Rules 1-4

1. Dial Corp. v. Judge Soriano Marlouis Planas

The petitioners are foreign corporations organized and existing under the laws of the United States, the
United Kingdom, and Malaysia, are not domiciled in the Philippines, nor do they have officers or agents,
place of business, or property in the Philippines; they are not licensed to engage, and are not engaged, in
business here. The respondent Imperial Vegetable Oil Company, Inc. (or "IVO" for brevity) is a
Philippine corporation which through its president, Dominador Monteverde, had entered into several
contracts for the delivery of coconut oil to the petitioners. Those contracts stipulate that any dispute
between the parties will be settled through arbitration under the rules of either the Federation of Oils
Seeds and Fats Association (FOSFA) or the National Institute of Oil Seed Products (NIOP). Because IVO
defaulted under the contracts, the petitioners and 15 others, initiated arbitration proceedings abroad, and
some have already obtained arbitration awards against IVO.
On April 8, 1987, IVO filed a complaint for injunction and damages against nineteen (19) foreign coconut
oil buyers including the petitioners, with whom its president, Dominador Monteverde, had entered into
contracts for the delivery of coconut oil (Civil Case No. 87-40166, RTC Manila entitled "Imperial
Vegetable Oil Co., Inc. vs. Dial Corporation et al."). IVO repudiated Monteverde's contracts on the
grounds that they were mere "paper trading in futures" as no actual delivery of the coconut oil was
allegedly intended by the parties; that the Board of Directors of IVO convened in a special meeting on
March 21, 1987 and removed Dominador Monteverde from his position as president of the corporation,
named in his place, Rodrigo Monteverde, and disowned Dominador Monteverde's allegedly illegal and
unauthorized acts; that the defendants have allegedly "harassed" IVO to comply with Dominador's
contracts and to come to a settlement with them. IVO prayed for the issuance of a temporary restraining
order or writ of preliminary injunction to stop the defendants from harassing IVO with their insistent
demands to recognize the contracts entered into by Dominador Monteverde and from portraying the IVO
as one that defaults on its contracts and obligations and has fallen into bad times and from interfering with
IVO's normal conduct of business. IVO also prayed that the defendants pay it moral damages of P5
million, actual damages of P10 million, exemplary damages of P5 million, attorney's fees of P1 million,
P3,000 per appearance of counsel, and litigation expenses.
On motion of IVO, respondent Judge authorized it to effect extraterritorial service of summons to all the
defendants through DHL Philippines corporation (Annex B). Pursuant to that order, the petitioners were
served with summons and copy of the complaint by DHL courier service.
On April 25, 1987, without submitting to the court's jurisdiction and only for the purpose of objecting to
said jurisdiction over their persons, the petitioners filed motions to dismiss the complaint against them on
the ground that the extraterritorial service of summons to them was improper and that hence the court did
not acquire jurisdiction over them. On December 15, 1987, the court denied their motions to dismiss and
upheld the validity of the extraterritorial service of summons to them on the ground that "the present

action relates to property rights which lie in contracts within the Philippines, or which defendants claim
liens or interests, actual or inchoate, legal or equitable (par. 2, complaint). And one of the reliefs
demanded consists, wholly or in part, in excluding the defendants from any interest in such property for
the reason that their transactions with plaintiff's former president are ultra vires." Furthermore, "as foreign
corporations doing business in the Philippines without a license, they opened themselves to suit before
Philippine courts, pursuant to Sec. 133 of the Corporation Code of the Philippines." (Annex H) The
petitioners' motions for reconsideration of that order were also denied by the court (Annex M), hence this
petition for certiorari with a prayer for the issuance of a temporary retraining order which We granted.
The petition is meritorious.
Section 17, Rule 14 of the Rules of Court provides:
Section 17.

Extraterritorial service. When the defendant does not reside and is not found in the

Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which
is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or
contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from
any interest therein, or the property of the defendant has been attached within the Philippines, service
may, by leave of court, be effected out of the Philippines by personal service as under section 7; or by
publication in a newspaper of general circulation in such places and for such time as the court may order,
in which case a copy of the summons and order of the court shall be sent by registered mail to the last
known address of the defendant, or in any other manner the court may deem sufficient. Any order
granting such leave shall specify a reasonable time, which shag not be less than sixty (60) days after
notice, within which the defendant must answer.
Only in four (4) instances is extraterritorial service of summons proper, namely: "(1) when the action
affects the personal status of the plaintiffs; (2) when the action relates to, or the subject of which is,
property within the Philippines, in which the defendant has or claims a lien or interest, actual or
contingent; (3) when the relief demanded in such action consists, wholly or in part, in excluding the
defendant from any interest in property located in the Philippines; and (4) when the defendant nonresident's property has been attached within the Philippines" (De Midgely vs. Fernandos, 64 SCRA 23).
The complaint in this case does not involve the personal status of the plaintiff, nor any property in the
Philippines in which the defendants have or claim an interest, or which the plaintiff has attached. The
action is purely an action for injunction to restrain the defendants from enforcing against IVO ("abusing
and harassing") its contracts for the delivery of coconut oil to the defendants, and to recover from the
defendants P21 million in damages for such "harassment." It is clearly a personal action as well as an
action in personam, not an action in rem or quasi in rem. "An action in personam is an action against a
person on the basis of his personal liability, while an action in remedies is an action against the thing
itself, instead of against the person." (Hernandez vs. Rural Bank of Lucena, Inc., 76 SCRA 85). A

personal action is one brought for the recovery of personal property, for the enforcement of some contract
or recovery of damages for its breach, or for the recovery of damages for the commission of an injury to
the person or property (Hernandez vs. Development Bank of the Philippines, 71 SCRA 292).<re||
an1w>
As Civil Case No. 87-40166 is a personal action, personal or substituted service of summons on the
defendants, not extraterritorial service, is necessary to confer jurisdiction on the court. The rule is
explained in Moran's Comments on the Rules of Court thus:
As a general rule, when the defendant is not residing and is not found in the Philippines, the Philippine
courts cannot try any case against him because of the impossibility of acquiring jurisdiction over his
person unless he voluntarily appears in court. But, when the action affects the personal status of the
plaintiff residing in the Philippines, or is intended to seize or dispose of any property, real or personal, of
the defendant located in the Philippines, it may be validly tried by the Philippine courts, for then, they
have jurisdiction over the res, i.e., the personal status of the plaintiff or the property of the defendant and
their jurisdiction over the person of the non-resident defendant is not essential. Venue in such cases may
be laid in the province where the property of the defendant or a part thereof involved in the litigation is
located. (5 Moran's Comments on the Rules of Court, 2nd Ed., p. 105.)
In an action for injunction, extraterritorial service of summons and complaint upon the non-resident
defendants cannot subject them to the processes of the regional trial courts which are powerless to reach
them outside the region over which they exercise their authority (Sec. 3-a, Interim Rules of Court; Sec.
21, subpar. 1, B.P. Blg. 129). Extraterritorial service of summons will not confer on the court jurisdiction
or power to compel them to obey its orders.
Neither may the court by extraterritorial service of summons acquire jurisdiction to render and enforce a
money judgment against a non-resident defendant who has no property in the Philippines for "the
fundamental rule is that jurisdiction in personam over non-residents, so as to sustain a money judgment,
must be based uponpersonal service within the state which renders the judgment "(Boudard vs. Tait, 67
Phil. 170, 174).
Respondents' contention that "the action below is related to property within the Philippines, specifically
contractual rights that petitioners are enforcing against IVO" is specious for the "contractual rights" of the
petitioners are not property found in the Philippines for the petitioners have not filed an action in the local
courts to enforce said rights. They have not submitted to the jurisdiction of our courts.
The lower court invoked Section 33 of the Corporation Code which provides that a "foreign corporation
transacting business in the Philippines without a license may be sued or proceeded against before
Philippine courts or administrative tribunal on any valid cause of action recognized under Philippine
laws." It assumed that the defendants (herein petitioners) are doing business in the Philippines, which
allegation the latter denied. Even if they can be considered as such, the Corporation Code did not repeal

the rules requiring proper service of summons to such corporations as provided in Rule 14 of the Rules of
Court and Section 128 of the Corporation Code.
The respondent court's finding that, by filing motions to dismiss, the petitioners hypothetically admitted
the allegations of the complaint that they are doing business in the Philippines without any license, and
that they may be served with summons and other court processes through their agents or representatives
enumerated in paragraph 2 of the complaint, is contradicted by its order authorizing IVO to summon them
by extraterritorial service, a mode of service which is resorted to when the defendant is not found in the
Philippines, does not transact business here, and has no resident agent on whom the summons may be
served.
WHEREFORE, We hold that the extraterritorial service of summons on the petitioners was improper,
hence null and void. The petition for certiorari is granted.

2. Mijares v. Javier Joseph Adrian Llames

Our martial law experience bore strange unwanted fruits, and we have yet to finish weeding out its bitter
crop. While the restoration of freedom and the fundamental structures and processes of democracy have
been much lauded, according to a significant number, the changes, however, have not sufficiently healed
the colossal damage wrought under the oppressive conditions of the martial law period. The cries of
justice for the tortured, the murdered, and the desaparecidos arouse outrage and sympathy in the hearts of
the fair-minded, yet the dispensation of the appropriate relief due them cannot be extended through the
same caprice or whim that characterized the ill-wind of martial rule. The damage done was not merely
personal but institutional, and the proper rebuke to the iniquitous past has to involve the award of
reparations due within the confines of the restored rule of law.
The petitioners in this case are prominent victims of human rights violations 1 who, deprived of the
opportunity to directly confront the man who once held absolute rule over this country, have chosen to do
battle instead with the earthly representative, his estate. The clash has been for now interrupted by a trial
court ruling, seemingly comported to legal logic, that required the petitioners to pay a whopping filing fee
of over Four Hundred Seventy-Two Million Pesos (P472,000,000.00) in order that they be able to enforce
a judgment awarded them by a foreign court. There is an understandable temptation to cast the struggle
within the simplistic confines of a morality tale, and to employ short-cuts to arrive at what might seem the
desirable solution. But easy, reflexive resort to the equity principle all too often leads to a result that may
be morally correct, but legally wrong.
Nonetheless, the application of the legal principles involved in this case will comfort those who maintain
that our substantive and procedural laws, for all their perceived ambiguity and susceptibility to myriad

interpretations, are inherently fair and just. The relief sought by the petitioners is expressly mandated by
our laws and conforms to established legal principles. The granting of this petition for certiorari is
warranted in order to correct the legally infirm and unabashedly unjust ruling of the respondent judge.
The essential facts bear little elaboration. On 9 May 1991, a complaint was filed with the United States
District Court (US District Court), District of Hawaii, against the Estate of former Philippine President
Ferdinand E. Marcos (Marcos Estate). The action was brought forth by ten Filipino citizens 2 who each
alleged having suffered human rights abuses such as arbitrary detention, torture and rape in the hands of
police or military forces during the Marcos regime. 3 The Alien Tort Act was invoked as basis for the US
District Court's jurisdiction over the complaint, as it involved a suit by aliens for tortious violations of
international law.4 These plaintiffs brought the action on their own behalf and on behalf of a class of
similarly situated individuals, particularly consisting of all current civilian citizens of the Philippines,
their heirs and beneficiaries, who between 1972 and 1987 were tortured, summarily executed or had
disappeared while in the custody of military or paramilitary groups. Plaintiffs alleged that the class
consisted of approximately ten thousand (10,000) members; hence, joinder of all these persons was
impracticable.
The institution of a class action suit was warranted under Rule 23(a) and (b)(1)(B) of the US Federal
Rules of Civil Procedure, the provisions of which were invoked by the plaintiffs. Subsequently, the US
District Court certified the case as a class action and created three (3) sub-classes of torture, summary
execution and disappearance victims. 5 Trial ensued, and subsequently a jury rendered a verdict and an
award of compensatory and exemplary damages in favor of the plaintiff class. Then, on 3 February 1995,
the US District Court, presided by Judge Manuel L. Real, rendered a Final Judgment (Final Judgment)
awarding the plaintiff class a total of One Billion Nine Hundred Sixty Four Million Five Thousand Eight
Hundred Fifty Nine Dollars and Ninety Cents ($1,964,005,859.90). The Final Judgment was eventually
affirmed by the US Court of Appeals for the Ninth Circuit, in a decision rendered on 17 December 1996. 6
On 20 May 1997, the present petitioners filed Complaint with the Regional Trial Court, City of Makati
(Makati RTC) for the enforcement of the Final Judgment. They alleged that they are members of the
plaintiff class in whose favor the US District Court awarded damages. 7 They argued that since the Marcos
Estate failed to file a petition for certiorari with the US Supreme Court after the Ninth Circuit Court of
Appeals had affirmed the Final Judgment, the decision of the US District Court had become final and
executory, and hence should be recognized and enforced in the Philippines, pursuant to Section 50, Rule
39 of the Rules of Court then in force.8
On 5 February 1998, the Marcos Estate filed a motion to dismiss, raising, among others, the non-payment
of the correct filing fees. It alleged that petitioners had only paid Four Hundred Ten Pesos (P410.00) as
docket and filing fees, notwithstanding the fact that they sought to enforce a monetary amount of damages
in the amount of over Two and a Quarter Billion US Dollars (US$2.25 Billion). The Marcos Estate cited
Supreme Court Circular No. 7, pertaining to the proper computation and payment of docket fees. In

response, the petitioners claimed that an action for the enforcement of a foreign judgment is not capable
of pecuniary estimation; hence, a filing fee of only Four Hundred Ten Pesos (P410.00) was proper,
pursuant to Section 7(c) of Rule 141.9
On 9 September 1998, respondent Judge Santiago Javier Ranada 10 of the Makati RTC issued the subject
Orderdismissing the complaint without prejudice. Respondent judge opined that contrary to the
petitioners' submission, the subject matter of the complaint was indeed capable of pecuniary estimation,
as it involved a judgment rendered by a foreign court ordering the payment of definite sums of money,
allowing for easy determination of the value of the foreign judgment. On that score, Section 7(a) of Rule
141 of the Rules of Civil Procedure would find application, and the RTC estimated the proper amount of
filing fees was approximately Four Hundred Seventy Two Million Pesos, which obviously had not been
paid.
Not surprisingly, petitioners filed a Motion for Reconsideration, which Judge Ranada denied in an Order
dated 28 July 1999. From this denial, petitioners filed a Petition for Certiorari under Rule 65 assailing the
twin orders of respondent judge. 11 They prayed for the annulment of the questioned orders, and an order
directing the reinstatement of Civil Case No. 97-1052 and the conduct of appropriate proceedings
thereon.
Petitioners submit that their action is incapable of pecuniary estimation as the subject matter of the suit is
the enforcement of a foreign judgment, and not an action for the collection of a sum of money or recovery
of damages. They also point out that to require the class plaintiffs to pay Four Hundred Seventy Two
Million Pesos (P472,000,000.00) in filing fees would negate and render inutile the liberal construction
ordained by the Rules of Court, as required by Section 6, Rule 1 of the Rules of Civil Procedure,
particularly the inexpensive disposition of every action.
Petitioners invoke Section 11, Article III of the Bill of Rights of the Constitution, which provides that
"Free access to the courts and quasi-judicial bodies and adequate legal assistance shall not be denied to
any person by reason of poverty," a mandate which is essentially defeated by the required exorbitant filing
fee. The adjudicated amount of the filing fee, as arrived at by the RTC, was characterized as indisputably
unfair, inequitable, and unjust.
The Commission on Human Rights (CHR) was permitted to intervene in this case. 12 It urged that the
petition be granted and a judgment rendered, ordering the enforcement and execution of the District Court
judgment in accordance with Section 48, Rule 39 of the 1997 Rules of Civil Procedure. For the CHR, the
Makati RTC erred in interpreting the action for the execution of a foreign judgment as a new case, in
violation of the principle that once a case has been decided between the same parties in one country on
the same issue with finality, it can no longer be relitigated again in another country. 13 The CHR likewise
invokes the principle of comity, and of vested rights.

The Court's disposition on the issue of filing fees will prove a useful jurisprudential guidepost for courts
confronted with actions enforcing foreign judgments, particularly those lodged against an estate. There is
no basis for the issuance a limited pro hac vice ruling based on the special circumstances of the
petitioners as victims of martial law, or on the emotionally-charged allegation of human rights abuses.
An examination of Rule 141 of the Rules of Court readily evinces that the respondent judge ignored the
clear letter of the law when he concluded that the filing fee be computed based on the total sum claimed
or the stated value of the property in litigation.
In dismissing the complaint, the respondent judge relied on Section 7(a), Rule 141 as basis for the
computation of the filing fee of over P472 Million. The provision states:
SEC. 7. Clerk of Regional Trial Court.(a) For filing an action or a permissive counterclaim or money claim against an estate not based on
judgment, or for filing with leave of court a third-party, fourth-party, etc., complaint, or a complaint in
intervention, and for all clerical services in the same time, if the total sum claimed, exclusive of interest,
or the started value of the property in litigation, is:
1. Less than P 100,00.00

P 500.00

2. P 100,000.00 or more but less than P 150,000.00

P 800.00

3. P 150,000.00 or more but less than P 200,000.00

P 1,000.00

4. P 200,000.00 or more but less than P 250,000.00

P 1,500.00

5. P 250,000.00 or more but less than P 300,00.00

P 1,750.00

6. P 300,000.00 or more but not more than P 400,000.00

P 2,000.00

7. P 350,000.00 or more but not more than P400,000.00

P 2,250.00

8. For each P 1,000.00 in excess of P 400,000.00

P 10.00

(Emphasis supplied)
Obviously, the above-quoted provision covers, on one hand, ordinary actions, permissive counterclaims,
third-party, etc. complaints and complaints-in-interventions, and on the other, money claims against
estates which are not based on judgment. Thus, the relevant question for purposes of the present petition
is whether the action filed with the lower court is a "money claim against an estate not based on
judgment."

Petitioners' complaint may have been lodged against an estate, but it is clearly based on a judgment, the
Final Judgment of the US District Court. The provision does not make any distinction between a local
judgment and a foreign judgment, and where the law does not distinguish, we shall not distinguish.
A reading of Section 7 in its entirety reveals several instances wherein the filing fee is computed on the
basis of the amount of the relief sought, or on the value of the property in litigation. The filing fee for
requests for extrajudicial foreclosure of mortgage is based on the amount of indebtedness or the
mortgagee's claim.14 In special proceedings involving properties such as for the allowance of wills, the
filing fee is again based on the value of the property. 15 The aforecited rules evidently have no application
to petitioners' complaint.
Petitioners rely on Section 7(b), particularly the proviso on actions where the value of the subject matter
cannot be estimated. The provision reads in full:
SEC. 7. Clerk of Regional Trial Court.(b) For filing
1.

Actions where the value

of the subject matter

cannot be estimated
2.

---

P 600.00

Special civil actions except

judicial foreclosure which

shall be governed by
paragraph (a) above
3.

---

P 600.00

All other actions not

involving property

---

P 600.00

In a real action, the assessed value of the property, or if there is none, the estimated value, thereof shall be
alleged by the claimant and shall be the basis in computing the fees.
It is worth noting that the provision also provides that in real actions, the assessed value or estimated
value of the property shall be alleged by the claimant and shall be the basis in computing the fees. Yet
again, this provision does not apply in the case at bar. A real action is one where the plaintiff seeks the
recovery of real property or an action affecting title to or recovery of possession of real property. 16 Neither
the complaint nor the award of damages adjudicated by the US District Court involves any real property
of the Marcos Estate.
Thus, respondent judge was in clear and serious error when he concluded that the filing fees should be
computed on the basis of the schematic table of Section 7(a), as the action involved pertains to a claim

against an estate based on judgment. What provision, if any, then should apply in determining the filing
fees for an action to enforce a foreign judgment?
To resolve this question, a proper understanding is required on the nature and effects of a foreign
judgment in this jurisdiction.
The rules of comity, utility and convenience of nations have established a usage among civilized states by
which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered
efficacious under certain conditions that may vary in different countries. 17 This principle was prominently
affirmed in the leading American case of Hilton v. Guyot18 and expressly recognized in our jurisprudence
beginning withIngenholl v. Walter E. Olsen & Co.19 The conditions required by the Philippines for
recognition and enforcement of a foreign judgment were originally contained in Section 311 of the Code
of Civil Procedure, which was taken from the California Code of Civil Procedure which, in turn, was
derived from the California Act of March 11, 1872. 20 Remarkably, the procedural rule now outlined in
Section 48, Rule 39 of the Rules of Civil Procedure has remained unchanged down to the last word in
nearly a century. Section 48 states:
SEC. 48.

Effect of foreign judgments. The effect of a judgment of a tribunal of a foreign country,

having jurisdiction to pronounce the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the
parties and their successors in interest by a subsequent title;
In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact.
There is an evident distinction between a foreign judgment in an action in rem and one in personam. For
an action in rem, the foreign judgment is deemed conclusive upon the title to the thing, while in an action
inpersonam, the foreign judgment is presumptive, and not conclusive, of a right as between the parties
and their successors in interest by a subsequent title. 21 However, in both cases, the foreign judgment is
susceptible to impeachment in our local courts on the grounds of want of jurisdiction or notice to the
party,22 collusion, fraud,23or clear mistake of law or fact. 24 Thus, the party aggrieved by the foreign
judgment is entitled to defend against the enforcement of such decision in the local forum. It is essential
that there should be an opportunity to challenge the foreign judgment, in order for the court in this
jurisdiction to properly determine its efficacy.25
It is clear then that it is usually necessary for an action to be filed in order to enforce a foreign judgment 26,
even if such judgment has conclusive effect as in the case of in rem actions, if only for the purpose of
allowing the losing party an opportunity to challenge the foreign judgment, and in order for the court to
properly determine its efficacy.27 Consequently, the party attacking a foreign judgment has the burden of
overcoming the presumption of its validity.28

The rules are silent as to what initiatory procedure must be undertaken in order to enforce a foreign
judgment in the Philippines. But there is no question that the filing of a civil complaint is an appropriate
measure for such purpose. A civil action is one by which a party sues another for the enforcement or
protection of a right,29 and clearly an action to enforce a foreign judgment is in essence a vindication of a
right prescinding either from a "conclusive judgment upon title" or the "presumptive evidence of a
right."30 Absent perhaps a statutory grant of jurisdiction to a quasi-judicial body, the claim for
enforcement of judgment must be brought before the regular courts. 31
There are distinctions, nuanced but discernible, between the cause of action arising from the enforcement
of a foreign judgment, and that arising from the facts or allegations that occasioned the foreign judgment.
They may pertain to the same set of facts, but there is an essential difference in the right-duty correlatives
that are sought to be vindicated. For example, in a complaint for damages against a tortfeasor, the cause of
action emanates from the violation of the right of the complainant through the act or omission of the
respondent. On the other hand, in a complaint for the enforcement of a foreign judgment awarding
damages from the same tortfeasor, for the violation of the same right through the same manner of action,
the cause of action derives not from the tortious act but from the foreign judgment itself.
More importantly, the matters for proof are different. Using the above example, the complainant will have
to establish before the court the tortious act or omission committed by the tortfeasor, who in turn is
allowed to rebut these factual allegations or prove extenuating circumstances. Extensive litigation is thus
conducted on the facts, and from there the right to and amount of damages are assessed. On the other
hand, in an action to enforce a foreign judgment, the matter left for proof is the foreign judgment itself,
and not the facts from which it prescinds.
As stated in Section 48, Rule 39, the actionable issues are generally restricted to a review of jurisdiction
of the foreign court, the service of personal notice, collusion, fraud, or mistake of fact or law. The
limitations on review is in consonance with a strong and pervasive policy in all legal systems to limit
repetitive litigation on claims and issues. 32 Otherwise known as the policy of preclusion, it seeks to
protect party expectations resulting from previous litigation, to safeguard against the harassment of
defendants, to insure that the task of courts not be increased by never-ending litigation of the same
disputes, and in a larger sense to promote what Lord Coke in the Ferrer's Case of 1599 stated to be
the goal of all law: "rest and quietness." 33 If every judgment of a foreign court were reviewable on the
merits, the plaintiff would be forced back on his/her original cause of action, rendering immaterial the
previously concluded litigation.34
Petitioners appreciate this distinction, and rely upon it to support the proposition that the subject matter of
the complaintthe enforcement of a foreign judgmentis incapable of pecuniary estimation. Admittedly the
proposition, as it applies in this case, is counter-intuitive, and thus deserves strict scrutiny. For in all
practical intents and purposes, the matter at hand is capable of pecuniary estimation, down to the last cent.
In the assailedOrder, the respondent judge pounced upon this point without equivocation:

The Rules use the term "where the value of the subject matter cannot be estimated." The subject matter of
the present case is the judgment rendered by the foreign court ordering defendant to pay plaintiffs definite
sums of money, as and for compensatory damages. The Court finds that the value of the foreign judgment
can be estimated; indeed, it can even be easily determined. The Court is not minded to distinguish
between the enforcement of a judgment and the amount of said judgment, and separate the two, for
purposes of determining the correct filing fees. Similarly, a plaintiff suing on promissory note for P1
million cannot be allowed to pay only P400 filing fees (sic), on the reasoning that the subject matter of his
suit is not the P1 million, but the enforcement of the promissory note, and that the value of such
"enforcement" cannot be estimated.35
The jurisprudential standard in gauging whether the subject matter of an action is capable of pecuniary
estimation is well-entrenched. The Marcos Estate cites Singsong v. Isabela Sawmill and Raymundo v.
Court of Appeals, which ruled:
[I]n determining whether an action is one the subject matter of which is not capable of pecuniary
estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or
remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of
pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance
would depend on the amount of the claim. However, where the basic issue is something other than the
right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the
principal relief sought, this Court has considered such actions as cases where the subject of the litigation
may not be estimated in terms of money, and are cognizable exclusively by courts of first instance (now
Regional Trial Courts).
On the other hand, petitioners cite the ponencia of Justice JBL Reyes in Lapitan v. Scandia,36 from which
the rule in Singsong and Raymundo actually derives, but which incorporates this additional nuance
omitted in the latter cases:
xxx However, where the basic issue is something other than the right to recover a sum of money, where
the money claim is purely incidental to, or a consequence of, the principal relief sought, like in suits to
have the defendant perform his part of the contract (specific performance) and in actions for
support, or for annulment of judgment or to foreclose a mortgage, this Court has considered such
actions as cases where the subject of the litigation may not be estimated in terms of money, and are
cognizable exclusively by courts of first instance. 37
Petitioners go on to add that among the actions the Court has recognized as being incapable of pecuniary
estimation include legality of conveyances and money deposits, 38 validity of a mortgage,39 the right to
support,40validity of documents,41 rescission of contracts, 42 specific performance,43 and validity or
annulment of judgments.44 It is urged that an action for enforcement of a foreign judgment belongs to the
same class.

This is an intriguing argument, but ultimately it is self-evident that while the subject matter of the action
is undoubtedly the enforcement of a foreign judgment, the effect of a providential award would be the
adjudication of a sum of money. Perhaps in theory, such an action is primarily for "the enforcement of the
foreign judgment," but there is a certain obtuseness to that sort of argument since there is no denying that
the enforcement of the foreign judgment will necessarily result in the award of a definite sum of money.
But before we insist upon this conclusion past beyond the point of reckoning, we must examine its
possible ramifications. Petitioners raise the point that a declaration that an action for enforcement of
foreign judgment may be capable of pecuniary estimation might lead to an instance wherein a first level
court such as the Municipal Trial Court would have jurisdiction to enforce a foreign judgment. But under
the statute defining the jurisdiction of first level courts, B.P. 129, such courts are not vested with
jurisdiction over actions for the enforcement of foreign judgments.
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts in civil cases. Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts shall exercise:
(1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate,
including the grant of provisional remedies in proper cases, where the value of the personal property,
estate, or amount of the demand does not exceed One hundred thousand pesos (P100,000.00) or, in Metro
Manila where such personal property, estate, or amount of the demand does not exceed Two hundred
thousand pesos (P200,000.00) exclusive of interest damages of whatever kind, attorney's fees, litigation
expenses, and costs, the amount of which must be specifically alleged: Provided, That where there are
several claims or causes of action between the same or different parties, embodied in the same complaint,
the amount of the demand shall be the totality of the claims in all the causes of action, irrespective of
whether the causes of action arose out of the same or different transactions;
(2) Exclusive original jurisdiction over cases of forcible entry and unlawful detainer: Provided, That
when, in such cases, the defendant raises the question of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be
resolved only to determine the issue of possession.
(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property,
or any interest therein where the assessed value of the property or interest therein does not exceed Twenty
thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not
exceed Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorney's
fees, litigation expenses and costs: Provided, That value of such property shall be determined by the
assessed value of the adjacent lots.45
Section 33 of B.P. 129 refers to instances wherein the cause of action or subject matter pertains to an
assertion of rights and interests over property or a sum of money. But as earlier pointed out, the subject

matter of an action to enforce a foreign judgment is the foreign judgment itself, and the cause of action
arising from the adjudication of such judgment.
An examination of Section 19(6), B.P. 129 reveals that the instant complaint for enforcement of a foreign
judgment, even if capable of pecuniary estimation, would fall under the jurisdiction of the Regional Trial
Courts, thus negating the fears of the petitioners. Indeed, an examination of the provision indicates that it
can be relied upon as jurisdictional basis with respect to actions for enforcement of foreign judgments,
provided that no other court or office is vested jurisdiction over such complaint:
Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction:
xxx
(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising
jurisdiction or any court, tribunal, person or body exercising judicial or quasi-judicial functions.
Thus, we are comfortable in asserting the obvious, that the complaint to enforce the US District Court
judgment is one capable of pecuniary estimation. But at the same time, it is also an action based on
judgment against an estate, thus placing it beyond the ambit of Section 7(a) of Rule 141. What provision
then governs the proper computation of the filing fees over the instant complaint? For this case and other
similarly situated instances, we find that it is covered by Section 7(b)(3), involving as it does, "other
actions not involving property."
Notably, the amount paid as docket fees by the petitioners on the premise that it was an action incapable
of pecuniary estimation corresponds to the same amount required for "other actions not involving
property." The petitioners thus paid the correct amount of filing fees, and it was a grave abuse of
discretion for respondent judge to have applied instead a clearly inapplicable rule and dismissed the
complaint.
There is another consideration of supreme relevance in this case, one which should disabuse the notion
that the doctrine affirmed in this decision is grounded solely on the letter of the procedural rule. We
earlier adverted to the the internationally recognized policy of preclusion, 46 as well as the principles of
comity, utility and convenience of nations 47 as the basis for the evolution of the rule calling for the
recognition and enforcement of foreign judgments. The US Supreme Court in Hilton v. Guyot48 relied
heavily on the concept of comity, as especially derived from the landmark treatise of Justice Story in his
Commentaries on the Conflict of Laws of 1834. 49 Yet the notion of "comity" has since been criticized as
one "of dim contours"50 or suffering from a number of fallacies. 51 Other conceptual bases for the
recognition of foreign judgments have evolved such as the vested rights theory or the modern doctrine of
obligation.52
There have been attempts to codify through treaties or multilateral agreements the standards for the
recognition and enforcement of foreign judgments, but these have not borne fruition. The members of the
European Common Market accede to the Judgments Convention, signed in 1978, which eliminates as to

participating countries all of such obstacles to recognition such as reciprocity and rvision au fond.53 The
most ambitious of these attempts is the Convention on the Recognition and Enforcement of Foreign
Judgments in Civil and Commercial Matters, prepared in 1966 by the Hague Conference of International
Law.54 While it has not received the ratifications needed to have it take effect, 55 it is recognized as
representing current scholarly thought on the topic. 56 Neither the Philippines nor the United States are
signatories to the Convention.
Yet even if there is no unanimity as to the applicable theory behind the recognition and enforcement of
foreign judgments or a universal treaty rendering it obligatory force, there is consensus that the viability
of such recognition and enforcement is essential. Steiner and Vagts note:
. . . The notion of unconnected bodies of national law on private international law, each following a quite
separate path, is not one conducive to the growth of a transnational community encouraging travel and
commerce among its members. There is a contemporary resurgence of writing stressing the identity or
similarity of the values that systems of public and private international law seek to further a community
interest in common, or at least reasonable, rules on these matters in national legal systems. And such
generic principles as reciprocity play an important role in both fields. 57
Salonga, whose treatise on private international law is of worldwide renown, points out:
Whatever be the theory as to the basis for recognizing foreign judgments, there can be little dispute that
the end is to protect the reasonable expectations and demands of the parties. Where the parties have
submitted a matter for adjudication in the court of one state, and proceedings there are not tainted with
irregularity, they may fairly be expected to submit, within the state or elsewhere, to the enforcement of
the judgment issued by the court.58
There is also consensus as to the requisites for recognition of a foreign judgment and the defenses against
the enforcement thereof. As earlier discussed, the exceptions enumerated in Section 48, Rule 39 have
remain unchanged since the time they were adapted in this jurisdiction from long standing American
rules. The requisites and exceptions as delineated under Section 48 are but a restatement of generally
accepted principles of international law. Section 98 of The Restatement, Second, Conflict of Laws, states
that "a valid judgment rendered in a foreign nation after a fair trial in a contested proceeding will be
recognized in the United States," and on its face, the term "valid" brings into play requirements such
notions as valid jurisdiction over the subject matter and parties. 59 Similarly, the notion that fraud or
collusion may preclude the enforcement of a foreign judgment finds affirmation with foreign
jurisprudence and commentators,60 as well as the doctrine that the foreign judgment must not constitute "a
clear mistake of law or fact."61 And finally, it has been recognized that "public policy" as a defense to the
recognition of judgments serves as an umbrella for a variety of concerns in international practice which
may lead to a denial of recognition.62

The viability of the public policy defense against the enforcement of a foreign judgment has been
recognized in this jurisdiction. 63 This defense allows for the application of local standards in reviewing
the foreign judgment, especially when such judgment creates only a presumptive right, as it does in cases
wherein the judgment is against a person. 64 The defense is also recognized within the international sphere,
as many civil law nations adhere to a broad public policy exception which may result in a denial of
recognition when the foreign court, in the light of the choice-of-law rules of the recognizing court,
applied the wrong law to the case. 65 The public policy defense can safeguard against possible abuses to
the easy resort to offshore litigation if it can be demonstrated that the original claim is noxious to our
constitutional values.
There is no obligatory rule derived from treaties or conventions that requires the Philippines to recognize
foreign judgments, or allow a procedure for the enforcement thereof. However, generally accepted
principles of international law, by virtue of the incorporation clause of the Constitution, form part of the
laws of the land even if they do not derive from treaty obligations. 66 The classical formulation in
international law sees those customary rules accepted as binding result from the combination two
elements: the established, widespread, and consistent practice on the part of States; and a psychological
element known as the opinion juris sive necessitates (opinion as to law or necessity). Implicit in the latter
element is a belief that the practice in question is rendered obligatory by the existence of a rule of law
requiring it.67
While the definite conceptual parameters of the recognition and enforcement of foreign judgments have
not been authoritatively established, the Court can assert with certainty that such an undertaking is among
those generally accepted principles of international law.68 As earlier demonstrated, there is a widespread
practice among states accepting in principle the need for such recognition and enforcement, albeit subject
to limitations of varying degrees. The fact that there is no binding universal treaty governing the practice
is not indicative of a widespread rejection of the principle, but only a disagreement as to the imposable
specific rules governing the procedure for recognition and enforcement.
Aside from the widespread practice, it is indubitable that the procedure for recognition and enforcement is
embodied in the rules of law, whether statutory or jurisprudential, adopted in various foreign jurisdictions.
In the Philippines, this is evidenced primarily by Section 48, Rule 39 of the Rules of Court which has
existed in its current form since the early 1900s. Certainly, the Philippine legal system has long ago
accepted into its jurisprudence and procedural rules the viability of an action for enforcement of foreign
judgment, as well as the requisites for such valid enforcement, as derived from internationally accepted
doctrines. Again, there may be distinctions as to the rules adopted by each particular state, 69 but they all
prescind from the premise that there is a rule of law obliging states to allow for, however generally, the
recognition and enforcement of a foreign judgment. The bare principle, to our mind, has attained the
status of opinio juris in international practice.

This is a significant proposition, as it acknowledges that the procedure and requisites outlined in Section
48, Rule 39 derive their efficacy not merely from the procedural rule, but by virtue of the incorporation
clause of the Constitution. Rules of procedure are promulgated by the Supreme Court, 70 and could very
well be abrogated or revised by the high court itself. Yet the Supreme Court is obliged, as are all State
components, to obey the laws of the land, including generally accepted principles of international law
which form part thereof, such as those ensuring the qualified recognition and enforcement of foreign
judgments.71
Thus, relative to the enforcement of foreign judgments in the Philippines, it emerges that there is a
general right recognized within our body of laws, and affirmed by the Constitution, to seek recognition
and enforcement of foreign judgments, as well as a right to defend against such enforcement on the
grounds of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or
fact.
The preclusion of an action for enforcement of a foreign judgment in this country merely due to an
exhorbitant assessment of docket fees is alien to generally accepted practices and principles in
international law. Indeed, there are grave concerns in conditioning the amount of the filing fee on the
pecuniary award or the value of the property subject of the foreign decision. Such pecuniary award will
almost certainly be in foreign denomination, computed in accordance with the applicable laws and
standards of the forum.72 The vagaries of inflation, as well as the relative low-income capacity of the
Filipino, to date may very well translate into an award virtually unenforceable in this country, despite its
integral validity, if the docket fees for the enforcement thereof were predicated on the amount of the
award sought to be enforced. The theory adopted by respondent judge and the Marcos Estate may even
lead to absurdities, such as if applied to an award involving real property situated in places such as the
United States or Scandinavia where real property values are inexorably high. We cannot very well require
that the filing fee be computed based on the value of the foreign property as determined by the standards
of the country where it is located.
As crafted, Rule 141 of the Rules of Civil Procedure avoids unreasonableness, as it recognizes that the
subject matter of an action for enforcement of a foreign judgment is the foreign judgment itself, and not
the right-duty correlatives that resulted in the foreign judgment. In this particular circumstance, given
that the complaint is lodged against an estate and is based on the US District Court's Final Judgment, this
foreign judgment may, for purposes of classification under the governing procedural rule, be deemed as
subsumed under Section 7(b)(3) of Rule 141, i.e., within the class of "all other actions not involving
property." Thus, only the blanket filing fee of minimal amount is required.
Finally, petitioners also invoke Section 11, Article III of the Constitution, which states that "[F]ree access
to the courts and quasi-judicial bodies and adequate legal assistance shall not be denied to any person by
reason of poverty." Since the provision is among the guarantees ensured by the Bill of Rights, it certainly
gives rise to a demandable right. However, now is not the occasion to elaborate on the parameters of this

constitutional right. Given our preceding discussion, it is not necessary to utilize this provision in order to
grant the relief sought by the petitioners. It is axiomatic that the constitutionality of an act will not be
resolved by the courts if the controversy can be settled on other grounds 73 or unless the resolution thereof
is indispensable for the determination of the case. 74
One more word. It bears noting that Section 48, Rule 39 acknowledges that the Final Judgment is not
conclusive yet, but presumptive evidence of a right of the petitioners against the Marcos Estate.
Moreover, the Marcos Estate is not precluded to present evidence, if any, of want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact. This ruling, decisive as it is on the
question of filing fees and no other, does not render verdict on the enforceability of the Final Judgment
before the courts under the jurisdiction of the Philippines, or for that matter any other issue which may
legitimately be presented before the trial court. Such issues are to be litigated before the trial court, but
within the confines of the matters for proof as laid down in Section 48, Rule 39. On the other hand, the
speedy resolution of this claim by the trial court is encouraged, and contumacious delay of the decision on
the merits will not be brooked by this Court.
WHEREFORE, the petition is GRANTED. The assailed orders are NULLIFIED and SET ASIDE, and a
new order REINSTATING Civil Case No. 97-1052 is hereby issued. No costs.
SO ORDERED.

3. Ching v. CA Kimberly Loto

This is a petition for review on certiorari which seeks to nullify the decision of respondent Court of
Appeals (penned by Hon. Rodolfo A. Nocon with the concurrence of Hon. Crisolito Pascual and Juan A.
Sison) in CA-G.R. No. 12358-SP entitled Alfredo Ching v. Hon. M. V. Romillo, et al. which in effect
affirmed the decision of the Court of First Instance of Rizal, now Regional Trial Court (penned by Judge
Manuel V. Romillo, Jr. then District Judge, Branch XXVII Pasay City) granting ex-parte the cancellation
of title registered in the name of Ching Leng in favor of Pedro Asedillo in Civil Case No. 6888-P entitled
Pedro Asedillo v. Ching Leng and/or Estate of Ching Leng.
The facts as culled from the records disclose that:
In May 1960, Decree No. N-78716 was issued to spouses Maximo Nofuente and Dominga Lumandan in
Land Registration Case No. N-2579 of the Court of First Instance of Rizal and Original Certificate of
Title No. 2433 correspondingly given by the Register of Deeds for the Province of Rizal covering a parcel
of land situated at Sitio of Kay-Biga Barrio of San Dionisio, Municipality of Paranaque, Province of
Rizal, with an area of 51,852 square meters (Exhibit "7", p. 80, CA, Rollo).

In August 1960, 5/6 portion of the property was reconveyed by said spouses to Francisco, Regina,
Perfects, Constancio and Matilde all surnamed Nofuente and Transfer Certificate of Title No. 78633 was
issued on August 10, 1960 accordingly (Exhibit "8", pp. 81 and 82, Ibid.).
By virtue of a sale to Ching Leng with postal address at No. 44 Libertad Street, Pasay City, Transfer
Certificate of Title No. 91137 was issued on September 18, 1961 and T.C.T. No. 78633 was deemed
cancelled. (Exhibit "5-2", pp. 76-77 and 83, Ibid.).
On October 19, 1965, Ching Leng died in Boston, Massachusetts, United States of America. His
legitimate son Alfredo Ching filed with the Court of First Instance of Rizal (now RTC) Branch III, Pasay
City a petition for administration of the estate of deceased Ching Leng docketed as Sp. Proc. No. 1956-P.
Notice of hearing on the petition was duly published in the "Daily Mirror", a newspaper of general
circulation on November 23 and 30 and December 7, 1965. No oppositors appeared at the hearing on
December 16, 1965, consequently after presentation of evidence petitioner Alfredo Ching was appointed
administrator of Ching Leng's estate on December 28, 1965 and letters of administration issued on
January 3, 1966 (pp. 51-53, Rollo). The land covered by T.C.T. No. 91137 was among those included in
the inventory submitted to the court (p. 75, Ibid.).
Thirteen (13) years after Ching Leng's death, a suit against him was commenced on December 27, 1978
by private respondent Pedro Asedillo with the Court of First Instance of Rizal (now RTC), Branch
XXVII, Pasay City docketed as Civil Case No. 6888-P for reconveyance of the abovesaid property and
cancellation of T.C.T. No. 91137 in his favor based on possession (p. 33, Ibid.). Ching Leng's last known
address is No. 44 Libertad Street, Pasay City which appears on the face of T.C.T. No. 91137 (not No. 441
Libertad Street, Pasay City, as alleged in private respondent's complaint). (Order dated May 29, 1980, p.
55, Ibid.). An amended complaint was filed by private respondent against Ching Leng and/or Estate of
Ching Leng on January 30, 1979 alleging "That on account of the fact that the defendant has been
residing abroad up to the present, and it is not known whetherthe defendant is still alive or dead, he or his
estate may be served by summons and other processes only by publication;" (p. 38, Ibid.). Summons by
publication to Ching Leng and/or his estate was directed by the trial court in its order dated February 7,
1979. The summons and the complaint were published in the "Economic Monitor", a newspaper of
general circulation in the province of Rizal including Pasay City on March 5, 12 and 19, 1979. Despite
the lapse of the sixty (60) day period within which to answer defendant failed to file a responsive
pleading and on motion of counsel for the private respondent, the court a quo in its order dated May 25,
1979, allowed the presentation of evidence ex-parte. A judgment by default was rendered on June 15,
1979, the decretal portion of which reads:
WHEREFORE, finding plaintiffs causes of action in the complaint to be duly substantiated by the
evidence, judgment is hereby rendered in favor of the plaintiff and against the defendant declaring the
former (Pedro Asedillo) to be the true and absolute owner of the property covered by T.C.T. No. 91137;
ordering the defendant to reconvey the said property in favor of the plaintiff; sentencing the defendant

Ching Leng and/or the administrator of his estate to surrender to the Register of Deeds of the Province of
Rizal the owner's copy of T.C.T. No. 91137 so that the same may be cancelled failing in which the said
T.C.T. No. 91137 is hereby cancelled and the Register of Deeds of the Province of Rizal is hereby ordered
to issue, in lieu thereof, a new transfer certificate of title over the said property in the name of the plaintiff
Pedro Asedillo of legal age, and a resident of Estrella Street, Makati, Metro Manila, upon payment of the
fees that may be required therefor, including the realty taxes due the Government.
IT IS SO ORDERED. (pp. 42-44, Ibid.)
Said decision was likewise served by publication on July 2, 9 and 16, 1979 pursuant to Section 7 of Rule
13 of the Revised Rules of Court (CA Decision, pp. 83-84, Ibid.). The title over the property in the name
of Ching Leng was cancelled and a new Transfer Certificate of Title was issued in favor of Pedro Asedillo
(p. 77, CA Rollo) who subsequently sold the property to Villa Esperanza Development, Inc. on September
3, 1979 (pp. 125-126, Ibid.).
On October 29, 1979 petitioner Alfredo Ching learned of the abovestated decision. He filed a verified
petition on November 10, 1979 to set it aside as null and void for lack of jurisdiction which was granted
by the court on May 29, 1980 (penned by Hon. Florentino de la Pena, Vacation Judge, pp. 54-59, Rollo).
On motion of counsel for private respondent the said order of May 29, 1980 was reconsidered and set
aside, the decision dated June 15, 1979 aforequoted reinstated in the order dated September 2, 1980. (pp.
60-63, Ibid.)
On October 30, 1980, petitioner filed a motion for reconsideration of the said latter order but the same
was denied by the trial court on April 12, 1981 (pp. 77-79, Ibid.)
Petitioner filed an original petition for certiorari with the Court of Appeals but the same was dismissed on
September 30, 1981. His motion for reconsideration was likewise denied on February 10, 1982 (pp. 8190, Ibid.)
Private respondent Pedro Asedillo died on June 7, 1981 at Makati, Metro Manila during the pendency of
the case with the Court of Appeals (p. 106, CA Rollo).
Hence, the instant petition.
Private respondent's comment was filed on June 1, 1982 (p. 117, Ibid.) in compliance with the resolution
dated April 26, 1982 (p. 109, Ibid.) Petitioner filed a reply to comment on June 18, 1982 (p. 159, Ibid ),
and the Court gave due course to the petition in the resolution of June 28, 1982 (p. 191, Ibid.)
Petitioner raised the following:
ASSIGNMENTS OF ERROR
I

WHETHER OR NOT A DEAD MAN CHING LENG AND/OR HIS ESTATE MAY BE VALIDLY
SERVED WITH SUMMONS AND DECISION BY PUBLICATION.
II
WHETHER OR NOT AN ACTION FOR RECONVEYANCE OF PROPERTY AND CANCELLATION
OF TITLE IS IN PERSONAM, AND IF SO, WOULD A DEAD MAN AND/OR HIS ESTATE BE
BOUND BY SERVICE OF SUMMONS AND DECISION BY PUBLICATION.
III
WHETHER OR NOT THE PROCEEDINGS FOR RECONVEYANCE AND CANCELLATION OF
TITLE CAN BE HELD EX-PARTE.
IV
WHETHER OR NOT THE TRIAL COURT ACQUIRED JURISDICTION OVER THE SUBJECT
MATTER AND THE PARTIES.
V
WHETHER OR NOT PRIVATE RESPONDENT IS GUILTY OF LACHES IN INSTITUTING THE
ACTION FOR RECONVEYANCE AFTER THE LAPSE OF 19 YEARS FROM THE TIME THE
DECREE OF REGISTRATION WAS ISSUED.
Petitioner's appeal hinges on whether or not the Court of Appeals has decided a question of substance in a
way probably not in accord with law or with the applicable decisions of the Supreme Court.
Petitioner avers that an action for reconveyance and cancellation of title is in personam and the court a
quonever acquired jurisdiction over the deceased Ching Leng and/or his estate by means of service of
summons by publication in accordance with the ruling laid down in Ang Lam v. Rosillosa et al., 86 Phil.
448 [1950].
On the other hand, private respondent argues that an action for cancellation of title is quasi in rem, for
while the judgment that may be rendered therein is not strictly a judgment in in rem, it fixes and settles
the title to the property in controversy and to that extent partakes of the nature of the judgment in rem,
hence, service of summons by publication may be allowed unto Ching Leng who on the face of the
complaint was a non-resident of the Philippines in line with the doctrine enunciated in Perkins v. Dizon,
69 Phil. 186 [1939].
The petition is impressed with merit.
An action to redeem, or to recover title to or possession of, real property is not an action in rem or an
action against the whole world, like a land registration proceeding or the probate of a will; it is an action
in personam, so much so that a judgment therein is binding only upon the parties properly impleaded and
duly heard or given an opportunity to be heard. Actions in personam and actions in rem differ in that the

former are directed against specific persons and seek personal judgments, while the latter are directed
against the thing or property or status of a person and seek judgments with respect thereto as against the
whole world. An action to recover a parcel of land is a real action but it is an action in personam, for it
binds a particular individual only although it concerns the right to a tangible thing (Ang Lam v. Rosillosa,
supra).
Private respondent's action for reconveyance and cancellation of title being in personam, the judgment in
question is null and void for lack of jurisdiction over the person of the deceased defendant Ching Leng .
Verily, the action was commenced thirteen (13) years after the latter's death. As ruled by this Court in
Dumlao v. Quality Plastic Products, Inc. (70 SCRA 475 [1976]) the decision of the lower court insofar as
the deceased is concerned, is void for lack of jurisdiction over his person. He was not, and he could not
have been validly served with summons. He had no more civil personality. His juridical personality, that
is fitness to be subject of legal relations, was lost through death (Arts. 37 and 42 Civil Code).
The same conclusion would still inevitably be reached notwithstanding joinder of Ching Leng's estate as
co-defendant. it is a well-settled rule that an estate can sue or be sued through an executor or
administrator in his representative capacity (21 Am. Jr. 872). Contrary to private respondent's claims,
deceased Ching Leng is a resident of 44 Libertad Street, Pasay City as shown in his death certificate and
T. C. T. No. 91137 and there is an on-going intestate proceedings in the same court, Branch III
commenced in 1965, and notice of hearing thereof duly published in the same year. Such misleading and
misstatement of facts demonstrate lack of candor on the part of private respondent and his counsel, which
is censurable.
The complaint for cancellation of Ching Leng's Torrens Title must be filed in the original land registration
case, RTC, Pasig, Rizal, sitting as a land registration court in accordance with Section 112 of the Land
Registration Act (Act No. 496, as amended) not in CFI Pasay City in connection with, or as a mere
incident in Civil Case No. 6888-P (Estanislao v. Honrado, 114 SCRA 748 [1982]).
Section 112 of the same law requires "notice to all parties in interest." Since Ching Leng was already in
the other world when the summons was published he could not have been notified at all and the trial court
never acquired jurisdiction over his person. The ex-parte proceedings for cancellation of title could not
have been held (Estanislao v. Honrado, supra).
The cited case of Perkins v. Dizon, supra is inapplicable to the case at bar since petitioner Perkins was a
non-resident defendant sued in Philippine courts and sought to be excluded from whatever interest she has
in 52,874 shares of stocks with Benguet Consolidated Mining Company. The action being a quasi in rem
summons by publication satisfied the constitutional requirement of due process.
The petition to set aside the judgment for lack of jurisdiction should have been granted and the amended
complaint of private respondent based on possession and filed only in 1978 dismissed outrightly. Ching

Leng is an innocent purchaser for value as shown by the evidence adduced in his behalf by petitioner
herein, tracing back the roots of his title since 1960, from the time the decree of registration was issued.
The sole remedy of the landowner whose property has been wrongfully or erroneously registered in
another's nameafter one year from the date of the decreeis not to set aside the decree, but respecting
the decree as incontrovertible and no longer open to review, to bring an ordinary action in the ordinary
court of justice for damages if the property has passed unto the hands of an innocent purchaser for value
(Sy, Sr. v. Intermediate Appellate Court, G.R. No. 66742; Teoville Development Corporation v. IAC, et
al., G.R. No. 75011, June 16, 1988).
Failure to take steps to assert any rights over a disputed land for 19 years from the date of registration of
title is fatal to the private respondent's cause of action on the ground of laches. Laches is the failure or
neglect, for an unreasonable length of time to do that which by exercising due diligence could or should
have been done, earlier; it is negligence or omission to assert a right within a reasonable time warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert it (BailonCasilao v. Court of Appeals, G.R. No. 78178, April 15, 1988; Villamor v. Court of Appeals, G.R. No.
41508, June 27, 1988).
The real purpose of the Torrens system is to quiet title to land and to stop forever any question as to its
legality. Once a title is registered, the owner may rest secure, without the necessity of waiting in the
portals of the court, or sitting on the "mirador su casa," to avoid the possibility of losing his land
(National Grains Authority v. IAC, 157 SCRA 388 [1988]).
A Torrens title is generally a conclusive evidence of the ownership of the land referred to therein (Section
49, Act 496). A strong presumption exists that Torrens titles are regularly issued and that they are valid. A
Torrens title is incontrovertible against any "information possessoria" or title existing prior to the issuance
thereof not annotated on the title (Salamat Vda. de Medina v. Cruz, G.R. No. 39272, May 4, 1988).
PREMISES CONSIDERED, (1) the instant petition is hereby GRANTED; (2) the appealed decision of
the Court of Appeals is hereby REVERSED and SET ASIDE; (3) the trial court's decision dated June 15,
1979 and the Order dated September 2, 1980 reinstating the same are hereby declared NULL and VOID
for lack of jurisdiction and (4) the complaint in Civil Case No. 6888-P is hereby DISMISSED.
SO ORDERED.

4. Sps.Jose v. Sps. Boyon Cyr Evaristo Franco

he Case
Before the Court is a Petition for Review onCertiorari[1] under Rule 45 of the Rules of Court, assailing the
February 26, 2001 Decision[2] of the Court of Appeals (CA) in CA-GR SP No. 60888.The dispositive
portion of the CA Decision is worded as follows:

WHEREFORE, on the basis of what prescinds, the assailed resolution and orders issued by the public
respondent are perforce ANNULLED and SET ASIDE.This pronouncement is nonetheless rendered
without prejudice to the refiling of the same case by the private respondents with the court a quo.[3]
The Facts
The factual antecedents of the case are narrated by the CA in this wise:
On July 2, 1998, [petitioners] Patrick and Rafaela Jose lodged a complaint for specific performance
against [respondents] Helen and Romeo Boyon to compel them to facilitate the transfer of ownership of a
parcel of land subject of a controverted sale. The action was lodged before the Regional Trial Court of
Muntinlupa which is presided by herein public respondent Judge N.C. Perello.On July 21, 1998,
respondent judge, through the acting Branch Clerk of Court of Branch 276 of the RTC ofMuntinlupa City,
issued summons to the [respondents].As per return of the summons, substituted service was resorted to by
the process server allegedly because efforts to serve the summons personally to the [respondents] failed.
On December 9, 1998, [petitioners] filed before the trial court an Ex-parte Motion for Leave of Court to
Effect Summons by Publication. OnDecember 28, 1998, public respondent issued an Order granting the
Ex-parte Motion for Leave of Court to Effect Summons by Publication. On July 30, 1999, the respondent
judge, sans a written motion, issued an Order declaring herein [respondents] in default for failure to file
their respective answers. As a consequence of the declaration of default, [petitioners] were allowed to
submit their evidence ex-parte. Ultimately, on December 7, 1999, respondent judge issued the assailed
resolution, the dispositive portion of which reads as follows:
x x x Therefore, Spouses Helen and Romeo Boyon are directed to execute the necessary document with
the effect of withdrawing the Affidavit of Loss they filed and annotated with the Register of Deeds of
Makati City so that title to the parcel of land subject of the Deed of Absolute Sale in favor of the Plaintiffs
be transferred in their names. Thereafter the Register of Deeds of MakatiCity or Muntinlupa City may
cancel Transfer of Certificate of Title No. 149635 of the Defendants and issue another to Plaintiff under
the deed of sale, clean and free of any reported encumbrance.
Defendants are also directed to pay Plaintiffs actual expenses in the amount of P20,000 and attorneys fees
ofP20,000 including costs of this suit.
xxxxxxxxx
On January 5, 2000, [respondent] Helen Boyon, who was then residing in the United States of America,
was surprised to learn from her sister Elizabeth Boyon, of the resolution issued by the respondent court.
On January 18, 2000, [respondents] filed an Ad Cautelam motion questioning, among others, the validity
of the service of summons effected by the court a quo. On March 17, 2000, the public respondent issued
an Order denying the said motion on the basis of the defaulted [respondents] supposed loss of standing in
court. On March 29, 2000, the [respondents] once again raised the issue of jurisdiction of the trial court
via a motion for reconsideration. On June 22, 2000, however, an Order was issued by the public

respondent denying the said motion. The [petitioners] moved for the execution of thecontroverted
judgment which the respondent judge ultimately granted. [4]
Thereafter, respondents filed before the CA a Petition for certiorari under Rule 65 of the Revised Rules of
Civil Procedure, questioning the jurisdiction of the regional trial court (RTC).
Ruling of the Court of Appeals
The CA held that the trial court had no authority to issue the questioned Resolution and Orders.
According to the appellate court, the RTC never acquired jurisdiction over respondents because of the
invalid service of summons upon them. First, the sheriff failed to comply with the requirements of
substituted service of summons, because he did not specify in the Return of Summons the prior efforts he
had made to locate them and the impossibility of promptly serving the summons upon them by personal
service.Second, the subsequent summons by publication was equally infirm, because the Complaint was a
suit for specific performance and therefore an action in personam. Consequently, the Resolution and the
Orders were null and void, since the RTC had never acquired jurisdiction over respondents.
Hence, this Petition.[5]
Issues
In their Memorandum, petitioners raise the following issues for our consideration:
A. The Honorable Court of Appeals erred in not holding that the assailed Resolution dated December 7,
1999was already final and executory
B. The Honorable Court of Appeals erred in giving due course to the Petition for Certiorari of private
respondents despite the pendency of an appeal earlier filed
C. The Honorable Court erred in not holding that the Petition for Certiorari was time barred
D. The Honorable Court of Appeals erred in holding that the proceedings in the lower court are null and
void due to invalid and defective service of summons and the court did not acquire jurisdiction over the
person of the respondents.[6]
In sum, the main issue revolves around the validity of the service of summons on respondents.
The Courts Ruling
The Petition has no merit.

Main Issue:
Validity of the Service of Summons
Petitioners aver that the CA erred in ruling that the service of summons on respondents was invalid. They
submit that although the case filed before the trial court was denominated as an action for specific

performance, it was actually an action quasi in rem, because it involved a piece of real property located in
the Philippines. They further argue that in actions quasi in rem involving ownership of a parcel of land, it
is sufficient that the trial court acquire jurisdiction over the res.Thus, the summons by publication, which
they effected subsequent to the substituted service of summons, was allegedly sufficient.
On the other hand, respondents maintain that the proceedings in the trial court were null and void because
of the invalid and defective service of summons. According to them, the Return of Summons issued by
the process server of the RTC failed to state that he had exerted earnest efforts to effect the service of
summons. He allegedly tried to serve it personally on them onJuly 22, 1998 at No. 32 Ariza Drive,
CamellaHomes, Alabang. He, however, resorted to substituted service on that same day, supposedly
because he could not find respondents in the above address. They further allege that the person to whom
he gave the summons was not even a resident of that address.
Respondents contend that when summons is served by substituted service, the return must show that it
was impossible to serve the summons personally, and that efforts had been exerted toward that end. They
add that noncompliance with the rule on substituted service renders invalid all proceedings relative
thereto.
As to the summons by publication subsequently effected by petitioners, respondents argue that the case
filed before the trial court was an action for specific performance and, therefore, an action in personam.
As such, the summons by publication was insufficient to enable the trial court to acquire jurisdiction over
the persons of respondents.
Respondents conclude that even granting that the service of summons by publication was permissible
under the circumstances, it would still be defective and invalid because of the failure of petitioners to
observe the requirements of law, like an Affidavit attesting that the latter deposited in the post office a
copy of the summons and of the order of publication, paid the postage, and sent the documents by
registered mail to the formerslast known address.
We agree with respondents. In general, trial courts acquire jurisdiction over the person of the defendant by
the service of summons. Where the action is in personam and the defendant is in thePhilippines, such
service may be done by personal or substituted service, following the procedures laid out in Sections 6
and 7 of Rule 14 of the Revised Rules of Court, which read:
Section 6. Service in person on defendant. - Whenever practicable, the summons shall be served by
handing a copy thereof to the defendant in person, or, if he refuses to receive and sign for it, by tendering
it to him.
Section 7. Substituted service. - If, for justifiable causes, the defendant cannot be served within a
reasonable time as provided in the preceding section, service may be effected (a) by leaving copies of the
summons at the defendant's residence with some person of suitable age and discretion then residing

therein, or (b) by leaving the copies at defendants office or regular place of business with some competent
person in charge thereof.
As can be gleaned from the above-quoted Sections, personal service of summons is preferred to
substituted service. Only if the former cannot be made promptly can the process server resort to the latter.
Moreover, the proof of service of summons must (a) indicate the impossibility of service of summons
within a reasonable time; (b)specify the efforts exerted to locate the defendant; and (c) state that the
summons was served upon a person of sufficient age and discretion who is residing in the address, or who
is in charge of the office or regular place of business, of the defendant. [7] It is likewise required that the
pertinent facts proving these circumstances be stated in the proof of service or in the officers return. The
failure to comply faithfully, strictly and fully with all the foregoing requirements of substituted service
renders the service of summons ineffective. [8]
Defective Personal
Service of Summons
In the instant case, it appears that the process server hastily and capriciously resorted to substituted
service of summons without actually exerting any genuine effort to locate respondents.A review of the
records[9] reveals that the only effort he exerted was to go to No. 32 Ariza Drive,Camella Homes, Alabang
on July 22, 1998, to try to serve the summons personally on respondents.While the Return of Summons
states that efforts to do so were ineffectual and unavailing because Helen Boyon was in the United States
and RomeoBoyon was in Bicol, it did not mention exactly what efforts -- if any -- were undertaken to find
respondents. Furthermore, it did not specify where or from whom the process server obtained the
information on their whereabouts. The pertinent portion of the Return of Summons is reproduced as
follows:
That efforts to serve the said Summons personally upon defendants Sps. Helen and Romeo Boyon were
made but the same were ineffectual and unavailing for the reason that defendant Helen Boyon is
somewhere in the United States of America and defendant Romeo Boyon is in Bicol thus substituted
service was made in accordance with Section 7, Rule 14, of the Revised Rules of Court. [10]
The Return of Summons shows that no effort was actually exerted and no positive step taken by either the
process server or petitioners to locate and serve the summons personally on respondents. At best, the
Return merely states the alleged whereabouts of respondents without indicating that such information was
verified from a person who had knowledge thereof. Certainly, without specifying the details of the
attendant circumstances or of the efforts exerted to serve the summons, a general statement that such
efforts were made will not suffice for purposes of complying with the rules of substituted service of
summons.

The necessity of stating in the process servers Return or Proof of Service the material facts and
circumstances sustaining the validity of substituted service was explained by this Court inHamilton v.
Levy,[11] from which we quote:
x x x The pertinent facts and circumstances attendant to the service of summons must be stated in the
proof of service or Officers Return; otherwise, any substituted service made in lieu of personal service
cannot be upheld.This is necessary because substituted service is in derogation of the usual method of
service. It is a method extraordinary in character and hence may be used only as prescribed and in the
circumstances authorized by statute.Here, no such explanation was made. Failure to faithfully, strictly,
and fully comply with the requirements of substituted service renders said service ineffective.[12]
Moreover, the requirements of substituted service of summons and the effect of noncompliance with the
subsequent proceedingstherefor were discussed in Madrigal v. Court of Appeals[13] as follows:
In a long line of cases, this Court held that the impossibility of personal service justifying availment of
substituted service should be explained in the proof of service; why efforts exerted towards personal
service failed. The pertinent facts and circumstances attendant to the service of summons must be stated
in the proof of service or Officers Return; otherwise, the substituted service cannot be upheld. It bears
stressing that since service of summons, especially for actions in personam, is essential for the acquisition
of jurisdiction over the person of the defendant, the resort to a substituted service must be duly justified.
Failure to do so would invalidate all subsequent proceedings on jurisdictional grounds. [14]
Summons by
Publication Improper
It must be noted that extraterritorial service of summons or summons by publication applies only when
the action is in rem or quasi in rem. The first is an action against the thing itself instead of against the
defendants person; in the latter, an individual is named as defendant, and the purpose is to subject that
individuals interest in a piece of property to the obligation or loan burdening it. [15]
In the instant case, what was filed before the trial court was an action for specific performance directed
against respondents. While the suit incidentally involved a piece of land, the ownership or possession
thereof was not put in issue, since they did not assert any interest or right over it. Moreover, this Court has
consistently declared that an action for specific performance is an action in personam.[16]
Having failed to serve the summons on respondents properly, the RTC did not validly acquire jurisdiction
over their persons. Consequently, due process demands that all the proceedings conducted subsequent
thereto should be deemed null and void.[17]
WHEREFORE, the Petition is DENIED and the assailed Decision and ResolutionAFFIRMED. Costs
against petitioners.

5. Gochan v. Gochan Maye Yarzo

This is a petition for review seeking to set aside the decision of the Court of Appeals dated September 10,
1999 in CA-G.R. SP No. 49084,1 as well as its Resolution2 dated November 22, 2000, denying the Motion
for Reconsideration.
Respondents were stockholders of the Felix Gochan and Sons Realty Corporation and the Mactan Realty
Development Corporation. Sometime in 1996, respondents offered to sell their shares in the two
corporations to the individual petitioners, the heirs of the late Ambassador Esteban Gochan, for and in
consideration of the sum of P200,000,000:00. Petitioners accepted and paid the said amount to
respondents. Accordingly, respondents issued to petitioners the necessary "Receipts." 3 In addition,
respondents executed their respective "Release, Waiver and Quitclaim," 4 wherein .they undertook that
they would not initiate any suit, action or complaint against petitioners for whatever reason or purpose.
In turn, respondents, through Crispo Gochan, Jr., required individual petitioners to execute a "promissory
note,"5undertaking not to divulge the actual consideration they paid for the shares of stock. For this
purpose, Crispo Gochan, Jr. drafted a document entitled "promissory note" in his own handwriting and
had the same signed by Felix Gochan, III, Louise Gochan and Esteban Gochan, Jr.
Unbeknown to petitioners, Crispo Gochan, Jr. inserted in the "promissory note" a phrase that says, "Said
amount is in partial consideration of the sale."6
On April 3, 1998, respondents filed a complaint against petitioners for specific performance and damages
with the Regional Trial Court of Cebu City, Branch 11, docketed as Civil Case No. CEB-21854.
Respondents alleged that sometime in November 1996, petitioner Louise Gochan, on behalf of all the
petitioners, offered to buy their shares of stock, consisting of 254 shares in the Felix Gochan and Sons
Realty Corporation and 1,624 shares of stock in the Mactan Realty Development Corporation; and that
they executed a Provisional Memorandum of Agreement, wherein they enumerated the following as
consideration for the sale:
1.

Pesos: Two Hundred Million Pesos (P200M)

2.

Two (2) hectares more or less of the fishpond in Gochan Compound, Mabolo, Lot 4F-2-B

3.

Lot 2, Block 9 with an area of 999 square meters in Gochan Compound, Mabolo, Cebu

4.

Three Thousand (3,000) square meters of Villas Magallanes in Mactan, Cebu

5.

Lot 423 New Gem Building with an area of 605 square meters. 7

Accordingly, respondents claimed that they are entitled to the conveyance of the aforementioned
properties, in addition to the amount of P200,000,000.00, which they acknowledge to have received from
petitioners. Further, respondents prayed for moral damages of P15,000,000.00, exemplary damages of
P2,000,000.00, attorney's fees of P14,000,000.00, and litigation expenses of P2,000,000.00.
Petitioners filed their answer, raising the following affirmative defenses: (a) lack of jurisdiction by the
trial court for non-payment of the correct docket fees; (b) unenforceability of the obligation to convey real
properties due to lack of a written memorandum thereof, pursuant to the Statute of Frauds; (c)
extinguishment of the obligation by payment; (d) waiver, abandonment and renunciation by respondent of
all their claims against petitioners; and (e) non-joinder of indispensable parties.
On August 7, 1998, petitioners filed with the trial court a motion for a preliminary hearing on the
affirmative defenses. In an Order dated August 11, 1998, the trial court denied the motion, ruling as
follows:
As the grant of said motion lies in the discretion of the court under Section 6 of Rule 16 of the 1997 Rules
of Civil Procedure, this Court in the exercise of its discretion, hereby denies the said motion because the
matters sought to be preliminarily heard do not appear to be tenable. For one, the statute of frauds does
not apply in this case because the contract which is the subject matter of this case is already an executed
contract. The statute of frauds applies only to executory contracts. According to Dr. Arturo M. Tolentino,
a leading authority in civil law, since the statute of frauds was enacted for the purpose of preventing
frauds, it should not be made the instrument to further them. Thus, where one party has performed his
obligation under a contract, equity would agree that all evidence should be admitted to prove the alleged
agreement (PNB vs. Philippine Vegetable Oil Company, 49 Phil. 897). For another, the contention of the
defendants that the claims of the plaintiffs are already extinguished by full payment thereof does not
appear to be indubitable because the plaintiffs denied under oath the due execution and genuineness of the
receipts which are attached as Annexes 1-A, 1-B and 1-C of defendants' answer. This issue therefore has
to be determined on the basis of preponderance of evidence to be adduced by both parties. Then, still for
another, the contention that the complaint is defective because it allegedly has failed to implead
indispensable parties appears to be wanting in merit because the parties to the memorandum of agreement
adverted to in the complaint are all parties in this case. Then the matter of payment of docketing and filing
fees is not a fatal issue in this case because the record shows that the plaintiffs had paid at least
P165,000.00 plus in the form of filing and docketing fees. Finally, regarding exerting earnest efforts
toward a compromise by the plaintiffs, the defendants cannot say that there is an absence of an allegation
to this effect in the complaint because paragraph 11 of the complaint precisely states that "before filing
this case, earnest efforts toward a compromise have been made."
Petitioners' motion for reconsideration of the above Order was denied by the trial court on September 11,
1998.

Petitioners thus filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No.
49084. On September 10, 1999, the Court of Appeals rendered the appealed decision dismissing the
petition on the ground that respondent court did not commit grave abuse of discretion, tantamount to lack
or in excess of jurisdiction in denying the motion to hear the affirmative defenses. 8
Again, petitioners filed a motion for reconsideration, but the same was denied by the Court of Appeals in
its assailed Resolution of November 22, 2000.9
Petitioners, thus, filed the instant petition for review anchored on the following grounds:
I.
THE COURT OF APPEALS COMMITTED GRAVE AND PALPABLE ERROR IN FINDING THAT
THE CORRECT DOCKET FEES HAVE BEEN PAID.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN RULING THAT THE PMOA WAS A
PARTIALLY EXECUTED CONTRACT AND HENCE NOT COVERED BY THE STATUTE OF
FRAUDS.
III.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DECIDING THAT THE CLAIMS OF
PRIVATE RESPONDENTS HAVE NOT BEEN EXTINGUISHED BY PAYMENT OR FULL
SETTLEMENT DESPITE THE PRESENCE OF RECEIPTS SIGNED BY THE PRIVATE
RESPONDENTS SHOWING THE CONTRARY.
IV.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN RESOLVING THAT FELIX GOCHAN
III AND ESTEBAN GOCHAN, JR. ARE NOT INDISPENSABLE PARTIES AND THEREFORE NEED
NOT BE IMPLEADED AS PARTIES.10
Respondents filed their Comment,11 arguing, in fine, that petitioners are guilty of forum-shopping when
they filed two petitions for certiorari with the Court of Appeals; and that the Court of Appeals did not err
in dismissing the petition for certiorari.
The instant petition has merit.
The rule is well-settled that the court acquires jurisdiction over any case only upon the payment of the
prescribed docket fees. In the case of Sun Insurance Office, Ltd. (SIOL) v. Asuncion,12 this Court held that
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.

Respondents maintain that they paid the correct docket fees in the amount of P165,000.00 when they filed
the complaint with the trial court. Petitioners, on the other hand, contend that the complaint is in the
nature of a real action which affects title to real properties; hence, respondents should have alleged therein
the value of the real properties which shall be the basis for the assessment of the correct docket fees.
The Court of Appeals found that the complaint was one for specific performance and incapable of
pecuniary estimation. We do not agree.
It is necessary to determine the true nature of the complaint in order to resolve the issue of whether or not
respondents paid the correct amount of docket fees therefor. In this jurisdiction, the dictum adhered to is
that the nature of an action is determined by the allegations in the body of the pleading or complaint itself,
rather than by its title or heading. 13 The caption of the complaint below was denominated as one for
"specific performance and damages." The relief sought, however, is the conveyance or transfer of real
property, or ultimately, the execution of deeds of conveyance in their favor of the real properties
enumerated in the provisional memorandum of agreement. Under these circumstances, the case below
was actually a real action, affecting as it does title to or possession of real property.
In the case of Hernandez v. Rural Bank of Lucena,14 this Court held that a real action is one where the
plaintiff seeks the recovery of real property or, as indicated in section 2(a) of Rule 4 (now Section 1, Rule
4 of the 1997 Rules of Civil Procedure), a real action is an action affecting title to or recovery of
possession of real property.
It has also been held that where a complaint is entitled as one for specific performance but nonetheless
prays for the issuance of a deed of sale for a parcel of land, its primary objective and nature is one to
recover the parcel of land itself and, thus, is deemed a real action. In such a case, the action must be filed
in the proper court where the property is located:
In this Court, the appellant insists that her action is one for specific performance, and, therefore, personal
and transitory in nature.
This very issue was considered and decided by this Court in the case of Manuel B. Ruiz vs. J.M. Tuason
& Co., Inc. et al., L-18692, promulgated 31 January 1963. There the Court, by unanimous vote of all the
Justices, held as follows:
'This contention has no merit. Although appellant's complaint is entitled to be one for specific
performance, yet the fact that he asked that a deed of sale of a parcel of land situated in Quezon City be
issued in his favor and that a transfer certificate of title covering said parcel of land be issued to him
shows that the primary objective and nature of the action is to recover the parcel of land itself because to
execute in favor of appellant the conveyance requested there is need to make a finding that he is the
owner of the land which in the last analysis resolves itself into an issue of ownership. Hence, the action
must be commenced in the province where the property is situated pursuant to Section 3, Rule 5, of the

Rules of Court, which provides that actions affecting title to or recovery of possession of real property
shall be commenced and tried in the province where the property or any part thereof lies." 15
In the case at bar, therefore, the complaint filed with the trial court was in the nature of a real action,
although ostensibly denominated as one for specific performance. Consequently, the basis for determining
the correct docket fees shall be the assessed value of the property, or the estimated value thereof as
alleged by the claimant. Rule 141, Section 7, of the Rules of Court, as amended by A.M. No. 00-2-01-SC,
provides:
Section 7.
(b)

Clerks of Regional Trial Courts. x x x

xxx

xxx

xxx

In a real action, the assessed value of the property, or if there is none, the estimated value thereof shall be
alleged by the claimant and shall be the basis in computing the fees.
We are not unmindful of our pronouncement in the case of Sun Insurance,16 to the effect that in case 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 period.
However, the liberal interpretation of the rules relating to the payment of docket fees as applied in the
case of Sun Insurance cannot apply to the instant case as respondents have never demonstrated any
willingness to abide by the rules and to pay the correct docket fees. Instead, respondents have stubbornly
insisted that the case they filed was one for specific performance and damages and that they actually paid
the correct docket fees therefor at the time of the filing of the complaint. Thus, it was stated in the case of
Sun Insurance:17
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,
unlikeManchester, 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.

Respondents accuse petitioners of forum-shopping when they filed two petitions before the Court of
Appeals. Petitioners, on the other hand, contend that there was no forum-shopping as there was no
identity of issues or identity of reliefs sought in the two petitions.
We agree with petitioners that they are not guilty of forum-shopping. The deplorable practice of forumshopping is resorted to by litigants who, for the purpose of obtaining the same relief, resort to two
different fora to increase his or her chances of obtaining a favorable judgment in either one. In the case of
Golangco v. Court of Appeals,18 we laid down the following test to determine whether there is forumshopping:
Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the
vexation caused the courts and the parties-litigant by a person who asks different courts and/or
administrative agencies to rule on the same or related causes and/or grant the same or substantially the
same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different
fora upon the same issues.
In sum, two different orders were questioned, two distinct causes of action and issues were raised, and
two objectives were sought; thus, forum shopping cannot be said to exist in the case at bar.
Likewise, we do not find that there is forum-shopping in the case at bar. The first petition, docketed as
CA-G.R. SP. No. 49084, which is now the subject of the instant petition, involved the propriety of the
affirmative defenses relied upon by petitioners in Civil Case No. CEB-21854. The second petition,
docketed as CA-G.R. SP No. 54985, raised the issue of whether or not public respondent Judge Dicdican
was guilty of manifest partiality warranting his inhibition from further hearing Civil Case No. CEB21854.
More importantly, the two petitions did not seek the same relief from the Court of Appeals. In CA-G.R.
SP. No. 49084, petitioners prayed, among others, for the annulment of the orders of the trial court denying
their motion for preliminary hearing on the affirmative defenses in Civil Case No. CEB-21854. No such
reliefs are involved in the second petition, where petitioners merely prayed for the issuance of an order
enjoining public respondent Judge Dicdican from further trying the case and to assign a new judge in his
stead.
True, the trial court has the discretion to conduct a preliminary hearing on affirmative defenses. In the
case at bar, however, the trial court committed a grave abuse of its discretion when it denied the motion
for preliminary hearing. As we have discussed above, some of these defenses, which petitioners invoked
as grounds for the dismissal of the action, appeared to be indubitable, contrary to the pronouncement of
the trial court. Indeed, the abuse of discretion it committed amounted to an evasion of positive duty or
virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, 19 which would
have warranted the extraordinary writ of certiorari. Hence, the Court of Appeals erred when it dismissed
the petition for certiorari filed by petitioners.

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. This case is REMANDED to
the Regional Trial Court of Cebu City, Branch 11, which is directed to forthwith conduct the preliminary
hearing on the affirmative defenses in Civil Case No. CEB-21854.
SO ORDERED.
Davide, Jr., C.J.;Kapunan, and Pardo, JJ., concur.

6. Mercado v. CA Simpson Grant\

This special civil action for certiorari seeks to annul the Court of Appeals Resolutions dated February 23,
2001[1] and July 31, 2001,[2] in CA-G.R. SP No. 62678, dismissing Eduardo S. Mercados petition for
certiorari for late payment of docket fees and denying his Motion for Reconsideration.
The facts and antecedent proceedings, as culled from records, are as follows:
On various dates from January to August 1988, private respondent Armando V. Gatmaitan obtained a
series of loans from petitioner Eduardo S. Mercado totaling P850,000, to renovate and repair two houses
located at 1827 Santan St., Dasmarias Village, Makati City. Said houses were the conjugal properties of
Armando and Concepcion Gatmaitan. The loan agreement was in writing.
The agreement stipulated that Armando was to lease the aforementioned houses and deliver all the rentals
collected to Eduardo. Despite repeated demands, Armando did not pay any amount to Eduardo.
Sometime in 1989, Eduardo learned that Concepcion had filed a Complaint docketed as Civil Case No.
89-4506 against Armando for the separation and liquidation of their conjugal properties before the
Regional Trial Court (RTC) of Makati City, Branch 149. [3] Eduardo immediately filed a Motion for
Leave to File Complaint in Intervention, claiming that he had an interest as a creditor in the unpaid
loans he extended to Armando for the renovation of the conjugal properties subject of said civil case.
For failure to file his Answer, Armando was declared in default and Concepcion was allowed to present
evidence ex parte. Petitioner then filed a Manifestation and Motion praying that the trial court hold in
abeyance the resolution of the case pending resolution of his Motion for Leave to File Complaint in
Intervention. Meanwhile, Armando moved to lift the Order of Default and sought to have his Answer
admitted.
In two separate Orders, both dated February 19, 1990, the trial court denied Armandos Motion to Lift
Order of Default and Motion for Admission of Answer as well as petitionersMotion for Leave to File
Complaint in Intervention.[4] However, Eduardo allegedly did not immediately learn of the denial of his
motion to intervene.
On January 7, 1994, the trial court handed down its Decision in Civil Case No. 89-4506. Again, Eduardo
allegedly had no knowledge about the judgment or the subsequent appeal of said ruling.

On February 22, 1999, Eduardo, thru a different counsel, filed a Motion for Early Resolution of the
Motion for Leave to File Complaint in Intervention, which was raffled to Branch 140 of the Makati
City RTC. During the hearing of the motion, the trial court informed Eduardo that a Decision had already
been rendered in Civil Case No. 89-4506 by Branch 149 and the appeal from said judgment had already
been resolved by the Court of Appeals. Nonetheless, it directed the parties to file their respective position
papers. Concepcion filed anOpposition with Motion for Issuance of Writ of Execution but she died on
May 15, 1999, before her motion could be resolved.
In an Order[5] dated September 27, 1999, Branch 140, denied Eduardos motion for want of merit,
pointing out that his Motion for Leave to File Complaint in Intervention had been dismissed previously
by Branch 149 in its Order dated February 19, 1990, without any Motion for Reconsideration being filed
from the aforesaid order of dismissal.
On September 30, 1999, the trial court granted the Motion for Writ of Execution.
Eduardo moved for reconsideration but this was denied on October 27, 1999. He then filed aPetition for
Relief dated January 30, 2000, raising denial of due process and fraud as his grounds since he allegedly
never received a copy of the Order of September 19, 1990, thus preventing him from moving for
reconsideration. In paragraphs 14 and 15 of the Petition for Relief, however, petitioner admits he did
receive an Order dated February 19, 1990.
In an Order dated April 6, 2000, the Regional Trial Court of Makati City, Branch 140, ruled on the
petition, as follows:
Finding no cogent reasons to reverse or set aside the [O]rders dated September 27, 1999 and October 27,
1999, the petition for relief filed by petitioner-intervenor Eduardo S. Mercado praying that he be allowed
to file complaint in intervention is hereby DENIED.
SO ORDERED.[6]
On May 18, 2000, petitioner moved for reconsideration of the foregoing Order but this was denied in an
Order dated September 26, 2000, a copy of which was received by petitioner on November 17, 2000.
Petitioner then filed a petition for certiorari with the Court of Appeals, which was dismissed for lack of
jurisdiction due to late payment of docket fees. The appellate court found that while Eduardo filed his
petition for certiorari by registered mail on January 16, 2001, the sixtieth (60 th) day from the receipt of the
Order of Denial of Motion for Reconsideration, the docket and other lawful fees were paid only on
January 17, 2001, one day after the expiration of the reglementary period for filing his petition. The Court
of Appeals applied Rule 46, Section 3 of the 1997 Rules of Civil Procedure [7] which allows payment of
docket fees within a reasonable time if it was not paid during the filing of the initiatory pleading, but in no
case beyond the applicable prescriptive period. It held that while the rule on the payment of docket fees
may be liberally construed if only to secure a just and speedy disposition of every action and proceeding,

nonetheless, it should not be ignored or belittled, lest it scathes and prejudices the other partys substantive
rights.[8] Petitioner then filed a Motion for Reconsideration but was denied.
Dissatisfied, petitioner now comes to this Court on the grounds that:
1. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION WHEN IT DISMISSED THE PETITION, SOLELY ON
PROCEDURAL GROUNDS.
2. PETITIONER HAS A GOOD AND MERITORIOUS CAUSE OF ACTION AS THE PUBLIC
RESPONDENT REGIONAL TRIAL COURT, BRANCH 140, MAKATI CITY COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
DENIED THE PETITION FOR RELIEF FILED BY THE HEREIN PETITIONER.[9]
Petitioners arguments lack persuasiveness. It bears stressing that this case must be dismissed outright as
the petitioner adopted the wrong remedy in bringing this case before this Court. Petitioner should have
filed a petition for review under Rule 45 of the 1997 Rules of Civil Procedure instead of a special civil
action for certiorari under Rule 65. The proper remedy of a party aggrieved by a decision of the Court of
Appeals is a petition for review under Rule 45, which is not identical to a petition for certiorari under
Rule 65. Under Rule 45, decisions, final orders or resolutions of the Court of Appeals in any case, i.e.,
regardless of the nature of the action or proceedings involved, may be appealed to us by filing a petition
for review, which would be but a continuation of the appellate process over the original case. On the other
hand, a special civil action under Rule 65 is an independent action based on the specific grounds therein
provided and, as a general rule, cannot be availed of as a substitute for the lost remedy of an ordinary
appeal, including that to be taken under Rule 45. Accordingly, when a party adopts an improper remedy,
as in this case, his petition may be dismissed outright.[10]
Petitioner should have availed of the ordinary appeal process such as a petition for review under Rule 45,
within 15 days after notice of denial of his Motion for Reconsideration. Undoubtedly, petitioner had
already lost this remedy when he filed this special civil action on January 16, 2001. A Petition for
Certiorari cannot be a substitute for the lost or lapsed remedy of appeal, where such loss is occasioned by
the petitioners own neglect or error in the choice of remedies. [11] By his own account, petitioner received
the Order denying the Motion for Reconsideration from the RTC on November 17, 2000. Instead of filing
a petition for review with the appellate court within 15 days thereof or until December 2, 2000, he filed
apetition for certiorari by registered mail on January 16, 2001, but belatedly made the payment of docket
fees only on January 17, 2001. Noteworthy, petitioner did not even attempt to explain why he was unable
to file a petition for review within the reglementary period.
Indeed, not infrequently, litigants and parties to a petition have invoked liberal construction of the Rules
of Court to justify lapses in its observance. Hopefully, it is not simply a cover-up of their own neglect or
sheer ignorance of procedure. While indeed this Court has on occasion set aside procedural irregularities

in the interest of justice, it must be stressed that liberality of construction of the rules should not be a
panacea for all procedural maladies. For this Court will not tolerate wanton disregard of the procedural
rules under the guise of liberal construction.
In any event, even if we were to disregard the procedural defects, we find that this petition must still be
dismissed as the appellate court did not commit any grave abuse of discretion amounting to want or
excess of jurisdiction in dismissing the petition for late payment of filing fees. Petitioner undeniably paid
his docket fees beyond the reglementary period of 60 days for filing a petition for certiorari. Well settled
is the rule that the court cannot acquire jurisdiction over the subject matter of a case, unless the docket
fees are paid.[12] And where the filing of the initiatory pleading is not accompanied by payment of the
docket fees, the court may allow payment of the fee within a reasonable time but in no case beyond the
applicable prescriptive or reglementary period.[13]
Thus, the Court of Appeals correctly dismissed the petition for certiorari pursuant to Rule 46, Section 3[14]
in relation to Rule 65, Section 6 (2)[15] of the 1997 Rules of Civil Procedure.
WHEREFORE, the instant petition is DISMISSED for lack of merit. The assailed Resolutions dated
February 23, 2001 and July 31, 2001 of the Court of Appeals are hereby AFFIRMED.
SO ORDERED.

7. Manchester Development Corp. v. CA Alan Lancelot Makasiar

Acting on the motion for reconsideration of the resolution of the Second Division of January 28,1987 and
another motion to refer the case to and to be heard in oral argument by the Court En Banc filed by
petitioners, the motion to refer the case to the Court en banc is granted but the motion to set the case for
oral argument is denied.
Petitioners in support of their contention that the filing fee must be assessed on the basis of the amended
complaint cite the case of Magaspi vs. Ramolete. 1 They contend that the Court of Appeals erred in that
the filing fee should be levied by considering the amount of damages sought in the original complaint.
The environmental facts of said case differ from the present in that
1.

The Magaspi case was an action for recovery of ownership and possession of a parcel of land

with damages. 2While the present case is an action for torts and damages and specific performance with
prayer for temporary restraining order, etc. 3
2.

In the Magaspi case, the prayer in the complaint seeks not only the annulment of title of the

defendant to the property, the declaration of ownership and delivery of possession thereof to plaintiffs but
also asks for the payment of actual moral, exemplary damages and attorney's fees arising therefrom in the
amounts specified therein.

However, in the present case, the prayer is for the issuance of a writ of

preliminary prohibitory injunction during the pendency of the action against the defendants' announced

forfeiture of the sum of P3 Million paid by the plaintiffs for the property in question, to attach such
property of defendants that maybe sufficient to satisfy any judgment that maybe rendered, and after
hearing, to order defendants to execute a contract of purchase and sale of the subject property and annul
defendants' illegal forfeiture of the money of plaintiff, ordering defendants jointly and severally to pay
plaintiff actual, compensatory and exemplary damages as well as 25% of said amounts as maybe proved
during the trial as attorney's fees and declaring the tender of payment of the purchase price of plaintiff
valid and producing the effect of payment and to make the injunction permanent. The amount of damages
sought is not specified in the prayer although the body of the complaint alleges the total amount of over
P78 Million as damages suffered by plaintiff. 5
3. Upon the filing of the complaint there was an honest difference of opinion as to the nature of the action
in the Magaspi case. The complaint was considered as primarily an action for recovery of ownership and
possession of a parcel of land. The damages stated were treated as merely to the main cause of action.
Thus, the docket fee of only P60.00 and P10.00 for the sheriff's fee were paid. 6
In the present case there can be no such honest difference of opinion. As maybe gleaned from the
allegations of the complaint as well as the designation thereof, it is both an action for damages and
specific performance. The docket fee paid upon filing of complaint in the amount only of P410.00 by
considering the action to be merely one for specific performance where the amount involved is not
capable of pecuniary estimation is obviously erroneous. Although the total amount of damages sought is
not stated in the prayer of the complaint yet it is spelled out in the body of the complaint totalling in the
amount of P78,750,000.00 which should be the basis of assessment of the filing fee.
4.

When this under-re assessment of the filing fee in this case was brought to the attention of this

Court together with similar other cases an investigation was immediately ordered by the Court.
Meanwhile plaintiff through another counsel with leave of court filed an amended complaint on
September 12, 1985 for the inclusion of Philips Wire and Cable Corporation as co-plaintiff and by
emanating any mention of the amount of damages in the body of the complaint. The prayer in the original
complaint was maintained. After this Court issued an order on October 15, 1985 ordering the reassessment of the docket fee in the present case and other cases that were investigated, on November 12,
1985 the trial court directed plaintiffs to rectify the amended complaint by stating the amounts which they
are asking for. It was only then that plaintiffs specified the amount of damages in the body of the
complaint in the reduced amount of P10,000,000.00. 7 Still no amount of damages were specified in the
prayer. Said amended complaint was admitted.
On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to pay the amount of
P3,104.00 as filing fee covering the damages alleged in the original complaint as it did not consider the
damages to be merely an or incidental to the action for recovery of ownership and possession of real
property. 8 An amended complaint was filed by plaintiff with leave of court to include the government of

the Republic as defendant and reducing the amount of damages, and attorney's fees prayed for to
P100,000.00. Said amended complaint was also admitted. 9
In the Magaspi case, the action was considered not only one for recovery of ownership but also for
damages, so that the filing fee for the damages should be the basis of assessment. Although the payment
of the docketing fee of P60.00 was found to be insufficient, nevertheless, it was held that since the
payment was the result of an "honest difference of opinion as to the correct amount to be paid as docket
fee" the court "had acquired jurisdiction over the case and the proceedings thereafter had were proper and
regular." 10 Hence, as the amended complaint superseded the original complaint, the allegations of
damages in the amended complaint should be the basis of the computation of the filing fee.11
In the present case no such honest difference of opinion was possible as the allegations of the complaint,
the designation and the prayer show clearly that it is an action for damages and specific performance. The
docketing fee should be assessed by considering the amount of damages as alleged in the original
complaint.
As reiterated in the Magaspi case the rule is well-settled "that a case is deemed filed only upon payment
of the docket fee regardless of the actual date of filing in court . 12 Thus, in the present case the trial court
did not acquire jurisdiction over the case by the payment of only P410.00 as docket fee. Neither can the
amendment of the complaint thereby vest jurisdiction upon the Court. 13 For an legal purposes there is no
such original complaint that was duly filed which could be amended. Consequently, the order admitting
the amended complaint and all subsequent proceedings and actions taken by the trial court are null and
void.
The Court of Appeals therefore, aptly ruled in the present case that the basis of assessment of the docket
fee should be the amount of damages sought in the original complaint and not in the amended complaint.
The Court cannot close this case without making the observation that it frowns at the practice of counsel
who filed the original complaint in this case of omitting any specification of the amount of damages in the
prayer although the amount of over P78 million is alleged in the body of the complaint. This is clearly
intended for no other purpose than to evade the payment of the correct filing fees if not to mislead the
docket clerk in the assessment of the filing fee. This fraudulent practice was compounded when, even as
this Court had taken cognizance of the anomaly and ordered an investigation, petitioner through another
counsel filed an amended complaint, deleting all mention of the amount of damages being asked for in the
body of the complaint. It was only when in obedience to the order of this Court of October 18, 1985, the
trial court directed that the amount of damages be specified in the amended complaint, that petitioners'
counsel wrote the damages sought in the much reduced amount of P10,000,000.00 in the body of the
complaint but not in the prayer thereof. The design to avoid payment of the required docket fee is
obvious.
The Court serves warning that it will take drastic action upon a repetition of this unethical practice.

To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar pleadings
should specify the amount of damages being prayed for not only in the body of the pleading but also in
the prayer, and said damages shall be considered in the assessment of the filing fees in any case. Any
pleading that fails to comply with this requirement shall not bib accepted nor admitted, or shall otherwise
be expunged from the record.
The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An
amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much less
the payment of the docket fee based on the amounts sought in the amended pleading. The ruling in the
Magaspi case 14 in so far as it is inconsistent with this pronouncement is overturned and reversed.
WHEREFORE, the motion for reconsideration is denied for lack of merit.
SO ORDERED.
Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Bidin,
Sarmiento and Cortes, JJ., concur.
Paras, J., took no part.
8. Great Southern Maritime Services Corp v. Acuna Ams Usman Hussain

Before us is a petition for review on certiorariunder Rule 45 of the Rules of Court assailing the
Decision[1] of the Court of Appeals dated June 30, 1999 in CA-G.R. SP No. 50504, which set aside the
Decision of the National Labor Relations Commission (NLRC) dated January 15, 1997 in NLRC CA No.
010186-96.
The factual background of the case is as follows:
Petitioner Great Southern Maritime Services Corporation (GSMSC) is a manning agency organized and
existing under Philippine laws. It is the local agent of petitioner Ferry Casinos Limited. Petitioner Pioneer
Insurance and Surety Corporation is the surety company of petitioner GSMSC.
On October 7, 1993, respondents Jennifer Anne B. Acua, Haydee Anne B. Acua, Marites T. Clarion,
Marissa C. Enriquez, Graciela M. Torralba, and Mary Pamela A. Santiago filed a complaint for illegal
dismissal against petitioners before the Philippine Overseas Employment Administration (POEA),
docketed as POEA Case No. (M) 93-10-1987.[2]
Respondents claim that: between the months of March and April 1993, they were deployed by petitioner
GSMSC to work as croupiers (card dealers) for petitioner Ferry Casinos Limited under a six-month
contract with monthly salaries of US$356.45 plus fixed overtime pay of US$107 a month and vacation
leave pay equivalent to two months salary pro rata, except for respondent Jennifer Anne B. Acua who had
a monthly salary of US$250.56 plus fixed overtime pay of US$87.17 and vacation leave pay equivalent to

two months salary pro rata; sometime in July 1993, Sue Smits, the Casino Manager, informed them that
their services were no longer needed; considering that their plane tickets were already ready and they
were subjected to harassment, they had no alternative but to sign documents on July 11 and 12, 1993
specifying that they were the ones who terminated their employment; they were repatriated on July 25,
1993.[3]
Petitioners denied the allegations of respondents and averred that respondents voluntarily resigned from
employment. They contend that: respondents were hired by petitioner Ferry Casinos Limited through
petitioner GSMSC to work as croupiers for a period of six months; sometime in July 1993, respondents
intimated their desire to resign; petitioner Ferry Casinos Limited did not allow them to resign as the
simultaneous loss of croupiers would paralyze casino operations; respondents thereafter exhibited
lukewarm attitude towards work, became defiant and rude; consequently, petitioner Ferry Casinos
Limited was forced to accede to respondents demands; and respondents executed resignation letters and
disembarked on July 27, 1993.[4]
On October 5, 1995, the POEA decided the case against petitioners, thus:
WHEREFORE, premises considered, respondent Great Southern Maritime Services [Corporation] and
Pioneer Insurance and Surety Corporation, are hereby ordered jointly and severally liable to pay
complainants the following amounts:
1. Jennifer B. Acua US $ 610.17
2. Marissa C. Enriquez 986.17
3. Marites T. Clarion 986.17
4. Graciela M. Torralba 986.17
5. Pamela Santiago 582.20
6. Haydee Anne B. Acua 582.20
representing their salaries for the unexpired portion of their contract. All other claims are dismissed for
lack of merit.
SO ORDERED.[5]
The POEA ruled that the respondents were illegally dismissed since petitioners failed to prove that
respondents voluntarily resigned from employment. It held that the alleged resignation letters are only
declarations of release and quitclaim.
Petitioners appealed to the NLRC[6] which, on January 15, 1997, set aside the decision of the POEA and
dismissed the complaint for illegal dismissal. [7] The NLRC held that the contested letters are not only
declarations of release and quitclaim but resignations as well. It further held that there is no concrete
evidence of undue pressure, force and duress in the execution of the resignation letters. The NLRC gave
credence to petitioners claim that respondents pre-terminated their contracts en masse because two of the
respondents, Haydee Anne B. Acua and Marites T. Clarion, are now working in Singapore.

Respondents filed a motion for reconsideration [8] but the NLRC denied the same in a Resolution dated
April 30, 1997.[9]
On July 18, 1997, respondents filed a petition for certiorari before us, docketed as G.R. No. 129673.[10]
On October 3, 1997, petitioners, in their Comment, prayed for outright dismissal of the petition for: (a)
failure of respondents to submit a verified statement of the material dates to show that the petition was
filed on time, and (b) filing a certification on non-forum shopping signed only by their counsel. In
addition, petitioners argued that the issues raised are factual and there is no showing that the NLRC
committed grave abuse of discretion.[11]
On January 27, 1998, the Solicitor General, in lieu of Comment, manifested that he is unable to sustain
the position of the NLRC because the allegation that respondents voluntarily resigned was not
substantially established and respondents non-compliance with the formal requirements of the petition
should be waived since the petition is meritorious.[12]
The NLRC, in compliance with our Resolution dated March 16, 1998, [13] filed its own Comment praying
for the dismissal of the petition and the affirmance of its decision with finality. It argued that in reversing
the POEA, it focused its attention on the correct evaluation of the evidence on record which substantially
showed that petitioners did not dismiss respondents but that the latter resigned en masse on July 12, 1993.
[14]

In accordance with St. Martin Funeral Homes vs. NLRC,[15] we referred the petition to the Court of
Appeals which, on June 30, 1999, set aside the decision of the NLRC and reinstated the decision of the
POEA.[16] The Court of Appeals held that respondents were illegally dismissed since the petitioners failed
to substantiate their claim that respondents voluntarily resigned from employment. It ruled that the
quitclaims are not sufficient to show valid terminations. Anent non-compliance with the formal
requirements of the petition, the Court of Appeals, adopting the observation of the Solicitor General, held
that the case is an exception to the rule on strict adherence to technicality.
On July 21, 1999, petitioners filed a motion for reconsideration but the Court of Appeals denied it in a
Resolution dated September 22, 1999.
Hence, the present petition for review oncertiorari on the following grounds:
1. Under the law and applicable jurisprudence, the Petition for Certiorari filed by respondents should have
been denied outright for non-compliance with the requirements for filing a Petition for Certiorari.[17]
2. Under the law and applicable jurisprudence, respondents cannot be considered to have been dismissed
from employment, because it was respondents who resigned from their employment.[18]
Petitioners maintain that the petition forcertiorari should have merited outright dismissal for noncompliance with the mandatory requirements of the rules. There is no statement indicating the material
dates when the decision of the NLRC was received and when the motion for reconsideration was filed.

Likewise, the certification on non-forum shopping was not signed by respondents but by their counsel. In
any event, petitioners insist that respondents voluntarily resigned from their employment.
In their Comment, respondents allege that the instant petition highlights the same arguments already
raised and squarely resolved by the Court of Appeals. Nevertheless, they reiterate that they did not resign
from employment but were abruptly and unceremoniously terminated by petitioner Ferry Casinos
Limited.[19]
Section 3[20] of Rule 46 of the Rules of Court provides that there are three material dates that must be
stated in a petition for certiorari brought under Rule 65: (a) the date when notice of the judgment or final
order or resolution was received, (b) the date when a motion for new trial or for reconsideration when one
such was filed, and, (c) the date when notice of the denial thereof was received. This requirement is for
the purpose of determining the timeliness of the petition, since the perfection of an appeal in the manner
and within the period prescribed by law is jurisdictional and failure to perfect an appeal as required by
law renders the judgment final and executory.[21]
The same rule requires the pleader to submit a certificate of non-forum shopping to be executed by the
plaintiff or principal party. Obviously, it is the plaintiff or principal party, and not the counsel whose
professional services have been retained for a particular case, who is in the best position to know whether
he or it actually filed or caused the filing of a petition in that case. [22]
As a general rule, these requirements are mandatory, meaning, non-compliance therewith is a sufficient
ground for the dismissal of the petition.[23]
In the case before us, the failure to comply with the rule on a statement of material dates in the petition
may be excused since the dates are evident from the records. A thorough scrutiny of the records reveals
that the January 15, 1997 decision of the NLRC was received by respondents counsel on January 24,
1997.[24] On February 19, 1997, respondents filed a motion for reconsideration [25] which was denied by the
NLRC in a Resolution dated April 30, 1997.[26]Respondents counsel received the resolution on May 30,
1997 and they filed the petition forcertiorari on July 18, 1997.
In view of the retroactive application of procedural laws, [27] Section 4, Rule 65 of the 1997 Rules of
Procedure, [28] as amended by A.M. No. 00-2-03 which took effect on September 1, 2000, is the governing
provision. It provides that when a motion for reconsideration is timely filed, the 60-day period for f iling a
petition for certiorari shall be counted from notice of the denial of said motion. While respondents
motion for reconsideration was filed 16 days late, [29] the NLRC nonetheless acted thereon and denied it on
the basis of lack of merit. In resolving the merits of the motion despite being filed out of time, the NLRC
undoubtedly recognized that it is not strictly bound by the technicalities of law and procedure. Thus, the
60-day period for filing of a petition for certiorarishould be reckoned from the date of the receipt of the
resolution denying the motion for reconsideration, i.e., May 30, 1997, and thus, the filing made on July
18, 1997 was well within the 60-day reglementary period.

As regards the verification signed only by respondents counsel, this procedural lapse could have
warranted the outright dismissal of respondents petition for certiorari before the Court of Appeals.
However, it must be remembered that the rules on forum shopping, which were precisely 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 which is the goal of all rules of
procedure - that is, to achieve substantial justice as expeditiously as possible. [30]
Needless to stress, rules of procedure are merely tools designed to facilitate the attainment of justice.
They were conceived and promulgated to effectively aid the court in the dispensation of justice. Courts
are not slaves to or robots of technical rules, shorn of judicial discretion. In rendering justice, courts have
always been, as they ought to be, conscientiously guided by the norm that on the balance, technicalities
take a backseat against substantive rights, and not the other way around. Thus, if the application of the
Rules would tend to frustrate rather than promote justice, it is always within our power to suspend the
rules or except a particular case from its operation. [31]
As the Court eloquently stated in the case ofAguam vs. Court of Appeals:[32]
The court has the discretion to dismiss or not to dismiss an appellant's appeal. It is a power conferred on
the court, not a duty. The "discretion must be a sound one, to be exercised in accordance with the tenets of
justice and fair play, having in mind the circumstances obtaining in each case." Technicalities, however,
must be avoided. The law abhors technicalities that impede the cause of justice. The court's primary duty
is to render or dispense justice. "A litigation is not a game of technicalities." "Lawsuits unlike duels are
not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and
becomes its great hindrance and chief enemy, deserves scant consideration from courts." Litigations must
be decided on their merits and not on technicality. Every party litigant must be afforded the amplest
opportunity for the proper and just determination of his cause, free from the unacceptable plea of
technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the policy of
the court is to encourage hearings of appeals on their merits and the rules of procedure ought not to be
applied in a very rigid, technical sense; rules of procedure are used only to help secure, not override
substantial justice. It is a far better and more prudent course of action for the court to excuse a
technical lapse and afford the parties a review of the case on appeal to attain the ends of justice
rather than dispose of the case on technicality and cause a grave injustice to the parties, giving a
false impression of speedy disposal of cases while actually resulting in more delay, if not a
miscarriage of justice.[33] (Emphasis supplied)
Thus, in Sy Chin vs. Court of Appeals,[34] we held that the procedural lapse of a partys counsel in signing
the certificate of non-forum shopping may be overlooked if the interests of substantial justice would
thereby be served. Further, inDamasco vs. NLRC,[35] we noted that the certificate of non-forum shopping
was executed by the petitioners counsel, but nevertheless resolved the case on its merits for the reason

that technicality should not be allowed to stand in the way of equitably and completely resolving the
equity and obligations of the parties to a labor case.
Indeed, where a decision may be made to rest on informed judgment rather than rigid rules, the equities of
the case must be accorded their due weight because labor determinations should not only be secundum
rationem but alsosecundum caritatem.[36]
In this case, the Court of Appeals aptly found compelling reasons to disregard respondents procedural
lapses in order to obviate a patent injustice.
Time and again we have ruled that in illegal dismissal cases like the present one, the onus of proving that
the employee was not dismissed or if dismissed, that the dismissal was not illegal, rests on the employer
and failure to discharge the same would mean that the dismissal is not justified and therefore illegal. [37]
Thus, petitioners must not only rely on the weakness of respondents evidence but must stand on the
merits of their own defense. A party alleging a critical fact must support his allegation with substantial
evidence for any decision based on unsubstantiated allegation cannot stand as it will offend due process.
[38]

Petitioners failed to discharge this burden.

Petitioners complete reliance on the alleged resignation letters cum release and quitclaim to support their
claim that respondents voluntarily resigned is unavailing as the filing of the complaint for illegal
dismissal is inconsistent with resignation.[39] Resignation is the voluntary act of employees who are
compelled by personal reasons to dissociate themselves from their employment. It must be done with the
intention of relinquishing an office, accompanied by the act of abandonment. [40] Thus, it is illogical for
respondents to resign and then file a complaint for illegal dismissal. We find it highly unlikely that
respondents would just quit even before the expiration of their contracts, after all the expenses and the
trouble they went through in seeking greener pastures and financial upliftment, and the concomitant
tribulations of being separated from their families, having invested so much time, effort and money to
secure their employment abroad. Considering the hard economic times, it is incongruous for respondents
to simply give up their work, return home and be jobless once again.
Likewise, petitioners submission that respondents voluntarily resigned because of their desire to seek
employment elsewhere, as accentuated by the concurrent fact that two of the respondents, Haydee Anne
B. Acua and Marites T. Clarion, already have jobs in Singapore is an unreasonable inference. The fact that
these two have already found employment elsewhere should not be weighed against their favor. It should
be expected that they would seek other means of income to tide them over during the time that the legality
of their termination is under litigation. They should not be faulted for seeking employment elsewhere for
their economic survival.
We further note that the alleged resignation letters, one of which reads:
In signing this document, I am declaring my decision to return to the Philippines with the other eight
employees of Ferry Casinos Limited and Great Southern Maritime Corporation, on the 25 th July 1993. I

understand that my contract is uncompleted and I fully understand the consequences of that. I do however
promise to work to full for both companies before my departure.
I realise (sic) that I may be dismissed by the captain or Purser of my assigned vessel, if I am suspected of
misconduct in the remaining weeks of my employment, until my departure, and I understand that I will
compansate (sic) both companies for the results from (sic) my actions.
I sign to say that I will follow the instructions of Captain A. Sanchez upon my arrival in the Philippines
and that any previous arrangements to this date are nul (sic) and void.
I recognise (sic) that I have been fairly treated by both companies and for this I will not jeopardise (sic)
them upon my arrival in the Philippines.
I acknowledge and accept this as evidence for (sic) my departure to be shown to the P.O.E.A. in the
Philippines.[41]
which were all prepared by petitioner Ferry Casinos Limited, are substantially similarly worded and of
the same tenor. A thorough scrutiny of the purported resignation letters reveals the true nature of these
documents. In reality, they are waivers or quitclaims which are not sufficient to show valid separation
from work or bar respondents from assailing their termination. The burden of proving that quitclaims
were voluntarily entered into falls upon the employer. [42] Deeds of release or quitclaim cannot bar
employees from demanding benefits to which they are legally entitled or from contesting the legality of
their dismissal.[43] The reason for this rule was laid down in the landmark case of Cario vs. ACCFA:[44]
Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee,
obviously, do not stand on the same footing. The employer drove the employee to the wall. The latter
must have to get hold of money. Because, out of job, he had to face the harsh necessities of life. He thus
found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice.
One thing sure, however, is that petitioners did not relent their claim. They pressed it. They are deemed
not to have waived any of their rights.Renuntiatio non praesumitur.
Thus, we are more than convinced that respondents did not voluntarily quit their jobs. Rather, they were
forced to resign or were summarily dismissed without just cause. The Court of Appeals acted in the
exercise of its sound discretion when it denied petitioners insistence to dismiss the petition for certiorari,
in light of the factual and antecedent milieu. By so doing, the appellate court correctly gave more
importance to the resolution of the case on the merits.
WHEREFORE, the instant petition is DENIED and the assailed Decision of the Court of Appeals dated
June 30, 1999 in CA-G.R. SP No. 50504 is AFFIRMED. Costs against petitioners.

9. Dimayuga v. PCIB A Shiro B Manding

This is a petition for review on certiorari seeking to set aside the resolutions of the respondent Court of
Appeals dated: (a) September 30,1975, dismissing the appeal of petitioner in CA-G.R. No. 57556-R
entitled "Philippine Commercial and Industrial Bank, Plaintiff-appellee vs. Pedro C. Tanjuatco, et. al.,
Defendants-appellants", (b) November 21, 1975 denying petitioner's motion for reconsideration, and (c)
January 13, 1976 denying petitioner's second motion for reconsideration.
Petitioner Carlos Dimayuga is the defendant-appellant in a case for collection of sum of money against
whom the decision was rendered by the trial court on May 28, 1974.
Plaintiff, who is now the respondent in the instant petition, is a banking institution duly organized and
existing under and by virtue of the laws of the Philippines and is the creditor of petitioner.
On February 6, 1962, petitioner borrowed from the plaintiff the sum of ten thousand (Pl0,000.00) pesos as
evidenced by a promissory note executed and signed by Pedro Tanjuatco and Carlos Dimayuga. The
indebtedness was to be paid on May 7, 1 962 with interest at the rate of ten percent (10%) per annum in
case of non-payment at maturity as evidenced by and in accordance with the terms and conditions of the
promissory note executed jointly and severally by defendants.
In the aforementioned promissory note, Carlos Dimayuga bound himself to pay jointly and severally with
Pedro Tanjuatco interest at the rate of 10% per annum on the said amount of P10,000.00 until frilly paid.
Moreover, both undertook to "jointly and severally authorize the respondent Philippine Commercial and
Industrial Bank, at its option to apply to the payment of this note any and all funds, securities or other real
or personal property of value which hands (sic) on deposit or otherwise belonging to anyone or all of us."
(p. 56, RA Rollo, p. 15).
Upon the default of the promissors to pay, a complaint was filed on July 11, 1969 by the Philippine
Commercial and Industrial Bank for sum of money.
Defendant Carlos Dimayuga, now petitioner, however, had remitted to the plaintiff (now respondent) the
amount totalling P4,000.00 by way of partial payments made from August 1, 1969 to May 7, 1970 as
evidenced by corresponding receipts thereto. These payments were nevertheless applied to past interests,
charges and partly on the principal.
On May 28, 1974, the trial court rendered a decision holding defendants jointly and severally liable to pay
the plaintiff the sum of P9,139.60 with interest at 10% per annum until fully paid plus P913.96 as
attorneys' fees and costs against defendants.
On July 11, 1974, petitioner filed a motion alleging that since Pedro Tanjuatco died on December 23,
1973, the money claim of the respondents should be dismissed and prosecuted against the estate of the
late Pedro Tanjuatco as provided in Sec. 5, Rule 86, New Rules of Court. On June 22, 1974, the trial court
denied the motion for lack of merit.

Not satisfied, the petitioner appealed to the respondent court. The appeal was opposed by the respondent
PCIB in a motion to dismiss the appeal, on the ground that the record on appeal did not disclose data
showing that the appeal was perfected on time. In opposition to the respondent's motion to dismiss, the
petitioner Carlos Dimayuga insisted that the appeal was perfected on time. On September 30, 1975, the
Court of Appeals in a resolution dated September 30, 1975 dismissed the appeal for failure of the Record
on Appeal to show on its face that the appeal was timely perfected.
Hence, this petition.
It is alleged by herein petitioner that the Court of Appeals erred in dismissing the appeal on the ground
that the printed records on appeal failed to show that it was perfected on time.
On March 18, 1976, the respondent Philippine Commercial and Industrial Bank filed its comment. In the
resolution dated April 2, 1976, the Supreme Court through its Second Division resolved to treat the
petition for review as a special civil action and required both parties to submit their simultaneous
memoranda.
On May 10, 1976, the petitioner submitted his memorandum while private respondent submitted its
corresponding memorandum on May 25, 1976.
The main issue in this case is whether or not the Court of Appeals erred in dismissing the appeal for
failure of the Record of Appeal to show on its face that the appeal had been timely perfected.
Among others, respondent PCIB's objection to this appeal is predicated on the fact that petitioner failed to
state in his record on appeal the date when he received the copy of the decision, the denial and/or granting
of the second motion filed although the same may be found in a motion for reconsideration. Respondent
bank insisted that petitioner's belated act in reciting the data in a motion for reconsideration of the
resolution of the Court of Appeals did not cure this defect.
This issue has long been laid to rest. Although no record on appeal is now required to take an appeal
(section 39, BPB 129), this Court had long discarded the rigid application of the material data rule
(section 6, Rule 41) in appeals from Courts of First Instance to the Appellate Court (Luzon Concrete
Products, Inc. v. Court of Appeals, 135 SCRA 463 [1985]; Abando v. C.A., 83 SCRA 511 [1978]). Thus,
the mere absence of a formal order granting the motion for extension of time to file record on appeal
should not be fatal to the petitioner if the record on appeal filed within the requested period was approved
by the court a quo. The approval thereof, as in the case at bar, carries with it the approval of the motion
for extension and the mere failure of the record on appeal to show such approval should not defeat the
right to appeal Berkenkotter v. Court of Appeals, 53 SCRA 22 [1973]). The appellate court may properly
rely on the trial court's order of approval and could determine therefrom without sending for or examining
any other records that the appeal was perfected on time as expressly found by the trial court . (Saura
Import & Export Co., Inc. v. Court of Appeals, 83 SCRA 276 [1978]).

In fine, the appeal interposed by the petitioner from the decision of the trial court should be given due
course. However, to remand the case to the Court of Appeals would only delay the final disposition of this
case. On the other hand, this Court has consistently ruled that remand of a case to a lower court for the
reception of evidence is not necessary where the Supreme Court could resolve the dispute already based
on the records before it (Quisumbing v. C.A., 122 SCRA 704 [1983]; Board of Liquidators vs. Zulueta,
115 SCRA 549 [1982]; Velasco v. C.A., 95 SCRA 617 [1980]). A case involving an interlocutory order
which would have been referred to the Court of Appeals was decided by the Supreme Court if only to
make up for time lost (Sacdalan v. Bautista, 56 SCRA 176 [1974]). Finally, in view of the long pendency
of a case, this Court finds "that the greater interest of justice demands that the case should be disposed on
the merits at this stage ... " Limpan Investment Corporation v. Sundiam, 157 SCRA 209 [1988]).
From the evidence presented, there can be no dispute that Carlos Dimayuga bound himself jointly and
severally with Pedro C. Tanjuatco, now deceased, to pay the obligation with PCIB in the amount of
P10,000.00 plus 10% interest per annum. In addition, as above stated, in case of non-payment, they
undertook among others to jointly and severally authorize respondent bank, at its option to apply to the
payment of this note, any and all funds, securities, real or personal properties, etc. belonging to anyone or
all of them. Otherwise stated, the promissory note in question provides in unmistakable language that the
obligation of petitioner Dimayuga is joint and several with Pedro C. Tanjuatco.
It is the position of the petitioner that Pedro Tanjuatco having died on December 23,1973, the money
claim of PCIB should be dismissed and prosecuted against the estate of the late Tanjuatco.
This contention is untenable.
It is well settled under the law and jurisprudence that when the obligation is solidary, the creditor may
bring his action in toto against the debtors obligated in solidum. As expressly allowed by Article 1216 of
the Civil Code, the creditor may proceed against any one of the solidary debtors or some or all of them
simultaneously. "Hence, there is nothing improper in the creditor's filing of an action against the surviving
solidary debtors alone, instead of instituting a proceeding for the settlement of the estate of the deceased
debtor wherein his claim could be filed." (Imperial Insurance Inc. v. David, 133 SCRA 317 [1984]). The
notice is undoubtedly left to the solidary creditor to determine against whom he will enforce collection
(PNB v. Independent Planters Association Inc., 122 SCRA 113 [1983]).
WHEREFORE, the resolutions of the Court of Appeals dated September 30, 1975, November 21, 1975
and January 13, 1976 are Reversed and Set Aside. The appeal interposed by petitioner-appellant is
Dismissed for lack of merit and the decision of the Court of First Instance of Manila, Branch VI dated
May 28, 1974, is Affirmedin toto.

10. Nadela v. City of Cebu Clarence Rogelio Castilar

Before us is a petition for review on certiorariof the Decision of the Court of Appeals promulgated on
April 30, 2001 in CA-G.R. CV No. 61910, which affirmed the Order of the Regional Trial Court of Cebu
City, Branch 12, dated March 12, 1998, [1] dismissing the action of petitioner Kenneth O. Nadela for
recovery of ownership and possession of a parcel of land with damages against respondents City of Cebu
and Metro Cebu Development Project (MCDP).
On March 4, 1997, herein petitioner, Kenneth O. Nadela, filed an action before the Regional Trial Court
of Cebu City, Branch 12, for recovery of ownership and possession of a parcel of land with damages and
a prayer for the issuance of a temporary restraining order and/or preliminary injunction against
respondents.
In his Amended Complaint,[2] petitioner alleged, thus:
1. For more than thirty (30) years, he and his predecessors-in-interest have been in actual, adverse,
peaceful and continuous possession in the concept of owner of an unregistered parcel of land described
as:
A parcel of agricultural land known as Lot No. Psu-07-006450, situated at Barangay Inayawan, Cebu
City, Philippines, and bounded:
North Public Land;
East -- Public Land;
South -- Psu-07-006451 (Heirs of Alipio Bacalso);
West -- Public Land and Property of Felicisimo Rallon.
With an assessed value of SIX THOUSAND (P6,000) PESOS.[3]
2. He merely tolerated respondents act of dumping garbage on his property believing that it will not be
prejudicial to his interest. However, sometime in the month of January 1997, respondents, without his
consent, dumped thereon not just garbage but also other filling materials.Respondents likewise conducted
some earthwork for the purpose of forcibly wresting from him the ownership and possession of said
property.
3. In utter disregard of his rights, respondent MCDP blocked the approval of the survey plan of the
subject property. Consequently, the Bureau of Lands (now the Lands Management Services), Department
of Environment and Natural Resources, Region VII, deferred action on the said plan.
4. Since the month of January 1997, respondent MCDP placed and stationed some security guards in the
subject property, thereby preventing him from entering and exercising his right of ownership and
possession over the property.
5. Said unlawful acts of respondents will not only cause irreparable injury but will also work injustice to
him, and complicate, aggravate and multiply the issues in this case.

Petitioner prayed that pending hearing of the case on the merits, and after the parties shall have been
heard, the court issue a writ of preliminary injunction, directing the respondents to desist and refrain from
conducting any earthwork, introducing any improvement, or placing any guard on the property.
Thereafter, petitioner prayed that judgment be rendered (1) declaring him as the true and lawful owner of
the subject property; (2) ordering the respondents and all persons acting in their behalf, control or
direction, and/or who derived their right of possession from the respondents, to vacate the subject
property; (3) ordering the respondents to pay the sum ofP500,000 as actual damages plus the sum
ofP50,000 a month until petitioners possession of the subject property shall have been restored,P100,000
as attorneys fees and costs of suit.
Respondent City of Cebu filed a Motion to Dismiss [4] on the ground that petitioner has no cause of action
since (1) the suit is against the State and there is no allegation that it has given its consent; and (2) the
Complaint itself shows that the case is premature since petitioner admitted that he is in possession in the
concept of owner of an unregistered parcel of land.
Respondent MCDP, represented by the Solicitor General, also filed a Motion to Dismiss [5]on the following
grounds: (1) the Complaint states no cause of action as the land involved is a public land and thus belongs
to the State, petitioner being a mere claimant thereof; (2) petitioner failed to exhaust available
administrative remedies; and (3) petitioners suit is barred under the doctrine of state immunity from suit.
Petitioner filed an Opposition[6] to respondents respective motion to dismiss asserting that the property in
litigation is a private agricultural land and that neither the doctrine of state immunity from suit nor the
general rule of exhaustion of administrative remedies applies in this case. Petitioner brought to the
attention of the trial court the following facts:
(1) That pursuant to Land Classification Map No. 222, Project No. 5, Certified on November 20, 1912,
the property in litigation (Lot No. PSU-07-006450, situated at Barangay Inayawan, Pardo, Cebu City) had
long been classified as alienable and disposable land;
(2) That the said lot is a portion of a parcel of land originally owned by Alipio O. Bacalso, whose
possession of the same commenced way back in 1962, as evidenced by a tax declaration issued in his
name;
(3) That on April 22, 1989, spouses Alipio Bacalso and Eleuteria Bacalso assigned their property situated
at Barangay Inayawan, Pardo, Cebu City, to Nadela Agro-Industrial Development Corporation;
(4) That in 1993, the same property was declared for taxation purposes in the name of Nadela AgroIndustrial Development Corporation;
(5) That on May 4, 1995, Nadela Agro-Industrial Development Corporation assigned the property in
litigation to the plaintiff; and

(6) That for more than thirty (30) years, plaintiff and his predecessors-in-interest paid realty taxes for the
property in litigation.[7]
Respondents filed their respective Reply[8] to petitioners Opposition.
On September 19, 1997, Acting Presiding Judge Victorino U. Montecillo issued an Order [9]granting
petitioners application for a writ of injunction.
Respondents City of Cebu and MCDP filed their respective Motion for Reconsideration [10] of said Order.
Petitioner filed a Comment and Opposition [11] to the motion for reconsideration of respondent MCDP,
which in turn filed a Reply.[12]Petitioner filed a Rejoinder[13] to said Reply.
On January 23, 1998, Presiding Judge Aproniano B. Taypin issued an Order [14] setting aside the Order of
the Court dated September 19, 1997, which granted the application for a writ of injunction. The trial court
ruled that the project undertaken by respondent MCDP falls within the definition of infrastructure project
and pursuant to Presidential Decree No. 1818, courts are prohibited from issuing writs of injunction to
stop any person, entity or government official from proceeding with or continuing the implementation of
any such infrastructure project. The trial court further ordered that the case be tried on the merits.
Respondent City of Cebu filed a Motion for Reconsideration of the Order denying the Motion to
Dismiss[15] reiterating therein that the Complaint states no cause of action and is premature as the lot in
question is admittedly an unregistered parcel of land; hence, it is still a part of the public domain and
owned by the State.
On March 12, 1998, the trial court issued an Order,[16] thus:
ORDER
This is a motion for reconsideration of an Order denying the motion to dismiss filed by the herein
defendant, City of Cebu. A copy of said motion was duly furnished to the herein plaintiff thru its counsels
on record.
The instant case involved an unregistered parcel of land, henceforth, a part of the public domain and
owned by the state. The Tax Declarations presented by the plaintiff are not considered conclusive
evidence of ownership, as has been held in the case of Rivera vs. Court of Appeals, 244 SCRA 218.
Moreover, the subject property being unclassified, whatever possession the applicant may have had and
however long cannot ripen into private ownership. (Director of lands vs. Intermediate Appellate Court,
219 SCRA 339).
Finally, under the Regalian Doctrine, all lands not otherwise appearing to be clearly within private
ownership are presumed to belong to the State (Director of Lands v. Intermediate Appellate Court, 219
SCRA 339).
Wherefore, in consideration of all the foregoing, the instant case is hereby dismissed.

SO ORDERED.
Petitioner filed a motion for reconsideration, which was denied by the trial court for being unmeritorious.
[17]

Petitioner thereafter appealed to the Court of Appeals alleging that (1) the trial court erred in dismissing
Civil Case No. Ceb-19990 without conducting a hearing of the case on the merits; and (2) the trial court
acted with grave abuse of discretion and denied him due process when it denied his motion for
reconsideration of the order of dismissal. [18]
On April 30, 2001, the Court of Appeals rendered a decision against petitioner, the dispositive portion of
which reads:
WHEREFORE, premises considered, the present appeal is hereby dismissed and the appealed Order dated
March 12, 1998 in Civil Case No. CEB-19990 is hereby AFFIRMED.[19]
The Court of Appeals ruled that the trial court did not err in ordering the dismissal of the Complaint based
on the following:
(1) Petitioners allegations in the Amended Complaint that the disputed property is still an unregistered
parcel of land and that he has a pending application for a survey plan with the Lands
Management Bureau of the Department of Environment and Natural Resources, which the appellate court
misstated as a pending application for a judicial confirmation of title, are admissions of the States
ownership of the property.
(2) Granting that petitioner has been in possession in the concept of owner of the subject property for
more than 30 years, still petitioner cannot be deemed to have acquired a grant by operation of law because
his possession thereof did not commence since June 12, 1945 as required by Section 48 (b) of the Public
Land Act as amended by Presidential Decree No. 1073, considering that the earliest tax declaration he
submitted during the hearing on the application for a writ of preliminary injunction was only for the year
1962.
The Court of Appeals also held that in denying petitioners motion for reconsideration of the order of
dismissal of the case, the trial court was of the honest opinion, after evaluating the grounds of said
motion, that the same was not meritorious. [20]Hence, the appellate court ruled that the trial court did not
act with grave abuse of discretion as there was no capricious or whimsical exercise of judgment
tantamount to lack of jurisdiction in the issuance of said order.[21]
Petitioner filed a motion for reconsideration, which was denied by the Court of Appeals for lack of merit.
[22]

Hence, this appeal.

Petitioner contends that the Court of Appeals erred, thus:

I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN AFFIRMING THE

REGIONAL TRIAL COURT OF CEBU CITY (BRANCH 12) GRANTING THE MOTION TO
DISMISS ON THE GROUND OF NO CAUSE OF ACTION.
II. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN FAILING TO RECOGNIZE
PETITIONERS CONSTITUTIONAL RIGHT TO PROPERTY WITHOUT DUE PROCESS AND JUST
COMPENSATION.
III. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN FAILING TO RECOGNIZE
PETITIONERS CONSTITUTIONAL RIGHT TO DUE PROCESS BY NOT ALLOWING THE LATTER
TO PRESENT HIS EVIDENCE-IN-CHIEF IN A TRIAL ON THE MERITS BY REMANDING THE
INSTANT CASE TO THE REGIONAL TRIAL COURT FOR FURTHER PROCEEDING. [23]
The Courts Ruling
Petitioner contends that the Court of Appeals erred in affirming the Order of the trial court which granted
the motion to dismiss of respondents on the ground that the Complaint states no cause of action. In
essence, petitioner asserts in his assigned errors that the allegations in his Amended Complaint are
sufficient to establish his cause of action, and said allegations were hypothetically admitted by
respondents when they filed a motion to dismiss. Petitioner prays that he be given an opportunity to prove
ownership over the subject property in a trial on the merits.
The contention is untenable.
The test of the sufficiency of the facts to constitute a cause of action is whether admitting the facts
alleged, the court can render a valid judgment upon the same in accordance with the prayer of the
complaint.[24] In answering the query, only the facts asserted in the complaint must be taken into account
without modification although with reasonable inferences therefrom. [25]Nevertheless, in Tan v. Director of
Forestry[26]and Santiago v. Pioneer Savings and Loan Bank,[27] evidence submitted by the parties during
a hearing in an application for a writ of preliminary injunction was considered by the court in resolving
the motion to dismiss. In Llanto v. Ali Dimaporo,[28] this Court held that the trial court can properly
dismiss a complaint on a motion to dismiss due to lack of cause of action even without a hearing, by
taking into consideration the discussion in said motion and the opposition thereto. In Marcopper Mining
Corporation v. Garcia,[29] this Court ruled that the trial court did not err in considering other pleadings,
aside from the complaint, in deciding whether or not the complaint should be dismissed for lack of cause
of action.
A cause of action exists if the following elements are present: (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 defendant to the plaintiff
for which the latter may maintain an action for recovery of damages.[30]

From the allegations in the Complaint, petitioner claims ownership of the subject property for having
possessed it in the concept of an owner openly, adversely, peacefully and exclusively for more than 30
years. Petitioner did not allege in his Complaint the actual date when his ownership of the subject
property accrued. However, in his Opposition[31] to respondents motion to dismiss,petitioner brought to
the attention of the trial court the fact that the said lot is a portion of a parcel of land originally owned by
Alipio O. Bacalso, whose possession of the same commenced way back in 1962, as evidenced by a tax
declaration issued in his name. (Emphasis supplied.)
Petitioners claim is an assertion that the subject property is private land, or that even assuming it was part
of the public domain, petitioner had already acquired imperfect title thereto under Section 48 (b) of
Commonwealth Act No. 141, otherwise known as the Public Land Act, as amended by Republic Act No.
1942.[32]Said section provides:
SEC. 48. The following-described citizens of the Philippines, occupying lands of the public domain or
claiming to own any such lands or an interest therein, but whose titles have not been perfected or
completed, may apply to the Court of First Instance of the province where the land is located for
confirmation of their claims and the issuance of a certificate therefor, under the Land Registration Act, to
wit:
xxx xxx xxx
(b) Those who by themselves or through their predecessors in interest have been in the open, continuous,
exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a
bona fide claim of acquisition of ownership, for at least thirty years immediately preceding the filing of
the application for confirmation of title except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential to a Government grant and shall be
entitled to a certificate of title under the provisions of this chapter.
Said Section 48(b) was amended by Presidential Decree No. 1073, approved on January 25, 1977, thus:
SEC. 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII, of the Public Land Act are
hereby amended in the sense that these provisions shall apply only to alienable and disposable lands of
the public domain which have been in open, continuous, exclusive and notorious possession and
occupation by the applicant himself or thru his predecessor-in-interest, under a bona fide claim of
acquisition of ownership, since June 12, 1945.
In Heirs of Marciano Nagano v. Court of Appeals,[33] we ruled that under Section 48, a subject lot is, for
all intents and purposes, segregated from the public domain, because the beneficiary is conclusively
presumed to have performed all the conditions essential to a Government grant and shall be entitled to a
certificate of title under the provisions of this chapter.
In Director of Lands v. Bengzon,[34] we also ruled:

We cannot subscribe to the view of petitioner that it is only after a possessor has been issued a certificate
of title that the land can be considered private land. In interpreting the provisions of Section 48 (b) of
Commonwealth Act No. [141], this Court said in Herico vs. Dar, . . . when the conditions as specified in
the foregoing provision are complied with, the possessor is deemed to have acquired, by operation of law,
a right to a grant, a government grant, without the necessity of a certificate of title being issued. The land,
therefore, ceases to be of the public domain, and beyond the authority of the Director of Lands to dispose
of. The application for confirmation is a mere formality, the lack of which does not affect the legal
sufficiency of the title as would be evidenced by the patent and the Torrens title to be issued upon the
strength of said patent.
In Suzi v. Razon and Director of Lands,[35]we ruled that if, as above stated, the land, the possession of
which is in dispute, had already become, by operation of law private property of the plaintiff, there
lacking only the judicial sanction of his title, [plaintiff] has the right to bring an action to recover the
possession thereof. One claiming private rights must prove that he has complied with Commonwealth Act
No. 141, as amended.[36]
Notably, the Court of Appeals knew that petitioner was claiming ownership over the subject property
under Section 48 (b) of the Public Land Act. However, it correctly affirmed the dismissal of the case as it
properly considered the evidence submitted by petitioner during the hearing of the application for a writ
of preliminary injunction.[37]The Court of Appeals held:
In view of the required length of possession, even if We hypothetically admit the truth of appellants
allegation in his complaint that he had been for more than thirty (30) years been in open, continuous,
exclusive and notorious possession in concept of owner of the subject land, still he cannot be deemed to
have acquired a grant, or a right to a grant, by operation of law, considering his possession thereof did not
commence since June 12, 1945 or earlier as required by Sec. 48 (b) and (c), as amended by P.D. No. 1073.
Among the documentary evidence submitted by appellant during the hearing on the application for a writ
of preliminary injunction are tax declarations in his name and that of his predecessor-in-interest Alipio
Bacalso, the oldest being for the year 1962. Appellant, therefore, has not acquired ownership and title
under the law, over the property subject of litigation, which remained part of the public domain,
exclusively belonging to the State. The trial court thus did not err in ordering the dismissal of the
complaint upon the ground of failure to state a cause of action. [38]
Petitioner, therefore, clearly relies on Tax Declaration No. 117609 [39] for the year 1962, [40]the earliest tax
declaration presented during the hearing on the application for a writ of preliminary injunction, which
appears to be the evidence mentioned in petitioners Opposition [41] to respondents motion to dismiss
wherein petitioner brought to the attention of the trial court the fact that the subject property is a portion
of a parcel of land originally owned by Alipio O. Bacalso,whose possession of the same commenced way
back in 1962, as evidenced by a tax declaration issued in his name (emphasis supplied).

Considering appellants allegation in his Opposition that his predecessor-in-interest, Alipio O. Bacalso,
necessarily the first and earliest, in view of the words originally owned, commenced possession of the
subject property only in 1962, and his submission of tax declarations, the earliest of which was for the
year 1962,[42] during the hearing on the application for a writ of preliminary injunction, petitioner cannot
be presumed to have performed all the conditions essential to a Government grant inasmuch as his
possession of the subject property did not commence since June 12, 1945 or earlier, as required by
Section 48 (b) of Commonwealth Act No. 141, as amended by Presidential Decree No. 1073. Hence, the
Court of Appeals did not err in affirming the Order of the trial court dismissing the Complaint on the
ground of failure to state a cause of action.
WHEREFORE, in view of the foregoing, the instant petition is DENIED for lack of merit. The
questioned Decision of the Court of Appeals in CA-G.R. CV No. 61910 is hereby AFFIRMED. Costs
against the petitioner.

11. Bataan Hardwood Corp v. Dy Pac and Co., Andreo Miguel H. Zamora
ppeal by certiorari from a decision of the Court of Appeals.
The undisputed facts of the case, as found by the appellate court in its decision and as reproduced by
petitioners in their petition at bar, are as follows: .
On January 21, 1960, plaintiff-appellant Dy Pac & Company and defendant-appellee Bataan Hardwood
Corporation, both duly organized Philippine Corporations, entered into a contract whereby appellant
would advance appellee certain sums of money for logs which the latter would sell to the former. In the
course of their business dealings, appellee became indebted to appellant for the amount of P21,000.00.
This fact is confirmed in a subsequent contract entered into by the same parties on July 6, 1960
superseding their former agreement (Exh. A), and setting forth the manner of payment by appellee
company of said obligation, thus:
That the SELLER (appellee corporation) will pay the BUYER (appellant company) the sum of
P21,000.00 interest at 1% per month beginning July 1, 1960 in manner following:
a)

P1,500.00 per month, the same to be payable at the rate of P750.00 every 15th day of the month,

and P750.00 every 30th day of the month, the same to begin July 15, 1960, with the understanding that
the said payments be applied to the payment of the amount due and herein above confirmed including
interest, said payments to continue up to December 30, 1960; .
b)

Beginning January 9, 1961, the SELLER agrees to liquidate the balance of said obligation herein

above stated as well as any and all advances that may hereinafter be granted at the rate of P1,000.00 per
week, beginning February 9, 1961 and weekly thereafter, the same to be deducted from the purchase price
of the logs to be sold by SELLER to the BUYER, in accordance with the terms and conditions

hereinabove specified, and until the amount, including such other advances as the SELLER may
hereinafter receive shall have been fully paid;' (Appellant's Record on Appeal, p. 7) .
In said contract Exhibit A, it further appears that as security for the obligation, appellee corporation and
Mauro B. Ganzon mortgaged in favor of appellant a vessel called "Batman ex LCT 1282," described in
their contract as registered in the name of said Mauro B. Ganzon; that the other appellee, Domingo B.
Sanchez, stipulated that said mortgage should be superior to another mortgage previously constituted on
the vessel in his own favor; that appellee corporation undertook to insure said vessel for at least
P30,000.00 in favor of appellant; that in the event of default by appellee corporation with respect to any
of the terms and conditions of the contract, appellant had the right to declare the contract terminated and
the whole standing balance on the obligation would automatically become due; that upon the expiration of
five days following demand of the obligation by appellant, appellee would pay a penalty of P100.00 for
each day of delay; and that finally, should appellant foreclose the mortgage judicially or extra-judicially,
"the penalty shall be included and added to the principal amount due plus an additional 25% of the full
amount due which the parties agree to be secured." .
Despite the contract, appellee company failed to insure the vessel and was, moreover, irregular in the
payment of the stipulated installments and interest due on its principal obligation, prompting appellant to
send letters of demand (Exhs. D, E & F). By October 19, 1960, appellee paid only the installments due as
of August 15, 1960 in the amount of P2,250.00 (Exhs. 1, 1-A & 1-B). With respect to the stipulated
interest, appellee similarly paid only up to August 15, 1960 (Exhs. 2, 2-A & 2-B). On November 4, 1960,
appellant wrote appellee company a final letter of demand informing the latter partly as follows: .
[Text of demand letter omitted.] 1
Appellee's mere response to the above letter was the payment of two additional installments in the amount
of P1,500.00, which was, however, duly accepted by appellant company (Exhs. 1-C). But up to the
present time, appellee has not paid its balance with appellant in the amount of P17,250.00; and on account
of appellee's failure to insure the vessel as agreed upon, appellant company itself secured the necessary
insurance spending for premiums and documentary stamps, the total sum of P2,131.56 (Exhs. C, C-1 &
C-2). On August 28, 1961, plaintiff-appellant as aforesaid, filed the present complaint.
Private respondent's verified complaint in the Court of First Instance of Manila set forth three causes of
action, and it prayed for judgment as follows: .
WHEREFORE, it is respectfully prayed that upon approval of the plaintiff's bond, an order be issued
directly to the Sheriff of Manila, or any officer of the court, to take possession of the above-described
vessel for the delivery of the same to plaintiff, and that judgment be rendered in favor of plaintiff;
ON THE FIRST CAUSE OF ACTION
1.

Declaring plaintiff entitled to the possession of the above-described property;

2.

Sentencing defendants jointly and severally to pay to plaintiff the sum of P17,250.00;

3.

Sentencing defendants jointly and severally to pay plaintiff interest on the amount of P17,250.00

at the rate 1% per month from July 1, 1960 until fully paid;
4.

Sentencing defendants jointly and severally to pay amount equivalent to 25% of the whole

amount due as attorney's fees;

ON THE SECOND CAUSE OF ACTION
5.

Sentencing defendants jointly and severally to pay plaintiff the sum of P100.00 a day from

November 14, 1960 until fully paid as penalty; .

6.

Sentencing defendants jointly and severally to pay amount equivalent to 25% of the whole

amount due as attorney fees; .

ON THE THIRD CAUSE OF ACTION
7.

Sentencing the defendants jointly and severally to the amount of P2,131.56 as insurance

premiums and such insurance premium as may accrue at the rate of P2,131.56 per annum from January
18, 1962 until the final termination this case; .
8.

Sentencing defendants jointly and severally to pay costs of suit: .

9.

Plaintiff further prays for such relief as may be just and equitable in the premises.

After due trial, the trial court rendered its judgment of January 14, 1963 in favor of respondent (plaintiff)
as follows: .
WHEREFORE, judgment is hereby rendered in favor the plaintiff and against the defendants Bataan
Hardwood Corporation, Mauro B. Ganzon and Domingo B. Sanchez, ordering the said defendants to pay
jointly and severally to the plaintiff the sum of P17,250.00 with interest at the rate of 1% per month from
August 16, 1968, until fully paid, and the amount P2,131.56 with legal interest from the date of filing of
the complaint on August 23, 1961 until fully paid, plus attorney's fees of P300.00, and to pay the costs.
Regarding the counterclaim for damages for the alleged premature seizure of the vessel Batman, the same
being under litigation in Branch X of this Court, interference by this Court will be improper.
Respondent, not satisfied with the judgment, moved for its reconsideration and modification, urging that
the judgment should contain a provision on declaring it entitled to take possession through the sheriff of
the vessel under the replevin bond tendered by it and grant furthermore the stipulated 25% attorneys fees
and the stipulated penalty of P100.00 per day of delay.
The trial court denied reconsideration in its order of March 2, 1963, as follows: .
Upon consideration of the motion for reconsideration dated February 6, 1963, filed by counsel for the
plaintiff, and the opposition thereto as well as the reply to the opposition, the said motion is hereby
denied, the court being of the opinion that the attorney's fees of P300.00 is sufficient because even if the

amount of P17,250.00 and P2,131.56 were awarded to the plaintiff the issues were not complicated and
not too much efforts were exerted to secure a judgment in favor of the plaintiff. As to the agreed penalty
of P100.00 a day, the court is also of the opinion that the same is immoral and contrary to law and
therefore void, specially taking into consideration that interests, which constitute a substantial amount,
were already allowed.
Both parties appealed the trial court's decision to the appellate court, although subsequently, petitioners'
appeal as defendants was dismissed by reason of their failure to file their brief.
The appellate court favorably considered respondent's appeal on the stipulation for attorney's fees, stating
that "(C)onsidering the stipulated amount which is 25% of P17,250.00 or P4,310.00; appellee company's
continued failure to discharge its obligation despite repeated letters of demand by appellant; the fact that
the lower court's assessment did not include counsel's efforts on appeal; and appellant's representation,
which we find persuasive, that "the amount of P300.00 is not even sufficient to pay the assistant attorney
who followed up all the incidents in the case", it is but fair to raise the award of attorney's fees to the sum
of P2,000.00."
It likewise modified the trial court's ruling on the contractual penalty clause, thus: "(W)e are unable to
share the lower court's view that the agreed penalty of P100.00 a day "is immoral and contrary to law and
therefore void cause, apart from being legally recognized under the Code (Articles 1226-1230; 22262228), liquidated damages are agreed upon for the legitimate purpose of creating effective deterrent
against breach of an obligation by making the consequences of such breach as onerous as may be
possible. Neither could the court a quo base its refusal to recognize the validity of the penalty on the
allowance of interest on appellant's claims for it must be served, the interest at the rate of 12% per annum
on balance of P17,250.00 is actually compensation for a appellants loan of that capital in accordance with
their voluntary agreement in Exhibit A, and therefore, said interest cannot be considered as partaking of
the nature of an award of damages in appellant's favor. Similarly, the legal interest on the additional sum
of P2,131.56, which the lower court further awarded appellant should not be equated the penalty
stipulated by the parties because said interest specifically ordained under Article 2209 of the Civil Code
as a separate consequence of appellee company's non-payment of the aforesaid obligation, compelling
appellant to the present complaint. The lower court then, similarly erred when it completely disregarded
the stipulated penalty even if it found the same to be iniquitous or unconscionable as indeed it is, its
discretion was limited to an equitable reduction of the damages (Article 2227, N.C.C.; Avecilla vs.
Santos, G.R. No. L-6343, April 29, 1954; Yulo vs. Chan Pe, G.R. No. L-10061, April 22, 1957, 53 O.G.
5633). Considering the fact that appellee corporation has made partial and irregular payment of the
obligation, we are further disposed to reduce the amount of the penalty (Article 12 N.C.C.); but on the
other hand, considering also, the length of time that has already elapsed since 1960 to the present during
which appellant has been deprived of the use of money together with interest (Uy Isabelo vs. Yandoc,

G.R. No. 8801-R, June 20, 1956), we believe the ends of justice will be satisfied by awarding appellant
the additional sum of P2,000.00 by way of liquidated damages." .
On respondent's submittal that it was entitled to a replevin order as prayed for by it, the appellate court
ruled that respondent "correctly filed the present complaint replevin because appellees have refused to
deliver the possession of the mortgaged vessel in order that appellant could proceed to foreclose the same
extrajudicially." .
It therefore rendered its judgment of March 7, 1968 for respondent as appellant as follows: .
"WHEREFORE, with the modification that appellant company is hereby declared entitled to the
possession of the vessel aforesaid for purpose of extrajudicial foreclosure of the chattel mortgage and that
said appellant is hereby awarded increased attorney's fees in the sum of P2,000.00 and liquidated damages
in the further sum of P2,000.00, the appealed decision is affirmed in all other respects, with costs against
appellees." .
Acting on petitioners' motion for reconsideration to reduce the attorney's fees and penalty awarded, the
appellate court held that "(T)o adjudge then what is reasonable in the premises, it is well to consider
counsel's efforts in pursuing appellant's claim against appellees, which in this case do not really amount to
much considering that the trial required only two hearings and the stenographer's transcript consists of
only 44 pages. This would justify a reduction of our previous award of attorney's fee though, in any event,
we do not agree that the same should be fixed at of our previous award of P300.00 because counsel's
efforts after the rendition of the lower court's decision up to and including plaintiff's appeal must be
additionally compensated. On reconsideration, therefore, we hereby reduce the attorney's fee to the
amount of P800.00." It therefore issued its amendatory resolution of August 27, 1968, as follows: .
"WHEREFORE, the decision of this Court dated March 7, 1968 is hereby reconsidered in the sense that
the award of attorney's fee in favor of plaintiff-appellant is reduced to the sum of P800.00; in all other
respects the motion for reconsideration is hereby denied." .
The single question of law posed in this appeal by petitioners is that the appellate court "committed a
grave error of law when it rendered judgment providing separate reliefs on two causes of action, arising
out of a single cause of action." 2
Petitioners' tenuous contention is that since respondent plaintiff "has only one cause of action, that is, the
breach of the contract by the defendants [petitioners] consisting of [their] failure to make the stimulated
payments," then respondent could not "state two causes of action in [its] complaint, one for replevin and
the other, for recovery of a sum of money." 3 Petitioners' blurred argumentation follows: .
"... Accordingly, the trial court awarded only one relief to the plaintiff and that is for the recovery of the
sum of money from the defendants. In granting said relief, the trial court considered as waived, by the
plaintiff, the right of the plaintiff to foreclose the mortgage, it appearing that there is only one cause of
action in the complaint. However, the Court of Appeals chose to award two reliefs to the plaintiff

although, actually there is only one cause of action by affirming the decision of the lower court for the
recovery of a sum of money and for the delivery of the property subject of the mortgage to the plaintiff
for foreclosure thereof. This, we submit, is erroneous in the premise for there being only one cause of
action, the plaintiff is only entitled to only one relief. The Court cannot grant the two reliefs prayed for by
the plaintiff at the same time but may grant only either of them. In the instant case, the trial court chose to
grant relief for the recovery of the sum of money. Such a relief therefore, bars the prayer for replevin or
delivery of the property. Hence, it is our contention that the Court of Appeals cannot, under the same
complaint, grant the other remedy of replevin to the plaintiff. Although there is only one complaint in the
present case, we respectfully submit that the same comes under the purview of the aforecited provisions
of Rule 2 of the Rules of Court as two causes of action are stated therein and that separate reliefs were
prayed for." .
The petition is manifestly without merit.
1. It is elementary, as restated by the late Chief Justice Moran, that "the violation of a single right may
give rise to more than one relief. In other words, for a single cause of action or violation of a right, the
plaintiff may be entitled to several reliefs. It is the filing of separate complaints for these several reliefs
that constitutes splitting up of the cause of action. This is what is prohibited by the rule." 4
Moran thus adds, in amplification, that "cause of action is the delict or wrong by which the rights of the
plaintiff are violated by the defendant. Where there is only one delict or wrong, there is but a single cause
of action regardless of the number of rights that may have been violated belonging to one person. And the
rule is that all such rights should be alleged in a single complaint, otherwise those that are not therein
included cannot be the subject of subsequent complaints, for they are barred forever. For instance, when
one's property is taken through violence by another, a single delict or wrong is committed consisting of
the illegal taking of the property, and accordingly there is but a single cause of action. This cause of
action, however, entitles the plaintiff to two claims: one for recovery of property, and another for damages
for its detention by the defendant. Under the above stated rule, plaintiff may file only one complaint
embracing the two claims. He may not file two complaints, one for the possession and another for
damages, for if he does so, he would be splitting up a single cause of action into two parts, and the filing
of the first complaint would bar the second." 5
2. The appellate court committed no error, therefore, in ruling that respondent's complaint was principally
for replevin and that respondent "correctly filed the present complaint for replevin because appellees have
refused to deliver the possession of the mortgaged vessel in order that appellant could proceed to
foreclose the same extra-judicially." The appellate court thus cited the old leading case of Bacharach
Motor Co. vs. Summer, 6 holding that "(P)reliminary to the sale provided for in section 14 of the Chattel
Mortgage Law, the mortgagee must secure possession of the mortgaged chattel, but if possession is
refused, he may institute an action for replevin or for judicial foreclosure."

As noted by Moran, "a

judicial proceeding is, of course, unnecessary because the mortgagee can foreclose extrajudicially by

causing the mortgaged property to be seized by the sheriff, as agent of the mortgagee, and have it sold at
public action in the manner prescribed by section 14 of the Chattel Mortgage Law." 8
3. As respondent has maintained from the beginning, its action was for replevin under Rule 62 of the old
Rules of Court (now Rule 60 of the Revised Rules), supported by the required affidavit under section 2 of
the Rule, and the principal prayer of its complaint being "that upon approval of the plaintiff's bond, an
order be issued directly to the Sheriff of Manila, or any officer of the court, to take possession of the
above-described vessel for the delivery of the same to plaintiff.".
Respondent further correctly maintained as to the money part of the judgment that " without the amount
or liability of the mortgaged vessel determined by the court, the sheriff who will conduct the auction sale
will not have any power or authority to determine how much amount he has to pay to the mortgagee, and
if he tries to make a determination of the amount due the mortgagee, the mortgagor will again come to
court for the determination of his obligation to the mortgagee, and in that way, there will be a multiplicity
of suits which is frowned upon by the Revised Rules of Court. Hence, the determination of the amount
due the respondent Dy Pac & Co., Inc. was procedurally correct in order to avoid once and for all the
determination of the liability in another court proceeding." 9
4. It is precisely in accordance with the principles of non-splitting causes of action and avoiding
multiplicity of suits that Rule 60 (formerly Rule 62) of the Revised Rules of Court in section 9 thereof
expressly provides that the court in a replevin suit "shall render judgment in the alternative for the
delivery [of the property] to the party entitled to the same, or for the value in case delivery cannot be
made, and also for such damages as either party may prove," thus: .
"SEC. 9. Judgment. After a trial of the issues the court shall find in whom is the right of possession
and the value of the property and shall render judgment in the alternative for the delivery thereof to the
party entitled to the same, or for the value in case delivery cannot be made, and also for such damages as
either party may prove, and for costs." (Rule 60)
This case once again recalls the Court's admonition, through Mr. Justice J. B. L. Reyes, in a similarly
unmeritorious case. 10 that " (T)he circumstances surrounding this litigation definitely prove that appeal is
frivolous and a plain trick to delay payment and prolong litigation unnecessarily. Such attitude deserves
severe condemnation, wasting, as it does, the time that the courts could well devote to meritorious
cases." .
The appellate court, while not granting the stipulated 25% attorney's fees, increased the trial court's award
of P300.00 to P 2,000.00 which it reduced to P800.00 upon petitioner's motion for reconsideration, supra,
11

on the premise that counsel's efforts in the appellate court must be additionally compensated. On the

same premise that counsel's efforts before this Court should likewise be additional compensated, the
Court awards an additional amount of P1,200.00 attorney's fees for services rendered in this last instance,
thereby making a total award of P2,000.00 for attorney's fees.

WHEREFORE, the judgment appealed from is hereby affirmed, with the modification that petitioners are
further ordered jointly and severally to pay private respondent in this instance additional attorney's fees of
P1,200.00 and treble costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando, Barredo, Villamor and
Makasiar, JJ., concur.

12. Soliven v. Fastform Bryan Paule

For our resolution is the instant petition for review on certiorari 1 assailing the Decision2 dated February 8,
1999 and Resolution dated June 17, 1999, both issued by the Court of Appeals in CA-G.R. CV No.
51946.
Records show that on May 20, 1994, Marie Antoinette R. Soliven, petitioner, filed with the Regional Trial
Court, Branch 60, Makati City a complaint for sum of money with damages against Fastforms
Philippines, Inc., respondent, docketed as Civil Case No. 94-1788.
The complaint alleges that on June 2, 1993, respondent, through its president Dr. Eduardo Escobar,
obtained a loan from petitioner in the amount of One Hundred Seventy Thousand Pesos (P170,000.00),
payable within a period of twenty-one (21) days, with an interest of 3%, as evidenced by a promissory
note3 executed by Dr. Escobar as president of respondent. The loan was to be used to pay the salaries of
respondents employees. On the same day, respondent issued a postdated check (dated June 25, 1993) 4 in
favor of petitioner in the amount ofP175,000.00 (representing the principal amount of P170,000.00, plus
P5,000.00 as interest). It was signed by Dr. Escobar and Mr. Lorcan Harney, respondent's vice-president.
About three weeks later, respondent, through Dr. Escobar, advised petitioner not to deposit the postdated
check as the account from where it was drawn has insufficient funds. Instead, respondent proposed to
petitioner that the P175,000.00 be "rolled-over," with a monthly interest of 5% (or P8,755.00). Petitioner
agreed to the proposal. Subsequently, respondent, through Dr. Escobar, Mr. Harney and Mr. Steve
Singson, the new president, issued several checks in the total sum ofP76,250.00 in favor of petitioner as
payment for interests corresponding to the months of June, August, September, October and December,
1993. Later, despite petitioners repeated demands, respondent refused to pay its principal obligation and
interests due.
In her complaint, petitioner prays:
"WHEREFORE, premises considered, it is respectfully prayed of this Honorable Court that judgment be
rendered:
(a) holding/declaring defendant (now respondent) guilty of breach of contract x x x; and
(b) ordering defendant to pay plaintiff (now petitioner) the following sums:

P195,155.00 as actual damages;

P200,000.00 as moral damages;
P100,000.00 as exemplary damages; and
P100,000.00 as attorneys fees, plus the costs of suit.
Plaintiff prays for such other relief just and equitable in the premises."
Respondent, in its answer with counterclaim, 5 denied that it obtained a loan from petitioner; and that it did
not authorize its then president, Dr. Eduardo Escobar, to secure any loan from petitioner or issue various
checks as payment for interests.
After trial on the merits, the court a quo rendered a Decision dated July 3, 1995 6 in favor of petitioner, the
dispositive portion of which reads:
"22. WHEREFORE, the court hereby renders judgment as follows:
22.1. The defendant FASTFORMS PHILS., INC. is ordered to pay the plaintiff, MARIE ANTOINETTE
R. SOLIVEN, the following amounts:
22.1.1. P175,000.00 the amount of the loan and its interest covered by the check (Exh. 3);
22.1.2. Five (5%) percent of P175,000.00 a month from June 25, 1993 until the P175,000.00 is fully
paid less the sum of P76,250.00 as interest;
22.1.3. P50,000.00 as attorneys fees.
22.2. The COMPLAINT for MORAL and EXEMPLARY damages is DISMISSED.
22.3. The COUNTERCLAIM is DISMISSED; and
22.4. Costs is taxed against the defendant."
Respondent then filed a motion for reconsideration 7 questioning for the first time the trial courts
jurisdiction. It alleged that since the amount of petitioners principal demand (P195,155.00) does not
exceed P200,000.00, the complaint should have been filed with the Metropolitan Trial Court pursuant to
Republic Act No. 7691.8
Petitioner opposed the motion for reconsideration, stressing that respondent is barred from assailing the
jurisdiction of the trial court since it has invoked the latters jurisdiction by seeking affirmative relief in
its answer to the complaint and actively participated in all stages of the trial. 9
In its Order dated October 11, 1995, 10 the trial court denied respondents motion for reconsideration,
holding that it has jurisdiction over the case because the totality of the claim therein exceeds P200,000.00.
The trial court also ruled that respondent, under the principle of estoppel, has lost its right to question its
jurisdiction.

On appeal, the Court of Appeals reversed the trial courts Decision on the ground of lack of jurisdiction.
The Appellate Court held that the case is within the jurisdiction of the Metropolitan Trial Court,
petitioners claim being only P195,155.00; and that respondent may assail the jurisdiction of the trial
court anytime even for the first time on appeal.
Petitioner filed a motion for reconsideration but was denied by the Court of Appeals in its Resolution
dated June 17, 1999.11
Hence, this petition.
The fundamental issue for our resolution is whether the trial court has jurisdiction over Civil Case No. 941788.
Section 1 of Republic Act No. 7691, which took effect on April 15, 1994 12 or prior to the institution of
Civil Case No. 94-1788, provides inter alia that where the amount of the demand in civil cases instituted
in Metro Manila exceeds P200,000.00, exclusive of interest, damages of whatever kind, attorneys fees,
litigation expenses, and costs, the exclusive original jurisdiction thereof is lodged with the Regional Trial
Court.
Under Section 3 of the same law, where the amount of the demand in the complaint instituted in Metro
Manila does not exceed P200,000.00, exclusive of interest, damages of whatever kind, attorneys fees,
litigation expenses, and costs, the exclusive original jurisdiction over the same is vested in the
Metropolitan Trial Court, Municipal Trial Court and Municipal Circuit Trial Court.
In Administrative Circular No. 09-94 dated March 14, 1994, we specified the guidelines in the
implementation of R.A. 7691. Paragraph 2 of the Circular provides:
"2. The exclusion of the term damages of whatever kind in determining the jurisdictional amount under
Section 19 (8) and Section 33 (1) of B.P. Blg. 129, as amended by R.A. No. 7691, applies to cases where
the damages are merely incidental to or a consequence of the main cause of action. However, in cases
where the claim for damages is the main cause of action, or one of the causes of action, the amount of
such claim shall be considered in determining the jurisdiction of the court." (underscoring ours)
Here, the main cause of action is for the recovery of sum of money amounting to only P195,155.00. The
damages being claimed by petitioner are merely the consequences of this main cause of action. Hence,
they are not included in determining the jurisdictional amount. It is plain from R.A. 7691 and our
Administrative Circular No. 09-94 that it is the Metropolitan Trial Court which has jurisdiction over the
instant case. As correctly stated by the Court of Appeals in its assailed Decision:
"Conformably, since the action is principally for the collection of a debt, and the prayer for damages is
not one of the main causes of action but merely a consequence thereto, it should not be considered in
determining the jurisdiction of the court."

While it is true that jurisdiction may be raised at any time, "this rule presupposes that estoppel has not
supervened."13 In the instant case, respondent actively participated in all stages of the proceedings before
the trial court and invoked its authority by asking for an affirmative relief. Clearly, respondent is estopped
from challenging the trial courts jurisdiction, especially when an adverse judgment has been rendered. In
PNOC Shipping and Transport Corporation vs. Court of Appeals,14 we held:
"Moreover, we note that petitioner did not question at all the jurisdiction of the lower court x x x in its
answers to both the amended complaint and the second amended complaint. It did so only in its motion
for reconsideration of the decision of the lower court after it had received an adverse decision. As this
Court held in Pantranco North Express, Inc. vs. Court of Appeals (G.R. No. 105180, July 5, 1993, 224
SCRA 477, 491), participation in all stages of the case before the trial court, that included invoking its
authority in asking for affirmative relief, effectively barred petitioner by estoppel from challenging the
courts jurisdiction. Notably, from the time it filed its answer to the second amended complaint on April
16, 1985, petitioner did not question the lower courts jurisdiction. It was only on December 29, 1989
when it filed its motion for reconsideration of the lower courts decision that petitioner raised the question
of the lower courts lack of jurisdiction. Petitioner thus foreclosed its right to raise the issue of jurisdiction
by its own inaction." (underscoring ours)
Similarly, in the subsequent case of Sta. Lucia Realty and Development, Inc. vs. Cabrigas, 15 we ruled:
"In the case at bar, it was found by the trial court in its 30 September 1996 decision in LCR Case No. Q60161(93) that private respondents (who filed the petition for reconstitution of titles) failed to comply
with both sections 12 and 13 of RA 26 and therefore, it had no jurisdiction over the subject matter of the
case. However, private respondents never questioned the trial courts jurisdiction over its petition for
reconstitution throughout the duration of LCR Case No. Q-60161(93). On the contrary, private
respondents actively participated in the reconstitution proceedings by filing pleadings and presenting its
evidence. They invoked the trial courts jurisdiction in order to obtain affirmative relief the
reconstitution of their titles. Private respondents have thus foreclosed their right to raise the issue of
jurisdiction by their own actions.
"The Court has constantly upheld the doctrine that while jurisdiction may be assailed at any stage, a
litigants participation in all stages of the case before the trial court, including the invocation of its
authority in asking for affirmative relief, bars such party from challenging the courts jurisdiction ( PNOC
Shipping and Transport Corporation vs. Court of Appeals, 297 SCRA 402 [1998]). A party cannot invoke
the jurisdiction of a court to secure affirmative relief against his opponent and after obtaining or failing to
obtain such relief, repudiate or question that same jurisdiction (Asset Privatization Trust vs. Court of
Appeals, 300 SCRA 579 [1998]; Province of Bulacan vs. Court of Appeals, 299 SCRA 442 [1998]). The
Court frowns upon the undesirable practice of a party participating in the proceedings and submitting his
case for decision and then accepting judgment, only if favorable, and attacking it for lack of jurisdiction,

when adverse (Producers Bank of the Philippines vs. NLRC, 298 SCRA 517 [1998], citing Ilocos Sur
Electric Cooperative, Inc. vs. NLRC, 241 SCRA 36 [1995])." (underscoring ours)
WHEREFORE, the instant petition is GRANTED. The assailed Decision dated February 8, 1999 and
Resolution dated June 17, 1999 of the Court of Appeals in CA-G.R. CV No. 51946 are REVERSED. The
Decision dated July 3, 1995 and Resolution dated October 11, 1995 of the Regional Trial Court, Branch
60, Makati City in Civil Case No. 94-1788 are hereby AFFIRMED.
SO ORDERED.
Panganiban, Corona, and Carpio Morales*, JJ., concur.
Footnotes

13. Oposa v. Factoran Eissel Danganan Pangan

DAVIDE, JR., J.:

In a broader sense, this petition bears upon the right of Filipinos to a balanced and healthful ecology
which the petitioners dramatically associate with the twin concepts of "inter-generational responsibility"
and "inter-generational justice." Specifically, it touches on the issue of whether the said petitioners have a
cause of action to "prevent the misappropriation or impairment" of Philippine rainforests and "arrest the
unabated hemorrhage of the country's vital life support systems and continued rape of Mother Earth."
The controversy has its genesis in Civil Case No. 90-77 which was filed before Branch 66 (Makati, Metro
Manila) of the Regional Trial Court (RTC), National Capital Judicial Region. The principal plaintiffs
therein, now the principal petitioners, are all minors duly represented and joined by their respective
parents. Impleaded as an additional plaintiff is the Philippine Ecological Network, Inc. (PENI), a
domestic, non-stock and non-profit corporation organized for the purpose of, inter alia, engaging in
concerted action geared for the protection of our environment and natural resources. The original
defendant was the Honorable Fulgencio S. Factoran, Jr., then Secretary of the Department of Environment
and Natural Resources (DENR). His substitution in this petition by the new Secretary, the Honorable
Angel C. Alcala, was subsequently ordered upon proper motion by the petitioners. 1 The complaint 2 was
instituted as a taxpayers' class suit 3 and alleges that the plaintiffs "are all citizens of the Republic of the
Philippines, taxpayers, and entitled to the full benefit, use and enjoyment of the natural resource treasure
that is the country's virgin tropical forests." The same was filed for themselves and others who are equally
concerned about the preservation of said resource but are "so numerous that it is impracticable to bring
them all before the Court." The minors further asseverate that they "represent their generation as well as
generations yet unborn." 4 Consequently, it is prayed for that judgment be rendered:

. . . ordering defendant, his agents, representatives and other persons acting in his behalf to
(1)

Cancel all existing timber license agreements in the country;

(2)

Cease and desist from receiving, accepting, processing, renewing or approving new timber

license agreements.
and granting the plaintiffs ". . . such other reliefs just and equitable under the premises." 5
The complaint starts off with the general averments that the Philippine archipelago of 7,100 islands has a
land area of thirty million (30,000,000) hectares and is endowed with rich, lush and verdant rainforests in
which varied, rare and unique species of flora and fauna may be found; these rainforests contain a genetic,
biological and chemical pool which is irreplaceable; they are also the habitat of indigenous Philippine
cultures which have existed, endured and flourished since time immemorial; scientific evidence reveals
that in order to maintain a balanced and healthful ecology, the country's land area should be utilized on
the basis of a ratio of fifty-four per cent (54%) for forest cover and forty-six per cent (46%) for
agricultural, residential, industrial, commercial and other uses; the distortion and disturbance of this
balance as a consequence of deforestation have resulted in a host of environmental tragedies, such as (a)
water shortages resulting from drying up of the water table, otherwise known as the "aquifer," as well as
of rivers, brooks and streams, (b) salinization of the water table as a result of the intrusion therein of salt
water, incontrovertible examples of which may be found in the island of Cebu and the Municipality of
Bacoor, Cavite, (c) massive erosion and the consequential loss of soil fertility and agricultural
productivity, with the volume of soil eroded estimated at one billion (1,000,000,000) cubic meters per
annum approximately the size of the entire island of Catanduanes, (d) the endangering and extinction
of the country's unique, rare and varied flora and fauna, (e) the disturbance and dislocation of cultural
communities, including the disappearance of the Filipino's indigenous cultures, (f) the siltation of rivers
and seabeds and consequential destruction of corals and other aquatic life leading to a critical reduction in
marine resource productivity, (g) recurrent spells of drought as is presently experienced by the entire
country, (h) increasing velocity of typhoon winds which result from the absence of windbreakers, (i) the
floodings of lowlands and agricultural plains arising from the absence of the absorbent mechanism of
forests, (j) the siltation and shortening of the lifespan of multi-billion peso dams constructed and operated
for the purpose of supplying water for domestic uses, irrigation and the generation of electric power, and
(k) the reduction of the earth's capacity to process carbon dioxide gases which has led to perplexing and
catastrophic climatic changes such as the phenomenon of global warming, otherwise known as the
"greenhouse effect."
Plaintiffs further assert that the adverse and detrimental consequences of continued and deforestation are
so capable of unquestionable demonstration that the same may be submitted as a matter of judicial notice.
This notwithstanding, they expressed their intention to present expert witnesses as well as documentary,
photographic and film evidence in the course of the trial.

As their cause of action, they specifically allege that:

CAUSE OF ACTION
7.

Plaintiffs replead by reference the foregoing allegations.

8.

Twenty-five (25) years ago, the Philippines had some sixteen (16) million hectares of rainforests

constituting roughly 53% of the country's land mass.

9.

Satellite images taken in 1987 reveal that there remained no more than 1.2 million hectares of

said rainforests or four per cent (4.0%) of the country's land area.
10.

More recent surveys reveal that a mere 850,000 hectares of virgin old-growth rainforests are left,

barely 2.8% of the entire land mass of the Philippine archipelago and about 3.0 million hectares of
immature and uneconomical secondary growth forests.
11.

Public records reveal that the defendant's, predecessors have granted timber license agreements

('TLA's') to various corporations to cut the aggregate area of 3.89 million hectares for commercial logging
purposes.
A copy of the TLA holders and the corresponding areas covered is hereto attached as Annex "A".
12.

At the present rate of deforestation, i.e. about 200,000 hectares per annum or 25 hectares per hour

nighttime, Saturdays, Sundays and holidays included the Philippines will be bereft of forest
resources after the end of this ensuing decade, if not earlier.
13.

The adverse effects, disastrous consequences, serious injury and irreparable damage of this

continued trend of deforestation to the plaintiff minor's generation and to generations yet unborn are
evident and incontrovertible. As a matter of fact, the environmental damages enumerated in paragraph 6
hereof are already being felt, experienced and suffered by the generation of plaintiff adults.
14.

The continued allowance by defendant of TLA holders to cut and deforest the remaining forest

stands will work great damage and irreparable injury to plaintiffs especially plaintiff minors and their
successors who may never see, use, benefit from and enjoy this rare and unique natural resource
treasure.
This act of defendant constitutes a misappropriation and/or impairment of the natural resource property he
holds in trust for the benefit of plaintiff minors and succeeding generations.
15.

Plaintiffs have a clear and constitutional right to a balanced and healthful ecology and are entitled

to protection by the State in its capacity as the parens patriae.

16.

Plaintiff have exhausted all administrative remedies with the defendant's office. On March 2,

1990, plaintiffs served upon defendant a final demand to cancel all logging permits in the country.
A copy of the plaintiffs' letter dated March 1, 1990 is hereto attached as Annex "B".

17.

Defendant, however, fails and refuses to cancel the existing TLA's to the continuing serious

damage and extreme prejudice of plaintiffs.

18.

The continued failure and refusal by defendant to cancel the TLA's is an act violative of the rights

of plaintiffs, especially plaintiff minors who may be left with a country that is desertified (sic), bare,
barren and devoid of the wonderful flora, fauna and indigenous cultures which the Philippines had been
abundantly blessed with.
19.

Defendant's refusal to cancel the aforementioned TLA's is manifestly contrary to the public policy

enunciated in the Philippine Environmental Policy which, in pertinent part, states that it is the policy of
the State
(a)

to create, develop, maintain and improve conditions under which man and nature can thrive in

productive and enjoyable harmony with each other;

(b)

to fulfill the social, economic and other requirements of present and future generations of

Filipinos and;
(c)

to ensure the attainment of an environmental quality that is conductive to a life of dignity and

well-being. (P.D. 1151, 6 June 1977)

20.

Furthermore, defendant's continued refusal to cancel the aforementioned TLA's is contradictory

to the Constitutional policy of the State to

a.

effect "a more equitable distribution of opportunities, income and wealth" and "make full and

efficient use of natural resources (sic)." (Section 1, Article XII of the Constitution);
b.

"protect the nation's marine wealth." (Section 2, ibid);

c.

"conserve and promote the nation's cultural heritage and resources (sic)" (Section 14, Article

XIV,id.);
d.

"protect and advance the right of the people to a balanced and healthful ecology in accord with

the rhythm and harmony of nature." (Section 16, Article II, id.)
21.

Finally, defendant's act is contrary to the highest law of humankind the natural law and

violative of plaintiffs' right to self-preservation and perpetuation.

22.

There is no other plain, speedy and adequate remedy in law other than the instant action to arrest

the unabated hemorrhage of the country's vital life support systems and continued rape of Mother Earth.

On 22 June 1990, the original defendant, Secretary Factoran, Jr., filed a Motion to Dismiss the complaint
based on two (2) grounds, namely: (1) the plaintiffs have no cause of action against him and (2) the issue
raised by the plaintiffs is a political question which properly pertains to the legislative or executive
branches of Government. In their 12 July 1990 Opposition to the Motion, the petitioners maintain that (1)

the complaint shows a clear and unmistakable cause of action, (2) the motion is dilatory and (3) the action
presents a justiciable question as it involves the defendant's abuse of discretion.
On 18 July 1991, respondent Judge issued an order granting the aforementioned motion to dismiss. 7 In
the said order, not only was the defendant's claim that the complaint states no cause of action against
him and that it raises a political question sustained, the respondent Judge further ruled that the granting
of the relief prayed for would result in the impairment of contracts which is prohibited by the fundamental
law of the land.
Plaintiffs thus filed the instant special civil action for certiorari under Rule 65 of the Revised Rules of
Court and ask this Court to rescind and set aside the dismissal order on the ground that the respondent
Judge gravely abused his discretion in dismissing the action. Again, the parents of the plaintiffs-minors
not only represent their children, but have also joined the latter in this case. 8
On 14 May 1992, We resolved to give due course to the petition and required the parties to submit their
respective Memoranda after the Office of the Solicitor General (OSG) filed a Comment in behalf of the
respondents and the petitioners filed a reply thereto.
Petitioners contend that the complaint clearly and unmistakably states a cause of action as it contains
sufficient allegations concerning their right to a sound environment based on Articles 19, 20 and 21 of the
Civil Code (Human Relations), Section 4 of Executive Order (E.O.) No. 192 creating the DENR, Section
3 of Presidential Decree (P.D.) No. 1151 (Philippine Environmental Policy), Section 16, Article II of the
1987 Constitution recognizing the right of the people to a balanced and healthful ecology, the concept of
generational genocide in Criminal Law and the concept of man's inalienable right to self-preservation and
self-perpetuation embodied in natural law. Petitioners likewise rely on the respondent's correlative
obligation per Section 4 of E.O. No. 192, to safeguard the people's right to a healthful environment.
It is further claimed that the issue of the respondent Secretary's alleged grave abuse of discretion in
granting Timber License Agreements (TLAs) to cover more areas for logging than what is available
involves a judicial question.
Anent the invocation by the respondent Judge of the Constitution's non-impairment clause, petitioners
maintain that the same does not apply in this case because TLAs are not contracts. They likewise submit
that even if TLAs may be considered protected by the said clause, it is well settled that they may still be
revoked by the State when the public interest so requires.
On the other hand, the respondents aver that the petitioners failed to allege in their complaint a specific
legal right violated by the respondent Secretary for which any relief is provided by law. They see nothing
in the complaint but vague and nebulous allegations concerning an "environmental right" which
supposedly entitles the petitioners to the "protection by the state in its capacity as parens patriae." Such
allegations, according to them, do not reveal a valid cause of action. They then reiterate the theory that the
question of whether logging should be permitted in the country is a political question which should be

properly addressed to the executive or legislative branches of Government. They therefore assert that the
petitioners' resources is not to file an action to court, but to lobby before Congress for the passage of a bill
that would ban logging totally.
As to the matter of the cancellation of the TLAs, respondents submit that the same cannot be done by the
State without due process of law. Once issued, a TLA remains effective for a certain period of time
usually for twenty-five (25) years. During its effectivity, the same can neither be revised nor cancelled
unless the holder has been found, after due notice and hearing, to have violated the terms of the
agreement or other forestry laws and regulations. Petitioners' proposition to have all the TLAs
indiscriminately cancelled without the requisite hearing would be violative of the requirements of due
process.
Before going any further, We must first focus on some procedural matters. Petitioners instituted Civil
Case No. 90-777 as a class suit. The original defendant and the present respondents did not take issue
with this matter. Nevertheless, We hereby rule that the said civil case is indeed a class suit. The subject
matter of the complaint is of common and general interest not just to several, but to all citizens of the
Philippines. Consequently, since the parties are so numerous, it, becomes impracticable, if not totally
impossible, to bring all of them before the court. We likewise declare that the plaintiffs therein are
numerous and representative enough to ensure the full protection of all concerned interests. Hence, all the
requisites for the filing of a valid class suit under Section 12, Rule 3 of the Revised Rules of Court are
present both in the said civil case and in the instant petition, the latter being but an incident to the former.
This case, however, has a special and novel element. Petitioners minors assert that they represent their
generation as well as generations yet unborn. We find no difficulty in ruling that they can, for themselves,
for others of their generation and for the succeeding generations, file a class suit. Their personality to sue
in behalf of the succeeding generations can only be based on the concept of intergenerational
responsibility insofar as the right to a balanced and healthful ecology is concerned. Such a right, as
hereinafter expounded, considers
the "rhythm and harmony of nature." Nature means the created world in its entirety. 9 Such rhythm and
harmony indispensably include, inter alia, the judicious disposition, utilization, management, renewal and
conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other
natural resources to the end that their exploration, development and utilization be equitably accessible to
the present as well as future generations.

10

Needless to say, every generation has a responsibility to the

next to preserve that rhythm and harmony for the full enjoyment of a balanced and healthful ecology. Put
a little differently, the minors' assertion of their right to a sound environment constitutes, at the same time,
the performance of their obligation to ensure the protection of that right for the generations to come.
The locus standi of the petitioners having thus been addressed, We shall now proceed to the merits of the
petition.

After a careful perusal of the complaint in question and a meticulous consideration and evaluation of the
issues raised and arguments adduced by the parties, We do not hesitate to find for the petitioners and rule
against the respondent Judge's challenged order for having been issued with grave abuse of discretion
amounting to lack of jurisdiction. The pertinent portions of the said order reads as follows:
xxx

xxx

xxx

After a careful and circumspect evaluation of the Complaint, the Court cannot help but agree with the
defendant. For although we believe that plaintiffs have but the noblest of all intentions, it (sic) fell short of
alleging, with sufficient definiteness, a specific legal right they are seeking to enforce and protect, or a
specific legal wrong they are seeking to prevent and redress (Sec. 1, Rule 2, RRC). Furthermore, the
Court notes that the Complaint is replete with vague assumptions and vague conclusions based on
unverified data. In fine, plaintiffs fail to state a cause of action in its Complaint against the herein
defendant.
Furthermore, the Court firmly believes that the matter before it, being impressed with political color and
involving a matter of public policy, may not be taken cognizance of by this Court without doing violence
to the sacred principle of "Separation of Powers" of the three (3) co-equal branches of the Government.
The Court is likewise of the impression that it cannot, no matter how we stretch our jurisdiction, grant the
reliefs prayed for by the plaintiffs, i.e., to cancel all existing timber license agreements in the country and
to cease and desist from receiving, accepting, processing, renewing or approving new timber license
agreements. For to do otherwise would amount to "impairment of contracts" abhored ( sic) by the
fundamental law. 11
We do not agree with the trial court's conclusions that the plaintiffs failed to allege with sufficient
definiteness a specific legal right involved or a specific legal wrong committed, and that the complaint is
replete with vague assumptions and conclusions based on unverified data. A reading of the complaint
itself belies these conclusions.
The complaint focuses on one specific fundamental legal right the right to a balanced and healthful
ecology which, for the first time in our nation's constitutional history, is solemnly incorporated in the
fundamental law. Section 16, Article II of the 1987 Constitution explicitly provides:
Sec. 16.The State shall protect and advance the right of the people to a balanced and healthful ecology in
accord with the rhythm and harmony of nature.
This right unites with the right to health which is provided for in the preceding section of the same article:
Sec. 15.The State shall protect and promote the right to health of the people and instill health
consciousness among them.
While the right to a balanced and healthful ecology is to be found under the Declaration of Principles and
State Policies and not under the Bill of Rights, it does not follow that it is less important than any of the

civil and political rights enumerated in the latter. Such a right belongs to a different category of rights
altogether for it concerns nothing less than self-preservation and self-perpetuation aptly and fittingly
stressed by the petitioners the advancement of which may even be said to predate all governments and
constitutions. As a matter of fact, these basic rights need not even be written in the Constitution for they
are assumed to exist from the inception of humankind. If they are now explicitly mentioned in the
fundamental charter, it is because of the well-founded fear of its framers that unless the rights to a
balanced and healthful ecology and to health are mandated as state policies by the Constitution itself,
thereby highlighting their continuing importance and imposing upon the state a solemn obligation to
preserve the first and protect and advance the second, the day would not be too far when all else would be
lost not only for the present generation, but also for those to come generations which stand to inherit
nothing but parched earth incapable of sustaining life.
The right to a balanced and healthful ecology carries with it the correlative duty to refrain from impairing
the environment. During the debates on this right in one of the plenary sessions of the 1986 Constitutional
Commission, the following exchange transpired between Commissioner Wilfrido Villacorta and
Commissioner Adolfo Azcuna who sponsored the section in question:
MR. VILLACORTA:
Does this section mandate the State to provide sanctions against all forms of pollution air, water and
noise pollution?
MR. AZCUNA:
Yes, Madam President. The right to healthful (sic) environment necessarily carries with it the correlative
duty of not impairing the same and, therefore, sanctions may be provided for impairment of
environmental balance. 12
The said right implies, among many other things, the judicious management and conservation of the
country's forests.
Without such forests, the ecological or environmental balance would be irreversiby disrupted.
Conformably with the enunciated right to a balanced and healthful ecology and the right to health, as well
as the other related provisions of the Constitution concerning the conservation, development and
utilization of the country's natural resources, 13 then President Corazon C. Aquino promulgated on 10 June
1987 E.O. No. 192,

14

Section 4 of which expressly mandates that the Department of Environment and

Natural Resources "shall be the primary government agency responsible for the conservation,
management, development and proper use of the country's environment and natural resources, specifically
forest and grazing lands, mineral, resources, including those in reservation and watershed areas, and lands
of the public domain, as well as the licensing and regulation of all natural resources as may be provided
for by law in order to ensure equitable sharing of the benefits derived therefrom for the welfare of the
present and future generations of Filipinos." Section 3 thereof makes the following statement of policy:

Sec. 3. Declaration of Policy. It is hereby declared the policy of the State to ensure the sustainable use,
development, management, renewal, and conservation of the country's forest, mineral, land, off-shore
areas and other natural resources, including the protection and enhancement of the quality of the
environment, and equitable access of the different segments of the population to the development and the
use of the country's natural resources, not only for the present generation but for future generations as
well. It is also the policy of the state to recognize and apply a true value system including social and
environmental cost implications relative to their utilization, development and conservation of our natural
resources.
This policy declaration is substantially re-stated it Title XIV, Book IV of the Administrative Code of
1987, 15specifically in Section 1 thereof which reads:
Sec. 1. Declaration of Policy. (1) The State shall ensure, for the benefit of the Filipino people, the full
exploration and development as well as the judicious disposition, utilization, management, renewal and
conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other
natural resources, consistent with the necessity of maintaining a sound ecological balance and protecting
and enhancing the quality of the environment and the objective of making the exploration, development
and utilization of such natural resources equitably accessible to the different segments of the present as
well as future generations.
(2)

The State shall likewise recognize and apply a true value system that takes into account social

and environmental cost implications relative to the utilization, development and conservation of our
natural resources.
The above provision stresses "the necessity of maintaining a sound ecological balance and protecting and
enhancing the quality of the environment." Section 2 of the same Title, on the other hand, specifically
speaks of the mandate of the DENR; however, it makes particular reference to the fact of the agency's
being subject to law and higher authority. Said section provides:
Sec. 2. Mandate. (1) The Department of Environment and Natural Resources shall be primarily
responsible for the implementation of the foregoing policy.
(2)

It shall, subject to law and higher authority, be in charge of carrying out the State's constitutional

mandate to control and supervise the exploration, development, utilization, and conservation of the
country's natural resources.
Both E.O. NO. 192 and the Administrative Code of 1987 have set the objectives which will serve as the
bases for policy formulation, and have defined the powers and functions of the DENR.
It may, however, be recalled that even before the ratification of the 1987 Constitution, specific statutes
already paid special attention to the "environmental right" of the present and future generations. On 6
June 1977, P.D. No. 1151 (Philippine Environmental Policy) and P.D. No. 1152 (Philippine Environment
Code) were issued. The former "declared a continuing policy of the State (a) to create, develop, maintain

and improve conditions under which man and nature can thrive in productive and enjoyable harmony with
each other, (b) to fulfill the social, economic and other requirements of present and future generations of
Filipinos, and (c) to insure the attainment of an environmental quality that is conducive to a life of dignity
and well-being." 16 As its goal, it speaks of the "responsibilities of each generation as trustee and guardian
of the environment for succeeding generations."

17

The latter statute, on the other hand, gave flesh to the

said policy.
Thus, the right of the petitioners (and all those they represent) to a balanced and healthful ecology is as
clear as the DENR's duty under its mandate and by virtue of its powers and functions under E.O. No.
192 and the Administrative Code of 1987 to protect and advance the said right.
A denial or violation of that right by the other who has the corelative duty or obligation to respect or
protect the same gives rise to a cause of action. Petitioners maintain that the granting of the TLAs, which
they claim was done with grave abuse of discretion, violated their right to a balanced and healthful
ecology; hence, the full protection thereof requires that no further TLAs should be renewed or granted.
A cause of action is defined as:
. . . an act or omission of one party in violation of the legal right or rights of the other; and its essential
elements are legal right of the plaintiff, correlative obligation of the defendant, and act or omission of the
defendant in violation of said legal right. 18
It is settled in this jurisdiction that in a motion to dismiss based on the ground that the complaint fails to
state a cause of action,

19

the question submitted to the court for resolution involves the sufficiency of the

facts alleged in the complaint itself. No other matter should be considered; furthermore, the truth of
falsity of the said allegations is beside the point for the truth thereof is deemed hypothetically admitted.
The only issue to be resolved in such a case is: admitting such alleged facts to be true, may the court
render a valid judgment in accordance with the prayer in the complaint?

20

In Militante vs. Edrosolano, 21

this Court laid down the rule that the judiciary should "exercise the utmost care and circumspection in
passing upon a motion to dismiss on the ground of the absence thereof [cause of action] lest, by its failure
to manifest a correct appreciation of the facts alleged and deemed hypothetically admitted, what the law
grants or recognizes is effectively nullified. If that happens, there is a blot on the legal order. The law
itself stands in disrepute."
After careful examination of the petitioners' complaint, We find the statements under the introductory
affirmative allegations, as well as the specific averments under the sub-heading CAUSE OF ACTION, to
be adequate enough to show, prima facie, the claimed violation of their rights. On the basis thereof, they
may thus be granted, wholly or partly, the reliefs prayed for. It bears stressing, however, that insofar as the
cancellation of the TLAs is concerned, there is the need to implead, as party defendants, the grantees
thereof for they are indispensable parties.

The foregoing considered, Civil Case No. 90-777 be said to raise a political question. Policy formulation
or determination by the executive or legislative branches of Government is not squarely put in issue.
What is principally involved is the enforcement of a right vis-a-vis policies already formulated and
expressed in legislation. It must, nonetheless, be emphasized that the political question doctrine is no
longer, the insurmountable obstacle to the exercise of judicial power or the impenetrable shield that
protects executive and legislative actions from judicial inquiry or review. The second paragraph of section
1, Article VIII of the Constitution states that:
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality
of the Government.
Commenting on this provision in his book, Philippine Political Law,

22

Mr. Justice Isagani A. Cruz, a

distinguished member of this Court, says:

The first part of the authority represents the traditional concept of judicial power, involving the settlement
of conflicting rights as conferred as law. The second part of the authority represents a broadening of
judicial power to enable the courts of justice to review what was before forbidden territory, to wit, the
discretion of the political departments of the government.
As worded, the new provision vests in the judiciary, and particularly the Supreme Court, the power to rule
upon even the wisdom of the decisions of the executive and the legislature and to declare their acts
invalid for lack or excess of jurisdiction because tainted with grave abuse of discretion. The catch, of
course, is the meaning of "grave abuse of discretion," which is a very elastic phrase that can expand or
contract according to the disposition of the judiciary.
In Daza vs. Singson, 23 Mr. Justice Cruz, now speaking for this Court, noted:
In the case now before us, the jurisdictional objection becomes even less tenable and decisive. The reason
is that, even if we were to assume that the issue presented before us was political in nature, we would still
not be precluded from revolving it under the expanded jurisdiction conferred upon us that now covers, in
proper cases, even the political question. Article VII, Section 1, of the Constitution clearly provides: . . .
The last ground invoked by the trial court in dismissing the complaint is the non-impairment of contracts
clause found in the Constitution. The court a quo declared that:
The Court is likewise of the impression that it cannot, no matter how we stretch our jurisdiction, grant the
reliefs prayed for by the plaintiffs, i.e., to cancel all existing timber license agreements in the country and
to cease and desist from receiving, accepting, processing, renewing or approving new timber license
agreements. For to do otherwise would amount to "impairment of contracts" abhored ( sic) by the
fundamental law. 24

We are not persuaded at all; on the contrary, We are amazed, if not shocked, by such a sweeping
pronouncement. In the first place, the respondent Secretary did not, for obvious reasons, even invoke in
his motion to dismiss the non-impairment clause. If he had done so, he would have acted with utmost
infidelity to the Government by providing undue and unwarranted benefits and advantages to the timber
license holders because he would have forever bound the Government to strictly respect the said licenses
according to their terms and conditions regardless of changes in policy and the demands of public interest
and welfare. He was aware that as correctly pointed out by the petitioners, into every timber license must
be read Section 20 of the Forestry Reform Code (P.D. No. 705) which provides:
. . . Provided, That when the national interest so requires, the President may amend, modify, replace or
rescind any contract, concession, permit, licenses or any other form of privilege granted herein . . .
Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a contract,
property or a property right protested by the due process clause of the Constitution. In Tan vs. Director of
Forestry, 25 this Court held:
. . . A timber license is an instrument by which the State regulates the utilization and disposition of forest
resources to the end that public welfare is promoted. A timber license is not a contract within the purview
of the due process clause; it is only a license or privilege, which can be validly withdrawn whenever
dictated by public interest or public welfare as in this case.
A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a contract
between the authority, federal, state, or municipal, granting it and the person to whom it is granted;
neither is it property or a property right, nor does it create a vested right; nor is it taxation (37 C.J. 168).
Thus, this Court held that the granting of license does not create irrevocable rights, neither is it property
or property rights (People vs. Ong Tin, 54 O.G. 7576).
We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive Secretary: 26
. . . Timber licenses, permits and license agreements are the principal instruments by which the State
regulates the utilization and disposition of forest resources to the end that public welfare is promoted. And
it can hardly be gainsaid that they merely evidence a privilege granted by the State to qualified entities,
and do not vest in the latter a permanent or irrevocable right to the particular concession area and the
forest products therein. They may be validly amended, modified, replaced or rescinded by the Chief
Executive when national interests so require. Thus, they are not deemed contracts within the purview of
the due process of law clause [See Sections 3(ee) and 20 of Pres. Decree No. 705, as amended. Also, Tan
v. Director of Forestry, G.R. No. L-24548, October 27, 1983, 125 SCRA 302].
Since timber licenses are not contracts, the non-impairment clause, which reads:
Sec. 10.No law impairing, the obligation of contracts shall be passed. 27
cannot be invoked.

In the second place, even if it is to be assumed that the same are contracts, the instant case does not
involve a law or even an executive issuance declaring the cancellation or modification of existing timber
licenses. Hence, the non-impairment clause cannot as yet be invoked. Nevertheless, granting further that a
law has actually been passed mandating cancellations or modifications, the same cannot still be
stigmatized as a violation of the non-impairment clause. This is because by its very nature and purpose,
such as law could have only been passed in the exercise of the police power of the state for the purpose of
advancing the right of the people to a balanced and healthful ecology, promoting their health and
enhancing the general welfare. In Abe vs. Foster Wheeler
Corp. 28 this Court stated:
The freedom of contract, under our system of government, is not meant to be absolute. The same is
understood to be subject to reasonable legislative regulation aimed at the promotion of public health,
moral, safety and welfare. In other words, the constitutional guaranty of non-impairment of obligations of
contract is limited by the exercise of the police power of the State, in the interest of public health, safety,
moral and general welfare.
The reason for this is emphatically set forth in Nebia vs. New York, 29 quoted in Philippine American Life
Insurance Co. vs. Auditor General, 30 to wit:
Under our form of government the use of property and the making of contracts are normally matters of
private and not of public concern. The general rule is that both shall be free of governmental interference.
But neither property rights nor contract rights are absolute; for government cannot exist if the citizen may
at will use his property to the detriment of his fellows, or exercise his freedom of contract to work them
harm. Equally fundamental with the private right is that of the public to regulate it in the common
interest.
In short, the non-impairment clause must yield to the police power of the state. 31
Finally, it is difficult to imagine, as the trial court did, how the non-impairment clause could apply with
respect to the prayer to enjoin the respondent Secretary from receiving, accepting, processing, renewing
or approving new timber licenses for, save in cases of renewal, no contract would have as of yet existed in
the other instances. Moreover, with respect to renewal, the holder is not entitled to it as a matter of right.
WHEREFORE, being impressed with merit, the instant Petition is hereby GRANTED, and the challenged
Order of respondent Judge of 18 July 1991 dismissing Civil Case No. 90-777 is hereby set aside. The
petitioners may therefore amend their complaint to implead as defendants the holders or grantees of the
questioned timber license agreements.
No pronouncement as to costs.
SO ORDERED.

Cruz, Padilla, Bidin, Grio-Aquino, Regalado, Romero, Nocon, Bellosillo, Melo and Quiason, JJ.,
concur.
Narvasa, C.J., Puno and Vitug, JJ., took no part.

Separate Opinions

FELICIANO, J., concurring

I join in the result reached by my distinguished brother in the Court, Davide, Jr., J., in this case which, to
my mind, is one of the most important cases decided by this Court in the last few years. The seminal
principles laid down in this decision are likely to influence profoundly the direction and course of the
protection and management of the environment, which of course embraces the utilization of all the
natural resources in the territorial base of our polity. I have therefore sought to clarify, basically to myself,
what the Court appears to be saying.
The Court explicitly states that petitioners have the locus standi necessary to sustain the bringing and,
maintenance of this suit (Decision, pp. 11-12). Locus standi is not a function of petitioners' claim that
their suit is properly regarded as a class suit. I understand locus standi to refer to the legal interest which a
plaintiff must have in the subject matter of the suit. Because of the very broadness of the concept of
"class" here involved membership in this "class" appears to embrace everyone living in the country
whether now or in the
future it appears to me that everyone who may be expected to benefit from the course of action
petitioners seek to require public respondents to take, is vested with the necessary locus standi. The Court
may be seen therefore to be recognizing a beneficiaries' right of action in the field of environmental
protection, as against both the public administrative agency directly concerned and the private persons or
entities operating in the field or sector of activity involved. Whether such beneficiaries' right of action
may be found under any and all circumstances, or whether some failure to act, in the first instance, on the
part of the governmental agency concerned must be shown ("prior exhaustion of administrative
remedies"), is not discussed in the decision and presumably is left for future determination in an
appropriate case.
The Court has also declared that the complaint has alleged and focused upon "one specific fundamental
legal right the right to a balanced and healthful ecology" (Decision, p. 14). There is no question that
"the right to a balanced and healthful ecology" is "fundamental" and that, accordingly, it has been
"constitutionalized." But although it is fundamental in character, I suggest, with very great respect, that it

cannot be characterized as "specific," without doing excessive violence to language. It is in fact very
difficult to fashion language more comprehensive in scope and generalized in character than a right to "a
balanced and healthful ecology." The list of particular claims which can be subsumed under this rubic
appears to be entirely open-ended: prevention and control of emission of toxic fumes and smoke from
factories and motor vehicles; of discharge of oil, chemical effluents, garbage and raw sewage into rivers,
inland and coastal waters by vessels, oil rigs, factories, mines and whole communities; of dumping of
organic and inorganic wastes on open land, streets and thoroughfares; failure to rehabilitate land after
strip-mining or open-pit mining; kaingin or slash-and-burn farming; destruction of fisheries, coral reefs
and other living sea resources through the use of dynamite or cyanide and other chemicals; contamination
of ground water resources; loss of certain species of fauna and flora; and so on. The other statements
pointed out by the Court: Section 3, Executive Order No. 192 dated 10 June 1987; Section 1, Title XIV,
Book IV of the 1987 Administrative Code; and P.D. No. 1151, dated 6 June 1977 all appear to be
formulations of policy, as general and abstract as the constitutional statements of basic policy in Article II,
Section 16 ("the right to a balanced and healthful ecology") and 15 ("the right to health").
P.D. No. 1152, also dated 6 June 1977, entitled "The Philippine Environment Code," is, upon the other
hand, a compendious collection of more "specific environment management policies" and "environment
quality standards" (fourth "Whereas" clause, Preamble) relating to an extremely wide range of topics:
(a)

air quality management;

(b)

water quality management;

(c)

land use management;

(d)

natural resources management and conservation embracing:

(i)

fisheries and aquatic resources;

(ii)

wild life;

(iii)

forestry and soil conservation;

(iv)

flood control and natural calamities;

(v)

energy development;

(vi)

conservation and utilization of surface and ground water

(vii) mineral resources

Two (2) points are worth making in this connection. Firstly, neither petitioners nor the Court has
identified the particular provision or provisions (if any) of the Philippine Environment Code which give
rise to a specific legal right which petitioners are seeking to enforce. Secondly, the Philippine
Environment Code identifies with notable care the particular government agency charged with the
formulation and implementation of guidelines and programs dealing with each of the headings and sub-

headings mentioned above. The Philippine Environment Code does not, in other words, appear to
contemplate action on the part of private persons who are beneficiaries of implementation of that Code.
As a matter of logic, by finding petitioners' cause of action as anchored on a legal right comprised in the
constitutional statements above noted, the Court is in effect saying that Section 15 (and Section 16) of
Article II of the Constitution are self-executing and judicially enforceable even in their present form. The
implications of this doctrine will have to be explored in future cases; those implications are too large and
far-reaching in nature even to be hinted at here.
My suggestion is simply that petitioners must, before the trial court, show a more specific legal right a
right cast in language of a significantly lower order of generality than Article II (15) of the Constitution
that is or may be violated by the actions, or failures to act, imputed to the public respondent by
petitioners so that the trial court can validly render judgment granting all or part of the relief prayed for.
To my mind, the Court should be understood as simply saying that such a more specific legal right or
rights may well exist in our corpus of law, considering the general policy principles found in the
Constitution and the existence of the Philippine Environment Code, and that the trial court should have
given petitioners an effective opportunity so to demonstrate, instead of aborting the proceedings on a
motion to dismiss.
It seems to me important that the legal right which is an essential component of a cause of action be a
specific, operable legal right, rather than a constitutional or statutory policy, for at least two (2) reasons.
One is that unless the legal right claimed to have been violated or disregarded is given specification in
operational terms, defendants may well be unable to defend themselves intelligently and effectively; in
other words, there are due process dimensions to this matter.
The second is a broader-gauge consideration where a specific violation of law or applicable regulation
is not alleged or proved, petitioners can be expected to fall back on the expanded conception of judicial
power in the second paragraph of Section 1 of Article VIII of the Constitution which reads:
Section 1.

...

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (Emphasis supplied)
When substantive standards as general as "the right to a balanced and healthy ecology" and "the right to
health" are combined with remedial standards as broad ranging as "a grave abuse of discretion amounting
to lack or excess of jurisdiction," the result will be, it is respectfully submitted, to propel courts into the
uncharted ocean of social and economic policy making. At least in respect of the vast area of
environmental protection and management, our courts have no claim to special technical competence and
experience and professional qualification. Where no specific, operable norms and standards are shown to

exist, then the policy making departments the legislative and executive departments must be given a
real and effective opportunity to fashion and promulgate those norms and standards, and to implement
them before the courts should intervene.
My learned brother Davide, Jr., J., rightly insists that the timber companies, whose concession agreements
or TLA's petitioners demand public respondents should cancel, must be impleaded in the proceedings
below. It might be asked that, if petitioners' entitlement to the relief demanded is not dependent upon
proof of breach by the timber companies of one or more of the specific terms and conditions of their
concession agreements (and this, petitioners implicitly assume), what will those companies litigate about?
The answer I suggest is that they may seek to dispute the existence of the specific legal right petitioners
should allege, as well as the reality of the claimed factual nexus between petitioners' specific legal rights
and the claimed wrongful acts or failures to act of public respondent administrative agency. They may
also controvert the appropriateness of the remedy or remedies demanded by petitioners, under all the
circumstances which exist.
I vote to grant the Petition for Certiorari because the protection of the environment, including the forest
cover of our territory, is of extreme importance for the country. The doctrines set out in the Court's
decision issued today should, however, be subjected to closer examination.

14. Heirs of Maximo Regoso v. CA Jared James Arpon Castaneda

The heirs of Maximo Regoso seek a review of the resolution dated October 9, 1989 of the Court of
Appeals in CA-G.R. No. 20183 dismissing the appeal filed by Regoso's former counsel.
The case involves an action for judicial partition of property with accounting and damages (Civil Case
No. 1464-V-81), which was filed by Belen Cruz-Regoso against her husband, Maximo Regoso, in the
Regional Trial Court, Branch XV of Malolos, Bulacan.
On November 14, 1988, the trial court rendered a decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, as
follows:
1.

Declaring the land situated at Sampalukan, Calvario, Meycauayan, Bulacan as paraphernal of the

plaintiff and the building and improvement thereon as conjugal property of the parties;
2.

Declaring the properties situated at Galas, Quezon City and Echague, Isabela as conjugal

properties of the parties;

3.

Requiring the defendant to render an accounting of all income derived from the aforementioned

properties; and

4.

Adjudging the defendant to pay the following amounts:

a)

P5,000.00 as moral damages;

b)

P5,000.00 as exemplary damages; and

c)

P5,000.00 as attorney's fees.

With costs against the defendant. (p. 25, Rollo.)

Regoso died on January 17, 1985 after the case had been submitted for decision, but he was not
substituted as defendant by his heirs because, apparently, the trial court was not informed of his death
until the decision had been promulgated on November 14, 1988.
On November 29, 1988, Regoso's counsel, Attorney Adriano Javier, Sr., filed a notice of appeal which the
trial court approved. The appeal was docketed in the Court of Appeals as CA-G.R. No. 20183.
The plaintiff, Belen Cruz-Regoso, through counsel, moved to dismiss the appeal on the ground that the
deceased defendant ceased to have legal personality and that Attorney Javier's authority to represent him
was terminated or expired upon his demise, hence, the notice of appeal filed by said counsel was invalid,
a worthless piece of paper.
The Court of Appeals issued a resolution on October 6, 1989, dismissing the appeal. It held:
It is a well-established rule that a lawyer-client relationship is terminated upon the death of the client. The
lawyer's authority to appear for his client automatically ceases (5 Am. Jur. 282). The only exceptions are
when there is a contract for the lawyer's services up to judgment, or when his fees are on a contingent
basis, and also when his appearance is coupled with an interest (7 CJS 945, 946). Since not one of the
above exceptions obtains in this case, it is obvious that when Attorney Javier filed the notice of appeal
after his client's death, he no longer had any authority to appear for him. Hence, the notice of appeal filed
by him was a mere scrap of paper and without any legal effect.
WHEREFORE, the instant appeal is hereby DISMISSED. (pp.
27-28, Rollo.)
The Motion for reconsideration filed by the heirs' new counsel was likewise denied by the Court of
Appeals.
Hence, the present petition in which the petitioners, as heirs of the late Maximo Regoso, allege that the
Appellate Court erred in dismissing their appeal and in not declaring that the judgment which the trial
court rendered after the death of said defendant, was null and void.
The petition has no merit.
Under the rules, it is the duty of the attorney for the deceased defendant to inform the court of his client's
death and to furnish the court with the names and residences of the executor, administrator, or legal
representative of the deceased. Sections 16 and 17, Rule 3 of the Rules of Court provide:

Sec. 16.Duty of attorney upon death, incapacity, or incompetency of party. Whenever a party to a
pending case dies, becomes incapacitated or incompetent, it shall be the duty of his attorney to inform the
court promptly of such death, incapacity or incompetency, and to give the name and residence of his
executor, administrator, guardian or other legal representative.
Sec. 17.Death of party. After a party dies and the claim is not thereby extinguished, the court shall
order, upon proper notice, the legal representative of the deceased to appear and to be substituted for the
deceased, within a period of thirty (30) days, or within such time as may be granted. If the legal
representative fails to appear within said time, the court may order the opposing party to procure the
appointment of a legal representative of the deceased within a time to be specified by the court, and the
representative shall immediately appear for and on behalf of the interest of the deceased. The court
charges involved in procuring such appointment, if defrayed by the opposing party, may be recovered as
costs. The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator and the court may appoint guardian ad litem for the minor
heirs.
The rules operate on the presumption that the attorney for the deceased party is in a better position than
the attorney for the adverse party to know about the death of his client and to inform the court of the
names and addresses of his legal representative or representatives.
In the case at bar, no such notice of death, nor a motion for substitution of the deceased defendant, was
ever made. Hence, the trial court could not be expected to know or take judicial notice of the death of
defendant, Maximo Regoso, without the proper manifestation from his counsel. It must be remembered
that the fault or negligence was Attorney Javier's alone (Llantero vs. Court of Appeals, 105 SCRA 609;
Chittick vs. Court of Appeals, 166 SCRA 219; Pulido vs. CA, 122 SCRA 63).
The supervening death of the defendant, Maximo Regoso, did not extinguish his wife's action for partition
of their conjugal assets, for it is an action that survives. The trial of the case on the merits was already
finished before the defendant died. Since it was not informed about that event, the trial court may not be
faulted for proceeding to render judgment without ordering the substitution of the deceased defendant. Its
judgment is valid and binding upon the defendant's legal representatives or successors-in-interest, insofar
as his interest in the property subject of the action is concerned (Florendo, et al. vs. Coloma, et al., 129
SCRA 304).
Attorney Javier's appeal from the decision of the trial court was correctly dismissed by the appellate court
for upon the death of Maximo Regoso, Attorney Javier's authority to represent him also expired. Then
notice of appeal, which Attorney Javier filed on behalf of the decedent was an unauthorized pleading,
hence, invalid (Barrameda, et al. vs. Barbara, et al., 90 Phil. 718; Caseas vs. Rosales, 19 SCRA 462).
However, the validity of the judgment of the trial court was not affected by the defendant's demise for the
action survived. The decision is binding and enforceable against the successors-in-interest of the deceased

litigant by title subsequent to the commencement of the action [Section 49(b) Rule 39, Rules of Court;
Florendo, et al. vs. Coloma, et al., 129 SCRA 304].
This is in line with the following provisions of the Rules of Court:
Sec. 49.EFFECT OF JUDGMENTS.The effect of a judgment or final order rendered by a court or
judge of the Philippines, having jurisdiction to pronounce the judgment or order, maybe as follows:
xxx
(b)

xxx

xxx

In other cases the judgment or order is, with respect to the matter directly adjudged or as to any

other matter that could have been raised in relation thereto, conclusive between the parties and their
successors-in-interest by title subsequent to the commencement of the action or special proceeding,
litigating for the same thing and under the same title and in the same capacity. (Section 49(b), Rule 39,
New Rules of Court.)
Thus, a judgment in an ejectment case may be enforced not only against defendants therein but also
against the members of their family, their relatives, or privies who derived their right of possession from
the defendants (Ariem vs. De los Angeles, 49 SCRA 343). The same rule applies to the successors-ininterest of a deceased party in an action that survives, if the decision should go against the latter
(Florendo, Jr. vs. Coloma, 129 SCRA 304, 305.)

15. Heirs of Mayor Galvez v. CA Arman Candelaria

At least two primordial issues are posed by the herein petition for review on certiorari: (1) Whether a
money judgment rendered by a Court in a case for Mandamus and Prohibition is valid or not, the
defendant, a Municipal Mayor, (a) having died during trial and before judgment could be rendered, and
(b) after the defendant mayor and all the other respondents ceased to hold office, without the substitution
of parties provided for in Section 18, Rule 3, of the Rules of Court; and (2) Whether the said money
judgment against the said deceased defendant mayor, assuming that the case has survived against him, can
be enforced in the very same case or in the proper estate proceedings.
This petition for review on certiorari seeks a reversal of: (1) the Court of Appeals' decision, dated
December 23, 1994, which dismissed the petitioners' certiorari petition on mere technicalities and (2) the
Court of Appeals' resolution, dated February 17, 1995, which denied the petitioners' motion for
reconsideration for lack of merit.
Specifically, the petitioners pray, among others, for the nullification of the writ of execution and the
execution sale of the "pro-indiviso" share and interest of the deceased mayor, Dr. Nemencio G. Galvez, in
the land covered by TCT No. T-307783 to satisfy the money judgment contained in the decision of the

Regional Trial Court, Branch 9, Malolos, Bulacan, dated May 6, 1988, which awarded moral and
exemplary damages, as well as attorney's fees, in favor of the then petitioner, now one of the private
respondents, Amparo San Gabriel-Mendoza. 1
The antecedent facts as culled from the records of this case and as gathered by the lower court from the ex
parteproceedings appear to be that:
The late Dr. Nemencio G. Galvez served as Mayor of the Municipality of Balagtas, Province of Bulacan,
from 1980 to May 1986. 2
The deceased private respondent, Amparo San Gabriel-Mendoza, during her lifetime, was the registered
owner and operator of a cockpit, located at San Juan, Balagtas, Bulacan popularly known as the "Balagtas
Sports Arena". 3
The business operations of the Balagtas Sports Arena commenced in 1975 and had remained
uninterrupted until 1984, with Ex-Mayor Arcadio Gonzales as cockpit manager. 4
Sometime in December, 1984, private respondent Mendoza filed a written application for the renewal of
the cockpit's business license and permit for the succeeding year, 1985, with then Municipal Mayor of
Balagtas, Bulacan, Dr. Nemencio Galvez. In connection with the said application, the amount of
P4,625.00 was remitted to the Municipal Treasurer of Balagtas, Bulacan, who acknowledged receipt
thereof for "deposit only" without the corresponding official receipt because the Balagtas Sports Arena
had allegedly failed to pay the correct amount of municipal taxes and had, thus, incurred unpaid taxes in
the amount of P400,000.00. 5
Having failed to secure a renewal of the cockpit's license and permit outrightly, private respondent
Mendoza, through counsel, made a written demand asking Mayor Nemencio Galvez to issue the
necessary license and permit applied for. Still, no favorable action came from the said Mayor
Galvez. 6
On January 29, 1985, a petition was filed with the Philippine Gamefowl Commission (PGC) by private
respondent Mendoza against Mayor Galvez praying, among others, for the issuance of an interlocutory
order so that the cockpit may operate temporarily while awaiting the approval of its renewal papers. The
then PGC Acting Chairman Luis A. Tabuena wired Mayor Galvez, the Bulacan Provincial PC
Commander, and the PC-INP Station Commander of Balagtas, Bulacan, stating that the cockpit was
allowed temporary operation pending hearing of the aforestated petition inasmuch as the refusal to issue a
business permit was without any valid ground. 7
On February 23, 1985, Mayor Nemencio Galvez filed a Motion to Dismiss the petition with the
Philippine Gamefowl Commission for lack of jurisdiction. 8
On April 18, 1985, the Philippine Gamefowl Commission issued an Order allowing the temporary
operation of the Balagtas Sports Arena "until further orders". 9

On April 19, 1985, the Sangguniang Bayan of Balagtas passed and unanimously approved a Resolution

10

which ordered the closure and cessation of operations of private respondent Mendoza's cockpit until
payment of the proper municipal taxes from 1980 to 1984 shall have been effected. 11
On May 15, 1995, the above Resolution No. 08-85, after submission to and consideration by the
Governor and the Sangguniang Panlalawigan of Bulacan, was approved by virtue of Resolution No. 256
12

of the Bulacan Provincial Board.

On August 19, 1985, Mayor Nemencio Galvez wrote private respondent Mendoza informing her of the
impending closure of her cockpit as per Resolution No. 08-85 of the Balagtas Sangguniang Bayan.

13

On August 22, 1995, Mayor Nemencio Galvez ordered that the cockpit's gate be padlocked to effect
cessation of its operations, pursuant to Resolution No. 08-85 of the Municipal Council of Balagtas,
Bulacan and Resolution No. 256 of the Provincial Board of Bulacan. 14
Consequently, the scheduled special "pintakasi"

15

on August 22, 23 and 24, 1985, at the Balagtas Sports

Arena to raise funds for the Boy Scouts of the Philippines, which was reset for August 29, 30 and 31, did
not materialize on account of the mayor's closure order. 16
On August 27, 1985, upon recourse to the Philippine Gamefowl Commission by private respondent
Mendoza, separate telegrams were sent anew to Mayor Galvez and the same Provincial Commander and
the same Police Station Commander to whom the Interlocutory Order, dated April 18, 1985, was
addressed, reminding them to respect the said Order allowing temporary operations of the Balagtas Sports
Arena (cockpit). 17
On September 3, 1985, private respondent Mendoza filed a Petition

18

for Mandamus and Prohibition,

with Damages and Prayer for a Preliminary Mandatory and Prohibitory Injunctions, against Mayor
Nemencio Galvez and the Sangguniang Bayan of Balagtas, Bulacan. Principally, the petition sought to
compel the respondent officials to issue a municipal license and permit in favor of the Balagtas Sports
Arena and to enjoin them from enforcing or implementing their Resolution No. 08-85 until further orders
from the court. 19
On September 4, 1985, a Temporary Restraining Order was issued by the Regional Trial Court of
Bulacan, Branch 9. 20 Hence, business operations of the Balagtas Sports Arena were resumed.
On September 11, 1985, a Motion to Quash Restraining Order was filed by the public officials in the
petition for mandamus and prohibition, with damages. Private respondent Mendoza, then petitioner,
opposed the said
motion. 21
On September 26, 1985, the lower court ordered the issuance of a writ of preliminary injunction with the
same tenor as the TRO earlier issued. The lower court further ordered: (1) the, Revenue Collection Agent
of Balagtas, Bulacan, to submit a statement or schedule of the local taxes allegedly due from private

respondent Mendoza; (2) the Municipal Treasurer of Balagtas, Bulacan, to submit his reply to the letter of
cockpit manager, Ex-Mayor Gonzales, requesting for a copy of the pertinent municipal tax ordinance
relating to the cockpit's unpaid taxes; and (3) the Balagtas public officials involved to submit a certified
true copy of the case 22 cited in their Motion to Quash Restraining Order. 23
On October 7, 1985, a motion praying that the public officials in Civil Case No. 8385-M be declared in
default was filed by private respondent Mendoza. 24
On October 10, 1985, the said public officials duly represented by the Office of the Solicitor General,
through the Provincial Fiscal's (now Prosecutor's) Office of Bulacan, filed a Motion to Admit Answer
which was opposed by private respondent Mendoza.

25

Said Answer prayed for a dismissal of the petition

alleging: (1) that the mayor, under the Local Government Code (BP Blg. 337) has the discretionary power
to grant or revoke permits relating to the operation of cockpit arenas; (2) that the municipal council has
the inherent power to pass resolutions or ordinances prohibiting or ordering the closure of cockpit arenas;
and (3) that the local public officials have the inherent power to effect collection of taxes due the local
government as provided under the Local Tax Code. (PD 321, as amended). 26
On December 5, 1985, the lower court issued a default order against Mayor Nemencio Galvez and the
Sangguniang Bayan of Balagtas, Bulacan, thereby allowing the reception of evidence ex parte from
private respondent Mendoza on December 11, 1985. 27
On January 9, 1986, Mayor Galvez and the Sangguniang Bayan of Balagtas, Bulacan filed a motion for
reconsideration and/or to set aside order of default and/or judgment which was again opposed by private
respondent Mendoza. 28
On March 18, 1986, the lower court denied the above motion. Hence, the case was deemed submitted for
decision. 29
At this point in time, the EDSA Revolution had taken place which consequently resulted in the
replacement "en masse" of the incumbent local public officials by officers-in-charge (OIC's) sometime in
May 1986.
Mayor Galvez and the entire Sangguniang Bayan of Balagtas, Bulacan, were not spared.

30

Even the

Presiding Judge of RTC, Branch 9, Malolos, Bulacan, to whom the Petition for Mandamus and
Prohibition, with Damages, was raffled, was replaced. 31
On May 6, 1988, the lower court decided Civil Case No. 8385-M in favor of private respondent Mendoza;
The dispositive portion of the said decision reads:
WHEREFORE, premises considered, judgment is hereby rendered:
(a)

Making permanent in its legal effects the writ of preliminary injunction dated September 26, 1985

enjoining the enforcement or implementation of Resolution #08-85 dated April 19, 1985 of the
Sangguniang Bayan of Balagtas, Bulacan;

(b)

Directing respondent Nemensio (sic) G. Galvez or his successor-in-office to cause the issuance of

the corresponding municipal's license and mayor's permit for the operation of the Balagtas Sports Arena
cockpit for the year 1985 and for the ensuing years, provided the corresponding fees therefor shall have
been paid and unless otherwise rendered impracticable by some other legal cause(s); and
(c)

Directing respondents Nemensio (sic) G. Galvez and the Sangguniang Bayan of Balagtas to pay

unto petitioner Amparo San Gabriel Mendoza the amounts of P75,000.00 as moral damages, and
P25,000.00 as exemplary damages, and P25,000.00 as attorney's fees, and to pay the costs of the suit.
On May 26, 1988, a Manifestation with Motion was filed by the Provincial Fiscal of Bulacan

33

32

apprising

the lower court of the fact that Mayor Galvez had died on September 14, 1986 and that the terms of office
of the local public officials concerned had already expired. The Provincial Fiscal's office requested that it
be relieved as counsel for the said public officials considering that the award of damages by the lower
court affected the officials in their personal capacities and that, with respect to Mayor Galvez, the money
judgment maybe enforced only against his estate. 34
On May 30, 1988, the lower court issued an Order granting the relief sought by the Provincial Fiscal with
instructions to serve copies of the May 6, 1988 decision to the deceased mayor through his lawyer-son,
Atty. Enrique Galvez, 35 and to the Sangguniang Bayan of Balagtas, Bulacan. 36
On June 20, 1988, Atty. Enrique Galvez, by way of special appearance, filed a Manifestation informing
the lower court of his receipt of a copy of its Order, dated May 30, 1988, and a copy of the Manifestation
with Motion of the Provincial Fiscal and notifying the lower court that he had neither authority nor
personality to receive its decision, dated May 6, 1988, for or in behalf of the Office of the Mayor,
Municipality of Balagtas, Bulacan. Valid service thereof, he said, should be made upon a Government
lawyer or office empowered to represent a Government entity. 37
On November 11, 1988, Atty. Galvez, again, by way of special appearance, filed a Motion for Recall of
Decision reiterating his position that he could not be compelled to receive the lower court's decision and
praying that the said decision be withdrawn and Civil Case No. 8385-M be dismissed for failure to effect
substitution of parties in accordance with Rule 3, section 18 of the Rules of Court.

38

On April 6, 1989, the lower court denied Atty. Galvez' motion for recall of decision on the ground that the
decision was already final and executory considering that no appeal nor any motion for reconsideration
within the reglementary period was filed by any of the public officials concerned after service was made
pursuant to the lower court's Order, dated May 30, 1988. 39
On June 28, 1989, a motion for execution was filed by private respondent Mendoza. This motion was
granted by the lower court in its Order, dated November 12, 1990. 40
On March 18, 1991, a writ of execution was issued.

41

Consequently, on April 16, 1991, a notice of levy

on execution on the real properties of the then deceased Mayor Nemencio Galvez, covered by TCT Nos.
T-307783, T-307784 and T-307785 was registered with the respondent Register of Deeds of Bulacan.

Hence, annotations were accordingly made at the back of the said titles. 42 The aforestated real properties
were still registered in the names of the late Mayor Galvez and other co-owners at the time the notice of
levy on execution was registered. 43
On May 8, 1991, the sheriff

44

returned the writ of execution unsatisfied indicating in his return that after

the notice of levy on execution was registered, the subsequent notice of sale of the aforestated real
properties was held in abeyance upon the request of private respondent Mendoza.

45

On April 13, 1993, a public auction was held wherein the real property covered by TCT No. T-307783
was sold to the highest bidder in the person of private respondent Andres D. Manuel as evidenced by the
corresponding Sheriff's Certificate of Sale issued as a result thereof.

46

On April 20, 1994 a Final Deed of Sale was issued after the lapse of the one-year redemption period. This
deed was registered later with the respondent Register of Deeds of Bulacan, on June 24, 1994. 47
On June 8, 1994, private respondent Manuel, through one of the lawyers of the Office of the Provincial
Attorney of Bulacan, filed a "motion to direct defendant (in the mandamus petition) to surrender TCT no.
T-307783." 48
On June 13, 1994, the petitioners filed a petition for certiorari with the Court of Appeals

49

praying for:

(1) the nullification of the decision, dated May 6, 1988, rendered in the mandamus petition and the writ of
execution, levy and sheriff's sale issued in relation thereto; and (2) the cancellation of the annotation of
levy made on TCT Nos. 307783, 307784 and 307785. 50
On July 4, 1994, the lower court issued an Order deferring resolution of private respondent Manuel's
motion to direct defendant to surrender TCT. No. T-307783 until the certiorari petition before the Court
of Appeals filed by the petitioners had been adjudicated. 51
On September 6, 1994, private respondent Manuel reiterated his motion seeking the surrender of TCT No.
T-307783. 52
On October 21, 1994, the lower court issued a similar Order holding in abeyance any action on the above
motion, pending resolution of the related certiorari petition with the Court of Appeals.

53

Upon motion for

reconsideration of the said Order filed by private respondent Manuel, the lower court, on December 14,
1994, granted the same stating that the Court of Appeals had not issued any restraining order enjoining
the court a quo from taking any action pertaining to the enforcement and implementation of the assailed
decision, dated May 6, 1988, which had already become final. The dispositive portion of the said Order
reads:
WHEREFORE, premises considered, the order of October 21, 1994 is hereby reconsidered, filed and set
aside; in lieu thereof, the Court hereby:
a)

orders the heirs of the late Nemensio (sic) G. Galvez to surrender, within thirty (30) days from

receipt hereof, Transfer Certificate of Title No. T-307783 (RT-38893) to movant Andres D. Manuel in

order that the Certificate of Sale and Final Deed of Sale issued in his favor may be properly annotated in
the said title;
b)

alternatively and in the event that the directive mentioned in the next preceding paragraph hereof

shall not have been complied with, orders the Register of Deeds of Bulacan (Guiguinto) to issue a new
title in the name of Andres D. Manuel after cancelling TCT No. T-307783 (RT-38893) in the name of the
heirs of the late Nemensio (sic) G. Galvez insofar as the property covered by the Certificate of Sale and
Final Deed of Sale issued to Andres D. Manuel is concerned;
c)

orders the heirs of the late Nemensio (sic) G. Galvez to surrender possession to Andres D.

Manuel of the property covered by the aforementioned Certificate of Sale and Final Deed of Sale.

54

On December 23, 1994, the Court of Appeals dismissed the certiorari petition 55 and on January 17, 1995,
the petitioners' motion for reconsideration was denied. Hence, the instant petition was filed on April 10,
1995 with the following assignment of errors:
I
RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION FOR THEY IGNORED AN OBVIOUS
FACT THAT ASSAILED DECISION IS NULL AND VOID SINCE IT WAS RENDERED LONG
AFTER THE TRIAL COURT HAS LOST JURISDICTION OVER THE ISSUE, OVER THE PERSON,
AND OVER THE SUBJECT MATTER OF THE CASE.
II
RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN GIVING UNDUE IMPORTANCE
AND HEAVY EMPHASIS TO FORMAL LAPSES/DEFECTS IN THE PHRASEOLOGY OF THE
PETITION FOR CERTIORARI RATHER THAN ITS INHERENT AND OBVIOUS MERIT.
III
RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN STATING THAT MAYOR N. GALVEZ
WAS FOUND PERSONALLY LIABLE FOR DAMAGES BY THE TRIAL COURT WHEN ASSAILED
DECISION READ IN ITS ENTIRETY DID NOT MAKE SUCH A CONCLUSION.
IV
RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT THE FORCED
SERVICE OF ASSAILED DECISION TO THE LAWYER-SON AS (SIC) VALID SERVICE TO THE
LATE RESPONDENT MAYOR AND TO HIS CO-HEIRS WHO WERE NEVER A PARTY TO THE
CASE.

V
RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ASSUMING AND TREATING THE
HEIRS AS THOUGH THEY WERE A PARTY/RESPONDENT/LITIGANT IN THE MANDAMUSCASE
DEMANDING THAT THEY SHOULD HAVE APPEALED ASSAILED DECISION.
VI
RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR ABUSE OF DISCRETION
(SIC) AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN HOLDING THAT THE
PETITION FOR CERTIORARI WAS A MERE SUBSTITUTE FOR A LAPSED APPEAL.
VII
RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ALLOWING A VOID WRIT OF
EXECUTION BE USED AS A LEGAL BASIS TO DEPRIVE THE HEIRS OF THEIR PROPERTY
CONTRARY TO THE CLEAR PROVISIONS OF ARTICLE III, SECTION I OF THE
CONSTITUTION.56
It is this Court's observation that a resolution of the above assigned errors hinges on the issue of whether
or not a substitution of parties in the petition for mandamus and prohibition as provided under Rule 3,
section 18 of the Rules of Court, should have been effected considering that at the time the assailed
decision was rendered the public officers against whom the mandamus petition was filed had ceased to
hold office on account of the replacement 'en masse' brought about by the Edsa Revolution in 1986 with
respect to local government positions like the mayors and members of the municipal councils. In the case
of Mayor Nemencio Galvez, in particular, he had ceased to hold office when he was replaced by an
officer-in-charge on or about May 12, 1986, and thereafter, on September 14, 1986, he died from an acute
myocardial infarction. 57
Rule 3, section 18 of the Rules of Court, provides that:
Sec. 18.Death or separation of a party who is a government officer. When an officer of the Philippines
is a party in an action and during its pendency dies, resigns, or otherwise ceases to hold office, the action
may be continued and maintained by or against his successor, if within thirty (30) days after the successor
takes office it is satisfactorily shown to the court that there is substantial need for so continuing and
maintaining it. Substitution pursuant to this rule may be made when it is shown by supplemental pleading
that the successor of an officer adopts or continues or threatens to adopt or continue the action of his
predecessor in enforcing a law averred to be in violation of the Constitution of the Philippines. Before a
substitution is made, the party or officer to be affected, unless expressly assenting thereto, shall be given
reasonable notice of the application therefor and accorded an opportunity to object.

Considering the attendant circumstances in the case at bench, the failure to make the substitution pursuant
to the aforequoted provision is a procedural defect. We bear in mind that the case out of which this
petition arose is in the nature of a petition for mandamus and prohibition which sought to compel the then
mayor, Dr. Nemencio Galvez, to issue the municipal license and permit to resume operations of the
Balagtas Sports Arena at Balagtas, Bulacan, and to enjoin the said mayor and the Sangguniang Bayan of
Balagtas, Bulacan, from implementing its Resolution No. 08-85 which ordered the closure of the cockpit
arena. When the said public officials were replaced by OICs as an aftermath of the 1986 Edsa Revolution,
it was incumbent upon private respondent Mendoza, through her counsel, to file far a substitution of
parties within thirty (30) days after the named successors-in-office of Mayor Galvez and the members of
the Sangguniang Bayan of Balagtas, Bulacan, assumed office. Inasmuch as no such substitution was
effected, the mandamus petition cannot prosper in the absence of a supplemental pleading showing that
the successors of Mayor Galvez and the members of the Sangguniang Bayan of Balagtas, Bulacan had
adopted or had continued or threatened to adopt or continue the action of their predecessors in enforcing
the assailed resolution which ordered the closure of the subject cockpit arena. In fact there is reason to
believe petitioners' claim that the appointed OIC no longer pursued the "closure policy" of Mayor Galvez
so that the corresponding license and permit to operate the Balagtas Sports Arena were subsequently
granted.

58

Thus, the mandamus petition should have been dismissed for non-compliance with the

substitution procedure pursuant to Rule 3, Section 18 of the Rules of Court. 59

The assailed decision dated May 6, 1988 was rendered a couple of years after the Mayor and members of
the Municipal Council of Balagtas, Bulacan, originally sued by private respondent Mendoza had ceased
to hold public office. As initiator of the mandamus petition, counsel for private respondent Mendoza had
ample time to make a proper substitution of parties had there still been compelling reasons to obtain the
writs of mandamusand prohibition prayed for at the earliest possible time. As it was, there were none. The
records fail to show that both private respondents had refuted the petitioners' claim that, with the
replacement of the late Mayor Galvez, the mandamus petition had become moot and academic after
private respondent Mendoza obtained the municipal license and permit from the said mayor's successorin-office. Thus, when no proper substitution of parties was seasonably effected under Rule 3, section 18
of the Rules of Court, the court a quo acted in excess of jurisdiction

60

for having rendered the assailed

decision against the petitioners in utter violation of their constitutional right to due process of law.

61

We

quote with approval our pronouncement in the case of Allied Banking Corporation v. Court of Appeals, et
al., 62
Consequently, the levy on execution and the execution sale that transpired to satisfy the lower court's
judgment rendered on May 6, 1988 in excess of jurisdiction for lack of due process cannot be given any
legal effect. The present certiorari petition must be given due course. In this regard, we reiterate our
ruling that:

Even when appeal is available and is the proper remedy, this Court has allowed a writ of certiorariwhen
the orders of the lower court were issued either in excess of or without jurisdiction.

65

The acts of the respondent sheriff in implementing the writ of execution, issued by the court a quo on
May 18, 1991, which eventually resulted in the issuance of a Final Deed of Sale in favor of private
respondent Manuel which covered real property under TCT No. T-307783, sold at public auction in
satisfaction of the money judgment against the late Mayor and the members of the Sangguniang Bayan of
Balagtas, Bulacan, have no legal effect since the said acts were founded upon a void judgment. The lower
court's Order, dated December 14, 1994, directing the Register of Deeds of Bulacan to issue a new title in
favor of private respondent Manuel after cancellation of TCT No. T-307783, likewise, has no legal effect.
As we have held in the case of Gomez v. Concepcion. 66
. . . A void judgment is in legal effect no judgment. By it no rights are divested. From it no rights can be
obtained. Being worthless in itself, all proceedings founded upon it are equally worthless. It neither binds
nor bars any one. All acts performed under it and all claims flowing out of it are void. The parties
attempting to enforce it may be responsible as trespassers. The purchaser at a sale by virtue of its
authority finds himself without title and without redress. (Emphasis supplied).
We take this occasion as an opportunity to caution sheriffs with respect to making levies on execution and
conducting execution sales that pertain to deceased parties against whom money judgments are adjudged,
so that they may remember to study their lessons well and to exercise extreme care in performing their
duties in order to avoid any prejudice that maybe caused thereby.
Considering that the assailed decision rendered by the lower court on May 6, 1988 is a void judgment, it
is no longer necessary to determine whether or not proper service on the late mayor's lawyer-son of a
copy of the said decision was valid to reckon the date of its finality inasmuch as a void judgment never
acquires finality and any action to declare its nullity does not prescribe. It can be attacked at anytime. 67
The respondent Court of Appeals committed error in dismissing the petitioner's certiorari petition on
mere technicalities considering that the lower court's judgment being assailed before it was a judgment by
default which is frowned upon by this Court.

68

Even granting, arguendo, that the assailed decision was

valid, the respondent appellate court should have realized that the enforcement of the money judgment
contained therein should have been made in the proper estate proceedings

69

of the late mayor, Dr.

Nemencio Galvez.
WHEREFORE, the petition is GRANTED. All acts, orders, and processes resulting from and in
pursuance of the execution of the assailed decision of the court a quo, particularly, the writ of execution
dated May 18, 1991, the notice of levy on execution on April 16,1991, the execution sale on April 13,
1993 and the Certificate of Sale dated April 13, 1993, the Final Deed of Sale, dated, April 20, 1994 and
the Orders of the court a quo, dated May 30, 1988, April 6, 1989, November 12, 1990, July 4, 1994,
October 21, 1994 and December 14, 1994, are hereby nullified and set aside.

The Register of Deeds of Bulacan is hereby directed to: (1) cancel the annotations of levy at the back of
TCT Nos. T-307783, T-307784 and T-307785; (2) cancel the annotation of the Final Deed of Sale made
on TCT No. T-307783 in favor of private respondent Andres Manuel, if there be any; and (3) cancel the
new title in the name of Andres D. Manuel if one has been issued in lieu of TCT No. T-307783.
The decision of the Court of Appeals, dated December 23, 1994, and its resolution, dated February 17,
1995, are hereby REVERSED and SET ASIDE. The decision of the Regional Trial Court of Bulacan,
Branch 9, dated May 6, 1988, is hereby declared NULL and VOID.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza,
Francisco and Panganiban, JJ., concur.
Torres, Jr., J., is on leave.
. . . We have ruled time and again that no man shall be affected by a proceeding to which he is a stranger.
63

It is a fundamental doctrine of law that a party, to be affected by a personal judgment must have a day

in court and an opportunity to be heard.

64

To rule otherwise would be to render nugatory the due process

clause of the Constitution.

16. CF Malolos v. Asia Pacific Finance Corp. Kass Arnaldo

his is a special civil action for certiorari and mandamus seeking: (a) to set aside and nullify the Resolution
of Judge Jose P. Alejandro dated August 29, 1980, denying petitioner's Motion to Dismiss on the ground
of non-survival of the money claim in Civil Case No. 125887 entitled, "ASIA PACIFIC FINANCE
CORPORATION v. E. FRANCISCO LINERS, CO., INC., ELIAS A. FRANCISCO and JOSEPHINE
CRUZ MALOLOS," pursuant to Sec. 21, Rule 3 of the Rules of Court, and (b) to command said Judge to
dismiss aforesaid case insofar as defendant Malolos is concerned.
Petitioner Josephine Cruz Malolos (deceased) is represented by her heirs Emmanuel, Maria Marinela and
Maria Marjorie, all surnamed Malolos.
Private respondent Asia Pacific Finance Corporation (herein referred to as APCOR) is a quasi-banking
institution organized and existing under and by virtue of the laws of the Philippines and is partly engaged
in the discounting of receivables of natural as well as juridical persons.
The facts of this case are as follows:
On April 16, 1979 APCOR purchased from E. Francisco Liners Company, Inc. (herein referred to as
Francisco Liner) a postdated Far East Bank and Trust Company check numbered 214070 in the amount of
P105,000.00 issued in the latter's favor by herein petitioner, Josephine Cruz Malolos. The cheek had a
maturity date of May 30, 1979. On purchase, Francisco Liners executed a Deed of Assignment of said

check and as payee, endorsed the same in favor of private respondent before getting the discounted
proceeds.
When deposited on its maturity date, the aforesaid check was dishonored for the reason that petitioner's
bank account had already been closed. Thereupon, APCOR demanded from Francisco Liners and also
from petitioner, in her capacity as drawer of the check, the payment of said check, but the obligation
remained unpaid.
As a result, on August 15, 1979, APCOR filed a complaint for sum of money with preliminary attachment
docketed as Civil Case No. 125887 in the then CFI of Manila (now RTC) against E. Francisco Liners,
Co., Inc., Elias A. Francisco (as president of Francisco Liners), and herein petitioner (in her capacity as
drawer of said check). (Private Respondent's Memorandum, Rollo, pp. 83-84). In the complaint, private
respondent (then plaintiff prayed, among others, that a writ of preliminary attachment be issued against
the properties of the defendants to serve as security for the satisfaction of any judgment that may be
recovered therein (Complaint, Rollo, pp. 2024).
On August 23, 1979, respondent Judge issued an Order of Attachment on the grounds:
... that defendants were guilty of fraud in contracting the obligation and had removed or disposed of their
property, or are about to do so, with intent to defraud their creditors, among whom is the plaintiff herein
and that there is no tangible or valuable security held on to by the plaintiff for the collection of
defendants' obligation, or for the enforcement of the claim sought to be enforced.
(ANNEX B, Rollo, p. 25) and thereafter a Writ of Preliminary Attachment was issued. By virtue thereof,
the levy was annotated upon the residential property of petitioner at 2555 Taal Street, Singalong, Manila,
which property is covered by Transfer Certificate of Title No. 129351 of the Registry of Deeds of Manila
(ANNEX C, Rollo, pp. 26-27).
Josephine Cruz Malolos died on April 27, 1980, and her counsel, on July 10, 1980, filed a Motion to
Dismiss the complaint as against her pursuant to Sec. 21, Rule 3 of the Rules of Court (ANNEX D, Rollo,
pp. 28-29).
Private respondent opposed the aforementioned motion and the late argued that while it is admitted that
the action again Josephine Cruz Malolos is one for recovery of money and being such it does not survive,
the circumstances obtaining in the case place the same among the exceptions to Sec. 21, Rule 3 of the
Rules of Court (ANNEX E, Rollo, pp. 30-31).
In a Resolution dated August 29, 1980, respondent Judge ruled in favor of private respondent and denied
the motion to dismiss (ANNEX G, Rollo, p. 35).
Hence, this petition.
Without giving due course to the petition, the Court required respondents to comment (Rollo, p. 39)
which order private respondent complied with on March 20, 1981 (Rollo, pp. 48-58). Thereafter,

petitioners were required to file a Reply thereto (Rollo, p. 60) which pleading was filed on July 20, 1981
(Rollo, pp. 66-74).
Acting on the petition, the Court, on August 3, 1981, resolved (a) to give due course to the petition; (b) to
consider respondent's comment as ANSWER; and (c) to require the parties to file their respective
MEMORANDA (Rollo, p. 75). Private respondent filed its Memorandum on October 20, 1981. On the
other hand petitioners whose counsel of record withdrew from the case (Rollo, p. 117) through their new
counsel moved that they be allowed to adopt by reference as their Memorandum, their basic petition and
their Reply-Comment already filed with this Court which motion was noted in the resolution of the
Second Division of this Court dated November 15, 1982 (Rollo, p. 122).
On November 21, 1984, the case was considered submitted for deliberation (Rollo, p. 123).
The sole issue to be resolved in this case is whether or not an attachment levied on some properties of the
defendant constitutes an exception to the general rule of non-survival of the money claim as provided for
in Sec. 21, Rule 3 of the Rules of Court.
Petitioners' contention is that upon the death of Josephine Cruz Malolos on April 27, 1980, respondent
Court ceased to have any jurisdiction over the subject matter of Civil Case No. 125887, the same being a
money claim, in so far as Josephine Cruz Malolos is concerned, pursuant to Sec. 21, Rule 3 of the Rules
of Court; that in not dismissing said Civil Case No. 125887, respondent judge not only acted without or in
excess of jurisdiction, and with grave abuse of discretion but also neglected to perform an act which the
law specifically enjoins him to do to the prejudice and damage of petitioners. (Rollo, pp. 4-5).lwphl@it
On the other hand, private respondent argues that Sec. 21, Rule 3 of the Rules of Court admits of
exceptions and one of them is when an-attachment has been levied on some of the properties of the
defendant, on motion of the plaintiff, to secure the payment of the latter's money claim in winch case the
pending action should not be dismissed but may be continued against the executor or administrator,
invoking the ruling in the case of Alacondray Co., Inc. v. Dungao, 11 SCRA 72, where it was held that:
There seems to be no doubt that the action brought by the plaintiff corporation is for collection or
recovery of money. The prayer of the complaint unmistakably appears to be for recovery or collection of
sum of money. And although at the bottom of the promissory note sued upon and before the signature of
the obligor there appears the following: "The payment of this note is secured by the mortgage on personal
property," yet it does not appear that the plaintiff sought to foreclose it, as the personal property
mortgaged to secure the payment of the promissory note is not described in the complaint. The
attachment levied on some properties of the defendant, on the plaintiff's motion, to secure payment of its
money claim might constitute an exception to the general rule on claims that do not survive as provided
for in Section 21 of Rule 3, Rules of Court. But after the discharge of the attachment upon the filing of a
bond by the surety company, the property attached becomes free from any specific lien and reverted to its
previous condition. (emphasis supplied). (Private Respondent's Comment, Rollo, pp. 48, 55-56).

Private respondent insists that in above-cited case, although the complaint is for the collection of a sum of
money, the nature of the same charged when a writ of attachment was issued against the properties of
defendant; that by virtue of said attachment levy a lien was constituted over said property levied upon,
and only upon the filing of a bond by a Surety Company will the attachment be discharged, rendering the
property previously attached free from any specific lien. With the filing of the requisite bond, the
attachment was discharged. On the other hand, in the instant case, no discharge of the attachment has as
yet been made, thus, the case must be continued, this time against the executor or administrator-argues the
private respondent.
The petition is impressed with merit.
There is no question that the action in the court below is for collection or recovery of money.
It is already a settled rule that an action for recovery of money or for collection of a debt is one that does
not survive and upon the death of the defendant the case should be dismissed to be presented in the
manner especially provided in the Rules of Court (Villegas and Santos v. Zapanta and Zorilla, 104 Phil.
973). This is explicitly provided in Sec. 21, Rule 3 of the Rules of Court which states that:
SEC. 21. Where claim does not survive. When the action is for recovery of money, debt or interest
thereon, and the defendant dies before final judgment in the Court of First Instance, it shall be dismissed
to be prosecuted in the manner especially provided in these rules.
Said provision of the Rules was in turn interpreted by the Supreme Court in Dy v. Enage (70 SCRA 117
[1976]) stating that "The language of Section 21 of Rule 3 is too clear in this respect as to require any
interpretation or construction. It very explicitly says that "when the action for recovery of money, debt or
interest thereon, and the defendant dies before final judgment in the Court of First Instance, it shall be
dismissed to be prosecuted in the manner specially provided by the rules," meaning, Section 5 of Rule 86
and its related provisions."
Earlier, Secs. 119 and 700 of Act 190 (Code of Civil Procedure) from which this Rule was derived were
interpreted by the Supreme Court in Pabico v. Jaranilla, et al. (60 Phil. 247, 251) to be mandatory in
character and confers no jurisdiction upon the Court. (Moran, Comments on the Rules of Court, 1970 ed.
p. 215).
The reason for the dismissal of the case is that upon the death of the defendant a testate or intestate
proceeding shall be instituted in the proper court wherein all his creditors must appear and file their
claims which shall be paid proportionately out of the property left by the deceased (1 Moran, Comments
on the Rules of Court, 1979 ed., p. 219).
The purpose of the rule is to avoid useless duplicity of procedure-the ordinary action must be wiped out
from the ordinary court (Ignacio v. Pampanga Bus Co., May 23, 1963, 20 SCRA 126).

The case of Macondray v. Dungao, supra, cited by private respondent to support its position does not fall
squarely with the case at bar.
In the above-cited case, the facts are as follows: (1) the promissory note executed by defendant Dungao
represented the purchase price of the car and trucks which said defendant bought from Macondray on
installment; (2) a writ of attachment was issued on August 16, 1949, but this was later on dissolved on
September 21, 1949, when the defendant put up a surety bond; and (3) the promissory note sued upon in
the cited case was secured by a mortgage on personal property and the proper action should have been a
foreclosure of mortgage.
In the present case, the money claim arose out of a pure and simple debt, which as aforementioned, under
the provision of Rule 3, Sec. 21 of the Rules of Court shall be dismissed and must be brought before the
probate court (1 Moran, Comments on the Rules of Court, 1970 ed., pp. 215-216).
In the light of the foregoing considerations, the conclusion is inevitable that the trial court deviated from
the procedure laid down by the above-mentioned provisions of the Rules. The fact that a writ attachment
has been issued cannot provide an excuse for such deviation, as a writ of attachment is a remedy ancillary
to the principal proceedings. (Gruenberg v. Court of Appeals, 138 SCRA 471 [1985]. Consequently, if it is
mandatory, under Rule 3 Sec. 21 of the Rules of Court that the principal proceeding or action be
dismissed for non-survival of the money claim, the purpose of the attachment which is to secure the
outcome of the trial no longer exists and so with the reasons for the issuance of the writ in this case,
insofar as the deceased debtor is concerned.
Corollary thereto, it has been held that a court order which violates the Rules constitutes grave abuse of
discretion as it wrecks the orderly procedure prescribed for the settlement of claims against deceased
persons designed to protect the interests of the creditors of the decedent. Allowing the private respondent
to attach petitioners' properties for the benefit of her claim against the estate would give an undue
advantage over other creditors against the estate. (Gruenberg v. Court of Appeals, supra) citing Dy v.
Enage, supra).lwphl@it Therefore, under the same principle, a writ of attachment already issued in
connection with a money claim which has to be dismissed because of the death of the defendant before
final judgment cannot provide an exception to the general rule, and must accordingly be dissolved.
PREMISES CONSIDERED, (a) the Resolution of respondent Judge dated August 29, 1980 is hereby SET
ASIDE; (b) the Writ of mandamus is hereby issued commanding the incumbent Judge of the trial court
involved to dismiss Civil Case No. 125887, but only insofar as Josephine Cruz Malolos' heirs are
concerned, without prejudice to the filing of the claim in the estate proceedings of the deceased and (c)
We hereby direct the Register of Property of Manila to cancel the Notice of Levy made on subject
properties pursuant to an Order of Attachment issued in said Civil Case.
SO ORDERED.

17. Urbano v. Chavez Levy John Lalusis

Sometime in 1988, the petitioners in G.R. No. 87977, namely, Iluminado Urbano and Marcial Acapulco,
instituted a criminal case against Secretary Luis Santos of the Department of Local Government as well
as Sectoral Representatives Pacifico Conol and Jason Ocampos, Jr. of the Sangguniang Panlungsod of
Tangub City, for alleged violation of the provisions of Republic Act No. 3019, as amended, otherwise
known as the Anti-Graft and Corrupt Practices Act. The complaint against them was filed with the Office
of the Ombudsman and was docketed as OSP Case No. 88-02780. The Office of the Solicitor General,
through Solicitor General Francisco I. Chavez, Assistant Solicitor General Ramon A. Barcelona and
Solicitor Amy C. Lazaro-Javier, entered its appearance as counsel for the said respondents as far as the
preliminary investigation of the case is concerned.
By way of a special civil action for prohibition filed with this Court, the said petitioners seek to enjoin the
Solicitor General and his associates from acting as counsel for the said respondents in the course of the
preliminary investigation. The said petitioners submit that in the event that the corresponding information
is filed against the said respondents with the Sandiganbayan and a judgment of conviction is rendered by
the said court, the appearance of the Office of the Solicitor General on behalf of the said respondents
during the preliminary investigation will be in conflict with its role as the appellate counsel of the People
of the Philippines.
In its Comment filed on June 13, 1989, the Office of the Solicitor General manifested that the issue raised
by the petitioners had been squarely resolved in favor of the said Office in Anti-Graft League of the
Philippines, Inc. v.Hon. Ortega 1 and Solicitor General v. Garrido. 2
G.R. No. 88578
On December 29, 1987, the petitioner in G.R. No. 88578, namely, Nemesio G. Co, filed an Amended
Complaint for damages against Solicitor General Francisco I. Chavez, the Businessworld Publishing
Corporation, Raul L. Locsin and one John Doe. The Amended Complaint was filed with Branch 165 of
the Regional Trial Court in Pasig, Metro Manila and was docketed as Civil Case No. 55379. The
Honorable Milagros V. Caguioa was the presiding judge therein.
In sum, the Amended Complaint alleged, inter alia, that the defendant Chavez knowingly, willfully and
maliciously published and/or caused to be published certain defamatory imputations against the petitioner
in an article which appeared in the December 4, 1987 issue of Business World, a periodical publication in
Metro Manila, and that he caused the publication thereof by way of an interview characterized by bad

faith and actual malice. The petitioner also alleged that the defamatory remarks impute that he was a close
associate of former President Ferdinand Marcos and his daughter Imee Marcos-Manotoc and that he was
involved in some anomalous transactions relating to the funds of the national government during the time
that President Marcos was in office. It appears that at the time of the publication of the questioned article,
Solicitor General Chavez was the counsel of the Presidential Commission on Good Government (PCGG),
the government agency responsible for the investigation of alleged graft and corrupt practices relating to
the former President, his relatives and his close associates.
On February 11, 1988, the private defendants Businessworld Publishing Corporation and Raul L. Locsin
filed a joint Motion to Dismiss.
On February 12, 1988, the Office of the Solicitor General sought an extension of time to file the required
responsive pleading. On March 14, 1988, the said Office filed a Motion to Dismiss on behalf of Solicitor
General Chavez. Thereafter, the trial court set the case for oral argument on June 23, 1988.
During the scheduled oral argument, the counsel of the petitioner objected to the appearance of the Office
of the Solicitor General on behalf of Solicitor General Chavez. The trial court issued an Order suspending
the proceedings and instructed the parties to submit their respective positions on the propriety of the
appearance of the said Office for the Solicitor General himself. The parties complied with the instructions
of the trial court.
By way of a Motion seeking the disqualification of the Office of the Solicitor General to act as counsel of
Solicitor General Chavez, the petitioner manifested to the trial court that he is suing the Solicitor General
in his personal capacity for acts which he committed beyond the scope of his authority and as such he
cannot be represented by the said Office in the civil suit instituted with the trial court. 3
In addition to the arguments above, the Office of the Solicitor General argued that public policy militates
against the disqualification of the said Office from representing the Solicitor General in his capacity as a
public official because, if it where the other way around, public officials will hesitate to perform their
official functions for fear of being haled to court by almost anybody for the purpose of accounting for
official acts, not to mention the trouble of having to hire a private lawyer at his own expense in order to
defend himself. 8
The petitioner submitted his Reply thereto, alleging therein, among others, that the argument of the
Solicitor General is untenable inasmuch as the expression of his views by way of an interview
subsequently featured in a newspaper article is not an official function of the Solicitor General and that
the jurisprudence cited by the Office of the Solicitor General opposes the position it had taken. 9
In another Order dated May 26, 1989, the trial court denied the reconsideration sought by the petitioner.
The pertinent portion of the said Order is as follows
After a careful study, assessment and dissertation of the grounds, arguments advanced by the parties in
their respective pleadings now under consideration, as well as the applicable laws and jurisprudence cited

therein, the Court has arrived at the inescapable conclusion, and so holds that the plaintiff failed to
satisfactorily convince the Court that the Office of the Solicitor General cannot and/or does not have the
authority to represent the defendant Francisco I. Chavez in this case, for the simple reason that it is
indisputable that at the time said defendant allegedly made the malicious imputations against the plaintiff,
he was then and still is the incumbent Solicitor General, and at the same time the counsel for the
Presidential Commission on Good Government or PCGG. 14
Thus, the Order of the trial court dated May 26, 1989 is challenged before this Court on the ground that
the same amounts to a grave abuse of discretion amounting to lack of jurisdiction on the part of the trial
court.

15

The petitioner now asks the Court to order the Office of the Solicitor General to desist from

representing the Solicitor General in the civil suit for damages.

On August 21, 1989, the Office of the Solicitor General filed its Comment on the Petition, reiterating
therein its position before the trial court. 16
On August 31, 1989, the Court resolved to consider the said Comment as the Answer to the Petition and
to give due course to the Petition.

17

Nonetheless, on October 4, 1989, the petitioner filed his Reply to the

Comment, reiterating therein his arguments raised before the trial court.

18

The issue raised in G.R. No. 87977 relates to the authority of the Office of the Solicitor General to appear
for certain government officials in the course of the preliminary investigation of their case before the
Office of the Ombudsman. The issue raised in G.R. No. 88578 pertains to the authority of the said Office
to appear for the Solicitor General who was haled to court in a civil suit for damages arising from an
alleged defamatory remark which appeared in a newspaper. Both petitioners raise pure questions of law
inasmuch as there are no evidentiary matters to be evaluated by this Court. Moreover, if the only issue is
whether or not the conclusions of the trial court are in consonance with law and jurisprudence, then the
issue is a pure question of law. 19 Thus, the Court resolved to consolidate both Petitions and to treat them
as Petitions for certiorari on pure questions of law in accordance with the provisions of the Rules of
Court. 20 In due time, both Petitions were deemed submitted for decision.
In resolving both Petitions, the Court must take into account the duties and functions of the Office of the
Solicitor General. Presidential Decree No. 478 21 defines such duties and functions, to wit
Sec. 1. Functions and Organization. 1) The Office of the Solicitor General shall represent the
Government of the Philippines, its agencies and instrumentalities and its officials and agents in any
litigation, proceeding, investigation or matter requiring the services of a lawyer. . . (Emphasis supplied)
The Office of the Solicitor General submits that on the basis of this provision, it can represent or
otherwise defend any public official without any qualification or distinction in any litigation, and that an
intepretation thereof to the effect that it is authorized to represent a public official only when the said
official is clearly shown to be sued in his official capacity is erroneous. In short, the said Office argues

that inasmuch as the law does not make a distinction as to the type of litigation wherein the said Office
can enter its appearance as counsel, there should be no distinction made. 22
A similar provision can be found in Section 1661 of the Revised Administrative Code. It reads as follows:
"As principal law officer of the Government, the Solicitor General shall have the authority to act for and
represent the Government of the Philippine Islands, its officers and agents in any official investigation,
proceeding or matter requiring the services of a lawyer." Like the cited provision of Presidential Decree
No. 478, this provision does not have any qualifying phrase. The argument of the Office of the Solicitor
General as regards Presidential Decree No. 478 seems to apply to this provision as well. Executive Order
No. 300, series of 1987 cited by the said Office merely reiterates the provisions of the aforementioned
Presidential Decree.
In Anti-Graft League of the Philippines, Inc.,

23

this Court pointed out that the phrase "official

investigation, proceeding or matter requiring the services of a lawyer" found in Section 1661 of the
Revised Administrative Code embraces a preliminary investigation in a criminal case initiated against a
public official considering that the law makes no qualification as to the nature or character of the "official
investigation" contemplated. The Court emphasized, however, that where the investigation results in an
information filed against the public official concerned, then that official may no longer be represented by
the Office of the Solicitor General and that, accordingly, he will have to get his own private counsel.
Thus, this Court held that the Office of the Solicitor General can represent the public official at the
preliminary investigation of his case, and that if an information is eventually filed against the said public
official, the said Office may no longer represent him in the litigation. This ruling was reiterated in
Solicitor General v. Garrido. 24
What is the rationale behind this rule which allows the Office of the Solicitor General to represent a
public official during the preliminary investigation of his case, and which prohibits the said office from
further representing the said public official when an information is filed against him with the appropriate
court? In Anti-Graft League of the Philippines, Inc., this Court stressed that in the performance of their
duties, public officials can be subjected to numerous suits, whether ill-founded or not, and that by threats
of possible criminal prosecution, parties adversely affected by official action can stay the hand of the
public official concerned. The Court observed that there may be hesitancy and diffidence in the execution
of their duties if public officials are deterred by the thought that they could be brought to court and face
criminal charges. The Court conluded that as an assurance against timidity the Office of the Solicitor
General sees to it that the public officials concerned are duly represented by counsel in the preliminary
investigation. As to why the public official concerned may no longer be represented by the Office of the
Solicitor General, the ostensible reason is this: the said Office may no longer represent him considering
that its position as counsel for the accused will be in direct conflict with its responsibilities as the
appellate counsel of the People of the Philippines in all criminal cases.

The Court believes that the ruling announced in Anti-Graft League of the Philippines, Inc. and reiterated
inGarrido should be re-examined in the light of the nature of a suit against a public official.
Under the Presidential Decree No. 478 aforecited, the Solicitor General shall represent the Government of
the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceeding,
investigation or matter requiring the services of a lawyer. This is as it should be as he is the principal law
officer of the Government. 25
In Anti-Graft League of the Philippines, Inc., this Court interpreted this to embrace "both civil and
criminal investigation, proceeding or matter requiring the services of a lawyer. 26
In Garrido, the Court sustained the authority of the Solicitor General to enter his appearance on behalf of
public officials charged with violating a penal statute for acts connected with the performance of their
official duties. 27
It is undisputed that the Office of the Solicitor General is the appellate counsel of the People of the
Philippines in all criminal cases. As such, the said Office participates in a criminal case only when the
same has reached the appellate courts. It is the office of the city, provincial or state prosecutor, as the case
may be, and not the Office of the Solicitor General, which attends to the investigation and the prosecution
of criminal cases in the first instance.
However, under the doctrine announced in Anti-Graft League of the Philippines, Inc. and Garrido, the
Office of the Solicitor General is authorized to enter its appearance as counsel for any public official,
against whom a criminal charge had been instituted, during the preliminary investigation stage thereof.
Nevertheless, in the same case, this Court held that once an information is filed against the public official,
the Office of the Solicitor General can no longer represent the said official in the litigation. The anomaly
in this paradigm becomes obvious when, in the event of a judgment of conviction, the case is brought on
appeal to the appellate courts. The Office of the Solicitor General, as the appellate counsel of the People
of the Philippines, is expected to take a stand against the accused. More often than not, it does.
Accordingly, there is a clear conflict of interest here, and one which smacks of ethical considerations,
where the Office of the Solicitor General as counsel for the public official, defends the latter in the
preliminary investigation stage of the criminal case, and where the same office, as appellate counsel of the
People of the Philippines, represents the prosecution when the case is brought on appeal. This anomalous
situation could not have been contemplated and allowed by the law, its unconditional terms and
provisions notwithstanding. It is a situation which cannot be countenanced by the Court.
Otherwise, if the Solicitor General who represents the state on appeal in criminal cases can appear for the
accused public official in a preliminary investigation, then by the same token a provincial or city fiscal,
his assistant or any government prosecutor who represents the People of the Philippines at the preliminary
investigation of a case up to the trial thereof can appear for an accused public official at the preliminary

investigation being conducted by another fiscal, prosecutor or municipal judge. The situation would
simply be scandalous, to say the least.
There is likewise another reason, as earlier discussed, why the Office of the Solicitor General cannot
represent an accused in a criminal case. Inasmuch as the State can speak and act only by law, whatever it
does say and do must be lawful, and that which is unlawful is not the word or deed of the State, but is the
mere wrong or trespass of those individual persons who falsely speak and act in its name.

28

Therefore, the

accused public official should not expect the State, through the Office of the Solicitor General, to defend
him for a wrongful act which cannot be attributed to the State itself. In the same light, a public official
who is sued in a criminal case is actually sued in his personal capacity inasmuch as his principal, the
State, can never be the author of a wrongful act, much less commit a crime.
Thus, the Court rules that the Office of the Solicitor General is not authorized to represent a public
official at any stage of a criminal case. For this reason, the doctrine announced in Anti-Graft League of
the Philippines, Inc. v.Hon. Ortega and Solicitor General v. Garrido, and all decided cases affirming the
same; in so far as they are inconsistent with this pronouncement, should be deemed abandoned. The
principle of stare decisisnotwithstanding, it is well-settled that a doctrine which should be abandoned or
modified should be abandoned or modified accordingly. After all, more important than anything else is
that this Court should be right. 29
This observation should apply as well to a public official who is haled to court on a civil suit for damages
arising from a felony allegedly committed by him.

30

Any pecuniary liability he may be held to account

for on the occasion of such civil suit is for his own account. The State is not liable for the same. A fortiori,
the Office of the Solicitor General likewise has no authority to represent him in such a civil suit for
damages.
For all these reasons, the argument of the Office of the Solicitor General to the effect that it has the
authority to represent or otherwise defend any public official without any qualification or distinction in
any litigation pursuant to the unconditional provisions of Presidential Decree No. 478 and the other cited
laws is untenable. Applying these principles to the case at bar, the Office of the Solicitor General has no
authority to represent Solicitor General Chavez in the civil suit for damages filed against him in the
Regional Trial Court arising from allegedly defamatory remarks uttered by him.
The issues raised in these two Petitions have been resolved on the basis of law and jurisprudence as well
as the pertinent arguments of the parties concerned. The other points raised by them are irrelevant to the
proper disposition of these cases and need not be considered.
The Court is aware of the possibility of public officials being haled to court in an endless array of civil
suits. With or without this pronouncement, and considering the nature of a public office in the Philippines
vis-a-vis the litigious character of most Filipinos as demonstrated by the number of cases filed in the
courts daily, this scenario is a fact that must be accepted. The possibility of being brought to court is an

occupational hazard of both the public officer and the citizen, in the same way that every occupation has
its own hazards to reckon with. This grim reality notwithstanding, public officials should know that
nobody is above the law.
Of course, there is the Citizens Legal Aid Office of the Department of Justice that may be made to assist
in the defense of any such public official. As to respondent Francisco I. Chavez, he may appear in his own
defense in his private capacity in the action for damages against him. The services of private counsel may
also be availed of. And if it is the intention of the State to protect public officials from alleged harassment
suits, then the creation of a separate office of government lawyers for this purpose may be in order. But
certainly the Office of the Solicitor General can not assume a responsibility in defense of such public
officials beyond its statutory authority.
Accordingly, the Court is of the opinion, and so holds that the Office of the Solicitor General is not
authorized to represent a public official at any stage of a criminal case or in a civil suit for damages
arising from a felony. This pronouncement applies to all public officials and employees in the executive,
legislative and judicial branches of the Government.
WHEREFORE, in view of the foregoing, the herein Petitions are hereby GRANTED. The Office of the
Solicitor General is permanently prohibited from representing the said respondents in OSP Case No. 8802780 pending in the Office of the Ombudsman and respondent Francisco I. Chavez in Civil Case No.
55379 pending before the Regional Trial Court of Pasig, Metro Manila. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Padilla, Bidin, Sarmiento, Cortes,
Grio-Aquino, Medialdea and Regalado, JJ., concur.
Feliciano, J., Did not participate in the deliberations.
In an Order dated November 9, 1988, the trial court denied the Motion of the petitioner for lack of merit.
10

The petitioner sought a reconsideration of the Order. On the other hand, the Office of the Solicitor

General opposed the reconsideration sought by the petitioner.

opposition on the part of the said Office

12

11

The petitioner filed a Reply to the

which, in turn, filed a Rejoinder to the Reply. 13

On the other hand, the Office of the Solicitor General manifested that the objection raised by the
petitioner is an afterthought on account of its belated character, and that this objection notwithstanding, it
is authorized to represent any public official even if the said official is sued in his personal capacity
pursuant to the unconditional provisions of Presidential Decree No. 478 which defines the functions of
the said Office, as well as Executive Order No. 300 issued on July 26, 1987 which made the said office an
independent agency under the Office of the President of the Philippines.

In support of this contention,

the said Office cited the pronouncement of this Court in Anti-Graft League of the Philippines, Inc. 5 The
said office also maintained that the cause of action against the Solicitor General is for acts committed by
him in his official capacity, i.e., as legal counsel of the PCGG under Executive Order No. 14, series of

1986, and that the assailed actuations of a public official are presumed to have been done in the lawful
performance of his duties. 6 In support thereof, the said Office cited the ruling of this Court in Peralta v.
Firme. 7

18. Mangila v. CA Nadjib Basir Bantuas

The Facts
Petitioner Anita Mangila (petitioner for brevity) is an exporter of sea foods and doing business under the
name and style of Seafoods Products. Private respondent Loreta Guina (private respondent for brevity) is
the President and General Manager of Air Swift International, a single registered proprietorship engaged
in the freight forwarding business.
Sometime in January 1988, petitioner contracted the freight forwarding services of private respondent for
shipment of petitioners products, such as crabs, prawns and assorted fishes, to Guam (USA) where
petitioner maintains an outlet. Petitioner agreed to pay private respondent cash on delivery. Private
respondents invoice stipulates a charge of 18 percent interest per annum on all overdue accounts. In case
of suit, the same invoice stipulates attorneys fees equivalent to 25 percent of the amount due plus costs of
suit.[3]
On the first shipment, petitioner requested for seven days within which to pay private respondent.
However, for the next three shipments, March 17, 24 and 31, 1988, petitioner failed to pay private
respondent shipping charges amounting to P109, 376.95.[4]
Despite several demands, petitioner never paid private respondent. Thus, on June 10, 1988, private
respondent filed Civil Case No. 5875 before the Regional Trial Court of Pasay City for collection of sum
of money.
On August 1, 1988, the sheriff filed his Sheriffs Return showing that summons was not served on
petitioner. A woman found at petitioners house informed the sheriff that petitioner transferred her
residence to Sto. Nio, Guagua, Pampanga. The sheriff found out further that petitioner had left the
Philippines for Guam.[5]
Thus, on September 13, 1988, construing petitioners departure from the Philippines as done with intent to
defraud her creditors, private respondent filed a Motion for Preliminary Attachment. On September 26,
1988, the trial court issued an Order of Preliminary Attachment [6] against petitioner. The following day,
the trial court issued a Writ of Preliminary Attachment.
The trial court granted the request of its sheriff for assistance from their counterparts in RTC, Pampanga.
Thus, on October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga served on petitioners
household help in San Fernando, Pampanga, the Notice of Levy with the Order, Affidavit and Bond. [7]

On November 7, 1988, petitioner filed an Urgent Motion to Discharge Attachment [8] without submitting
herself to the jurisdiction of the trial court. She pointed out that up to then, she had not been served a copy
of the Complaint and the summons. Hence, petitioner claimed the court had not acquired jurisdiction over
her person.[9]
In the hearing of the Urgent Motion to Discharge Attachment on November 11, 1988, private respondent
sought and was granted a re-setting to December 9, 1988. On that date, private respondents counsel did
not appear, so the Urgent Motion to Discharge Attachment was deemed submitted for resolution. [10]
The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon filing of petitioners
counter-bond. The trial court, however, did not rule on the question of jurisdiction and on the validity of
the writ of preliminary attachment.
On December 26, 1988, private respondent applied for an alias summons, which the trial court issued on
January 19, 1989.[11] It was only on January 26, 1989 that summons was finally served on petitioner.[12]
On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of improper
venue. Private respondents invoice for the freight forwarding service stipulates that if court litigation
becomes necessary to enforce collection xxx the agreed venue for such action is Makati, Metro Manila. [13]
Private respondent filed an Opposition asserting that although Makati appears as the stipulated venue, the
same was merely an inadvertence by the printing press whose general manager executed an affidavit [14]
admitting such inadvertence. Moreover, private respondent claimed that petitioner knew that private
respondent was holding office in Pasay City and not in Makati. [15]The lower court, finding credence in
private respondents assertion, denied the Motion to Dismiss and gave petitioner five days to file her
Answer. Petitioner filed a Motion for Reconsideration but this too was denied.
Petitioner filed her Answer[16] on June 16, 1989, maintaining her contention that the venue was improperly
laid.
On June 26, 1989, the trial court issued an Order setting the pre-trial for July 18, 1989 at 8:30 a.m. and
requiring the parties to submit their pre-trial briefs. Meanwhile, private respondent filed a Motion to Sell
Attached Properties but the trial court denied the motion.
On motion of petitioner, the trial court issued an Order resetting the pre-trial from July 18, 1989 to August
24, 1989 at 8:30 a.m..
On August 24, 1989, the day of the pre-trial, the trial court issued an Order [17] terminating the pre-trial and
allowing the private respondent to present evidence ex-parte on September 12, 1989 at 8:30 a.m.. The
Order stated that when the case was called for pre-trial at 8:31 a.m., only the counsel for private
respondent appeared. Upon the trial courts second call 20 minutes later, petitioners counsel was still
nowhere to be found. Thus, upon motion of private respondent, the pre-trial was considered terminated.

On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order terminating the pretrial. Petitioner explained that her counsel arrived 5 minutes after the second call, as shown by the
transcript of stenographic notes, and was late because of heavy traffic. Petitioner claims that the lower
court erred in allowing private respondent to present evidence ex-parte since there was no Order
considering the petitioner as in default. Petitioner contends that the Order of August 24, 1989 did not state
that petitioner was declared as in default but still the court allowed private respondent to present evidence
ex-parte.[18]
On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled the presentation
of private respondents evidence ex-parte on October 10, 1989.
On October 10, 1989, petitioner filed an Omnibus Motion stating that the presentation of evidence exparte should be suspended because there was no declaration of petitioner as in default and petitioners
counsel was not absent, but merely late.
On October 18, 1989, the trial court denied the Omnibus Motion. [19]
On November 20, 1989, the petitioner received a copy of the Decision of November 10, 1989, ordering
petitioner to pay respondent P109,376.95 plus 18 percent interest per annum, 25 percent attorneys fees
and costs of suit. Private respondent filed a Motion for Execution Pending Appeal but the trial court
denied the same.
The Ruling of the Court of Appeals
On December 15, 1995, the Court of Appeals rendered a decision affirming the decision of the trial court.
The Court of Appeals upheld the validity of the issuance of the writ of attachment and sustained the filing
of the action in the RTC of Pasay. The Court of Appeals also affirmed the declaration of default on
petitioner and concluded that the trial court did not commit any reversible error.
Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals denied the
same in a Resolution dated May 20, 1996.
Hence, this petition.
The Issues
The issues raised by petitioner may be re-stated as follows:
I.
WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF
ATTACHMENT WAS IMPROPERLY ISSUED AND SERVED;
II.
WHETHER THERE WAS A VALID DECLARATION OF DEFAULT;
III.

WHETHER THERE WAS IMPROPER VENUE.

IV.
WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS OBLIGED TO
PAY P109, 376.95, PLUS ATTORNEYS FEES.[20]
The Ruling of the Court
Improper Issuance and Service of Writ of Attachment
Petitioner ascribes several errors to the issuance and implementation of the writ of attachment. Among
petitioners arguments are: first, there was no ground for the issuance of the writ since the intent to defraud
her creditors had not been established; second, the value of the properties levied exceeded the value of
private respondents claim. However, the crux of petitioners arguments rests on the question of the validity
of the writ of attachment. Because of failure to serve summons on her before or simultaneously with the
writs implementation, petitioner claims that the trial court had not acquired jurisdiction over her person
and thus the service of the writ is void.
As a preliminary note, a distinction should be made between issuance and implementation of the writ of
attachment. It is necessary to distinguish between the two to determine when jurisdiction over the person
of the defendant should be acquired to validly implement the writ. This distinction is crucial in resolving
whether there is merit in petitioners argument.
This Court has long settled the issue of when jurisdiction over the person of the defendant should be
acquired in cases where a party resorts to provisional remedies. A party to a suit may, at any time after
filing the complaint, avail of the provisional remedies under the Rules of Court. Specifically, Rule 57 on
preliminary attachment speaks of the grant of the remedy at the commencement of the action or at any
time thereafter.[21] This phrase refers to the date of filing of the complaint which is the moment that marks
the commencement of the action. The reference plainly is to a time before summons is served on the
defendant, or even before summons issues.
In Davao Light & Power Co., Inc. v. Court of Appeals, [22] this Court clarified the actual time when
jurisdiction should be had:
It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction
over the person of defendant - issuance of summons, order of attachment and writ of attachment these do not and cannot bind and affect the defendant until and unless jurisdiction over his person is
eventually obtained by the court,either by service on him of summons or other coercive process or his
voluntary submission to the courts authority. Hence, when the sheriff or other proper officer
commencesimplementation of the writ of attachment, it is essential that he serve on the defendant not only
a copy of the applicants affidavit and attachment bond, and of the order of attachment, as explicitly

required by Section 5 of Rule 57, but also the summons addressed to said defendant as well as a copy of
the complaint xxx. (Emphasis supplied.)
Furthermore, we have held that the grant of the provisional remedy of attachment involves three stages:
first, the court issues the order granting the application; second, the writ of attachment issues pursuant to
the order granting the writ; and third, the writ is implemented. For the initial two stages, it is not
necessary that jurisdiction over the person of the defendant be first obtained.However, once the
implementation of the writ commences, the court must have acquired jurisdiction over the defendant for
without such jurisdiction, the court has no power and authority to act in any manner against the defendant.
Any order issuing from the Court will not bind the defendant. [23]
In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and
implemented on October 28, 1988. However, the alias summons was served only on January 26,1989 or
almost three months after the implementation of the writ of attachment.
The trial court had the authority to issue the Writ of Attachment on September 27 since a motion for its
issuance can be filed at the commencement of the action. However, on the day the writ was implemented,
the trial court should have, previously or simultaneously with the implementation of the writ, acquired
jurisdiction over the petitioner. Yet, as was shown in the records of the case, the summons was actually
served on petitioner several months after the writ had been implemented.
Private respondent, nevertheless, claims that the prior or contemporaneous service of summons
contemplated in Section 5 of Rule 57 provides for exceptions. Among such exceptions are where the
summons could not be served personally or by substituted service despite diligent efforts or where the
defendant is a resident temporarily absent therefrom x x x. Private respondent asserts that when she
commenced this action, she tried to serve summons on petitioner but the latter could not be located at her
customary address in Kamuning, Quezon City or at her new address in Guagua, Pampanga. [24]
Furthermore, respondent claims that petitioner was not even in Pampanga; rather, she was in Guam
purportedly on a business trip.
Private respondent never showed that she effected substituted service on petitioner after her personal
service failed. Likewise, if it were true that private respondent could not ascertain the whereabouts of
petitioner after a diligent inquiry, still she had some other recourse under the Rules of Civil Procedure.
The rules provide for certain remedies in cases where personal service could not be effected on a party.
Section 14, Rule 14 of the Rules of Court provides that whenever the defendants whereabouts are
unknown and cannot be ascertained by diligent inquiry, service may, by leave of court, be effected upon
him by publication in a newspaper of general circulation x x x. Thus, if petitioners whereabouts could not
be ascertained after the sheriff had served the summons at her given address, then respondent could have
immediately asked the court for service of summons by publication on petitioner.[25]

Moreover, as private respondent also claims that petitioner was abroad at the time of the service of
summons, this made petitioner a resident who is temporarily out of the country. This is the exact situation
contemplated in Section 16,[26] Rule 14 of the Rules of Civil Procedure, providing for service of summons
by publication.
In conclusion, we hold that the alias summons belatedly served on petitioner cannot be deemed to have
cured the fatal defect in the enforcement of the writ. The trial court cannot enforce such a coercive
process on petitioner without first obtaining jurisdiction over her person. The preliminary writ of
attachment must be served after or simultaneous with the service of summons on the defendant whether
by personal service, substituted service or by publication as warranted by the circumstances of the case. [27]
The subsequent service of summons does not confer a retroactive acquisition of jurisdiction over her
person because the law does not allow for retroactivity of a belated service.
Improper Venue
Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in private
respondents invoice which contains the following:
3. If court litigation becomes necessary to enforce collection, an additional equivalent (sic) to 25% of the
principal amount will be charged. The agreed venue for such action is Makati, Metro Manila, Philippines.
[28]

Based on this provision, petitioner contends that the action should have been instituted in the RTC of
Makati and to do otherwise would be a ground for the dismissal of the case.
We resolve to dismiss the case on the ground of improper venue but not for the reason stated by petitioner.
The Rules of Court provide that parties to an action may agree in writing on the venue on which an action
should be brought.[29] However, a mere stipulation on the venue of an action is not enough to preclude
parties from bringing a case in other venues. [30] The parties must be able to show that such stipulation is
exclusive. Thus, absent words that show the parties intention to restrict the filing of a suit in a particular
place, courts will allow the filing of a case in any venue, as long as jurisdictional requirements are
followed. Venue stipulations in a contract, while considered valid and enforceable, do not as a rule
supersede the general rule set forth in Rule 4 of the Revised Rules of Court. [31] In the absence of
qualifying or restrictive words, they should be considered merely as an agreement on additional forum,
not as limiting venue to the specified place.[32]
In the instant case, the stipulation does not limit the venue exclusively to Makati. There are no qualifying
or restrictive words in the invoice that would evince the intention of the parties that Makati is the only or
exclusive venue where the action could be instituted. We therefore agree with private respondent that
Makati is not the only venue where this case could be filed.
Nevertheless, we hold that Pasay is not the proper venue for this case.

Under the 1997 Rules of Civil Procedure, the general rule is venue in personal actions is where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff. [33]The exception to this rule is when the parties agree on an
exclusive venue other than the places mentioned in the rules. But, as we have discussed, this exception is
not applicable in this case. Hence, following the general rule, the instant case may be brought in the place
of residence of the plaintiff or defendant, at the election of the plaintiff (private respondent herein).
In the instant case, the residence of private respondent (plaintiff in the lower court) was not alleged in the
complaint. Rather, what was alleged was the postal address of her sole proprietorship, Air Swift
International. It was only when private respondent testified in court, after petitioner was declared in
default, that she mentioned her residence to be in Better Living Subdivision, Paraaque City.
In the earlier case of Sy v. Tyson Enterprises, Inc.,[34] the reverse happened. The plaintiff in that case was
Tyson Enterprises, Inc., a corporation owned and managed by Dominador Ti. The complaint, however,
did not allege the office or place of business of the corporation, which was in Binondo, Manila. What was
alleged was the residence of Dominador Ti, who lived in San Juan, Rizal. The case was filed in the Court
of First Instance of Rizal, Pasig. The Court there held that the evident purpose of alleging the address of
the corporations president and manager was to justify the filing of the suit in Rizal, Pasig instead of in
Manila. Thus, the Court ruled that there was no question that venue was improperly laid in that case and
held that the place of business of Tyson Enterpises, Inc. is considered as its residence for purposes of
venue. Furthermore, the Court held that the residence of its president is not the residence of the
corporation because a corporation has a personality separate and distinct from that of its officers and
stockholders.
In the instant case, it was established in the lower court that petitioner resides in San Fernando,
Pampanga[35] while private respondent resides in Paraaque City.[36] However, this case was brought in
Pasay City, where the business of private respondent is found. This would have been permissible had
private respondents business been a corporation, just like the case in Sy v. Tyson Enterprises, Inc.
However, as admitted by private respondent in her Complaint [37] in the lower court, her business is a sole
proprietorship, and as such, does not have a separate juridical personality that could enable it to file a suit
in court.[38] In fact, there is no law authorizing sole proprietorships to file a suit in court. [39]
A sole proprietorship does not possess a juridical personality separate and distinct from the personality of
the owner of the enterprise. [40] The law merely recognizes the existence of a sole proprietorship as a form
of business organization conducted for profit by a single individual and requires its proprietor or owner to
secure licenses and permits, register its business name, and pay taxes to the national government. [41] The
law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an
action in court.[42]

Thus, not being vested with legal personality to file this case, the sole proprietorship is not the plaintiff in
this case but rather Loreta Guina in her personal capacity. In fact, the complaint in the lower court
acknowledges in its caption that the plaintiff and defendant are Loreta Guina and Anita Mangila,
respectively. The title of the petition before us does not state, and rightly so, Anita Mangila v. Air Swift
International, but rather Anita Mangila v. Loreta Guina. Logically then, it is the residence of private
respondent Guina, the proprietor with the juridical personality, which should be considered as one of the
proper venues for this case.
All these considered, private respondent should have filed this case either in San Fernando, Pampanga
(petitioners residence) or Paraaque (private respondents residence). Since private respondent
(complainant below) filed this case in Pasay, we hold that the case should be dismissed on the ground of
improper venue.
Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court, petitioner
expressly stated that she was filing the motion without submitting to the jurisdiction of the court. At that
time, petitioner had not been served the summons and a copy of the complaint. [43]Thereafter, petitioner
timely filed a Motion to Dismiss[44] on the ground of improper venue. Rule 16, Section 1 of the Rules of
Court provides that a motion to dismiss may be filed [W]ithin the time for but before filing the answer to
the complaint or pleading asserting a claim. Petitioner even raised the issue of improper venue in his
Answer[45] as a special and affirmative defense. Petitioner also continued to raise the issue of improper
venue in her Petition for Review[46] before this Court. We thus hold that the dismissal of this case on the
ground of improper venue is warranted.
The rules on venue, like other procedural rules, are designed to insure a just and orderly administration of
justice or the impartial and evenhanded determination of every action and proceeding. Obviously, this
objective will not be attained if the plaintiff is given unrestricted freedom to choose where to file the
complaint or petition.[47]
We find no reason to rule on the other issues raised by petitioner.
WHEREFORE, the petition is GRANTED on the grounds of improper venue and invalidity of the
service of the writ of attachment. The decision of the Court of Appeals and the order of respondent judge
denying the motion to dismiss are REVERSED and SET ASIDE. Civil Case No. 5875 is hereby dismissed
without prejudice to refiling it in the proper venue. The attached properties of petitioner are ordered
returned to her immediately.
SO ORDERED.

19. Fortune Motors v. CA Bob Ryan Diator Gani

To fund their acquisition of new vehicles (which are later retailed or resold to the general public), car
dealers normally enter into wholesale automotive financing schemes whereby vehicles are delivered by
the manufacturer or assembler on the strength of trust receipts or drafts executed by the car dealers, which
are backed up by sureties. These trust receipts or drafts are then assigned and/or discounted by the
manufacturer to/with financing companies, which assume payment of the vehicles but with the
corresponding right to collect such payment from the car dealers and/or the sureties. In this manner, car
dealers are able to secure delivery of their stock-in-trade without having to pay cash therefor;
manufacturers get paid without any receivables/collection problems; and financing companies earn their
margins with the assurance of payment not only from the dealers but also from the sureties. When the
vehicles are eventually resold, the car dealers are supposed to pay the financing companies -- and the
business goes merrily on.However, in the event the car dealer defaults in paying the financing company,
may the surety escape liability on the legal ground that the obligations were incurred subsequent to the
execution of the surety contract?
This is the principal legal question raised in this petition for review (under Rule 45 of the Rules of Court)
seeking to set aside the Decision [1] of the Court of Appeals (Tenth Division)[2] promulgated on September
30, 1993 in CA G.R. CV No. 09136 which affirmed in toto the decision[3] of the Regional Trial Court of
Manila - Branch 11[4] in Civil Case No. 83-21994, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, by
ordering the latter to pay, jointly and severally, the plaintiff the following amounts:
1. The sum of P1,348,033.89, plus interest thereon at the rate of P922.53 per day starting April 1, 1985
until the said principal amount is fully paid;
2. The amount of P50,000.00 as attorneys fees and anotherP50,000.00 as liquidated damages; and
3. That the defendants, although spared from paying exemplary damages, are further ordered to pay, in
solidum, the costs of this suit.
Plaintiff therein was the financing company and the defendants the car dealer and its sureties.
The Facts
On or about August 4, 1981, Joseph L. G. Chua and Petitioner Edgar Lee Rodrigueza (Petitioner
Rodrigueza) each executed an undated Surety Undertaking [5] whereunder they absolutely, unconditionally
and solidarily guarantee(d) to Respondent Filinvest Credit Corporation (Respondent Filinvest) and its
affiliated and subsidiary companies the full, faithful and prompt performance, payment and discharge of
any and all obligations and agreements of Fortune Motors (Phils.) Corporation (Petitioner Fortune) under
or with respect to any and all such contracts and any and all other agreements (whether by way of
guaranty or otherwise) of the latter with Filinvest and its affiliated and subsidiary companies now in force
or hereafter made.

The following year or on April[6] 5, 1982, Petitioner Fortune, Respondent Filinvest and Canlubang
Automotive Resources Corporation (CARCO) entered into an Automotive Wholesale Financing
Agreement[7] (Financing Agreement) under which CARCO will deliver motor vehicles to Fortune for the
purpose of resale in the latters ordinary course of business; Fortune, in turn, will execute trust receipts
over said vehicles and accept drafts drawn by CARCO, which will discount the same together with the
trust receipts and invoices and assign them in favor of Respondent Filinvest, which will pay the motor
vehicles for Fortune. Under the same agreement, Petitioner Fortune, as trustee of the motor vehicles, was
to report and remit proceeds of any sale for cash or on terms to Respondent Filinvest immediately without
necessity of demand.
Subsequently, several motor vehicles were delivered by CARCO to Fortune, and trust receipts covered by
demand drafts and deeds of assignment were executed in favor of Respondent Filinvest.However, when
the demand drafts matured, not all the proceeds of the vehicles which Petitioner Fortune had sold were
remitted to Respondent Filinvest. Fortune likewise failed to turn over to Filinvest several unsold motor
vehicles covered by the trust receipts. Thus, Filinvest through counsel, sent a demand letter [8] dated
December 12, 1983 to Fortune for the payment of its unsettled account in the amount of P1,302,811.00.
Filinvest sent similar demand letters[9] separately to Chua and Rodrigueza as sureties. Despite said
demands, the amount was not paid. Hence, Filinvest filed in the Regional Trial Court of Manila a
complaint for a sum of money with preliminary attachment against Fortune, Chua and Rodrigueza.
In an order dated September 26, 1984, the trial court declared that there was no factual issue to be
resolved except for the correct balance of defendants account with Filinvest as agreed upon by the parties
during pre-trial.[10] Subsequently, Filinvest presented testimonial and documentary evidence. Defendants
(petitioners herein), instead of presenting their evidence, filed a Motion for Judgment on Demurrer to
Evidence[11] anchored principally on the ground that the Surety Undertakings were null and void because,
at the time they were executed, there was no principal obligation existing. The trial court denied the
motion and scheduled the case for reception of defendants evidence. On two scheduled dates, however,
defendants failed to present their evidence, prompting the court to deem them to have waived their right
to present evidence. On December 17, 1985, the trial court rendered its decision earlier cited ordering
Fortune, Chua and Rodrigueza to pay Filinvest, jointly and severally, the sum ofP1,348,033.83 plus
interest at the rate of P922.53 per day from April 1, 1985 until fully paid,P50,000.00 in attorneys fees,
another P50,000.00 in liquidated damages and costs of suit.
As earlier mentioned, their appeal was dismissed by the Court of Appeals (Tenth Division) which
affirmed in toto the trial courts decision.Hence, this recourse.
Issues
Petitioners assign the following errors in the appealed Decision:

1. that the Court of Appeals erred in declaring that surety can exist even if there was no existing
indebtedness at the time of its execution.
2. that the Court of Appeals erred when it declared that there was no novation.
3. that the Court of Appeals erred when it declared, that the evidence was sufficient to prove the amount
of the claim.[12]
Petitioners argue that future debts which can be guaranteed under Article 2053 of the Civil Code refer
only to debts existing at the time of the constitution of the guaranty but the amount thereof is unknown,
and that a guaranty being an accessory obligation cannot exist without a principal obligation.Petitioners
claim that the surety undertakings cannot be made to cover the Financing Agreement executed by
Fortune, Filinvest and CARCO since the latter contract was not yet in existence when said surety
contracts were entered into.
Petitioners further aver that the Financing Agreement would effect a novation of the surety contracts since
it changed the principal terms of the surety contracts and imposed additional and onerous obligations
upon the sureties.
Lastly, petitioners claim that no accounting of the payments made by Petitioner Fortune to Respondent
Filinvest was done by the latter. Hence, there could be no way by which the sureties can ascertain the
correct amount of the balance, if any.
Respondent Filinvest, on the other hand, imputes estoppel (by pleadings or by judicial admission) upon
petitioners when in their Motion to Discharge Attachment, they admitted their liability as sureties thus:
Defendants Chua and Rodrigueza could not have perpetrated fraud because they are only sureties of
defendant Fortune Motors x x x;
x x x The defendants (referring to Rodrigueza and Chua) are not parties to the trust receipts agreements
since they are ONLY sureties x x x.[13]
In rejecting the arguments of petitioners and in holding that they (Fortune and the sureties) were jointly
and solidarily liable to Filinvest, the trial court declared:
As to the alleged non-existence of a principal obligation when the surety agreement was signed, it is
enought (sic) tostate that a guaranty may also be given as security for future debts, the amount of which is
not known (Art. 2053, New Civil Code). In the case of NARIC vs. Fojas, L-11517, promulgated April 10,
1958, it was ruled that a bond posted to secure additional credit that the principal debtor had applied for,
is not void just because the said bond was signed and filed before the additional credit was extended by
the creditor. The obligation of the sureties on future obligations of Fortune is apparent from a proviso
under the Surety Undertakings marked Exhs. B and C that the sureties agree with the plaintiff as follows:
In consideration of your entering into an arrangement with the party (Fortune) named above, x x x x by
which you may purchase or otherwise require from, and or enter into with obligor x x x trust receipt x x x

arising out of wholesale and/or retail transactions by or with obligor, the undersigned x x x absolutely,
unconditionally, and solidarilyguarantee to you x x x the full, faithful and prompt performance, payment
and discharge of any and all obligations x x x of obligor under and with respect to any and all such
contracts and any and all agreements (whether by way of guaranty or otherwise) of obligor with you x x
xnow in force or hereafter made. (Underlinings supplied).
On the matter of novation, this has already been ruled upon when this Court denied defendants Motion to
dismiss on the argument that what happened was really an assignment of credit, and not a novation of
contract, which does not require the consent of the debtors. The fact of knowledge is enough. Besides, as
explained by the plaintiff, the mother or the principal contract was the Financing Agreement, whereas the
trust receipts, the sight drafts, as well as the Deeds of assignment were only collaterals or accidental
modifications which do not extinguish the original contract by way of novation. This proposition holds
true even if the subsequent agreement would provide for more onerous terms for, at any rate, it is the
principal or mother contract that is to be followed. When the changes refer to secondary agreements and
not to the object or principal conditions of the contract, there is no novation; such changes will produce
modifications of incidental facts, but will not extinguish the original obligation (Tolentino, Commentaries
on Jurisprudence of the Civil Code of the Philippines, 1973 Edition, Vol. IV, page 367; cited in plaintiffs
Memorandum of September 6, 1985, p. 3).
On the evidence adduced by the plaintiff to show the status of defendants accounts, which took into
consideration payments by defendants made after the filing of the case, it is enough to state that a
statement was carefully prepared showing a balance of the principal obligation plus interest totalling
P1,348,033.89 as of March 31, 1985 (Exh. M).This accounting has not been traversed nor contradicted by
defendants although they had the opportunity to do so.Likewise, there was absolute silence on the part of
defendants as to the correctness of the previous statement of account made as of December 16, 1983
(referring to Exh. I), but more important, however, is that defendants received demand letters from the
plaintiff stating that, as of December 1983 (Exhs. J, K and L), this total amount of obligation was
P1,302,811,00, and yet defendants were not heard to have responded to said demand letters, let alone have
taken any exception thereto. There is such a thing as evidence by silence (Sec. 23, Rule 130, Revised
Rules of Court).[14]
The Court of Appeals, affirming the above decision of the trial court, further explained:
x x x In the case at bar, the surety undertakings in question unequivocally state that Chua and Rodrigueza
absolutely, unconditionally and solidarily guarantee to Filinvest the full, faithful and prompt performance,
payment and discharge of any and all obligations and agreements of Fortune under or with respect to any
and all such contracts and any and all other agreements (whether by way of guaranty or otherwise) of the
latter with Filinvest in force at the time of the execution of the Surety Undertakings or made thereafter.
Indeed, if Chua and Rodrigueza did not intend to guarantee all of Fortunes future obligation with
Filinvest, then they should have expressly stated in their respective surety undertakings exactly what said

surety agreements guaranteed or to which obligations of Fortune the same were intended to apply. For
another, if Chua and Rodrigueza truly believed that the surety undertakings they executed should not
cover Fortunes obligations under the AWFA, then why did they not inform Filinvest of such fact when the
latter sent them the aforementioned demand letters (Exhs. K and L) urging them to pay Fortunes liability
under the AWFA. Instead, quite uncharacteristic of persons who have just been asked to pay an obligation
to which they believe they are not liable, Chua and Rodrigueza elected or chose not to answer said
demand letters. Then, too, considering that appellant Chua is the corporate president of Fortune and a
signatory to the AWFA, he should have simply had it stated in the AWFA or in a separate document that
the Surety Undertakings do not cover Fortunes obligations in the aforementioned AWFA, trust receipts or
demand drafts.
Appellants argue that it was unfair for Filinvest to have executed the AWFA only after two (2) years from
the date of the Surety undertakings because Chua and Rodrigueza were thereby made to wait for said
number of years just to know what kind of obligation they had to guarantee.
The argument cannot hold water. In the first place, the Surety Undertakings did not provide that after a
period of time the same will lose its force and effect. In the second place, if Chua and Rodrigueza did not
want to guarantee the obligations of Fortune under the AWFA, trust receipts and demand drafts, then why
did they not simply terminate the Surety Undertakings by serving ten (10) days written notice to Filinvest
as expressly allowed in said surety agreements. It is highly plausible that the reason why the Surety
Undertakings were not terminated was because the execution of the same was part of the consideration
why Filinvest and CARCO agreed to enter into the AWFA with Fortune. [15]
The Courts Ruling
We affirm the decisions of the trial and appellate courts.
First Issue: Surety May Secure Future Obligations
The case at bench falls on all fours with Atok Finance Corporation vs. Court of Appeals [16] which
reiterated our rulings in National Rice and Corn Corporation (NARIC) vs. Court of Appeals [17] andRizal
Commercial Banking Corporation vs. Arro. [18]In Atok Finance, Sanyu Chemical as principal, and Sanyu
Trading along with individual private stockholders of Sanyu Chemical, namely, spouses Daniel and
Nenita Arrieta, Leopoldo Halili and Pablito Bermundo, as sureties, executed a continuing suretyship
agreement in favor of Atok Finance as creditor. Under the agreement, Sanyu Trading and the individual
private stockholders and officers of Sanyu Chemical jointly and severally unconditionally guarantee(d) to
Atok Finance Corporation (hereinafter called Creditor), the full, faithful and prompt payment and
discharge of any and all indebtedness of [Sanyu Chemical] x x x to the Creditor. Subsequently, Sanyu
Chemical assigned its trade receivables outstanding with a total face value of P125,871.00 to Atok
Finance in consideration of receipt of the amount ofP105,000.00. Later, additional trade receivables with
a total face value of P100,378.45 were also assigned. Due to nonpayment upon maturity, Atok Finance

commenced action against Sanyu Chemical, the Arrieta spouses, Bermundo and Halili to collect the sum
of P120,240.00 plus penalty charges due and payable. The individual private respondents contended that
the continuing suretyship agreement, being an accessory contract, was null and void since, at the time of
its execution, Sanyu Chemical had no pre-existing obligation due to Atok Finance. The trial court
rendered a decision in favor of Atok Finance and ordered defendants to pay, jointly and severally,
aforesaid amount to Atok.
On appeal, the then Intermediate Appellate Court reversed the trial court and dismissed the complaint on
the ground that there was no proof that when the suretyship agreement was entered into, there was a preexisting obligation which served as the principal obligation between the parties.Furthermore, the future
debts alluded to in Article 2053 refer to debts already existing at the time of the constitution of the
agreement but the amount thereof is unknown, unlike in the case at bar where the obligation was acquired
two years after the agreement.
We ruled then that the appellate court was in serious error. The distinction which said court sought to
make with respect to Article 2053 (that future debts referred to therein relate to debts already existing at
the time of the constitution of the agreement but the amount [of which] is unknown and not to debts not
yet incurred and existing at that time) has previously been rejected, citing the RCBCand NARIC cases. We
further said:
x x x Of course, a surety is not bound under any particular principal obligation until that principal
obligation is born. But there is no theoretical or doctrinal difficulty inherent in saying that the suretyship
agreement itself is valid and binding even before the principal obligation intended to be secured thereby is
born, any more than there would be in saying that obligations which are subject to a condition precedent
are valid and binding before the occurrence of the condition precedent.
Comprehensive or continuing surety agreements are in fact quite commonplace in present day financial
and commercial practice. A bank or financing company which anticipates entering into a series of credit
transactions with a particular company, commonly requires the projected principal debtor to execute a
continuing surety agreement along with its sureties. By executing such an agreement, the principal places
itself in a position to enter into the projected series of transactions with its creditor; with such suretyship
agreement, there would be no need to execute a separate surety contract or bond for each financing or
credit accommodation extended to the principal debtor.
In Dio vs. Court of Appeals,[19] we again had occasion to discourse on continuing guaranty/suretyship
thus:
x x x A continuing guaranty is one which is not limited to a single transaction, but which contemplates a
future course of dealing, covering a series of transactions, generally for an indefinite time or until
revoked. It is prospective in its operation and is generally intended to provide security with respect to
future transactions within certain limits, and contemplates a succession of liabilities, for which, as they

accrue, the guarantor becomes liable. Otherwise stated, a continuing guaranty is one which covers all
transactions, including those arising in the future, which are within the description or contemplation of the
contract, of guaranty, until the expiration or termination thereof. A guaranty shall be construed as
continuing when by the terms thereof it is evident that the object is to give a standing credit to the
principal debtor to be used from time to time either indefinitely or until a certain period; especially if the
right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that the
same is to secure advances to be made from time to time the guaranty will be construed to be a continuing
one.
In other jurisdictions, it has been held that the use of particular words and expressions such as payment of
any debt, any indebtedness, any deficiency, or any sum, or the guaranty of any transaction or money to be
furnished the principal debtor at any time, or on such time that the principal debtor may require, have
been construed to indicate a continuing guaranty.[20]
We have no reason to depart from our uniform ruling in the above-cited cases. The facts of the instant
case bring us to no other conclusion than that the surety undertakings executed by Chua and Rodrigueza
were continuing guaranties or suretyships covering all future obligations of Fortune Motors (Phils.)
Corporation with Filinvest Credit Corporation. This is evident from the written contract itself which
contained the words absolutely, unconditionally and solidarily guarantee(d) to Respondent Filinvest and
its affiliated and subsidiary companies the full, faithful and prompt performance, payment and discharge
of any and all obligations and agreements of Petitioner Fortune under or with respect to any and all such
contracts and any and all other agreements (whether by way of guaranty or otherwise) of the latter with
Filinvest and its affiliated and subsidiary companies now in force or hereafter made.
Moreover, Petitioner Rodrigueza and Joseph Chua knew exactly where they stood at the time they
executed their respective surety undertakings in favor of Fortune. As stated in the petition:
Before the execution of the new agreement, Edgar L. Rodrigueza and Joseph Chua were required to sign
blank surety agreements, without informing them how much amount they would be liable as sureties.
However, because of the desire of petitioners, Chua and Rodrigueza to have the cars delivered to
petitioner, Fortune, they signed the blank promissory notes.[21] (underscoring supplied)
It is obvious from the foregoing that Rodrigueza and Chua were fully aware of the business of Fortune, an
automobile dealer; Chua being the corporate president of Fortune and even a signatory to the Financial
Agreement with Filinvest.[22] Both sureties knew the purpose of the surety undertaking which they signed
and they must have had an estimate of the amount involved at that time. Their undertaking by way of the
surety contracts was critical in enabling Fortune to acquire credit facility from Filinvest and to procure
cars for resale, which was the business of Fortune. Respondent Filinvest, for its part, relied on the surety
contracts when it agreed to be the assignee of CARCO with respect to the liabilities of Fortune with
CARCO. After benefiting therefrom, petitioners cannot now impugn the validity of the surety contracts

on the ground that there was no pre-existing obligation to be guaranteed at the time said surety contracts
were executed. They cannot resort to equity to escape liability for their voluntary acts, and to heap
injustice to Filinvest, which relied on their signed word.
This is a clear case of estoppel by deed. By the acts of petitioners, Filinvest was made to believe that it
can collect from Chua and/or Rodrigueza in case of Fortunes default. Filinvest relied upon the surety
contracts when it demanded payment from the sureties of the unsettled liabilities of Fortune. A refusal to
enforce said surety contracts would virtually sanction the perpetration of fraud or injustice. [23]
Second Issue: No Novation
Neither do we find merit in the averment of petitioners that the Financing Agreement contained onerous
obligations not contemplated in the surety undertakings, thus changing the principal terms thereof and
effecting a novation.
We have ruled previously that there are only two ways to effect novation and thereby extinguish an
obligation. First, novation must be explicitly stated and declared in unequivocal terms. Novation is never
presumed. Second, the old and new obligations must be incompatible on every point.The test of
incompatibility is whether the two obligations can stand together, each one having its independent
existence. If they cannot, they are incompatible and the latter obligation novates the first. [24] Novation
must be established either by the express terms of the new agreement or by the acts of the parties clearly
demonstrating the intent to dissolve the old obligation as a consideration for the emergence of the new
one. The will to novate, whether totally or partially, must appear by express agreement of the parties, or
by their acts which are too clear and unequivocal to be mistaken. [25]
Under the surety undertakings however, the obligation of the sureties referred to absolutely,
unconditionally and solidarily guaranteeing the full, faithful and prompt performance, payment and
discharge of all obligations of Petitioner Fortune with respect to any and all contracts and other
agreements with Respondent Filinvest in force at that time or thereafter made. There were no
qualifications, conditions or reservations stated therein as to the extent of the suretyship. The Financing
Agreement, on the other hand, merely detailed the obligations of Fortune to CARCO (succeeded by
Filinvest as assignee). The allegation of novation by petitioners is, therefore, misplaced. There is no
incompatibility of obligations to speak of in the two contracts. They can stand together without conflict.
Furthermore, the parties have not performed any explicit and unequivocal act to manifest their agreement
or intention to novate their contract.Neither did the sureties object to the Financing Agreement nor try to
avoid liability thereunder at the time of its execution. As aptly discussed by the Court of Appeals:
x x x For another, if Chua and Rodrigueza truly believed that the surety undertakings they executed
should not cover Fortunes obligations under the AWFA (Financing Agreement), then why did they not
inform Filinvest of such fact when the latter sent them the aforementioned demand letters (Exhs. K and L)
urging them to pay Fortunes liability under the AWFA. Instead, quite uncharacteristic of persons who

have just been asked to pay an obligation to which they are not liable, Chua and Rodrigueza elected or
chose not to answer said demand letters. Then, too, considering that appellant Chua is the corporate
president of Fortune and a signatory to the AWFA, he should have simply had it stated in the AWFA or in
a separate document that the Surety Undertakings do not cover Fortunes obligations in the
aforementioned AWFA, trust receipts or demand drafts. [26]
Third Issue: Amount of Claim Substantiated
The contest on the correct amount of the liability of petitioners is a purely factual issue. It is an oft
repeated maxim that the jurisdiction of this Court in cases brought before it from the Court of Appeals
under Rule 45 of the Rules of Court is limited to reviewing or revising errors of law. It is not the function
of this Court to analyze or weigh evidence all over again unless there is a showing that the findings of the
lower court are totally devoid of support or are glaringly erroneous as to constitute serious abuse of
discretion. Factual findings of the Court of Appeals are conclusive on the parties and carry even more
weight when said court affirms the factual findings of the trial court. [27]
In the case at bar, the findings of the trial court and the Court of Appeals with respect to the assigned error
are based on substantial evidence which were not refuted with contrary proof by petitioners. Hence, there
is no necessity to depart from the above judicial dictum.
WHEREFORE, premises considered, the petition is DENIED and the assailed Decision of the Court of
Appeals concurring with the decision of the trial court is hereby AFFIRMED. Costs against petitioners.
SO ORDERED.

20. BPI v. IAC Acel Gaffud Dabban

In a decision dated September 3, 1984, the Intermediate Appellate Court (now Court of Appeals) in ACG.R. CV No. 69178 entitled, "Arthur A. Canlas, et al., Plaintiff-Appellees vs. Commercial Bank and Trust
Company of the Philippines, Defendant-Appellant," reduced to P105,000 the P465,000 damage-award of
the trial court to the private respondents for an error of a bank teller which resulted in the dishonor of two
small checks which the private respondents had issued against their joint current account. This petition for
review of that decision was filed by the Bank.
The respondent spouses, Arthur and Vivienne Canlas, opened a joint current account No. 210-520-73 on
April 25, 1977 in the Quezon City branch of the Commercial Bank and Trust Company of the Philippines
(CBTC) with an initial deposit of P2,250. Prior thereto, Arthur Canlas had an existing separate personal
checking account No. 210-442-41 in the same branch.
When the respondent spouses opened their joint current account, the "new accounts" teller of the bank
pulled out from the bank's files the old and existing signature card of respondent Arthur Canlas for
Current Account No. 210-442-41 for use as I D and reference. By mistake, she placed the old personal

account number of Arthur Canlas on the deposit slip for the new joint checking account of the spouses so
that the initial deposit of P2,250 for the joint checking account was miscredited to Arthur's personal
account (p. 9, Rollo). The spouses subsequently deposited other amounts in their joint account.
However, when respondent Vivienne Canlas issued a check for Pl,639.89 in April 1977 and another check
for P1,160.00 on June 1, 1977, one of the checks was dishonored by the bank for insufficient funds and a
penalty of P20 was deducted from the account in both instances. In view of the overdrawings, the bank
tried to call up the spouses at the telephone number which they had given in their application form, but
the bank could not contact them because they actually reside in Porac, Pampanga. The city address and
telephone number which they gave to the bank belonged to Mrs. Canlas' parents.
On December 15, 1977, the private respondents filed a complaint for damages against CBTC in the Court
of First Instance of Pampanga (p. 113, Rollo).
On February 27, 1978, the bank filed a motion to dismiss the complaint for improper venue. The motion
was denied.
During the pendency of the case, the Bank of the Philippine Islands (BPI) and CBTC were merged. As the
surviving corporation under the merger agreement and under Section 80 (5) of the Corporation Code of
the Philippines, BPI took over the prosecution and defense of any pending claims, actions or proceedings
by and against CBTC.
On May 5, 1981, the Regional Trial Court of Pampanga rendered a decision against BPI, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered sentencing defendant to pay the plaintiff the following:
1.

P 5,000.00 as actual damages;

2.

P 150,000.00 for plaintiff Arthur Canlas and P150,000.00 for plaintiff Vivienne S. Canlas

representing moral damages;

3.

P 150.000.00 as exemplary damages;

4.

P 10,000.00 as attorney's fees; and

5.

Costs. (p. 36, Rollo).

On appeal, the Intermediate Appellate Court deleted the actual damages and reduced the other awards.
The dispositive portion of its decision reads:
WHEREFORE, the judgment appealed from is hereby modified as follows:
1.

The award of P50,000.00 in actual damages is herewith deleted.

2.

Moral damages of P50,000.00 is awarded to plaintiffs-appellees Arthur Canlas and Vivienne S.

Canlas, not P50,000.00 each.

3.

Exemplary damages is likewise reduced to the sum of P50,000.00 and attorney's fees to

P5,000.00.
Costs against the defendants appellant. (p. 40, Rollo.)
Petitioner filed this petition for review alleging that the appellate court erred in holding that:
1.

The venue of the case had been properly laid at Pampanga in the light of private respondents'

earlier declaration that Quezon City is their true residence.

2.

The petitioner was guilty of gross negligence in the handling of private respondents' bank

account.
3.

Private respondents are entitled to the moral and exemplary damages and attorney's fees adjudged

by the respondent appellate court.

On the question of venue raised by petitioner, it is evident that personal actions may be instituted in the
Court of First Instance (now Regional Trial Court) of the province where the defendant or any of the
defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election
of the plaintiff (Section 2[b], Rule 4 of the Rules of Court). In this case, there was ample proof that the
residence of the plaintiffs is B. Sacan, Porac, Pampanga (p. 117, Rollo). The city address of Mrs. Canlas'
parents was placed by the private respondents in their application for a joint checking account, at the
suggestion of the new accounts teller, presumably to facilitate mailing of the bank statements and
communicating with the private respondents in case any problems should arise involving the account. No
waiver of their provincial residence for purposes of determining the venue of an action against the bank
may be inferred from the so-called "misrepresentation" of their true residence.
The appellate court based its award of moral and exemplary damages, and attorney's fees on its finding
that the mistake committed by the new accounts teller of the petitioner constituted "serious" negligence
(p. 38, Rollo). Said court further stressed that it cannot absolve the petitioner from liability for damages to
the private respondents, even on the assumption of an honest mistake on its part, because of the
embarrassment that even an honest mistake can cause its depositors (p. 31, Rollo).
There is no merit in petitioner's argument that it should not be considered negligent, much less held liable
for damages on account of the inadvertence of its bank employee for Article 1173 of the Civil Code only
requires it to exercise the diligence of a good father of family.
In Simex International (Manila), Inc. vs. Court of Appeals (183 SCRA 360, 367), this Court stressed the
fiduciary nature of the relationship between a bank and its depositors and the extent of diligence expected
of it in handling the accounts entrusted to its care.
In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such
account consists only of a few hundred pesos or of millions. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the

account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit,
confident that the bank will deliver it as and to whomever he directs. A blunder on the part of the bank,
such as the dishonor of a check without good reason, can cause the depositor not a little embarrassment if
not also financial loss and perhaps even civil and criminal litigation.
The point is that as a business affected with public interest and because of the nature of its functions, the
bank is under obligation to treat the accounts of its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship. . . .
The bank is not expected to be infallible but, as correctly observed by respondent Appellate Court, in this
instance, it must bear the blame for not discovering the mistake of its teller despite the established
procedure requiring the papers and bank books to pass through a battery of bank personnel whose duty it
is to check and countercheck them for possible errors. Apparently, the officials and employees tasked to
do that did not perform their duties with due care, as may be gathered from the testimony of the bank's
lone witness, Antonio Enciso, who casually declared that "the approving officer does not have to see the
account numbers and all those things.Those are very petty things for the approving manager to look into"
(p. 78, Record on Appeal). Unfortunately, it was a "petty thing," like the incorrect account number that the
bank teller wrote on the initial deposit slip for the newly-opened joint current account of the Canlas
spouses, that sparked this half-a-million-peso damage suit against the bank.
While the bank's negligence may not have been attended with malice and bad faith, nevertheless, it
caused serious anxiety, embarrassment and humiliation to the private respondents for which they are
entitled to recover reasonable moral damages (American Express International, Inc. vs. IAC, 167 SCRA
209). The award of reasonable attorney's fees is proper for the private respondents were compelled to
litigate to protect their interest (Art. 2208, Civil Code). However, the absence of malice and bad faith
renders the award of exemplary damages improper (Globe Mackay Cable and Radio Corp. vs. Court of
Appeals, 176 SCRA 778).
WHEREFORE, the petition for review is granted. The appealed decision is MODIFIED by deleting the
award of exemplary damages to the private respondents. In all other respects, the decision of the
Intermediate Appellate Court, now Court of Appeals, is AFFIRMED. No costs.
SO ORDERED.

21. Young Auto Supply v. CA Patricia DL Diaz

Petitioners seek to set aside the decision of respondent Court of Appeals in CA-G.R. SP No. 25237, which
reversed the Order dated February 8, 1991 issued by the Regional Trial Court, Branch 11, Cebu City in

Civil Case No. CEB 6967. The order of the trial court denied the motion to dismiss filed by respondent
George C. Roxas of the complaint for collection filed by petitioners.
It appears that sometime on October 28, 1987, Young Auto Supply Co. Inc. (YASCO) represented by
Nemesio Garcia, its president, Nelson Garcia and Vicente Sy, sold all of their shares of stock in
Consolidated Marketing & Development Corporation (CMDC) to Roxas. The purchase price was
P8,000,000.00 payable as follows: a downpayment of P4,000,000.00 and the balance of P4,000,000.00 in
four post dated checks of P1,000,000.00 each.
Immediately after the execution of the agreement, Roxas took full control of the four markets of CMDC.
However, the vendors held on to the stock certificates of CMDC as security pending full payment of the
balance of the purchase price.
The first check of P4,000,000.00, representing the down-payment, was honored by the drawee bank but
the four other checks representing the balance of P4,000,000.00 were dishonored. In the meantime, Roxas
sold one of the markets to a third party. Out of the proceeds of the sale, YASCO received P600,000.00,
leaving a balance of P3,400,000.00 (Rollo, p. 176).
Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of the sale
of the CMDC shares to Nemesio Garcia.
On June 10, 1988, petitioners filed a complaint against Roxas in the Regional Trial Court, Branch 11,
Cebu City, praying that Roxas be ordered to pay petitioners the sum of P3,400,00.00 or that full control of
the three markets be turned over to YASCO and Garcia. The complaint also prayed for the forfeiture of
the partial payment of P4,600,000.00 and the payment of attorney's fees and costs (Rollo, p. 290).
Roxas filed two motions for extension of time to submit his answer. But despite said motion, he failed to
do so causing petitioners to file a motion to have him declared in default. Roxas then filed, through a new
counsel, a third motion for extension of time to submit a responsive pleading.
On August 19, 1988, the trial court declared Roxas in default. The order of default was, however, lifted
upon motion of Roxas.
On August 22, 1988, Roxas filed a motion to dismiss on the grounds that:
1.

The complaint did not state a cause of action due to non-joinder of indispensable parties;

2.

The claim or demand set forth in the complaint had been waived, abandoned or otherwise

extinguished; and
3.

The venue was improperly laid (Rollo, p. 299).

After a hearing, wherein testimonial and documentary evidence were presented by both parties, the trial
court in an Order dated February 8, 1991 denied Roxas' motion to dismiss. After receiving said order,
Roxas filed another motion for extension of time to submit his answer. He also filed a motion for

reconsideration, which the trial court denied in its Order dated April 10, 1991 for being pro-forma (Rollo,
p. 17). Roxas was again declared in default, on the ground that his motion for reconsideration did not toll
the running of the period to file his answer.
On May 3, 1991, Roxas filed an unverified Motion to Lift the Order of Default which was not
accompanied with the required affidavit or merit. But without waiting for the resolution of the motion, he
filed a petition for certiorariwith the Court of Appeals.
The Court of Appeals sustained the findings of the trial court with regard to the first two grounds raised in
the motion to dismiss but ordered the dismissal of the complaint on the ground of improper venue (Rollo,
p. 49).
A subsequent motion for reconsideration by petitioner was to no avail.
Petitioners now come before us, alleging that the Court of Appeals
erred in:
1.

holding the venue should be in Pasay City, and not in Cebu City (where both petitioners/plaintiffs

are residents;
2.

not finding that Roxas is estopped from questioning the choice of venue (Rollo, p. 19).

The petition is meritorious.

In holding that the venue was improperly laid in Cebu City, the Court of Appeals relied on the address of
YASCO, as appearing in the Deed of Sale dated October 28, 1987, which is "No. 1708 Dominga Street,
Pasay City." This was the same address written in YASCO's letters and several commercial documents in
the possession of Roxas (Decision, p. 12; Rollo, p. 48).
In the case of Garcia, the Court of Appeals said that he gave Pasay City as his address in three letters
which he sent to Roxas' brothers and sisters (Decision, p. 12; Rollo, p. 47). The appellate court held that
Roxas was led by petitioners to believe that their residence is in Pasay City and that he had relied upon
those representations (Decision, p. 12, Rollo, p. 47).
The Court of Appeals erred in holding that the venue was improperly laid in Cebu City.
In the Regional Trial Courts, all personal actions are commenced and tried in the province or city where
the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff [Sec. 2(b) Rule 4, Revised Rules of Court].
There are two plaintiffs in the case at bench: a natural person and a domestic corporation. Both plaintiffs
aver in their complaint that they are residents of Cebu City, thus:
1.1.

Plaintiff Young Auto Supply Co., Inc., ("YASCO") is a domestic corporation duly organized and

existing under Philippine laws with principal place of business at M. J. Cuenco Avenue, Cebu City. It also
has a branch office at 1708 Dominga Street, Pasay City, Metro Manila.

Plaintiff Nemesio Garcia is of legal age, married, Filipino citizen and with business address at Young
Auto Supply Co., Inc., M. J. Cuenco Avenue, Cebu City. . . . (Complaint, p. 1; Rollo, p. 81).
The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:
THIRD That the place where the principal office of the corporation is to be established or located is at
Cebu City, Philippines (as amended on December 20, 1980 and further amended on December 20, 1984)
(Rollo, p. 273).
A corporation has no residence in the same sense in which this term is applied to a natural person. But for
practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal
office is located as stated in the articles of incorporation (Cohen v. Benguet Commercial Co., Ltd., 34
Phil. 256 [1916] Clavecilla Radio System v. Antillon, 19 SCRA 379 [1967]). The Corporation Code
precisely requires each corporation to specify in its articles of incorporation the "place where the principal
office of the corporation is to be located which must be within the Philippines" (Sec. 14 [3]). The purpose
of this requirement is to fix the residence of a corporation in a definite place, instead of allowing it to be
ambulatory.
In Clavencilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why actions cannot
be filed against a corporation in any place where the corporation maintains its branch offices. The Court
ruled that to allow an action to be instituted in any place where the corporation has branch offices, would
create confusion and work untold inconvenience to said entity. By the same token, a corporation cannot
be allowed to file personal actions in a place other than its principal place of business unless such a place
is also the residence of a co-plaintiff or a defendant.
If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground that its
principal place of business was in Cebu City, Roxas could argue that YASCO was in estoppel because it
misled Roxas to believe that Pasay City was its principal place of business. But this is not the case before
us.
With the finding that the residence of YASCO for purposes of venue is in Cebu City, where its principal
place of business is located, it becomes unnecessary to decide whether Garcia is also a resident of Cebu
City and whether Roxas was in estoppel from questioning the choice of Cebu City as the venue.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals appealed from is SET
ASIDE and the Order dated February 8, 1991 of the Regional Trial Court is REINSTATED.
SO ORDERED.

22. Phil Banking Corp. v. Tensuan Mich Bernardo

In this Petition for Review on Certiorari, petitioner asks us to review and set aside the Order of Judge
Salvador A. Tensuan dated 3 August 1992, dismissing petitioner's complaint in Civil Case No. 91-2220
entitled "Philippine Banking Corporation vs. Circle Financial Corporation, et al."
Petitioner Philippine Banking Corporation (hereafter "Bank") is a commercial banking corporation with
principal office at Makati, Metro Manila. Petitioner Bank instituted a complaint for collection of a sum of
money, with a prayer for preliminary attachment, at the Regional Trial Court of Makati. It appears from
the allegations of the Bank's complaint that respondent Circle Financial Co. (hereafter "Circle"),
sometime in 1983 and 1984, through its representatives, obtained several loans aggregating
P1,000,000.00 from petitioner. Respondent Circle, for value received, delivered to petitioner Bank four
(4) promissory notes, each of which contained the stipulation that:
I/We hereby expressly submit to the jurisdiction of the courts of Valenzuela any legal action which may
arise out of this promissory note.
As security for the re-payment by respondent Circle of the sums loaned by petitioner Bank, eight (8)
individuals, who were impleaded as defendants in the complaint namely, Avelino Deato, Miguel
Violago, Benjamin Santiago, Socorro Gomez, Nerissa Gloria, Filemon Marquez, Domingo Santiago and
Hilario Lopez executed a Continuing Surety Agreement and undertook to
pay jointly and severally respondent Circle's obligations. Only five (5) out of eight (8) individual obligors
are respondents in present case, namely: Domingo Santiago, Hilario Lopez, Avelino Deato, Benjamin P.
Santiago and Socorro Gomez.
On their due dates, Circle failed to pay its obligations under the promissory notes. Thereupon, petitioner
Bank demanded payment from the eight (8) individual sureties conformably with their promises
contained in the Continuing Surety Agreement; the individual obligors, however, also failed to pay.
Petitioner moved for issuance of a writ of preliminary attachment, alleging that respondent Circle had
become insolvent and had been placed under receivership by the Central Bank. The trial judge granted the
motion and issued a writ of preliminary attachment. The sheriff's return indicated, however, that no
properties belonging to the respondent Circle and the individual obligors could be found. Per sheriff's
return, summons was served upon Domingo Santiago, 1 Hilario P. Lopez, 2 Avelino Deato, 3 Benjamin P.
Santiago, 4 and Socorro Gomez. 5 The sheriff failed to serve summons on (a) Miguel Violago, who had
died; (b) Nerissa T. Gloria 6 and Filemon Marquez, 7 whose whereabouts were unknown; and (c) Circle,
which had ceased to engage in business at the address given by petitioner and could not be located.
A motion to dismiss was filed by the respondents (Circle and the five [5] individual sureties served with
summons) and averred that the venue of the action was improperly laid since an agreement had fixed the
venue of actions arising from the promissory notes in Valenzuela, Metro Manila, only. Respondents called
the trial court's attention to the stipulation contained in the promissory note, quoted in limine.

Acting upon respondent's motion, respondent Judge Tensuan issued the challenged Order which read as
follows:
Acting on defendant's motion to dismiss on grounds of improper venue in relation with actionable
promissory notes which stipulate that the parties "expressly submit to the jurisdiction of the Courts of
Valenzuela, Metro Manila any legal action which may arise", and,
Finding said motion to be impressed with merit consistent with
Sec. 13, Rule 14 of the Rules of Court as well as in line with the doctrinal rule in Bautista vs. Hon. Juan
de Borja, et al. (18 SCRA 474) that the proper venue for an action is that stipulated in a document "in
case of any litigation herefrom or in connection herewith" upon a rationale that had the parties intended to
reserve the right to choose venue under Section 2 (b), Rule 4 of the Rules of Court, such reservation
should have been reflected in the document as against the rationale inPolytrade Corporation vs. Blanco
(30 SCRA 187) which should allow choice of venue where an actionable document does not set forth
qualifying or restrictive words in point, and
In order to more clearly define the parameters of the rule on proper venue vis-a-vis a clear perception that
a stipulation to "expressly submit to the jurisdiction of the Courts of Valenzuela, Metro Manila" amount
to unequivocal agreement to sue and be sued in Valenzuela, Metro Manila.
WHEREFORE, premises considered and finding the motion to be meritorious, same is hereby granted
and the above-entitled case is accordingly dismissed. Without pronouncement as to costs.
SO ORDERED. 8
Petitioner moved for reconsideration of the above Order of the trial court, without success.
Hence, this Petition.
We consider that the Petition is meritorious.
It is settled in this jurisdiction that the parties, by written agreement, may change or transfer the venue of
an action from one province to another. 9 We have many times sustained the validity and enforceability of
contractual stipulations concerning venue, it is, of course, the tenor of their agreement which is of critical
relevance. The relevant task, in other words, is determining the intent of the parties as manifested in the
words employed by them and, where such words are less than clear, in other recognized indicators of the
will of the contracting parties.
Petitioner Bank contends that the stipulation contained in the promissory notes is merely an agreement to
add the courts of Valenzuela to the tribunals to which the parties may resort. Petitioner thus insists that the
venue stipulation set out in the notes did not restrict or limit the permissible venue of actions arising out
of those notes to the courts of Valenzuela, to the exclusion of all the other courts recourse to any one of
which is authorized or permitted under the Rules of Court. Thus, venue was properly laid by petitioner
Bank in the place where its principal offices are located: i.e., Makati, Metropolitan Manila.

Private respondents, in opposition, aver that the words used in the stipulation here involved are clear and
unambiguous. A promise to submit to the jurisdiction of a specific court, without an express reservation of
the right to resort to one or more of the tribunals otherwise accessible under the Rules of Court, is an
agreement definitely fixing the permissible venue in only one place, i.e., Valenzuela, to the exclusion of
other competent courts.
A careful reading of the terms of the stipulation "I/We hereby expressly submit to the jurisdiction of
the courts of Valenzuela any legal action which may arise out of this promissory note" shows that the
stipulation does not require the laying of venue in Valenzuela exclusively or mandatorily. The plain or
ordinary import of the stipulation is the authorizing of, or permission to bring, suit in Valenzuela; there is
not the slightest indication of an intent to bar suit in other competent courts.
Permissive stipulations like the one here considered have invariably received judicial approval and we
have declared that either of the parties is authorized to lay venue of an action in the court named in the
stipulation. The stipulation her does not purport to deprive either party of it right to elect, or option to
have resort to, another competent court as expressly permitted by Section 2(b) of Rule 4 of the Rules of
Court, should such party choose to initiate a suit. The stipulation here merely operated to confer or
confirm a right upon a party to elect recourse to the courts of Valenzuela or, alternatively, to go before any
of the tribunals envisaged by the rules on venue, i.e., the courts of Makati, Quezon City and Bulacan. 10
In principle, the stipulation on venue here involved must be distinguished from stipulations which purport
torequire or compel the parties to lay venue of an action in a specified place, and in that particular place
only. The latter
type of venue stipulation must clearly indicate, through qualifying and restrictive words, that the parties
deliberately intended to exclude causes or actions from the operation of the ordinary permissive rules on
venue,11 and that they intended contractually to designate a specific venue to the exclusion of any other
court also competent and accessible to the parties under the ordinary rules on the venue of actions.
Stipulations of this exclusionary nature may, under certain circumstances, be characterized as
unreasonable or as contrary to public policy 12 and, accordingly, not judicially enforceable.
In practice, the task, as noted earlier, of this Court when confronted with issues of this kind is always
basically that of contract interpretation. In the case at bar, neither qualifying nor restrictive words (e.g.,
"must," "only" or "exclusively") were employed which could yield an intent on the part of the parties
mandatorily to restrict the venue of actions arising out of the promissory notes to the courts of Valenzuela
only. Private respondents suggest that the use of words "any legal action" expressed a supposed
agreement to bar actions before any court other than a Valenzuela court. We do not agree, for we see no
necessary or customary connection between the words "any legal action" and an intent strictly to limit
permissible venue to the Valenzuela courts. Intent so to establish an inflexible restriction of otherwise
permissible venue to one single place is not lightly to be presumed or inferred from stipulations which,

like that here before us, include no qualifying or exclusionary terms. Express reservation of the right to
elect venue under the ordinary rules was, accordingly, unnecessary in the case at bar.
Such is the thrust of the great bulk of the caselaw of this Court where this issue was directly raised and
discussed.
In Polytrade Corporation v. Blanco, 13 the stipulation on venue there involved read:
The parties agree to sue and be sued in the courts of Manila
The Court, in upholding that stipulation and ruling that venue had been properly laid in the then Court of
First Instance of Bulacan (the place of defendant's residence), speaking through Mr. Justice Sanchez, said:
. . . An accurate reading, however, of the stipulation, "The parties agree to sue and be sued in the Courts
of Manila," does not preclude the filing of suits in the residence of plaintiff or defendant. The plain
meaning is that the parties merely consented to be sued in Manila. Qualifying or restrictive words which
would indicate that Manila and Manila alone is the venue are totally absent therefrom. We cannot read
into that clause that plaintiff and defendant bound themselves to file suits with respect to the last two
transactions in question only or exclusively in Manila. For, that agreement did not change or transfer
venue. It simply is permissive. The parties solely agreed to add the courts of Manila as tribunals to which
they may resort. They did not waive their right to pursue remedy in the courts specifically mentioned in
Section 2 (b) of Rule 4. Renuntiatio non praesumitir.14 (Emphasis supplied)
In Nicolas v. Reparations Commission, 15 the stipulation on venue provided that:
All legal actions arising out of this contract . . . may be brought in and submitted to the jurisdiction of the
proper courts in the City of Manila. 16
This Court read the above stipulation as merely permissive, relying upon and reinforcing Polytrade:
. . . the venue in personal actions is fixed for the convenience of the plaintiff and his witnesses and to
promote the ends of justice. We cannot conceive how the interests of justice may be served by confining
the situs of the action to Manila, considering that the residences or offices of all the parties, including the
situs of the acts sought to be restrained or required to be done, are all within the territorial jurisdiction of
Rizal.
While the parties have agreed to submit their dispute to the jurisdiction of the Manila courts, there is
nothing in the language used . . . which clearly shows that the intention of the parties was to limit the
venue of the action to the City of Manila only. Such agreements should be construed reasonably and
should not be applied in such a manner that it would work more to the inconvenience of the parties
without promoting the ends of justice. 17 (Emphasis supplied)
In Lamis Enterprises v. Lagamon, 18 the promissory note sued on had the following stipulation:
In case of litigation, jurisdiction shall be vested in the courts of Davao City. 19

The collection suit was instituted in the then Court of First Instance of Tagum, Davao. The Supreme Court
rejected the defense of improper venue and held:
. . . it is alleged that the proper venue for Civil Case No. 1395 should be Davao City where the plaintiff
resides and as stipulated in the promissory note dated February 26, 1979 and in the chattel mortgage dated
February 27, 1979. However, the respondent judge found that Maningo has not only legal residence but
also physical and actual residence in Busaon, Tagum, Davao and we are not inclined to disturb this
finding. Anent the claim that Davao City had been stipulated as the venue, suffice it to say that a
stipulation as to venue does not preclude the filing of suits in the residence of plaintiff or defendant under
Section 2(b), Rule 4, Rules of Court, in the absence of qualifying or restrictive words in the agreement
which would indicate that the place named is the only venue agreed upon by the parties . The stipulation
did not deprive Maningo of his right to pursue remedy in the court specifically mentioned in Section 2(b)
of Rule 4, Rules of Courts, Renuntiatio non praesumitir. . . . 20 (Emphasis supplied)
In Western Minolco v. Court of Appeals, 21 the clause on venue read:
The parties stipulate that the venue of the actions referred to in Section 12.01 [Article XII of the
Agreement] shall be in the City of Manila.
The initial action was commenced in the Court of First Instance of Baguio and Benguet. This Court took
the occasion to reiterate once more the Polytrade doctrine:
. . . In any event, it is not entirely amiss to restate the doctrine that stipulations in a contract, which specify
a definite place for the institution of an action arising in connection therewith, do not, as a rule,
supersede the general rules on the matter set out in Rule 4 of the Rules of Court, but should be construed
merely as an agreement on an additional forum, not as limiting venue to the specified place. 22 (Emphasis
supplied)
It is not necessary top pretend that the decisions of the Supreme Court have been absolutely consistent in
this regard. There have been a few decisions notably Bautista v. de Borja 23 and Hoechst Philippines v.
Torres

24

which are not easy to reconcile with the line of cases beginning with Polytrade discussed

above. It is useful therefore to make clear that to the extent Bautista and Hoechst Philippines are
inconsistent with Polytrade (an en banc decision later in time thanBautista) and subsequent cases
reiterating Polytrade, Bautista and Hoechst Philippines have been rendered obsolete by thePolytrade line
of cases.
We note, finally, that no one of the private respondents has claimed to have been put to undue hardship or
inconvenience as a result of the institution of the action in Makati. Venue relates to the trial and touches
more upon the convenience of the parties rather than upon the substance or merits of the
case. 25

WHEREFORE, the Petition for Review on Certiorari is hereby GRANTED DUE COURSE and the
Orders dated 3 August 1992 and 28 August 1992 of public respondent Judge Salvador S. Tensuan are
hereby REVERSED and SET ASIDE. The case is hereby REMANDED to the court of origin for
resolution on the merits, with all deliberate dispatch. No pronouncements as to costs.

Rule 6-7
1. Far East Marble v. CA Dea Ballesteros
This has reference to a petition for review by certiorari seeking the reversal of the decision of
the Court of Appeals dated June 26, 1990, in CA-G.R. CV No. 14404 (Bellosillo (P), Marigomen,
Sempio-Diy, JJ.) which set aside the order of the Regional Trial Court of the National Capital
Judicial Region (Manila, Branch XIV), dated June 1, 1987 and remanded the case to the court a
quo for further proceedings on the grounds that the complaint for foreclosure of chattel
mortgage with replevin had not prescribed and that, there being a cause of action, further
proceedings, including the resolution of the motion for summary judgment may be pursued.
The antecedent facts of the case may be chronicled as follows:
On February 5, 1987, herein respondent Bank of the Philippines Islands (BPI) filed a complaint
for foreclosure of chattel mortgage with replevin against petitioner Far East Marble (Phils.), Inc.
(Far East), Ramon A. Tabuena and Luis R. Tabuena, Jr. which was docketed as Civil Case No.
87-39345 of Branch XIV of the Regional Trial Court of the National Capital Judicial Region
stationed in Manila.
The complaint pertinently alleged:
FIRST CAUSE OF ACTION AGAINST FAR EAST
2.

That on various dates and for valuable consideration, the defendant Far East received

from Commercial Bank and Trust Company . . . now merged with and into the plaintiff bank . . .
several loans evidenced by promissory notes executed by said Far East, photo copies of which
are attached hereto and made integral parts hereof as Annexes A, B and C.
3.

That said promissory notes . . . .have long matured but despite repeated requests and

demands for payment thereof with interests and related charges due, Far East has failed and
refused to pay. The account due on said promissory notes with interests and related charges as
of 10 September 1986 is P4,471,854.32 itemized in a statement of account, copy of which is
attached hereto and made a part hereof as Annex D
4.

That because of Far East's failure and refusal in bad faith to pay its long past due

obligations under the promissory notes above alleged, plaintiff was constrained to file this suit . .
.

SECOND CAUSE OF ACTION AGAINST FAR EAST

6.

That on various dates and for valuable consideration, the defendant Far East received

from and was extended by . . . plaintiff

Bank . . . credit facilities in the form of Trust Receipts, photo copies of which are hereto attached
and made integral parts hereof as Annexes E, F, G, H, I and J.
7.

That said Trust Receipts . . . have long matured and despite repeated requests and

demands for payment thereof with interests and related charges due Far East has failed and
refused to pay. The amount due on said Trust Receipts with interests and related charges as of
10 September 1986 is P2,170,476.62 as itemized in a statement of account, copy of which is
attached hereto and made an integral part hereof as
Annex K.
8.

That because of far East's failure and refusal to pay its long past due obligations under

the Trust Receipts above alleged, plaintiff was constrained to file this suit . . .
xxx
10.

xxx

xxx

That in September 1976 Far East executed in favor of . . . plaintiff Bank . . . a Chattel

Mortgage, photocopy of which is attached hereto and made an integral part hereof as Annex L,
to secure the payment of its loan obligations including interests and related charges. . .
xxx

xxx

xxx

CAUSE OF ACTION AGAINST INDIVIDUAL DEFENDANTS RAMON A. TABUENA AND LUIS

R. TABUENA, JR.
13.

That in September 1976, defendants Ramon A. Tabuena and Luis R. Tabuena, Jr.

executed in favor of . . . plaintiff Bank . . . a "continuing guaranty" photocopy of which is

attached hereto and made a part hereof as Annex M, whereby they bind themselves, jointly and
severally, to answer for the loan obligations to the Bank of defendant Far East.
14.

That despite requests and demands for their payment of Far East's long past due

accounts, said defendants Ramon A. Tabuena and Luis R. Tabuena, Jr. have failed and refused
to pay said Far East accounts and have already defaulted in their solidary obligation under said
"continuing Guaranty."
15.

That because of the failure and refusal of defendants Ramon A. Tabuena and Luis R.

Tabuena, Jr. in bad faith to pay Far East's past due accounts under their solidary obligation
stipulated in said "Continuing Guaranty,". . . plaintiff has been constrained to file suit against
them . . .
(pp. 32-36, Rollo.)

On March 10, 1987, Far East filed an answer with compulsory counterclaim admitting the
genuineness and due execution of the promissory notes attached as Annexes A, B, and C to the
complaint, but alleging further that said notes became due and demandable on November 19,
1976, respectively. On the basis of the maturity dates of the notes, Far East thereupon raised
the affirmative defenses of prescription and lack of cause of action as it denied the allegation of
the complaint that BPI had made previous repeated requests and demands for payment. Far
East claimed that during the more than 10 years which elapsed from the dates of maturity of
said obligations up to the time the action for foreclosure of the chattel mortgage securing said
obligations was filed, it had not received from BPI or its predecessor any demand for payment
and thus, it had "labored under the belief that they [the obligations] have already been written
off" in the books of BPI. Moreover, Far East denied the genuineness and due execution of the
trust receipts and of the Statement of Account (pp. 78-79, Rollo). A motion to hear affirmative
defenses was attached to the answer.
On March 16, 1987, BPI filed an opposition to the motion to hear affirmative defenses, alleging
that its cause of action against Far East have not prescribed, since within 10 years from the time
its cause of action accrued, various written extrajudicial demands (attached thereto as Annexes
"A" and
"A-1") were sent by BPI and received by Far East. Moreover, BPI offered several written
documents whereby Far East supposedly acknowledged its debt to BPI (Annexes "B" to "B-6).
Withal, BPI maintained, the ten-years prescriptive period to enforce its written contract had not
only been interrupted, but was renewed.
On the same date, BPI filed a motion for summary judgment on the ground that since Far East
had admitted the genuineness and due execution of the promissory notes and the deed of
chattel mortgage annexed to its complaint, there was no genuine issue as to any material fact,
thus entitling BPI to a favorable judgment as a matter of law in regard to its causes of action and
on its right to foreclose the chattel mortgage.
On June 1, 1987, the trial court issued an order to the following effect:
WHEREFORE, the Court issues this Order:
1 Dismissing the complaint against the defendant Far East Marble (Phils.) Inc. for lack of
cause of action and on grounds of pre[s]cription:
2 Denying for lack of merit the Motion for Summary Judgment and the Supplemental Motion
for Summary Judgment;
3 Striking off from the records the order of March 6, 1987 and recalling the writ of replevin
issued by this Court, and dismissing all the contempt charges;

4 Ordering the Sheriff to desist permanently from enforcing the writ of seizure and to return
all the property seized by him under the Writ of Replevin, to the defendant Far East Marble
(Phils.) Inc. immediately from receipt of a copy of this order, and in case of his failure to do so,
the value thereof shall be charged against the replevin bond. (pp. 89-90, Rollo.)
An appeal therefrom was forthwith interposed by BPI, assailing the findings of the trial court with
respect to its finding that BPI's cause of action has prescribed and the consequent denial of the
motion for summary judgment.
On June 26, 1990, the Court of Appeals rendered a decision setting aside the June 1, 1987
order of the court of origin and remanding the case to said court for further proceedings,
"including the resolution anew of plaintiff's motion for summary judgment . . ., reception of the
evidence of the parties and, thereafter, to decide the case as the facts may warrant." (pp. 98-99,
Rollo.)
Hence, the instant petition for review on certiorari filed by Far East, anchored on the following
assigned errors:
I
THE COURT OF APPEALS ERRED WHEN IT DISREGARDED THE FINDINGS OF THE TRIAL
COURT THAT PRESCRIPTION HAS SET IN OBLIVIOUS OF THE FACT THAT THIS FINDING
WAS REACHED AFTER DUE HEARING.
II
THE COURT OF APPEALS GRAVELY ERRED IN RULING FOR A REOPENING OF THE
TRIAL FOR THE RECEPTION OF EVIDENCE ON BOTH ISSUES OF PRESCRIPTION AND
SUMMARY JUDGMENT WHEN THESE WERE ALREADY TRIED AND WEIGHED BY THE
TRIAL COURT.
III
THE COURT OF APPEALS ERRED IN ASSUMING JURISDICTION OVER THE CASE
CONSIDERING THAT THE ISSUES RAISED THEREIN INVOLVE PURE QUESTIONS OF
LAW. (p. 14, Rollo.)
The issue of jurisdiction being basis, we shall endeavor to dispose of it ahead of the other topics
raised by petitioners
Petitioner Far East maintains the position that the Court of Appeals stepped beyond the limits of
its authority when it assumed jurisdiction over the appeal filed by BPI inasmuch as said appeal
raised only the pure questions of law or whether or not the trial court erred: (1) in dismissing
BPI's complaint for lack of cause of action; (2) in finding that BPI's cause of action had
prescribed; and (3) in ruling that BPI is not entitled to summary judgment on its causes of action

against Far East. Consequently, Far East contends, BPI should have taken its case directly to
this Court.
There is no dispute with respect to the fact that when an appeal raises only pure questions of
law, it is only this Court which has jurisdiction to entertain the same (Article VIII, Section 5 (2)
(e), 1987 Constitution; Rule 45, Rules of Court; see also Santos, Jr. vs. Court of Appeals, 152
SCRA 378 [1987]). On the other hand, appeals involving both questions of law and fact fall
within the exclusive appellate jurisdiction of the Court of Appeals. At this point, there seems to
be a need to distinguish a question of law from a question of fact.
It has been held in a number of cases (Medina vs. Asistio, Jr., 191 SCRA 218 [1990]; Gan vs.
Licup Design Group, Inc., G.R. NO. 94264, July 24, 1990, En Banc, Minute Resolution; Pilar
Development Corp. vs. Intermediate Appellate Court, et al., 146 SCRA 215 [1986]; Ramos vs.
Pepsi-Cola Bottling Co., 19 SCRA 289 [1967]; Consolidated Mines, Inc. vs. Court of Tax
Appeals, et al., 58 SCRA 618 [1974]), that there is a "question of law" when there is doubt or
difference of opinion as to what the law is on certain state of facts and which does not call for an
examination of the probative value of the evidence presented by the parties-litigants. On the
other hand, there is a "question of fact" when the doubt or controversy arises as to the truth or
falsity of the alleged facts. Simply put, when there is no dispute as to fact, the question of
whether or not the conclusion drawn therefrom is correct is a question of law.
In the case at bar, BPI alleged in its complaint (Rollo, p. 42) that on various dates and for
valuable consideration, it extended to Far East several loans, evidenced by promissory notes,
and credit facilities in the form of trust receipts, and that despite repeated requests and
demands for payment thereof, Far East had failed and refused to pay. Thus BPI sought
foreclosure of the chattel mortgage securing such indebtedness.
In its answer (Rollo, p. 78), Far East admitted the genuineness and due execution of the
promissory notes involved in the case, but denied BPI's allegation that repeated demands for
payment were made by BPI on it. Far East then raised the affirmative defenses of prescription
and lack of cause of action, arguing that since the promissory notes matured in 1976 while BPI
filed its action to foreclose the chattel mortgage only in 1987 (or more than 10 years from the
time its cause of action accrued), and there being no demand for payment which would interrupt
the period of prescription for instituting said action, BPI's claims have prescribed.
BPI, however, countered that its allegation of repeated demands on Far East for payment
sufficiently stated a cause of action; that within ten years from the time its cause of action
accrued in 1976, it sent written extrajudicial demands on Far East requesting payment of its due
and

outstanding

obligations;

that

within

that

10-years

period,

it

received

written

acknowledgments of debt from Far East; and, that these demands for payment and

acknowledgments of debt effectively interrupted and renewed the prescriptive period. Worth
noting is the fact that the acknowledgment of debt and the demands for payment, including the
affidavits of BPI's counsel who prepared the demand letter and that of BPI's messenger who
allegedly personally delivered said letters to Far East were duly annexed to BPI's pleadings.
From the foregoing exchange of pleading, the conflicting allegations of fact by the contending
parties sprung forth. It is thus quite obvious that the controversy centered on, and the doubt
arose with respect to, the very existence of previous demands for payment allegedly made by
BPI on petitioner Far East, receipt of which was denied by the latter. This dispute or controversy
inevitably raised a question of fact. Such being the case, the appeal taken by BPI to the Court of
Appeals was proper.
We now come to petitioner's first two assigned errors.
The trial court's finding that BPI's claims due to prescription, can no longer prosper, is
inextricably connected with, and underpinned by, its other conclusion that BPI's allegation that it
made "repeated requests and demands for payment" is not sufficient to state a cause of action.
Moreover, in its questioned Order (Rollo, p. 88) dated June 1, 1987, the trial court held that:
Apart from the fact that the complaint failed to allege that the period of prescription was
interrupted, the phrase "repeated requests and demands for payment" is vague and incomplete
as to establish in the minds of the defendant, or to enable the Court to draw a conclusion, that
demands or acknowledgment [of debt] were made that could have interrupted the period of
prescription. (p. 88,Rollo.).
Seemingly, therefore, the trial court believed that the interruption of the prescriptive period to
institute an action is an ULTIMATE FACT which had to be expressly and indispensably pleaded
by BPI in its complaint, and that failure to so alleged such circumstance is fatal to BPI's cause of
action.
We believe and hold otherwise.
Section 3 of Rule 6 state that a "complaint is a concise statement of the ultimate facts
constituting the plaintiff's cause or causes of action." Further elaborating thereon, Section 1 of
Rule 8 declares that every pleading, including, of course, a complaint, "shall contain in a
methodical and logical form, a plain, concise and direct statement of the ultimate facts . . .
omitting the statement of mere evidentiary facts." "Ultimate facts" are the essential and
substantial facts which either form the basis of the primary right and duty or which directly make
up the wrongful acts or omissions of the defendant (Tantuico, Jr. vs. Republic of the Phil., et al.,
204 SCRA 428 [1991]), while "evidentiary facts" are those which tend to prove or establish said
ultimate facts.

What then are the ultimate facts which BPI had to allege in its complaint so as to sufficiently
establish its cause of action?
Basically, a cause of action consists of three elements, namely: (1) the legal right of the plaintiff;
(2) the correlative obligation of the defendant; and (3) the act or omission of the defendant in
violation of said legal right (Nabus vs. Court of Appeals, et al., 193 SCRA 732 [1991]); Rebollido
vs. Court of Appeals et al., 170 SCRA 800 [1989]). These elements are manifest in BPI's
complaint, particularly when it was therein alleged that: (1) for valuable consideration, BPI
granted several loans, evidenced by promissory notes, and extended credit facilities in the form
of trust receipts to Far East (photocopies of said notes and receipts were duly attached to the
Complaint); (2) said promissory notes and trust receipts had matured; and (3) despite repeated
requests and demands for payment thereof, Far East had failed and refused to pay.
Clearly then, the general allegation of BPI that "despite repeated requests and demands for
payment, Far East has failed to pay" is sufficient to establish BPI's cause of action. Besides,
prescription is not a cause of action; it is a defense which, having been raised, should, as
correctly ruled by the Court of Appeals (DBP vs. Ozarraga, 15 SCRA 48 [1965]), be supported
by competent evidence. But even as Far East raised the defense of prescription, BPI countered
to the effect that the prescriptive period was interrupted and renewed by written extrajudicial
demands for payment and acknowledgment by Far East of the debt.
A complaint is sufficient if it contains sufficient notice of the cause of action even though the
allegation may be vague or indefinite, for in such case, the recourse of the defendant would be
to file a motion for a bill of particulars (Ramos vs. Condez, 20 SCRA 1146 [1967]). It is indeed
the better rule that, pleadings, as well as remedial laws, should be liberally construed so that the
litigants may have ample opportunity to prove their respective claims so as to avoid possible
denial of substantial justice due to legal technicalities (Adamo, et al. vs. Intermediate Appellate
Court, et al., 191 SCRA 195 [1990]).
In the case at bar, the circumstances of BPI extending loans and credits to Far East and the
failure of the latter to pay and discharge the same upon maturity are the only ultimate facts
which have to be pleaded, although the facts necessary to make the mortgage valid enforceable
must be proven during the trial (Ortiz v. Garcia, 15 Phil. 192 [1910]).
In fine, the finding of the trial court that prescription has set in is primarily premised on a
misappreciation of the sufficiency of BPI's allegation as above discussed. The records will show
that the hearing conducted by the trial court was merely pro forma and the trial judge did not
sufficiently address the issue of whether or not a demand for payment in fact made by BPI and
duly received by herein petitioner Far East.

WHEREFORE, the instant petition is hereby DENIED and the decision of the Court of Appeals
hereby AFFIRMED. No special pronouncement is made as to costs.
SO ORDERED.
2. Villanueva v. CA Shiro Manding
he Case
Petitioner seeks reversal of the Decision 1 of Respondent Court of
Appeals

promulgated on August 31, 1994 in CA-G.R. SP No. 34449, which answered the

foregoing question in the affirmative:

In view of the foregoing, the Lis Pendens in question is not registrable since it seeks to affect
property not belonging to the defendant [petitioner herein], and the action of the Register of
Deeds in denying the registration of the same is hereby sustained. 3
The lis pendens sought to be registered is Civil Case No. 92-2358 pending before Branch 74 of
the Regional Trial Court of Antipolo, Rizal. 4
The Facts
The assailed Decision fairly narrates the facts as follows: 5
Records show that TCT Nos. 262631; 273873 and 2777938 [sic] were issued in the name of
Valiant Realty and Development Corporation and Filipinas Textile Mills, Inc. and the same were
mortgaged in favor of Equitable Banking Corp. Upon failure of the mortgagors to comply with
the terms and conditions of the mortgage, the bank foreclosed the mortgaged properties [and]
sold the same to the Equitable Banking Corp. as the highest bidder at public auction sale. After
the expiration of the redemption period, mortgagors did not exercise the right of redemption and
as a consequence thereof, the mortgagee sold all its rights, interests and participation of said
properties to the herein oppositor, Oo Kian Tiok.
Immediately after acquiring the rights, titles and interests of the bank in said properties, Oo Kian
Tiok took possession up to the present time, except for a brief period of time when his
possession was interrupted by the herein petitioner [who] together with armed goons, [and]
without [any] court order swooped down on the properties and disarmed the security guards
assigned therein and forcibly removed the 30 workers therefrom, which prompted Oo Kian Tiok
to file Civil Case No. 92-2358 against Filipinas Textile Mills, Inc., [and] Daniel Villanueva, et als.
for Recovery of Possession and Damages with Prayers for Writ of Preliminary Mandatory
Injunction and/or Temporary Order.
As a consequence, the herein petitioner, being one of the defendants of the above-mentioned
case, filed a formal request with the Office of the Register of Deeds to annotate a corresponding

Notice of Lis Pendensof Civil Case No. 92-2358 in the respective Memorandum of
Encumbrances of TCT Nos. 262631; 273873 and 277938 but the same was denied registration
based on the following grounds, to wit:
. . . .that Mr. Villanueva is merely asserting possession of the property not on the title or right
over the property. While it appears that Mr. Villanueva is an officer of the owner-corporation,
Filipinas Textile Mills, Inc., the latter is no longer the owner thereof but plaintiff Oo Tian [sic] Tiok.
Moreover, no Board Resolution has been submitted indicating that said Villanueva has been
duly authorized by the former owner to file the notice of lis pendens.
Hence, the petitioner elevated the matter on consulta [to Respondent Land Registration
Authority] pursuant to Section 117 of P.D. 1529 on the grounds that the herein petitioner,
together with his sister Terry Villanueva-Yap, Eden Villanueva, Susan Villanueva and his brother
Frank Villanueva are the lawful owners of the 63% of the beneficial shares of Filipinas Textile
Mills, Inc. and are not merely asserting possession but also ownership over the subject
properties contrary to the conclusion submitted by the Register of Deeds. (Resolution, pp. 1-2)
The consulta was decided against petitioner by Respondent Land Registration Authority and
later, on appeal, by Respondent Court. Hence, this petition for review under Rule 45 of the
Rules of Court. 6
The Issues
Petitioner assigns the following errors to Respondent Court: 7
A.

Not appreciating petitioner's compliance with all the requirements set forth under the

Land Registration Act and the Rules of Court;

B

Not finding that the petitioner duly raised the affirmative defense of ownership over the

properties subject of Civil Case No. 92-2358;

C

Not finding that the Respondent Land Registration Authority erred in assuming

jurisdiction to determine the issue of ownership over the properties subject of civil case no. 922358;
D

In affirming the resolution of the Respondent Land Registration Authority in Consulta No.

2131.
The Solicitor General, as counsel for Respondent Land Registration Authority, summarizes the
issue: 8
Whether or not the notice of lis pendens requested by petitioner to be annotated in the
respective memorandum of encumbrances at the back of TCT Nos. 262631, 273873 and
277938 is registrable.

Stated simply, the issue is whether petitioner's application for registration of the notice of lis
pendens should be rejected on the ground that it affects a property which does not belong to
him personally, bur is merely claimed by a corporation, the majority (63%) of which is owned by
him and his brothers and sisters.
Respondent Court's Ruling
In dismissing petitioner's appeal, Respondent Court ruled: 9
Even if the petitioner were able to comply with all the requirements (referring to the formalities)
for the annotation of a notice of lis pendens, it does not necessarily follow that he would ipso
facto be entitled to such annotation. There is need for him to show that he owns the subject
property or that he has right or interest vis-a-vis its possession. The mere possession of a
property does not give rise to the right to annotate. Without such title or interest, whence would
his right to annotate come from?
The petitioner contends that the determination of registrability of a notice of lis pendens is
ministerial as far as the Register of Deeds is concerned. On the basis of the evidence on record,
this is exactly what the Register of Deeds of Rizal did he refused to annotate because it
clearly appears from the documents submitted (specifically, T.C.T. Nos. 262631, 273873 and
277938) that the subject parcels of land are registered not in the name of Villanueva but in the
name of Valiant Realty and Development Corporation and co-defendant Filipinas Textile Mills,
Inc. The Register of Deeds did not attempt to go beyond what clearly appears in the
aforementioned Transfer Certificates of Title. He did not attempt, as the petitioner would imply,
to inquire into and try to resolve conflicting allegations of the claimants of the aforesaid property.
The Land Registration Authority in its assailed resolution had aptly pointed out that petitioner
Villanueva had not produced a board resolution of Filipinas Textile Mills, Inc. authorizing him to
take possession of the litigated property. Hence, although it may be conceded that Villanueva is
in possession thereof, it would appear that his possession is illegal which would not result in
vesting in him any right or interest over the above-cited property. As far as the said property is
concerned, Villanueva is a third person, a stranger. There could be no dispute as to the fact that
Filipinas Textile Mills, Inc. (in the name of which the contested parcels of land are registered)
and Villanueva are, before the law, two separate and distinct persons. Indubitably Villanueva is
not Filipinas Textiles Mills, Inc.
The Court's Ruling
The petition is meritorious.
Sole Issue:

Registration of Lis Pendens

Who May Register Notice of Lis Pendens?

Petitioner contends that a notice of lis pendens may be filed in relation to actions "affecting the
title to or possession of real property." In the instant petition, defendants in Civil Case No. 922358, among whom is petitioner, "repeatedly and emphatically" allege that it is Filipinas Textile
Mills, Inc. (FTMI), of which petitioner is a stockholder, which owns the properties in question.
Thus, an affirmative relief of ownership is prayed for in the answer which sanctions registration
of the notice of lis pendens. 10
Private Respondent Oo Kian Tiok counters

10

that the errors and arguments raised in the petition

at bar are "mere repetitions of those already discussed in [the] petition for review" submitted
before Respondent Court, "which the latter had already considered, weighed and resolved
adversely to the herein petitioner." 11
The Solicitor General, on the other hand, asserts: 12
Based on the incontrovertible facts, the notice of lis pendens requested by petitioner to be
annotated on the back of the aforesaid certificates of title is not registrable, because the
registration will affect the property obviously not belonging to petitioner, who is one of the
defendants in Civil Case No. 92-2358 filed before the Regional Trial Court of Antipolo, Branch
74. It has been consistently held by public respondent LRA, as in Consulta No. 430, Pedro del
Rosario, petitioner versus the Register of Deeds of Quezon City, respondent, and in Consulta
No. 146, the Register of Deeds of Sorsogon, petitioner, thata notice of lis pendens is not
registrable if it seeks to affect property not belonging to the defendant.
The notice of lis pendens is an announcement to the whole world that a particular real property
is in litigation, and serves as a warning that one who acquires an interest over said property
does so at his own risk, or that he gambles on the result of the litigation over said property.

13

The registration of a notice of lis pendens is governed by Section 24, Rule 14 of the Rules of
Court: 14
Sec. 24.

Notice of lis pendens. In an action affecting the title or the right of possession of

real property, the plaintiff, at the time of filing the complaint, and the defendant, at the time of
filing his answer, when affirmative relief is claimed in such answer, or at any time afterwards,
may record in the office of the registrar of deeds of province in which the property is situated a
notice of the pendency of the action, containing the names of the parties and the object of the
action or defense, and a description of the property in that province affected thereby. From the
time only of filing such notice for record shall a purchaser, or incumbrancer of the property
affected thereby, be deemed to have constructive notice of the pendency of the action, and only
of its pendency against parties designated by their real names.

The notice of lis pendens hereinabove mentioned maybe cancelled only upon order of the court,
after proper showing that the notice is for the purpose of molesting the adverse party, or that it is
not necessary to protect the rights of the party who caused it to be recorded.
In Magdalena Homeowners Association, Inc. vs. Court of Appeals,

15

this Court enumerated the

cases where a notice of lis pendens is proper:

According to Section 24, Rule 14 of the Rules of Court and Section 76 of Presidential Decree
No. 1529, a notice of lis pendens is proper in the following cases, viz.:
a)

An action to recover possession of real estate;

b)

An action to quiet title thereto;

c)

An action to remove clouds thereon;

d)

An action for partition; and

e)

Any other proceedings of any kind in Court directly affecting the title to the land or the

use or occupation thereof or the buildings thereon.

The notice of lis pendens i.e., that real property is involved in an action is ordinarily
recorded without the intervention of the court where the action is pending. The notice is but an
incident in an action, an extrajudicial one, to be sure. It does not affect the merits thereof. It is
intended merely to constructively advise, or warn, all people who deal with the property that they
so deal with it at their own risk, and whatever rights they may acquire in the property in any
voluntary action transaction are subject to the results of the action, and may well be inferior and
subordinate to those which may finally be determined and laid down therein. The cancellation of
such a precautionary notice is therefore also a mere incident in the action, and may be ordered
by the Court having jurisdiction of it at any given time. And its continuance or removal like the
continuance or removal of a preliminary attachment or injunction is not contingent on the
existence of a final judgment in the action, and ordinarily has no effect on the merits thereof.
To annotate a notice of lis pendens, the following elements must be present: (a) the property
must be of such character as to be subject to the rule; (b) the court must have jurisdiction both
over the person and the res; and (c) the property or res involved must be sufficiently described
in the pleadings. 16
Only the first requisite is at issue in this case; the second and the third requisites are not. In
explaining the first requirement, former Senator Vicente J. Francisco wrote: 17
. . . to all suits or actions which directly affect real property and not only those which involve the
question of title, but also those which are brought to establish an equitable estate, interest, or
right, in specific real property or to enforce any lien, charge, or encumbrance against it, there
being in some cases a lis pendens, although at the commencement of the suit there is no

present vested interest, claim, or lien in or on the property which it seeks to charge. It has also
been held to apply in the case of a proceeding to declare an absolute deed a mortgage, or to
redeem from a foreclosure sale, or to establish a trust, or to suits for the settlement and
adjustment of partnership interests. [fn: 54 C.J.S., 577-578]
It is not sufficient that the title or right of possession may be incidentally affected. Thus a
proceeding to forfeit the charter of a corporation does not deprive it of the power to dispose of
its property, nor does it place such property within the rule of lis pendens, so that purchasers
thereof may lose the property or right to the possession through the appointment of a receiver.
[fn: Havemeyer vs. Superior Court, 84 Cal. 327, 18 Am. St. Rep. 192, 24 Pac. 121, 10 L.R.A.
627 . . .]
In order that the doctrine of lis pendens may apply, so that purchaser of property may be bound
by the judgment or decree rendered, it is essential that there be in existence a pending action,
suit or proceeding, and there can be no lis pendens because of the fact that an action or suit is
contemplated. [fn: 54 C.J.S., 583]
Civil Case No. 92-2358, which petitioner sought to annotate, is an action for "recovery of
possession and damages with prayer for writ of preliminary mandatory injunction and/or
temporary restraining order." That civil case is an accion publiciana or a plenary action in an
ordinary civil proceeding to determine the better and legal right to possess (independently of
title).

19

What private respondent sought to recover was not just possession de facto but

possession de jure.

20

On the other hand, the defendants in Civil Case No. 92-2358 alleged in

their answer that there was fraud committed among Bernardino Villanueva, Equitable Banking
Corporation and Respondent Oo Kian Tiok, such that the real estate mortgage was invalid.
Hence, the subsequent auction of the mortgaged property transferred "no right, title and interest
whatsoever" to Equitable Bank as the highest bidder and thence to private respondent as buyer.
In effect, the defendants in the civil case directly opposed the recovery of possession prayed for
by the plaintiff and in fact challenged the very validity of the title of private respondent. Both
contentions of the parries thus directly put the properties under the coverage of the rule, thereby
sufficiently satisfying the first requisite and placing the case squarely within the parameters set
by Magdalena. 21
In our jurisdiction, the following may file a notice of lis pendens: 22
(a)

The plaintiff at the time of filing the complaint.

(b)

The defendant

1)

at the time of filing his answer (when affirmative relief is claimed in such answer)

or at any time afterwards (See Sec. 24, Rule 14)

Petitioner is one of the defendants in Civil Case No. 92-2358.

23

Now, is it necessary for him to

prove to the Register of Deeds that the properties to which he seeks annotation of the notice of
lis pendens belong to him as required by Respondent Court! We do not believe so. The law
does not require such proof from the defendant. We cannot find any valid reason why we should
add to the requirements set in the Rules. The settled doctrine in statutory construction is that
legal intent is determined principally from the language of the statute. Where the language of a
statute is clear and unambiguous, the law is applied according to its express terms, and
interpretation would be resorted to only where a literal interpretation would be either impossible
or absurd or would lead to an
injustice. 24
We stress that although it is not necessary for the applicant to prove his ownership or interest
over the property sought to be affected by lis pendens, the applicant must, in the complaint or
answer filed in the subject litigation, assert a claim of possession or title over the subject
property in order to give due course to his application. As settled, lis pendens may be annotated
only where there is an action or proceeding in court which affects the title to, or possession of,
real property. 25
Be it remembered that a notation of lis pendens does not create a nonexistent right or lien. It
serves merely as a warning to a person who purchases or contracts on the subject property that
he does so at his peril and subject to the result of the pending litigation.

26

The registration of the

notice of lis pendens is done without leave of court. The Rule merely requires an affirmative
relief to be claimed in the answer to enable a defendant to apply for the annotation of the notice.
27

There is no requirement that the applying defendant must prove his right or interest over the

property sought to be annotated. In deciding the issue of whether the application by petitioner is
registerable, Respondent Court concluded: "it would appear that his possession is illegal which
would not result in vesting in him any right or interest over the above-cited properties."

28

This

conclusion of Respondent Court was premature, as it preempted the trial on the merits of the
main case sought to be registered.
On the other hand, an affirmative relief or defense is an allegation of a new matter which, while
admitting, expressly or impliedly, the material allegations of the complaint would nevertheless
prevent or bar recovery by the plaintiff. Affirmative defenses include fraud, statute of limitations,
release, payment, illegality, statute of frauds, estoppel, former recovery, discharge. in
bankruptcy, and other matters alleged by way of confession and avoidance.

29

An affirmative

defense may be an allegation of new matters that is, facts different from those averred by the
plaintiff which, if true, destroys or negates the plaintiff's right of action. An affirmative defense
admits the facts alleged by the plaintiff, or at least those not necessarily denied by the
interposition of the affirmative defense itself. Even though an affirmative defense contains

allegations inconsistent with those of the complaint, the latter must, in the absence of denials,
nevertheless be taken as admitted in the defense.

30

In the case at bar, the defendants in Civil

Case No. 92-2358 insist that fraud attended the agreement among Bernardino Villanueva,
Equitable Banking Corporation and Respondent Oo Kian Tiok. Such fraud, if proven true, will
defeat or bar the claim of said respondent and benefit the defendants.
Petitioner in this case was impleaded by private respondent as one of the defendants in the trial
court; thus, he falls under the definition of the Rules as a party claiming affirmative relief. His
status as a mere stockholder can no longer be questioned in this case, much less his capacity
to sue on the mere pretext that he was not authorized by the corporation to litigate on its behalf.
We emphasize that the issue at bar is the right to annotate the pendency of Civil Case No. 922358, not the legal standing of petitioner to represent the corporation in the said case.
Wary that the properties which were mortgaged and auctioned would be dissipated and/or
passed to innocent purchasers for value, petitioner initiated the move to annotate the lis
pendens to protect the corporation's right. He correctly acted, considering that there was, as
alleged by private respondent, an intra-corporate controversy which effectively barred a
common action by the management of the corporation. 31
In any event, a reading of the allegations in the answer will readily show that defendants (herein
petitioner included) were not merely asserting a right of possession over the disputed
properties. Rather, they were insisting on their ownership over the said real estate, claiming that
plaintiff (herein private respondent) was "not entitled at all to their possession, because he did
not have any right, title or interest whatsoever over them."
answer illustrate the claim of petitioner for affirmative relief:

32

The following allegations in the

33

Answering Defendants, for the reasons and facts stated herein and in their Affirmative
Allegations and Affirmative Defenses, specifically deny the following allegations in the original
Complaint dated 08 May 1992:
xxx

xxx

xxx

3.3.1. The compound located on Amang E. Rodriguez Avenue, Barangay San Rogue, Cainta,
Rizal is owned by plaintiff, the truth being that such compound is owned by defendant FTMI
being covered by the titles of the Subject Properties which are registered in the name of
defendant FTMI;
xxx

xxx

xxx

3.3.4. The compound located on Amang E. Rodriguez Avenue, Barangay San Rogue, Cainta,
Rizal was being unlawfully occupied by defendants Daniel Villanueva, Terry Villanueva-Yu,
Susan Villanueva, Eden Villanueva, Frankie Villanueva, Artemio Tuquero, Mel P. Dimat and
Bienvenido Bulaong, the truth being that the occupation of the compound by said defendants

was lawful because they are duly elected and authorized directors, officers and/or
representatives of defendant FTMI which is the registered owner thereof;
3.4

Paragraph 5, insofar as it is alleged that:

3.4.1. Plaintiff is the lawful owner of three (3) parcels of land together with the properties and
improvements that may be found therein, situated in Barangay San Rogue, Cainta, Rizal, the
truth being that plaintiff has no right, title and interest whatsoever in the said properties; and
3.4.2. The Certification dated 06 April 1992 of Mr. Vicente A. Garcia, Register of Deeds of
Pasig, attached as Annex "B" to the Complaint proves that plaintiff Oo Kian Tiok purchased the
rights and interests over the titles of defendant FTMI from EBC, the truth being that such a
Certification merely shows that defendant Bernardino Villanueva connived and colluded with
EBC and plaintiff whereby the Subject Properties were illegally mortgaged, and then sold at
public auction auction [sic] in favor of EBC, and thereafter allegedly purchased by Oo Kian Tiok
through a Redemption Contract;
3.5

Paragraph 6, in so far as it is made to appear that defendant FTMI is the former-owner

of the three (3) lots covered by T.C.T. Nos. 262631, 273873, and 277938 of the Registry of
Deeds for the Province of Rizal, the truth being that defendant FTMI remains as the registered
owner of the aforementioned three (3) lots;
3.6

Paragraph 7, insofar as it is alleged, that:

3.6.1

Defendant FTMI obtained a loan of Twenty Five Million Pesos (P25,000,000.00) from

EBC, the truth being that the loan purportedly obtained by defendant Bernardino Villanueva
ostensibly on behalf of defendant FTMI was not duly authorized by defendant FTMI's board of
directors, and thus not binding upon defendant FTMI;
3.6.2

Defendant FTMI mortgaged the Subject Properties, with all the buildings, improvements,

machineries and equipment thereon, to EBC on 14 July 1982, the truth being that the alleged
mortgage was never authorized by defendant FTMI's board of directors and therefore, not
binding upon defendant FTMI;
xxx
3.8

xxx

xxx

Paragraph 10, insofar as it is stated that defendant FTMI had one (1) year from 01

August 1988, or until 01 August 1989, to redeem the Subject Properties, the truth being that
since the Subject Properties were never validly mortgaged nor foreclosed, there was, in reality,
no period within which to redeem the Subject Properties.
xxx
3.12.

xxx

xxx

Paragraph 15, insofar as it is made to appear that:

3.12.1. The action taken on 04 April 1992 is merely an offshoot of an intra-corporate controversy
between the owners and stockholders of defendant FTMI, the truth being that the action taken
on 04 April 1992 was a valid exercise by defendant FTMI and/or its authorized representatives
of its power of administration over its own properties;
3.12.2. Plaintiff is an innocent bystander and is allegedly being helplessly dragged into the
controversy, the truth being that plaintiff is conniving and colluding with defendant Bernardino
Villanueva in order to wrest ownership and possession of the Subject Properties from its
registered owner, defendant FTMI, in order to favor defendant Bernardino Villanueva;
To require that an applicant must prove his ownership or his interest over the property sought to
be affected with the notice of lis pendens will unduly restrict the scope of the rule. In such case,
a party questioning the ownership of the registered owner will litigate his or her case without an
assurance that the property will be protected from unwanted alienation during the pendency of
the action, thereby defeating the very purpose and rationale of the registration.
WHEREFORE, the petition is hereby GRANTED. The assailed Decision is REVERSED and
SET ASIDE. The Land Registration Authority is hereby ORDERED to annotate the application
for a notice of lis pendens in TCT Nos. 262631, 273873 and 277938. No costs.
SO ORDERED.
Romero, Melo and Francisco, JJ., concur.
Narvasa, C.J., is on leave.

3. Javier v. IAC Rj Almazan

It is not disputed that the private respondent issued to the petitioners a check that was
subsequently dishonored and not made good despite the required notice of dishonor. For this he
has been charged with estafa under B.P. Blg. 22 in the Regional Trial Court of Makati. His
reason for issuing the check is not before us now. The question we are asked to resolve is
whether or not he can raise that reason in another court, in a separate civil action for damages
filed by him against the petitioners.
The information against Leon S. Gutierrez, Jr. was filed on April 1, 1985, and docketed as
Criminal Case No. 15581 in the Regional Trial Court of Makati. 1 The civil case was not
reserved. On September 5, 1985, Gutierrez filed a complaint for damages against the
petitioners in the Regional Trial Court of Catarman, Northern Samar. This was docketed as Civil
Case No. C-355. In this complaint, the defendants were charged with having inveigled Gutierrez
into signing the very check subject of the criminal case in the Makati court. 2 The complaint in
effect explains why he issued the check for which he is now facing prosecution.

On September 17, 1985, the petitioners filed a motion to dismiss Civil Case No. C-355 on the
grounds of lack of a cause of action and litis pendentia. 3 The motion was denied on September
24,1985. On the other hand, the private respondent moved to suspend proceedings in Criminal
Case No. 15581 pending the resolution of what was claimed to be the prejudicial question
raised in the civil case. The petitioners filed an opposition. The motion was also to be denied
later.
The petitioners went to the Intermediate Appellate Court to question the orders of Judge Cesar
R. Cinco of the Regional Trial Court of Catarman, Northern Samar, denying their motion to
dismiss and their motion for reconsideration of the denial. Failing to obtain relief there, 10 they
are now before us in this petition for review on certiorari under Rule 45 of the Rules of Court.
Challenged are the decision of the respondent court dated May 29, 1986, and its resolution
dated July 16, 1986, denying reconsideration.11
We shall reverse. The respondent court erred in sustaining the trial judge.
As the civil action was not reserved by the petitioners, it was deemed impliedly instituted with
the criminal case in the Regional Trial Court of Makati. The applicable provision is Rule 111,
Section 1, of the Rules of Court, reading in full as follows:
Section 1.

Institution of criminal and civil actions.- When a criminal action is instituted, the

civil action for the recovery of civil liability arising from the offense charged is impliedly instituted
with the criminal action, unless the offended party expressly waives the civil action or reserves
his right to institute it separately. However, after the criminal action has been commenced, the
civil action cannot be instituted until final judgment has been rendered in the criminal action.
When the offended party seeks to enforce civil liability against the accused by way of actual,
moral, nominal, temperate or exemplary damages, the filing fees for such civil action as
provided in these Rules shall first be paid to the Clerk of Court of the court where the criminal
case is filed. In all other cases, the filing fees corresponding to the civil liability awarded by the
court shall constitute a first lien on the judgment award and no payment by execution or
otherwise may be made to the offended party without his first paying the amount of such filing
fees to the Clerk of Court.
It was before the Makati court that the private respondent, as defendant in the criminal charge of
violation of B.P. Blg. 22, could explain why he had issued the bouncing check. As the civil action
based on the same act was also deemed filed there, it was also before that same court that he
could offer evidence to refute the claim for damages made by the petitioners. This he should
have done in the form of a counterclaim for damages for his alleged deception by the
petitioners. In fact, the counterclaim was compulsory and should have been filed by the private
respondent upon the implied institution of the civil action for damages in the criminal action.

A counterclaim is compulsory and is considered barred if not set up where the following
circumstances are present: (1) that it arises out of, or is necessarily connected with the
transaction or occurrence that is the subject matter of the opposing party's claim; (2) that it does
not require for its adjudication the presense of third parties of whom the court cannot acquire
jurisdiction, and (3) that the court has jurisdiction to entertain the claim.12
All these circumstances are present in the case before the Regional Trial Court of Makati.
This being so, it was improper for the private respondent to file his civil complaint in the
Regional Trial Court of Northern Samar alleging the very defense he should be making in the
Regional Trial Court of Makati. It is, of course, not possible for him now to invoke a different
defense there because he would be contradicting his own verified complaint in the Regional
Trial Court in Northern Samar. In effect, therefore, he is arguing that bothcourts have jurisdiction
to consider the same claim of deception he is making in connection with the same transaction
and involving the same parties.
The Court suspects that not having set it up against the civil claim for damages in the Regional
Trial Court of Makati, the private respondent is now seeking to make amends by filing a
separate civil action based on the same matter in the Regional Trial Court of Northern Samar.
That is bad enough. But what could be worse is that he may have filed the civil complaint in the
second court for the more censurable purpose of deliberately delaying the trial of the criminal
case, which has been deferred long enough as it is. That should not be permitted.
The principal reason of the respondent court in sustaining the trial judge is that Civil Case No.
C-355 is not barred because it was filed not by the petitioners but by the private respondent.
That reasoning is hardly worthy of the Court of Appeals. If such logic were accepted, every
accused could file his own civil complaint against the offended party based on the same
transaction involved in the prosecution, but in another court. The effect would not only be
multiplicity of suits but delay and frustration of the criminal case.
What the Court finds especially questionable here is the choice of the venue for the civil action.
Although both parties appear to be residents and running their affairs in Metro Manila, the
private respondent filed his complaint in Catarman, Northern Samar in an obvious attempt to
inconvenience the petitioners. The lower courts should have taken this matter into consideration
if only for reasons of equity. Legally, of course, the lack of proper venue was deemed waived by
the petitioners when they failed to invoke it in their original motion to dismiss.13 Even so, the
motivation of the private respondent should have been taken into account by both the trial judge
and the respondent court in arriving at their decisions.
As Chief Justice Concepcion said in Aytona v. Castillo: 14

Good faith, morality and propriety form the basic foundation of claims to equitable reliefs . . .
Needless to say, there are instances wherein not only strict, legality, but also fairness, justice
and righteousness should be taken into account.
Courts should not allow themselves to be used as instruments for harassment and the
circumvention of the law through cunning manipulations of the procedural rules by counsel who
may be too clever for their own good. Rules of procedure are intended to expedite rather than
complicate, and much less to obstruct, the administration of justice. There is no excuse why the
bench and the bar should not know this principle by now.
WHEREFORE, the decision of the respondent court dated May 29, 1986, and its resolution
dated July 16, 1986, are SET ASIDE and Civil Case No. C-355 in the Regional Trial Court of
Catarman, Northern Samar is DISMISSED, with costs against the private respondent. It is so
ordered.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
Petitioners not having submitted their answer in the civil case, the private respondent moved to
declare them in default and that he be allowed to present his evidence ex parte. 4 Pending
resolution of this motion, the petitioners moved for reconsideration of the order denying their
motion to dismiss. 5 This was denied on November 27,1985. 6 On January 3, 1986, the
petitioners filed a second motion for reconsideration based on the original two grounds and
alleging the additional ground of improper venue. 7 The record does not show if this second
motion for reconsideration was acted upon, but on January 17, 1986, the respondent judged
declared the petitioners in default and set the civil case for trial.8 Three days later, the motion to
suspend proceedings in the Regional Trial Court of Makati was denied and the criminal case
was set for hearing on the merits. 9
4. Metals Eng'g Resources Corp. v. CA Rhoda de los Santos
mpugned in this petition for review on certiorari is the decision of respondent Court of Appeals,
dated August 9, 1990, 1 dismissing the special civil action for certiorari and prohibition filed
therein by petitioner corporation.
The appeal herein arose from Civil Case No. 55560 filed by petitioner corporation against
private respondent Plaridel Jose, for the annulment of an agreement to buy and sell executed
between the parties, before the Regional Trial Court of Pasig, Branch 160, the complaint 2
alleging, inter alia, that:
xxx
2.

xxx

xxx

On October 31, 1987, plaintiff and defendant executed a document which was

denominated as 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 with an aggregate area of 6,135 sq.
m. . . .
xxx
4.

xxx

xxx

The "Agreement to Buy and Sell", oil 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. Consequently, the subject "Agreement", not
having been perfected and completed, did not contemplate nor did it result to a binding and
enforceable contract to sell. In fact, as stipulated in paragraphs 3 and 4 of said "agreement", the
terms of sale, including the payment of the purchase price, are uncertain and imperfect as they
are subject to the following:
a)

Defendant's obligation to pay one half (1/2) of the total consideration is conditioned and

depends exclusively on the ability of the plaintiff to "look for a place to transfer its offices and
plants from the land subject hereof within One hundred twenty days" but should plaintiff "fail to
locate a place to transfer its offices and plants from the land subject hereof within the said one
hundred and twenty days "the agreement is merely subject to an "extension" upon terms and
conditions to be determined and agreed upon separately and subsequently; and
b)

The payment of the remaining fifty percent (50%) thereof SHALL BE THE SUBJECT OF

A (ANOTHER) SEPARATE AGREEMENT to be made between the parties together with the
execution of a Deed of Absolute Sale.
5.

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
sub-lots and offered the same for sale to the public through an advertisement published in the
issue of the "Manila Bulletin" on November 25, 1987 . . .
6.

Thus, on December 24, 1987, 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.
xxx
8.

xxx

xxx

The refusal of defendant to acnowledge the imperfection and non-completion of the

"Agreement" and to accept the refund P50.000.00 as well as his acts of offering the land for sale
to third person and his annotation of adverse claims in the title covering the lands are
unjustifiable and great damage and prejudice to plaintiff.

xxx

xxx

xxx

Private respondent filed his Answer with Counterclaim 3 alleging a compulsory counterclaim on
the following operative facts:
12.

Defendant had already spent a considerable amount for the subdivision of the subject

properties into smaller parcels of land for resale to a group of buyers, for the advertisements
and promotion necessary thereto, and other related expenses;
13.

One of the pertinent provisions of the AGREEMENT (Annex "A") is the schedule of

payments to be paid by the defendant which provides as follows:

3.

Within one hundred and twenty (120) days from the execution of this agreement, the

VENDOR shall look for a place to transfer its offices and plant from the land subject hereof. And
once a place to transfer is found, the VENDOR shall inform the VENDEE of the same. Within
fifteen (15) days from such notice of the VENDOR to the VENDEE, the latter shall immediately
pay, without need of demand and further notice, to the former one-half (1/2) of the total
purchase price of the land . . .
Due to the adamant and unreasonable posture of the plaintiff, defendant's timetable to generate
funds and profits was severely stalled and placed at a standstill to the damage and prejudice of
his investment and financial projection, which can only be rectified or compensated by way of
tacking into, and thus extending the agreed period to pay the said-one-half (1/2) of the purchase
price, the length of time from plaintiffs notice to rescind (Annex "1") until defendant complies
with its part of the AGREEMENT (Annex "A") whether voluntarily, by compromise, or by judicial
compulsion;
14.

Defendant suffered further due to the fact that his reputation has been tarnished at the

very least considering that he could not pursue his legal and business commitment with those
who have already transacted with him over the subject parcels of land;
15.

By reason of the present unfounded and malicious action filed by the plaintiff, defendant

suffered sleepless nights, serious anxieties, embarrassment and similar injuries due to the
indefensible and destructive posture of the plaintiff for which he should be awarded
P300,000.00 at least in moral damages;
16.

Due to the patent, wanton and gross bad faith displayed by the plaintiff in its dealings

with the defendant, the latter should be awarded at least P100,000.00 in exemplary damages
likewise to be assessed against the plaintiff;
17.

By reason of the present suit, defendant was furthermore forced to hire the services of

counsel to protect his rights and interest under the premises, in the amount of P100,000.00 as

and for attorney's fees aside from the expenses and cost of litigation which shall be proved at
the trial hereof.
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of the defendant
dismissing the Complaint and declaring the AGREEMENT (Annex "A-Complaint") with the
defendant valid for all legal intents and purposes and ordering the plaintiff to honor its provisions
except the term or period of payment of the first one-half (1/2) of the purchase price, which
should be extended by tacking into the 15-day period the length of time mentioned under
paragraph 13 hereof; and for the damages, plaintiff be ordered to pay defendant the following:
a)

P300,000.00 in moral damages for the bersmirched reputation, embarrassment,

anguish, anxieties, sleepless nights, and similar injuries suffered by the defendant due to the
gross and wanton bad faith of the plaintiff;
b)

P100,000.00 in exemplary damages so that others who similarly inclined to do as what

the plaintiff did against the defendant, should properly be forewarned and deterred therefrom;
c)

P100,000.00 as and for attorney's fees plus the expenses of litigation proved at the trial;

and
d)

Costs."

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 Corporation, et al. vs. Court of Appeals, et al. 4 and Administrative
Circular No. 7 issued by this Court on March 4, 1988.
In an Order dated December 15, 1988, 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 it seeks to recover from private respondent.
However, 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.
Acting thereon, on April 12, 1989, the trial court issued an Order 5 granting the motion for
reconsideration and ordering that the complaint be expunged from the record on the ground that
it did not acquire jurisdiction over the case.

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.
Thereafter, the court a quo issued an Order, 6 dated June 20, 1989, granting private
respondent's motion to present evidence and holding that "a) compulsory counterclaim is a
complaint in itself; that it is a complaint against the plaintiff; that it is independent in character. It
has to be set up in the answer otherwise it will be waived or barred and it cannot be invoked in
another case, for it would be splitting a cause of action which is not allowed under the rules." It
added that herein private respondent "correctly insisted that the compulsory counterclaim
should be prosecuted now, otherwise he cannot invoke his claim in a separate proceeding
because he will be "barred by the dismissal" of the instant case."
Petitioner filed a Motion for Reconsideration of said order alleging that a compulsory
counterclaim is essentially ancillary to the main controversy and that, assuming that private
respondent's counterclaim can remain pending for independent trial, the same would
nevertheless be dismissed for non-payment of any docket fees on the total amount of the
counterclaim. Private respondent filed his Opposition at the same time attaching thereto a
receipt for the payment of docket fees. In reply, petitioner contended that the belated payment of
the docket fees for the counterclaim does not have the effect of vesting the trial court with
jurisdiction over the counterclaim. The motion for reconsideration was denied by the trial court in
its Order 7 dated September 29, 1989.
From said order, petitioner filed a special civil action for and certiorari prohibition with prayer for
preliminary injunction and/or temporary restraining order with respondent Court of Appeals. Its
contentions for the allowance thereof may be capsulized as follows:
1.

Respondent court acted without or in excess of its jurisdiction and gravely abused his

discretion in granting respondent Jose's motion to present evidence on his compulsory

counterclaim:
a.

The dismissal of the complaint carries with it the dismissal of the compulsory

counterclaim.

b.

Even assuming that respondent Jose's counterclaim may remain pending for

adjudication independently of the principal complaint, it should still be dismissed for failure on
the part of respondent to pay docket fees thereon.
2.

Great or irreparable injury and injustice would result to petitioner if respondent Jose

should be allowed to present evidence ex parte on his counterclaim pursuant to respondent

court's order September 29, 1989. 8
Respondent court, in its questioned decision, dismissed the special civil action for certiorari,
stating that since the order is merely interlocutory in nature and that at most it is merely an error
of judgment, it cannot be corrected bycertiorari, thus:
It is obvious that no jurisdictional error is involved in this case. If to allow the respondent to
present evidence in support of his counterclaim is a mistake, it is at most an error of judgment
that is not correctible by certiorari or prohibition. Such an error can be corrected in an appeal
which may be taken from the judgment to be rendered on the counterclaim (Fernando vs.
Vasquez, 31 SCRA 288).
Time and again, it has been said that the function of certiorari and prohibition is to keep an
inferior court within the limits of its jurisdiction (Enriquez vs. Rivera, 90 SCRA 641). These two
extraordinary writs are not intended to correct every error which may be committed in the course
of a trial.
Finally, the order sought to be annulled is interlocutory in nature which again cannot be
corrected bycertiorari (Perez vs. Moneta Board, 20 SCRA 592; Layag vs. Gerardo, 10 SCRA
837). 9
Its motion for reconsideration having been denied, petitioner filed the instant petition.
Petitioner avers that respondent Court of Appeals gravely erred (1) in finding that no
jurisdictional defect was committed by the trial court in issuing the order date June 20, 1989
allowing respondent Jose to present evidence in support of his compulsory counterclaim despite
the dismissal of the complaint; and (2) in holding that the order of June 20, 1989 cannot be the
basis of a petition for certiorari and prohibition. 10
We find for petitioner.
Private respondent's asseveration that a compulsory counterclaim is not deemed dismissed just
because the main complaint is dismissed by the court, and that the same has to be pursued
otherwise it will forever be barred on the ground of res judicata, is at most specious and should
be struck down for lack of merit.
There is no dispute that private respondent's counterclaim is compulsory in nature since (1) 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) it does not require for its adjudication the presence of
third parties over whom the court cannot acquire jurisdiction; and 3) the court has jurisdiction to
entertain the claim. And the rule is that a compulsory counterclaim not set up shall be barred 11
if not raised on time and the party in error is precluded from setting it up in a subsequent
litigation on the ground ofres judicata, the theory being that what are barred by prior judgment
are not only the matters actually raised and litigated upon, but also such matters as could have
been raised but were not. 12 In other words, a compulsory counterclaim cannot be made the
subject of a separate action but should be asserted in the same suit involving the same
transaction or occurrence giving rise to it. Where the counterclaim is made the subject of a
separate suit, it may be abated upon a plea of auter action pendant or litis pendentia, and/or
dismissed on the ground of res judicata.13
However, such is not the situation obtaining in the present action. In the petition before us,
private respondent, in his responsive pleading which is aptly titled "Answer with Counterclaim,"
has properly raised a counterclaim against herein petitioner's claim that the agreement to buy
and sell is imperfect and incomplete. Ironically, the insistence of private respondent in
proceeding with the trial of the case is premised on the very existence of his counterclaim.
Hence, there can be no res judicata to speak of because a counterclaim was correctly invoked
against herein petitioner's complaint. In fine, what private respondent is in effect saying is that
his counterclaim should be allowed to proceed independently of the main action.
The aforementioned doctrine is in consonance with the primary objective of a counterclaim
which is to avoid and prevent circuity of action by allowing the entire controversy between the
parties to be litigated and finally determined in one action, wherever this can be done with entire
justice to all parties before the court. 19 The philosophy of the rule is to discourage multiplicity of
suits. 20 It will be observed that the order of the trial court allowing herein private respondent to
proceed wit the presentation of his evidence in support of the latter's counterclaim is repugnant
to the very purpose and intent of the rule on counterclaims.
Furthermore, it has been held that a counterclaim presupposes the existence of a claim against
the party filing the counterclaim. Where there is no claim against the counterclaimant, then the
counterclaim is improper and should be dismissed. 21 The complaint filed by herein petitioner
was dismissed on the ground of lack of jurisdiction for non-payment of docket fees. By reason of
said dismissal, it is as if no claim was filed against herein private respondent, hence the
counterclaim has no leg to stand on. In addition, it was at the instance of private respondent that
the complaint was dismissed. In the words of Justice Abad Santos, "(private respondent) does
not object to the dismissal of the civil case but nonetheless wants (his) 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 is the counterclaim filed therein." 22

American jurisprudence similarly rules that in an action where defendant's answer set up a
counterclaim, the court was without authority to sever the causes of action by dismissing the
complaint and submitting the counterclaim to the jury, although the order of dismissal purported
to be without prejudice to the merits of plaintiff's cause of action upon another trial. 23 This is so
because a severance for trial of a claim or counterclaim may increase the possibility of
inconsistent verdicts and decrease the ability of the court to resolve such inconsistencies
without granting a re-trial in one or both causes. 24
In the case before us, severing herein private respondent's counterclaim to compel petitioner to
honor the purchase agreement executed between them, from petitioner's action to declare null
and void the same contract, may result in the following outcomes:
1)

If the same judgment would be rendered in Civil Case No. 55560 (on the counterclaim)

and Civil Case No. 58126 (on the main action which was re-filed) either for the validity or
nullification of the contract, then there would plausibly be no problem.
2)

However, should different and conflicting decisions be handed down in the two cases,

which is not an impossibility, then this will only serve to complicate the issues that will arise and
the remedies that may be necessitated.
Verily, practical considerations of consistency and economy likewise command a trial of the
counterclaim jointly and concurrently with the principal controversy. At any rate, considering that
petitioner has re-filed its complaint involving the same cause of action which is now pending
before another branch of the court, there is nothing to prevent private respondent from raising
the same counterclaim for adjudication in the subsequent action.
It is the submission of herein petitioner that assuming arguendo that the counterclaim can
proceed independently of the main action, the court did not acquire jurisdiction thereover for
failure of private respondent to pay the corresponding docket fees. Petitioner maintains that the
ruling in Manchester should likewise apply to compulsory counterclaims. The argument is
incorrect. The rules regarding payment of docket fees have been summarized in a subsequent
case 25 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 rule, therefore is made to apply specifically to permissive counterclaims only, thereby
excluding compulsory counterclaims from its purview. 26 This is because there is no need to
pay docketing fees for a compulsory counterclaim. 27
Finally, we do not ascribe to respondent court's declaration that the order of dismissal issued by
the trial court is merely interlocutory and, at most, an error of judgment which is not correctible
by certiorari and prohibition. As earlier stated, the trial court acted without jurisdiction in
proceeding with the hearing on the counterclaim after it had dismissed the complaint to which
the counterclaim attached. It is precisely to correct the lower court when in the course of
proceedings it acts without jurisdiction or in excess thereof or if the trial judge otherwise acted
with grave abuse of discretion that the extraordinary writ of certiorari or prohibition is afforded to
parties as a relief. Such a relief is available even in respect to interlocutory orders. 28
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and
judgment is hereby rendered DISMISSING the compulsory counterclaim of private respondent
in Civil Case No. 55560, without prejudice to the setting up of the same in Civil Case No. 58126,
both of the Regional Trial Court of Pasig, Metro Manila.
For all intents and purposes, such proposition runs counter to the nature of a compulsory
counterclaim in that it cannot remain pending for independent adjudication by the court. 14 This
is because a compulsory counterclaim is auxiliary to the proceeding in the original suit 15 and
derives its jurisdictional support therefrom, 16 inasmuch as it arises out of or is necessarily
connected with the transaction or occurrence that is the subject matter of the complaint. It
follows that if the court does not have jurisdiction to entertain the main action of the case and
dismisses the same, then the compulsory counterclaim, being ancillary to the principal
controversy, must likewise be dismissed 17 since no jurisdiction remained for any grant of relief
under the counterclaim. 18

5. Int'l Container v. CA A Zerina Domingo Lanete

What is the effect of the dismissal of a complaint ordered at the instance of the defendant upon a
compulsory counterclaim duly raised in its answer?chanrobles virtual lawlibrary

On February 10, 1988, Sharp, Inc., the herein private respondent filed a complaint for prohibition with
prayer for preliminary injunction against the Secretary of Transportation and Communications, the
Philippine Ports Authority (PPA), E. Razon, Inc., and the International Container Terminal Services Inc.,
the herein petitioner. The complaint was docketed as Civil Case No. 88-43616 in the Regional Trial Court
of Manila, Branch 9.

On March 7, 1988, the trial court issued a writ of preliminary injunction upon the posting by Sharp of a
bond issued by the Integrated Bonding and Insurance Co. in the sum of P10,000,000.00.

On that same day, the petitioner filed an answer with a compulsory counterclaim against Sharp for its
"unfounded and frivolous action." The petitioner claimed that as a consequence of the complaint and the
writ of preliminary injunction, it had suffered injuries which "if monetized (would) amount to more than
P100,000,000.00."cralaw virtua1aw library

On March 17, 1988, the writ of preliminary injunction was nullified by this Court in G.R. No. 82218. We
held that Sharp was not a proper party to stop the negotiation and awarding of the contract for the
development, management and operation of the Container Terminal at the Port of Manila. Moreover, the
petition was premature because Sharp had not exhausted the administrative remedies open to it from "the
PPA, the Bidding Committee, and the Office of the President."cralaw virtua1aw library

On March 25, 1988, the PPA, taking its cue from this decision, filed a motion to dismiss Sharps
complaint on the above-stated grounds. This motion was adopted by petitioner CCTSI in a manifestation
dated April 8, 1988.

On July 13, 1988, Judge Edilberto G. Sandoval dismissed the complaint as well as the counterclaim.

On August 13, 1988, CCTSI filed a motion for reconsideration of the order insofar as it dismissed its
counterclaim. Meanwhile, it gave notice to the First Integrated Bonding and Insurance Co., Inc. that it
was claiming damages against Sharp for the revoked injunction.chanrobles virtual lawlibrary

On November 10, 1988, the motion for reconsideration was denied. The trial court declared in
part:chanrob1es virtual 1aw library

. . . indeed a compulsory counterclaim by the nature of its nomenclature arises out of or is so intertwined
with the transaction or occurrence that is the subject matter of the complaint so that by the dismissal of
the latter, the same has to be discarded, specially since the complaint was dismissed without any trial.

The dismissal of the counterclaim was appealed to the respondent court, which upheld the lower court on
the following justifications:chanrob1es virtual 1aw library

(1)

Compulsory counterclaims for actual damages are not the claims recoverable against the bond.

(2)

Petitioners manifestation adopting Philippine Ports Authoritys motion to dismiss did not contain

any reservation. Hence, Sec. 2, Rule 17 of the Rules of Court will not apply. The counterclaim for
damages being compulsory in nature, for which no filing fee has been paid, was correctly dismissed.

(3)

Sec. 20 of Rule 57 of the Rules of Court specifically provides that "such damages (recoverable

against the bond) may be awarded only upon application and after proper hearing, and shall be included
in the final judgment. The application must be filed before the trial . . ., with due notice to the attaching
creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount
thereof.

The application contemplated in Sec. 20 is distinct and separate from the compulsory counterclaim
asserted in the answer.

(4)

The filing in court of claim against the injunction bond, with copy thereof being furnished the

surety, was not sufficient notice to the latter of an application against it under this bond.

CCTSI has filed the present petition for review alleging that the order of the trial court dismissing the
counterclaim was issued with grave abuse of discretion. Specifically, the petitioner contends that the
respondent court erred in sustaining the said order because:chanrob1es virtual 1aw library

(1)

Dismissal of the complaint upon defendants motion did not necessarily entail dismissal of

defendants compulsory counterclaim.

(2)

A claim for damages arising from a wrongfully obtained injunction may be made in a

counterclaim.

(3)

There is no rule requiring a particular form of notice to the surety of petitioners claim against the

injunction bond.

For its part, the private respondent argues that the dismissal of the compulsory counterclaim should be
sustained because:chanrob1es virtual 1aw library

(1)

The dismissal of the complaint upon petitioners motion necessarily entailed the dismissal of the

compulsory counterclaim.

(2)

The compulsory counterclaim raised by petitioner in its answer did not partake of the nature of a

claim for damages against the injunction bond.

(3)

The notice given by the petitioner to the surety was fatally defective and did not comply with the

requirements of the Rule of Court.

d.

Appeal, not certiorari, was the proper remedy of petitioner.

The Court gave due course to this petition and required the parties to submit simultaneous memoranda.
After studying their respective arguments and the pertinent law and jurisprudence, we have come to the
conclusion that the petition cannot prosper.

The counterclaim for damages alleged that the delay in the award of the MICT contract caused by Sharps
complaint and writ of preliminary injunction jeopardized the petitioners timetable to attain the projected
volumes in its winning bid and, as well, caused it to incur litigation expenses, including attorneys fees.

We have consistently held that a counterclaim is compulsory where: (1) it arises out of, or is necessarily
connected with, the transaction or occurrence that is the subject matter of the opposing partys claim; (2)
it does not require for its adjudication the presence of third parties of whom the court cannot acquire
jurisdiction; and (3) the court has jurisdiction to entertain the claim. 1

Tested by these requirements, the petitioners counterclaim was clearly compulsory. The petitioner itself
so denominated it. There is no doubt that the same evidence needed to sustain it would also refute the

cause of action alleged in the private respondents complaint; in other words, the counterclaim would
succeed only if the complaint did not. It is obvious from the very nature of the counterclaim that it could
not remain pending for independent adjudication, that is, without adjudication by the court of the
complaint itself on which the counterclaim was based.

Rule 17, Sec. 2 of the Rules of Court provides:chanrob1es virtual 1aw library

SECTION 2.

Dismissal by order of the court. Except as provided in the preceding section, an action

shall not be dismissed at the plaintiffs instance save upon order of the court and upon such terms and
conditions as the court may deem proper. If a counterclaim has been pleaded by a defendant prior to the
service upon him of the plaintiffs motion to dismiss, the action shall not be dismissed against the
defendants objection unless the counterclaim can remain pending for independent adjudication by the
court. Unless otherwise specified in the order, a dismissal under this paragraph shall be without prejudice.

The Court notes that, to begin with, the petitioner itself joined the PPA in moving for the dismissal of the
complaint; or put passively, it did not object to the dismissal of the private respondents complaint.
Secondly, the compulsory counterclaim was so interwined with the complaint that it could not remain
pending for independent adjudication by the court after the dismissal of the complaint which had
provoked the counterclaim in the first place. As a consequence, the dismissal of the complaint (on the
petitioners own motion) operated to also dismiss the counterclaim questioning that complaint.cralawnad

The petitioner is correct in contending that the claim for damages caused by the wrongful issuance of a
preliminary injunction can be made in the form of a counterclaim. As we held in Raymundo v. Carpio: 2

It would seem that the proper practice to be followed in cases where it is desired to obtain damages by
reason of the wrongful issuance of an attachment in favor of plaintiff that an issue would be tendered on
the subject by the defendant in his answer in the main case. Such a tender would present the question
squarely in that court, and the parties having offered their evidence on the subject, the trial court could
dispose of it along with the principal action. It is not necessary that the defendant wait until it is
determined by a final decision in the main action that the plaintiff is not entitled to recover in order to
present the question of his right to damages. All questions which are material to the main action or which
are incidental thereto but depending thereon should be presented and litigated at the same time with the
main action, so as to avoid the necessity of subsequent litigation and consequent loss of time and money.

However, there is no glossing away the fact that it was the petitioner itself that caused the dismissal of its
counterclaim when it not only did not object to, but actually moved for, the dismissal of the complaint.
The petitioner cannot undo that act. If it wanted the counterclaim to subsist, it should have objected to the
dismissal of the complaint or at least reserved its right to prosecute it, assuming this would still be
possible. It did neither of these. The petitioner now claims that there is no law requiring that reservation,
but there is no law presuming it either. The petitioner cannot simply say now that it intended all the time
to preserve its counterclaim when it knew that under Rule 17, Sec. 2 "if a counterclaim has been pleaded
by a defendant prior to the service upon him of a motion to dismiss, the action shall not be dismissed
against the defendants objection unless the counterclaim can remain pending for independent
adjudication by the Court."cralaw virtua1aw library

The counterclaim was not permissive. A counterclaim is permissive if it does not arise out of nor is it
necessarily connected with the subject matter of the opposing partys claim. It is not barred even if not set
up in the action. 3 The petitioners counterclaim was within the jurisdiction of the trial court. Most
importantly, it had no independent existence, being merely ancillary to the main action. 4 The petitioner
knew all this and did not object to the dismissal of the complaint. On the contrary, it actually moved to
dismiss that main action, and in so doing also moved, in effect, for the dismissal of its counterclaim.

The Court can stop at this point. For clarification of certain issues raised by the parties, however, the
following reminders are made.

The rules governing the application for damages against the surety bond posted in support of the
application for a writ of preliminary attachment are also applicable by analogy to preliminary injunction.
Sec. 20 of Rule 57 of the Rules of Court reads as follows:chanrob1es virtual 1aw library

Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the
party against whom attachment was issued. he may recover, upon the bond given or deposit made by the
attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon
application and after proper hearing, and shall be included in the final judgment. The application must be
filed before the trial or before appeal is perfected or before the judgment becomes executory, with due
notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to
damages and the amount thereof.chanrobles virtual lawlibrary

If the judgment of the appellate court be favorable to the party against whom the attachment was issued,
he must claim damages sustained during the pendency of the appeal by filing an application with notice to
the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the
appellate court becomes executory. The appellate court may allow the application to be heard and decided
by the trial court.

Interpreting this rule, the Court has laid down the following principles:chanrob1es virtual 1aw library

(1)

That damages resulting from preliminary attachment, preliminary injunction, the appointment of

a receiver, or the seizure of personal property, the payment of which is secured by judicial bond, must be
claimed and ascertained in the same action with due notice to the surety:chanrob1es virtual 1aw library

(2)

That if the surety is given such due notice, he is bound by the judgment that may be entered

against the principal, and writ of execution may issue against said surety to enforce the obligation of the
bond; and

(3)

That if no notice is given to the surety of the application for damages, the judgment that may be

entered against the principal cannot be executed against the surety without giving the latter an opportunity
to be heard as to the reality or reasonableness of the alleged damages. In such case, upon application of
the prevailing party, the court must order the surety to show cause why the bond should not respond for
the judgment for damages. If the surety should contest the reality or reasonableness of the damages
claimed by the prevailing party, the court must set the application and answer for hearing. The hearing
will be summary and will be limited to such new defense, not previously set up by the principal, as the
surety may allege and offer to prove. 5

A long line of cases has held that these rules are mandatory and failure to observe them deprives the
aggrieved party of the right to proceed against the surety bond. 6

Due notice to the adverse party and its surety setting forth the facts supporting the applicants right to
damages and the amount thereof under the bond is indispensable. No judgment for damages may be
entered and executed against the surety without giving it an opportunity to be heard as to the reality or
reasonableness of the damages resulting from the wrongful issuance of the writ.

The herein petitioner contends that it complied with the requirements when it served the bonding
company with notice of its claim for damages on August 31, 1988. It is correct. No particular form for
such notice is required. The rule also clearly says that the application for damages and the notice to the
surety may be made at any time before the judgment becomes final and executory. CCTSI served the
notice on the surety during the pendency of the motion for reconsideration, before the judgment
dismissing the complaint and the counterclaim had become final and executory.chanrobles virtual
lawlibrary

Had the counterclaim not been dismissed with the dismissal of the complaint, the petitioner could have
introduced evidence to show that it was prejudiced by the filing of the complaint and the obtention of the
writ of preliminary injunction by Sharp. But the petitioner itself aborted that effort when it joined PPA in
moving for the dismissal of Sharps complaint, knowing that it was the basis of its own compulsory
counterclaim. For failing to object when it should have, to keep its counterclaim alive, and instead
moving to dismiss the complaint from which the counterclaim derived its life, the petitioner must now
bear the consequences of its own negligence.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

6. Lafarge Cement v. Continental Cement Aileen Jagmis

SSUE:
WON RTC gravely erred in refusing to rule that CONTINENTAL has no personality to move to dismiss
petitioners compulsory counterclaims on Respondents Lim and Marianos behalf.

WON RTC gravely erred in ruling that (i) petitioners counterclaims against Respondents Lim and
Mariano are not compulsory; (ii) Sapugay v. Court of Appeals is inapplicable here; and (iii) petitioners
violated the rule on joinder of causes of action.

May defendants in civil cases implead in their counterclaims persons who were not parties to the original
complaints?

HELD:

Petition GRANTED and the assailed Orders REVERSED. The court of origin is hereby ORDERED to
take cognizance of the counterclaims pleaded in petitioners Answer with Compulsory Counterclaims and
to cause the service of summons on Respondents Gregory T. Lim and Anthony A. Mariano. No costs.

WON RTC gravely erred in ruling that (i) petitioners counterclaims (claim to rebut a previous claim)
against Respondents Lim and Mariano are not compulsory---- YES, COUNTERCLAIM IS
CONSIDERED COMPULSARY:
SEC 6 of Rule 6 of the Rules of Civil Procedure: any claim which a defending party may have against an
opposing party.
i.

Purpose of this is to avoid a multiplicity of suits and to facilitate the

disposition of the whole controversy in a single action, such that the defendants demand may be
considered by a counterclaim rather than by an independent suit.
ii.

LIMITATIONS:

1. Court should have jurisdiction over the subject matter of the counterclaim
2. It could acquire jurisdiction over third parties whose presence is essential for its consideration.
PERMISSIVE COUNTERCLAIM: an independent claim that may be filed separately in another case.
i.

Does not arise out of or is not necessarily connected with the subject

matter of the opposing partys claim.

COMPULSORY COUNTERCLAIM: does not require for its adjudication (consideration) the presence of
third parties of whom the court cannot acquire jurisdiction.
i.

Arises out of or is necessarily connected with the transaction or

occurrence constituting the subject matter of the opposing partys claim

ii.

Should be set up in the same action; otherwise, they would be barred

forever.
COMPULSORY OR PERMISSIVE?
i.

Issues of fact and law raised by the claim and by the counterclaim

ii.

Would res judicata (judged matter; matter considered by the court and

largely the same?

may not be pursued further) bar a subsequent suit on defendants claim, absent the compulsory
counterclaim rule?
iii.

Will substantially the same evidence support or refute plaintiffs claim as

well as defendants counterclaim?

iv.

Is there any logical relation between the claim and the counterclaim?

1. YES TO ALL four questions = COMPULSORY

LIM AND MARIANO were the persons responsible for making the bad faith decisions:
i.

Caused plaintiff to file this baseless suit and to procure an unwarranted

writ of attachment, notwithstanding their knowledge that plaintiff has no right to bring it or to secure the
writ.
ii.

LIM AND MARIANO ARE LAFARGES TORTFEASOR (commits a

tort; tort- infringement of right leading to legal liability)

1. They should be held jointly and solidarily liable as plaintiffs co-defendants to those compulsory
counterclaims pursuant to the Supreme Courts decision in Sapugay v. Mobil.
iii.

Allegations show that LAFARGEs counterclaims for damages were the

result of LIM AND MARIANOs act of filing the Complaint and securing the Writ of Attachment in bad
faith.
CASE AT HAND: LAFARGEs counterclaim for damages fulfills the necessary requisites of a
compulsory counterclaim.
i.

Damages as a consequence of the action filed against them.

ii.

Papa vs. Banaag:

1. Compensatory, moral and exemplary damages, allegedly suffered by the creditor in consequence of
the debtors action, are also compulsory counterclaim barred by the dismissal of the debtors action. They
cannot be claimed in a subsequent action by the creditor against the debtor.
2. Aside from the fact that petitioners counterclaim for damages cannot be the subject of an
independent action, it is the same evidence that sustains petitioners counterclaim that will refute private
respondents own claim for damages. This is an additional factor that characterizes petitioners
counterclaim as compulsory.
3. Since the counterclaim for damages is compulsory, it must be set up in the same action; otherwise, it
would be barred forever.
4. If it is filed concurrently with the main action but in a different proceeding, it would be abated on the
ground of litis pendentia
5. If filed subsequently, it would meet the same fate on the ground of res judicata.
7. Tan v. Kaakbay Lynne Caballegan
whether the counterclaim of respondents is compulsory or permissive in nature.

In Intestate Estate of Dalisay v. Hon. Marasigan,[25] we held that a counterclaim is compulsory where:
(1) it arises out of, or is necessarily connected with the transaction or occurrence that is the subject matter
of the opposing partys claim; (2) it does not require the presence of third parties of whom the court cannot
acquire jurisdiction; and (3) the trial court has jurisdiction to entertain the claim. To determine whether a
counterclaim is compulsory or not, we have devised the following tests: (1) Are the issues of fact or law
raised by the claim and the counterclaim largely the same? (2) Would res judicata bar a subsequent suit on
defendants claims absent the compulsory counterclaim rule? (3) Will substantially the same evidence
support or refute plaintiffs claim as well as the defendants counterclaim? and (4) Is there any logical
relation between the claim and the counterclaim?
It thus appears that the evidence required to prove petitioners claims is similar or identical to that needed
to establish respondents demands for the payment of unpaid loan from petitioner such as amount of
interest rates. In other words, petitioners claim is so related logically to respondents counterclaim, such
that conducting separate trials for the claim and the counterclaim would result in the substantial
duplication of the time and effort of the court and the parties. Clearly, this is the situation contemplated
under the compelling test of compulsoriness. The counterclaims of respondents herein are obviously
compulsory, not permissive. As aptly held by the Court of Appeals, the issues of fact and law raised by
both the claim and counterclaim are largely the same, with a logical relation, considering that the two
claims arose out of the same circumstances requiring substantially the same evidence. Any decision the
trial court will make in favor of petitioner will necessarily impinge on the claim of respondents, and vice
versa. In this light, considering that the counterclaims of respondents are compulsory in nature, payment
of docket fees is not required. The CA did not err in holding that the trial court had acquired jurisdiction
on the matter.[28]

WHEREFORE, the petition is hereby DENIED

8. Alday v. FGU Omni Gruba

9. Cabaero v. Cantos Punky Inciso
10. Torres v. CA Justin Mikhael Abraham
11. Ruiz Jr. v. CA Yuri Ann Ruiz
12. Asian Const. v. CA En En
13. Trans-Asia v. CA Abigael Francia Paraiso
14. BPI v. CA Cris Mae Gaspe
15. Torres v. Specialized Packaging Savannah White

16. Transfield Phils. v. Luzon Hydro Cha-cha Mendoza

17. Exec. Sec v. Gordon Grant Mesa
18. Expertravel and Tours v. CA Effer Reyes
19. Loyola v. CA Carl Cortes
Rule 6-7
20. Loquias v. Office of Ombudsman Marlouis Planas
21. DBP v. CA Joseph Adrian Llames
22. BPI Leasing Corp v. CA Kimberly Loto
Rule 8-15
1. Tantuico, Jr. Republic Cyr Evaristo Franco
2. Hydro resources v. CA Maye Yarzo
3. Sea Land Service, Inc. v. CA Simpson Grant
4. Tacay v. RTC of Tagum Alan Lancelot Makasiar
5. Hilario v. Salvador Ams Usman Hussain
6. Abad v. CFI A Shiro B Manding
7. Communication v. CA Clarence Rogelio Castilar
8. Shopper v. Roque Andreo Miguel H. Zamora
9. Phil-Am v. Sweet lines Bryan Paule
10. Dino v. CA Eissel Danganan Pangan
11. Luxuria v. CA Jared James Arpon Castaneda
12. Oaminial v. Castillo Arman Candelaria
13. Lim Tanhi v. Ramolete Kass Arnaldo
14. Remington v. Levy John Lalusis
15. Metropolitan v. Judge Nadjib Basir Bantuas
16. Versoza v. CA Bob Ryan Diator Gani
17. Enguerra v. Dolosa Acel Gaffud Dabban
18. Lafarge . continental Patricia DL Diaz
19. Associated Bank v. CA Mich Bernardo
20. British v. CIR Dea Ballesteros

21. Lamco v. WCC Shiro Manding

22. Baritua v. Mercader Rj Almazan
23. Ramos v. sps.Lim Rhoda de los Santos
24. Elcee Farms v. Semillano A Zerina Domingo Lanete
25. San Miguel v. NLRC Aileen Jagmis
26. Tuazon v. Molina Lynne Caballegan
27. Solar v. Ricafort Omni Gruba
28. Cruz v. CA Punky Inciso
29. Martinez v. People Justin Mikhael Abraham
30. PCIB v. CA Yuri Ann Ruiz
31. Sps.De la Cruz v. Ramiscal En En
32. Romualdez v. Licaros Abigael Francia Paraiso
33. Ang Ping v. CA Cris Mae Gaspe
34. Consolidatd v. Breva Savannah White
35. BPI v. Evangelista Cha-cha Mendoza
36. Toyota Cubao v. CA Grant Mesa
37. HB Zachcry v. CA Effer Reyes
38. Northwest oriental airlines v. CA Carl Cortes
Rule 8-15
39. Comm Materials v. CA Marlouis Planas
40. Acance v. CA Joseph Adrian Llames
41. Kawasaki v. Amores Kimberly Loto
42. Republic v. Ker Cyr Evaristo Franco
43. Getz Corp v. Pineda Maye Yarzo
44. Community Rural Bank v. Judge Talavera Simpson Grant
45. Dino v. Valencia Alan Lancelot Makasiar
46. Sps. Gutierrez v. Cabrera Ams Usman Hussain
47. Fecundo v. Berjamen Clarence Rogelio Castilar
48. Goldloop Properties v. CA Andreo Miguel H. Zamora
49. BPI v. Far Easr Bryan Paule