MARIO

RODIS
MAGASPI,
JUSTINO
R.
MAGASPI,
BALDOMERA M. ALEJANDRO, and MANOLITA M. CORTEZ
vs. HONORABLE JOSE R. RAMOLETE, Judge of the Court of
First Instance of Cebu, ESPERANZA V. GARCIA, Clerk of
Court of First Instance of Cebu, THE SHELL COMPANY OF
THE PHILIPPINES LIMITED and/or THE SHELL REFINING
COMPANY (Phil.) INC., CENTRAL VISAYAN REALTY &
INVESTMENTS CO., INC., CEBU CITY SAVINGS & LOAN
ASSOCIATION and the GOVERNMENT OF THE REPUBLIC OF
THE PHILIPPINES
FACTS:
(Petition for certiorari: correct amount to be paid for the filing of
the case)
In 1970, Pet filed a complaint for the recovery of ownership and
possession of a parcel of land with damages against Shell,
Central Visayan Realty & Investment Co., Inc. and Cebu City
Savings & Loan Association in the Court of First Instance of Cebu.
Docket fees pain in the amount of P60.00. Central Visayan and
Cebu City Savings filed a motion to compel the Pet to pay the
correct amount for docket fee within the time prescribed by
Court, claiming that the complaint contained two causes of
action: 1)recovery of the value of land; 2)damages. They
provided for their own computation of the proper amount of
docket fees to be paid in the amount of 6,732 claiming that
under the Old Rules of Court, Sec. 5, Rule 130 provides that it is
the sum claimed, 'exclusive of interest and damages while under
the new Rules of Court, Sec. 5, Rule 141, it is the sum claimed,
'exclusive of interest,' the word 'damages' having been excluded
purposely, indicating the intent to include damages in the
computation of the docket fee. The motion was opposed by the
petitioners who claimed that the main cause of action was the
recovery of a piece of land and on the basis of its assessed
valued, P60.00 was the correct docketing fee and that although

the Revised Rules of Court do not exclude damages in the

computation of the docket fee, damages are nonetheless still to
be excluded.
The presiding Judge Canonoy ordered the Clerk of Court to
comment on the motion and the opposition which it assessed
that the correct fees shall be fixed at of P3,164.00 plus P2.00
Legal Research fee (the value of the land, which is P17,280.00,
plus the damages amounting to P3,390,633.24). Hence,
petitioner shall pay P3,104, net of the P60.00 already paid.
However, private respondents filed their respective answers that
the same was exclusive of exemplary damages must be included
in the computation therein.
On November 3, 1970, the plaintiffs filed a motion for leave to
amend the complaint so as to include the Government of the
Republic of the Philippines as a defendant. Nine days after,
respondents filed an opposition to the admission of the amended
complaint.
On November 16, 1970, Judge Canonoy admitted the amended
complaint although the plaintiffs had not yet complied with his
Order that they should pay an additional P3,104.00 docket fee.
On April 3, 1971, Judge Jose R. Ramolete who had replaced Judge
Canonoy, issued the same order.
Petitioners assail the above order. They insist that they had
correctly paid the docketing fee in the amount of P60.00, or in
the alternative, that if they are to pay an additional docketing
fee, it should be based on the amended complaint.
ISSUE:
W/N the case may be considered as having been filed and
docketed when P60.00 was paid to the Clerk of Court even on the
assumption that said payment was not sufficient in amount

HELD:
YES. The case was docketed upon the payment of P60.00
although said amount is insufficient. Accordingly, the trial court
had acquired jurisdiction over the case and the proceedings
thereafter had were proper and regular.
It is well-settled that a case is deemed filed only upon payment
of the docket fee regardless of the actual date of its filing in
court.
The next question is in respect of the correct amount to be paid
as docket fee. Judge Canonoy on October 14, 1970, ordered the
payment of P3,104.00 as additional docket fee based on the
original complaint. However, the petitioners assert as an
alternative view, that the docket fee be based on the amended
complaint which was admitted on November 14, 1970, also by
Judge Canonoy.
The petitioners have a point. "When a pleading is amended, the
original pleading is deemed abandoned. The original ceases to
perform any further function as a pleading. The case stands for
trial on the amended pleading only. " On the basis of the
foregoing, the additional docket fee to be paid by the petitioners
should be based on their amended complaint.

MANCHESTER DEVELOPMENT CORPORATION, ET AL., vs.

COURT OF APPEALS
CITY LAND DEVELOPMENT CORPORATION, STEPHEN
ROXAS, ANDREW LUISON, GRACE LUISON and JOSE DE
MAISIP
FACTS:

Acting on the motion for reconsideration of the resolution of the

Second Division and another motion to refer the case to and to
be heard in oral argument by the Court En Banc filed by
petitioners, the motion to refer the case to the Court en banc is
granted but the motion to set the case for oral argument is
denied.
Petitioners in support of their contention that the filing fee must
be assessed on the basis of the amended complaint cite the case
of Magaspi vs. Ramolete. They contend that the Court of Appeals
erred in that the filing fee should be levied by considering the
amount of damages sought in the original complaint.
1. The Magaspi case was an action for recovery of ownership
and possession of a parcel of land with damages. While
the present case is an action for torts and damages and
specific performance with prayer for temporary
restraining order, etc.
1. Upon the filing of the complaint there was an honest
difference of opinion as to the nature of the action in the
Magaspi case. The complaint was considered as primarily
an action for recovery of ownership and possession of a
parcel of land. The damages stated were treated as
merely to the main cause of action. Here, the amount of
damages sought is not specified in the prayer although
the body of the complaint alleges the total amount of over
P78 Million as damages suffered by plaintiff.
2. In the Magaspi case, an amended complaint was filed by
plaintiff with leave of court to include the government of
the Republic as defendant and reducing the amount of
damages, and attorney's fees prayed for to P100,000.00.
Said amended complaint was also admitted. Here, when
this under-re assessment of the filing fee in this case was
brought to the attention of this Court together with similar

other cases an investigation was immediately ordered by

the Court. When trial court directed plaintiffs to rectify the
amended complaint by stating the amounts which they
are asking for. It was only then that plaintiffs specified the
amount of damages in the body of the complaint in the
reduced amount of P10,000,000.00. Still no amount of
damages were specified in the prayer. Said amended
complaint was admitted.
ISSUE:
Whether the filing fee must be assessed on the basis of the
amended complaint cite the case of Magaspi vs. Ramolete.
HELD:
NO. The Court of Appeals, aptly ruled in the present case that the
basis of assessment of the docket fee should be the amount of
damages sought in the original complaint and not in the
amended complaint.
In the present case no such honest difference of opinion was
possible as the allegations of the complaint, the designation and
the prayer show clearly that it is an action for damages and
specific performance. The docketing fee should be assessed by
considering the amount of damages as alleged in the original
complaint.
As reiterated in the Magaspi case the rule is well-settled "that a
case is deemed filed only upon payment of the docket fee
regardless of the actual date of filing in court . Thus, in the
present case the trial court did not acquire jurisdiction over the
case by the payment of only P410.00 as docket fee. Neither can
the amendment of the complaint thereby vest jurisdiction upon
the Court. For an legal purposes there is no such original
complaint that was duly filed which could be amended.

Consequently, the order admitting the amended complaint and

all subsequent proceedings and actions taken by the trial court
are null and void.
The Court cannot close this case without making the observation
that it frowns at the practice of counsel who filed the original
complaint in this case of omitting any specification of the amount
of damages in the prayer although the amount of over P78
million is alleged in the body of the complaint. This is clearly
intended for no other purpose than to evade the payment of the
correct filing fees if not to mislead the docket clerk in the
assessment of the filing fee.
To put a stop to this irregularity, henceforth all complaints,
petitions, answers and other similar pleadings should specify the
amount of damages being prayed for not only in the body of the
pleading but also in the prayer, and said damages shall be
considered in the assessment of the filing fees in any case. Any
pleading that fails to comply with this requirement shall not bib
accepted nor admitted, or shall otherwise be expunged from the
record.
The Court acquires jurisdiction over any case only upon the
payment of the prescribed docket fee. An amendment of the
complaint or similar pleading will not thereby vest jurisdiction in
the Court, much less the payment of the docket fee based on the
amounts sought in the amended pleading. The ruling in the
Magaspi case in so far as it is inconsistent with this
pronouncement is overturned and reversed.

SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS and

D.J. WARBY vs. HON. MAXIMIANO C. ASUNCION, Presiding
Judge, Branch 104, RTC of QC and MANUEL CHUA UY PO
TIONG

FACTS:
Petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a
complaint with the RTC of Makati for the consignation of a
premium refund on a fire insurance policy with a prayer for the
judicial declaration of its nullity against private respondent
Manuel Uy Po Tiong. Private respondent was declared in default
for failure to file the required answer.
On the other hand, private respondent filed a complaint in the
RTC of QCfor the refund of premiums and the issuance of a writ of
preliminary attachment which was docketed as Civil Case No. Q41177, initially against petitioner SIOL, and thereafter including
E.B. Philipps and D.J. Warby as additional defendants. The
complaint sought the payment of damages. Although the prayer
in the complaint did not quantify the amount of damages sought
said amount may be inferred from the body of the complaint to
be about Fifty Million Pesos (P50,000,000.00).
Only the amount of P210.00 was paid by private respondent as
docket fee which prompted petitioners' counsel to raise his
objection. Said objection was disregarded by respondent Judge
Castro. Upon the order of this Court, the records of said case
together with 22 other cases which were under investigation for
under-assessment of docket fees were transmitted to this Court.
The Court thereafter returned the said records to the trial court
with the directive that they be re-raffled to the other judges in
QC.
The Court en banc issued a Resolution in Administrative Case No.
85-10-8752-RTC directing the judges in said cases to reassess the
docket fees and that in case of deficiency, to order its payment.
All litigants were likewise required to specify in their pleadings
the amount sought to be recovered in their complaints.

Judge. Solano, to whose sala Civil Case No. Q-41177, issued an

order to the Clerk of Court instructing him to issue a certificate of
assessment of the docket fee paid by private respondent and, in
case of deficiency, to include the same in said certificate.
The case was, thereafter, assigned to Judge Asuncion. Private
respondent filed a "Compliance" and a "Re-Amended Complaint"
stating therein a claim of "not less than Pl0,000,000. 00 as actual
compensatory damages" in the prayer. In the body of the said
second amended complaint however, private respondent alleges
actual and compensatory damages and attorney's fees in the
total amount of about P44,601,623.70.
Judge Asuncion issued another Order admitting the second
amended complaint. The reassessment by the Clerk of Court
based on private respondent's claim of "not less than
P10,000,000.00 as actual and compensatory damages"
amounted to P39,786.00 as docket fee. This was subsequently
paid by private respondent.
Petitioners then filed a petition for certiorari with the CA
questioning the said order.
Private respondent filed a supplemental complaint alleging an
additional claim of P20,000,000.00 as damages so the total claim
amounts to about P64,601,623.70. On October 16, 1986, or some
seven months after filing the supplemental complaint, the private
respondent paid the additional docket fee of P80,396.00. 1
CA denied the petition to dismiss amended complaint. It,
however, granted the writ of preliminary attachment but giving
due course to the portion thereof questioning the reassessment
of the docketing fee.

During the pendency of this petition and in conformity with the

said judgment of respondent court, private respondent paid the
additional docket fee of P62,432.90 on April 28, 1988.
ISSUE:
Whether or not a court acquires jurisdiction over a case when the
correct and proper docket fee has not been paid.
(Petitioners allege that while it may be true that private
respondent had paid the amount of P182,824.90 as docket fee,
considering the amount claimed, private respondent
should have paid P257,810.49, more or less.)
HELD:
Private respondent claims that the ruling in Manchester cannot
apply retroactively to Civil Case No. Q41177 for at the time said
civil case was filed in court there was no such Manchester ruling
as yet. Further, private respondent avers that what is applicable
is the ruling of this Court in Magaspi v. Ramolete, wherein this
Court held that the trial court acquired jurisdiction over the case
even if the docket fee paid was insufficient.
The contention that Manchester cannot apply retroactively to this
case is untenable. Statutes regulating the procedure of the courts
will be construed as applicable to actions pending and
undetermined at the time of their passage. Procedural laws are
retrospective in that sense and to that extent. 6
This Court overturned Magaspi in Manchester. Manchester
involves an action for torts and damages and specific
performance with a prayer for the issuance of a temporary
restraining order, etc.

The present case, as above discussed, is among the several

cases of under-assessment of docket fee which were investigated
by this Court together with Manchester. The facts and
circumstances of this case are similar to Manchester.
The principle in Manchester could very well be applied in the
present case. The pattern and the intent to defraud the
government of the docket fee due it is obvious not only in the
filing of the original complaint but also in the filing of the second
amended complaint.
However, in Manchester, petitioner did not pay any additional
docket fee until the case was decided by this Court on May 7,
1987. Thus, in Manchester, due to the fraud committed on the
government, this Court held that the court a quo did not acquire
jurisdiction over the case and that the amended complaint could
not have been admitted inasmuch as the original complaint was
null and void.
In the present case, a more liberal interpretation of the
rules is called for considering that, unlike Manchester,
private respondent demonstrated his willingness to abide
by the rules by paying the additional docket fees as
required. The promulgation of the decision in Manchester
must have had that sobering influence on private
respondent who thus paid the additional docket fee as
ordered by the respondent court. It triggered his change
of stance by manifesting his willingness to pay such
additional docket fee as may be ordered.
Nevertheless, petitioners contend that the docket fee that was
paid is still insufficient considering the total amount of the claim.
This is a matter which the clerk of court of the lower court and/or
his duly authorized docket clerk or clerk in-charge should

determine and, thereafter, if any amount is found due, he must

require the private respondent to pay the same.
Thus, the Court rules as follows:
1. It is not simply the filing of the complaint or appropriate
initiatory pleading, but the payment of the prescribed docket fee,
that vests a trial court with jurisdiction over the subject matter or
nature of the action. Where the filing of the initiatory pleading is
not accompanied by payment of the docket fee, the court may
allow payment of the fee within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third party
claims and similar pleadings, which shall not be considered filed
until and unless the filing fee prescribed therefor is paid. The
court may also allow payment of said fee within a reasonable
time but also in no case beyond its applicable prescriptive or
reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the
filing of the appropriate pleading and payment of the prescribed
filing fee but, subsequently, the judgment awards a claim not
specified in the pleading, or if specified the same has been left
for determination by the court, the additional filing fee therefor
shall constitute a lien on the judgment. It shall be the
responsibility of the Clerk of Court or his duly authorized deputy
to enforce said lien and assess and collect the additional fee.
WHEREFORE, the petition is DISMISSED for lack of merit. The
Clerk of Court of the court a quo is hereby instructed to reassess
and determine the additional filing fee that should be paid.

THE HEIRS OF THE LATE RUBEN REINOSO, SR.,

represented by Ruben Reinoso Jr. vs. COURT OF APPEALS,
PONCIANO TAPALES, JOSE GUBALLA, and FILWRITERS
GUARANTY ASSURANCE CORPORATION
FACTS:
(Pet for review, CA set aside RTC ruling for non-payment of
docket fees. Initially a complaint for damages.)
The complaint for damages arose from the collision of a
passenger jeepney and a truck at around 7:00 oclock in the
evening of June 14, 1979 along E. Rodriguez Avenue,Quezon City.
As a result, a passenger of the jeepney, Reinoso Sr., was killed.
The jeep was owned by Tapales and driven Santos, while the
truck was owned by Guballa and driven by Geronimo. The heirs
of Reinoso (petitioners) filed a complaint for damages against
Tapales and Guballa. In turn, Guballa filed a third party complaint
against Filwriters Guaranty Assurance Corporation (FGAC). RTC
rendered a decision in favor of the petitioners and against
Guballa.
On appeal, the CA, in its Decision dated May 20, 1994, set aside
and reversed the RTC decision and dismissed the complaint on
the ground of non-payment of docket fees pursuant to the
doctrine laid down in Manchester v. CA. Also, the CA ruled that
since prescription had set in, petitioners could no longer pay the
required docket fees.
The petitioners argue that the ruling in Manchester should not
have been applied retroactively in this case, since it was filed
prior to the promulgation of the Manchester decision in 1987.
They plead that though this Court stated that failure to state the
correct amount of damages would lead to the dismissal of the
complaint, said doctrine should be applied prospectively.

Moreover, the petitioners assert that at the time of the filing of

the complaint in 1979, they were not certain of the amount of
damages they were entitled to, because the amount of the lost
income would still be finally determined in the course of the trial
of the case. They claim that the jurisdiction of the trial court
remains even if there was failure to pay the correct filing fee as
long as the correct amount would be paid subsequently. Finally,
the petitioners stress that the alleged defect was never put in
issue either in the RTC or in the CA.
ISSUE:
W/N the case should be dismissed for non-payment of docket
fees
HELD:
The rule is that payment in full of the docket fees within the
prescribed period is mandatory. In Manchester v. Court of
Appeals, it was held that a court acquires jurisdiction over any
case only upon the payment of the prescribed docket fee. The
strict application of this rule was, however, relaxed two (2) years
after in the case of Sun Insurance Office, Ltd. v. Asuncion,
wherein the Court decreed that where the initiatory pleading is
not accompanied by the payment of the docket fee, the court
may allow payment of the fee within a reasonable period of time,
but in no case beyond the applicable prescriptive or
reglementary period. This ruling was made on the premise that
the plaintiff had demonstrated his willingness to abide by the
rules by paying the additional docket fees required. [ Thus, in the
more recent case of United Overseas Bank v. Ros, the Court
explained that where the party does not deliberately intend to
defraud the court in payment of docket fees, and manifests its
willingness to abide by the rules by paying additional docket fees
when required by the court, the liberal doctrine enunciated
in Sun Insurance Office, Ltd., and not the strict regulations set

in Manchester, will apply. In the case of La Salette College v.

Pilotin, the Court stated:
Notwithstanding the mandatory nature of
the requirement of payment of appellate docket
fees, we also recognize that its strict application is
qualified by the following:first, failure to pay those
fees within the reglementary period allows only
discretionary,
not
automatic,
dismissal; second, such power should be used by
the court in conjunction with its exercise of sound
discretion in accordance with the tenets of justice
and fair play, as well as with a great deal of
circumspection in consideration of all attendant
circumstances.
While there is a crying need to unclog court dockets on the one
hand, there is, on the other, a greater demand for resolving
genuine disputes fairly and equitably, for it is far better to
dispose of a case on the merit which is a primordial end, rather
than on a technicality that may result in injustice.
In this case, it cannot be denied that the case was litigated
before the RTC and said trial court had already rendered a
decision. While it was at that level, the matter of non-payment of
docket fees was never an issue. It was only the CA which motu
propio dismissed the case for said reason.
Considering the foregoing, there is a need to suspend the strict
application of the rules so that the petitioners would be able to
fully and finally prosecute their claim on the merits at the
appellate level rather than fail to secure justice on a
technicality, for, indeed, the general objective of procedure is to
facilitate the application of justice to the rival claims of

contending parties, bearing always in mind that procedure is not

to hinder but to promote the administration of justice.
The Court also takes into account the fact that the case was filed
before the Manchester ruling came out. Even if said ruling could
be applied retroactively, liberality should be accorded to the
petitioners in view of the recency then of the ruling.
As the Court has taken the position that it would be grossly
unjust if Ps claim would be dismissed on a strict application of
the Manchester doctrine, the appropriate action, under
ordinary circumstances, would be for the Court to remand the
case to the CA. Considering, however, that the case at bench has
been pending for more than 30 years and the records thereof are
already before the Court, a remand of the case to the CA would
unnecessarily prolong its resolution. In the higher interest of
substantial justice and to spare the parties from further delay,
the Court will resolve the case on the merits.

KILUSANOLALIA ,et. al vs. COURT OF APPEALS, NLRC,

KIMBERLY-CLARK (PHIL.), INC., CORNELIO PERLATA,
DOMINGO GEVANA, MARINO ABES and LEOPOLDO BAYLON
x - - - - - - - - - - - - - - - - - - - - - - -x
KIMBERLY-CLARK (PHILS.),
KILUSAN-OLALIA, et al.

INC.,

vs.SECRETARY

OF

LABOR,

G.R. No. 156668

Before the Court are two consolidated petitions for review on
certiorari under Rule 45 of the Rules of Court.On June 30, 1986,
the Collective Bargaining Agreement (CBA) executed by and
between Kimberly-Clark (Phils.), Inc. (Kimberly), and United

Kimberly-Clark Employees Union-Philippine Transport and General

Workers Organization (UKCEO-PTGWO) expired. Within the
freedom period, on April 21, 1986, KILUSAN-OLALIA, then a
newly-formed labor organization, challenged the incumbency of
UKCEO-PTGWO, by filing a petition for certification election with
the Ministry (now Department) of Labor and Employment (MOLE)
A certification election was subsequently conducted on July 1,
1986 with UKCEO-PTGWO winning by a margin of 20 votes over
KILUSAN-OLALIA. Remaining as uncounted were 64 challenged
ballots4 cast by 64 casual workers whose regularization was in
question. KILUSAN-OLALIA filed a protest.
During the pendency of G.R. No. 77629, Kimberly dismissed from
service several employees and refused to heed the workers
grievances,6 impelling KILUSAN-OLALIA to stage a strike on May
17, 1987.Kimberly filed on a complaint to declare the strike
illegal. As a counter-complaint, KILUSAN-OLALIA, its officers and
members (herein petitioners) charged the company and its
officers, among others, with unfair labor practice: union-busting
and refusal to bargain; and violations of provisions of the Labor
Code. On June 3, 1987, Kimberly dismissed a number of workers
for knowingly participating in an illegal strike and for committing
illegal acts.
Labor Arbiter Pedro C. Ramos resolved the case declaring the
parties to be in pari delicto. On appeal by both parties, the NLRC
affirmed the decision. Both parties filed their respective motions
for reconsideration, which were denied by the NLRC.Aggrieved,
KILUSAN-OLALIA instituted a Petition for Certiorari with the Court
of Appeals.
The records disclose that Kimberly also filed a Petition for
Certiorari before the CA questioning the same Orders of the
NLRC.

On September 5, 2000, the CA dismissed KILUSAN-OLALIAs

petition on the ground that the verification was signed only by
petitioners president, sans any board resolution or power of
attorney authorizing anybody to sign the same and the certificate
on non-forum shopping
ISSUE:
WoN the disputed verification and certification against forum
shopping is sufficient in form.
HELD:
YES.We have emphasized, time and again, that verification 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.
Further, in rendering justice,
ought to be, conscientiously
balance, technicalities take
rights, and not the other way
application in labor cases
emphasized.

courts have always been, as they

guided by the norm that on the
a backseat vis--vis substantive
around. This principle finds greater
where social justice should be

In the instant case, despite the fact that Ernesto Facundo, the
union president, was not shown to have been duly authorized to
sign the verification on behalf of the other petitioners, the CA
should not have been too strict in the application of the Rules.
Necessarily, Facundo, being the union president, was in a position
to verify the truthfulness and correctness of the allegations in the

petition. Further, the petition was signed by the unions lawyer,

who had been authorized by a majority of the petitioners to
represent them and to sign on their behalf all pleadings and
appeals relative to the labor dispute.
With regard to the certification against forum shopping, suffice it
to state that in Cavile v. Heirs of Cavile, we took cognizance of a
petition although its certification was executed and signed by
only one of several petitioners, thus:
The rule is that the certificate of non-forum shopping must be
signed by all the petitioners or plaintiffs in a case and the signing
by only one of them is insufficient. However, the Court has also
stressed that the rules on forum shopping, which were designed
to promote and facilitate the orderly administration of justice,
should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective. The rule of
substantial compliance may be availed of with respect to the
contents of the certification. This is because the requirement of
strict compliance with the provisions regarding the certification of
non-forum shopping merely underscores its mandatory nature in
that the certification cannot be altogether dispensed with or its
requirements completely disregarded. It does not thereby
interdict substantial compliance with its provisions under
justifiable circumstances.
We find that the execution by Thomas George Cavile, Sr. in behalf
of all the other petitioners of the certificate of non-forum
shopping constitutes substantial compliance with the Rules. All
the petitioners, being relatives and co-owners of the properties in
dispute, share a common interest thereon. They also share a
common defense in the complaint for partition filed by the
respondents. Thus, when they filed the instant petition, they filed
it as a collective, raising only one argument to defend their rights
over the properties in question. There is sufficient basis,

therefore, for Thomas George Cavili, Sr. to speak for and in behalf
of his co-petitioners that they have not filed any action or claim
involving the same issues in another court or tribunal, nor is
there other pending action or claim in another court or tribunal
involving the same issues. Moreover, it has been held that the
merits of the substantive aspects of the case may be deemed as
"special circumstance" for the Court to take cognizance of a
petition for review although the certification against forum
shopping was executed and signed by only one of the petitioners.
IN VIEW OF THE FOREGOING, the Court, therefore, resolves, as
follows:
1) The Resolution of the Court, dated May 24, 2006, ordering the
consolidation of G.R. Nos. 149158-59 and G.R. No. 156668 is
RECALLED. The said cases are hereby DE-CONSOLIDATED;
2) In G.R. Nos. 149158-59: The petition is PARTIALLY GRANTED.
The petition is REMANDED to the Court of Appeals for
adjudication on the merits. The CA is further DIRECTED TO
CONSOLIDATE CA-G.R. SP No. 60035 with CA-G.R. SP No. 60001,
and to resolve the cases with dispatch.
3) As to G.R. No. 156668, the Court will resolve the same in a
separate decision after the de-consolidation.

IN-N-OUT BURGER, INC. vs. SEHWANI, INCORPORATED

AND/OR BENITAS FRITES, INC.
FACTS:
This is a Petition for Review on Certiorari under Rule 45.

Petitioner IN-N-OUT BURGER, INC., a business entity incorporated

under the laws of California, USA. Petitioner is engaged mainly in
the restaurant business, but it has never engaged in business in
the Philippines.
Respondents Sehwani, Incorporated and Benita Frites, Inc. are
corporations organized in the Philippines.
On 2 June 1997, Petitioner filed trademark and service mark
applications with the Bureau of Trademarks (BOT) of the IPO for
"IN-N-OUT" and "IN-N-OUT Burger & Arrow Design." Petitioner
later found out, through the Official Action Papers issued by the
IPO, that respondent Sehwani, Incorporated had already obtained
Trademark Registration for the mark "IN N OUT (the inside of the
letter "O" formed like a star)." By virtue of a licensing agreement,
Benita Frites, Inc. was able to use the registered mark of
respondent Sehwani, Incorporated.
Petitioner eventually filed before the Bureau of Legal Affairs (BLA)
of the IPO an administrative complaint against respondents for
unfair competition and cancellation of trademark registration.
Petitioner averred in its complaint that it is the owner of the trade
name IN-N-OUT and the following trademarks: (1) "IN-N-OUT"; (2)
"IN-N-OUT Burger & Arrow Design"; and (3) "IN-N-OUT Burger
Logo." These trademarks are registered with the Trademark
Office of the US and in various parts of the world. Petitioner
pointed out that its internationally well-known trademarks and
the mark of the respondents are all registered for the restaurant
business and are clearly identical and confusingly similar.
Petitioner claimed that respondents are making it appear that
their goods and services are those of the petitioner, thus,
misleading ordinary and unsuspecting consumers that they are
purchasing petitioners products.

Following the filing of its complaint, petitioner sent a demand

letter directing respondent Sehwani, Incorporated to cease and
desist from claiming ownership of the mark "IN-N-OUT" and to
voluntarily cancel its trademark registration. In a letter-reply,
respondents refused to accede to petitioner demand, but
expressed willingness to surrender the registration of respondent
Sehwani, Incorporated of the "IN N OUT" trademark for a fair and
reasonable consideration.
Petitioner was able to register the mark "Double Double". It
alleged that respondents also used this mark, as well as the
menu color scheme. Petitioners also averred that respondent
Benitas receipts bore the phrase, "representing IN-N-OUT
Burger." Also, respondent used the mark "IN-N-OUT."
To counter petitioners complaint, respondents filed before the
BLA-IPO an Answer with Counterclaim. Respondents asserted
therein that they had been using the mark "IN N OUT" in the
Philippines since 15 October 1982. On 15 November 1991,
respondent Sehwani, Incorporated filed with the then Bureau of
Patents, Trademarks and Technology Transfer (BPTTT) an
application for the registration of the mark "IN N OUT (the inside
of the letter "O" formed like a star)." Upon approval of its
application, a certificate of registration of the said mark was
issued in the name of respondent Sehwani, Incorporated on 17
December 1993. On 30 August 2000, respondents Sehwani,
Incorporated and Benita Frites, Inc. entered into a Licensing
Agreement, wherein the former entitled the latter to use its
registered mark, "IN N OUT." Respondents asserted that
respondent Sehwani, Incorporated, being the registered owner of
the mark "IN N OUT," should be accorded the presumption of a
valid registration of its mark with the exclusive right to use the
same. Additionally, respondents maintained that petitioner had
no legal capacity to sue as it had never operated in the
Philippines.12

Subsequently, the IPO Director of Legal Affairs, Estrellita BeltranAbelardo, rendered a Decision in favor of petitioner. According to
said Decision, petitioner had the legal capacity to sue in the
Philippines, since its country of origin was a member of and a
signatory to the Convention of Paris on Protection of Industrial
Property. And although petitioner had never done business in the
Philippines, it was widely known in this country through the use
herein of products bearing its corporate and trade name.
Moreover, the IPO had already declared in a previous inter partes
case that "In-N-Out Burger and Arrow Design" was an
internationally well-known mark. Given these circumstances, the
IPO Director for Legal Affairs pronounced in her Decision that
petitioner had the right to use its tradename and mark "IN-NOUT" in the Philippines to the exclusion of others. However,
respondents used the mark "IN N OUT" in good faith and were
not guilty of unfair competition.
Both parties filed their respective MRs of the aforementioned
Decision which were denied.
Subsequent events would give rise to two cases before this
Court, G.R. No. 171053 and G.R. No. 179127, the case at bar.
G.R. No. 171053
Respondents filed an Appeal Memorandum with IPO Director
General which was, however, dismissed by the IPO Director
General for being filed beyond the 15-day reglementary period to
appeal.
Respondents appealed to the Court of Appeals via a Petition for
Review under Rule 43 of the Rules of Court, filed on 20 December
2004 and docketed as CA-G.R. SP No. 88004, challenging the
dismissal of their appeal. The same was likewise denied.

Respondents raised the matter to the SC in a Petition for Review

under Rule 45 of the Rules of Court, filed on 30 January 2006,
bearing the title Sehwani, Incorporated v. In-N-Out Burger and
docketed as G.R. No. 171053.

The Court of Appeals, in a Resolution denied petitioners Motion

for Reconsideration of its aforementioned Decision.

This Court promulgated a Decision finding that herein

respondents failed to file their Appeal Memorandum before the
IPO Director General within the period prescribed by law and,
consequently, they lost their right to appeal. Respondents filed a
Motion for Reconsideration of the Decision of this Court in G.R.
No. 171053, but it was denied with finality in a Resolution.

RESPONDENTS POSITION:

G.R. No. 179127

Upon the denial of its Partial Motion for Reconsideration of the
IPO Director for Legal Affairs, petitioner was able to file a timely
appeal before the IPO Director General.
During the pendency of petitioners appeal before the IPO
Director General, the Court of Appeals already rendered on 21
October 2005 its Decision dismissing respondents Petition in CAG.R. SP No. 88004.
In a Decision, IPO Director General Adrian Cristobal, Jr. found
petitioners appeal meritorious and modified. The IPO Director
General declared that respondents were guilty of unfair
competition.
Aggrieved, respondents were thus constrained to file before the
CA another Petition for Review under Rule 43 of the Rules of
Court, docketed as CA-G.R. SP No. 92785.
The CA promulgated a Decisionin CA-G.R. SP No. 92785 reversing
the Decision of the IPO Director General.

Hence, the present Petition.

Respondents contend that the Verification/Certification executed

by Atty. Edmund Jason Barranda of Villaraza and Angangco, which
petitioner attached to the present Petition, is defective and
should result in the dismissal of the said Petition. Respondents
point out that the Secretarys Certificate executed by Arnold M.
Wensinger on 20 August 2007, stating that petitioner had
authorized the lawyers of Villaraza and Angangco to represent it
in the present Petition and to sign the Verification and
Certification against Forum Shopping, among other acts, was not
properly notarized. The jurat of the aforementioned Secretarys
Certificate reads:
Subscribed and sworn to me this 20 th day of August 2007
in Irving California.

Rachel
A.
Notary Public30

Blake

(Sgd.)

Respondents aver that the said Secretarys Certificate cannot

properly
authorize
Atty.
Barranda
to
sign
the
Verification/Certification on behalf of petitioner because the
notary public Rachel A. Blake failed to state that: (1) petitioners
Corporate Secretary, Mr. Wensinger, was known to her; (2) he
was the same person who acknowledged the instrument; and (3)
he acknowledged the same to be his free act and deed, as

required under Section 2 of Act No. 2103 and Landingin v.

Republic of the Philippines.
Respondents likewise impugn the validity of the notarial
certificate of Atty. Aldrich Fitz B. Uy, on Atty. Barandas
Verification/Certification attached to the instant Petition, noting
the absence of (1) the serial number of the commission of the
notary public; (2) the office address of the notary public; (3) the
roll of attorneys number and the IBP membership number; and
(4) a statement that the Verification/Certification was notarized
within the notary publics territorial jurisdiction, as required under
the 2004 Rules on Notarial Practice.
ISSUES:
Whether or not the instant petition is formally defective.
HELD:
Section 2 of Act No. 2103 and Landingin v. Republic of the
Philippines are not applicable to the present case. The
requirements enumerated therein refer to documents
which require an acknowledgement, and not a mere jurat.
A jurat is that part of an affidavit in which the notary certifies
that before him/her, the document was subscribed and sworn to
by the executor. Ordinarily, the language of the jurat should avow
that the document was subscribed and sworn to before the
notary public. In contrast, an acknowledgment is the act of one
who has executed a deed in going before some competent officer
or court and declaring it to be his act or deed. It involves an extra
step undertaken whereby the signor actually declares to the
notary that the executor of a document has attested to the
notary that the same is his/her own free act and deed. A

Secretarys Certificate, as that executed by petitioner in

favor of the lawyers of the Angangco and Villaraza law
office, only requires a jurat.
Even assuming that the Secretarys Certificate was flawed, Atty.
Barranda may still sign the Verification attached to the Petition at
bar. A pleading is verified by an affidavit that the affiant
has read the pleading and that the allegations therein are
true and correct of his personal knowledge or based on
authentic records. The party itself need not sign the
verification. A partys representative, lawyer or any other
person who personally knows the truth of the facts
alleged in the pleading may sign the verification. Atty.
Barranda, as petitioners counsel, was in the position to verify the
truth and correctness of the allegations of the present Petition.
Hence, the Verification signed by Atty. Barranda substantially
complies with the formal requirements for such.
Moreover, the Court deems it proper not to focus on the
supposed technical infirmities of Atty. Barandas Verification. It
must be borne in mind that the purpose of requiring a verification
is to secure an assurance that the allegations of the petition has
been made in good faith; or are true and correct, not merely
speculative. This requirement is simply a condition affecting the
form of pleadings, and non-compliance therewith does not
necessarily render it fatally defective. Indeed, verification is
only a formal, not a jurisdictional requirement. In the
interest of substantial justice, strict observance of procedural
rules may be dispensed with for compelling reasons.
This Court agrees, nevertheless, that the notaries public, Rachel
A. Blake and Aldrich Fitz B. Uy, were less than careful with their
jurats or notarial certificates. Parties and their counsel should
take care not to abuse the Courts zeal to resolve cases on their
merits. Notaries public in the Philippines are reminded to exert

utmost care and effort in complying with the 2004 Rules on

Notarial Practice.

that the amount of exemplary damages awarded be reduced to

P250,000.00.

On Forum Shopping
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 identity of the two preceding
particulars is such that any judgment rendered in the other
action, will, regardless of which party is successful, amount to res
judicata in the action under consideration.
Upon a closer scrutiny of the two Petitions, however, the Court
takes notice of one issue which respondents did not raise in CAG.R. SP No. 88004, but can be found in CA-G.R. SP No. 92785,
i.e., whether respondents are liable for unfair competition. Hence,
respondents seek additional reliefs in CA-G.R. SP No. 92785,
seeking the reversal of the finding of the IPO Director General
that they are guilty of unfair competition, and the nullification of
the award of damages in favor of petitioner resulting from said
finding. Undoubtedly, respondents could not have raised the
issue of unfair competition in CA-G.R. SP No. 88004 because at
the time they filed their Petition therein on 28 December 2004,
the IPO Director General had not yet rendered its Decision dated
23 December 2005 wherein it ruled that respondents were guilty
thereof and awarded damages to petitioner.
(P.S. There is unfair competition and IPO has jurisdiction)
IN VIEW OF THE FOREGOING, the instant Petition is
GRANTED. The assailed Decision of the Court of Appeals in CAG.R. SP No. 92785, promulgated on 18 July 2006, is REVERSED.
The Decision of the IPO Director General, dated 23 December
2005, is hereby REINSTATED IN PART, with the modification

TOKIO
MARINE
MALAYAN
INSURANCE
COMPANY
INCORPORATED, ALMA PEALOSA, KIMIO HOSAKA,
SUMITOMI NISHIDA, TERESITA H. QUIAMBAO and ANTONIO
B. LAPID vs. JORGE VALDEZ
FACTS:
Respondent Valdez was a former unit manager of Petitioner Tokio
Marine pursuant to a Unit Management Contract. Respondent
filed a complaint against Petitioner with the RTC MANILA for
violation of the terms of the Unit Management Contract, stating
that he was not paid his commission and bonuses. Eventually,
respondent filed an Urgent Ex Parte Motion for Authority to
Litigate as Indigent Plaintiff which was granted. Thus, his
complaint was filed without payment of filing fees. However, this
amount constituted as a lien upon any judgment rendered in his
favor.
It should also be noted that the respondent filed various criminal
complaints against the petitioners in MAKATI. This fact was
manifested before the trial court. Petitioner now argues, among
others, that the respondent engaged in forum shopping.
ISSUE:
DID THE RESPONDENT ENGAGE IN FORUM SHOPPING?
HELD:

NO. Forum shopping, as enunciated in Gatmaytan vs CA, is the

act of a litigant who repetitively availed of several judicial
remedies in different courts, simultaneously or successively, all
substantially founded on the same transactions and the same
essential facts and circumstances, and all raising substantially
the same issues either pending in, or already resolved adversely
by some other court to increase his chances of obtaining a
favorable decision if not in one court, then in another
In this case, the respondents certificate of Non Forum Shopping
attached to the Civil Case states the ff:
FURTHER,
that
he
has
not
heretofore
commenced any other action or proceeding
involving the same issues in the Supreme Court,
the Court of Appeals, or any other tribunal or
agency, except the criminal case for SWINDLING
(ESTAFA) under Art. 315, paragraph 1 (b) and for
FALSIFICATION BY PRIVATE INDIVIDUALS OF
PRIVATE DOCUMENTS under Art. 172, paragraph
2 of the Revised Penal Code to be filed before
the Makati Prosecutor's Office, criminal case for
violation of the Insurance Code of the Philippines
to be filed before the Makati Prosecutor's Office,
and the administrative case for violation of the
Insurance Code Commission; that to the best of
his knowledge no such other action is pending in
the Supreme Court and Court of Appeals. HISAET
This is considered SUBSTANTIAL COMPLIANCE with Section 5 of
Rule 7 as follows:
Section 5, Rule 7 of the 1997 Rules of Civil Procedure, as
amended, provides: STcEIC

SEC. 5. Certification against forum shopping.

The plaintiff or principal party shall certify under
oath in the complaint or other initiatory pleading
asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously
filed therewith: (a) that he has not theretofore
commenced any action or filed any claim
involving the same issues in any court, tribunal,
or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is
pending therein; (b) if there is such other
pending action or claim, a complete statement of
the present status thereof; and (c) if he should
thereafter learn that same or similar action
or claim has been filed or is pending, he
shall report that fact within five (5) days
therefrom to the court wherein his
aforesaid complaint or initiatory pleading
has been filed.
Failure to comply with the foregoing requirement
shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall
be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a
false certification or non-compliance with any of
the undertakings therein shall constitute indirect
contempt of court, without prejudice to the
corresponding
administrative
and
criminal
actions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum
shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute

direct contempt, as well

administrative sanctions.

as

cause

for

It should be noted that the fact that he has commenced criminal

cases was manifested before the trial court (Office of the City
Prosecutor of Makati).

DIGITAL MICROWAVE CORPORATION, vs. COURT OF

APPEALS and ASIAN HIGH TECHNOLOGY CORPORATION
FACTS:
Private respondent Asian High Technology Corp. filed a complaint
against petitioner Digital Microwave Corp. for a sum of money
and damages before the Regional Trial Court. Petitioner moved
for the dismissal of the complaint. The trial court denied the
motion, as well as petitioner's subsequent motion for
reconsideration.
Petitioner then initiated a special civil action for certiorari before
the Court of Appeals, alleging grave abuse of discretion on the
part of the trial court. However, the Court of Appeals dismissed
the petition for failure to comply with Revised Circular No. 28-91,
as amended by Administrative Circular No. 04-94. Said circular
requires the petition filed before the Court of Appeals to be
accompanied by a sworn certification against forum shopping,
signed by petitioner himself. Petitioner's certification was signed
by counsel; the petition was, thus, dismissed. Petitioner moved
for a reconsideration of the dismissal and submitted a sworn
certification against forum shopping duly signed by one of its
senior officers. The motion was, however, denied.
Petitioner contends that in the case of a corporation as petitioner,
the certification against forum shopping may be signed by a

natural person authorized to do so and with knowledge of the

required facts. The authorized person may be anyone authorized
by the corporation, not necessarily an officer thereof. In such a
case, petitioner argues, the counsel of record has the authority to
execute the certification on behalf of the corporation, particularly
considering that under the Rules of Court, counsel's authority to
represent his client is presumed. No written power of attorney is
required for counsel to appear for his client.
If we follow petitioner's line of reasoning, then the requirement in
Revised Circular No. 28-91 that petitioner himself must make the
certification against forum shopping would have been rendered
useless. Why require petitioner himself to certify when his
counsel can anyway execute the certification on his behalf?
ISSUE:
WoN a certification against forum shopping may be signed by
counsel.
HELD:
NO. The reason the certification against forum shopping is
required to be accomplished by petitioner himself is because only
the petitioner himself has actual knowledge of whether or not he
has initiated similar actions or proceedings in different courts or
agencies. Even his counsel may be unaware of such fact. For
sure, his counsel is aware of the action for which he has been
retained. But what of other possible actions?
We disagree with petitioner that a corporation cannot possibly
hope to comply with the requirement laid down by Revised
Circular No. 28-91 because it is a juridical entity and not a natural
person. If this were so, then it would have been impossible for a
corporation to do anything at all. Needless to say, this is the
reason why corporations have directors and officers, to represent

it in its transactions with others. The same is true for the

certification against forum shopping. It could easily have been
made by a duly authorized director or officer of the corporation.
That petitioner did not in the first instance comply with the
requirement of revised Circular No. 28-91 by having the
certification against forum shopping signed by one of its officers,
as it did after its petition before the Court of Appeals had been
dismissed, is beyond our comprehension.
In this case, petitioner has not adequately explained its failure to
have the certification against forum shopping signed by one of its
officers.

MARILLA MAYANG CAVILE, DON C. DELA CRUZ, JOSE C.

DELA CRUZ, JR., SOLON C. DELA CRUZ, JAMELA CAVILE
BACOLINAO, HENRIETTA GELLEGANI CAVILE, BERNARDO
CAVILE, LAWRENCE CAVILE, FRANCIS CAVILE REEVES, ROY
CAVILE, PRIMITIVO CAVILE, JR., NATIVIDAD CAVILE
MINGOY, AGUSTIN CAVILE, DIANA ROSE CAVILE DELA
ROSA, THOMAS GEORGE CAVILE, SR., HENRY CAVILE,
MANUEL AARON CAVILE, ALEXANDER CAVILE, WILFREDO
CAVILE, FE CAVILE DAGUIO, and HOPE CAVILE ARCHER, vs.
HEIRS OF CLARITA CAVILE, ULPIANO CAVILE, PLACIDA
CAVILE, GREGORIO CAVILE, FORTUNATA CAVILE, AMILITA
CAVILE, APAD CAVILE, AQUILINA CAVILE, CRESENCIO
CAVILE, ALMA CAVILE, JESUS CAVILE, ROMAN BANTILAN,
GREGORIO BANTILAN, FELOMINA PAREJA, ESPERANZA
PAREJA, DIONESA PAREJA, TEODULO TACANG, RAMONA
TACANG, FABIAN TACANG, COSME TACANG, CRESENCIO
TACANG, CONSOLACION TACANG, TERESITA TACANG,
PRIMITIVO TACANG, LEODEGARIO TACANG, BRENDA
MAPUTI, LORNA MAPUTI, ADELINA MAPUTI, SUSAN
MAPUTI, LOURDES MAPUTI, FRANKLIN MAPUTI, SALLY
MAPUTI, JESUS MAPUTI, FRANCISCO MAPUTI, VICTORIO

SUNLIT, BARTOLOME SUNLIT, TEOFILO SUNLIT, TIBURCIO

SUNLIT, TITO SUNLIT, ASUNCION SUNLIT, CATALINA
SUNLIT, RAYMONDA SUNLIT, ISIDRO SUNLIT, ROSAL
GALAN, FRANCISCO GALAN, ROMUALDO QUIANZO, JUSTO
QUIANZO,
LEONIDAD
QUIANZO,
JULITA
QUIANZO,
SOCORRO QUIANZO, MARGARITO QUIANZO, CASTOR
QUIANZO,
JUSTINA
LITANIA,
GENOVEVA
LITANIA,
FELICIDAD LITANIA, BIENVENIDO CAVILE, REPELITO
GALON,
FELOMENA
NAVARRA,
IRENE
NAVARRA,
RAYMUNDO
NAVARRA,
PEDRO
NAVARRA,
ESTELA
NAVARRA, CLEMENCIA NAVARRA, FORTUNATA NAVARRA,
LOURDES NAVARRA, VICTORIANO NAVARRA, EUSTAQUIO
LUYAS, and FORTUNATA LUYAS,
FACTS:
It appears that Bernardo Cavili contracted three marriages. The
first marriage was with Ines Dumat-ol with whom he had one
child, Simplicia. The second was with Orfia Colalho with whom he
had two children: Fortunato and Vevencia. And the third was with
Tranquilina Galon with whom he had three children: Castor,
Susana and Benedicta. Throughout his lifetime, Bernardo Cavili
acquired six parcels of land which became the subject of the
instant case.
The descendants of Bernardos first and second marriage (herein
respondents) filed a complaint for partition against the
descendants of his third marriage (herein petitioners). The
complaint alleged, among others, that respondents and
petitioners were co-owners of the properties in question, having
inherited the same from Bernardo Cavili. Upon the death of
Bernardo, his son by his third marriage, Castor Cavili, took
possession of the properties as administrator for and in behalf of
his co-owners. However, when Castor died, his children took
possession of the parcels of land but no longer as administrators.

They claimed the properties as well as their fruits as their own

and repeatedly refused respondents demand for partition.
As petitioners failed to file an Answer within the reglementary
period, they were declared in default and respondents were
allowed to present evidence ex parte. The trial court rendered a
decision ordering the partition of the six parcels of land.
However, upon motion of Primitivo Cavili and Quirino Cavili who
were not properly served with summons, the trial court held a
new trial and allowed said parties to present evidence. Among
the evidence they proferred was a Deed of Partition which
appeared to have been executed by the heirs of Bernardo Cavili.
The trial court rendered another decision dismissing the
complaint for partition. Basically, the court reasoned that there
was already a partition as evidenced by the document of
partition which was ratified by Notary Public Illuminado Golez. In
the same document, it revealed that the lots were sold to Castor
Cavili by the heirs.
Respondents appealed the case to the Court of Appeals. The
appellate court reversed the decision of the trial court. It ruled
that the trial court erred in admitting the Deed of Partition as
evidence without proof of its authenticity and due execution. The
respondents presented the testimonies of Ramona Tacang and
Filomena Pareja who testified that Simplicia Cavili, one of the
signatories in the Deed, resided in Mindanao from 1934 until
1947. The Court of Appeals thus directed the trial court "to
immediately appoint and constitute the necessary number of
commissioners who shall expeditiously effect the partition and
accounting of the subject properties in accordance with Rule 69
of the Rules of Court of the Philippines."
Hence, this petition.

ISSUE:
Whether the rule on certification against forum shopping was
violated because only one of the parties signed said certification.
(Respondents allege that the petition violated the rule on the
certification against forum shopping required to be attached to
petitions for review filed with this Court. Respondents harp on the
fact that only one of the twenty-two (22) petitioners, Thomas
George Cavili, Sr., executed and signed the certification against
forum shopping when the Rules require that said certification
must be signed by all the petitioners.)
HELD:
The rule is that the certificate of non-forum shopping must be
signed by all the petitioners or plaintiffs in a case and the signing
by only one of them is insufficient. However, the Court has
also stressed that the rules on forum shopping, which
were designed to promote and facilitate the orderly
administration of justice, should not be interpreted with
such absolute literalness as to subvert its own ultimate
and legitimate objective. The rule of substantial
compliance may be availed of with respect to the
contents of the certification. This is because the requirement
of strict compliance with the provisions regarding the certification
of non-forum shopping merely underscores its mandatory nature
in that the certification cannot be altogether dispensed with or its
requirements completely disregarded. It does not thereby
interdict substantial compliance with its provisions under
justifiable circumstances.
We find that the execution by Thomas George Cavile, Sr.
in behalf of all the other petitioners of the certificate of

non-forum shopping constitutes substantial compliance

with the Rules. All the petitioners, being relatives and coowners of the properties in dispute, share a common
interest thereon. They also share a common defense in
the complaint for partition filed by the respondents. Thus,
when they filed the instant petition, they filed it as a
collective, raising only one argument to defend their
rights over the properties in question. There is sufficient
basis, therefore, for Thomas George Cavili, Sr. to speak for and in
behalf of his co-petitioners that they have not filed any action or
claim involving the same issues in another court or tribunal, nor
is there other pending action or claim in another court or tribunal
involving the same issues. Moreover, it has been held that the
merits of the substantive aspects of the case may be deemed as
"special circumstance" for the Court to take cognizance of a
petition for review although the certification against forum
shopping was executed and signed by only one of the petitioners.
IN VIEW WHEREOF, the petition is GRANTED. The questioned
Decision of the Court of Appeals is SET ASIDE and the Decision of
the Regional Trial Court of Dumaguete City is hereby
REINSTATED.
PS The Court ruled that there was already a partition as
evidenced by the deed and that even if Simplicia resided in
Mindanao, it was not impossible for her to go to Manila and
concur on the partition. There was also an issue on prescription
which the court deemed unnecessary to discuss.

SARI-SARI GROUP OF COMPANIES, INC. (formerly MARIKO

NOVEL WARES, INC.), vs. PIGLAS KAMAO (Sari-Sari
Chapter), RONNIE S. TAMAYO, JOSE DEL CARMEN,
JOCYLENE PADUA, VICKY BERMEO and ELIZABETH
MATUTINA

FACTS: (Actually a Labor case. REM part not the main issue, also not
in the facts but in the ruling) Mariko Novel Wares, Inc. began its retail
outlet operations under the name Sari-Sari in the basement of
Robinsons Galleria in Quezon City. The respondents were its
employees all of whom were assigned at the Robinsons Galleria
branch. Respondents organized a union known as Piglas Kamao
(Sari-Sari Chapter). Respondents claim that the Petitioner through its
President interfered with the formation of the union. Despite such,
respondent union filed a petition for certification elections with the
Department of Labor and Employment (DOLE) to which petitioner
issued
a
policy
statement
pertaining
to
Employee
Complaints/Grievance Procedure, stating, among others, that it
supports an open communication policy both vertical and horizontal
within the organization.
Respondents were informed of the petitioners plan to close the
basement level store to give way to the opening of a Sari-Sari outlet
on the third floor of Robinsons Galleria. Respondents were supposed
to be absorbed in other Sari-Sari store branches. However, petitioner
put up an advertisement in the Manila Bulletin, announcing its need
for inventory, accounting, and sales clerks. Applicants were
requested to apply personally at the Robinsons Galleria branch.
Petitioners managerial staff approached union members to express
disapproval of the union membership. As a result of the
aforementioned events, respondent union filed an unfair labor
practice case with the Labor Arbiter against the petitioner for
harassment, coercion, and interference with the workers right to selforganization. Petitioner notified DOLE and the respondents of the
closure of the Galleria branch due to irreversible losses and nonextension of the lease of the store premises. Moreover, the

respondents were told that they would not be absorbed in the other
branches of the petitioner because of redundancy.
Respondents Tamayo, Del Carmen, and Padua filed amended
complaints of unfair labor practice and illegal dismissal against
petitioner. LA ruled in favor of petitioners but ordered payment of
separation pay and proportionate 13th month pay. During
the pendency of the appeal, respondents Bermeo, Matutina, and Padua
separately filed their respective manifestations and Motions to Dismiss,
praying that the appeal be dismissed as to them due to their having
already executed their respective quitclaims releasing Mariko from
liability. The NLRC affirmed the decision of the LA but dismissed the
claims of Bermeo, Matutina and Padua as they had executed
quitclaims. Respondents filed a Motion for Reconsideration which was
denied by the NLRC. Respondents then appealed to the CA. The CA
ruled that petitioner failed to discharge its burden of submitting
competent proof to show the irreversible substantial losses it suffered
warranting the closure of the Galleria branch.

ISSUE: (one of the 7 brought to the SC but the only one relevant to
REM) W/N Court of Appeals seriously erred in taking cognizance of the
petition insofar as the four other alleged petitioners therein were
concerned, considering only Jose Del Carmen signed and verified the
petition.
Effect of Non-Verification by All Parties
Section 1 of Rule 65 in relation to Section 3 of Rule 46 of the
Rules of Court requires that a petition for review filed with the CA should
be verified and should contain a certificate of non-forum shopping.

The purpose of requiring a verification is to secure an assurance

that the allegations of the petition have been made in good faith, or are
true and correct, not merely speculative. On the other hand, the rule
against forum shopping is rooted in the principle that a party-litigant
shall not be allowed to pursue simultaneous remedies in different fora,
as this practice is detrimental to orderly judicial procedure.
A distinction must be made between non-compliance with the
requirements for Verification and noncompliance with those for
Certification of Non-Forum Shopping. As to Verification, non-compliance
therewith does not necessarily render the pleading fatally defective;
hence, the court may order a correction 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.
A pleading which is required by the Rules of Court to be verified
may be given due course even without a verification of the
circumstances warranting the suspension of the rules in the interest of
justice. When circumstances warrant, the court may simply order the
correction of unverified pleadings or act on them and waive strict
compliance with the rules in order that the ends of justice may thereby
be served. Moreover, many authorities consider the absence of
Verification a mere formal, not jurisdictional defect, the absence of which
does not of itself justify a court in refusing to allow and act on the case.
In Torres v. Specialized Packing Development Corporation, the
problem was not lack of Verification, but the adequacy of one executed
by only two of the twenty-five petitioners, similar to the case at bar. The
Court ruled:

These two signatories are unquestionably real

parties in interest, who undoubtedly have sufficient
knowledge and belief to swear to the truth of the
allegations in the Petition. This verification is enough
assurance that the matters alleged therein have been
made in good faith or are true and correct, not merely
speculative. The requirement of verification has thus
been substantially complied with.[38]
Based on the foregoing, the lone Verification of respondent Jose
del Carmen is sufficient compliance with the requirements of the law.
On the other hand, the lack of a Certificate of Non-Forum
Shopping, unlike that of Verification is generally not curable by the
submission thereof after the filing of the petition. The submission of a
certificate against forum shopping is thus deemed obligatory, albeit not
jurisdictional.
The rule on certification against forum shopping may, however,
be also relaxed on grounds of substantial compliance or special
circumstances or compelling reasons.
Applicable to this case is Cavile v. Heirs of Clarita Cavile. Finding
that the petitioners were relatives and co-owners jointly sued over
property in which they had common interest, this Court in that case held
that the signature of just one co-owner on the Certificate of Non-Forum
Shopping in the petition before the Court substantially complied with the
rule in this wise:
We find that the execution by Thomas
George Cavile, Sr. in behalf of all the other petitioners of
the certificate of non-forum shopping constitutes
substantial compliance with the Rules. All the
petitioners, being relatives and co-owners of the

properties in dispute, share a common interest thereon.

They also share a common defense in the complaint for
partition filed by the respondents. Thus, when they filed
the instant petition, they filed it as a collective, raising
only one argument to defend their rights over the
properties in question. There is sufficient basis,
therefore, for Thomas George Cavili, Sr. to speak for and
in behalf of his co-petitioners that they have not filed
any action or claim involving the same issues in another
court or tribunal, nor is there other pending action or
claim in another court or tribunal involving the same
issues.
In the case at bar, respondent Jose del Carmen shares a
common interest with the other respondents as to the resolution of the
labor dispute between them and the petitioner. They collectively sued
the petitioner for illegal dismissal and unfair labor practices and have
collectively appealed the NLRC decision. Similarly, there is sufficient
basis for Jose del Carmen to speak on behalf of his co-respondents in
stating that they have not filed any action or claim involving the same
issues in another court or tribunal, nor is there any other pending action
or claim in another court or tribunal involving the same issues. Thus,
even if only respondent Jose del Carmen signed the Certificate of NonForum Shopping, the rule on substantial compliance applies. The CA
therefore did not commit any error in entertaining the appeal of the
respondents.

MEDIAN CONTAINER CORPORATION vs. METROPOLITAN

BANK AND TRUST COMPANY,
FACTS:
Respondent, Metropolitan Bank and Trust Company (Metrobank),
filed a complaint for sum of money before the Regional Trial Court

against petitioner Median Container Corporation (MCC) and the

spouses Carlos T. Ley and Fely C. Ley, Vice President/Treasurer of
MCC for failure of MCC to settle the amount of more than
P5,000,000 representing the outstanding balance of loans
contracted by MCC, represented by Fely C. Ley.
In the August 20, 2003 Process Servers Return,no date of filing
of which is indicated, process server George S. de Castro stated
that Summons was served on MCC on August 7, 2003 at its given
address upon one Danilo Ong (Ong) as shown by Ongs signature
at the left bottom portion of the Summons, below which
signature the process server wrote the words "General Manager."
In the same August 20, 2003 Process Servers Return, the
process server stated that he was unable to serve the Summons
upon the spouses Ley at their given address as they were no
longer residing there. Summons was eventually served upon the
spouses Ley.
On August 28, 2003, MCC filed a motion to dismiss the complaint
on the grounds of defective service of Summons over it and
defective verification and certificate against non- forum
shopping. The spouses Ley, upon the impression that the
Summons was also served upon them through Ong, also filed a
motion to dismiss on the same grounds as those of MCCs.
In its Motion to Dismiss, MCC alleged that, contrary to the
statement in the August 20, 2003 Process Servers Return, Ong,
on whom the Summons was served, was not its General
Manager, he being merely a former employee who had resigned
as of July 2002.
Respecting its claim of defective verification and certificate of
non-forum shopping, MCC questioned the authority of Atty.
Alexander P. Mendoza to accomplish the same on behalf of

Metrobank, alleging that a careful perusal of the "authority"

discloses that a certain Atty. Ramon S. Miranda delegated his
authority to Atty. Mendoza to "sign the complaint and/or
Verification and Certification of Non-Forum Shopping . This
authorization was given only on June 03, 2003. Therefore, it is
clear that Atty. Mendoza did not have the proper authorization
when he executed the verification and certification against nonforum shopping because his authority came only at a later date,
on June 03, 2003 or six days thereafter. In effect, there is no valid
and effective verification and certification by plaintiff in its
Complaint.
ISSUE:
1. WoN there is violation of Rule 7, Section 5 of the 1997
Rules
of
Civil
Procedure
regarding
the
verification/certification against forum shopping.
2. WoN there has been issuance of valid summons upon the
ongs
HELD:
1. NO. By the present challenged Decision of September 23,
2004, the appellate court dismissed petitioners petition
for certiorari, holding that the trial court did not commit
any abuse of discretion since "Atty. Mendoza was already
clothed with the proper authority to sign the verification
and certification through a Boards Resolution dated June
3, 2003 when the complaint was filed on June 23, 2003."
Verification is a formal, not jurisdictional, requirement. It is simply
intended to secure an assurance that the allegations in the
pleading are true and correct, and that the pleading is filed in
good faith. That explains why a 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 to serve the ends of justice.
As for the required certification against forum shopping, failure to
comply therewith is generally not curable by its submission
subsequent to the filing of the petition nor by amendment, and is
cause for its dismissal. A certification against forum shopping
signed by a person on behalf of a corporation which is
unaccompanied by proof that the signatory is authorized to file
the petition is generally likewise cause for dismissal. In several
cases, however, this Court relaxed the application of these
requirements
upon
appreciation
of
attendant
special
circumstances or compelling reasons.
In the instant case, the merits of petitioners case should be
considered special circumstances or compelling reasons that
justify tempering the requirement in regard to the certificate of
non-forum shopping. Moreover, in Loyola, Roadway, and Uy, the
Court excused non-compliance with the requirement as to the
certificate of non-forum shopping. With more reason should we
allow the instant petition since petitioner herein did submit a
certification on non-forum shopping, failing only to show proof
that the signatory was authorized to do so. That petitioner
subsequently submitted a secretarys certificate attesting that
Balbin was authorized to file an action on behalf of petitioner
likewise mitigates this oversight.
In the case at bar, simultaneous with the filing of the complaint,
Metrobank submitted both a certification of non-forum shopping
and proof that Atty. Mendoza who signed it on its behalf was
authorized to do so. The proof of authorization of Atty. Mendoza
was dated later than the date of his signing of the certification of
non-forum shopping, however, thus giving the impression that
he, at the time he affixed his signature, was not authorized to do
so. The passing on June 3, 2004 of a Board Resolution of

authorization before the actual filing on June 23, 2004 of the

complaint, however, is deemed a ratification of Atty. Mendozas
prior execution on May 28, 2004 of the verification and certificate
of non-forum shopping, thus curing any defects thereof.
2. YES. As for MCCs contention that the summons addressed
to it was served on a wrong party, hence, the trial court
did not acquire jurisdiction over it, the same fails. A
certificate of service by a proper officer is prima facie
evidence of the facts set out therein, and the presumption
arising from the certificate can only be overcome by clear
and convincing evidence. We note that aside from the
bare allegation that the court did not have jurisdiction due
to improper service of summons, no statement was ever
made to explain why a former employee was at
petitioners premises and ended up receiving the
summons served by the process server. Truly, we
wondered why a process server who apparently knew the
technicalities of his duties so served the summons and
then certified that service was upon the general manager,
even naming Danilo Ong as the general manager.
WHEREFORE, the petition is DENIED.

ALFREDO REMITERE, ET AL., vs. REMEDIOS MONTINOLA

VDA. DE YULO, ET AL.
FACTS:
In Cadastral Decrees Nos. 69518 and 69515 issued by CFI of
Negros Occidental, Gregorio Remitere was declared and
registered owner of Lots Nos. 35 and 52 of the Cadastral Survey

of Isabela. These lots were issued the corresponding OCT under

the Land Registration Act, being 10894 and 10898.
Upon the demise of Gregorio Remitere, the CFI of Negros
Occidental, in Civil Case No. 1661, Re-Application for Letters of
Administration, appointed his wife as administratrix of his estate,
among which are the two lots in question.

The defendants-appellees filed a MTD the complaint on the

grounds (1) that the complaint does not state a cause of action,
and (2) that even assuming that a cause of action exists, the
same has already prescribed. The lower court dismissed the
complaint precisely on the grounds relied upon by the
defendants-appellees. Hence this appeal.

During this period, the provincial sheriff of Negros Occidental

conducted a public auction sale over the said parcels of land, and
on the same day, he issued thereof a deed of sale in favor of
Mariano Yulo for the total consideration of P20,000.00.

In this appeal, the plaintiffs-appellants contend that the trial

court erred: (1) in declaring that the complaint contains no
narration of facts; (2) in holding that complaint states no cause of
action; and (3) in holding that the plaintiffs' cause of action, if
any, has already prescribed.

As a result, series of cancellations to the OCT had followed.

ISSUE:

First, they were cancelled by TCT Nos. 2819 and 2820, registered
in the name of Mariano C. Yulo by virtue of the Certificates of
Sale issued by the provincial sheriff. They were in turn cancelled
by R-T 602 and R-T 4706, by virtue of reconstitution of titles. Then
these were cancelled by T-532 and T-2979, by virtue of deeds of
sales registered in the name of Remedios Montinola Vda. de Yulo,
the defendant herein..

Whether the complaint states a cause of action based on the

facts alleged therein. (NO)

The public sale, however, was and still is absolutely a void sale,
and certainly did not pass titles and ownership of said lots.
The complaint prayed that the defendants be ordered to
reconvey the two lots in question to the plaintiffs; that the
defendant RD be ordered to cancel the CTC in the name of the
defendant Remedios Montinola Viuda de Yulo and to issue new
ones in the names of the plaintiffs; and that the defendants pay
the costs.

HELD:
The lack of a cause of action as a ground for dismissal must
appear on the face of the complaint, and to determine whether
the complaint states a cause of action only the facts alleged
therein, and no other, should be considered. A reading of the
complaint in this case will readily impress one that no
ultimate facts which may constitute the basis of plaintiffsappellants rights which had been violated are alleged.
Neither are there allegations of ultimate facts showing
acts or omissions on the part of the defendants-appellees
which constitute a violation of the rights of plaintiffsappellants. Apparently, the plaintiffs-appellants rely on the
allegations of paragraphs 3 and 5 of the complaint for their cause
of action. Paragraph 3 states:

3. Upon the demise of Gregorio Remitere on January 1,

1914 the Court of First Instance of Negros Occidental, in
Civil Case No. 1661, Re-Application for Letters of
Administration, appointed his wife as administratrix of his
estate, among which the two lots in question.
During this period, the provincial sheriff of Negros
Occidental, conducted a public auction sale over the said
parcels of land, and on the same day, September 23,
1918, he issued thereof a deed of sale in favor of Mariano
Yulo of Binalbagan, Negros Occidental, for the total
consideration of P20,000.00. . . . .
The allegations embodied in the above quoted paragraph are
mere averments or recitals of facts that do not establish any right
or claim on the part of the plaintiffs. The allegations do not state
any connection that the plaintiffs have with the deceased
Gregorio Remitere, nor do they state what connection or claim
the plaintiffs have on the properties left by the deceased
Gregorio Remitere. The allegation about the sale at public
auction does not state in what way the rights or interests of the
plaintiffs had been affected, nay prejudiced, by that sale. Again,
paragraph 5 of the complaint states:
5. The public sale mentioned in paragraph 3 of this
complaint, however, was and still is absolutely a void sale,
and certainly did not pass titles and ownership of said
lots, starting from its primitive owner, now being
represented by the plaintiffs herein, as surviving heirs
thereto, until it reaches the possession by the defendants.
That by reason of its invalidity, all and every benefits that
the transferees, including the defendant herein, had

acquired from the parcels of land in question, should be

indemnified to the plaintiffs.
It is not stated anywhere in the complaint why the sale at public
auction was absolutely void, nor were there stated any particular
facts or circumstances upon which the alleged nullity of the sale
or transaction is predicated. The averment in par. 5 is a
conclusion of law or an inference from facts not stated in the
pleading. A pleading should state the ultimate facts
essential to the rights of action or defense asserted, as
distinguished from mere conclusion of fact, or conclusion
of law. An allegation that a contract is valid, or void, as in the
instant case, is a mere conclusion of law.
Not being statements of ultimate facts which constitute
the basis of a right of the plaintiffs-appellants, nor are
they statements of ultimate facts which constitute the
wrongful acts or omissions of the defendants-appellees
that violated the right of the plaintiffs-appellants the
allegations of the complaint in the present case have not
fulfilled the requirements of Section 3, Rule 6 of the
Revised Rules of Court (Sec. 1, Rule 6 of the former Rules
of Court) that the complaint should contain a "concise
statement of the ultimate facts constituting the plaintiff's
cause or causes of action."
Ultimate facts are important and substantial facts which either
directly form the basis of the primary right and duty, or which
directly make up the wrongful acts or omissions of the defendant.
The term does not refer to the details of probative matter or
particulars of evidence by which these material elements are to
be established. It refers to principal determinate, constitutive
facts, upon the existence of which, the entire cause of action
rests. (Montemayor vs. Raborar, et al., 53 O.G. No. 19, p. 6596,
citing Pomeroy, Code Remedies, 5th Ed., sec. 420).

We, therefore, hold that the lower court had correctly ruled that
the complaint in the present case does not narrate facts that
constitute a cause of action.

PHILIPPINE STOCK EXCHANGE, INC. and the MEMBERS OF

ITS
BOARD
OF
GOVERNORS, Petitioners,
vs.
THE MANILA BANKING CORPORATION and the SECURITIES
INVESTIGATION CLEARING DEPARTMENT HEARING PANEL
consisting of the Hon. Hearing Officers ENRIQUE L.
FLORES, JR., ALBERTO P. ATAS, and YSOBEL S. YASAYMURILLO, Respondents.
FACTS: TMBC acquired Manila Stock Exchange Seat No. 97,
registered in the name of Recio, through an execution sale which
arose from a levy on execution to satisfy a loan obligation of
Recio to TMBC. Thereafter, TMBC requested MSE to record its
ownership of MSE Seat No. 97 in MSEs membership books.
Initially, MSE refused to register TMBC in its membership books
and contested the latters ownership of said seat. According to
MSE, its by-laws allow only individuals or corporations engaged
primarily in the business of stocks and bonds brokers and dealers
in securities to be a member or to hold a seat in the MSE. In the
end, TMBC settled for a mere acknowledgment from MSE of its
legal or naked ownership of, or proprietary right over, MSE Seat
No. 97 which was done by MSE through its Acknowledgment
Letter.
Before the aforementioned acknowledgment of MSEs title, the
Philippine Stock Exchange, Inc. (PSEI) was incorporated unifying
the MSE and the Makati Stock Exchange (MKSE) into one

exchange. The PSEI issued a certificate of membership to Recio

as Member No. 29.
Believing that MSE Seat No. 97 became PSE Seat No. 29 of the
unified exchanges and that the certificate of membership to PSEI
was issued to Recio on the basis of his previous ownership of MSE
Seat No. 97, TMBC sought to rectify the PSEIs listing of Recio as
a member without any reservation or annotation therein that
TMBC owns proprietary rights over PSE Seat No. 29. Armed with
MSEs acknowledgment of its legal ownership or naked title over
MSE Seat No. 97, TMBC sought PSEIs recognition of its legal
ownership of PSE Seat No. 29. However, TMBCs efforts were met
with PSEIs repeated refusal.
TMBC lodged a Petition for Mandamus with Claim for Damages, at
the SEC SICD. The petition prayed that the SEC order the PSEI to
acknowledge TMBCs proprietary interest or legal or naked
ownership of PSE Seat No. 29 to enable TMBC to register said
seat to a qualified nominee or otherwise sell the same to a
qualified vendee. Pet filed motion to dismiss claiming that SEC
had no jurisdiction to try and hear the same; the petition failed to
state TMBCs cause of action against petitioners; and the remedy
of mandamus was improper. SEC denied MTD and subsequent
motion for reconsideration. Case was elevated to SEC En Banc by
pet for certiorari which was also denied. CA also denied their pet
for review. Hence this action.
ISSUE:
HELD: The SEC en banc correctly sustained the SICD Hearing
Panels denial of petitioners motion to dismiss. We quote with
approval the findings of the SEC en banc on this matter: The
hearing panel held that although it entertains doubts as to the
truth of the facts averred, it shall not dismiss the complaint. We

believe that the hearing panel exercised its judgment within its
proper limits in issuing said order. On the contrary, the factual
issues of the case are not merely confined to the question of
membership, but also to the existence of the devices and
schemes amounting to fraud as alleged by the petitioner below
[TMBC]. If it is convinced that there are factual issues which
should be discussed in the answer and ventilated during the trial
on the merits, such as whether or not the transferor of the MSE
was a PSE member, the rights of the successor-in-interest of a
purported member of the PSE, Inc., and the evidence supporting
the allegations of herein respondent [TMBC] regarding bad faith
and fraud committed by PSE against TMBC, it is within the limits
of its power considering the fact that there are evidence
supporting its ruling.
We cannot fault the SICD Hearing Panel in requiring a more indepth and thorough determination of issues raised before it. After
all, the allegations in the mandamus petition sufficiently stated a
cause of action against the petitioners. Verily, the complaint
should contain a concise statement of ultimate facts. Ultimate
facts refer to the principal, determinative, constitutive
facts upon which rest the existence of the cause of
action. The term does not refer to details of probative matter or
particulars of evidence which establish the material elements.
Section 6 of the SEC Revised Rules of Procedure merely requires,
thus:
SECTION 6. Complaint - The complaint shall contain the names
and residences of the parties, a concise statement of the
ultimate facts constituting the complainants cause or causes of
action. It shall specify the relief/s sought, but it may add a
general prayer further or other relief/s as may be deemed just
and equitable.

In a number of cases,9 this Court has repeatedly held that so rigid

is the prescribed norm that if the Court should doubt the truth of
the facts averred, it must not dismiss the complaint but require
an answer and proceed to hear the case on the merits.
It is axiomatic that jurisdiction over the subject matter is
conferred by law and is determined by the allegations of the
complaint or the petition irrespective of whether the plaintiff is
entitled to all or some of the claims or reliefs asserted therein.
The three tribunals below are unanimous in appreciating TMBCs
cause of action against petitioners and that the same falls within
the ambit of Section 5(a) of P.D. 902-A.

PHILIPPINE BANK OF COMMUNICATIONS and ROMEO G.

DELA ROSA vs. ELENITA TRAZO
FACTS:
Petitioners are asking to reverse, in this Petition for review on
certiorari under Rule 45 the Decision of the CA denying
petitioners Motion for Reconsideration.
In order to facilitate the payment of her salaries and other
monetary benefits from her employer, petitioner Philippine Bank
of Communications (PBCOM 3), respondent Elenita B. Trazo
opened a payroll account with China Banking Corporation (CBC)
On or about 29 December 1997, petitioner Romeo G. dela Rosa,
PBCOM assistant vice-president, instructed CBC to credit all
accounts under its payroll with the medical and clothing subsidy
for the year 1998. Accordingly, respondent Trazos current

account was credited on that date with the amount of P7,000.00

for such annual subsidy.
On 31 December 1997, respondent Trazo, then project manager
of the information technology and management group, resigned
from PBCOM.Since respondent Trazo severed her employment
with PBCOM effective 1 January 1998 and was, therefore, no
longer entitled to the medical and clothing subsidy for the year
1998, petitioner dela Rosa wrote William Lim, CBC senior
assistant vice-president, on 5 January 1997 authorizing/directing
CBC/Lim to debit the sum of P7,000.00 from respondent Trazos
current account. Acting upon such authority/directive, CBC/Lim
debited said amount from respondent Trazos account on the
same date.
Trazo drew checks against her current account, but due to the
debit, the checks were dishonored. Trazo instituted an action for
damages against PBCOM, dela Rosa, CBC, and Lim before the
Regional Trial Court (RTC) of Quezon City.
After failure to respond after summons were served, respondent
Trazo filed a Motion to Declare Defendants China Banking
Corporation and William Lim in Default and Opposition to Motion
for Extension of Time to File Answer and/or Responsive Pleading.
CBC and Lim filed a Motion to Dismiss the case on the ground of
improper venue. On 24 June 1998, PBCOM and dela Rosa filed
their own Motion to Dismiss on the ground that the complaint
failed to state a cause of action.
When the case against defendants were DISMISSED on the
ground of improper venue. The case against defendants
Philippine Bank of Communications and Romeo G. dela Rosa is
DISMISSED for lack of cause of action.

Respondent Trazo filed with the trial court a Notice of Appeal. In

the assailed Decision, the Court of Appeals ruled in favor of
respondent Trazo. Hence, the instant Petition, where petitioners
PBCOM and Trazo bring before us the following issues:
ISSUE:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING
THAT THE COMPLAINT STATED A CAUSE OF ACTION FOR
DAMAGES AGAINST PETITIONERS ARISING OUT OF THE ALLEGED
UNLAWFUL DEBITING OF RESPONDENTS CHINABANK ACCOUNT,
NOTWITHSTANDING THAT IT WAS CHINABANK WHICH DEBITED
THE ACCOUNT, NOT PETITIONERS.
HELD:
Respondent Trazos complaint contains a cause of action against
petitioners PBCOM and dela Rosa.
Par. 13 of the complaint recites appellants alleged cause of
action against [PBCOM and dela Rosa]. It in substance read that
ROMEO G. DE LA ROSA, without [respondent Trazos] knowledge,
consent and approval, wrote a letter and authorized/directed the
debit of P7,000.00 having resigned from PBCom effective
December 31, 1997. Crucial to appellants action against [PBCOM
and dela Rosa] is the issue of whether the latter had the right to
authorize/direct [CBC and Lim] to debit the amount of P7,000.00
from appellants current account and, if so, whether appellant
was
entitled
to
notice
of
such
authority/directive.In
authorizing/directing [CBC and Lim] to debit appellants current
account, [PBCOM and dela Rosa] had, in effect, sought to
recover, without resorting to a court action, an amount
erroneously credited to her. And because appellant was not given
the courtesy of a notice of such authority/directive, she was lulled

into the belief that her funds at CBC were sufficient to cover the
checks she was issuing.
However, the lower court did not consider whether the act of
authorizing/directing CBC/Lim to debit appellants current
account without giving notice to her constitutes a cause of action
against [PBCOM and dela Rosa], for abuse of rights.
Amendment of the complaint, by way of supplementing and
amplifying facts as would carve out a clear abuse of rights
situation, would prevent multiplicity of suits. Amendment, not
dismissal, of the complaint is proper to avoid multiplicity of suits.
The policy in this jurisdiction is that amendment of pleadings is
favored and liberally allowed in the interest of substantial justice.
Amendment of the complaint may be allowed even if an order for
its dismissal has been issued provided that the motion to amend
is filed before the order of dismissal acquired finality
Petitioners argue that the afore-quoted paragraph 13 shows that
PBCOM and dela Rosa merely requested CBC to debit the account
of respondent Trazo, and that nothing in said paragraph shows
that PBCOM and dela Rosa were actually responsible for the
alleged unlawful debiting of respondents account.
As regards the Court of Appeals finding that the complaint
contains a cause of action against petitioners for abuse of rights,
petitioners claim that the elements of abuse of rights are not
found in the complaint, since no bad faith was imputed to PBCOM
and dela Rosa in requesting the debiting of the amount stated,
and since there was no allegation showing that PBCOM and dela
Rosa acted with the sole intent of prejudicing or injuring
respondent in requesting the same.

While we agree with petitioners that the complaint does not

contain a cause of action against them for abuse of rights, their
petition would, nonetheless, fail.
A cause of action is an act or omission of one party in violation of
the legal right of the other. A motion to dismiss based on lack of
cause of action hypothetically admits the truth of the allegations
in the complaint. The allegations in a complaint are sufficient to
constitute a cause of action against the defendants if,
hypothetically admitting the facts alleged, the court can render a
valid judgment upon the same in accordance with the prayer
therein. A cause of action exists if the following elements are
present, namely: (1) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not
to violate such right; and (3) an act or omission on the part of
such defendant violative of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery
of damages.
In debiting the checking/current account of the plaintiff, without
her knowledge, consent and approval, defendants acted in a
wanton, reckless and oppressive manner. Defendants PBCOM and
ROMEO G. DE LA ROSA had no cause nor reason to unilaterally
order the debiting of plaintiffs account as it was her personal
property and not of defendant PBCOM. Even if defendant PBCOM
erroneously credited plaintiff with monetary benefits, plaintiff was
to receive, as she did receive separation benefits equivalent to
more than FIVE HUNDRED THOUSAND PESOS (P500,000.00) more
or less, from defendant PBCOM itself. A reasonable set-off or
compensation should and could have been resorted to. However,
defendant PBCOM never utilized this option. Defendant PBCOM
neither informed plaintiff of said transaction, much less seek her
approval and authority to debit her CHINABANK account when at

the time of the debitting (sic), January 5, 1998, she was no longer
an employee of PBCOM.

called the FEDERATION, is a non-stock corporation duly organized

and existing under and by virtue of the laws of the Philippines.

In the case at bar, the allegations in the complaint verily show a

cause of action. To sustain a motion to dismiss for lack of cause
of action, the Complaint must show that the claim for relief does
not exist rather than that a claim has been defectively stated or
is ambiguous, indefinite or uncertain.

NAMARCO and the FEDERATION entered into a Contract of Sale.

Among the goods covered by the Contract of Sale were 2,000
cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit
Chewing Gums, 500 cartons of Adams Chicklets, 168 cartons of
Blue Denims, and 138 bales of Khaki Twill. To insure the payment
of those goods by the FEDERATION, the NAMARCO accepted
three domestic letters of credit.

Petitioners claim that respondent failed to specify in the

complaint the standard of proper conduct and decency required
of PBCOM and the basis of invoking such standard on PBCOM did
not improve their position any. The complaint should state only
ultimate facts, not conclusions of law, nor evidentiary facts. In
determining whether the allegations of a complaint are sufficient
to support a cause of action, the complaint does not have to
establish or allege the facts proving the existence of a cause of
action at the outset; this will have to be done at the trial on the
merits of the case. Ultimate facts refer to the principal,
determinative, constitutive facts upon the existence of which the
cause of action rests. The term does not refer to details of
probative matter or particulars of evidence which establish the
material ingredients.

NATIONAL MARKETING CORPORATION vs. FEDERATION OF

UNITED NAMARCO DISTRIBUTORS, INC.
FACTS:
The plaintiff, hereinafter to be called the NAMARCO, is a GOCC`
duly organized and existing under and by virtue of Republic Act
No. 1345, as amended; and the defendant, hereinafter to be

On March 2, 1960, the FEDERATION and some of its members

filed a complaint against the NAMARCO, which became Civil Case
No. 42684 of this Court for specific performance and damages,
alleging that after the NAMARCO had delivered a great portion of
the goods listed in the Contract of Sale, it refused to deliver the
other goods mentioned in the said contract.
On March 10, 1960, the NAMARCO presented to the Philippine
National Bank, Manila, for payment 3 Sight Drafts duly
accompanied with supporting papers.
On March 19, 1960, the NAMARCO filed in Civil Case No. 42684
its answer to the complaint, alleging that the Contract of Sale
was not validly entered into by the NAMARCO and, therefore, it is
not bound by the provisions thereof, without setting up any
counterclaim for the value of the goods which it had already
delivered but which had not yet been paid for by the
FEDERATION.
On the same date, the PNB informed the NAMARCO that could
not negotiate and effect payment on the sight drafts as the
requirements of the covering letters of credit had not been
complied with.

On June 7, 1960, the NAMARCO demanded from the FEDERATION

the payment of the total amount of P611,053.35, but the latter
failed and refused to pay the said amount, or any portion thereof,
to the NAMARCO.
CFI of Manila promulgated its decision in Civil Case No. 42684,
ordering the NAMARCO to specifically perform its obligation in the
Contract of Sale, by delivering to the FEDERATION the
undelivered goods. The NAMARCO appealed from the decision.
SC rendered a decision on NAMARCO's appeal in Civil Case No.
42684, holding that the Contract of Sale was valid.
NAMARCO instituted the present action (Civil Case No. 46124)
alleging, among others, that the FEDERATION'S act or omission in
refusing to satisfy the former's valid, just and demandable claim
has compelled it to file the instant action; and praying that the
FEDERATION be ordered to pay the NAMARCO the sum of
P611,053.35.
The FEDERATION moved to dismiss the complaint on the ground
that the cause of action alleged therein is barred forever,
pursuant to Section 6 of Rule 10 of the Rules of Court. In support
thereof, the FEDERATION alleged that the FEDERATION and some
of its members instituted Civil Case No. 42684 against NAMARCO
for specific performance to enforce compliance with the contract
of sale; that said contract, basis of Civil Case No. 42684, is also
the basis of NAMARCO's present complaint; that when NAMARCO
filed its answer to the complaint in Civil Case No. 42684, it did
not set up any counterclaim therein; the CFI promulgated the
decision in said Civil Case No. 42684, ordering the NAMARCO to
specifically perform its obligation under the contract of sale; that
NAMARCO's claim in the present case, Civil Case No. 46124,
against the FEDERATION alone, being a compulsory counterclaim
against the latter, in that it arose out of or is necessarily
connected with the transaction or occurrence that is the subject-

matter of the action of the FEDERATION in Civil Case No. 42684

against the NAMARCO and therefore it must have been set up in
said Civil Case No. 42684 in the manner prescribed by section 4,
Rule 10 of the Rules of Court, and within the time between the
date of filing, in Civil Case No. 42684, of the answer of NAMARCO,
and the date of the decision in that case; and that the failure
of NAMARCO to set up, in said Civil Case No. 42684, such
a counterclaim, precludes NAMARCO from raising it as an
independent action, pursuant to Section 6 of Rule 10 of
the Rules of Court.
NAMARCO interposed its opposition to said motion to dismiss
contending that its claim for the recovery of the cost of
merchandise is not necessarily connected with the suit in Civil
Case No. 42684 for specific performance and, therefore, does not
fall under the category of compulsory counterclaim; that the
issue in Civil Case No. 42684, was the genuineness and due
execution of said contract as the same was entered into by the
General Manager of the NAMARCO without the knowledge,
consent and approval of the Board of Directors and that the same
was not approved by the Auditor General; and that the present
claim is not necessarily connected with the transaction or
occurrence that is the subject matter of Civil Case No. 42684.
The lower court issued an order holding "in abeyance" action on
the motion to dismiss till after the trial on the merits.
The FEDERATION filed its answer to the NAMARCO's complaint.
By way of counterclaim, the FEDERATION sought P50,000.00 as
attorney's fees and other expenses of litigation, as well as
P17,000.00 as damages for improper issuance of a writ of
attachment which writ, evidently had been issued earlier by the
court.

On June 21, 1961, NAMARCO filed an answer to the

FEDERATION'S counterclaim specifically denying the material
averments thereof and maintaining that the present action is not
barred by Civil Case No. 42684.
The lower court rendered a decision ordering said FEDERATION to
pay NAMARCO P609,014.73 (re-adjusted amount). Hence, the
present appeal.
FEDERATIONS POSITION:
It is the theory of the FEDERATION that the applicable guiding
principle is that there be a logical relationship between
plaintiffs claim and defendants counterclaim. It insists that
logical relationship exists between the previous action for
specific performance (Civil Case No. 42684) and NAMARCOs
present action for the payment of the goods delivered as (a) both
actions are derived from the same contract of sale; and (b) the
two actions are but the consequences of the reciprocal obligation
imposed by law upon the parties by virtue of the aforesaid
contract. The alleged failure of the FEDERATION to pay for goods
delivered should therefore have been raised by NAMARCO as a
defense or counterclaim in the previous case notwithstanding the
fact that said claim only accrued after NAMARCOs answer was
filed in said Civil Case No. 42684 because NAMARCO could have
set it up as a counterclaim in a supplemental pleading pursuant
to section 4 of Rule 1 of the old Rules of Court.
NAMARCOS POSITION:
On the other hand, NAMARCO insists that the same evidence or
substantial identity in the evidence criterion should be applied in
determining whether or not its claim is compulsory, ... and on the
basis of such test its claim could not be considered compulsory,

because: (a) the evidence presented to support the genuineness

and due execution of the contract of sale as ground for specific
performance in Civil Case No. 42684, is not the same as the
evidence presented to support NAMARCO's claim for recovery of
the cost of the merchandise received by the FEDERATION, subject
of the instant appeal; (b) for NAMARCO in Civil Case No. 42684 to
interpose its claim for the payment of the goods delivered
pursuant to the contract of sale, and thus seek in effect the
enforcement of said contract, would have been inconsistent with
its defense that the same contract was a nullity and (c) in any
event, such claim could neither have been asserted as a
counterclaim by NAMARCO in its answer, filed on March 19, 1960,
to the complaint in Civil Case No. 42684, for it had no cause of
action as yet against the FEDERATION as, under the rule, a claim
to be available as a counterclaim to an action must be due and
owing at the time of the commencement of the action, nor could
NAMARCO file it as a counterclaim based on a contingent
demand for the same cannot be allowed.
ISSUE:
1. Whether the complaint of NAMARCO should have been
filed as a compulsory counterclaim. (NO.)
2. Whether or not this action of NAMARCO for the collection
of the payment of the merchandise delivered to, but not
yet paid by, the FEDERATION, is already barred as a
consequence of the failure of NAMARCO to set it up as a
counterclaim in the previous case, (Civil Case No. 42684).
(NO.)
HELD:

1. The rule on compulsory counterclaim contained in section 6 of

Rule 10 of the old Rules of Court, 1 is taken from section 97 of Act
No. 190. This rule is "mandatory" because the failure of the
corresponding party to set it up will bar his right to
interpose it in a subsequent litigation. Under this Rule,
counterclaim not set up shall be barred if the following
circumstances are present: (1) that it arises out of, or is
necessarily connected with, the transaction or occurrence
that is the subject matter of the opposing party's claim
(2) that it does not require for its adjudication the
presence of third parties of whom the court cannot
acquire jurisdiction; and (3) that the court has jurisdiction
to entertain the claim. Conversely, a counterclaim is merely
permissive and hence is not barred if not set up, where it has
logical relation with the transaction or occurrence that is the
subject matter of the opposing party's claim, or even where there
is such connection, the court has no jurisdiction to entertain the
claim or it requires for its adjudication the presence of third
persons of whom the court cannot acquire jurisdiction.
The first requisite that the claim should arise out of or is
necessarily connected with the transaction or occurrence that is
the subject matter of the opposing party's claim, may give rise to
the critical question: What constitutes a "transaction" or
"occurrence"? On this point the lower court has conveniently
embodied in its decision, quoted elsewhere herein, the meaning
of the terms "transaction" or "occurrence", as defined in Williams
v. Robinson2, and in Pomeroy's Treatise on Remedies and
1

Now Section 2, Rule 9

The terms "transaction" and "occurrence" used in the section now under consideration
include the facts and circumstances out of which a claim may arise, and whether two claims
arise out of the same transaction or occurrence depends in part on whether the same
evidence would support or refute both. (Williams v. Robinson, 3 Federal Rules Service, 174).
These terms are broader than the term "contract", and authorize matters to be counterclaimed which could not be counter-claimed as arising out of the contract sued upon by the
plaintiff. This is obvious, for while a contract is a transaction, a transaction is not necessarily a
2

Remedial Rights. The formulation in Williams v. Robinson shows

the futility of attempting to reduce the term "transaction" or
"occurrence" within the context of an all-embracing definition.
Such formulation does not adequately answer every question
whether a particular claim is compulsory in character. As a
matter of fact most courts, rather than attempting to define the
key terms of the rule on compulsory counterclaim, have preferred
to suggest certain criteria or tests by which the compulsory or
permissive nature of specific counterclaims can be determined.
Wright & Miller in their Federal Practice and Procedure summarize
them as follows:
1. Are the issues of fact and law raised by the claim and
counterclaim largely the same?
2. Would res judicata bar a subsequent suit on
defendant's claim absent the compulsory counterclaim
rule?
3. Will substantially the same evidence support or refute
plaintiff's claim as well as defendant's counter-claim?
4. Is there any logical relation between the claim and the
counter-claim?
An affirmative answer to each of the foregoing questions
suggests that the counterclaim is compulsory. These tests or
standards have been the object of extensive analysis and
criticisms, as follows:
The first test ... identity of issues, had been considered of
doubtful utility for it assumes that, in order to protect himself
from inadvertently losing the right to present his claim in a later
action, defendant will be both motivated and able to determine

contract. One of the definitions of the term "transaction" is, "a matter or affair either
completed or in course of completion."

before answering whether his claim must be asserted as a

compulsory counterclaim.
The second test ... that the counterclaim is compulsory if it would
be barred by res judicata, has been judicially recognized by some
courts as "the acid test" for distinguishing compulsory from
permissive counterclaim. This criterion has however been found
inadequate as an overall standard.
The third test ... same evidence or substantial identity in the
evidence relating to the claim and counterclaim
has been
considered satisfactory if used with caution. A test based on
similarity of evidence appears reasonable however, it has been
shown that some counterclaims may be compulsory even if they
do not meet this test.
The fourth test ... the logical relationship between the claim and
counterclaim has been called "the one compelling test of
compulsoriness" 19 Its outstanding quality is its flexibility. On the
other hand this flexibility necessarily entails some uncertainty in
its application because of its looseness and potentially over
broad scope.
While the refusal of NAMARCO to deliver the remainder of the
goods contracted for in its "trade assistance agreement" with
FEDERATION, is the important link in the chain of facts and
events that constituted the transaction upon which Federation's
cause of action was based in Civil Case No. 42684, it is not even
a part of the transaction constituting the subject matter of
NAMARCO's present suit. For the action of FEDERATION, to
compel NAMARCO to recognize the validity of their agreement
and deliver the remainder of the goods to be paid "on cash basis"
in no way involved the payment of the merchandise worth
P609,014.73, already delivered and paid for in cash by means of

the domestic letters of credit. When the domestic letters of credit

were subsequently dishonored by PNB compelling NAMARCO to
send a letter of demand for payment to FEDERATION which the
latter received, but which it apparently ignored and because of
such inaction NAMARCO therefore sued FEDERATION for
payment, such non-payment by FEDERATION was a matter which
was distinct and separate from and had no logical relationship
with the subject matter of FEDERATION's own suit. These two
claims are separate and distinct, as they involve totally
different factual and legal issues and do not represent
the same "basic controversy".
2. But even assuming for the nonce that NAMARCO's present
claim is logically related to the claim of the FEDERATION in the
previous case, NAMARCO's claim having accrued or matured after
the service of its answer in the earlier case is in the nature of an
after-acquired counterclaim which under the rules is not barred
even if it is not set up in the previous case as a counterclaim. An
after-acquired counterclaim, is one of the recognized
exceptions to the general rule that a counterclaim is
compulsory and must be asserted if it arises out of the
same transaction as the opposing party's claim.
Although the claim arises out of the transaction or
occurrence three exceptions are made to the
compulsory requirement that it be pleaded. They are:
(1) Time of Filing. The claim which is the basis of the
counterclaim must be in existence at the time of
"counter-claimant" files his pleading.
Wright & Miller, Federal Practice and Procedure, explain this
exception to the compulsory counterclaim requirement thus:

The first exception is that the party need not assert a

counterclaim that has not matured at the time he serves
his pleading. This is derived from the language in the rule
limiting its application to claims the pleader has "at the
time of serving the pleading." A counterclaim acquired by
defendant after he has answered will not be considered
compulsory, even if it arises out of the same transaction
as does plaintiff's claim.

Thus a party who fails to interpose a counterclaim

although arising out of or is necessarily connected with
the transaction or occurrence of the plaintiff's suit but
which did not exist or mature at the time said party files
his answer is not thereby barred from interposing such
claim in a future litigation. However such claim may with the
court's permission be included in the same case by way of
supplemental pleading before judgment under Section 4 of the
former Rule 10 of the Rules (now Sec. 9 of Rule 6).

Xxx
A counterclaim may be asserted under Rule 13(e) only by
leave of court, which usually will be granted in order to
enable the parties to litigate all the claims that they have
against each other at one time thereby avoiding multiple
actions. However, Rule 13(e) is permissive in character.
An after-acquired counterclaim, even if it arises out of the
transaction or occurrence that is the subject matter of the
opposing party's
claim, need not be pleaded
supplementally; the after-acquired claim is not considered
a compulsory counterclaim under Rule 13(a) and a failure
to interpose it will not bar its assertion in a later suit.
The provisions of Rule 13 of the Federal Rules of Civil Procedure,
adverted to in the preceding commentaries and decisions of the
federal courts, have been engrafted into our procedural rules.
The counterclaim must be existing at the time of filing the
answer, though not at the commencement of the action for under
Section 3 of the former Rule 10, the counterclaim or cross-claim
which a party may aver in his answer must be one which he may
have "at the time" against the opposing party. That phrase can
only have reference to the time of the answer.

We therefore rule that NAMARCO's present action, is not barred

by its failure to assert it as a counterclaim in the previous case.
On the issue of non-payment of FEDERATION:
The mere delivery by the FEDERATION of the domestic letters of
credit to NAMARCO did not operate to discharge the debt of the
FEDERATION. It was given therefore as a mere guarantee for the
payment of the merchandise. A mere attempt to collect or
enforce a bill or note from which no payment results is not such
an appropriation of it as to discharge the debt.
ACCORDINGLY, with the modifications above indicated, the
appealed judgment is hereby affirmed, with costs against
defendant-appellant.
METALS
ENGINEERING
RESOURCES
CORPORATION, petitioner,
vs.
COURT OF APPEALS and PLARIDEL JOSE, respondents.
FACTS: The appeal herein arose from Civil Case filed by petitioner
corporation against private respondent Plaridel Jose, for the

annulment of an agreement to buy and sell executed between

the parties.

reputation, sleepless nights serious anxieties, embarrassment

and similar injuries)

The was an "Agreement to Buy and Sell" in which plaintiff offered

to sell to the defendant and the latter in turn agreed to buy
several parcels of land.

Before the case could be heard on pre-trial, private respondent

filed a Motion to Expunge the Complaint on the ground that the
same did not specify the amount of damages sought either in the
body or in the prayer of the complaint, citing in support thereof
the then ruling case of Manchester Development

The "Agreement to Buy and Sell", on its face, is patently and

plainly imperfect and incomplete as there was and could have
been no meeting of the minds of the parties in regard to the
manner, period and terms of payment of the purchase price or
consideration which is undeniably an essential element of the
contract. The terms of sale, including the payment of the
purchase price, are uncertain and imperfect.
Despite the fact that the subject "agreement" had not yet been
perfected and completed, defendant prematurely caused the
preparation of a subdivision plan of the lands into several sublots and offered the same for sale to the public through an
advertisement published in the issue of the "Manila Bulletin"
Plaintiff wrote a letter to defendant rescinding and/or
withdrawing from the uncompleted and imperfect "Agreement"
and tendered a check for the amount of P50,000.00 representing
full refund of the earnest money previously delivered by
defendant pursuant to paragraph 2 of said agreement but
defendant refused to accept the same.
Private respondent filed his Answer with Counterclaim alleging a
compulsory counterclaim on the fact that had already spent a
considerable amount for the subdivision of the subject properties
into smaller parcels of land for resale, advertisement, and
promotion. And such other grounds for damages (tarnished

the trial court required petitioner to amend its complaint by

specifying the amount of damages prayed for, otherwise the
original complaint shall be dismissed. In compliance therewith,
petitioner filed its Amended Complaint specifying the amount of
damages. private respondent moved for the reconsideration of
the trial court's aforesaid order with respect to the portion
allowing petitioner to file an amended complaint, stating that the
court did not acquire jurisdiction when the wrong docket fee was
paid, hence the amendment of the complaint did not vest
jurisdiction upon the court; and that for all legal intents and
purposes, no original complaint was filed which could be the
subject of an amendment. TC granted private respondent MR.
Private respondent then filed a Motion to Set Case for
Presentation of Evidence in support of his counterclaim. In its
Opposition, petitioner averred that since private respondent's
counterclaim is compulsory in nature because it is necessarily
connected with and arose out of the same transaction subject of
the complaint, with the dismissal of petitioner's complaint the
compulsory counterclaim can no longer remain pending for
independent adjudication; and considering further that since
petitioner had re-filed its complaint against private respondent
on May 3, 1989 before the Regional Trial Court of Pasig, Branch
168, docketed therein as Civil Case No. 58126, then private
respondent could easily set up the same compulsory
counterclaim in said later case.

BA FINANCE CORPORATION, vs. RUFINO CO, HIGHLINE

MERCANTILE,
INC.,
LUCITA
VELOSO
YAP,
CLOVERLEAF
SUPERMARKET, INC., SAN ANDRES COMMERCIAL and COURT OF
APPEALS, respondents.

ISSUE:
Does the dismissal of the complaint for nonappearance of
plaintiff at the pre-trial, upon motion of defendants, carry with it
the dismissal of their compulsory counterclaim?

FACTS:

HELD:
Yes. The counterclaim of private respondents is not merely
permissive but compulsory in nature: it arises out of, or is
necessarily connected with, the transaction or occurrence that is
the subject matter of the opposing party's claim; it does not
require the presence of third parties of whom the court cannot
acquire the presence of third parties of whom the court cannot
acquire jurisdiction; and, the trial court has jurisdiction to
entertain the claim.

Petitioner BA Finance Corporation brought this action to recover a

sum of money arising from a credit accommodation in the form of
a discounting line which it granted to defendant Rufino Co, and
from certain suretyship agreements executed in its favor by his
co-defendants Highline Mercantile, Inc., LucitaVeloso Yap,
Cloverleaf Supermarket, Inc., and San Andres Commercial.
The private respondents had counterclaims consisting of alleged
overpayments and damages. They assert that they are no longer
indebted to petitioner and are in fact entitled to reimbursement
for overpayments. They ask for damages for expenses incurred
and inconveniences suffered by them as a result of the filing of
the present action.
The Pre-Trial Conference was repeatedly reset. Consequently,
defendants moved for dismissal of the case without prejudice.
The motion was granted, without prejudice. Finding merit in said
motion, the same is hereby granted.
On 22 January 1990, private respondents moved to set the
reception of their evidence in support of their counterclaim.
Petitioner opposed the motion. The trial court denied the motion
of private respondents, prompting them to elevate the order of
denial to the Court of Appeals which, reversed the questioned
order and directed the trial court to set the reception of their
evidence on their counterclaim. Its motion for reconsideration
was denied.

Clearly, the same evidence needed to sustain the counterclaim of

private respondents would also refute the cause of action in
petitioner's complaint. For, if private respondents could
successfully show that they actually made overpayments on the
credit accommodations extended by petitioner, then the
complaint must fail..
The rule is that a compulsory counterclaim cannot "remain
pending for independent adjudication by the court." This is
because a compulsory counterclaim is auxiliary to the proceeding
in the original suit and merely derives its jurisdictional support
therefrom.
As Justice Vicente Abad Santos succinctly puts it
. . . . The petitioner does not object to the dismissal of the civil
case but nonetheless wants her counterclaim therein to subsist.
Impossible. A person cannot eat his cake and have it at the same
time. If the civil case is dismissed, so also in the counterclaim
filed therein.

The Rules of Court provides a remedy to recover on defendant's

counterclaim if plaintiff moves to dismiss the case. Under Sec. 2,
Rule 17, defendant may raise objection to the dismissal of the
complaint; in such case, the trial curt may not dismiss the main
action.

The LZK Holdings and Development Corporation (LHDC) is a dulyorganized corporation with principal office at AGZ Building,
Quezon Avenue, San Fernando City, La Union. The Planters
Development Bank (PDB) is a banking institution duly-organized
and existing under and by virtue of the laws of the Philippines.

However, we are not unaware of the seeming unfairness, if not

harshness, of the application of the Rule herein enunciated.
Henceforth, for the guidance of Bench and Bar, if any of the
grounds to dismiss under Sec. 3, Rule 17, of the Rules of Court
arises, the proper recourse for a defendant who desires to pursue
his compulsory counterclaim in the same proceeding is not to
move for the dismissal of the complaint; instead, he should only
move to have plaintiff declared non-suited on the complaint so
that the latter can no longer present his evidence thereon, and
simultaneously move that he be declared as in default on the
compulsory counterclaim, and reserve the right to present
evidence ex parte on his counterclaim. This will enable defendant
who was unjustly haled to court to prove his compulsory
counterclaim, which is intertwined with the complaint, because
the trial court retains jurisdiction over the complaint and of the
whole case. The non-dismissal of the complaint, the non-suit
notwithstanding, provides the basis for the compulsory
counterclaim to remain active and subsisting.

LHDC, through its Chief Executive Officer, Mrs. Lourdes Z.

Korshak, and the PDB entered into a "Loan Agreement" whereby
the former was extended a credit accommodation in the amount
of P40,000,000.00. The amount was to be used to finance the
ongoing construction of the seven-storey AGZ Building at Quezon
Avenue, San Fernando City, La Union.

WHEREFORE, the instant petition is GRANTED. The Decision of

the Court of Appeals of 18 December 1991 in CA- G.R. No. CV28420 is REVERSED and SET ASIDE.

For non-payment of loan, non-compliance with the terms and

conditions of the Deed of Assignment and of the promissory
notes, the PDB caused the extra-judicial foreclosure of the real
estate mortgage under Act No. 3135. Consequently, a Notice of
Sale was published. The foreclosed property was sold to the PDB
as the highest bidder, and the corresponding Certificate of Sale
was issued in its favor.

PLANTERS DEVELOPMENT BANK vs. LZK HOLDINGS and

DEVELOPMENT CORPORATION
FACTS:

To secure the loan, the LHDC executed in favor of the PDB a real
estate mortgage over lot where the AGZ Building was then being
constructed, covered by TCT No. T-45337 issued under the name
of the LHDC. Subsequently, the latter executed two promissory
notes in favor of the PDB.
Thereafter, the LHDC executed a Deed of Assignment in favor of
the PDB, wherein it assigned to the latter all its rental incomes
from its AGZ Building, the same to be applied as payment of its
obligations.

LHDC filed with the Regional Trial Court (RTC) of Makati City,
Branch 150, a complaint against the PDB for "Annulment of

Extrajudicial Foreclosure, Mortgage Contract, Promissory Notes

and for Damages," docketed as Civil Case No. 99-471.
It was alleged, inter alia, that the real estate mortgage was void
because it was executed day after TCT No. T-45337 was issued by
the RD; the first page was unsigned by the parties; and it never
received the proceeds of the loan in the amount of
P40,000,000.00. The LHDC further alleged that it never
authorized the PDB to apply the proceeds of the loan to the
personal obligation of Armando Lao and/or his wife Lourdes
Korshak. Moreover, the extrajudicial foreclosure of the real estate
mortgage was void because the LHDC did not, in any way, violate
the said deed, and the PDB even failed to take into account the
remittances made under the promissory note. The LHDC also
averred that the PDB dealt with it in gross bad faith.
The PDB filed in due course its answer, traversing the material
allegations thereof and interposing a counterclaim for attorneys
fees and costs.
After a reply to the answer had been filed, the LHDC moved that
the case be set for a pre-trial conference, after which the parties
submitted their respective pre-trial briefs. Just before the
scheduled pre-trial, the LHDC filed a "Motion for Leave to file a
Supplemental Complaint" to cover occurrences subsequent to the
original complaint. It alleged that after the filing of the original
complaint, it agreed in principle to enter into a contract of lease
with a prospective lessee, AMA Computer College, but the latter
required it to first secure the petitioners consent. The LHDC thus
wrote the PDB, requesting its consent to the said lease. However,
the latter gave unreasonable conditions in its reply.
This prompted the AMA Computer College to back-out from the
contract. Furthermore, the PDB wrote each and every tenant of

the LHDC, demanding that they directly remit their respective

rentals to it. Worse still, the PDB, which was leasing a space in
the same building for its branch, had ceased paying its rentals,
on the pretext that it was setting-off the same against the loan
deficiency of the LHDC.
The LHDC averred that until title to the property had been
consolidated to the PDB, it (the LHDC) remained its
owner, and as such is entitled to exercise all the
attributes of ownership, including the right to receive
rentals from the tenants of the building. As such, the PDB
had no authority to collect the rentals and apply the
previous loan deficiency because the legality and validity
of the promissory notes, the real estate mortgage, and
the subsequent extrajudicial foreclosure were in question
before the courts. By applying the rentals to the
perceived loan deficiency, the PDB ignored the authority
of the court. Moreover, imposition by the PDB of
unreasonable and unfair conditions to the prospective
lease of the property to AMA Computer College, the LHDC
failed to realize expected rentals. It was also alleged that
as a result of the foregoing acts of the PDB, the LHDC was
entitled to moral damages of not less than P1,000,000.00.
LHDC filed an Urgent Motion for the Issuance of a Temporary
Restraining Order and Writ of Preliminary Injunction, seeking to
restrain the PDB from consolidating its title over the foreclosed
property pending the final determination of Civil Case No. 99471. It averred that the period for redemption had yet to expire
on March 15, 1999.
PDB jointly opposed the supplemental complaint and urgent
motion. As to the supplemental complaint, it argued that what
goes against its admission is the fact that the supplemental
matters involved therein would bring into the case new causes of

action, distinct from those mentioned in the original complaint. It

also pointed out the lack of verification of the said supplemental
complaint.
Trial court issued on March 13, 2000 a Temporary Restraining
Order (TRO) restraining the PDB from consolidating ownership
over the foreclosed property. Despite the injunction, however, the
PDB managed to consolidate its title over the foreclosed property.
On May 9, 2000, the LHDC filed an Omnibus Motion to declare
invalid the consolidated title, to cite the PDB and its counsel for
contempt, and to enjoin the latter from taking possession of the
property. The trial court issued an Order invalidating TCT No. T53253, and enjoining the PDB from taking possession of the
foreclosed property.
Over the opposition of the PDB, the trial court issued an Order,
admitting the supplemental complaint. The PDB moved for a
reconsideration of the order, but the trial court denied the
motion.
Dissatisfied, the PDB sought redress in the CA via a petition for
certiorari. The CA rendered a Decision, finding that no grave
abuse of discretion was committed by the trial court in admitting
the supplemental complaint of the LHDC.
As the plea of the PDB for reconsideration there was denied, it
now comes to this Court for redress.
PETITIONERS POSITION:
The petitioner reiterates its arguments before the appellate
court, claiming that the supplemental complaint was
inappropriate because it introduced causes of action which are

"entirely new, totally independent, separate and distinct" from

those of the original complaint. It argues that a supplemental
complaint cannot be used for the purpose of trying new matter or
a new cause of action.
The original complaint vis--vis the supplemental complaint, the
petitioner asseverates, would show a great deal of difference in
their causes of action.
In the supplemental complaint of LZK, the latter wishes to
"supplement" the original complaint with the following
additional causes of action (Refer to BOLD AND
UNDERLINED PARAGRAPH ABOVE)
4. The original complaint (Annex "C") sought to be
supplemented
is for
annulment
of extrajudicial
foreclosure, mortgage contract, promissory notes and for
damages with the following causes of actions:
a. the mortgage is allegedly null and void ab initio, as the
mortgagor, LZK, was not the registered owner of the
subject matter thereof, at the time the mortgage was
executed on 16 December 1996;
b. the promissory notes are allegedly invalid in view of the
claimed lack of valuable consideration;
c. the extrajudicial foreclosure should allegedly be
declared as invalid or void form (sic) the very beginning,
inasmuch as LZK allegedly did not violate the terms and
conditions of the promissory notes;
d. PDB is allegedly liable to LZK for moral and exemplary
damages plus attorneys fees.

ISSUE:
Whether the supplemental complaint stated new causes of action
and should have not been admitted. (NO.)
HELD:
Section 6, Rule 10 of the Revised Rules of Court prescribes the
manner and substance of filing supplemental pleadings:
SECTION 6. Supplemental Pleadings. Upon motion of a
party the court may, upon reasonable notice and upon
such terms as are just, permit him to serve a
supplemental pleading setting forth transactions,
occurrences or events which have happened since the
date of the pleading sought to be supplemented. The
adverse party may plead thereto within ten (10) days
from notice of the order admitting the supplemental
pleading.
As its very name denotes, a supplemental pleading only
serves to bolster or adds something to the primary
pleading. A supplement exists side by side with the
original. It does not replace that which it supplements.
Moreover, a supplemental pleading assumes that the original
pleading is to stand and that the issues joined with the original
pleading remained an issue to be tried in the action. It is but a
continuation of the complaint. Its usual office is to set up new
facts which justify, enlarge or change the kind of relief with
respect to the same subject matter as the controversy referred to
in the original complaint.
The purpose of the supplemental pleading is to bring into
the records new facts which will enlarge or change the

kind of relief to which the plaintiff is entitled; hence, any

supplemental facts which further develop the original
right of action, or extend to vary the relief, are available
by way of supplemental complaint even though they
themselves constitute a right of action.
In Leobrera v. Court of Appeals, the Court ruled that when the
cause of action stated in the supplemental complaint is different
from the causes of action mentioned in the original complaint,
the court should not admit the supplemental complaint.
However, a broad definition of causes of action should be
applied. As the United States Supreme Court ruled in Smith v.
Biggs Boiler Works Co.:
While a matter stated in a supplemental complaint
should have some relation to the cause of action
set forth in the original pleading, the fact that the
supplemental pleading technically states a new
cause of action should not be a bar to its allowance
but only a factor can be considered by the court in
the exercise of its discretion; and of course, a
broad definition of "cause of action" should be
applied here as elsewhere.
In the present case, the issue as to whether the petitioner
stopped the payment of rentals and the application thereof on
the perceived loan deficiency of the respondent, is a new matter
that occurred after the filing of the original complaint. However,
the relief for damages, the collection of the rentals and the
application thereof by the petitioner to the perceived loan
deficiency of the respondent are germane to, and are in fact,
intertwined with the cause of action of nullification of the real
estate mortgage and the extrajudicial foreclosure thereof, as well
as the sale at public auction. It is the respondents contention
that the petitioner remained liable to it for rentals, and until title

to the property had been lawfully consolidated with the

petitioner. The claims of unrealized income by way of rentals
from the AMA Computer College on account of the respondents
insistence that such should be remitted to it, and that the
respondent first drop the criminal complaint for falsification and
perjury filed by it against Mauro Tividad, the officer of the
petitioner, are, likewise, germane and related to the respondents
claim in its original complaint that it remained the owner of the
property despite the sale at public auction; hence, it is entitled to
lease the property and collect the rentals therefrom. By its
supplemental complaint, the respondent merely enlarged
its original causes of action on account of events that
transpired after the filing of the original complaint and
prayed for additional reliefs. The principal and core issues
raised by the parties in their original pleadings remain
the same. There is no showing on record that the petitioner
would be prejudiced by the admission of the supplemental
complaint. After all, the petitioner has the right to file a
supplemental answer to the supplemental complaint
The trial court cannot, thus, be faulted for admitting the
respondents supplemental complaint.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for
lack of merit.

GENALYN
D.
YOUNG, petitioner,
vs.
SPOUSES MANUEL SY and VICTORIA SY, respondents.

NOTE: I REALLY RECOMMEND READING THE ORIGINAL OF THIS

CASE BECAUSE I WILL ONLY COPY PASTE THE PART FOR
SUPPLEMENTAL PLEADINGS
Two Petitions for Review on Certiorari under Rule 45. Since the
two cases are interdependent and originate from the same
proceeding, and for the sake of expediency, they have been
consolidated by the SC.
FIRST CASE: (Re: Supplemental Complaint) challenges the
Decision of the CA affirming the Orders of the RTC, San Pablo
City, Branch 32 which denied the admission of petitioner's
Supplemental Complaint; and the CA Resolution which denied the
petitioner's Motion for Reconsideration.
SECOND CASE: (Re: Non-Suit) questions the Decision of the CA
which affirmed the three (3) Orders of the RTC ,all of which in
effect dismissed the Complaint for non-suit; and the CA which
denied the petitioner's Motion for Reconsideration.
FACTS: Both petitions originated from a Complaint for
Nullification of Second Supplemental Extra-judicial Settlement,
Mortgage, Foreclosure Sale and Tax Declaration filed by the
petitioner 2000 with the RTC. Young, in her Complaint, alleged
that the extra-judicial partition executed by her natural mother,
Lilia Dy Young which adjudicated an unregistered parcel of land
solely in favor of the latter, is unenforceable, since at the time of
the execution petitioner was only 15 years old and no court
approval had been procured; that the partition had been
registered with the Register of Deeds; that Lilia Dy obtained a
loan from respondent spouses and mortgaged the subject
property; that the property was foreclosed and sold to the
highest bidder, respondent Manuel; that a Certificate of Sale for
this purpose had been registered with the Register of Deeds; and

that, thereafter, respondents obtained in their name a tax

declaration over the property in question.
(Re: Supplemental Complaint) The petitioner filed with the
RTC a Motion to Admit Supplemental Complaint, attaching the
Supplemental Complaint wherein petitioner invoked her right, as
co-owner, to exercise the legal redemption. The RTC denied the
Motion Petitioner filed a Petition for Certiorari and Mandamus
with CA. CA promulgated its Decision denying the Petition
for Certiorari and Mandamus and held that the cause of action of
the petitioner in the Supplemental Complaint is entirely different
from the original complaint; that the Supplemental Complaint did
not merely supply its deficiencies; and that, at any rate, in the
event the trial court issues an adverse ruling, the petitioner can
still appeal the same, hence, the petition under Rule 65 is not
proper. Hence the first case
ISSUE: W/N the reliefs in the supplemental complaint merely
develop or extend the original causes of action.
HELD: The Petition (re: Supplemental Complaint) is meritorious;
but the Petition (re: Non-Suit) must fail.
The courts a quo held that the Supplemental Complaint
constituted a substantial amendment of the original complaint;
that the relief prayed for in the former is inconsistent with the
latter; and that the causes of action of both are likewise different.
This is incorrect.
Section 6, Rule 10 of the Revised Rules of Court provides:
SECTION 6. Supplemental Pleadings. - Upon motion of a
party the court may, upon reasonable notice and upon
such terms as are just, permit him to serve a

supplemental
pleading
setting
forth
transactions,
occurrences or events which have happened since the
date of the pleading sought to be supplemented. The
adverse party may plead thereto within ten (10) days
from notice of the order admitting the supplemental
pleading.
As its very name denotes, a supplemental pleading only serves
to bolster or add something to the primary pleading. A
supplement exists side by side with the original. It does not
replace that which it supplements. Moreover, a supplemental
pleading assumes that the original pleading is to stand and that
the issues joined with the original pleading remained an issue to
be tried in the action. It is but a continuation of the complaint. Its
usual office is to set up new facts which justify, enlarge or change
the kind of relief with respect to the same subject matter as the
controversy referred to in the original complaint.
The purpose of the supplemental pleading is to bring into the
records new facts which will enlarge or change the kind of relief
to which the plaintiff is entitled; hence, any supplemental facts
which further develop the original right of action, or extend to
vary the relief, are available by way of supplemental complaint
even though they themselves constitute a right of action.
In Leobrera v. Court of Appeals, the Court ruled that when the
cause of action stated in the supplemental complaint is different
from the causes of action mentioned in the original complaint,
the court should not admit the supplemental complaint; the
parties may file supplemental pleadings only to supply
deficiencies in aid of an original pleading, but not to introduce
new and independent causes of action. However, in Planters
Development Bank v. LZK Holdings and Development Co., the
Court held that a broad definition of causes of action should be
applied: while a matter stated in a supplemental complaint

should have some relation to the cause of action set forth in the
original pleading, the fact that the supplemental pleading
technically states a new cause of action should not be a bar to its
allowance but only a factor to be considered by the court in the
exercise of its discretion; and of course, a broad definition of
"cause of action" should be applied here as elsewhere.
In this case, the consolidation of title over the subject property in
the name of respondent Manuel Sy and the issue as to whether it
precluded petitioner as alleged co-owner from exercising the
right of legal redemption, are new matters that occurred after the
filing of the original complaint. The relief prayed for in the
Supplemental Complaint, which is the exercise of the right of
legal redemption accorded to co-owners of property, is germane
to and intertwined with the cause of action in the Complaint for
the nullification of the "Second Supplemental to the Extrajudicial
Partition" on the ground that it lacked the approval of a
guardianship court.
The petitioner's right to redeem the property is dependent on the
nullification of the partition which is the subject of the original
complaint. Unless the partition is nullified or declared without any
force or effect, the petitioner will not be considered a co-owner of
the property and, consequently, she will be unable to exercise
any right of legal redemption under Article 1620 of the Civil Code
granted to co-owners of property.
The right of legal redemption as co-owner is conferred by law and
is merely a natural consequence of co-ownership. Hence, the
petitioner's cause of action for legal redemption as embodied in
her Supplemental Complaint stems directly from and is an
extension of her rights as co-owner of the property subject of the
Complaint.

Furthermore, the evidence required to prove petitioner's right of

legal redemption in the Supplemental Complaint will be exactly
the same evidence required to prove the nullification of the
partition in the Complaint.
If a separate action is filed for the subject covered by the
Supplemental Complaint, there will be multiplicity of suits. Should
a separate complaint be filed before the nullification of the
partition, the same would be dismissed for being premature
pending the resolution of the Complaint for nullification.
After all, the respondents have the right to file a supplemental
answer to the Supplemental Complaint, conformably with Section
7, Rule 11 of the Rules of Court which reads:
SEC. 7. Answer to supplemental complaint. - A
supplemental complaint may be answered within ten (10)
days from notice of the order admitting the same, unless
a different period is fixed by the court. The answer to the
complaint shall serve as the answer to the supplemental
complaint if no new or supplemental answer is filed.
In affirming the RTC's denial of the admission of the
Supplemental Complaint, the CA rationalized that "[i]n the event
that the lower court rules in favor of petitioner, then there is no
need for her to file a petition to exercise the right of redemption.
On the other hand, should the trial court issue[ ] an adverse
ruling then petitioner can still appeal the same. The petition for
certiorari is therefore not proper."
This, too, is incorrect.
As the petitioner correctly pointed out, even if the trial court
decides in her favor, the redemption period would have lapsed

and would not form a part of the decision since it was not prayed
for, much less alleged in the original complaint. In such a case,
the respondents could oppose the exercise of the right to redeem
since it would not have been included in the decision over the
original complaint. And should the trial court issue an adverse
ruling, the petitioner can only appeal what is included in the
ruling which is limited to the denial of the prayer for the
nullification of the partition. Naturally, such a decision would not
concern any right of redemption.
Besides, as in Planters Development Bank, the admission of the
petitioner's Supplemental Complaint will better serve the ends of
justice. The Rules of Court were designed to facilitate the
administration of justice to the rival claims of the parties in a just,
speedy and inexpensive manner.
Thus, the courts a quo erred in denying the admission of
petitioner's Supplemental Complaint should be granted.

CARLOS LEOBRERA, vs. THE COURT OF APPEALS and BANK

OF THE PHILIPPINE ISLANDS
FACTS:
The crux of the present petition for review on certiorari is the
propriety of the admission by the trial court of a supplemental
complaint filed by petitioner.
In 1980, petitioner Carlos Leobrera was granted an P 800,000.00
credit facility by private respondent Bank of the Philippine
Islands. The facility was granted as part of an amicable

settlement. The credit facility granted was secured by two real

estate mortgages. In 1984, the facility was entirely converted
into a revolving promissory note line at 26% interest p.a. and set
on a floating rate basis the year after. The line was last renewed
on 21 March 1986 evidenced by two 90-day promissory notes.
Aside from the abovementioned credit facility, Leobrera also
obtained from BPI a separate three-year term loan in the amount
of P 500,000.00 This three-year term loan was secured by a third
real estate mortgage dated 23 October 1985.
Upon maturity of the 90-day notes BPI and Leobrera negotiated,
albeit unsuccessfully, on the terms of their renewal. No
agreement having been reached by them, BPI demanded the full
payment of the loan. Leobrera failed to settle his loan account
thus BPI prepared to foreclose the real estate mortgages securing
the same. Before BPI could institute foreclosure proceedings
however, Leobrera filed a complaint for damages with a prayer
for the issuance of a writ of preliminary injunction seeking to
enjoin BPI from foreclosing the mortgages,
The trial court issued an order restraining BPI from foreclosing
the real estate mortgages securing the 90 day loans and, after
hearing, issued a writ of preliminary injunction.
Meanwhile, on 9 February 1987, the bank wrote Leobrera
claiming that he failed to pay the amortization due on the threeyear term loan, as a result of which, BPI opted to accelarate the
maturity of the loan and called the entire loan due and
demandable. Leobrera likewise failed to remit the amount due
and BPI thus threatened to foreclose the real estate mortgage
securing the loan.
Before BPI could foreclose the mortgage, petitioner filed with the
trial court on 11 March 1987 a "Motion to File Supplemental

Complaint," attaching thereto the supplemental complaint which

prayed for the issuance of an injunction to restrain BPI from
foreclosing the third mortgage. The next day, the trial court
granted Leobrera's motion to file the supplemental complaint and
issued a restraining order enjoining BPI from proceeding with any
"Legal, court or other action" arising from the promissory note
evidencing the three-year term loan. BPI filed a motion to set it
aside but the motion was denied by the trial court. BPI then filed
a petition for certiorari and prohibition with a prayer for
preliminary injunction with the CA, but before the latter could act
on BPI's petition, the trial court granted the injunction prayed for.
The Court of Appeals gave due course to BPI's petition and
enjoined the trial judge from enforcing his order, and issued a
writ of preliminary injunction in favor of BPI.
The Court of Appeals rendered a decision in favor of BPI. Leobrera
filed the instant petition for review with prayer for the issuance of
a writ of preliminary injunction.
ISSUE:
Whether or not the Court of Appeals erred in holding that the trial
court abused its discretion in admitting the supplemental
complaint.
HELD:
YES.Section 6 of Rule 10 of the Rules of Court governs the
admission of supplemental pleadings .The said rule expressly
provides that the Court may allow a party upon motion to serve a
supplemental pleading after reasonable notice has been given
the other party. However, as the Court of Appeals found, that the
motion was sent to BPI by registered mail on the same day but
was received by the latter only on 13 March 1987. A day earlier
however, 12 March 1987, the trial court had already issued an
order granting the motion and admitted the supplemental

complaint "in the interest of sound administration of justice" The

trial judge likewise issued a temporary restraining order to enjoin
BPI from proceeding with "Any legal, court or other action against
plaintiff
It is difficult to ascribe as "reasonable' the above described
manner in which BPI was apprised of the proceedings relative to
the supplemental complaint. The undue haste which
characterized the trial courts admission of the supplemental
complaint is at once apparent as no notice had as yet been
received by BPI when the trial court issued the 12 March 1987
order granting the motion to file the supplemental complaint and
restraining BPI from foreclosing the mortgage. BPI learned of the
existence of the motion and the order granting it only on 13
March 1987. By then it was too late for it to contest the motion.
The arbitrariness of the trial court's admission of the
supplemental complaint is brought to the fore when it is
considered that the motion to file the supplemental complaint
contained an invalid notice of hearing and lacked proof of its
service as required by Section 4, 5 and 6 of Rule 15 of the
Revised Rules of Court. This is apparent from a cursory reading of
said "Notice of Hearing."
The notice of hearing is intended to prevent surprise and to
afford the adverse party a chance to be heard before the motion
is resolved by the trial court. While the court has said that a
literal observance of the notice requirements in Sections 4, 5 and
6 of Rule 15 is not necessary, a seasonable service of a copy of
the motion on adverse party or counsel with a notice of hearing
indicating the time and place of hearing of the motion are
mandatory requirements that cannot be dispensed with as these
are the minimum requirements of procedural due process. It is
evident from the notice that no time and place of hearing of the
motion is indicated. Neither does the record reveal that there was

proof of service attached to the motion. The minimum

requirements of procedural due process not having been satisfied
by the notice, the motion to which it was attached is thus a mere
scrap of paper not entitled to any cognizance by the trial court.
The Court of Appeals thus committed no reversible error in
annulling the 12 March 1987 order of the trial court tainted as it
was with clear grave abuse of discretion.
As to the supplemental complaint, what likewise militates against
its admission is the fact that the matters involved therein are
entirely different from the causes of action mentioned in the
original complaint.
A supplemental complaint should, as the name implies, supply
only deficiencies in aid of an original complaint.While petitioner
would persuade this Court that the causes of action are
interrelated, the record reveals otherwise. The record shows that
petitioner's main cause of action in the original complaint filed
concerned BPI's threat to foreclose two real estate mortgages
securing the two 90 day promissory notes executed by petitioner
in 1986. Petitioner alleges that this threatened foreclosure
violated the terms of the 1980 amicable settlement between BPI
and petitioner. The supplemental complaint on the other hand
alleged acts of harassment committed by BPI in unreasonably
opting to declare petitioner in default and in demanding full
liquidation of the 1985 three-year term loan. This three-year term
loan, as previously mentioned, was entirely distinct and separate
from the two promissory notes. It was independent of the 1980
amicable settlement between petitioner and BPI which gave rise
to the credit facility subject of the original complaint. Although
there is Identity in the remedies asked for in the original and
supplemental complaints, i.e. injunction, petitioner's subsequent
cause of action giving rise to the claim for damages in the
supplemental complaint is unrelated to the amicable settlement
which brought about the grant of the credit facilities, the breach

of which settlement is alleged to be the basis of the original

complaint. Petitioner himself in his supplemental complaint
admits this.
The two causes of action being entirely different, the latter one
could not be successfully pleaded by supplemental complaint.
WHEREFORE, in view of the foregoing, the petition is hereby
DENIED. The temporary restraining order issued on 28 October
1987 is hereby LIFTED.

THE DIRECTOR OF LANDS vs. THE COURT OF APPEALS and

BORROMEO BROS. ESTATE, INC.,
FACTS:
Whether the land in dispute was formed by the action of the sea
or by deposits of soil and sedimentary matter carried by river
currents is the main issue in this case, which was elevated to the
Court by petition for review of a decision of the Court of Appeals.
1

In October 1956 the corporation R. Borromeo Bros. Estate, Inc.

instituted in the CFI of Leyte original proceedings for confirmation
and registration of title in its favor of a parcel of land fronting the
sea in the coastal town of San Isidro, Leyte. The application
alleged that the land had been formed by accretion of sediments
carried from the highlands by the natural action of the Si-ong and
Sinubdan; that it had been publicly, openly, continuously and
adversely possessed by the applicant for 20 years prior to the
filing of the application; and that to the applicant's knowledge
there existed no mortgage, lien or other adverse claim on the
land.

Two oppositions to the application were filed. One, filed by the

Director of Lands, asserted that the land applied for was part of
the public domain, and that the applicant or its predecessors-ininterest had no sufficient title to the land. The other opposition,
filed by the Municipality of San Isidro, echoed the contention of
the Director of Lands that the land formed part of the public
domain; averred that the land was occupied by other parties who
had waived their claims in favor of said oppositor; and alleged,
further, that it (oppositor) needed the land for municipal
expansion and that the applicant had applied for, but had been
denied, a lease of the land after it had been released for private
occupation by the Bureau of Forestry.
The case was then heard. It would appear that after the applicant
had presented its evidence, it sought and was allowed to amend
its application, which originally alleged that the land applied for
had been formed of alluvium deposited by the action of the sea,
in order to allege, as said appellant's evidence had tended to
establish, that said land had been formed instead from accretions
of soil and sediment carried from higher places by the currents of
the Si-ong and Sinubdan Creeks.
The Trial Court rendered judgment denying the application and
declaring the land applied for public land formed by the action of
the sea and not of any river. The applicant then appealed to the
CA, which reversed the decision of the Trial Court and decreed
registration of the land in the applicant's name.
The CA judgment was in turn appealed to this Court by the
Director of Lands
ISSUE:

Whether the applicant is bound by the averment in its original

application that the land was formed by the natural action of the
sea. (NO)
HELD:
The Court of Appeals correctly overruled the petitioner's
contention that the averment in the original application for
registration attributing the origin of the land to the action of the
sea, which averment, with leave of court, was later superseded
by an amendment to the effect that the land was formed by the
action of rivers, was binding on the private respondent as a
judicial admission. Pleadings that have been amended
disappear from the record, lose their status as pleadings
and cease to be judicial admissions. While they may
nonetheless be utilized against the pleader as extrajudicial admissions, they must, in order to have such
effect, be formally offered in evidence. It does not appear
that the original application for registration containing
the averment in question, or that particular averment
itself, was offered or received in evidence for the
petitioner in the Trial Court.
WHEREFORE, the Decision of the Court of Appeals subject of the
petition for review is AFFIRMED, without pronouncement as to
costs.