FIRST DIVISION

NAGKAKAISANG LAKAS NG MANGGAGAWA SA KEIHIN (NLMK-OLALIA-KMU) and HELEN VALENZUELA, Petitioners, G.R. No. 171115

- versus -

KEIHIN PHILIPPINES CORPORATION, Respondent.

Promulgated: August 9, 2010

x----------------------- -------------------------------------------x

DECISION
DEL CASTILLO, J.: This Petition for Review on Certiorari[1] assails the November 2, 2005 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 91718 dismissing outright the petition for certiorari filed by the petitioners, as well as its January 6, 2006 Resolution[3] denying petitioners Motion for Reconsideration. Factual Antecedents Petitioner Helen Valenzuela (Helen) was a production associate in

respondent Keihin Philippines Corporation (Keihin), a company engaged in the production of intake manifold and throttle body used in motor vehicles manufactured by Honda. It is a standard operating procedure of Keihin to subject all its employees to reasonable search before they leave the company premises.[4] On September 5, 2003, while Helen was about to leave the company premises, she saw a packing tape near her work area and placed it inside her bag because it would be useful in her transfer of residence. When the lady guard on duty inspected Helens bag, she found the packing tape inside her bag. The guard confiscated it and submitted an incident report[5] dated September 5, 2003 to the Guard-in-Charge, who, in turn, submitted a memorandum[6] regarding the incident to the Human Resources and Administration Department on the same date. The following day, or on September 6, 2003, respondent company issued a show cause notice[7] to Helen accusing her of violating F.2 of the companys Code of Conduct, which says, Any act constituting theft or robbery, or any attempt to commit theft or robbery, of any company property or other associates property. Penalty: D (dismissal).[8] Paul Cupon, Helens supervisor, called her to his office and directed her to explain in writing why no disciplinary action should be taken against her. Helen, in her explanation,[9] admitted the offense and even manifested that she would accept whatever penalty would be imposed upon her. She, however, did not reckon that respondent company would terminate her services for her admitted offense.[10] On September 26, 2003, Helen received a notice[11] of disciplinary action informing her that Keihin has decided to terminate her services.

On October 15, 2003, petitioners filed a complaint[12] against respondent for illegal dismissal, non-payment of 13th month pay, with a prayer for reinstatement and payment of full backwages, as well as moral and exemplary damages. Petitioners alleged that Helens act of taking the packing tape did not constitute serious misconduct, because the same was done with no malicious intent.[13] They believed that the tape was not of great value and of no further use to respondent company since it was already half used. Although Helen admitted that she took the packing tape, petitioners claimed that her punishment was disproportionate to her infraction. Keihin, on the other hand, maintained that Helen was guilty of serious misconduct because there was a deliberate act of stealing from the company. Respondent company also claimed that motive and value of the thing stolen are irrelevant in this case. Ruling of the Labor Arbiter On July 30, 2004, the Labor Arbiter[14] rendered his Decision[15] dismissing the complaint of illegal dismissal. He brushed aside petitioners argument that the penalty imposed on Helen was disproportionate to the offense committed,[16] and held that she indeed committed a serious violation of the companys policies amounting to serious misconduct,[17] a just cause for terminating an employee under Article 282 of the Labor Code. The Labor Arbiter likewise upheld the right of the company to terminate Helen on the ground of loss of confidence or breach of trust.[18] The Labor Arbiter further held that Keihin observed the requirements of procedural due process in implementing the dismissal of Helen.[19] He ruled that the following circumstances showed that the company observed the requirements of procedural due process: a) there

was a show cause letter informing Helen of the charge of theft and requiring her to submit an explanation; b) there was an administrative hearing giving her an opportunity to be heard; and c) the respondent company furnished her with notice of termination stating the facts of her dismissal, the offense for which she was found guilty, and the grounds for her dismissal.[20] Ruling of the National Labor Relations Commission (NLRC) On appeal, the NLRC dismissed the appeal of the petitioners and affirmed in toto the Decision of the Labor Arbiter. It held that petitioners admitted in their Position Paper that Helen took the packing tape strewn on the floor near her production line within the company premises.[21] By the strength of petitioners admission, the NLRC held that theft is a valid reason for Helens dismissal.[22] As to the issue of due process, the pertinent portion of the Decision[23] of the NLRC reads:
Complainants dismissal too, was with due process. Procedural due process only requires employers to furnish their errant employees written notices stating the particular acts or omissions constituting the grounds for their dismissal and to hear their side of the story (Mendoza vs. NLRC, 310 SCRA 846 [1999]). Complainants claim that the showcause letter did not pass the stringent requirement of the law is belied by her admission in her position paper that Mr. Cupon furnished her a form, simultaneously asking her why she did such an act and x x x that Mr. Cupon directed her to submit a written explanation on the matter, which she complied with. By Complainants own admission then, it is clear that she was furnished a written notice informing her of the particular act constituting the ground for her dismissal and that x x x her side of the story [was heard]. Evidently then, Complainant was afforded due process prior to her dismissal.

The dispositive portion of the Decision of the NLRC reads:

WHEREFORE, premises considered, Complainants appeal is DISMISSED for lack of merit. The Labor Arbiters assailed Decision in the above-entitled case is hereby AFFIRMED in toto. SO ORDERED.[24]

Ruling of the Court of Appeals

After having their Motion for Reconsideration[25] denied[26] by the NLRC, the petitioner union, the Nagkakaisang Lakas ng Manggagawa sa Keihin, filed a Petition for Certiorari with the CA praying that the Decision of the NLRC be set aside. However, in a Resolution[27] dated November 2, 2005, the CA dismissed the petition outright for not having been filed by an indispensable party in interest under Section 2, Rule 3 of the Rules of Court.
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.

Petitioners filed a Motion for Reconsideration[28] but it was denied by the CA in its Resolution[29] of January 6, 2006. Hence, petitioners filed the present petition for review on certiorari under Rule 45, asking the Court to reverse the Resolutions of the CA and

enter a new one declaring Helens dismissal unjustified. They anchor their petition on the following grounds:
I. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT THE PETITION FOR CERTIORARI FILED BY THE UNION AND MS. HELEN VALENZUELA WAS NOT FILED BY AN INDISPENSABLE PARTY. II. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN FAILING TO DECIDE THE CASE ON THE MERITS DESPITE SHOWING THAT THE PETITION FOR CERTIORARI WAS VERIFIED BY THE UNION PRESIDENT AND MS. HELEN VALENZUELA. III. THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THAT SERIOUS MISCONDUCT UNDER EXISTING LAW AND JURISPRUDENCE CANNOT BE ATTRIBUTED TO HEREIN PETITIONER HELEN VALENZUELA BECAUSE THE DECISION OF THE NLRC IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.[30]

Our Ruling

We affirm the ruling of the CA. It is clear that petitioners failed to include the name of the dismissed employee Helen Valenzuela in the caption of their petition for certiorari filed with the CA as well as in the body of the said petition. Instead, they only indicated the name of the labor union Nagkakaisang Lakas ng Manggagawa sa Keihin (NLMK-OLALIA) as the party acting

on behalf of Helen. As a result, the CA rightly dismissed the petition based on a formal defect. Under Section 7, Rule 3 of the Rules of Court, parties in interest without whom no final determination can be had of an action shall be joined as plaintiffs or defendants. If there is a failure to implead an indispensable party, any judgment rendered would have no effectiveness.[31] It is precisely when an indispensable party is not before the court (that) an action should be dismissed. 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 to those present.[32] The purpose of the rules on joinder of indispensable parties is a complete determination of all issues not only between the parties themselves, but also as regards other persons who may be affected by the judgment. A decision valid on its face cannot attain real finality where there is want of indispensable parties. At any rate, we are aware that it is the policy of courts to encourage full adjudication of the merits of an appeal. Dismissal of appeals purely on technical grounds, especially an appeal by a worker who was terminated and whose livelihood depends on the speedy disposition of her case, is frowned upon. Thus, while we affirm the CAs dismissal of the petition for certiorari, we shall still discuss the substantive aspect of the case and go into the merits. The petitioners argue that serious misconduct under existing law and jurisprudence could not be attributed to Helen because she was not motivated by malicious intent. According to petitioners, during the routine inspection and even before the guard opened Helens bag, she readily admitted that the bag contained a packing tape. Petitioners claim that the mental attitude of Helen negates depravity, willful or wrongful intent and, thus, she cannot be held guilty of serious misconduct. Rather,

it was a mere error of judgment on the part of Helen. Furthermore, it was Helens honest belief that the tape she took was of no use or value and that she did not hide the same. Thus, the issue boils down to whether, in taking the packing tape for her own personal use, Helen committed serious misconduct, which is a just cause for her dismissal from service. Article 282 of the Labor Code enumerates the just causes for termination. It provides:
ARTICLE 282. Termination by employer. An employer may terminate an employment for any of the following causes: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) Other causes analogous to the foregoing.

Misconduct is defined as the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment.[33] For serious misconduct to justify dismissal under the law,

(a) it must be serious, (b) must relate to the performance of the employees duties; and (c) must show that the employee has become unfit to continue working for the employer.[34] In the case at bar, Helen took the packing tape with the thought that she could use it for her own personal purposes. When Helen was asked to explain in writing why she took the tape, she stated, Kumuha po ako ng isang packing tape na gagamitin ko sa paglilipat ng gamit ko sa bago kong lilipatang bahay.[35] In other words, by her own admission, there was intent on her part to benefit herself when she attempted to bring home the packing tape in question. It is noteworthy that prior to this incident, there had been several cases of theft and vandalism involving both respondent companys property and personal belongings of other employees. In order to address this issue of losses, respondent company issued two memoranda implementing an intensive inspection procedure and reminding all employees that those who will be caught stealing and performing acts of vandalism will be dealt with in accordance with the companys Code of Conduct. Despite these reminders, Helen took the packing tape and was caught during the routine inspection. All these circumstances point to the conclusion that it was not just an error of judgment on the part of Helen, but a deliberate act of theft of company property. In the case of Firestone Tire and Rubber Company of the Philippines v. Lariosa[36] involving an employee who was caught by the security guards of the company during a routine inspection with possession of company property, we held that:
There is no gainsaying that theft committed by an employee constitutes a valid reason for his dismissal by the employer. Although as a rule this Court leans over backwards to help workers and employees continue with their employment or to mitigate the penalties imposed on them, acts of dishonesty in the handling of company property are a

different matter.[37]

We hold that Helen is guilty of serious misconduct in her act of taking the packing tape. The petitioners also argue that the penalty of dismissal is too harsh and disproportionate to the offense committed since the value of the thing taken is very minimal. Petitioners cite the case of Caltex Refinery Employees Association v. National Labor Relations Commission[38] where Arnelio M. Clarete (Clarete) was found to have willfully breached the trust and confidence reposed in him by taking a bottle of lighter fluid. In said case, we refrained from imposing the supreme penalty of dismissal since the employee had no violations in his eight years of service and the value of the lighter fluid x x x is very minimal compared to his salary x x x.[39]

After a closer study of both cases, we are convinced that the case of Caltex is different from the case at hand. Although both Clarete and Helen had no prior violations, the former had a clean record of eight years with his employer. On the other hand, Helen was not even on her second year of service with Keihin when the incident of theft occurred. And what further distinguishes the instant case from Caltex is that respondent company was dealing with several cases of theft, vandalism, and loss of company and employees property when the incident involving Helen transpired. Regarding the requirement of procedural due process in dismissal of employees, petitioners argue that the first notice failed to explain the charge being leveled against Helen. According to the petitioners, the notice was vague and lacked sufficient definitiveness.

The show-cause notice states:

Please explain in writing within 48 hours upon receipt hereof, why you have committed an offense against company property specifically F.2 of the companys Code of Conduct: Any act constituting theft or robbery, or any attempt to commit theft or robbery, of any company property or other associates property.[40]

We reject petitioners claim that respondent company failed to observe the requirements of procedural due process. In the dismissal of employees, it has been consistently held that the twin requirements of notice and hearing are essential elements of due process. The employer must furnish the employee with two written notices before termination of employment can be legally effected: (a) a notice apprising the employee of the particular acts or omissions for which his dismissal is sought, and (b) a subsequent notice informing the employee of the employers decision to dismiss him.[41] In this case, respondent company furnished Helen a show-cause notice dated September 6, 2003 accusing her of violating F.2 of the companys Code of Conduct which says, Any act constituting theft or robbery, or any attempt to commit theft or robbery, of any company property or other associates property.[42] We find that such notice sufficiently informed Helen of the charge of theft of company property against her. We are convinced that such notice satisfies the due process requirement to apprise the employee of the particular acts or omissions for which dismissal is sought. With regard to the requirement of a hearing, the essence of due process lies in an opportunity to be heard. Such opportunity was afforded the petitioner when she was asked to explain her side of the story. In

Metropolitan Bank and Trust Company v. Barrientos,[43] we held that, the essence of due process lies simply in an opportunity to be heard, and not that an actual hearing should always and indispensably be held. Similarly in Philippine Pasay Chung Hua Academy v. Edpan,[44] we held that, [e]ven if no hearing or conference was conducted, the requirement of due process had been met since he was accorded a chance to explain his side of the controversy. WHEREFORE, the Petition is DENIED. The Resolutions dated November 2, 2005 and January 6, 2006 of the Court of Appeals in CAG.R. SP No. 91718 are AFFIRMED. SO ORDERED.

THIRD DIVISION

REPUBLIC OF THE PHILIPPINES, represented by DANTE QUINDOZA, in his capacity as Zone Administrator of the Bataan Economic Zone, Petitioner, - versus -

G.R. No. 161838 Present:

CORONA, J., Chairperson VELASCO, JR., NACHURA, PERALTA, and MENDOZA, JJ.

COALBRINE INTERNATIONAL PHILIPPINES, INC. and SHEILA F. Promulgated: NERI, Respondents. April 7, 2010 x----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

Assailed in this petition for review on certiorari filed by petitioner is the Decision[1] dated January 21, 2004 of the Court of Appeals in CA-G.R. SP No 74667, which affirmed the Order[2] dated September 24, 2002 of the Regional Trial Court (RTC) of Balanga, Bataan, in Civil Case No. 548-ML, denying petitioner's Motion to Dismiss.

The Export Processing Zone Authority (EPZA), predecessor of the Philippine Economic Zone Authority (PEZA), is the owner of the Bataan Hilltop Hotel and Country Club, located at the Bataan Export Processing Zone, Mariveles, Bataan. Dante M. Quindoza is the Zone Administrator of the Bataan Economic Zone. On August 4, 1994, EPZA, now PEZA, and respondent Coalbrine International Philippines, Inc. entered into a contract in which the latter would rehabilitate and lease the Bataan Hilltop Hotel, Golf Course and Clubhouse for twenty-five (25) years, which commenced on January 1, 1994, and renewable for another twentyfive (25) years at the option of respondent Coalbrine. Respondent Sheila F. Neri was the Managing Director of the hotel. On July 11, 1996, the PEZA Board passed Resolution No. 96231 rescinding the contract to rehabilitate and lease, on the ground of respondent Coalbrine's repeated violations and non-performance of its obligations as provided in the contract. Subsequently, PEZA sent respondent Coalbrine a notice to vacate the premises and to pay its outstanding obligations to it. On April 3, 1998, respondent Coalbrine filed with the RTC of Manila a Complaint for specific performance with prayer for the issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction with damages against PEZA and/or Bataan Economic Zone wherein respondent Coalbrine sought to declare that PEZA had no valid cause to rescind the contract to rehabilitate and lease; and to enjoin PEZA from taking over the hotel and country club and from disconnecting the water and electric services to the hotel. The complaint is pending with Branch 17 of the RTC of Manila.

On April 24, 2002, respondents Coalbrine and Neri filed with the RTC of Balanga, Bataan, a Complaint for damages with prayer for the issuance of a TRO and/or writ of preliminary prohibitory/mandatory injunction against Zone Administrator Quindoza, docketed as Civil Case No. 548-ML. Respondent alleged that: in October 2001, Quindoza started to harass the hotel's operations by causing the excavation of the entire width of a crosssection of the only road leading to the hotel for the supposed project of putting up a one length steel pipe; that such project had been stopped, which, consequently, paralyzed the hotel's operations; respondent Neri undertook the construction of a temporary narrow access ramp in order that the hotel guests and their vehicles could pass through the wide excavations; Quindoza had also placed a big ROAD CLOSED sign near the hotel, which effectively blocked all access to and from the hotel and created an impression that the hotel had been closed; in the last week of March 2002, Quindoza cut the pipelines that supplied water to the hotel to the great inconvenience of respondents and the hotel guests, and, subsequently, the pipelines were reconnected. Respondents prayed for the payment of damages, for the issuance of a TRO and a writ of preliminary injunction to enjoin Quindoza from cutting or disconnecting the reconnected water pipelines to the hotel and from committing further acts of harassment; and to cause the construction of a reasonable access road at Quindoza's expense. Administrator Quindoza, through the Solicitor General, filed a Motion to Dismiss[3] on the following grounds:
1. The Honorable Court has no jurisdiction over the instant case; 2. The Honorable Court is an improper venue for the instant

case; 3. Plaintiff (respondent Coalbrine) is guilty of forum shopping; 4. With respect to plaintiff (respondent) Neri, the complaint states no cause of action against defendant; 5. The complaint is fatally defective for being unauthorized.

On September 24, 2002, the RTC issued an Order[4] denying petitioner's motion to dismiss.

Administrator Quindoza filed a Motion for Reconsideration, which the RTC denied in its Order[5] dated December 9, 2002. On January 2, 2003, petitioner Republic of the Philippines, represented by Dante Quindoza, in his capacity as Zone Administrator of the Bataan Economic Zone, filed with the CA a petition for certiorari under Rule 65 seeking to annul the RTC Orders, reiterating the grounds raised by Administrator Quindoza in the RTC. On January 21, 2004, the CA issued its assailed Decision denying petitioner's petition for certiorari for lack of merit. Hence, petitioner is now before us in a petition for review on certiorari raising the lone issue of respondent Neri's lack of proof of authority to file the complaint in the RTC of Balanga, Bataan, which was docketed as Civil Case No. 548-ML. In their Comment, respondents argue that the Republic of the Philippines was not a party to the civil case subject of this petition, hence, it has no personality to file the instant petition for review; that

the RTC Order denying the motion to dismiss the complaint was a mere interlocutory order, thus, the same is not appealable and not a proper subject of a petition for certiorari unless it was shown that there was a grave abuse of discretion in its issuance; that petitioner had already filed an answer to the complaint incorporating the grounds stated in their motion to dismiss; and that respondents had already presented their evidence by way of an opposition to the motion to dismiss and in support of their application for the issuance of a writ of preliminary mandatory injunction. In its Reply, petitioner argues that it has the personality to file this petition, since Administrator Quindoza is being sued for damages for certain acts he performed in an official capacity; that the denial of petitioner's motion to dismiss was tainted with grave abuse of discretion, which justified the filing of a petition for certiorari with the CA. The parties filed their respective memoranda as required under the Resolution dated January 26, 2005. In its Memorandum, petitioner raises the following arguments, to wit:
THE COMPLAINT IS FATALLY DEFECTIVE FOR BEING UNAUTHORIZED. PETITIONER REPUBLIC OF THE PHILIPPINES IS THE REAL PARTY-IN-INTEREST IN THE CASE AT BAR. RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION IN DENYING PETITIONER'S MOTION TO DISMISS, NECESSITATING THE FILING OF A PETITION FOR CERTIORARI UNDER RULE 65 BEFORE THE HONORABLE COURT OF APPEALS.[6]

Petitioner claims that respondent Neri's signature in the verification and certification against non-forum shopping attached to the complaint filed by respondents in the RTC was defective, since there was no proof of her authority to institute the complaint on behalf of the corporation; and that respondent Neri is not a real party-in-interest. We agree. The verification and certification against non-forum shopping reads:
xxxx That I am the Managing Director of Bataan Hilltop Hotel and one of the plaintiffs in this case.[7]

Notably, respondent Neri signed the verification/certification as one of the plaintiffs. However, we find that respondent Neri is not a real party-in- interest. Section 2, Rule 3 of the Rules of Civil Procedure 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.

And 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.[8] 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.[9] The RTC based its conclusion that respondent Neri had a cause of action against petitioner on the allegations in the complaint. The CA, however, did not rule on the matter despite the fact that it was raised in petitioner's petition for certiorari filed before it and merely said that there was no necessity to discuss such issue after deciding the other grounds raised in the petition. We find the RTC in error. A reading of the allegations in the complaint shows that the acts complained of and said to have been committed by petitioner against respondents have solely affected the hotel's operations where respondent Neri was the hotel's Managing Director and whose interest in the suit was incidental. Thus, we find that respondent Neri has no cause of action against petitioner. Consequently, the plaintiff in this case would only be respondent Coalbrine. A corporation has no power, except those expressly conferred on it by the Corporation Code and those that are implied or incidental to its existence. In turn, a corporation exercises said powers through its board of directors and/or its duly authorized officers and agents.[10] Thus, it has been observed that the power of a corporation to sue and be sued in any court is lodged with the board of directors that exercises its corporate powers. In turn, physical acts of the corporation, like the signing of documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the board of directors.[11]

In this case, respondent Coalbrine is a corporation. However, when respondent Neri filed the complaint in the RTC, there was no proof that she was authorized to sign the verification and the certification against non-forum shopping. The Court has consistently held that the requirement regarding verification of a pleading is formal, not jurisdictional. Such requirement is simply a condition affecting the form of the pleading, non-compliance with which does not necessarily render the pleading fatally defective.[12] Verification is simply intended to secure an assurance that the allegations in the pleading are true and correct, and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith. The court may order the correction of the pleading if verification is lacking or act on the pleading although it is not verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with in order that the ends of justice may thereby be served.[13]

On the other hand, the lack of certification against non-forum shopping is generally not curable by mere amendment of the complaint, but shall be a cause for the dismissal of the case without prejudice.[14] The same rule applies to certifications against nonforum shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory is authorized to file the complaint on behalf of the corporation.[15] In Philippine Airlines, Inc. v. Flight Attendants and Stewards Association of the Philippines (FASAP),[16] we ruled that only individuals vested with authority by a valid board resolution may sign the certificate of non-forum shopping on behalf of a corporation. We also required that proof of such authority must be

attached. Failure to provide a certificate of non-forum shopping is sufficient ground to dismiss the petition. Likewise, the petition is subject to dismissal if a certification was submitted unaccompanied by proof of signatory's authority. While there were instances where we have allowed the filing of a certificate against non-forum shopping by someone on behalf of a corporation without the accompanying proof of authority at the time of its filing, we did so on the basis of a special circumstance or compelling reason. Moreover, there was a subsequent compliance by the submission of the proof of authority attesting to the fact that the person who signed the certification was duly authorized. In China Banking Corporation v. Mondragon International Philippines, Inc.,[17] the CA dismissed the petition filed by China Bank, since the latter failed to show that its bank manager who signed the certification against non-forum shopping was authorized to do so. We reversed the CA and said that the case be decided on the merits despite the failure to attach the required proof of authority, since the board resolution which was subsequently attached recognized the pre-existing status of the bank manager as an authorized signatory. In Abaya Investments Corporation v. Merit Philippines,[18] where the complaint before the Metropolitan Trial Court of Manila was instituted by petitioner's Chairman and President, Ofelia Abaya, who signed the verification and certification against non-forum shopping without proof of authority to sign for the corporation, we also relaxed the rule. We did so taking into consideration the merits of the case and to avoid a re-litigation of the issues and further delay the administration of justice, since the case had already been decided by the lower courts on the merits. Moreover, Abaya's authority to

sign the certification was ratified by the Board. In the present case, the RTC, in denying petitioner's motion to dismiss the complaint when the latter raised respondent Neri's lack of authority to sign the certification, found that respondent Neri testified that she was the Managing Director of the Bataan Hilltop Hotel which was being leased by respondent Coalbrine, and that she was authorized by the Corporate Secretary to file the case. Notably, while the matter of lack of authority was raised by petitioner in its petition for certiorari filed with the CA, it chose not to tackle the issue after disposing of the other issues raised therein. We cannot agree with the RTC's reasoning and find the certification signed by respondent Neri to be defective. The authority of respondent Neri to file the complaint in the RTC had not been proven. First, the certification against non-forum shopping did not even contain a statement that she was authorized by the corporate secretary to file the case on behalf of Coalbrine as she claimed. More importantly, while she testified that she was authorized by the corporate secretary, there was no showing that there was a valid board resolution authorizing the corporate secretary to file the action, and to authorize respondent Neri to file the action. In fact, such proof of authority had not been submitted even belatedly to show subsequent compliance. Thus, there was no reason for the relaxation of the rule. As to respondents' claim that petitioner Republic of the Philippines was not a party to the civil case subject of this petition since Administrator Quindoza was the sole defendant therein and, thus, has no personality to file this petition, their claim is not persuasive.

Notably, Administrator Quindoza was sued for damages for certain acts that he allegedly committed while he was the Zone Administrator of the Bataan Export Processing Zone. Therefore, the complaint is in the nature of suit against the State, and the Republic has the personality to file the petition. Anent respondents' claim that the RTC Order denying a motion to dismiss is a mere interlocutory order, thus, not appealable and may not be a subject of a petition for certiorari filed by the petitioner before the CA, the same is also not meritorious. While indeed, the general rule is that the denial of a motion to dismiss cannot be questioned in a special civil action for certiorari, which is not intended to correct every controversial interlocutory ruling,[19] and that the appropriate recourse is to file an answer and to interpose as defenses the objections raised in the motion, to proceed to trial, and, in case of an adverse

decision, to elevate the entire case by appeal in due course,[20] this rule is not absolute. Even when appeal is available and is the proper remedy, the Supreme Court has allowed a writ of certiorari (1) where the appeal does not constitute a speedy and adequate remedy; (2) where the orders were also issued either in excess of or without jurisdiction or with grave abuse of discretion; (3) for certain special considerations, as public welfare or public policy; (4) where in criminal actions, the court rejects rebuttal evidence for the prosecution as, in case of acquittal, there could be no remedy; (5) where the order is a patent nullity; and (6) where the decision in the certiorari case will avoid future litigations. [21]

In this case, we find that the RTC committed grave abuse of discretion amounting to lack of jurisdiction when it failed to consider the lack of proof of authority of respondent Neri to file the action on behalf of the corporation as we have discussed above. WHEREFORE, the petition for review is GRANTED. The Decision dated January 21, 2004 of the Court of Appeals in CA-G.R. SP No 74667 is REVERSED and SET ASIDE. The Complaint in Civil Case No. 548-ML pending in the Regional Trial Court, Branch 4, Balanga, Bataan, is ordered DISMISSED. SO ORDERED.

THIRD DIVISION

SANTIAGO CUA, JR., SOLOMON S. CUA and EXEQUIEL D. ROBLES, in their capacity as Directors of PHILIPPINE RACING CLUB, INC., Petitioners,

G.R. No. 181455-56

- versus -

MIGUEL OCAMPO TAN, JEMIE U. TAN and ATTY. BRIGIDO J. DULAY, Respondents. x -------------------------------------- x SANTIAGO CUA, SR., in his capacity as Director of PHILIPPINE RACING CLUB, INC., Petitioner,

G.R. No. 182008

Present: CORONA, J., Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ.

- versus -

COURT MIGUEL

OF APPEALS, OCAMPO TAN,

JEMIE U. TAN, ATTY. BRIGIDO J. DULAY, and HON. CESAR UNTALAN, Presiding Judge, Makati Regional Trial Court, Br. 149, Respondents.

Promulgated:

December 4, 2009 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before this Court are two Petitions: (1) a Petition for Review on Certiorari [1] under Rule 45 of the Rules of Court filed by petitioners Santiago Cua, Jr. (Santiago Jr.), Solomon S. Cua (Solomon), and Exequiel D. Robles (Robles), in their capacity as directors of the Philippine Racing Club, Inc. (PRCI), with Miguel Ocampo Tan (Miguel), Jemie U. Tan (Jemie) and Atty. Brigido J. Dulay (Dulay) as respondents, docketed as G.R. No. 181455-56; and (2) a Petition for Certiorari and Prohibition[2] under Rule 65 of the Rules of Court filed by petitioner Santiago Cua, Sr. (Santiago Sr.), also in his capacity as PRCI director, likewise naming Miguel, Jemie, and Dulay as respondents, together with the Court of Appeals and Presiding Judge Cesar Untalan (Judge Untalan) of the Regional Trial Court (RTC), Branch 149 of Makati City, docketed as G.R. No. 182008.

Both Petitions assail the Decision[3] dated 6 September 2007 and Resolution[4] dated 22 January 2008 of the Court of Appeals in the consolidated cases CA-G.R. SP No. 99769 and No. 99780. In its 6 September 2007 Decision, the Court of Appeals dismissed for lack of merit, mootness, and prematurity, the Petition for Certiorari of petitioners Santiago Jr., Solomon, and Robles (Santiago Jr., et al.); and the Petition for Certiorari and Prohibition of petitioner Santiago Sr., which sought the nullification of the Resolution[5] dated 16 July 2007 of the RTC in Civil Case No. 07-610 granting the Temporary Restraining Order (TRO) prayed for by respondents Miguel, Jemie, and Dulay (Miguel, et al.). In its 22 January 2008 Resolution, the appellate court denied the Motions for Reconsideration of petitioners and the Motion to Admit Supplemental Petition for Certiorari of petitioner Santiago Jr, et al. The same Resolution did not consider the Supplemental Petition for Certiorari and Prohibition filed by petitioner Santiago Sr. for the latters failure to seek leave of court for its filing and admittance. Petitioners would have wanted to challenge in their Supplemental Petitions the Resolution[6] dated 8 October 2007 of the RTC in Civil Case No. 07-610 granting the issuance of a permanent injunction against petitioners and the other PRCI directors until the said case was resolved. I FACTUAL AND PROCEDURAL ANTECEDENTS PRCI is a corporation organized and established under Philippine laws to: (1) carry on the business of a race course in all its branches and, in particular, to conduct horse races or races of any kind, to accept bets on the results of the races, and to construct grand or other stands, booths, stablings, paddocks, clubhouses, refreshment rooms and other erections, buildings, and conveniences, and to conduct, hold and promote race meetings and other shows and

exhibitions; and (2) promote the breeding of better horses in the Philippines, lend all possible aid in the development of sports, and uphold the principles of good sportsmanship and fair play.[7] To pursue its avowed purposes, PRCI holds a franchise granted under Republic Act No. 6632, as amended by Republic Act No. 7953, to operate a horse racetrack and manage betting stations. Under its franchise, PRCI may operate only one racetrack. In 1999, the Articles of Incorporation of PRCI was amended to include a secondary purpose, viz:
To acquire real properties and/or develop real properties into mix-use realty projects including but not limited to leisure, recreational and memorial parks and to own, operate, manage and/or sell these real estate projects.[8]

PRCI is publicly listed with the Philippine Stock Exchange (PSE). In 2006, PRCI had an authorized capital stock of P1,000,000,000.00 divided into 1,000,000,000 shares, with a par value of P1.00 each; of which a total of P569,857,749.00, representing 569,857,749 shares, had been subscribed and paid up.[9] PRCI owns only two real properties, each covered by several transfer certificates of title. One is known as the Sta. Ana Racetrack, located along A. P. Reyes Avenue, Makati City (Makati property), measuring around 21.2 hectares; and the other is located in the towns of Naic and Tanza in the province of Cavite (Cavite property). Following the trend in the development of properties in the same area,[10] PRCI wished to convert its Makati property from a racetrack to urban residential and commercial use. Given the

location and size of its Makati property, PRCI believed that said property was severely under-utilized. Hence, PRCI management decided to transfer its racetrack from Makati to Cavite. PRCI began developing its Cavite property as a racetrack, scheduled to be completed by April 2008. Now as to its Makati property, PRCI management decided that it was best to spin off the management and development of the same to a wholly owned subsidiary, so that PRCI could continue to focus its efforts on pursuing its core business competence of horse racing. Instead of organizing and establishing a new corporation for the said purpose, PRCI management opted to acquire another domestic corporation, JTH Davies Holdings, Inc. (JTH).[11] JTH was then owned by Jardine Matheson Europe B.V. (JME).[12] It had an authorized capital stock of P25,000,000.00, divided into 50,000,000 common shares with a par value of P0.50 each. JTH was publicly listed with the PSE. Its tangible assets substantially consisted of cash. To determine the value of JTH, PRCI engaged the services of the accounting firm Sycip Gorres Velayo & Co. (SGV) to conduct a due diligence study.[13] Using the results of the SGV study, PRCI management determined that PRCI could initially acquire 41,928,290 shares, or 95.55% of the outstanding capital stock of JTH, for the price of P10.71 per share, or for a total of P449,250,000.00; in this case, PRCI would be paying a premium of P42,410,450.00 for the said JTH shares, computed as follows:
Total price for all of the issued and subscribed JTH shares (at P10.71/share) Less: Unaudited net worth of JTH (purely cash) P 470,418,848.00 - 426,010,000.00

Total premium for 100% of JTH Multiply: Interest in JTH to be initially acquired by PRCI (95.5%) Premium for the 95.5% interest in JTH to be acquired by PRCI

44,408,848.00 x 0.955 P 42,410,450.00

The PRCI Board of Directors held a meeting on 26 September 2006. Among the directors present were petitioners Santiago Sr., Santiago Jr., and Solomon, as well as respondent Dulay. After discussing and deliberating on the matter of the acquisition of JTH by PRCI, all the directors present, except respondent Dulay, voted affirmatively to pass and approve the following resolutions:
1. Declaration of Intention to Acquire and Purchase Shares of Stock of Another Company -

RESOLVED, as it is hereby resolved, that the Corporation intends to acquire up to one hundred percent (100%) of the common shares of stock of JTH Davies Holdings, Inc. by way of negotiated sale; RESOLVED FURTHER, That Management and the Corporate Secretary shall prepare and submit the Tender Offer, as well as, to file all the necessary disclosures and notices in compliance with the Securities Regulation Code, its implementing rules, and other prevailing regulations; RESOLVED FURTHERMORE, That the Corporation authorizes its President, Mr. Solomon S. Cua, to sign and execute any purchase agreements, memoranda, and such other deeds, and to deliver any documents and papers, perform any acts, necessary and incidental to implement the foregoing, as well as to source the funds to implement the same. 2. Special Stockholders Meeting -

RESOLVED, That a Special Stockholders Meeting of PRCI shall be held on October 26, 2006 at 10:00 A.M., or at such later date as may be practicable under the circumstances, in the principal place of business of PRCI at Santa Ana Park, A.P. Reyes Avenue, Makati City; RESOLVED FURTHER, That only those stockholders of record as of end of business day of October 11, 2006 shall be entitled to notice, to vote and/or to be voted upon, in accordance with the laws, regulations and by-laws of PRCI; RESOLVED FURTHERMORE, That the Corporate Secretary shall be authorized to issue the required notices, set the time for the submission of, and to receive and validate proxies, as well as, to order publication of notices and undertake such appropriate and necessary steps, including the filing of the required disclosures to the regulating agencies, to effect the foregoing. 3. Authorized Attorney-In-Fact and Proxy -

In the event of a successful acquisition of the shares of JTH Davies Holdings, Inc., the Board passed and approved the following resolutions: RESOLVED, that the Corporation shall hereby authorize SANTIAGO CUA, or in his absence, EXEQUIEL ROBLES, or in his absence, SOLOMON S. CUA, or in his absence, SANTIAGO CUA, JR., or in his absence, DATUK SURIN UPATKOON, or in his absence, Laurence Lim Swee Lim, or in his absence, LIM TEONG LEONG, to act as its attorney-infact/proxy and to vote all shares as may be registered in the name of the Corporation/lodged with the PCD System, and to exercise all rights appurtenant thereto during the Annual Stockholders Meeting/s and all regular/special meeting/s of JTH DAVIES HOLDINGS, INC. (formerly JARDINE DAVIES, INC.); RESOLVED FURTHER, That these Directors, in the said order of priority, shall have full power and authority and discretion

to nominate, appoint, and/or vote into office such directors and/or officers during the said Annual Stockholders Meeting/s and regular/special meeting/s of JTH HOLDINGS, INC. (formerly JARDINE DAVIES, INC.); RESOLVED FINALLY, That these Directors be, as they are hereby granted full power and authority whatsoever requisite or necessary or proper to be done in these matters.[14]

The next day, 27 September 2006, PRCI entered into a Sale and Purchase Agreement for the acquisition from JME of 41,928,290 common shares or 95.55% of the outstanding capital stock of JTH. Among the principal terms of the Sale and Purchase Agreement were:
(a) The consideration for the acquisition was P10.71 per share or P449,250,000.00; (b) Upon the signing of the [A]greement, the [PRCI] shall pay P20 Million to an Escrow Agent as deposit; and (c) The sale and purchase transaction contemplated in the Agreement shall be consummated at a closing not later than November 30, 2006 or the 50th day from the start of the JTH Offer or such date which shall in no case be later than December 11, 2006.[15]

PRCI also made a tender offer for the remaining 4.45% or 1,954,883 issued and outstanding common shares of JTH at P10.71 each. In the Special Stockholders Meeting held on 7 November 2006, attended by stockholders with 481,045,887 shares or 84.42%

of the outstanding capital stock of PRCI, the acquisition by PRCI of JTH was presented for approval. The events during said meeting were duly recorded in the Minutes, to wit:
V. APPROVAL OF THE ACQUISITION OF THE SHARES OF STOCK OF JTH DAVIES HOLDINGS, INC. Thereafter, the Corporate Secretary informed that the President will present to the stockholders the rationale for the acquisition of the shares of JTH Davies Holdings, Inc. According to the President PRCI is intending to acquire up to 100% of the shares of JTH Davies Holdings, Inc. another listed company in the PSE. For reference, the President informed that the latest Annual Report of JTH has been appended to the Information Statement for guidance. Also copies of the Boards resolution presented for approval and ratification by the stockholders has been posted in the room for convenient reading of the stockholders. The President explained that JTH is one of the oldest holdings company and the name JTH Davies is an internationally acclaimed name with a reputation for solid and sound financial standing. With PRCIs acquisition of JTH, it gives PRCI the necessary vehicle within which to enlarge and broaden the business and operational alternatives or options of our company. PRCI believes that this JTH will complement the direction of PRCI in fast tracking the development of PRCIs plans and provide it investment opportunities. It is for this reason that we call this special meeting so you may know soonest the present opportunity faced by PRCI without need for you to wait until next years annual meeting. The Vice-Chairman then informed that the resolution

approving the purchase of JTH Davies Holdings, Inc. as presented in the Information Statement which were furnished to the stockholders is presented for approval to the body. A stockholder thereafter moved that the the (sic) resolution be approved which was duly seconded by another stockholder. The Vice-Chairman declared the resolution approved. Thereafter, Atty. Pagunsan took the floor and informed that he is the proxy of various stockholders (10%) and would like to manifest his vote as NO which the Vice-Chairman duly noted. Notwithstanding the objection of Atty. Pagunsan, considering the more than 2/3 of the outstanding capital stock of PRCI has approved and ratified the resolution, (74%) the Corporate Secretary declared the resolution as duly approved and ratified. Thereafter, another stockholder, Mr. Ngo, asked the President what are the plans of PRCI on the assets of JTH. The President informed that as of now, JTH has no material hard assets other than its retained earnings. Mr. Ngo asked again what will be the direction of PRCI on the substantial retained earnings of JTH to which the President replied that there are several options being considered once the purchase is complete one of which is the declaration of cash dividend. Another stockholder took the floor and informed the Management that he is happy with the transaction of PRCI and the purchase by PRCI of the JTH shares is a good deal since the value of the goodwill of JTH is substantial by his estimate. He proceeded to thank the President and shook hands with him.[16]

By 22 November 2006, PRCI was able to additionally acquire 1,160,137 common shares of JTH from the minority stockholders of the latter, giving PRCI ownership of 98.19% of the outstanding

capital stock of JTH. PRCI prepared consolidated financial statements for itself and for JTH for the fiscal year ending 31 December 2006. The financial statements were audited by the accounting firm Punongbayan & Araullo which gave the following unqualified opinion of the same: In our opinion, based on our audit and the report of other auditors, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Philippine Racing Club, Inc. and Subsidiary as of December 31, 2006, and their consolidated financial performance and their cash flows for the year then ended in accordance with Philippine Financial Reporting Standards. The audited financial statements of PRCI and JTH for 2006 were presented to the stockholders of PRCI and submitted to the Securities and Exchange Commission (SEC), the Bureau of Internal Revenue (BIR), and the Philippine Stock Exchange (PSE). Thereafter, PRCI again engaged the assistance of SGV in executing its intended spin-off to JTH of the management and development of PRCIs Makati property. It was then determined that the Makati property, with a total zonal value of P3,817,242,000.00, could be transferred to JTH in exchange for the unissued portion of the latters recently increase authorized capital stock,[17] amounting to P397,908,894.50, divided into 795,817,789 shares with a par value of P0.50 per share. The difference of P3,419,333,105.50 between the total zonal value of the Makati property and the aggregate par value of the JTH shares to be issued in exchange for the same, would be reflected as additional paid-in capital of PRCI in JTH. The matter of the proposed exchange was taken up and approved by the PRCI Board of Directors in its meeting held on 11

May 2007, again with the lone dissent of respondent Dulay. According to the Minutes of the said meeting, the following occurred:
A. Exchange of the Corporations Makati Property with Shares of JTH Davies Holdings, Inc.

President Cua reported on certain essential matters regarding the Corporations Makati Property. After doing so, President Cua proposed the exchange of this Property with shares of JTH Davies Holdings, Inc. He then presented to the Board financial facts and figures heavily favoring the transaction. After due discussion and deliberation, all the Directors present approved and passed the following resolution, except Director Brigido Dulay who registered a negative vote: RESOLVED, That the Corporation hereby approves and authorizes the exchange of its Makati property with shares of JTH Davies Holdings, Inc.; RESOLVED FURTHER, That, for this purpose, the Corporation hereby authorizes its Executive Committee to determine and approve the terms and conditions governing the exchange as it shall consider for the best interest of the Corporation subject to approval by the stockholders in compliance with the Corporation Code; RESOLVED FURTHER, That the Executive Committee, be, as it is hereby granted full power and authority whatsoever requisite or necessary or proper to accomplish these; RESOLVED FINALLY, That SOLOMON CUA, President & CEO, be, as he is hereby authorized to negotiate with JTH Davies

Holdings, Inc. and to execute, sign, and/or deliver any and all documents covering the exchange in accordance with the terms and conditions of the Executive Committee.[18]

Subsequently, the Annual Stockholders Meeting of PRCI was scheduled on 17 July 2007, the Agenda for which is reproduced below:
I. Call to Order; Proof of Notice; Certification of Quorum; Approval of the Minutes of the Annual Stockholders Meeting held last June 19, 2006 and of the Special Stockholders Meeting held last November 7, 2006; Report of the President; Approval of the Audited Financial Statement for the year ended December 31, 2006; Approval and Ratification of the acts of the Board of Directors, the Executive Committee and the Management of the Corporation for the Fiscal Year 2006;

II. III. IV.

V. VI. VII.

VIII. Approval of the Planned Exchange of PRCIs Makati

property for shares of stock;

IX. X.

Approval of the Amendments of the By-Laws to conform with the Manual of Corporate Governance; Election of the members of the Board of Directors;

XI. XII.

Appointment of Independent External Auditors; Other Matters;

XIII. Adjournment.[19] The 11 May 2007 Resolution of the PRCI Board of Directors on the property-for-shares exchange between PRCI and JTH was supposed to be presented for approval by the stockholders under the afore-quoted Items No. VII and No. VIII of the Agenda. However, on 10 July 2007, respondents Miguel, et al., as minority stockholders of PRCI, with the following shareholdings:
Stockholder Miguel Ocampo-Tan Jemie U. Tan Atty. Brigido J. Dulay[20] Total No. of Shares 16,380,000 15,972,720 1 32,352,721 Percentage 2.87 2.80 0.00 5.67

filed before the RTC a Complaint, denominated as a Derivative Suit with prayer for Issuance of TRO/Preliminary Injunction, against the rest of the directors of PRCI and/or JTH. The Complaint was docketed as Civil Case No. 07-610. The Complaint was based on three causes of action: (1) the approval by the majority directors of PRCI of the Board Resolutions dated 26 September 2006 and 11 May 2007 -- with undue haste and deliberate speed, despite the absence of any disclosure and information -- was not only anomalous and fraudulent, but also extremely prejudicial and inimical to interest of PRCI, committed in

violation of their fiduciary duty as directors of the said corporation; (2) respondent Solomon, as PRCI President, with the acquiescence of the majority directors of PRCI, maliciously refused and resisted the request of respondents Miguel, et al., for complete and adequate information relative to the disputed Board Resolutions, brazenly and unlawfully violating the rights of the minority stockholders to information and to inspect corporate books and records; and (3) without being officially and formally nominated, the majority directors of PRCI illegally and unlawfully constituted themselves as members of the Board of Directors and/or Executive Officers of JTH, rendering all the actions they have taken as such null and void ab initio. In the end, respondents Miguel, et al., prayed to the RTC, after notice and hearing, that:
1. A temporary restraining order and/or writ of preliminary injunction be issued restraining and enjoining the holding of the Annual Stockholders Meeting scheduled on 17 July 2007 and restraining and enjoining the defendants [PRCI directors] from enforcing, implementing, railroading, or taking any further action in reliance upon or in substitution or in furtherance of the Disputed Resolutions, which would inflict grave and irreparable injury in fraud of the Corporation. 2. A receiver and/or management committee be constituted and appointed to undertake the management and operations of the Corporation and to take over its assets to prevent its further loss, wastage and dissipation. 3. To compel the defendant Majority Directors to render a complete and adequate disclosure of all documents and information relating to the subject matter of the Disputed Resolutions as well as the business and affairs of the Corporation and its wholly-owned subsidiary from the time of the latters acquisition until final judgment.

4. After trial on the merits, that judgment be rendered in favor of the plaintiffs and against the defendants, as follows: (a) Permanently enjoining and prohibiting defendants from enforcing, implementing, or taking any action in reliance upon the Disputed Resolutions. (b) Declaring the Disputed Resolutions dated 26 September 2006 and 11 May 2007 and the approval by the Executive Committee of the exchange of the Corporations Makati Property for JTH shares, as well as any and all actions taken in reliance upon or pursuant to or in furtherance of the Disputed Resolutions and/or approval of the Executive Committee, as null and void ab initio. (c) Declaring the assumption by defendant Majority Directors as Directors and/or officers of JTH, including all acts done by defendant Majority Directors as such Directors and/or officers of JTH, as null and void ab initio. (d) Ordering defendants to pay plaintiffs the sum of P500,000.00, and by way of attorneys fees, plus P10,000.00 per court appearance, plus costs of suit. Other reliefs just and equitable under the premises are likewise prayed for.[21]

After conducting hearings on the prayer for the issuance of a TRO, RTC Judge Untalan issued a Resolution on 16 July 2007, the dispositive portion of which reads:
WHEREFORE, premises considered, this court hereby partially grants the prayer of PRCI for the issuance of Temporary Restraining Order upon the herein defendants subject to the posting of Php100,000.00 bond on condition that such bond shall answer to any damage that the Defendants may sustain by reason

of this TRO if the court should finally decide that the applicants are not entitled thereto. This TRO shall be effective for TWENTY (20) DAYS only from service of the same upon the Defendants after posting of the bond. Therefore, the Defendants, their agents, proxies and representatives are hereby enjoined, prohibited and forbidden to present to, discuss, much more to approve the same, at the 2007 Annual Stockholders Meeting of PRCI to be held on July 17, 2007 at 8:00 A.M. at the VIP Room, Santa Ana Park, A.P. Reyes Ave., Makati City, the following Agenda included in the Notice of said stockholders meeting: 1. Agenda Roman No. IV Approval of the Minutes of the Annual Stockholders Meeting held last June 19, 2006 and the Special Stockholders meeting held last November 7, 2006.

2. Agenda Roman No. VII Approval and Ratification

of the acts of the Board of Directors, the Executive Committee and the Management of the Corporation for the Fiscal Year 2006.

3. Agenda Roman No. VIII Approval of the Planned

Exchange of PRCIs Makati property for shares of stock. Thus, in order that these subject matters and items of the Agenda of the aforesaid Stockholders Meeting shall not be taken up, the herein Defendants, their agents, proxies and representatives, jointly and severally, are hereby ordered to delete and remove from the Agenda said three (3) above stated items of the Agenda before the start and conduct of the said stockholders meeting. Therefore, in case herein Defendants, their agents, proxies and representatives defy and disobey this mandate, they have committed already four (4) distinct contemptuous acts: delete, present, discuss and approve.

This Court appealed to the Corporate Secretary as Officer of the Court, to please make sure that this mandate is obeyed and observed by the Defendants, their agents, proxies and representatives, before and during the conduct of said stockholders meeting. Let the hearing of the main injunction be set on July 23 and 24, 2007 and August 2, 2007, all at two oclock in the afternoon.[22]

The Annual Stockholders Meeting of PRCI scheduled the next day, 17 July 2007, failed to push through for lack of quorum. On 19 July 2007, petitioners Santiago Jr., et al., as PRCI directors filed a Petition for Certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 99769. On 20 July 2007, Santiago Sr., also as PRCI director, filed his own Petition for Certiorari and Prohibition, docketed as CA-G.R. SP No. 99780. Both Petitions assailed the RTC Resolution dated 16 July 2007, granting the issuance of a TRO, for being rendered with grave abuse of discretion amounting to lack or excess of jurisdiction. CA-G.R. SP No. 99769 and No. 99780 were subsequently consolidated. The Court of Appeals promulgated its Decision on 6 September 2007 dismissing the Petitions in CA-G.R. SP No. 99769 and No. 99780 for lack of merit, mootness, and prematurity. According to the Court of Appeals, the TRO issued by the RTC enjoined the presentation, discussion, and approval of only three of the 13 items on the Agenda of the 2007 Annual Stockholders Meeting. There is no evidence that the TRO issued by the RTC legally impaired the holding of the scheduled stockholders

meeting. Indeed, the lack of quorum during the said meeting was due to the absence of petitioners themselves who comprised the majority interest in PRCI. Consequently, the appellate court found no grave abuse of discretion in the issuance by the RTC of the TRO. The Court of Appeals also noted that the Petitions in CA-G.R. SP No. 99769 and No. 99780 as regards the issuance of the TRO already became moot when the 20-day period of effectivity of said restraining order expired on 5 August 2007, even before the Petitions were submitted for resolution. Lastly, the Court of Appeals held that the issues raised by petitioners were factual and evidentiary in nature which must be threshed out before the RTC as the designated commercial court in Makati. The appellate court would not interfere with the proceedings a quo considering that Civil Case No. 07-610 had not yet gone to trial and had not yet been resolved or terminated by the RTC. Therefore, for being premature, the Court of Appeals could not prohibit the continuance of the RTC proceedings in Civil Case No. 07-610. The Court of Appeals ruled that there was no reason to dismiss the Complaint in Civil Case No. 07-610. Although the Complaint contained mere allegations, which had yet to be supported by evidence, it was sufficient in form and substance, and the RTC properly took cognizance of the same. The Court of Appeals reasoned that:
Rule 8, Section 1 of the Interim Rules of Procedure for Intra-Corporate Controversies (Interim Rules) provides: SECTION 1. Derivative action. A stockholder or member may bring an action in the

name of a corporation or association, as the case may be, provided, that: (1) He was a stockholder or member at the time the acts or transactions subject of the action occurred and at the time the action was filed; (2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or partnership to obtain the relief he desires; (3) No appraisal rights are available for the act or acts complained of; and (4) suit. The suit is not a nuisance or harassment

In case of nuisance or harassment suit, the court shall forthwith dismiss the case. A reading of the Complaint reveals that the same sufficiently alleges the foregoing requirements. Complainants essentially allege that they are PRCI stockholders, that they have opposed the issuance and approval of the questioned resolutions during the board stockholders (sic) meetings, that prior resort to intra-corporate remedies are futile, that nevertheless, they have asked for copies of the pertinent documents pertaining to the questioned transactions which the board has declined to furnish, that they have instituted the derivative suit in the name of the corporation, that they are questioning the acts of the majority of the board of directors believing that the herein petitioners have committed a wrong against the corporation and seeking a nullification of the questioned board resolutions on the ground of wastage of the corporate assets.

Thus, contrary to petitioners averment, the Complaint does state a cause of action.[23]

Petitioners in CA-G.R. SP No. 99769 and No. 99780 filed their respective Motions for Reconsideration of the foregoing Decision of the Court of Appeals. In the meantime, upon the expiration of the TRO issued by RTC Judge Untalan in Civil Case No. 07-610, the Annual Stockholders Meeting of PRCI was again scheduled on 10 October 2007. However, Judge Untalan issued on 8 October 2007 a Resolution with the following decree:
WHEREFORE, premises considered, this court hereby GRANTS the issuance of PERMANENT INJUNCTION against the defendants until the instant case is finally resolved, subject to the posting by plaintiffs of a Php 100,000.00 bond, on condition that such bond shall answer to any damage that the Defendants may sustain by reason of this injunction if the court should finally decide that the applicants are not entitled thereto. This injunction shall be effective from service of the same upon the Defendants after posting of the bond. Therefore, the Defendants, their agents, proxies and representatives are hereby enjoined, prohibited and forbidden to present to, discuss, much more to approve the same, at any stockholders meeting, whatsoever kind and nature, of PRCI of the following Agenda: 1. Approval of the Minutes of the Annual Stockholders Meeting held last June 19, 2006 and the Special Stockholders meeting held last November 7, 2006 of PRCI. 2. Approval and Ratification of the acts of the Board of

Directors, the Executive Committee and the Management of PRCI for the Fiscal Year 2006, as far as the acquisition of JTH and the planned exchange of PRCIs Makati property for shares of stock of JTH are concerned. 3. Approval of the Planned Exchange of PRCIs Makati property for shares of stock of JTH.[24]

As a result, the Annual Stockholders Meeting of PRCI proceeded as scheduled on 10 October 2007 without taking up the matters covered by the permanent injunction issued by the RTC. Petitioners Santiago Jr., et al. filed in CA-G.R. SP No. 99769 their Motion to Admit Supplemental Petition for Certiorari with the attached Supplemental Petition for Certiorari;[25] and petitioner Santiago Sr. filed in CA-G.R. SP No. 99780 a Supplemental Petition for Certiorari and Prohibition,[26] to be followed shortly thereafter by a Motion to Admit (Supplemental Petition).[27] Petitioners intended to additionally assail in their Supplemental Petitions the 8 October 2007 Resolution of the RTC granting the issuance of the permanent injunction. In its Resolution dated 22 January 2008, the Court of Appeals denied the Motions for Reconsideration of petitioners and the Motion to Admit Supplemental Petition for Certiorari of petitioners Santiago Jr., et al. The Court of Appeals found that petitioners Motions for Reconsideration merely reiterated the issues and arguments which were raised in the Petitions and/or which the appellate court already discussed and passed upon. The Court of Appeals reiterated its

ruling that it was premature to prohibit the continuance of the proceedings in Civil Case No. 07-610 before the RTC; and that the Complaint therein sufficiently stated a cause of action. The Court of Appeals likewise refused to admit petitioners Supplemental Petitions for Certiorari. It noted that Santiago Sr. filed his Supplemental Petition without asking for leave to file the same. Apparently, the appellate court disregarded the Motion to Admit (Supplemental Petition) which petitioner Santiago filed separately from and at a later date than his Supplemental Petition. In addition, the Court of Appeals adjudged that the Supplemental Petitions which petitioners hoped to be admitted involved a subject matter not covered in their original Petitions. Although the TRO and the permanent injunction were both issued by the RTC in Civil Case No. 07-610, the two issuances were independent of each other, and only the TRO was the subject of the original Petitions. Hence, the Supplemental Petitions assailing the permanent injunction granted by the RTC could not be considered as merely augmenting the matters, issues, and causes of action of the original Petitions; and should be challenged in a separate petition for certiorari. Failing to obtain any relief from the Court of Appeals, petitioners turned to this Court. Petitioners Santiago Jr., et al., filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, docketed as G.R. No. 181455-56; while petitioner Santiago Sr. filed a Petition for Certiorari under Rule 65 of the Rules of Court, docketed as G.R. No. 182008. According to petitioners, the appellate court committed reversible errors of law and grave abuse of discretion in its Decision dated 6 September 2007 and Resolution dated 22 January 2008 in CA-G.R. SP No. 99769 and No. 99780.

Petitioners insisted that Civil Case No. 07-610 pending before the RTC did not constitute a valid derivative suit. Respondents Miguel, et al., failed to allege in their Complaint that they had no appraisal rights for the acts they were complaining of. In fact, the very allegations made by respondents Miguel, et al. in their Complaint supported the availability of appraisal rights to them. The Complaint in Civil Case No. 07-610 was nothing more than a nuisance or harassment suit against petitioners and the other PRCI directors. Petitioners averred that, by finding no grave abuse of discretion on the part of the RTC in issuing the TRO against petitioners and the other PRCI directors, the Court of Appeals substituted its own judgment for that of the PRCI Board of Directors, arbitrarily and capriciously disregarding the business judgment made by the said Board and approved by PRCI stockholders. The TRO issued by the RTC was not for the benefit of the PRCI stockholders. Furthermore, the expiration of the 20-day TRO did not make their Petitions for Certiorari in CA-GR SP No. 99769 and No. 99780 moot. Said Petitions included the prayer that the RTC be restrained from proceeding with Civil Case No. 07-610 in view of the fatally defective Complaint, the grant or denial of which the appellate court should have still determined despite the expiration of the TRO. Petitioners also challenged the refusal by the Court of Appeals to admit their Supplemental Petitions in CA-GR SP No. 99769 and No. 99780. They asserted that the issues in their Supplemental Petitions were closely intertwined with those in their original Petitions. The prayer of petitioners Santiago Jr., et al., in their Petition

in G.R. No. 181455-56 reads:

PRAYER WHEREFORE, in view of the foregoing and in the interest of justice, it is most respectfully prayed of the Honorable Supreme Court that: A. The Decision of the Court of Appeals dated 06 September 2007 (Annex I) and the Resolution of the Court of Appeals dated 22 January 2008 (Annex M) be NULLIFIED, REVERSED and SET ASIDE for having been issued on the basis of reversible error of law and with grave abuse of discretion amounting to lack of jurisdiction. B. The Resolutions of Judge Cesar Untalan of Makati Regional Trial Court, Branch 149 dated 16 July 2007 (Annex F) and 08 October 2007 (Annex G) be accordingly NULLIFIED, REVERSED and SET ASIDE for having been issued with grave abuse of discretion amounting to lack of jurisdiction. C. The complaint of Respondents be DISMISSED outright for lack of jurisdiction and cause of action. D. Such further reliefs just and equitable under the circumstances be GRANTED.[28]

Petitioners Santiago Jr., et al., subsequently filed in G.R. No. 181455-56 an Urgent Motion for Issuance of a Temporary Restraining Order (Status Quo Ante) and/or Writ of Preliminary Injunction, in which they additionally asked the Court that a Temporary Restraining Order (Status Quo Ante) and/or Writ of Preliminary Injunction be immediately issued restraining the implementation (sic) Judge Cesar Untalans Resolutions dated 16 July 2007 and 08 October 2007 so as not to render inutile this Most

Honorable Courts exercise of jurisdiction over this action and to prevent the decision on this case from being rendered ineffectual and academic.[29] Meanwhile, petitioner Santiago Sr. sought the following reliefs from this Court in his Petition in G.R. No. 182008:

PRAYER WHEREFORE, premises considered, it is respectfully prayed that the petition be given due course, and that: 1. Upon the filing of this petition, a temporary restraining order and/or writ of preliminary injunction be immediately issued restraining and enjoining the enforcement or execution of the assailed Court of Appeals Decision and Resolution, and the assailed trial courts resolutions, particularly that which mandates the continued enforcement of the Writ of PERMANENT Injunction issued by the trial, which prevents the stockholders of the corporation from acting on matters that have to be submitted to them for approval and/ratification at the regular annual stockholders meetings. 2. Thereafter, a writ of prohibition be issued and/or the preliminary injunction be made permanent and continuing, during the pendency of the instant case before the Honorable court. 3. After due hearing, that the Honorable Court:

(a) Declare null and void the Honorable Court of Appeals 06 September 2007 Decision and 22 January 2008 Resolution, in CA-G.R. SP No. 99780, as well as the Trial Courts 16 July 2007 and 8 October 2007 Resolutions in Civil Case No. 07-610 of the Makati Regional Trial Court, and

(b) Order the dismissal of the Complaint filed by the private respondents against petitioner, et al., docketed as Civil Case No. 07-610 of the RTC of Makati City. Other reliefs just and equitable in the premises are likewise prayed for.[30]

In a Resolution dated 9 April 2008 in G.R. No. 182008, the Court granted petitioner Santiago Sr.s prayer for the issuance of a TRO, to wit:
Acting on the prayer for the issuance of a temporary restraining order and/or a writ of preliminary injunction dated 24 March 2008, the Court likewise resolves to ISSUE a TEMPORARY RESTRAINING ORDER enjoining respondents from enforcing or executing the assailed Court of Appeals decision and resolution and the assailed trial courts resolutions particularly that which mandates the continued enforcement of the writ of permanent injunction issued by the trial court, until further orders from this Court, and to require petitioner to POST a CASH BOND or a SURETY BOND from a reputable bonding company of indubitable solvency with terms and conditions acceptable to the Court, in the amount of TWO HUNDRED THOUSAND PESOS (P200,000.00), within five (5) days from notice, otherwise, the temporary restraining order herein issued shall automatically be lifted. Unless and until the Court directs otherwise, the bond shall be effective from its approval by the Court until this case is finally decided, resolved or terminated.[31]

Accordingly, the Court issued the TRO[32] on even date, directed against the respondents of G.R. No. 182008, namely, respondents Miguel, et al., and Judge Untalan.

On 21 April 2008, respondents Miguel, et al. filed with the Court their Comment with Prayer for the Immediate Lifting or Dissolution of the Temporary Restraining Order in G.R. No. 182008. Respondents Miguel, et al., argued that the Petition for Certiorari in G.R. No. 182008 was dismissible due to several procedural errors. Petitioner Solomon, who signed the Petition in G.R. No. 182008 on behalf of Santiago Sr., was guilty of forum shopping for failing to inform the Court of the Petition for Review in G.R. No. 181455-56, of which he was one of the petitioners. Both Petitions involved the same transactions, essential facts, and circumstances, as well as identical causes of action, subject matter, and issues. The Petition for Certiorari in G.R. No. 182008 was also not personally verified by petitioner Santiago Sr. as required by rules and jurisprudence. Moreover, the Petition for Certiorari was not a proper remedy, since it was only proper when there was no other plain, speedy, and adequate remedy in the ordinary course of law. Petitioner Cua himself admitted the availability of other remedies, except that he was avoiding the tortuous manner offered by other remedies. In fact, petitioners Santiago Jr., et al., filed a Petition for Review in G.R. No. 181455-56. Lastly, errors of judgment could not be remedied by a Petition for Certiorari. Petitioner Santiago Sr.s Petition in G.R. No. 182008 raised issues that were factual and evidentiary in nature, on which the RTC has yet to make finding. On substantial grounds, respondents Miguel, et al., explained that their Complaint in Civil Case No. 07-610 was comprised of several causes of action. It was not merely a derivative suit, but was also an intra-corporate action arising from devices or schemes employed by the PRCI Board of Directors amounting to fraud or misrepresentation and were detrimental to the interest of the PRCI stockholders. Additionally, the fraudulent acts and breach of

fiduciary duties by the PRCI directors had already been established by prima facie factual evidence, which warranted the continuation of the proceedings in Civil Case No. 07-610 before the RTC for adjudication on the merits. It was also established that there were no appraisal rights available for the acts complained of, since (1) the PRCI directors were being charged with mismanagement, misrepresentation, fraud, and breach of fiduciary duties, which were not subject to appraisal rights; (2) appraisal rights would only obtain for acts of the Board of Directors in good faith; and (3) appraisal rights may be exercised by a stockholder who had voted against the proposed corporate action, and no corporate action had yet been taken herein by PRCI stockholders, who still had not voted on the intended property-for-shares exchange between PRCI and JTH. Furthermore, the Court of Appeals correctly denied admission of the Supplemental Petitions in CA-GR SP No. 99769 and No. 99780. A new and independent cause of action could not be set by supplemental complaint. The issues raised in the original Petitions pertain to the grave abuse of discretion committed by the RTC in issuing the TRO and in taking cognizance of Civil Case No. 07-610, by setting the same for hearing on the main injunction; in contrast, the issues in the Supplemental Petitions referred to the issuance of the Writ of Preliminary Injunction. In support of their prayer for the immediate lifting or dissolution of the TRO issued by this Court, respondents Miguel, et al., contended that:
I THE TEMPORARY RESTRAINING ORDER ISSUED BY THIS HONORABLE COURT HAS IMPELLED HEREIN PETITIONER AND HIS CO-MAJORITY DIRECTORS TO SCHEDULE A STOCKHOLDERS MEETING WITH THE

VIEW TO RENDER MOOT AND ACADEMIC THE ACTION AND PROCEEDINGS BEFORE THE REGIONAL TRIAL COURT OF MAKATI, BRANCH 149. II THE PETITIONER HEREIN, HAVING BEEN IMPLEADED AS DIRECTOR AND FIDUCIARY OF PRCI, DOES NOT STAND TO SUFFER ANY IRREPARABLE INJURY. III TO THE CONTRARY, IT IS PRCI WHO STAND TO SUFFER GRAVE AND IRREPARABLE INJURY IF THE TRO IS NOT LIFTED AND/OR DISSOLVED. IV THE PETITIONER HEREIN HAS FAILED TO ESTABLISH ANY CLEAR LEGAL RIGHT THAT ENTITLES HIM TO THE ISSUANCE OF A TRO AND/OR WRIT OF PRELIMINARY INJUNCTION. V THE TRO WAS IMPROPERLY ISSUED AS PETITIONER HAS FAILED TO SHOW ANY EXTREME URGENCY TO NECESSITATE THE ISSUANCE THEREOF.[33]

In the end, respondents Miguel, et al., prayed:

PRAYER WHEREFORE, premises considered, it is respectfully prayed of this Honorable Supreme Court that the Temporary Restraining Order be LIFTED or DISSOLVED IMMEDIATELY, and that the instant Petition be DISMISSED.

Other just and equitable reliefs are likewise prayed for.[34]

Only two days later, on 23 April 2008, respondents Miguel, et al., again urgently moved[35] for the lifting and/or dissolution of the TRO issued by this Court. They informed the Court that the PRCI Board of Directors passed and approved on 22 April 2008 a Resolution setting the Annual Stockholders Meeting of PRCI on 18 June 2008, including in the proposed Agenda therefor the following items:
(d) Approval of the Minutes of the Special Stockholders Meeting held on 7 November 2006, and the Minutes of the Annual Stockholders Meeting held on 10 October 2007; xxxx (g) Approval and ratification of the acts of the Board of Directors, the Executive Committee, and Management of the Corporation for Fiscal Years 2006 and 2007; Approval of the Planned Exchange of PRCIs Makati Property for shares of stock of JTH Davies Holdings, Inc.[36]

(h)

On the same day, 23 April 2008, the Court issued a Resolution[37] consolidating G.R. No. 181455-56 and No. 182008. Thereafter, on 16 June 2008, Aris Prime Resources, Inc. (APRI), a minority stockholder of PRCI with 5,000,000.00 shares or 0.88% of the outstanding capital stock of PRCI filed a Very Respectful Motion for Leave to Intervene as Co-Respondent in the Petition with the attached Very Respectful Urgent Motion to Lift

Restraining Order.[38] It relayed to the Court that it received Notice of the Annual Stockholders Meeting of PRCI set on 18 June 2008, where the items on the property-for-shares exchange between PRCI and JTH were included in the Agenda. Considering that the validity of the acts of the PRCI Board of Directors concerning the property-for-shares exchange are the very issues raised in the Petitions presently before the Court, while the factual issues relating to the same are still being litigated before the RTC in Civil Case No. 07-610, the submission of the exchange to the PRCI stockholders for their approval will render the aforementioned proceedings before this Court and the RTC moot and academic. It will amount to a denial of the right of APRI and of respondents Miguel, et al., to be heard before the RTC where they are still to present their evidence on the factual issues. It will likewise unduly pave the way for the validation of the abuse committed by the majority directors of PRCI in denying the right of the minority directors and stockholders of the corporation to information, and for the sanction of the blatant disregard by the majority directors of their duties of fidelity and transparency. Unless the TRO is lifted forthwith, APRI, respondents Miguel, et al., and all other minority stockholders stand to suffer prejudice. Expectedly, petitioners seek the dismissal, while respondents Miguel, et al., pray for the grant of the motion to intervene of APRI. Pending action on the foregoing incidents, petitioners Santiago Jr., et al., filed before the Court a Manifestation and Motion to Set Case for Oral Arguments.[39] In their Manifestation, petitioners Santiago Jr., et al., admitted that the PRCI Board of Directors had already called and set the Annual Stockholders Meeting on 18 June 2008, and among the

items on the Agenda for confirmation and approval by the stockholders was the property-for-shares exchange between PRCI and JTH. Petitioners Santiago Jr., et al., brought to the attention of the Court the fact that on 5 June 2008, another set of minority stockholders of PRCI, namely, Jalane Christie U. Tan, Marilou U. Pua, Aristeo G. Puyat, and Ricardo S. Parreno (Jalane, et al.) filed with the RTC of Makati a Complaint against petitioners and the other directors of PRCI and/or JTH, docketed as Civil Case No. 08458. Jalane, et al., have the following shareholdings in PRCI:
Stockholder Jalane Christie U. Tan Marilou U. Pua Artisteo G. Puyat Ricardo S. Pareo Total No. of Shares 16,927,560 3,884,400 1,633,666 5,850 22,451,476 Percentage 2.97 0.68 0.29 0.00 3.94

Jalane, et al., claimed in their Complaint in Civil Case No. 08458 that [a]part from being a derivative suit, this suit is also filed based on devices or schemes employed by the Board of Directors amounting to fraud or misrepresentation which is detrimental to the interest of the corporation, the public and/or stockholders as provided for under Section 1(a)(1) of the Interim Rules of Procedure for Intra-Corporate Controversies (A.M. No. 01-2-04-SC).[40] The Complaint was based on four causes of action: (1) the acquisition of JTH by PRCI; (2) sale of 29.92% of JTH shares by PRCI;[41] (3) exchange of the Makati property of PRCI for JTH shares; and (4) interlocking of Directors of PRCI and JTH. The Complaint of Jalane, et al., contained the following prayer:

PRAYER WHEREFORE, it is respectfully prayed of this Honorable Court, after due notice and hearing, that: 1. A Temporary Restraining Order and/or Writ of Preliminary Mandatory Injunction be issued enjoining the presentation, discussion and ratification of portions of the Agenda of the Annual Stockholders Meeting of PRCI scheduled on June 18, 2008, particularly items IV, VII and VIII; 2. An order be issued nullifying the Sale and Purchase Agreement dated September 27, 2006 for the acquisition of JTH Davies Holdings, Inc. 3. An order be issued nullifying the sale of PRCI shares in JTH in April 2007 and May 7, 2007; [Paragraph crossed-out.] 5. An order be issued directing defendants to pay plaintiffs the sum of P500,000.00 as and by way of attorneys fees, plus cost of suit. Other reliefs, just and equitable under the premises are likewise prayed for.[42]

Acting on the Complaint of Jalane, et al. in Civil Case No. 08458, Executive Judge Winlove Dumayas (Executive Judge Dumayas) of the Makati City RTC issued a 72-hour TRO, enjoining PRCI directors from presenting, discussing, and ratifying the items in the Agenda for the Annual Stockholders Meeting set on 18 June 2008 related to the property-for-shares exchange between PRCI and JTH. However, upon being apprised of the TRO issued by this Court on 9 April 2008 in G.R. No. 182008, in relation to Civil Case

No. 07-610 pending before the Makati City RTC, Branch 149, Executive Judge Dumayas gave verbal advice that the Annual Stockholders Meeting of PRCI should proceed on 18 June 2008 as if the 72-hour TRO had not been issued. Consequently, the Annual Stockholders Meeting of PRCI proceeded on 18 June 2008. The Annual Stockholders Meeting of PRCI, held on 18 June 2008, was attended by stockholders with a total of 493,017,509 shares or 86.52% of the outstanding capital stock of PRCI, more than the necessary 2/3 to constitute a quorum. Discussed in the meeting were the same items, whose presentation to the stockholders was sought to be enjoined by respondents Miguel, et al., in Civil Case No. 07-610 and by Jalane, et al., in Civil Case No. 08-458. The actions taken by the stockholders on the controversial items were duly recorded in the Minutes of the meeting, as follows:
IV. APPROVAL OF THE MINUTES OF THE PREVIOUS STOCKHOLDERS MEETINGS Before the next agenda was tackled in the meeting, a stockholder, Atty. Benjamin Santos asked to be recognized on the floor. The Chairman gave Atty. Santos permission to speak. Atty. Santos inquired from the Corporate Secretary if there has already been official notice of service on him regarding a 72-hour temporary restraining order which was issued by the Executive Judge of the Makati Regional Trial Court (RTC). The Corporation (sic) Secretary answered in the negative. For the information of the stockholders present, Atty. Santos mentioned that a case has been filed by certain minority shareholders, namely, Jalane Christie U. Tan, Marilou U. Pua, Aristeo G. Puyat and Ricardo S. Parreno, against the Board of Directors of PRCI (Civil Case No. 08458, Makati RTC), and a 72-hour TRO was issued on 17

June 2008 enjoining defendants (directors of PRCI), their representatives, employees and/or all those acting for and in their behalf to refrain from the presentation, discussion and ratification of portions of the Agenda of the Annual Stockholders Meeting of PRCI scheduled on June 18, 2008 particularly items IV, VII and VIII. x x x. xxxx According to Atty. Santos, the TRO enjoins them in their capacity as Directors of PRCI. He further stated that the attendance of all the directors present in the stockholders meeting, is in their capacity as stockholders of PRCI and not as directors of PRCI. The Chairman is present merely to preside over the meeting, and the Corporate Secretary is not a member of the Board of Directors. Atty. Santos likewise informed the stockholders present of the existence of a temporary restraining order issued by the Supreme Court dated 09 April 2008 (in SC G.R. No. 182008) which enjoin(ed) respondents from enforcing or executing the assailed Court of Appeals decision and resolution, and the assailed trial courts resolutions particularly that which mandates the continued enforcement of the writ of permanent injunction issued by the trial court, until further orders from this Court. Thereafter, Atty. Santos moved that Agenda Item IV as well as the rest of the items to be taken up since the TRO of the Makati RTC is defective and should not prevail over the TRO of the Supreme Court. Atty. Santos added that the case recently filed by the abovementioned minority shareholders is a duplicate of another pending case filed by other minority shareholders also in the Makati RTC. It was pointed out that the shareholders in the recent case are guilty of forum shopping since they primarily have the same interests as those who had earlier filed a suit against PRCI. Atty. Santos clarified that the pending case is currently the subject of a Petition to the Supreme Court wherein the

aforementioned TRO was issued. With this Comment, the Corporate Secretary took note of the Petition filed with the Supreme Court and the TRO issued by the Supreme Court. xxxx x x x With all the foregoing comments, Atty. Santos moved that the stockholders proceed with the meeting and that the item under Agenda IV be approved, which are the following: the Minutes of the Annual Stockholders Meeting held on June 19, 2006, the Minutes of the Special Stockholders Meeting held on November 7, 2006 and the Minutes of the Annual Stockholders Meeting held on October 10, 2007. Thereafter, Atty. Alexander Carandang asked to be given permission to speak. The Chairman asked Atty. Carandang his name and authority to speak, to which, he answered his name and said he was stockholder of record and a proxy of Aristeo Puyat and Jose L. Santos. After Atty. Carandang was recognized, he stated that, contrary to Atty. Santos earlier actuations, the recent complaint filed is different from the complaint earlier filed by the Dulay group. He also mentioned that the case which Puyat earlier filed is different because it is a case for inspection and photocopying of PRCI documents. He thereafter warned against the tackling of Agenda Item No. 4. Atty. Brigido Dulay, as a stockholder and proxy to the Tan group (Miguel Ocampo Tan, Jemie U. Tan, JUT Holdings, Inc., Jalane Christie U. Tan, etc.) likewise took the floor to manifest his continuing objection to the proceedings. Atty. Amado Paolo Dimayuga also took the floor as a proxy to Marilou Pua and manifested that the complainants in the recent case filed are not guilty of forum shopping and also manifested his objection to the taking up of Item IV in the agenda and the continuance of the proceedings in

the stockholders meeting. Atty. Pelagio Ricalde also took the floor as proxy for Aries Prime Resources, Inc. and also manifested objection to the proceedings. Both Atty. Dimayuga and Atty. Ricalde manifested continuing objections. Atty. Dimayuga also mentioned that he received word that a Motion to Lift was just filed by the PRCI Directors regarding the recent TRO issued by the Makati RTC. As a reply, the Corporate Secretary asked that the counsel for the PRCI directors be allowed to explain such allegations. Atty. Garbriel Q. Enriquez, the counsel for PRCI Directors Cua, Cua, Jr., De Villa and Robles informed the stockholders of the wrong information being given by Atty. Dimayuga. They had filed a manifestation before the Executive Judge of the RTC which issued the TRO and informed him of the facts mentioned by Atty. Santos. The Executive Judge said that todays meeting should proceed because the plaintiffs therein suppressed the existing TRO in the Supreme Court, and the TRO of the RTC cannot rise above the Supreme Court TRO. There is therefore no legal obstacle to holding the Annual Stockholders Meeting, which should proceed so as not to prejudice the stockholders. The Corporate Secretary stated that all the objections are duly noted. There being an earlier motion for the approval of the Minutes, a stockholder seconded said motion. The motion having been duly seconded, the Chairman declared all the minutes for approval as duly approved. xxxx VI. RATIFICATION OF THE ACTS OF THE BOARD OF DIRECTORS, THE EXECUTIVE COMMITTEE AND THE MANAGEMENT OF THE CORPORATION FOR FISCAL YEARS 2006 AND 2007

The Chairman then proceeded by stating that the next item on the agenda is the ratification by the Stockholders of the acts of the Board of Directors, the Executive Committee, and the Management during the last fiscal years 2006 and 2007. The Chairman then explained that as to all other matters and action affecting the operations, financial performance and strategic posture of the Corporation, all have been subsumed and discussed in the Annual Report of the President and likewise reflected in the Information Statement sent to all stockholders of record and to the SEC. Once more, Atty. Dulay, Atty. Carandang, Atty. Dimayuga and Atty. Ricalde all took the floor successively and objected to this item in the agenda and the Corporate Secretary duly noted these objections. A stockholder later moved that all the acts of the Board of Directors, the Executive Committee, and the corporate management be confirmed, ratified and approved by the stockholders. The said motion was duly seconded, thus, the stockholders thereafter approved and ratified all the said acts. At this juncture, Atty. Dulay requested that the stockholders who moved and seconded the aforementioned acts be named and their authority to speak be made known. Atty. Carandang likewise inquired about the same information about a lady stockholder who earlier seconded the motion. With this, Atty. Jose Miguel Manalo stated his name and said he was a stockholder of record. The other stockholders stated that they were proxies of Mr. Santiago Cualoping III. VII. APPROVAL OF THE EXCHANGE OF PRCIS MAKATI PROPERTY FOR SHARES OF STOCK OF JTH DAVIES HOLDINGS, INC.

When asked by the Chairman as to the next item in the agenda, the Corporate Secretary informed all present that the next item is the approval of the exchange of PRCIs Makati property for shares of stock of JTH Davies Holdings which was duly approved by the Board of Directors during its 11 May 2007 meeting. The exchange was duly reported and disclosed to the SEC and the information thereof was included in the Information Statements mailed to all stockholders of PRCI. Yet again, Atty. Dulay, Atty. Carandang, Atty. Dimayuga and Atty. Ricalde all took the floor successively and objected to this item in the agenda which were duly noted by the Corporate Secretary. The Chairman then called the President of PRCI, Mr. Solomon Cua to officiate on this matter. At this point, one stockholder moved that the exchange of PRCIs Makati property for JTH shares be approved by the stockholders, which was duly seconded by another stockholder. President Cua then asked that the total percentage of those who are in favor of the exchange be taken. Mr. Santiago Cua, Jr., a stockholder and a proxy of approximately 31.39% of the shareholdings voted in favor of the exchange. Then, Mr. Lawrence Lim Swee Lin, representing Magnum Investment Ltd. and Leisure Management Ltd. who own 39.15% of the shareholdings, also voted in favor of the exchange. Mr. Exequiel D. Robles also voted in favor of the exchange, as proxy of Sta. Lucia Realty & Development, Inc. owning 4.19% of the shares. Lastly, Atty. Santos also wanted his vote of approval be counted whi his shares of stock of 117 shares. With 75.23% of the outstanding capital stock of PRCI voting in favor of the exchange of its Makati property for shares of stock of JTH Davies, the Chairman then declared said motion as carried and approved.[43]

Hence, at their annual meeting on 18 June 2008, the PRCI stockholders had already confirmed and approved the actions and resolutions of the PRCI Board of Directors, which were to subject matters of Civil Cases No. 07-610 and No. 08-458. Resultantly, on 7 July 2008, PRCI and JTH duly signed and executed a Deed of Transfer with Subscription Agreement, covering the exchange of the Makati property of PRCI for shares of stock of JTH. Paragraph 4 of said Deed expressly provides:
4. The parties understand, acknowledge and agree that this Deed is executed with the intention of availing of the benefits of Sections 40(C)(2) of the National Internal Revenue Code of 1997 (NIRC), as amended, where, upon subscription of shares hereunder, the Subscriber shall gain further control of the Company. The parties obtained a ruling from the Bureau of Internal Revenue to the effect that no gain or loss will be recognized on the part of each of the parties, pursuant to this Deed, in accordance with Sections 40(C)(2) of the NIRC, as amended. The ruling confirmed that the transfer of the Subscribers parcels of land to the Company in exchange for the shares of stock of the latter is not subject to income tax, capital gains tax, donors tax, value-added tax and documentary stamp tax, except for documentary stamp tax on the original issuance of the Companys shares of stock to the Subscriber. [44] (Emphases ours.)

However, in a letter dated 15 July 2008, the BIR reversed/revoked its earlier ruling that the property-for-shares exchange between PRCI and JTH was a tax-free transaction under Section 40(C)(2) of the National Internal Revenue Code of 1997; and subjected the exchange to value-added tax. As a result, PRCI and JTH executed on 22 August 2008 a Disengagement Agreement,[45] by virtue of which, effective immediately, PRCI and

JTH would disengaged and would no longer implement the Deed of Transfer with Subscription Agreement dated 7 July 2008. For all intents and purposes, the said Deed of Transfer with Subscription Agreement was rescinded. PRCI disclosed the Disengagement Agreement to the SEC on 26 August 2008. Civil Case No. 08-458 was eventually also assigned to the only commercial court of Makati City, i.e., RTC, Branch 149, presided over by Judge Untalan. Petitioners Santiago Jr., et al. averred that Judge Untalan refused to dismiss Civil Case No. 08-458 on the ground of forum shopping, even when it was no different from Civil Case No. 07-610. They further asserted that Judge Untalan showed evident partiality in favor of Jalane, et al., during the hearings in Civil Case No. 08-458, openly making hasty conclusions as to certain marked exhibits and demonstrating his prejudgment of the case. On 25 September 2008 and 30 September 2008, the PRCI directors filed before the RTC a Motion to Inhibit[46] and a Supplemental Motion to Inhibit,[47] respectively, urging Judge Untalan to inhibit himself from Civil Case No. 08-458, since he had revealed in several instances his utter bias and prejudice against the PRCI directors and admitted his being a relative by affinity of Atty. Amado Paulo Dimayuga,[48] the initial counsel of Jalane, et al. Judge Untalan has yet to act on such motions. At the end of their Manifestation, petitioners Santiago Jr., et al., asked that this Court grant them the following reliefs:
PRAYER WHEREFORE, it is respectfully prayed that the foregoing Manifestation be noted, and that the First Suit [Civil Case No. 07610] as well as the Second Suit [Civil Case No. 08-458] should now be dismissed for being moot and academic, without need of

remand to the trial (sic) Court for further proceedings. It is further respectfully prayed that should the Honorable Court find it proper and necessary, the instant cases be set for oral arguments on such date and time as it may deem convenient to its calendar. Herein petitioners furthermore pray for such other reliefs as may be just and equitable in the premises.[49]

Petitioner Santiago Sr. also filed his own Manifestation (To Update the Honorable Court on Relevant Supervening Proceedings and Incidents) with Motion to Resolve Merits of Petition and of the Case in the Lower Court (In View of Supervening Proceedings and Incidents),[50] essentially recounting the same events in the Manifestation of petitioners Santiago Jr., et al. The prayer of Santiago Sr. in his Manifestation and Motion reads:
PRAYER WHEREFORE, it is respectfully prayed that the Honorable Court: 1. TAKE COGNIZANCE of the instant Manifestation on relevant supervening proceedings and incidents in this case, especially and specifically, after the issuance by the Honorable Court on 09 April 2008 of a temporary restraining order, addressed to the Court of Appeals, the presiding judge of the Regional Trial Court, Branch 149, Makati City, and the private respondents, and their agents, representatives and/or any person or persons acting upon their orders or in their place of stead, who are: ENJOINED from enforcing or executing the assailed Court of Appeals decision and resolution, and the assailed trial courts resolutions particularly

that which mandates the continued enforcement of the writ of permanent injunction issued by the trial court, until further orders from this Court. 2. ORDER the dismissal of the complaint below on the ground that the same is not a legitimate and valid derivative suit. 3. ORDER the dismissal of the complaint below, in any case, on the ground that the issues raised in the complaint, specifically with respect to the so-called disputed resolutions, have been mooted and/or no longer subsist. 4. ORDER the private respondents to explain why they should not be cited for contempt of court for violation of the temporary restraining order issued by the Court on 09 April 2008. 5. ORDER the private respondents to explain why they should not be cited for contempt of court for engaging in forum-shopping. 6. ORDER that the temporary restraining order issued by the Court on 09 April 2008 be made PERMANENT. Other reliefs just and equitable in the premises are likewise prayed for.[51]

II ISSUES The Court identifies the following fundamental issues for its resolution in the Petitions at bar: (1) Whether the Petition of Santiago Sr. in G.R. No. 180028 should be dismissed for its procedural infirmities?

(2) Whether Civil Case No. 07-610 instituted by respondents Miguel, et al. before the RTC should be ordered dismissed? (3) Whether Civil Case No. 08-458 instituted by Jalane, et al., before the RTC should be ordered dismissed? (4) Whether APRI should be allowed to intervene in the instant Petitions? III RULING OF THE COURT Procedural infirmities of Petition in G.R. No. 180028 Respondents Miguel, et al., call attention to two procedural infirmities of the Petition for Certiorari of petitioner Santiago Sr. in G.R. No. 180028: (1) the failure to inform the Court of the pendency of the Petition in G.R. No. 181455-56, thus, violating the rule against forum-shopping; and (2) its being the wrong mode of appeal. The Verification and Certification of Non-Forum Shopping attached to the Petition for Certiorari of petitioner Santiago Sr. in G.R. No. 180028 was actually signed by his attorney-in-fact, Solomon,[52] who is also a petitioner in G.R. No. 181455-56. It contains the following paragraph:
4. In compliance with the 1997 Rules of Civil Procedure, I hereby certify that the petitioner, by himself personally and/or acting through his attorneys-in fact, has not heretofore commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency, and that to the best of my knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals, or different

Divisions thereof, or any other tribunal or agency. If I should learn that a similar action or proceeding has been filed or is pending before the Supreme Court, Court of Appeals, or different Divisions thereof, or any other tribunal or agency, I undertake to promptly inform this Honorable Court, the aforesaid courts and other tribunal or agency within five (5) days therefrom.[53]

Respondents Miguel, et al., maintain that the failure of Solomon, as petitioner Santiago Sr.s attorney-in-fact, to inform the Court as regards the pendency of the Petition for Review in G.R. No. 181455-56, of which Solomon is one of the petitioners, is in violation of the rule against forum-shopping and warrants the summary dismissal of the Petition in G.R. No. 182008. Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. It is an act of malpractice and is prohibited and condemned as trifling with courts and abusing their processes. In determining whether or not there is forum shopping, what is important is the vexation caused the courts and parties-litigants by a party who asks different courts and/or administrative bodies to rule on the same or related causes and/or grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different bodies upon the same issues.[54] Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or causes of action and reliefs prayed for, and (3) the two preceding particulars, such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration.[55]

It is evident that Santiago Sr., the petitioner in G.R. No. 182008, is not a party to G.R. No. 181455-56. Even though Solomon is admittedly a petitioner in G.R. No. 181455-56, he is only acting in G.R. No. 182008 as the attorney-in-fact of Santiago Sr., the actual petitioner in the latter case. Thus, the very first element for forum shopping, identity of parties, is lacking. Respondents Miguel, et al., cannot insist on identity of interests between petitioner Santiago Sr. in G.R. No. 182008 and petitioners Santiago Jr., et al., in G.R. No. 181455-56, when the Complaint itself of respondents Miguel, et al., before the RTC, docketed as Civil Case No. 07-610, impleads the petitioners Santiago Sr. and Santiago Jr., et al., as defendants a quo in their individual capacities as PRCI directors, and not collectively as the PRCI Board of Directors. Each individual PRCI director, therefore, is not precluded from hiring his own counsel, presenting his own arguments and defenses, and resorting to his own procedural remedies, apart and independent from the other PRCI directors. In addition, the consolidation of G.R. No. 181455-56 and G.R. No. 182008 has already eliminated the danger of conflicting decisions being issued in said cases. Assuming arguendo that Solomon did have the legal obligation to inform the Court in G.R. No. 182008 of the pendency of G.R. No. 181455-56, his failure to do so does not necessarily result in the dismissal of the former. Although the submission of a certificate against forum shopping is deemed obligatory, it is not jurisdictional.[56] Hence, in this case in which such a certification was in fact submitted only, it was defective -- the Court may still refuse to dismiss and may, instead, give due course to the Petition in light of attendant exceptional circumstances.[57]

Santiago Sr. committed another procedural faux pas by filing before this Court a Petition for Certiorari under Rule 65 of the Rules of Court to assail the Decision dated 6 September 2007 and Resolution dated 22 January 2008 of the Court of Appeals in CAG.R. SP No. 99769 and No. 99780. The proper remedy of a party aggrieved by a decision of the Court of Appeals is a petition for review under Rule 45, which is not similar to a petition for certiorari under Rule 65 of the Rules of Court. As provided in Rule 45 of the Rules of Court, decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or proceedings involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the appellate process over the original case. On the other hand, a special civil action under Rule 65 is an independent action based on the specific grounds therein provided and, as a general rule, cannot be availed of as a substitute for the lost remedy of an ordinary appeal, including that under Rule 45.[58] Accordingly, when a party adopts an improper remedy, as in this case, his Petition may be dismissed outright. However, in the interest of substantial justice, the strict application of procedural technicalities should not hinder the speedy disposition of this case on the merits. Thus, while the instant Petition is one for certiorari under Rule 65 of the Rules of Court, the assigned errors are more properly addressed in a petition for review under Rule 45.[59] The merits of the Petitions in both G.R. No. 181455-56 and No. 182008 compel this Court to give more weight to substantive justice, instead of technical rules. Indeed, where, as here, there is a strong showing that a grave miscarriage of justice would result from

the strict application of the Rules, the Court will not hesitate to relax the same in the interest of substantial justice. It bears stressing that the rules of procedure are merely tools designed to facilitate the attainment of justice. They were conceived and promulgated to effectively aid the court in the dispensation of justice. Courts are not slaves to or robots of technical rules, shorn of judicial discretion. In rendering justice, courts have always been, as they ought to be, conscientiously guided by the norm that, on the balance, technicalities take a backseat against substantive rights, and not the other way around. Thus, if the application of the Rules would tend to frustrate rather than promote justice, it is always within the power of the Court to suspend the Rules, or except a particular case from its operation.[60] Derivative suits, in general A corporation, such as PRCI, is but an association of individuals, allowed to transact under an assumed corporate name, and with a distinct legal personality. In organizing itself as a collective body, it waives no constitutional immunities and perquisites appropriate to such body. As to its corporate and management decisions, therefore, the State will generally not interfere with the same. Questions of policy and of management are left to the honest decision of the officers and directors of a corporation, and the courts are without authority to substitute their judgment for the judgment of the board of directors. The board is the business manager of the corporation, and so long as it acts in good faith, its orders are not reviewable by the courts.[61] The governing body of a corporation is its board of directors. Section 23 of the Corporation Code provides that [u]nless otherwise provided in this Code, the corporate powers of all corporations

formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees x x x. The concentration in the board of the powers of control of corporate business and of appointment of corporate officers and managers is necessary for efficiency in any large organization. Stockholders are too numerous, scattered and unfamiliar with the business of a corporation to conduct its business directly. And so the plan of corporate organization is for the stockholders to choose the directors who shall control and supervise the conduct of corporate business.[62] The following discourse on the corporate powers of the board of directors under Section 23 of the Corporation Code establishes the extent thereof:
Under the above provision, it is quite clear that, except in the instances where the Code expressly grants a specific power to the stockholders or member, the board has the sole power and responsibility to decide whether a corporation should sue, purchase and sell property, enter into any contract, or perform any act. Stockholders or members resolutions dealing with matters other than the exceptions are not legally effective nor binding on the board, and may be treated by it as merely advisory, or may even be completely disregarded. Since the law has vested the responsibility of managing the corporate affairs on the board, the stockholders must abide by its decisions. If they do not agree with the policies of the board, their remedy is to wait for the next election of the directors and choose new ones to take their place. The theory of the law is that although stockholders are to have all the profit, the complete management of the enterprise shall be with the board.[63]

The board of directors of a corporation is a creation of the stockholders. The board of directors, or the majority thereof,

controls and directs the affairs of the corporation; but in drawing to itself the power of the corporation, it occupies a position of trusteeship in relation to the minority of the stock. The board shall exercise good faith, care, and diligence in the administration of the affairs of the corporation, and protect not only the interest of the majority but also that of the minority of the stock. Where the majority of the board of directors wastes or dissipates the funds of the corporation or fraudulently disposes of its properties, or performs ultra vires acts, the court, in the exercise of its equity jurisdiction, and upon showing that intracorporate remedy is unavailing, will entertain a suit filed by the minority members of the board of directors, for and in behalf of the corporation, to prevent waste and dissipation and the commission of illegal acts and otherwise redress the injuries of the minority stockholders against the wrongdoing of the majority. The action in such a case is said to be brought derivatively in behalf of the corporation to protect the rights of the minority stockholders thereof.[64] It is well settled in this jurisdiction that where corporate directors are guilty of a breach of trust not of mere error of judgment or abuse of discretion and intracorporate remedy is futile or useless, a stockholder may institute a suit in behalf of himself and other stockholders and for the benefit of the corporation, to bring about a redress of the wrong inflicted directly upon the corporation and indirectly upon the stockholders.[65] A derivative suit must be differentiated from individual and representative or class suits, thus:
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.

Where a stockholder or member is denied the right of inspection, his suit would be individual because the wrong is done to him personally and not to the other stockholders or the corporation. Where the wrong is done to a group of stockholders, as where preferred stockholders rights are violated, a class or representative suit will be proper for the protection of all stockholders belonging to the same group. But where the acts complained of constitute a wrong to the corporation itself, the cause of action belongs to the corporation and not to the individual stockholder or member. Although in most every case of wrong to the corporation, each stockholder is necessarily affected because the value of his interest therein would be impaired, this fact of itself is not sufficient to give him an individual cause of action since the corporation is a person distinct and separate from him, and can and should itself sue the wrongdoer. Otherwise, not only would the theory of separate entity be violated, but there would be multiplicity of suits as well as a violation of the priority rights of creditors. Furthermore, there is the difficulty of determining the amount of damages that should be paid to each individual stockholder. However, in cases of mismanagement where the wrongful acts are committed by the directors or trustees themselves, a stockholder or member may find that he has no redress because the former are vested by law with the right to decide whether or not the corporation should sue, and they will never be willing to sue themselves. The corporation would thus be helpless to seek remedy. Because of the frequent occurrence of such a situation, the common law gradually recognized the right of a stockholder to sue on behalf of a corporation in what eventually became known as a derivative suit. It has been proven to be an effective remedy of the minority against the abuses of management. Thus, an individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate corporate rights, whenever officials of the corporation refuse to sue or are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded as the nominal party, with the corporation as the party

in interest.[66]

The afore-quoted exposition is relevant considering the claim of respondents Miguel, et al., that its Complaint in Civil Case No. 07-610 is not just a derivative suit, but also an intracorporate action arising from devices or schemes employed by the PRCI Board of Directors amounting to fraud or misrepresentation.[67] A thorough study of the said Complaint, however, reveals that the distinction is deceptive. The supposed devices and schemes employed by the PRCI Board of Directors amounting to fraud or misrepresentation are the very same bases for the derivative suit. They are the very same acts of the PRCI Board of Directors that have supposedly caused injury to the corporation. From the very beginning of their Complaint, respondents have alleged that they are filing the same as shareholders, for and in behalf of the Corporation, in order to redress the wrongs committed against the Corporation and to protect or vindicate corporate rights, and to prevent wastage and dissipation of corporate funds and assets and the further commission of illegal acts by the Board of Directors. Although respondents Miguel, et al., also aver that they are seeking redress for the injuries of the minority stockholders against the wrongdoings of the majority, the rest of the Complaint does not bear this out, and is utterly lacking any allegation of injury personal to them or a certain class of stockholders to which they belong.[68] Indeed, the Court notes American jurisprudence to the effect that a derivative suit, on one hand, and individual and class suits, on the other, are mutually exclusive, viz:
As the Supreme Court has explained: A shareholder's derivative suit seeks to recover for the benefit of the corporation and its whole body of shareholders when injury is caused to the

corporation that may not otherwise be redressed because of failure of the corporation to act. Thus, the action is derivative, i.e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets. [Citations.] (Jones, supra, 1 Cal.3d 93, 106, 81 Cal.Rptr. 592, 460 P.2d 464.) In contrast, a direct action [is one] filed by the shareholder individually (or on behalf of a class of shareholders to which he or she belongs) for injury to his or her interest as a shareholder. ... [] ... [T]he two actions are mutually exclusive: i.e., the right of action and recovery belongs to either the shareholders (direct action) *651 or the corporation (derivative action). (Friedman, Cal. Practice Guide: Corporations, supra, 6:598, p. 6-127.) Thus, in Nelson v. Anderson (1999) 72 Cal.App.4th 111, 84 Cal.Rptr.2d 753, the **289 minority shareholder alleged that the other shareholder of the corporation negligently managed the business, resulting in its total failure. (Id. at p. 125, 84 Cal.Rptr.2d 753) The appellate court concluded that the plaintiff could not maintain the suit as a direct action: Because the gravamen of the complaint is injury to the whole body of its stockholders, it was for the corporation to institute and maintain a remedial action. [Citation.] A derivative action would have been appropriate if its responsible officials had refused or failed to act. (Id. at pp. 125126, 84 Cal.Rptr.2d 753) The court went on to note that the damages shown at trial were the loss of corporate profits. (Id. at p. 126, 84 Cal.Rptr.2d 753) Since [s]hareholders own neither the property nor the earnings of the corporation, any damages that the plaintiff alleged that resulted from such loss of corporate profits were incidental to the injury to the corporation.[69]

Based on allegations in the Complaint of Miguel, et al., in Civil Case No. 07-610, the Court determines that there is only a derivative suit, based on the devices and schemes employed by the

PRCI Board of Directors that amounts to mismanagement, misrepresentation, fraud, and bad faith. At the crux of the Complaint of respondents Miguel, et al., in Civil Case No. 07-610 is their dissent from the passage by the majority of the PRCI Board of Directors of the disputed resolutions, particularly: (1) the Resolution dated 26 September 2006, authorizing the acquisition by PRCI of up to 100% of the common shares of JTH; and (2) the Resolution dated 11 May 2007, approving the property-for-shares exchange between PRCI and JTH. Derivative suit (re: acquisition of JTH) It is important for the Court to mention that the 26 September 2006 Resolution of the PRCI Board of Directors not only authorized the acquisition by PRCI of up to 100% of the common stock of JTH, but it also specifically appointed petitioner Santiago Sr.[70] to act as attorney-in-fact and proxy who could vote all the shares of PRCI in JTH, as well as nominate, appoint, and vote into office directors and/or officers during regular and special stockholders meetings of JTH. It was by this authority that PRCI directors were able to constitute the JTH Board of Directors. Thus, the protest of respondents Miguel, et al., against the interlocking directors of PRCI and JTH is also rooted in the 26 September 2006 Resolution of the PRCI Board of Directors. After a careful study of the allegations concerning this derivative suit, the Court rules that it is dismissible for being moot and academic. That a court will not sit for the purpose of trying moot cases and spend its time in deciding questions, the resolution of which

cannot in presenting moot and rendering value.[71]

any way affect the rights of the person or them, is well settled. Where the issues have academic, there is no justiciable controversy, the resolution of the same of no practical

persons become thereby use or

The Resolution dated 26 September 2006 of the PRCI Board of Directors was approved and ratified by the stockholders, holding 74% of the outstanding capital stock in PRCI, during the Special Stockholders Meeting held on 7 November 2006.[72] Respondents Miguel, et al., instituted Civil Case No. 07-610 only on 10 July 2007, against herein petitioners Santiago Sr., Santiago Jr., Solomon, and Robles, together with Renato de Villa, Lim Teong Leong, Lawrence Lim Swee Lin, Tham Ka Hon, and Dato Surin Upatkoon, in their capacity as directors of PRCI and/or JTH. Clearly, the acquisition by PRCI of JTH and the constitution of the JTH Board of Directors are no longer just the acts of the majority of the PRCI Board of Directors, but also of the majority of the PRCI stockholders. By ratification, even an unauthorized act of an agent becomes the authorized act of the principal.[73] To declare the Resolution dated 26 September 2006 of the PRCI Board of Directors null and void will serve no practical use or value, or affect any of the rights of the parties, because the Resolution dated 7 November 2006 of the PRCI stockholders -- approving and ratifying said acquisition and the manner in which PRCI shall constitute the JTH Board of Directors -- will still remain valid and binding. In fact, if the derivative suit, insofar as it concerns the Resolution dated 26 September 2006 of the PRCI Board of Directors, is not dismissible for mootness, it is still vulnerable to dismissal for failure to implead indispensable parties, namely, the

majority of the PRCI stockholders. Under Rule 3, Section 7 of the Rules of Court, an indispensable party is a party-in-interest, without whom there can be no final determination of an action. The interests of such indispensable party in the subject matter of the suit and the relief are so bound with those of the other parties that his legal presence as a party to the proceeding is an absolute necessity. As a rule, an indispensable partys interest in the subject matter is such that a complete and efficient determination of the equities and rights of the parties is not possible if he is not joined.[74] The majority of the stockholders of PRCI are indispensable parties to Civil Case No. 07-610, for they have approved and ratified, during the Special Stockholders Meeting on 7 November 2006, the Resolution dated 26 September 2006 of the PRCI Board of Directors. Obviously, no final determination of the validity of the acquisition by PRCI of JTH or of the constitution of the JTH Board of Directors can be had without consideration of the effect of the approval and ratification thereof by the majority stockholders. Respondents Miguel, et al., cannot simply assert that the majority of the PRCI Board of Directors named as defendants in Civil Case No. 07-610 are also the PRCI majority stockholders, because respondents Miguel, et al., explicitly impleaded said defendants in their capacity as directors of PRCI and/or JTH, not as stockholders. Derivative suit (re: property-for-shares exchange) The derivative suit, with respect to the Resolution dated 11 May 2007 of the PRCI Board of Directors, is similarly dismissible

for lack of cause of action. The Court has recognized that a stockholders right to institute a derivative suit is not based on any express provision of the Corporation Code, or even the Securities Regulation Code, but is impliedly recognized when the said laws make corporate directors or officers liable for damages suffered by the corporation and its stockholders for violation of their fiduciary duties. In effect, the suit is an action for specific performance of an obligation, owed by the corporation to the stockholders, to assist its rights of action when the corporation has been put in default by the wrongful refusal of the directors or management to adopt suitable measures for its protection. The basis of a stockholders suit is always one of equity. However, it cannot prosper without first complying with the legal requisites for its institution.[75] Rule 8, Section 1 of the Interim Rules of Procedure for IntraCorporate Controversies (IRPICC) lays down the following requirements which a stockholder must comply with in filing a derivative suit:
Sec. 1. Derivative action. A stockholder or member may bring an action in the name of a corporation or association, as the case may be, provided, that: (1) He was a stockholder or member at the time the acts or transactions subject of the action occurred and at the time the action was filed; (2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or partnership to obtain the relief he desires; (3) No appraisal rights are available for the act or acts

complained of; and (4) The suit is not a nuisance or harassment suit. (Emphasis ours.)

In their Complaint before the RTC in Civil Case No. 07-610, respondents Miguel, et al., made no mention at all of appraisal rights, which could or could not have been available to them. In their Comment on the Petitions at bar, respondents Miguel, et al., contend that there are no appraisal rights available for the acts complained of, since (1) the PRCI directors are being charged with mismanagement, misrepresentation, fraud, and breach of fiduciary duties, which are not subject to appraisal rights; (2) appraisal rights will only obtain for acts of the Board of Directors in good faith; and (3) appraisal rights may be exercised by a stockholder who shall have voted against the proposed corporate action, and no corporate action has yet been taken herein by PRCI stockholders, who still have not voted on the intended property-for-shares exchange between PRCI and JTH. The Court disagrees. It bears to point out that every derivative suit is necessarily grounded on an alleged violation by the board of directors of its fiduciary duties, committed by mismanagement, misrepresentation, or fraud, with the latter two situations already implying bad faith. If the Court upholds the position of respondents Miguel, et al. that the existence of mismanagement, misrepresentation, fraud, and/or bad faith renders the right of appraisal unavailable it would give rise to an absurd situation. Inevitably, appraisal rights would be unavailable in any derivative suit. This renders the requirement in Rule 8, Section 1(3) of the IPRICC superfluous and effectively

inoperative; and in contravention of an elementary rule of legal hermeneutics that effect must be given to every word, clause, and sentence of the statute, and that a statute should be so interpreted that no part thereof becomes inoperative or superfluous.[76] The import of establishing the availability or unavailability of appraisal rights to the minority stockholder is further highlighted by the fact that it is one of the factors in determining whether or not a complaint involving an intra-corporate controversy is a nuisance and harassment suit. Section 1(b), Rule 1 of IRPICC provides:
(b) Prohibition against nuisance and harassment suits. Nuisance and harassment suits are prohibited. In determining whether a suit is a nuisance or harassment suit, the court shall consider, among others, the following: (1) The extent of the shareholding or interest of the initiating stockholder or member; (2) Subject matter of the suit; (3) Legal and factual basis of the complaint; (4) Availability of appraisal rights for the act or acts complained of; and (5) Prejudice or damage to the corporation, partnership, or association in relation to the relief sought. [Emphasis ours.] In case of nuisance or harassment suits, the court may, motu proprio or upon motion, forthwith dismiss the case.

The availability or unavailability of appraisal rights should be objectively based on the subject matter of the complaint, i.e., the

specific act or acts performed by the board of directors, without regard to the subjective conclusion of the minority stockholder instituting the derivative suit that such act constituted mismanagement, misrepresentation, fraud, or bad faith. The raison detre for the grant of appraisal rights to minority stockholders has been explained thus:
x x x [Appraisal right] means that a stockholder who dissented and voted against the proposed corporate action, may choose to get out of the corporation by demanding payment of the fair market value of his shares. When a person invests in the stocks of a corporation, he subjects his investment to all the risks of the business and cannot just pull out such investment should the business not come out as he expected. He will have to wait until the corporation is finally dissolved before he can get back his investment, and even then, only if sufficient assets are left after paying all corporate creditors. His only way out before dissolution is to sell his shares should he find a willing buyer. If there is no buyer, then he has no recourse but to stay with the corporation. However, in certain specified instances, the Code grants the stockholder the right to get out of the corporation even before its dissolution because there has been a major change in his contract of investment with which he does not agree and which the law presumes he did not foresee when he bought his shares. Since the will of two-thirds of the stocks will have to prevail over his objections, the law considers it only fair to allow him to get back his investment and withdraw from the corporation. x x x,[77] (Emphasis ours.)

The Corporation Code expressly made appraisal rights available to the dissenting stockholder in the following instances:
Sec. 42. Power to invest corporate funds in another corporation or business or for any other purpose. Subject to the

provisions of this Code, a private corporation may invest its funds in any other corporation or business or for any purpose other than the primary purpose for which it was organized when approved by a majority of the board of directors or trustees and ratified by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or by at least two-thirds (2/3) of the members in case of non-stock corporations, at a stockholders or members meeting duly called for the purpose. Written notice of the proposed investment and the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally; Provided, That any dissenting stockholder shall have appraisal right as provided in this Code: Provided, however, That where the investment by the corporation is reasonably necessary to accomplish its primary purpose as stated in the articles of incorporation, the approval of the stockholders or members shall not be necessary. Sec. 81. Instances of appraisal right. Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his shares in the following instances: 1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholders or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence; 2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in this Code; and 3. In case of merger or consolidation. (Emphasis ours.)

Respondents Miguel, et al., themselves admitted that the

property-for-shares exchange between PRCI and JTH, approved by majority of the PRCI Board of Directors in the Resolution dated 11 May 2007, involved all or substantially all of the properties and assets of PRCI. They alleged in their Complaint in Civil Case No. 07-610 that:
49. The Corporations Makati Property, consisting of prime property in the heart of Makati City worth billions of pesos in its current value constitutes substantially all of the assets of the Corporation and is the sole and exclusive location on which it conducts its business of a race course. 50. The exchange of the Corporations property for JTH shares would therefore constitute a sale of substantially all of the assets of the corporation. (Emphasis ours.)

Irrefragably, the property-for-shares exchange between PRCI and JTH, involving as it did substantially all of the properties and assets of PRCI, qualified as one of the instances when dissenting stockholders, such as respondents Miguel, et al., could have exercised their appraisal rights. The Court finds specious the averment of respondents Miguel, et al., that appraisal rights were not available to them, because appraisal rights may only be exercised by stockholders who had voted against the proposed corporate action; and that at the time respondents Miguel, et al., instituted Civil Case No. 07-610, PRCI stockholders had yet to vote on the intended property-for-shares exchange between PRCI and JTH. Respondents Miguel, et al., themselves caused the unavailability of appraisal rights by filing the Complaint in Civil Case No. 07-610, in which they prayed that the 11 May 2007 Resolution of the Board of Directors approving the property-for-shares exchange between PRCI and JTH be declared

null and void, even before the said Resolution could be presented to the PRCI stockholders for approval or rejection. More than anything, the argument of respondents Miguel, et al., raises questions of whether their derivative suit was prematurely filed for they had failed to exert all reasonable efforts to exhaust all other remedies available under the articles of incorporation, by-laws, laws, or rules governing the corporation or partnership, as required by Rule 8, Section 1(2) of the IRPICC. The obvious intent behind the rule is to make the derivative suit the final recourse of the stockholder, after all other remedies to obtain the relief sought have failed.[78] Personal action for inspection of corporate books and records Respondents Miguel, et al., allege another cause of action, other than the derivative suit -- the violation of their right to information relative to the disputed Resolutions, i.e., the Resolutions dated 16 September 2006 and 11 May 2007 of the PRCI Board of Directors. Rule 7 of the IRPICC shall apply to disputes exclusively involving the rights of stockholders or members to inspect the books and records and/or to be furnished with the financial statements of a corporation, under Sections 74[79] and 75[80] of the Corporation Code.[81] Rule 7, Section 2 of IRPICC enumerates the requirements particular to a complaint for inspection of corporate books and records:
Sec. 2. Complaint. - In addition to the requirements in section 4, Rule 2 of these Rules, the complaint must state the

following: (1) The case is for the enforcement of plaintiff's right of inspection of corporate orders or records and/or to be furnished with financial statements under Sections 74 and 75 of the Corporation Code of the Philippines; (2) A demand for inspection and copying of books and records and/or to be furnished with financial statements made by the plaintiff upon defendant; (3) The refusal of defendant to grant the demands of the plaintiff and the reasons given for such refusals, if any; and (4) The reasons why the refusal of defendant to grant the demands of the plaintiff is unjustified and illegal, stating the law and jurisprudence in support thereof. (Emphasis ours.)

As has already been previously established herein, the right to information, which includes the right to inspect corporate books and records, is a right personal to each stockholder. After a closer reading of the Complaint in Civil Case No. 07-610, the Court observes that only respondent Dulay actually made a demand for a copy of all the records, documents, contracts, and agreements, emails, letters, correspondences, relative to the acquisition of JTH x x x. There is no allegation that his co-respondents (who are his coplaintiffs in Civil Case No. 07-610) made similar demands for the inspection or copying of corporate books and records. Only respondent Dulay complied then with the requirement under Rule 7, Section 2(2) of IRPICC. Even so, respondent Dulays Complaint should be dismissed for lack of cause of action, for his demand for copies of pertinent documents relative to the acquisition of JTH shares was not denied by any of the defendants named in the Complaint in Civil Case No.

07-610, but by Atty. Jesulito A. Manalo (Manalo), the Corporate Secretary of PRCI, in a letter dated 17 January 2006. Section 74 of the Corporation Code, the substantive law on which respondent Dulays Complaint for inspection and copying of corporate books and records is based, states that:
Sec. 74. Books to be kept; stock transfer agent. xxxx Any officer or agent of the corporation who shall refuse to allow any director, trustees, stockholder or member of the corporation to examine and copy excerpts from its records or minutes, in accordance with the provisions of this Code, shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall be guilty of an offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is pursuant to a resolution or order of the Board of Directors or Trustees, the liability under this section for such action shall be imposed upon the directors or trustees who voted for such refusal: x x x (Emphasis ours.)

Based on the foregoing, it is Corporate Secretary Manalo who should be held liable for the supposedly wrongful and unreasonable denial of respondent Dulays demand for inspection and copying of corporate books and records; but, as previously mentioned, Corporate Secretary Manalo is not among the defendants named in the Complaint in Civil Case No. 07-610. There is also utter lack of any allegation in the Complaint that Corporate Secretary Manalo denied respondent Dulays demand pursuant to a resolution or order of the PRCI Directors, so that the latter (who are actually named defendants in the Complaint) could also be held liable for the denial. Supervening events

During the pendency of the cases at bar, supervening events took place that further justified the dismissal of Civil Case No. 07610 for already being moot and academic. First, during the 2008 Annual Stockholders Meeting of PRCI, held on 18 June 2008, the following agenda items were finally presented to the stockholders, who approved and ratified the same by a majority vote: (1) the Minutes of the Special Stockholders Meeting dated 7 November 2006, during which the majority of the stockholders approved and ratified the acquisition of JTH by PRCI; (2) the acts of the Board of Directors, the Executive Committee, and the Management of PRCI for 2006, which included the acquisition of JTH by PRCI; and (3) the planned property-for-shares exchange between PRCI and JTH. Even respondents Miguel, et al., themselves admitted in their Comment with Prayer for the Immediate Lifting or Dissolution of the Temporary Restraining Order in G.R. No. 182008 that:
12. Indeed, the approval and/or ratification of the transfer of PRCIs Sta. Ana racetrack property to JTH during the upcoming stockholders meeting would render nugatory, moot and academic the action and proceedings before the Regional Trial Court of Makati, Branch 149, inasmuch as the acts assailed by private respondents would have already been consummated by such approval and/or ratification. 13. In the same vein, such approval and/or ratification during the forthcoming PRCI stockholders (sic) meeting would likewise render moot and academic the proceedings before this Honorable Court in that it would have effectively granted the reliefs sought by herein petitioner even before this Honorable Court could finally rule on the propriety of the Court of Appeals Decision/Resolution by herein petitioners.[82]

Second, although already approved and ratified by majority vote of the PRCI stockholders, and PRCI and JTH executed a Deed of Transfer with Subscription Agreement on 7 July 2008 to effect the property-for-shares exchange between the two corporations, the controversial transaction will no longer push through. A major consideration for the exchange is that it will be tax-free; but the BIR ruled that such transaction shall be subject to VAT. Resultantly, PRCI and JTH executed on 22 August 2008 a Disengagement Agreement, by virtue of which, both corporations rescinded the Deed of Transfer with Subscription Agreement dated 7 July 2008 and immediately disengaged from implementing the said Deed. Civil Case No. 08-458 The very nature of Civil Case No. 07-610 as a derivative suit bars Civil Case No. 08-458 and warrants the latters dismissal. In Chua v. Court of Appeals,[83] the Court stresses that the corporation is the real party in interest in a derivative suit, and the suing stockholder is only a nominal party:
An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stocks in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued, or hold the control of the corporation. In such actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in interest. xxxx x x x For a derivative suit to prosper, it is required that the

minority stockholder suing for and on behalf of the corporation must allege in his complaint that he is suing on a derivative cause of action on behalf of the corporation and all other stockholders similarly situated who may wish to join him in the suit. It is a condition sine qua non that the corporation be impleaded as a party because not only is the corporation an indispensable party, but it is also the present rule that it must be served with process. The judgment must be made binding upon the corporation in order that the corporation may get the benefit of the suit and may not bring subsequent suit against the same defendants for the same cause of action. In other words, the corporation must be joined as party because it is its cause of action that is being litigated and because judgment must be a res adjudicata against it. (Emphases ours.)

The more extensive discussion by the Court of the nature of a derivative suit in Asset Privatization Trust v. Court of Appeals[84] is presented below:
Settled is the doctrine that in a derivative suit, the corporation is the real party in interest while the stockholder filing suit for the corporations behalf is only a nominal party. The corporation should be included as a party in the suit. An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in interest. x x x. It is a condition sine qua non that the corporation be impleaded as a party because-

x x x. Not only is the corporation an indispensable party, but it is also the present rule that it must be served with process. The reason given is that the judgment must be made binding upon the corporation and in order that the corporation may get the benefit of the suit and may not bring a subsequent suit against the same defendants for the same cause of action. In other words the corporations must be joined as party because it is its cause of action that is being litigated and because judgment must be a res ajudicata against it. The reasons given for not allowing direct individual suit are: (1) x x x the universally recognized doctrine that a stockholder in a corporation has no title legal or equitable to the corporate property; that both of these are in the corporation itself for the benefit of the stockholders. In other words, to allow shareholders to sue separately would conflict with the separate corporate entity principle; (2) x x x that the prior rights of the creditors may be prejudiced. Thus, our Supreme Court held in the case of Evangelista v. Santos, that the stockholders may not directly claim those damages for themselves for that would result in the appropriation by, and the distribution among them of part of the corporate assets before the dissolution of the corporation and the liquidation of its debts and liabilities, something which cannot be legally done in view of Section 16 of the Corporation Law xxx;

(3) the filing of such suits would conflict with the duty of the management to sue for the protection of all concerned; (4) it would produce wasteful multiplicity of suits; and (5) it would involve confusion in ascertaining the effect of partial recovery by an individual on the damages recoverable by the corporation for the same act.

As established in the foregoing jurisprudence, in a derivative suit, it is the corporation that is the indispensable party, while the suing stockholder is just a nominal party. Under Rule 7, Section 3 of the Rules of Court, an indispensable party is a party-in-interest, without whom no final determination can be had of an action without that party being impleaded. Indispensable parties are those with such an interest in the controversy that a final decree would necessarily affect their rights, so that the court cannot proceed without their presence. Interest, within the meaning of this rule, should be material, directly in issue, and to be affected by the decree, as distinguished from a mere incidental interest in the question involved. On the other hand, a nominal or pro forma party is one who is joined as a plaintiff or defendant, not because such party has any real interest in the subject matter or because any relief is demanded, but merely because the technical rules of pleadings require the presence of such party on the record.[85] With the corporation as the real party-in-interest and the indispensable party, any ruling in one of the derivative suits should already bind the corporation as res judicata in the other. Allowing two different minority stockholders to institute separate derivative

suits arising from the same factual background, alleging the same causes of action, and praying for the same reliefs, is tantamount to allowing the corporation, the real party-in-interest, to file the same suit twice, resulting in the violation of the rules against a multiplicity of suits and even forum-shopping. It is also in disregard of the separate-corporate-entity principle, because it is to look beyond the corporation and to give recognition to the different identities of the stockholders instituting the derivative suits. It is for these reasons that the derivative suit, Civil Case No. 08-458, although filed by a different set of minority stockholders from those in Civil Case No. 07-610, should still not be allowed to proceed. Furthermore, the highly suspicious circumstances surrounding the institution of Civil Case No. 08-458 are not lost upon the Court. To recall, on 9 April 2008, the Court already issued in G.R. No. 182008 a TRO enjoining the execution and enforcement of the writ of permanent injunction issued by the RTC in Civil Case No. 07610, which prevented the PRCI Board of Directors from presenting to the PRCI stockholders at the Annual Stockholders Meeting, for approval and ratification, the agenda items on the acquisition by PRCI of JTH shares and the property-for-shares exchange between PRCI and JTH. The Complaint in Civil Case No. 08-458 was filed with the RTC on 16 June 2008, just two days before the scheduled Annual Stockholders Meeting on 18 June 2008, where the items subject of the permanent injunction were again included in the agenda. The 72-hour TRO issued by the RTC in Civil Case No. 08458 enjoined the very same acts covered by the writ of permanent injunction issued by the RTC in Civil Case No. 07-610, the execution and enforcement of which, in turn, was already enjoined by the TRO dated 9 April 2008 of this Court. Considering that it is

PRCI which is the real party-in-interest in both Civil Cases No. 07610 and No. 08-458, then its acquisition in the latter of a TRO exactly similar to the writ of permanent injunction in the former is but an obvious attempt to circumvent the TRO of this Court enjoining the execution and enforcement of the permanent injunction. Intervention of APRI It is also the nature of a derivative suit that prompts the Court to deny the intervention by APRI in Civil Case No. 07-610. Once more, the Court emphasizes that PRCI is the real party-in-interest in Civil Case No. 07-610, not respondents Miguel, et al., whose participation therein is deemed nominal. APRI, moreover, merely echoes the position of respondents Miguel, et al., and, hence, renders the participation of APRI in Civil Case No. 07-610 redundant. Also, the main concern of APRI was the lifting of the TRO issued by this Court on 9 April 2008 and the execution and enforcement of the permanent injunction issued by the RTC, enjoining the presentation by the PRCI Board of Directors -- at the Annual Stockholders Meeting scheduled on 18 June 2008, for approval and ratification by the stockholders of the agenda items on the acquisition by PRCI of JTH shares and the property-forshares exchange between PRCI and JTH. Given that the Annual Stockholders Meeting already took place on 18 June 2008, during which the subject agenda items were presented to and approved and ratified by the stockholders, the intervention of APRI is already moot. As a final note, respondent Miguel, et al. made repeated allegations that foreigners were taking over PRCI, and that this must

be stopped to protect the Filipino stockholders. They even invoked the ruling of this Court in Manila Prince Hotel v. Government Service Insurance System (GSIS).[86] Respondents Miguel, et al., however, cannot rely on Manila Prince Hotel as judicial precedent, for the facts therein are far different from those in the cases at bar. The Government, through GSIS, owned Manila Hotel Corporation (MHC), which, in turn, owned the historic Manila Hotel. The case arose from the efforts of GSIS at privatizing MHC by holding a public bidding for 30-51% of the issued and outstanding shares of MHC. The Court ruled that since the Filipino corporation was able to match the higher bid made by a foreign corporation, then preference should be given to the former, considering that Manila Hotel had become a landmark, a living testimonial to Philippine heritage, and part of Philippine economy and patrimony. This was in accord with the Filipino-first policy in the 1987 Constitution. In contrast, PRCI is a publicly listed corporation. Its shares can be freely sold and traded to the public, subject to regulation by the PSE and the SEC. Without any legal basis therefor, the Court cannot be expected to allocate or impose limitations on ownership of PRCI shares by foreigners. What is more, PRCI, which operates and maintains a horse racetrack and conducts horse racing and betting, can hardly claim to be a living testimonial of Philippine heritage, like Manila Hotel, that would justify judicial intervention to protect the interests of Filipino stockholders as against foreign stockholders. WHEREFORE, the Court renders the following judgment: (1) The Court GRANTS the Petitions of petitioners

Santiago, et al., and petitioner Santiago Sr. in G.R. No. 181455-56 and G.R. No. 182008, respectively. It REVERSES and SETS ASIDE the Decision dated 6 September 2007 and Resolution dated 22 January 2008 of the Court of Appeals in CA-G.R. SP No. 99769 and No. 99780; (2) The Court LIFTS the TRO issued on 9 April 2008 in G.R. No. 180028 and CANCELS and RETURNS the cash bond posted by petitioner Santiago Sr. The permanent injunction issued by the RTC on 8 October 2007, the execution and enforcement of which the TRO dated 9 April 2008 of this Court enjoins, has been rendered moot, since the agenda items subject of said permanent injunction were already presented to, and approved and ratified by a majority of the PRCI stockholders at the Annual Stockholders Meeting held on 18 June 2008; (3) The Court ORDERS the DISMISSAL of the Complaint of respondents Miguel, et al., in Civil Case No. 07-610 before the RTC for lack of cause of action, failure to implead indispensable parties, and mootness; (4) The Court ORDERS the DISMISSAL of the Complaint of Jalane, et al., in Civil Case No. 08-458, for being in violation of the rules on the multiplicity of suits and forum shopping; and (5) The Court DENIES the Very Respectful Motion for Leave to Intervene as Co-Respondent in the Petition with the attached Very Respectful Urgent Motion to Lift Restraining Order of APRI, for redundancy and mootness. No costs.

SO ORDERED.

EN BANC ATTY. SYLVIA BANDA, CONSORICIA O. PENSON, RADITO V. PADRIGANO, JEAN R. DE MESA, LEAH P. DELA CRUZ, ANDY V. MACASAQUIT, SENEN B. CORDOBA, ALBERT BRILLANTES, GLORIA BISDA, JOVITA V. CONCEPCION, TERESITA G. CARVAJAL, ROSANNA T. MALIWANAG, RICHARD ODERON, CECILIA ESTERNON, BENEDICTO CABRAL, MA. VICTORIA E. LAROCO, CESAR ANDRA, FELICISIMO GALACIO, ELSA R. CALMA, FILOMENA A. GALANG, JEAN PAUL MELEGRITO, CLARO G. SANTIAGO, JR., EDUARDO FRIAS, REYNALDO O. ANDAL, NEPHTALIE IMPERIO, RUEL BALAGTAS, VICTOR R. ORTIZ, FRANCISCO P. REYES, JR., ELISEO M. BALAGOT, JR., JOSE C. MONSALVE, JR., ARTURO ADSUARA, F.C. LADRERO, JR., NELSON PADUA, MARCELA C. SAYAO, ANGELITO MALAKAS, GLORIA RAMENTO, JULIANA SUPLEO, MANUEL MENDRIQUE, E. TAYLAN, G.R. No. 166620

CARMELA BOBIS, DANILO VARGAS, ROY-LEO C. PABLO, ALLAN VILLANUEVA, VICENTE R. VELASCO, JR., IMELDA ERENO, FLORIZA M. CATIIS, RANIEL R. BASCO, E. JALIJALI, MARIO C. CARAAN, DOLORES M. AVIADO, MICHAEL P. LAPLANA, GUILLERMO G. SORIANO, ALICE E. SOJO, ARTHUR G. NARNE, LETICIA SORIANO, FEDERICO RAMOS, JR., PETERSON CAAMPUED, RODELIO L. GOMEZ, ANTONIO D. GARCIA, JR., ANTONIO GALO, A. SANCHEZ, SOL E. TAMAYO, JOSEPHINE A.M. COCJIN, DAMIAN QUINTO, JR., EDLYN MARIANO, M.A. MALANUM, ALFREDO S. ESTRELLA, and JESUS MEL SAYO, Petitioners,

Present:

PUNO, C.J., CARPIO, CORONA, CARPIO MORALES, VELASCO, JR., NACHURA, LEONARDO-DE CASTRO BRION, PERALTA, BERSAMIN, DEL CASTILLO, ABAD,* VILLARAMA, JR., PEREZ, and MENDOZA, JJ.

- versus -

EDUARDO R. ERMITA, in his capacity as Executive Secretary, THE DIRECTOR GENERAL OF THE PHILIPPINE INFORMATION AGENCY and THE NATIONAL

Promulgated:

TREASURER, Respondents. April 20, 2010 x-------------------------------------------------x

DECISION
LEONARDO-DE CASTRO, J.: The present controversy arose from a Petition for Certiorari and prohibition challenging the constitutionality of Executive Order No. 378 dated October 25, 2004, issued by President Gloria Macapagal Arroyo (President Arroyo). Petitioners characterize their action as a class suit filed on their own behalf and on behalf of all their co-employees at the National Printing Office (NPO). The NPO was formed on July 25, 1987, during the term of former President Corazon C. Aquino (President Aquino), by virtue of Executive Order No. 285[1] which provided, among others, the creation of the NPO from the merger of the Government Printing Office and the relevant printing units of the Philippine Information Agency (PIA). Section 6 of Executive Order No. 285 reads:
SECTION 6. Creation of the National Printing Office. There is hereby created a National Printing Office out of the merger of the Government Printing Office and the relevant printing units of the Philippine Information Agency. The Office shall have exclusive printing jurisdiction over the following:

a. Printing, binding and distribution of all standard and accountable forms of national, provincial, city and municipal governments, including government corporations; b. Printing of officials ballots;

c. Printing of public documents such as the Official Gazette, General Appropriations Act, Philippine Reports, and development information materials of the Philippine Information Agency. The Office may also accept other government printing jobs, including government publications, aside from those enumerated above, but not in an exclusive basis. The details of the organization, powers, functions, authorities, and related management aspects of the Office shall be provided in the implementing details which shall be prepared and promulgated in accordance with Section II of this Executive Order. The Office shall be attached to the Philippine Information Agency.

On October 25, 2004, President Arroyo issued the herein assailed Executive Order No. 378, amending Section 6 of Executive Order No. 285 by, inter alia, removing the exclusive jurisdiction of the NPO over the printing services requirements of government agencies and instrumentalities. The pertinent portions of Executive Order No. 378, in turn, provide:
SECTION 1. The NPO shall continue to provide printing services to government agencies and instrumentalities as mandated by law. However, it shall no longer enjoy exclusive jurisdiction over the printing services requirements of the government over standard and accountable forms. It

shall have to compete with the private sector, except in the printing of election paraphernalia which could be shared with the Bangko Sentral ng Pilipinas, upon the discretion of the Commission on Elections consistent with the provisions of the Election Code of 1987. SECTION 2. Government agencies/instrumentalities may source printing services outside NPO provided that: 2.1 The printing services to be provided by the private sector is superior in quality and at a lower cost than what is offered by the NPO; and 2.2 The private printing provider is flexible in terms of meeting the target completion time of the government agency. SECTION 3. In the exercise of its functions, the amount to be appropriated for the programs, projects and activities of the NPO in the General Appropriations Act (GAA) shall be limited to its income without additional financial support from the government. (Emphases and underscoring supplied.)

Pursuant to Executive Order No. 378, government agencies and instrumentalities are allowed to source their printing services from the private sector through competitive bidding, subject to the condition that the services offered by the private supplier be of superior quality and lower in cost compared to what was offered by the NPO. Executive Order No. 378 also limited NPOs appropriation in the General Appropriations Act to its income. Perceiving Executive Order No. 378 as a threat to their security of tenure as employees of the NPO, petitioners now challenge its constitutionality, contending that: (1) it is beyond the executive powers of President Arroyo to amend or repeal Executive

Order No. 285 issued by former President Aquino when the latter still exercised legislative powers; and (2) Executive Order No. 378 violates petitioners security of tenure, because it paves the way for the gradual abolition of the NPO. We dismiss the petition. Before proceeding to resolve the substantive issues, the Court must first delve into a procedural matter. Since petitioners instituted this case as a class suit, the Court, thus, must first determine if the petition indeed qualifies as one. In Board of Optometry v. Colet,[2] we held that [c]ourts 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. 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.

From the foregoing definition, the requisites 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. In Mathay v. The Consolidated Bank and Trust Company,[3] the Court held that:
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 suit 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, 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. (Emphases ours.)

Here, the petition failed to state the number of NPO employees who would be affected by the assailed Executive Order and who were allegedly represented by petitioners. It was the Solicitor General, as counsel for respondents, who pointed out that there were about 549 employees in the NPO.[4] The 67 petitioners undeniably comprised a small fraction of the NPO employees whom they claimed to represent. Subsequently, 32 of the original petitioners executed an Affidavit of Desistance, while one signed a letter denying ever signing the petition,[5] ostensibly reducing the number of petitioners to 34. We note that counsel for the petitioners

challenged the validity of the desistance or withdrawal of some of the petitioners and insinuated that such desistance was due to pressure from people close to the seat of power.[6] Still, even if we were to disregard the affidavit of desistance filed by some of the petitioners, it is highly doubtful that a sufficient, representative number of NPO employees have instituted this purported class suit. A perusal of the petition itself would show that of the 67 petitioners who signed the Verification/Certification of Non-Forum Shopping, only 20 petitioners were in fact mentioned in the jurat as having duly subscribed the petition before the notary public. In other words, only 20 petitioners effectively instituted the present case. Indeed, in MVRS Publications, Inc. v. Islamic Dawah Council of the Philippines, Inc.,[7] we observed that an element of a class suit or representative suit is the adequacy of representation. In determining the question of fair and adequate representation of members of a class, the court must consider (a) whether the interest of the named party is coextensive with the interest of the other members of the class; (b) the proportion of those made a party, as it so bears, to the total membership of the class; and (c) any other factor bearing on the ability of the named party to speak for the rest of the class. Previously, we held in Ibaes v. Roman Catholic Church[8] that where the interests of the plaintiffs and the other members of the class they seek to represent are diametrically opposed, the class suit will not prosper. It is worth mentioning that a Manifestation of Desistance,[9] to which the previously mentioned Affidavit of Desistance[10] was attached, was filed by the President of the National Printing Office Workers Association (NAPOWA). The said manifestation

expressed NAPOWAs opposition to the filing of the instant petition in any court. Even if we take into account the contention of petitioners counsel that the NAPOWA President had no legal standing to file such manifestation, the said pleading is a clear indication that there is a divergence of opinions and views among the members of the class sought to be represented, and not all are in favor of filing the present suit. There is here an apparent conflict between petitioners interests and those of the persons whom they claim to represent. Since it cannot be said that petitioners sufficiently represent the interests of the entire class, the instant case cannot be properly treated as a class suit. As to the merits of the case, the petition raises two main grounds to assail the constitutionality of Executive Order No. 378: First, it is contended that President Arroyo cannot amend or repeal Executive Order No. 285 by the mere issuance of another executive order (Executive Order No. 378). Petitioners maintain that former President Aquinos Executive Order No. 285 is a legislative enactment, as the same was issued while President Aquino still had legislative powers under the Freedom Constitution;[11] thus, only Congress through legislation can validly amend Executive Order No. 285. Second, petitioners maintain that the issuance of Executive Order No. 378 would lead to the eventual abolition of the NPO and would violate the security of tenure of NPO employees. Anent the first ground raised in the petition, we find the same patently without merit. It is a well-settled principle in jurisprudence that the President

has the power to reorganize the offices and agencies in the executive department in line with the Presidents constitutionally granted power of control over executive offices and by virtue of previous delegation of the legislative power to reorganize executive offices under existing statutes. In Buklod ng Kawaning EIIB v. Zamora,[12] the Court pointed out that Executive Order No. 292 or the Administrative Code of 1987 gives the President continuing authority to reorganize and redefine the functions of the Office of the President. Section 31, Chapter 10, Title III, Book III of the said Code, is explicit:
Sec. 31. Continuing Authority of the President to Reorganize his Office. The President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President. For this purpose, he may take any of the following actions: (1) Restructure the internal organization of the Office of the President Proper, including the immediate Offices, the President Special Assistants/Advisers System and the Common Staff Support System, by abolishing, consolidating or merging units thereof or transferring functions from one unit to another; (2) Transfer any function under the Office of the President to any other Department or Agency as well as transfer functions to the Office of the President from other Departments and Agencies; and (3) Transfer any agency under the Office of the President to any other department or

agency as well as transfer agencies to the Office of the President from other Departments or agencies. (Emphases ours.)

Interpreting the foregoing provision, we held in Buklod ng Kawaning EIIB, thus:

But of course, the list of legal basis authorizing the President to reorganize any department or agency in the executive branch does not have to end here. We must not lose sight of the very source of the power that which constitutes an express grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise known as the Administrative Code of 1987), the President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have the continuing authority to reorganize the administrative structure of the Office of the President. For this purpose, he may transfer the functions of other Departments or Agencies to the Office of the President. In Canonizado v. Aguirre [323 SCRA 312 (2000)], we ruled that reorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions. It takes place when there is an alteration of the existing structure of government offices or units therein, including the lines of control, authority and responsibility between them. The EIIB is a bureau attached to the Department of Finance. It falls under the Office of the President. Hence, it is subject to the Presidents continuing authority to reorganize.[13] (Emphasis ours.)

It is undisputed that the NPO, as an agency that is part of the Office of the Press Secretary (which in various times has been an agency directly attached to the Office of the Press Secretary or as an agency under the Philippine Information Agency), is part of the Office of the President.[14]

Pertinent to the case at bar, Section 31 of the Administrative Code of 1987 quoted above authorizes the President (a) to restructure the internal organization of the Office of the President Proper, including the immediate Offices, the President Special Assistants/Advisers System and the Common Staff Support System, by abolishing, consolidating or merging units thereof or transferring functions from one unit to another, and (b) to transfer functions or offices from the Office of the President to any other Department or Agency in the Executive Branch, and vice versa. Concomitant to such power to abolish, merge or consolidate offices in the Office of the President Proper and to transfer functions/offices not only among the offices in the Office of President Proper but also the rest of the Office of the President and the Executive Branch, the President implicitly has the power to effect less radical or less substantive changes to the functional and internal structure of the Office of the President, including the modification of functions of such executive agencies as the exigencies of the service may require. In the case at bar, there was neither an abolition of the NPO nor a removal of any of its functions to be transferred to another agency. Under the assailed Executive Order No. 378, the NPO remains the main printing arm of the government for all kinds of government forms and publications but in the interest of greater economy and encouraging efficiency and profitability, it must now compete with the private sector for certain government printing jobs, with the exception of election paraphernalia which remains the exclusive responsibility of the NPO, together with the Bangko Sentral ng Pilipinas, as the Commission on Elections may determine. At most, there was a mere alteration of the main function

of the NPO by limiting the exclusivity of its printing responsibility to election forms.[15] There is a view that the reorganization actions that the President may take with respect to agencies in the Office of the President are strictly limited to transfer of functions and offices as seemingly provided in Section 31 of the Administrative Code of 1987. However, Section 20, Chapter 7, Title I, Book III of the same Code significantly provides:
Sec. 20. Residual Powers. Unless Congress provides otherwise, the President shall exercise such other powers and functions vested in the President which are provided for under the laws and which are not specifically enumerated above, or which are not delegated by the President in accordance with law. (Emphasis ours.)

Pursuant to Section 20, the power of the President to reorganize the Executive Branch under Section 31 includes such powers and functions that may be provided for under other laws. To be sure, an inclusive and broad interpretation of the Presidents power to reorganize executive offices has been consistently supported by specific provisions in general appropriations laws. In the oft-cited Larin v. Executive Secretary,[16] the Court likewise adverted to certain provisions of Republic Act No. 7645, the general appropriations law for 1993, as among the statutory bases for the Presidents power to reorganize executive agencies, to wit:

Section 48 of R.A. 7645 provides that: Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the Executive Branch. The heads of departments, bureaus and offices and agencies are hereby directed to identify their respective activities which are no longer essential in the delivery of public services and which may be scaled down, phased out or abolished, subject to civil [service] rules and regulations. x x x. Actual scaling down, phasing out or abolition of the activities shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President. Said provision clearly mentions the acts of "scaling down, phasing out and abolition" of offices only and does not cover the creation of offices or transfer of functions. Nevertheless, the act of creating and decentralizing is included in the subsequent provision of Section 62, which provides that: Sec. 62. Unauthorized organizational changes. Unless otherwise created by law or directed by the President of the Philippines, no organizational unit or changes in key positions in any department or agency shall be authorized in their respective organization structures and be funded from appropriations by this Act. The foregoing provision evidently shows that the President is authorized to effect organizational changes including the creation of offices in the department or agency concerned. The contention of petitioner that the two provisions are riders deserves scant consideration. Well settled is the rule that every law has in its favor the presumption of constitutionality. Unless and until a specific provision of the law is declared invalid and unconstitutional, the same is valid and binding for all intents and purposes.[17] (Emphases ours)

Buklod ng Kawaning EIIB v. Zamora,[18] where the Court

upheld as valid then President Joseph Estradas Executive Order No. 191 deactivating the Economic Intelligence and Investigation Bureau (EIIB) of the Department of Finance, hewed closely to the reasoning in Larin. The Court, among others, also traced from the General Appropriations Act[19] the Presidents authority to effect organizational changes in the department or agency under the executive structure, thus:
We adhere to the precedent or ruling in Larin that this provision recognizes the authority of the President to effect organizational changes in the department or agency under the executive structure. Such a ruling further finds support in Section 78 of Republic Act No. 8760. Under this law, the heads of departments, bureaus, offices and agencies and other entities in the Executive Branch are directed (a) to conduct a comprehensive review of their respective mandates, missions, objectives, functions, programs, projects, activities and systems and procedures; (b) identify activities which are no longer essential in the delivery of public services and which may be scaled down, phased-out or abolished; and (c) adopt measures that will result in the streamlined organization and improved overall performance of their respective agencies. Section 78 ends up with the mandate that the actual streamlining and productivity improvement in agency organization and operation shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President. x x x.[20] (Emphasis ours)

Notably, in the present case, the 2003 General Appropriations Act, which was reenacted in 2004 (the year of the issuance of Executive Order No. 378), likewise gave the President the authority to effect a wide variety of organizational changes in any department or agency in the Executive Branch. Sections 77 and 78 of said Act provides:

Section 77. Organized Changes. Unless otherwise provided by law or directed by the President of the Philippines, no changes in key positions or organizational units in any department or agency shall be authorized in their respective organizational structures and funded from appropriations provided by this Act. Section 78. Institutional Strengthening and Productivity Improvement in Agency Organization and Operations and Implementation of Organization/Reorganization Mandated by Law. The Government shall adopt institutional strengthening and productivity improvement measures to improve service delivery and enhance productivity in the government, as directed by the President of the Philippines. The heads of departments, bureaus, offices, agencies, and other entities of the Executive Branch shall accordingly conduct a comprehensive review of their respective mandates, missions, objectives, functions, programs, projects, activities and systems and procedures; identify areas where improvements are necessary; and implement corresponding structural, functional and operational adjustments that will result in streamlined organization and operations and improved performance and productivity: PROVIDED, That actual streamlining and productivity improvements in agency organization and operations, as authorized by the President of the Philippines for the purpose, including the utilization of savings generated from such activities, shall be in accordance with the rules and regulations to be issued by the DBM, upon consultation with the Presidential Committee on Effective Governance: PROVIDED, FURTHER, That in the implementation of organizations/reorganizations, or specific changes in agency structure, functions and operations as a result of institutional strengthening or as mandated by law, the appropriation, including the functions, projects, purposes and activities of agencies concerned may be realigned as may be necessary: PROVIDED, FINALLY, That any unexpended balances or savings in appropriations may be made available for payment of retirement gratuities and separation benefits to affected personnel, as authorized under existing laws. (Emphases

and underscoring ours.)

Implicitly, the aforequoted provisions in the appropriations law recognize the power of the President to reorganize even executive offices already funded by the said appropriations act, including the power to implement structural, functional, and operational adjustments in the executive bureaucracy and, in so doing, modify or realign appropriations of funds as may be necessary under such reorganization. Thus, insofar as petitioners protest the limitation of the NPOs appropriations to its own income under Executive Order No. 378, the same is statutorily authorized by the above provisions. In the 2003 case of Bagaoisan v. National Tobacco Administration,[21] we upheld the streamlining of the National Tobacco Administration through a reduction of its personnel and deemed the same as included in the power of the President to reorganize executive offices granted under the laws, notwithstanding that such streamlining neither involved an abolition nor a transfer of functions of an office. To quote the relevant portion of that decision:
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D. Zamora, in his capacity as the Executive Secretary, et al., this Court has had occasion to also delve on the Presidents power to reorganize the Office of the President under Section 31(2) and (3) of Executive Order No. 292 and the power to reorganize the Office of the President Proper. x x x xxxx The first sentence of the law is an express grant to the President of a continuing authority to reorganize the administrative structure of the Office of the President. The succeeding numbered paragraphs are not in the nature of provisos that unduly limit the aim and scope of the grant to the President of the power to reorganize but are to be viewed in consonance therewith.

Section 31(1) of Executive Order No. 292 specifically refers to the Presidents power to restructure the internal organization of the Office of the President Proper, by abolishing, consolidating or merging units hereof or transferring functions from one unit to another, while Section 31(2) and (3) concern executive offices outside the Office of the President Proper allowing the President to transfer any function under the Office of the President to any other Department or Agency and vice-versa, and the transfer of any agency under the Office of the President to any other department or agency and vice-versa. In the present instance, involving neither an abolition nor transfer of offices, the assailed action is a mere reorganization under the general provisions of the law consisting mainly of streamlining the NTA in the interest of simplicity, economy and efficiency. It is an act well within the authority of the President motivated and carried out, according to the findings of the appellate court, in good faith, a factual assessment that this Court could only but accept.[22] (Emphases and underscoring supplied.)

In the more recent case of Tondo Medical Center Employees Association v. Court of Appeals,[23] which involved a structural and functional reorganization of the Department of Health under an executive order, we reiterated the principle that the power of the President to reorganize agencies under the executive department by executive or administrative order is constitutionally and statutorily recognized. We held in that case:
This Court has already ruled in a number of cases that the President may, by executive or administrative order, direct the reorganization of government entities under the Executive Department. This is also sanctioned under the Constitution, as well as other statutes. Section 17, Article VII of the 1987 Constitution, clearly

states: [T]he president shall have control of all executive departments, bureaus and offices. Section 31, Book III, Chapter 10 of Executive Order No. 292, also known as the Administrative Code of 1987 reads: SEC. 31. Continuing Authority of the President to Reorganize his Office - The President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President. For this purpose, he may take any of the following actions: xxxx In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the rationale behind the Presidents continuing authority under the Administrative Code to reorganize the administrative structure of the Office of the President. The law grants the President the power to reorganize the Office of the President in recognition of the recurring need of every President to reorganize his or her office to achieve simplicity, economy and efficiency. To remain effective and efficient, it must be capable of being shaped and reshaped by the President in the manner the Chief Executive deems fit to carry out presidential directives and policies. The Administrative Code provides that the Office of the President consists of the Office of the President Proper and the agencies under it. The agencies under the Office of the President are identified in Section 23, Chapter 8, Title II of the Administrative Code: Sec. 23. The Agencies under the Office of the President.The agencies under the Office of the President refer to those offices placed under the chairmanship of the President, those under the

supervision and control of the President, those under the administrative supervision of the Office of the President, those attached to it for policy and program coordination, and those that are not placed by law or order creating them under any specific department. xxxx The power of the President to reorganize the executive department is likewise recognized in general appropriations laws. x x x. xxxx Clearly, Executive Order No. 102 is well within the constitutional power of the President to issue. The President did not usurp any legislative prerogative in issuing Executive Order No. 102. It is an exercise of the Presidents constitutional power of control over the executive department, supported by the provisions of the Administrative Code, recognized by other statutes, and consistently affirmed by this Court.[24] (Emphases supplied.)

Subsequently, we ruled in Anak Mindanao Party-List Group v. Executive Secretary[25] that:

The Constitutions express grant of the power of control in the President justifies an executive action to carry out reorganization measures under a broad authority of law. In enacting a statute, the legislature is presumed to have deliberated with full knowledge of all existing laws and jurisprudence on the subject. It is thus reasonable to conclude that in passing a statute which places an agency under the Office of the President, it was in accordance with existing laws and

jurisprudence on the Presidents power to reorganize. In establishing an executive department, bureau or office, the legislature necessarily ordains an executive agencys position in the scheme of administrative structure. Such determination is primary, but subject to the Presidents continuing authority to reorganize the administrative structure. As far as bureaus, agencies or offices in the executive department are concerned, the power of control may justify the President to deactivate the functions of a particular office. Or a law may expressly grant the President the broad authority to carry out reorganization measures. The Administrative Code of 1987 is one such law.[26]

The issuance of Executive Order No. 378 by President Arroyo is an exercise of a delegated legislative power granted by the aforementioned Section 31, Chapter 10, Title III, Book III of the Administrative Code of 1987, which provides for the continuing authority of the President to reorganize the Office of the President, in order to achieve simplicity, economy and efficiency. This is a matter already well-entrenched in jurisprudence. The reorganization of such an office through executive or administrative order is also recognized in the Administrative Code of 1987. Sections 2 and 3, Chapter 2, Title I, Book III of the said Code provide:
Sec. 2. Executive Orders. - Acts of the President providing for rules of a general or permanent character in implementation or execution of constitutional or statutory powers shall be promulgated in executive orders. Sec. 3. Administrative Orders. - Acts of the President which relate to particular aspects of governmental operations in pursuance of his duties as administrative head shall be promulgated in administrative orders. (Emphases supplied.)

To reiterate, we find nothing objectionable in the provision in Executive Order No. 378 limiting the appropriation of the NPO to its own income. Beginning with Larin and in subsequent cases, the Court has noted certain provisions in the general appropriations laws as likewise reflecting the power of the President to reorganize executive offices or agencies even to the extent of modifying and realigning appropriations for that purpose. Petitioners contention that the issuance of Executive Order No. 378 is an invalid exercise of legislative power on the part of the President has no legal leg to stand on. In all, Executive Order No. 378, which purports to institute necessary reforms in government in order to improve and upgrade efficiency in the delivery of public services by redefining the functions of the NPO and limiting its funding to its own income and to transform it into a self-reliant agency able to compete with the private sector, is well within the prerogative of President Arroyo under her continuing delegated legislative power to reorganize her own office. As pointed out in the separate concurring opinion of our learned colleague, Associate Justice Antonio T. Carpio, the objective behind Executive Order No. 378 is wholly consistent with the state policy contained in Republic Act No. 9184 or the Government Procurement Reform Act to encourage competitiveness by extending equal opportunity to private contracting parties who are eligible and qualified.[27] To be very clear, this delegated legislative power to reorganize pertains only to the Office of the President and the departments, offices and agencies of the executive branch and does not include the Judiciary, the Legislature or the constitutionallycreated or mandated bodies. Moreover, it must be stressed that the

exercise by the President of the power to reorganize the executive department must be in accordance with the Constitution, relevant laws and prevailing jurisprudence. In this regard, we are mindful of the previous pronouncement of this Court in Dario v. Mison[28] that:
Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. As a general rule, a reorganization is carried out in good faith if it is for the purpose of economy or to make bureaucracy more efficient. In that event, no dismissal (in case of a dismissal) or separation actually occurs because the position itself ceases to exist. And in that case, security of tenure would not be a Chinese wall. Be that as it may, if the abolition, which is nothing else but a separation or removal, is done for political reasons or purposely to defeat security of tenure, or otherwise not in good faith, no valid abolition takes place and whatever abolition is done, is void ab initio. There is an invalid abolition as where there is merely a change of nomenclature of positions, or where claims of economy are belied by the existence of ample funds. (Emphasis ours.)

Stated alternatively, the presidential power to reorganize agencies and offices in the executive branch of government is subject to the condition that such reorganization is carried out in good faith. If the reorganization is done in good faith, the abolition of positions, which results in loss of security of tenure of affected government employees, would be valid. In Buklod ng Kawaning EIIB v. Zamora,[29] we even observed that there was no such thing as an absolute right to hold office. Except those who hold constitutional offices, which provide for special immunity as regards

salary and tenure, no one can be said to have any vested right to an office or salary.[30] This brings us to the second ground raised in the petition that Executive Order No. 378, in allowing government agencies to secure their printing requirements from the private sector and in limiting the budget of the NPO to its income, will purportedly lead to the gradual abolition of the NPO and the loss of security of tenure of its present employees. In other words, petitioners avow that the reorganization of the NPO under Executive Order No. 378 is tainted with bad faith. The basic evidentiary rule is that he who asserts a fact or the affirmative of an issue has the burden of proving it.[31] A careful review of the records will show that petitioners utterly failed to substantiate their claim. They failed to allege, much less prove, sufficient facts to show that the limitation of the NPOs budget to its own income would indeed lead to the abolition of the position, or removal from office, of any employee. Neither did petitioners present any shred of proof of their assertion that the changes in the functions of the NPO were for political considerations that had nothing to do with improving the efficiency of, or encouraging operational economy in, the said agency. In sum, the Court finds that the petition failed to show any constitutional infirmity or grave abuse of discretion amounting to lack or excess of jurisdiction in President Arroyos issuance of Executive Order No. 378. WHEREFORE, the petition is hereby DISMISSED and the prayer for a Temporary Restraining Order and/or a Writ of Preliminary Injunction is hereby DENIED. No costs.

SO ORDERED.

SECOND DIVISION
MANILA INTERNATIONAL 143870 AIRPORT AUTHORITY, Petitioner, - versus MARTINEZ, CALLEJO, SR., TINGA, and NAZARIO, JJ. RIVERA VILLAGE LESSEE HOMEOWNERS ASSOCIATION, INCORPORATED, 2005 Respondent. x------------------------------------------------------------x Promulgated: September 30, G.R. Present: PUNO, Chairman, AUSTRIANo.

DECISION TINGA, J.:

We resolve the Petition for Review on Certiorari[1] dated August 23, 2000 filed by the Manila International Airport Authority (MIAA), assailing the Decision[2] of the Court of Appeals dated June 30, 2000 which directed

the issuance of a writ of preliminary injunction restraining petitioner from evicting the homeowners of Rivera Village from their dwellings. The antecedents, culled from the petition and the assailed Decision, are as follows: 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[4] against MIAA and the National Housing Authority (NHA). The petition, docketed as Civil Case No. 97-1598 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. It also sought to compel MIAA to segregate Rivera Village from the scope of the Conceptual Development Plan and the NHA to take the necessary steps for the disposition of the property in favor of the members of the homeowners association. MIAA filed an answer[5] 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. A preliminary hearing on MIAAs affirmative defenses was conducted, after which the trial court issued an Order[6] 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 dispositive portion of the Order reads:
In view of all the foregoing, the prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction is hereby denied for lack of merit and the above-entitled petition is hereby ordered dismissed for lack of merit. SO ORDERED.[7]

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. As regards the contention that the lessees are entitled to possess the subject property by virtue of PD 1517, Proclamation No. 1967 and PD 2016, which respectively identify parcels of urban land as part of the Urban Land Reform Zone, specify certain areas in Metro Manila, including Rivera Village, as areas for priority development or urban land reform zones, and prohibit the eviction of occupant families from such lands, the trial court declared that the subject property has been reserved by MIAA for airport-related activities and, as such, is exempt from the coverage of the Comprehensive and Continuing Urban Development and Housing Program under Republic Act No. (RA) 7279. 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 dispositive portion of the assailed Decision states:
WHEREFORE, the assailed October 12, 1998 Order is annulled, set aside and reversed. The case is remanded to the court a quo for further proceedings.

A writ of preliminary injunction is issued restraining and preventing respondent MIAA from evicting the members of petitioner Rivera Village Association from their respective lots in the Rivera Village. Petitioner is ordered to post a bond in the amount of P500,000.00 with the condition that petitioner will pay to respondent MIAA all damages it may sustain by reason of the injunction if the court should finally decided that petitioner is not entitled thereto. Upon approval of the bond, the writ of preliminary injunction shall forthwith issue. SO ORDERED.[8]

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. On the issue of the expiration of the lease contracts and the application of PD 1517, Proclamation No. 1967 and PD 2016, the Court of Appeals held that the expiration of the lease contracts cannot adversely affect the rights acquired by the lessees under the foregoing laws. Besides, the lease contracts were impliedly renewed by virtue of MIAAs acceptance of rental payments from May 25, 1990 up to December

1994. This resulted in an implied new lease under Article 1670 of the Civil Code. Moreover, the appellate court construed Sec. 5(c) of RA 7279 to mean that if the government lot has not been utilized during the ten (10)-year period for the purpose for which it has been reserved prior to 1983, then said lot is encompassed by the law and is subject to distribution to the legitimate and qualified residents of the area after appropriate proceedings have been undertaken. As to whether PD 1818 bars the issuance of an injunctive writ in this case, the appellate court ruled that PD 1818 is a general law on the issuance of restraining orders and writs of preliminary injunction. On the other hand, PD 2016 is a special law specifically prohibiting the eviction of tenants from lands identified as areas for priority development. Thus, the trial court can issue an injunctive writ if the act sought to be restrained will enforce the eviction of tenants from urban land reform zones. The court, however, declared that it cannot make a definitive ruling on the rights of the members of the homeowners association vis--vis the MIAA Conceptual Development Plan, considering the need for a full-blown trial to ferret out whether the claimed rights under the pertinent laws have ripened to actual legal and vested rights in their favor.

MIAA now seeks a review of the Decision of the Court of Appeals. In the instant petition, MIAA contends that the appellate court erred in ruling that PD 2016, which prohibits the eviction of occupant families from real property identified as areas for priority development or urban land reform zones, has modified PD 1818, which bars the issuance of injunctive writ in cases involving infrastructure projects of the government, including public utilities for the transport of goods and commodities. 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. MIAA also stresses that the subject property has recently been reserved by MIAA for airport-related activities and, as such, Sec. 5(c) of RA 7279 applies. Under the said law, lands which are used, reserved or otherwise set aside for government offices, facilities and other installations are exempt from the coverage of the law. Moreover, MIAA avers that the Court of Appeals should not have granted injunctive relief to respondent,

considering that the grant of an injunction would inflict greater damage to petitioner and to the public. Respondent filed a Comment[9] dated November 20, 2000, arguing that MIAA is mandated by law to dispose of Rivera Village to the homeowners thereof. Under existing laws, the homeowners have the right to possess and enjoy the property. To accept MIAAs pretense that the property has been recently reserved for airportrelated activities and therefor exempt from the coverage of RA 7279 will allegedly violate the right of the homeowners as bona fide tenants to socialized housing. Respondent further argues that PD 1818 is inapplicable to this case because it has established a clear and unmistakable right to an injunction. Besides, PD 2016 which protects from eviction tenants of lands identified for priority development, is a later enactment which should be deemed to prevail over PD 1818. In the Resolution[10] dated January 24, 2001, the petition was given due course and the parties were required to submit their respective memoranda. Accordingly, MIAA submitted its Memorandum[11] dated March 20, 2001, while respondent filed its Memorandum[12] dated April 20, 2001. For its part, NHA manifested that it is adopting the memorandum of MIAA as its own insofar as the same is germane and material to NHAs stand.[13]

As presented and discussed by the parties, the issues are the following:
1. 2. 3. Has PD 2016 modified PD 1818? Did the petition filed by respondent with the trial court state a cause of action against petitioner? Is petitioner obliged to dispose of the subject properties in favor of the members of respondent association after appropriate proceedings? Is respondent entitled to the issuance of a writ of preliminary injunction?[14]

4.

We first resolve the threshold question of whether respondent has personality to sue. MIAA contends that the real parties-in-interest in the petition filed with the trial court are the individual members of the homeowners association. Not having been brought in the name of the real parties-in-interest, the suit was correctly dismissed by the trial court for failure to state a cause of action. 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 courts 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. [Emphasis supplied.]

It is a settled rule that every action must be prosecuted or defended in the name of the real party-ininterest. 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-ininterest. 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 petitionerassociation will only result in the filing of multiple suits by the individual members of the association. What is more decisive to the resolution of the present controversy, however, is a matter not addressed by the parties in the case before this Court, that is, the fact that the petition filed before the trial court is for mandamus to compel MIAA to segregate Rivera Village from the scope of its Conceptual Development Plan and the NHA to take the necessary steps for the disposition of the subject property in favor of the members of the homeowners association. Parenthetically, while the procedural rule is that a party is required to indicate in his brief an assignment of errors and only those assigned shall be considered by the appellate court in deciding the case, it is equally settled that appellate courts have ample authority to rule on matters not assigned as errors in an appeal, if these are indispensable or necessary to the just resolution of the pleaded issues.[22] For instance, the Court has allowed the

consideration of other grounds not raised or assigned as errors specifically in the following instances: (1) grounds not assigned as errors but affecting jurisdiction over the subject matter; (2) matters not assigned as errors on appeal but are evidently plain or clerical errors within the contemplation of the law; (3) matters not assigned as errors on appeal but consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interest of justice or to avoid dispensing piecemeal justice; (4) matters not specifically assigned as errors on appeal but raised in the trial court and are matters of record having some bearing on the issue submitted which the parties failed to raise or which the lower court ignored; (5) matters not assigned as errors on appeal but closely related to an error assigned; and (6) matters not assigned as errors on appeal but upon which the determination of a question properly assigned is dependent.[23] In this case, although the propriety of the filing of a petition for mandamus was no longer raised as an issue before this Court, MIAA asserted in its answer[24] to the original petition that the homeowners association is not entitled to a writ of mandamus because it has not shown any legal right to possess the subject property and a correlative obligation on the part of MIAA to segregate the property from its Conceptual Development Plan. MIAA averred:
28. Petitioner is not entitled to the issuance of a writ of mandamus. For a writ of mandamus to issue, it is essential that petitioner has a legal right to the thing

demanded and that it is the imperative duty of respondent to perform the act required. The legal right of petitioner to the thing demanded must be welldefined, clear and certain. The corresponding duty of respondent to perform the required act must also be clear and specific (Cf. Lemi v. Valencia, 26 SCRA 203, 210 [1968]). 29. Petitioner, in view of the expiration of the lease contracts of its individual members, has failed to show that it has the legal right to possess the subject property. 30. There is therefore no corresponding duty on the part of respondent MIAA to segregate the property from the scope of its Conceptual Development Plan.[25]

The question of whether the homeowners association is entitled to the issuance of a writ of mandamus was again raised in the memorandum[26] filed by MIAA with the Court of Appeals. MIAA alleged:
Appellant is not entitled to the issuance of a writ of mandamus. For a writ of mandamus to issue, it is essential that the appellant has a legal right to the thing demanded and that it is the imperative duty of respondent to perform the act required. The legal right of appellant to the thing demanded must be welldefined, clear and certain. The corresponding duty of respondent to perform the required act must also be clear and specific (cf. Lemi v. Valencia, 26 SCRA 203, 210 [1968]).

In view of the expiration of the lease contracts of its individual members, appellant has failed to show that it has the legal right to possess the subject property. There is therefore no corresponding duty on the part of the MIAA to segregate the property from the scope of its conceptual development plan.[27]

The question of whether mandamus is the proper remedy was clearly raised in the trial court and the Court of Appeals although it was largely ignored by both courts. This issue being indispensable to the resolution of this case, we shall rule on the matter. A writ of mandamus can be issued only when petitioners 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.[31] We note that while respondent alleges that its members enlisted themselves with the NHA in order to avail of the benefits of the law, the NHA, in its answer[32] to the petition, denied this allegation for being self-serving. Whatever rights the members of the homeowners association may have under the relevant laws are still in substantial doubt or dispute. Hence, the petition for mandamus was appropriately dismissed for failure to state a cause of action. So, too, should the prayer for the issuance of a writ of prohibition contained in the same petition be denied. Writs of certiorari, prohibition and mandamus are prerogative writs of equity and their granting is ordinarily within the sound discretion of the courts to be exercised on equitable principles. Said writs should only be issued when the right to the relief is clear.[33] As our findings in this case confirm, the homeowners association failed to establish a clear legal right to the issuance of the writs of mandamus and prohibition prayed for. There is, moreover, another ground for the dismissal of the petition filed before the trial court which appears to have been overlooked by the parties in this case.

In the original petition filed before the trial court, the homeowners association averred that although EO 903 transferred to MIAA the properties and assets of MIA, such transfer was made subject to what the homeowners association claims to be the existing rights of its members.[34] MIAA dismissed this allegation as an erroneous conclusion of law.[35] We cite the complete text of the relevant provision of EO 903 to fully understand the import thereof and its effect on the present controversy. Section 3 thereof states:
Sec. 3. Creation of the Manila International Airport Authority.There is hereby established a body corporate to be known as the Manila International Airport Authority which shall be attached to the Ministry of Transportation and Communications. The principal office of the Authority shall be located at the New Manila International Airport. The Authority may establish such offices, branches, agencies or subsidiaries as it may deem proper and necessary; Provided, That any subsidiary that may be organized shall have the prior approval of the President. The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be

issued in the name of the authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. [Emphasis supplied.]

As can clearly be seen from the foregoing provision, while it is true that the ownership and administration of the airport and its surrounding land was assigned to MIAA subject to existing rights, which we may here understand to be the rights granted under PD 1517, EO 903 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-ininterest 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.[36] For the foregoing reasons, the prayer for the issuance of the writ of preliminary injunction must perforce be denied. Preliminary injunction is a mere ancillary remedy which cannot stand separately or proceed independently of the main case. Having declared that the petition filed before the trial court was correctly dismissed, the determination of the homeowners associations entitlement to a writ of preliminary injunction is already moot and academic.[37] Besides, as earlier noted, the right of the members of the homeowners association to possess and purchase the subject property is still uncertain considering that they have not completed the process for the acquisition of their lots as outlined in PD 1517. Injunction is a preservative remedy aimed at protecting substantive rights and interests. The writ of preliminary injunction is issued by the court to prevent threatened or continuous irreparable injury to parties before their claims can be thoroughly studied and adjudicated. Its sole objective is to preserve the status quo until the merits of the case can be heard fully. The writ is issued upon the satisfaction of two requisites,

namely: (1) the existence of a right to be protected; and (2) acts which are violative of said right. In the absence of a clear legal right, the issuance of the injunctive relief constitutes grave abuse of discretion. Injunction is not designed to protect contingent or future rights. Where the complainants right is doubtful or disputed, injunction is not proper. The possibility of irreparable damage without proof of actual existing right is not a ground for an injunction.[38] With this conclusion, we deem it unnecessary to discuss the other issues raised in this petition. WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated June 30, 2000 is REVERSED and SET ASIDE. Civil Case No. 971598 of the Regional Trial Court of Pasay City is ordered DISMISSED. SO ORDERED.

THIRD DIVISION CAPITOLINA VIVERO NAPERE, Petitioner, G.R. No. 160426 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CORONA,* NACHURA, and REYES, JJ. Promulgated: January 31, 2008

- versus -

AMANDO BARBARONA and GERVACIA MONJAS BARBARONA, Respondents.

x-----------------------------------------------------------------------------------x RESOLUTION NACHURA, J.:

Petitioner Capitolina Vivero Napere interposes this petition for review to assail the Court of Appeals Decision[1] dated October 9, 2003, which upheld the validity of the Regional Trial Courts decision despite failure to formally order the substitution of the heirs of the deceased defendant, petitioners husband.

The case stems from the following antecedents: Respondent Amando Barbarona is the registered owner of Lot No. 3177, situated in Barangay San Sotero (formerly Tambis), Javier, Leyte and covered by Original Certificate of Title (OCT) No. P-7350. Lot No. 3176, covered by OCT No. 1110 in the name of Anacleto Napere, adjoins said lot on the northeastern side. After Anacleto died, his son, Juan Napere, and the latters wife, herein petitioner, planted coconut trees on certain portions of the property with the consent of his co-heirs. In their complaint, respondents alleged that in April 1980, the spouses Napere, their relatives and hired laborers, by means of stealth and strategy, encroached upon and occupied the northeastern portion of Lot No. 3177; that the Naperes harvested the coconut fruits thereon, appropriated the proceeds thereof, and, despite demands, refused to turn over possession of the area; that in April 1992, a relocation survey was conducted which confirmed that the respondents property was encroached upon by the Naperes; that on the basis of the relocation survey, the respondents took possession of this encroached portion of the lot and harvested the fruits thereon from April 1993 to December 1993; but that in January 1994, the Naperes repeated their acts by encroaching again on the respondents property, harvesting the coconuts and appropriating the proceeds thereof, and refusing to vacate the property on demand. On November 10, 1995, while the case was pending, Juan Napere died. Their counsel informed the court of Juan Naperes death, and submitted the names and addresses of Naperes heirs. At the pre-trial, the RTC noted that the Naperes were not

contesting the respondents right of possession over the disputed portion of the property but were demanding the rights of a planter in good faith under Articles 445 and 455 of the Civil Code. On October 17, 1996, the RTC rendered a Decision against the estate of Juan Napere, thus:
WHEREFORE, this Court finds in favor of the plaintiff and against the defendant, hereby declaring the following: a) The estate of Juan Napere is liable to pay the amount of ONE HUNDRED SEVENTY-NINE THOUSAND TWO HUNDRED (P179,200.00) PESOS in actual damages; b) The estate of Juan Napere shall be liable to pay FIVE THOUSAND (P5,000.00) PESOS in litigation expenses, and the c) Cost[s] of suit. SO ORDERED.[2]

Petitioner appealed the case to the Court of Appeals (CA), arguing, inter alia, that the judgment of the trial court was void for lack of jurisdiction over the heirs who were not ordered substituted as party-defendants for the deceased. On October 9, 2003, the CA rendered a Decision affirming the RTC Decision.[3] The appellate court held that failure to substitute the heirs for the deceased defendant will not invalidate the proceedings and the judgment in a case which survives the death of such party. Thus, this petition for review where the only issue is whether

or not the RTC decision is void for lack of jurisdiction over the heirs of Juan Napere. Petitioner alleges that the trial court did not acquire jurisdiction over the persons of the heirs because of its failure to order their substitution pursuant to Section 17,[4] Rule 3 of the Rule of Court; hence, the proceedings conducted and the decision rendered by the trial court are null and void. The petition must fail. When a party to a pending case dies and the claim is not extinguished by such death, the Rules require the substitution of the deceased party by his legal representative or heirs. In such case, counsel is obliged to inform the court of the death of his client and give the name and address of the latters legal representative. The complaint for recovery of possession, quieting of title and damages is an action that survives the death of the defendant. Notably, the counsel of Juan Napere complied with his duty to inform the court of his clients death and the names and addresses of the heirs. The trial court, however, failed to order the substitution of the heirs. Nonetheless, despite this oversight, we hold that the proceedings conducted and the judgment rendered by the trial court are valid. The Court has repeatedly declared that failure of the counsel to comply with his duty to inform the court of the death of his client, such that no substitution is effected, will not invalidate the proceedings and the judgment rendered thereon if the action survives the death of such party.[5] The trial courts jurisdiction over the case subsists despite the death of the party. Mere failure to substitute a deceased party is not sufficient

ground to nullify a trial courts decision. The party alleging nullity must prove that there was an undeniable violation of due process.[6] Strictly speaking, the rule on substitution by heirs is not a matter of jurisdiction, but a requirement of due process.[7] The rule on substitution was crafted to protect every partys right to due process.[8] It was designed to ensure that the deceased party would continue to be properly represented in the suit through his heirs or the duly appointed legal representative of his estate.[9] Moreover, non-compliance with the Rules results in the denial of the right to due process for the heirs who, though not duly notified of the proceedings, would be substantially affected by the decision rendered therein.[10] Thus, it is only when there is a denial of due process, as when the deceased is not represented by any legal representative or heir, that the court nullifies the trial proceedings and the resulting judgment therein.[11] Formal substitution by heirs is not necessary when they themselves voluntarily appear, participate in the case, and present evidence in defense of the deceased.[12] In such case, there is really no violation of the right to due process. The essence of due process is the reasonable opportunity to be heard and to submit any evidence available in support of ones defense.[13] When due process is not violated, as when the right of the representative or heir is recognized and protected, noncompliance or belated formal compliance with the Rules cannot affect the validity of a promulgated decision.[14] In light of these pronouncements, we cannot nullify the proceedings before the trial court and the judgment rendered therein because the petitioner, who was, in fact, a co-defendant of the deceased, actively participated in the case. The records show that the counsel of Juan Napere and petitioner continued to represent them

even after Juans death. Hence, through counsel, petitioner was able to adequately defend herself and the deceased in the proceedings below. Due process simply demands an opportunity to be heard and this opportunity was not denied petitioner. Finally, the alleged denial of due process as would nullify the proceedings and the judgment thereon can be invoked only by the heirs whose rights have been violated. Violation of due process is a personal defense that can only be asserted by the persons whose rights have been allegedly violated.[15] Petitioner, who had every opportunity and who took advantage of such opportunity, through counsel, to participate in the trial court proceedings, cannot claim denial of due process. WHEREFORE, premises considered, the petition is DENIED DUE COURSE. The Decision of the Court of Appeals, dated October 9, 2003, in CA-G.R. CV No. 56457, is AFFIRMED.

SO ORDERED.

SECOND DIVISION

JUDGE ANTONIO C. SUMALJAG, Petitioner,

G.R. No. 149787 Present:

versus

QUISUMBING, J., Chairp TINGA, BRION, * REYES, and ** LEONARDO-DE CASTR JJ. Promulgated:

SPOUSES DIOSDIDIT and MENENDEZ M. LITERATO; and MICHAELES MAGLASANG RODRIGO, Respondents.

June 18, 2008

x --------------------------------------------------------------------------------x DECISION BRION, J.: Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision[1] of the Court of Appeals (CA) dated June 26, 2001 and its related Resolution[2] dated September 4, 2001 in CA-G.R. SP No. 59712. The assailed Decision dismissed the petition for certiorari filed by

petitioner Judge Antonio C. Sumaljag (the petitioner) in the interlocutory matter outlined below in Civil Cases B-1239 and B1281 before the trial court. The challenged Resolution denied the petitioners motion for reconsideration. ANTECEDENT 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 Inecita Diano Maglasang.[4] Lot 1220-D was partitioned to Josefa, while Lot 1220-E was given to Menendez. The respondent spouses response to the complaint was an amended answer with counterclaim[5] denying that the deed of sale was falsified. They impleaded the petitioner with Josefa as counterclaim defendant on the allegation that the petitioner, at the instance of Josefa, occupied Lot 1220-D and Lot 1220-E without their (the respondent spouses) authority; Lot 1220-E is theirs by inheritance while 1220-D had been sold to them by Josefa. 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. Civil Case No. 1281[6] is a complaint that Menendez filed on April 4, 1996 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 13, 1999, Atty. Zenen A. Puray (Atty. Puray) the petitioners and Josefas common counsel - asked the RTC in Civil Case No. 1239 that he be given an extended period or up to September 10, 1999 within which to file a formal notice of death and substitution of party. The RTC granted the motion in an order dated August 13, 1999.[7] On August 26, 1999, Atty. Puray 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 Josefas death, she executed a Quitclaim Deed[9] over Lot 1220-D in favor of Remismundo D. Maglasang[10] who in turn sold this

property to the petitioner. 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 latters full-blood sister, Michaeles Maglasang Rodrigo (Michaeles). The RTC denied Atty. Purays motion for substitution and instead ordered the appearance of Michaeles as representative of the deceased Josefa. This Order provides:
WHEREFORE, in view of the foregoing, the motion is hereby DENIED for lack of merit and instead order the appearance of Mrs. Mechailes Maglasang-Rodrigo of Brgy. Binulho, Albuera, Leyte, as representative of the deceased Josefa Maglasang. SO ORDERED.[11]

The RTC subsequently denied the petitioners motion for reconsideration in an order[12] dated May 25, 2000. 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 petitioners 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 Josefas 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. THE COURTS RULING 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 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. (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 in Gonzalez 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 deceaseds 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 counsels 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 Josefas interests in the subject matter of litigation pursuant to Section 19, Rule 3.[21] But this can happen only while the clienttransferor was alive and while 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 lite whose 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 Remismundo is Lot 1220-E, while the subject matter of the deed of sale executed by Remismundo in the petitioners 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.

Josefas 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. WHEREFORE, premises considered, we DENY the petition for lack of merit. We AFFIRM the Court of Appeals decision that the surviving heirs of the deceased Josefa namely Michaelis M. Rodrigo; Maria M. Cecilio; Zosima D. Maglasang; Consolacion M. Bag-aw; and the children of Lourdes M. Lumapas, namely Manuel Lumapas, Cesar Lumapas, Huros Lumapas and Regulo Maquilan should be her substitutes and are hereby so ordered to be substituted for her in Civil Case Nos. B-1239 and B-1281. Costs against the petitioner. SO ORDERED.

THIRD DIVISION SPOUSES ANTONIO F. ALGURA and LORENCITA S.J. ALGURA, Petitioners, G.R. No. 150135

Present: - versus Chairperson, QUISUMBING, J., CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ.

THE LOCAL GOVERNMENT UNIT OF THE CITY OF NAGA, ATTY. MANUEL TEOXON, ENGR. LEON PALMIANO, NATHAN SERGIO and BENJAMIN NAVARRO, SR., Respondents.

Promulgated: October 30, 2006

x----------------------------------------------------------------------------------------x

DECISION VELASCO, JR., J.:

Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor. James Baldwin

The Constitution affords litigantsmoneyed or poorequal access to the courts; moreover, it specifically provides that poverty shall not bar any person from having access to the courts.[1] Accordingly, laws and rules must be formulated, interpreted, and implemented pursuant to the intent and spirit of this constitutional provision. As such, filing fees, though one of the essential elements in court procedures, should not be an obstacle to poor litigants opportunity to seek redress for their grievances before the courts. The Case This Petition for Review on Certiorari seeks the annulment of the September 11, 2001 Order of the Regional Trial Court (RTC) of Naga City, Branch 27, in Civil Case No. 99-4403 entitled Spouses Antonio F. Algura and Lorencita S.J. Algura v. The Local Government Unit of the City of Naga, et al., dismissing the case for failure of petitioners Algura spouses to pay the required filing fees.[2] Since the instant petition involves only a question of law based on facts established from the pleadings and documents submitted by the parties,[3] the Court gives due course to the instant petition sanctioned under Section 2(c) of Rule 41 on Appeal from the RTCs, and governed by Rule 45 of the 1997 Rules of Civil Procedure. The Facts On September 1, 1999, spouses Antonio F. Algura and Lorencita S.J. Algura filed a Verified Complaint dated August 30, 1999[4] for damages against the Naga City Government and its officers, arising from the alleged illegal demolition of their residence and boarding house and for payment of lost income derived from fees paid by their boarders amounting to PhP 7,000.00 monthly.

Simultaneously, petitioners filed an Ex-Parte Motion to Litigate as Indigent Litigants,[5] to which petitioner Antonio Alguras Pay Slip No. 2457360 (Annex A of motion) was appended, showing a gross monthly income of Ten Thousand Four Hundred Seventy Four Pesos (PhP 10,474.00) and a net pay of Three Thousand Six Hundred Sixteen Pesos and Ninety Nine Centavos (PhP 3,616.99) for [the month of] July 1999.[6] Also attached as Annex B to the motion was a July 14, 1999 Certification[7] issued by the Office of the City Assessor of Naga City, which stated that petitioners had no property declared in their name for taxation purposes. Finding that petitioners motion to litigate as indigent litigants was meritorious, Executive Judge Jose T. Atienza of the Naga City RTC, in the September 1, 1999 Order,[8] granted petitioners plea for exemption from filing fees. Meanwhile, as a result of respondent Naga City Governments demolition of a portion of petitioners house, the Alguras allegedly lost a monthly income of PhP 7,000.00 from their boarders rentals. With the loss of the rentals, the meager income from Lorencita Alguras sari-sari store and Antonio Alguras small take home pay became insufficient for the expenses of the Algura spouses and their six (6) children for their basic needs including food, bills, clothes, and schooling, among others. On October 13, 1999, respondents filed an Answer with Counterclaim dated October 10, 1999,[9] arguing that the defenses of the petitioners in the complaint had no cause of action, the spouses boarding house blocked the road right of way, and said structure was a nuisance per se.

Praying that the counterclaim of defendants (respondents) be dismissed, petitioners then filed their Reply with Ex-Parte Request for a Pre-Trial Setting[10] before the Naga City RTC on October 19, 1999. On February 3, 2000, a pre-trial was held wherein respondents asked for five (5) days within which to file a Motion to Disqualify Petitioners as Indigent Litigants. On March 13, 2000, respondents filed a Motion to Disqualify the Plaintiffs for Non-Payment of Filing Fees dated March 10, 2000.[11] They asserted that in addition to the more than PhP 3,000.00 net income of petitioner Antonio Algura, who is a member of the Philippine National Police, spouse Lorencita Algura also had a mini-store and a computer shop on the ground floor of their residence along Bayawas St., Sta. Cruz, Naga City. Also, respondents claimed that petitioners second floor was used as their residence and as a boarding house, from which they earned more than PhP 3,000.00 a month. In addition, it was claimed that petitioners derived additional income from their computer shop patronized by students and from several boarders who paid rentals to them. Hence, respondents concluded that petitioners were not indigent litigants. On March 28, 2000, petitioners subsequently interposed their Opposition to the Motion[12] to respondents motion to disqualify them for non-payment of filing fees. On April 14, 2000, the Naga City RTC issued an Order disqualifying petitioners as indigent litigants on the ground that they failed to substantiate their claim for exemption from payment of legal fees and to comply with the third paragraph of Rule 141, Section 18 of the Revised Rules of Courtdirecting them to pay the requisite filing fees.[13]

On April 28, 2000, petitioners filed a Motion for Reconsideration of the April 14, 2000 Order. On May 8, 2000, respondents then filed their Comment/Objections to petitioners Motion for Reconsideration. On May 5, 2000, the trial court issued an Order[14] giving petitioners the opportunity to comply with the requisites laid down in Section 18, Rule 141, for them to qualify as indigent litigants. On May 13, 2000, petitioners submitted their Compliance[15] attaching the affidavits of petitioner Lorencita Algura[16] and Erlinda Bangate,[17] to comply with the requirements of then Rule 141, Section 18 of the Rules of Court and in support of their claim to be declared as indigent litigants. In her May 13, 2000 Affidavit, petitioner Lorencita Algura claimed that the demolition of their small dwelling deprived her of a monthly income amounting to PhP 7,000.00. She, her husband, and their six (6) minor children had to rely mainly on her husbands salary as a policeman which provided them a monthly amount of PhP 3,500.00, more or less. Also, they did not own any real property as certified by the assessors office of Naga City. More so, according to her, the meager net income from her small sari-sari store and the rentals of some boarders, plus the salary of her husband, were not enough to pay the familys basic necessities. To buttress their position as qualified indigent litigants, petitioners also submitted the affidavit of Erlinda Bangate, who attested under oath, that she personally knew spouses Antonio Algura and Lorencita Algura, who were her neighbors; that they derived substantial income from their boarders; that they lost said income from their boarders rentals when the Local Government

Unit of the City of Naga, through its officers, demolished part of their house because from that time, only a few boarders could be accommodated; that the income from the small store, the boarders, and the meager salary of Antonio Algura were insufficient for their basic necessities like food and clothing, considering that the Algura spouses had six (6) children; and that she knew that petitioners did not own any real property. Thereafter, Naga City RTC Acting Presiding Judge Andres B. Barsaga, Jr. issued his July 17, 2000[18] Order denying the petitioners Motion for Reconsideration. Judge Barsaga ratiocinated that the pay slip of Antonio F. Algura showed that the GROSS INCOME or TOTAL EARNINGS of plaintiff Algura [was] 10,474.00 which amount [was] over and above the amount mentioned in the first paragraph of Rule 141, Section 18 for pauper litigants residing outside Metro Manila.[19] Said rule provides that the gross income of the litigant should not exceed PhP 3,000.00 a month and shall not own real estate with an assessed value of PhP 50,000.00. The trial court found that, in Lorencita S.J. Alguras May 13, 2000 Affidavit, nowhere was it stated that she and her immediate family did not earn a gross income of PhP 3,000.00. The Issue Unconvinced of the said ruling, the Alguras instituted the instant petition raising a solitary issue for the consideration of the Court: whether petitioners should be considered as indigent litigants who qualify for exemption from paying filing fees. The Ruling of the Court

The petition is meritorious. A review of the history of the Rules of Court on suits in forma pauperis (pauper litigant) is necessary before the Court rules on the issue of the Algura spouses claim to exemption from paying filing fees. When the Rules of Court took effect on January 1, 1964, the rule on pauper litigants was found in Rule 3, Section 22 which provided that:
SECTION 22. Pauper litigant.Any court may authorize a litigant to prosecute his action or defense as a pauper upon a proper showing that he has no means to that effect by affidavits, certificate of the corresponding provincial, city or municipal treasurer, or otherwise. Such authority[,] once given[,] shall include an exemption from payment of legal fees and from filing appeal bond, printed record and printed brief. The legal fees shall be a lien to any judgment rendered in the case [favorable] to the pauper, unless the court otherwise provides.

From the same Rules of Court, Rule 141 on Legal Fees, on the other hand, did not contain any provision on pauper litigants. On July 19, 1984, the Court, in Administrative Matter No. 836-389-0 (formerly G.R. No. 64274), approved the recommendation of the Committee on the Revision of Rates and Charges of Court Fees, through its Chairman, then Justice Felix V. Makasiar, to revise the fees in Rule 141 of the Rules of Court to generate funds to effectively cover administrative costs for services rendered by the courts.[20] A provision on pauper litigants was inserted which

reads:
SECTION 16. Pauper-litigants exempt from payment of court fees.Pauper-litigants include wage earners whose gross income do not exceed P2,000.00 a month or P24,000.00 a year for those residing in Metro Manila, and P1,500.00 a month or P18,000.00 a year for those residing outside Metro Manila, or those who do not own real property with an assessed value of not more than P24,000.00, or not more than P18,000.00 as the case may be.

Such exemption shall include exemption from payment of fees for filing appeal bond, printed record and printed brief. The legal fees shall be a lien on the monetary or property judgment rendered in favor of the pauper-litigant. To be entitled to the exemption herein provided, the pauper-litigant shall execute an affidavit that he does not earn the gross income abovementioned, nor own any real property with the assessed value afore-mentioned [sic], supported by a certification to that effect by the provincial, city or town assessor or treasurer.

When the Rules of Court on Civil Procedure were amended by the 1997 Rules of Civil Procedure (inclusive of Rules 1 to 71) in Supreme Court Resolution in Bar Matter No. 803 dated April 8, 1997, which became effective on July 1, 1997, Rule 3, Section 22 of the Revised Rules of Court was superseded by Rule 3, Section 21 of said 1997 Rules of Civil Procedure, as follows:
SECTION 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 for the payment thereof, without prejudice to such other sanctions as the court may impose.

At the time the Rules on Civil Procedure were amended by the Court in Bar Matter No. 803, however, there was no amendment made on Rule 141, Section 16 on pauper litigants. On March 1, 2000, Rule 141 on Legal Fees was amended by the Court in A.M. No. 00-2-01-SC, whereby certain fees were increased or adjusted. In this Resolution, the Court amended Section 16 of Rule 141, making it Section 18, which now reads:
SECTION 18. Pauper-litigants exempt from payment of legal fees.Pauper litigants (a) whose gross income and that of their immediate family do not exceed four thousand (P4,000.00) pesos a month if residing in Metro Manila, and

three thousand (P3,000.00) pesos a month if residing outside Metro Manila, and (b) who do not own real property with an assessed value of more than fifty thousand (P50,000.00) pesos shall be exempt from the payment of legal fees. The legal fees shall be a lien on any judgment rendered in the case favorably to the pauper litigant, unless the court otherwise provides. To be entitled to the exemption herein provided, the litigant shall execute an affidavit that he and his immediate family do not earn the gross income abovementioned, nor do they own any real property with the assessed value aforementioned, supported by an affidavit of a disinterested person attesting to the truth of the litigants affidavit. Any falsity in the affidavit of a litigant or disinterested person shall be sufficient cause to strike out the pleading of that party, without prejudice to whatever criminal liability may have been incurred.

It can be readily seen that the rule on pauper litigants was inserted in Rule 141 without revoking or amending Section 21 of Rule 3, which provides for the exemption of pauper litigants from payment of filing fees. Thus, on March 1, 2000, there were two existing rules on pauper litigants; namely, Rule 3, Section 21 and Rule 141, Section 18. On August 16, 2004, Section 18 of Rule 141 was further amended in Administrative Matter No. 04-2-04-SC, which became effective on the same date. It then became Section 19 of Rule 141, to wit:

SEC. 19. Indigent litigants exempt from payment of legal fees.INDIGENT LITIGANTS (A) WHOSE GROSS INCOME AND THAT OF THEIR IMMEDIATE FAMILY DO NOT EXCEED AN AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE OF AN EMPLOYEE AND (B) WHO DO NOT OWN REAL PROPERTY WITH A FAIR MARKET VALUE AS STATED IN THE CURRENT TAX DECLARATION OF MORE THAN THREE HUNDRED THOUSAND (P300,000.00) PESOS SHALL BE EXEMPT FROM PAYMENT OF LEGAL FEES. The legal fees shall be a lien on any judgment rendered in the case favorable to the indigent litigant unless the court otherwise provides. To be entitled to the exemption herein provided, the litigant shall execute an affidavit that he and his immediate family do not earn a gross income abovementioned, and they do not own any real property with the fair value aforementioned, supported by an affidavit of a disinterested person attesting to the truth of the litigants affidavit. The current tax declaration, if any, shall be attached to the litigants affidavit. Any falsity in the affidavit of litigant or disinterested person shall be sufficient cause to dismiss the complaint or action or to strike out the pleading of that party, without prejudice to whatever criminal liability may have been incurred. (Emphasis supplied.)

Amendments to Rule 141 (including the amendment to Rule 141, Section 18) were made to implement RA 9227 which brought about new increases in filing fees. Specifically, in the August 16, 2004 amendment, the ceiling for the gross income of litigants

applying for exemption and that of their immediate family was increased from PhP 4,000.00 a month in Metro Manila and PhP 3,000.00 a month outside Metro Manila, to double the monthly minimum wage of an employee; and the maximum value of the property owned by the applicant was increased from an assessed value of PhP 50,000.00 to a maximum market value of PhP 300,000.00, to be able to accommodate more indigent litigants and promote easier access to justice by the poor and the marginalized in the wake of these new increases in filing fees. Even if there was an amendment to Rule 141 on August 16, 2004, there was still no amendment or recall of Rule 3, Section 21 on indigent litigants. With this historical backdrop, let us now move on to the sole issuewhether petitioners are exempt from the payment of filing fees. It is undisputed that the Complaint (Civil Case No. 99-4403) was filed on September 1, 1999. However, the Naga City RTC, in its April 14, 2000 and July 17, 2000 Orders, incorrectly applied Rule 141, Section 18 on Legal Fees when the applicable rules at that time were Rule 3, Section 21 on Indigent Party which took effect on July 1, 1997 and Rule 141, Section 16 on Pauper Litigants which became effective on July 19, 1984 up to February 28, 2000. The old Section 16, Rule 141 requires applicants to file an exparte motion to litigate as a pauper litigant by submitting an affidavit that they do not have a gross income of PhP 2,000.00 a month or PhP 24,000.00 a year for those residing in Metro Manila and PhP 1,500.00 a month or PhP 18,000.00 a year for those residing outside

Metro Manila or those who do not own real property with an assessed value of not more than PhP 24,000.00 or not more than PhP 18,000.00 as the case may be. Thus, there are two requirements: a) income requirementthe applicants should not have a gross monthly income of more than PhP 1,500.00, and b) property requirementthey should not own property with an assessed value of not more than PhP 18,000.00. In the case at bar, petitioners Alguras submitted the Affidavits of petitioner Lorencita Algura and neighbor Erlinda Bangate, the pay slip of petitioner Antonio F. Algura showing a gross monthly income of PhP 10,474.00,[21] and a Certification of the Naga City assessor stating that petitioners do not have property declared in their names for taxation.[22] Undoubtedly, petitioners do not own real property as shown by the Certification of the Naga City assessor and so the property requirement is met. However with respect to the income requirement, it is clear that the gross monthly income of PhP 10,474.00 of petitioner Antonio F. Algura and the PhP 3,000.00 income of Lorencita Algura when combined, were above the PhP 1,500.00 monthly income threshold prescribed by then Rule 141, Section 16 and therefore, the income requirement was not satisfied. The trial court was therefore correct in disqualifying petitioners Alguras as indigent litigants although the court should have applied Rule 141, Section 16 which was in effect at the time of the filing of the application on September 1, 1999. Even if Rule 141, Section 18 (which superseded Rule 141, Section 16 on March 1, 2000) were applied, still the application could not have been granted as the combined PhP 13,474.00 income of petitioners was beyond the PhP 3,000.00 monthly income threshold. Unrelenting, petitioners however argue in their Motion for Reconsideration of the April 14, 2000 Order disqualifying them as

indigent litigants[23] that the rules have been relaxed by relying on Rule 3, Section 21 of the 1997 Rules of Civil procedure which authorizes parties to litigate their action as indigents if the court 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. The trial court did not give credence to this view of petitioners and simply applied Rule 141 but ignored Rule 3, Section 21 on Indigent Party. The position of petitioners on the need to use Rule 3, Section 21 on their application to litigate as indigent litigants brings to the fore the issue on whether a trial court has to apply both Rule 141, Section 16 and Rule 3, Section 21 on such applications or should the court apply only Rule 141, Section 16 and discard Rule 3, Section 21 as having been superseded by Rule 141, Section 16 on Legal Fees. The Court rules that Rule 3, Section 21 and Rule 141, Section 16 (later amended as Rule 141, Section 18 on March 1, 2000 and subsequently amended by Rule 141, Section 19 on August 16, 2003, which is now the present rule) are still valid and enforceable rules on indigent litigants. For one, the history of the two seemingly conflicting rules readily reveals that it was not the intent of the Court to consider the old Section 22 of Rule 3, which took effect on January 1, 1994 to have been amended and superseded by Rule 141, Section 16, which took effect on July 19, 1984 through A.M. No. 83-6-389-0. If that is the case, then the Supreme Court, upon the recommendation of the Committee on the Revision on Rules, could have already deleted Section 22 from Rule 3 when it amended Rules 1 to 71 and approved the 1997 Rules of Civil Procedure, which took effect on July 1, 1997. The fact that Section 22 which became Rule 3, Section 21 on

indigent litigant was retained in the rules of procedure, even elaborating on the meaning of an indigent party, and was also strengthened by the addition of a third paragraph on the right to contest the grant of authority to litigate only goes to show that there was no intent at all to consider said rule as expunged from the 1997 Rules of Civil Procedure. Furthermore, Rule 141 on indigent litigants was amended twice: first on March 1, 2000 and the second on August 16, 2004; and yet, despite these two amendments, there was no attempt to delete Section 21 from said Rule 3. This clearly evinces the desire of the Court to maintain the two (2) rules on indigent litigants to cover applications to litigate as an indigent litigant. It may be argued that Rule 3, Section 21 has been impliedly repealed by the recent 2000 and 2004 amendments to Rule 141 on legal fees. This position is bereft of merit. Implied repeals are frowned upon unless the intent of the framers of the rules is unequivocal. It has been consistently ruled that:
(r)epeals by implication are not favored, and will not be decreed, unless it is manifest that the legislature so intended. As laws are presumed to be passed with deliberation and with full knowledge of all existing ones on the subject, it is but reasonable to conclude that in passing a statute[,] it was not intended to interfere with or abrogate any former law relating to same matter, unless the repugnancy between the two is not only irreconcilable, but also clear and convincing, and flowing necessarily from the language used, unless the later act fully embraces the subject matter of the earlier, or unless the reason for the earlier act is beyond peradventure removed. Hence, every effort must be used to make all acts stand and if, by any reasonable construction they can be reconciled, the later act will not operate as a repeal of the

earlier.[24] (Emphasis supplied).

Instead of declaring that Rule 3, Section 21 has been superseded and impliedly amended by Section 18 and later Section 19 of Rule 141, the Court finds that the two rules can and should be harmonized. The Court opts to reconcile Rule 3, Section 21 and Rule 141, Section 19 because it is a settled principle that when conflicts are seen between two provisions, all efforts must be made to harmonize them. Hence, every statute [or rule] must be so construed and harmonized with other statutes [or rules] as to form a uniform system of jurisprudence.[25] In Manila Jockey Club, Inc. v. Court of Appeals, this Court enunciated that in the interpretation of seemingly conflicting laws, efforts must be made to first harmonize them. This Court thus ruled:
Consequently, every statute should be construed in such a way that will harmonize it with existing laws. This principle is expressed in the legal maxim interpretare et concordare leges legibus est optimus interpretandi, that is, to interpret and to do it in such a way as to harmonize laws with laws is the best method of interpretation.[26]

In the light of the foregoing considerations, therefore, the two (2) rules can stand together and are compatible with each other. When an application to litigate as an indigent litigant is filed, the court shall scrutinize the affidavits and supporting documents submitted by the applicant to determine if the applicant complies with the income and property standards prescribed in the present

Section 19 of Rule 141that is, the applicants gross income and that of the applicants immediate family do not exceed an amount double the monthly minimum wage of an employee; and the applicant does not own real property with a fair market value of more than Three Hundred Thousand Pesos (PhP 300,000.00). If the trial court finds that the applicant meets the income and property requirements, the authority to litigate as indigent litigant is automatically granted and the grant is a matter of right. However, if the trial court finds that one or both requirements have not been met, then it would set a hearing to enable the applicant to prove that the applicant has no money or property sufficient and available for food, shelter and basic necessities for himself and his family. In that hearing, the adverse party may adduce countervailing evidence to disprove the evidence presented by the applicant; after which the trial court will rule on the application depending on the evidence adduced. In addition, Section 21 of Rule 3 also provides that the adverse party may later still contest the grant of such authority at any time before judgment is rendered by the trial court, possibly based on newly discovered evidence not obtained at the time the application was heard. If the court determines 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 of prescribed fees shall be made, without prejudice to such other sanctions as the court may impose. The Court concedes that Rule 141, Section 19 provides specific standards while Rule 3, Section 21 does not clearly draw the limits of the entitlement to the exemption. Knowing that the litigants may abuse the grant of authority, the trial court must use sound

discretion and scrutinize evidence strictly in granting exemptions, aware that the applicant has not hurdled the precise standards under Rule 141. The trial court must also guard against abuse and misuse of the privilege to litigate as an indigent litigant to prevent the filing of exorbitant claims which would otherwise be regulated by a legal fee requirement. Thus, the trial court should have applied Rule 3, Section 21 to the application of the Alguras after their affidavits and supporting documents showed that petitioners did not satisfy the twin requirements on gross monthly income and ownership of real property under Rule 141. Instead of disqualifying the Alguras as indigent litigants, the trial court should have called a hearing as required by Rule 3, Section 21 to enable the petitioners to adduce evidence to show that they didnt have property and money sufficient and available for food, shelter, and basic necessities for them and their family.[27] In that hearing, the respondents would have had the right to also present evidence to refute the allegations and evidence in support of the application of the petitioners to litigate as indigent litigants. Since this Court is not a trier of facts, it will have to remand the case to the trial court to determine whether petitioners can be considered as indigent litigants using the standards set in Rule 3, Section 21. Recapitulating the rules on indigent litigants, therefore, if the applicant for exemption meets the salary and property requirements under Section 19 of Rule 141, then the grant of the application is mandatory. On the other hand, when the application does not satisfy one or both requirements, then the application should not be denied outright; instead, the court should apply the indigency test under Section 21 of Rule 3 and use its sound discretion in determining the merits of the prayer for exemption.

Access to justice by the impoverished is held sacrosanct under Article III, Section 11 of the 1987 Constitution. The Action Program for Judicial Reforms (APJR) itself, initiated by former Chief Justice Hilario G. Davide, Jr., placed prime importance on easy access to justice by the poor as one of its six major components. Likewise, the judicial philosophy of Liberty and Prosperity of Chief Justice Artemio V. Panganiban makes it imperative that the courts shall not only safeguard but also enhance the rights of individualswhich are considered sacred under the 1987 Constitution. Without doubt, one of the most precious rights which must be shielded and secured is the unhampered access to the justice system by the poor, the underprivileged, and the marginalized. WHEREFORE, the petition is GRANTED and the April 14, 2000 Order granting the disqualification of petitioners, the July 17, 2000 Order denying petitioners Motion for Reconsideration, and the September 11, 2001 Order dismissing the case in Civil Case No. RTC-99-4403 before the Naga City RTC, Branch 27 are ANNULLED and SET ASIDE. Furthermore, the Naga City RTC is ordered to set the Ex-Parte Motion to Litigate as Indigent Litigants for hearing and apply Rule 3, Section 21 of the 1997 Rules of Civil Procedure to determine whether petitioners can qualify as indigent litigants. No costs. SO ORDERED.

SECOND DIVISION PAGLAUM MANAGEMENT & DEVELOPMENT CORP. and HEALTH MARKETING TECHNOLOGIES, INC., Petitioners, G.R. No. 179018 Present: CARPIO, J., Chairperson, BRION, PEREZ, SERENO, and REYES, JJ.

- versus -

UNION BANK OF THE PHILIPPINES, NOTARY PUBLIC JOHN DOE, and REGISTER OF DEEDS of Cebu City and Cebu Province Respondents.

J. KING & SONS CO., INC. Intervenor.

Promulgated: June 18, 2012

x---------------------------------------------- - - - -x DECISION SERENO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision dated 31 May 2007[1] and Resolution dated 24 July 2007[2] issued by the Court of Appeals (CA). Petitioner Paglaum Management and Development Corporation (PAGLAUM) is the registered owner of three parcels of land located in the Province of Cebu[3] and covered by Transfer Certificate of Title (TCT) Nos. 112488,[4] 112489,[5] and T68516.[6] These lots are co-owned by Benjamin B. Dy, the president of petitioner Health Marketing Technologies, Inc. (HealthTech), and his mother and siblings.[7] 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:
Section 9. Venue. 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.[10] (Emphasis supplied.)

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.[11] (Emphasis supplied.)

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.[12]

HealthTech and Union Bank agreed to subsequent renewals and increases in the credit line,[13] with the total amount of debt reaching 36,500,000.[14] Unfortunately, according to HealthTech, 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 extrajudicially 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, praying for: (a) the issuance of a temporary restraining order, and later a writ of preliminary injunction, directing Union Bank to refrain from exercising acts of ownership over the foreclosed

properties; (b) the annulment of the extra-judicial foreclosure of real properties; (c) the cancellation of the registration of the Certificates of Sale and the resulting titles issued; (d) the reinstatement of PAGLAUMs ownership over the subject properties; and (e) the payment of damages.[22] The case was docketed as Civil Case No. 01-1567 and raffled to the Regional Trial Court, National Capital Judicial Region, Makati City, Branch 134 (RTC Br. 134), which issued in favor of PAGLAUM and HealthTech a Writ of Preliminary Injunction restraining Union Bank from proceeding with the auction sale of the three mortgaged properties.[23] On 23 November 2001, Union Bank filed a Motion to Dismiss on the following grounds: (a) lack of jurisdiction over the issuance of the injunctive relief; (b) improper venue; and (c) lack of authority of the person who signed the Complaint.[24] RTC Br. 134 granted this Motion in its Order dated 11 March 2003, resulting in the dismissal of the case, as well as the dissolution of the Writ of Preliminary Injunction.[25] It likewise denied the subsequent Motion for Reconsideration filed by PAGLAUM and HealthTech.[26] PAGLAUM and HealthTech elevated the case to the CA, which affirmed the Order dated 11 March 2003[27] and denied the Motion for Reconsideration.[28] 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] Meanwhile, intervenor J. King & Sons Company, Inc. adopts the position of Union Bank and reiterates the position that Cebu City

is the proper venue.[31] The sole issue to be resolved is whether Makati City is the proper venue to assail the foreclosure of the subject real estate mortgage. This Court rules in the affirmative. 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. (Muoz 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 petitioners 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 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. 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, to wit:
Section 1. Secured Obligations. The obligations secured by this Mortgage (the Secured Obligations) are the following: a) All the obligations of the Borrower and/or the Mortgagor under: (i) the Notes, the Agreement, and this Mortgage; (ii) any and all instruments or documents issued upon the renewal, extension, amendment or novation of the Notes, the Agreement and this Mortgage, irrespective of whether such obligations as renewed, extended, amended or novated are in the nature of new, separate or additional obligations; and (iii) any and all instruments or documents issued pursuant to the Notes, the Agreement and this Mortgage; b) All other obligations of the Borrower and/or the Mortgagor in favor of the Mortgagee, whether presently owing or hereinafter incurred and whether or not arising from or connected with the Agreement, the Notes and/or this Mortgage; and c) Any and all expenses which may be incurred in collecting any and all of the above and in enforcing any and all

rights, powers and remedies of the Mortgagee under this Mortgage.[36]

On the other hand, the Restructuring Agreement was entered into by HealthTech and Union Bank to modify the entire loan obligation. Section 7 thereof provides:
Security. The principal, interests, penalties and other charges for which the BORROWER may be bound to the BANK under the terms of this Restructuring Agreement, including the renewal, extension, amendment or novation of this Restructuring Agreement, irrespective of whether the obligations arising out of or in connection with this Restructuring Agreement, as renewed, extended, amended or novated, are in the nature of new, separate or additional obligations, and all other instruments or documents covering the Indebtedness or otherwise made pursuant to this Restructuring Agreement (the Secured Obligations), shall continue to be secured by the following security arrangements (the Collaterals): a. Real Estate Mortgage dated February 11, 1994 executed by Paglaum Management and Development Corporation over a 474 square meter property covered by TCT No. 112489; b. Real Estate Mortgage dated February 11, 1994 executed by Paglaum Management and Development Corporation over a 2,796 square meter property covered by TCT No. T-68516; c. Real Estate Mortgage dated April 22, 1998 executed by Paglaum Management and Development Corporation over a 3,711 square meter property covered by TCT No. 112488; d. Continuing Surety Agreement of Benjamin B. Dy;

Without need of any further act and deed, the existing Collaterals, shall remain in full force and effect and continue to secure the payment and performance of the obligations of the BORROWER arising from the Notes and this Restructuring Agreement.[37] (Emphasis supplied.)

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.)

These quoted provisions of the Real Estate Mortgages and the later Restructuring Agreement clearly reveal the intention of the parties to implement a restrictive venue stipulation, which applies not only to the principal obligation, but also to the mortgages. The phrase waiving any other venue plainly shows that the choice of Makati City as the venue for actions arising out of or in connection with the Restructuring Agreement and the Collateral, with the Real Estate Mortgages being explicitly defined as such, is exclusive. Even if this Court were to consider the venue stipulations under the Real Estate Mortgages, it must be underscored that those provisions did not contain words showing exclusivity or restrictiveness. In fact, in the Real Estate Mortgages dated 11 February 1994, the phrase parties hereto waiving from the entire phrase the parties hereto waiving any other venue was stricken from the final executed contract. Following the ruling in Sps. Lantin as earlier quoted, in the absence of qualifying or restrictive words, the venue stipulation should only be deemed as an agreement on an additional forum, and not as a restriction on a specified place. 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. WHEREFORE, the Petition for Review is GRANTED. The

Decision dated 31 May 2007 and Resolution dated 24 July 2007 in CA-G.R. CV No. 82053 of the Court of Appeals, as well as the Orders dated 11 March 2003 and 19 September 2003 issued by the Regional Trial Court, Makati City, Branch 134, are REVERSED and SET ASIDE. The Complaint in Civil Case No. 01-1567 is hereby REINSTATED. SO ORDERED.

THIRD DIVISION
SPS. RENATO & ANGELINA LANTIN, Petitioners, - versus G.R. No. 160053

Present:

HON. JANE AURORA C. LANTION, PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF LIPA CITY, FOURTH JUDICIAL REGION, BRANCH 13, PLANTERS DEVELOPMENT Promulgated: BANK, ELIZABETH C. UMALI, ALICE PERCE, August 28, 2006 JELEN MOSCA, REGISTER OF DEEDS FOR LIPA CITY, BATANGAS, THE CLERK OF COURT and EX-OFFICIO SHERIFF OF THE REGIONAL TRIAL COURT OF BATANGAS, Respondents. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

QUISUMBING, J., Chairperson, CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ.

DECISION
QUISUMBING, J.: This is a petition for certiorari assailing the orders dated May 15, 2003[1] and September 15, 2003[2] in Civil Case No. 2002-0555

issued by public respondent, Presiding Judge Jane Aurora C. Lantion, of the Regional Trial Court (RTC) of Lipa City, Batangas. The facts of the case are as follows: Petitioners Renato and Angelina Lantin took several peso and dollar loans from respondent Planters Development Bank and executed several real estate mortgages and promissory notes to cover the loans. They defaulted on the payments so respondent bank foreclosed the mortgaged lots. The foreclosed properties, in partial satisfaction of petitioners debt, were sold at a public auction where the respondent bank was the winning bidder. On November 8, 2003, petitioners filed against Planters Development Bank and its officers Elizabeth Umali, Alice Perce and Jelen Mosca (private respondents), a Complaint for Declaration of Nullity and/or Annulment of Sale and/or Mortgage, Reconveyance, Discharge of Mortgage, Accounting, Permanent Injunction, and Damages with the RTC of Lipa City, Batangas. Petitioners alleged that only their peso loans were covered by the mortgages and that these had already been fully paid, hence, the mortgages should have been discharged. They challenged the validity of the foreclosure on the alleged nonpayment of their dollar loans as the mortgages did not cover those loans. Private respondents moved to dismiss the complaint on the ground of improper venue since the loan agreements restricted the venue of any suit in Metro Manila. On May 15, 2003, the respondent judge dismissed the case for improper venue. Petitioners sought reconsideration. They argued that the trial court in effect prejudged the validity of the loan documents because

the trial court based its dismissal on a venue stipulation provided in the agreement. The motion for reconsideration was denied and the lower court held that the previous order did not touch upon the validity of the loan documents but merely ruled on the procedural issue of venue. Petitioners now come before us alleging that:
I THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT THE VENUE STIPULATIONS IN THE REAL ESTATE MORTGAGE AND PROMISSORY NOTES FALL WITHIN THE PURVIEW OF SECTION 4(B) OF RULE 4 OF THE 1997 RULES OF CIVIL PROCEDURE IN THAT IT LIMITED THE VENUE OF ACTIONS TO A DEFINITE PLACE. II THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN NOT FINDING THAT THE MERE USE OF THE WORD EXCLUSIVELY DOES NOT, BY ITSELF, MEAN THAT SUCH STIPULATIONS AUTOMATICALLY PROVIDE FOR AN EXCLUSIVE VENUE, AS CONTEMPLATED BY SECTION 4(B) OF RULE 4 OF THE 1997 RULES OF CIVIL PROCEDURE, SPECIALLY WHEN THE TENOR OR LANGUAGE OF THE ENTIRE VENUE STIPULATION CLEARLY PROVIDES OTHERWISE. III THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DISREGARDING THE FACT THAT HEREIN PETITIONERS COMPLAINT INVOLVES SEVERAL CAUSES OF ACTION WHICH DO NOT ARISE SOLELY FROM THE REAL ESTATE MORTGAGE AND PROMISSORY NOTES AND WHICH OTHER CAUSES OF ACTION MAY BE FILED IN OTHER VENUES UNDER SECTIONS 1 AND 2 OF RULE 4 OF THE 1997 RULES OF

CIVIL PROCEDURE. IV THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DISREGARDING THE PRINCIPLE THAT THE RULE ON VENUE OF ACTIONS IS ESTABLISHED FOR THE CONVENIENCE OF THE PLAINTIFFS.[3]

The main issue in the present petition is whether respondent judge committed grave abuse of discretion when she dismissed the case for improper venue. Petitioners contend that, since the validity of the loan documents were squarely put in issue, necessarily this meant also that the validity of the venue stipulation also was at issue. Moreover, according to the petitioners, the venue stipulation in the loan documents is not an exclusive venue stipulation under Section 4(b) of Rule 4 of the 1997 Rules of Civil Procedure.[4] The venue in the loan agreement was not specified with particularity. Besides, petitioners posit, the rule on venue of action was established for the convenience of the plaintiff, herein petitioners. Further, petitioners also contend that since the complaint involves several causes of action which did not arise solely from or connected with the loan documents, the cited venue stipulation should not be made to apply. Private respondents counter that, in their complaint, petitioners did not assail the loan documents, and the issue of validity was merely petitioners afterthought to avoid being bound by the venue stipulation. They also aver that the venue stipulation was not contrary to the doctrine in Unimasters,[5] which requires that a venue stipulation employ categorical and suitably limiting language to the effect that the parties agree that the venue of actions between them should be laid only and exclusively at a definite place.

According to private respondents, the language of the stipulation is clearly exclusive. 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.[6] 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.[7] The pertinent provisions of the several real estate mortgages and promissory notes executed by the petitioner respectively read as follows:
18. In the event of suit arising out of or in connection with this mortgage and/or the promissory note/s secured by this mortgage, the parties hereto agree to bring their causes of auction (sic) exclusively in the proper court of Makati, Metro Manila or at such other venue chosen by the Mortgagee, the Mortgagor waiving for this purpose any other venue.[8] (Emphasis supplied.) I/We further submit that the venue of any legal action arising out of this note shall exclusively be at the proper court of Metropolitan Manila, Philippines or any other venue chosen by the BANK, waiving for this purpose any other venue provided by the Rules of Court.[9] (Emphasis supplied.)

Clearly, the words exclusively and waiving for this purpose any other venue are restrictive and used advisedly to meet the requirements. Petitioners claim that effecting the exclusive venue stipulation would be tantamount to a prejudgment on the validity of the loan

documents. We note however that in their complaint, petitioners never assailed the validity of the mortgage contracts securing their peso loans. They only assailed the terms and coverage of the mortgage contracts. What petitioners claimed is that their peso loans had already been paid thus the mortgages should be discharged, and that the mortgage contracts did not include their dollar loans. In our view, since the issues of whether the mortgages should be properly discharged and whether these also cover the dollar loans, arose out of the said loan documents, the stipulation on venue is also applicable thereto. Considering all the circumstances in this controversy, we find that the respondent judge did not commit grave abuse of discretion, as the questioned orders were evidently in accord with law and jurisprudence. WHEREFORE, the petition is DISMISSED. The assailed orders dated May 15, 2003 and September 15, 2003 of the Regional Trial Court of Lipa City, Batangas, in Civil Case No. 2002-0555 are AFFIRMED. Costs against petitioners. SO ORDERED.

FIRST DIVISION
[G.R. No. 151037. June 23, 2005]

SAN MIGUEL CORPORATION, petitioner, vs. TROY FRANCIS L. MONASTERIO, respondent. RESOLUTION
QUISUMBING, J.:

This appeal by certiorari seeks to reverse and set aside the Decision[1] dated July 16, 2001, and the Resolution[2] dated November 27, 2001, of the Court of Appeals in CA-G.R. SP No. 52622. The Court of Appeals dismissed the special civil action for certiorari filed by San Miguel Corporation (SMC)[3] assailing the Orders[4] of the Regional Trial Court of Naga City, Branch 20, which denied its Motion to Dismiss on the ground of improper venue and the subsequent Motion for Reconsideration in Civil Case No. RTC98-4150. The facts are as follows: On August 1, 1993, petitioner SMC entered into an Exclusive Warehouse Agreement[5] (hereafter EWA for brevity) with SMB Warehousing Services (SMB), represented by its manager, respondent Troy Francis L. Monasterio. SMB undertook to provide land, physical structures, equipment and personnel for storage, warehousing and related services such as, but not limited to, segregation of empty bottles, stock handling, and receiving SMC products for its route operations at Sorsogon, Sorsogon and Daet, Camarines Norte. The agreement likewise contained a stipulation on venue of actions, to wit: 26 GENERAL PROVISIONS ... b. Should it be necessary that an action be brought in

court to enforce the terms of this Agreement or the duties or rights of the parties herein, it is agreed that the proper court should be in the courts of Makati or Pasig, Metro Manila, to the exclusion of the other courts at the option of the COMPANY.[6] [Underscoring supplied.] ... On November 3, 1998, respondent Monasterio, a resident of Naga City, filed a complaint docketed as Civil Case No. RTC98-4150 for collection of sum of money against petitioner before the Regional Trial Court of Naga City, Branch 20. In his Complaint,[7] Monasterio claimed P900,600 for unpaid cashiering fees. He alleged that from September 1993 to September 1997 and May 1995 to November 1997, aside from rendering service as warehouseman, he was given the additional task of cashiering in SMCs Sorsogon and Camarines Norte sales offices for which he was promised a separate fee. He claims that of approximately 290 million pesos in cash and checks of the sales office and the risks of pilferage, theft, robbery and hold-up, he had assumed what amounted to approximately 35 million pesos per annum for Sorsogon, Sorsogon, and 60 million pesos for Daet, Camarines Norte. He also said that he hired personnel for the job. Respondent added that it was only on December 1, 1997, that petitioner SMC started paying him P11,400 per month for his cashiering services. Monasterio demanded P82,959.32 for warehousing fees, P11,400 for cashiering fees for the month of September, 1998, as well as exemplary damages, and attorneys fees in the amount of P500,000 and P300,000, respectively.[8] On November 19, 1998, SMC filed a Motion to Dismiss[9] on the ground of improper venue. SMC contended that respondents money claim for alleged unpaid cashiering services arose from respondents function as warehouse contractor thus the EWA should be followed and thus, the exclusive venue of courts of Makati or Pasig, Metro Manila is the proper venue as provided under paragraph 26(b) of the Exclusive Warehouse Agreement. SMC cites in its favor Section 4(b) in relation to Section 2 of Rule 4[10] of the Rules of Court allowing agreement of parties on exclusive venue of actions.

Respondent filed an Opposition[11] contending that the cashiering service he rendered for the petitioner was separate and distinct from the services under the EWA. Hence, the provision on venue in the EWA was not applicable to said services. Hence, respondent insists that in accordance with Section 2 of Rule 4 of the Rules of Court the venue should be in Naga City, his place of residence. On February 22, 1999, the Regional Trial Court, of Naga City, Branch 20 issued an Order[12] denying petitioners motion to dismiss. The court held that the services agreed upon in said contract is limited to warehousing services and the claim of plaintiff in his suit pertains to the cashiering services rendered to the defendant, a relationship which was not documented, and is certainly a contract separate and independent from the exclusive warehousing agreements.[13] SMCs subsequent Motion for Reconsideration was likewise denied.[14] While the motion was pending, the respondent filed an Amended Complaint[15] deleting his claim for unpaid warehousing and cashiering fees but increasing the exemplary damages from P500,000 to P1,500,000.[16] Petitioner elevated the controversy to the Court of Appeals by way of a special civil action for certiorari with a prayer for the issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction, imputing grave abuse of discretion on the RTC Naga City for denying its motion to dismiss and subsequent motion for reconsideration. On June 11, 1999, during the pendency of the certiorari petition SMC filed before the trial court an answer ex abundanti cautela[17] with a compulsory counterclaim for moral and exemplary damages and attorneys fees. SMC averred lack of cause of action, payment, waiver, abandonment and extinguishment. In its decision dated July 16, 2001, the Court of Appeals found respondents claim for cashiering services inseparable from his claim for warehousing services, thus, the venue stipulated in the EWA is the proper venue. However, the Court of Appeals noted that prior to the filing of SMCs petition, respondent Monasterio filed an amended complaint to which SMC filed an answer. Thus, the Court of Appeals dismissed San Miguels petition for certiorari, stating that the case was already moot and

academic. Petitioner filed a motion for reconsideration which was denied by the Court of Appeals. Hence, this petition wherein petitioner raises the following as issues:[18]
1. Whether or not this Honorable Court may review the finding of the Court of Appeals that the Complaint and Amended Complaint were filed in the wrong venue. 2. Assuming arguendo that this Honorable Court may review the finding of the Court of Appeals that the Complaint and Amended Complaint were filed in the wrong venue, whether or not such finding should be reversed. 3. Whether or not the Court of Appeals gravely erred in ruling that SMCs Petition For Certiorari has become moot and academic in view of the filing of Monasterios Amended Complaint and SMCs Answer (Ex Abundanti Cautela).[19]

In our view, two issues only require resolution: (1) Did the RTC of Naga City err in denying the motion to dismiss filed by SMC alleging improper venue? (2) Did the CA gravely err in ruling that SMCs petition for certiorari has become moot? On disputes relating to the enforcement of the rights and duties of the contracting parties, the venue stipulation in the EWA should be construed as mandatory. Nothing therein being contrary to law, morals, good custom or public policy, this provision is binding upon the parties. [20] The EWA stipulation on venue is clear and unequivocal, thus it ought to be respected. However, we note that the cause of action in the complaint filed by the respondent before the RTC of Naga was not based on the EWA, but concern services not enumerated in the EWA. Records show also that previously, respondent received a separate consideration of P11,400 for the cashiering service he rendered to SMC. Moreover, in the amended complaint, the respondents cause of action was specifically limited to the collection of the sum owing to him for his cashiering service in favor of SMC. He already omitted petitioners non-payment of warehousing fees. As previously ruled, allegations in the complaint determines the cause of action or the nature of the case.[21] Thus, given the circumstances of this

case now before us, we are constrained to hold that it would be erroneous to rule, as the CA did, that the collection suit of the respondent did not pertain solely to the unpaid cashiering services but pertain likewise to the warehousing services.[22] Exclusive venue stipulation embodied in a contract restricts or confines parties thereto when the suit relates to breach of the said contract. But where the exclusivity clause does not make it necessarily all 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. 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.[23] 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. Moreover, since convenience is the raison detre of the rules on venue,[24] venue stipulation should be deemed merely permissive, and that interpretation should be adopted which most serves the parties convenience.[25] Contrawise, the rules mandated by the Rules of Court should govern.[26] Accordingly, since the present case for the collection of sum of money filed by herein respondent is a personal action, [27] we find no compelling reason why it could not be instituted in the RTC of Naga City, the place where plaintiff resides. Having settled the issue on venue, we need not belabor the issue of whether SMCs petition has become moot. WHEREFORE, it is hereby ruled that no reversible error was committed by the Regional Trial Court of Naga City, Branch 20, in denying petitioners motion to dismiss. Said RTC is the proper venue of the amended complaint for a sum of money filed by respondent against petitioner San Miguel Corporation, in connection with his cashiering services. The case is hereby

REMANDED to the RTC of Naga City, Branch 20, for further proceedings on respondents amended complaint, without further delay. Costs against petitioner. SO ORDERED.

SECOND DIVISION

IRENE MARCOS-ARANETA, DANIEL RUBIO, ORLANDO G. RESLIN, and JOSE G. RESLIN, Petitioners, - versus -

G.R. No. 154096 Present: QUISUMBING, J., Chairperson, CARPIO MORALES, TINGA, VELASCO, JR., and BRION, JJ.

COURT OF APPEALS, JULITA C. BENEDICTO, and FRANCISCA Promulgated: BENEDICTOPAULINO, August 22, 2008 Respondents. x----------------------------------------------------------------------------------------x DECISION VELASCO, JR., J.: The Case This Petition for Review on Certiorari under Rule 45 assails and seeks to nullify the Decision[1] dated October 17, 2001 of the Court of Appeals (CA) in CA-G.R. SP No. 64246 and its Resolution[2] of June 20, 2002 denying petitioners motion for reconsideration. The assailed CA decision annulled and set aside the

Orders dated October 9, 2000, December 18, 2000, and March 15, 2001 of the Regional Trial Court (RTC), Branch 17 in Batac, Ilocos Norte which admitted petitioners amended complaint in Civil Case Nos. 3341-17 and 3342-17.

The 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). The first, docketed as Civil Case No. 3341-17, covered the UEC shares and named Benedicto, his daughter, and at least 20 other individuals as defendants. The second, 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.

Respondent Francisca Benedicto-Paulino,[3] Benedictos daughter, filed a Motion to Dismiss Civil Case No. 3341-17, followed later by an Amended Motion to Dismiss. Benedicto, on the other hand, moved to dismiss[4] Civil Case No. 3342-17, adopting in toto the five (5) grounds raised by Francisca in her amended motion to dismiss. Among these were: (1) the cases involved an intracorporate dispute over which the Securities and Exchange Commission, not the RTC, has jurisdiction; (2) venue was improperly laid; and (3) the complaint failed to state a cause of action, as there was no allegation therein that plaintiff, as beneficiary of the purported trust, has accepted the trust created in her favor. To the motions to dismiss, Irene filed a Consolidated Opposition, which Benedicto and Francisca countered with a Joint Reply to Opposition. Upon Benedictos motion, both cases were consolidated. During the preliminary proceedings on their motions to dismiss, 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 husbands house in Makati City. Against the aforesaid unrebutted joint affidavit, Irene presented her PhP 5 community tax certificate[6] (CTC) issued on

11/07/99 in Curimao, Ilocos Norte to support her claimed residency in Batac, Ilocos Norte. In the meantime, on May 15, 2000, Benedicto died and was substituted by his wife, Julita C. Benedicto, and Francisca. 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. In its dismissal order,[7] the court also declared all the other issues raised in the different Motions to Dismiss x x x moot and academic. From the above order, Irene interposed a Motion for Reconsideration[8] which Julita and Francisca duly opposed. Pending resolution of her motion for reconsideration, Irene filed on July 17, 2000 a Motion (to Admit Amended Complaint),[9] attaching therewith a copy of the Amended Complaint[10] dated July 14, 2000 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 Irenes new trustees. Parenthetically, the amended complaint stated practically the same cause of action but, as couched, sought the reconveyance of the FEMII shares only. During the August 25, 2000 hearing, the RTC dictated in open court an order denying Irenes motion for reconsideration aforementioned, but deferred action on her motion to admit amended complaint and the opposition thereto.[11] On October 9, 2000, the RTC issued an Order[12] entertaining the amended complaint, dispositively stating:

WHEREFORE, the admission of the Amended Complaint being tenable and legal, the same is GRANTED. Let copies of the Amended Complaint be served to the defendants who are ordered to answer within the reglementary period provided by the rules.

The RTC predicated its order on the following premises: (1) Pursuant to Section 2, Rule 10 of the Rules of Court,[13] Irene may opt to file, as a matter of right, an amended complaint. (2) 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. (3) 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 Irenes co-plaintiffs. In time, Julita and Francisca moved to dismiss the amended complaint, but the RTC, by Order[14] dated December 18, 2000, denied the motion and reiterated its directive for the two to answer the amended complaint. In said order, the RTC stood pat on its holding on the rule on amendments of pleadings. And scoffing at the argument about there being no complaint to amend in the first place as of October 9, 2000 (when the RTC granted the motion to amend) as the original complaints were dismissed with finality earlier, i.e., on August 25, 2000 when the court denied Irenes motion for reconsideration of the June 29, 2000 order dismissing the original complaints, the court

stated thusly: there was actually no need to act on Irenes motion to admit, it being her right as plaintiff to amend her complaints absent any responsive pleading thereto. Pushing its point, the RTC added the observation that the filing of the amended complaint on July 17, 2000 ipso facto superseded the original complaints, the dismissal of which, per the June 29, 2000 Order, had not yet become final at the time of the filing of the amended complaint. Following the denial on March 15, 2001 of their motion for the RTC to reconsider its December 18, 2000 order aforestated, Julita and Francisca, in a bid to evade being declared in default, filed on April 10, 2001 their Answer to the amended complaint.[15] But on the same day, they went to the CA via a petition for certiorari, docketed as CA-G.R. SP No. 64246, seeking to nullify the following RTC orders: the first, admitting the amended complaint; the second, denying their motion to dismiss the amended complaint; and the third, denying their motion for reconsideration of the second issuance. Inasmuch as the verification portion of the joint petition and the certification on non-forum shopping bore only Franciscas signature, the CA required the joint petitioners to submit x x x either the written authority of Julita C. Benedicto to Francisca B. Paulino authorizing the latter to represent her in these proceedings, or a supplemental verification and certification duly signed by x x x Julita C. Benedicto.[16] Records show the submission of the corresponding authorizing Affidavit[17] executed by Julita in favor of Francisca. Later developments saw the CA issuing a TRO[18] and then a writ of preliminary injunction[19] enjoining the RTC from conducting further proceedings on the subject civil cases.

On October 17, 2001, the CA rendered a Decision, setting aside the assailed RTC orders and dismissing the amended complaints in Civil Case Nos. 3341-17 and 3342-17. The fallo of the CA decision reads:
WHEREFORE, based on the foregoing premises, the petition is hereby GRANTED. The assailed Orders admitting the amended complaints are SET ASIDE for being null and void, and the amended complaints a quo are, accordingly, DISMISSED.[20]

Irene and her new trustees motion for reconsideration of the assailed decision was denied through the equally assailed June 20, 2002 CA Resolution. Hence, this petition for review is before us. The Issues Petitioners urge the setting aside and annulment of the assailed CA decision and resolution on the following submissions that the appellate court erred in: (1) allowing the submission of an affidavit by Julita as sufficient compliance with the requirement on verification and certification of non-forum shopping; (2) ruling on the merits of the trust issue which involves factual and evidentiary determination, processes not proper in a petition for certiorari under Rule 65 of the Rules of Court; (3) ruling that the amended complaints in the lower court should be dismissed because, at the time it was filed, there was no more original complaint to amend; (4) ruling that the respondents did not waive improper venue; and (5) ruling that petitioner Irene was not a resident of Batac, Ilocos Norte and that none of the principal parties are residents of Ilocos Norte.[21] The Courts Ruling

We affirm, but not for all the reasons set out in, the CAs decision. First Issue: Substantial Compliance with the Rule on Verification and Certification of Non-Forum Shopping Petitioners tag private respondents petition in CA-G.R. SP No. 64246 as defective for non-compliance with the requirements of Secs. 4[22] and 5[23] of Rule 7 of the Rules of Court at least with regard to Julita, who failed to sign the verification and certification of non-forum shopping. Petitioners thus fault the appellate court for directing Julitas counsel to submit a written authority for Francisca to represent Julita in the certiorari proceedings. We are not persuaded. Verification not Jurisdictional; May be Corrected Verification is, under the Rules, not a jurisdictional but merely a formal requirement which the court may motu proprio direct a party to comply with or correct, as the case may be. As the Court articulated in Kimberly Independent Labor Union for Solidarity, Activism and Nationalism (KILUSAN)-Organized Labor Associations in Line Industries and Agriculture (OLALIA) v. Court of Appeals:
[V]erification is a formal, not a jurisdictional requisite, as it is mainly intended to secure an assurance that the allegations therein made are done in good faith or are true and correct and not mere speculation. The Court may order the correction of the pleading, if not verified, or act on the unverified pleading if the attending circumstances are such that a strict compliance with the

rule may be dispensed with in order that the ends of justice may be served.[24]

Given this consideration, the CA acted within its sound discretion in ordering the submission of proof of Franciscas authority to sign on Julitas behalf and represent her in the proceedings before the appellate court. Signature by Any of the Principal Petitioners is Substantial Compliance Regarding the certificate of non-forum shopping, the general rule is that all the petitioners or plaintiffs in a case should sign it.[25] However, the Court has time and again stressed that the rules on forum shopping, which were designed to promote the orderly administration of justice, do not interdict substantial compliance with its provisions under justifiable circumstances.[26] As has been ruled by the Court, the signature of any of the principal petitioners[27] or principal parties,[28] as Francisca is in this case, would constitute a substantial compliance with the rule on verification and certification of non-forum shopping. It cannot be overemphasized that Francisca herself was a principal party in Civil Case No. 3341-17 before the RTC and in the certiorari proceedings before the CA. Besides being an heir of Benedicto, Francisca, with her mother, Julita, was substituted for Benedicto in the instant case after his demise. And should there exist a commonality of interest among the parties, or where the parties filed the case as a collective, raising only one common cause of action or presenting a common defense, then the signature of one of the petitioners or complainants, acting as representative, is sufficient compliance. We said so in Cavile v.

Heirs of Clarita Cavile.[29] Like Thomas Cavile, Sr. and the other petitioners in Cavile, Francisca and Julita, as petitioners before the CA, had filed their petition as a collective, sharing a common interest and having a common single defense to protect their rights over the shares of stocks in question. Second Issue: Merits of the Case cannot be Resolved on Certiorari under Rule 65 Petitioners posture on the second issue is correct. As they aptly pointed out, the CA, in the exercise of its certiorari jurisdiction under Rule 65, is limited to reviewing and correcting errors of jurisdiction only. It cannot validly delve into the issue of trust which, under the premises, cannot be judiciously resolved without first establishing certain facts based on evidence. Whether a determinative question is one of law or of fact depends on the nature of the dispute. A question of law exists when the doubt or controversy concerns the correct application of law or jurisprudence to a certain given set of facts; or when the issue does not call for an examination of the probative value of the evidence presented, the truth or falsehood of facts being admitted. A question of fact obtains when the doubt or difference arises as to the truth or falsehood of facts or when the query invites the calibration of the whole evidence considering mainly the credibility of the witnesses, the existence and relevancy of specific surrounding circumstances, as well as their relation to each other and to the whole, and the probability of the situation.[30] Clearly then, the CA overstepped its boundaries when, in disposing of private respondents petition for certiorari, it did not confine itself to determining whether or not lack of jurisdiction or

grave abuse of discretion tainted the issuance of the assailed RTC orders, but proceeded to pass on the factual issue of the existence and enforceability of the asserted trust. In the process, the CA virtually resolved petitioner Irenes case for reconveyance on its substantive merits even before evidence on the matter could be adduced. Civil Case Nos. 3341-17 and 3342-17 in fact have not even reached the pre-trial stage. To stress, the nature of the trust allegedly constituted in Irenes favor and its enforceability, being evidentiary in nature, are best determined by the trial court. The original complaints and the amended complaint certainly do not even clearly indicate whether the asserted trust is implied or express. To be sure, an express trust differs from the implied variety in terms of the manner of proving its existence.[31] Surely, the onus of factually determining whether the trust allegedly established in favor of Irene, if one was indeed established, was implied or express properly pertains, at the first instance, to the trial court and not to the appellate court in a special civil action for certiorari, as here. In the absence of evidence to prove or disprove the constitution and necessarily the existence of the trust agreement between Irene, on one hand, and the Benedicto Group, on the other, the appellate court cannot intelligently pass upon the issue of trust. A pronouncement on said issue of trust rooted on speculation and conjecture, if properly challenged, must be struck down. So it must be here. Third Issue: Admission of Amended Complaint Proper As may be recalled, the CA veritably declared as reversibly erroneous the admission of the amended complaint. The flaw in the RTCs act of admitting the amended complaint lies, so the CA held, in the fact that the filing of the amended complaint on July 17, 2000 came after the RTC had ordered with finality the dismissal of the original complaints. According to petitioners, scoring the CA for its

declaration adverted to and debunking its posture on the finality of the said RTC order, the CA failed to take stock of their motion for reconsideration of the said dismissal order. We agree with petitioners and turn to the governing Sec. 2 of Rule 10 of the Rules of Court which provides:
SEC. 2. Amendments as a matter of right. A party may amend his pleading once as a matter of right at any time before a responsive pleading is served or in the case of a reply, at any time within ten (10) days after it is served.

As the aforequoted provision makes it abundantly clear that the plaintiff may amend his complaint once as a matter of right, i.e., without leave of court, before any responsive pleading is filed or served. Responsive pleadings are those which seek affirmative relief and/or set up defenses,[32] like an answer. A motion to dismiss is not a responsive pleading for purposes of Sec. 2 of Rule 10.[33] Assayed against the foregoing perspective, the RTC did not err in admitting petitioners amended complaint, Julita and Francisca not having yet answered the original complaints when the amended complaint was filed. At that precise moment, Irene, by force of said Sec. 2 of Rule 10, had, as a matter of right, the option of amending her underlying reconveyance complaints. As aptly observed by the RTC, Irenes motion to admit amended complaint was not even necessary. The Court notes though that the RTC has not offered an explanation why it saw fit to grant the motion to admit in the first place. In Alpine Lending Investors v. Corpuz, the Court, expounding on the propriety of admitting an amended complaint before a

responsive pleading is filed, wrote:

[W]hat petitioner Alpine filed in Civil Case No. C-20124 was a motion to dismiss, not an answer. Settled is the rule that a motion to dismiss is not a responsive pleading for purposes of Section 2, Rule 10. As no responsive pleading had been filed, respondent could amend her complaint in Civil Case No. C-20124 as a matter of right. Following this Courts ruling in Breslin v. Luzon Stevedoring Co. considering that respondent has the right to amend her complaint, it is the correlative duty of the trial court to accept the amended complaint; otherwise, mandamus would lie against it. In other words, the trial courts duty to admit the amended complaint was purely ministerial. In fact, respondent should not have filed a motion to admit her amended complaint.[34]

It may be argued that the original complaints had been dismissed through the June 29, 2000 RTC order. It should be pointed out, however, that the finality of such dismissal order had not set in when Irene filed the amended complaint on July 17, 2000, she having meanwhile seasonably sought reconsideration thereof. Irenes motion for reconsideration was only resolved on August 25, 2000. Thus, when Irene filed the amended complaint on July 17, 2000, the order of dismissal was not yet final, implying that there was strictly no legal impediment to her amending her original complaints.[35] 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 Irenes 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 Irenes purported 65% stockownership of UEC and FEMII, inclusive of the fruits of the trust, and to execute in Irenes 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 FEMIIs 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 treasurers 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 RTCs 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 Irenes 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 coplaintiffs in the amended complaint as Irenes 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 Irenes 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 partyplaintiffs 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 Irenes 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. Costs against petitioners. SO ORDERED.