional and compelling circumstance which would warrant a direct recourse to this
Court.15

Under the principle of hierarchy of courts, direct recourse to this Court is improper because the
Supreme Court is a court of last resort and must remain to be so in order for it to satisfactorily perform
its constitutional functions, thereby allowing it to devote its time and attention to matters within its
exclusive jurisdiction and preventing the overcrowding of its docket. 16 Nonetheless, the invocation of
this Court’s original jurisdiction to issue writs of certiorari has been allowed in certain instances on the
ground of special and important reasons clearly stated in the petition, such as,(1) when dictated by the
public welfare and the advancement of public policy; (2) when demanded by the broader interest of
justice; (3) when the challenged orders were patent nullities; or (4) when analogous exceptional and
compelling circumstances called for and justified the immediate and direct handling of the case.17
This case falls under one of the exceptions to the principle of hierarchy of courts. Justice demands that
this Court take cognizance of this case to put an end to the controversy and resolve the matter which
has been dragging on for more than twenty (20) years. Moreover, in light of the fact that what is
involved is a final judgment promulgated by this Court, it is but proper for petitioner to call upon its
original jurisdiction and seek final clarification.

Wrong Mode of Appeal; Exception

Petitioner asserts that the RTC committed grave abuse of discretion when it failed to rule in his favor
despite the fact that he had been deprived by respondent of his property rights over M/V Pilar-I for the
past eighteen(18) years. Moreover, the change in the situation of the parties calls for a relaxation of the
rules which would make the execution of the earlier decision of this Court inequitable or unjust.
According to petitioner, for the RTC to allow respondent to return the ship to him in its severely
damaged and deteriorated condition without any liability would be to reward bad faith.18

Conversely, respondent submits that there was no grave abuse of discretion on the part of the RTC as
the latter merely observed due process and followed the principle that an execution order may not vary
or go beyond the terms of the judgment it seeks to enforce.19 Respondent adds that the proper remedy
should have been an ordinary appeal, where a factual review of the records can be made to determine
the condition of the ship at the time it was taken from petitioner, and not a special civil action for
certiorari.20

There are considerable differences between an ordinary appeal and a petition for certiorari which have
been exhaustively discussed by this Court in countless cases. The remedy for errors of judgment,
whether based on the law or the facts of the case or on the wisdom or legal soundness of a decision, is
an ordinary appeal.21 In contrast, a petition for certiorari under Rule 65 is an original action designed to
correct errors of jurisdiction, defined to be those "in which the act complained of was issued by the
court, officer, or quasi-judicial body without or in excess of jurisdiction, or with grave abuse of discretion
which is tantamount to lack of in excess of jurisdiction."22 A court or tribunal can only be considered to
have acted with grave abuse of discretion if its exercise of judgment was so whimsical and capricious as
to be equivalent to a lack of jurisdiction. The abuse must be extremely patent and gross that it would
amount to an "evasion of a positive duty or to virtual refusal to perform a duty enjoined by law, or to act
at all in contemplation of law, as where the power is exercised in an arbitrary and despotic manner by
reason of passion and hostility."23

Therefore, a misappreciation of evidence on the part of the lower court, as asserted by petitioner, may
only be reviewed by appeal and not by certiorari because the issue raised by the petitioner does not
involve any jurisdictional ground.24 It is a general rule of procedural law that when a party adopts an
inappropriate mode of appeal, his petition may be dismissed outright to prevent the erring party from
benefiting from his neglect and mistakes.25 There are exceptions to this otherwise ironclad rule,
however. One is when the strict application of procedural technicalities would hinder the expeditious
disposition of this case on the merits,26 such as in this case.

Petitioner Not Barred from Demanding

Return of the Vessel in its Former Condition

Respondent argues that petitioner is barred from asking for a modification of the judgment since he
never prayed for the return of M/V Pilar-I in the same condition that it had been at the time it was
seized.28 Petitioner could have prayed for such relief in his prior pleadings and presented evidence
thereon before the judgment became final and executory.

This Court is not unaware of the doctrine of immutability of judgments. When a judgment becomes final
and executory, it is made immutable and unalterable, meaning it can no longer be modified in any
respect either by the court which rendered it or even by this Court. Its purpose is to avoid delay in the
orderly administration of justice and to put an end to judicial controversies. Even at the risk of
occasional errors, public policy and sound practice dictate that judgments must become final at some
point.31

As with every rule, however, this admits of certain exceptions. When a supervening event renders the
execution of a judgment impossible or unjust, the interested party can petition the court to modify the
judgment to harmonize it with justice and the facts.32 A supervening event is a fact which transpires or
a new circumstance which develops after a judgment has become final and executory. This includes
matters which the parties were unaware of prior to or during trial because they were not yet in
existence at that time.

In this case, the sinking of M/V Pilar-I can be considered a supervening event. Petitioner, who did not
have possession of the ship, was only informed of its destruction when Colorado filed its Manifestation,
dated July 29, 2010, long after the September 11, 2009 Decision of this Court in Orix Metro Leasing and
Finance Corporation v. M/V "Pilar-I" and Spouses Ernesto Dy and Lourdes Dy attained finality on January
19, 2010.

C. Jurisdiction of Different Courts

Key Principles
Jurisdiction Definition
Home Guaranty Corp. v. R-II Builders, G.R. No. 192649, March 9, 2011
FACTS: HGC and R-II Builders were guarantors in a Joint Venture Agreement (JVA) for the
implementation of the Smokey Mountain Development and Reclamation Project (SMDRP). When the
SMPPCs (Smokey Mountain Project Participation Certificates) were not redeemed by HGC when it
matured, R-II Builders filed the complaint against HGC and NHA before Branch 24 of the Manila Regional
Trial Court, a Special Commercial Court (SCC). R-II Builders alleged, among other matters, that the DAC
(Deed of Assignment and Conveyance) to HGC should be rescinded and it should be appointed as new
trustee in the event of the resolution of the DAC. The complaint also sought the grant of the following
reliefs: (a) TRO/preliminary and permanent injunction, (b) the resolution or, in the alternative, the
nullification of the DAC; (c) R-II Builders' appointment as trustee pursuant to Rule 98 of the Rules of
Court; (d) HGC’s rendition of an accounting of the assets and the conveyance thereof in favor of R-II
Builders; and, (e) P500,000.00 in attorney’s fees.

On 26 October 2005, Branch 24 of the Manila RTC issued the writ of preliminary injunction. HGC moved
for the conduct of a preliminary hearing on its affirmative defenses which included such grounds as lack
of jurisdiction, improper venue and the then pendency before this Court of G.R. No. 164537, entitled
Francisco Chavez vs. National Housing Authority, et al., a case which challenged, among other matters,
the validity of the JVA and its subsequent amendments.

On 2 August 2007, R-II Builders, in turn, filed a motion to admit its Amended and Supplemental
Complaint which deleted the prayer for resolution of the DAC initially prayed for in its original
complaint. In lieu thereof, said pleading introduced causes of action for conveyance of title to and/or
possession of the entire Asset Pool, for NHA to pay the Asset Pool the sum of P1,803,729,757.88
representing the cost of the changes and additional works on the project and for an increased indemnity
for attorney’s fees in the sum of P2,000,000.00.

Consistent with its joint order dated 2 January 2008 which held that R-II Builders’ complaint was an
ordinary civil action and not an intra-corporate controversy, Branch 24 of the Manila RTC issued a
clarificatory order dated 1 February 2008 to the effect, among other matters, that it did not have the
authority to hear the case. As a consequence, the case was re-raffled to respondent Branch 22 of the
Manila RTC (respondent RTC) which subsequently issued the 19 May 2008 order which, having
determined that the case is a real action, admitted the aforesaid Amended and Supplemental
Complaint, subject to R-II Builders’ payment of the “correct and appropriate” docket fees.

On 15 August 2008, however, R-II Builders filed a motion to admit it Second Amended Complaint, on the
ground that its previous Amended and Supplemental Complaint had not yet been admitted in view of
the non-payment of the correct docket fees therefor. Said Second Amended Complaint notably
resurrected R-II Builders’ cause of action for resolution of the DAC, deleted its causes of action for
accounting and conveyance of title to and/or possession of the entire Asset Pool, reduced the claim for
attorney’s fees to P500,000.00, sought its appointment as Receiver pursuant to Rule 59 of the Rules of
Court and, after an inventory in said capacity, prayed for approval of the liquidation and distribution of
the Asset Pool in accordance with the parties’ agreements.

On 2 September 2008, HGC filed its opposition to the admission of R-II Builders’ Second Amended
Complaint on the ground that respondent RTC had no jurisdiction to act on the case until payment of
the correct docket fees and that said pleading was intended for delay and introduced a new theory
inconsistent with the original complaint and the Amended and Supplemental Complaint. Claiming that
R-II Builders had defied respondent court’s 19 May 2008 order by refusing to pay the correct docket
fees, HGC additionally moved for the dismissal of the case pursuant to Section 3, Rule 17 of the 1997
Rules of Civil Procedure.

RTC Ruling
The RTC denied HGCs motions and granted R-II Builders’ application for appointment of receiver. HGC
went on certiorari with the CA which held that the RTC had jurisdiction; that from the allegations of R-II
Builders’ original complaint and amended complaint the character of the relief primarily sought, i.e., the
declaration of nullity of the DAC, the action before respondent RTC is one where the subject matter is
incapable of pecuniary estimation; and R-II Builders need not pay any deficiency in the docket fees
considering its withdrawal of its Amended and Supplemental Complaint.

Hence, the instant case contending that the original court (the Special Commercial Court) was without
authority to hear the case and despite an unequivocal order from the trial court a quo, Private
Respondent (R-II Builders) failed and refused to pay the correct and proper docket fees, whether it be
for a real or personal action, based on the values of the properties or claims subject of the complaints.

ISSUES: WON the RTC had jurisdiction over the complaint

HELD: No. Reversed and set aside. R-II Builders’ case dismissed.

Jurisdiction is defined as the authority to hear and determine a cause or the right to act in a case.[37] In
addition to being conferred by the Constitution and the law,[38] the rule is settled that a court’s
jurisdiction over the subject matter is determined by the relevant allegations in the complaint,[39] the
law in effect when the action is filed,[40] and the character of the relief sought irrespective of whether
the plaintiff is entitled to all or some of the claims asserted.[41] Consistent with Section 1, Rule 141 of
the Revised Rules of Court which provides that the prescribed fees shall be paid in full “upon the filing of
the pleading or other application which initiates an action or proceeding”, the well-entrenched rule is to
the effect that a court acquires jurisdiction over a case only upon the payment of the prescribed filing
and docket fees.

HGC correctly faults the CA for not finding that Branch 24 of the Manila RTC had no authority to order
the transfer of the case to respondent RTC.[49] Being outside the jurisdiction of Special Commercial
Courts, the rule is settled that cases which are civil in nature, like the one commenced by R-II Builders,
should be threshed out in a regular court.[50] With its acknowledged lack of jurisdiction over the case,
Branch 24 of the Manila RTC should have ordered the dismissal of the complaint, since a court without
subject matter jurisdiction cannot transfer the case to another court.[51] Instead, it should have simply
ordered the dismissal of the complaint, considering that the affirmative defenses for which HGC sought
hearing included its lack of jurisdiction over the case.

Calleja v. Panday,[52] while on facts the other way around, i.e., a branch of the RTC exercising
jurisdiction over a subject matter within the Special Commercial Court’s authority, dealt squarely with
the issue:

Whether a branch of the Regional Trial Court which has no jurisdiction to try and decide a case has
authority to remand the same to another co-equal Court in order to cure the defects on venue and
jurisdiction.
Certainly, the pronouncement of Br. 24, the Special Commercial Court, in its Joint Order of 2 January
2008 that the case is not an intracorporate controversy, amplified in its Order of 1 February 2008 that it
“does not have the authority to hear the complaint it being an ordinary civil action” is incompatible with
the directive for the re-raffle of the case and to “leave the resolution of the same to Branch 22 of this
Court.” Such a directive is an exercise of authority over the case, which authority it had in the same
breath declared it did not have. What compounds the jurisdictional error is the fact that at the time of
its surrender of jurisdiction, Br. 24 had already acted on the case and had in fact, on 26 October 2005,
issued the writ of preliminary injunction sought by herein respondent R-II Builders. At that point, there
was absolutely no reason which could justify a re-raffle of the case considering that the order that was
supposed to have caused the re-raffle was not an inhibition of the judge but a declaration of absence of
jurisdiction. So faulty was the order of re-raffle that it left the impression that its previously issued
preliminary injunction remained effective since the case from which it issued was not dismissed but
merely transferred to another court. A re-raffle which causes a transfer of the case involves courts with
the same subject matter jurisdiction; it cannot involve courts which have different jurisdictions exclusive
of the other. More apt in this case, a re-raffle of a case cannot cure a jurisdictional defect.

Payment of docket fees jurisdictional

The jurisdictionally flawed transfer of the case from Branch 24, the SCC to Branch 22, the regular court,
is topped by another jurisdictional defect which is the non-payment of the correct docket fees. In its
order dated 19 May 2008 which admitted R-II Builders’ Amended and Supplemental Complaint,
respondent RTC distinctly ruled that the case was a real action and ordered the re-computation and
payment of the correct docket fees.[53] In patent circumvention of said order, however, R-II Builders
filed its 14 August 2008 motion to admit its Second Amended Complaint which effectively deleted its
causes of action for accounting and conveyance of title to and/or possession of the entire Asset Pool
and, in addition to reducing the claim for attorney’s fees and seeking its appointment as a receiver,
reinstated its cause of action for resolution of the DAC.

While it is true, however, that R-II Builder's continuing stake in the Asset Pool is "with respect only to its
residual value after payment of all the regular SMPPCs holders and the Asset Pool creditors",[59] the CA
failed to take into account the fact that R-II Builders’ original complaint and Amended and Supplemental
Complaint both interposed causes of action for conveyance and/or recovery of possession of the entire
Asset Pool. Indeed, in connection with its second cause of action for appointment as trustee in its
original complaint,[60] R-II Builders distinctly sought the conveyance of the entire Asset Pool[61] which
it consistently estimated to be valued at P5,919,716,618.62 as of 30 June 2005.[62] In its opposition to
HGC’s motion to dismiss, R-II Builders even admitted that the case is a real action as it affects title to or
possession of real property or an interest therein.[63] With R-II Builders' incorporation of a cause of
action for conveyance of title to and/or possession of the entire Asset Pool in its Amended and
Supplemental Complaint,[64] on the other hand, no less than respondent RTC, in its 19 May 2008 order,
directed the assessment and payment of docket fees corresponding to a real action.

Admittedly, this Court has repeatedly laid down the test in ascertaining whether the subject matter of
an action is incapable of pecuniary estimation by determining the nature of the principal action or
remedy sought. While a claim is, on the one hand, considered capable of pecuniary estimation if the
action is primarily for recovery of a sum of money, the action is considered incapable of pecuniary
estimation where the basic issue is something other than the right to recover a sum of money, the
money claim being only incidental to or merely a consequence of, the principal relief sought.[65] To our
mind, the application of foregoing test does not, however, preclude the further classification of actions
into personal actions and real action, for which appropriate docket fees are prescribed. In contrast to
personal actions where the plaintiff seeks the recovery of personal property, the enforcement of a
contract, or the recovery of damages, real actions are those which affect title to or possession of real
property, or interest therein.[66] While personal actions should be commenced and tried where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be found, at the election
of the plaintiff,[67] the venue for real actions is the court of the place where the real property is located.

While it is true that petitioner does not directly seek the recovery of title or possession of the property
in question, his action for annulment of sale and his claim for damages are closely intertwined with the
issue of ownership of the building which, under the law, is considered immovable property, the recovery
of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or
rescission of a sale of real property does not operate to efface the fundamental and prime objective and
nature of the case, which is to recover said real property. It is a real action.[72]

Granted that R-II Builders is not claiming ownership of the Asset Pool because its continuing stake
is, in the first place, limited only to the residual value thereof, the conveyance and/or transfer of
possession of the same properties sought in the original complaint and Amended and Supplemental
Complaint both presuppose a real action for which appropriate docket fees computed on the basis of
the assessed or estimated value of said properties should have been assessed and paid.

For failure of R-II Builders to pay the correct docket fees for its original complaint or, for that matter, its
Amended and Supplemental Complaint as directed in respondent RTC's 19 May 2008 order, it stands to
reason that jurisdiction over the case had yet to properly attach. Applying the rule that "a case is
deemed filed only upon payment of the docket fee regardless of the actual date of filing in court" in the
landmark case of Manchester Development Corporation v. Court of Appeals,[76] this Court ruled that
jurisdiction over any case is acquired only upon the payment of the prescribed docket fee which is both
mandatory and jurisdictional. To temper said ruling, the Court subsequently issued the following
guidelines in Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,[77] viz.:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the
action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the
court may allow payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which
shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may
also allow payment of said fee within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and
payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the
pleading, or if specified the same has been left for determination by the court, the additional filing fee
therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his
duly authorized deputy to enforce said lien and assess and collect the additional fee.

The importance of filing fees cannot be over-emphasized for they are intended to take care of court
expenses in the handling of cases in terms of costs of supplies, use of equipment, salaries and fringe
benefits of personnel, and others, computed as to man-hours used in the handling of each case. The
payment of said fees, therefore, cannot be made dependent on the result of the action taken without
entailing tremendous losses to the government and to the judiciary in particular.[80] For non-payment
of the correct docket fees which, for real actions, should be computed on the basis of the assessed value
of the property, or if there is none, the estimated value thereof as alleged by the claimant,[81]
respondent RTC should have denied admission of R-II Builders’ Second Amended Complaint and ordered
the dismissal of the case. Although a catena of decisions rendered by this Court eschewed the
application of the doctrine laid down in the Manchester case,[82] said decisions had been consistently
premised on the willingness of the party to pay the correct docket fees and/or absence of intention to
evade payment of the correct docket fees. This cannot be said of R-II Builders which not only failed to
pay the correct docket fees for its original complaint and Amended and Supplemental Complaint but
also clearly evaded payment of the same by filing its Second Amended Complaint.

By itself, the propriety of admitting R-II Builders’ Second Amended Complaint is also cast in dubious light
when viewed through the prism of the general prohibition against amendments intended to confer
jurisdiction where none has been acquired yet. Although the policy in this jurisdiction is to the effect
that amendments to pleadings are favored and liberally allowed in the interest of justice, amendment is
not allowed where the court has no jurisdiction over the original complaint and the purpose of the
amendment is to confer jurisdiction upon the court.[83] Hence, with jurisdiction over the case yet to
properly attach, HGC correctly fault the CA for upholding respondent RTC’s admission of R-II Builders’
Second Amended Complaint despite non-payment of the docket fees for its original complaint and
Amended and Supplemental Complaint as well as the clear intent to evade payment thereof.

Jurisdiction v. Venue

Davao Light v. Court of Appeals, G.R. No. 111685, August 20, 2001
FACTS: The CA and the RTC dismissed the petitioner’s case for improper venue. Davao Light filed a
complaint for damages against private respondent Francisco Tesorero before the Regional Trial Court of
Cebu City, Branch 11. The case was dismissed because Davao Light’s principal office is in “163-165 P.
Reyes Street, Davao City.” The CA upheld the dismissal, hence the instant case.

ISSUE: WON RTC Cebu City is the proper venue

HELD: Yes. Reversed CA

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or
waiver upon a court which otherwise would have no jurisdiction over the subject-matter of an action;
but the venue of an action as fixed by statute may be changed by the consent of the parties and an
objection that the plaintiff brought his suit in the wrong county may be waived by the failure of the
defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as
to jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition
exists against their alteration.

Practically the same issue was addressed in Young Auto Supply Co. v. Court of Appeals.[14] In the
aforesaid case, the defendant therein sought the dismissal of an action filed by the plaintiff, a
corporation, before the Regional Trial Court of Cebu City, on the ground of improper venue. The trial
court denied the motion to dismiss; on certiorari before the Court of Appeals, the denial was reversed
and the case was dismissed. According to the appellate tribunal, venue was improperly laid since the
address of the plaintiff was supposedly in Pasay City, as evidenced by a contract of sale, letters and
several commercial documents sent by the plaintiff to the defendant, even though the plaintiff’s articles
of incorporation stated that its principal office was in Cebu City. On appeal, we reversed the Court of
Appeals. We reasoned out thus:

In the Regional Trial Courts, all personal actions are commenced and tried in the province or city where
the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff xxx.

There are two plaintiffs in the case at bench: a natural person and a domestic corporation. Both
plaintiffs aver in their complaint that they are residents of Cebu City, thus:

xxx xxx xxx

The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:

“THIRD. That the place where the principal office of the corporation is to be established or located is at
Cebu City, Philippines (as amended on December 20, 1980 and further amended on December 20,
1984)” xxx.

A corporation has no residence in the same sense in which this term is applied to a natural person. But
for practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal
office is located as stated in the articles of incorporation (Cohen v. Benguet Commercial Co., Ltd., 34
Phil. 526 [1916] Clavecilla Radio System v. Antillo, 19 SCRA 379 [1967]). The Corporation Code precisely
requires each corporation to specify in its articles of incorporation the “place where the principal office
of the corporation is to be located which must be within the Philippines” (Sec. 14[3]). The purpose of
this requirement is to fix the residence of a corporation in a definite place, instead of allowing it to be
ambulatory.
In Clavecilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why actions cannot be
filed against a corporation in any place where the corporation maintains its branch offices. The Court
ruled that to allow an action to be instituted in any place where the corporation has branch offices,
would create confusion and work untold inconvenience to said entity. By the same token, a corporation
cannot be allowed to file personal actions in a place other than its principal place of business unless such
a place is also the residence of a co-plaintiff or a defendant.

If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground that its
principal place of business was in Cebu City, Roxas could argue that YASCO was in estoppel because it
misled Roxas to believe that Pasay City was its principal place of business. But this is not the case before
us.

With the finding that the residence of YASCO for purposes of venue is in Cebu City, where its principal
place of business is located, it becomes unnecessary to decide whether Garcia is also a resident of Cebu
City and whether Roxas was in estoppel from questioning the choice of Cebu City as the venue. [ talics
supplied]

The same considerations apply to the instant case. It cannot be disputed that petitioner’s principal
office is in Cebu City, per its amended articles of incorporation[15] and by-laws.[16] An action for
damages being a personal action,[17] venue is determined pursuant to Rule 4, section 2 of the Rules of
Court, to wit:

Venue of personal actions.- All other actions may be commenced and tried where the plaintiff or any of
the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in
the case of a non-resident defendant where he may be found, at the election of the plaintiff.[18]

Private respondent is not a party to any of the contracts presented before us. He is a complete stranger
to the covenants executed between petitioner and NAPOCOR, despite his protestations that he is privy
thereto, on the rather flimsy ground that he is a member of the public for whose benefit the electric
generating equipment subject of the contracts were leased or acquired. We are likewise not persuaded
by his argument that the allegation or representation made by petitioner in either the complaints or
answers it filed in several civil cases that its residence is in Davao City should estop it from filing the
damage suit before the Cebu courts. Besides there is no showing that private respondent is a party in
those civil cases or that he relied on such representation by petitioner.

Nocum v. Lucio Tan, G.R. No. 145022, September 23, 2005

FACTS: Lucio Tan’s filed a Complaint for Damages for the alleged malicious and defamatory imputations
against petitioners Armand Nocum and The Philippine Daily Inquirer. The first complaint failed to state
the residence of the complainant at the time of the alleged commission of the offense and the place
where the libelous article was printed and first published. The RTC dismissed the complaint but later
admitted the second amended complaint which alleged that the article was first printed and published
in the City of Makati and set aside the previous dismissal. The CA upheld the RTC’s decision, hence the
instant case. Nocum and PDI contends that the CA erred in ruling (1) that the lower court had
jurisdiction over the case (on the basis of the original complaint) notwithstanding the fact that the lower
court had earlier dismissed the original complaint for its failure to confer jurisdiction upon the court;
and (2) that the amended complaint was properly allowed or admitted because the lower court was
“never divested” of jurisdiction over the case and that the original complaint of respondent was
amended purposely to confer upon the lower court jurisdiction over the case.

ISSUE: Did the lower court acquire jurisdiction over the civil case upon the filing of the original complaint
for damages?

HELD: YES

It is settled that jurisdiction is conferred by law based on the facts alleged in the complaint since the
latter comprises a concise statement of the ultimate facts constituting the plaintiff's causes of
action.[11] In the case at bar, after examining the original complaint, we find that the RTC acquired
jurisdiction over the case when the case was filed before it. From the allegations thereof, respondent’s
cause of action is for damages arising from libel, the jurisdiction of which is vested with the RTC. Article
360 of the Revised Penal Code provides that it is a Court of First Instance[12] that is specifically
designated to try a libel case.

Petitioners are confusing jurisdiction with venue. A former colleague, the Hon. Florenz D. Regalado,[14]
differentiated jurisdiction and venue as follows: (a) Jurisdiction is the authority to hear and determine a
case; venue is the place where the case is to be heard or tried; (b) Jurisdiction is a matter of substantive
law; venue, of procedural law; (c) Jurisdiction establishes a relation between the court and the subject
matter; venue, a relation between plaintiff and defendant, or petitioner and respondent; and, (d)
Jurisdiction is fixed by law and cannot be conferred by the parties; venue may be conferred by the act or
agreement of the parties.

In the case at bar, the additional allegations in the Amended Complaint that the article and the
caricature were printed and first published in the City of Makati referred only to the question of venue
and not jurisdiction. These additional allegations would neither confer jurisdiction on the RTC nor would
respondent’s failure to include the same in the original complaint divest the lower court of its
jurisdiction over the case. Respondent’s failure to allege these allegations gave the lower court the
power, upon motion by a party, to dismiss the complaint on the ground that venue was not properly
laid.

In Laquian v. Baltazar,[15] this Court construed the term “jurisdiction” in Article 360 of the Revised
Penal Code as referring to the place where actions for libel shall be filed or “venue.”

In Escribano v. Avila,[16] pursuant to Republic Act No. 4363,[17] we laid down the following rules on the
venue of the criminal and civil actions in written defamations.
 1. General rule: The action may be filed in the Court of First Instance of the province or city
where the libelous article is printed and first published or where any of the offended parties actually
resides at the time of the commission of the offense.

2. If the offended party is a public officer with office in Manila at the time the offense was
committed, the venue is Manila or the city or province where the libelous article is printed and first
published.

3. Where an offended party is a public official with office outside of Manila, the venue is the
province or the city where he held office at the time of the commission of the offense or where the
libelous article is printed and first published.

4. If an offended party is a private person, the venue is his place of residence at the time of
the commission of the offense or where the libelous article is printed and first published.

The common feature of the foregoing rules is that whether the offended party is a public officer
or a private person, he has always the option to file the action in the Court of First Instance of the
province or city where the libelous article is printed or first published.

We further restated[18] the rules on venue in Article 360 as follows:

1. Whether the offended party is a public official or a private person, the criminal action may be
filed in the Court of First Instance of the province or city where the libelous article is printed and first
published.

2. If the offended party is a private individual, the criminal action may also be filed in the Court of
First Instance of the province where he actually resided at the time of the commission of the offense.

3. If the offended party is a public officer whose office is in Manila at the time of the commission of
the offense, the action may be filed in the Court of First Instance of Manila.

4. If the offended party is a public officer holding office outside of Manila, the action may be filed in
the Court of First Instance of the province or city where he held office at the time of the commission of
the offense.

We so hold that dismissal of the complaint by the lower court was proper considering that the
complaint, indeed, on its face, failed to allege neither the residence of the complainant nor the place
where the libelous article was printed and first published. Nevertheless, before the finality of the
dismissal, the same may still be amended as in fact the amended complaint was admitted, in view of the
court a quo’s jurisdiction, of which it was never divested. In so doing, the court acted properly and
without any grave abuse of discretion.[19]

It is elementary that objections to venue in CIVIL ACTIONS arising from libel may be waived since they do
not involve a question of jurisdiction. The laying of venue is procedural rather than substantive, relating
as it does to jurisdiction of the court over the person rather than the subject matter. Venue relates to
trial and not to jurisdiction.[20] It is a procedural, not a jurisdictional, matter. It relates to the place of
trial or geographical location in which an action or proceeding should be brought and not to the
jurisdiction of the court.[21] It is meant to provide convenience to the parties, rather than restrict their
access to the courts as it relates to the place of trial.[22] In contrast, in criminal actions, it is
fundamental that venue is jurisdictional it being an essential element of jurisdiction.[23]

Petitioners’ argument that the lower court has no jurisdiction over the case because respondent failed
to allege the place where the libelous articles were printed and first published would have been tenable
if the case filed were a criminal case. The failure of the original complaint to contain such information
would be fatal because this fact involves the issue of venue which goes into the territorial jurisdiction of
the court. This is not to be because the case before us is a civil action where venue is not jurisdictional.

The cases[24] cited by petitioners are not applicable here. These cases involve amendments on
complaints that confer jurisdiction on courts over which they originally had none. This is not true in the
case at bar. As discussed above, the RTC acquired jurisdiction over the subject matter upon the filing of
the original complaint. It did not lose jurisdiction over the same when it dismissed it on the ground of
improper venue. The amendment merely laid down the proper venue of the case.

Determined by the allegations in the complaint

Padlan v. Dinglasan, G.R. No. 180321, March 20, 2013

FACTS: Dinglasan was the registered owner of a parcel of land which petitioner Padlan later bought from
one Lorna Ong who acquired the property through a forged deed of sale. Dinglasan filed a complaint for
cancellation of the TCT in the name of Padlan but the summons was served to Padlan’s mother because
Padlan was residing in Japan. Padlan moved to dismiss the case but the trial ensued and she was
declared in default. The RTC rendered a decision finding Padlan an IPV and dismissed the complaint. On
appeal, the CA reversed the RTC and ordered the cancellation of Padlan’s TCT finding her in bad faith.
Aggrieved, petitioner filed a Motion for Reconsideration. Petitioner argued that not only did the
complaint lacks merit, the lower court failed to acquire jurisdiction over the subject matter of the case
and the person of the petitioner.

On October 23, 2007, the CA issued a Resolution11 denying the motion. The CA concluded that the
rationale for the exception made in the landmark case of Tijam v. Sibonghanoy was present in the case.
It reasoned that when the RTC denied petitioner’s motion to dismiss the case for lack of jurisdiction,
petitioner neither moved for a reconsideration of the order nor did she avail of any remedy provided by
the Rules. Instead, she kept silent and only became interested in the case again when the CA rendered a
decision adverse to her claim.

Hence the instant case. Padlan argues that the court did not acquire jurisdiction over her person
because pursuant to Section 15, Rule 14 of the Rules of Civil Procedure, when the defendant does not
reside in the Philippines and the subject of the action is property within the Philippines of the
defendant, service may be effected out of the Philippines by personal service or by publication in a
newspaper of general circulation. Also, petitioner posits that the court lacks jurisdiction of the subject
matter, considering that from the complaint, it can be inferred that the value of the property was only
P4,000.00, which was the amount alleged by respondents that the property was sold to petitioner by
Lorna.

ISSUE: WON the lower court acquired jurisdiction

HELD: No.

Respondents filed the complaint in 1999, at the time Batas Pambansa Blg. (BP) 129, the Judiciary
Reorganization Act of 1980, was already amended by Republic Act (RA) No. 7691, An Act Expanding the
Jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts,
amending for the purpose BP Blg. 129.

Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization Act
of 1980," is hereby amended to read as follows:

Sec. 19. Jurisdiction in civil cases. – Regional Trial Courts shall exercise exclusive original jurisdiction:

(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;

(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein,
where the assessed value of the property involved exceeds Twenty Thousand Pesos (P20,000.00) or for
civil actions in Metro Manila, where such value exceeds Fifty Thousand Pesos (P50,000.00), except
actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which
is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts; x x x

Section 3 of RA 7691 expanded the exclusive original jurisdiction of the first level courts, thus:

Section 3. Section 33 of the same law BP Blg. 129 is hereby amended to read as follows:

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts in Civil Cases. – Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts shall exercise:

xxxx

(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property,
or any interest therein where the assessed value of the property or interest therein does not exceed
Twenty Thousand Pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value
does not exceed Fifty Thousand Pesos (P50,000.00) exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses and costs: Provided, That in cases of land not declared for taxation
purposes, the value of such property shall be determined by the assessed value of the adjacent lots.

An action "involving title to real property" means that the plaintiff's cause of action is based on a claim
that he owns such property or that he has the legal rights to have exclusive control, possession,
enjoyment, or disposition of the same. Title is the "legal link between (1) a person who owns property
and (2) the property itself." "Title" is different from a "certificate of title" which is the document of
ownership under the Torrens system of registration issued by the government through the Register of
Deeds. While title is the claim, right or interest in real property, a certificate of title is the evidence of
such claim.19

In the present controversy, before the relief prayed for by the respondents in their complaint can be
granted, the issue of who between the two contending parties has the valid title to the subject lot must
first be determined before a determination of who between them is legally entitled to the certificate of
title covering the property in question.1âwphi1

From the Complaint, the case filed by respondent is not simply a case for the cancellation of a particular
certificate of title and the revival of another. The determination of such issue merely follows after a
court of competent jurisdiction shall have first resolved the matter of who between the conflicting
parties is the lawful owner of the subject property and ultimately entitled to its possession and
enjoyment. The action is, therefore, about ascertaining which of these parties is the lawful owner of the
subject lot, jurisdiction over which is determined by the assessed value of such lot.20

In no uncertain terms, the Court has already held that a complaint must allege the assessed value of the
real property subject of the complaint or the interest thereon to determine which court has jurisdiction
over the action.21 In the case at bar, the only basis of valuation of the subject property is the value
alleged in the complaint that the lot was sold by Lorna to petitioner in the amount of P4,000.00. No tax
declaration was even presented that would show the valuation of the subject property. In fact, in one of
the hearings, respondents’ counsel informed the court that they will present the tax declaration of the
property in the next hearing since they have not yet obtained a copy from the Provincial Assessor’s
Office.22 However, they did not present such copy.

To reiterate, where the ultimate objective of the plaintiffs is to obtain title to real property, it should be
filed in the proper court having jurisdiction over the assessed value of the property subject thereof.23
Since the amount alleged in the Complaint by respondents for the disputed lot is only P4,000.00, the
MTC and not the RTC has jurisdiction over the action. Therefore, all proceedings in the RTC are null and
void.

Residual power/jurisdiction

Gonzales v. Quirico Pe, G.R. No. 167398, August 9, 2011

FACTS: Petitioner Rodriguez issued a blank LBP check to respondent Pe to guarantee the payment of
15,698 bags of Portland cement valued at P1,507,008.00 for a DPWH project. When Rodriguez stopped
making payments, respondent filled up blank LBP Check No. 6563066, by placing P2,062,000.00 and
June 30, 1999, corresponding to the amount and date. The LBP check was dishonored for being “drawn
against insufficient funds (DAIF).

Rodriguez filed a complaint for Declaration of Payment, Cancellation of Documents and Damages
against respondent with the RTC, Branch 31, Iloilo City. Rodriguez claims he is already cleared of any
liability because after having paid respondent the amount of P2,306,500.00, which is P139,160.00 more
than the amount of P2,167,340.00 representing the value for 23,360 bags of cement taken for the Kalibo
project. Pe filed a counterclaim recovery of the balance of P2,062,000.00, with interest at 24% from
January 29, 1999 until fully paid as actual damages averring that he had so far delivered 40,360 bags of
cement to petitioners who remitted P2,306,500.00, thereby leaving an outstanding amount of
P2,062,000.00.

The RTC ruled in favor of Rodriguez, holding that the cement supplied for the Kalibo (Lanot-Banga) Road
Construction Project in the amount of P2,167,340.00 as already and fully paid and that the LBP check
was null and void because it was not made strictly in accordance with the authority given to him by
petitioner Rodriguez, in violation of the Negotiable Instruments Law and that since one year had already
lapsed, the same was not done within a reasonable time.

Pe filed a notice of appeal which the trial court gave due course and directed the transmittal of the
entire records of the case to the CA. Rodriguez opposed the appeal because it was not perfected due to
non-payment of docket and other lawful fees as required under Section 4, Rule 41 of the Rules of Court.
Rodriguez moved for execution since the respondent’s appeal was not perfected and, as a consequence,
the RTC Decision dated June 28, 2002 became final and executory. The trial court dismissed the appeal
and ordered a writ of execution.

Pe filed for certiorari and prohibition with the CA which rendered a decision in his favor allowing Pe to
pay the assessed docket fees. Hence the instant case, Rodriguez argues that the CA erred in allowing Pe
to belatedly pay the docket fees.

ISSUE: WON the CA erred in allowing Pe to pay the docket fees

HELD: Yes. Reversed CA

In reversing the ruling of the trial court, the CA cited Yambao v. Court of Appeals[23] as justification for
giving due course to respondent’s petition and ordering the belated payment of docket and other legal
fees. In Yambao, the CA dismissed therein petitioners’ appeal from the RTC decision for failure to pay
the full amount of the required docket fee. Upon elevation of the case, the Court, however, ordered the
CA to give due course to their appeal, and ruled that their subsequent payment of the P20.00 deficiency,
even before the CA had passed upon their motion for reconsideration, was indicative of their good faith
and willingness to comply with the Rules.

The ruling in Yambao is not applicable to the present case as herein respondent never made any
payment of the docket and other lawful fees, not even an attempt to do so, simultaneous with his filing
of the Notice of Appeal. Although respondent was able to file a timely Notice of Appeal, however, he
failed to pay the docket and other legal fees, claiming that the Branch Clerk of Court did not issue any
assessment. This procedural lapse on the part of the respondent rendered his appeal with the CA to be
dismissible and, therefore, the RTC Decision, dated June 28, 2002, to be final and executory.

In Far Corporation v. Magdaluyo,[24] as with other subsequent cases[25] of the same ruling, the Court
explained that the procedural requirement under Section 4 of Rule 41 is not merely directory, as the
payment of the docket and other legal fees within the prescribed period is both mandatory and
jurisdictional. It bears stressing that an appeal is not a right, but a mere statutory privilege. An ordinary
appeal from a decision or final order of the RTC to the CA must be made within 15 days from notice.
And within this period, the full amount of the appellate court docket and other lawful fees must be paid
to the clerk of the court which rendered the judgment or final order appealed from. The requirement of
paying the full amount of the appellate docket fees within the prescribed period is not a mere
technicality of law or procedure. The payment of docket fees within the prescribed period is mandatory
for the perfection of an appeal. Without such payment, the appeal is not perfected. The appellate court
does not acquire jurisdiction over the subject matter of the action and the Decision sought to be
appealed from becomes final and executory. Further, under Section 1 (c), Rule 50, an appeal may be
dismissed by the CA, on its own motion or on that of the appellee, on the ground of the non-payment of
the docket and other lawful fees within the reglementary period as provided under Section 4 of Rule 41.
The payment of the full amount of the docket fee is an indispensable step for the perfection of an
appeal. In both original and appellate cases, the court acquires jurisdiction over the case only upon the
payment of the prescribed docket fees.

The CA took cognizance over the case, based on the wrong premise that when the RTC issued the Order
dated August 5, 2002 giving due course to respondent’s Notice of Appeal and directing the Branch Clerk
of Court to transmit the entire records of the case to the CA, it ipso facto lost jurisdiction over the case.
Section 9,[28] Rule 41 of the Rules explains that the court of origin loses jurisdiction over the case only
upon the perfection of the appeal filed in due time by the appellant and the expiration of the time to
appeal of the other parties. Withal, prior to the transmittal of the original records of the case to the CA,
the RTC may issue orders for the protection and preservation of the rights of the prevailing party, as in
this case, the issuance of the writ of execution because the respondent’s appeal was not perfected.

Moreover, Section 13, Rule 41 of the Rules states that the CA may dismiss an appeal taken from the RTC
on the ground of non-payment of the docket and other lawful fees within the 15-day reglementary
period:

SEC 13. Dismissal of appeal. — Prior to the transmittal of the original record or the record on appeal to
the appellate court, the trial court may motu proprio or on motion dismiss the appeal for having been
taken out of time, or for non-payment of the docket and other lawful fees within the reglementary
period. (As amended by A.M. No. 00-2-10-SC, May 1, 2000.)

Since respondent’s appeal was not perfected within the 15-day reglementary period, it was as if no
appeal was actually taken. Therefore, the RTC retains jurisdiction to rule on pending incidents lodged
before it, such as the petitioner’s Motion for Reconsideration, to Dismiss Appeal, and for Issuance of
Writ of Execution, filed on August 26, 2002, which sought to set aside its Order dated August 5, 2002
that gave due course to respondent’s Notice of Appeal, and directed the issuance of a writ of execution.
Having no jurisdiction over the case, the prudent thing that the CA should have done was to dismiss the
respondent’s appeal for failure to pay the appeal fees, and declare that the RTC Decision dated June 28,
2002 has now become final and executory.

As an incidental matter on the propriety of petitioners’ petition for review on certiorari under Rule 45 of
the Rules, respondent raises the argument that since the subject of the present petition is the writ of
preliminary injunction granted by the CA (in favor of the respondent enjoining the execution of the RTC
Decision dated June 28, 2002), in CA-G.R. SP No. 73171, which is interlocutory in nature, petitioners’
petition should be denied for being the wrong remedy. In other words, respondent advances the theory
that since the assailed CA Decision dated June 23, 2004 partakes of an interlocutory order, i.e., enjoining
the finality of the RTC Decision dated June 28, 2002, petitioners should have availed of the remedy of a
petition for certiorari under Rule 65, not a petition for review on certiorari under Rule 45.

Respondent’s argument is unfounded. The proper remedy of a party aggrieved by a decision of the CA is
a petition for review on certiorari under Rule 45, which is not identical to a petition for certiorari under
Rule 65. Rule 45 provides that decisions, final orders or resolutions of the CA in any case, i.e., regardless
of the nature of the action or proceedings involved, may be appealed to Us by filing a petition for review
on certiorari, which would be but a continuation of the appellate process over the original case.[29]
Therefore, petitioners’ filing of the present petition for review on certiorari under Rule 45 is the proper
and adequate remedy to challenge the Decision dated June 24, 2004 and Resolution dated February 23,
2005 of the CA.

To recapitulate, one who seeks to avail of the right to appeal must strictly comply with the requirements
of the rules, and failure to do so leads to the loss of the right to appeal.[30] The rules require that from
the date of receipt of the assailed RTC order denying one’s motion for reconsideration, an appellant may
take an appeal to the CA by filing a notice of appeal with the RTC and paying the required docket and
other lawful fees with the RTC Branch Clerk of Court, within the 15-day reglementary period for the
perfection of an appeal. Otherwise, the appellant's appeal is not perfected, and the CA may dismiss the
appeal on the ground of non-payment of docket and other lawful fees. As a consequence, the assailed
RTC decision shall become final and executory and, therefore, the prevailing parties can move for the
issuance of a writ of execution.

While every litigant must be given the amplest opportunity for the proper and just determination of his
cause, free from the constraints of technicalities, the failure to perfect an appeal within the
reglementary period is not a mere technicality. It raises jurisdictional problem, as it deprives the
appellate court of its jurisdiction over the appeal. After a decision is declared final and executory,
vested rights are acquired by the winning party. Just as a losing party has the right to appeal within the
prescribed period, the winning party has the correlative right to enjoy the finality of the decision on the
case.
Doctrine of primary jurisdiction

Bagunu v. Spouses Aggabao, G.R. No. 186487, August 15, 2011

FACTS: Bagunu is an applicant for a free patent over a parcel of unregistered land which respondent
spouses Aggabao dispute claiming ownership over the same. The DENR ruled that Bagunu wrongfully
included the respondent’s land in his application. The CA upheld the DENR’s ruling, hence the instant
case of petition for review under Rule 45.

The petitioner argues that the DENR effectively reformed contracts and determined claims of ownership
over a real property – matters beyond the DENR’s competence to determine. The petitioner faults the
CA for applying the doctrine of primary jurisdiction since the issue of who has a better right over Lot 322
does not involve the “specialized technical expertise” of the DENR. On the contrary, the issue involves
interpretation of contracts, appreciation of evidence and the application of the pertinent Civil Code
provisions, which are matters within the competence of the courts.

ISSUE: WON the DENR had jurisdiction and WON the CA correctly applied the doctrine of primary
jurisdiction

HELD: YES. Denied.

Questions of fact generally barred under Rule 45

The petitioner correctly recognized the settled rule that questions of fact are generally barred under a
Rule 45 petition. In the present case, the identity of Lots 258 and 322 is a central factual issue. The
determination of the identity of these lots involves the task of delineating their actual boundaries in
accordance with the parties’ respective deeds of sale and survey plan, among others. While there are
instances where the Court departs from the general rule on the reviewable issues under Rule 45, the
petitioner did not even attempt to show that his case falls within the recognized exceptions.[21] On top
of this legal reality, the findings and decision of the Director of Lands[22] on questions of fact, when
approved by the DENR Secretary, are generally conclusive on the courts,[23] and even on this Court,
when these factual findings are affirmed by the appellate court. We shall consequently confine our
discussions to the petitioner’s twin legal issues.

The determination of the identity of a public land is within the DENR’s exclusive jurisdiction to
manage and dispose of lands of the public domain

The petitioner insists that under the law[24] actions incapable of pecuniary estimation, to which a suit
for reformation of contracts belong, and those involving ownership of real property fall within the
exclusive jurisdiction of the Regional Trial Court. Since these actions are already pending before the RTC,
the DENR Secretary overstepped his authority in excluding Lot 322 from the petitioner’s free patent
application and ordering the respondents to apply for a free patent over the same lot.

In an action for reformation of contract, the court determines whether the parties’ written agreement
reflects their true intention.[25] In the present case, this intention refers to the identity of the land
covered by the second and third sale. On the other hand, in a reivindicatory action, the court resolves
the issue of ownership of real property and the plaintiff’s entitlement to recover its full possession. In
this action, the plaintiff is required to prove not only his ownership, but also the identity of the real
property he seeks to recover.[26]

While these actions ordinarily fall within the exclusive jurisdiction of the RTC, the court’s jurisdiction to
resolve controversies involving ownership of real property extends only to private lands. In the present
case, neither party has asserted private ownership over Lot 322. The respondents acknowledged the
public character of Lot 322 by mainly relying on the administrative findings of the DENR in their
complaint-in-intervention, instead of asserting their own private ownership of the property. For his part,
the petitioner’s act of applying for a free patent with the Bureau of Lands is an acknowledgment that
the land covered by his application is a public land[27] whose management and disposition belong to
the DENR Secretary, with the assistance of the Bureau of Lands.

After the DENR assumed jurisdiction over Lot 322, pursuant to its mandate, the RTC must defer the
exercise of its jurisdiction on related issues on the same matter properly within its jurisdiction,[33] such
as the distinct cause of action for reformation of contracts involving the same property. Note that the
contracts refer to the same property, identified as “Lot 322,” - which the DENR Regional Office, DENR
Secretary and the CA found to actually pertain to Lot 258. When an administrative agency or body is
conferred quasi-judicial functions, all controversies relating to the subject matter pertaining to its
specialization are deemed to be included within its jurisdiction since the law does not sanction a split of
jurisdiction –

The argument that only courts of justice can adjudicate claims resoluble under the provisions of the Civil
Code is out of step with the fast-changing times. There are hundreds of administrative bodies now
performing this function by virtue of a valid authorization from the legislature. This quasi-judicial
function, as it is called, is exercised by them as an incident of the principal power entrusted to them of
regulating certain activities falling under their particular expertise.

The DENR has primary jurisdiction to resolve conflicting claims of title over public lands

Under the doctrine of primary jurisdiction, courts must refrain from determining a controversy involving
a question which is within the jurisdiction of the administrative tribunal prior to its resolution by the
latter, where the question demands the exercise of sound administrative discretion requiring the special
knowledge, experience and services of the administrative tribunal to determine technical and intricate
matters of fact[36]–

In recent years, it has been the jurisprudential trend to apply [the doctrine of primary jurisdiction] to
cases involving matters that demand the special competence of administrative agencies[. It may occur
that the Court has jurisdiction to take cognizance of a particular case, which means that the matter
involved is also judicial in character. However, if the case is such that its determination requires the
expertise, specialized skills and knowledge of the proper administrative bodies because technical
matters or intricate questions of facts are involved, then relief must first be obtained in an
administrative proceeding before a remedy will be supplied by the courts even though the matter is
within the proper jurisdiction of a court. This is the doctrine of primary jurisdiction.] It applies “where a
claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim
requires the resolution of issues which, under a regulatory scheme, have been placed within the special
competence of an administrative body, in such case the judicial process is suspended pending referral of
such issues to the administrative body for its view.”[37]

The application of the doctrine of primary jurisdiction, however, does not call for the dismissal of the
case below. It need only be suspended until after the matters within the competence of [the Lands
Management Bureau] are threshed out and determined. Thereby, the principal purpose behind the
doctrine of primary jurisdiction is salutarily served.

The resolution of conflicting claims of ownership over real property is within the regular courts’ area of
competence and, concededly, this issue is judicial in character. However, regular courts would have no
power to conclusively resolve this issue of ownership given the public character of the land, since under
C.A. No. 141, in relation to Executive Order No. 192,[39] the disposition and management of public lands
fall within the exclusive jurisdiction of the Director of Lands, subject to review by the DENR Secretary.

While the powers given to the DENR, through the Bureau of Lands, to alienate and dispose of public land
do not divest regular courts of jurisdiction over possessory actions instituted by occupants or applicants
(to protect their respective possessions and occupations),[41] the respondents’ complaint-in-
intervention does not simply raise the issue of possession – whether de jure or de facto – but likewise
raised the issue of ownership as basis to recover possession. Particularly, the respondents prayed for
declaration of ownership of Lot 322. Ineluctably, the RTC would have to defer its ruling on the
respondents’ reivindicatory action pending final determination by the DENR, through the Lands
Management Bureau, of the respondents’ entitlement to a free patent, following the doctrine of
primary jurisdiction.

Undoubtedly, the DENR Secretary’s exclusion of Lot 322 from the petitioner’s free patent application
and his consequent directive for the respondents to apply for the same lot are within the DENR
Secretary’s exercise of sound administrative discretion. In the oft-cited case of Vicente Villaflor, etc. v.
CA, et al,[42] which involves the decisions of the Director of Lands and the then Minister of Natural
Resources, we stressed that the rationale underlying the doctrine of primary jurisdiction applies to
questions on the identity of the disputed public land since this matter requires a technical
determination by the Bureau of Lands. Since this issue precludes prior judicial determination, the courts
must stand aside even when they apparently have statutory power to proceed, in recognition of the
primary jurisdiction of the administrative agency.

Omictin v. Court of Appeals, G.R. No. 148004, January 22, 2007

FACTS: Petitioner Vincent E. Omictin, Operations Manager Ad Interim of Saag Phils., Inc., filed a
complaint for two counts of estafa with the Office of the City Prosecutor of Makati against private
respondent George I. Lagos. He alleged that private respondent, despite repeated demands, refused to
return the two company vehicles entrusted to him when he was still the president of Saag Phils., Inc..

Lagos was charged with estafa but filed a motion to suspend proceedings on the basis of a prejudicial
question because of a pending petition with the Securities and Exchange Commission (SEC) involving the
same parties. Lagos had previously filed with the SEC a case for declaration of nullity of the respective
appointments of Alex Y. Tan and petitioner. Lagos resigned his post as president of Saag Phils., Inc. while
still retaining his position as a director of the company. Citing as a reason the absence of a board
resolution authorizing the continued operations of Saag Phils., Inc., private respondent retained his
possession of the office equipment of the company in a fiduciary capacity as director of the corporation
pending its dissolution and/or the resolution of the intra-corporate dispute. He likewise changed the
locks of the offices of the company allegedly to prevent Tan and petitioner from seizing company
property.

The trial court, in an order dated September 8, 1999, denied respondent’s motion to suspend
proceedings. Lagos filed with the CA a petition for certiorari which was granted when the CA found that
the SEC case presents a prejudicial question to the estafa case.

Hence, the instant case.

ISSUE: whether or not a prejudicial question exists to warrant the suspension of the criminal
proceedings pending the resolution of the intra-corporate controversy that was originally filed with the
SEC.

HELD: Yes

A prejudicial question is defined as that which arises in a case, the resolution of which is a logical
antecedent of the issue involved therein and the cognizance of which pertains to another tribunal.

Here, the case which was lodged originally before the SEC and which is now pending before the RTC of
Mandaluyong City by virtue of Republic Act No. 8799 involves facts that are intimately related to those
upon which the criminal prosecution is based.

Ultimately, the resolution of the issues raised in the intra-corporate dispute will determine the guilt
or innocence of private respondent in the crime of estafa filed against him by petitioner before the RTC
of Makati. As correctly stated by the CA, one of the elements of the crime of estafa with abuse of
confidence under Article 315, par. 1(b) of the Revised Penal Code is a demand made by the offended
party to the offender:

The elements of estafa with abuse of confidence under subdivision No. 1, par. (b) of Art. 315 are as
follows:

1. That money, goods, or other personal property be received by the offender in trust, or on
commission, or for administration, or under any other obligation involving the duty to make delivery of,
or to return the same;

2. That there be misrepresentation or conversion of such money or property by the offender, or

denial on his part of such receipt;

3. That such misappropriation or conversion or denial is to the prejudice of another; and

4. That there is a demand made by the offended party to the offender.[15]

Logically, under the circumstances, since the alleged offended party is Saag Phils., Inc., the validity
of the demand for the delivery of the subject vehicles rests upon the authority of the person making
such a demand on the company’s behalf. Private respondent is challenging petitioner’s authority to act
for Saag Phils., Inc. in the corporate case pending before the RTC of Mandaluyong, Branch 214. Taken in
this light, if the supposed authority of petitioner is found to be defective, it is as if no demand was ever
made, hence, the prosecution for estafa cannot prosper. Moreover, the mere failure to return the thing
received for safekeeping or on commission, or for administration, or under any other obligation
involving the duty to deliver or to return the same or deliver the value thereof to the owner could only
give rise to a civil action and does not constitute the crime of estafa. This is because the crime is
committed by misappropriating or converting money or goods received by the offender under a lawful
transaction. As stated in the case of United States v. Bleibel:[16]

The crime of estafa is not committed by the failure to return the things received for sale on
commission, or to deliver their value, but, as this class of crime is defined by law, by misappropriating or
converting the money or goods received on commission. Delay in the fulfillment of a commission or in
the delivery of the sum on such account received only involves civil liability. So long as the money that a
person is under obligation to deliver is not demanded of him, and he fails to deliver it for having
wrongfully disposed of it, there is no estafa, whatever be the cause of the debt.

Likewise, by analogy, the doctrine of primary jurisdiction may be applied in this case. The issues
raised by petitioner particularly the status of Saag Phils., Inc. vis-à-vis Saag (S) Pte. Ltd., as well as the
question regarding the supposed authority of the latter to make a demand on behalf of the company,
are proper subjects for the determination of the tribunal hearing the intra-corporate case which in this
case is the RTC of Mandaluyong, Branch 214. These issues would have been referred to the expertise of
the SEC in accordance with the doctrine of primary jurisdiction had the case not been transferred to the
RTC of Mandaluyong.

Strictly speaking, the objective of the doctrine of primary jurisdiction is to guide a court in
determining whether it should refrain from exercising its jurisdiction until after an administrative agency
has determined some question or some aspect of some question arising in the proceeding before the
court.[17] The court cannot or will not determine a controversy involving a question which is within the
jurisdiction of the administrative tribunal prior to resolving the same, where the question demands the
exercise of sound administrative discretion requiring special knowledge, experience and services in
determining technical and intricate matters of fact.[18]

While the above doctrine refers specifically to an administrative tribunal, the Court believes that the
circumstances in the instant case do not proscribe the application of the doctrine, as the role of an
administrative tribunal such as the SEC in determining technical and intricate matters of special
competence has been taken on by specially designated RTCs by virtue of Republic Act No. 8799.[19]
Hence, the RTC of Mandaluyong where the intra-corporate case is pending has the primary jurisdiction
to determine the issues under contention relating to the status of the domestic corporation, Saag Phils.,
Inc., vis-à-vis Saag Pte. Ltd.; and the authority of petitioner to act on behalf of the domestic corporation,
the determination of which will have a direct bearing on the criminal case. The law recognizes that, in
place of the SEC, the regular courts now have the legal competence to decide intra-corporate
disputes.[20]

In view of the foregoing, the Court finds no substantial basis in petitioner’s contention that the CA
committed grave abuse of discretion amounting to lack or excess of jurisdiction. Absent a showing of a
despotic, whimsical and arbitrary exercise of power by the CA, the petition must fail.

Agra, et al v. COA, G.R. No. 167807, December 6, 2011

FACTS: This is a special civil action via certiorari under Rule 65 in relation to Rule 64 of the 1997 Revised
Rules of Civil Procedure from the Decision[1] of the Commission on Audit (COA) No. 2003-134 dated
October 9, 2003, which denied the grant of rice allowance to employees of the National Electrification
Administration (NEA) who were hired after June 30, 1989 (petitioners) and COA’s Resolution[2] No.
2005-010 dated February 24, 2005, which likewise denied petitioners’ Motion for Reconsideration.

On July 1, 1989, Republic Act No. 6758 (the Compensation and Position Classification Act of 1989) took
effect, the DBM issued a circular which disallowed allowances and fringe benefits to GOCC and GFI
employees except for incumbents of positions as of June 30, 1989 who are authorized and actually
receiving said allowances/benefits as of said date.

A group of NEA employees who were hired after October 31, 1989[3] claimed that they did not receive
meal, rice, and children’s allowances. Thus, on July 23, 1999, they filed a special civil action for
mandamus against NEA and its Board of Administrators before the Regional Trial Court (RTC), Branch 88,
Quezon City, docketed as SP. Civil Action No. Q-99-38275, alleging violation of their right to the equal
protection clause under the Constitution. The RTC ruled in their favor ordering NEA to extend to the
employees the same benefits. The RTC decision became final and executory and a writ of execution was
issued. NEA implemented the RTC decision but COA disallowed the benefits to the after-hired
employees. COA insists that the applicable law is is still Section 12 of R.A. No. 6758 , and anent the
contention that the subject decision of the RTC has become the law of the case which must be applied,
COA stressed that the said doctrine is one of the policies only and will be disregarded when compelling
circumstances call for a redetermination of the point of law. As cited in Black’s Law Dictionary, 6th
Edition, 1990, “the doctrine is merely a rule of procedure and does not go to the power of the court, and
will not be adhered to where its application will result in unjust decision.”

Hence, the instant case. The petitioner employees argue that the RTC decision has become final and is
immutable and unalterable.

ISSUE: 1. Whether or not the immutability of final decision doctrine must prevail over the exclusive
jurisdiction of [the COA] to audit and settle disbursements of funds; and 2. Whether or not the NEA
employees hired after June 30, 1989 are entitled to rice allowance.

HELD:

The COA resolved these issues in this manner:

As to the first issue, the immutability rule applies only when the decision is promulgated by a court
possessed of jurisdiction to hear and decide the case. Undoubtedly, the petition in the guise of a case for
mandamus is a money claim falling within the original and exclusive jurisdiction of this Commission.
Noting the propensity of the lower courts in taking cognizance of cases filed by claimants in violation of
such primary jurisdiction, the Supreme Court issued Administrative Circular 10-2000 dated October 23,
2000 enjoining judges of lower courts to exercise caution in order to prevent “possible circumvention of
the rules and procedures of the Commission on Audit” and reiterating the basic rule that: “All money
claims against the Government must be filed with the Commission on Audit which shall act upon it
within sixty days. Rejection of the claim will authorize the claimant to elevate the matter to the Supreme
Court on certiorari and in effect sue the State thereby.”

Under the doctrine of primary jurisdiction, when an administrative body is clothed with original
and exclusive jurisdiction, courts are utterly without power and authority to exercise concurrently such
jurisdiction. Accordingly, all the proceedings of the court in violation of that doctrine and all orders and
decisions reached thereby are null and void. It will be noted in the cited Supreme Court Circular that
money claims are cognizable by the COA and its decision is appealable only to the Supreme Court. The
lower courts have nothing to do with such genus of transactions.

Anent the issue of entitlement to rice allowance by employees hired after June 30, 1989, this
Commission is left with no option but to affirm the disallowance in the face of the explicit provisions of
DBM-CCC No. 10. After its publication on March 9, 1999 in the Official Gazette, rice allowance was
allowed only for incumbents as of July 1, 1989. Obviously, there is no violation of the equal protection
clause as cited in the PITC case, supra, because whatever increments the incumbents are enjoying over
those of non-incumbents are transitory, for the same law provides that such difference shall be
deducted from the salary increase the former should receive under Section 17. Thus, the equalization or
standardization of what the two categories of employees will be receiving in terms of benefits is
ensured.

We agree with the findings of the COA

In National Electrification Administration v. Morales, the order of garnishment against the NEA funds to
implement the RTC Decision was in issue, and we said that the COA had exclusive jurisdiction to decide
on the allowance or disallowance of money claims arising from the implementation of Republic Act No.
6758. We observed therein that “the RTC acted prudently in halting implementation of the writ of
execution to allow the parties recourse to the processes of the COA.”[47] In fact, we even stated there
that “it is not for this Court to preempt the action of the COA on the post-audit to be conducted by it per
its Indorsement dated March 23, 2000.”[48]

We find that the COA had ruled in accordance with law and jurisprudence, and we see no reason to
reverse its decision.

Stare Decisis
The doctrine “stare decisis et non quieta movere (Stand by the decisions and disturb not what is
settled)” is firmly entrenched in our jurisprudence. Once this Court has laid down a principle of law as
applicable to a certain state of facts, it would adhere to that principle and apply it to all future cases in
which the facts are substantially the same as in the earlier controversy.

The precise interpretation and application of the assailed provisions of RA 6758, namely those in Section
12, have long been established in Philippine Ports Authority v. COA. The essential pronouncements in
that case have further been fortified by Manila International Airport Authority v. COA, Philippine
International Trading Corporation v. COA, and Social Security System v. COA.

This Court has consistently held in those cases that allowances or fringe benefits, whether or not
integrated into the standardized salaries prescribed by RA 6758, should continue to be enjoyed by
employees who (1) were incumbents and (2) were receiving those benefits as of July 1, 1989.

In consonance with stare decisis, there should be no more misgivings about the proper application of
Section 12. In the present case, the payment of benefits to employees hired after July 1, 1989, was
properly withheld, because the law clearly mandated that those benefits should be reserved only to
incumbents who were already enjoying them before its enactment. Withholding them from the others
ensured that the compensation of the incumbents would not be diminished in the course of the latter’s
continued employment with the government agency.

Spouses Fajardo v. Flores, G.R. No. 167891, January 15, 2010

FACTS: Fajardo is the tenant of Flores father. When the father died, Flores and Fajardo entered into a
Kasunduan to divide lots which was referred to the DARAB for adjudication. But Flores filed an
ejectment case in the MTC against Fajardo and the land in dispute is a stony land where Fajardo built his
house.

Fajardo filed a motion to dismiss contending that the MTC had no jurisdiction over the case, considering
that the dispute between the parties, regarding the Kasunduan, was referred to the DARAB; and that
the assumption by the DARAB of jurisdiction over the controversy involving the lot in question therefore
precluded the MTC from exercising jurisdiction over the case. The MTC ruled it had jurisdiction because
considering that it was admitted that petitioner was allowed to cultivate the land, a closer look at the
Kasunduan, however, revealed that what was divided was only the portion being tilled. By contrast, the
subject matter of the complaint was the stony portion where petitioners’ house was erected.

The MTC rendered a decision in favor of Flores. On appeal, the RTC affirmed the MTC. On motion for
reconsideration, however, the RTC issued an Order on December 10, 2002, reversing its decision dated
August 29, 2002. The RTC found that the issue involved appeared to be an agrarian dispute, which fell
within the contemplation of Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988, and thus ordered the dismissal of the case for lack of jurisdiction.

A petition for review was then filed by respondents with the CA to annul the Order of the RTC. On
October 28, 2004, the CA rendered the assailed decision, which reinstated the MTC decision. It
disagreed with the findings of the RTC and ruled that the part of Lot No. 2351 where petitioners’ house
stood was stony and residential in nature, one that may not be made to fall within the ambit of the
operation of Philippine agrarian laws, owing to its non-agriculture character.

Hence the instant case.

ISSUE: whether it is MTC or the DARAB which has jurisdiction over the case.

HELD: the DARAB. Reversed CA.

We agree with the RTC when it clearly pointed out in its Order dated December 10, 2002 that the
resolution of this case hinges on the correct interpretation of the contracts executed by the parties. The
issue of who has a better right of possession over the subject land cannot be determined without
resolving first the matter as to whom the subject property was allotted. Thus, this is not simply a case
for unlawful detainer, but one that is incapable of pecuniary estimation, definitely beyond the
competence of the MTC.[11]

More importantly, the controversy involves an agricultural land, which petitioners have continuously
and personally cultivated since the 1960s. In the Kasunduan, it was admitted that Jesus Fajardo was the
tiller of the land. Being agricultural lessees, petitioners have a right to a home lot and a right to exclusive
possession thereof by virtue of Section 24, R.A. No. 3844 of the Agricultural Land Reform Code.[12]
Logically, therefore, the case involves an agrarian dispute, which falls within the contemplation of R.A.
No. 6657, or the Comprehensive Agrarian Reform Law.

An agrarian dispute[13] refers to any controversy relating to tenurial arrangements, whether leasehold,
tenancy, stewardship, or otherwise, over lands devoted to agriculture, including disputes concerning
farmworkers’ associations or representation of persons in negotiating, fixing, maintaining, changing, or
seeking to arrange terms or conditions of such tenurial arrangements. It includes any controversy
relating to compensation of lands acquired under this Act and other terms and conditions of transfer of
ownership from landowner to farmworkers, tenants, and other agrarian reform beneficiaries, whether
the disputants stand in the proximate relation of farm operator and beneficiary, landowner and tenant,
or lessor and lessee. It relates to any controversy relating to, inter alia, tenancy over lands devoted to
agriculture.[14]

Undeniably, the instant case involves a controversy regarding tenurial arrangements. The contention
that the Kasunduans, which allegedly terminated the tenancy relationship between the parties and,
therefore, removed the case from the ambit of R.A. No. 6657, is untenable. There still exists an agrarian
dispute because the controversy involves the home lot of petitioners, an incident arising from the
landlord-tenant relationship.

Furthermore, the records disclose that the dispute between the parties, regarding the interpretation of
the Kasunduan, was, in fact, raised and referred to the DAR, which in turn referred the case to the
DARAB.[16] In view of the foregoing, we reiterate Hilario v. Prudente,[17] that:
The doctrine of primary jurisdiction precludes the courts from resolving a controversy over which
jurisdiction has initially been lodged with an administrative body of special competence. For agrarian
reform cases, jurisdiction is vested in the Department of Agrarian Reform (DAR); more specifically, in the
Department of Agrarian Reform Adjudication Board (DARAB).

Adherence of jurisdiction
Aruego v. Court of Appeals, G.R. No. 112193, March 13, 1996
FACTS: On March 7, 1983, a Complaint for Compulsory Recognition and Enforcement of Successional
Rights was filed before Branch 30 of the Regional Trial Court of Manila by the minors, private
respondent Antonia F. Aruego and her alleged sister Evelyn F. Aruego, represented by their mother and
natural guardian, Luz M. Fabian. The main basis of the action for compulsory recognition is their alleged
“open and continuous possession of the status of illegitimate children.”

RTC Ruling

After trial, the lower court rendered judgment, dated June 15, 1992, declaring Antonia Aruego as
illegitimate daughter of Jose Aruego and Luz Fabian but not Eveleyn.

Herein petitioners filed a Motion for Partial Reconsideration of the decision alleging loss of jurisdiction
on the part of the trial court over the complaint by virtue of the passage of Executive Order No. 209
(as amended by Executive Order No. 227), otherwise known as the Family Code of the Philippines which
took effect on August 3, 1988. This motion was denied by the lower court in the Order, dated January
14, 1993.

Petitioners interposed an appeal but the lower court refused to give it due course on the ground that it
was filed out of time.

CA Ruling
A Petition for Prohibition and Certiorari with prayer for a Writ of Preliminary Injunction was filed by
herein petitioners before respondent Court of Appeals, the petition was dismissed for lack of merit in a
decision promulgated on August 31, 1993. A Motion for Reconsideration when filed was denied by the
respondent court in a minute resolution, dated October 13, 1993.

Hence, this Petition for Review on Certiorari under Rule 45. Petitioners submit that with the advent of
the New Family Code on August 3, 1988, the trial court lost jurisdiction over the complaint of private
respondent on the ground of prescription, considering that under Article 175, paragraph 2, in relation to
Article 172 of the New Family Code, it is provided that an action for compulsory recognition of
illegitimate filiation, if based on the “open and continuous possession of the status of an illegitimate
child,” must be brought during the lifetime of the alleged parent without any exception, otherwise the
action will be barred by prescription.

In the case at bench, petitioners point out that, since the complaint of private respondent and her
alleged sister was filed on March 7, 1983, or almost one (1) year after the death of their presumed
father on March 30, 1982, the action has clearly prescribed under the new rule as provided in the
Family Code. Petitioners, further, maintain that even if the action was filed prior to the effectivity of the
Family Code, this new law must be applied to the instant case pursuant to Article 256 of the Family Code
which provides: “This Code shall have retroactive effect insofar as it does not prejudice or impair vested
or acquired rights in accordance with the Civil Code or other laws.”

ISSUE: WON the trial court lost jurisdiction over the case

HELD:
In Tayag vs. Court of Appeals, a case which involves a similar complaint denominated as “Claim for
Inheritance” but treated by this court as one to compel recognition as an illegitimate child brought prior
to the effectivity of the Family Code by the mother of the minor child, and based also on the “open and
continuous possession of the status of an illegitimate child,” we had occasion to rule that:

“Under the circumstances obtaining in the case at bar, we hold that the right of action of the minor child
has been vested by the filing of the complaint in court under the regime of the Civil Code and prior to
the effectivity of the Family Code. We herein adopt our ruling in the recent case of Republic of the
Philippines vs. Court of Appeals, et. al.[7] where we held that the fact of filing of the petition already
vested in the petitioner her right to file it and to have the same proceed to final adjudication in
accordance with the law in force at the time, and such right can no longer be prejudiced or impaired by
the enactment of a new law.

xxx xxx xxx

Accordingly, Article 175 of the Family Code finds no proper application to the instant case since it will
ineluctably affect adversely a right of private respondent and, consequentially, of the minor child she
represents, both of which have been vested with the filing of the complaint in court. The trial court is,
therefore, correct in applying the provisions of Article 285 of the Civil Code and in holding that private
respondent’s cause of action has not yet prescribed.”

Tayag applies four-square with the case at bench. The action brought by private respondent Antonia
Aruego for compulsory recognition and enforcement of successional rights which was filed prior to the
advent of the Family Code, must be governed by Article 285 of the Civil Code and not by Article 175,
paragraph 2 of the Family Code. The present law cannot be given retroactive effect insofar as the instant
case is concerned, as its application will prejudice the vested right of private respondent to have her
case decided under Article 285 of the Civil Code. The right was vested to her by the fact that she filed
her action under the regime of the Civil Code. Prescinding from this, the conclusion then ought to be
that the action was not yet barred, notwithstanding the fact that it was brought when the putative
father was already deceased, since private respondent was then still a minor when it was filed, an
exception to the general rule provided under Article 285 of the Civil Code. Hence, the trial court, which
acquired jurisdiction over the case by the filing of the complaint, never lost jurisdiction over the same
despite the passage of E.O. No. 209, also known as the Family Code of the Philippines.

Our ruling herein reinforces the principle that the jurisdiction of a court, whether in criminal or civil
cases, once attached cannot be ousted by subsequent happenings or events, although of a character
which would have prevented jurisdiction from attaching in the first instance, and it retains jurisdiction
until it finally disposes of the case.
Barrameda v. Rural Bank of Canaman, G.R. No. 176260, November 24, 2010
FACTS: on March 17, 2000, petitioner Lucia Barrameda Vda. De Ballesteros (Lucia) filed a complaint for
Annulment of Deed of Extrajudicial Partition, Deed of Mortgage and Damages with prayer for
Preliminary Injunction against her children and the Rural Bank of Canaman, Inc., Baao Branch (RBCI)
before the RTC-Iriga.

In her complaint, Lucia alleged that her deceased husband left two (2) parcels of land located in San
Nicolas, Baao, Camarines Sur; that on March 6, 1995, without her knowledge and consent, her children
executed a deed of extrajudicial partition and waiver of the estate of her husband wherein all the
heirs, including Lucia, agreed to allot the two parcels to Rico Ballesteros (Rico); that, still, without her
knowledge and consent, Rico mortgaged Parcel B of the estate in favor of RBCI which mortgage was
being foreclosed for failure to settle the loan secured by the lot.

During the pre-trial, PDIC (Philippine Deposit Insurance Corporation) took over the case of RCBI because
RBCI had already been closed and placed under the receivership of the PDIC

On May 9, 2003, RBCI, through PDIC, filed a motion to dismiss on the ground that the RTC-Iriga has no
jurisdiction over the subject matter of the action. RBCI stated that pursuant to Section 30, Republic Act
No. 7653 (RA No. 7653) which took effect on July 3, 1993, otherwise known as the “New Central Bank
Act,” the RTC-Makati, already constituted itself, per its Order dated August 10, 2001, as the liquidation
court to assist PDIC in undertaking the liquidation of RBCI. Thus, the subject matter of Civil Case No. IR-
3128 fell within the exclusive jurisdiction of such liquidation court. Lucia opposed the motion.

RTC-Iriga Ruling
On July 29, 2003, the RTC-Iriga issued an order granting the Motion to Dismiss, applying the rulings in
Ong v. C.A. 253 SCRA 105 and in the case of Hernandez v. Rural Bank of Lucena, Inc., dated January 10,
1978, wherein it was held that “the liquidation court shall have jurisdiction to adjudicate all claims
against the bank whether they be against assets of the insolvent bank, for Specific Performance,
Breach of Contract, Damages or whatever.”

CA Ruling

Not in conformity, Lucia appealed the RTC ruling to the CA on the ground that the RTC-Iriga erred in
dismissing the case because it had jurisdiction over Civil Case No. IR-3128 under the rule on adherence
of jurisdiction.

On August 15, 2006, the CA rendered the questioned decision ordering the consolidation of Civil Case
No. IR-3128 and the liquidation case pending before RTC-Makati.

Lucia filed a motion for reconsideration but it was denied by the CA in its Resolution dated December
14, 2006.

Hence, the present petition for review on certiorari. Lucia contends that the RTC-Iriga is vested with
jurisdiction over Civil Case No. 3128, the constitution of the liquidation court notwithstanding.
According to her, the case was filed before the RTC-Iriga on March 17, 2000 at the time RBCI was still
doing business or before the defendant bank was placed under receivership of PDIC in January 2001.
She further argues that the consolidation of the two cases is improper. Her case, which is for annulment
of deed of partition and waiver, deed of mortgage and damages, cannot be legally brought before the
RTC-Makati with the liquidation case considering that her cause of action against RBCI is not a simple
claim arising out of a creditor-debtor relationship, but one which involves her rights and interest over a
certain property irregularly acquired by RBCI.

In its Comment, PDIC, as liquidator of RBCI, counters that the consolidation of Civil Case No. 3128 with
the liquidation proceeding is proper. It posits that the liquidation court of RBCI, having been
established, shall have exclusive jurisdiction over all claims against the said bank.

ISSUE: whether a liquidation court can take cognizance of a case wherein the main cause of action is not
a simple money claim against a bank ordered closed, placed under receivership of the PDIC, and
undergoing a liquidation proceeding.

HELD: After due consideration, the Court finds the petition devoid of merit.

Lucia’s argument, that the RTC-Iriga is vested with jurisdiction to continue trying Civil Case No. IR-3128
until its final disposition, evidently falls out from a strained interpretation of the law and jurisprudence.
She contends that:

Since the RTC-Iriga has already obtained jurisdiction over the case it should continue exercising such
jurisdiction until the final termination of the case. The jurisdiction of a court once attached cannot be
ousted by subsequent happenings or events, although of a character which would have prevented
jurisdiction from attaching in the first instance, and the Court retains jurisdiction until it finally disposes
of the case (Aruego Jr. v. Court of Appeals, 254 SCRA 711).

When a court has already obtained and is exercising jurisdiction over a controversy, its jurisdiction to
proceed to final determination of the case is not affected by a new legislation transferring jurisdiction
over such proceedings to another tribunal. (Alindao v. Joson, 264 SCRA 211). Once jurisdiction is vested,
the same is retained up to the end of the litigation (Bernate v. Court of Appeals, 263 SCRA 323).[8]

The afore-quoted cases, cited by Lucia to bolster the plea for the continuance of her case, find no
application in the case at bench.

Indeed, the Court recognizes the doctrine on adherence of jurisdiction. Lucia, however, must be
reminded that such principle is not without exceptions. It is well to quote the ruling of the CA on this
matter, thus:

This Court is not unmindful nor unaware of the doctrine on the adherence of jurisdiction. However, the
rule on adherence of jurisdiction is not absolute and has exceptions. One of the exceptions is that when
the change in jurisdiction is curative in character (Garcia v. Martinez, 90 SCRA 331 [1979]; Calderon, Sr.
v. Court of Appeals, 100 SCRA 459 [1980]; Atlas Fertilizer Corporation v. Navarro, 149 SCRA 432 [1987];
Abad v. RTC of Manila, Br. Lll, 154 SCRA 664 [1987]).

For sure, Section 30, R.A. 7653 is curative in character when it declared that the liquidation court shall
have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims against
the Bank. The interpretation of this Section (formerly Section 29, R.A. 265) becomes more obvious in
the light of its intent. In Manalo v. Court of Appeals (366 SCRA 752, [2001]), the Supreme Court says:
xxx The requirement that all claims against the bank be pursued in the liquidation proceedings filed by
the Central Bank is intended to prevent multiplicity of actions against the insolvent bank and designed
to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of
litigations and to avoid injustice and arbitrariness (citing Ong v. CA, 253 SCRA 105 [1996]). The
lawmaking body contemplated that for convenience, only one court, if possible, should pass upon the
claims against the insolvent bank and that the liquidation court should assist the Superintendents of
Banks and regulate his operations (citing Central Bank of the Philippines, et al. v. CA, et al., 163 SCRA
482 [1988]).

As regards Lucia’s contention that jurisdiction already attached when Civil Case No. IR-3128 was
filed with, and jurisdiction obtained by, the RTC-Iriga prior to the filing of the liquidation case before the
RTC-Makati, her stance fails to persuade this Court. In refuting this assertion, respondent PDIC cited the
case of Lipana v. Development Bank of Rizal where it was held that the time of the filing of the
complaint is immaterial, viz:

It is the contention of petitioners, however, that the placing under receivership of Respondent Bank long
after the filing of the complaint removed it from the doctrine in the said Morfe Case.

This contention is untenable. The time of the filing of the complaint is immaterial. It is the execution
that will obviously prejudice the other depositors and creditors. Moreover, as stated in the said Morfe
case, the effect of the judgment is only to fix the amount of the debt, and not to give priority over other
depositors and creditors.

The cited Morfe case held that “after the Monetary Board has declared that a bank is insolvent and has
ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all
the creditors, including depositors. The assets of the insolvent banking institution are held in trust for
the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a
preference over another by an attachment, execution or otherwise.”

Thus, to allow Lucia’s case to proceed independently of the liquidation case, a possibility of favorable
judgment and execution thereof against the assets of RBCI would not only prejudice the other creditors
and depositors but would defeat the very purpose for which a liquidation court was constituted as well.

Consolidation is proper
Lucia’s complaint involving annulment of deed of mortgage and damages falls within the purview of a
disputed claim in contemplation of Section 30 of R.A. 7653 (The New Central Bank Act). The jurisdiction
should be lodged with the liquidation court.

“Disputed claims” refers to all claims, whether they be against the assets of the insolvent bank, for
specific performance, breach of contract, damages, or whatever.[12] Lucia’s action being a claim against
RBCI can properly be consolidated with the liquidation proceedings before the RTC-Makati.

A liquidation proceeding is a single proceeding which consists of a number of cases properly classified as
"claims." It is basically a two-phased proceeding. The first phase is concerned with the approval and
disapproval of claims. The second phase involves the approval by the Court of the distribution plan
prepared by the duly appointed liquidator
It is clear, therefore, that the liquidation court has jurisdiction over all claims, including that of Lucia
against the insolvent bank. As declared in Miranda v. Philippine Deposit Insurance Corporation,[14]
regular courts do not have jurisdiction over actions filed by claimants against an insolvent bank, unless
there is a clear showing that the action taken by the BSP, through the Monetary Board, in the closure of
financial institutions was in excess of jurisdiction, or with grave abuse of discretion. The same is not
obtaining in this present case.

In sum, this Court holds that the consolidation is proper considering that the liquidation court has
jurisdiction over Lucia’s action. It would be more in keeping with law and equity if Lucia’s case is
consolidated with the liquidation case in order to expeditiously determine whether she is entitled to
recover the property subject of mortgage from RBCI and, if so, how much she is entitled to receive from
the remaining assets of the bank.

Cabili v. Hon. Balindong, A.M. No. RTJ-10-22252, September 6, 2011

FACTS: The case is an administrative case against Judge Balindong of the RTC of Marawi City for Gross
Ignorance of the Law, Grave Abuse of Authority, Abuse of Discretion, and/or Grave Misconduct
Prejudicial to the Interest of the Judicial Service.

The RTC of Iligan City rendered a decision against the Mindanao State University which became final and
executor. The Sheriff garnished the properties of MSU but MSU filed a petition for injunction with the
RTC of Marawi City with respondent as presiding judge. The respondent Judge conducted a hearing on
the application for the issuance of a writ of preliminary injunction and required MSU to file a
memorandum in support of its application for the issuance of a writ of preliminary injunction. The
Sheriff moved to dismiss the case for lack of jurisdiction which respondent Judge thereafter granted. But
the Atty Cabiling, counsel for the plaintiffs in the MSU case filed administrative charges against the
judge.

The Office of the Court Administrator (OCA) found the respondent Judge guilty of gross ignorance of the
law for violating the elementary rule of non-interference with the proceedings of a court of co-equal
jurisdiction.[16] It recommended a fine of P40,000.00, noting that this is the respondent Judge’s second
offense.

ISSUE: WON the judge is guilty

HELD: Yes

The Court finds the OCA’s recommendation well-taken.

The doctrine of judicial stability or non-interference in the regular orders or judgments of a co-
equal court is an elementary principle in the administration of justice:[22] no court can interfere by
injunction with the judgments or orders of another court of concurrent jurisdiction having the power to
grant the relief sought by the injunction.[23] The rationale for the rule is founded on the concept of
jurisdiction: a court that acquires jurisdiction over the case and renders judgment therein has
jurisdiction over its judgment, to the exclusion of all other coordinate courts, for its execution and over
all its incidents, and to control, in furtherance of justice, the conduct of ministerial officers acting in
connection with this judgment.[24]

Thus, we have repeatedly held that a case where an execution order has been issued is considered as
still pending, so that all the proceedings on the execution are still proceedings in the suit.[25] A court
which issued a writ of execution has the inherent power, for the advancement of justice, to correct
errors of its ministerial officers and to control its own processes.[26] To hold otherwise would be to
divide the jurisdiction of the appropriate forum in the resolution of incidents arising in execution
proceedings. Splitting of jurisdiction is obnoxious to the orderly administration of justice.[27]

Jurisprudence shows that a violation of this rule warrants the imposition of administrative sanctions.

To be sure, the law and the rules are not unaware that an issuing court may violate the law in issuing a
writ of execution and have recognized that there should be a remedy against this violation. The remedy,
however, is not the resort to another co-equal body but to a higher court with authority to nullify the
action of the issuing court. This is precisely the judicial power that the 1987 Constitution, under Article
VIII, Section 1, paragraph 2,[34] speaks of and which this Court has operationalized through a petition
for certiorari, under Rule 65 of the Rules of Court.

Villamor v. Salas, G.R. No. 101041, November 13, 1991

FACTS: Judge Villamor was the presiding judge in the civil case Gloria Naval vs. George Carlos for
recovery of ownership of a parcel of coconut land. While the civil case was pending there, respondent
Carlos filed Criminal Cases for qualified theft against Gloria Naval and her helpers. The criminal cases
were also assigned to the sala of Judge Villamor. During the pendency of the civil case, the criminal cases
were archived.

After trial in Civil Case No. B-398, a decision was rendered in favor of Naval, thereafter, Carlos, through
counsel, moved to activate the archived criminal cases. Having declared Naval the lawful owner and
possessor of the contested land, Judge Villamor dismissed the criminal cases against her and her co-
accused. Judge Villamor likewise granted execution pending appeal of his decision in Civil Case No. B-
398. This order was challenged by Carlos in the Court of Appeals and in this Court, both without success.

Afterwards, Carlos filed an administrative case, A.M. No. RTJ-87-105, against Judge Villamor, charging
him with having issued illegal orders and an unjust decision in the Civil Case. this Court, in an En Banc
resolution, summarily dismissed the administrative case.

Dissatisfied with the outcome of the administrative case, respondent Carlos filed a civil action for
damages (Civil Case No. CEB-6478) against Judge Villamor for knowingly rendering an unjust judgment
when he dismissed the five (5) criminal cases against Naval, et al. Instead of answering the complaint,
Judge Villamor issued in Criminal Cases Nos. N-0989 to 0993 an order of direct contempt against Carlos
and his lawyer. Carlos immediately filed in this Court a petition for certiorari with a prayer for the
issuance of a writ of preliminary injunction against the Judge and annulled the contempt order.
Judge Villamor filed a motion to dismiss the civil case against him for lack of jurisdiction. The trial court
granted the motion. The order of dismissal was affirmed by the Court of Appeals (CA-G.R. CV No. 20657,
June 26, 1990). Carlos appealed to this Court which also denied the petition. Unfazed by these setbacks,
Carlos and his counsel, Attorney Antonio Guerrero, filed separate complaints for damages against Judge
Villamor for knowingly rendering an unjust order of contempt.

Attorney Guerrero's complaint for damages (Civil Case No. CEB-8802) was raffled to Branch 21, Regional
Trial Court, Cebu City, presided over by Judge Peary G. Aleonar. Carlos' complaint for damages was
docketed as Civil Case No. CEB-8823 and raffled to Branch 8, Regional Trial Court of Cebu City presided
over by Judge Bernardo LL. Salas.

On March 30, 1990, Judge Villamor filed a motion to dismiss Civil Case No. CEB-8802 but it was denied
by Judge Aleonar (p. 33, Rollo of G.R. No. 101296). Hence, this petition for certiorari and prohibition
with restraining order docketed as G.R. No. 101296. Judge Salas also denied Villamor’s motion to
dismiss, hence the second petition for certiorari and prohibition

ISSUE: whether or not Judges Aleonar and Salas may take cognizance of the actions for damages against
Judge Villamor for allegedly having rendered an unjust order of direct contempt against Carlos and
Attorney Guerrero which this Court subsequently annulled.

HELD: No. Granted petition

The answer is no.

As very aptly held by this Court in a Resolution it issued in connection with a previous case filed by
respondent Carlos against Judge Villamor, over a similar action for "Damages and Attorney's Fees Arising
From Rendering an Unjust Judgment," in dismissing the five (5) criminal cases for qualified theft which
he (respondent Carlos) had filed against Gloria P. Naval and others -

"Indeed, no Regional Trial Court can pass upon and scrutinize, and much less declare as unjust a
judgment of another Regional Trial Court and sentence the judge thereof liable for damages without
running afoul with the principle that only the higher appellate courts, namely, the Court of Appeals and
the Supreme Court, are vested with authority to renew and correct errors of the trial courts." (George D.
Carlos vs. CA, G.R. No. 95560, November 5, 1990; p. 125, Rollo of G.R. No. 101296.).

To allow respondent Judges Aleonar and Salas to proceed with the trial of the actions for damages
against the petitioner, a co-equal judge of a co-equal court, would in effect permit a court to renew and
interfere with the judgment of a co-equal court over which it has no appellate jurisdiction or power of
review. The various branches of a Court of First Instance (now the Regional Trial Court) being co-equal,
may not interfere with each other's cases, judgments and orders (Parco vs. Court of Appeals, 111 SCRA
262).

This Court has already ruled that only after the Appellate Court, in a final judgment, has found that a
trial judge's errors were committed deliberately and in bad faith may a charge of knowingly rendering an
unjust decision be levelled against the latter (Garcia vs. Alconcel, 111 SCRA 178; Sta. Maria vs. Ubay, 87
SCRA 179; Gahol vs. Riodique, 64 SCRA 494).

Nowhere in this Court's decision annulling Judge Villamor's order of direct contempt (G.R. Nos. 82238-
42, November 13, 1989) can there be found a declaration that the erroneous order was rendered
maliciously or with conscious and deliberate intent to commit an injustice. In fact, a previous order of
direct contempt issued by Judge Villamor against Carlos' former counsel was sustained by this Court
(Jaynes C. Abarrientos, et al. vs. Judge Villamor, G.R. No. 82237, June 1, 1988).

At most, the order of direct contempt which we nullified may only be considered an error of judgment
for which Judge Villamor may not be held criminally or civilly liable to the respondents.

A judge is not liable for an erroneous decision in the absence of malice or wrongful conduct in rendering
it (Barroso vs. Arche, 67 SCRA 161).

Heirs of Marasigan v. Marasigan, G.R. No. 156078, March 14, 2008

FACTS: The case is a petition for partition of the estate of Alicia Marasigan who died intestate and
without issue on 21 January 1995. The estate consists of 13 parcels of land and Alicia left behind her
2/21 shares to her siblings Cesar, Apolonio, Lilia, and Benito; Marissa, a sister-in-law; and the children of
her brothers who predeceased her: Francisco, Horacio, and Octavio. In answer to the private
respondents’ Complaint, Cesar enumerated Alicia’s several other properties and assets which he also
wanted included in the action for partition. Cesar’s request for inclusion was contested by private
respondents on the ground that the properties he enumerated had already been previously partitioned
and distributed to the appropriate parties.

On 4 February 2000, the RTC decided in favor of private respondents and issued an Order of Partition of
the Estate of Alicia Marasigan. Commissioners were appointed to assist in the physical partition. The
commissioner’s report held that the partition cannot be done because of the different locations and
conditions of the properties and recommended that the heirs may assign their 1/7 share to one of the
parties willing to buy the same and fixed the price at P700,000/hectare. Cesar opposed the report but
the RTC adopted it. Cesar filed an MR but it was denied. Petitioner elevated the case to the CA but it was
also dismissed. Still aggrieved, petitioners filed on 31 December 2002 this Petition for Review under Rule
45 of the Revised Rules of Court, docketed as G.R. No. 156078 contending that they were not notified
when the commissioners inspected the properties.

Meanwhile, the other siblings moved for execution which was granted by the RTC. A public auction was
held and Cesar’s 1/7 share sold less than the value determined by the Commissioners. Petitioners then
filed with the RTC a Motion to Declare Failure of Bidding and to Annul Public Auction Sale. the RTC
released an Omnibus Order ruling, among other things, that the objection of petitioners as to the
difference of the value of their 1/7 share as determined by the Commissioners vis-à-vis the winning bid
was no longer an issue since Apolonio Marasigan indicated his willingness to pay for the deficiency.

Petitioners filed a Notice of Appeal with the RTC of its Omnibus Order. The RTC denied petitioners’
Notice of Appeal on the ground that the proper remedy is not appeal, but certiorari. Petitioners then
filed on 27 August 2003 another Petition before the Court of Appeals for Certiorari and Mandamus
which the CA dismissed.

Petitioners argue that the CA erred in ruling that due notice to the parties was not needed in the
inspection of the properties by the Commissioners and that the finding of the CA of the physical
impossibility and impracticality prejudiced the parties. But in their memorandum, the petitioners raised
new issues of lack of cause of action and lack of jurisdiction.

ISSUE: whether or not the Court of Appeals erred in affirming in toto the RTC Order adopting the
Commissioners’ recommendation on the manner of partition of the estate of Alicia Marasigan.

HELD: No. Dismissed

This Court significantly notes that the first three issues,[34] alleging lack of jurisdiction and cause of
action, are raised by petitioners for the first time in their Memorandum. No amount of interpretation or
argumentation can place them within the scope of the assignment of errors they raised in their Petition.

The parties were duly informed by the Court in its Resolution dated 17 September 2003 that no new
issues may be raised by a party in his/its Memorandum and the issues raised in his/its pleadings but not
included in the Memorandum shall be deemed waived or abandoned. The raising of additional issues in
a memorandum before the Supreme Court is irregular, because said memorandum is supposed to be in
support merely of the position taken by the party concerned in his petition, and the raising of new issues
amounts to the filing of a petition beyond the reglementary period.[35] The purpose of this rule is to
provide all parties to a case a fair opportunity to be heard. No new points of law, theories, issues or
arguments may be raised by a party in the Memorandum for the reason that to permit these would be
offensive to the basic rules of fair play, justice and due process.[

First, it bears to point out that Cesar, petitioners’ predecessor, did not file any motion to dismiss, and his
answer before the RTC did not bear the defenses/objections of lack of jurisdiction or cause of action on
these grounds; consequently, these must be considered waived. The exception that the court may still
dismiss a case for lack of jurisdiction over the subject matter, although the same is not pleaded, but is
apparent in the pleadings or evidence on record, does not find application to the present Petition.
Second, petitioners’ arguments[37] on the lack of jurisdiction of the RTC over the case more
appropriately pertain to venue, rather than jurisdiction over the subject matter, and are, moreover, not
apparent from the pleadings and evidence on record. Third, the property subject of partition is only the
47.2 hectare pro-indiviso area representing the estate of Alicia. It does not include the entire 496
hectares of land comprising Hacienda Sta. Rita.

Even petitioners’ argument that non-payment of appropriate docket fees by private respondents
deprived the RTC of jurisdiction to partition the entire Hacienda Sta. Rita[38] deserves scant
consideration. In National Steel Corporation v. Court of Appeals,[39] the Court ruled:

x x x while the lack of jurisdiction of a court may be raised at any stage of an action, nevertheless, the
party raising such question may be estopped if he has actively taken part in the very proceedings which
he questions and he only objects to the court’s jurisdiction because the judgment or the order
subsequently rendered is adverse to him.

Irrefragably, petitioners raised the issues of jurisdiction for lack of payment of appropriate docket
fees and lack of cause of action belatedly in their Memorandum before this Court. Cesar and petitioners
were noticeably mum about these in the proceedings before. In fact, Cesar actively participated in the
proceedings conducted before the RTC by seeking affirmative reliefs therefrom, such as the inclusion of
more properties in the partition. Hence, petitioners are already estopped from assailing the jurisdiction
of the RTC on this ground.

It is conceded that this Court adheres to the policy that “where the court itself clearly has no
jurisdiction over the subject matter or the nature of the action, the invocation of this defense may de
done at any time.”[40] While it is the general rule that neither waiver nor estoppel shall apply to confer
jurisdiction upon a court, the Court may rule otherwise under meritorious and exceptional
circumstances. One such exception is Tijam v. Sibonghanoy,[41] which finds application in this case.
This Court held in Tijam that “after voluntarily submitting a cause and encountering an adverse decision
on the merits, it is too late for the loser to question the jurisdiction or power of the court."

This Court further notes that while petitioners filed their last pleading in this case, their
Memorandum, on 26 December 2003, they failed to mention therein that the Court of Appeals had
already dismissed CA-G.R. SP No. 78912.[42] To recall, CA-G.R. No. 78912 is a Petition for Certiorari and
Mandamus involving the RTC Order dated 2 July 2003, which denied petitioners’ Notice of Appeal.
Petitioners intended to appeal the RTC Omnibus Order dated 5 May 2003 sustaining the public auction
and sale of petitioners’ share in Alicia’s estate. Petitioners’ failure to provide this Court with information
on the developments in CA-G.R. SP No. 78912 is not only in violation of the rules on non-forum
shopping, but is also grossly misleading, because they are raising in their Memorandum in the present
case the same issues concerning the public auction and sale of their share in Alicia’s estate. The purpose
of the rule against forum shopping is to promote and facilitate the orderly administration of justice.

Forum shopping “occurs when a party attempts to have his action tried in a particular court or
jurisdiction where he feels he will receive the most favorable judgment or verdict.” In our jurisdiction, it
has taken the form of filing multiple petitions or complaints involving the same issues before two or
more tribunals or agencies in the hope that one or the other court would make a favorable disposition.
There is also forum shopping when, because of an adverse decision in one forum, a party seeks a
favorable opinion (other than by appeal or certiorari) in another. The rationale against forum shopping
is that a party should not be allowed to pursue simultaneous remedies in two different fora. Filing
multiple petitions or complaints constitutes abuse of court processes, which tends to degrade the
administration of justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of
the heavily burdened dockets of the courts. Thus, the rule proscribing forum shopping seeks to promote
candor and transparency among lawyers and their clients in the pursuit of their cases before the courts
to promote the orderly administration of justice, prevent undue inconvenience upon the other party,
and save the precious time of the courts. It also aims to prevent the embarrassing situation of two or
more courts or agencies rendering conflicting resolutions or decisions upon the same issue.[43]

The Court, nonetheless, manages to strip the issues in this Petition down to the singular issue of
whether or not the Court of Appeals erred in affirming in toto the RTC Order adopting the
Commissioners’ recommendation on the manner of partition of the estate of Alicia Marasigan.

After an exhaustive study of the merits of the case and the pleadings submitted by the parties,
this Court is convinced that the Court of Appeals did not err in affirming the Order of the RTC which
approved the Commissioners’ recommendations as to the manner of implementing the Order of
Partition of Alicia’s estate.

This petition originated from an original action for partition. It is governed by Rule 69 of the Rules of
Court, and can be availed of under the following circumstances:

Section 1. Complaint in action for partition of real estate. A person having the right to compel the
partition of real estate may do so as provided in this Rule, setting forth in his complaint the nature and
extent of his title and an adequate description of the real estate of which partition is demanded and
joining as defendants all other persons interested in the property.

In this jurisdiction, an action for partition is comprised of two phases: first, the trial court, after
determining that a co-ownership in fact exists and that partition is proper, issues an order for partition;
and, second, the trial court promulgates a decision confirming the sketch and subdivision of the
properties submitted by the parties (if the parties reach an agreement) or by the appointed
commissioners (if the parties fail to agree), as the case may be.[44]

The delineations of these two phases have already been thoroughly discussed by this Court in several
cases where it explained:

The first phase of a partition and/or accounting suit is taken up with the determination of whether or
not a co-ownership in fact exists, (i.e., not otherwise legally proscribed) and may be made by voluntary
agreement of all the parties interested in the property. This phase may end with a declaration that
plaintiff is not entitled to have a partition either because a co-ownership does not exist, or partition is
legally prohibited. It may end, upon the other hand, with an adjudgment that a co-ownership does in
truth exist, partition is proper in the premises and an accounting of rents and profits received by the
defendant from the real estate in question is in order. In the latter case, the parties may, if they are able
to agree, make partition among themselves by proper instruments of conveyance, and the court shall
confirm the partition so agreed upon. In either case – i.e., either the action is dismissed or partition
and/or accounting is decreed – the order is a final one, and may be appealed by any party aggrieved
thereby.
 The second phase commences when it appears that “the parties are unable to agree upon the
partition” directed by the court. In that event, partition shall be done for the parties by the court with
the assistance of not more than three (3) commissioners. This second stage may well also deal with the
rendition of the accounting itself and its approval by the court after the parties have been accorded
opportunity to be heard thereon, and an award for the recovery by the party or parties thereto entitled
of their just share in the rents and profits of the real estate in question. Such an order is, to be sure,
final and appealable.[45]

Trouble arose in the instant petition in the second phase.

Petitioners postulate that the Court of Appeals erred in holding that notice to the heirs regarding
the examination and viewing of the estate is no longer necessary given the circumstances.

We, on the other hand, find that the scales of justice have remained equal throughout the proceedings
before the RTC and the Commissioners. This Court, in the performance of its constitutionally mandated
duty to settle actual controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government, is duty-bound to ensure
that due process is afforded to all the parties to a case.

As the Court of Appeals declared, due process is not a mantra, the mere invocation of which shall
warrant a reversal of a decision. Well-settled is the rule that the essence of due process is the
opportunity to be heard. In Legarda v. Court of Appeals,[46] the Court held that as long as parties to a
case were given the opportunity to defend their interest in due course, they cannot be said to have been
denied due process of the law. Neither do the records show any indicia that the preference of
petitioners for the physical subdivision of the property was not taken into consideration by the
Commissioners.

Petitioners’ persistent assertion that their rights were prejudiced by the lack of notice is not
enough. Black’s Law Dictionary defines the word prejudice as damage or detriment to one’s legal rights
or claims. Prejudice means injury or damage.[47] No competent proof was adduced by petitioners to
prove their allegation. Mere allegations cannot be the basis of a finding of prejudice. He who alleges a
fact has the burden of proving it and a mere allegation is not evidence.[48]

It should not be forgotten that the purpose of the rules of procedure is to secure for the parties a just,
speedy and inexpensive determination of every action or proceeding. [49] The ultimate purpose of the
rules of procedure is to attain, not defeat, substantial justice.[50]
Records reveal that the parties were given sufficient opportunity to raise their concerns. From the time
the action for partition was filed by private respondents, all the parties, including the late Cesar,
petitioners’ predecessor, were given a fair opportunity to be heard. Since the parties were unable to
agree on how the properties shall be divided, Commissioners were appointed by the Court pursuant to
Section 3 of Rule 69 of the Rules of Court.

While the lack of notice to Cesar of the viewing and examination by the Commissioners of the real
properties comprising Alicia’s estate is a procedural infirmity, it did not violate any of his substantive
rights nor did it deprive him of due process. It is a matter of record, and petitioners cannot deny, that
Cesar was able to file his Comment/Opposition to the Commissioners’ Report. And after the RTC
adopted and confirmed the Commissioners’ recommendations in its Order dated 22 June 2001, Cesar
was able to file a Motion for Reconsideration of the said Order. He had sufficient opportunity to present
before the RTC whatever objections or oppositions he may have had to the Commissioners’ Report,
including the valuation of his share in Alicia’s estate.

As to whether a particular property may be divided without prejudice to the interests of the parties is a
question of fact. To answer it, the court must take into consideration the type, condition, location, and
use of the subject property. In appropriate cases such as the one at bar, the court may delegate the
determination of the same to the Commissioners.

The Commissioners found, after a viewing and examination of Alicia’s estate, that the same cannot
be divided without causing prejudice to the interests of the parties. This finding is further supported by
the testimony of Apolonio Marasigan that the estate cannot be divided into smaller portions, since only
certain portions of the land are suitable to agriculture, while others are not, due to the contours of the
land and unavailability of water supply.

The impracticality of physically dividing Alicia’s estate becomes more apparent, considering that
Hacienda Sta. Rita is composed of parcels and snippets of land located in two different municipalities,
Pili and Minalabac, Camarines Sur. The actual area representing Alicia’s 2/21 pro-indiviso shares in
Hacienda Sta. Rita is 422,422.65 square meters, more or less. Each of Alicia’s heirs is entitled to 1/7
share in her estate equivalent to 67,496.09 square meters or roughly seven hectares.[51] Cesar and his
heirs are entitled only to his 1/7 share in the yet unidentified, unsegregated 2/21 pro-indiviso shares of
Alicia in each of the 13 parcels of land that comprises Hacienda Sta. Rita. Dividing the parcels of land
even further, each portion allotted to Alicia’s heirs, with a significantly reduced land area and widely
scattered in two municipalities, would irrefragably diminish the value and use of each portion, as
compared to keeping the entire estate intact.
The correctness of the finding of the RTC and the Commissioners that dividing Alicia’s estate would be
prejudicial to the parties cannot be passed upon by the Court of Appeals in a petition for certiorari.
Factual questions are not within the province of a petition for certiorari. There is a question of fact
when the doubt arises as to the truth or falsity of the alleged facts. As to whether the court a quo
decided the question wrongly is immaterial in a petition for certiorari. It is a legal presumption that
findings of fact of a trial court carry great weight and are entitled to respect on appeal, absent any
strong and cogent reason to the contrary, since it is in a better position to decide the question of
credibility of witnesses.[52]

The writ of certiorari issues for the correction of errors of jurisdiction only or grave abuse of discretion
amounting to lack or excess of jurisdiction. The writ of certiorari cannot be legally used for any other
purpose.[53] At most, the petition pertains to an error of judgment, and not of jurisdiction, for clearly
under Section 5 of Rule 69, the question of whether a party’s interest shall be prejudiced by the division
of the real property is left to the determination and discretion of the Commissioners.

Petitioners’ argument that the assignment of the property will not terminate the co-ownership is
specious, considering that partition, in general, is the separation, division, and ASSIGNMENT of a thing
held in common by those to whom it may belong.[56]

Inasmuch as the parties continued to manifest their desire to terminate their co-ownership, but
the co-heirs/co-owners could not agree on which properties would be allotted to each of them, this
Court finds that the Court of Appeals was correct in ruling that the RTC did not act with grave abuse of
discretion amounting to lack or excess of jurisdiction when it approved the Commissioners’
recommendation that the co-heirs/co-owners assign their shares to one of them in exchange for proper
compensation.

This Court has consistently held that one of the purposes for which courts are organized is to put
an end to controversy in the determination of the respective rights of the contending parties. With the
full knowledge that courts are not infallible, the litigants submit their respective claims for judgment,
and they have a right at some time or another to have final judgment on which they can rely over a final
disposition of the issue or issues submitted, and to know that there is an end to the litigation;[57]
otherwise, there would be no end to legal processes.[58]

Republic v. Bantigue Point Development, G.R. No. 162322, March 14, 2012
FACTS: This Rule 45 Petition requires this Court to address the issue of the proper scope of the
delegated jurisdiction of municipal trial courts in land registration cases. Petitioner Republic of the
Philippines (Republic) assails the Decision of the Court of Appeals (CA)[1] in CA-G.R. CV No. 70349, which
affirmed the Decision of the Municipal Trial Court (MTC) of San Juan, Batangas[2] in LRC Case No. N-98-
20, LRA Record No. 68329, granting respondent Bantigue Point Development Corporation’s
(Corporation) application for original registration of a parcel of land. Since only questions of law have
been raised, petitioner need not have filed a Motion for Reconsideration of the assailed CA Decision
before filing this Petition for Review.

Bantigue Point Development Corporation filed with the Regional Trial Court (RTC) of Rosario, Batangas
an application for original registration of title over a parcel of land. The RTC set the case for initial
hearing to which the Republic filed its opposition. However, the case was transmitted motu proprio the
records of the case to the MTC of San Juan, because the assessed value of the property was allegedly
less than ₱100,000. Thereafter, the MTC entered an Order of General Default[8] and commenced with
the reception of evidence and the land was later awarded to Bantigue Development. The Republic
assailed the MTC’s jurisdiction with the CA but the CA held that since the former had actively
participated in the proceedings before the lower court, but failed to raise the jurisdictional challenge
therein, petitioner is thereby estopped from questioning the jurisdiction of the lower court on
appeal.[15] The CA further found that respondent Corporation had sufficiently established the latter’s
registrable title over the subject property after having proven open, continuous, exclusive and notorious
possession and occupation of the subject land by itself and its predecessors-in-interest even before the
outbreak of World War II.[16]

Dissatisfied with the CA’s ruling, petitioner Republic filed this instant Rule 45 Petition and raised the
following arguments in support of its appeal: that the Republic cannot be estopped from questioning
the jurisdiction of the MTC

ISSUE: WON the MTC had jurisdiction over the case

HELD: Yes

We uphold the jurisdiction of the MTC, but remand the case to the court a quo for further proceedings
in order to determine if the property in question forms part of the alienable and disposable land of the
public domain.

The Republic is not estopped from raising the issue of jurisdiction in this case.

At the outset, we rule that petitioner Republic is not estopped from questioning the jurisdiction of the
lower court, even if the former raised the jurisdictional question only on appeal. The rule is settled that
lack of jurisdiction over the subject matter may be raised at any stage of the proceedings.[18]
Jurisdiction over the subject matter is conferred only by the Constitution or the law.[19] It cannot be
acquired through a waiver or enlarged by the omission of the parties or conferred by the acquiescence
of the court.[20] Consequently, questions of jurisdiction may be cognizable even if raised for the first
time on appeal.

The ruling of the Court of Appeals that “a party may be estopped from raising such [jurisdictional]
question if he has actively taken part in the very proceeding which he questions, belatedly objecting to
the court’s jurisdiction in the event that the judgment or order subsequently rendered is adverse to
him”[22] is based on the doctrine of estoppel by laches. We are aware of that doctrine first enunciated
by this Court in Tijam v. Sibonghanoy.[23] In Tijam, the party-litigant actively participated in the
proceedings before the lower court and filed pleadings therein. Only 15 years thereafter, and after
receiving an adverse Decision on the merits from the appellate court, did the party-litigant question the
lower court’s jurisdiction. Considering the unique facts in that case, we held that estoppel by laches had
already precluded the party-litigant from raising the question of lack of jurisdiction on appeal. In
Figueroa v. People,[24] we cautioned that Tijam must be construed as an exception to the general rule
and applied only in the most exceptional cases whose factual milieu is similar to that in the latter case.

The facts are starkly different in this case, making the exceptional rule in Tijam inapplicable. Here,
petitioner Republic filed its Opposition to the application for registration when the records were still
with the RTC.[25] At that point, petitioner could not have questioned the delegated jurisdiction of the
MTC, simply because the case was not yet with that court. When the records were transferred to the
MTC, petitioner neither filed pleadings nor requested affirmative relief from that court. On appeal,
petitioner immediately raised the jurisdictional question in its Brief.[26] Clearly, the exceptional doctrine
of estoppel by laches is inapplicable to the instant appeal.

Laches has been defined as the “failure or neglect, for an unreasonable and unexplained length of time,
to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting the presumption that the party entitled
to assert it either has abandoned or declined to assert it.”[27] In this case, petitioner Republic has not
displayed such unreasonable failure or neglect that would lead us to conclude that it has abandoned or
declined to assert its right to question the lower court's jurisdiction.

The Municipal Trial Court properly acquired jurisdiction over the case.

In assailing the jurisdiction of the lower courts, petitioner Republic raised two points of contention: (a)
the period for setting the date and hour of the initial hearing; and (b) the value of the land to be
registered.

First, petitioner argued that the lower court failed to acquire jurisdiction over the application, because
the RTC set the date and hour of the initial hearing beyond the 90-day period provided under the
Property Registration Decree.[28]

We disagree.

The Property Registration Decree provides:

Sec. 23. Notice of initial hearing, publication, etc. - The court shall, within five days from filing of the
application, issue an order setting the date and hour of the initial hearing which shall not be earlier than
forty-five days nor later than ninety days from the date of the order. x x x.

In this case, the application for original registration was filed on 17 July 1997.[29] On 18 July
1997, or a day after the filing of the application, the RTC immediately issued an Order setting the case
for initial hearing on 22 October 1997, which was 96 days from the Order.[30] While the date set by the
RTC was beyond the 90-day period provided for in Section 23, this fact did not affect the jurisdiction of
the trial court. In Republic v. Manna Properties, Inc.,[31] petitioner Republic therein contended that
there was failure to comply with the jurisdictional requirements for original registration, because there
were 125 days between the Order setting the date of the initial hearing and the initial hearing itself. We
ruled that the lapse of time between the issuance of the Order setting the date of initial hearing and the
date of the initial hearing itself was not fatal to the application. Thus, we held:

x x x [A] party to an action has no control over the Administrator or the Clerk of Court acting as a land
court; he has no right to meddle unduly with the business of such official in the performance of his
duties. A party cannot intervene in matters within the exclusive power of the trial court. No fault is
attributable to such party if the trial court errs on matters within its sole power. It is unfair to punish an
applicant for an act or omission over which the applicant has neither responsibility nor control,
especially if the applicant has complied with all the requirements of the law.[32]

Indeed, it would be the height of injustice to penalize respondent Corporation by dismissing its
application for registration on account of events beyond its control.

Moreover, since the RTC issued a second Order on 7 August 1997 setting the initial hearing on 4
November 1997,[33] within the 90-day period provided by law, petitioner Republic argued that the
jurisdictional defect was still not cured, as the second Order was issued more than five days from the
filing of the application, again contrary to the prescribed period under the Property Registration
Decree.[34]

Petitioner is incorrect.

The RTC’s failure to issue the Order setting the date and hour of the initial hearing within five days
from the filing of the application for registration, as provided in the Property Registration Decree, did
not affect the court’s its jurisdiction. Observance of the five-day period was merely directory, and failure
to issue the Order within that period did not deprive the RTC of its jurisdiction over the case. To rule that
compliance with the five-day period is mandatory would make jurisdiction over the subject matter
dependent upon the trial court. Jurisdiction over the subject matter is conferred only by the
Constitution or the law.[35] It cannot be contingent upon the action or inaction of the court.

Second, petitioner contended[38] that since the selling price of the property based on the Deed of Sale
annexed to respondent’s application for original registration was ₱160,000,[39] the MTC did not have
jurisdiction over the case. Under Section 34 of the Judiciary Reorganization Act, as amended,[40] the
MTC’s delegated jurisdiction to try cadastral and land registration cases is limited to lands, the value of
which should not exceed ₱100,000.

We are not persuaded.

The delegated jurisdiction of the MTC over cadastral and land registration cases is indeed set forth
in the Judiciary Reorganization Act, which provides:
Sec. 34. Delegated Jurisdiction in Cadastral and Land Registration Cases. - Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts may be assigned by the Supreme Court to hear
and determine cadastral or land registration cases covering lots where there is no controversy or
opposition, or contested lots where the value of which does not exceed One hundred thousand pesos
(₱100,000.00), such value to be ascertained by the affidavit of the claimant or by agreement of the
respective claimants if there are more than one, or from the corresponding tax declaration of the real
property. Their decision in these cases shall be appealable in the same manner as decisions of the
Regional Trial Courts. (As amended by R.A. No. 7691) (Emphasis supplied.)

Thus, the MTC has delegated jurisdiction in cadastral and land registration cases in two instances:
first, where there is no controversy or opposition; or, second, over contested lots, the value of which
does not exceed ₱100,000.

The case at bar does not fall under the first instance, because petitioner opposed respondent
Corporation’s application for registration on 8 January 1998.[41]

However, the MTC had jurisdiction under the second instance, because the value of the lot in this
case does not exceed ₱100,000.

Contrary to petitioner’s contention, the value of the land should not be determined with reference
to its selling price. Rather, Section 34 of the Judiciary Reorganization Act provides that the value of the
property sought to be registered may be ascertained in three ways: first, by the affidavit of the claimant;
second, by agreement of the respective claimants, if there are more than one; or, third, from the
corresponding tax declaration of the real property.[42]

In this case, the value of the property cannot be determined using the first method, because the
records are bereft of any affidavit executed by respondent as to the value of the property. Likewise,
valuation cannot be done through the second method, because this method finds application only
where there are multiple claimants who agree on and make a joint submission as to the value of the
property. Here, only respondent Bantigue Point Development Corporation claims the property.

The value of the property must therefore be ascertained with reference to the corresponding Tax
Declarations submitted by respondent Corporation together with its application for registration. From
the records, we find that the assessed value of the property is ₱4,330, ₱1,920 and ₱8,670, or a total
assessed value of ₱14,920 for the entire property.[43] Based on these Tax Declarations, it is evident that
the total value of the land in question does not exceed ₱100,000. Clearly, the MTC may exercise its
delegated jurisdiction under the Judiciary Reorganization Act, as amended.

A certification from the CENRO is not sufficient proof that the property in question is alienable and
disposable land of the public domain.

The Regalian doctrine dictates that all lands of the public domain belong to the State.[44] The applicant
for land registration has the burden of overcoming the presumption of State ownership by establishing
through incontrovertible evidence that the land sought to be registered is alienable or disposable based
on a positive act of the government.[45] We held in Republic v. T.A.N. Properties, Inc. that a CENRO
certification is insufficient to prove the alienable and disposable character of the land sought to be
registered.[46] The applicant must also show sufficient proof that the DENR Secretary has approved the
land classification and released the land in question as alienable and disposable.[47]

Thus, the present rule is that an application for original registration must be accompanied by (1) a
CENRO or PENRO[48] Certification; and (2) a copy of the original classification approved by the DENR
Secretary and certified as a true copy by the legal custodian of the official records.[49]

Here, respondent Corporation only presented a CENRO certification in support of its application.[50]
Clearly, this falls short of the requirements for original registration.

We therefore remand this case to the court a quo for reception of further evidence to prove that the
property in question forms part of the alienable and disposable land of the public domain. If respondent
Bantigue Point Development Corporation presents a certified true copy of the original classification
approved by the DENR Secretary, the application for original registration should be granted. If it fails to
present sufficient proof that the land in question is alienable and disposable based on a positive act of
the government, the application should be denied.

Tijam v. Sibonghanoy, L-21450, April 15, 1968

FACTS: Tijam filed a complaint for recovery of sum of money against Sibonghanoy. A writ of attachment
was issued but the respondent filed a surety bond. the Court rendered judgment in favor of the plaintiffs
and, after the same had become final and executory, upon motion of the latter, the Court issued a writ
of execution against the defendants. The writ having been returned unsatisfied, the plaintiffs moved for
the issuance of a writ of execution against the Surety's bond. The Surety filed an opposition for (1)
Failure to prosecute and (2) Absence of a demand upon the Surety for the payment of the amount due
under the judgment.

The court ruled in favor of the surety but after demand by Tijam, the surety still did not pay, hence a
second motion for execution was filed which the Court granted. The surety moved to quash the writ
with the CA because it was granted without hearing. The CA affirmed the lower court’s orders. The
surety then filed a motion for extension of time within which to file a motion for reconsideration which
the CA granted. However, the surety filed a motion to dismiss alleging that the CFI had no jurisdiction
over the case because Republic Act No. 296, otherwise known as the Judiciary Act of 1948, had already
become effective, and Section 88 of which placed within the original exclusive jurisdiction of inferior
courts all civil actions where the value of the subject matter or the amount of the demand does not
exceed P2,000.00, exclusive of interest and costs. The CA certified the case to the Supreme Court for
resolution.

ISSUE: WON the CFI had jurisdiction

HELD:
It is an undisputed fact that the action commenced by appellees in the Court of First Instance of Cebu
against the Sibonghanoy spouses was for the recovery of the sum of P1,908.00 only — an amount within
the original exclusive jurisdiction of inferior courts in accordance with the provisions of the Judiciary Act
of 1948 which had taken effect about a month prior to the date when the action was commenced. True
also is the rule that jurisdiction over the subject matter is conferred upon the courts exclusively by law,
and as the lack of it affects the very authority of the court to take cognizance of the case, the objection
may be raised at any stage of the proceedings. However, considering the facts and circumstances of the
present case — which shall forthwith be set forth — We are of the opinion that the Surety is now barred
by laches from invoking this plea at this late hour for the purpose of annulling everything done
heretofore in the case with its active participation. As already stated, the action was commenced in the
Court of First Instance of Cebu on July 19, 1948, that is, almost fifteen years before the Surety filed its
motion to dismiss on January 12, 1963 raising the question of lack of jurisdiction for the first time

A party may be estopped or barred from raising a question in different ways and for different reasons.
Thus we speak of estoppel in pais, of estoppel by deed or by record, and of estoppel by laches.

Laches, in a general sense, is failure or neglect, for an unreasonable and unexplained length of time, to
do that which, by exercising due diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it.

The doctrine of laches or of "stale demands" is based upon grounds of public policy which requires, for
the peace of society, the discouragement of stale claims and, unlike the statute of limitations, is not a
mere question of time but is principally a question of the inequity or unfairness of permitting a right or
claim to be enforced or asserted.

It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative relief against
his opponent and, after obtaining or failing to obtain such relief, repudiate or question that same
jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of explaining the
rule, it was further said that the question whether the court had jurisdiction either of the subject matter
of the action or of the parties was not important in such cases because the party is barred from such
conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but
for the reason that such a practice cannot be tolerated — obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and encountering an
adverse decision on the merits, it is too late for the loser to question the jurisdiction or power of the
court (Pease vs. Rathbun-Jones etc. 243 U.S. 273, 61 L. Ed. 715, 37 S. Ct. 283; St. Louis etc. vs. McBride,
141 U.S. 127, 35 L. Ed. 659). And in Littleton vs. Burgess, 16 Wyo. 58, the Court said that it is not right for
a party who has affirmed and invoked the jurisdiction of a court in a particular matter to secure an
affirmative relief, to afterwards deny that same jurisdiction to escape a penalty.

The facts of this case show that from the time the Surety became a quasi-party on July 31, 1948, it could
have raised the question of the lack of jurisdiction of the Court of First Instance of Cebu to take
cognizance of the present action by reason of the sum of money involved which, according to the law
then in force, was within the original exclusive jurisdiction of inferior courts. It failed to do so. Instead, at
several stages of the proceedings in the court a quo as well as in the Court of Appeals, it invoked the
jurisdiction of said courts to obtain affirmative relief and submitted its case for a final adjudication on
the merits. It was only after an adverse decision was rendered by the Court of Appeals that it finally
woke up to raise the question of jurisdiction. Were We to sanction such conduct on its part, We would
in effect be declaring as useless all the proceedings had in the present case since it was commenced on
July 19, 1948 and compel the judgment creditors to go up their Calvary once more. The inequity and
unfairness of this is not only patent but revolting.

De Herrera v. Bernardo, G.R. No. 170251, June 1, 2011

FACTS: Respondents heirs of Crisanto S. Bernardo, represented by Emelita Bernardo, filed a complaint
before the Commission on the Settlement of Land Problems (COSLAP) against Alfredo Herrera (Alfredo)
for interference, disturbance, unlawful claim, harassment and trespassing over a portion of a parcel of
land. Petitioner, on the other hand, alleged that the portion of the subject property as bought by
Diosdado Herrera, Alfredo's father, from a certain Domingo Villaran. Upon the death of Diosdado
Herrera, Alfredo inherited the 700-square-meter lot.

COSLAP ruled in favor of the respondents, hence petitioner Celia S. Vda. de Herrera, as the surviving
spouse of Alfredo, filed a petition for certiorari with the CA. The CA, Twelfth Division, in its Decision
dated April 28, 2005, dismissed the petition and affirmed the resolution of the COSLAP. The CA ruled
that the COSLAP has exclusive jurisdiction over the present case and, even assuming that the COSLAP
has no jurisdiction over the land dispute of the parties herein, petitioner is already estopped from
raising the issue of jurisdiction because Alfredo failed to raise the issue of lack of jurisdiction before the
COSLAP and he actively participated in the proceedings before the said body.

Hence, petitioner elevated the case to this Court via Petition for Review on Certiorari under Rule 45 of
the Rules of Court alleging that COSLAP had no jurisdiction to decide the question of ownership. Further,
the present case cannot be classified as explosive in nature as the parties never resorted to violence in
resolving the controversy. Petitioner submits that it is the Regional Trial Court which has jurisdiction
over controversies relative to ownership of the subject property.

ISSUE: whether the COSLAP has jurisdiction to decide the question of ownership between the parties.

HELD: No. Reversed CA

The COSLAP was created by virtue of Executive Order (E.O.) No. 561, issued on September 21, 1979 by
then President Ferdinand E. Marcos. It is an administrative body established as a means of providing a
mechanism for the expeditious settlement of land problems among small settlers, landowners and
members of the cultural minorities to avoid social unrest.

Section 3 of E.O. No. 561 specifically enumerates the instances when the COSLAP can exercise its
adjudicatory functions:

Section 3. Powers and Functions. - The Commission shall have the following powers and functions:
xxxx

2. Refer and follow up for immediate action by the agency having appropriate jurisdiction any land
problem or dispute referred to the Commission: Provided, That the Commission may, in the following
cases, assume jurisdiction and resolve land problems or disputes which are critical and explosive in
nature considering, for instance, the large number of the parties involved, the presence or emergence of
social tension or unrest, or other similar critical situations requiring immediate action:

(a) Between occupants/squatters and pasture lease agreement holders or timber concessionaires;

(b) Between occupants/squatters and government reservation grantees;

(c) Between occupants/squatters and public land claimants or applicants;

(d) Petitions for classification, release and/or subdivision of lands of the public domain; and

(e) Other similar land problems of grave urgency and magnitude.[7]

Administrative agencies, like the COSLAP, are tribunals of limited jurisdiction that can only wield
powers which are specifically granted to it by its enabling statute.[8] Under Section 3 of E.O. No. 561,
the COSLAP has two options in acting on a land dispute or problem lodged before it, to wit: (a) refer the
matter to the agency having appropriate jurisdiction for settlement/resolution; or (b) assume
jurisdiction if the matter is one of those enumerated in paragraph 2 (a) to (e) of the law, if such case is
critical and explosive in nature, taking into account the large number of parties involved, the presence
or emergence of social unrest, or other similar critical situations requiring immediate action. In resolving
whether to assume jurisdiction over a case or to refer the same to the particular agency concerned, the
COSLAP has to consider the nature or classification of the land involved, the parties to the case, the
nature of the questions raised, and the need for immediate and urgent action thereon to prevent
injuries to persons and damage or destruction to property. The law does not vest jurisdiction on the
COSLAP over any land dispute or problem.[9]

In the instant case, the COSLAP has no jurisdiction over the subject matter of respondents'
complaint. The present case does not fall under any of the cases enumerated under Section 3,
paragraph 2 (a) to (e) of E.O. No. 561. The dispute between the parties is not critical and explosive in
nature, nor does it involve a large number of parties, nor is there a presence or emergence of social
tension or unrest. It can also hardly be characterized as involving a critical situation that requires
immediate action.

It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government

agency, over the nature and subject matter of a petition or complaint is determined by the material
allegations therein and the character of the relief prayed for, irrespective of whether the petitioner or
complainant is entitled to any or all such reliefs.[10]

Respondents' cause of action before the COSLAP pertains to their claim of ownership over the
subject property, which is an action involving title to or possession of real property, or any interest
therein,[11] the jurisdiction of which is vested with the Regional Trial Courts or the Municipal Trial
Courts depending on the assessed value of the subject property.[12]

Since the COSLAP has no jurisdiction over the action, all the proceedings therein, including the decision
rendered, are null and void.[14] A judgment issued by a quasi-judicial body without jurisdiction is void. It
cannot be the source of any right or create any obligation.[15] All acts performed pursuant to it and all
claims emanating from it have no legal effect.[16] Having no legal effect, the situation is the same as it
would be as if there was no judgment at all. It leaves the parties in the position they were before the
proceedings.[17]

Respondents’ allegation that petitioner is estopped from questioning the jurisdiction of the
COSLAP by reason of laches does not hold water. Petitioner is not estopped from raising the
jurisdictional issue, because it may be raised at any stage of the proceedings, even on appeal, and is not
lost by waiver or by estoppel.[18] The fact that a person attempts to invoke unauthorized jurisdiction of
a court does not estop him from thereafter challenging its jurisdiction over the subject matter, since
such jurisdiction must arise by law and not by mere consent of the parties.[19]

In Regalado v. Go,[20] the Court held that laches should be clearly present for the
Sibonghanoy[21] doctrine to apply, thus:

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to do
that which, by exercising due diligence, could or should have been done earlier, it is negligence or
omission to assert a right within a reasonable length of time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it.”

The ruling in People v. Regalario that was based on the landmark doctrine enunciated in Tijam v.
Sibonghanoy on the matter of jurisdiction by estoppel is the exception rather than the rule. Estoppel by
laches may be invoked to bar the issue of lack of jurisdiction only in cases in which the factual milieu is
analogous to that in the cited case. In such controversies, laches should have been clearly present; that
is, lack of jurisdiction must have been raised so belatedly as to warrant the presumption that the party
entitled to assert it had abandoned or declined to assert it.

In Sibonghanoy, the defense of lack of jurisdiction was raised for the first time in a motion to dismiss
filed by the Surety almost 15 years after the questioned ruling had been rendered. At several stages of
the proceedings, in the court a quo as well as in the Court of Appeals, the Surety invoked the jurisdiction
of the said courts to obtain affirmative relief and submitted its case for final adjudication on the merits.
It was only when the adverse decision was rendered by the Court of Appeals that it finally woke up to
raise the question of jurisdiction.[22]

The factual settings attendant in Sibonghanoy are not present in the case at bar that would justify
the application of estoppel by laches against the petitioner. Here, petitioner assailed the jurisdiction of
the COSLAP when she appealed the case to the CA and at that time, no considerable period had yet
elapsed for laches to attach. Therefore, petitioner is not estopped from assailing the jurisdiction of the
COSLAP. Additionally, no laches will even attach because the judgment is null and void for want of
jurisdiction.

Megan Sugar Corp. v. RTC of Iloilo, G.R. No. 170352, June 1, 2011
FACTS: respondent New Frontier Sugar Corporation (NFSC) obtained a loan from respondent Equitable
PCI Bank (EPCIB). Said loan was secured by a real estate mortgage over NFSC’s land and a chattel
mortgage over NFSC’s sugar mill.

because of liquidity problems and continued indebtedness to EPCIB, NFSC entered into a Memorandum
of Agreement[4] (MOA) with Central Iloilo Milling Corporation (CIMICO), whereby the latter agreed to
take-over the operation and management of the NFSC raw sugar factory and facilities for the period
covering crop years 2000 to 2003.

On April 19, 2002, NFSC filed a complaint for specific performance and collection[5] against CIMICO for
the latter’s failure to pay its obligations under the MOA. In response, CIMICO filed with the Regional
Trial Court (RTC) of Dumangas, Iloilo, Branch 68, a case against NFSC for sum of money and/or breach of
contract.

On May 10, 2002, because of NFSC’s failure to pay its debt, EPCIB instituted extra-judicial foreclosure
proceedings over NFSC’s land and sugar mill. During public auction, EPCIB was the sole bidder and was
thus able to buy the entire property and consolidate the titles in its name. EPCIB then employed the
services of Philippine Industrial Security Agency (PISA) to help it in its effort to secure the land and the
sugar mill. On September 16, 2002, CIMICO filed with the RTC an Amended Complaint[7] where it
impleaded PISA and EPCIB. As a result, on September 25, 2002, upon the motion of CIMICO, the RTC
issued a restraining order, directing EPCIB and PISA to desist from taking possession over the property in
dispute. Hence, CIMICO was able to continue its possession over the property.

On October 3, 2002, CIMICO and petitioner Megan Sugar Corporation (MEGAN) entered into a MOA[8]
whereby MEGAN assumed CIMICO’s rights, interests and obligations over the property. As a result of
the foregoing undertaking, MEGAN started operating the sugar mill on November 18, 2002.

On November 22, 2002, Passi Iloilo Sugar Central, Inc. (Passi Sugar) filed with the RTC a Motion for
Intervention claiming to be the vendee of EPCIB. Passi Sugar claimed that it had entered into a Contract
to Sell[9] with EPCIB after the latter foreclosed NFSC’s land and sugar mill.

On December 10, 2002, EPCIB filed a Motion for Delivery/Deposit of Mill Shares/Rentals.[10]

On December 11, 2002, Passi Sugar filed a Motion to Order Deposit of Mill Share Production of
“MEGAN” and/or CIMICO.[11] On the same day, NFSC filed a Motion to Order Deposit of Miller’s Share
(37%) or the Lease Consideration under the MOA between NFSC and CIMICO.[12]

On December 27, 2002, NFSC filed another Motion to Hold in Escrow Sugar Quedans or Proceeds of
Sugar Sales Equivalent to Miller’s Shares. On January 16, 2003, the RTC issued an Order[14] granting
EPCIB’s motion for the placement of millers’ share in escrow.
Aggrieved by the orders issued by the RTC, MEGAN filed before the CA a petition for certiorari. On
August 23, 2004, the CA issued a Decision dismissing MEGAN’s petition. In denying MEGAN’s petition,
the CA ruled that since Atty. Sabig had actively participated before the RTC, MEGAN was already
estopped from assailing the RTC’s jurisdiction.

Hence, herein petition, with MEGAN raising the following issues: WON Megan is estopped, WON the
RTC had jurisdiction

ISSUE: WON Megan is estopped, WON the RTC had jurisdiction

HELD:

After a judicial examination of the records pertinent to the case at bar, this Court agrees with the finding
of the CA that MEGAN is already estopped from assailing the jurisdiction of the RTC.

The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice,
and its purpose is to forbid one to speak against his own act, representations, or commitments to the
injury of one to whom they were directed and who reasonably relied thereon. The doctrine of estoppel
springs from equitable principles and the equities in the case. It is designed to aid the law in the
administration of justice where without its aid injustice might result. It has been applied by this Court
wherever and whenever special circumstances of a case so demand.[25]

Based on the events and circumstances surrounding the issuance of the assailed orders, this Court rules
that MEGAN is estopped from assailing both the authority of Atty. Sabig and the jurisdiction of the RTC.
While it is true, as claimed by MEGAN, that Atty. Sabig said in court that he was only appearing for the
hearing of Passi Sugar’s motion for intervention and not for the case itself, his subsequent acts, coupled
with MEGAN’s inaction and negligence to repudiate his authority, effectively bars MEGAN from assailing
the validity of the RTC proceedings under the principle of estoppel.

In the first place, Atty. Sabig is not a complete stranger to MEGAN. As a matter of fact, as manifested by
EPCIB, Atty. Sabig and his law firm SABIG SABIG & VINGCO Law Office has represented MEGAN in other
cases[26] where the opposing parties involved were also CIMICO and EPCIB. As such, contrary to
MEGAN’s claim, such manifestation is neither immaterial nor irrelevant,[27] because at the very least,
such fact shows that MEGAN knew Atty. Sabig.

Like the CA, this Court notes that MEGAN never repudiated the authority of Atty. Sabig when all the
motions, pleadings and court orders were sent not to the office of Atty. Sabig but to the office of
MEGAN, who in turn, would forward all of the same to Atty. Sabig.

One of the instances of estoppel is when the principal has clothed the agent with indicia of authority as
to lead a reasonably prudent person to believe that the agent actually has such authority.[32] With the
case of MEGAN, it had all the opportunity to repudiate the authority of Atty. Sabig since all motions,
pleadings and court orders were sent to MEGAN’s office. However, MEGAN never questioned the acts of
Atty. Sabig and even took time and effort to forward all the court documents to him.

In addition, it bears to point out that MEGAN was negligent when it did not assail the authority of Atty.
Sabig within a reasonable time from the moment when the first adverse order was issued.

The rule is that the active participation of the party against whom the action was brought, coupled with
his failure to object to the jurisdiction of the court or administrative body where the action is pending, is
tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the case
and will bar said party from later on impugning the court or body’s jurisdiction.[42] Based on the
preceding discussion, this Court holds that MEGAN’s challenge to Atty. Sabig’s authority and the RTC’s
jurisdiction was a mere afterthought after having received an unfavorable decision from the RTC.
Certainly, it would be unjust and inequitable to the other parties if this Court were to grant such a
belated jurisdictional challenge.

Manchester Development v. Court of Appeals, G.R. No. 75919, May 7, 1987

FACTS: The case is an action for torts and damages and specific performance totalling in the amount of
P78,750,000.00 but the docket fee paid upon filing of complaint was only P410.00 because the lower
court considered the action to be merely one for specific performance where the amount involved is not
capable of pecuniary estimation. After an investigation due to reports of under-assessment of filing fees,
the Supreme 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. Still no amount of damages were specified in the prayer. Said amended
complaint was admitted by the trial court but on appeal, the Court of Appeals ruled that the filing fees
should be based on the original complaint.

Petitioner invokes the ruling in Magaspi vs. Ramolete wherein the amended complaint was made the
basis of the computation of the filing fee.

ISSUE: WON the amended complaint should be the basis of the filing fees.

HELD:

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 . 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. For all 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 Magaspi case was an action for recovery of ownership and possession of a parcel of land with
damages. 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. 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. The trial court later 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. 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. 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." 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.

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.

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 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 in so far as it is inconsistent with this pronouncement is overturned and reversed.
Nestle Phils. v. FY Sons, G.R. No. 150789, May 5, 2006
FACTS: petitioner and respondent entered into a distributorship agreement. Nestle terminated the
agreement after FY Sons refused to pay the fine for supplying retail outlets proscribed by Nestle. Nestle
demanded payment of the balance of respondent’s accounts and When the alleged accounts were not
settled, petitioner applied the P500,000 time deposit which FY Sons gave as security for its credit
purchases as partial payment. FY Sons filed a complaint for damages against Nestle in the amount of
P4,246,015.60 with a prayer for an award of 1,000,000, alleging bad faith. The Makati City RTC ruled in
favor of the respondent. Petitioner appealed the decision to the CA. On January 11, 2001, the CA
rendered a decision affirming the RTC’s decision and ordering Nestle to refund the 500,000 time deposit
to FY Sons and deleting the payment of the balance of FY Sons’ account since Nestle failed to prove that
respondent had an outstanding balance. Hence the instant case. Petitioner asserts that the
documentary evidence presented by respondent to prove actual damages in the amount of
P4,246,015.60 should not have been considered because respondent’s complaint only prayed for an
award of P1,000,000. It further contends that the court acquires jurisdiction over the claim only upon
payment of the prescribed docket fee.

ISSUE: WON the CA erred in awarding damages and not awarding Nestle’s counterclaim

HELD: Indeed, a court acquires jurisdiction over the claim of damages upon payment of the correct
docket fees.[21] In this case, it is not disputed that respondent paid docket fees based on the amounts
prayed for in its complaint. Respondent adduced evidence to prove its losses. It was proper for the CA
and the RTC to consider this evidence and award the sum of P1,000,000. Had the courts below awarded
a sum more than P1,000,000, which was the amount prayed for, an additional filing fee would have
been assessed and imposed as a lien on the judgment.[22] However, the courts limited their award to
the amount prayed for.

Both the RTC and CA found that respondent had satisfactorily proven the factual bases for the damages
adjudged against the petitioner. This is a factual matter binding and conclusive upon this Court.[23] It is
well-settled that –

. . . findings of fact of the trial court, when affirmed by the Court of Appeals, are binding upon the
Supreme Court. This rule may be disregarded only when the findings of fact of the Court of Appeals are
contrary to the findings and conclusions of the trial court, or are not supported by the evidence on
record. But there is no ground to apply this exception to the instant case. This Court will not assess all
over again the evidence adduced by the parties particularly where as in this case the findings of both the
trial court and the Court of Appeals completely coincide.[24]

Likewise, the determination of the amount of damages commensurate with the factual findings upon
which it is based is primarily the task of the trial court.[25] Considering that the amount adjudged is not
excessive, we affirm its correctness.

Moreover, given that petitioner was not able to prove that respondent had unpaid accounts in the
amount of P995,319.81, the seizure of the P500,000 time deposit was improper. As a result, the refund
of this amount with interest is also called for.
Finally, petitioner’s counterclaims are necessarily without merit. It failed to prove the alleged
outstanding accounts of respondent. Accordingly, it is not entitled to the supposed unpaid balance of
P495,319.81 with interest.

Petitioner, being at fault and in bad faith, and there being no proof that respondent was guilty of any
wrongdoing, cannot claim moral and exemplary damages and attorney’s fees from respondent.

Sun Insurance v. Asuncion, G.R. Nos. 79937-38, February 13, 1989

FACTS: petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a complaint with the Regional Trial
Court of Makati, Metro Manila for the consignation of a premium refund on a fire insurance policy with
a prayer for the judicial declaration of its nullity against private respondent Manuel Uy Po Tiong. Tiong,
on the other hand, filed a complaint in the Regional Trial Court of Quezon City for the refund of
premiums and the issuance of a writ of preliminary attachment with damages amounting to 50M. But
Tiong paid only P210 as docket fees On the other hand, on March 28, 1984, private respondent filed a
complaint in the Regional Trial Court of Quezon City for the refund of premiums and the issuance of a
writ of preliminary attachment.

When cases under the RTC of Quezon City was investigated for under-assessment of docket fees, the
cases were re-raffled and the case filed by Tiong was raffled to Branch 104 under Judge Asuncion. Tiong
amended his complaint stating therein a claim of "not less than P10,000,000.00 as actual compensatory
damages" in the prayer. In the body of the said second amended complaint however, private
respondent alleges actual and compensatory damages and attorney's fees in the total amount of about
P44,601,623.70. Judge Asuncion admitted the amended complaint and Tiong paid the reassessed
docket fee of P39,786.00 based on Tiong’s claim of "not less than P10,000,000.00 as actual and
compensatory damages."

Petitioners then filed a petition for certiorari with the Court of Appeals questioning the said order of
Judge Asuncion.

On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of
P20,000,000.00 as damages so the total claim amounts to about P64,601,623.70. On October 16, 1986,
or some seven months after filing the supplemental complaint, the private respondent paid the
additional docket fee of P80,396.00.

The CA later dismissed petitioner’s motion to dismiss but ordered the payment of additional docket fees
which Tiong paid.

Hence the instant case. Petitioner that the Court of Appeals erred in not finding that the lower court did
not acquire jurisdiction over Civil Case No. Q-41177 on the ground of non-payment of the correct and
proper docket fee considering that the total amount sought to be recovered in the amended and
supplemental complaint is P64,601,623.70 the docket fee that should be paid by private respondent is
P257,810.49, more or less. Not having paid the same, petitioners contend that the complaint should be
dismissed and all incidents arising therefrom should be annulled. In support of their theory, petitioner
cite the latest ruling of the Court in Manchester Development Corporation vs. CA.
On the other hand, private respondent claims that the ruling in Manchester cannot apply retroactively
to Civil Case No. Q-41177 for at the time said civil case was filed in court there was no such Manchester
ruling as yet. Further, private respondent avers that what is applicable is the ruling of this Court in
Magaspi v. Ramolete, 5 wherein this Court held that the trial court acquired jurisdiction over the case
even if the docket fee paid was insufficient.

ISSUE: whether or not a court acquires jurisdiction over a case when the correct and proper docket fee
has not been paid.

HELD:

The contention that Manchester cannot apply retroactively to this case is untenable. Statutes regulating
the procedure of the courts will be construed as applicable to actions pending and undetermined at the
time of their passage. Procedural laws are retrospective in that sense and to that extent. 6

In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full amount of the docket
fee is an indispensable step for the perfection of an appeal.

The principle in Manchester could very well be applied in the present case. The pattern and the intent to
defraud the government of the docket fee due it is obvious not only in the filing of the original complaint
but also in the filing of the second amended complaint.

However, in Manchester, petitioner did not pay any additional docket fee until the case was decided by
this Court on May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this
Court held that the court a quo did not acquire jurisdiction over the case and that the amended
complaint could not have been admitted inasmuch as the original complaint was null and void.

In the present case, a more liberal interpretation of the rules is called for considering that, unlike
Manchester, private respondent demonstrated his willingness to abide by the rules by paying the
additional docket fees as required. The promulgation of the decision in Manchester must have had that
sobering influence on private respondent who thus paid the additional docket fee as ordered by the
respondent court. It triggered his change for stance by manifesting his willingness to pay such additional
docket fee as may be ordered.

Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the
total amount of the claim. This is a matter which the clerk of court of the lower court and/or his duly
authorized docket clerk or clerk in charge should determine and, thereafter, it any amount is found due,
he must require the private respondent to pay the same.

Thus, the Court rules as follows:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the
action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the
court may allow payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third party claims and similar pleadings, which
shall not be considered filed until and unless the filing fee prescribed therefore is paid. The court may
also allow payment of said fee within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and
payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the
pleading, or if specified the same has been left for determination by the court, the additional filing fee
therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his
duly authorized deputy to enforce said lien and assess and collect the additional fee.

Phil. First Insurance v. Paramount Gen. Insurance, G.R. No. 165147, July 9, 2008
FACTS: Pyramid sought to recover the proceeds of two insurance policies issued to it by petitioner
Paramount and Philippine First. The complaint claimed P907,149.07 for the value of the insured goods
and 50,000 as attorney’s fees. Pyramid was assessed P610 docket fee, apparently on the basis of the
amount of P50,000 specified in the prayer representing attorney’s fees, which it duly paid. Petitioners
filed a Motion to Dismiss on the ground of, inter alia, lack of jurisdiction, Pyramid not having paid the
docket fees in full. But if Pyramid would insist that its claim against the defendants is only Php50,000.00
plus Php 1,500.00 as appearance fee per court hearing, then it follows that it is the Metropolitan Trial
Court which has jurisdiction over this case, not the RTC.

The RTC denied the motion to dismiss holding that the case being for specific performance, it is not
dismissible on that ground but unless proper docket fees are paid, it can only grant what was prayed for
in the Complaint. Hence, petitioner filed for certiorari with the CA which set aside the trial court’s orders
but ordered Pyramid to pay the correct docket fees within a reasonable time. Thus, the present case by
petitioners.

ISSUE: whether respondent, Pyramid Logistics and Trucking Corporation (Pyramid), which filed on
November 7, 2001 a complaint,[1] denominated as one for specific performance and damages, against
petitioners Philippine First Insurance Company, Inc. (Philippine First) and Paramount General Insurance
Corporation (Paramount) before the Regional Trial Court (RTC) of Makati, paid the correct docket fee; if
in the negative, whether the complaint should be dismissed or Pyramid can still be ordered to pay the
fee.

HELD: No. Petition denied

In Tacay v. Regional Trial Court of Tagum, Davao del Norte,[43] the Court clarified the effect of the Sun
Insurance ruling on the Manchester ruling as follows:

As will be noted, the requirement in Circular No. 7 [of this Court which was issued based on the
Manchester ruling[44]] that complaints, petitions, answers, and similar pleadings should specify the
amount of damages being prayed for not only in the body of the pleading but also in the prayer, has not
been altered. What has been revised is the rule that subsequent “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 amount sought in the amended pleading,” the trial court now being authorized to allow
payment of the fee within a reasonable time but in no case beyond the applicable prescriptive period or
reglementary period. Moreover, a new rule has been added, governing the awards of claims not
specified in the pleading – i.e., damages arising after the filing of the complaint or similar pleading – as
to which the additional filing fee therefore shall constitute a lien on the judgment.

Now, under the Rules of Court, docket or filing fees are assessed on the basis of the “sum claimed,” on
the one hand, or the “value of the property in litigation or the value of the estate,” on the other. . .

Where the action is purely for the recovery of money or damages, the docket fees are assessed on the
basis of the aggregate amount claimed, exclusive only of interests and costs. In this case, the complaint
or similar pleading should, according to Circular No. 7 of this Court, “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 filing fees in any case.”

Two situations may arise. One is where the complaint or similar pleading sets out a claim purely for
money and damages and there is no statement of the amounts being claimed. In this event the rule is
that the pleading will “not be accepted nor admitted, or shall otherwise be expunged from the record.”
In other words, the complaint or pleading may be dismissed, or the claims as to which amounts are
unspecified may be expunged, although as aforestated the Court may, on motion, permit amendment of
the complaint and payment of the fees provided the claim has not in the meantime become time-
barred. The other is where the pleading does specify the amount of every claim, but the fees paid are
insufficient; and here again, the rule now is that the court may allow a reasonable time for the payment
of the prescribed fees, or the balance thereof, and upon such payment, the defect is cured and the court
may properly take cognizance of the action, unless in the meantime prescription has set in and
consequently barred the right of action.

Indeed, Pyramid captioned its complaint as one for “specific performance and damages” even if it was,
as the allegations in its body showed, seeking in the main the collection of its claims-sums of money
representing losses the amount of which it, by its own admission, “knew.”[46] And, indeed, it failed to
specify in its prayer in the complaint the amount of its claims/damages.

When Pyramid amended its complaint, it still did not specify, in its prayer, the amount of
claims/damages it was seeking. In fact it has the audacity to inform this Court, in its Comment on the
present Petition, that

x x x In the natural order of things, when a litigant is given the opportunity to spend less for a docket fee
after submitting his pleading for assessment by the Office of the Clerk of Court, he would not decline it
inasmuch as to request for a higher assessment under the circumstances [for such] is against his interest
and would be senseless. Placed under the same situation, petitioner[s] would certainly do likewise. To
say otherwise would certainly be dishonest,[47]
which comment drew petitioners to conclude as follows:

[This] only shows respondent’s dishonesty and lack of regard of the rules. Following this line of
reasoning, respondent would do everything if only for it to spend less for the filing fee, even to the
extent of circumventing and defying the rule on the payment of the filing fee.

In spite of the fact that the respondent was already caught in the quagmire of its own cobweb of
deception, it further justified its unethical act by ratiocinating that “placed under the same situation,
petitioner would certainly do likewise, to say otherwise would certainly be dishonest”. This attitude of
the respondent is very alarming! Having been caught red-handed, the honorable thing that respondent
should have done is admit its own violation rather than justify an act which it knows is a clear
contravention of the rules and jurisprudence.

Apparently, the trial court misinterpreted paragraph 3 of the [Sun Insurance] ruling of this Court
wherein it stated that “where the judgment awards a claim not specified in the pleading, or if specified,
the same has been left for the determination of the court, the additional filing fee therefor shall
constitute a lien on the judgment” by considering it to mean that where in the body and prayer of the
complaint there is a prayer xxx the amount of which is left to the discretion of the Court, there is no
need to specify the amount being sought, and that any award thereafter shall constitute a lien on the
judgment.

x x x While it is true that the determination of certain damages x x x is left to the sound discretion of the
court, it is the duty of the parties claiming such damages to specify the amount sought on the basis of
which the court may make a proper determination, and for the proper assessment of the appropriate
docket fees. The exception contemplated as to claims not specified or to claims although specified are
left for determination of the court is limited only to any damages that may arise after the filing of the
complaint or similar pleading for then it will not be possible for the claimant to specify nor speculate as
to the amount thereof.

Antonino v. Register of Deeds, G.R. No. 185663, June 20, 2012

FACTS: Since March 21, 1978, petitioner Remedios Antonino (Antonino) had been leasing a residential
property located at Makati City and owned by private respondent Tan Tian Su (Su). Under the governing
lease contract, Antonino was accorded with the right of first refusal in the event Su would decide to sell
the subject property. On July 7, 2004, the parties executed a document denominated as Undertaking
Agreement[4] where Su agreed to sell to Antonino the subject property for P39,500,000.00. However,
in view of a disagreement as to who between them would shoulder the payment of the capital gains tax,
the sale did not proceed as intended.

On July 9, 2004, Antonino filed a complaint against Su with the Regional Trial Court (RTC) of Makati City,
for the reimbursement of the cost of repairs on the subject property and payment of damages. Later
that same day, Antonino filed an amended complaint to enforce the Undertaking Agreement and
compel Su to sell to her the subject property.
In an Order[8] dated December 8, 2004, the RTC dismissed Antonino’s complaint on the grounds of
improper venue and non-payment of the appropriate docket fees. According to the RTC, Antonino’s
complaint is one for specific performance, damages and sum of money, which are personal actions that
should have been filed in the court of the place where any of the parties resides. Antonino and Su
reside in Muntinlupa and Manila, respectively, thus Makati City is not the proper venue. The RTC also
ruled that it did not acquire jurisdiction over Antonino’s complaint in view of her failure to pay the
correct amount of docket fees. The Amended Complaint makes the instant case an action for Specific
Performance in addition to the claim for Damages but the value of the described property was not
stated in the prayer and no docket fees were paid. Thus, following the ruling of the Supreme Court in
the case of Manchester Development Corporation vs. Court of Appeals, G.R. No. 75919, May 7, 1987,
that the Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee,
the instant case is hereby dismissed.

On January 3, 2005, Antonino filed a Motion for Reconsideration,[13] claiming that her complaint is a
real action and the location of the subject property is determinative of its venue. Alternatively, she
submitted a certification issued by the Commission on Elections, stating that she is a resident of Makati
City. She then prayed for the reinstatement of her complaint and issuance of an order directing the
clerk of court to assess the proper docket fees. This was denied by the RTC.

Su filed an Omnibus Motion,[12] praying for the cancellation of the notice of lis pendens, which
Antonino caused to be annotated on the title covering the subject property and the issuance of a
summary judgment on his counterclaims. Su, among others, alleged the propriety of cancelling the
notice of lis pendens in view of the dismissal of the complaint and Antonino’s failure to appeal
therefrom.

In a Joint Resolution[16] dated February 24, 2005, the RTC denied Su’s Omnibus Motion and Antonino’s
January 21, 2005 Motion for Reconsideration. The RTC refused to cancel the notice of lis pendens,
holding that:

It is quite clear that the dismissal of the Amended Complaint was anchored on two grounds, e.g. (1) for
improper venue and (2) for non-payment of docket fee. It is elementary that when a complaint was
dismissed based on these grounds[,] the court did not resolve the case on the merits. Moreover, “a
court cannot acquire jurisdiction over the subject matter of a case unless the docket fees are paid” x x x.
Thus, the cause of action laid down in the complaint remains unresolved for proper re-filing before the
proper court. Furthermore, the Supreme Court said: “The cancellation of such a precautionary notice is
therefore also a mere incident in the action, and may be ordered by the Court having jurisdiction of it at
any given time.”

On April 1, 2005, Antonino filed with the CA a petition for annulment of judgment. In its Decision[19]
dated May 26, 2008, the CA dismissed Antonino’s petition. Hence the instant petition for review under
Rule 45
ISSUE: The sole issue for the resolution of this Court is the propriety of Antonino’s use of the
remedy of a petition for annulment of judgment as against the final and executory orders of the RTC.

HELD: Denied petition

In Ramos v. Judge Combong, Jr.,[22] this Court expounded that the remedy of annulment of
judgment is only available under certain exceptional circumstances as this is adverse to the concept of
immutability of final judgments:

Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases as

where there is no available or other adequate remedy. Rule 47 of the 1997 Rules of Civil Procedure, as
amended, governs actions for annulment of judgments or final orders and resolutions, and Section 2
thereof explicitly provides only two grounds for annulment of judgment, i.e., extrinsic fraud and lack of
jurisdiction. The underlying reason is traceable to the notion that annulling final judgments goes against
the grain of finality of judgment. Litigation must end and terminate sometime and somewhere, and it is
essential to an effective administration of justice that once a judgment has become final, the issue or
cause involved therein should be laid to rest. The basic rule of finality of judgment is grounded on the
fundamental principle of public policy and sound practice that at the risk of occasional error, the
judgment of courts and the award of quasi-judicial agencies must become final at some definite date
fixed by law.[23] (Citations omitted)

In Barco v. Court of Appeals,[24] this Court emphasized that only void judgments, by reason of
“extrinsic fraud” or the court’s lack of jurisdiction, are susceptible to being annulled.

The law sanctions the annulment of certain judgments which, though final, are ultimately void.
Annulment of judgment is an equitable principle not because it allows a party-litigant another
opportunity to reopen a judgment that has long lapsed into finality but because it enables him to be
discharged from the burden of being bound to a judgment that is an absolute nullity to begin with.[25]

Apart from the requirement that the existence of “extrinsic fraud” or “lack of jurisdiction” should be
amply demonstrated, one who desires to avail this remedy must convince that the ordinary and other
appropriate remedies, such as an appeal, are no longer available for causes not attributable to him. This
is clearly provided under Section 1, Rule 47 of the Rules of Court.

Antonino’s recourse to annulment of judgment is seriously flawed and the reasons are patent. There is
therefore no reason to disturb the questioned issuances of the RTC that are already final and executory.

A petition for annulment of judgment cannot serve as a substitute for the lost remedy of an appeal.

First, Antonino cannot pursue the annulment of the various issuances of the RTC, primary of which is
the Order dated December 8, 2004, in order to avoid the adverse consequences of their becoming final
and executory because of her neglect in utilizing the ordinary remedies available. Antonino did not
proffer any explanation for her failure to appeal the RTC’s Order dated December 8, 2004 and,
thereafter, the Order dated January 6, 2005, denying her Motion for Reconsideration dated January 3,
2005. Knowledge of rudimentary remedial rules immediately indicates that an appeal was already
available from the Order dated December 8, 2004, as this is a final order as contemplated under
Sections 2, 3 and 5 of Rule 41 of the Rules of Court, and there was no legal compulsion for Antonino to
move for reconsideration. Nonetheless, since there is no bar for her to file a motion for reconsideration
so as to give the RTC opportunity to reverse itself before elevating the matter for the appellate courts’
review, appeal is the prescribed remedy from the denial of such motion and not another motion for
reconsideration. While Section 1 of Rule 41 of the Rules of Court includes “an order denying a motion
for new trial or reconsideration” in the enumeration of unappealable matters, this Court clarified in
Quelnan v. VHF Philippines, Inc.[26] that such refers to a motion for reconsideration of an interlocutory
order and the denial of a motion for reconsideration of an order of dismissal is a final order, therefore,
appealable. Moreover, a second motion for reconsideration from a final judgment or order is
prohibited, hence, can never interrupt the period to perfect an appeal.

The RTC may have been overly strict in the observance of the three-day notice rule under Section 4,
Rule 15 of the Rules of Court contrary to liberal stance taken by this Court in cases when the purpose of
such rule can be achieved by giving the opposing party sufficient time to study and controvert the
motion.[27] Justice and equity would thus suggest that the fifteen-day period within which Antonino
can appeal should be counted from her receipt on January 7, 2005[28] of the Order dated January 6,
2005 denying her Motion for Reconsideration dated January 3, 2005. Unfortunately, even liberality
proved to be inadequate to neutralize the adverse consequences of Antonino’s negligence as she
allowed such period to lapse without filing an appeal, erroneously believing that a second motion for
reconsideration is the proper remedy. While a second motion for reconsideration is not prohibited
insofar as interlocutory orders are concerned,[29] the Orders dated December 8, 2004 and January 6,
2005 are final orders.

In fact, even if the period to appeal would be counted from Antonino’s receipt of the Order dated
February 24, 2005 denying her second motion for reconsideration, she interposed no appeal and filed a
petition for annulment of judgment on April 1, 2005 instead. This, for sure, constitutes a categorical
admission that the assailed issuances of the RTC had already become final and executory in view of her
omission to perfect an appeal within the mandated period. By no means can her petition for annulment
of judgment prosper as that would, in effect, sanction her blatant negligence or sheer obliviousness to
proper procedure.

Let it be stressed at the outset that before a party can avail of the reliefs provided for by Rule 47, i.e.,
annulment of judgments, final orders, and resolutions, it is a condition sine qua non that one must have
failed to move for new trial in, or appeal from, or file a petition for relief against said issuances or take
other appropriate remedies thereon, through no fault attributable to him. If he failed to avail of those
cited remedies without sufficient justification, he cannot resort to the action for annulment provided in
Rule 47, for otherwise he would benefit from his own inaction or negligence.[30] (Citation omitted)

“Grave abuse of discretion” is not a ground to annul a final and executory judgment.
 Second, a petition for annulment of judgment can only be based on “extrinsic fraud” and “lack of
jurisdiction” and cannot prosper on the basis of “grave abuse of discretion”. By anchoring her petition
on the alleged grave abuse of discretion that attended the dismissal of her complaint and the denial of
her two (2) motions for reconsideration, Antonino, is, in effect, enlarging the concept of “lack of
jurisdiction”. As this Court previously clarified in Republic of the Philippines v. “G” Holdings, Inc.,[31]
“lack of jurisdiction” as a ground for the annulment of judgments pertains to lack of jurisdiction over the
person of the defending party or over the subject matter of the claim. It does not contemplate “grave
abuse of discretion” considering that “jurisdiction” is different from the exercise thereof. As ruled in
Tolentino v. Judge Leviste:[32]

Jurisdiction is not the same as the exercise of jurisdiction. As distinguished from the exercise of
jurisdiction, jurisdiction is the authority to decide a cause, and not the decision rendered therein.
Where there is jurisdiction over the person and the subject matter, the decision on all other questions
arising in the case is but an exercise of the jurisdiction. And the errors which the court may commit in
the exercise of jurisdiction are merely errors of judgment which are the proper subject of an appeal.

Antonino’s cause of action is premised on her claim that there has already been a perfected contract of
sale by virtue of their execution of the Undertaking Agreement and Su had refused to comply with his
obligations as seller. However, by claiming the existence of a perfected contract of sale, it does not
mean that Antonino acquired title to the subject property. She does not allege otherwise and tacitly
acknowledges Su’s title to the subject property by asking for the consummation of the sale.

That there is a private document supposedly evidencing the alleged sale does not confer to Antonino
title to the subject property. Ownership is transferred when there is actual or constructive delivery and
the thing is considered delivered when it is placed in the control or possession of the buyer or when the
sale is made through a public instrument and the contrary does not appear or cannot be clearly
inferred.[36] In other words, Antonino’s complaint is not in the nature of a real action as ownership of
the subject property is not at issue.

Moreover, that the object of the alleged sale is a real property does not make Antonino’s
complaint real in nature in the absence of a contrary claim of title. After a contract of sale is perfected,
the right of the parties to reciprocally demand performance, thus consummation, arises – the vendee
may require the vendor to compel the transfer the title to the object of the sale[37] and the vendor may
require the payment of the purchase price.[38] The action to cause the consummation of a sale does
not involve an adverse claim of ownership as the vendor’s title is recognized and the vendor is simply
being asked to perform an act, specifically, the transfer of such title by any of the recognized modes of
delivery.

Considering that the filing of the complaint in a wrong venue sufficed for the dismissal thereof, it
would be superfluous to discuss if Antonino’s non-payment of the correct docket fees likewise
warranted it.
 At any rate, even if the RTC erred in ordering the dismissal of her complaint, such had already become
final and executory and will not be disturbed as it had jurisdiction and it was not alleged, much less,
proved that there was extrinsic fraud. Moreover, annulment of the assailed orders of the RTC will not
issue if ordinary remedies, such as an appeal, were lost and were not availed of because of Antonino’s
fault. Litigation should end and terminate sometime and somewhere. It is essential to an effective and
efficient administration of justice that, once a judgment has become final, the winning party should not
be deprived of the fruits of the verdict.[39]

Unicapital v. Consing, G.R. Nos. 175277 & 175285, September 11, 2013
FACTS: The case are consolidated petitions.

Respondent Consing filed a Complex Action for Injunctive Relief against petitioners claiming that the
demands made against him by petitioners Unicapital and PBI to return to them the purchase price they
had paid for the subject property constituted harassment and oppression which severely affected his
personal and professional life. Consing claims for damages to the tune of around P2,000,000.00 per
month.

Petitioners filed a motion to dismiss for lack of cause of action. The RTC denied the motion to dismiss
holding that Consing, Jr.’s complaint sufficiently stated a cause of action for tort and damages pursuant
to Article 19 of the Civil Code. It equally refused to dismiss the action on the ground of non-payment of
docket fees, despite Consing, Jr.’s escalated claims for damages therein, as jurisdiction was already
vested in it upon the filing of the original complaint.

Aggrieved, petitioners elevated the denial of their motions to dismiss before the CA via a petition for
certiorari and prohibition which the CA dismissed. It ruled that while the payment of the prescribed
docket fee is a jurisdictional requirement, its non-payment will not automatically cause the dismissal of
the case. In this regard, it considered that should there be any deficiency in the payment of such fees,
the same shall constitute a lien on the judgment award. The CA also held that the complaint alleges a
cause of action and was principally one for damages over which the RTC has jurisdiction, and, in turn,
there lies no misjoinder of causes of action. Hence, the present petitions for review on certiorari in G.R.
Nos.175277 and 175285.

Meanwhile, on August 4, 1999, Unicapital filed a complaint for sum of money with damages against
Consing, Jr. and Dela Cruz before the RTC-Makati City seeking to recover (a) the amount of
P42,195,397.16, representing the value of their indebtedness based on the Promissory Notes (subject
promissory notes) plus interests; (b) P5,000,000.00 as exemplary damages; (c) attorney's fees; and (d)
costs of suit which Consing loaned from Unicapital. PBI also filed a complaint for damages and
attachment against Consing, Jr. and Dela Cruz before the RTC of Manila PBI prayed that it be allowed to
recover the following: (a) P13,369,641.79, representing the total amount of installment payments made
as actual damages plus interests; (b) P200,000.00 as exemplary damages; (c) P200,000.00 as moral
damages; (d) attorney's fees; and (e) costs of suit. For his part, Consing, Jr. filed a Motion to Dismiss and
motion to consolidate which were, however, denied by the RTC-Makati City.
On September 30, 2009, the CA rendered a Decision sustaining the Orders dated July 16, 2007 and
September 4, 2007 of the RTC-Makati City which denied Consing, Jr.’s motion for consolidation. It held
that consolidation is a matter of sound discretion on the part of the trial court which could be gleaned
from the use of the word "may" in Section 1, Rule38 of the Rules of Court. Hence, the instant petition

ISSUE: The essential issues in these cases are as follows: (a) in G.R. Nos.175277 and 175285, whether or
not the CA erred in upholding the RTC-Pasig City’s denial of Unicapital, et al.’s motion to dismiss; and (b)
in G.R. No. 192073, whether or not the CA erred in upholding the RTC-Makati City’s denial of Consing,
Jr.’s motion for consolidation.

HELD:

Consing properly alleged a cause of action for damages under Articles 19 and 26 of the Civil Code

A cause of action is defined as the act or omission by which a party violates a right of another.61 It is
well-settled that the existence of a cause of action is determined by the allegations in the complaint.62
In this relation, a complaint is said to sufficiently assert a cause of action if, admitting what appears
solely on its face to be correct, the plaintiff would be entitled to the relief prayed for.63 Thus, if the
allegations furnish adequate basis by which the complaint can be maintained, then the same should not
be dismissed, regardless of the defenses that may be averred by the defendants.64 As edified in the
case of Pioneer Concrete Philippines, Inc. v. Todaro,65 citing Hongkong and Shanghai Banking
Corporation, Limited. v. Catalan66 (HSBC):

The elementary test for failure to state a cause of action is whether the complaint alleges facts which if
true would justify the relief demanded. Stated otherwise, may the court render a valid judgment upon
the facts alleged therein? The inquiry is into the sufficiency, not the veracity of the material allegations.
If the allegations in the complaint furnish sufficient basis on which it can be maintained, it should not be
dismissed regardless of the defense that may be presented by the defendants.67 (Emphasis supplied)

Stated otherwise, the resolution on this matter should stem from an analysis on whether or not the
complaint is able to convey a cause of action; and not that the complainant has no cause of action. Lest
it be misunderstood, failure to state a cause of action is properly a ground for a motion to dismiss under
Section 1(g), Rule 1668 of the Rules of Court(Rules), while the latter is not a ground for dismissal under
the same rule.

In this case, the Court finds that Consing, Jr.’s complaint in SCA No.1759 properly states a cause of action
since the allegations there sufficiently bear out a case for damages under Articles 19 and 26 of the Civil
Code.

Records disclose that Consing, Jr.’s complaint contains allegations which aim to demonstrate the abusive
manner in which Unicapital and PBI, et al. enforced their demands against him. Among others, the
complaint states that Consing, Jr. "has constantly been harassed and bothered by Unicapital and PBI, et
al.; x x x besieged by phone calls from them; x x x has had constant meetings with them variously, and
on a continuing basis, such that he is unable to attend to his work as an investment banker."69 In the
same pleading, he also alleged that Unicapital and PBI, et al.’s act of "demanding a postdated check
knowing fully well that he does not have the necessary funds to cover the same, nor is he expecting to
have them is equivalent to asking him to commit a crime under unlawful coercive force."70 Accordingly,
these specific allegations, if hypothetically admitted, may result into the recovery of damages pursuant
to Article 19 of the Civil Code which states that "every person must, in the exercise of his rights and in
the performance of his duties, act with justice, give everyone his due, and observe honesty and good
faith." As explained in the HSBC case:

When a right is exercised in a manner which does not conform with the norms enshrined in Article 19
and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must
beheld responsible. But a right, though by itself legal because it is recognized or granted by law as such,
may nevertheless become the source of some illegality. A person should be protected only when he acts
in the legitimate exercise of his right, that is, when he acts with prudence and in good faith; but not
when he acts with negligence or abuse. There is an abuse of right when it is exercised for the only
purpose of prejudicing or injuring another. The exercise of a right must be in accordance with the
purpose for which it was established, and must not be excessive or unduly harsh; there must be no
intention to injure another.71 (Emphasis supplied)

Likewise, Consing, Jr.’s complaint states a cause of action for damages under Article 26 of the Civil Code
which provides that:

Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors
and other persons. The following and similar acts, though they may not constitute a criminal offense,
shall produce a cause of action for damages, prevention and other relief:

(1) Prying into the privacy of another's residence;

(2) Meddling with or disturbing the private life or family relations of another;

(3) Intriguing to cause another to be alienated from his friends;

(4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth,
physical defect, or other personal condition.

The rationale therefor was explained in the case of Manaloto v. Veloso III,72 citing Concepcion v. CA,73
to wit:

The philosophy behind Art. 26 underscores the necessity for its inclusion in our civil law. The Code
Commission stressed in no uncertain terms that the human personality must be exalted. The sacredness
of human personality is a concomitant consideration of every plan for human amelioration. The
touchstone of every system of law, of the culture and civilization of every country, is how far it dignifies
man. If the statutes insufficiently protect a person from being unjustly humiliated, in short, if human
personality is not exalted - then the laws are indeed defective. Thus, under this article, the rights of
persons are amply protected, and damages are provided for violations of a person's dignity, personality,
privacy and peace of mind.74
To add, a violation of Article 26 of the Civil Code may also lead to the payment of moral damages under
Article 2219(10)75 of the Civil Code.

No misjoinder of cause of action

Further, so as to obviate any confusion on the matter, the Court equally finds that the causes of action
in SCA No. 1759 were not – as Unicapital, et al. claim – misjoined even if Consing, Jr. averred that
Unicapital and PBI, et al. violated certain provisions of the Corporation Law and the Revised Securities
Act.80

The rule is that a party’s failure to observe the following conditions under Section 5, Rule 2 of the Rules
results in a misjoinder of causes of action:81

SEC. 5. Joinder of causes of action . - A party may in one pleading assert, in the alternative or otherwise,
as many causes of action as he may have against an opposing party, subject to the following conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of parties;

(b) The joinder shall not include special civil actions governed by special rules;

(c) Where the causes of action are between the same parties but pertain to different venues or
jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action
falls within the jurisdiction of said court and the venue lies therein; and

(d) Where the claims in all the causes of action are principally for recovery of money the aggregate
amount claimed shall be the test of jurisdiction. (Emphasis supplied)

A careful perusal of his complaint discloses that Consing, Jr. did not seek to hold Unicapital and PBI, et al.
liable for any specific violation of the Corporation Code or the Revised Securities Act. Rather, he merely
sought damages for Unicapital and PBI, et al.’s alleged acts of making him sign numerous documents
and their use of the same against him. In this respect, Consing, Jr. actually advances an injunction and
damages case82 which properly falls under the jurisdiction of the RTC-Pasig City.83 Therefore, there was
no violation of Section 5, Rule 2 of the Rules, particularly, paragraph (c) thereof. Besides, even on the
assumption that there was a misjoinder of causes of action, still, such defect should not result in the
dismissal of Consing, Jr.’s complaint. Section 6, Rule 2 of the Rules explicitly states that a "misjoinder of
causes of action is not a ground for dismissal of an action" and that "a misjoined cause of action may, on
motion of a party or on the initiative of the court, be severed and proceeded with separately."

Non-Payment of docket fees as cause of dismissal inapplicable in the absence of intent to defraud

Neither should Consing, Jr.’s failure to pay the required docket fees lead to the dismissal of his
complaint.It has long been settled that while the court acquires jurisdiction over any case only upon the
payment of the prescribed docket fees, its non-payment at the time of the filing of the complaint does
not automatically cause the dismissal of the complaint provided that the fees are paid within a
reasonable period.84 Consequently, Unicapital, et al.’s insistence that the stringent rule on non-
payment of docket fees enunciated in the case of Manchester Development Corporation v. CA85 should
be applied in this case cannot be sustained in the absence of proof that Consing, Jr. intended to defraud
the government by his failure to pay the correct amount of filing fees. As pronounced in the case of
Heirs of Bertuldo Hinog v. Hon. Melicor:86

Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its non-
payment at the time of filing does not automatically cause the dismissal of the case, as long as the fee is
paid within the applicable prescriptive or reglementary period, more so when the party involved
demonstrates a willingness to abide by the rules prescribing such payment.

Thus, when insufficient filing fees were initially paid by the plaintiffs and there was no intention to
defraud the government, the Manchester rule does not apply.87 (Emphasis and italics in the original)

Indeed, while the Court acknowledges Unicapital, et al.'s apprehension that Consing, Jr.'s "metered"
claim for damages to the tune of around P2,000,000.00 per month88 may balloon to a rather huge
amount by the time that this case is finally disposed of, still, any amount that may by then fall due shall
be subject to assessment and any additional fees determined shall constitute as a lien against the
judgment as explicitly provided under Section 2,89 Rule 141 of the Rules.

Propriety of the denial of Consing, Jr.’s motion for consolidation

It is hornbook principle that when or two or more cases involve the same parties and affect closely
related subject matters, the same must be consolidated and jointly tried, in order to serve the best
interest of the parties and to settle the issues between them promptly, thus, resulting in a speedy and
inexpensive determination of cases. In addition, consolidation serves the purpose of avoiding the
possibility of conflicting decisions rendered by the courts in two or more cases, which otherwise could
be disposed of in a single suit.92 The governing rule is Section 1, Rule 31 of the Rules which provides:

SEC. 1. Consolidation. - When actions involving a common question of law or fact are pending before the
court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all
the actions consolidated; and it may make such orders concerning proceedings therein as may tend to
avoid unnecessary costs or delay.

In the present case, the Court observes that the subject cases, i.e., SCA No. 1759 and Civil Case No. 99-
1418, although involving the same parties and proceeding from a similar factual milieu, should remain
unconsolidated since they proceed from different sources of obligations and, hence, would not yield
conflicting dispositions. SCA No. 1759 is an injunction and damages case based on the Civil Code
provisions on abuse of right and defamation, while Civil Case No. 99-1418 is a collection and damages
suit based on actionable documents, i.e., the subject promissory notes. In particular, SCA No. 1759 deals
with whether or not Unicapital and BPI, et al, abused the manner in which they demanded payment
from Consing, Jr., while Civil Case No. 99-1418 deals with whether or not Unicapital may demand
payment from Consing, Jr. based on the subject promissory notes. Clearly, a resolution in one case
would have no practical effect as the core issues and reliefs sought in each case are separate and
distinct from the other.
Likewise, as the CA correctly pointed out, the RTC-Makati City could not have been failured in retaining
Civil Case No. 99-1418 in its dockets since pre-trial procedures have already been undertaken therein
and, thus, its consolidation with SCA No. 1759 pending before the RTC-Pasig City would merely result in
complications on the part of the latter court or squander the resources or remedies already utilized in
Civil Case No. 99-1418.93 In this light, aside from the perceived improbability of having conflicting
decisions, the consolidation of SCA No. 1759 and Civil Case No. 99-1418 would, contrary to its objective,
only delay the proceedings and entail unnecessary costs.

All told, the Court finds the consolidation of SCA No. 1759 and Civil Case No. 99-1418 to be improper,
impelling the affirmance of the CA’s ruling. Consequently, the petition in G.R. No. 192073 must also be
denied.

1. Kinds of Jurisdiction
a. General Jurisdiction Regional Trial Court
Durisol Phil. v. Court of Appeals, G.R. No. 121106, February 20, 2002
FACTS: DBP instituted an extrajudicial foreclosure of mortgage covering 2 parcels of land against
petitioner. DBP emerged as the highest bidder. But the titles were registered to Durisol and was never
returned to the DBP. Because of this, DBP was unable to register the property in its name, although, it
purchased the properties is the foreclosure sale.

DBP filed a petition in the CFI (now RTC) for the surrender of the owners duplicate titles covering the
foreclosed properties. The RTC rendered summary judgment, ordering petitioner to surrender the
certificates of title which it obtained in lieu of the 2 mother titles. The Motion for Reconsideration filed
by petitioner was denied. Petitioner filed for annulment of judgment with the CA but it was also denied.

Durisol still refused to surrender the titles so the court directed the Register of Deeds of Bulacan to
cancel the seven titles and to issue new ones in lieu thereof.[13] Accordingly, new certificates of title
were issued to DBP. DBP later sold the lots to various buyers.

More than four years later, or on September 2, 1994, petitioner instituted before the Court of Appeals a
petition to annul the trial court’s decision dated January 10, 1989 and Resolution dated April 4, 1990,
alleging for the first time that the trial court had no jurisdiction over the case because it was only a
cadastral court. On January 20, 1995, the Court of Appeals rendered the now assailed decision
dismissing the petition for annulment of judgment.[16] Petitioner Durisol’s subsequent motion for
reconsideration was likewise denied for lack of merit.[17] Hence this petition.

ISSUE: (1) whether or not the trial court had jurisdiction over the petition for issuance of new duplicate
owner’s certificate of title; and (2) whether or not petitioner was estopped from challenging the court’s
lack of jurisdiction.

HELD: Denied
The first paragraph of Rule 47, Section 2, of the 1997 Rules of Civil Procedure provides:

Grounds for annulment. The annulment may be based only on the ground of extrinsic fraud and lack of
jurisdiction.

At the outset, it should be stressed that in a petition for annulment of judgment based on lack of
jurisdiction, petitioner must show not merely an abuse of jurisdictional discretion but an absolute lack of
jurisdiction. Lack of jurisdiction means absence of or no jurisdiction, that is, the court should not have
taken cognizance of the petition because the law does not vest it with jurisdiction over the subject
matter. Jurisdiction over the nature of the action or subject matter is conferred by law.[18]

The regional trial court, formerly the court of first instance, is a court of general jurisdiction. All cases,
the jurisdiction over which is not specifically provided for by law to be within the jurisdiction of any
other court, fall under the jurisdiction of the regional trial court. But the regional trial court is also a
court of limited jurisdiction over, among others, cadastral and land registration cases. All proceedings
involving title to real property,[19] or specifically land registration cases, including its incidents such as
the issuance of owner’s duplicate certificate of title, are matters cognizable by the regional trial
courts.[20] It has been ruled that the regional trial courts have jurisdiction over all actions involving
possession of land, except forcible entry and illegal detainer.[21]

Respondent DBP, after petitioner’s president unjustly refused to comply with the directive of the trial
court to surrender the seven certificates of title, filed a petition under Section 107 of the Property
Registration Decree (Presidential Decree No. 1529), to wit:

Surrender of withheld duplicate certificates. --- Where it is necessary to issue a new certificate of title
pursuant to any involuntary instrument which divests the title of the registered owner against his
consent of where a voluntary instrument cannot be registered by reason of the refusal or failure of the
holder to surrender the owner’s duplicate certificate of title, the party in interest may file a petition in
court to compel the surrender of the same to the Register of Deeds. The court, after hearing, may order
the registered owner or any person withholding the duplicate certificate to surrender the same, and
direct the entry of a new certificate or memorandum upon such surrender. If the person withholding the
duplicate certificate is not amenable to the process of the court, or if for any reason the outstanding
owner’s duplicate certificate cannot be delivered, the court may order the annulment of the same as
well as the issuance of a new certificate of title in lieu thereof. Such new certificate and all duplicates
thereof shall contain a memorandum of the annulment of the outstanding duplicate.

The term "court" in the above-quoted section refers to Courts of First Instance, now Regional Trial
Courts, as provided in Section 2 of the Property Registration Decree.

Even assuming arguendo that the regional trial court had no jurisdiction over the surrender of duplicate
title, petitioner can no longer raise this ground after having actively participated in the prosecution of
the case. A judgment rendered by a trial court for alleged lack of jurisdiction cannot be considered void
where the party who has the right to challenge it failed to do so at the first instance. In the case at bar,
petitioner did not raise the defense of lack of jurisdiction in its answer to respondent DBP’s petition for
surrender of owner’s duplicate certificate. Neither did petitioner file any motion to dismiss on this
ground. On the contrary, petitioner raised the affirmative defenses of failure to state a cause of action
and payment.[22] To be sure, a court’s lack of jurisdiction over the subject matter and the failure of the
complaint to state a cause of action are distinct and separate grounds for dismissal of a case.

As stated, petitioner actively participated in the course of the proceedings both in the trial court and in
the appellate court. In its motion for reconsideration, petitioner assailed the merits of the decision
without raising any argument pertaining to lack of jurisdiction of the trial court. When the case was
elevated to the IAC and when the case was remanded to the trial court, petitioner did not allege lack of
jurisdiction. In its motion for reconsideration of the trial court’s order directing the issuance of new
certificates of title, petitioner again failed to raise the ground of lack of jurisdiction.

Indeed, it was only two decades after the institution of the case at bar, when the issue of lack of
jurisdiction was first raised. However, it is already too late since the judgment had already attained
finality, considering that more than four years have elapsed without any action from petitioner.

Rule 47, Section 3 expressly provides that a petition for annulment of judgment based on lack of
jurisdiction must be filed before it is barred by laches or estoppel. Hence, it has been held that while
jurisdiction over the subject matter of a case may be raised at any time of the proceedings, this rule
presupposes that laches or estoppel has not supervened. Thus:

This Court has time and again frowned upon the undesirable practice of a party submitting his case for
decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction when
adverse. Here, the principle of estoppel lies. Hence, a party may be estopped or barred from raising the
question of jurisdiction for the first time in a petition before the Supreme Court when it failed to do so
in the early stages of the proceedings.[23]

Petitioner argues that the then CFI had no jurisdiction when the case was remanded to it by the then IAC
because as a cadastral court, the CFI had limited jurisdiction. It should be noted, however, that when the
CFI took cognizance of the remanded case, the distinction between the CFI acting as a land registration
court with limited jurisdiction, on the one hand, and a CFI acting as an ordinary court exercising general
jurisdiction, on the other hand, has already been removed with the effectivity of the Property
Registration Decree (PD 1529). The amendment was aimed at avoiding multiplicity of suits. The change
has simplified registration proceedings by conferring upon the designated trial courts the authority to
act not only on applications for "original registration" but also "over all petitions filed after original
registration of title, with power to hear and determine all questions arising from such applications or
petition."[24]

f. Exclusive Original Jurisdiction Shariah District Court

Montaner v. Shari’ah District Court, G.R. No. 174975, January 20, 2009
FACTS: On August 17, 1956, petitioner Luisa Kho Montañer, a Roman Catholic, married Alejandro
Montañer, Sr. at the Immaculate Conception Parish in Cubao, Quezon City.[3] Petitioners Alejandro
Montañer, Jr., Lillibeth Montañer-Barrios, and Rhodora Eleanor Montañer-Dalupan are their children.[4]
On May 26, 1995, Alejandro Montañer, Sr. died.

On August 19, 2005, private respondents Liling Disangcopan and her daughter, Almahleen Liling S.
Montañer, both Muslims, filed a “Complaint” for the judicial partition of properties before the Shari’a
District Court alleging that Alejandro Montañer, Sr. was a Muslim and they were the first family of the
decedent and that Almahleen Liling S. Montañer is the daughter of the decedent.

Petitioners filed an Answer with a Motion to Dismiss mainly on the following grounds: (1) the Shari’a
District Court has no jurisdiction over the estate of the late Alejandro Montañer, Sr., because he was a
Roman Catholic; (2) private respondents failed to pay the correct amount of docket fees; and (3) private
respondents’ complaint is barred by prescription, as it seeks to establish filiation between Almahleen
Liling S. Montañer and the decedent, pursuant to Article 175 of the Family Code.

On November 22, 2005, the Shari’a District Court dismissed the private respondents’ complaint. The
district court held that Alejandro Montañer, Sr. was not a Muslim, and its jurisdiction extends only to the
settlement and distribution of the estate of deceased Muslims. On MR, the Shari’a District Court
reconsidered its order of dismissal and allowed private respondents to adduce further evidence.[18] In
its second assailed order dated September 21, 2006, the Shari’a District Court ordered the continuation
of trial, trial on the merits, adducement of further evidence, and pre-trial conference.

Hence, the instant case. Petitioner argues that RESPONDENT SHARI’A DISTRICT COURT – MARAWI CITY
LACKS JURISDICTION OVER PETITIONERS WHO ARE ROMAN CATHOLICS AND NON-MUSLIMS and it DID
NOT ACQUIRE JURISDICTION OVER “THE ESTATES AND PROPERTIES OF THE LATE ALEJANDRO
MONTAÑER, SR.” WHICH IS NOT A NATURAL OR JURIDICAL PERSON WITH CAPACITY TO BE SUED and for
non-payment of docket fees. Petitioner also contends that the MR was defective for lack of notice of
hearing.

ISSUE: WON the Sharia District Court has jurisdiction over the case

HELD:

Article 143(b) of Presidential Decree No. 1083, otherwise known as the Code of Muslim Personal Laws of
the Philippines, provides that the Shari’a District Courts have exclusive original jurisdiction over the
settlement of the estate of deceased Muslims:

ARTICLE 143. Original jurisdiction. — (1) The Shari'a District Court shall have exclusive original
jurisdiction over:

xxxx

(b) All cases involving disposition, distribution and settlement of the estate of deceased Muslims,
probate of wills, issuance of letters of administration or appointment of administrators or executors
regardless of the nature or the aggregate value of the property.
The determination of the nature of an action or proceeding is controlled by the averments and character
of the relief sought in the complaint or petition.[21] The designation given by parties to their own
pleadings does not necessarily bind the courts to treat it according to the said designation. Rather than
rely on “a falsa descriptio or defective caption,” courts are “guided by the substantive averments of the
pleadings.”[22]

Although private respondents designated the pleading filed before the Shari’a District Court as a
“Complaint” for judicial partition of properties, it is a petition for the issuance of letters of
administration, settlement, and distribution of the estate of the decedent. It contains sufficient
jurisdictional facts required for the settlement of the estate of a deceased Muslim,[23] such as the fact
of Alejandro Montañer, Sr.’s death as well as the allegation that he is a Muslim. The said petition also
contains an enumeration of the names of his legal heirs, so far as known to the private respondents, and
a probable list of the properties left by the decedent, which are the very properties sought to be settled
before a probate court. Furthermore, the reliefs prayed for reveal that it is the intention of the private
respondents to seek judicial settlement of the estate of the decedent.[24] These include the following:
(1) the prayer for the partition of the estate of the decedent; and (2) the prayer for the appointment of
an administrator of the said estate.

We cannot agree with the contention of the petitioners that the district court does not have jurisdiction
over the case because of an allegation in their answer with a motion to dismiss that Montañer, Sr. is not
a Muslim. Jurisdiction of a court over the nature of the action and its subject matter does not depend
upon the defenses set forth in an answer[25] or a motion to dismiss.[26] Otherwise, jurisdiction would
depend almost entirely on the defendant[27] or result in having “a case either thrown out of court or its
proceedings unduly delayed by simple stratagem.[28] Indeed, the “defense of lack of jurisdiction which
is dependent on a question of fact does not render the court to lose or be deprived of its
jurisdiction.”[29]

The same rationale applies to an answer with a motion to dismiss.[30] In the case at bar, the Shari’a
District Court is not deprived of jurisdiction simply because petitioners raised as a defense the allegation
that the deceased is not a Muslim. The Shari’a District Court has the authority to hear and receive
evidence to determine whether it has jurisdiction, which requires an a priori determination that the
deceased is a Muslim. If after hearing, the Shari’a District Court determines that the deceased was not in
fact a Muslim, the district court should dismiss the case for lack of jurisdiction.

Special Proceedings

The underlying assumption in petitioners’ second argument, that the proceeding before the Shari’a
District Court is an ordinary civil action against a deceased person, rests on an erroneous understanding
of the proceeding before the court a quo. Part of the confusion may be attributed to the proceeding
before the Shari’a District Court, where the parties were designated either as plaintiffs or defendants
and the case was denominated as a special civil action. We reiterate that the proceedings before the
court a quo are for the issuance of letters of administration, settlement, and distribution of the estate of
the deceased, which is a special proceeding. Section 3(c) of the Rules of Court (Rules) defines a special
proceeding as “a remedy by which a party seeks to establish a status, a right, or a particular fact.” This
Court has applied the Rules, particularly the rules on special proceedings, for the settlement of the
estate of a deceased Muslim.[31] In a petition for the issuance of letters of administration, settlement,
and distribution of estate, the applicants seek to establish the fact of death of the decedent and later to
be duly recognized as among the decedent’s heirs, which would allow them to exercise their right to
participate in the settlement and liquidation of the estate of the decedent.[32] Here, the respondents
seek to establish the fact of Alejandro Montañer, Sr.’s death and, subsequently, for private respondent
Almahleen Liling S. Montañer to be recognized as among his heirs, if such is the case in fact.

Petitioners’ argument, that the prohibition against a decedent or his estate from being a party
defendant in a civil action[33] applies to a special proceeding such as the settlement of the estate of the
deceased, is misplaced. Unlike a civil action which has definite adverse parties, a special proceeding has
no definite adverse party. The definitions of a civil action and a special proceeding, respectively, in the
Rules illustrate this difference. A civil action, in which “a party sues another for the enforcement or
protection of a right, or the prevention or redress of a wrong”[34] necessarily has definite adverse
parties, who are either the plaintiff or defendant.[35] On the other hand, a special proceeding, “by
which a party seeks to establish a status, right, or a particular fact,”[36] has one definite party, who
petitions or applies for a declaration of a status, right, or particular fact, but no definite adverse party. In
the case at bar, it bears emphasis that the estate of the decedent is not being sued for any cause of
action. As a special proceeding, the purpose of the settlement of the estate of the decedent is to
determine all the assets of the estate,[37] pay its liabilities,[38] and to distribute the residual to those
entitled to the same.[39]

Docket Fees

Petitioners’ third argument, that jurisdiction was not validly acquired for non-payment of docket fees, is
untenable. Petitioners point to private respondents’ petition in the proceeding before the court a quo,
which contains an allegation estimating the decedent’s estate as the basis for the conclusion that what
private respondents paid as docket fees was insufficient. Petitioners’ argument essentially involves two
aspects: (1) whether the clerk of court correctly assessed the docket fees; and (2) whether private
respondents paid the correct assessment of the docket fees.

Filing the appropriate initiatory pleading and the payment of the prescribed docket fees vest a trial court
with jurisdiction over the subject matter.[40] If the party filing the case paid less than the correct
amount for the docket fees because that was the amount assessed by the clerk of court, the
responsibility of making a deficiency assessment lies with the same clerk of court.[41] In such a case, the
lower court concerned will not automatically lose jurisdiction, because of a party’s reliance on the clerk
of court’s insufficient assessment of the docket fees.[42] As “every citizen has the right to assume and
trust that a public officer charged by law with certain duties knows his duties and performs them in
accordance with law,” the party filing the case cannot be penalized with the clerk of court’s insufficient
assessment.[43] However, the party concerned will be required to pay the deficiency.[44]
In the case at bar, petitioners did not present the clerk of court’s assessment of the docket fees.
Moreover, the records do not include this assessment. There can be no determination of whether
private respondents correctly paid the docket fees without the clerk of court’s assessment.

Exception to Notice of Hearing

Petitioners’ fourth argument, that private respondents’ motion for reconsideration before the Shari’a
District Court is defective for lack of a notice of hearing, must fail as the unique circumstances in the
present case constitute an exception to this requirement. The Rules require every written motion to be
set for hearing by the applicant and to address the notice of hearing to all parties concerned.[45] The
Rules also provide that “no written motion set for hearing shall be acted upon by the court without
proof of service thereof.”[46] However, the Rules allow a liberal construction of its provisions “in order
to promote [the] objective of securing a just, speedy, and inexpensive disposition of every action and
proceeding.”[47] Moreover, this Court has upheld a liberal construction specifically of the rules of notice
of hearing in cases where “a rigid application will result in a manifest failure or miscarriage of justice
especially if a party successfully shows that the alleged defect in the questioned final and executory
judgment is not apparent on its face or from the recitals contained therein.”[48] In these exceptional
cases, the Court considers that “no party can even claim a vested right in technicalities,” and for this
reason, cases should, as much as possible, be decided on the merits rather than on technicalities.[49]

The case at bar falls under this exception. To deny the Shari’a District Court of an opportunity to
determine whether it has jurisdiction over a petition for the settlement of the estate of a decedent
alleged to be a Muslim would also deny its inherent power as a court to control its process to ensure
conformity with the law and justice. To sanction such a situation simply because of a lapse in fulfilling
the notice requirement will result in a miscarriage of justice.

In addition, the present case calls for a liberal construction of the rules on notice of hearing,
because the rights of the petitioners were not affected. This Court has held that an exception to the
rules on notice of hearing is where it appears that the rights of the adverse party were not affected.[50]
The purpose for the notice of hearing coincides with procedural due process,[51] for the court to
determine whether the adverse party agrees or objects to the motion, as the Rules do not fix any period
within which to file a reply or opposition.[52] In probate proceedings, “what the law prohibits is not the
absence of previous notice, but the absolute absence thereof and lack of opportunity to be heard.”[53]
In the case at bar, as evident from the Shari’a District Court’s order dated January 17, 2006, petitioners’
counsel received a copy of the motion for reconsideration in question. Petitioners were certainly not
denied an opportunity to study the arguments in the said motion as they filed an opposition to the
same. Since the Shari’a District Court reset the hearing for the motion for reconsideration in the same
order, petitioners were not denied the opportunity to object to the said motion in a hearing. Taken
together, these circumstances show that the purpose for the rules of notice of hearing, procedural
process, was duly observed.

Prescription and Filiation

 Petitioners’ fifth argument is premature. Again, the Shari’a District Court has not yet determined
whether it has jurisdiction to settle the estate of the decedent. In the event that a special proceeding for
the settlement of the estate of a decedent is pending, questions regarding heirship, including
prescription in relation to recognition and filiation, should be raised and settled in the said
proceeding.[54] The court, in its capacity as a probate court, has jurisdiction to declare who are the heirs
of the decedent.[55] In the case at bar, the determination of the heirs of the decedent depends on an
affirmative answer to the question of whether the Shari’a District Court has jurisdiction over the estate
of the decedent.

g. Concurrent/Confluent/Coordinate Jurisdiction
Vera v. Hon. Arca, G.R. No. L-25721, May 26, 1969
FACTS: Respondent Judge Arca issued a preliminary injunction against the implementation of the Tax
Census Act which required every resident of the Philippines over 18 years of age within the month of
February, 1962 and thereafter within the same month every four years to file with the City of Municipal
Treasurer a Sworn Statements of Assets, Income and Liabilities. Hence, petitioners Commissioner of
Internal Revenue, the Secretary of Finance and the Executive Secretary filed for certiorari and
prohibition.

ISSUE: whether respondent Judge ought to have issued the writ of preliminary injunction to restrain the
enforcement of the Tax Census Act.

HELD: No

As far back as March 23, 1909, more than 60 years ago, this Court, in the leading case of Devesa v.
Arbes, 21 made the categorical pronouncement that the issuance of an injunction is addressed to the
sound discretion of the Court, the exercise of which is controlled not so much by the then applicable
sections of the Code of Civil Procedure, now the Rules of Court, but by the accepted doctrines, one of
which is that it should not be granted while the rights between the parties are undetermined except in
extraordinary cases where material and irreparable injury will be done. For it is an action in equity
appropriate only when there can be no compensation in damages for the injury thus sustained and
where no adequate remedy in law exists. Such a holding reflected the prevailing American doctrine that
there is no power "the exercise of which is more delicate, which requires greater caution, deliberation
and sound discretion or more dangerous in a doubtful case," being "the strong arm of equity, that never
ought to be extended," except where the injury is great and irreparable.

We have remained committed to such an approach since then. Only last year, in Palanan Lumber &
Plywood Co. v. Arranz, 23 we emphasized: "It is not amiss to recall here that time and again this Court
has had occasion to deplore the readiness of some judges to grant and issue injunctions ex parte against
acts of public functionaries, ignoring the presumption of regularity and validity of official actuations, in
disregard of the deference and courtesy due to a coordinate branch of the government, and with no
other guide than the far from impartial assertions in pleadings of interested parties, which a summary
hearing would have shown to be either dubious or unfounded. The result has been that all too often,
the public interest has been prejudiced through unnecessary delays. It bears repeating here that
preliminary injunctions remain extraordinary remedies that should be dispensed with circumspection,
and that both sides should be first heard whenever possible."

It is true that the evil of ex parte injunction was stressed in the above excerpt. It is equally true that a
reminder was made of the extraordinary character of this remedy "to be dispensed with
circumspection" to avoid its invocation by interested parties whose claims could be shown "to be either
dubious or unfounded." What cannot be sufficiently pointed out is that a party seeking injunction must
show that his right to it must be clear and unmistakable. 24 The propriety of its issuance, therefore,
requires unmistakable proof "that the plaintiff is entitled to the relief demanded and only when his
complaint shows fact entitling him to such relief."

Independently then of whether or not there has been an unwarranted departure from the governing
principle that the power to issue a preliminary injunction is not to be availed of indiscriminately, the
more specific and pivotal question is whether it could be exercised to restrain the enforcement of the
Tax Census Act under the circumstances disclosed. The answer, to repeat, must be in the negative.

In the order granting the petition for the issuance of the writ of preliminary injunction, 26 it was stated
that a hearing on the matter took place on February 19, 1966. Then came a summary of the legal
arguments advanced both by the other respondents as petitioners and the then Solicitor General, now
Justice, Antonio P. Barredo, on behalf of the petitioners before us, who were the parties proceeded
against before the lower court.

It is apparent on the face of such order that respondent Judge took into consideration purely legal
arguments, no evidence being introduced, both for and against the validity of the challenged statute.
Moreover, his attention was invited to the presumption of validity that every legislative act has in its
favor as well as the doctrine that the task of suspending the operation of the law "is a matter of extreme
delicacy because that is an interference with the official acts not only with the duly elected
representatives of the people in Congress but also of the highest magistrate of the land." 27
Respondent Judge was deaf to the force of such cogent and persuasive constitutional law doctrines. He
issued the preliminary injunction nonetheless.

It is manifest that respondent Judge did overstep the bounds of discretion that set limits to the authority
he is entitled to exercise in the issuance of the preliminary injunction to restrain the enforcement of a
statute. There can be no dissent from the proposition that where the action required of a lower court
would be tantamount, even if only for a temporary period, to disregarding the clearly expressed will of
the two branches of the government, the need for caution is greatest. Here, respondent Judge was
apparently oblivious to such a need.

It might be said, of course, that the issuance of a preliminary injunction does not have the impress of
finality. After a hearing on the merits, the legislative act could regain its full vigor and could then be
enforced. There is much to be said though in favor of Cooley's approach in the exercise of what he
referred to as the "high prerogative of declaring a legislative enactment void," a lower court, "conscious
of the fallibility of human judgment" being admonished to manifest the utmost reluctance. 28 That
attitude should be displayed even at the stage of considering whether a preliminary injunction should
issue. Had respondent Judge been of such a frame of mind, he would have arrived at a more acceptable
conclusion. He would have refrained from indulging the other respondents in their plea for a preliminary
injunction.

To borrow from the language of Justice Laurel, he was hardly conscious of the truism "that a becoming
modesty of inferior courts demands conscious realization of the position they occupy in the interrelation
and operation of the integrated judicial system of the nation." 29 For if note be taken of the rigorous
requirement of a two- thirds vote for this Court to annul a statute, 30 the confidence displayed by
respondent Judge in thus restraining the enforcement of the act does indeed appear to be quite
excessive, under all the circumstances disclosed by the record. Correspondingly, it could be interpreted
as the failure to observe what Cooley referred to as "due caution and circumspection" and as well as
"the respect due to the action and judgment of the lawmakers."

It might have been different if at the hearing the attention of respondent Judge was invited to facts
which would overcome the presumption of validity. Even with reference to municipal ordinances, Justice
Malcolm so clearly emphasized that "the presumption is all in favor of validity." 32 In the recent
decision of Ermita-Malate Hotel & Motel Operators Asso. v. City Mayor of Manila, 33 we announced the
view that as underlying questions of fact may condition the constitutionality of legislation, "the
presumption of constitutionality must prevail in the absence of some factual foundation of record for
overthrowing the statute." It would appear clear, therefore, that the force of such a presumption would
preclude the issuance of a preliminary injunction, unless there be facts disclosed which would serve to
weaken if not to defeat the presumption of validity. No such facts have even been alleged.

There is much greater reason for a writ of preliminary injunction being set aside in this case by the grant
of the certiorari prayed for. It may serve to deter other inferior tribunals similarly minded. It may serve
to induce the conviction on the part of a lower court judge that it is a matter of the utmost seriousness
to stop the enforcement of an act after it has been enacted by a bicameral legislative body composed of
the House and the Senate and approved by the President, two of the coordinate branches of the
government. The greatest care should thus be taken before its operation is enjoined. Thereby, it would
be manifesting not judicial timidity but judicial wisdom.

This is not to say that in no case should a writ of preliminary injunction issue. There are times the
exercise of such an authority is appropriate. Thus when there is an invasion of the preferred freedoms of
belief, of expression as well as the cognate rights to freedom of assembly and association, an affirmative
response to a plea for preliminary injunction would indeed be called for. The primacy of the freedom of
the mind is entitled to the highest respect. This is not such a case, however, and the writ of certiorari
must be granted

Mendoza v. Mayor Villas, G.R. No. 187256, February 23, 2011

FACTS: Mendoza won as Punong Barangay of Barangay Balatasan, Bulalacao, Oriental Mindoro in the
2007 Barangay Elections. The losing candidate, Thomas Pajanel, filed a petition for quo warranto with
the Municipal Trial Court. The MTC issued a Decision dated February 23, 2008, disqualifying Mendoza
and declaring that Herato was entitled to succeed him as Punong Barangay with Herato garnering the
highest number of votes as a Barangay Kagawad. Mendoza appealed the MTC Decision to the COMELEC.

The mayor, Villas administered the Oath of Office to Herato. Then, Villas issued Memorandum No.
2008-03-010 dated March 3, 2008,[6] directing all department heads of the Municipal Government to
act only on documents signed or authorized by Herato.

Meanwhile, Mendoza sought the advice of the Department of the Interior and Local Government (DILG)
as to who should exercise the powers of Punong Barangay of Balatasan given the prevailing controversy.

In a letter dated April 11, 2008,[7] DILG Undersecretary Austere A. Panadero responded to Mendoza’s
inquiry informing Villas that Mendoza should occupy the post of Punong Barangay as there was no Writ
of Execution Pending Appeal of the MTC Decision dated February 23, 2008.

The LBP, issued Villas and Mendoza a letter dated April 24, 2008,[9] advising both parties that the LBP
shall not honor any transaction with regard the accounts of Barangay Balatasan.

Thereafter, petitioners filed a Petition dated May 5, 2008 for Mandamus with Damages and Prayer for
the Writ of Preliminary Mandatory Injunction, docketed as Special Civil Action No. 08-10 pending with
the Regional Trial Court, Branch 43 in Roxas, Oriental Mindoro. Petitioners prayed that the LBP be
directed to release the funds of Barangay Balatasan to them in order to render necessary, basic public
services to the inhabitants of the barangay.

Villas and Herato later filed a Motion to Dismiss dated November 7, 2008. In the Motion, a copy of the
COMELEC Resolution disqualifying Mendoza was attached. But Mendoza also presented a Certification
dated February 27, 2009[10] from the COMELEC which stated that COMELEC Case No. SPA-07-243-BRGY
is still pending with the Commission.

In an attempt to clarify the issues on the matter, Mendoza again sought the opinion of the DILG
regarding the controversy. Thus, the DILG issued another letter, denominated as DILG Opinion No. 5,
Series of 2009 dated January 2009,[11] reiterating its stance that the MTC Decision dated February 23,
2008 has not yet become final and executory.

Nevertheless, the RTC issued the assailed order dated February 2, 2009 dismissing the petition on the
strength of the COMELEC Resolution dated September 8, 2008 disqualifying Mendoza from running in
the 2007 elections. As stated, petitioners’ motion for reconsideration of the Order dated February 2,
2009 was denied in an Order dated March 17, 2009.

From such orders the petitioners went directly to this Court.

ISSUE: WON the petition is proper

HELD: No

The instant petition is a direct recourse to this Court from the assailed orders of the RTC. Notably,
petitioners did not cite the rule under the Rules of Court by which the petition was filed. If the petition is
to be treated as a petition filed under Rule 65 of the Rules of Court, the petition must be dismissed
outright for having been filed prematurely.

In Chamber of Real Estate and Builders Associations, Inc. (CREBA) v. Secretary of Agrarian Reform,[12] a
petition for certiorari filed under Rule 65 was dismissed for having been filed directly with the Court,
violating the principle of hierarchy of courts, to wit:

Primarily, although this Court, the Court of Appeals and the Regional Trial Courts have concurrent
jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction, such concurrence does not give the petitioner unrestricted freedom of choice of court forum.
In Heirs of Bertuldo Hinog v. Melicor, citing People v. Cuaresma, this Court made the following
pronouncements:

This Court’s original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court with
Regional Trial Courts and with the Court of Appeals. This concurrence of jurisdiction is not, however, to
be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of
the court to which application therefor will be directed. There is after all a hierarchy of courts. That
hierarchy is determinative of the venue of appeals, and also serves as a general determinant of the
appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial hierarchy
most certainly indicates that petitions for the issuance of extraordinary writs against first level
(“inferior”) courts should be filed with the Regional Trial Court, and those against the latter, with the
Court of Appeals. A direct invocation of the Supreme Court’s original jurisdiction to issue these writs
should be allowed only when there are special and important reasons therefor, clearly and specifically
set out in the petition. This is [an] established policy. It is a policy necessary to prevent inordinate
demands upon the Court’s time and attention which are better devoted to those matters within its
exclusive jurisdiction, and to prevent further over-crowding of the Court’s docket. (Emphasis supplied.)

Similarly, there are no special and important reasons that petitioners cite to justify their direct recourse
to this Court under Rule 65.

On the other hand, direct recourse to this Court has been allowed for petitions filed under Rule 45 when
only questions of law are raised, as in this case. Thus, the Court ruled in Barcenas v. Tomas:[13]

Section 1 of Rule 45 clearly states that the following may be appealed to the Supreme Court through a
petition for review by certiorari: 1) judgments; 2) final orders; or 3) resolutions of the Court of Appeals,
the Sandiganbayan, the Regional Trial Court or similar courts, whenever authorized by law. The appeal
must involve only questions of law, not of fact.

This Court has, time and time again, pointed out that it is not a trier of facts; and that, save for a few
exceptional instances, its function is not to analyze or weigh all over again the factual findings of the
lower courts. There is a question of law when doubts or differences arise as to what law pertains to a
certain state of facts, and a question of fact when the doubt pertains to the truth or falsity of alleged
facts.
Under the principle of the hierarchy of courts, decisions, final orders or resolutions of an MTC should be
appealed to the RTC exercising territorial jurisdiction over the former. On the other hand, RTC
judgments, final orders or resolutions are appealable to the CA through either of the following: an
ordinary appeal if the case was originally decided by the RTC; or a petition for review under Rule 42, if
the case was decided under the RTC's appellate jurisdiction.

Nonetheless, a direct recourse to this Court can be taken for a review of the decisions, final orders or
resolutions of the RTC, but only on questions of law. Under Section 5 of Article VIII of the Constitution,
the Supreme Court has the power to

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may
provide, final judgments and orders of lower courts in:

xxxx

(e) All cases in which only an error or question of law is involved.

This kind of direct appeal to this Court of RTC judgments, final orders or resolutions is provided for in
Section 2(c) of Rule 41, which reads:

SEC. 2. Modes of appeal.

xxxx

(c) Appeal by certiorari - In all cases where only questions of law are raised or involved, the appeal shall
be to the Supreme Court by petition for review on certiorari in accordance with Rule 45.

Procedurally then, petitioners could have appealed the RTC Decision affirming the MTC (1) to this Court
on questions of law only; or (2) if there are factual questions involved, to the CA -- as they in fact did.
Unfortunately for petitioners, the CA properly dismissed their petition for review because of serious
procedural defects. This action foreclosed their only available avenue for the review of the factual
findings of the RTC. (Emphasis supplied.)

Thus, the Court shall exercise liberality and consider the instant petition as one filed under Rule 45. In
Artistica Ceramica, Inc. v. Ciudad Del Carmen Homeowner’s Association, Inc.,[14] citing Republic v. Court
of Appeals,[15] the Court noted that it has the discretion to determine whether a petition was filed
under Rule 45 or 65 of the Rules of Court:

Admittedly, this Court, in accordance with the liberal spirit pervading the Rules of Court and in the
interest of justice, has the discretion to treat a petition for certiorari as having been filed under Rule 45,
especially if filed within the reglementary period for filing a petition for review.

Nevertheless, even providing that the petition was not filed prematurely, it must still be dismissed for
having become moot and academic.
In Gunsi, Sr. v. Commissioners, The Commission on Elections,[16] the Court defined a moot and
academic case as follows:

A moot and academic case is one that ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical value. As a rule, courts
decline jurisdiction over such case, or dismiss it on ground of mootness.

With the conduct of the 2010 barangay elections, a supervening event has transpired that has rendered
this case moot and academic and subject to dismissal. This is because, as stated in Fernandez v.
Commission on Elections,[17] “whatever judgment is reached, the same can no longer have any practical
legal effect or, in the nature of things, can no longer be enforced.” Mendoza’s term of office has expired
with the conduct of last year’s local elections. As such, Special Civil Action No. 08-10, where the assailed
Orders were issued, can no longer prosper. Mendoza no longer has any legal standing to further pursue
the case, rendering the instant petition moot and academic.

CREBA v. DAR Secretary, G.R. 183409, June 18, 2010

FACTS: The case is an original petition for Certiorari and Prohibition (with application for temporary
restraining order and/or writ of preliminary injunction) under Rule 65 of the 1997 Revised Rules of Civil
Procedure.

To address the unabated conversion of prime agricultural lands for real estate development, the
Secretary of Agrarian Reform issued Memorandum No. 88 on 15 April 2008, which temporarily
suspended the processing and approval of all land use conversion applications. CREBA, or the Chamber
of Real Estate and Builders Associations, Inc., assails the Memorandum. petitioner claims that there is an
actual slow down of housing projects, which, in turn, aggravated the housing shortage, unemployment
and illegal squatting problems to the substantial prejudice not only of the petitioner and its members
but more so of the whole nation.

CREBA argues that the memorandums issued by Secretary of Agrarian Reform expanded the definition
of agricultural lands, violates the autonomy of LGUs and the due process and equal protection clause.

ISSUE: WON the petition is proper

HELD: This petition must be dismissed.

Primarily, although this Court, the Court of Appeals and the Regional Trial Courts have concurrent
jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction, such concurrence does not give the petitioner unrestricted freedom of choice of court
forum.[15] In Heirs of Bertuldo Hinog v. Melicor,[16] citing People v. Cuaresma,[17] this Court made the
following pronouncements:

This Court's original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court
with Regional Trial Courts and with the Court of Appeals. This concurrence of jurisdiction is not,
however, to be taken as according to parties seeking any of the writs an absolute, unrestrained freedom
of choice of the court to which application therefor will be directed. There is after all a hierarchy of
courts. That hierarchy is determinative of the venue of appeals, and also serves as a general
determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for
that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs
against first level (“inferior”) courts should be filed with the Regional Trial Court, and those against the
latter, with the Court of Appeals. A direct invocation of the Supreme Court’s original jurisdiction to issue
these writs should be allowed only when there are special and important reasons therefor, clearly and
specifically set out in the petition. This is [an] established policy. It is a policy necessary to prevent
inordinate demands upon the Court’s time and attention which are better devoted to those matters
within its exclusive jurisdiction, and to prevent further over-crowding of the Court’s docket.[18]
(Emphasis supplied.)

The rationale for this rule is two-fold: (a) it would be an imposition upon the precious time of this Court;
and (b) it would cause an inevitable and resultant delay, intended or otherwise, in the adjudication of
cases, which in some instances had to be remanded or referred to the lower court as the proper forum
under the rules of procedure, or as better equipped to resolve the issues because this Court is not a trier
of facts.[19]

This Court thus reaffirms the judicial policy that it will not entertain direct resort to it unless the redress
desired cannot be obtained in the appropriate courts, and exceptional and compelling circumstances,
such as cases of national interest and of serious implications, justify the availment of the extraordinary
remedy of writ of certiorari, calling for the exercise of its primary jurisdiction.[20]

Exceptional and compelling circumstances were held present in the following cases: (a) Chavez v.
Romulo,[21] on citizens’ right to bear arms; (b) Government of [the] United States of America v. Hon.
Purganan,[22] on bail in extradition proceedings; (c) Commission on Elections v. Judge Quijano-
Padilla,[23] on government contract involving modernization and computerization of voters’ registration
list; (d) Buklod ng Kawaning EIIB v. Hon. Sec. Zamora,[24] on status and existence of a public office; and
(e) Hon. Fortich v. Hon. Corona,[25] on the so-called “Win-Win Resolution” of the Office of the President
which modified the approval of the conversion to agro-industrial area.[26]

In the case at bench, petitioner failed to specifically and sufficiently set forth special and important
reasons to justify direct recourse to this Court and why this Court should give due course to this petition
in the first instance, hereby failing to fulfill the conditions set forth in Heirs of Bertuldo Hinog v.
Melicor.[27] The present petition should have been initially filed in the Court of Appeals in strict
observance of the doctrine on the hierarchy of courts. Failure to do so is sufficient cause for the
dismissal of this petition.

Moreover, although the instant petition is styled as a Petition for Certiorari, in essence, it seeks the
declaration by this Court of the unconstitutionality or illegality of the questioned DAR AO No. 01-02, as
amended, and Memorandum No. 88. It, thus, partakes of the nature of a Petition for Declaratory Relief
over which this Court has only appellate, not original, jurisdiction.[28] Section 5, Article VIII of the 1987
Philippine Constitution provides:

Sec. 5. The Supreme Court shall have the following powers:

 (1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and
consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court
may provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in
question. (Emphasis supplied.)

With that, this Petition must necessarily fail because this Court does not have original jurisdiction over a
Petition for Declaratory Relief even if only questions of law are involved.

Even if the petitioner has properly observed the doctrine of judicial hierarchy, this Petition is still
dismissible.

The special civil action for certiorari is intended for the correction of errors of jurisdiction only or grave
abuse of discretion amounting to lack or excess of jurisdiction. Its principal office is only to keep the
inferior court within the parameters of its jurisdiction or to prevent it from committing such a grave
abuse of discretion amounting to lack or excess of jurisdiction.[29]

The essential requisites for a Petition for Certiorari under Rule 65 are: (1) the writ is directed against a
tribunal, a board, or an officer exercising judicial or quasi-judicial functions; (2) such tribunal, board, or
officer has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack
or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the
ordinary course of law.[30]

Excess of jurisdiction as distinguished from absence of jurisdiction means that an act, though within the
general power of a tribunal, board or officer, is not authorized and invalid with respect to the particular
proceeding, because the conditions which alone authorize the exercise of the general power in respect
of it are wanting.[31] Without jurisdiction means lack or want of legal power, right or authority to hear
and determine a cause or causes, considered either in general or with reference to a particular matter.
It means lack of power to exercise authority.[32] Grave abuse of discretion implies such capricious and
whimsical exercise of judgment as is equivalent to lack of jurisdiction or, in other words, where the
power is exercised in an arbitrary manner by reason of passion, prejudice, or personal hostility, and it
must be so patent or gross as to amount to an evasion of a positive duty or to a virtual refusal to
perform the duty enjoined or to act at all in contemplation of law.[33]

In the case before this Court, the petitioner fails to meet the above-mentioned requisites for the proper
invocation of a Petition for Certiorari under Rule 65. The Secretary of Agrarian Reform in issuing the
assailed DAR AO No. 01-02, as amended, as well as Memorandum No. 88 did so in accordance with his
mandate to implement the land use conversion provisions of Republic Act No. 6657. In the process, he
neither acted in any judicial or quasi-judicial capacity nor assumed unto himself any performance of
judicial or quasi-judicial prerogative. A Petition for Certiorari is a special civil action that may be invoked
only against a tribunal, board, or officer exercising judicial functions. Section 1, Rule 65 of the 1997
Revised Rules of Civil Procedure is explicit on this matter, viz.:

SECTION 1. Petition for certiorari. – When any tribunal, board or officer exercising judicial or quasi-
judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor any plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and praying that judgment must be rendered
annulling or modifying the proceedings of such tribunal, board or officer.

A tribunal, board, or officer is said to be exercising judicial function where it has the power to
determine what the law is and what the legal rights of the parties are, and then undertakes to
determine these questions and adjudicate upon the rights of the parties. Quasi-judicial function, on the
other hand, is “a term which applies to the actions, discretion, etc., of public administrative officers or
bodies x x x required to investigate facts or ascertain the existence of facts, hold hearings, and draw
conclusions from them as a basis for their official action and to exercise discretion of a judicial
nature.”[34]

Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there
be a law that gives rise to some specific rights of persons or property under which adverse claims to
such rights are made, and the controversy ensuing therefrom is brought before a tribunal, board, or
officer clothed with power and authority to determine the law and adjudicate the respective rights of
the contending parties.[35]

The Secretary of Agrarian Reform does not fall within the ambit of a tribunal, board, or officer
exercising judicial or quasi-judicial functions. The issuance and enforcement by the Secretary of
Agrarian Reform of the questioned DAR AO No. 01-02, as amended, and Memorandum No. 88 were
done in the exercise of his quasi-legislative and administrative functions and not of judicial or quasi-
judicial functions. In issuing the aforesaid administrative issuances, the Secretary of Agrarian Reform
never made any adjudication of rights of the parties. As such, it can never be said that the Secretary of
Agrarian Reform had acted with grave abuse of discretion amounting to lack or excess of jurisdiction in
issuing and enforcing DAR AO No. 01-02, as amended, and Memorandum No. 88 for he never exercised
any judicial or quasi-judicial functions but merely his quasi-legislative and administrative functions.

Furthermore, as this Court has previously discussed, the instant petition in essence seeks the
declaration by this Court of the unconstitutionality or illegality of the questioned DAR AO No. 01-02, as
amended, and Memorandum No. 88. Thus, the adequate and proper remedy for the petitioner therefor
is to file a Petition for Declaratory Relief, which this Court has only appellate and not original
jurisdiction. It is beyond the province of certiorari to declare the aforesaid administrative issuances
unconstitutional and illegal because certiorari is confined only to the determination of the existence of
grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioner cannot simply allege
grave abuse of discretion amounting to lack or excess of jurisdiction and then invoke certiorari to
declare the aforesaid administrative issuances unconstitutional and illegal. Emphasis must be given to
the fact that the writ of certiorari dealt with in Rule 65 of the 1997 Revised Rules of Civil Procedure is a
prerogative writ, never demandable as a matter of right, “never issued except in the exercise of judicial
discretion.”[36]

At any rate, even if the Court will set aside procedural infirmities, the instant petition should still be
dismissed.

Executive Order No. 129-A[37] vested upon the DAR the responsibility of implementing the CARP.
Pursuant to the said mandate and to ensure the successful implementation of the CARP, Section 5(c) of
the said executive order authorized the DAR to establish and promulgate operational policies, rules and
regulations and priorities for agrarian reform implementation. Section 4(k) thereof authorized the DAR
to approve or disapprove the conversion, restructuring or readjustment of agricultural lands into non-
agricultural uses. Similarly, Section 5(l) of the same executive order has given the DAR the exclusive
authority to approve or disapprove conversion of agricultural lands for residential, commercial,
industrial, and other land uses as may be provided for by law. Section 7 of the aforesaid executive order
clearly provides that “the authority and responsibility for the exercise of the mandate of the [DAR] and
the discharge of its powers and functions shall be vested in the Secretary of Agrarian Reform x x x.”

2. Manner of Acquiring Jurisdiction

a. Over Subject Matter
Allied Domecq Phil. v. Hon. Villon, G.R. No. 156264, September 30, 2004
FACTS: Petitioner filed in the RTC of Manila a complaint for injunction and damages with prayer for the
issuance of a temporary restraining order (TRO) and a writ of preliminary injunction against Clark Liberty
Warehouse, Inc to cease from importing Fundador brandy. Allied Domecq Phil Inc (ADPI) is the exclusive
distributor of Pedro Domecq, S.A. products including “Fundador” brandy until May 17, 2000 but Clark
Liberty, a duly licensed duty-free shop operating in the Clark Special Economic Zone, imported 800 cases
or a total of 9,420 bottles of “Fundador” brandy in 1999 which was seized by the Bureau of Customs due
to illegal importation.

The RTC Manila denied the ADPI’s petition. The trial court held that petitioner failed to prove that
respondent Clark Liberty engaged in unfair competition as there is no showing that it “employed deceit
or otherwise committed acts constituting bad faith;”[3] that the bottles of “Fundador” brandy imported
by respondent are the “ones imported by plaintiff”[4] and that these bottles “are not genuine, defective,
or of poor quality.” When the RTC denied ADPI’s MR, it filed a special civil action for certiorari with the
CA which was dismissed for lack of jurisdiction because it is the Supreme Court who had jurisdiction in
accordance with Section 21 of Republic Act No. 7227 or Bases Conversion and Development Act of 1992
since Clark Liberty is a registered enterprise of the Clark Special Economic Zone.

Hence, the instant petition for review

ISSUE: whether the Court of Appeals gravely abused its discretion in holding that it has no jurisdiction
over CA-G.R. SP No. 63802 pursuant to Section 21 of Republic Act 7227.

HELD: No.

Jurisdiction is the authority to hear and determine a cause.[8] Jurisdiction over the subject matter is the
power to hear and determine the general class to which the proceedings in question belong.[9]
Jurisdiction over the subject matter is conferred by law and not by the consent or acquiescence of any
or all of the parties or by erroneous belief of the court that it exists.[10] Basic is the rule that jurisdiction
over the subject matter is determined by the cause or causes of action as alleged in the complaint.[11]
But where the actual issues are evident from the records of the case, then jurisdiction over the subject
matter need not depend upon the literal averments in the complaint, but on the law as applied to
established facts.[12]

Here, in order to determine whether the court a quo has jurisdiction over petitioner’s complaint for
injunction, we have to interpret the law as applied to the established facts. There is no question that
respondent Clark Liberty is a registered enterprise of the Clark Special Economic Zone and is primarily
regulated by R.A. No. 7227, otherwise known as the Bases Conversion and Development Act of 1992.

The underlying purpose of the Legislature in enacting R.A. No. 7227 is provided by Section 2, thus:

“SEC. 2. Declaration of Policies. – It is hereby declared the policy of the Government to accelerate the
sound and balanced conversion into alternative productive uses of the Clark and Subic military
reservations and their extensions (John Hay Station, Wallace Air Station, O’Donnell Transmitter Station,
San Miguel Naval Communications Station and Capas Relay station), to raise funds by the sale of
portions of Metro Manila military camps and to apply said funds for the development and conversion to
productive civilian use of the lands covered under the 1947 Military Bases Agreement between the
Philippines and the United States of America, as amended.

It is likewise the declared policy of the Government to enhance the benefits to be derived from said
properties in order to promote the economic and social development of Central Luzon in particular and
the country in general.”

Republic Act No. 7227 goes on further to provide that:

“SEC. 4. Purposes of the Conversion Authority. – The Conversion authority shall have the following
purposes:

xxx

(c) To encourage the active participation of the private sector in transforming the Clark and Subic
military reservations and their extensions into other productive uses;”

The establishment, registration, and operation of respondent Clark Liberty and the other enterprises
within the Clark Special Economic Zone are projects (involving the private sector) which convert Clark Air
Base, a military reservation, “into productive uses.” In this connection, Section 21 of R.A. No. 7227
provides:

“SEC. 21. Injunction and Restraining Order. – The implementation of the projects for the conversion into
alternative productive uses of the military reservations are urgent and necessary and shall not be
restrained or enjoined except by an order issued by the Supreme Court of the Philippines.”

Verily, the Court of Appeals did not err when it dismissed CA-G.R. SP No. 63802 for want of jurisdiction.

Padlan v. Dinglasan, G.R. No. 180321, March 20, 2013 SUPRA

Guy v. Court of Appeals, G.R. No. 165849, December 10, 2007

FACTS: Before us are five (5) consolidated cases which stemmed from Civil Case No. 04-109444 filed
with the Regional Trial Court (RTC), Branch 24, Manila, subsequently re-raffled to Branch 46[1] and
eventually to Branch 25.

The instant controversies arose from a family dispute. Gilbert Guy is the son of Francisco and Simny
Guy. Geraldine, Gladys and Grace are his sisters. The family feud involves the ownership and control of
20,160 shares of stock of Northern Islands Co., Inc. (Northern Islands) engaged in the manufacture,
distribution, and sales of various home appliances bearing the “3-D” trademark.

In 1984, spouses Guy found that their son Gilbert has been disposing of the assets of their corporations
without authority. Thus, Simny registered 20,160 shares covered by the two Stock Certificates to the
sisters enabling them to assume an active role in the management of Northern Islands.

In November 1986, the spouses incorporated Lincoln Continental Development Corporation, Inc.
(Lincoln Continental) as a holding company of the 50% shares of stock of Northern Islands in trust for
their three (3) daughters.

On January 27, 2004, during a special meeting of the stockholders of Northern Islands, Simny was
elected President; Grace as Vice-President for Finance; Geraldine as Corporate Treasurer; and Gladys as
Corporate Secretary. Gilbert retained his position as Executive Vice President. This development
started the warfare between Gilbert and his sisters.

On March 18, 2004, Lincoln Continental filed with the RTC, Branch 24, Manila a Complaint for
Annulment of the Transfer of Shares of Stock against respondents. The complaint basically alleges that
Lincoln Continental owns 20,160 shares of stock of Northern Islands; and that respondents, in order to
oust Gilbert from the management of Northern Islands, falsely transferred the said shares of stock in
respondent sisters’ names. Lincoln Continental then prayed for an award of damages and that the
management of Northern Islands be restored to Gilbert.

On July 15, 2004, the trial court issued the TRO prayed for by Lincoln Continental directing respondents
to restore to Gilbert the shares of stock under controversy and later issued a writ of preliminary
injunction. But the respondents obtained a TRO from the appellate court enjoining the implementation
of the writ of preliminary injunction dated October 13, 2004 issued by the trial court in Civil Case No. 04-
109444; and directing Lincoln Continental to turn over the assets and records of Northern Islands to
respondents. On November 2, 2004, respondents filed with the appellate court (Eighth Division) an
Urgent Omnibus Motion praying for the issuance of a break-open Order to implement its TRO.

On November 4, 2004, the Eighth Division issued a Resolution granting respondents’ motion. Pursuant
to this Resolution, respondents entered the Northern Islands premises at No. 3 Mercury Avenue, Libis,
Quezon City.

Meanwhile, on December 16, 2004, Smartnet Philippines, Inc. (Smartnet) filed with the Metropolitan
Trial Court (MeTC), Branch 35, Quezon City a complaint for forcible entry against respondents, docketed
as Civil Case No. 35-33937. The complaint alleges that in entering the Northern Islands premises,
respondents took possession of the area being occupied by Smartnet and barred its officers and
employees from occupying the same.

Likewise on December 16, 2004, Ignacio and Ignacio Law Offices also filed with Branch 37, same court, a
complaint for forcible entry against respondents, docketed as Civil Case No. 34106. It alleges that
respondents forcibly occupied its office space when they took over the premises of Northern Islands.

Respondents filed a Second Supplemental Petition for Certiorari and Prohibition with Urgent Motion for
the Issuance of an Expanded Writ of Preliminary Injunction impleading new corporations who were
allegedly alter egos of Gilbert; and that the filing of the forcible entry cases with the MeTC was intended
to thwart the execution of the writ of preliminary injunction dated December 22, 2004 issued by the
Court of Appeals (Eighth Division) in CA-G.R. SP No. 87104. The CA granted the motion.

Later, the RTC rendered its decision dismissing the complaint of Lincoln Continental and Gilbert Guy.

Hence, Lincoln and Gilbert and Ignacio and Ignacio Law Offices and Smartnet filed a petition for
certiorari against the CA.

Ignacio and Ignacio Law Offices and Smartnet, petitioners, claim that the Court of Appeals never
acquired jurisdiction over their respective persons as they were not served with summons, either by the
MeTC or by the appellate court in CA-G.R. SP No. 87104. Thus, they submit that the Court of Appeals
committed grave abuse of discretion amounting to lack or excess of jurisdiction when it included them
in the coverage of its injunctive writ.

ISSUE: WON the CA acquired jurisdiction over Smartnet and Ignacio Law Offices

HELD:

Jurisdiction is the power or capacity given by the law to a court or tribunal to entertain, hear, and
determine certain controversies.[12] Jurisdiction over the subject matter of a case is conferred by law.

Section 9 (1) of Batas Pambansa Blg. 129,[13] as amended, provides:

SEC. 9. Jurisdiction. – The Court of Appeals shall exercise:

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo
warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction.

Rule 46 of the 1997 Rules of Civil Procedure, as amended, governs all cases originally filed with the Court
of Appeals. The following provisions of the Rule state:

SEC. 2. To what actions applicable. – This Rule shall apply to original actions for certiorari, prohibition,
mandamus and quo warranto.

Except as otherwise provided, the actions for annulment of judgment shall be governed by Rule 47, for
certiorari, prohibition, and mandamus by Rule 65, and for quo warranto by Rule 66.

xxx

SEC. 4. Jurisdiction over person of respondent, how acquired. – The court shall acquire jurisdiction over
the person of the respondent by the service on him of its order or resolution indicating its initial action
on the petition or by his voluntary submission to such jurisdiction.

SEC. 5. Action by the court. – The court may dismiss the petition outright with specific reasons for such
dismissal or require the respondent to file a comment on the same within ten (10) days from notice.
Only pleadings required by the court shall be allowed. All other pleadings and papers may be filed only
with leave of court.

It is thus clear that in cases covered by Rule 46, the Court of Appeals acquires jurisdiction over the
persons of the respondents by the service upon them of its order or resolution indicating its initial action
on the petitions or by their voluntary submission to such jurisdiction.[14] The reason for this is that,
aside from the fact that no summons or other coercive process is served on respondents, their response
to the petitions will depend on the initial action of the court thereon. Under Section 5, the court may
dismiss the petitions outright, hence, no reaction is expected from respondents and under the policy
adopted by Rule 46, they are not deemed to have been brought within the court’s jurisdiction until after
service on them of the dismissal order or resolution.[15]

Records show that on April 27, 2005, petitioners in these two forcible entry cases, were served copies of
the Resolution of the Court of Appeals (Seventh Division) dated April 26, 2005 in CA-G.R. SP No. 87104

Pursuant to Rule 46, the Court of Appeals validly acquired jurisdiction over the persons of Ignacio and
Ignacio Law Offices and Smartnet upon being served with the above Resolution.

But neither of the parties bothered to file the required comment. Their allegation that they have been
deprived of due process is definitely without merit. We have consistently held that when a party was
afforded an opportunity to participate in the proceedings but failed to do so, he cannot complain of
deprivation of due process for by such failure, he is deemed to have waived or forfeited his right to be
heard without violating the constitutional guarantee.[18]
On the question of whether the Court of Appeals could amend its Resolution directing the issuance of a
writ of preliminary injunction so as to include petitioners, suffice to state that having acquired
jurisdiction over their persons, the appellate court could do so pursuant to Section 5 (g), Rule 135 of the
Revised Rules of Court, thus:

SEC. 5. Inherent powers of courts. – Every court shall have power:

xxx

(g) To amend and control its process and orders so as to make them conformable to law and justice.

In Villanueva v. CFI of Oriental Mindoro[19] and Eternal Gardens Memorial Parks Corp. v. Intermediate
Appellate Court,[20] we held that under this Rule, a court has inherent power to amend its judgment so
as to make it conformable to the law applicable, provided that said judgment has not yet acquired
finality, as in these cases.

Ownership of the Stocks

One thing is clear. It was established before the trial court, affirmed by the Court of Appeals, that Lincoln
Continental held the disputed shares of stock of Northern Islands merely in trust for the Guy sisters. In
fact, the evidence proffered by Lincoln Continental itself supports this conclusion. It bears emphasis
that this factual finding by the trial court was affirmed by the Court of Appeals, being supported by
evidence, and is, therefore, final and conclusive upon this Court.

Article 1440 of the Civil Code provides that:

ART. 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as
regards property for the benefit of another person is known as the trustee; and the person for whose
benefit the trust has been created is referred to as the beneficiary.

In the early case of Gayondato v. Treasurer of the Philippine Islands,[23] this Court defines trust, in its
technical sense, as “a right of property, real or personal, held by one party for the benefit of another.”
Differently stated, a trust is “a fiduciary relationship with respect to property, subjecting the person
holding the same to the obligation of dealing with the property for the benefit of another person.”[24]

Both Lincoln Continental and Gilbert claim that the latter holds legal title to the shares in question. But
record shows that there is no evidence to support their claim. Rather, the evidence on record clearly
indicates that the stock certificates representing the contested shares are in respondents’ possession.
Significantly, there is no proof to support his allegation that the transfer of the shares of stock to
respondent sisters is fraudulent. As aptly held by the Court of Appeals, fraud is never presumed but
must be established by clear and convincing evidence.[25] Gilbert failed to discharge this burden. We,
agree with the Court of Appeals that respondent sisters own the shares of stocks, Gilbert being their
mere trustee. Verily, we find no reversible error in the challenged Decision of the Court of Appeals
(Special Second Division) in CA-G.R. CV No. 85937.
Barayuga v. Adventist University, G.R. No. 168008, August 17, 2011
FACTS: Petitioner Barayuga was appointed president of AUP until he was removed after an audit
revealed that he had committed serious violations of fundamental rules and procedure in the
disbursement and use of funds. The petitioner filed for injunction and damages in the RTC, with prayer
for the issuance of a temporary restraining order (TRO). After summary hearing, the RTC issued the TRO
enjoining the respondents and persons acting for and in their behalf from implementing the resolution
removing him as President issued by the Board of Trustees during the January 27, 2003 special meeting,
and enjoining the interim committee from performing the functions of President of AUP. After further
hearing, the RTC issued a writ of preliminary injunction holding that the special board meetings which
issued the resolution to remove him were not valid and he was denied of due process.

AUP filed a petition for certiorari in the CA contending that the petitioner’s complaint did not meet the
requirement that an injunctive writ should be anchored on a legal right; and that he had been merely
appointed, not elected, as President for a term of office of only two years, not five years, based on
AUP’s amended By-Laws. On August 5, 2004, the CA rendered its decision nullifying the RTC’s writ of
preliminary injunction.

Hence, the appeal.

ISSUE: whether the CA correctly ruled that the petitioner had no legal right to the position of President
of AUP that could be protected by the injunctive writ issued by the RTC.

HELD: Denied

Petition is already moot

The injunctive writ issued by the RTC was meant to protect the petitioner’s right to stay in office as
President. Given that the lifetime of the writ of preliminary injunction was co-extensive with the
duration of the act sought to be prohibited,[15] this injunctive relief already became moot in the face of
the admission by the petitioner himself, through his affidavit,[16] that his term of office premised on his
alleged five-year tenure as President had lasted only until December 2005. In short, the injunctive writ
granted by the RTC had expired upon the end of the term of office (as posited by him).

The mootness of the petition warranted its denial. When the resolution of the issue submitted in a case
has become moot and academic, and the prayer of the complaint or petition, even if granted, has
become impossible of enforcement – for there is nothing more to enjoin – the case should be
dismissed.[17] No useful purpose would then be served by passing on the merits of the petition,
because any ruling could hardly be of any practical or useful purpose in the premises. It is a settled rule
that a court will not determine a moot question or an abstract proposition, nor express an opinion in a
case in which no practical relief can be granted.[18] Indeed, moot and academic cases cease to present
any justiciable controversies by virtue of supervening events,[19] and the courts of law will not
determine moot questions,[20] for the courts should not engage in academic declarations and
determine a moot question.[21]

RTC acted in patently grave abuse of discretion

in issuing the TRO and writ of injunction

Nonetheless, the aspect of the case concerning the petitioner’s claim for damages has still to be
decided. It is for this reason that we have to resolve whether or not the petitioner had a right to the TRO
and the injunctive writ issued by the RTC.

A valid writ of preliminary injunction rests on the weight of evidence submitted by the plaintiff
establishing: (a) a present and unmistakable right to be protected; (b) the acts against which the
injunction is directed violate such right; and (c) a special and paramount necessity for the writ to
prevent serious damages.[22] In the absence of a clear legal right, the issuance of the injunctive writ
constitutes grave abuse of discretion[23] and will result to nullification thereof. Where the
complainant’s right is doubtful or disputed, injunction is not proper. The possibility of irreparable
damage sans proof of an actual existing right is not a ground for a preliminary injunction.[24]

It is clear to us, based on the foregoing principles guiding the issuance of the TRO and the writ of
injunction, that the issuance of the assailed order constituted patently grave abuse of discretion on the
part of the RTC, and that the CA rightly set aside the order of the RTC.

To begin with, the petitioner rested his claim for injunction mainly upon his representation that he was
entitled to serve for five years as President of AUP under the Constitution, By-Laws and Working Policy
of the General Conference of the Seventh Day Adventists (otherwise called the Bluebook). All that he
presented in that regard, however, were mere photocopies of pages 225-226 of the Bluebook. Yet, the
document had no evidentiary value. It had not been officially adopted for submission to and approval of
the Securities and Exchange Commission. It was nothing but an unfilled model form. As such, it was, at
best, only a private document that could not be admitted as evidence in judicial proceedings until it was
first properly authenticated in court.

Petitioner was not denied due process

The petitioner complains that he was denied due process because he was deprived of the right to
be heard and to seek reconsideration; and that the proceedings of the Board of Trustees were illegal
due to its members not being properly notified of the meeting.

Still, the petitioner fails to convince us.

The requirements of due process in an administrative context are satisfied when the parties are
afforded fair and reasonable opportunity to explain their respective sides of the controversy,[27] for the
essence of due process is an opportunity to be heard.[28] Here, the petitioner was accorded the full
opportunity to be heard, as borne by the fact that he was granted the opportunity to refute the
adverse findings contained in the GCAS audit report and that the Board of Trustees first heard his side
during the board meetings before his removal. After having voluntarily offered his refutations in the
proceedings before the Board of Trustees, he should not now be permitted to denounce the
proceedings and to plead the denial of due process after the decision of the Board of Trustees was
adverse to him.

Nor can his urging that the proceedings were illegal for lack of prior notification be plausible in light of
the fact that he willingly participated therein without raising the objection of lack of notification.
Thereby, he effectively waived his right to object to the validity of the proceedings based on lack of due
notice.

Ursua v. Republic, G.R. No. 178193, January 24, 2012

FACTS: The case is a consolidation of motions for separate and partial summary judgment by COCOFED
et al and other coconut farmers after the Supreme Court’s ruling that the coco levy funds were prima
facie public funds in separate cases. COCOFED et al and Ursua contends that the Republic failed to prove
the ill-gotten nature of the sequestered coconut farmer’s UCPB shares, thus, the Sandiganbayan failed
to acquire jurisdiction over the case. Accordingly, the controversy is removed from the subject matter
jurisdiction of the Sandiganbayan and necessarily any decision rendered on the merits.

Citing Manila Electric Company [Meralco] v. Ortañez,[66] petitioners argue that the jurisdiction of an
adjudicatory tribunal exercising limited jurisdiction, like the Sandiganbayan, “depends upon the facts of
the case as proved at the trial and not merely upon the allegation in the complaint.”

ISSUE: WON the Sandiganbayan has jurisdiction over the amended complaint

HELD:

The Sandiganbayan has jurisdiction over the subject

matter ofthe subdivided amended complaints.

Petitioners’ above posture is without merit.

Justice Florenz D. Regalado explicates subject matter jurisdiction:

16. Basic … is the doctrine that the jurisdiction of a court over the subject-matter of an action is
conferred only by the Constitution or the law and that the Rules of Court yield to substantive law, in this
case, the Judiciary Act and B.P. Blg. 129, both as amended, and of which jurisdiction is only a part.
Jurisdiction … cannot be acquired through, or waived, enlarged or diminished by, any act or omission of
the parties; neither can it be conferred by the acquiescence of the court…. Jurisdiction must exist as a
matter of law…. Consequently, questions of jurisdiction may be raised for the first time on appeal even if
such issue was not raised in the lower court….
17. Nevertheless, in some case, the principle of estoppel by laches has been availed … to bar attacks
on jurisdiction….[69]

It is, therefore, clear that jurisdiction over the subject matter is conferred by law. In turn, the
question on whether a given suit comes within the pale of a statutory conferment is determined by the
allegations in the complaint, regardless of whether or not the plaintiff will be entitled at the end to
recover upon all or some of the claims asserted therein.[70] We said as much in Magay v.
Estiandan:[71]

[J]urisdiction over the subject matter is determined by the allegations of the complaint, irrespective of
whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein-a
matter that can be resolved only after and as a result of the trial. Nor may the jurisdiction of the court
be made to depend upon the defenses set up in the answer or upon the motion to dismiss, for, were we
to be governed by such rule, the question of jurisdiction could depend almost entirely upon the
defendant.

Of the same tenor was what the Court wrote in Allied Domecq Philippines, Inc. v. Villon:[72]

Jurisdiction over the subject matter is the power to hear and determine the general class to which the
proceedings in question belong. Jurisdiction over the subject matter is conferred by law and not by the
consent or acquiescence of any or all of the parties or by erroneous belief of the court that it exists.
Basic is the rule that jurisdiction over the subject matter is determined by the cause or causes of action
as alleged in the complaint.

The material averments in subdivided CC No. 0033-A and CC No. 0033-F clearly allege the
defendants’ illegal acts thereat made, it is fairly obvious that both CC Nos. 0033-A and CC 0033-F
partake, in the context of EO Nos. 1, 2 and 14, series of 1986, the nature of ill-gotten wealth suits. Both
deal with the recovery of sequestered shares, property or business enterprises claimed, as alleged in the
corresponding basic complaints, to be ill-gotten assets of President Marcos, his cronies and nominees
and acquired by taking undue advantage of relationships or influence and/or through or as a result of
improper use, conversion or diversion of government funds or property. Recovery of these assets––
determined as shall hereinafter be discussed as prima facie ill-gotten––falls within the unquestionable
jurisdiction of the Sandiganbayan

The Republic’s averments in the amended complaints, particularly those detailing the alleged wrongful
acts of the defendants, sufficiently reveal that the subject matter thereof comprises the recovery by the
Government of ill-gotten wealth acquired by then President Marcos, his cronies or their associates and
dummies through the unlawful, improper utilization or diversion of coconut levy funds aided by P.D. No.
755 and other sister decrees. President Marcos himself issued these decrees in a brazen bid to legalize
what amounts to private taking of the said public funds.

Petitioners COCOFED et al. and Ursua, however, would insist that the Republic has failed to prove
the jurisdiction facts: that the sequestered assets indeed constitute ill-gotten wealth as averred in the
amended subdivided complaints.

This contention is incorrect.

There was no actual need for Republic, as plaintiff a quo, to adduce evidence to show that the
Sandiganbayan has jurisdiction over the subject matter of the complaints as it leaned on the averments
in the initiatory pleadings to make visible the jurisdiction of the Sandiganbayan over the ill-gotten
wealth complaints. As previously discussed, a perusal of the allegations easily reveals the sufficiency of
the statement of matters disclosing the claim of the government against the coco levy funds and the
assets acquired directly or indirectly through said funds as ill-gotten wealth. Moreover, the Court finds
no rule that directs the plaintiff to first prove the subject matter jurisdiction of the court before which
the complaint is filed. Rather, such burden falls on the shoulders of defendant in the hearing of a
motion to dismiss anchored on said ground or a preliminary hearing thereon when such ground is
alleged in the answer.

COCOFED et al. and Ursua’s reliance on Manila Electric Company [Meralco] v. Ortanez[76] is misplaced,
there being a total factual dissimilarity between that and the case at bar. Meralco involved a labor
dispute before the Court of Industrial Relations (CIR) requiring the interpretation of a collective
bargaining agreement to determine which between a regular court and CIR has jurisdiction. There, it
was held that in case of doubt, the case may not be dismissed for failure to state a cause of action as
jurisdiction of CIR is not merely based on the allegations of the complaint but must be proved during the
trial of the case. The factual milieu of Meralco shows that the said procedural holding is peculiar to the
CIR. Thus, it is not and could not be a precedent to the cases at bar.

Even PCGG v. Nepomuceno[77] is not on all fours with the cases at bench, the issue therein being
whether the regional trial court has jurisdiction over the PCGG and sequestered properties, vis-à-vis the
present cases, which involve an issue concerning the Sandiganbayan’s jurisdiction. Like in Meralco, the
holding in Nepomuceno is not determinative of the outcome of the cases at bar.

While the 1964 Meralco and the Nepomuceno cases are inapplicable, the Court’s ruling in Tijam v.
Sibonhonoy[78] is the leading case on estoppel relating to jurisdiction. In Tijam, the Court expressed
displeasure on “the undesirable practice of a party submitting his case for decision and then accepting
judgment, only if favorable, and then attacking it for lack of jurisdiction, when adverse.”
 Considering the antecedents of CC Nos. 0033-A and 0033-F, COCOFED, Lobregat, Ballares, et al.
and Ursua are already precluded from assailing the jurisdiction of the Sandiganbayan. Remember that
the COCOFED and the Lobregat group were not originally impleaded as defendants in CC No. 0033. They
later asked and were allowed by the Sandiganbayan to intervene. If they really believe then that the
Sandiganbayan is without jurisdiction over the subject matter of the complaint in question, then why
intervene in the first place? They could have sat idly by and let the proceedings continue and would not
have been affected by the outcome of the case as they can challenge the jurisdiction of the
Sandiganbayan when the time for implementation of the flawed decision comes. More importantly, the
decision in the case will have no effect on them since they were not impleaded as indispensable parties.
After all, the joinder of all indispensable parties to a suit is not only mandatory, but jurisdictional as
well.[79] By their intervention, which the Sandiganbayan allowed per its resolution dated September
30, 1991, COCOFED and Ursua have clearly manifested their desire to submit to the jurisdiction of the
Sandiganbayan and seek relief from said court. Thereafter, they filed numerous pleadings in the
subdivided complaints seeking relief and actively participated in numerous proceedings. Among the
pleadings thus filed are the Oppositions to the Motion for Intervention interposed by the Pambansang
Koalisyon ng mga Samahang Magsasaka at Manggagawa sa Niyogan and Gabay ng Mundo sa Kaunlaran
Foundation, Inc., a Class Action Omnibus Motion to enjoin the PCGG from voting the SMC shares dated
February 23, 2001 (granted by Sandiganbayan) and the Class Action Motion for a Separate Summary
Judgment dated April 11, 2001. By these acts, COCOFED et al. are now legally estopped from asserting
the Sandiganbayn’s want of jurisdiction, if that be the case, over the subject matter of the complaint as
they have voluntarily yielded to the jurisdiction of the Sandiganbayan. Estoppel has now barred the
challenge on Sandiganbayan’s jurisdiction.

The ensuing excerpts from Macahilig v. Heirs of Magalit[80] are instructive:

We cannot allow her to attack its jurisdiction simply because it rendered a Decision prejudicial to her
position. Participation in all stages of a case before a trial court effectively estops a party from
challenging its jurisdiction. One cannot belatedly reject or repudiate its decision after voluntarily
submitting to its jurisdiction, just to secure affirmative relief against one’s opponent or after failing to
obtain such relief. If, by deed or conduct, a party has induced another to act in a particular manner,
estoppel effectively bars the former from adopting an inconsistent position, attitude or course of
conduct that thereby causes loss or injury to the latter.

Lest it be overlooked, this Court has already decided that the sequestered shares are prima facie ill-
gotten wealth rendering the issue of the validity of their sequestration and of the jurisdiction of the
Sandiganbayan over the case beyond doubt. In the case of COCOFED v. PCGG,[81] We stated that:
It is of course not for this Court to pass upon the factual issues thus raised. That function pertains to the
Sandiganbayan in the first instance. For purposes of this proceeding, all that the Court needs to
determine is whether or not there is prima facie justification for the sequestration ordered by the PCGG.
The Court is satisfied that there is. The cited incidents, given the public character of the coconut levy
funds, place petitioners COCOFED and its leaders and officials, at least prima facie, squarely within the
purview of Executive Orders Nos. 1, 2 and 14, as construed and applied in BASECO

2nd issue: WON the Sandiganbayan abused its power of judicial review and wrongly encroached into the
exclusive domain of Congress when it declared certain provisions of the coconut levy laws and PCA
administrative issuances as unconstitutional.

HELD: NO.

It is basic that courts will not delve into matters of constitutionality unless unavoidable, when the
question of constitutionality is the very lis mota of the case, meaning, that the case cannot be legally
resolved unless the constitutional issue raised is determined. This rule finds anchorage on the
presumptive constitutionality of every enactment. Withal, to justify the nullification of a statute, there
must be a clear and unequivocal breach of the Constitution. A doubtful or speculative infringement
would simply not suffice.[98]

Just as basic is the precept that lower courts are not precluded from resolving, whenever
warranted, constitutional questions, subject only to review by this Court.

Sections 1 and 2 of P.D. No. 755, Article III, Section 5 of P.D. No. 961 and Article III, Section 5 of P.D.
No. 1468, are unconstitutional.

The Court may pass upon the constitutionality of P.D. Nos. 755, 961 and 1468.

To Us, the present controversy cannot be peremptorily resolved without going into the constitutionality
of P.D. Nos. 755, 961 and 1468 in particular. For petitioners COCOFED et al. and Ballares et al. predicate
their claim over the sequestered shares and necessarily their cause on laws and martial law issuances
assailed by the Republic on constitutional grounds. Indeed, as aptly observed by the Solicitor General,
this case is for the recovery of shares grounded on the invalidity of certain enactments, which in turn is
rooted in the shares being public in character, purchased as they were by funds raised by the taxing
and/or a mix of taxing and police powers of the state.[99] As may be recalled, P.D. No. 755, under the
policy-declaring provision, authorized the distribution of UCPB shares of stock free to coconut farmers.
On the other hand, Section 2 of P.D. No. 755, hereunder quoted below, effectively authorized the PCA
to utilize portions of the CCSF to pay the financial commitment of the farmers to acquire UCPB and to
deposit portions of the CCSF levies with UCPB interest free. And as there also provided, the CCSF, CIDF
and like levies that PCA is authorized to collect shall be considered as non-special or fiduciary funds to
be transferred to the general fund of the Government, meaning they shall be deemed private funds.
In other words, the relevant provisions of P.D. Nos. 755, as well as those of P.D. Nos. 961 and 1468,
could have been the only plausible means by which close to a purported million and a half coconut
farmers could have acquired the said shares of stock. It has, therefore, become necessary to determine
the validity of the authorizing law, which made the stock transfer and acquisitions possible.

To reiterate, it is of crucial importance to determine the validity of P.D. Nos. 755, 961 and 1468 in light
of the constitutional proscription against the use of special funds save for the purpose it was
established. Otherwise, petitioners’ claim of legitimate private ownership over UCPB shares and
indirectly over SMC shares held by UCPB’s subsidiaries will have no leg to stand on, P.D. No. 755 being
the only law authorizing the distribution of the SMC and UCPB shares of stock to coconut farmers, and
with the aforementioned provisions actually stating and holding that the coco levy fund shall not be
considered as a special – not even general – fund, but shall be owned by the farmers in their private
capacities.

The Court’s rulings in COCOFED v. PCGG and Republic v. Sandiganbayan, as law of the case, are
speciously invoked.

To thwart the ruling on the constitutionality of P.D. Nos. 755, 961 and 1468, petitioners would
sneak in the argument that the Court has, in three separate instances, upheld the validity, and thumbed
down the Republic’s challenge to the constitutionality, of said laws imposing the different coconut levies
and prescribing the uses of the fund collected. The separate actions of the Court, petitioners add, would
conclude the Sandiganbayan on the issue of constitutionality of said issuances, following the law-of-the-
case principle. Petitioners allege:

Otherwise stated, the decision of this Honorable Court in the COCOFED Case overruling the strict
public fund theory espoused by the Respondent Republic, upholding the propriety of the laws imposing
the collections of the different Coconut Levies and expressly allowing COCOFED, et al., to prove that the
Sequestered Assets have legitimately become their private properties had become final and
immutable.[104]

Petitioners are mistaken.

Yu v. Yu,[105] as effectively reiterated in Vios v. Pantangco,[106] defines and explains the

ramifications of the law of the case principle as follows:
Law of the case has been defined as the opinion delivered on a former appeal. It is a term applied to an
established rule that when an appellate court passes on a question and remands the case to the lower
court for further proceedings, the question there settled becomes the law of the case upon subsequent
appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision
between the same parties in the 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.

Otherwise put, the principle means that questions of law that have been previously raised and
disposed of in the proceedings shall be controlling in succeeding instances where the same legal
question is raised, provided that the facts on which the legal issue was predicated continue to be the
facts of the case before the court. Guided by this definition, the law of the case principle cannot provide
petitioners any comfort. We shall explain why.

The issue, therefore, in COCOFED v. PCGG turns on the legality of the transfer of the shares of
stock bought with the coconut levy funds to coconut farmers. This must be distinguished with the issues
in the instant case of whether P.D. No. 755 violated Section 29, paragraph 3 of Article VI of the 1987
Constitution as well as to whether P.D. No. 755 constitutes undue delegation of legislative power.
Clearly, the issues in both sets of cases are so different as to preclude the application of the law of the
case rule.

The second and third instances that petitioners draw attention to refer to the rulings in Republic v.
Sandiganbayan, where the Court by Resolution of December 13, 1994, as reiterated in another
resolution dated March 26, 1996, resolved to deny the separate motions of the Republic to resolve legal
questions on the character of the coconut levy funds, more particularly to declare as unconstitutional (a)
coconut levies collected pursuant to various issuances as public funds and (b) Article III, Section 5 of P.D.
No. 1468.

Prescinding from the foregoing considerations, petitioners would state: “Having filed at least three
(3) motions … seeking, among others, to declare certain provisions of the Coconut Levy Laws
unconstitutional and having been rebuffed all three times by this Court,” the Republic - and necessarily
Sandiganbayan – “should have followed as [they were] legally bound by this … Court’s prior
determination” on that above issue of constitutionality under the doctrine of Law of the Case.

Petitioners are wrong. The Court merely declined to pass upon the constitutionality of the coconut levy
laws or some of their provisions. It did not declare that the UCPB shares acquired with the use of
coconut levy funds have legitimately become private.
The coconut levy funds are in the nature of taxes and can only be used for public purpose.
Consequently, they cannot be used to purchase shares of stocks to be given for free to private
individuals.

Indeed, We have hitherto discussed, the coconut levy was imposed in the exercise of the State’s
inherent power of taxation. As We wrote in Republic v. COCOFED:[109]

Indeed, coconut levy funds partake of the nature of taxes, which, in general, are enforced
proportional contributions from persons and properties, exacted by the State by virtue of its sovereignty
for the support of government and for all public needs.

Based on its definition, a tax has three elements, namely: a) it is an enforced proportional
contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and
c) it is levied for the support of the government. The coconut levy funds fall squarely into these
elements for the following reasons:

(a) They were generated by virtue of statutory enactments imposed on the coconut
farmers requiring the payment of prescribed amounts. Thus, PD No. 276, which created the Coconut
Consumer[s] Stabilization Fund (CCSF), mandated the following:

“a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its equivalent in other coconut
products, shall be imposed on every first sale, in accordance with the mechanics established under RA
6260, effective at the start of business hours on August 10, 1973.

“The proceeds from the levy shall be deposited with the Philippine National Bank or any other
government bank to the account of the Coconut Consumers Stabilization Fund, as a separate trust fund
which shall not form part of the general fund of the government.”

The coco levies were further clarified in amendatory laws, specifically PD No. 961 and PD No. 1468 – in
this wise:

“The Authority (PCA) is hereby empowered to impose and collect a levy, to be known as the Coconut
Consumers Stabilization Fund Levy, on every one hundred kilos of copra resecada, or its equivalent …
delivered to, and/or purchased by, copra exporters, oil millers, desiccators and other end-users of copra
or its equivalent in other coconut products. The levy shall be paid by such copra exporters, oil millers,
desiccators and other end-users of copra or its equivalent in other coconut products under such rules
and regulations as the Authority may prescribe. Until otherwise prescribed by the Authority, the current
levy being collected shall be continued.”

Like other tax measures, they were not voluntary payments or donations by the people. They were
enforced contributions exacted on pain of penal sanctions, as provided under PD No. 276:

“3. Any person or firm who violates any provision of this Decree or the rules and regulations
promulgated thereunder, shall, in addition to penalties already prescribed under existing administrative
and special law, pay a fine of not less than P2,500 or more than P10,000, or suffer cancellation of
licenses to operate, or both, at the discretion of the Court.”

Such penalties were later amended thus: ….

(b) The coconut levies were imposed pursuant to the laws enacted by the proper legislative authorities
of the State. Indeed, the CCSF was collected under PD No. 276….”

(c) They were clearly imposed for a public purpose. There is absolutely no question that they were
collected to advance the government’s avowed policy of protecting the coconut industry. This Court
takes judicial notice of the fact that the coconut industry is one of the great economic pillars of our
nation, and coconuts and their byproducts occupy a leading position among the country’s export
products….

Taxation is done not merely to raise revenues to support the government, but also to provide means for
the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest
as to be within the police power of the State….

Even if the money is allocated for a special purpose and raised by special means, it is still public in
character…. In Cocofed v. PCGG, the Court observed that certain agencies or enterprises “were
organized and financed with revenues derived from coconut levies imposed under a succession of law of
the late dictatorship … with deposed Ferdinand Marcos and his cronies as the suspected authors and
chief beneficiaries of the resulting coconut industry monopoly.” The Court continued: “…. It cannot be
denied that the coconut industry is one of the major industries supporting the national economy. It is,
therefore, the State’s concern to make it a strong and secure source not only of the livelihood of a
significant segment of the population, but also of export earnings the sustained growth of which is one
of the imperatives of economic stability.

We have ruled time and again that taxes are imposed only for a public purpose.[111] “They cannot be
used for purely private purposes or for the exclusive benefit of private persons.”[112] When a law
imposes taxes or levies from the public, with the intent to give undue benefit or advantage to private
persons, or the promotion of private enterprises, that law cannot be said to satisfy the requirement of
public purpose.[113] In Gaston v. Republic Planters Bank, the petitioning sugar producers, sugarcane
planters and millers sought the distribution of the shares of stock of the Republic Planters Bank, alleging
that they are the true beneficial owners thereof.[114] In that case, the investment, i.e., the purchase of
the said bank, was funded by the deduction of PhP 1.00 per picul from the sugar proceeds of the sugar
producers pursuant to P.D. No. 388.[115] In ruling against the petitioners, the Court held that to rule in
their favor would contravene the general principle that revenues received from the imposition of taxes
or levies “cannot be used for purely private purposes or for the exclusive benefit of private
persons.”[116] The Court amply reasoned that the Stabilization Fund must “be utilized for the benefit of
the entire sugar industry, and all its components, stabilization of the domestic market including foreign
market, the industry being of vital importance to the country’s economy and to national interest.”[117]

Similarly in this case, the coconut levy funds were sourced from forced exactions decreed under P.D.
Nos. 232, 276 and 582, among others,[118] with the end-goal of developing the entire coconut
industry.[119] Clearly, to hold therefore, even by law, that the revenues received from the imposition of
the coconut levies be used purely for private purposes to be owned by private individuals in their private
capacity and for their benefit, would contravene the rationale behind the imposition of taxes or levies.

Needless to stress, courts do not, as they cannot, allow by judicial fiat the conversion of special funds
into a private fund for the benefit of private individuals. In the same vein, We cannot subscribe to the
idea of what appears to be an indirect – if not exactly direct – conversion of special funds into private
funds, i.e., by using special funds to purchase shares of stocks, which in turn would be distributed for
free to private individuals. Even if these private individuals belong to, or are a part of the coconut
industry, the free distribution of shares of stocks purchased with special public funds to them,
nevertheless cannot be justified.

In this case, the coconut levy funds were being exacted from copra exporters, oil millers, desiccators and
other end-users of copra or its equivalent in other coconut products.[122] Likewise so, the funds here
were channeled to the purchase of the shares of stock in UCPB. Drawing a clear parallelism between
Gaston and this case, the fact that the coconut levy funds were collected from the persons or entities in
the coconut industry, among others, does not and cannot entitle them to be beneficial owners of the
subject funds – or more bluntly, owners thereof in their private capacity. Parenthetically, the said
private individuals cannot own the UCPB shares of stocks so purchased using the said special funds of
the government.[

OPERATIVE FACT ISSUE

The Operative Fact Doctrine does not apply

Petitioners assert that the Sandiganbayan’s refusal to recognize the vested rights purportedly
created under the coconut levy laws constitutes taking of private property without due process of law.
They reason out that to accord retroactive application to a declaration of unconstitutionality would be
unfair inasmuch as such approach would penalize the farmers who merely obeyed then valid laws.

This contention is specious.

In Yap v. Thenamaris Ship’s Management,[170] the Operative Fact Doctrine was discussed in that:

As a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords
no protection; it creates no office; it is inoperative as if it has not been passed at all. The general rule is
supported by Article 7 of the Civil Code, which provides:

Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be
excused by disuse or custom or practice to the contrary.

The doctrine of operative fact serves as an exception to the aforementioned general rule. In Planters
Products, Inc. v. Fertiphil Corporation, we held:
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and
fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute
prior to a determination of unconstitutionality is an operative fact and may have consequences which
cannot always be ignored. The past cannot always be erased by a new judicial declaration.

The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on
those who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of
unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a
municipality in reliance upon a law creating it.[171]

In that case, this Court further held that the Operative Fact Doctrine will not be applied as an
exception when to rule otherwise would be iniquitous and would send a wrong signal that an act may be
justified when based on an unconstitutional provision of law.[172]

The Court had the following disquisition on the concept of the Operative Fact Doctrine in the case of
Chavez v. National Housing Authority:[173]

The “operative fact” doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated
that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid
and must be complied with, thus:

As the new Civil Code puts it: “When the courts declare a law to be inconsistent with the Constitution,
the former shall be void and the latter shall govern. Administrative or executive acts, orders and
regulations shall be valid only when they are not contrary to the laws of the Constitution.” It is
understandable why it should be so, the Constitution being supreme and paramount. Any legislative or
executive act contrary to its terms cannot survive.

Such a view has support in logic and possesses the merit of simplicity. It may not however be
sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with. This is so as until after
the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect.
Parties may have acted under it and may have changed their positions. What could be more fitting than
that in a subsequent litigation regard be had to what has been done while such legislative or executive
act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior
to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness
that precisely because the judiciary is the governmental organ which has the final say on whether or not
a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the
power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no recognition of what had transpired prior to such
adjudication.

In the language of an American Supreme Court decision: “The actual existence of a statute, prior
to such a determination [of unconstitutionality], is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of
the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to
particular relations, individual and corporate, and particular conduct, private and official.” This language
has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co.,
Inc. v. Flores. An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in
Fernandez v. Cuerva and Co. (Emphasis supplied.)

The principle was further explicated in the case of Rieta v. People of the Philippines, thus:

In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot
County Drainage District vs. Baxter Bank to wit:

The courts below have proceeded on the theory that the Act of Congress, having been found to be
unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and
hence affording no basis for the challenged decree…. It is quite clear, however, that such broad
statements as to the effect of a determination of unconstitutionality must be taken with qualifications.
The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and
may have consequences which cannot justly be ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in
various aspects –with respect to particular conduct, private and official. Questions of rights claimed to
have become vested, of status, of prior determinations deemed to have finality and acted upon
accordingly, of public policy in the light of the nature both of the statute and of its previous application,
demand examination. These questions are among the most difficult of those which have engaged the
attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive
statement of a principle of absolute retroactive invalidity cannot be justified.

Moreover, the Court ruled in Chavez that:

Furthermore, when petitioner filed the instant case against respondents on August 5, 2004, the
JVAs were already terminated by virtue of the MOA between the NHA and RBI. The respondents had no
reason to think that their agreements were unconstitutional or even questionable, as in fact, the
concurrent acts of the executive department lent validity to the implementation of the Project. The
SMDRP agreements have produced vested rights in favor of the slum dwellers, the buyers of reclaimed
land who were issued titles over said land, and the agencies and investors who made investments in the
project or who bought SMPPCs. These properties and rights cannot be disturbed or questioned after
the passage of around ten (10) years from the start of the SMDRP implementation. Evidently, the
“operative fact” principle has set in. The titles to the lands in the hands of the buyers can no longer be
invalidated.[174]

In the case at bar, the Court rules that the dictates of justice, fairness and equity do not support
the claim of the alleged farmer-owners that their ownership of the UCPB shares should be respected.
Our reasons:

1. Said farmers or alleged claimants do not have any legal right to own the UCPB shares
distributed to them. It was not successfully refuted that said claimants were issued receipts under R.A.
6260 for the payment of the levy that went into the Coconut Investment Fund (CIF) upon which shares
in the “Coconut Investment Company” will be issued. The Court upholds the finding of the
Sandiganbayan that said investment company is a different corporate entity from the United Coconut
Planters Bank. This was in fact admitted by petitioners during the April 17, 2001 oral arguments in G.R.
Nos. 147062-64.[175]

2. To grant all the UCPB shares to petitioners and its alleged members would be iniquitous and
prejudicial to the remaining 4.6 million farmers who have not received any UCPB shares when in fact
they also made payments to either the CIF or the CCSF but did not receive any receipt or who was not
able to register their receipts or misplaced them.

3. The Sandiganbayan made the finding that due to enormous operational problems and
administrative complications, the intended beneficiaries of the UCPB shares were not able to receive the
shares due to them. To reiterate what the anti-graft court said:
The actual distribution of the bank shares was admittedly an enormous operational problem which
resulted in the failure of the intended beneficiaries to receive their shares of stocks in the bank, as
shown by the rules and regulations, issued by the PCA, without adequate guidelines being provided to it
by P.D. No. 755.

Due to numerous flaws in the distribution of the UCPB shares by PCA, it would be best for the
interest of all coconut farmers to revert the ownership of the UCBP shares to the government for the
entire coconut industry, which includes the farmers;

. The Court also takes judicial cognizance of the fact that a number, if not all, of the coconut farmers
who sold copra did not get the receipts for the payment of the coconut levy for the reason that the
copra they produced were bought by traders or middlemen who in turn sold the same to the coconut
mills. The reality on the ground is that it was these traders who got the receipts and the corresponding
UCPB shares. In addition, some uninformed coconut farmers who actually got the COCOFUND receipts,
not appreciating the importance and value of said receipts, have already sold said receipts to non-
coconut farmers, thereby depriving them of the benefits under the coconut levy laws. Ergo, the coconut
farmers are the ones who will not be benefited by the distribution of the UCPB shares contrary to the
policy behind the coconut levy laws. The nullification of the distribution of the UCPB shares and their
transfer to the government for the coconut industry will, therefore, ensure that the benefits to be
deprived from the UCPB shares will actually accrue to the intended beneficiaries – the genuine coconut
farmers.

From the foregoing, it is highly inappropriate to apply the operative fact doctrine to the UCPB
shares. Public funds, which were supposedly given utmost safeguard, were haphazardly distributed to
private individuals based on statutory provisions that are found to be constitutionally infirm on not only
one but on a variety of grounds. Worse still, the recipients of the UCPB shares may not actually be the
intended beneficiaries of said benefit. Clearly, applying the Operative Fact Doctrine would not only be
iniquitous but would also serve injustice to the Government, to the coconut industry, and to the people,
who, whether willingly or unwillingly, contributed to the public funds, and therefore expect that their
Government would take utmost care of them and that they would be used no less, than for public
purpose.

City of Dumaguete v. Philippine Ports Authority, G.R. No. 168973, August 24, 2011
FACTS: The City of Dumaguete filed in the RTC an Application for Original Registration of Title over a
parcel of land with improvements under the Property Registration Decree claiming that the land was
acquired by possessory title in open, continuous, adverse occupation and possession in the concept of
owner for more than thirty years since 1960. The Republic and the respondent opposed the application
claiming that the subject property remains to be a portion of the public domain which belongs to the
Republic.

Respondent filed a Motion to Dismiss on the ground that the RTC lacked jurisdiction to hear and decide
the case. Respondent argued that Section 14(1) of Presidential Decree No. 1529, otherwise known as
the Property Registration Decree, refers only to alienable and disposable lands of the public domain
under a bona fide claim of ownership. The subject property in LRC Case No. N-201 is not alienable and
disposable, since it is a foreshore land, as explicitly testified to by petitioner’s own witness, Engr.
Dorado. A foreshore land is not registerable.

In its Terse Opposition to Oppositor’s Motion to Dismiss, petitioner claimed that the subject property
was a swamp reclaimed about 40 years ago, which it occupied openly, continuously, exclusively, and
notoriously under a bona fide claim of ownership. The technical description and approved plan of the
subject property showed that the said property was not bounded by any part of the sea. Petitioner
invoked Republic Act No. 1899,[9] which authorizes chartered cities and municipalities to undertake and
carry out, at their own expense, the reclamation of foreshore lands bordering them; and grants said
chartered cities and municipalities ownership over the reclaimed lands.

Respondent filed a Reply/Rejoinder asserting that there are no factual or legal basis for the claim of
petitioner that the subject property is reclaimed land. Petitioner sought the original registration of its
title over the subject property acquired through alleged continuous possession for 30 years under
Section 14(1) of the Property Registration Decree, and not through the reclamation of the said property
at its own expense under Republic Act No. 1899. The present claim of petitioner that the subject
property is reclaimed land should not be allowed for it would improperly change the earlier theory in
support of the application for registration.

On September 7, 2000, the RTC issued an Order[12] granting the Motion to Dismiss. The City filed an MR
and contended that the dismissal of its application was premature and tantamount to a denial of its
right to due process. It has yet to present evidence to prove factual matters in support of its application,
such as the subject property already being alienable and disposable at the time it was occupied and
possessed by petitioner. Respondent opposed the MR because it violated Sections 4 (Hearing of
motion), 5 (Notice of hearing), and 6 (Proof of service necessary), Rule 15 of the Rules of Court.

The RTC initially agreed with respondent but after taking into consideration the Supplemental Motion
for Reconsideration of petitioner, the RTC issued another Order[24] dated December 7, 2000, setting
aside its Order dated September 7, 2000 in the interest of justice and resolving to have a full-blown
proceeding to determine factual issues. Respondent filed an MR which was denied.

Respondent then filed a Petition for Certiorari and Prohibition with the CA arguing that the defects of
the Motion for Reconsideration of petitioner rendered the same as a mere scrap of paper, which did not
toll the running of the prescriptive period to appeal the RTC Order dismissing the case. The CA set aside
the order of the RTC.

Hence, petitioner comes before us via the instant Petition for Review seeking for a liberal application of
the rules

ISSUE:

HELD:

We grant the Petition.

 The grant of a petition for certiorari under Rule 65 of the Rules of Court requires grave abuse of
discretion amounting to lack or excess of jurisdiction. Grave abuse of discretion exists where an act is
performed with a capricious or whimsical exercise of judgment equivalent to lack of jurisdiction. The
abuse of discretion must be patent and gross as to amount to an evasion of positive duty or to a virtual
refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as where the power is
exercised in an arbitrary and despotic manner by reason of passion or personal hostility

The Court of Appeals erred in granting the writ of certiorari in favor of respondent. The RTC did not
commit grave abuse of discretion when, in its Orders dated December 7, 2000 and February 20, 2001, it
set aside the order of dismissal of LRC Case No. N-201 and resolved to have a full-blown proceeding to
determine factual issues in said case.

Procedural rules were conceived to aid the attainment of justice. If a stringent application of the rules
would hinder rather than serve the demands of substantial justice, the former must yield to the
latter.[29] In Basco v. Court of Appeals,[30] we allowed a liberal application of technical rules of
procedure, pertaining to the requisites of a proper notice of hearing, upon consideration of the
importance of the subject matter of the controversy, as illustrated in well-settled cases, to wit:

The liberal construction of the rules on notice of hearing is exemplified in Goldloop Properties, Inc. v.
CA:

Admittedly, the filing of respondent-spouses' motion for reconsideration did not stop the running of the
period of appeal because of the absence of a notice of hearing required in Secs. 3, 4 and 5, Rule 15, of
the Rules of Court. As we have repeatedly held, a motion that does not contain a notice of hearing is a
mere scrap of paper; it presents no question which merits the attention of the court. Being a mere scrap
of paper, the trial court had no alternative but to disregard it. Such being the case, it was as if no motion
for reconsideration was filed and, therefore, the reglementary period within which respondent-spouses
should have filed an appeal expired on 23 November 1989.

But, where a rigid application of that rule will result in a manifest failure or miscarriage of justice, then
the rule may be relaxed, especially if a party successfully shows that the alleged defect in the questioned
final and executory judgment is not apparent on its face or from the recitals contained therein.
Technicalities may thus be disregarded in order to resolve the case. After all, no party can even claim a
vested right in technicalities. Litigations should, as much as possible, be decided on the merits and not
on technicalities.

Likewise, in Samoso v. CA, the Court ruled:

But time and again, the Court has stressed that the rules of procedure are not to be applied in a very
strict and technical sense. The rules of procedure are used only to help secure not override substantial
justice (National Waterworks & Sewerage System vs. Municipality of Libmanan, 97 SCRA 138 [1980];
Gregorio v. Court of Appeals, 72 SCRA 120 [1976]). The right to appeal should not be lightly disregarded
by a stringent application of rules of procedure especially where the appeal is on its face meritorious
and the interests of substantial justice would be served by permitting the appeal (Siguenza v. Court of
Appeals, 137 SCRA 570 [1985]; Pacific Asia Overseas Shipping Corporation v. National Labor Relations
Commission, et al., G.R. No. 76595, May 6, 1998). . . .

In the case at bar, the Motion for Reconsideration and Supplemental Motion for Reconsideration of
petitioner, which sought the reversal of RTC Order dated September 7, 2000 dismissing LRC Case No. N-
201, cite meritorious grounds that justify a liberal application of procedural rules.

The dismissal by the RTC of LRC Case No. N-201 for lack of jurisdiction is patently erroneous.

Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by law
and determined by the allegations in the complaint which comprise a concise statement of the ultimate
facts constituting the plaintiff's cause of action. The nature of an action, as well as which court or body
has jurisdiction over it, is determined based on the allegations contained in the complaint of the
plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims
asserted therein. The averments in the complaint and the character of the relief sought are the ones to
be consulted. Once vested by the allegations in the complaint, jurisdiction also remains vested
irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted
therein.[32]

As a necessary consequence, the jurisdiction of the court cannot be made to depend upon the defenses
set up in the answer or upon the motion to dismiss; for otherwise, the question of jurisdiction would
almost entirely depend upon the defendant. What determines the jurisdiction of the court is the nature
of the action pleaded as appearing from the allegations in the complaint. The averments therein and
the character of the relief sought are the ones to be consulted.[33]

Under Act No. 496, otherwise known as the Land Registration Act, as amended by Act No. 2347,
jurisdiction over all applications for registration of title to land was conferred upon the Courts of First
Instance (CFI) of the respective provinces in which the land sought to be registered was situated.
Jurisdiction over land registration cases, as in ordinary actions, is acquired upon the filing in court of the
application for registration, and is retained up to the end of the litigation.[34]

The land registration laws were updated and codified by the Property Registration Decree, and under
Section 17 thereof, jurisdiction over an application for land registration was still vested on the CFI of the
province or city where the land was situated, viz:

SEC. 17. What and where to file. – The application for land registration shall be filed with the Court of
First Instance of the province or city where the land is situated. The applicant shall file together with the
application all original muniments of titles or copies thereof and a survey plan of the land approved by
the Bureau of Lands.

The Clerk of Court shall not accept any application unless it is shown that the applicant has furnished
the Director of Lands with a copy of the application and all annexes.
 Batas Pambansa Blg. 129, otherwise known as The Judiciary Reorganization Act of 1980, created the
RTC[35] in place of the CFI. Presently, jurisdiction over an application for land registration remains with
the RTC where the land is situated, except when such jurisdiction is delegated by the Supreme Court to
the Metropolitan Trial Court, Municipal Trial Courts, and Municipal Circuit Trial Courts under certain
circumstances.[36]

It is not disputed that the Application for Original Registration of Title filed by petitioner before the RTC
of the City of Dumaguete conformed to Section 15 of the Property Registration Decree, which prescribes
the form and contents of such applications. In its Application, petitioner prayed that its title to the
subject property, which it repeatedly alleged to have acquired through continuous and adverse
possession and occupation of the said property for more than 30 years or since 1960, be placed under
the land registration laws. The allegations and prayer in the Application of petitioner were sufficient to
vest jurisdiction on the RTC over the said Application upon the filing thereof.

Respondent sought the dismissal of LRC Case No. N-201 on the ground of lack of jurisdiction, not
because of the insufficiency of the allegations and prayer therein, but because the evidence presented
by petitioner itself during the trial supposedly showed that the subject property is a foreshore land,
which is not alienable and disposable. The RTC granted the Motion to Dismiss of respondent in its Order
dated September 7, 2000. The RTC went beyond the allegations and prayer for relief in the Application
for Original Registration of petitioner, and already scrutinized and weighed the testimony of Engr.
Dorado, the only witness petitioner was able to present.

As to whether or not the subject property is indeed foreshore land is a factual issue which the RTC
should resolve in the exercise of its jurisdiction, after giving both parties the opportunity to present their
respective evidence at a full-blown trial.

As we have explained in the Estate of the Late Jesus S. Yujuico v. Republic[37]:

The plain import of Municipality of Antipolo is that a land registration court, the RTC at present, has no
jurisdiction over the subject matter of the application which respondent Republic claims is public land.
This ruling needs elucidation.

Firmly entrenched is the principle that jurisdiction over the subject matter is conferred by law.
Consequently, the proper CFI (now the RTC) under Section 14 of PD 1529 (Property Registration Decree)
has jurisdiction over applications for registration of title to land.

xxxx

Conformably, the Pasig-Rizal CFI, Branch XXII has jurisdiction over the subject matter of the land
registration case filed by Fermina Castro, petitioners’ predecessor-in-interest, since jurisdiction over the
subject matter is determined by the allegations of the initiatory pleading – the application. Settled is the
rule that “the authority to decide a case and not the decision rendered therein is what makes up
jurisdiction. When there is jurisdiction, the decision of all questions arising in the case is but an exercise
of jurisdiction.
 In our view, it was imprecise to state in Municipality of Antipolo that the “Land Registration Court [has]
no jurisdiction to entertain the application for registration of public property x x x” for such court
precisely has the jurisdiction to entertain land registration applications since that is conferred by PD
1529. The applicant in a land registration case usually claims the land subject matter of the application
as his/her private property, as in the case of the application of Castro. Thus, the conclusion of the CA
that the Pasig-Rizal CFI has no jurisdiction over the subject matter of the application of Castro has no
mooring. The land registration court initially has jurisdiction over the land applied for at the time of the
filing of the application. After trial, the court, in the exercise of its jurisdiction, can determine whether
the title to the land applied for is registerable and can be confirmed. In the event that the subject
matter of the application turns out to be inalienable public land, then it has no jurisdiction to order the
registration of the land and perforce must dismiss the application. [38] (Emphasis ours.)

It is true that petitioner, as the applicant, has the burden of proving that the subject property is
alienable and disposable and its title to the same is capable of registration. However, we stress that the
RTC, when it issued its Order dated September 7, 2000, had so far heard only the testimony of Engr.
Dorado, the first witness for the petitioner. Petitioner was no longer afforded the opportunity to
present other witnesses and pieces of evidence in support of its Application. The RTC Order dated
September 7, 2000 – already declaring the subject property as inalienable public land, over which the
RTC has no jurisdiction to order registration – was evidently premature.

The RTC Order dated September 7, 2000 has not yet become final and executory as petitioner was able
to duly file a Motion for Reconsideration and Supplemental Motion for Reconsideration of the same,
which the RTC eventually granted in its Order dated December 7, 2000. Admittedly, said motions filed
by petitioner did not comply with certain rules of procedure. Ordinarily, such non-compliance would
have rendered said motions as mere scraps of paper, considered as not having been filed at all, and
unable to toll the reglementary period for an appeal. However, we find that the exceptional
circumstances extant in the present case warrant the liberal application of the rules.

Also, the Motion for Reconsideration and Supplemental Motion for Reconsideration of the Order dated
September 7, 2000 filed by petitioner did not comply with Section 11, Rule 13 of the Rules of Court, for
these did not include a written explanation why service or filing thereof was not done personally.
Nonetheless, in Maceda v. Encarnacion de Guzman Vda. de Magpantay,[39] citing Solar Team
Entertainment, Inc. v. Ricafort,[40] and Musa v. Amor,[41] we explained the rationale behind said rule
and the mandatory nature of the same, vis-à-vis the exercise of discretion by the court in case of non-
compliance therewith:

In Solar Team Entertainment, Inc. v. Ricafort, this Court, passing upon Section 11 of Rule 13 of the Rules
of Court, held that a court has the discretion to consider a pleading or paper as not filed if said rule is
not complied with.

Personal service and filing are preferred for obvious reasons. Plainly, such should expedite action or
resolution on a pleading, motion or other paper; and conversely, minimize, if not eliminate, delays likely
to be incurred if service or filing is done by mail, considering the inefficiency of the postal service.
Likewise, personal service will do away with the practice of some lawyers who, wanting to appear clever,
resort to the following less than ethical practices: (1) serving or filing pleadings by mail to catch opposing
counsel off-guard, thus leaving the latter with little or no time to prepare, for instance, responsive
pleadings or an opposition; or (2) upon receiving notice from the post office that the registered
containing the pleading of or other paper from the adverse party may be claimed, unduly
procrastinating before claiming the parcel, or, worse, not claiming it at all, thereby causing undue delay
in the disposition of such pleading or other papers.

If only to underscore the mandatory nature of this innovation to our set of adjective rules requiring
personal service whenever practicable, Section 11 of Rule 13 then gives the court the discretion to
consider a pleading or paper as not filed if the other modes of service or filing were not resorted to and
no written explanation was made as to why personal service was not done in the first place. The
exercise of discretion must, necessarily consider the practicability of personal service, for Section 11
itself begins with the clause “whenever practicable.”

We thus take this opportunity to clarify that under Section 11, Rule 13 of the 1997 Rules of Civil
Procedure, personal service and filing is the general rule, and resort to other modes of service and filing,
the exception. Henceforth, whenever personal service or filing is practicable, in the light of the
circumstances of time, place and person, personal service or filing is mandatory. Only when personal
service or filing is not practicable may resort to other modes be had, which must then be accompanied
by a written explanation as to why personal service or filing was not practicable to begin with. In
adjudging the plausibility of an explanation, a court shall likewise consider the importance of the subject
matter of the case or the issues involved therein, and the prima facie merit of the pleading sought to be
expunged for violation of Section 11.

In Musa v. Amor, this Court, on noting the impracticality of personal service, exercised its discretion and
liberally applied Section 11 of Rule 13:

As [Section 11, Rule 13 of the Rules of Court] requires, service and filing of pleadings must be done
personally whenever practicable. The court notes that in the present case, personal service would not
be practicable. Considering the distance between the Court of Appeals and Donsol, Sorsogon where the
petition was posted, clearly, service by registered mail [sic] would have entailed considerable time,
effort and expense. A written explanation why service was not done personally might have been
superfluous. In any case, as the rule is so worded with the use of “may,” signifying permissiveness, a
violation thereof gives the court discretion whether or not to consider the paper as not filed. While it is
true that procedural rules are necessary to secure an orderly and speedy administration of justice, rigid
application of Section 11, Rule 13 may be relaxed in this case in the interest of substantial justice.
In the case at bar, the address of respondent’s counsel is Lopez, Quezon, while petitioner Sonia’s
counsel’s is Lucena City. Lopez, Quezon is 83 kilometers away from Lucena City. Such distance makes
personal service impracticable. As in Musa v. Amor, a written explanation why service was not done
personally “might have been superfluous.”[42] (Emphases supplied and citations omitted.)

Our ruling in the above-cited cases is relevant to the instant case. Counsel for petitioner holds office in
Dumaguete City, Negros Oriental, in the Visayas; while counsel for respondent holds office in Quezon
City, Metro Manila, in Luzon. Given the considerable distance between the offices of these two
counsels, personal service of pleadings and motions by one upon the other was clearly not practicable
and a written explanation as to why personal service was not done would only be superfluous.[43] In
addition, we refer once more to the merits of the Motion for Reconsideration and Supplemental Motion
for Reconsideration of the RTC Order dated September 7, 2000 filed by petitioner, which justify the
liberal interpretation of Section 11, Rule 13 of the Rules of Court in this case.

Jurisprudence confirms that the requirements laid down in Sections 4, 5, and 6, Rule 15 of the Rules of
Court that the notice of hearing shall be directed to the parties concerned, and shall state the time and
place for the hearing of the motion, are mandatory. If not religiously complied with, they render the
motion pro forma. As such, the motion is a useless piece of paper that will not toll the running of the
prescriptive period.[44]

Yet, again, there were previous cases with peculiar circumstances that had compelled us to liberally
apply the rules on notice of hearing and recognize substantial compliance with the same. Once such
case is Philippine National Bank v. Paneda,[45] where we adjudged:

Thus, even if the Motion may be defective for failure to address the notice of hearing of said motion to
the parties concerned, the defect was cured by the court's taking cognizance thereof and the fact that
the adverse party was otherwise notified of the existence of said pleading. There is substantial
compliance with the foregoing rules if a copy of the said motion for reconsideration was furnished to the
counsel of herein private respondents.

In the present case, records reveal that the notices in the Motion were addressed to the respective
counsels of the private respondents and they were duly furnished with copies of the same as shown by
the receipts signed by their staff or agents.
Consequently, the Court finds that the petitioner substantially complied with the pertinent provisions of
the Rules of Court and existing jurisprudence on the requirements of motions and pleadings.[46]
(Emphasis supplied.)

It was not refuted that petitioner furnished respondent and respondent actually received copies of the
Motion for Reconsideration, as well as the Supplemental Motion for Reconsideration of the RTC Order
dated September 7, 2000 filed by petitioner. As a result, respondent was able to file its Oppositions to
the said Motions. The RTC, in issuing its Order dated December 7, 2000, was able to consider the
arguments presented by both sides. Hence, there was substantial compliance by petitioner with the
rules on notice of hearing for its Motion for Reconsideration and Supplemental Motion for
Reconsideration of the RTC Order dated September 7, 2000. Respondent cannot claim that it was
deprived of the opportunity to be heard on its opposition to said Motions.

In view of the foregoing circumstances, the RTC judiciously, rather than abusively or arbitrarily,
exercised its discretion when it subsequently issued the Order dated December 7, 2000, setting aside its
Order dated September 7, 2000 and proceeding with the trial in LRC Case No. N-201.

Republic v. Bantigue Point Development, G.R. No. 162322, March 14, 2012 SUPRA

b. Over the Case

People of the Philippines v. Hon. Garfin, G.R. No. 153176, March 29, 2004
FACTS: Garfin was charged with violation of Section 22(a) in relation to Sections 19(b) and 28(e) of
Republic Act No. 8282, otherwise known as the “Social Security Act. The corresponding information
was filed by Prosecutor Tolentino. Garfin was arraigned and pleaded not guilty. Three days
thereafter, the accused filed a motion to dismiss on the ground that the information was filed without
the prior written authority or approval of the city prosecutor as required under Section 4, Rule 112 of
the Revised Rules of Court. The Court thus the case dismissed for lack of jurisdiction.

In its MR, the People contends that Prosecutor Tolentino, having been duly designated to assist the City
Prosecutor in the investigation and prosecution of all SSS cases by the Regional State prosecutor as alter
ego of the Secretary of Justice in Region V, then that authority may be given to him other than the City
Prosecutor. The lower court denied the MR. Hence the instant case.

ISSUE: For determination in this petition is a question in procedural law - - - whether an information
filed by a state prosecutor without the prior written authority or approval of the city or provincial
prosecutor or chief state prosecutor should be dismissed after the accused has entered his plea
under the information. whether the lack of prior written approval of the city, provincial or chief state
prosecutor in the filing of an information is a defect in the information that is waived if not raised as an
objection before arraignment.

HELD:

After considering the respective arguments raised by the parties, the Court believes and so resolves that
the Information has not been filed in accordance with Section 4, par. 3 of Rule 112 of the 2000 Rules on
Criminal Procedure, thus:

‘Rule 112, Section 4 x x x x x x

No complaint or information may be filed or dismissed by an investigating prosecutor without the prior
written authority or approval of the provincial or city prosecutor or chief state prosecutor or the
Ombudsman or his deputy.’

Expresio unius est exclusio alterius.

The Information will readily show that it has not complied with this rule as it has not been approved by
the City Prosecutor.

This Court holds that the defendant’s plea to the Information is not a waiver to file a motion to dismiss
or to quash on the ground of lack of jurisdiction. By express provision of the rules and by a long line of
decisions, questions of want of jurisdiction may be raised at any stage of the proceedings (People vs.
Eduarte, 182 SCRA 750).

The Supreme Court in Villa vs. Ibañez (88 Phil 402) dwelt on lack of authority of the officer who filed the
information and on jurisdiction at the same time, pertinent portions run as follows:

The defendant had pleaded to the information before he filed a motion to quash, and it is contended
that by his plea he waived all objections to the information. The contention is correct as far as formal
objections to the pleadings are concerned. But by clear implication, if not by express provision of
section 10 of Rule 113 of the Rules of Court, and by a long line of uniform decisions, questions of want of
jurisdiction may be raised at any stage of the proceedings. Now, the objection to the respondent’s
actuations goes to the very foundations of jurisdiction. It is a valid information signed by a competent
officer which, among other requisites, confers jurisdiction on the court over the person of the accused
and the subject matter of the accusation. In consonance with this view, an infirmity of the nature noted
in the information cannot be cured by silence, acquiescence, or even by express consent.

The Regional State Prosecutor is not the alter ego of the Secretary of Justice but a mere subordinate
official and if ever the former files cases, it is by virtue of a delegated authority by the Secretary of
Justice. Potestas delegada non potesta delegare (sic) – what has been delegated cannot be redelegated.

Under Presidential Decree No. 1275, the powers of a Regional State Prosecutor are as follows:
Sec. 8. The Regional State Prosecution Office: Functions of Regional State Prosecutor. - The Regional
State Prosecutor shall, under the control of the Secretary of Justice, have the following functions:

a) Implement policies, plans, programs, memoranda, orders, circulars and rules and regulations of the
Department of Justice relative to the investigation and prosecution of criminal cases in his region.

b) Exercise immediate administrative supervision over all provincial and city fiscals and other
prosecuting officers of provinces and cities comprised within his region.

c) Prosecute any case arising within the region.

d) With respect to his regional office and the offices of the provincial and city fiscals within his region,
he shall:

1) Appoint such member of subordinate officers and employees as may be necessary; and approve
transfers of subordinate personnel within the jurisdiction of the regional office.

2) Investigate administrative complaints against fiscals and other prosecuting officers within his
region and submit his recommendation thereon to the Secretary of Justice who shall, after review
thereof, submit the appropriate recommendation to the Office of the President: Provided, that where
the Secretary of Justice finds insufficient grounds for the filing of charges, he may render a decision of
dismissal thereof.

3) Investigate administrative complaints against subordinate personnel of the region and submit his
recommendations thereon to the Secretary of Justice who shall have the authority to render decision
thereon. mphases supplied)

The power of administrative supervision is limited to “the authority of the department or its equivalent
to generally oversee the operations of such agencies and to insure that they are managed effectively,
efficiently and economically but without interference with day-to-day activities; or require the
submission of reports and cause the conduct of management audit, performance evaluation and
inspection to determine compliance with policies, standards and guidelines of the department; to take
such action as may be necessary for the proper performance of official functions, including rectification
of violations, abuses and other forms of maladministration; and to review and pass upon budget
proposals of such agencies but may not increase or add to them.”[36] This is distinguished from the
power of “supervision and control” which includes the authority “to act directly whenever a specific
function is entrusted by law or regulation to a subordinate; direct the performance of duty; restrain the
commission of acts; review, approve, reverse or modify acts and decisions of subordinate officials or
units; determine priorities in the execution of plans and programs; and prescribe standards, guidelines,
plans and programs.”[37]

The Regional State Prosecutor is clearly vested only with the power of administrative supervision. As
administrative supervisor, he has no power to direct the city and provincial prosecutors to inhibit from
handling certain cases. At most, he can request for their inhibition. Hence, the said directive of the
regional state prosecutor to the city and provincial prosecutors is questionable to say the least.
Petitioner cannot lean on the cases of Galvez and Sanchez. In those cases, the special prosecutors were
acting under the directive of the Secretary of Justice. They were appointed in accordance with law.
Nowhere in P.D. No. 1275 is the regional state prosecutor granted the power to appoint a special
prosecutor armed with the authority to file an information without the prior written authority or
approval of the city or provincial prosecutor or chief state prosecutor. P.D. No. 1275 provides the
manner by which special prosecutors are appointed, to wit:

Sec. 15. Special Counsels. - Whenever the exigencies of the service require the creation of positions of
additional counsel to assist provincial and city fiscals in the discharge of their duties, positions of Special
Counsels may be created by any province or city, subject to the approval of the Secretary of Justice, and
with salaries chargeable against provincial or city funds. The Secretary of Justice shall appoint said
Special Counsels, upon recommendation of the provincial or city fiscal and regional state prosecutors
concerned, either on permanent or temporary basis.

Special Counsel shall be appointed from members of the bar and shall be allowed not more than the
salary rate provided in this Decree for the lowest rank or grade of assistant fiscal in the province or city
where assigned. mphases supplied)

Under Department Order No. 318,[38] “Defining the authority, duties and responsibilities of regional
state prosecutors,” then Acting Secretary of Justice Silvestre H. Bello III ordered the appointed regional
state prosecutors (which included Regional State Prosecutor Turingan for Region V) to, among others,
“(i)nvestigate and/or prosecute, upon the directive of the Secretary of Justice, specific criminal cases
filed within the region.” mphasis supplied)

In the case at bar, there is no pretense that a directive was issued by the Secretary of Justice to
Regional State Prosecutor Turingan to investigate and/or prosecute SSS cases filed within his territorial
jurisdiction. A bare reading of the alleged letter of commendation by then Secretary Hernando Perez
would show that it does not amount to a directive or even a recognition of this authority. In fact, while
the letter of Secretary Perez commends the efforts of Regional State Prosecutor Turingan in successfully
prosecuting SSS cases, it also negates his authority to prosecute them. Secretary Perez called the
Regional State Prosecutor’s attention to DOJ Circular No. 27, series of 2001, which states that all
important cases of the SSS should be referred to the Office of the Government Corporate Counsel.[39]
Thus, Regional State Prosecutor Turingan cannot be considered a special prosecutor within the meaning
of the law.

whether the lack of prior written approval of the city, provincial or chief state prosecutor in the filing of
an information is a defect in the information that is waived if not raised as an objection before
arraignment.

We hold that it is not.

The provisions in the 2000 Revised Rules of Criminal Procedure that demand illumination are Sections 3
and 9 of Rule 117 in relation to paragraph 3, Section 4 of Rule 112, to wit:

Rule 117, Section 3. Grounds.-The accused may move to quash the complaint or information on any of
the following grounds:

(a) That the facts charged do not constitute an offense;

(b) That the court trying the case has no jurisdiction over the offense charged;

(c) That the court trying the case has no jurisdiction over the person of the accused;

(d) That the officer who filed the information had no authority to do so;

(e) That it does not conform substantially to the prescribed form;

(f) That more than one offense is charged except when a single punishment for various offenses is
prescribed by law;

(g) That the criminal action or liability has been extinguished;

(h) That it contains averments which, if true, would constitute a legal excuse or justification; and

(i) That the accused has been previously convicted or acquitted of the offense charged, or the
case against him was dismissed or otherwise terminated without his express consent.

xxx xxx xxx

Section 9. Failure to move to quash or to allege any ground therefor.-The failure of the accused to
assert any ground of a motion to quash before he pleads to the complaint or information, either
because he did not file a motion to quash or failed to allege the same in said motion, shall be deemed a
waiver of any objections except those based on the grounds provided for in paragraphs (a), (b), (g), and
(i) of section 3 of this Rule. mphasis supplied)

Rule 112, Section 4, paragraph 3 provides, viz:

No complaint or information may be filed or dismissed by an investigating prosecutor without the prior
written authority or approval of the provincial or city prosecutor or chief state prosecutor or the
Ombudsman or his deputy.

Private respondent and the OSG take the position that the lack of prior authority or approval by the city
or provincial prosecutor or chief state prosecutor is an infirmity in the information that prevented the
court from acquiring jurisdiction over the case. Since lack of jurisdiction is a defect that may be raised as
an objection anytime even after arraignment, the respondent judge did not err in granting the motion to
dismiss based on this ground. As basis, they cite the case of Villa v. Ibañez, et al.[40] where we held, viz:
 The defendant had pleaded to an information before he filed a motion to quash, and it is contended
that by his plea he waived all objections to the informations. The contention is correct as far as formal
objections to the pleadings are concerned. But by clear implication, if not by express provision of section
10 of Rule 113 of the Rules of Court (now Section 9 of Rule 117), and by a long line of uniform decisions,
questions of want of jurisdiction may be raised at any stage of the proceeding. Now, the objection to
the respondent’s actuations goes to the very foundation of the jurisdiction. It is a valid information
signed by a competent officer which, among other requisites, confers jurisdiction on the court over the
person of the accused and the subject matter of the accusation. In consonance with this view, an
infirmity in the information cannot be cured by silence, acquiescence, or even by express consent.[41]
mphasis supplied)

The case of Villa is authority for the principle that lack of authority on the part of the filing officer
prevents the court from acquiring jurisdiction over the case. Jurisdiction over the subject matter is
conferred by law while jurisdiction over the case is invested by the act of plaintiff and attaches upon the
filing of the complaint or information.[42] Hence, while a court may have jurisdiction over the subject
matter, like a violation of the SSS Law, it does not acquire jurisdiction over the case itself until its
jurisdiction is invoked with the filing of the information.

c. Over the Issue

Lazo v. Republic Surety, G.R. No. L-27365, January 30, 1970
FACTS: This case is before us on appeal by the defendants from the decision of the Court of First
Instance of Manila (Branch I, Judge Francisco Arca, presiding) rendered on December 7, 1966.

The original complaint was filed on December 12, 1963, and subsequently amended on November 9,
1964. Petitioner Lazo is the guarantor of co-petitioner Robles for a loan obtained from the Philippine
Bank of Commerce. Lazo executed a real estate mortgage in favor of the defendant Republic Surety &
Insurance Co., Inc who was co-debtor in the same loan. Robles failed to pay despite several extensions
until the loan was transferred to the Surety who foreclosed extra-judicially the mortgage on July 1, 1958.
Lazo claims the foreclosure as invalid because plaintiff Jose Robles had paid on the mortgage loan the
sum of P13,466.36 from August 20, 1953 to May 24, 1958; and that thereafter, from July 8, 1958 to
August 23, 1963, he continued to make other payments, aggregating P17,250.00. Hence Lazo filed a
petition for the defendant company to render an accounting of the payments thus made so that if the
loan had been paid in full then the real estate mortgage should be cancelled; otherwise the plaintiffs
should be allowed to pay, by way of legal redemption, whatever Balance still remained.

The respondents filed a motion to dismiss arguing that the complaint did not state a cause of action and
that the claim or demand set forth therein had already prescribed. The trial court did not resolve the
motion to dismiss categorically but set the case for trial.

After the plaintiffs filed their amended complaint on November 9, 1964 the defendants answered the
same, alleging inter alia that all the payments made by the plaintiffs after the foreclosure sale on July 1,
1958 were made in the concept of rents, for which the defendant company was under no obligation to
render an accounting.
The issue thus made out by the pleadings was whether or not the plaintiffs were entitled to the
accounting sought by them. A corollary issue — indeed the one on which the first depends — was
whether or not the right of redemption With respect to the foreclosed property was still available.

The trial court, however, went entirely out of the issues submitted to it and chose to decide the case on
a point which was not at all litigated, the validity of the mortgage foreclosure. Consequently, the court
concluded, the real estate mortgage in favor of said defendant was extinguished, and the foreclosure
thereof was a nullity.

Hence, the instant case

ISSUE: WON the trial court erred in deciding the case on an issue not raised in the complaint

HELD: Yes. Reversed trial court.

The actuation of the trial court was not legally permissible especially because the theory on which it
proceeded involved factual considerations neither touched upon the pleadings nor made the subject of
evidence at the trial. Rule 6, Section 1, is quite explicit in providing that "pleadings are the written
allegations of the parties of their respective claims and defenses submitted to the court for trial and
judgment." This rule has been consistently applied and adhered to by the courts.

The subject matter of any given case is determined ... by the nature and character of the pleadings
submitted by the parties to the court for trial and judgment. Belandres vs. Lopez Sugar Central Mill Co.,
Inc., 97 Phil. 100, 103.

It is a fundamental principle that judgments must conform to both the pleadings and the proof, and
must be in accordance with the theory of the action upon which the pleadings were framed and the
case was tried; that a party can no more succeed upon a case proved. but not alleged, than upon one
alleged but not proved." (Ramon v. Ortuzar, 89 Phil. 730, 742)

It is a well-known principle in procedure that courts of justice have no jurisdiction or power to decide a
question not in issue." (Lim Toco vs. Go Pay, 80 Phil. 166)

A judgment going outside the issues and purporting to adjudicate something upon which the parties
were not heard, is not merely irregular, but extrajudicial and invalid." (Salvante v. Cruz, 88 Phil. 236,
244.)

The parties here went to court and presented their respective sides on the premise, admitted by both,
that the mortgage was valid and subsisting. Evidence, therefore, to establish such premise was
unnecessary and uncalled for. Indeed, it was for that reason and because in any event the record of this
case, particularly with respect to the actuations of the parties after the mortgage was foreclosed, shows
with overwhelming preponderance that the said mortgage had not been extinguished

Redemption issue
The plaintiffs rely on Rule 39, Section 34.1 In this connection Section 9 of Act No. 3135, as amended,
may also be cited.2

Implicit in the application of these provisions is the premise that the period for redemption of the
property sold on execution (on extrajudicial foreclosure of mortgage in the present case) has not yet
expired. For if the right to redeem has been lost it stands to reason that there is no redemption price to
speak of, to which the rents received by the purchasers are to be applied or credited.3

The plaintiffs' position is that since the sheriff's certificate of sale was recorded in the office of the
Register of Deeds for Manila on March 28, 1963, the one-year period of legal redemption had not yet
expired when the action was commenced on December 12 of the same year.

There are, however, certain circumstances peculiar to this case which take it out of the operation of the
rule concerning registration in this regard.

There is, to begin with, the categorical statement in the certificate of sale that "the period of
redemption of the said property sold will expire on the 2nd day of July, 1959." Then there is the fact that
no lien or encumbrance, right or claim of any person, other than the mortgage in question, appeared on
the transfer certificate of title of the plaintiff spouses covering the mortgaged property, such that when
the defendant company obtained a new transfer certificate in its name on March 28, 1963, the same
was entirely clean. In other words, no third parties who might have an interest in the property, either as
possible redemptioners or otherwise, had to be protected by due notice of the sale through its
registration. Second, Beginning July 1958, immediately after the foreclosure sale, the plaintiffs — in
some instances in the joint names of Jose Robles and Felix Lazo and in other instances in the name of
Jose Robles alone — started paying rents on the property to the defendant company, indicating that the
former owners, while remaining in occupancy, did so in the concept of tenants.

The plaintiffs having reneged on all their repeated promises, the defendant company finally
consolidated its title to the property as purchaser at the foreclosure sale on March 28, 1963, and
obtained the corresponding transfer certificate of title. That was almost five years after the said sale.

It is clear, in the light of the facts and circumstances above set forth, that the parties had abandoned
entirely the concept of legal redemption in this case and converted it into one of conventional
redemption, in which the only governing factor was the agreement between them.

Buce v. Court of Appeals, G.R. No. 136913, May 12, 2000

FACTS: Petitioner leased a 56-square meter parcel of land for a period of fifteen years to commence on
1 June 1979 and to end on 1 June 1994 "subject to renewal for another ten (10) years, under the same
terms and conditions." Petitioner then constructed a building and paid the required monthly rental
which periodically increased. In 1992, the rent was again increased but Buce only tendered checks for a
lesser amount which Tiongco, the owner, refused to accept. Buce then filed with the Regional Trial
Court of Manila a complaint for specific performance with prayer for consignation and she prayed that
private respondents be ordered to accept the rentals in accordance with the lease contract and to
respect the lease of fifteen years, which was renewable for another ten years, at the rate of P200 a
month.

The respondents answered that the increase was pursuant to Republic Act No. 877 or the Rent Control
Act and that the phrase in the lease contract authorizing renewal for another ten years does not mean
automatic renewal; rather, it contemplates a mutual agreement between the parties.

On 29 August 1995, the RTC declared the lease contract automatically renewed for ten years and
considered as evidence thereof (a) the stipulations in the contract giving the lessee the right to construct
buildings and improvements and (b) the filing by petitioner of the complaint almost one year before the
expiration of the initial term of fifteen years. It then fixed the monthly rent. The RTC held that the
continuous increase of rent from P200 to P250 then P300, P400 and finally P1,000 caused "an inevitable
novation of their contract."

On appeal, the Court of Appeals reversed the decision of the RTC, and ordered petitioner to immediately
vacate the leased premises on the ground that the contract expired on 1 June 1994 without being
renewed and to pay the rental arrearages at the rate of P1,000 monthly. According to the Court of
Appeals, it is unclear as to who may exercise the option to renew. The stipulation allowing the
construction of a building and other improvements and the fact that the complaint was filed a year
before the expiration of the contract are not indicative of automatic renewal. It applied the ruling in
Fernandez v. Court of Appeals13 [166 SCRA 577 (1988)] that without a stipulation that the option to
renew the lease is solely for the benefit of one party any renewal of a lease contract must be upon the
agreement of the parties.

The Court of Appeals denied petitioner’s motion for reconsideration. Hence this petition.

Petitioner contends that by ordering her to vacate the premises, the Appellate Court went beyond the
bounds of its authority because the case she filed before the RTC was for "Specific Performance" not
unlawful detainer. The power to order the lessee to vacate the leased premises is lodged in another
forum. Additionally, private respondents did not pray for the ejectment of petitioners from the leased
premises in their Answer with Counterclaim; well-settled is the rule that a court cannot award relief not
prayed for in the complaint or compulsory counterclaim.

ISSUE: WON the CA erred in its ruling ordering petitioner to vacate the premises

HELD: Yes.

In the case at bar, it was not specifically indicated who may exercise the option to renew, neither was it
stated that the option was given for the benefit of herein petitioner. Thus, pursuant to the Fernandez
ruling and Article 1196 of the Civil Code, the period of the lease contract is deemed to have been set for
the benefit of both parties. Renewal of the contract may be had only upon their mutual agreement or at
the will of both of them. Since the private respondents were not amenable to a renewal, they cannot be
compelled to execute a new contract when the old contract terminated on 1 June 1994. It is the owner-
lessor’s prerogative to terminate the lease at its expiration.20 [Vda. de Roxas v. Court of Appeals, 63
SCRA 302, 303-304 (1975)] The continuance, effectivity and fulfillment of a contract of lease cannot be
made to depend exclusively upon the free and uncontrolled choice of the lessee between continuing the
payment of the rentals or not, completely depriving the owner of any say in the matter. Mutuality does
not obtain in such a contract of lease and no equality exists between the lessor and the lessee since the
life of the contract would be dictated solely by the lessee.21 [Lao Lim v. Court of Appeals, 191 SCRA 150,
155 (1990)]

After the lease terminated on 1 June 1994 without any agreement for renewal being reached, petitioner
became subject to ejectment from the premises.22 [See Chua v. Court of Appeals, 301 SCRA 356, 362-
363 (1999)] It must be noted, however, that private respondents did not include in their Answer with
Counterclaim a prayer for the restoration of possession of the leased premises. Neither did they file with
the proper Metropolitan Trial Court an unlawful detainer suit23 [See Pardo de Tavera v. Encarnacion, 22
SCRA 632 (1968]; Rosales v. CFI of Lanao del Norte, Br. III, 154 SCRA 153 (1987)] against petitioner after
the expiration of the lease contact. Moreover, the issues agreed upon by the parties to be resolved
during the pre-trial were the correct interpretation of the contract and the validity of private
respondents’ refusal to accept petitioner’s payment of P400 as monthly rental.24 [OR, 57-58.] They later
limited the issue to the first, i.e., the correct interpretation of the contract.25 [Id., 118.] The issue of
possession of the leased premises was not among the issues agreed upon by the parties or threshed out
before the court a quo. Neither was it raised by private respondents on appeal.

Accordingly, as correctly contended by the petitioner, the Court of Appeals went beyond the bounds of
its authority26 [See Abubakar v. Abubakar, G.R. No. 134622, 22 October 1999.] when after interpreting
the questioned provision of the lease contract in favor of the private respondents it proceeded to order
petitioner to vacate the subject premises.

WHEREFORE, the instant petition is partly GRANTED. The assailed decision of the Court of Appeals is
REVERSED insofar as it ordered the petitioner to immediately vacate the leased premises, without
prejudice, however, to the filing by the private respondents of an action for the recovery of possession
of the subject property.

Mercader v. DBP, G.R. No. 130699, May 12, 2000

FACTS: The original complaint was for specific performance filed by petitioner Mercader. Mercader
leased for 20 years a property owned by Manreal but the property was foreclosed by DBP because
Manreal defaulted on his loan with the bank. Mercader had already introduced improvements on the
property. Mercader prayed in his complaint that DBP respect the lease period and reimbursement for
the improvements and for the annotation of their interest in the TCT. After failed compromise involving
a lease-purchase option, the trial was set with three issues raised: 1. Whether the plaintiff [are] entitled
to specific performance of said agreement; 2. Whether the defendant bank can be compelled to
recognize the lease contract entered into between the spouses plaintiff Bernardo Mercader and Gelacio
Manreal; and 3. Whether the foreclosure proceedings of the contract between the defendant bank is
null and void.
The trial court ruled in favor of the Mercaders. On the first issue, the trial court found that the "DBP had
unnecessarily and unjustifiably made [Bernardo] Mercader understand that his second option [lease-
purchase] would be more or less approved, except that the approval will come from Manila."26 [Rollo,
157.] Anent the second issue, the trial court also believed "quite firmly" that the "DBP could not have
escaped having a foreknowledge of the existence of the prior unrecorded lease" as the "possession and
cultivation of Bernardo Mercader xxx [was] a matter of open, notorious and public knowledge in the
area." In resolving the third issue, the court first acknowledged that it is a "court of equity and not
merely a court of law" and the "DBP is not authorized to keep real propert[y] longer than ten years or
so.”

On appeal, the Court of Appeals found that the trial court erred in treating the lease-purchase option as
a controversial issue considering that it was "outside the parties' pleadings." But invoking the Supreme
Court's decision in Castro v. Court of Appeals29 [250 SCRA 661, 665-666 [1995].] in that "the
improvements introduced [into the mortgaged property] are to be considered so incorporated [in the
mortgage] only if so owned by the mortgagor," the Court of Appeals declared that the improvements
introduced on Lot No. 2985 had been improperly included in the foreclosure sale since they were not
owned by the mortgagors. But since the improvements were already included in the foreclosure sale
and the MERCADERs continued the possession and collection of income from the lot, the Court of
Appeals, as already earlier adverted to, reversed and set aside the appealed judgment. It entered a new
one declaring that the MERCADERs were not entitled to any compensation from the DBP. It also ordered
the MERCADERs to immediately turn over the possession of the lot to the DBP.

In this petition for review, the MERCADERs assert that in issuing the challenged decision, the Court of
Appeals contravened Section 4, Rule 20 and Section 5, Rule 10 of the Rules of Court by holding that the
trial court should not have taken cognizance of the lease-purchase option as a controversial issue since
it was not raised in the pleadings. They maintain that the trial court correctly took cognizance of the
lease-purchase option because it was part and parcel of the pre-trial stages, the determination of which
will prevent future litigation thereon.

ISSUE: WON the CA erred

HELD:

This Court agrees with the MERCADERs and finds that the Court of Appeals erred in disregarding as
material the lease-purchase option on the ground that it was not raised in the pleadings. If the Court of
Appeals adverts to the lack of reference to the lease-purchase option in the initiatory pleadings, this can
be simply explained by the fact that the trial court only took cognizance thereof when it became an
integral component of the pre-trial proceedings. That is why the lease-purchase option was included
firstly, in the pre-trial order as one of the issues to be resolved at trial and secondly, in the supplemental
pleading subsequently filed by the MERCADERs on 7 November 1985.31 [See OR, 204-205. ] As a
supplemental pleading, it served to aver supervening facts which were then not ripe for judicial relief
when the original pleading was filed. As such, it was meant to supply deficiencies in aid of the original
pleading, and not to dispense with the latter.32 [See Shoemart, Inc. v. Court of Appeals, 190 SCRA 189,
196 [1990] citing Pasay City Government v. CFI of Manila, Br. X, 132 SCRA 156 [1984]; British Traders'
Insurance Co., Ltd. v. Commissioner of Internal Revenue, 13 SCRA 719 [1965].] Hence, it was patently
erroneous for the Court of Appeals to pronounce that the lease-purchase option was not raised in the
pleadings. The DBP was even quite aware and knowledgeable of the supplemental pleading because it
filed an opposition thereto.33 [See OR, 209-210. ]

The records however reveal that the trial court did not promptly rule on the motion to admit the
supplemental pleading. And during trial, the trial court also failed to rule on the prompt objection
interposed by the DBP’s counsel to the MERCADERs’ introduction of evidence relative to said lease-
purchase option. But undisputed is the trial court's eventual admission in open court of the MERCADERs’
supplemental pleading

The records also show that not only did the DBP’s counsel began to rigorously cross-examine Bernardo
Mercader on the lease-purchase option, he also subjected his witness Mr. Ruben Carpio, then Chief of
the Collection Department, DBP to an intensive direct examination covering said subject matter.35 [See
TSN, 13 May 1987, 3-29.] He also offered as evidence the DBP’s letter indicating the three options to the
MERCADERs as Exhibit "1" and the lease-purchase option contained therein as Exhibit "1-A."36 [TSN, 7
April 1987, 4.]

The DBP is undoubtedly estopped from questioning the trial court’s inclusion of the lease-purchase
option as a controversial issue. This action of the trial court finds anchor on Section 4, Rule 20 of the
Rules of Court which reads:

Section 4. Record of pre-trial results. -- After the pre-trial the court shall make an order which recites the
action taken at the conference, the amendments allowed to the pleadings, and the agreements made by
the parties as to any of the matters considered. Such order shall limit the issues for trial to those not
disposed of by admissions or agreements of counsel and when entered controls the subsequent course
of the action, unless modified before trial to prevent manifest injustice.

Indeed, the pre-trial is primarily intended to make certain that all issues necessary to the disposition of a
case are properly raised. The purpose is to obviate the element of surprise, hence, the parties are
expected to disclose at the pre-trial conference all issues of law and fact which they intend to raise at
the trial, except such as may involve privileged or impeaching matter.37 [See De la Paz v. Panis, 245
SCRA 242, 248-249 [1995], citing Permanent Concrete Products, Inc. v. Teodoro, 26 SCRA 332, 336
[1968].] In the case at bar, the pre-trial order included as integral to the complete adjudication of the
case the issue of whether the MERCADERs can demand specific performance from the DBP relative to
the lease-purchase option. Thus, the element of surprise that the provision on pre-trial attempts to
preclude was satisfied.

Assuming arguendo that the MERCADERs failed to file the supplemental pleading, evidence relative to
the lease-purchase option may be legitimately admitted by the trial court in conformity with Section 5,
Rule 10 of the Rules of Court which states:
Section 5. Amendment to conform to or authorize presentation of evidence. -- When issues not raised
by the pleadings are tried by express or implied consent of the parties, they shall be treated in all
respects, as if they had been raised in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise these issues may be made upon
motion of any party at any time, even after judgment; but failure so to amend does not affect the result
of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the
issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely
when the presentation of the merits of the action will be subserved thereby and the objecting party fails
to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or
defense upon the merits. The court may grant a continuance to enable the objecting party to meet such
evidence. mphasis supplied)

This provision envisions two scenarios -- first, when evidence is introduced on an issue not alleged in the
pleadings and no objection was interjected and second, when evidence is offered again, on an issue not
alleged in the pleadings but this time an objection was interpolated. We are concerned with the second
scenario. In Co Tiamco v. Diaz, the Court held that "when evidence is offered on a matter not alleged in
the pleadings, the court may admit it even against the objection of the adverse party, where the latter
fails to satisfy the court that the admission of the evidence would prejudice him in maintaining his
defense upon the merits, and the court may grant him a continuance to enable him to meet the new
situation created by the evidence. Of course, the court, before allowing the evidence, as a matter of
formality, should allow an amendment of the pleading, xxx And, furthermore, where the failure to order
an amendment does not appear to have caused surprise or prejudice to the objecting party, it may be
allowed as a harmless error. Well-known is the rule that departures from procedure may be forgiven
where they do not appear to have impaired the substantial rights of the parties."

the Court reinforces the Co Tiamco ruling on the application of Section 5, Rule 10 of the Rules of Court in
this wise:

The failure of a party to amend a pleading to conform to the evidence adduced during trial does not
preclude adjudication by the court on the basis of such evidence which may embody new issues not
raised in the pleadings. Although, the pleading may not have been amended to conform to the evidence
submitted during trial, judgment may nonetheless be rendered, not simply on the basis of the issues
alleged but also on the issues discussed and the assertions of fact proved in the course of the trial. The
court may treat the pleading as if it had been amended to conform to the evidence, although it had not
been actually amended. xxx Clearly, a court may rule and render judgment on the basis of the evidence
before it even though the relevant pleading had not been previously amended, so long as no surprise or
prejudice is thereby caused to the adverse party. Put a little differently, so long as the basic
requirements of fair play had been met, as where the litigants were given full opportunity to support
their respective contentions and to object to or refute each other's evidence, the court may validly treat
the pleadings as if they had been amended to conform to the evidence and proceed to adjudicate on the
basis of all the evidence before it.
As already enunciated, the DBP was not and would not be prejudiced by the incorporation of the lease-
purchase option as one of the controverted issues. Moreover, it had been afforded ample opportunity
to refute and object to the evidence germane thereto, thus, the rudiments of fair play had been
properly observed.

Since we agree with the MERCADERs’ contention that the Court of Appeals contravened Section 4, Rule
20 and Section 5, Rule 10 of the Rules of Court in promulgating the questioned decision, we have to
grant their prayer to refer the matter back to said court for a determination of the question of whether
the lease-purchase option was already consummated and for a complete ascertainment of the rights
and obligations of the parties.

Victoria v. Court of Appeals, G.R. No. 147550, January 26, 2005

FACTS: The original complaint was an ejectment suit fild by Spouses Gibe against petitioner. The MTC
ruled in favor of the Gibe. The Gibes applied for immediate execution and demolition without notice to
the parties. Victoria timely filed for notice of appeal but did not post a supersedeas bond. The MTC tehn
granted the writ of execution and demolition, hence, Victoria filed A Petition for Certiorari and
Prohibition (With Prayer for Issuance of a Temporary Restraining Order [TRO] and a Writ of Preliminary
Injunction) with the RTC contending that the MTC had no jurisdiction because the land was covered by
P.D. 27 known as Operation Land Transfer and any dispute involving said lands must be referred to the
Honorable Department of Agrarian Reform Adjudication Board (DARAB) for proper disposition.

The RTC issued the writ of preliminary injunction. In the meantime, the appeal filed by the defendants in
the Ejectment Case before the RTC of Calauan, Laguna was dismissed by Branch 92 thereof by Order of
October 7, 1998[15] for failure to file their appeal memorandum. The certiorari was also denied.

On March 28, 2000, petitioner instituted another special civil action for certiorari, this time with the
Court of Appeals (CA), questioning both the August 13, 1999 Decision of the RTC and the May 21, 1998
Decision of the MTC with prayer for the issuance of a TRO and/or a Writ of Preliminary Injunction. By
Resolution of May 25, 2000,[22] the CA dismissed the CA Certiorari due to procedural defects. Hence,
the petition for review

ISSUE: WON the petition has merit

HELD: No.

As earlier noted, this Court granted petitioner an extended period to file the petition, conditioned,
however, on the timeliness of the filing of the Motion for Extension of Time to File Petition for Review
on Certiorari. It is a basic rule of remedial law that a motion for extension of time must be filed before
the expiration of the period sought to be extended.[29] Where a motion for extension of time is filed
beyond the period for appeal, the same is of no effect since there would no longer be any period to
extend, and the judgment or order to be appealed from will have become final and executory.[30]

In the case at bar, an examination of the records reveals that the reglementary period to appeal had in
fact expired almost 10 months prior to the filing of petitioner’s motion for extension of time on April 10,
2001. The Registry Return Receipt[31] of the Resolution of the CA dismissing the CA Certiorari Petition
shows that the same was received by counsel for petitioner’s agent on June 5, 2000. Hence, petitioner
had only until June 20, 2000 within which to file an appeal or a motion for new trial or
reconsideration.[32]

Clearly, the Court of Appeals committed no error when it denied petitioner’s Motion for
Reconsideration for having been filed two days after the expiration of the reglementary period on June
22, 2000.

Similarly, the instant petition for review must likewise be denied for having been filed on May 12, 2001,
almost 11 months after the expiration of the period to appeal on June 20, 2000.[33]

In fact, a closer inspection of the records indicates that this case should have been terminated as early
as January 4, 2000 with the lapse of the period within which petitioner could have appealed from the
RTC Decision.

By his own account, petitioner received a copy of the Decision of the RTC dismissing the Petition for
Certiorari on September 18, 1999 and filed a Motion for Reconsideration of the same on September 28,
1999. As correctly pointed out by the CA, by that time a period of 9 days had already elapsed.[34] Thus,
upon receipt of the notice of the denial of the motion for reconsideration, which was admitted to be on
December 29, 1999,[35] petitioner only had 6 days or until January 4, 2000[36] within which to file a
notice of appeal.

However, petitioner failed to do so, and he instead, on March 28, 2000, filed a petition for certiorari
under Rule 65 with the Court of Appeals. As the Court of Appeals again correctly pointed out, “[t]he
correct remedy from a decision of a Regional Trial Court in a petition for certiorari is an ordinary appeal
pursuant to Section 1, Rule 41 of the 1997 Rules of Civil Procedure xxx.” It is well settled that the
perfection of an appeal in the manner and within the period permitted by law is not only mandatory,
but also jurisdictional.[37] Certiorari is not and cannot be made a substitute for an appeal where the
latter remedy is available but was lost through fault or negligence.[38]

To be sure, petitioner has regularly invoked, before this Court and the lower courts, the policy in favor of
a liberal interpretation of the Rules of Procedure.

Apropos on this point are this Court’s observations in Duremdes v. Duremdes:[39]

Although it has been said time and again that litigation is not a game of technicalities, that every
case must be prosecuted in accordance with the prescribed procedure so that issues may be properly
presented and justly resolved, this does not mean that procedural rules may altogether be disregarded.
Rules of procedure must be faithfully followed except only when, for persuasive reasons, they may be
relaxed to relieve a litigant of an injustice commensurate with his failure to comply with the prescribed
procedure. Concomitant to a liberal application of the rules of procedure should be an effort on the
part of the party invoking liberality to adequately explain his failure to abide by the rules.[40] ( mphasis
supplied; italics in the original; citations omitted)
In the case at bar, petitioner has not provided any cogent explanation that would absolve him of the
consequences of his repeated failure to abide by the rules.

Moreover, petitioner’s principal substantive argument that the Ejectment Case properly falls within the
jurisdiction of the DARAB and not of the MTC is without merit.

The MTC does not automatically lose its exclusive original jurisdiction over ejectment cases by the mere
allegation of a tenancy relationship. As thoroughly discussed in Rivera v. Santiago,[41] the party alleging
tenancy must prove the existence of all the essential requisites of tenancy in order to oust the MTC of its
jurisdiction over the case:

Jurisdiction is determined by the allegations in the complaint. That is basic. Unquestionably,

petitioner lodged an action for ejectment before the MTC. Under BP 129, the allegations in the
complaint conferred initiatory jurisdiction on that first level court.

xxx

However, when tenancy is averred as a defense and is shown prima facie to be the real issue, the
MTC must dismiss the case for lack of jurisdiction. Under RA 6657, it is the DAR that has authority to
hear and decide when tenancy is legitimately involved.

In the instant case, respondents averred tenancy as an affirmative and/or special defense in their
Answer with Counterclaim. Under the RSP [Revised Rule on Summary Procedure], the MTC was
supposed to conduct a preliminary conference to determine if such relationship was indeed the real
issue. We emphasize that the MTC did not automatically lose its jurisdiction simply because
respondents raised tenancy as a defense. It continued to have the authority to hear the case precisely
to determine whether it had jurisdiction to dispose of the ejectment suit on its merits.

xxx

An agrarian dispute refers to any controversy relating to, inter alia, tenancy over lands devoted to
agriculture. To determine whether the CA was correct in its reversal of the trial court, it is necessary to
keep in mind the essential requisites of tenancy which are as follows:

(1) The parties are the landowner and the tenant or agricultural lessee;

(2) The subject of the relationship is agricultural land;

(3) There is mutual consent to the tenancy between the parties;

(4) The purpose of the relationship is agricultural production;

(5) There is personal cultivation by the tenant or agricultural lessee; and

(6) There is a sharing of harvests between the parties.

 All these elements must concur. It is not enough that they are alleged; to divest the MTC of
jurisdiction, they must all be shown to be present. x x x[42] (Emphasis and underscoring supplied; italics
in the original; citations omitted)

In Duremdes v. Duremdes,[43] where a similar argument was raised under factual circumstances
analogous to the case at bar, this Court held:

First. For the DARAB to have jurisdiction over the case, there must be a tenancy relationship
between the parties. In order for a tenancy agreement to take hold over a dispute it is essential to
establish all its indispensable elements, to wit:

1) [T]hat the parties are the landowner and the tenant or agricultural lessee; 2) that the subject
matter of the relationship is an agricultural land; 3) that there is consent between the parties to the
relationship; 4) that the purpose of the relationship is to bring about agricultural production; 5) that
there is personal cultivation on the part of the tenant or agricultural lessee; and 6) that the harvest is
shared between the landowner and the tenant or agricultural lessee.

Second. The trial court found that no such tenancy agreement existed between the respondent
and Herminio Tara, and that such allegation was a mere ploy to prevent the respondent from exercising
dominion and ownership over the subject property. This was affirmed by the Court of Appeals. We find
no cogent reason to reverse such finding.

Third. The petitioner is barred from raising the issue of jurisdiction. The petitioner actively
participated in all stages of the instant case, setting up a counterclaim and asking for affirmative relief in
his answer. He failed, however, to question the court’s jurisdiction over the suit. After relying on the
jurisdiction of the regular courts, he cannot be permitted to turn around and question it. It is not right
for a party who has affirmed and invoked the jurisdiction of a court in a particular matter to secure an
affirmative relief, to afterwards deny that same jurisdiction.[44] ( mphasis supplied; italics in the
original; citations omitted)

In the present case, neither petitioner nor his predecessor-in-interest submitted evidence to
substantiate the existence of the essential requisites of tenancy. Thus, there is no basis at all to support
petitioner’s claim that the MTC was without jurisdiction to render the questioned Decision.

What is more, as in Duremdes and unlike in Rivera, petitioner’s predecessor-in-interest never

questioned the jurisdiction of the MTC. Instead, she based her prayer for the dismissal of the Ejectment
Case on respondents’ alleged lack of cause of action; with a counterclaim praying that she be
maintained in the peaceful possession and cultivation of the subject property or, in the alternative,
awarded disturbance compensation; and, in either event, reimbursed for the expenses she incurred.
Considering that petitioner’s predecessor-in-interest actively participated in the proceedings before the
MTC and invoked its jurisdiction to secure an affirmative relief, petitioner cannot now turn around and
question that court’s jurisdiction.
Finally, this Court notes with consternation petitioner’s attempts, with the aid of his counsel, Atty. Abdul
A. Basar, to deliberately mislead this Court as to the material dates and status of the decision appealed
from, thereby impeding if not frustrating the ends of justice.

In his Motion for Extension of Time to File Petition for Review on Certiorari, petitioner declared under
oath that: (1) he had “filed a timely Motion for Reconsideration” of the CA Resolution dismissing his
petition for certiorari, and (2) the notice of the denial by the CA of his Motion for Reconsideration “was
received by petitioner only [on] March 28, 2001,” thus making it appear that he had until April 12, 2001
within which to perfect his appeal.

Significantly, petitioner did not disclose, either in his motion for extension of time or in his subsequent
petition, the date on which he received the Resolution of the CA denying his petition for certiorari,
thereby concealing the actual period for appeal from the Court processor.

As already noted, petitioner’s motion for reconsideration failed to suspend the running of the
reglementary period since it was filed two days too late. Worse, the Registry Return Receipt[45] of the
CA Resolution denying petitioner’s motion for reconsideration shows that it was received by counsel for
petitioner’s agent on September 20, 2000, and not March 28, 2001 as claimed by petitioner. In fact, by
Resolution dated May 7, 2001,[46] the CA had ordered the issuance of an Entry of Judgment in this case,
which was later withdrawn by Resolution of October 23, 2001[47] following receipt by it of the instant
Petition on May 15, 2001.

It cannot be overemphasized that parties and their counsel are duty-bound to observe honesty and
truthfulness in all their pleadings, motions and statements before the courts. Canon 10 of the Code of
Professional Responsibility states, “A lawyer owes candor, fairness and good faith to the court;” while
Rules 10.01 and 10.03 of the same provide:

Rule 10.01 – A lawyer shall not do any falsehood, nor consent to the doing of any in Court; nor
shall he mislead, or allow the Court to be mislead by any artifice.

xxx

Rule 10.03 – A lawyer shall observe the rules of procedure and shall not misuse them to defeat
the ends of justice.

Petitioner and his counsel, Atty. Abdul A. Basar, are thus hereby directed TO SHOW CAUSE, within 10
days from receipt of a copy of this Decision, why they should not be held in contempt of court and
disciplinarily dealt with for violation of Canon 10 of the Code of Professional Responsibility, respectively.

d. Over the Person or Party

Plaintiff
Cesar v. Hon. Ricafort-Bautista, G.R. No. 136415, October 31, 2006
FACTS: The original complaint was for collection of sum of money against petitioner arising from the
latter’s failure to pay the construction materials it purportedly purchased under a credit line extended
by private respondent Specified Materials Corporation. At the time of the institution of the action,
petitioner’s obligation stood at P1,860,000.00, and under the terms of the credit arrangement, materials
sold to petitioner was supposed to be paid within thirty days from date of delivery, subject to an interest
charge of 3% per month for delayed payments.

After the filing of the complaint, summons[9] was issued to petitioner and this was served by Sheriff
Juan C. Marquez to Mr. Arsenio Robles, an employee of defendant who was authorized to transact
business. As petitioner failed to file his answer to the complaint, private respondent moved that he be
declared in default.[10] This motion was favorably acted upon by public respondent through the Order
dated 14 March 1997,[11] and private respondent was able to present its evidence.

On 15 May 1997, private respondent filed a Motion to Admit Amended Complaint alleging that it
erroneously computed petitioner’s obligation to be P1,860,000.00, when it should have amounted to
P2,005,000.00. A copy of the motion and the Amended Complaint were personally received by
petitioner as evidenced by his signatures thereon.[12] The Amended Complaint was ordered admitted
on 16 May 1997.[13] On 9 September 1997, public respondent issued its now assailed decision.

On 3 November 1997, petitioner, by way of special appearance, filed a Motion to Set Aside Decision
arguing that the trial court did not acquire jurisdiction over his person.[14] This motion was denied
through public respondent’s order dated 7 November 1997.

Following the denial of its Motion to Set Aside Decision, petitioner filed before the Court of Appeals a
Petition for Annulment of Judgment, Preliminary Injunction with Prayer for Temporary Restraining
Order.[16] This petition was dismissed for “failure to attach an affidavit of merit as well as the affidavits
of witnesses or document supporting the defense.

Petitioner then filed a motion for reconsideration but this was denied by the Court of Appeals because
an annulment for judgment is proper only when there are no remedies available.

Petitioner then filed a petition for review with the Supreme Court which was denied for failure to
comply with procedural requirements which became final and executory.

On 10 November 1998, private respondent filed a Motion for Execution before the trial court.[22] The
scheduled hearing of this motion on 13 November 1998 was ordered reset to 19 November 1998 after
petitioner filed an Urgent Ex-Parte Motion to Re-Set Hearing.[23] The records also disclose that the 19
November 1998 hearing did not push through and in fact, it was rescheduled a couple of more times per
agreement of the parties.[24] Finally, on 18 December 1998, public respondent granted private
respondent’s Motion for Execution.

ISSUE: WHETHER OR NOT THE COURT A QUO ACQUIRED JURISDICTION OVER THE PERSON OF THE
PETITIONER BY VIRTUE OF THE SUBSTITUTED SERVICE OF SUMMONS EFFECTED BY SHERIFF JUAN C.
MARQUEZ.[
HELD:

It is fundamental that courts acquire jurisdiction over the plaintiff once the complaint is filed. On the
other hand, there are two ways through which jurisdiction over the defendant or respondent is acquired
– either through the service of summons upon them or through their voluntary appearance in court. In
the case of Avon Insurance PLC v. Court of Appeals,[28] we discussed the function of summons in court
actions, to be –

Fundamentally, the service of summons is intended to give official notice to the defendant or
respondent that an action had been commenced against it. The defendant or respondent is thus put
[on] guard as to the demands of the plaintiff as stated in the complaint. The service of summons upon
the defendant becomes an important element in the operation of a court’s jurisdiction upon a party to a
suit, as service of summons upon the defendant is the means by which the court acquires jurisdiction
over his person. Without service of summons, or when summons are improperly made, both the trial
and the judgment, being in violation of due process, are null and void, unless the defendant waives the
service of summons by voluntarily appearing and answering the suit. [29]

Elsewhere, we declared that jurisdiction of the court over the person of the defendant or respondent
cannot be acquired notwithstanding his knowledge of the pendency of a case against him unless he was
validly served with summons.[30] Such is the important role a valid service of summons plays in court
actions.

The Rules of Court[31] requires that, whenever practicable, summons must be served by handing a copy
thereof to the defendant in person. In case the defendant refuses to receive and sign for it, by
tendering the summons to him or her.

However, in the event that summons cannot be served within a reasonable time, the Rules permit that
substituted service may be resorted to, thus:

Sec. 7. Substituted service. - If, for justifiable causes, the defendant cannot be served within a
reasonable time as provided in the preceding section, service may be effected (a) by leaving copies of
the summons at the defendant’s residence with some person of suitable age and discretion then
residing therein, or (b) by leaving the copies at defendant’s office or regular place of business with some
competent person in charge thereof.

In this case, the sheriff employed the substituted service of summons. The defect, however, in the
manner in which he implemented this mode of service of summons is readily apparent on the face of
the return. It must be emphasized that laws providing for modes other than the personal service of
summons must be strictly followed in order for the court to acquire jurisdiction over the person of
respondent or defendant. Compliance therewith should appear affirmatively on the return.[32] The
essence of this requirement was enunciated in the case of Keister v. Navarro[33] to be –

The summons must be served to the defendant in person. It is only when the defendant cannot be
served personally within a reasonable time that a substituted service may be made. Impossibility of
prompt service should be shown by stating the efforts made to find the defendant personally and the
fact that such efforts failed. This statement should be made in the proof of service. This is necessary
because substituted service is in derogation of the usual method of service. It has been held that this
method of service is “in derogation of the common law; it is a method extraordinary in character, and
hence may be used only as prescribed and in the circumstances authorized by statute.” Thus, under the
controlling decisions, the statutory requirements of substituted service must be followed strictly,
faithfully and fully, and any substituted service other than that authorized by the statute is considered
ineffective.[34] ( mphases supplied.)

As the sheriff’s return in the present case does not contain any statement with regard to the
impossibility of personal service the same is patently defective and so the presumption of regularity in
the performance of official functions will not lie.[35]

Nevertheless, we still hold that jurisdiction was validly acquired by the trial court. Although the
substituted service upon him of summons was defective, said defect was cured by his voluntary
appearance.

As the records of this case disclose, after private respondent moved for the execution of the trial court’s
decision, petitioner filed a motion for a re-setting of the court’s hearing thereon. In Flores v.
Zurbito,[37] we held that an appearance in whatever form without expressly objecting to the jurisdiction
of the court over the person, is a submission to the jurisdiction of the court over the person of the
defendant or respondent, thus:

A voluntary appearance is a waiver of the necessity of a formal notice. An appearance in whatever

form, without expressly objecting to the jurisdiction of the court over the person, is a submission to the
jurisdiction of the court over the person. While the formal method of entering an appearance in a cause
pending in the courts is to deliver to the clerk a written direction ordering him to enter the appearance
of the person who subscribes it, an appearance may be made by simply filing a formal motion, or plea or
answer. This formal method of appearance is not necessary. He may appear without such formal
appearance and thus submit himself to the jurisdiction of the court. He may appear by presenting a
motion, for example, and unless by such appearance he specifically objects to the jurisdiction of the
court, he thereby gives his assent to the jurisdiction of the court over his person.[38]

Hence, in this case, petitioner’s filing of a Motion for Re-setting of the Hearing effectively cured the
defect of the substituted service of summons. Petitioner’s insistence of lack of jurisdiction over his
person is utterly lacking in any legal basis.

Defendant
1. by service of summons- Rule 14, Secs. 1-3, Rules of Court

i. personal service- Sec. 6

ii. substituted service- Sec. 7

iii. service by publication- Sec. 14

iv. extra-territorial service- Sec. 15

2. by voluntary appearance- Rule 14, Sec. 20, Rules of Court

Herrera-Felix v. Court of Appeals, G.R. No. 143736, August 11, 2004

FACTS: The original complaint was for sum of money against the Spouses Restituto and Ofelia Felix with
a prayer for a writ of preliminary attachment by St. Joseph Resource Development. The Felix Spouses
purchased from the respondent tubs of assorted fish and had an outstanding balance of P1,132,065.50.

The trial court granted the respondent’s prayer for a writ of preliminary attachment on a bond of
P1,132,065.50 which was posted on March 26, 1993. The Sheriff levied and took custody of some of the
personal properties of the Felix Spouses. On March 26, 1993, a copy of the writ of preliminary
attachment, summons and complaint were served on them at their residence, through the sister of
Ofelia Herrera-Felix, Ma. Luisa Herrera. According to the Sheriff’s Return, Ofelia Herrera-Felix was out of
the country, as per the information relayed to him by Ma. Luisa Herrera. On April 5, 1993, the Felix
Spouses, through Atty. Celestino C. Juan, filed a motion praying for an extension of time to file their
answer to the complaint.[5] On April 6, 1993, the trial court issued an Order granting the motion.
However, the Felix Spouses failed to file their answer to the complaint. The respondent then filed a
Motion dated April 23, 1993 to declare the said spouses in default,[6] which motion was granted by the
court in its Resolution[7] dated May 13, 1993. A copy of the said resolution was sent to and received by
the counsel of the Felix Spouses through registered mail.

On August 11, 1993, the court a quo rendered a decision in favor of the respondent. Copies of the said
decision were mailed to the Felix Spouses and their counsel, Atty. Celestino C. Juan, by registered mail.
The copy of the decision addressed to the spouses was returned to the court after two notices for
having been"“Unclaimed." However, then counsel for the Felix Spouses received his copy of the
decision.

The decision of the trial court became final and executory after the Felix Spouses failed to appeal the
same. The respondent filed a motion for a writ of execution. A copy thereof was served on the said
spouses by registered mail, but they failed to oppose the motion. The court thereafter issued an order
granting the motion and directing the issuance of a writ of execution. The counsel for the Felix Spouses
received a copy of the said order. Thereafter, the personal properties of the latter were levied and sold
at public auction for P83,200.00 to the respondent as the winning bidder.

On September 13, 1996, petitioner Ofelia Herrera-Felix, represented by another sister, Jovita Herrera-
Seña, filed a petition with the Court of Appeals under Rule 47 of the Rules of Court for the nullification
of the trial court’s judgment by default, the writ of execution issued by the said court, and the sale of
her properties at public auction. The petitioner alleged, inter alia, that the complaint and summons
were handed over to her sister, Ma. Luisa Herrera, who was merely a visitor in her house and, as such,
was not a valid substituted service under Rule 14, Section 7 of the Rules of Court. She also alleged that
her husband Restituto Felix had died as early as April 23, 1988, as evidenced by his Certificate of Death.
In its comment on the petition, the respondent alleged that the substituted service of the complaint and
summons on the petitioner, who was then temporarily outside the Philippines, through her sister Ma.
Luisa Herrera, was valid and effective. The respondent, likewise, averred that even if such substituted
service on the petitioner was defective, the defect was cured when the latter, through her counsel, Atty.
Celestino C. Juan, appeared in court and moved for an extension of time to file her responsive pleading.

On June 7, 2000, the CA rendered a decision dismissing the case.

The petitioner, through her sister, Jovita Herrera-Seña, now comes to this Court via a petition for review
on certiorari praying for the reversal of the decision of the Court of Appeals. She alleges that the trial
court did not acquire jurisdiction over her person through the service of the complaint and summons on
her sister, Ma. Luisa Herrera.

ISSUE: WON the court acquired jurisdiction

HELD: YES

The court acquires jurisdiction over the person of the defendant by service of the complaint and
summons on him, either by personal service or by substituted service or by extra-territorial service
thereof or by his voluntary personal appearance before the court or through counsel. In this case, the
petitioner appeared before the court, through counsel, and filed a motion for extension of time to file
her answer to the complaint which the trial court granted. She even admitted in the said motion that
she was served with a copy of the complaint as well as the summons. The admissions made in a motion
are judicial admissions which are binding on the party who made them. Such party is precluded from
denying the same unless there is proof of palpable mistake or that no such admission was made.[13]

By filing the said motion, through counsel, the petitioner thereby submitted herself to the jurisdiction of
the trial court. Indeed, in Busuego vs. Court of Appeals,[14] we ruled that:

A voluntary appearance is a waiver of the necessity of a formal notice. An appearance in whatever form,
without explicitly objecting to the jurisdiction of the court over the person, is a submission to the
jurisdiction of the court over the person. While the formal method of entering an appearance in a cause
pending in the courts is to deliver to the clerk a written direction ordering him to enter the appearance
of the person who subscribes it, an appearance may be made by simply filing a formal motion, or plea or
answer. This formal method of appearance is not necessary. He may appear without such formal
appearance and thus submit himself to the jurisdiction of the court. He may appear by presenting a
motion, for example, and unless by such appearance he specifically objects to the jurisdiction of the
court, he thereby gives his assent to the jurisdiction of the court over his person. When the appearance
is by motion objecting to the jurisdiction of the court over his person, it must be for the sole and
separate purpose of objecting to the jurisdiction of the court. If his motion is for any other purpose than
to object to the jurisdiction of the court over his person, he thereby submits himself to the jurisdiction
of the court.[15]
 Equally barren of factual basis is the claim of the petitioner that she was not served with a copy of
the decision of the trial court. The records show that aside from the copy of the decision sent to her by
the Branch Clerk of Court by registered mail, another copy of the decision was served on her through
her counsel, Atty. Celestino C. Juan, who received the same. The service of the decision on the
petitioner, through counsel, is binding on her, conformably to Rule 13, Section 2 of the Rules of
Court.[16]

We reject the petitioner’s plaint of having been deprived of her right to due process.

The essence of due process is a reasonable opportunity to be heard and submit evidence in
support of one’s defense. What the law proscribes, therefore, is the lack of opportunity to be heard.[17]
A party who opts not to avail of the opportunity to answer cannot complain of procedural due process.
There can be no denial of due process where a party had the opportunity to participate in the
proceedings but failed to do so through his own fault.

JAPRL Dev. Corp. v. Security Bank, G.R. No. 190107, June 6, 2011
FACTS: The original case was a complaint filed by Security Bank on September 1, 2003 for sum of money
with application for issuance of writ of preliminary attachment before the Regional Trial Court (RTC) of
Makati City against JAPRL, Limson and Arollado. JAPRL had an outstanding obligation of P43,926,021.41
from a credit facility (Letter of Credit/Trust Receipt) executed with the Bank.

The case was archived however pending JAPRL’s petition for rehabilitation case with the Quezon City
RTC. When the Makati RTC reduced to writing its open court Order of September 16, 2003, however, it
instead declared the dismissal of SBC’s complaint without prejudice. On SBC’s motion for
reconsideration, however, the Makati RTC, by Order of January 9, 2004,[10] reverted to its oral order of
archiving SBC’s complaint.

SBC moved to clarify the Makati RTC January 9, 2004 Order, positing that the suspension of the
proceedings should only be with respect to JAPRL but not with respect to Limson and Arollado.[11] The
Makati RTC, by Order of February 25, 2004, mantained its order archiving the complaint against all
petitioners herein. SBC filed a motion for reconsideration[12] of the February 25, 2004 Order, to which
Limson and Arollado separately filed an “Opposition (Ad Cautelam)”[13] wherein they claimed that
summons were not served on them, hence, the Makati RTC failed to acquire jurisdiction over their
person. At any rate, they raised defenses against SBC’s claim that they acted as sureties of JAPRL.

Meanwhile, the proposed rehabilitation plan before the Quezon City RTC was disapproved by Order of
May 9, 2005.[14] On SBC’s motion, the Makati RTC thus reinstated SBC’s complaint to its docket, by
Order of February 27, 2006.

Petitioners later filed before the Makati RTC a Manifestation (Ad Cautelam)[16] informing that a Stay
Order dated March 13, 2006[17] was issued, this time by the Calamba RTC, Branch 34, in a new petition
for rehabilitation filed by JAPRL and its subsidiary, RAPID Forming Corporation, and praying for the
archiving of SBC’s complaint.
By Order of June 30, 2006,[18] the Makati RTC again archived SBC’s complaint. SBC, by Consolidated
Motion, moved for the reconsideration of the June 30, 2006 Order, averring that its complaint should
not have been archived with respect to sureties Limson and Arollado; and that since the two failed to
file their respective Answers within the reglementary period, they should be declared in default.

The Makati RTC denied, by Order of October 2, 2006,[19] the Consolidated Motion of SBC,
prompting SBC to file a petition for certiorari before the Court of Appeals.

By Decision of September 25, 2008,[20] the appellate court held that Limson and Arollado voluntarily
submitted themselves to the jurisdiction of the Makati RTC, despite the qualification that the filing of
their respective “Opposition[s] Ad Cautelam” and “Manifestation[s] Ad Cautelam,” was “by way of
special appearance” they having sought affirmative relief by praying for the archiving of SBC’s complaint.

The appellate court denied petitioners’ motion for reconsideration by Resolution of October 29,
2009,[23] hence, the present petition for review on certiorari.

ISSUE: WON the court acquired jurisdiction

HELD:

A reading of the separate Oppositions Ad Cautelam by Limson and Arollado to SBC’s Motion for
Reconsideration[25] shows that they did not challenge the trial court’s jurisdiction. Albeit both
pleadings contained prefatory statements that the two did not receive summons, they pleaded defenses
in their favor.

When a defendant’s appearance is made precisely to object to the jurisdiction of the court over his
person, it cannot be considered as appearance in court.[28] Limson and Arollado glossed over the
alleged lack of service of summons, however, and proceeded to exhaustively discuss why SBC’s
complaint could not prosper against them as sureties. They thereby voluntarily submitted themselves to
the jurisdiction of the Makati RTC .

Liability

On a trial court’s suspension of proceedings against a surety of a corporation in the process of

rehabilitation, Banco de Oro-EPCI, Inc. v. JAPRL Development Corporation[29] holds that a creditor can
demand payment from the surety solidarily liable with the corporation seeking rehabilitation, it being
not included in the list of stayed claims:

Indeed, Section 6(b) of the Interim Rules of Procedure of Corporate Rehabilitation which the appellate
court cited in the earlier-quoted portion of its decision, provides that a stay order does not apply to
sureties who are solidarily liable with the debtor. In Limson and Arollado’s case, their solidary liability
with JAPRL is documented.

3. Liability of the Surety – The liability of the Surety is solidary and not contingent upon the pursuit by
the Bank of whatever remedies it may have against the Debtor or the collaterals/liens it may possess. If
any of the Guaranteed Obligation is not paid or performed on due date (at stated maturity or by
acceleration), the Surety shall, without need for any notice, demand or any other act or deed,
immediately become liable therefor and the Surety shall pay and perform the same. [30] (emphasis and
underscoring supplied)

Limson and Arollado, as sureties, whose liability is solidary cannot, therefore, claim protection
from the rehabilitation court, they not being the financially-distressed corporation that may be restored,
not to mention that the rehabilitation court has no jurisdiction over them. Article 1216 of the Civil
Code clearly is not on their side:

ART. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them
simultaneously. The demand made against any one of them shall not be an obstacle to those which may
subsequently be directed against the others, so long as the debt has not been fully collected.
(underscoring supplied)

IN FINE, SBC can pursue its claim against Limson and Arollado despite the pendency of JAPRL’s
petition for rehabilitation. For, by the CSA in favor of SBC, it is the obligation of the sureties, who are
therein stated to be solidary with JAPRL, to see to it that JAPRL’s debt is fully paid.[31]

Finally, contrary to petitioners’ position, the appellate court’s decision only nullified the suspension
of proceedings against Limson and Arollado.[32] The suspension with respect to JAPRL remains, in line
with Philippine Blooming Mills v. Court of Appeals.[33]

Rapid City Realty v. Villa, G.R. No. 184197, February 11, 2010
FACTS: Sometime in 2004, Rapid City Realty and Development Corporation (petitioner) filed a
complaint for declaration of nullity of subdivision plans . . . mandamus and damages against several
defendants including Spouses Orlando and Lourdes Villa (respondents).

After one failed attempt at personal service of summons, Gregorio Zapanta (Zapanta), court process
server, resorted to substituted service by serving summons upon respondents’ househelp who did not
acknowledge receipt thereof and refused to divulge their names.

Despite substituted service, respondents failed to file their Answer, prompting petitioner to file a
“Motion to Declare Defendants[-herein respondents] in Default” which the trial court granted by Order
of May 3, 2005. More than eight months thereafter or on January 30, 2006, respondents filed a Motion
to Lift Order of Default,[3] claiming that on January 27, 2006 they “officially received all pertinent
papers. And they denied the existence of two women helpers who allegedly refused to sign and
acknowledge receipt of the summons. In any event, they contended that assuming that the allegation
were true, the helpers had no authority to receive the documents.

By Order of July 17, 2006, the trial court set aside the Order of Default and gave herein respondents five
days to file their Answer. Respondents just the same did not file an Answer, drawing petitioner to again
file a Motion to declare them in default, which the trial court again granted by Order of February 21,
2007.

On April 18, 2007, respondents filed an Omnibus Motion for reconsideration of the second order
declaring them in default and to vacate proceedings, this time claiming that the trial court did not
acquire jurisdiction over their persons due to invalid service of summons.

The trial court denied respondents’ Omnibus Motion by Order of May 22, 2007 and proceeded to
receive ex-parte evidence for petitioner.

Respondents, via certiorari, challenged the trial court’s February 21, 2007 and April 18, 2007
Orders before the Court of Appeals.

In the meantime, the trial court, by Decision of September 4, 2007, rendered judgment in favor of
petitioner. In assailing the orders of the trial court through their Motion to Lift… and later their Omnibus
Motion… the petitioners [herein-respondents] never raised any other defense in avoidance of the
respondents’ [herein petitioners] claim, and instead focused all their energies on questioning the said
court’s jurisdiction. The latter motion clearly stated prefatorily their counsel’s reservation or “special
appearance to question jurisdiction” over the persons of the petitioners. “A party who makes a special
appearance in court challenging the jurisdiction of said court based on the ground of invalid service of
summons is not deemed to have submitted himself to the jurisdiction of the court.”[

Petitioner’s motion for reconsideration having been denied by the appellate court by Resolution of
August 12, 2008, it comes to the Court via petition for review on certiorari, arguing in the main that
respondents, in filing the first Motion to Lift the Order of Default, voluntarily submitted themselves to
the jurisdiction of the court.

ISSUE: WON the court acquired jurisdiction

HELD:

It is settled that if there is no valid service of summons, the court can still acquire jurisdiction over
the person of the defendant by virtue of the latter’s voluntary appearance. Thus Section 20 of Rule 14
of the Rules of Court provides:

Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be
equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack
of jurisdiction over the person shall not be deemed a voluntary appearance.

And Philippine Commercial International Bank v. Spouses Wilson Dy Hong Pi and Lolita Dy, et al.
enlightens:
 Preliminarily, jurisdiction over the defendant in a civil case is acquired either by the coercive power of
legal processes exerted over his person, or his voluntary appearance in court. As a general proposition,
one who seeks an affirmative relief is deemed to have submitted to the jurisdiction of the court. It is by
reason of this rule that we have had occasion to declare that the filing of motions to admit answer, for
additional time to file answer, for reconsideration of a default judgment, and to lift order of default with
motion for reconsideration, is considered voluntary submission to the court’s jurisdiction. This,
however, is tempered by the concept of conditional appearance, such that a party who makes a special
appearance to challenge, among others, the court’s jurisdiction over his person cannot be considered to
have submitted to its authority.

Prescinding from the foregoing, it is thus clear that:

(1) Special appearance operates as an exception to the general rule on voluntary appearance;

(2) Accordingly, objections to the jurisdiction of the court over the person of the defendant must be
explicitly made, i.e., set forth in an unequivocal manner; and

(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court, especially in
instances where a pleading or motion seeking affirmative relief is filed and submitted to the court for
resolution.[7] (italics and underscoring supplied)

In their first Motion to Lift the Order of Default[8] dated January 30, 2006, respondents alleged:

xxxx

4. In the case of respondents, there is no reason why they should not receive the Orders of this
Honorable Court since the subject of the case is their multi-million real estate property and naturally
they would not want to be declared in default or lose the same outright without the benefit of a trial on
the merits;

5. It would be the height of injustice if the respondents is [sic] denied the equal protection of the
laws[;]

6. Respondents must be afforded “Due process of Law” as enshrined in the New Constitution, which
is a basic right of every Filipino, since they were not furnished copies of pleadings by the plaintiff and the
Order dated May 3, 2005;

x x x x[9]

and accordingly prayed as follows:

WHEREFORE, . . . it is most respectfully prayed . . . that the Order dated May 5, 2005 declaring [them]
in default be LIFTED.[10]
 Respondents did not, in said motion, allege that their filing thereof was a special appearance for the
purpose only to question the jurisdiction over their persons. Clearly, they had acquiesced to the
jurisdiction of the court.

Allan Co v. Cordero, G.R. No. 164703, May 4, 2010

FACTS: Cordero is the exclusive distributor for Aluminium Fast Ferries Australia (AFFA) of catamaran and
other fast ferry vessels in the Philippines. Cordero was able to close a deal with Go, owner/operator of
ACG Express Liner of Cebu City. However, Cordero later discovered that Go was dealing directly with
Robinson of AFFA and had already negotiated for the purchase of a second SEACAT.

Cordero instituted Civil Case No. 98-35332 seeking to hold Robinson, Go, Tecson and Landicho liable
jointly and solidarily for conniving and conspiring together in violating his exclusive distributorship in
bad faith and wanton disregard of his rights, thus depriving him of his due commissions and causing him
actual, moral and exemplary damages on account of AFFA’s untimely cancellation of the exclusive
distributorship agreement. Cordero also prayed for the award of moral and exemplary damages, as well
as attorney’s fees and litigation expenses.

Robinson filed a motion to dismiss grounded on lack of jurisdiction over his person and failure to state a
cause of action, asserting that there was no act committed in violation of the distributorship agreement.
Said motion was denied by the trial court on December 20, 1999. Robinson was likewise declared in
default for failure to file his answer within the period granted by the trial court.[13] As for Go and
Tecson, their motion to dismiss based on failure to state a cause of action was likewise denied by the
trial court on February 26, 1999.

Due to Go’s failure to attend the pre-trial conference, Cordero was allowed to introduce evidence ex-
parte

On May 31, 2000, the trial court rendered its decision in favor of Cordero.

Go, Robinson, Landicho and Tecson filed a motion for new trial, claiming that they have been unduly
prejudiced by the negligence of their counsel who was allegedly unaware that the pre-trial conference
on January 28, 2000 did not push through for the reason that Cordero was then allowed to present his
evidence ex-parte, as he had assumed that the said ex-parte hearing was being conducted only against
Robinson who was earlier declared in default

In its Order dated July 28, 2000, the trial court denied the motion for new trial.[20] In the same order,
Cordero’s motion for execution pending appeal was granted. Defendants moved to reconsider the said
order insofar as it granted the motion for execution pending appeal.[21] On August 8, 2000, they filed a
notice of appeal.

On August 18, 2000, the trial court denied the motion for reconsideration and on August 21, 2000, the
writ of execution pending appeal was issued.[23] Meanwhile, the notice of appeal was denied for
failure to pay the appellate court docket fee within the prescribed period.[24] Defendants filed a
motion for reconsideration and to transmit the case records to the CA.
On September 29, 2000, the CA issued a temporary restraining order at the instance of defendants in
the certiorari case they filed with said court. Consequently, as requested by the defendants, the trial
court recalled and set aside its November 6, 2000 Order granting the ex-parte motion for release of
garnished funds, cancelled the scheduled public auction sale of levied real properties, and denied the
ex-parte Motion for Break-Open Order and Ex-Parte Motion for Encashment of Check filed by
Cordero.[26] On November 29, 2000, the trial court reconsidered its Order dated August 21, 2000
denying due course to the notice of appeal and forthwith directed the transmittal of the records to the
CA.

On January 29, 2001, the CA rendered judgment granting the petition for certiorari in CA-G.R. SP No.
60354 and setting aside the trial court’s orders of execution pending appeal. Cordero appealed the said
judgment in a petition for review filed with this Court which was eventually denied under our Decision
dated September 17, 2002

On March 16, 2004, the CA in CA-G.R. CV No. 69113 affirmed the trial court (1) in allowing Cordero to
present his evidence ex-parte after the unjustified failure of appellants (Go, Tecson and Landicho) to
appear at the pre-trial conference despite due notice; (2) in finding that it was Cordero and not Pamana
who was appointed by AFFA as the exclusive distributor in the Philippines of its SEACAT 25 and other
fast ferry vessels, which is not limited to the sale of one (1) such catamaran to Go on August 7, 1997;
and (3) in finding that Cordero is entitled to a commission per vessel sold for AFFA through his efforts in
the amount equivalent to 22.43% of the price of each vessel The CA sustained the trial court in ruling
that Cordero is entitled to damages for the breach of his exclusive distributorship agreement with AFFA.
However, it held that Cordero is entitled only to commission for the sale of the first catamaran obtained
through his efforts with the remaining unpaid sum of US$31,522.09 or P1,355,449.90 (on the basis of
US$1.00=P43.00 rate). On the amounts awarded by the trial court as moral and exemplary damages, as
well as attorney’s fees, the CA reduced the same to P500,000.00, P300,000.00 and P50,000.00,
respectively. Appellants were held solidarily liable pursuant to the provisions of Article 1207 in relation
to Articles 19, 20, 21 and 22 of the New Civil Code.

Hence, The instant case of petitions for review under Rule 45 separately filed by Go (G.R. No. 164703)
and Cordero (G.R. No. 164747)

ISSUE: (1) whether petitioner Cordero has the legal personality to sue the respondents for breach of
contract; and (2) whether the respondents may be held liable for damages to Cordero for his unpaid
commissions and termination of his exclusive distributorship appointment by the principal, AFFA.

HELD:

I. Real Party-in-Interest

First, on the issue of whether the case had been filed by the real party-in-interest as required by
Section 2, Rule 3 of the Rules of Court, which defines such party as the one (1) to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit. The purposes of this provision
are: 1) to prevent the prosecution of actions by persons without any right, title or interest in the case; 2)
to require that the actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a
multiplicity of suits; and 4) to discourage litigation and keep it within certain bounds, pursuant to sound
public policy.[31] A case is dismissible for lack of personality to sue upon proof that the plaintiff is not
the real party-in-interest, hence grounded on failure to state a cause of action.[32]

On this issue, we agree with the CA in ruling that it was Cordero and not Pamana who is the
exclusive distributor of AFFA in the Philippines as shown by the Certification dated June 1, 1997 issued
by Tony Robinson

For all intents and purposes, Robinson and AFFA dealt only with Cordero who alone made decisions in
the performance of the exclusive distributorship, as with other clients to whom he had similarly offered
AFFA’s fast ferry vessels. Moreover, the stipulated commissions from each progress payments made by
Go were directly paid by Robinson to Cordero.[37] Respondents Landicho and Tecson were only too
aware of Cordero’s authority as the person who was appointed and acted as exclusive distributor of
AFFA, which can be gleaned from their act of immediately furnishing him with copies of bank
transmittals everytime Go remits payment to Robinson, who in turn transfers a portion of funds
received to the bank account of Cordero in the Philippines as his commission. Out of these partial
payments of his commission, Cordero would still give Landicho and Tecson their respective
“commission,” or “cuts” from his own commission. Respondents Landicho and Tecson failed to refute
the evidence submitted by Cordero consisting of receipts signed by them. Said amounts were apart
from the earlier expenses shouldered by Cordero for Landicho’s airline tickets, transportation, food and
hotel accommodations for the trip to Australia.[38]

Moreover, petitioner Go, Landicho and Tecson never raised petitioner Cordero’s lack of personality
to sue on behalf of Pamana,[39] and did so only before the CA when they contended that it is Pamana
and not Cordero, who was appointed and acted as exclusive distributor for AFFA.[40] It was Robinson
who argued in support of his motion to dismiss that as far as said defendant is concerned, the real party
plaintiff appears to be Pamana, against the real party defendant which is AFFA.[41] As already
mentioned, the trial court denied the motion to dismiss filed by Robinson.

We find no error committed by the trial court in overruling Robinson’s objection over the improper
resort to summons by publication upon a foreign national like him and in an action in personam,
notwithstanding that he raised it in a special appearance specifically raising the issue of lack of
jurisdiction over his person. Courts acquire jurisdiction over the plaintiffs upon the filing of the
complaint, while jurisdiction over the defendants in a civil case is acquired either through the service of
summons upon them in the manner required by law or through their voluntary appearance in court and
their submission to its authority.[42] A party who makes a special appearance in court challenging the
jurisdiction of said court based on the ground of invalid service of summons is not deemed to have
submitted himself to the jurisdiction of the court.[43]
In this case, however, although the Motion to Dismiss filed by Robinson specifically stated as one (1) of
the grounds the lack of “personal jurisdiction,” it must be noted that he had earlier filed a Motion for
Time to file an appropriate responsive pleading even beyond the time provided in the summons by
publication.[44] Such motion did not state that it was a conditional appearance entered to question the
regularity of the service of summons, but an appearance submitting to the jurisdiction of the court by
acknowledging the summons by publication issued by the court and praying for additional time to file a
responsive pleading. Consequently, Robinson having acknowledged the summons by publication and
also having invoked the jurisdiction of the trial court to secure affirmative relief in his motion for
additional time, he effectively submitted voluntarily to the trial court’s jurisdiction. He is now estopped
from asserting otherwise, even before this Court.[45]

Lhuillier v. British Airways, G.R. No. 171092, March 15, 2010

FACTS: On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint2 for damages against
respondent British Airways before the Regional Trial Court (RTC) of Makati City. She alleged that on
February 28, 2005, she took respondent’s flight 548 from London, United Kingdom to Rome, Italy. Once
on board, she allegedly requested Julian Halliday (Halliday), one of the respondent’s flight attendants, to
assist her in placing her hand-carried luggage in the overhead bin. However, Halliday allegedly refused
to help and assist her, and even sarcastically remarked that "If I were to help all 300 passengers in this
flight, I would have a broken back!"

Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight
attendant, Nickolas Kerrigan (Kerrigan), singled her out from among all the passengers in the business
class section to lecture on plane safety. Allegedly, Kerrigan made her appear to the other passengers to
be ignorant, uneducated, stupid, and in need of lecturing on the safety rules and regulations of the
plane. Affronted, petitioner assured Kerrigan that she knew the plane’s safety regulations being a
frequent traveler. Thereupon, Kerrigan allegedly thrust his face a mere few centimeters away from that
of the petitioner and menacingly told her that "We don’t like your attitude."

Upon arrival in Rome, petitioner complained to respondent’s ground manager and demanded an
apology. However, the latter declared that the flight stewards were "only doing their job."

On May 16, 2005, summons, together with a copy of the complaint, was served on the respondent
through Violeta Echevarria, General Manager of Euro-Philippine Airline Services, Inc.3

On May 30, 2005, respondent, by way of special appearance through counsel, filed a Motion to Dismiss4
on grounds of lack of jurisdiction over the case and over the person of the respondent. Respondent
alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the
complaint for damages pursuant to the Warsaw Convention,5 Article 28(1) of which provides:

An action for damages must be brought at the option of the plaintiff, either before the court of domicile
of the carrier or his principal place of business, or where he has a place of business through which the
contract has been made, or before the court of the place of destination.
Thus, since a) respondent is domiciled in London; b) respondent’s principal place of business is in
London; c) petitioner bought her ticket in Italy (through Jeepney Travel S.A.S, in Rome);6 and d) Rome,
Italy is petitioner’s place of destination, then it follows that the complaint should only be filed in the
proper courts of London, United Kingdom or Rome, Italy.

Likewise, it was alleged that the case must be dismissed for lack of jurisdiction over the person of the
respondent because the summons was erroneously served on Euro-Philippine Airline Services, Inc.
which is not its resident agent in the Philippines.

On June 3, 2005, the trial court issued an Order requiring herein petitioner to file her
Comment/Opposition on the Motion to Dismiss within 10 days from notice thereof, and for respondent
to file a Reply thereon.7 Instead of filing a Comment/Opposition, petitioner filed on June 27, 2005, an
Urgent Ex-Parte Motion to Admit Formal Amendment to the Complaint and Issuance of Alias
Summons.8 Petitioner alleged that upon verification with the Securities and Exchange Commission, she
found out that the resident agent of respondent in the Philippines is Alonzo Q. Ancheta. Subsequently,
on September 9, 2005, petitioner filed a Motion to Resolve Pending Incident and Opposition to Motion
to Dismiss.9

On October 14, 2005, the RTC of Makati City, Branch 132, issued an Order10 granting respondent’s
Motion to Dismiss ruling that: “The Court sympathizes with the alleged ill-treatment suffered by the
plaintiff. However, our Courts have to apply the principles of international law, and are bound by treaty
stipulations entered into by the Philippines which form part of the law of the land. One of this is the
Warsaw Convention. Being a signatory thereto, the Philippines adheres to its stipulations and is bound
by its provisions including the place where actions involving damages to plaintiff is to be instituted, as
provided for under Article 28(1) thereof. The Court finds no justifiable reason to deviate from the
indicated limitations as it will only run counter to the provisions of the Warsaw Convention. Said
adherence is in consonance with the comity of nations and deviation from it can only be effected
through proper denunciation as enunciated in the Santos case (ibid). Since the Philippines is not the
place of domicile of the defendant nor is it the principal place of business, our courts are thus divested
of jurisdiction over cases for damages. Neither was plaintiff’s ticket issued in this country nor was her
destination Manila but Rome in Italy. It bears stressing however, that referral to the court of proper
jurisdiction does not constitute constructive denial of plaintiff’s right to have access to our courts since
the Warsaw Convention itself provided for jurisdiction over cases arising from international
transportation. Said treaty stipulations must be complied with in good faith following the time honored
principle of pacta sunt servanda.

The resolution of the propriety of service of summons is rendered moot by the Court’s want of
jurisdiction over the instant case.”

Petitioner now comes directly before us on a Petition for Review on Certiorari on pure questions of law

ISSUE:
I. WHETHER X X X PHILIPPINE COURTs HAVE JURISDICTION OVER A TORTIOUS CONDUCT COMMITTED
AGAINST A FILIPINO CITIZEN AND RESIDENT BY AIRLINE PERSONNEL OF A FOREIGN CARRIER TRAVELLING
BEYOND THE TERRITORIAL LIMIT OF ANY FOREIGN COUNTRY; AND THUS IS OUTSIDE THE AMBIT OF THE
WARSAW CONVENTION.

II. WHETHER x x x RESPONDENT AIR CARRIER OF PASSENGERS, IN FILING ITS MOTION TO DISMISS BASED
ON LACK OF JURISDICTION OVER THE SUBJECT MATTER OF THE CASE AND OVER ITS PERSON MAY BE
DEEMED AS HAVING IN FACT AND IN LAW SUBMITTED ITSELF TO THE JURISDICTION OF THE LOWER
COURT, ESPECIALLY SO, WHEN THE VERY LAWYER ARGUING FOR IT IS HIMSELF THE RESIDENT AGENT OF
THE CARRIER.

HELD:

Jurisdictio est potestas de publico introducta cum necessitate juris dicendi. Jurisdiction is a power
introduced for the public good, on account of the necessity of dispensing justice.1

Petitioner argues that her cause of action arose not from the contract of carriage, but from the tortious
conduct committed by airline personnel of respondent in violation of the provisions of the Civil Code on
Human Relations. Since her cause of action was not predicated on the contract of carriage, petitioner
asserts that she has the option to pursue this case in this jurisdiction pursuant to Philippine laws.

Respondent’s Arguments

In contrast, respondent maintains that petitioner’s claim for damages fell within the ambit of Article
28(1) of the Warsaw Convention. As such, the same can only be filed before the courts of London,
United Kingdom or Rome, Italy.

Our Ruling

The petition is without merit.

The Warsaw Convention has the force and effect of law in this country.

It is settled that the Warsaw Convention has the force and effect of law in this country. In Santos III v.
Northwest Orient Airlines,12 we held that:

The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating
to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on
February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on
May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on
October 13, 1950, and was deposited with the Polish government on November 9, 1950. The
Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955,
President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto, "to
the end that the same and every article and clause thereof may be observed and fulfilled in good faith
by the Republic of the Philippines and the citizens thereof."

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as
such, has the force and effect of law in this country.13

The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred,
was between the United Kingdom and Italy, which are both signatories to the Warsaw Convention.

Article 1 of the Warsaw Convention provides:

1. This Convention applies to all international carriage of persons, luggage or goods performed by
aircraft for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport
undertaking.

2. For the purposes of this Convention the expression "international carriage" means any carriage in
which, according to the contract made by the parties, the place of departure and the place of
destination, whether or not there be a break in the carriage or a transhipment, are situated either
within the territories of two High Contracting Parties, or within the territory of a single High Contracting
Party, if there is an agreed stopping place within a territory subject to the sovereignty, suzerainty,
mandate or authority of another Power, even though that Power is not a party to this Convention. A
carriage without such an agreed stopping place between territories subject to the sovereignty,
suzerainty, mandate or authority of the same High Contracting Party is not deemed to be international
for the purposes of this Convention. (Emphasis supplied)

Thus, when the place of departure and the place of destination in a contract of carriage are situated
within the territories of two High Contracting Parties, said carriage is deemed an "international
carriage". The High Contracting Parties referred to herein were the signatories to the Warsaw
Convention and those which subsequently adhered to it.14

In the case at bench, petitioner’s place of departure was London, United Kingdom while her place of
destination was Rome, Italy.15 Both the United Kingdom16 and Italy17 signed and ratified the Warsaw
Convention. As such, the transport of the petitioner is deemed to be an "international carriage" within
the contemplation of the Warsaw Convention.

Since the Warsaw Convention applies in the instant case, then the jurisdiction over the subject matter of
the action is governed by the provisions of the Warsaw Convention.

Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before –

1. the court where the carrier is domiciled;

2. the court where the carrier has its principal place of business;
3. the court where the carrier has an establishment by which the contract has been made; or

4. the court of the place of destination.

In this case, it is not disputed that respondent is a British corporation domiciled in London, United
Kingdom with London as its principal place of business. Hence, under the first and second jurisdictional
rules, the petitioner may bring her case before the courts of London in the United Kingdom. In the
passenger ticket and baggage check presented by both the petitioner and respondent, it appears that
the ticket was issued in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has
the option to bring her case before the courts of Rome in Italy. Finally, both the petitioner and
respondent aver that the place of destination is Rome, Italy, which is properly designated given the
routing presented in the said passenger ticket and baggage check. Accordingly, petitioner may bring her
action before the courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does
not have jurisdiction over the case filed by the petitioner.

Santos III v. Northwest Orient Airlines18 applies in this case.

Petitioner contends that Santos III v. Northwest Orient Airlines19 cited by the trial court is inapplicable
to the present controversy since the facts thereof are not similar with the instant case.

We are not persuaded.

In Santos III v. Northwest Orient Airlines,20 Augusto Santos III, a resident of the Philippines, purchased a
ticket from Northwest Orient Airlines in San Francisco, for transport between San Francisco and Manila
via Tokyo and back to San Francisco. He was wait-listed in the Tokyo to Manila segment of his ticket,
despite his prior reservation. Contending that Northwest Orient Airlines acted in bad faith and
discriminated against him when it canceled his confirmed reservation and gave his seat to someone who
had no better right to it, Augusto Santos III sued the carrier for damages before the RTC. Northwest
Orient Airlines moved to dismiss the complaint on ground of lack of jurisdiction citing Article 28(1) of the
Warsaw Convention. The trial court granted the motion which ruling was affirmed by the Court of
Appeals. When the case was brought before us, we denied the petition holding that under Article 28(1)
of the Warsaw Convention, Augusto Santos III must prosecute his claim in the United States, that place
being the (1) domicile of the Northwest Orient Airlines; (2) principal office of the carrier; (3) place where
contract had been made (San Francisco); and (4) place of destination (San Francisco).21

We further held that Article 28(1) of the Warsaw Convention is jurisdictional in character. Thus:

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a
venue provision. First, the wording of Article 32, which indicates the places where the action for
damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this
characterization is consistent with one of the objectives of the Convention, which is to "regulate in a
uniform manner the conditions of international transportation by air." Third, the Convention does not
contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the
phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last
sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions,"
which, as such, cannot be left to the will of the parties regardless of the time when the damage
occurred.

xxxx

In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual
concept. Jurisdiction in the international sense must be established in accordance with Article 28(1) of
the Warsaw Convention, following which the jurisdiction of a particular court must be established
pursuant to the applicable domestic law. Only after the question of which court has jurisdiction is
determined will the issue of venue be taken up. This second question shall be governed by the law of
the court to which the case is submitted.22

Contrary to the contention of petitioner, Santos III v. Northwest Orient Airlines23 is analogous to the
instant case because (1) the domicile of respondent is London, United Kingdom;24 (2) the principal
office of respondent airline is likewise in London, United Kingdom;25 (3) the ticket was purchased in
Rome, Italy;26 and (4) the place of destination is Rome, Italy.27 In addition, petitioner based her
complaint on Article 217628 of the Civil Code on quasi-delict and Articles 1929 and 2130 of the Civil
Code on Human Relations. In Santos III v. Northwest Orient Airlines,31 Augusto Santos III similarly
posited that Article 28 (1) of the Warsaw Convention did not apply if the action is based on tort. Hence,
contrary to the contention of the petitioner, the factual setting of Santos III v. Northwest Orient
Airlines32 and the instant case are parallel on the material points.

Respondent, in seeking remedies from the trial court through special appearance of counsel, is not
deemed to have voluntarily submitted itself to the jurisdiction of the trial court.

Petitioner argues that respondent has effectively submitted itself to the jurisdiction of the trial court
when the latter stated in its Comment/Opposition to the Motion for Reconsideration that "Defendant [is
at a loss] x x x how the plaintiff arrived at her erroneous impression that it is/was Euro-Philippines
Airlines Services, Inc. that has been making a special appearance since x x x British Airways x x x has
been clearly specifying in all the pleadings that it has filed with this Honorable Court that it is the one
making a special appearance."44

In refuting the contention of petitioner, respondent cited La Naval Drug Corporation v. Court of
Appeals45 where we held that even if a party "challenges the jurisdiction of the court over his person, as
by reason of absence or defective service of summons, and he also invokes other grounds for the
dismissal of the action under Rule 16, he is not deemed to be in estoppel or to have waived his objection
to the jurisdiction over his person."46

This issue has been squarely passed upon in the recent case of Garcia v. Sandiganbayan,47 where we
reiterated our ruling in La Naval Drug Corporation v. Court of Appeals48 and elucidated thus:
Special Appearance to Question a Court’s Jurisdiction Is Not

Voluntary Appearance

The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure clearly provides:

Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent
to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of
jurisdiction over the person of the defendant shall not be deemed a voluntary appearance.

Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over his person,
together with other grounds raised therein, is not deemed to have appeared voluntarily before the
court. What the rule on voluntary appearance – the first sentence of the above-quoted rule – means is
that the voluntary appearance of the defendant in court is without qualification, in which case he is
deemed to have waived his defense of lack of jurisdiction over his person due to improper service of
summons.

The pleadings filed by petitioner in the subject forfeiture cases, however, do not show that she
voluntarily appeared without qualification. Petitioner filed the following pleadings in Forfeiture I: (a)
motion to dismiss; (b) motion for reconsideration and/or to admit answer; (c) second motion for
reconsideration; (d) motion to consolidate forfeiture case with plunder case; and (e) motion to dismiss
and/or to quash Forfeiture I. And in Forfeiture II: (a) motion to dismiss and/or to quash Forfeiture II; and
(b) motion for partial reconsideration.

The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner solely for special
appearance with the purpose of challenging the jurisdiction of the SB over her person and that of her
three children. Petitioner asserts therein that SB did not acquire jurisdiction over her person and of her
three children for lack of valid service of summons through improvident substituted service of summons
in both Forfeiture I and Forfeiture II. This stance the petitioner never abandoned when she filed her
motions for reconsideration, even with a prayer to admit their attached Answer Ex Abundante Ad
Cautelam dated January 22, 2005 setting forth affirmative defenses with a claim for damages. And the
other subsequent pleadings, likewise, did not abandon her stance and defense of lack of jurisdiction due
to improper substituted services of summons in the forfeiture cases. Evidently, from the foregoing Sec.
20, Rule 14 of the 1997 Revised Rules on Civil Procedure, petitioner and her sons did not voluntarily
appear before the SB constitutive of or equivalent to service of summons.

Moreover, the leading La Naval Drug Corp. v. Court of Appeals applies to the instant case. Said case
elucidates the current view in our jurisdiction that a special appearance before the court––challenging
its jurisdiction over the person through a motion to dismiss even if the movant invokes other grounds––
is not tantamount to estoppel or a waiver by the movant of his objection to jurisdiction over his person;
and such is not constitutive of a voluntary submission to the jurisdiction of the court.1avvphi1

Thus, it cannot be said that petitioner and her three children voluntarily appeared before the SB to cure
the defective substituted services of summons. They are, therefore, not estopped from questioning the
jurisdiction of the SB over their persons nor are they deemed to have waived such defense of lack of
jurisdiction. Consequently, there being no valid substituted services of summons made, the SB did not
acquire jurisdiction over the persons of petitioner and her children. And perforce, the proceedings in the
subject forfeiture cases, insofar as petitioner and her three children are concerned, are null and void for
lack of jurisdiction. (Emphasis supplied)

In this case, the special appearance of the counsel of respondent in filing the Motion to Dismiss and
other pleadings before the trial court cannot be deemed to be voluntary submission to the jurisdiction
of the said trial court. We hence disagree with the contention of the petitioner and rule that there was
no voluntary appearance before the trial court that could constitute estoppel or a waiver of
respondent’s objection to jurisdiction over its person.

3. by voluntary submission

Rodriguez vs. Alikpala, G.R. No. L-38314, June 25, 1974

FACTS: On August 19, 1971 the petitioner Rodriguez, assisted by her counsel, the petitioner Santos, filed
an action with the city court of Manila against the spouses Manuel and Fe Rebollado for recovery of the
sum of P5,320 plus interest, attorney's fees and costs. A writ of preliminary attachment was issued and
served on the Rebollados at their store in Divisoria market. Rodriguez agreed to cause the suspension of
the attachment writ on condition that Fe Rebollado's parents, the now respondents Federico and Felisa
Tolentino, would bind themselves, jointly and severally with the Rebollados, to pay the entire obligation
subject of the suit. The parties compromised and drew up a motion for judgment on a compromise
embodying the terms of the agreement of the parties. On the basis of the said motion, the city court, on
August 14, 1971, rendered judgment.
The Rebollados subsequently failed to comply with the terms of the compromise, thus prompting the
petitioner Rodriguez to ask the city court for a writ of execution not only against the Rebollados but as
well against the Tolentinos. When this was granted, and later affirmed over the opposition of the
Tolentinos, the latter brought an action for certiorari in the respondent Court of First Instance of Manila
to enjoin the city court from enforcing any writ of execution against them. On December 20, 1973, after
hearing duly had, the respondent court rendered judgment excluding the Tolentinos from the effects of
the writ of execution granted by the city court. It is this judgment that is the subject of the present
appeal.

In excluding the Tolentinos from the effects of the judgment on a compromise rendered by the city
court, the respondent court invokes two reasons: first, the dispositive portion of the judgment quoted
above cannot be executed because it does not explicitly enjoin the Tolentinos to pay, jointly and
severally with the Rebollados, the amount due to the plaintiff; and second, the city court never acquired
jurisdiction over the persons of the Tolentinos and, therefore, the latter cannot be bound by the
judgment rendered in civil case

ISSUE: WON the court acquired jurisdiction over the Tolentinos

HELD:

1. The dispositive portion of the judgment in civil case 204601 of the city court approving the
compromise and "enjoining strict compliance thereto by the parties" is adequate for purposes of
execution. It is not unusual for the body of a judgment on a compromise to merely quote the words of
the agreement that spell out the respective rights and obligations of the parties, since it is both
unnecessary and improper for the court to still make preliminary adjudication of the facts and the law
involved in the case. 1 These rights and obligations, although not reproduced in the dispositive portion
of the judgment in obvious avoidance of repetition, are understood to constitute the terms under which
execution may issue. Decisions of similar tenor, import and form have in the past been given effect by
this Court. 2

2. There is no question in the mind of the respondent court that the Rebollados and the Tolentinos
freely and voluntarily entered into the compromise agreement which became the basis of the judgment
of the city court. Be it remembered that neither the Rebollados nor the Tolentinos question the
existence of the indebtedness of the Rebollados or the amount thereof. The respondent court heard the
testimonies of the witnesses first hand and accorded no credence to the version of the Rebollados and
the Tolentinos that Manuel and Fe Rebollado and Felisa Tolentino were made to sign the motion for a
judgment on a compromise without being permitted to read its contents and, further, that Felisa
Tolentino was induced to sign, too, the name of her husband without any authority from the latter. The
respondent court analyzed the evidence at length and found that the involvement of the Tolentinos in
the compromise agreement arose out of their natural filial concern for their daughter Fe whose
inventories at Divisoria market were under imminent threat of levy and seizure. The respondent court,
moreover, brooks no doubt, and we concur with it, that both the Rebollados and the Tolentinos
understood the plain unequivocal terms of the compromise agreement. And by assuming the roles of
co-movants in the motion for a judgment on a compromise, the Tolentinos actively instigated the city
court into giving its judicial imprimatur to the said agreement as well as their participation therein.
Under the circumstances, the Tolentinos are estopped from denying the very authority they have
invoked. 3

Moreover, because they signed and executed the compromise agreement willingly and voluntarily, and,
in a manner of speaking, with their eyes wide open, they should be bound by its terms. A person cannot,
to paraphrase Justice Alejo Labrador, repudiate the effects of his voluntary acts simply because they do
not. suit him. In the very words of Justice Labrador, "in a regime of law and order, repudiation of an
agreement validly entered into can not be made without any ground or reason in law or in fact for such
repudiation." 4

And even if we assume that estoppel does not apply in this case, we nonetheless cannot shunt aside the
principle of equity that jurisdiction over a person not formally or originally a party to a litigation may
nevertheless be acquired, under proper conditions, thru the voluntary appearance of that person before
the court. Thus; judgment may be directed against one who, although not a formal party in the case, has
assumed or participated in the defense. 5 By coming forward with the original litigants in moving for a
judgment on a compromise and, furthermore, by assuming such interest in the final adjudication of the
case as would place them in unequivocal liability, together with the Rebollados, to the plaintiff therein,
the Tolentinos effectively submitted themselves to the jurisdiction of the city court. They were and are
thus subject to its judgment.

ACCORDINGLY, the judgment a quo of December 20, 1973 is reversed, and the order of the city court of
November 26, 1971 in civil case 204601, directing the release of the writ of execution against the
Rebollado spouses and the Tolentino spouses, is hereby affirmed, with costs against the respondents
Federico and Felisa Tolentino.

e. Over the Res

Rule 14, Sec. 15, Rules of Court

Midgely v. Hon. Fernando, G.R. No. L-34314, May 13, 1975

FACTS: Sofia Pastor de Midgely, a British subject residing at Cura Planelles, 10 Cura Jardin, Alicante,
Spain, filed this special civil action of certiorari against Judge Pio B. Ferandos and Lewelyn Barlito
Quemada in order to set aside the Judge's order dated May 8, 1971 which denied her motion to dismiss
based on lack of jurisdiction and on article 222 of the Civil Code.

Alvaro Pastor, Sr., a Spanish citizen, was allegedly the owner of properties and rights in mining claims
located in Cebu and supposedly held in trust by his son, Alvaro Pastor, Jr., and his daughter-in-law,
Maria Elena Achaval-Pastor. Pastor, Sr. died on June 5, 1966. He was survived by his wife, Sofia Pastor y
Bossio (who died on October 21, 1966) and by his two legitimate children, Mrs. Midgely and Alvaro
Pastor, Jr. Respondent Quemada claims to be his illegitimate child.

Alvaro Pastor, Sr. in his supposed holographic will dated July 31, 1961 devised to Lewelyn Barlito
Quemada thirty percent of his forty-two percent share in certain mining claims and real properties. In
1970 the alleged will was presented for probate in Special Proceedings No. 3128-R assigned to Branch I
in Cebu City of the Court of First Instance of Cebu. Quemada was appointed special administrator of the
decedent's estate.

As such administrator and as heir of Alvaro Pastor, Sr., Quemada filed in the Court of First Instance of
Cebu at Toledo City a complaint dated December 7, 1970 against the spouses Alvaro Pastor, Jr. and
Maria Elena Achaval, Mrs. Midgely, Atlas Consolidated Mining and Development Corporation and Caltex
(Philippines), Inc. to settle the question of ownership over certain real properties and the rights in some
mining claims, to obtain an accounting and payment of the royalties and income thereof and for the
payment of damages amounting to P25,000. Quemada's theory is that those properties and income
belong to the estate of Alvaro Pastor, Sr.

Allegedly without complying with the requirements of Rule 14 of the Rules of Court, Quemada caused
extraterritorial service of summons to be made in that case through the Department of Foreign Affairs
and the Philippine Embassy in Madrid, Spain, which effected the service of the summons by registered
mail upon Mrs. Midgely and the Pastor, Jr. spouses at their respective address in Alicante and Barcelona,
Spain.

Alvaro Pastor, Jr. and Mrs. Midgely, in their respective letters to the Philippine Embassy dated February
11 and 12, 1971, acknowledged the service of summons but reserved the right to contest the courts
jurisdiction over their persons. The Minister-Counselor of the Embassy forwarded those letters to the
Clerk of Court and apprised him of the manner the summons was served.

Through counsel, Mrs. Midgely and the Pastor, Jr. spouses entered a special appearance and filed a
motion to dismiss on the ground of lack of jurisdiction. They contended that as nonresidents they could
be summoned only with leave of court and that the requirements laid down in section 17 of Rule 14
should have been observed. As additional, ground they alleged that the complaint does not show that
earnest efforts toward a compromise have been made, as required in article 222 of the Civil Code in
suits between members of the same family (See sec. 1[j], Rule 16, Rules of Court). Quemada opposed
the motion to dismiss.

As already stated, Judge Ferandos denied the motion. He ruled that Mrs. Midgely and the Pastor, Jr.
spouses had been properly summoned. He opined that article 222 was inapplicable to the case because
Quemada's civil status was involved and article 2035 of the Civil Code prohibits a compromise on a
person's civil status. He gave Mrs. Midgely and the Pastor, Jr. spouses seventy days from February 12,
1971 within which to file their answer, deducting from that period the time from March 10 to May 8,
1971 when their motion to dismiss was pending.
Mrs. Midgely's motion for reconsideration of the order denying her motion to dismiss was denied by
Judge Ferandos in his order of September 27, 1971 wherein he ruled that the action filed by Quemada
was for the recovery of real properties and real rights. He gave Mrs. Midgely and the Pastor, Jr. spouses
sixty days from notice within which to answer the complaint and directed that a copy of his order be
sent to them through the Philippine Embassy in Madrid. The petition for certiorari herein was filed on
November 3, 1971.

It was given due course. Respondent Quemada in his answer alleged that inasmuch as his action against
Mrs. Midgely concerns property located here in which she claims an interest, it is not necessary that
jurisdiction over her person be acquired. The service of summons upon her was not for the purpose of
acquiring jurisdiction over her person but merely as a matter of due process.

In the meantime the spouses Alvaro Pastor, Jr. and Maria Elena Achaval filed a verified answer to the
complaint in Civil Case No. 274-T dated December 5, 1971. Their answer was filed through the same
counsel who has been representing Mrs. Midgely. The said spouses-alleged that they were not waiving
their defense of lack of jurisdiction over their persons and over the subject matter of the action. They
claimed to be the owners of the properties described in the complaint.

ISSUE: WON the court has jurisdiction

HELD:

We are of the opinion that the lower court has acquired jurisdiction over the person of Mrs. Midgely by
reason of her voluntary appearance. The reservation in her motion to dismiss that she was making a
special appearance to contest the court's jurisdiction over her person may be disregarded.

It may be disregarded because it was nullified by the fact that in her motion to dismiss she relied not
only on the ground of lack of jurisdiction over the person but also on the ground that there was no
showing that earnest efforts were exerted to compromise the case and because she prayed "for such
other relief as" may be deemed "appropriate and proper".

Thus, it was held that where the defendant corporation (which was not properly summoned because
the summons was served upon its lawyer) filed a motion to dismiss on the ground of lack of jurisdiction
over its person but in the same motion it prayed for the dismissal of the complaint on the ground of
prescription, it was held that, by invoking prescription, it necessarily admitted the court's jurisdiction
upon its, person and, therefore, it was deemed to have abandoned its special appearance and
voluntarily submitted itself to the court's jurisdiction (Republic vs. Ker & Co., Ltd., 64 O. G. 3761, 18
SCRA 207, 213-214 citing Flores vs. Zurbito, 37 Phil. 746 and Menghra vs. Tarachand and Rewachand, 67
Phil. 286).
"When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the
person, it must be for the sole and separate purpose of objecting to the jurisdiction of the court. If his
motion is for any other purpose than to object to the jurisdiction of the court over his person, he
thereby submits himself to the jurisdiction of the court. A special appearance by motion made for the
purpose of objecting to the jurisdiction of the court over the person will be held to be a general
appearance, if the party in said motion should, for example, ask for a dismissal of the action upon the
further ground that the court had no jurisdiction over the subject matter." (Syllabus, Flores vs. Zurbito,
supra, at page 751. That rule was followed in Ocampo vs. Mina and Arejola, 41 Phil. 308).

Where the defendant contended that the court did not acquire jurisdiction over his person by means of
the publication of the corresponding summons in Hawaii, where he was residing, because the action did
not relate to personal or real properties situated in the Philippines in which the defendant had or
claimed a lien or interest, actual or contingent, it was held that the said defendant nevertheless
submitted to the court's jurisdiction when he filed a motion wherein he contested the court's
jurisdiction over his person and at the same time prayed that he be relieved from the effects of the
judgment by default, attaching to his motion an affidavit of merits. "He thereby impliedly waived his
special appearance assailing the jurisdiction of the court over his person, and voluntarily submitted to
the jurisdiction of said court." (Menghra vs. Tarachand and Rewachand, supra. See Tenchavez vs.
Escaño, L-19671, September 14, 1966, 17 SCRA 684 and Sharruf vs. Bubla, L-17029, September 30, 1964,
12 SCRA 79 where it was held that a non-resident alien, by filing his complaint in a Philippine court,
submits thereby to its jurisdiction and the court acquires jurisdiction over him even if as a matter of fact
he had never been able to enter the Philippines).

Having shown that Mrs. Midgely had voluntarily submitted to the lower court's jurisdiction when she
filed her motion to dismiss (see sec. 23, Rule 14, Rules of Court), the inevitable conclusion is that it did
not commit any grave abuse of discretion in denying her motion to dismiss.

In petitioner's lengthy memorandum and reply she confined her arguments to the jurisdictional issue.
She even argued that the lower court does not have jurisdiction over the res, a contention that is
palpably baseless.

She did not discuss the second ground of her motion to dismiss, which is non-compliance with the
requirement of article 222 of the Civil Code on compromise of intra-family disputes. She was
presumably convinced by the lower court's argument that such a compromise would violate the
prohibition in article 2035 of the Civil Code against compromise on a person's civil status (See De
Raquiza vs. Castellvi, L-17630, October 31, 1963, 9 SCRA 395).
The case may be viewed from another angle. Supposing arguendo that the lower court did not acquire
jurisdiction over the person of Mrs. Midgely, still her motion to dismiss was properly denied because
Quemada's action against her may be regarded as a quasi in rem action where jurisdiction over the
person of the nonresident defendant is not necessary and where service of summons is required only
for the purpose of complying with the requirement of due process (Perkins vs. Dizon, 69 Phil. 186; Banco
Español-Filipino vs. Palanca, 37 Phil. 921; Mabanag vs. Gallemore, 81 Phil. 254).

An action quasi in rem is an action between parties where the direct object is to reach and dispose of
property owned by them, or of some interest therein (1 Am Jur 2nd 574; State ex rel. South Brevard
Drainage Dist. vs. Smith, 170 So. 440, 126 Fla. 72). Quemada's action falls within that category.

With respect to the extraterritorial service of summons to a nonresident defendant like Mrs. Midgely,
Rule 14 of the Rules of Court provides:

SEC. 17. Extraterritorial service. - When the defendant does not reside and is not found in the
Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which
is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or
contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from
any interest therein, or the property of the defendant has been attached within the Philippines, service
may, by leave of court, be effected out of the Philippines by personal service as under section 7; or by
publication in a newspaper of general circulation in such places and for such time as the court may
order, in which case a copy of the summons and order of the court shall be sent by registered mail to
the last known address of the defendant, or in any other manner the court may deem sufficient. Any
order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days
after notice, within which the defendant must answer.

Under section 17, extraterritorial service of summons is proper (1) when the action affects the personal
status of the plaintiff; (2) when the action relates to, or the subject of which is, property within the
Philippines, in which the defendant has or claims a lien or interest, actual or contingent; (3) when the
relief demanded in such an action consists, wholly or in part, in excluding the defendant from any
interest in property located in the Philippines, and (4) when defendant nonresident's property has been
attached within the Philippines (Sec. 17, Rule 14, Rules of Court).

In any of such four cases, the service of summons may, with leave of court, be effected out of the
Philippines in three ways: (1) by personal service; (2) by publication in a newspaper of general
circulation in such places and for such time as the court may order, in which case a copy of the summons
and order of the court should be sent by registered mail to the last known address of the defendant, and
(3) service of summons may be effected in any other manner which the court may deem sufficient. That
third mode of extraterritorial service of summons was substantially complied with in this case.

In Civil Case No. 274-T the subject matter of the action for reconveyance consists of properties of Alvaro
Pastor, Sr. which are located in Cebu. Mrs. Midgely claims an actual interest in those properties. She has
been receiving a share of the income therefrom. Therefore, the extraterritorial service of summons
upon her was proper. As already noted, the action against her is quasi in rem. (See Brown vs. Brown,
113 Phil. 442).

The record does not show whether Judge Ferandos was consulted by the Clerk of Court and by
Quemada's counsel when the service of summons was effected through the Philippine Embassy in
Madrid. But although there was no court order allowing service in that manner, that mode of service
was later sanctioned or ratified by Judge Ferandos in his order of May 8, 1971. In another order he
corrected the defect in the summons by giving Mrs. Midgely the sixty-day reglementary period for
answering the complaint.

In the Banco Español-Filipino case, supra, the failure of the clerk of court, in a case of foreclosure of a
mortgage executed by a non-resident defendant (which is an action quasi in rem) to mail to the
defendant's last place of residence copies of the summons and complaint, as required in section 399 of
Act 190 (now section 17 of Rule 14) was held not to have affected the court's jurisdiction over the res.

In the Perkins case, supra, Eugene Arthur Perkins sued in the Court of First Instance of Manila the
Benguet Consolidated Mining Company, a domestic firm, together with Idonah Slade Perkins and
George Engelhard, two nonresidents, who were summoned by publication. The service of summons was
based on section 398 of Act 190 (from which section 17 of Rule 14 was partly taken) which provides that
service of summons by publication may be made on a nonresident in "an action which relates to, or the
subject of which is, real or personal property within the Islands, in which such person defendant or
foreign corporation defendant, has or claims a lien or interest, actual or contingent, or in which the
relief demanded consists wholly or in part in excluding such person or foreign corporation from any
interest therein."

Eugene Arthur Perkins in his complaint prayed that Engelhard and Idonah Slade Perkins, "be adjudged
without interest" in certain shares of stock of the Benguet Consolidated Mining Company and be
excluded from any claim involving such shares.
Idonah Slade Perkins challenged the court's jurisdiction over her person. Judge Arsenio P. Dizon
overruled her objection. She filed in this Court a certiorari proceeding wherein she prayed that the
summons by publication issued against her be declared void and that Judge Dizon be permanently
prohibited from taking any action in the case.

This Court held that the action filed by Eugene Arthur Perkins against the two non-residents was a quasi
in rem action and not an action in personam. In that action plaintiff Perkins sought to exclude Idonah
Slade Perkins from any interest in property located in the Philippines consisting shares of stock in a
domestic sociedad anomina.

This Court clarified that in a quasi in rem action jurisdiction over the person of the nonresident
defendant is not essential. The service of summons by publication is required "merely to satisfy the
constitutional requirement of due process". The judgment of the court in the case would settle the title
to the shares of stock and to that extent it partakes of the nature of a judgment in rem. Consequently,
the lower court had jurisdiction to try the case even if it had not acquired jurisdiction over the person of
Idonah Slade Perkins. The judgment would be confined to the res. No personal judgment could be
rendered against the non-resident.

Other considerations may be adduced to indicate the frivolous character of Mrs. Midgely's petition for
certiorari. There is the circumstance that she actually received the summons and a copy of the
complaint. Thus, she cannot complain that she was unaware of the action against her. The requirement
of due process has been satisfied. She is cognizant not only of Quemada's complaint in Civil Case No.
274-T in Branch IX of the Court of First Instance of Cebu at Toledo City but also of the testamentary
proceeding instituted earlier by Quemada for the settlement of the estate of Alvaro Pastor, Sr. in the
Cebu City Branch I of the Court of First Instance of Cebu. In that proceeding she and her brother, Alvaro
Pastor, Jr., through her counsel in this case, submitted to the court's jurisdiction by filing an opposition
to Quemada's petition.

It should be noted that Civil Case No. 274-T is related to the testamentary proceeding (which is a
proceeding in rem par excellance) because the former case was filed by Quemada for the purpose of
recovering the properties which, according to his understanding, belong to the estate of Alvaro Pastor,
Sr. and which are held by Mrs. Midgely and the spouses Alvaro Pastor, Jr. and Maria Elena Achaval.

Perkins v. Dizon, G.R. No. 46631, November 16, 1939

FACTS: On July 6, 1938, respondent, Eugene Arthur Perkins, instituted an action in the Court of First
Instance of Manila against the Benguet Consolidated Mining Company for dividends which was being
withheld by the company; and, for the recognition of his right to the control and disposal of said shares,
to the exclusion of all others. To the complaint, the company filed its answer alleging, by way of defense,
that the withholding of such dividends and the non-recognition of plaintiff's right to the disposal and
control of the shares were due to certain demands made with respect to said shares by the petitioner
herein, Idonah Slade Perkins, and by one George H. Engelhard. The answer prays that the adverse
claimants be made parties to the action and served with notice thereof by publication, and that
thereafter all such parties be required to interplead and settle the rights among themselves.

The complaint was accordingly amended and in addition to the relief prayed for in the original
complaint,-respondent Perkins prayed that petitioner Idonah Slade Perkins and George H. Engelhard be
adjudged without interest in the shares of stock in question and excluded from any claim they assert
thereon. Thereafter, summons by publication were served upon the non-resident defendants,

ISSUE: whether or not the Court of First Instance of Manila has acquired jurisdiction over the person of
the present petitioner as a non-resident defendant, or, notwithstanding the want of such jurisdiction,
whether or not said court may validly try the case.

HELD:

Section 398 of our Code of Civil Procedure provides that when a non-resident defendant is sued in the
Philippine courts and it appears, by the complaint or by affidavits, that the action relates to real or
personal property within the Philippines in which said defendant has or claims a lien or interest, actual
or contingent, or in which the relief demanded consists, wholly or in part, in excluding such person from
any interest therein, service of summons may be made by publication.

We have fully explained the meaning of this provision in El Banco Español Filipino vs. Palanca, 37 Phil.,
921, wherein we laid down the following rules:

(1) In order that the court may validly try a case, it must have jurisdiction over the subject-matter and
over the persons of the parties. Jurisdiction over the subject-matter is acquired by concession of the
sovereign authority which organizes a court and determines the nature and extent of its powers in
general and thus fixes its jurisdiction with reference to actions which it may entertain and the relief it
may grant. Jurisdiction over the persons of the parties is acquired by their voluntary appearance in court
and their submission to its authority, or by the coercive power of legal process exerted over their
persons.

(2) When the defendant is a non-resident and refuses to appear voluntarily, the court cannot acquire
jurisdiction over his person even if the summons be served by publication, for he is beyond the reach of
judicial process. No tribunal established by one State can extend its process beyond its territory so as to
subject to its decisions either persons or property located in another State. "There are many expressions
in the American reports from which it might be inferred that the court acquires personal jurisdiction
over the person of the defendant by publication and notice; but such is not the case. In truth, the
proposition that jurisdiction over the person of a non-resident cannot be acquired by publication and
notice was never clearly understood even in the American courts until after the decision had been
rendered by the Supreme Court of the United States in the leading case of Pennoyer v. Neff (95 U. S.,
714; 24 Law. ed., 565). In the light of that decision, and of other decisions which have subsequently been
rendered in that and other courts, the proposition that jurisdiction over the person cannot be thus
acquired by publication and notice is no longer open to question; and it is now fully established that a
personal judgment upon constructive or substituted service against a non-resident who does not appear
is wholly invalid. This doctrine applies to all kinds of constructive or substituted process, including
service by publication and personal service outside of the jurisdiction in which the judgment is rendered;
and the only exception seems to be found in the case where the non-resident defendant has expressly
or impliedly consented to the mode of service. (Note to Raher vs. Raher, 35 L. R. A. [N. S.], Z92; see also
5 L. R. A. 585; 35 L. R. A. L. R. S.], 312.)

(3) The general rule, therefore, is that a suit against a non-resident cannot be entertained by a
Philippine court. Where, however, the action is in rem or quasi in rem in connection with property
located in the Philippines, the court acquires jurisdiction over the res, and its jurisdiction over the
person of the non-resident is non-essential. In order that the court may exercise power over the res, it is
not necessary that the court should take actual custody of the property, potential custody thereof being
sufficient. There is potential custody when, from the nature of the action brought, the power of the
court over the property is impliedly recognized by law. "An illustration of what we term potential
jurisdiction over the res, is found in the proceeding to register the title of land under our system for the
registration of land. Here the court, without taking actual physical control over the property, assumes, at
the instance of some person claiming to be owner, to exercise a jurisdiction in rem over the property
and to adjudicate the title in favor of the petitioner against all the world."

(4) As before stated, in an action in rem or quasi in rem against a non-resident defendant, jurisdiction
over his person is non-essential, and if the law requires in such case that the summons upon the
defendant be served by publication, it is merely to satisfy the constitutional requirement of due process.
If any be said, in this connection, that "many reported cases can be cited in which it is assumed that the
question of the sufficiency of publication or notice in a case of this kind is a question affecting the
jurisdiction of the court, and the court is sometimes said to acquire jurisdiction by virtue of the
publication. This phraseology was undoubtedly originally adopted by the court because of the analogy
between service by publication and personal service of process upon the defendant; and, as has already
been suggested, prior to the decision of Pennoyer v. Neff (supra), the difference between the legal
effects of the two forms of service was obscure. It is accordingly not surprising that the modes of
expression which had already been mounded into legal tradition before that case was decided have
been brought down to the present day. But it is clear that the legal principle here involved is not
affected by the peculiar language in which the courts have expounded their ideas."
The reason for the rule that Philippine courts cannot acquire jurisdiction over the person of a non-
resident, as laid down by the Supreme Court of the United States in Pennoyer v. Neff, supra, may be
found in a recognized principle of public law to the effect that "no State can exercise direct jurisdiction
and authority over persons or property without its territory. Story, Confl. L., ch. 2; Wheat, Int. L., pt. 2,
ch. 2. The several States are of equal dignity and authority, and the independence of one implies the
exclusion of power from all others. And so it is laid down by jurists, as an elementary principle, that the
laws of one State have no operation outside of its territory, except so far as is allowed by comity; and
that no tribunal established by it can extend its process beyond that territory so as to subject either
persons or property to its decisions. Any exertion of authority of this sort beyond this limit,' says Story,
'is a mere nullity, and incapable of binding such persons or property in any other tribunals.' Story, Confl.
L., sec. 539." (Pennoyer v. Neff, 95 U. S., 714; 24 Law. ed., 565, 568-569.)

When, however, the action relates to property located in the Philippines, the Philippine courts may
validly try the case, upon the principle that a "State, through its tribunals, may subject property situated
within its limits owned by non-residents to the payment of the demand of its own citizens against them;
and the exercise of this jurisdiction in no respect infringes upon the sovereignty of the State where the
owners are domiciled. Every State owes protection to its own citizens; and, when non-residents deal
with them, it is a legitimate and just exercise of authority to hold and appropriate any property owned
by such non-residents to satisfy the claims of its citizens. It is in virtue of the State's jurisdiction over the
property of the non-resident situated within its limits that its tribunals can inquire into the non-
resident's obligations to its own citizens, and the inquiry can then be carried only to the extent
necessary to control the disposition of the property. If the non-resident has no property in the State,
there is nothing upon which the tribunals can adjudicate." (Pennoyer v. Neff, supra.)

In the instant case, there can be no question that the action brought by Eugene Arthur Ferkins in his
amended complaint against the petitioner, Idonah Slade Perkins, seeks to exclude her from any interest
in a property located in the Philippines. That property consists in certain shares of stock of the Benguet
Consolidated Mining Company, a sociedad anonima, organized in the Philippines under the provisions of
the Spanish Code of Commerce, with its principal office in the City of Manila and which conducts its
mining activities therein. The situs of the shares is in the jurisdiction where the corporation is created,
whether the certificates evidencing the ownership of those shares are within or without that
jurisdiction. (Fletcher Cyclopedia Corporations, Permanent ed., Vol. 11, p. 95). Under these
circumstances, we hold that the action thus brought is quasi in rem, for, while the judgment that may be
rendered therein is not strictly a judgment in rem, "it fixes and settles the title to the property in
controversy and to that extent partakes of the nature of the judgment in rem." (50 C. J., p. 503). As held
by the Supreme Court of the United States in Pennoyer v. Neff (supra):
"It is true that, in a strict sense, a proceeding in rem is one taken directly against property, and has for
its object the disposition of the property, without reference to the title of individual claimants; but, in a
larger and more general senses the terms are applied to actions between parties, where the direct
object is to reach and dispose of property owned by them, or of some interest therein."

The action being quasi in rem, the Court of First Instance of Manila has jurisdiction to try the same even
if it can acquire no jurisdiction over the person of the non-resident. In order to satisfy the constitutional
requirement of due process, summons has been served upon her by publication. There is no question as
to the adequacy of the publication made nor as to the mailing of the order of publication to the
petitioner's last known place of residence in the United States. But, of course, the action being quasi in
rem and notice having been made by publication, the relief that may be granted by the Philippine court
must be confined to the res, it having no jurisdiction to render a personal judgment against the non-
resident. In the amended complaint filed by Eugene Arthur Perkins, no money judgment or other relief
in personam is prayed for against the petitioner. The only relief sought therein is that she be declared to
be without any interest in the shares in controversy and that she be excluded from any claim thereto.

Petitioner contends that the proceeding instituted against her is one of interpleading and is therefore an
action in personam. Section 120 of our Code of Civil Procedure provides that whenever conflicting
claims are or may he made upon a person for or relating to personal property, or the performance of an
obligation or any portion thereof, so that he may be made subject to several actions by different
persons, such person may bring an action against the conflicting claimants, disclaiming personal interest
in the controversy, and the court may order them to interplead with one another and litigate their
several claims among themselves, and thereupon proceed to determine their several claims. Here, the
Benguet Consolidated Mining Company, in its answer to the complaint filed by Eugene Arthur Perkins,
averred that in connection with the shares of stock in question, conflicting claims were being made upon
it by said plaintiff, Eugene Arthur Perkins, his wife Idonah Slade Perkins, and one named George H.
Engelhard, and prayed that these last two be made parties to the action and served with summons by
publication, so that the three claimants may litigate their conflicting claims and settle their rights among
themselves. The court has not issued an order compelling the conflicting claimants to interplead with
one another and litigate their several claims among themselves, but instead ordered the plaintiff to
amend his complaint including the other two claimants as parties defendant. The plaintiff did so, praying
that the new defendants thus joined be excluded from any interest in the shares in question, and it is
upon this amended complaint that the court ordered the service of the summons by publication. It is,
therefore, clear that the publication of the summons was ordered not in virtue of an interpleading, but
upon the filing of the amended complaint wherein an action quasi in rem is alleged.

Had not the complaint been amended, including the herein petitioner as an additional defendant, and
had the court, upon the filing of the answer of the Benguet Consolidated Mining Company, issued an
order under section 120 of the Code of Civil Procedure, calling the conflicting claimants into court and
compelling them to interplead with one another, such order could not perhaps have validly been served
by publication or otherwise, upon the non-resident Idonah Slade Perkins, for then the proceeding would
be purely one of interpleading. Such proceeding is a personal action, for it merely seeks to call
conflicting claimants into court so that they may interplead and litigate their several claims among
themselves, and no specific relief is prayed for against them, as the interpleader simply disclaims any
personal interest in the controversy. What would be the situation if, after the claimants have appeared
in court, one of them pleads ownership of the personal property located in the Philippines and seeks to
exclude a non-resident claimant from any interest therein, is a question which we do not decide now.
Suffice it to say that here the service of the summons by publication was ordered by the lower court by
virtue of an action quasi in rem against the non-resident defendant.

Respondents contend that, as the petitioner in the lower court has pleaded res adjudicata, lis pendens
and lack of jurisdiction over the subject-matter, she has submitted herself to its jurisdiction. We have
noticed, however, that these pleas have been made not as independent grounds for relief, but merely as
additional arguments in support of her contention that the lower court had no jurisdiction over her
person. In other words, she claimed that the lower court had no jurisdiction over her person not only
because she is a non-resident, but also because the court had no jurisdiction over the subject-matter of
the action and that the issues therein involved have already been decided by the New York court and
are being relitigated in the California court. Although this argument is obviously erroneous, as neither
jurisdiction over the subject-matter nor res adjudicata nor lis pendens has anything to do with the
question of jurisdiction over her person, we believe and so hold that the petitioner has not, by such
erroneous argument, submitted herself to the jurisdiction of the court. Voluntary appearance cannot be
implied from either a mistaken or superfluous reasoning but from the nature of the relief prayed for.

Macahilig v. Heis of Magalit, G.R. No. 141423, November 15, 2000

FACTS: On February 5, 1965, Pepito Magalit, deceased husband of Dr. Grace M. Magalit filed with the
BFAR a Fishpond Application. On April 13, 1972, Bernardo Macahilig, deceased husband of petitioner,
filed with the BFAR Fishpond Application No. 29972 for five of the eleven hectares which Magalit had
previously applied for. The BFAR rejected Macahilig’s application for his failure to submit all the
requirements in 1972.

Undaunted, Macahilig protested Magalit’s application (in what will be referred to as the “Fishpond
Case”) on November 8, 1976, contending that for a period of 20 years, he had been in actual possession
of the five-hectare area included in Magalit’s application.

On August 22, 1979, the director of BFAR ordered the Committee on Fishpond Claims and Conflict to
hear and determine the rights of Macahilig and Magalit over the disputed area. The Committee
concluded that the former was merely the latter’s laborer and caretaker

Macahilig elevated this disposition to the Office of the President. However, then Presidential Assistant
for Legal Affairs Manuel M. Lazaro, by “authority of the President,” denied reconsideration
Subsequently, Macahilig challenged this action via a “Petition for Review with Prayer for an Issuance of a
Writ of Injunction and/or Restraining Order.” He had filed the Petition originally with the Supreme
Court, which then referred it to the Intermediate Appellate Court (IAC). On March 26, 1985, the
appellate court rendered a Decision declaring that Magalit had occupied, cleared and improved the
land; and that Macahilig was his mere caretaker and laborer

Later on, Magalit instituted Civil Case No. 3517 in the Regional Trial Court of Kalibo, Aklan, for the
issuance of a Writ of Execution.[8] On November 29, 1985, Deputy Provincial Sheriff of Aklan Eriberto
Taytayon Jr. implemented the Writ issued by Judge Jaime D. Discaya on October 30, 1985. The heirs of
Pepito Magalit, represented by Dr. Magalit, filed on August 6, 1990, a “Motion for Correction of the
Implementation of the Decision of the Court of Appeals because the spouses had refused to give up the
fishpond in question.

On September 17, 1992, Judge Maria Carillo-Zaldivar issued the following Order: “Finding from the
Ma[n]ifestation of counsel on record for the movant that the two (2) hectares of land she desires to be
executed thru an alias writ is outside the ten (10) hectares awarded to her by the Fisheries, this Court
has no jurisdiction over her claim.

On October 9, 1992, Dr. Magalit filed a “Petition for Contempt Against Melina Macahilig,” alleging that
on November 29, 1985, Bernardo Macahilig had refused to turn over Lot 4417 to her.

The trial court appointed a commissioner to determine whether Lot 4417 was included in the parcels of
land awarded to the deceased Magalit Sheriff Nelson R. dela Cruz, the appointed commissioner,
submitted his Commissioner’s Report dated May 13, 1993, pertinent portions of which read:

“That x x x Petitioner Dr. Grace M. Magalit is in the actual possession of Lot-A with an area of 99,114
[s]quare [m]eters or 9.9 [h]as. which is a fully developed [f]ishpond, and without any question from the
respondent. However, as per Order of the Bureau of Fisheries and Aquatic Resources dated June 6,
1980, that portion labelled Parcel-A in the sketch with an area of 2.3 [h]as. has to be excluded because it
is needed for [f]orest purposes. So if we deduct 2.3 [h]as. from the 9.9 [h]as. the remaining area for the
[p]etitioner will only be 7.6 [h]as., that is [why] the Bureau of Fisheries has to include Lot 4417 and Lot
5216, in order that the area of 10.0 hectares in said order will be satisfied.”[12]

In the Order of June 18, 1993, the trial court adopted the Commissioner’s Report and ruled in favor of
Dr. Magalit.

Petitioner moved for reconsideration, but her motion was denied. Unfazed by the unfavorable turn of
events, petitioner filed with the CA, on August 12, 1993, a Petition for Certiorari. The CA denied the
petition, hence the instant case

ISSUE: 1. Was the issuance of the Writ of Execution in Civil Case No. 3517 proper?
2. Did the trial court acquire jurisdiction over Lot 4417?

3. Did the September 17, 1992 Order constitute res adjudicata barring the June 18 and July 14, 1993
Orders of the trial court?

HELD:

Petitioner further contends that the trial court gravely abused its discretion in ordering the turnover of
Lot 4417 to Dr. Magalit, because of its earlier ruling that it had no jurisdiction over said property.

We cannot place much weight on this Order. First, the September 9, 1992 Motion for Reconsideration
taken up in said Order has not been attached to or alleged in the herein Petition. Hence, we cannot fully
consider the nature of the claim that was denied by this Order or speculate on why the trial court ruled
that it had no jurisdiction over the movant’s claim. We cannot even guess which Order the unidentified
movant wanted to be reconsidered.

More important, it is too late in the day for petitioner to challenge the jurisdiction of the trial court. She
clearly submitted to its authority by her unqualified participation in Civil Case No. 3517. We cannot
allow her to attack its jurisdiction simply because it rendered a Decision prejudicial to her position.
Participation in all stages of a case before a trial court effectively estops a party from challenging its
jurisdiction.[26] One cannot belatedly reject or repudiate its decision after voluntarily submitting to its
jurisdiction, just to secure affirmative relief against one’s opponent or after failing to obtain such
relief.[27] If, by deed or conduct, a party has induced another to act in a particular manner, estoppel
effectively bars the former from adopting an inconsistent position, attitude or course of conduct that
thereby causes loss or injury to the latter.[28]

Petitioner insists that the trial court had no jurisdiction over the res of Lot 4417 when it issued its
September 17, 1992 Order.

Again, we disagree. Jurisdiction over the res is acquired either (a) by the seizure of the property under
legal process, whereby it is brought into actual custody of the law; or (b) as a result of the institution of
legal proceedings, in which the power of the court is recognized and made effective.[29] In the latter
condition, the property, though at all times within the potential power of the court, may not be in the
actual custody of said court.

The trial court acquired jurisdiction over the disputed lot by virtue of the institution of the Petition for a
Writ of Execution filed by the respondents’ predecessors in interest. Without taking actual physical
control of the property, it had an impliedly recognized potential jurisdiction or potential custody over
the res. This was the jurisdiction which it exercised when it issued the Writ of Execution directing the
surrender of Lot 4417 to Dr. Magalit.

Third Issue: Res Judicata

Citing Section 49 of Rule 39, Rules of Court, petitioner insists that the September 17, 1997 Order of the
trial court in Civil Case No. 3517 bars it from rehearing questions on the ownership of Lot 4417. She
insists that said Order has become final and executory, because Dr. Magalit did not appeal it.

We disagree. Final, in the phrase judgments or final orders found in Section 49 of Rule 39, has two
accepted interpretations. In the first sense, it is an order that one can no longer appeal because the
period to do so has expired, or because the order has been affirmed by the highest possible tribunal
involved. The second sense connotes that it is an order that leaves nothing else to be done, as
distinguished from one that is interlocutory. The phrase refers to a final determination as opposed to a
judgment or an order that settles only some incidental, subsidiary or collateral matter arising in an
action; for example, an order postponing a trial, denying a motion to dismiss or allowing intervention.
Orders that give rise to res judicata and conclusiveness of judgment apply only to those falling under the
second category.

For res judicata to apply, the following elements must concur: (1) there is a final judgment or order; (2)
the court rendering it has jurisdiction over the subject matter and the parties; (3) the judgment is one on
the merits; and (4) there is, between the two cases, identity of parties, subject matter and cause of
action.[30] For example, an order overruling a motion to dismiss does not give rise to res adjudicata that
will bar a subsequent action, because such order is merely interlocutory and is subject to amendments
until the rendition of the final judgment.[31]

A judgment or an order on the merits is one rendered after a determination of which party is upheld, as
distinguished from an order rendered upon some preliminary or formal or merely technical point.[32]
Dismissal of a case for failure of plaintiff to comply with a “notice of case status” signed by an officer-in-
charge does not have the effect of an adjudication on the merits.[33] Strictly speaking, res judicata does
not apply to decisions or orders adjudicating interlocutory motions.

The interlocutory nature of the Order of September 17, 1992 is evident from the fact that the trial court
proceeded to hear and determine the inclusion of Lot 4417 in the Fishpond Case. Without any objection
from petitioner, it commissioned Sheriff de la Cruz to hear and submit a report on the issue. If it is true,
as she claims, that the September 17, 1992 Order constituted a final judgment, then she should have
objected to any further proceedings.
Petitioner alleges that her failure to object on time to the Commissioner’s Report was a “plain error,”
which could be corrected by the CA. This is wrong. Her failure to object to the Report cannot be
dismissed as just a matter of assigning errors on appeal. Rather, it was a failure to assert her right over
the lot in dispute, an inaction that constituted estoppel. After having performed affirmative acts upon
which a person acted in good faith, the actor cannot thereafter repudiate those acts or renege on their
effects, to the prejudice of the former.[34]

The apparent conflict between the Orders of the trial court cannot be construed in favor of petitioner,
since her Petition does not present sufficient basis for us to reverse the CA. The rule of thumb in these
cases is to uphold the validity of all these orders.[35] To be sure, petitioner’s lack of any right to own or
possess the disputed lot should be put to rest, as this issue has been resolved against her several times.
It is about time she faces the consequences of those decisions.

See: Joya v. Judge Marquez, G.R. No. 162416, January 31, 2006
FACTS: This is a petition for certiorari and prohibition that seeks the Court to nullify and set aside the
warrant of arrest issued by respondent judge against petitioner in Criminal Case No. 03-219952 for
violation of Article 315, par. 2(a) of the Revised Penal Code in relation to Presidential Decree (P.D.) No.
1689. Petitioner asserts that respondent judge erred in finding the existence of probable cause that
justifies the issuance of a warrant of arrest against him and his co-accused.

Petitioner Joya is a co-accused in an estafa charge but is still at large. He allegedly induced complainant
Manuel Dy Awiten to invest more than a hundred million pesos in State Resources Development
Management Corporation, but when the latter’s investments fell due, the checks issued by Hao in favor
of Dy as payment for his investments were dishonored for being drawn against insufficient funds or that
the account was closed.

ISSUE: WON the judge erred in finding probable cause

HELD: No

In addition, it may not be amiss to note that petitioner is not entitled to seek relief from this Court nor
from the trial court as he continuously refuses to surrender and submit to the court’s jurisdiction.
Justice Florenz D. Regalado explains the requisites for the exercise of jurisdiction and how the court
acquires such jurisdiction, thus:

x x x Requisites for the exercise of jurisdiction and how the court acquires such jurisdiction:

a. Jurisdiction over the plaintiff or petitioner: This is acquired by the filing of the complaint,
petition or initiatory pleading before the court by the plaintiff or petitioner.

b. Jurisdiction over the defendant or respondent: This is acquired by the voluntary appearance
or submission by the defendant or respondent to the court or by coercive process issued by the court to
him, generally by the service of summons.
c. Jurisdiction over the subject matter: This is conferred by law and, unlike jurisdiction over
the parties, cannot be conferred on the court by the voluntary act or agreement of the parties.

d. Jurisdiction over the issues of the case: This is determined and conferred by the pleadings
filed in the case by the parties, or by their agreement in a pre-trial order or stipulation, or, at times by
their implied consent as by the failure of a party to object to evidence on an issue not covered by the
pleadings, as provided in Sec. 5, Rule 10.

e. Jurisdiction over the res (or the property or thing which is the subject of the litigation). This
is acquired by the actual or constructive seizure by the court of the thing in question, thus placing it in
custodia legis, as in attachment or garnishment; or by provision of law which recognizes in the court the
power to deal with the property or subject matter within its territorial jurisdiction, as in land registration
proceedings or suits involving civil status or real property in the Philippines of a non-resident defendant.

Justice Regalado continues to explain:

In two cases, the court acquires jurisdiction to try the case, even if it has not acquired jurisdiction over
the person of a nonresident defendant, as long as it has jurisdiction over the res, as when the action
involves the personal status of the plaintiff or property in the Philippines in which the defendant claims
an interest. In such cases, the service of summons by publication and notice to the defendant is merely
to comply with due process requirements. Under Sec. 133 of the Corporation Code, while a foreign
corporation doing business in the Philippines without a license cannot sue or intervene in any action
here, it may be sued or proceeded against before our courts or administrative tribunals.[11]

Again, there is no exceptional reason in this case to allow petitioner to obtain relief from the courts
without submitting to its jurisdiction. On the contrary, his continued refusal to submit to the court’s
jurisdiction should give this Court more reason to uphold the action of the respondent judge. The
purpose of a warrant of arrest is to place the accused under the custody of the law to hold him for trial
of the charges against him. His evasive stance shows an intent to circumvent and frustrate the object of
this legal process. It should be remembered that he who invokes the court’s jurisdiction must first
submit to its jurisdiction.

RULE 1

Section 1
Alvero v. de la Rosa, G.R. No. L-286, March 29, 1946 (Supra.)
FACTS: FACTS: Alvero’s appeal of the decision of the lower court against him in a civil case of double sale
was dismissed because he failed to file the appeal bond.

Respondent Jose Victoriano purchased 2 parcels of land from Margarita Villarica in 120 equal monthly
installments for the aggregate sum of P6,000; the down payment was P1,700, and the monthly payment
was P76.86 on October 1, 1940. Victoriano took possession and paid the installments until December
1941, when war broke out and he verbally agreed with Villarica on February 1942 that the payments
would be suspended until the war ended. Victoriano stayed in the property until December 1944 when
he had to evacuate.

However, Villarica sold the land to petitioner Fredesvindo Alvero on December 31, 1944 for P100,000 in
Japanese military notes. Alvero presented the deed to the Register of Deeds of Manila on January 3,
1945 but was not able to secure a TCT. Alvero took possession in December, 1944, but afterwards found
Jose R. Victoriano in the premises in February, 1945. Villarica offered to repurchase from Alvero the
property but he refused.

Hence, Victoriano filed a complaint against Alvero and Villarica in the CFI of Manila on June 26, 1945
alleging two causes of action, to wit, (1) to declare in force the contract of sale between him and
Villarica which land was subsequently sold Alvero and (2) to declare said subsequent sale null and void.

On November 16, 1945, the CFI rendered his decision in favor of Victoriano, adjudging to him the title
over the property in question, including all the improvements existing thereon, and dismissed the
counterclaim of Alvero who demanded rental from him.

On November 28, 1945, Alvero was notified of said decision; and on December 27, 1945, he filed a
petition for reconsideration and new trial, which was denied on January 3, 1946; and of said order he
was notified on January 7, 1946. On January 8, 1946, Alvero filed his notice of appeal and record on'
appeal simultaneously in the lower court, without filing the P60 appeal bond.

On January 14, 1946, Victoriano filed a petition to dismiss the appeal, and at the same time, asked for
the execution of the judgment. On January 15, 1946, Alvero filed an opposition to said motion to
dismiss, alleging that on the very same day, January 15, 1946, said appeal bond for P60 had been
actually filed, and alleged as an excuse, for not filing the said appeal bond, in due time, the illness of his
lawyer's wife, who died on January 10, 1946, and buried the following day.

On January 17, 1946, the respondent judge, Hon. Mariano L. de la Rosa, ordered the dismissal of the
appeal, declaring that, although the notice of appeal and record on appeal had been filed in due time,
the P60-appeal bond was filed too late.

On January 23, 1946, Fredesvindo S. Alvero filed a petition for the reconsideration of the said order
dated January 17, 1946, dismissing his appeal; and said petition for reconsideration was denied on
January 29, 1946. Hence, this petition for certiorari.

On February 11, 1946, the respondents filed their answer to the petition for certiorari, alleging (1) that
said petition is defective in form as well as in substance; (2) that there has been no excusable
negligence, on the part of the petitioner, or grave abuse of discretion on the part of the respondent
judge, in the instant case.

ISSUE: WON the judge acted with grave abuse of discretion in dismissing the appeal

HELD: NO.
Alvero’s motion for reconsideration and new trial was pro forma and does not suspend the period for
the perfection of the appeal
As already stated, the decision rendered by the respondent judge, Hon. Mariano L. de la Rosa, was
dated November 16, 1945, of which counsel for Fredesvindo S. Alvero was notified on November 28,
1945; that his motion for reconsideration and new trial was filed on December 27, 1945, and denied on
January 3, 1946, and that said counsel for Alvero was notified of said order on January 7, 1946; and that
he filed his notice of appeal and record on appeal the following day, to wit, January 8, 1946, and that the
P60-appeal bond w as filed only on January 15, 1946.

According to the computation erroneously made by the trial court, the last day for filing and perfecting
the appeal, in this case, was January 8, 1946, on which date, Fredesvindo S. Alvero should have filed his
(1) notice of appeal, (2) record on appeal, and (3) appeal bond. But the P60-appeal bond was filed only
on January 15, 1946.

Alvero’s motion for reconsideration and new trial, dated December 27, 1945, he did not point out
specifically the findings or conclusions in the judgment, which are not supported by the evidence or
which are contrary to law, making express reference to the pertinent evidence or legal provisions, as
expressly required by Rule 37, section 2, paragraph (c) of the Rules of Court. Motions of that kind have
been considered as motions pro forma intended merely to delay the proceeding, and, as such, they
cannot and will not interrupt or suspend the period of time for the perfection of the appeal. (Valdez vs.
Jugo, 74 Phil., 49, and Reyes vs. Court of Appeals and Bautista, 74 Phil., 235.) Hence, the period for
perfecting herein petitioner's appeal commenced from November 28, 1945, when he was notified of the
judgment rendered in the case, and expired on December 28, 1945; and, therefore, his notice of appeal
and record on appeal filed on January 8, 1946, were filed out of time, and much more so his appeal
bond, which was only filed on January 15, 1946.

Failure to perfect the appeal, within the time prescribed by the rules of court, will cause the judgment to
become final, and the certification of the record on appeal thereafter, cannot restore the jurisdiction
which has been lost. (Roman Catholic Bishop of Tuguegarao vs. Director of Lands, 34 Phil., 623; Estate of
Cordoba and Zarate vs. Alabado, 34 Phil., 920; and Bermudez vs. Director of Lands, 36 Phil., 774.)

The period within which the record on appeal and appeal bond should be perfected and filed may,
however, be extended by order of the court, upon application made, prior to the expiration of the
original period. (Layda vs. Legaspi, 39 Phil., 83.)

Rules of courts, promulgated by authority of law, have the force and effect of law; and rules of court
prescribing the time within which certain acts must be done, or certain proceedings taken, are
considered absolutely indispensable to the prevention of needless delays and to the orderly and speedy
discharge of judicial business. (Shioji vs. Harvey, 43 Phil., 333.)

Strict compliance with the rules of court has been held mandatory and imperative, so that failure to pay
the docket fee in the Supreme Court, within the period fixed for that purpose, will cause the dismissal of
the appeal. (Salaveria vs. Albindo, 39 Phil., 922.)

In the same manner, on failure of the appellant in a civil case to serve his brief, within the time
prescribed by said rules, on motion of the appellee and notice to the appellant, or on its own motion,
the court may dismiss the appeal. (Shioji vs. Harvey, 43 Phil., 333.)
Primicias v. Ocampo, G.R. No. L-6120, June 30, 1953
FACTS: This petition was originally filed with the Court of Appeals, but was later certified to this court on
the ground that the main basis of the petition was the constitutionality of Section 49 of Republic Act No.
409 which respondents assail as unconstitutional because it contravenes the constitutional provision
that the rules of court "shall be uniform for all courts of the same grade . . . " (Section 13, Article VIII of
the Constitution.)

Primicias was charged before the Court of First Instance of Manila with two statutory offenses namely,
(1) violation of Commonwealth Act No. 60 in that he knowingly chartered a vessel of Philippine registry
to an alien without the approval of the President of the Philippines and (2) violation of section 129 in
relation to section 2713 of the Revised Administrative Code, in that he failed to submit to the Collector
of Customs the manifests and certain authenticated documents for the vessel "Antarctic" and failed to
obtain the necessary clearance from the Bureau of Customs prior to the departure of said vessel for a
foreign port.

On April 23, 1952, before the trial, petitioner filed a motion praying that assessors be appointed to assist
the court in considering the questions of fact involved in the cases as authorized by section 49 of
Republic Act No. 409, otherwise known as Revised Charter of the City of Manila.

On April 28, 1952, the court issued an order denying the motion. holding in effect that with the
promulgation of the Rules of Court by the Supreme Court, which became effective on July 1, 1940, all
rules concerning pleading, practice and procedure in all courts of the Philippines previously existing
were not only superseded but expressly repealed, that the Supreme Court, having been vested with the
rule- making power, expressly omitted the portions of the Code of Civil Procedure regarding assessors in
said Rules of Court, and that the reference to said statute by section 49 of Republic Act No. 409 on the
provisions regarding assessors should be deemed as a mere surplusage.

Hence the instant case.

Petitioner argues that the right to trial with the assistance of assessors is a substantive right which
cannot impaired by this court in the exercise of its rule-making power and that the Revised Charter of
Manila, RA 409, approved on June 18, 1949, wherein section 49 of said Act states that the aid of
assessors may be invoked in the manner provided in the Code of Civil Procedure, has reenacted said
provision on right to the assistance of assessors.

ISSUE:
"I. The right of the petitioner to a trial with the aid of assessors is an absolute substantive right, and the
duty of the court to provide assessors is mandatory.

"II. The right to trial with the aid of assessors, being substantive right, cannot be impaired by this court
in the exercise of its rule-making power.
"III. Section 154 of the Code of Civil Procedure and Section 2477 of the Old Charter of Manila, creating
the right to trial with the aid of assessors, are substantive law and were not repealed by Rules of Court.

"IV. Granting without admitting that the provisions on assessors of the Code of Civil Procedure and the
old Charter of Manila were impliedly repealed, nevertheless, the same provisions were later reenacted
by reference in section 49 of the Revised Charter of Manila, which is now the source of the right to trial
with the aid of assessors and which refers to the Code of Civil Procedure merely to indicate the
procedure for appointing assessors.

HELD: We hold that the provisions on assessors embodied in the Code of Civil Procedure are still in force
and that the same may still be invoked in the light of the provisions of section 49 of Republic Act No.
409. It is therefore our opinion that the respondent Judge acted with abuse of discretion in denying
petitioner his right to the aid of assessors in the trial of the two criminal cases now pending in the Court
of First Instance of Manila.

The right to a trial by assessors is a substantive right which is not embraced by the rule-making power
of the Court

The right to a trial by assessors is substantive in the sense that it must be created and defined by express
enactment as opposed to a mere remedy devised to enforce such right or obtain redress therefor.
"Rules of procedure should be distinguished from substantive law. A substantive law creates, defines or
regulates rights concerning life, liberty or property, or the powers of agencies or instrumentalities for
the administration of public affairs, whereas rules of procedure are provisions prescribing the method
by which substantive rights may be enforced in courts of justice." (Moran, Comments on the Rules of
Court, Vol. I, 1952 ed., p. 4.)

In Bustos vs. Lucero, * (46 Off. Gaz., January Supp., pp. 445, 448), this Court cited with approval the
following definitions of substantive law:

"Substantive law creates substantive rights and the two terms in this respect may be said to be
synonymous. Substantive rights in a term which includes those rights which one enjoys under
the legal system prior to the disturbance of normal relations. (60 C. J. 980.)

"Substantive law is that part of the law which creates, defines and regulates rights, or which
regulates the right and duties which give rise to a cause of action; that part of the law which
courts are established to administer; as opposed to adjective or remedial law, which prescribes
the method of enforcing rights or obtain redress for their invasions (36 C. J. 27; 52 C. J. S. 1026)."

The trial with the aid of assessors as granted by section 154 of the Code of Civil Procedure and section
2477 of the old Charter of Manila are parts of substantive law and as such are not embraced by the rule
making power of the Supreme Court. This is so because in said section 154 this matter is referred to as a
right given by law to a party litigant. Section 2477 of the Administrative Code of 1917 is couched in such
a manner that a similar right is implied when invoked by a party litigant. It says that the aid may be
invoked in the manner provided in the Code of Civil Procedure. And this right has been declared
absolute and substantial by this Court in several cases where the aid of assessors had been invoked
(Berbari vs. Concepcion, et al., 40 Phil., 320; Colegio de San Jose vs. Sison, 54 Phil., 344).
Being substantive in nature, it is not difficult to see why the provisions concerning trial by assessors
embodied in the Code of Civil Procedure have not been incorporated by the Supreme Court in the
present Rules of Court. To have done so, it would have been a travesty of its rule-making power which,
by direct mandate of the Constitution, is limited to matters referring to pleading, practice and
procedure.

There is a point in the claim that the provisions concerning trial by assessors embodied in the Code of
Civil Procedure are not wholly substantive but portions thereof are remedial. This is true; but it is
likewise true that because said remedial provisions are inextricably interwoven with the substantive
part, it must have been deemed wise and proper to leave them as they were for reasons of coordination
and expediency, it being a truism that the one cannot be detached from the other. Ubi jus ibi remedium.
Remedial measures are but implementary in character and they must be appended to the portion of the
law to which they belong.

Reference Statutes
Granting arguendo that the provisions on assessors of the Code of Civil Procedure and even in the old
Charter of Manila are purely remedial in nature and because of the failure to incorporate them in the
Rules of Court they are deemed to have been impliedly repealed as claimed by respondents, we are of
the opinion that they can still he invoked by a litigant upon the theory that they had been reaffirmed
and reenacted by Republic Act No. 409, which was approved in 1949, or nine years after the Rules of
Court became effective. The mention made of the Code of Civil Procedure in said section indicates in
itself a re-enactment or incorporation by reference of the provisions concerning assessors contained in
said law. Congress, whose members were mostly lawyers, must be presumed to know that at the time
said Act was approved the Rules of Court had already been promulgated without incorporating therein
the provisions concerning the aid to assessors, and fully cognizant of this situation, and not desiring to
omit this right granted to a litigant, they must have deemed it wise and proper to re-enact them by
reference in said section 49. This Congress can do, for, while our Constitution has given the power to
adopt rules of procedure to the Supreme Court, such grant did not preclude Congress from enacting any
procedural law or altering, amending, or supplementing any of the rules that may be promulgated by
the Supreme Court (Section 13, Article VIII, Philippine Constitution).

The practice of making such reference has long been sanctioned. Our Congress did this not only in
connection with courts in the City of Manila. It also did it in connection with courts in Quezon City
(Republic Act No. 537). Statutes which refer to other statutes and make them applicable to the subject
for legislation are called "reference statutes". These statutes are frequently used "to avoid encumbering
the statute books by unnecessary repetition, and they have frequently been recognized as an approved
method of legislation, in the absence of constitutional restrictions." [50 Am. Jur. 57; Gruen vs. Tax
Commission, 211 P. (2d) (1949) 651, 666.]

Again, it has been held that "The adoption of an earlier statute by reference makes it as much as a part
of the latter act as though it had been incorporated at full length. This is true of a legislative act which
refers to another act for the procedure to be taken." (50 Am. Jur. 58.) The reference in Republic Act No.
409 to the provisions on assessors must be deemed, therefore, to have incorporated therein the
pertinent provisions on the matter contained in the Code of Civil Procedure in much the same manner
as if the whole provisions had been reproduced. Consistent with this theory, we cannot but hold that
the observations made by respondents to the effect that the reference made to said provisions in
section 49 is a mere surplusage, or was due to a mere oversight, has no legal basis, as such innuendo
would be tantamount to imputing lack of foresight, if not brazen negligence, to our legislative body.

Constitutionality
It is finally contended that section 49 of Republic Act No. 409 is unconstitutional because it violates the
constitutional provisions that procedural rules "shall be uniform for all courts of the same grade" and,
therefore, it is a class legislation. This contention cannot be entertained: firstly, because it is raised for
the first time in this instance, a procedural defect which would bar any further discussion on the matter
following well-known precedents and, secondly, because it is not correct that at present only in Manila
trial with the aid of assessors may be invoked.

The contention of respondents - we reckon - is predicated on the assumption that the provisions on
assessors of the Code of Civil Procedure had been impliedly repealed. Such is not the case. We have
already pointed out that the basic provisions on the matter partake of the nature of substantive law and
as such they were left intact by the Supreme Court. The corollary to this conclusion is that this remedy
may be invoked out only in Manila but in all other places where it existed prior to the promulgation of
the Rules of Court. This is true in civil cases. With regard to criminal cases, we have seen that they are
allowed by Act No. 2369; and we have already said that the same remedy may be invoked in the cities of
Cebu, Iloilo and Quezon, with the particularity that their charters make express reference, either directly
or indirectly, to the provisions of the code of Civil Procedure. With this historical background, the claim
that under the theory we have entertained the trial with the aid of assessors can only be invoked in the
City of Manila is certainly without merit.

Sec. 2. In what courts applicable

These Rules shall apply in all the courts, except as otherwise provided by the Supreme Court.

Sec. 4. In what cases not applicable

These Rules shall not apply to:
Election cases
Land registration
Cadastral
Naturalization and insolvency proceedings
Other cases not herein provided for
EXCEPT by analogy or in a suppletory character and whenever practicable and convenient.

GSIS v. Villaviza, G.R. No. 180291, July 27, 2010

FACTS: Petitioner Winston Garcia (PGM Garcia), as President and General Manager of the GSIS, filed
separate formal charges against respondents, 20 employees of the GSIS main office, for Grave
Misconduct and/or Conduct Prejudicial to the Best Interest of the Service pursuant to the Rules of
Procedure in Administrative Investigation (RPAI) of GSIS Employees and Officials, III, D, (1, c, f) in relation
to Section 52A (3), (20), Rule IV, of the Uniform Rules on Administrative Cases in the Civil Service
(URACCS), in accordance with Book V of the Administrative Code of 1987. The respondents wore red
shirts when they attended a public hearing on 27 May 2005 in support for Mario Molina and Albert
Velasco, union officers who were facing separate administrative charges.
On June 29, 2005, PGM Garcia issued separate but similarly worded decisions finding all seven (7)
respondents guilty of the charges and meting out the penalty of one (1) year suspension plus the
accessory penalties appurtenant thereto.

On appeal, the Civil Service Commission (CSC) found the respondents guilty of the lesser offense of
Violation of Reasonable Office Rules and Regulations and reduced the penalty to reprimand. The CSC
ruled that there was no substantial evidence to hold them guilty of Conduct Prejudicial to the Best
Interest of the Service. Instead, the CSC found that the respondent’s assembly was an exercise of their
freedom of expression, a constitutionally guaranteed right.

PGM Garcia sought reconsideration but was denied. Thus, PGM Garcia went to the Court of Appeals via
a Petition for Review under Rule 43 of the Rules on Civil Procedure.[7] The CA upheld the CSC ruling
that Garcia “failed to prove that the supposed concerted activity of the respondents resulted in work
stoppage and caused prejudice to the public service. Petitioners are aware at the outset that the only
apparent intention of the respondents in going to the IU was to show support to Atty. Mario Molina and
Albert Velasco, their union officers. The belated assertion that the intention of the respondents in going
to the IU was to disrupt the operation and pressure the GSIS administration to be lenient with Atty.
Mario Molina and Albert Velasco, is only an afterthought.

Hence the instant case.

Petitioners primarily question the probative value accorded to respondents’ letters of explanation in
response to the memorandum of the GSIS-IU Manager. The respondents never filed their answers to
the formal charges. The petitioners argue that there being no answers, the allegations in the formal
charges that they filed should have been deemed admitted pursuant to Section 11, Rule 8 of the Rules
of Court which provides:

SECTION 11. Allegations not specifically denied deemed admitted.— Material averment in the
complaint, other than those as to the amount of liquidated damages, shall be deemed admitted when
not specifically denied. Allegations of usury in a complaint to recover usurious interest are deemed
admitted if not denied specifically and under oath.

According to the petitioners, this rule is applicable to the case at bench pursuant to Rule 1, Section 4 of
the Rules of Court which reads:

SECTION 4. In what cases not applicable. – These Rules shall not apply to election cases, land
registration, cadastral, naturalization and insolvency proceedings, and other cases not herein provided
for, except by analogy or in a suppletory character and whenever practicable and convenient.
(underscoring supplied)

ISSUE:
WHETHER AN ADMINISTRATIVE TRIBUNAL MAY APPLY SUPPLETORILY THE PROVISIONS OF THE RULES
OF COURT ON THE EFFECT OF FAILURE TO DENY THE ALLEGATIONS IN THE COMPLAINT AND FAILURE TO
FILE ANSWER, WHERE THE RESPONDENTS IN THE ADMINISTRATIVE PROCEEDINGS DID NOT FILE ANY
RESPONSIVE PLEADING TO THE FORMAL CHARGES AGAINST THEM.

HELD:
The Court does not subscribe to the argument of the petitioners. Petitioners’ own rules, Rule XI, Section
4 of the GSIS’ Amended Policy and Procedural Guidelines No. 178-04, specifically provides:

If the respondent fails to file his Answer within five (5) working days from receipt of the Formal Charge
for the supporting evidence, when requested, he shall be considered to have waived his right to file an
answer and the PGM or the Board of Trustees, in proper cases, shall render judgment, as may be
warranted by the facts and evidence submitted by the prosecution.

A perusal of said section readily discloses that the failure of a respondent to file an answer merely
translates to a waiver of “his right to file an answer.” There is nothing in the rule that says that the
charges are deemed admitted. It has not done away with the burden of the complainant to prove the
charges with clear and convincing evidence.

It is true that Section 4 of the Rules of Court provides that the rules can be applied in a “suppletory
character.” Suppletory is defined as “supplying deficiencies.” It means that the provisions in the Rules of
Court will be made to apply only where there is an insufficiency in the applicable rule. There is,
however, no such deficiency as the rules of the GSIS are explicit in case of failure to file the required
answer. What is clearly stated there is that GSIS may “render judgment as may be warranted by the
facts and evidence submitted by the prosecution.”

Even granting that Rule 8, Section 11 of the Rules of Court finds application in this case, petitioners must
remember that there remain averments that are not deemed admitted by the failure to deny the same.
Among them are immaterial allegations and incorrect conclusions drawn from facts set out in the
complaint.[11] Thus, even if respondents failed to file their answer, it does not mean that all averments
found in the complaint will be considered as true and correct in their entirety, and that the forthcoming
decision will be rendered in favor of the petitioners. We must not forget that even in administrative
proceedings, it is still the complainant, or in this case the petitioners, who have the burden of proving,
with substantial evidence, the allegations in the complaint or in the formal charges.

A perusal of the decisions of the CA and of the CSC will reveal that the case was resolved against
petitioners based, not on the absence of respondents’ evidence, but on the weakness of that of the
petitioners.

Reyes v. Barrios, G.R. No. 172841, December 15, 2010

FACTS: On 26 September 1995, petitioner Renato Reyes (petitioner) filed before the Department of
Agrarian Reform, Region III, PARAD of San Fernando, Pampanga, a complaint for ejectment against
respondent Leopoldo Barrios (respondent).

The property was co-owned by petitioner and his four sisters.7 Petitioner claimed that the property
became subject of the Operation Land Transfer under Presidential Decree No. 27 (PD 27), except the
3.6‒hectare landholding which was allegedly retained. In his Memorandum8 dated 18 September 2007,
petitioner averred that he and his sister Leticia V. Reyes are the co-owners of the landholding. Petitioner
hired respondent as the overseer of the farm and piggery on the landholding. However, petitioner
contended that respondent never remitted the proceeds from the piggery business and the fruits from
the landholding
On the other hand, respondent alleged that he was a tenant of the landholding since 1972 and he even
built his house on the subject landholding. Respondent also acted as the caretaker of the piggery
business on the landholding. Contrary to petitioner’s allegations, respondent stated that petitioner’s
wife took all the proceeds from the piggery business, which later ceased operation due to an epidemic.

When respondent failed to appear during the scheduled hearings, petitioner moved to submit the case
for decision on the basis of the evidence presented. Respondent alleged that his failure to attend the
scheduled hearings was because he received the Notice for the 29 February 1996 hearing only on 6
March 1996. Respondent moved for the postponement of the hearing because he was bedridden due to
hypertension and heart ailment.10 However, the PARAD again heard the case ex-parte on 28 March
1996, of which respondent alleged that he was still not notified.

On 31 October 1996, the PARAD rendered a decision declaring that herein plaintiff [Renato Reyes] is
entitled to recover the possession of the property.

Respondent appealed to the DARAB. Meanwhile, respondent passed away on 13 February 1997 and was
substituted by his spouse Lucia Manalus-Barrios.

On 29 June 1998, the DARAB reversed the PARAD decision and held that respondent is a bona fide
tenant of the landholding and that he cannot be ejected from the landholding absent any justifiable
cause.

Petitioner filed a Motion for Reconsideration, asking for the reversal of the DARAB decision and the
reinstatement of the PARAD decision. Respondent, substituted by his spouse Lucia Manalus-Barrios, also
filed a Motion for Partial Reconsideration, asking for the modification of the decision by declaring
respondent as a beneficiary under PD 27 and to issue an Emancipation Patent in favor of respondent’s
surviving spouse Lucia Manalus-Barrios.

In its 7 December 2004 Resolution, the DARAB denied petitioner’s Motion for Reconsideration for lack of
merit and granted respondent’s Motion for Partial Reconsideration and granted Barrios motion for the
issuance of an Emancipation Patent.

Petitioner filed another Motion for Reconsideration, which the DARAB denied in its Resolution dated 5
May 2005.16 Petitioner then appealed to the Court of Appeals, which denied the petition for review in
its 8 February 2006 Decision. The Court of Appeals likewise denied petitioner’s motion for
reconsideration in its 29 May 2006 Resolution. The CA held “But the petitioner insists that public
respondent decided the case at bench against him in defiance of the evidence on record. We do not
agree. The DARAB based its findings on the certification dated December 7, 1982 of then Ministry of
Agrarian Reform (now Department of Agrarian Reform) of Sta. Ana, Pampanga finding Leopoldo Barrios
as legitimate farmer-beneficiary and on the joint statement dated March 5, 1989 of residents of
neighboring lots who attested to respondent-appellant’s cultivation and occupation of the subject lot. It
bears stressing that in administrative proceedings, as in the case at bench, the quantum of evidence
required to sustain a judgment is only substantial evidence. It is such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion, even if other minds equally reasonable might
conceivably opine differently. Thus, findings of fact of quasi-judicial agencies are generally accorded
respect, and even finality, by the appellate tribunal, if supported by substantial evidence.”
Hence, this petition for review.

ISSUES:
1. THE COURT OF APPEALS BY RULING IN ITS QUESTIONED DECISION (ANNEX “A”) THAT THE DARAB
WAS CORRECT IN DECIDING THE CASE AGAINST HIM AS THIS IS SUPPORTED BY THE CERTIFICATIONS
ISSUED BY THE MINISTRY OF AGRARIAN REFORM AND THE OFFICER-IN-CHARGE OF THE AGRARIAN
REFORM TEAM OF ARAYAT-STA. ANA-CANDABA, PAMPANGA DENIED PETITIONER HIS RIGHT TO DUE
PROCESS OF LAW AND COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION BECAUSE THE RECORD SHOWS THAT NOT ONLY ARE THE EVIDENCE OF BARRIOS
IRRELEVANT BUT THEY [ARE] ALSO MERE MACHINE COPIES WHICH WERE NEVER PRESENTED IN A
PROPER HEARING WHERE THE PETITIONER CAN SCRUTINIZE THEM AND CROSS-EXAMINE PRIVATE
RESPONDENT ON THEM.

2. THE COURT OF APPEALS COMMITTED GRIEVOUS LEGAL ERROR AND/OR GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION BY FAILING TO CORRECT THE DARAB IN
NOT RECOGNIZING PETITIONER’S RIGHT OVER HIS RETAINED AREA WHICH HAD ALREADY BEEN THE
SUBJECT OF AN AWARD IN CLAIM 83-144 OF LAND BANK OF THE PHILIPPINES.

HELD: Partially granted

Under Section 3, Rule I of the 1994 DARAB New Rules of Procedure (now Section 3, Rule I of the 2009
DARAB Rules of Procedure26), the Board and its Regional and Provincial Adjudicators are not bound by
technical rules of procedure and evidence:

SECTION 3. Technical Rules Not Applicable. The Board and its Regional and Provincial Adjudicators shall
not be bound by technical rules of procedure and evidence as prescribed in the Rules of Court, but shall
proceed to hear and decide all agrarian cases, disputes or controversies in a most expeditious manner,
employing all reasonable means to ascertain the facts of every case in accordance with justice and
equity.

xxx

c) The provisions of the Rules of Court shall not apply even in suppletory character unless adopted
herein or by resolution of the Board. However, due process of law shall be observed and followed in all
instances.

Section 1, Rule VIII of the 1994 DARAB New Rules of Procedure (now Section 1, Rule X of the 2009
DARAB Rules of Procedure27) reiterates the non-applicability of technical rules regarding the admission
and sufficiency of evidence, thus:

SECTION 1. Nature of Proceedings. The proceedings before the Board or its Adjudicators shall be non-
litigious in nature. Subject to the essential requirements of due process, the technicalities of law and
procedures and the rules governing the admissibility and sufficiency of evidence obtained in the courts
of law shall not apply. x x x

Thus, in Reyes v. Court of Appeals,28 the Court held:

 Finally, we rule that the trial court did not err when it favorably considered the affidavits of Eufrocina
and Efren Tecson (Annexes “B” and “C”) although the affiants were not presented and subjected to
cross-examination. Section 16 of P.D. No. 946 provides that ‘Rules of Court shall not be applicable in
agrarian cases even in a suppletory character.’ The same provision states that ‘In the hearing,
investigation and determination of any question or controversy, affidavits and counter-affidavits may be
allowed and are admissible in evidence.’

Besides, the DARAB Rules should be liberally construed to carry out the objectives of agrarian reform
and to promote just, expeditious, and inexpensive adjudication and settlement of agrarian cases,
disputes or controversies.

Although we affirm the ruling of the DARAB that respondent is a bona fide tenant, we disagree with its
order for the issuance of an Emancipation Patent in favor of respondent’s heir. Thus, there are several
steps to be undertaken before an Emancipation Patent can be issued. As regards respondent, the
records are bereft of evidence indicating that this procedure has been followed. It was improper for the
DARAB to order the issuance of the Emancipation Patent in favor of respondent without the required
supporting documents and without following the requisite procedure before an Emancipation Patent
may be validly issued. Moreover, there was no sufficient evidence to prove that respondent has fully
paid the value of the subject landholding.

Sec. 3. Cases governed

These Rules shall govern the procedure to be observed in actions, civil or criminal, and special proceedings.

Kinds of Actions in the Rules of Court

Civil Action – is one by which a party sues another for the enforcement or protection of a right or the
prevention or redress of a wrong. A civil action may either be ordinary or special. Both are governed
by the rules of ordinary civil actions, subject to the specific rules prescribed for a special civil action.
Criminal Action – is one by which the State prosecutes a person for an act or omission punishable by
law.
Special Proceedings – is a remedy by which a party seeks to establish a status, a right or a particular
fact.

Kinds of Civil Actions in the Rules of Court

Ordinary Civil Action

Special Civil Action

DBM v. Manila’s Finest Retirees, G.R. No. 169466, May 9, 2007

FACTS: When RA 6975 or the PNP Law was enacted on December 13, 1990, replacing PD 765 or the
Integrated National Police Law, the amendatory law reengineered the retirement scheme in the police
organization. Hence, retirees under the Integrated National Police Law spearheaded by the Manila’s
Finest Retirees Association, Inc., or the MFRAI filed a suit for declaratory relief in the RTC of Manila. The
petition impleaded the DBM, the PNP, the NAPOLCOM, the Civil Service Commission (CSC) and the GSIS.

The petition alleged in gist that INP retirees were equally situated as the PNP retirees but whose
retirement benefits prior to the enactment of R.A. No. 6975, as amended by R.A. No. 8551, were
unconscionably and arbitrarily excepted from the higher rates and adjusted benefits accorded to the
PNP retirees. They pray that they be entitled to the same benefits.

The GSIS moved to dismiss the petition on grounds of lack of jurisdiction and cause of action. On the
other hand, the CSC, DBM, NAPOLCOM and PNP, in their respective answers, asserted that the
petitioners could not claim the more generous retirement benefits under R.A. No. 6975 because at no
time did they become PNP members, having retired prior to the enactment of said law.

On March 21, 2003, the RTC came out with its decision holding that R.A. No. 6975, as amended, did not
abolish the INP but merely provided for the absorption of its police functions by the PNP and the INP
retirees were entitled to the same benefits under the PNP Law and ordered the adjustments of the
retirement benefits. On April 2, 2003, the trial court issued what it denominated as Supplement to the
Decision whereunder it granted the GSIS’ motion to dismiss and thus considered the basic petition as
withdrawn with respect to the latter. From the adverse decision of the trial court, the remaining
respondents, namely, DBM, PNP, NAPOLCOM and CSC, interposed an appeal to the CA.

Their motion for reconsideration having been denied by the CA in` its equally assailed resolution of
August 24, 2005,[8] herein petitioners are now with this Court via the instant recourse on their singular
submission that -

THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW IN AFFIRMING THE DECISION OF THE
TRIAL COURT NOTWITHSTANDING THAT IT IS CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE.

ISSUE: WON the CA erred in affirming the trial court’s decision

WON the trial court can order adjustments of the retirement benefits when the petition is merely for
declaratory relief

HELD: Denied

The INP was never, as posited by the petitioners, abolished or terminated out of existence by R.A. No.
6975. For sure, nowhere in R.A. No. 6975 does the words “abolish” or “terminate” appear in reference
to the INP. Instead, what the law provides is for the “absorption,” “transfer,” and/or “merger” of the
INP, as well as the other offices comprising the PC-INP, with the PNP. To “abolish” is to do away with, to
annul, abrogate or destroy completely;[12] to “absorb” is to assimilate, incorporate or to take in.[13]
“Merge” means to cause to combine or unite to become legally absorbed or extinguished by merger[14]
while “transfer” denotes movement from one position to another. Clearly, “abolition” cannot be
equated with “absorption.”

True it is that Section 90[15] of R.A. No. 6975 speaks of the INP “[ceasing] to exist” upon the effectivity
of the law. It ought to be stressed, however, that such cessation is but the logical consequence of the
INP being absorbed by the PNP.

Far from being abolished then, the INP, at the most, was merely transformed to become the PNP, minus
of course its military character and complexion.
With the conclusion herein reached that the INP was not in fact abolished but was merely transformed
to become the PNP, members of the INP which include the herein respondents are, therefore, not
excluded from availing themselves of the retirement benefits accorded to PNP retirees under Sections
74[17] and 75[18] of R.A. No. 6975, as amended by R.A. No. 8551. It may be that respondents were no
longer in the government service at the time of the enactment of R.A. No. 6975. This fact, however,
without more, would not pose as an impediment to the respondents’ entitlement to the new retirement
scheme set forth under the aforecited sections. As correctly ratiocinated by the CA to which we are in
full accord:

The [respondents’] retirement prior to the passage of R.A. No. 6975 did not exclude them from the
benefits provided by R.A. No. 6975, as amended by R.A. No. 8551, since their membership in the INP
was an antecedent fact that nonetheless allowed them to avail themselves of the benefits of the
subsequent laws. R.A. No. 6975 considered them as PNP members, always referring to their
membership and service in the INP in providing for their retirement benefits

The court can award immediate adjustments even if the petition is for declaratory relief
In a further bid to scuttle respondents’ entitlement to the desired retirement benefits, the petitioners
fault the trial court for ordering the immediate adjustments of the respondents’ retirement benefits
when the basic petition filed before it was one for declaratory relief. To the petitioners, such petition
does not essentially entail an executory process, the only relief proper under that setting being a
declaration of the parties’ rights and duties.

Petitioners’ above posture is valid to a point. However, the execution of judgments in a petition for
declaratory relief is not necessarily indefensible. In Philippine Deposit Insurance Corporation[PDIC] v.
Court of Appeals, wherein the Court affirmed the order for the petitioners therein to pay the balance of
the deposit insurance to the therein respondents, we categorically ruled:

Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing
of a counterclaim based on the same transaction, deed or contract subject of the complaint. A special
civil action is after all not essentially different from an ordinary civil action, which is generally governed
by Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject matter which
makes necessary some special regulation. But the identity between their fundamental nature is such
that the same rules governing ordinary civil suits may and do apply to special civil actions if not
inconsistent with or if they may serve to supplement the provisions of the peculiar rules governing
special civil actions.[28]

Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of Malabang, Lanao del Sur:[29] the Court
upheld the lower court’s order for a party to refund the amounts paid by the adverse party under the
municipal ordinance therein questioned, stating:

x x x Under Sec. 6 of Rule 64, the action for declaratory relief may be converted into an
ordinary action and the parties allowed to file such pleadings as may be necessary or proper, if before
the final termination of the case "a breach or violation of an … ordinance, should take place." In the
present case, no breach or violation of the ordinance occurred. The petitioner decided to pay "under
protest" the fees imposed by the ordinance. Such payment did not affect the case; the declaratory relief
action was still proper because the applicability of the ordinance to future transactions still remained to
be resolved, although the matter could also be threshed out in an ordinary suit for the recovery of taxes
paid …. In its petition for declaratory relief, petitioner-appellee alleged that by reason of the
enforcement of the municipal ordinance by respondents it was forced to pay under protest the fees
imposed pursuant to the said ordinance, and accordingly, one of the reliefs prayed for by the petitioner
was that the respondents be ordered to refund all the amounts it paid to respondent Municipal
Treasurer during the pendency of the case. The inclusion of said allegation and prayer in the petition
was not objected to by the respondents in their answer. During the trial, evidence of the
payments made by the petitioner was introduced. Respondents were thus fully aware of the petitioner's
claim for refund and of what would happen if the ordinance were to be declared invalid by the court.

The Court sees no reason for treating this case differently from PDIC and Matalin. This disposition
becomes all the more appropriate considering that the respondents, as petitioners in the RTC,
pleaded for the immediate adjustment of their retirement benefits which, significantly, the herein
petitioners, as respondents in the same court, did not object to. Being aware of said prayer, the
petitioners then already knew the logical consequence if, as it turned out, a declaratory judgment is
rendered in the respondents’ favor.

At bottom then, the trial court’s judgment forestalled multiplicity of suits which, needless to stress,
would only entail a long and arduous process. Considering their obvious advanced years, the
respondents can hardly afford another protracted proceedings. It is thus for this Court to already write
finis to this case.

Amberti v. Court of Appeals, G.R. No. 79981, 2 April 1991

FACTS: Pietro (Piero) Amberti, an Italian citizen, married petitioner Engracia V. Bacate on September 16,
1965. They have one child, herein private respondent Maria Teresa Amberti, now married to Wilfredo
M. Talag. In June, 1970, Pietro, then a resident of Antipolo, Rizal, died in Torino, Italy, leaving behind
considerable properties in the Philippines and a holographic will designating Maria Teresa as his
universal heir in accordance with the laws of Italy. The will was subsequently admitted to probate in the
Philippines on August 2, 1971 and the widow Engracia was named the executrix, only to be removed
after eight (8) years by the same probate court for maladministration of the Amberti estate, failure to
submit an inventory or render an accounting for more than eight (8) years and to account for the money
received by the estate totalling more than P7,000,000.00. She was ordered replaced by her daughter,
Maria Teresa, upon the latter's motion.

Engracia then filed a petition for certiorari, prohibition and mandamus in the Appellate Court which was
dismissed for lack of merit.

After payment of the estate and inheritance taxes due, private respondent Maria Teresa, as the new
administratrix, filed a motion with the probate court to terminate the administration proceedings and to
declare her as the universal heir of the deceased Pietro Amberti and the absolute owner of all the real
and personal properties of his estate. In compliance with the court's order of November 29, 1985, she
submitted an inventory listing of all the real and personal properties of the subject estate which
disclosed, among others, that petitioner had already sold one-half (1/2) of the 975-square meter West
Avenue (Quezon City) property and had disposed of the various mining equipment used in the once
thriving marble business of the deceased in the reported total amount of P687,500.00. 3
On January 10, 1986, the lower court rendered judgment in Special Proceedings No. 5958 awarding
ownership of the residue of the entire Amberti estate consisting of real and personal properties to the
decedent's universal heir, private respondent Maria Teresa.

On April 14, 1986, petitioner moved for a reconsideration of the January 10, 1986 decision, questioning
for the first time the provisions of the holographic will and asserting her alleged right of usufruct over
one-half (1/2) of the estate. The trial court denied said motion on November 4, 1986 for having been
filed long after the judgment of January 10, 1986 had acquired finality.

Petitioner again sought recourse in the Court of Appeals, this time to seek the annulment of the orders
of January 10, 1986 and November 4, 1986 on the ground that the notice of the January 10, 1986 order
sent by registered mail was not "actually" received by her counsel of record resulting in "deprivation of
due process." But before private respondent could comment on the petition, petitioner filed a motion
to withdraw CA-G.R. SP No. 10786 stating that she was no longer interested in pursuing her action.
Consequently, the Appellate Court dismissed the case on January 9, 1987.

However, it would appear that petitioner had a change of heart for on January 12, 1987 she instituted
another action before the Court of Appeals to annul and reverse the orders dated January 10, 1986 and
November 4, 1986 of the Regional Trial Court. Petitioner claimed that the act of private respondent in
furnishing petitioner with a copy of the motion to terminate the administration proceedings through her
former counsel (Atty. Rogelio Velarde) and not through her new counsel of record (Atty. Antonio P.
Coronel) constituted extrinsic fraud calculated to deprive her of her day in court. She likewise sought the
invalidation of the inventory submitted by her daughter on the ground that said inventory included
properties allegedly belonging to her exclusively or to the conjugal partnership with the deceased Pietro
Amberti.

On March 24, 1987, the Appellate Court issued another resolution declaring as final the dismissal of the
previous petition. Hence the instant case

ISSUE: The ultimate issue raised in this petition for review is whether or not the dismissal of CA-G.R. SP
No. 10786 by respondent Appellate Court amounts to a dismissal with prejudice such that petitioner is
now precluded from bringing a second action (CA-GR SP No. 10991) based on the same subject matter.

HELD:

A careful scrutiny of the records shows that CA-G.R. SP No. 10786 is a special civil action for certiorari
with prayer for preliminary injunction under Rule 65 of the Revised Rules of Court which petitioner filed
on December 8, 1986 to annul the judgment of the trial court of January 10, 1986 and the order of
denial of petitioner's motion for reconsideration of November 4, 1986 on the grounds of lack of due
process and grave abuse of discretion. 12 As above related, before respondents could submit their
comment, petitioner filed a motion to withdraw the petition stating that she was no longer interested in
pursuing the case. The motion was granted by the Appellate Court in its resolution of January 9, 1987.
On March 24, 1987, said resolution having become final, entry of judgment was issued and the case was
remanded to the court of origin for execution of judgment.
Section 1, Rule 62 of the Rules of Court under the heading SPECIAL CIVIL ACTIONS provides as follows:

"SECTION 1. Preceding rules applicable in special civil actions. The provisions of the preceding rules
shall apply in special actions for interpleader, declaratory relief and similar remedies, certiorari,
prohibition, mandamus, quo warranto, eminent domain, foreclosure of mortgage, partition, forcible
entry and detainer, and contempt, which are not inconsistent with or may serve to supplement the
provisions of the rules relating to such special civil actions."

From the foregoing, it is clearly stated that in special civil actions the preceding rules are applicable in a
supplementary manner. More specifically, under Sections 2 and 4, Rule 50 of Rules of Court, relating to
DISMISSAL OF APPEAL in the Court of Appeals, the following are provided:

"SECTION 2. Effect of dismissal. Fifteen (15) days after the dismissal of an appeal, the clerk shall
return to the court below the record on appeal with a certificate under the seal of the court showing
that the appeal has been dismissed. Upon the receipt of such certificate in the lower court the case shall
stand there as though no appeal had ever been taken, and the judgment of the said court may be
enforced with the additional costs allowed by the appellate court upon dismissing the appeal."

"SECTION 4. Withdrawal of appeal. An appeal may be withdrawn as of right at any time before the
filing of appellee's brief. After the brief is filed the withdrawal may be allowed by the court in its
discretion. The withdrawal of an appeal shall have the same effect as that of a dismissal in accordance
with Section 2 of this rule."

Applying the foregoing rules in a supplementary manner, upon the withdrawal of a petition in a special
civil action before the answer or comment thereto has been filed, the case shall stand as though no
appeal has been taken, so that the judgment or order of the lower court being questioned becomes
immediately final and executory. Thus, a resolution granting the withdrawal of such a petition is with
prejudice and petitioner is precluded from bringing a second action based on the same subject matter.

The subsequent petition in CA-G.R. SP No. 10991 is an original action for annulment of judgment filed by
petitioner in the Court of Appeals in accordance with Section 9 of the Judiciary Reorganization Act of
1980 (B.P. Blg. 129) which vests upon the Intermediate Appellate Court (now Court of Appeals) the
original exclusive jurisdiction over actions for annulment of judgments of the Regional Trial Courts. No
doubt that second petition is barred by res judicata, as the dismissal of the earlier petition for certiorari
in C.A. G.R. SP No. 10786 was with prejudice and on the merits. It has not escaped this Court's attention
that these two petitions are based on the same ground of the alleged deprivation of due process and
sought the same reliefs, i.e., the annulment or setting aside of the January 10, 1986 judgment and
November 4, 1986 order of the trial court. A party cannot evade the effects of res judicata by varying the
form of his action or adopting a different method of presenting his case as petitioner attempted to do in
instituting an original action for annulment of judgment to obtain the same relief sought in the petition
for certiorari earlier withdrawn from the Court of Appeals.
C. Kinds of Civil Actions as to Cause

Real Actions

Fortune Motors v. Court of Appeals, G.R. No. 76431, October 16, 1989
FACTS: On March 29, 1982 up to January 6, 1984, private respondent Metropolitan Bank extended
various loans to petitioner Fortune Motors in the total sum of P32,500,000.00 (according to the
borrower; or P34,150,000.00 according to the Bank) which loan was secured by a real estate mortgage
on the Fortune building and lot in Makati, Rizal. The petitioner was not able to pay the loan which
became due so the respondent bank initiated extrajudicial foreclosure proceedings. After notices were
served, posted, and published, the mortgaged property was sold at public auction for the price of
P47,899,264.91 to mortgagee Bank as the highest bidder. The sheriff s certificate of sale was registered
on October 24, 1984 with the one-year redemption period to expire on October 24, 1985.

On October 21, 1985, three days before the expiration of the redemption period, petitioner Fortune
Motors filed a complaint for annulment of the extrajudicial foreclosure sale in the RTC of Manila alleging
that the foreclosure was premature because its obligation to the Bank was not yet due, the publication
of the notice of sale was incomplete, there was no public auction, and the price for which the property
was sold was "shockingly low".

Before summons could be served private respondent Bank filed a motion to dismiss the complaint on
the ground that the venue of the action was improperly laid in Manila for the realty covered by the real
estate mortgage is situated in Makati, therefore the action to annul the foreclosure sale should be filed
in the Regional Trial Court of Makati.

The motion was opposed by petitioner Fortune Motors alleging that its action "is a personal action" and
that "the issue is the validity of the extrajudicial foreclosure proceedings" so that it may have a new one
year period to redeem.

On January 8, 1986 an order was issued by the lower court reserving the resolution of the Bank's motion
to dismiss until after the trial on the merits as the grounds relied upon by the defendant were not clear
and indubitable. The Bank filed a motion for reconsideration of the order dated January 8, 1986 but it
was denied by the lower court in its order dated May 28, 1986. On June 11, 1986 the respondent Bank
filed a petition for certiorari and prohibition in the Court of Appeals.

On July 30, 1986, a decision was issued by the Court of Appeals who granted the motion to dismiss
without prejudice to its being filed in the proper venue. A motion for reconsideration was filed on
August 11, 1986 on the said decision and on October 30, 1986 a resolution was issued denying such
motion for reconsideration.

Hence, the petition for review on certiorari.

ISSUE: whether petitioner's action for annulment of the real estate mortgage extrajudicial foreclosure
sale of Fortune Building is a personal action or a real action for venue purposes.

HELD: In a real action, the plaintiff seeks the recovery of real property, or as indicated in Sec. 2 (a) of
Rule 4, a real action is an action affecting title to real property, or for the recovery of possession, or for
the partition or condemnation of, or foreclosure of a mortgage on real property. (Comments on the
Rules of Court by Moran, Vol. I, p. 122)

Real actions or actions affecting title to, or for the recovery of possession, or for the partition or
condemnation of, or foreclosure of mortgage on real property, must be instituted in the Court of First
Instance of the province where the property or any part thereof lies. (Enriquez v. Macadaeg, 84 Phil.
674, 1949; Garchitorena v. Register of Deeds, 101 Phil. 1207, 1957)

Personal actions upon the other hand, may be instituted in the Court of First Instance where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff (Sec. 1, Rule 4, Revised Rules of Court).

A prayer for annulment or rescission of contract does not operate to efface the true objectives and
nature of the action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)

An action for the annulment or rescission of a sale of real property is a real action. Its prime objective is
to recover said real property. (Gavieres v. Sanchez, 94 Phil. 760, 1954)

An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a
private sale of real property. (Muñoz v. Llamas, 87 Phil. 737, 1950)

While it is true that petitioner does not directly seek the recovery of title or possession of the property
in question, his action for annulment of sale and his claim for damages are closely intertwined with the
issue of ownership of the building which, under the law, is considered immovable property, the recovery
of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or
rescission of a sale of real property does not operate to efface the fundamental and prime objective and
nature of the case, which is to recover said real property. It is a real action. Respondent Court,
therefore, did not err in dismissing the case on the ground of improper venue (Sec. 2, Rule 4) which was
timely raised (Sec. 1, Rule 16). (Punzalan, Jr. v. Vda. de Lacsamana, 121 SCRA 336, [1983]).

Thus, as aptly decided by the Court of Appeals in a decision penned by then Court of Appeals Associate
Justice now Associate Justice of the Supreme Court Carolina C. Griño-Aquino, the pertinent portion
reads: "Since an extrajudicial foreclosure of real property results in a conveyance of the title of the
property sold to the highest bidder at the sale, an action to annul the foreclosure sale is necessarily an
action affecting the title of the property sold. It is therefore a real action which should be commenced
and tried in the province where the property or part thereof lies."

See Rule 4, Sec. 1 – Venue of real actions

Actions affecting title to or possession of real property or interest therein shall be
commenced and tried in the proper court which has jurisdiction over the area wherein the real
property involved or a portion thereof is situated.
Forcible entry and detainer actions shall be commenced and tried in the municipal trial
court of the municipality or city wherein the real property involved, or a portion thereof is situated.
Personal Actions

Chua v. Total Office Products, G.R. No. 152808, September 30, 2005
FACTS: On December 28, 1999, respondent Total Office Products and Services, Inc., (TOPROS) lodged a
complaint for annulment of contracts of loan and real estate mortgage against herein petitioner Antonio
T. Chua before the Regional Trial Court of Pasig City. The said suit sought to annul a loan contract
allegedly extended by petitioner to respondent TOPROS in the amount of ten million four hundred
thousand pesos (P10,400,000) and the accessory real estate mortgage contract covering two parcels of
land situated in Quezon City as collateral.

On February 28, 2000, petitioner filed a motion to dismiss on the ground of improper venue. He
contended that the action filed by TOPROS affects title to or possession of the parcels of land subject of
the real estate mortgage. He argued that it should thus have been filed in the Regional Trial Court of
Quezon City where the encumbered real properties are located, instead of Pasig City where the parties
reside.

On August 9, 2000, Judge Pahimna issued an order denying the motion to dismiss. She reasoned that
the action to annul the loan and mortgage contracts is a personal action and thus, the venue was
properly laid in the RTC of Pasig City where the parties reside.

Petitioner moved for a reconsideration of the said order, which Judge Pahimna denied in its order of
October 6, 2000. Hence, petitioner filed with the Court of Appeals a special civil action for certiorari.
The Court of Appeals dismissed said petition in its decision dated November 28, 2001.

It held that the authorities relied upon by petitioner, namely Pascual v. Pascual[6] and Banco Español-
Filipino v. Palanca,[7] are inapplicable in the instant case. The appellate court instead applied
Hernandez v. Rural Bank of Lucena, Inc.[8] wherein we ruled that an action for the cancellation of a real
estate mortgage is a personal action if the mortgagee has not foreclosed the mortgage and the
mortgagor is in possession of the premises, as neither the mortgagor’s title to nor possession of the
property is disputed. Dissatisfied, petitioner filed a motion for reconsideration, which the Court of
Appeals denied for lack of merit in its resolution of April 1, 2002.

Undeterred, petitioner now comes to us on a petition for review.

ISSUES: WHETHER AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED AS
‘FICTITIOUS’ FOR BEING WITH ABSOLUTELY NO CONSIDERATION IS A PERSONAL ACTION OR REAL
ACTION?

WHETHER IN AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED AS

‘FICTITIOUS’ FOR BEING WITH ABSOLUTELY NO CONSIDERATION, THE PERSON ALLEGED TO HAVE
‘[LACKED] AUTHORITY’ TO ENTER INTO SAID CONTRACTS IS AN INDISPENSABLE PARTY?[

HELD:

Well-settled is the rule that an action to annul a contract of loan and its accessory real estate
mortgage is a personal action. In a personal action, the plaintiff seeks the recovery of personal property,
the enforcement of a contract or the recovery of damages.[12] In contrast, in a real action, the plaintiff
seeks the recovery of real property, or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, a
real action is an action affecting title to real property or for the recovery of possession, or for partition
or condemnation of, or foreclosure of mortgage on, real property.[13]

In the Pascual case, relied upon by petitioner, the contract of sale of the fishpond was assailed as
fictitious for lack of consideration. We held that there being no contract to begin with, there is nothing
to annul. Hence, we deemed the action for annulment of the said fictitious contract therein as one
constituting a real action for the recovery of the fishpond subject thereof.

We cannot, however, apply the foregoing doctrine to the instant case. Note that in Pascual, title
to and possession of the subject fishpond had already passed to the vendee. There was, therefore, a
need to recover the said fishpond. But in the instant case, ownership of the parcels of land subject of
the questioned real estate mortgage was never transferred to petitioner, but remained with TOPROS.
Thus, no real action for the recovery of real property is involved. This being the case, TOPROS’ action for
annulment of the contracts of loan and real estate mortgage remains a personal action.

Petitioner’s reliance on the Banco Español-Filipino case is likewise misplaced. That case involved a
foreclosure of real estate mortgage against a nonresident. We held therein that jurisdiction is
determined by the place where the real property is located and that personal jurisdiction over the
nonresident defendant is nonessential and, in fact, cannot be acquired.

Needless to stress, the instant case bears no resemblance to the Banco Español-Filipino case. In the first
place, this is not an action involving foreclosure of real estate mortgage. In the second place, none of
the parties here is a nonresident. We find no reason to apply here our ruling in Banco Español-Filipino.

The Court of Appeals finds that Hernandez v. Rural Bank of Lucena, Inc. provides the proper precedent in
this case. In Hernandez, appellants contended that the action of the Hernandez spouses for the
cancellation of the mortgage on their lots was a real action affecting title to real property, which should
have been filed in the place where the mortgaged lots were situated. Rule 4, Section 2 (a), of the then
Rules of Court, was applied, to wit:

SEC. 2. Venue in Courts of First Instance. – (a) Real actions. – Actions affecting title to, or for recovery of
possession, or for partition or condemnation of, or foreclosure of mortgage on, real property, shall be
commenced and tried in the province where the property or any part thereof lies.

The Court pointed out in the Hernandez case that with respect to mortgage, the rule on real actions only
mentions an action for foreclosure of a real estate mortgage. It does not include an action for the
cancellation of a real estate mortgage. Exclusio unios est inclusio alterius. The latter thus falls under the
catch-all provision on personal actions under paragraph (b) of the above-cited section, to wit:

SEC. 2 (b) Personal actions. – All other actions may be commenced and tried where the defendant or any
of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff.

In the same vein, the action for annulment of a real estate mortgage in the present case must fall under
Section 2 of Rule 4, to wit:
SEC. 2. Venue of personal actions. – All other actions may be commenced and tried where the plaintiff
or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants
resides, or in the case of a non-resident defendant where he may be found, at the election of the
plaintiff.[14]

Thus, Pasig City, where the parties reside, is the proper venue of the action to nullify the subject loan
and real estate mortgage contracts. The Court of Appeals committed no reversible error in upholding
the orders of the Regional Trial Court denying petitioner’s motion to dismiss the case on the ground of
improper venue.

Indispensable party
Anent the second issue, Section 7, Rule 3 of the Revised Rules of Court provides:

SEC. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants. (Emphasis ours)

The presence of indispensable parties is necessary to vest the court with jurisdiction. The absence of an
indispensable party renders all subsequent actuations of the court null and void, because of that court’s
want of authority to act, not only as to the absent parties but even as to those present.[15] Thus,
whenever it appears to the court in the course of a proceeding that an indispensable party has not been
joined, it is the duty of the court to stop the trial and order the inclusion of such party.[16]

A person is not an indispensable party, however, if his interest in the controversy or subject matter is
separable from the interest of the other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them.[17]

Is John Charles Chang, Jr., the president of TOPROS who allegedly entered into the disputed contracts of
loan and real estate mortgage, an indispensable party in this case?

We note that although it is Chang’s signature that appears on the assailed real estate mortgage
contract, his participation is limited to being a representative of TOPROS, allegedly without authority.
The document[18] which constitutes as the contract of real estate mortgage clearly points to petitioner
and TOPROS as the sole parties-in-interest to the agreement as mortgagee and mortgagor therein,
respectively. Any rights or liabilities arising from the said contract would therefore bind only the
petitioner and TOPROS as principal parties. Chang, acting as mere representative of TOPROS, acquires
no rights whatsoever, nor does he incur any liabilities, arising from the said contract between petitioner
and TOPROS. Certainly, in our view, the only indispensable parties to the mortgage contract are
petitioner and TOPROS alone.

We thus hold that John Charles Chang, Jr., is not an indispensable party in Civil Case No. 67736. This is
without prejudice to any separate action TOPROS may institute against Chang, Jr., in a proper
proceeding.

Paderanga v. Hon. Buissan and Elumba Industries, G.R. No. L-49475, September 28, 1993
FACTS: Sometime in 1973, petitioner JORGE C. PADERANGA and private respondent ELUMBA
INDUSTRIES COMPANY, a partnership represented by its General Manager JOSE J. ELUMBA, entered into
an oral contract of lease for the use of a commercial space within a building owned by petitioner in
Ozamiz City. The lease was for an indefinite period although the rent of P150.00 per month was paid on
a month-to-month basis. ELUMBA INDUSTRIES COMPANY utilized the area under lease as the Sales
Office of Allied Air Freight in Ozamiz City.

On 4 April 1977, PADERANGA subdivided the leased premises into two (2) by constructing a partition
wall in between. He then took possession of the other half, which repossession was said to have been
undertaken with the acquiescence of the local manager of ELUMBA.

On 18 July 1977, private respondent Elumba instituted an action for damages 4 which, at the same
time, prayed for the fixing of the period of lease at five (5) years, before the then Court of First Instance
of Zamboanga del Norte based in Dipolog City. Petitioner, a resident of Ozamiz City, moved for its
dismissal contending that the action was a real action which should have been filed with the Court of
First Instance of Misamis Occidental stationed in Ozamiz City where the property in question was
situated.

CFI Ruling
On 6 November 1978, respondent Judge Dimalanes B. Buissan denied the Motion to Dismiss and held
that Civil Case No. 2901 merely involved the enforcement of the contract of lease, and while affecting a
portion of real property, there was no question of ownership raised. 6 Hence, venue was properly laid.

Petitioner pleaded for reconsideration of the order denying his Motion to Dismiss. He contended that
while the action did not involve a question of ownership, it was nevertheless seeking recovery of
possession; thus, it was a real action which, consequently, must be filed in Ozamiz City.

On 4 December 1978, respondent judge denied reconsideration. 8 While admitting that Civil Case No.
2901 did pray for recovery of possession, he nonetheless ruled that this matter was not the main issue
at hand; neither was the question of ownership raised. Not satisfied, petitioner instituted the present
recourse.

PADERANGA argues that inasmuch as ELUMBA seeks to recover possession of the portion surrendered
to him by the local manager of private respondent, as well as to fix the period of lease at five (5) years,
Dipolog City could not be the proper venue of the action. It being a real action, venue is laid in the court
having jurisdiction over the territory in which the property lies.

ELUMBA counters that the present action is chiefly for damages arising from an alleged breach in the
lease contract; hence, the issue of recovery of possession is merely incidental. ELUMBA further argues
that the action is one in personam and not in rem. Therefore venue may be laid in the place where
plaintiff or defendant resides at the option of plaintiff.

ISSUE: WON the action is real or personal

HELD: Real action

Private respondent appears to be confused over the difference between personal and real actions vis-a-
vis actions in personam and in rem. The former determines venue; the latter, the binding effect of a
decision the court may render over a party, whether impleaded or not.
In the case before us, it is indubitable that the action instituted by private respondent against petitioner
affects the parties alone, not the whole world. Hence, it is an action in personam, i.e., any judgment
therein is binding only upon the parties properly impleaded. 9 However, this does not automatically
mean that the action for damages and to fix the period of the lease contract is also a personal action.
For, a personal action may not necessarily be an action in personam and a real action may not at the
same time be an action in rem. In Hernandez v. Rural Bank of Lucena, Inc., 10 we held thus --

In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract
or the recovery of damages. In a real action, the plaintiff seeks the recovery of real property, or, as
indicated in section 2(a) of Rule 4, a real action is an action affecting title to real property or for the
recovery of possession, or for partition or condemnation of, or foreclosure of a mortgage on, real
property.

An action in personam is an action against a person on the basis of his personal liability, while an action
in rem is an action against the thing itself, instead of against the person. Hence, a real action may at the
same time be an action in personam and not necessarily an action in rem.

Consequently, the distinction between an action in personam and an action in rem for purposes of
determining venue is irrelevant. Instead, it is imperative to find out if the action filed is a personal action
or a real action. After all, personal actions may be instituted in the Regional Trial Court (then Court of
First Instance) where the defendant or any of the defendants resides or may be found, or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff. 11 On the other hand, real
actions should be brought before the Regional Trial Court having jurisdiction over the territory in which
the subject property or part thereof lies. 12

While the instant action is for damages arising from an alleged breach of the lease contract, it likewise
prays for the fixing of the period of lease at five (5) years. If found meritorious, private respondent will
be entitled to remain not only as lessee for another five (5) years but also to the recovery of the portion
earlier taken from him as well. This is because the leased premises under the original contract was the
whole commercial space itself and not just the subdivided portion thereof.

While it may be that the instant complaint does not explicitly pray for recovery of possession, such is the
necessary consequence thereof. 13 The instant action therefore does not operate to efface the
fundamental and prime objective of the nature of the case which is to recover the one-half portion
repossessed by the lessor, herein petitioner. 14 Indeed, where the ultimate purpose of an action
involves title to or seeks recovery of possession, partition or condemnation of, or foreclosure of
mortgage on, real property, 15 such an action must be deemed a real action and must perforce be
commenced and tried in the province where the property or any part thereof lies.

See Rule 4, Sec. 2

Venue of personal actions – All other actions may be commenced and tried where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident defendant, where he may be
found, at the election of the plaintiff.
Mixed Actions

De la Cruz v. El Seminario De la Archdioceses de Manila, G.R. No. L-5402, January 28, 1911
FACTS: Petitioner De la Cruz, President of the Methodist Episcopal religious association at Dinalupijan,
Province of Bataan leased from one J. C. Miller, the agent of the appellant, His Grace Jeremiah J. Harty,
Archbishop of Manila and administrator of the hacienda of Dinalupijan, leased for a period of two years,
a certain lot or parcel of land for the construction of the Methodist Episcopal chapel. When the chapel
was near completion, one Raymundo Sinsuangco filed a complaint of forcible entry and detainer against
De la Cruz and Miller. Judgment was rendered against them and no appeal was taken so the judgment
became final and executory resulting in the destruction of the chapel.

Hence, De la Cruz filed an action in the Court of First Instance of the city of Manila against the appellants
to recover the sum of P2,000 as damages for a breach of the rental contract.

To this complaint the appellants, through their attorneys, presented a demurrer, based upon the
following grounds: (1) That the Court of First Instance of the city of Manila was without jurisdiction to
try and determine this action for the reason that damages for injuries caused to real property situated in
the Province of Bataan is sought to be recovered; and (2) the complaint fails to allege facts sufficient to
constitute a cause of action. This demurrer was overruled, the appellants duly noting their exception.

The CFI of Manila rendered a judgment in favor of the appellees and against the appellants for the sum
of P402, P2 being the rent for the first year paid in advance, and the P400 being the agreed value of the
chapel which was destroyed

Hence the appeal to this Court raising the following issues:

1. That as this action is one for damages to real estate situated in the Province of Bataan, under the
provisions of section 377 of the Code of Civil Procedure the Court of First Instance of the city of Manila
had no jurisdiction;

2. The court below erred in admitting the amended complaint by which the other members of the
religious association, jointly interested with Cayetano de la Cruz, were made parties plaintiff; and,

3. That the appellants are not liable for the consequences of the judgment of the justice of the peace.

HELD:

The demurrer was properly overruled. This is not an action to recover damages to real estate; it is an
action for breach of covenant in a lease. The fact that the damages to real estate are involved, as an
incident to the breach of the contract, does not change the character of the action. Such an action is
personal and transitory. The rule is well stated in the case of Neil vs. Owen (3 Tex., 145), wherein the
court said (p. 146):

"If the action is founded on privity of contract between the parties, then the action whether debt or
covenant, is transitory. But if there is no privity of contract and the action is founded on privity of estate
only, such a covenant that runs with the land in the hands of the remote grantees, then the action is
local and must be brought in the country wherein the land lies.
"In an action on a covenant contained in a lease, whether begun by the lessor against the lessee, or by
the lessee against the lessor, the action is transitory because it is founded on a mere privity of contract.
(Thursby vs. Plant, cited in vol. 5, Ency. Plead. & Prac., p. 362.)

"In general, also, actions which are founded upon contracts are transitory. In an action upon a lease for
nonpayment of rent or other breach of covenants, when the action is founded on the privity of contract
it is transitory and the venue may laid in any county. (22 Ency. Plead. & Prac., pp. 782-783.)"

Therefore, section 377 of the Code of Civil Procedure, which provides, among other things, that actions
to recover damages for injuries to real estate shall be brought in the province where the land, or a part
thereof, is situated, is not applicable. (Molina vs. De la Riva, 6 Phil. Rep., 12.) The amended complaint
clearly states facts sufficient to constitute a cause of action. (Sec. 90, Code of Civil Procedure.)

Emergency Loan Pawnshop v. Court of Appeals, G.R. No. 129184, February 28, 2001
FACTS: On January 18, 1996, Traders Royal Bank (TRB for brevity) sold in favor of petitioner Emergency
Loan Pawnshop Incorporated (ELPI for brevity) a parcel of land located at Km. 3 Asin, Baguio City for Five
Hundred Thousand Pesos (P500,000.00). At the time of the sale, TRB misrepresented to ELPI that the
subject property was a vacant residential lot with a usable land area of 1,143.75 square meters when it
truth the subject property was dominantly a public road with only 140 square meters usable area.

ELPI, after having spent to fully ascertain the actual condition of the property, demanded from TRB the
rescission and cancellation of the sale of the property. TRB refused, hence, on April 16, 1996, ELPI filed
with the Regional Trial Court, Davao, Branch 17, a complaint for annulment of sale and damages against
TRB.

On August 27, 1996, TRB filed a Motion to Dismiss[4] the complaint on the ground of improper venue.

RTC Ruling
On September 18, 1996 the trial court denied the motion to dismiss.[5] On October 21, 1996, TRB filed a
motion for reconsideration.[6] On November 14, 1996, the trial court denied the motion.[7]

On January 15, 1997, TRB elevated the case to the Court of Appeals by petition for certiorari and
prohibition with preliminary injunction or temporary restraining order, contending that the trial court
committed a grave abuse of discretion in denying its motion to dismiss the complaint on the ground of
improper venue.

CA Ruling
After due proceedings, on March 11, 1997, the Court of Appeals promulgated its decision annulling the
RTC’s orders and dismissing the complaint for improper venue.

Hence, this petition. According to petitioners, the determination of whether the venue of an action was
improperly laid was a question of law, thus, the Court of Appeals had no jurisdiction to entertain the
petition for certiorari and prohibition, which involves pure questions of law. Petitioners further alleged
that an order denying a motion to dismiss is interlocutory in nature that can not be the subject of an
appeal and can not be even reviewed by a special civil action for certiorari.
ISSUE: Petitioners seek to set aside the decision of the Court of Appeals alleging that:

1. The Court of Appeals erred in entertaining the petition for certiorari and prohibition, for lack of
jurisdiction;

2. The Court of Appeals erred in ruling that the Regional Trial Court erred in not dismissing the
complaint for improper venue.

HELD:

The general rule is that the denial of a motion to dismiss a complaint is an interlocutory order and,
hence, cannot be appealed or questioned via a special civil action of certiorari until a final judgment on
the merits of the case is rendered.

The remedy of the aggrieved party is to file an answer to the complaint and to interpose as defenses the
objections raised in his motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate
the entire case by appeal in due course. However, the rule is not ironclad. Under certain situations,
recourse to certiorari or mandamus is considered appropriate, that is, (a) when the trial court issued
the order without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion by the
trial court; or, (c) appeal would not prove to be a speedy and adequate remedy as when an appeal
would not promptly relieve a defendant from the injurious effects of the patently mistaken order
maintaining the plaintiff’s baseless action and compelling the defendant needlessly to go through a
protracted trial and clogging the court dockets by another futile case."[13]

In the case at bar, we agree with the Court of Appeals that the trial court erred grievously amounting to
ousting itself of jurisdiction. The motion of respondent TRB was well founded because venue was
clearly improperly laid. The action in the Regional Trial Court was for annulment of sale involving a
parcel of land located at Km. 3 Asin Road, Baguio City. The venue of such action is unquestionably
within the territorial jurisdiction of the proper court where the real property or part thereof lies.[14] An
action affecting title to real property, or for recovery of, or foreclosure of mortgage on real property,
shall be commenced and tried in the proper court having jurisdiction over the area where the real
property or any part thereof lies.

Hence, the case at bar clearly falls within the exceptions to the rule that an interlocutory order cannot
be questioned on certiorari. The Regional Trial Court has committed a palpable and grievous error
amounting to lack or excess of jurisdiction in denying the motion to dismiss the complaint on the ground
of improper venue.

Kinds of Civil Actions as to Object

Action in Personam

Spouses Yu v. Pacleb, G.R. No. 172172, February 24, 2009

FACTS: Respondent Baltazar N. Pacleb and his late first wife, Angelita Chan, are the registered owners of
an 18,000-square meter parcel of land in Barrio Langcaan, Dasmariñas, Cavite. The Langcaan property
became the subject of three sales: first, from Pacleb to Angelita Chan and Rebecca Del Rosario on
February 27, 1992; second, from Rebecca Del Rosario to Ruperto L. Javier on May 7, 1992; third, from
Javier and petitioner spouses Ernesto V. Yu and Elsie Ong Yu on November 10, 1992. The Spouses Yu
had already paid P600,000 out of the P900,000 purchase price. However, all three sales were not
registered. On September 11, 1992, the Spouses Yu discovered the property was tenanted by Ramon C.
Pacleb, son of Baltazar, but Ramon agreed to vacate the property provided he was paid disturbance
compensation by Javier. But Javier did not comply with his obligations.

Hence, on April 23, 1993, petitioner spouses Yu filed with the Regional Trial Court of Imus, Cavite, a
Complaint for specific performance and damages against Javier. Javier did not appear in the proceedings
and was declared in default. On September 8, 1994, the trial court rendered a Decision in favor of the
Spouses Yu.

On March 10, 1995, petitioner spouses and Ramon and the latter’s wife, Corazon Bodino, executed an
agreement wherein Ramon would surrender the property and waive any right in exchange for the
payment of P500,000.

On October 12, 1995, respondent Baltazar Pacleb filed a Complaint[15] for annulment of deed of sale
and other documents arising from it. He alleged that the deed of sale purportedly executed between
him and his late first wife and Rebecca Del Rosario was spurious as their signatures thereon were
forgeries. Respondent moved to have summons served upon Rebecca Del Rosario by publication since
the latter’s address could not be found. The trial court, however, denied his motion. Respondent
Baltazar then moved to dismiss the case, and the trial court granted the motion in its Order dated April
11, 1996, dismissing the case without prejudice.

Meanwhile, on November 23, 1995, petitioner spouses filed an action for forcible entry against
respondent Baltazar with the Municipal Trial Court (MTC). They alleged that they had prior physical
possession of the Langcaan Property through their trustee, Ramon, until the latter was ousted by
respondent in September 1995. The MTC ruled in favor of petitioner spouses, which decision was
affirmed by the Regional Trial Court.[18] However, the Court of Appeals set aside the decisions of the
lower courts and found that it was respondent who had prior physical possession of the property as
shown by his payment of real estate taxes thereon.

On May 29, 1996, respondent filed the instant case for removal of cloud from title with damages.
Respondent Baltazar alleged that the deed of sale between him and his late first wife and Rebecca Del
Rosario, who is not known to them, could not have been possibly executed on February 27, 1992, the
date appearing thereon. He alleged that on said date, he was residing in the United States and his late
first wife, Angelita Chan, died twenty (20) years ago.

On May 28, 1997, during the pendency of the instant case before the trial court, respondent died
without having testified on the merits of his case. Hence, he was substituted by his surviving spouse,
Antonieta S. Pacleb, and his children with the first wife.

On December 27, 2002, the trial court dismissed respondent’s case and held that petitioner spouses are
purchasers in good faith. The trial court ratiocinated that the dismissal of respondent’s complaint for
annulment of the successive sales at his instance “sealed the regularity of the purchase” by petitioner
spouses and that he “in effect admits that the said sale…was valid and in order.” Further, the trial court
held that the Decision in Civil Case No. 741-93 on petitioner spouses’ action for specific performance
against Javier is already final and can no longer be altered. Accordingly, the trial court ordered the
cancellation of TCT No. T-118375 in the name of respondent and the issuance of a new title in the name
of petitioner spouses. The trial court also ordered the heirs of respondent and all persons claiming
under them to surrender possession of the Langcaan Property to petitioner spouses.

On appeal by respondent, the Court of Appeals reversed and set aside the decision of the trial court.[27]
The Court of Appeals ruled that petitioner spouses are not purchasers in good faith and that the
Decision in Civil Case No. 741-93 did not transfer ownership of the Langcaan Property to them.
Accordingly, the appellate court ordered the cancellation of the annotation of the Decision in Civil Case
No. 741-93 on the title of the Langcaan Property. The Court of Appeals denied reconsideration of said
decision.[28]

Hence, this Petition. Petitioner spouses argue that they are purchasers in good faith. Further, they
contend that the Court of Appeals erred in finding that: “Ramon told him [Ernesto V. Yu] that the
property is owned by his father, Baltazar, and that he is the mere caretaker thereof”[29] since Ramon
clarified that his father was the former owner of the Langcaan Property.

Petitioner spouses argue that the decision of the Regional Trial Court in Civil Case No. 741-93 as to the
rightful owner of the Langcaan Property is conclusive and binding upon respondent even if the latter
was not a party thereto since it involved the question of possession and ownership of real property, and
is thus not merely an action in personam but an action quasi in rem.

ISSUE: Two issues are involved in the instant petition. The first is whether petitioner spouses are
innocent purchasers for value and in good faith. The second is whether the decision in the civil
complaint for specific performance filed by Spouses Yu against Javier is binding on Baltazar

HELD: We find petitioner spouses’ contentions without merit.

Spouses are not innocent purchasers for value

At the outset, we note that in petitioner Ernesto V. Yu’s testimony, he stated that he inspected the
Langcaan Property and talked with the tenant, Ramon, before he purchased the same. However, in his
Complaint for specific performance and damages which he filed against Javier, he alleged that it was
only after he had entered into an Agreement for the sale of the property and his initial payment of
P200,000 that he discovered that the property was indeed being tenanted by Ramon. This inconsistency
casts grave doubt as to whether petitioner spouses personally inspected the property before purchasing
it.

First, it should be noted that the property remains to be registered in the name of respondent despite
the two (2) Deeds of Absolute Sale[32] purporting to transfer the Langcaan Property from respondent
and his late first wife, Angelita Chan, to Rebecca Del Rosario then from the latter to Javier. Both deeds
were not even annotated in the title of the Langcaan Property.

Second, a perusal of the two deeds of absolute sale reveals that they were executed only about two (2)
months apart and that they contain identical provisions.

Third, it is undisputed that the Langcaan Property is in the possession of Ramon, the son of the
registered owner. Regardless of the representations given by the latter, this bare fact alone should have
made petitioner spouses suspicious as to the veracity of the alleged title of their vendor. Moreover, as
noted by the Court of Appeals, petitioner spouses could have easily verified the true status of the
Langcaan Property from Ramon’s wife, since the latter is their relative.

The law protects to a greater degree a purchaser who buys from the registered owner himself.
Corollarily, it requires a higher degree of prudence from one who buys from a person who is not the
registered owner, although the land object of the transaction is registered. While one who buys from
the registered owner does not need to look behind the certificate of title, one who buys from one who is
not the registered owner is expected to examine not only the certificate of title but all factual
circumstances necessary for him to determine if there are any flaws in the title of the transferor, or in
his capacity to transfer the land.

Finally, as correctly pointed out by the Court of Appeals, the dismissal of Civil Case No. 1199-95 (the
action to annul the successive sales of the property) cannot serve to validate the sale to petitioner
spouses since the dismissal was ordered because Rebecca Del Rosario and Javier could no longer be
found. Indeed, the dismissal was without prejudice.

Based on the foregoing, therefore, petitioner spouses cannot be considered as innocent purchasers in
good faith.

Action for specific performance is an action in personam and not binding on Baltazar nor to the
Langcaan property

In Domagas v. Jensen,[35] we distinguished between actions in personam and actions quasi in rem.

The settled rule is that the aim and object of an action determine its character. Whether a proceeding is
in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by
these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought
against the person and is based on the jurisdiction of the person, although it may involve his right to, or
the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court. The purpose of a proceeding in personam is to impose,
through the judgment of a court, some responsibility or liability directly upon the person of the
defendant. Of this character are suits to compel a defendant to specifically perform some act or actions
to fasten a pecuniary liability on him. An action in personam is said to be one which has for its object a
judgment against the person, as distinguished from a judgment against the propriety (sic) to determine
its state. It has been held that an action in personam is a proceeding to enforce personal rights or
obligations; such action is brought against the person.

xxx

On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the
property of such persons to the discharge of the claims assailed. In an action quasi in rem, an individual
is named as defendant and the purpose of the proceeding is to subject his interests therein to the
obligation or loan burdening the property. Actions quasi in rem deal with the status, ownership or
liability of a particular property but which are intended to operate on these questions only as between
the particular parties to the proceedings and not to ascertain or cut off the rights or interests of all
possible claimants. The judgments therein are binding only upon the parties who joined in the action.
Civil Case No. 741-93 is an action for specific performance and damages filed by petitioner spouses
against Javier to compel performance of the latter’s undertakings under their Contract to Sell. As
correctly held by the Court of Appeals, its object is to compel Javier to accept the full payment of the
purchase price, and to execute a deed of absolute sale over the Langcaan Property in their favor. The
obligations of Javier under the contract to sell attach to him alone, and do not burden the Langcaan
Property.[36]

We have held in an unbroken string of cases that an action for specific performance is an action in
personam.[37] In Cabutihan v. Landcenter Construction and Development Corporation,[38] we ruled
that an action for specific performance praying for the execution of a deed of sale in connection with an
undertaking in a contract, such as the contract to sell, in this instance, is an action in personam. Being a
judgment in personam, Civil Case No. 741-93 is binding only upon the parties properly impleaded
therein and duly heard or given an opportunity to be heard.[39] Therefore, it cannot bind respondent
since he was not a party therein. Neither can respondent be considered as privy thereto since his
signature and that of his late first wife, Angelita Chan, were forged in the deed of sale.

Ching v. Court of Appeals, G.R. No. L-59731, January 11, 1990

FACTS: In May 1960, spouses Maximo Nofuente and Dominga Lumandan was granted an Original
Certificate of Title after Land Registration proceedings at the Court of First Instance of Rizal over a parcel
of land situated at Sitio of Kay-Biga Barrio of San Dionisio, Municipality of Paranaque, Province of Rizal.

In August 1960, 5/6 portion of the property was reconveyed by said spouses to Francisco, Regina,
Perfects, Constancio and Matilde all surnamed Nofuente and Transfer Certificate of Title No. 78633 was
issued on August 10, 1960.

By virtue of a sale to Ching Leng with postal address at No. 44 Libertad Street, Pasay City, Transfer
Certificate of Title No. 91137 was issued on September 18, 1961 and T.C.T. No. 78633 was deemed
cancelled.

Thirteen (13) years after Ching Leng's death, a suit against him was commenced on December 27, 1978
by private respondent Pedro Asedillo with the Court of First Instance of Rizal (now RTC), Branch XXVII,
Pasay City for reconveyance of the abovesaid property and cancellation of T.C.T. No. 91137 in his favor
based on possession. An amended complaint was filed by private respondent against Ching Leng and/or
Estate of Ching Leng on January 30, 1979 alleging that Ching Leng has been residing abroad up to the
present, and it is not known whether he is still alive or dead.

Summons and complaint were published but Ching failed to file an answer. on motion of counsel for the
private respondent, the court a quo in its order dated May 25, 1979, allowed the presentation of
evidence ex-parte. A judgment by default was rendered on June 15, 1979 in favor of Asedillo.

On October 29, 1979 petitioner Alfredo Ching, son of Ching Leng, learned of the abovestated decision.
He filed a verified petition on November 10, 1979 to set it aside as null and void for lack of jurisdiction
which was granted by the court on May 29, 1980.
On motion of counsel for private respondent Asedillo the said order of May 29, 1980 was reconsidered
and set aside, the decision dated June 15, 1979 in favor of Asedillo was reinstated in the order dated
September 2, 1980. (pp. 60-63, Ibid.)

On October 30, 1980, petitioner filed a motion for reconsideration of the said latter order but the same
was denied by the trial court on April 12, 1981 (pp. 77-79, Ibid.)

Petitioner filed an original petition for certiorari with the Court of Appeals but the same was dismissed
on September 30, 1981. His motion for reconsideration was likewise denied on February 10, 1982 (pp.
81-90, Ibid.)

Private respondent Pedro Asedillo died on June 7, 1981 at Makati, Metro Manila during the pendency of
the case with the Court of Appeals (p. 106, CA Rollo).

Hence, the instant petition.

Petitioner avers that an action for reconveyance and cancellation of title is in personam and the court a
quo never acquired jurisdiction over the deceased Ching Leng and/or his estate by means of service of
summons by publication in accordance with the ruling laid down in Ang Lam v. Rosillosa et al., 86 Phil.
448 [1950].

On the other hand, private respondent argues that an action for cancellation of title is quasi in rem, for
while the judgment that may be rendered therein is not strictly a judgment in in rem, it fixes and settles
the title to the property in controversy and to that extent partakes of the nature of the judgment in rem,
hence, service of summons by publication may be allowed unto Ching Leng who on the face of the
complaint was a non-resident of the Philippines in line with the doctrine enunciated in Perkins v. Dizon,
69 Phil. 186 [1939].

ISSUE: WHETHER OR NOT A DEAD MAN CHING LENG AND/OR HIS ESTATE MAY BE VALIDLY SERVED
WITH SUMMONS AND DECISION BY PUBLICATION.

WHETHER OR NOT AN ACTION FOR RECONVEYANCE OF PROPERTY AND CANCELLATION OF TITLE IS IN

PERSONAM, AND IF SO, WOULD A DEAD MAN AND/OR HIS ESTATE BE BOUND BY SERVICE OF
SUMMONS AND DECISION BY PUBLICATION.

WHETHER OR NOT THE PROCEEDINGS FOR RECONVEYANCE AND CANCELLATION OF TITLE CAN BE HELD
EX-PARTE.

WHETHER OR NOT THE TRIAL COURT ACQUIRED JURISDICTION OVER THE SUBJECT MATTER AND THE
PARTIES.

WHETHER OR NOT PRIVATE RESPONDENT IS GUILTY OF LACHES IN INSTITUTING THE ACTION FOR
RECONVEYANCE AFTER THE LAPSE OF 19 YEARS FROM THE TIME THE DECREE OF REGISTRATION WAS
ISSUED.

HELD:

The petition is impressed with merit.

An action to redeem, or to recover title to or possession of, real property is not an action in rem or an
action against the whole world, like a land registration proceeding or the probate of a will; it is an action
in personam, so much so that a judgment therein is binding only upon the parties properly impleaded
and duly heard or given an opportunity to be heard. Actions in personam and actions in rem differ in
that the former are directed against specific persons and seek personal judgments, while the latter are
directed against the thing or property or status of a person and seek judgments with respect thereto as
against the whole world. An action to recover a parcel of land is a real action but it is an action in
personam, for it binds a particular individual only although it concerns the right to a tangible thing (Ang
Lam v. Rosillosa, supra).

Private respondent's action for reconveyance and cancellation of title being in personam, the judgment
in question is null and void for lack of jurisdiction over the person of the deceased defendant Ching
Leng. Verily, the action was commenced thirteen (13) years after the latter's death. As ruled by this
Court in Dumlao v. Quality Plastic Products, Inc. (70 SCRA 475 [1976]) the decision of the lower court
insofar as the deceased is concerned, is void for lack of jurisdiction over his person. He was not, and he
could not have been validly served with summons. He had no more civil personality. His juridical
personality, that is fitness to be subject of legal relations, was lost through death (Arts. 37 and 42 Civil
Code).

The same conclusion would still inevitably be reached notwithstanding joinder of Ching Leng's estate as
co-defendant. it is a well-settled rule that an estate can sue or be sued through an executor or
administrator in his representative capacity (21 Am. Jr. 872). Contrary to private respondent's claims,
deceased Ching Leng is a resident of 44 Libertad Street, Pasay City as shown in his death certificate and
T. C. T. No. 91137 and there is an on-going intestate proceedings in the same court, Branch III
commenced in 1965, and notice of hearing thereof duly published in the same year. Such misleading and
misstatement of facts demonstrate lack of candor on the part of private respondent and his counsel,
which is censurable.

The complaint for cancellation of Ching Leng's Torrens Title must be filed in the original land registration
case, RTC, Pasig, Rizal, sitting as a land registration court in accordance with Section 112 of the Land
Registration Act (Act No. 496, as amended) not in CFI Pasay City in connection with, or as a mere
incident in Civil Case No. 6888-P (Estanislao v. Honrado, 114 SCRA 748 [1982]).

The cited case of Perkins v. Dizon, supra is inapplicable to the case at bar since petitioner Perkins was a
non-resident defendant sued in Philippine courts and sought to be excluded from whatever interest she
has in 52,874 shares of stocks with Benguet Consolidated Mining Company. The action being a quasi in
rem summons by publication satisfied the constitutional requirement of due process.

Action in Rem

Licaros v. Licaros, G.R. No. 150656, April 29, 2003

FACTS: Abelardo and Margarita were married. Margarita later migrated to the United States with their
children and secured a divorce and distribution of properties. Abelardo and Margarita also executed an
“Agreement of Separation of Properties.” Nine years later, Margarita filed with the Court of Appeals a
petition for the annulment of two judgments:

(1) The Decision dated 27 December 1990[4] granting the dissolution of the conjugal partnership of
gains of the spouses Abelardo B. Licaros and Margarita Romualdez-Licaros which was a Special
Proceeding.

(2) The Decision dated 8 November 1991[5] declaring the marriage between the same spouses null and
void initiated by Abelardo.

Margarita alleges there was extrinsic fraud in her husband’s filing and preparation of the petition for
dissolution of the conjugal partnership of gains and its annex, the agreement of separation of
properties. Margarita also assails the jurisdiction of the court which annulled their marriage wherein
summons was served through the Department of Foreign Affairs and by publication.

Ruling of the Court of Appeals

The Court held that there was no fraud because the documents were signed by Margarita.

The Court of Appeals also rejected Margarita’s claim that the trial court lacked jurisdiction to hear and
decide the Petition for Declaration of Nullity of Marriage for improper service of summons on her. The
case involves the marital status of the parties, which is an action in rem or quasi in rem. The Court of
Appeals ruled that in such an action the purpose of service of summons is not to vest the trial court with
jurisdiction over the person of the defendant, but “only” to comply with due process. The Court of
Appeals concluded that any irregularity in the service of summons involves due process which does not
destroy the trial court’s jurisdiction over the res which is the parties’ marital status. Neither does such
irregularity invalidate the judgment rendered in the case.

At bar, the case involves the personal (marital) status of the plaintiff and the defendant. This status is
the res over which the Philippine court has acquired jurisdiction. This is also the kind of action which the
Supreme Court had ruled that service of summons may be served extraterritorially under Section 15
(formerly Section 17) of Rule 14 and where such service of summons is not for the purpose of vesting
the trial court with jurisdiction over the person of the defendant but only for the purpose of complying
with the requirements of fair play and due process. A fortiori, the court a quo had properly acquired
jurisdiction over the person of herein petitioner-defendant when summons was served by publication
and a copy of the summons, the complaint with annexes, together with the Order of June 28, 1991, was
served to the defendant through the Department of Foreign Affairs by registered mail and duly received
by said office to top it all. Such mode was upon instruction and lawful order of the court and could even
be treated as ‘any other manner the court may deem sufficient’

ISSUE: WON the trial court validly acquired jurisdiction in the annulment case

HELDThe petition is bereft of merit.

First Issue: Validity of the Service of Summons on Margarita

Margarita insists that the trial court never acquired jurisdiction over her person in the petition for
declaration of nullity of marriage since she was never validly served with summons. Neither did she
appear in court to submit voluntarily to its jurisdiction.
On the other hand, Abelardo argues that jurisdiction over the person of a non-resident defendant in an
action in rem or quasi in rem is not necessary. The trial and appellate courts made a clear factual finding
that there was proper summons by publication effected through the Department of Foreign Affairs as
directed by the trial court. Thus, the trial court acquired jurisdiction to render the decision declaring the
marriage a nullity.

Summons is a writ by which the defendant is notified of the action brought against him. Service of such
writ is the means by which the court acquires jurisdiction over his person.[9]

As a rule, when the defendant does not reside and is not found in the Philippines, Philippine courts
cannot try any case against him because of the impossibility of acquiring jurisdiction over his person
unless he voluntarily appears in court. But when the case is one of actions in rem or quasi in rem
enumerated in Section 15,[10] Rule 14 of the Rules of Court, Philippine courts have jurisdiction to hear
and decide the case. In such instances, Philippine courts have jurisdiction over the res, and jurisdiction
over the person of the non-resident defendant is not essential.[11]

Actions in personam[12] and actions in rem or quasi in rem differ in that actions in personam are
directed against specific persons and seek personal judgments. On the other hand, actions in rem or
quasi in rem are directed against the thing or property or status of a person and seek judgments with
respect thereto as against the whole world.[13]

At the time Abelardo filed the petition for nullity of the marriage in 1991, Margarita was residing in the
United States. She left the Philippines in 1982 together with her two children. The trial court
considered Margarita a non-resident defendant who is not found in the Philippines. Since the petition
affects the personal status of the plaintiff, the trial court authorized extraterritorial service of summons
under Section 15, Rule 14 of the Rules of Court. The term “personal status” includes family relations,
particularly the relations between husband and wife.[14]

Under Section 15 of Rule 14, a defendant who is a non-resident and is not found in the country may be
served with summons by extraterritorial service in four instances: (1) when the action affects the
personal status of the plaintiff; (2) when the action relates to, or the subject of which is property within
the Philippines, in which the defendant has or claims a lien or interest, actual or contingent; (3) when
the relief demanded consists, wholly or in part, in excluding the defendant from any interest in property
located in the Philippines; or (4) when the property of the defendant has been attached within the
Philippines.

In these instances, extraterritorial service of summons may be effected under any of three modes: (1) by
personal service out of the country, with leave of court; (2) by publication and sending a copy of the
summons and order of the court by registered mail to the defendant’s last known address, also with
leave of court; or (3) by any other means the judge may consider sufficient.

Applying the foregoing rule, the trial court required extraterritorial service of summons to be effected
on Margarita in the following manner:

x x x, service of Summons by way of publication in a newspaper of general circulation once a week for
three (3) consecutive weeks, at the same time, furnishing respondent copy of this Order as well as the
corresponding Summons and copy of the petition at her given address at No. 96 Mulberry Lane,
Atherton, California, U.S.A., thru the Department of Foreign Affairs, all at the expense of petitioner.[15]
(Emphasis ours)

The trial court’s prescribed mode of extraterritorial service does not fall under the first or second mode
specified in Section 15 of Rule 14, but under the third mode. This refers to “any other means that the
judge may consider sufficient.”

The Process Server’s Return of 15 July 1991 shows that the summons addressed to Margarita together
with the complaint and its annexes were sent by mail to the Department of Foreign Affairs with
acknowledgment of receipt. The Process Server’s certificate of service of summons is prima facie
evidence of the facts as set out in the certificate.[16] Before proceeding to declare the marriage
between Margarita and Abelardo null and void, the trial court stated in its Decision dated 8 November
1991 that “compliance with the jurisdictional requirements hav(e) (sic) been duly established.” We hold
that delivery to the Department of Foreign Affairs was sufficient compliance with the rule. After all, this
is exactly what the trial court required and considered as sufficient to effect service of summons under
the third mode of extraterritorial service pursuant to Section 15 of Rule 14.

Gomez v. Court of Appeals, G.R. No. 127692, March 10, 2004

FACTS: Some time in 1975, the spouses Jesus and Caridad Trocino mortgaged two parcels of land to Dr.
Clarence Yujuico. The mortgage was subsequently foreclosed and the properties sold at public auction
on July 11, 1988, and before the expiry of the redemption period, the spouses Trocino sold the property
to petitioners Gomez on December 12, 1989, who in turn, redeemed the same from Dr. Yujuico. The
spouses Trocino, however, refused to convey ownership of the properties to petitioners, hence, a
complaint for specific performance and/or rescission was filed by herein petitioners, spouses Fortunato
and Aurora Gomez, against the heirs of Jesus J. Trocino on December 16, 1991. The summons was
served on Caridad Trocino, the mother, who was then residing at the property.

After trial on the merits, the RTC rendered its decision on March 1993 in favor of Spouses Gomez.

Thereafter, or on March 13, 1996, respondents Adolfo and Mariano Trocino filed with the Court of
Appeals, a petition for the annulment of the judgment rendered by the RTC-Cebu. Private respondents
alleged that the trial court’s decision is null and void on the ground that it did not acquire jurisdiction
over their persons as they were not validly served with a copy of the summons and the complaint.
According to them, at the time summons was served on them, Adolfo Trocino was already in Ohio,
U.S.A., and has been residing there for 25 years, while Mariano Trocino was in Talibon, Bohol, and has
been residing there since 1986. They also refuted the receipt of the summons by Caridad A. Trocino,
and the representation made by Atty. Bugarin in their behalf.

On September 30, 1996, the Court of Appeals issued the assailed Decision granting the petition and
annulling the decision of the RTC-Cebu. Their motion for reconsideration having been denied by the
Court of Appeals, petitioners Gomez filed the present petition. The petitioners contend that the Court
of Appeals erred in declaring the need for personal and/or extraterritorial service of summons, despite
the nature of the cause of action being one in rem.

ISSUE: WON an action in rem requires personal or extraterritorial service of summons

HELD: The action is an action in personam and needs personal service of summons to the defendants
so that the court will acquire jurisdiction over them. The decision is only binding on Caridad, the
mother, who is a co-heir of Jesus Trocino but only as to her share in the property.

To resolve whether there was valid service of summons on respondents, the nature of the action filed
against them must first be determined. As the Court explained in Asiavest Limited vs. Court of Appeals,
it will be helpful to determine first whether the action is in personam, in rem, or quasi in rem because
the rules on service of summons under Rule 14 of the Rules of Court of the Philippines apply according
to the nature of the action.[13]

In actions in personam, summons on the defendant must be served by handing a copy thereof to the
defendant in person, or, if he refuses to receive it, by tendering it to him. This is specifically provided in
Section 7, Rule 14 of the Rules of Court,[14] which states:

SEC. 7. Personal service of summons.-- The summons shall be served by handing a copy thereof to the
defendant in person or, if he refuses to receive it, by tendering it to him.

If efforts to find defendant personally makes prompt service impossible, substituted service may be
effected by leaving copies of the summons at the defendant's dwelling house or residence with some
person of suitable age and discretion then residing therein, or by leaving the copies at the defendant's
office or regular place of business with some competent person in charge thereof.[15] In substituted
service, it is mandated that the fact of impossibility of personal service should be explained in the proof
of service.[16]

When the defendant in an action in personam is a non-resident who does not voluntarily submit himself
to the authority of the court, personal service of summons within the State is essential to the acquisition
of jurisdiction over his person. This cannot be done if the defendant is not physically present in the
country, and thus, the court cannot acquire jurisdiction over his person and therefore cannot validly try
and decide the case against him.[17] An exception was accorded in Gemperle vs. Schenker wherein
service of summons through the non-resident’s wife, who was a resident of the Philippines, was held
valid, as the latter was his representative and attorney-in-fact in a prior civil case filed by the non-
resident, and the second case was merely an offshoot of the first case.[18]

Meanwhile, in actions in rem or quasi in rem, jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over the res,
although summons must be served upon the defendant in order to satisfy the due process
requirements.[19] Thus, where the defendant is a non-resident who is not found in the Philippines, and
(1) the action affects the personal status of the plaintiff; (2) the action relates to, or the subject matter
of which is property in the Philippines in which the defendant has or claims a lien or interest; (3) the
action seeks the exclusion of the defendant from any interest in the property located in the Philippines;
or (4) the property of the defendant has been attached in the Philippines, summons may be served
extraterritorially by (a) personal service out of the country, with leave of court; (b) publication, also with
leave of court; or (c) any other manner the court may deem sufficient.

In the present case, petitioners’ cause of action in Civil Case No. CEB-11103 is anchored on the claim
that the spouses Jesus and Caridad Trocino reneged on their obligation to convey ownership of the two
parcels of land subject of their sale. Thus, petitioners pray in their complaint that the spouses Trocino
be ordered to execute the appropriate deed of sale and that the titles be delivered to them
(petitioners); or in the alternative, that the sale be revoked and rescinded; and spouses Trocino ordered
to return to petitioners their down payment in the amount of P500,000.00 plus interests. The action
instituted by petitioners affect the parties alone, not the whole world. Hence, it is an action in
personam, i.e., any judgment therein is binding only upon the parties properly impleaded.

Contrary to petitioners’ belief, the complaint they filed for specific performance and/or rescission is not
an action in rem. While it is a real action because it affects title to or possession of the two parcels of
land covered by TCT Nos. 10616 and 31856, it does not automatically follow that the action is already
one in rem. In Hernandez vs. Rural Bank of Lucena, Inc., the Court made the following distinction:

In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract
or the recovery of damages. In a real action, the plaintiff seeks the recovery of real property, or, as
indicated in section 2(a) of Rule 4, a real action is an action affecting title to real property or for the
recovery of possession, or for partition or condemnation of, or foreclosure of a mortgage on, real
property.

An action in personam is an action against a person on the basis of his personal liability, while an action
in rem is an action against the thing itself, instead of against the person. Hence, a real action may at the
same time be an action in personam and not necessarily an action in rem.

The objective sought in petitioners’ complaint was to establish a claim against respondents for their
alleged refusal to convey to them the title to the two parcels of land that they inherited from their
father, Jesus Trocino, who was one of the sellers of the properties to petitioners. Hence, to repeat, Civil
Case No. CEB-11103 is an action in personam because it is an action against persons, namely, herein
respondents, on the basis of their personal liability. As such, personal service of summons upon the
defendants is essential in order for the court to acquire of jurisdiction over their persons.[23]

A distinction, however, must be made with regard to service of summons on respondents Adolfo
Trocino and Mariano Trocino. Adolfo Trocino, as records show, is already a resident of Ohio, U.S.A. for
25 years. Being a non-resident, the court cannot acquire jurisdiction over his person and validly try and
decide the case against him.

On the other hand, Mariano Trocino has been in Talibon, Bohol since 1986. To validly acquire
jurisdiction over his person, summons must be served on him personally, or through substituted service,
upon showing of impossibility of personal service. Such impossibility, and why efforts exerted towards
personal service failed, should be explained in the proof of service. The pertinent facts and
circumstances attendant to the service of summons must be stated in the proof of service or Officer’s
Return. Failure to do so would invalidate all subsequent proceedings on jurisdictional grounds.[24]

In the present case, the process server served the summons and copies of the complaint on respondents
Jacob, Jesus, Jr., Adolfo, Mariano, Consolacion, Alice and Racheal,[25] through their mother, Caridad
Trocino.[26] The return did not contain any particulars as to the impossibility of personal service on
Mariano Trocino within a reasonable time. Such improper service renders the same ineffective.
Due process of law requires personal service to support a personal judgment, and, when the proceeding
is strictly in personam brought to determine the personal rights and obligations of the parties, personal
service within the state or a voluntary appearance in the case is essential to the acquisition of
jurisdiction so as to constitute compliance with the constitutional requirement of due process.[27]

Moreover, inasmuch as the sheriff’s return failed to state the facts and circumstances showing the
impossibility of personal service of summons upon respondents within a reasonable time, petitioners
should have sought the issuance of an alias summons. Under Section 5, Rule 14 of the Rules of Court,
alias summons may be issued when the original summons is returned without being served on any or all
of the defendants.[28] Petitioners, however, did not do so, and they should now bear the consequences
of their lack of diligence.

The fact that Atty. Expedito Bugarin represented all the respondents without any exception does not
transform the ineffective service of summons into a valid one. It does not constitute a valid waiver or
even a voluntary submission to the trial court’s jurisdiction. There was not even the slightest proof
showing that respondents authorized Atty. Bugarin’s appearance for and in their behalf.

While Caridad Trocino may have engaged the services of Atty. Bugarin, it did not necessarily mean that
Atty. Bugarin also had the authority to represent the defendant heirs. The records show that in all the
pleadings which required verification, only Caridad Trocino signed the same. There was never a single
instance where defendant heirs signed the pleading. The fact that a pleading is signed by one defendant
does not necessarily mean that it is binding on a co-defendant. Furthermore, Caridad Trocino
represented herself as the principal defendant in her Motion to Withdraw Appeal. (Rollo, p. 80)

Since the defendant heirs are co-defendants, the trial court should have verified the extent of Atty.
Bugarin’s authority when petitioners failed to appear as early as the pre-trial stage, where the parties
are required to appear. The absence of the defendant heirs should have prompted the trial court to
inquire from the lawyer whether he was also representing the other petitioners. As co-defendant and
co-heirs over the disputed properties, the defendant heirs had every right to be present during the trial.
Only Caridad Trocino appeared and testified on her own behalf. All the defenses raised were her own,
not the defendant heirs.[29]

Consequently, the judgment sought to be executed against respondents were rendered without
jurisdiction as there was neither a proper service of summons nor was there any waiver or voluntary
submission to the trial court’s jurisdiction. Hence, the same is void, with regard to private respondents
except Caridad Trocino.

It must be pointed out that while it was the spouses Jesus and Caridad Trocino who sold the properties
to petitioners, their right to proceed against Jesus Trocino when he died was passed on to his heirs,
which includes respondents and Caridad Trocino. Such transmission of right occurred by operation of
law, more particularly by succession, which is a mode of acquisition by virtue of which the property,
rights and obligations to the extent of the value of the inheritance of a person are transmitted.[30]
When the process server personally served the summons on Caridad Trocino, the trial court validly
acquired jurisdiction over her person alone. Hence, the trial court’s decision is valid and binding with
regard to her, but only in proportion to Caridad Trocino’s share.
Action Quasi in Rem

Spouses Yu v. Pacleb, G.R. No. 172172, February 24, 2009 (Supra.)

FACTS: Respondent Baltazar N. Pacleb and his late first wife, Angelita Chan, are the registered owners of
an 18,000-square meter parcel of land in Barrio Langcaan, Dasmariñas, Cavite. The Langcaan property
became the subject of three sales: first, from Pacleb to Angelita Chan and Rebecca Del Rosario on
February 27, 1992; second, from Rebecca Del Rosario to Ruperto L. Javier on May 7, 1992; third, from
Javier and petitioner spouses Ernesto V. Yu and Elsie Ong Yu on November 10, 1992. The Spouses Yu
had already paid P600,000 out of the P900,000 purchase price. However, all three sales were not
registered. On September 11, 1992, the Spouses Yu discovered the property was tenanted by Ramon C.
Pacleb, son of Baltazar, but Ramon agreed to vacate the property provided he was paid disturbance
compensation by Javier. But Javier did not comply with his obligations.

Hence, on April 23, 1993, petitioner spouses Yu filed with the Regional Trial Court of Imus, Cavite, a
Complaint for specific performance and damages against Javier. Javier did not appear in the proceedings
and was declared in default. On September 8, 1994, the trial court rendered a Decision in favor of the
Spouses Yu.

On March 10, 1995, petitioner spouses and Ramon and the latter’s wife, Corazon Bodino, executed an
agreement wherein Ramon would surrender the property and waive any right in exchange for the
payment of P500,000.

On October 12, 1995, respondent Baltazar Pacleb filed a Complaint[15] for annulment of deed of sale
and other documents arising from it. He alleged that the deed of sale purportedly executed between
him and his late first wife and Rebecca Del Rosario was spurious as their signatures thereon were
forgeries. Respondent moved to have summons served upon Rebecca Del Rosario by publication since
the latter’s address could not be found. The trial court, however, denied his motion. Respondent
Baltazar then moved to dismiss the case, and the trial court granted the motion in its Order dated April
11, 1996, dismissing the case without prejudice.

Meanwhile, on November 23, 1995, petitioner spouses filed an action for forcible entry against
respondent Baltazar with the Municipal Trial Court (MTC). They alleged that they had prior physical
possession of the Langcaan Property through their trustee, Ramon, until the latter was ousted by
respondent in September 1995. The MTC ruled in favor of petitioner spouses, which decision was
affirmed by the Regional Trial Court.[18] However, the Court of Appeals set aside the decisions of the
lower courts and found that it was respondent who had prior physical possession of the property as
shown by his payment of real estate taxes thereon.

On May 29, 1996, respondent filed the instant case for removal of cloud from title with damages.
Respondent Baltazar alleged that the deed of sale between him and his late first wife and Rebecca Del
Rosario, who is not known to them, could not have been possibly executed on February 27, 1992, the
date appearing thereon. He alleged that on said date, he was residing in the United States and his late
first wife, Angelita Chan, died twenty (20) years ago.

On May 28, 1997, during the pendency of the instant case before the trial court, respondent died
without having testified on the merits of his case. Hence, he was substituted by his surviving spouse,
Antonieta S. Pacleb, and his children with the first wife.
On December 27, 2002, the trial court dismissed respondent’s case and held that petitioner spouses are
purchasers in good faith. The trial court ratiocinated that the dismissal of respondent’s complaint for
annulment of the successive sales at his instance “sealed the regularity of the purchase” by petitioner
spouses and that he “in effect admits that the said sale…was valid and in order.” Further, the trial court
held that the Decision in Civil Case No. 741-93 on petitioner spouses’ action for specific performance
against Javier is already final and can no longer be altered. Accordingly, the trial court ordered the
cancellation of TCT No. T-118375 in the name of respondent and the issuance of a new title in the name
of petitioner spouses. The trial court also ordered the heirs of respondent and all persons claiming
under them to surrender possession of the Langcaan Property to petitioner spouses.

On appeal by respondent, the Court of Appeals reversed and set aside the decision of the trial court.[27]
The Court of Appeals ruled that petitioner spouses are not purchasers in good faith and that the
Decision in Civil Case No. 741-93 did not transfer ownership of the Langcaan Property to them.
Accordingly, the appellate court ordered the cancellation of the annotation of the Decision in Civil Case
No. 741-93 on the title of the Langcaan Property. The Court of Appeals denied reconsideration of said
decision.[28]

Hence, this Petition. Petitioner spouses argue that they are purchasers in good faith. Further, they
contend that the Court of Appeals erred in finding that: “Ramon told him [Ernesto V. Yu] that the
property is owned by his father, Baltazar, and that he is the mere caretaker thereof”[29] since Ramon
clarified that his father was the former owner of the Langcaan Property.

Petitioner spouses argue that the decision of the Regional Trial Court in Civil Case No. 741-93 as to the
rightful owner of the Langcaan Property is conclusive and binding upon respondent even if the latter
was not a party thereto since it involved the question of possession and ownership of real property, and
is thus not merely an action in personam but an action quasi in rem.

ISSUE: Two issues are involved in the instant petition. The first is whether petitioner spouses are
innocent purchasers for value and in good faith. The second is whether the decision in the civil
complaint for specific performance filed by Spouses Yu against Javier is binding on Baltazar

HELD: We find petitioner spouses’ contentions without merit.

Spouses are not innocent purchasers for value

At the outset, we note that in petitioner Ernesto V. Yu’s testimony, he stated that he inspected the
Langcaan Property and talked with the tenant, Ramon, before he purchased the same. However, in his
Complaint for specific performance and damages which he filed against Javier, he alleged that it was
only after he had entered into an Agreement for the sale of the property and his initial payment of
P200,000 that he discovered that the property was indeed being tenanted by Ramon. This inconsistency
casts grave doubt as to whether petitioner spouses personally inspected the property before purchasing
it.

First, it should be noted that the property remains to be registered in the name of respondent despite
the two (2) Deeds of Absolute Sale[32] purporting to transfer the Langcaan Property from respondent
and his late first wife, Angelita Chan, to Rebecca Del Rosario then from the latter to Javier. Both deeds
were not even annotated in the title of the Langcaan Property.

Second, a perusal of the two deeds of absolute sale reveals that they were executed only about two (2)
months apart and that they contain identical provisions.

Third, it is undisputed that the Langcaan Property is in the possession of Ramon, the son of the
registered owner. Regardless of the representations given by the latter, this bare fact alone should have
made petitioner spouses suspicious as to the veracity of the alleged title of their vendor. Moreover, as
noted by the Court of Appeals, petitioner spouses could have easily verified the true status of the
Langcaan Property from Ramon’s wife, since the latter is their relative.

The law protects to a greater degree a purchaser who buys from the registered owner himself.
Corollarily, it requires a higher degree of prudence from one who buys from a person who is not the
registered owner, although the land object of the transaction is registered. While one who buys from
the registered owner does not need to look behind the certificate of title, one who buys from one who is
not the registered owner is expected to examine not only the certificate of title but all factual
circumstances necessary for him to determine if there are any flaws in the title of the transferor, or in
his capacity to transfer the land.

Finally, as correctly pointed out by the Court of Appeals, the dismissal of Civil Case No. 1199-95 (the
action to annul the successive sales of the property) cannot serve to validate the sale to petitioner
spouses since the dismissal was ordered because Rebecca Del Rosario and Javier could no longer be
found. Indeed, the dismissal was without prejudice.

Based on the foregoing, therefore, petitioner spouses cannot be considered as innocent purchasers in
good faith.

Action for specific performance is an action in personam and not binding on Baltazar nor to the
Langcaan property

In Domagas v. Jensen,[35] we distinguished between actions in personam and actions quasi in rem.

The settled rule is that the aim and object of an action determine its character. Whether a proceeding is
in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by
these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought
against the person and is based on the jurisdiction of the person, although it may involve his right to, or
the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court. The purpose of a proceeding in personam is to impose,
through the judgment of a court, some responsibility or liability directly upon the person of the
defendant. Of this character are suits to compel a defendant to specifically perform some act or actions
to fasten a pecuniary liability on him. An action in personam is said to be one which has for its object a
judgment against the person, as distinguished from a judgment against the propriety (sic) to determine
its state. It has been held that an action in personam is a proceeding to enforce personal rights or
obligations; such action is brought against the person.

xxx
On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the
property of such persons to the discharge of the claims assailed. In an action quasi in rem, an individual
is named as defendant and the purpose of the proceeding is to subject his interests therein to the
obligation or loan burdening the property. Actions quasi in rem deal with the status, ownership or
liability of a particular property but which are intended to operate on these questions only as between
the particular parties to the proceedings and not to ascertain or cut off the rights or interests of all
possible claimants. The judgments therein are binding only upon the parties who joined in the action.

Civil Case No. 741-93 is an action for specific performance and damages filed by petitioner spouses
against Javier to compel performance of the latter’s undertakings under their Contract to Sell. As
correctly held by the Court of Appeals, its object is to compel Javier to accept the full payment of the
purchase price, and to execute a deed of absolute sale over the Langcaan Property in their favor. The
obligations of Javier under the contract to sell attach to him alone, and do not burden the Langcaan
Property.[36]

We have held in an unbroken string of cases that an action for specific performance is an action in
personam.[37] In Cabutihan v. Landcenter Construction and Development Corporation,[38] we ruled
that an action for specific performance praying for the execution of a deed of sale in connection with an
undertaking in a contract, such as the contract to sell, in this instance, is an action in personam. Being a
judgment in personam, Civil Case No. 741-93 is binding only upon the parties properly impleaded
therein and duly heard or given an opportunity to be heard.[39] Therefore, it cannot bind respondent
since he was not a party therein. Neither can respondent be considered as privy thereto since his
signature and that of his late first wife, Angelita Chan, were forged in the deed of sale.

Asiavest Ltd. v. Court of Appeals and Heras, G.R. No. 128803, September 25, 1998
FACTS: The plaintiff Asiavest Limited filed a complaint on December 3, 1987 against the defendant
Antonio Heras praying that said defendant be ordered to pay to the plaintiff the amounts awarded by
the Hong Kong Court Judgment dated December 28, 1984 and amended on April 13, 1987. Heras was
sued in Hong Kong on the basis of his personal guarantee of the obligations of Compania Hermanos de
Navegacion S.A. Asiavest is based in Hong Kong and is not doing business and is not licensed in the
Philippines.

On March 3, 1988, the defendant filed a Motion to Dismiss. However, before the court could resolve the
said motion, a fire which partially razed the Quezon City Hall Building on June 11, 1988 totally destroyed
the office of this Court, together with all its records, equipment and properties. On July 26, 1988, the
plaintiff, through counsel filed a Motion for Reconstitution of Case Records. The Court, after allowing
the defendant to react thereto, granted the said Motion and admitted the annexes attached thereto as
the reconstituted records of this case per Order dated September 6, 1988. Thereafter, the Motion to
Dismiss, the resolution of which had been deferred, was denied by the Court in its Order of October 4,
1988.
At the pre-trial conference, the parties agreed on stipulation of facts wherein defendant admits the
existence of the judgment dated December 28, 1984 as well as its amendment dated April 13, 1987, but
not necessarily the authenticity or validity thereof.

In view of the admission by the defendant of the existence of the aforementioned judgment as well as
the legal presumption in favor of the plaintiff, the plaintiff presented only documentary evidence to
show rendition, existence, and authentication of such judgment by the proper officials concerned.

On the other hand, the defendant presented two witnesses, namely, Fortunata dela Vega, Heras
secretary and Russel Warren Lousich. The gist of Ms. dela Vega’s testimony is to the effect that no writ
of summons or copy of a statement of claim of Asiavest Limited was ever served in the office of the
Navegante Shipping Agency Limited and/or for Mr. Antonio Heras, and that no service of the writ of
summons was either served on the defendant at his residence in New Manila, Quezon City.

Mr. Lousich was presented as an expert on the laws of Hong Kong, and as a representative of the law
office of the defendant’s counsel who made a verification of the record of the case filed by the plaintiff
in Hong Kong against the defendant, as well as the procedure in serving Court processes in Hong Kong.
In his counter-affidavit,8 [Exhibit "2," OR, Civil Case No. Q-52452, 197-200.] which served as his direct
testimony per agreement of the parties,9 [TSN, 14 February 1990, 5] Lousich declared that the record of
the Hong Kong case failed to show that a writ of summons was served upon HERAS in Hong Kong or that
any such attempt was made. Neither did the record show that a copy of the judgment of the court was
served on HERAS. He stated further that under Hong Kong laws (a) a writ of summons could be served
by the solicitor of the claimant or plaintiff; and (b) where the said writ or claim was not contested, the
claimant or plaintiff was not required to present proof under oath in order to obtain judgment.

On cross-examination by counsel for ASIAVEST, Lousich testified that the Hong Kong court authorized
service of summons on HERAS outside of its jurisdiction, particularly in the Philippines. He admitted also
the existence of an affidavit of one Jose R. Fernandez of the Sycip Salazar Hernandez & Gatmaitan law
firm stating that he (Fernandez) served summons on HERAS on 13 November 1984 at No. 6, 1st St.,
Quezon City, by leaving a copy with HERAS’s son-in-law Dionisio Lopez.10 [Id., 11-12.] On redirect
examination, Lousich declared that such service of summons would be valid under Hong Kong laws
provided that it was in accordance with Philippine laws.11 [Id., 13-15.]

On 2 November 1990, the trial court concluded that the Hong Kong court judgment should be
recognized and given effect in this jurisdiction for failure of HERAS to overcome the legal presumption in
favor of the foreign judgment. As to HERAS’ contention that the Hong Kong court judgment violated the
Constitution and the procedural laws of the Philippines because it contained no statements of the facts
and the law on which it was based, the trial court ruled that since the issue related to procedural
matters, the law of the forum, i.e., Hong Kong laws, should govern. As testified by the expert witness
Lousich, such legalities were not required under Hong Kong laws. The trial court also debunked HERAS’
contention that the principle of excussion under Article 2058 of the Civil Code of the Philippines was
violated. It declared that matters of substance are subject to the law of the place where the transaction
occurred; in this case, Hong Kong laws must govern.
ASIAVEST moved for the reconsideration of the decision. It sought an award of judicial costs and an
increase in attorney’s fees. HERAS no longer opposed the motion and instead appealed the decision to
the Court of Appeals. The trial court approved Asiavest’s motion to increase the award.

On 3 April 1997, the Court of Appeals rendered its decision reversing the decision of the trial court and
dismissing ASIAVEST’s complaint without prejudice. It underscored the fact that a foreign judgment does
not of itself have any extraterritorial application. For it to be given effect, the foreign tribunal should
have acquired jurisdiction over the person and the subject matter. If such tribunal has not acquired
jurisdiction, its judgment is void. The Court of Appeals agreed with HERAS that "notice sent outside the
state to a non-resident is unavailing to give jurisdiction in an action against him personally for money
recovery." Summons should have been personally served on HERAS in Hong Kong, for, as claimed by
ASIAVEST, HERAS was physically present in Hong Kong for nearly 14 years. Since there was not even an
attempt to serve summons on HERAS in Hong Kong, the Hong Kong Supreme Court did not acquire
jurisdiction over HERAS.

The Court of Appeals agreed with the trial court that matters of remedy and procedure such as those
relating to service of summons upon the defendant are governed by the lex fori, which was, in this case,
the law of Hong Kong. Relative thereto, it gave weight to Lousich’s testimony that under the Hong Kong
law, the substituted service of summons upon HERAS effected in the Philippines by the clerk of Sycip
Salazar Hernandez & Gatmaitan firm would be valid provided that it was done in accordance with
Philippine laws. It then stressed that where the action is in personam and the defendant is in the
Philippines, the summons should be personally served on the defendant pursuant to Section 7, Rule 14
of the Rules of Court. Finally, the Court of Appeals also agreed with HERAS that it was necessary that
evidence supporting the validity of the foreign judgment be submitted, and that our courts are not
bound to give effect to foreign judgments which contravene our laws and the principle of sound
morality and public policy.

ASIAVEST forthwith filed the instant petition alleging that the Court of Appeals erred in ruling that

I. -- IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT EVIDENCE ‘SUPPORTING THE VALIDITY OF THE
JUDGMENT’;
II. -- THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE UNDER PHILIPPINE LAW;
III. -- SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON HERAS IN HONG KONG;
IV. -- THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH LEAVE OF PHILIPPINE COURTS;
V. -- THE FOREIGN JUDGMENT ‘CONTRAVENES PHILIPPINE LAWS, THE PRINCIPLES OF SOUND MORALITY,
AND THE PUBLIC POLICY OF THE PHILIPPINES.

ISSUE: WON summons were properly served on Heras

HELD:

Under paragraph (b) of Section 50, Rule 39 of the Rules of Court which was the governing law at the
time this case was decided by the trial court and respondent Court of Appeals, a foreign judgment
against a person rendered by a court having jurisdiction to pronounce the judgment is presumptive
evidence of a right as between the parties and their successors in interest by the subsequent title.
However, the judgment may be repelled by evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact. Also, Section 3(n) of Rule 131 of the New Rules of
Evidence provides that in the absence of proof to the contrary, a court, or judge acting as such, whether
in the Philippines or elsewhere, is presumed to have acted in the lawful exercise of jurisdiction. Hence,
once the authenticity of the foreign judgment is proved, the burden to repel it on grounds provided for
in paragraph (b) of Section 50, Rule 39 of the Rules of Court is on the party challenging the foreign
judgment -- HERAS in this case.

At the pre-trial conference, HERAS admitted the existence of the Hong Kong judgment. On the other
hand, ASIAVEST presented evidence to prove rendition, existence, and authentication of the judgment
by the proper officials. The judgment is thus presumed to be valid and binding in the country from which
it comes, until the contrary is shown.6 [Northwest Orient Airlines, Inc. v. Court of Appeals, 241 SCRA
192, 199 (1995)] Consequently, the first ground relied upon by ASIAVEST has merit. The presumption of
validity accorded foreign judgment would be rendered meaningless were the party seeking to enforce it
be required to first establish its validity.

The main argument raised against the Hong Kong judgment is that the Hong Kong Supreme Court did
not acquire jurisdiction over the person of HERAS. This involves the issue of whether summons was
properly and validly served on HERAS. It is settled that matters of remedy and procedure such as those
relating to the service of process upon the defendant are governed by the lex fori or the law of the
forum,7 [Ibid.] i.e., the law of Hong Kong in this case. HERAS insisted that according to his witness Mr.
Lousich, who was presented as an expert on Hong Kong laws, there was no valid service of summons on
him.

We note that there was no objection on the part of ASIAVEST on the qualification of Mr. Lousich as an
expert on the Hong Kong law. Under Sections 24 and 25, Rule 132 of the New Rules of Evidence, the
record of public documents of a sovereign authority, tribunal, official body, or public officer may be
proved by (1) an official publication thereof or (2) a copy attested by the officer having the legal custody
thereof, which must be accompanied, if the record is not kept in the Philippines, with a certificate that
such officer has the custody. The certificate may be issued by a secretary of the embassy or legation,
consul general, consul, vice consul, or consular agent, or any officer in the foreign service of the
Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of
his office. The attestation must state, in substance, that the copy is a correct copy of the original, or a
specific part thereof, as the case may be, and must be under the official seal of the attesting officer.

Nevertheless, the testimony of an expert witness may be allowed to prove a foreign law.

There is, however, nothing in the testimony of Mr. Lousich that touched on the specific law of Hong
Kong in respect of service of summons either in actions in rem or in personam, and where the defendant
is either a resident or nonresident of Hong Kong. In view of the absence of proof of the Hong Kong law
on this particular issue, the presumption of identity or similarity or the so-called processual presumption
shall come into play. It will thus be presumed that the Hong Kong law on the matter is similar to the
Philippine law.
As stated in Valmonte vs. Court of Appeals,18 [252 SCRA 92, 99 (1996)] it will be helpful to determine
first whether the action is in personam, in rem, or quasi in rem because the rules on service of summons
under Rule 14 of the Rules of Court of the Philippines apply according to the nature of the action.

An action in personam is an action against a person on the basis of his personal liability. An action in rem
is an action against the thing itself instead of against the person.19 [Dial Corp. v. Soriano, 161 SCRA 737
[1988] An action quasi in rem is one wherein an individual is named as defendant and the purpose of the
proceeding is to subject his interest therein to the obligation or lien burdening the property.20 [Brown
v. Brown, 3 SCRA 451, 456 (1961)]

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to
validly try and decide the case. Jurisdiction over the person of a resident defendant who does not
voluntarily appear in court can be acquired by personal service of summons as provided under Section 7,
Rule 14 of the Rules of Court. If he cannot be personally served with summons within a reasonable time,
substituted service may be made in accordance with Section 8 of said Rule. If he is temporarily out of
the country, any of the following modes of service may be resorted to: (1) substituted service set forth
in Section 8; (2) personal service outside the country, with leave of court; (3) service by publication, also
with leave of court; [Section 18 in relation to Section 17, Rule 14 of the Rules of Court; or (4) any other
manner the court may deem sufficient.[Section 18 in relation to Section 17, Rule 14 of the Rules of
Court. These provisions read:

SEC. 18. Residents temporarily out of the Philippines. - When an action is commenced against a
defendant who ordinarily resides within the Philippines, but who is temporarily out of it, service may, by
leave of court, be effected out of the Philippines, as under the preceding section.

SEC. 17. Extraterritorial service. - When the defendant does not reside and is not found in the
Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which
is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or
contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from
any interest therein, or the property of the defendant has been attached within the Philippines, service
may, by leave of court, be effected out of the Philippines by personal service as under section 7; or by
publication in a newspaper of general circulation in such places and for such time as the court may
order, in which case a copy of the summons and order of the court shall be sent by registered mail to
the last known address of the defendant, or in any other manner the court may deem sufficient. Any
order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days
after notice, within which the defendant must answer.]

However, in an action in personam wherein the defendant is a non-resident who does not voluntarily
submit himself to the authority of the court, personal service of summons within the state is essential to
the acquisition of jurisdiction over her person.24 [Boudart v. Tait, 67 Phil. 170, 174-175 1 (1939)] This
method of service is possible if such defendant is physically present in the country. If he is not found
therein, the court cannot acquire jurisdiction over his person and therefore cannot validly try and decide
the case against him.25 [1 MORAN 456.] An exception was laid down in Gemperle v. Schenker26 [19
SCRA 45 (1967)] wherein a non-resident was served with summons through his wife, who was a resident
of the Philippines and who was his representative and attorney-in-fact in a prior civil case filed by him;
moreover, the second case was a mere offshoot of the first case.
On the other hand, in a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant
is not a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over
the res. Nonetheless, summons must be served upon the defendant not for the purpose of vesting the
court with jurisdiction but merely for satisfying the due process requirements.27 [Valmonte v. Court of
Appeals, supra note 18 at 100-101.] Thus, where the defendant is a non-resident who is not found in the
Philippines and (1) the action affects the personal status of the plaintiff; (2) the action relates to, or the
subject matter of which is property in the Philippines in which the defendant has or claims a lien or
interest; (3) the action seeks the exclusion of the defendant from any interest in the property located in
the Philippines; or (4) the property of the defendant has been attached in the Philippines -- service of
summons may be effected by (a) personal service out of the country, with leave of court; (b) publication,
also with leave of court; or (c) any other manner the court may deem sufficient.28 [Section 17, Rule 14
of the Rules of Court.]

In the case at bar, the action filed in Hong Kong against HERAS was in personam, since it was based on
his personal guarantee of the obligation of the principal debtor. Before we can apply the foregoing rules,
we must determine first whether HERAS was a resident of Hong Kong.

Fortunata de la Vega, HERAS’s personal secretary in Hong Kong since 1972 until 1985 testified that
HERAS was the President and part owner of a shipping company in Hong Kong during all those times
that she served as his secretary. He had "business commitments, undertakings, conferences, and
appointments until October 1984 when [he] left Hong Kong for good."

Significantly, in the pre-trial conference, the parties came up with stipulations of facts, among which was
that "the residence of defendant, Antonio Heras, is New Manila, Quezon City."39 [OR, 127.]

We note that the residence of HERAS insofar as the action for the enforcement of the Hong Kong court
judgment is concerned, was never in issue. He never challenged the service of summons on him through
a security guard in his Quezon City residence and through a lawyer in his office in that city. In his Motion
to Dismiss, he did not question the jurisdiction of the Philippine court over his person on the ground of
invalid service of summons. What was in issue was his residence as far as the Hong Kong suit was
concerned. We therefore conclude that the stipulated fact that HERAS "is a resident of New Manila,
Quezon City, Philippines" refers to his residence at the time jurisdiction over his person was being
sought by the Hong Kong court. With that stipulation of fact, ASIAVEST cannot now claim that HERAS
was a resident of Hong Kong at the time.

Accordingly, since HERAS was not a resident of Hong Kong and the action against him was, indisputably,
one in personam, summons should have been personally served on him in Hong Kong. The
extraterritorial service in the Philippines was therefore invalid and did not confer on the Hong Kong
court jurisdiction over his person. It follows that the Hong Kong court judgment cannot be given force
and effect here in the Philippines for having been rendered without jurisdiction.

Even assuming that HERAS was formerly a resident of Hong Kong, he was no longer so in November
1984 when the extraterritorial service of summons was attempted to be made on him. As declared by
his secretary, which statement was not disputed by ASIAVEST, HERAS left Hong Kong in October 1984
"for good."40 [Exhibit "1."] His absence in Hong Kong must have been the reason why summons was not
served on him therein; thus, ASIAVEST was constrained to apply for leave to effect service in the
Philippines, and upon obtaining a favorable action on the matter, it commissioned the Sycip Salazar
Hernandez & Gatmaitan law firm to serve the summons here in the Philippines.
In Brown v. Brown,41 [Supra note 20.] the defendant was previously a resident of the Philippines.
Several days after a criminal action for concubinage was filed against him, he abandoned the Philippines.
Later, a proceeding quasi in rem was instituted against him. Summons in the latter case was served on
the defendant’s attorney-in-fact at the latter’s address. The Court held that under the facts of the case,
it could not be said that the defendant was "still a resident of the Philippines because he ha[d] escaped
to his country and [was] therefore an absentee in the Philippines." As such, he should have been
"summoned in the same manner as one who does not reside and is not found in the Philippines."

Similarly, HERAS, who was also an absentee, should have been served with summons in the same
manner as a non-resident not found in Hong Kong. Section 17, Rule 14 of the Rules of Court providing
for extraterritorial service will not apply because the suit against him was in personam. Neither can we
apply Section 18, which allows extraterritorial service on a resident defendant who is temporarily absent
from the country, because even if HERAS be considered as a resident of Hong Kong, the undisputed fact
remains that he left Hong Kong not only "temporarily" but "for good."

Mixed Action

BA Finance v. Court of Appeals and Reyes, G.R. No. 102998, July 5, 1996
FACTS: The spouses Reynaldo and Florencia Manahan executed, on 15 May 1980, a promissory note 4
binding themselves to pay Carmasters, Inc., the amount of P83,080.00 in thirty-six monthly installments
commencing 01 July 1980. To secure payment, the Manahan spouses executed a deed of chattel
mortgage 5 over a motor vehicle, a Ford Cortina. Carmasters later assigned 6 the promissory note and
the chattel mortgage to petitioner BA Finance Corporation with the conformity of the Manahans. When
the latter failed to pay the due installments, petitioner sent demand letters. The demands not having
been heeded, petitioner, on 02 October 1987, filed a complaint for replevin with damages against the
spouses, as well as against a John Doe. Upon petitioner's motion and the filing of a bond in the amount
of P169,161.00 the lower court issued a writ of replevin. The court, however, cautioned petitioner that
should summons be not served on the defendants within thirty (30) days from the writ's issuance, the
case would be dismissed to failure to prosecute.
The service of summons upon the spouses Manahan was caused to be served by petitioner at No. 35
Lantana St., Cubao, Quezon City. The original of the summons had the name and the signature of private
respondent Roberto M. Reyes indicating that he received, on 14 October 1987, a copy of the summons
and the complaint. 9 Forthwith, petitioner, through its Legal Assistant, Danilo E. Solano, issued a
certification to the effect that it had received from Orson R. Santiago, the deputy sheriff of the Regional
Trial Court of Manila, Branch 20, the Ford Cortina seized from private respondent Roberto M. Reyes, the
John Doe referred to in the complaint, 10 in Sorsogon, Sorsogon. 11 On 20 October 1987, the lower
court came out with an order of seizure.

Alleging possession in good faith, private respondent filed, on 26 October 1987, a motion for an
extension of time within which to file his answer and/or a motion for intervention. The court granted
the motion.

A few months later, or on 18 February 1988, the court issued an order which dismissed the case for
failure to prosecute and ordered the return of the vehicle to respondent Reyes because the principal
defendants, the Spouses Manahan were still not served summons inspite of the lapse of 4 months.
On 26 February 1988, petitioner filed a notice of dismissal of the case "without prejudice and without
pronouncement as to costs, before service of Summons and Answer, under Section 1, Rule 17, of the
Rules of Court." 13 It also sought in another motion the withdrawal of the replevin bond. In view of the
earlier dismissal of the case (for petitioner's failure to prosecute), the court, on 02 March 1988, merely
noted the notice of dismissal and denied the motion to withdraw the replevin bond considering that the
writ of replevin had meanwhile been implemented

On 09 March 1988, private respondent filed a motion praying that petitioner be directed to comply with
the court order requiring petitioner to return the vehicle to him. In turn, petitioner filed, on 14 March
1988, a motion for the reconsideration of the orders of 18 February 1988 and 02 March 1988
contending that: (a) the dismissal of the case was tantamount to adjudication on the merits that thereby
deprived it with the remedy to enforce the promissory note, the chattel mortgage and the deed of
assignment, under Section 3, Rule 117, of the Rules of Court; (b) the order to return the vehicle to
private respondent was a departure from jurisprudence recognizing the right of the mortgagor to
foreclose the property to respond to the unpaid obligation secured by the chattel mortgage, and (c)
there were no legal and factual bases for the court's view that the filing of the replevin case was
"characterized (by) evil practices."

On 20 April 1988, the court granted petitioner's motion for reconsideration and accordingly recalled the
order directing the return of the vehicle to private respondent, set aside the order dismissing the case,
directed petitioner "to cause the service of summons together with a copy of the complaint on the
principal defendants within five (5) days from receipt" 16 thereof at petitioner's expense, and ordered
private respondent to answer the complaint.

A few months later, or on 02 August 1988, petitioner filed a motion to declare private respondent in
default and allowed petitioner to present evidence ex parte. On 27 February 1989, the trial court
rendered a decision dismissing the complaint against the Manahans for failure of petitioner to prosecute
the case against them. It also dismissed the case against private respondent for failure of petitioner to
show any legal basis for said respondent's liability.

In its appeal to the Court of Appeals, petitioner has asserted that a suit for replevin aimed at the
foreclosure of the chattel is an action quasi in rem which does not necessitate the presence of the
principal obligors as long as the court does not render any personal judgment against them. It is next
contended by appellant that as between appellant, as mortgagee, and John Doe, whose right to
possession is dubious if not totally non-existent, it is the former which has the superior right of
possession.

The CA dismissed the appeal holding that Reyes was a possessor in good faith and that the action is
quasi in rem requiring personal service to the defendants for the court to acquire jurisdiction. The
appellate court, subsequently, denied petitioner's motion for reconsideration.

In the instant appeal, petitioner insists that a mortgagee can maintain an action for replevin against any
possessor of the object of a chattel mortgage even if the latter were not a party to the mortgage.
ISSUE: WON the action for replevin can be maintained against a possessor not a party to the chattel
mortgage

HELD:
Replevin, broadly understood, is both a form of principal remedy and of a provisional relief. It may refer
either to the action itself, i.e., to regain the possession of personal chattels being wrongfully detained
from the plaintiff by another, or to the provisional remedy that would allow the plaintiff to retain the
thing during the pendency of the action and hold it pendente lite. 20 The action is primarily possessory
in nature and generally determines nothing more than the right of possession. Replevin is so usually
described as a mixed action, being partly in rem and partly in personam in rem insofar as the recovery
of specific property is concerned, and in personam as regards to damages involved. As an "action in
rem," the gist of the replevin action is the right of the plaintiff to obtain possession of specific personal
property by reason of his being the owner or of his having a special interest therein. 21 Consequently,
the person in possession of the property sought to be replevied is ordinary the proper and only
necessary party defendant, and the plaintiff is not required to so join as defendants other persons
claiming a right on the property but not in possession thereof. Rule 60 of the Rules of Court allows an
application for the immediate possession of the property but the plaintiff must show that he has a good
legal basis, i.e., a clear title thereto, for seeking such interim possession.

Where the right of the plaintiff to the possession of the specific property is so conceded or evident, the
action need only be maintained against him who so possesses the property. In rem actio est per quam
rem nostram quae ab alio possidetur petimus, et semper adversus eum est qui rem possidet. In
Northern Motors, Inc. vs. Herrera, 22 the Court has said:

There can be no question that persons having a special right of property in the goods the recovery of
which is sought; such as a chattel mortgagee, may maintain an action for replevin therefor. Where the
mortgage authorizes the mortgagee to take possession of the property on default, he may maintain an
action to recover possession of the mortgaged chattels from the mortgagor or from any person in whose
hands he may find them. 23

In effect then, the mortgagee, upon the mortgagor's default, is constituted an attorney-in-fact of the
mortgagor enabling such mortgagee to act for and in behalf of the owner. Accordingly, that the
defendant is not privy to the chattel mortgage should be inconsequential. By the fact that the object of
replevin is traced to his possession, one properly can be a defendant in an action for replevin. It is here
assumed that the plaintiffs right to possess the thing is not or cannot be disputed.

In case the right of possession on the part of the plaintiff, or his authority to claim such possession or
that of his principal, is put to great doubt (a contending party might contest the legal bases for plaintiffs
cause of action or an adverse and independent claim of ownership or right of possession is raised by
that party), it could become essential to have other persons involved and accordingly impleaded for a
complete determination and resolution of the controversy.

For instance, in Servicewide Specialists, Inc., vs. Court of Appeals, et al., G.R. No. 103301, 08 December
1995, this Court ruled.

While, in its present petition for review on certiorari, Servicewide has raised a number of points, the
crucial issue still remains, however, to be whether or not an action filed by the mortgagee for replevin to
effect a foreclosure of the property covered by the chattel mortgage would require that the mortgagor
be so impleaded as an indispensable party thereto.

Rule 60 of the Rules of Court allows a plaintiff, in an action for the recovery of possession of personal
property, to apply for a writ of replevin if it can be shown that he is the owner of the property claimed . .
. or is entitled to the possession thereof.' The plaintiff need not be the owner so long as he is able to
specify his right to the possession of the property and his legal basis therefor. The question then, insofar
as the matter finds relation to the instant case, is whether or not the plaintiff (herein petitioner) who
has predicated his right on being the mortgagee of a chattel mortgage should implead the mortgagor in
his complaint that seeks to recover possession of the encumbered property in order to effect its
foreclosure.

The answer has to be in the affirmative. In a suit for replevin, a clear right of possession must be
established. A foreclosure under a chattel mortgage may properly be commenced only once there is
default on the part of the mortgagor of his obligation secured by the mortgage. The replevin in the
instant case has been sought to pave the way for the foreclosure of the object covered by the chattel
mortgage. The conditions essential for that foreclosure would be to show, firstly, the existence of the
chattel mortgage and, secondly, the default of the mortgagor. These requirements must be established
since the validity of the plaintiffs exercise of the right of foreclosure are inevitably dependent thereon. It
would thus seem, considering particularly an adverse and independent claim of ownership by private
respondent that the lower court acted improvidently when it granted the dismissal of the complaint
against Dollente, albeit on petitioner's (then plaintiff) plea, on the ground that the "non-service of
summons upon Ernesto Dollente (would) only delay the determination of the merits of the case, to the
prejudice of the parties."

A chattel mortgagee, unlike a pledgee, need not be in, nor entitled to the possession of the property
unless and until the mortgagor defaults and the mortgagee thereupon seeks to foreclose thereon. Since
the mortgagee's right of possession is conditioned upon the actual fact of default which itself may be
controverted, the inclusion of other parties like the debtor or the mortgagor himself, may be required in
order to allow a full and conclusive determination of the case. When the mortgagee seeks a replevin in
order to effect the eventual foreclosure of the mortgage, it is not only the existence of, but also the
mortgagor's default on, the chattel mortgage that, among other things, can properly uphold the right to
replevy the property. The burden to establish a valid justification for that action lies with the plaintiff. An
adverse possessor, who is not the mortgagor, cannot just be deprived of his possession, let alone be
bound by the terms of the chattel mortgage contract, simply because the mortgagee brings up an action
for replevin.

The appellate court, accordingly, acted well in arriving at its now questioned judgment.

Kinds of Actions as to Place of Filing of Complaint

a) Local Action
b) Transitory Action

Sec. 5. Commencement of action

A civil action is commenced by the filing of the original complaint in court. If an additional defendant is
impleaded in a later pleading, the action is commenced with regard to him on the dated of the filing of
such later pleading, irrespective of whether the motion for its admission, if necessary, is denied by the
court.

Board of Liquidators, Trustee of Land Settlement and Devt Corp v. Zulueta, G.R. No. L-30738, July 30,
1982
FACTS: On November 23, 1955, a decision was rendered by the Court of First Instance of Manila, Branch
VII, in Civil Case No. 22237 (first case), entitled "Land Settlement and Development Corporation,
Plaintiff, versus Jose Zulueta, Defendant", based on an amicable settlement between the parties,
pursuant to which defendant-appellee was ordered to pay the Land Settlement and Development
Corporation the sum of P10,391.62 with interest at four (4%) per cent per annum from January 13, 1948
until the same is fully paid in the manner stated in the amicable settlement and subject to the terms
thereof, without pronouncement as to costs.

On March 5, 1965, herein plaintiff-appellant, as trustee of the Land Settlement and Development
Corporation, filed a complaint (second case) in the Court of First Instance of Manila against defendant-
appellee to revive the judgment rendered in Civil Case No. 22237 which had not been enforced by that
time. Difficulty was encountered in serving summons on defendant-appellee, thereby prompting the
trial court to dismiss the second civil case in an order dated March 12, 1966. Plaintiff-appellant's motion
for reconsideration of the order of dismissal having been denied, plaintiff-appellant filed a new
complaint, docketed as Civil Case No. 66341 (third case) which is the present action and which is also for
revival and enforcement of the judgment rendered in Civil Case No. 22237.

Zulueta filed a motion to dismiss on the ground of prescription of the third case. The trial court denied
the motion to dismiss holding that the second case filed on March 5, 1965 interrupted the running of
the period of prescription, and it started to run again only after its dismissal on March 12, 1966; and,
therefore, when the instant case was filed on May 10, 1966, only 9 years, 5 months and 11 days had
expired from the time that the judgment in the first case had become final and executory.

Zulueta filed an Answer with counterclaim but on the date when presentation of evidence was schedule,
November 28, 1968, he did not appear, hence the court declared the case submitted for decision.

The trial court issued its decision dated December 27, 1968 dismissing the case due to prescription
because the dismissal of the action for lack of prosecution did not stop the period of prescription citing
Conspecto vs. Fruto which was invoked by Zulueta:

'While the commencement of the action would of course, stop the running of the statute of limitations,
its dismissal or voluntary abandonment by plaintiff would leave the parties in exactly the same position
as if no action had been commenced at all. Said action by reason of its dismissal or abandonment took
no time out of the period of prescription.'

A motion for the reconsideration of the said decision was denied by the trial court. On August 4, 1969,
plaintiff-appellant filed the present petition for review. The petition was given due course in Our
Resolution of August 6, 1969 and the petitioner filed its brief as plaintiff-appellant. No brief was filed in
behalf of defendant-appellee.
ISSUE: whether or not plaintiff-appellant's cause of action in Civil Case No. 65341 had already
prescribed.

HELD:

Article 1144 of the New Civil Code provides that an action based upon a judgment "must be brought
within ten (10), years from the time the right of action accrues." The prescriptive period starts from the
time that the judgment becomes final and executory. In the case at bar, the decision sought to be
enforced, to wit, that rendered in Civil Case No. 22237, being based on a compromise agreement, the
same became final and executory on the date of its rendition on November 23, 1955.

There is no question that when the first revival action, docketed as Civil Case No. 60112, was filed on
March 5, 1965, only 9 years, 3 months and 12 days had elapsed from November 23, 1955. It is also a fact
that when the second action to revive judgment was filed on May 10, 1965, it was already more than 10
years from the finality of the decision rendered in Civil Case No. 22237 which is sought to be revived
therein.

Article 1155 of the New Civil Code expressly provides that the "prescription of action is interrupted
when they are filed before the court . . ." (Sotelo vs. Dizon, 67 Phil. 537; Cabrera vs. Tianco, 8, SCRA
582.) Such interruption lasts during the pendency of the action. (FIorendo vs. Organo, 9 Phil. 483.)

These principles apply to the prescription of the action to revive or enforce a judgment. (Marc
Donnelly vs. Court of First Instance of Manila, 44 SCRA 381.) The facts in the last cited case are
almost similar to the present action. Resolving the issue in Marc Donelly of whether or not the
first action for revival of judgment interrupted the period of prescription, We reversed the
dismissal of the second action to revive judgment upon the following considerations:

"The sole issue to be resolved herein is whether or not prescription has set in to bar the filing by
petitioner of his second action to revive the judgment in Civil Case No. 23466. An action for the
revival of a judgment prescribes in ten (10) years (Art. 1144[3], Civil Code). The ten-year period
is counted either from the date the judgment became final or from the date of its entry (Vda.
de Decena vs. De los Angeles, etc., et al., L-29317, May 29, 1971, 39 SCRA 95, 99). The
prescription of an action is interrupted, among others, by its filing before the court (Art. 1155,
Civil Code). issue

Applying the foregoing tenets to the case at bar, we find that petitioner's filing of the first action
for revival of the judgment in Civil Case No. 23466 was well within the ten-year prescriptive
period. Final judgment was entered by the Court of Appeals on August 5, 1957. Petitioners filed
Civil Case No. 70028 (his first action to revive the judgment) on July 8, 1967. Therefore, as of the
latter date, only nine (9) years, eleven (11) months and three (3) days had elapsed. The ten-year
prescriptive period was effectively suspended by the filing of Civil Case No. 70028.

Let us now consider the second complaint (Civil Case No. 76166) for revival of the same
judgment. The first such action (Civil Case No. 70028) was dismissed by the court without
prejudice; and copy of the dismissal order was received by petitioner on March 19, 1969. On
March 31, 1969, petitioner filed the second action for revival of the judgment. When a case is
ordered dismissed without prejudice, the plaintiff may file his complaint against the same
defendant in a separate action, even if the order has already become final and executory
 (Rapadaz Vda. de Rapisura vs. Nicolas, etc., et al., L-22594, April 29, 1966, 16 SCRA 798, 801). As
it is, the second case to revive the judgment was filed even before the order of dismissal in the
first case could become final, for only twelve (12) days had expired between March 19, 1969,
when petitioner received notice of the dismissal order, and March 31, 1969, when he filed the
second motion. In any event, the dismissal of the first case being without prejudice, the filing of
the second action was still within the original period of ten (10) years. At any rate, when the
defendant's address cannot with due diligence be ascertained and no property of his can be
found, the period of prescription is tolled under article 1108(2) of the new Civil Code.

As may be noted from the decision dismissing Civil Case No. 65341, the trial court relied on the rulings in
Conspecto vs. Fruto, et al., 31 Phil. 148 and Oriental Commercial Co. Inc. vs. Jureidini, Inc., et al. 71 Phil.
25. Said reliance is misplaced, the facts in the said cases being different from those appearing in the one
under consideration. In Fruto, it was held that the running of the period of limitation was not
interrupted by an action filed within the said period because the said action was discontinued by "its
dismissal or voluntary abandonment by the plaintiff." In the case under consideration, the first action
for revival, Civil Case No. 60112, was dismissed not by reason of abandonment. As in the case of Marc
Donnelley, the dismissal of the first revival action as due to the inability to serve summons on the
defendant-appellee.

Neither may plaintiff-appellant be charged with failure to recommence its suit within a reasonable time
after its dismissal. The record reveals that plaintiff-appellant received notice of the dismissal of Civil Case
No. 60112 on March 21, 1966. Four (4) days later, or on March 25, 1966, plaintiff-appellant filed a
motion for reconsideration of said order of dismissal. Plaintiff-appellant received the order denying the
motion for reconsideration on April 26, 1966. On May 10, 1966, plaintiff-appellant filed its second action
for revival, docketed as Civil Case No. 65341.

Nor may the ruling in Jureidini defeat herein plaintiff-appellant's cause of action. In Jureidini the plaintiff
filed three (3) cases within the period of prescription, all of which were dismissed, the first on motion of
the plaintiff, and the other two (2) for failure to prosecute. When the fourth action was filed beyond the
prescriptive period, it was held that the act of the plaintiff in failing to prosecute his first three (3) cases
may not be interpreted except as a waiver on its part and did not place the plaintiff on the same
situation where it was before the filing of the first of the three actions; and, following the view
expressed in the analogous case of Conspecto vs. Fruto, 31 Phil. 150, the fourth action should be
dismissed on the ground of prescription. It is to be noted that as in Fruto, the filing of the actions
within the prescriptive period was considered as not interrupting the running of the period of
limitation due to the circumstance that the plaintiff is deemed to have abandoned or waived its claim.

The record further reveals that plaintiff-appellant made written extra-judicial demands upon defendant-
appellee by means of letters. Such written extrajudicial demand also produced the result of interrupting
the period of prescription. (Art. 1155, Civil Code; Marella vs. Agoncillo, 44 Phil;. 844.)

There can be no serious dispute that the plaintiff Board of Liquidators can prosecute this action as
trustee of the abolished Land Settlement and Development Corporation, known for short as LASEDECO.
The principal issue is whether or not the action has prescribed." (Decision, Rollo, pp. 79-80.)
The defendant-appellee presented no contradictory evidence, he having failed to appear for the trial of
the case scheduled on November 28, 1968 despite notice, thereby prompting the trial court to consider
the case submitted for decision on the basis of the evidence presented by the plaintiff. The facts found
by the trial court suffice to justify the rendition of a decision on the merits which the trial court failed to
do in view of its ruling that the action is barred by the statute of limitations.

Sotelo vs. Dizon, 67 Phil. 537;

FACTS: On July 22, 1938, the respondent Harrie S. Everett brought civil case No. 53411 in the Court of
First Instance of Manila against Lazarus Joseph, to recover the ownership and possession of the
cinematograph business established in the Fox and Savory theatres, with the equipment and existing
funds. As the then defendant alleged that the cinematograph business had been transferred by him to
the partnership Joseph Brothers, the respondent Everett amended his complaint by including as
defendants the said partnership and its partners, John Joseph and George Joseph and asked that R.
Marino Corpus be appointed receiver to take charge of the properties in litigation during the pendency
of the case.

On December 16, 1938 the court appointed R. Marino Corpus receiver ordering him to take possession
thereof and administer them. When the receiver tried to take possession of the properties, Sotelo
claimed he is the owner thereof by purchase from Joseph Brothers on December 15, 1938.

Everett filed a supplementary complaint on December 23, 1938 including the petitioner as defendant
and asking that the order of December 16th appointing a receiver be confirmed. On January 3, 1939 the
respondent judge issued an order allowing the supplementary complaint but the petitioner could not be
found the next day hence Everett filed a motion to place the receiver in possession. On January 5, 1939,
the court granted Everett’s motion but Sotelo refused receipt of the supplemental complaint, but
rather, he filed the instant petition for certiorari.

Sotelo argues that the order to place the receiver in possession is illegal because on said date there was
yet no pending action against him and bacause he was not duly served with the supplementary
complaint.

citing in his support sections 173 and 389 of the Code of Civil Procedure reading as follows:

SEC. 173. Receivers, who may appoint. - A judge of the Supreme Court, or a judge of the Court of First
Instance in which the action is pending, may appoint one or more receivers of the property, real,
personal, or mixed, which is the subject of the action, in the manner and under the conditions
hereinafter provided.

SEC. 389. Commencement of actions. - Civil actions must be commenced by filing a complaint with the
clerk of the court in which the action is to be instituted. The date of the filing of the complaint upon
which process is issued and duly served shall be deemed to be the true time of the commencement of
the action.

ISSUE: WON civil actions commence on the filing of the complaint or upon service of summons

HELD:
We find no merit in this contention. Under section 389, a civil action is deemed legally commenced from
the date of the filing and docketing of the complaint with the clerk of the Court of First Instance, without
taking into account the issuance and service of the summons. Section 389 of the Code of Civil Procedure
is taken from section 405 of the California Code of Civil Procedure, and the Supreme Court of said State
has so interpreted it in Tinn vs. United States District Attorney (148 Cal., 773); Dowling vs. Comerford
(99 Cal., 204); Ex parte Fil Ki (79 Cal., 584); and Nash vs. El Dorado County (24 Fed. 252; 1 C. J., sec. 403,
pp. 1155, 1156).chanroblesvirtualawlibrary chanrobles virtual law library

Under the facts the respondent judge had jurisdiction to issue the orders of January 3 and 5, 1939, and
he did not exceed the same or the discretion conferred upon him by law in such cases.

Cabrera vs. Tiano, 8 SCRA 582

FACTS: Petitioners are sisters. Their father, Ciriaco, and their 3 other siblings, (Isabelo, Lourdes and
Cresencia), purportedly sold a parcel belonging to the conjugal property, to herein defendant Mariano
T. Tiano, for P3,500.00. At the time of the sale, petitioner Cresencia was a minor, and co-petitioner,
Josefina, did not sign the deed of sale, and did not know about the transaction.

Under date of June 20, 1957, in action for "Partition and Recovery of Real Estate, with Damages" was
filed by Josefina and Cresencia against Tiano. In the complaint, it was alleged that they were entitled to
a portion of the land, since Josefina did not sign the sale and Crescencia was a minor; that defendant
Tiano had usurped the portions belonging to them, to their damage and prejudice in the amount of
P7,000.00, which consisted of their share in the produce of the property, during the period of
defendant's possession.

In answer, defendant claimed that the plaintiffs herein knew of the sale and that he was not aware of
any defect in the title of his vendors. As a Special Defense, defendant alleged that he was the absolute
owner of the land by acquisitive prescription of ten (10) years, from the date of purchase.
The trial rendered a decision in favor of the sisters and declared them entitled to partition of their 1/8
share each of the entire property. Defendant moved for a reconsideration of the decision, contending
that prescription had already set in, and his (defendant's) title, had become irrevocable.

The motion for reconsideration was denied on March 5, 1960. The Commissioner's report partitioning
the property was submitted on April 11, 1960. Defendant perfected his appeal on May 9, 1960, and on
May 14, 1960, the same was given due course and elevated to this Court.

In claiming that prescription had taken place, appellant insists that the period should be counted from
the date the summons was served on him, which was on July 2, 1957. It was agreed, however, that the
complaint for the recovery of the land in question was presented on June 20, 1957, and the summons
was sent out the following day.

ISSUE: WON the action has prescribed

HELD:

The Civil Code, provides that—

The prescription of actions is interrupted when they are filed before the court, when there is a written
extra-judicial demand by the creditors, and when there is any written acknowledgment of the debt of
the debtor. (Art. 1155)

Since the sale of the property took place on July 2, 1947, the ten (10) year period within which to file the
action had not yet elapsed on June 20, 1957, when the complaint was presented. While it is true that
the sale in question had taken place before the effectivity of the new Civil Code and the law then on
matter of prescription was Act No. 190, said law, however, contained no specific provision on the
interruption of the prescriptive period; and the established rule then, as it is the rule now, is that the
commencement of the suit prior to the expiration of the applicable limitation period, interrupts the
running of the statute, as to all parties to the action.

The fact that summons was only served on defendant on July 2, 1957, which incidentally and/or
coincidentally was the end of the ten (10) year period, is of no moment, since civil actions are deemed
commenced from date of the filing and docketing of the complaint with the Clerk of Court, without
taking into account the issuance and service of summons (Sotelo v. Dizon, et al., 67 Phil. 573). The
contention that the period was not interrupted, until after defendant received the summons is,
therefore, without legal basis.

Defendant-appellant claims that he had already acquired full ownership of the property in question
because the judicial summons, which could civilly interrupt his possession (Art. 1123, N.C.C.), was
received by him only on July 2, 1957. Conceding, for the purposes of argument, that the article cited is
applicable, still appellant cannot avail himself of acquisitive prescription, for the simple reason that no
finding was made by the trial court that his possession from the time of the sale (July 2, 1947), was with
just title, in good faith, in the concept of an owner, public, peaceful, adverse and uninterrupted (Arts.
1117 & 1118, N.C.C.). Good faith is a question of fact which must be proved (Art. 1127, N.C.C.). For the
purposes of acquisitive prescription, just title must also be proved, it is never presumed (Art. 1131,
N.C.C.). The factual requisite of adverse possession do not appear in the stipulation of facts and the trial
court did not make findings to this effect. These circumstances could and/or should have been
ventilated, had the appeal been taken to the Court of Appeals. Defendant, however, having chosen to
appeal the decision directly to this Court, he is deemed to have waived questions of fact and raised only
questions of law. There being no factual finding by the lower court of the presence of the requisites of
acquisitive prescription this Court has to reject, as did the trial court, said defense. Moreover, on July 2,
1957, when the summons was received, the ten (10) years necessary for acquisitive prescription had not
yet elapsed. In fact, said period terminated on that very day.

Manchester Development v. Court of Appeals, G.R. No. 75919, May 7, 1987 (Supra.)
FACTS: The case is an action for torts and damages and specific performance totalling in the amount of
P78,750,000.00 but the docket fee paid upon filing of complaint was only P410.00 because the lower
court considered the action to be merely one for specific performance where the amount involved is not
capable of pecuniary estimation. After an investigation due to reports of under-assessment of filing fees,
the Supreme 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. Still no amount of damages were specified in the prayer. Said amended
complaint was admitted by the trial court but on appeal, the Court of Appeals ruled that the filing fees
should be based on the original complaint.

Petitioner invokes the ruling in Magaspi vs. Ramolete wherein the amended complaint was made the
basis of the computation of the filing fee.

ISSUE: WON the amended complaint should be the basis of the filing fees.

HELD:

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 Magaspi case was an action for recovery of ownership and possession of a parcel of land with
damages. 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. 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. The trial court later 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. 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. 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." 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.

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. 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.

Nestle Phils. v. FY Sons, G.R. No. 150780, May 5, 2006

FACTS: Petitioner and respondent entered into a distributorship agreement. Nestle terminated the
agreement after FY Sons refused to pay the fine for supplying retail outlets proscribed by Nestle. Nestle
demanded payment of the balance of respondent’s accounts and When the alleged accounts were not
settled, petitioner applied the P500,000 time deposit which FY Sons gave as security for its credit
purchases as partial payment.

FY Sons filed a complaint for damages against Nestle in the amount of P4,246,015.60 with a prayer for
an award of 1,000,000, alleging bad faith. The Makati City RTC ruled in favor of the respondent.

Petitioner appealed the decision to the CA. On January 11, 2001, the CA rendered a decision affirming
the RTC’s decision and ordering Nestle to refund the 500,000 time deposit to FY Sons and deleting the
payment of the balance of FY Sons’ account since Nestle failed to prove that respondent had an
outstanding balance. Hence the instant case.

Petitioner asserts that the documentary evidence presented by respondent to prove actual damages in
the amount of P4,246,015.60 should not have been considered because respondent’s complaint only
prayed for an award of P1,000,000. It further contends that the court acquires jurisdiction over the claim
only upon payment of the prescribed docket fee.

ISSUE: WON the CA erred in awarding damages and not awarding Nestle’s counterclaim

HELD: Indeed, a court acquires jurisdiction over the claim of damages upon payment of the correct
docket fees. In this case, it is not disputed that respondent paid docket fees based on the amounts
prayed for in its complaint. Respondent adduced evidence to prove its losses. It was proper for the CA
and the RTC to consider this evidence and award the sum of P1,000,000. Had the courts below awarded
a sum more than P1,000,000, which was the amount prayed for, an additional filing fee would have
been assessed and imposed as a lien on the judgment. However, the courts limited their award to the
amount prayed for.

Both the RTC and CA found that respondent had satisfactorily proven the factual bases for the damages
adjudged against the petitioner. This is a factual matter binding and conclusive upon this Court.[23] It is
well-settled that –

. . . findings of fact of the trial court, when affirmed by the Court of Appeals, are binding upon the
Supreme Court. This rule may be disregarded only when the findings of fact of the Court of Appeals are
contrary to the findings and conclusions of the trial court, or are not supported by the evidence on
record. But there is no ground to apply this exception to the instant case. This Court will not assess all
over again the evidence adduced by the parties particularly where as in this case the findings of both the
trial court and the Court of Appeals completely coincide.[24]

Likewise, the determination of the amount of damages commensurate with the factual findings upon
which it is based is primarily the task of the trial court.[25] Considering that the amount adjudged is not
excessive, we affirm its correctness.

Moreover, given that petitioner was not able to prove that respondent had unpaid accounts in the
amount of P995,319.81, the seizure of the P500,000 time deposit was improper. As a result, the refund
of this amount with interest is also called for.

Finally, petitioner’s counterclaims are necessarily without merit. It failed to prove the alleged
outstanding accounts of respondent. Accordingly, it is not entitled to the supposed unpaid balance of
P495,319.81 with interest.

Petitioner, being at fault and in bad faith, and there being no proof that respondent was guilty of any
wrongdoing, cannot claim moral and exemplary damages and attorney’s fees from respondent.

Sun Insurance v. Asuncion, G.R. Nos. 79937-38, February 13, 1989

FACTS: petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a complaint with the Regional Trial
Court of Makati, Metro Manila for the consignation of a premium refund on a fire insurance policy with
a prayer for the judicial declaration of its nullity against private respondent Manuel Uy Po Tiong.

Tiong, on the other hand, filed a complaint in the Regional Trial Court of Quezon City for the refund of
premiums and the issuance of a writ of preliminary attachment with damages amounting to 50M. But
Tiong paid only P210 as docket fees. On March 28, 1984, private respondent filed a complaint in the
Regional Trial Court of Quezon City for the refund of premiums and the issuance of a writ of preliminary
attachment.

When cases under the RTC of Quezon City was investigated for under-assessment of docket fees, the
cases were re-raffled and the case filed by Tiong was raffled to Branch 104 under Judge Asuncion. Tiong
amended his complaint stating therein a claim of "not less than P10,000,000.00 as actual compensatory
damages" in the prayer. In the body of the said second amended complaint however, private
respondent alleges actual and compensatory damages and attorney's fees in the total amount of about
P44,601,623.70. Judge Asuncion admitted the amended complaint and Tiong paid the reassessed
docket fee of P39,786.00 based on Tiong’s claim of "not less than P10,000,000.00 as actual and
compensatory damages."

Petitioners then filed a petition for certiorari with the Court of Appeals questioning the said order of
Judge Asuncion.

On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of
P20,000,000.00 as damages so the total claim amounts to about P64,601,623.70. On October 16, 1986,
or some seven months after filing the supplemental complaint, the private respondent paid the
additional docket fee of P80,396.00.
The CA later dismissed petitioner’s motion to dismiss but ordered the payment of additional docket fees
which Tiong paid.

Hence the instant case. Petitioner that the Court of Appeals erred in not finding that the lower court did
not acquire jurisdiction over Civil Case No. Q-41177 on the ground of non-payment of the correct and
proper docket fee considering that the total amount sought to be recovered in the amended and
supplemental complaint is P64,601,623.70 the docket fee that should be paid by private respondent is
P257,810.49, more or less. Not having paid the same, petitioners contend that the complaint should be
dismissed and all incidents arising therefrom should be annulled. In support of their theory, petitioner
cite the latest ruling of the Court in Manchester Development Corporation vs. CA.

On the other hand, private respondent claims that the ruling in Manchester cannot apply retroactively
to Civil Case No. Q-41177 for at the time said civil case was filed in court there was no such Manchester
ruling as yet. Further, private respondent avers that what is applicable is the ruling of this Court in
Magaspi v. Ramolete, 5 wherein this Court held that the trial court acquired jurisdiction over the case
even if the docket fee paid was insufficient.

ISSUE: whether or not a court acquires jurisdiction over a case when the correct and proper docket fee
has not been paid.

HELD:

The contention that Manchester cannot apply retroactively to this case is untenable. Statutes regulating
the procedure of the courts will be construed as applicable to actions pending and undetermined at the
time of their passage. Procedural laws are retrospective in that sense and to that extent. 6

In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full amount of the docket
fee is an indispensable step for the perfection of an appeal.

The principle in Manchester could very well be applied in the present case. The pattern and the intent to
defraud the government of the docket fee due it is obvious not only in the filing of the original complaint
but also in the filing of the second amended complaint.

However, in Manchester, petitioner did not pay any additional docket fee until the case was decided by
this Court on May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this
Court held that the court a quo did not acquire jurisdiction over the case and that the amended
complaint could not have been admitted inasmuch as the original complaint was null and void.

In the present case, a more liberal interpretation of the rules is called for considering that, unlike
Manchester, private respondent demonstrated his willingness to abide by the rules by paying the
additional docket fees as required. The promulgation of the decision in Manchester must have had that
sobering influence on private respondent who thus paid the additional docket fee as ordered by the
respondent court. It triggered his change for stance by manifesting his willingness to pay such additional
docket fee as may be ordered.
Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the
total amount of the claim. This is a matter which the clerk of court of the lower court and/or his duly
authorized docket clerk or clerk in charge should determine and, thereafter, it any amount is found due,
he must require the private respondent to pay the same.

Thus, the Court rules as follows:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the
action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the
court may allow payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third party claims and similar pleadings, which
shall not be considered filed until and unless the filing fee prescribed therefore is paid. The court may
also allow payment of said fee within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and
payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the
pleading, or if specified the same has been left for determination by the court, the additional filing fee
therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his
duly authorized deputy to enforce said lien and assess and collect the additional fee.

Phil. First Insurance v. Paramount Gen. Insurance, G.R. No. 165147, July 9, 2008
FACTS: Pyramid sought to recover the proceeds of two insurance policies issued to it by petitioner
Paramount and Philippine First. The complaint claimed P907,149.07 for the value of the insured goods
and 50,000 as attorney’s fees. Pyramid was assessed P610 docket fee, apparently on the basis of the
amount of P50,000 specified in the prayer representing attorney’s fees, which it duly paid. Petitioners
filed a Motion to Dismiss on the ground of, inter alia, lack of jurisdiction, Pyramid not having paid the
docket fees in full. But if Pyramid would insist that its claim against the defendants is only Php50,000.00
plus Php 1,500.00 as appearance fee per court hearing, then it follows that it is the Metropolitan Trial
Court which has jurisdiction over this case, not the RTC.

The RTC denied the motion to dismiss holding that the case being for specific performance, it is not
dismissible on that ground but unless proper docket fees are paid, it can only grant what was prayed for
in the Complaint. Hence, petitioner filed for certiorari with the CA which set aside the trial court’s orders
but ordered Pyramid to pay the correct docket fees within a reasonable time. Thus, the present case by
petitioners.

ISSUE: whether respondent, Pyramid Logistics and Trucking Corporation (Pyramid), which filed on
November 7, 2001 a complaint,[1] denominated as one for specific performance and damages, against
petitioners Philippine First Insurance Company, Inc. (Philippine First) and Paramount General Insurance
Corporation (Paramount) before the Regional Trial Court (RTC) of Makati, paid the correct docket fee; if
in the negative, whether the complaint should be dismissed or Pyramid can still be ordered to pay the
fee.

HELD: No. Petition denied

In Tacay v. Regional Trial Court of Tagum, Davao del Norte,[43] the Court clarified the effect of the Sun
Insurance ruling on the Manchester ruling as follows:

As will be noted, the requirement in Circular No. 7 [of this Court which was issued based on the
Manchester ruling[44]] that complaints, petitions, answers, and similar pleadings should specify the
amount of damages being prayed for not only in the body of the pleading but also in the prayer, has not
been altered. What has been revised is the rule that subsequent “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 amount sought in the amended pleading,” the trial court now being authorized to allow
payment of the fee within a reasonable time but in no case beyond the applicable prescriptive period or
reglementary period. Moreover, a new rule has been added, governing the awards of claims not
specified in the pleading – i.e., damages arising after the filing of the complaint or similar pleading – as
to which the additional filing fee therefore shall constitute a lien on the judgment.

Now, under the Rules of Court, docket or filing fees are assessed on the basis of the “sum claimed,” on
the one hand, or the “value of the property in litigation or the value of the estate,” on the other. . .

Where the action is purely for the recovery of money or damages, the docket fees are assessed on the
basis of the aggregate amount claimed, exclusive only of interests and costs. In this case, the complaint
or similar pleading should, according to Circular No. 7 of this Court, “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 filing fees in any case.”

Two situations may arise. One is where the complaint or similar pleading sets out a claim purely for
money and damages and there is no statement of the amounts being claimed. In this event the rule is
that the pleading will “not be accepted nor admitted, or shall otherwise be expunged from the record.”
In other words, the complaint or pleading may be dismissed, or the claims as to which amounts are
unspecified may be expunged, although as aforestated the Court may, on motion, permit amendment of
the complaint and payment of the fees provided the claim has not in the meantime become time-
barred.

The other is where the pleading does specify the amount of every claim, but the fees paid are
insufficient; and here again, the rule now is that the court may allow a reasonable time for the payment
of the prescribed fees, or the balance thereof, and upon such payment, the defect is cured and the court
may properly take cognizance of the action, unless in the meantime prescription has set in and
consequently barred the right of action.

Indeed, Pyramid captioned its complaint as one for “specific performance and damages” even if it was,
as the allegations in its body showed, seeking in the main the collection of its claims-sums of money
representing losses the amount of which it, by its own admission, “knew.”[46] And, indeed, it failed to
specify in its prayer in the complaint the amount of its claims/damages.

When Pyramid amended its complaint, it still did not specify, in its prayer, the amount of
claims/damages it was seeking. In fact it has the audacity to inform this Court, in its Comment on the
present Petition, that

x x x In the natural order of things, when a litigant is given the opportunity to spend less for a docket fee
after submitting his pleading for assessment by the Office of the Clerk of Court, he would not decline it
inasmuch as to request for a higher assessment under the circumstances [for such] is against his interest
and would be senseless. Placed under the same situation, petitioner[s] would certainly do likewise. To
say otherwise would certainly be dishonest,[47]

which comment drew petitioners to conclude as follows:

[This] only shows respondent’s dishonesty and lack of regard of the rules. Following this line of
reasoning, respondent would do everything if only for it to spend less for the filing fee, even to the
extent of circumventing and defying the rule on the payment of the filing fee.

In spite of the fact that the respondent was already caught in the quagmire of its own cobweb of
deception, it further justified its unethical act by ratiocinating that “placed under the same situation,
petitioner would certainly do likewise, to say otherwise would certainly be dishonest”. This attitude of
the respondent is very alarming! Having been caught red-handed, the honorable thing that respondent
should have done is admit its own violation rather than justify an act which it knows is a clear
contravention of the rules and jurisprudence.

Apparently, the trial court misinterpreted paragraph 3 of the [Sun Insurance] ruling of this Court
wherein it stated that “where the judgment awards a claim not specified in the pleading, or if specified,
the same has been left for the determination of the court, the additional filing fee therefor shall
constitute a lien on the judgment” by considering it to mean that where in the body and prayer of the
complaint there is a prayer xxx the amount of which is left to the discretion of the Court, there is no
need to specify the amount being sought, and that any award thereafter shall constitute a lien on the
judgment.

x x x While it is true that the determination of certain damages x x x is left to the sound discretion of the
court, it is the duty of the parties claiming such damages to specify the amount sought on the basis of
which the court may make a proper determination, and for the proper assessment of the appropriate
docket fees. The exception contemplated as to claims not specified or to claims although specified are
left for determination of the court is limited only to any damages that may arise after the filing of the
complaint or similar pleading for then it will not be possible for the claimant to specify nor speculate as
to the amount thereof.
Home Guaranty Corp. v. R-II Home Guaranty Corp. v. R-II Builders, G.R. No. 192649, March 9, 2011
(Supra.)
FACTS: HGC and R-II Builders were guarantors in a Joint Venture Agreement (JVA) for the
implementation of the Smokey Mountain Development and Reclamation Project (SMDRP). When the
SMPPCs (Smokey Mountain Project Participation Certificates) were not redeemed by HGC when it
matured, R-II Builders filed the complaint against HGC and NHA before Branch 24 of the Manila
Regional Trial Court, a Special Commercial Court (SCC). R-II Builders alleged, among other matters, that
the DAC (Deed of Assignment and Conveyance) to HGC should be rescinded and it should be appointed
as new trustee in the event of the resolution of the DAC.

On 26 October 2005, Branch 24 of the Manila RTC issued the writ of preliminary injunction. But HGC
challenged the Special Commercial Court’s jurisdiction because no intra-corporate controversy was
involved. On 2 August 2007, R-II Builders, filed a motion to admit its Amended and Supplemental
Complaint which deleted the prayer for resolution of the DAC initially prayed for in its original
complaint. In lieu thereof, said pleading introduced causes of action for conveyance of title to and/or
possession of the entire Asset Pool, for NHA to pay the Asset Pool the sum of P1,803,729,757.88 and for
an increased indemnity for attorney’s fees in the sum of P2,000,000.00.

On 2 January 2008, the Special Commercial Court held that R-II Builders’ complaint was an ordinary civil
action and not an intra-corporate controversy and later issued a clarificatory order dated 1 February
2008 to the effect, among other matters, that it did not have the authority to hear the case and ordered
its transfer to an ordinary civil court. As a consequence, the case was re-raffled to respondent Branch 22
of the Manila RTC (respondent RTC) which subsequently issued the 19 May 2008 order which, having
determined that the case is a real action, admitted the aforesaid Amended and Supplemental
Complaint, subject to R-II Builders’ payment of the “correct and appropriate” docket fees.

On 15 August 2008, however, R-II Builders filed a motion to admit it Second Amended Complaint, on the
ground that its previous Amended and Supplemental Complaint had not yet been admitted in view of
the non-payment of the correct docket fees therefor. Said Second Amended Complaint notably
resurrected R-II Builders’ cause of action for resolution of the DAC, deleted its causes of action for
accounting and conveyance of title to and/or possession of the entire Asset Pool, reduced the claim for
attorney’s fees to P500,000.00, sought its appointment as Receiver pursuant to Rule 59 of the Rules of
Court and, after an inventory in said capacity, prayed for approval of the liquidation and distribution of
the Asset Pool in accordance with the parties’ agreements.

On 2 September 2008, HGC filed its opposition to the admission of R-II Builders’ Second Amended
Complaint on the ground that respondent RTC had no jurisdiction to act on the case until payment of
the correct docket fees and that said pleading was intended for delay and introduced a new theory
inconsistent with the original complaint and the Amended and Supplemental Complaint. Claiming that
R-II Builders had defied respondent court’s 19 May 2008 order by refusing to pay the correct docket
fees, HGC additionally moved for the dismissal of the case pursuant to Section 3, Rule 17 of the 1997
Rules of Civil Procedure.
The RTC denied HGCs motions and granted R-II Builders’ application for appointment of receiver. HGC
went on certiorari with the CA which held that the RTC had jurisdiction; that from the allegations of R-II
Builders’ original complaint and amended complaint the character of the relief primarily sought, i.e., the
declaration of nullity of the DAC, the action before respondent RTC is one where the subject matter is
incapable of pecuniary estimation; and R-II Builders need not pay any deficiency in the docket fees
considering its withdrawal of its Amended and Supplemental Complaint.

Hence, the instant case contending that the original court (the Special Commercial Court) was without
authority to hear the case and despite an unequivocal order from the trial court a quo, Private
Respondent (R-II Builders) failed and refused to pay the correct and proper docket fees, whether it be
for a real or personal action, based on the values of the properties or claims subject of the complaints.

ISSUES: WON the RTC had jurisdiction over the complaint

HELD: No.

Jurisdiction is defined as the authority to hear and determine a cause or the right to act in a case.[37] In
addition to being conferred by the Constitution and the law,[38] the rule is settled that a court’s
jurisdiction over the subject matter is determined by the relevant allegations in the complaint,[39] the
law in effect when the action is filed,[40] and the character of the relief sought irrespective of whether
the plaintiff is entitled to all or some of the claims asserted.[41] Consistent with Section 1, Rule 141 of
the Revised Rules of Court which provides that the prescribed fees shall be paid in full “upon the filing of
the pleading or other application which initiates an action or proceeding”, the well-entrenched rule is to
the effect that a court acquires jurisdiction over a case only upon the payment of the prescribed filing
and docket fees.

HGC correctly faults the CA for not finding that Branch 24 of the Manila RTC had no authority to order
the transfer of the case to respondent RTC.[49] Being outside the jurisdiction of Special Commercial
Courts, the rule is settled that cases which are civil in nature, like the one commenced by R-II Builders,
should be threshed out in a regular court.[50] With its acknowledged lack of jurisdiction over the case,
Branch 24 of the Manila RTC should have ordered the dismissal of the complaint, since a court without
subject matter jurisdiction cannot transfer the case to another court.[51] Instead, it should have simply
ordered the dismissal of the complaint, considering that the affirmative defenses for which HGC sought
hearing included its lack of jurisdiction over the case.

Calleja v. Panday,[52] while on facts the other way around, i.e., a branch of the RTC exercising
jurisdiction over a subject matter within the Special Commercial Court’s authority, dealt squarely with
the issue:

Whether a branch of the Regional Trial Court which has no jurisdiction to try and decide a case has
authority to remand the same to another co-equal Court in order to cure the defects on venue and
jurisdiction.
Certainly, the pronouncement of Br. 24, the Special Commercial Court, in its Joint Order of 2 January
2008 that the case is not an intracorporate controversy, amplified in its Order of 1 February 2008 that it
“does not have the authority to hear the complaint it being an ordinary civil action” is incompatible with
the directive for the re-raffle of the case and to “leave the resolution of the same to Branch 22 of this
Court.” Such a directive is an exercise of authority over the case, which authority it had in the same
breath declared it did not have. What compounds the jurisdictional error is the fact that at the time of
its surrender of jurisdiction, Br. 24 had already acted on the case and had in fact, on 26 October 2005,
issued the writ of preliminary injunction sought by herein respondent R-II Builders. At that point, there
was absolutely no reason which could justify a re-raffle of the case considering that the order that was
supposed to have caused the re-raffle was not an inhibition of the judge but a declaration of absence of
jurisdiction. So faulty was the order of re-raffle that it left the impression that its previously issued
preliminary injunction remained effective since the case from which it issued was not dismissed but
merely transferred to another court. A re-raffle which causes a transfer of the case involves courts with
the same subject matter jurisdiction; it cannot involve courts which have different jurisdictions exclusive
of the other. More apt in this case, a re-raffle of a case cannot cure a jurisdictional defect.

the jurisdictionally flawed transfer of the case from Branch 24, the SCC to Branch 22, the regular court, is
topped by another jurisdictional defect which is the non-payment of the correct docket fees. In its order
dated 19 May 2008 which admitted R-II Builders’ Amended and Supplemental Complaint, respondent
RTC distinctly ruled that the case was a real action and ordered the re-computation and payment of the
correct docket fees.[53] In patent circumvention of said order, however, R-II Builders filed its 14 August
2008 motion to admit its Second Amended Complaint which effectively deleted its causes of action for
accounting and conveyance of title to and/or possession of the entire Asset Pool and, in addition to
reducing the claim for attorney’s fees and seeking its appointment as a receiver, reinstated its cause of
action for resolution of the DAC.

While it is true, however, that R-II Builder's continuing stake in the Asset Pool is "with respect only to its
residual value after payment of all the regular SMPPCs holders and the Asset Pool creditors",[59] the CA
failed to take into account the fact that R-II Builders’ original complaint and Amended and Supplemental
Complaint both interposed causes of action for conveyance and/or recovery of possession of the entire
Asset Pool. Indeed, in connection with its second cause of action for appointment as trustee in its
original complaint,[60] R-II Builders distinctly sought the conveyance of the entire Asset Pool[61] which
it consistently estimated to be valued at P5,919,716,618.62 as of 30 June 2005.[62] In its opposition to
HGC’s motion to dismiss, R-II Builders even admitted that the case is a real action as it affects title to or
possession of real property or an interest therein.[63] With R-II Builders' incorporation of a cause of
action for conveyance of title to and/or possession of the entire Asset Pool in its Amended and
Supplemental Complaint,[64] on the other hand, no less than respondent RTC, in its 19 May 2008 order,
directed the assessment and payment of docket fees corresponding to a real action.

Admittedly, this Court has repeatedly laid down the test in ascertaining whether the subject matter of
an action is incapable of pecuniary estimation by determining the nature of the principal action or
remedy sought. While a claim is, on the one hand, considered capable of pecuniary estimation if the
action is primarily for recovery of a sum of money, the action is considered incapable of pecuniary
estimation where the basic issue is something other than the right to recover a sum of money, the
money claim being only incidental to or merely a consequence of, the principal relief sought.[65] To our
mind, the application of foregoing test does not, however, preclude the further classification of actions
into personal actions and real action, for which appropriate docket fees are prescribed. In contrast to
personal actions where the plaintiff seeks the recovery of personal property, the enforcement of a
contract, or the recovery of damages, real actions are those which affect title to or possession of real
property, or interest therein.[66] While personal actions should be commenced and tried where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be found, at the election
of the plaintiff,[67] the venue for real actions is the court of the place where the real property is located.

While it is true that petitioner does not directly seek the recovery of title or possession of the property
in question, his action for annulment of sale and his claim for damages are closely intertwined with the
issue of ownership of the building which, under the law, is considered immovable property, the recovery
of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or
rescission of a sale of real property does not operate to efface the fundamental and prime objective and
nature of the case, which is to recover said real property. It is a real action.[72]

Granted that R-II Builders is not claiming ownership of the Asset Pool because its continuing stake
is, in the first place, limited only to the residual value thereof, the conveyance and/or transfer of
possession of the same properties sought in the original complaint and Amended and Supplemental
Complaint both presuppose a real action for which appropriate docket fees computed on the basis of
the assessed or estimated value of said properties should have been assessed and paid.

For failure of R-II Builders to pay the correct docket fees for its original complaint or, for that matter, its
Amended and Supplemental Complaint as directed in respondent RTC's 19 May 2008 order, it stands to
reason that jurisdiction over the case had yet to properly attach. Applying the rule that "a case is
deemed filed only upon payment of the docket fee regardless of the actual date of filing in court" in the
landmark case of Manchester Development Corporation v. Court of Appeals,[76] this Court ruled that
jurisdiction over any case is acquired only upon the payment of the prescribed docket fee which is both
mandatory and jurisdictional. To temper said ruling, the Court subsequently issued the following
guidelines in Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,[77] viz.:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the
action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the
court may allow payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which
shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may
also allow payment of said fee within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period.
 3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and
payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the
pleading, or if specified the same has been left for determination by the court, the additional filing fee
therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his
duly authorized deputy to enforce said lien and assess and collect the additional fee.

The importance of filing fees cannot be over-emphasized for they are intended to take care of court
expenses in the handling of cases in terms of costs of supplies, use of equipment, salaries and fringe
benefits of personnel, and others, computed as to man-hours used in the handling of each case. The
payment of said fees, therefore, cannot be made dependent on the result of the action taken without
entailing tremendous losses to the government and to the judiciary in particular.[80] For non-payment
of the correct docket fees which, for real actions, should be computed on the basis of the assessed value
of the property, or if there is none, the estimated value thereof as alleged by the claimant,[81]
respondent RTC should have denied admission of R-II Builders’ Second Amended Complaint and ordered
the dismissal of the case. Although a catena of decisions rendered by this Court eschewed the
application of the doctrine laid down in the Manchester case,[82] said decisions had been consistently
premised on the willingness of the party to pay the correct docket fees and/or absence of intention to
evade payment of the correct docket fees. This cannot be said of R-II Builders which not only failed to
pay the correct docket fees for its original complaint and Amended and Supplemental Complaint but
also clearly evaded payment of the same by filing its Second Amended Complaint.

By itself, the propriety of admitting R-II Builders’ Second Amended Complaint is also cast in dubious light
when viewed through the prism of the general prohibition against amendments intended to confer
jurisdiction where none has been acquired yet. Although the policy in this jurisdiction is to the effect
that amendments to pleadings are favored and liberally allowed in the interest of justice, amendment is
not allowed where the court has no jurisdiction over the original complaint and the purpose of the
amendment is to confer jurisdiction upon the court.[83] Hence, with jurisdiction over the case yet to
properly attach, HGC correctly fault the CA for upholding respondent RTC’s admission of R-II Builders’
Second Amended Complaint despite non-payment of the docket fees for its original complaint and
Amended and Supplemental Complaint as well as the clear intent to evade payment thereof.

Unicapital v. Consing, G.R. Nos. 175277 & 175285, September 11, 2013
FACTS: The case are consolidated petitions.

Respondent Consing filed a Complex Action for Injunctive Relief against petitioners claiming that the
demands made against him by petitioners Unicapital and PBI to return to them the purchase price they
had paid for the subject property constituted harassment and oppression which severely affected his
personal and professional life. Consing claims for damages to the tune of around P2,000,000.00 per
month.

Petitioners filed a motion to dismiss for lack of cause of action. The RTC denied the motion to dismiss
holding that Consing, Jr.’s complaint sufficiently stated a cause of action for tort and damages pursuant
to Article 19 of the Civil Code. It equally refused to dismiss the action on the ground of non-payment of
docket fees, despite Consing, Jr.’s escalated claims for damages therein, as jurisdiction was already
vested in it upon the filing of the original complaint.

Aggrieved, petitioners elevated the denial of their motions to dismiss before the CA via a petition for
certiorari and prohibition which the CA dismissed. It ruled that while the payment of the prescribed
docket fee is a jurisdictional requirement, its non-payment will not automatically cause the dismissal of
the case. In this regard, it considered that should there be any deficiency in the payment of such fees,
the same shall constitute a lien on the judgment award. The CA also held that the complaint alleges a
cause of action and was principally one for damages over which the RTC has jurisdiction, and, in turn,
there lies no misjoinder of causes of action. Hence, the present petitions for review on certiorari in G.R.
Nos.175277 and 175285.

Meanwhile, on August 4, 1999, Unicapital filed a complaint for sum of money with damages against
Consing, Jr. and Dela Cruz before the RTC-Makati City seeking to recover (a) the amount of
P42,195,397.16, representing the value of their indebtedness based on the Promissory Notes (subject
promissory notes) plus interests; (b) P5,000,000.00 as exemplary damages; (c) attorney's fees; and (d)
costs of suit which Consing loaned from Unicapital. PBI also filed a complaint for damages and
attachment against Consing, Jr. and Dela Cruz before the RTC of Manila PBI prayed that it be allowed to
recover the following: (a) P13,369,641.79, representing the total amount of installment payments made
as actual damages plus interests; (b) P200,000.00 as exemplary damages; (c) P200,000.00 as moral
damages; (d) attorney's fees; and (e) costs of suit. For his part, Consing, Jr. filed a Motion to Dismiss and
motion to consolidate which were, however, denied by the RTC-Makati City.

On September 30, 2009, the CA rendered a Decision sustaining the Orders dated July 16, 2007 and
September 4, 2007 of the RTC-Makati City which denied Consing, Jr.’s motion for consolidation. It held
that consolidation is a matter of sound discretion on the part of the trial court which could be gleaned
from the use of the word "may" in Section 1, Rule38 of the Rules of Court. Hence, the instant petition

ISSUE: WON the non-payment of docket fees in this case is jurisdictional; WON the Manchester ruling
applies

HELD:

Non-Payment of docket fees as cause of dismissal inapplicable in the absence of intent to defraud

Neither should Consing, Jr.’s failure to pay the required docket fees lead to the dismissal of his
complaint.It has long been settled that while the court acquires jurisdiction over any case only upon the
payment of the prescribed docket fees, its non-payment at the time of the filing of the complaint does
not automatically cause the dismissal of the complaint provided that the fees are paid within a
reasonable period.84 Consequently, Unicapital, et al.’s insistence that the stringent rule on non-
payment of docket fees enunciated in the case of Manchester Development Corporation v. CA85 should
be applied in this case cannot be sustained in the absence of proof that Consing, Jr. intended to defraud
the government by his failure to pay the correct amount of filing fees. As pronounced in the case of
Heirs of Bertuldo Hinog v. Hon. Melicor:86

Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its non-
payment at the time of filing does not automatically cause the dismissal of the case, as long as the fee is
paid within the applicable prescriptive or reglementary period, more so when the party involved
demonstrates a willingness to abide by the rules prescribing such payment.

Thus, when insufficient filing fees were initially paid by the plaintiffs and there was no intention to
defraud the government, the Manchester rule does not apply.87 (Emphasis and italics in the original)

Indeed, while the Court acknowledges Unicapital, et al.'s apprehension that Consing, Jr.'s "metered"
claim for damages to the tune of around P2,000,000.00 per month88 may balloon to a rather huge
amount by the time that this case is finally disposed of, still, any amount that may by then fall due shall
be subject to assessment and any additional fees determined shall constitute as a lien against the
judgment as explicitly provided under Section 2,89 Rule 141 of the Rules.

Sec. 6. Construction
These Rules shall be liberally construed in order to promote their objective of securing a just, speedy
and inexpensive disposition of every action and proceeding

Anama v. Phil. Savings Bank, G.R. No. 187021, January 25, 2012
FACTS: Sometime in 1973, the Petitioner, Douglas F. Anama (Anama), and the Respondent, Philippine
Savings Bank (PSB), entered into a “Contract to Buy,” on installment basis, the real property owned by
PSB. However, Anama defaulted in paying his obligations thereunder, thus, PSB rescinded the said
contract and title to the property remained with the latter. Subsequently, the property was sold by PSB
to the Spouses Saturnina Baria and Tomas Co (Co Spouses) who, after paying the purchase price in full,
caused the registration of the same in their names.

Resultantly, Anama filed before the Respondent Court a complaint for declaration of nullity of the deed
of sale, cancellation of transfer certificate of title, and specific performance with damages against PSB,
the Co Spouses, and the Register of Deeds of Metro Manila, District II.

On August 21, 1991 and after trial on the merits, the trial Court dismissed Anama’s complaint and
upheld the validity of the sale between PSB and the Co Spouses. Undaunted, Anama appealed, at first,
to the Court of Appeals, and after failing to obtain a favorable decision, to the Supreme Court.

On January 29, 2004, the Supreme Court rendered judgment denying Anama’s petition and sustaining
the validity of the sale between PSB and the Co Spouses. Its decision became final and executory on July
12, 2004. Pursuant thereto, the Co Spouses moved for execution, which was granted by the trial Court
per its Order, dated November 25, 2005.

Aggrieved, Anama twice moved for the reconsideration of the Respondent Court’s November 25, 2005
Order arguing that the Co Spouses’ motion for execution is fatally defective. He averred that the
Spouses’ motion was pro forma because it lacked the required affidavit of service and has a defective
notice of hearing, hence, a mere scrap of paper. The trial Court, however, denied Anama’s motion(s) for
reconsideration.
Dissatisfied, the petitioner questioned the RTC Order before the CA for taking judicial cognizance of the
motion for execution filed by spouses Tomas Co and Saturnina Baria (Spouses Co) which was (1) not in
accord with Section 4 and Section 15 of the Rules of Court because it was without a notice of hearing
addressed to the parties; and (2) not in accord with Section 6, Rule 15 in conjunction with Section 13,
Rule 13 of the Rules of Court because it lacks the mandatory affidavit of service.

On March 31, 2008, the CA rendered a decision dismissing the petition. It reasoned out, among others,
that the issue on the validity of the deed of sale between respondents, Philippine Savings Bank (PSB)
and the Spouses Co, had long been laid to rest considering that the January 29, 2004 Decision of this
Court became final and executory on July 12, 2004. Hence, execution was already a matter of right on
the part of the respondents and the RTC had the ministerial duty to issue a writ of execution enforcing a
final and executory decision.

Not satisfied with the CA’s unfavorable disposition, petitioner filed this petition praying for the reversal
thereof. Basically, petitioner argues that the respondents failed to substantially comply with the rule on
notice and hearing when they filed their motion for the issuance of a writ of execution with the RTC.

On the other hand, The Spouses Co counter that the petition should be dismissed outright for raising
both questions of facts and law in violation of Section 1, Rule 45 of the Rules of Court. they assert that
they have substantially complied with the requirements of notice and hearing provided under Sections 4
and 5 of Rule 15 and Section 13, Rule 13 of the Rules of Court. Contrary to petitioner’s allegations, a
copy of the motion for the issuance of a writ of execution was given to petitioner through his principal
counsel, the Quasha Law Offices. Spouses Co argue that what they sought to be executed was the final
judgment of the RTC duly affirmed by the CA and this Court, thus, putting the issues on the merits to
rest. The issuance of a writ of execution then becomes a matter of right and the court’s duty to issue
the writ becomes ministerial.

ISSUE: WON there was compliance with the rules on notice and hearing

HELD:

Elementary is the rule that every motion must contain the mandatory requirements of notice and
hearing and that there must be proof of service thereof. The Court has consistently held that a motion
that fails to comply with the above requ irements is considered a worthless piece of paper which should
not be acted upon. The rule, however, is not absolute. There are motions that can be acted upon by the
court ex parte if these would not cause prejudice to the other party. They are not strictly covered by the
rigid requirement of the rules on notice and hearing of motions.

The motion for execution of the Spouses Co is such kind of motion. It cannot be denied that the
judgment sought to be executed in this case had already become final and executory. As such, the
Spouses Co have every right to the issuance of a writ of execution and the RTC has the ministerial duty
to enforce the same. This right on the part of the Spouses Co and duty on the part of the RTC are based
on Section 1 and Section 2 of Rule 39 of the 1997 Revised Rules of Civil Procedure.
Under Paragraph 1 of Section 1 of Rule 39 of the 1997 Revised Rules of Civil Procedure, the Spouses Co
can have their motion for execution executed as a matter of right without the needed notice and
hearing requirement to petitioner. This is in contrast to the provision of Paragraph 2 of Section 1 and
Section 2 where there must be notice to the adverse party. In the case of Far Eastern Surety and
Insurance Company, Inc. v. Virginia D. Vda. De Hernandez,[5] it was written:

It is evident that Section 1 of Rule 39 of the Revised Rules of Court does not prescribe that a copy of the
motion for the execution of a final and executory judgment be served on the defeated party, like
litigated motions such as a motion to dismiss (Section 3, Rule 16), or motion for new trial (Section 2,
Rule 37), or a motion for execution of judgment pending appeal (Section 2, Rule 39), in all of which
instances a written notice thereof is required to be served by the movant on the adverse party in order
to afford the latter an opportunity to resist the application.

It is not disputed that the judgment sought to be executed in the case at bar had already become final
and executory. It is fundamental that the prevailing party in a litigation may, at any time within five (5)
years after the entry thereof, have a writ of execution issued for its enforcement and the court not only
has the power and authority to order its execution but it is its ministerial duty to do so. It has also been
held that the court cannot refuse to issue a writ of execution upon a final and executory judgment, or
quash it, or order its stay, for, as a general rule, the parties will not be allowed, after final judgment, to
object to the execution by raising new issues of fact or of law, except when there had been a change in
the situation of the parties which makes such execution inequitable or when it appears that the
controversy has ever been submitted to the judgment of the court; or when it appears that the writ of
execution has been improvidently issued, or that it is defective in substance, or is issued against the
wrong party, or that judgment debt has been paid or otherwise satisfied; or when the writ has been
issued without authority. Defendant-appellant has not shown that she falls in any of the situations
afore-mentioned. Ordinarily, an order of execution of a final judgment is not appealable. Otherwise, as
was said by this Court in Molina v. de la Riva, a case could never end. Once a court renders a final
judgment, all the issues between or among the parties before it are deemed resolved and its judicial
function as regards any matter related to the controversy litigated comes to an end. The execution of its
judgment is purely a ministerial phase of adjudication. The nature of its duty to see to it that the claim of
the prevailing party is fully satisfied from the properties of the loser is generally ministerial.

In Pamintuan v. Muñoz, We ruled that once a judgment becomes final and executory, the prevailing
party can have it executed as a matter of right, and the judgment debtor need not be given advance
notice of the application for execution.

Also of the same stature is the rule that once a judgment becomes final and executory, the prevailing
party can have it executed as a matter of right and the granting of execution becomes a ministerial duty
of the court. Otherwise stated, once sought by the prevailing party, execution of a final judgment will
just follow as a matter of course. Hence, the judgment debtor need not be given advance notice of the
application for execution nor he afforded prior hearing.
Absence of such advance notice to the judgment debtor does not constitute an infringement of the
constitutional guarantee of due process.

However, the established rules of our system of jurisprudence do not require that a defendant who has
been granted an opportunity to be heard and has had his day in court should, after a judgment has been
rendered against him, have a further notice and hearing before supplemental proceedings are taken to
reach his property in satisfaction of the judgment. Thus, in the absence of a statutory requirement, it is
not essential that he be given notice before the issuance of an execution against his tangible property;
after the rendition of the judgment he must take "notice of what will follow," no further notice being
"necessary to advance justice." [Emphases and underscoring supplied]

Likewise, in the case of Leonardo Lim De Mesa v. Hon. Court of Appeals,[6] it was stated:

In the present case, the decision ordering partition and the rendition of accounting had already become
final and executory. The execution thereof thus became a matter of right on the part of the plaintiffs,
herein private respondents, and is a mandatory and ministerial duty on the part of the court. Once a
judgment becomes final and executory, the prevailing party can have it executed as a matter of right,
and the judgment debtor need not be given advance notice of the application for execution nor be
afforded prior hearings thereon.

On the bases of the foregoing considerations, therefore, the Court of Appeals acted correctly in holding
that the failure to serve a copy of the motion for execution on petitioner is not a fatal defect. In fact,
there was no necessity for such service. [Emphases and underscoring supplied]

At any rate, it is not true that the petitioner was not notified of the motion for execution of the Spouses
Co. The records clearly show that the motion for execution was duly served upon, and received by,
petitioner’s counsel-of-record, the Quasha Ancheta Pena Nolasco Law Offices, as evidenced by a “signed
stamped received mark” appearing on said pleading.[7] The records are bereft of proof showing any
written denial from petitioner’s counsel of its valid receipt on behalf of its client. Neither is there proof
that the Quasha Ancheta Pena Nolasco Law Offices has formally withdrawn its appearance as
petitioner’s counsel-of-record. Considering that there is enough proof shown on record of personal
delivery in serving the subject motion for execution, there was a valid compliance with the Rules, thus,
no persuasive reason to stay the execution of the subject final and executory judgment.

Moreover, this Court takes note that petitioner was particularly silent on the ruling of the CA that he
was notified, through his counsel, of the motion for execution of the Spouses Co when he filed a motion
for reconsideration of the RTC’s order dated June 28, 2005, holding in abeyance said motion pending the
resolution of petitioner’s pleading filed before this Court. He did not dispute the ruling of the CA either
that the alleged defect in the Spouses Co’s motion was cured when his new counsel was served a copy
of said motion for reconsideration of the RTC’s June 28, 2005 Order.[8]

The three-day notice rule is not absolute. A liberal construction of the procedural rules is proper where
the lapse in the literal observance of a rule of procedure has not prejudiced the adverse party and has
not deprived the court of its authority. Indeed, Section 6, Rule 1 of the Rules of Court provides that the
Rules should be liberally construed in order to promote their objective of securing a just, speedy and
inexpensive disposition of every action and proceeding. Rules of procedure are tools designed to
facilitate the attainment of justice, and courts must avoid their strict and rigid application which would
result in technicalities that tend to frustrate rather than promote substantial justice.

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

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

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

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

The test is the presence of opportunity to be heard, as well as to have time to study the motion and
meaningfully oppose or controvert the grounds upon which it is based.[9] [Emphases and underscoring
supplied]

Likewise, in the case of KKK Foundation, Inc. v. Hon. Adelina Calderon-Bargas,[10] this Court stated:

Anent the second issue, we have consistently held that a motion which does not meet the requirements
of Sections 4 and 5 of Rule 15 of the Rules of Court is considered a worthless piece of paper, which the
Clerk of Court has no right to receive and the trial court has no authority to act upon. Service of a copy
of a motion containing a notice of the time and the place of hearing of that motion is a mandatory
requirement, and the failure of movants to comply with these requirements renders their motions
fatally defective. However, there are exceptions to the strict application of this rule. These exceptions
are: (1) where a rigid application will result in a manifest failure or miscarriage of justice especially if a
party successfully shows that the alleged defect in the questioned final and executory judgment is not
apparent on its face or from the recitals contained therein; (2) where the interest of substantial justice
will be served; (3) where the resolution of the motion is addressed solely to the sound and judicious
discretion of the court; and (4) where the injustice to the adverse party is not commensurate with the
degree of his thoughtlessness in not complying with the procedure prescribed.
A notice of hearing is an integral component of procedural due process to afford the adverse parties a
chance to be heard before a motion is resolved by the court. Through such notice, the adverse party is
given time to study and answer the arguments in the motion. Records show that while Angeles’s Motion
for Issuance of Writ of Execution contained a notice of hearing, it did not particularly state the date and
time of the hearing. However, we still find that petitioner was not denied procedural due process. Upon
receiving the Motion for Issuance of Writ of Execution, the trial court issued an Order dated September
9, 2002 giving petitioner ten (10) days to file its comment. The trial court ruled on the motion only after
the reglementary period to file comment lapsed. Clearly, petitioner was given time to study and
comment on the motion for which reason, the very purpose of a notice of hearing had been achieved.

The notice requirement is not a ritual to be followed blindly. Procedural due process is not based solely
on a mechanical and literal application that renders any deviation inexorably fatal. Instead, procedural
rules are liberally construed to promote their objective and to assist in obtaining a just, speedy and
inexpensive determination of any action and proceeding. [Emphases supplied]

At any rate, it is undisputed that the August 21, 1991 RTC Decision[11] in Civil Case No. 44940 is already
final and executory. Once a judgment becomes final and executory, all the issues between the parties
are deemed resolved and laid to rest. All that remains is the execution of the decision which is a matter
of right. The prevailing party is entitled to a writ of execution, the issuance of which is the trial court’s
ministerial duty.[12]

The Court agrees with the respondents that petitioner mainly relies on mere technicalities to frustrate
the ends of justice and further delay the execution process and enforcement of the RTC Decision that
has been affirmed by the CA and this Court. The record shows that the case has been dragging on for
almost 30 years since petitioner filed an action for annulment of sale in 1982. From the time the
Spouses Co bought the house from PSB in 1978, they have yet to set foot on the subject house and lot.

To remand the case back to the lower court would further prolong the agony of the Spouses Co. The
Court should not allow this to happen. The Spouses Co should not be prevented from enjoying the fruits
of the final judgment in their favor. In another protracted case, the Court wrote:

As a final note, it bears to point out that this case has been dragging for more than 15 years and the
execution of this Court’s judgment in PEA v. CA has been delayed for almost ten years now simply
because De Leon filed a frivolous appeal against the RTC’s order of execution based on arguments that
cannot hold water. As a consequence, PEA is prevented from enjoying the fruits of the final judgment in
its favor. The Court agrees with the Office of the Solicitor General in its contention that every litigation
must come to an end once a judgment becomes final, executory and unappealable. Just as a losing party
has the right to file an appeal within the prescribed period, the winning party also has the correlative
right to enjoy the finality of the resolution of his case by the execution and satisfaction of the judgment,
which is the "life of the law." To frustrate it by dilatory schemes on the part of the losing party is to
frustrate all the efforts, time and expenditure of the courts. It is in the interest of justice that this Court
should write finis to this litigation.
Tan v. Court of Appeals, G.R. No. 130314, September 22, 1998
FACTS: Petitioner Annie Tan, doing business under the name and style “AJ & T Trading,” leased a portion
of the ground floor of her building, more specifically described as Stall No. 623, Carvajal Street, Binondo,
Manila, in favor of respondent Bloomberry Export Manufacturing, Inc. The lease was for a period of five
years starting on February 17, 1995 and ending on February 17, 2000, at a monthly rental of P20,000 for
the first three years.

For several alleged violations of the lease contract, Tan filed against Bloomberry a complaint for
ejectment. As its rental payment was refused by petitioner, Bloomberry instituted on July 13, 1995 a
case for consignation.

The two cases were consolidated. In due course, the Metropolitan Trial Court (MTC) of Manila, Branch I,
rendered on February 1, 1996 a Decision against Tan, dismissing her complaint while Bloomberry’s
complaint for consignation was allowed because Tan failed to appeal.

On appeal, the RTC affirmed the MTC in its decision dated July 18, 1996. Tan filed a motion for
reconsideration to the RTC’s decision but without notice of hearing. On August 23, 1996, Bloomberry
filed an ex-parte Motion for Entry of Judgment upon the ground that said motion for reconsideration is a
mere scrap of paper aside from being pro forma, hence it did not toll the period of appeal and the
Decision dated July 18, 1996, had become final and executory.

On September 3, 1996, [petitioner] filed a Motion to Set for Hearing the Motion for Reconsideration
which was vehemently opposed by [private respondent] on September 23, 1996.

On October 4, 1996, [the RTC] issued an Order granting the motion to set for hearing [petitioner’s]
Motion for Reconsideration and set[ting] the hearing [for] October 21, 1996, at 8:30 o’clock in the
morning.

On October 20, 1996, [private respondent] filed a Motion for Reconsideration of the Order dated
October 4, 1996, which was set for hearing on October 25, 1996. On November 11, 1996, [the RTC]
issued an Order denying [private respondent’s] Motion for Reconsideration.

Hence, Bloomberry filed a Petition for Certiorari and Prohibition with the Court of Appeals. Respondent
Court of Appeals reversed the trial court’s Order setting for hearing petitioner’s Motion for
Reconsideration. The Court of Appeals held that the trial court acted with grave abuse of discretion in
setting for hearing petitioner’s Motion for Reconsideration, notwithstanding the fact that said Motion
contained no notice of hearing.

Hence, this petition.[12]

ISSUE: “Whether xxx the omission [through] inadvertence of a notice of hearing of a motion for
reconsideration filed with the trial court xxx is a fatal defect which did not stop the running of the period
to appeal[,] thus rendering the assailed decision final [and] executory.”

HELD:
Petitioner admits the categorical and mandatory character of the directives in Sections 4 and 5 of Rule
15 of the Rules of Court, which read:[15]

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

“Every written motion required to be heard and the notice of the hearing thereof shall be served in such
a manner as to ensure its receipt by the other party at least three (3) days before the date of hearing,
unless the court for good cause sets the hearing on shorter notice.(4a)

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

In De la Peña v. De la Peña,[16] the Court presented a resume of earlier decisions regarding the
necessity of the notice of hearing in motions for reconsideration:

“In Pojas v. Gozo-Dadole,[17] we had occasion to rule on the issue of whether a motion for
reconsideration without any notice of hearing tolls the running of the prescriptive period. In Pojas,
petitioner received copy of the decision in Civil Case No. 3430 of the Regional Trial Court of Tagbilaran
on 15 April 1986. The decision being adverse to him petitioner filed a motion for reconsideration. For
failing to mention the date when the motion was to be resolved as required in Sec. 5, Rule 15, of the
Rules of Court, the motion for reconsideration was denied. A second motion for reconsideration met
the same fate. On 2 July 1986 petitioner filed a notice of appeal but the same was denied for being filed
out of time as ‘the motion for reconsideration which the Court ruled as pro forma did not stop the
running of the 15-day period to appeal.’[18]

“In resolving the issue of whether there was grave abuse of discretion in denying petitioner’s notice of
appeal, this Court ruled—

‘Section 4 of Rule 15 of the Rules of Court requires that notice of motion be served by the movant on all
parties concerned at least three (3) days before its hearing. Section 5 of the same Rule provides that the
notice shall be directed to the parties concerned, and shall state the time and place for the hearing of
the motion. A motion which does not meet the requirements of Section 4 and 5 of Rule 15 of the Rules
of Court is considered a worthless piece of paper which the clerk has no right to receive and the court
has no authority to act upon. Service of copy of a motion containing notice of the time and place of
hearing of said motion is a mandatory requirement and the failure of the movant to comply with said
requirements renders his motion fatally defective.’[19]
“In New Japan Motors, Inc. v. Perucho,[20] defendant filed a motion for reconsideration which did not
contain any notice of hearing. In a petition for certiorari, we affirmed the lower court in ruling that a
motion for reconsideration that did not contain a notice of hearing was a useless scrap of paper. We
held further—

‘Under Sections 4 and 5 of Rule 15 of the Rules of Court, xxx a motion is required to be accompanied by
a notice of hearing which must be served by the applicant on all parties concerned at least three (3) days
before the hearing thereof. Section 6 of the same rule commands that “(n)o motion shall be acted upon
by the Court, without proof of service of the notice thereof xxx.” It is therefore patent that the motion
for reconsideration in question is fatally defective for it did not contain any notice of hearing. We have
already consistently held in a number of cases that the requirements of Sections 4, 5 and 6 of Rules 15
of the Rules of Court are mandatory and that failure to comply with the same is fatal to movant’s
cause.[21]

“In Sembrano v. Ramirez,[22] we declared that—

‘(A) motion without notice of hearing is a mere scrap of paper. It does not toll the running of the period
of appeal. This requirement of notice of hearing equally applies to a motion for reconsideration.
Without such notice, the motion is pro forma. And a pro forma motion for reconsideration does not
suspend the running of the period to appeal.’

“In In re Almacen,[23] defendant lost his case in the lower court. His counsel then filed a motion for
reconsideration but did not notify the adverse counsel of the time and place of hearing of said motion.
The Court of Appeals dismissed the motion for the reason that ‘the motion for reconsideration dated
July 5, 1966 does not contain a notice of time and place of hearing thereof and is, therefore a useless
piece of paper which did not interrupt the running of the period to appeal, and, consequently, the
appeal was perfected out of time.’ When the case was brought to us, we reminded counsel for the
defendant that –

‘As a law practitioner who was admitted to the bar as far back as 1941, Atty. Almacen knew – or ought
to have known – that [for] a motion for reconsideration to stay the running of the period of appeal, the
movant must not only serve a copy of the motion upon the adverse party x x x but also notify the
adverse party of the time and place of hearing x x x.’

“Also, in Manila Surety and Fidelity Co., Inc. v. Bath Construction and Company,[24] we ruled--

‘The written notice referred to evidently is that prescribed for motions in general by Rule 15, Sections 4
and 5 (formerly Rule 26), which provide that such notice shall state the time and place of hearing and
shall be served upon all the parties concerned at least three days in advance. And according to Section 6
of the same Rule no motion shall be acted upon by the court without proof of such notice. Indeed, it
has been held that in such a case the motion is nothing but a useless piece of paper. The reason is
obvious; unless the movant sets the time and place of hearing the court would have no way to
determine whether that party agrees to or objects to the motion, and if he objects, to hear him on his
objection, since the Rules themselves do not fix any period within [which] he may file his reply or
opposition.'[25]

“In fine, the abovecited cases confirm that the requirements laid down in Sec. 5 of Rule 15 of the Rules
of Court that the notice shall be directed to the parties concerned, and shall state the time and place for
the hearing of the motion, are mandatory. If not religiously complied with, they render the motion pro
forma. As such the motion is a useless piece of paper that will not toll the running of the prescriptive
period.”

Petitioner pleads for liberal construction of the rule on notice of hearing, citing Tamargo, Galvez and
Que. In rebuttal, we adopt by reference the CA’s excellent disquisition, cited earlier, on why these cases
are inapplicable.

Respondent Court held that the facts in Galvez drastically differ from those in the present case.
Galvez involved a motion to withdraw the information -- not a motion for reconsideration -- that
was filed ex parte before the arraignment of the accused. In that case, the Court held that there
was no imperative need of notice and hearing because, first, the withdrawal of an information
rests on the discretion of the trial court; and, second, the accused was not placed in jeopardy.
On the other hand, the subject of the present controversy is a motion for reconsideration
directed against the Decision of the RTC; thus, the motion affects the period to perfect an
appeal.

Que is not applicable, either. In said case, the trial court set the Motion for Reconsideration
(MR) for hearing, which was actually attended by the counsel for the adverse party. This was
not so in the case at bar; petitioner’s MR was set for hearing, because she belatedly moved for it
upon the filing of private respondent’s Motion for Entry of Judgment. Likewise, the present case
differs from Tamargo, wherein the application of the aforesaid mandatory provisions was
suspended. The Court did so in order to give substantial justice to the petitioner and in view of
the nature of the issues raised which were found to be highly meritorious.

Petitioner further alleges that, first, the nonadmission of her Motion for Reconsideration would result in
a miscarriage of justice, as the main case (ejectment), which was tried under summary procedure, had
been unnecessarily prolonged; and, second, the tenant lessee would be occupying the premises without
paying rentals. She also relies on People v. Leviste,[31] in which the Court held:

“While it is true that any motion that does not comply with the requirements of Rule 15, Rules of Court
should not be accepted for filing and, if filed, is not entitled to judicial cognizance, the Supreme Court
has likewise held that where rigid application of the rule will result in manifest failure or miscarriage of
justice, technicalities may be disregarded in order to resolve the case.”

Liberal construction of this rule has been allowed by this Court in the following cases: (1) where a rigid
application will result in a manifest failure or miscarriage of justice,[32] especially if a party successfully
shows that the alleged defect in the questioned final and executory judgment is not apparent on its face
or from the recitals contained therein;[33] (2) where the interest of substantial justice will be
served;[34] (3) where the resolution of the motion is addressed solely to the sound and judicious
discretion of the court;[35] and (4) where the injustice to the adverse party is not commensurate with
the degree of his thoughtlessness in not complying with the procedure prescribed.[36] Petitioner has
failed to demonstrate that the case at bar falls under any of these exceptions.

Finally, petitioner claims that she will be deprived of property without due process, as private
respondent has accumulated P348,800 in unpaid rentals and accrued interests.

We disagree. Petitioner can obtain proper payment of rentals through a motion for execution in the
case below. The MTC may have dismissed her ejectment case, but it did not exculpate private
respondent from its liabilities. Petitioner is, therefore, not being deprived of her property without due
process.

Indeed, there is no miscarriage of justice to speak of. Having failed to observe very elementary rules of
procedure which are mandatory, petitioner caused her own predicament. To exculpate her from the
compulsory coverage of such rules is to undermine the stability of the judicial process, as the bench and
bar will be confounded by such irritating uncertainties as when to obey and when to ignore the Rules.
We have to draw the line somewhere.[

Baylon v. Fact-finding Intelligence, G.R. No. 150870, December 11, 2002

FACTS: Sometime in 1993, Dr. Honorata G. Baylon (petitioner), Head of the Division of Hematology and
Transfusion Medicine at the National Kidney and Transplant Institute (NKTI), was designated as Program
Manager of the government’s National Voluntary Blood Donation Program (Blood Donation Program)
with NKTI as the lead agency in the implementation thereof.

The NKTI purchased “Terumo” blood bags from their exclusive distributor, the FVA EX-IM Trading, Inc.
(FVA) in 1994. But in March 1995, the Commission on Audit disallowed in post audit the sale
transactions entered into by the NKTI with FVA on the ground that the blood bags were purchased
without public bidding contrary to the applicable laws or rules, thereby allegedly resulting to
overpricing.[8] The COA found that FVA sold “Terumo” blood bags to the Philippine National Red Cross
(PNRC) and to blood banks Our Lady of Fatima and Mother Seaton at prices lower than those at which it
sold to the NKTI, leading to a consequent total loss to the government in the amount of P1,964,304.70.

Petitioner was charged with a criminal complaint for violation of Section 3(e) and (g) of Republic Act (R.
A.) No. 3019 and an administrative complaint for gross misconduct with the Ombudsman. The
administrative complaint was docketed as OMB-ADM-0-97-0165, now the subject of the present
petition.

Petitioner claimed that the acquisition of the blood bags via negotiated purchase came under the
exceptions to public bidding as provided for by law. Thus she explained: firstly, the blood bags were
used in the Blood Donation Program which had to be implemented immediately to address the scarcity
of blood at the time; secondly, FVA was the only exclusive distributor without subdealers of “Terumo”
blood bags; and thirdly, negotiated purchase of the blood bags was most advantageous to the
government for the prices at which the NKTI obtained them from FVA were the lowest compared to
those at which they were acquired by other government hospitals.

By Memorandum Review of June 13, 2000, Assistant Ombudsman Abelardo L. Aportadera (Aportadera)
recommended the exoneration of the respondents Nañagas and Estrella. Taking note, of the
Ombudsman’s finding of probable cause to criminally hale petitioner and company into court,
Aportadera recommended, by the same Review Memorandum, that herein petitioner and the rest of
her co-respondents be held guilty of Grave Misconduct for which they should be meted a penalty of SIX
(6) MONTHS SUSPENSION.

Aportadera’s recommendation was approved by the Ombudsman on June 16, 2000. A motion for
reconsideration of the approved Memorandum Review having been denied by the Memorandum
Review of July 19, 2000 which the Ombudsman approved on July 28, 2000, petitioner filed on October
4, 2000 a petition with this Court for certiorari and prohibition with prayer for a temporary restraining
order (TRO) and/or writ of preliminary injunction

By Resolution of October 16, 2000, this Court dismissed the petition for having been brought to the
wrong forum in light of the ruling in Fabian v. Desierto[16] that appeals from the decision of the
Ombudsman should be made to the Court of Appeals by a petition for review under Rule 43 of the 1997
Rules of Civil Procedure.

Petitioner thus elevated the Ombudsman’s Memorandum Reviews to the Court of Appeals by a petition
for review filed on April 18, 2001. However, the Court of Appeals dismissed the petition for having been
filed beyond the fifteen-day reglementary period, reckoned from petitioner’s receipt of the
Ombudsman’s second Memorandum Review on August 7, 2000.

Petitioner filed a Motion for Reconsideration of the May 2, 2001 Resolution of the Court of Appeals.
Pending resolution thereof or on July 6, 2001, petitioner filed a motion for leave to submit a copy of the
COA Decision No. 2001-11 dated June 21 2001[18] which lifted the audit disallowance of the payments
made for the purchases by the NKTI of the “Terumo” blood bags from FVA. In said decision, the COA
held that the purchase of blood bags without public bidding was not violative of the law, was not
disadvantageous to the government, and did not accord undue preference to FVA. In a Resolution of
November 21, 2001,[19] the Court of Appeals denied petitioner’s Motion for Reconsideration.

Hence, the present petition for review on certiorari with an application for a TRO and/or an injunctive
writ which was filed on December 21, 2001.

Petitioner imputes to the Court of Appeals the commission of grave error in dismissing her petition for
review on a mere technicality. She invokes considerations of substantial justice for this Court to give her
petition due course and essentially prays that the Resolutions of the Court of Appeals be set aside and
that the Memorandum Reviews of the Ombudsman be nullified.

During the pendency of the present petition or on March 14, 2002, petitioner filed a motion[22] to grant
her leave to file a Manifestation informing that this Court rendered on December 14, 2001 a
decision[23] in G. R. No. 142738, “Dr. Honorata Baylon v. Office of the Ombudsman and
Sandiganbayan,” reversing and setting aside the Ombudsman’s February 28, 2000 Resolution finding
probable cause to criminally prosecute her before the Sandiganbayan arising from the same acts subject
of the Ombudsman’s Memorandum Reviews finding her administratively liable, and that the said
decision “be considered persuasive to the instant proceeding.” At the same time, petitioner filed the
Manifestation.[24]

Petitioner submits that the dismissal by the Court of Appeals of her petition for review by mere
technicality would cause a miscarriage of justice for, so she contends, she has raised meritorious
arguments, adduced evidence, and presented special circumstances proving her innocence of the charge
of grave misconduct.

ISSUE: WON the Court of Appeals erred in dismissing the petition

HELD:

This Court finds that the Court of Appeals correctly dismissed petitioner’s petition for review for having
been filed beyond the reglementary period.

The correctness of the Court of Appeals’ dismissal of petitioner’s petition for review notwithstanding,
this Court cannot write finis to the case at bar by the strict application of the rules of procedure
governing appeals. For judicial cases do not come and go through the portals of a court of law by the
mere mandate of technicalities.

After going over all the pleadings, evidence, and all other documents bearing on this case, this Court has
resolved to spare the present petition from dismissal to which it should have been consigned as a
matter of procedure.

The allowance of the filing of appeals or actions even when everything is lost due to non-compliance
with rules or technicalities is not a novel phenomenon for this Court. In the case of Cortes v. Court of
Appeals,[25] counsel for a party in a case before the trial court failed to withdraw his appearance as
such when he was appointed as judge of the Dumaguete Regional Trial Court in January 1983. Thus,
after the lower court rendered a decision on February 16, 1983, the same was served on February 28,
1983 upon said counsel, who was then in his judicial station, at his Cebu City address. Having learned of
the decision only on March 8, 1983, he immediately informed his client who learned of the adverse
judgment a few days later after being out on official business. On March 22, 1983, the concerned
party’s new counsel accordingly filed a notice of appeal which the lower court denied due course for
having been filed beyond the 15-day reglementary period. This Court ruled that the seven-day delay
did not warrant the outright dismissal of the appeal, taking into account the peculiar circumstances of
the case and the appeal’s ostensible merit.

Likewise, in Legasto v. Court of Appeals,[26] a decision in an action for ejectment was rendered against
therein private respondents by the Metropolitan Trial Court and the Regional Trial Court. Appeal via a
petition for review was subsequently filed with the Court of Appeals which initially dismissed the
petition for having been filed two days beyond the reglementary period. On motion for reconsideration,
however, the Court of Appeals gave due course to the appeal after accepting counsel’s explanation that
the making of the petition was delayed by brownouts. Declaring that a delay in the filing of an appeal
under exceptional circumstances may be excused on grounds of substantial justice and equity, this Court
affirmed the Court of Appeals decision to give due course to the belated appeal as it raised an
important legal question bearing upon many similarly situated tenants and landlords in the country.

The same failure to file an appeal on time was excused in Philippine National Bank v. Court of
Appeals[27] where this Court allowed an appeal filed three days late in the higher interest of justice, as
barring the said appeal would be inequitable and unjust in light of certain circumstances therein.

The foregoing jurisprudence and similar other cases indeed constitute a testament to what C. Viuda de
Ordoveza v. Raymundo28 described as “. . . the power of the court to suspend its own rules, or to
except a particular case from its operation, whenever the purposes of justice require it.” Ginete v. Court
of Appeals29 specifically laid down the range of reasons which may provide justifications for a court to
resist a strict adherence to procedure, enumerating, thus, the following elements for an appeal to be
given due course by a suspension of the enforcement of procedural rules: (1) matters of life, liberty,
honor or property; (2) counsel’s negligence without any participatory negligence on the part of the
client; (3) the existence of special or compelling circumstances; (4) the merits of the case; (5) a cause not
entirely attributable to the fault or negligence of the party favored by the suspension of the rules; (6) a
lack of any showing that the review sought is merely frivolous and dilatory; and (7) the other party will
not be unjustly prejudiced thereby.

We find attendant in the case at bar transcendental considerations which outweigh rules of procedure
thereby providing justification for the suspension of their application. Petitioner’s evidence and
arguments in support of her claim of innocence of the charge of grave misconduct have indeed cast
doubt on the veracity of the Ombudsman’s factual conclusions in the subject administrative case against
her. We cannot thus simply brush aside petitioner’s protestations of lack of administrative culpability
for the sake of sticking to technicalities when the merits of her cause are crying out for proper judicial
determination.

The tardiness of the appeal of petitioner before the Court of Appeals undoubtedly stemmed from her
counsel’s faux pas in the remedy pursued to assail the Ombudsman’s questioned Memorandum
Reviews. In the normal course of things, petitioner would have been covered by the general rule that a
client is bound by the negligence or mistakes of his counsel. Yet, the patent merits of petitioner’s cause
for the nullification of her suspension from public office nag the Court towards the realization that to
deny her the instant petition now based merely on the fiction that the counsel’s negligence binds the
client is to unjustly seal petitioner’s fate without the benefit of a review of the correctness and justness
of her imposed administrative liability. Hers, thus, is a case of an extremely different kind; the
exception to the rule on the effects of the counsel’s mistake or negligence, for the application of the rule
would result in serious injustice to petitioner. Especially in this case where she had nothing to do with
her counsel’s mistake and negligence, thus clearly falling within the ambit of the reasons provided for by
Ginete for the relaxation of the rules.
This Court takes note of special circumstances relative to the case at bar. The Decision of this Court in G.
R. No. 142738 categorically declared the lack of probable cause to indict petitioner for the same acts
constitutive of the administrative charge against her, hence, it ordered the Sandiganbayan to dismiss the
criminal case against petitioner and her co-accused. In the same vein, the COA Decision No. 2001-11
found no irregularity in the purchases by the NKTI of the blood bags from FVA and thus it lifted its
previous disallowance of the payments to said purchases. Such determinations in favor of petitioner by
other fora, independent they may be from the administrative action against her, serve as added reasons
to warrant the taking of a hard look at the Ombudsman’s Memorandum Reviews.

On the suspension of the enforcement of procedural rules to give way to matters of greater value, this
Court could not have more eloquently defined its stance, thus:

In the interest of substantial justice, procedural rules of the most mandatory character in terms of
compliance, may be relaxed. In other words, if strict adherence to the letter of the law would result in
absurdity and manifest injustice or where the merit of a party’s cause is apparent and outweighs
consideration of non-compliance with certain formal requirements, procedural rules should definitely be
liberally construed. A party-litigant is to be given the fullest opportunity to establish the merits of his
complaint or defense rather than for him to lose life, liberty, honor or property on mere technicalities.32
xxx

Prescinding from the foregoing, the Court resolved to give due course to the present petition and set
aside the challenged Resolutions of May 2, 2001 and November 21, 2001 of the Court of Appeals. We
will not, however, remand the case to the appellate court, a remand not being necessary where, as in
this case, We are in a position to resolve the dispute based on the records before it and the ends of
justice would not be subserved thereby.33

Republic v. Kenrick Development, G.R. No. 149567, August 8, 2006

FACTS: This case stemmed from the construction by respondent Kenrick Development Corporation of a
concrete perimeter fence around some parcels of land located behind the Civil Aviation Training Center
of the Air Transportation Office (ATO) in 1996. As a result, the ATO was dispossessed of some 30,228
square meters of prime land. Respondent justified its action with a claim of ownership over the
property. It presented Transfer Certificate of Title issued in its name and which allegedly originated from
one Alfonso Concepcion.

The ATO verified the authenticity of respondent’s titles with the LRA. The Registrar of Deeds of Pasay
City had no record of Concepcion’s TCT and its ascendant title. The land allegedly covered by
respondent’s titles was also found to be within Villamor Air Base (headquarters of the Philippine Air
Force) in Pasay City.

Hence, the OSG on September 3, 1996, filed a complaint for revocation, annulment and cancellation of
certificates of title against respondent and Alfonso Concepcion. It was raffled to Branch 114 of the
Regional Trial Court of Pasay City.
On December 5, 1996, respondent filed its answer which was purportedly signed by Atty. Onofre
Garlitos, Jr. as counsel for respondent.

Since Alfonso Concepcion could not be located and served with summons, the trial court ordered the
issuance of an alias summons by publication against him on February 19, 1997.

During the pendency of the case, the Senate Blue Ribbon Committee and Committee on Justice and
Human Rights conducted a hearing in aid of legislation on the matter of land registration and titling. In
particular, the legislative investigation looked into the issuance of fake titles and focused on how
respondent was able to acquire his TCTs.

During the congressional hearing held on November 26, 1998, one of those summoned was Atty.
Garlitos, respondent’s former counsel. He testified that he prepared respondent’s answer and
transmitted an unsigned draft to respondent’s president, Mr. Victor Ong. The signature appearing above
his name was not his. He authorized no one to sign in his behalf either. And he did not know who finally
signed it.

With Atty. Garlitos’ revelation, the Republic promptly filed an urgent motion on December 3, 1998 to
declare respondent in default,[2] predicated on its failure to file a valid answer. The Republic argued
that, since the person who signed the answer was neither authorized by Atty. Garlitos nor even known
to him, the answer was effectively an unsigned pleading. Pursuant to Section 3, Rule 7 of the Rules of
Court,[3] it was a mere scrap of paper and produced no legal effect.

On February 19, 1999, the trial court issued a resolution granting the Republic’s motion.

The Republic presented its evidence ex parte, after which it rested its case and formally offered its
evidence.

Meanwhile, respondent sought reconsideration of the February 19, 1999 resolution but the trial court
denied it.

Aggrieved, respondent elevated the matter to the Court of Appeals via a petition for certiorari[5]
seeking to set aside the February 19, 1999 resolution of the trial court.

On May 31, 2001, the Court of Appeals rendered the assailed decision. It found Atty. Garlitos’
statements in the legislative hearing to be unreliable since they were not subjected to cross-
examination. The appellate court also scrutinized Atty. Garlitos’ acts after the filing of the answer[6] and
concluded that he assented to the signing of the answer by somebody in his stead. This supposedly
cured whatever defect the answer may have had. Hence, the appellate court granted respondent’s
petition for certiorari. It directed the lifting of the order of default against respondent and ordered the
trial court to proceed to trial with dispatch.

The Republic moved for reconsideration but it was denied. Thus, this petition.
ISSUE: Did the Court of Appeals err in reversing the trial court’s order which declared respondent in
default for its failure to file a valid answer?

HELD: Yes, the CA erred

A party may, by his words or conduct, voluntarily adopt or ratify another’s statement.[7] Where it
appears that a party clearly and unambiguously assented to or adopted the statements of another,
evidence of those statements is admissible against him.[8] This is the essence of the principle of
adoptive admission.

An adoptive admission is a party’s reaction to a statement or action by another person when it is

reasonable to treat the party’s reaction as an admission of something stated or implied by the other
person.[9] By adoptive admission, a third person’s statement becomes the admission of the party
embracing or espousing it. Adoptive admission may occur when a party:

(a) expressly agrees to or concurs in an oral statement made by another;[10]

(b) hears a statement and later on essentially repeats it;[11]

(c) utters an acceptance or builds upon the assertion of another;[12]

(d) replies by way of rebuttal to some specific points raised by another but ignores further points
which he or she has heard the other make[13] or

(e) reads and signs a written statement made by another.[14]

Here, respondent accepted the pronouncements of Atty. Garlitos and built its case on them. At no
instance did it ever deny or contradict its former counsel’s statements. It went to great lengths to
explain Atty. Garlitos’ testimony as well as its implications.

Evidently, respondent completely adopted Atty. Garlitos’ statements as its own. Respondent’s adoptive
admission constituted a judicial admission which was conclusive on it.

Contrary to respondent’s position, a signed pleading is one that is signed either by the party himself or
his counsel. Section 3, Rule 7 is clear on this matter. It requires that a pleading must be signed by the
party or counsel representing him.

Therefore, only the signature of either the party himself or his counsel operates to validly convert a
pleading from one that is unsigned to one that is signed.
Counsel’s authority and duty to sign a pleading are personal to him. He may not delegate it to just any
person.

The signature of counsel constitutes an assurance by him that he has read the pleading; that, to the best
of his knowledge, information and belief, there is a good ground to support it; and that it is not
interposed for delay.[16] Under the Rules of Court, it is counsel alone, by affixing his signature, who can
certify to these matters.

The preparation and signing of a pleading constitute legal work involving practice of law which is
reserved exclusively for the members of the legal profession. Counsel may delegate the signing of a
pleading to another lawyer[17] but cannot do so in favor of one who is not. The Code of Professional
Responsibility provides:

Rule 9.01 ― A lawyer shall not delegate to any unqualified person the performance of any task which by
law may only be performed by a member of the Bar in good standing.

Moreover, a signature by agents of a lawyer amounts to signing by unqualified persons,[18] something

the law strongly proscribes.

Therefore, the blanket authority respondent claims Atty. Garlitos entrusted to just anyone was void. Any
act taken pursuant to that authority was likewise void. There was no way it could have been cured or
ratified by Atty. Garlitos’ subsequent acts.

Respondent insists on the liberal application of the rules. It maintains that even if it were true that its
answer was supposedly an unsigned pleading, the defect was a mere technicality that could be set aside.

Procedural requirements which have often been disparagingly labeled as mere technicalities have their
own valid raison d’ etre in the orderly administration of justice. To summarily brush them aside may
result in arbitrariness and injustice.

The Court’s pronouncement in Garbo v. Court of Appeals[20] is relevant:

Procedural rules are [tools] designed to facilitate the adjudication of cases. Courts and litigants alike are
thus [enjoined] to abide strictly by the rules. And while the Court, in some instances, allows a relaxation
in the application of the rules, this, we stress, was never intended to forge a bastion for erring litigants
to violate the rules with impunity. The liberality in the interpretation and application of the rules applies
only in proper cases and under justifiable causes and circumstances. While it is true that litigation is not
a game of technicalities, it is equally true that every case must be prosecuted in accordance with the
prescribed procedure to insure an orderly and speedy administration of justice.

Like all rules, procedural rules should be followed except only when, for the most persuasive of
reasons, they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of
his thoughtlessness in not complying with the prescribed procedure.[21] In this case, respondent failed
to show any persuasive reason why it should be exempted from strictly abiding by the rules.

Building Care Corp. v. Macaraeg, G.R. No. 198357, December 10, 2012
FACTS: Petitioners are in the business of providing security services to their clients. They hired
respondent as a security guard beginning August 25, 1996, assigning her at Genato Building in Caloocan
City. However, on March 9, 2008, respondent was relieved of her post. She was re-assigned to Bayview
Park Hotel from March 9-13, 2008, but after said period, she was allegedly no longer given any
assignment. Thus, on September 9, 2008, respondent filed a complaint against petitioners for illegal
dismissal, underpayment of salaries, non-payment of separation pay and refund of cash bond.
Respondent claimed that petitioners failed to give her an assignment for more than nine months,
amounting to constructive dismissal, and this compelled her to file the complaint for illegal dismissal.4

On May 13, 2009, the Labor Arbiter rendered a Decision, dismissing the charge of illegal dismissal.
Respondent then filed a Notice of Appeal with the National Labor Relations Commission (NLRC), but in a
Decision dated October 23, 2009, the NLRC dismissed the appeal for having been filed out of time,
thereby declaring that the Labor Arbiter's Decision had become final and executory on June 16, 2009.

Respondent elevated the case to the CA via a petition for certiorari, and on March 24, 2011, the CA
promulgated its Decision reversing the NLRC and declaring that Macaraeg was illegally dismissed and
ordered reinstatement.

Petitioners' motion for reconsideration of the aforequoted Decision was denied per Resolution dated
August 19, 2011. Hence, the present petition, where the main issue for resolution is whether the CA
erred in liberally applying the rules of procedure and ruling that respondent's appeal should be allowed
and resolved on the merits despite having been filed out of time.

ISSUE: WON the CA erred in allowing the appeal despite having been filed out of time

HELD:

It should be emphasized that the resort to a liberal application, or suspension of the application of
procedural rules, must remain as the exception to the well-settled principle that rules must be complied
with for the orderly administration of justice. In Marohomsalic v. Cole,10 the Court stated:

While procedural rules may be relaxed in the interest of justice, it is well-settled that these are tools
designed to facilitate the adjudication of cases. The relaxation of procedural rules in the interest of
justice was never intended to be a license for erring litigants to violate the rules with impunity. Liberality
in the interpretation and application of the rules can be invoked only in proper cases and under
justifiable causes and circumstances. While litigation is not a game of technicalities, every case must be
prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy
administration of justice.11
The later case of Daikoku Electronics Phils., Inc. v. Raza,12 further explained that:

To be sure, the relaxation of procedural rules cannot be made without any valid reasons proffered for or
underpinning it. To merit liberality, petitioner must show reasonable cause justifying its non-compliance
with the rules and must convince the Court that the outright dismissal of the petition would defeat the
administration of substantial justice. x x x The desired leniency cannot be accorded absent valid and
compelling reasons for such a procedural lapse. x x x

We must stress that the bare invocation of "the interest of substantial justice" line is not some magic
want that will automatically compel this Court to suspend procedural rules. Procedural rules are not to
be belittled, let alone dismissed simply because their non-observance may have resulted in prejudice to
a party's substantial rights. Utter disregard of the rules cannot be justly rationalized by harping on the
policy of liberal construction.13

In this case, the justifications given by the CA for its liberality by choosing to overlook the belated filing
of the appeal are, the importance of the issue raised, i.e., whether respondent was illegally dismissed;
and the belief that respondent should be "afforded the amplest opportunity for the proper and just
determination of his cause, free from the constraints of technicalities,"14 considering that the belated
filing of respondent's appeal before the NLRC was the fault of respondent's former counsel. Note,
however, that neither respondent nor her former counsel gave any explanation or reason citing
extraordinary circumstances for her lawyer's failure to abide by the rules for filing an appeal.
Respondent merely insisted that she had not been remiss in following up her case with said lawyer.

It is, however, an oft-repeated ruling that the negligence and mistakes of counsel bind the client. A
departure from this rule would bring about never-ending suits, so long as lawyers could allege their own
fault or negligence to support the client’s case and obtain remedies and reliefs already lost by the
operation of law.15 The only exception would be, where the lawyer's gross negligence would result in
the grave injustice of depriving his client of the due process of law.16 In this case, there was no such
deprivation of due process. Respondent was able to fully present and argue her case before the Labor
Arbiter. She was accorded the opportunity to be heard. Her failure to appeal the Labor Arbiter's Decision
cannot, therefore, be deemed as a deprivation of her right to due process. In Heirs of Teofilo Gaudiano
v. Benemerito,17 the Court ruled, thus:

The perfection of an appeal within the period and in the manner prescribed by law is jurisdictional and
non-compliance with such legal requirements is fatal and has the effect of rendering the judgment final
and executory. The limitation on the period of appeal is not without reason. They must be strictly
followed as they are considered indispensable to forestall or avoid unreasonable delays in the
administration of justice, to ensure an orderly discharge of judicial business, and to put an end to
controversies. x x x

xxxx
The right to appeal is not a natural right or part of due process; it is merely a statutory privilege and may
be exercised only in the manner and in accordance with the provisions of law. Thus, one who seeks to
avail of the right to appeal must strictly comply with the requirements of the rules, and failure to do so
leads to the loss of the right to appeal."18

In Ocampo v. Court of Appeals (Former Second Division),19 the Court declared that:

x x x we cannot condone the practice of parties who, either by their own or their counsel's inadvertence,
have allowed a judgment to become final and executory and, after the same has become immutable,
seek iniquitous ways to assail it. The finality of a decision is a jurisdictional event which cannot be made
to depend on the convenience of the parties.20

Clearly, allowing an appeal, even if belatedly filed, should never be taken lightly. The judgment attains
finality by the lapse of the period for taking an appeal without such appeal or motion for
reconsideration being filed.21 In Ocampo v. Court of Appeals (Former Second Division),22 the Court
reiterated the basic rule that "when a party to an original action fails to question an adverse judgment
or decision by not filing the proper remedy within the period prescribed by law, he loses the right to do
so, and the judgment or decision, as to him, becomes final and binding."23 The Decision of the Labor
Arbiter, therefore, became final and executory as to respondent when she failed to file a timely appeal
therefrom. The importance of the concept of finality of judgment cannot be gainsaid. As elucidated in
Pasiona, Jr. v. Court of Appeals,24 to wit:

The Court re-emphasizes the doctrine of finality of judgment. In Alcantara v. Ponce, the Court, citing its
much earlier ruling in Arnedo v. Llorente, stressed the importance of said doctrine, to wit:

x x x controlling and irresistible reasons of public policy and of sound practice in the courts demand that
at the risk of occasional error, judgments of courts determining controversies submitted to them should
become final at some definite time fixed by law, or by a rule of practice recognized by law, so as to be
thereafter beyond the control even of the court which rendered them for the purpose of correcting
errors of fact or of law, into which, in the opinion of the court it may have fallen. The very purpose for
which the courts are organized is to put an end to controversy, to decide the questions submitted to the
litigants, and to determine the respective rights of the parties. With the full knowledge that courts are
not infallible, the litigants submit their respective claims for judgment, and they have a right at some
time or other to have final judgment on which they can rely as a final disposition of the issue submitted,
and to know that there is an end to the litigation.

xxxx

It should also be borne in mind that the right of the winning party to enjoy the finality of the resolution
of the case is also an essential part of public policy and the orderly administration of justice. Hence, such
right is just as weighty or equally important as the right of the losing party to appeal or seek
reconsideration within the prescribed period.25
When the Labor Arbiter's Decision became final, petitioners attained a vested right to said judgment.
They had the right to fully rely on the immutability of said Decision. In Sofio v. Valenzuela,26 it was
amply stressed that:

The Court will not override the finality and immutability of a judgment based only on the negligence of a
party’s counsel in timely taking all the proper recourses from the judgment. To justify an override, the
counsel’s negligence must not only be gross but must also be shown to have deprived the party the right
to due process.

In sum, the Court cannot countenance relaxation of the rules absent the showing of extraordinary
circumstances to justify the same. In this case, no compelling reasons can be found to convince this
Court that the CA acted correctly by according respondent such liberality.

Uy v. Chua, G.R. No. 183965, September 18, 2009

FACTS: Petitioner Joanie Surposa Uy filed on 27 October 2003 before the RTC a Petition[1] for the
issuance of a decree of illegitimate filiation against respondent. The Complaint was docketed as Special
Proceeding assigned to RTC-Branch 24.

In his Answer to the Complaint, filed on 9 December 2003, respondent denied that petitioner was his
daughter.

Subsequently, on 27 March 2008, respondent filed a Demurrer to Evidence[5] on the ground that the
Decision dated 21 February 2000 of RTC-Branch 9 in Special Proceeding No. 8830-CEB had already been
barred by res judicata in Special Proceeding No. 12562-CEB before RTC-Branch 24.

It turned out that prior to instituting Special Proceeding No. 12562-CEB on 27 October 2003, petitioner
had already filed a similar Petition. It was docketed as Special Proceeding No. 8830-CEB, assigned to
RTC-Branch 9. Petitioner and respondent eventually entered into a Compromise Agreement in Special
Proceeding No. 8830-CEB, which was approved by RTC-Branch 9 in a Decision dated 21 February 2000.
With no appeal having been filed therefrom, the 21 February 2000 Decision of RTC-Branch 9 in Special
Proceeding 8830-CEB was declared final and executory.

Petitioner filed on 15 April 2008 her Opposition[8] to respondent’s Demurrer to Evidence in Special
Proceeding No. 12562-CEB. Thereafter, RTC-Branch 24 issued its now assailed Resolution dated 25 June
2008 in Special Proceeding No. 12562-CEB, granting respondent’s Demurrer and dismissing the case.

RTC-Branch 24 denied petitioner’s Motion for Reconsideration[12] in a Resolution[13] dated 29 July

2008.

Petitioner then filed the instant Petition raising the following issues for resolution of this Court:

I. Whether or not the principle of res judicata is applicable to judgments predicated upon a compromise
agreement on cases enumerated in Article 2035 of the Civil Code of the Philippines;

II. Whether or not the compromise agreement entered into by the parties herein before the Regional
Trial Court, Branch 09 of Cebu City effectively bars the filing of the present case.
ISSUE: The central issue in this case is whether the Compromise Agreement entered into between
petitioner and respondent, duly approved by RTC-Branch 9 in its Decision dated 21 February 2000 in
Special Proceeding No. 8830-CEB, constitutes res judicata in Special Proceeding No. 12562-CEB still
pending before RTC-Branch 24.

HELD:

No res judicata because RTC Branch 9 had no jurisdiction to approve the compromise agreement
which is contrary to Art 2035

The doctrine of res judicata is a rule that pervades every well- regulated system of jurisprudence and is
founded upon two grounds embodied in various maxims of the common law, namely: (1) public policy
and necessity, which makes it in the interest of the State that there should be an end to litigation,
interest reipublicae ut sit finis litium, and (2) the hardship of the individual that he should be vexed
twice for the same cause, nemo debet bis vexari pro eadem causa.[16]

For res judicata, to serve as an absolute bar to a subsequent action, the following requisites must
concur: (1) there must be a final judgment or order; (2) the court rendering it must have jurisdiction
over the subject matter and the parties; (3) it must be a judgment or order on the merits; and (4) there
must be, between the two cases, identity of parties, subject matter, and causes of action.[17]

It is undeniable that Special Proceeding No. 8830-CEB, previously before RTC-Branch 9, and Special
Proceeding No. 12562-CEB, presently before RTC-Branch 24, were both actions for the issuance of a
decree of illegitimate filiation filed by petitioner against respondent. Hence, there is apparent identity
of parties, subject matter, and causes of action between the two cases. However, the question arises as
to whether the other elements of res judicata exist in this case.

The court rules in the negative.

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or
put an end to one already commenced.[18] In Estate of the late Jesus S. Yujuico v. Republic,[19] the
Court pronounced that a judicial compromise has the effect of res judicata. A judgment based on a
compromise agreement is a judgment on the merits.

It must be emphasized, though, that like any other contract, a compromise agreement must comply
with the requisites in Article 1318 of the Civil Code, to wit: (a) consent of the contracting parties; (b)
object certain that is the subject matter of the contract; and (c) cause of the obligation that is
established. And, like any other contract, the terms and conditions of a compromise agreement must
not be contrary to law, morals, good customs, public policy and public order. Any compromise
agreement that is contrary to law or public policy is null and void, and vests no rights in and holds no
obligation for any party. It produces no legal effect at all.[20]

In connection with the foregoing, the Court calls attention to Article 2035 of the Civil Code, which states:

ART. 2035. No compromise upon the following questions shall be valid:

(1) The civil status of persons;

(2) The validity of a marriage or a legal separation;

(3) Any ground for legal separation;

(4) Future support;

(5) The jurisdiction of courts;

(6) Future legitime. (Emphases ours.)

The Compromise Agreement between petitioner and respondent, executed on 18 February 2000 and
approved by RTC-Branch 9 in its Decision dated 21 February 2000 in Special Proceeding No. 8830-CEB,
obviously intended to settle the question of petitioner’s status and filiation, i.e., whether she is an
illegitimate child of respondent. In exchange for petitioner and her brother Allan acknowledging that
they are not the children of respondent, respondent would pay petitioner and Allan P2,000,000.00 each.
Although unmentioned, it was a necessary consequence of said Compromise Agreement that petitioner
also waived away her rights to future support and future legitime as an illegitimate child of respondent.
Evidently, the Compromise Agreement dated 18 February 2000 between petitioner and respondent is
covered by the prohibition under Article 2035 of the Civil Code.

It is settled, then, in law and jurisprudence, that the status and filiation of a child cannot be
compromised. Public policy demands that there be no compromise on the status and filiation of a
child.[22] Paternity and filiation or the lack of the same, is a relationship that must be judicially
established, and it is for the Court to declare its existence or absence. It cannot be left to the will or
agreement of the parties.[23]

Being contrary to law and public policy, the Compromise Agreement dated 18 February 2000 between
petitioner and respondent is void ab initio and vests no rights and creates no obligations. It produces no
legal effect at all. The void agreement cannot be rendered operative even by the parties' alleged
performance (partial or full) of their respective prestations.

Neither can it be said that RTC-Branch 9, by approving the Compromise Agreement, in its Decision dated
21 February 2000 in Special Proceeding No. 8830-CEB, already made said contract valid and legal.
Obviously, it would already be beyond the jurisdiction of RTC-Branch 9 to legalize what is illegal. RTC-
Branch 9 had no authority to approve and give effect to a Compromise Agreement that was contrary to
law and public policy, even if said contract was executed and submitted for approval by both parties.
RTC-Branch 9 would not be competent, under any circumstances, to grant the approval of the said
Compromise Agreement. No court can allow itself to be used as a tool to circumvent the explicit
prohibition under Article 2035 of the Civil Code.

A judgment void for want of jurisdiction is no judgment at all. It cannot be the source of any right or the
creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no
legal effect. Hence, it can never become final, and any writ of execution based on it is void. It may be
said to be a lawless thing that can be treated as an outlaw and slain on sight, or ignored wherever and
whenever it exhibits its head.[26]

In sum, Special Proceeding No. 12562-CEB before RTC-Branch 24 is not barred by res judicata, since RTC-
Branch 9 had no jurisdiction to approve, in its Decision dated 21 February 2000 in Special Proceeding
No. 8830-CEB, petitioner and respondent’s Compromise Agreement, which was contrary to law and
public policy; and, consequently, the Decision dated 21 February 2000 in Special Proceeding No. 8830-
CEB, being null and void for having been rendered by RTC-Branch 9 without jurisdiction, could not have
attained finality or been considered a judgment on the merits.

Nevertheless, the Court must clarify that even though the Compromise Agreement between petitioner
and respondent is void for being contrary to law and public policy, the admission petitioner made
therein may still be appreciated against her in Special Proceeding No. 12562-CEB. RTC-Branch 24 is
only reminded that while petitioner’s admission may have evidentiary value, it does not, by itself,
conclusively establish the lack of filiation.

Case remanded to trial court for presentation of evidence and respondent may still present his
evidence as a liberal application of the rules

Demurrer to Evidence is governed by Rule 33 of the Rules of Court, Section 1 of which is reproduced in
full below:

SECTION 1. Demurrer to evidence. – After the plaintiff has completed the presentation of his evidence,
the defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has
shown no right to relief. If his motion is denied, he shall have the right to present evidence. If the
motion is granted but on appeal the order of dismissal is reversed he shall be deemed to have waived
the right to present evidence.

Demurrer to evidence authorizes a judgment on the merits of the case without the defendant having to
submit evidence on his part, as he would ordinarily have to do, if plaintiff's evidence shows that he is not
entitled to the relief sought. Demurrer, therefore, is an aid or instrument for the expeditious
termination of an action, similar to a motion to dismiss, which the court or tribunal may either grant or
deny.[28]

The Court has recently established some guidelines on when a demurrer to evidence should be granted,
thus:

A demurrer to evidence may be issued when, upon the facts and the law, the plaintiff has shown no
right to relief. Where the plaintiff's evidence together with such inferences and conclusions as may
reasonably be drawn therefrom does not warrant recovery against the defendant, a demurrer to
evidence should be sustained. A demurrer to evidence is likewise sustainable when, admitting every
proven fact favorable to the plaintiff and indulging in his favor all conclusions fairly and reasonably
inferable therefrom, the plaintiff has failed to make out one or more of the material elements of his
case, or when there is no evidence to support an allegation necessary to his claim. It should be sustained
where the plaintiff's evidence is prima facie insufficient for a recovery.[29]
 The essential question to be resolved in a demurrer to evidence is whether petitioner has been able to
show that she is entitled to her claim, and it is incumbent upon RTC-Branch 24 to make such a
determination.

A perusal of the Resolution dated 25 June 2008 of RTC-Branch 24 in Special Proceeding No. 12562-CEB
shows that it is barren of any discussion on this matter. It did not take into consideration any of the
evidence presented by petitioner. RTC-Branch 24 dismissed Special Proceedings No. 12562-CEB on the
sole basis of res judicata, given the Decision dated 21 February 2000 of RTC-Branch 9 in Special
Proceeding No. 8830-CEB, approving the Compromise Agreement between petitioner and respondent.
Hence, the Resolution dated 25 June 2008 of RTC-Branch 24 should be deemed as having dismissed
Special Proceeding No. 12562-CEB on the ground of res judicata rather than an adjudication on the
merits of respondent’s demurrer to evidence. Necessarily, the last line of Section 1, Rule 33 of the
Rules of Court should not apply herein and respondent should still be allowed to present evidence
before RTC-Branch 24 in Special Proceedings No. 12562-CEB.

It must be kept in mind that substantial justice must prevail. When there is a strong showing that grave
miscarriage of justice would result from the strict application of the Rules, this Court will not hesitate to
relax the same in the interest of substantial justice. The Rules of Court were conceived and
promulgated to set forth guidelines in the dispensation of justice but not to bind and chain the hand
that dispenses it, for otherwise, courts will be mere slaves to or robots of technical rules, shorn of
judicial discretion. That is precisely why courts in rendering real justice have always been, as they in fact
ought to be, conscientiously guided by the norm that when on the balance, technicalities take backseat
against substantive rights, and not the other way around.

Llamas v. Court of Appeals, G.R. No. 149588, August 16, 2010

FACTS: On August 14, 1984, petitioners were charged before the Regional Trial Court (RTC) of Makati
with, as aforesaid, the crime of “other forms of swindling” because they sold their land to Conrado P.
Avila free from liens and encumbrance but it was in fact mortgaged to the Rural Bank of Imus.

After trial on the merits, the RTC rendered its Decision on June 30, 1994, finding petitioners guilty
beyond reasonable doubt of the crime charged and sentencing them to suffer the penalty of
imprisonment for two months and to pay the fine of P18,085.00 each.

On appeal, the Court of Appeals, in its February 19, 1999 Decision in CA-G.R. No. CR No. 18270, affirmed
the decision of the trial court. In its December 22, 1999 Resolution, the appellate court further denied
petitioners’ motion for reconsideration.

Assailing the aforesaid issuances of the appellate court, petitioners filed before this Court, on February
11, 2000, their petition for review, docketed as G.R. No. 141208. The Court, however, on March 13,
2000, denied the same for petitioners’ failure to state the material dates. Since it subsequently denied
petitioners’ motion for reconsideration on June 28, 2000, the judgment of conviction became final and
executory.

With the consequent issuance by the trial court of the April 19, 2001 Warrant of Arrest, the police
arrested, on April 27, 2001, petitioner Carmelita C. Llamas for her to serve her 2-month jail term. The
police, nevertheless, failed to arrest petitioner Francisco R. Llamas because he was nowhere to be
found.

On July 16, 2001, petitioner Francisco moved for the lifting or recall of the warrant of arrest, raising for
the first time the issue that the trial court had no jurisdiction over the offense charged.

There being no action taken by the trial court on the said motion, petitioners instituted, on
September 13, 2001, the instant proceedings for the annulment of the trial and the appellate courts’
decisions.

The Court initially dismissed on technical grounds the petition in the September 24, 2001
Resolution, but reinstated the same, on motion for reconsideration, in the October 22, 2001 Resolution.
[2]

In its September 29, 2009 Decision, this Court held that, following the ruling in People v.
Bitanga,[3] the remedy of annulment of judgment cannot be availed of in criminal cases. The Court
likewise rejected petitioners’ contention that the trial court had no jurisdiction over the case.

Petitioners are now before this Court seeking the reversal of the September 29, 2009 Decision and,
consequently, the annulment of their conviction by the trial court. In their Verified Motion for
Reconsideration,[4] petitioners ask this Court to “revisit and take a second look” at the issues in the case
“without being unduly hampered by any perceived technical shortfalls of a beleaguered innocent
litigant.”

In particular, they raise the following issues:

1. WITH ALL DUE RESPECT, AND IN LIGHT OF THE CORRECT APPLICATIONS OF

DOCTRINAL JURISPRUDENCE, PETITIONERS HAD PURSUED THEIR MORE THAN TWENTY FIVE (25) YEARS
QUEST FOR JUSTICE AS INNOCENT MEN, AND HAD HONESTLY MAINTAINED THAT THEIR RESORT TO
REVERSE, SET ASIDE AND/OR ANNUL, IS IN LINE WITH JURISPRUDENCE AND LAW, ANY TECHNICAL
SHORTFALLS [OR] DEFECTS NOTWITHSTANDING[;]

2. WITH ALL DUE RESPECT, AGAIN IN LIGHT OF APPLICABLE JURISPRUDENCE ON THE

ISSUE OF JURISDICTION, PETITIONERS ARE NOT BARRED FROM RAISING SUCH QUESTION OF
JURISDICTION AT ANY TIME AND IN FACT MAINTAIN THAT RESPONDNET COURTS HAD NO JURISDICTION
IN LAW AND ENLIGHTENING DOCTRINES TO TRY AND DECIDE THIS CASE;

3. AGAIN WITH ALL DUE RESPECT AND UNFORTUNATELY, THE VERY JUSTIFYING MERITS
OF PETITIONERS’ APPROPRIATE INSTANT REMEDY; HAD NOT CONSEQUENTLY BEEN PASSED UPON, TO
UPHOLD THE PARAMOUNT CONSTITUTIONAL CHERISED MANDATE, “THE PRESUMPTION OF INNOCENCE
MUST BE UPHELD, EXCEPT ONLY UPON ESTABLISHED AND ADMISSIBLE EVIDENCE BEYOND REASONABLE
DOUBT; AND

4. PETITIONERS VERY HUMBLY BESEECH THIS HONORABLE COURT’S HIGHEST SENSE OF

MAGNANIMITY, UNDERSTANDING, JUDICIOUS WISDOM AND COMPASSION, SO THAT JUSTICE MAY
TRULY AND JUSTLY BE RENDERED IN FAVOR OF PETITIONERS AS IT MUST, GIVEN THE VERY UNIQUE AND
COMPELLING JUSTIFICATIONS HEREOF

HELD:

In the interest of justice and for humanitarian reasons, the Court deems it necessary to re-examine this
case.

Admittedly, petitioners took many procedural missteps in this case, from the time it was pending
in the trial court until it reached this Court, all of which could serve as enough basis to dismiss the
present motion for reconsideration. However, considering petitioners’ advanced age, the length of time
this case has been pending, and the imminent loss of personal liberty as a result of petitioners’
conviction, the Court resolves to grant pro hac vice the motion for reconsideration.

This Court has, on occasion, suspended the application of technical rules of procedure where matters of
life, liberty, honor or property, among other instances, are at stake.[6] It has allowed some meritorious
cases to proceed despite inherent procedural defects and lapses on the principle that rules of procedure
are mere tools designed to facilitate the attainment of justice. The strict and rigid application of rules
that tend to frustrate rather than promote substantial justice must always be avoided. It is far better
and more prudent for the court 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.

Article 316 (2) of the Revised Penal Code states:

ART. 316. Other forms of swindling. – The penalty of arresto mayor in its minimum and medium periods
and a fine of not less than the value of the damage caused and not more than three times such value,
shall be imposed upon:

xxx
2. Any person who, knowing that real property is encumbered, shall dispose of the same, although such
encumbrance be not recorded;
xxx

In every criminal prosecution, the State must prove beyond reasonable doubt all the elements of the
crime charged and the complicity or participation of the accused.[10]

For petitioners to be convicted of the crime of swindling under Article 316 (2) of the Revised Penal Code,
the prosecution had the burden to prove the confluence of the following essential elements of the
crime:

1. that the thing disposed of be real property;

2. that the offender knew that the real property was encumbered,
whether the encumbrance is recorded or not;
3. that there must be express representation by the offender that the real property is free from
encumbrance; and
4. that the act of disposing of the real property be made to the damage of another.[11]

One of the essential elements of swindling under Article 316, paragraph 2, is that the act of disposing
the encumbered real property is made to the damage of another. In this case, neither the trial court nor
the CA made any finding of any damage to the offended party. Nowhere in the Decision of the RTC or
that of the CA is there any discussion that there was damage suffered by complainant Avila, or any
finding that his rights over the property were prejudiced.

On the contrary, complainant had possession and control of the land even as the cases were being
heard. His possession and right to exercise dominion over the property was not disturbed. Admittedly,
there was delay in the delivery of the title. This, however, was the subject of a separate case, which was
eventually decided in petitioners’ favor.[12]

If no damage should result from the sale, no crime of estafa would have been committed by the vendor,
as the element of damage would then be lacking.[13] The inevitable conclusion, therefore, is that
petitioners should be acquitted of the crime charged.

RULE 2- CAUSE OF ACTION

Sec. 1. Ordinary civil actions, basis of

Every ordinary civil action must be based on a cause of action.

Turner v. Lorenzo Shipping, G.R. No. 157479, November 24, 2010

FACTS: The petitioners held 1,010,000 shares of stock of the respondent, a domestic corporation
engaged primarily in cargo shipping activities. In June 1999, the respondent decided to amend its
articles of incorporation to remove the stockholders’ pre-emptive rights to newly issued shares of stock.
Feeling that the corporate move would be prejudicial to their interest as stockholders, the petitioners
voted against the amendment and demanded payment of their shares at the rate of P2.276/share based
on the book value of the shares, or a total of P2,298,760.00.

The respondent found the fair value of the shares demanded by the petitioners unacceptable. It insisted
that the market value on the date before the action to remove the pre-emptive right was taken should
be the value, or P0.41/share (or a total of P414,100.00), considering that its shares were listed in the
Philippine Stock Exchange, and that the payment could be made only if the respondent had unrestricted
retained earnings in its books to cover the value of the shares, which was not the case.

The disagreement on the valuation of the shares led the parties to constitute an appraisal
committee pursuant to Section 82 of the Corporation Code

On October 27, 2000, the appraisal committee reported its valuation of P2.54/share, for an aggregate
value of P2,565,400.00 for the petitioners.[2]
Subsequently, the petitioners demanded payment based on the valuation of the appraisal committee,
plus 2%/month penalty from the date of their original demand for payment, as well as the
reimbursement of the amounts advanced as professional fees to the appraisers.[3]

In its letter to the petitioners dated January 2, 2001,[4] the respondent refused the petitioners’
demand, explaining that pursuant to the Corporation Code, the dissenting stockholders exercising their
appraisal rights could be paid only when the corporation had unrestricted retained earnings to cover the
fair value of the shares, but that it had no retained earnings at the time of the petitioners’ demand, as
borne out by its Financial Statements for Fiscal Year 1999 showing a deficit of P72,973,114.00 as of
December 31, 1999.

Upon the respondent’s refusal to pay, the petitioners sued the respondent for collection and
damages in the RTC in Makati City Branch 132 on January 22, 2001.

On June 26, 2002, the petitioners filed their motion for partial summary judgment, claiming that:

7) xxx the defendant has an accumulated unrestricted retained earnings of ELEVEN MILLION NINE
HUNDRED SEVENTY FIVE THOUSAND FOUR HUNDRED NINETY (P11,975,490.00) PESOS, Philippine
Currency, evidenced by its Financial Statement as of the Quarter Ending March 31, 2002; xxx

8) xxx the fair value of the shares of the petitioners as fixed by the Appraisal Committee is final, that the
same cannot be disputed xxx

9) xxx there is no genuine issue to material fact and therefore, the plaintiffs are entitled, as a matter of
right, to a summary judgment. xxx [6]

The respondent opposed the motion for partial summary judgment, stating that the
determination of the unrestricted retained earnings should be made at the end of the fiscal year of the
respondent, and that the petitioners did not have a cause of action against the respondent.

During the pendency of the motion for partial summary judgment, the case was re-raffled to Branch
142, a commercial court because the case was an intra-corporate dispute. Nevertheless, because the
principal office of the respondent was in Manila, Civil Case No. 01-086 was ultimately transferred to
Branch 46 of the RTC in Manila presided by Judge Artemio Tipon pursuant to Interim Rules of Procedure
on Intra-Corporate Controversies (Interim Rules) requiring intra-corporate cases to be brought in the
RTC exercising jurisdiction over the place where the principal office of the corporation was found.

At a heraring on October 23, 2002, which the petitioners’ counsel did not attend, Judge Tipon issued an
order,[8] granting the petitioners’ motion for partial summary judgment.

On November 12, 2002, the respondent filed a motion for reconsideration.

On the scheduled hearing of the motion for reconsideration on November 22, 2002, the petitioners filed
a motion for immediate execution and a motion to strike out motion for reconsideration. In the latter
motion, they pointed out that the motion for reconsideration was prohibited by Section 8 of the Interim
Rules. Thus, also on November 22, 2002, Judge Tipon denied the motion for reconsideration and
granted the petitioners’ motion for immediate execution.[10]
Subsequently, on November 28, 2002, the RTC issued a writ of execution.[11]

Aggrieved, the respondent commenced a special civil action for certiorari in the CA to
challenge the two aforecited orders of Judge Tipon.

Upon the respondent’s application, the CA issued a temporary restraining order (TRO) to stop the writ of
execution. By then, however, the writ of execution had been partially enforced.

The TRO lapsed without the CA issuing a writ of preliminary injunction to prevent the execution.
Thereupon, the sheriff resumed the enforcement of the writ of execution.

The CA promulgated its assailed decision on March 4, 2003 holding that the Turners’ right to payment
had not yet accrued when they filed their Complaint on January 22, 2001 because there was no
unrestricted retained earnings, albeit their appraisal right already existed. The CA discussed so:

In Philippine American General Insurance Co. Inc. vs. Sweet Lines, Inc., the Supreme Court
declared that:

Now, before an action can properly be commenced all the essential elements of the cause of
action must be in existence, that is, the cause of action must be complete. All valid conditions
precedent to the institution of the particular action, whether prescribed by statute, fixed by
agreement of the parties or implied by law must be performed or complied with before
commencing the action, unless the conduct of the adverse party has been such as to prevent or
waive performance or excuse non-performance of the condition.

It bears restating that a right of action is the right to presently enforce a cause of action, while a
cause of action consists of the operative facts which give rise to such right of action. The right of
action does not arise until the performance of all conditions precedent to the action and may be
taken away by the running of the statute of limitations, through estoppel, or by other
circumstances which do not affect the cause of action. Performance or fulfillment of all
conditions precedent upon which a right of action depends must be sufficiently alleged,
considering that the burden of proof to show that a party has a right of action is upon the
person initiating the suit.

The Turners’ right of action arose only when petitioner had already retained earnings in the amount of
P11,975,490.00 on March 21, 2002; such right of action was inexistent on January 22, 2001 when they
filed the Complaint. However, in the doctrinal case of Surigao Mine Exploration Co. Inc., vs. Harris, the
Supreme Court ruled:

Subject to certain qualifications, and except as otherwise provided by law, an action commenced
before the cause of action has accrued is prematurely brought and should be dismissed. The fact that
the cause of action accrues after the action is commenced and while it is pending is of no moment. 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. 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 as yet no cause of action should not be summoned before the public
tribunals to answer complaints which are groundless. An action prematurely brought is a groundless
suit. 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.

The petitioners now come to the Court for a review on certiorari of the CA’s decision

ISSUE: WON the CA erred in rendering summary judgment and issuing a writ of execution

HELD:

A stockholder who dissents from certain corporate actions has the right to demand payment of the fair
value of his or her shares. This right, known as the right of appraisal, is expressly recognized in Section
81 of the Corporation Code. Clearly, the right of appraisal may be exercised when there is a fundamental
change in the charter or articles of incorporation substantially prejudicing the rights of the stockholders.
It does not vest unless objectionable corporate action is taken.[13] It serves the purpose of enabling the
dissenting stockholder to have his interests purchased and to retire from the corporation

Notwithstanding the right of appraisal, no payment shall be made to any dissenting stockholder unless
the corporation has unrestricted retained earnings in its books to cover the payment. In case the
corporation has no available unrestricted retained earnings in its books, Section 83 of the Corporation
Code provides that if the dissenting stockholder is not paid the value of his shares within 30 days after
the award, his voting and dividend rights shall immediately be restored.

The trust fund doctrine backstops the requirement of unrestricted retained earnings to fund the
payment of the shares of stocks of the withdrawing stockholders. Under the doctrine, the capital stock,
property, and other assets of a corporation are regarded as equity in trust for the payment of corporate
creditors, who are preferred in the distribution of corporate assets.[24] The creditors of a corporation
have the right to assume that the board of directors will not use the assets of the corporation to
purchase its own stock for as long as the corporation has outstanding debts and liabilities.[25] There can
be no distribution of assets among the stockholders without first paying corporate debts. Thus, any
disposition of corporate funds and assets to the prejudice of creditors is null and void.

Petitioners’ cause of action was premature

That the respondent had indisputably no unrestricted retained earnings in its books at the time the
petitioners commenced Civil Case No. 01-086 on January 22, 2001 proved that the respondent’s legal
obligation to pay the value of the petitioners’ shares did not yet arise. Thus, the CA did not err in
holding that the petitioners had no cause of action, and in ruling that the RTC did not validly render the
partial summary judgment.

A cause of action is the act or omission by which a party violates a right of another.[27] The
essential elements of a cause of action are: (a) the existence of a legal right in favor of the plaintiff; (b) a
correlative legal duty of the defendant to respect such right; and (c) an act or omission by such
defendant in violation of the right of the plaintiff with a resulting injury or damage to the plaintiff for
which the latter may maintain an action for the recovery of relief from the defendant.[28]

Although the first two elements may exist, a cause of action arises only upon the occurrence of the last
element, giving the plaintiff the right to maintain an action in court for recovery of damages or other
appropriate relief

Section 1, Rule 2, of the Rules of Court requires that every ordinary civil action must be based on a cause
of action. Accordingly, Civil Case No. 01-086 was dismissible from the beginning for being without any
cause of action.

The RTC concluded that the respondent’s obligation to pay had accrued by its having the
unrestricted retained earnings after the making of the demand by the petitioners. It based its conclusion
on the fact that the Corporation Code did not provide that the unrestricted retained earnings must
already exist at the time of the demand.

The RTC’s construal of the Corporation Code was unsustainable, because it did not take into account the
petitioners’ lack of a cause of action against the respondent. In order to give rise to any obligation to pay
on the part of the respondent, the petitioners should first make a valid demand that the respondent
refused to pay despite having unrestricted retained earnings. Otherwise, the respondent could not be
said to be guilty of any actionable omission that could sustain their action to collect.

Neither did the subsequent existence of unrestricted retained earnings after the filing of the
complaint cure the lack of cause of action in Civil Case No. 01-086. The petitioners’ right of action could
only spring from an existing cause of action. Thus, a complaint whose cause of action has not yet
accrued cannot be cured by an amended or supplemental pleading alleging the existence or accrual of a
cause of action during the pendency of the action.[30] For, only when there is an invasion of primary
rights, not before, does the adjective or remedial law become operative.[31] Verily, a premature
invocation of the court’s intervention renders the complaint without a cause of action and dismissible
on such ground.[32] In short, Civil Case No. 01-086, being a groundless suit, should be dismissed.

Although the respondent’s petition for certiorari targeted only the RTC’s orders granting the
motion for partial summary judgment and the motion for immediate execution, the CA’s directive for
the dismissal of Civil Case No. 01-086 was not an abuse of discretion, least of all grave, because such
dismissal was the only proper thing to be done under the circumstances. According to Surigao Mine
Exploration Co., Inc. v. Harris:[35]

Subject to certain qualification, and except as otherwise provided by law, an action commenced
before the cause of action has accrued is prematurely brought and should be dismissed. The fact that
the cause of action accrues after the action is commenced and while the case is pending is of no
moment. It is a rule of law to which there is, perhaps no exception, either in law or in equity, that to
recover at all there must be some cause of action at the commencement of the suit. 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 as yet no cause of action should not be summoned before the
public tribunals to answer complaints which are groundless. An action prematurely brought is a
groundless suit. 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.

Sec. 2. Cause of action, defined

A cause of action is the act or omission by which a party violates a right of another.

Heirs of Ypon v. Ricaforte, G.R. No. 198680, July 8, 2013

FACTS: On July 29, 2010, petitioners, together with some of their cousins,4 filed a complaint for
Cancellation of Title and Reconveyance with Damages (subject complaint) against respondent Gaudioso
Ponteras Ricaforte a.k.a. "Gaudioso E. Ypon”

In their complaint, they alleged that Magdaleno Ypon (Magdaleno) died intestate and childless on June
28, 1968, leaving behind two lots. Claiming to be the sole heir of Magdaleno, Gaudioso executed an
Affidavit of Self-Adjudication and caused the cancellation of the aforementioned certificates of title,
leading to their subsequent transfer in his name to the prejudice of petitioners who are Magdaleno’s
collateral relatives and successors-in-interest.

In his Answer, Gaudioso alleged that he is the lawful son of Magdaleno as evidenced by: (a) his
certificate of Live Birth; (b) two (2) letters from Polytechnic School; and (c) a certified true copy of his
passport.9 Further, by way of affirmative defense, he claimed that: (a) petitioners have no cause of
action against him; (b) the complaint fails to state a cause of action; and (c) the case is not prosecuted
by the real parties-in-interest, as there is no showing that the petitioners have been judicially declared
as Magdaleno’s lawful heirs.

The RTC Ruling

On July 27, 2011, the RTC issued the assailed July 27, 2011 Order,11 finding that the subject complaint
failed to state a cause of action against Gaudioso. It observed that while the plaintiffs therein had
established their relationship with Magdaleno in a previous special proceeding for the issuance of letters
of administration,12 this did not mean that they could already be considered as the decedent’s
compulsory heirs. Quite the contrary, Gaudioso satisfactorily established the fact that he is Magdaleno’s
son – and hence, his compulsory heir.

The plaintiffs therein filed a motion for reconsideration which was, however, denied on August 31, 2011
due to the counsel’s failure to state the date on which his Mandatory Continuing Legal Education
Certificate of Compliance was issued.

Aggrieved, petitioners, who were among the plaintiffs in Civil Case No. T-2246,15 sought direct recourse
to the Court through the instant petition.

ISSUE: whether or not the RTC’s dismissal of the case on the ground that the subject complaint failed to
state a cause of action was proper.

HELD:

Cause of action is defined as the act or omission by which a party violates a right of another.16 It is well-
settled that the existence of a cause of action is determined by the allegations in the complaint.17 In
this relation, a complaint is said to assert a sufficient cause of action if, admitting what appears solely on
its face to be correct, the plaintiff would be entitled to the relief prayed for.18Accordingly, if the
allegations furnish sufficient basis by which the complaint can be maintained, the same should not be
dismissed, regardless of the defenses that may be averred by the defendants.19

As stated in the subject complaint, petitioners, who were among the plaintiffs therein, alleged that they
are the lawful heirs of Magdaleno and based on the same, prayed that the Affidavit of Self-Adjudication
executed by Gaudioso be declared null and void and that the transfer certificates of title issued in the
latter’s favor be cancelled. While the foregoing allegations, if admitted to be true, would consequently
warrant the reliefs sought for in the said complaint, the rule that the determination of a decedent’s
lawful heirs should be made in the corresponding special proceeding20 precludes the RTC, in an
ordinary action for cancellation of title and reconveyance, from granting the same. In the case of Heirs
of Teofilo Gabatan v. CA,21 the Court, citing several other precedents, held that the determination of
who are the decedent’s lawful heirs must be made in the proper special proceeding for such purpose,
and not in an ordinary suit for recovery of ownership and/or possession

By way of exception, the need to institute a separate special proceeding for the determination of
heirship may be dispensed with for the sake of practicality, as when the parties in the civil case had
voluntarily submitted the issue to the trial court and already presented their evidence regarding the
issue of heirship, and the RTC had consequently rendered judgment thereon,23 or when a special
proceeding had been instituted but had been finally closed and terminated, and hence, cannot be re-
opened.24

In this case, none of the foregoing exceptions, or those of similar nature, appear to exist. Hence, there
lies the need to institute the proper special proceeding in order to determine the heirship of the parties
involved, ultimately resulting to the dismissal of the case.

Verily, while a court usually focuses on the complaint in determining whether the same fails to state a
cause of action, a court cannot disregard decisions material to the proper appreciation of the questions
before it.25 Thus, concordant with applicable jurisprudence, since a determination of heirship cannot be
made in an ordinary action for recovery of ownership and/or possession, the dismissal of Civil Case No.
T-2246 was altogether proper.

Swagman Hotels v. Court of Appeals, G.R. No. 161135, April 8, 2005

FACTS: 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. 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.

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 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.

RTC Baguio City Ruling

The court declared on 5 May 2000 that 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 holding that there was no novation but only reduction of interest
and on the issue of lack of cause of action, the RTC held:

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.

Court of Appeals Ruling

In its decision of 5 September 2003, the Court of Appeals denied petitioner’s appeal and affirmed in toto
the decision of the trial court. As to the issue of lack of cause of action:

In the case at bench, while it is true that appellant Swagman raised in its Answer the issue of
prematurity in the filing of the complaint, appellant Swagman nonetheless failed to object to
appellee Christian’s presentation of evidence to the effect that the promissory notes have
become due and demandable.

The afore-quoted rule allows a complaint which states no cause of action to be cured either by
evidence presented without objection or, in the event of an objection sustained by the court, by
an amendment of the complaint with leave of court (Herrera, Remedial Law, Vol. VII, 1997 ed.,
p. 108).

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:

ISSUE: 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?
HELD:

Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil Procedure, is the act or
omission by which a party violates the right of another. Its essential elements are as follows:

1. A right in favor of the plaintiff by whatever means and under whatever law it arises or is created;

2. An obligation on the part of the named defendant to respect or not to violate such right; and

3. Act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for
recovery of damages or other appropriate relief.[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.

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

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. Compañía 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.

Joseph v. Bautista, G.R. No. L-41423, February 23, 1989

FACTS: Respondent Patrocinio Perez is the owner of a cargo truck for conveying cargoes and passengers
for a consideration from Dagupan City to Manila. On January 12, 1973, the truck driven by defendant
Domingo Villa veered towards the shoulder of the road and rammed a mango tree injuring petitioner.
Villa was overtaking a tricycle when he has overtaken as well by another truck, owned by respondents
Antonio Sioson and Jacinto Pagarigan, then driven by respondent Lazaro Villanueva.

Petitioner filed a complaint for damages against respondent Patrocinio Perez, as owner of the cargo
truck, based on a breach of contract of carriage and against respondents Antonio Sioson and Lazaro
Villanueva, as owner and driver, respectively, of the pick-up truck, based on quasi-delict at the CFI of
Bulacan, Branch III.

Respondent Sioson (Truck 2) filed his answer alleging that he is not and never was an owner of the pick-
up truck and neither would he acquire ownership thereof in the future.

On September 24, 1973, petitioner, with prior leave of court, filed his amended complaint impleading
respondents Jacinto Pagarigan and a certain Rosario Vargas as additional alternative defendants since
he was not sure who the real owners of the two trucks were.

Respondent Perez (Truck 1) filed her amended answer with crossclaim against her co-defendants for
indemnity and subrogation in the event she is ordered to pay petitioner's claim, and therein impleaded
cross-defendant Alberto Cardeno as additional alternative defendant.
On September 27, 1974, respondents Lazaro Villanueva, Alberto Cardeno, Antonio Sioson and Jacinto
Pagarigan, (Truck 2) thru their insurer, Insurance Corporation of the Philippines, paid petitioner's claim
for injuries sustained in the amount of P 1,300.00. By reason thereof, petitioner executed a release of
claim releasing from liability the following parties, viz: Insurance Corporation of the Philippines,
Alberto Cardeno, Lazaro Villanueva, Antonio Sioson and Jacinto Pagarigan.

On December 2, 1974, respondents Lazaro Villanueva, Alberto Cardeno and their insurer, the Insurance
Corporation of the Philippines, paid respondent Patrocinio Perez' claim for damages to her cargo truck
in the amount of P 7,420.61.

Consequently, respondents Sioson, Pagarigan, Cardeno and Villanueva filed a "Motion to Exonerate and
Exclude Defs/ Cross defs. Alberto Cardeno, Lazaro Villanueva, Antonio Sioson and Jacinto Pagarigan on
the Instant Case", alleging that respondents Cardeno and Villanueva already paid P 7,420.61 by way of
damages to respondent Perez, and alleging further that respondents Cardeno, Villanueva, Sioson and
Pagarigan paid P 1,300.00 to petitioner by way of amicable settlement.

Thereafter, respondent Perez filed her "Opposition to Cross-defs.' motion dated Dec. 2, 1974 and
Counter Motion" to dismiss. The so-called counter motion to dismiss was premised on the fact that the
release of claim executed by petitioner in favor of the other respondents inured to the benefit of
respondent Perez, considering that all the respondents are solidarity liable to herein petitioner.

On July 8, 1975, respondent judge issued the questioned order dismissing the case, and a motion for
the reconsideration thereof was denied.

Hence, this appeal, petitioner contending that respondent judge erred in declaring that the release of
claim executed by petitioner in favor of respondents Sioson, Villanueva and Pagarigan inured to the
benefit of respondent Perez; ergo, it likewise erred in dismissing the case.

ISSUE:

HELD:

The argument that there are two causes of action embodied in petitioner's complaint, hence the
judgment on the compromise agreement under the cause of action based on quasi-delict is not a bar to
the cause of action for breach of contract of carriage, is untenable.

A cause of action is understood to be the delict or wrongful act or omission committed by the defendant
in violation of the primary rights of the plaintiff. 3 It is true that a single act or omission can be violative
of various rights at the same time, as when the act constitutes juridically a violation of several separate
and distinct legal obligations. However where there is only one delict or wrong, there is but a single
cause of action regardless of the number of rights that may have been violated belonging to one person.
4

The singleness of a cause of action lies in the singleness of the- delict or wrong violating the rights of one
person. Nevertheless, if only one injury resulted from several wrongful acts, only one cause of action
arises. 5 In the case at bar, there is no question that the petitioner sustained a single injury on his
person. That vested in him a single cause of action, albeit with the correlative rights of action against the
different respondents through the appropriate remedies allowed by law.

The trial court was, therefore, correct in holding that there was only one cause of action involved
although the bases of recovery invoked by petitioner against the defendants therein were not
necessarily Identical since the respondents were not identically circumstanced. However, a recovery by
the petitioner under one remedy necessarily bars recovery under the other. This, in essence, is the
rationale for the proscription in our law against double recovery for the same act or omission which,
obviously, stems from the fundamental rule against unjust enrichment.

There is no question that the respondents herein are solidarily liable to petitioner. On the evidence
presented in the court below, the trial court found them to be so liable. It is undisputed that petitioner,
in his amended complaint, prayed that the trial court hold respondents jointly and severally liable.
Furthermore, the allegations in the amended complaint clearly impleaded respondents as solidary
debtors. We cannot accept the vacuous contention of petitioner that said allegations are intended to
apply only in the event that execution be issued in his favor. There is nothing in law or jurisprudence
which would countenance such a procedure.

The respondents having been found to be solidarity liable to petitioner, the full payment made by some
of the solidary debtors and their subsequent release from any and all liability to petitioner inevitably
resulted in the extinguishment and release from liability of the other solidary debtors, including herein
respondent Patrocinio Perez.

The claim that there was an agreement entered into between the parties during the pre-trial conference
that, after such payment made by the other respondents, the case shall proceed as against respondent
Perez is both incredible and unsubstantiated. There is nothing in the records to show, either by way of a
pre-trial order, minutes or a transcript of the notes of the alleged pre-trial hearing, that there was
indeed such as agreement.

Sec. 3. One suit for a single cause of action

A party may not institute more than one suit for a single cause of action.

Phil. Bank of Comm. v. Lim, G.R. No. 158138, April 12, 2005
FACTS: On September 3, 1999, the Philippine Bank of Communications (hereinafter ‘[petitioner’]) filed a
complaint against [Respondents Elena Lim, Ramon Calderon and Tri-Oro International Trading &
Manufacturing Corporation (‘Tri-Oro’ for brevity)] with the Regional Trial Court of Manila for the
collection of a deficiency amounting to P4,014,297.23 exclusive of interest.

[Petitioner] alleged therein that [respondents] obtained a loan from it and executed a continuing surety
agreement dated November 16, 1995 in favor of [petitioner] for all loans, credits, etc., that were
extended or may be extended in the future to [respondents]. The loan was renewed on January 21,
1998 wherein it was expressly stipulated therein that the venue for any legal action that may arise out
of said promissory note shall be Makati City, ‘to the exclusion of all other courts’. Respondents allegedly]
failed to pay said obligation upon maturity. Thus, [petitioner] foreclosed the real estate mortgage
executed by [respondents] valued at P1,081,600.00 leaving a deficiency balance of P4,014,297.23 as of
August 31, 1999.
“[Respondents] moved to dismiss the complaint on the ground of improper venue, invoking the
stipulation contained in the last paragraph of the promissory note with respect to the
restrictive/exclusive venue. [The trial court] denied said motion asseverating that [petitioner] ha[d]
separate causes of action arising from the promissory note and the continuing surety agreement. Thus,
[under] Rule 4, Section 2, of the 1997 Rules of Civil Procedure, as amended, x x x venue was properly laid
in Manila. [The trial court] supported [its] order with cases where venue was held to be merely
permissive. A motion for reconsideration of said order was likewise denied.”[

Ruling of the Court of Appeals

On appeal, the CA ruled that respondents’ alleged debt was based on the Promissory Note, which had
provided an exclusionary stipulation on venue “to the exclusion of all other courts.”[5] The parties’
Surety Agreement, though silent as to venue, was an accessory contract that should have been
interpreted in consonance with the Promissory Note.[6]

Hence, this Petition

ISSUE: Whether or not the Honorable Court of Appeals had decided the issue of venue in a way not in
accord with law and applicable decisions of this Honorable Court and had thereby departed from the
accepted and usual course of judicial proceedings, as to call for this Honorable Supreme Court’s power
of supervision and appellate review.

HELD:

Venue

At the outset, this Court observes that petitioner took liberties with the stipulated facts to suit its
allegations in the present Petition. In its Complaint, petitioner bank averred that respondents had
entered into the Surety Agreement (SA) to guarantee existing and future credit facilities, and that they
had executed the Promissory Note (PN) to document their loan.[9] Now, the bank is claiming that Tri-
Oro issued the PN on which the other respondents should be made liable as sureties.[10]

This strategy is obviously intended to disconnect the SA from the PN and to support the claim of
petitioner that the stipulation on venue does not apply to the SA. However, as will be discussed below,
the cause of action to recover on the basis of the SA is inseparable from that which is based on the PN.

Rule on Venue

Section 2 of Rule 4 of the Rules of Court provides that personal actions[11] must be commenced and
tried (1) in the place where the plaintiff resides, or (2) where the defendant resides, or (3) in case of
non-resident defendants, where they may be found, at the choice of the plaintiff.[12] This rule on venue
does not apply when the law specifically provides otherwise, or when -- before the filing of the action --
the contracting parties agree in writing on the exclusive venue thereof.[13] Venue is not jurisdictional
and may be waived by the parties.[14]

A stipulation as to venue does not preclude the filing of the action in other places, unless qualifying or
restrictive words are used in the agreement.[15]
In the instant case, the stipulation on the exclusivity of the venue as stated in the PN is not at issue.
What petitioner claims is that there was no restriction on the venue, because none was stipulated in
the SA on which petitioner had allegedly based its suit.[16] Accordingly, the action on the SA may be
filed in Manila, petitioner’s place of residence.

Petitioner adds that its Complaint filed in the trial court had two causes of action: the first was founded
on a breach of the PN; and the second, on a violation of the SA.[17] Consequently, it was allegedly
correct to join the causes of action and to file the case in Manila, per Section 5 of Rule 2 of the Rules of
Court, which reads:[18]

“Section 5. Joinder of Causes of Action. –A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the following
conditions:

xxx xxx xxx

(c) Where the causes of action are between the same parties but pertain to different venue or
jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action
falls within the jurisdiction of the said court and venue lies therein.”[19]

Surety Agreement

Suretyship arises upon the solidary binding of a person -- deemed the surety -- with the principal debtor,
for the purpose of fulfilling an obligation.[20] The prestation is not an original and direct obligation for
the performance of the surety’s own act, but merely accessory or collateral to the obligation contracted
by the principal.[21] Although the surety contract is secondary to the principal obligation, the surety
assumes liability as a regular party to the undertaking.[22]

In enforcing a surety contract, the “complementary-contracts-construed-together” doctrine finds

application.[23] According to this principle, an accessory contract must be read in its entirety and
together with the principal agreement.[24] This principle is used in construing contractual stipulations
in order to arrive at their true meaning; certain stipulations cannot be segregated and then made to
control.[25] This no-segregation principle is based on Article 1374 of the Civil Code, which we quote:

“Art. 1374. The various stipulations of a contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly.”

The aforementioned doctrine is applicable to the present case. Incapable of standing by itself, the SA
can be enforced only in conjunction with the PN. The latter documents the debt that is sought to be
collected in the action against the sureties.

The factual milieu of the present case shows that the SA was entered into to facilitate existing and
future loan agreements. Petitioner approved the loan covered by the PN, partly because of the SA that
assured the payment of the principal obligation. The circumstances that related to the issuance of the
PN and the SA are so intertwined that neither one could be separated from the other. It makes no sense
to argue that the parties to the SA were not bound by the stipulations in the PN.
Notably, the PN was a contract of adhesion that petitioner required the principal debtor to execute as a
condition of the approval of the loan. It was made in the form and language prepared by the bank. By
inserting the provision that Makati City would be “the venue for any legal action [that] may arise out of
[the] Promissory Note,”[26] petitioner also restricted the venue of actions against the sureties. The
legal action against the sureties arose not only from the SA, but also from the PN.

Cause of Action

Petitioner correctly argues that there are two causes of action contained in its Complaint. A cause of
action is a party’s act or omission that violates the rights of the other.[27] Only one suit may be
commenced for a single cause of action.[28] If two or more suits are instituted on the basis of the same
cause of action, only one case should remain and the others must be dismissed.[29]

As against Tri-Oro International Trading & Manufacturing Corporation, petitioner’s cause of action is the
alleged failure to pay the debt in violation of the PN; as against Elena Lim and Ramon Calderon, in
violation of the SA.

Because of the variance between the causes of action, petitioner could have filed separate actions
against respondents to recover the debt, on condition that it could not recover twice from the same
cause. It could have proceeded against only one or all of them,[30] as full payment by any one of them
would have extinguished the obligation.[31] By the same token, respondents could have been joined as
defendants in one suit, because petitioner’s alleged right of relief arose from the same transaction or
series of transactions that had common questions of fact.[32] To avoid a multiplicity of suits, joinder of
parties is encouraged by the law.

The cause of action, however, does not affect the venue of the action. The vital issue in the present
case is whether the action against the sureties is covered by the restriction on venue stipulated in the
PN. As earlier stated, the answer is in the affirmative. Since the cases pertaining to both causes of
action are restricted to Makati City as the proper venue, petitioner cannot rely on Section 5 of Rule 2 of
the Rules of Court.

Sec. 4. Splitting a single cause of action; effect of

If two or more suits are instituted on the basis of the same cause of action, the filing of one or a
judgment upon the merits in any one is available as a ground for the dismissal of the others.

Chua v. Metrobank, G.R. No. 182311, August 19, 2009

FACTS: Petitioner Chua is president of co-petitioner Filiden, a domestic corporation, engaged in the
realty business.[4] Respondent Metropolitan Bank and Trust Co. (respondent Metrobank) is a domestic
corporation and a duly licensed banking institution.[5]

Sometime in 1988, petitioners obtained from respondent Metrobank a loan of P4,000,000.00, which
was secured by a real estate mortgage (REM) on parcels of land. Since the value of the collateral was
more than the loan, petitioners were given an open credit line for future loans. On 18 September 1995,
17 January 1996, 31 July 1996, 21 January 1997, and 12 October 1998, petitioners obtained other loans
from respondent Metrobank, and the real estate mortgages were repeatedly amended in accordance
with the increase in petitioners’ liabilities.
Having failed to fully pay their obligations, petitioners entered into a Debt Settlement Agreement[8]
with respondent Metrobank on 13 January 2000, whereby the loan obligations of the former were
restructured. The debt consisted of a total principal amount of P79,650,000.00, plus unpaid interest of
P7,898,309.02, and penalty charges of P552,784.96. Amortization payments were to be made in
accordance with the schedule attached to the agreement.

In a letter[9] dated 28 February 2001, the lawyers of respondent Metrobank demanded that petitioners
fully pay and settle their liabilities, including interest and penalties, in the total amount of P103,450,391
as of 16 January 2001, as well as the stipulated attorney’s fees, within three days from receipt of said
letter.

When petitioners still failed to pay their loans, respondent Metrobank sought to extra-judicially
foreclose the REM constituted on the subject properties. Upon a verified Petition for Foreclosure filed
by respondent Metrobank on 25 April 2001, respondent Atty. Romualdo Celestra (Atty. Celestra) issued
a Notice of Sale dated 26 April 2001, wherein the mortgage debt was set at P88,101,093.98, excluding
unpaid interest and penalties (to be computed from 14 September 1999), attorney’s fees, legal fees, and
other expenses for the foreclosure and sale. The auction sale was scheduled on 31 May 2001.[10] On 4
May 2001, petitioners received a copy of the Notice of Sale.

On 28 May 2001, petitioner Chua, in his personal capacity and acting on behalf of petitioner Filiden, filed
before Branch 257 of the Regional Trial Court of Parañaque (RTC-Branch 257), a Complaint for
Injunction with Prayer for Issuance of Temporary Restraining Order (TRO), Preliminary Injunction and
Damages,[12] against respondents Atty. Celestra.

Upon the motion of petitioners, RTC-Branch 257 issued a TRO.

After the expiration of the TRO on 18 June 2001, and no injunction having been issued by RTC-Branch
257, respondent Atty. Celestra reset the auction sale on 8 November 2001.

On 8 November 2001, the rescheduled date of the auction sale, RTC-Branch 257 issued an Order
directing that the said sale be reset anew after 8 November 2001. The Order was served on 8
November 2001, on respondent Atty. Celestra’s daughter, Arlene Celestra. The auction sale, however,
proceeded on 8 November 2001, and a Certificate of Sale was accordingly issued to respondent
Metrobank as the highest bidder of the foreclosed properties.

On 13 February 2002, petitioners filed with RTC-Branch 257 a Motion to Admit Amended Complaint
which impleaded as additional defendant the incumbent Register of Deeds of Parañaque City and
prayed for a TRO on the foreclosure sale . Petitioners alleged that the Certificate of Sale was a falsified
document since there was no actual sale that took place on 8 November 2001. And, even if an auction
sale was conducted, the Certificate of Sale would still be void because the auction sale was done in
disobedience to a lawful order of RTC-Branch 257.

In an Order dated 6 March 2002, RTC-Branch 257 denied petitioners’ application for injunction on the
ground that the sale of the foreclosed properties rendered the same moot and academic. The auction
sale, which was conducted by respondents Metrobank and Atty. Celestra, after the expiration of the
TRO, and without knowledge of the Order dated 8 November 2001 of RTC-Branch 257, was considered
as proper and valid.
Petitioners filed a Motion for Reconsideration of the 6 March 2002 Order of RTC-Branch 257. When
RTC-Branch 257 failed to take any action on said Motion, petitioners filed with the Court of Appeals a
Petition for Certiorari.

In a Decision dated 26 July 2002, the Court of Appeals reversed the 6 March 2002 Order of RTC-Branch
257 and remanded the case for further proceedings. The Supreme Court dismissed the appeal of
respondents with finality.
Thus, on 27 September 2005, RTC-Branch 257 set the hearing for the presentation of evidence by
respondent Metrobank for the application for preliminary injunction on 9 November 2005.

On 2 November 2005, petitioners sought the inhibition of Acting Executive Judge Rolando How of RTC-
Branch 257. Their motion was granted and the case was re-raffled to RTC-Branch 258.

On 28 October 2005, petitioners filed with Branch 195 of the Regional Trial Court of Parañaque (RTC-
Branch 195) a Verified Complaint for Damages against respondents Metrobank, Atty. Celestra, and
three Metrobank lawyers. Petitioners sought in their Complaint the award of actual, moral, and
exemplary damages against the respondents for making it appear that an auction sale of the subject
properties took place, as a result of which, the prospective buyers of the said properties lost their
interest and petitioner Chua was prevented from realizing a profit of P70,000,000.00 from the
intended sale.

Petitioners filed with RTC-Branch 195 a Motion to Consolidate the action for damages pending before
said court with the injunction case that was being heard before RTC-Branch 258 because it involves the
same properties, subject matter and parties.

On 3 January 2006, respondents filed with RTC-Branch 195 an Opposition to Motion to Consolidate
with Prayer for Sanctions, praying for the dismissal of the Complaint for Damages in Civil Case No. CV-
05-0402, on the ground of forum shopping.

In an Order dated 23 January 2006, RTC-Branch 195 granted the Motion to Consolidate.

After the two cases were consolidated, respondents filed two motions before RTC-Branch 258: (1)
Motion for Reconsideration of the Order dated 23 January 2006 of RTC-Branch 195, which granted the
Motion to Consolidate of petitioners; and (2) Manifestation and Motion raising the ground of forum
shopping, among the affirmative defenses of respondents.[25] RTC-Branch 258 issued an Order on 3
July 2006, granting the first Motion of respondents, thus, dismissing Civil Case No. CV-05-0402 on the
ground of forum shopping,[26] and consequently, rendering the second Motion of respondents moot.
RTC-Branch 258 declared that the facts or claims submitted by petitioners, the rights asserted, and the
principal parties in the two cases were the same.

From the foregoing Order of RTC-Branch 258, petitioners filed a Petition for Review on Certiorari with
the Court of Appeals

In a Decision dated 31 January 2008, the Court of Appeals affirmed the 3 July 2006 Order of RTC-Branch
258. The appellate court observed that although the defendants in the two cases were not identical,
they represented a community of interest. It also declared that the cause of action of the two cases,
upon which the recovery of damages was based, was the same, i.e., the feigned auction sale, such that
the nullification of the foreclosure of the subject properties, which petitioners sought in Civil Case No.
CV-01-0207, would render proper the award for damages, claimed by petitioners in Civil Case No. CV-05-
0402. Thus, judgment in either case would result in res judicata.

Petitioners filed a Motion for Reconsideration of the afore-mentioned Decision, which the Court of
Appeals denied in a Resolution dated 28 March 2008.[30]

Hence, the present Petition, in which the following issues are raised[31]:

ISSUE: whether or not successively filing Civil Case No. CV-01-0207 and Civil Case No. CV-05-0402
amounts to forum shopping.

HELD: The Court answers in the affirmative.

The proscription against forum shopping is found in Section 5, Rule 7 of the 1997 Rules of Court, which
provides that:

SEC. 5. Certification against forum shopping.—The plaintiff or principal party shall certify under oath in
the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed
thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or
filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of
his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action
or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that
the same or similar action or claim has been filed or is pending, he shall report that fact within five (5)
days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall constitute indirect contempt
of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the
party or his counsel clearly constitutes willful and deliberate forum shopping, the same shall be ground
for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions.

Forum shopping exists when a party repeatedly avails himself of several judicial remedies in different
courts, simultaneously or successively, all substantially founded on the same transactions and the same
essential facts and circumstances, and all raising substantially the same issues either pending in or
already resolved adversely by some other court.[32]

Ultimately, what is truly important in determining whether forum shopping exists or not is the vexation
caused the courts and party-litigant by a party who asks different courts to rule on the same or related
causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility
of conflicting decisions being rendered by the different fora upon the same issue.[33]
Forum shopping can be committed in three ways: (1) filing multiple cases based on the same cause of
action and with the same prayer, the previous case not having been resolved yet (where the ground for
dismissal is litis pendentia); (2) filing multiple cases based on the same cause of action and the same
prayer, the previous case having been finally resolved (where the ground for dismissal is res judicata);
and (3) filing multiple cases based on the same cause of action, but with different prayers (splitting of
causes of action, where the ground for dismissal is also either litis pendentia or res judicata).[34]

In the present case, there is no dispute that petitioners failed to state in the Certificate of Non-Forum
Shopping, attached to their Verified Complaint in Civil Case No. CV-05-0402 before RTC-Branch 195, the
existence of Civil Case No. CV-01-0207 pending before RTC-Branch 258. Nevertheless, petitioners insist
that they are not guilty of forum shopping, since (1) the two cases do not have the same ultimate
objective – Civil Case No. CV-01-0207 seeks the annulment of the 8 November 2001 public auction and
certificate of sale issued therein, while Civil Case No. CV-05-0402 prays for the award of actual and
compensatory damages for respondents’ tortuous act of making it appear that an auction sale actually
took place on 8 November 2001; and (2) the judgment in Civil Case No. CV-01-0207, on the annulment
of the foreclosure sale, would not affect the outcome of Civil Case No. CV-05-0402, on the entitlement
of petitioners to damages. The Court, however, finds these arguments refuted by the allegations made
by petitioners themselves in their Complaints in both cases.

Petitioners committed forum shopping by filing multiple cases based on the same cause of action,
although with different prayers.

Sections 3 and 4, Rule 2 of the Rules of Court proscribe the splitting of a single cause of action:

Section 3. A party may not institute more than one suit for a single cause of action.

Section 4. Splitting a single cause of action; effect of.—If two or more suits are instituted on the basis of
the same cause of action, the filing of one or a judgment upon the merits in any one is available as a
ground for the dismissal of the others.

Forum shopping occurs although the actions seem to be different, when it can be seen that there is a
splitting of a cause of action. [35] A cause of action is understood to be the delict or wrongful act or
omission committed by the defendant in violation of the primary rights of the plaintiff. It is true that a
single act or omission can violate various rights at the same time, as when the act constitutes juridically
a violation of several separate and distinct legal obligations. However, where there is only one delict or
wrong, there is but a single cause of action regardless of the number of rights that may have been
violated belonging to one person.[36]

Petitioners would like to make it appear that Civil Case No. CV-01-0207 was solely concerned with the
nullification of the auction sale and certification of sale, while Civil Case No. CV-05-0402 was a totally
separate claim for damages. Yet, a review of the records reveals that petitioners also included an
explicit claim for damages in their Amended Complaint in the first case due to the alleged feigned sale.
The Court observes that the damages being claimed by petitioners in their Complaint in Civil Case No.
CV-05-0402 (second case) were also occasioned by the supposedly fictitious 8 November 2001
foreclosure sale.
There is no question that the claims of petitioners for damages in Civil Case No. CV-01-0207 and Civil
Case No. CV-05-0402 are premised on the same cause of action, i.e., the purportedly wrongful conduct
of respondents in connection with the foreclosure sale of the subject properties.

At first glance, said claims for damages may appear different. In Civil Case No. CV-01-0207, the damages
purportedly arose from the bad faith of respondents in offering the subject properties at the auction
sale at a price much lower than the assessed fair market value of the said properties, said to be
P176,117,000.00. On the other hand, the damages in Civil Case No. CV-05-0402, allegedly resulted from
the backing out of prospective buyers, who had initially offered to buy the subject properties for “not
less than P175,000,000.00,” because respondents made it appear that the said properties were already
sold at the auction sale. Yet, it is worthy to note that petitioners quoted closely similar values for the
subject properties in both cases, against which they measured the damages they supposedly suffered.
Evidently, this is due to the fact that petitioners actually based the said values on the single appraisal
report of the Philippine Appraisal Company on the subject properties. Even though petitioners did not
specify in their Amended Complaint in Civil Case No. CV-01-0207 the exact amount of damages they
were seeking to recover, leaving the same to the determination of the trial court, and petitioners
expressly prayed that they be awarded damages of not less than P70,000,000.00 in their Complaint in
Civil Case No. CV-05-0402, petitioners cannot deny that all their claims for damages arose from what
they averred was a fictitious public auction sale of the subject properties.

Petitioners’ contention that the outcome of Civil Case No. CV-01-0207 will not determine that of Civil
Case No. CV-05-0402 does not justify the filing of separate cases. Even if it were assumed that the two
cases contain two separate remedies that are both available to petitioners, these two remedies that
arose from one wrongful act cannot be pursued in two different cases. The rule against splitting a cause
of action is intended to prevent repeated litigation between the same parties in regard to the same
subject of controversy, to protect the defendant from unnecessary vexation; and to avoid the costs and
expenses incident to numerous suits. It comes from the old maxim nemo debet bis vexari, pro una et
eadem causa (no man shall be twice vexed for one and the same cause).

Moreover, petitioners admitted in their Motion to Consolidate[42] dated 27 December 2005 before
RTC-Branch 195 that both cases shared the same parties, the same central issue, and the same subject
property, viz:

2. The above-captioned case is a complaint for damages as a result of the [herein respondents’]
conspiracy to make it appear as if there was an auction sale conducted on November 8, 2001 when in
fact there was none. The properties subject of the said auction sale are the same properties subject of
Civil Case No. 01-0207.

3. Since the subject matter of both cases are the same properties and the parties of both cases are
almost the same, and both cases have the same central issue of whether there was an auction sale, then
necessarily, both cases should be consolidated.

If the forum shopping is not considered willful and deliberate, the subsequent case shall be dismissed
without prejudice, on the ground of either litis pendentia or res judicata. However, if the forum
shopping is willful and deliberate, both (or all, if there are more than two) actions shall be dismissed
with prejudice..[43] In this case, petitioners did not deliberately file Civil Case No. CV-05-0402 for the
purpose of seeking a favorable decision in another forum. Otherwise, they would not have moved for
the consolidation of both cases. Thus, only Civil Case No. CV-05-0402 is dismissed and the hearing of
Civil Case No. CV-01-0207 before RTC-Branch 258 will be continued.

Chu v. Spouses Cunanan, G.R. No. 156185, September 12, 2011

FACTS: On September 30, 1986, Spouses Manuel and Catalina Chu (Chus) executed a deed of sale with
assumption of mortgage[3] involving their five parcels of land situated in Saguin, San Fernando City,
Pampanga, in favor of Trinidad N. Cunanan (Cunanan) for the consideration ofP5,161,090.00.

They also executed a so-called side agreement, whereby they clarified that Cunanan had paid only
P1,000,000.00 to the Chus despite the Chus, as vendors, having acknowledged receiving P5,161,090.00;
that the amount of P1,600,000.00 was to be paid directly to Benito Co and to Security Bank and Trust
Company (SBTC) in whose favor the five lots had been mortgaged; and that Cunanan would pay the
balance of P2,561.90.00 within three months, with a grace period of one month subject to 3%/month
interest on any remaining unpaid amount. The parties further stipulated that the ownership of the lots
would remain with the Chus as the vendors and would be transferred to Cunanan only upon complete
payment of the total consideration and compliance with the terms of the deed of sale with assumption
of mortgage.

Thereafter, the Chus executed a special power of attorney authorizing Cunanan to borrow
P5,161,090.00 from any banking institution and to mortgage the five lots as security, and then to deliver
the proceeds to the Chus net of the balance of the mortgage obligation and the downpayment.[5]

Cunanan was able to transfer the title of the five lots to her name without the knowledge of the Chus,
and to borrow money with the lots as security without paying the balance of the purchase price to the
Chus.

She later transferred two of the lots to Spouses Amado and Gloria Carlos (Carloses) on July 29, 1987. As
a result, on March 18, 1988, the Chus caused the annotation of an unpaid vendor’s lien on three of the
lots. Nonetheless, Cunanan still assigned the remaining three lots to Cool Town Realty on May 25,
1989 despite the annotation.

In February 1988, the Chus commenced Civil Case No. G-1936 in the RTC to recover the unpaid balance
from Spouses Fernando and Trinidad Cunanan (Cunanans). Five years later, on April 19, 1993, the Chus
amended the complaint to seek the annulment of the deed of sale with assumption of mortgage and of
the TCTs issued pursuant to the deed, and to recover damages. They impleaded Cool Town Realty and
Development Corporation (Cool Town Realty), and the Office of the Registry of Deeds of Pampanga as
defendants in addition to the Cunanans. Considering that the Carloses had meanwhile sold the two lots
to Benelda Estate Development Corporation (Benelda Estate) in 1995, the Chus further amended the
complaint in Civil Case No. G-1936 to implead Benelda Estate as additional defendant

In due course, Benelda Estate filed its answer with a motion to dismiss, claiming, among others, that the
amended complaint stated no cause of action because it had acted in good faith in buying the affected
lots, exerting all efforts to verify the authenticity of the titles, and had found no defect in them. After
the RTC denied its motion to dismiss, Benelda Estate assailed the denial on certiorari in the CA, which
annulled the RTC’s denial for being tainted with grave abuse of discretion and dismissed Civil Case No.
G-1936 as against Benelda Estate. On March 1, 2001, the Court upheld the dismissal of Civil Case No. G-
1936 in G.R. No. 142313 entitled Chu, Sr. v. Benelda Estate Development Corporation.
On December 2, 1999, the Chus, the Cunanans, and Cool Town Realty entered into a compromise
agreement,[9] whereby the Cunanans transferred to the Chus their 50% share in “all the parcels of land
situated in Saguin, San Fernando, Pampanga” registered in the name of Cool Town Realty “for and in
consideration of the full settlement of their case.” The RTC approved the compromise agreement in a
partial decision dated January 25, 2000.[

Thereafter, on April 30, 2001, the petitioners herein (i.e., Catalina Chu and her children) brought
another suit, Civil Case No. 12251, against the Carloses and Benelda Estate,[11] seeking the
cancellation of the TCTs of the two lots in the name of Benelda Estate, and the issuance of new TCTs in
their favor, plus damages. The petitioners amended their complaint in Civil Case No. 12251 on February
4, 2002 to implead the Cunanans as additional defendants.
The Cunanans moved to dismiss the amended complaint based on two grounds, namely: (a) bar by prior
judgment, and (b) the claim or demand had been paid, waived, and abandoned. Benelda Estate likewise
moved to dismiss the amended complaint, citing as grounds: (a) forum shopping; (b) bar by prior
judgment, and (c) failure to state a cause of action. On their part, the Carloses raised affirmative
defenses in their answer, namely: (a) the failure to state a cause of action; (b) res judicata or bar by prior
judgment; and (c) bar by statute of limitations.

RTC Ruling
On April 25, 2002, the RTC denied both motions to dismiss,[13] holding that the amended complaint
stated a cause of action against all the defendants.

The Cunanans sought reconsideration, but their motion was denied on May 31, 2002.[15]

On September 2, 2002, the Cunanans filed a petition for certiorari in the CA (SP-72558), assailing the
RTC’s denial of their motion to dismiss and motion for reconsideration

CA Ruling
On November 19, 2002, the CA promulgated its decision, granting the petition for certiorari and
nullifying the challenged orders of the RTC. The CA ruled that the compromise agreement had ended
the legal controversy between the parties with respect to the cause of action arising from the deed of
sale with assumption of mortgage covering all the five parcels of land and involved the violation by the
Cunanans of the same legal right under the deed of sale with assumption of mortgage; and that the
filing of the instant case contravened the rule against splitting of a cause of action

Hence, this appeal.

Issue: Was Civil Case No. 12251 barred by res judicata although the compromise agreement did not
expressly include Benelda Estate as a party and although the compromise agreement made no reference
to the lots now registered in Benelda Estate’s name?

HELD:

The petitioners contend that the compromise agreement did not apply or extend to the Carloses and
Benelda Estate; hence, their Civil Case No. 12251 was not barred by res judicata.

We disagree.
 A compromise agreement is a contract whereby the parties, by making reciprocal concessions,
avoid a litigation or put an end to one already commenced.[19] It encompasses the objects specifically
stated therein, although it may include other objects by necessary implication,[20] and is binding on the
contracting parties, being expressly acknowledged as a juridical agreement between them.[21] It has the
effect and authority of res judicata upon the parties.[22]

In the construction or interpretation of a compromise agreement, the intention of the parties is to

be ascertained from the agreement itself, and effect should be given to that intention.[23] Thus, the
compromise agreement must be read as a whole.

The following pertinent portions of the compromise agreement indicate that the parties intended to
thereby settle all their claims against each other.

The intent of the parties to settle all their claims against each other is expressed in the phrase any and
all their respective claims against each other as alleged in the pleadings they respectively filed in
connection with this case, which was broad enough to cover whatever claims the petitioners might
assert based on the deed of sale with assumption of mortgage.

There is no question that the deed of sale with assumption of mortgage covered all the five lots.

To limit the compromise agreement only to the three lots mentioned therein would contravene the
avowed objective of Civil Case No. G-1936 to enforce or to rescind the entire deed of sale with
assumption of mortgage. Such interpretation is akin to saying that the Cunanans separately sold the five
lots, which is not the truth. For one, Civil Case No. G-1936 did not demand separate amounts for each of
the purchased lots. Also, the compromise agreement did not state that the value being thereby
transferred to the petitioners by the Cunanans corresponded only to that of the three lots.

Apparently, the petitioners were guilty of splitting their single cause of action to enforce or rescind the
deed of sale with assumption of mortgage. Splitting a single cause of action is the act of dividing a
single or indivisible cause of action into several parts or claims and instituting two or more actions upon
them.[26] A single cause of action or entire claim or demand cannot be split up or divided in order to be
made the subject of two or more different actions.[27] Thus, Section 4, Rule 2 of the Rules of Court
expressly prohibits splitting of a single cause of action, viz:

Section 4. Splitting a single cause of action; effect of. — If two or more suits are instituted on the basis of
the same cause of action, the filing of one or a judgment upon the merits in any one is available as a
ground for the dismissal of the others. (4a)

The petitioners were not at liberty to split their demand to enforce or rescind the deed of sale with
assumption of mortgage and to prosecute piecemeal or present only a portion of the grounds upon
which a special relief was sought under the deed of sale with assumption of mortgage, and then to leave
the rest to be presented in another suit; otherwise, there would be no end to litigation.[28] Their
splitting violated the policy against multiplicity of suits, whose primary objective was to avoid unduly
burdening the dockets of the courts. Their contravention of the policy merited the dismissal of Civil Case
No. 12251 on the ground of bar by res judicata.
Res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled
by judgment.[29] The doctrine of res judicata is an old axiom of law, dictated by wisdom and sanctified
by age, and founded on the broad principle that it is to the interest of the public that there should be
an end to litigation by the same parties over a subject once fully and fairly adjudicated. It has been
appropriately said that the doctrine is a rule pervading every well-regulated system of jurisprudence,
and is put upon two grounds embodied in various maxims of the common law: the one, public policy
and necessity, which makes it to the interest of the State that there should be an end to litigation –
interest reipublicae ut sit finis litium; the other, the hardship on the individual that he should be vexed
twice for one and the same cause – nemo debet bis vexari pro una et eadem causa. A contrary doctrine
would subject the public peace and quiet to the will and neglect of individuals and prefer the
gratification of the litigious disposition on the part of suitors to the preservation of the public tranquillity
and happiness.[30]

Under the doctrine of res judicata, a final judgment or decree on the merits rendered by a court
of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits and
on all points and matters determined in the previous suit.[31] The foundation principle upon which the
doctrine rests is that the parties ought not to be permitted to litigate the same issue more than once;
that when a right or fact has been judicially tried and determined by a court of competent jurisdiction,
so long as it remains unreversed, should be conclusive upon the parties and those in privity with them
in law or estate.[32]

Yet, in order that res judicata may bar the institution of a subsequent action, the following requisites
must concur:– (a) the former judgment must be final; (b) it must have been rendered by a court having
jurisdiction of the subject matter and the parties; (c) it must be a judgment on the merits; and (d) there
must be between the first and second actions (i) identity of parties, (ii) identity of the subject matter,
and (iii) identity of cause of action.[33]

The first requisite was attendant. Civil Case No. G-1936 was already terminated under the compromise
agreement, for the judgment, being upon a compromise, was immediately final and unappealable. As to
the second requisite, the RTC had jurisdiction over the cause of action in Civil Case No. G-1936 for the
enforcement or rescission of the deed of sale with assumption of mortgage, which was an action whose
subject matter was not capable of pecuniary estimation. That the compromise agreement explicitly
settled the entirety of Civil Case No. G-1936 by resolving all the claims of the parties against each other
indicated that the third requisite was also satisfied.[34]

But was there an identity of parties, of subject matter, and of causes of action between Civil Case No.G-
1936 and Civil Case No. 12251?

There is identity of parties when the parties in both actions are the same, or there is privity between
them, or they are successors-in-interest by title subsequent to the commencement of the action
litigating for the same thing and under the same title and in the same capacity.[35] The requirement of
the identity of parties was fully met, because the Chus, on the one hand, and the Cunanans, on the
other hand, were the parties in both cases along with their respective privies. The fact that the Carloses
and Benelda Estate, defendants in Civil Case No. 12251, were not parties in the compromise agreement
was inconsequential, for they were also the privies of the Cunanans as transferees and successors-in-
interest. It is settled that the absolute identity of parties was not a condition sine qua non for res
judicata to apply, because a shared identity of interest sufficed.[36] Mere substantial identity of
parties, or even community of interests between parties in the prior and subsequent cases, even if the
latter were not impleaded in the first case, was sufficient.[37]

As to identity of the subject matter, both actions dealt with the properties involved in the deed of sale
with assumption of mortgage. Identity of the causes of action was also met, because Case No. G-1936
and Civil Case No. 12251 were rooted in one and the same cause of action – the failure of Cunanan to
pay in full the purchase price of the five lots subject of the deed of sale with assumption of mortgage. In
other words, Civil Case No. 12251 reprised Civil Case No. G-1936, the only difference between them
being that the petitioners alleged in the former that Benelda Estate was “not also a purchaser for value
and in good faith.”[38]

In fine, the rights and obligations of the parties vis-à-vis the five lots were all defined and governed by
the deed of sale with assumption of mortgage, the only contract between them. That contract was
single and indivisible, as far as they were concerned. Consequently, the Chus could not properly proceed
against the respondents in Civil Case No. 12251, despite the silence of the compromise agreement as to
the Carloses and Benelda Estate, because there can only be one action where the contract is entire, and
the breach total, and the petitioners must therein recover all their claims and damages.[39] The Chus
could not be permitted to split up a single cause of action and make that single cause of action the basis
of several suits.[40]

Pantranco v. Standard Insurance, G.R. No. 140746, March 16, 2005

FACTS: In the afternoon of October 28, 1984, Crispin Gicale was driving the passenger jeepney owned by
his mother Martina Gicale, respondent herein when it was hit by a passenger bus, owned by Pantranco
North Express, Inc., petitioner, driven by Alexander Buncan, also a petitioner, which sped away after the
accident.

Crispin reported the incident to the Talavera Police Station and respondent Standard Insurance Co., Inc.
(Standard), insurer of the jeepney. The total cost of the repair was P21,415.00, but respondent
Standard paid only P8,000.00. Martina Gicale shouldered the balance of P13,415.00.

Thereafter, Standard and Martina, respondents, demanded reimbursement from petitioners Pantranco
and its driver Alexander Buncan, but they refused. This prompted respondents to file with the Regional
Trial Court (RTC), Branch 94, Manila, a complaint for sum of money.

In their answer, both petitioners specifically denied the allegations in the complaint and averred that it
is the Metropolitan Trial Court, not the RTC, which has jurisdiction over the case.

On June 5, 1992, the trial court rendered a Decision in favor of respondents Standard and Martina

On appeal, the Court of Appeals, in a Decision dated July 23, 1999, affirmed the trial court’s ruling,
holding that:

“The appellants argue that appellee Gicale’s claim of P13,415.00 and appellee insurance company’s
claim of P8,000.00 individually fell under the exclusive original jurisdiction of the municipal trial court.
This is not correct because under the Totality Rule provided for under Sec. 19, Batas Pambansa Bilang
129, it is the sum of the two claims that determines the jurisdictional amount. Appellants contend that
there was a misjoinder of parties. Assuming that there was, under the Rules of Court (Sec. 11, Rule 7) as
well as under the Rules of Civil Procedure (ditto), the same does not affect the jurisdiction of the court
nor is it a ground to dismiss the complaint.

Petitioners filed a motion for reconsideration but was denied by the Appellate Court in a Resolution
dated November 4, 1999.

Hence, this petition for review on certiorari

ISSUE: WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT OF THE ACTION
CONSIDERING THAT RESPONDENTS’ RESPECTIVE CAUSE OF ACTION AGAINST PETITIONERS DID NOT
ARISE OUT OF THE SAME TRANSACTION NOR ARE THERE QUESTIONS OF LAW AND FACTS COMMON TO
BOTH PETITIONERS AND RESPONDENTS.

HELD:

Petitioners insist that the trial court has no jurisdiction over the case since the cause of action of each
respondent did not arise from the same transaction and that there are no common questions of law and
fact common to both parties. Section 6, Rule 3 of the Revised Rules of Court,[5] provides:

“Sec. 6. Permissive joinder of parties. – All persons in whom or against whom any right to relief in
respect to or arising out of the same transaction or series of transactions is alleged to exist, whether
jointly, severally, or in the alternative, may, except as otherwise provided in these Rules, join as plaintiffs
or be joined as defendants in one complaint, where any question of law or fact common to all such
plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may
be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection
with any proceedings in which he may have no interest.”

Permissive joinder of parties requires that: (a) the right to relief arises out of the same transaction or
series of transactions; (b) there is a question of law or fact common to all the plaintiffs or defendants;
and (c) such joinder is not otherwise proscribed by the provisions of the Rules on jurisdiction and
venue.[6]

In this case, there is a single transaction common to all, that is, Pantranco’s bus hitting the rear side of
the jeepney. There is also a common question of fact, that is, whether petitioners are negligent. There
being a single transaction common to both respondents, consequently, they have the same cause of
action against petitioners.

To determine identity of cause of action, it must be ascertained whether the same evidence which is
necessary to sustain the second cause of action would have been sufficient to authorize a recovery in
the first.[7] Here, had respondents filed separate suits against petitioners, the same evidence would
have been presented to sustain the same cause of action. Thus, the filing by both respondents of the
complaint with the court below is in order. Such joinder of parties avoids multiplicity of suit and ensures
the convenient, speedy and orderly administration of justice.

Corollarily, Section 5(d), Rule 2 of the same Rules provides:

“Sec. 5. Joinder of causes of action. – A party may in one pleading assert, in the alternative or otherwise,
as many causes of action as he may have against an opposing party, subject to the following conditions:

xxx

(d) Where the claims in all the causes of action are principally for recovery of money the aggregate
amount claimed shall be the test of jurisdiction.”

The above provision presupposes that the different causes of action which are joined accrue in favor of
the same plaintiff/s and against the same defendant/s and that no misjoinder of parties is involved.[8]
The issue of whether respondents’ claims shall be lumped together is determined by paragraph (d) of
the above provision. This paragraph embodies the “totality rule” as exemplified by Section 33 (1) of B.P.
Blg. 129[9] which states, among others, that “where there are several claims or causes of action
between the same or different parties, embodied in the same complaint, the amount of the demand
shall be the totality of the claims in all the causes of action, irrespective of whether the causes of action
arose out of the same or different transactions.”

As previously stated, respondents’ cause of action against petitioners arose out of the same transaction.
Thus, the amount of the demand shall be the totality of the claims.

Respondent Standard’s claim is P8,000.00, while that of respondent Martina Gicale is P13,415.00, or a
total of P21,415.00. Section 19 of B.P. Blg. 129 provides that the RTC has “exclusive original jurisdiction
over all other cases, in which the demand, exclusive of interest and cost or the value of the property in
controversy, amounts to more than twenty thousand pesos (P20,000.00).” Clearly, it is the RTC that has
jurisdiction over the instant case. It bears emphasis that when the complaint was filed, R.A. 7691
expanding the jurisdiction of the Metropolitan, Municipal and Municipal Circuit Trial Courts had not yet
taken effect. It became effective on April 15, 1994.

Umale v. Canoga Park, G.R. No. 167246, July 20, 2011

FACTS: The original case was one for unlawful detainer filed by respondent Canoga Park against
petitioner before the Metropolitan Trial Court (MTC)-Branch 68, Pasig City.

Respondent leased to petitioner (860)-square-meter prime lot located in Ortigas Center, Pasig City for 2
years starting on January 4, 2000. On October 10, 2000, before the lease contract expired, the
respondent filed an unlawful detainer case against the petitioner. The respondent used as a ground for
ejectment the petitioner’s violation of stipulations in the lease contract regarding the use of the
property. Under this contract, the petitioner shall use the leased lot as a parking space for light vehicles
and as a site for a small drivers’ canteen,[8] and may not utilize the subject premises for other purposes
without the respondent’s prior written consent.[9] The petitioner, however, constructed restaurant
buildings and other commercial establishments on the lot, without first securing the required written
consent from the respondent, and the necessary permits from the Association and the Ortigas & Co. Ltd.
Partnership. The petitioner also subleased the property to various merchants-tenants in violation of the
lease contract.
 The MTC-Branch 68 decided the ejectment case in favor of the respondent. On appeal, the RTC-
Branch 155, Pasig City affirmed in toto the MTC-Branch 68 decision.[10] The case, however, was re-
raffled to the RTC-Branch 267, Pasig City because the Presiding Judge of the RTC-Branch 155, upon
motion, inhibited himself from resolving the petitioner’s motion for reconsideration.[11] The RTC-
Branch 267 granted the petitioner’s motion, thereby reversing and setting aside the MTC-Branch 68
decision. Accordingly, Civil Case No. 8084 was dismissed for being prematurely filed.[12] Thus, the
respondent filed a petition for review with the CA on April 10, 2002.[13]

Second unlawful detainer case

During the pendency of the petition for review, the respondent filed on May 3, 2002 another case
for unlawful detainer against the petitioner before the MTC-Branch 71, Pasig City. The case was
docketed as Civil Case No. 9210.[14] This time, the respondent used as a ground for ejectment the
expiration of the parties’ lease contract.

On December 4, 2002, the MTC-Branch 71 rendered a decision in favor of the respondent. On

appeal, the RTC-Branch 68 reversed and set aside the decision of the MTC-Branch 71, and dismissed Civil
Case No. 9210 on the ground of litis pendentia.[16] The petitioner, however, was still ordered to pay
rent in the amount of seventy-one thousand five hundred pesos (P71,500.00) per month beginning
January 16, 2002, which amount is the monthly rent stipulated in the lease contract.

Aggrieved by the reversal, the respondent filed a Petition for Review under Rule 42 of the Rules of
Court with the CA. The respondent argued that there exists no litis pendentia between Civil Case Nos.
8084 and 9210 because the two cases involved different grounds for ejectment, i.e., the first case was
filed because of violations of the lease contract, while the second case was filed due to the expiration of
the lease contract.

On August 20, 2004, the CA nullified and set aside the assailed decision of the RTC-Branch 68, and ruled
that there was no litis pendentia because the two civil cases have different causes of action. The
decision of the MTC- Branch 71 was ordered reinstated. Subsequently, the petitioner’s motion for
reconsideration was denied; hence, the filing of the present petition for review on certiorari.

In presenting his case before this Court, the petitioner insists that litis pendentia exists between the two
ejectment cases filed against him because of their identity with one another and that any judgment on
the first case will amount to res judicata on the other.

ISSUE: WON there is litis pendentia

HELD:

We disagree with the petitioner and find that there is no litis pendentia.

As a ground for the dismissal of a civil action, litis pendentia refers to a situation where two actions are
pending between the same parties for the same cause of action, so that one of them becomes
unnecessary and vexatious.[19]

Litis pendentia exists when the following requisites are present: identity of the parties in the two
actions; substantial identity in the causes of action and in the reliefs sought by the parties; and the
identity between the two actions should be such that any judgment that may be rendered in one case,
regardless of which party is successful, would amount to res judicata in the other.[20]

In the present case, the parties’ bone of contention is whether Civil Case Nos. 8084 and 9210 involve the
same cause of action. The petitioner argues that the causes of action are similar, while the respondent
argues otherwise. If an identity, or substantial identity, of the causes of action in both cases exist, then
the second complaint for unlawful detainer may be dismissed on the ground of litis pendentia.
We rule that Civil Case Nos. 8084 and 9210 involve different causes of action.

Generally, a suit may only be instituted for a single cause of action.[21] If two or more suits are
instituted on the basis of the same cause of action, the filing of one or a judgment on the merits in any
one is ground for the dismissal of the others.[22]

Several tests exist to ascertain whether two suits relate to a single or common cause of action, such as
whether the same evidence would support and sustain both the first and second causes of action[23]
(also known as the “same evidence” test),[24] or whether the defenses in one case may be used to
substantiate the complaint in the other.[25] Also fundamental is the test of determining whether the
cause of action in the second case existed at the time of the filing of the first complaint.[26]

Of the three tests cited, the third one is especially applicable to the present case, i.e., whether the
cause of action in the second case existed at the time of the filing of the first complaint – and to which
we answer in the negative.

The facts clearly show that the filing of the first ejectment case was grounded on the petitioner’s
violation of stipulations in the lease contract, while the filing of the second case was based on the
expiration of the lease contract. At the time the respondent filed the first ejectment complaint on
October 10, 2000, the lease contract between the parties was still in effect. The lease was fixed for a
period of two (2) years, from January 16, 2000, and in the absence of a renewal agreed upon by the
parties, the lease remained effective until January 15, 2002. It was only at the expiration of the lease
contract that the cause of action in the second ejectment complaint accrued and made available to the
respondent as a ground for ejecting the petitioner. Thus, the cause of action in the second case was not
yet in existence at the time of filing of the first ejectment case.

In response to the petitioner’s contention that the similarity of Civil Case Nos. 8084 and 9210 rests
on the reiteration in the second case of the cause of action in the first case, we rule that the
restatement does not result in substantial identity between the two cases. Even if the respondent
alleged violations of the lease contract as a ground for ejectment in the second complaint, the main
basis for ejecting the petitioner in the second case was the expiration of the lease contract. If not for this
subsequent development, the respondent could no longer file a second complaint for unlawful detainer
because an ejectment complaint may only be filed within one year after the accrual of the cause of
action,[27] which, in the second case, was the expiration of the lease contract.

Similarly, we do not find the respondent guilty of forum shopping in filing Civil Case No. 9210, the
second civil case. To determine whether a party violated the rule against forum shopping, the test
applied is whether the elements of litis pendentia are present or whether a final judgment in one
case will amount to res judicata in another.[29] Considering our pronouncement that not all the
requisites of litis pendentia are present in this case, the CA did not err in declaring that the respondent
committed no forum shopping. Also, a close reading of the Verification and Certification of Non-
Forum Shopping[30] (attached to the second ejectment complaint) shows that the respondent did
disclose that it had filed a former complaint for unlawful detainer against the petitioner. Thus, the
respondent cannot be said to have committed a willful and deliberate forum shopping.

Spouses Plaza v. Lustiva, G.R. No. 172909, March 5, 2014

FACTS: Respondents are successors-in-interest of Barbara Plaza to whom a disputed agricultural land
was adjudicated to in August 28, 1997 by the CA.

Petitioners are the successors of Barbara’s brother, Vidal, who filed on September 14, 1999, a
Complaint for Injunction, Damages, Attorney’s Fees with Prayer for the Issuance of the Writ of
Preliminary Injunction and/or Temporary Restraining Order against the respondents and the City
Government of Butuan. They prayed that the respondents be enjoined from unlawfully and illegally
threatening to take possession of the subject property. According to the petitioners, they acquired the
land from Virginia Tuazon in 1997; Tuazon was the sole bidder and winner in a tax delinquency sale
conducted by the City of Butuan on December 27, 1996.

Respondents contend that they were never delinquent in paying the land taxes and were in fact not
aware that their property had been offered for public auction. Moreover, Tuazon, being a government
employee, was disqualified to bid in the public auction. Equally important, the petitioners merely
falsified the property tax declaration by inserting the name of the petitioners’ father, making him appear
as a co-owner of the auctioned land. Armed with the falsified tax declaration, the petitioners, as heirs of
their father, fraudulently redeemed the land from Tuazon. Nonetheless, there was nothing to redeem as
the land was not sold.

THE RTC’S RULING

In its December 14, 1999 order,6 the Regional Trial Court (RTC) of Butuan City, Branch 5, reconsidered
its earlier order,7 denied the prayer for a Writ of Preliminary Injunction, and ordered that the
possession and occupation of the land be returned to the respondents. The RTC found that the auction
sale was tainted with irregularity as the bidder was a government employee disqualified in accordance
with Section 89 of the Local Government Code of 1991. The petitioners are not buyers in good faith
either. On the contrary, they were in bad faith for having falsified the tax declaration they redeemed the
property with.

THE CA’S RULING

Through a petition for review on certiorari under Rule 65, the petitioners challenged the RTC’s order
before the CA.

Second Complaint
While the petition for review on certiorari was pending before the CA, the petitioners filed an action for
specific performance8 against the City Government of Butuan. According to the petitioners, they
acquired possession and ownership over the auctioned property when they redeemed it from Tuazon.
The City Government of Butuan must therefore issue them a certificate of sale.
In its October 24, 2005 decision,10 the CA affirmed the RTC’s ruling, found the petitioners guilty of
forum shopping, dismissed the case, and referred the case to the Court and to the Integrated Bar of the
Philippines for investigation and institution of the appropriate administrative action.11 The CA, after
legal analysis, similarly concluded that for being disqualified to bid under Section 89 of the Local
Government Code of 1991, Tuazon never obtained ownership over the property; much less transmit any
proprietary rights to the petitioners.

On April 6, 2006, the CA rejected the petitioners’ motion for reconsideration.

The petitioners filed the present petition for review on certiorari with this Court to challenge the CA
rulings.

the petitioners argue that they did not commit forum shopping, as the reliefs prayed for in the present
case and in the specific performance case are not the same. In the present case, they merely impleaded
the City Government of Butuan as a nominal party to pay for the value of the land only if possession of
the land was awarded to the respondents. On the other hand, the complaint for specific performance
prayed that the City Government of Butuan execute the necessary certificate of sale and other relevant
documents pertaining to the auction.

ISSUE: WON there was forum shopping

HELD:

The petitioners are guilty

of forum shopping

We agree with the CA that the petitioners committed forum shopping when they filed the specific
performance case despite the pendency of the present case before the CA. In the recent case of Heirs of
Marcelo Sotto, etc., et al. v. Matilde S. Palicte,26 the Court laid down the three ways forum shopping
may be committed: 1) through litis pendentia — filing multiple cases based on the same cause of action
and with the same prayer, the previous case not having been resolved yet; 2) through res judicata —
filing multiple cases based on the same cause of action and the same prayer, the previous case having
been finally resolved; and 3) splitting of causes of action — filing multiple cases based on the same
cause of action but with different prayers — the ground to dismiss being either litis pendentia or res
judicata. "The requisites of litis pendentia are: (a) the identity of parties, or at least such as representing
the same interests in both actions; (b) the identity of rights asserted and relief prayed for, the relief
being founded on the same facts; and (c) the identity of the two cases such that judgment in one,
regardless of which party is successful, would amount to res judicata in the other."27

Noticeable among these three types of forum shopping is the identity of the cause of action in the
different cases filed. Cause of action is "the act or omission by which a party violates the right of
another."28

The cause of action in the present case (and the main case) is the petitioners’ claim of ownership of the
land when they bought it, either from the City Government of Butuan or from Tuazon. This ownership is
the petitioners’ basis in enjoining the respondents from dispossessing them of the property. On the
other hand, the specific performance case prayed that the City Government of Butuan be ordered to
issue the petitioners the certificate of sale grounded on the petitioners’ ownership of the land when
they had bought it, either from the City Government of Butuan or from Tuazon. While it may appear
that the main relief prayed for in the present injunction case is different from what was prayed for in the
specific performance case, the cause of action which serves as the basis for the reliefs remains the same
— the petitioners’ alleged ownership of the property after its purchase in a public auction.

Thus, the petitioners' subsequent filing of the specific performance action is forum shopping of the third
kind-splitting causes of action or filing multiple cases based on the same cause of action, but with
different prayers. As the Court has held in the past, "there is still forum shopping even if the reliefs
prayed for in the two cases are different, so long as both cases raise substantially the same issues."29

Similarly, the CA correctly found that the petitioners and their counsel were guilty of forum shopping
based on litis pendentia. Not only were the parties in both cases the same insofar as the City
Government of Butuan is concerned, there was also identity of rights asserted and identity of facts
alleged. The cause of action in the specific performance case had already been ruled upon in the present
case, although it was still pending appeal before the CA. Likewise, the prayer sought in the specific
performance case-for the City Government ofButuan to execute a deed of sale in favor of the petitioners
- had been indirectly ruled upon in the present case when the R TC declared that no certificate of sale
could be issued because there had been no valid sale.

Bayang v. Court of Appeals, G.R. No. L-53564, February 27, 1987

FACTS: Sometime in November 1969, Juan Bayang filed a complaint for quieting of title with damages
against Benigno Biong in the Court of First Instance of Surigao del Norte, Branch 1

In 1970, while the case was pending, Biong succeeded in dispossessing the plaintiff of the land in
question and remained there until January 25, 1978. 2 On February 21, 1972, the case was decided in
favor of Biong, but the Court of Appeals on December 8, 1977, reversed the trial court declaring Bayang
the owner of the land. This decision became final on February 2, 1978.

Second case
On February 6, 1978, Bayang filed a second case, docketed as Civil Case No. 2589, with the CFI of Surigao
del Norte, Branch II, seeking to recover from Biong the incomes earned from the same land from 1970
up to the quarterly incomes from 1978 until the said land was delivered to the plaintiff. 4 At the pre-trial
conference held on July 10, 1978, the counsel for Bayang admitted that as of January 25, 1978, Biong
had already surrendered possession of the land in question to Bayang. 5 On August 16, 1978, Biong filed
a motion for summary judgment, reiterating the affirmative defense of res judicata raised in his answer
dated April 12, 1978, insofar as it related to the incidents concerning the case prior to January 25, 1978.
6 An opposition to this motion was duly filed by Bayang.

The trial court, after considering the arguments of the parties, granted the motion and rendered a
summary judgment on October 30, 1978. 8 The said decision was sustained by the Court of Appeals, and
Bayang is now before us in this petition for review by certiorari under Rule 45 of the Rules of Court.

His assignment of errors raises two basic submissions, to wit:

1. Civil Case No. 2589 should not have been decided by summary judgment.
2. The judgment in CA-G.R. No. 54720-R (appeal from judgment in Civil Case No. 1892) did not
constitute res judicata as to bar Civil Case No. 2589.

ISSUE: WON there is res judicata

HELD:
A long line of decisions has consistently held that for res judicata to apply: a) the former judgment must
be final; b) it must have been rendered by a court having jurisdiction over the subject matter and the
parties; c) it must be a judgment on the merits; and d) there must be between the first case and the
second case identity of parties, identity of subject matter and Identity of cause of action. 10

The decision in Civil Case No. 1892 became final and executory on February 2, 1978. There is no dispute
that the trial court which rendered that decision had jurisdiction over the subject-matter and the parties
to the proceeding. The case was tried on the merits. The parties to Civil Case No. 1892 and the
subsequent Civil Case No. 2589 are the same petitioner and private respondent now before us.

The petitioner would draw a distinction between the land in dispute in Civil Case No. 1892 and the
income from that land being claimed in Civil Case No. 2589. But that is in our view splitting hairs to split
a cause of action. The subject-matter is essentially the same in both cases as the income is only a
consequence or accessory of the disputed property. We cannot agree that there are involved here two
causes of action calling for two separate cases. The claim for the income from the land was incidental to,
and should have been raised by Bayang in his earlier claim for, ownership of the land.

We note that while the first case was pending, the private respondent, by the petitioner's own account,
"succeeded in dispossessing" him of the disputed land 11 and that at the pretrial conference on Civil
Case No. 2589, Bayang's counsel admitted that Biong had vacated the said property as of January 25,
1978. 12 This means that from 1970 to the date the respondent surrendered the property in 1978, Biong
was presumably collecting and enjoying the income therefrom to the exclusion of the petitioner.

Civil Case No. 1892 was commenced in November 1969 and was finally decided only on February 2,
1978. The private respondent entered the disputed property in 1970 and left it only in 1978. For about
seven years, therefore, the petitioner made no move at all to amend his complaint to include a claim for
the income supposedly received by the private respondent during that period.

Under Rule 10, Section 6, of the Rules of Court.

Sec. 6. Matters subject of supplemental pleadings. — Upon motion of a party the court may, upon
reasonable notice and upon such terms as are just, permit him to serve a supplemental pleading setting
forth transactions, occurrence or events which have happened since the date of the pleading sought to
be supplemented. If the court deems it advisable that the adverse party should plead thereto, it shall so
order, specifying the time therefor.

In the case of Jalandoni v. Martin-Guanzon, 13 this Court declared through Justice J.B.L. Reyes:

As to the value of the plaintiff's share in the products of the land during the time that the former action
was pending (which are the damages claimed under the second cause of action), their recovery is now
barred by the previous judgment. These damages are but the result of the original cause of action, viz.,
the continuing refusal by defendants in 1941 to recognize the plaintiff's right to an interest in the
property. In the same way that plaintiffs claimed for their share of the produce from 1941 to 1947,
these later damages could have been claimed in the first action, either in the original camplaint (for
their existence could be anticipated when the first complaint was filed) or else by supplemental
pleading. To allow them to be recovered by subsequent suit would be a violation of the rule against
multiplicity of suits, and specifically of sections 3 and 4 of Rules 2 of the Rules of Court, against the
splitting of causes of action, since these damages spring from the same cause of action that was
pleading (sic) in the former case No. 573 between the same parties (Blossom & Co., Inc. v. Manila Gas
Corporation, 55 Phil. 226; Santos v. Moir, 36 Phil. 350; Pascua v. Sideco 24 Phil. 26; Bachrach Motor Co.
v. Icarangal 68 Phil. 287).

And in another case, 14 the same jurist declared:

Urtula, as defendant in the expropriation case, could have raised the matter of interest before the trial
court even if there had been no actual taking yet by the Republic and the said court could have included
the payment of interest in its judgment but conditioned upon the actual taking, because the rate of
interest upon the amount of just compensation (6%) is a known factor, and it can reasonably be
expected that at some future time, the expropriator would take possession of the property, though the
date be not fixed. In this way, multiple suits would be avoided. Moreover, nothing prevented appellee
from calling the attention of the appellate courts (even by motion to reconsider before judgment
became final) to the subsequent taking of possession by the condemnor, and asking for allowance of
interest on the indemnity since that followed the taking as a matter of course, and raised no issue
requiring remand of the records to the Court of origin.

As the issue of interest could have been raised in the former case but was not raised, res judicata blocks
the recovery of interest in the present case. (Tejedor vs. Palet, 61 Phil. 494; Phil. Engineering Corp., et al.
vs. Ceniza, etc., et al., L-17834, 29 Sept. 1962). It is settled that a former judgment constitutes a bar, as
between the parties, not only as to matters expressly adjudged, but all matters that could have been
adjudged at the time (Rule 39, sec. 49; Corda vs. Maglinti L-17476, November 30, 1961; Rodriguez vs.
Tan, 48 Off. Gaz. 3330).

Clearly, then, Civil Case No. 2589 is barred by the previous judgment in Civil Case No. 1892. This being
so, it should follow that the trial judge committed no grave abuse of discretion in deciding the latter
case by summary judgment.

We are not unmindful of the argument that affirmance of the challenged decision of the respondent
court will result in the unjust enrichment of Biong at the expense of Bayang. This assumes, of course,
that the petitioner could have proved his right to the income he now claims belatedly. The point is that
he did not make the proper claim at the proper time and in the proper proceedings, and he cannot do it
now. Whatever right he might have had is now deemed waived because of his neglect.

Nemo debet bis vexare pro una et eadem causa. This has to be so if litigants are to be spared the
annoyance, anxiety and expense that could otherwise be inflicted upon them endlessly by capricious,
malicious or vindictive suitors.

De Larena v. Villanueva, G.R. No. L-29155, November 5, 1928

FACTS: On August 23, 1922 Petitioner De Larena filed a complaint for rescission against respondent
Villanueva of a lease contract which the CFI decided on March 26, 1924 granting the rescission. Shortly
after the record was returned to the court below, a writ of execution was issued, but before levy was
made the parties came to an agreement, under which the money judgment was to be satisfied by the
payment of P10,500 in cash and the transfer to the plaintiff of a dwelling house situated in the
municipality of Bais.

Second case
The present action was brought on April 13, 1925, but the last amended complaint, setting forth three
causes of action, was not filed until June 17, 1927. As her first cause of action the plaintiff alleges that
Villanueva in bad faith, continued in possession of the hacienda during the agricultural year 1922-1924
and appropriated to himself the cane harvest for that year and refused to pay despite his knowledge of
the decision in the first case rendered on September 8, 1923 that he was not anymore entitled to the
land. The plaintiff, therefore, asks judgment for the sum of P21,827.26 upon the first cause of action.

For the second cause of action the plaintiff alleges that Vilanueva failed to return all the tools,
agricultural implements, draft animals, and other effects enumerated in an inventory made at the time
he entered in possession under the lease. De Larena asks for P3,596 as the value of the tools and
animals that Villanueva did not return, plus P500 in damages.

As a third cause of action the plaintiff prays for the value of the harvest of sugar cane illegally made by
the defendant in 1924 .

In his answer to the first and third causes of action, the defendants alleges that according to the
pleadings in case G. R. No. 21706, the two causes of action were included in that case and, therefore,
must be considered res adjudicata. In regard to the second cause of action the defendant pleads the
general issue and sets up as a special defense that assuming that the property referred to in said cause
of action was missing, it loss was due to its total extinction by ordinary use, for which the defendant
could not be held responsible. For all three causes of action, the defendant sets up as a special defense
the document executed by the plaintiff on September 30, 1924, acknowledging the satisfaction of the
judgment in case G. R. No. 21706.

Upon trial the Court of First Instance sustained the defendant's special defense and absolved him from
the complaint with the cost against the plaintiff, whereupon the latter appealed to this court.

ISSUE: WON there is res judicata

HELD: We do not think that the court below erred in absolving the defendant from liability upon the
second cause of action.

It is not without significance that in her original complaint the plaintiff claimed only 5 plows, 6 carts, 3
carabaos an 4 vacunos, the total value of which was alleged to be P1,360; in the first amended
complaint filed over two years later, the same claim was made, but in the last amended complaint a
number of other articles were included, thus increasing the claim to P3,596. The court below found that
the weight of the evidence showed that the missing draft animals died from rinderpest and that the
other personal property was turned over to the provincial sheriff for delivery to the plaintiff before the
writ of execution was returned to the court. If so, the action would lie against the sheriff rather than
against the defendant.
As to the first cause of action the defendant argues that it was included in the prayer of an amended
complaint filed in case G. R. No. 21706 and that, although no express determination thereof was made
in the decision of the case, it must, nevertheless, be regarded as res judicata. That such is not the case is
very clear. The Code of Civil Procedure says:

That only is deemed to have been so adjudged in a former judgment which appears upon its face to
have been so adjudged, or which was actually and necessarily included therein or necessary thereto.
(Sec. 307, Code of Civil Proc.)

But the defendant maintains that the plaintiff having had an opportunity to ventilate the matter in the
former case, she cannot now enforce the same cause of action in the present case. Properly speaking,
this argument does not involve the doctrine of res judicata but rests on the well-known an, in American
law, firmly established principle that a party will not be permitted to split up a single cause of action an
make it the basis for several suits. But that is not this case. The rule is well established that when a lease
provides for the payment of the rent in separate installments, each installment is an independent cause
of action, though it has been held and is good law, that in an action upon such a lease for the recovery
of rent, the installments due at the time the action was brought must be included in the complaint and
that failure to do so will constitute a bar to a subsequent action for the payment of that rent. The
aforesaid action, G. R. No. 21706, was brought on August 23, 1922, the plaintiff demanding payment of
then due rent in addition to the rescission of the lease. On July 27, 1923, the plaintiff filed a motion for
an amendment to paragraph 6 of the complaint adding to that paragraph the following sentence:

Que tambien ha vencido ya el tercer ano el arrendamiento de la finca en cuestion y que tampoco ha
pagado el demandao el canon correspondiente a icho ano.

The plaintiff also amended the prayer of the complaint by asking judgment for rent for years subsequent
to 1922. The motion was granted, and the case came up for trial on July 30, 1923, and on September 8,
1923, the trial court rendered its decision giving judgment for rent up to and including the rent for the
agricultural year ending in 1923. The lease did not provide for payment of rent in advance or at any
definite time, and it appears plainly from the record that the rent for an agricultural year was not
considered due until the end of the corresponding year. It follows that the rent for the agricultural year
1922-1924 had not become due at the time of the trial of the case and that consequently the trial court
could not render judgment therefore. The action referred to is, therefore, no bar to the first cause of
action in the present litigation.

The defendant places much weigh upon the document of September 30, 1924, hereinbefore quoted.
The document speaks for itself, and it will be readily seen that it is merely a receipt for the satisfaction
of the money judgment in the case G. R. No. L-21706 and has nothing to with the present case.

The only question in regard to the first cause of action relates to the amount of the damages. The
plaintiff contends that the defendant was a possessor in bad faith, and therefore, must pay the value of
the fruits of the land in accordance with article 455 of the Civil Code. Under the circumstances of the
case, we cannot so hold. The defendant held possession under the contract of lease until said contract
was rescinded. The contract contained no special provision for the procedure in effecting the rescission,
and it follows that it could only be accompanied by a final judgment of the court. The judgment in case
G. R. No. L-210706 did not become final until March 27, 192, when our decision on appeal was
rendered. As that must have been close to the end of the harvest and milling of the sugar crop for the
period to which the first cause of action refers, we do not think that the defendant should be required
to pay more than the amount of the stipulated rent for the period, i. e., the sum of P8,000 with interest
rent for that period, i. e., the sum of P8,000 with interest. (Lerma vs. De la Cruz, 7 Phil., 581.)

The action for terminating the lease was brought under article 1124 of the Civil Code, and it may,
perhaps, be said that properly speaking, the subject matter of the action was a resolution of the
contract and not a rescission. That may be true, but it is a distinction without a difference; in their case a
judicial declaration would be necessary for the cancellation of the contract in the absence of a special
agreement.

Very little need be said in regard to the third cause of action. It relates to a period subsequent to the
complete termination of the lease by final judicial order. The defendant had then no right whatever to
the possession of the land or to the fruits thereof, and in removing the fruits, he acted in bad faith. This
being the case, he must pay for the fruits received by him, less the necessary expenses of production.
(Arts. 455 and 453 of the Civil Code.) As his bad faith commence long before the fruits in question were
produced, he is not entitled to any part of the net proceeds of the crop. The evidence shows that the net
ratoon crop of the year 1924-1925 was 1,613.25 piculs of sugar, and according to the defendant's own
statement, the market value of the sugar was in the neighborhood of P11 per picul an the costs of
production about P4.50. The net result is that under the third cause of action, the defendant must pay
to the plaintiff the sum of P10,486.13 with interest.

For the reason stated, the judgment of the court below is affirmed in regard to the second cause of
action. It is reversed as to the first and third causes of action, and it is hereby ordered that the plaintiff
have and recover from the defendant the sum of P18,486.13 with interest at the rate of 6 per cent per
annum from April 13, 1925, the date of the filing of the complaint. No costs will be allowed. So ordered.

Blossom & Company v. Manila Gas Corp., G.R. No. L-32958, November 8, 1930
FACTS: On November 23, 1923, the plaintiff complaint for specific performance and damages against the
defendant in the Court of First Instance of Manila when Manila Gas refused to comply with its
obligations to deliver coal and water gas tar. Plaintiff sought to recover damages from the defendant
which it claims to have sustained arising from, and growing out of, its original contract of September 10,
1918, as modified on January 1, 1919, to continue for a period of ten years from that date. Judgment
was entered therein in favor of the plaintiff herein and against the said defendant, the Manila Gas
Corporation, for the sum of P26,119.08, as the damages suffered by this plaintiff by the defendant's
breach of said contract from July, 1920, up to and including September, 1923, with legal interest
thereon from November 23, 1923, and for the costs but the court refused to order the said defendant to
resume the delivery of the coal and water gas tar to the plaintiff under said contract, but left the
plaintiff with its remedy for damages against said defendant for the subsequent breaches of said
contract, which said decision was affirmed by our Supreme Court on March 3, 1926.

On March 3, 1927, petitioner filed a second complaint for rescission of contract and damages. After the
decision on the first case, petitioner and respondent resumed relation on March 26, 1926 but Blossom
alleges that Manila Gas yet again failed to deliver and comply with its obligations and was overcharging
them.
On July 18, 1928, the defendant filed an amended answer in which it alleged as an affirmative defense,
first, that the complaint does not state facts sufficient to constitute cause of action the reason that a
prior adjudication has been had of all the issues involved in this action.

A referee was appointed to assist the court in the determination of facts and law and the referee’s
report found that the plaintiff was entitled to P56,901.53 damages, with legal interest from the date of
the filing on the complaint, to which both parties filed numerous exceptions.

The Court ruled in favor of Manila Gas and awarded damages to plaintiff in the sum of P2,219.60 for the
overcharging of the price of tar in 1926.

From which plaintiff only appealed and assigns twenty-four different errors, of which the following are
material to this opinion:

I. The trial court erred in holding that this suit in so far as the damages from November, 1923, to March
31, 1926, are concerned , is res adjudicata.

II. The trial court erred in holding that the defendant repudiated the contract in question as a whole,
and that the plaintiff when it brought its first suit to collect damages had already elected and consented
to the dissolution of the contract, and its choice once made, being final, it was estopped to claim that
the contract was alive when that suit was brought.

HELD:

In the final analysis, plaintiff in this action seeks to recover damages growing out of, and arising from,
other and different breaches of that same contract after November, 1923, for the remainder of the ten-
year period, and the question is thus squarely presented as to whether the rendition of the former
judgment is a bar to the right of the plaintiff to recover damages from and after September, 1923,
arising from, and growing out of, breaches of the original contract of September 10, 1918, as modified
on January 1, 1919. That is to say, whether the plaintiff, in a former action, having recovered judgment
for the damages which it sustained by reason of a breach of its contract by the defendant up to
September, 1923, can now in this action recover damages it may have sustained after September, 1923,
arising from, and growing out of, a breach of the same contract, upon and for which it recovered its
judgment in the former action.

In the final analysis, plaintiff must stand or fall on its own pleadings, and tested by that rule it must be
admitted that the plaintiff's original cause of action, in which it recovered judgment for damages, was
founded on the ten-year contract, and that the damages which it then recovered were recovered for a
breach of that contract.

Both actions are founded on one and the same contract. the contract provided for the delivery to the
plaintiff from month to month of the specified amounts of the different tars as ordered and requested
by the plaintiff. In other words, under plaintiff's own theory, the defendant was to make deliveries from
month to month of the tars during the period of ten years, and it is alleged in both complaints that the
defendant broke its contract, and in bad faith refused to make any more deliveries.

In 34 Corpus Juris, p. 839, it is said:

As a general rule a contract to do several things at several times in its nature, so as to authorize
successive actions; and a judgment recovered for a single breach of a continuing contract or covenant is
no bar to a suit for a subsequent breach thereof. But where the covenant or contract is entire, and the
breach total, there can be only one action, and plaintiff must therein recover all his damages.

In the case of Rhoelm vs, Horst, 178 U. U., 1; 44 Law. ed., 953, that court said:

An unqualified and positive refusal to perform a contract, though the performance thereof is not yet
due, may, if the renunciation goes to the whole contract, be treated as a complete breach which will
entitle the injured party to bring his action at once.

15 Ruling Case Law, 966, 967, sec. 441 says:

Similarly if there is a breach by the vendor of a contract for the sale of goods to be delivered and paid
for in installments, and the vendee maintains an action therefor and recovers damages, he cannot
maintain a subsequent action to recover for the failure to deliver later installments.

In Pakas vs. Hollingshead, 184 N. Y., 211; 77 N. E., 40; 3 L. R. A. (N. S.), 1024, the syllabus says:

Upon refusal, by the seller, after partial performance, longer to comply with his contract to sell and
deliver a quantity of articles in installments the buyer cannot keep the contract in force and maintain
actions for breaches as they occur but must recover all his damages in one suit.

And on page 1044 of its opinion, the court say:

The learned counsel for the plaintiff contends that the former judgment did not constitute a bar to the
present action but that the plaintiff had the right to elect to waive or disregard the breach, keep the
contract in force, and maintain successive actions for time to time as the installments of goods were to
be delivered, however numerous these actions might be. It is said that this contention is supported in
reason and justice, and has the sanction of authority at least in other jurisdictions. We do not think that
the contention can be maintained. There is not as it seems to us any judicial authority in this state that
gives it any substantial support. On the contrary, we think that the cases, so far as we have been able to
examine them, are all the other way, and are to the effect that, inasmuch as there was a total breach of
the contract by the defendant's refusal to deliver, the plaintiff cannot split up his demand and maintain
successive actions, but must either recover all his damages in the first suit or wait until the contract
matured or the time for the delivery of all the goods had arrived. In other words, there can be but one
action for damages for a total breach of an entire contract to deliver goods, and the fact that they were
to be delivered in installment from time to time does not change the general rule.

The case of L. Bucki & Son Lumber Co. vs. Atlantic Lumber Co. (109 Federal, 411), of the United States
Circuit Court of Appeals for the Fifth Circuit, is very similar.

The syllabus says:

1. CONTRACTS — CONSTRUCTION —ENTIRE CONTRACT. —A contract was made for the sale of a large
quantity of logs to be delivered in monthly installments during a period of eight years, payments to be
made also in installments at times having relation tot he deliveries. It contained stipulations as to such
payments, and guaranties as to the average size of the logs to be delivered in each installment. Held,
that it was an entire contract, and not a number of separate and independent agreements for the sale of
the quantity to be delivered and paid for each month, although there might be breaches of the minor
stipulations and warranties with reference thereto which would warrant suits without a termination of
the contract.

2. JUDGMENTS — MATTERS CONCLUDED —ACTION FOR BREACH OF INDIVISIBLE CONTRACT. — The

seller declared the contract terminated for alleged breaches by the purchaser, and brought suit for
general and special damages the latter covering payments due for installments of logs delivered. By way
of set-off and recoupment against this demand, the purchaser pleaded breaches of the warranty as to
the size of the logs delivered during the months for which payment had not been made. Held, that the
judgment in such action was conclusive as to all claims or demands or either party against the other
growing out of the entire contract, and was a bar to a subsequent suit brought by the purchaser to
recover for other breaches of the same warranty in relation to deliveries made in previous months.

On page 415 of the opinion, the court says:

When the contract was ended, the claims of each party for alleged breaches and damages therefor
constituted an indivisible demand; and when the same, or any part of the same, was pleaded, litigation
had, and final judgment rendered, such suit and judgment constitute a bar to subsequent demands
which were or might have been litigated (Baird vs. U. S., 96 U. S., 430; 24 L. ed., 703.)

In Watts vs. Weston (238 Federal, 149), Circuit Court of Appeals, Second Circuit, the syllabus says:

1. JUDGMENTS — 593 — JUDGMENT AS BAR — MATTERS CONCLUDED. — Where a continuing contract

was terminated by the absolute refusal of the party whose action was necessary to further perform, a
claim for damages on account of the breach constituted as indivisible demand, and when the same or
any part of the same was pleaded, litigated, and final judgment rendered, such suit and judgment
constitute a bar to subsequent demands which were or might have been litigated therein.

And on page 150 of the opinion, the court says:

It is enough to show the lack of merit in the present contention to point out as an inexorable rule of law
that, when Kneval's contract was discharged by his total repudiation thereof, Watt's claims for breaches
and damages therefor constituted an indivisible demand, and when the same, or any part of the same,
was pleaded, litigation had and final judgment rendered, such suit and judgment constitute a bar to
subsequent demands which were or might have been litigated." (Bucki, etc., Co. vs. Atlantic, etc., Co.,
109 Fed. at page 415; 48 C. C. A., 459; Cf. Landon vs. Bulkley, 95 Fed., 344; 337 C. C. A., 96.)

The rule is usually applied in cases of alleged or supposed successive breaches, and consequently
severable demands for damages; but if the contract has been discharged by breach, if suit for damages
is all that is left, the rule is applicable, and every demand arising form that contract and possessed by
any given plaintiff must be presented (at least as against any given defendant) in one action; what the
plaintiff does not advance he foregoes by conclusive presumption.

Inn Abbott vs. 76 Land and Water Co. (118 Pac., 425; 161 Cal., 42), at page 428, the court said:
In Fish vs. Folley, 6 Hill (N. Y.), 54, it was held, in accord with the rule we have discussed, that, where the
defendant had covenanted that plaintiff should have a continual supply of water for his mill from a dam,
and subsequently totally failed to perform for nine years, and plaintiff brought an action for the breach
and recovered damages sustained by him to that time, the judgment was a bar to a second action
arising from subsequent failure to perform, on the theory that, although he covenant was a continuing
one in one sense, it was an entire contract, and a total breach put an end to it, and gave plaintiff the
right to sue for an equivalent in damages.

In such a case it is no warrant for a second action that the party may not be able to actually prove in the
first action all the items of the demand, or that all the damage may not then have been actually
suffered. He is bound to prove in the first action not only such damages as has been actually suffered,
but also such prospective damage by reason of the breach as he may be legally entitled to, for the
judgment he recovers in such action will be a conclusive adjudication as to the total damage on account
of the breach.

It will thus be seen that, where there is a complete and total breach of a continuous contract for a term
of years, the recovery of a judgment for damages by reason of the breach is a bar to another action on
the same contract for and on account of the continuous breach.

After careful study of the many important questions presented on this appeal in the exhaustive brief of
the appellant, we are clearly of the opinion that, as found by the lower court, the plea of res judicata
must be sustained. The judgment of the lower court is affirmed.

See:Danfoss v. Continental Cement, G.R. No. 143788, September 9, 2005

FACTS: on November 5, 1998, respondent Continental Cement Corporation (CCC) filed a complaint for
damages against petitioner DANFOSS and Mechatronics Instruments and Controls, Inc. (MINCI) before
the Regional Trial Court of Quezon City, Branch 80. Continental Cement ordered from MINCI and
Danfoss 2 units of Frequency Converter/Inverter on 1 September 1997. The delivery was set within
eight (8) to ten (10) weeks from the opening of the letter of credit. But MINCI and Danfoss was not able
to delivery right away after repeated demands until, Continental informed defendant MINCI in a letter
dated 13 November 1997, of it’s intention to cancel the said order and it has suffered an actual
substantial production losses in the amount of Eight Million Sixty-four Thousand Pesos (P8,064,000.00)
due to the time lost and delay in the delivery of the said two (2) unit Frequency Converter/Inverter.
Likewise, plaintiff CCC was compelled to look for another supplier

On February 17, 1999, petitioner DANFOSS filed a motion to dismiss the complaint on the ground that it
did not state a cause of action. The argument is that the plaintiff’s cause of action against Danfoss or
plaintiff’s right to demand delivery cannot arise earlier than November 19, 1997, which is the last day
for the defendant Danfoss’s principal (Danfoss Denmark) to deliver the two (2) units Frequency
Converter. As admitted by the plaintiff, it cancelled its order on November 13, 1997, or six (6) days
before the expiry of the defendant’s obligation to deliver. Indeed, defendant Danfoss’s obligation to
deliver is not yet demandable. The period of 8 to 10 weeks for the delivery of plaintiff’s purchase order
of two (2) units Frequency Converter was established for the benefit of both the plaintiff and the
defendant Danfoss.

MINCI’s defense is that it cannot be held liable with Danfoss because it was merely an agent.
The court a quo denied the twomotions to dismiss in its order[4] dated May 28, 1999.

Danfoss filed a motion for reconsideration of the order but it was denied. On appeal to the Court of
Appeals, the latter also denied Danfoss’ petition for lack of merit. The CA likewise denied petitioner’s
motion for reconsideration, hence, this appeal.

The only issue for our consideration is whether or not the CA erred in affirming the denial by the court a
quo of petitioner’s motion to dismiss the complaint for damages on the ground that it failed to state a
cause of action.

ISSUE:

HELD:

Section 1 (g), Rule 16 of the 1997 Revised Rules on Civil Procedure provides that:

Section 1. Grounds – Within the time for but before filing the answer to the complaint or pleading
asserting a claim, a motion to dismiss may be made on any of the following grounds:

xxx xxx xxx

(g) That the pleading asserting the claim states no cause of action;

A cause of action is defined under Section 2, Rule 2 of the same Rules as:

Sec. 2. Cause of action, defined. – A cause of action is the act or omission by which a party violates a
right of another.

It is the delict or wrongful act or omission committed by the defendant in violation of the primary right
of the plaintiff.[6]

In order to sustain a dismissal on the ground of lack of cause of action, the insufficiency must appear on
the face of the complaint. And the test of the sufficiency of the facts alleged in the complaint to
constitute a cause of action is whether or not, admitting the facts alleged, the court can render a valid
judgment thereon in accordance with the prayer of the complaint. For this purpose, the motion to
dismiss must hypothetically admit the truth of the facts alleged in the complaint.[7]

After a careful perusal of the allegations in respondent’s complaint for damages against petitioner, we
rule that the same failed to state a cause of action. When respondent sued petitioner for damages,
petitioner had not violated any right of respondent from which a cause of action had arisen.
Respondent only surmised that petitioner would not be able to deliver the two units frequency
converter/inverter on the date agreed upon by them. Based on this apprehension, it cancelled its order
six days prior to the agreed date of delivery. How could respondent hold petitioner liable for damages
(1) when petitioner had not yet breached its obligation to deliver the goods and (2) after respondent
made it impossible for petitioner to deliver them by cancelling its order even before the agreed delivery
date?

The trial court erred in ruling that the issue of whether or not the defendants incurred delay in the
delivery of the equipment within the period stipulated was a debatable question. It said that trial on the
merits was necessary and the parties had to adduce evidence in support of their respective positions.[8]
But what was there to argue about when, based on the allegations of the complaint, petitioner was not
yet due to deliver the two units frequency converter/inverter when respondent cancelled its order? It
still had six days within which to comply with its obligation. The court a quo should not have denied
petitioner’s motion to dismiss the complaint (for its failure to state a cause of action) when, on its face,
it was clear that petitioner had not yet reneged on its obligation to deliver the frequency
converter/inverter on the date mutually agreed upon by the parties. Moreover, the obligation itself was
negated by no less than respondent’s own act of cancelling its order even before the prestation became
due and demandable. Where therefore was the breach? Where was the damage caused by petitioner?
There was none.

Consequently, it was wrong for the CA to affirm the order of the trial court denying petitioner’s motion
to dismiss the complaint for its failure to state a cause of action.

The principle of anticipatory breach enunciated in Blossom & Company, Inc. v. Manila Gas Corporation
[9] does not apply here. In that case, Blossom & Company, Inc. entered into a contract with Manila Gas
Corporation for the sale and delivery of water gas and coal gas tar at stipulated prices for a period of
four years. On the second year of the contract, Manila Gas willfully and deliberately refused to deliver
any coal and water gas tar to Blossom and Company, Inc. because it was asking for a higher price than
what had been previously stipulated by them. The price of its tar products had gone up. We held that:

… even if the contract is divisible in its performance and the future periodic deliveries are not yet due, if
the obligor has already manifested his refusal to comply with his future periodic obligations, “the
contract is entire and the breach total,” hence, there can only be one action for damages.[10]

Thus, the principle contemplates future periodic deliveries and a willful refusal to comply therewith.
Here, the obligation was single and indivisible – to deliver two units of frequency converter/inverter by
November 19, 1997. The records do not show that petitioner refused to deliver the goods on the date
agreed upon. On the contrary, petitioner exerted efforts to make good its obligation by looking for
other suppliers who could provide it the parts needed to make timely delivery of the frequency
converter/inverter ordered by respondent.

Furthermore, respondent’s complaint suffered from another fatal infirmity. It was premature. The
obligation of petitioner to respondent was not yet due and demandable at the time the latter filed the
complaint. The alleged violation of respondent’s right being no more than mere speculation, there was
no need to call for judicial intervention.
The premature invocation of the court’s intervention was fatal to respondent’s cause of action.[11]
Hence, the dismissal of respondent’s complaint was in order.

In sum, since respondent’s fear that petitioner might not be able to deliver the frequency
converter/inverter on time was not the cause of action referred to by the Rules and jurisprudence, the
motion to dismiss the respondent’s complaint for damages for lack of cause of action should have been
granted by the trial court. In addition, the dismissal of the complaint was warranted on the ground of
prematurity.

Bank of America v. American Realty, G.R. No. 133876, December 29, 1999
FACTS: Respondent American Realty Corp or ARC is a foreign affiliate of 3 companies based in Panama
who are borrowers of petitioner Bank. Under a loan restructuring agreement between petitioner bank
and borrowers, ARC, as third party mortgagor, executed two real estate mortgages dated 17 February
1983 and 20 July 1984, over its parcels of land including improvements thereon, located at Barrio Sto.
Cristo, San Jose Del Monte, Bulacan.

Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting
petitioner BANTSA to file civil actions[5] before foreign courts England and Hong Kong, for the collection
of the principal loan.

In the civil suits instituted before the foreign courts, private respondent ARC, being a third party
mortgagor, was not impleaded as party-defendant.

On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of Bulacan,
Philippines, an application for extrajudicial foreclosure[6] of real estate mortgage.

On 22 January 1993, after due publication and notice, the mortgaged real properties were sold at public
auction in an extrajudicial foreclosure sale, with Integrated Credit and Corporation Services Co. (ICCS) as
the highest bidder for the sum of Twenty Four Million Pesos (P24,000,000.00).

On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch 159, an
action for damages[8] against the petitioner, for the latter’s act of foreclosing extrajudicially the real
estate mortgages despite the pendency of civil suits before foreign courts for the collection of the
principal loan.

In its answer[9] petitioner alleged that the rule prohibiting the mortgagee from foreclosing the
mortgage after an ordinary suit for collection has been filed, is not applicable in the present case,
claiming that:

“a) The plaintiff, being a mere third party mortgagor and not a party to the principal restructuring
agreements, was never made a party defendant in the civil cases filed in Hongkong and England;

“b) There is actually no civil suit for sum of money filed in the Philippines since the civil actions were
filed in Hongkong and England. As such, any decisions (sic) which may be rendered in the
abovementioned courts are not (sic) enforceable in the Philippines unless a separate action to enforce
the foreign judgments is first filed in the Philippines, pursuant to Rule 39, Section 50 of the Revised Rules
of Court.

“c) Under English Law, which is the governing law under the principal agreements, the mortgagee does
not lose its security interest by filing civil actions for sums of money.”

On 14 December 1993, private respondent filed a motion for suspension[10] of the redemption period
on the ground that “it cannot exercise said right of redemption without at the same time waiving or
contradicting its contentions in the case that the foreclosure of the mortgage on its properties is legally
improper and therefore invalid.”

In an order[11] dated 28 January 1994, the trial court granted the private respondent’s motion for
suspension after which a copy of said order was duly received by the Register of Deeds of Meycauayan,
Bulacan.

On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the foreclosure sale,
consolidated its ownership over the real properties, resulting to the issuance of Transfer Certificate of
Title Nos. T-18627, T-186272, T-186273, T-16471 and T-16472 in its name.

On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real properties to
Stateland Investment Corporation for the amount of Thirty Nine Million Pesos (P39,000,000.00).[12]
Accordingly, Transfer Certificate of Title Nos. T-187781(m), T-187782(m), T-187783(m), T-16653P(m) and
T-16652P(m) were issued in the latter’s name.

RTC Ruling
After trial, the lower court rendered a decision in favor of private respondent ARC.

On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting petitioner
to file a motion for reconsideration which the appellate court denied.

Hence, the instant petition for review[14] on certiorari by petitioner BANTSA

ISSUE: 1. Whether or not the petitioner’s act of filing a collection suit against the principal debtors for
the recovery of the loan before foreign courts constituted a waiver of the remedy of foreclosure.

2. Whether or not the award by the lower court of actual and exemplary damages in favor of private
respondent ARC, as third-party mortgagor, is proper.

HELD: The remedies of a mortgage creditor, a personal action for collection of debt or a real action to
foreclose mortgage, are alternative, not cumulative. Election of one is waiver of the other. Mere filing
of one action is deemed waiver of the other and finality of judgment is not necessary for the waiver to
operate. A third party mortgagor is only secondarily liable if the principal debtor is insolvent. Though
the debt and the mortgage constitute separate agreements, the latter is subsidiary to the former, and
both refer to one and the same obligation. Consequently, there exists only one cause of action for a
single breach of that obligation.

The petition is bereft of merit.

First, as to the issue of availability of remedies, petitioner submits that a waiver of the remedy of
foreclosure requires the concurrence of two requisites: an ordinary civil action for collection should be
filed and subsequently a final judgment be correspondingly rendered therein. According to petitioner,
the mere filing of a personal action to collect the principal loan does not suffice; a final judgment must
be secured and obtained in the personal action so that waiver of the remedy of foreclosure may be
appreciated. To put it differently, absent any of the two requisites, the mortgagee-creditor is deemed
not to have waived the remedy of foreclosure.
We do not agree.

Certainly, this Court finds petitioner’s arguments untenable and upholds the jurisprudence laid down in
Bachrach[15] and similar cases adjudicated thereafter, thus:

“In the absence of express statutory provisions, a mortgage creditor may institute against the
mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In other
words, he may pursue either of the two remedies, but not both. By such election, his cause of action
can by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to
bring a personal action will leave open to him all the properties of the debtor for attachment and
execution, even including the mortgaged property itself. And, if he waives such personal action and
pursues his remedy against the mortgaged property, an unsatisfied judgment thereon would still give
him the right to sue for a deficiency judgment, in which case, all the properties of the defendant, other
than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either
case, his remedy is complete, his cause of action undiminished, and any advantages attendant to the
pursuit of one or the other remedy are purely accidental and are all under his right of election. On the
other hand, a rule that would authorize the plaintiff to bring a personal action against the debtor and
simultaneously or successively another action against the mortgaged property, would result not only in
multiplicity of suits so offensive to justice (Soriano vs. Enriques, 24 Phil. 584) and obnoxious to law and
equity (Osorio vs. San Agustin, 25 Phil., 404), but also in subjecting the defendant to the vexation of
being sued in the place of his residence or of the residence of the plaintiff, and then again in the place
where the property lies.”

In Danao vs. Court of Appeals,[16] this Court, reiterating jurisprudence enunciated in Manila Trading and
Supply Co. vs. Co Kim[17]and Movido vs. RFC,[18] invariably held:

“x x x The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead,
an ordinary action to recover the indebtedness with the right to execute a judgment thereon on all the
properties of the debtor, including the subject matter of the mortgage x x x, subject to the qualification
that if he fails in the remedy by him elected, he cannot pursue further the remedy he has waived.
(Underscoring Ours)

Anent real properties in particular, the Court has laid down the rule that a mortgage creditor may
institute against the mortgage debtor either a personal action for debt or a real action to foreclose the
mortgage.[19]

In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not
cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose, a
remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the complaint in
an action for foreclosure of mortgage, pursuant to the provision of Rule 68 of the 1997 Rules of Civil
Procedure. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor
upon filing of the petition not with any court of justice but with the Office of the Sheriff of the province
where the sale is to be made, in accordance with the provisions of Act No. 3135, as amended by Act No.
4118.

In the case at bench, private respondent ARC constituted real estate mortgages over its properties as
security for the debt of the principal debtors. By doing so, private respondent subjected itself to the
liabilities of a third party mortgagor. Under the law, third persons who are not parties to a loan may
secure the latter by pledging or mortgaging their own property.[20]

Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes a third
person who secures the fulfillment of another‘s obligation by mortgaging his own property, to be
solidarily bound with the principal obligor. The signatory to the principal contract—loan—remains to be
primarily bound. It is only upon default of the latter that the creditor may have recourse on the
mortgagors by foreclosing the mortgaged properties in lieu of an action for the recovery of the amount
of the loan.[21]

In the instant case, petitioner’s contention that the requisites of filing the action for collection and
rendition of final judgment therein should concur, is untenable.

Thus, in Cerna vs. Court of Appeals,[22] we agreed with the petitioner in said case, that the filing of a
collection suit barred the foreclosure of the mortgage:

“A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel mortgage
constituted over the personal property as security for the debt or value of the promissory note when he
seeks to recover in the said collection suit.”

“ x x x When the mortgagee elects to file a suit for collection, not foreclosure, thereby abandoning the
chattel mortgage as basis for relief, he clearly manifests his lack of desire and interest to go after the
mortgaged property as security for the promissory note x x x.”

Contrary to petitioner’s arguments, we therefore reiterate the rule, for clarity and emphasis, that the
mere act of filing of an ordinary action for collection operates as a waiver of the mortgage-creditor’s
remedy to foreclose the mortgage. By the mere filing of the ordinary action for collection against the
principal debtors, the petitioner in the present case is deemed to have elected a remedy, as a result of
which a waiver of the other necessarily must arise. Corollarily, no final judgment in the collection suit is
required for the rule on waiver to apply.

Hence, in Caltex Philippines, Inc. vs. Intermediate Appellate Court,[23] a case relied upon by petitioner,
supposedly to buttress its contention, this Court had occasion to rule that the mere act of filing a
collection suit for the recovery of a debt secured by a mortgage constitutes waiver of the other remedy
of foreclosure.

In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of the debt.
Nevertheless, alternative remedies are available for its enjoyment and exercise. Petitioner then may opt
to exercise only one of two remedies so as not to violate the rule against splitting a cause of action.

As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc. vs. Icarangal.[24]

“For non-payment of a note secured by mortgage, the creditor has a single cause of action against the
debtor. This single cause of action consists in the recovery of the credit with execution of the security.
In other words, the creditor in his action may make two demands, the payment of the debt and the
foreclosure of his mortgage. But both demands arise from the same cause, the non-payment of the
debt, and for that reason, they constitute a single cause of action. Though the debt and the mortgage
constitute separate agreements, the latter is subsidiary to the former, and both refer to one and the
same obligation. Consequently, there exists only one cause of action for a single breach of that
obligation. Plaintiff, then, by applying the rules above stated, cannot split up his single cause of action
by filing a complaint for payment of the debt, and thereafter another complaint for foreclosure of the
mortgage. If he does so, the filing of the first complaint will bar the subsequent complaint. By allowing
the creditor to file two separate complaints simultaneously or successively, one to recover his credit and
another to foreclose his mortgage, we will, in effect, be authorizing him plural redress for a single
breach of contract at so much cost to the courts and with so much vexation and oppression to the
debtor.”

Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine enunciated in
Caltex, wherein this High Court relaxed the application of the general rules to wit:

“In the present case, however, we shall not follow this rule to the letter but declare that it is the
collection suit which was waived and/or abandoned. This ruling is more in harmony with the principles
underlying our judicial system. It is of no moment that the collection suit was filed ahead, what is
determinative is the fact that the foreclosure proceedings ended even before the decision in the
collection suit was rendered. x x x”

Notably, though, petitioner took the Caltex ruling out of context. We must stress that the Caltex case
was never intended to overrule the well-entrenched doctrine enunciated in Bachrach, which to our mind
still finds applicability in cases of this sort. To reiterate, Bachrach is still good law.

We then quote the decision[25]of the trial court, in the present case, thus:

“The aforequoted ruling in Caltex is the exception rather than the rule, dictated by the peculiar
circumstances obtaining therein. In the said case, the Supreme Court chastised Caltex for making “ x x x
a mockery of our judicial system when it initially filed a collection suit then, during the pendency
thereof, foreclosed extrajudicially the mortgaged property which secured the indebtedness, and still
pursued the collection suit to the end.” Thus, to prevent a mockery of our judicial system”, the
collection suit had to be nullified because the foreclosure proceedings have already been pursued to
their end and can no longer be undone.

xxx xxx xxx

“In the case at bar, it has not been shown whether the defendant pursued to the end or are still
pursuing the collection suits filed in foreign courts. There is no occasion, therefore, for this court to
apply the exception laid down by the Supreme Court in Caltex, by nullifying the collection suits. Quite
obviously, too, the aforesaid collection suits are beyond the reach of this Court. Thus the only way the
court may prevent the spector of a creditor having “plural redress for a single breach of contract” is by
holding, as the Court hereby holds, that the defendant has waived the right to foreclose the mortgages
constituted by the plaintiff on its properties originally covered by Transfer Certificates of Title Nos. T-
78759, T-78762, T-78760 and T-78761.” (RTC Decision pp., 10-11)

In this light, the actuations of Caltex are deserving of severe criticism, to say the least.[26]

Moreover, petitioner attempts to mislead this Court by citing the case of PCIB vs. IAC.[27] Again,
petitioner tried to fit a square peg in a round hole. It must be stressed that far from overturning the
doctrine laid down in Bachrach, this Court in PCIB buttressed its firm stand on this issue by declaring:
“While the law allows a mortgage creditor to either institute a personal action for the debt or a real
action to foreclosure the mortgage, he cannot pursue both remedies simultaneously or successively as
was done by PCIB in this case.”

xxx xxx xxx

“Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3 million promissory note
secured by real estate mortgages and subsequently filed a petition for extrajudicial foreclosure, it
violates the rule against splitting a cause of action.”

Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four civil
suits before foreign courts, necessarily abandoned the remedy to foreclose the real estate mortgages
constituted over the properties of third-party mortgagor and herein private respondent ARC. Moreover,
by filing the four civil actions and by eventually foreclosing extrajudicially the mortgages, petitioner in
effect transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our
statute books.

In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after the collection suit
was filed, considering that the creditor should not be afforded “plural redress for a single breach of
contract.” For cause of action should not be confused with the remedy created for its enforcement.[28]

Notably, it is not the nature of the redress which is crucial but the efficacy of the remedy chosen in
addressing the creditor’s cause. Hence, a suit brought before a foreign court having competence and
jurisdiction to entertain the action is deemed, for this purpose, to be within the contemplation of the
remedy available to the mortgagee-creditor. This pronouncement would best serve the interest of
justice and fair play and further discourage the noxious practice of splitting up a lone cause of action.

Alandale Sportsline v. Good Development Corp, G.R. No. 164521, December 18, 2008
FACTS: Allandale Sportsline, Inc. (ASI) obtained a loan of P204,000.00 from The Good Development
Corp. (GDC) under a Promissory Note signed by Melbarose R. Sasot (Melbarose) and Allandale R. Sasot
(Allandale). The loan was secured by chattel mortgage.

On June 24, 1991, GDC demanded that Melbarose pay the unpaid account of P179,000.00 or surrender
the mortgaged chattels within five days from notice. When no payment was made, GDC filed with the
RTC a Complaint for Replevin and/or Sum of Money with Damages against ASI, Melbarose, Manipon,
Florante Edrino and John Doe at the Pasig City, Branch 158. Plaintiff GDC prayed for alternative reliefs of
replevin for the purpose of foreclosure and if the chattels cannot be obtained, for collection of sum of
money.

The RTC issued the writ of replevin and several chattels were seized.

Meanwhile, ASI and Melbarose filed their Answer with Counterclaim alleging that their unpaid
obligation was only P171,000.00;[20] that they repeatedly tendered payment of this amount, but GDC
rejected their efforts for no valid reason.
During the pendency of the case, GDC disclosed that after it obtained possession of the properties
subject of the writs of replevin, it caused the auction sale of some of them and realized proceeds
amounting to P78,750.00.

RTC Ruling

The RTC ruled in favor of GDC and ordered Allandale to pay the plaintiff jointly and severally the amount
of P269,611.82 plus legal interest thereon effective to date until the full amount is fully paid, and 25% of
the total amount due as liquidated damages.

ASI, Sasot and Manipon appealed to the CA, which rendered the Decision denying the appeal. Their
Motion for Reconsideration was also denied by the CA.

Only ASI and Sasot (petitioners) took the present recourse, raising the following issues:

I. Whether or not petitioners’ check payment of Php171,000.00, PCIB Check No. 851688,
to cover the total balance of their loan to respondent, became a valid tender of payment by virtue of the
respondent’s acceptance thereof;

III. Whether or not petitioners are entitled to the return of their properties pursuant to
Section 9, Rule 60 of the Rules of Court.

IV. Whether or not there is legal basis in the award of liquidated damages.

HELD: No pay

Tender of payment, without more, produces no effect; rather, tender of payment must be followed by a
valid consignation in order to produce the effect of payment and extinguish an obligation.[40]

Tender of payment is but a preparatory act to consignation. It is the manifestation by the debtor of a
desire to comply with or pay an obligation. If refused without just cause, the tender of payment will
discharge the debtor of the obligation to pay but only after a valid consignation of the sum due shall
have been made with the proper court.

Consignation is the deposit of the proper amount with a judicial authority, before whom the debtor
must establish compliance with the following mandatory requirements: (1) there was a debt due; (2) the
consignation of the obligation had been made because the creditor to whom tender of payment was
made refused to accept it, or because he was absent or incapacitated, or because several persons claim
to be entitled to receive the amount due, or because the title to the obligation has been lost; (3)
previous notice of the consignation had been given to the person interested in the performance of the
obligation; (4) the amount due was placed at the disposal of the court; and (5) after the consignation
had been made, the person interested was notified thereof. Failure to prove any of these requirements
is enough ground to render a consignation ineffective.

The third and fourth issues are interrelated because their resolution depends on the nature of the
remedy which respondent actually adopted.
As emphasized at the outset, the reliefs respondent prayed for in its Complaint and Amended Complaint
are in the alternative: delivery of the mortgaged properties preparatory to foreclosure or payment of
the unpaid loan

Moreover, after respondent acquired possession of the mortgaged properties through the writs of
replevin, it caused the auction sale of assorted sports outfits, one unit Sansio Karaoke, one unit Sony
T.V. Set and one unit Toyota Corona, and earned proceeds amounting to P78,750.00.[45] While it
appears that respondent failed to obtain the other personal properties covered by the Deed of
Mortgage and the writs of replevin, there is no doubt that it had effectively elected the remedy of extra-
judicial foreclosure of the mortgage security over the remedy of collection of the unpaid loan.

The RTC was aware that respondent had elected one remedy. In its Decision, it cited the fact that some
of the mortgaged properties which were delivered to respondent by means of the Writs of Replevin had
been sold on auction, and acknowledged that the proceeds from said auction sale should be deducted
from the loan account of petitioners. The RTC noted:

The seized pieces of personal properties by virtue of the writ of replevin and alias writ of replevin were
sold in an auction sale where [respondent] realized P78,750.00 from the sale.

Yet, it is curious that in the dispositive portion of its Decision, the RTC granted respondent the remedy of
collection of sum of money.

Not only is there no more reference to the conduct of the auction sale of the mortgaged properties,
there is also no longer any acknowledgment that the proceeds earned from the auction sale should be
deducted from the total unpaid loan.

This is a glaring error.

In Bachrach Motor Co., Inc. v. Icarangal,[48] the Court held that the remedies available to any mortgage
creditor are alternative, not cumulative or successive,[49] viz.:

For non-payment of a note secured by mortgage, the creditor has a single cause of action against the
debtor. This single cause of action consists in the recovery of the credit with execution of the security.
In other words, the creditor in his action may make two demands, the payment of the debt and the
foreclosure of his mortgage. But both demands arise from the same cause, the non-payment of the
debt, and for that reason, they constitute a single cause of action. Though the debt and the mortgage
constitute separate agreements, the latter is subsidiary to the former, and both refer to one and the
same obligation. Consequently, there exists only one cause of action for a single breach of that
obligation. Plaintiff, then, by applying the rules above stated, cannot split up his single cause of action
by filing a complaint for payment of the debt, and thereafter another complaint for foreclosure of the
mortgage. If he does so, the filing of the first complaint will bar the subsequent complaint. By allowing
the creditor to file two separate complaints simultaneously or successively, one to recover his credit and
another to foreclose his mortgage, we will, in effect, be authorizing him plural redress for a single
breach of contract at so much cost to the courts and with so much vexation and oppression to the
debtor. (Emphasis supplied)
By causing the auction sale of the mortgaged properties, respondent effectively adopted and pursued
the remedy of extra-judicial foreclosure,[50] using the writ of replevin as a tool to get hold of the
mortgaged properties.[51] As emphasized in Bachrach, one effect of respondent’s election of the
remedy of extra-judicial foreclosure is its waiver of the remedy of collection of the unpaid loan.

Therefore, there was no more legal basis for the RTC to grant respondent the relief of collecting from
petitioners “the amount of Php269,611.82 [sic] plus legal interest thereon effective to date until the full
amount is fully paid,” nor for the CA to affirm it.

However, another effect of its election of the remedy of extra-judicial foreclosure is that whatever
deficiency remains after applying the proceeds of the auction sale to the total loan obligation may still
be recovered by respondent.[52]

But to recover any deficiency after foreclosure, the rule is that a mortgage creditor must institute an
independent civil action.[53] However, in PCI Leasing & Finance, Inc. v. Dai[54] the Court held that the
claim should at least be included in the pre-trial brief. In said case, the mortgage-creditor had
foreclosed on the mortgaged properties and sold the same at public auction during the trial on the
action for damages with replevin. After judgment on the replevin case was rendered, the mortgage-
creditor filed another case, this time for the deficiency amount. The Court dismissed the second case on
the ground of res judicata, noting that:

Petitioner ignores the fact that it prayed in the replevin case that in the event manual delivery of
the vessel could not be effected, the court “render judgment in its favor by ordering [herein
respondents] to pay x x x the sum of P3,502,095.00 plus interest and penalty thereon from
October 12, 1994 until fully paid as provided in the Promissory Note.”

Since petitioner had extrajudicially foreclosed the chattel mortgage over the vessel even before
the pre-trial of the case, it should have therein raised as issue during the pre-trial the award of a
deficiency judgment. After all, the basis of its above-stated alternative prayer was the same as
that of its prayer for replevin – the default of respondents in the payment of the monthly
installments of their loan. But it did not. (Emphasis supplied)

The question in the present case therefore is whether respondent instituted the proper action for the
deficiency amount or raised its claim at the pre-trial.

An examination of the Complaint and Amended Complaint reveals that respondent did not allege any
deficiency account. Nor did it raise the matter in its Pre-Trial Brief.[55] This is only to be expected
because the auction sale of the properties was apparently conducted on June 19, 1992, long after it filed
its Complaint/Amended Complaint and Pre-trial Brief.

However, the Court notes that evidence on the deficiency amount was duly presented by respondent
and examined by petitioners. Documentary evidence of the deficiency amount was also presented in the
form of the August 24, 1992 Statement of Account marked Exhibits “F-1” and “F-2.”[58] Thus, an
independent action to recover the deficiency will merely entail the presentation of the same evidence of
the same claim, in the process taxing the time and resources of the parties and the courts.[59]
Therefore, in the higher interest of justice and equity, the Court takes it upon itself to grant the claim of
respondent to the deficiency amount of P191,111.82, as stated in its August 24, 1992 Statement of
Account.

Yet another effect of the election by respondent of the remedy of extra-judicial foreclosure is the
inapplicability of Section 9, Rule 60 of the Rules of Court, which states:

Section 9. Judgment. – After trial of the issues, the court shall determine who has the right of
possession to and the value of the property and shall render judgment in the alternative for the delivery
thereof to the party entitled to the same, or for its value in case delivery can not be made and also for
such damages as either party may prove, with costs.

As already discussed, the properties of petitioners which were seized by virtue of the Writs of Replevin
were extra-judicially foreclosed and sold at public auction by respondent in the exercise of its absolute
right under the contract entered into by the parties, without need of prior notice or demand to
forthwith judicially or extra-judicially foreclose this mortgage and proceed against all or any of the
mortgaged rights, interests and properties for the full satisfaction of the mortgagors' entire obligation to
the mortgagee.

Finally, under the same Deed of Mortgage, it is provided that in case of default, petitioners shall be
liable for liquidated penalty/collection charge in the amount equivalent to “twenty-five (25%) percent
of said outstanding obligation.” It being settled that petitioners defaulted on their loan obligation to
respondent, the former are liable for liquidated damages.

Enriquez v. Ramos, G.R. No. L-16797, February 27, 1963

FACTS: On 24 November 1958, Rodrigo Enriquez and the spouses Urbano Dizon and Aurea Soriano de
Dizon sold to Socorro A. Ramos, by a notarial deed of even date, eleven (11) parcels of land situated in
Bago Bantay, Quezon City, and covered by their corresponding certificates of title, for the stipulated
price of P101,000.00. The vendee paid P5,000.00 down, P2,500.00 in cash, and P2,500.00 by a check
drawn against the Philippine National Bank, and agreed to satisfy the balance of P96,000.00 within
ninety (90) days.

To secure the said balance, the vendee Socorro A. Ramos, in the same deed of sale, mortgaged the
eleven parcels in favor of the vendors. By way of additional security, Socorro A. Ramos, as attorney-in-
fact of her children, Enrique, Antonio, Milagros, and Lourdes, and as judicial guardian of her minor child
Angelita Ramos, executed another mortgage on Lot No. 409 of the Malinta Estate.

Because of the vendee-mortgagor's failure to comply with some conditions of the mortgage, this action
for foreclosure of the mortgage was filed by the vendors-mortgagees in the court below, on 29 April
1959 at the Court of First Instance of Rizal.

Defendant Socorro Ramos moved to dismiss, alleging that the plaintiffs previously had filed action
against her in the Court of First Instance of Manila on 24 February 1959 for the recovery of P2,500.00
paid by check as part of the down payment on the price of the mortgaged lands; that at the time this
first suit was filed, the mortgage debt was already accrued and demandable; that plaintiffs were,
therefore, guilty of splitting a single cause of action, and under section 4 of Rule 2 of the Rules of Court,
the filing of the first action for P2,500.00 was a defense that could be pleaded in abatement of the
second suit.

MTC Ruling
Upon opposition by the plaintiffs, the Court of First Instance of Quezon City denied the motion to
dismiss; but defendant Ramos repleaded the averments as a special defense in her answer. After trial,
on 16 December 1959, the Court of First Instance of Quezon City rendered judgment against defendant
Ramos; ordered her to pay P96,000.00, with 12% interest from 24 February 1959 until payment, 10% of
the amount due as attorney's fees, and the costs of the suit; and further decreed the foreclosure sale of
the mortgaged properties in case of non-payment within ninety (90) days.

Socorro Ramos appealed directly to this Court, and here insists that the action should be dismissed on
account of the alleged splitting of appellee's cause of action, and that the obligation not having fixed a
period, although one was intended, the court below should have set first a date of maturity before
ordering payment or foreclosure.

ISSUE: WON There was splitting of the cause of action

HELD:

An examination of the first complaint filed against appellant in the Court of First Instance of Manila
shows that it was based on appellants' having unlawfully stopped payment of the check for P2,500.00
she had issued in favor of appellees; while the complaint in the present action was for non-payment of
the balance of P96,000.00 guaranteed by the mortgage. The claim for P2,500.00 was, therefore, a
distinct debt not covered by the security; and since the mortgage was constituted on lands situated in
Quezon City, the appellees could not ask for its foreclosure in the Manila courts. The two causes of
action being different, section 4 of Rule 2 does not apply.

On the second assignment of error: the stipulation in the mortgage contract that the obligation for
P96,000.00 was to be —

without interest, payable within ninety (90) days from this date, provided that in case of default it shall
bear interest at the rate of 12% per annum,

clearly fixes a date of maturity, the stipulated twelve per cent in case of default being nothing more than
a penalty, designed to induce the debtor to pay on or before the expiration of the ninety (90) days.
Hence, there was no call upon the court to set another due date.

Tarnate v. Garcia, G.R. No. L-26266, December 29, 1972

FACTS: On 17 August 1964 herein respondent Lucilo U. Garcia filed a complaint for forcible entry against
herein petitioner Ramon A. Tarnate in the Municipal Court of Batangas, Batangas. Tarnate allegedly
constructed a fence fence that intruded upon Lot 85.

On 10 September 1964 respondent Garcia filed another complaint for forcible entry against the same
defendant in the same court but now alleging that the fence also encroaches upon Lots 57, 59 and 60
which he discovered after he engaged the services of a Private Land Surveyor.
On 28 October 1964 Tarnate moved to dismiss the second case (No. 1091) on the ground of pendency of
another action between the same parties for the same cause. Garcia opposed the motion.

MTC Ruling
On 23 December 1964 the municipal court denied the motion to dismiss because it did not find the
ground for dismissal to be indubitable.

Having failed to secure a reconsideration, petitioner Tarnate filed a petition for prohibition and
mandamus against the municipal court of Batangas and Lucilo U. Garcia in the Court of First Instance of
Batangas (Special Civil Case No. 1033), praying that the order of denial by the municipal court be
annulled and that the said court be commanded not to give due course to, but to order the dismissal of
the second case.

After trial, where evidence was introduced and stipulations of facts were made by the parties, the Court
of First Instance of Batangas rendered judgment on 12 January 1966 denying the writ prayed for.

The present case before Us is a direct appeal from the aforesaid judgment of the Court of First Instance
of Batangas. The said court gave due course to the appeal and ordered the transmittal of the original
records on 26 April 1966, or before the effectivity of Republic Act 5440.

ISSUE: The issue here is whether or not the municipal court abused its discretion in denying the motion
to dismiss the second complaint because the ground therefor, namely, pendency of another action
between the same parties for the same cause, was not indubitable.

HELD:
In the court of first instance the parties stipulated in the course of the trial that Civil Case No. 1083
referred to "that portion of the old bed of the Calumpang River east of Lot 58" and that Civil Case No.
1091 referred to the bed of the "old course of the Calumpang River east of Lot 57, 59 and 60."

While from the strictly technical viewpoint there was a splitting of the cause of action in pursuing the
same remedy in two separate complaints notwithstanding the fact that the alleged forcible entry
constituted one and the same act, still a realistic and practical approach dictated the action taken by the
municipal court. It should be remembered that the first complaint was commenced on 17 August 1964
and had not yet been tried when the second was filed about three weeks later. The two cases could be
tried together as one, or the second complaint could be treated as an amendment of the first. Either
way the entire controversy between the parties could be judicially settled, disregarding unessential
procedural niceties, especially in the light of the reasonable explanation offered by the plaintiff below.

WHEREFORE, the order appealed from is hereby affirmed, with costs against the appellant.

Sec. 5. Joinder of causes of action

Section 5. Joinder of causes of action. — A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the following
conditions:
(a) The party joining the causes of action shall comply with the rules on joinder of parties;
(b) The joinder shall not include special civil actions or actions governed by special rules;
(c) Where the causes of action are between the same parties but pertain to different venues or
jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action
falls within the jurisdiction of said court and the venue lies therein; and
(d) Where the claims in all the causes action are principally for recovery of money, the aggregate
amount claimed shall be the test of jurisdiction. (5a)

See: Sec. 6, Rule 3

Section 6. Permissive joinder of parties. — All persons in whom or against whom any right to relief
in respect to or arising out of the same transaction or series of transactions is alleged to exist, whether
jointly, severally, or in the alternative, may, except as otherwise provided in these Rules, join as plaintiffs
or be joined as defendants in one complaint, where any question of law or fact common to all such
plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may
be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection
with any proceedings in which he may have no interest. (

Ada v. Baylon, G.R. No. 182435, August 13, 2012

FACTS: On July 3, 1996, the petitioners filed with the RTC a Complaint4 for partition, accounting and
damages against Florante, Rita and Panfila. The parties are either the heirs or successors-in-interest of
the Baylon siblings who are the heirs of the estate of spouses Florentino Baylon and Maximina Elnas
Baylon.

The petition alleged therein that Spouses Baylon, during their lifetime, owned 43 parcels of land5 all
situated in Negros Oriental. After the death of Spouses Baylon, they claimed that Rita took possession of
the said parcels of land and appropriated for herself the income from the same. Using the income
produced by the said parcels of land, Rita allegedly purchased two parcels of land, Lot No. 47096 and
half of Lot No. 4706,7 situated in Canda-uay, Dumaguete City. The petitioners averred that Rita refused
to effect a partition of the said parcels of land.

In their Answer, Florante, Rita and Panfila asserted that they and the petitioners co-owned 22 out of the
43 parcels of land mentioned in the latter’s complaint, whereas Rita actually owned 10 parcels of land
out of the 43 parcels which the petitioners sought to partition, while the remaining 11 parcels of land
are separately owned by other siblings and relatives.

During the pendency of the case, Rita, through a Deed of Donation dated July 6, 1997, conveyed Lot No.
4709 and half of Lot No. 4706 to Florante. On July 16, 2000, Rita died intestate and without any issue.
Thereafter, learning of the said donation inter vivos in favor of Florante, the petitioners filed a
Supplemental Pleading17 dated February 6, 2002, praying that the said donation in favor of the
respondent be rescinded in accordance with Article 1381(4) of the Civil Code. They further alleged that
Rita was already sick and very weak when the said Deed of Donation was supposedly executed and,
thus, could not have validly given her consent thereto.

Florante and Panfila opposed the rescission of the said donation, asserting that Article 1381(4) of the
Civil Code applies only when there is already a prior judicial decree on who between the contending
parties actually owned the properties under litigation.18

The RTC Decision

On October 20, 2005, the RTC rendered a Decision ordering partition over the co-owned lots and that
declared that the death of Rita during the pendency of the case without any issue had rendered the
issue of ownership insofar as parcels of land which she claims as her own moot since the parties below
are the heirs to her estate. Thus, the RTC regarded Rita as the owner of the said 10 parcels of land and,
accordingly, directed that the same be partitioned among her heirs. Nevertheless, the RTC rescinded the
donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante.

Florante sought reconsideration of the Decision dated October 20, 2005 of the RTC insofar as it
rescinded the donation of Lot No. 4709 and half of Lot No. 4706 in his favor. He asserted that, at the
time of Rita’s death on July 16, 2000, Lot No. 4709 and half of Lot No. 4706 were no longer part of her
estate as the same had already been conveyed to him through a donation inter vivos three years earlier.

On July 28, 2006, the RTC issued an Order23 which denied the motion for reconsideration filed by
Florante.

The CA Decision

On appeal, the CA rendered a Decision dated October 26, 2007 reversing the rescission and remanding
the case to determine ownership of the donated lots holding that the rescission was premature in the
absence of a judicial decree that the contested lots were owned by the Spouses Baylon. The CA held
that an action for rescission should be filed by the parties concerned independent of the proceedings
below.

The petitioners sought reconsideration27 of the Decision dated October 26, 2007 but it was denied by
the CA in its Resolution28 dated March 6, 2008.

Hence, this petition.

ISSUE: whether the CA erred in ruling that the donation inter vivos of Lot No. 4709 and half of Lot No.
4706 in favor of Florante may only be rescinded if there is already a judicial determination that the same
actually belonged to the estate of Spouses Baylon.

HELD:
Procedural Matters

Before resolving the lone substantive issue in the instant case, this Court deems it proper to address
certain procedural matters that need to be threshed out which, by laxity or otherwise, were not raised
by the parties herein.

Misjoinder of Causes of Action

The complaint filed by the petitioners with the RTC involves two separate, distinct and independent
actions – partition and rescission. First, the petitioners raised the refusal of their co-heirs, Florante, Rita
and Panfila, to partition the properties which they inherited from Spouses Baylon. Second, in their
supplemental pleading, the petitioners assailed the donation inter vivos of Lot No. 4709 and half of Lot
No. 4706 made by Rita in favor of Florante pendente lite.

The actions of partition and

rescission cannot be joined in a
single action.

By a joinder of actions, or more properly, a joinder of causes of action is meant the uniting of two or
more demands or rights of action in one action, the statement of more than one cause of action in a
declaration. It is the union of two or more civil causes of action, each of which could be made the basis
of a separate suit, in the same complaint, declaration or petition. A plaintiff may under certain
circumstances join several distinct demands, controversies or rights of action in one declaration,
complaint or petition.29

The objectives of the rule or provision are to avoid a multiplicity of suits where the same parties and
subject matter are to be dealt with by effecting in one action a complete determination of all matters in
controversy and litigation between the parties involving one subject matter, and to expedite the
disposition of litigation at minimum cost. The provision should be construed so as to avoid such
multiplicity, where possible, without prejudice to the rights of the litigants.30

Nevertheless, while parties to an action may assert in one pleading, in the alternative or otherwise, as
many causes of action as they may have against an opposing party, such joinder of causes of action is
subject to the condition, inter alia, that the joinder shall not include special civil actions governed by
special rules.31

Here, there was a misjoinder of causes of action. The action for partition filed by the petitioners could
not be joined with the action for the rescission of the said donation inter vivos in favor of Florante. Lest
it be overlooked, an action for partition is a special civil action governed by Rule 69 of the Rules of Court
while an action for rescission is an ordinary civil action governed by the ordinary rules of civil procedure.
The variance in the procedure in the special civil action of partition and in the ordinary civil action of
rescission precludes their joinder in one complaint or their being tried in a single proceeding to avoid
confusion in determining what rules shall govern the conduct of the proceedings as well as in the
determination of the presence of requisite elements of each particular cause of action.32

A misjoined cause of action, if not

severed upon motion of a party or
by the court sua sponte, may be
adjudicated by the court together
with the other causes of action.

Nevertheless, misjoinder of causes of action is not a ground for dismissal. Indeed, the courts have the
power, acting upon the motion of a party to the case or sua sponte, to order the severance of the
misjoined cause of action to be proceeded with separately.33 However, if there is no objection to the
improper joinder or the court did not motu proprio direct a severance, then there exists no bar in the
simultaneous adjudication of all the erroneously joined causes of action. On this score, our disquisition
in Republic of the Philippines v. Herbieto34 is instructive, viz:

This Court, however, disagrees with petitioner Republic in this regard. This procedural lapse committed
by the respondents should not affect the jurisdiction of the MTC to proceed with and hear their
application for registration of the Subject Lots.

xxxx
Considering every application for land registration filed in strict accordance with the Property
Registration Decree as a single cause of action, then the defect in the joint application for registration
filed by the respondents with the MTC constitutes a misjoinder of causes of action and parties. Instead
of a single or joint application for registration, respondents Jeremias and David, more appropriately,
should have filed separate applications for registration of Lots No. 8422 and 8423, respectively.

Misjoinder of causes of action and parties do not involve a question of jurisdiction of the court to hear
and proceed with the case. They are not even accepted grounds for dismissal thereof. Instead, under the
Rules of Court, the misjoinder of causes of action and parties involve an implied admission of the court’s
jurisdiction. It acknowledges the power of the court, acting upon the motion of a party to the case or on
its own initiative, to order the severance of the misjoined cause of action, to be proceeded with
separately (in case of misjoinder of causes of action); and/or the dropping of a party and the severance
of any claim against said misjoined party, also to be proceeded with separately (in case of misjoinder of
parties).35 (Citations omitted)

It should be emphasized that the foregoing rule only applies if the court trying the case has jurisdiction
over all of the causes of action therein notwithstanding the misjoinder of the same. If the court trying
the case has no jurisdiction over a misjoined cause of action, then such misjoined cause of action has to
be severed from the other causes of action, and if not so severed, any adjudication rendered by the
court with respect to the same would be a nullity.

Here, Florante posed no objection, and neither did the RTC direct the severance of the petitioners’
action for rescission from their action for partition. While this may be a patent omission on the part of
the RTC, this does not constitute a ground to assail the validity and correctness of its decision. The RTC
validly adjudicated the issues raised in the actions for partition and rescission filed by the petitioners.

Asserting a New Cause of Action in a Supplemental Pleading

In its Decision dated October 26, 2007, the CA pointed out that the said action for rescission should have
been filed by the petitioners independently of the proceedings in the action for partition. It opined that
the action for rescission could not be lumped up with the action for partition through a mere
supplemental pleading.

We do not agree.

A supplemental pleading may raise

a new cause of action as long as it
has some relation to the original
cause of action set forth in the
original complaint.

Section 6, Rule 10 of the Rules of Court reads:

Sec. 6. Supplemental Pleadings. – Upon motion of a party the court may, upon reasonable notice and
upon such terms as are just, permit him to serve a supplemental pleading setting forth transactions,
occurrences or events which have happened since the date of the pleading sought to be supplemented.
The adverse party may plead thereto within ten (10) days from notice of the order admitting the
supplemental pleading.

In Young v. Spouses Sy,36 this Court had the opportunity to elucidate on the purpose of a supplemental
pleading. Thus:

As its very name denotes, a supplemental pleading only serves to bolster or add something to the
primary pleading. A supplement exists side by side with the original. It does not replace that which it
supplements. Moreover, a supplemental pleading assumes that the original pleading is to stand and that
the issues joined with the original pleading remained an issue to be tried in the action. It is but a
continuation of the complaint. Its usual office is to set up new facts which justify, enlarge or change the
kind of relief with respect to the same subject matter as the controversy referred to in the original
complaint.

The purpose of the supplemental pleading is to bring into the records new facts which will enlarge or
change the kind of relief to which the plaintiff is entitled; hence, any supplemental facts which further
develop the original right of action, or extend to vary the relief, are available by way of supplemental
complaint even though they themselves constitute a right of action.37 (Citations omitted and emphasis
ours)

Thus, a supplemental pleading may properly allege transactions, occurrences or events which had
transpired after the filing of the pleading sought to be supplemented, even if the said supplemental
facts constitute another cause of action.

Admittedly, in Leobrera v. Court of Appeals,38 we held that a supplemental pleading must be based on
matters arising subsequent to the original pleading related to the claim or defense presented therein,
and founded on the same cause of action. We further stressed therein that a supplemental pleading
may not be used to try a new cause of action.

However, in Planters Development Bank v. LZK Holdings and Development Corp.,39 we clarified that,
while a matter stated in a supplemental complaint should have some relation to the cause of action set
forth in the original pleading, the fact that the supplemental pleading technically states a new cause of
action should not be a bar to its allowance but only a matter that may be considered by the court in the
exercise of its discretion. In such cases, we stressed that a broad definition of "cause of action" should
be applied.

Here, the issue as to the validity of the donation inter vivos of Lot No. 4709 and half of Lot No. 4706
made by Rita in favor of Florante is a new cause of action that occurred after the filing of the original
complaint. However, the petitioners’ prayer for the rescission of the said donation inter vivos in their
supplemental pleading is germane to, and is in fact, intertwined with the cause of action in the partition
case. Lot No. 4709 and half of Lot No. 4706 are included among the properties that were sought to be
partitioned.

The petitioners’ supplemental pleading merely amplified the original cause of action, on account of the
gratuitous conveyance of Lot No. 4709 and half of Lot No. 4706 after the filing of the original complaint
and prayed for additional reliefs, i.e., rescission. Indeed, the petitioners claim that the said lots form part
of the estate of Spouses Baylon, but cannot be partitioned unless the gratuitous conveyance of the same
is rescinded. Thus, the principal issue raised by the petitioners in their original complaint remained the
same.

Rescission is a remedy to address

the damage or injury caused to the
contracting parties or third
persons.

Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure the
reparation of damages caused to them by a contract, even if it should be valid, by means of the
restoration of things to their condition at the moment prior to the celebration of said contract.41 It is a
remedy to make ineffective a contract, validly entered into and therefore obligatory under normal
conditions, by reason of external causes resulting in a pecuniary prejudice to one of the contracting
parties or their creditors.42

Contracts which are rescissible are valid contracts having all the essential requisites of a contract, but by
reason of injury or damage caused to either of the parties therein or to third persons are considered
defective and, thus, may be rescinded.

The kinds of rescissible contracts, according to the reason for their susceptibility to rescission, are the
following: first, those which are rescissible because of lesion or prejudice;43 second, those which are
rescissible on account of fraud or bad faith;44 and third, those which, by special provisions of law,45 are
susceptible to rescission.46

Contracts which refer to things

subject of litigation is rescissible
pursuant to Article 1381(4) of the
Civil Code.

Contracts which are rescissible due to fraud or bad faith include those which involve things under
litigation, if they have been entered into by the defendant without the knowledge and approval of the
litigants or of competent judicial authority. Thus, Article 1381(4) of the Civil Code provides:

Art. 1381. The following contracts are rescissible:

xxxx

(4) Those which refer to things under litigation if they have been entered into by the defendant without
the knowledge and approval of the litigants or of competent judicial authority.

The rescission of a contract under Article 1381(4) of the Civil Code only requires the concurrence of the
following: first, the defendant, during the pendency of the case, enters into a contract which refers to
the thing subject of litigation; and second, the said contract was entered into without the knowledge
and approval of the litigants or of a competent judicial authority. As long as the foregoing requisites
concur, it becomes the duty of the court to order the rescission of the said contract.
The reason for this is simple. Article 1381(4) seeks to remedy the presence of bad faith among the
parties to a case and/or any fraudulent act which they may commit with respect to the thing subject of
litigation.

When a thing is the subject of a judicial controversy, it should ultimately be bound by whatever
disposition the court shall render. The parties to the case are therefore expected, in deference to the
court’s exercise of jurisdiction over the case, to refrain from doing acts which would dissipate or debase
the thing subject of the litigation or otherwise render the impending decision therein ineffectual.

There is, then, a restriction on the disposition by the parties of the thing that is the subject of the
litigation. Article 1381(4) of the Civil Code requires that any contract entered into by a defendant in a
case which refers to things under litigation should be with the knowledge and approval of the litigants or
of a competent judicial authority.

Further, any disposition of the thing subject of litigation or any act which tends to render inutile the
court’s impending disposition in such case, sans the knowledge and approval of the litigants or of the
court, is unmistakably and irrefutably indicative of bad faith. Such acts undermine the authority of the
court to lay down the respective rights of the parties in a case relative to the thing subject of litigation
and bind them to such determination.

It should be stressed, though, that the defendant in such a case is not absolutely proscribed from
entering into a contract which refer to things under litigation. If, for instance, a defendant enters into a
contract which conveys the thing under litigation during the pendency of the case, the conveyance
would be valid, there being no definite disposition yet coming from the court with respect to the thing
subject of litigation. After all, notwithstanding that the subject thereof is a thing under litigation, such
conveyance is but merely an exercise of ownership.

This is true even if the defendant effected the conveyance without the knowledge and approval of the
litigants or of a competent judicial authority. The absence of such knowledge or approval would not
precipitate the invalidity of an otherwise valid contract. Nevertheless, such contract, though considered
valid, may be rescinded at the instance of the other litigants pursuant to Article 1381(4) of the Civil
Code.

Here, contrary to the CA’s disposition, the RTC aptly ordered the rescission of the donation inter vivos of
Lot No. 4709 and half of Lot No. 4706 in favor of Florante. The petitioners had sufficiently established
the presence of the requisites for the rescission of a contract pursuant to Article 1381(4) of the Civil
Code. It is undisputed that, at the time they were gratuitously conveyed by Rita, Lot No. 4709 and half of
Lot No. 4706 are among the properties that were the subject of the partition case then pending with the
RTC. It is also undisputed that Rita, then one of the defendants in the partition case with the RTC, did
not inform nor sought the approval from the petitioners or of the RTC with regard to the donation inter
vivos of the said parcels of land to Florante.

Although the gratuitous conveyance of the said parcels of land in favor of Florante was valid, the
donation inter vivos of the same being merely an exercise of ownership, Rita’s failure to inform and seek
the approval of the petitioners or the RTC regarding the conveyance gave the petitioners the right to
have the said donation rescinded pursuant to Article 1381(4) of the Civil Code.

Rescission under Article 1381(4) of

the Civil Code is not preconditioned
upon the judicial determination as
to the ownership of the thing
subject of litigation.

In this regard, we also find the assertion that rescission may only be had after the RTC had finally
determined that the parcels of land belonged to the estate of Spouses Baylon intrinsically amiss. The
petitioners’ right to institute the action for rescission pursuant to Article 1381(4) of the Civil Code is not
preconditioned upon the RTC’s determination as to the ownership of the said parcels of land.

It bears stressing that the right to ask for the rescission of a contract under Article 1381(4) of the Civil
Code is not contingent upon the final determination of the ownership of the thing subject of litigation.
The primordial purpose of Article 1381(4) of the Civil Code is to secure the possible effectivity of the
impending judgment by a court with respect to the thing subject of litigation. It seeks to protect the
binding effect of a court’s impending adjudication vis-à-vis the thing subject of litigation regardless of
which among the contending claims therein would subsequently be upheld. Accordingly, a definitive
judicial determination with respect to the thing subject of litigation is not a condition sine qua non
before the rescissory action contemplated under Article 1381(4) of the Civil Code may be instituted.

Even if the donation inter vivos is

validly rescinded, a determination
as to the ownership of the subject
parcels of land is still necessary.

Admittedly, whoever may be adjudicated as the owner of Lot No. 4709 and half of Lot No. 4706, be it
Rita or Spouses Baylon, the same would ultimately be transmitted to the parties in the proceedings
before the RTC as they are the only surviving heirs of both Spouses Baylon and Rita. However, the RTC
failed to realize that a definitive adjudication as to the ownership of Lot No. 4709 and half of Lot No.
4706 is essential in this case as it affects the authority of the RTC to direct the partition of the said
parcels of land. Simply put, the RTC cannot properly direct the partition of Lot No. 4709 and half of Lot
No. 4706 until and unless it determines that the said parcels of land indeed form part of the estate of
Spouses Baylon.

Pantranco v. Standard Insurance, G.R. No. 140746, March 16, 2005 (Supra.)
FACTS: In the afternoon of October 28, 1984, Crispin Gicale was driving the passenger jeepney owned by
his mother Martina Gicale, respondent herein when it was hit by a passenger bus, owned by Pantranco
North Express, Inc., petitioner, driven by Alexander Buncan, also a petitioner, which sped away after the
accident.

Crispin reported the incident to the Talavera Police Station and respondent Standard Insurance Co., Inc.
(Standard), insurer of the jeepney. The total cost of the repair was P21,415.00, but respondent
Standard paid only P8,000.00. Martina Gicale shouldered the balance of P13,415.00.

Thereafter, Standard and Martina, respondents, demanded reimbursement from petitioners Pantranco
and its driver Alexander Buncan, but they refused. This prompted respondents to file with the Regional
Trial Court (RTC), Branch 94, Manila, a complaint for sum of money.
In their answer, both petitioners specifically denied the allegations in the complaint and averred that it
is the Metropolitan Trial Court, not the RTC, which has jurisdiction over the case.

On June 5, 1992, the trial court rendered a Decision in favor of respondents Standard and Martina

On appeal, the Court of Appeals, in a Decision dated July 23, 1999, affirmed the trial court’s ruling,
holding that:

“The appellants argue that appellee Gicale’s claim of P13,415.00 and appellee insurance company’s
claim of P8,000.00 individually fell under the exclusive original jurisdiction of the municipal trial court.
This is not correct because under the Totality Rule provided for under Sec. 19, Batas Pambansa Bilang
129, it is the sum of the two claims that determines the jurisdictional amount. Appellants contend that
there was a misjoinder of parties. Assuming that there was, under the Rules of Court (Sec. 11, Rule 7) as
well as under the Rules of Civil Procedure (ditto), the same does not affect the jurisdiction of the court
nor is it a ground to dismiss the complaint.

Petitioners filed a motion for reconsideration but was denied by the Appellate Court in a Resolution
dated November 4, 1999.

Hence, this petition for review on certiorari

ISSUE: WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT OF THE ACTION
CONSIDERING THAT RESPONDENTS’ RESPECTIVE CAUSE OF ACTION AGAINST PETITIONERS DID NOT
ARISE OUT OF THE SAME TRANSACTION NOR ARE THERE QUESTIONS OF LAW AND FACTS COMMON TO
BOTH PETITIONERS AND RESPONDENTS.

HELD:

Petitioners insist that the trial court has no jurisdiction over the case since the cause of action of each
respondent did not arise from the same transaction and that there are no common questions of law and
fact common to both parties. Section 6, Rule 3 of the Revised Rules of Court,[5] provides:

“Sec. 6. Permissive joinder of parties. – All persons in whom or against whom any right to relief in
respect to or arising out of the same transaction or series of transactions is alleged to exist, whether
jointly, severally, or in the alternative, may, except as otherwise provided in these Rules, join as plaintiffs
or be joined as defendants in one complaint, where any question of law or fact common to all such
plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may
be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection
with any proceedings in which he may have no interest.”

Permissive joinder of parties requires that: (a) the right to relief arises out of the same transaction or
series of transactions; (b) there is a question of law or fact common to all the plaintiffs or defendants;
and (c) such joinder is not otherwise proscribed by the provisions of the Rules on jurisdiction and
venue.[6]

In this case, there is a single transaction common to all, that is, Pantranco’s bus hitting the rear side of
the jeepney. There is also a common question of fact, that is, whether petitioners are negligent. There
being a single transaction common to both respondents, consequently, they have the same cause of
action against petitioners.

To determine identity of cause of action, it must be ascertained whether the same evidence which is
necessary to sustain the second cause of action would have been sufficient to authorize a recovery in
the first.[7] Here, had respondents filed separate suits against petitioners, the same evidence would
have been presented to sustain the same cause of action. Thus, the filing by both respondents of the
complaint with the court below is in order. Such joinder of parties avoids multiplicity of suit and ensures
the convenient, speedy and orderly administration of justice.

Corollarily, Section 5(d), Rule 2 of the same Rules provides:

“Sec. 5. Joinder of causes of action. – A party may in one pleading assert, in the alternative or otherwise,
as many causes of action as he may have against an opposing party, subject to the following conditions:

xxx

(d) Where the claims in all the causes of action are principally for recovery of money the aggregate
amount claimed shall be the test of jurisdiction.”

The above provision presupposes that the different causes of action which are joined accrue in favor of
the same plaintiff/s and against the same defendant/s and that no misjoinder of parties is involved.[8]
The issue of whether respondents’ claims shall be lumped together is determined by paragraph (d) of
the above provision. This paragraph embodies the “totality rule” as exemplified by Section 33 (1) of B.P.
Blg. 129[9] which states, among others, that “where there are several claims or causes of action
between the same or different parties, embodied in the same complaint, the amount of the demand
shall be the totality of the claims in all the causes of action, irrespective of whether the causes of action
arose out of the same or different transactions.”

As previously stated, respondents’ cause of action against petitioners arose out of the same transaction.
Thus, the amount of the demand shall be the totality of the claims.

Respondent Standard’s claim is P8,000.00, while that of respondent Martina Gicale is P13,415.00, or a
total of P21,415.00. Section 19 of B.P. Blg. 129 provides that the RTC has “exclusive original jurisdiction
over all other cases, in which the demand, exclusive of interest and cost or the value of the property in
controversy, amounts to more than twenty thousand pesos (P20,000.00).” Clearly, it is the RTC that has
jurisdiction over the instant case. It bears emphasis that when the complaint was filed, R.A. 7691
expanding the jurisdiction of the Metropolitan, Municipal and Municipal Circuit Trial Courts had not yet
taken effect. It became effective on April 15, 1994.

Union Glass Corp. v. SEC, G.R. No. 64013, November 28, 1983
FACTS: Private respondent Carolina Hofileña, complainant in SEC Case No. 2035, is a stockholder of
Pioneer Glass Manufacturing Corporation.

Since 1967, Pioneer Glass had obtained various loan accommodations from the DBP, and also from
other local and foreign sources which DBP guaranteed. As security for said loan accommodations,
Pioneer Glass mortgaged and/or assigned its assets, real and personal, to the DBP, in addition to the
mortgages executed by some of its corporate officers over their personal assets. DBP later on came to
occupy three seats in the Board of Directors by gaining control of Pioneer Glass’ outstanding shares
when the accumulated unpaid interests were converted into equity..

In March, 1978, when Pioneer Glass suffered serious liquidity problems such that it could no longer
meet its financial obligations with DBP, it entered into a dacion en pago agreement with the latter,
whereby all its assets mortgaged to DBP were ceded to the latter in full satisfaction of the corporation's
obligations in the total amount of P59,000,000.00. Part of the assets transferred to the DBP was the
glass plant in Rosario, Cavite, which DBP leased and subsequently sold to herein petitioner Union Glass
and Container Corporation, hereinafter referred to as Union Glass.

On April 1, 1981, Carolina Hofileña filed a complaint before the respondent SEC against the DBP, Union
Glass and Pioneer Glass. Of the five causes of action pleaded therein, only the first cause of action
concerned petitioner Union Glass as transferee and possessor of the glass plant. Said first cause of
action was based on the alleged illegality of the aforesaid dacion en pago resulting from: [1] the
supposed unilateral and unsupported undervaluation of the assets of Pioneer Glass covered by the
agreement; [2] the self-dealing indulged in by DBP, having acted both as stockholder/director and
secured creditor of Pioneer Glass; and [3] the wrongful inclusion by DBP in its statement of account of
P26M as due from Pioneer Glass when the same had already been converted into equity.

On April 21, 1981, Pioneer Glass filed its answer. On May 8, 1981, petitioners moved for dismissal of the
case on the ground that the SEC had no jurisdiction over the subject matter or nature of the suit.
Respondent Hofileña filed her opposition to said motion, to which herein petitioners filed a rejoinder.

On July 23, 1981, SEC Hearing Officer Eugenio E. Reyes, to whom the case was assigned, granted the
motion to dismiss for lack of jurisdiction. However, on September 25, 1981, upon motion for
reconsideration filed by respondent Hofileña, Hearing Officer Reyes reversed his original order by
upholding the SEC's jurisdiction over the subject matter and over the persons of petitioners.

Unable to secure a reconsideration of the Order as well as to have the same reviewed by the
Commission En Banc, petitioners filed the instant petition for certiorari and prohibition to set aside the
order of September 25, 1981, and to prevent respondent SEC from taking cognizance of SEC Case No.
2035.

ISSUE: Is it the regular court or the SEC that has jurisdiction over the case?

HELD:

In the ordinary course of things, petitioner Union Glass, as transferee and possessor of the glass plant
covered by the dacion en pago agreement, should be joined as party-defendant under the general rule
which requires the joinder of every party who has an interest in or lien on the property subject matter of
the dispute. 4 Such joinder of parties avoids multiplicity of suits as well as ensures the convenient,
speedy and orderly administration of justice.
But since petitioner Union Glass has no intra-corporate relation with either the complainant or the DBP,
its joinder as party-defendant in SEC Case No. 2035 brings the cause of action asserted against it outside
the jurisdiction of the respondent SEC.

In order that the SEC can take cognizance of a case, the controversy must pertain to any of the following
relationships: [a] between the corporation, partnership or association and the public; [b] between the
corporation, partnership or association and its stockholders, partners, members, or officers; [c] between
the corporation, partnership or association and the state in so far as its franchise, permit or license to
operate is concerned; and [d] among the stockholders, partners or associates themselves.

The fact that the controversy at bar involves the rights of petitioner Union Glass who has no intra-
corporate relation either with complainant or the DBP, places the suit beyond the jurisdiction of the
respondent SEC. The case should be tried and decided by the court of general jurisdiction, the Regional
Trial Court. This view is in accord with the rudimentary principle that administrative agencies, like the
SEC, are tribunals of limited jurisdiction 6 and, as such, could wield only such powers as are specifically
granted to them by their enabling statutes.

As heretofore pointed out, petitioner Union Glass is involved only in the first cause of action of Hofileñas
complaint in SEC Case No, 2035. While the Rules of Court, which applies suppletorily to proceedings
before the SEC, allows the joinder of causes of action in one complaint, such procedure however is
subject to the rules regarding jurisdiction, venue and joinder of parties. 9 Since petitioner has no intra-
corporate relationship with the complainant, it cannot be joined as party-defendant in said case as to do
so would violate the rule or jurisdiction. Hofileñas complaint against petitioner for cancellation of the
sale of the glass plant should therefore be brought separately before the regular court But such action, if
instituted, shall be suspended to await the final outcome of SEC Case No. 2035, for the issue of the
validity of the dacion en pago posed in the last mentioned case is a prejudicial question, the resolution
of which is a logical antecedent of the issue involved in the action against petitioner Union Glass. Thus,
Hofileñas complaint against the latter can only prosper if final judgment is rendered in SEC Case No.
2035, annulling the dacion en pago executed in favor of the DBP.

Flores v. Hon. Mallare-Philipps, G.R. No. L-66620, September 24, 1986

FACTS: Petitioner filed a complaint against respondent Ignacio Binongcal and Fernando Calion. the first
cause of action alleged in the complaint was against respondent Ignacio Binongcal for refusing to pay
the amount of P11,643.00 representing cost of truck tires which he purchased on credit from petitioner
on various occasions from August to October, 1981; and the second cause of action was against
respondent Fernando Calion for allegedly refusing to pay the amount of P10,212.00 representing cost of
truck tires which he purchased on credit from petitioner on several occasions from March, 1981 to
January, 1982.

On December 15, 1983, counsel for respondent Binongcal filed a Motion to Dismiss on the ground of
lack of jurisdiction since the amount of the demand against said respondent was only P11,643.00, and
under Section 19(8) of BP129 the regional trial court shall exercise exclusive original jurisdiction if the
amount of the demand is more than twenty thousand pesos (P20,000.00). It was further averred in said
motion that although another person, Fernando Calion, was allegedly indebted to petitioner in the
amount of P10,212.00, his obligation was separate and distinct from that of the other respondent. At
the hearing of said Motion to Dismiss, counsel for respondent Calion joined in moving for the dismissal
of the complaint on the ground of lack of jurisdiction. Counsel for petitioner opposed the Motion to
Dismiss.

Petitioner’s complaint was dismissed for lack of jurisdiction by the RTC of of Baguio City and Benguet
Province. Petitioner has appealed by certiorari from the dismissal did not attach to his petition a copy of
his complaint in the erroneous belief that the entire original record of the case shall be transmitted to
this Court pursuant to the second paragraph of Section 39 of BP129. This provision applies only to
ordinary appeals from the regional trial court to the Court of Appeals (Section 20 of the Interim Rules).
Appeals to this Court by petition for review on certiorari are governed by Rule 45 of the Rules of Court
(Section 25 of the Interim Rules).

Petitioner maintains that the lower court has jurisdiction over the case following the "novel" totality
rule introduced in Section 33(l) of BP129 and Section 11 of the Interim Rules.

The pertinent portion of Section 33(l) of BP129 reads as follows:

... Provided,That where there are several claims or causes of action between the same or different
parties, embodied in the same complaint, the amount of the demand shall be the totality of the claims
in all the causes of action, irrespective of whether the causes of action arose out of the same or
different transactions. ...

Section 11 of the Interim Rules provides thus:

Application of the totality rule.-In actions where the jurisdiction of the court is dependent on the
amount involved, the test of jurisdiction shall be the aggregate sum of all the money demands, exclusive
only of interest and costs, irrespective of whether or not the separate claims are owned by or due to
different parties. If any demand is for damages in a civil action, the amount thereof must be specifically
alleged.

Petitioner compares the above-quoted provisions with the pertinent portion of the former rule under
Section 88 of the Judiciary Act of 1948 as amended which reads as follows:

... Where there are several claims or causes of action between the same parties embodied in the same
complaint, the amount of the demand shall be the totality of the demand in all the causes of action,
irrespective of whether the causes of action arose out of the same or different transactions; but where
the claims or causes of action joined in a single complaint are separately owned by or due to different
parties, each separate claim shall furnish the jurisdictional test. ...

and argues that with the deletion of the proviso in the former rule, the totality rule was reduced to
clarity and brevity and the jurisdictional test is the totality of the claims in all, not in each, of the
causes of action, irrespective of whether the causes of action arose out of the same or different
transactions.

This argument is partly correct. There is no difference between the former and present rules in cases
where a plaintiff sues a defendant on two or more separate causes of action. In such cases, the amount
of the demand shall be the totality of the claims in all the causes of action irrespective of whether the
causes of action arose out of the same or different transactions. If the total demand exceeds twenty
thousand pesos, then the regional trial court has jurisdiction. Needless to state, if the causes of action
are separate and independent, their joinder in one complaint is permissive and not mandatory, and any
cause of action where the amount of the demand is twenty thousand pesos or less may be the subject
of a separate complaint filed with a metropolitan or municipal trial court.

On the other hand, there is a difference between the former and present rules in cases where two or
more plaintiffs having separate causes of action against a defendant join in a single complaint. Under
the former rule, "where the claims or causes of action joined in a single complaint are separately owned
by or due to different parties, each separate claim shall furnish the jurisdictional test" (Section 88 of the
Judiciary Act of 1948 as amended, supra). This was based on the ruling in the case of Vda. de Rosario vs.
Justice of the Peace, 99 Phil. 693. As worded, the former rule applied only to cases of permissive
joinder of parties plaintiff. However, it was also applicable to cases of permissive joinder of parties
defendant, as may be deduced from the ruling in the case of Brillo vs. Buklatan, thus:

Furthermore, the first cause of action is composed of separate claims against several defendants
of different amounts each of which is not more than P2,000 and falls under the jurisdiction of
the justice of the peace court under section 88 of Republic Act No, 296. The several claims do
not seem to arise from the same transaction or series of transactions and there seem to be no
questions of law or of fact common to all the defendants as may warrant their joinder under
Rule 3, section 6. Therefore, if new complaints are to be filed in the name of the real party in
interest they should be filed in the justice of the peace court. (87 Phil. 519, 520, reiterated in
Gacula vs. Martinez, 88 Phil. 142, 146)

Under the present law, the totality rule is applied also to cases where two or more plaintiffs having
separate causes of action against a defendant join in a single complaint, as well as to cases where a
plaintiff has separate causes of action against two or more defendants joined in a single complaint.
However, the causes of action in favor of the two or more plaintiffs or against the two or more
defendants should arise out of the same transaction or series of transactions and there should be a
common question of law or fact, as provided in Section 6 of Rule 3.

The difference between the former and present rules in cases of permissive joinder of parties may be
illustrated by the two cases which were cited in the case of Vda. de Rosario vs. Justice of the Peace
(supra) as exceptions to the totality rule. In the case of Soriano y Cia vs. Jose (86 Phil. 523), where
twenty-nine dismissed employees joined in a complaint against the defendant to collect their respective
claims, each of which was within the jurisdiction of the municipal court although the total exceeded the
jurisdictional amount, this Court held that under the law then the municipal court had jurisdiction. In
said case, although the plaintiffs' demands were separate, distinct and independent of one another,
their joint suit was authorized under Section 6 of Rule 3 and each separate claim furnished the
jurisdictional test. In the case of International Colleges, Inc. vs. Argonza (90 Phil. 470), where twenty-
five dismissed teachers jointly sued the defendant for unpaid salaries, this Court also held that the
municipal court had jurisdiction because the amount of each claim was within, although the total
exceeded, its jurisdiction and it was a case of permissive joinder of parties plaintiff under Section 6 of
Rule 3.

Under the present law, the two cases above cited (assuming they do not fall under the Labor Code)
would be under the jurisdiction of the regional trial court. Similarly, in the abovecited cases of Brillo vs.
Buklatan and Gacula vs. Martinez (supra), if the separate claims against the several defendants arose
out of the same transaction or series of transactions and there is a common question of law or fact,
they would now be under the jurisdiction of the regional trial court.

In other words, in cases of permissive joinder of parties, whether as plaintiffs or as defendants, under
Section 6 of Rule 3, the total of all the claims shall now furnish the jurisdictional test. Needless to state
also, if instead of joining or being joined in one complaint separate actions are filed by or against the
parties, the amount demanded in each complaint shall furnish the jurisdictional test.

In the case at bar, the lower court correctly held that the jurisdictional test is subject to the rules on
joinder of parties pursuant to Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Court and that,
after a careful scrutiny of the complaint, it appears that there is a misjoinder of parties for the reason
that the claims against respondents Binongcal and Calion are separate and distinct and neither of which
falls within its jurisdiction.

Genesis Investment v. Heirs of Ebarasabal, G.R. No. 181622, November 20, 2013
FACTS: Respondents are heirs and successors-in-interest of deceased Roman Ebarsabal who died on 07
September 1952 leaving a parcel of land located in Basdaku, Saavedra, Moalboal, Cebu with a total
assessed value of P11,990.00. However, one child, Gil Ebarsabal and his children had executed among
themselves a Deed of Extrajudicial Settlement with Sale of Roman Ebarsabal's entire property described
above, by virtue of which they allegedly extrajudicially settled the same and, for P2,600,000.00 –
although only the sum of P950,000.00 was reflected in their Deed of Sale for reason only known to
them, they sold the whole property to defendants Genesis Investment Inc. represented by co-defendant
Rhodora B. Lim, the wife of Lambert Lim, without the knowledge of the other heirs. Genesis had the
titles registered to Cebu Jaya Realty.

On November 12, 2003, herein respondents filed against herein petitioners a Complaint3 for Declaration
of Nullity of Documents, Recovery of Shares, Partition, Damages and Attorney's Fees. The Complaint was
filed with the Regional Trial Court (RTC) of Barili, Cebu.

On August 5, 2004, herein petitioners filed a Motion to Dismiss4 contending, among others, that the RTC
has no jurisdiction to try the case on the ground that, as the case involves title to or possession of real
property or any interest therein and since the assessed value of the subject property does not exceed
P20,000.00 (the same being only P11,990.00), the action falls within the jurisdiction of the Municipal
Trial Court (MTC).5

In its Order6 dated September 29, 2004, the RTC granted petitioners' Motion to Dismiss.

Respondents filed a Motion for Partial Reconsideration, arguing that their complaint consists of several
causes of action, including one for annulment of documents, which is incapable of pecuniary estimation
and, as such, falls within the jurisdiction of the RTC.9

On March 17, 2005, the RTC issued an Order granting respondents' Motion for Partial Reconsideration
and reversing its earlier Order dated September 29, 2004.
Petitioners filed a Motion for Reconsideration,11 but the RTC denied it in its Order dated June 23, 2005.

Aggrieved, petitioners filed a petition for certiorari with the CA. However, the CA dismissed the petition
via its assailed Decision dated July 11, 2007, holding that the subject matter of respondents' complaint is
incapable of pecuniary estimation and, therefore, within the jurisdiction of the RTC, considering that the
main purpose in filing the action is to declare null and void the documents assailed therein.12

Petitioners' Motion for Reconsideration was, subsequently, denied in the CA Resolution dated January
10, 2008.

Hence, the instant petition for review on certiorari raising the sole issue, to wit:

ISSUE: Whether or not the Honorable Court of Appeals gravely erred in concluding that the Regional
Trial Court, Branch 60 of Barili, Cebu has jurisdiction over the instant case when the ALLEGATIONS IN
THE COMPLAINT clearly shows that the main cause of action of the respondents is for the Recovery of
their Title, Interest, and Share over a Parcel of Land, which has an assessed value of P11,990.00 and
thus, within the jurisdiction of the Municipal Trial Court

HELD:

It is true that one of the causes of action of respondents pertains to the title, possession and interest of
each of the contending parties over the contested property, the assessed value of which falls within the
jurisdiction of the MTC. However, a complete reading of the complaint would readily show that, based
on the nature of the suit, the allegations therein, and the reliefs prayed for, the action is within the
jurisdiction of the RTC.

As stated above, it is clear from the records that respondents' complaint was for "Declaration of Nullity
of Documents, Recovery of Shares, Partition, Damages and Attorney's Fees." In filing their Complaint
with the RTC, respondents sought to recover ownership and possession of their shares in the disputed
parcel of land by questioning the due execution and validity of the Deed of Extrajudicial Settlement with
Sale as well as the Memorandum of Agreement entered into by and between some of their co-heirs and
herein petitioners. Aside from praying that the RTC render judgment declaring as null and void the said
Deed of Extrajudicial Settlement with Sale and Memorandum of Agreement, respondents likewise
sought the following: (1) nullification of the Tax Declarations subsequently issued in the name of
petitioner Cebu Jaya Realty, Inc.; (2) partition of the property in litigation; (3) reconveyance of their
respective shares; and (3) payment of moral and exemplary damages, as well as attorney's fees, plus
appearance fees.1âwphi1

Clearly, this is a case of joinder of causes of action which comprehends more than the issue of partition
of or recovery of shares or interest over the real property in question but includes an action for
declaration of nullity of contracts and documents which is incapable of pecuniary estimation.15

As cited by the CA, this Court, in the case of Singson v. Isabela Sawmill,16 held that:

In determining whether an action is one the subject matter of which is not capable of pecuniary
estimation, this Court has adopted the criterion of first ascertaining the nature of the principal action
or remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable
of pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first
instance would depend on the amount of the claim. However, where the basic issue is something
other than the right to recover a sum of money, where the money claim is purely incidental to, or a
consequence of, the principal relief sought, this Court has considered such actions as cases where the
subject of the litigation may not be estimated in terms of money, and are cognizable by courts of first
instance [now Regional Trial Courts].17

This rule was reiterated in Russell v. Vestil18 and Social Security System v. Atlantic Gulf and Pacific
Company of Manila Inc.19

Contrary to petitioners contention, the principal relief sought by petitioners is the nullification of the
subject Extrajudicial Settlement with Sale entered into by and between some of their co-heirs and
respondents, insofar as their individual shares in the subject property are concerned. Thus, the
recovery of their undivided shares or interest over the disputed lot, which were included in the sale,
simply becomes a necessary consequence if the above deed is nullified. Hence, since the principal action
sought in respondents Complaint is something other than the recovery of a sum of money, the action is
incapable of pecuniary estimation and, thus, cognizable by the RTC.20 Well entrenched is the rule that
jurisdiction over the subject matter of a case is conferred by law and is determined by the allegations in
the complaint and the character of the relief sought, irrespective of whether the party is entitled to all
or some of the claims asserted.21

Moreover, it is provided under Section 5 (c), Rule 2 of the Rules of Court that where the causes of action
are between the same parties but pertain to different venues or jurisdictions, the joinder may be
allowed in the RTC provided one of the causes of action falls within the jurisdiction of said court and the
venue lies therein. Thus, as shown above, respondents complaint clearly falls within the jurisdiction of
the RTC.

Uniwide Holdings v. Cruz, G.R. No. 171456, August 9, 2007

FACTS: Petitioner, Uniwide Holdings, Inc. (UHI), whose principal office is located in Parañaque City,
entered into a Franchise Agreement[1] (the agreement) granting respondent, Alexander M. Cruz (Cruz),
a five-year franchise to adopt and use the “Uniwide Family Store System” for the establishment and
operation of a “Uniwide Family Store” along Marcos Highway, Sta. Cruz, Cogeo, Marikina City.

It appears that Cruz had purchased goods from UHI’s affiliated companies First Paragon
Corporation (FPC) and Uniwide Sales Warehouse Club, Inc. (USWCI).

In August 2002, FPC and USWCI executed Deeds of Assignment[4] in favor of UHI assigning all their
rights and interests over Cruz’s accounts payable to them.

As of August 13, 2002, Cruz had outstanding obligations with UHI, FPC, and USWCI in the total
amount of P1,358,531.89, drawing UHI to send him a letter of even date for the settlement thereof in
five days. His receipt of the letter notwithstanding, Cruz’s accounts remained unsettled.

Thus UHI filed a complaint[5] for collection of sum of money before the Regional Trial Court (RTC)
of Parañaque docketed as Civil Case No. 04-0278 against Cruz on the following causes of action: first,
damages for non-payment of the monthly service fee for the Uniwide franchise; second, damages as
assignee of FPC; third, damages as assignee of USCWI’s rights and fourth, litigation expenses and
attorney’s fees

To the complaint Cruz filed a motion to dismiss[7] on the ground of improper venue, he invoking Article
27.5 of the agreement which reads:

27.5 Venue Stipulation – The Franchisee consents to the exclusive jurisdiction of the courts of Quezon
City, the Franchisee waiving any other venue.[8] (Emphasis supplied)

Branch 258 of the Parañaque RTC, by Order[9] of December 12, 2005, granted Cruz’s motion to dismiss.

Hence, the present petition before this Court.

ISSUE: WHETHER A CASE BASED ON SEVERAL CAUSES OF ACTION IS DISMISSIBLE ON THE GROUND OF
IMPROPER VENUE WHERE ONLY ONE OF THE CAUSES OF ACTION ARISES FROM A CONTRACT WITH
EXCLUSIVE VENUE STIPULATION.[10]

HELD:

The petition is impressed with merit.

The general rule on venue of personal actions, as in petitioner’s complaint for collection of sum of
money, is embodied in Section 2, Rule 4 of the Rules of Court which provides:

Sec. 2. Venue of personal actions. – All other actions may be commenced and tried where the plaintiff or
any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides,
or in the case of a nonresident defendant, where he may be found, at the election of the plaintiff.
(Emphasis and underscoring supplied)

The afore-quoted provision is, however, qualified by Section 4 of the same rule which allows parties,
before the filing of the action, to validly agree in writing on an exclusive venue.[11]

The forging of a written agreement on an exclusive venue of an action does not, however, preclude
parties from bringing a case to other venues.

Where there is a joinder of causes of action between the same parties one of which does not arise out
of the contract where the exclusive venue was stipulated upon, the complaint, as in the one at bar, may
be brought before other venues provided that such other cause of action falls within the jurisdiction of
the court and the venue lies therein.[12]

Based on the allegations in petitioner’s complaint, the second and third causes of action are based on
the deeds of assignment executed in its favor by FPC and USWCI. The deeds bear no exclusive venue
stipulation with respect to the causes of action thereunder. Hence, the general rule on venue applies –
that the complaint may be filed in the place where the plaintiff or defendant resides.[13]

It bears emphasis that the causes of action on the assigned accounts are not based on a breach of the
agreement between UHI and Cruz. They are based on separate, distinct and independent contracts-
deeds of assignment in which UHI is the assignee of Cruz’s obligations to the assignors FPC and USWCI.
Thus, any action arising from the deeds of assignment cannot be subjected to the exclusive venue
stipulation embodied in the agreement. So San Miguel Corporation v. Monasterio[14] enlightens:

Exclusive venue stipulation embodied in a contract restricts or confines parties thereto

when the suit relates to breach of said contract. But where the exclusivity clause does not make it
necessarily encompassing, such that even those not related to the enforcement of the contract should
be subject to the exclusive venue, the stipulation designating exclusive venues should be strictly
confined to the specific undertaking or agreement. Otherwise, the basic principles of freedom to
contract might work to the great disadvantage of a weak party-suitor who ought to be allowed free
access to courts of justice.[15] (Emphasis and underscoring supplied)

In fine, since the other causes of action in petitioner’s complaint do not relate to a breach of the
agreement it forged with Cruz embodying the exclusive venue stipulation, they should not be subjected
thereto. As San Miguel further enlightens:

Restrictive stipulations are in derogation of the general policy of making it more

convenient for the parties to institute actions arising from or in relation to their agreements. Thus, the
restriction should be strictly construed as relating solely to the agreement for which the exclusive venue
stipulation is embodied. Expanding the scope of such limitation on a contracting party will create
unwarranted restrictions which the parties might find unintended or worse, arbitrary and
oppressive.[16] (Underscoring supplied)

Unicapital v. Consing, G.R. Nos. 175277 & 175285, September 11, 2013
FACTS: FACTS: The case are consolidated petitions.

Respondent Consing filed a Complex Action for Injunctive Relief against petitioners claiming that the
demands made against him by petitioners Unicapital and PBI to return to them the purchase price they
had paid for the subject property constituted harassment and oppression which severely affected his
personal and professional life. Consing claims for damages to the tune of around P2,000,000.00 per
month.

Petitioners filed a motion to dismiss for lack of cause of action. The RTC denied the motion to dismiss
holding that Consing, Jr.’s complaint sufficiently stated a cause of action for tort and damages pursuant
to Article 19 of the Civil Code. It equally refused to dismiss the action on the ground of non-payment of
docket fees, despite Consing, Jr.’s escalated claims for damages therein, as jurisdiction was already
vested in it upon the filing of the original complaint.

Aggrieved, petitioners elevated the denial of their motions to dismiss before the CA via a petition for
certiorari and prohibition which the CA dismissed. It ruled that while the payment of the prescribed
docket fee is a jurisdictional requirement, its non-payment will not automatically cause the dismissal of
the case. In this regard, it considered that should there be any deficiency in the payment of such fees,
the same shall constitute a lien on the judgment award. The CA also held that the complaint alleges a
cause of action and was principally one for damages over which the RTC has jurisdiction, and, in turn,
there lies no misjoinder of causes of action. Hence, the present petitions for review on certiorari in G.R.
Nos.175277 and 175285.

Meanwhile, on August 4, 1999, Unicapital filed a complaint for sum of money with damages against
Consing, Jr. and Dela Cruz before the RTC-Makati City seeking to recover (a) the amount of
P42,195,397.16, representing the value of their indebtedness based on the Promissory Notes (subject
promissory notes) plus interests; (b) P5,000,000.00 as exemplary damages; (c) attorney's fees; and (d)
costs of suit which Consing loaned from Unicapital. PBI also filed a complaint for damages and
attachment against Consing, Jr. and Dela Cruz before the RTC of Manila PBI prayed that it be allowed to
recover the following: (a) P13,369,641.79, representing the total amount of installment payments made
as actual damages plus interests; (b) P200,000.00 as exemplary damages; (c) P200,000.00 as moral
damages; (d) attorney's fees; and (e) costs of suit. For his part, Consing, Jr. filed a Motion to Dismiss and
motion to consolidate which were, however, denied by the RTC-Makati City.

On September 30, 2009, the CA rendered a Decision sustaining the Orders dated July 16, 2007 and
September 4, 2007 of the RTC-Makati City which denied Consing, Jr.’s motion for consolidation. It held
that consolidation is a matter of sound discretion on the part of the trial court which could be gleaned
from the use of the word "may" in Section 1, Rule38 of the Rules of Court. Hence, the instant petition

ISSUE: The essential issues in these cases are as follows: (a) in G.R. Nos.175277 and 175285, whether or
not the CA erred in upholding the RTC-Pasig City’s denial of Unicapital, et al.’s motion to dismiss; and (b)
in G.R. No. 192073, whether or not the CA erred in upholding the RTC-Makati City’s denial of Consing,
Jr.’s motion for consolidation.

HELD:

Consing properly alleged a cause of action for damages under Articles 19 and 26 of the Civil Code

A cause of action is defined as the act or omission by which a party violates a right of another.61 It is
well-settled that the existence of a cause of action is determined by the allegations in the complaint.62
In this relation, a complaint is said to sufficiently assert a cause of action if, admitting what appears
solely on its face to be correct, the plaintiff would be entitled to the relief prayed for.63 Thus, if the
allegations furnish adequate basis by which the complaint can be maintained, then the same should not
be dismissed, regardless of the defenses that may be averred by the defendants.64 As edified in the
case of Pioneer Concrete Philippines, Inc. v. Todaro,65 citing Hongkong and Shanghai Banking
Corporation, Limited. v. Catalan66 (HSBC):

The elementary test for failure to state a cause of action is whether the complaint alleges facts which if
true would justify the relief demanded. Stated otherwise, may the court render a valid judgment upon
the facts alleged therein? The inquiry is into the sufficiency, not the veracity of the material allegations.
If the allegations in the complaint furnish sufficient basis on which it can be maintained, it should not be
dismissed regardless of the defense that may be presented by the defendants.67 (Emphasis supplied)
Stated otherwise, the resolution on this matter should stem from an analysis on whether or not the
complaint is able to convey a cause of action; and not that the complainant has no cause of action. Lest
it be misunderstood, failure to state a cause of action is properly a ground for a motion to dismiss under
Section 1(g), Rule 1668 of the Rules of Court(Rules), while the latter is not a ground for dismissal under
the same rule.

In this case, the Court finds that Consing, Jr.’s complaint in SCA No.1759 properly states a cause of action
since the allegations there sufficiently bear out a case for damages under Articles 19 and 26 of the Civil
Code.

Records disclose that Consing, Jr.’s complaint contains allegations which aim to demonstrate the abusive
manner in which Unicapital and PBI, et al. enforced their demands against him. Among others, the
complaint states that Consing, Jr. "has constantly been harassed and bothered by Unicapital and PBI, et
al.; x x x besieged by phone calls from them; x x x has had constant meetings with them variously, and
on a continuing basis, such that he is unable to attend to his work as an investment banker."69 In the
same pleading, he also alleged that Unicapital and PBI, et al.’s act of "demanding a postdated check
knowing fully well that he does not have the necessary funds to cover the same, nor is he expecting to
have them is equivalent to asking him to commit a crime under unlawful coercive force."70 Accordingly,
these specific allegations, if hypothetically admitted, may result into the recovery of damages pursuant
to Article 19 of the Civil Code which states that "every person must, in the exercise of his rights and in
the performance of his duties, act with justice, give everyone his due, and observe honesty and good
faith." As explained in the HSBC case:

When a right is exercised in a manner which does not conform with the norms enshrined in Article 19
and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must
beheld responsible. But a right, though by itself legal because it is recognized or granted by law as such,
may nevertheless become the source of some illegality. A person should be protected only when he acts
in the legitimate exercise of his right, that is, when he acts with prudence and in good faith; but not
when he acts with negligence or abuse. There is an abuse of right when it is exercised for the only
purpose of prejudicing or injuring another. The exercise of a right must be in accordance with the
purpose for which it was established, and must not be excessive or unduly harsh; there must be no
intention to injure another.71 (Emphasis supplied)

Likewise, Consing, Jr.’s complaint states a cause of action for damages under Article 26 of the Civil Code
which provides that:

Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors
and other persons. The following and similar acts, though they may not constitute a criminal offense,
shall produce a cause of action for damages, prevention and other relief:

(1) Prying into the privacy of another's residence;

(2) Meddling with or disturbing the private life or family relations of another;
(3) Intriguing to cause another to be alienated from his friends;

(4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth,
physical defect, or other personal condition.

The rationale therefor was explained in the case of Manaloto v. Veloso III,72 citing Concepcion v. CA,73
to wit:

The philosophy behind Art. 26 underscores the necessity for its inclusion in our civil law. The Code
Commission stressed in no uncertain terms that the human personality must be exalted. The sacredness
of human personality is a concomitant consideration of every plan for human amelioration. The
touchstone of every system of law, of the culture and civilization of every country, is how far it dignifies
man. If the statutes insufficiently protect a person from being unjustly humiliated, in short, if human
personality is not exalted - then the laws are indeed defective. Thus, under this article, the rights of
persons are amply protected, and damages are provided for violations of a person's dignity, personality,
privacy and peace of mind.74

To add, a violation of Article 26 of the Civil Code may also lead to the payment of moral damages under
Article 2219(10)75 of the Civil Code.

No misjoinder of cause of action

Further, so as to obviate any confusion on the matter, the Court equally finds that the causes of action
in SCA No. 1759 were not – as Unicapital, et al. claim – misjoined even if Consing, Jr. averred that
Unicapital and PBI, et al. violated certain provisions of the Corporation Law and the Revised Securities
Act.80

The rule is that a party’s failure to observe the following conditions under Section 5, Rule 2 of the Rules
results in a misjoinder of causes of action:81

SEC. 5. Joinder of causes of action . - A party may in one pleading assert, in the alternative or otherwise,
as many causes of action as he may have against an opposing party, subject to the following conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of parties;

(b) The joinder shall not include special civil actions governed by special rules;

(c) Where the causes of action are between the same parties but pertain to different venues or
jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action
falls within the jurisdiction of said court and the venue lies therein; and

(d) Where the claims in all the causes of action are principally for recovery of money the aggregate
amount claimed shall be the test of jurisdiction. (Emphasis supplied)

A careful perusal of his complaint discloses that Consing, Jr. did not seek to hold Unicapital and PBI, et al.
liable for any specific violation of the Corporation Code or the Revised Securities Act. Rather, he merely
sought damages for Unicapital and PBI, et al.’s alleged acts of making him sign numerous documents
and their use of the same against him. In this respect, Consing, Jr. actually advances an injunction and
damages case82 which properly falls under the jurisdiction of the RTC-Pasig City.83 Therefore, there was
no violation of Section 5, Rule 2 of the Rules, particularly, paragraph (c) thereof. Besides, even on the
assumption that there was a misjoinder of causes of action, still, such defect should not result in the
dismissal of Consing, Jr.’s complaint. Section 6, Rule 2 of the Rules explicitly states that a "misjoinder of
causes of action is not a ground for dismissal of an action" and that "a misjoined cause of action may, on
motion of a party or on the initiative of the court, be severed and proceeded with separately."

Iniego v. Hon. Purganan, G.R. No. 166876, March 24, 2006

FACTS: On 1 March 2002, private respondent Fokker Santos filed a complaint for quasi-delict and
damages at the RTC, Branch 42, Manila against Jimmy T. Pinion, the driver of a truck involved in a traffic
accident, and against petitioner Artemio Iniego, as owner of the said truck and employer of Pinion. The
complaint stemmed from a vehicular accident that happened on 11 December 1999, when a freight
truck allegedly being driven by Pinion hit private respondent’s jitney which private respondent was
driving at the time of the accident.

Iniego challenged the jurisdiction of the RTC in a motion to dismiss which was denied by respondent
Judge Purganan because the court has exclusive jurisdiction when the claim for damages exceeds
P400,000.00 and the cause of action is based on a quasi-delict which is incapable of pecuniary
estimation. The complaint prays for actual damages in the amount of P40,000.00, moral damages in the
amount of P300,000.00, and exemplary damages in the amount of P150,000.00. Excluding attorney’s
fees in the amount of P50,000.00, the total amount of damages being claimed is P490,000.00.

On 7 November 2002, petitioner filed a Motion for Reconsideration of the Omnibus Order of 21 October
2002. On 21 January 2003, public respondent issued an Order denying petitioner’s motion for
reconsideration reiterating that what the RTC referred to in its assailed Order as not capable of
pecuniary estimation is the cause of action, which is a quasi-delict, and not the amount of damage
prayed for.

Petitioner elevated the 21 October 2002 and 21 January 2003 Orders of the RTC to the Court of Appeals
on petition for certiorari under Rule 65 of the Rules of Court. On 28 October 2004, the Court of Appeals
promulgated the assailed Decision denying petitioner’s certiorari.

Iniego argues that actions for damages based on quasi-delict are actions that are capable of pecuniary
estimation and that the moral and exemplary damages claimed by private respondent must be excluded
from the computation of the total amount of damages for jurisdictional purposes because the said
moral and exemplary damages arose, not from the quasi-delict, but from the petitioner’s refusal to pay
the actual damages. If the moral and exemplary damages are not excluded, then it would be the MTC
who would have jurisdiction over the case since actual damages claimed is only 40,000.

ISSUE: WON actions arising from quasi delict are capable of pecuniary estimation and WON actual and
exemplary damages should be excluded from the computation

HELD:
Actions for damages based on quasi-delicts are primarily and effectively actions for the recovery of a
sum of money for the damages suffered because of the defendant’s alleged tortious acts, and are
therefore capable of pecuniary estimation.

In a recent case,[6] we did affirm the jurisdiction of a Municipal Circuit Trial Court in actions for damages
based on quasi-delict, although the ground used to challenge said jurisdiction was an alleged forum
shopping, and not the applicability of Section 19(1) of Batas Pambansa Blg. 129.

Respondent Judge’s observation is erroneous. It is crystal clear from B.P. Blg. 129, as amended by
Republic Act No. 7691, that what must be determined to be capable or incapable of pecuniary
estimation is not the cause of action, but the subject matter of the action.[9] A cause of action is “the
delict or wrongful act or omission committed by the defendant in violation of the primary rights of the
plaintiff.”[10] On the other hand, the “subject matter of the action” is “the physical facts, the thing real
or personal, the money, lands, chattels, and the like, in relation to which the suit is prosecuted, and not
the delict or wrong committed by the defendant.”[11]

The case of Lapitan v. Scandia, Inc., et al.,[12] has guided this Court time and again in determining
whether the subject matter of the action is capable of pecuniary estimation. In Lapitan, the Court spoke
through the eminent Mr. Justice Jose B.L. Reyes:

In determining whether an action is one the subject matter of which is not capable of pecuniary
estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or
remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of
pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance
[now Regional Trial Courts] would depend on the amount of the claim. However, where the basic issue is
something other than the right to recover a sum of money, where the money claim is purely incidental
to, or a consequence of, the principal relief sought like suits to have the defendant perform his part of
the contract (specific performance) and in actions for support, or for annulment of a judgment or to
foreclose a mortgage, this court has considered such actions as cases where the subject of the litigation
may not be estimated in terms of money, and are cognizable exclusively by courts of first instance [now
Regional Trial Courts]. x x x.[13] (Emphasis supplied.)

Actions for damages based on quasi-delicts are primarily and effectively actions for the recovery of a
sum of money for the damages suffered because of the defendant’s alleged tortious acts. The damages
claimed in such actions represent the monetary equivalent of the injury caused to the plaintiff by the
defendant, which are thus sought to be recovered by the plaintiff. This money claim is the principal
relief sought, and is not merely incidental thereto or a consequence thereof. It bears to point out that
the complaint filed by private respondent before the RTC actually bears the caption “for DAMAGES.”

Fault or negligence, which the Court of Appeals claims is not capable of pecuniary estimation, is not
actionable by itself. For such fault or negligence to be actionable, there must be a resulting damage to a
third person. The relief available to the offended party in such cases is for the reparation, restitution, or
payment of such damage, without which any alleged offended party has no cause of action or relief. The
fault or negligence of the defendant, therefore, is inextricably intertwined with the claim for damages,
and there can be no action based on quasi-delict without a claim for damages.
We therefore rule that the subject matter of actions for damages based on quasi-delict is capable of
pecuniary estimation.

The amount of damages claimed is within the jurisdiction of the RTC, since it is the claim for all kinds of
damages that is the basis of determining the jurisdiction of courts, whether the claims for damages arise
from the same or from different causes of action.

Despite our concurrence in petitioner’s claim that actions for damages based on quasi-delict are actions
that are capable of pecuniary estimation, we find that the total amount of damages claimed by the
private respondent nevertheless still exceeds the jurisdictional limit of P400,000.00 and remains under
the jurisdiction of the RTC.

Petitioner argues that in actions for damages based on quasi-delict, claims for damages arising from a
different cause of action (i.e., other than the fault or negligence of the defendant) should not be
included in the computation of the jurisdictional amount. According to petitioner, the moral and
exemplary damages claimed by the respondents in the case at bar are not direct and proximate
consequences of the alleged negligent act. Petitioner points out that the complaint itself stated that
such moral and exemplary damages arose from the alleged refusal of defendants to honor the demand
for damages, and therefore there is no reasonable cause and effect between the fault or negligence of
the defendant and the claim for moral and exemplary damages.[14] If the claims for moral and
exemplary damages are not included in the computation for purposes of determining jurisdiction, only
the claim for actual damages in the amount of P40,000.00 will be considered, and the MeTC will have
jurisdiction.

We cannot give credence to petitioner’s arguments. The distinction he made between damages arising
directly from injuries in a quasi-delict and those arising from a refusal to admit liability for a quasi-delict
is more apparent than real, as the damages sought by respondent originate from the same cause of
action: the quasi-delict. The fault or negligence of the employee and the juris tantum presumption of
negligence of his employer in his selection and supervision are the seeds of the damages claimed,
without distinction.

Even assuming, for the sake of argument, that the claims for moral and exemplary damages arose from
a cause of action other than the quasi-delict, their inclusion in the computation of damages for
jurisdictional purposes is still proper. All claims for damages should be considered in determining the
jurisdiction of the court regardless of whether they arose from a single cause of action or several causes
of action. Rule 2, Section 5, of the Rules of Court allows a party to assert as many causes of action as he
may have against the opposing party. Subsection (d) of said section provides that where the claims in all
such joined causes of action are principally for recovery of money, the aggregate amount claimed shall
be the test of jurisdiction.[15]

Hence, whether or not the different claims for damages are based on a single cause of action or
different causes of action, it is the total amount thereof which shall govern. Jurisdiction in the case at
bar remains with the RTC, considering that the total amount claimed, inclusive of the moral and
exemplary damages claimed, is P490,000.00.

In sum, actions for damages based on quasi-delicts are actions that are capable of pecuniary estimation.
As such, they fall within the jurisdiction of either the RTC or the municipal courts, depending on the
amount of damages claimed. In this case, the amount of damages claimed is within the jurisdiction of
the RTC, since it is the claim for all kinds of damages that is the basis of determining the jurisdiction of
courts, whether the claims for damages arise from the same or from different causes of action.

Sec. 6, Rules of Procedure on Small Claims (A.M. 08-8-7-SC, October 27, 2009)
SEC. 6. Joinder of Claims.—Plaintiff may join in a single statement of claim one or more separate small
claims against a defendant provided that the total amount claimed, exclusive of interest and costs, does
not exceed P100,000.00.

Sec. 6. Misjoinder of causes of action

Section 6. Misjoinder of causes of action. — Misjoinder of causes of action is not a ground for dismissal
of an action. A misjoined cause of action may, on motion of a party or on the initiative of the court, be
severed and proceeded with separately. (n)

Ada v. Baylon, G.R. No. 182435, August 13, 2012 (Supra.)

FACTS: On July 3, 1996, the petitioners filed with the RTC a Complaint4 for partition, accounting and
damages against Florante, Rita and Panfila. The parties are either the heirs or successors-in-interest of
the Baylon siblings who are the heirs of the estate of spouses Florentino Baylon and Maximina Elnas
Baylon.

The petition alleged therein that Spouses Baylon, during their lifetime, owned 43 parcels of land5 all
situated in Negros Oriental. After the death of Spouses Baylon, they claimed that Rita took possession of
the said parcels of land and appropriated for herself the income from the same. Using the income
produced by the said parcels of land, Rita allegedly purchased two parcels of land, Lot No. 47096 and
half of Lot No. 4706,7 situated in Canda-uay, Dumaguete City. The petitioners averred that Rita refused
to effect a partition of the said parcels of land.

In their Answer, Florante, Rita and Panfila asserted that they and the petitioners co-owned 22 out of the
43 parcels of land mentioned in the latter’s complaint, whereas Rita actually owned 10 parcels of land
out of the 43 parcels which the petitioners sought to partition, while the remaining 11 parcels of land
are separately owned by other siblings and relatives.

During the pendency of the case, Rita, through a Deed of Donation dated July 6, 1997, conveyed Lot No.
4709 and half of Lot No. 4706 to Florante. On July 16, 2000, Rita died intestate and without any issue.
Thereafter, learning of the said donation inter vivos in favor of Florante, the petitioners filed a
Supplemental Pleading17 dated February 6, 2002, praying that the said donation in favor of the
respondent be rescinded in accordance with Article 1381(4) of the Civil Code. They further alleged that
Rita was already sick and very weak when the said Deed of Donation was supposedly executed and,
thus, could not have validly given her consent thereto.

Florante and Panfila opposed the rescission of the said donation, asserting that Article 1381(4) of the
Civil Code applies only when there is already a prior judicial decree on who between the contending
parties actually owned the properties under litigation.18

The RTC Decision

On October 20, 2005, the RTC rendered a Decision ordering partition over the co-owned lots and that
declared that the death of Rita during the pendency of the case without any issue had rendered the
issue of ownership insofar as parcels of land which she claims as her own moot since the parties below
are the heirs to her estate. Thus, the RTC regarded Rita as the owner of the said 10 parcels of land and,
accordingly, directed that the same be partitioned among her heirs. Nevertheless, the RTC rescinded the
donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante.

Florante sought reconsideration of the Decision dated October 20, 2005 of the RTC insofar as it
rescinded the donation of Lot No. 4709 and half of Lot No. 4706 in his favor. He asserted that, at the
time of Rita’s death on July 16, 2000, Lot No. 4709 and half of Lot No. 4706 were no longer part of her
estate as the same had already been conveyed to him through a donation inter vivos three years earlier.

On July 28, 2006, the RTC issued an Order23 which denied the motion for reconsideration filed by
Florante.

The CA Decision

On appeal, the CA rendered a Decision dated October 26, 2007 reversing the rescission and remanding
the case to determine ownership of the donated lots holding that the rescission was premature in the
absence of a judicial decree that the contested lots were owned by the Spouses Baylon. The CA held
that an action for rescission should be filed by the parties concerned independent of the proceedings
below.

The petitioners sought reconsideration27 of the Decision dated October 26, 2007 but it was denied by
the CA in its Resolution28 dated March 6, 2008.

Hence, this petition.

ISSUE: whether the CA erred in ruling that the donation inter vivos of Lot No. 4709 and half of Lot No.
4706 in favor of Florante may only be rescinded if there is already a judicial determination that the same
actually belonged to the estate of Spouses Baylon.

HELD:
Procedural Matters

Before resolving the lone substantive issue in the instant case, this Court deems it proper to address
certain procedural matters that need to be threshed out which, by laxity or otherwise, were not raised
by the parties herein.

Misjoinder of Causes of Action

The complaint filed by the petitioners with the RTC involves two separate, distinct and independent
actions – partition and rescission. First, the petitioners raised the refusal of their co-heirs, Florante, Rita
and Panfila, to partition the properties which they inherited from Spouses Baylon. Second, in their
supplemental pleading, the petitioners assailed the donation inter vivos of Lot No. 4709 and half of Lot
No. 4706 made by Rita in favor of Florante pendente lite.

The actions of partition and

rescission cannot be joined in a
single action.

By a joinder of actions, or more properly, a joinder of causes of action is meant the uniting of two or
more demands or rights of action in one action, the statement of more than one cause of action in a
declaration. It is the union of two or more civil causes of action, each of which could be made the basis
of a separate suit, in the same complaint, declaration or petition. A plaintiff may under certain
circumstances join several distinct demands, controversies or rights of action in one declaration,
complaint or petition.29

The objectives of the rule or provision are to avoid a multiplicity of suits where the same parties and
subject matter are to be dealt with by effecting in one action a complete determination of all matters in
controversy and litigation between the parties involving one subject matter, and to expedite the
disposition of litigation at minimum cost. The provision should be construed so as to avoid such
multiplicity, where possible, without prejudice to the rights of the litigants.30

Nevertheless, while parties to an action may assert in one pleading, in the alternative or otherwise, as
many causes of action as they may have against an opposing party, such joinder of causes of action is
subject to the condition, inter alia, that the joinder shall not include special civil actions governed by
special rules.31

Here, there was a misjoinder of causes of action. The action for partition filed by the petitioners could
not be joined with the action for the rescission of the said donation inter vivos in favor of Florante. Lest
it be overlooked, an action for partition is a special civil action governed by Rule 69 of the Rules of Court
while an action for rescission is an ordinary civil action governed by the ordinary rules of civil procedure.
The variance in the procedure in the special civil action of partition and in the ordinary civil action of
rescission precludes their joinder in one complaint or their being tried in a single proceeding to avoid
confusion in determining what rules shall govern the conduct of the proceedings as well as in the
determination of the presence of requisite elements of each particular cause of action.32

A misjoined cause of action, if not

severed upon motion of a party or
by the court sua sponte, may be
adjudicated by the court together
with the other causes of action.

Nevertheless, misjoinder of causes of action is not a ground for dismissal. Indeed, the courts have the
power, acting upon the motion of a party to the case or sua sponte, to order the severance of the
misjoined cause of action to be proceeded with separately.33 However, if there is no objection to the
improper joinder or the court did not motu proprio direct a severance, then there exists no bar in the
simultaneous adjudication of all the erroneously joined causes of action. On this score, our disquisition
in Republic of the Philippines v. Herbieto34 is instructive, viz:

This Court, however, disagrees with petitioner Republic in this regard. This procedural lapse committed
by the respondents should not affect the jurisdiction of the MTC to proceed with and hear their
application for registration of the Subject Lots.

xxxx
Considering every application for land registration filed in strict accordance with the Property
Registration Decree as a single cause of action, then the defect in the joint application for registration
filed by the respondents with the MTC constitutes a misjoinder of causes of action and parties. Instead
of a single or joint application for registration, respondents Jeremias and David, more appropriately,
should have filed separate applications for registration of Lots No. 8422 and 8423, respectively.

Misjoinder of causes of action and parties do not involve a question of jurisdiction of the court to hear
and proceed with the case. They are not even accepted grounds for dismissal thereof. Instead, under the
Rules of Court, the misjoinder of causes of action and parties involve an implied admission of the court’s
jurisdiction. It acknowledges the power of the court, acting upon the motion of a party to the case or on
its own initiative, to order the severance of the misjoined cause of action, to be proceeded with
separately (in case of misjoinder of causes of action); and/or the dropping of a party and the severance
of any claim against said misjoined party, also to be proceeded with separately (in case of misjoinder of
parties).35 (Citations omitted)

It should be emphasized that the foregoing rule only applies if the court trying the case has jurisdiction
over all of the causes of action therein notwithstanding the misjoinder of the same. If the court trying
the case has no jurisdiction over a misjoined cause of action, then such misjoined cause of action has to
be severed from the other causes of action, and if not so severed, any adjudication rendered by the
court with respect to the same would be a nullity.

Here, Florante posed no objection, and neither did the RTC direct the severance of the petitioners’
action for rescission from their action for partition. While this may be a patent omission on the part of
the RTC, this does not constitute a ground to assail the validity and correctness of its decision. The RTC
validly adjudicated the issues raised in the actions for partition and rescission filed by the petitioners.

Asserting a New Cause of Action in a Supplemental Pleading

In its Decision dated October 26, 2007, the CA pointed out that the said action for rescission should have
been filed by the petitioners independently of the proceedings in the action for partition. It opined that
the action for rescission could not be lumped up with the action for partition through a mere
supplemental pleading.

We do not agree.

A supplemental pleading may raise

a new cause of action as long as it
has some relation to the original
cause of action set forth in the
original complaint.

Section 6, Rule 10 of the Rules of Court reads:

Sec. 6. Supplemental Pleadings. – Upon motion of a party the court may, upon reasonable notice and
upon such terms as are just, permit him to serve a supplemental pleading setting forth transactions,
occurrences or events which have happened since the date of the pleading sought to be supplemented.
The adverse party may plead thereto within ten (10) days from notice of the order admitting the
supplemental pleading.

In Young v. Spouses Sy,36 this Court had the opportunity to elucidate on the purpose of a supplemental
pleading. Thus:

As its very name denotes, a supplemental pleading only serves to bolster or add something to the
primary pleading. A supplement exists side by side with the original. It does not replace that which it
supplements. Moreover, a supplemental pleading assumes that the original pleading is to stand and that
the issues joined with the original pleading remained an issue to be tried in the action. It is but a
continuation of the complaint. Its usual office is to set up new facts which justify, enlarge or change the
kind of relief with respect to the same subject matter as the controversy referred to in the original
complaint.

The purpose of the supplemental pleading is to bring into the records new facts which will enlarge or
change the kind of relief to which the plaintiff is entitled; hence, any supplemental facts which further
develop the original right of action, or extend to vary the relief, are available by way of supplemental
complaint even though they themselves constitute a right of action.37 (Citations omitted and emphasis
ours)

Thus, a supplemental pleading may properly allege transactions, occurrences or events which had
transpired after the filing of the pleading sought to be supplemented, even if the said supplemental
facts constitute another cause of action.

Admittedly, in Leobrera v. Court of Appeals,38 we held that a supplemental pleading must be based on
matters arising subsequent to the original pleading related to the claim or defense presented therein,
and founded on the same cause of action. We further stressed therein that a supplemental pleading
may not be used to try a new cause of action.

However, in Planters Development Bank v. LZK Holdings and Development Corp.,39 we clarified that,
while a matter stated in a supplemental complaint should have some relation to the cause of action set
forth in the original pleading, the fact that the supplemental pleading technically states a new cause of
action should not be a bar to its allowance but only a matter that may be considered by the court in the
exercise of its discretion. In such cases, we stressed that a broad definition of "cause of action" should
be applied.

Here, the issue as to the validity of the donation inter vivos of Lot No. 4709 and half of Lot No. 4706
made by Rita in favor of Florante is a new cause of action that occurred after the filing of the original
complaint. However, the petitioners’ prayer for the rescission of the said donation inter vivos in their
supplemental pleading is germane to, and is in fact, intertwined with the cause of action in the partition
case. Lot No. 4709 and half of Lot No. 4706 are included among the properties that were sought to be
partitioned.

The petitioners’ supplemental pleading merely amplified the original cause of action, on account of the
gratuitous conveyance of Lot No. 4709 and half of Lot No. 4706 after the filing of the original complaint
and prayed for additional reliefs, i.e., rescission. Indeed, the petitioners claim that the said lots form part
of the estate of Spouses Baylon, but cannot be partitioned unless the gratuitous conveyance of the same
is rescinded. Thus, the principal issue raised by the petitioners in their original complaint remained the
same.

RULE 3
Sec. 1. Who may be parties; plaintiff and defendant

Art. 44, Civil Code

Article 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose, created by law; their
personality begins as soon as they have been constituted according to law;

(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a
juridical personality, separate and distinct from that of each shareholder, partner or member.

Arts. 1772 & 1768, Civil Code

Article 1768. The partnership has a juridical personality separate and distinct from that of each of the
partners, even in case of failure to comply with the requirements of article 1772, first paragraph.

Article 1772. Every contract of partnership having a capital of three thousand pesos or more, in money
or property, shall appear in a public instrument, which must be recorded in the Office of the Securities
and Exchange Commission.

Secs. 21 & 122, Corporation Code

Section 21. Corporation by estoppel. – All persons who assume to act as a corporation knowing it to be
without authority to do so shall be liable as general partners for all debts, liabilities and damages
incurred or arising as a result thereof: Provided, however, That when any such ostensible corporation is
sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not
be allowed to use as a defense its lack of corporate personality.

On who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof
on the ground that there was in fact no corporation. (n)

Section 122. Corporate liquidation. – Every corporation whose charter expires by its own limitation or is
annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in
any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time
when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against
it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its
assets, but not for the purpose of continuing the business for which it was established.

At any time during said three (3) years, the corporation is authorized and empowered to convey all of its
property to trustees for the benefit of stockholders, members, creditors, and other persons in interest.
From and after any such conveyance by the corporation of its property in trust for the benefit of its
stockholders, members, creditors and others in interest, all interest which the corporation had in the
property terminates, the legal interest vests in the trustees, and the beneficial interest in the
stockholders, members, creditors or other persons in interest.

Upon the winding up of the corporate affairs, any asset distributable to any creditor or stockholder or
member who is unknown or cannot be found shall be escheated to the city or municipality where such
assets are located.

Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall
distribute any of its assets or property except upon lawful dissolution and after payment of all its debts
and liabilities. (77a, 89a, 16a)

Art. 242 (3), Labor Code

Article 242. Rights of legitimate labor organizations. A legitimate labor organization shall have the right:

To act as the representative of its members for the purpose of collective bargaining;

To be certified as the exclusive representative of all the employees in an appropriate bargaining unit for
purposes of collective bargaining;

To be furnished by the employer, upon written request, with its annual audited financial statements,
including the balance sheet and the profit and loss statement, within thirty (30) calendar days from the
date of receipt of the request, after the union has been duly recognized by the employer or certified as
the sole and exclusive bargaining representative of the employees in the bargaining unit, or within sixty
(60) calendar days before the expiration of the existing collective bargaining agreement, or during the
collective bargaining negotiation;

To own property, real or personal, for the use and benefit of the labor organization and its members;

To sue and be sued in its registered name; and

To undertake all other activities designed to benefit the organization and its members, including
cooperative, housing, welfare and other projects not contrary to law.

Notwithstanding any provision of a general or special law to the contrary, the income and the properties
of legitimate labor organizations, including grants, endowments, gifts, donations and contributions they
may receive from fraternal and similar organizations, local or foreign, which are actually, directly and
exclusively used for their lawful purposes, shall be free from taxes, duties and other assessments. The
exemptions provided herein may be withdrawn only by a special law expressly repealing this provision.
(As amended by Section 17, Republic Act No. 6715, March 21, 1989)

-Estate of deceased (See: Limjoco v. Instestate Estate, G.R. No. L-770, April 27, 1948)
FACTS: Petiioner Limjoco opposed the application of respondent in the Public Service Commission. The
application is for a certificate of public convenience to install, maintain and operate an ice plant in San
Juan, Rizal by the Intestate Estate of the deceased Pedro Fragante. The Commission authorized said
Intestate Estate through its Special or Judicial Administrator, appointed by the proper court of
competent jurisdiction, to maintain and operate an ice plant.

The commission declared in its decision that his estate was financially able to maintain and operate the
ice plant. The aforesaid right of Pedro O. Fragante to prosecute said application to its final conclusion
was one which by its nature did not lapse through his death. Hence, it constitutes a part of the assets of
his estate, for such a right was property despite the possibility that in the end the commission might
have denied the application.

In his argument petitioner contends that it was error on the part of the commission to allow the
substitution of the legal representative of the estate of Pedro O. Fragante for the latter as party
applicant in the case then pending before the commission, and in subsequently granting to said estate
the certificate applied for, which is said to be in contravention of law.

ISSUE: WON the right to prosecute the application passes on to the estate; WON an estate is a person

HELD:

Rule 88, section 2, provides that the executor or administrator may bring or defend actions, among
other cases, for the protection of the property or rights of the deceased which survive, and it says that
such actions may be brought or defended "in the right of the deceased".

Rule 82, section 1, paragraph (a), mentions among the duties of the executor or administrator, the
making of an inventory of all goods, chattels, rights, credits, and estate of the deceased which shall
come to his possession or knowledge, or to the possession of any other person for him.

In his commentaries on the Rules of Court (Volume II, 2nd ed., pages 366, 367), the present Chief Justice
of this Court draws the following conclusion from the decisions cited by him:

"Therefore, unless otherwise expressly provided by law, any action affecting the property or rights of a
deceased person which may be brought by or against him if he were alive, may likewise be instituted
and prosecuted by or against the administrator, unless the action is for recovery of money, debt or
interest thereon, or unless, by its very nature, it cannot survive, because death extinguishes the right . .
.".

It is true that a proceeding upon an application for a certificate of public convenience before the Public
Service Commission is not an "action". But the foregoing provisions and citations go to prove that the
decedent's rights which by their nature are not extinguished by death go to make up a part and parcel of
the assets of his estate which, being placed under the control and management of the executor or
administrator, cannot be exercised but by him in representation of the estate for the benefit of the
creditors, devisees, or legatees, if any, and the heirs of the decedent. And if the right involved happens
to consist in the prosecution of an unfinished proceeding upon an application for a certificate of public
convenience of the deceased before the Public Service Commission, it is but logical that the legal
representative be empowered and entitled in behalf of the estate to make the right effective in that
proceeding.

Manresa (Vol. III, 6th ed., p. 11) says that No. 10 of article 334 and article 336 of the Civil Code,
respectively, consider as immovable and movable things rights which are not material. The same
eminent commentator says in the cited volume (p. 45) that article 336 of the Civil Code has been
deficiently drafted in that it is not sufficiently expressive of all incorporeal rights which are also property
for juridical purposes.

Corpus Juris (Vol. 50, p. 737) states that in the broad sense of the term, property includes, among other
things, "an option", and "the certificate of the railroad commission permitting the operation of a bus
line", and on page 748 of the same volume we read:

"However, these terms (real property, as estate or interest) have also been declared to include every
species of title, inchoate or complete, and embrace rights which lie in contract, whether executory or
executed."

Another important question raised by petitioner is whether the estate of Pedro O. Fragante is a
"person" within the meaning of the Public Service Act.

Words and Phrases, First Series, (Vol. 6, p. 5325), states the following doctrine in the jurisdiction of the
State of Indiana:

"As the estate of a decedent is in law regarded as a person, a forgery committed after the death of the
man whose name purports to be signed to the instrument may be prosecuted as with the intent to
defraud the estate. Billings vs. State, 107 Ind., 54, 55, 6 N. E. 914, 7 N. E. 763, 57 Am. Rep. 77."

The Supreme Court of Indiana in the decision cited above had before it a case of forgery committed
after the death of one Morgan for the purpose of defrauding his estate. The objection was urged that
the information did not aver that the forgery was committed with the intent to defraud any person. The
Court, per Elliott, J., disposed of this objection as follows:

". . . The reason advanced in support of this proposition is that the law does not regard the estate of a
decedent as a person. This intention (contention) cannot prevail. The estate of a decedent is a person in
legal contemplation. 'The word "person", says Mr. Abbot, 'in its legal signification, is a generic term, and
includes artificial as well as natural persons,' 2 Abb. Dict. 271; Douglas vs. Pacific, etc., Co., 4 Cal. 304;
Planters', etc., Bank vs. Andrews, 8 Port (Ala.) 404. It is said in another work that 'persons are of two
kinds: natural and artificial. A natural person is a human being. Artificial persons include (1) a collection
or succession of natural persons forming a corporation; (2) a collection of property to which the law
attributes the capacity of having rights and duties. The latter class of artificial persons is recognized only
to a limited extent in our law. Examples are the estate of a bankrupt or deceased person.' 2 Rapalje & L.
Law Dict. 954. Our own cases inferentially recognize the correctness of the definition given by the
authors from whom we have quoted, for they declare that it is sufficient, in pleading a claim against a
decedent's estate, to designate the defendant as the estate of the deceased person, naming him. Ginn
vs. Collins, 43 Ind. 271. Unless we accept this definition as correct, there would be a failure of justice in
cases where, as here, the forgery is committed after the death of the person whose name is forged; and
this is a result to be avoided if it can be done consistent with principle. We perceive no difficulty in
avoiding such a result; for, to our minds, it seems reasonable that the estate of a decedent should be
regarded as an artificial person. It is the creation of law for the purpose of enabling a disposition of the
assets to be properly made, and, although natural persons as heirs, devisees, or creditors, have an
interest in the property, the artificial creature is a distinct legal entity. The interest which natural
persons have in it is not complete until there has been a due administration; and one who forges the
name of the decedent to an instrument purporting to be a promissory note must be regarded as having
intended to defraud the estate of the decedent, and not the natural persons having diverse interests in
it, since he cannot be presumed to have known who those persons were, or what was the nature of
their respective interests. The fraudulent intent is against the artificial person, — the estate, — and not
the natural persons who have direct or contingent interests in it." (107 Ind. 54, 55, 6 N. E. 914-915.)

In the instant case there would also be a failure of justice unless the estate of Pedro O. Fragante is
considered a "person", for the quashing of the proceedings for no other reason than his death would
entail prejudicial results to his investment amounting to P35,000.00 as found by the commission, not
counting the expenses and disbursements which the proceeding can be presumed to have occasioned
him during his lifetime, let alone those defrayed by the estate thereafter. In this jurisdiction there are
ample precedents to show that the estate of a deceased person is also considered as having legal
personality independent of the heirs. Among the most recent cases maybe mentioned that of "Estate of
Mota vs. Concepcion, 56 Phil., 712, 717, wherein the principal plaintiff was the estate of the deceased
Lazaro Mota, and this Court gave judgment in favor of said estate along with the other plaintiffs in these
words:

". . . the judgment appealed from must be affirmed so far as it holds that defendants Concepcion and
Whitaker are indebted to the plaintiffs in the amount of P245,804.69 . . .."

Under the regime of the Civil Code and before the enactment of the Code of Civil Procedure, the heirs of
a deceased person were considered in contemplation of law as the continuation of his personality by
virtue of the provision of article 661 of the first Code that the heirs succeed to all the rights and
obligations of the decedent by the mere fact of his death. It was so held by this Court in Barrios vs.
Dolor, 2 Phil., 44, 46. However, after the enactment of the Code of Civil Procedure, article 661 of the
Civil Code was abrogated, as held in Suiliong & Co. vs. Chio-Taysan, 12 Phil., 13 22. In that case, as well
as in many others decided by this Court after the innovations introduced by the Code of Civil Procedure
in the matter of estates of deceased persons, it has been the constant doctrine that it is the estate or
the mass of property, rights and assets left by the decedent, instead of the heirs directly, that becomes
vested and charged with his rights and obligations which survive after his demise.

The heirs were formerly considered as the continuation of the decedent's personality simply by legal
fiction, for they might not be even of his flesh and blood — the reason was one in the nature of a legal
exigency derived from the principle that the heirs succeeded to the rights and obligations of the
decedent. Under the present legal system, such rights and obligations as survive after death have to be
exercised and fulfilled only by the estate of the deceased. And if the same legal fiction were not
indulged, there would be no juridical basis for the estate, represented by the executor or administrator,
to exercise those rights and to fulfill those obligations of the deceased. The reason and purpose for
indulging the fiction is identical and the same in both cases. This is why according to the Supreme Court
of Indiana in Billings vs. State, supra, citing 2 Rapalje & L. Dictionary, 954, among the artificial persons
recognized by law figures "a collection of property to which the law attributes the capacity of having
rights and duties", as for instance, the estate of a bankrupt or deceased person.

Petitioner raises the decisive question of whether or not the estate of Pedro O. Fragante can be
considered a "citizen of the Philippines" within the meaning of section 16 of the Public Service Act, as
amended, particularly the proviso thereof expressly and categorically limiting the power of the
commission to issue certificates of public convenience or certificates of public convenience and
necessity "only to citizens of the Philippines or of the United States or to corporations, co-partnerships,
associations, or joint-stock companies constituted and organized under the laws of the Philippines", and
the further proviso that sixty per centum of the stock or paid-up capital of such entities must belong
entirely to citizens of the Philippines or of the United States.

Within the philosophy of the present legal system, the underlying reason for the legal fiction by which,
for certain purposes, the estate of a deceased person is considered a "person" is the avoidance of
injustice or prejudice resulting from the impossibility of exercising such legal rights and fulfilling such
legal obligations of the decedent as survived after his death unless the fiction is indulged. Substantially
the same reason is assigned to support the same rule in the jurisdiction of the State of Indiana, as
announced in Billings vs. State, supra, when the Supreme Court of said State said:

". . . It seems reasonable that the estate of a decedent should be regarded as an artificial person. It is the
creation of law for the purpose of enabling a disposition of the assets to be properly made . . .."

Within the framework and principles of the constitution itself, to cite just one example, under the bill of
rights it seems clear that while the civil rights guaranteed therein in the majority of cases relate to
natural persons, the term "person" used in section 1 (1) and (2) must be deemed to include artificial or
juridical persons, for otherwise these latter would be without the constitutional guarantee against being
deprived of property without due process of law, or the immunity from unreasonable searches and
seizures. We take it that it was the intendment of the framers to include artificial or juridical, no less
than natural, persons in these constitutional immunities and in others of similar nature. Among these
artificial or juridical persons figure estates of deceased persons. Hence, we hold that within the
framework of the constitution, the estate of Pedro O. Fragante should be considered an artificial or
juridical person for the purposes of the settlement and distribution of his estate which, of course,
include the exercise during the judicial administration thereof of those rights and the fulfillment of those
obligations of his which survived after his death. One of those rights was the one involved in his pending
application before the Public Service Commission in the instant case, consisting in the prosecution of
said application to its final conclusion. As stated above, an injustice would ensue from the opposite
course.

How about the point of citizenship? If by legal fiction his personality is considered extended so that any
debts or obligations left by, and surviving, him may be paid, and any surviving rights may be exercised
for the benefit of his creditors and heirs, respectively, we find no sound and cogent reason for denying
the application of the same fiction to his citizenship, and for not considering it as likewise extended for
the purposes of the aforesaid unfinished proceeding before the Public Service Commission. The
outcome of said proceeding, if successful, would in the end inure to the benefit of the same creditors
and the heirs. Even in that event petitioner could not allege any prejudice in the legal sense, any more
than he could have done if Fragante had lived longer and obtained the desired certificate. The fiction of
such extension of his citizenship is grounded upon the same principle, and motivated by the same
reason, as the fiction of the extension of his personality. The fiction is made necessary to avoid the
injustice of subjecting his estate, creditors and heirs, solely by reason of his death, to the loss of the
investment amounting to P35,000, which he had already made in the ice plant, not counting the other
expenses occasioned by the instant proceeding, from the Public Service Commission to this Court.

We can perceive no valid reason for holding that within the intent of the Constitution (Article IV), its
provisions on Philippine citizenship exclude the legal principle of extension above adverted to. If for
reasons already stated our law indulges the fiction of extension of personality, if for such reasons the
estate of Pedro O. Fragante should be considered an artificial or juridical person herein, we can find no
justification for refusing to declare a like fiction as to the extension of his citizenship for the purposes of
this proceeding.

Pedro O. Fragante was a Filipino citizen, and as such, if he had lived, in view of the evidence of record,
he would have obtained from the commission the certificate for which he was applying. The situation
has suffered but one change, and that is, his death. His estate was that of a Filipino citizen. And its
economic ability to appropriately and adequately operate and maintain the service of an ice plant was
the same that it received from the decedent himself. In the absence of a contrary showing, which does
not exist here, his heirs may be assumed to be also Filipino citizens; and if they are not, there is the
simple expedient of revoking the certificate or enjoining them from inheriting it.

Upon the whole, we are of opinion that for the purposes of the prosecution of said case No. 4572 of the
Public Service Commission to its final conclusion, both the personality and citizenship of Pedro O.
Fragante must be deemed extended, within the meaning and intent of the Public Service Act, as
amended, in harmony with the constitution: it is so adjudged and decreed.

-Roman Catholic church (See:Barlin vs. Ramirez, G.R. No. L-2832, Nov. 24, 1906)
FACTS: In January, 1904, the plaintiff Reverend Barlin, representative of the Roman Catholic Apostolic
Church in the diocese of Nueva Caceres, brought this action against the defendant, Ramirez, ex-Rector
of Roman Catholic Apostolic Parochial Church of Lagonoy and the Municipality of Lagonoy.

Barlin, alleged in his amended complaint that the Roman Catholic Church was the owner of the church
building, the convent, cemetery, the books, money, and other property in Lagonoy which Ramirez
retained and refused to turn over.

The answer of the defendant, Ramirez, in addition to a general denial of the allegation of the complaint,
admitted that he was in the possession and administration of the property described therein with the
authority of the municipality of Lagonoy and of the inhabitants of the same, who were the lawful
owners of the said property. The church was built by the people of the pueblo under the direction of the
cabeza de barangay. Under the law then in force, each man in the pueblo was required to work for the
government, without compensation, for forty days every year. The time spent in the reconstruction of
these buildings was counted as a part of the forty days. The material necessary was brought and paid for
in part by the parish priest from the funds of the church and in part was donated by certain individuals
of the pueblo. Ramirez refused because the town people had decided to separate from the Roman
Catholic Church and join the Filipino Church.

Lower Court Ruling

Plaintiff answered this complaint, or answer in intervention, and the case was tried and final judgment
in entered therein in favor of the plaintiff and against the defendants. The defendants then brought the
case here by a bill of exceptions.

ISSUE: WON the Roman Catholic Church has legal personality

HELD: Affirmed

Ramirez only an agent of the Church

(1) As to the defendant, Ramirez, it appears that he took possession of the property as the servant or
agent of the plaintiff. The only right which he had to the possession at the time he took it, was the right
which was given to him by the plaintiff, and he took possession under the agreement to return that
possession whenever it should be demanded of him.

Municipality never had title to the property

The evidence in this case does not show that the municipality has, as such, any right of whatever in the
property in question. It has produced no evidence of ownership. Its claim of ownership is rested in its
brief in this court upon the following propositions: That the property in question belonged prior to the
treaty of Paris to the Spanish Government; that by the treaty of Paris the ownership thereof passed to
the Government of the United States; that by section 12 of the act of Congress of July 1, 1902, such
property was transferred to the Government of the Philippine Islands, and that by the circular of that
Government, dated November 11, 1902, the ownership and the right to the possession of this property
passed to the municipality of Lagonoy. If, for the purposes of the argument, we should admit that the
other propositions are true, there is no evidence whatever to support the last proposition, namely that
the Government of the Philippine Islands has transferred the ownership of this church to the
municipality of Lagonoy. We have found no circular of the date above referred to. The one of February
10, 1903, which is probably the one intended, contains nothing that indicates any such transfer. As to
the municipality of Lagonoy, therefore, it is very clear that it has neither title, ownership, nor right of
possession.

To whom do churches belong

As a matter of law, the Spanish Government at the time the treaty of peace was signed, was not the
owner of this property, nor of any other property like it, situated in the Philippine Islands.

It does not admit of doubt that from the earliest times the parish churches in the Philippine Islands were
built by the Spanish Government. Not only were all the parish churches in the Philippines erected by the
King and under his direction, but it was made unlawful to erect a church without the license of the King.

But by agreement at an early date between the Pope and the Crown of Spain, all tithes in the Indies
were given by the former to the latter. That the condition of things existing by virtue of the Laws of the
Indies was continued to the present time is indicated by the royal order of the 31st of January, 1856,
and by the royal order of the 13th of August, 1876, both relating to the construction and repair of
churches, there being authority for saying that the latter order was in force in the Philippines.

This church, and other churches similarly situated in the Philippines, having been erected by the Spanish
Government, and under its direction, the next question to be considered is, To whom did these churches
belong?

Title 28 of the third partida is devoted to the ownership of things and, after discussing what can be
called public property and what can be called private property, speaks, in Law 12, of those things which
are sacred, religious, or holy. That law is as follows:

Law XII. ---- HOW SACRED OR RELIGIOUS THINGS CAN NOT BE OWNED BY ANY PERSON.

"No sacred, religious, or holy thing, devoted to the service of God, can be the subject of ownership by
any man, nor can it be considered as included in his property holdings. Although the priests may have
such things in their possession, yet they are not the owners thereof. They, hold them thus as guardians
or servants, or because they have the care of the same and serve God in or without them. Hence they
were allowed to take from the revenues of the church and lands what was reasonably necessary for
their support; the balance, belonging to God, was to be devoted to pious purposes, such as the feeding
and clothing of the poor, the support of orphans, the marrying of poor virgins to prevent their becoming
evil women because of their poverty, and for the redemption of captives and the repairing of the
churches, and the buying of chalices, clothing, books, and others things which they might be in need of,
and other similar charitable purposes."

And then taking up for consideration the first of the classes in to which this law has divided these things,
it defines in Law 13, title 28, third partida, consecrated things. That law is as follows:

"Sacred things, we say, are those which are consecrated by the bishops, such as churches, the altars
therein, crosses, chalices, censers, vestments, books, and all other things which are in tended for the
service of the church, and the title to these things can not be alienated except in certain specific cases as
we have already shown in the first partida of this book by the laws dealing with this subject. We say
further that even where a consecrated church is razed, the ground upon which it formerly stood shall
always be consecrated ground. But if any consecrated church should fall into the hands of the enemies
of our faith it shall there and then cease to be sacred as long as the enemy has it under control, although
once recovered by the Christians, it will again become sacred, reverting to its condition before the
enemy seized it and shall have all the right and privileges formerly belonging to it."

That the principles of the partida in reference to churches still exist is indicated by Sanchez Roman,
whose work on the Civil Law contains the following statement:

"First Group.----Spiritual and corporeal or ecclesiastical. A. Spiritual. ---- From early times distinction has
been made by authors and by law between things governed by divine law, called divine, and those
governed by human law, called human, and although the former can not be the subject of civil juridical
relations, their nature and species should be ascertained either to identify them and exclude them from
such relations or because they furnish a complete explanation of the foregoing tabulated statement, or
finally because the laws of the partida deal with them.

"Divine things are those which are either directly or indirectly established by God for his service and
sanctification of men and which are governed by divine or canonical laws. This makes it necessary to
divide them into spiritual things, which are those which have a direct influence on the religious
redemption of man such as the sacrament, prayers, fasts, indulgences, etc., and corporeal or
ecclesiastical, which are those means more or less direct for the proper religious salvation of man.

"7. First Group.----Divine things. B. Corporeal or ecclesiastical things (sacred, religious, holy, and
temporal belonging to the church). Corporeal or ecclesiastical things are so divided.

"(a) Sacred things are those devoted to God, religion, and worship in general, such as temples, altars,
ornaments, etc. These things can not be alienated except for some pious purpose and in such cases as
are provided for in the laws, according to which their control pertains to the ecclesiastical authorities,
and in so far as their use is concerned, to the believers and the clergy. (2 Derecho Civil Español, Sanchez
Roman, p. 480; 8 Manresa, Commentaries on the Spanish Civil Code, p. 636; 3 Alcubilla, Diccionario de la
Administracion Española, p. 486.)"
The partidas defined minutely what things belonged to the public in general and what belonged to
private persons. In the first group churches are not named. The present Civil Code declares in article 338
that property is of public or private ownership. Article 339, which defines public property, is as follows:

"Property of public ownership is ----

"1. That destined to the public use, such as roads, canals, rivers, torrents, ports, and bridges
constructed by the State, and banks, shores, roadsteads, and that of similar character.

"2. That belonging exclusively to the state without being for public use and which is destined to some
public service, or to the development of the national wealth, such as walls, fortresses, and other works
for the defense of the territory, and mines, until their concession has been granted."

The code also defines the property of provinces and of pueblos, and in defining what property is of
public use, article 344 declares as follows:

"Property for public use in provinces and in towns comprises the provincial and town roads, the squares,
streets, fountains, and public waters, the promenades, and public works of general service supported by
the said towns or provinces.

"All other property possessed by either is patrimonial, and shall be governed by the provisions of this
code, unless otherwise prescribe in special laws."

It will be noticed that in either one of these articles is any mention made of churches. When the Civil
Code undertook to define those things in a pueblo which were for the common use of the inhabitants of
the pueblo, or which belonged to the State, while it mentioned a great many other things, it did not
mention churches.

It has been said that article 25 of the Regulations for the Execution of the Mortgage Law indicates that
churches belong to the State and are public property. That article is as follows:

"There shall be excepted from the record required by article 2 of the law:

"First.----Property which belongs exclusively to the eminent domain of the State, and which is for the use
of all, such as the shores of the sea, islands, rivers and their borders, wagon roads, and the roads of all
kinds, with the exception of railroads; streets, parks, public promenades, and commons of towns,
provided they are not lands of common profit to the inhabitants; walls of cities and parks, ports, and
roadsteads, and any other analogous property during the time they are in common and general use,
always reserving the servitudes established by law on the shores of the sea and borders of navigable
rivers.

"Second.----Public temples dedicated to the Catholic faith."

A reading of this article shows that far from proving that churches belong to the State and to the
eminent domain thereof, it proves the contrary, for, if they had belonged to the State, they would have
been included in the first paragraph instead of being placed in a paragraph by themselves.
The truth is that, from the earliest times down to the cession of the Philippines to the United States,
churches and other consecrated objects were considered outside of the commerce of man. They were
not public property, nor could they be subjects of private property in the sense that any private person
could the owner thereof. They constituted a kind of property distinctive characteristic of which was that
it was devoted to the worship of God.

But, being material things was necessary that some one should have the care and custody of them and
the administration thereof, and the question occurs, To whom, under the Spanish law, was intrusted
that possession and administration? For the purposes of the Spanish law there was only one religion.
That was the religion professed by the Roman Catholic Church. It was for the purposes of that religion
and for the observance of its rites that this church and all other churches in the Philippines were
erected. The possession of the churches, their care and custody, and the maintenance of religious
worship therein were necessarily, therefore, intrusted to that body. It was, by virtue of the laws of
Spain, the only body which could under any circumstances have possession of, or any control over, any
church dedicated to the worship of God. By virtue of those laws this possession and right of control
were necessarily exclusive. It is not necessary or important to give any name to this right of possession
and control exercised by the Roman Catholic Church in the church buildings of the Philippines prior to
1898. It is not necessary to show that the church as a juridical person was the owner of the buildings. It
is sufficient to say that this right to the exclusive possession and control of the same, for the purposes of
its creation, existed.

The right of patronage, existing in the King of Spain with reference to the churches in the Philippines, did
not give him any right to interfere with the material possession of these buildings.

Title 6 of book 1 of the Compilation of the laws of the Indies treats Del Patronazgo Real de las Indias.
There is nothing in any one of the fifty-one laws which compose this title which in any way indicates that
the King of Spain was the owner of the churches in the Indies because he had constructed them. These
laws relate to the right of presentation to ecclesiastical charges and offices. For example, Law 49 of the
title commences as follows:

"Because the patronage and right of presentation of all archbishops, bishops, dignitaries, prevents,
curates, and doctrines and all other beneficiaries and ecclesiastical offices whatsoever belong to us, no
other person can obtain or possess the same without our presentation as provided in Law 1 and other
laws of this title."

Title 15 of the first partida treats of the right of patronage vesting in private persons, but there is
nothing in any one of its fifteen laws which in any way indicates that the private patron is the owner of
the church.

When it is said that this church never belonged to the Crown of Spain, it is not intended to say that the
Government and had no power over it. It may be that by virtue of that power of eminent domain which
is necessarily resides in every government, it might have appropriated this church and other churches,
and private property of individuals. But nothing of this kind was ever attempted in the Philippines.

It, therefore, follows that in 1898, and prior to the treaty of Paris, the Roman Catholic Church had by law
the exclusive right to the possession of this church and it had the legal right to administer the same for
the purposes for which the building was consecrated. It was then in the full and peaceful possession of
the church with the rights aforesaid. That these rights were fully protected by the treaty of Paris is very
clear. That treaty, in article 8, provides, among other things, as follows:

"And it is hereby declared that the relinquishment or cession, as the case may be, to which the
preceding paragraph refers, can not in any respect impair the property or rights which by law belong to
the peaceful possession of property of all kinds, or provinces, municipalities, public or private
establishments, ecclesiastical or civic bodies, or any other associations having legal capacity to acquire
and possess property in the aforesaid territories renounced or ceded, or of private individuals, or
whatsoever nationality such individuals may be."

It is not necessary, however, to invoke the provisions of that treaty. Neither the Government of the
United States, nor the Government of these Islands, has ever attempted in any way to interfere with the
rights which the Roman Catholic Church had in this building when Spanish sovereignty ceased in the
Philippines. Any interference that has resulted has been caused by private individuals, acting without
any authority from the Government. Against such interference by private persons with the rights of
others, redress is given in the courts of justice without reference to the provisions of the treaty of Paris.

The evidence in this case makes no showing in regard to the cemetery. It is always mentioned in
connection with the church and convent and no point is made by the possession of the church and
convent, he is not also entitled to recover possession of the cemetery. So, without discussing the
question as to whether the rules applicable to churches are all respects applicable to cemeteries, we
hold for the purpose of this case that the plaintiff has the same right to the cemetery that he has to the
church.

Legal personality of the Roman Catholic Church

4) It is suggested by the appellant that the Roman Catholic Church has no legal personality in the
Philippine Islands. This suggestion, made with reference to an institution which antedates by almost a
thousand years any other personality in Europe, and which existed "when Grecian eloquence still
flourished in Antioch, and when idols were still worshiped in the temple of Mecca," does not require
serious consideration. In the preamble to the budget relating to ecclesiastical obligations, presented by
Montero Rios to the Cortes on the 1st of October 1871, speaking of the Roman Catholic Church, he says:

"Persecuted as an unlawful association since the early days of its existence up to the time of Galieno,
who was the first of the Roman emperors to admit it among the juridical entities protected by the laws
of the Empire, it existed until then by the mercy and will of the faithful and depended for such existence
upon pious gifts and offerings. Since the latter half of the third century, and more particularly since the
year 313, when Constantine, by the edict of Milan, inaugurated an era of protection for the church, the
latter gradually entered upon the exercise of such rights as were required for the acquisition,
preservation, and transmission of property the same as any other juridical entity under the laws of the
Empire. (3 Dictionary of Spanish Administration, Alcubilla, p. 211. See also the royal order of the 4th of
December, 1890, 3 Alcubilla, 189.)"

Ventanilla Enterprises v. Hon. Lazaro, G.R. No. L-53856, August 21, 1980
FACTS: Petitioner Oscar Ventanilla Enterprises Corporation, in these special civil actions of certiorari and
prohibition, seeks to restrain the enforcement against it of the judgment of the Court of First Instance of
Manila dated November 14, 1978 in Civil Case No. 107607 entitled "Emperor Films Int'l. (Phils.), Inc. vs.
Broadway Theater".
Emperor Films sued the Broadway Theater which was being leased by Ricardo Ventanilla at the Court of
First Instance of Manila. Empire Films and Ricardo entered into a compromise agreement and Ricardo
was obligated to pay Emperor Films Int'l. (Phils.), Inc. the sum of P12,662 which he promised to pay in
installments. He agreed that, in case he defaulted in the payment of any installment, "execution shall
immediately issue.”

The lower court rendered judgment in accordance with the compromise agreement. Oscar Ventanilla
Enterprises Corporation alleged that the deputy sheriff of Branch XXXV of the Court of First Instance of
Manila would enforce against the Broadway Theater the writ of execution issued in Civil Case No.
107607. It claims to be the owner of the Broadway Theater located at Burgos Avenue, Cabanatuan City
which it leased to Ricardo C. Ventanilla for a ten-year period starting January 1, 1975 (Annex A).

Ventanilla filed in the Court of Appeals a special civil actions of certiorari and prohibition. It was
dismissed because that Court can issue the writs of certiorari and prohibition only in aid of its appellate
jurisdiction and there was no more appeal in Civil Case No. 107607. Moreover, as reasoned out by the
Court of Appeals, the petitioner, not being a party in Civil Case No. 107607, cannot ask for a review of
any order issued in that case (CA-G. R. No. SP-09510-R, April 30, 1980).

Hence the instant case

ISSUE: WON the CA erred in dismissing the case

HELD:
It is at once obvious that the complaint in Civil Case No. 107607 is defective because the defendant is
not a natural or juridical person. However, that defect was cured by the answer of Ricardo C. Ventanilla,
the lessee of the Broadway Theater (who admitted having issued three postdated checks to guarantee
his wife's obligation to the plaintiff), and by the compromise agreement dated October 11, 1978
executed between the plaintiff and Ricardo C. Ventanilla, who, in effect, substituted himself for
defendant "Broadway Theater".

In that compromise agreement, which is in reality a confession of judgment, Ricardo C. Ventanilla, as

defendant, acknowledged that he was obligated to pay Emperor Films Int'l. (Phils.), Inc. the sum of
P12,662 which he promised to pay in installments. He agreed that, in case he defaulted in the payment
of any installment, "execution shall immediately issue".

The lower court rendered judgment in accordance with the compromise agreement. Oscar Ventanilla
Enterprises Corporation alleged that the deputy sheriff of Branch XXXV of the Court of First Instance of
Manila would enforce against the Broadway Theater the writ of execution issued in Civil Case No.
107607. It claims to be the owner of the Broadway Theater located at Burgos Avenue, Cabanatuan City
which it leased to Ricardo C. Ventanilla for a ten-year period starting January 1, 1975 (Annex A).

We hold that Oscar Ventanilla Enterprises Corporation is entitled to the writ of prohibition enjoining the
sheriff from levying on the Broadway Theater for the satisfaction of the judgment rendered against
Ricardo C. Ventanilla who is a mere lessee of the theater.

This incident would not have arisen if Emperor Films Int'l. (Phils.), Inc. had sued directly Ricardo C.
Ventanilla and not "Broadway Theater" and if respondent Judge had perceived the anomaly that the
defendant is not a natural or juridical person and had ordered the substitution of Ricardo C. Ventanilla
for "Broadway Theater" as the real party defendant in Civil Case No. 107607.

Chiang Kai Shek School v. Court of Appeals, G.R. No. 58028, April 18, 1989
FACTS: The original complaint was filed by Fausta F. Oh in the Court of First Instance of Sorsogon against
the Chiang Kai Shek School demanding separation pay, social security benefits, salary differentials,
maternity benefits and moral and exemplary damages after the school dismissed her.

Chiang Kai Shek School filed a motion to dismiss on the ground that it could not be sued. The complaint
was thus amended impleading school officials to make them solidarily liable with the school.

The Court of First Instance of Sorsogon dismissed the complaint. 3 On appeal, its decision was set aside
by the respondent court, which held the school suable and liable while absolving the other defendants.
4 The motion for reconsideration having been denied, 5 the school then came to this Court in this
petition for review on certiorari.

The issues raised in the petition are:

1. Whether or not a school that has not been incorporated may be sued by reason alone of its long
continued existence and recognition by the government.

2. Whether or not a complaint filed against persons associated under a common name will justify a
judgment against the association itself and not its individual members.

3. Whether or not the collection of tuition fees and book rentals will make a school profit-making and
not charitable.

4. Whether or not the Termination Pay Law then in force was available to the private respondent who
was employed on a year-to-year basis.

5. Whether or not the awards made by the respondent court were warranted.

HELD:
We hold against the petitioner on the first question. It is true that Rule 3, Section 1, of the Rules of Court
clearly provides that "only natural or juridical persons may be parties in a civil action." It is also not
denied that the school has not been incorporated. However, this omission should not prejudice the
private respondent in the assertion of her claims against the school.

As a school, the petitioner was governed by Act No. 2706 as amended by C.A. No. 180, which provided
as follows:

Unless exempted for special reasons by the Secretary of Public Instruction, any private school or college
recognized by the government shall be incorporated under the provisions of Act No. 1459 known as the
Corporation Law, within 90 days after the date of recognition, and shall file with the Secretary of Public
Instruction a copy of its incorporation papers and by-laws.

Having been recognized by the government, it was under obligation to incorporate under the
Corporation Law within 90 days from such recognition. It appears that it had not done so at the time the
complaint was filed notwithstanding that it had been in existence even earlier than 1932. The petitioner
cannot now invoke its own non-compliance with the law to immunize it from the private respondent's
complaint.

There should also be no question that having contracted with the private respondent every year for
thirty two years and thus represented itself as possessed of juridical personality to do so, the petitioner
is now estopped from denying such personality to defeat her claim against it. According to Article 1431
of the Civil Code, "through estoppel an admission representation is rendered conclusive upon the
person making it and cannot be denied or disproved as against the person relying on it."

As the school itself may be sued in its own name, there is no need to apply Rule 3, Section 15, under
which the persons joined in an association without any juridical personality may be sued with such
association. Besides, it has been shown that the individual members of the board of trustees are not
liable, having been appointed only after the private respondent's dismissal. 6

It is clear now that a charitable institution is covered by the labor laws 7 although the question was still
unsettled when this case arose in 1968. At any rate, there was no law even then exempting such
institutions from the operation of the labor laws (although they were exempted by the Constitution
from ad valorem taxes). Hence, even assuming that the petitioner was a charitable institution as it
claims, the private respondent was nonetheless still entitled to the protection of the Termination Pay
Law, which was then in force.

While it may be that the petitioner was engaged in charitable works, it would not necessarily follow that
those in its employ were as generously motivated. Obviously, most of them would not have the means
for such charity. The private respondent herself was only a humble school teacher receiving a meager
salary of P180.00 per month.

At that, it has not been established that the petitioner is a charitable institution, considering especially
that it charges tuition fees and collects book rentals from its students. 8 While this alone may not
indicate that it is profit-making, it does weaken its claim that it is a non-profit entity.

Sec. 1 (d) & (g), Rule 16

Section 1. Grounds. — Within the time for but before filing the answer to the complaint or
pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:

(a) That the court has no jurisdiction over the person of the defending party;
(b) That the court has no jurisdiction over the subject matter of the claim;
(c) That venue is improperly laid;
(d) That the plaintiff has no legal capacity to sue;
(e) That there is another action pending between the same parties for the same cause;
(f) That the cause of action is barred by a prior judgment or by the statute of limitations;
(g) That the pleading asserting the claim states no cause of action;
(h) That the claim or demand set forth in the plaintiff's pleading has been paid, waived, abandoned,
or otherwise extinguished;
(i) That the claim on which the action is founded is enforceable under the provisions of the statute
of frauds; and
(j) That a condition precedent for filing the claim has not been complied with.
Sec. 2. Parties in interest
Stronghold Insurance v. Cuenca, G.R. No. 173297, March 6, 2013
FACTS: On January 19, 1998, Marañon filed a complaint in the RTC against the Cuencas for the collection
of a sum of money and damages. His complaint, docketed as Civil Case No. 98-023, included an
application for the issuance of a writ of preliminary attachment.3 On January 26, 1998, the RTC granted
the application for the issuance of the writ of preliminary attachment conditioned upon the posting of a
bond of P1,000,000.00 executed in favor of the Cuencas. Less than a month later, Marañon amended
the complaint to implead Tayactac as a defendant.4

On February 11, 1998, Marañon posted SICI Bond No. 68427 JCL (4) No. 02370 in the amount of
P1,000,000.00 issued by Stronghold Insurance. Two days later, the RTC issued the writ of preliminary
attachment. The sheriff served the writ, the summons and a copy of the complaint on the Cuencas on
the same day. The service of the writ, summons and copy of the complaint were made on Tayactac on
February 16, 1998.6

Enforcing the writ of preliminary attachment on February 16 and February 17, 1998, the sheriff levied
upon the equipment, supplies, materials and various other personal property belonging to Arc Cuisine,
Inc. that were found in the leased corporate office-cum-commissary or kitchen of the corporation.

On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion to Dismiss and to Quash
Writ of Preliminary Attachment on the grounds that: (1) the action involved intra-corporate matters that
were within the original and exclusive jurisdiction of the Securities and Exchange Commission (SEC); and
(2) there was another action pending in the SEC as well as a criminal complaint in the Office of the City
Prosecutor of Parañaque City. On March 5, 1998, Marañon opposed the motion.

RTC Ruling
On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ of Preliminary
Attachment, stating that the action, being one for the recovery of a sum of money and damages, was
within its jurisdiction.

Under date of September 3, 1998, the Cuencas and Tayactac moved for the reconsideration of the
denial of their Motion to Dismiss and to Quash Writ of Preliminary Attachment, but the RTC denied their
motion for reconsideration on September 16, 1998.

Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on certiorari and prohibition to
challenge the August 10, 1998 and September 16, 1998 orders of the RTC on the basis of being issued
with grave abuse of discretion amounting to lack or excess of jurisdiction (C.A.-G.R. SP No. 49288).

CA Ruling
On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R. SP No. 49288, granting the
petition. It annulled and set aside the challenged orders, and dismissed the amended complaint for lack
of jurisdiction and ordered the return of the properties.

On the scheduled inventory of the properties (February 17, 2000) at the warehouse where Marañon
kept the seized articles, it was discovered that the properties were all gone and missing and there was
already a new tenant.
On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to Deliver Attached
Properties and to Set Case for Hearing,17 praying that: (1) the Branch Sheriff be ordered to immediately
deliver the attached properties to them; (2) Stronghold Insurance be directed to pay them the damages
being sought in accordance with its undertaking under the surety bond for P1,000,0000.00; (3) Marañon
be held personally liable to them considering the insufficiency of the amount of the surety bond; (4)
they be paid the total of P1,721,557.20 as actual damages representing the value of the lost attached
properties because they, being accountable for the properties, would be turning that amount over to
Arc Cuisine, Inc.; and (5) Marañon be made to pay P200,000.00 as moral damages, P100,000.00 as
exemplary damages, and P100,000.00 as attorney’s fees.

Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn, the Cuencas and
Tayactac filed their reply on May 5, 2000.

On May 25, 2000, Marañon filed his own comment/opposition arguing that because the attached
properties belonged to Arc Cuisine, Inc. 50% of the stockholding of which he and his relatives owned, it
should follow that 50% of the value of the missing attached properties constituted liquidating dividends
that should remain with and belong to him. Accordingly, he prayed that he should be required to return
only P100,000.00 to the Cuencas and Tayactac.18

On June 5, 2000, the RTC commanded Marañon to surrender all the attached properties to the RTC
through the sheriff within 10 days from notice; and directed the Cuencas and Tayactac to submit the
affidavits of their witnesses in support of their claim for damages.19

On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and Compliance.20

After trial, the RTC rendered its judgment on April 28, 2003, holding Marañon and Stronghold Insurance
jointly and solidarily liable for damages to the Cuencas and Tayactac.

Only Stronghold Insurance appealed to the CA. On January 31, 2006, the CA, finding no reversible error,
promulgated its decision affirming the judgment of the RTC.23

Stronghold Insurance moved for reconsideration, but the CA denied its motion for reconsideration on
June 22, 2006. It argues that the Cuencas are not the owners of the properties attached and thus, are
not the proper parties to claim any purported damages arising therefrom.

ISSUE: WON the Cuencas are the proper parties

HELD: No.

The personality of a corporation is distinct and separate from the personalities of its stockholders.
Hence, its stockholders are not themselves the real parties in interest to claim and recover
compensation for the damages arising from the wrongful attachment of its assets. Only the corporation
is the real party in interest for that purpose.

The petition for review is meritorious.

There is no question that a litigation should be disallowed immediately if it involves a person without
any interest at stake, for it would be futile and meaningless to still proceed and render a judgment
where there is no actual controversy to be thereby determined. Courts of law in our judicial system are
not allowed to delve on academic issues or to render advisory opinions. They only resolve actual
controversies, for that is what they are authorized to do by the Fundamental Law itself, which
forthrightly ordains that the judicial power is wielded only to settle actual controversies involving rights
that are legally demandable and enforceable.28

To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of the Rules of Court
requires that unless otherwise authorized by law or the Rules of Court every action must be prosecuted
or defended in the name of the real party in interest.29 Under the same rule, a real party in interest is
one who stands to be benefited or injured by the judgment in the suit, or one who is entitled to the
avails of the suit. Accordingly, a person , to be a real party in interest in whose name an action must be
prosecuted, should appear to be the present real owner of the right sought to be enforced, that is, his
interest must be a present substantial interest, not a mere expectancy, or a future, contingent,
subordinate, or consequential interest.30

Where the plaintiff is not the real party in interest, the ground for the motion to dismiss is lack of cause
of action.31 The reason for this is that the courts ought not to pass upon questions not derived from any
actual controversy. Truly, a person having no material interest to protect cannot invoke the jurisdiction
of the court as the plaintiff in an action.32 Nor does a court acquire jurisdiction over a case where the
real party in interest is not present or impleaded.

The purposes of the requirement for the real party in interest prosecuting or defending an action at law
are: (a) to prevent the prosecution of actions by persons without any right, title or interest in the case;
(b) to require that the actual party entitled to legal relief be the one to prosecute the action; (c) to avoid
a multiplicity of suits; and (d) to discourage litigation and keep it within certain bounds, pursuant to
sound public policy.33 Indeed, considering that all civil actions must be based on a cause of action,34
defined as the act or omission by which a party violates the right of another,35 the former as the
defendant must be allowed to insist upon being opposed by the real party in interest so that he is
protected from further suits regarding the same claim.36 Under this rationale, the requirement benefits
the defendant because "the defendant can insist upon a plaintiff who will afford him a setup providing
good res judicata protection if the struggle is carried through on the merits to the end."37

The rule on real party in interest ensures, therefore, that the party with the legal right to sue brings the
action, and this interest ends when a judgment involving the nominal plaintiff will protect the defendant
from a subsequent identical action. Such a rule is intended to bring before the court the party rightfully
interested in the litigation so that only real controversies will be presented and the judgment, when
entered, will be binding and conclusive and the defendant will be saved from further harassment and
vexation at the hands of other claimants to the same demand.38

But the real party in interest need not be the person who ultimately will benefit from the successful
prosecution of the action. Hence, to aid itself in the proper identification of the real party in interest, the
court should first ascertain the nature of the substantive right being asserted, and then must determine
whether the party asserting that right is recognized as the real party in interest under the rules of
procedure. Truly, that a party stands to gain from the litigation is not necessarily controlling.39

It is fundamental that the courts are established in order to afford reliefs to persons whose rights or
property interests have been invaded or violated, or are threatened with invasion by others’ conduct or
acts, and to give relief only at the instance of such persons. The jurisdiction of a court of law or equity
may not be invoked by or for an individual whose rights have not been breached.40

The remedial right or the remedial obligation is the person’s interest in the controversy. The right of the
plaintiff or other claimant is alleged to be violated by the defendant, who has the correlative obligation
to respect the right of the former. Otherwise put, without the right, a person may not become a party
plaintiff; without the obligation, a person may not be sued as a party defendant; without the violation,
there may not be a suit. In such a situation, it is legally impossible for any person or entity to be both
plaintiff and defendant in the same action, thereby ensuring that the controversy is actual and exists
between adversary parties. Where there are no adversary parties before it, the court would be without
jurisdiction to render a judgment.41

There is no dispute that the properties subject to the levy on attachment belonged to Arc Cuisine, Inc.
alone, not to the Cuencas and Tayactac in their own right. They were only stockholders of Arc Cuisine,
Inc., which had a personality distinct and separate from that of any or all of them.42 The damages
occasioned to the properties by the levy on attachment, wrongful or not, prejudiced Arc Cuisine, Inc.,
not them. As such, only Arc Cuisine, Inc. had the right under the substantive law to claim and recover
such damages. This right could not also be asserted by the Cuencas and Tayactac unless they did so in
the name of the corporation itself. But that did not happen herein, because Arc Cuisine, Inc. was not
even joined in the action either as an original party or as an intervenor.

The Cuencas and Tayactac were clearly not vested with any direct interest in the personal properties
coming under the levy on attachment by virtue alone of their being stockholders in Arc Cuisine, Inc.
Their stockholdings represented only their proportionate or aliquot interest in the properties of the
corporation, but did not vest in them any legal right or title to any specific properties of the corporation.
Without doubt, Arc Cuisine, Inc. remained the owner as a distinct legal person.43

Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuencas and Tayactac lacked
the legal personality to claim the damages sustained from the levy of the former’s properties. According
to Asset Privatization Trust v. Court of Appeals,44 even when the foreclosure on the assets of the
corporation was wrongful and done in bad faith the stockholders had no standing to recover for
themselves moral damages; otherwise, they would be appropriating and distributing part of the
corporation’s assets prior to the dissolution of the corporation and the liquidation of its debts and
liabilities.

While plaintiffs ask for remedy to which they are not entitled unless the requirement of section 16 of
the Corporation Law be first complied with, we note that the action stated in their complaint is
susceptible of being converted into a derivative suit for the benefit of the corporation by a mere change
in the prayer. Such amendment, however, is not possible now, since the complaint has been filed in the
wrong court, so that the same has to be dismissed.46

That Marañon knew that Arc Cuisine, Inc. owned the properties levied on attachment but he still
excluded Arc Cuisine, Inc. from his complaint was of no consequence now. The Cuencas and Tayactac
still had no right of action even if the affected properties were then under their custody at the time of
the attachment, considering that their custody was only incidental to the operation of the corporation.

It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine, Inc. a proper action to
recover damages resulting from the attachment. Such action would be one directly brought in the name
of the corporation. Yet, that was not true here, for, instead, the Cuencas and Tayactac presented the
claim in their own names.

Mayor Dagdag v. Tongnawa, G.R. Nos. 161166-67, February 3, 2005

FACTS: Petitioner was formerly the mayor of the municipality of Tanudan, Province of Kalinga. Michael
Tongnawa and Antonio Gammod, respondents, are the municipal engineer and municipal planning and
development coordinator, respectively, of the said municipality.

On July 24, 1995, petitioner, while then the mayor of Tanudan, sent respondents a memorandum
ordering them to explain within 72 hours why they should not be administratively sanctioned for acts
unbecoming of public servants and failure to perform their duties. Respondents submitted to
petitioner their respective explanations.

On August 1, 1995, petitioner issued Executive Order No. 95-002 creating a Municipal Grievance
Committee to investigate the charges against respondents. Guilbert Dangpason, then the vice-mayor of
Tanudan, was designated Chairman.

After investigation, the Committee found respondents liable for insubordination, non-performance of
duties and absences without official leaves (AWOL).

On November 27, 1995, petitioner issued an order suspending respondents from their respective
positions for two months or from December 1, 1995 to February 28, 1996.

Respondents then appealed to the Civil Service Commission (CSC) contending that their right to due
process has been violated. On May 23, 1996, during the pendency of respondents’ appeal, petitioner
issued an order dropping them from the roll of employees effective May 28, 1996 by reason of their
unauthorized absences. Again, they appealed to the CSC.

On October 21, 1997, the CSC issued Resolution No. 974229 affirming petitioner’s order suspending
respondents from the service for two months. They moved for a reconsideration but was denied by the
CSC on May 31, 1999, prompting them to file with the Court of Appeals a petition for review, docketed
as CA-G.R. SP No. 54511.

Meanwhile, on June 29, 1999, the CSC issued Resolution No. 991136 affirming petitioner’s order
dropping respondents from the roll. When their motion for reconsideration was denied by the CSC,
respondents filed with the Court of Appeals a petition for review, docketed as CA-G.R. SP 57315.

As mentioned earlier, the Court of Appeals, in its joint Decision in CA-G.R. SP Nos. 54511 and 57315,
granted respondents’ petitions for review, reversing the CSC challenged Resolutions and reinstating
them to their respective positions and ordering the payment of their corresponding backwages.

Petitioner filed a joint motion for reconsideration but was denied by the Court of Appeals.

Hence, the instant petition.

Basically, petitioner alleges that his “suspension and dismissal orders against the respondents are
supported by substantial evidence.”[4] Moreover, the sworn declarations of William Tumbali and
Guilbert Dangpason, the designated Chairman of the Municipal Grievance Committee, that there was
actually no investigation conducted on petitioner’s charges, are “devoid of credibility.”[5]

In their joint comment, respondents aver that petitioner has no legal personality to file the
instant petition because he had ceased to be the municipal mayor of Tanudan, Kalinga; and that the
CSC, being the aggrieved party, is the proper party to file this petition.

ISSUE: The fundamental issue before us is: who may appeal from the Decision of the Court of Appeals?

HELD: The mayor has the right to appeal the court’s reversal of his order to terminated the appointed
employees because his power to appoint carries with it the power to remove. But once the public
officer leaves the office, it is the successor who can continue the action

In resolving the issue, the concept of “real party in interest” becomes relevant.

Section 2, Rule 3 of the 1997 Rules of Civil Procedure, as amended, provides:

“SEC. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by
law or these Rules, every action must be prosecuted or defended in the name of the real party in
interest.”

The established rule is that a real party in interest is one who would be benefited or injured by the
judgment, or one entitled to the avails of the suit. The word “interest,” as contemplated by the Rules,
means material interest or an interest in issue and to be affected by the judgment, as distinguished from
mere interest in the question involved or a mere incidental interest. Stated differently, the rule refers
to a real or present substantial interest as distinguished from a mere expectancy, or a future,
contingent, subordinate, or consequential interest. As a general rule, one who has no right or interest
to protect cannot invoke the jurisdiction of the court as party-plaintiff in an action.[6]

We hold that the CSC and the mayor of Tanudan are real parties in interest in this case and, therefore,
can contest the assailed joint Decision of the Court of Appeals before us.

The CSC is the party adversely affected by the questioned Decision of the Court of Appeals because it
has been mandated by the Constitution to preserve and safeguard the integrity of our civil service
system.[7] Thus, any transgression by herein respondents of the CSC rules and regulations will
adversely affect its integrity. Significantly, it has not challenged the assailed Decision.

As regards the mayor of Tanudan, there are two (2) reasons why he may interpose such appeal. The
first is rooted in his power to appoint officials and employees of his municipality.[8] Both respondents
were appointed by petitioner during his incumbency. In Francisco Abella, Jr. vs. Civil Service
Commission,[9] the Court En Banc (through Justice Artemio V. Panganiban) held that the municipal
mayor, being the appointing authority, is the real party in interest to challenge the CSC’s disapproval of
the appointment of his appointee, thus:

“x x x. The power of appointment necessarily entails the exercise of judgment and discretion (Sevilla vs.
Parina, 128 Phil. 639, 643, October 30, 1967; Manalang vs. Quitoriano, 94 Phil. 903, 911, April 30, 1954).
Luego vs. Civil Service Commission (227 Phil. 303, August 5, 1986) declared:
‘Appointment is an essentially discretionary power and must be performed by the officer in which it is
vested according to his best lights, the only condition being that the appointee should possess the
qualifications required by law. If he does, then the appointment cannot be faulted on the ground that
there are others better qualified who should have been preferred. This is a political question involving
considerations of wisdom which only the appointing authority can decide’ (Rimonte vs. Civil Service
Commission, 314 Phil. 421, 430, May 29, 1995).

Significantly, ‘the selection of the appointee – taking into account the totality of his qualifications,
including those abstract qualities that define his personality – is the prerogative of the appointing
authority (Lapinid vs. Civil Service Commission, 274 Phil. 381, 387, May 14, 1991, per Cruz J.; Jimenez vs.
Francisco, 127 Phil. 1025, 1032, February 28, 1957; Branganza vs. Commission on Elections, 127 Phil.
442, 447, August 15, 1967). No tribunal, not even this Court (Lapinid vs. Civil Service Commission, supra;
Amponin vs. Commission on Elections, 128 Phil. 412, 415, September 29, 1967), may compel the
exercise of an appointment for a favored person (Sevilla vs. Patrina, supra; Manalang vs. Quitoriano,
supra; Torio vs. Civil Service Commission, 209 SCRA 677, 691, June 9, 1992; Medalla vs. Sto. Tomas, 208
SCRA 351, 357, May 5, 1992).

The CSC’s disapproval of an appointment is a challenge to the exercise of the appointing authority’s
discretion. The appointing authority must have the right to contest the disapproval. Thus, Section 2 of
Rule VI of CSC Memorandum Circular 40, s. 1998 is justified insofar as it allows the appointing authority
to request reconsideration or appeal.

In Central Bank vs. Civil Service Commission (171 SCRA 744, 756, April 10, 1989), this Court has affirmed
that the appointing authority stands to be adversely affected when the CSC disapproves an
appointment. Thus, the said authority can ‘defend its appointment since it knows the reasons for the
same’ (id., p. 757, per Gancayco, J.). It is also the act of the appointing authority that is being
questioned when an appointment is disapproved (id.).

x x x.” (underscoring ours)

Similarly, where a municipal mayor orders the suspension or dismissal of a municipal employee on
grounds he believes to be proper, but his order is reversed or nullified by the CSC or the Court of
Appeals (as in this case), he has the right to contest such adverse ruling. His right to appeal flows from
the fact that his power to appoint carries with it the power to remove. Being chief executive of the
municipality, he possesses this disciplinary power over appointive municipal officials and employees.[10]
To be sure, whenever his order imposing administrative sanctions upon erring municipal personnel is
challenged, he should be allowed to defend his action considering that he is the appointing authority.

The second reason why the municipal mayor of Tanudan has legal personality to challenge the Decision
of the Court of Appeals is because the salaries of the respondents, being municipal officials, are drawn
from the municipal funds. Obviously, the mayor has real and substantial interest in the outcome of the
administrative cases against respondents.

Admittedly, however, petitioner, at the time he filed with this Court the instant petition assailing the
Appellate Court Decision, was no longer the mayor of Tanudan.

Section 17, Rule 3 of the 1997 Rules of Civil Procedure, as amended, is relevant, thus:
“Sec. 17. Death or separation of a party who is a public officer. – When a public officer is a party in an
action in his official capacity and during its pendency dies, resigns or otherwise ceases to hold office, the
action may be continued and maintained by or against his successor if, within thirty (30) days after the
successor takes office or such time as may be granted by the court, it is satisfactorily shown to the court
by any party that there is a substantial need for continuing or maintaining it and that the successor
adopts or continues or threatens to adopt or continue the action of his predecessor. Before a
substitution is made, the party or officer to be affected, unless expressly assenting thereto, shall be
given reasonable notice of the application therefor and accorded an opportunity to be heard.”
(underscoring ours)

Interpreting the above rule, in Miranda vs. Carreon,[11] Heirs of Mayor Nemencio Galvez vs. Court of
Appeals,[12] and Roque, et al. vs. Delgado, et al.,[13] we held that where the petitioner (a public officer)
ceases to be mayor, the appeal and/or action he initiated may be continued and maintained by his
successor if there is substantial need to do so. If the successor failed to pursue the appeal and/or
action, the same should be dismissed.

Records show that upon petitioner’s cessation from public office, his successor did not file any
manifestation to the effect that he is continuing and maintaining this appeal.

We thus agree with the respondents that petitioner has lost his legal personality to interpose the instant
petition.

Spouses Oco v. Limbaring, G.R. No. 161298, January 31, 2006

FACTS: Sometime in 1996, Sabas Limbaring subdivided his Lot Sometime in 1996, Sabas Limbaring
subdivided his Lot and executed in favor of Jennifer Limbaring a Deed of Sale for one lot for P60,000 and
Sarah Jane Limbaring the other for P14,440. TCTs were issued correspondingly.

Sensing some irregularities in the transaction, Percita Oco, the daughter of Sabas Limbaring filed a case
of perjury and falsification of documents against respondent, Victor Limabaring, her uncle who was the
father of Jennifer and Sarah Jane. During the pre-litigation conference the parties agreed that the two
parcels of land should be reconveyed to Percita, who was to pay respondent all the expenses that had
been and would be incurred to transfer the titles to her name.

Pursuant to their agreement, respondent facilitated the transfer of the titles to her from the names of
his daughters. After the transfer had been effected on July 12, 1996, Percita left for Puerta Princesa on
July 17, 1996, without paying the P25,000. Several demands were made, but she refused to pay.

On April 6, 1999, respondent filed against Spouses Anthony and Percita Oco a Complaint for the
rescission of the sales contracts, with recovery of possession and ownership of the two parcels of
land.[11] Among others, he claimed 1) that he was the actual buyer of the lots, but the vendees whose
names appeared on the Deeds were his daughters; 2) that he initially refused to reconvey the properties
because he had paid for them with his hard-earned money, which was partly used by Sabas Limbaring
for medical expenses; 3) that Percita had prepared the two Deeds of Sale, which his daughters signed
despite receiving no consideration as stated in the Deeds; 4) that because she refused to pay the
P25,000, the Limbaring clan held a meeting on October 26, 1996, during which it was agreed that P1,000
per month would be given to respondent from the rentals of Sabas Limbaring’s house; and 5) that the
agreement was not implemented, because Percita had failed to cooperate.

On May 27, 1999, Spouses Oco filed a Motion to Dismiss on the ground that the plaintiff (herein
respondent) was not the real party in interest.[13] In his Opposition to the Motion to Dismiss,
respondent contended that he was a trustor, whose property was being held in trust by his
daughters.[14] He also averred that, on the assumption that he was not the real party in interest, he
was entitled to an amendment of the pleadings.

RTC Ruling
Spouses Oco filed a Demurrer to Evidence. On October 2, 2000, the RTC granted the demurrer and
dismissed the Complaint and Counterclaim,[20] on the ground that respondent was not the real party in
interest. The trial court also held that Jennifer and Sarah Jane had already acknowledged receipt of the
consideration for the reconveyance of the lots. It added that the P25,000 was an independent
obligation for the reimbursement of the expenses incurred for the transfer of the titles.

Ruling of the Court of Appeals

The CA held that a trust relationship was created when respondent purchased the lots in favor of his
daughters.[22] Thus, he was a real party in interest.

The appellate court also ruled that the P25,000 was part of the consideration for the reconveyance of
the two parcels of land.[23] The CA held that, since Percita had admitted her failure to pay the amount,
respondent had the right to rescind the contracts of reconveyance.[24]

The assailed November 25, 2003 CA Resolution denied reconsideration. Hence, this Petition

ISSUE: whether respondent, who was the plaintiff in the trial court, was a real party in interest in the suit
to rescind the Deeds of Reconveyance.

HELD:
The Petition is meritorious.

Main Issue:

Real Party in Interest

Petitioners contend that respondent was not a trustor, and therefore not the real party in interest and
had no legal right to institute the suit.[27] The real parties in interest were Jennifer and Sarah Jane, to
whom the subject properties had been given as gifts.[28]

The controversy centers on Rule 3 of the Rules of Court, specifically an elementary rule in remedial law,
which is quoted as follows:

“Sec. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by
law or these Rules, every action must be prosecuted or defended in the name of the real party in
interest.”

As applied to the present case, this provision has two requirements: 1) to institute an action, the
plaintiff must be the real party in interest; and 2) the action must be prosecuted in the name of the real
party in interest.[29] Necessarily, the purposes of this provision are 1) to prevent the prosecution of
actions by persons without any right, title or interest in the case; 2) to require that the actual party
entitled to legal relief be the one to prosecute the action; 3) to avoid a multiplicity of suits; and 4) to
discourage litigation and keep it within certain bounds, pursuant to sound public policy.[30]

Interest within the meaning of the Rules means material interest or an interest in issue to be affected by
the decree or judgment of the case, as distinguished from mere curiosity about the question
involved.[31] One having no material interest to protect cannot invoke the jurisdiction of the court as
the plaintiff in an action.[32] When the plaintiff is not the real party in interest, the case is dismissible
on the ground of lack of cause of action.[33]

Action on Contracts

The parties to a contract are the real parties in interest in an action upon it, as consistently held by the
Court.[34] Only the contracting parties are bound by the stipulations in the contract;[35] they are the
ones who would benefit from and could violate it.[36] Thus, one who is not a party to a contract, and
for whose benefit it was not expressly made, cannot maintain an action on it. One cannot do so, even if
the contract performed by the contracting parties would incidentally inure to one’s benefit.[37]

As an exception, parties who have not taken part in a contract may show that they have a real interest
affected by its performance or annulment.[38] In other words, those who are not principally or
subsidiarily obligated in a contract, in which they had no intervention, may show their detriment that
could result from it.[39] Contracts pour autrui are covered by this exception.[40] In this latter instance,
the law requires that the “contracting parties must have clearly and deliberately conferred a favor upon
a third person.” A “mere incidental benefit is not enough.”

Action on the Contracts

Presently Involved

Respondent’s Complaint, entitled “Rescission of Contract & Recovery of Possession & Ownership of Two
Parcels of Land,” is clearly an action on a contract. The agreements sought to be rescinded[41] clearly
show that the parties to the Deeds of Absolute Sale were Jennifer and Sarah Jane Limbaring[42] as
vendors and Percita Oco as vendee. Clearly then, the action upon the contracts may -- as a rule -- be
instituted only by Jennifer and Sarah Jane against Percita.

Respondent is not a real party in interest. He was not a party to the contracts and has not
demonstrated any material interest in their fulfillment. Evidently, the allegations in the Complaint do
not show that the properties would be conveyed to him, even if Percita were to be proven to have
committed a breach of the subject agreements.

Trust Relationship
To show material interest, respondent argues that a trust was created when he purchased the
properties from Sabas Limbaring in favor of his daughters. As trustor, he allegedly stands to be
benefited or injured by any decision in the case.[43]

Trust is the legal relationship between one person who has equitable ownership of a property and
another who owns the legal title to the property.[44] The trustor is the one who establishes the trust;
the beneficiary, the person for whose benefit the trust was created; and the trustee, the one in whom,
by conferment of a legal title, confidence has been reposed as regards the property of the
beneficiary.[45]

Trusts may be either express or implied.[46] Express trusts are those created by direct and positive acts
of the parties, such as by some writing, deed or will; or by words either expressly or impliedly evidencing
an intention to create a trust. Implied trusts are those that, without being expressed, are deducible
from the nature of the transaction as matters of intent; or that are super-induced in the transaction by
operation of law as a matter of equity, independently of the particular intention of the parties.[47]

Respondent has presented only bare assertions that a trust was created. Noting the need to prove the
existence of a trust, this Court has held thus:

“As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such
proof must be clear and satisfactorily show the existence of the trust and its elements. While implied
trusts may be proved by oral evidence, the evidence must be trustworthy and received by the courts
with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations.
Trustworthy evidence is required because oral evidence can easily be fabricated.”[48]

On this point, the Civil Code states as follows:

“ART. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party
but the price is paid by another for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied
by law, it being disputably presumed that there is a gift in favor of the child.”

Under the last sentence of Article 1448, respondent’s alleged acts -- paying the price of the subject
properties and, in the titles, naming his children as owners -- raise the presumption that a gift was
effected in their favor. Respondent failed to rebut this presumption. Absent any clear proof that a trust
was created, he cannot be deemed a real party in interest.[49] That he should be deemed a trustor on
the basis merely of having paid the purchase price is plainly contradicted by the presumption based on
Article 1448 of the Civil Code “that there is a gift in favor of the child,” not a trust in favor of the parent.

Uy v. Court of Appeals, G.R. No. 120465, September 9, 1999

FACTS: Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the
owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba,
Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a
housing project.
But NHA only paid for 5 out of the eight lands because of the report1 [Exhibit "4."] it received from the
Land Geosciences Bureau of the Department of Environment and Natural Resources (DENR) that the
remaining area is located at an active landslide area and therefore, not suitable for development into a
housing project. The NHA cancelled the sale over the 3 parcels and offered 1.225 Million as damages.

On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of Quezon City a Complaint for
Damages against NHA and its General Manager Robert Balao.

After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial
court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount initially
offered by NHA to petitioners as damages.

Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a
new one dismissing the complaint. It held that since there was "sufficient justifiable basis" in cancelling
the sale, "it saw no reason" for the award of damages. The Court of Appeals also noted that petitioners
were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial
court.

Their motion for reconsideration having been denied, petitioners seek relief from this Court. Petitioners
claim that they lodged the complaint not in behalf of their principals but in their own name as agents
directly damaged by the termination of the contract. The damages prayed for were intended not for the
benefit of their principals but to indemnify petitioners for the losses they themselves allegedly incurred
as a result of such termination. These damages consist mainly of "unearned income" and advances.

ISSUE: WON the petitioner is a real party in interest

HELD:
We find this contention unmeritorious.

Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in
the name of the real party-in-interest. The real party-in-interest is the party who stands to be benefited
or injured by the judgment or the party entitled to the avails of the suit. "Interest," within the meaning
of the rule, means material interest, an interest in the issue and to be affected by the decree, as
distinguished from the mere interest in the question involved, or a mere incidental interest.6 [University
of the Philippines vs. Ligot-Telan, 227 SCRA 343 (1993); Ralla vs. Ralla, 199 SCRA 495 (1991); Rebollido
vs. Court of Appeals, 170 SCRA 800 (1989)] Cases construing the real party-in-interest provision can be
more easily understood if it is borne in mind that the true meaning of real party-in-interest may be
summarized as follows: An action shall be prosecuted in the name of the party who, by the substantive
law, has the right sought to be enforced.7 [1 Francisco, The Revised Rules of Court in the Phil., ed., p.
211. See also Lubbock Feed Lots, Inc. v. Iowa Beef Processors, 630 F. 2d 250 (1980)]

Do petitioners, under substantive law, possess the right they seek to enforce? We rule in the negative.

The applicable substantive law in this case is Article 1311 of the Civil Code, which states:

Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights
and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by
provision of law. x x x.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment
provided he communicated his acceptance to the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person.

Petitioners are not parties to the contract of sale between their principals and NHA. They are mere
agents of the owners of the land subject of the sale. As agents, they only render some service or do
something in representation or on behalf of their principals.8 [Article 1868, Civil Code.] The rendering of
such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a
contract may be violated only by the parties thereto as against each other, the real parties-in-interest,
either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said
contract.9 [Marimperio Compa¤ia Naviera, S.A. vs. Court of Appeals, 156 SCRA 368 (1987). See also 1
Moran, Comments on the Rules of Court, 1979 ed., p. 157.]

Neither has there been any allegation, much less proof, that petitioners are the heirs of their principals.

Are petitioners assignees to the rights under the contracts of sale? In McMicking vs. Banco Espa¤ol-
Filipino,10 [13 Phil. 429 (1909)] we held that the rule requiring every action to be prosecuted in the
name of the real party-in-interest

x x x recognizes the assignments of rights of action and also recognizes that when one has a right of
action assigned to him he is then the real party in interest and may maintain an action upon such claim
or right. The purpose of [this rule] is to require the plaintiff to be the real party in interest, or, in other
words, he must be the person to whom the proceeds of the action shall belong, and to prevent actions
by persons who have no interest in the result of the same. xxx

Thus, an agent, in his own behalf, may bring an action founded on a contract made for his principal, as
an assignee of such contract. We find the following declaration in Section 372 (1) of the Restatement of
the Law on Agency (Second):11 [As adopted and Promulgated by the American Law Institute at
Washington, D.C., May 23, 1957.]

Section 372. Agent as Owner of Contract Right.

(1) Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes
on behalf of his principal can, although not a promisee, maintain such action thereon as might a
transferee having a similar interest.

The Comment on subsection (1) states:

a. Agent a transferee. One who has made a contract on behalf of another may become an assignee of
the contract on behalf of another may become an assignee of the contract and bring suit against the
other party to it, as any other transferee. The customs of business or the course of conduct between the
principal and the agent may indicate that an agent who ordinarily has merely a security interest is a
transferee of the principals rights under the contract and as such is permitted to bring suit. If the agent
has settled with his principal with the understanding that he is to collect the claim against the obligor by
way of reimbursing himself for his advances and commissions, the agent is in the position of an assignee
who is the beneficial owner of the chose in action. He has an irrevocable power to sue in his principal's
name. x x x. And, under the statutes which permit the real party in interest to sue, he can maintain an
action in his own name. This power to sue is not affected by a settlement between the principal and the
obligor if the latter has notice of the agent's interest. x x x. Even though the agent has not settled with
his principal, he may, by agreement with the principal, have a right to receive payment and out of the
proceeds to reimburse himself for advances and commissions before turning the balance over to the
principal. In such a case, although there is no formal assignment, the agent is in the position of a
transferee of the whole claim for security; he has an irrevocable power to sue in his principal's name
and, under statutes which permit the real party in interest to sue, he can maintain an action in his own
name.

Petitioners, however, have not shown that they are assignees of their principals to the subject contracts.
While they alleged that they made advances and that they suffered loss of commissions, they have not
established any agreement granting them "the right to receive payment and out of the proceeds to
reimburse [themselves] for the advances and commissions before turning the balance over to the
principal[s]."

Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second
paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of
Absolute Sale "clearly and deliberately" conferring a favor to any third person.

That petitioners did not obtain their commissions or recoup their advances because of the non-
performance of the contract did not entitle them to file the action below against respondent NHA.
Section 372 (2) of the Restatement of the Law on Agency (Second) states:

(2) An agent does not have such an interest in a contract as to entitle him to maintain an action at law
upon it in his own name merely because he is entilted to a portion of the proceeds as compensation for
making it or because he is liable for its breach.

The following Comment on the above subsection is illuminating:

The fact that an agent who makes a contract for his principal will gain or suffer loss by the performance
or nonperformance of the contract by the principal or by the other party thereto does not entitle him to
maintain an action on his own behalf against the other party for its breach. An agent entitled to receive
a commission from his principal upon the performance of a contract which he has made on his
principal's account does not, from this fact alone, have any claim against the other party for breach of
the contract, either in an action on the contract or otherwise. An agent who is not a promisee cannot
maintain an action at law against a purchaser merely because he is entitled to have his compensation or
advances paid out of the purchase price before payment to the principal. x x x.

Thus, in Hopkins vs. Ives,12 [566 S.W. 2d 147.] the Supreme Court of Arkansas, citing Section 372 (2)
above, denied the claim of a real estate broker to recover his alleged commission against the purchaser
in an agreement to purchase property.

In Goduco vs. Court of Appeals,13 [10 SCRA 275 (1964)] this Court held that:

x x x granting that appellant had the authority to sell the property, the same did not make the buyer
liable for the commission she claimed. At most, the owner of the property and the one who promised to
give her a commission should be the one liable to pay the same and to whom the claim should have
been directed. xxx

As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the
contracts of sale, they do not, under substantive law, possess the right they seek to enforce. Therefore,
they are not the real parties-in-interest in this case.

Petitioners not being the real parties-in-interest, any decision rendered herein would be pointless since
the same would not bind the real parties-in-interest.14 [Filipinas Industrial Corporation vs. San Diego, 23
SCRA 706 (1968)]

Nevertheless, to forestall further litigation on the substantive aspects of this case, we shall proceed to
rule on the merits.

Accordingly, we hold that the NHA was justified in cancelling the contract. The realization of the mistake
as regards the quality of the land resulted in the negation of the motive/cause thus rendering the
contract inexistent.28 [Note that said contract is also avoidable under Article 1331 of the Civil Code
which states:

Art. 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing
which is the object of the contract, or to those conditions which have principally moved one or both
parties to enter into the contract. x x x] Article 1318 of the Civil Code states that:

Art. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established.

Therefore, assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they
would not be entitled to any award of damages.

Goco v. Court of Appeals, G.R. No. 157449, April 6, 2010

FACTS: In 1952, the Municipality of Calapan (now a City) acquired a one-half interest over Lot No. 2042
in satisfaction of a judgment award in its favor against Alveyra. Upon registration, however, the entire
Lot No. 2042 was included in Transfer Certificate of Title (TCT) No. 21306; OCT No. 529 was accordingly
cancelled.

To determine the extent of Alveyra and the Municipality of Calapan’s interest over Lot No. 2042, an
action to quiet title[2] was instituted, which case eventually reached the Court of Appeals (CA).[3] The
CA, in a decision dated October 28, 1974, subdivided Lot No. 2042 into two lots: one-half or Lot No.
2042-A (referring to the northern portion) was declared as the property of the heirs of Alveyra who had
since died, while the other half, Lot No. 2042-B (referring to the southern portion), was declared owned
by the Municipality of Calapan.
We affirmed the CA’s decision on February 23, 1976 in G.R. No. 40820.

Meanwhile, while the heirs of Alveyra and the Municipality of Calapan were litigating their conflicting
rights over Lot No. 2042, the heirs sold their one-half interest over the land (Lot No. 2042-A) to
respondent spouses Hicoblino and Lourdes Catly (respondent Catlys). Respondent Catlys then filed a
petition for judicial approval of the subdivision plan of Lot No. 2042-A.[4] On July 31, 1996, the trial
court approved the petition and ordered the subdivision of Lot No. 2042-A to into four lots and the
registration of four new titles under the name of the respondents.[5]

In 1999, respondent Catlys alleged that a portion of their Lot No. 2042-A was being occupied by the
petitioners and sought to recover possession of the lot, initially, by instituting an ejectment case against
the petitioners. [6] When the ejectment case was dismissed,[7] respondent Catlys then filed a
complaint for recovery of possession[8] against the petitioners; the case is still pending decision before
the Regional Trial Court (RTC) of Calapan City, Branch 39.

Allegedly to defend themselves against the cases filed by respondent Catlys and to protect their vested
rights as lawful occupants of the land, the petitioners filed a complaint for declaration of nullity of the
four certificates of title issued in respondent Caltys’ names.[9] The petitioners claimed they are
occupants of the original Lot No. 2042 since 1946 and anchored their continued right to occupy as
lessees of the Municipality of Calapan.

Respondent Catlys, in turn, moved for the dismissal of the complaint asserting that it failed to state a
cause of action and that the petitioners (plaintiffs below) were not the real parties in interest.

RTC Ruling
In its September 7, 1999 Order,[10] the Regional Trial Court (RTC) of Oriental Mindoro, Branch 39,
ordered the dismissal of the complaint for declaration of nullity of respondent Catlys’ titles. It found
that the petitioners were in fact occupying portions of respondent Catlys’ Lot No. 2042-A. Corollary to
this, it declared that the petitioners were not the real parties in interest who could assail and seek the
annulment of the respondents’ title.

The petitioners’ move to have the September 7, 1999 Order reconsidered was denied by the RTC in its
March 30, 2000 Order.[12] They sought the reversal of the trial court’s Orders by filing a petition for
certiorari under Rule 65 of the Rules of Court before the CA.

CA Ruling
In a decision dated October 7, 2002,[13] the CA dismissed the petition and affirmed the RTC’s dismissal
of the complaint for annulment of respondent Catlys’ titles. Ruling on the merits of case, the CA agreed
with the RTC that the petitioners have no cause of action against respondent Catlys. Even assuming that
a portion of respondent Catlys’ lot includes that belonging to the Municipality of Calapan, the
petitioners do not possess sufficient interest to assail respondent Catlys’ titles as they are mere lessees.

The petitioners filed a motion for reconsideration of the CA’s decision dated October 7, 2002.[14] The
CA denied the motion in a resolution dated March 6, 2003.[15] The petitioners now seek to reverse
these CA rulings before the Court via a petition for certiorari filed under Rule 65 of the Rules of Court.
The petitioners reiterate the same arguments they raised before the RTC and insist that they have
sufficient interest in praying for the annulment of respondent Catlys’ titles, as their vested rights have
been impaired.
ISSUE: WON the lessees are real party in interest in a complaint for annulment of title

HELD: The Court resolves to dismiss the petition.

An action for annulment of title, like any other civil action, must be instituted by the real party in
interest

Section 2, Rule 3 of the Rules of Court states:

Sec. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by
law or these Rules, every action must be prosecuted or defended in the name of the real party in
interest.

This provision has two requirements: 1) to institute an action, the plaintiff must be the real party in
interest; and 2) the action must be prosecuted in the name of the real party in interest. Interest within
the meaning of the Rules of Court means material interest or an interest in issue to be affected by the
decree or judgment of the case, as distinguished from mere curiosity about the question involved. One
having no material interest to protect cannot invoke the jurisdiction of the court as the plaintiff in an
action. When the plaintiff is not the real party in interest, the case is dismissible on the ground of lack of
cause of action.[21]

An action for annulment of certificates of title to property into the issue of ownership of the land
covered by a Torrens title and the relief generally prayed for by the plaintiff is to be declared as the
land’s true owner.[22] The real party in interest in such action therefore is the person claiming title or
ownership adverse to that of the registered owner. The case of Tankiko v. Cezar[23] has illustrated for
us the application of this principle in the following manner:

It is evident that respondents are not the real parties in interest. Because they admit that they are not
the owners of the land but mere applicants for sales patents thereon, it is daylight clear that the land is
public in character and that it should revert to the State. This being the case, Section 101 of the Public
Land Act categorically declares that only the government may institute an action to recover ownership
of a public land.
x x x x

Under Section 2, Rule 3 of the Rules of Court, every action must be prosecuted or defended in the name
of the real party in interest. It further defines a “real party in interest” as one who stands to be
benefited or injured by the judgment in the suit. x x x The interest of the party must be personal and
not one based on a desire to vindicate the constitutional right of some third and unrelated party.

Clearly, a suit filed by a person who is not a party in interest must be dismissed. Thus, in Lucas v. Durian,
the Court affirmed the dismissal of a Complaint filed by a party who alleged that the patent was
obtained by fraudulent means and, consequently, prayed for the annulment of said patent and the
cancellation of a certificate of title. The Court declared that the proper party to bring the action was the
government, to which the property would revert. Likewise affirming the dismissal of a Complaint for
failure to state a cause of action, the Court in Nebrada v. Heirs of Alivio noted that the plaintiff, being
a mere homestead applicant, was not the real party in interest to institute an action for reconveyance.
x x x x

Verily, the Court stressed that “if the suit is not brought in the name of or against the real party in
interest, a motion to dismiss may be filed on the ground that the complaint states no cause of
action.”[24] [Emphasis supplied.]

The petitioners demand the annulment of respondent Catlys’ titles because they allege that these
included portions belonging to the Municipality of Calapan. This allegation is a clear recognition of the
Municipality’s superior interest over the lot. In instituting the action for annulment of respondent
Catlys’ titles, what the petitioners are asserting is a right that is not personal to them, but to that of the
local government. That they are lessees who were granted by the Municipality of Calapan the option to
purchase the portion they occupy does not suffice to constitute as parties with material interest to
commence the action.

Tampico v. Intermediate Appellate Court, G.R. No. 76225, March 31, 1992
FACTS: On May 10, 1985, a complaint for payment of disturbance compensation with damages was filed
by petitioner Espiridion Tenpingco against respondent Benedicto Horca, Sr. with the Regional Trial Court
of Palo, Leyte.

It is alleged in the complaint that the petitioner is the tenant-lessee in the respondent's parcel of
agricultural riceland situated at Brgy. Buenavista, Jaro, Leyte under a leasehold contract entered into
sometime in April, 1976; that in a letter dated April 9, 1985, the respondent through his representative
informed him to desist from working on the subject land, having already donated the same on February
3, 1985; that the respondent openly ordered the petitioner to vacate the landholding and is determined
to oust him from the premises in violation of law; that the petitioner is willing to accept payment of
disturbance compensation in an amount computed in accordance with law and in the alternative to
remain as tenant-lessee of the subject riceland.

On July 5, 1985, the cage was called for pre-trial following which the trial court gave the respondent
until July 9, 1985 to file his answer. The respondent filed instead a Motion to Dismiss alleging principally
that the complaint states no cause of action because the respondent is not the real party-in-interest
having already donated the subject land to the Ministry of Education, Culture and Sports, Region VIII, as
a school site of the Buenavista Barangay High School; and that the donation not having in any way
benefited the respondent, no disturbance compensation is due the petitioner since under Section 36 (1)
of the Agrarian Reform Code as amended, disturbance compensation holds true only in cases wherein
the lessor-owner derives financial benefits from the conversion of the agricultural land into non-
agricultural purposes.

The trial court granted the respondent's Motion to Dismiss and denied the petitioner's Motion for
Reconsideration.

On June 20, 1986, the Intermediate Appellate Court rendered the decision now assailed which dismissed
the appeal.

ISSUE: WON the dismissal was proper

HELD:
We agree with the contentions of the private respondent. The petitioner should have impleaded the
Ministry of Education, Culture and Sports as the party-defendant for as stated in Roman Catholic
Archbishop of Manila v. Court of Appeals (198 SCRA 300 [1991]), a donation, as a mode of acquiring
ownership, results in an effective transfer of title over the property from the donor to the donee and
once a donation is accepted, the donee becomes the absolute owner of the property donated.

Under Article 428 of the New Civil Code, the owner has the right to dispose of a thing without other
limitations than those established by law. As an incident of ownership therefore, there is nothing to
prevent a landowner from donating his naked title to the land. However, the new owner must respect
the rights of the tenant. Section 7 of R.A. No. 3844, as amended (Code of Agrarian Reforms of the
Philippines) gives the agricultural lessee the right to work on the land holding once the leasehold
relationship is established. It also entitles him to security of tenure on his landholding. He can only be
ejected by the court for cause. Time and again, this Court has guaranteed the continuity and security of
tenure of a tenant even in cases of a mere transfer of legal possession. As elucidated in the case of
Bernardo v. Court of Appeals (168 SCRA 439 [1988]), security of tenure is a legal concession to
agricultural lessees which they value as life itself and deprivation of their land holdings is tantamount to
deprivation of their only means of livelihood. Also, under Section 10 of the same Act, the law explicitly
provides that the leasehold relation is not extinguished by the alienation or transfer of the legal
possession of the land holding. The only instances when the agricultural leasehold relationship is
extinguished are found in Sections 8, 28 and 36 of the Code of Agrarian Reforms of the Philippines. The
donation of the land did not terminate the tenancy relationship. However, the donation itself is valid.

Considering that the tenant in the case at bar is willing to accept payment of disturbance compensation
in exchange for his right to cultivate the land holding in question, the real issue is who should pay the
compensation. We rule that the Ministry of Education, Culture and Sports as the new owner cannot oust
the petitioner from the subject riceland and build a public high school thereon until after there is
payment of the disturbance compensation in accordance with Section 36 (1) of R.A. No. 3844, as
amended.

In view of the foregoing, we are of the opinion and so hold that the trial court correctly dismissed the
complaint for payment of disturbance compensation because the private respondent is not the real
party-in-interest. And having arrived at this conclusion, we do not deem it necessary to pass upon the
other errors assigned by the petitioner for as stated in Filamer Christian Institute v. Court of Appeals
(190 SCRA 485 [1990]), a person who was hot impleaded in the complaint could not be bound by the
decision rendered therein, for no man shall be affected by a proceeding to which he is a stranger. The
remedy then of the petitioner is to claim his disturbance compensation from the new owner or
whatever agency, local or national, is in a position to pay for it.

Salonga v. Warner, Barnes, G.R. No. L-2246, January 31, 1951

FACTS: On August 28, 1946, Westchester Fire Insurance Company of New York entered into a contract
with Tina J. Gamboa whereby said company insured one case of rayon yardage which said Tina J.
Gamboa shipped from San Francisco, California, on steamer Clovis Victory, to Manila, Philippines and
consigned to Jovito Salonga, plaintiff herein. According to the contract of insurance, the insurance
company undertook to pay to the sender or her consignee the damages that may be caused to the
goods shipped subject to the condition that the liability of the company will be limited to the actual loss
which the insured may suffer not to exceed the sum of P2,000. The ship arrived in Manila on September
10, 1946. On October 7, the shipment was examined by C. B. Nelson and Co., marine surveyors, at the
request of the plaintiff, and in their examination the surveyors found a shortage in the shipment in the
amount of P1,723.12. On October 9, plaintiff filed a claim for damages in the amount of P1,723.12
against the American President Lines, agents of the ship Clovis Victory, demanding settlement, and
when apparently no action was taken on this claim, plaintiff demanded payment thereof from Warner,
Barnes & Co., Ltd., as agent of the insurance company in the Philippines, and this agent having refused
to pay the claim, on April 17, 1947, plaintiff instituted the present action.

In the meantime, the American President Lines, in a letter dated November 25, 1946, agreed to pay to
the plaintiff the amount of P476.17 under its liability in the bill of lading, and when this offer was
rejected, the claim was finally settled in the amount of P1,021.25. As a result, the amount claimed in the
complaint as the ultimate liability of the defendant under the insurance contract was reduced to
P717.82 only.

CFI Manila Ruling

After trial, at which both parties presented their respective evidence, the court rendered judgment
ordering the defendant, as agent of Westchester Fire Insurance Company of New York, to pay to the
plaintiff the sum of P727.82

The motion for reconsideration filed by the defendant having been denied, the case was appealed to
this court.

Warner claims that it cannot be made responsible to pay the amount in litigation because (1) said
defendant has no contractual relation with either the plaintiff or his consignor; (2) the defendant is not
the real party in interest against whom the suit should be brought; and (3) a judgment for or against an
agent in no way binds the real party in interest.

ISSUE: WON defendant, as agent of Westchester Fire Insurance Company of New York, United States of
America, is responsible upon the insurance claim subject to the suit

HELD:

Counsel next contends that Warner, Barnes and Co., Ltd., is not the real party in interest against whom
the suit should be brought. It is claimed that this action should have been filed against its principal, the
Westchester Fire Insurance Company of New York. This point is also well taken. Section 2, Rule 3 of the
Rules of Court requires that "every action must be prosecuted in the name of the real party in interest."
A corollary proposition to this rule is that an action must be brought against the real party in interest, or
against a party which may be bound by the judgment to be rendered therein (Salmon & Pacific
Commercial Co. vs. Tan Cueco, 36 Phil., 556). The real party in interest is the party who would be
benefited or injured by the judgment, or the "party entitled to the avails of the suit" (1 Sutherland,
Court Pleading Practice & Forms, p. 11). And in the case at bar, the defendant issued upon in its capacity
as agent of Westchester Fire Insurance Company of New York in spite of the fact that the insurance
contract has not been signed by it. As we have said, the defendant did not assume any obligation
thereunder either as agent or as a principal. It cannot, therefore, be made liable under said contract,
and hence it can be said that this case was filed against one who is not the real party in interest.
We agree with counsel for the appellee that the defendant is a settlement and adjustment agent of the
foreign insurance company and that as such agent it has the authority to settle all the losses and claims
that may arise under the policies that may be issued by or in behalf of said company in accordance with
the instructions it may receive from time to time from its principal, but we disagree with counsel in his
contention that as such adjustment and settlement agent, the defendant has assumed personal liability
under said policies, and, therefore, it can be sued in its own right. An adjustment and settlement agent
is no different from any other agent from the point of view of his responsibility, for he also acts in a
representative capacity. Whenever he adjusts or settles a claim, he does it in behalf of his principal, and
his action is binding not upon himself but upon his principal. And here again, the ordinary rule of agency
applies. The following authorities bear this out:

"An insurance adjuster is ordinarily a special agent for the person or company for whom he acts, and his
authority is prima facie coextensive with the business intrusted to him. . . ."

"An adjuster does not discharge functions of a quasi-judicial nature, but represents his employer, to
whom he owes faithful service, and for his acts, in the employer's interest, the employer is responsible
so long as the acts are done while the agent is acting within the scope of his employment." (45 C. J. S.,
1338-1340.)

It, therefore, clearly appears that the scope and extent of the functions of an adjustment and settlement
agent do not include personal liability. His functions are merely to settle and adjusts claims in behalf of
his principal if those claims are proven and undisputed, and if the claim is disputed or is disapproved by
the principal, like in the instant case, the agent does not assume any personal liability. The recourse of
the insured is to press his claim against the principal

3. This brings us to the consideration of the third point. It is claimed that a judgment, for or against an
agent, in no way binds the real party in interest. In our opinion this point is also well taken, for it is but a
sequel to the principle we have pointed out above. The reason is obvious. An action is brought for a
practical purpose, nay to obtain actual and positive relief. If the party sued upon is not the proper party,
any decision that may be rendered against him would be futile, for it cannot be enforced or executed.
The effort that may be employed will be wasted. Such would be the result of this case if it will be
allowed to proceed against the defendant, for even if a favorable judgment is obtained against it, it
cannot be enforced because the real party is not involved. The defendant cannot be made to pay for
something it is not responsible. Thus, in the following authorities it was held:

". . . Section 114 of the Code of Civil Procedure requires an action to be brought in the name of the real
party in interest; and a corollary proposition requires that an action shall be brought against the persons
or entities which are to be bound by the judgment obtained therein. An action upon a cause of action
pertaining to his principal cannot be brought by an attorney-in-fact in his name (Arroyo vs. Granada and
Gentero, 18 Phil., 484); nor can an action based upon a right of action belonging to a principal be
brought in the name of his representative (Lichauco vs. Limjuco and Gonzalo, 19 Phil., 12). Actions must
be brought by the real parties in interest and against the persons who are to be bound by the judgment
obtained therein." (Salmon & Pacific Commercial Co. vs. Tan Cueco, 36 Phil., 557-558.)

xxx xxx xxx

"An action to set aside an instrument of transfer of land should be brought in the name of the real party
in interest. An apoderado or attorney in fact is not a real party. He has no interest in the litigation and
has absolutely no right to bring the defendant into court or to put him to the expense of a suit, and
there is no provision of law permitting action to be brought in such manner. A judgment for or against
the apoderado in no way binds or affects the real party, and a decision in the suit would be utterly futile.
It would touch no interest, adjust no question, bind no one, and settle no litigation. Courts should not be
required to spend their time solemnly considering and deciding cases where no one could be bound and
no interest affected by such deliberation and decision." (Arroyo vs. Granada and Gentero, 18 Phil., 484.)

If the case cannot be filed against the defendant as we have pointed out, what then is the remedy of the
plaintiff under the circumstances? Is the case of the plaintiff beyond remedy? We believe that the only
way by which the plaintiff can bring the principal into this case or make it come under the courts in this
jurisdiction is to follow the procedure indicated in section 14, Rule 7, of the Rules of Court concerning
litigations involving foreign corporations. This rule says that if the defendant is a foreign corporation and
it has not designated an agent in the Philippines on whom service may be made in case of litigation,
such service may be made on any agent it may have in the Philippines. And in our opinion the
Westchester Fire Insurance Company of New York comes within the import of this rule for even if it has
not designated an agent as required by law, it has however a settling agent who may serve the purpose.
In other words, an action may be brought against said insurance company in the Philippines and the
process may be served on the defendant to give our courts the necessary jurisdiction. This is the way we
have pointed out in the case of General Corporation of the Philippines & Mayon Investment Co. vs.
Union Insurance Society of Canton Ltd. et al., (87 Phil., 313).

In view of the foregoing, we are of the opinion and so hold that the lower court erred in holding the
defendant responsible for the loss or damage claimed in the complaint. And having arrived at this
conclusion, we do not deem it necessary to pass upon the other errors assigned by the appellant.

Sec. 1 (g), Rules of Court

Sec. 3. Representatives as parties

Ang v. Ang, G.R. No. 186993, August 22, 2012
FACTS: On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a loan in the amount of
Three Hundred Thousand U.S. Dollars (US$300,000.00) from Theodore and Nancy Ang (petitioners). On
even date, the respondents executed a promissory note5 in favor of the petitioners wherein they
promised to pay the latter the said amount, with interest at the rate of ten percent (10%) per annum,
upon demand. However, despite repeated demands, the respondents failed to pay the petitioners.

Thus, on August 28, 2006, the petitioners sent the respondents a demand letter asking them to pay their
outstanding debt which, at that time, already amounted to Seven Hundred Nineteen Thousand, Six
Hundred Seventy-One U.S. Dollars and Twenty-Three Cents (US$719,671.23), inclusive of the ten
percent (10%) annual interest that had accumulated over the years. Notwithstanding the receipt of the
said demand letter, the respondents still failed to settle their loan obligation.

On August 6, 2006, the petitioners, who were then residing in Los Angeles, California, United States of
America (USA), executed their respective Special Powers of Attorney in favor of Attorney Eldrige Marvin
B. Aceron (Atty. Aceron) for the purpose of filing an action in court against the respondents. On
September 15, 2006, Atty. Aceron, in behalf of the petitioners, filed a Complaint for collection of sum of
money with the RTC of Quezon City against the respondents.
On November 21, 2006, the respondents moved for the dismissal of the complaint filed by the
petitioners on the grounds of improper venue and prescription. Insisting that the venue of the
petitioners’ action was improperly laid, the respondents asserted that the complaint against them may
only be filed in the court of the place where either they or the petitioners reside. They averred that they
reside in Bacolod City while the petitioners reside in Los Angeles, California, USA. Thus, the respondents
maintain, the filing of the complaint against them in the RTC of Quezon City was improper.

The RTC Orders

On April 12, 2007, the RTC of Quezon City issued an Order which, inter alia, denied the respondents’
motion to dismiss reasoning that plaintiff Nancy Ang constituted Atty. Eldrige Marvin Aceron as her duly
appointed attorney-in-fact to prosecute her claim against herein defendants. Considering that the
address given by Atty. Aceron is in Quezon City, hence, being the plaintiff, venue of the action may lie
where he resides.

The respondents sought reconsideration of the RTC Order dated April 12, 2007, asserting that there is
no law which allows the filing of a complaint in the court of the place where the representative, who
was appointed as such by the plaintiffs through a Special Power of Attorney, resides.

The respondents’ motion for reconsideration was denied by the RTC of Quezon City in its Order12 dated
August 27, 2007.

The respondents then filed with the CA a petition for certiorari13 alleging in the main that, pursuant to
Section 2, Rule 4 of the Rules of Court, the petitioners’ complaint may only be filed in the court of the
place where they or the petitioners reside. Considering that the petitioners reside in Los Angeles,
California, USA, the respondents assert that the complaint below may only be filed in the RTC of Bacolod
City, the court of the place where they reside in the Philippines. They explained that Atty. Aceron, being
merely a representative of the petitioners, is not the real party in interest in the case below; accordingly,
his residence should not be considered in determining the proper venue of the said complaint.

The CA Decision
On August 28, 2008, the CA rendered the herein Decision,14 which annulled and set aside the Orders
dated April 12, 2007 and August 27, 2007 of the RTC of Quezon City and, accordingly, directed the
dismissal of the complaint filed by the petitioners. The CA held that the complaint below should have
been filed in Bacolod City and not in Quezon City.

The petitioners sought a reconsideration of the Decision dated August 28, 2008, but it was denied by the
CA in its Resolution dated February 20, 2009.

Hence, the instant petition.

Issue: WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF LAW WHEN IT
RULED THAT THE COMPLAINT MUST BE DISMISSED ON THE GROUND THAT VENUE WAS NOT PROPERLY
LAID

HELD: The petition is denied.

The petitioners’ complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.

It is a legal truism that the rules on the venue of personal actions are fixed for the convenience of the
plaintiffs and their witnesses. Equally settled, however, is the principle that choosing the venue of an
action is not left to a plaintiff’s caprice; the matter is regulated by the Rules of Court.19

The petitioners’ complaint for collection of sum of money against the respondents is a personal action
as it primarily seeks the enforcement of a contract. The Rules give the plaintiff the option of choosing
where to file his complaint. He can file it in the place (1) where he himself or any of them resides, or (2)
where the defendant or any of the defendants resides or may be found. The plaintiff or the defendant
must be residents of the place where the action has been instituted at the time the action is
commenced.20

However, if the plaintiff does not reside in the Philippines, the complaint in such case may only be filed
in the court of the place where the defendant resides. In Cohen and Cohen v. Benguet Commercial Co.,
Ltd.,21 this Court held that there can be no election as to the venue of the filing of a complaint when the
plaintiff has no residence in the Philippines. In such case, the complaint may only be filed in the court of
the place where the defendant resides. Thus:

Section 377 provides that actions of this character "may be brought in any province where the
defendant or any necessary party defendant may reside or be found, or in any province where the
plaintiff or one of the plaintiffs resides, at the election of the plaintiff." The plaintiff in this action has no
residence in the Philippine Islands. Only one of the parties to the action resides here. There can be,
therefore, no election by plaintiff as to the place of trial. It must be in the province where the defendant
resides. x x x.22 (Emphasis ours)

Here, the petitioners are residents of Los Angeles, California, USA while the respondents reside in
Bacolod City. Applying the foregoing principles, the petitioners’ complaint against the respondents may
only be filed in the RTC of Bacolod City – the court of the place where the respondents reside. The
petitioners, being residents of Los Angeles, California, USA, are not given the choice as to the venue of
the filing of their complaint.

Thus, the CA did not commit any reversible error when it annulled and set aside the orders of the RTC of
Quezon City and consequently dismissed the petitioners’ complaint against the respondents on the
ground of improper venue.

In this regard, it bears stressing that the situs for bringing real and personal civil actions is fixed by the
Rules of Court to attain the greatest convenience possible to the litigants and their witnesses by
affording them maximum accessibility to the courts.23 And even as the regulation of venue is primarily
for the convenience of the plaintiff, as attested by the fact that the choice of venue is given to him, it
should not be construed to unduly deprive a resident defendant of the rights conferred upon him by the
Rules of Court.24

Atty. Aceron is not a real party in

interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.

Contrary to the petitioners’ claim, Atty. Aceron, despite being the attorney-in-fact of the petitioners, is
not a real party in interest in the case below. Section 2, Rule 3 of the Rules of Court reads:

Sec. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by
law or these Rules, every action must be prosecuted or defended in the name of the real party in
interest. (Emphasis ours)

Interest within the meaning of the Rules of Court means material interest or an interest in issue to be
affected by the decree or judgment of the case, as distinguished from mere curiosity about the question
involved.25 A real party in interest is the party who, by the substantive law, has the right sought to be
enforced.26

Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in interest in the case below as
he does not stand to be benefited or injured by any judgment therein. He was merely appointed by the
petitioners as their attorney-in-fact for the limited purpose of filing and prosecuting the complaint
against the respondents. Such appointment, however, does not mean that he is subrogated into the
rights of petitioners and ought to be considered as a real party in interest.

Being merely a representative of the petitioners, Atty. Aceron in his personal capacity does not have the
right to file the complaint below against the respondents. He may only do so, as what he did, in behalf of
the petitioners – the real parties in interest. To stress, the right sought to be enforced in the case below
belongs to the petitioners and not to Atty. Aceron. Clearly, an attorney-in-fact is not a real party in
interest.27

The petitioner’s reliance on Section 3, Rule 3 of the Rules of Court to support their conclusion that Atty.
Aceron is likewise a party in interest in the case below is misplaced. Section 3, Rule 3 of the Rules of
Court provides that:

Sec. 3. Representatives as parties. – Where the action is allowed to be prosecuted and defended by a
representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of
the case and shall be deemed to be the real property in interest. A representative may be a trustee of an
expert trust, a guardian, an executor or administrator, or a party authorized by law or these Rules. An
agent acting in his own name and for the benefit of an undisclosed principal may sue or be sued without
joining the principal except when the contract involves things belonging to the principal. (Emphasis ours)

Nowhere in the rule cited above is it stated or, at the very least implied, that the representative is
likewise deemed as the real party in interest. The said rule simply states that, in actions which are
allowed to be prosecuted or defended by a representative, the beneficiary shall be deemed the real
party in interest and, hence, should be included in the title of the case.

Indeed, to construe the express requirement of residence under the rules on venue as applicable to the
attorney-in-fact of the plaintiff would abrogate the meaning of a "real party in interest", as defined in
Section 2 of Rule 3 of the 1997 Rules of Court vis-à-vis Section 3 of the same Rule.28
On this score, the CA aptly observed that:

As may be unerringly gleaned from the foregoing provisions, there is nothing therein that expressly
allows, much less implies that an action may be filed in the city or municipality where either a
representative or an attorney-in-fact of a real party in interest resides. Sec. 3 of Rule 3 merely provides
that the name or names of the person or persons being represented must be included in the title of the
case and such person or persons shall be considered the real party in interest. In other words, the
principal remains the true party to the case and not the representative. Under the plain meaning rule, or
verba legis, if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and
applied without interpretation. xxx29 (Citation omitted)

At this juncture, it bears stressing that the rules on venue, like the other procedural rules, are designed
to insure a just and orderly administration of justice or the impartial and even-handed determination of
every action and proceeding. Obviously, this objective will not be attained if the plaintiff is given
unrestricted freedom to choose the court where he may file his complaint or petition. The choice of
venue should not be left to the plaintiff's whim or caprice. He may be impelled by some ulterior
motivation in choosing to file a case in a particular court even if not allowed by the rules on venue.

Ching v. Court of Appeals, G.R. No. L-59731, January 11, 1990 (Supra.)
FACTS: In May 1960, Original Certificate of Title No. 2433 was issued to Maximo Nofuente and Dominga
Lumandan covering a parcel of land situated at Sitio of Kay-Biga, Barrio of San Dionisio, Municipality of
Parañaque, Province of Rizal, with an area of 51,852 square meters.

In August 1960, 5/6 portion of the property was reconveyed by said spouses to Francisco, Regina,
Perfecta, Constancio and Matilde all surnamed Nofuente and Transfer Certificate of Title No. 78633 was
issued on August 10, 1960 accordingly.

By virtue of a sale to Ching Leng with postal address at No. 44 Libertad Street, Pasay City, Transfer
Certificate of Title No. 91137 was issued on September 18, 1961 and T.C.T. No. 78633 was deemed
cancelled.

On October 19, 1965, Ching Leng died in Boston, Massachusetts, United States of America. His
legitimate son Alfredo Ching became the administrator of his estate which included the land covered by
T.C.T. No. 91137.

Thirteen (13) years after Ching Leng's death, a suit against him was commenced on December 27, 1978
by private respondent Pedro Asedillo with the Court of First Instance of Rizal (now RTC), Branch XXVII,
Pasay City for reconveyance of the abovesaid property and cancellation of T.C.T. No. 91137 in his favor
based on possession. Ching Leng was summoned by publication but he did not make an appearance.
Hence, the court a quo in its order dated May 25, 1979, allowed the presentation of evidence ex-parte.
A judgment by default was rendered on June 15, 1979. Asedillo was declared the owner of the property
and TCT 91137 was cancelled. A new Transfer Certificate of Title was issued in favor of Pedro Asedillo (p.
77, CA Rollo) who subsequently sold the property to Villa Esperanza Development, Inc. on September 3,
1979.
On October 29, 1979 petitioner Alfredo Ching learned of the abovestated decision. He filed a verified
petition on November 10, 1979 to set it aside as null and void for lack of jurisdiction which was granted
by the court on May 29, 1980.

On motion of counsel for private respondent the said order of May 29, 1980 was reconsidered and set
aside, the decision dated June 15, 1979 aforequoted reinstated in the order dated September 2, 1980.

On October 30, 1980, petitioner filed a motion for reconsideration of the said latter order but the same
was denied by the trial court on April 12, 1981 (pp. 77-79, Ibid.).

Petitioner filed an original petition for certiorari with the Court of Appeals but the same was dismissed
on September 30, 1981. His motion for reconsideration was likewise denied or February 10, 1982 (pp.
81-90, Ibid.).

Private respondent Pedro Asedillo died on June 7, 1981 at Makati, Metro Manila during the pendency of
the case with the Court of Appeals (p. 106, CA Rollo).

Hence, the instant petition.

Petitioner raised the following:

ASSIGNMENTS OF ERROR

WHETHER OR NOT A DEAD MAN CHING LENG AND/OR HIS ESTATE MAY BE VALIDLY SERVED WITH
SUMMONS AND DECISION BY PUBLICATION.

II

WHETHER OR NOT AN ACTION FOR RECONVEYANCE OF PROPERTY AND CANCELLATION OF TITLE IS IN

PERSONAM, AND IF SO, WOULD A DEAD MAN AND/OR HIS ESTATE BE BOUND BY SERVICE OF
SUMMONS AND DECISION BY PUBLICATION.

III

WHETHER OR NOT THE PROCEEDINGS FOR RECONVEYANCE AND CANCELLATION OF TITLE CAN BE HELD
EX-PARTE.

IV

WHETHER OR NOT THE TRIAL COURT ACQUIRED JURISDICTION OVER THE SUBJECT MATTER AND THE
PARTIES.

V
WHETHER OR NOT PRIVATE RESPONDENT IS GUILTY OF LACHES IN INSTITUTING THE ACTION FOR
RECONVEYANCE AFTER THE LAPSE OF 19 YEARS FROM THE TIME THE DECREE OF REGISTRATION WAS
ISSUED.

HELD:

Private respondent's action for reconveyance and cancellation of title being in personam, the judgment
in question is null and void for lack of jurisdiction over the person of the deceased defendant Ching
Leng. Verily, the action was commenced thirteen (13) years after the latter's death. As ruled by this
Court in Dumlao v. Quality Plastic Products, Inc. (70 SCRA 475 [1976]) the decision of the lower court
insofar as the deceased is concerned, is void for lack of jurisdiction over his person. He was not, and he
could not have been validly served with summons. He had no more civil personality. His juridical
personality, that is fitness to be subject of legal relations, was lost through death (Arts. 37 and 42 Civil
Code).

The same conclusion would still inevitably be reached notwithstanding joinder of Ching Leng's estate as
co-defendant. It is a well-settled rule that an estate can sue or be sued through an executor or
administrator in his representative capacity (21 Am. Jr. 872). Contrary to private respondent's claims,
deceased Ching Leng is a resident of 44 Libertad Street, Pasay City as shown in his death certificate and
T.C.T. No. 91137 and there is an on-going intestate proceedings in the same court, Branch III
commenced in 1965, and notice of hearing thereof duly published in the same year. Such misleading and
misstatement of facts demonstrate lack of candor on the part of private respondent and his counsel,
which is censurable.

The complaint for cancellation of Ching Leng's Torrens Title must be filed in the original land registration
case, RTC, Pasig, Rizal, sitting as a land registration court in accordance with Section 112 of the Land
Registration Act (Act No. 496, as amended) not in CFI Pasay City in connection with, or as a mere
incident in Civil Case No. 6888-P (Estanislao v. Honrado, 114 SCRA 748 [1982]).

Section 112 of the same law requires "notice to all parties in interest." Since Ching Leng was already in
the other world when the summons was published he could not have been notified at all and the trial
court never acquired jurisdiction over his person. The ex-parte proceedings for cancellation of title could
not have been held (Estanislao v. Honrado, supra).

The petition to set aside the judgment for lack of jurisdiction should have been granted and the
amended complaint of private respondent based on possession and filed only in 1978 dismissed
outrightly. Ching Leng is an innocent purchaser for value as shown by the evidence adduced in his behalf
by petitioner herein, tracing back the roots of his title since 1960, from the time the decree of
registration was issued.

The sole remedy of the landowner whose property has been wrongfully or erroneously registered in
another's name - after one year from the date of the decree - is not to set aside the decree, but
respecting the decree as incontrovertible and no longer open to review, to bring an ordinary action in
the ordinary court of justice for damages if the property has passed unto the hands of an innocent
purchaser for value (Sy, Sr. v. Intermediate Appellate Court, G.R. No. 66742; Teoville Development
Corporation v. IAC, et al., G.R. No. 75011, June 16, 1988).
Failure to take steps to assert any rights over a disputed land for 19 years from the date of registration
of title is fatal to the private respondent's cause of action on the ground of laches. Laches is the failure
or neglect, for an unreasonable length of time to do that which by exercising due diligence could or
should have been done, earlier; it is negligence or omission to assert a right within a reasonable time
warranting a presumption that the party entitled to assert it either has abandoned it or declined to
assert it (Bailon-Casilao v. Court of Appeals, G.R. No. 78178, April 15, 1988; Villamor v. Court of Appeals,
G.R. No. 41508, June 27, 1988).

MIA v. Rivera Village, G.R. No. 143870, September 30, 2005

FACTS: The then Civil Aeronautics Administration (CAA) was entrusted with the administration,
operation, management, control, maintenance and development of the Manila International Airport
(MIA), now the Ninoy Aquino International Airport. Among its powers was the power to enter into,
make and execute concessions and concession rights for purposes essential to the operation of the
airport.

On May 25, 1965, the CAA, through its Director, Capt. Vicente C. Rivera, entered into individual lease
contracts with its employees (lessees) for the lease of portions of a four (4)-hectare lot situated in what
is now known as Rivera Village located in Barangay 199 and 200 in Pasay City. The leases were for a
twenty-five (25)-year period to commence on May 25, 1965 up to May 24, 1990 at P20.00[3] per annum
as rental.

On May 4, 1982, Executive Order No. (EO) 778 was issued (later amended by EO 903 on July 21, 1983),
creating petitioner MIAA, transferring existing assets of the MIA to MIAA, and vesting the latter with the
power to administer and operate the MIA.

Sometime in January 1995, MIAA stopped issuing accrued rental bills and refused to accept rental
payments from the lessees. As a result, respondent Rivera Village Lessee Homeowners Association, Inc.
(homeowners association), purportedly representing the lessees, requested MIAA to sell the subject
property to its members, invoking the provisions of Presidential Decree No. (PD) 1517 or the Urban Land
Reform Act and PD 2016.

The MIAA, on February 14, 1996, denied the request, claiming that the subject property is included in its
Conceptual Development Plan intended for airport-related activities.

Respondent then filed a petition for mandamus and prohibition with prayer for the issuance of a
preliminary injunction against MIAA and the National Housing Authority (NHA) in the Regional Trial
Court of Pasay City, Branch 109, sought to restrain the MIAA from implementing its Conceptual
Development Plan insofar as Rivera Village is concerned.

MIAA filed an answer alleging that the petition fails to state a cause of action in view of the expiration of
the lease contracts and the lack of personality to sue of the homeowners association. MIAA also claimed
that the homeowners association is not entitled to a writ of mandamus because it does not have a clear
legal right to possess the subject property and MIAA does not have a corresponding duty to segregate
Rivera Village from its Conceptual Development Plan.

RTC Ruling
A preliminary hearing on MIAA’s affirmative defenses was conducted, after which the trial court issued
an Order dated October 12, 1998, denying the prayer for the issuance of a temporary restraining order
and/or writ of preliminary injunction and dismissing the petition for lack of merit. The trial court held
that PD 1818 bars the issuance of a restraining order, preliminary injunction or preliminary mandatory
injunction in any case, dispute or controversy involving infrastructure projects of the government or any
public utility operated by the government. It also ruled that the petition failed to state a cause of action
inasmuch as petitioner therein (respondent homeowners association) is not the real party-in-interest,
the individual members of the association being the ones who have possessory rights over their
respective premises. Moreover, the lease contracts have already expired.

CA Ruling
Respondent filed an appeal with the Court of Appeals, interposing essentially the same arguments
raised before the trial court. The appellate court annulled and set aside the order of the trial court and
remanded the case for further proceedings. The appellate court foremost ruled that the case can be
construed as a class suit instituted by the Rivera Village lessees. The homeowners association,
considered as the representative of the lessees, merely instituted the suit for the benefit of its
members. It does not claim to have any right or interest in the lots occupied by the lessees, nor seek the
registration of the titles to the land in its name.

MIAA now seeks a review of the Decision of the Court of Appeals.

It argues that the petition filed by the homeowners association with the trial court fails to state a cause
of action because the homeowners association is not the real party-in-interest in the suit. Allegedly, the
Board Resolution presented by respondent shows that it was only the board of directors of the
association, as distinguished from the members thereof, which authorized respondent to act as its
representative in the suit.

ISSUE: Did the petition filed by respondent with the trial court state a cause of action against petitioner?

HELD:

The 1997 Rules of Civil Procedure (Rules of Court) requires that every action must be prosecuted or
defended in the name of the real party-in-interest, i.e., the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit.[15] A case is dismissible for
lack of personality to sue upon proof that the plaintiff is not the real party-in-interest, hence grounded
on failure to state a cause of action.[16]

The petition before the trial court was filed by the homeowners association, represented by its
President, Panfilo R. Chiutena, Sr., upon authority of a Board Resolution empowering the latter to file
“[A]ll necessary action to the Court of Justice and other related acts necessary to have our Housing
Project number 4 land be titled to the members of the Association.”

Obviously, the petition cannot be considered a class suit under Sec. 12, Rule 3[17] of the Rules of Court,
the requisites therefor not being present in the case, notably because the petition does not allege the
existence and prove the requisites of a class suit, i.e., that the subject matter of the controversy is one
of common or general interest to many persons and the parties are so numerous that it is impracticable
to bring them all before the court, and because it was brought only by one party.
In Board of Optometry v. Colet,[18] we held that courts must exercise utmost caution before allowing a
class suit, which is the exception to the requirement of joinder of all indispensable parties. For while no
difficulty may arise if the decision secured is favorable to the plaintiffs, a quandary would result if the
decision were otherwise as those who were deemed impleaded by their self-appointed representatives
would certainly claim denial of due process.

There is, however, merit in the appellate court’s pronouncement that the petition should be construed
as a suit brought by the homeowners association as the representative of the members thereof under
Sec. 3, Rule 3 of the Rules of Court, which provides:

Sec. 3. Representatives as parties.—Where the action is allowed to be prosecuted or defended by a

representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of
the case and shall be deemed to be the real party in interest. A representative may be a trustee of an
express trust, a guardian, an executor or administrator, or a party authorized by law or these Rules. An
agent acting in his own name and for the benefit of an undisclosed principal may sue or be sued without
joining the principal except when the contract involves things belonging to the principal. [ mphasis
supplied.]

It is a settled rule that every action must be prosecuted or defended in the name of the real party-in-
interest. Where the action is allowed to be prosecuted or defended by a representative acting in a
fiduciary capacity, the beneficiary must be included in the title of the case and shall be deemed to be
the real party-in-interest. The name of such beneficiaries shall, likewise, be included in the
complaint.[19]

Moreover, Sec. 4, Rule 8 of the Rules of Court provides that facts showing the capacity of a party to sue
or be sued, or the authority of a party to sue or be sued in a representative capacity must be averred in
the complaint. In order to maintain an action in a court of justice, the plaintiff must have an actual legal
existence, that is, he or she or it must be a person in law and possessed of a legal entity as either a
natural or an artificial person. The party bringing suit has the burden of proving the sufficiency of the
representative character that he claims. If a complaint is filed by one who claims to represent a party as
plaintiff but who, in fact, is not authorized to do so, such complaint is not deemed filed and the court
does not acquire jurisdiction over the complaint. It must be stressed that an unauthorized complaint
does not produce any legal effect.[20]

In this case, the petition filed with the trial court sufficiently avers that the homeowners association,
through its President, is suing in a representative capacity as authorized under the Board Resolution
attached to the petition. Although the names of the individual members of the homeowners
association who are the beneficiaries and real parties-in-interest in the suit were not indicated in the
title of the petition, this defect can be cured by the simple expedient of requiring the association to
disclose the names of the principals and to amend the title and averments of the petition accordingly.

Essentially, the purpose of the rule that actions should be brought or defended in the name of the real
party-in-interest is to protect against undue and unnecessary litigation and to ensure that the court will
have the benefit of having before it the real adverse parties in the consideration of a case. This rule,
however, is not to be narrowly and restrictively construed, and its application should be neither
dogmatic nor rigid at all times but viewed in consonance with extant realities and practicalities.[21] As
correctly noted by the Court of Appeals, the dismissal of this case based on the lack of personality to sue
of petitioner-association will only result in the filing of multiple suits by the individual members of the
association.

Mandamus
A writ of mandamus can be issued only when petitioner’s legal right to the performance of a particular
act which is sought to be compelled is clear and complete. A clear legal right is a right which is
indubitably granted by law or is inferable as a matter of law.[28]

In order that a writ of mandamus may aptly issue, it is essential that, on the one hand, petitioner has a
clear legal right to the claim that is sought and that, on the other hand, respondent has an imperative
duty to perform that which is demanded of him. Mandamus will not issue to enforce a right, or to
compel compliance with a duty, which is questionable or over which a substantial doubt exists. The
principal function of the writ of mandamus is to command and to expedite, not to inquire and to
adjudicate. Thus, it is neither the office nor the aim of the writ to secure a legal right but to implement
that which is already established. Unless the right to relief sought is unclouded, mandamus will not
issue.

In this case, the Court of Appeals itself conceded that no definitive ruling as regards the rights of the
individual members of the homeowners association could yet be made considering the need for a full
determination of whether their claimed rights under the pertinent laws have ripened into actual legal
and vested rights. The appellate court even outlined the requisites under PD 1517 which have yet to be
complied with, namely: (1) the submission to the NHA of a proposal to acquire the subject property as
required under Sec. 9[29] of PD 1517;

and (2) proof that the members of the homeowners association are qualified to avail of the benefits
under PD 1517 as mandated by Sec. 6[30] of the same law.

Resort to mandamus is evidently premature because there is no showing that the members of the
homeowners association have already filed an application or proposal with the NHA to acquire their
respective lots. There is still an administrative remedy open to the members of the homeowners
association which they should have first pursued, failing which they cannot invoke judicial action.[

Executive Secretary must be impleaded

EO 903, which transferred to MIAA the properties and assets of MIA, specifically requires the approval
of the President of the Philippines before any disposition by sale or any other mode may be made
concerning the property transferred to MIAA.

The Executive Secretary as representative of the President of the Philippines is, therefore, an
indispensable party in actions seeking to compel the sale or disposition of properties of the MIAA.
Section 7, Rule 3 of the Rules of Court provides that parties-in-interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.

Thus, the presence of all indispensable parties is a condition sine qua non for the exercise of judicial
power. It is precisely when an indispensable party is not before the court that the action should be
dismissed. The plaintiff is mandated to implead all indispensable parties, and the absence of one renders
all subsequent actions of the court null and void for want of authority to act, not only as to the absent
parties, but even as to those present. One who is a party to a case is not bound by any decision of the
court; otherwise, he will be deprived of his right to due process
Sec. 4. Spouses as parties
Husband and wife shall sue or be sued jointly, except as provided by law.

Carandang v. Heirs of de Guzman, G.R. No. 160347, November 29, 2006

FACTS: [Quirino de Guzman] and [the Spouses Carandang] are stockholders as well as corporate officers
of Mabuhay Broadcasting System (MBS for brevity), with equities at fifty four percent (54%) and forty six
percent (46%) respectively.

When the capital stock of MBS was increased, Carandang subscribed to the new issued capital stock. [De
Guzman] claims that, part of the payment for these subscriptions were paid by him, P293,250 for the
November 26, 1983 capital stock increase and P43,125 for the March 3, 1989 Capital Stock increase or a
total of P336,375. Thus, on March 31, 1992, [de Guzman] sent a demand letter to [the spouses
Carandang] for the payment of said total amount.

[The spouses Carandang] refused to pay the amount, contending that a pre-incorporation agreement
was executed between [Arcadio Carandang] and [de Guzman], whereby the latter promised to pay for
the stock subscriptions of the former without cost, in consideration for [Arcadio Carandang’s] technical
expertise, his newly purchased equipment, and his skill in repairing and upgrading radio/communication
equipment therefore, there is no indebtedness on their part [sic].

On June 5, 1992, [de Guzman] filed his complaint, seeking to recover the P336,375 together with
damages. After trial on the merits, the trial court disposed of the case in favor of [de Guzman].

The spouses Carandang appealed the RTC Decision to the Court of Appeals, which affirmed the same in
the 22 April 2003 assailed Decision. The Motion for Reconsideration filed by the spouses Carandang was
similarly denied by the Court of Appeals in the 6 October 2003 assailed Resolution

The spouses Carandang then filed before this Court the instant Petition for Review on Certiorari. The
spouses Carandang claims that the Decision of the RTC, having been rendered after the death of Quirino
de Guzman, is void for failing to comply with Section 16, Rule 3 of the Rules of Court because there had
been no valid substitution by the heirs of the deceased party. The Spouses Carandang also contend that
the case failed to state a cause of action because Milagros de Guzman was not included as party-
plaintiff.

ISSUES:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN FAILING TO
STRICTLY COMPLY WITH SECTION 16, RULE 3 OF THE 1997 RULES OF CIVIL PROCEDURE.

Whether or not the RTC should have dismissed the case for failure to state a cause of action, considering
that Milagros de Guzman, allegedly an indispensable party, was not included as a party-plaintiff

HELD:
Substitution
SEC. 16. Death of party; duty of counsel. – Whenever a party to a pending action dies, and the claim is
not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days
after such death of the fact thereof, and to give the name and address of his legal representative or
representatives. Failure of counsel to comply with this duty shall be a ground for disciplinary action.

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator and the court may appoint a guardian ad litem for the
minor heirs.

The court shall forthwith order the legal representative or representatives to appear and be substituted
within a period of thirty (30) days from notice.

If no legal representative is named by the counsel for the deceased party, or if the one so named shall
fail to appear within the specified period, the court may order the opposing party, within a specified
time, to procure the appointment of an executor or administrator for the estate of the deceased and the
latter shall immediately appear for and on behalf of the deceased. The court charges in procuring such
appointment, if defrayed by the opposing party, may be recovered as costs.

The spouses Carandang posits that such failure to comply with the above rule renders void the decision
of the RTC, in adherence to the following pronouncements in Vda. de Haberer v. Court of Appeals[5] and
Ferreria v. Vda. de Gonzales[6]:

Thus, it has been held that when a party dies in an action that survives and no order is issued by the
court for the appearance of the legal representative or of the heirs of the deceased in substitution of the
deceased, and as a matter of fact no substitution has ever been effected, the trial held by the court
without such legal representatives or heirs and the judgment rendered after such trial are null and void
because the court acquired no jurisdiction over the persons of the legal representatives or of the heirs
upon whom the trial and judgment would be binding.[7]

In the present case, there had been no court order for the legal representative of the deceased to
appear, nor had any such legal representative appeared in court to be substituted for the deceased;
neither had the complainant ever procured the appointment of such legal representative of the
deceased, including appellant, ever asked to be substituted for the deceased. As a result, no valid
substitution was effected, consequently, the court never acquired jurisdiction over appellant for the
purpose of making her a party to the case and making the decision binding upon her, either personally
or as a representative of the estate of her deceased mother.[8]

However, unlike jurisdiction over the subject matter which is conferred by law and is not subject to the
discretion of the parties,[9] jurisdiction over the person of the parties to the case may be waived either
expressly or impliedly.[10] Implied waiver comes in the form of either voluntary appearance or a failure
to object.[11]

In the cases cited by the spouses Carandang, we held that there had been no valid substitution by the
heirs of the deceased party, and therefore the judgment cannot be made binding upon them. In the
case at bar, not only do the heirs of de Guzman interpose no objection to the jurisdiction of the court
over their persons; they are actually claiming and embracing such jurisdiction. In doing so, their waiver
is not even merely implied (by their participation in the appeal of said Decision), but express (by their
explicit espousal of such view in both the Court of Appeals and in this Court). The heirs of de Guzman
had no objection to being bound by the Decision of the RTC.

Thus, lack of jurisdiction over the person, being subject to waiver, is a personal defense which can only
be asserted by the party who can thereby waive it by silence.

It also pays to look into the spirit behind the general rule requiring a formal substitution of heirs. The
underlying principle therefor is not really because substitution of heirs is a jurisdictional requirement,
but because non-compliance therewith results in the undeniable violation of the right to due process of
those who, though not duly notified of the proceedings, are substantially affected by the decision
rendered therein.[12] Such violation of due process can only be asserted by the persons whose rights
are claimed to have been violated, namely the heirs to whom the adverse judgment is sought to be
enforced.

Care should, however, be taken in applying the foregoing conclusions. In People v. Florendo,[13] where
we likewise held that the proceedings that took place after the death of the party are void, we gave
another reason for such nullity: “the attorneys for the offended party ceased to be the attorneys for the
deceased upon the death of the latter, the principal x x x.” Nevertheless, the case at bar had already
been submitted for decision before the RTC on 4 June 1998, several months before the passing away of
de Guzman on 19 February 1999. Hence, no further proceedings requiring the appearance of de
Guzman’s counsel were conducted before the promulgation of the RTC Decision. Consequently, de
Guzman’s counsel cannot be said to have no authority to appear in trial, as trial had already ceased
upon the death of de Guzman.

In sum, the RTC Decision is valid despite the failure to comply with Section 16, Rule 3 of the Rules of
Court, because of the express waiver of the heirs to the jurisdiction over their persons, and because
there had been, before the promulgation of the RTC Decision, no further proceedings requiring the
appearance of de Guzman’s counsel.

Spouses as parties
The spouses Carandang claim that, since three of the four checks used to pay their stock subscriptions
were issued in the name of Milagros de Guzman, the latter should be considered an indispensable party.
Being such, the spouses Carandang claim, the failure to join Mrs. de Guzman as a party-plaintiff should
cause the dismissal of the action because “(i)f a suit is not brought in the name of or against the real
party in interest, a motion to dismiss may be filed on the ground that the complaint states no cause of
action.”[14]

The Court of Appeals held:

We disagree. The joint account of spouses Quirino A de Guzman and Milagros de Guzman from which
the four (4) checks were drawn is part of their conjugal property and under both the Civil Code and the
Family Code the husband alone may institute an action for the recovery or protection of the spouses’
conjugal property.

Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held that “x x x Under the New Civil
Code, the husband is the administrator of the conjugal partnership. In fact, he is the sole administrator,
and the wife is not entitled as a matter of right to join him in this endeavor. The husband may defend
the conjugal partnership in a suit or action without being joined by the wife. x x x Under the Family
Code, the administration of the conjugal property belongs to the husband and the wife jointly.
However, unlike an act of alienation or encumbrance where the consent of both spouses is required,
joint management or administration does not require that the husband and wife always act together.
Each spouse may validly exercise full power of management alone, subject to the intervention of the
court in proper cases as provided under Article 124 of the Family Code. x x x.”

The Court of Appeals is correct. Petitioners erroneously interchange the terms “real party in interest”
and “indispensable party.” A real party in interest is the party who stands to be benefited or injured by
the judgment of the suit, or the party entitled to the avails of the suit.[15] On the other hand, an
indispensable party is a party in interest without whom no final determination can be had of an
action,[16] in contrast to a necessary party, which is one who is not indispensable but who ought to be
joined as a party if complete relief is to be accorded as to those already parties, or for a complete
determination or settlement of the claim subject of the action.[17]

The spouses Carandang are indeed correct that “(i)f a suit is not brought in the name of or against the
real party in interest, a motion to dismiss may be filed on the ground that the complaint states no cause
of action.”[18] However, what dismissal on this ground entails is an examination of whether the parties
presently pleaded are interested in the outcome of the litigation, and not whether all persons interested
in such outcome are actually pleaded. The latter query is relevant in discussions concerning
indispensable and necessary parties, but not in discussions concerning real parties in interest. Both
indispensable and necessary parties are considered as real parties in interest, since both classes of
parties stand to be benefited or injured by the judgment of the suit.

Quirino and Milagros de Guzman were married before the effectivity of the Family Code on 3 August
1988. As they did not execute any marriage settlement, the regime of conjugal partnership of gains
govern their property relations.[19]

All property acquired during the marriage, whether the acquisition appears to have been made,
contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the
contrary is proved.[20] Credits are personal properties,[21] acquired during the time the loan or other
credit transaction was executed. Therefore, credits loaned during the time of the marriage are
presumed to be conjugal property.

Consequently, assuming that the four checks created a debt for which the spouses Carandang are liable,
such credits are presumed to be conjugal property. There being no evidence to the contrary, such
presumption subsists. As such, Quirino de Guzman, being a co-owner of specific partnership
property,[22] is certainly a real party in interest. Dismissal on the ground of failure to state a cause of
action, by reason that the suit was allegedly not brought by a real party in interest, is therefore
unwarranted.

So now we come to the discussion concerning indispensable and necessary parties. When an
indispensable party is not before the court, the action should likewise be dismissed.[23] The absence of
an indispensable party renders all subsequent actuations of the court void, for want of authority to act,
not only as to the absent parties but even as to those present.[24] On the other hand, the non-joinder
of necessary parties do not result in the dismissal of the case. Instead, Section 9, Rule 3 of the Rules of
Court provides for the consequences of such non-joinder:
Sec. 9. Non-joinder of necessary parties to be pleaded. – Whenever in any pleading in which a claim is
asserted a necessary party is not joined, the pleader shall set forth his name, if known, and shall state
why he is omitted. Should the court find the reason for the omission unmeritorious, it may order the
inclusion of the omitted necessary party if jurisdiction over his person may be obtained.

The failure to comply with the order for his inclusion, without justifiable cause, shall be deemed a waiver
of the claim against such party.

The non-inclusion of a necessary party does not prevent the court from proceeding in the action, and
the judgment rendered therein shall be without prejudice to the rights of such necessary party.

Non-compliance with the order for the inclusion of a necessary party would not warrant the dismissal of
the complaint. This is an exception to Section 3, Rule 17 which allows the dismissal of the complaint for
failure to comply with an order of the court, as Section 9, Rule 3 specifically provides for the effect of
such non-inclusion: it shall not prevent the court from proceeding in the action, and the judgment
rendered therein shall be without prejudice to the rights of such necessary party. Section 11, Rule 3
likewise provides that the non-joinder of parties is not a ground for the dismissal of the action.

Other than the indispensable and necessary parties, there is a third set of parties: the pro-forma parties,
which are those who are required to be joined as co-parties in suits by or against another party as may
be provided by the applicable substantive law or procedural rule.[25] An example is provided by Section
4, Rule 3 of the Rules of Court:

Sec. 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided by law.

Pro-forma parties can either be indispensable, necessary or neither indispensable nor necessary. The
third case occurs if, for example, a husband files an action to recover a property which he claims to be
part of his exclusive property. The wife may have no legal interest in such property, but the rules
nevertheless require that she be joined as a party.

In cases of pro-forma parties who are neither indispensable nor necessary, the general rule under
Section 11, Rule 3 must be followed: such non-joinder is not a ground for dismissal. Hence, in a case
concerning an action to recover a sum of money, we held that the failure to join the spouse in that case
was not a jurisdictional defect.[26] The non-joinder of a spouse does not warrant dismissal as it is
merely a formal requirement which may be cured by amendment.[27]

Conversely, in the instances that the pro-forma parties are also indispensable or necessary parties, the
rules concerning indispensable or necessary parties, as the case may be, should be applied. Thus,
dismissal is warranted only if the pro-forma party not joined in the complaint is an indispensable party.

Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses
Carandang, seems to be either an indispensable or a necessary party. If she is an indispensable party,
dismissal would be proper. If she is merely a necessary party, dismissal is not warranted, whether or not
there was an order for her inclusion in the complaint pursuant to Section 9, Rule 3.

Article 108 of the Family Code provides:

Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all
that is not in conflict with what is expressly determined in this Chapter or by the spouses in their
marriage settlements.

This provision is practically the same as the Civil Code provision it superceded:

Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all
that is not in conflict with what is expressly determined in this Chapter.

In this connection, Article 1811 of the Civil Code provides that “[a] partner is a co-owner with the other
partners of specific partnership property.” Taken with the presumption of the conjugal nature of the
funds used to finance the four checks used to pay for petitioners’ stock subscriptions, and with the
presumption that the credits themselves are part of conjugal funds, Article 1811 makes Quirino and
Milagros de Guzman co-owners of the alleged credit.

Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action
for the recovery thereof. In the fairly recent cases of Baloloy v. Hular[28] and Adlawan v. Adlawan,[29]
we held that, in a co-ownership, co-owners may bring actions for the recovery of co-owned property
without the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumed to
have been filed for the benefit of his co-owners. In the latter case and in that of De Guia v. Court of
Appeals,[30] we also held that Article 487 of the Civil Code, which provides that any of the co-owners
may bring an action for ejectment, covers all kinds of action for the recovery of possession.[31]

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to
Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, any kind
of action, for the recovery of co-owned properties. Therefore, only one of the co-owners, namely the
co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party
thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a
complete relief can be accorded in the suit even without their participation, since the suit is presumed
to have been filed for the benefit of all co-owners.[32]

We therefore hold that Milagros de Guzman is not an indispensable party in the action for the recovery
of the allegedly loaned money to the spouses Carandang. As such, she need not have been impleaded in
said suit, and dismissal of the suit is not warranted by her not being a party thereto.

Loan
The spouses Carandang, however, insist that the de Guzmans have not proven the loan itself, having
presented evidence only of the payment in favor of the Carandangs. They claim:

It is an undeniable fact that payment is not equivalent to a loan. For instance, if Mr. “A” decides to pay
for Mr. “B’s” obligation, that payment by Mr. “A” cannot, by any stretch of imagination, possibly mean
that there is now a loan by Mr. “B” to Mr. “A”. There is a possibility that such payment by Mr. “A” is
purely out of generosity or that there is a mutual agreement between them. As applied to the instant
case, that mutual agreement is the pre-incorporation agreement (supra) existing between Mr. de
Guzman and the petitioners --- to the effect that the former shall be responsible for paying stock
subscriptions of the latter. Thus, when Mr. de Guzman paid for the stock subscriptions of the
petitioners, there was no loan to speak of, but only a compliance with the pre-incorporation
agreement.[34]
The spouses Carandang are mistaken. If indeed a Mr. “A” decides to pay for a Mr. “B’s” obligation, the
presumption is that Mr. “B” is indebted to Mr. “A” for such amount that has been paid. This is pursuant
to Articles 1236 and 1237 of the Civil Code, which provide:

Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no
interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if he paid
without the knowledge or against the will of the debtor, he can recover only insofar as the payment has
been beneficial to the debtor.

Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the
latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage,
guarantee, or penalty.

Articles 1236 and 1237 are clear that, even in cases where the debtor has no knowledge of payment by a
third person, and even in cases where the third person paid against the will of the debtor, such payment
would produce a debt in favor of the paying third person. In fact, the only consequences for the failure
to inform or get the consent of the debtor are the following: (1) the third person can recover only
insofar as the payment has been beneficial to the debtor; and (2) the third person is not subrogated to
the rights of the creditor, such as those arising from a mortgage, guarantee or penalty.[35]

We say, however, that this is merely a presumption. By virtue of the parties’ freedom to contract, the
parties could stipulate otherwise and thus, as suggested by the spouses Carandang, there is indeed a
possibility that such payment by Mr. “A” was purely out of generosity or that there was a mutual
agreement between them. But such mutual agreement, being an exception to presumed course of
events as laid down by Articles 1236 and 1237, must be adequately proven.
The de Guzmans have successfully proven their payment of the spouses Carandang’s stock
subscriptions. These payments were, in fact, admitted by the spouses Carandang. Consequently, it is
now up to the spouses Carandang to prove the existence of the pre-incorporation agreement that was
their defense to the purported loan.

Unfortunately for the spouses Carandang, the only testimony which touched on the existence and
substance of the pre-incorporation agreement, that of petitioner Arcardio Carandang, was stricken off
the record because he did not submit himself to a cross-examination of the opposing party. On the
other hand, the testimonies of Romeo Saavedra,[36] Roberto S. Carandang,[37] Gertrudes Z.
Esteban,[38] Ceferino Basilio,[39] and Ma. Luisa Carandang[40] touched on matters other than the
existence and substance of the pre-incorporation agreement. So aside from the fact that these
witnesses had no personal knowledge as to the alleged existence of the pre-incorporation agreement,
the testimonies of these witnesses did not even mention the existence of a pre-incorporation
agreement.

Sec. 5. Minor or incompetent persons

A minor or a person alleged to be incompetent, may sue or be sued with the assistance of his father,
mother, guardian, or if he has none, a guardian ad litem.
Sec. 6. Permissive joinder of parties
All persons in whom or against whom any right to relief in respect to or arising out of the same
transaction or series of transactions is alleged to exist, whether jointly, severally, or in the alternative,
may, except as otherwise provided in these Rules, join as plaintiffs or be joined as defendants in one
complaint, where any question of law or fact common to all such plaintiffs or to all such defendants may
arise in the action; but the court may make such orders as may be just to prevent any plaintiff or
defendant from being embarrassed or put to expense in connection with any proceedings in which he
may have no interest.

Flores v. Hon. Mallare-Philipps, G.R. No. L-66620, September 24, 1986 (Supra.)
FACTS: Petitioner filed a complaint against respondent Ignacio Binongcal and Fernando Calion. the first
cause of action alleged in the complaint was against respondent Ignacio Binongcal for refusing to pay
the amount of P11,643.00 representing cost of truck tires which he purchased on credit from petitioner
on various occasions from August to October, 1981; and the second cause of action was against
respondent Fernando Calion for allegedly refusing to pay the amount of P10,212.00 representing cost of
truck tires which he purchased on credit from petitioner on several occasions from March, 1981 to
January, 1982.

On December 15, 1983, counsel for respondent Binongcal filed a Motion to Dismiss on the ground of
lack of jurisdiction since the amount of the demand against said respondent was only P11,643.00, and
under Section 19(8) of BP129 the regional trial court shall exercise exclusive original jurisdiction if the
amount of the demand is more than twenty thousand pesos (P20,000.00). It was further averred in said
motion that although another person, Fernando Calion, was allegedly indebted to petitioner in the
amount of P10,212.00, his obligation was separate and distinct from that of the other respondent. At
the hearing of said Motion to Dismiss, counsel for respondent Calion joined in moving for the dismissal
of the complaint on the ground of lack of jurisdiction. Counsel for petitioner opposed the Motion to
Dismiss.

Petitioner’s complaint was dismissed for lack of jurisdiction by the RTC of of Baguio City and Benguet
Province. Petitioner has appealed by certiorari from the dismissal did not attach to his petition a copy of
his complaint in the erroneous belief that the entire original record of the case shall be transmitted to
this Court pursuant to the second paragraph of Section 39 of BP129. This provision applies only to
ordinary appeals from the regional trial court to the Court of Appeals (Section 20 of the Interim Rules).
Appeals to this Court by petition for review on certiorari are governed by Rule 45 of the Rules of Court
(Section 25 of the Interim Rules).

Petitioner maintains that the lower court has jurisdiction over the case following the "novel" totality
rule introduced in Section 33(l) of BP129 and Section 11 of the Interim Rules.

The pertinent portion of Section 33(l) of BP129 reads as follows:

... Provided,That where there are several claims or causes of action between the same or different
parties, embodied in the same complaint, the amount of the demand shall be the totality of the claims
in all the causes of action, irrespective of whether the causes of action arose out of the same or
different transactions. ...
Section 11 of the Interim Rules provides thus:

Application of the totality rule.-In actions where the jurisdiction of the court is dependent on the
amount involved, the test of jurisdiction shall be the aggregate sum of all the money demands, exclusive
only of interest and costs, irrespective of whether or not the separate claims are owned by or due to
different parties. If any demand is for damages in a civil action, the amount thereof must be specifically
alleged.

Petitioner compares the above-quoted provisions with the pertinent portion of the former rule under
Section 88 of the Judiciary Act of 1948 as amended which reads as follows:

... Where there are several claims or causes of action between the same parties embodied in the same
complaint, the amount of the demand shall be the totality of the demand in all the causes of action,
irrespective of whether the causes of action arose out of the same or different transactions; but where
the claims or causes of action joined in a single complaint are separately owned by or due to different
parties, each separate claim shall furnish the jurisdictional test. ...

and argues that with the deletion of the proviso in the former rule, the totality rule was reduced to
clarity and brevity and the jurisdictional test is the totality of the claims in all, not in each, of the
causes of action, irrespective of whether the causes of action arose out of the same or different
transactions.

This argument is partly correct. There is no difference between the former and present rules in cases
where a plaintiff sues a defendant on two or more separate causes of action. In such cases, the amount
of the demand shall be the totality of the claims in all the causes of action irrespective of whether the
causes of action arose out of the same or different transactions. If the total demand exceeds twenty
thousand pesos, then the regional trial court has jurisdiction. Needless to state, if the causes of action
are separate and independent, their joinder in one complaint is permissive and not mandatory, and any
cause of action where the amount of the demand is twenty thousand pesos or less may be the subject
of a separate complaint filed with a metropolitan or municipal trial court.

On the other hand, there is a difference between the former and present rules in cases where two or
more plaintiffs having separate causes of action against a defendant join in a single complaint. Under
the former rule, "where the claims or causes of action joined in a single complaint are separately owned
by or due to different parties, each separate claim shall furnish the jurisdictional test" (Section 88 of the
Judiciary Act of 1948 as amended, supra). This was based on the ruling in the case of Vda. de Rosario vs.
Justice of the Peace, 99 Phil. 693. As worded, the former rule applied only to cases of permissive
joinder of parties plaintiff. However, it was also applicable to cases of permissive joinder of parties
defendant, as may be deduced from the ruling in the case of Brillo vs. Buklatan, thus:

Furthermore, the first cause of action is composed of separate claims against several defendants
of different amounts each of which is not more than P2,000 and falls under the jurisdiction of
the justice of the peace court under section 88 of Republic Act No, 296. The several claims do
not seem to arise from the same transaction or series of transactions and there seem to be no
questions of law or of fact common to all the defendants as may warrant their joinder under
Rule 3, section 6. Therefore, if new complaints are to be filed in the name of the real party in
interest they should be filed in the justice of the peace court. (87 Phil. 519, 520, reiterated in
Gacula vs. Martinez, 88 Phil. 142, 146)
Under the present law, the totality rule is applied also to cases where two or more plaintiffs having
separate causes of action against a defendant join in a single complaint, as well as to cases where a
plaintiff has separate causes of action against two or more defendants joined in a single complaint.
However, the causes of action in favor of the two or more plaintiffs or against the two or more
defendants should arise out of the same transaction or series of transactions and there should be a
common question of law or fact, as provided in Section 6 of Rule 3.

The difference between the former and present rules in cases of permissive joinder of parties may be
illustrated by the two cases which were cited in the case of Vda. de Rosario vs. Justice of the Peace
(supra) as exceptions to the totality rule. In the case of Soriano y Cia vs. Jose (86 Phil. 523), where
twenty-nine dismissed employees joined in a complaint against the defendant to collect their respective
claims, each of which was within the jurisdiction of the municipal court although the total exceeded the
jurisdictional amount, this Court held that under the law then the municipal court had jurisdiction. In
said case, although the plaintiffs' demands were separate, distinct and independent of one another,
their joint suit was authorized under Section 6 of Rule 3 and each separate claim furnished the
jurisdictional test. In the case of International Colleges, Inc. vs. Argonza (90 Phil. 470), where twenty-
five dismissed teachers jointly sued the defendant for unpaid salaries, this Court also held that the
municipal court had jurisdiction because the amount of each claim was within, although the total
exceeded, its jurisdiction and it was a case of permissive joinder of parties plaintiff under Section 6 of
Rule 3.

Under the present law, the two cases above cited (assuming they do not fall under the Labor Code)
would be under the jurisdiction of the regional trial court. Similarly, in the abovecited cases of Brillo vs.
Buklatan and Gacula vs. Martinez (supra), if the separate claims against the several defendants arose
out of the same transaction or series of transactions and there is a common question of law or fact,
they would now be under the jurisdiction of the regional trial court.

In other words, in cases of permissive joinder of parties, whether as plaintiffs or as defendants, under
Section 6 of Rule 3, the total of all the claims shall now furnish the jurisdictional test. Needless to state
also, if instead of joining or being joined in one complaint separate actions are filed by or against the
parties, the amount demanded in each complaint shall furnish the jurisdictional test.

In the case at bar, the lower court correctly held that the jurisdictional test is subject to the rules on
joinder of parties pursuant to Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Court and that,
after a careful scrutiny of the complaint, it appears that there is a misjoinder of parties for the reason
that the claims against respondents Binongcal and Calion are separate and distinct and neither of which
falls within its jurisdiction.

Sec. 7. Compulsory joinder of indispensable parties

Boston Equity v. Court of Appeals, G.R. No. 173946, June 19, 2013
FACTS: On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the
issuance of a writ of preliminary attachment against the spouses Manuel and Lolita Toledo.6 Herein
respondent filed an Answer dated 19 March 1998 but on 7 May 1998, she filed a Motion for Leave to
Admit Amended Answer7 in which she alleged, among others, that her husband and co-defendant,
Manuel Toledo (Manuel), is already dead.

The death certificate9 of Manuel states "13 July 1995" as the date of death. As a result, petitioner filed a
motion, dated 5 August 1999, to require respondent to disclose the heirs of Manuel.10 In compliance
with the verbal order of the court during the 11 October 1999 hearing of the case, respondent
submitted the required names and addresses of the heirs. Petitioner then filed a Motion for
Substitution, dated 18 January 2000, praying that Manuel be substituted by his children as party-
defendants. It appears that this motion was granted by the trial court in an Order dated 9 October 2000.

on 7 October 2004, respondent instead filed a motion to dismiss the complaint, citing the following as
grounds: (1) that the complaint failed to implead an indispensable party or a real party in interest;
hence, the case must be dismissed for failure to state a cause of action; (2) that the trial court did not
acquire jurisdiction over the person of Manuel pursuant to Section 5, Rule 86 of the Revised Rules of
Court; (3) that the trial court erred in ordering the substitution of the deceased Manuel by his heirs; and
(4) that the court must also dismiss the case against Lolita Toledo in accordance with Section 6, Rule 86
of the Rules of Court.

The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having been filed
out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that: "Within the time for
but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be
made x x x."17 Respondent’s motion for reconsideration of the order of denial was likewise denied on
the ground that "defendants’ attack on the jurisdiction of this Court is now barred by estoppel by
laches" since respondent failed to raise the issue despite several chances to do so.

Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the trial court
seriously erred and gravely abused its discretion in denying her motion to dismiss despite discovery,
during the trial of the case, of evidence that would constitute a ground for dismissal of the case.19

The Court of Appeals granted the petition ruling that the court did not acquire jurisdiction over Manuel
Toledo since he was already dead and that the complaint should have impleaded the estate of Manuel S.
Toledo as defendant, not only the wife, considering that the estate of Manuel S. Toledo is an
indispensable party.

The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition.

The Issues

Petitioner claims that the Court of Appeals erred in not holding that:

1. Respondent is already estopped from questioning the trial court’s jurisdiction;

2. Petitioner never failed to implead an indispensable party as the estate of Manuel is not an
indispensable party;

3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not warranting the dismissal
of the case before the lower court; and
4. Since the estate of Manuel is not an indispensable party, it is not necessary that petitioner file its
claim against the estate of Manuel.

In essence, what is at issue here is the correctness of the trial court’s orders denying respondent’s
motion to dismiss.

HELD: We find merit in the petition.

Motion to dismiss filed out of time

To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of respondent. Well
settled is the rule that the special civil action for certiorari is not the proper remedy to assail the denial
by the trial court of a motion to dismiss. The order of the trial court denying a motion to dismiss is
merely interlocutory, as it neither terminates nor finally disposes of a case and still leaves something to
be done by the court before a case is finally decided on the merits.21 Therefore, "the proper remedy in
such a case is to appeal after a decision has been rendered."

Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse of
discretion in denying respondent’s motion to dismiss. It, in fact, acted correctly when it issued the
questioned orders as respondent’s motion to dismiss was filed SIX YEARS AND FIVE MONTHS AFTER SHE
FILED HER AMENDED ANSWER. This circumstance alone already warranted the outright dismissal of the
motion for having been filed in clear contravention of the express mandate of Section 1, Rule 16, of the
Revised Rules of Court. Under this provision, a motion to dismiss shall be filed within the time for but
before the filing of an answer to the complaint or pleading asserting a claim.

On whether or not respondent is estopped from

questioning the jurisdiction of the trial court

Jurisdiction over the person of Manuel should not be an issue in this case. Petitioner calls attention to
the fact that respondent’s motion to dismiss questioning the trial court’s jurisdiction was filed more
than six years after her amended answer was filed. According to petitioner, respondent had several
opportunities, at various stages of the proceedings, to assail the trial court’s jurisdiction but never did so
for six straight years. Citing the doctrine laid down in the case of Tijam, et al. v. Sibonghanoy, et al.30
petitioner claimed that respondent’s failure to raise the question of jurisdiction at an earlier stage bars
her from later questioning it, especially since she actively participated in the proceedings conducted by
the trial court.

Petitioner’s argument is misplaced, in that, it failed to consider that the concept of jurisdiction has
several aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the parties; (3)
jurisdiction over the issues of the case; and (4) in cases involving property, jurisdiction over the res or
the thing which is the subject of the litigation.31

The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by laches is
jurisdiction over the subject matter. In subsequent cases citing the ruling of the Court in Tijam, what was
likewise at issue was the jurisdiction of the trial court over the subject matter of the case.In all of these
cases, the Supreme Court barred the attack on the jurisdiction of the respective courts concerned over
the subject matter of the case based on estoppel by laches, declaring that parties cannot be allowed to
belatedly adopt an inconsistent posture by attacking the jurisdiction of a court to which they submitted
their cause voluntarily.
Here, what respondent was questioning in her motion to dismiss before the trial court was that court’s
jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel by laches finds no
application in this case. Instead, the principles relating to jurisdiction over the person of the parties are
pertinent herein.

The Rules of Court provide:

RULE 9
EFFECT OF FAILURE TO PLEAD

Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or
the evidence on record that the court has no jurisdiction over the subject matter, that there is another
action pending between the same parties for the same cause, or that the action is barred by a prior
judgment or by statute of limitations, the court shall dismiss the claim.

RULE 15
MOTIONS

Sec. 8. Omnibus motion. – Subject to the provisions of Section 1 of Rule 9, a motion attacking a pleading,
order, judgment, or proceeding shall include all objections then available, and all objections not so
included shall be deemed waived.

Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived even if
not alleged in a motion to dismiss or the answer is lack of jurisdiction over the subject matter. x x x Lack
of jurisdiction over the subject matter can always be raised anytime, even for the first time on appeal,
since jurisdictional issues cannot be waived x x x subject, however, to the principle of estoppel by
laches."36

Since the defense of lack of jurisdiction over the person of a party to a case is not one of those defenses
which are not deemed waived under Section 1 of Rule 9, such defense must be invoked when an answer
or a motion to dismiss is filed in order to prevent a waiver of the defense.

The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its questioned
decision, stating that "issue on jurisdiction may be raised at any stage of the proceeding, even for the
first time on appeal" and that, therefore, respondent timely raised the issue in her motion to dismiss
and is, consequently, not estopped from raising the question of jurisdiction. As the question of
jurisdiction involved here is that over the person of the defendant Manuel, the same is deemed waived
if not raised in the answer or a motion to dismiss. In any case, respondent cannot claim the defense
since "lack of jurisdiction over the person, being subject to waiver, is a personal defense which can only
be asserted by the party who can thereby waive it by silence."

Jurisdiction over the person of a defendant is acquired through a valid service of summons; trial court
did not acquire jurisdiction over the person of Manuel Toledo

In the first place, jurisdiction over the person of Manuel was never acquired by the trial court. A
defendant is informed of a case against him when he receives summons. "Summons is a writ by which
the defendant is notified of the action brought against him. Service of such writ is the means by which
the court acquires jurisdiction over his person."

In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since there was
no valid service of summons upon him, precisely because he was already dead even before the
complaint against him and his wife was filed in the trial court. The issues presented in this case are
similar to those in the case of Sarsaba v. Vda. de Te.

In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally dismissed from
employment and ordering the payment of his monetary claims. To satisfy the claim, a truck in the
possession of Sereno’s employer was levied upon by a sheriff of the NLRC, accompanied by Sereno and
his lawyer, Rogelio Sarsaba, the petitioner in that case. A complaint for recovery of motor vehicle and
damages, with prayer for the delivery of the truck pendente lite was eventually filed against Sarsaba,
Sereno, the NLRC sheriff and the NLRC by the registered owner of the truck. After his motion to dismiss
was denied by the trial court, petitioner Sarsaba filed his answer. Later on, however, he filed an omnibus
motion to dismiss citing, as one of the grounds, lack of jurisdiction over one of the principal defendants,
in view of the fact that Sereno was already dead when the complaint for recovery of possession was
filed.

Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of the issues
submitted for resolution in both cases is similar: whether or not a case, where one of the named
defendants was already dead at the time of its filing, should be dismissed so that the claim may be
pursued instead in the proceedings for the settlement of the estate of the deceased defendant. The
petitioner in the Sarsaba Case claimed, as did respondent herein, that since one of the defendants died
before summons was served on him, the trial court should have dismissed the complaint against all the
defendants and the claim should be filed against the estate of the deceased defendant. The petitioner in
Sarsaba, therefore, prayed that the complaint be dismissed, not only against Sereno, but as to all the
defendants, considering that the RTC did not acquire jurisdiction over the person of Sereno.42 This is
exactly the same prayer made by respondent herein in her motion to dismiss.

The Court, in the Sarsaba Case, resolved the issue in this wise:

x x x We cannot countenance petitioner’s argument that the complaint against the other defendants
should have been dismissed, considering that the RTC never acquired jurisdiction over the person of
Sereno. The court’s failure to acquire jurisdiction over one’s person is a defense which is personal to the
person claiming it. Obviously, it is now impossible for Sereno to invoke the same in view of his death.
Neither can petitioner invoke such ground, on behalf of Sereno, so as to reap the benefit of having the
case dismissed against all of the defendants. Failure to serve summons on Sereno’s person will not be a
cause for the dismissal of the complaint against the other defendants, considering that they have been
served with copies of the summons and complaints and have long submitted their respective responsive
pleadings. In fact, the other defendants in the complaint were given the chance to raise all possible
defenses and objections personal to them in their respective motions to dismiss and their subsequent
answers.43 (Emphasis supplied.)

Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against Sereno only.
Based on the foregoing pronouncements, there is no basis for dismissing the complaint against
respondent herein. Thus, as already emphasized above, the trial court correctly denied her motion to
dismiss.

On whether or not the estate of Manuel

Toledo is an indispensable party

Rule 3, Section 7 of the 1997 Rules of Court states:

SEC. 7. Compulsory joinder of indispensable parties. – Parties-in-interest without whom no final

determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is one who has such an interest in the controversy or subject matter of a case
that a final adjudication cannot be made in his or her absence, without injuring or affecting that interest.
He or she is a party who has not only an interest in the subject matter of the controversy, but "an
interest of such nature that a final decree cannot be made without affecting that interest or leaving the
controversy in such a condition that its final determination may be wholly inconsistent with equity and
good conscience. It has also been considered that an indispensable party is a person in whose absence
there cannot be a determination between the parties already before the court which is effective,
complete or equitable." Further, an indispensable party is one who must be included in an action before
it may properly proceed.44

On the other hand, a "person is not an indispensable party if his interest in the controversy or subject
matter is separable from the interest of the other parties, so that it will not necessarily be directly or
injuriously affected by a decree which does complete justice between them. Also, a person is not an
indispensable party if his presence would merely permit complete relief between him or her and those
already parties to the action, or if he or she has no interest in the subject matter of the action." It is not
a sufficient reason to declare a person to be an indispensable party simply because his or her presence
will avoid multiple litigations.

Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel is not an
indispensable party to the collection case, for the simple reason that the obligation of Manuel and his
wife, respondent herein, is solidary.

In other words, the collection case can proceed and the demands of petitioner can be satisfied by
respondent only, even without impleading the estate of Manuel. Consequently, the estate of Manuel is
not an indispensable party to petitioner’s complaint for sum of money.

However, the Court of Appeals, agreeing with the contention of respondent, held that the claim of
petitioner should have been filed against the estate of Manuel in accordance with Sections 5 and 6 of
Rule 86 of the Rules of Court. The aforementioned provisions provide:

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for money
against the decedent, arising from contract, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and judgment for money against the decedent, must be filed
within the time limited in the notice; otherwise, they are barred forever, except that they may be set
forth as counterclaims in any action that the executor or administrator may bring against the claimants.
x x x.
SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with another
debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice to
the right of the estate to recover contribution from the other debtor. x x x.

The Court of Appeals erred in its interpretation of the above-quoted provisions.

In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86 of the
Revised Rules of Court, which latter provision has been retained in the present Rules of Court without
any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v. Villarama, et. al.,49
held:50

Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was taken, this
Court held that where two persons are bound in solidum for the same debt and one of them dies, the
whole indebtedness can be proved against the estate of the latter, the decedent’s liability being
absolute and primary; x x x. It is evident from the foregoing that Section 6 of Rule 87 provides the
procedure should the creditor desire to go against the deceased debtor, but there is certainly nothing in
the said provision making compliance with such procedure a condition precedent before an ordinary
action against the surviving solidary debtors, should the creditor choose to demand payment from the
latter, could be entertained to the extent that failure to observe the same would deprive the court
jurisdiction to take cognizance of the action against the surviving debtors. Upon the other hand, the Civil
Code expressly allows the creditor to proceed against any one of the solidary debtors or some or all of
them simultaneously. There is, therefore, nothing improper in the creditor’s filing of an action against
the surviving solidary debtors alone, instead of instituting a proceeding for the settlement of the estate
of the deceased debtor wherein his claim could be filed.

The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank v.
Asuncion51 where the Supreme Court pronounced:

A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein
prevents a creditor from proceeding against the surviving solidary debtors. Said provision merely sets up
the procedure in enforcing collection in case a creditor chooses to pursue his claim against the estate of
the deceased solidary debtor. The rule has been set forth that a creditor (in a solidary obligation) has the
option whether to file or not to file a claim against the estate of the solidary debtor. x x x

xxxx

It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said
provision gives the creditor the right to "proceed against anyone of the solidary debtors or some or all of
them simultaneously." The choice is undoubtedly left to the solidary creditor to determine against
whom he will enforce collection. In case of the death of one of the solidary debtors, he (the creditor)
may, if he so chooses, proceed against the surviving solidary debtors without necessity of filing a claim
in the estate of the deceased debtors. It is not mandatory for him to have the case dismissed as against
the surviving debtors and file its claim against the estate of the deceased solidary debtor, x x x. For to
require the creditor to proceed against the estate, making it a condition precedent for any collection
action against the surviving debtors to prosper, would deprive him of his substantive rightsprovided by
Article 1216 of the New Civil Code. (Emphasis supplied.)
Based on the foregoing, the estate of Manuel is not an indispensable party and the case can proceed as
against respondent only. That petitioner opted to collect from respondent and not from the estate of
Manuel is evidenced by its opposition to respondent’s motion to dismiss asserting that the case, as
against her, should be dismissed so that petitioner can proceed against the estate of Manuel.

On whether or not the inclusion of Manuel as

party defendant is a misjoinder of party

Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder nor non-joinder of parties is
ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of
any party or on its own initiative at any stage of the action and on such terms as are just. Any claim
against a misjoined party may be severed and proceeded with separately."

Based on the last sentence of the afore-quoted provision of law, a misjoined party must have the
capacity to sue or be sued in the event that the claim by or against the misjoined party is pursued in a
separate case. In this case, therefore, the inclusion of Manuel in the complaint cannot be considered a
misjoinder, as in fact, the action would have proceeded against him had he been alive at the time the
collection case was filed by petitioner. This being the case, the remedy provided by Section 11 of Rule 3
does not obtain here. The name of Manuel as party-defendant cannot simply be dropped from the case.
Instead, the procedure taken by the Court in Sarsaba v. Vda. de Te,52 whose facts, as mentioned earlier,
resemble those of this case, should be followed herein. There, the Supreme Court agreed with the trial
court when it resolved the issue of jurisdiction over the person of the deceased Sereno in this wise:

As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the person
of Patricio Sereno since there was indeed no valid service of summons insofar as Patricio Sereno is
concerned. Patricio Sereno died before the summons, together with a copy of the complaint and its
annexes, could be served upon him.

However, the failure to effect service of summons unto Patricio Sereno, one of the defendants herein,
does not render the action DISMISSIBLE, considering that the three (3) other defendants, x x x, were
validly served with summons and the case with respect to the answering defendants may still proceed
independently. Be it recalled that the three (3) answering defendants have previously filed a Motion to
Dismiss the Complaint which was denied by the Court.

Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a claim
against the estate of Patricio Sereno, but the case with respect to the three (3) other accused [sic] will
proceed. (Emphasis supplied.)53

As a result, the case, as against Manuel, must be dismissed.

In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule 3 of the
Rules of Court, which states that: only natural or juridical persons, or entities authorized by law may be
parties in a civil action." Applying this provision of law, the Court, in the case of Ventura v. Militante,54
held:

Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of justice,
the plaintiff must have an actual legal existence, that is, he, she or it must be a person in law and
possessed of a legal entity as either a natural or an artificial person, and no suit can be lawfully
prosecuted save in the name of such a person.

The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes a
judicial proceeding, to name the proper party defendant to his cause of action. In a suit or proceeding in
personam of an adversary character, the court can acquire no jurisdiction for the purpose of trial or
judgment until a party defendant who actually or legally exists and is legally capable of being sued, is
brought before it. It has even been held that the question of the legal personality of a party defendant is
a question of substance going to the jurisdiction of the court and not one of procedure.

The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving spouse
Ms. Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the same on the ground that the
defendant as named in the complaint had no legal personality. We agree.

x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent, a
decedent does not have the capacity to be sued and may not be named a party defendant in a court
action. (Emphases supplied.)

Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized by law,
the complaint may be dismissed on the ground that the pleading asserting the claim states no cause of
action or for failure to state a cause of action pursuant to Section 1(g) of Rule 16 of the Rules of Court,
because a complaint cannot possibly state a cause of action against one who cannot be a party to a civil
action.55

Since the proper course of action against the wrongful inclusion of Manuel as party-defendant is the
dismissal of the case as against him, thus did the trial court err when it ordered the substitution of
Manuel by his heirs. Substitution is proper only where the party to be substituted died during the
pendency of the case, as expressly provided for by Section 16, Rule 3 of the Rules of Court, which states:

Death of party;duty of counsel. – Whenever a party to a pending action dies, and the claim is not
thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after
such death of the fact thereof, and to give the name and address of his legal representative or
representatives. x x x

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator x x x.

The court shall forthwith order said legal representative or representatives to appear and be substituted
within a period of thirty (30) days from notice. (Emphasis supplied.)

Here, since Manuel was already dead at the time of the filing of the complaint, the court never acquired
jurisdiction over his person and, in effect, there was no party to be substituted.

Malazarte v. Court of Appeals, G.R. No. 166519, March 31, 2009

FACTS: In 1974, petitioners[3] filed a complaint for recovery of title to property with damages before the
Court of First Instance (now, Regional Trial Court [RTC]) of Maasin, Southern Leyte against respondents.
Respondents, for their part, denied petitioners’ allegation of ownership and possession of the premises,
and interposed, as their main defense, that the subject land was inherited by all the parties from their
common ancestor, Francisco Plasabas.

Revealed in the course of the trial was that petitioner Nieves, contrary to her allegations in the
complaint, was not the sole and absolute owner of the land. After resting their case, respondents raised
in their memorandum the argument that the case should have been terminated at inception for
petitioners’ failure to implead indispensable parties, the other co-owners – Jose, Victor and Victoria.

In its April 19, 1993 Order,[8] the trial court, without ruling on the merits, dismissed the case without
prejudice for lack of cause of action as the plaintiffs spouses Marcos Malazarte and Nieves Plasabas
Malazarte have no complete legal personality to sue by themselves alone without joining the brothers
and sisters of Nieves who are as INDISPENSABLE as the latter in the final determination of the case.

Aggrieved, petitioners elevated the case to the CA. In the challenged May 12, 2004 Decision,[10] the
appellate court affirmed the ruling of the trial court. The CA, further, declared that the non-joinder of
the indispensable parties would violate the principle of due process, and that Article 487 of the Civil
Code could not be applied considering that the complaint was not for ejectment, but for recovery of title
or a reivindicatory action.

With their motion for reconsideration denied in the further assailed December 1, 2004
Resolution,[12] petitioners filed the instant petition.

ISSUE: WON dismissal was proper

HELD: The Court grants the petition and remands the case to the trial court for disposition on the
merits.

Article 487 of the Civil Code provides that any one of the co-owners may bring an action for ejectment.
The article covers all kinds of actions for the recovery of possession, including an accion publiciana and a
reivindicatory action. A co-owner may file suit without necessarily joining all the other co-owners as co-
plaintiffs because the suit is deemed to be instituted for the benefit of all. Any judgment of the court in
favor of the plaintiff will benefit the other co-owners, but if the judgment is adverse, the same cannot
prejudice the rights of the unimpleaded co-owners.[13]

With this disquisition, there is no need to determine whether petitioners’ complaint is one for
ejectment or for recovery of title. To repeat, Article 487 of the Civil Code applies to both actions.

Thus, petitioners, in their complaint, do not have to implead their co-owners as parties. The only
exception to this rule is when the action is for the benefit of the plaintiff alone who claims to be the sole
owner and is, thus, entitled to the possession thereof. In such a case, the action will not prosper unless
the plaintiff impleads the other co-owners who are indispensable parties.[14]

Here, the allegation of petitioners in their complaint that they are the sole owners of the property in
litigation is immaterial, considering that they acknowledged during the trial that the property is co-
owned by Nieves and her siblings, and that petitioners have been authorized by the co-owners to
pursue the case on the latter’s behalf.[15] Impleading the other co-owners is, therefore, not mandatory,
because, as mentioned earlier, the suit is deemed to be instituted for the benefit of all.
In any event, the trial and appellate courts committed reversible error when they summarily dismissed
the case, after both parties had rested their cases following a protracted trial commencing in 1974, on
the sole ground of failure to implead indispensable parties. The rule is settled that the non-joinder of
indispensable parties is not a ground for the dismissal of an action. The remedy is to implead the non-
party claimed to be indispensable. Parties may be added by order of the court on motion of the party or
on its own initiative at any stage of the action and/or at such times as are just. If petitioner refuses to
implead an indispensable party despite the order of the court, the latter may dismiss the
complaint/petition for the plaintiff’s/petitioner's failure to comply therewith

Quilatan v. Heirs of Quilatan, G.R. No. 183059, August 28, 2009

FACTS: On August 15, 1999, petitioners Ely Quilatan and Rosvida Quilatan-Elias filed Civil Case No. 67367
for nullification of Tax Declaration Nos. D-014-00330 and D-014-00204 and Partition of the Estate of the
late Pedro Quilatan with damages against respondent heirs of Lorenzo Quilatan. They claim that during
his lifetime, Pedro Quilatan owned two parcels of land covered by Tax Declaration Nos. 1680 and 2301,
both located in Taguig, Metro Manila; that sometime in 1998, they discovered that said tax declarations
were cancelled without their knowledge and new ones were issued, to wit: Tax Declaration No. D-014-
00204 and D-014-00330, under the names of Spouses Lorenzo Quilatan and Anita Lizertiquez as owners
thereof.

On June 22, 2004, the trial court rendered its decision declaring as void the cancellation of Tax
Declaration Nos. 1680 and 2301. At the same time, it ordered the partition of the subject properties
into three equal shares among the heirs of Francisco, Ciriaco and Lorenzo, all surnamed Quilatan.

On appeal, the Court of Appeals reversed without prejudice the decision of the trial court on the ground
that petitioners failed to implead other co-heirs who are indispensable parties to the case. Thus, the
judgment of the trial court was null and void for want of jurisdiction. Petitioners filed a motion for
reconsideration but it was denied.

Hence, this petition for review where petitioners argue that the issue of failure to implead indispensable
parties was a mere afterthought because respondents did not raise the same in their Answer to the
complaint, but only for the first time in their Motion for Reconsideration of the June 22, 2004 decision of
the trial court. Petitioners further argue that the order of dismissal without prejudice and the re-filing of
the case in order to implead the heirs of Ciriaco only invite multiplicity of suits since the second action
would be a repetition of the first action, where the judgment therein rightly partitioned the subject
properties into three equal shares, apportioning each share to the heirs of the children of Pedro
Quilatan.

ISSUE: WON the dismissal is proper

HELD: The petition lacks merit.

Records show that Pedro Quilatan died intestate in 1960 and was survived by his three children, namely,
Ciriaco, Francisco and Lorenzo, all of whom are now deceased. Ciriaco was survived by his children,
namely Purita Santos, Rosita Reyes, Renato Quilatan, Danilo Quilatan, and Carlito Quilatan; Francisco
was survived by herein petitioners and their two other siblings, Solita Trapsi and Rolando Quilatan; while
Lorenzo was survived by his children, herein respondents.
In the complaint filed by petitioners before the trial court, they failed to implead their two siblings,
Solita and Rolando, and all the heirs of Ciriaco, as co-plaintiffs or as defendants. It is clear that the
central thrust of the complaint filed in Civil Case No. 67367 was to revert the subject properties back to
the estate of Pedro Quilatan, thereby making all his heirs pro indiviso co-owners thereof, and to
partition them equally among themselves; and that all the co-heirs and persons having an interest in the
subject properties are indispensable parties to an action for partition, which will not lie without the
joinder of said parties.

Respondents could not be blamed if they did not raise this issue in their Answer because in an action for
partition of real estate, it is the plaintiff who is mandated by the Rules to implead all the indispensable
parties, considering that the absence of one such party renders all subsequent actions of the court null
and void for want of authority to act, not only as to the absent parties but even as to those present.[7]

Thus, the Court of Appeals correctly applied Section 1, Rule 69 and Section 7, Rule 3 of the Rules of
Court, which read:

SECTION 1. Complaint in action for partition of real estate. — A person having the right to compel the
partition of real estate may do so as in this rule prescribed, setting forth in his complaint the nature and
extent of his title and an adequate description of the real estate of which partition is demanded and
joining as defendants all the other persons interested in the property. (Emphasis supplied)

SECTION 7. Compulsory joinder of indispensable parties. — Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.

In Moldes v. Villanueva,[8] the Court held that:

An indispensable party is one who has such an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that interest. A party who has
not only an interest in the subject matter of the controversy, but also has an interest of such nature that
a final decree cannot be made without affecting his interest or leaving the controversy in such a
condition that its final determination may be wholly inconsistent with equity and good conscience. He is
a person in whose absence there cannot be a determination between the parties already before the
court which is effective, complete, or equitable. In Commissioner Andrea D. Domingo v. Herbert Markus
Emil Scheer, the Court held that the joinder of indispensable parties is mandatory. Without the presence
of indispensable parties to the suit, the judgment of the court cannot attain real finality. Strangers to a
case are not bound by the judgment rendered by the court. The absence of an indispensable party
renders all subsequent actions of the court null and void, with no authority to act not only as to the
absent party but also as to those present. The responsibility of impleading all the indispensable parties
rests on the petitioner/plaintiff.

Likewise, in Metropolitan Bank and Trust Company v. Hon. Floro T. Alejo, the Court ruled that the
evident aim and intent of the Rules regarding the joinder of indispensable and necessary parties is a
complete determination of all possible issues, not only between the parties themselves but also as
regards to other persons who may be affected by the judgment. A valid judgment cannot even be
rendered where there is want of indispensable parties.

On the issue of multiplicity of suits, the Court of Appeals correctly ordered the dismissal of Civil Case No.
67367 without prejudice for want of jurisdiction. The dismissal could have been avoided had
petitioners, instead of merely stating in their complaint the unimpleaded indispensable parties, joined
them as parties to the case in order to have a complete and final determination of the action.

The rationale for treating all the co-owners of a property as indispensable parties in a suit involving the
co-owned property is explained in Arcelona v. Court of Appeals:[10]

As held by the Supreme Court, were the courts to permit an action in ejectment to be maintained by a
person having merely an undivided interest in any given tract of land, a judgment in favor of the
defendants would not be conclusive as against the other co-owners not parties to the suit, and thus the
defendant in possession of the property might be harassed by as many succeeding actions of ejectment,
as there might be co-owners of the title asserted against him. The purpose of this provision was to
prevent multiplicity of suits by requiring the person asserting a right against the defendant to include
with him, either as co-plaintiffs or as co-defendants, all persons standing in the same position, so that
the whole matter in dispute may be determined once and for all in one litigation.

In fine, the absence of an indispensable party renders all subsequent actions of the court null and void
for want of authority to act, not only as to the absent parties but even as to those present. Hence, the
trial court should have ordered the dismissal of the complaint.

Metrobank v. Hon. Alejo, G.R. No. 141970, September 10, 2001

FACTS: On November 21, 1995[3] and January 30, 1996,[4] Spouses Raul and Cristina Acampado
obtained loans from petitioner in the amounts of P5,000,000 and P2,000,000, respectively. As security
for the payment of these credit accommodations, the Acampados executed in favor of petitioner a Real
Estate Mortgage[5] and an Amendment of Real Estate Mortgage[6] over a parcel of land registered in
their names. The land was covered by TCT No. V-41319 in the Registry of Deeds of Valenzuela City,
where the contracts were also registered on November 20, 1995 and January 23, 1996, respectively.[7]

On June 3, 1996, a Complaint for Declaration of Nullity of TCT No. V-41319 was filed by Respondent Sy
Tan Se against Spouses Acampado. In the Regional Trial Court (RTC) of Valenzuela, Branch 172.
Despite being the registered mortgagee of the real property covered by the title sought to be annulled,
petitioner was not made a party to Civil Case No. 4930-V-96,[9] nor was she notified of its existence.

Because the spouses defaulted in the payment of their loan, extrajudicial foreclosure proceedings over
the mortgaged property were initiated on April 19, 1997.

On June 17, 1997, the sheriff of Valenzuela conducted an auction sale of the property, during which
petitioner submitted the highest and winning bid.[10] On July 15, 1997, a Certificate of Sale was issued
in its favor.[11] This sale was entered in the Registry of Deeds of Valenzuela on July 28, 1997.

When the redemption period lapsed exactly a year after, on July 28, 1998, petitioner executed an
Affidavit of Consolidation of Ownership to enable the Registry of Deeds of Valenzuela to issue a new TCT
in its name. Upon presentation to the Register of Deeds of the Affidavit of Consolidation of Ownership,
petitioner was informed of the existence of the August 12, 1998 RTC Decision in Civil Case No. 4930-V-
96, annulling TCT No. V-41319.

On January 27, 1999, petitioner filed with the Court of Appeals a Petition for Annulment of the RTC
Decision.
Ruling of the Court of Appeals

For being insufficient in form and substance, the Petition for Annulment was outrightly dismissed by the
CA. It ruled that petitioner ought to have filed, instead, a petition for relief from judgment or an action
for quieting of title.

Hence, this Petition.[13]

Issues: [W]hether or not a petition for annulment of judgment under Rule 47 of the 1997 Rules of Civil
Procedure is the proper remedy available to petitioner under the circumstances.”

[W]hether or not the judgment of the trial court in Civil Case No. 4930-V-96 should be annulled.”[14]

HELD: The Petition is meritorious.

First Issue: Proper Remedy

Respondents aver that a petition for annulment is not proper, because there were three different
remedies available but they were not resorted to by petitioner.

We are not persuaded. First, a petition for relief, the remedy pointed to by the Court of Appeals, was
not available to petitioner. Section 1, Rule 38 of the Rules of Court, states:

“Petition for relief from judgment, order, or other proceedings.-When a judgment or final order is
entered, or any other proceeding is thereafter taken against a party in any court through fraud,
accident, mistake, or excusable negligence, he may file a petition in such court and in the same case
praying that the judgment, order or proceeding be set aside.” talics supplied)

It must be emphasized that petitioner was never a party to Civil Case No. 4930-V-96. In Lagula et al. v.
Casimiro et al.,[15] the Court held that -- relative to a motion for relief on the ground of fraud, accident,
mistake, or excusable negligence -- Rule 38 of the Rules of Court “only applies when the one deprived of
his right is a party to the case.” Since petitioner was never a party to the case or even summoned to
appear therein, then the remedy of relief from judgment under Rule 38 of the Rules of Court was not
proper. This is plainly provided in the italicized words of the present provision just quoted.

Second, in denying petitioner’s Motion for Reconsideration of the Decision dismissing the Petition for
Annulment of Judgment, the Court of Appeals reasoned that another remedy, an action for quieting of
title, was also available to petitioner.

We do not agree. It should be stressed that this case was instituted to ask for relief from the
peremptory declaration of nullity of TCT No. V-41319, which had been issued without first giving
petitioner an opportunity to be heard. Petitioner focused on the judgment in Civil Case No. 4930-V-96
which adversely affected it, and which it therefore sought to annul. Filing an action for quieting of title
will not remedy what it perceived as a disregard of due process; it is therefore not an appropriate
remedy.

Equally important, an action for quieting of title is filed only when there is a cloud on title to real
property or any interest therein. As defined, a “cloud on title is a semblance of title which appears in
some legal form but which is in fact unfounded.”[16] In this case, the subject judgment cannot be
considered as a cloud on petitioner’s title or interest over the real property covered by TCT No. V-41319,
which does not even have a semblance of being a title.

It would not be proper to consider the subject judgment as a cloud that would warrant the filing of an
action for quieting of title, because to do so would require the court hearing the action to modify or
interfere with the judgment or order of another co-equal court. Well-entrenched in our jurisdiction is
the doctrine that a court has no power to do so, as that action may lead to confusion and seriously
hinder the administration of justice.[17] Clearly, an action for quieting of title is not an appropriate
remedy in this case.

Third, private respondent cites a last remedy: the intervention by petitioner in Civil Case No. 4930-V-96.
The availability of this remedy hinges on petitioner’s knowledge of the pendency of that case, which
would have otherwise been alerted to the need to intervene therein. Though presumed by private
respondent, any such knowledge prior to October 1998 is, however, emphatically denied by petitioner.

The Petition for Annulment before the Court of Appeals precisely alleged that private respondent
purposely concealed the case by excluding petitioner as a defendant in Civil Case No. 4930-V-96, even if
the latter was an indispensable party. Without due process of law, the former intended to deprive
petitioner of the latter’s duly registered property right. Indeed, the execution of the Decision in Civil
Case No. 4930-V-96 necessarily entailed its enforcement against petitioner, even though it was not a
party to that case. Hence, the latter concludes that annulment of judgment was the only effective
remedy open to it.

The allegation of extrinsic fraud, if fully substantiated by a preponderance of evidence, may be the basis
for annulling a judgment.[18] The resort to annulment becomes proper because of such allegation,
coupled with the unavailability of the other remedies pointed to by respondents.

Second Issue: Lack of Jurisdiction

It is undisputed that the property covered by TCT No. V-41319 was mortgaged to petitioner, and that
the mortgage was annotated on TCT No. V-41319 before the institution of Civil Case No. 4930-V-96. It is
also undisputed that all subsequent proceedings pertaining to the foreclosure of the mortgage were
entered in the Registry of Deeds. The nullification and cancellation of TCT No. V-41319 carried with it
the nullification and cancellation of the mortgage annotation.

Although a mortgage affects the land itself and not merely the TCT covering it, the cancellation of the
TCT and the mortgage annotation exposed petitioner to real prejudice, because its rights over the
mortgaged property would no longer be known and respected by third parties. Necessarily, therefore,
the nullification of TCT No. V-41319 adversely affected its property rights, considering that a real
mortgage is a real right and a real property by itself.[19]

Evidently, petitioner is encompassed within the definition of an indispensable party; thus, it should have
been impleaded as a defendant in Civil Case No. 4930-V-96.

“An indispensable party is a party who has such an interest in the controversy or subject matter that a
final adjudication cannot be made, in his absence, without injuring or affecting that interest[;] a party
who has not only an interest in the subject matter of the controversy, but also has an interest of such
nature that a final decree cannot be made without affecting his interest or leaving the controversy in
such a condition that its final determination may be wholly inconsistent with equity and good
conscience. It has also been considered that an indispensable party is a person in whose absence there
cannot be a determination between the parties already before the court which is effective, complete, or
equitable. Further, an indispensable party is one who must be included in an action before it may
properly go forward.

“A person is not an indispensable party, however, if his interest in the controversy or subject matter is
separable from the interest of the other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them.”[20]

The joinder of indispensable parties to an action is mandated by Section 7, Rule 3 of the Revised Rules of
Civil Procedures, which we quote:

“SEC 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.”

Aside from the above provision, jurisprudence requires such joinder, as the following excerpts indicate:

“Indispensable parties must always be joined either as plaintiffs or defendants, for the court cannot
proceed without them. x x x. Indispensable parties are those with such an interest in the controversy
that a final decree would necessarily affect their rights, so that the courts cannot proceed without their
presence.”[21]

"x x x. Without the precence of indispensable parties to a suit or proceeding, a judgment of a Court
cannot attain real finality."[22]

“Whenever it appears to the court in the course of a proceeding that an indispensable party has not
been joined, it is the duty of the court to stop the trial and to order the inclusion of such party. (The
Revised Rules of Court, Annotated & Commented by Senator Vicente J. Francisco, Vol. I, p. 271, 1973
ed., See also Cortez vs. Avila, 101 Phil. 705.) Such an order is unavoidable, for the ‘general rule with
reference to the making of parties in a civil action requires the joinder of all necessary parties wherever
possible, and the joinder of all indispensable parties under any and all conditions, the presence of those
latter parties being a sine qua non of the exercise of judicial power.’ (Borlasa vs. Polistico, 47 Phil. 345,
at p. 347.) It is precisely ‘when an indispensable party is not before the court (that) the action should be
dismissed.’ (People vs. Rodriguez, 106 Phil. 325. at p. 327.) The absence of an indispensable party
renders all subsequent actuations of the court null and void, for want of authority to act, not only as to
the absent parties but even as to those present.”[23] mphasis supplied)

“The evident aim and intent of the Rules regarding the joinder of indispensable and necessary parties is
a complete determination of all possible issues, not only between the parties themselves but also as
regards to other persons who may be affected by the judgment. A valid judgment cannot even be
rendered where there is want of indispensable parties.”[24]

From the above, it is clear that the presence of indispensable parties is necessary to vest the court with
jurisdiction, which is “the authority to hear and determine a cause, the right to act in a case.”[25] We
stress that the absence of indispensable parties renders all subsequent actuations of the court null and
void, because of that court’s want of authority to act, not only as to the absent parties but even as to
those present.

It is argued that petitioner cannot possibly be an indispensable party, since the mortgage may not even
be valid because of the possible absence of compliance with the requirement[26] that the mortgagor be
the absolute owner of the thing mortgaged. It should be emphasized, however, that at the time the
mortgage was constituted, there was an existing TCT (No. V-41319), which named the mortgagors, the
Acampado spouses, as the registered owners of the property. In Seno v. Mangubat[27] this Court held
as follows:

“The well-known rule in this jurisdiction is that a person dealing with a registered land has a right to rely
upon the face of the Torrens Certificate of Title and to dispense with the need of inquiring further,
except when the party concerned has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry.

xxx xxx xxx

“Thus, where innocent third persons relying on the correctness of the certificate of title issued, acquire
rights over the property, the court cannot disregard such rights and order the total cancellation of the
certificate for that would impair public confidence in the certificate of title; otherwise everyone dealing
with property registered under the Torrens system would have to inquire in every instance as to
whether the title ha[s] been regularly or irregularly issued by the court. Indeed this is contrary to the
evident purpose of the law.”

The peremptory disregard of the annotations registered and entered in TCT No. V-41319 constituted a
deprivation of private property without due process of law and was therefore unquestionably unjust
and iniquitous. This, we cannot countenance.

Clearly, it was the trial court’s duty to order petitioner’s inclusion as a party to Civil Case No. 4930-V-96.
This was not done. Neither the court nor private respondents bothered to implead petitioner as a party
to the case. In the absence of petitioner, an indispensable party, the trial court had no authority to act
on the case. Its judgment therein was null and void due to lack of jurisdiction over an indispensable
party.

In Leonor v. Court of Appeals[28] and Arcelona v. Court of Appeals,[29] we held thus:

“A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor
the creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no
legal effect. Hence, it can never become final and any writ of execution based on it is void:”x x x it may
be said to be a lawless thing which can be treated as an outlaw and slain at sight, or ignored wherever
and whenever it exhibits its head.”

Guy v. Guy, G.R. No. 189486, September 5, 2012

FACTS: In September 2004, Gilbert filed with the Regional Trial Court (RTC) of Manila, a Complaint for
the "Declaration of Nullity of Transfers of Shares in GoodGold and of General Information Sheets and
Minutes of Meeting, and for Damages with Application for a Preliminary Injunctive Relief," against his
mother, Simny, and his sisters, Geraldine, Grace, and Gladys.
GoodGold is a family owned company. Gilbert originally had 80% of the shares of stock in his name until
in 1999 when the shares were evenly redistributed among the 4 siblings. New certificates were issued to
reflect the stock distribution.

Gilbert, in his complaint alleged, among others, that no stock certificate ever existed; that his signature
at the back of the spurious Stock Certificate Nos. 004-014 which purportedly endorsed the same and
that of the corporate secretary, Emmanuel Paras, at the obverse side of the certificates were forged,
and, hence, should be nullified. Gilbert, however, withdrew the complaint, after the National Bureau of
Investigation (NBI) submitted a report to the RTC of Manila authenticating Gilbert’s signature in the
endorsed certificates.

The present controversy arose, when in 2008, three years after the complaint with the RTC of Manila
was withdrawn, Gilbert again filed a complaint, this time, with the RTC of Mandaluyong, captioned as
"Intra-Corporate Controversy: For the Declaration of Nullity of Fraudulent Transfers of Shares of Stock
Certificates, Fabricated Stock Certificates, Falsified General Information Sheets, Minutes of Meetings,
and Damages with Application for the Issuance of a Writ of Preliminary and Mandatory Injunction,"
docketed as SEC-MC08-112, against his mother, Simny, his sisters, Geraldine, Gladys, and the heirs of his
late sister Grace.

Gilbert alleged that he never signed any document which would justify and support the transfer of his
shares to his siblings and that he has in no way, disposed, alienated, encumbered, assigned or sold any
or part of his shares in GoodGold.14 He also denied the existence of the certificates of stocks.

In an Order dated 30 June 2008,20 the RTC denied Gilbert’s Motion for Injunctive Relief21 which
constrained him to file a motion for reconsideration, and, thereafter, a Motion for Inhibition against
Judge Edwin Sorongon, praying that the latter recuse himself from further taking part in the case.

Meanwhile, Gilbert’s siblings filed a manifestation claiming that the complaint is a nuisance and
harassment suit under Section 1(b), Rule 1 of the Interim Rules of Procedure on Intra-Corporate
Controversies.

RTC Ruling
In an Order dated 6 November 2008,22 the RTC denied the motion for inhibition. The RTC also dismissed
the case, declaring it a nuisance and harassment suit.

This constrained Gilbert to assail the above Order before the Court of Appeals (CA). The petition for
review was docketed as CA-G.R. SP No. 106405.

CA Ruling
In a Decision24 dated 27 May 2009, the CA upheld Judge Sorongon’s refusal to inhibit. The CA, in the
same decision, also denied Gilbert’s Petition for the Issuance of Writ of Preliminary Injunction but found
merit on Gilbert’s contention that the complaint should be heard on the merits.

Hence, these consolidated petitions.

G.R. No. 189486 is a Petition for Review under Rule 45 of the Rules of Court filed by Simny, Geraldine,
Gladys, and the heirs of the late Grace against Gilbert, which prays that this Court declare Civil Case No.
SEC-MC08-112, a harassment or nuisance suit.
Meanwhile, during the pendency of G.R. No. 189486, the trial court set the pre-trial conference on the
case subject of this controversy, constraining the petitioners to file a Motion to defer the pre-trial, which
was, however, denied by the court a quo.

The denial of the petitioners’ motion to defer pre-trial, compelled them to file with this Court a Petition
for Certiorari with Urgent Application for the Issuance of TRO and/or A Writ of Preliminary Injunction
ISSUE:

HELD:

Suits by stockholders or members of a corporation based on wrongful or fraudulent acts of directors or

other persons may be classified into individual suits, class suits, and derivative suits.30

An individual suit may be instituted by a stockholder against another stockholder for wrongs committed
against him personally, and to determine their individual rights31 – this is an individual suit between
stockholders. But an individual suit may also be instituted against a corporation, the same having a
separate juridical personality, which by its own may be sued. It is of course, essential that the suing
stockholder has a cause of action against the corporation.32

Individual suits against another stockholder or against a corporation are remedies which an aggrieved
stockholder may avail of and which are recognized in our jurisdiction as embedded in the Interim Rules
on Intra-Corporate Controversy. Together with this right is the parallel obligation of a party to comply
with the compulsory joinder of indispensable parties whether they may be stockholders or the
corporation itself.

The absence of an indispensable

party in a case renders all
subsequent actions of the court null
and void for want of authority to act,
not only as to the absent parties but
even as to those present.33

It bears emphasis that this controversy started with Gilbert’s complaint filed with the RTC of
Mandaluyong City in his capacity as stockholder, director and Vice-President of GoodGold.34

Gilbert’s complaint essentially prayed for the return of his original 519,997 shares in GoodGold, by
praying that the court declare that "there were no valid transfers of the contested shares to defendants
and Francisco."35 It baffles this Court, however, that Gilbert omitted Francisco as defendant in his
complaint. While Gilbert could have opted to waive his shares in the name of Francisco to justify the
latter’s non-inclusion in the complaint, Gilbert did not do so, but instead, wanted everything back and
even wanted the whole transfer of shares declared fraudulent. This cannot be done, without including
Francisco as defendant in the original case. The transfer of the shares cannot be, as Gilbert wanted,
declared entirely fraudulent without including those of Francisco who owns almost a third of the total
number.

Francisco, in both the 2004 and 2008 complaints, is an indispensable party without whom no final
determination can be had for the following reasons: (a) the complaint prays that the shares now under
the name of the defendants and Francisco be declared fraudulent; (b) Francisco owns 195,000 shares
some of which, Gilbert prays be returned to him; (c) Francisco signed the certificates of stocks
evidencing the alleged fraudulent shares previously in the name of Gilbert. The inclusion of the shares of
Francisco in the complaint makes Francisco an indispensable party. Moreover, the pronouncement
about the shares of Francisco would impact on the hereditary rights of the contesting parties or on the
conjugal properties of the spouses to the effect that Francisco, being husband of Simny and father of the
other contesting parties, must be included for, otherwise, in his absence, there cannot be a
determination between the parties already before the court which is effective, complete, or equitable.

The definition in the Rules of Court, Section 7, Rule 3 thereof, of indispensable parties as "parties in
interest without whom no final determination can be had of an action" has been jurisprudentially
amplified. In Sps. Garcia v. Garcia, et.al.,36 this Court held that:

An indispensable party is a party who has such an interest in the controversy or subject matter that a
final adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who
has not only an interest in the subject matter of the controversy, but also has an interest of such nature
that a final decree cannot be made without affecting his interest or leaving the controversy in such a
condition that its final determination may be wholly inconsistent with equity and good conscience. It has
also been considered that an indispensable party is a person in whose absence there cannot be a
determination between the parties already before the court which is effective, complete, or equitable.
Further, an indispensable party is one who must be included in an action before it may properly go
forward.

This was our pronouncements in Servicewide Specialists Inc. v. CA,37 Arcelona v. CA,38 and Casals v.
Tayud Golf and Country Club, Inc.39

Settled is the rule that joinder of indispensable parties is compulsory40 being a sine qua non for the
exercise of judicial power,41 and, it is precisely "when an indispensable party is not before the court
that the action should be dismissed" for such absence renders all subsequent actions of the court null
and void for want of authority to act, not only as to the absent parties but even as to those present.42

It bears emphasis that Gilbert, while suing as a stockholder against his co-stockholders, should have also
impleaded GoodGold as defendant. His complaint also prayed for the annulment of the 2004
stockholders’ annual meeting, the annulment of the 2004 election of the board of directors and of its
officers, the annulment of 2004 GIS submitted to the SEC, issuance of an order for the accounting of all
monies and rentals of GoodGold, and the issuance of a writ of preliminary and mandatory injunction.
We have made clear that GoodGold is a separate juridical entity distinct from its stockholders and from
its directors and officers. The trial court, acting as a special commercial court, cannot settle the issues
with finality without impleading GoodGold as defendant. Like Francisco, and for the same reasons,
GoodGold is an indispensable party which Gilbert should have impleaded as defendant in his complaint.

Allegations of deceit, machination,false pretenses, misrepresentation, and threats are largely

conclusions of law that, without supporting statements of the facts to which the allegations of fraud
refer, do not sufficiently state an effective cause of action.

"In all averments of fraud or mistake, the circumstances constituting fraud or mistake must be stated
with particularity"44 to "appraise the other party of what he is to be called on to answer, and so that it
may be determined whether the facts and circumstances alleged amount to fraud."45 These particulars
would necessarily include the time, place and specific acts of fraud committed.46 "The reason for this
rule is that an allegation of fraud concerns the morality of the defendant’s conduct and he is entitled to
know fully the ground on which the allegations are made, so he may have every opportunity to prepare
his case to clear himself at the trial."

Tested against established standards, we find that the charges of fraud which Gilbert accuses his siblings
are not supported by the required factual allegations. Significantly, no corporate power or office was
alleged to have facilitated the transfer of Gilbert’s shares. How the petitioners perpetrated the fraud, if
ever they did, is an indispensable allegation which Gilbert must have had alleged with particularity in his
complaint, but which he failed to.

Failure to specifically allege the fraudulent acts in intra-corporate controversies is indicative of a

harassment or nuisance suit and may be dismissed motu proprio.

In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute a ground for
dismissal since such a defect can be cured by a bill of particulars. A bill of particulars may be ordered as
to a defense of fraud or mistake if the circumstances constituting fraud or mistake are not stated with
the particularity required by the rule.53

The above-stated rule, however, does not apply to intra-corporate controversies. In Reyes,54 we
pronounced that "in cases governed by the Interim Rules of Procedure on Intra-Corporate Controversies
a bill of particulars is a prohibited pleading. It is essential, therefore, for the complaint to show on its
face what are claimed to be the fraudulent corporate acts if the complainant wishes to invoke the
court’s special commercial jurisdiction." This is because fraud in intra-corporate controversies must be
based on "devises and schemes employed by, or any act of, the board of directors, business associates,
officers or partners, amounting to fraud or misrepresentation which may be detrimental to the interest
of the public and/or of the stockholders, partners, or members of any corporation, partnership, or
association," as stated under Rule 1, Section 1 (a)(1) of the Interim Rules. The act of fraud or
misrepresentation complained of becomes a criterion in determining whether the complaint on its face
has merits, or within the jurisdiction of special commercial court, or merely a nuisance suit.

It did not escape us that Gilbert, instead of particularly describing the fraudulent acts that he
complained of, just made a sweeping denial of the existence of stock certificates by claiming that such
were not necessary, GoodGold being a mere family corporation.55 As sweeping and bereft of particulars
is his claim that he "is unaware of any document signed by him that would justify and support the
transfer of his shares to herein petitioners."56 Even more telling is the contradiction between the denial
of the existence of stock certificates and the denial of the transfer of his shares of stocks "under his
name under the books of the corporations."

Even beyond the vacant pleadings, its nature as nuisance is palpable. To recapitulate, it was only after
five years following the redistribution of GoodGold’s shares of stock, that Gilbert filed with the RTC of
Manila, a Complaint

When a stock certificate is endorsed

in blank by the owner thereof, it
constitutes what is termed as "street
certificate," so that upon its face, the
holder is entitled to demand its
transfer his name from the issuing
corporation.

With Gilbert’s failure to allege specific acts of fraud in his complaint and his failure to rebut the NBI
report, this Court pronounces, as a consequence thereof, that the signatures appearing on the stock
certificates, including his blank endorsement thereon were authentic. With the stock certificates having
been endorsed in blank by Gilbert, which he himself delivered to his parents, the same can be cancelled
and transferred in the names of herein petitioners.

In Santamaria v. Hongkong and Shanghai Banking Corp.,61 this Court held that when a stock certificate is
endorsed in blank by the owner thereof, it constitutes what is termed as "street certificate," so that
upon its face, the holder is entitled to demand its transfer into his name from the issuing corporation.
Such certificate is deemed quasi-negotiable, and as such the transferee thereof is justified in believing
that it belongs to the holder and transferor.

While there is a contrary ruling, as an exception to the general rule enunciated above, what the Court
held in Neugene Marketing Inc., et al., v CA,62 where stock certificates endorsed in blank were stolen
from the possession of the beneficial owners thereof constraining this Court to declare the transfer void
for lack of delivery and want of value, the same cannot apply to Gilbert because the stock certificates
which Gilbert endorsed in blank were in the undisturbed possession of his parents who were the
beneficial owners thereof and who themselves as such owners caused the transfer in their names.
Indeed, even if Gilbert’s parents were not the beneficial owners, an endorsement in blank of the stock
certificates coupled with its delivery, entitles the holder thereof to demand the transfer of said stock
certificates in his name from the issuing corporation.
Monis v. Velasco, G.R. No. 169276, June 16, 2009
FACTS: Rev. Fr. Patricio (Patricio), Magdalena Catalina (Magdalena), Venancio, and respondent Macaria,
all surnamed Monis, as well as respondent Andrea Monis - Velasco (Andrea), are siblings. Venancio is
the father of petitioners Dionisia Monis Lagunilla and Rafael Monis. During their lifetime, Patricio and
Magdalena acquired several properties which included several parcels of land in the province of La
Union and another one situated in Quezon City, with an area of 208.35 sq. m. (otherwise known as the
Quezon City property).[3] The Quezon City property was co-owned by Patricio and Magdalena, together
with Andrea and Pedro Velasco.

After the death of Patricio and Magdalena, or on February 24, 1993, Andrea and Macaria (to the
exclusion of Venancio’s children) executed a Deed of Extrajudicial Settlement with Donation[4]
(hereinafter referred to as the subject Deed) involving the Quezon City property, and donated the same
to Andrea’s son, Pedro Monis Velasco, Jr. (Pedro).

On June 1, 1993, petitioners instituted an action for Annulment of Documents and Damages[7] before
the Regional Trial Court (RTC) of Balaoan, La Union against respondents. In their complaint, petitioners
sought the annulment of the subject Deed, allegedly because of the fraudulent act committed by
respondents in executing the same. They claimed that respondents misrepresented that they were the
only surviving heirs of Patricio and Magdalena by virtue of their right to represent their deceased father
Venancio. In short, being Patricio and Magdalena’s nephew and niece, they were asserting their rights,
as co-heirs, to the Quezon City property. Respondents’ fraudulent act was, according to petitioners, a
ground for the annulment of the subject Deed. As a consequence of the nullity of the extrajudicial
settlement, they further sought the cancellation of the title and tax declarations issued pursuant
thereto, in the name of Pedro.

Respondents countered that nowhere in the subject Deed did they assert to be the only surviving heirs
of Patricio and Magdalena. Admittedly, however, they claimed to be the only legitimate sisters of the
deceased. They added that annulment of the Deed was not tenable, considering that petitioners
already received advances on their share of the properties of the decedent; besides, there were other
properties that had not been the subject of partition from which they could obtain reparation, if they
are so entitled. Contrary to petitioners’ claim, respondents insisted that there was no way that the
subject Deed could be annulled in the absence of any valid ground to rely on

After petitioners rested their case, they moved for the amendment of the complaint to implead
additional party and to conform to the evidence presented.[9] Petitioners averred that the resolution of
the case would affect the interest of Pedro as donee; hence, he is an indispensable party. The RTC,
however, denied the motion, as the amendment of the complaint would result in the introduction of a
different cause of action prejudicial to respondents. The court further held that the amendment of the
complaint would unduly delay the resolution of the case.

RTC Ruling
On April 24, 1997, the RTC decided in favor of respondents and dismissed the case. Applying Article 887
of the Civil Code, the RTC ruled that petitioners are not compulsory heirs; thus, they could not invoke
bad faith as a ground to rescind the subject Deed.

On appeal to the Court of Appeals, the appellate court affirmed. The appellate court made a definitive
conclusion that petitioners, together with respondents, are heirs of Macaria and Patricio. However,
considering that petitioners are not compulsory heirs, it agreed with the RTC that they could not use
“bad faith” as a ground to rescind the contract as provided for in Article 1104 of the New Civil Code.
While recognizing the doctrine that the subject Deed was not binding on petitioners because they did
not participate therein, the appellate court refused to annul the contract on the basis thereof, in view of
the existence of other properties previously received by petitioners and those that may still be the
subject of partition.

Unsatisfied, petitioners come to this Court in this petition for review on certiorari

ISSUE: WON the CA erred in affirming the RTC in the denial of the motion to implead Pedro

HELD:

In fine, petitioners challenge the appellate court’s conclusions on the validity of the extrajudicial
settlement with donation and the denial of the motion to amend the complaint to implead an
indispensable party and conform to the evidence presented.

Much as we would like to make a definitive conclusion on the respective rights of all the parties and
decide, once and for all, their interests over the subject property, we are barred by a jurisdictional issue.

Jurisdiction is the power invested in courts for administering justice, that is, to hear and decide cases.
For the court to exercise the authority to dispose of the case on the merits, it must acquire jurisdiction
over the subject matter and the parties.[16]
Courts acquire jurisdiction over a party plaintiff upon the filing of the complaint. On the other hand,
jurisdiction over the person of a party defendant is assured upon the service of summons in the manner
required by law or, otherwise, by his voluntary appearance. As a rule, if a defendant has not been
summoned, the court acquires no jurisdiction over his person, and a personal judgment rendered
against such defendant is null and void. A decision that is null and void for want of jurisdiction of the
trial court is not a decision in contemplation of law and can never become final and executory.[17]

Corollary to the issue of jurisdiction, and equally important, is the mandatory rule on joinder of
indispensable parties set forth in Section 7, Rule 3 of the Rules of Court, to wit:

SEC. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.

The general rule with reference to parties to a civil action requires the joinder of all necessary parties,
where possible, and the joinder of all indispensable parties under any and all conditions.[18] The evident
intent of the Rules on the joinder of indispensable and necessary parties is the complete determination
of all possible issues, not only between the parties themselves but also as regards other persons who
may be affected by the judgment.[19]

In this case, petitioners challenge the denial of their motion to amend the complaint to implead Pedro
who, they claim, is an indispensable party to the case. We are, therefore, compelled to address this
important question.

In Regner v. Logarta[20] and Arcelona v. CA,[21] we laid down the test to determine if a party is an
indispensable party, viz.:

An indispensable party is a party who has an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has
not only an interest in the subject matter of the controversy, but also has an interest of such nature that
a final decree cannot be made without affecting his interest or leaving the controversy in such a
condition that its final determination may be wholly inconsistent with equity and good conscience. It
has also been considered that an indispensable party is a person in whose absence there cannot be a
determination between the parties already before the court which is effective, complete or equitable.
Further, an indispensable party is one who must be included in an action before it may properly go
forward.

A person is not an indispensable party, however, if his interest in the controversy or subject matter is
separable from the interest of the other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them. Also, a person is not an indispensable
party if his presence would merely permit complete relief between him and those already parties to the
action, or if he has no interest in the subject matter of the action. It is not a sufficient reason to declare
a person to be an indispensable party that his presence will avoid multiple litigation.[22]

In upholding the denial of the motion to amend the complaint, the appellate court concluded that the
sole desire of petitioners in instituting the case was the annulment of the extrajudicial settlement.
Effectively, it separated the question of the validity of the extrajudicial settlement from the validity of
the donation. Accordingly, the court said, the latter issue could be threshed out in a separate
proceeding later. This explains why Pedro was not considered an indispensable party by the trial and
appellate courts.

We beg to differ.

Even without having to scrutinize the records, a mere reading of the assailed decision readily
reveals that Pedro is an indispensable party. At the time of the filing of the complaint, the title to the
Quezon City property was already registered in the name of Pedro, after TCT No. 60455 (190472) in the
names of Pedro Velasco, Andrea, Magdalena and Patricio Monis was cancelled, pursuant to the
extrajudicial settlement with donation executed by respondents. The central thrust of the complaint
was that respondents, by themselves, could not have transferred the Quezon City property to Pedro
because petitioners, as heirs of Patricio and Magdalena, also have rights over it. Accordingly, petitioners
specifically prayed that the extrajudicial settlement with donation be annulled and the transfer
certificate of title and tax declarations (in the name of Pedro) issued pursuant thereto be canceled.

If such prayer and thrust were to be denied (as held by the trial and appellate courts), the problem
would be less obvious, as the status quo would be maintained. However, if they were to be upheld,
Pedro’s title to the property would undoubtedly be directly and injuriously affected. Even if we only
resolve the validity of the extrajudicial settlement, there would be no final adjudication of the case
without involving Pedro’s interest.

Verily, Pedro’s interest in the subject matter of the suit and in the relief sought are so inextricably
intertwined with that of the other parties. His legal presence as a party to the proceedings is, therefore,
an absolute necessity.[24] His interest in the controversy and in the subject matter is not separable from
the interest of the other parties.

It is unfortunate that petitioners failed to implead Pedro as defendant in their complaint. Interestingly,
however, they realized such mistake, albeit belatedly, and thus sought the amendment of the complaint
to join him as a defendant, but the RTC refused to grant the same.

Well-settled is the rule that joinder of indispensable parties is mandatory.[25] It is a condition sine qua
non to the exercise of judicial power.[26] The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the absent parties but even
as to those present.[27] Without the presence of indispensable parties to the suit, the judgment of the
court cannot attain finality.[28] One who is not a party to a case is not bound by any decision of the
court; otherwise, he will be deprived of his right to due process.[29] That is why the case is generally
remanded to the court of origin for further proceedings.[30]

In light of these premises, no final ruling can be had on the validity of the extrajudicial settlement.
While we wish to abide by the mandate on speedy disposition of cases, we cannot render a premature
judgment on the merits. To do so could result in a possible violation of due process. The inclusion of
Pedro is necessary for the effective and complete resolution of the case and in order to accord all parties
the benefit of due process and fair play.[31]

Nevertheless, as enunciated in Commissioner Domingo v. Scheer,[32] Lotte Phil. Co., Inc. v. Dela
Cruz,[33] and PepsiCo, Inc. v. Emerald Pizza, Inc.,[34] the non-joinder of indispensable parties is not a
ground for the dismissal of an action. The remedy is to implead the non-party claimed to be
indispensable. Parties may be added by order of the court on motion of the party or on its own initiative
at any stage of the action and/or at such times as are just. If the plaintiff refuses to implead an
indispensable party despite the order of the court, then the court may dismiss the complaint for the
plaintiff’s failure to comply with a lawful court order.

In light of the foregoing, a remand of the case to the trial court is imperative.

Sec. 8. Necessary party

Chua v. Torres, G.R. No. 151900, August 30, 2005

FACTS: On 24 October 2001, a complaint for damages was lodged before the Regional Trial Court (RTC)
of Caloocan City, Branch 126.[1] The complaint was filed by Christine Chua, herein petitioner,
impleading her brother Jonathan Chua as a necessary co-plaintiff. Named as defendants in the suit were
herein respondents Jorge Torres and Antonio Beltran. Torres was the owner of the 9th Avenue Caltex
Service Center (Caltex Service Center), while Beltran was an employee of the said establishment as the
head of its Sales and Collection Division.[2]

The complaint alleged that on 3 April 2000, Jonathan Chua issued in favor of the Caltex Service
Center his personal Rizal Commercial Banking Corporation (RCBC) Check No. 0412802 in the amount of
Nine Thousand Eight Hundred Forty Nine Pesos and Twenty Centavos (P9,849.20) in payment for
purchases of diesel oil. However, the check was dishonored by the drawee bank when presented for
payment on the ground that the account was closed. Beltran then sent petitioner a demand letter
informing her of the dishonor of the check and demanding the payment thereof. Petitioner ignored the
demand letter on the ground that she was not the one who issued the said check.

Without bothering to ascertain who had actually issued the check, Beltran instituted against petitioner a
criminal action for violation of Batas Pambansa Bilang 22 (B.P. 22). Subsequently, a criminal information
was filed against petitioner with the Metropolitan Trial Court (MTC) of Caloocan City, Branch 50.[3] The
MTC then issued a warrant of arrest against petitioner. The police officers tasked with serving the
warrant looked for her in her residence, in the auto repair shop of her brother, and even at the Manila
Central University were she was enrolled as a medical student, all to the alleged embarrassment and
“social humiliation” of petitioner

Significantly, while Jonathan Chua was named as a plaintiff to the suit, it was explicitly qualified in the
second paragraph of the complaint that he was being “impleaded here-in as a necessary party-
plaintiff”.[6] There was no allegation in the complaint of any damage or injury sustained by Jonathan,
and the prayer therein expressly named petitioner as the only party to whom respondents were sought
to recompense.[7] Neither did Jonathan Chua sign any verification or certification against forum-
shopping, although petitioner did sign an attestation, wherein she identified herself as “the principal
plaintiff”

Upon motion of respondents, the RTC ordered the dismissal of the complaint[9] on the ground that
Jonathan Chua had not executed a certification against forum-shopping.
After the RTC denied the motion for reconsideration[12] lodged by petitioner, the matter was elevated
directly to this Court by way of petition for review under Rule 45, raising a purely legal question

ISSUE:

HELD: The Court settles an issue, heretofore undecided, on whether the absence of the signature in the
required verification and certification against forum-shopping of a party misjoined as a plaintiff is a valid
ground for the dismissal of the complaint. We rule in the negative.

We find the petition has merit, although we appreciate the situation differently from petitioner. Our
decision proceeds from the fundamental premise that Jonathan Chua was misjoined as a party plaintiff
in this case.

It is elementary that it is only in the name of a real party in interest that a civil suit may be
prosecuted.[19] Under Section 2, Rule 3 of the Rules of Civil Procedure, a real party in interest is the
party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit. "Interest" within the meaning of the rule means material interest, an interest in issue
and to be affected by the decree, as distinguished from mere interest in the question involved, or a
mere incidental interest.[20] One having no right or interest to protect cannot invoke the jurisdiction of
the court as a party plaintiff in an action.[21] To qualify a person to be a real party in interest in whose
name an action must be prosecuted, he must appear to be the present real owner of the right sought to
enforced.[22]

The subject complaint does not allege any rights of Jonathan Chua violated by respondents, present any
rights of his to be enforced, or seek in his behalf any rights to the avails of suit. In short, Jonathan claims
nothing, and for nothing, in the subject complaint. If he alone filed the complaint, it would have been
dismissed on the ground that the complaint states no cause of action, instituted as it was by a person
who was not a real party in interest.

But was it proper for petitioner to have even impleaded Jonathan as a co-plaintiff in the first place?
Petitioner alleged in her complaint that Jonathan was a necessary party, and remains consistent to that
claim even before this Court. She however fails to demonstrate how Jonathan can be considered as a
necessary party, other than by noting that he was “the one who really
issued the check in controversy.”[23] Such fact, if proven, may establish the malice of respondents in
filing the criminal case against petitioner for violation of B.P. 22, but does not create the need to require
Jonathan’s participation as a necessary party.

Section 8, Rule 7 of the Rules of Civil Procedure defines a necessary party as “one who is not
indispensable but who ought to be joined as a party if complete relief is to be accorded as to those
already parties, or for a complete determination or settlement of the claim subject of the action.”[24]
Necessary parties are those whose presence is necessary to adjudicate the whole controversy, but
whose interests are so far separable that a final decree can be made in their absence without affecting
them.[25]

An example of a necessary party may be found in Seno v. Mangubat.[26] Petitioner therein sold her
property through a deed of sale to three vendees. Two of the vendees then sold their shares to the third
buyer, who then sold the property to another set of persons. Thereafter, petitioner, who claimed that
the true intent of the first sale was an equitable mortgage, filed a complaint seeking the reformation of
the deed of sale and the annulment of the second sale. The question arose whether the two vendees
who had since disposed of their shares should be considered as indispensable parties or necessary
parties. In concluding that they were only necessary parties, the Court reasoned:

In the present case, there are no rights of defendants Andres Evangelista and Bienvenido Mangubat to
be safeguarded if the sale should be held to be in fact an absolute sale nor if the sale is held to be an
equitable mortgage. Defendant Marcos Mangubat became the absolute owner of the subject property
by virtue of the sale to him of the shares of the aforementioned defendants in the property. Said
defendants no longer have any interest in the subject property. However, being parties to the
instrument sought to be reformed, their presence is necessary in order to settle all the possible issues of
the controversy. Whether the disputed sale be declared an absolute sale or an equitable mortgage, the
rights of all the defendants will have been amply protected. Defendants-spouses Luzame in any event
may enforce their rights against defendant Marcos Mangubat.[27]

In Seno, the persons deemed by the Court as necessary parties may have had already disposed of
their interests in the property. However, should the lower court therein grant the prayer for the
reformation of the deed of sale, the ruling will undoubtedly have an effect on such parties, on matters
such as the purchase price which they may have received, and on whatever transmission of rights that
may have occurred between them and the vendor.

In contrast, Jonathan Chua does not stand to be affected should the RTC rule either favorably or
unfavorably of the complaint. This is due to the nature of the cause of action of the complaint, which
alleges an injury personal to petitioner, and the relief prayed for, which is to be adjudicated solely to
petitioner. There is no allegation in the complaint alleging any violation or omission of any right of
Jonathan, either arising from contract or from law.

It may be so that Jonathan may be called to testify by his sister, in order to prove the essential allegation
that she did not issue the check in question, and perhaps such testimony would be vital to petitioner’s
cause of action. But this does not mean that Jonathan should be deemed a necessary party, as such
circumstance would merely place him in the same class as those witnesses whose testimony would be
necessary to prove the allegations of the complaint. But the fact remains that Jonathan would stand
unaffected by the final ruling on the complaint. The judicial confirmation or rejection of the allegations
therein, or grant or denial of the reliefs prayed for will not infringe on or augment any of his rights under
the law. If there would be any effect to Jonathan of the RTC’s ultimate decision on the complaint, it
would be merely emotional, arising from whatever ties of kinship he may retain towards his sister, and
no different from whatever effects that may be similarly sustained on petitioner’s immediate family.

Since we are unconvinced by petitioner’s basic premise that Jonathan was a necessary party, it is
unnecessary to directly settle the issue as couched by petitioner of “whether or not a co-plaintiff
impleaded only as a necessary party, who however has no claim for relief or is not asserting any claim
for relief in the complaint, should also make a certification against forum shopping.”[28] We can note, as
the RTC did, that Section 5, Rule 7 of the 1997 Rules of Civil Procedure makes no distinctions that would
expressly exempt a necessary party from executing the certification against forum shopping.
Nonetheless, there are dimensions to the matter, heretofore unraised, that may unsettle a strict
application of the rule, such as if the necessary party is impleaded as a plaintiff or counterclaimant
without his knowledge or against his will.[29] But these circumstances relevant to a necessary party are
not present in this case, and thus require no further comment upon for now.

Instead, what the Court may rule upon is whether the absence of the signature of the person
misjoined as a party-plaintiff in either the verification page or certification against forum-shopping is
ground for the dismissal of the action. We rule that it is not so, and that the RTC erred in dismissing the
instant complaint. There is no judicial precedent affirming or rejecting such a view, but we are
comfortable with making such a pronouncement. A misjoined party plaintiff has no business
participating in the case as a plaintiff in the first place, and it would make little sense to require the
misjoined party in complying with all the requirements expected of plaintiffs.

At the same time, Section 11, Rule 3 of the 1997 Rules of Civil Procedure states:

Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be
dropped or added by order of the court on motion of any party or on its own initiative at any stage of
the action and on such terms as are just. Any claim against a misjoined party may be severed and
proceeded with separately.[30]

Clearly, misjoinder of parties is not fatal to the complaint. The rule prohibits dismissal of a suit on
the ground of non-joinder or misjoinder of parties.[31] Moreover, the dropping of misjoined parties
from the complaint may be done motu proprio by the court, at any stage, without need for a motion to
such effect from the adverse party.[32] Section 11, Rule 3 indicates that the misjoinder of parties, while
erroneous, may be corrected with ease through amendment, without further hindrance to the
prosecution of the suit.

It should then follow that any act or omission committed by a misjoined party plaintiff should not
be cause for impediment to the prosecution of the case, much less for the dismissal of the suit. After all,
such party should not have been included in the first place, and no efficacy should be accorded to
whatever act or omission of

the party.[33] Since the misjoined party plaintiff receives no recognition from the court as either an
indispensable or necessary party-plaintiff, it then follows that whatever action or inaction the misjoined
party may take on the verification or certification against forum-shopping is inconsequential. Hence, it
should not have mattered to the RTC that Jonathan Chua had failed to sign the certification against
forum-shopping, since he was misjoined as a plaintiff in the first place. The fact that Jonathan was
misjoined is clear on the face of the complaint itself, and the error of the RTC in dismissing the
complaint is not obviated by the fact that the adverse party failed to raise this point. After all, the RTC
could have motu proprio dropped Jonathan as a plaintiff, for the reasons above-stated which should
have been evident to it upon examination of the complaint.

There may be a school of thought that would nonetheless find some satisfaction in petitioner’s
woes before the RTC, as it was her error in the first place of wrongfully impleading her brother as a party
plaintiff which ultimately served as cause for the dismissal of the complaint. The blame may in the final
analysis lie with petitioner, yet we should not construe the rules of procedure to quench an unnecessary
thirst to punish at the expense of the intellectual integrity of the rules. For our Rules of Court do not
regard the misjoinder of parties as an error of fatal consequence, and the logical extension of this
principle is to consider those procedural acts or omissions of misjoined parties as of similar import.
Seno v. Mangubat, G.R. No. 44339, December 2, 1987
FACTS: This case stemmed from a complaint filed by plaintiffs on August 29, 1969 seeking 1) the
reformation of a Deed of Sale executed in favor of defendant Marcos Mangubat and, 2) the annulment
of a subsequent sale to defendant spouses Francisco Luzame and Vergita Peñaflor of a parcel of land in
Barrio Dongalo, Parañaque, Rizal.

plaintiff Crisanta Seno, a widow, approached defendant Marcos Mangubat sometime in 1961 to
negotiate with him a mortgage over the subject parcel of land so she can pay off a previous
indebtedness agreed on a mortgage for the sum of P15,000.00 with interest of 2% a month payable
every month and that as long as the interest is being paid, the mortgage over the property will not be
foreclosed; that on the assurance of defendant Marcos Mangubat, a practicing lawyer, that he will
respect their true agreement on the mortgage, plaintiff Crisanta F. Seno agreed to the execution of a
Deed of Absolute Sale over the subject property for a consideration of P5,000.00 in favor of defendant
Marcos Mangubat and certain Andres Evangelista and Bienvenido Mangubat on July 17, 1961; 3 that
defendant Marcos Mangubat was able to obtain a title in his name and the other alleged vendees
Andres Evangelista and Bienvenido Mangubat; that on January 8, 1962 Andres Evangelista and
Bienvenido Mangubat executed a Deed of Absolute Sale transferring their share in the subject property
to defendant Marcos Mangubat; that defendant Marcos Mangubat was able to obtain a title over the
subject property in his name by virtue of this latter sale; that plaintiff Crisanta F. Seno continued paying
defendant Marcos Mangubat the usurious 2% interest per month; that sometime in 1963, when plaintiff
Crisanta F. Seno failed to pay the monthly interest of 2%, she was sued for ejectment by defendant
Marcos Mangubat alleging nonpayment of rentals; that sometime in the later week of January 1969,
plaintiff Crisanta F. Seno learned that defendant Marcos Mangubat sold the subject property in favor of
spouses Francisco Luzame and Vergita Peñaflor for the sum of P10,000.00 on January 14, 1969; 4 that
defendant spouses Francisco Luzame and Vergita Peñaflor bought the property in bad faith since they
had knowledge of the circumstances surrounding the transaction between plaintiff and defendant
Marcos Mangubat; that defendant spouses Luzame filed an ejectment case against plaintiff Crisanta
Seno for alleged non-payment of rentals.

On motion of defendant spouses Luzame and Peñaflor, the trial court ordered on October 20, 1975 the
inclusion as defendants of Andres Evangelista and Bienvenido Mangubat on the ground that they are
indispensable parties, on December 29, 1971, plaintiffs filed their amended complaint in compliance
with the court's order of October 20, impleading Andres Evangelista and Bienvenido Mangubat as
defendants.

The newly impleaded defendants moved for the dismissal of the case against them on the ground of
prescription against defendants Andres Evangelista and Bienvenido Mangubat which motion was
granted by the court in its order of July 3, 1972
The court a quo in its order of September 27, 1972 reconsidered its order of July 3rd and dismissed the
case against all the defendants holding that the court is no longer in a position to grant plaintiffs'
demands, principally the reformation of subject Deed of Absolute Sale.

The motion for reconsideration filed by the plaintiffs of the foregoing order was denied by the trial court
in its order of January 17, 1973; 6 hence, an appeal was brought before the Court of Appeals praying for
the reversal of the orders of the court a quo dated September 27, 1972 and January 17, 1973 and for the
remand of the case to the court a quo for further proceedings.
The Court of Appeals certified the instant case to this Court holding that the assignment of errors made
by plaintiffs in their appeal raised purely legal questions, to wit

1) Are defendants Andres Evangelista and Bienvenido Mangubat indispensable parties in the case
without whom no action can be properly taken thereon?

2) If they are such, has the action prescribed against them in view of Art. 1144, Civil Code?

3) If they are not, was the dismissal of said defendants a legal grounds for dismissal of the complaint
as against the other defendants? and

4) Was the dismissal of the case without a hearing on the merits in accordance with law? 7

HELD:

The first issue We need to resolve is whether or not defendants Andres Evangelista and Bienvenido
Mangubat are indispensable parties. Plaintiffs contend that said defendants being mere dummies of
defendant Marcos Mangubat and therefore not real parties in interest, there is no room for the
application of Sec. 7, Rule 3 of the Rules of Court.

For the determination of this issue, We find it necessary to consider the distinction between
indispensable and proper parties as clearly stated in Sections 7 and 8, Rule 3 of the Revised Rules of
Court which provide:

"Sec. 7. Compulsory joinder of indispensable parties. Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants."

"Sec. 8. Joinder of proper parties. When persons who are not indispensable but who ought to be
parties if complete relief is to be accorded as between those already parties, have not been made
parties and are subject to the jurisdiction of the court as to both service of process and venue, the court
shall order them summoned to appear in the action. But the court may, in its discretion, proceed in the
action without making such persons parties, and the judgment rendered therein shall be without
prejudice to the rights of such persons."

Under Section 7, indispensable parties must always be joined either as plaintiffs or defendants, for the
court cannot proceed without them. Necessary parties 8 must be joined, under Section 8, in order to
adjudicate the whole controversy and avoid multiplicity of suits. 9

Indispensable parties are those with such an interest in the controversy that a final decree would
necessarily affect their rights, so that the courts cannot proceed without their presence. Necessary
parties are those whose presence is necessary to adjudicate the whole controversy, but whose interests
are so far separable that a final decree can be made in their absence without affecting them. 10

Defendants cite Alberto vs. Mananghala 11 to support their theory that defendants Andres Evangelista
and Bienvenido Mangubat are indispensable parties. Thus

xxx xxx xxx

"One of the issues raised by the parties is whether the transactions carried out by and between Arcadio
Ramos and the deceased Vicente Feliciano is a sale with pacto de retro or simply an equitable mortgage.
If it be held that it is an equitable mortgage, then their right would be defeated and they would be held
liable for warranty and eviction under the law to Casimiro Mananghala. This being so, it would seem
clear that the presence of all the heirs of Vicente Feliciano in this case is indispensable in order that they
may protect their interests. They are entitled to be heard. They may have a valid defense which may
have the effect of defeating the claim of the plaintiff. This however, was not done, for some of the heirs
of Vicente Feliciano were not served with summons and consequently have not entered their
appearance. This is in violation of Section 7, Rule 3 of the Rules of Court.

"xxx xxx xxx

We, however, find this case inapplicable to the case at bar.

In the present case, there are no rights of defendants Andres Evangelista and Bienvenido Mangubat to
be safeguarded if the sale should be held to be in fact an absolute sale nor if the sale is held to be an
equitable mortgage. Defendant Marcos Mangubat became the absolute owner of the subject property
by virtue of the sale to him of the shares of the aforementioned defendants in the property. Said
defendants no longer have any interest in the subject property. However, being parties to the
instrument sought to be reformed, their presence is necessary in order to settle all the possible issues of
the controversy. Whether the disputed sale be declared an absolute sale or an equitable mortgage, the
rights of all the defendants will have been amply protected. Defendants-spouses Luzame in any event
may enforce their rights against defendant Marcos Mangubat.

In fact the plaintiffs were not after defendants Andres Evangelista and Bienvenido Mangubat as shown
by their non-inclusion in the complaint and their opposition to the motion to include said defendants in
the complaint as indispensable parties. It was only because they were ordered by the court a quo that
they included the said defendants in the complaint. The lower court erroneously held that the said
defendants are indispensable parties.

Notwithstanding, defendants Andres Evangelista and Bienvenido Mangubat not being indispensable
parties but only proper parties, their joinder as parties defendants was correctly ordered being in
accordance with Sec. 8 of Rule 3.

Prescription
We, therefore, need to settle the next issue of whether the action against them has prescribed in view
of Art. 1144, Civil Code, which provides:

"The following actions must be brought ten years from the time the right of action accrues:

"1) Upon a written contract;

xxx xxx xxx"

The complaint clearly alleged that the deed of sale executed on July 17, 1961 did not express the true
intention of the parties and should be reformed into the mortgage it actually was. Such allegations are
binding for purposes of determining the motion to dismiss (which hypothetically admits the allegations
in the complaint). The prescriptive period for such actions based upon a written contract and for
reformation thereof is ten years as provided in Article 1144 of the Civil Code. Such right to reformation
is expressly recognized in Article 1365 of the same Code which provides:

"If two parties agree upon the mortgage or pledge of real or personal property, but the instrument
states that the property is sold absolutely or with a right of repurchase, reformation of the instrument is
proper." 12

Article 1605 of the Civil Code 13 in conjunction with Article 1604 14 likewise allows the apparent vendor
to ask for the reformation of the instrument.

In the case of Pangasinan Transportation Co. vs. Philippine Farming Co., Ltd., 16 this Court held that
where the original complaint states a cause of action but does it imperfectly and afterwards an
amended complaint is filed correcting the defect, the plea of prescription will relate to the time of the
filing of the original complaint. However, in the case of Aetna Insurance Co. vs. Luzon Stevedoring
Corporation, 17 We held that this rule would not apply to the party impleaded for the first time in the
amended complaint.

In Aetna, the defendant Barber Lines Far East Service was impleaded for the first time in the amended
complaint which was filed after the one-year period for prescription. The order of the lower court
dismissing the amended complaint against the said defendant was affirmed by this Court.

In the instant case, defendants Andres Evangelista and Bienvenido Mangubat were only impleaded in
the amended complaint of December 29, 1971 or ten (10) years, five (5) months and twelve (12) days
from July 17, 1961 the date of execution of the subject Deed of Absolute Sale, clearly more than the ten
(10) year prescriptive period.

By the dismissal of the case against defendants Andres Evangelista and Bienvenido Mangubat, the court
a quo had lost jurisdiction over them. We have already pointed out that the joinder of proper parties is
necessary in order to determine all the possible issues of the controversy; but if for some reason or
another it is not possible to join them, as when they are out of the jurisdiction of the Court, the court
may proceed without them, and the judgment that may be rendered shall be without prejudice to their
rights. 22 Hence, notwithstanding the absence of said defendants, the court could still proceed with the
trial of the case as against the remaining defendants in accordance with Sec. 8 of Rule 3.

Nevertheless, the court is constrained to affirm the dismissal of the complaint against all the defendants
as there is merit in the argument raised by defendants-appellees that plaintiffs are barred by laches to
bring suit against them.

A perusal of the records shows that from the time of the execution of the deed of sale on July 17, 1961
to the time of the filing of the present complaint on August 29, 1969 or a period of 8 years, 1 month and
12 days, plaintiffs never took any step to enforce their rights which they claim to have despite the
several opportunities available to them.

Defendant Marcos Mangubat filed an ejectment suit against plaintiff Crisanta Seno in 1963 and this fact
was admitted by the plaintiffs in their complaint. For failure of plaintiff to appear in the case, a decision
was rendered by the trial court ordering plaintiffs to vacate the subject property 25 which decision was
duly executed. 26
It further appears from the complaint that plaintiffs were well aware of the transfer of the title from the
name of plaintiff Crisanta Seno to the names of defendants Marcos Mangubat, Andres Evangelista and
Bienvenido Mangubat and subsequently to the name of defendant Marcos Mangubat alone as early as
1963 when the ejectment case was filed against plaintiffs, and also they did not do anything about it.

In January 1969, plaintiffs learned of the sale of the subject property to defendants-spouses Luzame. but
it was only on August 29, 1969 when plaintiffs brought this action and only after an ejectment case was
filed by said defendant spouses against plaintiff Crisanta Seno before the Municipal Court of Parañaque,
Rizal on August 4, 1969.

As defendants-appellees contend, before the nine-year period lapsed, plaintiffs never raised a voice to
protest against all these proceedings. They chose to sleep on their rights and to rely on defendants'
alleged word that their true agreement would be respected rather than bring their grievances to a court
of law. However, when an ejectment case was filed against them just when the 10-year prescriptive
period for bringing of their suit was nearly over, they finally decided to stake their claim against the
defendants.

The essence of laches is not merely lapse of time. It is essential that there be also acquiescence in the
alleged wrong or lack of diligence in seeking a remedy. 27 The doctrine of laches or of "stale demands" is
based on public policy which requires, for the peace of society, the discouragement of stale claims and,
unlike the statute of limitations not a mere question of time but is principally a question of the inequity
or unfairness of permitting a right or claim to be enforced or asserted. 28

By the negligence of plaintiffs in asserting their rights for an unreasonable length of time, they are now
forever precluded from enforcing whatever right they may have against defendants. Indeed, it is an
indicia of the infirmity of their claim.

Spouses Luzame are buyers in good faith

Plaintiffs would have Us believe that defendant spouses being their erstwhile neighbors and friends had
knowledge of the circumstances surrounding the transaction between plaintiff Crisanta Seno and
Defendant Marcos Mangubat which therefore makes them purchasers in bad faith.

Defendant spouses, however, claim that they came to know of the existence of the original title of
plaintiff Crisanta Seno only when they verified the title to the land in 1969 when it was being offered to
them by co-defendant Marcos Mangubat. They deny that they are neighbors much less friends of
plaintiffs.

In order that a purchaser of land with a Torrens title may be considered as a purchaser in good faith, it is
enough that he examines the latest certificate of title which in this case is that issued in the name of the
immediate transferor. 29 The purchaser is not bound by the original certificate of title but only by the
certificate of title of the person from whom he has purchased the property. 30

Good faith, while it is always to be presumed in the absence of proof to the contrary, requires a well-
founded belief that the person from whom title was received was himself the owner of the land, with
the right to convey it. 31 In this regard, a buyer of real estate should exercise ordinary care in purchasing
land, 32 so that one who purchases real property should make inquiries about the right of those in
possession thereof. 33
The well-known rule in this jurisdiction is that a person dealing with a registered land has a right to rely
upon the face of the Torrens Certificate of Title and to dispense with the need of inquiring further,
except when the party concerned has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry. 34

It is true that by the possession of plaintiffs of the subject property, defendant spouses Luzame should
have been put on their guard and should have taken precautionary steps in ascertaining the interest of
the possessors of the land. The defendant spouses did verify the title to the property with the Register
of Deeds and finding that the latest title was in the name of defendant Marcos Mangubat, they, had
every reason to rely on such title. Besides, there was the ejectment suit filed by defendant Marcos
Mangubat against plaintiff Crisanta Seno which was decided in favor of the former. The defendant
spouses could not be faulted for believing that the possession of the plaintiffs was in the concept of
lessee; in fact said defendant spouses also filed an ejectment suit against plaintiffs.

This Court had occasion to rule that possession by the appellees, either by themselves or through their
predecessors in interest, if there was such possession at all, would be unavailing against the holder of a
Torrens Certificate of Title covering the parcels of land now in question. 35

Thus, where innocent third persons relying on the correctness of the certificate of title issued, acquire
rights over the property, the court cannot disregard such rights and order the total cancellation of the
certificate for that would impair public confidence in the certificate of title; otherwise everyone dealing
with property registered under the torrens system would have to inquire in every instance as to
whether the title had been regularly or irregularly issued by the court. Indeed, this is contrary to the
evident purpose of the law. Every person dealing with registered land may safely rely on the correctness
of the certificate of title issued therefore and the law will in no way oblige him to go behind the
certificate to determine the condition of the property. Stated differently, an innocent purchaser for
value relying on a torrens title issued is protected. 36

We therefore hold and find that defendants spouses Luzame are purchasers in good faith and for value
of the questioned property.

Wee v. Castro, G.R. No. 176405, August 20, 2008

FACTS: In their Complaint[5] filed on 1 July 2002 with the MTC of Alaminos City, docketed as Civil Case
No. 1990, respondents CASTRO alleged that they are the registered owners of the subject property, a
two-storey building erected on a parcel of land.

Respondents rented out the subject property to petitioner on a month to month basis for P9,000.00 per
month.[7] Both parties agreed that effective 1 October 2001, the rental payment shall be increased from
P9,000.00 to P15,000.00. Petitioner, however, failed or refused to pay the corresponding increase on
rent when his rental obligation for the month of 1 October 2001 became due.

The rental dispute was brought to the Lupon Tagapagpamayapa of Poblacion, Alaminos, Pangasinan, in
an attempt to amicably settle the matter but the parties failed to reach an agreement, resulting in the
issuance by the Barangay Lupon of a Certification to file action in court on 18 January 2002. On 10 June
2002, respondent George de Castro sent a letter to petitioner terminating their lease agreement and
demanding that the latter vacate and turn over the subject property to respondents. Since petitioner
stubbornly refused to comply with said demand letter, respondent George de Castro, together with his
siblings and co-respondents, Annie de Castro, Felomina de Castro Uban and Jesus de Castro, filed the
Complaint for ejectment before the MTC.

It must be noted, at this point, that although the Complaint stated that it was being filed by all
of the respondents, the Verification and the Certificate of Non-Forum Shopping were signed by
respondent George de Castro alone. He would subsequently attach to his position paper filed before
the MTC on 28 October 2002 the Special Powers of Attorney (SPAs) executed by his sisters Annie de
Castro and Felomina de Castro Uban dated 7 February 2002 and 14 March 2002 respectively, authorizing
him to institute the ejectment case against petitioner.

Petitioner, on the other hand, countered that there was no agreement between the parties to increase
the monthly rentals and respondents’ demand for an increase was exorbitant. Petitioner then argued
that respondents failed to comply with the jurisdictional requirement of conciliation before the
Barangay Lupon prior to the filing of Civil Case. No. 1990, meriting the dismissal of their Complaint
therein. The Certification to file action issued by the Barangay Lupon appended to the respondents’
Complaint merely referred to the issue of rental increase and not the matter of ejectment.

MTC Ruling
the MTC, on 21 November 2002, rendered a Decision[10] dismissing respondents’ Complaint

On appeal, docketed as Civil Case No. A-2835, the RTC of Alaminos, Pangasinan, Branch 54, promulgated
its Decision[11] dated 27 June 2005 affirming the dismissal of respondents’ Complaint for ejectment.
Adopting petitioner’s position, the RTC declared that respondents’ failure to refer the matter to the
Barangay court for conciliation process barred the ejectment case, conciliation before the Lupon being a
condition sine qua non in the filing of ejectment suits. The RTC likewise agreed with petitioner in ruling
that the allegation in the Complaint was flawed, since respondents failed to allege that there was an
“unlawful withholding” of possession of the subject property, taking out Civil Case No. 1990 from the
purview of an action for unlawful detainer. Finally, the RTC decreed that respondents’ Complaint failed
to comply with the rule that a co-owner could not maintain an action without joining all the other co-
owners.

Undaunted, respondents filed a Petition for Review on Certiorari[13] with the Court of Appeals where it
was docketed as CA-G.R. SP No. 90906. Respondents argued in their Petition that the RTC gravely erred
in ruling that their failure to comply with the conciliation process was fatal to their Complaint, since it is
only respondent George de Castro who resides in Alaminos City, Pangasinan, while respondent Annie de
Castro resides in Pennsylvania, United States of America (USA); respondent Felomina de Castro Uban, in
California, USA; and respondent Jesus de Castro, now substituted by his wife, Martiniana, resides in
Manila. Respondents further claimed that the MTC was not divested of jurisdiction over their Complaint
for ejectment because of the mere absence therein of the term “unlawful withholding” of their subject
property, considering that they had sufficiently alleged the same in their Complaint, albeit worded
differently. Finally, respondents posited that the fact that only respondent George de Castro signed the
Verification and the Certificate of Non-Forum Shopping attached to the Complaint was irrelevant since
the other respondents already executed Special Powers of Attorney (SPAs) authorizing him to act as
their attorney-in-fact in the institution of the ejectment suit against the petitioner.

On 19 September 2006, the Court of Appeals rendered a Decision granting the respondents’
Petition and ordering petitioner to vacate the subject property and turn over the same to respondents.
In a Resolution dated 25 January 2007, the appellate court denied the Motion for Reconsideration
interposed by petitioner for lack of merit.

Petitioner is now before this Court via the Petition at bar

ISSUE: III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FILING OF THE
COMPLAINT OF RESPONDENT GEORGE DE CASTRO WITHOUT JOINING ALL HIS OTHER CO-OWNERS
OVER THE SUBJECT PROPERTY IS PROPER;

HELD:

Barangay conciliation
While it is true that the Certification to file action dated 18 January 2002 of the Barangay Lupon refers
only to rental increase and not to the ejectment of petitioner from the subject property, the submission
of the same for conciliation before the Barangay Lupon constitutes sufficient compliance with the
provisions of the Katarungang Pambarangay Law. Given the particular circumstances of the case at bar,
the conciliation proceedings for the amount of monthly rental should logically and reasonably include
also the matter of the possession of the property subject of the rental, the lease agreement, and the
violation of the terms thereof.

Period of lease
The contract of lease between the parties did not stipulate a fixed period. Hence, the parties agreed to
the payment of rentals on a monthly basis. On this score, Article 1687 of the Civil Code provides:

Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year,
if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent
is weekly; and from day to day, if the rent is to be paid daily. However, even though a monthly rent is
paid, and no period for the lease has been set, the courts may fix a longer term for the lease after the
lessee has occupied the premises for over one year. If the rent is weekly, the courts may likewise
determine a longer period after the lessee has been in possession for over six months. In case of daily
rent, the courts may also fix a longer period after the lessee has stayed in the place for over one month.
( mphasis supplied.)

The rentals being paid monthly, the period of such lease is deemed terminated at the end of
each month. Thus, respondents have every right to demand the ejectment of petitioners at the end of
each month, the contract having expired by operation of law. Without a lease contract, petitioner has
no right of possession to the subject property and must vacate the same. Respondents, thus, should be
allowed to resort to an action for ejectment before the MTC to recover possession of the subject
property from petitioner.

Corollarily, petitioner’s ejectment, in this case, is only the reasonable consequence of his unrelenting
refusal to comply with the respondents’ demand for the payment of rental increase agreed upon by
both parties. Verily, the lessor’s right to rescind the contract of lease for non-payment of the demanded
increased rental was recognized by this Court

Joinder of all co-owners

Article 487 of the New Civil Code is explicit on this point:
 ART. 487. Any one of the co-owners may bring an action in ejectment.

This article covers all kinds of action for the recovery of possession, i.e., forcible entry and
unlawful detainer (accion interdictal), recovery of possession (accion publiciana), and recovery of
ownership (accion de reivindicacion). As explained by the renowned civilist, Professor Arturo M.
Tolentino[20]:

A co-owner may bring such an action, without the necessity of joining all the other co-owners as
co-plaintiffs, because the suit is deemed to be instituted for the benefit of all. If the action is for the
benefit of the plaintiff alone, such that he claims possession for himself and not for the co-ownership,
the action will not prosper. (Emphasis added.)

In the more recent case of Carandang v. Heirs of De Guzman,[21] this Court declared that a co-
owner is not even a necessary party to an action for ejectment, for complete relief can be afforded even
in his absence, thus:

In sum, in suits to recover properties, all co-owners are real parties in interest. However,
pursuant to Article 487 of the Civil Code and the relevant jurisprudence, any one of them may bring an
action, any kind of action for the recovery of co-owned properties. Therefore, only one of the co-
owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an
indispensable party thereto. The other co-owners are not indispensable parties. They are not even
necessary parties, for a complete relief can be afforded in the suit even without their participation, since
the suit is presumed to have been filed for the benefit of all co-owners.

Moreover, respondents Annie de Castro and Felomina de Castro Uban each executed a Special
Power of Attorney, giving respondent George de Castro the authority to initiate Civil Case No. 1990.

A power of attorney is an instrument in writing by which one person, as principal, appoints

another as his agent and confers upon him the authority to perform certain specified acts or kinds of
acts on behalf of the principal. The written authorization itself is the power of attorney, and this is
clearly indicated by the fact that it has also been called a “letter of attorney.”[22]

Even then, the Court views the SPAs as mere surplusage, such that the lack thereof does not in
any way affect the validity of the action for ejectment instituted by respondent George de Castro. This
also disposes of petitioner’s contention that respondent George de Castro lacked the authority to sign
the Verification and the Certificate of Non-Forum Shopping. As the Court ruled in Mendoza v.
Coronel[23]:

We likewise hold that the execution of the certification against forum shopping by the attorney-
in-fact in the case at bar is not a violation of the requirement that the parties must personally sign the
same. The attorney-in-fact, who has authority to file, and who actually filed the complaint as the
representative of the plaintiff co-owner, pursuant to a Special Power of Attorney, is a party to the
ejectment suit. In fact, Section 1, Rule 70 of the Rules of Court includes the representative of the owner
in an ejectment suit as one of the parties authorized to institute the proceedings.
Mayor of Parañaque v. Ebio, G.R. No. 178411, June 23, 2010
FACTS: Respondents claim that they are the absolute owners of a parcel of land consisting of 406 square
meters, more or less, located at 9781 Vitalez Compound in Barangay Vitalez, Parañaque City in the name
of respondent Mario D. Ebio. Said land was an accretion of Cut-cut creek. Respondents assert that the
original occupant and possessor of the said parcel of land was their great grandfather, Jose Vitalez.
Sometime in 1930, Jose gave the land to his son, Pedro Vitalez. From then on, Pedro continuously and
exclusively occupied and possessed the said lot. In 1966, after executing an affidavit declaring
possession and occupancy,[4] Pedro was able to obtain a tax declaration over the said property in his
name.[5] Since then, respondents have been religiously paying real property taxes for the said property.

Meanwhile, in 1961, respondent Mario Ebio married Pedro’s daughter, Zenaida. Upon Pedro’s advice,
the couple established their home on the said lot. In April 1964 and in October 1971, Mario Ebio secured
building permits from the Parañaque municipal office for the construction of their house within the said
compound.[7] On April 21, 1987, Pedro executed a notarized Transfer of Rights[8] ceding his claim over
the entire parcel of land in favor of Mario Ebio. Subsequently, the tax declarations under Pedro’s name
were cancelled and new ones were issued in Mario Ebio’s name.

On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed Resolution No. 08, series
of 1999[10] seeking assistance from the City Government of Parañaque for the construction of an access
road along Cut-cut Creek located in the said barangay. The proposed road, projected to be eight (8)
meters wide and sixty (60) meters long, will run from Urma Drive to the main road of Vitalez
Compound[11] traversing the lot occupied by the respondents. When the city government advised all
the affected residents to vacate the said area, respondents immediately registered their opposition
thereto. As a result, the road project was temporarily suspended.[12]
In January 2003, however, respondents were surprised when several officials from the barangay
and the city planning office proceeded to cut eight (8) coconut trees planted on the said lot.
Respondents filed letter-complaints before the Regional Director of the Bureau of Lands, the
Department of Interior and Local Government and the Office of the Vice Mayor.[13] On June 29, 2003,
the Sangguniang Barangay of Vitalez held a meeting to discuss the construction of the proposed road. In
the said meeting, respondents asserted their opposition to the proposed project and their claim of
ownership over the affected property.[14] On November 14, 2003, respondents attended another
meeting with officials from the city government, but no definite agreement was reached by and among
the parties.[15]
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents ordering them to
vacate the area within the next thirty (30) days, or be physically evicted from the said property.[16]
Respondents sent a letter to the Office of the City Administrator asserting, in sum, their claim over the
subject property and expressing intent for a further dialogue.[17] The request remained unheeded.

Threatened of being evicted, respondents went to the RTC of Parañaque City on April 21, 2005 and
applied for a writ of preliminary injunction against petitioners.[18] In the course of the proceedings,
respondents admitted before the trial court that they have a pending application for the issuance of a
sales patent before the Department of Environment and Natural Resources (DENR).

RTC Ruling
On April 29, 2005, the RTC issued an Order denying the petition for lack of merit. The trial court
reasoned that respondents were not able to prove successfully that they have an established right to
the property since they have not instituted an action for confirmation of title and their application for
sales patent has not yet been granted. Additionally, they failed to implead the Republic of the
Philippines, which is an indispensable party.

Respondents moved for reconsideration, but the same was denied.

CA Ruling
Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31, 2007, the
Court of Appeals issued its Decision in favor of the respondents. According to the Court of Appeals--

The issue ultimately boils down to the question of ownership of the lands adjoining Cutcut Creek
particularly Road Lot No. 8 (hereinafter RL 8) and the accreted portion beside RL 8.

The evidentiary records of the instant case, shows that RL 8 containing an area of 291 square
meters is owned by Guaranteed Homes, Inc. covered by TCT No. S-62176. The same RL 8 appears to
have been donated by the Guaranteed Homes to the City Government of Parañaque on 22 March 1966
and which was accepted by the then Mayor FLORENCIO BERNABE on 5 April 1966. There is no evidence
however, when RL 8 has been intended as a road lot. On the other hand, the evidentiary records reveal
that PEDRO VITALEZ possessed the accreted property since 1930 per his Affidavit dated 21 March 1966
for the purpose of declaring the said property for taxation purposes.

On 21 April 1987, PEDRO VITALEZ transferred his rights in the accreted property to MARIO EBIO and his
successors-in-interest.
Applying [Article 457 of the Civil Code considering] the foregoing documentary evidence, it could
be concluded that Guaranteed Homes is the owner of the accreted property considering its ownership
of the adjoining RL 8 to which the accretion attached. However, this is without the application of the
provisions of the Civil Code on acquisitive prescription which is likewise applicable in the instant case.
xxxx
The subject of acquisitive prescription in the instant case is the accreted portion which [was] duly
proven by the Appellants. It is clear that since 1930, Appellants together with their predecessor-in-
interest, PEDRO VITALEZ[,] have been in exclusive possession of the subject property and starting 1964
had introduced improvements thereon as evidenced by their construction permits. Thus, even by
extraordinary acquisitive prescription[,] Appellants have acquired ownership of the property in question
since 1930 even if the adjoining RL 8 was subsequently registered in the name of Guaranteed Homes

The subject of acquisitive prescription in the instant case is the accreted portion which [was] duly
proven by the Appellants. It is clear that since 1930, Appellants together with their predecessor-in-
interest, PEDRO VITALEZ[,] have been in exclusive possession of the subject property and starting 1964
had introduced improvements thereon as evidenced by their construction permits. Thus, even by
extraordinary acquisitive prescription[,] Appellants have acquired ownership of the property in question
since 1930 even if the adjoining RL 8 was subsequently registered in the name of Guaranteed Homes. x x
x.
xxxx
Further, it was only in 1978 that Guaranteed Homes was able to have RL 8 registered in its name,
which is almost fifty years from the time PEDRO VITALEZ occupied the adjoining accreted property in
1930. x x x.
xxxx
We likewise note the continuous payment of real property taxes of Appellants which bolster their
right over the subject property
On June 8, 2007, the appellate court denied petitioners’ motion for reconsideration. Hence, this petition

ISSUE: procedurally, whether the State is an indispensable party to respondents’ action for prohibitory
injunction; and substantively, whether the character of respondents’ possession and occupation of the
subject property entitles them to avail of the relief of prohibitory injunction.

HELD: The petition is without merit.

It is an uncontested fact that the subject land was formed from the alluvial deposits that have gradually
settled along the banks of Cut-cut creek. This being the case, the law that governs ownership over the
accreted portion is Article 84 of the Spanish Law of Waters of 1866, which remains in effect,[26] in
relation to Article 457 of the Civil Code.
Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over alluvial deposits
along the banks of a creek. It reads:
ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams, rivers, and lakes, by
accessions or sediments from the waters thereof, belong to the owners of such lands.[27]
Interestingly, Article 457 of the Civil Code states:
Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion which they gradually
receive from the effects of the current of the waters.

It is therefore explicit from the foregoing provisions that alluvial deposits along the banks of a creek do
not form part of the public domain as the alluvial property automatically belongs to the owner of the
estate to which it may have been added. The only restriction provided for by law is that the owner of
the adjoining property must register the same under the Torrens system; otherwise, the alluvial
property may be subject to acquisition through prescription by third persons.[28]
In contrast, properties of public dominion cannot be acquired by prescription. No matter how long
the possession of the properties has been, there can be no prescription against the State regarding
property of public domain.[29] Even a city or municipality cannot acquire them by prescription as
against the State.[30]

Hence, while it is true that a creek is a property of public dominion,[31] the land which is formed
by the gradual and imperceptible accumulation of sediments along its banks does not form part of the
public domain by clear provision of law.

Moreover, an indispensable party is one whose interest in the controversy is such that a final
decree would necessarily affect his/her right, so that the court cannot proceed without their
presence.[32] In contrast, a necessary party is one whose presence in the proceedings is necessary to
adjudicate the whole controversy but whose interest is separable such that a final decree can be made
in their absence without affecting them.[33]

In the instant case, the action for prohibition seeks to enjoin the city government of Parañaque
from proceeding with its implementation of the road construction project. The State is neither a
necessary nor an indispensable party to an action where no positive act shall be required from it or
where no obligation shall be imposed upon it, such as in the case at bar. Neither would it be an
indispensable party if none of its properties shall be divested nor any of its rights infringed.
 We also find that the character of possession and ownership by the respondents over the
contested land entitles them to the avails of the action.

A right in esse means a clear and unmistakable right.[34] A party seeking to avail of an injunctive
relief must prove that he or she possesses a right in esse or one that is actual or existing.[35] It should
not be contingent, abstract, or future rights, or one which may never arise.[36]

In the case at bar, respondents assert that their predecessor-in-interest, Pedro Vitalez, had
occupied and possessed the subject lot as early as 1930. In 1964, respondent Mario Ebio secured a
permit from the local government of Parañaque for the construction of their family dwelling on the said
lot. In 1966, Pedro executed an affidavit of possession and occupancy allowing him to declare the
property in his name for taxation purposes. Curiously, it was also in 1966 when Guaranteed Homes, Inc.,
the registered owner of Road Lot No. 8 (RL 8) which adjoins the land occupied by the respondents,
donated RL 8 to the local government of Parañaque.

From these findings of fact by both the trial court and the Court of Appeals, only one conclusion can
be made: that for more than thirty (30) years, neither Guaranteed Homes, Inc. nor the local government
of Parañaque in its corporate or private capacity sought to register the accreted portion. Undoubtedly,
respondents are deemed to have acquired ownership over the subject property through prescription.
Respondents can assert such right despite the fact that they have yet to register their title over the said
lot. It must be remembered that the purpose of land registration is not the acquisition of lands, but only
the registration of title which the applicant already possessed over the land. Registration was never
intended as a means of acquiring ownership.[37] A decree of registration merely confirms, but does not
confer, ownership.[

Did the filing of a sales patent application by the respondents, which remains pending before the DENR,
estop them from filing an injunction suit?
We answer in the negative.
Confirmation of an imperfect title over a parcel of land may be done either through judicial
proceedings or through administrative process. In the instant case, respondents admitted that they
opted to confirm their title over the property administratively by filing an application for sales patent.
Respondents’ application for sales patent, however, should not be used to prejudice or derogate
what may be deemed as their vested right over the subject property. The sales patent application should
instead be considered as a mere superfluity particularly since ownership over the land, which they seek
to buy from the State, is already vested upon them by virtue of acquisitive prescription. Moreover, the
State does not have any authority to convey a property through the issuance of a grant or a patent if the
land is no longer a public land.[39]

Sec. 10. Unwilling co-plaintiff

If the consent of any party who should be joined as plaintiff can not be obtained, he may be made a
defendant and the reason therefor shall be stated in the complaint.

Emata v. IAC, G.R. No. L-72714, June 29, 1989

FACTS: Petitioner purchased a car on installment from Violago Motor Sales Corporation (Violago, for brevity) with a
down payment of P 14,982.00. Petitioner likewise executed in favor of the seller a promissory note and a chattel
mortgage over the car as security for the payment of the note.
After the execution of said documents, Violago endorsed the promissory note and assigned the chattel mortgage to
Filinvest Credit Corporation (hereafter, Filinvest for short) upon payment by the latter of P 34,958.00, the unpaid
balance of the list cash price of the car. Three years later, Filinvest assigned to private respondent Servicewide
Specialists, Inc. the remaining installment balance due on and corresponding to the period from February 25, 1981 to
August 25, 1981.

Alleging non-payment of five (5) consecutive installments from February 25 to June 25, 1981, private respondent
SERVICEWIDE SPECIALISTS initiated the case in the trial court for a writ of replevin to effect the seizure of the car
or, alternatively, for the payment by petitioner of the sum of P 1,332.40, with interest thereon of fourteen percent
(14%) per annum from July 10, 1981 until fully paid and, additionally, for attorney's fees and costs of suit.

Herein petitioner, in answer thereto and as summarized by the court a quo, alleged that "the promissory note was
produced through fraud, deceit, trickery and misrepresentation; that he was made to sign the note and the mortgage
in blank; that he has paid, and even overpaid, Filinvest by P 9,388.22 and said overcharging was in violation of the
Financing Company Act (Republic Act No. 5980) and the Usury Law; that the demand set forth in the complaint has
long been extinguished; that Filinvest violated the provisions of the Truth in Lending Act (Republic Act No. 3765) for
failure to provide him a copy of the disclosure statement containing entries required by said law. He consequently set
up a counterclaim against Filinvest for various items of damages and attorney's fees all amounting to more than P
1,100,000.00.

On November 5, 1981, petitioner filed a "Motion to Implead Filinvest Credit Corporation" on the theory that "for all
legal purposes the corporation sought to be impleaded is the real party in interest" because it retained interest over
the balance of the petitioner's account in spite of its assignment to private respondent. An opposition thereto was filed
by private respondent corporation on January 18, 1982. petitioner was given fifteen (15) days to file the third-party
complaint against the third party defendant (Filinvest)." 8 Petitioner , however, did not file any third-party complaint,
hence the trial court set the case for pre-trial on May 3, 1983, it being understood that petitioner was no longer
interested in impleading the herein private respondent as a third-party defendant therein.

Petitioner failed to appear at pretrial despite several postponements until he was declared in default and respondent
was allowed to present evidence ex-parte. However, upon a subsequent motion of petitioner, in its order of August
17, 1983 the trial court not only lifted the default order but also allowed him to cross-examine private respondent's
sole witness. The same order declared that the order of April 26, 1982, hereinbefore stated, must be maintained
since petitioner had opted not to comply therewith, hence his motion to implead Filinvest was in effect already
resolved in said order of April 26, 1982. 9

RTC Ruling
On March 6, 1984, judgment was rendered by the trial court against the defendant and in favor of the plaintiff,
ordering the former to deliver to the latter the Toyota Car hereinabove described, or to pay the latter the sum of P
11,332.40, plus interest thereon at the rate of 14% per annum.

Petitioner takes exception to respondent court's affirmance of said decision, hence this petition. Petitioner raises both
procedural and substantive issues. Initially, he complains that the trial court erred in requiring him to file a third- party
complaint against Filinvest, instead of impleading the latter either as party plaintiff or defendant. 11 He insists that
Filinvest is the real party in interest in the present case and it should be impleaded under Rule 3 of the Rules of Court
which provides:

Sec. 10. Unwilling co-plaintiff. -If the consent of any party who should be joined as plaintiff can not
be obtained, he may be made a defendant and the reason therefor shall be stated in the complaint.

Sec. 11. Misjoinder and non-joinder of parties. -Misjoinder of parties is not ground for dismissal of
an action. Parties may be dropped or added by order of the court on motion of any party or on its
own initiative at any stage of the action and on such terms as are just. Any claim against a party
may be severed and proceeded with separately.

which he complements with a provision in Rule 6, to wit:

 Sec. 14. Bringing new parties. When the presence of parties other than those to the original action
is required for the granting of complete relief in the determination of a counterclaim or cross-claim,
the court shall order them to be brought in as defendants if jurisdiction over them can be obtained.

ISSUE: WON Filinvest is a real party in interest and should be impleaded

HELD: Concededly, additional parties may be brought in under the above-quoted provisions of the Rules. A third-
party complaint, however, is not to be eschewed or disregarded in the procedural scheme since it may, in fact, be the
very vehicle for impleading a third person as a party to the case. Thus, for purposes of Section 14 of Rule 6, above
quoted, the court may authorize the filing of the proper third-party complaint to implead the other parties not included
in the original complaint, in keeping with the injunction that "all pleadings shall be liberally construed so as to do
substantial justice." 12

We reject petitioner's complaint that the order of the court a quo requiring the filing of a third-party complaint is
improper. A third- party complaint is "a claim that a defending party may, with leave of court, file against a person not
a party to the action, called the third- party defendant, for contribution, indemnity, subrogation or any other relief in
respect of his opponent's claim." 13 Obviously, a third-party complaint against Filinvest, had petitioner filed the same,
would be a claim in respect of the plaintiffs claim since the former arises from the same transaction on which the
plaintiffs claim is based, that is, the promissory note which was eventually assigned to private respondent. 14 Although
the petitioner did not admit in his answer that any amount is due from the corporation sought to be impleaded, that is
not indicative of nor does it support his thesis of the alleged impropriety of a third-party complaint. Apparently,
petitioner failed to take into consideration that the remedy is also applicable where the defendant seeks "any other
relief in respect of his opponent's claim," a remedial grant of power broad enough to include the relief he seeks in the
case at bar.

Petitioner cannot rely on the provisions of Section 10, Rule 3 which envisages a party who should be joined as a
plaintiff but who does not assent to such joinder. Obviously and necessarily, such unwilling party must be a real party
in interest. In the case at bar, Filinvest's position and the evidence thereon was that it was not a real party in interest,
as it was no longer entitled to the avails of the suit by reason of the anterior assignment it made in favor of private
respondent. Hence, at the very least, its capacity was in issue and it would be a case of proceduralpetitio principii for
the trial court to have categorized it as an unwilling co-plaintiff, with the procedural consequences thereof, although
such operative issue was still unresolved. Furthermore, the option lies with the plaintiff on whether or not to join an
additional party in his complaint. The original plaintiff cannot be compelled, on the mere representations of the
defendant, to implead anyone, especially if it does not appear that such joinder is proper or is necessary for the
complete and expeditious adjudication of the case.

Nor can the general rule in Section 11, Rule 3, on the power to order the addition or dropping of a party at any stage
of action, be of solace to the petitioner. This is a power addressed to the sound discretion of the court to be exercised
on such terms as are just, and by this is meant that it must be just to all the other parties. 15 Obviously, given the facts
of this case, the trial court wisely exercised its discretion in refusing to give in to the unjustified importunings of
petitioner.

Petitioner should be reminded that the courts, as the arbiters of the rights of the parties, stand in a better position and
are clothed with ample authority to rule on the procedural measures that are proper in cases before them. If a party
believes that the order of the court is not in accordance with law, he is not without other alternative remedial avenues.
If, on the other hand, the order does not suffer from any legal infirmities, the same is binding on the parties and to this
they must submit with grace. We cannot but be displeased with petitioner's unseemly motivation and stance when he
"adopted an attitude of inaction and completely ignored" the order of the trial court requiring the filing of a third-party
complaint, especially in view of the factual finding that it was he who manifested on April 26, 1982 that he would file
said third party complaint . 16

Apart from all these considerations, the inclusion of Filinvest would at any rate have been a useless recourse in the
light of the fact that the arguments on which this petition is moored are bereft of merit .

Usury law not applicable

On the issue of usury, the present rule that usury at present is legally non-existent 17 would not apply to the instant
case. The present controversy arose before the adoption on December 3, 1982 of Resolution No. 224 by the Central
Bank Monetary Board on which the existing rule is based.

Nevertheless, the records of this case reveal that the Usury Law, Act No. 2655, is not applicable thereto. The amount
added to the cash price of the car is what is commonly known as the "time price differential" and not interest within
the meaning of the Usury Law. The law is applicable only in case of a loan or forbearance of money, goods or credit
which is not the case here. The transaction involved here being admittedly a conditional sale based on an installment
plan and not a loan, it has been held that the alleged increase in the price of the article sold cannot be considered a
mere pretext to cover a usurious loan. "The increase in price, when the sale is on credit serves not only to cover the
expenses generally entailed by such transactions on credit, but also to encourage cash sales, so useful to commerce.
It is up to the purchaser to decide which price he prefers in making the purchase. ... if on the contrary, he prefers to
buy on credit, he cannot complain of the increase of the price demanded by the vendor. " 18

Financing Act not violated

The petitioner avers that the amount of P 22,246.00, or forty-four and five-hundredths percent (44.05%), added to the
list cash price is way above the purchase discount prescribed by Republic Act No. 5980, as well as Central Bank
Circular No. 586 providing for nineteen percent (19%) per annum as the effective rate of yield from purchase of
receivables. 20 We do not have to unnecessarily clutter this decision with unduly involved or extensively complex
computations to demonstrate the incorrectness of petitioner's position. The finding of the trial court, that the stipulated
interest in the promissory note is well within the allowable rate, is adequately supported by the evidence of record.
Although, forty-four and five- hundredths percent (44.05%) was added to the list cash price of the car, the same was
actually spread over a three-year period of amortization. Thus, whether it be fourteen percent (14%) plus one and
one-sixth percent (1-1/6%) under Republic Act No. 5980 or nineteen percent (19%) under Circular No. 586, it is clear
that the yield or purchase discount, as the case may be, is within the limits prescribed by law.

Sec. 11. Misjoinder and non-joinder of parties

Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be
dropped or added by order of the court on motion of any party or on its own initiative at any stage the
action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded
with separately.

Boston Equity v. Court of Appeals, G.R. No. 173946, June 19, 2013 (Supra.)
FACTS: On 24 December 1997, petitioner Boston Equity filed a complaint for sum of money with a
prayer for the issuance of a writ of preliminary attachment against the spouses Manuel and Lolita
Toledo. Herein respondent filed an Answer dated 19 March 1998 but on 7 May 1998, she filed a Motion
for Leave to Admit Amended Answer in which she alleged, among others, that her husband and co-
defendant, Manuel Toledo (Manuel), is already dead.

The death certificate of Manuel states "13 July 1995" as the date of death. As a result, petitioner filed a
motion, dated 5 August 1999, to require respondent to disclose the heirs of Manuel.10 In compliance
with the verbal order of the court during the 11 October 1999 hearing of the case, respondent
submitted the required names and addresses of the heirs. Petitioner then filed a Motion for
Substitution, dated 18 January 2000, praying that Manuel be substituted by his children as party-
defendants. It appears that this motion was granted by the trial court in an Order dated 9 October 2000.

On 7 October 2004, respondent filed a motion to dismiss the complaint, citing the following as grounds:
(1) that the complaint failed to implead an indispensable party or a real party in interest; hence, the case
must be dismissed for failure to state a cause of action; (2) that the trial court did not acquire
jurisdiction over the person of Manuel pursuant to Section 5, Rule 86 of the Revised Rules of Court; (3)
that the trial court erred in ordering the substitution of the deceased Manuel by his heirs; and (4) that
the court must also dismiss the case against Lolita Toledo in accordance with Section 6, Rule 86 of the
Rules of Court.

RTC Ruling
The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having been filed
out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that: "Within the time for
but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be
made x x x."17 Respondent’s motion for reconsideration of the order of denial was likewise denied on
the ground that "defendants’ attack on the jurisdiction of this Court is now barred by estoppel by
laches" since respondent failed to raise the issue despite several chances to do so.

Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the trial court
seriously erred and gravely abused its discretion in denying her motion to dismiss despite discovery,
during the trial of the case, of evidence that would constitute a ground for dismissal of the case.

CA Ruling
The Court of Appeals granted the petition ruling that the court did not acquire jurisdiction over Manuel
Toledo since he was already dead and that the complaint should have impleaded the estate of Manuel S.
Toledo as defendant, not only the wife, considering that the estate of Manuel S. Toledo is an
indispensable party.

The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition.

The Issues

Petitioner claims that the Court of Appeals erred in not holding that:

1. Respondent is already estopped from questioning the trial court’s jurisdiction;

2. Petitioner never failed to implead an indispensable party as the estate of Manuel is not an
indispensable party;

3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not warranting the dismissal
of the case before the lower court; and

4. Since the estate of Manuel is not an indispensable party, it is not necessary that petitioner file its
claim against the estate of Manuel.

In essence, what is at issue here is the correctness of the trial court’s orders denying respondent’s
motion to dismiss.

HELD: We find merit in the petition.

Motion to dismiss filed out of time

To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of respondent. Well
settled is the rule that the special civil action for certiorari is not the proper remedy to assail the denial
by the trial court of a motion to dismiss. The order of the trial court denying a motion to dismiss is
merely interlocutory, as it neither terminates nor finally disposes of a case and still leaves something to
be done by the court before a case is finally decided on the merits.21 Therefore, "the proper remedy in
such a case is to appeal after a decision has been rendered."

Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse of
discretion in denying respondent’s motion to dismiss. It, in fact, acted correctly when it issued the
questioned orders as respondent’s motion to dismiss was filed SIX YEARS AND FIVE MONTHS AFTER SHE
FILED HER AMENDED ANSWER. This circumstance alone already warranted the outright dismissal of the
motion for having been filed in clear contravention of the express mandate of Section 1, Rule 16, of the
Revised Rules of Court. Under this provision, a motion to dismiss shall be filed within the time for but
before the filing of an answer to the complaint or pleading asserting a claim.

On whether or not respondent is estopped from

questioning the jurisdiction of the trial court

Jurisdiction over the person of Manuel should not be an issue in this case. Petitioner calls attention to
the fact that respondent’s motion to dismiss questioning the trial court’s jurisdiction was filed more
than six years after her amended answer was filed. According to petitioner, respondent had several
opportunities, at various stages of the proceedings, to assail the trial court’s jurisdiction but never did so
for six straight years. Citing the doctrine laid down in the case of Tijam, et al. v. Sibonghanoy, et al.30
petitioner claimed that respondent’s failure to raise the question of jurisdiction at an earlier stage bars
her from later questioning it, especially since she actively participated in the proceedings conducted by
the trial court.

Petitioner’s argument is misplaced, in that, it failed to consider that the concept of jurisdiction has
several aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the parties; (3)
jurisdiction over the issues of the case; and (4) in cases involving property, jurisdiction over the res or
the thing which is the subject of the litigation.31

The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by laches is
jurisdiction over the subject matter. In subsequent cases citing the ruling of the Court in Tijam, what was
likewise at issue was the jurisdiction of the trial court over the subject matter of the case.In all of these
cases, the Supreme Court barred the attack on the jurisdiction of the respective courts concerned over
the subject matter of the case based on estoppel by laches, declaring that parties cannot be allowed to
belatedly adopt an inconsistent posture by attacking the jurisdiction of a court to which they submitted
their cause voluntarily.

Here, what respondent was questioning in her motion to dismiss before the trial court was that court’s
jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel by laches finds no
application in this case. Instead, the principles relating to jurisdiction over the person of the parties are
pertinent herein.

The Rules of Court provide:

RULE 9
EFFECT OF FAILURE TO PLEAD
Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either in
a motion to dismiss or in the answer are deemed waived. However, when it appears from the
 pleadings or the evidence on record that the court has no jurisdiction over the subject matter,
that there is another action pending between the same parties for the same cause, or that the
action is barred by a prior judgment or by statute of limitations, the court shall dismiss the
claim.

RULE 15
MOTIONS
Sec. 8. Omnibus motion. – Subject to the provisions of Section 1 of Rule 9, a motion attacking a
pleading, order, judgment, or proceeding shall include all objections then available, and all
objections not so included shall be deemed waived.

Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived even if
not alleged in a motion to dismiss or the answer is lack of jurisdiction over the subject matter. x x x Lack
of jurisdiction over the subject matter can always be raised anytime, even for the first time on appeal,
since jurisdictional issues cannot be waived x x x subject, however, to the principle of estoppel by
laches."36

Since the defense of lack of jurisdiction over the person of a party to a case is not one of those defenses
which are not deemed waived under Section 1 of Rule 9, such defense must be invoked when an answer
or a motion to dismiss is filed in order to prevent a waiver of the defense.

The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its questioned
decision, stating that "issue on jurisdiction may be raised at any stage of the proceeding, even for the
first time on appeal" and that, therefore, respondent timely raised the issue in her motion to dismiss
and is, consequently, not estopped from raising the question of jurisdiction. As the question of
jurisdiction involved here is that over the person of the defendant Manuel, the same is deemed waived
if not raised in the answer or a motion to dismiss. In any case, respondent cannot claim the defense
since "lack of jurisdiction over the person, being subject to waiver, is a personal defense which can only
be asserted by the party who can thereby waive it by silence."

Jurisdiction over the person of a defendant is acquired through a valid service of summons; trial court
did not acquire jurisdiction over the person of Manuel Toledo

In the first place, jurisdiction over the person of Manuel was never acquired by the trial court. A
defendant is informed of a case against him when he receives summons. "Summons is a writ by which
the defendant is notified of the action brought against him. Service of such writ is the means by which
the court acquires jurisdiction over his person."

In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since there was
no valid service of summons upon him, precisely because he was already dead even before the
complaint against him and his wife was filed in the trial court. The issues presented in this case are
similar to those in the case of Sarsaba v. Vda. de Te.

In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally dismissed from
employment and ordering the payment of his monetary claims. To satisfy the claim, a truck in the
possession of Sereno’s employer was levied upon by a sheriff of the NLRC, accompanied by Sereno and
his lawyer, Rogelio Sarsaba, the petitioner in that case. A complaint for recovery of motor vehicle and
damages, with prayer for the delivery of the truck pendente lite was eventually filed against Sarsaba,
Sereno, the NLRC sheriff and the NLRC by the registered owner of the truck. After his motion to dismiss
was denied by the trial court, petitioner Sarsaba filed his answer. Later on, however, he filed an omnibus
motion to dismiss citing, as one of the grounds, lack of jurisdiction over one of the principal defendants,
in view of the fact that Sereno was already dead when the complaint for recovery of possession was
filed.

Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of the issues
submitted for resolution in both cases is similar: whether or not a case, where one of the named
defendants was already dead at the time of its filing, should be dismissed so that the claim may be
pursued instead in the proceedings for the settlement of the estate of the deceased defendant. The
petitioner in the Sarsaba Case claimed, as did respondent herein, that since one of the defendants died
before summons was served on him, the trial court should have dismissed the complaint against all the
defendants and the claim should be filed against the estate of the deceased defendant. The petitioner in
Sarsaba, therefore, prayed that the complaint be dismissed, not only against Sereno, but as to all the
defendants, considering that the RTC did not acquire jurisdiction over the person of Sereno.42 This is
exactly the same prayer made by respondent herein in her motion to dismiss.

The Court, in the Sarsaba Case, resolved the issue in this wise:

x x x We cannot countenance petitioner’s argument that the complaint against the other defendants
should have been dismissed, considering that the RTC never acquired jurisdiction over the person of
Sereno. The court’s failure to acquire jurisdiction over one’s person is a defense which is personal to the
person claiming it. Obviously, it is now impossible for Sereno to invoke the same in view of his death.
Neither can petitioner invoke such ground, on behalf of Sereno, so as to reap the benefit of having the
case dismissed against all of the defendants. Failure to serve summons on Sereno’s person will not be a
cause for the dismissal of the complaint against the other defendants, considering that they have been
served with copies of the summons and complaints and have long submitted their respective responsive
pleadings. In fact, the other defendants in the complaint were given the chance to raise all possible
defenses and objections personal to them in their respective motions to dismiss and their subsequent
answers.43 (Emphasis supplied.)

Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against Sereno only.

Based on the foregoing pronouncements, there is no basis for dismissing the complaint against
respondent herein. Thus, as already emphasized above, the trial court correctly denied her motion to
dismiss.

On whether or not the estate of Manuel

Toledo is an indispensable party

Rule 3, Section 7 of the 1997 Rules of Court states:

SEC. 7. Compulsory joinder of indispensable parties. – Parties-in-interest without whom no final

determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is one who has such an interest in the controversy or subject matter of a case
that a final adjudication cannot be made in his or her absence, without injuring or affecting that interest.
He or she is a party who has not only an interest in the subject matter of the controversy, but "an
interest of such nature that a final decree cannot be made without affecting that interest or leaving the
controversy in such a condition that its final determination may be wholly inconsistent with equity and
good conscience. It has also been considered that an indispensable party is a person in whose absence
there cannot be a determination between the parties already before the court which is effective,
complete or equitable." Further, an indispensable party is one who must be included in an action before
it may properly proceed.44

On the other hand, a "person is not an indispensable party if his interest in the controversy or subject
matter is separable from the interest of the other parties, so that it will not necessarily be directly or
injuriously affected by a decree which does complete justice between them. Also, a person is not an
indispensable party if his presence would merely permit complete relief between him or her and those
already parties to the action, or if he or she has no interest in the subject matter of the action." It is not
a sufficient reason to declare a person to be an indispensable party simply because his or her presence
will avoid multiple litigations.

Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel is not an
indispensable party to the collection case, for the simple reason that the obligation of Manuel and his
wife, respondent herein, is solidary.

In other words, the collection case can proceed and the demands of petitioner can be satisfied by
respondent only, even without impleading the estate of Manuel. Consequently, the estate of Manuel is
not an indispensable party to petitioner’s complaint for sum of money.

However, the Court of Appeals, agreeing with the contention of respondent, held that the claim of
petitioner should have been filed against the estate of Manuel in accordance with Sections 5 and 6 of
Rule 86 of the Rules of Court. The aforementioned provisions provide:

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for
money against the decedent, arising from contract, express or implied, whether the same be
due, not due, or contingent, all claims for funeral expenses and judgment for money against the
decedent, must be filed within the time limited in the notice; otherwise, they are barred forever,
except that they may be set forth as counterclaims in any action that the executor or
administrator may bring against the claimants. x x x.

SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with
another debtor, the claim shall be filed against the decedent as if he were the only debtor,
without prejudice to the right of the estate to recover contribution from the other debtor. x x x.

The Court of Appeals erred in its interpretation of the above-quoted provisions.

In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86 of the
Revised Rules of Court, which latter provision has been retained in the present Rules of Court without
any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v. Villarama, et. al.,49
held:

Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was taken, this
Court held that where two persons are bound in solidum for the same debt and one of them dies, the
whole indebtedness can be proved against the estate of the latter, the decedent’s liability being
absolute and primary; x x x.

It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said
provision gives the creditor the right to "proceed against anyone of the solidary debtors or some or all of
them simultaneously." The choice is undoubtedly left to the solidary creditor to determine against
whom he will enforce collection. In case of the death of one of the solidary debtors, he (the creditor)
may, if he so chooses, proceed against the surviving solidary debtors without necessity of filing a claim
in the estate of the deceased debtors. It is not mandatory for him to have the case dismissed as against
the surviving debtors and file its claim against the estate of the deceased solidary debtor, x x x. For to
require the creditor to proceed against the estate, making it a condition precedent for any collection
action against the surviving debtors to prosper, would deprive him of his substantive rightsprovided by
Article 1216 of the New Civil Code. (Emphasis supplied.)

Based on the foregoing, the estate of Manuel is not an indispensable party and the case can proceed as
against respondent only. That petitioner opted to collect from respondent and not from the estate of
Manuel is evidenced by its opposition to respondent’s motion to dismiss asserting that the case, as
against her, should be dismissed so that petitioner can proceed against the estate of Manuel.

On whether or not the inclusion of Manuel as

party defendant is a misjoinder of party

Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder nor non-joinder of parties is
ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of
any party or on its own initiative at any stage of the action and on such terms as are just. Any claim
against a misjoined party may be severed and proceeded with separately."

Based on the last sentence of the afore-quoted provision of law, a misjoined party must have the
capacity to sue or be sued in the event that the claim by or against the misjoined party is pursued in a
separate case. In this case, therefore, the inclusion of Manuel in the complaint cannot be considered a
misjoinder, as in fact, the action would have proceeded against him had he been alive at the time the
collection case was filed by petitioner. This being the case, the remedy provided by Section 11 of Rule 3
does not obtain here. The name of Manuel as party-defendant cannot simply be dropped from the case.
Instead, the procedure taken by the Court in Sarsaba v. Vda. de Te,52 whose facts, as mentioned earlier,
resemble those of this case, should be followed herein. There, the Supreme Court agreed with the trial
court when it resolved the issue of jurisdiction over the person of the deceased Sereno in this wise:

As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the person
of Patricio Sereno since there was indeed no valid service of summons insofar as Patricio Sereno is
concerned. Patricio Sereno died before the summons, together with a copy of the complaint and its
annexes, could be served upon him.

However, the failure to effect service of summons unto Patricio Sereno, one of the defendants herein,
does not render the action DISMISSIBLE, considering that the three (3) other defendants, x x x, were
validly served with summons and the case with respect to the answering defendants may still proceed
independently. Be it recalled that the three (3) answering defendants have previously filed a Motion to
Dismiss the Complaint which was denied by the Court.
Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a claim
against the estate of Patricio Sereno, but the case with respect to the three (3) other accused [sic] will
proceed. (Emphasis supplied.)53

As a result, the case, as against Manuel, must be dismissed.

In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule 3 of the
Rules of Court, which states that: only natural or juridical persons, or entities authorized by law may be
parties in a civil action." Applying this provision of law, the Court, in the case of Ventura v. Militante,54
held:

Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of justice,
the plaintiff must have an actual legal existence, that is, he, she or it must be a person in law and
possessed of a legal entity as either a natural or an artificial person, and no suit can be lawfully
prosecuted save in the name of such a person.

The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes a
judicial proceeding, to name the proper party defendant to his cause of action. In a suit or proceeding in
personam of an adversary character, the court can acquire no jurisdiction for the purpose of trial or
judgment until a party defendant who actually or legally exists and is legally capable of being sued, is
brought before it. It has even been held that the question of the legal personality of a party defendant is
a question of substance going to the jurisdiction of the court and not one of procedure.

The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving spouse
Ms. Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the same on the ground that the
defendant as named in the complaint had no legal personality. We agree.

x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent, a
decedent does not have the capacity to be sued and may not be named a party defendant in a court
action. (Emphases supplied.)

Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized by law,
the complaint may be dismissed on the ground that the pleading asserting the claim states no cause of
action or for failure to state a cause of action pursuant to Section 1(g) of Rule 16 of the Rules of Court,
because a complaint cannot possibly state a cause of action against one who cannot be a party to a civil
action.55

Since the proper course of action against the wrongful inclusion of Manuel as party-defendant is the
dismissal of the case as against him, thus did the trial court err when it ordered the substitution of
Manuel by his heirs. Substitution is proper only where the party to be substituted died during the
pendency of the case, as expressly provided for by Section 16, Rule 3 of the Rules of Court, which states:

Death of party;duty of counsel. – Whenever a party to a pending action dies, and the claim is not
thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after
such death of the fact thereof, and to give the name and address of his legal representative or
representatives. x x x
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator x x x.

The court shall forthwith order said legal representative or representatives to appear and be substituted
within a period of thirty (30) days from notice. (Emphasis supplied.)

Here, since Manuel was already dead at the time of the filing of the complaint, the court never acquired
jurisdiction over his person and, in effect, there was no party to be substituted.

Leonis Navigation v. Villamater, G.R. No. 179169, March 3, 2010

FACTS: Private respondent Catalino U. Villamater (Villamater) was hired as Chief Engineer for the ship
MV Nord Monaco, owned by petitioner World Marine Panama, S.A., through the services of petitioner
Leonis Navigation Co., Inc. (Leonis), as the latter’s local manning agent.

Sometime in October 2002, around four (4) months after his deployment, Villamater suffered intestinal
bleeding and was given a blood transfusion. Villamater was diagnosed with Obstructive Adenocarcinoma
of the Sigmoid, with multiple liver metastases, possibly local peritoneal carcinosis and infiltration of the
bladder, possibly lung metastasis, and anemia; Candida Esophagitis; and Chronic Gastritis. Villamater
was later repatriated, under medical escort, as soon as he was deemed fit to travel.

Upon arrival, he was examined by Dr. Kelly Siy Salvador, one of the company-designated physicians,
opined that Villamater’s condition “appears to be not work-related,” but suggested a disability grading
of 1.

In the course of his chemotherapy, when no noticeable improvement occurred, Villamater filed a
complaint[8] before the Arbitration Branch of the National Labor Relations Commission (NLRC) for
payment of permanent and total disability benefits in the amount of US$80,000.00, reimbursement of
medical and hospitalization expenses in the amount of P11,393.65, moral damages in the sum of
P1,000,000.00, exemplary damages in the amount of P1,000,000.00, as well as attorney’s fees.

Labor Arbiter Ruling

After the submission of the required position papers, the Labor Arbiter rendered a decision[9] dated July
28, 2003 in favor of Villamater, holding that his illness was compensable, but denying his claim for moral
and exemplary damages.

Petitioners appealed to the NLRC. Villamater also filed his own appeal, questioning the award of the
Labor Arbiter and claiming that the 100% degree of disability should be compensated in the amount of
US$80,000.00 pursuant to the ITF-JSU/AMOSUP CBA.

NLRC Ruling
On February 4, 2004, the NLRC issued its resolution, dismissing the respective appeals of both parties
and affirming in toto the decision of the Labor Arbiter.

Petitioners filed their motion for reconsideration of the February 4, 2004 resolution, but the NLRC
denied the same in its resolution dated June 15, 2004.
CA Ruling
Aggrieved, petitioners filed a petition for certiorari under Rule 65 of the Rules of Court before the CA.
After the filing of the required memoranda, the CA rendered its assailed May 3, 2007 Decision,
dismissing the petition. The CA dismissed the case on the ground of non-joinder of parties because the
petitioners only impleaded the then deceased Villameter excluding his heirs and that the NLRC decision
had already become final and executory and the judgment already entered in the book and that the
award was already executed.

The appellate court, likewise, denied petitioners’ motion for reconsideration in its July 23, 2007
Resolution.

Hence, this petition.

ISSUE: WON the Court of Appeals erred in holding that non-joinder of indispensable parties warrant the
outright dismissal of the Petition for Review on Certiorari.

We also agree with petitioners in their position that the CA erred in dismissing outright their petition for
certiorari on the ground of non-joinder of indispensable parties. It should be noted that petitioners
impleaded only the then deceased Villamater[26] as respondent to the petition, excluding his heirs.

Rule 3, Section 7 of the Rules of Court defines indispensable parties as those who are parties in interest
without whom there can be no final determination of an action.[27] They are those parties who possess
such an interest in the controversy that a final decree would necessarily affect their rights, so that the
courts cannot proceed without their presence.[28] A party is indispensable if his interest in the subject
matter of the suit and in the relief sought is inextricably intertwined with the other parties’
interest.[29]

Unquestionably, Villamater’s widow stands as an indispensable party to this case.

Under Rule 3, Section 11 of the Rules of Court, neither misjoinder nor non-joinder of parties is a ground
for the dismissal of an action, thus:

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground
for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party
or on its own initiative at any stage of the action and on such terms as are just. Any claim against a
misjoined party may be severed and proceeded with separately.

The proper remedy is to implead the indispensable party at any stage of the action. The court, either
motu proprio or upon the motion of a party, may order the inclusion of the indispensable party or give
the plaintiff an opportunity to amend his complaint in order to include indispensable parties. If the
plaintiff ordered to include the indispensable party refuses to comply with the order of the court, the
complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only upon
unjustified failure or refusal to obey the order to include or to amend is the action dismissed.[

Disability
we sustain the Labor Arbiter and the NLRC in granting total and permanent disability benefits in favor of
Villamater, as it was sufficiently shown that his having contracted colon cancer was, at the very least,
aggravated by his working conditions,[43] taking into consideration his dietary provisions on board, his
age, and his job as Chief Engineer, who was primarily in charge of the technical and mechanical
operations of the vessels to ensure voyage safety. Jurisprudence provides that to establish
compensability of a non-occupational disease, reasonable proof of work-connection and not direct
causal relation is required. Probability, not the ultimate degree of certainty, is the test of proof in
compensation proceedings.

Sec. 12. Class suit

When the subject matter of the controversy is one of common or general interest to many persons so
numerous that it is impracticable to join all as parties, a number of them which the court finds to be
sufficiently numerous and representative as to fully protect the interests of all concerned may sue or
defend for the benefit of all. Any party in interest shall have the right to intervene to protect his
individual interest.

Juana Complex v. Fil-Estate Land, G.R. No. 152272, March 5, 2012

FACTS: On January 20, 1999, Juana Complex I Homeowners Association, Inc. (JCHA), together with
individual residents of Juana Complex I and other neighboring subdivisions(collectively referred as JCHA,
et. al.), instituted a complaint[5] for damages, in its own behalf and as a class suit representing the
regular commuters and motorists of Juana Complex I and neighboring subdivisions who were deprived
of the use of La Paz Road, against Fil-Estate Land, Inc. (Fil-Estate), Fil-estate Ecocentrum
Corporation (FEEC), La Paz Housing & Development Corporation (La Paz), and Warbird Security Agency
and their respective officers (collectively referred as Fil-Estate, et al.).

Accordingly, JCHA, et al. also prayed for the immediate issuance of a Temporary Restraining
Order (TRO) or a writ of preliminary injunction (WPI) to enjoin Fil-Estate, et al. from stopping and
intimidating them in their use of La Paz Road.

On February 10, 1999, a TRO was issued ordering Fil-Estate, et al, for a period of twenty (20)
days, to stop preventing, coercing, intimidating or harassing the commuters and motorists from using
the La Paz Road. [6]

On February 26, 1999, Fil-Estate, et al. filed a motion to dismiss[7] arguing that the complaint failed to
state a cause of action and that it was improperly filed as a class suit.

On March 3, 1999, the RTC issued an Order [10] granting the WPI and required JCHA, et al. to post
a bond.

On March 19, 1999, Fil-Estate, et al. filed a motion for reconsideration[11] arguing, among others,
that JCHA, et al. failed to satisfy the requirements for the issuance of a WPI. On March 23, 1999, JCHA,
et al. filed their opposition to the motion.[12]

RTC Ruling
The RTC then issued its June 16, 2000 Omnibus Order, denying both the motion to dismiss and the
motion for reconsideration filed by Fil-Estate, et al.

Not satisfied, Fil-Estate, et al. filed a petition for certiorari and prohibition before the CA to annul (1) the
Order dated March 3, 1999 and (2) the Omnibus Order dated June 16, 2000. They contended that the
complaint failed to state a cause of action and that it was improperly filed as a class suit. With regard to
the issuance of the WPI, the defendants averred that JCHA, et al. failed to show that they had a clear
and unmistakable right to the use of La Paz Road; and further claimed that La Paz Road was a torrens
registered private road and there was neither a voluntary nor legal easement constituted over it

CA Ruling
On July 31, 2001, the CA rendered the decision partially granting the petition. The CA ruled that the
complaint sufficiently stated a cause of action when JCHA, et al. alleged in their complaint that they had
been using La Paz Road for more than ten (10) years and that their right was violated when Fil-Estate
closed and excavated the road. It sustained the RTC ruling that the complaint was properly filed as a
class suit as it was shown that the case was of common interest and that the individuals sought to be
represented were so numerous that it was impractical to include all of them as parties. The CA,
however, annulled the WPI for failure of JCHA, et al. to prove their clear and present right over La Paz
Road. The CA ordered the remand of the case to the RTC for a full-blown trial on the merits.

Hence, these petitions for review. JCHA, et al. argue that La Paz Road has attained the status
and character of a public road or burdened by an apparent easement of public right of way. According to
them, La Paz Road is a torrens registered private road and there is neither a voluntary nor legal
easement constituted over it. They claim that La Paz Road is a private property registered under the
name of La Paz and the beneficial ownership thereof was transferred to FEEC when La Paz joined the
consortium for the Ecocentrum Project. They likewise argue that the complaint was improperly filed as a
class suit for it failed to show that JCHA, et al. and the commuters and motorists they are representing have a
well-defined community of interest over La Paz Road. They claim that the excavation of La Paz Road would not
necessarily give rise to a common right or cause of action for JCHA, et al. against them since each of them has a
separate and distinct purpose and each may be affected differently than the others.

ISSUE: (1) whether or not the complaint states a cause of action; (2) whether the complaint has been
properly filed as a class suit; and (2) whether or not a WPI is warranted.
HELD: Section 2, Rule 2 of the Rules of Court defines a cause of action as an act or omission by
which a party violates the right of another. A complaint states a cause of action when it contains three
(3) essential elements of a cause of action, namely:

(1) the legal right of the plaintiff,

(2) the correlative obligation of the defendant, and
(3) the act or omission of the defendant in violation of said legal right.[18]

The question of whether the complaint states a cause of action is determined by its averments
regarding the acts committed by the defendant.[19] Thus, it must contain a concise statement of the
ultimate or essential facts constituting the plaintiff’s cause of action.[20] To be taken into account are
only the material allegations in the complaint; extraneous facts and circumstances or other
matters aliunde are not considered.[21]

The test of sufficiency of facts alleged in the complaint as constituting a cause of action is
whether or not admitting the facts alleged, the court could render a valid verdict in accordance with the
prayer of said complaint.[22] Stated differently, if the allegations in the complaint furnish sufficient basis
by which the complaint can be maintained, the same should not be dismissed regardless of the defense
that may be asserted by the defendant.[23]
 In the present case, the Court finds the allegations in the complaint sufficient to establish a
cause of action. First, JCHA, et al.’s averments in the complaint show a demandable right over La Paz
Road. These are: (1) their right to use the road on the basis of their allegation that they had been using
the road for more than 10 years; and (2) an easement of a right of way has been constituted over the
said roads. There is no other road as wide as La Paz Road existing in the vicinity and it is the shortest,
convenient and safe route towards SLEX Halang that the commuters and motorists may use. Second,
there is an alleged violation of such right committed by Fil-Estate, et al. when they excavated the road
and prevented the commuters and motorists from using the same. Third, JCHA, et al. consequently
suffered injury and that a valid judgment could have been rendered in accordance with the relief sought
therein.

With respect to the issue that the case was improperly instituted as a class suit, the Court finds
the opposition without merit.
Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:
Sec. 12. Class suit. – When the subject matter of the controversy is one of
common or general interest to many persons so numerous that it is impracticable to
join all as parties, a number of them which the court finds to be sufficiently numerous
and representative as to fully protect the interests of all concerned may sue or defend
for the benefit of all. Any party in interest shall have the right to intervene to protect
his individual interest.

The necessary elements for the maintenance of a class suit are: 1) the subject matter of
controversy is one of common or general interest to many persons; 2) the parties affected are so
numerous that it is impracticable to bring them all to court; and 3) the parties bringing the class suit are
sufficiently numerous or representative of the class and can fully protect the interests of all
concerned.[24]

In this case, the suit is clearly one that benefits all commuters and motorists who use La Paz
Road. As succinctly stated by the CA:

The subject matter of the instant case, i.e., the closure and excavation of the La
Paz Road, is initially shown to be of common or general interest to many persons. The
records reveal that numerous individuals have filed manifestations with the lower court,
conveying their intention to join private respondents in the suit and claiming that they
are similarly situated with private respondents for they were also prejudiced by the acts
of petitioners in closing and excavating the La Paz Road. Moreover, the individuals
sought to be represented by private respondents in the suit are so numerous that it is
impracticable to join them all as parties and be named individually as plaintiffs in the
complaint. These individuals claim to be residents of various barangays in Biñan, Laguna
and other barangays in San Pedro, Laguna.

Anent the issue on the propriety of the WPI, Section 3, Rule 58 of the Rules of Court lays down
the rules for the issuance thereof. Thus:

(a) That the applicant is entitled to the relief demanded, and the whole or part of
such relief consists in restraining the commission or continuance of the acts complained of, or in
the performance of an act or acts, either for a limited period or perpetually;
 (b) That the commission, continuance or non-performance of the act or acts
complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, or agency or a person is doing, threatening, or attempting to

do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of
the applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.

A writ of preliminary injunction is available to prevent a threatened or continuous irremediable injury to

parties before their claims can be thoroughly studied and adjudicated.[25] The requisites for its issuance are: (1) the
existence of a clear and unmistakable right that must be protected; and (2) an urgent and paramount necessity for
the writ to prevent serious damage.[26] For the writ to issue, the right sought to be protected must be a present
right, a legal right which must be shown to be clear and positive.[27] This means that the persons applying for
the writ must show that they have an ostensible right to the final relief prayed for in their complaint.[28]

In the case at bench, JCHA, et al. failed to establish a prima facie proof of violation of their right to justify the
issuance of a WPI. Their right to the use of La Paz Road is disputable since they have no clear legal right therein.

Newsweek, Inc. v. IAC, G.R. No. L-63559, May 30, 1986

FACTS: It appears that on March 5, 1981, private respondents, incorporated associations of sugarcane
planters in Negros Occidental claiming to have 8,500 members and several individual sugar planters,
filed Civil Case No. 15812 in their own behalf and/or as a class suit in behalf of all sugarcane planters in
the province of Negros Occidental, against petitioner and two of petitioners' non-resident
correspondents/reporters Fred Bruning and Barry Came.

The libelous article supposedly portrayed the island province of Negros Occidental as a place dominated
by big landowners or sugarcane planters who not only exploited the impoverished and underpaid
sugarcane workers/laborers, but also brutalized and killed them with impunity.

On November 5, 1981, petitioner filed a motion to dismiss on the grounds that (1) the printed article
sued upon is not actionable in fact and in law; and (2) the complaint is bereft of allegations that state,
much less support a cause of action. It pointed out the non-libelous nature of the article and,
consequently, the failure of the complaint to state a cause of action. Private respondents filed an
Opposition to the motion to dismiss and petitioner filed a reply.

On March 17, 1982, the trial court denied the motion to dismiss, stating that the grounds on which the
motion to dismiss are predicated are not indubitable as the complaint on its face states a valid cause of
action; and the question as to whether the printed article sued upon its actionable or not is a matter of
evidence. Petitioner's motion for reconsideration was denied on May 28, 1982.

On June 18, 1982, petitioner filed a petition for certiorari with respondent Court (CA-G. R. No. 14406)
seeking the annulment of the aforecited trial court's Orders for having been issued with such a grave
abuse of discretion as amounting to lack of jurisdiction and praying for the dismissal of the complaint for
failure to state a cause of action.
As earlier stated, respondent Court affirmed the trial court's Orders. Subsequently, on March 10, 1983,
the respondent Court denied petitioner's Motion for Reconsideration of the aforesaid decision, hence
this petition.

ISSUE: WON the case states a cause of action

HELD:

First, petitioner argues that private respondents' complaint failed to state a cause of action because the
complaint made no allegation that anything contained in the article complained of regarding sugarcane
planters referred specifically to any one of the private respondents; that libel can be committed only
against individual reputation; and that in cases where libel is claimed to have been directed at a group,
there is actionable defamation only if the libel can be said to reach beyond the mere collectivity to do
damage to a specific, individual group member's reputation.

We agree with petitioner.

In the case of Corpus vs. Cuaderno, Sr. (16 SCRA 807) this Court ruled that "in order to maintain a libel
suit, it is essential that the victim be identifiable (People vs. Monton, L-16772, November 30, 1962),
although it is not necessary that he be named (19 A.L.R. 116)." In an earlier case, this Court declared
that" ... defamatory matter which does not reveal the Identity of the person upon whom the imputation
is cast, affords no ground of action unless it be shown that the readers of the libel could have Identified
the personality of the individual defamed." (Kunkle vs. Cablenews-American and Lyons 42 Phil. 760).

This principle has been recognized to be of vital importance, especially where a group or class of
persons, as in the case at bar, claim to have been defamed, for it is evident that the larger the
collectivity, the more difficult it is for the individual member to prove that the defamatory remarks apply
to him.

In the case of Uy Tioco vs. Yang Shu Wen , 32 Phil. 624, this Court held as follows:

Defamatory remarks directed at a class or group of persons in general language only,

are not actionable by individuals composing the class or group unless the statements
are sweeping; and it is very probable that even then no action would lie where the body
is composed of so large a number of persons that common sense would tell those to
whom the publication was made that there was room for persons connected with the
body to pursue an upright and law abiding course and that it would be unreasonable
and absurd to condemn all because of the actions of a part. (supra p. 628).

It is evident from the above ruling that where the defamation is alleged to have been directed at a group
or class, it is essential that the statement must be so sweeping or all-embracing as to apply to every
individual in that group or class, or sufficiently specific so that each individual in the class or group can
prove that the defamatory statement specifically pointed to him, so that he can bring the action
separately, if need be.
We note that private respondents filed a "class suit" in representation of all the 8,500 sugarcane
planters of Negros Occidental. Petitioner disagrees and argues that the absence of any actionable basis
in the complaint cannot be cured by the filing of a class suit on behalf of the aforesaid sugar planters.

We find petitioner's contention meritorious.

The case at bar is not a class suit. It is not a case where one or more may sue for the benefit of all
(Mathay vs. Consolidated Bank and Trust Company, 58 SCRA 559) or where the representation of class
interest affected by the judgment or decree is indispensable to make each member of the class an actual
party (Borlaza vs. Polistico, 47 Phil. 348). We have here a case where each of the plaintiffs has a separate
and distinct reputation in the community. They do not have a common or general interest in the subject
matter of the controversy.

The disputed portion of the article which refers to plaintiff Sola and which was claimed to be libelous
never singled out plaintiff Sola as a sugar planter. The news report merely stated that the victim had
been arrested by members of a special police unit brought into the area by Pablo Sola, the mayor of
Kabankalan. Hence, the report, referring as it does to an official act performed by an elective public
official, is within the realm of privilege and protected by the constitutional guarantees of free speech
and press.

The article further stated that Sola and the commander of the special police unit were arrested. The
Court takes judicial notice of this fact. (People vs. Sola, 103 SCRA 393.)

Mathay v. Consolidated Bank, G.R. No. L-23136, August 26, 1974

FACTS: The complaint in this case, filed on December 24, 1963 as a class suit, under Section 12, Rule 3,
of the Rules of Court, contained six causes of action. Plaintiffs-appellants are stockholders in the
Consolidated Mines, Inc. who allege that the defendants, who are also stockholders, unlawfully acquired
stockholdings in the defendant-appellee Bank in excess of what they were lawfully entitled by depriving
them of their right to subscribe, in proportion to their equities established under their respective "Pre-
Incorporation Agreements to Subscribe", to that portion of the capital stock which was unsubscribed
because of failure of the CMI stockholders to exercise their right to subscribe thereto.

On February 7, 1964 defendants-appellees, except Fermin Z. Caram, Jr., filed a motion to dismiss on the
grounds that (a) plaintiffs-appellants had no legal standing or capacity to institute the alleged class suit;
(b) that the complaint did not state a sufficient and valid cause of action; and (c) that plaintiffs-
appellants' complaint against the increase of the number of directors did not likewise state a cause of
action.

On March 7, 1964 defendants-appellees, except Fermin Z. Caram, Jr., filed a supplemental ground for
their motion to dismiss, to wit, that the stockholders, except Fermin Z. Caram, Jr., who abstained, had
unanimously, at their regular annual meeting held on March 5, 1964, ratified and confirmed all the
actuations of the organizers-directors in the incorporation, organization and establishment of the Bank.

In its order, dated March 21, 1964, the trial court granted the motion to dismiss, holding, among other
things, that the class suit could not be maintained because of the absence of a showing in the complaint
that the plaintiffs-appellants were sufficiently numerous and representative, and that the complaint
failed to state a cause of action.

From said order, appellants, plaintiffs and intervenors, interposed this appeal to this Court on questions
of law and fact, contending that the lower court erred as follows:

1. In holding that plaintiffs-appellants could not maintain the present class suit because
of the absence of a showing in the complaint that they were sufficiently numerous and
representative;

II. In holding that the instant action could not be maintained as a class suit because
plaintiffs-appellants did not have a common legal interest in the subject matter of the
suit;

III. In dismissing the present class suit on the ground that it did not meet the
requirements of Rule 3, section 12 of the Rules of Court;

IV. In holding that the complaint was fatally defective in that it failed to state with
particularity that plaintiffs-appellants had resorted to, and exhausted, intra-corporate
remedies;

ISSUE: (1) whether the instant action could be maintained as a class suit, and (2) whether the complaint
stated a cause of action. These issues alone will be discussed.

HELD:

Appellants contended that the complaint showed that besides the four plaintiff-appellants of record,
and the four movant-intervenors-appellants there were in the appellee Bank many other stockholders
who, tough similarly situated as the appellants, did not formally include themselves as parties on record
in view of the representative character of the suit that the test, in order to determine the legal standing
of a party to institute a class suit, was not one, of number, but whether or not the interest of said party
was representative of the persons in whose behalf the class suit was instituted; that granting arguendo,
that the plaintiffs-appellants were not sufficiently numerous and representative, the court should not
have dismissed the action, for insufficiency of number in a class suit was not a ground for a motion to
dismiss, and the court should have treated the suit as an action under Rule 3, section 6, of the Rules of
Court which permits a joinder of parties.

Defendants-appellees, on the contrary, stressed that the plaintiffs-appellants were only four out of
1,500 stockholders, and owned only 8 shares out of the 80,000 shares of stock of the appellee Bank

In their Reply Brief, appellants insisted that non-compliance with Section 12, Rule 3, not being one
enumerated in Rules 16 and 17, was not a ground for dismissal; that the requirements for a class had
been complied with; that the required common interest existed even if the interests were several for
there was a common question of law or fact and a common relief was sought; that the common or
general interest could be in the object of the action, in the result of the proceedings, or in the question
involved in the action, as long as there was a common right based on the same essential facts; that
plaintiffs-appellants adequately represented the aggrieved group of bank stockholders, inasmuch as
appellants' interests were not antagonistic to those of the latter, and appellants were in the same
position as the group in whose behalf the complaint was filed.

The governing statutory provision for the maintenance of a class suit is Section 12 of Rule 3 of the Rules
of Court, which reads as follows:

Sec. 12. Class suit — When the subject matter of the controversy is one of common or
general interest to many persons, and the parties are so numerous that it is
impracticable to bring them all before the court, one or more may sue or defend for the
benefit of -ill. But in such case the court shall make sure that the parties actually before
it are sufficiently numerous and representative so that all interests concerned are fully
protected. Any party in interest shall have a right to intervene in protection of his
individual interest.

The necessary elements for the maintenance of a class suit are accordingly: (1) that the subject matter
of the controversy be one of common or general interest to many persons, and (2) that such persons be
so numerous as to make it impracticable to bring them all to the court. An action does not become a
class suit merely because it is designated as such in the pleadings. Whether the suit is or is not a class
quit depends upon the attending facts, and the complaint, or other pleading initiating the class action
should allege the existence of the necessary facts, to wit, the existence of a subject matter of common
interest, and the existence of a class and the number of persons in the alleged class, 3 in order that the
court might be enabled to determine whether the members of the class are so numerous as to make it
impracticable to bring them all before the court, to contrast the number appearing on the record with
the number in the class and to determine whether claimants on record adequately represent the class
and the subject matter of general or common interest. 4

The complaint in the instant case explicitly declared that the plaintiffs- appellants instituted the "present
class suit under Section 12, Rule 3, of the Rules of Court in. behalf of CMI subscribing stockholders" 5 but
did not state the number of said CMI subscribing stockholders so that the trial court could not infer,
much less make sure as explicitly required by the sufficiently numerous and representative in order that
all statutory provision, that the parties actually before it were interests concerned might be fully
protected, and that it was impracticable to bring such a large number of parties before the court.

The statute also requires, as a prerequisite to a class suit, that the subject-matter of the controversy be
of common or general interest to numerous persons. Although it has been remarked that the "innocent
'common or general interest' requirement is not very helpful in determining whether or not the suit is
proper", 6 the decided cases in our jurisdiction have more incisively certified the matter when there is
such common or general interest in the subject matter of the controversy. By the phrase "subject matter
of the action" is meant "the physical facts, the things real or personal, the money, lands, chattels, and
the like, in relation to which the suit is prosecuted, and not the delict or wrong committed by the
defendant." 7

This Court has ruled that a class suit did not lie in an action for recovery of real property where separate
portions of the same parcel were occupied and claimed individually by different parties to the exclusion
of each other, such that the different parties had determinable, though undivided interests, in the
property in question. 8 It his likewise held that a class suit would not lie against 319 defendants
individually occupying different portions of a big parcel of land, where each defendant had an interest
only in the particular portion he was occupying, which portion was completely different from the other
portions individually occupied by other defendants, for the applicable section 118 of the Code of Civil
Procedure relates to a common and general interest in single specific things and not to distinct ones. 9 In
an action for the recovery of amounts that represented surcharges allegedly collected by the city from
some 30,000 customers of four movie houses, it was held that a class suit did not lie, as no one plaintiff
had any right to, or any share in the amounts individually claimed by the others, as each of them was
entitled, if at all, only to the return of what he had personally paid. 10

The interest, subject matter of the class suits in the above cited cases, is analogous to the interest
claimed by appellants in the instant case. The interest that appellants, plaintiffs and intervenors, and the
CMI stockholders had in the subject matter of this suit — the portion of stocks offering of the Bank left
unsubscribed by CMI stockholders who failed to exercise their right to subscribe on or before January
15, 1963 — was several, not common or general in the sense required by the statute. Each one of the
appellants and the CMI stockholders had determinable interest; each one had a right, if any, only to his
respective portion of the stocks. No one of them had any right to, or any interest in, the stock to which
another was entitled.

Anent this point, the trial court correctly remarked:

It appears to be the theory of the plaintiffs borne out by the prayer, that each
subscribing CMI stockholder is entitled to further subscribe to a certain Proportion
depending upon his stockholding in the CMI, of the P8 million capital stock of the
defendant bank open to subscription (out of the 20 million authorized capital stock) as
well as the unsubscribed portion of the P8 million stock offering which were left
unsubscribed by those CMI stockholders who for one reason or another had failed to
exercise their subscription rights on or before January 15, 1963. Under the plaintiffs'
theory therefore, each subscribing CMI stockholder was entitled to subscribe to a
definite number of shares both in the original offering of P8 million and in that part
thereof not subscribed on or before the deadline mentioned, so that one subscribing
CMI stockholder may be entitled to subscribe to one share, another to 3 shares and a
third to 11 shares, and so on, depending upon the amount and extent of CMI
stockholding. But except for the fact that a question of law — the proper interpretation
of the waiver provisions of the CMI stockholders' resolution of March 28, 1962 — is
common to all, each CMI subscribing stock holder has a legal interest in, and a claim to,
only his respective proportion of shares in the defendant bank, and none with regard to
any of the shares to which another stockholder is entitled. Thus plaintiff Ismael Mathay
has no legal interest in, or claim to, any share claimed by any or all of his co-plaintiffs
from the defendant individuals. Hence, no CMI subscribing stockholder or, for that
matter, not any number of CMI stockholders can maintain a class suit in behalf of
others,... 11

Even if it be assumed, for the sake of argument, that the appellants and the CMI stockholders suffered
wrongs that had been committed by similar means and even pursuant to a single plan of the Interim
Board of Organizers of the Bank, the wrong suffered by each of them would constitute a wrong separate
from those suffered by the other stockholders, and those wrongs alone would not create that common
or general interest in the subject matter of the controversy as would entitle any one of them to bring a
class suit on behalf of the others. Anent this point it has been said that:

Separate wrongs to separate persons, although committed by similar means and even
pursuant to a single plan, do not alone create a 'common' or 'general' interest in those
who are wronged so as to entitle them to maintain a representative action. 12

Appellants, however, insisted, citing American authorities, 13 that a class suit might be brought even if
the interests of plaintiffs-appellants might be several as long as there was a common question of law or
fact affecting them and a common relief was sought. We have no conflict with the authorities cited;
those were rulings under the Federal Rules of Civil Procedure, pursuant to Rule 23 of which, there were
three types of class suits, namely: the true, the hybrid, and the spurious, and these three had only one
feature in common, that is, in each the persons constituting the class must be so numerous as to make it
impracticable to bring them all before the court. The authorities cited by plaintiffs-appellants refer to
the spurious class action (Rule 23 (a) (3) which involves a right sought to be enforced, which is several,
and there is a common question of law or fact affecting the several rights and a common relief is
sought. 14 The spurious class action is merely a permissive joinder device; between the members of the
class there is no jural relationship, and the right or liability of each is distinct, the class being formed
solely by the presence of a common question of law or fact. 15 This permissive joinder is provided in
Section 6 of Rule 3, of our Rules of Court. Such joinder is not and cannot be regarded as a class suit,
which this action purported and was intended to be as per averment of the complaint.

It may be granted that the claims of all the appellants involved the same question of law. But this alone,
as said above, did not constitute the common interest over the subject matter indispensable in a class
suit. The right to purchase or subscribe to the shares of the proposed Bank, claimed by appellants
herein, is analogous to the right of preemption that stockholders have when their corporation increases
its capital. The right to preemption, it has been said, is personal to each stockholder, 16 and while a
stockholder may maintain a suit to compel the issuance of his proportionate share of stock, it has been
ruled, nevertheless, that he may not maintain a representative action on behalf of other stockholders
who are similarly situated. 17 By analogy, the right of each of the appellants to subscribe to the waived
stocks was personal, and no one of them could maintain on behalf of others similarly situated a
representative suit.

Appellants, furthermore, insisted that insufficiency of number in a class suit was not a ground for
dismissal of one action. This Court has, however, said that where it appeared that no sufficient
representative parties had been joined, the dismissal by the trial court of the action, despite the
contention by plaintiffs that it was a class suit, was correct. 19 Moreover, insofar as the instant case is
concerned, even if it be granted for the sake of argument, that the suit could not be dismissed on that
ground, it could have been dismissed, nevertheless, on the ground of lack of cause of action which will
be presently discussed. .

Let us premise the legal principles governing the motion to dismiss on the ground of lack of cause of
action.

Section 1, Rule 16 of the Rules of Court providing in part that: .

 Within the time for pleading a motion to dismiss may be made on any of the following
grounds: ....

(g) That the complaint states no cause of action. ..1.

explicitly requires that the sufficiency of the complaint must be tested exclusively on the basis of the
complaint itself and no other should be considered when the ground for motion to dismiss is that the
complaint states no cause of action. Pursuant thereto this Court has ruled that:

As a rule the sufficiency of the complaint, when Challenged in a motion to dismiss, must be determined
exclusively on the basis of the facts alleged therein. 23

It has been likewise held that a motion to dismiss based on lack of cause of action hypothetically admits
the truth of the allegations of fact made in the complaint. 24 It is to be noted that only the facts well
pleaded in the complaint, and likewise, any inferences fairly deducible therefrom, are deemed admitted
by a motion to dismiss. Neither allegations of conclusions 25 nor allegations of facts the falsity of which
the court may take judicial notice are deemed admitted. 26 The question, therefore, submitted to the
Court in a motion to dismiss based on lack of cause of action is not whether the facts alleged in the
complaint are true, for these are hypothetically admitted, but whether the facts alleged are sufficient to
constitute a cause of action such that the court may render a valid judgment upon the facts alleged
therein.

A cause of action is an act or omission of one party in violation of the legal right of the other. Its
essential elements are, namely: (1) the existence of a legal right in the plaintiff, (2) a correlative legal
duty in the defendant, and (3) an act or omission of the defendant in violation of plaintiff's right with
consequential injury or damage to the plaintiff for which he may maintain an action for the recovery of
damages or other appropriate relief. 27 On the other hand, Section 3 of Rule 6 of the Rules of Court
provides that the complaint must state the ultimate facts constituting the plaintiff's cause of action.
Hence, where the complaint states ultimate facts that constitute the three essential elements of a cause
of action, the complaint states a cause of action; 28 otherwise, the complaint must succumb to a motion
to dismiss on that ground.

The legal principles having been premised, let us now analyze and discuss appellant's various causes of
action.

Appellants' first cause of action, pursuant to what has been premised above, should have consisted of:
(1) the right of appellants as well as of the other CMI stockholders to subscribe, in proportion to their
equities established under their respective "Pre-Incorporation Agreements to Subscribe", to that portion
of the capital stock which was unsubscribed because of failure of the CMI stockholders to exercise their
right to subscribe thereto; (2) the legal duty of the appellant to have said portion of the capital stock to
be subscribed by appellants and other CMI stockholders; and (3) the violation or breach of said right of
appellants and other CMI stockholders by the appellees.

Did the complaint state the important and substantial facts directly forming the basis of the primary
right claimed by plaintiffs? Before proceeding to elucidate this question, it should be noted that a bare
allegation that one is entitled to something is an allegation of a conclusion. Such allegations adds
nothing to the pleading, it being necessary to plead specifically the facts upon which such conclusion is
founded. 29 The complaint alleged that appellants were stockholders of the CMI; that as such
stockholders, they were entitled; by virtue of the resolution of March 28, 1962, to subscribe to the
capital stock of the proposed Consolidated Bank and Trust Co., at par value to the same extent and in
the same amount as said stockholders' respective share holdings in the CMI as shown in the latter's
stock book as of January 15, 1963, the right to subscribe to be exercised until January 15, 1963, provided
said stockholders of the CMI were qualified under the law to become stockholders of the proposed
Bank; 30 that appellants accomplished and filed their respective "Pre-Incorporation Agreements to
Subscribe" and fully paid the subscription. 31

These alleged specific facts did not even show that appellants were entitled to subscribe to the capital
stock of the proposed Bank, for said right depended on a condition precedent, which was, that they
were qualified under the law to become stockholders of the Bank, and there was no direct averment in
the complaint of the facts that qualified them to become stockholders of the Bank. The allegation of the
fact that they subscribed to the stock did not, by necessary implication, show that they were possessed
of the necessary qualifications to become stockholders of the proposed Bank.

Assuming arguendo that appellants were qualified to become stockholders of the Bank, they could
subscribe, pursuant to the explicit terms of the resolution of March 28, 1962, "to the same extent and in
the same amount as said stockholders' respective stockholdings in the CMI" as of January 15,
1963. 32 This was the measure of the right they could claim to subscribe to waived stocks. Appellants did
not even aver that the stocks waived to the subscription of which they claimed the right to subscribe,
were comprised in "the extent and amount" of their respective share holdings in the CMI. It is not
surprising that they did not make such an averment for they did not even allege the amount of shares of
stock to which they claimed they were entitled to subscribe. The failure of the complaint to plead
specifically the above facts rendered it impossible for the court to conclude by natural reasoning that
the appellants and other CMI stockholders had a right to subscribe to the waived shares of stock, and
made any allegation to that effect a conclusion of the pleader, not an ultimate fact, in accordance with
the test suggested by the California Supreme Court, to wit:

If from the facts in evidence, the result can be reached by that process of natural
reasoning adopted in the investigation of truth, it becomes an ultimate fact, to be found
as such. If, on the other hand, resort must be had to the artificial processes of the law, in
order to reach a final determination, the result is a conclusion of law. 33

Let us now pass to the second and third elements that would have constituted the first cause of action.
Did the complaint allege as ultimate facts the legal duty of defendants-appellees to have a portion of the
capital stock subscribed to by appellants? Did the complaint allege as ultimate facts that defendants
appellees had violated appellants' right?

Even if it be assumed arguendo that defendants-appellees had the duty to have the waived stocks
subscribed to by the CMI stockholders, this duty was not owed to all the CMI stockholders, but only to
such CMI stockholders as were qualified to become stockholders of the proposed Bank. Inasmuch as it
has been shown that the complaint did not contain ultimate facts to show that plaintiffs-appellants were
qualified to become stockholders of the Bank, it follows that the complaint did not show that
defendants-appellees were under duty to have plaintiffs-appellants subscribe to the stocks of the
proposed Bank. It inevitably follows also that the complaint did not contain ultimate facts to show that
the right of the plaintiffs-appellants to subscribe to the shares of the proposed Bank had been violated
by defendants-appellees. How could a non-existent right be violated?

Borlasa v. Polistico, G.R. No. L-22909, January 28, 1925

FACTS: This action was instituted in the Court of First Instance of Laguna on July 25, 1917, by Victoriano
Borlasa and others against Vicente Polistico and others, chiefly for the purpose of securing the
dissolution of a voluntary association named Turuhan Polistico & Co., and to compel the defendants to
account for and surrender the money and property of the association in order that its affairs may be
liquidated and its assets applied according to law. The trial judge having sustained a demurrer for defect
of parties and the plaintiffs electing not to amend, the cause was dismissed, and from this order an
appeal was taken by the plaintiffs to this court.

In the month of April, 1911, the plaintiffs and defendants, together with several hundred other persons,
formed an association under the name of Turuhan Polistico & Co. Vicente Polistico, the principal
defendant herein, was elected president and treasurer of the association, and his house in Lilio, Laguna,
was made its principal place of business. The life of the association was fixed at fifteen years, and under
the by-laws each member obligated himself to pay to Vicente Polistico, as president-treasurer, before 3
o'clock in the afternoon of every Sunday the sum of 50 centavos, except that on every fifth Sunday the
amount was P1, if the president elected to call this amount, as he always did. It is alleged that from
April, 1911, until April, 1917, the sums of money mentioned above were paid weekly by all of the
members of the society with few irregularities. The inducement to these weekly contributions was
found in provisions of the by-laws to the effect that a lottery should be conducted weekly among the
members of the association and that the successful member should be paid the amount collected each
week, from which, however, the president-treasurer of the society was to receive the sum of P200, to be
held by him as funds of the society.

It is further alleged that by virtue of these weekly lotteries Vicente Polistico, as president-treasurer of
the association, received sums of money amounting to P74,000, more or less, in the period stated,
which he still retains in his power or has applied to the purchase of real property largely in his own name
and partly in the names of others.

In an amended answer the defendants raised the question of lack of parties and set out a list of some
hundreds of persons whom they alleged should be brought in as parties defendant on the ground,
among others, that they were in default in the payment of their dues to the association.

On November 28, 1922, the court made an order requiring the plaintiffs to amend their complaint
within a stated period so as to include all of the members of theTurnuhan Polistico & Co. either as
plaintiffs or defendants. The plaintiffs excepted to this order, but acquiesced to the extent of amending
their complaint by adding as additional parties plaintiff some hundreds of persons, residents of Lilio, said
to be members of the association and desirous of being joined as plaintiffs

ISSUE: WON all the members need to be parties

HELD: No
The trial judge appears to have supposed that all the members of the Turnuhan Polistico & Co. should be
brought in either plaintiffs or defendants. This notion is entirely mistaken. The situation involved is
precisely the one contemplated in section 118 of the Code of Civil Procedure, where one or more may
sue for the benefit of all. It is evident from the showing made in the complaint, and from the
proceedings in the court below, that it would be impossible to make all of the persons in interest parties
to the cases and to require all of the members of the association to be joined as parties would be
tantamount to a denial of justice.

The general rule with reference to the making of parties in a civil action requires, of course, the joinder
of all necessary parties wherever possible, and the joinder of all indispensable parties under any and all
conditions, the presence of those latter being a sine qua non of the exercise of judicial power. The class
suit contemplates an exceptional situation where there are numerous persons all in the same plight and
all together constituting a constituency whose presence in the litigation is absolutely indispensable to
the administration of justice. Here the strict application of the rule as to indispensable parties would
require that each and every individual in the class should be present. But at this point the practice is so
far relaxed as to permit the suit to proceed, when the class is sufficient represented to enable the court
to deal properly and justly with that interest and with all other interest involved in the suit. In the class
suit, then, representation of a class interest which will be affected by the judgment is indispensable; but
it is not indispensable to make each member of the class an actual party.

His Honor, the trial judge, in sustaining this demurrer was possibly influenced to some extent by the
case ofRallonza vs. Evangelista (15 Phil., 531); but we do not consider that case controlling, inasmuch as
that was an action for the recovery of real property and the different parties in interest had
determinable, though undivided interests, in the property there in question. In the present case, the
controversy involves an indivisible right affecting many individuals whose particular interest is of
indeterminate extent and is incapable of separation.

The addition of some hundreds of persons to the number of the plaintiffs, made in the amendment to
the complaint of December 13, 1922, was unnecessary, and as the presence of so many parties is bound
to prove embarrassing to the litigation from death or removal, it is suggested that upon the return of
this record to the lower court for further proceedings, the plaintiff shall again amend their complaint by
dismissing as to unnecessary parties plaintiffs, but retaining a sufficient number of responsible persons
to secure liability for costs and fairly to present all the members of the association.

There is another feature of the complaint which makes a slight amendment desirable, which is, that the
complaint should be made to show on its face that the action is intended to be litigated as a class suit.
We accordingly recommend that the plaintiffs further amend by adding after the names of the parties
plaintiffs the words, "in their own behalf and in behalf of other members of Turuhan Polistico & Co."

The order appealed from is reversed, the demurrer of the defendants based upon supposed lack of
parties is overruled, and the defendants are required to answer to the amended complaint within the
time allowed by law and the rules of the court. The costs of this appeal will be paid by the defendants.
So ordered.

(See: Ibañez v. Roman Catholic Church, 12 Phil. 227)

FACTS: The subject of this dispute is the image of the Holy Child of Ternate (Santo Niño de Ternate).
Plaintiffs, thirteen in number, filed the petition for themselves and in the name of the other inhabitants
of the town of Ternate, against the Roman Catholic Apostolic Church and its representative, the parish
priest of Naic, Valentin Velasco, defendants, for the proprietor-ship of an image of the Holy Child.

The petition claims that the inhabitants of Ternate were the owners in common of the image considered
as a piece of personal property. The petitioners want the image to be in the Independent Filipino Church

The image was brought from Molluccas by the Mardicas to Maragondon in the Province of Cavite, where
they established the barrio/hamlet of Ternate. Ternate was later made a separate town. The image was
was established to be in the parish church of Maragondon and not in the hamlet of Ternate as late as
1803 but it was exhibited in Ternate every fiesta.

From that time more than fifty years passed, as to which period the record contains no written
evidence. Where the image was during that time, does not appear. Witnesses in the case, whose
memory goes back to about 1855, say that, since their recollection, the image was not then in the
church of Maragondon, but was kept in a box in a private house in the barrio by the majordomo of the
cofradia, and that every Friday it was taken to the chapel, where it was worshipped.

About 1863 a church was built in Ternate and the image was immediately located therein, where it
remained until 1896. At the outbreak in Cavite of the rebellion against Spain of that year, the parish
priest, a native of the Islands, fled to the mountains and from that retreat ordered the president of the
pueblo of Ternate to take the image from the church and bring it to the mountains. This was done and it
there remained until the amnesty of 1897, when it was returned to the church of Ternate. It there
remained until 1903, when a party of men, among whom were some of the plaintiffs, entered the
church during the absence of the priest, seized the image, carried it out and placed it in a chapel of the
Independent Filipino Church in the same pueblo of Ternate. Under orders of the executive branch of the
Government it was taken therefrom by a military force of scouts, placed in the church of Maragondon,
and the persons taking it from the church of Ternate were prosecuted for robbery. That case was
dismissed, and the image ordered to remain in the custody of the Roman Catholic priest of Maragondon
in the church of that pueblo until the right thereto could be determined in a civil judicial proceeding.
Thereupon this action was brought.

ISSUE: WON the plaintiffs can maintain the action as a class suit

HELD: No.

There are no other allegations in the complaint as to the right of the plaintiffs to represent the
inhabitants of Ternate, nor is there any proof whatever in the case upon this point. The claim of the
plaintiffs is that the persons who were at the time of the presentation of the complaint the inhabitants
of Ternate were the owners in common of the image considered as a piece of personal property. There
is no evidence to show that the present plaintiffs, or any one of the present inhabitants of Ternate, were
the heirs or in any way related to any one of the two hundred Mardicas who came to the Philippines
nearly two hundred and fifty years ago. The claim of the plaintiffs is apparently not rested upon the
proposition that they are entitled to relief because they are such heirs, but because they live in the
pueblo. Their view seems to be that the heirs of the Mardicas living in other pueblos have no interest in
the image.

Nor is there any evidence in the case to show how many, if any, of the plaintiffs or of the present
inhabitants of Ternate, who are some 2,460 people, belong to the Roman Catholic Church.
Passing the question as to whether the Roman Catholic Church is not the owner of the image, the
question may be asked, whether under these circumstances it can be said that any one has a proprietary
right in this image who is not a Roman Catholic? If among the Mardicas who first came here there had
been one who did not profess that religion, would he have had any participation therein? Are the
Chinese who now live in Ternate part owners of the image? These are questions which we do not feel
called upon to decide, for the case must be resolved upon the point made by the defendant at the very
commencement of the action, to wit, that the thirteen persons named as plaintiffs have no right to
maintain it.

The plaintiffs rely upon article 118 of the Code of Civil Procedure, which is as follows:

"When the subject-matter of the controversy is one of common or general interest to many persons,
and the parties are so numerous that it is impracticable to bring them all before the court, one or more
may sue or defend for the benefit of all. But in such case any party in interest shall have a right to
intervene in protection of his individual interests, and the court shall make sure that the parties actually
before it are sufficiently numerous and representative so that all interests concerned are fully
protected."

No case has been called to our attention in which this section or the rule which it enunciates has been
applied where the ownership of personal property is involved and where it is claimed to belong to
persons who at a particular time reside in a particular place, or where the ownership changes as persons
move in or out of such locality.

In the case of Macon & Birmingham Railroad vs. Gibson (85 Ga., 1; s. c. 21 Am. St., 135), it appeared that
the railroad, in accordance with the terms of its charter, if it built its railroad within 5 miles of the town
of Thomaston, had to build it within the corporate limits, or within 1 mile of the court-house. It was
there held that two citizens of the town had a right to maintain a suit in behalf of themselves and of
their fellow citizens, to prevent the railroad from violating its charter. The court said that the object of
the provision in the charter was to prevent the decline and decay of the town in consequence of having
a railroad in the vicinity but not near enough to prevent some rival town from springing up, and that the
citizens of Thomaston had a peculiar and vital interest therein. It will be seen that in this case the
ownership of personal property was not involved.

The case of Wheelock r vs. First Presbyterian Church (119 Cal., 477), did involve the ownership of certain
property and two persons were allowed to bring the action in behalf of others, but it there appeared
that the persons who belonged to the Central Presbyterian Church, and whom the two plaintiffs
represented, numbered 369 and were well known. In other words, that they were the members of a
well-defined unincorporated society. The case of Smith vs. Swormstedt (16 How., 288), involved the
division of the Methodist Church of the United States into two bodies, Methodist Church North and
Methodist Church South. The matter in controversy was a property known as The Book Concern. The
only persons interested in this property were the preachers belonging to the two churches, of whom
there were about 1,500 in the Church South and about 3,800 in the Church North. These persons were
well known and could be identified, and six of the preachers belonging to the Church South were
allowed to maintain the action for themselves and for all their fellow-preachers in that body. It w ill be
seen that no one of these three cases is like the present one, wherein no one of the inhabitants of
Ternate has a vested interest in the property in question which would survive his removal from the town
and in which another person, by moving into the town, acquired an interest.
But even if this section were applicable to such a case as the present, the action could not be
maintained. In the case of Smith vs. Swormstedt, above cited, the court said, at page 303:

"In all cases where exceptions to the general rule are allowed, and a few are permitted to sue and
defend on I behalf of the many, by representation, care must be taken that persons are brought on the
record fairly representing the interest or right involved, so that it may be fully and honestly tried."

In Macon & Birmingham Railroad vs. Gibson, above cited, the court said:

"It is true that as only two of the citizens have become parties, it is rather a small representation of the
whole community; but considering the publicity of the case and of the interest involved in it, and the
fact that the suit is located in Upson County and will be tried (if tried at all) at the county town, which is
the town whose citizens are interested, there can be no cause to apprehend that the two plaintiffs on
the face of the petition will be disposed, or if so disposed, allowed to misrepresent the community in
whose behalf they have brought this suit. No doubt it is somewhat discretionary with a court of equity
as to how many representatives of a class will, or ought to be, regarded as a fair representation of the
whole class in the given instance."

It sufficiently appears from the record in this case that it is a controversy between the Roman Catholic
Church on one side and the Independent Filipino Church on the other. That it is the purpose if the
plaintiffs, if they secure possession of the image, to place it in the chapel of the Independent Church is
also very clear. What number of the inhabitants of the town (2,460 according to the census) are
members of the Roman Catholic Church and what part are members of the Independent Filipino Church
does not appear. But it is very apparent that many of the inhabitants are opposed to the transfer of the
image from the Roman Catholic Church. Under the circumstances, the thirteen plaintiffs do not fairly
represent all of the inhabitants of the town. Their interest and the interests of some of the others are
diametrically opposed. For this reason this action can not be maintained.

The judgment of the court below is reversed, and the defendants are acquitted of the complaint, with
the costs of the first instance against the plaintiffs. No costs will be allowed to either party in this court.
So ordered.

Llana v. NLRC, G.R. No. 111014, May 31, 1996

FACTS: On 24 March 1984 respondent National Labor Union on behalf of its members filed a complaint
against petitioner and/or Peter Sy, Rosa Sy, officers of Llana Supermarket; BAVSPIA, a manpower
provider; and Warner Laputt, owner of BAVSPIA; before the Labor Arbiter for underpayment of wages,
nonpayment of overtime pay, monthly emergency allowance, legal holiday pay, service incentive leave
pay and 13th month pay.

On 24 May 1984 the complaint was amended since respondent Union manifested through its authorized
representative that it was intended as a class suit. Three more complaints were filed and the four (4)
cases were consolidated. Several complainants withdrew but more employees submitted sworn
statements thus increasing again the number of complainants to eighty-eight (88).

When petitioner learned of the charges before the Labor Arbiter it demanded the resignation of the
employees from the Union and withdrawal of their cases or face criminal charges. It also threatened to
withhold their wages and even to dismiss them from their employment. Since they refused to resign
petitioner dismissed them. Hence, charges of unfair labor practice and illegal dismissal were added as
causes of action in their complaints.

Petitioner contended that there was no unfair labor practice because there was no ongoing union
activity before the alleged illegal dismissals; but even if there were, the dismissals were not effected by
petitioner as complainants were not its employees but of BAVSPZA.

On 6 February 1987, after the consolidated cases were submitted for decision, petitioner filed what was
purportedly a compromise agreement between itself and the local chapter of respondent Union.

BAVSPIA participated during the initial stages of the hearings but later moved to have its name dropped
as co-respondent when it noted, after complainants have rested, that the evidence formally offered was
directed only against petitioner.

Labor Arbiter Ruling

On 28 February 1989 the Labor Arbiter held that (1) petitioner was the employer of complainants with
BAVSPIA being engaged in labor-only contracting; (2) complainants were illegally dismissed; (3) Peter Sy
and Rosa Sy were not personally liable; and, (4) the charge of unfair labor practice and all labor
standards claims were unsubstantiated by evidence. Corollarily, petitioner was ordered to reinstate all
the complainants and to pay them backwages and all benefits.

NLRC Ruling
On 30 June 1993 public respondent National Labor Relations Commission affirmed the ruling of the
Labor Arbiter.2

The petitioner now asks how many individual complainants are there in these cases, whether seven (7)
or eighty-five (85); whether these complainants were illegally dismissed; and, whether a compromise
agreement with a motion to dismiss filed by a local chapter of respondent Union may be given legal
effect. Moreover, according to petitioner, these cases do not fall under the term "class suit" as defined
in Sec. 12, Rule 3, of the Rules of Court because the parties are not so numerous that it would be
impracticable to bring them all before the court. It is further the position of petitioner that BAVSPIA is
the true employer of the complainants and the resignations of certain employees were voluntary.
Petitioner still further argues that the compromise agreement duly signed by the officers of the local
chapter of respondent Union and filed while the case was still pending before the Labor Arbiter is
binding on all the complainants.

ISSUE: WON the action is a class suit

HELD:

We disagree with petitioner. This is a "representative suit" as distinguished from "class suit" defined in
Sec. 12, Rule 3, of the Rules of Court —

Sec. 12. Class suit. — When the subject matter of the controversy is one of common or
general interest to many persons, and the parties are so numerous that it is
 impracticable to bring them all before the court, one or more may sue or defend for the
benefit of all. But in such case the court shall make sure that the parties actually before
it are sufficiently numerous and representative so that all interests concerned are fully
protected. Any party in interest shall have a right to intervene in protection of his
individual interest.

In Re: Request of the Heirs of the Passengers of the Doña Paz to Set Aside the Order Dated
January 4, 1988 of Judge B. D. Chingcuangco, 3 the Court had occasion to explain "class suit" —

What is contemplated, as will be noted, is that (a) the subject matter in controversy is of
common or general interest to many persons, and (b) those persons are so numerous as
to make it impracticable to bring them all before the court . . . What makes the situation
a proper case for a class suit is the circumstance that there is only one right or cause of
action pertaining or belonging in common to many persons (emphasis supplied), not
separately or severally to distinct individuals . . . . The object of the suit is to obtain relief
for or against numerous persons as a group or as an integral entity, and not as separate,
distinct individuals whose rights or liabilities are separate from and independent of
those affecting the others. . . The other factor that serves to distinguish the rule on class
suits . . . is . . . the numerousness of parties involved . . . The rule is that for a class suit to
be allowed, it is needful inter alia that the parties be so numerous that it would be
impracticable to bring them all before the court.

In the present case, there are multiple rights or causes of action pertaining separately to several, distinct
employees who are members of respondent Union. Therefore, the applicable rule is that provided in
Sec. 3, Rule 3, of the Rules of Court on "representative parties," which states —

Sec. 3. Representative parties. A trustee of a an express trust, a guardian, executor or

administrator or a party authorized by statute (emphasis supplied), may sue or be sued
without joining the party for whose benefit the action is presented or defended; but the
court may, at any stage of the proceedings, order such beneficiary to be made a party. .
.

One of the rights granted by Art. 242 of the Labor Code to a legitimate labor organization, like
respondent Union, is to sue and be sued in its registered name. In Liberty Manufacturing Workers Union
v. Court of First Instance of Bulacan, 4 citing National Brewery and Allied Industries Labor Union of the
Philippines v. San Miguel Brewery, Inc., 5 and Itogon-Suyoc Mines, Inc. v. Sañgilo-Itogon Workers'
Union, 6 the Court held that the aforementioned provision authorizes a union to file a "representative
suit" for the benefit of its members in the interest of avoiding an otherwise cumbersome procedure of
joining all union members in the complaint, even if they number by the hundreds. The Court further
rationalized that —

To hold otherwise and compel the 57 union members-employees to file

57 separate cases on their own individual and respective causes of action before the
municipal court rather than through the present single collective action filed by
petitioner union on their behalf and for their benefit would be to unduly clog the court
dockets and slow down the prompt and expeditious determination of cases by the sheer
number, time and volume of paper work that would be involved and required in
 disposing of 57 identical cases that could be adjudged in a single case such as that filed
before the lower court.

What is worse then . . . by such an unrealistic approach, the courts would not keep faith
with the Constitutional injunction to extend protection to labor . . .

In another case, Davao Free Workers Front v. Court of Industrial Relations, 7 the Court stated that the
detail that the number and names of the striking members of petitioner union were not specified in the
decision nor in the complaint is of no consequence. Reiterating the rule in the Liberty case, the Court
held that it was the function precisely of a labor union to carry the representation of its members and to
file an action for their benefit and behalf without joining them and avoid the cumbersome procedure of
joining each and every member as a separate party. Still, in La Carlota Sugar Central v. Court of Industrial
Relations, 8 the Court emphasized that it would be an unwarranted impairment of the right to self-
organization through formation of labor associations if thereafter such collective entities would be
barred from instituting action in their representative capacity.

A "representative suit" is akin to a "class suit" in the limited sense that the phrases found in Sec. 12 of
Rule 3, "one or more may sue or defend for the benefit of all," and "the parties actually before it are
sufficiently numerous and representative," are similar to the phrase may sue or be sued without joining
the party for whose benefit the action is presented or defended" found in Sec. 3 of the same Rule. In
other words, both suits are always filed in behalf of another or others. That is why the two terms are
sometimes used interchangeably. Apparently respondent Union, the Labor Arbiter and respondent
Commission merely denominated the suit, although erroneously, as a "class suit" when, in reality, it is a
"representative suit." Anyway, the issue as to the actual number of complainants in this case was
correctly resolved by the Labor Arbiter with this ratiocination —

The very first complaint (No. 3-1270-84) filed in these consolidated cases was captioned
National Labor Union for and in behalf of its members as complainants. It was dated
March 24, 1984. When the same was amended on May 24, 1984, the same caption for
complainants also appeared . . . Consistently with the instruction of said Arbiter as to
the number of complainants allegedly prejudiced by the acts of respondents, their
counsel submitted two lists (Exhs. A-1 & A-2) containing a total of one hundred thirty-six
names. However, said counsel submitted in evidence only around sixty affidavits of
complainants, thereby giving credence to the allegation of respondents that not all
those listed are actually complaining. Nonetheless and considering that respondents
recognized that there are eighty-five complainants (Exhs. 48 & 49) we hold that the
instant cases have been filed by the said Union for and in behalf of such number (85) of
complainants. 9

Section 1, Rule III, of the NLRC New Rules of Procedure cited by petitioner is simply inapplicable because
it was issued on 31 August 1990 or six (6) years after the complaints in these cases were filed in 1984.

Sec. 13. Alternative Defendants

Where the plaintiff is uncertain against who of several persons he is entitled to relief, he may join any or
all of them as defendants in the alternative, although a right to relief against one may be inconsistent
with a right of relief against the other.
Insurance Company v. US Lines, G.R. No. L-21839 April 30, 1968

FACTS: Prudential Bank & Trust Co., Manila. Ordered from Eastman Kodak Co 12 cases of cinematograph
film. On October 10, 1960, the films were loaded on "SS Pioneer Mart" operated by defendant United
States Lines Co., a foreign corporation licensed to do business in the Philippines and operating under the
name of American Pioneer Lines. The film had an invoice value of $8,685.36, and the cargo was insured
with plaintiff Insurance Company of North America against the risk of loss and damage.

The shipment arrived in Manila on November 6, 1960, and the last package thereof was discharged on
November 7, 1960 into defendant Manila Port Service, a subsidiary of defendant Manila Railroad
Company, which was the arrastre operator at the Port of Manila. Upon the presentation of the pertinent
documents and payment of the arrastre service fees the broker of the consignee made demand for the
delivery of the shipment from the Manila Port Service. Of the 12 cases constituting the shipment, only
nine cases were first delivered. Later, two cases were found, one of which was found short of its
contents. One case was missing and could not be delivered to the consignee.

On November 14, 1960, within the 15-day period from the date of discharge of the last package of the
shipment, the broker of the consignee filed a provisional claim for loss and damage with the Manila Port
Service for one case missing and one case partly short of its contents. The consignee filed its claim
against the United States Lines Co., as operator of the carrying vessel, and against the plaintiff insurance
company through the Eastman Kodak Co. for the insurance.

The insurance was paid by the plaintiff to the consignee, in the sum of $1,228.48, and the plaintiff
insurance company thereby became subrogated to all the rights of the consignee to recover the value of
the loss.

Plaintiff made demands upon the United States Lines Co. and with the Manila Port Service for the
payment of the sum equivalent to what was paid to the consignee as insurance of the goods that were
lost.

Upon refusal by the United States Lines Co. and the Manila Port Service to make payment, plaintiff filed
an action against the said parties, including the Manila Railroad Co., in the Court of First Instance of
Manila, for the recovery of the sum of $1,228.48 or its peso equivalent at the current rate of exchange,
with legal interest from the date of the filing of the complaint plus the costs of the suit. The Manila
Railroad Company was made party defendant because the Manila Port Service is a subsidiary of the
railroad company.

The action filed by the plaintiff against the defendants was an alternative one — an action in admiralty
against the United States Lines Co. on its liability as a carrier, and against the Manila Port Service and/or
the Manila Railroad Company on their liability is the arrastre operator of the Port of Manila.

RTC Ruling
After trial the lower court, on June 20, 1963, rendered decision that the total liability arising from the
loss amounted to $1,266.13. The lower court found that the full shipment had been unloaded from the
carrying vessel unto the care and custody of defendant Manila Port Service in good order that the
responsibility for the loss devolves upon them but it nevertheless dismissed the case upon the ground
that it had no jurisdiction over the action of the plaintiff against defendants Manila Port Service and
Manila Railroad Company, it appearing that the value of the claim of the plaintiff against said
defendants was less than P5,000.00 so that the action was well within the exclusive jurisdiction of the
Municipal Court of Manila. This Court holds the view that when this case was filed against the shipping
company, it was properly vested with jurisdiction to entertain the same notwithstanding the small
amount involved herein, which falls within the jurisdiction of the Municipal Court. The Manila Port
Service, however, is an alternative defendant and the claim against the same cannot be considered a
mere incident of the admiralty jurisdiction, for it is a separate claim for the recovery of the missing
goods from its warehouse with a total value well within the exclusive jurisdiction of the Municipal Court.

In the present appeal, plaintiff-appellant maintains that the lower court erred: (1) when it ruled that
plaintiff's alternative action against defendant operator of the carrying vessel and the defendant
arrastre operator as separable; (2) when it ruled that plaintiff's action ceased to be admiralty after the
evidence had established that the shipment had been discharged to the defendant arrastre operator
complete and in good order; and (3) in not rendering judgment against defendant Manila Port Service
and/or Manila Railroad Company as arrastre operator.

ISSUE: WON the alternative action is separable

HELD: The appeal is well taken. The reason of the lower court in dismissing plaintiff's action is not in
accord with the ruling of this Court in a line of decisions.1 The circumstances obtaining, and the question
of law involved, in the case of Rizal Surety and Insurance Co. v. Manila Railroad Co., et al., G. R. No. L-
20875, April 30, 1966, are similar to those that We find in the present case. The ruling that We made in
the Rizal Surety case, which We herein quote in part, squarely settle the questions involved in the
present appeal:

The sole issue is one purely of law, whether or not the court below had jurisdiction over the
case.

The complaint in this case named as alternative defendants under alternative causes of action
(1) C. F. Sharp & Co., Inc., for breach of contract of carriage by sea, and (2) Manila Port Service
and Manila Railroad Company, for violation of arrastre contract. The cause of action against C. F.
Sharp & Co., Inc., being in admiralty, comes within the jurisdiction of the Court of First Instance
whereas, the cause of action against the Manila Port Service and Manila Railroad Company
comes within the exclusive original jurisdiction of the municipal court inasmuch as the amount
of the demand is less than P5,000.00.

At the time the complaint was filed, plaintiff did not know at what precise stage of the series of
transactions the loss complained of occurred. If the loss took place in transit, C. F. Sharp & Co.,
Inc. would be liable therefor, but if the loss occurred after the goods were landed and
discharged from the carrying vessel, the Manila Port Service would bear the loss. Hence, the
joinder of causes of action and parties defendants in the alternative which is permitted by
Section 5 of Rule 2 of the Rules of Court, quoted hereunder:

SEC. 5. Joinder of causes of action. — Subject to rules regarding jurisdiction, venue and
joinder of parties, a party may in one pleading state, in the alternative or otherwise, as
many causes of action as he may have against an oppossing party (a) if the said causes
of action arise out of the same contract, transaction or relation between the parties, or
 (b) if the causes of action are for demands for money, or are of the same nature and
character.

In the cases falling under clause (a) of the preceding paragraph, the action shall be filed
in the inferior court unless any of the causes joined falls within the jurisdiction of the
Court of First Instance, in which case it shall be filed in the latter court.

In the cases falling under clause (b) the jurisdiction shall be determined by the aggregate
amount of the demands, if for money or by their nature and character, if otherwise.

And, since one of the causes of action is cognizable by the Court of First Instance the suit should
be filed, as was correctly done by the plaintiff, in said court, notwithstanding that the other
cause of action — if standing alone — would fall within the jurisdiction of the municipal court,
by reason of the amount of the demand. In International Harvester Co. of the Philippines v.
Judge Aragon, where a similar action was filed with the municipal court, we held that the
municipal court lacked jurisdiction over the case inasmuch as one of the alternative causes of
action, against the shipping firm, was an action in admiralty, cognizable by the Court of First
Instance.

The subsequent dismissal of the cases against C. F. Sharp & Co., Inc. did not bring the case
within the exclusive original jurisdiction of the municipal court nor deprive the Court of First
Instance of Manila of the jurisdiction it had already acquired over the case when the complaint
was filed. It is well settled that jurisdiction once acquired is not lost but continues until the case
is finally terminated.

WHEREFORE, the decision appealed from should be, as it is hereby, reversed and the defendants-
appellees, Manila Port Service and/or Manila Railroad Co., are ordered to pay plaintiff-appellant
Insurance Company of North America the sum of $1,266.13, or its peso equivalent at the current rate of
exchange, with legal interest from the date of the filing of the complaint until payment is made; with
costs against the said defendants-appellees. It is so ordered.

Sec. 14. Unknown identity or name of defendant

Whenever the identity or name of a defendant is unknown, he may be sued as the unknown owner heir
devisee, or by such other designation as the case may require, when his identity or true name is
discovered, the pleading must be amended accordingly. (14)

See: Sec. 14, Rule 14

Section 14. Service upon defendant whose identity or whereabouts are unknown. — In any action where
the defendant is designated as an unknown owner, or the like, or whenever his whereabouts are
unknown and cannot be ascertained by diligent inquiry, service may, by leave of court, be effected upon
him by publication in a newspaper of general circulation and in such places and for such time as the
court may order.

Sec. 15. Entity without juridical personality as defendant

When two or more persons not organized as an entity with juridical personality enter into a transaction,
they may be sued under the name by which they are generally or commonly known.
See: Sec. 8, Rule 14
Section 8. Service upon entity without juridical personality. — When persons associated in an entity
without juridical personality are sued under the name by which they are generally or commonly known,
service may be effected upon all the defendants by serving upon any one of them, or upon the person in
charge of the office or place of business maintained in such name. But such service shall not bind
individually any person whose connection with the entity has, upon due notice, been severed before the
action was brought.

Sec. 16. Death of party; duty of counsel

Whenever a party to a pending action dies, and the claim is not thereby extinguished, it shall be the duty
of his counsel to inform the court within thirty (30) days after such death of the fact thereof, and to give
the name and address of his legal representative or representatives. Failure of counsel to comply with his
duty shall be a ground for disciplinary action.

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator and the court may appoint a guardian ad litem for the minor
heirs.

The court shall forthwith order said legal representative or representatives to appear and be substituted
within a period of thirty (30) days from notice.

If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail
to appear within the specified period, the court may order the opposing party, within a specified time to
procure the appointment of an executor or administrator for the estate of the deceased and the latter shall
immediately appear for and on behalf of the deceased. The court charges in procuring such appointment,
if defrayed by the opposing party, may be recovered as costs. (16a, 17a)

Saligumba v. Palanog, G.R. No. 143365, December 4, 2008

FACTS: Monica Palanog, assisted by her husband Avelino Palanog (spouses Palanogs), filed a complaint
dated 28 February 1977 for Quieting of Title with Damages against defendants, spouses
Valeria Saligumba and Eliseo Saligumba, Sr. (spouses Saligumbas), before the Regional Trial Court,
Branch 3, Kalibo, Aklan (RTC-Branch 3). In the complaint, spouses Palanogs alleged that they have been
in actual, open, adverse and continuous possession as owners for more than 50 years of a parcel of land
located in Solido, Nabas, Aklan. The spouses Saligumbas allegedly prevented them from entering and
residing on the subject premises and had destroyed the barbed wires enclosing the land. Spouses
Saligumba were represented by their counsel Atty. Miralles who was later appointed as Municipal
Circuit Trial Court judge during the pendency of the case but remained on record as their counsel
because no motion to withdraw was filed. During the trial, orders to Eliseo Saligumba Sr. were returned
to the court unserved with the notation “Party–Deceased” while the order sent to defendant
Valeria Saligumba was returned with the notation “Party inManila.” The petitioners did not attend any
more hearings and failed to present evidence.

RTC Ruling First Complaint

On 7 August 1987, RTC-Branch 3 rendered a judgment in Civil Case No. 2570 declaring
spouses Palanogs the lawful owners of the subject land.
 Thereafter, a motion for the issuance of a writ of execution of the said decision was filed but the
trial court, in its Order dated 8 May 1997, ruled that since more than five years had elapsed after the
date of its finality, the decision could no longer be executed by mere motion.

Second Complaint
Thus, on 9 May 1997, Monica Palanog (respondent), now a widow, filed a Complaint seeking to
revive and enforce the Decision dated 7 August 1987 in Civil Case No. 2570 which she claimed has not
been barred by the statute of limitations. She impleaded petitioners Generoso Saligumba and
Ernesto Saligumba, the heirs and children of the spouses Saligumbas, as defendants

Petitioner Generoso Saligumba, for himself and in representation of his brother Ernesto who was out
of the country working as a seaman, engaged the services of the Public Attorney’s
Office, Kalibo, Aklan which filed a motion for time to allow them to file a responsive
pleading. Petitioner Generoso Saligumba filed his Answer[10]alleging that: (1) respondent had
no cause of action; (2) the spouses Saligumbas died while Civil Case No. 2570 was pending and no order
of substitution was issued and hence, the trial was null and void; and (3) the court did not acquire
jurisdiction over the heirs of the spouses Saligumbas and therefore, the judgment was not binding on
them.

Meanwhile, on 19 December 1997, the trial court granted respondent’s motion to implead additional
defendants namely, Eliseo Saligumba, Jr. and Eduardo Saligumba, who are also the heirs and children of
spouses Saligumbas.[11] They were, however, declared in default on 1 October 1999 for failure to file any
responsive pleading.[12]

The Trial Court’s Ruling

On 24 May 2000, the RTC-Branch 5 rendered a decision in favor of respondent Palanog ordering
the revival of judgment. The trial court ruled that the non-substitution of the deceased spouses did not
have any legal significance. The land subject of Civil Case No. 2570 was the exclusive property of
defendant Valeria Saligumba who inherited the same from her deceased parents. The death of her
husband, Eliseo Saligumba, Sr., did not change the complexion of the ownership of the property that
would require his substitution. The spouses Saligumbas’ children, who are the petitioners in this case,
had no right to the property while Valeria Saligumba was still alive. The trial court further found that
when defendant Valeria Saligumba died, her lawyer, Atty. Miralles, did not inform the court of the death
of his client. The trial court thus ruled that the non-substitution of the deceased defendant was solely
due to the negligence of counsel. Moreover, petitioner Ernesto Saligumba could not feign ignorance of
Civil Case No. 2570 as he was present during the delimitation of the subject land. The trial court
likewise held that the decision in Civil Case No. 2570 could not be the subject of a collateral attack.
There must be a direct action for the annulment of the said decision.

Petitioners elevated the matter directly to this Court. Hence, the present petition.
Petitioners contend that the RTC-Branch 3 Decision of 7 August 1987 in Civil Case No. 2570 is null and
void since there was no proper substitution of the deceased spousesSaligumbas despite the trial court’s
knowledge that the deceased spouses Saligumbas were no longer represented by counsel. They argue
that they were deprived of due process and justice was not duly served on them.

Petitioners argue that the trial court even acknowledged the fact of death of
spouses Saligumbas but justified the validity of the decision rendered in that case despite lack of
substitution because of the negligence or fault of their counsel. Petitioners contend that the duty of
counsel for the deceased spouses Saligumbas to inform the court of the death of his clients and to
furnish the name and address of the executor, administrator, heir or legal representative of the
decedent under Rule 3 presupposes adequate or active representation by counsel.

ISSUE: whether or not execution of judgment can be issued against petitioners who claim that they are
not bound by the RTC-Branch 3 Decision dated 7 August 1987 in Civil Case No. 2570.

HELD:
Civil Case No. 2570 is an action for quieting of title with damages which is an action involving real
property. It is an action that survives pursuant to Section 1, Rule 87[16]as the claim is not extinguished by
the death of a party. And when a party dies in an action that survives, Section 17 of Rule 3 of the
Revised Rules of Court[17] provides for the procedure, thus:

Section 17. Death of Party. - After a party dies and the claim is not thereby
extinguished, the court shall order, upon proper notice, the legal representative of the
deceased to appear and to be substituted for the deceased, within a period of thirty (30)
days, or within such time as may be granted. If the legal representative fails to appear
within said time, the court may order the opposing party to procure the appointment of
a legal representative of the deceased within a time to be specified by the court, and
the representative shall immediately appear for and on behalf of the interest of the
deceased. The court charges involved in procuring such appointment, if defrayed by the
opposing party, may be recovered as costs. The heirs of the deceased may be allowed to
be substituted for the deceased, without requiring the appointment of an executor or
administrator and the court may appoint guardian ad litem for the minor heirs.
(Emphasis supplied)
 Under the express terms of Section 17, in case of death of a party, and upon proper notice, it is the
duty of the court to order the legal representative or heir of the deceased to appear for the deceased. In
the instant case, it is true that the trial court, after receiving an informal notice of death by the mere
notation in the envelopes, failed to order the appearance of the legal representative or heir of the
deceased. There was no court order for deceased’s legal representative or heir to appear, nor did any
such legal representative ever appear in court to be substituted for the deceased. Neither did the
respondent ever procure the appointment of such legal representative, nor did the heirs ever ask to be
substituted.

It appears that Eliseo Saligumba, Sr. died on 18 February 1984 while Valeria Saligumba died on 2
February 1985. No motion for the substitution of the spouses was filed nor an order issued for the
substitution of the deceased spouses Saligumbas in Civil Case No. 2570. Atty. Miralles and
petitioner Eliseo Saligumba, Jr., despite notices sent to them to appear, never confirmed the death
of Eliseo Saligumba, Sr. and Valeria Saligumba. The record is bereft of any evidence proving the death of
the spouses, except the mere notations in the envelopes enclosing the trial court’s orders which were
returned unserved.

Section 17 is explicit that the duty of the court to order the legal representative or heir to appear
arises only “upon proper notice.” The notation “Party-Deceased” on the unserved notices could not be
the “proper notice” contemplated by the rule. As the trial court could not be expected to know or take
judicial notice of the death of a party without the proper manifestation from counsel, the trial court was
well within its jurisdiction to proceed as it did with the case. Moreover, there is no showing that the
court’s proceedings were tainted with irregularities.[18]

Likewise, the plaintiff or his attorney or representative could not be expected to know of the death
of the defendant if the attorney for the deceased defendant did not notify the plaintiff or his attorney of
such death as required by the rules.[19] The judge cannot be blamed for sending copies of the orders and
notices to defendants spouses in the absence of proof of death or manifestation to that effect from
counsel.[20]

Section 16, Rule 3 of the Revised Rules of Court likewise expressly provides:

SEC. 16. Duty of attorney upon death, incapacity or incompetency of party. -

Whenever a party to a pending case dies, becomes incapacitated or incompetent, it shall
be the duty of his attorney to inform the court promptly of such death, incapacity
 or incompetency, and to give the name and residence of his executor, administrator,
guardian or other legal representative.

It is the duty of counsel for the deceased to inform the court of the death of his client. The failure of
counsel to comply with his duty under Section 16 to inform the court of the death of his client and the
non-substitution of such party will not invalidate the proceedings and the judgment thereon if the
action survives the death of such party. The decision rendered shall bind the party’s successor-in-
interest.[21]

The rules operate on the presumption that the attorney for the deceased party is in a better
position than the attorney for the adverse party to know about the death of his client and to inform the
court of the name and address of his legal representative.[22]

Atty. Miralles continued to represent the deceased spouses even after the latter’s demise. Acting
on their behalf, Atty. Miralles even asked for postponement of the hearings and did not even confirm
the death of his clients nor his appointment as Municipal Circuit Trial Court judge. These clearly negate
petitioners’ contention that Atty. Miralles ceased to be spouses Saligumbas’ counsel.

Atty. Miralles still remained the counsel of the spouses Saligumbas despite the alleged
appointment as judge. Records show that when Civil Case No. 2570 was called for trial on 25 October
1984, Atty. Miralles appeared and moved for a postponement.

Nonetheless, as the trial court in Civil Case No. 5288 declared, the non-substitution of Eliseo Saligumba,
Sr. did not have any legal significance as the land subject of Civil Case No. 2570 was the exclusive
property of Valeria Saligumba who inherited it from her deceased parents.

This notwithstanding, when Valeria Saligumba died on 2 February 1985, Atty. Miralles again did not
inform the trial court of the death of Valeria Saligumba. There was no formal substitution nor
submission of proof of death of Valeria Saligumba. Atty. Miralles was remiss in his duty under
Section 16, Rule 3 of the Revised Rules of Court. The counsel of record is obligated to protect his client’s
interest until he is released from his professional relationship with his client. For its part, the court could
recognize no other representation on behalf of the client except such counsel of record until a formal
substitution of attorney is effected.[27]
An attorney must make an application to the court to withdraw as counsel, for the relation does
not terminate formally until there is a withdrawal of record; at least, so far as the opposite party is
concerned, the relation otherwise continues until the end of the litigation.[28] Unless properly relieved,
the counsel is responsible for the conduct of the case.[29] Until his withdrawal shall have been approved,
the lawyer remains counsel of record who is expected by his client as well as by the court to do what the
interests of his client require. He must still appear on the date of hearing for the attorney-client relation
does not terminate formally until there is a withdrawal of record.[30]

Petitioners should have questioned immediately the validity of the proceedings absent any formal
substitution. Yet, despite the court’s alleged lack of jurisdiction over the persons of petitioners,
petitioners never bothered to challenge the same, and in fact allowed the proceedings to go on until the
trial court rendered its decision. There was no motion for reconsideration, appeal or even an action to
annul the judgment in Civil Case No. 2570. Petitioners themselves could not feign ignorance of the case
since during thependency of Civil Case No. 2570, petitioner Ernesto Saligumba, son of the deceased
spouses, was among the persons present during the delimitation of the land in question before the
Commissioner held on 5 November 1977

In the present case for revival of judgment, the other petitioners have not shown much interest in the
case. Petitioners Eliseo Saligumba, Jr. and Eduardo Saligumba were declared in default for failure to file
their answer. Petitioner Ernesto Saligumba was out of the country working as a seaman. Only
petitioner Generoso Saligumba filed an Answer to the complaint. The petition filed in this Court was
signed only by petitioner Generoso Saligumba as someone signed on behalf of petitioner
Ernesto Saligumba without the latter’s authority to do so.

Hon. Sumaliag v. Spouses Literato, G.R. No. 149787, June 18, 2008
FACTS: On November 16, 1993, Josefa D. Maglasang (“Josefa”) filed with the Regional Trial Court
(“RTC”), Branch 14, Baybay, Leyte a complaint[3] (docketed as Civil Case No. B-1239) for the nullity of the
deed of sale of real property purportedly executed between her as vendor and the
spouses Diosdidit and Menendez Literato (the “respondent spouses”) as vendees. The complaint alleged
that this deed of sale dated October 15, 1971 of Lot 1220-D is spurious. Josefa was the sister of
Menendez Maglasang Literato(“Menendez”). They were two (2) of the six (6) heirs who inherited equal
parts of a 6.3906-hectare property (Lot 1220) passed on to them by their
parents Cristito and InecitaDiano Maglasang.[4] Lot 1220-D was partitioned to Josefa, while Lot 1220-E
was given to Menendez.

The respondent spouses’ response was that Josefa illegally occupied both lots and that Lot 1220-D was
sold by Josefa to them. They also alleged that the petitioner acted in bad faith in acquiring the two (2)
lots because he prepared and notarized on September 26, 1986 the contract of lease over the whole of
Lot 1220 between all the Maglasang heirs (but excluding Josefa) and Vicente Tolo, with the lease
running from 1986 to 1991; thus, the petitioner then knew that Josefa no longer owned Lot 1220-D.

on April 4, 1996 Menendez filed with the RTC for the declaration of the inexistence of lease contract,
recovery of possession of land, and damages against the petitioner and Josefa after the RTC dismissed
the respondent spouses’ counterclaim in Civil Case No. 1239. The complaint alleged that Josefa, who
had previously sold Lot 1220-D to Menendez, leased it, together with Lot 1220-E, to the
petitioner. Menendez further averred that the petitioner and Josefa were in bad faith in entering their
contract of lease as they both knew that Josefa did not own the leased lots. Menendez prayed, among
others, that this lease contract between Josefa and the petitioner be declared null and void.
 Josefa died on May 3, 1999 during the pendency of Civil Case Nos. B-1239 and B-1281.

On August 26, 1999, Atty. Puray, the petitioner’s and Josefa’s common counsel, filed with the RTC a
notice of death and substitution of party,[8]praying that Josefa – in his capacity as plaintiff and third
party counterclaim defendant – be substituted by the petitioner. The submission alleged that prior
to Josefa’s death, she executed a Quitclaim Deed[9] over Lot 1220-D in favor
[10]
of Remismundo D. Maglasang who in turn sold this property to the petitioner Sumaljag.

Menendez, through counsel, objected to the proposed substitution, alleging that Atty. Puray filed the
notice of death and substitution of party beyond the thirty-day period provided under Section 16, Rule 3
of the 1997 Rules of Civil Procedure, as amended. She recommended instead that Josefa be substituted
by the latter’s full-blood sister,Michaeles Maglasang Rodrigo (“Michaeles”).

RTC Ruling
The RTC denied Atty. Puray’s motion for substitution and instead ordered the appearance
of Michaeles as representative of the deceased Josefa. This Order provides:
The RTC subsequently denied the petitioner’s motion for reconsideration in an order[12] dated May 25,
2000.

CA Ruling
The petitioner went to the CA on a petition for certiorari (docketed as CA-G.R. SP No. 59712) to
question the above interlocutory orders. In a Decision[13] dated June 26, 2001, the CA dismissed the
petition for lack of merit. The appellate court similarly denied the petitioner’s motion for
reconsideration in its Resolution[14] dated September 4, 2001.

The present petition essentially claims that the CA erred in dismissing CA-G.R. No. SP 59712
since: (a) the property under litigation was no longer part of Josefa’s estate since she was no longer its
owner at the time of her death; (b) the petitioner had effectively been subrogated to the rights
of Josefa over the property under litigation at the time she died; (c) without an estate, the heir who was
appointed by the lower court no longer had any interest to represent; (d) the notice of death was
seasonably submitted by the counsel of Josefa to the RTC within the extended period granted; and (e)
the petitioner is a transferee pendente lite who the courts should recognize pursuant to Rule 3, Section
20 of the Rules of Court.

ISSUE:

HELD:
We resolve to deny the petition for lack of merit.
The Governing Rule.

The rule on substitution in case of death of a party is governed by Section 16, Rule 3 of the 1997
Rules of Civil Procedure, as amended, which provides:
Section 16. Death of a party; duty of counsel. –Whenever a party to a pending action
dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the
court within thirty (30) days after such death of the fact thereof, and to give the name and
address of his legal representative or representatives. Failure of counsel to comply with this
duty shall be a ground for disciplinary action.
 The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardianad litem for the minor heirs.

The court shall forthwith order said legal representative or representatives to appear
and be substituted within a period of thirty (30) days from notice.

If no legal representative is named by the counsel for the deceased party, or if the one
so named shall fail to appear within the specified period, the court may order the opposing
party, within a specified time, to procure the appointment of an executor or administrator for
the estate of the deceased, and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing party,
may be recovered as costs. (Emphasis ours)

The purpose behind this rule is the protection of the right to due process of every party to the
litigation who may be affected by the intervening death. The deceased litigant is herself or himself
protected as he/she continues to be properly represented in the suit through the duly appointed legal
representative of his estate.[15]

Application of the Governing Rule.

a. Survival of the pending action

A question preliminary to the application of the above provision is whether Civil Case Nos. B-
1239 and B-1281 are actions that survive the death of Josefa. We said inGonzalez v. Pagcor:[16]

“The criteria for determining whether an action survives the death of a plaintiff or
petitioner was elucidated upon in Bonilla v. Barcena (71 SCRA 491 (1976). as follows:

. . . The question as to whether an action survives or not depends on the nature

of the action and the damage sued for. In the causes of action which survive, the
wrong complained [of] affects primarily and principally property and property
rights, the injuries to the person being merely incidental, while in the causes of
action which do not survive, the injury complained of is to the person, the
property and rights of property affected being incidental. . . .

Since the question involved in these cases relate to property and property rights, then we are
dealing with actions that survive so that Section 16, Rule 3 must necessarily apply.
b. Duty of Counsel under the Rule.

The duty of counsel under the aforecited provision is to inform the court within thirty (30) days
after the death of his client of the fact of death, and to give the name and address of the
deceased’s legal representative or representatives. Incidentally, this is the only representation that
counsel can undertake after the death of a client as the fact of death terminated any further lawyer-
client relationship.[17]
 In the present case, it is undisputed that the counsel for Josefa did in fact notify the lower court,
although belatedly, of the fact of her death.[18] However, he did as well inform the lower court that –

“2. That before she died she executed a QUITCLAIM DEED in favor of REMISMUNDO D.
MAGLASANG over the land in question (Lot No. 1220-D of Benolho,Albuera, Leyte),
evidenced by a QUITCLAIM DEED, copy of which is hereto attached as Annex “B” who in
turn sold it in favor of JUDGE ANTONIO SUMALJAG, evidenced by a DEED OF ABSOLUTE
SALE, copy of which is hereto attached as Annex “C”.”

Further, counsel asked that “the deceased Josefa Maglasang in her capacity as plaintiff and as Third
Party Counterclaim Defendant be substituted in the case at bar by JUDGE ANTONIO SUMALJAG whose
address is 38 Osmena Street, Ormoc City” pursuant to “Section 16, Rule 3 of the 1997 Rules of Civil
Procedure”.

This notification, although filed late, effectively informed the lower court of the death of
litigant Josefa Maglasang so as to free her counsel of any liability for failure to make a report of death
under Section 16, Rule 3 of the Rules of Court. In our view, counsel satisfactorily explained to the lower
court the circumstances of the late reporting, and the latter in fact granted counsel an extended
period. The timeliness of the report is therefore a non-issue.

The reporting issue that goes into the core of this case is whether counsel properly gave the
court the name and address of the legal representative of the deceased that Section 16, Rule 3
specifies. We rule that he did not. The “legal representatives” that the provision speaks of, refer to
those authorized by law – the administrator, executor or guardian[19] who, under the rule on settlement
of estate of deceased persons,[20] is constituted to take over the estate of the deceased. Section 16,
Rule 3 likewise expressly provides that “the heirs of the deceased may be allowed to be substituted for
the deceased, without requiring the appointment of an executor or administrator . . .”. Significantly, the
person – now the present petitioner - that counsel gave as substitute was not one of those mentioned
under Section 16, Rule 3. Rather, he is a counterclaim co-defendant of the deceased
whose proferred justification for the requested substitution is the transfer to him of the interests of the
deceased in the litigation prior to her death.

Under the circumstances, both the lower court and the CA were legally correct in not giving
effect to counsel’s suggested substitute.

First, the petitioner is not one of those allowed by the Rules to be a substitute. Section 16, Rule
3 speaks for itself in this respect.

Second, as already mentioned above, the reason for the Rule is to protect all concerned who
may be affected by the intervening death, particularly the deceased and her estate. We note in this
respect that the Notice that counsel filed in fact reflects a claim against the interest of the
deceased through the transfer of her remaining interest in the litigation to another party. Interestingly,
the transfer is in favor of the very same person who is suggested to the court as the substitute. To state
the obvious, the suggested substitution effectively brings to naught the protection that the Rules intend;
plain common sense tells us that the transferee who has his own interest to protect, cannot at the same
time represent and fully protect the interest of the deceased transferor.
 Third, counsel has every authority to manifest to the court changes in interest that transpire in
the course of litigation. Thus, counsel could have validly manifested to the court the transfer
of Josefa’s interests in the subject matter of litigation pursuant to Section 19, Rule 3.[21] But this can
happen only while the client-transferor was alive andwhile the manifesting counsel was still the effective
and authorized counsel for the client-transferor, not after the death of the client when the lawyer-client
relationship has terminated. The fact that the alleged transfer may have actually taken place is
immaterial to this conclusion, if only for the reason that it is not for counsel, after the death of his client,
to make such manifestation because he then has lost the authority to speak for and bind his
client. Thus, at most, the petitioner can be said to be a transferee pendente litewhose status is pending
with the lower court.
Lastly, a close examination of the documents attached to the records disclose that the subject
matter of the Quitclaim allegedly executed by Josefa in favor of Remismundois Lot 1220-E, while the
subject matter of the deed of sale executed by Remismundo in the petitioner’s favor is Lot 1220-D. This
circumstance alone raises the possibility that there is more than meets the eye in the transactions
related to this case.
c. The Heirs as Legal Representatives.
The CA correctly harked back to the plain terms of Section 16, Rule 3 in determining who the
appropriate legal representative/s should be in the absence of an executor or administrator. The
second paragraph of the Section 16, Rule 3 of the 1997 Rules of Court, as amended, is clear - the heirs of
the deceased may be allowed to be substituted for the deceased, without requiring the appointment of
an executor or administrator. Our decisions on this matter have been clear and unequivocal. In San
Juan, Jr. v. Cruz, this Court held:

The pronouncement of this Court in Lawas v. Court of Appeals x x x that priority

is given to the legal representative of the deceased (the executor or administrator) and
that it is only in case of unreasonable delay in the appointment of an executor or
administrator, or in cases where the heirs resort to an extra-judicial settlement of the
estate that the court may adopt the alternative of allowing the heirs of the deceased to
be substituted for the deceased, is no longer true.[22] (Emphasis ours)

We likewise said in Gochan v. Young: [23]

For the protection of the interests of the decedent, this Court has in previous
instances recognized the heirs as proper representatives of the decedent, even when
there is already an administrator appointed by the court. When no administrator has
been appointed, as in this case, there is all the more reason to recognize the heirs as the
proper representatives of the deceased.

Josefa’s death certificate[24] shows that she was single at the time of her death. The records do
not show that she left a will. Therefore, as correctly held by the CA, in applying Section 16, Rule 3, her
heirs are her surviving sisters (Michaelis, Maria, Zosima, and Consolacion) and the children of her
deceased sister, Lourdes (Manuel, Cesar,Huros and Regulo) who should be her legal
representatives. Menendez, although also a sister, should be excluded for being one of the adverse
parties in the cases before the RTC.
Sec. 17. Death or separation of a party who is a public officer
When a public officer is a party in an action in his official capacity and during its pendency dies, resigns,
or otherwise ceases to hold office, the action may be continued and maintained by or against his
successor if, within thirty (30) days after the successor takes office or such time as may be granted by the
court, it is satisfactorily shown to the court by any party that there is a substantial need for continuing or
maintaining it and that the successor adopts or continues or threatens to adopt or continue to adopt or
continue the action of his predecessor. Before a substitution is made, the party or officer to be affected,
unless expressly assenting thereto, shall be given reasonable notice of the application therefor and
accorded an opportunity to be heard.

Commissioner v. Jardin, G.R. No. 141834, July 30, 2007

FACTS: Respondent Samuel A. Jardin, chief of the BI's Law and Intelligence Division, was seen at the
airport by intelligence agents of the Bureau of Immigration (BI) with Japanese national Mizutani
Ryoichiro, an alien declared undesirable in 1999 and prohibited from entering the Philippines.

Ryoichiro was immediately apprehended him and sent him back to Japan pursuant to an exclusion order
and Jardin was ordered to explain by the BI. Jardin said his relatives requested his assistance in
welcoming a niece's fiancé, Mizutani Ryoichiro.

On June 4, 1999, Ylagan-Cortez, as acting immigration commissioner,[16] ordered the preventive

suspension of respondent for 90 days.[17] The administrative case against respondent was then referred
to petitioner Alan Roullo Yap, an associate commissioner at that time, for formal investigation and
reception of evidence.[18] Respondent moved for the suspension of proceedings and
reconsideration[19] but petitioner Yap denied his motion.[20]

On July 8, 1999, respondent sought the review of the June 4, 1999 order by the Secretary of
Justice.

Despite the lapse of his preventive suspension on September 4, 1999 and pending the resolution of his
appeal with the Secretary of Justice, respondent filed a special civil action for certiorari[22] with the CA,
assailing the June 4, 1999 order. On November 19, 1999, the appellate court nullified the order and
directed petitioners to reinstate respondent to his position.[23] Petitioners' motion for reconsideration
was denied.[24]

On February 21, 2000, petitioners in their official capacities filed this appeal.[25] They contended
that the CA erred in granting respondent's petition for certiorari and in annulling the June 4, 1999
order.[26]

On June 15, 2002, respondent moved to declare the petition moot. He averred that petitioner
Rodriguez had in the meantime been replaced by Andrea D. Domingo as immigration commissioner
while petitioner Yap had been appointed to the Office of the Government Corporate Counsel.[27] Despite
the lapse of 30 days, no substitution was effected pursuant to Section 17, Rule 3

ISSUE: WON the petition is moot

HELD:
On April 30, 2003, the Office of the Solicitor General (OSG) manifested that Andrea D. Domingo had
indeed been appointed the new immigration commissioner replacing petitioner Rodriguez. The OSG also
stated that Commissioner Domingo was not adopting the position of her predecessor, petitioner
Rodriguez.[28]

Despite serious misgivings, we agree with respondent but purely on technicality.

Well-settled is the rule that failure to make a substitution pursuant to Section 17, Rule 3 of the
Rules of Court is a ground for the dismissal of an action.[29] For the valid substitution of a public officer
who has sued or has been sued in his or her official capacity, the following requisites must be satisfied:

1. satisfactory proof by any party that there is substantial need for continuing
or maintaining the action;

2. the successor adopts or continues or threatens to adopt or continue the

acts of his or her predecessor;

3. the substitution must be effected within 30 days after the successor

assumes office or within the time granted by the court; and,

4. notice of the application to the other party.

Here, petitioner Rodriguez's successor categorically expressed her lack of interest in pursuing this
appeal, hence, the failure to effect a substitution.

Sec. 18. Incompetency or incapacity

If a party becomes incompetent or incapacitated, the court, upon motion with notice, may allow the action
to be continued by or against the incompetent or incapacitated person assisted by his legal guardian or
guardian ad litem.

Sec. 19. Transfer of Interest

In case of any transfer of interest, the action may be continued by or against the original party, unless the
court upon motion directs the person to whom the interest is transferred to be substituted in the action or
joined with the original party.

Associated Bank v. Spouses Pronstroller, G.R. No. 148444, September 3, 2009

FACTS: petitioner Associated Bank (now United Overseas Bank [Phils.]) sold to Spouses Vaca a property
subject of the case against Spouses Pronstroller. The Court rendered a decision promulgated on July 14,
2008. After the promulgation of the July 14, 2008 Decision, spouses Vaca filed a Motion for Leave to
Intervene alleging that they are the registered owners of the subject property and are thus real parties-
in-interest. They add that they stand to be deprived of their family home without having been given
their day in court. They also contend that the Court should order petitioner to reimburse the spouses
Vaca the amount received from the latter.

ISSUE: WON the motion to intervene is proper

HELD:

The Motion for Leave to Intervene must be denied.

Section 2, Rule 19 of the Rules of Court, provides:

SEC. 2. Time to intervene. – The motion to intervene may be filed at any time
before rendition of judgment by the trial court. A copy of the pleading-in-intervention
shall be attached to the motion and served on the original parties.[8]

Obviously, the spouses Vaca’s motion for leave to intervene before this Court was belatedly filed.

The purpose of intervention is to enable a stranger to an action to become a party to protect his
interest, and the court, incidentally, to settle all conflicting claims.[9] The spouses Vaca are not strangers
to the action. Their legal interest in the litigation springs from the sale of the subject property by
petitioner in their favor during the pendency of this case. As transferee pendente lite, the spouses Vaca
are the successors-in-interest of the transferor, the petitioner, who is already a party to the
action. Thus, the applicable provision is Section 19, Rule 3 of the Rules of Court, governing transfers of
interest pendente lite. It provides:

SEC. 19. Transfer of interest. – In case of any transfer of interest, the action may be
continued by or against the original party, unless the court upon motion directs the
person to whom the interest is transferred to be substituted in the action or joined with
the original party.

In Natalia Realty, Inc. v. Court of Appeals,[10] citing Santiago Land Development Corporation v.
Court of Appeals,[11] we have ruled that:

[A] transferee pendente lite of the property in litigation does not have a right to
intervene. We held that a transferee stands exactly in the shoes of his predecessor-in-
interest, bound by the proceedings and judgment in the case before the rights were
assigned to him. It is not legally tenable for a transferee pendente lite to still
intervene. Essentially, the law already considers the transferee joined or substituted in
the pending action, commencing at the exact moment when the transfer of interest is
perfected between the original party-transferor and the transfereependente lite.[12]

That the Certificate of Title covering the subject property is in the name of the spouses Vaca is of
no moment. It is noteworthy that a notice of lis pendens was timely annotated on petitioner’s title. This
was done prior to the sale of the property to the spouses Vaca, the cancellation of petitioner’s title, and
the issuance of the new Transfer Certificate of Title in the name of the spouses. By virtue of the notice
of lis pendens, the spouses Vaca are bound by the outcome of the litigation subject of the lis
pendens. Their interest is subject to the incidents or results of the pending suit, and their Certificate of
Title will afford them no special protection.[13]
 Lastly, the spouses Vaca’s claim for reimbursement, if any, must be ventilated in a separate action
against petitioner. To allow the intervention would unduly delay and prejudice the rights especially of
respondents who have been deprived of the subject property for so long.

Sec. 20. Action on contractual and money claims

When the action is for recovery of money arising from contract, express or implied, and the defendant
dies before entry of final judgment in the court in which the action was pending at the time of such death,
it shall not be dismissed but shall instead be allowed to continue until entry of final judgment. A favorable
judgment obtained by the plaintiff therein shall be enforced in the manner especially provided in these
Rules for prosecuting claims against the estate of a deceased person. (

See: Sec. 5, Rule 86;

Section 5. Claims which must be filed under the notice. If not filed, barred; exceptions. — All claims for
money against the decent, arising from contract, express or implied, whether the same be due, not due,
or contingent, all claims for funeral expenses and expense for the last sickness of the decedent, and
judgment for money against the decent, must be filed within the time limited in the notice; otherwise they
are barred forever, except that they may be set forth as counterclaims in any action that the executor or
administrator may bring against the claimants. Where an executor or administrator commences an action,
or prosecutes an action already commenced by the deceased in his lifetime, the debtor may set forth by
answer the claims he has against the decedent, instead of presenting them independently to the court as
herein provided, and mutual claims may be set off against each other in such action; and if final judgment
is rendered in favor of the defendant, the amount so determined shall be considered the true balance
against the estate, as though the claim had been presented directly before the court in the administration
proceedings. Claims not yet due, or contingent, may be approved at their present value.

Sec. 7, Rule 39
Section 7. Execution in case of death of party. — In case of the death of a party, execution may issue or
be enforced in the following manner:
(a) In case of the death of the judgment obligee, upon the application of his executor or
administrator, or successor in interest;
(b) In case of the death of the judgment obligor, against his executor or administrator or successor in
interest, if the judgment be for the recovery of real or personal property, or the enforcement of a
lien thereon;
(c) In case of the death of the judgment obligor, after execution is actually levied upon any of his
property, the same may be sold for the satisfaction of the judgment obligation, and the officer
making the sale shall account to the corresponding executor or administrator for any surplus in
his hands. (7a)

Gabriel v. Pagaygay, G.R. No. 146989, February 7, 2007

FACTS: Petitioner, represented by his surviving spouse, Flordeliza V. Gabriel, was the owner-operator of
a public transport business, “Gabriel Jeepney,” with a fleet of 54 jeepneysplying the Baclaran-Divisoria-
Tondo route. Petitioner had a pool of drivers, which included respondents, operating under a “boundary
system” of P400 per day.

On November 15, 1995, respondents filed their separate complaints for illegal dismissal, illegal
deductions, and separation pay against petitioner with the National Labor Relations Commission (NLRC).
On December 15, 1995, the complaint was amended, impleading as party respondent
the Bacoor Transport Service Cooperative, Inc., as both parties are members of the cooperative.
On March 17, 1997, the Labor Arbiter found that the respondents were illegally dismissed and ordered
backwages and separation pay.

Incidentally, on April 4, 1997, petitioner passed away. On April 18, 1997, a copy of the above
decision was delivered personally to petitioner’s house. According to respondents, petitioner’s surviving
spouse, Flordeliza Gabriel, and their daughter, after reading the contents of the decision and after they
had spoken to their counsel, refused to receive the same. Nevertheless, Bailiff Alfredo V. Estonactoc left
a copy of the decision with petitioner’s wife and her daughter but they both refused to sign and
acknowledge receipt of the decision.[7]

The labor arbiter’s decision was subsequently served by registered mail at petitioner’s residence
and the same was received on May 28, 1997.
On May 16, 1997, counsel for petitioner filed an entry of appearance with motion to dismiss the
case for the reason that petitioner passed away last April 4, 1997.

On June 5, 1997, petitioner appealed the labor arbiter’s decision to the National Labor Relations
Commission, First Division which reversed the LA and dismissed the case for lack of employer-employee
relationship in its decision promulgated on on April 28, 1998.

NLRC Ruling
Respondents filed a motion for reconsideration. The NLRC reversed itself and ordered dismissal of the
case and that the respondents pursue their claim against the estate of Melencio Gabriel. The NLRC held
that there was no valid substitution when Melencio died and that the decision did not become final
because there was no proper service of copy thereof. Since the case is for recovery of money which does
not survive, and considering that the decision has not become final, the case should be dismissed and
the appeal no longer entertained.

CA Ruling
Aggrieved by the decision of the NLRC, respondents elevated the case to the Court of Appeals (CA)
by way of a petition for certiorari. On August 4, 2000, the CA reversed the decisions of the NLRC holding
that:

we disagree with the ratiocination of the NLRC that the death of the private respondent
on April 4, 1997 ipso facto negates recovery of the money claim against the successors-
in-interest …. Rather, this situation comes within the aegis of Section 3, Rule III of the
NLRC Manual on Execution of Judgment, which provides:

SECTION 3. Execution in Case of Death of Party. – Where a party

dies after the finality of the decision/entry of judgment of order,
execution thereon may issue or one already issued may be enforced in
the following cases:

a) xxx;
b) In case of death of the losing party, against his successor-in-
interest, executor or administrator;
c) In case of death of the losing party after execution is
actually levied upon any of his property, the same may be sold
for the satisfaction thereof, and the sheriff making the sale shall
 account to his successor-in-interest, executor or administrator
for any surplus in his hands.

Petitioner filed a motion for reconsideration but the same was denied by the CA in a resolution
dated February 7, 2001.

Hence, this petition raising the following issues

ISSUE: ) whether petitioner’s appeal was filed out of time; and b) whether the claim survives.

HELD:
As regards the first issue, the Court considers the service of copy of the decision of the labor
arbiter to have been validly made on May 28, 1997 when it was received through registered mail. As
correctly pointed out by petitioner’s wife, service of a copy of the decision could not have been
validly effected on April 18, 1997 because petitioner passed away on April 4, 1997.

Section 4, Rule III of the New Rules of Procedure of the NLRC provides:

SEC. 4. Service of Notices and Resolutions. – (a) Notices or summons and copies
of orders, resolutions or decisions shall be served on the parties to the case personally
by the bailiff or authorized public officer within three (3) days from receipt thereof or by
registered mail; Provided, That where a party is represented by counsel or authorized
representative, service shall be made on such counsel or authorized representative;
Provided further, That in cases of decision and final awards, copies thereof shall be
served on both parties and their counsel ….
With regard to respondents’ monetary claim, the same shall be governed by Section 20 (then Section
21), Rule 3 of the Rules of Court which provides:

SEC. 20. Action on contractual money claims. – When the action is for recovery of
money arising from contract, express or implied, and the defendant dies before entry of
final judgment in the court in which the action was pending at the time of such death, it
shall not be dismissed but shall instead be allowed to continue until entry of final
judgment. A favorable judgment obtained by the plaintiff therein shall be enforced in
the manner provided in these Rules for prosecuting claims against the estate of a
deceased person. (21a)

In relation to this, Section 5, Rule 86 of the Rules of Court states:

SEC. 5. Claims which must be filed under the notice. If not filed, barred
; exceptions. – All claims for money against the decedent arising from contract, express
or implied, whether the same be due, not due, or contingent, ... and judgment for
money against the decedent, must be filed within the time limited in the notice;
otherwise they are barred forever, except that they maybe set forth as counterclaims in
any action that the executor or administrator may bring against the claimants….
 Thus, in accordance with the above Rules, the money claims of respondents must be filed against
the estate of petitioner Melencio Gabriel.[25]

For the purpose of computing the period of appeal, the same shall be counted
from receipt of such decisions, awards or orders by the counsel of record.

(b) The bailiff or officer personally serving the notice, order, resolution or
decision shall submit his return within two (2) days from date of service thereof, stating
legibly in his return, his name, the names of the persons served and the date of receipt
which return shall be immediately attached and shall form part of the records of the
case. If no service was effected, the serving officer shall state the reason therefore in
the return.

Section 6, Rule 13 of the Rules of Court which is suppletory to the NLRC Rules of Procedure states
that: “[s]ervice of the papers may be made by delivering personally a copy to the party or his counsel, or
by leaving it in his office with his clerk or with a person having charge thereof. If no person is found in his
office, or his office is not known, or he has no office, then by leaving the copy, between the hours of
eight in the morning and six in the evening, at the party’s or counsel’s residence, if known, with a person
of sufficient age and discretion then residing therein.”
The foregoing provisions contemplate a situation wherein the party to the action is alive upon the
delivery of a copy of the tribunal’s decision. In the present case, however, petitioner died before a copy
of the labor arbiter’s decision was served upon him. Hence, the above provisions do not apply. As aptly
stated by the NLRC:

… In the case at bar, respondent Melencio Gabriel was not represented by

counsel during the pendency of the case. A decision was rendered by the Labor Arbiter a
quo on March 17, 1997 while Mr. Gabriel passed away on April 4, 1997, without having
received a copy thereof during his lifetime. The decision was only served on April 18,
1997 when he was no longer around to receive the same. His surviving spouse and
daughter cannot automatically substitute themselves as party respondents. Thus, when
the bailiff tendered a copy of the decision to them, they were not in a position to
receive them. The requirement of leaving a copy at the party’s residence is not
applicable in the instant case because this presupposes that the party is still living and is
not just available to receive the decision.

The preceding considered, the decision of the Labor Arbiter has not become
final because there was no proper service of copy thereof to party respondent….[15]

Thus, the appeal filed on behalf of petitioner on June 5, 1997 after receipt of a copy of the
decision via registered mail on May 28, 1997 was within the ten-dayreglementary period prescribed
under Section 223 of the Labor Code.
Sec. 21. Indigent party
A party may be authorized to litigate his action, claim or defense as an indigent if the court, upon an ex
parte application and hearing, is satisfied that the party is one who has no money or property sufficient
and available for food, shelter and basic necessities for himself and his family.

Such authority shall include an exemption from payment of docket and other lawful fees, and of
transcripts of stenographic notes which the court may order to be furnished him. The amount of the
docket and other lawful fees which the indigent was exempted from paying shall be a lien on any
judgment rendered in the case favorable to the indigent, unless the court otherwise provides.

Any adverse party may contest the grant of such authority at any time before judgment is rendered by the
trial court. If the court should determine after hearing that the party declared as an indigent is in fact a
person with sufficient income or property, the proper docket and other lawful fees shall be assessed and
collected by the clerk of court. If payment is not made within the time fixed by the court, execution shall
issue or the payment thereof, without prejudice to such other sanctions as the court may impose.

Sec. 22. Notice to the Solicitor General

In any action involving the validity of any treaty, law, ordinance, executive order, presidential decree, rules
or regulations, the court, in its discretion, may require the appearance of the Solicitor General who may
be heard in person or a representative duly designated by him. (23a)

RULE 4- VENUE OF ACTIONS

Sec. 1. Venue of real actions

Actions affecting title to or possession of real property, or interest therein, shall be commenced and
tried in the proper court which has jurisdiction over the area wherein the real property involved, or
a portion thereof, is situated.

Fortune Motors v. Court of Appeals, G.R. No. 76431, October 16, 1989 (Supra.)
FACTS: Forcelosed mortgaged properties in Makati, Rizal, Case for annulment of foreclosure filed with
the Regional Trial Court of Manila, Branch IV.

On March 29, 1982 up to January 6, 1984, private respondent Metropolitan Bank extended various loans
to petitioner Fortune Motors in the total sum of P32,500,000.00 (according to the borrower; or
P34,150,000.00 according to the Bank) which loan was secured by a real estate mortgage on the Fortune
building and lot in Makati, Rizal.

Due to financial difficulties and the onslaught of economic recession, the petitioner was not able to pay
the loan which became due. (Rollo, p. 62)

For failure of the petitioner to pay the loans, the respondent bank initiated extrajudicial foreclosure
proceedings. After notices were served, posted, and published, the mortgaged property was sold at
public auction for the price of P47,899,264.91 to mortgagee Bank as the highest bidder. (Rollo, p. 11)

The sheriff s certificate of sale was registered on October 24, 1984 with the one-year redemption period
to expire on October 24, 1985. (Rollo, p. 12)
On October 21, 1985, three days before the expiration of the redemption period, petitioner Fortune
Motors filed a complaint for annulment of the extrajudicial foreclosure sale alleging that the foreclosure
was premature because its obligation to the Bank was not yet due, the publication of the notice of sale
was incomplete, there was no public auction, and the price for which the property was sold was
"shockingly low".

Before summons could be served private respondent Bank filed a motion to dismiss the complaint on
the ground that the venue of the action was improperly laid in Manila for the realty covered by the real
estate mortgage is situated in Makati, therefore the action to annul the foreclosure sale should be filed
in the Regional Trial Court of Makati.

The motion was opposed by petitioner Fortune Motors alleging that its action "is a personal action" and
that "the issue is the validity of the extrajudicial foreclosure proceedings" so that it may have a new one
year period to redeem.

RTC Ruling – Reserved resolution of the Motion to Dismiss until trial. Bank filed MR which was denied,
hence, the Bank went to the CA on a petition for prohibition and certiorari.

CA Ruling: Granted the certiorari and dismissed the case for improper venue.

Hence, the instant case by Fortune Motors

ISSUE: whether petitioner's action for annulment of the real estate mortgage extrajudicial foreclosure
sale of Fortune Building is a personal action or a real action for venue purposes.

HELD:
In a real action, the plaintiff seeks the recovery of real property, or as indicated in Sec. 2 (a) of Rule 4, a
real action is an action affecting title to real property, or for the recovery of possession, or for the
partition or condemnation of, or foreclosure of a mortgage on real property. (Comments on the Rules of
Court by Moran, Vol. I, p. 122)

Real actions or actions affecting title to, or for the recovery of possession, or for the partition or
condemnation of, or foreclosure of mortgage on real property, must be instituted in the Court of First
Instance of the province where the property or any part thereof lies. (Enriquez v. Macadaeg, 84 Phil.
674, 1949; Garchitorena v. Register of Deeds, 101 Phil. 1207, 1957)

Personal actions upon the other hand, may be instituted in the Court of First Instance where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff (Sec. 1, Rule 4, Revised Rules of Court).

A prayer for annulment or rescission of contract does not operate to efface the true objectives and
nature of the action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)

An action for the annulment or rescission of a sale of real property is a real action. Its prime objective is
to recover said real property. (Gavieres v. Sanchez, 94 Phil. 760, 1954)

An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a
private sale of real property. (Muñoz v. Llamas, 87 Phil. 737, 1950)
While it is true that petitioner does not directly seek the recovery of title or possession of the property
in question, his action for annulment of sale and his claim for damages are closely intertwined with the
issue of ownership of the building which, under the law, is considered immovable property, the recovery
of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or
rescission of a sale of real property does not operate to efface the fundamental and prime objective and
nature of the case, which is to recover said real property. It is a real action. Respondent Court,
therefore, did not err in dismissing the case on the ground of improper venue (Sec. 2, Rule 4) which was
timely raised (Sec. 1, Rule 16). (Punzalan, Jr. v. Vda. de Lacsamana, 121 SCRA 336, [1983]).

Thus, as aptly decided by the Court of Appeals in a decision penned by then Court of Appeals Associate
Justice now Associate Justice of the Supreme Court Carolina C. Griño-Aquino, the pertinent portion
reads: "Since an extrajudicial foreclosure of real property results in a conveyance of the title of the
property sold to the highest bidder at the sale, an action to annul the foreclosure sale is necessarily an
action affecting the title of the property sold. It is therefore a real action which should be commenced
and tried in the province where the property or part thereof lies."

Paglaum Management v. Union Bank, G.R. No. 179018, June 18, 2012
FACTS: Petitioner Paglaum Management and Development Corporation (PAGLAUM) is the registered
owner of three parcels of land. These lots are co-owned by Benjamin B. Dy, the president of petitioner
Health Marketing Technologies, Inc. (HealthTech), and his mother and siblings.

On 3 February 1994, respondent Union Bank of the Philippines (Union Bank) extended HealthTech a
credit line in the amount of ₱10,000,000.[8] To secure this obligation, PAGLAUM executed three Real
Estate Mortgages on behalf of HealthTech and in favor of Union Bank.[9] It must be noted that the Real
Estate Mortgage, on the provision regarding the venue of all suits and actions arising out of or in
connection therewith, originally stipulates that the venue of “all suits and actions arising out of or in
connection with this Mortgage shall be in Makati, Metro Manila or in the place where any of the
Mortgaged Properties is located, at the absolute option of the Mortgagee, the parties hereto waiving
any other venue”

However, under the two Real Estate Mortgages dated 11 February 1994, the following version appears:

Section 9. Venue. – The venue of all suits and actions arising out of or in connection with this Mortgage
shall be in Cebu City Metro Manila or in the place where any of the Mortgaged Properties is located, at
the absolute option of the Mortgagee, the xxxxxxxxxxxxx any other venue

Meanwhile, the same provision in the Real Estate Mortgage dated 22 April 1998 contains the
following:
Section 9. Venue. – The venue of all suits and actions arising out of or in connection with this Mortgage
shall be in _________ or in the place where any of the Mortgaged Properties is located, at the absolute
option of the Mortgagee, the parties hereto waiving any other venue
 HealthTech and Union Bank agreed to subsequent renewals and increases in the credit
line, with the total amount of debt reaching ₱36,500,000.[14] Unfortunately, according to HealthTech,
[13]

the 1997 Asian financial crisis adversely affected its business and caused it difficulty in meeting its
obligations with Union Bank.[15] Thus, on 11 December 1998, both parties entered into a Restructuring
Agreement,[16] which states that any action or proceeding arising out of or in connection therewith shall
be commenced in Makati City, with both parties waiving any other venue.[17]

Despite the Restructuring Agreement, HealthTech failed to pay its obligation, prompting Union
Bank to send a demand letter dated 9 October 2000, stating that the latter would be constrained to
institute foreclosure proceedings, unless HealthTech settled its account in full.[18]

Since HealthTech defaulted on its payment, Union Bank extra-judicially foreclosed the
mortgaged properties.[19] The bank, as the sole bidder in the auction sale, was then issued a Certificate
of Sale dated 24 May 2001.[20] Thereafter, it filed a Petition for Consolidation of Title.[21]

Consequently, HealthTech filed a Complaint for Annulment of Sale and Titles with Damages and
Application for Temporary Restraining Order and Writ of Injunction dated 23 October 2001 at the
Regional Trial Court, National Capital Judicial Region, Makati City, Branch 134 (RTC Br. 134).

Union Bank filed a MTD on improper venue. In the instant Petition, PAGLAUM and HealthTech argue
that: (a) the Restructuring Agreement governs the choice of venue between the parties, and (b) the
agreement on the choice of venue must be interpreted with the convenience of the parties in mind and
the view that any obscurity therein was caused by Union Bank.[29]

On the other hand, Union Bank contends that: (a) the Restructuring Agreement is applicable
only to the contract of loan, and not to the Real Estate Mortgage, and (b) the mortgage contracts
explicitly state that the choice of venue exclusively belongs to it.[30]

ISSUE: whether Makati City is the proper venue to assail the foreclosure of the subject real estate
mortgage. This Court rules in the affirmative.

HELD:

Civil Case No. 01-1567, being an action for Annulment of Sale and Titles resulting from the
extrajudicial foreclosure by Union Bank of the mortgaged real properties, is classified as a real action.
In Fortune Motors v. Court of Appeals,[32] this Court held that a case seeking to annul a foreclosure of a
real estate mortgage is a real action, viz:

An action to annul a real estate mortgage foreclosure sale is no different from

an action to annul a private sale of real property. (Muñoz v. Llamas, 87 Phil. 737, 1950).
While it is true that petitioner does not directly seek the recovery of title or
possession of the property in question, his action for annulment of sale and his claim for
damages are closely intertwined with the issue of ownership of the building which,
under the law, is considered immovable property, the recovery of which is petitioner’s
primary objective. The prevalent doctrine is that an action for the annulment or
rescission of a sale of real property does not operate to efface the fundamental and
 prime objective and nature of the case, which is to recover said real property. It is a real
action.[33]

Being a real action, the filing and trial of the Civil Case No. 01-1567 should be governed by the
following relevant provisions of the Rules of Court (the Rules):

Rule 4
VENUE OF ACTIONS

Section 1. Venue of real actions. – Actions affecting title to or possession of real

property, or interest therein, shall be commenced and triedin the proper court which
has jurisdiction over the area wherein the real property involved, or a portion thereof,
is situated.

Forcible entry and detainer actions shall be commenced and tried in the
municipal trial court of the municipality or city wherein the real property involved, or a
portion thereof, is situated.

Sec. 3. When Rule not applicable. – This Rule shall not apply –

(a) In those cases where a specific rule or law provides otherwise; or

(b) Where the parties have validly agreed in writing before the filing of
the action on the exclusive venue thereof. (Emphasis supplied.)

In Sps. Lantin v. Lantion,[34] this Court explained that a venue stipulation must contain words
that show exclusivity or restrictiveness, as follows:

At the outset, we must make clear that under Section 4 (b) of Rule 4 of the 1997
Rules of Civil Procedure, the general rules on venue of actions shall not apply where the
parties, before the filing of the action, have validly agreed in writing on an exclusive
venue. The mere stipulation on the venue of an action, however, is not enough to
preclude parties from bringing a case in other venues. The parties must be able to show
that such stipulation is exclusive. In the absence of qualifying or restrictive words, the
stipulation should be deemed as merely an agreement on an additional forum, not as
limiting venue to the specified place.

xxx xxx xxx

Clearly, the words “exclusively” and “waiving for this purpose any other
venue” are restrictive and used advisedly to meet the requirements.[35] (Emphasis
supplied.)

According to the Rules, real actions shall be commenced and tried in the court that has
jurisdiction over the area where the property is situated. In this case, all the mortgaged properties are
located in the Province of Cebu. Thus, following the general rule, PAGLAUM and HealthTech should have
filed their case in Cebu, and not in Makati.

However, the Rules provide an exception, in that real actions can be commenced and tried in a
court other than where the property is situated in instances where the parties have previously and
validly agreed in writing on the exclusive venue thereof. In the case at bar, the parties claim that such
an agreement exists. The only dispute is whether the venue that should be followed is that contained in
the Real Estate Mortgages, as contended by Union Bank, or that in the Restructuring Agreement, as
posited by PAGLAUM and HealthTech. This Court rules that the venue stipulation in the Restructuring
Agreement should be controlling.

The Real Estate Mortgages were executed by PAGLAUM in favor of Union Bank to secure the credit line
extended by the latter to HealthTech. All three mortgage contracts contain a dragnet clause, which
secures succeeding obligations, including renewals, extensions, amendments or novations thereof,
incurred by HealthTech from Union Bank.

On the other hand, the Restructuring Agreement was entered into by HealthTech and Union Bank to
modify the entire loan obligation.

Meanwhile, Section 20 of the Restructuring Agreement as regards the venue of actions state:
20. Venue – Venue of any action or proceeding arising out of or connected with this Restructuring
Agreement, the Note, the Collateral and any and all related documents shall be in Makati City,
[HealthTech] and [Union Bank] hereby waiving any other venue.[38] (Emphasis supplied.)

Considering that Makati City was agreed upon by the parties to be the venue for all actions
arising out of or in connection with the loan obligation incurred by HealthTech, as well as the Real Estate
Mortgages executed by PAGLAUM, the CA committed reversible error in affirming the dismissal of Civil
Case No. 01-1567 by RTC Br. 134 on the ground of improper venue.

Ochoa v. China Bank, G.R. No. 192877, March 23, 2011

FACTS: For resolution is petitioners’ motion for reconsideration[1] of our January 17, 2011
Resolution denying their petition for review on certiorari for failing to sufficiently show any reversible
error in the assailed judgment[4] of the Court of Appeals (CA).

Petitioners insist that it was error for the CA to rule that the stipulated exclusive venue of Makati City is
binding only on petitioners’ complaint for Annulment of Foreclosure, Sale, and Damages filed before
the Regional Trial Court of Parañaque City, but not on respondent bank’s Petition for Extrajudicial
Foreclosure of Mortgage, which was filed with the same court.

HELD:
 The extrajudicial foreclosure sale of a real estate mortgage is governed by Act No. 3135, as
amended by Act No. 4118, otherwise known as "An Act to Regulate the Sale of Property Under Special
Powers Inserted In or Annexed to Real-Estate Mortgages." Sections 1 and 2 thereof clearly state:

Section 1. When a sale is made under a special power inserted in or attached to

any real-estate mortgage hereafter made as security for the payment of money or the
fulfillment of any other obligation, the provisions of the following sections shall govern
as to the manner in which the sale and redemption shall be effected, whether or not
provision for the same is made in the power.

Sec. 2. Said sale cannot be made legally outside of the province in which the
property sold is situated; and in case the place within said province in which the sale is to
be made is the subject of stipulation, such sale shall be made in said place or in the
municipal building of the municipality in which the property or part thereof is situated.[5]

The case at bar involves petitioners’ mortgaged real property located in Parañaque City over
which respondent bank was granted a special power to foreclose extra-judicially. Thus, by express
provision of Section 2, the sale can only be made in ParañaqueCity.

The exclusive venue of Makati City, as stipulated by the parties[6] and sanctioned by Section 4,
Rule 4 of the Rules of Court,[7] cannot be made to apply to the Petition for Extrajudicial Foreclosure filed
by respondent bank because the provisions of Rule 4 pertain to venue of actions, which an extrajudicial
foreclosure is not.

Pertinent are the following disquisitions in Supena v. De la Rosa:[8]

Section 1, Rule 2 [of the Rules of Court] defines an action in this wise:

"Action means an ordinary suit in a court of justice, by which

one party prosecutes another for the enforcement or protection of a
right, or the prevention or redress of a wrong."

Hagans v. Wislizenus does not depart from this definition when it states that "[A]n
action is a formal demand of one's legal rights in a court of justice in the manner
prescribed by the court or by the law. x x x." It is clear that the determinative or
operative fact which converts a claim into an "action or suit" is the filing of the same
with a "court of justice." Filed elsewhere, as with some other body or office not a court
of justice, the claim may not be categorized under either term. Unlike an action, an
extrajudicial foreclosure of real estate mortgage is initiated by filing a petition not with
any court of justice but with the office of the sheriff of the province where the sale is to
be made. By no stretch of the imagination can the office of the sheriff come under the
category of a court of justice. And as aptly observed by the complainant, if ever the
executive judge comes into the picture, it is only because he exercises administrative
supervision over the sheriff. But this administrative supervision, however, does not
change the fact that extrajudicial foreclosures are not judicial proceedings, actions or
suits.[9]
 These pronouncements were confirmed on August 7, 2001 through A.M. No. 99-10-05-0,
entitled “Procedure in Extra-Judicial Foreclosure of Mortgage,” the significant portions of which provide:

In line with the responsibility of an Executive Judge under Administrative Order

No. 6, date[d] June 30, 1975, for the management of courts within his administrative
area, included in which is the task of supervising directly the work of the Clerk of
Court, who is also the Ex-Office Sheriff, and his staff, and the issuance of commissions
to notaries public and enforcement of their duties under the law, the following
procedures are hereby prescribed in extra-judicial foreclosure of mortgages:

1. All applications for extrajudicial foreclosure of mortgage whether

under the direction of the sheriff or a notary public, pursuant to Act
3135, as amended by Act 4118, and Act 1508, as amended, shall be filed
with the Executive Judge, through the Clerk of Court who is also the Ex-
Officio Sheriff.

Verily then, with respect to the venue of extrajudicial foreclosure sales, Act No. 3135, as
amended, applies, it being a special law dealing particularly with extrajudicial foreclosure sales of real
estate mortgages, and not the general provisions of the Rules of Court on Venue of Actions.

Consequently, the stipulated exclusive venue of Makati City is relevant only to actions arising
from or related to the mortgage, such as petitioners’ complaint for Annulment of Foreclosure, Sale, and
Damages.

Sec. 2. Venue of personal actions

All other actions may be commenced and tried where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants resides, or in the case of a
non-resident defendant where he may be found, at the election of the plaintiff. (2[b]a)
Nominal party- opposite to principal party
Ang v. Ang, G.R. No. 186993, August 22, 2012 (Supra.)
FACTS: On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a loan in the amount of
Three Hundred Thousand U.S. Dollars (US$300,000.00) from Theodore and Nancy Ang (petitioners). On
even date, the respondents executed a promissory note5 in favor of the petitioners wherein they
promised to pay the latter the said amount, with interest at the rate of ten percent (10%) per annum,
upon demand. However, despite repeated demands, the respondents failed to pay the petitioners.

Thus, on August 28, 2006, the petitioners sent the respondents a demand letter asking them to pay their
outstanding debt which, at that time, already amounted to Seven Hundred Nineteen Thousand, Six
Hundred Seventy-One U.S. Dollars and Twenty-Three Cents (US$719,671.23), inclusive of the ten
percent (10%) annual interest that had accumulated over the years. Notwithstanding the receipt of the
said demand letter, the respondents still failed to settle their loan obligation.

On August 6, 2006, the petitioners, who were then residing in Los Angeles, California, United States of
America (USA), executed their respective Special Powers of Attorney in favor of Attorney Eldrige Marvin
B. Aceron (Atty. Aceron) for the purpose of filing an action in court against the respondents. On
September 15, 2006, Atty. Aceron, in behalf of the petitioners, filed a Complaint for collection of sum of
money with the RTC of Quezon City against the respondents.

On November 21, 2006, the respondents moved for the dismissal of the complaint filed by the
petitioners on the grounds of improper venue and prescription. Insisting that the venue of the
petitioners’ action was improperly laid, the respondents asserted that the complaint against them may
only be filed in the court of the place where either they or the petitioners reside. They averred that they
reside in Bacolod City while the petitioners reside in Los Angeles, California, USA. Thus, the respondents
maintain, the filing of the complaint against them in the RTC of Quezon City was improper.

The RTC Orders

On April 12, 2007, the RTC of Quezon City issued an Order which, inter alia, denied the respondents’
motion to dismiss reasoning that plaintiff Nancy Ang constituted Atty. Eldrige Marvin Aceron as her duly
appointed attorney-in-fact to prosecute her claim against herein defendants. Considering that the
address given by Atty. Aceron is in Quezon City, hence, being the plaintiff, venue of the action may lie
where he resides.

The respondents sought reconsideration of the RTC Order dated April 12, 2007, asserting that there is
no law which allows the filing of a complaint in the court of the place where the representative, who
was appointed as such by the plaintiffs through a Special Power of Attorney, resides.

The respondents’ motion for reconsideration was denied by the RTC of Quezon City in its Order12 dated
August 27, 2007.

The respondents then filed with the CA a petition for certiorari13 alleging in the main that, pursuant to
Section 2, Rule 4 of the Rules of Court, the petitioners’ complaint may only be filed in the court of the
place where they or the petitioners reside. Considering that the petitioners reside in Los Angeles,
California, USA, the respondents assert that the complaint below may only be filed in the RTC of Bacolod
City, the court of the place where they reside in the Philippines. They explained that Atty. Aceron, being
merely a representative of the petitioners, is not the real party in interest in the case below; accordingly,
his residence should not be considered in determining the proper venue of the said complaint.

The CA Decision
On August 28, 2008, the CA rendered the herein Decision,14 which annulled and set aside the Orders
dated April 12, 2007 and August 27, 2007 of the RTC of Quezon City and, accordingly, directed the
dismissal of the complaint filed by the petitioners. The CA held that the complaint below should have
been filed in Bacolod City and not in Quezon City.

The petitioners sought a reconsideration of the Decision dated August 28, 2008, but it was denied by the
CA in its Resolution dated February 20, 2009.

Hence, the instant petition.

Issue: WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF LAW WHEN IT
RULED THAT THE COMPLAINT MUST BE DISMISSED ON THE GROUND THAT VENUE WAS NOT PROPERLY
LAID
HELD: The petition is denied.

The petitioners’ complaint should

have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.

It is a legal truism that the rules on the venue of personal actions are fixed for the convenience of the
plaintiffs and their witnesses. Equally settled, however, is the principle that choosing the venue of an
action is not left to a plaintiff’s caprice; the matter is regulated by the Rules of Court.

The petitioners’ complaint for collection of sum of money against the respondents is a personal action
as it primarily seeks the enforcement of a contract. The Rules give the plaintiff the option of choosing
where to file his complaint. He can file it in the place (1) where he himself or any of them resides, or (2)
where the defendant or any of the defendants resides or may be found. The plaintiff or the defendant
must be residents of the place where the action has been instituted at the time the action is
commenced.

However, if the plaintiff does not reside in the Philippines, the complaint in such case may only be filed
in the court of the place where the defendant resides. In Cohen and Cohen v. Benguet Commercial Co.,
Ltd., this Court held that there can be no election as to the venue of the filing of a complaint when the
plaintiff has no residence in the Philippines. In such case, the complaint may only be filed in the court of
the place where the defendant resides. Thus:

Section 377 provides that actions of this character "may be brought in any province where the
defendant or any necessary party defendant may reside or be found, or in any province where the
plaintiff or one of the plaintiffs resides, at the election of the plaintiff." The plaintiff in this action has no
residence in the Philippine Islands. Only one of the parties to the action resides here. There can be,
therefore, no election by plaintiff as to the place of trial. It must be in the province where the defendant
resides. x x x. (Emphasis ours)

Here, the petitioners are residents of Los Angeles, California, USA while the respondents reside in
Bacolod City. Applying the foregoing principles, the petitioners’ complaint against the respondents may
only be filed in the RTC of Bacolod City – the court of the place where the respondents reside. The
petitioners, being residents of Los Angeles, California, USA, are not given the choice as to the venue of
the filing of their complaint.

Thus, the CA did not commit any reversible error when it annulled and set aside the orders of the RTC of
Quezon City and consequently dismissed the petitioners’ complaint against the respondents on the
ground of improper venue.

In this regard, it bears stressing that the situs for bringing real and personal civil actions is fixed by the
Rules of Court to attain the greatest convenience possible to the litigants and their witnesses by
affording them maximum accessibility to the courts. And even as the regulation of venue is primarily for
the convenience of the plaintiff, as attested by the fact that the choice of venue is given to him, it should
not be construed to unduly deprive a resident defendant of the rights conferred upon him by the Rules
of Court.
Araneta v. Court of Appeals, G.R. No. 154096, August 22. 2008
FACTS: Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now deceased, and his business
associates (Benedicto Group) organized Far East Managers and Investors, Inc. (FEMII) and Universal
Equity Corporation (UEC), respectively. As petitioner Irene Marcos-Araneta would later allege, both
corporations were organized pursuant to a contract or arrangement whereby Benedicto, as trustor,
placed in his name and in the name of his associates, as trustees, the shares of stocks of FEMII and UEC
with the obligation to hold those shares and their fruits in trust and for the benefit of Irene to the extent
of 65% of such shares. Several years after, Irene, through her trustee-husband, Gregorio Ma. Araneta III,
demanded the reconveyance of said 65% stockholdings, but the Benedicto Group refused to oblige.

In March 2000, Irene thereupon instituted before the RTC two similar complaints for conveyance of
shares of stock, accounting and receivership against the Benedicto Group with prayer for the issuance of
a temporary restraining order (TRO) a second case, docketed as Civil Case No. 3342-17, sought the
recovery to the extent of 65% of FEMII shares held by Benedicto and the other defendants named
therein at the Regional Trial Court (RTC), Branch 17 in Batac, Ilocos Norte. Both cases were later
consolidated

Respondents filed a Motion to Dismiss on the ground of improper venue. Benedicto and Francisca, by
way of bolstering their contentions on improper venue, presented the Joint Affidavit[5] of Gilmia B.
Valdez, Catalino A. Bactat, and Conchita R. Rasco who all attested being employed as household staff at
the Marcos’ Mansion in Brgy. Lacub, Batac, Ilocos Norte and that Irene did not maintain residence in
said place as she in fact only visited the mansion twice in 1999; that she did not vote in Batac in the 1998
national elections; and that she was staying at her husband’s house in Makati City.

RTC Ruling: On June 29, 2000, the RTC dismissed both complaints, stating that these partly constituted
“real action,” and that Irene did not actually reside in Ilocos Norte, and, therefore, venue was
improperly laid

Imee filed an amended complaint in which the names of Daniel Rubio, Orlando G. Reslin, and Jose G.
Reslin appeared as additional plaintiffs. As stated in the amended complaint, the added plaintiffs, all
from Ilocos Norte, were Irene’s new trustees.

RTC Ruling: The RT admitted the amended complaint ruling that the inclusion of additional plaintiffs, one
of whom was a Batac, an Ilocos Norte resident, in the amended complaint setting out the same cause of
action cured the defect of improper venue. Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow
the filing of the amended complaint in question in the place of residence of any of Irene’s co-plaintiffs.

CA Ruling: Reversed the RT and dismissed the amended complaints.

ISSUE: WON the venue is proper

Fourth Issue: Private Respondents did not Waive Improper Venue

Petitioners maintain that Julita and Francisca were effectively precluded from raising the matter of
improper venue by their subsequent acts of filing numerous pleadings. To petitioners, these pleadings,
taken together, signify a waiver of private respondents’ initial objection to improper venue.
This contention is without basis and, at best, tenuous. Venue essentially concerns a rule of procedure
which, in personal actions, is fixed for the greatest convenience possible of the plaintiff and his
witnesses. The ground of improperly laid venue must be raised seasonably, else it is deemed waived.
Where the defendant failed to either file a motion to dismiss on the ground of improper venue or
include the same as an affirmative defense, he is deemed to have waived his right to object to improper
venue.[36] In the case at bench, Benedicto and Francisca raised at the earliest time possible, meaning
“within the time for but before filing the answer to the complaint,”[37] the matter of improper venue.
They would thereafter reiterate and pursue their objection on venue, first, in their answer to the
amended complaints and then in their petition for certiorari before the CA. Any suggestion, therefore,
that Francisca and Benedicto or his substitutes abandoned along the way improper venue as ground to
defeat Irene’s claim before the RTC has to be rejected.

Fifth Issue: The RTC Has No Jurisdiction

on the Ground of Improper Venue

Subject Civil Cases are Personal Actions

It is the posture of Julita and Francisca that the venue was in this case improperly laid since the suit in
question partakes of a real action involving real properties located outside the territorial jurisdiction of
the RTC in Batac.

This contention is not well-taken. In a personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contract, or the recovery of damages.[38] Real actions, on the other
hand, are those affecting title to or possession of real property, or interest therein. In accordance with
the wordings of Sec. 1 of Rule 4, the venue of real actions shall be the proper court which has territorial
jurisdiction over the area wherein the real property involved, or a portion thereof, is situated. The
venue of personal actions is the court where the plaintiff or any of the principal plaintiffs resides, or
where the defendant or any of the principal defendants resides, or in the case of a non-resident
defendant where he may be found, at the election of the plaintiff.[39]

In the instant case, petitioners are basically asking Benedicto and his Group, as defendants a quo, to
acknowledge holding in trust Irene’s purported 65% stockownership of UEC and FEMII, inclusive of the
fruits of the trust, and to execute in Irene’s favor the necessary conveying deed over the said 65%
shareholdings. In other words, Irene seeks to compel recognition of the trust arrangement she has with
the Benedicto Group. The fact that FEMII’s assets include real properties does not materially change the
nature of the action, for the ownership interest of a stockholder over corporate assets is only inchoate
as the corporation, as a juridical person, solely owns such assets. It is only upon the liquidation of the
corporation that the stockholders, depending on the type and nature of their stockownership, may have
a real inchoate right over the corporate assets, but then only to the extent of their stockownership.

The amended complaint is an action in personam, it being a suit against Francisca and the late
Benedicto (now represented by Julita and Francisca), on the basis of their alleged personal liability to
Irene upon an alleged trust constituted in 1968 and/or 1972. They are not actions in rem where the
actions are against the real properties instead of against persons.[40] We particularly note that
possession or title to the real properties of FEMII and UEC is not being disputed, albeit part of the assets
of the corporation happens to be real properties.
Given the foregoing perspective, we now tackle the determinative question of venue in the light of the
inclusion of additional plaintiffs in the amended complaint.

Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2 of Rule 4

We point out at the outset that Irene, as categorically and peremptorily found by the RTC after a
hearing, is not a resident of Batac, Ilocos Norte, as she claimed. The Court perceives no compelling
reason to disturb, in the confines of this case, the factual determination of the trial court and the
premises holding it together. Accordingly, Irene cannot, in a personal action, contextually opt for Batac
as venue of her reconveyance complaint. As to her, Batac, Ilocos Norte is not what Sec. 2, Rule 4 of the
Rules of Court adverts to as the place “where the plaintiff or any of the principal plaintiffs resides” at the
time she filed her amended complaint. That Irene holds CTC No. 17019451[41] issued sometime in June
2000 in Batac, Ilocos Norte and in which she indicated her address as Brgy. Lacub, Batac, Ilocos is really
of no moment. Let alone the fact that one can easily secure a basic residence certificate practically
anytime in any Bureau of Internal Revenue or treasurer’s office and dictate whatever relevant data one
desires entered, Irene procured CTC No. 17019451 and appended the same to her motion for
reconsideration following the RTC’s pronouncement against her being a resident of Batac.

Petitioners, in an attempt to establish that the RTC in Batac, Ilocos Norte is the proper court venue,
asseverate that Batac, Ilocos Norte is where the principal parties reside.

Pivotal to the resolution of the venue issue is a determination of the status of Irene’s co-plaintiffs in the
context of Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4, which pertinently provide as follows:

Rule 3
PARTIES TO CIVIL ACTIONS

SEC. 2. Parties in interest. –– A real party in interest is the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized
by law or these Rules, every action must be prosecuted or defended in the name of the real party in
interest.

SEC. 3. Representatives as parties. –– Where the action is allowed to be prosecuted or defended by a

representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of
the case and shall be deemed to be the real party in interest. A representative may be a trustee of an
express trust, a guardian, an executor or administrator, or a party authorized by law or these Rules. An
agent acting in his own name and for the benefit of an undisclosed principal may sue or be sued without
joining the principal except when the contract involves things belonging to the principal.

Rule 4
VENUE OF ACTIONS

SEC. 2. Venue of personal actions. –– All other actions may be commenced and tried where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be found, at the election
of the plaintiff.

Venue is Improperly Laid

There can be no serious dispute that the real party-in-interest plaintiff is Irene. As self-styled beneficiary
of the disputed trust, she stands to be benefited or entitled to the avails of the present suit. It is
undisputed too that petitioners Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin, all from Ilocos Norte,
were included as co-plaintiffs in the amended complaint as Irene’s new designated trustees. As trustees,
they can only serve as mere representatives of Irene.

Upon the foregoing consideration, the resolution of the crucial issue of whether or not venue had
properly been laid should not be difficult.

Sec. 2 of Rule 4 indicates quite clearly that when there is more than one plaintiff in a personal action
case, the residences of the principal parties should be the basis for determining proper venue. According
to the late Justice Jose Y. Feria, “the word ‘principal’ has been added [in the uniform procedure rule] in
order to prevent the plaintiff from choosing the residence of a minor plaintiff or defendant as the
venue.”[42] Eliminate the qualifying term “principal” and the purpose of the Rule would, to borrow from
Justice Regalado, “be defeated where a nominal or formal party is impleaded in the action since the
latter would not have the degree of interest in the subject of the action which would warrant and entail
the desirably active participation expected of litigants in a case.”[43]

Before the RTC in Batac, in Civil Case Nos. 3341-17 and 3342-17, Irene stands undisputedly as the
principal plaintiff, the real party-in-interest. Following Sec. 2 of Rule 4, the subject civil cases ought to
be commenced and prosecuted at the place where Irene resides.

Principal Plaintiff not a Resident in Venue of Action

As earlier stated, no less than the RTC in Batac declared Irene as not a resident of Batac, Ilocos Norte.
Withal, that court was an improper venue for her conveyance action.

The Court can concede that Irene’s three co-plaintiffs are all residents of Batac, Ilocos Norte. But it
ought to be stressed in this regard that not one of the three can be considered as principal party-
plaintiffs in Civil Case Nos. 3341-17 and 3342-17, included as they were in the amended complaint as
trustees of the principal plaintiff. As trustees, they may be accorded, by virtue of Sec. 3 of Rule 3, the
right to prosecute a suit, but only on behalf of the beneficiary who must be included in the title of the
case and shall be deemed to be the real party-in-interest. In the final analysis, the residences of Irene’s
co-plaintiffs cannot be made the basis in determining the venue of the subject suit. This conclusion
becomes all the more forceful considering that Irene herself initiated and was actively prosecuting her
claim against Benedicto, his heirs, assigns, or associates, virtually rendering the impleading of the
trustees unnecessary.

And this brings us to the final point. Irene was a resident during the period material of Forbes Park,
Makati City. She was not a resident of Brgy. Lacub, Batac, Ilocos Norte, although jurisprudence[44] has it
that one can have several residences, if such were the established fact. The Court will not speculate on
the reason why petitioner Irene, for all the inconvenience and expenses she and her adversaries would
have to endure by a Batac trial, preferred that her case be heard and decided by the RTC in Batac. On
the heels of the dismissal of the original complaints on the ground of improper venue, three new
personalities were added to the complaint doubtless to insure, but in vain as it turned out, that the case
stays with the RTC in Batac.
Litigants ought to bank on the righteousness of their causes, the superiority of their cases, and the
persuasiveness of arguments to secure a favorable verdict. It is high time that courts, judges, and those
who come to court for redress keep this ideal in mind.

WHEREFORE, the instant petition is hereby DISMISSED. The Decision and Resolution dated October 17,
2001 and June 20, 2002, respectively, of the CA in CA-G.R. SP No. 64246, insofar as they nullified the
assailed orders of the RTC, Branch 17 in Batac, Ilocos Norte in Civil Case Nos. 3341-17 and 3342-17 on
the ground of lack of jurisdiction due to improper venue, are hereby AFFIRMED. The Orders dated
October 9, 2000, December 18, 2000, and March 15, 2001 of the RTC in Civil Case Nos. 3341-17 and
3342-17 are accordingly ANNULLED and SET ASIDE and said civil cases are DISMISSED.

Emergency Loan Pawnshop v. Court of Appeals, G.R. No. 129184, February 28, 2001
FACTS: On January 18, 1996, Traders Royal Bank (TRB for brevity) sold in favor of petitioner Emergency
Loan Pawnshop Incorporated (ELPI for brevity) a parcel of land located at Km. 3 Asin, Baguio City for Five
Hundred Thousand Pesos (P500,000.00). At the time of the sale, TRB misrepresented to ELPI that the
subject property was a vacant residential lot with a usable land area of 1,143.75 square meters when it
truth the subject property was dominantly a public road with only 140 square meters usable area.

ELPI, after having spent to fully ascertain the actual condition of the property, demanded from TRB the
rescission and cancellation of the sale of the property. TRB refused, hence, on April 16, 1996, ELPI filed
with the Regional Trial Court, Davao, Branch 17, a complaint for annulment of sale and damages against
TRB.

On August 27, 1996, TRB filed a Motion to Dismiss[4] the complaint on the ground of improper venue.

RTC Ruling
On September 18, 1996 the trial court denied the motion to dismiss.[5] On October 21, 1996, TRB filed a
motion for reconsideration.[6] On November 14, 1996, the trial court denied the motion.[7]

On January 15, 1997, TRB elevated the case to the Court of Appeals by petition for certiorari and
prohibition with preliminary injunction or temporary restraining order, contending that the trial court
committed a grave abuse of discretion in denying its motion to dismiss the complaint on the ground of
improper venue.

CA Ruling
After due proceedings, on March 11, 1997, the Court of Appeals promulgated its decision annulling the
RTC’s orders and dismissing the complaint for improper venue.

Hence, this petition. According to petitioners, the determination of whether the venue of an action was
improperly laid was a question of law, thus, the Court of Appeals had no jurisdiction to entertain the
petition for certiorari and prohibition, which involves pure questions of law. Petitioners further alleged
that an order denying a motion to dismiss is interlocutory in nature that can not be the subject of an
appeal and can not be even reviewed by a special civil action for certiorari.

ISSUE: Petitioners seek to set aside the decision of the Court of Appeals alleging that:
1. The Court of Appeals erred in entertaining the petition for certiorari and prohibition, for lack of
jurisdiction;

2. The Court of Appeals erred in ruling that the Regional Trial Court erred in not dismissing the
complaint for improper venue.

HELD:

The general rule is that the denial of a motion to dismiss a complaint is an interlocutory order and,
hence, cannot be appealed or questioned via a special civil action of certiorari until a final judgment on
the merits of the case is rendered.

The remedy of the aggrieved party is to file an answer to the complaint and to interpose as defenses the
objections raised in his motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate
the entire case by appeal in due course. However, the rule is not ironclad. Under certain situations,
recourse to certiorari or mandamus is considered appropriate, that is, (a) when the trial court issued
the order without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion by the
trial court; or, (c) appeal would not prove to be a speedy and adequate remedy as when an appeal
would not promptly relieve a defendant from the injurious effects of the patently mistaken order
maintaining the plaintiff’s baseless action and compelling the defendant needlessly to go through a
protracted trial and clogging the court dockets by another futile case."[13]

In the case at bar, we agree with the Court of Appeals that the trial court erred grievously amounting to
ousting itself of jurisdiction. The motion of respondent TRB was well founded because venue was
clearly improperly laid. The action in the Regional Trial Court was for annulment of sale involving a
parcel of land located at Km. 3 Asin Road, Baguio City. The venue of such action is unquestionably
within the territorial jurisdiction of the proper court where the real property or part thereof lies.[14] An
action affecting title to real property, or for recovery of, or foreclosure of mortgage on real property,
shall be commenced and tried in the proper court having jurisdiction over the area where the real
property or any part thereof lies.

Hence, the case at bar clearly falls within the exceptions to the rule that an interlocutory order cannot
be questioned on certiorari. The Regional Trial Court has committed a palpable and grievous error
amounting to lack or excess of jurisdiction in denying the motion to dismiss the complaint on the ground
of improper venue.

Hyatt Elevators v. Goldstar, G.R. No. 161026, October 24, 2005

FACTS: Respondent Goldstar Elevator Philippines, Inc. (GOLDSTAR for brevity) is a domestic corporation
primarily engaged in the business of marketing, distributing, selling, importing, installing, and
maintaining elevators and escalators, with address at 6th Floor, Jacinta II Building, 64 EDSA, Guadalupe,
Makati City.

Petitioner Hyatt Elevators and Escalators Company (HYATT for brevity) is a domestic corporation
similarly engaged in the business of selling, installing and maintaining/servicing elevators, escalators and
parking equipment, with address at the 6th Floor, Dao I Condominium, Salcedo St., Legaspi Village,
Makati, as stated in its Articles of Incorporation.
HYATT filed a Complaint for unfair trade practices and damages under Articles 19, 20 and 21 of the Civil
Code against LG Industrial Systems Co. Ltd. (LGISC) and LG International Corporation (LGIC) for allegedly
ending unliateraly their Exclusive Distributorship Agreement and conducting their negotiations for a
joint venture partnership in bad faith. Goldstar was later impleaded because it was allegedly being
utilized by LG against Hyatt.

On April 12, 2002, x x x GOLDSTAR filed a Motion to Dismiss the amended complaint, raising the
following grounds: (1) the venue was improperly laid, as neither HYATT nor defendants reside in
Mandaluyong City, where the original case was filed

RTC Ruling: denied the motion to dismiss

CA Ruling: The appellate court held that the venue was clearly improper, because none of the litigants
“resided” in Mandaluyong City, where the case was filed. According to the appellate court, since Makati
was the principal place of business of both respondent and petitioner, as stated in the latter’s Articles of
Incorporation, that place was controlling for purposes of determining the proper venue. The fact that
petitioner had abandoned its principal office in Makati years prior to the filing of the original case did
not affect the venue where personal actions could be commenced and tried.

ISSUE: Whether or not the Court of Appeals, in reversing the ruling of the Regional Trial Court, erred as a
matter of law and jurisprudence, as well as committed grave abuse of discretion, in holding that in the
light of the peculiar facts of this case, venue was improper

HELD:
Well established in our jurisprudence is the rule that the residence of a corporation is the place where
its principal office is located, as stated in its Articles of Incorporation.

The resolution of this case rests upon a proper understanding of Section 2 of Rule 4 of the 1997 Revised
Rules of Court:

“Sec. 2. Venue of personal actions. – All other actions may be commenced and tried where the plaintiff
or any of the principal plaintiff resides, or where the defendant or any of the principal defendant
resides, or in the case of a non-resident defendant where he may be found, at the election of the
plaintiff.”

Since both parties to this case are corporations, there is a need to clarify the meaning of “residence.”
The law recognizes two types of persons: (1) natural and (2) juridical. Corporations come under the
latter in accordance with Article 44(3) of the Civil Code.[8]

Residence is the permanent home -- the place to which, whenever absent for business or pleasure, one
intends to return.[9] Residence is vital when dealing with venue.[10] A corporation, however, has no
residence in the same sense in which this term is applied to a natural person. This is precisely the
reason why the Court in Young Auto Supply Company v. Court of Appeals[11] ruled that “for practical
purposes, a corporation is in a metaphysical sense a resident of the place where its principal office is
located as stated in the articles of incorporation.”[12] Even before this ruling, it has already been
established that the residence of a corporation is the place where its principal office is established.[13]
This Court has also definitively ruled that for purposes of venue, the term “residence” is synonymous
with “domicile.”[14] Correspondingly, the Civil Code provides:

“Art. 51. When the law creating or recognizing them, or any other provision does not fix the domicile of
juridical persons, the same shall be understood to be the place where their legal representation is
established or where they exercise their principal functions.”[15]

It now becomes apparent that the residence or domicile of a juridical person is fixed by “the law
creating or recognizing” it. Under Section 14(3) of the Corporation Code, the place where the principal
office of the corporation is to be located is one of the required contents of the articles of incorporation,
which shall be filed with the Securities and Exchange Commission (SEC).

In the present case, there is no question as to the residence of respondent. What needs to be examined
is that of petitioner. Admittedly,[16] the latter’s principal place of business is Makati, as indicated in its
Articles of Incorporation. Since the principal place of business of a corporation determines its residence
or domicile, then the place indicated in petitioner’s articles of incorporation becomes controlling in
determining the venue for this case.

Petitioner argues that the Rules of Court do not provide that when the plaintiff is a corporation, the
complaint should be filed in the location of its principal office as indicated in its articles of
incorporation.[17] Jurisprudence has, however, settled that the place where the principal office of a
corporation is located, as stated in the articles, indeed establishes its residence.[18] This ruling is
important in determining the venue of an action by or against a corporation,[19] as in the present case.

Without merit is the argument of petitioner that the locality stated in its Articles of Incorporation does
not conclusively indicate that its principal office is still in the same place. We agree with the appellate
court in its observation that the requirement to state in the articles the place where the principal office
of the corporation is to be located “is not a meaningless requirement. That proviso would be rendered
nugatory if corporations were to be allowed to simply disregard what is expressly stated in their Articles
of Incorporation.”[20]

Inconclusive are the bare allegations of petitioner that it had closed its Makati office and relocated to
Mandaluyong City, and that respondent was well aware of those circumstances. Assuming arguendo
that they transacted business with each other in the Mandaluyong office of petitioner, the fact remains
that, in law, the latter’s residence was still the place indicated in its Articles of Incorporation. Further
unacceptable is its faulty reasoning that the ground for the CA’s dismissal of its Complaint was its failure
to amend its Articles of Incorporation so as to reflect its actual and present principal office. The
appellate court was clear enough in its ruling that the Complaint was dismissed because the venue had
been improperly laid, not because of the failure of petitioner to amend the latter’s Articles of
Incorporation.

Indeed, it is a legal truism that the rules on the venue of personal actions are fixed for the convenience
of the plaintiffs and their witnesses. Equally settled, however, is the principle that choosing the venue
of an action is not left to a plaintiff’s caprice; the matter is regulated by the Rules of Court.[21] Allowing
petitioner’s arguments may lead precisely to what this Court was trying to avoid in Young Auto Supply
Company v. CA:[22] the creation of confusion and untold inconveniences to party litigants. Thus
enunciated the CA:
“x x x. To insist that the proper venue is the actual principal office and not that stated in its Articles of
Incorporation would indeed create confusion and work untold inconvenience. Enterprising litigants
may, out of some ulterior motives, easily circumvent the rules on venue by the simple expedient of
closing old offices and opening new ones in another place that they may find well to suit their
needs.”[23]

We find it necessary to remind party litigants, especially corporations, as follows:

“The rules on venue, like the other procedural rules, are designed to insure a just and orderly
administration of justice or the impartial and evenhanded determination of every action and
proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted freedom to
choose the court where he may file his complaint or petition.

“The choice of venue should not be left to the plaintiff’s whim or caprice. He may be impelled by some
ulterior motivation in choosing to file a case in a particular court even if not allowed by the rules on
venue.”

Sec. 3. Venue of actions against non-residents

If any of the defendants does not reside and is not found in the Philippines, and the action
affects the personal status of the plaintiff, or any property of said defendant located in the
Philippines, the action may be commenced and tried in the court of the place where the
plaintiff resides, or where the property or any portion thereof is situated or found.

Time, Inc. v. Reyes, G.R. No. L-28882, May 31, 1971

FACTS: Private respondents Villegas and Enrile filed a case for damages at the CFI of Rizal against Time
magazine upon an alleged libel arising from a publication in the magazine of an essay, entitled
"Corruption in Asia”.

Time filed a motion to dismiss the complaint for lack of jurisdiction and improper venue, relying upon
the provisions of Republic Act 4363.

The respondent judge deferred the determination of the motion to dismiss until after trial of the case on
the merits ruling that "the rule laid down under Republic Act No. 4363, amending Article 360 of the
Revised Penal Code, is not applicable to actions against non-resident defendants, and because questions
involving harrasments and inconvenience, as well as disruption of public service do not appear
indubitable . . ."

Hence, petitioner filed the instant petition for certiorari and prohibition.

There is no dispute that at the time of the publication of the allegedly offending essay, private
respondents Antonio Villegas and Juan Ponce Enrile were the Mayor of the City of Manila and
Undersecretary of Finance and concurrently Acting Commissioner of Customs, respectively, with offices
in the City of Manila.

The petition alleges that petitioner Time, Inc., is an American corporation with principal offices at
Rockefeller Center, New York City, N. Y., and is the publisher of "Time", a weekly news magazine; the
petition, however, does not allege the petitioner's legal capacity to sue in the courts of the Philippines.
ISSUE: 1. Whether or not, under the provisions of Republic Act No. 4363 the respondent Court of First
Instance of Rizal has jurisdiction to take cognizance of the civil suit for damages arising from an allegedly
libelous publication, considering that the action was instituted by public officers whose offices were in
the City of Manila at the time of the publication; if it has no jurisdiction, whether or not its erroneous
assumption of jurisdiction may be challenged by a foreign corporation by writ of certiorari or
prohibition; and

2. Whether or not Republic Act 4363 is applicable to action against a foreign corporation or non-
resident defendant.

HELD:

Provisions of Republic Act No. 4363, which are relevant to the resolution of the foregoing issues, read,
as follows:

"Section 1. Article three hundred sixty of the Revised Penal Code, as amended by Republic Act Numbered
Twelve hundred and eighty-nine, is further amended to read as follows:

'ART. 360. Persons responsible. Any person who shall publish, exhibit, or cause the publication or
exhibition of any defamation in writing or by similar means, shall be responsible for the same.

'The author or editor of a book or pamphlet, or the editor or business manager of a daily newspaper,
magazine or serial publication, shall be responsible for the defamations contained therein to the extent
as if he were the author thereof.

'The criminal and civil action for damages in cases of written defamations as provided for in this chapter,
shall be filed simultaneously or separately with the court of first instance of the province or city where
the libelous article is printed and first published or where any of the offended parties actually resides at
the time of the commission of the offense; Provided, however, That where one of the offended parties is
a public officer whose office is in the City of Manila at the time of the commission of the offense, the
action shall be filed in the Court of First Instance of the City of Manila or of the city or province where the
libelous article is printed and first published, and in case such public officer does not hold office in the
City of Manila, the action shall be filed in the Court of First Instance of the province or city where he held
office at the time of the commission of the offense or where the libelous article is printed and first
published and in case one of the offended parties is a private individual, the action shall be filed in the
Court of First Instance of the province or city where he actually resides at the time of the commission of
the offense or where the libelous matter is printed and first published; Provided, further, That the civil
action shall be filed in the same court where the criminal action is filed and vice versa; Provided,
furthermore, That the court where the criminal action or civil action for damages is first filed, shall
acquire jurisdiction to the exclusion of other courts; And provided finally, That this amendment shall not
apply to cases of written defamations, the civil and/or criminal actions which have been filed in court at
the time of the effectivity of this law.

'xxx xxx xxx

Under the first proviso in section 1, the venue of a civil action for damages in cases of written
defamations is localized upon the basis of, first, whether the offended party or plaintiff is a public officer
or a private individual; and second, if he is a public officer, whether his office is in Manila or not in
Manila, at the time of the commission of the offense. If the offended party is a public officer with office
in the City of Manila, the proviso limits him to two (2) choices of venue, namely, "in the Court of First
Instance of the City of Manila or in the city or province where the libelous article is printed and first
published . . ."

The complaint lodged in the court of Rizal by respondents does not allege that the libelous article was
printed and first published in the province of Rizal and, since the respondents-plaintiffs are public
officers with offices in Manila at the time of the commission of the alleged offense, it is clear that the
only place left for them wherein to file their action is the Court of First Instance of Manila.

The limitation of the choices of venue, as introduced into the Penal Code through its amendments by
Republic Act 4363, was intended "to minimize or limit the filing of out-of-town libel suits" to protect an
alleged offender from "hardships, inconveniences and harassments" and, furthermore, to protect "the
interest of the public service" where one of the offended parties is a public officer." 4 The intent of the
law is clear: a libeled public official must sue in the court of the locality where he holds office, in order
that the prosecution of the action should interfere as little as possible with the discharge of his official
duties and labors. The only alternative allowed him by law is to prosecute those responsible for the libel
in the place where the offending article was printed and first published. Here, the law tolerates the
interference with the labeled officer's duties only for the sake of avoiding unnecessary harassment of
the accused. Since the offending publication was not printed in the Philippines, the alternative venue
was not open to respondent Mayor Villegas of Manila and Undersecretary of Finance Enrile, who were
the offended parties.

Applicability of RA 4363 to non-resident defendants

However, respondent-plaintiffs urge that, in enacting Republic Act No. 4363, Congress did not intend to
protect non-resident defendants as shown by Section 3, which provides for the effectivity of the statute
only if and when the "newspapermen in the Philippines" have organized a "Philippine Press Council"
whose function shall be to promulgate a Code of Ethics for "them" and "the Philippine press"; and since
a non-resident defendant is not in a position to comply with the conditions imposed for the effectivity
of the statute, such defendant may not invoke its provisions; that a foreign corporation is not
inconvenienced by an out-of-town libel suit; that it would be absurd and incongruous, in the absence of
an extradition treaty, for the law to give to public officers with office in Manila the second option of
filing a criminal case in the court of the place where the libelous article is printed and first published if
the defendant is a foreign corporation and that, under the "single publication" rule which originated in
the United States and imported into the Philippines, the rule was understood to mean that publications
in another state are not covered by venue statutes of the forum.

The implication of respondents' argument is that the law would not take effect as to non-resident
defendants or accused. We see nothing in the text of the law that would sustain such unequal
protection to some of those who may be charged with libel.

The assertion that a foreign corporation or a non-resident defendant is not inconvenienced by an out-of-
town suit is irrelevant and untenable, for venue and jurisdiction are not dependent upon convenience or
inconvenience to a party; and moreover, venue was fixed under Republic Act No. 4363, pursuant to the
basic policy of the law that is, as previously stated, to protect the interest of the public service when the
offended party is a public officer, by minimizing as much as possible any interference with the discharge
of his duties.

That respondents-plaintiffs could not file a criminal case for libel against a non-resident defendant does
not make Republic Act No. 4363 incongruous of absurd, for such inability to file a criminal case against a
non-resident natural person equally exists in crimes other than libel. It is a fundamental rule of
international jurisdiction that no state can by its laws, and no court which is only a creature of the state,
can by its judgments or decrees, directly bind or affect property or persons beyond the limits of that
state 5 Not only this, but if the accused is a corporation, no criminal action can lie against it, 6 whether
such corporation be resident or non-resident. At any rate, the case filed by respondents-plaintiffs is not
a criminal cases but a civil case for damages.

We are here confronted by a specific venue statute, conferring jurisdiction in cases of libel against public
officials to specified courts, and no other. The rule is that where a statute creates a right and provides a
remedy for its enforcement, the remedy is exclusive; and where it confers jurisdiction upon a particular
court, that jurisdiction is likewise exclusive, unless otherwise provided. Hence, the venue provisions of
Republic Act No 4363 should be deemed mandatory for the party bringing the action, unless the
question of venue should be waived by the defendant, which was not the case here. Only thus can the
policy of the Act be upheld and maintained. Nor is there any reason why the inapplicability of one
alternative venue should result in rendering the other alternative also inapplicable.

The dismissal of the present petition is asked on the ground that the petitioner foreign corporation
failed to allege its capacity to sue in the courts of the Philippines. Respondents rely on Section 69 of the
Corporation law, which provides:

"SEC. 69. No foreign corporation or corporations formed, organized, or existing under any laws other
than those of the Philippines shall be permitted to . . . maintain by itself or assignee any suit for the
recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in the
section immediately preceding . . ." . . .;

They also invoke the ruling in Marshall-Wells Co. vs. Elser & Co., Inc. 7 that no foreign corporation may
be permitted to maintain any suit in the local courts unless it shall have the license required by the law,
and the ruling in Atlantic Mutual Ins. Co., Inc. vs. Cebu Stevedoring Co., Inc. 8 that "where . . . the law
denies to a foreign corporation the right to maintain suit unless it has previously complied with a certain
requirement, then such compliance or the fact that the suing corporation is exempt therefrom, becomes
a necessary averment in the complaint." We fail to see how these doctrines can be a propos in the case
at bar, since the petitioner is not "maintaining any suit" but is merely defending one against itself; it did
not file any complaint but only a corollary defensive petition to prohibit the lower court from further
proceeding with a suit that it had no jurisdiction to entertain.

Petitioner's failure to aver its legal capacity to institute the present petition is not fatal, for . . .

"A foreign corporation may, by writ of prohibition, seek relief against the wrongful assumption of
jurisdiction. And a foreign corporation seeking a writ of prohibition against further maintenance of a
suit, on the ground of want of jurisdiction, is not bound by the ruling of the court in which the suit was
brought, on a motion to quash service of summons, that it has jurisdiction." 9
Sec. 4. When Rule not applicable
This Rule shall not apply –
(a) In those cases where a specific rule or law provides otherwise; or
(b) Where the parties have validly agreed in writing before the filing og the action on
the exclusive venue thereof.

Union Bank v. Maunlad Homes, G.R. No. 190071, August 5, 2012

FACTS: Union Bank, as seller, entered into a contract of sale with Maunlad Homes who were the buyers
of the Maunlad Shopping Mall. When Maunlad Homes failed to pay, Union Bank filed an ejectment suit
before the Metropolitan Trial Court (MeTC) of Makati City, Branch 64, on February 19, 2004.

On May 18, 2005, the MeTC dismissed Union Bank’s ejectment complaint.9 It found that Union Bank’s
cause of action was based on a breach of contract and that both parties are claiming a better right to
possess the property based on their respective claims of ownership of the property.

The MeTC ruled that the appropriate action to resolve these conflicting claims was an accion
reivindicatoria, over which it had no jurisdiction.

On appeal, the Regional Trial Court (RTC) of Makati City, Branch 139, affirmed the MeTC in its decision
dated July 17, 2008. Additionally, the RTC noted that the property is located in Malolos, Bulacan, but the
ejectment suit was filed by Union Bank in Makati City, based on the contract stipulation that "the venue
of all suits and actions arising out or in connection with the Contract to Sell shall be in Makati
City."11 The RTC ruled that the proper venue for the ejectment action is in Malolos, Bulacan, pursuant to
the second paragraph of Section 1, Rule 4 of the Rules of Court. The RTC declared that Union Bank
cannot rely on the waiver of venue provision in the contract because ejectment is not an action arising
out of or connected with the contract.

Union Bank appealed the RTC decision to the CA through a petition for review under Rule 42 of the
Rules of Court. The CA affirmed the RTC decision in its October 28, 2009 decision,12 ruling that Union
Bank’s claim of possession is based on its claim of ownership which in turn is based on its interpretation
of the terms and conditions of the contract, particularly, the provision on the consequences of Maunlad
Homes’ breach of contract. . The CA, however, made no further ruling on the issue of venue of the
action.

From the CA’s judgment, Union Bank appealed to the Court by filing the present petition for review
on certiorari under Rule 45 of the Rules of Court.

Union Bank disagreed with the CA’s finding that it is claiming ownership over the property through the
ejectment action. It claimed that it never lost ownership over the property despite the execution of the
contract, since only the right to possess was conceded to Maunlad Homes under the contract. Because
of Maunlad Homes’ failure to comply with the terms of the contract, Union Bank believes that it
rightfully rescinded the sale, which rescission terminated Maunlad Homes’ right to possess the subject
property. Since Maunlad Homes failed to turn over the possession of the subject property, Union Bank
believes that it correctly instituted the ejectment suit.
ISSUE:

HELD:

The authority of the MeTC to

interpret contracts in an unlawful
detainer action

The authority granted to the MeTC to preliminarily resolve the issue of ownership to determine the
issue of possession ultimately allows it to interpret and enforce the contract or agreement between the
plaintiff and the defendant. To deny the MeTC jurisdiction over a complaint merely because the issue of
possession requires the interpretation of a contract will effectively rule out unlawful detainer as a
remedy. As stated, in an action for unlawful detainer, the defendant’s right to possess the property may
be by virtue of a contract, express or implied; corollarily, the termination of the defendant’s right to
possess would be governed by the terms of the same contract. Interpretation of the contract between
the plaintiff and the defendant is inevitable because it is the contract that initially granted the defendant
the right to possess the property; it is this same contract that the plaintiff subsequently claims was
violated or extinguished, terminating the defendant’s right to possess.

The MeTC’s ruling on the rights of the parties based on its interpretation of their contract is, of course,
not conclusive, but is merely provisional and is binding only with respect to the issue of possession.

The right to possess the property was

extinguished when the contract to
sell failed to materialize

Section 11 of the contract between Union Bank and Maunlad Homes provides that "upon payment in
full of the Purchase Price of the Property x x x, the SELLER shall execute and deliver a Deed of Absolute
Sale conveying the Property to the BUYER."26 "Jurisprudence has established that where the seller
promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the
price, the contract is only a contract to sell."27 The presence of this provision generally identifies the
contract as being a mere contract to sell.28 After reviewing the terms of the contract between Union
Bank and Maunlad Homes, we find no reasonable ground to exempt the present case from the general
rule; the contract between Union Bank and Maunlad Homes is a contract to sell.

In a contract to sell, the full payment of the purchase price is a positive suspensive condition whose non-
fulfillment is not a breach of contract, but merely an event that prevents the seller from conveying title
to the purchaser. "The non-payment of the purchase price renders the contract to sell ineffective and
without force and effect."29 Maunlad Homes’ act of withholding the installment payments rendered the
contract ineffective and without force and effect, and ultimately deprived itself of the right to continue
possessing Maunlad Shopping Mall.

The propriety of filing the unlawful

detainer action in Makati City
pursuant to the venue stipulation in
the contract

Maunlad Homes questioned the venue of Union Bank’s unlawful detainer action which was filed in
Makati City while the contested property is located in Malolos, Bulacan. Citing Section 1, Rule 4 of the
Rules of Court, Maunlad Homes claimed that the unlawful detainer action should have been filed with
the municipal trial court of the municipality or city where the real property involved is situated. Union
Bank, on the other hand, justified the filing of the complaint with the MeTC of Makati City on the venue
stipulation in the contract which states that "the venue of all suits and actions arising out of or in
connection with this Contract to Sell shall be at Makati City."30

While Section 1, Rule 4 of the Rules of Court states that ejectment actions shall be filed in "the municipal
trial court of the municipality or city wherein the real property involved x x x is situated," Section 4 of
the same Rule provides that the rule shall not apply "where the parties have validly agreed in writing
before the filing of the action on the exclusive venue thereof." Precisely, in this case, the parties
provided for a different venue. In Villanueva v. Judge Mosqueda, etc., et al.,31 the Court upheld the
validity of a stipulation in a contract providing for a venue for ejectment actions other than that stated
in the Rules of Court. Since the unlawful detainer action is connected with the contract, Union Bank
rightfully filed the complaint with the MeTC of Makati City.

Pilipino Telephone v. Tecson, G.R. No. 156966, May 7, 2004

FACTS: 1996, Delfino C. Tecson had six (6) cellular phone subscriptions with petitioner Pilipino
Telephone Corporation (PILTEL).

On 05 April 2001, Tecson filed with the Regional Trial Court of Iligan City, Lanao Del Norte, a complaint
against petitioner for a “Sum of Money and Damages.” Petitioner moved for the dismissal of the
complaint on the ground of improper venue, citing a common provision in the mobiline service
agreements to the effect that -

“Venue of all suits arising from this Agreement or any other suit directly or indirectly arising from the
relationship between PILTEL and subscriber shall be in the proper courts of Makati, Metro Manila.
Subscriber hereby expressly waives any other venues.”

The RTC denied the MTD.

Petitioner filed a petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure before the
Court of Appeals.

The Court of Appeals, in its decision of 30 April 2002, saw no merit in the petition and affirmed the
assailed orders of the trial court.

Hence the instant case

ISSUE:

HELD:
Section 4, Rule 4, of the Revised Rules of Civil Procedure[2] allows the parties to agree and stipulate in
writing, before the filing of an action, on the exclusive venue of any litigation between them. Such an
agreement would be valid and binding provided that the stipulation on the chosen venue is exclusive in
nature or in intent, that it is expressed in writing by the parties thereto, and that it is entered into before
the filing of the suit.

The provision contained in paragraph 22 of the “Mobile Service Agreement,” a standard contract made
out by petitioner PILTEL to its subscribers, apparently accepted and signed by respondent, states that
the venue of all suits arising from the agreement, or any other suit directly or indirectly arising from the
relationship between PILTEL and subscriber, “shall be in the proper courts of Makati, Metro Manila.”
The added stipulation that the subscriber “expressly waives any other venue”[3] should indicate, clearly
enough, the intent of the parties to consider the venue stipulation as being preclusive in character.

The appellate court, however, would appear to anchor its decision on the thesis that the subscription
agreement, being a mere contract of adhesion, does not bind respondent on the venue stipulation.

Indeed, the contract herein involved is a contract of adhesion. But such an agreement is not per se
inefficacious. The rule instead is that, should there be ambiguities in a contract of adhesion, such
ambiguities are to be construed against the party that prepared it. If, however, the stipulations are not
obscure, but are clear and leave no doubt on the intention of the parties, the literal meaning of its
stipulations must be held controlling.[4]

A contract of adhesion is just as binding as ordinary contracts. It is true that this Court has, on occasion,
struck down such contracts as being assailable when the weaker party is left with no choice by the
dominant bargaining party and is thus completely deprived of an opportunity to bargain effectively.
Nevertheless, contracts of adhesion are not prohibited even as the courts remain careful in scrutinizing
the factual circumstances underlying each case to determine the respective claims of contending parties
on their efficacy.

In the case at bar, respondent secured six (6) subscription contracts for cellular phones on various dates.
It would be difficult to assume that, during each of those times, respondent had no sufficient
opportunity to read and go over the terms and conditions embodied in the agreements. Respondent
continued, in fact, to acquire in the pursuit of his business subsequent subscriptions and remained a
subscriber of petitioner for quite sometime.

In Development Bank of the Philippines vs. National Merchandising Corporation,[5] the contracting
parties, being of age and businessmen of experience, were presumed to have acted with due care and
to have signed the assailed documents with full knowledge of their import. The situation would be no
less true than that which obtains in the instant suit. The circumstances in Sweet Lines, Inc. vs. Teves,[6]
wherein this Court invalidated the venue stipulation contained in the passage ticket, would appear to be
rather peculiar to that case. There, the Court took note of an acute shortage in inter-island vessels that
left passengers literally scrambling to secure accommodations and tickets from crowded and congested
counters. Hardly, therefore, were the passengers accorded a real opportunity to examine the fine prints
contained in the tickets, let alone reject them.

A contract duly executed is the law between the parties, and they are obliged to comply fully and not
selectively with its terms. A contract of adhesion is no exception.
Ochoa v. China Bank, G.R. No. 192877, March 23, 2011 (Supra.)
FACTS: For resolution is petitioners’ motion for reconsideration of our January 17, 2011
Resolution denying their petition for review on certiorari for failing to sufficiently show any reversible
error in the assailed judgment of the Court of Appeals (CA).

Petitioners insist that it was error for the CA to rule that the stipulated exclusive venue of Makati City is
binding only on petitioners’ complaint for Annulment of Foreclosure, Sale, and Damages filed before
the Regional Trial Court of Parañaque City, but not on respondent bank’s Petition for Extrajudicial
Foreclosure of Mortgage, which was filed with the same court. The disputed property is located in
Parañaque City.

ISSUE: WON the stipulated venue of Makati City is applicable in a petition for extrajudicial foreclosure
sale

HELD:
The extrajudicial foreclosure sale of a real estate mortgage is governed by Act No. 3135, as
amended by Act No. 4118, otherwise known as "An Act to Regulate the Sale of Property Under Special
Powers Inserted In or Annexed to Real-Estate Mortgages." Sections 1 and 2 thereof clearly state:

Section 1. When a sale is made under a special power inserted in or attached to

any real-estate mortgage hereafter made as security for the payment of money or the
fulfillment of any other obligation, the provisions of the following sections shall govern
as to the manner in which the sale and redemption shall be effected, whether or not
provision for the same is made in the power.

Sec. 2. Said sale cannot be made legally outside of the province in which the
property sold is situated; and in case the place within said province in which the sale is to
be made is the subject of stipulation, such sale shall be made in said place or in the
municipal building of the municipality in which the property or part thereof is situated.

The case at bar involves petitioners’ mortgaged real property located in Parañaque City over
which respondent bank was granted a special power to foreclose extra-judicially. Thus, by express
provision of Section 2, the sale can only be made in Parañaque City.

The exclusive venue of Makati City, as stipulated by the parties and sanctioned by Section 4, Rule
4 of the Rules of Court, cannot be made to apply to the Petition for Extrajudicial Foreclosure filed by
respondent bank because the provisions of Rule 4 pertain to venue of actions, which an extrajudicial
foreclosure is not.

Pertinent are the following disquisitions in Supena v. De la Rosa:[8]

Section 1, Rule 2 [of the Rules of Court] defines an action in this wise:

"Action means an ordinary suit in a court of justice, by which

one party prosecutes another for the enforcement or protection of a
right, or the prevention or redress of a wrong."
 Hagans v. Wislizenus does not depart from this definition when it states that "[A]n
action is a formal demand of one's legal rights in a court of justice in the manner
prescribed by the court or by the law. x x x." It is clear that the determinative or
operative fact which converts a claim into an "action or suit" is the filing of the same
with a "court of justice." Filed elsewhere, as with some other body or office not a court
of justice, the claim may not be categorized under either term. Unlike an action, an
extrajudicial foreclosure of real estate mortgage is initiated by filing a petition not with
any court of justice but with the office of the sheriff of the province where the sale is to
be made. By no stretch of the imagination can the office of the sheriff come under the
category of a court of justice. And as aptly observed by the complainant, if ever the
executive judge comes into the picture, it is only because he exercises administrative
supervision over the sheriff. But this administrative supervision, however, does not
change the fact that extrajudicial foreclosures are not judicial proceedings, actions or
suits.
These pronouncements were confirmed on August 7, 2001 through A.M. No. 99-10-05-0,
entitled “Procedure in Extra-Judicial Foreclosure of Mortgage,” the significant portions of which provide:

In line with the responsibility of an Executive Judge under Administrative Order

No. 6, date[d] June 30, 1975, for the management of courts within his administrative
area, included in which is the task of supervising directly the work of the Clerk of
Court, who is also the Ex-Office Sheriff, and his staff, and the issuance of commissions
to notaries public and enforcement of their duties under the law, the following
procedures are hereby prescribed in extra-judicial foreclosure of mortgages:

1. All applications for extrajudicial foreclosure of mortgage whether

under the direction of the sheriff or a notary public, pursuant to Act
3135, as amended by Act 4118, and Act 1508, as amended, shall be filed
with the Executive Judge, through the Clerk of Court who is also the Ex-
Officio Sheriff.

Verily then, with respect to the venue of extrajudicial foreclosure sales, Act No. 3135, as
amended, applies, it being a special law dealing particularly with extrajudicial foreclosure sales of real
estate mortgages, and not the general provisions of the Rules of Court on Venue of Actions.

Consequently, the stipulated exclusive venue of Makati City is relevant only to actions arising
from or related to the mortgage, such as petitioners’ complaint for Annulment of Foreclosure, Sale, and
Damages.

Republic v. Glasgow Credit, G.R. No. 170281, January 18, 2008

FACTS: On July 18, 2003, the Republic filed a complaint in the RTC Manila for civil forfeiture of assets
against the bank deposits maintained by Glasgow in CSBI. The case was filed pursuant to RA 9160 (the
Anti-Money Laundering Act of 2001).

The Court issued a TRO and later a writ of preliminary injunction against Glasgow. Summons to Glasgow
was returned “unserved” as it could no longer be found at its last known address. The Republic was
granted alias summons which were also unserved. The Republic requested for summons by publication
which was not granted.

Until in August 11, 2005 when Glasgow Credit filed a motion to dismiss. It alleged that (1) the court had
no jurisdiction over its person as summons had not yet been served on it; (2) the complaint was
premature and stated no cause of action as there was still no conviction for estafa or other criminal
violations implicating Glasgow and (3) there was failure to prosecute on the part of the Republic.

The Court dismissed the case on the following grounds: (1) improper venue as it should have been filed
in the RTC of Pasig where CSBI, the depository bank of the account sought to be forfeited, was located;
(2) insufficiency of the complaint in form and substance and (3) failure to prosecute.

ISSUE: WON venue is improper

HELD:

The Complaint Was Filed

In The Proper Venue
On November 15, 2005, this Court issued A.M. No. 05-11-04-SC, the Rule of Procedure in Cases of Civil
Forfeiture, Asset Preservation, and Freezing of Monetary Instrument, Property, or Proceeds
Representing, Involving, or Relating to an Unlawful Activity or Money Laundering Offense under RA
9160, as amended (Rule of Procedure in Cases of Civil Forfeiture). The order dismissing the Republic’s
complaint for civil forfeiture of Glasgow’s account in CSBI has not yet attained finality on
account of the pendency of this appeal. Thus, the Rule of Procedure in Cases of Civil Forfeiture applies to
the Republic’s complaint.[8] Moreover, Glasgow itself judicially admitted that the Rule of Procedure in
Cases of Civil Forfeiture is “applicable to the instant case.”[9]

Section 3, Title II (Civil Forfeiture in the Regional Trial Court) of the Rule of Procedure in Cases of Civil
Forfeiture provides:

Sec. 3. Venue of cases cognizable by the regional trial court. – A petition for civil forfeiture shall be filed
in any regional trial court of the judicial region where the monetary instrument, property or proceeds
representing, involving, or relating to an unlawful activity or to a money laundering offense are located;
provided, however, that where all or any portion of the monetary instrument, property or proceeds is
located outside the Philippines, the petition may be filed in the regional trial court in Manila or of the
judicial region where any portion of the monetary instrument, property, or proceeds is located, at the
option of the petitioner. mphasis supplied)

Under Section 3, Title II of the Rule of Procedure in Cases of Civil Forfeiture, therefore, the venue of civil
forfeiture cases is any RTC of the judicial region where the monetary instrument, property or proceeds
representing, involving, or relating to an unlawful activity or to a money laundering offense are located.
Pasig City, where the account sought to be forfeited in this case is situated, is within the National Capital
Judicial Region (NCJR). Clearly, the complaint for civil forfeiture of the account may be filed in any RTC of
the NCJR. Since the RTC Manila is one of the RTCs of the NCJR,[10] it was a proper venue of the
Republic’s complaint for civil forfeiture of Glasgow’s account.
RULE 5- UNIFORM PROCEDURE IN TRIAL COURTS

Sec. 1. Uniform procedure

The Procedure in the Municipal Trial Courts shall be the same as in the Regional Trial Courts, except (a)
where a particular provision expressly or impliedly applies only to either of said courts or (b) in civil
cases governed by the Rule on Summary Procedure.

Sec. 2. Meaning of terms

The term “Municipal Trial Courts” as used in these Rules shall include Metropolitan Trial Courts,
Municipal Trial Courts in Cities, Municipal Trial Courts and Municipal Circuit Trial Courts.

Revised Rule on Summary Procedure

Sec. De Lima v. Gatdula, G.R. No. 204528, February 19, 2013

FACTS: Respondent Magtanggol B. Gatdula filed a Petition for the Issuance of a Writ of Amparo in the
Regional Trial Court of Manila against petitioners Justice Secretary Leila M. De Lima et al "to cease and
desist from framing up Petitioner [Gatdula] for the fake ambush incident by filing bogus charges of
Frustrated Murder against Petitioner [Gatdula] in relation to the alleged ambush incident."

The judge issued summons and ordered De Lima, et al. to file an Answer. At a hearing, De Lima, et al.
manifested that a Return, not an Answer, is appropriate for Amparo cases.

In an Order dated 2 March 2012,6 Judge Pampilo insisted that "[s]ince no writ has been issued, return is
not the required pleading but answer".7 The judge noted that the Rules of Court apply suppletorily
in Amparo cases.8 He opined that the Revised Rules of Summary Procedure applied and thus required an
Answer.

Even without a Return nor an Answer, he ordered the parties to file their respective memoranda within
five (5) working days after that hearing.

The RTC then granted the writ of amparo. Petitioners Sec. De Lima, et al. thus came to this Court
assailing the RTC "Decision"

ISSUE:

HELD:

WRIT OF AMPARO

via Rule 45, as enunciated in Section 19 of the Rule on the Writ of Amparo (A.M. No. 07-9- 12-SC, 25
September 2007), viz:

SEC. 19. Appeal. – Any party may appeal from the final judgment or order to the Supreme Court under
Rule 45. The appeal may raise questions of fact or law or both. x x x (Emphasis supplied).
It is the Court’s view that the "Decision" dated 20 March 2012 granting the writ of Amparo is not the
judgment or final order contemplated under this rule. Hence, a Petition for Review under Rule 45 may
not yet be the proper remedy at this time.

The RTC and the Parties must understand the nature of the remedy of Amparo to put its procedures in
the proper context.

The remedy of the Writ of Amparo is an equitable and extraordinary remedy to safeguard the right of
the people to life, liberty12 and security13 as enshrined in the 1987 Constitution.14 The Rule on the Writ
of Amparo was issued as an exercise of the Supreme Court's power to promulgate rules concerning the
protection and enforcement of constitutional rights.15 It aims to address concerns such as, among
others, extrajudicial killings and enforced disappearances.16

Due to the delicate and urgent nature of these controversies, the procedure was devised to afford swift
but decisive relief.17 It is initiated through a petition18 to be filed in a Regional Trial Court,
Sandiganbayan, the Court of Appeals, or the Supreme Court.19 The judge or justice then makes an
"immediate" evaluation20 of the facts as alleged in the petition and the affidavits submitted "with the
attendant circumstances detailed".21 After evaluation, the judge has the option to issue the
Writ of Amparo22 or immediately dismiss the case. Dismissal is proper if the petition and the supporting
affidavits do not show that the petitioner's right to life, liberty or security is under threat or the acts
complained of are not unlawful. On the other hand, the issuance of the writ itself sets in motion
presumptive judicial protection for the petitioner. The court compels the respondents to appear before
a court of law to show whether the grounds for more permanent protection and interim reliefs are
necessary.

The respondents are required to file a Return23 after the issuance of the writ through the clerk of court.
The Return serves as the responsive pleading to the petition.24 Unlike an Answer, the Return has other
purposes aside from identifying the issues in the case. Respondents are also required to detail the
actions they had taken to determine the fate or whereabouts of the aggrieved party.

If the respondents are public officials or employees, they are also required to state the actions they had
taken to: (i) verify the identity of the aggrieved party; (ii) recover and preserve evidence related to the
death or disappearance of the person identified in the petition; (iii) identify witnesses and obtain
statements concerning the death or disappearance; (iv) determine the cause, manner, location, and
time of death or disappearance as well as any pattern or practice that may have brought about the
death or disappearance; and (vi) bring the suspected offenders before a competent court.25 Clearly
these matters are important to the judge so that s/he can calibrate the means and methods that will be
required to further the protections, if any, that will be due to the petitioner.

There will be a summary hearing26 only after the Return is filed to determine the merits of the petition
and whether interim reliefs are warranted. If the Return is not filed, the hearing will be done ex
parte.27 After the hearing, the court will render the judgment within ten (10) days from the time the
petition is submitted for decision.28

If the allegations are proven with substantial evidence, the court shall grant the privilege of the writ and
such reliefs as may be proper and appropriate.29 The judgment should contain measures which the
judge views as essential for the continued protection of the petitioner in the Amparo case. These
measures must be detailed enough so that the judge may be able to verify and monitor the actions
taken by the respondents. It is this judgment that could be subject to appeal to the Supreme Court via
Rule 45.30 After the measures have served their purpose, the judgment will be satisfied.
In Amparo cases, this is when the threats to the petitioner’s life, liberty and security cease to exist as
evaluated by the court that renders the judgment. Parenthetically, the case may also be terminated
through consolidation should a subsequent case be filed – either criminal or civil.31 Until the full
satisfaction of the judgment, the extraordinary remedy of Amparo allows vigilant judicial monitoring to
ensure the protection of constitutional rights.

The "Decision" dated 20 March 2012 assailed by the petitioners could not be the judgment or final order
that is appealable under Section 19 of the Rule on the Writ of Amparo. This is clear from the tenor of the
dispositive portion of the "Decision", to wit:

The Branch Clerk of Court of Court [sic] is hereby DIRECTED to issue the Writ of Amparo.

Likewise, the Branch Clerk of Court is hereby DIRECTED to effect the service of the Writ of Amparo in an
expeditious manner upon all concerned, and for this purpose may call upon the assistance of any
military or civilian agency of the government.

This "Decision" pertained to the issuance of the writ under Section 6 of the Rule on the Writ of Amparo,
not thejudgment under Section 18. The "Decision" is thus an interlocutory order, as suggested by the
fact that temporary protection, production and inspection orders were given together with the decision.
The temporary protection, production and inspection orders are interim reliefs that may be granted by
the court upon filing of the petition but before final judgment is rendered.32

APPLICABILITY OF REVISED RULES OF PROCEDURE

First, the insistence on filing of an Answer was inappropriate. It is the Return that serves as the
responsive pleading for petitions for the issuance of Writs of Amparo. The requirement to file an Answer
is contrary to the intention of the Court to provide a speedy remedy to those whose right to life, liberty
and security are violated or are threatened to be violated. In utter disregard of the Rule on the Writ
of Amparo, Judge Pampilo insisted on issuing summons and requiring an Answer.

Judge Pampilo’s basis for requiring an Answer was mentioned in his Order dated 2 March 2012:

Under Section 25 of the same rule [on the Writ of Amparo], the Rules of Court shall apply suppletorily
insofar as it is not inconsistent with the said rule.

Considering the summary nature of the petition, Section 5 of the Revised Rules of Summary Procedure
shall apply.

Section 5. Answer – Within ten (10) days from service of summons, the defendant shall file his Answer
to the complaint and serve a copy thereof on the plaintiff. x x x

WHEREFORE, based on the foregoing, the respondents are required to file their Answer ten (days) from
receipt of this Order.33
The 1991 Revised Rules of Summary Procedure is a special rule that the Court has devised for the
following circumstances:

SECTION 1. Scope. – This rule shall govern the summary procedure in the Metropolitan Trial Courts, the
Municipal Trial Courts in Cities, the Municipal Trial Courts, and the Municipal Circuit Trial Courts in the
following cases falling within their jurisdiction:

A. Civil Cases:

(1) All cases of forcible entry and unlawful detainer, x x x.

(2) All other cases, except probate proceedings, where the total amount of the plaintiff’s
claim does not exceed x x x.

B. Criminal Cases:

(1) Violations of traffic laws, rules and regulations;

(2) Violations of the rental law;

(3) Violations of municipal or city ordinances;

(4) All other criminal cases where the penalty prescribed by law for the offense charged
is imprisonment not exceeding six months, or a fine not exceeding one thousand pesos
(P1,000.00), or both, x x x.

xxxx

It is clear from this rule that this type of summary procedure only applies to MTC/MTCC/MCTCs. It is
mind-boggling how this rule could possibly apply to proceedings in an RTC. Aside from that, this Court
limited the application of summary procedure to certain civil and criminal cases. A writ of Amparo is
a special proceeding. It is a remedy by which a party seeks to establish a status, a right or particular
fact.34 It is not a civil nor a criminal action, hence, the application of the Revised Rule on Summary
Procedure is seriously misplaced.

The second irregularity was the holding of a hearing on the main case prior to the issuance of the writ
and the filing of a Return. Without a Return, the issues could not have been properly joined.

Worse, is the trial court’s third irregularity: it required a memorandum in lieu of a responsive pleading
(Answer) of De Lima, et al.

The Return in Amparo cases allows the respondents to frame the issues subject to a hearing. Hence, it
should be done prior to the hearing, not after. A memorandum, on the other hand, is a synthesis of the
claims of the party litigants and is a final pleading usually required before the case is submitted for
decision. One cannot substitute for the other since these submissions have different functions in
facilitating the suit.
More importantly, a memorandum is a prohibited pleading under the Rule on the Writ of Amparo.35

The fourth irregularity was in the "Decision" dated 20 March 2012 itself. In the body of its decision, the
RTC stated:

"Accordingly this court GRANTS the privilege of the writ and the interim reliefs prayed for by the
petitioner." (Emphasis supplied).

This gives the impression that the decision was the judgment since the phraseology is similar to Section
18 of the Rule on the Writ of Amparo:

"SEC. 18. Judgment. — The court shall render judgment within ten (10) days from the time the petition
is submitted for decision. If the allegations in the petition are proven by substantial evidence, the court
shall grant the privilege of the writ and such reliefs as may be proper and appropriate; otherwise, the
privilege shall be denied." (Emphasis supplied).

The privilege of the Writ of Amparo should be distinguished from the actual order called the Writ of
Amparo. The privilege includes availment of the entire procedure outlined in A.M. No. 07-9-12-SC, the
Rule on the Writ ofAmparo. After examining the petition and its attached affidavits, the Return and the
evidence presented in the summary hearing, the judgment should detail the required acts from the
respondents that will mitigate, if not totally eradicate, the violation of or the threat to the petitioner's
life, liberty or security.

A judgment which simply grants "the privilege of the writ" cannot be executed.1âwphi1 It is tantamount
to a failure of the judge to intervene and grant judicial succor to the petitioner. Petitions filed to avail of
the privilege of the Writ ofAmparo arise out of very real and concrete circumstances. Judicial responses
cannot be as tragically symbolic or ritualistic as "granting the privilege of the Writ of Amparo."

The procedural irregularities in the RTC affected the mode of appeal that petitioners used in elevating
the matter to this Court.

It is the responsibility of counsels for the parties to raise issues using the proper procedure at the right
time. Procedural rules are meant to assist the parties and courts efficiently deal with the substantive
issues pertaining to a case. When it is the judge himself who disregards the rules of procedure, delay and
confusion result.

The Petition for Review is not the proper remedy to assail the interlocutory order denominated
as "Decision"dated 20 March 2012. A Petition for Certiorari, on the other hand, is prohibited.36 Simply
dismissing the present petition, however, will cause grave injustice to the parties involved. It
undermines the salutary purposes for which the Rule on the Writ of Amparo were promulgated.

In many instances, the Court adopted a policy of liberally construing its rules in order to promote a just,
speedy and inexpensive disposition of every action and proceeding.37 The rules can be suspended on the
following grounds: (1) matters of life, liberty, honor or property, (2) the existence of special or
compelling circumstances, (3) the merits of the case, (4) a cause not entirely attributable to the fault or
negligence of the party favored by the suspension of the rules, (5) a lack of any showing that the review
sought is merely frivolous and dilatory, and (6) the other party will not be unjustly prejudiced thereby.
Rule of Procedure for Small Claims Cases

A.L. Ang v. Mondejar, G.R. No. 200804, January 22, 2014

FACTS: Petitioner filed a complaint for sum of money under the Rule of Procedure for Small Claims
Cases6 before the MTCC, seeking to collect from respondent the amount of P23,111.71 which
represented her unpaid water bills.

Respondent stopped paying when petitioner unilaterally charged her unreasonable and excessive
adjustments far above the agreed flat rate of P75.00.

In the interim, petitioner disconnected respondent’s water line for not paying the adjusted water
charges since March 2003 up to August 2005.

On June 10, 2011, the MTCC ruled the petitioner could only charge the flat rate because it was only
given the Certificate of Public Convenience after the disputed period.

Aggrieved, petitioner filed a petition for certiorari20 under Rule 65 of the Rules of Court before the RTC

On November 23, 2011, the RTC issued a Decision21 dismissing the petition for certiorari, finding that the
said petition was only filed to circumvent the non-appealable nature of small claims cases as provided
under Section 2322 of the Rule of Procedure on Small Claims Cases. To this end, the RTC ruled that it
cannot supplant the decision of the MTCC with another decision directing respondent to pay petitioner
a bigger sum than that which has been awarded.

The Issue Before the Court

The sole issue in this case is whether or not the RTC erred in dismissing petitioner’s recourse under Rule
65 of the Rules of Court assailing the propriety of the MTCC Decision in the subject small claims case.

HELD: The petition is meritorious.

Section 23 of the Rule of Procedure for Small Claims Cases states that:

SEC. 23. Decision. — After the hearing, the court shall render its decision on the same day, based on the
facts established by the evidence (Form 13-SCC). The decision shall immediately be entered by the Clerk
of Court in the court docket for civil cases and a copy thereof forthwith served on the parties.

The decision shall be final and unappealable.

Considering the final nature of a small claims case decision under the above-stated rule, the remedy of
appeal is not allowed, and the prevailing party may, thus, immediately move for its
execution.25 Nevertheless, the proscription on appeals in small claims cases, similar to other proceedings
where appeal is not an available remedy,26 does not preclude the aggrieved party from filing a petition
for certiorari under Rule 65 of the Rules of Court. This general rule has been enunciated in the case of
Okada v. Security Pacific Assurance Corporation,27wherein it was held that:
In a long line of cases, the Court has consistently ruled that "the extraordinary writ of certiorari is always
available where there is no appeal or any other plain, speedy and adequate remedy in the ordinary
course of law." In Jaca v. Davao Lumber Co., the Court ruled:

x x x Although Section 1, Rule 65 of the Rules of Court provides that the special civil action of certiorari
may only be invoked when "there is no appeal, nor any plain, speedy and adequate remedy in the
course of law," this rule is not without exception. The availability of the ordinary course of appeal does
not constitute sufficient ground to prevent a party from making use of the extraordinary remedy of
certiorari where appeal is not an adequate remedy or equally beneficial, speedy and sufficient. It is the
inadequacy – not the mere absence – of all other legal remedies and the danger of failure of justice
without the writ that usually determines the propriety of certiorari.

This ruling was reiterated in Conti v. Court of Appeals:

Truly, an essential requisite for the availability of the extraordinary remedies under the Rules is an
absence of an appeal nor any "plain, speedy and adequate remedy" in the ordinary course of law, one
which has been so defined as a "remedy which (would) equally (be) beneficial, speedy and sufficient not
merely a remedy which at some time in the future will bring about a revival of the judgment x x x
complained of in the certiorari proceeding, but a remedy which will promptly relieve the petitioner from
the injurious effects of that judgment and the acts of the inferior court or tribunal" concerned. x x x
(Emphasis supplied)

In this relation, it may not be amiss to placate the RTC’s apprehension that respondent’s recourse
before it (was only filed to circumvent the non-appealable nature of [small claims cases], because it asks
[the court] to supplant the decision of the lower [c]ourt with another decision directing the private
respondent to pay the petitioner a bigger sum than what has been awarded."28 Verily, a petition for
certiorari, unlike an appeal, is an original action29designed to correct only errors of jurisdiction and not
of judgment. Owing to its nature, it is therefore incumbent upon petitioner to establish that
jurisdictional errors tainted the MTCC Decision. The RTC, in turn, could either grant or dismiss the
petition based on an evaluation of whether or not the MTCC gravely abused its discretion by
capriciously, whimsically, or arbitrarily disregarding evidence that is material to the controversy.30

In view of the foregoing, the Court thus finds that petitioner correctly availed of the remedy of certiorari
to assail the propriety of the MTCC Decision in the subject small claims case, contrary to the RTC’s ruling.

Likewise, the Court finds that petitioner filed the said petition before the proper forum (i.e., the
RTC).1âwphi1 To be sure, the Court, the Court of Appeals and the Regional Trial Courts have concurrent
jurisdiction to issue a writ of certiorari.31 Such concurrence of jurisdiction, however, does not give a
party unbridled freedom to choose the venue of his action lest he ran afoul of the doctrine of hierarchy
of courts. Instead, a becoming regard for judicial hierarchy dictates that petitions for the issuance of
writs of certiorari against first level courts should be filed with the Regional Trial Court, and those
against the latter, with the Court of Appeals, before resort may be had before the Court.32 This
procedure is also in consonance with Section 4, Rule 65 of the Rules of Court.33

Hence, considering that small claims cases are exclusively within the jurisdiction of the Metropolitan
Trial Courts, Municipal Trial Courts in Cities, Municipal Trial Courts, and Municipal Circuit Trial
Courts,34 certiorari petitions assailing its dispositions should be filed before their corresponding Regional
Trial Courts. This petitioner complied with when it instituted its petition for certiorari before the RTC
which, as previously mentioned, has jurisdiction over the same. In fine, the RTC erred in dismissing the
said petition on the ground that it was an improper remedy, and, as such, RTC Case No. 11-13833 must
be reinstated and remanded thereto for its proper disposition.

RULE 6- KINDS OF PLEADINGS

Sec. 1. Pleadings defined

Pleadings are the written statements of the respective claims and defenses of the parties submitted to
the court for appropriate judgment.

Sec. 2. Pleadings allowed

The claims of a party are asserted in a complaint, counterclaim, cross-claim, third (fourth, etc)-party
complaint, or complaint-in-intervention.

The defenses of a party are alleged in the answer to the pleading asserting a claim against him.

An answer may be responded to by a reply.

Sec. 3. Complaint
The complaint is the pleading alleging the plaintiff’s cause or causes of action. The names and residences
of the plaintiff and defendant must be stated in the complaint.

Sec. 4. Answer
An answer is a pleading in which the defending party sets forth his defenses.

Sec 5. Defenses
Defenses may either be negative or affirmative.

a) A negative defense is the specific denial of the material fact or facts alleged in the pleading of
the claimant essential to his cause or causes of action.

b) An affirmative defense is an allegation of a new matter which, while hypothetically admitting

the material allegations in the pleading of the claimant, would nevertheless prevent or bar
recovery by him. The affirmative defenses include fraud, statute of limitations, release,
payment, illegality, statute of frauds, estoppels, former recovery, discharge in bankruptcy, and
any other matter by way of confession and avoidance.

See: Rule 8, Sec. 10. Specific Denial

A defendant must specify each material allegation of fact the truth of which he does not admit and,
whenever practicable, shall set forth the substance of the matters upon which he relies to support his
denial. Where a defendant desires to deny only a part of an averment, he shall specify so much of it as
true and material and shall deny only the remainder. Where a defendant is without knowledge or
information sufficient to form a belief as to the truth of a material averment made in the complaint, he
shall so state, and this shall have the effect of a denial.

Rule 16, Sec. 6. Pleading grounds as affirmative defenses

If no motion to dismiss has been filed, any of the grounds for dismissal provided for in this Rule may be
pleaded as a affirmative defense in the answer and, in the discretion of the court, a preliminary hearing
may be had thereon as if a motion to dismiss had been filed.

The dismissal of the complaint under this section shall be without prejudice to the prosecution in the
same or separate action of a counterclaim pleaded in the answer.

PBCom v. Spouses Go, G.R. No. 175514, February 14, 2011

FACTS: Go obtained a loan from PBCom totaling more than 90 Million and payable within the period of
10 years. It was secured by a promissory note and they also entered into a pledge agreement covering
Go’s shares of stocks in Ever Gotesco mall.

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.

PBCom filed before the RTC a complaint for sum of money with prayer for a writ of preliminary
attachment against Go and his wife, Elvy T. Go. PBCom alleged that Spouses Go defaulted on the two (2)
promissory notes, having paid only three (3) installments on interest payments, consequently, the entire
balance of the obligations of Go became immediately due and demandable.

Go, in his Answer with Counterclaim[8] denied the material allegations in the complaint and
stated 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

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 plaintiff’s 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.
 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

II. NO REAL DEFENSES AND NO GENUINE ISSUES AS TO ANY MATERIAL

FACT WERE TENDERED BY THE DEFENDANT-SPOUSES IN THEIR ANSWER

III. PLANTIFF’S CAUSES OF ACTIONS ARE SUPPORTED BY VOLUNTARY

ADMISSIONS AND AUTHENTIC DOCUMENTS WHICH MAY NOT BE CONTRADICTED.[10]

PBCom contended that the Answer interposed no specific denials on the material averments 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 repeated demands for the
payment of the obligations

RTC Ruling

The RTC granted the motion for summary judgment and rendered judgment in favor of PBCom.

RULING OF THE COURT OF APPEALS

In its Decision dated July 28, 2006, the CA reversed and set aside the assailed judgment of the RTC,
denied PBCom’s motion for summary judgment, and ordered the remand of the records to the court of
origin for trial on the merits.

The CA could not agree with the conclusion of the RTC that Spouses Go admitted paragraphs 3, 4 and 7
of the complaint. It found the supposed admission to be insufficient to justify a 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 on the material facts in the action.[17]

The CA agreed with Spouses Go that paragraphs 3 and 4 of the complaint merely dwelt on the fact
that a contract of loan was entered into by the parties, while paragraph 7 simply emphasized the terms
of the promissory notes executed by Go in favor of PBCom. The fact of default, the amount of the
outstanding obligation, and the existence of a prior demand, which were all material to PBCom’s 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]

PBCom’s motion for reconsideration was denied in a resolution[20] dated November 27, 2006.

Thus, this petition for review.

The CA could not agree with the conclusion of the RTC that Spouses Go admitted paragraphs 3, 4 and 7
of the complaint. It found the supposed admission to be insufficient to justify a 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 on the material facts in the action.[17]
 The CA agreed with Spouses Go that paragraphs 3 and 4 of the complaint merely dwelt on the fact
that a contract of loan was entered into by the parties, while paragraph 7 simply emphasized the terms
of the promissory notes executed by Go in favor of PBCom. The fact of default, the amount of the
outstanding obligation, and the existence of a prior demand, which were all material to PBCom’s claim,
were “hardly admitted” by Spouses Go in their Answer and were, in fact, effectively questioned in the
other allegations in the Answer.

PBCom’s motion for reconsideration was denied in a resolution dated November 27, 2006.

Thus, this petition for review.

Petitioner PBCom’s 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, 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.

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. 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.

On the matter of specific denial, Spouses Go posit that the Court decisions cited by PBCom 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. Before respondents may be held liable, it must be established, first, that
they indeed defaulted; and second, that the obligations has remained outstanding.

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.

ISSUE: WON summary judgment was proper

HELD:

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. 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.

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. (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] andMorales v. Court of Appeals. Spouses Go, on the other
hand, argue that although admissions were made in the Answer, the special and affirmative defenses
contained therein tendered genuine issues.

Under the Rules, every pleading must contain, in a methodical and logical form, a plain, concise and
direct statement of the ultimate facts on which the party pleading relies for his claim or defense, as the
case may be, omitting the statement of mere evidentiary facts.[43]

To specifically deny a material allegation, a defendant must specify each material allegation of fact
the truth of which he does not admit, and whenever practicable, shall set forth the substance of the
matters upon which he relies to support his denial. Where a defendant desires to deny only a part of an
averment, he shall specify so much of it as is true and material and shall deny only the remainder. Where
a defendant is without knowledge or information sufficient to form a belief as to the truth of a material
averment made in the complaint, he shall so state, and this shall have the effect of a denial.[44]

Rule 8, Section 10 of the Rules of Civil Procedure contemplates three (3) modes of specific denial,
namely: 1) by specifying each material allegation of the fact in the complaint, the truth of which the
defendant does not admit, and whenever practicable, setting forth the substance of the matters which
he will rely upon to support his denial; (2) by specifying so much of an averment in the complaint as is
true and material and denying only the remainder; (3) by stating that the defendant is without
knowledge or information sufficient to form a belief as to the truth of a material averment in the
complaint, which has the effect of a denial.

The purpose of requiring the defendant to make a specific denial is to make him disclose the
matters alleged in the complaint which he succinctly intends to disprove at the trial, together with the
matter which he relied upon to support the denial. The parties are compelled to lay their cards on the
table.

Again, in drafting pleadings, members of the bar are enjoined to be clear and concise in their
language, and to be organized and logical in their composition and structure in order to set forth their
statements of fact and arguments of law in the most readily comprehensible manner possible. Failing
such standard, allegations made in pleadings are not to be taken as stand-alone catchphrases in the
interest of accuracy. They must be contextualized and interpreted in relation to the rest of the
statements in the pleading.

In this case, as in Gaza, the admissions made by Spouses Go are to be read and taken together with
the rest of the allegations made in the Answer, including the special and affirmative defenses.
The portions of the pleadings referred to are juxtaposed below:

Complaint Answer

8. The defendant defaulted in the payment of the 6. Defendants deny the allegations in paragraphs 8,
obligations on the two (2) promissory notes 9, 10 and 11 of the Complaint;
(Annexes “A” and “B” hereof) as he has paid only
three (3) installments on interests (sic) payments xxx
covering the months of September, November and
8. The promissory notes referred to in the
December, 1999, on both promissory notes,
complaint expressly state that the loan obligation
respectively. As a consequence of the default, the
is payable within the period of ten (10) years.
entire balance due on the obligations of the
Thus, from the execution date of September 30,
defendant to plaintiff on both promissory notes
1999, its due date falls on September 3o, 2009
immediately became due and demandable
(and not 2001 as erroneously stated in the
pursuant to the terms and conditions embodied in
complaint). Thus, prior to September 30, 2009, the
the two (2) promissory notes;[48]
loan obligations cannot be deemed due and
demandable.

In conditional obligations, the acquisition of rights,

as well as the 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 plaintiff’s 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 (sic) just 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 stocks 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.[49]

12. And even assuming without conceding, that

the present value of said shares has went (sic)
down, it cannot be considered as something
permanent since, the prices of stocks in the
market either increases (sic) or (sic) decreases
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.
Moreso (sic), it is unfair for the plaintiff to
renounce or abandon the pledge agreements.
 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 were not aware of any
demand made by PBCom for the settlement of the whole obligation. Both sections are quoted below:

Complaint Answer

10. Plaintiff made repeated demands from (sic) 10. While demand is a necessary requirement to
defendant for the payment of the obligations consider the defendant to be in delay/default,
which the latter acknowledged to have incurred such has not been complied with by the plaintiff
however, defendant imposed conditions such as since the former is not aware of any demand made
[that] his [effecting] payments shall depend upon to him by the latter for the settlement of the
the lifting of garnishment effected by the Bangko whole obligation.
Sentral on his accounts. Photocopies of
defendant’s communication dated March 3, 2000
and April 7, 2000, with plaintiff are hereto
attached as Annexes “F” and “G” hereof, as well as
its demand to pay dated April 18, 2000. Demand
by plaintiff is hereto attached as Annex
“H” hereof.[50] [Emphases supplied]

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.

Complaint Answer

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]
9. Contrary to the plaintiff’s 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]
 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.

BPI v. Spouses Royeca, G.R. No. 176664, July 21, 2008

FACTS: On August 23, 1993, spouses Reynaldo and Victoria Royeca (respondents) executed and
delivered to Toyota Shaw, Inc. a Promissory Note for P577,008.00 payable in 48 equal monthly
installments of P12,021.00, with a maturity date of August 18, 1997. The Promissory Note provides for a
penalty of 3% for every month or fraction of a month that an installment remains unpaid. To secure the
payment of said Promissory Note, respondents executed a Chattel Mortgage in favor of Toyota over a
certain motor vehicle.

Toyota, with notice to respondents, executed a Deed of Assignment transferring all its rights, title, and
interest in the Chattel Mortgage to Far East Bank and Trust Company (FEBTC).

Claiming that the respondents failed to pay four (4) monthly amortizations covering the period
from May 18, 1997 to August 18, 1997, FEBTC sent a formal demand to respondents on March 14,
2000 asking for the payment thereof, plus penalty. The respondents refused to pay on the ground that
they had already paid their obligation to FEBTC. On April 19, 2000, FEBTC filed a Complaint for Replevin
and Damages against the respondents with the Metropolitan Trial Court (MeTC) of Manila.

In their Answer, respondents alleged that on May 20, 1997, they delivered to the Auto Financing
Department of FEBTC eight (8) postdated checks in different amounts totaling P97,281.78 and the FEBTC
received them as evidenced by an Acknowledgment Receipt. The respondents further averred that they
did not receive any notice from the drawee banks or from FEBTC that these checks were dishonored.
They explained that, considering this and the fact that the checks were issued three years ago, they
believed in good faith that their obligation had already been fully paid. The respondents made a
counterclaim for damages.

During trial, BPI, who had merged with FEBTC admitted receiving the checks but said that two of these
checks amounting to P23,692.00 were dishonored.

Lower Court Rulings

On February 23, 2005, the MeTC dismissed the case and granted the respondents’ counterclaim for
damages.

On appeal, the Regional Trial Court (RTC) set aside the MeTC Decision and ordered the respondents to
pay the amount claimed by the petitioner.

The respondents elevated the case to the Court of Appeals (CA) through a petition for review. They
succeeded in obtaining a favorable judgment when the CA set aside the RTC’s Decision and reinstated
the MeTC’s Decision on July 12, 2006.

Hence the instant case.

The petitioner insists that the respondents did not sufficiently prove the alleged payment. It
avers that, under the law and existing jurisprudence, delivery of checks does not constitute payment. It
points out that this principle stands despite the fact that there was no notice of dishonor of the two
checks and the demand to pay was made three years after default.

On the other hand, the respondents postulate that they have established payment of the amount being
claimed by the petitioner and, unless the petitioner proves that the checks have been dishonored, they
should not be made liable to pay the obligation again.

The issues submitted for resolution in this petition for review are as follows:

I. WHETHER OR NOT RESPONDENTS WERE ABLE TO PROVE FULL PAYMENT OF THEIR

OBLIGATION AS ONE OF THEIR AFFIRMATIVE DEFENSES.

II. WHETHER OR NOT TENDER OF CHECKS CONSTITUTES PAYMENT.

III. WHETHER OR NOT RESPONDENTS ARE ENTITLED TO MORAL AND EXEMPLARY DAMAGES
AND ATTORNEY’S FEES

HELD:
The petition is partly meritorious.

In civil cases, the party having the burden of proof must establish his case by a preponderance
of evidence, or evidence which is more convincing to the court as worthy of belief than that which is
offered in opposition thereto. Thus, the party, whether plaintiff or defendant, who asserts the
affirmative of an issue has the onus to prove his assertion in order to obtain a favorable judgment. For
the plaintiff, the burden to prove its positive assertions never parts. For the defendant, an affirmative
defense is one which is not a denial of an essential ingredient in the plaintiff’s cause of action, but one
which, if established, will be a good defense –i.e. an “avoidance” of the claim.

In Jimenez v. NLRC,[20] cited by both the RTC and the CA, the Court elucidated on who, between
the plaintiff and defendant, has the burden to prove the affirmative defense of payment:

As a general rule, one who pleads payment has the burden of proving it. Even
where the plaintiff must allege non-payment, the general rule is that the burden rests
on the defendant to prove payment, rather than on the plaintiff to prove non-payment.
The debtor has the burden of showing with legal certainty that the obligation has been
discharged by payment.

When the existence of a debt is fully established by the evidence contained in

the record, the burden of proving that it has been extinguished by payment devolves
upon the debtor who offers such a defense to the claim of the creditor. Where the
debtor introduces some evidence of payment, the burden of going forward with the
evidence - as distinct from the general burden of proof - shifts to the creditor, who is
then under a duty of producing some evidence to show non-payment.[21]

In applying these principles, the CA and the RTC, however, arrived at different conclusions.
While both agreed that the respondents had the burden of proof to establish payment, the two courts
did not agree on whether the respondents were able to present sufficient evidence of payment —
enough to shift the burden of evidence to the petitioner. The RTC found that the respondents failed to
discharge this burden because they did not introduce evidence of payment, considering that mere
delivery of checks does not constitute payment.[22] On the other hand, the CA concluded that the
respondents introduced sufficient evidence of payment, as opposed to the petitioner, which failed to
produce evidence that the checks were in fact dishonored. It noted that the petitioner could have easily
presented the dishonored checks or the advice of dishonor and required respondents to replace the
dishonored checks but none was presented. Further, the CA remarked that it is absurd for a bank, such
as petitioner, to demand payment of a failed amortization only after three years from the due date.

The divergence in this conflict of opinions can be narrowed down to the issue of whether the
Acknowledgment Receipt was sufficient proof of payment. As correctly observed by the RTC, this is only
proof that respondents delivered eight checks in payment of the amount due. Apparently, this will not
suffice to establish actual payment.

Settled is the rule that payment must be made in legal tender. A check is not legal tender and,
therefore, cannot constitute a valid tender of payment.[23] Since a negotiable instrument is only a
substitute for money and not money, the delivery of such an instrument does not, by itself, operate as
payment. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is
not extinguished and remains suspended until the payment by commercial document is actually
realized.[24]

To establish their defense, the respondents therefore had to present proof, not only that they
delivered the checks to the petitioner, but also that the checks were encashed. The respondents failed
to do so. Had the checks been actually encashed, the respondents could have easily produced the
cancelled checks as evidence to prove the same. Instead, they merely averred that they believed in good
faith that the checks were encashed because they were not notified of the dishonor of the checks and
three years had already lapsed since they issued the checks.

Because of this failure of the respondents to present sufficient proof of payment, it was no
longer necessary for the petitioner to prove non-payment, particularly proof that the checks were
dishonored. The burden of evidence is shifted only if the party upon whom it is lodged was able to
adduce preponderant evidence to prove its claim.[25]

To stress, the obligation to prove that the checks were not dishonored, but were in fact
encashed, fell upon the respondents who would benefit from such fact. That payment was effected
through the eight checks was the respondents’ affirmative allegation that they had to establish with
legal certainty. If the petitioner were seeking to enforce liability upon the check, the burden to prove
that a notice of dishonor was properly given would have devolved upon it.[26] The fact is that the
petitioner’s cause of action was based on the original obligation as evidenced by the Promissory Note
and the Chattel Mortgage, and not on the checks issued in payment thereof.

Further, it should be noted that the petitioner, as payee, did not have a legal obligation to
inform the respondents of the dishonor of the checks. A notice of dishonor is required only to preserve
the right of the payee to recover on the check. It preserves the liability of the drawer and the indorsers
on the check. Otherwise, if the payee fails to give notice to them, they are discharged from their liability
thereon, and the payee is precluded from enforcing payment on the check. The respondents, therefore,
cannot fault the petitioner for not notifying them of the non-payment of the checks because whatever
rights were transgressed by such omission belonged only to the petitioner.

In all, we find that the evidence at hand preponderates in favor of the petitioner. The
petitioner’s possession of the documents pertaining to the obligation strongly buttresses its claim that
the obligation has not been extinguished. The creditor’s possession of the evidence of debt is proof that
the debt has not been discharged by payment.[27] A promissory note in the hands of the creditor is a
proof of indebtedness rather than proof of payment.[28] In an action for replevin by a mortgagee, it
is prima facie evidence that the promissory note has not been paid.[29] Likewise, an uncanceled
mortgage in the possession of the mortgagee gives rise to the presumption that the mortgage debt is
unpaid.[30]

Finally, the respondents posit that the petitioner’s claim is barred by laches since it has been
three years since the checks were issued. We do not agree. Laches is a recourse in equity. Equity,
however, is applied only in the absence, never in contravention, of statutory law. Thus, laches cannot,
as a rule, abate a collection suit filed within the prescriptive period mandated by the New Civil
Code.[31] The petitioner’s action was filed within the ten-year prescriptive period provided under Article
1144 of the New Civil Code. Hence, there is no room for the application of laches.

Nonetheless, the Court cannot ignore what the respondents have consistently raised — that
they were not notified of the non-payment of the checks. Reasonable banking practice and prudence
dictates that, when a check given to a creditor bank in payment of an obligation is dishonored, the bank
should immediately return it to the debtor and demand its replacement or payment lest it causes any
prejudice to the drawer. In light of this and the fact that the obligation has been partially paid, we deem
it just and equitable to reduce the 3% per month penalty charge as stipulated in the Promissory Note
to 12% per annum.[32] Although a court is not at liberty to ignore the freedom of the parties to agree on
such terms and conditions as they see fit, as long as they contravene no law, morals, good customs,
public order or public policy, a stipulated penalty, nevertheless, may be equitably reduced by the courts
if it is iniquitous or unconscionable, or if the principal obligation has been partly or irregularly complied
with.[33]

Sec. 6. Counterclaim
A counterclaim is any claim which a defending party may have against an opposing party.

Lafarge Cement v. Continental, G.R. No. 155173, November 23, 2004

FACTS: Lafarge Cement and Continental Cement Corporation (CCC) executed a Sale and Purchase
Agreement (SPA) wherein Lafarge would buy CCC. At the time of the foregoing transactions, Lafarge
was aware that CCC had a case pending with the Supreme Court against Asset Privatization Trust (APT).
In anticipation of the liability that the High Tribunal might adjudge against CCC, the parties, under
Clause 2 (c) of the SPA, allegedly agreed to retain from the purchase price a portion of the contract price
in the amount of P117,020,846.84 -- the equivalent of US$2,799,140 or the APT Retained Amount. This
amount was to be deposited in an interest-bearing account in the First National City Bank of New York
(Citibank) for payment to APT, the petitioner in GR No. 119712.
However, petitioners allegedly refused to apply the sum to the payment to APT, despite the subsequent
finality of the Decision in GR No. 119712 in favor of the latter and the repeated instructions of
Respondent CCC. Fearful that nonpayment to APT would result in the foreclosure, not just of its
properties covered by the SPA with Lafarge but of several other properties as well, CCC filed before the
Regional Trial Court of Quezon City on June 20, 2000, a “Complaint with Application for Preliminary
Attachment” against petitioners.

Petitioners moved to dismiss the Complaint on the ground of forum-shopping. Respondent CCC
had allegedly made the same claim it was raising in Civil Case No. Q-00-41103 in another action, which
involved the same parties and which was filed earlier before the International Chamber of Commerce.
After the trial court denied the Motion to Dismiss in its November 14, 2000 Order, petitioners elevated
the matter before the Court of Appeals in CA-GR SP No. 68688.
In the meantime, to avoid being in default and without prejudice to the outcome of their appeal,
petitioners filed their Answer and Compulsory Counterclaims ad Cautelam before the trial court in Civil
Case No. Q-00-41103. In their Answer, they denied the allegations in the Complaint. They prayed -- by
way of compulsory counterclaims against Respondent CCC, its majority stockholder and president
Gregory T. Lim, and its corporate secretary Anthony A. Mariano sums of damages.
On behalf of Lim and Mariano who had yet to file any responsive pleading, CCC moved to dismiss
petitioners’ compulsory counterclaims on grounds that essentially constituted the very issues for
resolution in the instant Petition.
RTC Ruling
On May 22, 2002, the Regional Trial Court of Quezon City (Branch 80) dismissed petitioners’
counterclaims for several reasons, among which were the following: a) the counterclaims against
Respondents Lim and Mariano were not compulsory; b) the ruling in Sapugay was not applicable; and c)
petitioners’ Answer with Counterclaims violated procedural rules on the proper joinder of causes of
action.
Acting on the Motion for Reconsideration filed by petitioners, the trial court -- in an Amended Order
dated September 3, 2002, the RTC clarified that it was dismissing the counterclaim insofar as it
impleaded Respondents Lim and Mariano, even if it included CCC.
Hence this Petition.[8]
ISSUE: Whether or not the RTC gravely erred in ruling that (i) petitioners’ counterclaims against
Respondents Lim and Mariano are not compulsory; (ii) Sapugay v. Court of Appeals is inapplicable here;
and (iii) petitioners violated the rule on joinder of causes of action.”[9]
HELD:

Petitioners’ Counterclaims
Compulsory

Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil Procedure as “any claim which
a defending party may have against an opposing party.” They are generally allowed in order to avoid a
multiplicity of suits and to facilitate the disposition of the whole controversy in a single action, such that
the defendant’s demand may be adjudged by a counterclaim rather than by an independent suit. The
only limitations to this principle are (1) that the court should have jurisdiction over the subject matter
of the counterclaim, and (2) that it could acquire jurisdiction over third parties whose presence is
essential for its adjudication.
A counterclaim may either be permissive or compulsory. It is permissive “if it does not arise out of
or is not necessarily connected with the subject matter of the opposing party’s claim.” A permissive
counterclaim is essentially an independent claim that may be filed separately in another case.
A counterclaim is compulsory when its object “arises out of or is necessarily connected with the
transaction or occurrence constituting the subject matter of the opposing party’s claim and does not
require for its adjudication the presence of third parties of whom the court cannot acquire
jurisdiction.”[12]
Unlike permissive counterclaims, compulsory counterclaims should be set up in the same action;
otherwise, they would be barred forever. NAMARCO v. Federation of United Namarco
Distributors[13] laid down the following criteria to determine whether a counterclaim is compulsory or
permissive: 1) Are issues of fact and law raised by the claim and by the counterclaim largely the same?
2) Would res judicata bar a subsequent suit on defendant’s claim, absent the compulsory counterclaim
rule? 3) Will substantially the same evidence support or refute plaintiff’s claim as well as defendant’s
counterclaim? 4) Is there any logical relation between the claim and the counterclaim? A positive
answer to all four questions would indicate that the counterclaim is compulsory.
Adopted in Quintanilla v. CA[14] and reiterated in Alday v. FGU Insurance Corporation,[15] the
“compelling test of compulsoriness” characterizes a counterclaim as compulsory if there should exist a
“logical relationship” between the main claim and the counterclaim. There exists such a relationship
when conducting separate trials of the respective claims of the parties would entail substantial
duplication of time and effort by the parties and the court; when the multiple claims involve the same
factual and legal issues; or when the claims are offshoots of the same basic controversy between the
parties.
We shall now examine the nature of petitioners’ counterclaims against respondents with the use of
the foregoing parameters.
Petitioners base their counterclaim on the following allegations:

“Gregory T. Lim and Anthony A. Mariano were the persons responsible for making the bad faith
decisions for, and causing plaintiff to file this baseless suit and to procure an unwarranted writ of
attachment, notwithstanding their knowledge that plaintiff has no right to bring it or to secure the writ.
In taking such bad faith actions, Gregory T. Lim was motivated by his personal interests as one of the
owners of plaintiff while Anthony A. Mariano was motivated by his sense of personal loyalty to Gregory
T. Lim, for which reason he disregarded the fact that plaintiff is without any valid cause.

“Consequently, both Gregory T. Lim and Anthony A. Mariano are the plaintiff’s co-joint tortfeasors in the
commission of the acts complained of in this answer and in the compulsory counterclaims pleaded
below. As such they should be held jointly and solidarily liable as plaintiff’s co-defendants to those
compulsory counterclaims pursuant to the Supreme Court’s decision in Sapugay v. Mobil.

xxx xxx xxx

“The plaintiff’s, Gregory T. Lim and Anthony A. Mariano’s bad faith filing of this baseless case has
compelled the defendants to engage the services of counsel for a fee and to incur costs of litigation, in
amounts to be proved at trial, but in no case less than P5 million for each of them and for which plaintiff
Gregory T. Lim and Anthony A. Mariano should be held jointly and solidarily liable.

“The plaintiff’s, Gregory T. Lim’s and Anthony A. Mariano’s actions have damaged the reputations of the
defendants and they should be held jointly and solidarily liable to them for moral damages of P100
million each.

“In order to serve as an example for the public good and to deter similar baseless, bad faith litigation,
the plaintiff, Gregory T. Lim and Anthony A. Mariano should be held jointly and solidarily liable to the
defendants for exemplary damages of P100 million each.” [16]

The above allegations show that petitioners’ counterclaims for damages were the result of
respondents’ (Lim and Mariano) act of filing the Complaint and securing the Writ of Attachment in bad
faith. Tiu Po v. Bautista[17] involved the issue of whether the counterclaim that sought moral, actual and
exemplary damages and attorney’s fees against respondents on account of their “malicious and
unfounded” complaint was compulsory. In that case, we held as follows:

“Petitioners’ counterclaim for damages fulfills the necessary requisites of a compulsory counterclaim.
They are damages claimed to have been suffered by petitioners as a consequence of the action filed
against them. They have to be pleaded in the same action; otherwise, petitioners would be precluded
by the judgment from invoking the same in an independent action. The pronouncement in Papa vs.
Banaag (17 SCRA 1081) (1966) is in point:

“Compensatory, moral and exemplary damages, allegedly suffered by the creditor in consequence of the
debtor’s action, are also compulsory counterclaim barred by the dismissal of the debtor’s action. They
cannot be claimed in a subsequent action by the creditor against the debtor.”

“Aside from the fact that petitioners’ counterclaim for damages cannot be the subject of an
independent action, it is the same evidence that sustains petitioners’ counterclaim that will refute
private respondent’s own claim for damages. This is an additional factor that characterizes petitioners’
counterclaim as compulsory.”[18]

Moreover, using the “compelling test of compulsoriness,” we find that, clearly, the recovery of
petitioners’ counterclaims is contingent upon the case filed by respondents; thus, conducting separate
trials thereon will result in a substantial duplication of the time and effort of the court and the parties.
Since the counterclaim for damages is compulsory, it must be set up in the same action; otherwise,
it would be barred forever. If it is filed concurrently with the main action but in a different proceeding,
it would be abated on the ground of litis pendentia; if filed subsequently, it would meet the same fate
on the ground of res judicata.[19]

Sapugay v. Court of Appeals

Applicable to the Case at Bar
 Among the issues raised in Sapugay was whether Cardenas, who was not a party to the original
action, might nevertheless be impleaded in the counterclaim. We disposed of this issue as follows:

“A counterclaim is defined as any claim for money or other relief which a defending party may have
against an opposing party. However, the general rule that a defendant cannot by a counterclaim bring
into the action any claim against persons other than the plaintiff admits of an exception under Section
14, Rule 6 which provides that ‘when the presence of parties other than those to the original action is
required for the granting of complete relief in the determination of a counterclaim or cross-claim, the
court shall order them to be brought in as defendants, if jurisdiction over them can be obtained.’ The
inclusion, therefore, of Cardenas in petitioners’ counterclaim is sanctioned by the rules.”[20]

The prerogative of bringing in new parties to the action at any stage before judgment is intended to
accord complete relief to all of them in a single action and to avert a duplicity and even a multiplicity of
suits thereby.
In insisting on the inapplicability of Sapugay, respondents argue that new parties cannot be
included in a counterclaim, except when no complete relief can be had. They add that “[i]n the present
case, Messrs. Lim and Mariano are not necessary for petitioners to obtain complete relief from
Respondent CCC as plaintiff in the lower court. This is because Respondent CCC as a corporation with a
separate [legal personality] has the juridical capacity to indemnify petitioners even without Messrs. Lim
and Mariano.”[21]
We disagree. The inclusion of a corporate officer or stockholder -- Cardenas in Sapugay or Lim and
Mariano in the instant case -- is not premised on the assumption that the plaintiff corporation does not
have the financial ability to answer for damages, such that it has to share its liability with individual
defendants. Rather, such inclusion is based on the allegations of fraud and bad faith on the part of the
corporate officer or stockholder. These allegations may warrant the piercing of the veil of corporate
fiction, so that the said individual may not seek refuge therein, but may be held individually and
personally liable for his or her actions.
In Tramat Mercantile v. Court of Appeals,[22] the Court held that generally, it should only be the
corporation that could properly be held liable. However, circumstances may warrant the inclusion of
the personal liability of a corporate director, trustee, or officer, if the said individual is found guilty of
bad faith or gross negligence in directing corporate affairs.
Remo Jr. v. IAC[23] has stressed that while a corporation is an entity separate and distinct from its
stockholders, the corporate fiction may be disregarded if “used to defeat public convenience, justify a
wrong, protect fraud, or defend crime.” In these instances, “the law will regard the corporation as an
association of persons, or in case of two corporations, will merge them into one.” Thus, there is no
debate on whether, in alleging bad faith on the part of Lim and Mariano the counterclaims had in effect
made them “indispensable parties” thereto; based on the alleged facts, both are clearly parties in
interest to the counterclaim.[24]
Respondents further assert that “Messrs. Lim and Mariano cannot be held personally liable
[because their assailed acts] are within the powers granted to them by the proper board resolutions;
therefore, it is not a personal decision but rather that of the corporation as represented by its board of
directors.”[25] The foregoing assertion, however, is a matter of defense that should be threshed out
during the trial; whether or not “fraud” is extant under the circumstances is an issue that must be
established by convincing evidence.[26]
 Suability and liability are two distinct matters. While the Court does rule that the counterclaims
against Respondent CCC’s president and manager may be properly filed, the determination of whether
both can in fact be held jointly and severally liable with respondent corporation is entirely another issue
that should be ruled upon by the trial court.
However, while a compulsory counterclaim may implead persons not parties to the original
complaint, the general rule -- a defendant in a compulsory counterclaim need not file any responsive
pleading, as it is deemed to have adopted the allegations in the complaint as its answer -- does not
apply. The filing of a responsive pleading is deemed a voluntary submission to the jurisdiction of the
court; a new party impleaded by the plaintiff in a compulsory counterclaim cannot be considered to
have automatically and unknowingly submitted to the jurisdiction of the court. A contrary ruling would
result in mischievous consequences whereby a party may be indiscriminately impleaded as a defendant
in a compulsory counterclaim; and judgment rendered against it without its knowledge, much less
participation in the proceedings, in blatant disregard of rudimentary due process requirements.
The correct procedure in instances such as this is for the trial court, per Section 12 of Rule 6 of the
Rules of Court, to “order [such impleaded parties] to be brought in as defendants, if jurisdiction over
them can be obtained,” by directing that summons be served on them. In this manner, they can be
properly appraised of and answer the charges against them. Only upon service of summons can the trial
court obtain jurisdiction over them.
In Sapugay, Cardenas was furnished a copy of the Answer with Counterclaim, but he did not file any
responsive pleading to the counterclaim leveled against him. Nevertheless, the Court gave due
consideration to certain factual circumstances, particularly the trial court’s treatment of the Complaint
as the Answer of Cardenas to the compulsory counterclaim and of his seeming acquiescence thereto, as
evidenced by his failure to make any objection despite his active participation in the proceedings. It was
held thus:

“It is noteworthy that Cardenas did not file a motion to dismiss the counterclaim against him on the
ground of lack of jurisdiction. While it is a settled rule that the issue of jurisdiction may be raised even
for the first time on appeal, this does not obtain in the instant case. Although it was only Mobil which
filed an opposition to the motion to declare in default, the fact that the trial court denied said motion,
both as to Mobil and Cardenas on the ground that Mobil’s complaint should be considered as the
answer to petitioners’ compulsory counterclaim, leads us to the inescapable conclusion that the trial
court treated the opposition as having been filed in behalf of both Mobil and Cardenas and that the
latter had adopted as his answer the allegations raised in the complaint of Mobil. Obviously, it was this
ratiocination which led the trial court to deny the motion to declare Mobil and Cardenas in default.
Furthermore, Cardenas was not unaware of said incidents and the proceedings therein as he testified
and was present during trial, not to speak of the fact that as manager of Mobil he would necessarily be
interested in the case and could readily have access to the records and the pleadings filed therein.

“By adopting as his answer the allegations in the complaint which seeks affirmative relief, Cardenas is
deemed to have recognized the jurisdiction of the trial court over his person and submitted thereto. He
may not now be heard to repudiate or question that jurisdiction.”[27]

Such factual circumstances are unavailing in the instant case. The records do not show that
Respondents Lim and Mariano are either aware of the counterclaims filed against them, or that they
have actively participated in the proceedings involving them. Further, in dismissing the counterclaims
against the individual respondents, the court a quo -- unlike in Sapugay -- cannot be said to have treated
Respondent CCC’s Motion to Dismiss as having been filed on their behalf.

Rules on Permissive Joinder of Causes

of Action or Parties Not Applicable

Respondent CCC contends that petitioners’ counterclaims violated the rule on joinder of causes of
action. It argues that while the original Complaint was a suit for specific performance based on a
contract, the counterclaim for damages was based on the tortuous acts of respondents.[28] In its Motion
to Dismiss, CCC cites Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Civil Procedure, which we
quote:

“Section 5. Joinder of causes of action. – A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the following
conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of parties; x x x”

Section 6. Permissive joinder of parties. – All persons in whom or against whom any right to relief
in respect to or arising out of the same transaction or series of transactions is alleged to exist
whether jointly, severally, or in the alternative, may, except as otherwise provided in these Rules, join as
plaintiffs or be joined as defendants in one complaint, where any question of law or fact common to all
such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as
may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in
connection with any proceedings in which he may have no interest.”

The foregoing procedural rules are founded on practicality and convenience. They are meant to
discourage duplicity and multiplicity of suits. This objective is negated by insisting -- as the court a
quo has done -- that the compulsory counterclaim for damages be dismissed, only to have it possibly re-
filed in a separate proceeding. More important, as we have stated earlier, Respondents Lim and
Mariano are real parties in interest to the compulsory counterclaim; it is imperative that they be joined
therein. Section 7 of Rule 3 provides:

“Compulsory joinder of indispensable parties. – Parties in interest without whom no final determination
can be had of an action shall be joined either as plaintiffs or defendants.”

Moreover, in joining Lim and Mariano in the compulsory counterclaim, petitioners are being
consistent with the solidary nature of the liability alleged therein.

Yulienco v. Court of Appeals, G.R. No. 131692, June 10, 1999

FACTS: Private respondent Advance Capital Corporation (ACC) filed a case in the RTC of Quezon City
against petitioner Felipe Yulienco to recover the amount of P30,631,162.19 plus interests and penalty,
which was apparently extended as a loan to the petitioner, as evidenced by four promissory notes. Each
promissory note also provided for an interest rate of 30% per annum.
Petitioner filed his answer on July 17, 1995, alleging in sum, that the trial court cannot acquire
jurisdiction over ACC's complaint because there is another case pending between ACC and the petitioner
involving the same subject matter, and that ACC's complaint should have been filed as a necessary and
compulsory counterclaim in the said case at the RTC of Makati City. Also, ACC's complaint was allegedly
in violation of the proscription against splitting of a cause of action. Alternatively, petitioner countered
that the promissory notes upon which ACC based its claim are fake, and do not express the true intent
of the contracting parties. On April 19, 1996, petitioner filed a memorandum/motion to dismiss with the
trial court, setting up the special and affirmative defenses in his answer as grounds for the dismissal of
ACC's suit.

The trial court denied the motion to dismiss ruling that the cases had different subject-matters. The
promissory notes which comprise the subject matters of the RTC, Makati case, involve separate and
distinct causes of action. Moreover, the Makati case involves real action whereas the instant case is only
for collection of sum of money."

Thereafter, YULIENCO filed before the Court of Appeals a petition for certiorari, prohibition and/or
injunction. The Court of Appeals rejected YULIENCO's argument and consequently dismissed the petition

Unable to accept the decision, YULIENCO filed the instant petition. He insists that the decision of the
Court of Appeals is not in accord with law and jurisprudence, because: (1) Civil Case No. Q-95-23691
violated the fundamental rules on splitting of causes of action and/or necessary joinder of causes of
action in that the cause of action therein (complaint for collection of sums of money covered by
Promissory Notes Nos. 56, 57, 59 and 60) should have been set up as compulsory counterclaim in Special
Case No. Q-93-2521; and (2) in filing Civil Case No. Q-95-23691, ACC was guilty of forum shopping.

On its part, ACC maintains that Civil Case No. Q-95-23691 of the RTC of Quezon City is separate and
distinct from Special Civil Case No. 932521 of the RTC of Makati City. The first is an ordinary collection
suit, while the second is for injunction, and while both cases involve promissory notes, they are not the
same promissory notes. The dissimilarity arises from the disparate obligations and transactions entered
into or incurred by YULIENCO in different years. Hence, there is no violation of the rule concerning
splitting causes of action or the necessary joinder of causes of action.

ISSUE: WON the case is a compulsory counterclaim in the first case

HELD:
We agree with ACC.

A counterclaim is defined as any claim for money or other relief which a defending party may have
against an opposing party.6 [Chan v. Court of Appeals, 230 SCRA 685, 696 (1994)] A counterclaim is
compulsory if (a) it arises out of, or is necessarily connected with, the transaction or occurrence which is
the subject matter of the opposing party's claim; (b) it does not require for its adjudication the presence
of third parties of whom the court cannot acquire jurisdiction; and (c) the court has jurisdiction to
entertain the claim.7 [Intestate Estate of Amado B. Dalisay v. Marasigan, 257 SCRA 509, 513 (1996)] In
other words, a compulsory counterclaim cannot be made the subject of a separate action but should be
asserted in the same suit involving the same transaction or occurrence giving rise to it.8 [Visayan
Packing Corporation v. Reparations Commission, 155 SCRA 542, 545 (1987)]
The criteria or tests by which the compulsory or permissive nature of specific counterclaims can be
determined are as follows:

(1) Are the issues of fact and law raised by the claim and counterclaim largely the same?

(2) Would res judicata bar a subsequent suit on defendant's claim absent the compulsory counterclaim
rule?

(3) Will substantially the same evidence support or refute plaintiff's claim as well as defendant's
counterclaim?

(4) Is there any logical relation between the claim ano the counterclaim?9 [Valencia v. Court of Appeals,
263 SCRA 275, 288 (1996)]

Stripped of its legalese and trivial details, Special Civil Case No. 932521 of the RTC of Makati City is
basically an injunction suit, a petition for prohibition. On the other hand, Civil Case No. Q-95-23691 is an
ordinary action for collection of sums of money. In the former, YULIENCO essentially seeks to prohibit or
enjoin the disposition and/or sale of his property, the proceeds of which will answer for his unpaid
obligations to ACC. Specifically, YULIENCO attempts to prevent (1) the foreclosure of the real estate
mortgages which he executed to secure his monetary obligations, (2) the issuance of certificates of sale
in cases of mortgages already foreclosed, and (3) the sale of his specific club membership certificates
and shares of stocks in ACC. Promissory notes are also involved in that case but they are specifically
identified as Promissory Notes Nos. 315, 317 and 318, and are intimately related to or secured by the
real estate mortgages. In Civil Case No. Q-95-23691, ACC simply seeks to collect from YULIENCO his
unpaid monetary obligations covered by specific but unsecured Promissory Notes Nos. 56, 57, 59 and
60. Needless to say, they are not the promissory notes subject of the first action. Neither are they
substantially, intimately and reasonably relevant to nor even remotely connected with the promissory
notes and the cause of action in the injunction suit. Simply put, the promissory notes in both cases differ
from and are not related to each other.

There is, therefore, a dissimilarity in the subject matter of both cases arising from separate and distinct
transactions and necessarily requiring different evidence to support the divergent claims. More
importantly, the "one compelling test of compulsoriness" i.e., the logical relationship between the claim
and counterclaim, does not apply here. To reiterate, there is no logical relationship between YULIENCO's
petition for injunctive relief and ACC's collection suit, hence separate trials of the respective claims of
the parties will not entail a substantial duplication of effort and time as the factual and/or legal issues
involved, as already explained, art dissimilar and distinct.

In light of the above showing, there was no violation of the rule against splitting causes of action or
necessary joinder of causes of action.

Sec. 7. Compulsory Counterclaim

A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of
or is connected with the transaction or occurrence constituting the subject matter of the opposing
party’s claim and does not require for its adjudication the presence of third parties of whom the court
cannot acquire jurisdiction. Such a counterclaim must be within the jurisdiction of the court both as to
the amount and the nature thereof, except that in an original action before the Regional Trial Court, the
counterclaim may be considered compulsory regardless of the amount.

See: Rule 11, Sec. 8 – Existing counterclaim or cross-claim

A compulsory counterclaim or a cross-claim that a defending party has at the time he files his answer
shall be contained therein.

Rule 9, Sec. 2 – Compulsory counterclaim, or cross-claim not set up barred

A compulsory counterclaim, or a cross-claim, not set up shall be barred.

Lafarge Cement v. Continental, G.R. No. 155173, November 23, 2004 (Supra.)
FACTS: Lafarge Cement and Continental Cement Corporation (CCC) executed a Sale and Purchase
Agreement (SPA) wherein Lafarge would buy CCC. At the time of the foregoing transactions, Lafarge
was aware that CCC had a case pending with the Supreme Court against Asset Privatization Trust (APT).
In anticipation of the liability that the High Tribunal might adjudge against CCC, the parties, under
Clause 2 (c) of the SPA, allegedly agreed to retain from the purchase price a portion of the contract price
in the amount of P117,020,846.84 -- the equivalent of US$2,799,140 or the APT Retained Amount. This
amount was to be deposited in an interest-bearing account in the First National City Bank of New York
(Citibank) for payment to APT, the petitioner in GR No. 119712.

However, petitioners allegedly refused to apply the sum to the payment to APT, despite the subsequent
finality of the Decision in GR No. 119712 in favor of the latter and the repeated instructions of
Respondent CCC. Fearful that nonpayment to APT would result in the foreclosure, not just of its
properties covered by the SPA with Lafarge but of several other properties as well, CCC filed before the
Regional Trial Court of Quezon City on June 20, 2000, a “Complaint with Application for Preliminary
Attachment” against petitioners.

Petitioners moved to dismiss the Complaint on the ground of forum-shopping. Respondent CCC
had allegedly made the same claim it was raising in Civil Case No. Q-00-41103 in another action, which
involved the same parties and which was filed earlier before the International Chamber of Commerce.
After the trial court denied the Motion to Dismiss in its November 14, 2000 Order, petitioners elevated
the matter before the Court of Appeals in CA-GR SP No. 68688.
In the meantime, to avoid being in default and without prejudice to the outcome of their appeal,
petitioners filed their Answer and Compulsory Counterclaims ad Cautelam before the trial court in Civil
Case No. Q-00-41103. In their Answer, they denied the allegations in the Complaint. They prayed -- by
way of compulsory counterclaims against Respondent CCC, its majority stockholder and president
Gregory T. Lim, and its corporate secretary Anthony A. Mariano sums of damages.
On behalf of Lim and Mariano who had yet to file any responsive pleading, CCC moved to dismiss
petitioners’ compulsory counterclaims on grounds that essentially constituted the very issues for
resolution in the instant Petition.
RTC Ruling
On May 22, 2002, the Regional Trial Court of Quezon City (Branch 80) dismissed petitioners’
counterclaims for several reasons, among which were the following: a) the counterclaims against
Respondents Lim and Mariano were not compulsory; b) the ruling in Sapugay was not applicable; and c)
petitioners’ Answer with Counterclaims violated procedural rules on the proper joinder of causes of
action.
Acting on the Motion for Reconsideration filed by petitioners, the trial court -- in an Amended Order
dated September 3, 2002, the RTC clarified that it was dismissing the counterclaim insofar as it
impleaded Respondents Lim and Mariano, even if it included CCC.
Hence this Petition.[8]
ISSUE: Whether or not the RTC gravely erred in ruling that (i) petitioners’ counterclaims against
Respondents Lim and Mariano are not compulsory; (ii) Sapugay v. Court of Appeals is inapplicable here;
and (iii) petitioners violated the rule on joinder of causes of action.”[9]
HELD:

Petitioners’ Counterclaims
Compulsory

Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil Procedure as “any claim which
a defending party may have against an opposing party.” They are generally allowed in order to avoid a
multiplicity of suits and to facilitate the disposition of the whole controversy in a single action, such that
the defendant’s demand may be adjudged by a counterclaim rather than by an independent suit. The
only limitations to this principle are (1) that the court should have jurisdiction over the subject matter
of the counterclaim, and (2) that it could acquire jurisdiction over third parties whose presence is
essential for its adjudication.
A counterclaim may either be permissive or compulsory. It is permissive “if it does not arise out of
or is not necessarily connected with the subject matter of the opposing party’s claim.” A permissive
counterclaim is essentially an independent claim that may be filed separately in another case.
A counterclaim is compulsory when its object “arises out of or is necessarily connected with the
transaction or occurrence constituting the subject matter of the opposing party’s claim and does not
require for its adjudication the presence of third parties of whom the court cannot acquire
jurisdiction.”[12]
Unlike permissive counterclaims, compulsory counterclaims should be set up in the same action;
otherwise, they would be barred forever. NAMARCO v. Federation of United Namarco
Distributors[13] laid down the following criteria to determine whether a counterclaim is compulsory or
permissive: 1) Are issues of fact and law raised by the claim and by the counterclaim largely the same?
2) Would res judicata bar a subsequent suit on defendant’s claim, absent the compulsory counterclaim
rule? 3) Will substantially the same evidence support or refute plaintiff’s claim as well as defendant’s
counterclaim? 4) Is there any logical relation between the claim and the counterclaim? A positive
answer to all four questions would indicate that the counterclaim is compulsory.
Adopted in Quintanilla v. CA[14] and reiterated in Alday v. FGU Insurance Corporation,[15] the
“compelling test of compulsoriness” characterizes a counterclaim as compulsory if there should exist a
“logical relationship” between the main claim and the counterclaim. There exists such a relationship
when conducting separate trials of the respective claims of the parties would entail substantial
duplication of time and effort by the parties and the court; when the multiple claims involve the same
factual and legal issues; or when the claims are offshoots of the same basic controversy between the
parties.
We shall now examine the nature of petitioners’ counterclaims against respondents with the use of
the foregoing parameters.
Petitioners base their counterclaim on the following allegations:

“Gregory T. Lim and Anthony A. Mariano were the persons responsible for making the bad faith
decisions for, and causing plaintiff to file this baseless suit and to procure an unwarranted writ of
attachment, notwithstanding their knowledge that plaintiff has no right to bring it or to secure the writ.
In taking such bad faith actions, Gregory T. Lim was motivated by his personal interests as one of the
owners of plaintiff while Anthony A. Mariano was motivated by his sense of personal loyalty to Gregory
T. Lim, for which reason he disregarded the fact that plaintiff is without any valid cause.

“Consequently, both Gregory T. Lim and Anthony A. Mariano are the plaintiff’s co-joint tortfeasors in the
commission of the acts complained of in this answer and in the compulsory counterclaims pleaded
below. As such they should be held jointly and solidarily liable as plaintiff’s co-defendants to those
compulsory counterclaims pursuant to the Supreme Court’s decision in Sapugay v. Mobil.

xxx xxx xxx

“The plaintiff’s, Gregory T. Lim and Anthony A. Mariano’s bad faith filing of this baseless case has
compelled the defendants to engage the services of counsel for a fee and to incur costs of litigation, in
amounts to be proved at trial, but in no case less than P5 million for each of them and for which plaintiff
Gregory T. Lim and Anthony A. Mariano should be held jointly and solidarily liable.

“The plaintiff’s, Gregory T. Lim’s and Anthony A. Mariano’s actions have damaged the reputations of the
defendants and they should be held jointly and solidarily liable to them for moral damages of P100
million each.

“In order to serve as an example for the public good and to deter similar baseless, bad faith litigation,
the plaintiff, Gregory T. Lim and Anthony A. Mariano should be held jointly and solidarily liable to the
defendants for exemplary damages of P100 million each.” [16]

The above allegations show that petitioners’ counterclaims for damages were the result of
respondents’ (Lim and Mariano) act of filing the Complaint and securing the Writ of Attachment in bad
faith. Tiu Po v. Bautista[17] involved the issue of whether the counterclaim that sought moral, actual and
exemplary damages and attorney’s fees against respondents on account of their “malicious and
unfounded” complaint was compulsory. In that case, we held as follows:

“Petitioners’ counterclaim for damages fulfills the necessary requisites of a compulsory counterclaim.
They are damages claimed to have been suffered by petitioners as a consequence of the action filed
against them. They have to be pleaded in the same action; otherwise, petitioners would be precluded
by the judgment from invoking the same in an independent action. The pronouncement in Papa vs.
Banaag (17 SCRA 1081) (1966) is in point:
“Compensatory, moral and exemplary damages, allegedly suffered by the creditor in consequence of the
debtor’s action, are also compulsory counterclaim barred by the dismissal of the debtor’s action. They
cannot be claimed in a subsequent action by the creditor against the debtor.”

“Aside from the fact that petitioners’ counterclaim for damages cannot be the subject of an
independent action, it is the same evidence that sustains petitioners’ counterclaim that will refute
private respondent’s own claim for damages. This is an additional factor that characterizes petitioners’
counterclaim as compulsory.”[18]

Moreover, using the “compelling test of compulsoriness,” we find that, clearly, the recovery of
petitioners’ counterclaims is contingent upon the case filed by respondents; thus, conducting separate
trials thereon will result in a substantial duplication of the time and effort of the court and the parties.
Since the counterclaim for damages is compulsory, it must be set up in the same action; otherwise,
it would be barred forever. If it is filed concurrently with the main action but in a different proceeding,
it would be abated on the ground of litis pendentia; if filed subsequently, it would meet the same fate
on the ground of res judicata.[19]

Sapugay v. Court of Appeals

Applicable to the Case at Bar

Among the issues raised in Sapugay was whether Cardenas, who was not a party to the original
action, might nevertheless be impleaded in the counterclaim. We disposed of this issue as follows:

“A counterclaim is defined as any claim for money or other relief which a defending party may have
against an opposing party. However, the general rule that a defendant cannot by a counterclaim bring
into the action any claim against persons other than the plaintiff admits of an exception under Section
14, Rule 6 which provides that ‘when the presence of parties other than those to the original action is
required for the granting of complete relief in the determination of a counterclaim or cross-claim, the
court shall order them to be brought in as defendants, if jurisdiction over them can be obtained.’ The
inclusion, therefore, of Cardenas in petitioners’ counterclaim is sanctioned by the rules.”[20]

The prerogative of bringing in new parties to the action at any stage before judgment is intended to
accord complete relief to all of them in a single action and to avert a duplicity and even a multiplicity of
suits thereby.
In insisting on the inapplicability of Sapugay, respondents argue that new parties cannot be
included in a counterclaim, except when no complete relief can be had. They add that “[i]n the present
case, Messrs. Lim and Mariano are not necessary for petitioners to obtain complete relief from
Respondent CCC as plaintiff in the lower court. This is because Respondent CCC as a corporation with a
separate [legal personality] has the juridical capacity to indemnify petitioners even without Messrs. Lim
and Mariano.”[21]
We disagree. The inclusion of a corporate officer or stockholder -- Cardenas in Sapugay or Lim and
Mariano in the instant case -- is not premised on the assumption that the plaintiff corporation does not
have the financial ability to answer for damages, such that it has to share its liability with individual
defendants. Rather, such inclusion is based on the allegations of fraud and bad faith on the part of the
corporate officer or stockholder. These allegations may warrant the piercing of the veil of corporate
fiction, so that the said individual may not seek refuge therein, but may be held individually and
personally liable for his or her actions.
In Tramat Mercantile v. Court of Appeals,[22] the Court held that generally, it should only be the
corporation that could properly be held liable. However, circumstances may warrant the inclusion of
the personal liability of a corporate director, trustee, or officer, if the said individual is found guilty of
bad faith or gross negligence in directing corporate affairs.
Remo Jr. v. IAC[23] has stressed that while a corporation is an entity separate and distinct from its
stockholders, the corporate fiction may be disregarded if “used to defeat public convenience, justify a
wrong, protect fraud, or defend crime.” In these instances, “the law will regard the corporation as an
association of persons, or in case of two corporations, will merge them into one.” Thus, there is no
debate on whether, in alleging bad faith on the part of Lim and Mariano the counterclaims had in effect
made them “indispensable parties” thereto; based on the alleged facts, both are clearly parties in
interest to the counterclaim.[24]
Respondents further assert that “Messrs. Lim and Mariano cannot be held personally liable
[because their assailed acts] are within the powers granted to them by the proper board resolutions;
therefore, it is not a personal decision but rather that of the corporation as represented by its board of
directors.”[25] The foregoing assertion, however, is a matter of defense that should be threshed out
during the trial; whether or not “fraud” is extant under the circumstances is an issue that must be
established by convincing evidence.[26]
Suability and liability are two distinct matters. While the Court does rule that the counterclaims
against Respondent CCC’s president and manager may be properly filed, the determination of whether
both can in fact be held jointly and severally liable with respondent corporation is entirely another issue
that should be ruled upon by the trial court.
However, while a compulsory counterclaim may implead persons not parties to the original
complaint, the general rule -- a defendant in a compulsory counterclaim need not file any responsive
pleading, as it is deemed to have adopted the allegations in the complaint as its answer -- does not
apply. The filing of a responsive pleading is deemed a voluntary submission to the jurisdiction of the
court; a new party impleaded by the plaintiff in a compulsory counterclaim cannot be considered to
have automatically and unknowingly submitted to the jurisdiction of the court. A contrary ruling would
result in mischievous consequences whereby a party may be indiscriminately impleaded as a defendant
in a compulsory counterclaim; and judgment rendered against it without its knowledge, much less
participation in the proceedings, in blatant disregard of rudimentary due process requirements.
The correct procedure in instances such as this is for the trial court, per Section 12 of Rule 6 of the
Rules of Court, to “order [such impleaded parties] to be brought in as defendants, if jurisdiction over
them can be obtained,” by directing that summons be served on them. In this manner, they can be
properly appraised of and answer the charges against them. Only upon service of summons can the trial
court obtain jurisdiction over them.
In Sapugay, Cardenas was furnished a copy of the Answer with Counterclaim, but he did not file any
responsive pleading to the counterclaim leveled against him. Nevertheless, the Court gave due
consideration to certain factual circumstances, particularly the trial court’s treatment of the Complaint
as the Answer of Cardenas to the compulsory counterclaim and of his seeming acquiescence thereto, as
evidenced by his failure to make any objection despite his active participation in the proceedings. It was
held thus:

“It is noteworthy that Cardenas did not file a motion to dismiss the counterclaim against him on the
ground of lack of jurisdiction. While it is a settled rule that the issue of jurisdiction may be raised even
for the first time on appeal, this does not obtain in the instant case. Although it was only Mobil which
filed an opposition to the motion to declare in default, the fact that the trial court denied said motion,
both as to Mobil and Cardenas on the ground that Mobil’s complaint should be considered as the
answer to petitioners’ compulsory counterclaim, leads us to the inescapable conclusion that the trial
court treated the opposition as having been filed in behalf of both Mobil and Cardenas and that the
latter had adopted as his answer the allegations raised in the complaint of Mobil. Obviously, it was this
ratiocination which led the trial court to deny the motion to declare Mobil and Cardenas in default.
Furthermore, Cardenas was not unaware of said incidents and the proceedings therein as he testified
and was present during trial, not to speak of the fact that as manager of Mobil he would necessarily be
interested in the case and could readily have access to the records and the pleadings filed therein.

“By adopting as his answer the allegations in the complaint which seeks affirmative relief, Cardenas is
deemed to have recognized the jurisdiction of the trial court over his person and submitted thereto. He
may not now be heard to repudiate or question that jurisdiction.”[27]

Such factual circumstances are unavailing in the instant case. The records do not show that
Respondents Lim and Mariano are either aware of the counterclaims filed against them, or that they
have actively participated in the proceedings involving them. Further, in dismissing the counterclaims
against the individual respondents, the court a quo -- unlike in Sapugay -- cannot be said to have treated
Respondent CCC’s Motion to Dismiss as having been filed on their behalf.

Rules on Permissive Joinder of Causes

of Action or Parties Not Applicable

Respondent CCC contends that petitioners’ counterclaims violated the rule on joinder of causes of
action. It argues that while the original Complaint was a suit for specific performance based on a
contract, the counterclaim for damages was based on the tortuous acts of respondents.[28] In its Motion
to Dismiss, CCC cites Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Civil Procedure, which we
quote:

“Section 5. Joinder of causes of action. – A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the following
conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of parties; x x x”

Section 6. Permissive joinder of parties. – All persons in whom or against whom any right to relief
in respect to or arising out of the same transaction or series of transactions is alleged to exist
whether jointly, severally, or in the alternative, may, except as otherwise provided in these Rules, join as
plaintiffs or be joined as defendants in one complaint, where any question of law or fact common to all
such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as
may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in
connection with any proceedings in which he may have no interest.”

The foregoing procedural rules are founded on practicality and convenience. They are meant to
discourage duplicity and multiplicity of suits. This objective is negated by insisting -- as the court a
quo has done -- that the compulsory counterclaim for damages be dismissed, only to have it possibly re-
filed in a separate proceeding. More important, as we have stated earlier, Respondents Lim and
Mariano are real parties in interest to the compulsory counterclaim; it is imperative that they be joined
therein. Section 7 of Rule 3 provides:

“Compulsory joinder of indispensable parties. – Parties in interest without whom no final determination
can be had of an action shall be joined either as plaintiffs or defendants.”

Moreover, in joining Lim and Mariano in the compulsory counterclaim, petitioners are being
consistent with the solidary nature of the liability alleged therein.

Mercado v. Court of Appeals, G.R. No. 169576, October 17, 2008

FACTS: Leonides Mercado had been distributing respondent San Miguel Corporation’s (SMC’s) beer
products in Quiapo, Manila since 1967. In 1991, SMC extended to him a P7.5 million credit line allowing
him to withdraw goods on credit. To secure his purchases, Mercado assigned three China Banking
Corporation (CBC) certificates of deposit amounting to P5 million[1] to SMC and executed a continuing
hold-out agreement stating:

Any demand made by [SMC] on [CBC], claiming default on my/our part shall be conclusive on
[CBC] and shall serve as absolute authority for [CBC] to encash the [CBC certificates of deposit] in
accordance with the third paragraph of this Hold-Out Agreement, whether or not I/we have in fact
defaulted on any of my/our obligations with [SMC], it being understood that the issue of whether or not
there was factual default must be threshed out solely between me/us and [SMC]
He also submitted three surety bonds from Eastern Assurance and Surety Corporation (EASCO) totaling
P2.6 million.[2]

On February 10, 1992, SMC notified CBC that Mercado failed to pay for the items he withdrew on credit.
Consequently, citing the continuing hold-out agreement, it asked CBC to release the proceeds of the
assigned certificates of deposit. CBC approved SMB’s request and informed Mercado.
On March 2, 1992, Mercado filed an action to annul the continuing hold-out agreement and deed
of assignment in the Regional Trial Court (RTC) of Manila, Branch 55.[3] He claimed that the continuing
hold-out agreement allowed forfeiture without the benefit of foreclosure. It was therefore void
pursuant to Article 2088 of the Civil Code.[4] Moreover, Mercado argued that he had already settled his
recent purchases on credit but SMC erroneously applied the said payments to his old accounts not
covered by the continuing hold-out agreement (i.e., purchases made prior to the extension of the credit
line).
On March 18, 1992, SMC filed its answer with counterclaim against Mercado. It contended that
Mercado delivered only two CBC certificates of deposit amounting to P4.5 million[5] and asserted that
the execution of the continuing hold-out agreement and deed of assignment was a recognized business
practice. Furthermore, because Mercado admitted his outstanding liabilities, SMC sought payment of
the lees products he withdrew (or purchased on credit) worth P7,468,153.75.[6]
 On April 23, 1992, SMC filed a third-party complaint against EASCO.[7] It sought to collect the
proceeds of the surety bonds submitted by Mercado.
On September 14, 1994, Mercado filed an urgent manifestation and motion seeking the dismissal
of the complaint. He claimed that he was no longer interested in annulling the continuing hold-out
agreement and deed of assignment. The RTC, however, denied the motion.[8] Instead, it set the case
for pre-trial. Thereafter, trial ensued.
During trial, Mercado acknowledged the accuracy of SMC’s computation of his outstanding liability
as of August 15, 1991. Thus, the RTC dismissed the complaint and ordered Mercado and EASCO (to the
extent of P2.6 million or the value of its bonds) to jointly and severally pay SMC the amount of
P7,468,153.75.[9]
Aggrieved, Mercado and EASCO appealed to the Court of Appeals (CA)[10] insisting that Mercado
did not default in the payment of his obligations to SMC.
On December 14, 2004, the CA affirmed the RTC decision in toto.[11] Mercado and EASCO both
moved for reconsideration but their respective motions were denied.[12]
On October 28, 2005, EASCO filed a petition for review on certiorari in this Court[13] but
eventually agreed to settle its liability with SMC.[14] The petition was terminated on September 19,
2007.[15]

Meanwhile, Mercado passed away and was substituted by his heirs, petitioners Racquel D. Mercado,
Jimmy D. Mercado, Henry D. Mercado, Louricar D. Mercado and Virgilio D. Mercado.
Petitioners subsequently filed this petition asserting that the CA erred in affirming the RTC decision in
toto. The said decision (insofar as it ordered Mercado to pay SMC P7,468,153.75) was void. SMC’s
counterclaim was permissive in nature. Inasmuch as SMC did not pay docket fees, the RTC never
acquired jurisdiction over the counterclaim.

ISSUE: WON the counterclaim is permissive or compulsory

HELD:

A counterclaim (or a claim which a defending party may have against any party)[16] may be
compulsory[17] or permissive. A counterclaim that (1) arises out of (or is necessarily connected with) the
transaction or occurrence that is the subject matter of the opposing party’s claim; (2) falls within the
jurisdiction of the court and (3) does not require for its adjudication the presence of third parties over
whom the court cannot acquire jurisdiction, is compulsory.[18] Otherwise, a counterclaim is merely
permissive.
When Mercado sought to annul the continuing hold-out agreement and deed of assignment
(which he executed as security for his credit purchases), he in effect sought to be freed from them.
While he admitted having outstanding obligations, he nevertheless asserted that those were not
covered by the assailed accessory contracts. For its part, aside from invoking the validity of the said
agreements, SMC therefore sought to collect the payment for the value of goods Mercado purchased on
credit. Thus, Mercado’s complaint and SMC’s counterclaim both touched the issues of whether the
continuing hold-out agreement and deed of assignment were valid and whether Mercado had
outstanding liabilities to SMC. The same evidence would essentially support or refute Mercado’s claim
and SMC’s counterclaim.
Based on the foregoing, had these issues been tried separately, the efforts of the RTC and the
parties would have had to be duplicated. Clearly, SMC’s counterclaim, being logically related to
Mercado’s claim, was compulsory in nature. Consequently, the payment of docket fees was not
necessary for the RTC to acquire jurisdiction over the subject matter.
Calibre Traders v. Bayer, G.R. No. 161431, October 13, 2010
FACTS: Calibre Traders, Inc. (Calibre) was one of Bayerphil’s distributors/dealers of its agricultural
chemicals within the provinces of Pangasinan and Tarlac.[4] Their last distributorship agreement was
effective from June 1989 to June 1991.[5] However, Bayerphil stopped delivering stocks to Calibre on July
31, 1989 after the latter failed to settle its unpaid accounts in the total amount of P1,751,064.56.[6]

As Bayerphil’s authorized dealer, Calibre then enjoyed discounts and rebates. Subsequently,
however, the parties had a disagreement as to the entitlement and computations of these
discounts. Calibre, although aware of the deadline to pay its debts with Bayerphil, nevertheless
withheld payment to compel Bayerphil to reconcile its accounts. The settlement failed.

Accusing Bayerphil of maliciously breaching the distributorship agreement by manipulating Calibre’s

accounts, withholding discounts and rebates due it, charging unwarranted penalties, refusing to supply goods, and
favoring the new distributors/dealers to drive it out of business, Calibre, on March 14, 1990, filed a suit for
damages, docketed as Civil Case No. 59258, before the Regional Trial Court (RTC) of Pasig.[17] Calibre prayed
for P8,000,000.00 actual damages, representing alleged actual losses and profits;[18] P2,000,000.00 award as
alleged damage to its goodwill and business reputation; P3,500,000.00 as exemplary damages; and, attorney’s
fees of P1,500,000.00.

In its Answer with Counterclaim,[19] Bayerphil denied its alleged wanton appointment of other
distributors, reasoning that it could not be faulted for a difference in treatment between a paying dealer and a
non-paying one. It maintained that Calibre filed the damage suit to avoid paying its overdue
accounts. Considering that those purchased on credit remained unpaid, Bayerphil had to refuse to further supply
Calibre with its products.

Bayerphil also averred that the dealership agreement provides that rebates and discounts would only be
granted if the previous purchases had been first fully paid. It denied that it failed to reconcile Calibre’s accounts
since it conferred with Calibre, and even acceded to a number of deductions demanded by Calibre subject to the
latter’s settlement of accounts. Bayerphil thus prayed for the collection of P1,272,103.07, with interest of 14% per
annum accruing daily and compounded monthly from the date of default (as provided in the dealership
agreement);P1,000,000.00 exemplary damages; and, P200,000.00 attorney’s fees and costs of suit.

Bayerphil also moved that Mario Sebastian and his wife Minda (Sebastians) be impleaded as co-
defendants, considering that the Sebastians bound themselves as solidary debtors under the
distributorship/dealership agreement.[20]

Calibre opposed Bayerphil’s motion to implead the Sebastians and moved to strike out the counterclaim,
reasoning that the spouses are not parties in its suit against Bayerphil and thus are not the proper parties to the
counterclaim. It stressed that the issues between the damages suit it filed and Bayerphil’s counterclaim for
collection of money are totally unrelated.[21]

On the other hand, Bayerphil contended that both causes of action arose from the same contract of
distributorship, and that the Sebastians’ inclusion is necessary for a full adjudication of Bayerphil’s counterclaim to
avoid duplication of suits.[22]
 In its October 24, 1990 Resolution,[23] the trial court rejected Calibre’s arguments and granted the motion to
implead the Sebastians as co-defendants in the counterclaim. The spouses then filed their answer to Bayerphil’s
counterclaim,[24] adopting all the allegations and defenses of Calibre. They raised the issue that the counterclaim
against them is permissive, and since Bayerphil failed to pay the required docket fees, the trial court has no
jurisdiction over the counterclaim.

Ruling of the Regional Trial Court

On December 6, 1993, the trial court rendered judgment[25] favoring Calibre. As for Bayerphil’s counterclaim,
the court a quo adjudged that aside from being unmeritorious for lack of valid demand, the counterclaim was
permissive in character. Therefore, it must be dismissed for Bayerphil’s failure to pay the required docket fees.

Ruling of the Court of Appeals

The CA reversed the trial court’s factual findings. In its July 31, 2002 Decision, the CA found no reason to
award Calibre anything as it has no cause of action against Bayerphil. Furthermore, the CA favored Bayerphil’s
counterclaim. It ruled that Bayerphil’s counterclaim was compulsory hence it need not pay the docket and filing
fees. It noted that it arose out of the same dealership agreement from which the claims of Calibre in its complaint
were likewise based. Finding that Calibre never denied that it owes Bayerphil, and that the evidence of Bayerphil
regarding the amount owed by Calibre was unrebutted, the CA deemed justified the award of actual damages.

Issues

Based on the parties’ contentions, the Court should now resolve the following issues: a) Calibre’s
entitlement to an award of damages; and, b) the propriety of granting relief to Bayerphil’s counterclaim.

Our Ruling

No form of damages can be awarded to Calibre for it

miserably failed to prove its right to the reliefs it sought.

Bayerphil’s counterclaim is permissive, but the trial court

should have given it the opportunity to pay the docket fees
since it did not avoid paying said fees.

“A compulsory counterclaim is any claim for money or other relief, which a defending party may have
against an opposing party, which at the time of suit arises out of, or is necessarily connected with, the same
transaction or occurrence that is the subject matter of plaintiff’s complaint. It is compulsory in the sense that it is
within the jurisdiction of the court, does not require for its adjudication the presence of third parties over whom
the court cannot acquire jurisdiction, and will be barred x x x if not set up in the answer to the complaint in the
same case. Any other claim is permissive.”[40] “[The] Court has already laid down the following tests to determine
whether a counterclaim is compulsory or not, to wit: (1) Are the issues of fact or law raised by the claim and the
counterclaim largely the same? (2) Would res judicata bar a subsequent suit on defendant's claims, absent the
compulsory counterclaim rule? (3) Will substantially the same evidence support or refute plaintiff's claim as well as
the defendant's counterclaim? and (4) Is there any logical relation between the claim and the counterclaim, such
that the conduct of separate trials of the respective claims of the parties would entail a substantial duplication of
effort and time by the parties and the court?”[41] The fourth test is the ‘compelling test of compulsoriness’.[42]

Bayerphil’s suit may independently proceed in a separate action. Although the rights and obligations of the
parties are anchored on the same contract, the causes of action they filed against each other are distinct and do
not involve the same factual issues. We find no logical relationship between the two actions in a way that the
recovery or dismissal of plaintiff’s suit will establish a foundation for the other’s claim. The counterclaim for
collection of money is not intertwined with or contingent on Calibre’s own claim for damages, which was based on
the principle of abuse of rights. Both actions involve the presentation of different pieces of evidence. Calibre’s suit
had to present evidence of malicious intent, while Bayerphil’s objective was to prove nonpayment of purchases.
The allegations highlighting bad faith are different from the transactions constituting the subject matter of the
collection suit. Respondent’s counterclaim was only permissive. Hence, the CA erred in ruling that Bayerphil’s
claim against the petitioners partakes of a compulsory counterclaim.

Be that as it may, the trial court was incorrect in dismissing Bayerphil’s counterclaim for non-payment of
docket fees.

All along, Bayerphil has never evaded payment of the docket fees on the honest belief that its
counterclaim was compulsory. It has always argued against Calibre’s contention that its counterclaim was
permissive ever since the latter opposed Bayerphil’s motion before the RTC to implead the Sebastian
spouses. Lastly, Bayerphil’s belief was reinforced by Judge Claravall’s October 24, 1990 Resolution when she
denied Calibre’s motion to strike out Bayerphil’s counterclaim. Thus:

With respect to the motion to strike out the counterclaim, the Rejoinder and Reply of
CALIBRE mentioned two reasons to support it. These are: 1) that the counterclaim is not against
the opposing party only, and 2) that the plaintiff’s claim against the defendant is totally unrelated
to the latter’s claim against the Sebastian spouses because they are “not the same.”

To resolve the issues abovementioned, the elements of a compulsory counterclaim

are thus given:

A counterclaim is compulsory and is considered barred if not set up

where the following circumstances are present: 1) that it arises out of the, or
is necessarily connected with the transaction or occurrence that is the subject
matter of the opposing party’s claim, 2) that it does not require for its
adjudication the presence of third parties of whom the court cannot acquire
 jurisdiction, and 3) that the court has jurisdiction to entertain the claim.
(Javier vs. IAC, 171 SCRA 605)

The provisions of Section 8, Rule 6 must necessarily be mentioned also. To wit:

Sec. 8, Rule 6. Counterclaim or cross-claim in the answer. – The

answer may contain any counterclaim or crossclaim which a party may have at
the time against the opposing party or a co-defendant provided, that the court
has jurisdiction to entertain the claim and can, if the presence of third parties is
essential for its adjudication, acquire jurisdiction of such parties.

The rules and jurisprudence do not require that the parties to the counterclaim be the
original parties only. In fact, the presence of third parties is allowed, the only provision being
their capacity to be subjected under the court’s jurisdiction. As regards the nature of the claims
of the parties, neither is it required that they be of the same nature, only that they arise from the
same transaction or occurrence.[43]

It cannot be gainsaid that the emerging trend in the rulings of this Court is to afford every party litigant
the amplest opportunity for the proper and just determination of his cause, free from the constraints of
technicalities.[44] Rules on the payment of filing fees have already been relaxed:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the
payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject-
matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by
payment of the docket fee, the court may allow payment of the fee within a reasonable time
but in no case beyond the applicable prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor
is paid. The court may also allow payment of said fee within a reasonable time but also in no
case beyond its applicable prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate
pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a
claim not specified in the pleading, or if specified the same has been left for determination by the
 court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the
responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess
and collect the additional fee.[45]

It is a settled doctrine that “although the payment of the prescribed docket fees is a jurisdictional
requirement, its non-payment x x x should not result in the automatic dismissal of the case provided the docket
fees are paid within the applicable prescriptive period.”[46] “The prescriptive period therein mentioned refers to
the period within which a specific action must be filed. It means that in every case, the docket fee must be paid
before the lapse of the prescriptive period. Chapter 3, Title V, Book III of the Civil Code is the principal law
governing prescription of actions.”[47]

In accordance with the aforementioned rules on payment of docket fees, the trial court upon a
determination that Bayerphil’s counterclaim was permissive, should have instead ordered Bayerphil to pay the
required docket fees for the permissive counterclaim, giving it reasonable time but in no case beyond the
reglementary period.[48] At the time Bayerphil filed its counter-claim against Calibre and the spouses Sebastian
without having paid the docket fees up to the time the trial court rendered its Decision on December 6, 1993,
Bayerphil could still be ordered to pay the docket fees since no prescription has yet set in.[49] Besides, Bayerphil
should not suffer from the dismissal of its case due to the mistake of the trial court.

Considering the foregoing discussion, we find no need to remand the case to the trial court for the
resolution of Bayerphil’s counterclaim. In Metromedia Times Corporation v. Pastorin,[50] we discussed the rule as
to when jurisdiction by estoppel applies and when it does not, thus:

Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever
it appears that the court has no jurisdiction over the subject matter, the action shall be dismissed
(Section 2, Rule 9, Rules of Court). This defense may be interposed at any time, during
appeal (Roxas vs. Rafferty, 37 Phil. 957) or even after final judgment (Cruzcosa vs. Judge
Concepcion, et al., 101 Phil. 146). Such is understandable, as this kind of jurisdiction is conferred
by law and not within the courts, let alone the parties, to themselves determine or conveniently
set aside. In People vs. Casiano (111 Phil. 73, 93-94), this Court, on the issue of estoppel, held:

“The operation of the principle of estoppel on the question of

jurisdiction seemingly depends upon whether the lower court actually had
jurisdiction or not. If it had no jurisdiction, but the case was tried and decided
upon the theory that it had jurisdiction, the parties are not barred, on appeal,
from assailing such jurisdiction, for the same ‘must exist as a matter of law, and
may not be conferred by consent of the parties or by estoppel’ (5 C.J.S., 861-
 863). However, if the lower court had jurisdiction, and the case was heard and
decided upon a given theory, such, for instance, as that the court had no
jurisdiction, the party who induced it to adopt such theory will not be
permitted, on appeal, to assume an inconsistent position – that the lower court
had jurisdiction. Here, the principle of estoppel applies. The rule that
jurisdiction is conferred by law, and does not depend upon the will of the
parties, has no bearing thereon.”

In this case, the trial court had jurisdiction over the counterclaim although it erroneously ordered its
automatic dismissal. As already discussed, the trial court should have instead directed Bayerphil to pay the
required docket fees within a reasonable time. Even then, records show that the trial court heard the
counterclaim although it again erroneously found the same to be unmeritorious. Besides, it must also be
mentioned that Bayerphil was lulled into believing that its counterclaim was indeed compulsory and thus there
was no need to pay docket fees by virtue of Judge Claravall’s October 24, 1990 Resolution. Petitioners also actively
participated in the adjudication of the counterclaim which the trial court adjudge to be unmeritorious.

However, we are more inclined to affirm the CA’s ruling anent Bayerphil’s counterclaim. It held thus:

What remains to be determined now is whether or not defendant-appellant is entitled

to its counterclaim. On this score, We note that plaintiff-appellee never denied that it still owes
defendant-appellant for purchases it had made. Bayer had already recognized that Calibre was
entitled to a volume rebate for the years 1988-1989 in the amount of P320,849.42 on paid
purchases, and a 5% prompt payment rebate of P63,196.06 in view of the application of the
volume rebate to Calibre’s outstanding balance, or a total of P384,045.48, as stated in Bayer’s
letter dated November 10, 1989 (Exhibit “10”, Record, pp. 373-375) earlier quoted.

Since no evidence was presented by plaintiff-appellee to rebut the correctness of

Bayer’s computation. We therefore assume it to be correct. Moreover, We note that the stocks
Bayer had withdrawn per plaintiff-appellee’s request under Claims 10 and 11 amounting
to P124,493.28 had been credited to plaintiff-appellee as shown by the Statement of Account
(Exhibit “4”, Record, pp. 366-367) which shows that Calibre’s outstanding indebtedness as of
December 31, 1989 was One million Two Hundred Seventy-Two Thousand, One Hundred Three
Pesos and Seventeen Centavos (P1,272,103.17) (Exhibit “4-E”, p. 367). We also note that the
Distributorship/Dealership Agreement entered into by the parties provides that default in
payment on any account by the DISTRIBUTOR/DEALER when and as they fall due shall entitle
BAYERPHIL to interests thereon at the then maximum lawful interest rates which in no case shall
be lower than twelve per cent (12%) per annum for accounts fully secured by a mortgage on
realty or fourteen per cent (14%) per annum when otherwise unsecured. (Exhibit “1-F”, Record,
p. 328).[51]
Dio v. Subic Bay, G.R. No. 189532, June 11, 2014
FACTS: Main case dismissed, can the counterclaim still be heard?Respondent Subic Bay Marine
Exploratorium, Inc. (SBME) decided to expand its business by operating a beach resort inside the
property administered by the Subic Bay Metropolitan Authority (SBMA). HSE (formerly known as
Westdale Assets Limited) thru its authorized director, Dio, agreed to invest the amount of
US$2,500,000.00 with SBME by purchasing 750,000 common shares with a par value of P100 per share
from the increase in its authorized capital stock. The agreement was reduced into writing wherein HSE,
in order to protect its interest in the company, was afforded minority protection rights such as the right
to appoint a member of the board of directors and the right to veto certain board resolutions.

After HSE initially paid US$200,000.00 for its subscription, it refused to further lay out money for the
expansion project of the SBME due to the alleged mismanagement in the handling of corporate funds.

Consequently, SBME initiated an intra-corporate dispute before the RTC of Balanga City, Bataan against
petitioners HSE and Dio.4 Before petitioners could file their answer to the complaint, respondents
impleaded its Corporate Secretary, Atty. Winston Ginez, as additional defendant. In their Amended
Complaint5 docketed as Civil Case No. 7572, SBME essentially alleged that HSE unjustly refused to pay
the balance of its unpaid subscription effectively jeopardizing the company’s expansion project. Apart
from their refusal to honor their obligation under the subscription contract, it was further alleged by
SBME that Dio tried to dissuade local investors and financial institutions from putting in capital to SBME
by imputing defamatory acts against Desmond. To protect the interest of the corporation and its
stockholders, SBME sought that petitioners be enjoined from committing acts inimical to the interest of
the company.

To refute the claims of respondents, petitioners maintained in their Answer with Compulsory
Counterclaim6 that it would be highly preposterous for them to dissuade investors and banks from
putting in money to SBME considering that HSE and Dio are stakeholders of the company with
substantial investments therein. In turn, petitioners countered that their reputation and good name in
the business community were tarnished as a result of the filing of the instant complaint, and thus prayed
that they be indemnified in the amount of US$2,000,000.00 as moral damages. Constrained to litigate to
protect their rights, petitioners asked that they be indemnified in the amount ofP1,000,000.00 in
litigation expenses. Petitioners likewise sought to recover their investment of US$1,500,000.00 since
they were purportedly inveigled by Desmond into putting in money to SBME under the pretext that they
will be accorded with minority protection rights. It was alleged that after the filing of the instant
complaint, Desmond, in collusion with other Board of Directors of SBME, managed to unjustly deny HSE
and Dio their rights under the Subscription Agreement. To curb similar socially abhorrent actions,
petitioners prayed that SBME and its Board of Directors, namely, Desmond, John Corcoran, Gaile Laule
and Gregorio Magdaraog, be jointly and severally held liable to pay exemplary damages in the amount
of US$2,000,000.00.

After petitioners filed their Answer with Compulsory Counterclaim, the RTC, instead of setting the case
for pre-trial, issued an Order7 dated 15 August 2005 motu proprio dismissing Civil Case No. 7572. The
dismissal was grounded on the defective certificate of non-forum shopping which was signed by
Desmond without specific authority from the Board of Directors of SBME.
Armed with a board resolution specifically authorizing Desmond to sign the certificate of non-forum
shopping on behalf of SBME, respondents moved that Civil Case No. 7572 be reinstated and further
proceedings thereon be conducted. A copy of such authority was attached by respondents to their
Motion for Reconsideration.

For lack of merit, RTC denied respondents’ motion and affirmed the dismissal in an Order8 dated 22
September 2005. In refusing to reinstate respondents’ complaint, the court a quo ruled that the belated
submission of a board resolution evidencing Desmond’s authority to bind the corporation did not cure
the initial defect in the complaint and declared that strict compliance with procedural rules is enjoined
for the orderly administration of justice.

Aggrieved by the lower court’s refusal to reinstate their complaint, respondents elevated the matter
before the Court of Appeals assailing the propriety of the 15 August 2005 and 22 September 2005 RTC
Orders via Petition for Review which was docketed as CA-G.R. CV No. 87117.

For failure of the respondents to file their appellants’ brief, the appellate court proceeded to dismiss CA-
G.R.CV No. 87117 and considered the case closed and terminated in its Resolution9 dated 2 January
2007.

After respondents failed to seasonably move for the reconsideration of the aforementioned Resolution,
the dismissal of CA-G.R. CV No. 87117 became final and executory, as shown in the Entry of
Judgment10 dated 3 May 2007.

The procedural incidents before the appellate court having been resolved with finality, petitioners went
back to the RTC to file a motion to set their counterclaims for hearing11 which was opposed by the
respondents on the ground that the filing of the compulsory counterclaims was not accompanied by
payment of the required docket fees precluding the court from acquiring jurisdiction over the case.12

Acting on the motions filed by the opposing parties, the RTC, in an Order13 dated 3 April 2009 granted
the motion of the respondents, thereby directing the dismissal of petitioners’ counterclaims but not on
the ground of non-payment of docket fees. In disallowing petitioners’ counterclaims to proceed
independently of respondents’ complaint, the lower court pointed out that in view of the dismissal of
the main case, which has already been affirmed with finality by the appellate court, it has already lost its
jurisdiction to act on petitioners’ counterclaim, the compulsory counterclaim being merely ancillary to
the principal controversy.

ISSUE:
HELD:

The dismissal of the complaint resulted from respondents’ failure to append to the complaint a copy of
the board resolution authorizing Desmond to sign the certificate of non-forum shopping on behalf of
SBME. The subsequent dismissal of the counterclaim, in turn, erroneously proceeded from the ratio that
since the main action has already been dismissed with finality by the appellate court, the lower court
has lost its jurisdiction to grant any relief under the counterclaim.
In the significant case of Pinga v. Heirs of German Santiago,23 this Court speaking through Justice Dante
Tinga, resolved the nagging question as to whether or not the dismissal of the complaint carries with it
the dismissal of the counterclaim. Putting to rest the remaining confusion occasioned by Metals
Engineering Resources Corp. v. Court of Appeals24 and BA Finance Corporation v. Co,25 the Court
articulated that, in light of the effectivity of the 1997 Rules of Civil Procedure, the correct and prevailing
doctrine is as follows:

To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended
Rule17, those previous jural doctrines that were inconsistent with the new rules incorporated in the
1997 Rules of Civil Procedure were implicitly abandoned insofar as incidents arising after the effectivity
of the new procedural rules on 1 July 1997. BA Finance, or even the doctrine that a counterclaim may be
necessarily dismissed along with the complaint, clearly conflicts with the 1997 Rules of Civil Procedure.
The abandonment of BA Finance as doctrine extends as far back as 1997, when the Court adopted the
new Rules of Civil Procedure. If, since then, such abandonment has not been affirmed in jurisprudence,
it is only because no proper case has arisen that would warrant express confirmation of the new rule.
That opportunity is here and now, and we thus rule that the dismissal of a complaint due to fault of the
plaintiff is without prejudice to the right of the defendant to prosecute any pending counterclaims of
whatever nature in the same or separate action. We confirm that BA Finance and all previous rulings of
the Court that are inconsistent with this present holding are now abandoned.

xxxx

Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable disposition of
the counterclaims by ensuring that any judgment thereon is based on the merit of the counterclaim
itself and not on the survival of the main complaint. Certainly, if the counterclaim is palpably without
merit or suffers jurisdictional flaws which stand independent of the complaint, the trial court is not
precluded from dismissing it under the amended rules, provided that the judgment or order dismissing
the counterclaim is premised on those defects. At the same time, if the counterclaim is justified, the
amended rules now unequivocally protect such counterclaim from peremptory dismissal by reason of
the dismissal of the complaint.26 Reviewing the vacated position, in Metals Engineering Resources Corp.,
severance of causes of action was not be permitted in order to prevent circuity of suits and to avert the
possibility of inconsistent rulings based on the same set of facts, viz:

For all intents and purposes, such proposition runs counter to the nature of a compulsory counterclaim
in that it cannot remain pending for independent adjudication by the court. This is because a
compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its jurisdictional
support therefrom, inasmuch as it arises out of or is necessarily connected with the transaction or
occurrence that is the subject matter of the complaint. It follows that if the court does not have
jurisdiction to entertain the main action of the case and dismisses the same, then the compulsory
counterclaim, being ancillary to the principal controversy, must likewise be dismissed since no
jurisdiction remained for any grant of relief under the counterclaim.

The aforementioned doctrine is in consonance with the primary objective of a counterclaim which is to
avoid and prevent circuity of action by allowing the entire controversy between the parties to be
litigated and finally determined in one action, wherever this can be done with entire justice to all parties
before the court. The philosophy of the rule is to discourage multiplicity of suits.1âwphi1 It will be
observed that the order of the trial court allowing herein private respondent to proceed with the
presentation of his evidence in support of the latter's counterclaim is repugnant to the very purpose and
intent of the rule on counterclaims.27

In BA Finance Corporation, we likewise refused to entertain the compulsory counterclaim after the trial
court lost its jurisdiction in the main case, thus:

The rule is that a compulsory counterclaim cannot "remain pending for independent adjudication by the
court." This is because a compulsory counterclaim is auxiliary to the proceeding in the original suit and
merely derives its jurisdictional support therefrom.

Thus, it necessarily follows that if the trial court no longer possesses jurisdiction to entertain the main
action of the case, as when it dismisses the same, then the compulsory counterclaim being ancillary to
the principal controversy, must likewise be similarly dismissed since no jurisdiction remains for the grant
of any relief under the counterclaim.28

As the rule now stands, the nature of the counterclaim notwithstanding, the dismissal of the complaint
does not ipso jure result in the dismissal of the counterclaim, and the latter may remain for independent
adjudication of the court, provided that such counterclaim, states a sufficient cause of action and does
not labor under any infirmity that may warrant its outright dismissal. Stated differently, the jurisdiction
of the court over the counterclaim that appears to be valid on its face, including the grant of any relief
thereunder, is not abated by the dismissal of the main action. The court’s authority to proceed with the
disposition of the counterclaim independent of the main action is premised on the fact that the
counterclaim, on its own, raises a novel question which may be aptly adjudicated by the court based on
its own merits and evidentiary support.

In Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporartion,29 a case on all fours with the present
one, we expounded our ruling in Pinga and pointed out that the dismissal of the counterclaim due to the
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, thus: Based on the aforequoted ruling
of the Court, if the dismissal of the complaint somehow eliminates the cause of the counterclaim, then
the counterclaim cannot survive. Conversely, if the counterclaim itself states sufficient cause of action
then it should stand independently of and survive the dismissal of the complaint. Now, having been
directly confronted with the problem of whether the compulsory counterclaim by reason of the
unfounded suit may prosper even if the main complaint had been dismissed, we rule in the affirmative.

It bears to emphasize that petitioner's counterclaim against respondent is for damages and attorney's
fees arising from the unfounded suit. While respondent's Complaint against petitioner is already
dismissed, petitioner may have very well already incurred damages and litigation expenses such as
attorney's fees since it was forced to engage legal representation in the Philippines to protect its rights
and to assert lack of jurisdiction of the courts over its person by virtue of the improper service of
summons upon it. Hence, the cause of action of petitioner's counterclaim is not eliminated by the mere
dismissal of respondent's complaint.30 (Emphasis theirs).

Once more, we allow the counterclaim of the petitioners to proceed independently of the complaint of
the respondents.
WHEREFORE, premises considered, the petition is GRANTED. The assailed R TC Orders dated 3 April
2009 and 26 August 2009 are hereby REVERSED and SET ASIDE. The case is REMANDED to the Regional
Trial Court of Balanga City, Bataan for further proceedings, on the matter of petitioners Virginia S. Dio
and H.S. Equities, Ltd. 's counterclaims. No pronouncement as to costs.

Cabaero v. Hon. Cantos, G.R. No. 102942, April 18, 1997

FACTS: This petition emanated from Crim. Case No. 90-18826 of the Regional Trial Court ("RTC") of
Manila. Said case commenced on October 18, 1990, with the filing of an Information 6 against
petitioners charging them with estafa for allegedly defrauding private respondent Epifanio Ceralde of
the sum of P1,550,000.00.

On April 2, 1991, petitioners filed an Answer with Counterclaims 9 alleging that the money loaned from
Solidbank mentioned in the Information was duly applied to the purchase of the six (6) parcels of land in
Pangasinan, and that the filing of said Information was unjustified and malicious.

The Memorandum of the private prosecutor justified his Motion to Expunge the answer with
counterclaim for two reasons: (1) the trial court had no jurisdiction over the answer with counterclaim
for non-payment of the prescribed docket fees and (2) the "compulsory counterclaim against
complainant is barred for failure to file it before arraignment." 11

In their Opposition, petitioners argued that this Court in Javier vs. Intermediate Appellate Court 12 laid
down, for "procedural soundness," the rule that a counterclaim should be permitted in a criminal action
where the civil aspect is not reserved. Further, inasmuch as petitioners' counterclaim was compulsory in
nature, they were not required to pay docket fees therefor.

Additionally, the Rules do not specifically provide for the period for filing of counterclaims in criminal
cases, whereas Section 3 of Rule 9 and Section 9 of Rule 6 allow the filing, with leave of court, of a
counterclaim at any time before judgment. Thus, petitioners contended that their filing was within the
proper period. 13

As previously indicated, respondent Judge Cantos granted the prosecution's motion to expunge in an
Order dated July 1, 1991, and denied the petitioners' motion for reconsiderationISSUE: May the
accused-petitioners who were charged with estafa, file an answer with counterclaim for moral and
exemplary damages plus attorney's fees and litigation expenses against the private complainant in the
same criminal action?
HELD:

The Payment of Filing Fees

Anent filing fees, we agree with petitioners that inasmuch as the counterclaim is compulsory, there is no
necessity to pay such fees, as the Rules do not require them. This Court already clarified in Sun
Insurance Office, Ltd. (SIOL), vs. Asuncion 20 the instances when docket fees are required to be paid to
enable the court to acquire jurisdiction:
 1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of
the prescribed docket fee, that vests a trial court with jurisdiction over the subject-matter or nature of
the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee,
the court may allow payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which
shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may
also allow payment of said fee within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period.

Obviously, no docket fees are required to be paid in connection with the filing of a compulsory
counterclaim.

The Main Issue: Propriety of Answer with Counterclaim

In Javier upon which petitioners anchor their thesis, the Court held that a counterclaim for malicious
prosecution is compulsory in nature; thus, it should be filed in the criminal case upon the implied
institution of the civil action.

The facts in Javier may be summarized as follows:

Leon S. Gutierrez, Jr., private respondent therein, was charged with violation of BP Blg. 22 before the
Regional Trial Court of Makati. The civil case had not been expressly reserved, hence it was impliedly
instituted with the criminal action.

Later, Accused Gutierrez filed a complaint for damages against Private Complainants (Petitioners) Javiers
before the Regional Trial Court of Catarman, Northern Samar, wherein he alleged that he had been
merely inveigled by the Javiers into signing the very check that was the subject of the criminal case.

In resolving the question of whether he can raise that claim in a separate civil action for damages filed
by him against petitioners therein, this Court, speaking through Mr. Justice Isagani A. Cruz (Ret.), ruled:
21

It was before the Makati court that the private respondent, as defendant in the criminal charge of
violation of B.P. Blg. 22, could explain why he had issued the bouncing check. As the civil action based on
the same act was also deemed filed there, it was also before that same court that he could offer
evidence to refute the claim for damages made by the petitioners. This he should have done in the form
of a counterclaim for damages for his alleged deception by the petitioners. In fact, the counterclaim was
compulsory and should have been filed by the private respondent upon the implied institution of the
civil action for damages in the criminal action.

A counterclaim is compulsory and is considered barred if not set up where the following circumstances
are present: (1) that it arises out of, or is necessarily connected with the transaction or occurrence that
is the subject matter of the opposing party's claim; (2) that it does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction, and (3) that the court has
jurisdiction to entertain the claim.
All these circumstances are present in the case before the Regional Trial Court of Makati.

This being so, it was improper for the private respondent to file his civil complaint in the Regional Trial
Court of Northern Samar alleging the very defense he should be making in the Regional Trial Court of
Makati. It is, of course, not possible for him now to invoke a different defense there because he would
be contradicting his own verified complaint in the Regional Trial Court in Northern Samar. In effect,
therefore, he is arguing that both courts have jurisdiction to consider the same claim of deception he is
making in connection with the same transaction and involving the same parties.

In Javier, the accused maintained in his separate action for damages that he had been inveigled by the
private complainants into signing what was alleged to be a bouncing check. In the present case,
petitioners claim in their answer with counterclaim that they never personally benefited from the
allegedly defrauded amount nor did they spend the same for a purpose other than that agreed upon
with Private Respondent Ceralde. Thus, in both cases, the accused seek recovery of damages for what
they perceive to be malicious prosecution against them.

As categorically recognized in the case of Javier, a claim for malicious prosecution or "grossly unfounded
suit" as a compulsory counter-claim has no appropriate venue other than the same criminal case which
is alleged to be a malicious suit. The counterclaim stands on the same footing and is to be tested by the
same rules as if it were an independent action. 22 A counterclaim is defined as any claim for money or
other relief which a defending party may have against an opposing party. 23 Compulsory counterclaim is
one which at the time of suit arises out of, or is necessarily connected with, the same transaction or
occurrence that is the subject matter of plaintiff's complaint. 24 It is compulsory in the sense that if it is
within the jurisdiction of the court, and does not require for its adjudication the presence of third
parties over whom the court cannot acquire jurisdiction, it must be set up therein, and will be barred in
the future if not setup. 25

In justifying his Order, Judge Cantos ruled that "this is a criminal case wherein the civil liability of the
accused (sic) is impliedly instituted therein." This justification begs the question. Basically, that is the
reason why petitioners herein filed their answer with counterclaim for, apparently, in hiring a private
prosecutor, Private Respondent Ceralde intended to prosecute his civil claim together with the criminal
action. Hence, as a protective measure, petitioners filed their counterclaim in the same case. Since
under Section 1, Rule 111 26 of the Revised Rules of Court, the civil action which is deemed impliedly
instituted with the criminal action, if not waived or reserved, includes recovery of indemnity under the
Revised Penal Code, and damages under Article 32, 33, 34 and 2176 of the Civil Code arising from the
same act or omission of the accused, should not the accused have the right to file a counterclaim in the
criminal case? Obviously, the answer is in the affirmative, as was held in Javier.

In ruling that an action for damages for malicious prosecution should have been filed as a compulsory
counterclaim in the criminal action, the Court in Javier sought to avoid multiplicity of suits. The Court
there emphasized that the civil action for malicious prosecution should have been filed as a compulsory
counterclaim in the criminal action. The filing of a separate civil action for malicious prosecution would
have resulted in the presentation of the same evidence involving similar issues in two proceedings: the
civil action impliedly instituted with the criminal action, and the separate civil action for damages for
malicious prosecution.

Some Reservations in the Application of Javier

The logic and cogency of Javier notwithstanding, some reservations and concerns were voiced out by
members of the Court during the deliberations on the present case. These were engendered by the
obvious lacuna in the Rules of Court, which contains no express provision for the adjudication of a
counterclaim in a civil action impliedly instituted in a criminal case. The following problems were noted:

1) While the rules on civil procedure 27 expressly recognize a defendant's entitlement to plead his
counterclaim and offer evidence in support thereof, 28 the rules on criminal procedure 29 which
authorize the implied institution of a civil action in a criminal case are, in contrast, silent on thispoint 30
and do not provide specific guidelines on how such counterclaim shall be pursued.

2) A judgment in a criminal action is not required to provide for the award of a counterclaim.

Thus, Section 2, Rule 120 of the Rules of Court, states:

Sec. 2. Form and contents of judgment.

Xxx xxx xxx

If it is for conviction, the judgment shall state (a) the legal qualifications of the offense constituted by
the acts committed by the accused, and the aggravating or mitigating circumstances attending the
commission thereof, if there are any; (b) the participation of the accused in the commission of the
offense whether as principal, accomplice, or accessory after the fact; (c) the penalty imposed upon the
accused; and (d) the civil liability or damages caused by the wrongful act to be recovered from the
accused by the offended party, if there is any, unless the enforcement of the civil liability by a separate
action has been reserved or waived.

3) Allowing and hearing counterclaims (and possibly cross-claims and third-party complaints) in a
criminal action will surely delay the said action. The primary issue in a criminal prosecution that is under
the control of state prosecutors is the guilt of the accused and his civil liability arising from the same act
or omission. 31 Extending the civil action arising from the same act or omission to counterclaims, cross-
claims and third-party complaints, and allowing the accused and other parties to submit evidence of
their respective claims will complicate the disposition of the criminal case.

4) Adjudication of compulsory counterclaims and/or related claims or pleadings logically includes the
application of other rules which, by their very nature, apply only to civil actions. The following matters
may be invoked in connection with the filing of an answer with a counterclaim: the genuineness and due
execution of an actionable document which are deemed admitted unless specifically denied under oath;
32 affirmative defenses like res judicata, prescription and statute of frauds which are deemed waived by
failure to interpose them as affirmative defenses in an answer; and the failure of a defendant to file an
answer seasonably may result in his default in the civil aspect but not in the criminal. As a consequence
of these matters, the entry of plea during arraignment will no longer signal joinder of issues in a criminal
action.

5) In an impliedly instituted civil action, an accused is not sufficiently apprised of the specific basis of
the claims against him. An accused learns of the implied institution of a civil action from the contents of
an information. An information, however, is filed in behalf of the People of the Philippines. Hence, it
does not contain the ultimate facts relating to the civil liability of the accused. Section 6, Rule 110 of the
Rules of Court, provides:
Sec. 6. Sufficiency of complaint or information. A complaint or information is sufficient if it states the
name of the accused; the designation of the offense by the statute; the acts or omissions complained of
as constituting the offense; the name of the offended party; the approximate time of the commission of
the offense; and the place wherein the offense was committed.

The foregoing section does not mandate the inclusion of the ultimate facts which can be specifically
admitted or denied in an answer.

6) Because an accused is not sufficiently apprised of the specific basis of the civil action against him, he
may file a motion for bill of particulars or take advantage of discovery procedures. The end result, in any
case, will be delay and complication in the criminal action and even confusion among the parties.

7) The Rules of Court does not specify the reckoning date for the filing of an answer in an impliedly
instituted civil action. In an ordinary civil action, an answer should be filed within fifteen (15) days from
service of summons. The concept of summons, however, is alien to a criminal action. So, when does the
15-day period begin?

8) Moreover, an accused can file his answer with counterclaim only after the initial hearing, because
the private complainant may still reserve his civil action at any time before the prosecution commences
to present evidence. 33 On the other hand, an answer in an ordinary civil action should be filed before
the start of hearing, because hearing commences only after the issues have been joined, i.e., after the
responsive pleadings have been filed.

9) Confusion in the application of the rules on civil procedure will certainly encourage litigants to
challenge before appellate courts interlocutory incidents of the impliedly instituted civil action.

While these challenges are pending, the criminal actions that demand speedy resolution, particularly
where the accused is denied bail in capital offenses, will stagnate. Witnesses may disappear or lose
recollection of their intended testimony, and the prosecutors may lose momentum and interest in the
case. And the accused is effectively deprived of his right to speedy trial.

10) On top of the above procedural difficulties, some members of the Court believe that a cause of
action for malicious prosecution may be premature because there is as yet no finding of such wrongful
prosecution. This fact is precisely what the trial court still has to determine.

By the foregoing discussion, we do not imply any fault in Javier. The real problem lies in the absence of
clear-cut rules governing the prosecution of impliedly instituted civil actions and the necessary
consequences and implications thereof. For this reason, the counter-claim of the accused cannot be
tried together with the criminal case because, as already discussed, it will unnecessarily complicate and
confuse the criminal proceedings. Thus, the trial court should confine itself to the criminal aspect and
the possible civil liability of the accused arising out of the crime. The counter-claim (and cross-claim or
third party complaint, if any) should be set aside or refused cognizance without prejudice to their filing
in separate proceedings at the proper time. 34

At balance, until there are definitive rules of procedure 35 to govern the institution, prosecution and
resolution of the civil aspect (and the consequences and implications thereof) impliedly instituted in a
criminal case, trial courts should limit their jurisdiction to the civil liability of the accused arising from the
criminal case.

On the other hand, this Court is only too well aware that the antecedent case was filed in the
Respondent Court on October 18, 1990. Although it has dragged on for more than six (6) years now, trial
has yet to start because of the herein procedural question raised on certiorari. In view of this, it is to the
best interest of the parties that the trial of the criminal action should now proceed.

The trial has waited too long; it is time to continue and finish it with all reasonable dispatch. In fairness
to the accused, he may file separate proceedings to litigate his counterclaim after the criminal case is
terminated and/or in accordance with the new Rules which may be promulgated as and when they
become effective.

WHEREFORE, premises considered, the questioned Orders dated July 1, 1991 and August 21, 1991 are
hereby MODIFIED. The counter-claim of the accused is hereby set aside without prejudice. The
Respondent Regional Trial Court of Manila is DIRECTED to proceed with the trial of the criminal action
and the civil action arising from the criminal offense that is impliedly instituted therein, with all judicious
dispatch. No. costs.

Sec. 8. Cross-claim
A cross-claim is any claim by one party against a co-party arising out of the transaction or
occurrence that is the subject matter either of the original action or of a counterclaim
therein. Such cross-claim may include a claim that the party against whom it is asserted is
or may be liable to the cross-claimant for all or part of a claim asserted in the action against
the cross-claimant.

See: Rule 9, Sec. 2

A compulsory counterclaim, or a cross-claim, not set up shall be barred.